Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moven News.
Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever
Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
Speaker 1: So that's why we bring man Deep in here because
Speaker 1: he's the tech guy for along with Anna rog Ran
Speaker 1: and the team there Bloomberg Intelligence, a global tech team
Speaker 1: which Mandeep now runs with an iron fist. I am
Speaker 1: told Mandeep talk to us about these IPOs totally two
Speaker 1: different companies, ARM and Instacart. How do you view ARM
Speaker 1: because that's kind of the one I think that's kind
Speaker 1: of got people's attention in the sense of is this
Speaker 1: an AI play or isn't it.
Speaker 3: Well, So ARM clearly has a history in terms of,
Speaker 3: you know, being the core part of how AI has
Speaker 3: evolved and how chips have evolved because they are the
Speaker 3: IP providers when had come to computing and all the
Speaker 3: advancements that we've seen, and what they have told us
Speaker 3: is they have increased the royalty revenue. So basically they
Speaker 3: have increased the prices and everyone is on board in
Speaker 3: terms of paying the higher prices for their technology. So
Speaker 3: that's a good sign ahead of the IPO, and I
Speaker 3: think from what we have gleaned so far, the IPO
Speaker 3: has been oversubscribed. Clearly everyone believes this is a technology
Speaker 3: that's not going away. It can be replaced, and hence,
Speaker 3: even though the growth was slow, the fact that they
Speaker 3: can raise prices like this, it's a good sign ahead
Speaker 3: of the IPO. Instacart, on the other hand, completely different
Speaker 3: ballgame marketplace business. We know all the marketplace businesses haven't
Speaker 3: done very well, including Uber and lived since the IPO, but.
Speaker 2: The marketplace business is Amazon and marketplace business as well.
Speaker 3: Amazon is a two sided marketplace. Instacart is a three
Speaker 3: sided marketplace where you've got all the grocery kind of providers,
Speaker 3: you've got the shoppers, and then you've got the consumers.
Speaker 3: The problem and ride sharing, for example, is a two
Speaker 3: sided marketplace. You only have the consumers and the drivers,
Speaker 3: so it's not a three sided marketplace. The problem in
Speaker 3: a three sided marketplace is your take rates are much
Speaker 3: lower because you have to split your take rates through
Speaker 3: you know two other providers in a two sided marketplace,
Speaker 3: it's a higher take rate. So instakarts business the unit
Speaker 3: economics look a lot better than you know, some of
Speaker 3: the other providers, whether it's storedash or Uber, simply because
Speaker 3: they leer a lot more ADS. For every dollar in
Speaker 3: transaction revenue. They make about thirty cent in ADS. That's
Speaker 3: phenomenal for you know, unit economics. Problem is the top
Speaker 3: line is decelerating. They have flat order growth. Marketplaces are
Speaker 3: scale businesses. Once your top line slows, even if you
Speaker 3: make you know, thirty cents on a dollar for ADS,
Speaker 3: that's not good enough because you our scale isn't growing.
Speaker 3: And that is where I think they're pricing the IP
Speaker 3: appropriately to reflect that.
Speaker 4: That's a good bet.
Speaker 2: If you feel like COVID's coming back, Paul, I do
Speaker 2: not I know, but I'm saying if you do, you know,
Speaker 2: because that would grow their top line, that would masterfully.
Speaker 4: That would at least for maybe there was a.
Speaker 3: Pull forward during the Covid time. I mean, all these
Speaker 3: companies grew one hundred percent plus triple digit growth.
Speaker 1: So I guess for Instacart one of the real questions
Speaker 1: will be valuation. So just walk us through kind of
Speaker 1: where the thing was valued at its peak, when people
Speaker 1: were going nuts getting stuff delivered home, maybe where it
Speaker 1: is now.
Speaker 3: Yeah, so at its peak it was around thirty nine
Speaker 3: billion dollar valuation in twenty twenty one. And that's when
Speaker 3: you know.
Speaker 1: See this, This is what I say, being in an
Speaker 1: old you know, old conjure Wall Street guy, that's Silicon
Speaker 1: Valley valuation. That's the kids you don't want to come
Speaker 1: to the public markets. Then you got to talk to
Speaker 1: people like me.
Speaker 2: That's what happened here.
Speaker 3: Well, and I think back in you know, twenty nineteen
Speaker 3: when Lyft went public, they went public at a twenty
Speaker 3: billion dollar valuation. There is more than two billion in
Speaker 3: an ipo. Well, clearly things have reset completely now and
Speaker 3: I think they're.
Speaker 4: Worth a fifth of that now.
Speaker 2: No lift is worth a gajillion, I mean no, they're
Speaker 2: worth a fifth. Yeah, yeah, exactly, I think uber Yeah.
Speaker 3: So I think that's where instacart. Clearly the valuation is
Speaker 3: a lot more reasonable now. I can see the IPO
Speaker 3: pricing maybe revised upward to around ten to twelve billion,
Speaker 3: based on the initial pricing it's more a to nine billion.
Speaker 3: I can see it being revised slightly higher because of
Speaker 3: that ad revenue, and if they can convince investors at
Speaker 3: the road show that the top line will re accelerate,
Speaker 3: because right now, as I said, it's flat order growth.
Speaker 3: That's not good news when you're a growth story. So
Speaker 3: clearly that top line acceleration is key. But the unit economics,
Speaker 3: as I said, for instacart to look a lot healthier
Speaker 3: than all the other marketplaces, including door, dash and Uber.
Speaker 2: I'll tell you what, Paul, I'd rather get into IPOs
Speaker 2: in this climate then during the you know, the lift
Speaker 2: and Rivian, the heady days of massive valuations, because now
Speaker 2: we're also pessimistic about everything. Right now you have Mande
Speaker 2: coming on, going, Eh, the top line's not gonna grow
Speaker 2: very much. They're gonna have to cut what they are
Speaker 2: actually worth by like four times. And back then it
Speaker 2: was like, who knows, this guy's the limit? You know,
Speaker 2: So at least now you can get in without that
Speaker 2: irrational exuberance.
Speaker 1: I'd rather be a momentum investor than a value investor
Speaker 1: any day of the week because I don't have to
Speaker 1: be right on the names. I just have to jump
Speaker 1: on the mo here. I gotta pick the name, right,
Speaker 1: I gotta pick the valuation, right, I gotta be all
Speaker 1: kinds of right. So is this the beginning?
Speaker 5: Man?
Speaker 4: Deep?
Speaker 1: I mean, this is gonna be a down round, to
Speaker 1: put it in the parlance of private equity.
Speaker 2: Inventry for all of them, right, for arm, for Instacar.
Speaker 1: So does this open up? I kind of feel like
Speaker 1: there's a stigma. There is a stigma to not doing
Speaker 1: down rounds. But now we're gonna have a couple of
Speaker 1: notable names doing down rounds in the public market. Do
Speaker 1: you think that's gonna have an influence on the other
Speaker 1: companies to maybe consider IPOs?
Speaker 3: There will be And look, you're not gonna see a
Speaker 3: lot more delivery companies come to the scene now. Now
Speaker 3: the market is consolidating. That's good news for those ones
Speaker 3: that are left over. So previously you had gopuff and
Speaker 3: you know every new company coming to the scene trying
Speaker 3: to figure out delivery. Well, those days are over. I
Speaker 3: think vcs are quite cautious about investing in this space altogether.
Speaker 3: And I feel once you have consolidation, which is what
Speaker 3: we are seeing with Door, Dash, Uber and to an extent, Instacart,
Speaker 3: that probably will good for the will be good for
Speaker 3: the unit economics. Of these companies.
Speaker 1: ARMS said to consider here's Bloomberg story, ARM said to
Speaker 1: consider raising IPO price range about that that's like dull days.
Speaker 2: Yeah, but that's because they've already brought it down by
Speaker 2: so much. You know, they had their own owner by
Speaker 2: a stake in them that it essentially already owned for
Speaker 2: far more than what they're doing public for now.
Speaker 1: So it's just I mean, ARM, is this week right
Speaker 1: like maybe a Tuesday pricing Tuesday night for Wednesday trade.
Speaker 1: That'd be really interesting to see how that trades. Silicon
Speaker 1: Valleant in general? Is it still all AI right now?
Speaker 1: It's all about generator of AI. This year is the
Speaker 1: year of generator AI. You can lump in chatbots as well,
Speaker 1: and just overall large angrid models foundational models, which is
Speaker 1: why the Apple event. If they don't talk about generator
Speaker 1: AI at this event, they clearly have a problem.
Speaker 4: Because really that's what everyone is hoping for.
Speaker 3: That Apple three trillion dollar company hasn't mentioned generat AAI
Speaker 3: even once?
Speaker 6: Is that right?
Speaker 2: Yes?
Speaker 1: What's why is that thirty seconds?
Speaker 3: Well, because they probably haven't built their foundational model yet
Speaker 3: and they are focused on privacy. When you think about
Speaker 3: large anglid models. It's built on big data sets. Apple
Speaker 3: is a company that has always been focused on privacy,
Speaker 3: and that is what makes them hard to build their
Speaker 3: own large angrid model like a chat GPT or.
Speaker 1: We're going to have you again on this one, because
Speaker 1: I mean, this kind of could be existential for Apple
Speaker 1: if they don't, at least in the minds of investors.
Speaker 4: Dude.
Speaker 2: This morning, Gina Martin Adams on Surveillance was talking about
Speaker 2: how important generative AI is for a hostess exactly if
Speaker 2: it's summers to a Twinkie maker.
Speaker 1: That's what I say. When you hear Tom Keene mentioned
Speaker 1: Twinkie and AI in the same sentence, you know something's up,
Speaker 1: all right, Mandy, thanks so much for joining us men
Speaker 1: deep seeing he's a senior analyst. He runs all of
Speaker 1: our technology research where you have tech analyss literally all
Speaker 1: over the globe Europe, North America and of course Asia
Speaker 1: and Mendeep kind of runs that business for us, and
Speaker 1: we appreciate that.
Speaker 7: You're listening to the team. Ken's live program Bloomberg Markets
Speaker 7: weekdays at ten am Eastern on Bloomberg dot com, the
Speaker 7: iHeartRadio app, and the Bloomberg Business app, or listen on
Speaker 7: demand wherever you get your podcasts.
Speaker 4: We have Rick Caruso with us.
Speaker 2: He's the founder and executive chairman of Caruso, starting out
Speaker 2: life as a lawyer and then transition to Kruso affiliated holdings,
Speaker 2: and they own, among other things, The Grove, which was
Speaker 2: ranked number two on Fortunes's list of the ten highest
Speaker 2: sales generating shopping centers across the country.
Speaker 4: I've always been a fan.
Speaker 2: Of the mall you haven't, Yeah, I love the Westchester
Speaker 2: up in White Plains, Jersey.
Speaker 1: Person nosey, we do malls in New Jersey.
Speaker 2: Yeah, I'm from the great state of Ohio. Of course,
Speaker 2: we have traditionally had a big mallsley state. They started
Speaker 2: I think when I was a kid, so I kind
Speaker 2: of grew up with them fast times. Ridgemont High was
Speaker 2: like the story of my middle school. Rick talk to
Speaker 2: us about the current state of commercial real estate because
Speaker 2: it had been, you know, kind of the one of
Speaker 2: the big fears I would say of twenty twenty three.
Speaker 2: But it seems to be fading a bit as a fear.
Speaker 8: Well, thank you, I think on the retail site listen,
Speaker 8: we do outdoor malls, so all of our properties are
Speaker 8: not covered. I think that's a very different sector. But
Speaker 8: what we're seeing on our properties consumer is still strong,
Speaker 8: Consumer spending is still up. Our growth on our properties
Speaker 8: is double digit in terms of attendance, and our sales
Speaker 8: per square foot is up. So we're having a very
Speaker 8: good year. My fear is that with inflation, with rising
Speaker 8: interest costs, I don't know how long that lasts. But
Speaker 8: right now we're running at at a really good pace.
Speaker 1: What's the occupancy of your malls in general today? Maybe
Speaker 1: relative to pre pre pandemic.
Speaker 9: We're very unique.
Speaker 8: So I'm going to tell you this and you won't
Speaker 8: believe it, but we run at one hundred percent with
Speaker 8: a waiting list. But our properties are incredibly productive. We
Speaker 8: have three in the top ten in the United States.
Speaker 9: We're a different business. Yeah, you know, it's a very.
Speaker 4: It's not strip malls.
Speaker 1: Well, what's the term thing?
Speaker 2: It's like Ridge Hill we have up in Westchester, Polaris.
Speaker 4: And Columbus is like this. What do you think different
Speaker 4: in downtown centers?
Speaker 7: Yeah?
Speaker 9: Like downtown Okay, So.
Speaker 4: Well, what makes it different than a covered mall?
Speaker 8: Because we're creating an environment. Listen, a covered mall is
Speaker 8: an artificial atmosphere that you're asking somebody to go into.
Speaker 9: Right, And people always say.
Speaker 1: Well, we have a good one over in New Jersey,
Speaker 1: the mall of what's it called the Dream Mall.
Speaker 4: Well, you and I have never been there. Happens, that's good.
Speaker 9: That one through a lot of problems.
Speaker 7: I know, I know, but I.
Speaker 8: Think the difference is we're creating an environment for people
Speaker 8: to come and enjoy themselves, relax, have fun, create an
Speaker 8: environment very very different. We have dwell time. We want
Speaker 8: people to stay, we want people to just relax, and
Speaker 8: people respond to it. You know, we're tapping into the
Speaker 8: consumer experience, which I think is all important.
Speaker 2: They'll go without even knowing, without even thinking we're going
Speaker 2: to the mall. They'll go because they want to visit
Speaker 2: a restaurant. We're not even drive through occasionally.
Speaker 8: We're not designing it with the idea that we want
Speaker 8: people to shop. We're designing it with the idea that
Speaker 8: we want people to enjoy themselves, and then they're going
Speaker 8: to go shop because they're there.
Speaker 2: Why do you think though the grove is so popular?
Speaker 4: I mean, where is.
Speaker 9: The grove in Los Angeles? Los Angeles?
Speaker 8: Okay, it's it's popular because it just it makes people
Speaker 8: feel better. It sounds corny, but it enriches your life.
Speaker 9: And you can go.
Speaker 8: There and hang out and have a cup of coffee
Speaker 8: and read the paper and really not spend a dime.
Speaker 8: Or you can go there and spend the day and
Speaker 8: spend a lot of money. But it's the trees, it's
Speaker 8: the fountain, it's the lawn, it's the flowers, it's everything.
Speaker 8: And the shopping is incidental to it in the restaurants,
Speaker 8: and it's curated with the best retailers and restaurants in
Speaker 8: the business.
Speaker 1: Are you adding new malls? Are you taking over existing malls?
Speaker 8: How we've got we've got a pipeline of new projects
Speaker 8: that we're doing, all in the format of outdoor centers,
Speaker 8: and we're going strong with it.
Speaker 1: Are you putting them all in the Austin Texas of
Speaker 1: the world, the nationals and where.
Speaker 8: We're now We're we're growing in southern California and we're
Speaker 8: going to continue to do that.
Speaker 9: Now.
Speaker 8: Listen, we're looking in Florida, and we're looking in other areas.
Speaker 1: There are your primarily in southern California?
Speaker 9: Yeah?
Speaker 1: Gotcha? Okay, So I mean, so give us a sense
Speaker 1: of how southern California. Is you got strikes all across
Speaker 1: Los Angeles and all that type of thing. Give us
Speaker 1: a sense of to southern California general, because we have
Speaker 1: someone here at Bloomberg in our editorial who's very bullish
Speaker 1: on California.
Speaker 4: H Matt Winkler, the guy who founded Blooo News.
Speaker 1: He found a Bloomberg News and he's written a number
Speaker 1: of editorials extolling the virtues of not only Los Angeles,
Speaker 1: but you.
Speaker 2: Can strength of the California economy essentially exactly exactly.
Speaker 8: I think the California economy, listen, is strong. It's a
Speaker 8: massive economy right globally, but the reality is we have
Speaker 8: enormous challenges in California.
Speaker 2: I have a viewer writing in for a question with
Speaker 2: a question for Rick, and essentially it comes down to
Speaker 2: the same thing.
Speaker 4: It's about the economy.
Speaker 2: Viewer, listener, we have you know, we're a radio, but
Speaker 2: we're also streaming on YouTube. He asked, is do you
Speaker 2: anticipate hiring to slow on your properties as the economy slows,
Speaker 2: or as inflation remains higher, or as the consumer weekends.
Speaker 2: Are you looking forward with concern to any of those things?
Speaker 8: Well, I'm concerned about the consumer weekening. The consumer has
Speaker 8: to weaken, right, I mean, you've got rising interest rate
Speaker 8: and you still have inflation, and prices are high, and
Speaker 8: savings are getting lower, and the default rates on credit
Speaker 8: cards are coming up, which we've seen that data.
Speaker 9: So it has to happen. It's just a question of time.
Speaker 8: But I think all of us have to reorganize our
Speaker 8: companies around the fact that we've got a higher tenure
Speaker 8: and it's probably going to remain high for a while,
Speaker 8: and it's chewing into free cash flow of every company,
Speaker 8: and so we have to be smarter about how we
Speaker 8: spend our money, which may mean slowering our hiring and
Speaker 8: slowering growth and slowering cap X. I mean, it's going
Speaker 8: to have an impact, which I worry about.
Speaker 1: Theft is something that I've heard more from retailers earnings calls,
Speaker 1: and they call it shrink. It's just been extraordinary and
Speaker 1: it looks organized.
Speaker 9: It's insane.
Speaker 1: So can you give us a sense kind of from
Speaker 1: your perspective what this means for the industry.
Speaker 8: Well, here's a problem. In Los Angeles County. We have
Speaker 8: a no bail system, so you can get arrested and
Speaker 8: you're out within an hour, even if it's a felony.
Speaker 8: If you steal under nine hundred and fifty dollars plus
Speaker 8: or minus, it's a misdemeanor. And these theft rings are organized.
Speaker 8: I mean, it's organized crime, and they're mobs, and we've
Speaker 8: got to change the rules, and we've got to get
Speaker 8: elected officials that actually have some backbone and say we're
Speaker 8: not going to allow this to happen anymore. And let's
Speaker 8: hold criminals accountable. They need to be incarcerated if they're
Speaker 8: a ring and they're repeat offenders. And then of course
Speaker 8: we've got to give people a chance for you know,
Speaker 8: rebuild their lives and whatnot. But what's happening in southern
Speaker 8: California right now with the smash and grabs are in
Speaker 8: San Francisco. You can't tolerate that.
Speaker 9: In business, do you?
Speaker 8: I mean, and it's killing small business, big business.
Speaker 2: If you if you own you know, you know, essentially
Speaker 2: an outdoor shopping community like the grove, do you bring
Speaker 2: in an extra you know, police force, auxiliary cops. Do
Speaker 2: you try and you know, get the employees to do
Speaker 2: something about it?
Speaker 4: I mean, how do you how do you We don't.
Speaker 8: Want we don't want employees to engage. But what we
Speaker 8: do on all of our properties, we have armed security
Speaker 8: and we have extensive camera systems. We have equipment that
Speaker 8: can actually identify people, and so we're very sophisticated in
Speaker 8: our properties. But the problem is ninety percent of the
Speaker 8: businesses in LA are small businesses. They can't afford to
Speaker 8: do that, and they get one smash and grab that
Speaker 8: could be their monthly profit. So what's happening I think
Speaker 8: in Southern California LA is the responsibility to keep people
Speaker 8: safe is getting pushed to the private sector because we
Speaker 8: have a shortage of cops and we have a shortage
Speaker 8: of again, elected officials. I think that are actually dedicated
Speaker 8: to making sure that our communities are safe, and we're
Speaker 8: picking that up, and that's not good business.
Speaker 9: We're smart for the community long term.
Speaker 1: Is that one of the biggest challenges for Southern California
Speaker 1: in general? Do you think?
Speaker 8: I think so. I think it's a big challenge for
Speaker 8: California in general.
Speaker 2: For New York right even though we have an ex
Speaker 2: cop here in office, and I think a lot of
Speaker 2: people expected the crime to change on the day he
Speaker 2: came in and it hasn't.
Speaker 8: Yeah, and you have a big police force, which we
Speaker 8: don't have in LA Is that right? Yeah, I mean
Speaker 8: you have almost five times as many cops as we
Speaker 8: do in Los Angeles.
Speaker 1: Really I didn't know that. Okay, very interesting stuff there, Ricrusia,
Speaker 1: thanks so much for taking the time to join us
Speaker 1: here today. Really fascinating discussion.
Speaker 4: We ought to do the show from the growth. We
Speaker 4: should do that.
Speaker 2: Let's go, let's go get out, get out to the
Speaker 2: west coast and really dive into the economics and businesses
Speaker 2: of California.
Speaker 1: I think we can do that and get some support.
Speaker 4: I would like to do that.
Speaker 7: We hope they have you all right, Rick.
Speaker 1: Thanks so much for joining us. Ricruso is a founder
Speaker 1: and executive chairman of Cruser talking about the retail business
Speaker 1: and the retail business on the outdoor malls, if you will,
Speaker 1: quite vibrant relative to kind of what you hear from
Speaker 1: other parts of some of the retail. But retail in
Speaker 1: general has been good, the consumer has been good. The
Speaker 1: question now is just kind of going forward with the
Speaker 1: higher rates and all that type of thing.
Speaker 7: You're listening to The tape cats are live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
Speaker 7: You can also listen live on Amazon Alexa from our
Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 1: Big Takes story right down Matt's alley. Here, Monica Raymlandt
Speaker 1: joins this. She's the auto industry disruption reporter. How about
Speaker 1: that with Bloomberg News. She's got the story out there
Speaker 1: entitled Germany Frets Volkswagen is heading down the wrong or
Speaker 1: down the road to nowhere. Yeah, so, Monica, thanks much
Speaker 1: for joining us via zoom her. What's kind of the
Speaker 1: thesis thesis of your story? I thought v Volkswagen's going
Speaker 1: all in EV.
Speaker 10: Oh, definitely. I wouldn't say that they're not focused on
Speaker 10: their EV strategy. But really, what the concern is is
Speaker 10: that Volkswagen is sort of atrophying market share in China
Speaker 10: when it comes to EV's, when it comes to competing
Speaker 10: with Tesla, when it comes to competing with BYD, and
Speaker 10: basically the company needs to sort of catch up and
Speaker 10: redo their strategy and figure out how to deliver to
Speaker 10: the Chinese market what the Chinese have come to expect
Speaker 10: it's a unique situation because basically during the pandemic, when
Speaker 10: everyone was sort of triaging their own issues back at home,
Speaker 10: China really went all in with EV's, with their infrastructure,
Speaker 10: with supporting their their startups there, and the scene completely changed.
Speaker 10: They made leaps and bounds when it came to software technology,
Speaker 10: when it came to infotainment, when it came to in
Speaker 10: car experiences, and now Volkswagen and other legacy carmakers are
Speaker 10: looking at the market and realizing, you know, the Chinese
Speaker 10: are doing it really, really well when it comes to
Speaker 10: when it comes to EV's, and they have to sort
Speaker 10: of find a way to catch up. And the bigger
Speaker 10: picture is that this is a big concern for Germany
Speaker 10: because the auto industry plays such a huge role in
Speaker 10: the macro environment, in the economy, and you know, if
Speaker 10: Folkswagen fails to get this right, it's going to have
Speaker 10: an impact on, you know, on their domestic situation, on
Speaker 10: the domestic.
Speaker 2: I mean, I think it's an amazing story on so
Speaker 2: many levels, Monica. The first thing that I that I
Speaker 2: was wondering about is did Deese, Herbert Deese leave Folkswagen
Speaker 2: in the situation, or is Bluema, you know, not executing
Speaker 2: on the d strategy well enough. Then I also thought about,
Speaker 2: you know, if this is a security issue for Germany
Speaker 2: as well as an economic issue, how much ConTroll does
Speaker 2: the state feel like it can take over this behemoth?
Speaker 2: Because if things go wrong, it's not just for the
Speaker 2: Porsche piche family a problem, It's a problem for the
Speaker 2: entire country and economy. So I think there's so many
Speaker 2: different threads that are fascinating. What happened to the tens
Speaker 2: of billions of dollars that Deese was investing in becoming
Speaker 2: an EV maker, becoming a software company. I remember headlines
Speaker 2: out from Rauvoald that were like thirty billion dollars or
Speaker 2: fifty billion dollars? Are they spending that money? Is it
Speaker 2: getting them anywhere?
Speaker 3: Yeah?
Speaker 10: Absolutely great questions all around on the investment question.
Speaker 2: Sorry, I just thought the story moved me. Honestly, I
Speaker 2: really really think it's fantastic. I recommend to our listeners
Speaker 2: and viewers to check it out. I just it blew
Speaker 2: me away this morning, So I should have read it
Speaker 2: last night. I wouldn't have been able to sleep if
Speaker 2: I did.
Speaker 4: All right, So the.
Speaker 10: Money right, So on the money part No, and the
Speaker 10: investment is money is still there. Volkswagen is an investing
Speaker 10: I think total over the next five years something like
Speaker 10: one hundred and eighty billion, and two thirds of that
Speaker 10: is going to evs. Don't quote me on that, I
Speaker 10: have to The numbers are a bit fuzzy.
Speaker 4: In my head, it's a lot, but.
Speaker 10: They're still it's a lot. Yeah, and you're absolutely right.
Speaker 10: Deese was, in my mind and in my assessment, totally
Speaker 10: the innovator. He had the long term vision for where
Speaker 10: the where the car industry was going and where it
Speaker 10: needed to go, where Volkswagen needed to go if it
Speaker 10: really wanted to compete with Tesla and you know, eventually
Speaker 10: the Chinese and one of his big you know, one
Speaker 10: of his big strategic plans or moves, was this idea
Speaker 10: of vertical integration. We got to get control of the
Speaker 10: battery supply chain and that was you know why he
Speaker 10: really went all in with Power Code, creating their own
Speaker 10: battery company. He thought, you know, we have to go
Speaker 10: in all in on software. We have to create our
Speaker 10: own software unit. We have to control that as well,
Speaker 10: in order to control the profit pools that subsequently come
Speaker 10: from in car entertainment, and so he was all about
Speaker 10: sort of focusing on what Volkswagen could do on its own,
Speaker 10: making Volkswagen into sort of more of a tech company.
Speaker 10: As you know, the car becomes more of a sort
Speaker 10: of a living room on wheels or sort of more
Speaker 10: like a mobile phone on wheels. That people's expectations, customer
Speaker 10: expectations have sort of moved in the direction of smartphone
Speaker 10: apps and services, and you needed to be able to
Speaker 10: offer that in car. And so his strategy was, well,
Speaker 10: let's do it on our own so we can control
Speaker 10: more of the more of the profit pools. And that
Speaker 10: maybe turned out to be sort of the Achilles Heel
Speaker 10: of Deese in addition to his his management style. That
Speaker 10: I would say, there's a big difference. There's a difference
Speaker 10: between Dsee and Bluma, and that Dees, You're right. Deese
Speaker 10: did bring a lot of these innovative projects into the
Speaker 10: company and Bluma is now sort of carrying those forward
Speaker 10: and bringing those along. And I would say, you know,
Speaker 10: Bluma has totally Oliver Blooma, the new CEO, who is
Speaker 10: also currently the CEO of Porsha, he is really he's
Speaker 10: he's going all in with the battery strategy. He's still
Speaker 10: supporting Carriot the software unit and saying we're still gonna,
Speaker 10: you know, back carry it's efforts one hundred percent to
Speaker 10: to create the premium platform for the Audi and Porsha vehicles,
Speaker 10: for the Emacon, for the Q six Etron, and then
Speaker 10: you know, using the company's resources to to you know,
Speaker 10: broaden their their offering for electric electric vehicles.
Speaker 2: I feel like that just they're they're slow to catch
Speaker 2: up and they can't really knock the ball out of
Speaker 2: the park when it comes to you know, range, they
Speaker 2: don't do as well as GM has four hundred and
Speaker 2: fifty miles of range in their EV pickup trucks. Now
Speaker 2: they have gigantic batteries to support that two hundred ten
Speaker 2: kilowatt packs, but still they have it right, And.
Speaker 4: It doesn't seem like, uh.
Speaker 2: Porscha should only have one EV model out at this
Speaker 2: stage in the game. Why don't they already have an
Speaker 2: EMA Coon, Why don't they already have an E version
Speaker 2: of the nine to eleven?
Speaker 11: Like?
Speaker 4: What is taking them so long?
Speaker 10: Yeah, it's definitely the software issue. So by creating, you know,
Speaker 10: by having a legacy car maker that really knows German
Speaker 10: engine engineering really well. To have them pivot and suddenly
Speaker 10: start doing software, it's a completely different process. It's a
Speaker 10: completely different ballgame, it's a completely different sport, and they
Speaker 10: had to sort of learn from zero how to do it,
Speaker 10: how the processes work, how you develop software, and that
Speaker 10: led to, you know, delays when it came to the
Speaker 10: launch of the platform that the EMA coon is going
Speaker 10: to be based on. It was supposed to be out
Speaker 10: I think about two years ago already, and that was
Speaker 10: that was one of the things ai Audi and Pousha.
Speaker 10: These models that are coming out for Audi and Posha,
Speaker 10: these electric models, the models that are going to come
Speaker 10: from between twenty twenty four and twenty twenty eight, are
Speaker 10: supposed to make up about fifty percent of folks swagging
Speaker 10: revenues in that time period. So there, you know, if
Speaker 10: they don't do that premium.
Speaker 4: Platform, eleven or twelve brands.
Speaker 10: Right, yeah, exactly. No, I mean Audi and Pousha are
Speaker 10: really the you know, the big money makers. I mean,
Speaker 10: Poorsha is no longer technically a cash cow since the
Speaker 10: I p O they're no longer sharing their profits with Volkswagen.
Speaker 10: But for Audi it's really key, it's really critical that
Speaker 10: they get this this platform, this uh premium platform from
Speaker 10: carry it out to build their their their model lineup,
Speaker 10: and they haven't been able to do that because of
Speaker 10: the delays. Basically it was it was a struggle for
Speaker 10: carry it for the software unit because they've they've had
Speaker 10: to do one one software platform for the Volkswagen, this
Speaker 10: other premium platform for for Audi and Pousha, and then
Speaker 10: they also had this SSP platform, this scalable unified platform
Speaker 10: for all the brands. That's sort of the longtime vision
Speaker 10: that Deese had and that's you know, sort of up
Speaker 10: in the air at this point about if and when
Speaker 10: that's that's going to come to Fruition.
Speaker 1: Hey, Monica, thanks so much for joining us. Really appreciate
Speaker 1: getting some of your time. Is Matt med a fantastic
Speaker 1: piece of work there, Monica Raymond, Auto's industry disruption reporter
Speaker 1: for Bloomberg News. Out the Big Take story today on
Speaker 1: the Bloomberg terminal entitled Germany Fretz Volkswagen is heading down
Speaker 1: the road to nowhere. So check that out on the
Speaker 1: terminal or Bloomberg dot com slash Big Take. Those are
Speaker 1: really deeply reported stories, great stuff. Highly recommend it.
Speaker 7: You're listening to the Team Can't Live program Bloomberg Markets
Speaker 7: weekdays at ten am Eastern on Bloomberg dot com, the
Speaker 7: iHeartRadio app and the Bloomberg Business app, or listen on
Speaker 7: demand wherever you get your podcasts.
Speaker 1: There are old sky divers and Bold skyde divers, but
Speaker 1: there are no old Bold skydivers. That's a good one.
Speaker 1: I guess you can apply that to investing as a certainly.
Speaker 1: Our next guest does that very well. Jessica Rabe joins us.
Speaker 1: She's a founder of Data Trek Research. We love the
Speaker 1: folks at Data Trek. Lots of really smart research comes
Speaker 1: out of there.
Speaker 2: Now, you said Rabe, think it's Raba.
Speaker 1: Let's hear Jesse here. Let's say you Jessica Rade.
Speaker 5: You are correct. Thank you so much for having me, Matt.
Speaker 5: I'm very excited to be.
Speaker 1: On all right, Jessica. I like how you kind of
Speaker 1: bring together the skydiving thing, which, by the way, we
Speaker 1: have to talk about that at some point. Who does
Speaker 1: that willingly end investing? So how do you bring the
Speaker 1: two together?
Speaker 11: Sure? Yeah, so to me, skydiving is an amplified version
Speaker 11: of life and even investing in that.
Speaker 5: It's a masterclass in risk management.
Speaker 11: So, like you said at the top, they saying they're
Speaker 11: in skydiving is very common. One. There are old skydivers
Speaker 11: and bold skydivers, but there are no old bold skydivers.
Speaker 11: So no matter anyone's experience, both skydiving and investing are processed,
Speaker 11: driven disciplines with small.
Speaker 5: Margins for air for error.
Speaker 11: So ultimately it helps helps teach you how to confront
Speaker 11: natural human fear and overcome it by sticking to a process,
Speaker 11: staying president and it's very important to remain calm and
Speaker 11: high pressure pressure situations.
Speaker 2: All Right, So I have to say that I love
Speaker 2: now you skydiving, but I'm not licensed, so I still
Speaker 2: have to get strapped to a big man's back or
Speaker 2: to his chest, unlike Jessica, because I've gone seven times
Speaker 2: and uh, Jessica, I'm guessing you've done more. Uh.
Speaker 11: Yes, I'm still a baby in the sport, but I've
Speaker 11: done one hundred and fourteen solo skydis at this point.
Speaker 2: Wow, and do you pack your own shoot or how
Speaker 2: does that all work?
Speaker 4: I'm wondering.
Speaker 11: Yep, that's part of getting licensed. You have to know
Speaker 11: how to how to pack pack your own parachuting and
Speaker 11: quite frankly, you want to you want to know your
Speaker 11: own equipment, and uh, you want to know how to pack,
Speaker 11: because then you're the way that your can it be
Speaker 11: opened is more reliable.
Speaker 1: I was strung.
Speaker 2: I read your note as soon as I saw it
Speaker 2: hit my inbox, and I.
Speaker 4: Thought it was really cool.
Speaker 2: The parallels between investing in skydiving that I'd never thought of.
Speaker 2: The only difference for me and probably for most people
Speaker 2: listening in terms of retail investing is I don't pack
Speaker 2: my own shoot in the markets, right. I don't even
Speaker 2: have the ability to know how to do that. I
Speaker 2: need to leave it to people like you and Nick
Speaker 2: to pack my shoot for me because I just don't
Speaker 2: have the time to do the research, if you know
Speaker 2: what I mean.
Speaker 5: Yeah, sure, absolutely, and yeah I mean so, there's.
Speaker 11: So many parallels between investing in skydiving for and for
Speaker 11: really all levels of experience.
Speaker 5: So you know, one of those is just sticking to
Speaker 5: a process.
Speaker 11: There are fundamentals in skydiving that that keep you safe,
Speaker 11: whether it be checking your gear, remaining altitude a wear,
Speaker 11: or knowing how to fly in and land in different
Speaker 11: conditions so you can do most of the skydive right
Speaker 11: but make one wrong move in the last two hundred
Speaker 11: feet or so and face serious consequences. The same as
Speaker 11: when it comes to investing straight from core guidelines for
Speaker 11: idea generation to taking profits or losses, and any type
Speaker 11: of investor from a novice to a twenty year year
Speaker 11: veteran can can pay the price.
Speaker 1: All right, So I like this one. Anticipate other participants.
Speaker 1: So I guess in skydiving you're going to be have
Speaker 1: that situational awareness of no what's around you. But I
Speaker 1: guess that kind of makes sense in investing as well.
Speaker 11: Oh yeah, so I can do everything right on a jump,
Speaker 11: but get hurt by another skydiver, whether that be colliding
Speaker 11: under free fall or under canopy. So you really have
Speaker 11: to prepare, not just for yourself, but you have to
Speaker 11: anticipate other people. It's it's just like riding a motorcycle,
Speaker 11: which I also do. You constantly have to have your
Speaker 11: head on a swivel. And that's much of investing, too,
Speaker 11: is anticipating not just what you're gonna do, but what
Speaker 11: other markets participants are going to do, especially when it
Speaker 11: comes to how they respond ering crises. That's how a
Speaker 11: lot of volatility is created. Is by other market participants
Speaker 11: and how they respond under pressure.
Speaker 2: Yeah, I would argue in motorcycling, especially I mean motorcycling
Speaker 2: on the highway or in you know, public roads, paying
Speaker 2: attention to what other people are doing is far more
Speaker 2: important than paying attention to you know, I'm not going
Speaker 2: to make many mistakes. The motorcycle stays up by itself
Speaker 2: as long as you know, I'm putting in the right inputs.
Speaker 2: So the most important thing is.
Speaker 1: Watch out for that car ture, one of those crazy
Speaker 1: people in the Garden State Parkway that zoom in and
Speaker 1: out of cars doing like one hundred twenty miles an hour.
Speaker 4: I try not to.
Speaker 1: Jessica is laughing over there.
Speaker 2: That's like a bold skydiver, right, Those people don't last
Speaker 2: very Yeah.
Speaker 5: That's yeah. You don't want to you don't want to
Speaker 5: be too bold.
Speaker 11: And that's why I mean the motorcycle riding too, is
Speaker 11: a perfect example. Whether it be skydiving or motorcycle riding
Speaker 11: or investing, is you just you have to plan for
Speaker 11: diverse events. There are certain forces out of our control,
Speaker 11: whether it be weather or other skydivers and skydiving, or
Speaker 11: economic and geopolitical shocks and investing the best we can
Speaker 11: do is stay aware of the risks plan for them.
Speaker 11: I see skydivers with thousands of jumps, still practicing their
Speaker 11: emergency procedures and the plane ride up to altitude so
Speaker 11: that way muscle memory kicks, and should they need to
Speaker 11: cut away their main parachute and deploy their their reserve parachute.
Speaker 5: In the event of an equipment malfunction. And the same
Speaker 5: with investing.
Speaker 11: People know at data Track we have a long standing
Speaker 11: recommendation to add risk exposure when the VIX gets to
Speaker 11: twenty eight, thirty six, and forty four because these are one,
Speaker 11: two and three standard deviations above the long run mean
Speaker 11: and therefore.
Speaker 5: Signal excessive investor fear.
Speaker 11: So yeah, investing, skydiving, motorcycle riding, you always have to
Speaker 11: have to be on your toes and be ready for.
Speaker 1: Anything, all right. So I'm looking at some of the
Speaker 1: photographs use attached to your note here, and they're making
Speaker 1: my stomach literally queasy as I look at them. What's
Speaker 1: the highest altitude that you've done a jump from?
Speaker 5: So I jump at Skydives Sussex.
Speaker 11: And the nice thing about that drop soon is they
Speaker 11: go all the way up to fourteen five hundred feet.
Speaker 1: Yeah, is that you hanging off like a helicopter or
Speaker 1: a plane or something like that.
Speaker 5: Yeah.
Speaker 11: Yeah, I did my first few helicopter jumps a few
Speaker 11: weeks ago, so that was certainly.
Speaker 5: Very very fun.
Speaker 11: That is because the jumping out of a helicopter is
Speaker 11: different than a plane. With a plane, you have all
Speaker 11: the relative wind coming at you. With a helicopter, you
Speaker 11: jump into the dead air.
Speaker 4: Jesus, that sounds like fun.
Speaker 2: Yeah, now this I mean I was wondering if if
Speaker 2: you make these parallels. You know, with skydiving you want
Speaker 2: to be pretty conservative, and in investing you do have
Speaker 2: a little bit of a risk tolerance, right, So how
Speaker 2: do you limit yourself or how do you stop yourself
Speaker 2: from just buying ten year treasuries right now?
Speaker 5: Yeah?
Speaker 11: I would say that you have to inscat both skydiving
Speaker 11: and investing. You have to assess your abilities honestly. So
Speaker 11: in skydiving it's very important to know your skill level
Speaker 11: and also stay within your personal risk tolerance. So that
Speaker 11: means only jumping in wins or or or or joining
Speaker 11: group formation skydives that you believe that you're confident enough
Speaker 11: to be able to land safely, or also confident in
Speaker 11: others abilities that you can actually execute the skydiving plan
Speaker 11: plans safely. There's a saying in skydiving it's better to
Speaker 11: be on the ground wishing you're in the sky than
Speaker 11: be in the sky.
Speaker 5: Wishing you're on the ground.
Speaker 11: That's been part of a part of the job for
Speaker 11: investors or financial advisors is just doing what will keep
Speaker 11: your clients in the game by knowing your own limits
Speaker 11: or your client's limits.
Speaker 5: Just because you can doesn't mean you should.
Speaker 11: And virtual currencies are are a great example that many
Speaker 11: many people are in that heart lesson over the past
Speaker 11: two years.
Speaker 4: So virtual currencies.
Speaker 1: So what's the like, what's the next step for you
Speaker 1: in terms of skydiving.
Speaker 11: Uh, there's there's so many disciplines in the sport, so
Speaker 11: there's just always ways to constantly to constantly improve.
Speaker 5: And uh and and learn something new.
Speaker 11: So yet people a lot of people wonder they think
Speaker 11: they see they think skydiving is crazy.
Speaker 5: You know what, what's the appeal?
Speaker 11: And I'd say they're There are three main appeals to skydiving,
Speaker 11: at least for myself.
Speaker 5: Number one, I like.
Speaker 11: Pastimes that push limits and require mental focus. So skydiving
Speaker 11: obviously fits that description, as does motorcycle riding. As we discussed,
Speaker 11: the other thing about skydiving is it's a really wonderful.
Speaker 5: Diverse and welcoming community. I have friends in the sport
Speaker 5: from all walks of life.
Speaker 11: One's a famous rapper the the helicopter jump that.
Speaker 5: That you referenced.
Speaker 11: I did my first helicopter jump with the rapper Redman,
Speaker 11: so that was super fun. Other people are yeah, other
Speaker 11: people are computer coders to helicopter pilots.
Speaker 5: I've met a bunch of women in the sport and
Speaker 5: we all connect.
Speaker 11: Around a common passion, all right. Well, and thirdly, it
Speaker 11: just it allows me to be present and take a
Speaker 11: fun break from the grind of Watch Street as much
Speaker 11: as I love it. So in portfolio construction terms, I'd
Speaker 11: say it's my uncrrelated asset with high returns on invest
Speaker 11: Very nice.
Speaker 1: I'll let you go with that. Jessica Ray found our
Speaker 1: data track research. Appreciate getting some of your time you're.
Speaker 7: Listening to the tape cans are live program Bloomberg Markets
Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune
Speaker 7: in app, Bloomberg dot Com, and the Bloomberg Business app.
Speaker 7: You can also listen live on Amazon Alexa from our
Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 1: Let's talk hole man. We talk a lot about you know,
Speaker 1: eco kind of green energy. We want to talk a
Speaker 1: lot about Cole. It gotta be tough to be in
Speaker 1: a cold business in a world that's going green. But
Speaker 1: we have found someone who does that very well, Randall Atkins.
Speaker 1: He's the CEO of Romanco Aramaco Ramica Resources trades on
Speaker 1: the Nasdaq, etc. I get it, I get the ticker
Speaker 1: met Cole. He joined his live here in our Bloomberg
Speaker 1: Interactive Brokers studio. Of course the highlight of his career
Speaker 1: obviously graduated of the Duke University. But I finally found
Speaker 1: somebody who did it before I did. I mean so not,
Speaker 1: you know, just landed there.
Speaker 4: Randall.
Speaker 1: I'm looking at your background. It's not like you're one
Speaker 1: of these people that came up in the coal business.
Speaker 1: In your entire life, a lot of banking, a lot
Speaker 1: of investments, a lot of finance. Why did you get
Speaker 1: into the coal business.
Speaker 12: Got into the coal business because it was sort of
Speaker 12: a distressed business.
Speaker 4: It was to play that.
Speaker 12: Frankly, we stepped back. Even five years ago, most of
Speaker 12: the public companies were all in bankruptcy. So if you
Speaker 12: could start one from scratch, kind of reverse engineer it
Speaker 12: correctly with little debt and sort of maximize the asset quality.
Speaker 12: You know, we have proven that you can make a
Speaker 12: very good go in this business. And it's our expression
Speaker 12: is we view coal in a manner which coal is
Speaker 12: too valuable to burn, so we approach it a little
Speaker 12: differently than most.
Speaker 2: So how do you address what I assume must be
Speaker 2: a shrinking market?
Speaker 4: Is it in this country? Do we use less and
Speaker 4: less coal every year?
Speaker 12: Split the market into two different pots, one is thermal coal,
Speaker 12: And that answer to your question is yes, it's probably
Speaker 12: a declining market. Met coal, which is what we focus on,
Speaker 12: is basically a precursor to make steel, so that business
Speaker 12: is not declining.
Speaker 4: And indeed, internationally, where.
Speaker 12: We probably placed upwards of two thirds of our market
Speaker 12: is growing. Obviously the Asian market is the principal growth factor.
Speaker 1: So okay, So two thirds of your businesses outside the
Speaker 1: US correct?
Speaker 4: Okay, So.
Speaker 1: Just about just the competitive landscape, I can't even think
Speaker 1: of other coal companies out there. Who else is out
Speaker 1: there that you compete with like who is the competitive marketplace?
Speaker 4: Is it other US bulletin? Yeah?
Speaker 1: I guess yeah, So what's competitive LAK.
Speaker 12: They wouldn't compete so much in the in the Australian market,
Speaker 12: which is pretty much got a lock on a lot
Speaker 12: of the Asians just because of the proximity of logistics.
Speaker 12: But domestically we would compete with companies like Alpha Arch
Speaker 12: to a lesser extent, Peabody Warrior, those would be some
Speaker 12: of the names.
Speaker 2: So met coal, cocin coal still desperately needed to create
Speaker 2: to produce all the steel that we need. What does
Speaker 2: the growth in that industry look like?
Speaker 12: The growth in that industry is basically I always say
Speaker 12: met coal is a proxy for steel. Steel is a
Speaker 12: proxy for GDP. So if you look at basically general
Speaker 12: economic trends, whether it's in the US or overseas, it
Speaker 12: pretty well ties to medical ties to the growth in
Speaker 12: the generally economic situation most of the countries.
Speaker 1: All right, So I'm looking at your financials here on
Speaker 1: the FA function on the Bloomberg terminal. I got top
Speaker 1: line going kind of mid single digits ibadam margins mid
Speaker 1: mid twenties, free cash a positive. What's the growth driver
Speaker 1: for your business, you acquire additional minds, do you develop
Speaker 1: further what you've got? How do you grow your business?
Speaker 11: Sure?
Speaker 12: Well, we're actually the only domestic coal company that's projecting
Speaker 12: the doublin size from where we sit right now.
Speaker 10: So we have.
Speaker 12: Decided to grow organically without buying existing minds. We basically
Speaker 12: have taken properties where we're in essence by the reserve
Speaker 12: and developed that planet and then.
Speaker 4: Market it from there.
Speaker 12: So we will jump from about two and a half
Speaker 12: million tons last year to about three and a half
Speaker 12: million tons of production this year, ultimately to about six
Speaker 12: six to seven million tons.
Speaker 4: What do you I mean?
Speaker 2: I look at the stock price and I wonder what
Speaker 2: happened two years ago? You know, all of a sudden,
Speaker 2: it just goes boom on the rise at the August
Speaker 2: September twenty twenty one part of the chart.
Speaker 4: What happened there? Basically after that.
Speaker 12: You had sort of an economically decline you had after
Speaker 12: effects of COVID, You had a different market situation. Basically
Speaker 12: in the August and September periods is when you find
Speaker 12: almost one hundred percent of the domestic sales occur in
Speaker 12: the US. So that was a tough period in domestic sales.
Speaker 4: A lot of the coal companies dropped in that same time. No,
Speaker 4: but you jumped. I'm looking.
Speaker 2: So twenty twenty one, your stock went from two fifty
Speaker 2: to I'm going to say twelve at the end of
Speaker 2: the year. It was the end of the pandemic, which
Speaker 2: is why I think it's so interesting. Usually you see
Speaker 2: these stock moves right around twenty twenty, depending on what
Speaker 2: the company is. But you climbed high into twenty twenty one,
Speaker 2: twenty twenty two, and now you're holding it about eight
Speaker 2: dollars right.
Speaker 12: Our jump was primarily based on a market recognition that
Speaker 12: we had gone from being sort of a small time
Speaker 12: producer into coming into the ranks of a larger When
Speaker 12: we get to the six to seven million ton size,
Speaker 12: we will be almost an equal size in terms of
Speaker 12: the met coal production with most of the major coal companies,
Speaker 12: which frankly still have got a predominant thermal mix. And
Speaker 12: that's frankly, the drag on most coal stocks is that
Speaker 12: there's not a market differentiation between thermal and met.
Speaker 1: So what's the future of coal in this country?
Speaker 4: This energy?
Speaker 11: You know?
Speaker 1: I mean, is there always going to be a place
Speaker 1: for coal, or it just seems like, you know, if
Speaker 1: you talk to some of the more cleaner energy folks,
Speaker 1: they would like to see that go to zero.
Speaker 4: Yeah.
Speaker 12: So I have been a proponent for about ten years that,
Speaker 12: as I said, there's a higher and better use for coal.
Speaker 12: Coal is too valuable to burn. I go back to
Speaker 12: really one hundred years ago when coal was used for
Speaker 12: a variety of things that had more of a chemical nature.
Speaker 12: So we have been working with the Department of Energy
Speaker 12: in some of the national labs in creating new uses
Speaker 12: for coal where you can convert it into things like
Speaker 12: synthetic graph fight and graphenes, carbon fiber, and frankly, that
Speaker 12: took us into the rare earth business, where you know,
Speaker 12: ten years ago, I didn't know the difference between rare current,
Speaker 12: rare coins, and rare earth, but we have found that
Speaker 12: connected to coal seams. So the future of coal I
Speaker 12: see as having three legs of the stool, one for
Speaker 12: thermal production for combustion, one for steel production, and the
Speaker 12: third leg of the stool will be higher tech uses
Speaker 12: for alternative carbon products.
Speaker 2: What are the rare earths that you're finding and how
Speaker 2: are you doing it? Getting them out.
Speaker 12: We have found a spectrum of about fourteen different rare earths,
Speaker 12: and frankly, thirty percent of what we found are concentrated
Speaker 12: in the heavier magnetic rare earths, which are frankly the
Speaker 12: more valuable ones. Rare earths are measured in parts per million,
Speaker 12: so it's you know, it's unlike the bulk coal business.
Speaker 12: It's more like you're looking for diamonds almost, and it's
Speaker 12: more of an industrial chemical business than that's a mining business.
Speaker 12: Because once you find it, that's only half the battle.
Speaker 12: The trick is to separate the rarer and get them
Speaker 12: processed in a way that they then become commercially usable.
Speaker 1: Hey, Randal, thanks so much for joining us. Really appreciate
Speaker 1: you coming in here. We don't talk about cole that office,
Speaker 1: so it's fascinating discussion. Randall Atkins, he's the CEO of
Speaker 1: Romanco Resource Ramico Resources. Thank you, Symble, M E. T.
Speaker 7: Seed. You're listening to the tape kent'sur live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business app.
Speaker 7: You can also listen live on Amazon Alexa from our
Speaker 7: flagship New York station, Just say Alexa Play Bloomberg eleven
Speaker 7: thirty JM.
Speaker 1: Smucker agreed to acquire Twinkies maker Hostess Brands for about
Speaker 1: five point six billion dollars, furthering a growing consolidation trend
Speaker 1: among the companies that stock the shelf stable aisles at
Speaker 1: the heart of supermarkets. Do we have an expert on
Speaker 1: this business? We appsolutely do, Diana rossettopenya. She's an equity
Speaker 1: research channels follow all the consumer space for Blueberg Intelligence. Diana,
Speaker 1: you're like one of our first bianos. You're like an
Speaker 1: original original. You're aging me absolutely. I mean you're there
Speaker 1: from just the get go, and she's just become one
Speaker 1: of the top annos out there covering the consumer space. Diana,
Speaker 1: What do you make of this deal? Smucker's buying Hostess.
Speaker 1: What's going on here? Strategically?
Speaker 6: Yeah, Well, strategically for Smucker, this will be a more
Speaker 6: of a mixed deal for Smucker in terms of on
Speaker 6: the cells side, it's definitely positive. It's a company that
Speaker 6: is growing in the mid single digits compared to consumer foods.
Speaker 6: The consumer foods segment for Smucker, which is growing in
Speaker 6: the low single digits, So definitely on the cell side
Speaker 6: is going to be a positive. Now if you go
Speaker 6: down the P and L, that's probably going to be
Speaker 6: a little bit more complicated.
Speaker 1: Why is that.
Speaker 6: Because Ebida margins are not necessarily going to be as
Speaker 6: as as positive as the company is stating in our
Speaker 6: view the company, the company's call these mornings said that
Speaker 6: they host this had a twenty three percent of that margin,
Speaker 6: which is going to probably be about uh the same
Speaker 6: as the consumer food segment for the company going forward,
Speaker 6: So we don't necessarily see a lot of accretion on
Speaker 6: that end.
Speaker 2: I feel like there's a there's room for real improvement
Speaker 2: on execution of Hostess product sales.
Speaker 11: You know.
Speaker 4: I we have interviewed the CEO Hosts a couple.
Speaker 2: Of times, and as a result, I always go out
Speaker 2: and look for their products and stores and I see
Speaker 2: that they do have like sometimes separate areas or specific displays,
Speaker 2: but the products aren't stocked very well and there's just
Speaker 2: not enough attention drawn to them in the in the
Speaker 2: in the points of purchase.
Speaker 4: Couldn't they improve that?
Speaker 6: I think that is something that attracted smockery. It seems
Speaker 6: that Hostess has been increasing innovation and points of sale,
Speaker 6: as you mentioned, and I think they're probably going to
Speaker 6: benefit from the supply chain leverage that Smucker has. And
Speaker 6: it's also in terms of Smocker, you will give them
Speaker 6: a little bit more exposure on the convenience side, which
Speaker 6: is about forty percent of Hostess sales.
Speaker 1: So I'm a big fan of the Hostess brands. But
Speaker 1: there's some people out there that maybe even during the pandemic,
Speaker 1: I don't know, maybe they went to more of those
Speaker 1: you know, ringings and all that kind of good stuff
Speaker 1: that we all love, but maybe now they're coming back
Speaker 1: and going back to more healthier food. What are the
Speaker 1: trends you're seeing out there?
Speaker 6: So basically it's consumers in the United States. They say
Speaker 6: they want one thing and they actually do another. So, yes,
Speaker 6: you're right, people want to be healthier. And definitely the
Speaker 6: pandemic was a big catalyst for people going and purchase
Speaker 6: more of the indulgence snacks. I think there's still a
Speaker 6: little bit of growth on that aspect. People seem to
Speaker 6: be a little bit more permissible in the indulgence side,
Speaker 6: and I think that is probably going to fuel growth
Speaker 6: going forward.
Speaker 2: I mean Twinkies obviously, and then the cupcakes. I like
Speaker 2: the orange ones, but they have the chocolate and the
Speaker 2: ding Dongs are a classic. The ho hosp can't forget
Speaker 2: about those. I have always been a fan of the
Speaker 2: chocolate dial, which is a twinkie essentially dipped in chocolate.
Speaker 2: I've never really liked the snowballs, but they're there, the
Speaker 2: Zingers and then I mean they're just like classic brands.
Speaker 2: I feel like instead of just selling them at you know,
Speaker 2: the seven eleven or the Dwayne Reid, they should be
Speaker 2: sold in you know, these trendy like urban outfitters should
Speaker 2: sell these things, right because.
Speaker 6: But you can't fit on their clothes though, so that
Speaker 6: would be a little bit of lack of synergy.
Speaker 1: Why is James muckerstock down six percent today?
Speaker 6: Well, obviously it has, as you know, there's also the
Speaker 6: acquirer curves playing into that. But like I said, I
Speaker 6: think it's more of investors try it and I don't
Speaker 6: want to say not believing, but being a little bit
Speaker 6: wary about the bottom line for this acquisition and how
Speaker 6: accreative is going to be on the epidem margin.
Speaker 1: Are we are we seeing more consolidation in the I
Speaker 1: don't know, the grocery space, If so why or what's
Speaker 1: happening out there?
Speaker 6: Well, we actually, I mean I have been fairly active
Speaker 6: in terms of writing because Campbell's SUPA a few weeks
Speaker 6: ago bought Solos, So that is right, that's right. Yeah,
Speaker 6: So that is definitely it seems that because decisions seem
Speaker 6: to be ramping up in the second half of the year.
Speaker 6: It really is in terms of it's not unusual. I
Speaker 6: think we're going back to patterns compared to before the pandemic,
Speaker 6: that all of these big companies are looking for growth
Speaker 6: and they're paying a pretty high price for it.
Speaker 1: How can host this, I mean going to bankruptcy not
Speaker 1: just once but twice?
Speaker 10: Was that just?
Speaker 4: I mean who can sell?
Speaker 1: Yeah, who can sell twinkies?
Speaker 4: What happened?
Speaker 1: I mean there's maybe before your time, but was it
Speaker 1: just again it's mass suggested maybe just some bad management there.
Speaker 6: Yeah, it was a commination of bad management. And at
Speaker 6: the same time, you know, it was lack of innovation.
Speaker 6: The brands were falling out of flavor. And I think
Speaker 6: you know, now with more innovation and with the strong
Speaker 6: supply chain leverage, I think that they're probably going to
Speaker 6: be expanding into that.
Speaker 1: You expect more or m and a going forward in
Speaker 1: this space.
Speaker 4: I think.
Speaker 6: So I'm a little worried about the premiums that we're
Speaker 6: seeing and the leverage expansion. Obviously, Smucker it's their balance
Speaker 6: sheet is going that net leverage is going to be
Speaker 6: four point four after four point four times, that seems high.
Speaker 1: After yeah, it's fine from my industry, the media industry,
Speaker 1: because we grow our EBITDA fifteen to twenty percent. You
Speaker 1: guys don't grow your IBITAD that fast exactly.
Speaker 6: And usually we should be able to see leverage in
Speaker 6: the three times. But now when we're looking at deals
Speaker 6: that are expanding into four times, it makes people a
Speaker 6: little nervous.
Speaker 4: I wonder, what the what are the other brands out
Speaker 4: there that are on the block. Do we know Hostess
Speaker 4: was on the block? Do we know? Or was this
Speaker 4: a surprise?
Speaker 6: Well, apparently according to Smocker management, the acquisition was a surprise.
Speaker 6: There they themselves actually divested some of the food brands
Speaker 6: for pet so divestitors seem to be also be on
Speaker 6: the blog.
Speaker 2: Smuckers has coffee, right, They make Duncan coffee for sale.
Speaker 2: They have folders, They obviously do Jeff peanut butter, and
Speaker 2: the and the jelly.
Speaker 1: You're a Jiff guy.
Speaker 2: I love I will eat gift peanut butter straight out
Speaker 2: of the jar in a spoon. I'm a jiff Wow.
Speaker 2: So you the tie and Crunchy, but Smuckers also does
Speaker 2: meow mix and milk bone.
Speaker 4: Right, Are they getting out of that the pet food business.
Speaker 2: Yes, they are.
Speaker 6: Actually they're concentrating on the pet snacks category, which is paperoni,
Speaker 6: yes exactly, yes, milk bone. So, but that is I
Speaker 6: think one of the arguments against the deal is that
Speaker 6: is this going to be a big heart pet brand?
Speaker 6: A two point zero Back in twenty fifteen, the company
Speaker 6: acquired these company pig big Heart brands for five point
Speaker 6: something billion dollars. Leverage was also four four times ABDA,
Speaker 6: so it and now they're divesting a lot of brands
Speaker 6: of it. So you know, people are concerned about that.
Speaker 1: What's what's your thoughts on Chewi We'll get about twenty
Speaker 1: twenty seconds Chewy.
Speaker 6: They're growing on their nut cells per active consumers and
Speaker 6: active consumers seems to be a painful point for them
Speaker 6: so far.
Speaker 1: All right, good stuff. A reader just kind of writes
Speaker 1: in Peter Pan peanut butter is word's.
Speaker 2: At That's not the case that a strong well, you
Speaker 2: know what, I don't.
Speaker 4: Actually, it's spent a long time.
Speaker 2: I'll go I'm gonna go out right now because I'm leaving, okay,
Speaker 2: and I'm going to go get a jar of Peter Pan.
Speaker 2: I'll go over to the d Wayne Read and pick
Speaker 2: one up and see. I think Jeff is still the
Speaker 2: raining champ.
Speaker 1: All right, Dan sat Open Equity Research channels for Bloomberg Intellent,
Speaker 1: just breaking down this deal.
Speaker 7: You're listening to the tape Cat's are live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business app.
Speaker 7: You can also listen live on Amazon Alexa from our
Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 1: Let's talk about ad tech, digital advertising, all that fun stuff,
Speaker 1: the part of the advertising pie that continues to put
Speaker 1: up some really solid numbers. And you think about the
Speaker 1: digital advertising, the you know, the facebooks, the Googles, I
Speaker 1: use it the old school words, not meta or whatever
Speaker 1: the other one is. But there's technology behind that, and
Speaker 1: that is a fascinating part of the business. Our next
Speaker 1: guest is all over that stuff. Megan Clarkin joins us.
Speaker 1: She's the CEO of Crytao or Critio Critia Critio. It's
Speaker 1: a Nasdaq traded company. C rt O is the ticker
Speaker 1: to put into your Bloomberg terminal. It's a French company
Speaker 1: based in Paris. Megan, thanks so much for joining us
Speaker 1: here in a Bloomberg interactive broker studio.
Speaker 4: What do you guys do it?
Speaker 13: Critio we're in at tech company. As you said, we
Speaker 13: focus in on commerce media, retail.
Speaker 1: Media, retail media.
Speaker 13: What is retail media, Well, retail media is the lighting
Speaker 13: up of advertising on retailer sites or even broader commerce
Speaker 13: sites like Uber. They're now selling advertising and it's incredibly successful.
Speaker 13: It's the fastest growing area of digital advertising. What Critio
Speaker 13: does is we enable all of that for them. We
Speaker 13: make sure that the right ads gets to the right
Speaker 13: person on the right side at the right time, and
Speaker 13: we also make sure that their inventory is shown up
Speaker 13: for the demand side, or the advertisers and the agencies
Speaker 13: who are looking to spend their advertising dollars across sites.
Speaker 13: So it's competing, if you like, with traditional traditional media
Speaker 13: and advertising. It's competing with Google it's completely copeeding with search.
Speaker 13: It is the new wave of advertising across retailers.
Speaker 1: What's a typical advertiser in that part of the marketplace.
Speaker 1: Is it a Coca Cola trying to do some brand advertising.
Speaker 1: Is it a car agency trying to get me to
Speaker 1: go out and buy something tomorrow.
Speaker 4: Yeah, it's all of that.
Speaker 13: So they now see a real opportunity getting in front
Speaker 13: of audiences.
Speaker 1: Who are actually shoppers.
Speaker 4: They're actually on.
Speaker 13: Their buy a journey, and they're really close to the
Speaker 13: point of sale posed to on a social site where
Speaker 13: it's a conversation that's happened, and they might happen to
Speaker 13: see the pepsi ad and it might spark a sort
Speaker 13: of thought to go. If you're actually on Costco and
Speaker 13: you're getting a pepsi ad and they stop Costco, you're
Speaker 13: very close to that point of sale. So it's a
Speaker 13: very viable advertising channel for all of those brands.
Speaker 1: So your clients are the Costcos of the world as
Speaker 1: opposed to the Pepsis of the world.
Speaker 13: Well, we service both because we light up the advertising
Speaker 13: for Costco, for Macy's, for Best Buy, for half of
Speaker 13: the biggest retailers in the US. We power that advertising,
Speaker 13: but we also make that advertising inventry available to the Pepsis,
Speaker 13: to the Cokes, to all of We have twenty six
Speaker 13: hundred brands that we support to try to bring their
Speaker 13: dollars into that retail media space.
Speaker 1: All right, how has that market that's been When you
Speaker 1: think about the global advertising pie, and you take the
Speaker 1: traditional media not growing, declining depending upon what you're looking at,
Speaker 1: and you look at the digital piece continues to grow
Speaker 1: and that was when I used to cover this four
Speaker 1: or five years ago, still growing at twenty percent. Where
Speaker 1: is a digital dollar spend growth rate kind of over
Speaker 1: the next several years.
Speaker 13: From your Well, if we think about retail media, retail
Speaker 13: media marketplace is by twenty twenty five going to be
Speaker 13: worth about one hundred and ten billion dollars. Now, if
Speaker 13: you think on top of that, there's a star player
Speaker 13: in there right now, which is Amazon. And Amazon's been
Speaker 13: doing this for six to ten years now. Amazon have
Speaker 13: last quarter posted about it eleven billion dollars worth of
Speaker 13: advertising and have a run rate to about forty billion
Speaker 13: dollars by the end of the year. And if you
Speaker 13: think of traditional TV over all of the TV players,
Speaker 13: that's a sixty six billion dollar market. So Amazon in
Speaker 13: the retail space forty billion. All of TV over all
Speaker 13: of the years that it's been playing about sixty six.
Speaker 13: Is this real opportunity in retail media that's just exploding.
Speaker 1: How are retailers in general, how are they as clients
Speaker 1: adapting to this whole concept of you can monetize your
Speaker 1: kind of your user base, that whole concept through advertising.
Speaker 13: Another thing, Well, it's interesting because they're not media players.
Speaker 13: You know, there are retailers, but they look at Amazon,
Speaker 13: and they look at Walmart, they look at instacart, and
Speaker 13: they look at how valuable this proposition is. And this
Speaker 13: is where critio comes in because we come into them
Speaker 13: and say, hey, we've got this platform, we will represent you,
Speaker 13: we'll make sure that the ad tech works for you,
Speaker 13: and we'll make sure that you're seen as compared to
Speaker 13: others for all of the advertisers that we represent and
Speaker 13: all of the agencies, the five big holding companies that
Speaker 13: we represent. So we create an ecosystem around retail media
Speaker 13: and they love that because they don't have to think
Speaker 13: this through themselves.
Speaker 1: Right, how do the agencies think about retail media. It's
Speaker 1: not going to ABC and buying a thirty second spot
Speaker 1: on the Super Bowl or whatever. So it's a different
Speaker 1: type of channel. How do they view it?
Speaker 4: Yeah, it's different.
Speaker 13: These are all tactics. So if you think of an agency,
Speaker 13: their job is to make money for their brand. And
Speaker 13: so depending on what the brand is and what they're
Speaker 13: objective is, they'll either go to broad based advertising, brand
Speaker 13: advertising across traditional TV, or they'll go into a big
Speaker 13: audience on a social environment or a search environment, or
Speaker 13: they'll go to a precision a point of sale across retailers.
Speaker 13: And so they think about that as a new way
Speaker 13: to get a return on investment for those brands, for
Speaker 13: those advertisers.
Speaker 1: So we think about retail, I think you know Amazon
Speaker 1: or Walmart, but there are adjacent retail industry, travel, hotels,
Speaker 1: all that kind of stuff. How's that business evolving because
Speaker 1: people are spending a lot of time on.
Speaker 13: This exis well definitely, So we see retail media as
Speaker 13: sort of the core of this, and then there's this
Speaker 13: broader opportunity called commerce media. And that's exactly what you're
Speaker 13: talking about. So Uber was a client that we signed
Speaker 13: last quarter. And if you go to uber eats, you
Speaker 13: see critio and action, you see the sponsored ads appearing
Speaker 13: when you're searching for a product. You see their display advertising,
Speaker 13: their video advertising, and they look for all intensive center
Speaker 13: person purposes like Amazon.
Speaker 9: When you go there.
Speaker 13: So it's really interesting to see how that's going to unfold.
Speaker 1: It's interesting we see this a lot companies, platforms have
Speaker 1: this audience, this unique audience, and the question is how
Speaker 1: do you monetize it. The current example I have, and
Speaker 1: I've mentioned this to the company is Peloton. They're searching
Speaker 1: for revenue, and I'm like, you've got X number of
Speaker 1: millions of people and they're crazy people. Because I am
Speaker 1: one of them and as is my household. There's no
Speaker 1: you need to go down to Peloton people and start
Speaker 1: pitching them to monetize starts putting some ads on there.
Speaker 4: But it's so true.
Speaker 13: I mean, they're a valuable audience and they're if their
Speaker 13: shoppers or they're in that mindset, go sell me fire
Speaker 13: product related to physical fitness, and their prime candidate that.
Speaker 1: Is that That is kind of kind of what you
Speaker 1: guys do and kind of what a lot of smart
Speaker 1: people in the ad tech space are trying to enable.
Speaker 1: Is the for folks to monetize their audience. Megan Clark
Speaker 1: and thanks so much for joining us. Megan is the
Speaker 1: CEO of Cridio again Ada traded stock. You know, I
Speaker 1: like to flip these things around all the time. Crt
Speaker 1: OH is the ticker seven buys six holds on the
Speaker 1: stock and oneself, so a little bit divided street there.
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 2: at Matt Miller nineteen seventy three.
Speaker 1: And I'm fall Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio