WEBVTT - Amazon to Buy Satellite Operator Globalstar for $90 a Share 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.080 or watch us live on YouTube. 0:00:23.760 --> 0:00:25.480 A little m and a trade today here, not so 0:00:25.520 --> 0:00:28.520 little for this seller here, But we're Amazon, Amazon, which 0:00:28.560 --> 0:00:30.160 doesn't do a lot of acquisitions, and you agreed to 0:00:30.160 --> 0:00:33.680 acquire satellite operator Global Start in a roughly eleven point 0:00:33.720 --> 0:00:37.600 six billion dollar deal to boost its satellite operation. Okay, 0:00:37.840 --> 0:00:40.559 Michelle Davis, she's got the detailed senior deals reporter for 0:00:40.640 --> 0:00:44.159 Bloomberg News. Here, Michelle, what's Amazon up to these days? 0:00:44.440 --> 0:00:47.680 You know this deal is all about basically, you know, 0:00:47.720 --> 0:00:51.600 there's a massive rate to race to dominate space based productivity. 0:00:51.720 --> 0:00:54.840 All the tech giants are trying to do it. SpaceX 0:00:54.880 --> 0:00:58.040 is obviously the leader. Amazon also has a big ambitions 0:00:58.040 --> 0:00:59.640 to be a leader in satellites and this steal is 0:00:59.640 --> 0:01:03.160 all about spectrum. Global Star has really valuable spectrum, which 0:01:03.200 --> 0:01:05.039 is think of it as real estate. That's you know, 0:01:05.080 --> 0:01:08.360 a scarce asset. Whoever got it first was able to 0:01:08.400 --> 0:01:10.800 sell it later on, and that's that's how Global Star 0:01:11.880 --> 0:01:14.520 ended up, you know, being able to sell this to Amazon. 0:01:14.600 --> 0:01:16.440 And not only are they getting spectrum with this deal, 0:01:16.480 --> 0:01:19.800 they're also getting infrastructure on the ground and a massive 0:01:19.840 --> 0:01:24.080 customer in Apple, Apples one of global Stars customers. As 0:01:24.120 --> 0:01:28.040 part of the deal, Amazon was able to negotiate basically, 0:01:28.240 --> 0:01:31.240 you know, keeping Apple on board, they'll be using the 0:01:31.319 --> 0:01:34.200 Apple will be using its services to provide you know, 0:01:34.400 --> 0:01:37.280 emergency services. If you're out hiking and there's no no 0:01:37.400 --> 0:01:40.759 cell service, you can use satellites to call nine one one, 0:01:40.880 --> 0:01:42.920 or you know, people can find you and find my friends. 0:01:42.920 --> 0:01:46.800 Basically, is there reason to think that anyone would raise 0:01:46.800 --> 0:01:48.320 their hand object to this deal? 0:01:48.480 --> 0:01:49.800 Would regulators get in the way. 0:01:50.320 --> 0:01:54.200 It's a good question. We've seen regulators be pretty open 0:01:54.320 --> 0:01:57.360 to these spectrum deals. I mean, the regulators themselves are 0:01:57.400 --> 0:02:00.240 the ones who auction off spectrum when it is of 0:02:00.320 --> 0:02:03.200 available in the open market. But in a deal like 0:02:03.240 --> 0:02:05.520 this where you know Global Star was the owner of it, 0:02:05.600 --> 0:02:07.280 of course, you know they get to be the. 0:02:07.640 --> 0:02:09.680 Ultimate decider of who buys it. 0:02:09.720 --> 0:02:13.120 And because Amazon isn't the big leader in this space, 0:02:13.720 --> 0:02:15.680 you know, it doesn't seem like it'd be an issue, 0:02:15.680 --> 0:02:18.520 but you never know, I think what's interesting. 0:02:18.120 --> 0:02:20.320 About but all of this is while this does. 0:02:20.200 --> 0:02:22.920 Kind of help Amazon accelerate its ambitions to be a 0:02:22.960 --> 0:02:27.560 big leader in satellite SpaceX still you know, light years 0:02:27.600 --> 0:02:31.240 ahead of it has way more satellites in orbit. Amazon 0:02:31.280 --> 0:02:35.679 hasn't been able to launch as many as SpaceX, so 0:02:35.960 --> 0:02:37.720 that will be something else that it has to do. 0:02:38.080 --> 0:02:41.040 And PAULA was just noticing that Global Star CEO is 0:02:41.040 --> 0:02:43.639 Paul Jacobs, the former CEO of Qualcom. 0:02:44.639 --> 0:02:48.360 Okay, so I mean Amazon does have this low earth 0:02:48.480 --> 0:02:53.080 orbit satellite network Amazon LEO exactly, but I don't hear 0:02:53.160 --> 0:02:53.680 much about that. 0:02:54.040 --> 0:02:55.519 It's not really in use yet. 0:02:56.040 --> 0:02:58.960 There's still kind of literally getting it off the ground, 0:03:00.200 --> 0:03:05.640 and they're hoping that by twenty twenty eight, especially after 0:03:05.680 --> 0:03:07.480 this deal, they will be able to launch a. 0:03:07.800 --> 0:03:10.080 Direct to device service. 0:03:09.680 --> 0:03:12.880 Which is like having a cell phone tower up in space, 0:03:12.919 --> 0:03:16.799 and it basically means, you know, consumers companies would be 0:03:16.880 --> 0:03:21.119 able to get voice text data without having to use 0:03:21.240 --> 0:03:23.239 a cell tower, but by using their statellites. 0:03:23.360 --> 0:03:25.200 Paul, you had mentioned that Amazon does not make a 0:03:25.240 --> 0:03:27.880 lot of big deals. If you go to the buyp 0:03:28.160 --> 0:03:31.760 function on the Bloomberg terminal, it shows you the buyer profile. 0:03:32.160 --> 0:03:34.600 And the biggest deal is that Amazon has made direct 0:03:35.280 --> 0:03:38.360 M and a Whole Foods was back in twenty seventeen 0:03:38.440 --> 0:03:40.960 for thirteen point six billion dollars Global Star of course 0:03:41.000 --> 0:03:44.400 what we're reporting on today, and MGM holdings the Library 0:03:44.480 --> 0:03:46.640 for ten point two billion, that was back in twenty 0:03:46.720 --> 0:03:50.120 twenty one. Otherwise, Amazon kind of builds it itself and 0:03:50.320 --> 0:03:51.640 we'll see how things shake. 0:03:51.480 --> 0:03:54.640 Out before it decides what the I don't know this one. Yeah, 0:03:54.680 --> 0:03:56.360 you could sort by recent and by largest. 0:03:58.040 --> 0:04:00.400 So what's Amazon saying is their strategy here? I mean, 0:04:00.400 --> 0:04:02.520 are they going to invest in this business? 0:04:03.000 --> 0:04:03.160 Yeah? 0:04:03.240 --> 0:04:05.400 I mean what they're really saying is that this, you know, 0:04:05.560 --> 0:04:08.840 is part of their vision to provide connectivity to people 0:04:08.960 --> 0:04:12.520 and be a leader on Earth, connecting people, you know, 0:04:12.960 --> 0:04:16.719 through groceries and deliveries and now you know, voice, text 0:04:16.760 --> 0:04:17.360 and data. 0:04:17.400 --> 0:04:20.320 And this is separate from Jeff Bezos' own little rocket. Yeah. 0:04:20.360 --> 0:04:22.560 Well that's why Michelle said on Earth, because at some 0:04:22.600 --> 0:04:24.960 point it's going to expand to in space as well. 0:04:26.320 --> 0:04:29.160 Stay with us more from Bloomberg Intelligence coming up after this. 0:04:32.839 --> 0:04:36.520 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:04:36.600 --> 0:04:39.320 weekdays at ten am. He's done on Apple, Cocklay and 0:04:39.320 --> 0:04:42.600 Android Auto with the Bloomberg Business app. Listen on demand 0:04:42.640 --> 0:04:46.200 wherever you get your podcasts, or watch us live on YouTube. 0:04:47.120 --> 0:04:50.839 Let's talk about another group that obviously is affected directly 0:04:50.920 --> 0:04:54.240 by the surgeon oil prices, and that is the airline sector. 0:04:55.000 --> 0:04:58.440 There's a really interesting story today, Paul, about the United 0:04:58.480 --> 0:05:03.840 CEO pitching President Trump about a possible combination with American 0:05:04.160 --> 0:05:06.480 that kind of just struck me as bananas because it 0:05:06.520 --> 0:05:08.040 would create a behemoth. 0:05:07.680 --> 0:05:10.120 Yep, and they didn't let smaller airlines get together. I'm 0:05:10.120 --> 0:05:11.599 not sure why they let these big ones get together. 0:05:11.640 --> 0:05:13.200 All right, So let's bring in Sid philipp Is, our 0:05:13.240 --> 0:05:17.200 chief correspondent for Global aviation. So, I mean, as Pop 0:05:17.200 --> 0:05:20.080 pointed out, they didn't let Jet Blue and Spirit get together, 0:05:20.160 --> 0:05:23.919 why would someone okay a United American Airlines combination? 0:05:24.760 --> 0:05:27.560 So, Scarlett, this is this is obviously a story that 0:05:27.600 --> 0:05:30.600 we've sort of heard from multiple sources, and I think 0:05:30.800 --> 0:05:34.280 the airlines are looking to test the administration on how 0:05:34.320 --> 0:05:36.919 willing they would be to approve of deals. I mean, 0:05:36.960 --> 0:05:39.680 the last administration was pretty clear that they did not 0:05:39.839 --> 0:05:45.320 see consolidation as sort of beneficial to customers, but they 0:05:45.360 --> 0:05:48.200 sort of Trump administration has been more business friendly, and 0:05:48.279 --> 0:05:52.040 so United Airlines has sort of floated this idea to 0:05:52.200 --> 0:05:55.200 the President. In terms of merging with American Airlines, I mean, 0:05:55.200 --> 0:05:58.880 it would create the largest airline on the planet, and 0:05:59.600 --> 0:06:01.760 it's just still wouldn't be I mean, they still only 0:06:01.800 --> 0:06:04.279 have a third of the US market check combined, so 0:06:04.320 --> 0:06:07.599 it's not quite this would sort of dominate the market. 0:06:07.600 --> 0:06:09.760 I mean it would because I mean they would have 0:06:09.800 --> 0:06:14.159 all the important rules like Dallas and Chicago, where United 0:06:14.160 --> 0:06:16.640 and American control a large junk of the market, but 0:06:17.320 --> 0:06:20.200 in other places like we've seen other airlines as well. 0:06:20.279 --> 0:06:24.040 So it does look like it's unlikely to go through 0:06:24.080 --> 0:06:27.000 because I mean, this would be opposed by all the 0:06:27.040 --> 0:06:29.440 airlines who are not part of it, It would be 0:06:29.440 --> 0:06:32.440 opposed by consumer rights activists, and may also sort of 0:06:32.960 --> 0:06:36.200 not find fail with the legislators, and so we have 0:06:36.279 --> 0:06:37.840 to see how this will go through. 0:06:38.279 --> 0:06:41.080 Do we have any feeling from the regulators in the past, 0:06:41.120 --> 0:06:43.360 because again, as Scarla mentioned, all we kind of know 0:06:43.440 --> 0:06:46.320 is is observers is that they didn't want they didn't 0:06:46.360 --> 0:06:49.720 let too little, anty bitty airlines get together. How would 0:06:49.720 --> 0:06:50.279 this happen? 0:06:50.960 --> 0:06:53.400 So we still we're still looking on We're still waiting 0:06:53.440 --> 0:06:55.640 to see any sort of commentary from it. I mean, 0:06:55.920 --> 0:06:58.159 the sort of the most direct commentary we've heard was 0:06:58.160 --> 0:07:01.880 from Sean Duffy, the trap Transportation Secretary, when he spoke 0:07:01.960 --> 0:07:06.440 last week and told CNN the CNBC that the President 0:07:06.600 --> 0:07:10.040 likes big deals and he would any sort of and 0:07:10.400 --> 0:07:14.040 when asked about a specific large merger, he said that 0:07:14.120 --> 0:07:16.400 they may have to share assets. And so that's the 0:07:16.440 --> 0:07:19.200 only thing we've really heard. But in terms of whether 0:07:19.280 --> 0:07:21.640 or not this administration will be willing to sign off 0:07:21.680 --> 0:07:23.960 on such a big deal, that's still to be seen. 0:07:24.160 --> 0:07:26.320 Okay, So there's a bit of a backstory here in 0:07:26.360 --> 0:07:28.840 that United CEO Scott Kirby was the one who said 0:07:28.840 --> 0:07:31.040 that this is something he kind of floated, and he 0:07:31.240 --> 0:07:33.840 has a history with American Airlines, so it didn't come 0:07:33.840 --> 0:07:34.760 from out of nowhere. 0:07:34.880 --> 0:07:37.320 Absolutely. I mean, this is also personal for Scott Kirby 0:07:37.360 --> 0:07:41.440 because Scott Kirby was previously the president of American Allies 0:07:41.440 --> 0:07:44.800 and he left in twenty sixteen when it became clear 0:07:44.840 --> 0:07:47.640 that he wasn't going to be CEO of American Alliance, 0:07:47.680 --> 0:07:49.920 and then he sort of joined the United airlines and 0:07:49.960 --> 0:07:52.280 he rose to the top job. And that's really his 0:07:52.360 --> 0:07:56.440 sort of backstory. And so American and United have been 0:07:56.480 --> 0:07:59.360 sort of always been one uptering each other. I mean 0:07:59.400 --> 0:08:01.720 at the most recent is that they've been battling in 0:08:01.800 --> 0:08:05.640 Chicago over gates and market share, and then the FA 0:08:05.680 --> 0:08:08.080 had to come in and sort of restrict flights because 0:08:08.560 --> 0:08:11.240 there's too many airlines adding flights in Chicago and the 0:08:11.240 --> 0:08:12.880 airport can't actually handle those coupes. 0:08:13.480 --> 0:08:15.440 So what does it mean for I mean, I'm looking 0:08:15.480 --> 0:08:18.360 at Jet Blue that stocks up eleven percent today? Are 0:08:18.440 --> 0:08:20.120 people in the industry saying whoa whoa whoa? 0:08:20.240 --> 0:08:20.280 What? 0:08:20.360 --> 0:08:23.920 People would talk about it United in American? How about 0:08:23.920 --> 0:08:25.520 everybody else? Getting together? 0:08:25.880 --> 0:08:29.240 Absolutely? I mean the fact that this deals out there, 0:08:29.320 --> 0:08:31.960 it also sort of opens the doors for other combinations. 0:08:31.960 --> 0:08:35.920 I mean, especially at times of crisis for the airline industry, 0:08:36.559 --> 0:08:39.120 mergers and acquisitions tend to happen. I mean, we saw 0:08:39.160 --> 0:08:41.679 that in the aftermath of the two thousand and eight 0:08:41.720 --> 0:08:44.920 financial crisis, and for the airline industry at the moment, 0:08:45.320 --> 0:08:48.079 this sort of surgeon oil prices is a massive blow 0:08:48.200 --> 0:08:51.040 because there's only a limit as to how much a 0:08:51.080 --> 0:08:53.760 consumer will be willing to pay before they sort of say, okay, 0:08:53.760 --> 0:08:57.240 we'll hold off on travel this summer. And for the airlines, 0:08:57.520 --> 0:09:00.840 fuel is the biggest sort of single biggest cost aside 0:09:00.840 --> 0:09:03.600 from stuff costs, and so they have to sort of 0:09:03.720 --> 0:09:06.559 figure out how they can actually make money on with 0:09:06.840 --> 0:09:09.120 fuel being where it's at, and that sort of time 0:09:09.240 --> 0:09:13.240 when typically consolidation happens where weekup players tend to get 0:09:13.280 --> 0:09:16.760 snapped up by the more sort of robusts financially. Financially 0:09:16.840 --> 0:09:17.440 robust ones. 0:09:18.679 --> 0:09:19.320 Stay with us. 0:09:19.480 --> 0:09:21.800 More from Bloomberg Intelligence coming up after this. 0:09:25.679 --> 0:09:29.360 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:09:29.440 --> 0:09:32.559 weekdays at ten am Eastern on Apple, Cocklay and Android 0:09:32.559 --> 0:09:35.880 Auto with the Bloomberg Business app. Listen on demand wherever 0:09:35.920 --> 0:09:39.400 you get your podcasts, or watch us live on YouTube. 0:09:40.080 --> 0:09:42.240 I'm not into the EV thing yet. I did get 0:09:42.480 --> 0:09:45.200 one hybrid for the number four Offspring episode. 0:09:44.840 --> 0:09:47.240 Who's in California, So like that's the context here. 0:09:47.360 --> 0:09:50.480 Six dollars guests. So one of the EV companies I 0:09:50.559 --> 0:09:52.079 kind of forget about it. It's just me is a 0:09:52.120 --> 0:09:53.560 lucid group they. 0:09:53.480 --> 0:09:55.280 Make because you're not a Timothy shalomy fan. 0:09:55.480 --> 0:09:55.640 Oh? 0:09:55.880 --> 0:09:56.240 Is that it? 0:09:56.360 --> 0:09:58.160 Yeah, he's the global brand ambassador. 0:09:58.200 --> 0:10:00.480 All right, the stocks you got two point nine billion 0:10:00.520 --> 0:10:04.720 dollar valuation down sixteen percent this year, down sixty five 0:10:04.760 --> 0:10:06.280 percent or the trailing twelve months. But they have some 0:10:06.320 --> 0:10:09.920 news out today. They're going to new CEO and now 0:10:10.080 --> 0:10:12.520 seven hundred and fifty million dollars of fresh investment from 0:10:12.520 --> 0:10:14.280 two big backers here. So let's see what's going on 0:10:14.360 --> 0:10:19.400 with Lucid. Ticker ELCID is the Bloomberg ticker. Craig Trudeall, 0:10:19.559 --> 0:10:23.480 Global Autors, editor for Bloomberg News. He joins from London. Craig, 0:10:23.520 --> 0:10:26.200 what's Lucid doing here to try to turn things around? 0:10:27.480 --> 0:10:29.360 We knew it was going to be a busy morning 0:10:29.400 --> 0:10:33.040 for them. It was an even busier morning than we anticipated. 0:10:33.120 --> 0:10:39.960 We spoke with Sylvio Napoli, the former head of Shindler 0:10:40.400 --> 0:10:46.960 holding of Elevator and you know, moving Walkway fame. He's 0:10:47.000 --> 0:10:51.480 going to take over as CEO, the person who's been 0:10:51.559 --> 0:10:53.679 filling that seat for over a year now on an 0:10:53.679 --> 0:10:57.000 interim basis, Mark winter Off. He will return to the 0:10:57.080 --> 0:11:01.520 role of COO. He took over from the CEO who 0:11:01.559 --> 0:11:05.040 actually kind of took this company public. I think, you know, 0:11:05.160 --> 0:11:08.120 Lucid in addition to you know, you mentioned that the 0:11:08.840 --> 0:11:12.240 you know, commitment as well from the Saudi Public Investment 0:11:12.320 --> 0:11:16.320 Fund and Uber. The other news here was as part 0:11:16.360 --> 0:11:20.320 of this capital raising which they're doing some raising beyond 0:11:20.440 --> 0:11:24.480 just from the PIFF, and Uber is releasing some preliminary 0:11:24.480 --> 0:11:27.320 earnings which did not look great. So this is a 0:11:27.360 --> 0:11:30.640 company that has really been struggling to execute make some 0:11:30.720 --> 0:11:34.880 really appealing and interesting electric vehicles, but has really struggled 0:11:34.880 --> 0:11:38.200 to make them in higher volumes than doing so in 0:11:38.840 --> 0:11:43.640 profitable or remotely profitable way. So, you know, I think 0:11:43.640 --> 0:11:45.840 in short, Napoli has his work cutout for him. 0:11:46.000 --> 0:11:48.480 I mean, is Loocid's goal to be a mass market 0:11:48.640 --> 0:11:52.400 EV company? From what I can find, it doesn't deliver 0:11:52.520 --> 0:11:54.640 a lot of cars. In twenty twenty four, for instance, 0:11:55.440 --> 0:11:58.679 it delivered more than ten thousand vehicles, but I mean 0:11:58.720 --> 0:12:00.800 that's nothing compared to something like Tesla. 0:12:01.679 --> 0:12:04.120 Yeah, it's a fraction, you know, And I do think 0:12:04.160 --> 0:12:06.680 it's been a case where the company has been sort 0:12:06.679 --> 0:12:09.360 of feeling around what exactly its play is. I think, 0:12:09.440 --> 0:12:11.480 you know, for a time they were trying to go 0:12:11.640 --> 0:12:15.640 lower volume, higher higher prices, and you know, kind of 0:12:16.160 --> 0:12:19.880 casting themselves as a premium player. But later this year, 0:12:19.880 --> 0:12:22.520 they will start production of a mid sized vehicle where 0:12:23.040 --> 0:12:25.760 they've they've flagged the rough pricing of that being around 0:12:25.800 --> 0:12:28.480 fifty thousand dollars, so that would put them more, you know, 0:12:28.600 --> 0:12:30.920 at least closer to the sort of mass market where 0:12:31.000 --> 0:12:33.679 you see, you know, like a model why you can 0:12:33.720 --> 0:12:37.160 get you know, price in that range. So you know, 0:12:37.400 --> 0:12:41.640 this is a company that has tried to compete with 0:12:41.679 --> 0:12:44.720 like the Mercedes and the Porches of the world, found 0:12:44.760 --> 0:12:48.440 that really difficult, and they are doing a bit of pivoting. 0:12:49.160 --> 0:12:51.520 How much that has been a sort of like change 0:12:51.520 --> 0:12:54.920 in plan versus the plan all along is a little 0:12:54.960 --> 0:12:58.720 bit unclear, and it's kind of depending on who you ask. 0:12:58.800 --> 0:13:00.520 I think the CEO, who is sort of placed about 0:13:00.520 --> 0:13:03.199 a year ago, I would have preferred they stayed premium, 0:13:03.240 --> 0:13:06.280 and I think they've changed attack a little bit under 0:13:06.280 --> 0:13:06.880 the new regime. 0:13:07.120 --> 0:13:09.920 So right now, the Lucid's big thing, of course, this 0:13:10.040 --> 0:13:13.640 is partnership with Uber, and this was first annunced in 0:13:13.720 --> 0:13:15.560 July where Uber said it would buy at least twenty 0:13:15.559 --> 0:13:17.800 thousand Lucid Gravity SUVs. 0:13:17.320 --> 0:13:19.000 That new vehicle you were talking about. 0:13:19.400 --> 0:13:24.120 Has this partnership with Uber amounted to anything just yet, 0:13:24.160 --> 0:13:25.920 I mean, is it getting its name out there. 0:13:27.200 --> 0:13:28.960 Yeah, I think it's going to be really interesting to 0:13:29.000 --> 0:13:31.520 see if that you know, is able to get off 0:13:31.600 --> 0:13:34.160 the ground. They have a third party that's involved in 0:13:34.200 --> 0:13:38.560 that partnership, a company called Neuro that itself was working 0:13:38.600 --> 0:13:43.320 on delivery robots and has pivoted to getting into autonomous 0:13:43.400 --> 0:13:45.960 vehicles and trying to compete with the likes of Weimo. 0:13:46.960 --> 0:13:49.079 You know, this is still very much in the sort 0:13:49.080 --> 0:13:52.920 of prototyping and testing phase, and we've not seen them 0:13:52.920 --> 0:13:56.679 actually launched vehicles. But I'm endlessly fascinated by just how 0:13:56.800 --> 0:14:00.719 much money Uber is throwing at trying to kind of 0:14:00.800 --> 0:14:04.040 you know, have its own fleet of self driving vehicles 0:14:04.080 --> 0:14:07.600 and and have you know, some competition for weimo. Even 0:14:07.640 --> 0:14:11.080 as it partners with Weimo, there's a lot of experimenting 0:14:11.160 --> 0:14:14.599 and playing around with business models in the space. And 0:14:15.240 --> 0:14:17.400 we are still so early. For all the headlines we 0:14:17.480 --> 0:14:19.960 read about you know, new cities that Weimo is entering, 0:14:20.000 --> 0:14:21.920 they still have just a few thousand cars out on 0:14:22.320 --> 0:14:25.040 US roads across the various cities where they have deployed, 0:14:25.360 --> 0:14:28.000 and so this is really really early innings. Even if 0:14:28.200 --> 0:14:31.840 people are increasingly having their first experiences with getting into 0:14:32.200 --> 0:14:33.400 a fully driverless car. 0:14:34.240 --> 0:14:37.200 Craig, what's the what's the latest with Tesla and it's 0:14:37.240 --> 0:14:40.120 bringing in a lower price model. 0:14:41.520 --> 0:14:44.680 Yeah, that was There was an interesting report out of 0:14:45.000 --> 0:14:48.960 Reuters about maybe they're dipping their toe back into making 0:14:49.400 --> 0:14:52.520 a vehicle priced below the Model three in the Model y. 0:14:53.400 --> 0:14:59.520 We saw Tesla China representatives deny that that report. But 0:14:59.640 --> 0:15:02.440 what may that's so fascinating is it's it's speaking of 0:15:02.560 --> 0:15:05.440 sort of you know, changes in strategy by companies, you know. 0:15:05.480 --> 0:15:09.240 I think Elon Musk has sort of you know, mince 0:15:09.320 --> 0:15:12.280 no words about, in his words, it being stupid for 0:15:12.280 --> 0:15:15.080 for Tesla to sort of bring cars to market that 0:15:15.120 --> 0:15:19.000 are lower price, you know, because in his mind, you know, 0:15:19.680 --> 0:15:22.480 you know, every day is you know, going to be 0:15:22.680 --> 0:15:24.600 the day that Tesla sort of flips a switch and 0:15:24.720 --> 0:15:27.960 is able to render its cars capable of driving themselves. 0:15:28.040 --> 0:15:32.440 I think regulators are extremely skeptical of that, in part 0:15:32.480 --> 0:15:35.520 because you know, those days keep you know, coming and 0:15:35.560 --> 0:15:39.840 going without that capability really being ready to where you know, 0:15:39.880 --> 0:15:42.640 people behind the wheel can actually tune out and not 0:15:42.720 --> 0:15:45.680 pay attention to the system that that Tesla sells as 0:15:45.720 --> 0:15:48.200 full self driving, which just has not lived up to 0:15:48.240 --> 0:15:48.840 the name yet. 0:15:49.160 --> 0:15:51.240 Yeah, I mean there's two components to that, right, the 0:15:51.280 --> 0:15:53.680 fact that a switch could be flipped on that and 0:15:53.720 --> 0:15:57.560 whether regulators would allow it to technologically, whether we're there yet, 0:15:57.560 --> 0:16:01.080 and whether the regulators have given that the Okay, do 0:16:01.160 --> 0:16:03.480 consumers want that? 0:16:03.600 --> 0:16:05.640 And that's a great question too. I think you know 0:16:05.680 --> 0:16:09.920 some consumers absolutely and uh, you know you will see 0:16:10.280 --> 0:16:13.000 uh Tesla super fans. Many of them happen to be investors, 0:16:13.040 --> 0:16:16.640 you know, sharing uh, you know, indications of a progress 0:16:16.680 --> 0:16:20.160 where you know they are fond of taping their drives 0:16:20.240 --> 0:16:23.480 where things go well and uh, and yet the questions 0:16:23.840 --> 0:16:27.600 that you sort of naturally, you know, raise our how 0:16:27.680 --> 0:16:30.240 sort of choosy are they being about what clips they 0:16:30.240 --> 0:16:32.960 show and don't show? And you still continue to see 0:16:33.080 --> 0:16:36.600 incidents where you know, teslos that aren't being supervised or 0:16:36.600 --> 0:16:39.200 getting into two really troubling crashes. 0:16:40.240 --> 0:16:43.080 Stay with us. More from Bloomberg Intelligence coming up after this. 0:16:46.440 --> 0:16:50.160 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:16:50.240 --> 0:16:52.920 weekdays at ten a m. Eastern on Apple, Cocklay and 0:16:52.920 --> 0:16:56.200 Android Auto with the Bloomberg Business app. Listen on demand 0:16:56.240 --> 0:17:00.200 wherever you get your podcasts, or watch US Live on YouTube. 0:17:00.480 --> 0:17:01.560 It is earning season. 0:17:01.920 --> 0:17:05.080 The big banks began reporting yesterday with Goldman Sacks kicking 0:17:05.119 --> 0:17:07.440 things off, which is kind of unusual because. 0:17:07.200 --> 0:17:09.360 It's usually not the first bank to report YEP. 0:17:09.760 --> 0:17:12.840 That would be JP Morgan, JP Morgan City Group and 0:17:12.880 --> 0:17:14.120 Wells Fargo reported today. 0:17:14.160 --> 0:17:16.440 So four out of six big banks have reported. 0:17:16.680 --> 0:17:21.040 Herman Chan, of course, is our senior bank analyst here 0:17:21.040 --> 0:17:23.520 at Bloomberg Intelligence, and of course we needed to bring 0:17:23.600 --> 0:17:25.840 him in. Is it as simple as to say that 0:17:25.880 --> 0:17:29.800 the volatility in the markets is just unit directionally good 0:17:29.880 --> 0:17:31.000 news for these big banks? 0:17:31.119 --> 0:17:34.280 It is, at least for the ones that reported today. So, 0:17:34.400 --> 0:17:39.040 JP Morgan City posted really strong results on trading equities 0:17:39.080 --> 0:17:41.800 and on the fixed income side. I would contrast that 0:17:41.840 --> 0:17:45.000 a bit with what Goldman did yesterday where they disappoint 0:17:45.040 --> 0:17:47.560 a bit on the fixed income side of the trading 0:17:47.600 --> 0:17:52.720 house that was driven by areas like rates and mortgage, 0:17:52.760 --> 0:17:55.600 which seemed like they were not positioned correctly with the 0:17:55.680 --> 0:17:56.960 volatility that happened in March. 0:17:57.640 --> 0:17:59.960 What happened or what's going on with Wells Farg? 0:18:00.600 --> 0:18:05.679 Yeah, Wells Fargo, it's interesting story. They reported really strong 0:18:05.800 --> 0:18:11.160 earnings from a EPs standpoints, but the disappointment came from 0:18:11.200 --> 0:18:14.600 the net interest margin. It was down thirteen basis points 0:18:14.640 --> 0:18:18.080 quarter of a quarter. Management talked about some areas that 0:18:18.280 --> 0:18:23.160 we're driving that growth in some lower yielding markets, businesses 0:18:23.280 --> 0:18:27.200 that they're intentionally growing due to the fact that they 0:18:27.280 --> 0:18:31.240 think that will bring along business and other areas like 0:18:31.320 --> 0:18:34.399 trading in the prime brokerage business. So it's sort of 0:18:34.440 --> 0:18:37.040 like build it and they will come type action going on, 0:18:37.320 --> 0:18:41.560 and they expect some further compression in the second quarter, 0:18:41.600 --> 0:18:44.119 which is driving some of the weaker market sentiment that 0:18:44.200 --> 0:18:44.919 we're seeing today. 0:18:45.119 --> 0:18:48.159 Wells Fargo had its asset cap lifted by the Federal Reserve, 0:18:48.160 --> 0:18:50.679 which means that it can now get bigger. So do 0:18:50.720 --> 0:18:55.439 we expect, you know, some more spending, some you know, 0:18:56.040 --> 0:18:59.080 tighter margins for the foreseeable future as it tries to 0:18:59.119 --> 0:18:59.919 really build. 0:18:59.680 --> 0:19:04.280 On its assets. Yeah, you see the assets growing really quickly. 0:19:04.320 --> 0:19:08.600 They're probably going to be the fastest growing JISA bank 0:19:08.640 --> 0:19:10.399 that we cover, the largest banks that we cover in 0:19:10.520 --> 0:19:12.920 terms of long growth that's about five percent quarter. 0:19:12.960 --> 0:19:15.159 But make up a lot of lost ground it does. 0:19:15.280 --> 0:19:16.920 It has to make up a lot of lost ground, 0:19:16.960 --> 0:19:20.840 and they're sort of growing the balance sheet to hope 0:19:20.960 --> 0:19:23.280 to help offset some of the margin compression that I 0:19:23.359 --> 0:19:28.560 mentioned earlier, but that also portends the higher costs in 0:19:28.600 --> 0:19:33.960 areas like advertising and headcount growth potentially over time, but 0:19:34.040 --> 0:19:35.960 definitely you're seeing it in the advertising spend. 0:19:36.600 --> 0:19:39.120 Are the banks in general are they lending money these days? 0:19:39.160 --> 0:19:41.119 How does loanrigination look? 0:19:41.359 --> 0:19:41.639 Yeah? 0:19:41.920 --> 0:19:44.560 They are in pockets right. So there's not a lot 0:19:44.600 --> 0:19:49.160 of growth in areas like mortgage because of the rate environments. 0:19:50.040 --> 0:19:52.960 Card is seasonally softer this quarter, but it was strong 0:19:53.040 --> 0:19:56.439 last quarter given the holiday season. A lot of the 0:19:56.480 --> 0:20:00.959 growth is areas like lending to non bank finds ancial institutions. 0:20:00.960 --> 0:20:03.600 That's been the rage in the industry, lending to these 0:20:03.640 --> 0:20:06.600 private credit firms that are in the news, lending to 0:20:06.680 --> 0:20:12.320 areas like a venture capital and mortgage company. So it's 0:20:12.359 --> 0:20:14.520 a bit of a mixed bag in terms of where 0:20:14.560 --> 0:20:15.720 the long growth is coming from. 0:20:16.000 --> 0:20:18.440 We talk a lot about a K shaped economy where 0:20:18.560 --> 0:20:20.800 the upper leg of the K is doing very well. 0:20:21.160 --> 0:20:25.480 The wealthy are getting wealthier, the less wealthy, the ones 0:20:25.520 --> 0:20:29.199 that are really struggling through this are suffering more. Are 0:20:29.240 --> 0:20:32.360 banks actively using that as their strategy as well? I'm 0:20:32.400 --> 0:20:35.000 wondering if the services that they're offering, the areas are 0:20:35.040 --> 0:20:37.919 choosing to grow, is pursuing that higher end of that K. 0:20:38.200 --> 0:20:38.880 Yeah, that's right. 0:20:39.200 --> 0:20:44.080 That's been a trend over time where the largest banks 0:20:44.119 --> 0:20:47.040 are really focusing on that prime customer. So there's not 0:20:47.160 --> 0:20:51.239 a lot of lending activity towards the bottom half of 0:20:51.280 --> 0:20:55.600