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Speaker 1: Originals and the Bloomberg Business App.
Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big
Speaker 2: business stories impacting Wall Street and the global markets.
Speaker 3: Each and every week, we provide in depth research and
Speaker 3: data on some of the two thousand companies and one
Speaker 3: hundred and thirty industries are analysts cover worldwide.
Speaker 2: Today, we'll look at why AI is emerging as a
Speaker 2: catalyst for office space demand despite fears of job cuts.
Speaker 3: Plus we'll discuss what you sent. Thirteen f filings revealed
Speaker 3: about Warren Buffett's last quarter as CEO of Berkshire Hathaway.
Speaker 2: But first we begin with news from the farm machinery
Speaker 2: leader Deer.
Speaker 3: This week, Deer boosted its annual profit outlook as the company,
Speaker 3: which is the world's biggest farm machinery maker, anticipates the
Speaker 3: agriculture economy will soon get better.
Speaker 5: For more.
Speaker 2: We were joined by Chris Ciolino, Bloomberg Intelligence senior US
Speaker 2: machinery analyst.
Speaker 3: We began by asking Chris for his take on the
Speaker 3: latest at Deer.
Speaker 6: It was a really solid beat and race quarter, and
Speaker 6: I think this kind of gives us the all clear
Speaker 6: on the cycle and that you know, twenty six will
Speaker 6: be the trough earnings year. The one Q beat was
Speaker 6: broad based, all segments, better top line, better margins than expected,
Speaker 6: really on the back of higher shipment volumes, with particular
Speaker 6: strength in the small agg business and construction. Those are
Speaker 6: markets that you know, have started to already recover now
Speaker 6: this year. The large agg business, which is obviously their
Speaker 6: bigger growth engine, continues to be soft, but I think
Speaker 6: we're seeing that business to stabilize and really for the
Speaker 6: first time, you know, in years, we're starting to see
Speaker 6: some green shoots emerge there. Order books, you know, strengthened
Speaker 6: a little bit during the quarter as well.
Speaker 3: How does this compare in contrast with what CNCH Industrial
Speaker 3: reported earlier this week, which took a more it feels
Speaker 3: like a cautious stance.
Speaker 6: Yeah, you know, I think so. Both companies are calling
Speaker 6: twenty six as the bottom. I think that's pretty well
Speaker 6: understood at this point. I think the incremental piece coming
Speaker 6: out of Deer is that you're starting to see some
Speaker 6: early signs of improvement in the North American lar jag business.
Speaker 6: That's a market they're projecting in terms of unit volumes
Speaker 6: so to be down fifteen to twenty percent this year.
Speaker 6: That's going to put volumes at the lowest level in
Speaker 6: more than four decades. But what you're starting to hear
Speaker 6: from them this quarter is that the order books strengthened,
Speaker 6: particularly just in the last month of the quarter. You're
Speaker 6: starting to see a little bit more trade flows going
Speaker 6: to China, the fleets continue to age, you have the
Speaker 6: government aid support, so this is not a big step change,
Speaker 6: but it's really the first signs of incremental improvement.
Speaker 2: You got to have a great sense of time. Chris
Speaker 2: as I said, Deer's up forty two percent year to date,
Speaker 2: so the market's anticipating this business bottoming and then turning up.
Speaker 2: How long is this cycle for some of these companies
Speaker 2: that you follow here, they're cyclical.
Speaker 6: Yeah, so a typical downturn in this business will last
Speaker 6: anywhere from two to four years. This will be the
Speaker 6: third year of the downturn. So in terms of the downturn,
Speaker 6: it looks very similar to what we've seen historically. Typically
Speaker 6: the upturns last a little bit longer. But you know,
Speaker 6: this is an incredibly volatile market and it's ultimately dictated
Speaker 6: by crop prices and farmer profitability. So the crop outlooks
Speaker 6: do have a significant impact here in terms of what
Speaker 6: farmers are willing and able to spend.
Speaker 3: And it looks like Deer relies on the US for
Speaker 3: a huge part of its revenue, if not half. What
Speaker 3: is it doing in terms of growing it's business overseas?
Speaker 3: Is it just kind of a trajectory of growth there
Speaker 3: that is so learn to what it sees in the US.
Speaker 3: Or is it competing against some established players?
Speaker 6: Yeah, so they're regional markets, But in terms of what
Speaker 6: markets matter for Deer's it's North America and then South
Speaker 6: America is becoming more important reason being those are you know,
Speaker 6: typically the bigger producers of road crops, corn, soybeans. They're
Speaker 6: larger farms, they utilize more the larger equipment that you know,
Speaker 6: is more conducive to some of the precision technologies which
Speaker 6: come in at a higher margin. Europe tends to be
Speaker 6: a little bit more stable. They get a lot of
Speaker 6: government support, So I think of that market as less cyclical.
Speaker 6: You know, lower peaks, higher troughs. Those are really kind
Speaker 6: of the three big growth engines if you think about
Speaker 6: Deer's geographic exposure.
Speaker 2: So what is Deer saying about the US farmer these days?
Speaker 6: Listen, things are still challenging. Let's not understate that, you know,
Speaker 6: crop prices really haven't moved that much and still under
Speaker 6: tremendous pressure. As we look at another year of you know,
Speaker 6: near record production, they are seeing some signs of stability,
Speaker 6: I would say, And like I mentioned earlier, I think
Speaker 6: we're starting to see some early signs of improved order
Speaker 6: activity again, albeit off a very low base, and a
Speaker 6: lot of that's predicated on you know, we're starting to
Speaker 6: see a little bit more exports going to China, you
Speaker 6: have a continued government support, and then also you know,
Speaker 6: there's certainly a need for replacement. The age of the
Speaker 6: fleet is as old as it's been in a number
Speaker 6: of years. So as farmers get more money, you start
Speaker 6: to see some stability on the crop price front. That
Speaker 6: that should, you know, unlock some pent up demand.
Speaker 3: Yeah, I'm just looking at the stock price trading at
Speaker 3: a record high, but it really has gone on a
Speaker 3: tear over the past three weeks or two weeks. What
Speaker 3: accounts for that? Was it anticipation of this report or
Speaker 3: was it something else.
Speaker 6: A combination of things, you know. I think, you know,
Speaker 6: it's pretty well understood now that this year will be
Speaker 6: the trough of the cycle, so I think there's some
Speaker 6: positioning ahead of that. And you know, a lot these
Speaker 6: heavy machinery companies typically do well in early in the
Speaker 6: rate cut environment. So the anticipation of lower rates stronger
Speaker 6: growth environment not only in the ag business, but also construction.
Speaker 6: I think that sometimes gets overlooked. They're completely refreshing their
Speaker 6: excavator product lineup. They have a pretty strong position in
Speaker 6: construction equipment, and I think the growth dynamics there moving
Speaker 6: for twenty six and twenty seven are still quite favorable.
Speaker 2: Our Thanks to Chris Ciolino, Bloomberg Intelligence Senior US machinery analyst.
Speaker 3: We move next to the retail giant Walmart.
Speaker 2: This week, Walmart issued a forecast for four year earnings
Speaker 2: that missed higher expectations, flagging the unpredictable state of trade
Speaker 2: and labor market conditions.
Speaker 3: So we brought in Emily Cone, Bloomberg's consumer team leader.
Speaker 2: We first asked Emily for her take on Walmart's most
Speaker 2: recent results.
Speaker 7: There's another solid quarter for Walmart in the fourth quarter.
Speaker 7: They did come out with conservative guidance, which is pretty
Speaker 7: typical for Walmart, come out with cautious guidance and then
Speaker 7: exceed it later in the year, which is sort of
Speaker 7: their playbook. And then their guidance was also paired with
Speaker 7: some warning signs or cautious outlook about the economy, which
Speaker 7: I found interesting.
Speaker 3: Yeah, I want to pick up on that idea, because
Speaker 3: the CFO talked to Bloomberg and mentioned that tariff driven
Speaker 3: inflation has reached or is reaching its peak, which I
Speaker 3: thought was really interesting given that there's so many people
Speaker 3: expecting rate cuts later on this year. Given that inflation
Speaker 3: seems to have settled down, what more can they tell
Speaker 3: us about pricing?
Speaker 7: I think they told us that prices rose one percent
Speaker 7: in the quarter, which I think was the same as
Speaker 7: the last quarter. But they also mentioned other things like
Speaker 7: tepid job growth, student loan delinquencies, rising consumer sentiment being uneven,
Speaker 7: things that you know, would give any CEO or CFO
Speaker 7: or company pause when they're trying to outlay what might
Speaker 7: happen in the coming year.
Speaker 2: And I've noticed over the last a couple of years
Speaker 2: they've talked about how maybe their customer base is changing
Speaker 2: a little bit. People some middle class, maybe even upper
Speaker 2: income areas coming down to Walmart. They're seeing more and
Speaker 2: more of that. Is that still the case.
Speaker 7: I think yes, that's definitely the case, and that's sort
Speaker 7: of their superpower right now that you know, poor this
Speaker 7: is the case shaped economy that we talk about a
Speaker 7: lot poor customers are pulling back in areas, but what
Speaker 7: they're seeing is wealthier clients clientele who might not have
Speaker 7: come to Walmart in the past shopping at Walmart, especially
Speaker 7: for things like their groceries, which they've invested in a
Speaker 7: lot in the last ten years. You can now find
Speaker 7: organic groceries and that's really paying off.
Speaker 3: And they also have this Walmart Plus program which they're
Speaker 3: really putting a lot of emphasis on. It's actually one
Speaker 3: of the benefits if you're an American Express Platinum cardholder,
Speaker 3: which speaks to that idea that they're really reaching for
Speaker 3: the higher income consumer. How's that going and is it
Speaker 3: making any headway on stealing Marcus share from Amazon with
Speaker 3: its Prime program.
Speaker 7: Yeah, they're seeing a huge growth in e commerce. I
Speaker 7: think that was one of the major areas that grew
Speaker 7: this quarter. That is drawing in higher income shoppers who
Speaker 7: actually pay even more than the membership for faster deliveries,
Speaker 7: speedier pickup times, and that's helping them also grow market
Speaker 7: share among wealthier shoppers who are looking for convenience over
Speaker 7: everything else.
Speaker 2: What are they saying about Did they even talk about
Speaker 2: on comments called tariffs anymore? That's still a discussion point.
Speaker 2: And what's the company saying about tariffs?
Speaker 7: Yeah, tariffs came up a little bit, but they said
Speaker 7: that they expect that that tariff driven inflation to peak now.
Speaker 7: I think they also benefit here again from their groceries.
Speaker 7: Groceries are a portion of their assortment that is less
Speaker 7: impacted by tariffs, and they're really benefiting from I think
Speaker 7: sixty percent of their sales come from groceries these days.
Speaker 3: You mentioned e commerce. It sounds like Walmart will continue
Speaker 3: to invest in technology and automation. What were some of
Speaker 3: the things that they flagged that they're working on in
Speaker 3: terms of innovation and building on the technology that they
Speaker 3: have already implemented into their system.
Speaker 7: Yeah, it was interesting. They said most of their fulfillment
Speaker 7: and stores is now coming from automated warehouses, most of
Speaker 7: their fulfillment for e commerces coming from automated warehouses. They
Speaker 7: have really made huge gains here to speed up fulfillment centers,
Speaker 7: and I think we should expect to see more of
Speaker 7: that in the coming quarters. They cited story models and
Speaker 7: automation as the main areas where they're going to be
Speaker 7: continuing to invest.
Speaker 2: You know, one of the things that's amazed me really
Speaker 2: for ten fifteen years about Walmart is how well their
Speaker 2: digital business has been, their e commerce business. They have
Speaker 2: built that to not only I mean they can go
Speaker 2: toe to toe with Amazon dot Com just about anything.
Speaker 2: It seems like is that still a growth story for them?
Speaker 7: Yeah? I think they said something like a third. They've
Speaker 7: seen a huge amount of shoppers are now actually interacting
Speaker 7: with their AI, their AI assistant on their app and
Speaker 7: on their website that really helping people make shopping decisions faster.
Speaker 7: They're seeing an increasing spend from customers who interact with
Speaker 7: the AI shopping assistant, they said, which which I think
Speaker 7: we can expect to see.
Speaker 2: Just in the last five years, their ibathas roughly doubled,
Speaker 2: but their cap X is tripled.
Speaker 3: Commerce build out, that tech build out, yep.
Speaker 2: So I mean they're putting their money where their mount
Speaker 2: is here.
Speaker 3: You know what Paul's dream job is, Emily does. He
Speaker 3: mentioned this to you, No.
Speaker 2: Be a greeter at Walmart. See, I'm a nice, friendly guy.
Speaker 3: I want themock. He wants to wear the smock. I
Speaker 3: bet you know. To that point, Walmart employees about two
Speaker 3: point one million people, which makes it a huge employer.
Speaker 3: Do we have a sense of whether they've been growing
Speaker 3: their employee base at all with this commitment to technology,
Speaker 3: to automation.
Speaker 7: I think they've definitely made a huge investment in technology.
Speaker 7: They have a lot more people working on tech than
Speaker 7: they ever have, and I think we could expect to
Speaker 7: see more of that for sure.
Speaker 3: That was Emily Cone, Bloomberg Consumer Team Leader.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries.
Speaker 3: You can access Bloomberg Intelligence via bi go on the terminal.
Speaker 3: I'm Scarlett Foo.
Speaker 2: And I'm Paul Sweeney, and this is Bloomberg.
Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
Speaker 1: on Bloomberg Radio.
Speaker 2: Next to news from the amusement resort operator six Flags Entertainment.
Speaker 3: This week, six Flags reported twenty twenty five earnings and
Speaker 3: revenue that were slightly ahead of analyst estimates. For more
Speaker 3: on this and the latest in the travel and leisure space,
Speaker 3: were joined by Jody Lori, Bloomberg Intelligence credit analyst.
Speaker 2: We first asked Jody for her take on six Flags earnings.
Speaker 8: So I think what's interesting, Paul, is that we're seeing
Speaker 8: that some of what six Flags said, oddly was similar
Speaker 8: to what we saw on APHIS's call. And both companies
Speaker 8: has had these large impairment charges to boost EBADA, but
Speaker 8: it didn't necessarily equate to cash generation. And both companies
Speaker 8: are focused on improving their debt load and also just
Speaker 8: the core of the business, the operational side, adding in
Speaker 8: AI to boost the business and figuring out ways to
Speaker 8: turn around, and both companies are dealing with new CEOs.
Speaker 8: So it's just like a weird sort of compare contrast
Speaker 8: scenario that I've been toying with my head.
Speaker 3: I mean, Paul was talking about how Hershey Park was
Speaker 3: his first amusement park, and then we're obviously the big
Speaker 3: one would be Disney yep or Universal. Have you been there? No, Okay,
Speaker 3: that's a pretty good one.
Speaker 2: Yeah.
Speaker 3: Is that the competition for six Flags or does it
Speaker 3: work on a different level than those It is and.
Speaker 8: It isn't the competition Scarlett. I mean, I think you know,
Speaker 8: six Flags likes to compare itself more to alternatives in
Speaker 8: leisure and entertainment. There was a great slide that they
Speaker 8: provided that showcase the value proposition if you compare it
Speaker 8: to like concert tickets or in inert sporting event. The
Speaker 8: amount of time that you spend at six Flags, in
Speaker 8: theory is all day, right, So the cost to enter
Speaker 8: and the cost for the you know, the sort of
Speaker 8: concessions is much lower than what you would pay to
Speaker 8: go to a Taylor Swift concert. Now that said, I mean,
Speaker 8: I think what's so interesting is is when the company combined,
Speaker 8: there was this image that they could create like an
Speaker 8: all pass promotion right that you can enter in all parks.
Speaker 8: They've only finally started rolling out something that's a regional
Speaker 8: pass recently, and I'm curious to see what could happen
Speaker 8: with the company as they improve those sort of points
Speaker 8: of it, because what's funny is if you look at
Speaker 8: it from a revenue perspective, it did actually pretty well
Speaker 8: this year compared to twenty four, and twenty four was
Speaker 8: a pretty strong year. Same thing with some of the
Speaker 8: per cap spending pieces of it, right, the per cap component,
Speaker 8: the admissions were down, but the in park spending was decent,
Speaker 8: and so you say, what's going on, like why are
Speaker 8: they having such issues? And it comes down to an
Speaker 8: operational issue. It comes down to the fact that the
Speaker 8: legacy six Flags assets. I think we're in way worse
Speaker 8: shape than Cedar Fair anticipated when they took on the company,
Speaker 8: and they're saddled with a lot of debt. So it's
Speaker 8: really a question of if the capital markets are going
Speaker 8: to be encouraging enough to help them through. You know,
Speaker 8: they help them through in January with a new issue,
Speaker 8: but really are they able to sort of support the
Speaker 8: company through this transition.
Speaker 3: That park past You mentioned sounds like a you know,
Speaker 3: the amusement park version of an epic past, which makes
Speaker 3: sense if you're skier and you are chasing the weather
Speaker 3: around the country. What doesn't make sense to go to,
Speaker 3: you know, the West Coast for six flocks and they
Speaker 3: come back.
Speaker 8: I don't know it could scarlet. You don't talk to
Speaker 8: Ira Jersey enough. Apparently, at least when it comes to
Speaker 8: roller coasters. You probably talked him about interest rates. Next
Speaker 8: time when you have him on, ask him about his
Speaker 8: son's American Coasters Enthusiast card.
Speaker 3: That he proudly carry.
Speaker 8: If you are deep into the roller coaster dynamics and culture,
Speaker 8: people will go to the end of the Earth. And
Speaker 8: I am curious to see how the Middle East traction
Speaker 8: for six Flags, for SeaWorld and for some of the
Speaker 8: other parks that have expanded there. How that's going to
Speaker 8: play out if you do see these park coaster enthusiasts
Speaker 8: fly out to Saudi Aravia, fly out to the OAE
Speaker 8: to ride certain coasters.
Speaker 3: Our thanks to Jody Lourie, Bloomberg Intelligence credit analyst, we
Speaker 3: move next to the real estate sector.
Speaker 2: Bloomberg Intelligence recently put out research entitled AI Drives Office
Speaker 2: demand amid job cut fears.
Speaker 3: And according to BI, AI is emerging as a catalyst
Speaker 3: for office demand, reinforcing leasing momentum in New York City
Speaker 3: and San Francisco.
Speaker 2: For more on this, we were joined by Jeffrey Langbaum,
Speaker 2: Bloomberg Intelligence Senior US rit analyst.
Speaker 3: We started our conversation by asking Jeffrey to discuss what
Speaker 3: people are saying to him with regards to AI and
Speaker 3: office space.
Speaker 4: Right now, what people are thinking about is what the
Speaker 4: impact is going to be on office space if AI
Speaker 4: makes all of these industries that lease office space irrelevant. Okay,
Speaker 4: what does that mean for demand for space? And you know,
Speaker 4: we saw last week that you know that started with
Speaker 4: software and then it went to you know, industry after
Speaker 4: industry and ended up with the real estate brokers and
Speaker 4: eventually the office rates getting hit hard.
Speaker 3: So so far, this is just kind of fear that's
Speaker 3: wafting across the market. Have we actually seen any evidence
Speaker 3: of this happening.
Speaker 4: Not yet, And in fact we've seen some of the opposite.
Speaker 4: Leasing velocity has been at the highest level since before
Speaker 4: the pandemic in markets like New York and San Francisco.
Speaker 4: The reats that we follow names like sl Green Bornado
Speaker 4: Boston properties are now BXP. These guys are reporting very
Speaker 4: strong leasing volumes. We're starting to see occupancies tick up
Speaker 4: off the bottom in their portfolios. And you know, one
Speaker 4: of the one of the dynamics at play is that
Speaker 4: AI firms are leasing space as they grow, and to
Speaker 4: the extent that companies being you know, impacted by AI
Speaker 4: start to receive a little bit, there's an offset there.
Speaker 2: So your office reached docs last week sold off on
Speaker 2: this fear.
Speaker 4: Yeah, and it's not a new fear. I mean it's
Speaker 4: been it's been at play for some time now.
Speaker 5: You know, work from.
Speaker 4: Home kind of worked its way through and everyone kind
Speaker 4: of got comfortable with where hybrid kind of settled in,
Speaker 4: and then you know what was the next thing to
Speaker 4: hit office? And it was this And it's been you know,
Speaker 4: it's been out there for probably a couple of quarters. Now,
Speaker 4: what is the impact going to be? But last week
Speaker 4: when software rolled over it, it's just compounded.
Speaker 3: Is this something where because of the evidence that companies
Speaker 3: are still leasing quite a bit of space, that we're
Speaker 3: going to see a just as sharp recovery.
Speaker 4: Well that's possible, but you know there's also the risk
Speaker 4: that you know, the the equity markets are turbulent and forecasting, right,
Speaker 4: and so there is the possibility that there will be
Speaker 4: negative leasing news to come. It's certainly not showing up
Speaker 4: in the numbers now. And we do think, and this
Speaker 4: is backed up by some survey work that we just
Speaker 4: did last week of office workers in both New York
Speaker 4: and San Francisco.
Speaker 9: We actually think that.
Speaker 4: There's still a period of time to come where firms
Speaker 4: are actually leasing more space, they're expanding their headcount to
Speaker 4: try and figure out how to take advantage of AI
Speaker 4: and to grow their business. And that could actually you know,
Speaker 4: I don't know about a sharp snapback, but it could
Speaker 4: you prolong the positive vibes for some time.
Speaker 2: What's the sector of the remarket that you like the
Speaker 2: most right now?
Speaker 4: Senior housing is I mean, you know, it's the one
Speaker 4: aspect where you cannot refute the demand story at all.
Speaker 4: And at the same time, where real estate guys typically
Speaker 4: love to build what to take advantage of those demand stories.
Speaker 4: There's not much senior housing coming out of the ground,
Speaker 4: so there's a huge supply demand imbalance.
Speaker 3: Okay, but a senior housing more attractive in certain markets
Speaker 3: over other markets. How do you pick between winners and
Speaker 3: losers when it comes to senior housing.
Speaker 4: It's really more about the local operator than it is
Speaker 4: about the specific market. I mean, obviously, if you're in
Speaker 4: a place where you know, economics aren't as strong and
Speaker 4: you don't have this affluent a potential resident base, then
Speaker 4: that's going to you know, potentially impact but local strong
Speaker 4: local operators. When there's not a lot of supply coming
Speaker 4: out of the ground, and you know you basically just
Speaker 4: have an aging American population that is going to need
Speaker 4: housing solutions, it's really a play across the board, all right.
Speaker 2: Thanks to Jeff Langbaum, Bloomberg Intelligence Senior US Route analyst, we.
Speaker 3: Move now to some research at Bloomberg Intelligence recently published
Speaker 3: on American Express.
Speaker 2: According to BI, American Express is focused on attracting new
Speaker 2: premium cardholders should help it meet its consensus EPs growth
Speaker 2: in twenty twenty six and twenty twenty seven.
Speaker 3: So we brought in Edward D. Jerry and Bloomberg Intelligence
Speaker 3: consumer finance analyst.
Speaker 2: We first asked ed about Amex's most recent quarter and
Speaker 2: what we've learned since a company rolled out it's increased
Speaker 2: fee for the Platinum card.
Speaker 5: When they reported the quarter, great quarter.
Speaker 10: Uh, everything everything kind of in line with expectations or
Speaker 10: in some areas better and gave great guidance in terms
Speaker 10: of mid teens EPs growth for twenty twenty six. And
Speaker 10: you know a lot of a lot of conversation about
Speaker 10: the refresh and how great the refresh is going and
Speaker 10: acquiring you know, lots of new customers.
Speaker 9: Uh.
Speaker 5: But generally there were two things that.
Speaker 10: Sort of analysts picked on in the quarter when you're
Speaker 10: when you're trading that sort of a high multiple financial
Speaker 10: and and those two things were.
Speaker 5: Number one, that new card the new card.
Speaker 10: Acquisition rate kind of went down a little bit relative
Speaker 10: to last year and relative to the third quarter. And
Speaker 10: initially all the money that they're spending on rewards and
Speaker 10: services and and all of what they call variable customer
Speaker 10: engagement expenses went up a lot, a little too much
Speaker 10: in some people's opinions. So what what we kind of
Speaker 10: learned recently with sort of some supporting data around two things.
Speaker 10: And the big thing was while the number of new
Speaker 10: cards acquired went down a little bit, the fee per
Speaker 10: new card went up from one hundred and ninety six
Speaker 10: in the third quarter to two hundred and eighty two.
Speaker 5: So huge jump. Now why is that?
Speaker 10: That's because a lot of the much bigger percentage of
Speaker 10: those new cards came from new Platinum customers, which is
Speaker 10: much better than just a regular customers. So even though
Speaker 10: a little less customers acquired, you're getting many more new
Speaker 10: Platinum customers, much better economics.
Speaker 5: So that's sort of one thing.
Speaker 10: And then talked a lot about how they're absorbing all
Speaker 10: of those extra reward costs if you will. But still
Speaker 10: that's and that's fine because it's enhancing revenue growth, and
Speaker 10: sort of the revenue growth benefit of that offsets the
Speaker 10: reward cost more than offsets that reward cost.
Speaker 3: Okay, Edward. One thing that I've noticed from these Facebook
Speaker 3: groups is that people get a Platinum card that's you know,
Speaker 3: for the sign up bonus and everything else. But then
Speaker 3: they start branching out and they get the Gold card
Speaker 3: because there's more reward points for groceries there. They start
Speaker 3: to compile a lot of AMEX cards, so a lot
Speaker 3: of the users have multiple cards, don't they.
Speaker 5: Yeah, no question about that.
Speaker 10: And obviously you've got to you know, a lot of
Speaker 10: sort of families on the Platinum card, so there's sort
Speaker 10: of a primary Platinum card owner and then issuer of
Speaker 10: multiple cards related to that. So you sort of have
Speaker 10: this this sort of network effect of the Platinum card
Speaker 10: that just keeps building and to some extent, you know,
Speaker 10: if you can, you know, when you come back to
Speaker 10: the JP Morgan Sapphire card, if you can, you know,
Speaker 10: build that reward and service infrastructure even bigger and better,
Speaker 10: you know, you create the you know, sort of the
Speaker 10: mode effect, which is what they're trying to do and
Speaker 10: seems to be working.
Speaker 2: Hey, ed the I have the Green card I got
Speaker 2: the day I graduated college at kept it all. But
Speaker 2: Scarlet and other folks, I understand they go crazy for
Speaker 2: these really expensive cards and all the points in managing.
Speaker 5: You need to go platinum.
Speaker 2: Paul, No, I just can't. I can't do it. But
Speaker 2: how big of a business is that for these card companies?
Speaker 2: Is that really the value driver? The Scarlet foods of
Speaker 2: the world.
Speaker 5: That's it.
Speaker 10: Yeah, they care much more about Scarlett than they care
Speaker 10: about you. I have to say, yes, she's going she's
Speaker 10: about to pay eight hundred and ninety five dollars a year,
Speaker 10: up from six hundred and ninety five dollars a year.
Speaker 5: They're going to give her a heck of a lot
Speaker 5: of rewards and services for that, but I had a
Speaker 5: big sign of bum on average.
Speaker 10: Now I hope this is not completely true, but on average,
Speaker 10: she one of the Platinum card members, spends about ten
Speaker 10: times as much on her card as you do.
Speaker 3: That was Edward Nigerian Bloomberg Intelligence consumer finance analyst. Coming up,
Speaker 3: we'll look at why MSG sports is considering splitting up
Speaker 3: its Nicks and Rangers businesses.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio of riding
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Speaker 2: one hundred and thirty industries.
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Speaker 13: With the Bloomberg Small Business Report. I'm John Tucker. There's
Speaker 13: a historic mansion on the northeast corner of San Francisco's
Speaker 13: Alamo Square Park where several dozen people live spending their
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Speaker 13: The Residency, which started in twenty twenty and just completed
Speaker 13: its seventh batch, has maintained a relatively low profile, even
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Speaker 13: five percent equity in each participating startup. And that's the
Speaker 13: Bloomberg Small Business Report.
Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
Speaker 1: on Bloomberg Radio.
Speaker 2: We move next to some news at the multi national
Speaker 2: conglomerate Berkshire Hathaway.
Speaker 3: This week, the company released its thirteen F filing for
Speaker 3: the fourth quarter, and investor Warren Buffett's last quarter as
Speaker 3: Berkshire Hathaway CEO reflected a bearish sentiment.
Speaker 2: Berkshire slast its holding of Amazon by more than seventy
Speaker 2: five percent in the fourth quarter, while also building a
Speaker 2: stake in The New York Times.
Speaker 3: Berkshire also continued trimming Bank of America and Apple during
Speaker 3: the quarter while increasing its stakes and Chevron and Chubb.
Speaker 2: For more on all of this, we were joined by
Speaker 2: Matt Palizola, Bloomberg Intelligence senior analyst.
Speaker 3: We began by asking Matthew if this will be the
Speaker 3: last time we mentioned Warren Buffett buying or selling shares
Speaker 3: in companies.
Speaker 14: Yes, it is so he was the CEO as of
Speaker 14: the fourth quarter. So these moves that we're looking at
Speaker 14: in the thirteen F took place in the fourth quarter
Speaker 14: of last year.
Speaker 9: To be totally fair. He's been stepping back.
Speaker 14: He probably wasn't behind a lot of this anyway, but
Speaker 14: this is actually the last quarter that you could even
Speaker 14: attribute these things to him. He remains chairman, so you
Speaker 14: never know he'd be looming behind the scenes. But his
Speaker 14: last quarter as CEO, he.
Speaker 3: Famously said he was only investing in things that he
Speaker 3: understood then that typically did not include technology companies. But Apple,
Speaker 3: I guess he saw more as a consumer company than
Speaker 3: anything else.
Speaker 9: Yeah, I think so.
Speaker 14: And I think the you know, his thing was motes
Speaker 14: right and probably still is, but the iPhone mode and
Speaker 14: the infrastructure built in, I think those were appealing things.
Speaker 14: They have been pairing that that investment, as we know,
Speaker 14: part of that, and you know, it's it's kind of
Speaker 14: a twist because he had said this said of the
Speaker 14: annual meeting a couple of meetings ago, that it was
Speaker 14: a kind of tax reasons that they had these huge
Speaker 14: unrealized gains in there, and he thought taxes would be
Speaker 14: going up. Now they're certainly not going to go up
Speaker 14: under the current administration kind of anytime soon. But Buffett
Speaker 14: is always long term thinking, so I think that's what
Speaker 14: he was looking at. As we've got you know, tens
Speaker 14: of billions of dollars of unrealized gains that will be taxed.
Speaker 14: And I think it does still hold true that in
Speaker 14: ten years from now, probably the corporate tax rate could
Speaker 14: be higher. And I think that was his concern and
Speaker 14: part of the reason they were taking down those those
Speaker 14: big gains in those big positions.
Speaker 2: And Lambert also cut its Amazon steak by seventy five percent.
Speaker 14: They did so Amazon. They initially got into Amazon him
Speaker 14: in twenty nineteen. That was one of his investment deputies,
Speaker 14: I think brought it to him. Then again also like tech,
Speaker 14: but a retailer. Right, that position we calculated was up
Speaker 14: about one hundred and thirty to one hundred and forty
Speaker 14: percent over the time. They hold it nice but kind
Speaker 14: of in line with the S and P five hundred.
Speaker 14: So it didn't really outperform, so I think it was
Speaker 14: kind of taking some money off the table. I sold it,
Speaker 14: I believe like one point seven billion worth of that stock,
Speaker 14: cutting most of the position, So that one I think
Speaker 14: was probably a company specific didn't really outperform. They bought
Speaker 14: four billion of Alphabet last quarter, so you know, the
Speaker 14: kind of tech aversion you know, maybe changing over time,
Speaker 14: what did he increase stakes in so two big ones
Speaker 14: Chevron and Chubb. So Chevron is they their fifth biggest holding.
Speaker 14: I think they interestingly, I don't know if they were
Speaker 14: kind of betting on US intervention in Venezuela, which happened
Speaker 14: kind of after the quarter, so you can't say that
Speaker 14: like murderer got taken out and this stuff happened and
Speaker 14: they did it and Reaction did it before. But maybe
Speaker 14: they were reading the tea leaves there. I don't know.
Speaker 14: It's a big holding for them. I think the kind
Speaker 14: of geopolitical energy play makes total sense. The other one
Speaker 14: is Chubb, which I don't want to get too excited
Speaker 14: thinking about insurance mega deal here, but they are now
Speaker 14: the second well they've been the second largest holder of
Speaker 14: Chubb stock.
Speaker 9: Chubb makes total sense.
Speaker 14: It is, in our view of BI a cream of
Speaker 14: the crop insurance company, global reach, still growing nicely, great management.
Speaker 14: It's a company that Berkshire would want to own. Now
Speaker 14: Berkshire's got their own massive insurance business. Yes, the interesting
Speaker 14: thing is you've got two massive insurance businesses. They're actually
Speaker 14: quite complimentary if one were to want to put them together.
Speaker 14: So the Berkshire business very big personal atto in Geico,
Speaker 14: very big reinsurance, kind of global global reinsurance. Those are
Speaker 14: two businesses that Chubb is not really in. There's some
Speaker 14: overlap in the kind of US specialty businesses that they're
Speaker 14: both in, but it would be phenomenally complementary of those
Speaker 14: two businesses. I think there's probably a lot of hurdles
Speaker 14: to some sort of you know, total deal there. Chubb's
Speaker 14: market cap is one hundred and thirty billion. Berkshire has
Speaker 14: three hundred billion of cash, so they theoretically could buy
Speaker 14: Chubb in cash if they wanted to. But I think
Speaker 14: it's probably some cultural issues and would Chubb really want
Speaker 14: to sell as the other thing? But you know, it
Speaker 14: is something it as a stock something Berkshire would want to.
Speaker 3: Is that a strategy that Berkshire actually follows through on
Speaker 3: where it starts off with a stake and then eventually decides,
Speaker 3: you know what, we're just gonna buy the whole thing.
Speaker 9: Scarlett, Yeah, they do do that.
Speaker 14: So I think with Burlington Northern, which is a little
Speaker 14: bit before time when they bought it, they did things
Speaker 14: like that where they acquire the public stake and then
Speaker 14: they build.
Speaker 9: It over time.
Speaker 14: That's why there was a lot of speculator about occidental.
Speaker 14: Buffett then came out and threw cold water on it,
Speaker 14: saying that but it seemed like it was going along
Speaker 14: with their playbook of huge acquisitions that they made before.
Speaker 2: So none of the warns out. Can we have a
Speaker 2: serious discussion about a dividend?
Speaker 9: We can?
Speaker 14: I think you know, we'll get you on the phone
Speaker 14: with Greg Abel Let's see what he says. But you know,
Speaker 14: I think our take has been in the early years.
Speaker 14: Able will probably adhere to the ethos of Berkshire. And
Speaker 14: I don't think he's going to come in and start
Speaker 14: breaking down walls like I don't think anyone would like
Speaker 14: to see that, especially Buffett's still there. I mean, they
Speaker 14: have tremendous excess capital. Buffett is praised Able as being
Speaker 14: a great capital allocator, great capital manager, and they've also
Speaker 14: said we literally can't there's so much money, we can't
Speaker 14: put it to work in a reasonable way. So it
Speaker 14: would make sense to see something happen there. And I think, look,
Speaker 14: the other thesis is they're not going to be as
Speaker 14: good as anything anymore. Right, there's no better investor than Buffett.
Speaker 14: Give a g Jane, who is the head of the
Speaker 14: insurance operations. He's been selling a lot of stock. Perhaps
Speaker 14: he's getting close to retirement, so you're not going to
Speaker 14: be good at any of these things anymore.
Speaker 9: Some sort of capital which there will be a big catalyst.
Speaker 2: Oh, thanks to Matt Palozola, Bloomberg Intelligence Senior Analyst.
Speaker 3: We move next to some news in the business of sports.
Speaker 2: This week, we heard that Madison Square Gardens board of
Speaker 2: directors approved a plan to explore splitting the NBA's New
Speaker 2: York Knicks from the NHL's New York Rangers.
Speaker 3: It's a move that would make each team a separate,
Speaker 3: publicly traded company.
Speaker 2: From more on this, we were joined by Randall Williams,
Speaker 2: Bloomberg Business of Sports reporter. We first asked Randall to
Speaker 2: break down why this deal may happen.
Speaker 12: Yeah, you look at the enterprise value of the Knicks
Speaker 12: and Rangers and what they're traded at its seven billion dollars.
Speaker 9: But you look at what the Lakers sold for.
Speaker 12: A loan ten billion dollars, and I think the Knicks
Speaker 12: obviously are in a larger market than New York. The
Speaker 12: Lakers have won more titles, but New York is New York,
Speaker 12: and so both the Knicks and the Rangers, I think
Speaker 12: would carry a tremendous value, maybe twelve billion dollars combined,
Speaker 12: and that's on the low end.
Speaker 2: So is this maybe a first step for selling one
Speaker 2: of the teams, selling a piece of one of.
Speaker 12: Them, getting into speculative territory.
Speaker 2: Well, James Dolan, that's always a fun place to look.
Speaker 12: I mean, silver Lake owns a piece of MSG Sports,
Speaker 12: and so that's five percent. It's a ten percent stake,
Speaker 12: but probably five percent each. And when you think about
Speaker 12: someone wanting to buy into that, you would want to
Speaker 12: know how much each individually is worth. If not, you're
Speaker 12: buying into something and it's like you could be buying
Speaker 12: in at a supreme price or maybe something that's a
Speaker 12: little bit lower. And I think buyers who are interested
Speaker 12: in there have been several over the years want a
Speaker 12: want a more precise price, and so do the shareholders
Speaker 12: of MSG Sports.
Speaker 3: So what's held up the company from being split up
Speaker 3: up until now because there's been a lot of calls
Speaker 3: for the enterprise value trading at a discount to the
Speaker 3: actual value of each franchise has been there for a while.
Speaker 2: I know the answer for voting stock is from the
Speaker 2: Dolan control.
Speaker 12: Yeah, I think that James Dolan has long been the
Speaker 12: controlling person for all of these companies. He decides where
Speaker 12: for worse, yes, exactly, he decides, you know what he
Speaker 12: wants to do. And there is a board of directors
Speaker 12: that voted on this. But this would have never put
Speaker 12: up been up for a vote had James Dolan that said,
Speaker 12: you know what, maybe we should consider this, and then
Speaker 12: from there on, you know, things happen and then they
Speaker 12: vote on this.
Speaker 2: Madison Square Garden, James Stone, did they own the garden itself,
Speaker 2: the building?
Speaker 9: I believe so.
Speaker 2: Yeah, that's always a big That's always a big part
Speaker 2: of it too. Do you own the arena they plan?
Speaker 3: Or yes, in a different publicly traded company, exactly exactly.
Speaker 12: And I had a Bloomberg terminal reader and the original
Speaker 12: copy that I wrote, I said Madison Square Garden was
Speaker 12: one of the most famous in the world, and someone quickly,
Speaker 12: someone quickly replied and said, no, it it is the
Speaker 12: most famous arena in the world. So Madison Square Garden
Speaker 12: is a huge, you know, attraction. When you think about
Speaker 12: arenas in New York, there's the Barclay Center, of course,
Speaker 12: which is newer but the legacy of New York is
Speaker 12: often rooted in MSG and the events that it's held
Speaker 12: over many, many years.
Speaker 2: Yeah, I mean, first of all, and they also put
Speaker 2: in I think close to a billion dollars and renovations
Speaker 2: several years ago, so they've really upgraded the garden. What's
Speaker 2: one of the many great things about going to the
Speaker 2: Garden is they have the photos on the wall, the concourses,
Speaker 2: all the great events, whether it's a concert, a game, whatever,
Speaker 2: and there's thousands of them.
Speaker 12: There's no there's no venue that has a greater history,
Speaker 12: I would argue than Madison Square Garden that is still
Speaker 12: you know, open and operational, and.
Speaker 9: That's that's part of this.
Speaker 12: I mean, you think about the Knicks playoff end last year.
Speaker 12: You think about the Rangers and what they've.
Speaker 5: Done, not having the.
Speaker 12: Past two seasons, but in the seasons before that, all
Speaker 12: of these things. When they eventually win, you know, God willing,
Speaker 12: it isn't MSG. It it isn't one of the deals
Speaker 12: where you know they're in away game and then they
Speaker 12: have to come back. If it happens in MSG, that
Speaker 12: will probably be the biggest moment in that arena in
Speaker 12: the last twenty five years, and so whoever wants to
Speaker 12: buy into that potentially is going to want a good
Speaker 12: value at it.
Speaker 3: There is also a note from light Shed that pointed
Speaker 3: out that there's a new tax law that goes into
Speaker 3: effect for the twenty twenty eight fiscal year that for
Speaker 3: public companies limits deductions two one million dollars per cover employees.
Speaker 3: For sports teams, it's easy to find a lot of
Speaker 3: employees that make at least a million dollars a year.
Speaker 3: So once this goes through in twenty twenty eight, that's
Speaker 3: going to put the company in a negative free cash
Speaker 3: flow situation unless the Knicks, for instance, go deep into
Speaker 3: a playoff run or the Rangers go deep into a
Speaker 3: playoff run. So it also allows the company, you know,
Speaker 3: for tax reasons, to be in a better position.
Speaker 12: Absolutely absolutely. I mean there's not a lot of publicly
Speaker 12: traded sports companies out there for this reason in particular, And.
Speaker 9: You think about all of the big ones.
Speaker 12: You think about the Cronky Sports and Entertainment, which houses
Speaker 12: the Rams, the Nuggets, I believe, another soccer team, and
Speaker 12: so many more. It's private, and that's that's for a reason.
Speaker 12: But this one is unique, and Madison's square Garden is
Speaker 12: Madison Square Garden. The Nicks is the Nicks and the
Speaker 12: Rangers of the.
Speaker 3: Rangers our thanks to Randa Williams, Bloomberg Business of Sports Reporter.
Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
Speaker 2: providing in depth research and data on two thousand companies
Speaker 2: and one hundred and thirty industries.
Speaker 3: And remember you can access Bloomberg Intelligence via b I
Speaker 3: go on the terminal. I'm Scarlett Foo and I'm Paul Sweeney.
Speaker 2: Stay with us. Today's time stories and global business headlines
Speaker 2: are coming up right now
Speaker 11: Mm hm