1 00:00:01,480 --> 00:00:05,360 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 2 00:00:05,440 --> 00:00:08,159 Speaker 1: weekdays at ten am Eastern on Apple card Playing and 3 00:00:08,240 --> 00:00:11,160 Speaker 1: Broun Auto with the Bloomberg Business app. Listen on demand 4 00:00:11,200 --> 00:00:15,280 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 5 00:00:16,600 --> 00:00:19,680 Speaker 2: Busy twenty four hours or so. Here in the ipo market, 6 00:00:19,680 --> 00:00:22,239 Speaker 2: we've got Esteri Labs that price last lane at thirty six, 7 00:00:22,960 --> 00:00:25,319 Speaker 2: indicating to open at fifty six, so that would be 8 00:00:25,360 --> 00:00:27,520 Speaker 2: good for the ipo market. And then we've also got 9 00:00:27,520 --> 00:00:31,400 Speaker 2: Reddit looking to price tonight. And we saw some Bloomberg 10 00:00:31,440 --> 00:00:34,080 Speaker 2: reporting earlier today. It says they are considering the high 11 00:00:34,159 --> 00:00:36,640 Speaker 2: end or perhaps even above it abobove the range. So 12 00:00:36,720 --> 00:00:38,640 Speaker 2: let's break it all down with Bailly Lipschaltz. She covers 13 00:00:39,040 --> 00:00:41,560 Speaker 2: the equity markets, including the new issue markets. So Billy, 14 00:00:41,640 --> 00:00:44,360 Speaker 2: let's sell with Astera Labs. Boy, if this would open 15 00:00:44,720 --> 00:00:47,120 Speaker 2: we had fifty six dollars again after pricing at thirty six, 16 00:00:47,159 --> 00:00:49,280 Speaker 2: that would be huge news for the ico market. 17 00:00:49,360 --> 00:00:51,959 Speaker 3: The even more interesting thing this is an ipo that 18 00:00:52,200 --> 00:00:55,640 Speaker 3: bumped up its rage, increased the allocation and number of shares, 19 00:00:55,680 --> 00:00:57,680 Speaker 3: and then priced above. So we're already talking about it 20 00:00:57,720 --> 00:00:59,360 Speaker 3: pricing almost twenty six. 21 00:00:59,200 --> 00:01:02,320 Speaker 4: Percent of government for this kind of bump necessarily. 22 00:01:01,840 --> 00:01:04,360 Speaker 3: No, and this is the deal that everyone had circled. 23 00:01:04,400 --> 00:01:06,319 Speaker 3: We're all talking about Reddit. But when I talk to 24 00:01:06,360 --> 00:01:08,920 Speaker 3: bankers and investors, they say a stair Labs, they're backed 25 00:01:08,959 --> 00:01:12,480 Speaker 3: by Intel, they make AI chips, they fit into every 26 00:01:12,520 --> 00:01:15,280 Speaker 3: tailwind that you want in this market. That's the deal 27 00:01:15,280 --> 00:01:16,240 Speaker 3: that you want to keep an eye on. 28 00:01:16,319 --> 00:01:18,679 Speaker 2: And they're profitable, but they don't do the weight lossing. 29 00:01:19,800 --> 00:01:22,400 Speaker 5: As far as I know, they're profitable, which begs the 30 00:01:22,480 --> 00:01:24,119 Speaker 5: question is Reddit profitable? 31 00:01:24,319 --> 00:01:24,720 Speaker 2: They are not. 32 00:01:24,880 --> 00:01:27,880 Speaker 3: They've been on the path to profitability, if you will. 33 00:01:27,920 --> 00:01:30,520 Speaker 3: They talked up kind of the fact that they tightened spending. 34 00:01:30,560 --> 00:01:34,440 Speaker 3: They have AI licensing, data licensing partnerships that really kind 35 00:01:34,480 --> 00:01:38,280 Speaker 3: of bolstered numbers in three Q really four Q of 36 00:01:38,400 --> 00:01:41,720 Speaker 3: last year. But when you talk to investors in some 37 00:01:41,760 --> 00:01:44,479 Speaker 3: of the skeptical analysts, the big question is it's almost 38 00:01:44,520 --> 00:01:47,840 Speaker 3: two decades old, it's not profitable. It operates in social media, 39 00:01:47,920 --> 00:01:50,840 Speaker 3: which has its own flurry of issues. You look at 40 00:01:50,840 --> 00:01:53,720 Speaker 3: Snapchat and Pinterest, who are the two best comps publicly traded? 41 00:01:53,840 --> 00:01:55,920 Speaker 3: Those docks aren't doing too well. But if it does, 42 00:01:55,960 --> 00:01:57,480 Speaker 3: price at the top of the range. That'd be a 43 00:01:57,520 --> 00:02:01,080 Speaker 3: six point four billion dollar valuation haircut from the ten 44 00:02:01,120 --> 00:02:03,880 Speaker 3: billion it raised at in twenty twenty one, but still 45 00:02:04,240 --> 00:02:05,960 Speaker 3: maybe a bit of a green shoot. It does remind 46 00:02:06,000 --> 00:02:08,320 Speaker 3: me quite a bit of the instacart ipo in the 47 00:02:08,360 --> 00:02:11,919 Speaker 3: fall of last year, which took a quote unquote down round, 48 00:02:12,000 --> 00:02:14,120 Speaker 3: but right now is trading up about twenty three percent 49 00:02:14,160 --> 00:02:17,160 Speaker 3: from that IPO price, despite some choppy aftermarket performance. 50 00:02:17,360 --> 00:02:20,520 Speaker 2: So when Reddit, I also understand in addition to the 51 00:02:20,639 --> 00:02:23,480 Speaker 2: advertising component, which again we've seen before as you mentioned 52 00:02:23,480 --> 00:02:28,400 Speaker 2: with Pinterest and others Snapchat, there's also a data component 53 00:02:28,440 --> 00:02:30,440 Speaker 2: to it, and they're trying to tie it into a 54 00:02:30,480 --> 00:02:33,079 Speaker 2: little bit of an AI situation. You can explain what 55 00:02:33,120 --> 00:02:33,639 Speaker 2: that pitch is. 56 00:02:33,760 --> 00:02:35,120 Speaker 3: Yeah, So I talked to one of the pitch book 57 00:02:35,120 --> 00:02:37,200 Speaker 3: analysts who laid it out, I think pretty easily. 58 00:02:37,240 --> 00:02:37,560 Speaker 2: He said. 59 00:02:37,600 --> 00:02:41,960 Speaker 3: Basically, they're trying to license data for AI makers, so 60 00:02:42,000 --> 00:02:44,560 Speaker 3: they have exactly what some of these AI companies want, 61 00:02:44,600 --> 00:02:47,560 Speaker 3: which is engagement and human beings posting and talking to 62 00:02:47,639 --> 00:02:50,440 Speaker 3: each other. He basically said, though the question is it's 63 00:02:50,480 --> 00:02:51,440 Speaker 3: still in the early stages. 64 00:02:51,560 --> 00:02:52,680 Speaker 2: Well, exactly the human. 65 00:02:52,520 --> 00:02:53,760 Speaker 3: Beings, and that's one of the things I talked to 66 00:02:53,800 --> 00:02:56,519 Speaker 3: a number of Wall Street Bets moderators about whether or 67 00:02:56,520 --> 00:02:57,800 Speaker 3: not they're buying into the IPO. 68 00:02:58,240 --> 00:02:59,440 Speaker 2: They were very much divided. 69 00:02:59,440 --> 00:03:01,320 Speaker 3: But the big quest question for them, the boal case 70 00:03:01,680 --> 00:03:05,800 Speaker 3: for these believers of Reddit, these redditors, is that as 71 00:03:05,880 --> 00:03:07,800 Speaker 3: of now where we are in kind of the AI 72 00:03:07,919 --> 00:03:12,200 Speaker 3: technology landscape, you need data, you need input, you need 73 00:03:12,320 --> 00:03:15,040 Speaker 3: humans to create something. So that's one of the big 74 00:03:15,120 --> 00:03:17,560 Speaker 3: kind of pitches from Reddit is that if you open 75 00:03:17,600 --> 00:03:21,120 Speaker 3: up a partnership with Google or whoever and say, hey, 76 00:03:21,160 --> 00:03:24,240 Speaker 3: here's the thousands and millions of people actively engaging with 77 00:03:24,320 --> 00:03:26,240 Speaker 3: each other, do with it what you want. Though, that 78 00:03:26,280 --> 00:03:29,239 Speaker 3: does kind of raise questions for users and whether or 79 00:03:29,280 --> 00:03:30,920 Speaker 3: not they would maybe taper. 80 00:03:30,680 --> 00:03:31,440 Speaker 2: Off their usage. 81 00:03:31,480 --> 00:03:33,720 Speaker 5: Well also yes, and also I was going to say, 82 00:03:33,760 --> 00:03:36,360 Speaker 5: like I've never been on Reddit. Do we want language 83 00:03:36,400 --> 00:03:40,080 Speaker 5: models to know Reddit? Really like, do we like that relationship? 84 00:03:40,200 --> 00:03:41,360 Speaker 2: That's the big question. 85 00:03:41,480 --> 00:03:44,640 Speaker 3: I mean, I lurk, So I don't, Alex, I don't 86 00:03:44,640 --> 00:03:45,880 Speaker 3: have a Reddit account, but I do. 87 00:03:45,960 --> 00:03:48,560 Speaker 2: You know, I lurk. 88 00:03:48,600 --> 00:03:51,080 Speaker 3: You know you're planning a trip, you kind of want 89 00:03:51,080 --> 00:03:53,000 Speaker 3: to see what people recommend or if you're looking to 90 00:03:53,000 --> 00:03:54,480 Speaker 3: make a purchase, see what what. 91 00:03:54,360 --> 00:03:55,680 Speaker 2: The forums are talking about. 92 00:03:56,000 --> 00:03:58,760 Speaker 3: But I think even if you talk to Reddit users, 93 00:03:58,840 --> 00:04:01,080 Speaker 3: a lot of their content is not safe for work. 94 00:04:01,120 --> 00:04:04,080 Speaker 3: A lot of it is shall we say, not family friendly, 95 00:04:04,360 --> 00:04:06,800 Speaker 3: and they call each other a lot of names and taking. 96 00:04:06,880 --> 00:04:09,920 Speaker 4: Actually I did go on Reddit. I went down the 97 00:04:10,000 --> 00:04:11,600 Speaker 4: Kate Middleton reddit rabbit hole. 98 00:04:11,760 --> 00:04:13,840 Speaker 2: Oh okay, did you find good content? 99 00:04:14,200 --> 00:04:14,360 Speaker 6: No? 100 00:04:14,440 --> 00:04:16,120 Speaker 4: I didn't know what to trust. I didn't know what 101 00:04:16,240 --> 00:04:16,679 Speaker 4: was real. 102 00:04:16,920 --> 00:04:19,479 Speaker 5: I got really confused, and then I got scared and 103 00:04:19,520 --> 00:04:22,320 Speaker 5: I left. But that's a great example of like what 104 00:04:22,560 --> 00:04:24,200 Speaker 5: what reddit is? 105 00:04:24,400 --> 00:04:27,080 Speaker 3: It sounds about right, Yeah, And Reddit is built on 106 00:04:27,520 --> 00:04:29,920 Speaker 3: so called karma points. So you get karma points when 107 00:04:29,920 --> 00:04:33,600 Speaker 3: people upvote your comments or upvote your posts vote, which 108 00:04:33,640 --> 00:04:36,360 Speaker 3: is just basically liking. It's liking, but you can also 109 00:04:36,400 --> 00:04:38,480 Speaker 3: dislike it. I actually trying to get people to talk 110 00:04:38,520 --> 00:04:40,000 Speaker 3: to me and said I was a Bloomberg reporter and 111 00:04:40,000 --> 00:04:42,800 Speaker 3: wanted to talk about the IPO. Immediately had negative karma like. 112 00:04:44,400 --> 00:04:45,440 Speaker 5: That hurts. 113 00:04:45,520 --> 00:04:47,800 Speaker 3: Yeah, and then you can't comment. So then I couldn't 114 00:04:47,800 --> 00:04:51,600 Speaker 3: comment anything. I couldn't respond to people because I know exactly. 115 00:04:51,920 --> 00:04:53,520 Speaker 3: And then yeah, I got hit with some of the 116 00:04:53,600 --> 00:04:56,760 Speaker 3: Steve Belushia giffs and memes of like hey, cool, fellow 117 00:04:56,880 --> 00:04:58,960 Speaker 3: fellow friends like what's going on? 118 00:04:59,120 --> 00:04:59,400 Speaker 1: Which? 119 00:04:59,720 --> 00:05:03,479 Speaker 2: All right, how important are these two IPOs to the 120 00:05:03,520 --> 00:05:05,640 Speaker 2: new issue market here? I mean, do we have a 121 00:05:05,640 --> 00:05:08,040 Speaker 2: whole bunch backed up and we're just looking for some 122 00:05:08,120 --> 00:05:11,280 Speaker 2: good karma in the IPO market? How important these two 123 00:05:11,360 --> 00:05:14,400 Speaker 2: names here? They're critical? And it's really because they both 124 00:05:14,640 --> 00:05:18,279 Speaker 2: are in the tech space. They are what we would 125 00:05:18,320 --> 00:05:20,920 Speaker 2: call kind of down the middle of the fairway IPOs 126 00:05:21,000 --> 00:05:23,479 Speaker 2: in that five hundred to a billion dollar raise in 127 00:05:23,560 --> 00:05:24,760 Speaker 2: terms of cash being funded. 128 00:05:24,880 --> 00:05:27,600 Speaker 3: You look at arm and armor sports, Yeah, big deals, 129 00:05:27,600 --> 00:05:29,480 Speaker 3: they're their own thing. The big thing though, when I 130 00:05:29,520 --> 00:05:31,279 Speaker 3: talked to bankers is that at this point in time, 131 00:05:31,680 --> 00:05:34,479 Speaker 3: the new issue market is going to be idiosyncratics. So 132 00:05:35,080 --> 00:05:38,080 Speaker 3: the reason for Asteria Labs going public is very different 133 00:05:38,120 --> 00:05:40,320 Speaker 3: than the reason that Rerdeup's going public. And they're they're 134 00:05:40,400 --> 00:05:43,080 Speaker 3: kind of trying to take or at least trying to 135 00:05:43,120 --> 00:05:45,679 Speaker 3: read the signals from investors on who's willing to pay 136 00:05:45,960 --> 00:05:48,680 Speaker 3: what multiple. But if these deals price as they are 137 00:05:48,800 --> 00:05:51,800 Speaker 3: indicated and trade strongly, I definitely think, at least from 138 00:05:51,800 --> 00:05:54,200 Speaker 3: my channel checks and conversations, that people will be drawn 139 00:05:54,240 --> 00:05:55,000 Speaker 3: from the sidelines. 140 00:05:55,320 --> 00:05:57,480 Speaker 5: Is it do you think that these companies and I 141 00:05:57,480 --> 00:05:59,680 Speaker 5: appreciate their all different companies. Do they need the money 142 00:05:59,720 --> 00:06:02,720 Speaker 5: to go stuff? Is it a commentary on while this 143 00:06:02,839 --> 00:06:04,880 Speaker 5: market's awesome when we get a piece of it, or 144 00:06:05,000 --> 00:06:07,000 Speaker 5: is it we need investors need to cash out or 145 00:06:07,000 --> 00:06:08,960 Speaker 5: employees have shares and they need a vehicle? 146 00:06:09,120 --> 00:06:10,320 Speaker 4: Like what is the reasoning? 147 00:06:10,480 --> 00:06:12,160 Speaker 3: A little bit of both, so you have in both 148 00:06:12,200 --> 00:06:15,080 Speaker 3: cases insider selling is part of the IPO, so trying 149 00:06:15,120 --> 00:06:16,680 Speaker 3: to get some form of a return. But when you 150 00:06:16,680 --> 00:06:19,279 Speaker 3: look at a Steri Labs taking those proceeds and being 151 00:06:19,279 --> 00:06:22,159 Speaker 3: able to kind of bolster on their operations. Again to 152 00:06:22,200 --> 00:06:24,080 Speaker 3: your point, they're writing the AI wave. So if you 153 00:06:24,080 --> 00:06:27,560 Speaker 3: can have Jensen wang As filming a video for your roadshow, 154 00:06:27,680 --> 00:06:29,040 Speaker 3: that's going to get people excited. 155 00:06:29,040 --> 00:06:30,400 Speaker 2: So why not go public now? 156 00:06:30,560 --> 00:06:33,160 Speaker 3: Whereas write it again, you look at the business, the 157 00:06:33,200 --> 00:06:36,599 Speaker 3: evolution of the business on that path to profitability. It's 158 00:06:36,640 --> 00:06:39,479 Speaker 3: been private, it's about nineteen years old, so it's kind 159 00:06:39,480 --> 00:06:42,279 Speaker 3: of due time for it to go public again, similar 160 00:06:42,320 --> 00:06:45,400 Speaker 3: to instacart. So they all kind of have their own reasons. 161 00:06:45,440 --> 00:06:47,360 Speaker 3: But the big thing when you talk to investors and 162 00:06:47,400 --> 00:06:50,839 Speaker 3: bankers either profitability, path to profitability or some form of 163 00:06:50,920 --> 00:06:53,040 Speaker 3: unit economics and that's been the big thing, and that's 164 00:06:53,080 --> 00:06:55,280 Speaker 3: why we can see some of the more interesting names 165 00:06:55,320 --> 00:06:58,720 Speaker 3: I think potentially going public in the next few weeks 166 00:06:58,720 --> 00:07:01,680 Speaker 3: and months, those names that have been in the pipeline, 167 00:07:01,720 --> 00:07:04,400 Speaker 3: but also some that just have good, strong, fundamental businesses. 168 00:07:04,480 --> 00:07:07,080 Speaker 2: I would think there'd be a lot of private equity 169 00:07:07,120 --> 00:07:09,800 Speaker 2: sponsored deals that would like to come. 170 00:07:09,840 --> 00:07:12,239 Speaker 3: So we haven't seen a lot that was Homer Sports 171 00:07:12,320 --> 00:07:15,640 Speaker 3: was essentially private equity, not necessarily bright Spring is just 172 00:07:15,720 --> 00:07:18,280 Speaker 3: KKR back that was a disaster of a deal and 173 00:07:18,320 --> 00:07:21,560 Speaker 3: traded terribly. That was at least when I talked to 174 00:07:21,600 --> 00:07:23,480 Speaker 3: some investors and strategists, was kind of. 175 00:07:23,480 --> 00:07:25,040 Speaker 2: They just needed to get it out the door. 176 00:07:25,320 --> 00:07:28,000 Speaker 3: But to your point, when you're a private equity company, 177 00:07:28,480 --> 00:07:31,640 Speaker 3: a private equity firm, you're kind of looking to recycle 178 00:07:31,680 --> 00:07:33,880 Speaker 3: and get that fund of flows. We've had the IPO 179 00:07:33,960 --> 00:07:36,200 Speaker 3: market really frozen for a few years at this point, 180 00:07:36,400 --> 00:07:38,520 Speaker 3: so it's really a question of will they kind of 181 00:07:38,560 --> 00:07:41,880 Speaker 3: cave on valuation and meet investors where they are Because 182 00:07:41,880 --> 00:07:45,560 Speaker 3: a lot of those assets are big, they aren't necessarily growing, 183 00:07:45,800 --> 00:07:47,880 Speaker 3: and you need to get someone to at least buy 184 00:07:47,880 --> 00:07:48,360 Speaker 3: the IPO. 185 00:07:48,880 --> 00:07:50,320 Speaker 4: Will they do you think they will? 186 00:07:50,960 --> 00:07:51,360 Speaker 2: I don't know. 187 00:07:51,480 --> 00:07:53,160 Speaker 3: I think again, it goes back to the whole case 188 00:07:53,160 --> 00:07:54,360 Speaker 3: by case argument. 189 00:07:54,080 --> 00:07:55,360 Speaker 4: That company a company. 190 00:07:56,160 --> 00:07:57,880 Speaker 3: The big thing is when you look at your comps. 191 00:07:57,880 --> 00:08:01,720 Speaker 3: So if you're again an Asteri Labs, Semiconductors AI perfect, 192 00:08:01,920 --> 00:08:05,600 Speaker 3: If you're Reddit, a little bit tougher again because Snapchat Pinterest, 193 00:08:05,640 --> 00:08:08,640 Speaker 3: but you're pitching that AI kind of part of the 194 00:08:08,680 --> 00:08:11,800 Speaker 3: business and also trying to get more tied to meta platforms. 195 00:08:12,200 --> 00:08:15,440 Speaker 5: All right, Bailey, great stuff, really really great stuff. I'm 196 00:08:15,480 --> 00:08:17,280 Speaker 5: amazed that you can be that excited about so many 197 00:08:17,280 --> 00:08:20,880 Speaker 5: different companies going ipo and Billy Lipschaltz, a Bloomberg News 198 00:08:20,920 --> 00:08:22,840 Speaker 5: IPO reporter, joining us there. 199 00:08:24,280 --> 00:08:28,160 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 200 00:08:28,240 --> 00:08:31,800 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 201 00:08:31,800 --> 00:08:34,559 Speaker 1: Auto with the Bloomberg Business app. You can also listen 202 00:08:34,679 --> 00:08:37,800 Speaker 1: live on Amazon Alexa from our flagship New York station 203 00:08:38,160 --> 00:08:42,000 Speaker 1: just say Alexa playing Bloomberg eleven thirty. 204 00:08:42,080 --> 00:08:44,000 Speaker 2: The other news item out there, in addition to the 205 00:08:44,120 --> 00:08:45,800 Speaker 2: FED one of the key ones. It's just kind of 206 00:08:45,800 --> 00:08:48,160 Speaker 2: in the chip business. Got a couple data points for 207 00:08:48,240 --> 00:08:50,599 Speaker 2: you here. Today, Intel wins almost twenty billion dollars in 208 00:08:50,720 --> 00:08:54,480 Speaker 2: chips incentives for US plants. That's good for Intel in 209 00:08:54,520 --> 00:08:56,880 Speaker 2: the US chip business. On the flip side, the US 210 00:08:56,960 --> 00:09:01,400 Speaker 2: ways sanctioning Huawei's secretive Chinese chip network. Let's get the 211 00:09:01,440 --> 00:09:03,880 Speaker 2: latest on kind of what's happening there. We're joined by 212 00:09:03,920 --> 00:09:08,240 Speaker 2: Mackenzie Hawkins. She is a Bloomberg News US industrial reporter. Mackenzie, 213 00:09:08,240 --> 00:09:09,920 Speaker 2: thanks so much for joining us here. Let's start with 214 00:09:10,000 --> 00:09:14,120 Speaker 2: Intel here here. I guess this is part of on shoring. 215 00:09:14,520 --> 00:09:16,360 Speaker 2: You know, a lot of stuff on the US soil, 216 00:09:16,480 --> 00:09:21,080 Speaker 2: particularly on the chip side, talks about this Intel story, right. 217 00:09:21,240 --> 00:09:25,160 Speaker 7: So today we saw the first preliminary term sheet for 218 00:09:25,400 --> 00:09:28,160 Speaker 7: an advanced chip maker to come out of this broader 219 00:09:28,280 --> 00:09:31,600 Speaker 7: US effort to bring semi conductor manufacturing back to American soil. 220 00:09:32,080 --> 00:09:35,360 Speaker 7: So Biden signed the chips back into law in August 221 00:09:35,400 --> 00:09:38,800 Speaker 7: twenty twenty two. Companies have been waiting for you know, 222 00:09:38,880 --> 00:09:41,240 Speaker 7: well over a year to see those funds start flowing 223 00:09:41,240 --> 00:09:43,240 Speaker 7: out the door. They haven't actually flowed out the door yet. 224 00:09:43,240 --> 00:09:46,400 Speaker 7: Intel's award today is just a preliminary agreement, and it 225 00:09:46,440 --> 00:09:48,600 Speaker 7: will be likely until the end of this year that 226 00:09:48,640 --> 00:09:51,240 Speaker 7: they start to actually see money doled out in tranches. 227 00:09:51,320 --> 00:09:54,000 Speaker 7: But this is a huge investment in you know, the 228 00:09:54,080 --> 00:09:57,520 Speaker 7: real leading American chip maker, and I mean these chips 229 00:09:57,600 --> 00:10:00,840 Speaker 7: will power you know, the AI friends. There are the 230 00:10:00,840 --> 00:10:03,720 Speaker 7: types of tips that go into nuclear missiles and hypersonics, 231 00:10:03,760 --> 00:10:05,920 Speaker 7: and this is a really significant investment for the company 232 00:10:06,120 --> 00:10:10,120 Speaker 7: and for the states for they're building, including Arizona, Ohio, Oregon, 233 00:10:10,200 --> 00:10:10,840 Speaker 7: and New Mexico. 234 00:10:11,200 --> 00:10:15,080 Speaker 5: So Mackenzie pair of this. So okay, I love covering energy. 235 00:10:15,280 --> 00:10:17,280 Speaker 5: So I'm really into the IRA And like what you've 236 00:10:17,280 --> 00:10:20,200 Speaker 5: seen a lot in the IRA is everyone got super excited, 237 00:10:20,640 --> 00:10:24,160 Speaker 5: but then actually sort of putting shovels in the ground 238 00:10:24,480 --> 00:10:26,800 Speaker 5: was a lot more difficult. So there's like, yeah, yeah, 239 00:10:26,800 --> 00:10:28,640 Speaker 5: we're gonna get the money, It's gonna happen, but it's 240 00:10:28,679 --> 00:10:31,720 Speaker 5: not happening quite yet. How do we think this plays 241 00:10:31,720 --> 00:10:34,199 Speaker 5: out from the chips act? Like when does Intel put 242 00:10:34,200 --> 00:10:37,080 Speaker 5: a shovel in the ground. What other companies are trying 243 00:10:37,080 --> 00:10:38,680 Speaker 5: to put their shovels in the ground and get the 244 00:10:38,720 --> 00:10:40,800 Speaker 5: funding and will it actually you know, happen. 245 00:10:42,320 --> 00:10:46,120 Speaker 7: So Intel's already building these facilities. They've had a twenty 246 00:10:46,160 --> 00:10:49,079 Speaker 7: billion dollar Arizona expansion underway for some time. They're building 247 00:10:49,160 --> 00:10:53,320 Speaker 7: multiple fabrication facilities, there. They're making some progress in Ohio, 248 00:10:53,360 --> 00:10:55,960 Speaker 7: although there's been reporting that that's slightly delayed. We expect 249 00:10:56,000 --> 00:10:59,960 Speaker 7: that construction to finish in twenty twenty six. Intel's rival 250 00:11:00,440 --> 00:11:03,640 Speaker 7: Taiwan Semi Conductor Manufacturing Company and Samsung out of South 251 00:11:03,720 --> 00:11:06,800 Speaker 7: Korea are also building plants in the US. Both of 252 00:11:06,840 --> 00:11:09,880 Speaker 7: their sites have seen some delays that the companies and 253 00:11:09,920 --> 00:11:13,040 Speaker 7: the Biden administration insist are in line with typical projections, 254 00:11:13,640 --> 00:11:16,440 Speaker 7: but time will tell on this one. It will be 255 00:11:16,559 --> 00:11:19,240 Speaker 7: years before these facilities are stood up. The Commerce Department 256 00:11:19,240 --> 00:11:21,200 Speaker 7: has set a goal that the US will produce twenty 257 00:11:21,200 --> 00:11:23,360 Speaker 7: percent of the world's advanced logic shows by the end 258 00:11:23,360 --> 00:11:26,920 Speaker 7: of the decade. Currently we're at about zero, so that's 259 00:11:26,920 --> 00:11:28,600 Speaker 7: a lot of progress to catch up on. Most of 260 00:11:28,600 --> 00:11:32,199 Speaker 7: that productions happening in East Asia. The companies announced their 261 00:11:32,200 --> 00:11:35,040 Speaker 7: projects before they got the funding from the federal government, 262 00:11:35,080 --> 00:11:37,360 Speaker 7: but it is certainly their expectation that they will receive 263 00:11:37,400 --> 00:11:39,720 Speaker 7: that funding, and they would like it to happen, probably 264 00:11:39,720 --> 00:11:40,839 Speaker 7: a little bit faster than it did. 265 00:11:40,920 --> 00:11:43,920 Speaker 2: Hey McKinnie, how secure is this funding over time? Thinking 266 00:11:43,920 --> 00:11:47,480 Speaker 2: about we may have a new administration in twenty twenty five, 267 00:11:47,920 --> 00:11:50,520 Speaker 2: how secure is this funding particularly you know in the 268 00:11:50,559 --> 00:11:51,479 Speaker 2: out years. 269 00:11:53,000 --> 00:11:57,280 Speaker 7: It's a great question. So today's announcement is a preliminary agreement. 270 00:11:57,960 --> 00:12:01,000 Speaker 7: Then there's a due diligence stage, and then a final 271 00:12:01,080 --> 00:12:04,280 Speaker 7: term sheet between Intel and the Commerce Department that will 272 00:12:04,360 --> 00:12:07,320 Speaker 7: likely come closer to the time of the presidential election. 273 00:12:07,640 --> 00:12:10,679 Speaker 7: And the Commerce Department is setting all types of benchmarks 274 00:12:10,679 --> 00:12:12,840 Speaker 7: that Intel must need for the money to be doled 275 00:12:12,880 --> 00:12:14,760 Speaker 7: out over time. So it's not that they get the 276 00:12:14,800 --> 00:12:17,120 Speaker 7: final agreement and then they get eight and a half 277 00:12:17,120 --> 00:12:19,920 Speaker 7: billion dollars in grants and eleven billion dollars worth of 278 00:12:19,920 --> 00:12:24,079 Speaker 7: love loan guarantees. They have to meet benchmarks related to production, 279 00:12:24,200 --> 00:12:27,000 Speaker 7: related to workforce development, and there are all types of 280 00:12:27,040 --> 00:12:31,280 Speaker 7: requirements that Biden's Commerce Department might set that a potential 281 00:12:31,400 --> 00:12:34,600 Speaker 7: from Commerce Department might not be as interested in. You've 282 00:12:34,600 --> 00:12:37,439 Speaker 7: seen saying like child care facilities, which Intel and other 283 00:12:37,480 --> 00:12:41,760 Speaker 7: companies have committed to community development agreements, all those types 284 00:12:41,760 --> 00:12:45,640 Speaker 7: of things. It's entirely possible that that could shift over time. 285 00:12:45,920 --> 00:12:48,280 Speaker 7: But the reality is, once they've got the equipment in 286 00:12:48,320 --> 00:12:51,320 Speaker 7: the building, these are machines that cost hundreds of millions 287 00:12:51,320 --> 00:12:55,720 Speaker 7: of dollars, they're committed to these facilities but Intel's CEO 288 00:12:55,800 --> 00:12:58,240 Speaker 7: Podcassingers said just yesterday, we might need to shift back 289 00:12:58,240 --> 00:13:00,959 Speaker 7: to two point zero companies buying for a lot more 290 00:13:01,000 --> 00:13:04,000 Speaker 7: money than they currently have. The advance chipmakers together asked 291 00:13:04,040 --> 00:13:06,360 Speaker 7: for more than double what the Commerce Department has available. 292 00:13:06,679 --> 00:13:08,319 Speaker 7: So this is really something to watch over the next 293 00:13:08,360 --> 00:13:09,440 Speaker 7: couple of years and decades. 294 00:13:10,040 --> 00:13:12,160 Speaker 5: I mean, is President Trump really going to go to 295 00:13:12,200 --> 00:13:14,920 Speaker 5: Ohio and Arizona and Oregon in New Mexico and be like, 296 00:13:14,960 --> 00:13:18,120 Speaker 5: just kidding, I'm gonna take this development back. I mean, 297 00:13:18,160 --> 00:13:21,280 Speaker 5: I think that's going to be a tricky proposition since 298 00:13:21,280 --> 00:13:21,680 Speaker 5: hearing it. 299 00:13:21,760 --> 00:13:22,840 Speaker 4: Is so much money. 300 00:13:23,520 --> 00:13:26,640 Speaker 5: So I just came back mackenzie from energy conference basically, 301 00:13:26,679 --> 00:13:29,040 Speaker 5: and I was just telling Paul that all the talk 302 00:13:29,120 --> 00:13:32,280 Speaker 5: there was that tech companies are finally getting wise to 303 00:13:32,320 --> 00:13:34,360 Speaker 5: the fact that they're going to build all this stuff 304 00:13:34,840 --> 00:13:37,520 Speaker 5: they need power, and that power isn't as easy to 305 00:13:37,600 --> 00:13:40,280 Speaker 5: come by as they might have thought. Do you hear 306 00:13:40,320 --> 00:13:42,600 Speaker 5: that at all on your industrial side, Like, hey, this 307 00:13:42,720 --> 00:13:44,800 Speaker 5: is great, build all these data centers Intel, but like, 308 00:13:44,880 --> 00:13:46,640 Speaker 5: who's going to how are you going to get that power? 309 00:13:46,640 --> 00:13:47,640 Speaker 4: What do you plug it in? 310 00:13:49,720 --> 00:13:52,559 Speaker 7: Absolutely, the infrastructure is a top concern for these companies. 311 00:13:52,600 --> 00:13:55,040 Speaker 7: You know, a big part of their ability to apply 312 00:13:55,120 --> 00:13:57,840 Speaker 7: for chap X funding is to demonstrate commercial viability and 313 00:13:57,840 --> 00:14:00,760 Speaker 7: that they have buy in from state and localists to 314 00:14:00,960 --> 00:14:04,600 Speaker 7: marshal the resources necessary to stand up factories that cost 315 00:14:04,640 --> 00:14:07,839 Speaker 7: tens of billions of dollars to build, sometimes require entire 316 00:14:07,960 --> 00:14:13,239 Speaker 7: new water pipelines or energy resources. You know, take Arizona, 317 00:14:13,320 --> 00:14:16,080 Speaker 7: which has not just this massive Intel expansion but also 318 00:14:16,240 --> 00:14:20,920 Speaker 7: a huge factory to factories under construction from PSMC. Arizona 319 00:14:20,960 --> 00:14:24,080 Speaker 7: does one hundred year water planning. This is a desert 320 00:14:24,440 --> 00:14:27,640 Speaker 7: and so they've had to very carefully plan their water 321 00:14:27,720 --> 00:14:31,240 Speaker 7: development ensure residents that their water supply is not going 322 00:14:31,280 --> 00:14:34,040 Speaker 7: to be impacted, and I mean down to the land 323 00:14:34,120 --> 00:14:37,880 Speaker 7: parcels in Arizona, they've planned these industrial park. You see 324 00:14:37,880 --> 00:14:41,040 Speaker 7: similar things happening in Indiana, which is expected to get 325 00:14:41,080 --> 00:14:44,280 Speaker 7: a roughly fifteen billion dollar investment from Skhinex, which is 326 00:14:44,320 --> 00:14:47,000 Speaker 7: one of the main advanced packaging companies out of South Korea. 327 00:14:47,320 --> 00:14:50,640 Speaker 7: That announcement hasn't been formally announced yet on Boo Bloomberg 328 00:14:50,680 --> 00:14:52,880 Speaker 7: has reported on it. So I mean, this is a 329 00:14:52,880 --> 00:14:56,000 Speaker 7: massive infrastructural effort which, as you note, is coming alongside 330 00:14:56,280 --> 00:14:58,960 Speaker 7: a lot of other investments in other sectors coming from 331 00:14:59,000 --> 00:15:03,840 Speaker 7: the Inflation Reduction Act, things like UV's batteries, hydrogen, wind, solar, 332 00:15:04,400 --> 00:15:07,000 Speaker 7: and sort of more traditional heart infrastructure from the Byparts 333 00:15:07,000 --> 00:15:07,800 Speaker 7: and Infrastructure Law. 334 00:15:08,320 --> 00:15:12,520 Speaker 2: All Right, more news mackenzie on the chip front, which 335 00:15:12,520 --> 00:15:15,040 Speaker 2: you're reporting as well. Well, you're all over this stuff. 336 00:15:15,240 --> 00:15:20,400 Speaker 2: The US ways sanctioning Huawei's secretive Chinese chip network. This 337 00:15:20,560 --> 00:15:24,160 Speaker 2: sounds like another round of what may be a technological 338 00:15:24,160 --> 00:15:26,360 Speaker 2: cold war between China and the West. What's the latest 339 00:15:26,400 --> 00:15:27,080 Speaker 2: year with Whuahwei? 340 00:15:28,520 --> 00:15:32,040 Speaker 7: Certainly so this is I would say the strongest potential 341 00:15:32,200 --> 00:15:35,000 Speaker 7: US reactions so far. So a pretty significant breakthrough that 342 00:15:35,080 --> 00:15:39,080 Speaker 7: Huawei had last August. So Huawei has been the target 343 00:15:39,240 --> 00:15:44,440 Speaker 7: of US efforts to curtail China's text development for years now. 344 00:15:44,560 --> 00:15:48,440 Speaker 7: Is originally sanctioned in twenty nineteen the Biden administration that 345 00:15:48,480 --> 00:15:51,000 Speaker 7: was under Trump. The Biden administration followed up with sweeping 346 00:15:51,000 --> 00:15:54,520 Speaker 7: export controls on the ability of US companies and foreign 347 00:15:54,560 --> 00:15:57,480 Speaker 7: companies that use US technology to ship advance shifts and 348 00:15:57,520 --> 00:16:00,320 Speaker 7: ship making equipment to China, and the goal was to 349 00:16:00,440 --> 00:16:04,600 Speaker 7: cap Huawei and other Chinese companies chip development. At what 350 00:16:04,680 --> 00:16:07,880 Speaker 7: we consider an older generation or mature node. And then 351 00:16:08,000 --> 00:16:11,720 Speaker 7: while the Commerce Secretary Junior Raimondo was visiting China in August, 352 00:16:12,040 --> 00:16:14,880 Speaker 7: Huawei unveiled a smartphone that was powered by an advanced 353 00:16:14,880 --> 00:16:17,840 Speaker 7: seven nanimeter chips produced by their chip making partner, Smick, 354 00:16:17,960 --> 00:16:20,720 Speaker 7: also a Chinese company, and a lot of people who've 355 00:16:20,760 --> 00:16:22,480 Speaker 7: been watching the industry for a while saying this isn't 356 00:16:22,480 --> 00:16:25,800 Speaker 7: actually hugely surprising. Of course, China's doubling down on efforts 357 00:16:25,840 --> 00:16:28,240 Speaker 7: to build a full domestic semi conductor supply chain. They 358 00:16:28,320 --> 00:16:31,440 Speaker 7: figured out how to retool some older generation machines from 359 00:16:31,680 --> 00:16:34,960 Speaker 7: the main Dutch equipment maker to produce these chips. But 360 00:16:35,480 --> 00:16:37,560 Speaker 7: a lot of folks in Washington were caught a little 361 00:16:37,560 --> 00:16:41,880 Speaker 7: bit by surprise and has been working on a response. 362 00:16:42,000 --> 00:16:44,360 Speaker 7: And so this is what the response could look like. 363 00:16:44,440 --> 00:16:49,040 Speaker 7: There's a network that Bloomberg reported on last year. The 364 00:16:49,040 --> 00:16:52,600 Speaker 7: Semi Conductor Industry Association of Washington based trade group identified 365 00:16:52,640 --> 00:16:56,360 Speaker 7: several companies that could potentially produce chips for Huawei in 366 00:16:56,400 --> 00:16:59,560 Speaker 7: the future. And so this list affirms that BIDEN is 367 00:16:59,600 --> 00:17:03,480 Speaker 7: considered sanctioning, meaning that any shipments to those companies would 368 00:17:03,520 --> 00:17:06,840 Speaker 7: require a formal license from the Commerce department includes four 369 00:17:06,880 --> 00:17:09,800 Speaker 7: companies that might make chips for Huawei and two companies 370 00:17:09,800 --> 00:17:12,960 Speaker 7: that they're worried. These are not actual shipmakers themselves, but 371 00:17:13,000 --> 00:17:16,280 Speaker 7: they could import advanced equipment and then send that to 372 00:17:16,320 --> 00:17:20,360 Speaker 7: Huaweis or to Huawei's other infomating partners to continue producing 373 00:17:20,359 --> 00:17:21,320 Speaker 7: these chips. 374 00:17:21,600 --> 00:17:23,440 Speaker 5: Really great stuff. You were coming out all the time 375 00:17:23,480 --> 00:17:25,880 Speaker 5: at Kensie Hawkins. Thank you so much, Bloomberg News US 376 00:17:25,920 --> 00:17:29,639 Speaker 5: Industrial Reporter. It's just the whole decoupling thing. Yeah, exactly, 377 00:17:29,680 --> 00:17:31,600 Speaker 5: really hard. It's take out a lot of time. 378 00:17:33,040 --> 00:17:36,880 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 379 00:17:37,000 --> 00:17:40,080 Speaker 1: weekdays at ten am Eastern on Appo, Cardplay and Android 380 00:17:40,080 --> 00:17:43,200 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 381 00:17:43,240 --> 00:17:47,080 Speaker 1: you get your podcasts, or watch us live on YouTube. 382 00:17:47,960 --> 00:17:49,760 Speaker 2: Speaking of Boeing, I'm looking at the stock here. It's 383 00:17:49,800 --> 00:17:52,280 Speaker 2: up about one point eight percent, as Abigail suggested, so 384 00:17:52,560 --> 00:17:54,959 Speaker 2: still down twenty nine percent year to date and off 385 00:17:55,000 --> 00:17:57,080 Speaker 2: about ten percent over tilling twelve months. There really some 386 00:17:57,080 --> 00:17:59,640 Speaker 2: concerns there from investors. So let's check in with George 387 00:17:59,640 --> 00:18:04,320 Speaker 2: Fergus and he's an aerospace and airlines analyst for Bloomberg Intelligence. 388 00:18:05,000 --> 00:18:08,480 Speaker 2: He joins us a via a zoom from Princeton. God 389 00:18:08,520 --> 00:18:10,280 Speaker 2: for Biddy gets on the train and comes to New York. 390 00:18:10,320 --> 00:18:11,840 Speaker 2: But anyway, he's the best on the street, so we 391 00:18:11,880 --> 00:18:15,080 Speaker 2: appreciate getting a few minutes at his time. George, you know, 392 00:18:15,880 --> 00:18:18,159 Speaker 2: I love Boeing. It's just a great American company. I 393 00:18:18,160 --> 00:18:21,920 Speaker 2: love aerospace. But boy, these guys have just seems like 394 00:18:22,000 --> 00:18:23,239 Speaker 2: every day something's happening here. 395 00:18:23,280 --> 00:18:23,359 Speaker 7: Now. 396 00:18:23,359 --> 00:18:25,119 Speaker 2: I guess it's partly you know, the press is just 397 00:18:25,160 --> 00:18:28,040 Speaker 2: picking up on any little thing. But what's going on 398 00:18:28,040 --> 00:18:29,200 Speaker 2: there with Boeing? Really, do you think? 399 00:18:30,600 --> 00:18:30,719 Speaker 6: Well? 400 00:18:30,760 --> 00:18:33,200 Speaker 8: I mean, I think we heard it from Brian West 401 00:18:33,200 --> 00:18:35,000 Speaker 8: this morning. He was in London at the Bank of 402 00:18:35,000 --> 00:18:38,960 Speaker 8: America conference. And you know, besides, I think the cash 403 00:18:38,960 --> 00:18:43,359 Speaker 8: flow guidance he provided, he provided few details about anything else. 404 00:18:43,400 --> 00:18:43,760 Speaker 9: And so. 405 00:18:45,560 --> 00:18:48,439 Speaker 8: He describes a lot of processes, you know, processes at 406 00:18:48,480 --> 00:18:53,760 Speaker 8: the FAA to get airplanes certified, processes and refining, the 407 00:18:53,800 --> 00:18:58,840 Speaker 8: manufacturing process, curing, you know, the excess outsourcing they've probably 408 00:18:58,840 --> 00:19:00,439 Speaker 8: done over the last couple of dedys aids. 409 00:19:01,480 --> 00:19:03,640 Speaker 9: So I think what you really get. 410 00:19:03,520 --> 00:19:05,640 Speaker 8: Is a sense of a company that's in a state 411 00:19:05,640 --> 00:19:08,720 Speaker 8: of a lot of flux, and you know, I think 412 00:19:08,760 --> 00:19:11,879 Speaker 8: that the markets have shown us, you know, the stock 413 00:19:11,920 --> 00:19:13,760 Speaker 8: prices sort of reflects that. 414 00:19:14,720 --> 00:19:16,840 Speaker 5: So George, does that mean so if the stock is 415 00:19:16,920 --> 00:19:18,600 Speaker 5: up two percent, does that mean that it could have 416 00:19:18,600 --> 00:19:19,240 Speaker 5: been worse? Like? 417 00:19:19,320 --> 00:19:20,160 Speaker 4: Is that my takeaway? 418 00:19:20,200 --> 00:19:22,840 Speaker 5: Like that cash burn and the cash outflow could have 419 00:19:22,880 --> 00:19:24,320 Speaker 5: been worse than foreign a half billion. 420 00:19:25,080 --> 00:19:27,560 Speaker 8: Well, that's my biggest takeaway from this was that, you know, 421 00:19:28,040 --> 00:19:30,679 Speaker 8: the market likes the fact that he talked about cashual 422 00:19:30,840 --> 00:19:33,439 Speaker 8: being positive by the end of the year. So it 423 00:19:33,520 --> 00:19:37,320 Speaker 8: sounds like they've got a pretty nice ramp up in 424 00:19:37,720 --> 00:19:40,480 Speaker 8: you know, sort of resuming build rates of their factories 425 00:19:40,880 --> 00:19:41,680 Speaker 8: across the year. 426 00:19:41,880 --> 00:19:43,840 Speaker 9: That was better than what I expected. 427 00:19:44,320 --> 00:19:46,960 Speaker 8: But again, the storyline inside the company is still one 428 00:19:47,000 --> 00:19:51,080 Speaker 8: that's all about flux and not about details. So I 429 00:19:51,119 --> 00:19:53,840 Speaker 8: just wonder. I think I got a sense there's some 430 00:19:53,960 --> 00:19:56,200 Speaker 8: risk in that cashlow projection. 431 00:19:56,760 --> 00:19:59,399 Speaker 2: So, George, you've covered Boeing for decades here, can you 432 00:19:59,440 --> 00:20:02,160 Speaker 2: recall a time when maybe they're they've had these quality 433 00:20:02,240 --> 00:20:05,720 Speaker 2: issues before? Is this how unprecedented disease? You know, last 434 00:20:06,160 --> 00:20:06,800 Speaker 2: couple of years? 435 00:20:06,840 --> 00:20:11,959 Speaker 8: Really, I think thoroughly unprecedented. Right, So, even as I 436 00:20:12,000 --> 00:20:14,919 Speaker 8: was leaving Blackrock, you know, on the during the global 437 00:20:14,960 --> 00:20:18,200 Speaker 8: financial crisis. I remember Boeing stock was down at thirty 438 00:20:18,200 --> 00:20:21,200 Speaker 8: three dollars a share, pretty cheap than what it is today. 439 00:20:22,160 --> 00:20:26,200 Speaker 8: But the discussion then was just about like a defense portfolio, 440 00:20:26,240 --> 00:20:30,679 Speaker 8: who products really weren't that modern, you know, and and 441 00:20:31,280 --> 00:20:34,000 Speaker 8: angst about the company's future, but not these kind of 442 00:20:34,080 --> 00:20:38,000 Speaker 8: problems inside their manufacturing business, which is the core business 443 00:20:38,040 --> 00:20:40,840 Speaker 8: of this company, right, it's an engineering and manufacturing company. 444 00:20:40,840 --> 00:20:44,760 Speaker 8: If you can't manufacture things well in aerospace, that's a 445 00:20:44,800 --> 00:20:46,920 Speaker 8: bad science. So I don't think it's ever been this 446 00:20:47,080 --> 00:20:47,600 Speaker 8: bad ever. 447 00:20:48,080 --> 00:20:50,480 Speaker 5: So just to recap today, at a Bank of America 448 00:20:50,520 --> 00:20:52,920 Speaker 5: conference in London, the CFO, so the cash outflow is 449 00:20:52,920 --> 00:20:54,520 Speaker 5: going to reach four to four and a half billion 450 00:20:54,840 --> 00:20:58,480 Speaker 5: in the first quarter. Analysts we're looking for maybe five 451 00:20:58,520 --> 00:21:01,120 Speaker 5: billion plus, and like you said that maybe we'll get 452 00:21:01,119 --> 00:21:02,720 Speaker 5: cash flow positive by the end of the year. 453 00:21:02,800 --> 00:21:05,960 Speaker 4: That was the indication from Boeing. Do we believe. 454 00:21:06,160 --> 00:21:08,119 Speaker 5: Okay, that's not the right question. How did they come 455 00:21:08,200 --> 00:21:10,199 Speaker 5: up with this estimate? Like what are the factors that 456 00:21:10,240 --> 00:21:11,479 Speaker 5: go into this kind of estimate? 457 00:21:12,080 --> 00:21:14,600 Speaker 8: That's exactly we don't know, right, And so some of 458 00:21:15,119 --> 00:21:18,800 Speaker 8: it's all about deliveries, it's all about deliveries of commercial airplanes. 459 00:21:19,480 --> 00:21:22,600 Speaker 8: And so what I heard, you know, listening to it 460 00:21:22,640 --> 00:21:25,280 Speaker 8: this morning was I heard what I thought was, we're 461 00:21:25,280 --> 00:21:27,879 Speaker 8: going to be at rate thirty eight by the end 462 00:21:27,960 --> 00:21:29,760 Speaker 8: of the year, which is the rate they should have 463 00:21:29,840 --> 00:21:30,960 Speaker 8: probably built out. 464 00:21:30,880 --> 00:21:31,760 Speaker 2: All year long. 465 00:21:32,440 --> 00:21:34,440 Speaker 8: And then we'll move to the next higher rate, that's 466 00:21:34,440 --> 00:21:36,480 Speaker 8: thirty eight a month, sorry on the seven thirty seven, 467 00:21:36,920 --> 00:21:39,480 Speaker 8: and we'll move to the next higher rate when. 468 00:21:39,320 --> 00:21:40,760 Speaker 9: The FAA lets us. 469 00:21:41,320 --> 00:21:44,440 Speaker 8: So we'll publish tomorrow on the Bloomberg Terminal our view 470 00:21:44,520 --> 00:21:47,400 Speaker 8: at Bloomberg Intelligence of what we think build rates were. 471 00:21:47,480 --> 00:21:49,720 Speaker 8: I can tell you we have factored in a fourth 472 00:21:49,800 --> 00:21:53,520 Speaker 8: quarter at rate thirty eight, but it sounds like quarter 473 00:21:53,560 --> 00:21:55,840 Speaker 8: one is going to be a really rough quarter. So 474 00:21:55,840 --> 00:21:57,920 Speaker 8: they'll have to pull a lot of things back together 475 00:21:58,400 --> 00:22:00,479 Speaker 8: to get rate back to thirty eight by the end 476 00:22:00,480 --> 00:22:00,920 Speaker 8: of the year. 477 00:22:01,680 --> 00:22:04,800 Speaker 5: I think it's everything has to go right, yeah, for 478 00:22:05,359 --> 00:22:07,719 Speaker 5: that to happen, Paul, And as we know, that never happened. 479 00:22:08,080 --> 00:22:10,280 Speaker 2: Never happens. But George, you've told us in the past, 480 00:22:10,600 --> 00:22:12,959 Speaker 2: in the airspace business, there is no hey, we did 481 00:22:12,960 --> 00:22:14,679 Speaker 2: a pretty good job on this plane. It has to 482 00:22:14,680 --> 00:22:19,880 Speaker 2: be perfect every single time, otherwise it's disastrous. And from 483 00:22:19,920 --> 00:22:21,520 Speaker 2: their customers perspective. 484 00:22:21,520 --> 00:22:21,840 Speaker 9: Georgia. 485 00:22:21,800 --> 00:22:24,480 Speaker 2: If I'm a big buyer, like a Southwest or United, 486 00:22:25,200 --> 00:22:27,000 Speaker 2: what am I saying to these guys? I mean, I 487 00:22:27,359 --> 00:22:30,639 Speaker 2: fly thousands of these planes every single day in my fleet. 488 00:22:30,960 --> 00:22:32,359 Speaker 2: What am I telling Boeing these days? 489 00:22:32,920 --> 00:22:35,800 Speaker 8: Yeah, so you're watching very very closely. Of course, you're 490 00:22:35,840 --> 00:22:40,159 Speaker 8: telling Boeing the quality is job one. Safety quality is 491 00:22:40,280 --> 00:22:43,040 Speaker 8: job one. But if you're especially if you're like a 492 00:22:43,080 --> 00:22:46,400 Speaker 8: Southwest or a Ryanair where you're a pure fleet, right, 493 00:22:46,440 --> 00:22:50,320 Speaker 8: you really can't afford your most important supplier to have 494 00:22:50,440 --> 00:22:55,000 Speaker 8: problems like this. So I think you're quietly coaching them 495 00:22:55,080 --> 00:22:58,399 Speaker 8: to improve things, hoping for better, but you're probably biting 496 00:22:58,400 --> 00:23:01,000 Speaker 8: your nails a little bit, right because if they it 497 00:23:01,040 --> 00:23:05,280 Speaker 8: continues to be serious problems, You're not switching to Airbus, 498 00:23:05,600 --> 00:23:06,360 Speaker 8: you know, overnight. 499 00:23:06,400 --> 00:23:08,360 Speaker 9: And I don't know that those people are considering it. 500 00:23:08,480 --> 00:23:11,000 Speaker 8: I'm not saying that they are, but you got to 501 00:23:11,000 --> 00:23:12,679 Speaker 8: be concerned. You've got to be watching very closely. 502 00:23:12,960 --> 00:23:14,800 Speaker 5: Does the cash burn that they're looking at for the 503 00:23:14,800 --> 00:23:17,560 Speaker 5: first quarter would that I guess the answer is no. 504 00:23:17,680 --> 00:23:19,560 Speaker 5: But I'm just wondering if they wind up buying Spirit 505 00:23:20,760 --> 00:23:23,920 Speaker 5: what that does to their cash burn, Like, they look 506 00:23:23,960 --> 00:23:26,639 Speaker 5: optimistic about getting back to their ramp rate of thirty 507 00:23:26,640 --> 00:23:28,840 Speaker 5: eight per month by the end of the year, But 508 00:23:28,840 --> 00:23:30,960 Speaker 5: what if they buy Spirit. Doesn't that get worse? Isn't 509 00:23:30,960 --> 00:23:32,359 Speaker 5: there cash burn get worse? 510 00:23:33,240 --> 00:23:33,480 Speaker 1: Well? 511 00:23:33,560 --> 00:23:36,520 Speaker 8: I mean so, I guess to some degree, there's some 512 00:23:36,560 --> 00:23:39,199 Speaker 8: things that end up getting hidden when you start buying Spirit, right, 513 00:23:39,200 --> 00:23:42,440 Speaker 8: because there's no If Spirit's showing a loss because they're 514 00:23:42,480 --> 00:23:45,840 Speaker 8: selling a fuselage to Boeing at a loss, you know 515 00:23:45,880 --> 00:23:48,080 Speaker 8: Boeing is getting some excess out of that, that whole 516 00:23:48,080 --> 00:23:51,000 Speaker 8: thing washes out. So you can't always say just because 517 00:23:51,000 --> 00:23:53,359 Speaker 8: they're pulling Spirit in it's going to be a loss. 518 00:23:53,400 --> 00:23:56,040 Speaker 8: It depends how they structure that whole thing too, Right, 519 00:23:56,040 --> 00:23:58,760 Speaker 8: if they hive off the airbus businesses, we think some 520 00:23:58,800 --> 00:24:01,560 Speaker 8: of those are loss making that can make things better. 521 00:24:02,320 --> 00:24:05,160 Speaker 8: I think it's I think it's really really hard to tell. 522 00:24:05,200 --> 00:24:07,360 Speaker 8: But for sure there'll be a lot of work down 523 00:24:07,400 --> 00:24:10,160 Speaker 8: at Spirit to make sure they stabilize the production at Spirit, 524 00:24:10,520 --> 00:24:12,359 Speaker 8: and that's not going to help cash burn either. But 525 00:24:12,760 --> 00:24:16,600 Speaker 8: I'd assume Brian had that built into his assumptions. 526 00:24:17,480 --> 00:24:20,520 Speaker 2: George, Let's talk about the other half of your research coverage, 527 00:24:20,520 --> 00:24:24,440 Speaker 2: which is the airlines themselves. I just flew Newark to 528 00:24:24,720 --> 00:24:28,760 Speaker 2: Salt Lake City seven thirty seven Max eight fully packed 529 00:24:28,960 --> 00:24:32,320 Speaker 2: to the gills both ways. How are the airlines doing 530 00:24:32,400 --> 00:24:32,800 Speaker 2: these days? 531 00:24:33,960 --> 00:24:36,439 Speaker 8: Yeah, so in one queue, I think a bunch of 532 00:24:36,440 --> 00:24:39,560 Speaker 8: them are going to show losses. So they're filling airplanes 533 00:24:39,600 --> 00:24:42,560 Speaker 8: because I think the revenue managers never let airplanes go 534 00:24:42,640 --> 00:24:45,879 Speaker 8: down the runway with almost you know, being entirely full. 535 00:24:46,560 --> 00:24:48,879 Speaker 8: But everything what counts, as you know, the most is 536 00:24:48,920 --> 00:24:51,960 Speaker 8: going to be the ticket prices. And you know, when 537 00:24:51,960 --> 00:24:53,840 Speaker 8: we looked at four Q as we closed out of 538 00:24:53,840 --> 00:24:58,399 Speaker 8: four Q, the biggest challenge to the higher revenue that 539 00:24:58,400 --> 00:25:00,640 Speaker 8: they were bringing in was all about out these higher 540 00:25:00,640 --> 00:25:01,440 Speaker 8: pilot salaries. 541 00:25:01,480 --> 00:25:03,560 Speaker 9: Right. They gave a bunch away to the pilots, and 542 00:25:03,640 --> 00:25:04,280 Speaker 9: so while. 543 00:25:04,040 --> 00:25:07,080 Speaker 8: We're all paying more for the ticket, the pilot's getting 544 00:25:07,080 --> 00:25:07,840 Speaker 8: more in the front seat. 545 00:25:08,119 --> 00:25:10,000 Speaker 9: They probably deserve it. They work pretty hard. 546 00:25:10,680 --> 00:25:13,080 Speaker 2: And it's so happy you do. 547 00:25:13,200 --> 00:25:16,640 Speaker 9: Actually, So profitability is still challenged. 548 00:25:16,640 --> 00:25:20,000 Speaker 8: Compared to what we saw last decade, I think fares 549 00:25:20,000 --> 00:25:22,520 Speaker 8: would have to go even higher, and we've seen them 550 00:25:22,560 --> 00:25:25,040 Speaker 8: softening a bit. This summer could be a little bit 551 00:25:25,040 --> 00:25:27,440 Speaker 8: better for the airlines. You know, if we have a 552 00:25:27,480 --> 00:25:29,760 Speaker 8: bunch of Airbus A three twenties out of the market 553 00:25:29,760 --> 00:25:32,800 Speaker 8: because of the gear turbo fan problems. If Boeing deliveries 554 00:25:32,840 --> 00:25:35,240 Speaker 8: are slowing down capacity gains in the. 555 00:25:35,119 --> 00:25:37,399 Speaker 9: Marketplace, it could be a little bit better. 556 00:25:37,680 --> 00:25:39,720 Speaker 8: But we're not looking at an environment where we think 557 00:25:39,720 --> 00:25:42,439 Speaker 8: they're going to see twenty nineteen levels of profitability, not 558 00:25:42,480 --> 00:25:46,240 Speaker 8: twenty nineteen, you know, even last decade levels of profitability 559 00:25:46,280 --> 00:25:46,840 Speaker 8: this summer. 560 00:25:46,880 --> 00:25:49,800 Speaker 9: So I'd say profits still a little bit weak. As 561 00:25:49,800 --> 00:25:52,560 Speaker 9: the airlines recover, I think there might. 562 00:25:52,400 --> 00:25:54,320 Speaker 8: Be just too much capacity in the marketplace to get 563 00:25:54,320 --> 00:25:55,359 Speaker 8: at the cutting right. 564 00:25:55,920 --> 00:25:58,119 Speaker 5: Like getn't just blu anounced they're going to cut capacity. 565 00:25:58,200 --> 00:26:00,480 Speaker 5: They're getting out of certain markets and stuff like. I mean, 566 00:26:00,560 --> 00:26:02,360 Speaker 5: it feels like the capacity cuts are underway. 567 00:26:02,960 --> 00:26:05,040 Speaker 8: There's a lot of discussion at the airlines about how 568 00:26:05,080 --> 00:26:09,680 Speaker 8: to optimize schedules to try to improve fares. Like you said, 569 00:26:09,960 --> 00:26:13,560 Speaker 8: airlines like Jet Blue Spirit pushing back some of their 570 00:26:13,840 --> 00:26:16,960 Speaker 8: new deliveries as they manage balance sheets a little better 571 00:26:16,960 --> 00:26:20,280 Speaker 8: and think about, you know, their their financial health. I 572 00:26:20,320 --> 00:26:23,040 Speaker 8: wouldn't say that all signals are rosy inside that market. 573 00:26:23,080 --> 00:26:26,720 Speaker 8: I think they're especially on the low cost budget side. 574 00:26:26,760 --> 00:26:30,240 Speaker 8: I think there's probably too much seat capacity in the 575 00:26:30,359 --> 00:26:33,440 Speaker 8: in the budget world, and folks have to think about 576 00:26:33,480 --> 00:26:35,720 Speaker 8: how they could fix that in order to get better 577 00:26:35,760 --> 00:26:37,280 Speaker 8: fares and improve profitability. 578 00:26:37,359 --> 00:26:39,639 Speaker 5: I have a question, why do some of my business 579 00:26:39,640 --> 00:26:41,879 Speaker 5: class tickets I have Sometimes I have a TV on 580 00:26:41,920 --> 00:26:45,000 Speaker 5: the back, and sometimes I don't, And it gets really confusing. 581 00:26:45,920 --> 00:26:47,280 Speaker 4: Why is this? George? 582 00:26:48,760 --> 00:26:51,960 Speaker 8: You know, it's all about how you know the airplane 583 00:26:51,960 --> 00:26:55,840 Speaker 8: they're using, how it's been outfitted. Sometimes it's on length 584 00:26:55,880 --> 00:26:57,960 Speaker 8: of haul and how important the market is. 585 00:26:58,040 --> 00:26:58,240 Speaker 9: Right. 586 00:26:58,520 --> 00:27:01,760 Speaker 8: I've had overnight flights that come out of San Diego 587 00:27:02,000 --> 00:27:03,720 Speaker 8: where I can't even get a live flat seat on it, 588 00:27:03,720 --> 00:27:05,879 Speaker 8: and I'm a business class. You come out of LA 589 00:27:05,960 --> 00:27:07,800 Speaker 8: you get a live flat seat. Because competition is a 590 00:27:07,840 --> 00:27:10,399 Speaker 8: lot more intense than it. It depends about competition in 591 00:27:10,400 --> 00:27:15,080 Speaker 8: those marketplaces. It's about airlines using older equipment. But there 592 00:27:15,200 --> 00:27:18,359 Speaker 8: is even a school out there that says, why bother 593 00:27:18,480 --> 00:27:21,720 Speaker 8: putting a screen behind any seat anymore? Because everybody gets 594 00:27:21,720 --> 00:27:24,400 Speaker 8: on the airplane with an iPad or an iPhone will 595 00:27:24,400 --> 00:27:27,240 Speaker 8: stream them their content. Save all those electronics behind the 596 00:27:27,280 --> 00:27:29,840 Speaker 8: see save all that weight. Maybe it's a better world. 597 00:27:29,920 --> 00:27:32,360 Speaker 8: Sounds like you vote no exactly. 598 00:27:32,400 --> 00:27:33,199 Speaker 2: That's a good point. 599 00:27:33,440 --> 00:27:35,520 Speaker 5: Yeah, well it's just not consistent. So it makes me 600 00:27:35,560 --> 00:27:38,600 Speaker 5: scratch my head. So going to Houston. I've been back 601 00:27:38,640 --> 00:27:42,000 Speaker 5: and forth and called last couple weeks TV super nice plane, 602 00:27:42,640 --> 00:27:43,280 Speaker 5: all good. 603 00:27:43,480 --> 00:27:44,040 Speaker 4: Coming back. 604 00:27:44,080 --> 00:27:47,359 Speaker 5: Both times I'm like, oh, okay, this is an old plane, 605 00:27:47,440 --> 00:27:49,400 Speaker 5: isn't it, And like you don't have a TV. 606 00:27:50,080 --> 00:27:53,480 Speaker 2: George Ferguson, what's happening? I mean, right, George Ferguson, Thank 607 00:27:53,520 --> 00:27:55,200 Speaker 2: you very much. You can go back to work here 608 00:27:55,240 --> 00:27:57,000 Speaker 2: George Ferguson Aerospace Airlines and. 609 00:27:58,760 --> 00:28:02,640 Speaker 1: You're listening to the Bloomer Intelligence podcast. Catch us live 610 00:28:02,720 --> 00:28:06,240 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 611 00:28:06,280 --> 00:28:09,040 Speaker 1: Auto with a Bloomberg Business app. You can also listen 612 00:28:09,160 --> 00:28:12,280 Speaker 1: live on Amazon Alexa from our flagship New York station, 613 00:28:12,640 --> 00:28:15,679 Speaker 1: Just Say Alexa playing Bloomberg eleven thirty. 614 00:28:17,200 --> 00:28:20,200 Speaker 2: Looking at the shares of Caring. That's the owner of 615 00:28:20,240 --> 00:28:24,359 Speaker 2: a bunch of luxury good manufacturers, most notably Gucci. And 616 00:28:24,400 --> 00:28:26,000 Speaker 2: if you're looking for a good book in a good movie, 617 00:28:26,000 --> 00:28:29,840 Speaker 2: the House of Gucci is awesome and it really gives 618 00:28:29,880 --> 00:28:32,040 Speaker 2: a good sense what's happening there in that world. But boy, 619 00:28:32,040 --> 00:28:35,159 Speaker 2: the stocks down thirteen percent here today. I need to 620 00:28:35,160 --> 00:28:36,840 Speaker 2: figure out why. So I go to one person, one 621 00:28:36,840 --> 00:28:39,400 Speaker 2: person only. That's Debacon. She's a senior in retail annalys 622 00:28:39,440 --> 00:28:43,480 Speaker 2: of Bloomberg Intelligence covering the luxury space, amongst others. But 623 00:28:43,520 --> 00:28:46,440 Speaker 2: I think your real forte is the luxury space. Got 624 00:28:46,480 --> 00:28:48,320 Speaker 2: a really good sense of what's going on out there 625 00:28:48,360 --> 00:28:51,960 Speaker 2: Bloomberg Intelligence in London. So deb carrying this is a 626 00:28:51,960 --> 00:28:54,040 Speaker 2: big company, it's got a forty five billion dollar market 627 00:28:54,040 --> 00:28:56,520 Speaker 2: cap stock, but it's really taking it on the chin today. 628 00:28:56,520 --> 00:28:59,840 Speaker 2: What did the company announce? And what's going on with 629 00:29:00,080 --> 00:29:01,120 Speaker 2: friends of Gucci. 630 00:29:02,440 --> 00:29:06,680 Speaker 6: Right high? So it was a prelimb on the Q 631 00:29:06,760 --> 00:29:12,800 Speaker 6: one in the knowledge that Gucci was by far weaker 632 00:29:12,800 --> 00:29:16,680 Speaker 6: than the market had expected, particularly out of Asia. So 633 00:29:16,800 --> 00:29:21,280 Speaker 6: the idea here a guided ten percent for coring overall 634 00:29:21,440 --> 00:29:25,640 Speaker 6: in the one queue. This whole group will start reporting 635 00:29:25,760 --> 00:29:29,400 Speaker 6: mid April, and then for Gucci in particular, they expected 636 00:29:29,480 --> 00:29:34,920 Speaker 6: to be down around twenty percent. Now what that does 637 00:29:35,040 --> 00:29:38,480 Speaker 6: Gucci into these numbers was fifty percent of cells and 638 00:29:38,520 --> 00:29:43,479 Speaker 6: a much higher contributor to profitability and cash flow. We 639 00:29:43,520 --> 00:29:46,680 Speaker 6: already know that the whole sector is up against very 640 00:29:46,720 --> 00:29:51,120 Speaker 6: high comps, including but not actually Gucci, because we know 641 00:29:51,200 --> 00:29:53,680 Speaker 6: that it's been going through almost two years of transition, 642 00:29:55,040 --> 00:29:58,680 Speaker 6: but the brand did. The underlying product that's behind the 643 00:29:58,680 --> 00:30:02,840 Speaker 6: brand while it transitions to a new creative director, is 644 00:30:03,000 --> 00:30:05,800 Speaker 6: just not resonating out in Asia or is not being 645 00:30:05,840 --> 00:30:08,880 Speaker 6: backed perhaps in the way that it should with investment 646 00:30:09,080 --> 00:30:10,480 Speaker 6: and direct advertising. 647 00:30:11,640 --> 00:30:14,240 Speaker 5: How much of it is also that Gucci in some 648 00:30:14,280 --> 00:30:17,200 Speaker 5: ways I appreciate it's not cheap, but it became like 649 00:30:17,240 --> 00:30:21,120 Speaker 5: an aspirational thing for young people. And if that's the 650 00:30:21,160 --> 00:30:23,760 Speaker 5: area of consumer that's also getting hit, like it's not 651 00:30:23,840 --> 00:30:26,440 Speaker 5: our mes right, Like it's not like insane high end. 652 00:30:26,920 --> 00:30:29,120 Speaker 5: They're trying to be sort of cooler. They're trying to 653 00:30:29,120 --> 00:30:30,840 Speaker 5: get that aspirational buyer. 654 00:30:31,520 --> 00:30:32,280 Speaker 4: Is that a mistake? 655 00:30:34,080 --> 00:30:36,840 Speaker 6: So the idea actually with Gucci's that that's where they 656 00:30:36,960 --> 00:30:41,760 Speaker 6: ended up after three years of thirty to forty percent 657 00:30:41,880 --> 00:30:46,320 Speaker 6: of sales and into so many categories and their brand. 658 00:30:47,440 --> 00:30:49,520 Speaker 6: It reminds me of something that happened a few years 659 00:30:49,560 --> 00:30:53,640 Speaker 6: ago also with Birbury. So their brand became more of 660 00:30:53,680 --> 00:30:58,240 Speaker 6: a fashion focus brand, a lot of a listers in 661 00:30:58,280 --> 00:31:02,320 Speaker 6: the younger generation, a lot of products that were kind 662 00:31:02,320 --> 00:31:07,440 Speaker 6: of niche in their product portfolio, and it lost what 663 00:31:07,560 --> 00:31:11,880 Speaker 6: I would classes the exclusivity, the high end, the level 664 00:31:11,880 --> 00:31:14,600 Speaker 6: of production that is expected for one of the names 665 00:31:14,640 --> 00:31:16,840 Speaker 6: you've given at the very high end, and what has 666 00:31:16,840 --> 00:31:18,880 Speaker 6: actually tried to do over the last two years is 667 00:31:18,920 --> 00:31:24,080 Speaker 6: to elevate luxury and identity and it's failed on that. 668 00:31:24,200 --> 00:31:27,680 Speaker 6: So it has a new creative director in place. Products 669 00:31:27,680 --> 00:31:31,000 Speaker 6: adjus in from mid February are only and ready to wear, 670 00:31:31,040 --> 00:31:33,600 Speaker 6: which is fifteen percent of the business there, and it 671 00:31:33,640 --> 00:31:35,480 Speaker 6: needs the rest of the year to roll that out. 672 00:31:35,520 --> 00:31:39,600 Speaker 6: And in the meantime, particularly in Asia, it's very much 673 00:31:39,760 --> 00:31:44,160 Speaker 6: a wholesale backed market where those wholesale accounts aren't willing 674 00:31:44,200 --> 00:31:47,920 Speaker 6: to take the risk on inventry which could become very 675 00:31:47,960 --> 00:31:53,200 Speaker 6: quickly obsolete from the prior creative director, and separately where 676 00:31:53,440 --> 00:31:55,800 Speaker 6: the new creative director is not yet tested. 677 00:31:56,600 --> 00:31:59,680 Speaker 2: So I know from talking to you in a pass 678 00:31:59,720 --> 00:32:03,640 Speaker 2: and reading your research the Asian consumer is so key. 679 00:32:03,640 --> 00:32:07,480 Speaker 2: The Asian market is so key, particularly China. What do 680 00:32:07,560 --> 00:32:09,840 Speaker 2: we hear because I don't see the Chinese shoppers on 681 00:32:09,920 --> 00:32:11,480 Speaker 2: Fifth Avenue. I'm not sure if you've seen them on 682 00:32:11,480 --> 00:32:12,440 Speaker 2: the high streets in London. 683 00:32:12,480 --> 00:32:14,920 Speaker 4: But nothing. There's French people now in for that avenue. 684 00:32:14,960 --> 00:32:17,640 Speaker 2: There's all the Europeans are everywhere here, which is great. 685 00:32:17,640 --> 00:32:20,880 Speaker 2: They're always welcome in New York. But I don't see 686 00:32:20,480 --> 00:32:23,240 Speaker 2: the Asian shoppers. So talk to us about China. What 687 00:32:23,240 --> 00:32:24,160 Speaker 2: that means for luxury? 688 00:32:25,400 --> 00:32:27,840 Speaker 6: Oh, what's happening at the moment. There's a lot of 689 00:32:27,880 --> 00:32:31,040 Speaker 6: domestic spend. Now there is certainly what's propping up in 690 00:32:31,200 --> 00:32:35,160 Speaker 6: positive comments. After these results, we went through searching as 691 00:32:35,200 --> 00:32:38,040 Speaker 6: a reminder what was said by Mmes, by Kushin Ali, 692 00:32:38,080 --> 00:32:41,280 Speaker 6: Bipradra and others, and will certainly pop some of that 693 00:32:41,400 --> 00:32:45,360 Speaker 6: information out there. But overall, when you think about the 694 00:32:45,440 --> 00:32:50,560 Speaker 6: Chinese consumer, the numbers for the Chinese consumer or Asia 695 00:32:50,640 --> 00:32:54,520 Speaker 6: overall is still only about eighty percent recovered where it was. 696 00:32:55,440 --> 00:33:00,959 Speaker 6: Chinese consumer is shopping on the mainland. Excuse me, shopping 697 00:33:01,000 --> 00:33:03,880 Speaker 6: on the mainland. But also I was hearing from one 698 00:33:03,880 --> 00:33:08,160 Speaker 6: of our colleagues, Thailand is very very popular right now 699 00:33:08,200 --> 00:33:10,920 Speaker 6: because of price sensitivity. They can get a very good 700 00:33:10,960 --> 00:33:14,000 Speaker 6: break over there. Hong Kong, you only have a seven 701 00:33:14,120 --> 00:33:20,600 Speaker 6: day permit to stay from the Chinese mainland and so 702 00:33:20,760 --> 00:33:24,440 Speaker 6: therefore others are becoming more popular, like traveling to Singapore 703 00:33:24,440 --> 00:33:27,320 Speaker 6: where you have thirty day visa free. So there is 704 00:33:27,440 --> 00:33:29,960 Speaker 6: movement around, but it's just not really long haul yet, 705 00:33:30,040 --> 00:33:32,520 Speaker 6: and we weren't expecting that until the second half the year. 706 00:33:32,880 --> 00:33:35,320 Speaker 6: With what's happening with real estate another we're kind of 707 00:33:35,360 --> 00:33:38,400 Speaker 6: pushing that into end of the year twenty twenty five. 708 00:33:39,000 --> 00:33:43,000 Speaker 5: So clearly this news is driving down most luxury stocks today, 709 00:33:43,000 --> 00:33:46,080 Speaker 5: all lugsury stocks today, which one shouldn't be beaten. 710 00:33:45,880 --> 00:33:52,240 Speaker 6: Up if I look at the end of twenty twenty three. 711 00:33:53,040 --> 00:33:55,640 Speaker 6: First of all, I should highlight half one twenty four. 712 00:33:55,680 --> 00:33:58,040 Speaker 6: We came into this year saying it was very much 713 00:33:58,080 --> 00:34:00,760 Speaker 6: going to be a tale of two halves. That's not 714 00:34:00,800 --> 00:34:03,080 Speaker 6: on a big pickup in the market per se, but 715 00:34:03,160 --> 00:34:05,560 Speaker 6: it's on the fact that the first half comps are 716 00:34:05,600 --> 00:34:09,600 Speaker 6: particularly heavy versus the second half. Even for emes, you're 717 00:34:09,640 --> 00:34:12,680 Speaker 6: looking at almost thirty percent growth in the first half 718 00:34:12,920 --> 00:34:15,120 Speaker 6: and half of that in the second half, so they're 719 00:34:15,160 --> 00:34:17,799 Speaker 6: up against big comps. But what doesn't get beaten up 720 00:34:17,840 --> 00:34:21,240 Speaker 6: it's the very high end of the hierarchy. So generally 721 00:34:21,400 --> 00:34:26,279 Speaker 6: it's MS. It's also prot should do very well. It's Kushnelly, 722 00:34:26,480 --> 00:34:30,160 Speaker 6: it's within the alviumhor portfolio. There are some brands which 723 00:34:30,200 --> 00:34:33,399 Speaker 6: they really pick out. Louis Vitandi or and others which 724 00:34:33,640 --> 00:34:34,800 Speaker 6: should still hold well. 725 00:34:35,800 --> 00:34:39,720 Speaker 5: But even with your stand I know they're really nice, 726 00:34:39,920 --> 00:34:42,759 Speaker 5: it's really expensive and they're pretty, but it's like it's 727 00:34:42,760 --> 00:34:45,719 Speaker 5: like suits and stuff, it's like regular clothes, Like it's 728 00:34:45,760 --> 00:34:47,120 Speaker 5: not I don't get it right. 729 00:34:50,160 --> 00:34:53,240 Speaker 6: I think with the Kushinelli side, it's about the quality 730 00:34:53,280 --> 00:34:55,799 Speaker 6: and what it offers, the fact that the product is 731 00:34:56,360 --> 00:34:59,640 Speaker 6: there with longevity, very well made, so it's a piece 732 00:34:59,680 --> 00:35:01,440 Speaker 6: that you can but in your wardrobe. A lot of 733 00:35:01,440 --> 00:35:05,400 Speaker 6: it is not seasonal, so you're buying a piece for 734 00:35:06,160 --> 00:35:08,640 Speaker 6: an event or the office or so, and it's something 735 00:35:08,680 --> 00:35:10,080 Speaker 6: that you can regularly use. 736 00:35:10,960 --> 00:35:13,320 Speaker 2: How is the luxury shopping? I know, as part of 737 00:35:13,320 --> 00:35:15,520 Speaker 2: your duligiens you'll go around to some of the luxury 738 00:35:15,520 --> 00:35:18,919 Speaker 2: stores in London. How are things in London and maybe 739 00:35:18,920 --> 00:35:20,840 Speaker 2: even Paris and the other places you go? 740 00:35:21,680 --> 00:35:26,040 Speaker 6: Yeah, and I would say quite mixed. Actually you see 741 00:35:27,400 --> 00:35:29,640 Speaker 6: more of the high end where they're in there and 742 00:35:29,680 --> 00:35:33,880 Speaker 6: really being highly serviced and not so many not so 743 00:35:33,960 --> 00:35:37,240 Speaker 6: many bags on the high street. We are still seeing 744 00:35:38,080 --> 00:35:42,480 Speaker 6: decent numbers in terms of e commerce growth, but there 745 00:35:42,520 --> 00:35:45,520 Speaker 6: are there are very high end product. There's very high 746 00:35:45,640 --> 00:35:48,840 Speaker 6: end product out there in bags if you're in particular stores, 747 00:35:48,880 --> 00:35:51,320 Speaker 6: but then you're only in selective stores where the brand 748 00:35:51,400 --> 00:35:55,479 Speaker 6: is stocked, and so it is quite mixed out there 749 00:35:55,520 --> 00:35:57,160 Speaker 6: in any major cities. 750 00:35:57,520 --> 00:35:59,319 Speaker 2: Okay, Dev, thanks so much for joining us. As always, 751 00:35:59,360 --> 00:36:02,440 Speaker 2: debiecon she covers all the retailers, including the luxury names. 752 00:36:03,440 --> 00:36:07,680 Speaker 2: For Bloomberg Intelligence based in London again Carringstock, owner of 753 00:36:08,200 --> 00:36:12,160 Speaker 2: several luxury brands including Gucci. Down about thirteen percent here today. 754 00:36:12,280 --> 00:36:16,759 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apples, Spotify, 755 00:36:16,960 --> 00:36:19,880 Speaker 1: and anywhere else you will get your podcasts. Listen live 756 00:36:19,960 --> 00:36:23,600 Speaker 1: each weekday ten am to noon Eastern on Bloomberg dot com, 757 00:36:23,680 --> 00:36:27,080 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 758 00:36:27,200 --> 00:36:30,160 Speaker 1: You can also watch us live every weekday on YouTube 759 00:36:30,440 --> 00:36:32,280 Speaker 1: and always on the Bloomberg terminal