WEBVTT - White House Eyeing Chips Act Funds for Intel Stake 

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<v Speaker 2>So the Trump administration reportedly and talks with Intel to

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<v Speaker 2>have the US government take a stake in the company.

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<v Speaker 2>What does this all mean. Let's go to someone who

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<v Speaker 2>knows about it. It's Ryan Gold. He's Bloomberg Deals reporter,

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<v Speaker 2>joining us live here in the studio.

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<v Speaker 3>Ryan, Thanks for joining us. What would a deal like

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<v Speaker 3>this do?

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<v Speaker 4>I think this probably should be seen as a way

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<v Speaker 4>to potentially show up Intel's balance sheet. I mean, it's

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<v Speaker 4>a company that's mean struggling, it's losing money. It's really

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<v Speaker 4>got an ambition to return semiconductive manufacturing on mass to

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<v Speaker 4>the United States in a way that we've not seen

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<v Speaker 4>in use. It's all centered around the Ohio plant. The

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<v Speaker 4>Ohio plant has been seen as a way for Intel

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<v Speaker 4>to become a shining light across the world. That he

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<v Speaker 4>said by twenty thirty it was going to be one

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<v Speaker 4>of the biggest and the best in the world. Obviously

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<v Speaker 4>that hasn't been the case. It's been delayed quite a

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<v Speaker 4>few times. So this investment, this proposed investment should probably

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<v Speaker 4>be viewed as a confidence capital type of arrangement for Intel,

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<v Speaker 4>you know, bring give some confidence to investors that this

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<v Speaker 4>is something they should stand behind because it has the

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<v Speaker 4>backing of the most credit worthy institution in the world.

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<v Speaker 5>We don't do this very often. We've been the US government.

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<v Speaker 6>This is a monstrous change in industrial policy. What are

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<v Speaker 6>folks saying out there about this?

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<v Speaker 4>It is I think, you know, certainly among the people

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<v Speaker 4>I've been speaking to, this is something that you know,

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<v Speaker 4>it's a new dawn in a way. I mean, if

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<v Speaker 4>you're a bank or a lawyer, or anyone on Wall

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<v Speaker 4>Street thinking about struggling US companies in quote unquote mission

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<v Speaker 4>critical industries or industries that are sensitive to the United States,

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<v Speaker 4>is the government now an option for you? I mean,

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<v Speaker 4>we think back to the financial crisis, the Cristo GM

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<v Speaker 4>and so on. I mean that's years ago. I mean,

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<v Speaker 4>tied has turned since then, clearly, But it does seem

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<v Speaker 4>as though just given some of these other transactions we've seen,

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<v Speaker 4>like MP materials, like the almost you know, pay per

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<v Speaker 4>play in a way in video agreement with AMD as

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<v Speaker 4>well the fifteen percent that Trump struck to allow China

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<v Speaker 4>to have these chips. It does seem like a new time,

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<v Speaker 4>a new dawn for how to think about, you know,

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<v Speaker 4>the Trump's administration's play with private industry.

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<v Speaker 2>So who's going to pay for the stake? I mean,

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<v Speaker 2>we're hearing the Trump administration eyeing the Chips Act?

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<v Speaker 3>Is that right? Yeah?

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<v Speaker 4>So far? I mean, we just ran a story this morning.

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<v Speaker 4>Our understanding is that at least for now, the funding

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<v Speaker 4>could come from the Chip SECT. I mean, bearing in mind,

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<v Speaker 4>the Chips Act was passed in twenty twenty two, committing

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<v Speaker 4>two hundred and eighty billion dollars in new funding for

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<v Speaker 4>domestic research and manufacturing of semis in the United States.

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<v Speaker 4>Intel was already poised to be the biggest beneficiary of

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<v Speaker 4>the Chip SECT. I mean, I think they were awarded

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<v Speaker 4>seven point nine billion dollars in grants for a commercial

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<v Speaker 4>semi manufacturing program, and they also struck agreement with the

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<v Speaker 4>Pentagon under the Secure Enclay program that was worth around

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<v Speaker 4>three billion. So Intel's already seen quite a bit of

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<v Speaker 4>this money. It remains to be seeing exactly how much

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<v Speaker 4>or what size stake the government will take.

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<v Speaker 3>Does Intel do they welcome a stake by the US government.

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<v Speaker 3>Have they said anything?

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<v Speaker 4>They haven't said anything. I think one of the things

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<v Speaker 4>that was kind of telling yesterday when we went to

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<v Speaker 4>them for comment, they you know, the client to comment

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<v Speaker 4>on what they called rumors in speculation, But they did

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<v Speaker 4>add that they were deeply committed to supporting administration's efforts

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<v Speaker 4>to strengthen US technology and manufacturing leadership. I mean, make

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<v Speaker 4>no mistake, Intel sees itself that it should be the

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<v Speaker 4>leader in semiconductor manufacturing. It has always been in the

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<v Speaker 4>shadow of TSMC as it relates to semiconductor fabs. I

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<v Speaker 4>think they do feel as though this could be a

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<v Speaker 4>potentially very good time for them to change course and

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<v Speaker 4>return to the top of the channel.

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<v Speaker 2>So do you see this as just another intervention intervention

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<v Speaker 2>by by President Trump. We had the you know, the

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<v Speaker 2>fifteen percent cut of certain semi doctor sales to China.

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<v Speaker 2>You had this golden share in the United States Steel.

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<v Speaker 3>I mean, can can you dive more into that?

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<v Speaker 7>Yeah?

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<v Speaker 4>I think you know this is certainly I say, I

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<v Speaker 4>just really want to draw a line under how unprecedented

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<v Speaker 4>this is I mean, this is a wacky suggestion what

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<v Speaker 4>we have here, Lipbu Tam By the way, who you know,

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<v Speaker 4>there are very few people who were as qualified as

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<v Speaker 4>him in semi conductors. I mean he sat on the

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<v Speaker 4>board of Intel before he became the CEO. He left

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<v Speaker 4>the board, and then they've had a process and now

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<v Speaker 4>he's back a CEO. I mean he was already making

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<v Speaker 4>the point when he was on the board that in

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<v Speaker 4>telling them to sort out its manufacturing problem. The fact

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<v Speaker 4>that the Trump administration is now coming in and suggesting

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<v Speaker 4>that they could be behind essentially as a as a

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<v Speaker 4>backstop in a way for what the company is looking

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<v Speaker 4>to do there is turning conventional wisdom on its head

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<v Speaker 4>for sure. I think to draw the tension again to

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<v Speaker 4>the MP Materials deal, that was really interesting because it's

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<v Speaker 4>about you know, loans, it's about outside financing. It could

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<v Speaker 4>they mentioned as part of that deal, it could take

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<v Speaker 4>the of partnerships with other customers. I think it's really

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<v Speaker 4>being seen as a blueprint for for what the Trump

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<v Speaker 4>administration is thinking about Intel here.

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<v Speaker 3>It could work, I mean, it could have.

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<v Speaker 6>It be really advantageous because we see Intel investing all

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<v Speaker 6>this money in this new foundry plant in Ohio, but

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<v Speaker 6>they don't have any customers exactly. And if the US

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<v Speaker 6>government was now a part owner of Intel, I think

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<v Speaker 6>I might want to do some business.

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<v Speaker 4>With Intel, exactly. And I think you make a great

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<v Speaker 4>point because we've you know, we've been asking these questions

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<v Speaker 4>since yesterday. If you're one of Intel's competitors looking across

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<v Speaker 4>the way and thinking, okay, sure, we'd love to be

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<v Speaker 4>in this business, what about us? That's the kind of

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<v Speaker 4>scenario we're in now. Is is Intel being seen to

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<v Speaker 4>get preferential treatment from the US government? And what does

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<v Speaker 4>it mean if you're another semi conductor company which has

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<v Speaker 4>ambitions like Global Foundriies. Global Founderies is a major backerd

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<v Speaker 4>is Mubadla, the Sovereign Wealth Fund. But they're a semi

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<v Speaker 4>conductor manufacturer. They have a few sites in the US,

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<v Speaker 4>a few in Germany. You must, you know, penny for

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<v Speaker 4>their thoughts.

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<v Speaker 3>Before you go the timing of this.

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<v Speaker 2>Didn't the Intel's CEO just come back from meeting with the.

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<v Speaker 3>President at the White House? Was was this kind of

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<v Speaker 3>discussed during that time?

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<v Speaker 4>That was Monday? Yeah, and now on Friday? Is it crazy?

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<v Speaker 4>What differences that we can make but yeah that this

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<v Speaker 4>these plans were talked about on Monday between Trump and

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<v Speaker 4>let Bhutan. You'll note that the Trump put out the

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<v Speaker 4>Truth social post after that meeting and said that he

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<v Speaker 4>described him as an amazing man with a really interesting backstory.

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<v Speaker 4>You know, it was an about face given that he

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<v Speaker 4>just the day before called for the guy to be replaced.

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<v Speaker 4>I think another point i'd not just on the on

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<v Speaker 4>the politics of this. Poor you mentioned Ohio. Ohio is

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<v Speaker 4>a massively sensitive state for Donald Trump. It's where he

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<v Speaker 4>has a very deep base of you know, margat Republicans,

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<v Speaker 4>and they won their three He's won there three times.

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<v Speaker 4>So JD. Vans, the Vice President, is also from Ohio. Big, big,

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<v Speaker 4>big social attention. Then stay with us.

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<v Speaker 5>More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

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<v Speaker 2>So, Paul, my daughter and I have these matching bracelets.

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<v Speaker 2>They're Pandora bracelets. They're really cute. They have these little

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<v Speaker 2>charms and everything like that, but I think we might

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<v Speaker 2>stop at one because the.

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<v Speaker 3>Price of them might start to go up.

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<v Speaker 2>That's according to its CEO, weighing potential price increases due

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<v Speaker 2>to higher tariffs.

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<v Speaker 3>But we want to go someone who knows more about it.

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<v Speaker 2>It's Deborah Ak and she's Bloomberg Intelligence Luxury Goods analysts.

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<v Speaker 5>Deborah.

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<v Speaker 2>Thanks for joining us this morning via London, coming in

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<v Speaker 2>from zoom So what do we know about these price increases?

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<v Speaker 2>I mean, how much is this going to affect the consumer?

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<v Speaker 7>I think, well, the price increases are still very much

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<v Speaker 7>to go through the market. In the jewelry industry, we

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<v Speaker 7>have already seen the higher end brands As and others

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<v Speaker 7>popping through prices of around five to six percent, and

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<v Speaker 7>then on top of that with this brings some collections

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<v Speaker 7>and extra foccent into the US. So we would expect

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<v Speaker 7>when we did some deep analysis, and because of the

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<v Speaker 7>different tariff situations, we would expect maybe four cent pricing

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<v Speaker 7>additionally to come through from Pandora, for example. And that's

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<v Speaker 7>very much a difficult play when other prices are going

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<v Speaker 7>up and in the value orientated offer.

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<v Speaker 6>Well, how about in the watch business, because that's one

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<v Speaker 6>I'm interested. And I mean Lisa and her daughter have

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<v Speaker 6>the bracelets. I get it, I get it.

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<v Speaker 5>I'm kind of a watch guy, not a crazy one.

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<v Speaker 3>But boy, the arrfs.

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<v Speaker 6>We're talking about thirty nine percent tariffs on stuff coming

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<v Speaker 6>out of Switzerland, little old neutral Switzerland. That could be

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<v Speaker 6>a problem for the watch manufacturers.

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<v Speaker 5>What are they saying?

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<v Speaker 7>Yeah, so I think you know, the watch MANUF and

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<v Speaker 7>the retailers too, because I think they'll take a bit

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<v Speaker 7>of the brunt, a lot of the brunt of some

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<v Speaker 7>of the biggest names. So Richmond and its brands, Swatch

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<v Speaker 7>and all of its brands, Swatches brands are all produced

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<v Speaker 7>on the watchmaker side out of Switzerland, richemon On watches

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<v Speaker 7>and also it's Cartier brand, a lot of that out

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<v Speaker 7>of Switzerland, mostly out of Switzerland. So the idea there

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<v Speaker 7>when we did our analysis. They're not saying anything on

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<v Speaker 7>numbers yet, but in order to try to manage EBIT margin,

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<v Speaker 7>we would say that they would need about nine percent

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<v Speaker 7>from Richmond. They do have very high gross margins, so

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<v Speaker 7>low cost of business that is one thing that will

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<v Speaker 7>help them. But even so, we are going to see

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<v Speaker 7>mid single digger prices expected to be passed on to

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<v Speaker 7>the consumer and the big thing coming from you know,

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<v Speaker 7>the numbers this morning from Pandora were very much that

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<v Speaker 7>actually they haven't been passed on yet in key categories,

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<v Speaker 7>with jewelry being one of them because they're gifting occasions

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<v Speaker 7>and so a lot of that inflation is to come

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<v Speaker 7>into the US market.

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<v Speaker 2>So is Pandora's US exposure lower compared to its rivals.

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<v Speaker 7>If we think about it from a global perspective, No,

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<v Speaker 7>But if we're looking at the US, if we're looking

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<v Speaker 7>at the US consumers, then yes, it's one third of

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<v Speaker 7>sales for Pandora globally, but it is its biggest market

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<v Speaker 7>and it has been the engine for growth through the

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<v Speaker 7>first half of this year. It's of eight percent on

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<v Speaker 7>a constant currency twelve percent including the store opening it's doing,

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<v Speaker 7>and that's versus eight percent overall for the business. So

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<v Speaker 7>it is the key driver. But then otherwise, if you

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<v Speaker 7>think about the business overall on the jewelry side, for

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<v Speaker 7>branded business, it's still hugely fragmented. So Pandora only has

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<v Speaker 7>a two percent market share and it's one of the leaders,

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<v Speaker 7>so a lot of pricing to come through lots from

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<v Speaker 7>India and others also with those tariffs coming into force

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<v Speaker 7>from the beginning of August.

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<v Speaker 6>So, deb you cover all of global luxury here. What

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<v Speaker 6>are your companies generally saying about the US market and

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<v Speaker 6>the tariff situation? Are they suggesting that makes that the

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<v Speaker 6>US market less attractive to them? And what are their

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<v Speaker 6>policies for actually dealing with the tariffs?

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<v Speaker 3>Yeah, I think.

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<v Speaker 7>Twofold or threefold should we say one of them is

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<v Speaker 7>cost safe in. All of these companies are working avidly

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<v Speaker 7>on cost safe in. There are also adapting portfolios, which does

0:11:31.960 --> 0:11:33.679
<v Speaker 7>take a little bit of time, so we see more

0:11:33.720 --> 0:11:37.120
<v Speaker 7>of that in the autumn winter. They're widening price points,

0:11:37.160 --> 0:11:40.440
<v Speaker 7>so prior to for example, had said, we realize we

0:11:40.480 --> 0:11:43.240
<v Speaker 7>need to be more at the top of the price point,

0:11:43.320 --> 0:11:46.079
<v Speaker 7>but equally we need to be further down the architecture.

0:11:46.480 --> 0:11:48.800
<v Speaker 7>So they're going to be one of many companies that

0:11:48.920 --> 0:11:52.040
<v Speaker 7>will do the same into the US market. But generally,

0:11:52.120 --> 0:11:55.000
<v Speaker 7>I would say, actually, the market from the mid luxury

0:11:55.080 --> 0:11:59.440
<v Speaker 7>upwards has been particularly robust, and we've seen the consumer

0:11:59.480 --> 0:12:01.720
<v Speaker 7>confidence are still very much at are low, but it

0:12:01.840 --> 0:12:04.880
<v Speaker 7>is picking up in the higher end income brackets more

0:12:04.960 --> 0:12:08.800
<v Speaker 7>quickly than others. And that's typical and a trend that

0:12:08.840 --> 0:12:11.520
<v Speaker 7>we've seen over the long term from the different income

0:12:11.600 --> 0:12:12.559
<v Speaker 7>bands in the US.

0:12:12.800 --> 0:12:14.719
<v Speaker 2>Yeah, but we've got about a minute left. How is

0:12:14.720 --> 0:12:17.120
<v Speaker 2>a luxury market doing in China? That's been kind of

0:12:17.120 --> 0:12:17.880
<v Speaker 2>a sticking point.

0:12:19.000 --> 0:12:23.080
<v Speaker 7>It has it's very, very slow to recover to the

0:12:23.120 --> 0:12:26.360
<v Speaker 7>things we discussed just this week. We're thinking about the

0:12:26.400 --> 0:12:29.719
<v Speaker 7>fact that there's an extension between US and China and

0:12:29.840 --> 0:12:33.600
<v Speaker 7>the tariff situation until the tenth of November, so another

0:12:33.720 --> 0:12:36.320
<v Speaker 7>ninety day pause, so to speak, and we think that's

0:12:36.400 --> 0:12:39.520
<v Speaker 7>negative because both the US and China are running on

0:12:39.679 --> 0:12:43.880
<v Speaker 7>very low consumer sentiment, with China four years in the

0:12:43.920 --> 0:12:46.959
<v Speaker 7>dold rooms and the numbers that we're seen now today

0:12:47.040 --> 0:12:51.360
<v Speaker 7>on kind of CPI on different retail analysis highlights that

0:12:51.480 --> 0:12:56.120
<v Speaker 7>the Chinese consumer is really resolute on holding onto their

0:12:56.160 --> 0:12:59.959
<v Speaker 7>money or shopping very high end or finding something that's local.

0:13:00.600 --> 0:13:03.560
<v Speaker 7>So there's a lot more localized competition and they're not

0:13:03.679 --> 0:13:06.679
<v Speaker 7>traveling the way that they used to. It's all held

0:13:06.720 --> 0:13:09.680
<v Speaker 7>off until they really know what's going on. So difficult

0:13:09.679 --> 0:13:13.000
<v Speaker 7>outlook for the first half of twenty twenty six for luxury.

0:13:13.160 --> 0:13:13.800
<v Speaker 3>Stay with us.

0:13:13.920 --> 0:13:16.319
<v Speaker 5>More from Bloomberg Intelligence coming up after this.

0:13:18.480 --> 0:13:22.160
<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

0:13:22.240 --> 0:13:25.720
<v Speaker 1>weekdays at ten am Eastern on Applecarplay and Android Auto

0:13:25.720 --> 0:13:28.800
<v Speaker 1>with the Bloomberg Business App. Listen on demand wherever you

0:13:28.840 --> 0:13:32.360
<v Speaker 1>get your podcasts, or watch us live on YouTube.

0:13:32.840 --> 0:13:35.920
<v Speaker 6>One of the stories in the mortgage market that really

0:13:35.960 --> 0:13:39.680
<v Speaker 6>got my attention is potential IPO of Fanny May Freddie

0:13:39.679 --> 0:13:44.280
<v Speaker 6>macause I'm just thinking about my finance group bankers on

0:13:44.440 --> 0:13:46.319
<v Speaker 6>was shtreet what a boondogle that would be for them,

0:13:46.360 --> 0:13:49.319
<v Speaker 6>but also concern here what it might mean for mortgage

0:13:49.400 --> 0:13:51.720
<v Speaker 6>rates out there. So let's check in with Ben Elliott,

0:13:51.720 --> 0:13:54.719
<v Speaker 6>consumer finance analyst Bloomberg Intelligence.

0:13:54.920 --> 0:13:55.520
<v Speaker 3>So Ben talk to.

0:13:55.559 --> 0:13:57.760
<v Speaker 6>Us about Fannie Mae, Freddie Mac. Is there going to

0:13:57.760 --> 0:14:02.920
<v Speaker 6>be an IPO of these companies and if so, when, Well, Paul.

0:14:02.920 --> 0:14:05.320
<v Speaker 8>It wouldn't really be an IPO since the companies do

0:14:05.400 --> 0:14:08.280
<v Speaker 8>still trade over the counter. But you know, Treasury is

0:14:08.280 --> 0:14:12.000
<v Speaker 8>talking about different options, maybe selling some of the shares

0:14:12.040 --> 0:14:15.160
<v Speaker 8>that they currently own, maybe raising some new equity at

0:14:15.200 --> 0:14:18.240
<v Speaker 8>the market. But I think the core of the issue

0:14:18.240 --> 0:14:20.400
<v Speaker 8>here is we don't know what Treasury is planning to do,

0:14:21.480 --> 0:14:25.720
<v Speaker 8>and so they're talked about timeline, which was by the

0:14:25.840 --> 0:14:28.080
<v Speaker 8>end of twenty twenty five seems to be very optimistic

0:14:28.120 --> 0:14:29.880
<v Speaker 8>because as far as we can tell, none of the

0:14:29.880 --> 0:14:30.840
<v Speaker 8>work has been done.

0:14:31.200 --> 0:14:34.600
<v Speaker 2>So what does this What could this mean for mortgage rates?

0:14:34.600 --> 0:14:35.880
<v Speaker 2>I mean, how much higher could they go?

0:14:35.960 --> 0:14:36.360
<v Speaker 3>If any?

0:14:37.560 --> 0:14:40.240
<v Speaker 8>So there are different estimates out there that you know

0:14:40.240 --> 0:14:42.920
<v Speaker 8>they could go up twenty thirty basis points. Some people

0:14:42.960 --> 0:14:46.280
<v Speaker 8>suggest maybe a percentage point if you sort of sort

0:14:46.280 --> 0:14:50.160
<v Speaker 8>of think about agency nbs. The most of the premium

0:14:50.160 --> 0:14:53.440
<v Speaker 8>there over treasuries that investors get today is because people

0:14:53.440 --> 0:14:56.920
<v Speaker 8>can prepay their mortgage and they have negative convexity, but

0:14:57.040 --> 0:14:59.680
<v Speaker 8>not because of credit risk. Right, So if you re

0:15:00.000 --> 0:15:03.160
<v Speaker 8>reduce credit risk as a result of making the company's

0:15:03.200 --> 0:15:07.160
<v Speaker 8>private and cutting off the federal government guarantee, then that

0:15:07.200 --> 0:15:10.320
<v Speaker 8>could add relatively substantial price there.

0:15:10.840 --> 0:15:14.880
<v Speaker 6>So, just like rewind back to the terrible time of

0:15:14.920 --> 0:15:18.640
<v Speaker 6>the Great Financial Crisis, the government basically bailed out Fannie

0:15:18.640 --> 0:15:23.560
<v Speaker 6>Mae Freddie Mack, and they now have significant equity ownership

0:15:24.000 --> 0:15:27.120
<v Speaker 6>of those two entities. And the question is is now

0:15:27.240 --> 0:15:30.800
<v Speaker 6>the time to sell down some of that equity interest

0:15:30.880 --> 0:15:32.400
<v Speaker 6>is at the story?

0:15:32.480 --> 0:15:34.560
<v Speaker 8>Yeah, that's part of the story. So they own warrants

0:15:34.600 --> 0:15:37.320
<v Speaker 8>to purchase eighty percent of the common stock but they

0:15:37.360 --> 0:15:41.720
<v Speaker 8>also own a senior class of preferred shares and that

0:15:41.760 --> 0:15:44.760
<v Speaker 8>has a par value around two hundred and something billion,

0:15:44.960 --> 0:15:48.280
<v Speaker 8>But it also has a liquidation preference which rises each

0:15:48.360 --> 0:15:51.800
<v Speaker 8>quarter along with Fanny and Freddy's earnings that's hovering around

0:15:51.800 --> 0:15:55.240
<v Speaker 8>three hundred and fifty billion. So when you hear different

0:15:55.240 --> 0:15:57.520
<v Speaker 8>people on the street talk about the potential to raise

0:15:57.960 --> 0:16:01.720
<v Speaker 8>you know, three hundred billion dollars, you know that's actually

0:16:02.400 --> 0:16:05.520
<v Speaker 8>from writing down the senior prefers. That's actually not enough

0:16:05.600 --> 0:16:08.680
<v Speaker 8>really to pay back the stated value or the liquidation

0:16:08.760 --> 0:16:11.240
<v Speaker 8>preference of the senior prefers. So a lot of the

0:16:11.360 --> 0:16:14.280
<v Speaker 8>uncertainty here is what will Treasury do with its senior

0:16:15.120 --> 0:16:18.240
<v Speaker 8>ownership stake as opposed to just its commons.

0:16:18.520 --> 0:16:20.480
<v Speaker 2>Hey Ben, can you dig into what are some of

0:16:20.720 --> 0:16:23.520
<v Speaker 2>the pros and cons of making these companies private?

0:16:25.040 --> 0:16:25.320
<v Speaker 6>Yeah?

0:16:25.360 --> 0:16:28.720
<v Speaker 8>Sure, So, I mean the obvious con right is that

0:16:28.880 --> 0:16:32.320
<v Speaker 8>if any of ready work extremely well, they're providing a

0:16:32.320 --> 0:16:36.640
<v Speaker 8>ton of liquidity to us home buyers. We have a

0:16:36.720 --> 0:16:38.800
<v Speaker 8>unique financial product in this country, which is a thirty

0:16:38.880 --> 0:16:43.520
<v Speaker 8>year fixed rate mortgage at incredibly low rates. The credit

0:16:43.600 --> 0:16:46.760
<v Speaker 8>quality is fantastic, it's better than really it's ever been,

0:16:48.320 --> 0:16:50.680
<v Speaker 8>and so you have to ask yourself what is the

0:16:50.720 --> 0:16:54.000
<v Speaker 8>benefit of disturbing that and going back to sort of

0:16:54.000 --> 0:16:57.240
<v Speaker 8>the pre two thousand and eight status quo that led

0:16:57.280 --> 0:17:00.680
<v Speaker 8>to what occurred with the companies in the financial crisis.

0:17:01.720 --> 0:17:03.800
<v Speaker 8>But if you sort of, you know, take a sort

0:17:03.800 --> 0:17:08.600
<v Speaker 8>of thirty thousand foot view as a more theoretical observer, right,

0:17:08.760 --> 0:17:11.159
<v Speaker 8>maybe there's some benefit in getting the government out of

0:17:11.200 --> 0:17:16.159
<v Speaker 8>private capital markets. Maybe introducing competition could increase innovation, but

0:17:16.200 --> 0:17:17.719
<v Speaker 8>it would have to be done in a really careful

0:17:17.760 --> 0:17:20.600
<v Speaker 8>way that ensured that we never sort of returned to

0:17:20.600 --> 0:17:24.359
<v Speaker 8>the risks that we're inherent in the business model prior

0:17:24.400 --> 0:17:25.480
<v Speaker 8>to the financial crisis.

0:17:25.840 --> 0:17:29.199
<v Speaker 6>So, Ben, you cover the consumer finance industry. What are

0:17:29.240 --> 0:17:30.959
<v Speaker 6>the companies that you cover? What are they telling you

0:17:31.040 --> 0:17:34.199
<v Speaker 6>about the health of the consumer. There's a lot of

0:17:34.240 --> 0:17:36.040
<v Speaker 6>places I like to go to get kind of first

0:17:36.040 --> 0:17:39.280
<v Speaker 6>hand information. Restaurants for examples. I talked to Mike Haalen

0:17:39.560 --> 0:17:42.000
<v Speaker 6>and he gives you a view. But also for you

0:17:42.080 --> 0:17:45.399
<v Speaker 6>like the consumer finance companies because they bank everybody and

0:17:45.480 --> 0:17:47.760
<v Speaker 6>not just the big blue chips. They bank you know,

0:17:47.840 --> 0:17:51.479
<v Speaker 6>the small and some of the more questionable credits.

0:17:51.480 --> 0:17:52.239
<v Speaker 3>What are they telling you?

0:17:53.160 --> 0:17:55.200
<v Speaker 8>Yeah, so our credit card companies put out a really

0:17:55.240 --> 0:17:58.959
<v Speaker 8>interesting data set every month with their delinquencies they're net

0:17:59.040 --> 0:18:02.520
<v Speaker 8>charge offs and their growth. And the story is sort

0:18:02.560 --> 0:18:05.560
<v Speaker 8>of two part. Loan growth is slowing, people are spending

0:18:05.640 --> 0:18:09.000
<v Speaker 8>less money on their credit cards. Maybe consumer confidence is

0:18:09.040 --> 0:18:11.760
<v Speaker 8>declining a little bit at the margins, but credit is

0:18:11.800 --> 0:18:15.359
<v Speaker 8>still fantastic. It's still you know, write at about twenty

0:18:15.440 --> 0:18:19.000
<v Speaker 8>nineteen levels. It's trending sort of down as though it

0:18:19.080 --> 0:18:23.359
<v Speaker 8>might eclipse those levels, and buy and large borrowers are

0:18:23.520 --> 0:18:26.480
<v Speaker 8>are very resilient. But if you sort of look down

0:18:26.520 --> 0:18:29.720
<v Speaker 8>into the weeds of some of the more marginal lenders

0:18:29.760 --> 0:18:33.840
<v Speaker 8>who are doing things like store credit cards, you know

0:18:34.240 --> 0:18:36.919
<v Speaker 8>those people. Those companies say that they see some of

0:18:36.920 --> 0:18:41.240
<v Speaker 8>their consumers struggling and managing through things like inflation, and

0:18:41.280 --> 0:18:43.440
<v Speaker 8>so there's a potential at the margin of the economy

0:18:43.440 --> 0:18:45.359
<v Speaker 8>worsens for that to create some trouble.

0:18:45.680 --> 0:18:48.560
<v Speaker 2>But the question is are they paying off the credit

0:18:48.600 --> 0:18:49.040
<v Speaker 2>card dead?

0:18:49.280 --> 0:18:54.280
<v Speaker 8>Are they're paying it off? They are, Yeah, they're And delinquency, importantly,

0:18:54.320 --> 0:18:57.000
<v Speaker 8>which is a leading indicator of charge offs, is still improving.

0:18:57.240 --> 0:18:59.359
<v Speaker 8>And that gives you about a six month view into

0:18:59.440 --> 0:19:01.360
<v Speaker 8>charge offs because of how they work and how long

0:19:01.400 --> 0:19:03.840
<v Speaker 8>it takes, and so right now of the trend work

0:19:03.840 --> 0:19:06.840
<v Speaker 8>to continue. Credit would keep improving over the next six months.

0:19:07.200 --> 0:19:11.879
<v Speaker 1>This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

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