1 00:00:02,720 --> 00:00:10,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,640 --> 00:00:14,600 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am, 3 00:00:14,640 --> 00:00:17,880 Speaker 1: ea'sterne on, Apple Cocklay and Android Auto with the Bloomberg 4 00:00:17,960 --> 00:00:21,080 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,400 --> 00:00:23,520 Speaker 1: or watch us live on YouTube. 6 00:00:24,200 --> 00:00:27,840 Speaker 2: A lot of news flow today on the tech front Nvidia. 7 00:00:27,960 --> 00:00:31,320 Speaker 2: I mean, when Masa Son sells stock in a company, 8 00:00:31,520 --> 00:00:32,280 Speaker 2: that's news to me. 9 00:00:32,479 --> 00:00:34,520 Speaker 3: That is news. But I mean does he have great 10 00:00:34,560 --> 00:00:36,760 Speaker 3: timing or does he have poor timing? That's my question? 11 00:00:36,880 --> 00:00:39,360 Speaker 4: Uh, yep, I don't know. I mean you mean sold 12 00:00:39,360 --> 00:00:41,040 Speaker 4: it for five twenty billions. What are you gonna do 13 00:00:41,040 --> 00:00:41,239 Speaker 4: with that? 14 00:00:41,520 --> 00:00:43,920 Speaker 2: Ed Luvelow, he does all this tech stuff out there 15 00:00:44,080 --> 00:00:45,240 Speaker 2: in San Francisco. 16 00:00:45,280 --> 00:00:48,680 Speaker 4: He is the b Tech co anchor alongside Caroline Hyde. 17 00:00:48,920 --> 00:00:52,919 Speaker 2: So Ed, you know, whenever Massa herosn does anything, it 18 00:00:53,000 --> 00:00:54,560 Speaker 2: really gets people's attention. 19 00:00:54,640 --> 00:00:57,560 Speaker 4: Here, what do you make of this trade? Your heads 20 00:00:57,560 --> 00:00:58,520 Speaker 4: are in the right place. 21 00:00:58,760 --> 00:01:01,080 Speaker 5: I mean, they're selling out of the entire stake, and 22 00:01:01,120 --> 00:01:03,440 Speaker 5: that's worth reiterating. It's all of it in one go 23 00:01:03,840 --> 00:01:06,119 Speaker 5: five point six billion dollars, which for a five trillion 24 00:01:06,160 --> 00:01:10,119 Speaker 5: dollar company, almost five trillion dollar company is not that much, 25 00:01:10,200 --> 00:01:13,360 Speaker 5: but it's also not unprecedented. And what Scarlett was saying 26 00:01:13,400 --> 00:01:17,080 Speaker 5: about timing, soft Banks sold out of Nvidia once before. 27 00:01:17,240 --> 00:01:20,080 Speaker 5: That was in twenty nineteen, right before the kind of 28 00:01:20,160 --> 00:01:25,880 Speaker 5: chat GBT explosion in AI data center demand. But then 29 00:01:25,920 --> 00:01:28,720 Speaker 5: they kind of realized twenty twenty they needed to get 30 00:01:28,760 --> 00:01:31,440 Speaker 5: back in and they slowly built up a stake which 31 00:01:31,600 --> 00:01:36,360 Speaker 5: resulted in on paper gains that were really significant. So 32 00:01:36,959 --> 00:01:39,520 Speaker 5: the market seeing this, even though in video is down, 33 00:01:39,560 --> 00:01:41,160 Speaker 5: I think it's down two and a half per cent, right, guys, 34 00:01:41,480 --> 00:01:45,280 Speaker 5: not necessarily is an issue with Nvidia or a signal 35 00:01:45,319 --> 00:01:49,200 Speaker 5: that SoftBank has concerned about Nvidia. They're seeing it or 36 00:01:49,240 --> 00:01:51,120 Speaker 5: taking soft Bank at its word that this is just 37 00:01:51,200 --> 00:01:52,920 Speaker 5: financing for the other things they want to do. 38 00:01:53,440 --> 00:01:55,880 Speaker 3: Okay, And in terms of the other things that wants 39 00:01:55,920 --> 00:01:58,160 Speaker 3: to do, It's got a lot of different AI projects 40 00:01:58,360 --> 00:01:59,320 Speaker 3: going on, isn't it. 41 00:02:00,200 --> 00:02:02,960 Speaker 5: Across both public and private initiatives. Right, There are some 42 00:02:03,480 --> 00:02:06,160 Speaker 5: AI startups in the compute space that they're looking at 43 00:02:06,200 --> 00:02:09,919 Speaker 5: taking private. For example. They still want to deploy capital 44 00:02:10,000 --> 00:02:12,840 Speaker 5: out of the Vision funds and Vision fund too. And 45 00:02:13,000 --> 00:02:16,200 Speaker 5: you know they didn't tell tell us much. The CFO 46 00:02:16,240 --> 00:02:20,560 Speaker 5: in particular on the call. But but that's it, you know, 47 00:02:21,080 --> 00:02:25,920 Speaker 5: realizing gains, using the realized gains to generate cash, and 48 00:02:26,000 --> 00:02:28,240 Speaker 5: using that cash for investing. 49 00:02:28,880 --> 00:02:31,560 Speaker 4: That's what they do, right, I think, yep, exactly right. 50 00:02:32,240 --> 00:02:35,600 Speaker 2: Do you think that Massa believes that he and the 51 00:02:35,600 --> 00:02:38,080 Speaker 2: fund have a proper allocation to AI at the moment? 52 00:02:39,520 --> 00:02:43,880 Speaker 5: This is the really important question because there is a 53 00:02:43,880 --> 00:02:47,040 Speaker 5: lot of exposure with soft Bank to open AI, both 54 00:02:47,080 --> 00:02:52,120 Speaker 5: in terms of direct investment but also co financing and 55 00:02:52,280 --> 00:02:56,240 Speaker 5: partnering on the Stargate Data Center project. Some people have 56 00:02:56,320 --> 00:03:00,320 Speaker 5: concern about the concentration risk. You know, right now AI 57 00:03:00,400 --> 00:03:02,560 Speaker 5: as seen as the world's leading frontier. 58 00:03:02,160 --> 00:03:03,440 Speaker 4: Model lab or AI lab. 59 00:03:03,800 --> 00:03:07,040 Speaker 5: But that's not guaranteed of course, and so they would 60 00:03:07,040 --> 00:03:10,480 Speaker 5: ask what is it diversified enough? But yeah, it's a 61 00:03:10,480 --> 00:03:15,640 Speaker 5: really critical question. Remember, like through ARM and the board 62 00:03:15,680 --> 00:03:18,480 Speaker 5: representation that they have with ARM, there is an idea 63 00:03:18,600 --> 00:03:21,919 Speaker 5: that if ARMED design staf senships, Top Bank benefits from that. 64 00:03:22,040 --> 00:03:25,080 Speaker 5: What they're doing with ampare in the compute space as well. 65 00:03:25,840 --> 00:03:28,440 Speaker 5: That's why they need this five point six billion dollars. 66 00:03:28,480 --> 00:03:31,519 Speaker 3: They say, Okay, so that's one of the big stories 67 00:03:31,919 --> 00:03:34,640 Speaker 3: on the top Worldwide page on the Bloomberg terminal. The 68 00:03:34,720 --> 00:03:37,600 Speaker 3: other one is Corewed's results, and we talked a little 69 00:03:37,600 --> 00:03:40,280 Speaker 3: bit about Nvidia earlier. In Vidia actually owns about a 70 00:03:40,320 --> 00:03:42,640 Speaker 3: six and a half percent stake in Coreweaves, one of 71 00:03:42,720 --> 00:03:45,200 Speaker 3: those neo cloud companies. What was the takeaway from the 72 00:03:45,280 --> 00:03:46,280 Speaker 3: latest earnings report. 73 00:03:46,920 --> 00:03:50,360 Speaker 5: Yeah, so they cut their full year revenue guidance for 74 00:03:50,400 --> 00:03:53,000 Speaker 5: fiscal twenty five to a range of five point zero 75 00:03:53,040 --> 00:03:56,760 Speaker 5: five billion to five point one five billion dollars. The 76 00:03:56,840 --> 00:03:59,440 Speaker 5: previous high end of the range had been five point 77 00:03:59,480 --> 00:04:02,720 Speaker 5: three five billion dollars, so they've lowered it by about 78 00:04:02,720 --> 00:04:06,520 Speaker 5: two hundred million dollars. And they say that that is 79 00:04:06,560 --> 00:04:10,560 Speaker 5: because a third party that was building data center capacity 80 00:04:10,600 --> 00:04:14,080 Speaker 5: for them let them down. They're behind schedule, and because 81 00:04:14,120 --> 00:04:16,719 Speaker 5: that data center won't be up and running, they can't 82 00:04:16,800 --> 00:04:20,520 Speaker 5: realize the revenue for a specific customer, which they're not naming. 83 00:04:22,160 --> 00:04:26,120 Speaker 5: Does that justify the stock being down eleven percent? That's 84 00:04:26,120 --> 00:04:27,800 Speaker 5: not a question for us. That's a question for the 85 00:04:27,839 --> 00:04:30,279 Speaker 5: sale s item, for the investors themselves. But there's a 86 00:04:30,279 --> 00:04:32,440 Speaker 5: lot of commotion about what it is a two hundred 87 00:04:32,480 --> 00:04:35,719 Speaker 5: million dollar trim because some capacity is delayed and the 88 00:04:35,760 --> 00:04:38,320 Speaker 5: thing you need to know Scarlet is like generally speaking, 89 00:04:38,800 --> 00:04:41,960 Speaker 5: call we've cannot get data center capacity up and running 90 00:04:42,040 --> 00:04:44,240 Speaker 5: quick enough to meet the demand that it has. 91 00:04:45,800 --> 00:04:48,919 Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this. 92 00:04:52,520 --> 00:04:56,200 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 93 00:04:56,320 --> 00:04:59,400 Speaker 1: weekdays at ten am Eastern on Apple Coarclay and Android 94 00:04:59,400 --> 00:05:02,280 Speaker 1: Otto with the bloom Work Business app. Listen on demand 95 00:05:02,320 --> 00:05:06,800 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 96 00:05:07,440 --> 00:05:10,600 Speaker 4: I think my new favorite stock symbol is peace guy. 97 00:05:11,080 --> 00:05:12,040 Speaker 6: Yeah, such a good one. 98 00:05:12,120 --> 00:05:14,880 Speaker 2: I like that one for Paramount Skydance. The company reported 99 00:05:15,200 --> 00:05:18,240 Speaker 2: earnings yesterday kind of in line numbers, but there's a 100 00:05:18,320 --> 00:05:20,200 Speaker 2: lot of cost cutting going over there, and the stocks 101 00:05:20,240 --> 00:05:23,599 Speaker 2: up ten percent on the news today. So let's check 102 00:05:23,600 --> 00:05:25,960 Speaker 2: it out with Getha rang on Nothing because she covers 103 00:05:25,960 --> 00:05:28,200 Speaker 2: all the media stuff for Bloomberg Intelligence and Getha I'll 104 00:05:28,200 --> 00:05:31,160 Speaker 2: ask you the one you know, Ernie's question. Then I 105 00:05:31,200 --> 00:05:32,599 Speaker 2: want to get to the need of the matter here. 106 00:05:32,680 --> 00:05:35,680 Speaker 2: How were the earnings for this newly combined company and 107 00:05:35,920 --> 00:05:36,680 Speaker 2: what's the outlook? 108 00:05:37,839 --> 00:05:41,240 Speaker 7: Yeah, Paul, earnings were a little bit messy. They were mixed, 109 00:05:41,360 --> 00:05:44,920 Speaker 7: but the good news was that the company kind of 110 00:05:44,960 --> 00:05:48,039 Speaker 7: over delivered when it came to streaming crafitability, which is 111 00:05:48,040 --> 00:05:50,479 Speaker 7: the big thing that everybody's looking for, given that, you know, 112 00:05:50,520 --> 00:05:53,320 Speaker 7: they've just lost tons and tons of money on their 113 00:05:53,360 --> 00:05:56,359 Speaker 7: streaming business, so that was good news. I think why 114 00:05:56,400 --> 00:05:59,520 Speaker 7: Wall Street is really cheering, you know, paramount Skuidance today 115 00:05:59,600 --> 00:06:02,360 Speaker 7: is because the guidance that they provided for twenty twenty 116 00:06:02,400 --> 00:06:06,080 Speaker 7: six was pretty promising. So A Street was in at 117 00:06:06,120 --> 00:06:09,120 Speaker 7: about three point one billion for ibit dah for next year, 118 00:06:09,760 --> 00:06:12,200 Speaker 7: they came in with three point five billion, and a 119 00:06:12,240 --> 00:06:14,640 Speaker 7: lot of that, as you just pointed out, was because 120 00:06:14,640 --> 00:06:16,760 Speaker 7: of the cost savings. So they've taken it out from 121 00:06:16,760 --> 00:06:20,960 Speaker 7: two billion to three billion. Very very aggressive measures across 122 00:06:21,000 --> 00:06:23,520 Speaker 7: the board, but I think overall it was you know, 123 00:06:23,560 --> 00:06:25,440 Speaker 7: what really kind of came across was that this is 124 00:06:25,480 --> 00:06:28,239 Speaker 7: a solid management team that really knows what they're doing. 125 00:06:28,839 --> 00:06:33,719 Speaker 7: They're super focused, you know, on driving that transformation within 126 00:06:33,760 --> 00:06:37,680 Speaker 7: the company, and I think that really kind of cheered investors. 127 00:06:37,960 --> 00:06:40,960 Speaker 3: Speaking of driving transformation in the company, the big question 128 00:06:41,200 --> 00:06:45,520 Speaker 3: for Paramounts guidance is whether it's going to buy Warner 129 00:06:45,520 --> 00:06:48,960 Speaker 3: Brothers Discovery wholesale or at least parts of it. Did 130 00:06:48,960 --> 00:06:51,760 Speaker 3: we hear anything from the executives in the earnings call. 131 00:06:52,760 --> 00:06:54,839 Speaker 7: Yeah, Scarlet, that's a great question. I mean, obviously that 132 00:06:54,880 --> 00:06:57,120 Speaker 7: was the first thing on everybody's minds. So, you know, 133 00:06:57,160 --> 00:07:00,359 Speaker 7: obviously no specific commentary on Warner Brothers itself, but the 134 00:07:00,400 --> 00:07:03,040 Speaker 7: one thing that they did say was that they think, 135 00:07:03,680 --> 00:07:06,440 Speaker 7: you know, they don't there's no must have for them, 136 00:07:06,440 --> 00:07:09,560 Speaker 7: So they really kind of downplayed the whole need for 137 00:07:09,760 --> 00:07:11,640 Speaker 7: M and A. They said that, you know, they have 138 00:07:11,760 --> 00:07:13,720 Speaker 7: all of the you know, they have a great portfolio 139 00:07:13,760 --> 00:07:16,160 Speaker 7: of assets. Of course, we all know that these assets 140 00:07:16,160 --> 00:07:19,960 Speaker 7: have been undermanaged for many many years, underinvested, so there's 141 00:07:20,000 --> 00:07:21,840 Speaker 7: a lot of work to do there. There's a lot 142 00:07:21,840 --> 00:07:25,360 Speaker 7: of restructuring that needs to happen. But they really kind 143 00:07:25,360 --> 00:07:29,040 Speaker 7: of downplayed you know, Warner Brothers. Of course, we know that, 144 00:07:29,200 --> 00:07:32,280 Speaker 7: you know, yes, they are making huge content investments. They 145 00:07:32,320 --> 00:07:35,200 Speaker 7: are making huge technological investments. But if you look at 146 00:07:35,240 --> 00:07:37,960 Speaker 7: their streaming service, which is Paramount Plus, it has roughly 147 00:07:38,080 --> 00:07:41,840 Speaker 7: eighty million subscribers. Okay, they do have, you know, all 148 00:07:41,880 --> 00:07:44,679 Speaker 7: of these new content investments. Let's say the UFC ZUOFA boxing, 149 00:07:44,720 --> 00:07:47,840 Speaker 7: all of that South Park not enough to move the needle. 150 00:07:47,880 --> 00:07:49,760 Speaker 7: And I think they know that the street knows that, 151 00:07:49,840 --> 00:07:52,600 Speaker 7: which is why they do need something transformative like Warner 152 00:07:52,600 --> 00:07:55,000 Speaker 7: Brothers Discovery, which will really kind of put them on 153 00:07:55,040 --> 00:07:58,240 Speaker 7: the map when it comes to streaming for sure, and 154 00:07:58,320 --> 00:08:00,920 Speaker 7: also in terms of extracting more synergy on the linear 155 00:08:00,960 --> 00:08:03,400 Speaker 7: TV side of the business where they have huge exposure. 156 00:08:03,400 --> 00:08:06,000 Speaker 7: Over fifty five percent of revenue still comes from linear TV. 157 00:08:06,800 --> 00:08:08,560 Speaker 2: So when you look at the enterprise value of Warner 158 00:08:08,600 --> 00:08:13,120 Speaker 2: Brothers Discovery, it's almost three times the enterprise value of 159 00:08:13,920 --> 00:08:17,600 Speaker 2: Paramount Skuidance, suggesting that if Paramounts Guidance wants to do 160 00:08:17,640 --> 00:08:19,520 Speaker 2: a deal here, they're going to need a ton of equity, 161 00:08:19,720 --> 00:08:23,920 Speaker 2: whether it comes from mister Ellison or whether it comes 162 00:08:23,920 --> 00:08:26,360 Speaker 2: from private equity or some combination. Is that kind of 163 00:08:26,400 --> 00:08:28,480 Speaker 2: where people are thinking about it. 164 00:08:29,200 --> 00:08:30,840 Speaker 7: That is kind of where people are thinking about it. 165 00:08:30,840 --> 00:08:32,920 Speaker 7: And you know what was really interesting, Paul was, you know, 166 00:08:32,960 --> 00:08:36,640 Speaker 7: they've made three bids for Warner Brothers Discovery thus far, 167 00:08:37,200 --> 00:08:41,120 Speaker 7: all of which have been rejected. The last one was 168 00:08:41,200 --> 00:08:44,560 Speaker 7: for almost twenty four dollars a share, which was basically 169 00:08:44,600 --> 00:08:48,640 Speaker 7: sixty billion equity value, about ninety billion enterprise value. And 170 00:08:48,679 --> 00:08:50,920 Speaker 7: the thing there was they were offering eighty percent cash. 171 00:08:50,960 --> 00:08:52,600 Speaker 7: I mean they first started out with sixty percent. They 172 00:08:52,600 --> 00:08:55,280 Speaker 7: sweetened it to eighty percent, but David Zaslav, as we know, 173 00:08:55,360 --> 00:08:58,400 Speaker 7: is really a tough negotiator and basically said no, So 174 00:08:58,440 --> 00:09:01,720 Speaker 7: we think he's looking for something north of thirty. I'm 175 00:09:01,760 --> 00:09:04,079 Speaker 7: not sure Paramount Skuidance is going to be willing to 176 00:09:04,120 --> 00:09:06,000 Speaker 7: cough up that much, but let's see. 177 00:09:07,480 --> 00:09:10,120 Speaker 6: Yeah, that's a that's a big, big question, Mark Keitha. 178 00:09:10,200 --> 00:09:13,640 Speaker 3: As you look at the media landscape, we're focused so 179 00:09:13,720 --> 00:09:16,640 Speaker 3: much on Warner Brothers Discovery and what happens to its assets, 180 00:09:16,679 --> 00:09:19,719 Speaker 3: what's happening to its businesses. What are we missing when 181 00:09:19,760 --> 00:09:21,600 Speaker 3: we look at what else might be a for sale 182 00:09:21,679 --> 00:09:26,120 Speaker 3: or might become, you know, not a for sale, but 183 00:09:26,360 --> 00:09:29,280 Speaker 3: something that a buyer might be interested in pursuing. 184 00:09:30,559 --> 00:09:32,959 Speaker 7: Yeah, I mean, when we look across the landscape, you're 185 00:09:33,000 --> 00:09:35,120 Speaker 7: absolutely right, Scarleton. The reason why there's so much of 186 00:09:35,160 --> 00:09:37,880 Speaker 7: attention on Warner Brothers Discoveries because it's really kind of 187 00:09:38,280 --> 00:09:41,679 Speaker 7: the last big you know, iconic studio if you're looking 188 00:09:41,720 --> 00:09:44,200 Speaker 7: at it, a huge streaming property with HBO, you know, 189 00:09:44,320 --> 00:09:47,640 Speaker 7: huge names in the business, just iconic franchises, big brands, 190 00:09:47,679 --> 00:09:50,040 Speaker 7: big brands, core franchises, things that can really move the 191 00:09:50,080 --> 00:09:53,400 Speaker 7: needle for any company, for any buyer. We don't really 192 00:09:53,559 --> 00:09:57,040 Speaker 7: have anything quite like Warner Brothers. Yes, we have a 193 00:09:57,040 --> 00:09:59,319 Speaker 7: lot of smaller names. You can think of an AMC Networks, 194 00:09:59,320 --> 00:10:01,600 Speaker 7: you can think of a Life studio, you can think 195 00:10:01,640 --> 00:10:05,400 Speaker 7: of comcasts new spinoff cable TV networks which is called worsened, 196 00:10:05,800 --> 00:10:09,640 Speaker 7: but none of them as attractive, you know, as as 197 00:10:09,720 --> 00:10:12,400 Speaker 7: Warner Brothers. So there there are a lot of opportunities 198 00:10:12,440 --> 00:10:15,160 Speaker 7: for consolidation. You have a lot on the broadcast TV 199 00:10:15,240 --> 00:10:17,679 Speaker 7: station side, whether you're thinking of a Gray or Sinclair, 200 00:10:18,160 --> 00:10:22,760 Speaker 7: but again, nothing quite as attractive or as massive as 201 00:10:22,800 --> 00:10:25,160 Speaker 7: Warner Brothers Discovery. 202 00:10:25,200 --> 00:10:27,800 Speaker 4: Timing. When do you think something might happen with Warner 203 00:10:27,840 --> 00:10:29,400 Speaker 4: Brothers Discovery. 204 00:10:29,480 --> 00:10:32,400 Speaker 7: It has to happen quickly, Paul, because they you know, 205 00:10:32,480 --> 00:10:36,040 Speaker 7: if Warner Brothers Discovery doesn't decide to go ahead with 206 00:10:36,120 --> 00:10:39,800 Speaker 7: a sale, they do have a split of the company, 207 00:10:39,800 --> 00:10:42,120 Speaker 7: which is, you know, splitting the company into the TV 208 00:10:42,200 --> 00:10:44,319 Speaker 7: network's division and the streaming of studio's division. That is 209 00:10:44,360 --> 00:10:48,439 Speaker 7: supposed to happen sometime mid twenty twenty six. So I'm 210 00:10:48,440 --> 00:10:50,600 Speaker 7: assuming you know, things have to move pretty quickly in 211 00:10:50,600 --> 00:10:51,800 Speaker 7: the next couple of months. 212 00:10:52,400 --> 00:10:55,520 Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this. 213 00:10:59,400 --> 00:11:03,120 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 214 00:11:03,200 --> 00:11:06,280 Speaker 1: weekdays at ten am Eastern on Apple, Coarclay, and Android 215 00:11:06,320 --> 00:11:09,600 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 216 00:11:09,679 --> 00:11:12,800 Speaker 1: you get your podcasts, or watch us live on YouTube. 217 00:11:13,800 --> 00:11:16,760 Speaker 3: One subject that I can't get enough of is premium 218 00:11:16,760 --> 00:11:20,000 Speaker 3: credit cards and the rewards that you rack up if 219 00:11:20,040 --> 00:11:23,120 Speaker 3: you use them only in certain times at grocery stores 220 00:11:23,200 --> 00:11:26,319 Speaker 3: versus restaurants versus to pay for your plane ticket. Well, 221 00:11:26,320 --> 00:11:29,680 Speaker 3: there's been a settlement between Visa MasterCard and merchants that 222 00:11:30,040 --> 00:11:33,600 Speaker 3: may change the way that we use our premium credit cards. 223 00:11:33,640 --> 00:11:36,000 Speaker 3: And Justin Teresi is here with us. He is a 224 00:11:36,000 --> 00:11:40,080 Speaker 3: bi litigation analyst to hear at Bloomberg Intelligence. Justin what 225 00:11:40,280 --> 00:11:43,079 Speaker 3: happened and what does this mean for my Chase Sapphire 226 00:11:43,120 --> 00:11:44,680 Speaker 3: card or my AMX Platform card. 227 00:11:44,880 --> 00:11:46,040 Speaker 4: Yeah, really big news here. 228 00:11:46,080 --> 00:11:47,880 Speaker 8: So first of all, this case has been going on 229 00:11:47,920 --> 00:11:50,840 Speaker 8: for about twenty years now, long I started before I 230 00:11:50,880 --> 00:11:52,560 Speaker 8: went to law school, which was a long time ago. 231 00:11:52,800 --> 00:11:54,720 Speaker 8: There's salt and pepper in my hair. So we're talking 232 00:11:54,720 --> 00:11:57,800 Speaker 8: about a really really ancient case. But basically what a 233 00:11:57,840 --> 00:12:00,280 Speaker 8: lot of folks don't know is when you have those 234 00:12:00,320 --> 00:12:03,480 Speaker 8: really valuable premium cards, right the airline miles cards or 235 00:12:03,480 --> 00:12:06,360 Speaker 8: the cash back cards, there's a fee associated with those, 236 00:12:06,400 --> 00:12:08,720 Speaker 8: and it's the merchants who are eating that fee, typically 237 00:12:08,720 --> 00:12:11,680 Speaker 8: around three or four percent depending on the varying swipe 238 00:12:11,679 --> 00:12:14,360 Speaker 8: fee when you use it at a register. So merchants, 239 00:12:14,400 --> 00:12:17,840 Speaker 8: no surprise, they're upset about that, right. So Visa, you know, 240 00:12:17,920 --> 00:12:20,960 Speaker 8: big litigation here, the accusation being that they fix those 241 00:12:21,000 --> 00:12:22,920 Speaker 8: fees and that you know, the merchants are basically the 242 00:12:23,000 --> 00:12:26,560 Speaker 8: ones eating the costs there. So big deal announced yesterday 243 00:12:26,559 --> 00:12:29,480 Speaker 8: between Visa, master Card and merchants would make a little 244 00:12:29,520 --> 00:12:32,040 Speaker 8: bit more flexibility on the part of merchants here. They 245 00:12:32,040 --> 00:12:34,520 Speaker 8: could basically say, hey, we're going to take the lower 246 00:12:34,600 --> 00:12:36,959 Speaker 8: tier version of a Visa or a master Card, but 247 00:12:37,120 --> 00:12:40,000 Speaker 8: we're maybe not going to accept airline miles cards or 248 00:12:40,280 --> 00:12:43,120 Speaker 8: cash back cards. And then alternatively, they also might have 249 00:12:43,160 --> 00:12:45,720 Speaker 8: the option of passing those fees onto you, the consumer 250 00:12:45,840 --> 00:12:47,920 Speaker 8: at the register if they do take them. So some 251 00:12:47,920 --> 00:12:50,480 Speaker 8: big changes here and how things are shaping up. 252 00:12:50,400 --> 00:12:52,480 Speaker 2: Well, I've noticed in the last couple of three years 253 00:12:52,600 --> 00:12:54,960 Speaker 2: they are doing that. Yeah, I mean, almost every merchant 254 00:12:55,000 --> 00:12:56,480 Speaker 2: I go to now, I don't know if it's just 255 00:12:56,520 --> 00:12:58,679 Speaker 2: a state of New Jersey thing, but they're saying, hey, 256 00:12:58,720 --> 00:13:00,720 Speaker 2: here's the cash price, here's the credit card price. 257 00:13:00,800 --> 00:13:03,600 Speaker 8: Yeah, Paul, this is actually a really interesting issue here 258 00:13:03,679 --> 00:13:06,160 Speaker 8: because state by state there's a lot of differences in 259 00:13:06,280 --> 00:13:08,440 Speaker 8: how this actually plays out. In New York, and I 260 00:13:08,440 --> 00:13:10,160 Speaker 8: see this too when I go to my dry cleaner, 261 00:13:10,200 --> 00:13:12,600 Speaker 8: it's like, oh, maybe that's four percent more if I'm 262 00:13:12,600 --> 00:13:15,120 Speaker 8: going to use my credit card here. That's actually illegal 263 00:13:15,160 --> 00:13:17,160 Speaker 8: in New York right now to do that, But the 264 00:13:17,280 --> 00:13:19,240 Speaker 8: enforcement seems to be lacking that this is a new 265 00:13:19,320 --> 00:13:21,400 Speaker 8: law pass in twenty twenty four, there has to be 266 00:13:21,440 --> 00:13:24,040 Speaker 8: an upfront kind of price on a tag if they're 267 00:13:24,040 --> 00:13:26,040 Speaker 8: going to pass a surch charge onto the consumer. In 268 00:13:26,080 --> 00:13:29,400 Speaker 8: New York, Massachusetts, Connecticut, you can't surcharge at all. So 269 00:13:30,000 --> 00:13:32,439 Speaker 8: if this settlement goes through, you know, that's a big 270 00:13:32,520 --> 00:13:33,040 Speaker 8: question mark. 271 00:13:33,080 --> 00:13:35,760 Speaker 3: Too interesting that you say that the surcharge is illegal 272 00:13:35,760 --> 00:13:37,800 Speaker 3: in New York, because what I've seen is the dry 273 00:13:37,800 --> 00:13:39,679 Speaker 3: cleaner will say we'll give you a discount if you 274 00:13:39,800 --> 00:13:42,400 Speaker 3: pay in cash. Here's the regular price, but you get 275 00:13:42,440 --> 00:13:43,600 Speaker 3: the discount if you pay cash. 276 00:13:43,600 --> 00:13:45,880 Speaker 6: So it's no longer a surcharge. 277 00:13:45,400 --> 00:13:47,320 Speaker 3: Justin you said that this has been a case that's 278 00:13:47,320 --> 00:13:50,840 Speaker 3: been around for twenty some odd years. So yes, this 279 00:13:50,920 --> 00:13:52,920 Speaker 3: settlement that was announced yesterday, I mean, is it just 280 00:13:52,920 --> 00:13:55,080 Speaker 3: going to get caught up in a more legal jegmire? 281 00:13:55,320 --> 00:13:57,480 Speaker 8: You know, it really could. So last year there was 282 00:13:57,480 --> 00:13:59,760 Speaker 8: a first attempt to this. This is the second try now, right, 283 00:13:59,840 --> 00:14:02,160 Speaker 8: And the big issue that blew up the deal last 284 00:14:02,200 --> 00:14:04,760 Speaker 8: year is that the smaller merchants kind of pushed for 285 00:14:04,800 --> 00:14:06,720 Speaker 8: the terms that they set in the first place, and 286 00:14:06,760 --> 00:14:09,320 Speaker 8: big folks like Walmart, et cetera kind of got ice 287 00:14:09,400 --> 00:14:11,959 Speaker 8: out from the discussions on that. It seems like that 288 00:14:12,080 --> 00:14:15,240 Speaker 8: might have happened again here. The National Retail Federation was 289 00:14:15,280 --> 00:14:18,000 Speaker 8: out yesterday saying, wait a minute, what kind of business 290 00:14:18,000 --> 00:14:20,680 Speaker 8: practice would this be for us to say, hey, we're 291 00:14:20,680 --> 00:14:22,440 Speaker 8: going to take these cards and not those cards. And 292 00:14:22,440 --> 00:14:25,440 Speaker 8: they're also criticizing the fee concessions that were part of 293 00:14:25,480 --> 00:14:27,520 Speaker 8: this deal too for the next five years or so. 294 00:14:27,520 --> 00:14:29,680 Speaker 8: So I think there's still a lot of questions here. 295 00:14:29,720 --> 00:14:32,480 Speaker 8: There's probably enough changes from last year's deal to get 296 00:14:32,520 --> 00:14:35,760 Speaker 8: it over the finish line, but there's a big period 297 00:14:35,800 --> 00:14:37,680 Speaker 8: here with objectors who are going to be weighing in 298 00:14:37,800 --> 00:14:40,000 Speaker 8: on what they think of the deal. And honestly, the 299 00:14:40,080 --> 00:14:41,920 Speaker 8: judge last year she said, look, you guys can do 300 00:14:41,960 --> 00:14:44,600 Speaker 8: a lot more than you're offering to do in this deal. 301 00:14:44,640 --> 00:14:46,640 Speaker 8: So is this enough? That's going to be a huge 302 00:14:46,720 --> 00:14:49,720 Speaker 8: question moving into an approval hearing. What are the dollars 303 00:14:50,040 --> 00:14:52,400 Speaker 8: dollar amounts we're talking about here, you know, so it's 304 00:14:52,480 --> 00:14:55,960 Speaker 8: quadrupled according to the National Retail Federation since two thousand 305 00:14:55,960 --> 00:14:58,320 Speaker 8: and nine. But if you said MasterCard, they've got eighty 306 00:14:58,360 --> 00:15:01,160 Speaker 8: percent of this market for the the card fees, right, 307 00:15:01,560 --> 00:15:05,160 Speaker 8: one hundred and eleven billion dollars last year alone collected 308 00:15:05,240 --> 00:15:09,400 Speaker 8: in these wipe fees according to the NRF, So really massive, massive. 309 00:15:09,400 --> 00:15:12,120 Speaker 8: But you know, these companies are also diversifying their streams, right, 310 00:15:12,160 --> 00:15:15,520 Speaker 8: They're looking into digital wallets and other payment platforms too. 311 00:15:15,640 --> 00:15:17,560 Speaker 8: So there's a lot more on the table now than 312 00:15:17,600 --> 00:15:19,560 Speaker 8: there was when this was first brought back in two 313 00:15:19,560 --> 00:15:20,160 Speaker 8: thousand and five. 314 00:15:20,360 --> 00:15:23,880 Speaker 3: And to be clear, this is Visa and MasterCard and merchants. 315 00:15:23,920 --> 00:15:25,960 Speaker 3: What about American Express? Where does it sit here? 316 00:15:26,080 --> 00:15:29,640 Speaker 8: Yeah, so that's another great question. American Express basically settled 317 00:15:29,640 --> 00:15:32,120 Speaker 8: a version of this loss or one a version of 318 00:15:32,160 --> 00:15:35,120 Speaker 8: this lawsuit years ago. Their card acceptance terms are a 319 00:15:35,160 --> 00:15:38,320 Speaker 8: little bit different. Surcharging doesn't really allowed with those when 320 00:15:38,360 --> 00:15:41,040 Speaker 8: it's not applied to all card types, right, But that 321 00:15:41,080 --> 00:15:44,240 Speaker 8: begs the question if you start allowing surcharging through card 322 00:15:44,280 --> 00:15:48,160 Speaker 8: holder through acceptance agreements for Visa MasterCard, does Amex now 323 00:15:48,200 --> 00:15:50,040 Speaker 8: have to allow us for charging on its card? So 324 00:15:50,080 --> 00:15:52,440 Speaker 8: that's another big question mark. If this deal goes through, 325 00:15:52,640 --> 00:15:55,040 Speaker 8: it really has the potential to impact everything, not just 326 00:15:55,200 --> 00:15:56,320 Speaker 8: Visa MasterCard. 327 00:15:56,440 --> 00:15:56,680 Speaker 6: Paul. 328 00:15:56,720 --> 00:15:59,640 Speaker 3: I remember when MX used to be accepted everywhere, and 329 00:15:59,640 --> 00:16:01,520 Speaker 3: then after while it was like, oh we'll take Visa 330 00:16:01,560 --> 00:16:04,520 Speaker 3: master Card, but not American Express because it was always 331 00:16:04,560 --> 00:16:05,160 Speaker 3: for the merchants. 332 00:16:05,240 --> 00:16:06,440 Speaker 6: Too expensive, too expensive. 333 00:16:06,480 --> 00:16:09,120 Speaker 2: Okay, yeah, I haven't. I can't remember the last time 334 00:16:09,120 --> 00:16:10,240 Speaker 2: I used my AMEX card. 335 00:16:10,080 --> 00:16:10,680 Speaker 4: Literally can't. 336 00:16:10,840 --> 00:16:12,520 Speaker 6: It's there in your pocket, though it's in my pocket. 337 00:16:12,560 --> 00:16:12,760 Speaker 7: Okay. 338 00:16:12,840 --> 00:16:13,520 Speaker 6: See that's the thing. 339 00:16:13,560 --> 00:16:16,800 Speaker 3: I mean, what does this mean for companies that have 340 00:16:16,880 --> 00:16:18,640 Speaker 3: corporate cards justin. 341 00:16:18,560 --> 00:16:20,680 Speaker 8: So that's one of the different brackets here too. So 342 00:16:20,720 --> 00:16:22,520 Speaker 8: the way the settlement works is that it's going to 343 00:16:22,520 --> 00:16:25,440 Speaker 8: divide cards into three different types, so it be commercial cards, 344 00:16:25,760 --> 00:16:28,720 Speaker 8: standard customer cards, and then premium customer cards. 345 00:16:28,760 --> 00:16:29,600 Speaker 4: I think the. 346 00:16:29,560 --> 00:16:32,720 Speaker 8: Commercial and standard cards you know, you want that corporate business. 347 00:16:32,800 --> 00:16:35,120 Speaker 8: I think those two really are of the less concern. 348 00:16:35,480 --> 00:16:38,280 Speaker 8: It's those premium cards, I think, with the rewards that 349 00:16:38,400 --> 00:16:40,400 Speaker 8: really are on the line here in terms of whether 350 00:16:40,480 --> 00:16:43,320 Speaker 8: or not they continue to have that universal acceptance everywhere. 351 00:16:44,040 --> 00:16:47,239 Speaker 3: So there's so many businesses built around how to gamify 352 00:16:47,360 --> 00:16:47,960 Speaker 3: your points. 353 00:16:48,160 --> 00:16:51,240 Speaker 4: Oh yeah, I love it, So you do that question. 354 00:16:51,400 --> 00:16:52,800 Speaker 4: I absolutely love it. 355 00:16:52,840 --> 00:16:54,880 Speaker 8: I mean every day it's like, oh, these annex offers, 356 00:16:54,880 --> 00:16:57,280 Speaker 8: you know, what can I get here for this discount paper. 357 00:16:57,040 --> 00:16:58,440 Speaker 6: And redsheet tracking? 358 00:16:58,480 --> 00:17:00,880 Speaker 8: But I really should, honestly, I mean it's that good, 359 00:17:00,920 --> 00:17:01,280 Speaker 8: I think. 360 00:17:01,320 --> 00:17:03,040 Speaker 6: So Paul's like, I cannot get into this. 361 00:17:04,280 --> 00:17:05,119 Speaker 4: But the kids are. 362 00:17:05,040 --> 00:17:08,439 Speaker 2: Because I mean I've noticed it that they really are 363 00:17:08,480 --> 00:17:11,160 Speaker 2: good at gaming the system and to the point where, 364 00:17:11,480 --> 00:17:13,479 Speaker 2: you know, I'm going to Barcelona for the weekend on points, 365 00:17:13,760 --> 00:17:15,040 Speaker 2: you know, right exactly. 366 00:17:15,080 --> 00:17:18,119 Speaker 3: And these premium credit cards are almost like coupon books 367 00:17:18,119 --> 00:17:20,520 Speaker 3: in any ways, right because they offer you know, like 368 00:17:20,840 --> 00:17:23,920 Speaker 3: fifty dollars a quarter at well, actually it's seventy five 369 00:17:23,960 --> 00:17:26,359 Speaker 3: dollars a quarter at Lululemon for instance, right, the Camic's 370 00:17:26,359 --> 00:17:28,880 Speaker 3: Platinum card. And then people try to buy gift card 371 00:17:28,920 --> 00:17:31,000 Speaker 3: and stack them and use them like a year later. 372 00:17:31,160 --> 00:17:31,800 Speaker 4: Paul's laughing. 373 00:17:31,880 --> 00:17:33,880 Speaker 8: I mean that's true, and they carry those really high 374 00:17:33,880 --> 00:17:36,600 Speaker 8: annual fees. But I always think to myself, look how 375 00:17:36,680 --> 00:17:38,560 Speaker 8: much I'm getting back for this, and that ways the 376 00:17:38,560 --> 00:17:40,120 Speaker 8: fees sometimes at least in my mind. 377 00:17:40,200 --> 00:17:41,000 Speaker 7: So there you go. 378 00:17:41,520 --> 00:17:44,320 Speaker 6: What are what are Visa MasterCards saying about this? 379 00:17:44,600 --> 00:17:47,480 Speaker 8: So they are they signed onto this deal, they reach 380 00:17:47,560 --> 00:17:50,160 Speaker 8: this agreement. I think they're pretty happy with the terms 381 00:17:50,160 --> 00:17:51,600 Speaker 8: of it because you know, that kind of lets them 382 00:17:51,640 --> 00:17:54,880 Speaker 8: walk away. The issuing banks like JP Morgan, Bank of America, 383 00:17:54,920 --> 00:17:56,840 Speaker 8: all of them are also defendants. They get to walk 384 00:17:56,840 --> 00:17:59,600 Speaker 8: away from this litigation. The overhang would be removed, right, 385 00:17:59,640 --> 00:18:02,280 Speaker 8: So it's really the merchants. Are all of the merchants 386 00:18:02,280 --> 00:18:04,640 Speaker 8: going to sign on? And what are those objections look 387 00:18:04,720 --> 00:18:06,720 Speaker 8: like in the coming months to the court? 388 00:18:07,840 --> 00:18:10,959 Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this. 389 00:18:14,880 --> 00:18:18,560 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 390 00:18:18,640 --> 00:18:22,040 Speaker 1: weekdays at ten am Eastern on Applecarclay, and Android Auto 391 00:18:22,160 --> 00:18:25,199 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 392 00:18:25,240 --> 00:18:28,680 Speaker 1: get your podcasts, or watch us live on YouTube. 393 00:18:29,280 --> 00:18:30,439 Speaker 2: I don't know, for a lot of us that have 394 00:18:30,480 --> 00:18:31,879 Speaker 2: been in this market for a long time, this is 395 00:18:31,960 --> 00:18:33,560 Speaker 2: kind of the end of an. 396 00:18:33,480 --> 00:18:35,280 Speaker 4: Ear, if you will, Warren Buffett. 397 00:18:35,800 --> 00:18:39,119 Speaker 2: Warren Buffett saying that he is going quiet and marking 398 00:18:39,119 --> 00:18:40,600 Speaker 2: the end of an ear for one of the business 399 00:18:40,640 --> 00:18:44,399 Speaker 2: world's most watched investing gurus. He will stop writing BERTRAI 400 00:18:44,440 --> 00:18:47,600 Speaker 2: Hathaway's annual letters and speaking at its meetings. 401 00:18:48,000 --> 00:18:50,040 Speaker 4: Let's bring in Matthew Palozoli. He's a senior analyst. 402 00:18:50,080 --> 00:18:55,000 Speaker 2: He covers Berkshire Hathaway and the property and casualty insurance business. 403 00:18:55,040 --> 00:18:58,360 Speaker 4: He joins us here in our Bloomberg Interactive Brooker Studio Boy. 404 00:18:58,600 --> 00:19:02,400 Speaker 2: Again, for most of in America, this is a big 405 00:19:02,440 --> 00:19:06,239 Speaker 2: piece of news that Warren Buffett is stepping back from 406 00:19:06,280 --> 00:19:07,760 Speaker 2: the day to day, which he's been doing over time. 407 00:19:07,840 --> 00:19:10,800 Speaker 9: I yes, so you know, kind of sad day said 408 00:19:10,800 --> 00:19:15,800 Speaker 9: for us Berkshire watchers. But we've known it. I mean this, 409 00:19:15,960 --> 00:19:17,680 Speaker 9: so we knew this letter was coming out. He does 410 00:19:17,680 --> 00:19:20,359 Speaker 9: this every year around Thanksgiving. We also knew he was 411 00:19:20,520 --> 00:19:26,160 Speaker 9: stepping down as CEO, so not huge surprise in this letter. 412 00:19:26,320 --> 00:19:29,359 Speaker 9: I think the going quiet thing was kind of to 413 00:19:29,480 --> 00:19:31,639 Speaker 9: everyone a little bit by surprise. I think maybe the 414 00:19:32,320 --> 00:19:36,040 Speaker 9: thought was, hey, he's he's gonna he's stepping back a CEO, 415 00:19:36,280 --> 00:19:38,280 Speaker 9: but maybe he'll kind of be out there in the 416 00:19:38,320 --> 00:19:41,280 Speaker 9: public and he's still chairman, so maybe we'd still hear 417 00:19:41,320 --> 00:19:43,320 Speaker 9: more from him. A little while ago he said he 418 00:19:43,320 --> 00:19:45,280 Speaker 9: wasn't going to speak at the meeting, and now he's 419 00:19:45,320 --> 00:19:48,640 Speaker 9: going to kind of focus on his philanthropic work. And 420 00:19:48,720 --> 00:19:50,399 Speaker 9: he's also a ninety five years old, he's maybe a 421 00:19:50,400 --> 00:19:51,120 Speaker 9: little tired. 422 00:19:50,920 --> 00:19:51,600 Speaker 4: Yeah, exactly. 423 00:19:52,000 --> 00:19:54,000 Speaker 2: And he's going to donate more than one point three 424 00:19:54,040 --> 00:19:57,680 Speaker 2: billion dollars to four family foundations and plans to quote 425 00:19:57,720 --> 00:20:00,280 Speaker 2: step up the pace of his childable giving to kids 426 00:20:00,320 --> 00:20:01,760 Speaker 2: foundations while he's still alive. 427 00:20:01,800 --> 00:20:03,280 Speaker 4: So that seems to be the point of life. 428 00:20:03,320 --> 00:20:06,920 Speaker 2: He is any reason to think that the business strategies, 429 00:20:06,960 --> 00:20:11,640 Speaker 2: the operations Hathaway may change now that he has kind 430 00:20:11,640 --> 00:20:13,199 Speaker 2: of stepped back on another step, I guess so. 431 00:20:13,240 --> 00:20:14,399 Speaker 10: I don't think so right away. 432 00:20:14,480 --> 00:20:19,240 Speaker 9: So he is always praising his successor Greg Abel, talking 433 00:20:19,280 --> 00:20:21,760 Speaker 9: about how he maintains the ethos of Berkshire, and they'll 434 00:20:21,800 --> 00:20:24,240 Speaker 9: be doing the same thing. I think Abel walks a 435 00:20:24,359 --> 00:20:27,400 Speaker 9: fine line now where I think over the next couple 436 00:20:27,440 --> 00:20:29,720 Speaker 9: of years he will want to put his own stamp 437 00:20:29,760 --> 00:20:33,600 Speaker 9: and make a name for himself, but also not stray 438 00:20:33,720 --> 00:20:38,000 Speaker 9: too far from what has led to this massive value 439 00:20:38,040 --> 00:20:41,480 Speaker 9: creation of Berkshire. So I don't think anything dramatic happens 440 00:20:41,560 --> 00:20:42,400 Speaker 9: in the near term. 441 00:20:43,000 --> 00:20:44,480 Speaker 10: You know, we talked about this. 442 00:20:44,560 --> 00:20:47,280 Speaker 9: I think in the past the amount of capital they're 443 00:20:47,280 --> 00:20:50,199 Speaker 9: sitting on and Able is a good capital allocator, at 444 00:20:50,240 --> 00:20:53,800 Speaker 9: least according to Buffett. Maybe something happens there special dividend 445 00:20:53,920 --> 00:20:56,119 Speaker 9: or something like that. You know, no guarantees on any 446 00:20:56,160 --> 00:20:58,600 Speaker 9: of that stuff, but I could see Able wanting to 447 00:20:58,640 --> 00:21:00,000 Speaker 9: put that kind of stamp on the company. 448 00:21:00,080 --> 00:21:01,760 Speaker 2: Because again what we learned I guess from the last 449 00:21:01,840 --> 00:21:04,159 Speaker 2: quarterly released was the cash is now three hundred and 450 00:21:04,200 --> 00:21:05,960 Speaker 2: eighty two billion dollars. 451 00:21:06,560 --> 00:21:09,440 Speaker 4: You know, it's a number that's you know, most portfolio 452 00:21:09,480 --> 00:21:11,159 Speaker 4: managers what have wouldn't know where to start. 453 00:21:11,000 --> 00:21:12,000 Speaker 10: Get boggles of mine. 454 00:21:12,040 --> 00:21:15,159 Speaker 9: I think even in the letter he had mentioned, uh, 455 00:21:15,320 --> 00:21:16,760 Speaker 9: there's just not a lot of things that moved the 456 00:21:16,800 --> 00:21:20,280 Speaker 9: needle for them. So they bought a twelve billion dollar 457 00:21:20,359 --> 00:21:22,880 Speaker 9: company in Alleghany a couple of years ago doesn't really 458 00:21:22,880 --> 00:21:25,080 Speaker 9: move the needle that much. Help the insurance businesses grow 459 00:21:25,080 --> 00:21:27,640 Speaker 9: a little bit, but overall for the company. 460 00:21:27,720 --> 00:21:28,240 Speaker 10: Not dramatic. 461 00:21:28,320 --> 00:21:32,200 Speaker 9: They bought this eleven billion dollar chemical business from Occidental. 462 00:21:32,680 --> 00:21:34,840 Speaker 9: You know these are these are ten and twelve billion 463 00:21:34,880 --> 00:21:37,240 Speaker 9: dollar deals, but they're just not moving the needle for 464 00:21:37,320 --> 00:21:39,560 Speaker 9: the company. So there's not not a ton they can 465 00:21:39,600 --> 00:21:41,040 Speaker 9: do too dramatically. 466 00:21:41,400 --> 00:21:45,440 Speaker 2: Historically, why is Warren and the company what's been their 467 00:21:45,480 --> 00:21:47,600 Speaker 2: thought about returning cash to shareholders? 468 00:21:47,680 --> 00:21:49,560 Speaker 9: The thought has been, we don't want to do that, right, 469 00:21:50,119 --> 00:21:54,720 Speaker 9: even said, you know, Berkshire shareholders have foregone dividends for 470 00:21:54,840 --> 00:21:58,320 Speaker 9: a reinvestment in America. I forgot the exact line, and 471 00:21:58,359 --> 00:22:01,800 Speaker 9: that was Buffets. He likes collecting dividends, he didn't like 472 00:22:01,800 --> 00:22:04,159 Speaker 9: paying them. I think he always thought we are the 473 00:22:04,200 --> 00:22:08,040 Speaker 9: best allocators of this. So if you're a owner of 474 00:22:08,080 --> 00:22:10,880 Speaker 9: Berkshire shares, would you rather have some money or would 475 00:22:10,920 --> 00:22:13,000 Speaker 9: you rather have warm Buffett invest that money for you? 476 00:22:13,840 --> 00:22:15,840 Speaker 10: I think over the past couple of years, again, they've 477 00:22:15,840 --> 00:22:16,200 Speaker 10: had so. 478 00:22:16,200 --> 00:22:18,679 Speaker 9: Much money that's been tough for them to invest it 479 00:22:18,720 --> 00:22:21,679 Speaker 9: in effective ways. But that's that's been the philosophy. 480 00:22:21,800 --> 00:22:24,679 Speaker 2: Yeah, because I mean it's I guess my response would be, 481 00:22:25,240 --> 00:22:27,800 Speaker 2: I can put it in cash too and get similar 482 00:22:27,880 --> 00:22:32,040 Speaker 2: rates of return to you. And I guess that when 483 00:22:32,080 --> 00:22:34,280 Speaker 2: it's ten twenty fifty one hundred million dollars line around, 484 00:22:34,480 --> 00:22:35,720 Speaker 2: not that big of account argument. 485 00:22:35,800 --> 00:22:38,800 Speaker 9: Now it's you know, it's significant, and it helped their 486 00:22:38,840 --> 00:22:41,520 Speaker 9: earnings over the past couple of years. Just getting four 487 00:22:41,560 --> 00:22:45,360 Speaker 9: percent on that was a dramatic tailwind to their earnings. 488 00:22:45,480 --> 00:22:48,920 Speaker 9: So you know, it didn't do much for the stock 489 00:22:49,000 --> 00:22:51,640 Speaker 9: after Buffett said he was leaving. That's been the thing 490 00:22:51,640 --> 00:22:55,439 Speaker 9: that's weighed on it more than anything else. But annual 491 00:22:55,440 --> 00:22:59,240 Speaker 9: see short term rates going down, so that tail wind diminishing. 492 00:22:59,280 --> 00:23:00,879 Speaker 10: I mean, I think the. 493 00:23:00,320 --> 00:23:04,159 Speaker 9: There is a school of thought that Berkshire, you know, 494 00:23:04,280 --> 00:23:07,040 Speaker 9: not the same without Buffett, but just maybe not as 495 00:23:07,119 --> 00:23:09,960 Speaker 9: good at almost all of their things. 496 00:23:10,080 --> 00:23:11,480 Speaker 10: That's one school of thought. 497 00:23:12,560 --> 00:23:16,240 Speaker 9: I could see other ones where you know, still able, 498 00:23:16,280 --> 00:23:18,920 Speaker 9: maybe takes a different direction. So that's another maybe catalyst 499 00:23:18,960 --> 00:23:21,200 Speaker 9: for the shares. But you know, it's it's a kind 500 00:23:21,240 --> 00:23:24,119 Speaker 9: of darker time for Burshure. 501 00:23:23,840 --> 00:23:26,640 Speaker 4: And what's Warren's ownership stake in the company. 502 00:23:27,160 --> 00:23:28,640 Speaker 10: So I don't know this of my head. 503 00:23:28,640 --> 00:23:30,680 Speaker 4: I don't controlling yeah, oh for sure. 504 00:23:31,400 --> 00:23:33,560 Speaker 2: And you're not going to have an activist investor come 505 00:23:33,560 --> 00:23:35,840 Speaker 2: in here and say this is just a poor allocation gun. 506 00:23:36,240 --> 00:23:39,040 Speaker 9: It would be impossible. He owns too much in the 507 00:23:39,040 --> 00:23:42,080 Speaker 9: The A shares I believe are ten thousand votes to 508 00:23:42,440 --> 00:23:45,720 Speaker 9: a B share, he owns most of them. He will 509 00:23:46,320 --> 00:23:48,280 Speaker 9: he's going to step up the amount he's giving away, 510 00:23:48,280 --> 00:23:49,440 Speaker 9: but he still owns. 511 00:23:49,200 --> 00:23:50,760 Speaker 10: Too much for anyone else to step in. 512 00:23:51,320 --> 00:23:56,040 Speaker 9: And should he should he die in his will, he would. 513 00:23:56,359 --> 00:23:59,439 Speaker 9: I think it's over ten years. His ownership goes to 514 00:23:59,640 --> 00:24:03,720 Speaker 9: these foundations run by his children, who I can't imagine. 515 00:24:03,760 --> 00:24:07,399 Speaker 9: Would you let them kind of immediately fall into the 516 00:24:07,520 --> 00:24:09,680 Speaker 9: hands of some sort of actives investor. I think he'd 517 00:24:09,720 --> 00:24:12,320 Speaker 9: set a timeframe of over ten years that he'd want. 518 00:24:12,240 --> 00:24:14,320 Speaker 10: That stuff divested. But he does want to divest it. 519 00:24:14,320 --> 00:24:15,800 Speaker 10: He doesn't want them to just hold on to it. 520 00:24:16,320 --> 00:24:21,000 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 521 00:24:21,200 --> 00:24:24,680 Speaker 1: and anywhere else you get your podcasts. Listen live each 522 00:24:24,680 --> 00:24:28,480 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com, 523 00:24:28,560 --> 00:24:32,119 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 524 00:24:32,520 --> 00:24:35,440 Speaker 1: You can also watch us live every weekday on YouTube 525 00:24:35,840 --> 00:24:38,080 Speaker 1: and always on the Bloomberg terminal