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This is Bloomberg Intelligence 2 00:00:11,640 --> 00:00:13,760 Speaker 1: with Scarletfoo and Paul Sweeney. 3 00:00:13,880 --> 00:00:16,680 Speaker 2: Concerned about rising crisis spooking investors? 4 00:00:16,720 --> 00:00:19,000 Speaker 3: What does renewables investment look like in the US? 5 00:00:19,239 --> 00:00:23,000 Speaker 2: More power talk coming out of this administration. 6 00:00:22,560 --> 00:00:26,279 Speaker 1: Breaking market headlines and corporate news from across the globe. 7 00:00:26,280 --> 00:00:28,280 Speaker 3: The President wants a lower interest rates, He wants a 8 00:00:28,360 --> 00:00:29,160 Speaker 3: rate cut cycle. 9 00:00:29,240 --> 00:00:29,680 Speaker 4: How do you. 10 00:00:29,680 --> 00:00:31,640 Speaker 2: Broaden out the AI play? 11 00:00:31,880 --> 00:00:33,599 Speaker 3: Are people just looking for someone to worry about when 12 00:00:33,640 --> 00:00:34,240 Speaker 3: it comes to China? 13 00:00:34,440 --> 00:00:38,880 Speaker 1: Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio 14 00:00:39,080 --> 00:00:41,240 Speaker 1: Originals and the Bloomberg Business App. 15 00:00:42,200 --> 00:00:44,519 Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big 16 00:00:44,560 --> 00:00:47,000 Speaker 2: business stories impacting Wall Street and the global markets. 17 00:00:47,080 --> 00:00:49,280 Speaker 3: Each and every week, we provide in depth research and 18 00:00:49,360 --> 00:00:51,320 Speaker 3: data on some of the two thousand companies and one 19 00:00:51,400 --> 00:00:54,000 Speaker 3: hundred and thirty industries are analysts cover worldwide. 20 00:00:54,040 --> 00:00:56,040 Speaker 2: Today, we'll look at why AI is emerging as a 21 00:00:56,040 --> 00:00:58,760 Speaker 2: catalyst for office space demand despite fears of job cuts. 22 00:00:58,920 --> 00:01:01,560 Speaker 3: Plus we'll discuss what you sent. Thirteen f filings revealed 23 00:01:01,560 --> 00:01:05,319 Speaker 3: about Warren Buffett's last quarter as CEO of Berkshire Hathaway. 24 00:01:05,080 --> 00:01:07,440 Speaker 2: But first we begin with news from the farm machinery 25 00:01:07,520 --> 00:01:08,160 Speaker 2: leader Deer. 26 00:01:08,440 --> 00:01:11,360 Speaker 3: This week, Deer boosted its annual profit outlook as the company, 27 00:01:11,400 --> 00:01:14,440 Speaker 3: which is the world's biggest farm machinery maker, anticipates the 28 00:01:14,480 --> 00:01:16,399 Speaker 3: agriculture economy will soon get better. 29 00:01:16,520 --> 00:01:16,800 Speaker 5: For more. 30 00:01:16,880 --> 00:01:19,920 Speaker 2: We were joined by Chris Ciolino, Bloomberg Intelligence senior US 31 00:01:20,040 --> 00:01:21,000 Speaker 2: machinery analyst. 32 00:01:21,200 --> 00:01:23,319 Speaker 3: We began by asking Chris for his take on the 33 00:01:23,400 --> 00:01:24,199 Speaker 3: latest at Deer. 34 00:01:24,600 --> 00:01:27,160 Speaker 6: It was a really solid beat and race quarter, and 35 00:01:27,200 --> 00:01:29,000 Speaker 6: I think this kind of gives us the all clear 36 00:01:29,040 --> 00:01:31,559 Speaker 6: on the cycle and that you know, twenty six will 37 00:01:31,600 --> 00:01:35,000 Speaker 6: be the trough earnings year. The one Q beat was 38 00:01:35,560 --> 00:01:40,319 Speaker 6: broad based, all segments, better top line, better margins than expected, 39 00:01:40,440 --> 00:01:44,440 Speaker 6: really on the back of higher shipment volumes, with particular 40 00:01:44,440 --> 00:01:49,320 Speaker 6: strength in the small agg business and construction. Those are 41 00:01:49,400 --> 00:01:52,000 Speaker 6: markets that you know, have started to already recover now 42 00:01:52,040 --> 00:01:55,400 Speaker 6: this year. The large agg business, which is obviously their 43 00:01:55,640 --> 00:01:58,800 Speaker 6: bigger growth engine, continues to be soft, but I think 44 00:01:58,840 --> 00:02:01,720 Speaker 6: we're seeing that business to stabilize and really for the 45 00:02:01,760 --> 00:02:04,000 Speaker 6: first time, you know, in years, we're starting to see 46 00:02:04,000 --> 00:02:06,760 Speaker 6: some green shoots emerge there. Order books, you know, strengthened 47 00:02:06,760 --> 00:02:08,240 Speaker 6: a little bit during the quarter as well. 48 00:02:08,639 --> 00:02:12,360 Speaker 3: How does this compare in contrast with what CNCH Industrial 49 00:02:12,440 --> 00:02:15,359 Speaker 3: reported earlier this week, which took a more it feels 50 00:02:15,400 --> 00:02:16,440 Speaker 3: like a cautious stance. 51 00:02:17,560 --> 00:02:19,919 Speaker 6: Yeah, you know, I think so. Both companies are calling 52 00:02:20,000 --> 00:02:22,440 Speaker 6: twenty six as the bottom. I think that's pretty well 53 00:02:22,480 --> 00:02:25,480 Speaker 6: understood at this point. I think the incremental piece coming 54 00:02:25,480 --> 00:02:27,960 Speaker 6: out of Deer is that you're starting to see some 55 00:02:28,200 --> 00:02:31,680 Speaker 6: early signs of improvement in the North American lar jag business. 56 00:02:32,120 --> 00:02:34,480 Speaker 6: That's a market they're projecting in terms of unit volumes 57 00:02:34,480 --> 00:02:37,080 Speaker 6: so to be down fifteen to twenty percent this year. 58 00:02:37,360 --> 00:02:39,160 Speaker 6: That's going to put volumes at the lowest level in 59 00:02:39,200 --> 00:02:41,639 Speaker 6: more than four decades. But what you're starting to hear 60 00:02:41,639 --> 00:02:44,040 Speaker 6: from them this quarter is that the order books strengthened, 61 00:02:44,080 --> 00:02:46,919 Speaker 6: particularly just in the last month of the quarter. You're 62 00:02:46,919 --> 00:02:48,919 Speaker 6: starting to see a little bit more trade flows going 63 00:02:48,960 --> 00:02:51,480 Speaker 6: to China, the fleets continue to age, you have the 64 00:02:51,560 --> 00:02:54,760 Speaker 6: government aid support, so this is not a big step change, 65 00:02:54,800 --> 00:02:57,160 Speaker 6: but it's really the first signs of incremental improvement. 66 00:02:58,040 --> 00:03:00,680 Speaker 2: You got to have a great sense of time. Chris 67 00:03:01,360 --> 00:03:03,680 Speaker 2: as I said, Deer's up forty two percent year to date, 68 00:03:03,760 --> 00:03:06,880 Speaker 2: so the market's anticipating this business bottoming and then turning up. 69 00:03:07,200 --> 00:03:09,679 Speaker 2: How long is this cycle for some of these companies 70 00:03:09,720 --> 00:03:11,280 Speaker 2: that you follow here, they're cyclical. 71 00:03:11,680 --> 00:03:14,280 Speaker 6: Yeah, so a typical downturn in this business will last 72 00:03:14,320 --> 00:03:16,440 Speaker 6: anywhere from two to four years. This will be the 73 00:03:16,480 --> 00:03:20,480 Speaker 6: third year of the downturn. So in terms of the downturn, 74 00:03:20,520 --> 00:03:24,720 Speaker 6: it looks very similar to what we've seen historically. Typically 75 00:03:24,880 --> 00:03:29,400 Speaker 6: the upturns last a little bit longer. But you know, 76 00:03:29,480 --> 00:03:33,520 Speaker 6: this is an incredibly volatile market and it's ultimately dictated 77 00:03:33,560 --> 00:03:37,480 Speaker 6: by crop prices and farmer profitability. So the crop outlooks 78 00:03:38,000 --> 00:03:40,600 Speaker 6: do have a significant impact here in terms of what 79 00:03:40,720 --> 00:03:43,000 Speaker 6: farmers are willing and able to spend. 80 00:03:44,560 --> 00:03:47,920 Speaker 3: And it looks like Deer relies on the US for 81 00:03:48,360 --> 00:03:51,480 Speaker 3: a huge part of its revenue, if not half. What 82 00:03:51,560 --> 00:03:55,320 Speaker 3: is it doing in terms of growing it's business overseas? 83 00:03:55,920 --> 00:03:58,680 Speaker 3: Is it just kind of a trajectory of growth there 84 00:03:58,800 --> 00:04:01,160 Speaker 3: that is so learn to what it sees in the US. 85 00:04:01,280 --> 00:04:03,240 Speaker 3: Or is it competing against some established players? 86 00:04:04,360 --> 00:04:07,560 Speaker 6: Yeah, so they're regional markets, But in terms of what 87 00:04:07,680 --> 00:04:11,840 Speaker 6: markets matter for Deer's it's North America and then South 88 00:04:11,840 --> 00:04:15,840 Speaker 6: America is becoming more important reason being those are you know, 89 00:04:15,920 --> 00:04:20,720 Speaker 6: typically the bigger producers of road crops, corn, soybeans. They're 90 00:04:20,800 --> 00:04:25,000 Speaker 6: larger farms, they utilize more the larger equipment that you know, 91 00:04:25,120 --> 00:04:28,160 Speaker 6: is more conducive to some of the precision technologies which 92 00:04:28,440 --> 00:04:31,359 Speaker 6: come in at a higher margin. Europe tends to be 93 00:04:31,400 --> 00:04:33,440 Speaker 6: a little bit more stable. They get a lot of 94 00:04:33,480 --> 00:04:36,960 Speaker 6: government support, So I think of that market as less cyclical. 95 00:04:37,480 --> 00:04:41,039 Speaker 6: You know, lower peaks, higher troughs. Those are really kind 96 00:04:41,040 --> 00:04:43,240 Speaker 6: of the three big growth engines if you think about 97 00:04:43,320 --> 00:04:44,920 Speaker 6: Deer's geographic exposure. 98 00:04:45,800 --> 00:04:48,880 Speaker 2: So what is Deer saying about the US farmer these days? 99 00:04:50,600 --> 00:04:54,560 Speaker 6: Listen, things are still challenging. Let's not understate that, you know, 100 00:04:54,600 --> 00:04:57,400 Speaker 6: crop prices really haven't moved that much and still under 101 00:04:57,440 --> 00:05:00,479 Speaker 6: tremendous pressure. As we look at another year of you know, 102 00:05:00,680 --> 00:05:06,000 Speaker 6: near record production, they are seeing some signs of stability, 103 00:05:06,080 --> 00:05:08,080 Speaker 6: I would say, And like I mentioned earlier, I think 104 00:05:08,080 --> 00:05:10,800 Speaker 6: we're starting to see some early signs of improved order 105 00:05:10,839 --> 00:05:14,200 Speaker 6: activity again, albeit off a very low base, and a 106 00:05:14,240 --> 00:05:16,200 Speaker 6: lot of that's predicated on you know, we're starting to 107 00:05:16,200 --> 00:05:19,320 Speaker 6: see a little bit more exports going to China, you 108 00:05:19,400 --> 00:05:23,440 Speaker 6: have a continued government support, and then also you know, 109 00:05:23,560 --> 00:05:25,520 Speaker 6: there's certainly a need for replacement. The age of the 110 00:05:25,520 --> 00:05:27,400 Speaker 6: fleet is as old as it's been in a number 111 00:05:27,440 --> 00:05:30,480 Speaker 6: of years. So as farmers get more money, you start 112 00:05:30,480 --> 00:05:32,880 Speaker 6: to see some stability on the crop price front. That 113 00:05:32,880 --> 00:05:35,080 Speaker 6: that should, you know, unlock some pent up demand. 114 00:05:36,080 --> 00:05:38,440 Speaker 3: Yeah, I'm just looking at the stock price trading at 115 00:05:38,480 --> 00:05:40,560 Speaker 3: a record high, but it really has gone on a 116 00:05:40,680 --> 00:05:45,000 Speaker 3: tear over the past three weeks or two weeks. What 117 00:05:45,080 --> 00:05:47,960 Speaker 3: accounts for that? Was it anticipation of this report or 118 00:05:48,040 --> 00:05:49,040 Speaker 3: was it something else. 119 00:05:50,080 --> 00:05:52,560 Speaker 6: A combination of things, you know. I think, you know, 120 00:05:52,600 --> 00:05:55,800 Speaker 6: it's pretty well understood now that this year will be 121 00:05:55,880 --> 00:05:58,159 Speaker 6: the trough of the cycle, so I think there's some 122 00:05:58,240 --> 00:06:00,240 Speaker 6: positioning ahead of that. And you know, a lot these 123 00:06:00,240 --> 00:06:03,160 Speaker 6: heavy machinery companies typically do well in early in the 124 00:06:03,200 --> 00:06:06,600 Speaker 6: rate cut environment. So the anticipation of lower rates stronger 125 00:06:06,640 --> 00:06:10,320 Speaker 6: growth environment not only in the ag business, but also construction. 126 00:06:10,640 --> 00:06:13,960 Speaker 6: I think that sometimes gets overlooked. They're completely refreshing their 127 00:06:14,000 --> 00:06:17,640 Speaker 6: excavator product lineup. They have a pretty strong position in 128 00:06:17,720 --> 00:06:21,600 Speaker 6: construction equipment, and I think the growth dynamics there moving 129 00:06:21,920 --> 00:06:24,440 Speaker 6: for twenty six and twenty seven are still quite favorable. 130 00:06:24,640 --> 00:06:28,400 Speaker 2: Our Thanks to Chris Ciolino, Bloomberg Intelligence Senior US machinery analyst. 131 00:06:28,680 --> 00:06:30,839 Speaker 3: We move next to the retail giant Walmart. 132 00:06:31,000 --> 00:06:33,760 Speaker 2: This week, Walmart issued a forecast for four year earnings 133 00:06:33,760 --> 00:06:37,800 Speaker 2: that missed higher expectations, flagging the unpredictable state of trade 134 00:06:37,839 --> 00:06:39,280 Speaker 2: and labor market conditions. 135 00:06:39,320 --> 00:06:41,920 Speaker 3: So we brought in Emily Cone, Bloomberg's consumer team leader. 136 00:06:42,040 --> 00:06:44,120 Speaker 2: We first asked Emily for her take on Walmart's most 137 00:06:44,120 --> 00:06:44,880 Speaker 2: recent results. 138 00:06:45,080 --> 00:06:49,120 Speaker 7: There's another solid quarter for Walmart in the fourth quarter. 139 00:06:49,560 --> 00:06:52,719 Speaker 7: They did come out with conservative guidance, which is pretty 140 00:06:52,760 --> 00:06:57,279 Speaker 7: typical for Walmart, come out with cautious guidance and then 141 00:06:57,279 --> 00:06:59,400 Speaker 7: exceed it later in the year, which is sort of 142 00:06:59,400 --> 00:07:02,720 Speaker 7: their playbook. And then their guidance was also paired with 143 00:07:02,800 --> 00:07:07,400 Speaker 7: some warning signs or cautious outlook about the economy, which 144 00:07:07,400 --> 00:07:08,400 Speaker 7: I found interesting. 145 00:07:09,120 --> 00:07:11,000 Speaker 3: Yeah, I want to pick up on that idea, because 146 00:07:11,040 --> 00:07:14,720 Speaker 3: the CFO talked to Bloomberg and mentioned that tariff driven 147 00:07:14,760 --> 00:07:18,200 Speaker 3: inflation has reached or is reaching its peak, which I 148 00:07:18,240 --> 00:07:21,160 Speaker 3: thought was really interesting given that there's so many people 149 00:07:21,160 --> 00:07:24,680 Speaker 3: expecting rate cuts later on this year. Given that inflation 150 00:07:24,800 --> 00:07:27,640 Speaker 3: seems to have settled down, what more can they tell 151 00:07:27,680 --> 00:07:28,600 Speaker 3: us about pricing? 152 00:07:29,880 --> 00:07:33,160 Speaker 7: I think they told us that prices rose one percent 153 00:07:33,200 --> 00:07:35,080 Speaker 7: in the quarter, which I think was the same as 154 00:07:35,080 --> 00:07:38,240 Speaker 7: the last quarter. But they also mentioned other things like 155 00:07:39,040 --> 00:07:45,320 Speaker 7: tepid job growth, student loan delinquencies, rising consumer sentiment being uneven, 156 00:07:46,240 --> 00:07:49,760 Speaker 7: things that you know, would give any CEO or CFO 157 00:07:49,880 --> 00:07:53,840 Speaker 7: or company pause when they're trying to outlay what might 158 00:07:53,920 --> 00:07:55,160 Speaker 7: happen in the coming year. 159 00:07:55,560 --> 00:07:58,000 Speaker 2: And I've noticed over the last a couple of years 160 00:07:58,000 --> 00:08:00,480 Speaker 2: they've talked about how maybe their customer base is changing 161 00:08:00,520 --> 00:08:02,920 Speaker 2: a little bit. People some middle class, maybe even upper 162 00:08:03,480 --> 00:08:06,520 Speaker 2: income areas coming down to Walmart. They're seeing more and 163 00:08:06,520 --> 00:08:07,760 Speaker 2: more of that. Is that still the case. 164 00:08:07,880 --> 00:08:10,200 Speaker 7: I think yes, that's definitely the case, and that's sort 165 00:08:10,200 --> 00:08:13,800 Speaker 7: of their superpower right now that you know, poor this 166 00:08:13,920 --> 00:08:16,040 Speaker 7: is the case shaped economy that we talk about a 167 00:08:16,040 --> 00:08:20,480 Speaker 7: lot poor customers are pulling back in areas, but what 168 00:08:20,480 --> 00:08:23,720 Speaker 7: they're seeing is wealthier clients clientele who might not have 169 00:08:23,800 --> 00:08:27,560 Speaker 7: come to Walmart in the past shopping at Walmart, especially 170 00:08:27,600 --> 00:08:31,280 Speaker 7: for things like their groceries, which they've invested in a 171 00:08:31,280 --> 00:08:33,400 Speaker 7: lot in the last ten years. You can now find 172 00:08:33,520 --> 00:08:35,800 Speaker 7: organic groceries and that's really paying off. 173 00:08:36,040 --> 00:08:38,600 Speaker 3: And they also have this Walmart Plus program which they're 174 00:08:38,640 --> 00:08:41,000 Speaker 3: really putting a lot of emphasis on. It's actually one 175 00:08:41,000 --> 00:08:44,000 Speaker 3: of the benefits if you're an American Express Platinum cardholder, 176 00:08:44,040 --> 00:08:46,640 Speaker 3: which speaks to that idea that they're really reaching for 177 00:08:46,679 --> 00:08:49,559 Speaker 3: the higher income consumer. How's that going and is it 178 00:08:49,720 --> 00:08:53,240 Speaker 3: making any headway on stealing Marcus share from Amazon with 179 00:08:53,320 --> 00:08:54,240 Speaker 3: its Prime program. 180 00:08:54,679 --> 00:08:57,559 Speaker 7: Yeah, they're seeing a huge growth in e commerce. I 181 00:08:57,640 --> 00:08:59,800 Speaker 7: think that was one of the major areas that grew 182 00:08:59,800 --> 00:09:04,120 Speaker 7: this quarter. That is drawing in higher income shoppers who 183 00:09:04,200 --> 00:09:08,960 Speaker 7: actually pay even more than the membership for faster deliveries, 184 00:09:09,000 --> 00:09:12,840 Speaker 7: speedier pickup times, and that's helping them also grow market 185 00:09:12,840 --> 00:09:17,319 Speaker 7: share among wealthier shoppers who are looking for convenience over 186 00:09:17,640 --> 00:09:18,400 Speaker 7: everything else. 187 00:09:19,040 --> 00:09:21,360 Speaker 2: What are they saying about Did they even talk about 188 00:09:21,400 --> 00:09:24,360 Speaker 2: on comments called tariffs anymore? That's still a discussion point. 189 00:09:25,120 --> 00:09:27,240 Speaker 2: And what's the company saying about tariffs? 190 00:09:27,520 --> 00:09:31,480 Speaker 7: Yeah, tariffs came up a little bit, but they said 191 00:09:31,520 --> 00:09:37,720 Speaker 7: that they expect that that tariff driven inflation to peak now. 192 00:09:38,920 --> 00:09:42,360 Speaker 7: I think they also benefit here again from their groceries. 193 00:09:42,440 --> 00:09:45,880 Speaker 7: Groceries are a portion of their assortment that is less 194 00:09:45,880 --> 00:09:50,640 Speaker 7: impacted by tariffs, and they're really benefiting from I think 195 00:09:50,679 --> 00:09:53,360 Speaker 7: sixty percent of their sales come from groceries these days. 196 00:09:54,120 --> 00:09:56,679 Speaker 3: You mentioned e commerce. It sounds like Walmart will continue 197 00:09:56,720 --> 00:10:00,520 Speaker 3: to invest in technology and automation. What were some of 198 00:10:00,520 --> 00:10:02,400 Speaker 3: the things that they flagged that they're working on in 199 00:10:02,480 --> 00:10:06,079 Speaker 3: terms of innovation and building on the technology that they 200 00:10:06,080 --> 00:10:08,280 Speaker 3: have already implemented into their system. 201 00:10:08,440 --> 00:10:12,520 Speaker 7: Yeah, it was interesting. They said most of their fulfillment 202 00:10:12,600 --> 00:10:15,800 Speaker 7: and stores is now coming from automated warehouses, most of 203 00:10:15,840 --> 00:10:20,120 Speaker 7: their fulfillment for e commerces coming from automated warehouses. They 204 00:10:20,160 --> 00:10:26,520 Speaker 7: have really made huge gains here to speed up fulfillment centers, 205 00:10:26,640 --> 00:10:29,760 Speaker 7: and I think we should expect to see more of 206 00:10:29,800 --> 00:10:32,800 Speaker 7: that in the coming quarters. They cited story models and 207 00:10:32,880 --> 00:10:35,880 Speaker 7: automation as the main areas where they're going to be 208 00:10:35,880 --> 00:10:37,280 Speaker 7: continuing to invest. 209 00:10:37,480 --> 00:10:39,400 Speaker 2: You know, one of the things that's amazed me really 210 00:10:39,440 --> 00:10:42,480 Speaker 2: for ten fifteen years about Walmart is how well their 211 00:10:42,520 --> 00:10:45,120 Speaker 2: digital business has been, their e commerce business. They have 212 00:10:45,840 --> 00:10:48,080 Speaker 2: built that to not only I mean they can go 213 00:10:48,160 --> 00:10:51,000 Speaker 2: toe to toe with Amazon dot Com just about anything. 214 00:10:51,080 --> 00:10:53,560 Speaker 2: It seems like is that still a growth story for them? 215 00:10:53,920 --> 00:10:56,559 Speaker 7: Yeah? I think they said something like a third. They've 216 00:10:56,600 --> 00:11:00,920 Speaker 7: seen a huge amount of shoppers are now actually interacting 217 00:11:01,000 --> 00:11:07,520 Speaker 7: with their AI, their AI assistant on their app and 218 00:11:07,679 --> 00:11:13,120 Speaker 7: on their website that really helping people make shopping decisions faster. 219 00:11:13,880 --> 00:11:17,000 Speaker 7: They're seeing an increasing spend from customers who interact with 220 00:11:17,120 --> 00:11:20,640 Speaker 7: the AI shopping assistant, they said, which which I think 221 00:11:20,640 --> 00:11:21,520 Speaker 7: we can expect to see. 222 00:11:21,720 --> 00:11:24,640 Speaker 2: Just in the last five years, their ibathas roughly doubled, 223 00:11:25,040 --> 00:11:26,480 Speaker 2: but their cap X is tripled. 224 00:11:27,880 --> 00:11:29,680 Speaker 3: Commerce build out, that tech build out, yep. 225 00:11:29,760 --> 00:11:31,520 Speaker 2: So I mean they're putting their money where their mount 226 00:11:31,640 --> 00:11:31,960 Speaker 2: is here. 227 00:11:32,200 --> 00:11:34,600 Speaker 3: You know what Paul's dream job is, Emily does. He 228 00:11:34,720 --> 00:11:36,200 Speaker 3: mentioned this to you, No. 229 00:11:36,440 --> 00:11:39,280 Speaker 2: Be a greeter at Walmart. See, I'm a nice, friendly guy. 230 00:11:39,280 --> 00:11:41,319 Speaker 3: I want themock. He wants to wear the smock. I 231 00:11:41,440 --> 00:11:44,679 Speaker 3: bet you know. To that point, Walmart employees about two 232 00:11:44,679 --> 00:11:47,920 Speaker 3: point one million people, which makes it a huge employer. 233 00:11:48,520 --> 00:11:50,160 Speaker 3: Do we have a sense of whether they've been growing 234 00:11:50,160 --> 00:11:54,400 Speaker 3: their employee base at all with this commitment to technology, 235 00:11:54,440 --> 00:11:55,040 Speaker 3: to automation. 236 00:11:56,280 --> 00:11:59,600 Speaker 7: I think they've definitely made a huge investment in technology. 237 00:12:00,200 --> 00:12:02,080 Speaker 7: They have a lot more people working on tech than 238 00:12:02,120 --> 00:12:04,280 Speaker 7: they ever have, and I think we could expect to 239 00:12:04,320 --> 00:12:06,040 Speaker 7: see more of that for sure. 240 00:12:06,480 --> 00:12:08,600 Speaker 3: That was Emily Cone, Bloomberg Consumer Team Leader. 241 00:12:08,720 --> 00:12:11,560 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 242 00:12:11,600 --> 00:12:13,720 Speaker 2: depth research and data on two thousand companies and one 243 00:12:13,840 --> 00:12:14,880 Speaker 2: hundred and thirty industries. 244 00:12:15,000 --> 00:12:18,080 Speaker 3: You can access Bloomberg Intelligence via bi go on the terminal. 245 00:12:18,120 --> 00:12:19,240 Speaker 3: I'm Scarlett Foo. 246 00:12:19,120 --> 00:12:21,280 Speaker 2: And I'm Paul Sweeney, and this is Bloomberg. 247 00:12:26,000 --> 00:12:30,520 Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 248 00:12:30,840 --> 00:12:34,080 Speaker 1: on Bloomberg Radio. 249 00:12:33,040 --> 00:12:36,559 Speaker 2: Next to news from the amusement resort operator six Flags Entertainment. 250 00:12:36,679 --> 00:12:39,160 Speaker 3: This week, six Flags reported twenty twenty five earnings and 251 00:12:39,280 --> 00:12:42,160 Speaker 3: revenue that were slightly ahead of analyst estimates. For more 252 00:12:42,160 --> 00:12:44,280 Speaker 3: on this and the latest in the travel and leisure space, 253 00:12:44,320 --> 00:12:47,200 Speaker 3: were joined by Jody Lori, Bloomberg Intelligence credit analyst. 254 00:12:47,440 --> 00:12:50,040 Speaker 2: We first asked Jody for her take on six Flags earnings. 255 00:12:50,400 --> 00:12:53,080 Speaker 8: So I think what's interesting, Paul, is that we're seeing 256 00:12:53,160 --> 00:12:56,199 Speaker 8: that some of what six Flags said, oddly was similar 257 00:12:56,240 --> 00:13:00,000 Speaker 8: to what we saw on APHIS's call. And both companies 258 00:13:00,120 --> 00:13:03,760 Speaker 8: has had these large impairment charges to boost EBADA, but 259 00:13:03,800 --> 00:13:07,720 Speaker 8: it didn't necessarily equate to cash generation. And both companies 260 00:13:07,720 --> 00:13:10,760 Speaker 8: are focused on improving their debt load and also just 261 00:13:11,000 --> 00:13:14,040 Speaker 8: the core of the business, the operational side, adding in 262 00:13:14,240 --> 00:13:17,480 Speaker 8: AI to boost the business and figuring out ways to 263 00:13:17,480 --> 00:13:19,880 Speaker 8: turn around, and both companies are dealing with new CEOs. 264 00:13:20,160 --> 00:13:23,359 Speaker 8: So it's just like a weird sort of compare contrast 265 00:13:23,480 --> 00:13:26,120 Speaker 8: scenario that I've been toying with my head. 266 00:13:26,559 --> 00:13:28,720 Speaker 3: I mean, Paul was talking about how Hershey Park was 267 00:13:28,720 --> 00:13:32,200 Speaker 3: his first amusement park, and then we're obviously the big 268 00:13:32,240 --> 00:13:37,400 Speaker 3: one would be Disney yep or Universal. Have you been there? No, Okay, 269 00:13:37,480 --> 00:13:38,440 Speaker 3: that's a pretty good one. 270 00:13:38,520 --> 00:13:39,800 Speaker 2: Yeah. 271 00:13:39,920 --> 00:13:42,600 Speaker 3: Is that the competition for six Flags or does it 272 00:13:42,600 --> 00:13:45,800 Speaker 3: work on a different level than those It is and. 273 00:13:45,800 --> 00:13:48,320 Speaker 8: It isn't the competition Scarlett. I mean, I think you know, 274 00:13:48,400 --> 00:13:52,280 Speaker 8: six Flags likes to compare itself more to alternatives in 275 00:13:52,440 --> 00:13:56,720 Speaker 8: leisure and entertainment. There was a great slide that they 276 00:13:56,760 --> 00:14:00,599 Speaker 8: provided that showcase the value proposition if you compare it 277 00:14:00,640 --> 00:14:05,040 Speaker 8: to like concert tickets or in inert sporting event. The 278 00:14:05,120 --> 00:14:07,440 Speaker 8: amount of time that you spend at six Flags, in 279 00:14:07,520 --> 00:14:10,600 Speaker 8: theory is all day, right, So the cost to enter 280 00:14:11,000 --> 00:14:13,640 Speaker 8: and the cost for the you know, the sort of 281 00:14:13,679 --> 00:14:16,120 Speaker 8: concessions is much lower than what you would pay to 282 00:14:16,160 --> 00:14:19,600 Speaker 8: go to a Taylor Swift concert. Now that said, I mean, 283 00:14:19,640 --> 00:14:22,400 Speaker 8: I think what's so interesting is is when the company combined, 284 00:14:22,800 --> 00:14:25,200 Speaker 8: there was this image that they could create like an 285 00:14:25,240 --> 00:14:29,040 Speaker 8: all pass promotion right that you can enter in all parks. 286 00:14:29,040 --> 00:14:31,760 Speaker 8: They've only finally started rolling out something that's a regional 287 00:14:31,800 --> 00:14:36,720 Speaker 8: pass recently, and I'm curious to see what could happen 288 00:14:36,840 --> 00:14:39,600 Speaker 8: with the company as they improve those sort of points 289 00:14:39,640 --> 00:14:41,560 Speaker 8: of it, because what's funny is if you look at 290 00:14:41,600 --> 00:14:44,480 Speaker 8: it from a revenue perspective, it did actually pretty well 291 00:14:44,520 --> 00:14:46,360 Speaker 8: this year compared to twenty four, and twenty four was 292 00:14:46,400 --> 00:14:49,040 Speaker 8: a pretty strong year. Same thing with some of the 293 00:14:49,240 --> 00:14:53,480 Speaker 8: per cap spending pieces of it, right, the per cap component, 294 00:14:53,640 --> 00:14:56,360 Speaker 8: the admissions were down, but the in park spending was decent, 295 00:14:56,720 --> 00:14:59,200 Speaker 8: and so you say, what's going on, like why are 296 00:14:59,280 --> 00:15:01,400 Speaker 8: they having such issues? And it comes down to an 297 00:15:01,400 --> 00:15:03,680 Speaker 8: operational issue. It comes down to the fact that the 298 00:15:03,720 --> 00:15:06,800 Speaker 8: legacy six Flags assets. I think we're in way worse 299 00:15:06,840 --> 00:15:09,840 Speaker 8: shape than Cedar Fair anticipated when they took on the company, 300 00:15:10,280 --> 00:15:12,120 Speaker 8: and they're saddled with a lot of debt. So it's 301 00:15:12,160 --> 00:15:14,200 Speaker 8: really a question of if the capital markets are going 302 00:15:14,240 --> 00:15:17,200 Speaker 8: to be encouraging enough to help them through. You know, 303 00:15:17,200 --> 00:15:19,440 Speaker 8: they help them through in January with a new issue, 304 00:15:19,520 --> 00:15:22,480 Speaker 8: but really are they able to sort of support the 305 00:15:22,560 --> 00:15:24,400 Speaker 8: company through this transition. 306 00:15:24,280 --> 00:15:26,640 Speaker 3: That park past You mentioned sounds like a you know, 307 00:15:26,680 --> 00:15:28,920 Speaker 3: the amusement park version of an epic past, which makes 308 00:15:28,960 --> 00:15:31,960 Speaker 3: sense if you're skier and you are chasing the weather 309 00:15:32,320 --> 00:15:34,360 Speaker 3: around the country. What doesn't make sense to go to, 310 00:15:34,600 --> 00:15:36,640 Speaker 3: you know, the West Coast for six flocks and they 311 00:15:36,680 --> 00:15:37,120 Speaker 3: come back. 312 00:15:37,680 --> 00:15:40,680 Speaker 8: I don't know it could scarlet. You don't talk to 313 00:15:40,800 --> 00:15:43,520 Speaker 8: Ira Jersey enough. Apparently, at least when it comes to 314 00:15:43,600 --> 00:15:46,080 Speaker 8: roller coasters. You probably talked him about interest rates. Next 315 00:15:46,080 --> 00:15:47,920 Speaker 8: time when you have him on, ask him about his 316 00:15:48,000 --> 00:15:51,119 Speaker 8: son's American Coasters Enthusiast card. 317 00:15:50,880 --> 00:15:52,440 Speaker 3: That he proudly carry. 318 00:15:52,760 --> 00:15:57,480 Speaker 8: If you are deep into the roller coaster dynamics and culture, 319 00:15:57,960 --> 00:16:00,360 Speaker 8: people will go to the end of the Earth. And 320 00:16:00,360 --> 00:16:02,600 Speaker 8: I am curious to see how the Middle East traction 321 00:16:02,760 --> 00:16:05,360 Speaker 8: for six Flags, for SeaWorld and for some of the 322 00:16:05,360 --> 00:16:07,960 Speaker 8: other parks that have expanded there. How that's going to 323 00:16:07,960 --> 00:16:10,960 Speaker 8: play out if you do see these park coaster enthusiasts 324 00:16:11,000 --> 00:16:13,320 Speaker 8: fly out to Saudi Aravia, fly out to the OAE 325 00:16:13,720 --> 00:16:15,200 Speaker 8: to ride certain coasters. 326 00:16:15,680 --> 00:16:18,840 Speaker 3: Our thanks to Jody Lourie, Bloomberg Intelligence credit analyst, we 327 00:16:18,880 --> 00:16:20,440 Speaker 3: move next to the real estate sector. 328 00:16:20,600 --> 00:16:24,680 Speaker 2: Bloomberg Intelligence recently put out research entitled AI Drives Office 329 00:16:24,680 --> 00:16:27,160 Speaker 2: demand amid job cut fears. 330 00:16:26,960 --> 00:16:29,920 Speaker 3: And according to BI, AI is emerging as a catalyst 331 00:16:30,000 --> 00:16:33,080 Speaker 3: for office demand, reinforcing leasing momentum in New York City 332 00:16:33,080 --> 00:16:33,960 Speaker 3: and San Francisco. 333 00:16:34,160 --> 00:16:36,120 Speaker 2: For more on this, we were joined by Jeffrey Langbaum, 334 00:16:36,240 --> 00:16:38,560 Speaker 2: Bloomberg Intelligence Senior US rit analyst. 335 00:16:38,880 --> 00:16:41,680 Speaker 3: We started our conversation by asking Jeffrey to discuss what 336 00:16:41,680 --> 00:16:44,200 Speaker 3: people are saying to him with regards to AI and 337 00:16:44,280 --> 00:16:44,920 Speaker 3: office space. 338 00:16:45,320 --> 00:16:47,400 Speaker 4: Right now, what people are thinking about is what the 339 00:16:47,440 --> 00:16:50,680 Speaker 4: impact is going to be on office space if AI 340 00:16:51,000 --> 00:16:55,800 Speaker 4: makes all of these industries that lease office space irrelevant. Okay, 341 00:16:55,840 --> 00:16:59,040 Speaker 4: what does that mean for demand for space? And you know, 342 00:16:59,080 --> 00:17:03,280 Speaker 4: we saw last week that you know that started with 343 00:17:03,320 --> 00:17:06,400 Speaker 4: software and then it went to you know, industry after 344 00:17:06,440 --> 00:17:08,359 Speaker 4: industry and ended up with the real estate brokers and 345 00:17:08,359 --> 00:17:10,640 Speaker 4: eventually the office rates getting hit hard. 346 00:17:11,119 --> 00:17:13,120 Speaker 3: So so far, this is just kind of fear that's 347 00:17:13,160 --> 00:17:16,240 Speaker 3: wafting across the market. Have we actually seen any evidence 348 00:17:16,359 --> 00:17:17,080 Speaker 3: of this happening. 349 00:17:17,200 --> 00:17:19,480 Speaker 4: Not yet, And in fact we've seen some of the opposite. 350 00:17:20,480 --> 00:17:25,520 Speaker 4: Leasing velocity has been at the highest level since before 351 00:17:25,560 --> 00:17:28,119 Speaker 4: the pandemic in markets like New York and San Francisco. 352 00:17:28,840 --> 00:17:32,440 Speaker 4: The reats that we follow names like sl Green Bornado 353 00:17:32,520 --> 00:17:36,640 Speaker 4: Boston properties are now BXP. These guys are reporting very 354 00:17:36,640 --> 00:17:39,440 Speaker 4: strong leasing volumes. We're starting to see occupancies tick up 355 00:17:39,480 --> 00:17:43,040 Speaker 4: off the bottom in their portfolios. And you know, one 356 00:17:43,080 --> 00:17:45,120 Speaker 4: of the one of the dynamics at play is that 357 00:17:45,320 --> 00:17:49,719 Speaker 4: AI firms are leasing space as they grow, and to 358 00:17:49,760 --> 00:17:53,679 Speaker 4: the extent that companies being you know, impacted by AI 359 00:17:54,359 --> 00:17:57,040 Speaker 4: start to receive a little bit, there's an offset there. 360 00:17:57,720 --> 00:18:02,679 Speaker 2: So your office reached docs last week sold off on 361 00:18:02,840 --> 00:18:03,320 Speaker 2: this fear. 362 00:18:03,960 --> 00:18:05,720 Speaker 4: Yeah, and it's not a new fear. I mean it's 363 00:18:05,720 --> 00:18:09,240 Speaker 4: been it's been at play for some time now. 364 00:18:09,560 --> 00:18:11,280 Speaker 5: You know, work from. 365 00:18:11,200 --> 00:18:15,040 Speaker 4: Home kind of worked its way through and everyone kind 366 00:18:15,040 --> 00:18:18,479 Speaker 4: of got comfortable with where hybrid kind of settled in, 367 00:18:18,600 --> 00:18:20,720 Speaker 4: and then you know what was the next thing to 368 00:18:20,800 --> 00:18:23,040 Speaker 4: hit office? And it was this And it's been you know, 369 00:18:23,080 --> 00:18:25,640 Speaker 4: it's been out there for probably a couple of quarters. Now, 370 00:18:25,640 --> 00:18:28,200 Speaker 4: what is the impact going to be? But last week 371 00:18:28,240 --> 00:18:30,960 Speaker 4: when software rolled over it, it's just compounded. 372 00:18:31,800 --> 00:18:35,320 Speaker 3: Is this something where because of the evidence that companies 373 00:18:35,400 --> 00:18:37,440 Speaker 3: are still leasing quite a bit of space, that we're 374 00:18:37,440 --> 00:18:40,280 Speaker 3: going to see a just as sharp recovery. 375 00:18:40,920 --> 00:18:45,960 Speaker 4: Well that's possible, but you know there's also the risk 376 00:18:46,080 --> 00:18:50,880 Speaker 4: that you know, the the equity markets are turbulent and forecasting, right, 377 00:18:50,920 --> 00:18:53,320 Speaker 4: and so there is the possibility that there will be 378 00:18:54,160 --> 00:18:57,679 Speaker 4: negative leasing news to come. It's certainly not showing up 379 00:18:57,680 --> 00:19:00,560 Speaker 4: in the numbers now. And we do think, and this 380 00:19:00,600 --> 00:19:02,720 Speaker 4: is backed up by some survey work that we just 381 00:19:02,760 --> 00:19:05,320 Speaker 4: did last week of office workers in both New York 382 00:19:05,320 --> 00:19:06,080 Speaker 4: and San Francisco. 383 00:19:06,560 --> 00:19:07,440 Speaker 9: We actually think that. 384 00:19:07,400 --> 00:19:10,879 Speaker 4: There's still a period of time to come where firms 385 00:19:10,920 --> 00:19:14,960 Speaker 4: are actually leasing more space, they're expanding their headcount to 386 00:19:14,960 --> 00:19:16,640 Speaker 4: try and figure out how to take advantage of AI 387 00:19:17,800 --> 00:19:22,280 Speaker 4: and to grow their business. And that could actually you know, 388 00:19:22,960 --> 00:19:25,800 Speaker 4: I don't know about a sharp snapback, but it could 389 00:19:25,880 --> 00:19:28,800 Speaker 4: you prolong the positive vibes for some time. 390 00:19:28,880 --> 00:19:30,800 Speaker 2: What's the sector of the remarket that you like the 391 00:19:30,800 --> 00:19:31,480 Speaker 2: most right now? 392 00:19:31,840 --> 00:19:36,760 Speaker 4: Senior housing is I mean, you know, it's the one 393 00:19:37,160 --> 00:19:42,600 Speaker 4: aspect where you cannot refute the demand story at all. 394 00:19:42,960 --> 00:19:46,000 Speaker 4: And at the same time, where real estate guys typically 395 00:19:46,200 --> 00:19:49,280 Speaker 4: love to build what to take advantage of those demand stories. 396 00:19:49,560 --> 00:19:51,560 Speaker 4: There's not much senior housing coming out of the ground, 397 00:19:51,800 --> 00:19:54,280 Speaker 4: so there's a huge supply demand imbalance. 398 00:19:54,480 --> 00:19:57,000 Speaker 3: Okay, but a senior housing more attractive in certain markets 399 00:19:57,040 --> 00:19:59,159 Speaker 3: over other markets. How do you pick between winners and 400 00:19:59,200 --> 00:20:00,600 Speaker 3: losers when it comes to senior housing. 401 00:20:00,640 --> 00:20:04,080 Speaker 4: It's really more about the local operator than it is 402 00:20:04,160 --> 00:20:07,359 Speaker 4: about the specific market. I mean, obviously, if you're in 403 00:20:07,400 --> 00:20:11,760 Speaker 4: a place where you know, economics aren't as strong and 404 00:20:11,800 --> 00:20:16,040 Speaker 4: you don't have this affluent a potential resident base, then 405 00:20:16,040 --> 00:20:20,840 Speaker 4: that's going to you know, potentially impact but local strong 406 00:20:20,920 --> 00:20:24,880 Speaker 4: local operators. When there's not a lot of supply coming 407 00:20:24,880 --> 00:20:27,000 Speaker 4: out of the ground, and you know you basically just 408 00:20:27,040 --> 00:20:30,560 Speaker 4: have an aging American population that is going to need 409 00:20:30,600 --> 00:20:34,240 Speaker 4: housing solutions, it's really a play across the board, all right. 410 00:20:34,240 --> 00:20:38,200 Speaker 2: Thanks to Jeff Langbaum, Bloomberg Intelligence Senior US Route analyst, we. 411 00:20:38,119 --> 00:20:41,080 Speaker 3: Move now to some research at Bloomberg Intelligence recently published 412 00:20:41,080 --> 00:20:42,000 Speaker 3: on American Express. 413 00:20:42,119 --> 00:20:45,240 Speaker 2: According to BI, American Express is focused on attracting new 414 00:20:45,280 --> 00:20:48,720 Speaker 2: premium cardholders should help it meet its consensus EPs growth 415 00:20:48,760 --> 00:20:50,560 Speaker 2: in twenty twenty six and twenty twenty seven. 416 00:20:50,680 --> 00:20:53,160 Speaker 3: So we brought in Edward D. Jerry and Bloomberg Intelligence 417 00:20:53,200 --> 00:20:54,520 Speaker 3: consumer finance analyst. 418 00:20:55,000 --> 00:20:57,720 Speaker 2: We first asked ed about Amex's most recent quarter and 419 00:20:57,800 --> 00:21:00,520 Speaker 2: what we've learned since a company rolled out it's increased 420 00:21:00,560 --> 00:21:02,240 Speaker 2: fee for the Platinum card. 421 00:21:02,440 --> 00:21:05,200 Speaker 5: When they reported the quarter, great quarter. 422 00:21:05,920 --> 00:21:09,199 Speaker 10: Uh, everything everything kind of in line with expectations or 423 00:21:09,240 --> 00:21:13,080 Speaker 10: in some areas better and gave great guidance in terms 424 00:21:13,080 --> 00:21:17,240 Speaker 10: of mid teens EPs growth for twenty twenty six. And 425 00:21:17,359 --> 00:21:19,400 Speaker 10: you know a lot of a lot of conversation about 426 00:21:19,400 --> 00:21:22,080 Speaker 10: the refresh and how great the refresh is going and 427 00:21:22,119 --> 00:21:25,119 Speaker 10: acquiring you know, lots of new customers. 428 00:21:25,600 --> 00:21:25,840 Speaker 9: Uh. 429 00:21:26,000 --> 00:21:28,359 Speaker 5: But generally there were two things that. 430 00:21:28,320 --> 00:21:31,200 Speaker 10: Sort of analysts picked on in the quarter when you're 431 00:21:31,200 --> 00:21:33,920 Speaker 10: when you're trading that sort of a high multiple financial 432 00:21:34,720 --> 00:21:36,120 Speaker 10: and and those two things were. 433 00:21:36,920 --> 00:21:39,160 Speaker 5: Number one, that new card the new card. 434 00:21:39,000 --> 00:21:42,040 Speaker 10: Acquisition rate kind of went down a little bit relative 435 00:21:42,080 --> 00:21:46,000 Speaker 10: to last year and relative to the third quarter. And 436 00:21:46,080 --> 00:21:49,359 Speaker 10: initially all the money that they're spending on rewards and 437 00:21:49,440 --> 00:21:53,720 Speaker 10: services and and all of what they call variable customer 438 00:21:53,720 --> 00:21:56,560 Speaker 10: engagement expenses went up a lot, a little too much 439 00:21:56,600 --> 00:22:00,280 Speaker 10: in some people's opinions. So what what we kind of 440 00:22:00,359 --> 00:22:04,440 Speaker 10: learned recently with sort of some supporting data around two things. 441 00:22:04,440 --> 00:22:07,920 Speaker 10: And the big thing was while the number of new 442 00:22:07,920 --> 00:22:11,360 Speaker 10: cards acquired went down a little bit, the fee per 443 00:22:11,400 --> 00:22:13,720 Speaker 10: new card went up from one hundred and ninety six 444 00:22:13,800 --> 00:22:16,320 Speaker 10: in the third quarter to two hundred and eighty two. 445 00:22:17,520 --> 00:22:19,160 Speaker 5: So huge jump. Now why is that? 446 00:22:19,160 --> 00:22:22,359 Speaker 10: That's because a lot of the much bigger percentage of 447 00:22:22,400 --> 00:22:26,199 Speaker 10: those new cards came from new Platinum customers, which is 448 00:22:26,280 --> 00:22:29,240 Speaker 10: much better than just a regular customers. So even though 449 00:22:29,240 --> 00:22:32,360 Speaker 10: a little less customers acquired, you're getting many more new 450 00:22:32,400 --> 00:22:35,040 Speaker 10: Platinum customers, much better economics. 451 00:22:35,680 --> 00:22:36,960 Speaker 5: So that's sort of one thing. 452 00:22:37,000 --> 00:22:41,560 Speaker 10: And then talked a lot about how they're absorbing all 453 00:22:41,640 --> 00:22:46,760 Speaker 10: of those extra reward costs if you will. But still 454 00:22:46,880 --> 00:22:50,479 Speaker 10: that's and that's fine because it's enhancing revenue growth, and 455 00:22:50,520 --> 00:22:54,040 Speaker 10: sort of the revenue growth benefit of that offsets the 456 00:22:54,080 --> 00:22:56,639 Speaker 10: reward cost more than offsets that reward cost. 457 00:22:56,840 --> 00:22:59,640 Speaker 3: Okay, Edward. One thing that I've noticed from these Facebook 458 00:22:59,640 --> 00:23:02,479 Speaker 3: groups is that people get a Platinum card that's you know, 459 00:23:02,640 --> 00:23:04,480 Speaker 3: for the sign up bonus and everything else. But then 460 00:23:04,480 --> 00:23:07,080 Speaker 3: they start branching out and they get the Gold card 461 00:23:07,080 --> 00:23:09,840 Speaker 3: because there's more reward points for groceries there. They start 462 00:23:09,880 --> 00:23:13,000 Speaker 3: to compile a lot of AMEX cards, so a lot 463 00:23:13,040 --> 00:23:15,320 Speaker 3: of the users have multiple cards, don't they. 464 00:23:16,760 --> 00:23:18,840 Speaker 5: Yeah, no question about that. 465 00:23:19,000 --> 00:23:21,960 Speaker 10: And obviously you've got to you know, a lot of 466 00:23:22,040 --> 00:23:24,720 Speaker 10: sort of families on the Platinum card, so there's sort 467 00:23:24,720 --> 00:23:28,480 Speaker 10: of a primary Platinum card owner and then issuer of 468 00:23:28,640 --> 00:23:31,679 Speaker 10: multiple cards related to that. So you sort of have 469 00:23:31,800 --> 00:23:35,800 Speaker 10: this this sort of network effect of the Platinum card 470 00:23:35,840 --> 00:23:39,040 Speaker 10: that just keeps building and to some extent, you know, 471 00:23:39,119 --> 00:23:41,439 Speaker 10: if you can, you know, when you come back to 472 00:23:41,440 --> 00:23:44,080 Speaker 10: the JP Morgan Sapphire card, if you can, you know, 473 00:23:44,640 --> 00:23:49,320 Speaker 10: build that reward and service infrastructure even bigger and better, 474 00:23:49,760 --> 00:23:51,439 Speaker 10: you know, you create the you know, sort of the 475 00:23:51,440 --> 00:23:53,560 Speaker 10: mode effect, which is what they're trying to do and 476 00:23:53,680 --> 00:23:54,560 Speaker 10: seems to be working. 477 00:23:55,160 --> 00:23:58,280 Speaker 2: Hey, ed the I have the Green card I got 478 00:23:58,440 --> 00:24:01,119 Speaker 2: the day I graduated college at kept it all. But 479 00:24:01,440 --> 00:24:04,560 Speaker 2: Scarlet and other folks, I understand they go crazy for 480 00:24:04,600 --> 00:24:08,200 Speaker 2: these really expensive cards and all the points in managing. 481 00:24:07,840 --> 00:24:09,600 Speaker 5: You need to go platinum. 482 00:24:09,640 --> 00:24:13,040 Speaker 2: Paul, No, I just can't. I can't do it. But 483 00:24:13,119 --> 00:24:16,200 Speaker 2: how big of a business is that for these card companies? 484 00:24:16,240 --> 00:24:18,800 Speaker 2: Is that really the value driver? The Scarlet foods of 485 00:24:18,800 --> 00:24:19,440 Speaker 2: the world. 486 00:24:20,560 --> 00:24:21,040 Speaker 5: That's it. 487 00:24:21,280 --> 00:24:24,120 Speaker 10: Yeah, they care much more about Scarlett than they care 488 00:24:24,119 --> 00:24:27,760 Speaker 10: about you. I have to say, yes, she's going she's 489 00:24:27,840 --> 00:24:30,399 Speaker 10: about to pay eight hundred and ninety five dollars a year, 490 00:24:30,600 --> 00:24:32,800 Speaker 10: up from six hundred and ninety five dollars a year. 491 00:24:34,359 --> 00:24:35,680 Speaker 5: They're going to give her a heck of a lot 492 00:24:35,680 --> 00:24:38,560 Speaker 5: of rewards and services for that, but I had a 493 00:24:38,560 --> 00:24:40,080 Speaker 5: big sign of bum on average. 494 00:24:40,119 --> 00:24:44,160 Speaker 10: Now I hope this is not completely true, but on average, 495 00:24:44,600 --> 00:24:47,400 Speaker 10: she one of the Platinum card members, spends about ten 496 00:24:47,440 --> 00:24:49,160 Speaker 10: times as much on her card as you do. 497 00:24:49,680 --> 00:24:53,680 Speaker 3: That was Edward Nigerian Bloomberg Intelligence consumer finance analyst. Coming up, 498 00:24:53,720 --> 00:24:56,520 Speaker 3: we'll look at why MSG sports is considering splitting up 499 00:24:56,560 --> 00:24:58,280 Speaker 3: its Nicks and Rangers businesses. 500 00:24:58,440 --> 00:25:01,200 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio of riding 501 00:25:01,200 --> 00:25:03,320 Speaker 2: in depth research and data on two thousand companies and 502 00:25:03,359 --> 00:25:04,560 Speaker 2: one hundred and thirty industries. 503 00:25:04,600 --> 00:25:06,919 Speaker 3: You can access Bloomberg Intelligence through b I go on 504 00:25:06,960 --> 00:25:08,960 Speaker 3: the terminal. I'm Scarlett Foe and I'm. 505 00:25:08,800 --> 00:25:10,520 Speaker 2: Paul Swiney and this is Bloomberg. 506 00:25:18,119 --> 00:25:20,320 Speaker 11: Everyone needs to take care of their mental health, even 507 00:25:20,400 --> 00:25:21,880 Speaker 11: running back Jon Robinson. 508 00:25:22,320 --> 00:25:24,359 Speaker 5: When I'm on the field that filling the pressure. Usually 509 00:25:24,480 --> 00:25:25,480 Speaker 5: just take a deep breath. 510 00:25:26,080 --> 00:25:28,199 Speaker 12: When I'm just breathing and seeing what's in front of me, 511 00:25:28,359 --> 00:25:29,480 Speaker 12: everything just slows down. 512 00:25:29,680 --> 00:25:31,360 Speaker 5: It just made us feel great before I run the play. 513 00:25:32,760 --> 00:25:35,080 Speaker 11: Just like Bijon, we all need a strong mental game 514 00:25:35,119 --> 00:25:37,679 Speaker 11: on and off the field. Make a game plan for 515 00:25:37,720 --> 00:25:41,800 Speaker 11: your mental Health at Love youomindplaybook dot org Love You'reby 516 00:25:42,080 --> 00:25:44,040 Speaker 11: Brought to you by the Huntsman Mental Health Foundation, the 517 00:25:44,080 --> 00:25:47,000 Speaker 11: author n Blank Family Foundation, and the ad Console. 518 00:25:46,880 --> 00:25:50,080 Speaker 13: With the Bloomberg Small Business Report. I'm John Tucker. There's 519 00:25:50,119 --> 00:25:52,879 Speaker 13: a historic mansion on the northeast corner of San Francisco's 520 00:25:52,960 --> 00:25:56,280 Speaker 13: Alamo Square Park where several dozen people live spending their 521 00:25:56,359 --> 00:26:01,840 Speaker 13: days immersed in esthetic concentration. Welcome to HFO or Hacker 522 00:26:01,960 --> 00:26:06,440 Speaker 13: Fellowship zero. The goal is to attract the best entrepreneurs. 523 00:26:06,960 --> 00:26:10,359 Speaker 13: The Living's startup Accelerator promises to strip away all of 524 00:26:10,480 --> 00:26:13,720 Speaker 13: life's tedium so that founders can have the most productive 525 00:26:13,800 --> 00:26:17,359 Speaker 13: twelve weeks of their life and birth their real life's work. 526 00:26:17,840 --> 00:26:21,439 Speaker 13: The program comps living expenses and hands over cash in 527 00:26:21,520 --> 00:26:25,000 Speaker 13: exchange for equity in each startup operating from its house. 528 00:26:25,440 --> 00:26:28,840 Speaker 13: The Residency, which started in twenty twenty and just completed 529 00:26:28,880 --> 00:26:33,240 Speaker 13: its seventh batch, has maintained a relatively low profile, even 530 00:26:33,280 --> 00:26:37,200 Speaker 13: as it gets thousands of applications for each session's ten slots. 531 00:26:37,600 --> 00:26:40,639 Speaker 13: Among those who've attended or a dozen founders who previously 532 00:26:40,640 --> 00:26:44,600 Speaker 13: build companies with billion dollar valuations, HFO it takes a 533 00:26:44,640 --> 00:26:48,320 Speaker 13: five percent equity in each participating startup. And that's the 534 00:26:48,320 --> 00:26:50,000 Speaker 13: Bloomberg Small Business Report. 535 00:26:51,600 --> 00:26:56,080 Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 536 00:26:56,480 --> 00:26:57,920 Speaker 1: on Bloomberg Radio. 537 00:26:58,480 --> 00:27:00,639 Speaker 2: We move next to some news at the multi national 538 00:27:00,640 --> 00:27:02,000 Speaker 2: conglomerate Berkshire Hathaway. 539 00:27:02,240 --> 00:27:04,600 Speaker 3: This week, the company released its thirteen F filing for 540 00:27:04,640 --> 00:27:07,560 Speaker 3: the fourth quarter, and investor Warren Buffett's last quarter as 541 00:27:07,560 --> 00:27:10,480 Speaker 3: Berkshire Hathaway CEO reflected a bearish sentiment. 542 00:27:10,760 --> 00:27:13,720 Speaker 2: Berkshire slast its holding of Amazon by more than seventy 543 00:27:13,760 --> 00:27:15,760 Speaker 2: five percent in the fourth quarter, while also building a 544 00:27:15,800 --> 00:27:16,879 Speaker 2: stake in The New York Times. 545 00:27:17,000 --> 00:27:19,920 Speaker 3: Berkshire also continued trimming Bank of America and Apple during 546 00:27:19,960 --> 00:27:22,680 Speaker 3: the quarter while increasing its stakes and Chevron and Chubb. 547 00:27:23,000 --> 00:27:24,399 Speaker 2: For more on all of this, we were joined by 548 00:27:24,400 --> 00:27:26,880 Speaker 2: Matt Palizola, Bloomberg Intelligence senior analyst. 549 00:27:27,200 --> 00:27:29,320 Speaker 3: We began by asking Matthew if this will be the 550 00:27:29,359 --> 00:27:31,879 Speaker 3: last time we mentioned Warren Buffett buying or selling shares 551 00:27:31,920 --> 00:27:32,480 Speaker 3: in companies. 552 00:27:32,840 --> 00:27:35,439 Speaker 14: Yes, it is so he was the CEO as of 553 00:27:35,520 --> 00:27:38,640 Speaker 14: the fourth quarter. So these moves that we're looking at 554 00:27:38,640 --> 00:27:40,840 Speaker 14: in the thirteen F took place in the fourth quarter 555 00:27:40,880 --> 00:27:41,520 Speaker 14: of last year. 556 00:27:42,480 --> 00:27:44,920 Speaker 9: To be totally fair. He's been stepping back. 557 00:27:44,960 --> 00:27:47,159 Speaker 14: He probably wasn't behind a lot of this anyway, but 558 00:27:47,240 --> 00:27:50,160 Speaker 14: this is actually the last quarter that you could even 559 00:27:50,200 --> 00:27:52,879 Speaker 14: attribute these things to him. He remains chairman, so you 560 00:27:52,960 --> 00:27:55,520 Speaker 14: never know he'd be looming behind the scenes. But his 561 00:27:55,600 --> 00:27:57,639 Speaker 14: last quarter as CEO, he. 562 00:27:57,600 --> 00:27:59,480 Speaker 3: Famously said he was only investing in things that he 563 00:27:59,560 --> 00:28:03,600 Speaker 3: understood then that typically did not include technology companies. But Apple, 564 00:28:03,680 --> 00:28:05,879 Speaker 3: I guess he saw more as a consumer company than 565 00:28:06,000 --> 00:28:06,480 Speaker 3: anything else. 566 00:28:06,520 --> 00:28:07,040 Speaker 9: Yeah, I think so. 567 00:28:07,160 --> 00:28:09,840 Speaker 14: And I think the you know, his thing was motes 568 00:28:09,960 --> 00:28:14,560 Speaker 14: right and probably still is, but the iPhone mode and 569 00:28:14,600 --> 00:28:17,119 Speaker 14: the infrastructure built in, I think those were appealing things. 570 00:28:17,440 --> 00:28:19,919 Speaker 14: They have been pairing that that investment, as we know, 571 00:28:21,320 --> 00:28:23,560 Speaker 14: part of that, and you know, it's it's kind of 572 00:28:23,560 --> 00:28:25,440 Speaker 14: a twist because he had said this said of the 573 00:28:25,440 --> 00:28:28,520 Speaker 14: annual meeting a couple of meetings ago, that it was 574 00:28:29,080 --> 00:28:31,160 Speaker 14: a kind of tax reasons that they had these huge 575 00:28:31,240 --> 00:28:34,199 Speaker 14: unrealized gains in there, and he thought taxes would be 576 00:28:34,240 --> 00:28:36,639 Speaker 14: going up. Now they're certainly not going to go up 577 00:28:36,680 --> 00:28:39,520 Speaker 14: under the current administration kind of anytime soon. But Buffett 578 00:28:39,560 --> 00:28:42,120 Speaker 14: is always long term thinking, so I think that's what 579 00:28:42,200 --> 00:28:44,520 Speaker 14: he was looking at. As we've got you know, tens 580 00:28:44,560 --> 00:28:47,280 Speaker 14: of billions of dollars of unrealized gains that will be taxed. 581 00:28:47,320 --> 00:28:51,000 Speaker 14: And I think it does still hold true that in 582 00:28:51,080 --> 00:28:53,360 Speaker 14: ten years from now, probably the corporate tax rate could 583 00:28:53,360 --> 00:28:55,479 Speaker 14: be higher. And I think that was his concern and 584 00:28:55,520 --> 00:28:57,360 Speaker 14: part of the reason they were taking down those those 585 00:28:57,360 --> 00:29:00,000 Speaker 14: big gains in those big positions. 586 00:29:00,040 --> 00:29:03,320 Speaker 2: And Lambert also cut its Amazon steak by seventy five percent. 587 00:29:03,560 --> 00:29:08,320 Speaker 14: They did so Amazon. They initially got into Amazon him 588 00:29:08,320 --> 00:29:10,760 Speaker 14: in twenty nineteen. That was one of his investment deputies, 589 00:29:10,760 --> 00:29:14,600 Speaker 14: I think brought it to him. Then again also like tech, 590 00:29:14,720 --> 00:29:19,840 Speaker 14: but a retailer. Right, that position we calculated was up 591 00:29:19,880 --> 00:29:21,680 Speaker 14: about one hundred and thirty to one hundred and forty 592 00:29:21,680 --> 00:29:25,480 Speaker 14: percent over the time. They hold it nice but kind 593 00:29:25,480 --> 00:29:27,760 Speaker 14: of in line with the S and P five hundred. 594 00:29:27,880 --> 00:29:31,680 Speaker 14: So it didn't really outperform, so I think it was 595 00:29:31,760 --> 00:29:33,320 Speaker 14: kind of taking some money off the table. I sold it, 596 00:29:33,360 --> 00:29:36,520 Speaker 14: I believe like one point seven billion worth of that stock, 597 00:29:36,560 --> 00:29:39,680 Speaker 14: cutting most of the position, So that one I think 598 00:29:39,720 --> 00:29:42,640 Speaker 14: was probably a company specific didn't really outperform. They bought 599 00:29:42,840 --> 00:29:45,960 Speaker 14: four billion of Alphabet last quarter, so you know, the 600 00:29:46,240 --> 00:29:49,600 Speaker 14: kind of tech aversion you know, maybe changing over time, 601 00:29:49,920 --> 00:29:53,520 Speaker 14: what did he increase stakes in so two big ones 602 00:29:54,480 --> 00:29:58,800 Speaker 14: Chevron and Chubb. So Chevron is they their fifth biggest holding. 603 00:29:58,840 --> 00:30:02,840 Speaker 14: I think they interestingly, I don't know if they were 604 00:30:02,960 --> 00:30:07,640 Speaker 14: kind of betting on US intervention in Venezuela, which happened 605 00:30:07,720 --> 00:30:09,520 Speaker 14: kind of after the quarter, so you can't say that 606 00:30:09,560 --> 00:30:11,280 Speaker 14: like murderer got taken out and this stuff happened and 607 00:30:11,320 --> 00:30:13,880 Speaker 14: they did it and Reaction did it before. But maybe 608 00:30:13,920 --> 00:30:15,720 Speaker 14: they were reading the tea leaves there. I don't know. 609 00:30:16,400 --> 00:30:19,040 Speaker 14: It's a big holding for them. I think the kind 610 00:30:19,080 --> 00:30:23,960 Speaker 14: of geopolitical energy play makes total sense. The other one 611 00:30:24,000 --> 00:30:26,720 Speaker 14: is Chubb, which I don't want to get too excited 612 00:30:26,760 --> 00:30:31,320 Speaker 14: thinking about insurance mega deal here, but they are now 613 00:30:31,360 --> 00:30:34,240 Speaker 14: the second well they've been the second largest holder of 614 00:30:34,320 --> 00:30:34,880 Speaker 14: Chubb stock. 615 00:30:34,960 --> 00:30:36,520 Speaker 9: Chubb makes total sense. 616 00:30:36,640 --> 00:30:39,280 Speaker 14: It is, in our view of BI a cream of 617 00:30:39,280 --> 00:30:44,920 Speaker 14: the crop insurance company, global reach, still growing nicely, great management. 618 00:30:45,080 --> 00:30:47,600 Speaker 14: It's a company that Berkshire would want to own. Now 619 00:30:47,680 --> 00:30:51,680 Speaker 14: Berkshire's got their own massive insurance business. Yes, the interesting 620 00:30:51,720 --> 00:30:54,960 Speaker 14: thing is you've got two massive insurance businesses. They're actually 621 00:30:55,000 --> 00:30:57,959 Speaker 14: quite complimentary if one were to want to put them together. 622 00:30:58,040 --> 00:31:01,360 Speaker 14: So the Berkshire business very big personal atto in Geico, 623 00:31:01,600 --> 00:31:05,880 Speaker 14: very big reinsurance, kind of global global reinsurance. Those are 624 00:31:05,880 --> 00:31:10,000 Speaker 14: two businesses that Chubb is not really in. There's some 625 00:31:10,080 --> 00:31:12,880 Speaker 14: overlap in the kind of US specialty businesses that they're 626 00:31:12,920 --> 00:31:18,520 Speaker 14: both in, but it would be phenomenally complementary of those 627 00:31:18,560 --> 00:31:21,240 Speaker 14: two businesses. I think there's probably a lot of hurdles 628 00:31:21,280 --> 00:31:25,000 Speaker 14: to some sort of you know, total deal there. Chubb's 629 00:31:25,080 --> 00:31:27,840 Speaker 14: market cap is one hundred and thirty billion. Berkshire has 630 00:31:27,880 --> 00:31:30,240 Speaker 14: three hundred billion of cash, so they theoretically could buy 631 00:31:30,480 --> 00:31:33,240 Speaker 14: Chubb in cash if they wanted to. But I think 632 00:31:33,240 --> 00:31:36,120 Speaker 14: it's probably some cultural issues and would Chubb really want 633 00:31:36,160 --> 00:31:38,440 Speaker 14: to sell as the other thing? But you know, it 634 00:31:38,520 --> 00:31:41,680 Speaker 14: is something it as a stock something Berkshire would want to. 635 00:31:41,880 --> 00:31:44,840 Speaker 3: Is that a strategy that Berkshire actually follows through on 636 00:31:44,920 --> 00:31:47,680 Speaker 3: where it starts off with a stake and then eventually decides, 637 00:31:47,720 --> 00:31:49,040 Speaker 3: you know what, we're just gonna buy the whole thing. 638 00:31:49,160 --> 00:31:50,480 Speaker 9: Scarlett, Yeah, they do do that. 639 00:31:50,600 --> 00:31:52,760 Speaker 14: So I think with Burlington Northern, which is a little 640 00:31:52,760 --> 00:31:54,760 Speaker 14: bit before time when they bought it, they did things 641 00:31:54,800 --> 00:31:57,360 Speaker 14: like that where they acquire the public stake and then 642 00:31:57,400 --> 00:31:58,120 Speaker 14: they build. 643 00:31:57,920 --> 00:31:58,440 Speaker 9: It over time. 644 00:31:58,520 --> 00:32:01,040 Speaker 14: That's why there was a lot of speculator about occidental. 645 00:32:01,280 --> 00:32:03,240 Speaker 14: Buffett then came out and threw cold water on it, 646 00:32:03,320 --> 00:32:05,240 Speaker 14: saying that but it seemed like it was going along 647 00:32:05,280 --> 00:32:08,040 Speaker 14: with their playbook of huge acquisitions that they made before. 648 00:32:08,080 --> 00:32:09,920 Speaker 2: So none of the warns out. Can we have a 649 00:32:09,920 --> 00:32:11,440 Speaker 2: serious discussion about a dividend? 650 00:32:12,280 --> 00:32:12,720 Speaker 9: We can? 651 00:32:12,880 --> 00:32:15,520 Speaker 14: I think you know, we'll get you on the phone 652 00:32:15,520 --> 00:32:18,280 Speaker 14: with Greg Abel Let's see what he says. But you know, 653 00:32:18,360 --> 00:32:21,800 Speaker 14: I think our take has been in the early years. 654 00:32:23,600 --> 00:32:27,240 Speaker 14: Able will probably adhere to the ethos of Berkshire. And 655 00:32:27,280 --> 00:32:29,040 Speaker 14: I don't think he's going to come in and start 656 00:32:29,560 --> 00:32:31,920 Speaker 14: breaking down walls like I don't think anyone would like 657 00:32:31,960 --> 00:32:35,120 Speaker 14: to see that, especially Buffett's still there. I mean, they 658 00:32:35,120 --> 00:32:39,040 Speaker 14: have tremendous excess capital. Buffett is praised Able as being 659 00:32:39,320 --> 00:32:43,160 Speaker 14: a great capital allocator, great capital manager, and they've also 660 00:32:43,200 --> 00:32:45,720 Speaker 14: said we literally can't there's so much money, we can't 661 00:32:45,760 --> 00:32:49,320 Speaker 14: put it to work in a reasonable way. So it 662 00:32:49,320 --> 00:32:52,560 Speaker 14: would make sense to see something happen there. And I think, look, 663 00:32:52,760 --> 00:32:54,600 Speaker 14: the other thesis is they're not going to be as 664 00:32:54,640 --> 00:32:57,760 Speaker 14: good as anything anymore. Right, there's no better investor than Buffett. 665 00:32:57,880 --> 00:32:59,600 Speaker 14: Give a g Jane, who is the head of the 666 00:32:59,640 --> 00:33:02,280 Speaker 14: insurance operations. He's been selling a lot of stock. Perhaps 667 00:33:02,280 --> 00:33:04,000 Speaker 14: he's getting close to retirement, so you're not going to 668 00:33:04,040 --> 00:33:05,560 Speaker 14: be good at any of these things anymore. 669 00:33:05,800 --> 00:33:07,760 Speaker 9: Some sort of capital which there will be a big catalyst. 670 00:33:08,160 --> 00:33:11,120 Speaker 2: Oh, thanks to Matt Palozola, Bloomberg Intelligence Senior Analyst. 671 00:33:11,400 --> 00:33:13,680 Speaker 3: We move next to some news in the business of sports. 672 00:33:13,800 --> 00:33:16,000 Speaker 2: This week, we heard that Madison Square Gardens board of 673 00:33:16,040 --> 00:33:19,200 Speaker 2: directors approved a plan to explore splitting the NBA's New 674 00:33:19,280 --> 00:33:21,600 Speaker 2: York Knicks from the NHL's New York Rangers. 675 00:33:21,640 --> 00:33:23,800 Speaker 3: It's a move that would make each team a separate, 676 00:33:23,840 --> 00:33:25,040 Speaker 3: publicly traded company. 677 00:33:25,080 --> 00:33:27,040 Speaker 2: From more on this, we were joined by Randall Williams, 678 00:33:27,120 --> 00:33:30,200 Speaker 2: Bloomberg Business of Sports reporter. We first asked Randall to 679 00:33:30,240 --> 00:33:32,080 Speaker 2: break down why this deal may happen. 680 00:33:32,400 --> 00:33:35,400 Speaker 12: Yeah, you look at the enterprise value of the Knicks 681 00:33:35,400 --> 00:33:37,640 Speaker 12: and Rangers and what they're traded at its seven billion dollars. 682 00:33:37,640 --> 00:33:39,240 Speaker 9: But you look at what the Lakers sold for. 683 00:33:39,240 --> 00:33:41,800 Speaker 12: A loan ten billion dollars, and I think the Knicks 684 00:33:41,800 --> 00:33:43,880 Speaker 12: obviously are in a larger market than New York. The 685 00:33:43,920 --> 00:33:46,720 Speaker 12: Lakers have won more titles, but New York is New York, 686 00:33:46,760 --> 00:33:49,040 Speaker 12: and so both the Knicks and the Rangers, I think 687 00:33:49,040 --> 00:33:53,160 Speaker 12: would carry a tremendous value, maybe twelve billion dollars combined, 688 00:33:53,160 --> 00:33:54,080 Speaker 12: and that's on the low end. 689 00:33:54,880 --> 00:33:59,560 Speaker 2: So is this maybe a first step for selling one 690 00:33:59,600 --> 00:34:01,880 Speaker 2: of the teams, selling a piece of one of. 691 00:34:01,880 --> 00:34:03,960 Speaker 12: Them, getting into speculative territory. 692 00:34:04,200 --> 00:34:06,840 Speaker 2: Well, James Dolan, that's always a fun place to look. 693 00:34:06,880 --> 00:34:10,600 Speaker 12: I mean, silver Lake owns a piece of MSG Sports, 694 00:34:10,600 --> 00:34:13,080 Speaker 12: and so that's five percent. It's a ten percent stake, 695 00:34:13,160 --> 00:34:15,720 Speaker 12: but probably five percent each. And when you think about 696 00:34:16,200 --> 00:34:18,680 Speaker 12: someone wanting to buy into that, you would want to 697 00:34:18,760 --> 00:34:22,879 Speaker 12: know how much each individually is worth. If not, you're 698 00:34:22,880 --> 00:34:25,000 Speaker 12: buying into something and it's like you could be buying 699 00:34:25,040 --> 00:34:28,719 Speaker 12: in at a supreme price or maybe something that's a 700 00:34:28,760 --> 00:34:31,400 Speaker 12: little bit lower. And I think buyers who are interested 701 00:34:31,440 --> 00:34:34,160 Speaker 12: in there have been several over the years want a 702 00:34:34,560 --> 00:34:37,400 Speaker 12: want a more precise price, and so do the shareholders 703 00:34:37,400 --> 00:34:38,480 Speaker 12: of MSG Sports. 704 00:34:38,840 --> 00:34:42,000 Speaker 3: So what's held up the company from being split up 705 00:34:42,040 --> 00:34:43,919 Speaker 3: up until now because there's been a lot of calls 706 00:34:43,960 --> 00:34:47,600 Speaker 3: for the enterprise value trading at a discount to the 707 00:34:47,640 --> 00:34:50,319 Speaker 3: actual value of each franchise has been there for a while. 708 00:34:50,360 --> 00:34:54,800 Speaker 2: I know the answer for voting stock is from the 709 00:34:55,120 --> 00:34:55,880 Speaker 2: Dolan control. 710 00:34:55,960 --> 00:35:00,200 Speaker 12: Yeah, I think that James Dolan has long been the 711 00:35:00,239 --> 00:35:03,280 Speaker 12: controlling person for all of these companies. He decides where 712 00:35:03,320 --> 00:35:05,960 Speaker 12: for worse, yes, exactly, he decides, you know what he 713 00:35:06,040 --> 00:35:07,760 Speaker 12: wants to do. And there is a board of directors 714 00:35:07,800 --> 00:35:09,719 Speaker 12: that voted on this. But this would have never put 715 00:35:09,840 --> 00:35:12,520 Speaker 12: up been up for a vote had James Dolan that said, 716 00:35:12,520 --> 00:35:14,960 Speaker 12: you know what, maybe we should consider this, and then 717 00:35:15,000 --> 00:35:16,719 Speaker 12: from there on, you know, things happen and then they 718 00:35:16,800 --> 00:35:17,200 Speaker 12: vote on this. 719 00:35:17,360 --> 00:35:20,200 Speaker 2: Madison Square Garden, James Stone, did they own the garden itself, 720 00:35:20,239 --> 00:35:20,640 Speaker 2: the building? 721 00:35:20,800 --> 00:35:21,440 Speaker 9: I believe so. 722 00:35:21,600 --> 00:35:23,640 Speaker 2: Yeah, that's always a big That's always a big part 723 00:35:23,640 --> 00:35:25,439 Speaker 2: of it too. Do you own the arena they plan? 724 00:35:25,560 --> 00:35:29,680 Speaker 3: Or yes, in a different publicly traded company, exactly exactly. 725 00:35:29,760 --> 00:35:32,480 Speaker 12: And I had a Bloomberg terminal reader and the original 726 00:35:32,480 --> 00:35:34,799 Speaker 12: copy that I wrote, I said Madison Square Garden was 727 00:35:34,960 --> 00:35:38,880 Speaker 12: one of the most famous in the world, and someone quickly, 728 00:35:38,960 --> 00:35:41,320 Speaker 12: someone quickly replied and said, no, it it is the 729 00:35:41,360 --> 00:35:44,200 Speaker 12: most famous arena in the world. So Madison Square Garden 730 00:35:44,280 --> 00:35:47,000 Speaker 12: is a huge, you know, attraction. When you think about 731 00:35:47,080 --> 00:35:48,920 Speaker 12: arenas in New York, there's the Barclay Center, of course, 732 00:35:48,960 --> 00:35:51,520 Speaker 12: which is newer but the legacy of New York is 733 00:35:51,560 --> 00:35:54,399 Speaker 12: often rooted in MSG and the events that it's held 734 00:35:54,719 --> 00:35:55,719 Speaker 12: over many, many years. 735 00:35:56,120 --> 00:35:58,080 Speaker 2: Yeah, I mean, first of all, and they also put 736 00:35:58,120 --> 00:36:00,719 Speaker 2: in I think close to a billion dollars and renovations 737 00:36:00,719 --> 00:36:03,560 Speaker 2: several years ago, so they've really upgraded the garden. What's 738 00:36:03,640 --> 00:36:05,160 Speaker 2: one of the many great things about going to the 739 00:36:05,160 --> 00:36:08,560 Speaker 2: Garden is they have the photos on the wall, the concourses, 740 00:36:09,120 --> 00:36:13,800 Speaker 2: all the great events, whether it's a concert, a game, whatever, 741 00:36:14,080 --> 00:36:15,600 Speaker 2: and there's thousands of them. 742 00:36:15,640 --> 00:36:18,200 Speaker 12: There's no there's no venue that has a greater history, 743 00:36:18,239 --> 00:36:20,479 Speaker 12: I would argue than Madison Square Garden that is still 744 00:36:20,520 --> 00:36:23,160 Speaker 12: you know, open and operational, and. 745 00:36:22,960 --> 00:36:23,920 Speaker 9: That's that's part of this. 746 00:36:23,960 --> 00:36:25,839 Speaker 12: I mean, you think about the Knicks playoff end last year. 747 00:36:25,880 --> 00:36:27,600 Speaker 12: You think about the Rangers and what they've. 748 00:36:27,400 --> 00:36:28,440 Speaker 5: Done, not having the. 749 00:36:30,440 --> 00:36:33,000 Speaker 12: Past two seasons, but in the seasons before that, all 750 00:36:33,040 --> 00:36:35,560 Speaker 12: of these things. When they eventually win, you know, God willing, 751 00:36:35,680 --> 00:36:37,959 Speaker 12: it isn't MSG. It it isn't one of the deals 752 00:36:37,960 --> 00:36:39,440 Speaker 12: where you know they're in away game and then they 753 00:36:39,440 --> 00:36:41,400 Speaker 12: have to come back. If it happens in MSG, that 754 00:36:41,440 --> 00:36:43,440 Speaker 12: will probably be the biggest moment in that arena in 755 00:36:43,480 --> 00:36:46,080 Speaker 12: the last twenty five years, and so whoever wants to 756 00:36:46,160 --> 00:36:49,000 Speaker 12: buy into that potentially is going to want a good 757 00:36:49,080 --> 00:36:49,560 Speaker 12: value at it. 758 00:36:49,960 --> 00:36:52,080 Speaker 3: There is also a note from light Shed that pointed 759 00:36:52,120 --> 00:36:53,839 Speaker 3: out that there's a new tax law that goes into 760 00:36:53,880 --> 00:36:56,640 Speaker 3: effect for the twenty twenty eight fiscal year that for 761 00:36:56,719 --> 00:37:00,520 Speaker 3: public companies limits deductions two one million dollars per cover employees. 762 00:37:00,520 --> 00:37:03,000 Speaker 3: For sports teams, it's easy to find a lot of 763 00:37:03,000 --> 00:37:05,399 Speaker 3: employees that make at least a million dollars a year. 764 00:37:05,560 --> 00:37:09,080 Speaker 3: So once this goes through in twenty twenty eight, that's 765 00:37:09,120 --> 00:37:11,919 Speaker 3: going to put the company in a negative free cash 766 00:37:11,960 --> 00:37:15,399 Speaker 3: flow situation unless the Knicks, for instance, go deep into 767 00:37:15,440 --> 00:37:17,120 Speaker 3: a playoff run or the Rangers go deep into a 768 00:37:17,120 --> 00:37:20,000 Speaker 3: playoff run. So it also allows the company, you know, 769 00:37:20,040 --> 00:37:21,840 Speaker 3: for tax reasons, to be in a better position. 770 00:37:22,160 --> 00:37:24,440 Speaker 12: Absolutely absolutely. I mean there's not a lot of publicly 771 00:37:24,440 --> 00:37:27,719 Speaker 12: traded sports companies out there for this reason in particular, And. 772 00:37:27,880 --> 00:37:29,359 Speaker 9: You think about all of the big ones. 773 00:37:29,400 --> 00:37:31,560 Speaker 12: You think about the Cronky Sports and Entertainment, which houses 774 00:37:31,560 --> 00:37:34,920 Speaker 12: the Rams, the Nuggets, I believe, another soccer team, and 775 00:37:35,000 --> 00:37:37,960 Speaker 12: so many more. It's private, and that's that's for a reason. 776 00:37:38,120 --> 00:37:40,640 Speaker 12: But this one is unique, and Madison's square Garden is 777 00:37:40,640 --> 00:37:42,120 Speaker 12: Madison Square Garden. The Nicks is the Nicks and the 778 00:37:42,200 --> 00:37:42,600 Speaker 12: Rangers of the. 779 00:37:42,640 --> 00:37:46,280 Speaker 3: Rangers our thanks to Randa Williams, Bloomberg Business of Sports Reporter. 780 00:37:46,560 --> 00:37:49,240 Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio, 781 00:37:49,320 --> 00:37:51,760 Speaker 2: providing in depth research and data on two thousand companies 782 00:37:51,800 --> 00:37:53,160 Speaker 2: and one hundred and thirty industries. 783 00:37:53,239 --> 00:37:55,840 Speaker 3: And remember you can access Bloomberg Intelligence via b I 784 00:37:55,960 --> 00:37:58,840 Speaker 3: go on the terminal. I'm Scarlett Foo and I'm Paul Sweeney. 785 00:37:58,920 --> 00:38:01,440 Speaker 2: Stay with us. Today's time stories and global business headlines 786 00:38:01,440 --> 00:38:02,560 Speaker 2: are coming up right now 787 00:38:05,160 --> 00:38:05,480 Speaker 11: Mm hm