1 00:00:02,960 --> 00:00:12,600 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Intelligence 2 00:00:12,680 --> 00:00:14,400 Speaker 1: with Alex Steel and Paul'sweeny. 3 00:00:14,520 --> 00:00:17,720 Speaker 2: The real app performance has been the US corporate high yield. 4 00:00:17,920 --> 00:00:20,280 Speaker 3: Are the companies lean enough? Have they trimmed all the fats? 5 00:00:20,320 --> 00:00:24,119 Speaker 2: The semiconductor business is a really cyclical business. 6 00:00:23,640 --> 00:00:27,200 Speaker 1: Breaking market headlines and corporate news from across the globe. 7 00:00:27,280 --> 00:00:29,920 Speaker 3: Do investors like the M and A that we've seen? 8 00:00:30,120 --> 00:00:31,080 Speaker 4: These are two. 9 00:00:31,040 --> 00:00:33,159 Speaker 2: Big time blue chip companies. 10 00:00:33,320 --> 00:00:36,920 Speaker 3: The window between the peak and cut changing super fast. 11 00:00:37,120 --> 00:00:42,040 Speaker 1: Bloomberg Intelligence with Alex Steel and Paul'sweeny on Bloomberg Radio. 12 00:00:43,080 --> 00:00:45,319 Speaker 2: On Today's Boomberg Intelligence Show, we dig inside the big 13 00:00:45,360 --> 00:00:48,000 Speaker 2: business stories impacting Wall Street and the global markets. Each 14 00:00:48,040 --> 00:00:50,080 Speaker 2: and every week we provide in depth research and data 15 00:00:50,080 --> 00:00:51,840 Speaker 2: on some of the two thousand companies and one hundred 16 00:00:51,880 --> 00:00:54,880 Speaker 2: and thirty industries our analysts cover worldwide. Today, well look 17 00:00:54,880 --> 00:00:57,640 Speaker 2: at why sales at the sportswork company Nike are declining. 18 00:00:57,960 --> 00:01:00,880 Speaker 2: Plus we'll discuss how the Inflation Reduction Act is impacting 19 00:01:00,920 --> 00:01:03,760 Speaker 2: the energy sector. But first we begin in the M 20 00:01:03,800 --> 00:01:06,560 Speaker 2: and A space. DirecTV and Dish have agreed to combine 21 00:01:06,560 --> 00:01:09,240 Speaker 2: in a deal that would create the biggest PayTV provider 22 00:01:09,280 --> 00:01:12,480 Speaker 2: in the US. That one included about eighteen million subscribers. 23 00:01:12,720 --> 00:01:15,760 Speaker 2: Under the terms of the transaction, DirecTV will acquire Dish 24 00:01:15,840 --> 00:01:19,160 Speaker 2: TV and Sling TV from EchoStar, and DirecTV would assume 25 00:01:19,200 --> 00:01:22,319 Speaker 2: about nine point seventy five billion dollars of Dish's debt. 26 00:01:22,480 --> 00:01:25,800 Speaker 2: The deal is contingent upon regulatory approvals and bondholders writing 27 00:01:25,800 --> 00:01:28,480 Speaker 2: off nearly one point six billion dollars in debt related 28 00:01:28,520 --> 00:01:30,600 Speaker 2: to Dish. Co host Alex Steel and I were joined 29 00:01:30,600 --> 00:01:33,520 Speaker 2: by Githa Rong Andathan Bloomberg, intelligence analyst on the US 30 00:01:33,560 --> 00:01:37,120 Speaker 2: media space. We first asked, getha, what's driving this deal? 31 00:01:37,560 --> 00:01:41,200 Speaker 4: What's really driving this deal is desperate times kind of 32 00:01:41,200 --> 00:01:45,880 Speaker 4: call for desperate measures, Paul, So, satellite TV has steadily 33 00:01:46,440 --> 00:01:49,320 Speaker 4: seen an erosion of its subscriber base. I mean, at 34 00:01:49,360 --> 00:01:52,400 Speaker 4: one point it was the only other game in town, 35 00:01:52,520 --> 00:01:55,160 Speaker 4: along with cable TV, for people to get access to 36 00:01:55,240 --> 00:01:59,400 Speaker 4: different PATV packages. Today the world is a completely different place. 37 00:01:59,440 --> 00:02:01,680 Speaker 4: I mean, you have cable, you have satellite, which is 38 00:02:01,720 --> 00:02:05,040 Speaker 4: of course the traditional facilities based operators, but then you 39 00:02:05,160 --> 00:02:10,440 Speaker 4: also have a whole slew of new Internet based options. 40 00:02:10,480 --> 00:02:12,960 Speaker 4: Whether you know it's a YouTube TV, which gives you 41 00:02:13,000 --> 00:02:15,720 Speaker 4: all of the linear TV options, or whether it's like 42 00:02:16,040 --> 00:02:19,799 Speaker 4: completely different what are known as sphalts services subscription video 43 00:02:19,800 --> 00:02:22,440 Speaker 4: on demand services like an Amazon Prime or Netflix, and 44 00:02:22,480 --> 00:02:24,760 Speaker 4: so the world today is completely different. And because of this, 45 00:02:25,080 --> 00:02:28,200 Speaker 4: satellite TV has has seen a huge, huge erosion of 46 00:02:28,200 --> 00:02:31,919 Speaker 4: its subscriber based dish and direct TV. Once upon a time, 47 00:02:32,240 --> 00:02:34,919 Speaker 4: you know, they were some of the largest PATV operators. 48 00:02:34,960 --> 00:02:38,720 Speaker 4: They've lost about sixty three percent of their satellite subscriber 49 00:02:38,760 --> 00:02:40,520 Speaker 4: base just over the past seven years. 50 00:02:40,960 --> 00:02:45,400 Speaker 3: That's unbelievable. Did two wrongs then make a right slash? 51 00:02:45,600 --> 00:02:46,919 Speaker 3: Will regulators like it? 52 00:02:48,160 --> 00:02:52,360 Speaker 4: So regulators of course squashed this deal back you know, 53 00:02:52,360 --> 00:02:54,640 Speaker 4: about twenty years ago, but then again, it was a 54 00:02:54,680 --> 00:02:58,920 Speaker 4: completely different landscape. They have to kind of understand that 55 00:02:59,040 --> 00:03:01,079 Speaker 4: things have completely each change today. One of the main 56 00:03:01,200 --> 00:03:03,919 Speaker 4: appealing points of satellite TV, why people even taken in 57 00:03:03,960 --> 00:03:06,440 Speaker 4: the first place, is because in a lot of areas 58 00:03:06,440 --> 00:03:09,120 Speaker 4: in rural America, this is the only way that you 59 00:03:09,120 --> 00:03:11,880 Speaker 4: can get access to PATV. But things have been changing 60 00:03:11,919 --> 00:03:15,400 Speaker 4: because you know, we've had this whole initiative to narrow 61 00:03:15,480 --> 00:03:19,120 Speaker 4: the digital divide, So more and more houses in rural 62 00:03:19,200 --> 00:03:22,280 Speaker 4: America are getting wired up and with that they now 63 00:03:22,320 --> 00:03:26,480 Speaker 4: have the option to switch to Internet based TV, which 64 00:03:26,520 --> 00:03:28,880 Speaker 4: is you know, exactly what Distion direct Tv are saying. 65 00:03:28,880 --> 00:03:31,080 Speaker 4: This is the reason why they've lost subscribers. So this 66 00:03:31,160 --> 00:03:33,600 Speaker 4: is the reason why there is more competition, and therefore 67 00:03:33,960 --> 00:03:36,240 Speaker 4: regulators should allow the deal to pass. 68 00:03:36,520 --> 00:03:39,720 Speaker 2: And I guess a parallel announcement here is that TPG Group, 69 00:03:39,760 --> 00:03:41,960 Speaker 2: the private equity company, is going to acquire AT and 70 00:03:42,000 --> 00:03:45,320 Speaker 2: t's seventy percent stake in direct TV that TBG doesn't 71 00:03:45,320 --> 00:03:48,480 Speaker 2: already own. So in effect, a private equity owner is 72 00:03:48,480 --> 00:03:52,120 Speaker 2: now going to own the entire US satellite television business. 73 00:03:52,640 --> 00:03:53,400 Speaker 2: What's going on there? 74 00:03:53,440 --> 00:03:53,600 Speaker 1: Why? 75 00:03:53,600 --> 00:03:54,440 Speaker 2: Why is this happening? 76 00:03:55,080 --> 00:03:58,200 Speaker 4: Yeah, exactly, Paul. So it's you know, Charlie ergan walking 77 00:03:58,200 --> 00:04:01,280 Speaker 4: away from the PATV business, and in many ways again 78 00:04:01,560 --> 00:04:03,720 Speaker 4: AT and T also walking away from the PATV business. 79 00:04:03,720 --> 00:04:05,960 Speaker 4: And as you well know, AT and T had invested 80 00:04:06,000 --> 00:04:08,440 Speaker 4: heavily in the media businesses. They had bought the whole 81 00:04:08,520 --> 00:04:10,880 Speaker 4: Warner Brothers operation, which they kind of got rid of, 82 00:04:10,960 --> 00:04:13,360 Speaker 4: selling that to Discovery, and then of course they had 83 00:04:13,360 --> 00:04:16,240 Speaker 4: also bought the Direct TV operations, which they sold a 84 00:04:16,320 --> 00:04:18,880 Speaker 4: thirty percent stake to TPG. They still retained a seventy 85 00:04:18,880 --> 00:04:20,960 Speaker 4: percent stake, and of course with that deal with TPG, 86 00:04:21,720 --> 00:04:24,920 Speaker 4: they are completely exiting that business. And for both of them, 87 00:04:24,960 --> 00:04:26,760 Speaker 4: if you kind of look at what you know is 88 00:04:26,760 --> 00:04:29,240 Speaker 4: the final endgame here for both AT and T and 89 00:04:29,480 --> 00:04:32,920 Speaker 4: EchoStar or the other part of the dish business, they 90 00:04:33,000 --> 00:04:35,920 Speaker 4: really want to kind of focus on their core business, 91 00:04:35,920 --> 00:04:37,800 Speaker 4: which is the wireless business for AT and T. Of 92 00:04:37,800 --> 00:04:41,360 Speaker 4: course it's the wireless business for EchoStar. They have, you know, built, 93 00:04:41,400 --> 00:04:43,960 Speaker 4: they've mastered a huge amount of spectrum, and they ultimately 94 00:04:44,000 --> 00:04:48,240 Speaker 4: want to become the fourth largest wireless player in the 95 00:04:48,360 --> 00:04:50,359 Speaker 4: United States, and this deal really helps them do that 96 00:04:50,400 --> 00:04:53,600 Speaker 4: and kind of focus their resources, investments, time, and energy 97 00:04:53,640 --> 00:04:55,000 Speaker 4: on just that part of the operation. 98 00:04:55,200 --> 00:04:58,280 Speaker 3: This might be a dumb question, but do they grow 99 00:04:58,400 --> 00:05:00,599 Speaker 3: their customer base at this point? Is they're a customer 100 00:05:00,640 --> 00:05:02,680 Speaker 3: base to grow, or as you said, do they just 101 00:05:02,720 --> 00:05:05,680 Speaker 3: become better at execution and they kind of cut with 102 00:05:05,720 --> 00:05:08,360 Speaker 3: synergis and that's how they become successful. 103 00:05:08,800 --> 00:05:11,760 Speaker 4: Yes, they outline about a billion dollars in synergies. A 104 00:05:11,800 --> 00:05:13,839 Speaker 4: lot of those will of course be programming costs. They 105 00:05:13,920 --> 00:05:16,039 Speaker 4: still will be with the combination, they still will be 106 00:05:16,120 --> 00:05:19,280 Speaker 4: the largest PATV operator. They will have about nineteen to 107 00:05:19,279 --> 00:05:22,719 Speaker 4: twenty million subscribers, but there's not a whole lot to 108 00:05:22,800 --> 00:05:26,160 Speaker 4: really grow ALEX, So it's really more kind of stemming 109 00:05:26,200 --> 00:05:30,680 Speaker 4: the declines, if you will, just reducing the bleeding and 110 00:05:30,720 --> 00:05:34,560 Speaker 4: becoming much much more efficient in kind of delivering customized, 111 00:05:34,600 --> 00:05:37,360 Speaker 4: tailor made packages for the PayTV market. 112 00:05:37,720 --> 00:05:39,839 Speaker 2: And Keith, you're about thirty seconds left. What's your forecast 113 00:05:39,880 --> 00:05:43,200 Speaker 2: for just the overall pay TV business? Are paying subscribers 114 00:05:43,279 --> 00:05:44,680 Speaker 2: going to go to zero? Is where we're going to 115 00:05:44,680 --> 00:05:46,000 Speaker 2: be all streaming stuff soon? 116 00:05:47,240 --> 00:05:50,320 Speaker 4: I hope not, but we're definitely seeing that. You know, 117 00:05:50,400 --> 00:05:53,479 Speaker 4: YouTube tv is becoming a major major player in the 118 00:05:53,520 --> 00:05:57,320 Speaker 4: market again. They are delivering linear TV channels. They right 119 00:05:57,360 --> 00:05:59,200 Speaker 4: now are you know, about the third or the fourth 120 00:05:59,279 --> 00:06:01,880 Speaker 4: largest operator eight million subscribers, so they actually have more 121 00:06:01,880 --> 00:06:04,640 Speaker 4: subscribers than Dish has on its satellite business. But we 122 00:06:04,680 --> 00:06:06,560 Speaker 4: eventually in the next two to three years see them 123 00:06:06,600 --> 00:06:09,880 Speaker 4: becoming the largest player and then that of course changes 124 00:06:09,920 --> 00:06:12,560 Speaker 4: the whole dynamics off the whole PATV market because then 125 00:06:12,600 --> 00:06:16,000 Speaker 4: you have a streaming based operator that's the largest operator 126 00:06:16,080 --> 00:06:17,599 Speaker 4: of you know, the PATV market. 127 00:06:17,960 --> 00:06:21,720 Speaker 2: Our thanks to Geitha Ranganathan Bloomberg Intelligence media analyst. We 128 00:06:21,760 --> 00:06:24,320 Speaker 2: move now to the tech space. Open Ai is bolstering 129 00:06:24,360 --> 00:06:28,080 Speaker 2: its efforts to build the world's leading generative artificial intelligence technology. 130 00:06:28,320 --> 00:06:30,520 Speaker 2: The company has completed a deal to raise six point 131 00:06:30,600 --> 00:06:33,320 Speaker 2: six billion dollars in new funding, giving it a one 132 00:06:33,360 --> 00:06:36,600 Speaker 2: hundred and fifty seven billion dollar valuation. The funding round 133 00:06:36,640 --> 00:06:39,919 Speaker 2: was led by Thrive Capital and Microsoft. Other investors included 134 00:06:40,080 --> 00:06:44,400 Speaker 2: Costla Ventures, Fidelity Management, and Nvidia. Open Ai also tapped 135 00:06:44,400 --> 00:06:46,840 Speaker 2: Global Banks for a four billion dollar revolving line of 136 00:06:46,880 --> 00:06:49,360 Speaker 2: credit on top of its recent fundraising. For more and 137 00:06:49,440 --> 00:06:51,719 Speaker 2: all this. Guest hosts Bailey Lipscholtz and I were joined 138 00:06:51,760 --> 00:06:55,200 Speaker 2: by anaag Rana, Bloomberg Intelligence technology analyst. I first asked 139 00:06:55,200 --> 00:06:57,640 Speaker 2: anarrog what else he knows about what's going on with 140 00:06:57,720 --> 00:06:58,240 Speaker 2: open Ai. 141 00:06:58,640 --> 00:07:00,719 Speaker 5: Yeah, Openea is really taking going to lead over the 142 00:07:00,760 --> 00:07:03,680 Speaker 5: last three years because of the launch of chat GPT 143 00:07:03,839 --> 00:07:06,240 Speaker 5: and after that it has become the go to things, 144 00:07:06,279 --> 00:07:09,600 Speaker 5: even for enterprises. We recently did a CIO survey and 145 00:07:09,760 --> 00:07:13,120 Speaker 5: open Ai Microsoft combination was far ahead than all the 146 00:07:13,160 --> 00:07:15,760 Speaker 5: other large language models that was out there. So that's 147 00:07:15,760 --> 00:07:18,280 Speaker 5: on the enterprise side and consumer side. We already know 148 00:07:18,600 --> 00:07:21,200 Speaker 5: how well they are doing both on the app that 149 00:07:21,200 --> 00:07:25,080 Speaker 5: they're selling along with the distribution that the the what 150 00:07:25,120 --> 00:07:27,880 Speaker 5: they won with Apple being part of CD when the 151 00:07:27,920 --> 00:07:30,560 Speaker 5: software upgrade is going to come. So open AI in 152 00:07:31,120 --> 00:07:33,360 Speaker 5: the world of large language models really at the top 153 00:07:33,440 --> 00:07:37,080 Speaker 5: of the top of the mountain at this point, and 154 00:07:37,160 --> 00:07:40,000 Speaker 5: this is one of the reasons you're getting these high valuations. 155 00:07:40,280 --> 00:07:42,520 Speaker 6: Yeah, I just want to put into perspective. At one 156 00:07:42,600 --> 00:07:44,960 Speaker 6: hundred and fifty seven billion dollars, open ai would be 157 00:07:45,160 --> 00:07:48,160 Speaker 6: larger than uber and at that six point six billion 158 00:07:48,200 --> 00:07:51,920 Speaker 6: dollars in funding relative to IPOs, it would be the 159 00:07:51,960 --> 00:07:58,200 Speaker 6: twelfth largest global IPO since twenty eighteen. So anak are 160 00:07:58,240 --> 00:08:01,520 Speaker 6: we in a AI bubble as it relates to private markets? 161 00:08:02,960 --> 00:08:04,480 Speaker 5: I think, to be very frank with you, I can 162 00:08:04,520 --> 00:08:06,800 Speaker 5: only answer that five years from now. But we just 163 00:08:07,080 --> 00:08:11,160 Speaker 5: you know, updated our numbers looking at capital expenditures for 164 00:08:11,200 --> 00:08:16,400 Speaker 5: the top five six companies. These companies, which includes Amazon, Microsoft, Meta, Oracle, 165 00:08:16,400 --> 00:08:19,120 Speaker 5: et cetera. In twenty twenty three, they spent about one 166 00:08:19,200 --> 00:08:21,400 Speaker 5: hundred and ten billion dollars in all the things what 167 00:08:21,440 --> 00:08:24,840 Speaker 5: we call capital expenditures. In twenty twenty five, they're going 168 00:08:24,880 --> 00:08:27,040 Speaker 5: to spend about two hundred billion dollars so that's a 169 00:08:27,120 --> 00:08:29,680 Speaker 5: massive increase of ninety billion over a two year period. 170 00:08:29,960 --> 00:08:32,040 Speaker 5: You know, where is that money going to? Expansion of 171 00:08:32,120 --> 00:08:36,400 Speaker 5: data center, buying more GPUs, buying more hardware, expanding their 172 00:08:36,440 --> 00:08:37,560 Speaker 5: own large language models. 173 00:08:37,559 --> 00:08:39,840 Speaker 7: So it really feels. 174 00:08:39,520 --> 00:08:41,559 Speaker 5: Real, frankly as to the amount of money that the 175 00:08:42,040 --> 00:08:45,079 Speaker 5: big guys are spending it over here, and they won't 176 00:08:45,080 --> 00:08:47,000 Speaker 5: be doing it if they didn't see the demand on 177 00:08:47,040 --> 00:08:48,120 Speaker 5: the other side of the equation. 178 00:08:48,840 --> 00:08:51,520 Speaker 2: This has been a turbulent year for the company here. 179 00:08:51,920 --> 00:08:55,280 Speaker 2: I know, lass November the company's board fired and then 180 00:08:55,360 --> 00:08:58,760 Speaker 2: quickly we hired the CEO, Sam Altman. Following months had 181 00:08:58,760 --> 00:09:01,360 Speaker 2: a lot of key leaders leave, including the co founder, 182 00:09:01,400 --> 00:09:05,240 Speaker 2: the chief technology officer. It seems like the market's kind 183 00:09:05,240 --> 00:09:07,680 Speaker 2: of forgotten all about that, or maybe it's not a 184 00:09:07,720 --> 00:09:10,439 Speaker 2: problem anymore. How's the market dealing with some of that 185 00:09:10,800 --> 00:09:12,240 Speaker 2: turmoil we've seen over the last year. 186 00:09:13,559 --> 00:09:16,040 Speaker 5: I think people tend to forget that who's really behind 187 00:09:16,120 --> 00:09:19,760 Speaker 5: a lot of backing off this particular company, and that's Microsoft, 188 00:09:19,800 --> 00:09:24,040 Speaker 5: and you know they have the biggest distribution and among enterprises. 189 00:09:24,360 --> 00:09:27,160 Speaker 5: So if they are basically telling people if you want 190 00:09:27,160 --> 00:09:31,120 Speaker 5: to create an enterprise application using some AI large language model, 191 00:09:31,400 --> 00:09:33,920 Speaker 5: here is OpenAI model and you can host it on 192 00:09:33,960 --> 00:09:36,920 Speaker 5: our cloud platform. I think that is resonating very well 193 00:09:36,920 --> 00:09:39,800 Speaker 5: with customers. So as long as that continues for the 194 00:09:39,840 --> 00:09:43,000 Speaker 5: next several years, open AI's revenue will continue to go up. 195 00:09:43,320 --> 00:09:45,680 Speaker 5: And you know, then you can you know, argue whether 196 00:09:45,679 --> 00:09:46,920 Speaker 5: the valuations is high or not. 197 00:09:47,520 --> 00:09:50,040 Speaker 6: And just from the bloom we're reporting Tiger Global put 198 00:09:50,040 --> 00:09:52,560 Speaker 6: in three hundred and fifty million dollars, Ultimeter putting in 199 00:09:52,559 --> 00:09:54,280 Speaker 6: at least two hundred and fifty million dollars. But to 200 00:09:54,320 --> 00:09:57,920 Speaker 6: your point, if Microsoft is able to write such large checks, 201 00:09:58,000 --> 00:10:01,960 Speaker 6: how does that impact the funding environment for AI companies. 202 00:10:01,960 --> 00:10:04,560 Speaker 6: I'm just thinking about the biggest competitors for open ai 203 00:10:04,679 --> 00:10:06,440 Speaker 6: in Anthropic and XAI. 204 00:10:07,400 --> 00:10:09,800 Speaker 5: Yeah, I mean Anthropic is backed by you know, Amazon 205 00:10:09,840 --> 00:10:12,680 Speaker 5: Web Services at this point primarily, and almost all the others. 206 00:10:12,920 --> 00:10:15,240 Speaker 5: The one thing we heard, you know, from reporting from 207 00:10:15,280 --> 00:10:18,080 Speaker 5: Bloomberg News is that open aye is asking them not 208 00:10:18,160 --> 00:10:21,520 Speaker 5: to back up you know, Elon's xai or others. And 209 00:10:21,559 --> 00:10:23,440 Speaker 5: I think that's partially the reason you see all the 210 00:10:23,480 --> 00:10:26,760 Speaker 5: other plays coming in because and by the way, there's 211 00:10:26,760 --> 00:10:28,160 Speaker 5: not going to be one winner, They're going to be 212 00:10:28,240 --> 00:10:31,160 Speaker 5: multiple models. They're going to be multiple companies doing well here, 213 00:10:31,720 --> 00:10:34,440 Speaker 5: and there is no reason Anthropic can't thrive in this 214 00:10:34,520 --> 00:10:37,720 Speaker 5: way or Mistral or all the other large language model companies. 215 00:10:38,520 --> 00:10:41,880 Speaker 2: What do we know about open AI's financials if anything. 216 00:10:42,880 --> 00:10:45,040 Speaker 5: It's I mean, I don't have a clear picture on it. 217 00:10:45,080 --> 00:10:47,200 Speaker 5: I've I've read as much as you have, and you know, 218 00:10:47,240 --> 00:10:49,800 Speaker 5: we have seen projections out there for the next several 219 00:10:49,880 --> 00:10:51,760 Speaker 5: years they can get to I don't know, five billion, 220 00:10:51,840 --> 00:10:54,439 Speaker 5: ten billion or so forth. So I mean it's it's 221 00:10:54,520 --> 00:10:56,559 Speaker 5: unless we see the s one when they go public, 222 00:10:57,360 --> 00:10:59,760 Speaker 5: you know, up till at that point, you know, it's 223 00:10:59,760 --> 00:11:01,120 Speaker 5: it's it's purely a guess work. 224 00:11:01,160 --> 00:11:03,440 Speaker 2: Do we have any sense of do they have an 225 00:11:03,440 --> 00:11:05,880 Speaker 2: appetite to go public? Is it a sense of timing? 226 00:11:06,080 --> 00:11:08,760 Speaker 2: What are their plans for going public? If any? 227 00:11:09,760 --> 00:11:09,960 Speaker 6: See? 228 00:11:10,000 --> 00:11:11,720 Speaker 5: My personal view is they don't need to go public 229 00:11:11,760 --> 00:11:14,400 Speaker 5: at all. They don't need the funding they will you know, 230 00:11:14,400 --> 00:11:17,319 Speaker 5: the whoever is part of this particular ecosystem is getting 231 00:11:17,400 --> 00:11:20,280 Speaker 5: rich every day. I think they should figure out how 232 00:11:20,280 --> 00:11:23,600 Speaker 5: to grab as much enterprise workloads as possible before they 233 00:11:23,640 --> 00:11:26,160 Speaker 5: think about it, because one thing is for sure, even 234 00:11:26,200 --> 00:11:28,720 Speaker 5: as they are doing this land grabbing right now, they're 235 00:11:28,760 --> 00:11:30,240 Speaker 5: at a loss, and they will be at a loss 236 00:11:30,280 --> 00:11:33,120 Speaker 5: for several years out because the cost of running these 237 00:11:33,120 --> 00:11:35,679 Speaker 5: workloads is very high and it's going to you know, 238 00:11:35,760 --> 00:11:37,360 Speaker 5: you're not going to see any free cash flow. You're 239 00:11:37,360 --> 00:11:39,679 Speaker 5: not going to see any But once you've got public, 240 00:11:39,880 --> 00:11:41,840 Speaker 5: you know, you really go under the lens when it's 241 00:11:41,880 --> 00:11:44,160 Speaker 5: about profitability and your margins. 242 00:11:44,120 --> 00:11:46,360 Speaker 6: Wellly have about thirty seconds. But going back to a 243 00:11:46,400 --> 00:11:48,959 Speaker 6: story that has been reported out recently in terms of 244 00:11:49,040 --> 00:11:51,440 Speaker 6: giving all in a stake in the company that could 245 00:11:51,440 --> 00:11:53,079 Speaker 6: be worth more than ten billion dollars, what do you 246 00:11:53,120 --> 00:11:55,199 Speaker 6: make of those conversations and what that could mean for 247 00:11:55,240 --> 00:11:56,400 Speaker 6: the company and its ambitions. 248 00:11:57,800 --> 00:11:59,760 Speaker 5: Yeah, I mean it's always talked about how he is 249 00:11:59,800 --> 00:12:02,280 Speaker 5: doing for the greater good of the world. But I 250 00:12:02,280 --> 00:12:04,000 Speaker 5: bet I guess when you get this much options you 251 00:12:04,320 --> 00:12:07,840 Speaker 5: change your mind on that. But it's it is what 252 00:12:07,960 --> 00:12:08,280 Speaker 5: it is. 253 00:12:08,679 --> 00:12:12,200 Speaker 2: Our thanks to anaag Rana, Bloomberg Intelligence technology analyst, coming 254 00:12:12,280 --> 00:12:15,280 Speaker 2: up or break down why investors are disappointed in Tesla 255 00:12:15,480 --> 00:12:19,080 Speaker 2: despite its first quarterly sales gain this year. You're listening 256 00:12:19,080 --> 00:12:22,120 Speaker 2: to Bloomberg Intelligence on Bloomberg Radio, providing in depth research 257 00:12:22,160 --> 00:12:24,079 Speaker 2: and data on two thousand companies and one hundred and 258 00:12:24,120 --> 00:12:26,880 Speaker 2: thirty industries. You can ask us Bloomberg Intelligence if via 259 00:12:26,960 --> 00:12:29,680 Speaker 2: b I go on the terminal. I'm Paul Sweeney and 260 00:12:29,800 --> 00:12:30,800 Speaker 2: this is Bloomberg. 261 00:12:37,000 --> 00:12:40,880 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 262 00:12:40,960 --> 00:12:43,760 Speaker 1: weekdays at ten am Eastern on Apple Card playing en 263 00:12:43,800 --> 00:12:47,160 Speaker 1: Broudouto with the Bloomberg Business app, Listen on demand wherever 264 00:12:47,240 --> 00:12:51,040 Speaker 1: you get your podcasts, or watch us live on YouTube. 265 00:12:51,760 --> 00:12:54,640 Speaker 2: We move now to earnings from the sportswear company Nike, 266 00:12:54,960 --> 00:12:57,160 Speaker 2: and they you reported first quarter sales that fell ten 267 00:12:57,200 --> 00:13:00,480 Speaker 2: percent and we're short of analyst expectations. Thank He Also, 268 00:13:00,520 --> 00:13:02,920 Speaker 2: it drew it's for year sales guidance, citing a transition 269 00:13:03,000 --> 00:13:06,160 Speaker 2: to its new CEO, Elliott Hill, who will arrive later 270 00:13:06,200 --> 00:13:09,439 Speaker 2: this month. The company also said it'll postpone its investor Day, 271 00:13:09,440 --> 00:13:12,280 Speaker 2: which had been scheduled for November for more. Co hosts. 272 00:13:12,280 --> 00:13:14,400 Speaker 2: Alex Steel and I were joined by Punam Goyle, senior 273 00:13:14,520 --> 00:13:17,240 Speaker 2: US e Commerce and retail analyst at Bloomberg Intelligence. We 274 00:13:17,360 --> 00:13:20,800 Speaker 2: first asked Poonam for her take on Nike's latest quarterly results. 275 00:13:21,320 --> 00:13:24,120 Speaker 8: It was weak, right. Their sales continue to drop and 276 00:13:24,520 --> 00:13:27,920 Speaker 8: there's no signs of a recovery at least yet until 277 00:13:27,920 --> 00:13:31,040 Speaker 8: they have a better planning place. I'd say this year 278 00:13:31,080 --> 00:13:33,240 Speaker 8: for them, their fiscal year is going to be the 279 00:13:33,320 --> 00:13:36,400 Speaker 8: year of a reset. Once the new CEO comes into 280 00:13:36,480 --> 00:13:39,560 Speaker 8: play in just a few weeks, he will have a 281 00:13:39,640 --> 00:13:44,160 Speaker 8: new playbook and that playbook will drive Nike's turnaround in 282 00:13:44,200 --> 00:13:45,680 Speaker 8: the fiscal twenty twenty six. 283 00:13:46,280 --> 00:13:48,520 Speaker 3: So part of that was, yes, cleaning the sleeve for him. 284 00:13:48,559 --> 00:13:50,320 Speaker 3: They got rid of their investor day for all of 285 00:13:50,320 --> 00:13:52,839 Speaker 3: those reasons. Can we assume that this is the drop, 286 00:13:52,960 --> 00:13:54,880 Speaker 3: this is the worst it's going to get. It's only 287 00:13:55,000 --> 00:13:55,520 Speaker 3: up from here. 288 00:13:57,000 --> 00:14:00,560 Speaker 8: I would say fiscal twenty twenty five the year of 289 00:14:00,559 --> 00:14:03,840 Speaker 8: a trough. I wouldn't necessarily say that to that physical 290 00:14:03,880 --> 00:14:07,000 Speaker 8: one Q is a trough because as you probably heard, 291 00:14:07,480 --> 00:14:10,240 Speaker 8: they have guided to fiscal two Q sales to be 292 00:14:10,320 --> 00:14:13,520 Speaker 8: down eight to ten percent, which is roughly still in 293 00:14:13,679 --> 00:14:18,599 Speaker 8: line with one queue. And with the holiday season being unpredictable, 294 00:14:19,000 --> 00:14:22,680 Speaker 8: we have port strikes, we have a shorter holiday season 295 00:14:22,840 --> 00:14:25,640 Speaker 8: with fewer days of shopping. You know, things are still 296 00:14:25,760 --> 00:14:28,080 Speaker 8: very much up in the air from a macro perspective, 297 00:14:28,080 --> 00:14:30,240 Speaker 8: and the Nike has its own troubles on top of that. 298 00:14:31,440 --> 00:14:34,320 Speaker 2: All right, So from your perspective, Punum, what is the 299 00:14:34,440 --> 00:14:35,600 Speaker 2: problem with Nike. 300 00:14:37,360 --> 00:14:40,360 Speaker 8: The problem is that they don't have enough newness in 301 00:14:40,400 --> 00:14:44,880 Speaker 8: their pipeline and they haven't been focused on merchandise. Nike 302 00:14:45,400 --> 00:14:50,520 Speaker 8: has to have good merchandise, new merchandise, performance based merchandise 303 00:14:50,680 --> 00:14:54,440 Speaker 8: in front of consumers on a constant basis to really 304 00:14:54,560 --> 00:14:57,840 Speaker 8: drive the outperformance that they had seen a pre pandemic. 305 00:14:58,280 --> 00:15:02,040 Speaker 8: They lost that under the current leadership because the focus 306 00:15:02,120 --> 00:15:05,960 Speaker 8: is more on DTC and using the franchises that did 307 00:15:06,000 --> 00:15:09,480 Speaker 8: well and really just adding new variations of them. For 308 00:15:09,520 --> 00:15:12,120 Speaker 8: example the Air Force, Right, we have so many variations 309 00:15:12,120 --> 00:15:14,760 Speaker 8: of the Air Force, saying with the dunks and saying 310 00:15:14,760 --> 00:15:17,120 Speaker 8: with the Jordan's just new color waves. So we need 311 00:15:17,160 --> 00:15:19,160 Speaker 8: to see more. We need to see them do more 312 00:15:19,160 --> 00:15:21,640 Speaker 8: on the product front and then the marketing of it 313 00:15:21,680 --> 00:15:22,320 Speaker 8: of course too. 314 00:15:22,760 --> 00:15:26,360 Speaker 2: So what s Nike saying just about the consumer in 315 00:15:26,440 --> 00:15:28,480 Speaker 2: general these days? Because I would think WOY with their 316 00:15:28,520 --> 00:15:30,480 Speaker 2: broad product line in reach, they would have a pretty 317 00:15:30,520 --> 00:15:30,920 Speaker 2: good view. 318 00:15:32,080 --> 00:15:35,880 Speaker 8: They you know, the consumers uneven, they're spending in certain 319 00:15:35,920 --> 00:15:38,880 Speaker 8: places and then they're not spending. For example, they talked 320 00:15:38,880 --> 00:15:41,520 Speaker 8: a lot about their new product that they brought to 321 00:15:41,560 --> 00:15:42,320 Speaker 8: market earlier. 322 00:15:42,360 --> 00:15:42,760 Speaker 4: This year. 323 00:15:42,800 --> 00:15:45,960 Speaker 8: That's actually done really well for them, and that's a 324 00:15:46,000 --> 00:15:48,440 Speaker 8: good sign. But then the rest of the stuff is 325 00:15:48,560 --> 00:15:51,400 Speaker 8: just status quo. They are seeing weakness in their own 326 00:15:51,440 --> 00:15:54,360 Speaker 8: retail channels, and the weakness is coming from traffic, right. 327 00:15:54,680 --> 00:15:57,000 Speaker 8: So this goes back to the macro a little, where 328 00:15:57,240 --> 00:16:00,400 Speaker 8: traffic is down in the stores, Traffic is down on line, 329 00:16:00,680 --> 00:16:03,600 Speaker 8: and traffic is what's hurting sales because the average selling 330 00:16:03,640 --> 00:16:06,480 Speaker 8: price was actually up, which means they're able to sell 331 00:16:06,480 --> 00:16:09,080 Speaker 8: these expensive sneakers. They're just not able to get enough 332 00:16:09,080 --> 00:16:10,320 Speaker 8: people to come in and buy them. 333 00:16:10,880 --> 00:16:13,920 Speaker 3: Okay, do Nikes have sneakers with those heels, because if 334 00:16:13,920 --> 00:16:16,560 Speaker 3: they did, I'd feel like, Yeah, there's like a whole 335 00:16:16,560 --> 00:16:19,920 Speaker 3: brand of like sneakers with a heel, so like stilettos, 336 00:16:19,920 --> 00:16:21,960 Speaker 3: and they have the look of a sneaker, and I 337 00:16:22,000 --> 00:16:24,080 Speaker 3: think they have I think that would be helpful. 338 00:16:24,160 --> 00:16:26,000 Speaker 8: I don't think they have that, but I don't know 339 00:16:26,000 --> 00:16:27,240 Speaker 8: if they actually need. 340 00:16:27,040 --> 00:16:31,960 Speaker 3: That to win They probably they're not talking up fair enough. 341 00:16:32,280 --> 00:16:35,560 Speaker 3: But in all seriousns though, how is China doing for Nike? 342 00:16:35,840 --> 00:16:39,600 Speaker 8: China is not doing well. China has struggled for some time, 343 00:16:40,120 --> 00:16:42,520 Speaker 8: and I think the China struggle will eb and flow. 344 00:16:42,840 --> 00:16:45,680 Speaker 8: The highlight for China is a new stimulus that they 345 00:16:45,720 --> 00:16:49,000 Speaker 8: have just gotten, and I think that can serve as 346 00:16:49,000 --> 00:16:52,360 Speaker 8: a catalyst to help at least improve sales from where 347 00:16:52,360 --> 00:16:55,720 Speaker 8: they are today in the near future, because that should 348 00:16:55,800 --> 00:16:59,000 Speaker 8: get Nike back onto people's feet there as they have 349 00:16:59,160 --> 00:17:02,400 Speaker 8: more spending pass. The thing is, though, everyone's fighting for 350 00:17:02,480 --> 00:17:05,320 Speaker 8: share in China right That's the growth engine for most 351 00:17:05,320 --> 00:17:08,120 Speaker 8: app leisure companies, and while Nike does have a lead 352 00:17:08,280 --> 00:17:11,520 Speaker 8: still in China, it's one among many players, the locals 353 00:17:11,520 --> 00:17:12,400 Speaker 8: and the nationals. 354 00:17:12,680 --> 00:17:16,080 Speaker 2: Thirty seconds, Punham, what's the you know, the holiday season 355 00:17:16,200 --> 00:17:18,520 Speaker 2: look like we have any growth there? For US retailers, 356 00:17:19,359 --> 00:17:20,280 Speaker 2: there will be growth. 357 00:17:20,320 --> 00:17:22,200 Speaker 8: We think e commerce is going to lead, Bob. We 358 00:17:22,320 --> 00:17:24,879 Speaker 8: think there's a value play here. Consumers are scratched. It's 359 00:17:24,920 --> 00:17:26,840 Speaker 8: a shorter season. There's going to be a lot of 360 00:17:26,840 --> 00:17:28,640 Speaker 8: deals in the next few weeks of the time day 361 00:17:28,720 --> 00:17:31,800 Speaker 8: kicking off, so shoppers bull shop deals and will shop early. 362 00:17:32,240 --> 00:17:34,480 Speaker 2: Our thanks to Punham Goyle, senior US e Commerce and 363 00:17:34,560 --> 00:17:37,840 Speaker 2: retail analyst at Bloomberg Intelligence, We look next at the 364 00:17:37,880 --> 00:17:41,720 Speaker 2: ev giant Tesla. Tesla posted its first increase in quarterly 365 00:17:41,760 --> 00:17:44,920 Speaker 2: vehicle sales this year, but the automaker let down investors 366 00:17:44,960 --> 00:17:47,400 Speaker 2: who are expecting more of a bump from China boosting 367 00:17:47,440 --> 00:17:50,359 Speaker 2: electric car subsidies for more. Co hosts Alex Steel and 368 00:17:50,400 --> 00:17:53,280 Speaker 2: I were joined by Keith marton Bloomberg Auto Reporter. We 369 00:17:53,400 --> 00:17:56,040 Speaker 2: first asked Keith for his take on Tessa's recent numbers. 370 00:17:56,440 --> 00:17:59,400 Speaker 9: Yeah, there's a little disappointment on the vehicle sales. They 371 00:17:59,440 --> 00:18:04,360 Speaker 9: came in just under analysts expectations about one thousand vehicles 372 00:18:04,440 --> 00:18:07,600 Speaker 9: under They sold four hundred and sixty two thousand and 373 00:18:08,119 --> 00:18:11,119 Speaker 9: four hundred and sixty three was more the It was 374 00:18:11,160 --> 00:18:14,280 Speaker 9: a consensus, but more to the point, they kind of 375 00:18:14,560 --> 00:18:19,400 Speaker 9: missed the whisper expectation, which was maybe as high as 376 00:18:19,560 --> 00:18:23,240 Speaker 9: four seventy. Seems like there's some softness in the cyber truck. 377 00:18:23,960 --> 00:18:27,639 Speaker 9: There also were high expectations for sort of a cash 378 00:18:27,680 --> 00:18:31,119 Speaker 9: for Clunger's sort of promotion going on in China. They've 379 00:18:31,280 --> 00:18:34,040 Speaker 9: doubled the incentive for EV sales if you turn in 380 00:18:34,080 --> 00:18:37,280 Speaker 9: an older model there. That was expected to give more 381 00:18:37,840 --> 00:18:42,680 Speaker 9: tailwind to Tesla, and that didn't quite materialize the way 382 00:18:42,800 --> 00:18:44,240 Speaker 9: that investors expected. 383 00:18:44,680 --> 00:18:47,920 Speaker 3: You know, just in terms of ubers, for example, every 384 00:18:48,000 --> 00:18:49,800 Speaker 3: Uber I'm in now feels like it's a Tesla. I 385 00:18:49,840 --> 00:18:51,840 Speaker 3: don't know if you guys experienced the same thing. And 386 00:18:51,960 --> 00:18:54,480 Speaker 3: I feel like, is that a good or bad sign 387 00:18:54,480 --> 00:18:57,040 Speaker 3: for Tesla, because yeah, okay, it's promotional, but I feel 388 00:18:57,040 --> 00:18:59,719 Speaker 3: like the reason why all the Ubers are now Tesla 389 00:18:59,800 --> 00:19:02,400 Speaker 3: is is because it's a promotion, like get this off 390 00:19:02,440 --> 00:19:04,800 Speaker 3: my lot. Are we at the trough with that? 391 00:19:06,080 --> 00:19:09,960 Speaker 9: Yeah? You know, Model three and Model Y. That is 392 00:19:10,000 --> 00:19:12,159 Speaker 9: the volume of the company, which are their you know, 393 00:19:12,240 --> 00:19:16,479 Speaker 9: mainstream cars, their luxury models does not sell very well anymore. 394 00:19:16,520 --> 00:19:19,520 Speaker 9: It's getting pretty long on the tooth. And cyber Truck, 395 00:19:20,000 --> 00:19:23,199 Speaker 9: you know, is priced sort of around one hundred thousand, 396 00:19:23,359 --> 00:19:27,280 Speaker 9: and that limits its volume under twenty thousand probably for 397 00:19:27,320 --> 00:19:32,520 Speaker 9: the quarter. So they are becoming a more mainstream brand, 398 00:19:32,560 --> 00:19:35,639 Speaker 9: and when that happens, they become Ubers. 399 00:19:36,080 --> 00:19:40,040 Speaker 2: Matt from Westchester emails in here and says, is Tesla 400 00:19:40,080 --> 00:19:42,320 Speaker 2: ever gonna have a new model? We haven't had a 401 00:19:42,320 --> 00:19:44,760 Speaker 2: new model like ever, really, like just an upgraded model. 402 00:19:45,240 --> 00:19:48,240 Speaker 9: Yeah. This is you know, sort of a long standing 403 00:19:48,320 --> 00:19:54,200 Speaker 9: issue that the product lineup, with the exception of cyber Truck, 404 00:19:54,240 --> 00:19:57,040 Speaker 9: which for now is a niche vehicle, that the lineup 405 00:19:57,119 --> 00:20:00,600 Speaker 9: is getting stale. But you know, Elon must is really 406 00:20:00,640 --> 00:20:04,600 Speaker 9: focusing more on Tesla as an AI company. They have 407 00:20:04,800 --> 00:20:09,760 Speaker 9: this event coming up next week to unveil the Robotaxi 408 00:20:09,840 --> 00:20:13,560 Speaker 9: that he's really been talking up, and that's actually moved 409 00:20:13,640 --> 00:20:16,680 Speaker 9: up the stock from the way he's positioning the company. 410 00:20:16,760 --> 00:20:20,480 Speaker 9: So he's trying to speak less like a traditional automaker 411 00:20:20,920 --> 00:20:22,920 Speaker 9: and more like an AI tech company. 412 00:20:23,080 --> 00:20:24,560 Speaker 3: I feel like it's always been that. It's been like 413 00:20:24,600 --> 00:20:26,840 Speaker 3: Tesla's a tech company. Nope, it's a car company. No, 414 00:20:27,000 --> 00:20:29,639 Speaker 3: now it's an AI company. How does the sales though, 415 00:20:29,680 --> 00:20:31,400 Speaker 3: that we're seeing for EV's, because that's still the bread 416 00:20:31,400 --> 00:20:33,679 Speaker 3: and butter, How is that stacking up against its peers 417 00:20:33,720 --> 00:20:34,600 Speaker 3: like a GM or Forward. 418 00:20:35,640 --> 00:20:37,840 Speaker 9: Well, I mean, Tesla's still far and away leads to 419 00:20:37,880 --> 00:20:42,479 Speaker 9: the market. But GM, for example, had an excellent quarter 420 00:20:42,600 --> 00:20:46,320 Speaker 9: in EV sales because they've just rolled out this thirty 421 00:20:46,359 --> 00:20:50,800 Speaker 9: five thousand dollars Chevy Equinox electric vehicle and that's a 422 00:20:50,840 --> 00:20:56,560 Speaker 9: great price and it's below Tesla's lowest prices, so you know, 423 00:20:56,760 --> 00:21:00,359 Speaker 9: new competitors are coming in. Tesla's supposed to have a 424 00:21:00,440 --> 00:21:04,880 Speaker 9: lower priced EV coming next year, but Elon hasn't really 425 00:21:04,920 --> 00:21:09,200 Speaker 9: talked much about that, so you know, as more competitors 426 00:21:09,240 --> 00:21:10,959 Speaker 9: come in, as they come in at the lower end 427 00:21:11,000 --> 00:21:13,639 Speaker 9: of the market, that's going to chip away at Tesla's share. 428 00:21:13,840 --> 00:21:17,080 Speaker 2: Our thanks to Keith Thoughton, Bloomberg's Auto Reporter. We move 429 00:21:17,160 --> 00:21:20,240 Speaker 2: now to earnings from Carnival Cruise Line. Carnival reported third 430 00:21:20,320 --> 00:21:23,600 Speaker 2: quarter sales and profits that beat analysts expectations while raising 431 00:21:23,640 --> 00:21:26,160 Speaker 2: its full year outlook for a third time this year, 432 00:21:26,440 --> 00:21:28,760 Speaker 2: but the companies share slumped shortly after the report as 433 00:21:28,760 --> 00:21:31,840 Speaker 2: a company delivered a softer outlook for demand next quarter. 434 00:21:32,119 --> 00:21:34,080 Speaker 2: For more, co host Alex Steel and I were joined 435 00:21:34,080 --> 00:21:37,119 Speaker 2: by Brian Egger, Bloomberg Intelligence Senior Gaming and Lodging analyst. 436 00:21:37,400 --> 00:21:40,640 Speaker 2: We first asked Brian to break down Carnival's results. 437 00:21:40,640 --> 00:21:43,520 Speaker 10: Overall, strong quarter and more of what we've been seeing 438 00:21:43,560 --> 00:21:47,399 Speaker 10: in the past, which is strong onboard spending, close in 439 00:21:47,480 --> 00:21:50,560 Speaker 10: booking has looked really good and overall the demand pace 440 00:21:50,600 --> 00:21:53,920 Speaker 10: from the consumer's perspective is quite strong. I can't really 441 00:21:53,920 --> 00:21:57,320 Speaker 10: attribute anything to the specifically to the stock price decline. 442 00:21:57,359 --> 00:21:59,120 Speaker 10: I do know there was some discussion on the call 443 00:21:59,680 --> 00:22:02,840 Speaker 10: about the effect of expense timing. Higher dry do costs 444 00:22:02,880 --> 00:22:06,200 Speaker 10: expense timing going into the fourth quarter, but that's generally 445 00:22:06,760 --> 00:22:09,399 Speaker 10: in line with what was previously expected and not at 446 00:22:09,440 --> 00:22:13,199 Speaker 10: all indicative of any kind of systemic cost issues. Overall, 447 00:22:13,760 --> 00:22:17,560 Speaker 10: from a demand perspective, Compared to the other sectors we follow, 448 00:22:17,720 --> 00:22:19,720 Speaker 10: cruise lines have not shown any crack. 449 00:22:19,720 --> 00:22:23,160 Speaker 2: Yep, Where are they in terms of deploying their fleet? 450 00:22:23,160 --> 00:22:24,200 Speaker 2: Are they fully deployed? 451 00:22:24,240 --> 00:22:24,440 Speaker 6: Now? 452 00:22:24,640 --> 00:22:27,159 Speaker 2: Do they keep ships in port? I don't know what 453 00:22:27,200 --> 00:22:28,359 Speaker 2: they do here? How does that work? 454 00:22:28,440 --> 00:22:31,120 Speaker 10: Yeah, they're fully deployed. They're back to full pre pandemic 455 00:22:31,240 --> 00:22:35,240 Speaker 10: levels of deployment and ocumancy. In fact, one of the 456 00:22:35,280 --> 00:22:37,400 Speaker 10: pieces of good news going I think into next year 457 00:22:37,480 --> 00:22:40,680 Speaker 10: is a capacity growth is quite modest, so that kind 458 00:22:40,680 --> 00:22:45,240 Speaker 10: of is another favorable factor in terms of yield demand 459 00:22:45,280 --> 00:22:45,880 Speaker 10: for next year. 460 00:22:46,200 --> 00:22:48,879 Speaker 3: What do we think the relationship is between say, you know, 461 00:22:49,040 --> 00:22:51,960 Speaker 3: US GDP and Carnival, Like, how a recession proof or 462 00:22:52,000 --> 00:22:53,520 Speaker 3: not recession proof or sensitive? 463 00:22:53,560 --> 00:22:53,920 Speaker 6: Are they? 464 00:22:54,000 --> 00:22:54,200 Speaker 1: Yeah? 465 00:22:54,240 --> 00:22:58,760 Speaker 10: I've generally viewed cruises in general as being modestly cyclical, 466 00:22:59,000 --> 00:23:02,679 Speaker 10: but if you go back as storically over decades, passenger 467 00:23:02,720 --> 00:23:06,119 Speaker 10: growth has kept pace with supply growth even across weaker 468 00:23:06,160 --> 00:23:09,640 Speaker 10: economic periods. Although this is probably a consumer cycle coal 469 00:23:10,080 --> 00:23:12,239 Speaker 10: it has generally proven to be less cycle coal than 470 00:23:12,280 --> 00:23:16,800 Speaker 10: other sectors because of this significant penetration expansion opportunity getting 471 00:23:16,800 --> 00:23:17,920 Speaker 10: more first time cruisers. 472 00:23:18,359 --> 00:23:20,480 Speaker 2: We've heard from Carnival and from the other cruise lines 473 00:23:20,520 --> 00:23:23,040 Speaker 2: that demand, as you mentioned, remains very strong. 474 00:23:23,520 --> 00:23:24,320 Speaker 6: Why aren't they just. 475 00:23:24,480 --> 00:23:26,600 Speaker 2: Launching new ships, cranking out new ships to meet the 476 00:23:26,600 --> 00:23:27,920 Speaker 2: demand and try to take the mantage of it. 477 00:23:28,000 --> 00:23:30,040 Speaker 10: They're doing that, and over time you're going to see 478 00:23:30,119 --> 00:23:33,399 Speaker 10: kind of this mid single digit capacity growth measure just 479 00:23:33,440 --> 00:23:35,680 Speaker 10: happens to be a point in twenty twenty five where 480 00:23:35,720 --> 00:23:37,720 Speaker 10: the level of capacity of growth is like zero point 481 00:23:37,840 --> 00:23:41,280 Speaker 10: seven percent. So it's a more modest period of growth here, 482 00:23:41,320 --> 00:23:43,760 Speaker 10: which I think probably entering some period of economic and 483 00:23:43,880 --> 00:23:46,720 Speaker 10: certainty not itself a bad thing. They're also adding more 484 00:23:47,280 --> 00:23:49,800 Speaker 10: amenities other than the new ships, like their private island 485 00:23:49,840 --> 00:23:51,440 Speaker 10: destinations and things of that sort. 486 00:23:51,920 --> 00:23:54,679 Speaker 3: Excuse me, Wait, so I take a cruise to a 487 00:23:54,680 --> 00:23:55,960 Speaker 3: private island. Whose island? 488 00:23:56,600 --> 00:23:59,520 Speaker 10: Yeah? So Celebration Key is one of those private island 489 00:23:59,560 --> 00:24:02,160 Speaker 10: destinations that most of the cruise companies have, and that's 490 00:24:02,160 --> 00:24:05,000 Speaker 10: something that they're going to be unveiling going into next year. 491 00:24:05,320 --> 00:24:08,560 Speaker 10: So I think that, combined with generally strong pace of 492 00:24:08,600 --> 00:24:11,720 Speaker 10: demand and the fact that on the ships themselves, the 493 00:24:11,800 --> 00:24:14,040 Speaker 10: onboard spending really has not led up. Those are all 494 00:24:14,200 --> 00:24:18,000 Speaker 10: very favorable factors, and we're obviously watching this closely given 495 00:24:18,960 --> 00:24:22,160 Speaker 10: all the understandable concerns about what happens with the consumer, 496 00:24:22,600 --> 00:24:24,280 Speaker 10: there's any kind of economic slowdown. 497 00:24:24,680 --> 00:24:28,119 Speaker 2: What's the biggest cost drivers that these companies have to 498 00:24:28,200 --> 00:24:28,760 Speaker 2: manage here? 499 00:24:29,119 --> 00:24:31,840 Speaker 10: Yeah, I mean generally fuel has always been something we 500 00:24:31,920 --> 00:24:35,760 Speaker 10: watch carefully, fuel food supplies. You know, it's kind of 501 00:24:35,800 --> 00:24:38,800 Speaker 10: a different kind of labor composition than other industries, but 502 00:24:39,280 --> 00:24:41,879 Speaker 10: certainly if you look at the cost growth picture, we 503 00:24:41,920 --> 00:24:45,800 Speaker 10: carefully watch things like foreign currency exchange movements and fuel 504 00:24:45,800 --> 00:24:46,439 Speaker 10: cost growth. 505 00:24:46,800 --> 00:24:49,240 Speaker 2: All right, thanks to Brian Egger, Bloomberg Intelligence senior Gaming 506 00:24:49,240 --> 00:24:51,560 Speaker 2: and lodging analysts, coming up on the program and look 507 00:24:51,600 --> 00:24:55,600 Speaker 2: at how leadership and strategy changes have impacted Harvard University financially. 508 00:24:55,800 --> 00:24:58,720 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 509 00:24:58,760 --> 00:25:00,880 Speaker 2: depth research and data on two that companies and one 510 00:25:00,960 --> 00:25:03,920 Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via 511 00:25:03,960 --> 00:25:07,200 Speaker 2: Bigo on the terminal. I'm Paul Sweeney, This is Bloomberg. 512 00:25:12,920 --> 00:25:16,800 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 513 00:25:16,880 --> 00:25:20,400 Speaker 1: weekdays at ten am Eastern on applecard Play and Android 514 00:25:20,440 --> 00:25:23,200 Speaker 1: Auto with the Bloomberg Business App. You can also listen 515 00:25:23,320 --> 00:25:26,400 Speaker 1: live on Amazon Alexa from our flagship New York station 516 00:25:26,800 --> 00:25:30,280 Speaker 1: Just Say Alexa Play Bloomberg eleven thirty. 517 00:25:30,920 --> 00:25:33,800 Speaker 2: Each week we look at research from Bloomberg's n EF 518 00:25:34,040 --> 00:25:36,560 Speaker 2: previously known as New Energy Finance. They're the team of 519 00:25:36,600 --> 00:25:40,000 Speaker 2: Bloomberg that tracks and analyzes the energy transition from commodities 520 00:25:40,080 --> 00:25:44,520 Speaker 2: to power, transport, industries, buildings, and agricultural sectors. This week 521 00:25:44,600 --> 00:25:47,119 Speaker 2: we looked at the Inflation Reduction Act and its impact 522 00:25:47,240 --> 00:25:49,880 Speaker 2: on the energy sector. For more, co host Alex Steel 523 00:25:49,920 --> 00:25:53,400 Speaker 2: and I were joined by Thomas Rowlands Reese, bnev's head 524 00:25:53,440 --> 00:25:56,560 Speaker 2: of research for North America. We first asked Thomas, what 525 00:25:56,760 --> 00:25:58,800 Speaker 2: has happened over the last two years in terms of 526 00:25:58,840 --> 00:26:01,320 Speaker 2: deployment and project and what is left to do? 527 00:26:01,760 --> 00:26:03,919 Speaker 7: I think the main thing that has happened, you know, 528 00:26:03,960 --> 00:26:05,920 Speaker 7: you'll see most of the money will have flowed through 529 00:26:06,040 --> 00:26:09,000 Speaker 7: into the build out of the power sect, particularly into 530 00:26:09,040 --> 00:26:11,560 Speaker 7: solar and wind and storage. Now there's a question of 531 00:26:11,560 --> 00:26:13,840 Speaker 7: whether that was all going to get built anyway, and 532 00:26:13,920 --> 00:26:16,000 Speaker 7: what you'd say the real value of the inflation Reduction Act, 533 00:26:16,000 --> 00:26:19,720 Speaker 7: there is been more of a buffer against changing commodities prices. 534 00:26:20,119 --> 00:26:23,280 Speaker 7: So when the Act was passed, natural gas was pretty expensive. 535 00:26:23,320 --> 00:26:25,840 Speaker 7: It's come down a whole lot since then. So at 536 00:26:25,840 --> 00:26:27,840 Speaker 7: the time, you know, you might have argued that that 537 00:26:27,840 --> 00:26:30,000 Speaker 7: stuff was going to get built anyway, but with the 538 00:26:30,080 --> 00:26:32,840 Speaker 7: drop in prices, I think that actually maybe it wouldn't happen, 539 00:26:32,840 --> 00:26:36,040 Speaker 7: So it gave that stability to that sector. Then outside 540 00:26:36,040 --> 00:26:38,560 Speaker 7: of that, one of the big things we've seen is 541 00:26:38,600 --> 00:26:42,520 Speaker 7: the development of supply chains. You know, where the US 542 00:26:42,640 --> 00:26:46,560 Speaker 7: was really at a standing start with regards batteries and 543 00:26:46,680 --> 00:26:49,200 Speaker 7: solar in particular, now we're seeing a lot of factories 544 00:26:49,200 --> 00:26:53,440 Speaker 7: being announced in different states across the country. And then 545 00:26:53,520 --> 00:26:59,680 Speaker 7: finally a real uptick in investment in hydrogen Electoralizer orders 546 00:26:59,720 --> 00:27:03,080 Speaker 7: have have significantly ticked upwards. Those are some of the 547 00:27:04,160 --> 00:27:06,240 Speaker 7: it's kind of kept the power sector on the steady 548 00:27:06,240 --> 00:27:09,480 Speaker 7: path that was on, and then it's really poured fertilizer 549 00:27:09,520 --> 00:27:11,720 Speaker 7: on the ground of some of these more nascent technologies 550 00:27:12,960 --> 00:27:15,600 Speaker 7: in your world of you know, kind of managing this 551 00:27:15,680 --> 00:27:18,200 Speaker 7: transition to a cleaner energy. 552 00:27:18,440 --> 00:27:21,879 Speaker 2: What is the political risk that for this market, for 553 00:27:21,920 --> 00:27:23,680 Speaker 2: this part of the world. If we were to get 554 00:27:24,240 --> 00:27:26,640 Speaker 2: a reelection of former President Trump, what would that mean. 555 00:27:27,320 --> 00:27:29,280 Speaker 7: It's something we get asked about a lot, and actually 556 00:27:29,320 --> 00:27:32,960 Speaker 7: we're producing some research right now to really answer that question. 557 00:27:33,600 --> 00:27:36,800 Speaker 7: I think one of the things that we have concluded 558 00:27:37,040 --> 00:27:40,760 Speaker 7: is that actually the main provisions of the Inflation Reduction 559 00:27:40,800 --> 00:27:43,560 Speaker 7: Act are probably safe for a couple of reasons. One 560 00:27:43,640 --> 00:27:48,080 Speaker 7: is that in the US it's so hard to change legislation, 561 00:27:48,400 --> 00:27:51,119 Speaker 7: you know, with you don't have a trifector, and you know, 562 00:27:51,160 --> 00:27:54,160 Speaker 7: whatever the result of the election, a trifector is somewhat unlikely. 563 00:27:54,640 --> 00:27:57,560 Speaker 7: And even if there was a Republican trifector, a lot 564 00:27:57,600 --> 00:27:59,920 Speaker 7: of the investment from the Inflation Reduction Act is going 565 00:28:00,080 --> 00:28:03,840 Speaker 7: into states and into districts represented by Republicans, so there's 566 00:28:04,760 --> 00:28:06,639 Speaker 7: they would have to have a really big majority in 567 00:28:06,680 --> 00:28:10,000 Speaker 7: both chambers of the House. So I think there are 568 00:28:10,080 --> 00:28:13,080 Speaker 7: certain aspects of the Inflation Reduction Act that could change. 569 00:28:13,160 --> 00:28:15,560 Speaker 7: There's how the laws are implemented. There's a lot of 570 00:28:15,560 --> 00:28:18,440 Speaker 7: regulations still being written around some of the tax credits, 571 00:28:18,760 --> 00:28:22,080 Speaker 7: and that could be written differently because that happens in 572 00:28:22,119 --> 00:28:26,520 Speaker 7: government agencies which report up to the executive branch. But 573 00:28:26,920 --> 00:28:31,160 Speaker 7: I think there's less risk than maybe one might assume. 574 00:28:31,200 --> 00:28:33,480 Speaker 3: How much money still needs to get deployed. I just 575 00:28:33,520 --> 00:28:35,640 Speaker 3: was really struck by Sarah Week for example. It's where 576 00:28:35,640 --> 00:28:37,640 Speaker 3: all the energy people go and talk about stuff. It's 577 00:28:37,640 --> 00:28:40,240 Speaker 3: a big conference, happens in Houston every year, happens in March, 578 00:28:40,360 --> 00:28:43,600 Speaker 3: and Secretary Granholm is really like, guys, come and get money, 579 00:28:43,760 --> 00:28:45,800 Speaker 3: like we have it, we will give it to you. 580 00:28:45,880 --> 00:28:48,440 Speaker 3: Come to us to let's give us money. And some 581 00:28:48,480 --> 00:28:50,240 Speaker 3: people don't like that. Some people are like that just 582 00:28:50,280 --> 00:28:52,680 Speaker 3: shows that we're spending money on stuff that we don't 583 00:28:52,720 --> 00:28:54,040 Speaker 3: necessarily need to spend money on. 584 00:28:54,600 --> 00:28:57,440 Speaker 7: Yeah, I mean, it's an interesting one because for the 585 00:28:57,440 --> 00:29:00,960 Speaker 7: most part, the Inflation Reduction Act is not a pot 586 00:29:00,960 --> 00:29:04,440 Speaker 7: of money, in that the majority of the investment would 587 00:29:04,440 --> 00:29:06,400 Speaker 7: come through tax credits, which are really just dependent on 588 00:29:06,400 --> 00:29:08,960 Speaker 7: how much stuff gets built. Where there is a pot 589 00:29:08,960 --> 00:29:11,000 Speaker 7: of money, and I should have come in with the 590 00:29:11,040 --> 00:29:14,520 Speaker 7: actual figure is the amount that's been authorized for the 591 00:29:14,520 --> 00:29:17,960 Speaker 7: Loan Program's office. So and that is the one that 592 00:29:18,080 --> 00:29:20,640 Speaker 7: is really politically under threat because that you know, that 593 00:29:20,760 --> 00:29:23,800 Speaker 7: was the the program in the past that was associated 594 00:29:23,800 --> 00:29:27,200 Speaker 7: with Cylindra. So there is this perception that this is 595 00:29:27,320 --> 00:29:31,600 Speaker 7: money being allocated to companies that may fail, and there's 596 00:29:32,200 --> 00:29:35,200 Speaker 7: a lot of that money still yet to be spent currently, 597 00:29:35,240 --> 00:29:37,720 Speaker 7: and it's it's an ongoing process. 598 00:29:38,480 --> 00:29:42,680 Speaker 2: What industries are doing relatively well versus their benchmarks, versus 599 00:29:42,720 --> 00:29:44,520 Speaker 2: maybe some industries that aren't. We were talking to Brian 600 00:29:44,560 --> 00:29:47,480 Speaker 2: Egger from Bloomberg Intelligence about the cruise industry and their 601 00:29:47,480 --> 00:29:49,720 Speaker 2: carbon footprint and trying to manage that. Which industries are 602 00:29:49,720 --> 00:29:51,120 Speaker 2: doing well, which maybe you're struggling. 603 00:29:52,520 --> 00:29:54,440 Speaker 7: I suppose on I think of things on a really 604 00:29:54,480 --> 00:29:56,800 Speaker 7: macro level, so you know, I divide the world into 605 00:29:56,840 --> 00:30:00,240 Speaker 7: power and transport and industry, which obviously is a real 606 00:30:00,680 --> 00:30:05,080 Speaker 7: simplification most of them. Momentum in decarbonization to date in 607 00:30:05,120 --> 00:30:07,440 Speaker 7: the US has been in the power sector, okay, and 608 00:30:07,520 --> 00:30:10,520 Speaker 7: most of that has been because of gas plants replacing 609 00:30:10,560 --> 00:30:13,440 Speaker 7: coal plants, which doesn't get you to zero, It just 610 00:30:14,000 --> 00:30:17,280 Speaker 7: brings emissions down in the near term. So wind and 611 00:30:17,320 --> 00:30:20,400 Speaker 7: solar is then the next wave, and that's really starting 612 00:30:20,440 --> 00:30:22,960 Speaker 7: to kick in now. So there is good progress in power. 613 00:30:23,760 --> 00:30:28,480 Speaker 7: Then transport historically hasn't had great success in reducing its emissions. 614 00:30:28,480 --> 00:30:30,560 Speaker 7: But I think we're just at the start of the 615 00:30:30,600 --> 00:30:33,000 Speaker 7: electric vehicle wave, which is gonna I think be a 616 00:30:33,040 --> 00:30:35,200 Speaker 7: slow burn over a couple of decades, because even if 617 00:30:35,240 --> 00:30:39,000 Speaker 7: electric vehicle sales increase quickly, it takes time for the 618 00:30:39,040 --> 00:30:41,840 Speaker 7: whole vehicle fleet to turnover. But there is a downward 619 00:30:42,160 --> 00:30:47,120 Speaker 7: trajectory in transport. So it's really industry where what we 620 00:30:47,200 --> 00:30:49,080 Speaker 7: call the hard to abate sectors, where there's. 621 00:30:48,920 --> 00:30:51,960 Speaker 3: More work to be done, like some men steel that 622 00:30:52,040 --> 00:30:54,280 Speaker 3: kind of fun stuff before I let you go. What 623 00:30:54,320 --> 00:30:56,400 Speaker 3: I've also noticed when it comes to the IRA specifically, 624 00:30:56,440 --> 00:30:58,680 Speaker 3: it really helped ignite the supply side of it with 625 00:30:58,720 --> 00:31:00,840 Speaker 3: tax credits, but now the demand side. So the gap 626 00:31:00,880 --> 00:31:03,240 Speaker 3: between here's my cool hydrogen thing that I just built 627 00:31:03,400 --> 00:31:05,640 Speaker 3: and then here's this company buying that cool hydrogen thing 628 00:31:05,640 --> 00:31:06,880 Speaker 3: that I just built is wide. 629 00:31:07,360 --> 00:31:08,400 Speaker 2: Yes, how do we solve that? 630 00:31:08,720 --> 00:31:12,360 Speaker 7: I mean, that's very especially true for hydrogen, and that 631 00:31:12,480 --> 00:31:17,360 Speaker 7: is fundamentally the issue around the policy support that hydrogen 632 00:31:17,400 --> 00:31:19,600 Speaker 7: receives is it's so much has been focused on supply, 633 00:31:20,760 --> 00:31:22,960 Speaker 7: but I think it speaks to a deeper issue of 634 00:31:23,000 --> 00:31:25,200 Speaker 7: what policy has to come next, because I think the 635 00:31:25,280 --> 00:31:29,520 Speaker 7: nature of the Inflation Reduction Act was really throwing a 636 00:31:29,560 --> 00:31:32,600 Speaker 7: lot at all these different industries to get things kickstarted. 637 00:31:33,440 --> 00:31:36,360 Speaker 7: It's a bit like putting petrol in the engine. Maybe 638 00:31:36,360 --> 00:31:39,760 Speaker 7: not the best analogies such, but it put petrol in 639 00:31:39,800 --> 00:31:42,520 Speaker 7: the engine of the energy transition in the US. But 640 00:31:42,600 --> 00:31:44,520 Speaker 7: whatever comes next needs to be more like a steering 641 00:31:44,520 --> 00:31:48,719 Speaker 7: wheel because it's established this momentum. But there are all 642 00:31:48,760 --> 00:31:50,800 Speaker 7: these questions now that are you know, we never knew 643 00:31:50,800 --> 00:31:53,640 Speaker 7: we'd have this problem of oh, there's too much supply, 644 00:31:53,760 --> 00:31:56,120 Speaker 7: where's the demand, because at the time there was no 645 00:31:56,160 --> 00:31:58,480 Speaker 7: supply and no demand. Yeah, so the next wave of 646 00:31:58,480 --> 00:31:59,640 Speaker 7: a legislation has to. 647 00:32:00,800 --> 00:32:04,320 Speaker 2: Our Thanks to Thomas Rowlands Reese, bnaf's head of research 648 00:32:04,400 --> 00:32:07,080 Speaker 2: for North America, we turned out to a Bloomberg Big 649 00:32:07,120 --> 00:32:09,920 Speaker 2: Take story we focused on this week, titled Harvard Endowment 650 00:32:09,960 --> 00:32:12,760 Speaker 2: paid out a fortune and Lost its investing edge. The 651 00:32:12,800 --> 00:32:16,360 Speaker 2: story talks about how Harvard's money managers underperformed after changing 652 00:32:16,360 --> 00:32:19,320 Speaker 2: personnel and strategies at the worst times. Co host Alex 653 00:32:19,360 --> 00:32:21,880 Speaker 2: Steel and I were joined by the story's author, Janet Lauren, 654 00:32:22,200 --> 00:32:25,400 Speaker 2: Bloomberg Higher Education finance reporter. We first asked Janet to 655 00:32:25,440 --> 00:32:27,760 Speaker 2: discuss her findings and what she learned well. 656 00:32:27,800 --> 00:32:30,640 Speaker 11: I went and read through a lot of anal reports 657 00:32:30,640 --> 00:32:34,080 Speaker 11: of the Harvard Management Company, which has managed Harvard's endowment 658 00:32:34,120 --> 00:32:37,680 Speaker 11: for fifty years this year. And one issue that came up, 659 00:32:37,680 --> 00:32:40,080 Speaker 11: which is no surprise to our listeners and readers, is 660 00:32:40,080 --> 00:32:43,000 Speaker 11: there's been a lot of turnover there. Since two thousand 661 00:32:43,040 --> 00:32:45,920 Speaker 11: and five, a guy by the name of Jack Mayer 662 00:32:46,120 --> 00:32:50,520 Speaker 11: had extraordinary returns. The team he built, they paid their 663 00:32:50,560 --> 00:32:53,840 Speaker 11: managers a lot of money for really outstanding returns. They 664 00:32:53,880 --> 00:32:57,239 Speaker 11: got a lot of complaints that system was dismantled, and 665 00:32:57,280 --> 00:33:00,520 Speaker 11: since then they've had seven people running the fund, including 666 00:33:00,560 --> 00:33:04,160 Speaker 11: some interims, but two people who stayed less than two years. 667 00:33:04,520 --> 00:33:08,719 Speaker 11: Lots of turnover, lots of strategy changes. And you know, 668 00:33:08,800 --> 00:33:11,440 Speaker 11: Harvard was the envy of the world, and if you 669 00:33:11,480 --> 00:33:13,920 Speaker 11: look at their ten year return, you know they were 670 00:33:13,920 --> 00:33:15,320 Speaker 11: in the bottom twenty percent. 671 00:33:16,320 --> 00:33:19,040 Speaker 2: Why the turnover, It seemed like a pretty good seat 672 00:33:19,080 --> 00:33:19,320 Speaker 2: to me. 673 00:33:19,840 --> 00:33:23,600 Speaker 11: Yeah, Well, there's a lot of scrutiny. And one issue is, 674 00:33:23,880 --> 00:33:27,479 Speaker 11: you know, if you're a top performer there, you're getting paid. 675 00:33:27,960 --> 00:33:30,400 Speaker 11: You show up on the tax forms and everybody knows 676 00:33:30,400 --> 00:33:33,320 Speaker 11: how much you are being paid, and there's a lot 677 00:33:33,320 --> 00:33:33,960 Speaker 11: of scrutiny. 678 00:33:34,840 --> 00:33:37,040 Speaker 3: So who, like what universities are doing well if we 679 00:33:37,160 --> 00:33:38,800 Speaker 3: rank them in terms of return and all. 680 00:33:38,680 --> 00:33:42,280 Speaker 11: That, Well, if you look at their big rival Yale. 681 00:33:43,160 --> 00:33:46,240 Speaker 11: They are in the top ten percent of returns for 682 00:33:46,520 --> 00:33:49,480 Speaker 11: a ten year annualized return in the twenty year annualized return. 683 00:33:49,920 --> 00:33:54,080 Speaker 11: They've had largely one person, the legendary David Swinson, who 684 00:33:54,160 --> 00:33:57,160 Speaker 11: managed their fund from nineteen eighty six, a Yale trained 685 00:33:57,200 --> 00:34:00,560 Speaker 11: economist until he died in twenty twenty one, and one 686 00:34:00,560 --> 00:34:04,000 Speaker 11: of his trusted lieutenants has picked up where he left off. 687 00:34:04,400 --> 00:34:07,680 Speaker 11: They have a very different structure. They've unlike Harvard, which 688 00:34:07,760 --> 00:34:10,600 Speaker 11: used to employ, you know, more than two hundred people traders, 689 00:34:11,080 --> 00:34:15,160 Speaker 11: They've always sought to work with outside managers, and they 690 00:34:15,480 --> 00:34:17,880 Speaker 11: sort of were there at the beginning of private equity 691 00:34:17,880 --> 00:34:21,600 Speaker 11: when there wasn't as much capital, and they seated a 692 00:34:21,600 --> 00:34:24,600 Speaker 11: lot of these managers who've had excellent returns. And you 693 00:34:24,640 --> 00:34:26,920 Speaker 11: know how private equity works, You're not going to get 694 00:34:26,920 --> 00:34:29,040 Speaker 11: a big return in year one or year two. There's 695 00:34:29,080 --> 00:34:31,600 Speaker 11: this thing called the j curb, so it takes time. 696 00:34:31,960 --> 00:34:34,920 Speaker 11: And you know, schools like Yale and Princeton and MIT 697 00:34:35,960 --> 00:34:39,400 Speaker 11: whose CIOs have worked for Yale in the past, they 698 00:34:39,440 --> 00:34:42,640 Speaker 11: all invest together and they've they've all done much better 699 00:34:42,680 --> 00:34:43,240 Speaker 11: than Harvard. 700 00:34:43,920 --> 00:34:47,239 Speaker 2: So I mean that Yale I called it's referred to 701 00:34:47,239 --> 00:34:49,279 Speaker 2: as the Yale model. It used to be, you know, 702 00:34:49,280 --> 00:34:51,560 Speaker 2: back in the day, a sixty forty portfolio. Then Yelle said, no, 703 00:34:51,600 --> 00:34:53,719 Speaker 2: we're going to allocate a lot two alternatives. I think 704 00:34:53,960 --> 00:34:56,120 Speaker 2: in the simplest form, that's kind of the Yale model. 705 00:34:56,480 --> 00:34:57,920 Speaker 2: Hasn't everybody replicated that. 706 00:34:58,200 --> 00:35:01,359 Speaker 11: Well, everybody's tried to, But can you get into the 707 00:35:01,360 --> 00:35:03,040 Speaker 11: funds that Yale us in no way? 708 00:35:04,360 --> 00:35:06,440 Speaker 2: So they're still reaping the benefits of being early. 709 00:35:07,000 --> 00:35:11,000 Speaker 11: Absolutely, but now this year and last year we're not 710 00:35:11,160 --> 00:35:14,680 Speaker 11: great years of returns for the biggest endowments. Private equity 711 00:35:14,760 --> 00:35:19,200 Speaker 11: has really lagged in public equities this year, what was it, 712 00:35:19,280 --> 00:35:22,759 Speaker 11: twenty two twenty three percent return? The college endowments are 713 00:35:22,880 --> 00:35:24,560 Speaker 11: going to be nowhere near that. I mean, to be 714 00:35:24,840 --> 00:35:27,040 Speaker 11: fully in the S and P would be too much 715 00:35:27,120 --> 00:35:29,160 Speaker 11: risk for them. But you know, we've seen a few 716 00:35:29,239 --> 00:35:33,440 Speaker 11: schools report returns high single digits. You know, they need 717 00:35:33,520 --> 00:35:36,399 Speaker 11: to get seven eight percent to get to pay their 718 00:35:36,400 --> 00:35:37,720 Speaker 11: salaries plus inflation. 719 00:35:38,880 --> 00:35:42,080 Speaker 3: When we talk about what they're not investing in. There's 720 00:35:42,080 --> 00:35:45,520 Speaker 3: been a huge social pushback we've seen at universities like 721 00:35:45,560 --> 00:35:47,960 Speaker 3: Columbia when it comes to the war in Gaza. There's 722 00:35:47,960 --> 00:35:51,120 Speaker 3: obviously been a big push against fossil fuel investments. How 723 00:35:51,239 --> 00:35:55,040 Speaker 3: quick or how nimble are these endowments to respond to those. 724 00:35:55,080 --> 00:35:58,400 Speaker 11: Well, first of all, nobody is divesting from things related 725 00:35:58,440 --> 00:36:02,080 Speaker 11: to Israel. But that's pretty clear, So that's not really 726 00:36:02,080 --> 00:36:05,360 Speaker 11: a factor of what these colleges are doing. And Harvard 727 00:36:05,480 --> 00:36:08,680 Speaker 11: did not divest from fossil fuels. They're rolling things off, 728 00:36:08,920 --> 00:36:11,759 Speaker 11: and they had a loss in twenty twenty two, and 729 00:36:11,800 --> 00:36:14,560 Speaker 11: they said a small portion of that was not being 730 00:36:14,560 --> 00:36:17,600 Speaker 11: in the funds that you know, did very well on 731 00:36:17,760 --> 00:36:20,960 Speaker 11: energy in twenty twenty two. Divesting is really is not 732 00:36:21,040 --> 00:36:23,560 Speaker 11: an investing strategy. It's going you know, what does Warren 733 00:36:23,560 --> 00:36:27,799 Speaker 11: Buffett say, don't do anything with emotion and colleges, you know, 734 00:36:27,840 --> 00:36:30,440 Speaker 11: if that's what they're looking for. You saw meddling with 735 00:36:30,520 --> 00:36:34,160 Speaker 11: the change in pay structure, meddling with energy, meddling not 736 00:36:34,239 --> 00:36:36,600 Speaker 11: such a good investment policy. And Harvard has also been 737 00:36:36,600 --> 00:36:40,400 Speaker 11: pretty steadfast that they're not doing anything related to the 738 00:36:40,480 --> 00:36:42,880 Speaker 11: BDS movement for twenty years. 739 00:36:42,600 --> 00:36:45,360 Speaker 2: They have been, so, I mean, they still have fifty 740 00:36:45,400 --> 00:36:48,600 Speaker 2: billion dollar endowment, they're still the biggest they are, so 741 00:36:48,920 --> 00:36:50,279 Speaker 2: I mean, I'm not going to cry for these guys. 742 00:36:50,320 --> 00:36:50,759 Speaker 4: Right now. 743 00:36:51,000 --> 00:36:55,239 Speaker 11: But also, you know who's nipping at their toes is 744 00:36:55,280 --> 00:36:57,680 Speaker 11: the University of Texas. And the reason is they have 745 00:36:57,719 --> 00:37:02,200 Speaker 11: an asset that's completely uncorrelated to anything. They have oil 746 00:37:02,560 --> 00:37:05,040 Speaker 11: and they have two point one million acres of land 747 00:37:05,040 --> 00:37:07,120 Speaker 11: in West Texas that they were just given in the 748 00:37:07,160 --> 00:37:10,080 Speaker 11: eighteen hundred by the State of Texas, and a couple 749 00:37:10,239 --> 00:37:12,920 Speaker 11: years ago they had an extra two billion dollar gains 750 00:37:12,960 --> 00:37:15,680 Speaker 11: that had nothing to do with anything they did investing. 751 00:37:15,239 --> 00:37:18,240 Speaker 2: Wise, all right, Thanks to Janet Lauren Bloomberg Higher Education 752 00:37:18,280 --> 00:37:19,200 Speaker 2: at Finance Reporter. 753 00:37:19,520 --> 00:37:24,040 Speaker 1: This is the Bloomberg Intelligence podcast, available on apples, Spotify, 754 00:37:24,239 --> 00:37:27,160 Speaker 1: and anywhere else you will get your podcasts. Listen live 755 00:37:27,239 --> 00:37:30,840 Speaker 1: each weekday ten am to noon Eastern on Bloomberg dot Com, 756 00:37:30,960 --> 00:37:34,360 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 757 00:37:34,480 --> 00:37:37,600 Speaker 1: You can also watch us live every weekday on YouTube 758 00:37:37,680 --> 00:37:39,520 Speaker 1: and always on the Bloomberg terminal