1 00:00:00,240 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,880 Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,520 Speaker 1: or watch us live on YouTube. 6 00:00:24,200 --> 00:00:26,960 Speaker 2: Earnings Palooza in full swing here. General Motor is the 7 00:00:27,040 --> 00:00:29,960 Speaker 2: latest report as well. It expects profit to grow as 8 00:00:30,040 --> 00:00:33,479 Speaker 2: much as two billion dollars this year, and like RTX, 9 00:00:33,479 --> 00:00:35,880 Speaker 2: plans to return more of that to shareholders with the 10 00:00:35,960 --> 00:00:40,040 Speaker 2: higher dividend as well as buybacks. Earlier, GM's CEO Mary 11 00:00:40,080 --> 00:00:43,519 Speaker 2: Burra joined Bloomberg's Matt Miller to discuss their earnings and 12 00:00:43,840 --> 00:00:46,519 Speaker 2: their push on EV's remember those. For more on the 13 00:00:46,560 --> 00:00:48,840 Speaker 2: company's earnings and what she had to say, let's bring 14 00:00:48,840 --> 00:00:51,680 Speaker 2: in our Steve Man. He covers autos for us here 15 00:00:51,680 --> 00:00:54,600 Speaker 2: at Bloomberg Intelligence. He's the Bloomberg Intelligence Global Autos and 16 00:00:54,680 --> 00:00:58,880 Speaker 2: Industrials Analysts. Steve. When Mary was talking about their portfolio 17 00:00:58,960 --> 00:01:02,360 Speaker 2: of internal combustion engines and their portfolio of EV vehicles, 18 00:01:02,520 --> 00:01:05,160 Speaker 2: what does that portfolio actually look like? I mean, is 19 00:01:05,200 --> 00:01:09,240 Speaker 2: it seventy thirty ICE engines to EV's eighty twenty. 20 00:01:09,560 --> 00:01:12,959 Speaker 3: Oh, it's actually Ice enginees much greater. I know they 21 00:01:13,000 --> 00:01:16,560 Speaker 3: have a full portfolio of EV's, but you're talking about 22 00:01:16,600 --> 00:01:21,600 Speaker 3: like eighty five ninety percent ICE versus ten fifteen percent evs, 23 00:01:21,800 --> 00:01:24,600 Speaker 3: So you know, they do have a big portfolio, but 24 00:01:24,720 --> 00:01:26,839 Speaker 3: it was just at the beginning of rolling them out. 25 00:01:27,360 --> 00:01:29,640 Speaker 3: You know, they do have still they do still have 26 00:01:29,680 --> 00:01:32,520 Speaker 3: one more major rollout coming out, which is the Chevy 27 00:01:32,600 --> 00:01:36,319 Speaker 3: Bolt of smaller vehicles, which the industry and GM thinks 28 00:01:36,360 --> 00:01:39,680 Speaker 3: that that's where the market is going, a cheaper, more 29 00:01:39,720 --> 00:01:40,520 Speaker 3: convenient EV. 30 00:01:41,640 --> 00:01:44,040 Speaker 4: GM stock up nine percent today to a fifty two 31 00:01:44,120 --> 00:01:47,120 Speaker 4: week and an all time high. 32 00:01:47,160 --> 00:01:48,680 Speaker 5: So the street likes what they're hearing. 33 00:01:49,160 --> 00:01:52,600 Speaker 4: Steve, It's almost to the point where the street rewards 34 00:01:52,600 --> 00:01:56,440 Speaker 4: these companies if they not just not fully back away, 35 00:01:56,480 --> 00:02:00,400 Speaker 4: but at least slow down the evolution to EV and 36 00:02:00,480 --> 00:02:02,800 Speaker 4: just focus on what's making money today. 37 00:02:02,880 --> 00:02:05,080 Speaker 5: Is that kind of what where the industry is today? 38 00:02:05,800 --> 00:02:09,680 Speaker 3: Yeah, exactly, like Trump actually did the auto industry a 39 00:02:09,760 --> 00:02:15,480 Speaker 3: major favor by relaxing the miles per gallon the mandate. 40 00:02:15,880 --> 00:02:20,919 Speaker 3: So basically every vehicle in the Big three portfolio are 41 00:02:20,960 --> 00:02:25,720 Speaker 3: currently meeting those mandates, and what it means is less 42 00:02:25,760 --> 00:02:30,040 Speaker 3: penalties right, and no need to buy EV credits going forward. 43 00:02:30,520 --> 00:02:34,320 Speaker 3: Huge savings. And what that means is it could translate 44 00:02:34,400 --> 00:02:39,600 Speaker 3: into a slower increase in car prices for consumers, especially 45 00:02:39,639 --> 00:02:42,280 Speaker 3: for big trucks. Makes the big trucks a lot more 46 00:02:42,280 --> 00:02:45,960 Speaker 3: attractive to sell for the Big Three, So they're going 47 00:02:46,040 --> 00:02:50,400 Speaker 3: to sell as many as possible given this opportunity. I 48 00:02:50,440 --> 00:02:53,919 Speaker 3: know we talked about hybrid for GM's, it's going to 49 00:02:53,960 --> 00:02:57,200 Speaker 3: be a huge a sinkhole for them if they invest 50 00:02:57,280 --> 00:03:01,040 Speaker 3: in that technology today. So let's not do that. Maintain 51 00:03:01,280 --> 00:03:05,280 Speaker 3: whatever they can do with evs and really push the 52 00:03:05,320 --> 00:03:06,160 Speaker 3: ice vehicles. 53 00:03:06,720 --> 00:03:09,480 Speaker 2: Maintain what they can with ev so that you know, 54 00:03:09,560 --> 00:03:12,680 Speaker 2: small ten to fifteen percent of their overall portfolio. Forget 55 00:03:12,720 --> 00:03:16,440 Speaker 2: about hybrids and just focus on the mammoth gas guzzling 56 00:03:16,840 --> 00:03:19,000 Speaker 2: vehicles that Matt Miller likes driving. I know he talked 57 00:03:19,000 --> 00:03:21,520 Speaker 2: about how he drove electric versions of that. But let's 58 00:03:21,520 --> 00:03:25,080 Speaker 2: face it, what happens then if gas prices do turn 59 00:03:25,200 --> 00:03:27,840 Speaker 2: up higher unexpectedly, and I know that the administration is 60 00:03:27,880 --> 00:03:30,560 Speaker 2: doing all it can to prevent that from happening, but 61 00:03:30,760 --> 00:03:33,639 Speaker 2: I'm looking at triple A gas prices and they bottomed 62 00:03:33,680 --> 00:03:36,760 Speaker 2: at around two seventy nine and have now made their 63 00:03:36,800 --> 00:03:38,520 Speaker 2: way back up towards two ninety. 64 00:03:38,720 --> 00:03:42,240 Speaker 3: Yeah. I mean historically, when gas prices go up, it 65 00:03:42,280 --> 00:03:45,520 Speaker 3: does impact ice sales, and you know, it may it 66 00:03:45,560 --> 00:03:48,520 Speaker 3: may push some buyers into evs, you know, depending on 67 00:03:48,560 --> 00:03:52,160 Speaker 3: how how where the expansion of the EV charging network 68 00:03:52,240 --> 00:03:54,839 Speaker 3: is at. But I think at the end of the day, 69 00:03:55,000 --> 00:03:58,520 Speaker 3: if gas prices do go up, actually benefits the Japanese 70 00:03:58,720 --> 00:04:01,760 Speaker 3: companies like Toyota and Honda, where they have a full 71 00:04:01,840 --> 00:04:04,680 Speaker 3: suite of hybrid vehicles that actually consumer love. 72 00:04:05,520 --> 00:04:05,800 Speaker 6: Yeah. 73 00:04:05,880 --> 00:04:09,320 Speaker 5: I just leased the Honda CRV hybrid. 74 00:04:09,520 --> 00:04:09,800 Speaker 4: Uh huh. 75 00:04:10,440 --> 00:04:12,280 Speaker 5: My son who drives in California all the time where 76 00:04:12,280 --> 00:04:14,560 Speaker 5: the gas is really exp Yes, that's right, he probably 77 00:04:14,600 --> 00:04:14,920 Speaker 5: wanted it. 78 00:04:14,960 --> 00:04:16,400 Speaker 2: And how often does he have to fill up? 79 00:04:17,120 --> 00:04:19,440 Speaker 4: Not that often? I mean just not that often. It's great, 80 00:04:19,480 --> 00:04:22,200 Speaker 4: it's a great tech technology. Steve. Let's just while we 81 00:04:22,279 --> 00:04:26,560 Speaker 4: got you here, what's the call these days on Tesla 82 00:04:27,480 --> 00:04:30,200 Speaker 4: as we talk about this EV business? But really for Tesla, 83 00:04:30,200 --> 00:04:31,680 Speaker 4: we're talking about so so much more. 84 00:04:32,760 --> 00:04:37,800 Speaker 3: Yeah, looking at GM as a as a backdrop, you know, 85 00:04:38,040 --> 00:04:41,560 Speaker 3: GM's earnings for twenty twenty six is probably a little 86 00:04:41,600 --> 00:04:44,880 Speaker 3: bit light. There's probably some more upside on the shift 87 00:04:44,920 --> 00:04:48,760 Speaker 3: mix for more ice. So what means for Tesla it's 88 00:04:48,800 --> 00:04:53,640 Speaker 3: an uphill battle for them. I know the stock is trading, 89 00:04:54,040 --> 00:04:59,039 Speaker 3: you know, at an astronomical valuation at the moment. Investors 90 00:04:59,040 --> 00:05:04,720 Speaker 3: are very focused on their robo taxi autonomous vehicle build out. Uh. 91 00:05:04,920 --> 00:05:08,760 Speaker 3: They people feel that, you know, they can actually outcompete 92 00:05:09,160 --> 00:05:13,160 Speaker 3: the likes of Uber and Lyft. So you know, sales 93 00:05:13,279 --> 00:05:16,120 Speaker 3: will be weak in the fourth quarter for Tesla, but 94 00:05:16,160 --> 00:05:19,560 Speaker 3: I believe the you know, the investors are actually looking 95 00:05:19,600 --> 00:05:23,880 Speaker 3: over past that into you know, what is the what 96 00:05:24,000 --> 00:05:26,760 Speaker 3: is the catalyst or what is what is Elon Musk 97 00:05:26,760 --> 00:05:29,880 Speaker 3: going to talk about in their next earning calls on 98 00:05:29,920 --> 00:05:30,640 Speaker 3: the robotaxi. 99 00:05:30,720 --> 00:05:34,159 Speaker 2: Yeah, it's always about the Elon Musk narrative, his vision 100 00:05:34,320 --> 00:05:36,200 Speaker 2: going forward of what this company is going to be. 101 00:05:37,000 --> 00:05:39,440 Speaker 2: I wonder, you know, my Mary Borrow talked about that 102 00:05:39,920 --> 00:05:43,000 Speaker 2: charging infrastructure in the network and how we're not there 103 00:05:43,040 --> 00:05:47,039 Speaker 2: in the United States. Tesla is offering the supercharger and 104 00:05:47,040 --> 00:05:48,960 Speaker 2: that's part of its business model to be able to 105 00:05:49,000 --> 00:05:53,320 Speaker 2: make that charger available to other automakers. How big a 106 00:05:53,360 --> 00:05:57,440 Speaker 2: contributor is that to its revenue to its profitability when 107 00:05:57,480 --> 00:05:58,040 Speaker 2: it's problems. 108 00:05:58,920 --> 00:06:00,960 Speaker 3: Yeah, it's still still a small amount. 109 00:06:01,960 --> 00:06:02,280 Speaker 2: It is. 110 00:06:02,880 --> 00:06:05,599 Speaker 3: What they do is they want to expand that business. 111 00:06:06,520 --> 00:06:10,599 Speaker 3: So they are talking to you know, gas stations like 112 00:06:10,600 --> 00:06:14,599 Speaker 3: wah wah out in Pennsylvania are actually you know, buying superchargers, 113 00:06:14,640 --> 00:06:18,520 Speaker 3: installing it into next to the gas gas pumps and 114 00:06:18,520 --> 00:06:21,239 Speaker 3: next to the stations. So they are trying to expand 115 00:06:21,279 --> 00:06:26,920 Speaker 3: it in terms of charging, selling these supercharging business, and 116 00:06:27,800 --> 00:06:30,520 Speaker 3: in the in the revenues from the charging, it's still 117 00:06:30,839 --> 00:06:34,559 Speaker 3: really really small. I would say around ten percent maybe less. 118 00:06:34,960 --> 00:06:38,680 Speaker 4: Hey, what do we know about how important are incentives here? 119 00:06:38,720 --> 00:06:40,599 Speaker 4: I look at other countries around. 120 00:06:40,279 --> 00:06:42,640 Speaker 5: The world and they have got these huge evy. 121 00:06:43,000 --> 00:06:48,280 Speaker 4: Percentages of China sales China, the Nordic countries. How important 122 00:06:48,400 --> 00:06:50,440 Speaker 4: are government incentives to get there? 123 00:06:50,720 --> 00:06:52,120 Speaker 5: It is very important. 124 00:06:52,160 --> 00:06:55,080 Speaker 3: I think the Germans are actually putting back the incentives 125 00:06:55,279 --> 00:07:00,799 Speaker 3: and it has lifted EV sales in Europe, in Germany. 126 00:07:00,800 --> 00:07:04,039 Speaker 3: But at the end of the day, you really want 127 00:07:04,080 --> 00:07:08,400 Speaker 3: to build a sustainable growth environment for for these cars. 128 00:07:08,920 --> 00:07:11,440 Speaker 3: And Mary Barr is right, you know, we actually publish 129 00:07:11,440 --> 00:07:15,440 Speaker 3: a very extensive report on EV charging, comparing charging network 130 00:07:15,480 --> 00:07:19,600 Speaker 3: in the US versus China night and day, right, So, uh, 131 00:07:19,880 --> 00:07:22,720 Speaker 3: you know, it's about convenience, it's about costs for the 132 00:07:22,840 --> 00:07:27,360 Speaker 3: US consumer. It's great to have it's great for consumer 133 00:07:27,480 --> 00:07:30,960 Speaker 3: to have some subsidy, you know, help pay for for 134 00:07:31,040 --> 00:07:34,480 Speaker 3: the for the cars that they're buying. But I think 135 00:07:34,520 --> 00:07:39,680 Speaker 3: long term, you know, it really needs the consumer to 136 00:07:39,760 --> 00:07:42,400 Speaker 3: really buy into the product. 137 00:07:43,520 --> 00:07:46,680 Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this. 138 00:07:50,520 --> 00:07:54,200 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 139 00:07:54,280 --> 00:07:57,679 Speaker 1: weekdays at ten am Eastern on Applecarclay, and Android Auto 140 00:07:57,800 --> 00:08:00,680 Speaker 1: with the Bloomberg Business App. Listen on the and wherever 141 00:08:00,760 --> 00:08:03,840 Speaker 1: you get your podcasts, or watch us live on YouTube. 142 00:08:04,600 --> 00:08:07,440 Speaker 4: Well, a lot of newsflow in the airline space, the 143 00:08:07,480 --> 00:08:09,280 Speaker 4: aerospace areas. 144 00:08:09,360 --> 00:08:11,760 Speaker 5: Let's get right to it with somebody who knows this stuff. 145 00:08:11,760 --> 00:08:16,840 Speaker 4: Stid Fillip, Deputy team leader for Global Aviation, Bloomberg News. 146 00:08:17,200 --> 00:08:20,640 Speaker 4: I think he's in my hometown, Dublin, Ireland, back when 147 00:08:20,640 --> 00:08:22,280 Speaker 4: my peeps were fun way back in the day. So 148 00:08:22,280 --> 00:08:25,160 Speaker 4: good for him. Hey, Sid, let's talk to us about 149 00:08:25,200 --> 00:08:28,400 Speaker 4: the airlines. American airlines, they said their pois for a 150 00:08:28,400 --> 00:08:31,760 Speaker 4: pretty strong year, yet Jet Blue had a wire than 151 00:08:31,800 --> 00:08:32,760 Speaker 4: expected loss. Here. 152 00:08:32,800 --> 00:08:34,600 Speaker 5: What's going on with these two airlines here? 153 00:08:35,640 --> 00:08:38,000 Speaker 7: So the airline industry is actually in a sort of 154 00:08:38,200 --> 00:08:40,800 Speaker 7: bit of a flux at the moment. I mean, you've 155 00:08:41,040 --> 00:08:43,480 Speaker 7: obviously had the impact of all these storms, you've had 156 00:08:43,480 --> 00:08:47,920 Speaker 7: the impact of the government shutdown, and you've got the 157 00:08:48,000 --> 00:08:50,720 Speaker 7: uncertainty about the year ahead. And so American Airlines is 158 00:08:50,760 --> 00:08:53,240 Speaker 7: taking a more bullish view of the year ahead. They 159 00:08:53,240 --> 00:08:56,679 Speaker 7: sort of following their peers United and Delta in targeting 160 00:08:56,760 --> 00:08:59,680 Speaker 7: the most premium end of the spectrum, and they sort 161 00:08:59,679 --> 00:09:03,920 Speaker 7: of hope that by aiming their product at the premium 162 00:09:04,040 --> 00:09:06,599 Speaker 7: end of the market, they can sort of offset the 163 00:09:06,640 --> 00:09:09,040 Speaker 7: sort of downturn that's happened in the bottom end of 164 00:09:09,080 --> 00:09:12,480 Speaker 7: the market. Jet Blue also talking about how at the 165 00:09:12,559 --> 00:09:15,960 Speaker 7: moment things look a bit shaky, but they're talking about 166 00:09:16,000 --> 00:09:19,600 Speaker 7: how they see a road to profitability and a free 167 00:09:19,600 --> 00:09:21,560 Speaker 7: cash flow by the end of twenty twenty seven, so 168 00:09:22,040 --> 00:09:25,520 Speaker 7: slightly more long term view of when the recovery might happen, 169 00:09:25,920 --> 00:09:29,720 Speaker 7: and that sort of explains the dichotomy in the earnings 170 00:09:29,800 --> 00:09:31,359 Speaker 7: podcast for both these companies. 171 00:09:31,520 --> 00:09:33,240 Speaker 2: And of course Jet Blue is also doing what it 172 00:09:33,280 --> 00:09:37,319 Speaker 2: can to premium premiumize if that's a verb, it's experience 173 00:09:37,360 --> 00:09:39,959 Speaker 2: for customers to with absolutely opening up that New Lounge 174 00:09:40,000 --> 00:09:43,560 Speaker 2: and JFK. So that is the story with airlines, and 175 00:09:43,559 --> 00:09:45,800 Speaker 2: it's been fairly consistent too with what we heard from 176 00:09:45,920 --> 00:09:50,880 Speaker 2: Delta and United. Where does that leave the smaller carriers 177 00:09:50,920 --> 00:09:54,280 Speaker 2: that need to either team up or fade into oblivion. 178 00:09:54,600 --> 00:09:58,160 Speaker 2: I'm thinking Spirit, I'm thinking Frontier. Is there still a 179 00:09:58,200 --> 00:10:00,240 Speaker 2: market for these discount carriers? 180 00:10:01,040 --> 00:10:02,959 Speaker 7: So the market at the moment is very tough for 181 00:10:03,000 --> 00:10:06,160 Speaker 7: the discount carriers. So essentially what's happening is that the 182 00:10:06,160 --> 00:10:08,440 Speaker 7: top end of the market is going to Delta and 183 00:10:08,520 --> 00:10:11,520 Speaker 7: United for their premium products like first class in business class, 184 00:10:11,800 --> 00:10:13,320 Speaker 7: and on the other end of the market you have 185 00:10:13,440 --> 00:10:16,040 Speaker 7: sort of everyone else competing to get the lowest cost 186 00:10:16,520 --> 00:10:18,600 Speaker 7: tickets into the hands of the passengers, and that sort 187 00:10:18,600 --> 00:10:22,400 Speaker 7: of eroding margins, especially as costs for both pilots and 188 00:10:22,440 --> 00:10:25,599 Speaker 7: Cavin Krue are hurting the ultra low cost carriers and 189 00:10:25,640 --> 00:10:28,120 Speaker 7: the low cost carriers, and sort of that's sort of 190 00:10:28,120 --> 00:10:31,680 Speaker 7: been explained by this gase shaped recovery that airline executors 191 00:10:31,679 --> 00:10:34,240 Speaker 7: are talking about, and so Jet Blue and the others 192 00:10:34,240 --> 00:10:36,400 Speaker 7: are sort of trying to get the premium end of it. 193 00:10:36,440 --> 00:10:39,360 Speaker 7: I mean, we've seen even Spirit Airlines talking about how 194 00:10:39,360 --> 00:10:42,199 Speaker 7: they're adding a so called business class product, They've added 195 00:10:42,200 --> 00:10:44,520 Speaker 7: Wi Fi, they've added all sorts of things to keep 196 00:10:44,559 --> 00:10:47,079 Speaker 7: people coming back to them, and so they're hoping that 197 00:10:47,440 --> 00:10:52,640 Speaker 7: by slightly differentiating themselves from just very commoditized ultralow cost carriers, 198 00:10:52,960 --> 00:10:54,920 Speaker 7: they can be able to get in those customers. 199 00:10:55,440 --> 00:10:57,680 Speaker 4: Well, then it kind of goes back to the point, 200 00:10:58,280 --> 00:11:01,079 Speaker 4: is there a need for her real true low cost 201 00:11:01,120 --> 00:11:04,640 Speaker 4: carrier out there? Some of these supposed ones are going 202 00:11:04,720 --> 00:11:07,160 Speaker 4: kind of mid market higher market. Is there a market 203 00:11:07,160 --> 00:11:08,920 Speaker 4: demand for that or is everybody just willing to pay 204 00:11:08,960 --> 00:11:09,520 Speaker 4: up for travel? 205 00:11:10,840 --> 00:11:13,000 Speaker 7: At the moment, it looks the people who are willing 206 00:11:13,000 --> 00:11:15,280 Speaker 7: to pay up for travel are the people willing to 207 00:11:15,280 --> 00:11:17,480 Speaker 7: pay up for travel, and so at the bottom end 208 00:11:17,480 --> 00:11:19,319 Speaker 7: of the market. I mean, everyone talks about how there 209 00:11:19,360 --> 00:11:21,679 Speaker 7: will be a recovery of the ultralocalst carriers and that 210 00:11:22,600 --> 00:11:25,400 Speaker 7: once people are more certain about the economy, and once 211 00:11:25,840 --> 00:11:28,200 Speaker 7: people at the bottom end of that kay start to 212 00:11:28,240 --> 00:11:31,560 Speaker 7: see some stability in the economy, people will travel because 213 00:11:31,600 --> 00:11:35,160 Speaker 7: I mean, remember during the pandemic, there was as we 214 00:11:35,240 --> 00:11:37,840 Speaker 7: exited the pandemic, there was this boom in travel for 215 00:11:37,920 --> 00:11:41,080 Speaker 7: across the board, and that sort of has further split up, 216 00:11:41,120 --> 00:11:44,480 Speaker 7: and so we will see that demand coming back. We 217 00:11:44,640 --> 00:11:46,720 Speaker 7: just don't know when and what sort of shape that 218 00:11:46,800 --> 00:11:47,199 Speaker 7: will be. 219 00:11:48,600 --> 00:11:51,560 Speaker 2: So sid you also cover Boeing, and it came out 220 00:11:51,559 --> 00:11:53,960 Speaker 2: with its results and in terms of the numbers for 221 00:11:54,000 --> 00:11:56,800 Speaker 2: the fourth quarter a free cashlow topping estimates. It generated 222 00:11:56,800 --> 00:11:58,880 Speaker 2: cash for a second straight quarter. That sounds like it's 223 00:11:59,000 --> 00:12:02,760 Speaker 2: good news. How far along this recovery, this long awaited 224 00:12:02,840 --> 00:12:04,080 Speaker 2: covery is Boeing? 225 00:12:04,200 --> 00:12:07,839 Speaker 7: Actually, so Boeing is on the road to recovery. They're 226 00:12:07,840 --> 00:12:10,880 Speaker 7: still not there yet, but they are recovered. They are recovering. 227 00:12:10,920 --> 00:12:13,880 Speaker 7: I mean their fourth quarter results and their folio results 228 00:12:13,920 --> 00:12:17,800 Speaker 7: were boosted by the sale of their Jefferson Digital Aviation 229 00:12:17,920 --> 00:12:20,840 Speaker 7: subsidiary and that sort of gave them a nine point 230 00:12:20,840 --> 00:12:23,800 Speaker 7: six billion dollar boost. And at the same time, the 231 00:12:24,240 --> 00:12:28,080 Speaker 7: Boeing is sort of ramping up production. They are ramping 232 00:12:28,160 --> 00:12:30,400 Speaker 7: up sales. I mean they've seen a surgeon sales. I 233 00:12:30,400 --> 00:12:34,920 Speaker 7: mean in the last ever since the Trump administration came in, 234 00:12:35,000 --> 00:12:38,600 Speaker 7: we've seen a surgeon Boeing sales. And so Kelly Outberg, 235 00:12:38,640 --> 00:12:42,920 Speaker 7: the new CEO, is sort of pushing Boeing to improve production, 236 00:12:43,080 --> 00:12:45,000 Speaker 7: ramp up production at a steady pace. I mean they've 237 00:12:45,040 --> 00:12:48,480 Speaker 7: gone to about forty two seven three seven Max jets 238 00:12:48,480 --> 00:12:51,400 Speaker 7: a month, and they are sort of further boosting those 239 00:12:51,440 --> 00:12:54,760 Speaker 7: production numbers and that will get them on at the 240 00:12:54,800 --> 00:12:56,400 Speaker 7: sort of where they want to be in the Kelly 241 00:12:56,440 --> 00:12:59,200 Speaker 7: Oudberg's talked about how ten billion in free cash flow 242 00:12:59,280 --> 00:13:01,160 Speaker 7: is his target companies on its way there. 243 00:13:01,640 --> 00:13:03,960 Speaker 4: Sid I'm glad you mentioned deliveries because I guess I 244 00:13:04,040 --> 00:13:07,000 Speaker 4: learned long ago about this aircraft manufacturing business. It's not 245 00:13:07,080 --> 00:13:10,880 Speaker 4: the sales you announced, it's the orders that you actually deliver. 246 00:13:11,760 --> 00:13:13,959 Speaker 4: You mentioned kind of on a seven thirty seven, which 247 00:13:14,040 --> 00:13:17,200 Speaker 4: is the key aircraft for Boeing, that around forty two 248 00:13:17,280 --> 00:13:20,120 Speaker 4: a month. Here, where does a company want to get 249 00:13:20,160 --> 00:13:21,960 Speaker 4: to and by what timeframe? 250 00:13:23,360 --> 00:13:26,680 Speaker 7: So Boeing still way below it used to be above 251 00:13:26,720 --> 00:13:30,400 Speaker 7: fifty pre pandemic when they sort of shut down production 252 00:13:30,520 --> 00:13:33,560 Speaker 7: of the Max because of the grounding that happened after 253 00:13:33,600 --> 00:13:35,679 Speaker 7: those two fatal crashes, and so they need to get 254 00:13:35,720 --> 00:13:39,439 Speaker 7: to beyond that. I remember Airbus is talked about seventy 255 00:13:39,520 --> 00:13:42,720 Speaker 7: five a month by twenty twenty seven on their arrival 256 00:13:42,720 --> 00:13:45,559 Speaker 7: a three twenty model, and so Boeing would have to 257 00:13:45,600 --> 00:13:48,120 Speaker 7: sort of ramp up production to some some of those 258 00:13:48,200 --> 00:13:50,840 Speaker 7: levels to target that backlog. I mean they've got a 259 00:13:50,920 --> 00:13:54,480 Speaker 7: massive they've got a record breaking six hundred and eighty 260 00:13:54,480 --> 00:13:58,400 Speaker 7: two billion dollar backlog of customer orders, and so that's 261 00:13:58,440 --> 00:14:02,280 Speaker 7: actually when airlines get the Airframers like Boeing and Airbus 262 00:14:02,480 --> 00:14:04,880 Speaker 7: only get paid when they actually deliver those planes. So 263 00:14:05,520 --> 00:14:08,120 Speaker 7: when they book those orders, they don't really get the 264 00:14:08,160 --> 00:14:10,280 Speaker 7: money from the airlines. The airlines pay them when they 265 00:14:10,320 --> 00:14:13,560 Speaker 7: get those planes. And so we're Boeing to actually start 266 00:14:13,600 --> 00:14:15,680 Speaker 7: generating that free cash. They need to actually get those 267 00:14:15,720 --> 00:14:18,120 Speaker 7: planes out the door, and that they need to do 268 00:14:18,160 --> 00:14:20,440 Speaker 7: by ramping up production very quickly. 269 00:14:20,440 --> 00:14:22,640 Speaker 2: You mentioned that backlog record six hundred and eighty two 270 00:14:22,640 --> 00:14:25,840 Speaker 2: billion dollars. How much of that is customers trying to 271 00:14:25,880 --> 00:14:29,400 Speaker 2: curry favor with the Trump administration by buying US aircraft 272 00:14:29,480 --> 00:14:32,320 Speaker 2: or at least announcing plans to do so. 273 00:14:32,360 --> 00:14:35,320 Speaker 7: Some of it may be some of the customers trying 274 00:14:35,320 --> 00:14:37,080 Speaker 7: to carry fair with the administration. I mean, we saw 275 00:14:37,080 --> 00:14:40,960 Speaker 7: that massive cut our order. At the same time, there 276 00:14:41,040 --> 00:14:43,840 Speaker 7: is only the only two planemakers in town, and Airbus 277 00:14:43,840 --> 00:14:46,160 Speaker 7: is sold out until the end of the decade and 278 00:14:46,320 --> 00:14:48,520 Speaker 7: sort of into the next decade. And so the only 279 00:14:48,560 --> 00:14:50,600 Speaker 7: way for an airline to actually get planes is to 280 00:14:50,640 --> 00:14:54,240 Speaker 7: either buy planes from either Boeing or Airbus, and Boeing 281 00:14:54,320 --> 00:14:57,520 Speaker 7: is similarly sold out, and so airlines are placing their 282 00:14:57,520 --> 00:15:00,240 Speaker 7: bets with either manufacturer and hoping that they will get 283 00:15:00,240 --> 00:15:03,800 Speaker 7: those plans. Whenever they actually get those plans in front 284 00:15:03,880 --> 00:15:05,520 Speaker 7: of the delivery focus. 285 00:15:06,240 --> 00:15:09,400 Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this. 286 00:15:13,280 --> 00:15:16,960 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 287 00:15:17,040 --> 00:15:20,160 Speaker 1: weekdays at ten am Eastern on Apple Coarclay, and Android 288 00:15:20,160 --> 00:15:23,480 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 289 00:15:23,520 --> 00:15:26,600 Speaker 1: you get your podcasts, or watch us live on YouTube. 290 00:15:27,440 --> 00:15:31,560 Speaker 4: Still on the earnings front, UPS Big Brown sees better 291 00:15:31,640 --> 00:15:34,880 Speaker 4: than expected sales amid a network overhaul. Thomas Black Joints 292 00:15:34,880 --> 00:15:37,640 Speaker 4: is Bloomberg Opinion calumnist Thomas what'd you see? What you 293 00:15:37,760 --> 00:15:41,080 Speaker 4: learn from the UPS earnings here? 294 00:15:42,920 --> 00:15:46,080 Speaker 6: UPS continues to shrink to become more profitable. That's the 295 00:15:46,080 --> 00:15:52,040 Speaker 6: big takeaway there. They're reducing their Amazon business and they're 296 00:15:52,080 --> 00:15:56,600 Speaker 6: trying to retrench with more profitable packages, and that's probably 297 00:15:56,640 --> 00:16:00,680 Speaker 6: a move away from some of the e commerce where 298 00:16:00,720 --> 00:16:03,320 Speaker 6: the competition is fierce and there's lots of little companies 299 00:16:03,360 --> 00:16:05,360 Speaker 6: that are out there competing. 300 00:16:06,440 --> 00:16:09,480 Speaker 2: So how far along this journey of shrinking to become 301 00:16:09,480 --> 00:16:12,240 Speaker 2: more profitable are they? Are we in the third inning? 302 00:16:12,280 --> 00:16:13,680 Speaker 2: Are we in the seventh inning? 303 00:16:15,400 --> 00:16:17,320 Speaker 6: This will be the last year of this, so I 304 00:16:17,320 --> 00:16:20,640 Speaker 6: would say we're in the sixth inning heading toward the ninth. 305 00:16:21,280 --> 00:16:25,120 Speaker 6: So after this year, Carol to May, the CEO at UPS, 306 00:16:25,120 --> 00:16:28,600 Speaker 6: said we're going to be a leaner company and ready 307 00:16:28,640 --> 00:16:30,960 Speaker 6: to grow. So well, it's going to be a little 308 00:16:30,960 --> 00:16:34,080 Speaker 6: bit painful this year, she walked analysts through it. The 309 00:16:34,120 --> 00:16:36,720 Speaker 6: first half is going to be more painful as they 310 00:16:36,720 --> 00:16:39,240 Speaker 6: glide down from Amazon and they take some right downs 311 00:16:39,240 --> 00:16:43,200 Speaker 6: and so forth. As you know, they retired their fleet 312 00:16:43,240 --> 00:16:46,960 Speaker 6: of MD eleven's, which is this old plane that assisted 313 00:16:47,040 --> 00:16:49,600 Speaker 6: they had a crash. So they're going through all of 314 00:16:49,600 --> 00:16:51,920 Speaker 6: this in the first half, and then the second half 315 00:16:52,320 --> 00:16:55,400 Speaker 6: things should start to turn around. They're also they're not 316 00:16:55,440 --> 00:16:59,520 Speaker 6: only shrinking their Amazon business or shrinking their footprint, their 317 00:16:59,520 --> 00:17:03,360 Speaker 6: facility and the older ones are being retired and the 318 00:17:03,480 --> 00:17:06,720 Speaker 6: replacing those with new automated facilities. And that's going to 319 00:17:06,720 --> 00:17:10,879 Speaker 6: allow them to lay off more union workers. So that 320 00:17:10,960 --> 00:17:14,359 Speaker 6: big union contract where the teamsters push through a big 321 00:17:15,640 --> 00:17:18,960 Speaker 6: labor increase is turning around to bite them a little 322 00:17:18,960 --> 00:17:23,040 Speaker 6: bit because UPS is dealing with that by shrinking its workforce. 323 00:17:23,480 --> 00:17:28,160 Speaker 4: How does this UPS strategy differ from that of FedEx. 324 00:17:31,760 --> 00:17:35,880 Speaker 6: They're similar in the sense that they're both cutting costs aggressively. 325 00:17:36,600 --> 00:17:38,880 Speaker 6: Of FedEx is a little bit different because it doesn't 326 00:17:38,920 --> 00:17:43,959 Speaker 6: have the labor costs from the union workforce, so it's 327 00:17:43,960 --> 00:17:47,800 Speaker 6: a little bit more flexible. And fed X is undergoing 328 00:17:47,840 --> 00:17:51,800 Speaker 6: a major overhaul that's probably in its last innings as well, 329 00:17:52,320 --> 00:17:54,680 Speaker 6: and the last part of that is the most difficult part, 330 00:17:54,680 --> 00:17:58,119 Speaker 6: where they're going to combine there two separate networks, the 331 00:17:58,160 --> 00:18:00,639 Speaker 6: ground network and the express network. They're in the middle 332 00:18:00,640 --> 00:18:02,680 Speaker 6: of that, but so they're going to be coming out 333 00:18:02,680 --> 00:18:04,040 Speaker 6: of that as well. So we're going to have two 334 00:18:04,040 --> 00:18:07,320 Speaker 6: parcel companies that are restructured and ready to grow at 335 00:18:07,320 --> 00:18:08,080 Speaker 6: the end of this year. 336 00:18:08,680 --> 00:18:11,800 Speaker 2: Every time there's some kind of headline regarding UPS laying 337 00:18:11,800 --> 00:18:14,760 Speaker 2: off workers or cutting positions, it's in it's these massive 338 00:18:14,800 --> 00:18:17,359 Speaker 2: numbers right this time around. It's up to thirty thousand 339 00:18:17,400 --> 00:18:20,440 Speaker 2: positions this year, and as you mentioned, Thomas, this is 340 00:18:20,480 --> 00:18:25,080 Speaker 2: all due to trimming down and small downsizing the scope 341 00:18:25,080 --> 00:18:28,399 Speaker 2: of the company at what point, are we looking at 342 00:18:28,920 --> 00:18:31,080 Speaker 2: job cuts tied to AI or have we not got 343 00:18:31,119 --> 00:18:31,960 Speaker 2: even gotten there yet? 344 00:18:33,040 --> 00:18:36,040 Speaker 6: Well, I would instead of saying AI, I would say 345 00:18:36,080 --> 00:18:40,199 Speaker 6: automation and that those are these new facilities that handle 346 00:18:40,240 --> 00:18:45,760 Speaker 6: packages automatically. You even have the induction of packages where 347 00:18:45,760 --> 00:18:48,560 Speaker 6: you have robots putting the packages on the conveyor belts 348 00:18:48,960 --> 00:18:51,920 Speaker 6: and taking them off. So those are the steps toward 349 00:18:52,000 --> 00:18:55,640 Speaker 6: more automation. This is that physical AI that people talk about, right, 350 00:18:56,280 --> 00:19:00,159 Speaker 6: And an interesting stat that Carol to May gave the 351 00:19:00,200 --> 00:19:04,000 Speaker 6: cause that those automated buildings are twenty eight percent more 352 00:19:04,040 --> 00:19:07,960 Speaker 6: efficient than the older buildings. So the more automation is 353 00:19:07,960 --> 00:19:11,320 Speaker 6: what they're leaning into. So it's part of it shrinking 354 00:19:11,440 --> 00:19:16,199 Speaker 6: some of the low profit volume plus more automation to 355 00:19:16,280 --> 00:19:17,720 Speaker 6: replace the human workers. 356 00:19:17,760 --> 00:19:21,840 Speaker 4: Basically, e commerce continues to grow, and I guess Double digits, 357 00:19:22,600 --> 00:19:26,040 Speaker 4: who's handling all these packages of ups, is maybe backing 358 00:19:26,040 --> 00:19:26,600 Speaker 4: away a little bit. 359 00:19:27,600 --> 00:19:31,760 Speaker 6: Well, Amazon has its own delivery network. It tends to 360 00:19:32,880 --> 00:19:36,560 Speaker 6: want to deliver into those big urban areas where it 361 00:19:36,640 --> 00:19:40,800 Speaker 6: just takes things from a warehouse to a residential home, 362 00:19:41,080 --> 00:19:44,600 Speaker 6: so they do that very well. Where they want help 363 00:19:44,680 --> 00:19:47,000 Speaker 6: is on the rural areas. That's where they turn to 364 00:19:47,240 --> 00:19:52,560 Speaker 6: folks like ups and the postal service, so obviously Amazon 365 00:19:52,680 --> 00:19:54,720 Speaker 6: is a big player there. We'll also have lots of 366 00:19:54,760 --> 00:19:58,920 Speaker 6: smaller companies. These are gig type companies that have apps, 367 00:19:58,960 --> 00:20:02,240 Speaker 6: and workers show up and they have an app on 368 00:20:02,280 --> 00:20:04,119 Speaker 6: their phone and it gives them a delivery route and 369 00:20:04,160 --> 00:20:07,520 Speaker 6: they throw packages in their car or their truck and 370 00:20:07,600 --> 00:20:10,280 Speaker 6: they go delivers. There's a lot of those companies that 371 00:20:10,400 --> 00:20:13,960 Speaker 6: tend to operate in urban areas, so there's actually a 372 00:20:14,000 --> 00:20:17,000 Speaker 6: lot of capacity out there for retailers or people who 373 00:20:17,040 --> 00:20:20,080 Speaker 6: are really smart on their inventory management to tap into. 374 00:20:20,640 --> 00:20:23,720 Speaker 5: Stay with us more from Bloomberg Intelligence coming up after this. 375 00:20:27,240 --> 00:20:30,920 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 376 00:20:31,000 --> 00:20:34,479 Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto 377 00:20:34,480 --> 00:20:37,560 Speaker 1: with the Bloomberg Business App. Listen on demand wherever you 378 00:20:37,600 --> 00:20:40,600 Speaker 1: get your podcasts, or watch us live on YouTube. 379 00:20:41,400 --> 00:20:46,119 Speaker 2: Whenever we talk about universities and their investments their endowments, 380 00:20:46,560 --> 00:20:48,520 Speaker 2: the one name always comes up, and that is Yale. 381 00:20:48,840 --> 00:20:52,159 Speaker 2: Yale created this endowment model that was predicated on lots 382 00:20:52,160 --> 00:20:57,320 Speaker 2: of private assets, long term investments that paid off handsomely 383 00:20:57,520 --> 00:21:00,480 Speaker 2: years down the road, except they're now questions marks over 384 00:21:00,520 --> 00:21:04,520 Speaker 2: whether this Yale endowment model is still relevant, whether it's 385 00:21:04,560 --> 00:21:08,200 Speaker 2: debt or not. Janet Lauren is Bloomberg News's higher education 386 00:21:08,359 --> 00:21:12,920 Speaker 2: finance reporter, and today's big take really focuses on that idea. Janet, 387 00:21:13,440 --> 00:21:16,199 Speaker 2: there's question marks about the Yeale endowment model because the 388 00:21:16,200 --> 00:21:19,280 Speaker 2: better performing endowments of late are those that invest in 389 00:21:19,520 --> 00:21:21,000 Speaker 2: just plain old stocks and bonds. 390 00:21:21,240 --> 00:21:23,880 Speaker 8: Yes, and you know, occasionally from time to time we've 391 00:21:23,920 --> 00:21:28,719 Speaker 8: seen that in certain years where simple just outperformed private 392 00:21:28,720 --> 00:21:32,960 Speaker 8: equity and other VC. And in twenty twenty one, remember 393 00:21:33,040 --> 00:21:37,000 Speaker 8: the outstanding returns that these schools had. But now higher 394 00:21:37,000 --> 00:21:40,720 Speaker 8: interest rates, fewer exits, You've got a huge amount of 395 00:21:40,720 --> 00:21:44,760 Speaker 8: money locked up in private equity, in some cases forty percent. 396 00:21:45,000 --> 00:21:48,520 Speaker 8: And you know, look, these schools would like a little cash. 397 00:21:48,640 --> 00:21:51,440 Speaker 8: They're looking, you know, perhaps they want to change managers. 398 00:21:51,480 --> 00:21:53,480 Speaker 8: They need the cash to do other things as well 399 00:21:53,520 --> 00:21:56,600 Speaker 8: and refresh their portfolios. But when you have, you know, 400 00:21:56,680 --> 00:22:00,119 Speaker 8: in the forty percent locked up, you know, time to 401 00:22:00,160 --> 00:22:02,280 Speaker 8: think about other things. And that's perhaps why you saw 402 00:22:02,359 --> 00:22:04,840 Speaker 8: Yale doing its first ever sale last year, which was 403 00:22:04,840 --> 00:22:05,400 Speaker 8: a big deal. 404 00:22:06,040 --> 00:22:09,280 Speaker 4: So again this sale, Yale unloaded about two point five 405 00:22:09,320 --> 00:22:13,960 Speaker 4: billion dollars in LBO funds at a discount that is brutal. 406 00:22:14,760 --> 00:22:18,280 Speaker 5: Well, is that unprecedented or other? Well, well, Yale. 407 00:22:18,080 --> 00:22:20,520 Speaker 8: Has done it for the first time. You know, others 408 00:22:20,560 --> 00:22:23,600 Speaker 8: had been doing this before. Harvard has unloaded a lot 409 00:22:23,720 --> 00:22:28,399 Speaker 8: in previous years. But it's sort of a new normal 410 00:22:28,480 --> 00:22:31,520 Speaker 8: in some ways looking at secondaries. The secondary market is 411 00:22:31,640 --> 00:22:35,879 Speaker 8: very popular right now, and you know, they in the 412 00:22:36,000 --> 00:22:39,159 Speaker 8: hunt for potential cash and liquidity. You know, you look 413 00:22:39,200 --> 00:22:42,639 Speaker 8: at the UC Endowment where we talked about this eighty twenty. 414 00:22:42,680 --> 00:22:44,840 Speaker 8: They call it the Blue and Gold Fund, very proud 415 00:22:44,840 --> 00:22:48,000 Speaker 8: of it, and in the height of the pandemic when 416 00:22:48,320 --> 00:22:52,320 Speaker 8: they wanted some liquidity, they gave almost two billion dollars 417 00:22:52,359 --> 00:22:56,560 Speaker 8: in cash to the campuses for liquidity. Compare that to 418 00:22:56,600 --> 00:22:59,640 Speaker 8: two thousand and eight when schools were forced to sell 419 00:22:59,680 --> 00:23:03,479 Speaker 8: on this secondaries or borrow. That's kind of a stark 420 00:23:03,520 --> 00:23:04,480 Speaker 8: example right there. 421 00:23:04,520 --> 00:23:06,680 Speaker 2: When you need money, when you need money, And I 422 00:23:06,720 --> 00:23:09,440 Speaker 2: think that's a key phrase here, especially in twenty twenty six, 423 00:23:09,560 --> 00:23:13,120 Speaker 2: because this White House has been targeting higher ed and 424 00:23:13,760 --> 00:23:16,280 Speaker 2: even though Yale has not been targeted to the extent 425 00:23:16,320 --> 00:23:20,120 Speaker 2: that Harvard has, for instance, or Columbia, these schools need 426 00:23:20,160 --> 00:23:22,680 Speaker 2: money in a way that they didn't before for nothing 427 00:23:22,680 --> 00:23:24,640 Speaker 2: else to pay taxes on their endowment. 428 00:23:24,840 --> 00:23:27,119 Speaker 8: Yes, and that's a huge game changer. You know, a 429 00:23:27,240 --> 00:23:30,800 Speaker 8: year ago we may not be having this conversation. Yale 430 00:23:30,840 --> 00:23:34,160 Speaker 8: and Harvard each had pegged their bill for the endowment tax, 431 00:23:34,240 --> 00:23:37,199 Speaker 8: which is now eight percent of net investment returns, to 432 00:23:37,280 --> 00:23:40,480 Speaker 8: be about three hundred million dollars a year. 433 00:23:41,280 --> 00:23:41,560 Speaker 2: Wow. 434 00:23:41,640 --> 00:23:44,840 Speaker 5: And is that is that enforced? Is that happening right now? 435 00:23:44,960 --> 00:23:49,160 Speaker 8: Absolutely? That happened July first, when the big beautiful ACCT. 436 00:23:49,200 --> 00:23:54,280 Speaker 4: How about the the the actual I guess halting payments 437 00:23:54,320 --> 00:23:56,520 Speaker 4: to some of these universities that President Trump administration I 438 00:23:56,600 --> 00:23:58,880 Speaker 4: talked that for some of their funding. 439 00:23:59,000 --> 00:23:59,720 Speaker 5: Has that happened? 440 00:24:00,640 --> 00:24:05,600 Speaker 8: So many schools have had settlements. Harvard famously has not yet. 441 00:24:07,040 --> 00:24:11,080 Speaker 8: There there was a lawsuit in last September. The district 442 00:24:11,119 --> 00:24:15,639 Speaker 8: court ruled in favor of Harvard. Late December the government appealed. 443 00:24:15,840 --> 00:24:18,560 Speaker 8: So that's still in flux. But there's a huge concern 444 00:24:18,600 --> 00:24:21,280 Speaker 8: of Harvard in all universities. Are we still going to 445 00:24:21,280 --> 00:24:26,040 Speaker 8: get this federal research funding going forward? And Harvard may 446 00:24:26,080 --> 00:24:30,879 Speaker 8: have temporarily solved their problem, still very unclear, but what 447 00:24:31,040 --> 00:24:35,200 Speaker 8: is the money going forward school. Our universities, these large 448 00:24:35,240 --> 00:24:37,359 Speaker 8: research universities still going to be able to count on 449 00:24:37,480 --> 00:24:40,800 Speaker 8: hundreds of millions of dollars. You know, Northwestern, which settled 450 00:24:41,400 --> 00:24:46,080 Speaker 8: around Thanksgiving, had been self funding their research the tune 451 00:24:46,080 --> 00:24:48,960 Speaker 8: of something like thirty or forty million dollars a month. 452 00:24:49,720 --> 00:24:52,639 Speaker 8: So we're talking, you know, lots and lots of money. 453 00:24:53,800 --> 00:24:55,399 Speaker 2: Yeah, they need the money in a way that they 454 00:24:55,440 --> 00:24:58,639 Speaker 2: didn't before. And going back to the Yale endowment strategy 455 00:24:58,720 --> 00:25:01,720 Speaker 2: and how well it worked at least initially when David 456 00:25:01,720 --> 00:25:04,760 Speaker 2: Swinson launched it back I think in the eighties and nineties, 457 00:25:04,800 --> 00:25:06,720 Speaker 2: those were the heydays of the Yell and domit model. 458 00:25:07,240 --> 00:25:12,520 Speaker 2: Maybe it made sense when private equity, private investing was 459 00:25:12,560 --> 00:25:14,720 Speaker 2: not a big thing yet, was not yet mainstream, or 460 00:25:14,720 --> 00:25:16,520 Speaker 2: maybe it makes more sense in a low rate environment. 461 00:25:16,520 --> 00:25:18,440 Speaker 2: But times have changed and that's a big part of it. 462 00:25:18,440 --> 00:25:21,680 Speaker 8: Right absolutely, first mover advantage. You know, there weren't as 463 00:25:21,680 --> 00:25:25,600 Speaker 8: many institutional investors doing what he was doing. He was 464 00:25:25,920 --> 00:25:29,280 Speaker 8: He saw inefficiencies in the market and he said, look, 465 00:25:29,359 --> 00:25:31,639 Speaker 8: this is what we can do. We have the ability 466 00:25:31,720 --> 00:25:34,960 Speaker 8: to lock up money for a while. We're very long 467 00:25:35,080 --> 00:25:38,840 Speaker 8: term investors. We invest in sent in for centuries. We 468 00:25:38,880 --> 00:25:42,480 Speaker 8: can do this, they and it was extremely successful, and 469 00:25:42,600 --> 00:25:46,879 Speaker 8: others tried to copy. Certainly more money piled into private equity, 470 00:25:46,960 --> 00:25:51,520 Speaker 8: sovereign wealth funds, pension funds, foundations, and when you have 471 00:25:51,600 --> 00:25:54,520 Speaker 8: a lot of money chasing returns, it just it just 472 00:25:54,640 --> 00:25:58,360 Speaker 8: isn't a successful especially at this higher interest rate when 473 00:25:58,359 --> 00:25:59,440 Speaker 8: there are fewer exits. 474 00:25:59,760 --> 00:26:02,080 Speaker 5: What is the l model in terms of asset allocation? 475 00:26:02,240 --> 00:26:03,160 Speaker 5: And is it dead? 476 00:26:03,320 --> 00:26:03,560 Speaker 4: Now? 477 00:26:03,960 --> 00:26:06,120 Speaker 8: Well, you know, we had the head of a very 478 00:26:06,200 --> 00:26:09,680 Speaker 8: large pension fund say it's not dead. It's perhaps on 479 00:26:10,240 --> 00:26:14,119 Speaker 8: life support, but it's you know, it's it's it's looking 480 00:26:14,160 --> 00:26:17,760 Speaker 8: at inefficiencies in the market. Now, typically Yale has not 481 00:26:17,840 --> 00:26:22,280 Speaker 8: been a big investor in US equities, you know, tiny 482 00:26:22,480 --> 00:26:25,639 Speaker 8: share of you know, we don't know the details because 483 00:26:25,720 --> 00:26:30,000 Speaker 8: unfortunately they stopped publishing their asset elogition when David Swce 484 00:26:30,040 --> 00:26:32,880 Speaker 8: had died. You know, a huge loss for me personally 485 00:26:33,920 --> 00:26:36,919 Speaker 8: because it gave me some great insight. But they, you know, 486 00:26:37,000 --> 00:26:41,200 Speaker 8: typically had a very very tiny investment in US equities. Now, 487 00:26:41,200 --> 00:26:45,760 Speaker 8: look at the University of California eighty percent in global equities. 488 00:26:45,840 --> 00:26:49,080 Speaker 8: But you know who is who are they trying to emulate? 489 00:26:49,200 --> 00:26:53,520 Speaker 8: You know, some investor in Omaha who's been pretty successful, 490 00:26:54,119 --> 00:26:55,840 Speaker 8: you know, betting on America. 491 00:26:55,960 --> 00:26:58,440 Speaker 2: Just blind cheap index funds. I guess what's not immediately 492 00:26:58,480 --> 00:27:00,760 Speaker 2: obvious to people is that an dowmon is more of 493 00:27:00,800 --> 00:27:04,000 Speaker 2: a fund of funds rather than just a fund like 494 00:27:04,040 --> 00:27:05,600 Speaker 2: the Ucy fund, the Blue and golds On you were 495 00:27:05,600 --> 00:27:08,879 Speaker 2: talking about. That's almost like a very basic personal account 496 00:27:08,920 --> 00:27:11,159 Speaker 2: where you're just putting money into index funds and not 497 00:27:11,359 --> 00:27:12,159 Speaker 2: dealing with it. 498 00:27:12,040 --> 00:27:13,240 Speaker 5: For a long time exactly. 499 00:27:13,280 --> 00:27:16,120 Speaker 2: But Yale is like they're picking fund managers like it's 500 00:27:16,359 --> 00:27:17,400 Speaker 2: very very complex. 501 00:27:17,640 --> 00:27:21,200 Speaker 8: Well, it's actively managed. And Yale is very famous for 502 00:27:21,359 --> 00:27:24,520 Speaker 8: you know, having managers for ten or more years. They 503 00:27:24,520 --> 00:27:26,720 Speaker 8: did a story maybe ten years ago that talked about 504 00:27:26,720 --> 00:27:30,639 Speaker 8: the length of managers and it's often ten years. And 505 00:27:30,760 --> 00:27:33,360 Speaker 8: you know, Yale very smartly came up with a new 506 00:27:33,400 --> 00:27:36,159 Speaker 8: program they call it the Prospect Fellowship, and they're looking 507 00:27:36,200 --> 00:27:39,119 Speaker 8: for new talent. And we had a comment from a 508 00:27:39,119 --> 00:27:42,960 Speaker 8: former Princeton manager who talked about, you know, they look 509 00:27:43,040 --> 00:27:45,439 Speaker 8: for talent and they grow with them. So maybe a 510 00:27:45,520 --> 00:27:50,800 Speaker 8: small allocation to a manager today think hill House at Yale, 511 00:27:50,960 --> 00:27:54,440 Speaker 8: it turns when they're successful into you know, billion dollar 512 00:27:54,520 --> 00:27:57,520 Speaker 8: investments and especially when they've done well. You know, you 513 00:27:57,560 --> 00:28:00,280 Speaker 8: can grow with a successful manager, and then all of 514 00:28:00,320 --> 00:28:04,040 Speaker 8: a sudden, your allocations are much larger as you're growing 515 00:28:04,040 --> 00:28:06,120 Speaker 8: with them, and that's what they're seeking, So that's sort 516 00:28:06,160 --> 00:28:07,720 Speaker 8: of like a refresh for them. 517 00:28:08,520 --> 00:28:13,240 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 518 00:28:13,400 --> 00:28:17,400 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 519 00:28:17,600 --> 00:28:20,879 Speaker 1: ten am to noon Eastern on Bloomberg dot com, the 520 00:28:20,960 --> 00:28:24,840 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 521 00:28:24,880 --> 00:28:28,159 Speaker 1: can also watch us live every weekday on YouTube and 522 00:28:28,359 --> 00:28:30,320 Speaker 1: always on the Bloomberg terminal