WEBVTT - Anthropic Flags ‘Existential Risks’ in Long-Awaited IPO Filing 0:00:02.730 --> 0:00:04.410 Bloomberg Audio Studios. 0:00:04.890 --> 0:00:05.569 Podcasts. 0:00:05.890 --> 0:00:06.410 Radio. 0:00:06.850 --> 0:00:07.250 News. 0:00:09.750 --> 0:00:13.450 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:13.530 --> 0:00:16.570 weekdays at 10 a.m. Eastern on Apple CarPlay and Android 0:00:16.640 --> 0:00:19.939 Auto with the Bloomberg Business App. Listen on demand wherever 0:00:19.980 --> 0:00:23.040 you get your podcasts or watch us live on YouTube. 0:00:23.980 --> 0:00:24.659 We're going to get back to this. 0:00:24.739 --> 0:00:29.120 Anthropic filing for its IPO to become the first frontier 0:00:29.360 --> 0:00:32.599 AI lab to list. Ed Ludlow joins us, Bloomberg Tech 0:00:33.020 --> 0:00:36.650 co-host here. Ed, the day has finally come for AI. 0:00:36.690 --> 0:00:39.550 This is their time to really get out there and 0:00:39.610 --> 0:00:42.430 talk the story. What do you expect to hear from 0:00:42.550 --> 0:00:45.760 AI when they go on the road to sell this monster, 0:00:45.940 --> 0:00:46.680 monster IPO? 0:00:46.700 --> 0:00:46.980 Yeah. 0:00:47.590 --> 0:00:49.440 I mean, it's probably easier to start with the things 0:00:49.479 --> 0:00:51.979 that are missing from the S1. The obvious things, because 0:00:52.000 --> 0:00:54.240 they never are in the S1 when it's public, is 0:00:54.280 --> 0:00:57.540 the size of this IPO and the target raise. But 0:00:57.580 --> 0:01:00.440 what was interesting as well is, like, there aren't any 0:01:00.680 --> 0:01:03.420 really contemporaneous financials. There's no Q3 numbers. 0:01:03.440 --> 0:01:03.960 They're out there. 0:01:03.980 --> 0:01:07.199 They've been reported. I think what's amazing in the document, 0:01:07.360 --> 0:01:09.530 and you know as well as anyone, Paul, right, the 0:01:09.580 --> 0:01:12.709 boilerplate does a lot of work. So the risk factors, 0:01:12.770 --> 0:01:15.030 the language they have to put in these– But the 0:01:15.090 --> 0:01:19.410 really simple story is Anthropic has presented massive, incredible growth 0:01:20.010 --> 0:01:21.910 through to the first half of this year or the 0:01:21.950 --> 0:01:24.700 nine months through September 30th. But there could not be 0:01:24.740 --> 0:01:28.860 a starker warning that that growth won't continue for lots 0:01:28.900 --> 0:01:30.539 of reasons which we can get into. And so when 0:01:30.560 --> 0:01:32.880 they hit the road, you know, they're going to need 0:01:32.920 --> 0:01:35.619 to sort of explain the positive on that, the upside 0:01:35.680 --> 0:01:35.940 on that. 0:01:37.280 --> 0:01:39.610 Very much big risk, big reward kind of thing. 0:01:39.630 --> 0:01:39.929 Yeah. 0:01:40.770 --> 0:01:43.390 They're determined, it seems, to go public this year. What 0:01:43.430 --> 0:01:45.790 does that say about their need for capital, Ed? 0:01:47.090 --> 0:01:51.050 Yeah, I think what's interesting is they have minimum contracted 0:01:51.090 --> 0:01:54.770 spending commitments of about $ 250 billion. Those are the things 0:01:54.790 --> 0:01:57.290 that they are absolutely on the hook for. But the 0:01:57.330 --> 0:02:01.060 way that they explain this is that they have operated 0:02:01.120 --> 0:02:04.780 in an environment historically where they are compute constrained. In 0:02:04.820 --> 0:02:07.840 other words, they cannot get access to the level of 0:02:07.900 --> 0:02:11.000 computing power that they think they need to to service 0:02:11.020 --> 0:02:13.320 the current demand for their products. And so if you 0:02:13.360 --> 0:02:19.390 go through, whether it's with Amazon, Google, SpaceX, Broadcom, AMD, 0:02:20.470 --> 0:02:23.810 the number is actually far greater than $ 250 billion in 0:02:23.850 --> 0:02:27.350 what they've lined up to have access to. But the 0:02:27.410 --> 0:02:29.330 issue is that they, and they say it again in 0:02:29.350 --> 0:02:32.419 the risk language, they are asking the cloud computing providers 0:02:32.480 --> 0:02:35.440 to give them more than those cloud computing providers are 0:02:35.500 --> 0:02:38.620 willing or able to do. And that's an interesting thing. 0:02:38.680 --> 0:02:42.160 So the capital, they did a huge round in May, right? 0:02:42.500 --> 0:02:43.350 And we don't know what. 0:02:43.270 --> 0:02:45.510 They're going to try and raise in this IPO, but 0:02:45.610 --> 0:02:48.390 it's there long term. It's not just they need it 0:02:48.430 --> 0:02:48.769 right now. 0:02:50.040 --> 0:02:52.980 So one of the key things for an IPO, Ed, 0:02:53.160 --> 0:02:54.940 is the quality of management. 0:02:54.970 --> 0:02:57.430 You're really betting on management. What do we know about 0:02:57.450 --> 0:02:59.410 this management team at Anthropic? 0:03:00.370 --> 0:03:04.550 Yeah, so basically things stay the same. Dario Amodei stays 0:03:04.630 --> 0:03:08.530 on as the CEO. Daniela Amodei, who is his sister, 0:03:08.690 --> 0:03:11.000 remains in the role of president, but also chair of 0:03:11.020 --> 0:03:15.419 the board. There is a long-term benefit trust, which appoints 0:03:15.500 --> 0:03:18.440 the majority of board members. And then there is an 0:03:18.480 --> 0:03:21.360 issue of control. which we are learning about every day 0:03:21.400 --> 0:03:24.179 in the world of technology recently. When you look at 0:03:24.200 --> 0:03:27.429 what Meta did with its Class C shares. Anthropic has 0:03:27.470 --> 0:03:30.680 a group of seven founders. And each of those founders, 0:03:31.160 --> 0:03:36.640 those founders collectively will net out with 50, 5, 0.1% 0:03:36.640 --> 0:03:39.740 of shareholder voting power. And there are some stipulations about 0:03:39.800 --> 0:03:41.700 the common stock they have to hold to do that. 0:03:42.020 --> 0:03:44.720 But that is a really interesting outcome when you also 0:03:44.780 --> 0:03:48.570 take into account that this is a public benefit corporation structure, right? 0:03:48.610 --> 0:03:52.850 And that Anthropic has other philanthropic goals and societal goals 0:03:52.870 --> 0:03:54.510 that it's trying to meet while still being a public 0:03:54.550 --> 0:03:57.470 company with fiduciary duty to its shareholders. 0:03:58.560 --> 0:04:01.400 And if you're open AI, what are you hoping to learn, 0:04:02.600 --> 0:04:05.460 not just from this S1 filing, but from the roadshow, 0:04:05.660 --> 0:04:08.100 the investor roadshow that Anthropic is about to go on? 0:04:08.860 --> 0:04:10.540 You know, Scott, you're the first person to ask me that, 0:04:10.560 --> 0:04:12.340 which I'm surprised about. Like, I thought this would come 0:04:12.410 --> 0:04:15.350 up sooner. And the answer to your question is, well, 0:04:15.390 --> 0:04:18.310 what did Anthropic learn from SpaceX's S1? You know, if 0:04:18.330 --> 0:04:20.750 you think about when SpaceX flipped the S1 in May, 0:04:21.310 --> 0:04:25.370 they decided to go with this just out-of-this-world total addressable 0:04:25.390 --> 0:04:26.110 market number. 0:04:27.400 --> 0:04:27.840 Of $ 26. 0:04:27.740 --> 0:04:32.340 5 trillion specifically for AI. Anthropic did not... put any 0:04:32.420 --> 0:04:35.750 total addressable market number. They had some brief commentary about 0:04:35.790 --> 0:04:39.810 how in 2025, they felt the value, the economic value 0:04:39.830 --> 0:04:43.230 of knowledge work from AI was about 40 trillion. So 0:04:43.250 --> 0:04:45.490 they've resisted the urge to say, here's the future that 0:04:45.510 --> 0:04:49.930 we see too much. I think going into this, all 0:04:49.990 --> 0:04:51.850 signs point that Anthropic is going to try and do 0:04:51.910 --> 0:04:56.000 this IPO by Thanksgiving. But my understanding from the companies 0:04:56.150 --> 0:04:58.800 and from the investor base is that OpenAI was pretty 0:04:58.860 --> 0:05:01.960 calm about the idea that Anthropic would go first. and 0:05:01.980 --> 0:05:04.920 the open AI would be at some point in 2027. 0:05:04.920 --> 0:05:07.890 You know, there's a chronology to it. What did they learn? 0:05:08.690 --> 0:05:10.330 Maybe how to choose your risk language. 0:05:11.050 --> 0:05:11.650 Exactly. 0:05:11.750 --> 0:05:14.480 Stay with us. More from Bloomberg Intelligence coming up after this. 0:05:18.810 --> 0:05:22.520 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:05:22.600 --> 0:05:25.620 weekdays at 10 a.m. Eastern on Apple CarPlay and Android 0:05:25.700 --> 0:05:28.980 Auto with the Bloomberg Business App. Listen on demand wherever 0:05:29.040 --> 0:05:32.100 you get your podcasts or watch us live on YouTube. 0:05:33.020 --> 0:05:35.839 The anthropic S1 filing finally dropped. 0:05:36.700 --> 0:05:36.880 Boom. 0:05:37.000 --> 0:05:38.839 And how many pages was it? I don't know. 0:05:38.860 --> 0:05:40.200 I haven't seen it yet. It's still printing. 0:05:40.400 --> 0:05:43.119 Okay. Still printing, but we know that the risks section 0:05:43.200 --> 0:05:47.280 is really long and it includes things like existential risks 0:05:47.920 --> 0:05:51.820 to humanity, including attempts to resist shutdown and conceal or 0:05:51.860 --> 0:05:52.700 manipulate information. 0:05:52.720 --> 0:05:55.120 I mean, you could write a book on this already 0:05:55.160 --> 0:05:55.540 on its own. 0:05:55.880 --> 0:05:58.960 Michael Shepard, he is our Bloomberg News Senior Tech Editor 0:05:59.020 --> 0:06:02.190 joining us right now. Michael, what do we need to 0:06:02.260 --> 0:06:05.750 know about the S1 filing from Anthropic, short of the 0:06:05.830 --> 0:06:06.650 risks section. 0:06:06.690 --> 0:06:08.510 Just let's start with the business first. 0:06:09.490 --> 0:06:13.310 Let's look at the top lines in all of this. 0:06:13.440 --> 0:06:19.500 And for our audience, of course, who is leading this IPO? Well, 0:06:19.620 --> 0:06:22.989 Goldman Sachs Group and Morgan Stanley. There are 20 other 0:06:23.020 --> 0:06:28.050 banks involved. The filing shows The timing on this, we've 0:06:28.089 --> 0:06:32.030 been told to expect a formal marketing of the IPO 0:06:32.050 --> 0:06:35.190 to begin as soon as the week of November 9. 0:06:35.190 --> 0:06:37.700 Anthropic is really trying to get this done before the 0:06:37.760 --> 0:06:41.000 end of the year and, in fact, before Thanksgiving. So 0:06:41.080 --> 0:06:43.980 this is the timetable that they're on. And it's happening, 0:06:44.000 --> 0:06:47.460 of course, even during this time. moment of, let's say, 0:06:47.560 --> 0:06:52.469 churn and turmoil surrounding the AI trade and AI market 0:06:52.610 --> 0:06:56.360 and all the concerns that maybe some companies are taking 0:06:56.440 --> 0:06:58.300 on a little bit too much debt and too much 0:06:58.400 --> 0:07:01.740 risk in trying to deploy the technology. But anthropic a 0:07:01.820 --> 0:07:06.830 pioneer in developing those models is forging ahead. They emphasized, 0:07:06.990 --> 0:07:10.230 of course, that, yes, we talked about the risks, but 0:07:10.250 --> 0:07:19.290 they also pointed to their business. They reported having $ 16. 3 0:07:15.410 --> 0:07:18.310 billion in revenue for the first six months of this 0:07:18.390 --> 0:07:24.000 year versus a loss of $ 80. 7 billion in that same period. Now, 0:07:24.500 --> 0:07:28.280 When you look back to the comparable stretch just a 0:07:28.320 --> 0:07:34.440 year earlier, they had a $ 13 billion loss on just 0:07:34.440 --> 0:07:37.670 $ 1. 2 billion in revenue. So we really are seeing the 0:07:37.770 --> 0:07:41.690 trajectory of the business growing very fast, and that also 0:07:41.950 --> 0:07:44.310 points to why they may want to get to market 0:07:44.370 --> 0:07:45.590 sooner rather than later. 0:07:46.090 --> 0:07:49.780 So the company's not making money. Has management said when 0:07:49.800 --> 0:07:52.780 they expect to be profitable? Have they indicated that yet? 0:07:54.080 --> 0:07:57.100 It's unclear from the filing exactly what that timing is. 0:07:57.300 --> 0:08:00.690 And as they market this to investors, we may get 0:08:00.700 --> 0:08:04.250 a clearer picture of that. There were sure a lot 0:08:04.270 --> 0:08:07.270 of caveats in this, as Scarlett alluded to in the 0:08:07.330 --> 0:08:11.020 risk section about all the challenges. that they could face 0:08:11.100 --> 0:08:14.680 in terms of their ability to deliver on the promises 0:08:14.760 --> 0:08:17.680 of their product. And it really depends so much on 0:08:17.700 --> 0:08:21.120 the infrastructure that they need to do all the computing 0:08:21.620 --> 0:08:27.290 to continue to advance their cutting edge or so-called frontier models. 0:08:27.530 --> 0:08:29.670 And the risks are not only the safety ones that 0:08:29.690 --> 0:08:32.069 we've been talking about, but being able to build all 0:08:32.090 --> 0:08:36.210 those data centers that are needed to run the models. 0:08:36.309 --> 0:08:38.609 And they even point to the risk of opposition there. 0:08:39.390 --> 0:08:41.689 So being able to build all those data centers means 0:08:41.710 --> 0:08:43.199 they're going to have to spend a lot more money. 0:08:43.220 --> 0:08:45.800 And that's partly why they're moving forward with this IPO. 0:08:46.100 --> 0:08:48.819 What do we know about how much debt or how 0:08:48.860 --> 0:08:50.079 much debt is willing to take on? 0:08:51.130 --> 0:08:54.170 Well, that's another great question. And they did point a 0:08:54.470 --> 0:08:59.690 little bit to debt in the filing. They said that, well, 0:08:59.970 --> 0:09:03.310 to go back to their spending on computing power, they 0:09:03.350 --> 0:09:08.980 had put nearly $ 9 billion toward computing power and infrastructure 0:09:09.340 --> 0:09:11.960 for the first six months of this year. And that's 0:09:12.000 --> 0:09:15.599 almost a fourfold increase from the year earlier. So it 0:09:15.660 --> 0:09:20.260 just gives you an idea of of what, um, you know, 0:09:20.340 --> 0:09:23.500 the investment that it's putting out and, you know, really, uh, 0:09:24.220 --> 0:09:27.209 in the filing, they also talked about just how much 0:09:27.250 --> 0:09:30.510 they've expanded their agreements for computing power. And some of 0:09:30.550 --> 0:09:36.490 these include a substantial amount of debt, minimum obligations in these, uh, 0:09:36.570 --> 0:09:43.120 computing power agreements of $ 417 billion. And those agreements, uh, 0:09:43.179 --> 0:09:46.780 will carry out through, uh, As you know, as long 0:09:46.820 --> 0:09:51.000 as 2046, some of these are very long term. They 0:09:51.240 --> 0:09:53.750 talked about their debt. They said their total debt is 0:09:53.850 --> 0:09:58.230 six point two billion as of June 30th. And they 0:09:58.270 --> 0:10:03.500 do have a revolving facility above. to $ 15 billion. They 0:10:03.740 --> 0:10:08.709 don't have investment grade credit rating yet. So once they 0:10:08.760 --> 0:10:11.730 need that, they may be able to make that revolving 0:10:11.790 --> 0:10:15.110 loan unsecure. But that still hasn't yet for those who 0:10:15.410 --> 0:10:17.949 pay close attention to how companies structure their debt. 0:10:18.270 --> 0:10:18.710 Stay with us. 0:10:19.070 --> 0:10:21.400 More from Bloomberg Intelligence coming up after this. 0:10:25.100 --> 0:10:29.610 This is Bloomberg Intelligence with Scarlett Fu and Paul Sweeney 0:10:29.950 --> 0:10:31.050 on Bloomberg Radio. 0:10:32.330 --> 0:10:34.100 All right, Scarlett Philp, Paul Sweeney, we're live here in 0:10:34.120 --> 0:10:36.200 our Bloomberg Interactive Broker Studio in New York City. 0:10:36.700 --> 0:10:38.520 We're streaming live on YouTube as well. 0:10:38.540 --> 0:10:42.380 All right, two years after Donald Trump's promises to bring 0:10:42.440 --> 0:10:45.240 down the high cost of living helped him get elected 0:10:45.300 --> 0:10:48.960 to an historic second term, his failure to deliver has 0:10:49.020 --> 0:10:52.000 disappointed many of the supporters he won over. 0:10:52.020 --> 0:10:52.620 And that is the. 0:10:52.520 --> 0:10:56.300 Subject of our big take story today on the Bloomberg Terminal. 0:10:56.340 --> 0:10:59.250 Mark Nickette joins us here. He's a real economy reporter. 0:10:59.809 --> 0:11:03.050 for Bloomberg News. What is a real economy reporter covering 0:11:03.070 --> 0:11:07.040 the intersection of government and politics and the economy? And boy, 0:11:07.059 --> 0:11:09.340 with the midterm elections a week from tomorrow, that is 0:11:09.420 --> 0:11:12.400 spot on here. Mark, thanks so much for joining us here. 0:11:12.679 --> 0:11:19.240 How much is this economy characterized by very good economic growth, 0:11:19.660 --> 0:11:23.620 full employment, but very high inflation? How much is that 0:11:23.640 --> 0:11:25.969 going to be a problem for the Republicans here in 0:11:25.990 --> 0:11:26.410 this midterm? 0:11:28.179 --> 0:11:31.880 I think it's driving a lot of the campaigns, particularly 0:11:31.900 --> 0:11:38.400 in these tossed-up Senate races, because the focus that voters 0:11:38.460 --> 0:11:43.500 have is all on high prices and affordability, even with, 0:11:43.640 --> 0:11:48.490 as you mentioned, the solid job market and booming stock market. 0:11:48.850 --> 0:11:51.429 I mean, it's sort of an interesting dichotomy where we 0:11:51.490 --> 0:11:55.690 have sort of strong economic growth and positive economic indicators. 0:11:55.770 --> 0:11:57.710 But in particular, the. 0:11:57.670 --> 0:12:04.370 High prices for gasoline and diesel are really driving negative 0:12:04.410 --> 0:12:10.140 consumer sentiments and backlash really against Republicans because of Donald 0:12:10.160 --> 0:12:13.219 Trump's promises to bring down prices on day one if 0:12:13.260 --> 0:12:14.559 he was elected to a second term. 0:12:15.400 --> 0:12:15.980 And it's interesting. 0:12:16.000 --> 0:12:19.079 I mean, it must be frustrating for the Republican National Committee. 0:12:19.100 --> 0:12:22.020 I always highlight that because some of his policies are 0:12:22.059 --> 0:12:27.350 direct contradiction to that. Thinking simply about tariffs. Obviously, most 0:12:27.390 --> 0:12:29.449 economists say that is a tax on the U.S. consumer, 0:12:29.770 --> 0:12:32.470 higher prices to some degree. And then starting a war 0:12:32.950 --> 0:12:36.429 in the Middle East, which not unexpectedly drives up the 0:12:36.470 --> 0:12:40.170 cost of energy on a global scale. How is the 0:12:40.220 --> 0:12:43.840 president trying to kind of work around those issues? 0:12:45.710 --> 0:12:48.010 Well, he's been really, as far as the war is concerned, 0:12:48.090 --> 0:12:52.510 been really focused on the message that prices are going 0:12:52.530 --> 0:12:56.250 to come down quickly once the Iran war is settled. 0:12:57.260 --> 0:13:01.560 He's been doing rallies almost every day leading up to 0:13:01.580 --> 0:13:05.959 the midterms and essentially saying the same thing, that sure, 0:13:06.000 --> 0:13:08.970 your gas prices might be high now, but one, it's 0:13:09.010 --> 0:13:13.990 a small price to pay for denying Iran from getting 0:13:14.010 --> 0:13:16.569 a nuclear weapon, but also that prices are going to 0:13:16.610 --> 0:13:20.390 come down really quickly. The problem, of course, is that 0:13:20.410 --> 0:13:26.040 the conflict has continued much longer than the administration promised 0:13:26.140 --> 0:13:30.540 at the beginning, at the outset. And there's even concerns 0:13:30.600 --> 0:13:34.020 that we'll see an escalation in fighting after the midterms. 0:13:34.080 --> 0:13:38.030 So it's sort of a tough needle for the president 0:13:38.050 --> 0:13:40.920 to thread because on the one hand, he can talk 0:13:40.960 --> 0:13:44.870 about prices coming down once the conflict is resolved, but 0:13:45.390 --> 0:13:47.770 there's no clear indication of when that's going to happen. 0:13:48.250 --> 0:13:51.800 And meanwhile, consumers are seeing high prices at the pump, 0:13:51.880 --> 0:13:54.439 you know, every day when they drive past the gas stations. 0:13:54.700 --> 0:13:55.520 Yeah, absolutely. 0:13:55.880 --> 0:13:59.020 So, Mark, we've seen President Trump pretty aggressively out on 0:13:59.040 --> 0:14:01.400 the campaign trail on a daily basis over the last 0:14:01.420 --> 0:14:04.880 several weeks, and the expectation now will continue through Election Day. 0:14:05.320 --> 0:14:07.960 What are the folks down ballot? How are they embracing 0:14:07.980 --> 0:14:10.679 the president? How are they using the president, given that 0:14:10.750 --> 0:14:13.390 his polling numbers are so low, given that many of 0:14:13.450 --> 0:14:16.150 his policies have driven up pressures here? 0:14:17.700 --> 0:14:21.700 It's kind of a difficult balancing act, particularly in states 0:14:21.740 --> 0:14:24.780 that have toss-up Senate races or these, you know, really 0:14:24.820 --> 0:14:29.119 competitive swing congressional districts. Because on the one hand, the 0:14:29.460 --> 0:14:34.700 Republicans need strong turnout from the Trump supporters in particular 0:14:34.780 --> 0:14:38.700 and the Republican base in general. So, you know, they 0:14:38.720 --> 0:14:44.000 don't want to distance themselves too much from Trump because 0:14:44.020 --> 0:14:47.180 they need sort of Trump's help to get their voters 0:14:47.230 --> 0:14:50.110 to turn out. On the other hand, Trump's also a 0:14:50.150 --> 0:14:54.700 motivating factor on the other side in encouraging Democratic participation, 0:14:54.820 --> 0:14:58.360 if nothing else, to put a check on the final 0:14:58.380 --> 0:15:04.080 two years of the Trump administration. And there's been a 0:15:04.120 --> 0:15:08.230 push by some Republicans in these competitive districts to sort 0:15:08.270 --> 0:15:10.030 of back away from the Trump or at least not 0:15:10.110 --> 0:15:13.650 emphasize their connections to Trump or even, you know, promoting 0:15:13.690 --> 0:15:17.650 their willingness to oppose the president if they think that 0:15:17.670 --> 0:15:20.860 will help them in these districts with, you know, independent voters. 0:15:21.860 --> 0:15:24.840 And Mark, in this story, you guys interview a gentleman 0:15:24.980 --> 0:15:27.820 in McAllen, Texas. He's on his lunch break from a 0:15:27.880 --> 0:15:30.480 retail job. And his quote is, I thought stuff was 0:15:30.520 --> 0:15:32.990 going to get cheaper and that life was going to 0:15:33.000 --> 0:15:35.430 be better, but that never happened. 0:15:35.450 --> 0:15:36.090 End quote. 0:15:36.350 --> 0:15:40.330 How common is that kind of thinking in different parts 0:15:40.350 --> 0:15:40.850 of the country? 0:15:42.190 --> 0:15:42.890 It's pretty common. 0:15:42.950 --> 0:15:47.090 It's pretty common among different demographic groups. We looked at 0:15:48.530 --> 0:15:52.490 demographic groups that had big swings to Donald Trump in 0:15:52.490 --> 0:16:00.370 2024 from 2020, primarily Latinos. low-income voters and. 0:16:02.190 --> 0:16:02.810 Young voters. 0:16:03.410 --> 0:16:06.430 And we saw a big shift, I think, of those 0:16:06.490 --> 0:16:11.520 voters to Trump because of the economy, the expectation that, 0:16:12.900 --> 0:16:14.840 or the belief at least, that Trump would be better 0:16:14.940 --> 0:16:19.080 on the economy than Kamala Harris. And also, you know, 0:16:19.100 --> 0:16:22.640 Donald Trump was promising throughout the campaign that he would 0:16:22.660 --> 0:16:26.910 bring down prices immediately and fight inflation. So while these 0:16:26.970 --> 0:16:30.980 voters swung to Trump in 2024 because of the economy, 0:16:31.340 --> 0:16:33.680 their disappointment in the fact that prices have not come 0:16:33.720 --> 0:16:36.540 down is sort of driving them away from Republicans this cycle. 0:16:36.720 --> 0:16:37.120 Stay with us. 0:16:37.530 --> 0:16:39.750 More from Bloomberg Intelligence coming up after this. 0:16:43.770 --> 0:16:46.350 You're listening to the Bloomberg Intelligence Podcast. 0:16:46.700 --> 0:16:48.580 Catch us live weekdays at 10 a.m. 0:16:48.660 --> 0:16:51.900 Eastern on Apple CarPlay and Android Auto with the Bloomberg 0:16:51.920 --> 0:16:55.010 Business App. Listen on demand wherever you get your podcasts 0:16:55.350 --> 0:16:58.530 or watch us live on YouTube. All right, I. 0:16:58.490 --> 0:17:01.750 Took my first cruise on a Viking cruise ship. Had 0:17:01.770 --> 0:17:03.010 a good time on the Sun River. I think we 0:17:03.030 --> 0:17:04.550 actually put a deposit down for something else. 0:17:04.790 --> 0:17:05.270 Wait, really? 0:17:05.550 --> 0:17:06.090 Yeah, I think so. 0:17:06.270 --> 0:17:08.470 When did you do that? Like a day in, towards 0:17:08.510 --> 0:17:08.950 the end? 0:17:10.130 --> 0:17:10.790 After, I think. 0:17:11.030 --> 0:17:11.450 Oh, okay. 0:17:11.490 --> 0:17:14.150 But yeah, so anyway, so we're locked in again. 0:17:14.260 --> 0:17:15.119 He's a lifer now. 0:17:15.150 --> 0:17:15.650 So I guess. 0:17:16.460 --> 0:17:19.080 The other person I know that knows this cruise business 0:17:19.359 --> 0:17:21.560 and appreciates it is Jody Laurie. She's a senior credit 0:17:21.600 --> 0:17:25.200 analyst for Bloomberg Intelligence. She follows all these consumer-facing kind 0:17:25.220 --> 0:17:28.899 of fun companies, think casinos, hotels, cruise ship lines, all 0:17:28.940 --> 0:17:30.900 that kind of good stuff. They need capital to grow. 0:17:31.350 --> 0:17:33.210 That's particularly the case for these cruise liners. 0:17:33.510 --> 0:17:35.490 Jodi, thanks so much for joining us here. Talk to 0:17:35.510 --> 0:17:38.710 us about Norwegian cruise lines. I know you keep close 0:17:38.730 --> 0:17:41.800 tabs on that credit profile. What are you seeing from Norwegian? 0:17:43.440 --> 0:17:45.979 So I think, Paul, the thing about Norwegian is that 0:17:46.020 --> 0:17:51.050 they've been lagging. their peers in terms of the deleveraging story. 0:17:51.369 --> 0:17:53.470 So you talk about Viking, they have some of the 0:17:53.510 --> 0:17:57.310 lowest leverage in terms of debt leverage across the board. 0:17:57.830 --> 0:18:00.119 And by this, we mean is that management took the 0:18:00.130 --> 0:18:04.220 strategy of trying to grow margins, grow EBITDA in order 0:18:04.260 --> 0:18:08.780 to delever as opposed to actively repaying debt. And that 0:18:08.820 --> 0:18:10.619 sort of put them in a little bit of a 0:18:10.660 --> 0:18:13.700 challenging situation, you know, especially for someone like Norwegian, that's 0:18:13.720 --> 0:18:17.600 a When they're cutting costs, you sort of wonder what 0:18:17.800 --> 0:18:20.560 kind of quality service they have as a result. 0:18:24.230 --> 0:18:26.689 Whoops, didn't press the mic in time. So how do 0:18:26.710 --> 0:18:29.310 they move forward with that kind of situation? How do 0:18:29.350 --> 0:18:32.880 you see them using their financials to their advantage? 0:18:34.530 --> 0:18:37.890 So, Scarlett, I think the challenge is what are they 0:18:37.930 --> 0:18:38.970 going to do next? 0:18:39.550 --> 0:18:40.310 And something that we. 0:18:40.250 --> 0:18:42.530 Did as an exercise a few days ago was looking 0:18:42.590 --> 0:18:46.650 at Norwegian and comparing it to Caesars. And you think, okay, 0:18:46.670 --> 0:18:50.950 gaming company versus cruise line, yes, there's gaming on cruises, 0:18:51.330 --> 0:18:53.170 but what do they have to do with one another? Well, 0:18:53.270 --> 0:18:56.129 in fact, we actually see that their stories are a 0:18:56.210 --> 0:18:58.070 little bit similar in a lot of ways. 0:18:58.550 --> 0:19:01.070 You know, they're operators within a very sort of. 0:19:02.920 --> 0:19:05.080 Al Gopli kind of industry, right? You know, you have 0:19:05.100 --> 0:19:08.080 a couple of key players. They've been lagging their peers. 0:19:08.180 --> 0:19:10.950 Both of them have been beating the drum on deleveraging, 0:19:11.010 --> 0:19:14.730 on improving their balance sheet, but haven't quite hit the mark. 0:19:15.210 --> 0:19:18.990 And now Caesars is getting taken private by Fertitta. or 0:19:19.050 --> 0:19:22.810 potentially taken private, you know, it's moving along. And Norwegian, 0:19:22.850 --> 0:19:25.409 you know, is also a company that was private at 0:19:25.510 --> 0:19:26.050 one point. 0:19:26.630 --> 0:19:28.310 They are lagging. 0:19:28.350 --> 0:19:31.130 They now have a new CEO and you sort of wonder, okay, 0:19:31.260 --> 0:19:33.179 what are they going to do next in terms of 0:19:33.200 --> 0:19:36.560 the company? They've been selling off assets. They've been entering 0:19:36.619 --> 0:19:40.740 into these charter agreements as well to increase their cashflow 0:19:40.920 --> 0:19:42.760 and to get a little bit more creative with their 0:19:42.800 --> 0:19:46.400 balance sheet. But I'm not quite sure what that means 0:19:46.530 --> 0:19:48.449 for Norwegian short-term and long-term. 0:19:49.570 --> 0:19:49.990 Talk to us about it. 0:19:50.070 --> 0:19:52.990 Just the fundamentals of the cruise business in general. Like, John, 0:19:53.020 --> 0:19:55.880 you'll appreciate this. I did take the free, you know, 0:19:55.950 --> 0:19:58.100 all the booze included option. 0:19:58.240 --> 0:19:59.520 Oh, you definitely have to do that. 0:19:59.540 --> 0:20:01.419 You know, I cost Viking a lot of money on 0:20:01.440 --> 0:20:01.920 that one. 0:20:02.119 --> 0:20:03.920 They're going to have to talk about that in their 0:20:03.980 --> 0:20:06.159 quarterly results. Talk to us about the fundamentals just of 0:20:06.180 --> 0:20:08.100 the cruise business in general. It seems like the demand 0:20:08.140 --> 0:20:11.070 story Remains pretty darn strong, but boy, the feel's got 0:20:11.090 --> 0:20:11.949 to be a big issue for them. 0:20:13.380 --> 0:20:13.810 Yeah. 0:20:13.960 --> 0:20:14.410 Yeah, Paul. 0:20:14.450 --> 0:20:17.710 I mean, you know, taking the beverage package, if you 0:20:17.790 --> 0:20:21.350 like to drink quite a bit, does help you. 0:20:21.490 --> 0:20:23.310 But, you know, most people, I don't know if you 0:20:23.330 --> 0:20:25.450 could hit the mark, but I'm just kidding. 0:20:26.190 --> 0:20:30.179 So in terms of costs, in terms of, you know, appetite, 0:20:30.520 --> 0:20:33.000 we are seeing that bookings are still very strong. We've 0:20:33.040 --> 0:20:35.680 seen a few blips along the way as a result 0:20:35.720 --> 0:20:38.280 of the Iran war, as a result of fuel prices, 0:20:38.359 --> 0:20:43.830 as a result of consumers just getting a That said, 0:20:43.950 --> 0:20:47.660 we've seen momentum still in bookings. The exception being the 0:20:47.700 --> 0:20:51.520 Norwegian brand management made a comment that it's lagging what 0:20:51.560 --> 0:20:54.180 they expected in terms of bookings. And I think that's 0:20:54.220 --> 0:20:58.180 problematic when you compare that to even Viking or Royal 0:20:58.300 --> 0:21:01.390 or Carnival that have been communicating that bookings have been 0:21:01.430 --> 0:21:05.070 rather strong. From a fuel perspective, it really is a 0:21:05.109 --> 0:21:08.030 difference of stories among the companies in terms of strategies. 0:21:08.450 --> 0:21:11.649 Some of them, such as Royal and Norwegian, are both 0:21:11.790 --> 0:21:14.570 at least partially or fully hedged for what they expect 0:21:14.609 --> 0:21:17.450 to spend. Some of them Like Carnival, it's a little 0:21:17.490 --> 0:21:20.850 touch and go depending on the situation. And so that 0:21:20.990 --> 0:21:25.100