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Speaker 2: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast.
Speaker 2: Carol is off this week. Bloomberg News cross asset reporter
Speaker 2: Emily Graffeo joining me for most of our conversations over
Speaker 2: this past week, and it was a week where companies
Speaker 2: were still reporting for the most recent quarter, more than
Speaker 2: a dozen retailers reporting earnings. Geopolitics also front and center,
Speaker 2: as President Donald Trump hosted European leaders on Monday to
Speaker 2: discuss an end to the Russia Ukraine War, and then
Speaker 2: of course, the Kansas City FEDS annual gathering in Jackson
Speaker 2: Hole put monetary policy front and center again for the
Speaker 2: latest head on over to Bloomberg dot com. With the
Speaker 2: backdrop of monetary policy and how the Fed is planning
Speaker 2: to react to this economy, this hour, we take a
Speaker 2: look into consumer spending in this new world of tariffs. Also,
Speaker 2: we'll look into President Donald Trump's new brand of economic
Speaker 2: state craft. Plus the Finance Minister of New Zealand visits
Speaker 2: our studio to discuss US trade, the country's golden visas,
Speaker 2: and its economic outlook. All that to come, We begin
Speaker 2: with the batch of news from retailers this past week.
Speaker 2: Home Depot is raising its prices due to tariffs after
Speaker 2: previously saying it didn't plan to target, named a new
Speaker 2: CEO in hopes of breaking its sales slump, and Walmart
Speaker 2: profit missed expectations for the first time in three years.
Speaker 2: It overshadowed higher sales. It's just a handful of the
Speaker 2: companies that reported this past week. For the roundup of
Speaker 2: all things retail, Bloomberg News Equities reporter Nora Melinda and
Speaker 2: I Lee, Don Jen Bartasha's Bloomberg Intelligence Senior Retail Staples
Speaker 2: and packaged food analysts, and Bloomberg News Consumer reporter Jenet Newman.
Speaker 3: I think overall that the US consumer is actually doing okay.
Speaker 3: I think there's there's a note of caution looking forward
Speaker 3: because a lot of what's been sold in the in
Speaker 3: the last couple of quarters price price increases has not
Speaker 3: hit those goods, and so there's concern about when price
Speaker 3: increases really do start to flow through, what how consumers
Speaker 3: will will react. I mean, Walmart did have a profit
Speaker 3: miss that's very rare, that had to do with some claims,
Speaker 3: but they actually raised their sales guidance for the year
Speaker 3: which was already which was already pretty high. So that
Speaker 3: shows that there they do have some confidence in the
Speaker 3: consumer in the year in the year ahead.
Speaker 2: Hey, Jen, come on in here, because we spoke with
Speaker 2: the CFO of Kava, Trisia Toliver joined us and she
Speaker 2: said there's this fluid macroeconomic environment that these are her words.
Speaker 2: She said, it creates a fog for consumers and during
Speaker 2: those times they tend to step up off the gas.
Speaker 2: Would you say that that's the view you have at
Speaker 2: Bloomberg Intelligence about the consumer, that it's foggy and as
Speaker 2: a result of that fog, consumers are pulling back a
Speaker 2: little bit.
Speaker 4: Yeah.
Speaker 5: I think that's a pretty good insight. You know, when
Speaker 5: we look at the consumer and you look at sort
Speaker 5: of the bigger numbers in terms of the economy, the
Speaker 5: consumer is hanging in there. But the consumer has been
Speaker 5: conservative for a long time. It really started when we
Speaker 5: had high food inflation, and as soon as that started
Speaker 5: to roll back, we had pressure from tariffs, and there's
Speaker 5: just uncertainty. And when that consumer is uncertain, they still
Speaker 5: buy the things that they need to buy. They're still
Speaker 5: going on vacation, but they're just being a little bit
Speaker 5: more prudent. And until we have a little bit more clarity,
Speaker 5: we're not expecting that to really change.
Speaker 2: Jen, what is the bifurcation that you're seeing at Bloomberg
Speaker 2: Intelligence when it comes to consumers those at the higher
Speaker 2: end of the income spectrum versus what those at the
Speaker 2: lower end of the income spectrum are doing. And we've
Speaker 2: talked a lot for years about the K shaped recovery,
Speaker 2: and it kind of sounds like we're still there. Maybe
Speaker 2: it's even more pronounced.
Speaker 5: It's pretty pronounced. You know, lower income consumers continue to
Speaker 5: be pressured. When you look at retailers that really have
Speaker 5: a lot of those customers in their base, and that
Speaker 5: would be the Walmart's of the world, it would be
Speaker 5: Dollar Generals of the world. You know, you see that
Speaker 5: the spending and the average ticket and the traffic into
Speaker 5: those stores in some instances is a little bit pressured.
Speaker 5: At the same time, you know, higher income households are
Speaker 5: almost kind of going along as normal. They're still seeking value,
Speaker 5: but they're taking advantage of all the value that's being
Speaker 5: offered out to the broader economy and they're saving money
Speaker 5: that way. So it's an interesting thing to track and
Speaker 5: how those two different parts of the consumer base are
Speaker 5: really behaving a little bit differently.
Speaker 3: And everybody loves the deal, right and Walmart has actually,
Speaker 3: you know, to what Jen's saying, Walmart has has been
Speaker 3: hitd from everyone loving a deal and is attracting increasingly
Speaker 3: more higher income consumers and that's part of what's helped
Speaker 3: boost its its sales. And that's been a strategy. You
Speaker 3: know a lot of those consumers went to Walmart during
Speaker 3: the pandemic to get groceries and then have increasingly kind
Speaker 3: of bought more and more. Walmart is stepping up, you know,
Speaker 3: it's clothing offering and so that's also you know, that's helping,
Speaker 3: that's helping Walmart.
Speaker 2: Are those consumers sticky with Walmart?
Speaker 3: Yes, they are, They are sticky, and that's been that's
Speaker 3: been part of the that's been part of Walmart's success
Speaker 3: because they go to the grocery, they go in, they
Speaker 3: get the groceries, and then they see, oh, actually, like
Speaker 3: Walmart has great genes. Now Walmart has knows that these consumers.
Speaker 2: That was an American Eagle reference, wasn't it.
Speaker 6: Know.
Speaker 2: We're not gonna definitely, we're not gonna get We're not
Speaker 2: going again talking.
Speaker 3: Okay, not moving on, sorry, go ahead, chapter, next chapter.
Speaker 3: And that that also is you know, Walmart has been
Speaker 3: seizing on that and Target has been missing out. Target
Speaker 3: has not been doing well. They obviously just appointed a
Speaker 3: new seat. He's an insider.
Speaker 6: He was an amazing story. It is an amazing story.
Speaker 2: It is an amazing story.
Speaker 7: But the market's not that impressed though. That's what we're seeing.
Speaker 7: But I mean, you also come for companies like sday Lauder.
Speaker 7: We talked about Walmart. Of course, we know that has
Speaker 7: a lot of those consumers staples opportunities there. But when
Speaker 7: we look at Esta latter and a lot of competitors
Speaker 7: like that on the more luxury end, what are the
Speaker 7: contours of consumer spending in that space?
Speaker 6: Right now?
Speaker 3: You know, Beauty overall is doing okay again, kind of
Speaker 3: still slowing down a little bit, but still writing a
Speaker 3: post pandemic boom when we all got into you know,
Speaker 3: lots of different lots of different beauty beauty products at
Speaker 3: one at one time. But Stay Lauder is not doing
Speaker 3: that well. So that's kind of like even though the
Speaker 3: consumer right now is okay, a little bit conservative, like
Speaker 3: like Jen said, but Walmart is doing overall really well.
Speaker 3: Target is not doing great. That's also because of differences
Speaker 3: with the with the two companies and how they're run. Similarly, Loreal,
Speaker 3: huge beauty company, obviously is actually doing really well. Stay
Speaker 3: Latter No. Their sales in the most recent fiscal year
Speaker 3: that just ended, we're down eight percent, and those are
Speaker 3: kind of internal internal problems that they've been that they've
Speaker 3: been dealing with.
Speaker 7: Jennifer, I want to bring you back into the conversation here.
Speaker 7: Are we seeing any sense of consumer fatigue right now,
Speaker 7: especially when we know inflation is super high and if
Speaker 7: you were to ask the average person, they do think
Speaker 7: that things are kind of tight right now.
Speaker 5: I don't know that we're seeing a lot of fatigue.
Speaker 5: I think people have sort of adjusted to what is
Speaker 5: sort of almost a new normal, and that's a little
Speaker 5: bit post food inflation. They've seen prices come down in
Speaker 5: different ways, especially on the grocery side and some of
Speaker 5: the general merchandise, like entry level fashion, and so I
Speaker 5: think that gives the perception of a little bit of relief.
Speaker 5: So I don't think people are really pulling back anymore,
Speaker 5: but they're not also simultaneously really loosening the purse strings.
Speaker 5: It seems like we've sort of settled into kind of
Speaker 5: this new normal, this new normal range. One other note
Speaker 5: on Walmart that I think is pretty interesting. When you're
Speaker 5: talking about retention, you can't not talk about Walmart Plus,
Speaker 5: which is a huge loyalty program and they're generating a
Speaker 5: lot of incremental revenue off of it, and people who
Speaker 5: get in there, they keep renewing, and it just locks
Speaker 5: in loyalty and locks in spending, and we're seeing that
Speaker 5: across all income cohorts.
Speaker 2: Wait, wait, can you talk a little bit more about that?
Speaker 2: And I think I think what this is not an
Speaker 2: ad for American Express, but I will say if you
Speaker 2: have a certain American Express card, you can get a
Speaker 2: free membership to the program.
Speaker 8: Which one do you want to.
Speaker 2: I think it's the Platinum card. I believe, Yeah, I
Speaker 2: believe that's what it is. Thanks for calling you actually.
Speaker 5: Just completed a survey of one thousand Walmart Plus subscribers,
Speaker 5: and what's really interesting is that eighty three percent of
Speaker 5: Walmart Plus subscribers also have an Amazon Prime membership, but
Speaker 5: that doesn't stop them from maximizing their Walmart Plus value.
Speaker 5: And so I think that it really illustrates how Walmart
Speaker 5: has very uniquely carved out a service and a recurring
Speaker 5: revenue stream that is really pretty remarkable. And that the
Speaker 5: fact that a lot of the people who are in
Speaker 5: that program are making digital orders, that's driving their digital
Speaker 5: revenue for advertising, and it's really adding to just the
Speaker 5: overall flywheel of Walmart. So there's a lot of really
Speaker 5: interesting things happening that are really stemming from some of
Speaker 5: these intelligent decisions they made maybe five years ago to
Speaker 5: introduce that Walmart Plus program.
Speaker 2: That's a fascinating thing to hear because it was always
Speaker 2: sort of an owl also around when it comes to
Speaker 2: Amazon Prime. So it's interesting to hear that. Jen Janette,
Speaker 2: I want to bring you back in here and talk
Speaker 2: a little bit about Target. You mentioned the CEO change
Speaker 2: the news we got earlier this week. You said investors
Speaker 2: didn't love it. A lot of the conversation around Target
Speaker 2: over the last couple of years, well actually really over
Speaker 2: the last year or so, has had to do with
Speaker 2: backlash against DEI efforts. And to what extent in your
Speaker 2: view that actually a affected company sales or the image
Speaker 2: of what that looked like for consumers. What do we
Speaker 2: know about this?
Speaker 3: The company executives at Target have said that the backlash,
Speaker 3: like black black consumers not shopping at Target, has had
Speaker 3: an impact on sales. They have not quantified that, and
Speaker 3: so we don't really know. These kinds of boycotts don't
Speaker 3: often have a huge effect, but they have said that
Speaker 3: it had that it had an effect. And I think
Speaker 3: also more more importantly, even in some of the analyst
Speaker 3: notes and you hear investors talking about the staff at Target,
Speaker 3: we've had some reporting it's nearly sixty percent of staff
Speaker 3: at Target are people of color, and so the staff
Speaker 3: itself has been, you know, upset by everything that's been
Speaker 3: going on with with Target pulling back on DEI, and
Speaker 3: that is that is something that some people think is
Speaker 3: kind of behind some of this tumult with with staff.
Speaker 3: Job in retail is so difficult, and you need especially
Speaker 3: great especially now, and you need great staff, and you
Speaker 3: need people who are going to stick around and they
Speaker 3: know how the stores work, so that has also so
Speaker 3: been a problem, whereas you don't hear those same complaints
Speaker 3: from staff at Walmart, for example. Excuse me. They've also
Speaker 3: been increasing the salaries that they're paying their their top employees,
Speaker 3: so that is also an issue at Target. Is the
Speaker 3: issue with staff.
Speaker 2: Well, we love talking retail and the consumer with both
Speaker 2: of you. Thank you so much for joining us. Jenet Newman,
Speaker 2: Bloomberg News Consumer Reporter, and Jennifer bartashas Bloomberg Intelligence Consumer
Speaker 2: Team Leader and senior Retail Staples and Package of Food analysts.
Speaker 2: Check out Janette's reporting on the Bloomberg Terminal and Jennifer's
Speaker 2: research on the Bloomberg Ternaminal. Also, of course, at Bloomberg
Speaker 2: dot com.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch
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Speaker 2: He didn't campaign on it, it wasn't even broached during
Speaker 2: his first administration. He criticized his predecessor for it, but
Speaker 2: this month President Donald Trump made clear He's willing to
Speaker 2: use the full force of the US government to directly
Speaker 2: intervene in corporate matters to achieve his economic and foreign
Speaker 2: policy goals, so writes Bloomberg Economic Statecraft reporter Joe Doe
Speaker 2: on the Trump administration taking a more active role in
Speaker 2: US companies seeking to collect fifteen percent of the money
Speaker 2: generated from sales of AI chips to China by Nvidia
Speaker 2: and AMD, the US government potentially taking a stake in Intel,
Speaker 2: a golden share in US Steel, and a DoD investment
Speaker 2: in a rare Earth's firm. This has investors, lawmakers, and
Speaker 2: trade experts raising concern and in some cases optimism. Joe
Speaker 2: Doe joined us with more, Yeah.
Speaker 8: You have the President of the United States in his
Speaker 8: entire administration, which by the way, has a number of
Speaker 8: Wall Street pros in it, saying why don't we use
Speaker 8: the full force of the United States federal government to
Speaker 8: take direct involvement in corporations that we deem crucial and
Speaker 8: central to national security? Tim, I mean, I know you
Speaker 8: and I have sat here many times and talked about
Speaker 8: the imp materials deal and where that stands today. I
Speaker 8: mean the AMD Nvidia fifteen percent cut of Chinese AI
Speaker 8: chip sales that goes to the federal government. I mean
Speaker 8: that's massive. And then now the reporting that we've had
Speaker 8: from Bloomberg for the past five days that and now
Speaker 8: confirm by how this administration is looking to take an
Speaker 8: equity stake in Intel. I mean like to say, this
Speaker 8: is off the beaten path.
Speaker 2: I mean under.
Speaker 8: States just how wild this is and how new this
Speaker 8: is even to Washington policy pros and Wall Street pros
Speaker 8: who've been doing these jobs for decades.
Speaker 9: We'll talk to us about that, Joe. What makes these
Speaker 9: actions so unprecedented and so unlike different kinds of you know,
Speaker 9: government intervention in companies that we've seen before in the
Speaker 9: United States.
Speaker 8: I mean, if you think about it, we can look
Speaker 8: back to the financial crisis where we saw the bailouts
Speaker 8: of the banks, of AIG of GM. I mean, these
Speaker 8: were under extraordinary circumstances, right There was real fear in
Speaker 8: the federal government and in the markets that you could
Speaker 8: have a complete collapse of the financial system if the
Speaker 8: US government didn't step in to provide liquidity to the market.
Speaker 8: This is different. This is companies that they're not on
Speaker 8: the verge of bankruptcy that were taking equity stakes in
Speaker 8: and then we're taking cuts of sales supposedly. I mean,
Speaker 8: we'll see how they follow through on it. Typically, what
Speaker 8: we have seen, even with the Trump administration the first
Speaker 8: summer around was well, let's do things through trade, right,
Speaker 8: Let's use three oh one terraffs, which are country level tariffs.
Speaker 8: Let's do two thirty two terraffts, which are sectoral tearfs.
Speaker 8: These were written into US law even though they hadn't
Speaker 8: been used in years or sometimes decades, they were there,
Speaker 8: and they had been used before. I think this is
Speaker 8: starting to push the boundaries of those legal questions.
Speaker 2: So did the word nationalism or nationalizing companies come up
Speaker 2: at all in the reporting here? And in the folks
Speaker 2: you spoke to, You go into some detail about the
Speaker 2: so called Chinese model, but there's also you know, Argentina
Speaker 2: comes to mind with nationalization in the past.
Speaker 8: Yeah, totally, Tim When you talk to people, and again,
Speaker 8: this isn't just like a couple of guys on Wall
Speaker 8: Street or like one guy you know sitting in a
Speaker 8: law firm. This is this is across the spectrum, and
Speaker 8: you hear over and over again uncharted territory, Chinese model,
Speaker 8: and like you said the question of nationalizing companies, like,
Speaker 8: I had one source say, listen, there are ways the
Speaker 8: federal government can step in and direct the actions of companies,
Speaker 8: and you can do that without taking a stake in
Speaker 8: the company. You start doing these things, and it does
Speaker 8: spread worry, right, It spreads worry among investors who say, well,
Speaker 8: wait a minute, if you're going to choose national champions,
Speaker 8: that you're just going to wake up one morning and
Speaker 8: say we're taking a stake in this because we think
Speaker 8: it's critical to US national security. That changes fundamentals of
Speaker 8: making bets on companies, right. I mean, one person mentioned
Speaker 8: to me, you have high valuations already. What happens if
Speaker 8: you have the federal government starting to get involved with
Speaker 8: some of these these high valuation companies. I mean, those
Speaker 8: are the kind of conversations I was having that really
Speaker 8: became the idea behind America Inc. And seeing for the
Speaker 8: first time President of the United States taking direct action
Speaker 8: in corporate America.
Speaker 9: Yeah, what have investors said so far? I mean I'm
Speaker 9: thinking specifically about Intel on like whether this is good
Speaker 9: for the company or not.
Speaker 8: I think when you look at all this, we are
Speaker 8: in what a number of these people told me, which
Speaker 8: is uncharted territory. Is it good? Well, some people would say,
Speaker 8: listen to compete with China, because let's be clear, one
Speaker 8: of the things that the White House said to us
Speaker 8: in our story was, you know, semiconductors rare or steel.
Speaker 8: These are national security issues long have been for the
Speaker 8: President of the United States. Those often also happen to
Speaker 8: be issues that are directly tied to China, something that
Speaker 8: the administration sees itself in direct competition with. Steel has
Speaker 8: been an oversupply for a long time out of China.
Speaker 8: That's one of the reasons the President moved in his
Speaker 8: first term to put up trade barriers on steel. Now,
Speaker 8: this time around, the trade war between the United States
Speaker 8: and China centers around chips and permanent magnets, and the
Speaker 8: permanent magnet story is already told. MP Materials gets a
Speaker 8: four hundred million dollars preferred equity stake from the DoD.
Speaker 8: That's what you really have to start looking at, which
Speaker 8: is like, what else does the President of the United
Speaker 8: States consider central to this national security question? In particular,
Speaker 8: maybe with China.
Speaker 2: That's exactly where I was going to go. So based
Speaker 2: on your reporting, the folks you spoke to what's next here?
Speaker 2: We have US Steel, we have MP materials, right, we
Speaker 2: have Intel, we have news around AMD and Nvidia. What
Speaker 2: do investors need to be prepared for the next shoot
Speaker 2: a drop?
Speaker 8: I don't know, Tim, I don't know.
Speaker 2: Would it be like a do autos going and get
Speaker 2: on your radar at all?
Speaker 8: It's hard to tell.
Speaker 2: Listen.
Speaker 8: Bloomberg has reported, particularly around the MP Materials deal. We've
Speaker 8: reported that IMP Materials looked like something was being lined
Speaker 8: up by the DoD and it wouldn't just be the
Speaker 8: only one.
Speaker 4: Some of the.
Speaker 8: Reporting we've had is that the Intel situation may not
Speaker 8: just be a one off, right, Like the things I
Speaker 8: have heard are this administration is keen on taking home
Speaker 8: run swings and not just on one thing, right. So
Speaker 8: I think at this point the market is looking into
Speaker 8: the question that you're asking, Tim, like what is next?
Speaker 8: I think it's hard to know what's next. I mean,
Speaker 8: so much of this, it's important to say, is so fluid.
Speaker 8: The conversations are just ongoing, and what they might be
Speaker 8: talking about today might completely change in the next twenty
Speaker 8: four hours.
Speaker 2: Joe Doe, we know whatever comes you will be on it.
Speaker 2: It's one of the most read stories on the Blueloomberg terminal.
Speaker 2: President Trump targets America Inc. With a new brand of
Speaker 2: US statecraft. Joe Doe is Economic Statecraft Reporter.
Speaker 1: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 2: And we stick with Joe Doe and the race for
Speaker 2: Greenland's riches. We've been hearing a lot about rareth minerals,
Speaker 2: you know, the critical materials used in everything from missile
Speaker 2: defense systems to smartphones, and now they're at the heart
Speaker 2: of renewed US interest in Greenland, where some of the
Speaker 2: world's richest untapped deposits can be found. The Trump administration
Speaker 2: has made no secret of its geopolitical curiosity about the island,
Speaker 2: and the minerals may be a big part of why.
Speaker 2: To break it all down. Bloomberg Cross Asset reporter Isabel
Speaker 2: Lee and I were joined by Joe Doe, Bloomberg News
Speaker 2: Economic Statecraft reporter, who visited the icy island.
Speaker 8: This was really the thesis I wanted to dig into, right.
Speaker 8: I mean, we spent the first three months of the Trump,
Speaker 8: the Trump two point zero administration, focusing on let's buy
Speaker 8: Greenland again, let's take it over. We're not going to
Speaker 8: rule out military force. And you know, I'd been talking
Speaker 8: to people kind of in the background who said, you know,
Speaker 8: what's really being discussed here is the national security and
Speaker 8: the potential for investments within the island. So I met
Speaker 8: up with Drew Horn, who was a former Trump administration official.
Speaker 8: He worked in the DoD Defense Department and the Defense
Speaker 8: excuse me, the DOE, the Energy Department. He was on
Speaker 8: Trump's team in twenty nineteen that was tasked with figuring
Speaker 8: out a way to own Greenland.
Speaker 2: I guess.
Speaker 8: And so where we came down on this was we
Speaker 8: took this trip with Drew to kind of see this
Speaker 8: behind the scenes of like trying to invest in Greenland.
Speaker 2: So take us there, because you went to Greenland. Well,
Speaker 2: first you went to Denmark, I believe, and then you yeah.
Speaker 8: I went to Copenhagen for a day.
Speaker 2: Yeah, well Greenland is I guess. I scouldly Greenland is
Speaker 2: part of Denmark. But first you went to Denmark proper,
Speaker 2: that's right, Hagen to then fly to Greenland. What was
Speaker 2: it like? How'd you get there? Was it all snow?
Speaker 2: Just break it down for us partly? Yeah, I mean
Speaker 2: it was really difficult. People had warned me before I
Speaker 2: went to Greenland, hey, like, actually, my neighbor is a
Speaker 2: flight attendant and said to me, hey, some of my
Speaker 2: flight attendant friends have been stuck for like three.
Speaker 8: Days in Greenland. And this was literally a week before
Speaker 8: I went there, and I said, oh my gosh, okay,
Speaker 8: and other people had warned me, listen, whatever days you
Speaker 8: think you're flying in and out of Greenland, just like,
Speaker 8: assume it's going to be a day or two difference.
Speaker 8: And that turned out to be the case. I mean,
Speaker 8: I flew out of Newark on a Tuesday. I got
Speaker 8: into Copenhagen the next morning, no problem there, and then
Speaker 8: the day after that. So this is third I took
Speaker 8: a flight four and a half hour flight direct to Nook.
Speaker 8: I didn't realize at the time that something like twenty
Speaker 8: percent of the direct flights from Copenhagen to Nook there's
Speaker 8: only one per day, had been canceled or turned around
Speaker 8: or something to that effect. We got in, I thought,
Speaker 8: no problem. A day later, we fly out to Southern Greenland,
Speaker 8: which is where this actual mine was located.
Speaker 2: We flew on a plane, a helicopter.
Speaker 8: We flew on a plane to get down there. It
Speaker 8: was a prop plane, which was kind of cool. We
Speaker 8: landed and within moments of landing, it's like the densest
Speaker 8: fog I've ever seen in my life just started to
Speaker 8: settle in. And we were supposed to be up the
Speaker 8: next day in a helicopter to get to this mine.
Speaker 8: Because getting to the mine from this kind of base
Speaker 8: camp that we had in Southern Greenland, it was either
Speaker 8: like a two and a half hour three hour boat
Speaker 8: ride or a helicopter ride that takes you fifteen minutes.
Speaker 8: There's no driving, there's there's no other options. Those are
Speaker 8: the options. The next day we woke up and it
Speaker 8: was snowing and it was a fog. I mean, I
Speaker 8: feel like the fog ceiling was like twenty feet above us.
Speaker 8: I mean it was straight out of like Harry Potter,
Speaker 8: you know, when he's like at the end of the
Speaker 8: whole movie and he's just in this densely fogged area
Speaker 8: and none of it makes sense. It felt that way
Speaker 8: does it?
Speaker 2: And you know there's a big take podcast that you
Speaker 2: did with David Gura. It'z great. You have some sound
Speaker 2: from the French the helicopter pilot. Yeah, Pierre explaining to you,
Speaker 2: you know, about the percentages that you were going to
Speaker 2: actually get off the ground. I'm not going to give
Speaker 2: the whole thing away, but it made me think when
Speaker 2: I was listening to that and reading your story, the
Speaker 2: actual extraction and processing of this stuff, it's got to
Speaker 2: be pretty challenging in environments such as this.
Speaker 4: Yeah.
Speaker 8: Part of that story was just pointing out how hard
Speaker 8: it was to get to the mine itself. So you
Speaker 8: add that on top of it is in a type
Speaker 8: of rock that has still not been processed at commercial scale.
Speaker 8: It is in a place that currently has no port.
Speaker 8: There's no there's no equipment there right Like, it's not
Speaker 8: like there were roads and early stage equipment. There's not
Speaker 8: even like a small campsite of people on the site.
Speaker 8: It's just a mound of dirt on a mountain. So
Speaker 8: you have to imagine that from that point on, you
Speaker 8: need to somehow get all the equipment in. You somehow
Speaker 8: need to basically build out like a small camp to
Speaker 8: begin digging into the ground and this mine tanbreeze. The
Speaker 8: deposit is well known as being a serious deposit of
Speaker 8: critical minerals, specifically rare earth. And you know, one of
Speaker 8: the things we put out in the story is that
Speaker 8: Chinese officials have been to the property before asking about
Speaker 8: the potential of buying it. We've also heard that Russian
Speaker 8: officials had been there before, so it's known, but to
Speaker 8: get it to work, it is still unclear actually how
Speaker 8: you will get it to work.
Speaker 10: One of the tidbits that I learned from your story,
Speaker 10: among the many, is that rare earths, in spite of
Speaker 10: their name, tend to be abundant as other industrial components.
Speaker 10: But I guess I mean extracting them is a different
Speaker 10: story altogether.
Speaker 4: Yeah.
Speaker 10: So we know that Trump floated by in Greenland in
Speaker 10: twenty nineteen, a move back then which was widely mocked.
Speaker 10: But given the island's rare earth reserve, strategic location shipping potential,
Speaker 10: was Trump actually ahead of his time, ahead of the curve?
Speaker 8: I don't know for sure, Like I think maybe the
Speaker 8: way I kind of phrase it is, you know, it
Speaker 8: seems like the president gets information in front of him,
Speaker 8: and the way he kind of communicates it maybe is
Speaker 8: cut up and spliced as to what the reality is.
Speaker 8: I think people like Drew Horn and others who have
Speaker 8: been around Greenland now for years finally felt like the
Speaker 8: attention by the President of United States on this on
Speaker 8: the rare earth on the island give it a business opportunity.
Speaker 8: Because the sense from Drew Horn, and he said this
Speaker 8: to me on the trip, was like, if investors feel
Speaker 8: like the full faith and credit of the United States
Speaker 8: federal government is behind a project, they will suddenly give
Speaker 8: it a chance and that will be the thing to
Speaker 8: see here. Like one of the things we pointed out
Speaker 8: was so we found Drew Horn finally made it to
Speaker 8: Tanbreeze and he got to see it, and later that
Speaker 8: week he got out of Greenland and went down to
Speaker 8: mar A Lago to talk to Trump Aids about it.
Speaker 8: And then within weeks after that, the Export Import Bank
Speaker 8: in the United States gave a letter of interest of
Speaker 8: a fifteen year loan for the mind. Now, the key
Speaker 8: thing here is that's a letter of interest. It's non binding,
Speaker 8: it technically means nothing, but it does mean that it's
Speaker 8: now on the radar of the US federal government. So
Speaker 8: is that enough to convince investors like this is a
Speaker 8: good bet. I don't know, but it does say to investors, okay,
Speaker 8: so it's probably not a complete no show, Like maybe
Speaker 8: we should at least sniff around it because there's a
Speaker 8: potential that Trump just says, let's throw some money at it.
Speaker 8: But I think that's that's where we get into this
Speaker 8: territory of like, whoa, what are we really doing here?
Speaker 8: I've covered mining for ten years at Bloomberg, and one
Speaker 8: of the things you run into all the time are
Speaker 8: these junior exploration companies or these junior miners, and you
Speaker 8: don't you don't write about them because they're.
Speaker 2: Nothing, because they haven't done anything.
Speaker 8: They haven't done anything, and typically kind of the rule
Speaker 8: of thumb is like they aren't really anything until a
Speaker 8: major miner comes up and buys them, you know, fifty
Speaker 8: percent of them or the entirety of them, and then
Speaker 8: it's like, Okay, this is a real deposit. It's going
Speaker 8: to get developed by serious people with investors and you know,
Speaker 8: the companies with good bonds. But this, this tanbreeze still
Speaker 8: does fall within that junior miner, junior exploration company.
Speaker 10: So then what challenges technical financial or regulatory still stand
Speaker 10: in the way, all of them.
Speaker 8: Of yeah, I mean all of them, all of them
Speaker 8: for sure. One of the things pointed out to me
Speaker 8: in Greenland was like, hey, the thing about Greenlanders is
Speaker 8: they're open for business. They love that idea.
Speaker 10: So locals were open.
Speaker 8: Well, open, but so long as it doesn't hurt the environment. Right,
Speaker 8: So we don't want our fjords polluted. We don't want
Speaker 8: very nice green mountain side with a big hole in
Speaker 8: it suddenly. Right, if you're able to do it responsibly
Speaker 8: and sustainably, the understanding was that would be okay, But
Speaker 8: then it's it's it's still not clear that that would
Speaker 8: necessarily happen with tanbreeze.
Speaker 2: Can that be done? Joe?
Speaker 4: Can?
Speaker 2: Can mining happen? Can mining of rares happen in a
Speaker 2: sustainable way that doesn't scar the earth, that doesn't destroy
Speaker 2: or affect these fjords?
Speaker 8: The Tanbres folks would say yes, they would say, modern mining,
Speaker 8: technical capabilities, we're able to figure it out. We're able
Speaker 8: to make this sustainable and clean. But again, like anything else,
Speaker 8: it is you enter a period of show me. You know,
Speaker 8: investors need to see that you can actually do it.
Speaker 2: Does the US buy Greenland. Does it need to buy Greenland?
Speaker 8: No? No, I mean, let's be honest, it does not
Speaker 8: need to buy Greenland. It's not going to buy Greenland.
Speaker 8: Greenland is still a part of Denmark. One of the
Speaker 8: most interesting parts of the story for me was I
Speaker 8: sat in the home of a local politician who said, listen,
Speaker 8: for me, it's not about being owned by the United States. Like,
Speaker 8: right now we're owned by Denmark. We don't want to
Speaker 8: be owned by Denmark. We don't want to be owned
Speaker 8: by anybody. We want to be ourselves. We want to
Speaker 8: be our own country. We are Inuit, we are Greenlandic.
Speaker 8: There's a real history there. So I think that's another
Speaker 8: important part is it's not a oh, the US would
Speaker 8: be better. It's like, no, we don't want to be
Speaker 8: owned by anybody. And I think that bit has often
Speaker 8: gotten missed in the discussion over Greenland.
Speaker 2: He's the economic Statecraft reporter for Bloomberg News. Check out
Speaker 2: his Big Take It's on the Bloomberg Terminal and at
Speaker 2: bloomberg dot com. Also check out the Big Take podcast
Speaker 2: of him along with David Gura of Bloomberg News.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch
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Speaker 2: Earlier this month, the Trump administration increased its tariffs on
Speaker 2: imports from New Zealand from ten percent to fifteen percent,
Speaker 2: a move that has rattled New Zealand farmers, manufacturers, and
Speaker 2: trade officials. It's a move that threatens billions and economic
Speaker 2: ties and raises tough questions about how New Zealand navigates
Speaker 2: a trade relationship with both the US and China. On
Speaker 2: top of that, the Reserve Bank of New Zealand cut
Speaker 2: its policy rate by twenty five basis point. It's to
Speaker 2: a three year low of three percent, flagging ostalled economy
Speaker 2: and warnings of domestic global headwinds for more. Carol and
Speaker 2: I recently caught up with the Finance Minister of New Zealand,
Speaker 2: Nicola willis Well.
Speaker 11: I think that there's considerable uncertainty in weld affairs today.
Speaker 11: Where there were once things that were given and were
Speaker 11: very predictable, we are now seeing more volatility and policy
Speaker 11: decision making, which has implications for investors and for sovereigns
Speaker 11: in terms of the way that we go about things.
Speaker 11: For our part in New Zealand, we tend to want
Speaker 11: to be a beacon of stability amidst all of that,
Speaker 11: to say, you know what, We're going to continue to
Speaker 11: be rules based. We have low, stable inflation, we have
Speaker 11: declining interest rates. We're going for growth. We trade with
Speaker 11: many countries around the world and wish to continue to
Speaker 11: pursue freer trading relationships. We have prospects for growth, and
Speaker 11: so we aim to be stable, predictable. We have secure institutions,
Speaker 11: and we think those things will be at a premium
Speaker 11: in the coming years as there is more volatility.
Speaker 2: Mister Willis, whenever we have officials from other countries visiting
Speaker 2: the US, which is a big part of your job,
Speaker 2: we always ask the question about a particular trip, why
Speaker 2: are you in New York right now? Why are you
Speaker 2: visiting us right now?
Speaker 11: We're here because we value very much both our economic
Speaker 11: and security relationship with the United States, and I'm pursuing
Speaker 11: more economic growth for New Zealand and New Zealanders, and
Speaker 11: we believe it's in the interests of both of our
Speaker 11: countries to forge stronger trade and investment ties in pursuit
Speaker 11: of that.
Speaker 2: So how does that work in an America first environment,
Speaker 2: In an environment from Washington, d C. Where the communication
Speaker 2: has been very strongly This is an administration that is
Speaker 2: looking at the priorities of the US, whether or not
Speaker 2: it affects other countries in a negative way.
Speaker 11: Well, quite simply, our proposition is it's in the United
Speaker 11: States interests to have a strong and growing relationship with
Speaker 11: New Zealand. We're part of the Five Eyes security partnership
Speaker 11: with Canada, the United Kingdom, and Australia, and we continue
Speaker 11: to believe that's very important for the United States. We
Speaker 11: also have a very complementary trade relationship. We export primary
Speaker 11: products tech services which Americans value, and equally, we import
Speaker 11: significant amounts from the United States and will continue to
Speaker 11: do so. We, like many countries, are increasing our investment
Speaker 11: and defense, and it's likely that some of the kit
Speaker 11: that we will be purchasing in future will be manufactured
Speaker 11: in the United States. Similarly, when our national Airline replaces
Speaker 11: its fleet, it's likely that some of those planes will
Speaker 11: be produced in America. We have very strong and longstanding
Speaker 11: people to people ties. Our two countries have gone along
Speaker 11: well for many, many decades, and we think it is
Speaker 11: in the interests of both countries that New Zealand continue
Speaker 11: to be a strong relationship that the United States could
Speaker 11: look to and rely on.
Speaker 12: So is this White House so impacting the relationship, the
Speaker 12: strong relationship that New Zealand has had with the United
Speaker 12: States in any way we.
Speaker 11: Can tinue to view the United States as our friends. Now.
Speaker 11: Of course, we would prefer not to be facing additional tariffs.
Speaker 11: Find me a country that says, yeah, we really like
Speaker 11: additional tariffs.
Speaker 12: And we're not in that.
Speaker 11: We're not in that situation, and we have a history
Speaker 11: of pursuing freer trading agreements. We have very very low
Speaker 11: trade barriers for United States and ports, and we feel
Speaker 11: we've treated American exporters very well, so we would pre
Speaker 11: prefer to be on a lower tariff rate. We've ended
Speaker 11: up at fifteen percent as a base rate, which reflects
Speaker 11: the fact we have a small trade surplus with the
Speaker 11: United States. We're talking very marginal New Zealand dollars five
Speaker 11: hundred million, so it isn't big. We don't really think.
Speaker 12: Disappointing that it wasn't maybe the ten percent that dooks
Speaker 12: for thinking it.
Speaker 11: We would have preferred that we understand the rule that's
Speaker 11: been applied. But it's hard to conceive that New Zealand,
Speaker 11: a country of five million people, is any kind of
Speaker 11: threat to the manufacturing or industrial base of America.
Speaker 12: Does it lead though? And I guess we're trying to
Speaker 12: figure out. We talk a lot about the geopolitical world
Speaker 12: war being changing around. We talked about if the present
Speaker 12: was just asked about maybe closer ties between China and
Speaker 12: Latin America. China already has a presence, we know in
Speaker 12: Latin America, but maybe they are increased as a result
Speaker 12: of what's going on. Are you forging different relationships because
Speaker 12: of some of the strained relationships out of the United
Speaker 12: States or strained relations out of the US.
Speaker 11: I wouldn't characterize it that way. New Zealand has always
Speaker 11: looked to forge relationships around the world and to reinforce
Speaker 11: the rules based system wherever we can, and to work
Speaker 11: through multilateral institutions because we're small and our voice will
Speaker 11: never be the loudest like the United States. We have
Speaker 11: a strong and important economic relationship with China that we've
Speaker 11: been able to maintain while also taking very different points
Speaker 11: of view on many matters, and we've been able to
Speaker 11: balance those two things.
Speaker 12: So not strengthening them with China because of maybe what's going.
Speaker 11: On, No, I would not characterize it that way, but
Speaker 11: continuing to lean into our relationships where we have inst
Speaker 11: So we are members, for example, of the CPTPP trade relationship,
Speaker 11: and we have welcomed the EU's interest in becoming a
Speaker 11: dialogue partner and looking to reinforce that trade arrangement. We've
Speaker 11: recently signed free trade agreements with the United Kingdom, with
Speaker 11: the European Union. They're important with the GCC, the UAE,
Speaker 11: and we're pursuing a trade relationship with India. We think
Speaker 11: it's very important as a small exporting country that we
Speaker 11: have options and who we trade with and wherever possible,
Speaker 11: try and open more doors. We've got a grand history
Speaker 11: of doing that. We were one of the first countries
Speaker 11: in the world to drop subsidies to ensure that we
Speaker 11: were genuinely open to the world. We won't get rich
Speaker 11: selling to ourselves, we're too small for that, so we
Speaker 11: do well when the world welcomes our goods and services.
Speaker 2: Mister Willis, are you meeting with any US officials on
Speaker 2: this trip?
Speaker 11: Not on this trip thirty six hours only. I'm afraid,
Speaker 11: but I look forward to returning to Washington later this
Speaker 11: year for some the annual meetings, and at that point
Speaker 11: I would hope to meet with some people from the administration.
Speaker 2: At that point, do you will part of your job
Speaker 2: be to try to reduce the fifteen percent tariff on
Speaker 2: goods from New Zealand.
Speaker 11: Well, look, we're realistic about the fact that the Trump
Speaker 11: administration have set a clear parameter that countries that have
Speaker 11: surpluses are unlikely to get reductions in their tariffs. But
Speaker 11: we will continue to advance our case, which is that
Speaker 11: we have a very complementary trade relationship with the United States,
Speaker 11: built on a security partnership in a very long history,
Speaker 11: and we will press the case for our exporters that
Speaker 11: we would we think be fairly facing a lower rate.
Speaker 11: And we will continue to share that message with our
Speaker 11: friends in the United States to make sure that if
Speaker 11: there is reconsideration of the current tariff regime in future,
Speaker 11: that we're front of the line for reconsideration. We think
Speaker 11: we should be. We're keyws, we play fair, we play
Speaker 11: by the rules. We sell you Sauvignon blanc tourism experiences
Speaker 11: and lean red meat that Americans love and we would
Speaker 11: like you to be getting it at fair prices into
Speaker 11: the future. And a lower tariff right supports that we
Speaker 11: expect to continue buying huge amounts of American goods into
Speaker 11: the future. So there's nothing to fear from giving New
Speaker 11: Zealand a lower tariff right in the future.
Speaker 12: You're also great sailors. I'm just going to point it
Speaker 12: out we as a fellow sailor myself, we're talking with
Speaker 12: you Alot Willis, she's Minister of Finance of New Zealand
Speaker 12: here in our studio at Bloomberg Headquarters in New York City.
Speaker 12: What are you go doing to encourage foreign direct investment? Yeah, well,
Speaker 12: we're very big on this.
Speaker 11: So we've set up a new entity, Invested New Zealand
Speaker 11: to connect international investors with New Zealand. We're reforming our
Speaker 11: legislation to make it easier for foreign investors to make investments,
Speaker 11: and administratively, we've sped up the process by which they
Speaker 11: can do that. Particular, we've introduced golden visas the Active
Speaker 11: Investor Plus, which means that investors can get residency rights
Speaker 11: in exchange for making investments either actively or passively. In
Speaker 11: New Zealand assets.
Speaker 12: Is it working.
Speaker 11: It is working. We've been delighted by the response, a
Speaker 11: really high degree of interest. Hundreds of people have applied
Speaker 11: for those visas within the first few months, pledging over
Speaker 11: a billion dollars in New Zealand funds. And I think
Speaker 11: that reflects two things. One, New Zealand is a safe,
Speaker 11: secure place in a world that increasingly is less so,
Speaker 11: and people like the idea of having that residency in
Speaker 11: New Zealand. But second, they can see that many of
Speaker 11: our investment opportunities are currently undercapitalized. Investing in New Zealand
Speaker 11: is a good bet.
Speaker 2: Can they buy real estate in New Zealand though if
Speaker 2: we get residency.
Speaker 11: Not currently that is excluded. Our government, which is comprised
Speaker 11: of three parties, has been in discussion about loosening those
Speaker 11: regulations so that those who get an active investor visa
Speaker 11: may in future be able to purchase a proper.
Speaker 2: How far is the future? What are we talking about
Speaker 2: for a timeline here?
Speaker 11: Those talks have been underway and you would expect that
Speaker 11: a decision would be made by our cabinet in the coming.
Speaker 2: Weeks, Okay, in the coming weeks, So Carol, get ready.
Speaker 12: Your little slice of paradise.
Speaker 11: You know, we're surrounded by a big, fat option. I
Speaker 11: know we have huge amounts of land. It's beautiful. I
Speaker 11: think the world should be looking at New Zealand. We
Speaker 11: have great prospects.
Speaker 12: Will the US tariffs impact growth in your nation?
Speaker 11: Well, as I said, we'd always prefer not to be
Speaker 11: facing those tariffs, but as a proportion of our overall trade,
Speaker 11: it is actually quite small. The more significant impact for
Speaker 11: US is the same as it is for many other countries,
Speaker 11: which is a lower rate of global growth resulting from
Speaker 11: tariffs and retaliatory too.
Speaker 12: You're worried about a global recession, then.
Speaker 11: Not a recession, but just a lower rate of potential
Speaker 11: growth would have otherwise been the case, particularly out of
Speaker 11: our trading partners. That then effects prices for our goods
Speaker 11: and demand for our goods.
Speaker 12: It's just enough to feel like a recession.
Speaker 11: Well, it can slow enough to feel like we're not
Speaker 11: meeting the potential that would have otherwise been realized. And
Speaker 11: that's been reflected in our forecast for the New Zealand economy,
Speaker 11: and which we did peer down our growth expectations for
Speaker 11: the future based on what was developing with tariffs. You know,
Speaker 11: obviously there's a lot of water to go into the
Speaker 11: bridge to see how all of this does play out globally,
Speaker 11: how countries are affected, and what it means for New
Speaker 11: Zealand's part. We continue to forecast strong growth, low inflation.
Speaker 11: That will remain the case, but a teriff free world
Speaker 11: is one in which we grow faster.
Speaker 12: Do you think that might come back if there's a
Speaker 12: different president in the.
Speaker 2: Way it is.
Speaker 11: I think countries will always continue to pursue their own
Speaker 11: interests as they should, and that's why I will keep
Speaker 11: singing the song for freer trade, because that is in
Speaker 11: New Zealand's interests.
Speaker 12: So glad to get some time with you. Thank you
Speaker 12: so much. Tom and I both enjoyed it. Nicola well
Speaker 12: as she's Minister of Finance for New Zealand right here
Speaker 12: in our studio.
Speaker 1: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 2: Plenty ahead in our second hour of the weekend edition
Speaker 2: of Bloomberg BusinessWeek. From Subways to Superchargers, more insights from
Speaker 2: the c suite, including the CFO of New York's Metropolitan
Speaker 2: Transportation Authority on addressing fair evasion, keeping the city's public
Speaker 2: transit budgets on track, and the agency's nearly two billion
Speaker 2: dollar investment in a subway line. Plus the founder and
Speaker 2: CEO of spark Charge wants to bring mobile ev charging
Speaker 2: everywhere you go. We discussed the company's plans to accelerate
Speaker 2: ev adoption all across North America. That's coming up later
Speaker 2: this hour, but first. The digital payments company Block formerly
Speaker 2: known as Square, earlier this month raised its full year
Speaker 2: profit guidance. This after second quarter earnings came in well
Speaker 2: ahead of Wall Street expectations. It was fueled by strength
Speaker 2: and its cash app lending business and resilient payment volumes.
Speaker 2: The company now expects to generate ten point one seven
Speaker 2: billion dollars in gross profit this year. That's up from
Speaker 2: a prior forecast of nine point nine to six billion.
Speaker 2: We've got with us am Rita, USA CFO and COLO
Speaker 2: of Block. She joins us from Palo Alto, California, actually
Speaker 2: from Hillsborough California. Excuse me, I'm Rerida is going to
Speaker 2: be featured in an upcoming edition of the Bloomberg CFO
Speaker 2: Briefing newsletter. You can sign up for that at Bloomberg
Speaker 2: dot com slash CFO Briefing. Also with us is a
Speaker 2: Nina Trentman, Bloomberg News Senior editor. She writes the Bloomberg
Speaker 2: CFO Briefing newsletter. She joins us here in the Bloomberg
Speaker 2: Interactive Brokers Studio. Welcome, Welcome, everybody, and Rita, I want
Speaker 2: to start with you. I almost said Square at Block
Speaker 2: you've got a great view of what the consumer's doing
Speaker 2: because of transactions, because of what's happening with.
Speaker 6: The Cash App.
Speaker 2: How would you describe the US consumer right now?
Speaker 4: Yeah?
Speaker 13: Well, first of all, thank you so much for having me.
Speaker 13: It's great to be here. You know, look, we have
Speaker 13: real time data across our two at scale ecosystems, Square
Speaker 13: that serves sellers small businesses, and across that we see
Speaker 13: hundreds of millions of buyer cards consumer cards, and then
Speaker 13: Cash App, which serves individuals fifty seven million monthly active
Speaker 13: accounts and Cash App across the United States. So between
Speaker 13: these two businesses we get to see a lot in
Speaker 13: terms of consumer spending and consumer health patterns. Overall, what
Speaker 13: we've seen is resilience. From a square perspective, we see
Speaker 13: strong retention. This is the growth or seam store growth
Speaker 13: for a small business on our platform remaining steady and strong.
Speaker 13: And we see strong new customer acquisition, which we think
Speaker 13: is a sign of strong small business as well as
Speaker 13: the growth of our platform. And then from a cash
Speaker 13: app perspective, we see continued growth in spending and in
Speaker 13: earned wages on our platform, which again is an indication
Speaker 13: of the engagement of our platform, our ability to command
Speaker 13: share of wallet, as well as the resilience of a consumer.
Speaker 14: Man, Rita, thanks for joining us.
Speaker 15: Just following up there in terms of your business, you
Speaker 15: also have a buy now, pay later component. I'm wondering
Speaker 15: how delinquency rates have evolved in that business and also
Speaker 15: how you're thinking about underwriting in this somewhat uncertain crow environment.
Speaker 13: Well, we think the product attributes of our three lending
Speaker 13: products enable us to be pretty nimble and be able
Speaker 13: to pivot quickly. To the extent we do see a
Speaker 13: turn in repayment rates, which, as you heard on our call,
Speaker 13: we haven't yet heard. We have three primary lending products.
Speaker 13: Square loans that serve small businesses, as you note by
Speaker 13: now pay later, which serves customers at a point of
Speaker 13: checkout when they're buying something and they can pay in
Speaker 13: for that transaction, and then cash that borrow, which enables
Speaker 13: you to get a line of credit that often bridges people.
Speaker 13: We know so many millions are living to effect a
Speaker 13: paycheck and this helps smooth their cash flows. And across
Speaker 13: each of these three lending products, we've seen strong and
Speaker 13: healthy repayment behavior. Now we're ready to the extent that
Speaker 13: that changes. We have the ability to update our underwriting
Speaker 13: machine learning based underwriting models in real time, but we
Speaker 13: also want to be there to support customers as their
Speaker 13: needs arise, and we think that our products can do
Speaker 13: that effectively.
Speaker 15: Just following up in terms of signals that you're looking
Speaker 15: for specifically on performance of the business and whether any
Speaker 15: of the micro uncertainty is feeding through. What are the
Speaker 15: metrics that you're specifically looking for.
Speaker 13: Sure, So from a cash app perspective, we look at
Speaker 13: things like inflows per active that's the amount of money
Speaker 13: that customers bring into cash app, and that held a
Speaker 13: growth rate on inflows proactive in the second quarter for
Speaker 13: US with cash up was at eight percent, showing again
Speaker 13: strong engagement with our platform and resilience of the consumer.
Speaker 13: We also look at things like commerce volumes. Our commerce
Speaker 13: volumes over the last twelve months within cash app grew
Speaker 13: sixteen percent year over that year over year. That's the
Speaker 13: amount of money that people are using our platform to
Speaker 13: conduct commerce, whether it's by now, pay later, cash up card,
Speaker 13: or cash up pay. We also look from a square
Speaker 13: perspective at things like growth on our discretionary verticals, so
Speaker 13: our food and beverage GPV, which you can think of
Speaker 13: as discretionary. We serve a lot of quick service restaurants.
Speaker 13: Full service restaurants grew fifteen percent your rear in the
Speaker 13: second quarter. Retail GPV also oftentimes discretionary vertical for uscrew
Speaker 13: ten percent your reear. Again, these are healthy rates of growth,
Speaker 13: but we're very watchful. We look at this data on
Speaker 13: a daily basis, and we want to be there both
Speaker 13: to protect our business but also more importantly serve our
Speaker 13: customers to the extent that you know, in this dynamic environment,
Speaker 13: anything were to change.
Speaker 9: I want to pivot a little bit to crypto because
Speaker 9: block holds roughly eighty six hundred bitcoins worth almost a
Speaker 9: billion dollars, and crypto treasury companies have been getting a
Speaker 9: lot of attention. You guys own bitcoin. Are there any
Speaker 9: plans to add Ether to the company. What's the journey
Speaker 9: been like on that crypto planet? Yeah, Ether plans at all.
Speaker 13: No plans to add anything beyond Bitcoin from a crypto
Speaker 13: currency perspective to our balance sheet. We believe that if
Speaker 13: the Internet is to have a currency, Bitcoin is the
Speaker 13: most likely contender. It's the longest lived, it's resilient, it's
Speaker 13: an open developer ecosystem. All the rules are understood, and
Speaker 13: it is effectively an open source platform, an open protocol
Speaker 13: for money. We think ultimately, if the Internet does have
Speaker 13: a currency, and that is Bitcoin, that enables us as
Speaker 13: a company to move at the speed of the Internet
Speaker 13: as we think about our business more globally. So a
Speaker 13: world in which Bitcoin succeeds is a world in which
Speaker 13: companies like ours can move more efficiently and more quickly
Speaker 13: to serve our customers. That's the sort of purpose the
Speaker 13: strategic alignment that we have with bitcoin. All sorts of
Speaker 13: different ways that we as a company are learning about
Speaker 13: how to operate in a bitcoin world. One of those
Speaker 13: is by holding it on our own balance sheet as
Speaker 13: a corporate to have bitcoin in our treasuries, and we've
Speaker 13: been doing this for five plus years now, and it's
Speaker 13: something where we get to learn the insurance aspects, the
Speaker 13: buy sell aspects, the custody aspects, the protection around that,
Speaker 13: and how we think about the accounting and the tax
Speaker 13: elements for bitcoin. So we're learning a lot as a
Speaker 13: company as we do that, just as an individual would
Speaker 13: or another institution might, and I think it's something that
Speaker 13: a lot of other corporates will begin to consider more
Speaker 13: and more.
Speaker 2: We're speaking with Amrita, who'sha CFO and COO of Block
Speaker 2: and Rita on the bitcoin question, the buying and selling.
Speaker 2: Do you have plans to buy more bitcoin to add
Speaker 2: to the treasury.
Speaker 13: We have a program in place where we dollar cost
Speaker 13: to average our bitcoin purchases. We have a gross profit
Speaker 13: that we generate from bitcoin and our customer oriented products,
Speaker 13: so we sell bitcoin through cash app. We've sold over
Speaker 13: fifty eight billion dollars worth of bitcoin to our cash
Speaker 13: app customers. We also have a product that we're launching
Speaker 13: in the back half of this year for bitcoin minors
Speaker 13: around the infrastructure, the hardware, and the integrated software for that,
Speaker 13: and we have a self custody product, bitkey. We have
Speaker 13: said that ten percent of all of the gross profit
Speaker 13: that we generate across our bitcoin products, we will invest
Speaker 13: back in the bitcoin. And so we're in the market
Speaker 13: every single day buying that ten percent worth of our
Speaker 13: gross profit back into bitcoin.
Speaker 15: Mam Rita, we are running out of time, just very quickly.
Speaker 15: Just wandering from a CFO perspective, you said, if you've
Speaker 15: held bitcoin on your balance sheet for five years, you've
Speaker 15: seen the fluctuations. That's basically what I'm hearing from CFOs
Speaker 15: as to why they don't want to hold bitcoin. How
Speaker 15: is the company navigating the ups and downs in the price,
Speaker 15: even though most recently we've seen more increase than decrease.
Speaker 13: You know, there's been fluctuations in a number of different assets,
Speaker 13: different asset classes. You have to be transparent with your
Speaker 13: investors as to what's driving various elements. The updated accounting
Speaker 13: standards for bitcoin treat it like any other asset that
Speaker 13: you may own, where you write it up at the
Speaker 13: end of the quarter. If the value goes up and
Speaker 13: you write it down at the end of a quarter,
Speaker 13: if the value goes down. The prior standards which to
Speaker 13: get into some of the accounting wonkiness were as an
Speaker 13: intangible asset. We're very very strict and you can only
Speaker 13: ever write down the value of bitcoin. So now with
Speaker 13: these updated accounting standards that look like any other asset
Speaker 13: you may hold on your balance sheet, we think that
Speaker 13: that has the opportunity to create clarity for investors and
Speaker 13: for companies, and to bring more people into the bitcoin ecosystem.
Speaker 2: I'm Rita, who's a CFO and COO of Block. Please
Speaker 2: do come back and join us soon on a Bloomberg
Speaker 2: Business Weekdaily. Really appreciate your time. Once again. I'm Rita,
Speaker 2: who's just CFO and COO of Block joining us from Hillsboro, California.
Speaker 2: Also with us Nina Trettman, Bloomberg News Senior editor. She
Speaker 2: writes the Bloomberg CFO Briefing newsletter. Sign up for it
Speaker 2: at Bloomberg dot com slash CFO Dash Briefing.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch
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Speaker 1: or watch us live on YouTube.
Speaker 2: The MTA runs New York City subways, buses, and commuter
Speaker 2: trains that six million people rely on each weekday, and
Speaker 2: on Monday, board members approved close to a two billion
Speaker 2: dollar contract to expand the Second Avenue subway line into
Speaker 2: East Harlem. Jpitzel is the CFO of the MTA. She's
Speaker 2: charged with quite the task, which I think is fair
Speaker 2: to say many would find unenviable, charting a sustainable path
Speaker 2: through one of the agency's most financially trying periods in
Speaker 2: its six decade history. She joins us here in the
Speaker 2: Bloomberg Business Week studio. Jay, Welcome, how are you.
Speaker 14: I'm good, how are you? Tim? Thank you for having me.
Speaker 2: Yeah, thanks so much for joining us. I want to
Speaker 2: start with the numbers and just ridership.
Speaker 4: Here.
Speaker 2: Weekday subway ridership is still twenty five percent below pre
Speaker 2: COVID levels. In your modeling, does that ever come back
Speaker 2: to where it was?
Speaker 14: I you know, we have a financial plan that's a
Speaker 14: five year period, and originally we were projecting that we
Speaker 14: would see our subway ridership up to ninety percent, but
Speaker 14: a couple of years ago we revised that because we
Speaker 14: weren't seeing that. But We're hopeful we see an eighty
Speaker 14: percent by twenty twenty nine ridership recovery for subways, But
Speaker 14: on the railroads, we're seeing that recovery even higher. Today
Speaker 14: we see eighty five percent ridership recovery on our railroads,
Speaker 14: which is amazing, something that we thought was going to
Speaker 14: be slower our railroad customers than our subway customers originally
Speaker 14: coming out of pre pandemic.
Speaker 2: So is there a way to tap into that growth financially,
Speaker 2: perhaps with higher prices for those commuters rather than here
Speaker 2: in the city for subway and bus riders.
Speaker 14: So you know, what we have is very small, predictable
Speaker 14: far increases that help balance the financial plan, and so
Speaker 14: we don't want to burden one rider or over another.
Speaker 14: It's really about distance space and commuters, and so we
Speaker 14: keep that equitable. You know that we do a two
Speaker 14: percent fair increase every other you know, every other year,
Speaker 14: and that keeps our financial plan and balance.
Speaker 9: How do you plan to get that number, I think
Speaker 9: you said eighty percent ridership? How do you bring people
Speaker 9: back into the subways?
Speaker 14: We bring writers back by providing reliable on time performance right,
Speaker 14: our service matters to customers and delivering the service that
Speaker 14: we promise and schedule is something that we strive for,
Speaker 14: but also safety. Our customers need to feel safe safe,
Speaker 14: and our customers feel that right. We've had the lowest
Speaker 14: safety you know numbers or crime numbers in July, and
Speaker 14: so our customers are telling us that by taking the subway,
Speaker 14: but also our customer surveys right tell us that customers
Speaker 14: are satisfied with the service that we're providing.
Speaker 2: The MTA phases that combined one point one billion dollar
Speaker 2: deficit over three years starting in twenty twenty seven, it
Speaker 2: already owes close to fifty billion dollars that needs to
Speaker 2: spend sixty eight billion dollars more for vital improvements. There's
Speaker 2: some federal aid that's up in the air. The Trump
Speaker 2: administration is trying to roll back congestion pricing. What's the
Speaker 2: backup plan if the aid evaporates and the President is
Speaker 2: successful in rolling back congestion pricing.
Speaker 14: You know, Tim, I would be remiss if I didn't
Speaker 14: mention that. Back in twenty twenty three, we were the
Speaker 14: first transit agency to solve our fiscal cliff. Thanks to
Speaker 14: Governor Holcal, chairliber and the legislature, we were able to
Speaker 14: come out of a deficit unlike any other transit agency today.
Speaker 14: You've heard SEPTA's facing deep cuts Chicago, but we were
Speaker 14: the first to say we need state, federal and local aid,
Speaker 14: and we got our state federal funding for us. We
Speaker 14: also as the MTA, contributing to our solving our deficit. Right,
Speaker 14: the MTA contributes five hundred million to operating efficiencies, and
Speaker 14: those deficits that we have in twenty seven and twenty
Speaker 14: eight and twenty nine are very small compared to our
Speaker 14: operating budget, and we are committed to doing our part
Speaker 14: in saving money to help ensure that we can balance
Speaker 14: our budget in the out years.
Speaker 9: We were talking a little bit about the base fares
Speaker 9: of subways increasing regularly. I'm wondering if there is there
Speaker 9: a set area within the MTA that that revenue goes toward.
Speaker 9: Because the base fare for a subway in New York
Speaker 9: City it's expected to increase to three dollars in January.
Speaker 14: Correct, So our fares help our operating budget, right, So
Speaker 14: they seventy percent of MTA's cost our labor and fringe,
Speaker 14: and so that pays for seventy thousand employees, and then
Speaker 14: the small fraction is for the non labor contract, so
Speaker 14: every fair contributes to operating cost.
Speaker 2: On our side, let's talk about fares and fair evasion.
Speaker 2: Usually when we talk fair evasion, I think of people
Speaker 2: jumping over subway turnstiles, and I know there's been some
Speaker 2: mitigation efforts in place. But I took the bus to
Speaker 2: LaGuardia on Thursday. It was a great experien So when
Speaker 2: I got on the SBS and Queens, I got on
Speaker 2: it was like an articulated bus, so you know, it
Speaker 2: was a long when I got off and on in
Speaker 2: the back and out of like more than half a
Speaker 2: dozen people, I think I was the only one who paid,
Speaker 2: And I was thinking to myself, I didn't know it
Speaker 2: was optional to pay to get on the bus. What
Speaker 2: are the numbers there?
Speaker 14: So it's not optional right to pay the fair. We
Speaker 14: are encouraging every customer to pay our pay their fair share.
Speaker 2: To but there's no enforcement on the bus.
Speaker 14: So there's a couple of things that we're doing for
Speaker 14: fair evasion. And our chair has been tackling this first
Speaker 14: when he became chair. So on the subways you've heard
Speaker 14: of us talking about we're doing fins, sleeves, gate guards,
Speaker 14: enforcing the exit gate, which is the fair you know,
Speaker 14: evasion highway. And so we've made great strides on the subways.
Speaker 14: We've reduced fair evasion in over a year by thirty percent.
Speaker 14: We've dropped that rate from a high of fourteen percent
Speaker 14: to nine point eight percent, So we know those efforts
Speaker 14: are working. On the buses, it's a little bit more difficult,
Speaker 14: but we're also working there. We've decreased fair invasion on
Speaker 14: our buses as well in the last year from fifty
Speaker 14: percent to forty four percent because all the tactics the
Speaker 14: President of New York City Transit is employeing. We have
Speaker 14: eagle teams that are looking, you know, on different bus
Speaker 14: routes to make sure that they are enforcing the pay
Speaker 14: your fare right. Our bus operators do their due diligence,
Speaker 14: but really our eagle teams are enforcement out there riding
Speaker 14: different routes and making sure customers fair pay their fare
Speaker 14: or they're getting a summons or they're getting off the bus.
Speaker 14: And that's how we're working.
Speaker 6: How does that work?
Speaker 9: Because I heard of a friend who was on a
Speaker 9: bus and someone had come around and like scanned their
Speaker 9: phone to see if they had paid the fare. Is
Speaker 9: that how it works explain to us.
Speaker 14: So right now what we are doing is if you're
Speaker 14: boarding the bus, you have to pay, because there's two
Speaker 14: different ways you can pay right today is the Metro
Speaker 14: card and the OMNI, And when we go to full
Speaker 14: OMNI next year, there's going to be proof of payment.
Speaker 14: And so what you can do is European style proof
Speaker 14: of payment for customers is you can tap their phones
Speaker 14: or credit cards the method of payment to see if
Speaker 14: they paid their fare and if they didn't pay their fare.
Speaker 14: That's something that we will work with on a summons
Speaker 14: or you know, you need to pay your fare for
Speaker 14: our customer, and so that's something that's coming. We're really
Speaker 14: excited about that for OMNI and proof of payment, but
Speaker 14: right now there's two different methods and so we're working
Speaker 14: on different ways to combat fair evasion.
Speaker 2: I want to talk a little bit about proposals from
Speaker 2: mayoral candidates or in Mumdani. For example, it's proposal to
Speaker 2: make all New York City buses free. What do you
Speaker 2: think of that and does it create a sort of
Speaker 2: a two tiered mass transit system where people who ride
Speaker 2: buses don't pay for it, but then people who ride
Speaker 2: the subway do and then kind of offset like people
Speaker 2: not necessarily taking the right mode of transit for their destination.
Speaker 14: We've heard the mariial candidates proposal for a fair free buses.
Speaker 14: What I'd like to emphasize again is fairbox revie. He
Speaker 14: is important to the operations of the MTA. It's twenty
Speaker 14: six percent of our revenue, and buses is about a
Speaker 14: billion dollars in the out years of revenue for the
Speaker 14: MTA bus for the MTA, excuse me, and that's important
Speaker 14: to us, and so we want to make sure revenues
Speaker 14: equal service. And that is something that's hypothetical right now,
Speaker 14: but we rely on fairbox revenue.
Speaker 2: So you said a billion dollars in revenue is what
Speaker 2: it brings in. Momdanni estimates that's about seven hundred and
Speaker 2: fifty million dollars annually to make buses free. Is that
Speaker 2: an accurate assessment on his part?
Speaker 14: I think there's pieces that he's he's looking at just
Speaker 14: the New York City Transit bus fair We have MTA
Speaker 14: bus that we also a run that the city contributes to,
Speaker 14: and that is also fairbox revenue for buses.
Speaker 2: So what would take away that revenue from the MTA
Speaker 2: due to the authorities finances or would it just be
Speaker 2: I mean, look again, it's a proposal, you said, it's
Speaker 2: something that you know is not a plan yet. But
Speaker 2: to be fair, he is by far the favored candidate,
Speaker 2: and there are a lot of questions about what power
Speaker 2: he has to actually follow through with a campaign promise
Speaker 2: such as this. But this is certainly a central part
Speaker 2: of his campaign, so you got to be looking at
Speaker 2: it closely.
Speaker 14: We are looking at it. But one thing that I
Speaker 14: would like to emphasize right right now in New York City,
Speaker 14: fares are affordable. We make transit and buses the most
Speaker 14: affordable at two dollars and ninety cents, and it's affordable
Speaker 14: with fairfares, reduce fair for our customers. But you know,
Speaker 14: it is something that we will look into as the
Speaker 14: mayoral candidate has proposed.
Speaker 9: What about mitigating climate issues that affect particularly the subway stations.
Speaker 9: You go online, you see videos of flooding in station,
Speaker 9: trying to.
Speaker 2: Get home and on a raading day.
Speaker 9: Right and water in the subway station. Do you guys have,
Speaker 9: at least as part of the upcoming capital plan, a
Speaker 9: plan in place to update the infrastructure.
Speaker 14: A couple of points on that right. A couple of
Speaker 14: the issues that arise in the subway systems are not
Speaker 14: the MTA's fault. New York City contributes to the flooding
Speaker 14: issues that we face in the subways, whether it's through
Speaker 14: dep manholes, the sewage. So that is one aspect of
Speaker 14: the flooding that you see on the New York City Transit.
Speaker 14: But our historic capital plan that sixty eight point four
Speaker 14: billion dollars does have climate resiliency of hardening the system
Speaker 14: in certain stations in proposed And therefore.
Speaker 2: Let's talk a little bit about congestion pricing. Not as
Speaker 2: hot of a topic as it was a few months ago,
Speaker 2: it seems like it's died down a little bit in
Speaker 2: your view. Is it working?
Speaker 14: Congestion pricing is working. It is reducing traffic by eleven percent.
Speaker 14: What does that mean? Seventy thousand cars are off the
Speaker 14: road every single day. What else is it doing. It's
Speaker 14: moving our buses faster, it's moving people faster. We've seen
Speaker 14: a change in ridership, but also we've seen safety increases.
Speaker 14: There's a fourteen percent decline in pedestrian crashes. And on
Speaker 14: top of it all, it is bringing in the revenue
Speaker 14: that we had projected originally.
Speaker 2: It's being watched very closely, not just by proponents and
Speaker 2: opponents of it, but also by other cities that might
Speaker 2: want to put this into practice. Have you or has
Speaker 2: the MTA heard from other cities about congestion pricing, about
Speaker 2: the model and about questions about implementing it in their
Speaker 2: own cities.
Speaker 14: The MTA has heard from other cities and transit properties
Speaker 14: and engaged with them to have conversations about the process
Speaker 14: that New York implemented for the successful congestion pricing program
Speaker 14: that we're having. So they're looking at it at us
Speaker 14: as a model.
Speaker 9: We have to ask about the second Second Avenue subway
Speaker 9: expansion as well. Just walk us through some of the
Speaker 9: plans for and the timeline here, because this has been
Speaker 9: something that's been in the work, something that any New
Speaker 9: Yorker who's lived in New York for the.
Speaker 2: Last ford how many years, forty.
Speaker 14: Decades, fifty yards fifty I think we've talked about that
Speaker 14: at our special board meeting. You know, the contract that
Speaker 14: our board just approved is almost one point nine billion
Speaker 14: dollar contract to start boring, right, what does that mean?
Speaker 14: It's starting the tunneling for the three stations that are
Speaker 14: vital to Second Avenue Subway Phase two, and we are
Speaker 14: committed to expanding Second Avenue Phase two here at the MTA,
Speaker 14: and we think it's going to be a great service
Speaker 14: to our customers. It's going to serve about one hundred
Speaker 14: thousand customers in addition to the two hundred thousand customers
Speaker 14: that's Second Avenue Subway Phase one serves today.
Speaker 9: Do you have a timeline or an expected timeline.
Speaker 4: I think the.
Speaker 14: Twenty thirty two was the service date that we have
Speaker 14: said publicly.
Speaker 2: It's a very like I said at the beginning, it's
Speaker 2: an enviable task that you have ahead of you. Some
Speaker 2: people would argue, I would imagine that you spend quite
Speaker 2: a bit of time studying other transit systems around the world,
Speaker 2: what's worked and what hasn't worked. If you could wave
Speaker 2: a magic wand here in New York City to overcome
Speaker 2: some of the barriers that the MTA has experien whether
Speaker 2: they're financial barriers, whether they're CAPEX barriers, what would those
Speaker 2: be like? What is the biggest obstacle to making the
Speaker 2: service even better here?
Speaker 14: So I think tim one thing that I would say
Speaker 14: is MTAs a leader and being the largest agency in
Speaker 14: North America other agencies look to US. I think I
Speaker 14: said this before we led with the fiscal cliff, we
Speaker 14: lead with our capital program as well. We have started
Speaker 14: to do things differently since Janel Lieber took over for
Speaker 14: cn D and now Jamie Torres Springer. We do design, build,
Speaker 14: We do faster, cheaper and better. But we're employing definitely
Speaker 14: different ways of doing capital programs as well as operating
Speaker 14: for US to be better.
Speaker 2: I want to go back to congestion pricing and some
Speaker 2: financial questions around that, specifically about selling debt off of revenues.
Speaker 2: Do you have plans to sell debt off of revenues
Speaker 2: from congestion pricing?
Speaker 14: As you know, the congestion revenue is dedicated to the
Speaker 14: twenty to twenty four capital program. It is expected to
Speaker 14: generate fifteen billion for that program, and once we see
Speaker 14: a stable market in the revenues coming in, we do
Speaker 14: plan to issue debt. We've talked about it. That's not
Speaker 14: sometime until twenty twenty six for US. Once we see
Speaker 14: a comfortable stream of revenue. We've projected five hundred million
Speaker 14: for the next three years, and we want to make
Speaker 14: sure that we see that revenue and the markets are
Speaker 14: comfortable issuing that debt for us.
Speaker 2: You've talked about fair increases on MTA services, what about
Speaker 2: increases in congestion pricing? And what is the timeline for that?
Speaker 14: So as the governor has said to us, right, it's
Speaker 14: the toll will continue to be nine dollars for three years,
Speaker 14: then it'll increase gradually to the next three years at
Speaker 14: twelve dollars, and then in the final the seventh year,
Speaker 14: it'll be a fifteen dollars use a toll. So we've
Speaker 14: already had that phased in based on the schedule we approved.
Speaker 2: Can you just bring us another litigation around this with
Speaker 2: the federal government and with the state, But can you
Speaker 2: just take us into conversations that you've had with counterparts
Speaker 2: at the Department of Transportation over the last few months
Speaker 2: about making sure that the MTA stays on a sustainable
Speaker 2: financial path.
Speaker 14: So I think you know what I would say is
Speaker 14: the federal government contributes two billion dollars to the MTA,
Speaker 14: and that's a revenue source that we rely on to
Speaker 14: keep the system in the state of good repair, and
Speaker 14: so we would continue to want that funding. You know,
Speaker 14: MTA moves forty percent of riders across North America, but
Speaker 14: receives only a fraction of federal dollars from Washington, and
Speaker 14: so we continue to rely on the federal dollars that
Speaker 14: we get and it's important for us.
Speaker 2: But what's the backup plan if that evaporates?
Speaker 14: Yeah, we're confident, right that the MTA and the federal government,
Speaker 14: the federal judge that is designed right, we're confident that
Speaker 14: we would win that lawsuit. You know, Judge Lineman issued
Speaker 14: a positive finding for the MTA just a few months ago.
Speaker 14: And congestion pricing is, you know, continuing to operate and
Speaker 14: we're generating the funding.
Speaker 2: JA, thanks so much. Oh go ahead, Well, I was
Speaker 2: just going to ask one more question.
Speaker 9: Just I mean, I imagine you know, you get a lot
Speaker 9: of people who hear these numbers. Congestion pricing is on
Speaker 9: tractories five hundred million. They say, wow, that sounds like
Speaker 9: a lot of money. Why are you know, why are
Speaker 9: the subways still the way that they are? Delays, crime
Speaker 9: on cleanliness? Help us just understand. I know that you
Speaker 9: said that a lot of those fares go towards paying workers,
Speaker 9: But a number like this, a number like five hundred million,
Speaker 9: what does it mean in the context for the broader
Speaker 9: MTA organization is that a lot of money.
Speaker 14: So I'll give you context. Our operating budget every every
Speaker 14: year is about twenty billion dollars, right, That is to
Speaker 14: run subways, buses, commuter rails and the services for six
Speaker 14: million commuters every day. But in order for us to
Speaker 14: keep that system running, you have to maintain it, right,
Speaker 14: and so sixty eight point four billion dollars a good
Speaker 14: majority of that funding is to keep it in a
Speaker 14: state of good repair. That means new railcars, new buses,
Speaker 14: new signal upgrades, track maintenance, and everything else that goes
Speaker 14: with operating a system that's so vast in size. So
Speaker 14: five hundred million dollars is just one stream of revenue
Speaker 14: that generates when we leverage it fifteen billion dollars to
Speaker 14: continue with the capital side of the world, but the
Speaker 14: operating side has different funding sources. But we're confident that we,
Speaker 14: you know, move six million customers every single day, and
Speaker 14: we're happy to do that safely.
Speaker 2: Jpittel, CFO of the Metropolitan Transit Authority, joining us here
Speaker 2: in the Bloomberg Business Week Studio.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch
Speaker 1: us live weekday afternoons from two to five these during
Speaker 1: this listen on Applecarplay and Android Auto with the Bloomberg
Speaker 1: Business app, or watch us live on YouTube.
Speaker 2: Some big news in the EV space this past month.
Speaker 2: Bloomberg reporting that Ford is unveiling plants for a new
Speaker 2: line of budget universal evs and a five billion dollar
Speaker 2: bid to achieve mass appeal. And then the US Department
Speaker 2: of Transportation revived the five billion dollar National Electric Vehicle
Speaker 2: Infrastructure Program, which was suspended back in February. So while
Speaker 2: Ford and the Department of Transportation poor billions into EV
Speaker 2: manufacturing and charging infrastructure, one company is providing an alternative
Speaker 2: to EV charging. Spark Charge provides off grid scalable charging
Speaker 2: solutions where they bring the charging power to you. The
Speaker 2: company recently raised over thirty million dollars in capital to
Speaker 2: accelerate mobile EV charging adoption. For more. Carol and Bloomberg
Speaker 2: TV anchor Matt Miller caught up with the founder and
Speaker 2: CEO of spark Charge, Josh Avive. Matt is widely known
Speaker 2: at Bloomberg as a major car enthusiast, always driving something new.
Speaker 2: He kicks off the interview by explaining whether he is
Speaker 2: ready to make the transition to a full EV.
Speaker 6: No, because I'm a gearhead. I like to work on
Speaker 6: my cars myself. I like old American muscle. I like
Speaker 6: cars to be loud and smell like gasoline and vibrate
Speaker 6: a lot. But but lately I've been driving a ton
Speaker 6: of evs. I drive a new car every week for
Speaker 6: my podcast it's called Hot Pursuit with Hannah Elliott, and
Speaker 6: the acceleration, the handling has gotten so much better. There's
Speaker 6: so many more to choose from that. It's not just
Speaker 6: boring looking Tesla's with spartan interiors that it's It's become
Speaker 6: almost a preferred motor transportation for me. The one problem
Speaker 6: I have still charging the charging network is so bad.
Speaker 12: Yeah, so we have a guest just got a front
Speaker 12: row seat to it, so let's bring him in. Josh
Speaker 12: Aviv is founder in CEO of Spark Charge. He's out
Speaker 12: there in Massachusetts. Josh, good to have you here with Matt.
Speaker 12: Get ready for a grilling, because it is Matt Miller.
Speaker 4: We're ready, We're ready.
Speaker 2: Listen.
Speaker 12: Your company reminds us that it is the world's largest
Speaker 12: EV fleet charging network. Lay it out for us where
Speaker 12: it is how many who's using it give us some
Speaker 12: size and scope.
Speaker 16: Absolutely, so, spark Charge is the world's largest off grade
Speaker 16: evy fleet charging network. We have operations across all fifty
Speaker 16: states and recently just launched in Canada and Mexico. What
Speaker 16: makes us special is that we bring the power to
Speaker 16: the fleet. So we show up with our off grid
Speaker 16: mobile battery chargers and mobile power hubs. We can get
Speaker 16: going without any grid connection, which means we get fleets
Speaker 16: up and running and charging and as little as three
Speaker 16: to seven days versus them having to wait as much
Speaker 16: as two to three years for infrastructure to catch up.
Speaker 6: So you're the biggest off grid ev charging network.
Speaker 12: What does that mean mean?
Speaker 6: Meaning you're not the consumer chargers that are build up
Speaker 6: in malls or next to a Starbucks. You're you're working
Speaker 6: with like Ford pro kind of customers to charge their
Speaker 6: trucks exactly. So you're wringing with construction fleets, with plumbers,
Speaker 6: with electricians, with anybody, with anybody who's Amazon fleet.
Speaker 12: Yeah, Amazon fleets.
Speaker 16: Like Amazon last mile delivery rideshare fleets as well construction fleets,
Speaker 16: rental car fleets, school bus fleets. Think about the problem
Speaker 16: that consumers have where they're like, hey, I need to
Speaker 16: figure out how.
Speaker 4: To charge one car.
Speaker 16: Fleets have the issue of how do I charge twenty
Speaker 16: cars one hundred cars, and how do I do that
Speaker 16: every day to keep my business going? And we step
Speaker 16: in and we basically get them up and running quicker
Speaker 16: than any other electrification option on planet. Or if we
Speaker 16: can get a full fleet up and running in as
Speaker 16: little as three days fully electrified, and those cars out
Speaker 16: on the road.
Speaker 6: Dude, that is such a great business. How did you
Speaker 6: start this?
Speaker 16: Yeah, so we started it when we realized that a
Speaker 16: lot of fleets were waiting anywhere from two to five
Speaker 16: years before the grid would catch up and allow them
Speaker 16: to electrify. And we said, well, how what happens if
Speaker 16: we bring the energy to you, or if we get
Speaker 16: power set up to where we can use our batteries
Speaker 16: to get you charging almost immediately. What we realize is
Speaker 16: that fleets still incorporate fifty cars. They'll incorporate twenty cars,
Speaker 16: but then they'll have the issue of going to the
Speaker 16: grid and saying, hey, we want to get these cars electrified,
Speaker 16: but the grid.
Speaker 4: Can't handle the demand of all these vehicles.
Speaker 16: And so we show up, We get them up and
Speaker 16: go out with from mobile battery chargers, which means they're
Speaker 16: charging from a giant battery connected to charging stations and
Speaker 16: then they're able to get up and running a lot quicker,
Speaker 16: and then they also have a smoother service.
Speaker 4: Right there's no such thing as.
Speaker 16: Grid delays or power outages, especially when it's being battery backed.
Speaker 4: All the energy is there.
Speaker 12: Wait, so you just kind of bring a massive battery
Speaker 12: to places and that's how you do it?
Speaker 6: Is it on eighteen wheels? How do you transport that?
Speaker 4: Yeah?
Speaker 16: So some of them are trailer based, some of them
Speaker 16: are container based, but basically we can get that fleet
Speaker 16: set up operating off that battery and then they can
Speaker 16: begin charging from those charging stations immediately. We also have
Speaker 16: power hubs that use basically clean energy like hydrogen and
Speaker 16: things like that. They can also get a fleet up
Speaker 16: and run in and quickly as well.
Speaker 12: That's what I was going to do. So how do
Speaker 12: you charge your battery? That's what I'm curious, Like, where
Speaker 12: are you getting the power and how do you make
Speaker 12: sure it's cost efficient, especially when there's such a power
Speaker 12: grab right now with all the AI going on.
Speaker 16: Absolutely, so we're pretty much energy agnostic. So that means
Speaker 16: that we can grab energy from solar, which a lot
Speaker 16: of times, that's what we'll do. We'll swap the battery out,
Speaker 16: so we'll basically have a battery recharging from a solar partner.
Speaker 16: We'll bring it in, we'll swap it out with a
Speaker 16: fresh battery, and then keep that fleet going twenty four
Speaker 16: seven three sixty five. To the fleet, it looks like
Speaker 16: limitless energy and we're managing all the power on the
Speaker 16: back end, which means they never have to worry about
Speaker 16: downtime or any operational efficiencies. We're constantly swapping that battery
Speaker 16: out or hooking it up to solar to keep them going.
Speaker 6: I'm normally pretty skeptical, but I was like, Wow, what
Speaker 6: a cool company with a great idea.
Speaker 2: And now it realized what he's just a great pitch man.
Speaker 6: Also, right, I didn't see until now that you got
Speaker 6: a million dollar investment from Mark Cuban and Lorie Grinder
Speaker 6: on Shark Tank. You won various awards too, So you're
Speaker 6: great at selling these businesses, Josh, what's.
Speaker 12: Your There has to be demand otherwise you don't have
Speaker 12: a bill for sure.
Speaker 6: No, it's huge, and I mean, look at how well
Speaker 6: Ford Pro has done with that unit. It's just unbelievable
Speaker 6: to growth. But what's your exit? I mean, are you
Speaker 6: looking at IPO this company? Will you sell it to
Speaker 6: a bigger company? How do you how do you get
Speaker 6: Mark Cuban is money out?
Speaker 4: Yeah?
Speaker 16: I mean right now we're really just focused on execution.
Speaker 16: We're having an amazing year, thank god, and we're really
Speaker 16: seeing fleets come to us and say, hey, we want
Speaker 16: to get going a lot quicker. We don't want to wait,
Speaker 16: and so we're having an amazing year. I think for us,
Speaker 16: the right exit will present itself, but right now we're
Speaker 16: focused on scale. We're focused on making sure our customers
Speaker 16: are happy and making sure that we're onboarding a new fleet.
Speaker 16: Keep in mind, because we're not waiting on the grid
Speaker 16: to catch up because we're able to service these fleets.
Speaker 16: We're almost onboarding a new fleet every week. So you know,
Speaker 16: while we don't don't come out there and say it,
Speaker 16: we're probably one of the fastest growing ev charging networks
Speaker 16: out there as well.
Speaker 12: Wait execution, no offense. It's a pet pee for me.
Speaker 12: When an executive says execution, I don't know what that means.
Speaker 12: It's like everybody dumps things into that.
Speaker 6: One want to grow their business, you know, and they
Speaker 6: don't want to tell you what their exit is.
Speaker 12: So tell us, I mean, what does that mean? What
Speaker 12: do you need to do? What do you need to
Speaker 12: hit what targets in order to really be successful and
Speaker 12: sustainable longer term?
Speaker 16: Absolutely, so for us, success is making sure that when
Speaker 16: we get a fleet operational, we're getting them operational to
Speaker 16: where they can actually grow their fleet. A lot of
Speaker 16: times fleets will come to us and they'll say, hey,
Speaker 16: I'm starting out with ten cars, but my goal is
Speaker 16: to get to one hundred cars and the grid can't
Speaker 16: keep up with that growth. Plus the time to install
Speaker 16: is going to take me three to five years at
Speaker 16: that number of vehicles. So for us, execution means, hey,
Speaker 16: get this fleet up and running in three to seven days,
Speaker 16: get them fully electrified. And then now that they're fully
Speaker 16: electrified and they want to grow their fleet, let's grow
Speaker 16: with them. Let's allow them to go from ten vehicles
Speaker 16: to twenty twenty to fifty to fifty to one hundred
Speaker 16: and see long term growth with that fleet partner over
Speaker 16: a number of years as they continue to grow and operate.
Speaker 16: And because we're getting them up and running quicker, we
Speaker 16: want them to see a better ROI than if they
Speaker 16: had to wait on infrastructure to catch up.
Speaker 6: All right, So we're speaking right now with Josh Aviv.
Speaker 6: He's the founder and CEO of Spark Charge. I know
Speaker 6: that you're focused on the pro unit, the commercial fleets,
Speaker 6: but you must also love cars. I've been in a
Speaker 6: ton of evs lately. I was in a Chevy Blazer EVSs.
Speaker 6: I was in a Dodge Charger daytona scat Pack, which
Speaker 6: I loved. Right now I'm in a Cadillac Vistic, which
Speaker 6: I'm also just really positively surprised by. What do you drive?
Speaker 6: What's your d d Josh?
Speaker 4: I drive a twenty twenty six Cadillac Vistic.
Speaker 6: The Vistic is pretty sick, isn't it. I was truly
Speaker 6: impressed by this vehicle.
Speaker 4: Love it.
Speaker 6: I didn't love the Escalade IQ as much, which is
Speaker 6: the bigger EV. It's massive, it's a it's a giant,
Speaker 6: It's like a giant house one. But the Vistick is
Speaker 6: relatively snappy for a car that can still hold like
Speaker 6: seven people. What do you do for your for your
Speaker 6: charging when you're on the road, when you're going around,
Speaker 6: you know, to make work trips and you can't just
Speaker 6: be charging at home every night. What's your experience been
Speaker 6: with the US consumer charging network.
Speaker 16: Yeah, so I'd say, you know, when it comes to
Speaker 16: road trips and things like that, one of the things
Speaker 16: that I love about the Vistick it's got I think,
Speaker 16: you know, real world mile is roughly around three hundred
Speaker 16: and thirty miles of range, and so I've been able
Speaker 16: to go from basically Boston down to New Jersey and
Speaker 16: almost all the way back on a single charge. I'm
Speaker 16: about having to stop and I love it. I love it.
Speaker 4: I love the super crews on it.
Speaker 16: It's it's a it's probably, in my opinion, one of
Speaker 16: the best evs I've driven, and I I've owned I
Speaker 16: think close to ten evs in my lifetime.
Speaker 4: So love that car. I think when it comes.
Speaker 16: To you know, travel charging, you know, I've typically used
Speaker 16: the Tesla Supercharger network or Electrify America, any of your
Speaker 16: standard EV charging networks.
Speaker 12: So what what do you make of the state of
Speaker 12: kind of evs in America under this administration which seems
Speaker 12: to have been pulling.
Speaker 6: Back There's a lot of backlash. It seems like YEP
Speaker 6: flows down. But what do you, is there any doubt
Speaker 6: in your mind, Josh, that we're all driving EV's in
Speaker 6: ten years.
Speaker 4: There's no doubt in my mind.
Speaker 16: I think, Look, I think what it's going to come
Speaker 16: down to is the economics of owning an EV Right.
Speaker 16: I think that's really and I think that probably should
Speaker 16: have been the focal point from day one.
Speaker 14: Right.
Speaker 16: Look how much money you're going to save when you're
Speaker 16: charging at home.
Speaker 2: Right.
Speaker 16: Look at the time save not having to go to
Speaker 16: the gas station.
Speaker 2: Right.
Speaker 4: Look at the experience of just.
Speaker 16: Being able to plug in when you pull in to
Speaker 16: your driveway.
Speaker 4: Right.
Speaker 16: I think that is really going to come down to it.
Speaker 16: And if you think about it, the low cost of maintenance.
Speaker 4: Right.
Speaker 16: I can't remember the last time I went to a
Speaker 16: mechanic for an oil change. I can't remember the last
Speaker 16: time I went to a mechanic because the engine what
Speaker 16: came on.
Speaker 4: I didn't know what that meant. Right.
Speaker 16: The low cost of ownership for an electric vehicle is
Speaker 16: ultimately going to push more people to own electric vehicles.
Speaker 16: And I think that is why in the next ten
Speaker 16: years we're all going to be driving evs, is because
Speaker 16: they're going to save so much money to the consumer.
Speaker 6: Carol will switch when they drive themselves. She wants her
Speaker 6: own personal Weymo at her house in Jersey City.
Speaker 12: I do love WEIMO, but I do like you. I
Speaker 12: do like the idea of EV's. I don't want to,
Speaker 12: you know, I'm concerned about the environment. Hey, Josh, stay
Speaker 12: in touch. Josh a ve founder in CEF Spark Charge,
Speaker 12: joining us from Massachuset.
Speaker 6: You got to get him on my podcast now, Hot
Speaker 6: Pursuit with Hannah Elliott.
Speaker 12: No, yes you could. Yeah, we'll share, We'll share.
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