1 00:00:02,440 --> 00:00:09,119 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:09,160 --> 00:00:13,280 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:13,360 --> 00:00:16,320 Speaker 1: Eastern on Affo card playing Android otto with the Bloomberg 4 00:00:16,400 --> 00:00:19,640 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:19,960 --> 00:00:21,640 Speaker 1: or watch us live on YouTube. 6 00:00:23,280 --> 00:00:25,880 Speaker 2: Let's go right to the man himself, Michael Halen. He's 7 00:00:25,920 --> 00:00:28,360 Speaker 2: a senior restaurant analyst for Bloomberg Intelligence. He's been all 8 00:00:28,400 --> 00:00:31,680 Speaker 2: over busy, busy day today with the McDonald's news, with 9 00:00:31,800 --> 00:00:36,680 Speaker 2: the Starbucks earnings. Hey, Mike, let's start with McDonald's here. Boy, 10 00:00:36,720 --> 00:00:39,440 Speaker 2: if I were a long term shareholder of McDonald's I 11 00:00:39,520 --> 00:00:42,280 Speaker 2: think I'd be buying stock here today because nothing's fundamentally 12 00:00:42,479 --> 00:00:46,360 Speaker 2: changed other than this short term, really unfortunate incident out 13 00:00:46,440 --> 00:00:47,280 Speaker 2: in the West. 14 00:00:49,080 --> 00:00:49,239 Speaker 3: Yeah. 15 00:00:49,240 --> 00:00:50,840 Speaker 4: I guess the question is going to be how short 16 00:00:50,920 --> 00:00:51,360 Speaker 4: term is it? 17 00:00:51,800 --> 00:00:51,959 Speaker 3: Right? 18 00:00:52,760 --> 00:00:56,040 Speaker 5: Obviously it was a tragedy. Somebody's passed away. You have 19 00:00:56,200 --> 00:00:59,400 Speaker 5: ten people in the hospital. That number could expand in 20 00:00:59,520 --> 00:01:03,480 Speaker 5: the coming weeks. So yeah, I guess it's going to 21 00:01:03,560 --> 00:01:06,200 Speaker 5: depend on when customers are going to feel comfortable going. 22 00:01:06,160 --> 00:01:07,200 Speaker 4: Back to McDonald's. 23 00:01:07,240 --> 00:01:09,880 Speaker 5: You know, we think, you know, we think that some 24 00:01:10,040 --> 00:01:13,720 Speaker 5: negative sentiment could linger. Obviously, this company has gotten ahead 25 00:01:13,720 --> 00:01:17,200 Speaker 5: of itself in terms of pricing, and customers, especially low 26 00:01:17,240 --> 00:01:21,240 Speaker 5: income consumers have pushed back by visiting less this year, 27 00:01:21,400 --> 00:01:24,040 Speaker 5: and so, you know, I think the timing of it 28 00:01:24,720 --> 00:01:27,120 Speaker 5: was kind of bad in terms of where the stock's at. 29 00:01:27,240 --> 00:01:29,200 Speaker 4: I mean, the stock's been ripping higher over the last 30 00:01:29,240 --> 00:01:29,760 Speaker 4: couple of months. 31 00:01:29,800 --> 00:01:33,080 Speaker 5: It makes us think that they finally kind of hit 32 00:01:33,200 --> 00:01:35,640 Speaker 5: on value and we're able to track people back with 33 00:01:35,720 --> 00:01:39,320 Speaker 5: this five dollars meal in the last quarter, right, but 34 00:01:39,520 --> 00:01:42,199 Speaker 5: with the stock near all time highs man, that's that's 35 00:01:43,720 --> 00:01:46,600 Speaker 5: you know, I guess that's a decision consumers investors are 36 00:01:46,600 --> 00:01:47,440 Speaker 5: going to have to make today. 37 00:01:47,840 --> 00:01:50,720 Speaker 6: So for the next earnings report out of McDonald's, do 38 00:01:50,760 --> 00:01:54,920 Speaker 6: you expect any type of hit either to the sales 39 00:01:55,080 --> 00:01:57,640 Speaker 6: or any earnings metrics that has to do with this 40 00:01:57,920 --> 00:01:59,200 Speaker 6: equal y outbreak news? 41 00:02:00,040 --> 00:02:02,520 Speaker 5: So this is gonna be, uh, this is gonna impact 42 00:02:02,520 --> 00:02:04,320 Speaker 5: a fourth quarter. So we think this is gonna have 43 00:02:04,440 --> 00:02:08,960 Speaker 5: a meaningful impact on the fourth quarter and it'll probably 44 00:02:09,080 --> 00:02:11,720 Speaker 5: bleed into early twenty twenty five as well. We think 45 00:02:11,760 --> 00:02:13,840 Speaker 5: traffic and Samsar sales are going to get it a 46 00:02:13,960 --> 00:02:17,679 Speaker 5: hit because you know, I've been on TV four times 47 00:02:17,720 --> 00:02:20,639 Speaker 5: already today. I'm sure all the major outlets are covering 48 00:02:21,840 --> 00:02:25,000 Speaker 5: this story. And so it's gonna turn a lot of 49 00:02:25,040 --> 00:02:27,200 Speaker 5: people off from McDonald's. And I think there's gonna be 50 00:02:27,240 --> 00:02:28,959 Speaker 5: a lot of people out there that just may not 51 00:02:29,280 --> 00:02:32,120 Speaker 5: feel safe eating in their local McDonalds. So I think 52 00:02:32,120 --> 00:02:35,440 Speaker 5: it's gonna it's gonna impact sales and traffic and earnings 53 00:02:36,880 --> 00:02:37,959 Speaker 5: for at least a few quarters. 54 00:02:38,639 --> 00:02:42,400 Speaker 2: And Mike, aren't most I mean, like the vast majority 55 00:02:42,400 --> 00:02:45,720 Speaker 2: of McDonald's. Aren't they franchised versus company owned? 56 00:02:46,919 --> 00:02:50,320 Speaker 5: Yes, yeah, they're They're ninety six percent franchised. So yeah, 57 00:02:50,360 --> 00:02:53,480 Speaker 5: the largest impact is gonna be to the franchisees. That's 58 00:02:53,520 --> 00:02:56,600 Speaker 5: a great point, Paul. Franchisees are gonna suffer the most, 59 00:02:57,080 --> 00:02:59,880 Speaker 5: you know, because McDonald's is so heavily franchised. You know 60 00:03:00,120 --> 00:03:04,359 Speaker 5: that they'll take a top line impact, but there's less 61 00:03:04,400 --> 00:03:07,400 Speaker 5: operating leverage in that model, right, and so because of that, 62 00:03:07,600 --> 00:03:09,639 Speaker 5: their earnings aren't going to get hurt. 63 00:03:09,960 --> 00:03:10,079 Speaker 3: You know. 64 00:03:10,800 --> 00:03:12,280 Speaker 4: The last big example of. 65 00:03:12,280 --> 00:03:12,960 Speaker 2: This was Chapotle. 66 00:03:13,080 --> 00:03:14,919 Speaker 4: Chapotle owned all their stores. 67 00:03:14,800 --> 00:03:17,800 Speaker 5: So when their same star sales drop twenty percent twenty seventeen, 68 00:03:18,080 --> 00:03:20,720 Speaker 5: their margins got decimated, right, because there's just a lot 69 00:03:20,760 --> 00:03:23,079 Speaker 5: more operating leverage in the model. So you know, for 70 00:03:23,240 --> 00:03:25,959 Speaker 5: that reason, there's a lot less risk to the McDonald's 71 00:03:26,000 --> 00:03:29,160 Speaker 5: story in this case versus what we saw the Chipotle 72 00:03:29,320 --> 00:03:29,640 Speaker 5: back then. 73 00:03:30,400 --> 00:03:33,000 Speaker 6: So Michael Paul said that he's been ordering the same 74 00:03:33,120 --> 00:03:36,480 Speaker 6: thing from McDonald since high school. I imagine that when 75 00:03:36,520 --> 00:03:39,040 Speaker 6: he first lets going back ordered it, maybe the burger 76 00:03:39,280 --> 00:03:44,440 Speaker 6: was two dollars fifty cent. I want to talk about 77 00:03:44,480 --> 00:03:49,040 Speaker 6: pricing though, How is McDonald's doing right now with being 78 00:03:49,080 --> 00:03:52,920 Speaker 6: able to raise prices with a consumer that is kind 79 00:03:52,960 --> 00:03:55,680 Speaker 6: of constrained by higher interest rates and inflation right now? 80 00:03:56,920 --> 00:03:59,160 Speaker 5: Yeah, it's not just them, it's it's it's all of 81 00:03:59,240 --> 00:04:02,440 Speaker 5: the restaurant, but especially quick service. Thirty percent of their 82 00:04:02,480 --> 00:04:05,320 Speaker 5: transactions are made by low income consumers. And there's this 83 00:04:05,560 --> 00:04:09,080 Speaker 5: ke shaped economy right where if you own assets, right, 84 00:04:09,200 --> 00:04:10,520 Speaker 5: if you have a lot of money in your four 85 00:04:10,600 --> 00:04:13,000 Speaker 5: oh one k and you own a house, and you 86 00:04:13,080 --> 00:04:18,000 Speaker 5: know you're doing pretty good, right, But inflation has squeezed 87 00:04:18,040 --> 00:04:20,920 Speaker 5: the hell out of low income consumers now for four years, 88 00:04:21,480 --> 00:04:24,720 Speaker 5: and they're they're just shopping at the grocery store more often. 89 00:04:24,760 --> 00:04:26,120 Speaker 4: They're cutting back on their visits. 90 00:04:27,800 --> 00:04:30,000 Speaker 5: You know, they're they're cutting back on their checks when 91 00:04:30,040 --> 00:04:33,520 Speaker 5: they do go to the restaurants, right, and so McDonald's 92 00:04:33,520 --> 00:04:35,840 Speaker 5: franchise ease because they're the ones that set the pricing, 93 00:04:36,839 --> 00:04:39,240 Speaker 5: you know, and everyone else in the restaurant industry is 94 00:04:40,000 --> 00:04:43,200 Speaker 5: struggling mightily to raise prices on their consumers this year. 95 00:04:43,960 --> 00:04:46,120 Speaker 5: And you know, and the rising you know, the seven 96 00:04:46,160 --> 00:04:49,320 Speaker 5: since of fifty basis points cut commodity prices have just 97 00:04:49,400 --> 00:04:52,480 Speaker 5: gone up since since September when we started pricing that in, right, 98 00:04:52,600 --> 00:04:55,520 Speaker 5: and so that's a big concern for restaurant tours. 99 00:04:55,520 --> 00:04:56,800 Speaker 4: I think in twenty twenty five. 100 00:04:57,600 --> 00:05:01,080 Speaker 2: All right, Mike, let's switch gears. Look at Starbucks. Sbux 101 00:05:01,200 --> 00:05:03,559 Speaker 2: is the ticker to put into your Bloomberg terminal stocks 102 00:05:03,600 --> 00:05:05,880 Speaker 2: off about a half of one percent today. It's pretty 103 00:05:05,960 --> 00:05:08,920 Speaker 2: much unchanged on the year, so badly, badly trailing the 104 00:05:09,040 --> 00:05:10,720 Speaker 2: S and P five hundred, which is up about twenty 105 00:05:10,760 --> 00:05:11,200 Speaker 2: two percent. 106 00:05:11,279 --> 00:05:11,440 Speaker 4: Here. 107 00:05:12,040 --> 00:05:15,000 Speaker 2: What's going on at Starbucks here, Michael? 108 00:05:17,240 --> 00:05:20,600 Speaker 5: Yeah, they they played catch up a bit once the 109 00:05:21,320 --> 00:05:24,240 Speaker 5: appointment of Brian Nickel was the hiring of Brian Nichol 110 00:05:24,400 --> 00:05:27,880 Speaker 5: was announced. You know, Brian Nickel started last month, and 111 00:05:28,120 --> 00:05:29,400 Speaker 5: you know, he's moving quickly. 112 00:05:29,520 --> 00:05:29,680 Speaker 3: Man. 113 00:05:29,720 --> 00:05:33,719 Speaker 5: He's making a lot of management changes, and he's aggressively 114 00:05:34,680 --> 00:05:39,960 Speaker 5: making moves to simplify operations. You know, they're going to rationalize, 115 00:05:40,560 --> 00:05:44,240 Speaker 5: rationalized menu items, make it easier to execute, and try 116 00:05:44,279 --> 00:05:44,680 Speaker 5: to bring. 117 00:05:44,600 --> 00:05:46,400 Speaker 4: Hospitality back to the coffee shops. 118 00:05:46,640 --> 00:05:46,760 Speaker 7: Right. 119 00:05:46,839 --> 00:05:50,040 Speaker 5: They want to free up their employees, their partners as 120 00:05:50,080 --> 00:05:53,239 Speaker 5: they like to call them, to get back to knowing 121 00:05:53,360 --> 00:05:56,160 Speaker 5: the names of their customers, right and being able to 122 00:05:56,160 --> 00:05:58,520 Speaker 5: greet them with a smile and friendly service. 123 00:05:58,680 --> 00:05:58,800 Speaker 3: Right. 124 00:05:58,880 --> 00:06:01,280 Speaker 5: And so that's that's going to be job one, and 125 00:06:01,360 --> 00:06:04,200 Speaker 5: then from there they're gonna expand on the marketing side. 126 00:06:04,320 --> 00:06:09,760 Speaker 5: You know, Starbucks has historically only marketed to its rewards members, right, 127 00:06:09,800 --> 00:06:12,680 Speaker 5: and Brian Nicol wants to expand that to everyone, right. 128 00:06:12,720 --> 00:06:14,560 Speaker 5: And we think that's a smart plan. We think they've 129 00:06:14,720 --> 00:06:17,600 Speaker 5: been under investing in marketing for a long time, and 130 00:06:17,680 --> 00:06:20,760 Speaker 5: we expected to pay dividends as early as fiscal twenty 131 00:06:20,800 --> 00:06:21,240 Speaker 5: twenty five. 132 00:06:21,960 --> 00:06:25,760 Speaker 6: What is the company said to explain the seven percent 133 00:06:25,839 --> 00:06:28,520 Speaker 6: decline in same store sales? Because before you came on, 134 00:06:28,640 --> 00:06:31,200 Speaker 6: we were talking about how you have to wait in 135 00:06:31,279 --> 00:06:35,040 Speaker 6: a really long line to get your Starbucks. There's less drive, right, 136 00:06:35,160 --> 00:06:37,920 Speaker 6: if you're doing it. There's I guess, well maybe some 137 00:06:38,240 --> 00:06:41,040 Speaker 6: teams in the store, but there's less people in the store. 138 00:06:41,120 --> 00:06:43,640 Speaker 6: What have they said about really what's driving that decline? 139 00:06:44,400 --> 00:06:45,359 Speaker 2: You know, part of what. 140 00:06:48,080 --> 00:06:49,920 Speaker 5: New CEO Brian Nichol has said this is like it's 141 00:06:50,040 --> 00:06:54,240 Speaker 5: largely about the experience. You know, it's become largely transactional. Right, 142 00:06:54,320 --> 00:06:57,880 Speaker 5: They've lost that customer service feel. They've had the trouble 143 00:06:57,960 --> 00:07:00,720 Speaker 5: executing the orders. You know, a big part of it is, 144 00:07:01,800 --> 00:07:03,600 Speaker 5: you know, and then he also mentioned that, you know, 145 00:07:03,760 --> 00:07:06,680 Speaker 5: all of these new menu items that they added to 146 00:07:06,760 --> 00:07:10,200 Speaker 5: try to bring people in didn't work right. And then 147 00:07:11,040 --> 00:07:13,200 Speaker 5: you know, to your point, pricing has gotten ahead of 148 00:07:13,200 --> 00:07:17,120 Speaker 5: itself at Starbucks as well, and then China China, there's 149 00:07:17,160 --> 00:07:20,400 Speaker 5: a huge price gap between the prices that they're charging. 150 00:07:20,480 --> 00:07:23,320 Speaker 5: Sometimes they're charging three times as much as as some 151 00:07:23,440 --> 00:07:26,280 Speaker 5: of their smaller competitors like Luck and Coffee and k Coffee. So, 152 00:07:27,400 --> 00:07:30,400 Speaker 5: you know, prices has also been a big part of 153 00:07:30,480 --> 00:07:33,080 Speaker 5: their issue, and it's something that they're they're going to 154 00:07:33,120 --> 00:07:33,920 Speaker 5: address right away. 155 00:07:34,320 --> 00:07:38,640 Speaker 2: You know, I've seen some crazy graphics in various articles 156 00:07:38,640 --> 00:07:41,880 Speaker 2: showing the permutations of the different orders that one could have, 157 00:07:42,040 --> 00:07:45,240 Speaker 2: and if you're bar barbista. There's it's virtually impossible to 158 00:07:45,360 --> 00:07:47,600 Speaker 2: learn all these Is there a sense that they kind 159 00:07:47,600 --> 00:07:50,560 Speaker 2: of simplified just the menu a little bit? 160 00:07:52,360 --> 00:07:57,840 Speaker 5: Yeah, that was They issued a video yesterday after the close, 161 00:07:57,880 --> 00:07:59,840 Speaker 5: and that was a big point of emphasis. It was 162 00:07:59,880 --> 00:08:02,720 Speaker 5: like making the jobs of their barista is a lot 163 00:08:02,920 --> 00:08:05,640 Speaker 5: easier and their employees a lot easier, right, And so 164 00:08:06,200 --> 00:08:06,840 Speaker 5: you know when an. 165 00:08:06,760 --> 00:08:08,920 Speaker 4: Employee stressed, it's very hard for. 166 00:08:08,960 --> 00:08:11,400 Speaker 5: Them to provide the customer with a good experience, right. 167 00:08:11,480 --> 00:08:12,920 Speaker 5: So this all flows downhill. 168 00:08:13,040 --> 00:08:16,040 Speaker 4: So making the barista's jobs easier. 169 00:08:16,880 --> 00:08:20,280 Speaker 5: Making it more and more enjoyable environment for them is 170 00:08:20,360 --> 00:08:23,360 Speaker 5: going to flow down to the consumer, and then it's 171 00:08:23,400 --> 00:08:25,679 Speaker 5: going to result in better traffic and same source sales. 172 00:08:26,400 --> 00:08:28,160 Speaker 6: We don't have a ton a ton of time left, 173 00:08:28,280 --> 00:08:30,840 Speaker 6: but I was curious to get your thoughts, you know, 174 00:08:30,960 --> 00:08:34,600 Speaker 6: Brian Nichols said. The company said that they're pulling back 175 00:08:34,679 --> 00:08:38,280 Speaker 6: this guidance because the CEO needs more time to kind 176 00:08:38,320 --> 00:08:41,040 Speaker 6: of think through all this. How unprecedented is that just 177 00:08:41,200 --> 00:08:41,840 Speaker 6: thirty seconds? 178 00:08:42,600 --> 00:08:42,720 Speaker 3: Uh? 179 00:08:42,800 --> 00:08:44,040 Speaker 4: No, it would be This is very common. 180 00:08:44,120 --> 00:08:47,040 Speaker 5: Any any good CEO, we're worth his soul is gonna 181 00:08:47,400 --> 00:08:49,719 Speaker 5: is going to suspend guidance. So they have more time 182 00:08:49,760 --> 00:08:52,200 Speaker 5: to get their initiatives in place. This is a huge company. 183 00:08:52,240 --> 00:08:54,800 Speaker 5: It's going to take a long time for momentum to 184 00:08:54,840 --> 00:08:56,120 Speaker 5: start building in the right direction. 185 00:08:56,240 --> 00:08:58,720 Speaker 4: And this is a wise move, all right. 186 00:08:58,840 --> 00:09:02,599 Speaker 2: Michael Halen busy busy analysts today here with Starbucks McDonald's 187 00:09:02,600 --> 00:09:06,360 Speaker 2: in the news. Michael Halen, senior restaurant and food service 188 00:09:06,360 --> 00:09:10,400 Speaker 2: analysts for Bloomberg Intelligence, joining us from the BI office 189 00:09:10,520 --> 00:09:12,040 Speaker 2: in Princeton, New Jersey. 190 00:09:13,640 --> 00:09:17,520 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 191 00:09:17,640 --> 00:09:20,680 Speaker 1: weekdays at ten am Eastern on applecard. 192 00:09:20,160 --> 00:09:22,880 Speaker 3: Play and Android Auto with the Bloomberg Business App. 193 00:09:23,040 --> 00:09:25,840 Speaker 1: You can also listen live on Amazon Alexa from our 194 00:09:25,920 --> 00:09:30,559 Speaker 1: flagship New York station Just Say Alexa playing Bloomberg eleven thirty. 195 00:09:31,760 --> 00:09:34,240 Speaker 2: Family Graffeo sitting in for Alex steel On Paul Swinging. 196 00:09:34,280 --> 00:09:36,199 Speaker 2: Were live here in our Boomberg Arrective Brokers studio and 197 00:09:36,200 --> 00:09:39,040 Speaker 2: we're streaming live on YouTube as well. Bowing back in 198 00:09:39,080 --> 00:09:42,640 Speaker 2: the news again today with some earnings not a good 199 00:09:42,679 --> 00:09:44,839 Speaker 2: cash flow story, stocks down three and a quarter percent. 200 00:09:45,840 --> 00:09:49,839 Speaker 2: Boeing CEO Kelly Ortberg provided an unvarnished view of his 201 00:09:50,000 --> 00:09:53,839 Speaker 2: company at a crossolads absorbed by challenges ranging from huge 202 00:09:53,920 --> 00:09:57,080 Speaker 2: debt to serious performance lapses that it needs to address 203 00:09:57,120 --> 00:10:00,160 Speaker 2: before it can consider developing a new aircraft. Take it 204 00:10:00,200 --> 00:10:03,679 Speaker 2: Down Force. George Ferguson joins US Senior Aerospace, Airlines and 205 00:10:03,720 --> 00:10:07,280 Speaker 2: Defense anels for Bloomberg Intelligence. So what did you see 206 00:10:07,320 --> 00:10:10,240 Speaker 2: in this earnings release, George? What did you hear from 207 00:10:10,480 --> 00:10:14,679 Speaker 2: new CEO Kelly Ortberg as you think about this Boeing 208 00:10:14,720 --> 00:10:15,360 Speaker 2: story right now? 209 00:10:16,320 --> 00:10:16,520 Speaker 3: Yeah? 210 00:10:16,559 --> 00:10:18,679 Speaker 8: So I think you touched on the most important thing 211 00:10:19,160 --> 00:10:21,040 Speaker 8: we heard on the call. I don't think it was 212 00:10:21,200 --> 00:10:25,760 Speaker 8: that cash burn continues into twenty twenty five, you know, 213 00:10:25,840 --> 00:10:27,840 Speaker 8: that worse than the front half of the year. 214 00:10:28,080 --> 00:10:30,040 Speaker 4: It's not like in the back half of the year cash. 215 00:10:31,200 --> 00:10:34,600 Speaker 8: There could be some generation, but it'll finish the year negative, 216 00:10:35,240 --> 00:10:37,800 Speaker 8: which really leads to me to believe, right, they just 217 00:10:37,880 --> 00:10:40,120 Speaker 8: got to raise They got to raise cash here shortly 218 00:10:41,200 --> 00:10:44,240 Speaker 8: because they don't want to dip underneath that ten billion dollars, 219 00:10:44,920 --> 00:10:47,280 Speaker 8: you know, amount they need to run the company. I 220 00:10:47,320 --> 00:10:51,599 Speaker 8: think also I found it interesting away from his discussions 221 00:10:51,840 --> 00:10:54,360 Speaker 8: on you know, the culture Boeing and how it needs 222 00:10:54,400 --> 00:10:56,680 Speaker 8: to change. I think everybody understands that, we all agree. 223 00:10:58,440 --> 00:11:01,640 Speaker 8: I found it interesting too, you know, A couple of 224 00:11:01,640 --> 00:11:06,000 Speaker 8: analysts went out of him about selling divisions, didn't get 225 00:11:06,040 --> 00:11:08,600 Speaker 8: a lot out of them, I think on on selling 226 00:11:09,559 --> 00:11:13,200 Speaker 8: parts of Boeing to raise money. Look, I know he's busy, 227 00:11:13,200 --> 00:11:15,120 Speaker 8: he's been first couple of days. But my guess is 228 00:11:15,760 --> 00:11:18,240 Speaker 8: they've looked at ways to raise cash, and you know, 229 00:11:18,480 --> 00:11:21,960 Speaker 8: we didn't think there was much potential to sell big 230 00:11:22,080 --> 00:11:25,240 Speaker 8: chunks and raise cash. And it didn't sound like Kelly 231 00:11:25,320 --> 00:11:27,640 Speaker 8: had any of those on top of his list either, 232 00:11:27,760 --> 00:11:29,000 Speaker 8: So I thought. 233 00:11:28,880 --> 00:11:29,880 Speaker 4: It was the most interesting stuff. 234 00:11:30,160 --> 00:11:33,959 Speaker 6: What did the CEO say about the serious performance lapses 235 00:11:34,200 --> 00:11:36,360 Speaker 6: that Boeing has had over the last year. 236 00:11:37,280 --> 00:11:39,920 Speaker 8: Yeah, I mean you know what I heard was, you know, 237 00:11:40,200 --> 00:11:44,959 Speaker 8: the serious lapses. You know, I guess he kind of 238 00:11:45,640 --> 00:11:48,760 Speaker 8: owned up to them as well. But again I think 239 00:11:48,800 --> 00:11:51,719 Speaker 8: we all knew that and that and that, you know, 240 00:11:51,800 --> 00:11:55,599 Speaker 8: he thought companies still had, you know, potential for a 241 00:11:55,720 --> 00:11:59,920 Speaker 8: very bright future. They're part of a duopoly, large backlog, 242 00:12:00,880 --> 00:12:02,880 Speaker 8: and I think he understands that they need to bring 243 00:12:03,000 --> 00:12:06,199 Speaker 8: back the machinist as soon as they can in a 244 00:12:06,240 --> 00:12:09,440 Speaker 8: way where they're happy and ready to build product well, 245 00:12:10,720 --> 00:12:15,160 Speaker 8: and that's the path to success. And so but again 246 00:12:15,160 --> 00:12:17,839 Speaker 8: I think he kind of owned again the problems of 247 00:12:17,920 --> 00:12:21,280 Speaker 8: the company. But we've heard this before, right, I think 248 00:12:21,360 --> 00:12:23,280 Speaker 8: now that the question is how do you change it? 249 00:12:23,320 --> 00:12:25,360 Speaker 2: And you turn it around? All right? The most immediate 250 00:12:26,320 --> 00:12:29,160 Speaker 2: I guess mile post for this company is settling the striking. 251 00:12:29,280 --> 00:12:31,480 Speaker 2: Today is the day the rank and file out there 252 00:12:31,520 --> 00:12:33,280 Speaker 2: in the Pacific northwester they are going to vote today, 253 00:12:33,760 --> 00:12:35,160 Speaker 2: and he consents us how this might go. 254 00:12:36,720 --> 00:12:40,160 Speaker 8: I'm not seeing any I mean, I'm I'm in the 255 00:12:40,240 --> 00:12:43,120 Speaker 8: camp that it looks like he has a pretty good 256 00:12:43,160 --> 00:12:45,600 Speaker 8: shot of it, because again, I think, you know, I've 257 00:12:45,640 --> 00:12:48,079 Speaker 8: talked before that the union's been out now for about 258 00:12:48,120 --> 00:12:51,280 Speaker 8: a month, so I'm sure they're starting to feel the 259 00:12:51,320 --> 00:12:54,240 Speaker 8: pain of not having a paychecker at least a paycheck 260 00:12:54,280 --> 00:12:56,920 Speaker 8: as large as they're used to coming in. They're pretty 261 00:12:57,000 --> 00:13:00,240 Speaker 8: close to the terms that I think they're all looking for. 262 00:13:00,520 --> 00:13:02,599 Speaker 8: The union might have been looking for forty percent. I 263 00:13:02,679 --> 00:13:05,800 Speaker 8: think they'll get. You know, thirty five sounds pretty darn close. 264 00:13:06,200 --> 00:13:07,600 Speaker 8: I don't know if you really want to hold out 265 00:13:07,600 --> 00:13:11,040 Speaker 8: for the extra five percent. And they sweetened up some 266 00:13:11,160 --> 00:13:13,640 Speaker 8: of the four oh one k matching and some bonuses, 267 00:13:14,160 --> 00:13:16,720 Speaker 8: so to me, it feels like they're pretty darn close 268 00:13:17,320 --> 00:13:20,199 Speaker 8: and given the timeline, since they last all work, it 269 00:13:20,320 --> 00:13:22,040 Speaker 8: kind of feels like he might get it tonight. 270 00:13:22,360 --> 00:13:25,439 Speaker 2: All right. So the long term challenge I think for 271 00:13:25,520 --> 00:13:27,760 Speaker 2: this company, and I actually just happen to know a 272 00:13:27,840 --> 00:13:31,160 Speaker 2: couple of you know, long time really right out of 273 00:13:31,200 --> 00:13:35,360 Speaker 2: college engineers at Boeing, and it goes to that culture 274 00:13:35,400 --> 00:13:39,600 Speaker 2: issue of you know, the engineering first, maybe not necessarily 275 00:13:39,720 --> 00:13:43,960 Speaker 2: profitability metrics first, but engineering first, that there's a belief 276 00:13:44,000 --> 00:13:45,920 Speaker 2: in at least by some that the company needs to 277 00:13:45,960 --> 00:13:49,280 Speaker 2: get back there. A does a company believe that? And 278 00:13:49,440 --> 00:13:51,760 Speaker 2: B is there any sense that they can actually do it? 279 00:13:53,160 --> 00:13:53,319 Speaker 3: Yeah? 280 00:13:53,360 --> 00:13:56,440 Speaker 8: I mean I do think they can. I think it again, 281 00:13:56,520 --> 00:13:58,920 Speaker 8: it's going to take a wholesale I think change in 282 00:13:59,080 --> 00:14:02,839 Speaker 8: attitude here. I do know people as well inside Boeing, 283 00:14:02,920 --> 00:14:06,079 Speaker 8: and I hear a lot of stories about you know, 284 00:14:06,559 --> 00:14:09,880 Speaker 8: non engineers running around with clipboards trying to figure out 285 00:14:09,880 --> 00:14:13,599 Speaker 8: how to manage programs that are very technical, you know, 286 00:14:13,960 --> 00:14:18,760 Speaker 8: in very technical programs. And so I think it will 287 00:14:18,800 --> 00:14:20,400 Speaker 8: be hard to change. And I think they can't lose 288 00:14:20,480 --> 00:14:23,440 Speaker 8: sight of profitability. And I think even Kelly, as he 289 00:14:23,520 --> 00:14:25,680 Speaker 8: tells you we got to get back to engineering and 290 00:14:25,760 --> 00:14:29,120 Speaker 8: a manufacturing culture, he's canceling the seven to sixty seven 291 00:14:29,240 --> 00:14:32,960 Speaker 8: because he thinks the prospects for the future aren't as good. 292 00:14:33,040 --> 00:14:34,720 Speaker 4: Right, he said, Look, this program was. 293 00:14:34,720 --> 00:14:37,480 Speaker 8: Coming to an end anyways, let's just get distractions away 294 00:14:37,520 --> 00:14:40,160 Speaker 8: from us so they can't lose sight of profitability. But 295 00:14:40,240 --> 00:14:44,360 Speaker 8: they yeah, they have to get back to engineering prowess 296 00:14:44,600 --> 00:14:45,880 Speaker 8: and manufacturing skills. 297 00:14:47,360 --> 00:14:52,200 Speaker 6: The stock is down almost forty percent or over forty 298 00:14:52,240 --> 00:14:56,240 Speaker 6: percent the year to date. Is there a sense in 299 00:14:56,360 --> 00:15:00,360 Speaker 6: the investor community that this is we're near the bottom bowing? 300 00:15:02,240 --> 00:15:04,720 Speaker 8: So look the other day, I think Monday, when you 301 00:15:04,840 --> 00:15:09,720 Speaker 8: saw the announcement of you know, the next proposal for 302 00:15:09,840 --> 00:15:13,640 Speaker 8: the union and a vote coming, you saw the stock move, 303 00:15:13,760 --> 00:15:17,160 Speaker 8: and so I think that that alone is an indicator 304 00:15:17,280 --> 00:15:21,160 Speaker 8: that you know, look on Wall Street and financial markets, 305 00:15:21,760 --> 00:15:25,520 Speaker 8: hope hope is eternal. And there are some folks out 306 00:15:25,560 --> 00:15:27,320 Speaker 8: there that saying think they see value in this. 307 00:15:28,080 --> 00:15:29,560 Speaker 2: When do you if they do come to market with 308 00:15:29,640 --> 00:15:32,160 Speaker 2: either debt or equity capital, George, when do you think 309 00:15:32,200 --> 00:15:34,000 Speaker 2: that'll be now that they've got the earnings behind them, 310 00:15:34,160 --> 00:15:35,320 Speaker 2: Seemingly they have the green light. 311 00:15:36,360 --> 00:15:39,400 Speaker 8: I think that they want to see the vote tonight, right, Okay, 312 00:15:39,440 --> 00:15:43,760 Speaker 8: So my senses it's come in late this week, next week. 313 00:15:43,840 --> 00:15:45,200 Speaker 8: I think they want to see the vote tonight and 314 00:15:45,240 --> 00:15:47,400 Speaker 8: figure out what they think they need. Right if Kelly 315 00:15:47,440 --> 00:15:49,440 Speaker 8: doesn't get the vote, if the vote doesn't go his way, 316 00:15:50,000 --> 00:15:51,720 Speaker 8: it's going to be a larger chunk coming out of 317 00:15:51,760 --> 00:15:52,440 Speaker 8: the coming out of. 318 00:15:52,440 --> 00:15:55,800 Speaker 2: The high see you're saying, yep, makes sense, all right, George, 319 00:15:55,840 --> 00:15:58,880 Speaker 2: thanks so much once again, and for give us a 320 00:15:58,920 --> 00:16:01,520 Speaker 2: few minutes of your time. George fur He's a senior aerospace, 321 00:16:01,600 --> 00:16:04,160 Speaker 2: defense and airlines animals for Bloomberg Intelligence. He's been our 322 00:16:04,240 --> 00:16:07,400 Speaker 2: go to voice here on really the last several years 323 00:16:07,440 --> 00:16:10,040 Speaker 2: on Boeing when they've had these you know, really serious 324 00:16:10,600 --> 00:16:13,640 Speaker 2: safety issues and doors you know, flying off airplanes and 325 00:16:13,720 --> 00:16:16,440 Speaker 2: things like that, cracks in the wings, and so they 326 00:16:16,520 --> 00:16:18,440 Speaker 2: really need to, obviously, as they've been saying for a 327 00:16:18,480 --> 00:16:22,040 Speaker 2: long time, get that focus back on quality. But now 328 00:16:22,080 --> 00:16:24,400 Speaker 2: they've got the I guess the shorter term issue of 329 00:16:24,760 --> 00:16:27,880 Speaker 2: managing this strike here, which again is well, I guess 330 00:16:27,920 --> 00:16:30,280 Speaker 2: into its fifth week right now. So they will have 331 00:16:30,400 --> 00:16:34,280 Speaker 2: a critical vote the machinists tonight. Will they support what 332 00:16:34,360 --> 00:16:37,440 Speaker 2: their union leadership has agreed to with the company and 333 00:16:37,680 --> 00:16:40,880 Speaker 2: end their strike. So again a key key vote today 334 00:16:41,160 --> 00:16:43,800 Speaker 2: for the striking workers and for the company, and for 335 00:16:43,920 --> 00:16:45,800 Speaker 2: the industry. And you think about all the supply chains 336 00:16:46,240 --> 00:16:49,520 Speaker 2: that fall back from Boeing, all the suppliers that supply Boeing, 337 00:16:49,760 --> 00:16:52,200 Speaker 2: they're pretty much on standby waiting for this thing. So 338 00:16:52,360 --> 00:16:54,440 Speaker 2: it just affects a lot more people and a lot 339 00:16:54,480 --> 00:16:57,480 Speaker 2: more companies than just Boeing. So keep an eye on that, 340 00:16:57,520 --> 00:17:00,000 Speaker 2: and that'll be breaking news tonight in Bloomberg. Will certain 341 00:17:00,080 --> 00:17:01,080 Speaker 2: they cover that as well. 342 00:17:02,560 --> 00:17:06,400 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 343 00:17:06,560 --> 00:17:09,520 Speaker 1: weekdays at ten am Eastern on applecar. 344 00:17:09,080 --> 00:17:11,800 Speaker 3: Play and Android Otto with the Bloomberg Business app. 345 00:17:11,960 --> 00:17:14,760 Speaker 1: You can also listen live on Amazon Alexa from our 346 00:17:14,840 --> 00:17:19,200 Speaker 1: flagship New York station, Just say Alexa Play Bloomberg eleven thirty. 347 00:17:20,560 --> 00:17:22,520 Speaker 2: Let's talk about the market. Chare Carol Pepper joined his 348 00:17:22,560 --> 00:17:25,040 Speaker 2: founder and CEO of Pepper International, Carol, A lot of 349 00:17:25,080 --> 00:17:28,480 Speaker 2: folks have been climbing this wall of worry about the stocks. 350 00:17:28,520 --> 00:17:30,200 Speaker 2: Book get the S and p F twenty two percent 351 00:17:30,400 --> 00:17:33,080 Speaker 2: this year. What are you telling people who are concerned 352 00:17:33,119 --> 00:17:35,560 Speaker 2: that are saying, oh boy, this market's too far over 353 00:17:35,720 --> 00:17:36,240 Speaker 2: its skis. 354 00:17:36,280 --> 00:17:36,880 Speaker 9: What do you tell them? 355 00:17:37,840 --> 00:17:40,080 Speaker 10: I tell them relax, First of all, it's not too 356 00:17:40,160 --> 00:17:41,080 Speaker 10: far over as skis. 357 00:17:41,160 --> 00:17:42,879 Speaker 7: There's a lot of good news in the market. 358 00:17:43,080 --> 00:17:46,040 Speaker 10: And really, as you guys know, I manage money for 359 00:17:46,119 --> 00:17:48,479 Speaker 10: people with over one hundred million dollars, and we're starting 360 00:17:48,520 --> 00:17:52,000 Speaker 10: to plan what should we be doing post election, post 361 00:17:52,080 --> 00:17:54,560 Speaker 10: the next rate cup, because that's really where you want 362 00:17:54,600 --> 00:17:57,760 Speaker 10: to look. Just like Wayne Gretzky said, don't skate to 363 00:17:57,760 --> 00:17:59,720 Speaker 10: where the puck is, skate to where it's going to be. 364 00:18:00,040 --> 00:18:03,119 Speaker 10: So we need to stop being focused on the election 365 00:18:03,359 --> 00:18:06,840 Speaker 10: and terrified whoever wins it will be a fareom free election. 366 00:18:07,160 --> 00:18:09,520 Speaker 7: There will not be another January sixth, I don't believe. 367 00:18:10,080 --> 00:18:11,920 Speaker 10: So that means we really should be focusing on what 368 00:18:12,080 --> 00:18:14,200 Speaker 10: is January twenty five going to look like and what's 369 00:18:14,240 --> 00:18:16,680 Speaker 10: going to happen after the next rate cut, And that's 370 00:18:16,720 --> 00:18:19,160 Speaker 10: all good news. The market is pricing in the fact 371 00:18:19,160 --> 00:18:21,960 Speaker 10: that we will have lower rates, the election will be 372 00:18:22,040 --> 00:18:24,760 Speaker 10: finally out of the way, so whoever's in will know 373 00:18:24,960 --> 00:18:27,400 Speaker 10: how to position ourselves and there will be a relief rally. 374 00:18:27,920 --> 00:18:30,560 Speaker 10: So you want to be looking during these fearful days, 375 00:18:30,600 --> 00:18:32,680 Speaker 10: these worried days, what can I buy that I don't 376 00:18:32,720 --> 00:18:34,879 Speaker 10: have that will do well in the good times, because 377 00:18:35,040 --> 00:18:38,640 Speaker 10: believe me, the good times are coming no matter who wins. 378 00:18:38,760 --> 00:18:41,680 Speaker 10: I think we'll have a really strong first quarter next year. 379 00:18:41,800 --> 00:18:45,040 Speaker 10: And so let's position for that, which to me means growth. 380 00:18:45,200 --> 00:18:48,480 Speaker 10: Let's look at growth again because you know during fear days, 381 00:18:48,560 --> 00:18:51,720 Speaker 10: growth is what goes down. You see the nasdak drifting 382 00:18:51,800 --> 00:18:54,200 Speaker 10: lower when people get scared, and then when people are excited, 383 00:18:54,640 --> 00:18:57,720 Speaker 10: the nasdak shoots up. So when it's down, this is 384 00:18:57,760 --> 00:18:59,399 Speaker 10: the time to look at your portfolio and say what 385 00:18:59,440 --> 00:19:01,360 Speaker 10: am I under invested in? How do I get into 386 00:19:01,440 --> 00:19:04,240 Speaker 10: the strong names that will do well when we're past 387 00:19:04,320 --> 00:19:04,760 Speaker 10: the election? 388 00:19:05,880 --> 00:19:08,320 Speaker 6: So what does growth mean to you? Is that mag 389 00:19:08,440 --> 00:19:12,120 Speaker 6: seven or is that taking on a new I guess definition? 390 00:19:12,200 --> 00:19:12,720 Speaker 2: Do you do? 391 00:19:12,760 --> 00:19:13,200 Speaker 6: You prescribe? 392 00:19:13,320 --> 00:19:16,000 Speaker 7: No, I think it's bag seven. I think it's in video. 393 00:19:16,119 --> 00:19:17,919 Speaker 10: I think it's things that are going to be working 394 00:19:18,240 --> 00:19:21,240 Speaker 10: as we go into the future. So that means artificial intelligence, 395 00:19:21,840 --> 00:19:24,639 Speaker 10: big tech, The big leaders are going to stay strong 396 00:19:24,720 --> 00:19:28,280 Speaker 10: and get stronger. Names like Starbucks will come back, McDonald's 397 00:19:28,320 --> 00:19:31,520 Speaker 10: will recover from this blip of you know, bad onions, 398 00:19:32,200 --> 00:19:36,040 Speaker 10: and so I always say be bet on the big 399 00:19:36,200 --> 00:19:39,160 Speaker 10: growth names because that's really where you're going to see 400 00:19:39,200 --> 00:19:42,240 Speaker 10: the turbo charging when things are going well. And don't 401 00:19:42,320 --> 00:19:45,520 Speaker 10: forget these big AI companies need to have a lot 402 00:19:45,560 --> 00:19:49,480 Speaker 10: of data centers. That's more manufacturing jobs. They need lower 403 00:19:49,560 --> 00:19:50,160 Speaker 10: interest rates. 404 00:19:50,200 --> 00:19:50,879 Speaker 7: Those are coming. 405 00:19:51,040 --> 00:19:53,080 Speaker 10: So that is only even though in video looks like 406 00:19:53,160 --> 00:19:55,920 Speaker 10: a crazy name with over five hundred percent return in 407 00:19:56,000 --> 00:19:59,480 Speaker 10: three years, it's just getting started. Look at the long 408 00:19:59,600 --> 00:20:03,000 Speaker 10: term turns of Microsoft and Amazon and some of the 409 00:20:03,040 --> 00:20:04,920 Speaker 10: big names, how they've done over twenty years. 410 00:20:04,960 --> 00:20:06,480 Speaker 7: And you'll be very glad if you put some of 411 00:20:06,560 --> 00:20:10,160 Speaker 7: these new big names in your portfolio and just close your. 412 00:20:10,119 --> 00:20:12,280 Speaker 10: Eyes, put the man on a fair day and leave 413 00:20:12,359 --> 00:20:14,560 Speaker 10: them there and say, you know what, ten years from now, I'll. 414 00:20:14,400 --> 00:20:15,600 Speaker 7: Thank myself that I did that. 415 00:20:16,560 --> 00:20:19,360 Speaker 2: You also, so you have been consistent on your Nvidia 416 00:20:19,480 --> 00:20:21,720 Speaker 2: call there for sure. Now you're talking to us a 417 00:20:21,720 --> 00:20:24,040 Speaker 2: little bit about energy names, and I've looked at you know, 418 00:20:24,119 --> 00:20:26,360 Speaker 2: we've seen WTA, cud oil just over the last several 419 00:20:26,400 --> 00:20:29,440 Speaker 2: weeks really be volatile with some of the escalation intentions 420 00:20:29,440 --> 00:20:31,560 Speaker 2: in the Middle East. What's your energy call here? 421 00:20:32,400 --> 00:20:35,400 Speaker 10: Yeah, I really think that energy is going to stay 422 00:20:35,440 --> 00:20:37,840 Speaker 10: below one hundred, but stay above fifty. I really think 423 00:20:37,880 --> 00:20:39,320 Speaker 10: we're going to be in that band for quite a 424 00:20:39,359 --> 00:20:42,320 Speaker 10: long time, and you know I do. I'm a great 425 00:20:42,400 --> 00:20:44,840 Speaker 10: believer in renewable energy. I'm a great believer in the 426 00:20:44,920 --> 00:20:46,760 Speaker 10: new carbon markets that are going to get started. That 427 00:20:46,800 --> 00:20:48,600 Speaker 10: will be a whole new asset class that we can 428 00:20:48,680 --> 00:20:52,000 Speaker 10: talk about next year and in twenty six where we 429 00:20:52,200 --> 00:20:55,320 Speaker 10: are offsetting the emissions from these fossil fuels. But I 430 00:20:55,440 --> 00:20:58,040 Speaker 10: do not believe fossil fuels are going away in any way, 431 00:20:58,160 --> 00:21:00,600 Speaker 10: shape or form. It's just a question of have will 432 00:21:00,600 --> 00:21:03,439 Speaker 10: all the various components of an energy market fit together. 433 00:21:04,119 --> 00:21:06,480 Speaker 10: And for that reason, I think energy should be a 434 00:21:06,600 --> 00:21:08,560 Speaker 10: core part of your portfolio. Will go up and we'll 435 00:21:08,560 --> 00:21:10,000 Speaker 10: go down, but it's going to stay in a band 436 00:21:10,400 --> 00:21:12,560 Speaker 10: certainly for the next ten years, and it's a great 437 00:21:12,600 --> 00:21:16,280 Speaker 10: dividend payer generally. So again, stick with the big names, 438 00:21:16,800 --> 00:21:19,040 Speaker 10: stick with the exxons and groups that are going to 439 00:21:19,119 --> 00:21:21,560 Speaker 10: do well. And frankly, a lot of those companies are 440 00:21:21,800 --> 00:21:26,680 Speaker 10: very committed to renewable energies, fossil fuels, offsetting their carbon footprint. 441 00:21:26,760 --> 00:21:29,040 Speaker 7: They really have massive departments now who are doing that. 442 00:21:29,240 --> 00:21:31,639 Speaker 7: That is not a conspiracy theory, that is a fact. 443 00:21:32,359 --> 00:21:34,640 Speaker 7: And so for this reason, I think even for any 444 00:21:34,720 --> 00:21:37,320 Speaker 7: ethical investors. It's an important part of your portfolio. 445 00:21:37,960 --> 00:21:41,640 Speaker 6: Carol. How dependent is your bull thesis that you've laid 446 00:21:41,680 --> 00:21:45,640 Speaker 6: out here on more rate cuts from the FED? Because 447 00:21:45,640 --> 00:21:49,399 Speaker 6: we've seen traders kind of pair back the level of 448 00:21:49,800 --> 00:21:51,640 Speaker 6: I I guess the number of rate cuts that we're 449 00:21:51,680 --> 00:21:55,080 Speaker 6: going to see this year potentially next year. How many 450 00:21:55,160 --> 00:21:57,800 Speaker 6: rate cuts does your bull thesis need. 451 00:21:58,840 --> 00:22:01,560 Speaker 10: I don't think the number actually important. I think it's 452 00:22:01,640 --> 00:22:04,280 Speaker 10: the trend and the trajectory. So is it four cuts 453 00:22:04,320 --> 00:22:06,800 Speaker 10: over the next year or two? Is it three cuts? 454 00:22:07,440 --> 00:22:09,800 Speaker 10: It will be fewer cuts if the market is strong, 455 00:22:09,960 --> 00:22:11,800 Speaker 10: it will be more cuts if the market is weak. 456 00:22:12,000 --> 00:22:14,200 Speaker 10: And where those numbers will turn out are up to 457 00:22:14,280 --> 00:22:17,280 Speaker 10: the FED. Frankly, nothing that we can really project. But 458 00:22:17,400 --> 00:22:19,240 Speaker 10: I don't see a situation where they're going to start 459 00:22:19,280 --> 00:22:21,600 Speaker 10: raising interest rates, certainly because I think they did a 460 00:22:21,680 --> 00:22:23,720 Speaker 10: great job of getting us a soft landing that we 461 00:22:23,840 --> 00:22:26,320 Speaker 10: need in I think we're getting that soft landing, and 462 00:22:26,400 --> 00:22:30,680 Speaker 10: again technology, we can't discount what technology is doing in 463 00:22:30,800 --> 00:22:34,359 Speaker 10: terms of increasing productivity without increasing costs, but at the 464 00:22:34,440 --> 00:22:37,840 Speaker 10: same time, frankly, allowing for higher wages for the workers. 465 00:22:38,320 --> 00:22:39,920 Speaker 7: I mean, that's a nice sweet spot to be in. 466 00:22:39,960 --> 00:22:42,679 Speaker 10: Where you can raise your wages and have more productivity 467 00:22:42,720 --> 00:22:43,440 Speaker 10: at the same time. 468 00:22:44,080 --> 00:22:45,960 Speaker 7: And I think we're going to see that trend continuing. 469 00:22:46,160 --> 00:22:50,200 Speaker 10: So not really dependent on a particular number of rate cuts, 470 00:22:50,280 --> 00:22:52,880 Speaker 10: because of course, if the FED announced fewer rate cuts 471 00:22:52,920 --> 00:22:55,080 Speaker 10: in the beginning, the market will go down and be 472 00:22:55,160 --> 00:22:56,119 Speaker 10: upset for a week or two. 473 00:22:56,160 --> 00:22:58,240 Speaker 7: But the second there are good earnings coming out and 474 00:22:58,359 --> 00:23:01,320 Speaker 7: we see that the corporations are still drow on, the 475 00:23:01,440 --> 00:23:02,280 Speaker 7: market will come back. 476 00:23:02,760 --> 00:23:04,679 Speaker 2: Hey, Carol, thanks so much for joining us. Always appreciate 477 00:23:04,680 --> 00:23:07,000 Speaker 2: getting a few minutes of your time. Carol Pepper, founder 478 00:23:07,040 --> 00:23:08,639 Speaker 2: and CEO of Pepper intern National. 479 00:23:10,119 --> 00:23:13,960 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 480 00:23:14,080 --> 00:23:16,800 Speaker 1: weekdays at ten am Eastern on Apple car Playing and 481 00:23:16,920 --> 00:23:19,760 Speaker 1: broud Otto with the Bloomberg Business app. Listen on demand 482 00:23:19,840 --> 00:23:23,480 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 483 00:23:25,280 --> 00:23:27,720 Speaker 2: Got Emily Graffeo sitting in for Alex Steel on Paul Sweeney. 484 00:23:27,720 --> 00:23:29,679 Speaker 2: You live here in our Bloomberg and Director Broker Studio 485 00:23:29,680 --> 00:23:32,919 Speaker 2: owners streaming live on YouTube as well, so check us 486 00:23:32,960 --> 00:23:35,040 Speaker 2: out there. We had a deal in the data security 487 00:23:36,040 --> 00:23:39,280 Speaker 2: business a couple of days ago, SOFOS. I think Tomo 488 00:23:39,320 --> 00:23:44,200 Speaker 2: Bravo own Sofos acquiring secure Works in an all cash 489 00:23:44,560 --> 00:23:48,159 Speaker 2: deal values the company secure Works about eight hundred and 490 00:23:48,160 --> 00:23:51,119 Speaker 2: fifty nine million dollars. Secure Works as a publicly traded 491 00:23:51,160 --> 00:23:54,320 Speaker 2: company SCWX is as symbol. We have Wendy Thomas. She 492 00:23:54,480 --> 00:23:57,440 Speaker 2: is the CEO of secure Works. When you talk to 493 00:23:57,520 --> 00:24:01,920 Speaker 2: us about this transaction, why why sell to sofos and 494 00:24:02,200 --> 00:24:04,119 Speaker 2: what's the pro former company look like? 495 00:24:05,520 --> 00:24:08,840 Speaker 11: Yes, good morning, Paul. This is a strategic combination of 496 00:24:08,960 --> 00:24:12,679 Speaker 11: two longtime security market leaders. And so when you think 497 00:24:12,720 --> 00:24:18,399 Speaker 11: about combining are two agnostic, very open platforms, decades of 498 00:24:18,480 --> 00:24:22,359 Speaker 11: cybersecurity experience, and strong brands in the space. This is 499 00:24:22,440 --> 00:24:25,920 Speaker 11: a way to really scale up and defeat the adversary 500 00:24:25,960 --> 00:24:26,399 Speaker 11: at scale. 501 00:24:28,440 --> 00:24:32,320 Speaker 6: What does it say about the current market for cybersecurity 502 00:24:32,400 --> 00:24:36,080 Speaker 6: companies that this acquisition is going through. 503 00:24:38,200 --> 00:24:43,480 Speaker 11: The market is really looking for a single partner for cybersecurity, 504 00:24:43,560 --> 00:24:47,640 Speaker 11: sort of a consolidated platform play that a one organization 505 00:24:47,760 --> 00:24:51,920 Speaker 11: can increasingly address multiple use cases for their security needs, 506 00:24:52,359 --> 00:24:57,960 Speaker 11: from being proactive about vulnerability management to reactive to detection 507 00:24:58,080 --> 00:25:01,639 Speaker 11: and response capabilities, the way to AI powered platforms that 508 00:25:01,720 --> 00:25:04,679 Speaker 11: can predict the next cyber attack, and so the scale 509 00:25:04,760 --> 00:25:07,600 Speaker 11: of R and D required to make that a reality 510 00:25:07,760 --> 00:25:12,560 Speaker 11: for customers is one that requires scale in organizations. So 511 00:25:12,720 --> 00:25:16,960 Speaker 11: to take two cash low positive growing leaders in the 512 00:25:17,000 --> 00:25:19,840 Speaker 11: space and put them together means more scaled R and 513 00:25:19,960 --> 00:25:22,720 Speaker 11: D to be better, faster, stronger for customers. 514 00:25:24,520 --> 00:25:28,560 Speaker 2: All right, So what are your customers doing with cybersecurity 515 00:25:28,920 --> 00:25:31,760 Speaker 2: these days? In terms of they're spending their investment. 516 00:25:34,040 --> 00:25:38,520 Speaker 11: They are increasingly moving from what I would call preventative 517 00:25:38,640 --> 00:25:45,119 Speaker 11: cybersecurity investments to proactive cybersecurity posture and risk management. This 518 00:25:45,320 --> 00:25:49,879 Speaker 11: is all about moving towards increasing prevention and the reason 519 00:25:50,040 --> 00:25:53,400 Speaker 11: is that dwell times of thread actors in an organization's 520 00:25:53,560 --> 00:25:58,600 Speaker 11: environment have gone from months to days to now hours. 521 00:25:59,119 --> 00:26:01,920 Speaker 11: So with the power of an AI powered platform, in 522 00:26:02,160 --> 00:26:06,399 Speaker 11: order to really be able to keep constant visibility about 523 00:26:06,480 --> 00:26:11,439 Speaker 11: potential holes in their attack surface, right, those unlocked doors, 524 00:26:11,480 --> 00:26:14,600 Speaker 11: as I like to talk about, it requires technology to 525 00:26:14,680 --> 00:26:18,440 Speaker 11: do that, technology to detect that someone's rattling that door 526 00:26:18,520 --> 00:26:23,000 Speaker 11: handle and the ability to immediately protect the organization from 527 00:26:23,040 --> 00:26:26,399 Speaker 11: someone getting in and taking those valuable data assets or 528 00:26:27,040 --> 00:26:28,840 Speaker 11: encrypting their systems with ransomware. 529 00:26:29,960 --> 00:26:33,000 Speaker 6: So you're using an AI powered you're an AI powered 530 00:26:33,040 --> 00:26:37,359 Speaker 6: security platform. I'm wondering how difficult it is right now 531 00:26:37,520 --> 00:26:41,600 Speaker 6: to be a company that's using AI when it seems 532 00:26:41,640 --> 00:26:45,600 Speaker 6: like demand is outpacing supply. Is that a challenge for 533 00:26:45,960 --> 00:26:46,399 Speaker 6: you guys. 534 00:26:48,040 --> 00:26:51,000 Speaker 11: Well, if you think about AI, that's a pretty broad category. 535 00:26:51,240 --> 00:26:55,680 Speaker 11: And while you know, natural language processing and generative AI 536 00:26:55,840 --> 00:26:58,240 Speaker 11: is the is the hot topic right now, and it 537 00:26:58,440 --> 00:27:01,960 Speaker 11: has its place in security in terms of things like 538 00:27:02,280 --> 00:27:07,280 Speaker 11: changing cybersecurity detections into readable language of what's going on 539 00:27:07,440 --> 00:27:11,000 Speaker 11: to a business person. We've been using AI for a 540 00:27:11,119 --> 00:27:13,560 Speaker 11: very long time in our platform. We started building it 541 00:27:13,640 --> 00:27:17,880 Speaker 11: in twenty seventeen for things like machine learning, deep learning, 542 00:27:17,960 --> 00:27:21,879 Speaker 11: statistical learning in order to sort through tremendous amounts of 543 00:27:22,040 --> 00:27:25,440 Speaker 11: data and find patterns of behavior that we can match 544 00:27:25,560 --> 00:27:27,560 Speaker 11: to thread actors, the way that they try to come 545 00:27:27,640 --> 00:27:30,640 Speaker 11: into an environment, the software that they use in those 546 00:27:30,720 --> 00:27:33,720 Speaker 11: tactics and techniques, and a platform like that that can 547 00:27:33,800 --> 00:27:36,280 Speaker 11: filter through a lot of data and find those patterns 548 00:27:36,760 --> 00:27:39,600 Speaker 11: is the key to being able to protect an organization. 549 00:27:40,160 --> 00:27:44,080 Speaker 11: So it's home built for both sofas and for secure works. 550 00:27:44,280 --> 00:27:47,480 Speaker 11: Their hub platform and our Tage's platform. It just makes 551 00:27:47,520 --> 00:27:49,000 Speaker 11: a ton of sense to be able to take the 552 00:27:49,080 --> 00:27:50,800 Speaker 11: best of both worlds. And put those together. 553 00:27:51,720 --> 00:27:54,719 Speaker 2: All right, So you and I, Wendy, we first chatted 554 00:27:54,800 --> 00:27:57,159 Speaker 2: back in twenty twenty one. How is your company? How 555 00:27:57,200 --> 00:27:59,480 Speaker 2: has the industry changed over the last several years. 556 00:28:02,160 --> 00:28:04,520 Speaker 11: The industry is, I think, on a path for the 557 00:28:04,560 --> 00:28:08,000 Speaker 11: first and a long time to really consolidate, and that 558 00:28:08,240 --> 00:28:11,000 Speaker 11: is frankly as a result of customer demand to be 559 00:28:11,080 --> 00:28:18,160 Speaker 11: able to run a holistic security program, understand, frankly, quantify 560 00:28:18,280 --> 00:28:22,720 Speaker 11: their risk, demonstrate where they've protected against that risk, and 561 00:28:22,800 --> 00:28:27,719 Speaker 11: then have the accountability around who is attacking their environment 562 00:28:27,800 --> 00:28:29,960 Speaker 11: and how they've protected against it for their boards and 563 00:28:30,040 --> 00:28:34,440 Speaker 11: c suite. It's become a boardroom topic for the last 564 00:28:34,520 --> 00:28:37,360 Speaker 11: couple of years, and so the ability of a security 565 00:28:37,400 --> 00:28:41,560 Speaker 11: professional to elevate sort of a technical pursuit into the 566 00:28:41,680 --> 00:28:44,640 Speaker 11: language of business and risk. It's probably the biggest change 567 00:28:44,680 --> 00:28:46,320 Speaker 11: that I've seen over the last few years. 568 00:28:47,760 --> 00:28:49,800 Speaker 6: I want to zoom out and just talk about the 569 00:28:49,920 --> 00:28:54,040 Speaker 6: cyber industry more broadly and how different corporations should be 570 00:28:54,160 --> 00:28:59,600 Speaker 6: thinking about the current state of threat to their businesses 571 00:28:59,680 --> 00:29:03,360 Speaker 6: when it comes to cybersecurity. Is are we worse off 572 00:29:03,480 --> 00:29:07,320 Speaker 6: than we were maybe five years ago? As hackers get 573 00:29:07,360 --> 00:29:08,000 Speaker 6: more advanced. 574 00:29:10,000 --> 00:29:13,360 Speaker 11: I would say that the great things about AI that 575 00:29:13,480 --> 00:29:17,880 Speaker 11: have enabled us as businesses or security companies to leverage 576 00:29:17,920 --> 00:29:20,840 Speaker 11: the power of that AI has also represented a certain 577 00:29:20,840 --> 00:29:24,200 Speaker 11: amount of peril in terms of empowering those thread actors 578 00:29:24,240 --> 00:29:28,440 Speaker 11: as well, and whether it's nation states or cyber criminals 579 00:29:28,800 --> 00:29:32,640 Speaker 11: who are involved, their ability to use the same sort 580 00:29:32,680 --> 00:29:37,320 Speaker 11: of natural language processing technologies to make that phishing email 581 00:29:37,480 --> 00:29:40,200 Speaker 11: much more believable. It really does look like it's coming 582 00:29:40,240 --> 00:29:44,520 Speaker 11: from your bank or from a vendor that you use. 583 00:29:45,160 --> 00:29:50,080 Speaker 11: And so the last line of defense, always beyond technology, 584 00:29:50,240 --> 00:29:53,040 Speaker 11: is people and the need for all of us to 585 00:29:53,120 --> 00:29:58,160 Speaker 11: become more educated and just cyber aware is more important 586 00:29:58,200 --> 00:30:01,520 Speaker 11: than ever. So there's always is that human edge that 587 00:30:02,280 --> 00:30:05,400 Speaker 11: can make the difference on top of technology to keep 588 00:30:05,480 --> 00:30:09,120 Speaker 11: us all a little bit safer. When cyber criminals cannot 589 00:30:09,160 --> 00:30:13,560 Speaker 11: make money off of global citizens, then we start to 590 00:30:13,600 --> 00:30:14,920 Speaker 11: break that economic. 591 00:30:14,560 --> 00:30:17,000 Speaker 2: Model, all right, Wendy, thank you so much for joining us. 592 00:30:17,000 --> 00:30:19,720 Speaker 2: Wendy Thomas, she's the CEO of Secure Works. That's a 593 00:30:19,760 --> 00:30:22,680 Speaker 2: public traded company SCWX. Just recently, in the last couple 594 00:30:22,720 --> 00:30:26,000 Speaker 2: of days, agreed to be acquired by private company Sofos 595 00:30:26,880 --> 00:30:28,920 Speaker 2: and a deal for eight dollars and fifty cents per 596 00:30:29,040 --> 00:30:32,000 Speaker 2: sharing cash, which was a pre solid premium to the 597 00:30:32,200 --> 00:30:37,000 Speaker 2: pre deal talk there. And Sophos is owned by the 598 00:30:37,080 --> 00:30:41,000 Speaker 2: private equity firm Toma Bravo, so more consolidation than the 599 00:30:41,160 --> 00:30:44,080 Speaker 2: data security business. That seems like an area that is 600 00:30:44,200 --> 00:30:47,200 Speaker 2: just going to get significant investment for as far as 601 00:30:47,400 --> 00:30:49,880 Speaker 2: I can see, because I mean, you have to continue to, 602 00:30:50,160 --> 00:30:53,280 Speaker 2: I think invest in cybersecurity because as you mentioned, Emily, 603 00:30:53,400 --> 00:30:56,840 Speaker 2: the you know, the state actors, the private actors are 604 00:30:56,880 --> 00:30:59,400 Speaker 2: just getting smarter and smarter and more and more aggressive. 605 00:30:59,440 --> 00:31:01,800 Speaker 6: Exactly you imagine the threat just gets worse. 606 00:31:01,960 --> 00:31:07,239 Speaker 1: Yep, you're listening to the Bloomberg Intelligence podcast. Catch us 607 00:31:07,320 --> 00:31:10,560 Speaker 1: live weekdays at ten am Eastern on applecar Play and 608 00:31:10,720 --> 00:31:13,600 Speaker 1: androyd Otto with the Bloomberg Business App. You can also 609 00:31:13,720 --> 00:31:16,880 Speaker 1: listen live on Amazon Alexa from our flagship New York 610 00:31:16,920 --> 00:31:20,320 Speaker 1: station Just Say Alexa playing Bloomberg eleven thirty. 611 00:31:21,880 --> 00:31:23,560 Speaker 2: Let's get a sense of what's happening with these markets, 612 00:31:23,640 --> 00:31:26,040 Speaker 2: John just reporting we have a sell off in place 613 00:31:26,160 --> 00:31:28,920 Speaker 2: here today, but otherwise we are at or near all 614 00:31:29,000 --> 00:31:32,160 Speaker 2: time highs for these markets right smack in the middle 615 00:31:32,160 --> 00:31:34,680 Speaker 2: of earning. So it looks like people feel pretty decent 616 00:31:34,720 --> 00:31:37,000 Speaker 2: about the earnings that are coming about. Let's check in 617 00:31:37,080 --> 00:31:40,120 Speaker 2: with somebody who does this stuff for a living. Loreen Gilbert, 618 00:31:40,360 --> 00:31:44,080 Speaker 2: CEO of wealth Wise Financial, joins us via Dallas via 619 00:31:44,160 --> 00:31:46,880 Speaker 2: zoom from Dallas, Texas. Laurene, thanks so much for joining 620 00:31:46,960 --> 00:31:50,000 Speaker 2: us here. How do you What are the discussions you're 621 00:31:50,040 --> 00:31:53,440 Speaker 2: having with your clients these days? As they had a 622 00:31:53,520 --> 00:31:56,440 Speaker 2: pretty good twenty twenty four a year to date both 623 00:31:56,480 --> 00:31:58,440 Speaker 2: in stocks and even bonds are giving you some some 624 00:31:58,560 --> 00:32:01,120 Speaker 2: pretty solid returns. What's the conversation like these days. 625 00:32:02,920 --> 00:32:05,000 Speaker 12: Well, it has been a really good year, and what's 626 00:32:05,080 --> 00:32:08,680 Speaker 12: on everybody's mind is the upcoming election, and it's interesting 627 00:32:08,760 --> 00:32:12,240 Speaker 12: to see how many people are holding this weight and 628 00:32:12,400 --> 00:32:16,400 Speaker 12: see mentality on what to do with big life decisions, 629 00:32:16,440 --> 00:32:19,160 Speaker 12: whether it's buying a house or making a move with 630 00:32:19,320 --> 00:32:22,200 Speaker 12: a business. A lot of people are just playing wait 631 00:32:22,240 --> 00:32:25,479 Speaker 12: and see. So the talk has been how will election 632 00:32:25,960 --> 00:32:30,800 Speaker 12: this election affect my portfolio? And to that question, we 633 00:32:31,000 --> 00:32:36,120 Speaker 12: say there shouldn't be a lot of allocation changes based 634 00:32:36,280 --> 00:32:39,840 Speaker 12: on the general election because we already know that this 635 00:32:40,080 --> 00:32:42,360 Speaker 12: year is a positive year for the market, so we 636 00:32:42,440 --> 00:32:44,880 Speaker 12: don't expect that to change. It's been a fantastic year 637 00:32:44,920 --> 00:32:47,400 Speaker 12: across the board, and so the real question is what 638 00:32:47,600 --> 00:32:51,040 Speaker 12: happens next year, and to that we look to Congress. 639 00:32:51,560 --> 00:32:54,400 Speaker 12: So more important for the markets would be what kind 640 00:32:54,440 --> 00:32:57,760 Speaker 12: of legislation could be enacted in Congress, So who controls 641 00:32:57,800 --> 00:33:01,280 Speaker 12: Congress could have an outcome as to what happens on 642 00:33:01,480 --> 00:33:05,880 Speaker 12: corporate tax rates, on individual tax rates, on regulations. So 643 00:33:06,080 --> 00:33:07,680 Speaker 12: all those things are of concern to people. 644 00:33:08,760 --> 00:33:11,520 Speaker 6: When you think about where we are right now in 645 00:33:11,840 --> 00:33:15,960 Speaker 6: the business and economic cycle and markets, is there still 646 00:33:16,120 --> 00:33:19,840 Speaker 6: room for this bull market to run? We just had 647 00:33:20,280 --> 00:33:23,680 Speaker 6: six straight weeks of S and P five hundred gains. 648 00:33:23,720 --> 00:33:27,440 Speaker 6: That was the best winning streak for the index all year. 649 00:33:28,240 --> 00:33:31,320 Speaker 6: Where are we are We still early? Are we mid cycle? 650 00:33:31,400 --> 00:33:31,880 Speaker 6: What do you think? 651 00:33:33,160 --> 00:33:36,880 Speaker 12: Well, we're in a light cycle, there's no doubt. But 652 00:33:36,960 --> 00:33:39,800 Speaker 12: this rally now is two years really in the making. 653 00:33:40,000 --> 00:33:43,400 Speaker 12: And the odds would say, or the history tells us 654 00:33:43,480 --> 00:33:46,600 Speaker 12: in the markets that there is still room for this 655 00:33:46,880 --> 00:33:49,720 Speaker 12: market to run. So where of the opinion that the 656 00:33:49,800 --> 00:33:52,560 Speaker 12: market continues to run that we'll see right now we're 657 00:33:52,560 --> 00:33:53,960 Speaker 12: seeing a pause in the market. A lot of that 658 00:33:54,120 --> 00:33:58,040 Speaker 12: is profit taking from stock So even you know, looking 659 00:33:58,360 --> 00:34:01,960 Speaker 12: this morning at next stare that report and beat on 660 00:34:02,040 --> 00:34:04,520 Speaker 12: earnings missed a little bit on revenue, but at the 661 00:34:04,600 --> 00:34:07,760 Speaker 12: end of the day is still flat on the price, 662 00:34:07,840 --> 00:34:11,320 Speaker 12: and so there's been definite profit taking. Coca Cola is 663 00:34:11,320 --> 00:34:14,399 Speaker 12: another example of reporting and then the stock going down. 664 00:34:14,520 --> 00:34:17,760 Speaker 12: So I think what we're seeing is some profit taking 665 00:34:17,880 --> 00:34:21,600 Speaker 12: before your end a pause. And yet I will say, 666 00:34:22,120 --> 00:34:25,120 Speaker 12: we think there is definitely room to run. And fourth 667 00:34:25,239 --> 00:34:29,759 Speaker 12: quarter expectations for earnings are very robout. So while third 668 00:34:29,840 --> 00:34:32,759 Speaker 12: quarter is somewhat muted on your over year earnings, fourth 669 00:34:32,840 --> 00:34:34,680 Speaker 12: quarter we're expecting quite a bit. 670 00:34:36,160 --> 00:34:38,040 Speaker 2: Lauren, I kind of grew up in the age of 671 00:34:38,080 --> 00:34:40,759 Speaker 2: the sixty forty portfolio, but I know that's kind of 672 00:34:40,800 --> 00:34:43,319 Speaker 2: a thing of the past that in fact, a lot 673 00:34:43,440 --> 00:34:47,160 Speaker 2: of not just institutional investors, but retail investors like they 674 00:34:47,200 --> 00:34:50,640 Speaker 2: have some alternatives in their portfolio, whether that's you know, 675 00:34:50,960 --> 00:34:54,600 Speaker 2: hedge funds, private equity, private credit. How does that conversation 676 00:34:54,760 --> 00:34:56,000 Speaker 2: go with you and your clients. 677 00:34:57,560 --> 00:35:00,320 Speaker 12: Alternatives definitely have a place in a space, and it 678 00:35:00,400 --> 00:35:04,040 Speaker 12: all depends on the liquidity of the client and their 679 00:35:04,120 --> 00:35:09,800 Speaker 12: risk tolerance. Definitely, equities, you know, public equities, there's nothing 680 00:35:09,880 --> 00:35:13,040 Speaker 12: that can replace that because of liquidity and long term 681 00:35:13,520 --> 00:35:16,480 Speaker 12: growth as well as dividend income, So your equities have 682 00:35:16,520 --> 00:35:19,200 Speaker 12: a place right now. We were talking about bonds have 683 00:35:19,360 --> 00:35:21,600 Speaker 12: done very well, and the expectation is over the next 684 00:35:21,680 --> 00:35:24,920 Speaker 12: five years we see the bond market being very robust 685 00:35:25,040 --> 00:35:27,320 Speaker 12: as rates come down, and that trend will be our friend, 686 00:35:27,760 --> 00:35:31,080 Speaker 12: so that we'll see long term you know what I 687 00:35:31,160 --> 00:35:34,360 Speaker 12: mean is three years to five years some robust returns 688 00:35:34,400 --> 00:35:38,360 Speaker 12: on fixed income, So we can't negate that or neglect it, 689 00:35:38,920 --> 00:35:42,120 Speaker 12: and so then you are left with alternatives as well. 690 00:35:42,160 --> 00:35:45,480 Speaker 12: And what alternatives can do is diversify a portfolio. There 691 00:35:45,480 --> 00:35:48,520 Speaker 12: are liquid alternatives and they're non liquid alternatives, so making 692 00:35:48,600 --> 00:35:51,520 Speaker 12: sure you're using probably a combination of both of those, 693 00:35:52,000 --> 00:35:57,960 Speaker 12: whether it's hedging a portfolio looking to commodities are considered 694 00:35:58,000 --> 00:36:02,399 Speaker 12: in a sense an alternative looking at private equity as 695 00:36:02,440 --> 00:36:05,080 Speaker 12: a long term hold. So there's lots of different avenues 696 00:36:05,120 --> 00:36:10,560 Speaker 12: and ways to play at macro looking at macro elements too, 697 00:36:10,680 --> 00:36:13,640 Speaker 12: so lots of ways to play alternatives, and we believe 698 00:36:13,680 --> 00:36:18,320 Speaker 12: in that we've got double digit allocation in alternatives in 699 00:36:18,400 --> 00:36:19,080 Speaker 12: our portfolio. 700 00:36:20,600 --> 00:36:24,520 Speaker 6: I know you had mentioned that the election not really 701 00:36:25,320 --> 00:36:28,719 Speaker 6: kind of a longer term concern for investors, especially those 702 00:36:28,760 --> 00:36:33,279 Speaker 6: who have maybe a longer time horizon than traders. So 703 00:36:33,400 --> 00:36:35,960 Speaker 6: when you do think about maybe the next year ahead, 704 00:36:36,200 --> 00:36:40,760 Speaker 6: what are the risks to the market and your outlook. 705 00:36:41,760 --> 00:36:45,360 Speaker 12: Yeah, so it really is there is a risk. The 706 00:36:45,520 --> 00:36:49,040 Speaker 12: risk is we go into recession, and looking at history 707 00:36:49,760 --> 00:36:52,560 Speaker 12: during a rate cut cycle, most of the time that's 708 00:36:52,640 --> 00:36:55,920 Speaker 12: very positive for equity markets. And the reason it's positive 709 00:36:56,160 --> 00:36:58,440 Speaker 12: is if you can go into a rate cut cycle 710 00:36:58,560 --> 00:37:02,359 Speaker 12: and avoid a recession, then the markets do quite well 711 00:37:02,400 --> 00:37:07,239 Speaker 12: and have double digit returns. If the rate cut then 712 00:37:07,320 --> 00:37:10,279 Speaker 12: we go into a recession, then we're going to see 713 00:37:10,400 --> 00:37:15,040 Speaker 12: negatives on stock market prices, no doubt. Now, we believe 714 00:37:15,400 --> 00:37:20,480 Speaker 12: that we're going to still see continued growth in the economy. 715 00:37:20,920 --> 00:37:23,800 Speaker 12: We don't see this economy even though the leading economic 716 00:37:23,880 --> 00:37:26,480 Speaker 12: indicators we're seeing going down, we don't think that that 717 00:37:26,640 --> 00:37:30,400 Speaker 12: means we're huating right now into a recession. So if 718 00:37:30,440 --> 00:37:33,600 Speaker 12: we can avoid a recession, we see the stock market 719 00:37:34,000 --> 00:37:36,799 Speaker 12: doing quite well in twenty twenty five. So right now, 720 00:37:36,840 --> 00:37:39,520 Speaker 12: our base case is that there's not a recession, that 721 00:37:39,640 --> 00:37:43,600 Speaker 12: Pharaohserve continues low rates, and that the market will continue 722 00:37:43,600 --> 00:37:44,000 Speaker 12: to rally. 723 00:37:44,800 --> 00:37:46,560 Speaker 2: All right, Lauren, thank you so much for joining us. 724 00:37:46,600 --> 00:37:50,200 Speaker 2: Loreen Gilbert she's the CEO of wealth Wise Financial. Joining 725 00:37:50,280 --> 00:37:52,239 Speaker 2: us fro Dallas, Texas via that zoom thing. 726 00:37:53,840 --> 00:37:57,680 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 727 00:37:57,800 --> 00:38:00,480 Speaker 1: weekdays at ten am Eastern on Apple card. 728 00:38:00,360 --> 00:38:02,880 Speaker 3: Play and Android Otto with the Bloomberg. 729 00:38:02,480 --> 00:38:05,640 Speaker 1: Business at You can also listen live on Amazon Alexa 730 00:38:05,760 --> 00:38:09,040 Speaker 1: from our flagship New York station, Just say Alexa play 731 00:38:09,160 --> 00:38:10,440 Speaker 1: Bloomberg eleven thirty. 732 00:38:12,560 --> 00:38:18,000 Speaker 2: Sometimes a headline gets your attention, boy, this one does. Crackskull, 733 00:38:18,560 --> 00:38:21,960 Speaker 2: fractured bones, show danger at Rivian's factory. That draws you 734 00:38:22,160 --> 00:38:23,360 Speaker 2: right in. So I want to get right to the 735 00:38:23,440 --> 00:38:26,279 Speaker 2: reporter on this story. It's a big take story. We 736 00:38:26,360 --> 00:38:30,000 Speaker 2: love the big takes stories, really cool stories, deeply deeply reported, 737 00:38:30,080 --> 00:38:32,840 Speaker 2: resourced and sourced, I mean, and great graphics, all the 738 00:38:32,920 --> 00:38:34,359 Speaker 2: kind of good stuff. So it makes sure good long 739 00:38:34,440 --> 00:38:38,640 Speaker 2: form journalism. Kyle Porter joins US Industrials reporter for Bloomberg News. 740 00:38:39,000 --> 00:38:41,560 Speaker 2: Kyle talk to us about Rivian. I mean, I remember 741 00:38:41,640 --> 00:38:46,080 Speaker 2: talking to Bloomberg Intelligence analysts years ago and they say, Hey, 742 00:38:46,120 --> 00:38:49,520 Speaker 2: the technology of evs, that's one thing, but at some 743 00:38:49,600 --> 00:38:52,279 Speaker 2: point they got to go start bending some metal. That's 744 00:38:52,320 --> 00:38:55,919 Speaker 2: another whole thing, you know, entirely, and these companies don't 745 00:38:55,920 --> 00:38:58,480 Speaker 2: have any experience in it. What did you find at Rivian. 746 00:38:59,880 --> 00:39:03,200 Speaker 9: The kind of really struggling to build a safety culture 747 00:39:03,239 --> 00:39:05,880 Speaker 9: that they can be proud of. In short, there's been 748 00:39:06,040 --> 00:39:09,320 Speaker 9: numerous incidents, some of which you start that in the headline, 749 00:39:09,680 --> 00:39:11,719 Speaker 9: others which we didn't put into the story, or this 750 00:39:11,800 --> 00:39:14,160 Speaker 9: which I haven't been investigated by OSHA. If you talk 751 00:39:14,200 --> 00:39:15,000 Speaker 9: to people out. 752 00:39:14,880 --> 00:39:17,600 Speaker 4: There in normal Illinois, a lot of them. 753 00:39:17,520 --> 00:39:19,439 Speaker 9: Go to work every day because it's the best paid 754 00:39:19,640 --> 00:39:21,839 Speaker 9: employer in the region, but they don't feel safe. 755 00:39:24,360 --> 00:39:26,719 Speaker 2: So I mean, again, they only have one plant here. 756 00:39:27,480 --> 00:39:30,200 Speaker 2: I'm wondering how did Rivian, Like if I were starting 757 00:39:30,280 --> 00:39:31,759 Speaker 2: up a new hot Cup and I'd just go over 758 00:39:31,800 --> 00:39:34,200 Speaker 2: to Ford or GM or Stalantis, steal a bunch of 759 00:39:34,239 --> 00:39:36,560 Speaker 2: their factory people and say, hey, guys, start building my 760 00:39:36,680 --> 00:39:39,480 Speaker 2: car here. How did Rivian do it? How is Rivian 761 00:39:39,600 --> 00:39:41,799 Speaker 2: kind of I guess learning on the job if you will. 762 00:39:42,480 --> 00:39:43,520 Speaker 7: Well, Rivian got a deal. 763 00:39:43,800 --> 00:39:48,520 Speaker 9: The original the plan that they have they purchased the 764 00:39:48,800 --> 00:39:52,319 Speaker 9: sixteen million dollars have been abandoned by Mitsubishi when they 765 00:39:52,320 --> 00:39:54,200 Speaker 9: were trying to make an electric car in the US. 766 00:39:54,840 --> 00:39:56,840 Speaker 9: So it's sort of all fell into place. There were 767 00:39:56,880 --> 00:39:58,920 Speaker 9: still workers from the time that it was owned by 768 00:39:58,920 --> 00:40:01,040 Speaker 9: Mitsubishi that could come in work, so they felt that 769 00:40:01,080 --> 00:40:03,279 Speaker 9: they could get some muscle memory. And then at the 770 00:40:03,320 --> 00:40:05,040 Speaker 9: start they you know, it was designed to be a 771 00:40:05,120 --> 00:40:08,359 Speaker 9: very niche carmaker, and then they got the Amazon deal. 772 00:40:08,520 --> 00:40:10,200 Speaker 9: Things exploded and they had to ramp up. 773 00:40:11,520 --> 00:40:15,200 Speaker 2: So what's the company responding, like, how they've kind of 774 00:40:15,280 --> 00:40:17,719 Speaker 2: respond to this and do they have any policies in 775 00:40:17,719 --> 00:40:19,359 Speaker 2: place to try to address this, because I'm just looking 776 00:40:19,400 --> 00:40:22,080 Speaker 2: at another great graph you having a story that just 777 00:40:22,120 --> 00:40:25,520 Speaker 2: shows a number of serious violation sited, and Rube's at 778 00:40:25,560 --> 00:40:26,439 Speaker 2: the top of that list. 779 00:40:27,560 --> 00:40:30,080 Speaker 9: Yes it is, and as you pointed out, it's only 780 00:40:30,200 --> 00:40:32,720 Speaker 9: one factory with eight thousand staff. Most of the companies 781 00:40:32,760 --> 00:40:35,160 Speaker 9: on that list have multiple sites and tens of thousands 782 00:40:35,200 --> 00:40:38,880 Speaker 9: of workers the company, I'm sorry, continued no go. 783 00:40:39,040 --> 00:40:40,320 Speaker 2: So I just want to know kind of how the 784 00:40:40,360 --> 00:40:41,319 Speaker 2: companies responding here. 785 00:40:42,520 --> 00:40:44,040 Speaker 9: They're responded in great detail to us. 786 00:40:44,760 --> 00:40:45,600 Speaker 4: It's fair to say. 787 00:40:46,000 --> 00:40:48,520 Speaker 9: They pointed out that most of the serious citations that 788 00:40:48,600 --> 00:40:51,640 Speaker 9: they were issued were ultimately downgraded or in a couple 789 00:40:51,680 --> 00:40:54,640 Speaker 9: of cases, dismiss which is true of most people that 790 00:40:54,800 --> 00:40:57,680 Speaker 9: go through the citation process, and they pointed this to 791 00:40:57,760 --> 00:41:00,600 Speaker 9: things that they've done to improve their safety process. An indeed, 792 00:41:00,640 --> 00:41:04,000 Speaker 9: Osher itself has commended the company for being open and 793 00:41:04,120 --> 00:41:05,640 Speaker 9: looking to improve its health and safety. 794 00:41:06,920 --> 00:41:11,800 Speaker 2: So is Rivin any materially different than say a Tesla 795 00:41:11,880 --> 00:41:14,840 Speaker 2: factory or you know the other ev makers. 796 00:41:16,440 --> 00:41:20,279 Speaker 9: Well, it currently only builds two types of vehicle. You 797 00:41:20,360 --> 00:41:24,480 Speaker 9: have the Amazon truck and then you have the R one, 798 00:41:24,520 --> 00:41:27,399 Speaker 9: which comes into several bottles. It's an SUV in a truck, 799 00:41:27,520 --> 00:41:29,400 Speaker 9: and they're looking to ramp that up with an expansion 800 00:41:29,440 --> 00:41:33,600 Speaker 9: with the R two next year. So it's smaller. It's 801 00:41:34,280 --> 00:41:35,960 Speaker 9: I think it's aiming to produce now that you actually 802 00:41:36,080 --> 00:41:39,360 Speaker 9: cut their forecast this year about fifty thousand vehicles, so 803 00:41:39,719 --> 00:41:41,200 Speaker 9: the scale of it is much smaller. 804 00:41:42,320 --> 00:41:45,960 Speaker 2: Does Rivian have the money to invest in their plants 805 00:41:46,040 --> 00:41:48,840 Speaker 2: into the safety because well, you look at the stocks 806 00:41:48,880 --> 00:41:51,280 Speaker 2: of some of these companies that are just so volatile, 807 00:41:51,320 --> 00:41:53,480 Speaker 2: and I wonder if they even really have the money 808 00:41:53,680 --> 00:41:55,080 Speaker 2: to invest in safety protocols. 809 00:41:56,600 --> 00:41:58,920 Speaker 9: It's a question to ask the company that they say 810 00:41:58,960 --> 00:42:00,759 Speaker 9: that they have a real commitment to safety and they 811 00:42:00,800 --> 00:42:01,680 Speaker 9: are investing in it. 812 00:42:03,360 --> 00:42:06,640 Speaker 2: Is it is making an evy. I don't know, it 813 00:42:06,719 --> 00:42:09,520 Speaker 2: seems like they're not building an internal combustion engine, so 814 00:42:09,560 --> 00:42:12,160 Speaker 2: they're not actually building an engine, there is it? I 815 00:42:12,200 --> 00:42:14,239 Speaker 2: would think the process is a lot different. Is it 816 00:42:14,320 --> 00:42:17,640 Speaker 2: any more or less dangerous as the industry said versus 817 00:42:17,719 --> 00:42:20,640 Speaker 2: say a you know traditional guess assembly plant. 818 00:42:21,920 --> 00:42:26,400 Speaker 9: Oh, given that you're building this thing from scratch, you know, 819 00:42:26,520 --> 00:42:29,719 Speaker 9: from the engine upwards, there's a lot of process that 820 00:42:29,800 --> 00:42:31,480 Speaker 9: has to be learned. There's a lot of things that 821 00:42:31,600 --> 00:42:33,239 Speaker 9: need to be learned. Indeed, one of the things that 822 00:42:33,560 --> 00:42:38,239 Speaker 9: the company was cited for was a movement vehicle that 823 00:42:38,360 --> 00:42:42,120 Speaker 9: the engineers are designed and you know, wasn't safe for 824 00:42:42,200 --> 00:42:44,320 Speaker 9: employees to use. They were telling employees to be careful 825 00:42:44,440 --> 00:42:46,120 Speaker 9: until I she cited them and they figured out a 826 00:42:46,160 --> 00:42:48,480 Speaker 9: way to do it differently. And you could replicate that 827 00:42:48,600 --> 00:42:51,440 Speaker 9: across a thousand examples, from how you attach the doors 828 00:42:51,840 --> 00:42:52,680 Speaker 9: to how you put. 829 00:42:52,520 --> 00:42:53,000 Speaker 4: The glass in. 830 00:42:53,080 --> 00:42:54,800 Speaker 9: You could go on and on and on, and Ribbean's 831 00:42:54,840 --> 00:42:56,480 Speaker 9: had to work out new and different ways of doing 832 00:42:56,520 --> 00:42:58,960 Speaker 9: all these things for these new bespoke vehicles. 833 00:42:59,719 --> 00:43:02,880 Speaker 2: But the employees, I guess they are. Are they aware 834 00:43:02,920 --> 00:43:04,680 Speaker 2: of the hazards when they take these jobs. 835 00:43:07,800 --> 00:43:11,600 Speaker 9: That's a very good question. It's rapidly becoming a company town. 836 00:43:13,080 --> 00:43:15,239 Speaker 9: Most of the people that we spoke to for the 837 00:43:15,360 --> 00:43:18,400 Speaker 9: story are one of several family members who work at 838 00:43:18,400 --> 00:43:20,759 Speaker 9: the plant. They all talk about how when the plant 839 00:43:20,800 --> 00:43:24,160 Speaker 9: first opened, it was very small, very welcoming. You saw 840 00:43:24,320 --> 00:43:27,239 Speaker 9: members of senior management. It felt like a family. And 841 00:43:27,320 --> 00:43:30,000 Speaker 9: as production as ramptup, that's gone away and there's been 842 00:43:30,040 --> 00:43:33,040 Speaker 9: a pressure just to produce interesting. 843 00:43:33,080 --> 00:43:35,840 Speaker 2: All right, interesting story. Kyle Appreciate a Kyle Porter, industrials 844 00:43:35,840 --> 00:43:37,920 Speaker 2: reporter for Bloomberg News. It's got the Big Take story 845 00:43:39,360 --> 00:43:42,520 Speaker 2: about Rivian and working in their plant in Normal, Ohio, 846 00:43:42,840 --> 00:43:45,759 Speaker 2: some of the safety concerns there. You can read more 847 00:43:45,880 --> 00:43:48,839 Speaker 2: of this story on the Bloomberg and at bloomberg dot 848 00:43:48,920 --> 00:43:52,360 Speaker 2: com slash Big Take. Looking at the stock of Rivian, 849 00:43:52,560 --> 00:43:56,120 Speaker 2: it's down about two percent today, it's down fifty six 850 00:43:56,320 --> 00:43:58,880 Speaker 2: percent year to date. It's got a market cap of 851 00:43:59,000 --> 00:44:01,440 Speaker 2: ten point three billion, so again reflecting some of the 852 00:44:01,520 --> 00:44:05,040 Speaker 2: challenges of starting up some of these ev companies and 853 00:44:05,120 --> 00:44:08,360 Speaker 2: the volatility around kind of the adoption of electric vehicles, 854 00:44:08,360 --> 00:44:10,560 Speaker 2: which is really still i think pretty uncertain as to 855 00:44:10,719 --> 00:44:13,160 Speaker 2: where the ultimate demand is for electric vehicles. We're seeing 856 00:44:13,200 --> 00:44:17,000 Speaker 2: that in some different demand numbers we see out of 857 00:44:17,040 --> 00:44:17,800 Speaker 2: some of these companies. 858 00:44:18,120 --> 00:44:22,600 Speaker 1: This is the Bloomberg Intelligence Podcast, available on apples, Spotify, 859 00:44:22,840 --> 00:44:26,480 Speaker 1: and anywhere else you get your podcasts. 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