1 00:00:00,280 --> 00:00:11,040 Speaker 1: Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence 2 00:00:11,119 --> 00:00:13,200 Speaker 1: with Scarletfoo and Paul Sweeney. 3 00:00:13,280 --> 00:00:15,360 Speaker 2: How do you think the FED is looking at tariffs? 4 00:00:15,560 --> 00:00:16,720 Speaker 2: The uncertainty of terriffs. 5 00:00:16,840 --> 00:00:19,320 Speaker 3: Let's take a look at the sectors and how they performed. 6 00:00:19,320 --> 00:00:22,400 Speaker 2: A lot of investors getting whipsaled every day by news events. 7 00:00:22,079 --> 00:00:25,800 Speaker 1: Breaking market headlines, and corporate news from across the globe. 8 00:00:25,840 --> 00:00:28,480 Speaker 3: Could we see a market disruption of market events? 9 00:00:28,520 --> 00:00:30,560 Speaker 2: So people just too exuberant out there? 10 00:00:30,680 --> 00:00:33,280 Speaker 3: You see some so called low quality stocks driving this 11 00:00:33,320 --> 00:00:34,080 Speaker 3: short term rally. 12 00:00:34,120 --> 00:00:39,599 Speaker 1: Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, YouTube, 13 00:00:39,640 --> 00:00:41,000 Speaker 1: and Bloomberg Originals. 14 00:00:41,479 --> 00:00:43,880 Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big 15 00:00:43,880 --> 00:00:46,360 Speaker 2: business stories impacting Wall Street and the global markets. 16 00:00:46,440 --> 00:00:48,720 Speaker 3: Each and every week, we provide in depth research and 17 00:00:48,840 --> 00:00:50,879 Speaker 3: data on some of the two thousand companies and one 18 00:00:51,000 --> 00:00:53,680 Speaker 3: hundred and thirty industries are analysts cover worldwide. 19 00:00:53,800 --> 00:00:56,200 Speaker 2: Today, we'll take a look at why US judge ruled 20 00:00:56,240 --> 00:00:59,040 Speaker 2: against the government's proposals to break up Google Plus. 21 00:00:59,040 --> 00:01:01,440 Speaker 3: We'll look at why more AI researchers are leaving the 22 00:01:01,480 --> 00:01:02,320 Speaker 3: tech giant Apple. 23 00:01:02,640 --> 00:01:04,720 Speaker 2: But first we begin with news from the food and 24 00:01:04,800 --> 00:01:06,679 Speaker 2: beverage company craft hinds. 25 00:01:06,400 --> 00:01:09,000 Speaker 3: Because this week Craft Hines announced its plans to split 26 00:01:09,040 --> 00:01:12,640 Speaker 3: into two separate publicly traded companies. One company will sell 27 00:01:12,680 --> 00:01:15,680 Speaker 3: condiments and box meals, while the other will include its 28 00:01:15,680 --> 00:01:18,320 Speaker 3: slower growing grocery products like lunchables. 29 00:01:18,480 --> 00:01:20,760 Speaker 2: For more, Scarlet and I were joined by Jen Bartashi's 30 00:01:20,760 --> 00:01:24,360 Speaker 2: Bloomberg Intelligence senior retail analysts. We first asked Jen what 31 00:01:24,480 --> 00:01:27,360 Speaker 2: this news means for craft Hns ten years after its 32 00:01:27,360 --> 00:01:28,039 Speaker 2: initial merger. 33 00:01:28,560 --> 00:01:30,440 Speaker 4: It was just about a decade ago that they put 34 00:01:30,440 --> 00:01:33,319 Speaker 4: the companies together with the plans that it would become 35 00:01:33,440 --> 00:01:37,080 Speaker 4: kind of a package food powerhouse. But trends have changed 36 00:01:37,120 --> 00:01:39,720 Speaker 4: and consumers have changed, and it just hasn't materialized the 37 00:01:39,720 --> 00:01:41,119 Speaker 4: way they originally thought it would. 38 00:01:41,760 --> 00:01:43,920 Speaker 3: So what did the two companies get out of this 39 00:01:44,040 --> 00:01:44,560 Speaker 3: merger then? 40 00:01:46,160 --> 00:01:49,240 Speaker 4: So, you know, when they when we're looking at what 41 00:01:49,280 --> 00:01:52,920 Speaker 4: they brought together, they brought together some products where they 42 00:01:52,920 --> 00:01:55,360 Speaker 4: were able to recognize some synergies, They were able to 43 00:01:55,960 --> 00:01:59,440 Speaker 4: do some co branding, some you know, product development, that 44 00:01:59,520 --> 00:02:02,680 Speaker 4: sort of thing. But as I said, the consumer has 45 00:02:02,760 --> 00:02:06,840 Speaker 4: changed and demand for shelf stable packaged food products is 46 00:02:06,920 --> 00:02:09,040 Speaker 4: just less than it was, and so we've seen multiple 47 00:02:09,080 --> 00:02:12,360 Speaker 4: years where scanner data shows that Kraft Heiind's brands have 48 00:02:12,440 --> 00:02:14,679 Speaker 4: sort of been shrinking a little bit, and I think 49 00:02:14,720 --> 00:02:17,560 Speaker 4: this separation is an attempt to kind of reinvigorate growth 50 00:02:17,560 --> 00:02:18,920 Speaker 4: in different parts of their portfolio. 51 00:02:19,440 --> 00:02:22,160 Speaker 3: You mentioned several times how the consumer has changed. Let's 52 00:02:22,160 --> 00:02:24,160 Speaker 3: dig into that a little bit more. Are we talking 53 00:02:24,160 --> 00:02:27,839 Speaker 3: about because of the anti obesity drugs like GLP one? 54 00:02:28,040 --> 00:02:31,480 Speaker 3: Is it a case where RFK and Make America Healthy 55 00:02:31,520 --> 00:02:34,919 Speaker 3: Again is really taking root? I mean, this is kind 56 00:02:34,960 --> 00:02:38,239 Speaker 3: of a slow moving shift in the consumer, right. 57 00:02:39,040 --> 00:02:41,680 Speaker 4: It is, indeed, Scarlet, it's a slow moving shift, and 58 00:02:41,720 --> 00:02:44,760 Speaker 4: it started, you know, coming out of the pandemic. In 59 00:02:44,800 --> 00:02:48,080 Speaker 4: the pandemic, everybody sort of retreated to familiarity, right, They 60 00:02:48,120 --> 00:02:50,560 Speaker 4: went back to brands, they went back to shelf stable products. 61 00:02:50,880 --> 00:02:53,320 Speaker 4: And since then there's been more emphasis on things that 62 00:02:53,320 --> 00:02:57,639 Speaker 4: are more natural, lower sodium, healthier for you, that sort 63 00:02:57,639 --> 00:02:59,760 Speaker 4: of thing. And while craft Tiinn's has been making updates 64 00:02:59,760 --> 00:03:03,240 Speaker 4: to their portfolio, it is hard to envision how kind 65 00:03:03,240 --> 00:03:07,480 Speaker 4: of electric orange mac and cheese has a long term growth, 66 00:03:08,120 --> 00:03:10,760 Speaker 4: a long term growth appeal to people where you know, 67 00:03:10,840 --> 00:03:13,680 Speaker 4: there's pressure from as you said, RFK on more like 68 00:03:13,840 --> 00:03:17,160 Speaker 4: natural colorantce and things like that. So you know, their 69 00:03:17,160 --> 00:03:19,480 Speaker 4: portfolio is caught in that crosshairs. 70 00:03:19,280 --> 00:03:22,720 Speaker 2: When you put companies together. The pressurelease often talks about 71 00:03:22,760 --> 00:03:24,720 Speaker 2: the synergies that are going to be the cost synergies, 72 00:03:24,760 --> 00:03:27,799 Speaker 2: maybe some revenue synergies. Maybe are there disynergies when you 73 00:03:27,840 --> 00:03:28,560 Speaker 2: break them apart? 74 00:03:29,400 --> 00:03:32,919 Speaker 4: Yeah, there are dissynergies. The company expects about three hundred 75 00:03:32,919 --> 00:03:37,320 Speaker 4: million dollars in disynergies. You know, thankfully most of their 76 00:03:37,360 --> 00:03:41,400 Speaker 4: manufacturing practices are fairly separate, but there is a component 77 00:03:41,480 --> 00:03:44,600 Speaker 4: to that craft. TIGNDS actually said in May they were 78 00:03:44,840 --> 00:03:47,920 Speaker 4: exploring strategic options. There's been repeated rumors that it would 79 00:03:48,040 --> 00:03:50,760 Speaker 4: result in a split of two companies, so the confirmation 80 00:03:50,920 --> 00:03:53,480 Speaker 4: isn't necessarily unexpected news. 81 00:03:53,720 --> 00:03:56,120 Speaker 3: Paul, disynergies, Does that just mean upfront costs? 82 00:03:56,320 --> 00:03:58,520 Speaker 2: I think I need a new CFO, I need a 83 00:03:58,520 --> 00:04:02,200 Speaker 2: new accounting department. I don't know, Well, so go ahead, 84 00:04:02,240 --> 00:04:04,960 Speaker 2: JD Jed's what's next for the packaged food business? I mean, 85 00:04:05,040 --> 00:04:08,800 Speaker 2: is this just a industry wide secular decline? 86 00:04:09,600 --> 00:04:12,800 Speaker 4: Well, right now it appears to be, especially in North America, 87 00:04:13,160 --> 00:04:16,280 Speaker 4: a bit of a secular decline. Pockets of growth are 88 00:04:16,320 --> 00:04:19,680 Speaker 4: becoming more and more isolated, and so when you're looking 89 00:04:19,760 --> 00:04:23,280 Speaker 4: at scanner data, the problem is the consumer. As I said, 90 00:04:23,279 --> 00:04:25,560 Speaker 4: they're shifting behaviors, but they're just not buying as much 91 00:04:25,560 --> 00:04:27,960 Speaker 4: as they used to. And you see this even with 92 00:04:28,320 --> 00:04:31,680 Speaker 4: Walmart or Target or Kroger, where people used to buy 93 00:04:31,720 --> 00:04:34,080 Speaker 4: in multiples and stock up their pantries, and they just 94 00:04:34,120 --> 00:04:37,680 Speaker 4: don't shop that way anymore. They're buying more on an 95 00:04:37,680 --> 00:04:40,920 Speaker 4: as needed basis, and part of that is the macroeconomic environment, 96 00:04:41,760 --> 00:04:45,320 Speaker 4: and so that just doesn't favor these companies right now 97 00:04:45,560 --> 00:04:50,080 Speaker 4: where historically they've been pantry staples. And so right now 98 00:04:50,120 --> 00:04:52,240 Speaker 4: when consumers are looking what they're going to make for 99 00:04:52,279 --> 00:04:55,760 Speaker 4: dinner tonight, a bigger portion of their plate is fresh foods. 100 00:04:55,839 --> 00:04:58,200 Speaker 4: So the perimeter of grocery stores are doing much better 101 00:04:58,960 --> 00:05:01,039 Speaker 4: than the center of the store, which is these shelf 102 00:05:01,080 --> 00:05:01,919 Speaker 4: stable products. 103 00:05:02,240 --> 00:05:05,520 Speaker 3: Let's talk about the folks who brought these two companies together. 104 00:05:05,680 --> 00:05:08,400 Speaker 3: Is Berkshire Hathaway run by Warren Buffett and three G 105 00:05:08,600 --> 00:05:13,560 Speaker 3: Capital run by a group of Brazilian operations. Guys, where 106 00:05:13,560 --> 00:05:16,560 Speaker 3: did they stand in all this gen what happens to do? 107 00:05:16,680 --> 00:05:19,120 Speaker 3: They each still hold steaks in the companies, I mean, 108 00:05:19,279 --> 00:05:21,279 Speaker 3: do they come out looking better ten years later. 109 00:05:22,360 --> 00:05:25,799 Speaker 4: Well, Berkshire Hathaway still has a large stake in the company. 110 00:05:26,040 --> 00:05:27,840 Speaker 4: I think they owned just over twenty five percent of 111 00:05:27,880 --> 00:05:31,640 Speaker 4: the outstanding shares. But you know, they did relinquish their 112 00:05:32,040 --> 00:05:35,719 Speaker 4: their chairs on the board shortly before the strategic options 113 00:05:36,120 --> 00:05:39,760 Speaker 4: were announced, or that the company was exploring strategic options, 114 00:05:40,240 --> 00:05:43,880 Speaker 4: So they've been slowly pulling back you know, from the 115 00:05:43,920 --> 00:05:46,279 Speaker 4: time of their initial steak. They're probably still going to 116 00:05:46,279 --> 00:05:48,600 Speaker 4: come out ahead, but it has been a ten year 117 00:05:48,640 --> 00:05:50,120 Speaker 4: play for them. 118 00:05:50,440 --> 00:05:52,600 Speaker 2: Do we know where they're going to put their shares? 119 00:05:52,640 --> 00:05:54,719 Speaker 2: Are they can go equally between the two companies, because 120 00:05:54,800 --> 00:05:56,919 Speaker 2: I'd like to invest alongside. 121 00:05:56,480 --> 00:05:59,800 Speaker 4: Warren Buffet I think at this point, I don't think 122 00:05:59,839 --> 00:06:02,359 Speaker 4: that's been disclosed, but it is certainly something that everyone 123 00:06:02,360 --> 00:06:03,160 Speaker 4: will be watching for. 124 00:06:03,720 --> 00:06:05,599 Speaker 3: What will you be watching for, Jen, in terms of 125 00:06:05,640 --> 00:06:10,359 Speaker 3: how competitors respond or react or move in, you know, 126 00:06:10,720 --> 00:06:13,120 Speaker 3: to kind of take advantage of this breakup. 127 00:06:14,080 --> 00:06:15,840 Speaker 4: I think what will be interesting is to watch the 128 00:06:17,080 --> 00:06:21,800 Speaker 4: level of promotional activity. There will likely be some some 129 00:06:22,080 --> 00:06:26,120 Speaker 4: effort to take market share, and craft Times is likely 130 00:06:26,160 --> 00:06:28,480 Speaker 4: to up their marketing spend in order to try to 131 00:06:28,560 --> 00:06:31,480 Speaker 4: drive volumes just ahead of when this split actually becomes 132 00:06:32,480 --> 00:06:36,239 Speaker 4: realized to sort of show improvement in some of their 133 00:06:36,560 --> 00:06:40,560 Speaker 4: legacy brands. So what that really sets up a stage 134 00:06:40,560 --> 00:06:43,440 Speaker 4: for is actually probably good for the everyday shopper and 135 00:06:43,480 --> 00:06:46,760 Speaker 4: that they'll be probably more sale items, more discounts. But 136 00:06:46,920 --> 00:06:49,640 Speaker 4: it also means that it's less profitable sales for the 137 00:06:49,680 --> 00:06:52,680 Speaker 4: companies that are involved in chasing that market share, so 138 00:06:52,720 --> 00:06:55,600 Speaker 4: it will be interesting to watch how it unfolds. Companies 139 00:06:55,640 --> 00:06:58,520 Speaker 4: only expecting this to close or to be realized that 140 00:06:58,600 --> 00:07:01,279 Speaker 4: this second half of next year, so there's some time 141 00:07:01,279 --> 00:07:02,640 Speaker 4: for those dynamics to play out. 142 00:07:03,120 --> 00:07:06,680 Speaker 3: Our thanks to Jen bartashis Bloomberg Intelligence senior retail analysts. 143 00:07:06,720 --> 00:07:09,440 Speaker 2: We turn next to more news in the consumer product space. 144 00:07:09,680 --> 00:07:13,040 Speaker 2: This week, activist investor Elliott Investment Management announced it built 145 00:07:13,040 --> 00:07:15,360 Speaker 2: a stake of about four billion dollars in the food 146 00:07:15,400 --> 00:07:16,760 Speaker 2: and beverage company PepsiCo. 147 00:07:17,080 --> 00:07:20,360 Speaker 3: This makes Elliott one of PepsiCo's largest investors, and after 148 00:07:20,400 --> 00:07:23,320 Speaker 3: the announcement, Elliott outlined its plans for the beverage company. 149 00:07:23,360 --> 00:07:27,880 Speaker 3: This includes potentially restructuring its beverage unit and reviewance Snack's offerings. 150 00:07:28,080 --> 00:07:29,880 Speaker 2: For more on all of this. Scarlett and I were 151 00:07:29,920 --> 00:07:33,240 Speaker 2: joined by Kensha Bloomberg Intelligence, senior consumer products analysts. We 152 00:07:33,320 --> 00:07:35,920 Speaker 2: first asked Ken what the future looks like for PepsiCo 153 00:07:36,160 --> 00:07:38,280 Speaker 2: and whether the company could eventually break up. 154 00:07:38,680 --> 00:07:42,240 Speaker 5: I wrote a report or Bloomberg Intelligence saying that given 155 00:07:42,320 --> 00:07:44,560 Speaker 5: the weakness of the stock, is really just a matter 156 00:07:44,600 --> 00:07:47,280 Speaker 5: of time where these talks are going to be revived. Recall, 157 00:07:47,360 --> 00:07:52,560 Speaker 5: back in twenty fourteen, try On, an activist, actually advocated 158 00:07:52,560 --> 00:07:55,320 Speaker 5: that breaking the company up between beverages and foods. The 159 00:07:55,360 --> 00:07:57,520 Speaker 5: company decided not to do it. It made the case 160 00:07:57,560 --> 00:08:01,360 Speaker 5: that it was getting good synergies between the two. Fast 161 00:08:01,400 --> 00:08:04,200 Speaker 5: Forward Elliott isn't quite going that far. And Elliot's letter 162 00:08:04,360 --> 00:08:07,560 Speaker 5: it said it believes that value can be created by 163 00:08:07,680 --> 00:08:11,600 Speaker 5: simply having the beverage side, roughly forty percent of the business, 164 00:08:12,000 --> 00:08:15,360 Speaker 5: just refranchise their bottling operations and plain English, what that 165 00:08:15,400 --> 00:08:20,200 Speaker 5: means is to divest those capital intensive operations manufacturing operations 166 00:08:20,200 --> 00:08:23,840 Speaker 5: that create the finished product from the syrups and concentrates 167 00:08:24,120 --> 00:08:28,320 Speaker 5: that Pepsi, the beverage company sells. That's really the golden 168 00:08:28,760 --> 00:08:31,440 Speaker 5: part of that business, you know, the jewel that business 169 00:08:31,480 --> 00:08:34,120 Speaker 5: is the concentrate business. That's what Coca Cola does. Coca 170 00:08:34,120 --> 00:08:38,480 Speaker 5: Colatus sells concentrate syrups or high margin to third parties 171 00:08:38,679 --> 00:08:41,319 Speaker 5: to make the product. PepsiCo chooses to do it in house. 172 00:08:42,160 --> 00:08:46,720 Speaker 5: That results in tying up capital, lower margins, and so on. 173 00:08:47,240 --> 00:08:49,000 Speaker 5: At the same time, Eliot is also saying on the 174 00:08:49,040 --> 00:08:54,720 Speaker 5: food side, perhaps some SKU rationalization is due, meaning there's 175 00:08:54,720 --> 00:08:56,760 Speaker 5: a lot of food products there that they may not 176 00:08:56,960 --> 00:09:00,320 Speaker 5: be well suited to sell. The Freda Ley is doing 177 00:09:00,360 --> 00:09:03,520 Speaker 5: it really well, although it's a kind of a slowdown 178 00:09:03,600 --> 00:09:07,320 Speaker 5: right now with many consumer products. It's the Quaker foods. 179 00:09:07,640 --> 00:09:09,760 Speaker 5: I think it's really targeting and saying, you know, maybe 180 00:09:09,840 --> 00:09:12,679 Speaker 5: some reduction there maybe in order. So that's really what 181 00:09:12,679 --> 00:09:14,120 Speaker 5: what the gist is today with Pepsi. 182 00:09:14,240 --> 00:09:17,040 Speaker 3: All right, Ken, thank you for that very very detailed rundown. 183 00:09:17,080 --> 00:09:18,400 Speaker 3: I want to pick up on what you were talking 184 00:09:18,440 --> 00:09:21,680 Speaker 3: about with the bottling business, refranchising the bottling business, which 185 00:09:21,720 --> 00:09:24,360 Speaker 3: is what Coca Cola does right now. What does Coca 186 00:09:24,360 --> 00:09:26,360 Speaker 3: Cola give up by doing that? I mean, there had 187 00:09:26,360 --> 00:09:28,400 Speaker 3: to be a reason why Pepsi chose to keep it 188 00:09:28,440 --> 00:09:29,600 Speaker 3: in house up until now. 189 00:09:30,280 --> 00:09:32,560 Speaker 5: Yeah, that's a great question, Scarlett. So go back in 190 00:09:32,600 --> 00:09:35,760 Speaker 5: time with ten fifteen years ago or so, both companies 191 00:09:36,040 --> 00:09:40,560 Speaker 5: had done that. They both had separated those businesses. Petsico 192 00:09:40,760 --> 00:09:44,480 Speaker 5: decided to retain or it so and then it brought 193 00:09:44,480 --> 00:09:46,480 Speaker 5: it back and it decided to keep it and made 194 00:09:46,480 --> 00:09:49,439 Speaker 5: the case. At the time that's the soft drink business 195 00:09:49,640 --> 00:09:52,800 Speaker 5: was in a downturn, volumes were weak. They thought by 196 00:09:52,880 --> 00:09:57,040 Speaker 5: gaining more control of those bottling operations, they could right 197 00:09:57,120 --> 00:09:59,240 Speaker 5: size the ship if they could get it back in 198 00:09:59,360 --> 00:10:03,400 Speaker 5: order lining the interest between the bottlers and the company. 199 00:10:03,480 --> 00:10:06,960 Speaker 5: Because I'm gonna remember Coca Cola. By separating it, it 200 00:10:07,080 --> 00:10:10,199 Speaker 5: is to some degree giving up a little it's accepting 201 00:10:10,200 --> 00:10:12,240 Speaker 5: a little risk. I mean, these are third parties, or 202 00:10:12,320 --> 00:10:14,840 Speaker 5: these are independent companies. They can sell beer, they can 203 00:10:14,880 --> 00:10:17,120 Speaker 5: do other things. PepsiCo didn't want them to do that. 204 00:10:17,120 --> 00:10:19,640 Speaker 5: PepsiCo said, look, we want you to be fully aligned 205 00:10:19,640 --> 00:10:22,440 Speaker 5: with what we want. So that's what they said. They 206 00:10:22,559 --> 00:10:24,960 Speaker 5: gained from that, and I guess there's some truth to that, 207 00:10:26,160 --> 00:10:28,199 Speaker 5: But you're giving up a lot also for the factors 208 00:10:28,200 --> 00:10:29,040 Speaker 5: that I mentioned before. 209 00:10:29,760 --> 00:10:32,080 Speaker 2: Ken, you've been covering this consumer space for a long time. 210 00:10:32,120 --> 00:10:34,800 Speaker 2: You've seen the cycles come and go. It seems like 211 00:10:34,840 --> 00:10:37,520 Speaker 2: we're in a cycle of breaking these companies up. I 212 00:10:37,559 --> 00:10:40,719 Speaker 2: mean you've seen this game before. How do you think 213 00:10:40,720 --> 00:10:42,800 Speaker 2: this is going to play out across the consumer space? 214 00:10:44,240 --> 00:10:48,040 Speaker 5: Well, you know, given the PepsiCo stock before today was 215 00:10:48,040 --> 00:10:50,280 Speaker 5: down about twenty percent over the last two years. So 216 00:10:50,320 --> 00:10:53,960 Speaker 5: it's really disappointed investors. And beyond that, it's that their 217 00:10:54,440 --> 00:10:57,840 Speaker 5: long term algorithm of high single digit comparable EPs growth 218 00:10:57,880 --> 00:10:59,480 Speaker 5: is not going to happen this year. They're looking at 219 00:10:59,520 --> 00:11:04,439 Speaker 5: flat this year, and investors see the writing on the wall, 220 00:11:04,440 --> 00:11:06,920 Speaker 5: they see a slow down, and they're saying, look, maybe 221 00:11:06,920 --> 00:11:09,720 Speaker 5: there's more than just a cyclical element here. Maybe there 222 00:11:09,760 --> 00:11:13,960 Speaker 5: are some structural things this company can do. I think 223 00:11:13,960 --> 00:11:17,239 Speaker 5: Elliott's making some good points here, and I think PepsiCo 224 00:11:17,480 --> 00:11:19,559 Speaker 5: ought to follow through on some of these if they 225 00:11:19,600 --> 00:11:22,679 Speaker 5: want to regain some of the low sentiment that's out 226 00:11:22,720 --> 00:11:23,720 Speaker 5: there among investors. 227 00:11:24,559 --> 00:11:27,040 Speaker 3: Do you expect other investors to jump in here and 228 00:11:27,720 --> 00:11:31,480 Speaker 3: kind of ride on Elliott Management's coattails? I mean, is 229 00:11:31,600 --> 00:11:35,520 Speaker 3: Elliott going to be empowered to ask for more going forward? 230 00:11:36,880 --> 00:11:39,360 Speaker 5: That's a great question. I think there's going to be 231 00:11:39,360 --> 00:11:41,600 Speaker 5: some supporters of Elliott. Like I said, I think Elliott's 232 00:11:41,600 --> 00:11:45,240 Speaker 5: making some fair points. PepsiCo has been really disappointing on 233 00:11:45,280 --> 00:11:47,960 Speaker 5: the operational side. And like I said in the Stock Front, 234 00:11:48,440 --> 00:11:51,120 Speaker 5: I think it ought to be open ears to listen 235 00:11:51,160 --> 00:11:53,520 Speaker 5: to what Elliott says. I think others will support Elliott 236 00:11:53,559 --> 00:11:54,160 Speaker 5: in this case. 237 00:11:54,240 --> 00:11:57,760 Speaker 3: Yes, our thanks to Ken Shape Bloomberg Intelligence senior consumer 238 00:11:57,800 --> 00:12:00,560 Speaker 3: products analysts. Coming up, we'll look at why the department 239 00:12:00,559 --> 00:12:03,040 Speaker 3: store chain Maycy's raised its guidance. 240 00:12:02,600 --> 00:12:05,679 Speaker 2: For the year. You're listening to Bloomberg Intelligence on Bloomberg Radio, 241 00:12:05,840 --> 00:12:08,240 Speaker 2: providing in depth research and data on two thousand companies 242 00:12:08,280 --> 00:12:09,640 Speaker 2: in one hundred and thirty industries. 243 00:12:09,840 --> 00:12:13,280 Speaker 3: You can access Bloomberg Intelligence via bi go on the terminal. 244 00:12:13,400 --> 00:12:14,520 Speaker 3: I'm Scarlettfoo and. 245 00:12:14,600 --> 00:12:16,599 Speaker 2: I'm Paul Sween. This is Bloomberg. 246 00:12:21,240 --> 00:12:26,160 Speaker 1: This is Bloomberg Intelligence with Scarlettfoo and Paul Sweeney on 247 00:12:26,320 --> 00:12:27,400 Speaker 1: Bloomberg Radio. 248 00:12:27,960 --> 00:12:30,559 Speaker 2: We moved next to some news from the tech giant Alphabet. 249 00:12:30,760 --> 00:12:34,440 Speaker 2: This week, US judge ahmit Meta ruled against the government's 250 00:12:34,480 --> 00:12:35,720 Speaker 2: proposal to break up Google. 251 00:12:36,080 --> 00:12:38,320 Speaker 3: This includes a forced sale of its Chrome browser in 252 00:12:38,320 --> 00:12:41,439 Speaker 3: the biggest antitrust case in three decades, and the ruling 253 00:12:41,760 --> 00:12:43,880 Speaker 3: is seen as a setback for the US government in 254 00:12:43,920 --> 00:12:46,200 Speaker 3: its bid to curb the power of big tech companies. 255 00:12:46,559 --> 00:12:49,280 Speaker 2: For more, Scarlet and I were joined by Jenniferree, Bloomberg 256 00:12:49,280 --> 00:12:52,360 Speaker 2: Intelligence senior litigation analysts. We first asked jen for a 257 00:12:52,440 --> 00:12:54,640 Speaker 2: clarification on the recent court ruling. 258 00:12:55,200 --> 00:12:57,520 Speaker 6: You know, really the court aligned much more so with 259 00:12:57,559 --> 00:13:00,360 Speaker 6: what Google proposed than what the Department of Justice post. 260 00:13:00,480 --> 00:13:04,040 Speaker 6: No divestiture of Chrome or contingent divestor of Android, because 261 00:13:04,040 --> 00:13:07,960 Speaker 6: that was in there. Some data sharing, no exclusive agreements, 262 00:13:08,720 --> 00:13:12,640 Speaker 6: some search syndication, meaning a search engine can basically provide 263 00:13:12,640 --> 00:13:15,560 Speaker 6: results that just comes straight from Google, right, They're mimicking Google. 264 00:13:16,080 --> 00:13:19,000 Speaker 6: The surprising thing though here, and what was great for 265 00:13:19,080 --> 00:13:22,240 Speaker 6: Apple is that the judge said Google could continue to 266 00:13:22,280 --> 00:13:25,439 Speaker 6: pay for search default positions. That's with Apple. With Mozilla, 267 00:13:25,760 --> 00:13:28,680 Speaker 6: it pays some OEMs to pre install Google Search on 268 00:13:28,720 --> 00:13:31,480 Speaker 6: the Android phones that they group that they manufacture, and 269 00:13:31,520 --> 00:13:33,440 Speaker 6: that I think was a really big surprise. 270 00:13:34,080 --> 00:13:36,800 Speaker 3: How is this remedy consistent with the original ruling, with 271 00:13:36,840 --> 00:13:38,439 Speaker 3: the original finding of the court. 272 00:13:38,880 --> 00:13:41,120 Speaker 6: You know, I actually have a really big problem with 273 00:13:41,280 --> 00:13:43,880 Speaker 6: aligning those two things because I don't think that it is. 274 00:13:44,240 --> 00:13:47,120 Speaker 6: In terms of no Chrome divestiture, I think it's very consistent. 275 00:13:47,160 --> 00:13:49,160 Speaker 6: And Paul, you know, I've been on this show before 276 00:13:49,200 --> 00:13:51,160 Speaker 6: and I've been saying for two years that there would 277 00:13:51,200 --> 00:13:53,719 Speaker 6: not be a chrome divestiture ordered here. But where it's 278 00:13:53,760 --> 00:13:58,320 Speaker 6: inconsistent is with this default position. Because having a monopoly 279 00:13:58,400 --> 00:14:00,880 Speaker 6: is not illegal, but it's the conduct that maintains the 280 00:14:00,920 --> 00:14:03,920 Speaker 6: monopoly that's exclusionary, that is illegal. And what the judge 281 00:14:03,920 --> 00:14:06,679 Speaker 6: found in that liability decision that the conduct that was 282 00:14:06,720 --> 00:14:10,760 Speaker 6: illegal were the default agreements. Right, This was exclusionary. This 283 00:14:10,880 --> 00:14:13,160 Speaker 6: kept other search engines from being able to grow and 284 00:14:13,200 --> 00:14:16,440 Speaker 6: scale and get better. He's allowing those default positions to 285 00:14:16,440 --> 00:14:18,680 Speaker 6: stay in place. Now it's a shorter term, it's only 286 00:14:18,720 --> 00:14:22,040 Speaker 6: for one year. Theoretically, in one year or one year 287 00:14:22,040 --> 00:14:24,600 Speaker 6: after that, other search engines that have improved can compete 288 00:14:24,600 --> 00:14:27,840 Speaker 6: for that contract. But it's still odd to me that 289 00:14:27,920 --> 00:14:30,400 Speaker 6: what is found to be illegal is allowed to continue. 290 00:14:31,080 --> 00:14:35,000 Speaker 2: What does this mean for just Silicon Valley in general? 291 00:14:35,080 --> 00:14:38,000 Speaker 2: Can I sit back if I'm a CEO in Silicon 292 00:14:38,040 --> 00:14:40,120 Speaker 2: Valiant saying Hm, the courts are maybe a little bit 293 00:14:40,160 --> 00:14:43,360 Speaker 2: more aligned with our industry how we think about the 294 00:14:43,400 --> 00:14:45,240 Speaker 2: world than maybe the government. 295 00:14:46,200 --> 00:14:48,600 Speaker 6: I would say that the way Silicon Valley can think 296 00:14:48,600 --> 00:14:50,800 Speaker 6: about it is that this judge was cautious, and this 297 00:14:50,920 --> 00:14:54,200 Speaker 6: judge did talk about needing to apply caution when you're 298 00:14:54,200 --> 00:14:58,120 Speaker 6: dealing with tech markets and Silicon valley companies, because judges 299 00:14:58,160 --> 00:15:01,120 Speaker 6: don't understand it. They don't want to m pack the route, 300 00:15:01,200 --> 00:15:04,120 Speaker 6: the innovation and the natural course of the industry, right, 301 00:15:04,640 --> 00:15:06,960 Speaker 6: They don't want to distort that, And so it does 302 00:15:07,000 --> 00:15:09,200 Speaker 6: suggest that it's more likely a judge is going to 303 00:15:09,200 --> 00:15:13,480 Speaker 6: be cautious in future remedies for other cases. But what 304 00:15:13,560 --> 00:15:15,360 Speaker 6: I think everybody has to keep in mind, because I've 305 00:15:15,400 --> 00:15:17,480 Speaker 6: seen people talking about the fact that there's read through 306 00:15:17,520 --> 00:15:20,520 Speaker 6: for some of these other monopolization cases, I don't really 307 00:15:20,560 --> 00:15:23,760 Speaker 6: think that there is, because the facts are entirely different 308 00:15:23,880 --> 00:15:26,560 Speaker 6: case by case, the markets are entirely different, and what 309 00:15:26,680 --> 00:15:30,760 Speaker 6: made a divestitor remedy inappropriate here doesn't necessarily exist as 310 00:15:30,760 --> 00:15:34,120 Speaker 6: a fact pattern. Let's say an FTCB Meta or usdojb 311 00:15:34,200 --> 00:15:36,880 Speaker 6: Apple or the other DOJ case against Google in the 312 00:15:36,920 --> 00:15:39,720 Speaker 6: ad tech space. Those are different cases with different facts, 313 00:15:39,720 --> 00:15:42,600 Speaker 6: and I don't think that there's necessarily a read through 314 00:15:42,840 --> 00:15:45,880 Speaker 6: that companies are safe from divestiture orders because of this one. 315 00:15:46,080 --> 00:15:50,160 Speaker 3: Do we think that AI the quickness and how it's 316 00:15:50,200 --> 00:15:53,680 Speaker 3: developing played any kind of role in the judge's decision here? 317 00:15:53,880 --> 00:15:54,040 Speaker 7: Oh? 318 00:15:54,080 --> 00:15:58,600 Speaker 6: Absolutely, the judge even observed that in the liability hearing, 319 00:15:58,640 --> 00:16:00,800 Speaker 6: which was now a year and a half or so ago, 320 00:16:01,120 --> 00:16:03,880 Speaker 6: that AI barely came up at all other than by Google, 321 00:16:03,920 --> 00:16:05,760 Speaker 6: it barely came up. But in the remedies hearing it 322 00:16:05,800 --> 00:16:08,200 Speaker 6: was all about AI and the witnesses were all AI. 323 00:16:08,240 --> 00:16:09,720 Speaker 6: And he says, it just shows in a year, a 324 00:16:09,800 --> 00:16:11,920 Speaker 6: year and a half, how much things have changed, and 325 00:16:12,280 --> 00:16:15,320 Speaker 6: the fact that you now have real competition to general 326 00:16:15,360 --> 00:16:17,800 Speaker 6: search other than other general search engines. And I think 327 00:16:17,840 --> 00:16:18,920 Speaker 6: that impacted him a lot. 328 00:16:19,360 --> 00:16:23,000 Speaker 3: Our Thanks to Jennifer Ree, Bloomberg Intelligence Senior litigation analyst. 329 00:16:23,480 --> 00:16:25,920 Speaker 2: Staying on tech, this week, we learned that the tech 330 00:16:25,960 --> 00:16:30,080 Speaker 2: giant Apple lost Gian Jang, its lead AI researcher for 331 00:16:30,160 --> 00:16:31,520 Speaker 2: robotics to meta platforms. 332 00:16:31,960 --> 00:16:35,000 Speaker 3: Three more AI researchers are also leaving Apple's in house 333 00:16:35,080 --> 00:16:38,560 Speaker 3: large Language Models team to join other companies. The departures 334 00:16:38,600 --> 00:16:41,120 Speaker 3: are part of an exodus of AI talent from Apple, 335 00:16:41,280 --> 00:16:44,280 Speaker 3: and the AI departures may only worsen with a potential 336 00:16:44,320 --> 00:16:46,240 Speaker 3: shift toward using third party models. 337 00:16:46,560 --> 00:16:48,880 Speaker 2: For more on this and all things Apple, Scarlet and 338 00:16:48,920 --> 00:16:51,920 Speaker 2: I were joined by Mark German, Bloomberg news Managing editor 339 00:16:51,960 --> 00:16:54,680 Speaker 2: for Global Consumer Tech First to ask Mark if he 340 00:16:54,720 --> 00:16:57,640 Speaker 2: thinks it's a problem Apple is losing its AI experts. 341 00:16:58,160 --> 00:17:02,600 Speaker 8: It's only a problem if it impacts the consumer, and 342 00:17:03,320 --> 00:17:07,560 Speaker 8: right now, Apple's AI efforts are impacting the consumer because 343 00:17:07,600 --> 00:17:12,280 Speaker 8: Apple Intelligence and Siri lag very much in comparison to 344 00:17:12,600 --> 00:17:16,560 Speaker 8: competing products on other platforms. Now, this can all be 345 00:17:16,680 --> 00:17:19,679 Speaker 8: turned around. Right You've got the ability for Apple to 346 00:17:19,720 --> 00:17:22,720 Speaker 8: do partnerships. I predict there'll be some sort of big 347 00:17:22,760 --> 00:17:25,639 Speaker 8: AI partnership for Apple. I've reported that they were in 348 00:17:25,680 --> 00:17:28,359 Speaker 8: talks with Google and AI partnership. I've reported they've been 349 00:17:28,359 --> 00:17:32,080 Speaker 8: in talks with Anthropic and Open Ai on potential AI partnerships. 350 00:17:32,080 --> 00:17:34,560 Speaker 8: They get one of those done, it's a different ballgame. 351 00:17:35,040 --> 00:17:37,639 Speaker 8: They buy a company. I reported first reported over the 352 00:17:37,640 --> 00:17:40,520 Speaker 8: summer that they've talked to Mistral reported that they talk 353 00:17:40,600 --> 00:17:43,399 Speaker 8: to Perplexity. I don't expect either of those deals to 354 00:17:43,400 --> 00:17:47,200 Speaker 8: get done, but that certainly shows you where their head's at. Okay, 355 00:17:47,800 --> 00:17:49,840 Speaker 8: if this all gets turned around with a major new 356 00:17:49,920 --> 00:17:53,119 Speaker 8: version of Siri next year, if they get the Apple 357 00:17:53,160 --> 00:17:57,000 Speaker 8: Intelligence pipeline heading in the right direction, if they buy 358 00:17:57,080 --> 00:17:59,680 Speaker 8: and hire the right LLLM people, they could be in 359 00:17:59,720 --> 00:18:02,560 Speaker 8: pretty good shape. Don't forget Apple has the best ecosystem, 360 00:18:02,840 --> 00:18:05,720 Speaker 8: they have the best hardware, and they're able to deploy 361 00:18:05,800 --> 00:18:08,679 Speaker 8: new features and operating system upgrades faster than any other company. 362 00:18:09,400 --> 00:18:11,760 Speaker 8: And so at the end of the day, this is 363 00:18:11,800 --> 00:18:14,600 Speaker 8: still their game to lose because there are so many 364 00:18:14,680 --> 00:18:17,399 Speaker 8: levers they can pull, especially with their cash balance, to 365 00:18:17,400 --> 00:18:18,200 Speaker 8: turn this thing around. 366 00:18:18,440 --> 00:18:20,520 Speaker 3: So why haven't they done any of those things so far? 367 00:18:20,520 --> 00:18:22,960 Speaker 3: Why are they waiting? What's the hold up? 368 00:18:23,359 --> 00:18:28,159 Speaker 8: Well, you know Apple, Unfortunately for them, they're very tied 369 00:18:28,200 --> 00:18:31,639 Speaker 8: to a couple cycles, right. They have their spring cycle 370 00:18:32,080 --> 00:18:34,439 Speaker 8: and then they have their fall cycle. The fall cycle 371 00:18:34,480 --> 00:18:37,359 Speaker 8: has been set for some time. There's really no changing that. 372 00:18:37,359 --> 00:18:40,200 Speaker 8: That's locked and loaded. You'll see the introduction of those 373 00:18:40,240 --> 00:18:43,800 Speaker 8: products and those software features next Tuesday at the iPhone 374 00:18:43,800 --> 00:18:47,320 Speaker 8: seventeen launch event. The spring is really the next opportunity 375 00:18:47,440 --> 00:18:50,040 Speaker 8: for there to be major new features, right, that's when 376 00:18:50,040 --> 00:18:52,399 Speaker 8: they're going to roll out pretty big update to iOS 377 00:18:52,400 --> 00:18:55,720 Speaker 8: twenty six called iOS twenty six point four. At that time, 378 00:18:55,840 --> 00:18:58,320 Speaker 8: I expect them to release an overhauled version of Siri 379 00:18:58,600 --> 00:19:00,159 Speaker 8: that are going to fix a lot of these. 380 00:19:00,080 --> 00:19:01,640 Speaker 3: Issues that's all supposed about now. 381 00:19:02,160 --> 00:19:04,080 Speaker 8: It is a long time, yeah, it is a long time. 382 00:19:04,160 --> 00:19:06,560 Speaker 8: And the truth of the matter is that the AI 383 00:19:06,640 --> 00:19:09,920 Speaker 8: space runs far more quickly than even the mobile space. 384 00:19:10,000 --> 00:19:11,880 Speaker 8: You saw a lot of innovation in the smartphone space 385 00:19:11,920 --> 00:19:14,560 Speaker 8: for the last two decades. AI is moving ten times 386 00:19:14,560 --> 00:19:15,200 Speaker 8: as fast. 387 00:19:15,000 --> 00:19:18,280 Speaker 2: As that, and they're aware of that. They're smart people. 388 00:19:18,920 --> 00:19:21,280 Speaker 2: I guess they've made the decision that they're comfortable with 389 00:19:21,400 --> 00:19:24,959 Speaker 2: their timing. Did they run the risk of making a 390 00:19:25,080 --> 00:19:28,399 Speaker 2: fund fundamental error in their judgment of that timing. 391 00:19:28,560 --> 00:19:30,800 Speaker 8: I don't think they're comfortable with the timing. I think 392 00:19:30,840 --> 00:19:33,840 Speaker 8: that the timing was actually even further out. I wasn't 393 00:19:33,880 --> 00:19:38,440 Speaker 8: expecting a major new version of sery with incredible enhancements 394 00:19:38,440 --> 00:19:41,280 Speaker 8: for consumers, probably not until the end of twenty six 395 00:19:41,400 --> 00:19:44,560 Speaker 8: or sometime. Even had the tail out of twenty twenty seven. 396 00:19:44,800 --> 00:19:46,360 Speaker 8: So this is going to be happening at least six 397 00:19:46,359 --> 00:19:50,280 Speaker 8: to twelve months sooner than Apple had originally planned. They 398 00:19:50,359 --> 00:19:54,000 Speaker 8: are probably one or two years away if they did 399 00:19:54,040 --> 00:19:57,919 Speaker 8: nothing of starting to bleed share to competing smartphones with 400 00:19:58,000 --> 00:20:00,600 Speaker 8: major AI features right now. Tell you the truth. We 401 00:20:00,640 --> 00:20:02,760 Speaker 8: talk about AI all day every day. It's very important 402 00:20:02,800 --> 00:20:05,439 Speaker 8: to the market. It's very important for the current technology age. 403 00:20:05,520 --> 00:20:09,240 Speaker 8: Nobody's buying phones because of AI or not because of AI, 404 00:20:09,560 --> 00:20:12,440 Speaker 8: but we are moving towards that, and that is going 405 00:20:12,480 --> 00:20:14,879 Speaker 8: to happen. It's one or two years away, and so 406 00:20:14,960 --> 00:20:16,879 Speaker 8: if they're not in good shape by then, they're going 407 00:20:16,920 --> 00:20:19,480 Speaker 8: to start being impacted not only in terms of what 408 00:20:19,520 --> 00:20:21,920 Speaker 8: we talk about, not only on Wall Street in the 409 00:20:21,960 --> 00:20:25,280 Speaker 8: stock market, but in actual purchasing decisions by consumers, because 410 00:20:25,320 --> 00:20:27,040 Speaker 8: right now consumers only care about a few things when 411 00:20:27,080 --> 00:20:29,880 Speaker 8: they buy new phones. They want to fix their broken screen, yep, 412 00:20:30,560 --> 00:20:31,639 Speaker 8: they want a better camera. 413 00:20:32,160 --> 00:20:34,879 Speaker 3: That was Mark German, Bloomberg News Managing editor for Global 414 00:20:34,920 --> 00:20:38,159 Speaker 3: Consumer Tech. We move next to earnings in the retail space. 415 00:20:38,520 --> 00:20:41,800 Speaker 2: This week, the department store chain Makesy's raised its annual 416 00:20:41,800 --> 00:20:45,400 Speaker 2: outlook and reported it's best comparable sales growth in three years. 417 00:20:45,680 --> 00:20:48,960 Speaker 2: This comes despite new tariffs and moderation in consumer spending. 418 00:20:49,280 --> 00:20:52,359 Speaker 3: Meanwhile, the discount retail company Dollar Tree raised its annual 419 00:20:52,359 --> 00:20:55,920 Speaker 3: sales guidance. However, it disappointed investors, stating the benefit from 420 00:20:55,960 --> 00:20:57,440 Speaker 3: price heights would disappear. 421 00:20:57,800 --> 00:20:59,800 Speaker 2: For more on these companies, Scarlett and I were joined 422 00:20:59,800 --> 00:21:02,800 Speaker 2: by Emily Cone, Bloomberg Consumer team Leader. If We first 423 00:21:02,840 --> 00:21:05,960 Speaker 2: asked Emily for her key takeaways from Macy's most recent quarter. 424 00:21:06,320 --> 00:21:08,120 Speaker 7: I think this falls in line with what we've heard 425 00:21:08,160 --> 00:21:12,120 Speaker 7: from other retailers. Shoppers are still shopping, They're being precise 426 00:21:12,160 --> 00:21:16,320 Speaker 7: about what they're spending on, being choosy. They called out 427 00:21:16,520 --> 00:21:20,440 Speaker 7: home furnishings and apparel as strong sellers, also citing high 428 00:21:20,480 --> 00:21:25,720 Speaker 7: demand for fine watches, jewelry, mattresses. So they are shopping. 429 00:21:26,000 --> 00:21:28,400 Speaker 7: I think the main question I have is how long 430 00:21:28,440 --> 00:21:29,720 Speaker 7: will this last? 431 00:21:30,280 --> 00:21:33,159 Speaker 2: How promotional are some of these retailers. How promotions do 432 00:21:33,240 --> 00:21:34,879 Speaker 2: they have to be? Because I know that goes right to 433 00:21:34,920 --> 00:21:35,359 Speaker 2: the margin. 434 00:21:36,480 --> 00:21:39,000 Speaker 7: Yeah, I mean that's an interesting segue into Dollar Tree. 435 00:21:39,000 --> 00:21:43,000 Speaker 7: I think Dollar Tree raised prices so far this year 436 00:21:43,040 --> 00:21:47,600 Speaker 7: to offset the cost of tariffs, and shoppers felt that 437 00:21:47,880 --> 00:21:50,960 Speaker 7: and that doesn't have that has a limit. There's only 438 00:21:51,000 --> 00:21:53,919 Speaker 7: so far you can raise prices, and I think that 439 00:21:54,119 --> 00:21:56,280 Speaker 7: is starting to eat away at their bottom line. They 440 00:21:56,280 --> 00:22:00,199 Speaker 7: can't really raise prices that much anymore. I think these 441 00:22:00,240 --> 00:22:02,280 Speaker 7: retailers are in a difficult spot. They want to keep 442 00:22:02,359 --> 00:22:06,399 Speaker 7: let prices low because of how the consumer is feeling, 443 00:22:06,440 --> 00:22:08,920 Speaker 7: but also their costs are up on account of tariffs. 444 00:22:09,200 --> 00:22:11,520 Speaker 3: I would imagine Dollar Tree has a lot less cushion. 445 00:22:11,560 --> 00:22:14,680 Speaker 3: As you say, to raise prices, given who they're targeting, 446 00:22:15,040 --> 00:22:17,080 Speaker 3: and given how they're seeing a lot of higher end 447 00:22:17,080 --> 00:22:20,520 Speaker 3: consumers trade down to Dollar Tree than a Macy's. Macy's 448 00:22:20,560 --> 00:22:23,640 Speaker 3: did say explicitly that price increases are on the way, 449 00:22:23,640 --> 00:22:24,120 Speaker 3: didn't they. 450 00:22:24,359 --> 00:22:26,399 Speaker 7: Yes, they said that they have already started and that 451 00:22:26,440 --> 00:22:29,840 Speaker 7: they're coming. But their sales are strong, and I think 452 00:22:30,280 --> 00:22:32,359 Speaker 7: you know they're in the midst of a turnaround. There 453 00:22:32,359 --> 00:22:36,119 Speaker 7: were signs that Tony Springs strategy is taking hold. Comp 454 00:22:36,160 --> 00:22:40,040 Speaker 7: sales rose more at his reimagined stores than they did overall. 455 00:22:40,560 --> 00:22:44,479 Speaker 2: What is what's different about a quote unquote reimagine good question. 456 00:22:45,240 --> 00:22:47,160 Speaker 7: I think that is a really good question. I think 457 00:22:47,440 --> 00:22:49,440 Speaker 7: these are the stores where they believe that they can 458 00:22:49,480 --> 00:22:52,720 Speaker 7: have the greatest edge. So they're doing a lot to 459 00:22:53,960 --> 00:22:59,719 Speaker 7: reinvigorate sales. They're redesigning the stores, they're rethinking their assortment, 460 00:23:00,680 --> 00:23:03,639 Speaker 7: and these are the stores that they say we should 461 00:23:03,640 --> 00:23:05,920 Speaker 7: really watch. This is the future of Macy's. 462 00:23:06,520 --> 00:23:08,880 Speaker 3: Let's put this into context. What we heard from Macy's, 463 00:23:08,880 --> 00:23:11,040 Speaker 3: what we heard from Dollar Train. Of course, Dollar General 464 00:23:11,160 --> 00:23:14,320 Speaker 3: earlier in the month, or was it this month or 465 00:23:14,680 --> 00:23:18,000 Speaker 3: last week? In any case, what are we hearing from 466 00:23:18,000 --> 00:23:22,560 Speaker 3: retailers overall because investors are punishing some and rewarding others. 467 00:23:22,640 --> 00:23:24,960 Speaker 3: Even though the message, I would say is fairly consistent 468 00:23:25,000 --> 00:23:28,760 Speaker 3: that consumers are spending, they're just being really, really weary 469 00:23:28,760 --> 00:23:29,560 Speaker 3: and careful. 470 00:23:30,000 --> 00:23:32,399 Speaker 7: I think you nailed it. I think retailers continue to 471 00:23:32,440 --> 00:23:37,399 Speaker 7: point to strong sales momentum. People are shopping even in 472 00:23:37,440 --> 00:23:40,680 Speaker 7: the face of tariffs and threats of inflation. I think 473 00:23:40,720 --> 00:23:44,320 Speaker 7: the question I have is knowing that retailers stock up 474 00:23:44,440 --> 00:23:47,840 Speaker 7: months ahead of time, They had their inventory that they 475 00:23:47,880 --> 00:23:51,720 Speaker 7: sold through now months ago, perhaps even before tariffs. I 476 00:23:51,720 --> 00:23:55,160 Speaker 7: don't think we've really seen the full paths through of 477 00:23:55,200 --> 00:23:57,880 Speaker 7: the costs of tariffs yet, and I think we'll continue 478 00:23:57,880 --> 00:24:01,480 Speaker 7: to see that in the coming months, and especially during 479 00:24:01,520 --> 00:24:03,919 Speaker 7: the all important holiday shopping season. 480 00:24:04,119 --> 00:24:06,800 Speaker 2: Let's go there. What's Is there a consensus building to 481 00:24:06,840 --> 00:24:08,800 Speaker 2: how the holiday season may shape up? 482 00:24:09,400 --> 00:24:16,000 Speaker 7: It's still early. I think the outlook isn't great so far. 483 00:24:16,359 --> 00:24:19,040 Speaker 7: Although Tony Spring did say that the back to school 484 00:24:19,240 --> 00:24:22,480 Speaker 7: shopping season was he used the word good, and he 485 00:24:22,560 --> 00:24:25,320 Speaker 7: said that back to school is generally a good bell 486 00:24:25,400 --> 00:24:28,719 Speaker 7: weather for the holiday shopping season. So there was a 487 00:24:28,720 --> 00:24:32,360 Speaker 7: slight note of optimism there, but not totally bullish. 488 00:24:32,720 --> 00:24:35,639 Speaker 3: That was Emily Cone, Bloomberg Consumer team leader, coming up 489 00:24:35,680 --> 00:24:37,960 Speaker 3: a look at how the Trump administration is impacting the 490 00:24:38,000 --> 00:24:39,160 Speaker 3: clean energy transition. 491 00:24:39,440 --> 00:24:42,359 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 492 00:24:42,400 --> 00:24:44,640 Speaker 2: depth research and data on two thousand companies and one 493 00:24:44,680 --> 00:24:45,800 Speaker 2: hundred and thirty industries. 494 00:24:45,920 --> 00:24:49,199 Speaker 3: You can access Bloomberg Intelligence via bi go on the terminal. 495 00:24:49,320 --> 00:24:50,360 Speaker 3: I'm Scarlet Foo. 496 00:24:50,280 --> 00:24:52,480 Speaker 2: And I'm Paul Sweeney. This is Bloomberg. 497 00:24:59,400 --> 00:25:03,920 Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 498 00:25:04,240 --> 00:25:05,560 Speaker 1: on Bloomberg Radio. 499 00:25:06,520 --> 00:25:09,520 Speaker 2: On Bloomberg Intelligence, we often look at research from Bloomberg 500 00:25:09,600 --> 00:25:12,400 Speaker 2: and EF previously known as New Energy Finance. 501 00:25:12,520 --> 00:25:14,920 Speaker 3: They're the team at Bloomberg that tracks and analyzes the 502 00:25:15,040 --> 00:25:19,439 Speaker 3: energy transition from commodities to power, transport, industries, buildings, and 503 00:25:19,480 --> 00:25:22,199 Speaker 3: agriculture sectors. And this week we took a look at 504 00:25:22,240 --> 00:25:25,320 Speaker 3: how the Trump administration is impacting the clean energy transition. 505 00:25:25,640 --> 00:25:28,760 Speaker 2: For more. Scarlett and I were joined by Antoine Wagner Jones, 506 00:25:28,920 --> 00:25:32,520 Speaker 2: Bloomberg BNEF, head of Trade and Supply Chains. First to 507 00:25:32,560 --> 00:25:35,720 Speaker 2: ask Antoine to explain how the Trump administration is now 508 00:25:35,800 --> 00:25:37,800 Speaker 2: impacting the transition to cleaner energy. 509 00:25:38,080 --> 00:25:40,760 Speaker 9: There's a few things that have happened that are quite dramatic. 510 00:25:40,880 --> 00:25:42,760 Speaker 9: In recent months, there's been a bill that has been 511 00:25:42,800 --> 00:25:46,240 Speaker 9: passed by the Trump administration which seeks to reverse a 512 00:25:46,280 --> 00:25:48,119 Speaker 9: lot of what was brought in under Biden under the 513 00:25:48,119 --> 00:25:51,280 Speaker 9: Inflation Reduction Act, which was this big climate bill that 514 00:25:51,480 --> 00:25:53,720 Speaker 9: gave all of this federal money, mostly in the form 515 00:25:53,760 --> 00:25:56,000 Speaker 9: of tax credits for clean energy. A lot of that's 516 00:25:56,040 --> 00:25:58,680 Speaker 9: being cut. So there was a really big, high profile 517 00:25:58,720 --> 00:26:01,560 Speaker 9: tax credit for electric vehicle that's going to be gone 518 00:26:01,720 --> 00:26:03,840 Speaker 9: as of this month, and a lot of the other 519 00:26:03,840 --> 00:26:06,320 Speaker 9: stuff is made much harder to access. So this is 520 00:26:07,600 --> 00:26:10,760 Speaker 9: a big problem for many of the manufacturers who have 521 00:26:11,119 --> 00:26:13,760 Speaker 9: led to over one hundred and ten billion dollars of 522 00:26:13,760 --> 00:26:17,000 Speaker 9: announcements for factories in the United States. There's a lot 523 00:26:17,040 --> 00:26:19,439 Speaker 9: of question marks about the fate of those factories and 524 00:26:19,480 --> 00:26:21,720 Speaker 9: the business case under the current environment. 525 00:26:22,400 --> 00:26:25,280 Speaker 3: Does the current administration want a transition to clean energy 526 00:26:25,280 --> 00:26:26,080 Speaker 3: to green energy? 527 00:26:26,800 --> 00:26:29,520 Speaker 9: The current administration is focused on a number of different things, 528 00:26:29,560 --> 00:26:34,159 Speaker 9: such as when it comes to energy date load increasing 529 00:26:34,440 --> 00:26:38,159 Speaker 9: due to data centences one a nuclear revival for the 530 00:26:38,240 --> 00:26:40,440 Speaker 9: United States is another. When it comes to clean energy, 531 00:26:40,480 --> 00:26:42,960 Speaker 9: when it comes to electric vehicles, those are things that 532 00:26:43,000 --> 00:26:46,639 Speaker 9: are being actively diminished in terms of their rollout and 533 00:26:46,680 --> 00:26:49,840 Speaker 9: support at a federal level. So the answer is no, 534 00:26:49,960 --> 00:26:51,520 Speaker 9: they are pushing against it. 535 00:26:51,680 --> 00:26:56,280 Speaker 2: So how are companies within the entire supply chain, how 536 00:26:56,359 --> 00:26:57,080 Speaker 2: are they reacting? 537 00:26:57,720 --> 00:27:02,240 Speaker 9: They're waiting and seeing force. For example, there's a number 538 00:27:02,240 --> 00:27:03,720 Speaker 9: of different things that are happening where it's just not 539 00:27:03,800 --> 00:27:05,240 Speaker 9: clear what the outcome is going to be. One of 540 00:27:05,240 --> 00:27:06,960 Speaker 9: the things is that in the most recent bill that's 541 00:27:06,960 --> 00:27:10,639 Speaker 9: been passed by the Trump administration, there's a number of 542 00:27:10,760 --> 00:27:13,040 Speaker 9: rules around whether or not you can have any kind 543 00:27:13,040 --> 00:27:17,680 Speaker 9: of Chinese involvement in a factory project at any real level. 544 00:27:17,760 --> 00:27:20,520 Speaker 9: It seems incredibly expansive beyond what was done under the 545 00:27:20,560 --> 00:27:23,800 Speaker 9: Biden administration, and the guidance for that isn't out yet. 546 00:27:24,200 --> 00:27:27,280 Speaker 9: And that's just one of the things where uncertainty is 547 00:27:27,359 --> 00:27:31,240 Speaker 9: just continuing. We're still waiting for clarifications on that specific rule. 548 00:27:31,280 --> 00:27:33,640 Speaker 9: And then if you zoom out again the tariff situation, 549 00:27:33,720 --> 00:27:36,959 Speaker 9: the volatility there. We've had recent news around you know, 550 00:27:37,040 --> 00:27:40,720 Speaker 9: the ultimate Supreme Court decision, which will likely impact many 551 00:27:40,720 --> 00:27:44,560 Speaker 9: of the so called reciprocal tariffs, is going to be 552 00:27:44,600 --> 00:27:46,800 Speaker 9: you know, something that we are waiting for early next year, 553 00:27:46,960 --> 00:27:49,000 Speaker 9: and That's just one example of how even with the 554 00:27:49,000 --> 00:27:51,840 Speaker 9: tariff situation, things are changing by the day, and there's 555 00:27:51,880 --> 00:27:55,520 Speaker 9: a lot of uncertainty there too. So in you know, 556 00:27:55,560 --> 00:27:58,160 Speaker 9: in terms of new investments, very little is happening because 557 00:27:58,160 --> 00:28:00,520 Speaker 9: people are waiting and seeing and that's due to the 558 00:28:00,600 --> 00:28:03,240 Speaker 9: volatility not just in terms of federal support and the 559 00:28:03,240 --> 00:28:05,720 Speaker 9: fate of those programs, but also in terms of trade policy. 560 00:28:06,320 --> 00:28:08,760 Speaker 3: And there was the one big beautiful bill as well. 561 00:28:08,880 --> 00:28:11,119 Speaker 3: How did that change up the landscape? 562 00:28:11,480 --> 00:28:15,400 Speaker 9: So that scrapped the electric vehicle tax credit, for example, 563 00:28:15,480 --> 00:28:18,879 Speaker 9: that is gone. That has also brought a whole host 564 00:28:18,920 --> 00:28:22,560 Speaker 9: of what's called foreignenety of concern rules around accessing many 565 00:28:22,600 --> 00:28:25,200 Speaker 9: of those tax credits. Those rules were in place under 566 00:28:25,200 --> 00:28:27,720 Speaker 9: the Biden administration, but in a much more restricted form. 567 00:28:27,960 --> 00:28:30,680 Speaker 9: These are being expanded be far beyond what they were, 568 00:28:31,040 --> 00:28:33,600 Speaker 9: and the aim there is really interesting. Originally there was 569 00:28:33,600 --> 00:28:35,359 Speaker 9: a thought that the Trump administration when it came to 570 00:28:35,440 --> 00:28:39,200 Speaker 9: Chinese involvement investments in the US, would be much less ideological, 571 00:28:39,320 --> 00:28:42,600 Speaker 9: much more quote unquote transactional. That doesn't seem to be 572 00:28:42,640 --> 00:28:44,840 Speaker 9: the case with this bill, where suddenly you have a 573 00:28:44,880 --> 00:28:46,840 Speaker 9: new series of rules which is going to make extremely 574 00:28:46,880 --> 00:28:50,080 Speaker 9: hard for any project where there's any you know, any 575 00:28:50,160 --> 00:28:52,440 Speaker 9: kind of doubt as to some Chinese investment in the 576 00:28:52,480 --> 00:28:55,920 Speaker 9: form of debt financing inputs into a factory from going 577 00:28:55,960 --> 00:28:59,840 Speaker 9: ahead and receiving tax credits. That's one big outcome from 578 00:28:59,840 --> 00:29:01,960 Speaker 9: the spill, and we're still waiting on the guidance for 579 00:29:02,000 --> 00:29:03,120 Speaker 9: that and how it's going to play out. 580 00:29:03,840 --> 00:29:06,400 Speaker 2: I mean, does the US have the capability to be 581 00:29:06,440 --> 00:29:12,520 Speaker 2: self sufficient in transitioning to cleaner energy or does it 582 00:29:12,560 --> 00:29:13,720 Speaker 2: need a global supply chain. 583 00:29:13,960 --> 00:29:15,960 Speaker 9: It needs a global supply chain. So what we've done, 584 00:29:15,960 --> 00:29:19,480 Speaker 9: we've just published a huge report sort of detailing the 585 00:29:19,600 --> 00:29:22,680 Speaker 9: current installed capacity for lots of different sectors in terms 586 00:29:22,680 --> 00:29:25,440 Speaker 9: of factories online in the United States. We look at 587 00:29:25,480 --> 00:29:27,560 Speaker 9: what's been announced, we make a call as to what 588 00:29:27,600 --> 00:29:30,120 Speaker 9: could come online. And when it comes to some products 589 00:29:30,120 --> 00:29:33,440 Speaker 9: like downstream products for things like solar modules, so solar 590 00:29:33,440 --> 00:29:36,800 Speaker 9: panels in their finished form. When it comes to lifthiumine 591 00:29:36,800 --> 00:29:39,440 Speaker 9: battery cells, so that's batteries in their finished form, the 592 00:29:39,520 --> 00:29:41,480 Speaker 9: US actually has a pretty good shot at being self 593 00:29:41,480 --> 00:29:45,080 Speaker 9: sufficient by twenty thirty we think. However, and this is 594 00:29:45,120 --> 00:29:47,880 Speaker 9: a big however, when it comes to the inputs, the 595 00:29:47,920 --> 00:29:50,360 Speaker 9: components that go into those things. So for a battery, 596 00:29:50,400 --> 00:29:52,680 Speaker 9: it's stuff like the cathode, the anode, You're going to 597 00:29:52,720 --> 00:29:55,080 Speaker 9: have to rely on other trade partners. If we suddenly 598 00:29:55,080 --> 00:29:57,800 Speaker 9: have rules which shut out China from those supply chains, 599 00:29:58,120 --> 00:30:00,480 Speaker 9: that means that the mapping exercise that we've don suddenly 600 00:30:00,520 --> 00:30:03,000 Speaker 9: becomes quite relevant where you begin to say, oh, well, 601 00:30:03,080 --> 00:30:05,920 Speaker 9: Japan has a surplus in separators that are used for 602 00:30:05,920 --> 00:30:09,440 Speaker 9: making batteries. South Korea as a surplace in cathodes. And 603 00:30:09,680 --> 00:30:12,240 Speaker 9: that's when you start having this sort of rejigging of 604 00:30:12,240 --> 00:30:14,600 Speaker 9: all the different puzzle pieces and where procurement teams are 605 00:30:14,600 --> 00:30:16,200 Speaker 9: going to be very busy over the next few months. 606 00:30:16,360 --> 00:30:18,520 Speaker 3: Can any of that be brought back to be made 607 00:30:18,720 --> 00:30:21,200 Speaker 3: in the US on shore manufacturing. 608 00:30:21,080 --> 00:30:23,520 Speaker 9: That's the aim. And under the Biden administration, where you 609 00:30:23,520 --> 00:30:26,040 Speaker 9: had not just tariffs that were relatively stable, but you 610 00:30:26,040 --> 00:30:28,640 Speaker 9: also had visibility in terms of future support, and you 611 00:30:28,640 --> 00:30:31,040 Speaker 9: also had demand side policies which meant that there'd be 612 00:30:31,080 --> 00:30:34,000 Speaker 9: local demand for your product that was locked in. Even 613 00:30:34,080 --> 00:30:36,640 Speaker 9: under those circumstances, still quite hard to do with the 614 00:30:36,720 --> 00:30:39,320 Speaker 9: kind of price increases you see in the US. We've 615 00:30:39,320 --> 00:30:41,320 Speaker 9: got a lot of announcements we'll see whether those factories 616 00:30:41,360 --> 00:30:43,560 Speaker 9: get built now. But in terms of that midstream, we 617 00:30:43,640 --> 00:30:45,760 Speaker 9: haven't seen as much in the way of announced investments, 618 00:30:45,760 --> 00:30:47,600 Speaker 9: and it's very unlikely that we're going to see anything 619 00:30:47,600 --> 00:30:49,840 Speaker 9: in the short term under the current environment. So the 620 00:30:49,840 --> 00:30:52,720 Speaker 9: short answer is no, not anytime soon. 621 00:30:53,040 --> 00:30:53,320 Speaker 3: Is it. 622 00:30:54,000 --> 00:30:56,280 Speaker 2: What are the capital markets like for any of this 623 00:30:56,920 --> 00:30:59,280 Speaker 2: these days? I would think with the uncertainty that you've 624 00:30:59,360 --> 00:31:03,040 Speaker 2: laid out for capital markets must have they dried up. 625 00:31:03,760 --> 00:31:06,320 Speaker 9: Yeah, capital for these it's become a lot harder, and 626 00:31:06,320 --> 00:31:09,040 Speaker 9: we've seen a real fall in terms of VC funding 627 00:31:09,120 --> 00:31:11,480 Speaker 9: for for example, for a lot of these projects, there's 628 00:31:11,520 --> 00:31:15,480 Speaker 9: been a shift towards things like AI defense spending. And 629 00:31:15,520 --> 00:31:17,960 Speaker 9: there's also some big question marks around, you know, the 630 00:31:18,000 --> 00:31:21,040 Speaker 9: suitability of some of these early stage funds for funding 631 00:31:21,080 --> 00:31:24,120 Speaker 9: clean energy and climate technology in general, the returns profiles 632 00:31:24,160 --> 00:31:27,760 Speaker 9: are very different to many other sectors, and that means that, Yeah, 633 00:31:27,840 --> 00:31:30,240 Speaker 9: that means that there's an increased relevance to the kind 634 00:31:30,240 --> 00:31:33,520 Speaker 9: of policy changes we've been seeing recently. And actually, when 635 00:31:33,520 --> 00:31:35,280 Speaker 9: it comes down to it, you really do need a 636 00:31:35,280 --> 00:31:38,920 Speaker 9: lot of state support, even you know that that needs 637 00:31:38,920 --> 00:31:41,080 Speaker 9: to be qualified when it comes to evs. That might 638 00:31:41,120 --> 00:31:43,160 Speaker 9: be the case we're still going to see a lot 639 00:31:43,200 --> 00:31:47,200 Speaker 9: of deployment of solar power, for example, and things like batteries, 640 00:31:47,240 --> 00:31:50,360 Speaker 9: because costs have just gone down so dramatically that a 641 00:31:50,400 --> 00:31:53,360 Speaker 9: lot of that will be built even without the kind 642 00:31:53,360 --> 00:31:55,800 Speaker 9: of federal support that we saw until recently. So there 643 00:31:55,800 --> 00:31:58,160 Speaker 9: is a silver lining for some sectors, but for many 644 00:31:58,200 --> 00:32:00,520 Speaker 9: sectors we're going to see some real difficult in terms 645 00:32:00,520 --> 00:32:01,680 Speaker 9: of financing. 646 00:32:01,400 --> 00:32:04,480 Speaker 3: Our Thanks to Antoine Wagner Jones, Bloomberg bn EF, head 647 00:32:04,480 --> 00:32:06,640 Speaker 3: of Trade and Supply Chains, we move. 648 00:32:06,520 --> 00:32:09,680 Speaker 2: Next to some recent research by Bloomberg Intelligence on Environmental, 649 00:32:09,880 --> 00:32:11,400 Speaker 2: social and governance investing. 650 00:32:11,680 --> 00:32:14,360 Speaker 3: Now, in simple terms, ESG is a framework used to 651 00:32:14,400 --> 00:32:18,400 Speaker 3: evaluate a company's management of environmental, social, or governance risks, 652 00:32:18,800 --> 00:32:21,200 Speaker 3: and since the war in Ukraine, roughly half of the 653 00:32:21,440 --> 00:32:24,240 Speaker 3: ESG registered equity funds in Europe have been allocating at 654 00:32:24,320 --> 00:32:28,080 Speaker 3: least some capital to companies that manufacture, supply, or transport 655 00:32:28,160 --> 00:32:28,920 Speaker 3: nuclear arms. 656 00:32:29,320 --> 00:32:32,840 Speaker 2: Now, according to Bloomberg Intelligence, that number may only increase. 657 00:32:33,080 --> 00:32:35,720 Speaker 2: This comes as recent guidance in an EU proposal leaves 658 00:32:35,840 --> 00:32:38,840 Speaker 2: nuclear arms out of its definition of controversial weapons. 659 00:32:39,000 --> 00:32:42,160 Speaker 3: For more guest hosts, Lisa Mattail and Alexis christoffers spoke 660 00:32:42,240 --> 00:32:46,200 Speaker 3: with Shaheen contractor Bloomberg Intelligence senior ESG strategist. 661 00:32:46,400 --> 00:32:48,840 Speaker 2: The first asked Shaheen to break down how ESG funds 662 00:32:48,880 --> 00:32:50,440 Speaker 2: are tied to nuclear arms. 663 00:32:50,800 --> 00:32:54,200 Speaker 10: Traditionally, I mean ESG funds defense. This whole thing has 664 00:32:54,280 --> 00:32:59,560 Speaker 10: been quite controversial, so historically ESG funds tend to exclude 665 00:32:59,600 --> 00:33:04,080 Speaker 10: such sectors such weapons. I guess now the companies I 666 00:33:04,120 --> 00:33:07,040 Speaker 10: analyze are part of not just banks exclusionless you know, 667 00:33:07,120 --> 00:33:10,240 Speaker 10: biggest one of the biggest asset owners, things that excluded. 668 00:33:11,400 --> 00:33:14,360 Speaker 10: What's happened now is that the EU and a new rule. 669 00:33:14,400 --> 00:33:18,760 Speaker 10: It's defined controversial weapons, but it's left nuclear weapons out, 670 00:33:19,160 --> 00:33:22,600 Speaker 10: so it now defines it as cluster ammunition, land mines, 671 00:33:22,680 --> 00:33:25,920 Speaker 10: things like that. So it's now explicitly not for the 672 00:33:26,000 --> 00:33:28,640 Speaker 10: lack of better words, controversial according to the ALA. 673 00:33:28,760 --> 00:33:31,960 Speaker 11: But doesn't that sit in direct conflict with what these 674 00:33:32,240 --> 00:33:34,840 Speaker 11: ESG funds are supposed to be about, like ethically and 675 00:33:34,920 --> 00:33:38,120 Speaker 11: morally or is this really not following the money at 676 00:33:38,120 --> 00:33:39,120 Speaker 11: the end of the day. 677 00:33:39,080 --> 00:33:43,160 Speaker 10: So it's it's I guess Traditionally ESG has been about 678 00:33:43,200 --> 00:33:46,400 Speaker 10: you know, socially responsible investing, values investing. Actually those are 679 00:33:46,400 --> 00:33:48,440 Speaker 10: two separate things. So if you want to go based 680 00:33:48,440 --> 00:33:53,640 Speaker 10: on your values, your ethics and yes, but ESG now 681 00:33:53,840 --> 00:33:56,200 Speaker 10: or you know, the way we analyze it, it's following 682 00:33:56,200 --> 00:34:00,400 Speaker 10: the money. It's financially material metrics that lead to out how. 683 00:34:00,360 --> 00:34:02,480 Speaker 11: It all leads there, because I mean, initially always do 684 00:34:02,640 --> 00:34:05,960 Speaker 11: no harm, right, no significant harm? Correct, And so it's 685 00:34:05,960 --> 00:34:07,960 Speaker 11: hard to make the argument that nuclear weapons may not 686 00:34:08,040 --> 00:34:09,360 Speaker 11: do significant harm. 687 00:34:09,960 --> 00:34:12,600 Speaker 10: So I would say a lot of these values things, 688 00:34:12,719 --> 00:34:15,839 Speaker 10: they're so subjective. I'm not saying that they do significant harm, 689 00:34:15,880 --> 00:34:18,320 Speaker 10: but I'm just saying it's so subjective and never changing. 690 00:34:18,560 --> 00:34:19,960 Speaker 7: That's the point that is true. 691 00:34:20,200 --> 00:34:22,840 Speaker 12: But it could boost returns if defense continues. 692 00:34:22,440 --> 00:34:23,120 Speaker 2: To aub performed. 693 00:34:23,200 --> 00:34:25,400 Speaker 10: Correct, So the two things it could booster, it turns. 694 00:34:25,440 --> 00:34:28,439 Speaker 10: But at the same time, some values based investors might 695 00:34:29,160 --> 00:34:32,920 Speaker 10: you know, it might go against their mandates. So I 696 00:34:32,920 --> 00:34:36,240 Speaker 10: guess the point is we cannot assume that these funds 697 00:34:36,280 --> 00:34:39,200 Speaker 10: now no longer have such exposures. It would lead to 698 00:34:39,239 --> 00:34:42,000 Speaker 10: greater fund scrutiny. That's the point of this. You have 699 00:34:42,040 --> 00:34:43,960 Speaker 10: to examine the fund. 700 00:34:43,520 --> 00:34:46,120 Speaker 11: So who's going to be driving this push into these 701 00:34:46,560 --> 00:34:51,160 Speaker 11: ESG funds sort of focusing or including now nuclear weapons. 702 00:34:51,040 --> 00:34:53,879 Speaker 10: So driving the pushes it's always been Europe. If you're 703 00:34:53,880 --> 00:34:57,440 Speaker 10: talking about you know who's investing into this, it's always 704 00:34:57,480 --> 00:34:59,640 Speaker 10: been Europe. North America, i would say, is seeing a 705 00:34:59,640 --> 00:35:02,480 Speaker 10: bit of pause when it comes to these kinds of investments. 706 00:35:02,560 --> 00:35:03,680 Speaker 10: It has been for a while. 707 00:35:04,280 --> 00:35:05,880 Speaker 13: And when you look into that, I was looking at 708 00:35:05,880 --> 00:35:07,399 Speaker 13: some of the numbers that you put. You said, five 709 00:35:07,640 --> 00:35:10,000 Speaker 13: ESG funds have seven percent or more of their portfolio 710 00:35:10,040 --> 00:35:14,320 Speaker 13: invested in companies excluded. How significant is that figure? 711 00:35:14,560 --> 00:35:19,680 Speaker 10: So seven percent of your portfolio in such companies, it's 712 00:35:19,960 --> 00:35:24,520 Speaker 10: quite substantial. It's concentrated. Now the number behind that that five, Yes, 713 00:35:24,560 --> 00:35:27,759 Speaker 10: she funds, it's not that much. I think, contrary to 714 00:35:27,840 --> 00:35:32,080 Speaker 10: what people might think. You know, historically exposure to such 715 00:35:32,120 --> 00:35:36,080 Speaker 10: companies that are involved in uklear weapons like Saffron Jacob Solutions, 716 00:35:36,120 --> 00:35:41,239 Speaker 10: it hasn't increased. So before the war, the Russia Ukraine War, 717 00:35:41,280 --> 00:35:44,160 Speaker 10: people might have thought it increased, but actually it didn't. 718 00:35:44,239 --> 00:35:45,560 Speaker 10: But it could going forward. 719 00:35:46,000 --> 00:35:49,439 Speaker 11: Russia's invasion of Ukraine did it push money into these 720 00:35:50,040 --> 00:35:52,560 Speaker 11: ESG funds inclusion of nuclear weapons? 721 00:35:52,600 --> 00:35:57,680 Speaker 10: So it did not push ESG funds to increase allocation 722 00:35:57,880 --> 00:36:01,680 Speaker 10: into these companies. That's the point. And it's interesting because 723 00:36:01,800 --> 00:36:04,400 Speaker 10: you would expect that it did, but I think not 724 00:36:04,560 --> 00:36:06,920 Speaker 10: just bank you know, being on not just banks exclusion 725 00:36:06,920 --> 00:36:09,719 Speaker 10: list has such a like stigma to it historically that 726 00:36:09,800 --> 00:36:12,600 Speaker 10: it didn't that being said, that could change now. 727 00:36:12,800 --> 00:36:15,279 Speaker 12: So I'm still confid. So why does the E you 728 00:36:15,680 --> 00:36:16,920 Speaker 12: want to change things? 729 00:36:18,560 --> 00:36:23,239 Speaker 10: I don't know, right. 730 00:36:23,280 --> 00:36:25,360 Speaker 3: So I guess so let me so. 731 00:36:25,800 --> 00:36:30,080 Speaker 10: Historically, the EU defined controversial weapons, as you know, according 732 00:36:30,080 --> 00:36:34,040 Speaker 10: to international treaties and UN principles, so it was always 733 00:36:34,120 --> 00:36:36,719 Speaker 10: up in the air as to whether what was included. 734 00:36:36,760 --> 00:36:40,400 Speaker 10: So some asset managers exclude nuclear weapons, some didn't, so 735 00:36:40,440 --> 00:36:42,800 Speaker 10: it was always a gray area. It was never defined. 736 00:36:42,880 --> 00:36:46,600 Speaker 10: Now it's explicitly defined as not being included. If that 737 00:36:46,719 --> 00:36:47,200 Speaker 10: makes sense. 738 00:36:47,440 --> 00:36:51,280 Speaker 11: It does, it does, But what do they risk pushing 739 00:36:51,280 --> 00:36:52,920 Speaker 11: away value based divestors. 740 00:36:53,040 --> 00:36:55,280 Speaker 10: Yes, so that's the point. You know, it could boost returns, 741 00:36:55,280 --> 00:36:59,000 Speaker 10: but then you have this conflict for people where this 742 00:36:59,080 --> 00:37:01,640 Speaker 10: does not align with their value. So it's that dual conflict. 743 00:37:01,680 --> 00:37:06,160 Speaker 10: So again the point is funds might need additional scrutiny. 744 00:37:06,200 --> 00:37:08,880 Speaker 10: I can't if that doesn't align with my values. I 745 00:37:08,920 --> 00:37:11,279 Speaker 10: can't assume that those companies are not in this sort. 746 00:37:11,200 --> 00:37:13,279 Speaker 11: Of the next generation of investors are doing that because 747 00:37:13,280 --> 00:37:15,799 Speaker 11: you're talking about younger investors where those things sort of 748 00:37:15,840 --> 00:37:18,520 Speaker 11: matter in a way they maybe didn't for the prior generation. 749 00:37:18,680 --> 00:37:21,680 Speaker 10: Yes, I mean, survey show that a lot of you know, 750 00:37:21,840 --> 00:37:25,520 Speaker 10: research shows that how this pans out, we'd have to 751 00:37:25,520 --> 00:37:27,400 Speaker 10: see as the younger generation takes on. 752 00:37:27,520 --> 00:37:29,160 Speaker 12: Well, I was gonna statish, where where does this go 753 00:37:29,200 --> 00:37:29,640 Speaker 12: from here? 754 00:37:30,440 --> 00:37:32,080 Speaker 10: I think where does this go from here? So I 755 00:37:32,120 --> 00:37:35,239 Speaker 10: think if we continue to focus on ESG as sort 756 00:37:35,280 --> 00:37:37,640 Speaker 10: of risk and returns, I think that's why we go 757 00:37:37,680 --> 00:37:40,480 Speaker 10: from here. These values based things are very subjective. 758 00:37:40,920 --> 00:37:45,000 Speaker 3: Our thanks to Shaheen contractor Bloomberg Intelligence senior ESG strategists. 759 00:37:45,200 --> 00:37:48,120 Speaker 2: That's a sweet edition of Bloomberg Intelligence on Bloomberg Radio, 760 00:37:48,360 --> 00:37:50,680 Speaker 2: providing in depth research and data on two thousand companies 761 00:37:50,719 --> 00:37:52,080 Speaker 2: and one hundred and thirty industries. 762 00:37:52,200 --> 00:37:54,799 Speaker 3: And remember you can access Bloomberg Intelligence via b I 763 00:37:54,880 --> 00:37:57,160 Speaker 3: go on the terminal. I'm Scarlet Fox and. 764 00:37:57,120 --> 00:37:59,600 Speaker 2: I'm Paul Sweeney. Stay with us. Today's top stories and 765 00:37:59,640 --> 00:38:01,839 Speaker 2: global business headlines are coming up right now. 766 00:38:03,760 --> 00:38:08,000 Speaker 1: Mm hmm