1 00:00:02,920 --> 00:00:07,280 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,560 --> 00:00:14,400 Speaker 2: This is Bloomberg Intelligence with Alex Steinhl and Paul'sweeny. 3 00:00:14,520 --> 00:00:17,720 Speaker 1: The real app performance has been in US corporate high yield. 4 00:00:17,880 --> 00:00:20,240 Speaker 3: Are the companies lean enough? Have they trimmed all the fats? 5 00:00:20,320 --> 00:00:23,880 Speaker 1: The semiconductor business is a really cyclical business. 6 00:00:23,600 --> 00:00:27,200 Speaker 2: Breaking market headlines and corporate news from across the globe. 7 00:00:27,240 --> 00:00:29,880 Speaker 3: Do investors like the M and A that we've seen? 8 00:00:30,080 --> 00:00:33,159 Speaker 1: These are two big time blue chip companies. 9 00:00:33,320 --> 00:00:36,920 Speaker 4: The window between the peak and cut changing super fast. 10 00:00:37,080 --> 00:00:41,680 Speaker 2: Bloomberg Intelligence with Alex Steinhl and Paul'sweenye on Bloomberg Radio. 11 00:00:43,240 --> 00:00:45,760 Speaker 1: Today's Bloomberg Intelligence Show, we dig inside the big business 12 00:00:45,760 --> 00:00:47,880 Speaker 1: stories impacting Wall Street and the global markets. 13 00:00:47,960 --> 00:00:49,800 Speaker 4: Each and every week we provide in depth research and 14 00:00:49,880 --> 00:00:51,640 Speaker 4: data on some of the two thousand companies and one 15 00:00:51,720 --> 00:00:54,360 Speaker 4: hundred and thirty industries our analysts cover worldwide. 16 00:00:54,480 --> 00:00:57,480 Speaker 1: Today, we'll look at why offshore wind industry, particularly in 17 00:00:57,520 --> 00:00:59,440 Speaker 1: the US, has been struggling. 18 00:00:59,040 --> 00:01:01,760 Speaker 4: Plaus We'll discuss why the CEO Elon Musk's companies may 19 00:01:01,760 --> 00:01:04,160 Speaker 4: be under threat as Tesla struggles. 20 00:01:04,240 --> 00:01:06,040 Speaker 1: But first we dive into M and A in the 21 00:01:06,080 --> 00:01:09,320 Speaker 1: oil and gas industry. This week Conoco Phillips agreed to 22 00:01:09,319 --> 00:01:12,000 Speaker 1: require Marathon Oil in an all stock deal, value in 23 00:01:12,000 --> 00:01:13,919 Speaker 1: the company at about seventeen billion dollars. 24 00:01:14,040 --> 00:01:17,000 Speaker 4: The move expands Conicco Phillips footprint and domestic shale fields 25 00:01:17,000 --> 00:01:19,560 Speaker 4: from Texas to North Dakota. It also adds to the 26 00:01:19,600 --> 00:01:22,240 Speaker 4: wave of recent mega deals as producers are betting that 27 00:01:22,280 --> 00:01:25,479 Speaker 4: oil and gas demand will remain robust for years to come. 28 00:01:25,640 --> 00:01:28,200 Speaker 1: For more, we were joined by Vince Piazza, Bloomberg Intelligence, 29 00:01:28,240 --> 00:01:31,000 Speaker 1: senior equity research Channels, who covers the oil and gas space. 30 00:01:31,160 --> 00:01:33,120 Speaker 4: We first ask bens and if this deal makes Conicgo 31 00:01:33,160 --> 00:01:34,720 Speaker 4: Phillips bigger or better. 32 00:01:35,600 --> 00:01:38,400 Speaker 5: I think a little bit of both. It makes them. 33 00:01:38,480 --> 00:01:43,160 Speaker 6: Better in certain basins because it does consolidate an opportunity 34 00:01:43,240 --> 00:01:47,560 Speaker 6: set in places like the Delaware, the Baking and even 35 00:01:47,640 --> 00:01:48,919 Speaker 6: the Eagle Forward. 36 00:01:49,200 --> 00:01:53,400 Speaker 5: But it does extend the franchise into other areas that 37 00:01:54,320 --> 00:01:57,960 Speaker 5: probably dilutes some of that narrative. You know, the narrative 38 00:01:58,040 --> 00:02:03,480 Speaker 5: has been consolidate streamline leverage to what you do best. 39 00:02:04,160 --> 00:02:07,480 Speaker 5: We saw that in the Permian. We saw that for 40 00:02:07,640 --> 00:02:13,200 Speaker 5: natural gas as well, with Southwestern and Chesapeake likely getting together. 41 00:02:13,800 --> 00:02:16,960 Speaker 5: So in this case you have some pieces of that 42 00:02:17,120 --> 00:02:22,799 Speaker 5: marathon pie. That may not work as well within the 43 00:02:22,840 --> 00:02:27,840 Speaker 5: broader Conicco platform, but that's an opportunity set to divest 44 00:02:28,080 --> 00:02:33,160 Speaker 5: some of those pieces and really concentrate around Texas and 45 00:02:33,240 --> 00:02:36,239 Speaker 5: the Bakan. But the bocket itself is maturing as well. 46 00:02:36,880 --> 00:02:39,680 Speaker 5: What you're really getting here is a ton of free 47 00:02:39,760 --> 00:02:42,880 Speaker 5: cash flow as well. You know, this is consistent with 48 00:02:43,080 --> 00:02:47,120 Speaker 5: the formula, the theme, the narrative that we've heard and 49 00:02:47,200 --> 00:02:51,120 Speaker 5: seen in the past, the acquirer using a slightly higher 50 00:02:51,200 --> 00:02:56,160 Speaker 5: multiple to do an all stock transaction by the company, 51 00:02:56,600 --> 00:03:01,280 Speaker 5: bring those assets, those cash flow generating assets that's into 52 00:03:01,320 --> 00:03:05,799 Speaker 5: the platform, lower the spend, generate that free cash flow, 53 00:03:06,320 --> 00:03:10,320 Speaker 5: be able to boost the ordinary dividend and also the 54 00:03:10,360 --> 00:03:13,959 Speaker 5: supplemental dividend and support the stock by buying back shares 55 00:03:14,000 --> 00:03:18,359 Speaker 5: as well. And in this case financially, financially, engineering wise, 56 00:03:18,400 --> 00:03:19,919 Speaker 5: it actually works out right. 57 00:03:20,400 --> 00:03:23,080 Speaker 1: Hey, Vince, I noticed you know there's a lot of 58 00:03:23,160 --> 00:03:25,440 Speaker 1: M and A stuff going on in your energy world here. 59 00:03:25,520 --> 00:03:27,680 Speaker 1: Do the regulators care about this stuff? 60 00:03:27,960 --> 00:03:30,120 Speaker 5: Oh yeah, they will take a serious look at this. 61 00:03:31,000 --> 00:03:33,960 Speaker 5: They will increase the scrutiny of all of these deals. 62 00:03:34,639 --> 00:03:37,360 Speaker 5: I know that they're looking to close this by four 63 00:03:37,480 --> 00:03:41,200 Speaker 5: q twenty twenty four. I think that's kind of tight. 64 00:03:42,120 --> 00:03:47,760 Speaker 5: We have seen other deals close Exxon closing Pioneer around 65 00:03:47,760 --> 00:03:50,800 Speaker 5: that same time as a projected closing date as well, 66 00:03:51,200 --> 00:03:54,640 Speaker 5: But there are other deals that may be prolonged. And 67 00:03:54,800 --> 00:03:58,160 Speaker 5: this will be a rather large entity. It's going to 68 00:03:58,240 --> 00:04:00,720 Speaker 5: be roughly, you know, two point two million barrels a 69 00:04:00,800 --> 00:04:04,920 Speaker 5: day of production, so it will get scrutiny. It will 70 00:04:04,920 --> 00:04:09,920 Speaker 5: get scrutiny more broadly, but in general, it's really not 71 00:04:10,440 --> 00:04:14,480 Speaker 5: sizeable in those particular basins that they are consolidating. 72 00:04:14,880 --> 00:04:18,960 Speaker 4: So to that point, do we see another bitter come in? 73 00:04:19,160 --> 00:04:22,560 Speaker 4: So Bloomberg has reported that Devin was also interested in 74 00:04:22,640 --> 00:04:25,279 Speaker 4: Marathon Oil. Do you think we see this happening now? 75 00:04:26,440 --> 00:04:28,760 Speaker 5: Well, you know they were looking at it. When you 76 00:04:28,839 --> 00:04:31,320 Speaker 5: work out the numbers, it would have been kind of 77 00:04:31,320 --> 00:04:35,760 Speaker 5: difficult to make it work. But the increation here Conico 78 00:04:35,920 --> 00:04:41,799 Speaker 5: Marathon actually works out better for Marathon holders. It's interesting 79 00:04:41,880 --> 00:04:45,520 Speaker 5: because within the first three years of the deal, Conico 80 00:04:45,720 --> 00:04:49,159 Speaker 5: suggests that they'll buy back as much stock as the 81 00:04:49,360 --> 00:04:53,520 Speaker 5: entire market cap of Marathon, including a boosted dividend for 82 00:04:53,760 --> 00:04:59,480 Speaker 5: legacy Conical holders and new holders from the Marathon purchase. 83 00:05:00,120 --> 00:05:01,920 Speaker 1: You know, it's an all stock deal, which all right, 84 00:05:02,000 --> 00:05:03,719 Speaker 1: I get my M and A fee Alex, but I 85 00:05:03,720 --> 00:05:05,640 Speaker 1: don't get to do the high yield piece which choices 86 00:05:05,760 --> 00:05:08,200 Speaker 1: mine here. So I'm not really happy with an all 87 00:05:08,200 --> 00:05:09,560 Speaker 1: stocks it's evercore. 88 00:05:09,600 --> 00:05:11,920 Speaker 3: I think that led kind of go on this one. 89 00:05:12,400 --> 00:05:12,640 Speaker 7: Yeah. 90 00:05:12,680 --> 00:05:14,200 Speaker 1: I looked at M A go. They did not have 91 00:05:14,240 --> 00:05:16,640 Speaker 1: the M and advisors. They're a little bit slow on. 92 00:05:16,600 --> 00:05:17,239 Speaker 8: That, Vincer. 93 00:05:17,279 --> 00:05:19,000 Speaker 1: We going to see more of this. I mean, we're 94 00:05:19,040 --> 00:05:21,000 Speaker 1: going to be talking to you more about M and 95 00:05:21,080 --> 00:05:22,600 Speaker 1: A in your space. 96 00:05:23,520 --> 00:05:26,600 Speaker 5: Yeah, we've seen it across the Permian. We've seen it 97 00:05:26,880 --> 00:05:29,520 Speaker 5: in natural gas as well. Haven't seen it as much 98 00:05:30,160 --> 00:05:33,080 Speaker 5: in natural gas, but I think that'll pick up as well, 99 00:05:33,360 --> 00:05:37,039 Speaker 5: as we're seeing a big here for Henry Hub and 100 00:05:37,200 --> 00:05:41,080 Speaker 5: various prices across the regions. When you have a industry 101 00:05:41,320 --> 00:05:45,400 Speaker 5: that is in the crosshairs of both civic and political leaders, 102 00:05:45,920 --> 00:05:49,320 Speaker 5: the one way to survive is to consolidate and get 103 00:05:49,400 --> 00:05:52,040 Speaker 5: bigger if you're not able to grow organically. 104 00:05:52,279 --> 00:05:55,200 Speaker 1: Our thanks to Vince Piatza, Bloomberg Intelligence senior equity research 105 00:05:55,240 --> 00:05:57,560 Speaker 1: channelists on the oil and gas industry. 106 00:05:57,360 --> 00:05:59,760 Speaker 4: We move now to big tech and Apple Apples, I 107 00:06:00,080 --> 00:06:02,760 Speaker 4: on stage the rebound in China last month, with shipments 108 00:06:02,839 --> 00:06:05,800 Speaker 4: rising fifty two percent. That's according to the latest figures 109 00:06:05,839 --> 00:06:08,880 Speaker 4: from the China Academy of Information and Communications Technology. 110 00:06:09,200 --> 00:06:11,600 Speaker 1: This all comes as Apple and it's Chinese retailers have 111 00:06:11,680 --> 00:06:13,920 Speaker 1: been cutting prices since it start of twenty twenty four, 112 00:06:14,160 --> 00:06:15,480 Speaker 1: following steep declines. 113 00:06:15,600 --> 00:06:19,000 Speaker 4: For more, we're joined by aniog Rana, Bloomberg Intelligence Technology analysts. 114 00:06:19,080 --> 00:06:21,520 Speaker 4: We first asked anarog for his reaction to the data. 115 00:06:21,680 --> 00:06:23,479 Speaker 9: This is the way I looked at it in jan 116 00:06:23,600 --> 00:06:26,680 Speaker 9: and feb. This data was down I think minus thirty 117 00:06:26,680 --> 00:06:29,719 Speaker 9: five minus forty percent or so. And then when Apple 118 00:06:29,800 --> 00:06:32,679 Speaker 9: reported their quarter, they said, you know what, mainland China, 119 00:06:32,760 --> 00:06:35,800 Speaker 9: our iPhone revenue grew. So there is not that direct 120 00:06:35,800 --> 00:06:39,280 Speaker 9: correlation between the two numbers. And it could be because 121 00:06:39,360 --> 00:06:43,159 Speaker 9: there are times when Apple, you know, sells phone, but 122 00:06:43,240 --> 00:06:45,840 Speaker 9: it's stuck in the inventory channel in between. Then they 123 00:06:45,880 --> 00:06:48,160 Speaker 9: put out a sale and then gets cleared up. So 124 00:06:48,160 --> 00:06:50,440 Speaker 9: it's a question of timing not so much. But the 125 00:06:50,440 --> 00:06:53,600 Speaker 9: big thing for us is that there was a downdraft 126 00:06:53,640 --> 00:06:57,040 Speaker 9: of negative news coming out of China. It's turned positive 127 00:06:57,080 --> 00:06:59,240 Speaker 9: two months in a row, so that's a good news. 128 00:06:59,640 --> 00:07:02,039 Speaker 9: Seems more like a cyclical issue to me than a 129 00:07:02,040 --> 00:07:06,000 Speaker 9: structural problem of people giving away Apple phones not buying it. 130 00:07:06,080 --> 00:07:07,920 Speaker 8: So that's not the case. So that's a good news. 131 00:07:08,120 --> 00:07:11,240 Speaker 8: So I think, you know, from an overall point of sentiment. 132 00:07:10,880 --> 00:07:12,480 Speaker 9: Point of view, I think this is good news for 133 00:07:12,520 --> 00:07:15,600 Speaker 9: Apple that China, which in our view is the most 134 00:07:15,680 --> 00:07:18,640 Speaker 9: important market for them over the next three to five years, 135 00:07:18,920 --> 00:07:20,920 Speaker 9: and we are not going to see you know, let's 136 00:07:20,920 --> 00:07:24,920 Speaker 9: say eurobar declining share. I think it's going to be 137 00:07:24,960 --> 00:07:27,320 Speaker 9: okay over the next few years, even if it goes 138 00:07:27,520 --> 00:07:28,080 Speaker 9: ups and down. 139 00:07:28,120 --> 00:07:29,760 Speaker 8: So that's really the big takeaway for us. 140 00:07:29,960 --> 00:07:32,160 Speaker 3: So can I call this a nothing burger? 141 00:07:33,400 --> 00:07:35,200 Speaker 8: No, that's not true because. 142 00:07:35,840 --> 00:07:37,160 Speaker 3: I say that because you didn't hear it. 143 00:07:37,160 --> 00:07:39,400 Speaker 4: But Paul was guessing you would call this data a 144 00:07:39,440 --> 00:07:41,480 Speaker 4: nothing for But you're being too polite about it. 145 00:07:41,480 --> 00:07:42,200 Speaker 3: I think gone a wrong. 146 00:07:42,840 --> 00:07:44,600 Speaker 8: So sentiment advice, think about it. 147 00:07:44,800 --> 00:07:47,080 Speaker 9: The only thing that we've been hearing for almost a 148 00:07:47,160 --> 00:07:49,880 Speaker 9: year now that people don't want to buy iPhones in China, 149 00:07:50,000 --> 00:07:52,960 Speaker 9: it's because of the government and nationalism and so many 150 00:07:53,040 --> 00:07:55,240 Speaker 9: all things. And I think this one tells us that's 151 00:07:55,240 --> 00:07:58,400 Speaker 9: not the case. People are strapped for cash and if 152 00:07:58,440 --> 00:08:00,440 Speaker 9: they get a good deal on a phone, buy it. 153 00:08:00,520 --> 00:08:02,920 Speaker 9: So what do I expect. I expect Apple to go 154 00:08:03,000 --> 00:08:06,280 Speaker 9: out and do more promotional activities over the next few 155 00:08:06,320 --> 00:08:09,640 Speaker 9: months to try and sell more products into the market. Now, 156 00:08:09,720 --> 00:08:12,720 Speaker 9: not every market is different. Apple's not known to give 157 00:08:12,880 --> 00:08:15,360 Speaker 9: a lot of discounts globally, but if that's what they 158 00:08:15,400 --> 00:08:16,960 Speaker 9: have to do in China, that's what they have to. 159 00:08:16,920 --> 00:08:19,400 Speaker 3: Do, all right, fair enough. But let's go to the 160 00:08:19,440 --> 00:08:20,440 Speaker 3: discounts though for a second. 161 00:08:20,600 --> 00:08:23,200 Speaker 4: So even if we don't say, take this data as gold, 162 00:08:23,240 --> 00:08:27,360 Speaker 4: but just directionally, Apple and discounts tend not to go together, 163 00:08:27,400 --> 00:08:28,560 Speaker 4: at least in my mind. 164 00:08:28,920 --> 00:08:29,720 Speaker 3: What do you make of that? 165 00:08:30,840 --> 00:08:32,680 Speaker 9: Yeah, I think this is a new thing for Apple, 166 00:08:32,720 --> 00:08:35,400 Speaker 9: and again they're probably grinding their teeth and not liking it. 167 00:08:35,480 --> 00:08:37,040 Speaker 9: But you know what, they have the rest of the 168 00:08:37,040 --> 00:08:39,520 Speaker 9: world to make up for it. In the US, for example, 169 00:08:39,559 --> 00:08:42,160 Speaker 9: people are liking to buy the higher end model, the 170 00:08:42,200 --> 00:08:45,760 Speaker 9: pro model. That helps margins, that helps the average selling price. 171 00:08:46,000 --> 00:08:47,680 Speaker 9: So if they have to give a little bit up 172 00:08:47,720 --> 00:08:50,120 Speaker 9: to gain market share in China, I think they should 173 00:08:50,120 --> 00:08:52,200 Speaker 9: do it, because you don't want to be branded as 174 00:08:52,480 --> 00:08:55,600 Speaker 9: somebody a second player in China out there, which is 175 00:08:55,960 --> 00:08:58,360 Speaker 9: you know, in our view the most important market for 176 00:08:58,440 --> 00:09:01,679 Speaker 9: growth for Apple, what's going to happen is you're not 177 00:09:01,720 --> 00:09:04,319 Speaker 9: going to see any growth in China. For that matter, 178 00:09:04,440 --> 00:09:06,480 Speaker 9: their top line growth is not going to grow, and 179 00:09:06,520 --> 00:09:07,600 Speaker 9: that's not good for the stock. 180 00:09:07,640 --> 00:09:09,600 Speaker 8: Also, and I've talked to. 181 00:09:09,640 --> 00:09:12,559 Speaker 1: Us about India. What is it as a percentage of 182 00:09:12,559 --> 00:09:14,760 Speaker 1: Apple's business today and what do you think it can 183 00:09:14,840 --> 00:09:16,880 Speaker 1: be five, six, seven years from now. 184 00:09:17,600 --> 00:09:19,880 Speaker 9: Yeah, so in our view, apples very small, less than 185 00:09:19,880 --> 00:09:23,040 Speaker 9: five percent. In fact, when we have done a lot 186 00:09:23,040 --> 00:09:26,640 Speaker 9: of work on the number of shipments in India, Apple's 187 00:09:26,679 --> 00:09:29,040 Speaker 9: market share is, you know, less than five percent. 188 00:09:29,240 --> 00:09:30,200 Speaker 8: But here's the kicker. 189 00:09:30,800 --> 00:09:34,000 Speaker 9: Ninety five percent of the phones don't even qualify for 190 00:09:34,440 --> 00:09:37,520 Speaker 9: to be in the Apples you could say ecosystem, which 191 00:09:37,520 --> 00:09:42,120 Speaker 9: means they're under three hundred dollars. As the Indian economy grows, 192 00:09:42,200 --> 00:09:45,199 Speaker 9: as the middle class becomes more affluent, I think Apple's 193 00:09:45,240 --> 00:09:47,200 Speaker 9: going to be a winner over here. But think about 194 00:09:47,240 --> 00:09:49,040 Speaker 9: it this way. When we look at the US with 195 00:09:49,120 --> 00:09:51,960 Speaker 9: per capita income of let's say sixty five seventy thousand dollars, 196 00:09:52,160 --> 00:09:54,640 Speaker 9: somewhere in that realm, China is around twelve and a 197 00:09:54,679 --> 00:09:57,800 Speaker 9: half thousand dollars. India is about two thousand, twenty five 198 00:09:57,840 --> 00:10:00,760 Speaker 9: hundred dollars. So when you look at these three systems, 199 00:10:01,600 --> 00:10:04,360 Speaker 9: I think when we look at that growth driver from 200 00:10:04,440 --> 00:10:07,800 Speaker 9: five years onwards, that's where you know, India comes in 201 00:10:07,840 --> 00:10:10,400 Speaker 9: and there's a massive market there for Apple. But that's 202 00:10:10,440 --> 00:10:12,319 Speaker 9: not going to happen next year or the year after. 203 00:10:12,280 --> 00:10:15,120 Speaker 4: Right, that's sort of a structural change, et cetera in 204 00:10:15,160 --> 00:10:17,360 Speaker 4: the market. I don't know what else are you working 205 00:10:17,360 --> 00:10:18,000 Speaker 4: on right now. 206 00:10:18,880 --> 00:10:20,800 Speaker 9: I think the biggest thing right now is what happens 207 00:10:20,800 --> 00:10:23,640 Speaker 9: at WWDC and whether that's going to be enough to 208 00:10:23,679 --> 00:10:27,280 Speaker 9: sustain this. You know, I would say optimism that we 209 00:10:27,320 --> 00:10:29,480 Speaker 9: have seen in Apple for the first time, I would 210 00:10:29,480 --> 00:10:32,400 Speaker 9: say in the last eighteen months, because we all knew 211 00:10:32,480 --> 00:10:34,840 Speaker 9: China was a problem. We saw that in the numbers, 212 00:10:35,480 --> 00:10:39,080 Speaker 9: sales numbers and not very strong. But AI has that 213 00:10:39,240 --> 00:10:42,680 Speaker 9: outside potential to go out and spur the next sale 214 00:10:42,720 --> 00:10:46,040 Speaker 9: off phones. Why because there is a massive amount over 215 00:10:46,120 --> 00:10:49,280 Speaker 9: forty three percent of the phones our iPhone twelve and below, 216 00:10:49,360 --> 00:10:52,240 Speaker 9: which is old phones with lower you know, you could 217 00:10:52,280 --> 00:10:55,240 Speaker 9: say RAM memory and other things. Now for if they 218 00:10:55,280 --> 00:10:57,720 Speaker 9: go out and say I have really cool features coming 219 00:10:57,760 --> 00:10:59,760 Speaker 9: into the phone you got to go find a way 220 00:10:59,800 --> 00:11:03,320 Speaker 9: to upgraded. Now, if somebody has a fourteen or a fifteen, 221 00:11:03,440 --> 00:11:05,559 Speaker 9: they're most likely not going to upgrade it. But if 222 00:11:05,559 --> 00:11:08,079 Speaker 9: you have something that I can iPhone ten, iPhone eleven, 223 00:11:08,280 --> 00:11:10,400 Speaker 9: there may be a reason enough for you to upgrade it. 224 00:11:10,760 --> 00:11:14,680 Speaker 9: So that really brings a new fresh you could say 225 00:11:14,760 --> 00:11:17,920 Speaker 9: life and Apple, and that's really important. On June tenth 226 00:11:17,960 --> 00:11:19,680 Speaker 9: when they get this developer conference. 227 00:11:19,800 --> 00:11:24,400 Speaker 1: All right, I'm sitting on an Apple iPhone eleven. When 228 00:11:24,400 --> 00:11:25,120 Speaker 1: do I upgrade? 229 00:11:26,080 --> 00:11:28,840 Speaker 9: You should update it in the winter when the sixteen 230 00:11:28,880 --> 00:11:31,199 Speaker 9: comes out or whatever the name they give that phone, 231 00:11:31,200 --> 00:11:34,320 Speaker 9: because it should have a faster processor, it should have 232 00:11:34,360 --> 00:11:37,160 Speaker 9: a lot more memory. They'll just make things easier for you. 233 00:11:37,160 --> 00:11:38,880 Speaker 9: You can watch your golf shows in a little bit 234 00:11:39,080 --> 00:11:39,720 Speaker 9: easier way. 235 00:11:40,080 --> 00:11:42,280 Speaker 1: Very good. Now, Tim Cook's sixty three, I'm gonna switch 236 00:11:42,520 --> 00:11:45,120 Speaker 1: gears on you. Is there any push for this guy 237 00:11:45,160 --> 00:11:49,000 Speaker 1: to put out a succession plan of note or things 238 00:11:49,080 --> 00:11:51,640 Speaker 1: just going so well at Apple that nobody's pushing for that. 239 00:11:52,720 --> 00:11:56,440 Speaker 9: See, Tim's done well. The Apple's done very well under Tim. 240 00:11:56,920 --> 00:11:58,920 Speaker 9: I have no way of predicting what he's going to leave. 241 00:11:59,040 --> 00:12:01,719 Speaker 9: But in my view, if you were to somehow ring 242 00:12:01,800 --> 00:12:05,440 Speaker 9: fence the China business. Apple alone is a company that 243 00:12:05,559 --> 00:12:08,360 Speaker 9: I think can do good by itself. It doesn't really 244 00:12:08,400 --> 00:12:11,440 Speaker 9: need a massive charismatic leader in order to, you know, 245 00:12:11,520 --> 00:12:13,400 Speaker 9: come up with that. This is a company with a 246 00:12:13,760 --> 00:12:17,480 Speaker 9: global brand, the products people love, people trust the products, 247 00:12:17,679 --> 00:12:20,120 Speaker 9: and the installed base is very loyal. I mean, we 248 00:12:20,200 --> 00:12:23,640 Speaker 9: think somewhere in the mid nineties people can keep the phones. 249 00:12:23,679 --> 00:12:26,920 Speaker 9: They don't go out and change into a new ecosystem. 250 00:12:27,000 --> 00:12:30,000 Speaker 9: I think this is a phenomenal business, but you know, 251 00:12:30,120 --> 00:12:32,840 Speaker 9: you do need certain innovation, but not to the level 252 00:12:32,880 --> 00:12:34,520 Speaker 9: you need in other technology companies. 253 00:12:34,720 --> 00:12:37,760 Speaker 1: Our thanks to anorak Ruana Bloomberg Intelligence technology analyst. 254 00:12:37,960 --> 00:12:40,120 Speaker 4: Coming up, we're going to breakdown why American Airlines gave 255 00:12:40,120 --> 00:12:42,760 Speaker 4: an outlook for the coming quarter the disappointed investors. 256 00:12:42,840 --> 00:12:45,640 Speaker 1: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 257 00:12:45,679 --> 00:12:48,040 Speaker 1: depth research and data on two thousand companies and one 258 00:12:48,120 --> 00:12:51,120 Speaker 1: hundred and thirty industries. You can access Bloomberg Intelligence be 259 00:12:51,200 --> 00:12:52,520 Speaker 1: a b I go on the terminal. 260 00:12:52,600 --> 00:12:55,400 Speaker 4: I'm Paul Sweet and I'm Alex Steel and this is Bloomberg. 261 00:13:00,280 --> 00:13:04,640 Speaker 2: This is Bloomberg Intelligence with Alex Steele and Paul Sweeney 262 00:13:04,960 --> 00:13:06,640 Speaker 2: on Bloomberg Radio. 263 00:13:07,360 --> 00:13:09,880 Speaker 4: We move now to the airline industry. This week, American 264 00:13:09,920 --> 00:13:13,280 Speaker 4: Airlines issued guidance for the second quarter. The disappointed investors. 265 00:13:13,600 --> 00:13:17,160 Speaker 1: The carrier slash profit and revenue expectations, and American air 266 00:13:17,240 --> 00:13:20,600 Speaker 1: also acknowledged that it misjudge domestic demand heading into the 267 00:13:20,640 --> 00:13:22,360 Speaker 1: crucial summer travel season. 268 00:13:22,480 --> 00:13:25,120 Speaker 4: For more, we're drawn by George ferguson Bloomberg Intelligence in 269 00:13:25,160 --> 00:13:27,200 Speaker 4: your Aerospace, Defense and Airlines analyst. 270 00:13:27,440 --> 00:13:30,320 Speaker 1: We first asked George for his take on this week's guidance. 271 00:13:30,720 --> 00:13:33,880 Speaker 10: There's some analysts that think that this is driven by 272 00:13:34,800 --> 00:13:38,760 Speaker 10: they got a very much more domestically focused strategy, different 273 00:13:38,760 --> 00:13:42,679 Speaker 10: corporate strategy than United in Delta. You know, I guess 274 00:13:42,920 --> 00:13:47,040 Speaker 10: we're the view that American has been underperforming Delta United 275 00:13:47,280 --> 00:13:50,360 Speaker 10: for the last couple quarters, especially last quarter. We saw 276 00:13:50,400 --> 00:13:55,199 Speaker 10: them down in every single market, including Transatlantic, which had 277 00:13:55,240 --> 00:14:01,040 Speaker 10: been an area of strength for airlines like you know, Delta. 278 00:14:01,240 --> 00:14:05,000 Speaker 10: So they absolutely seem like they've been underperforming. But you know, 279 00:14:05,040 --> 00:14:07,439 Speaker 10: we've taken a look at the capacity that's getting added 280 00:14:07,520 --> 00:14:12,160 Speaker 10: to the market all the markets US airlines fly domestic, 281 00:14:13,040 --> 00:14:17,880 Speaker 10: Latin America, you know, Atlantic and Pacific, and frankly, what 282 00:14:17,920 --> 00:14:21,480 Speaker 10: we see is capacity ads that are in some cases 283 00:14:21,560 --> 00:14:25,600 Speaker 10: twice GDP growth since last summer. So well, we think 284 00:14:25,640 --> 00:14:28,400 Speaker 10: Americans probably going to be the worst on the downside 285 00:14:28,440 --> 00:14:31,440 Speaker 10: of the big three. I think it's going to be 286 00:14:31,480 --> 00:14:34,760 Speaker 10: hard for the other two to avoid similar trends. They 287 00:14:34,800 --> 00:14:36,960 Speaker 10: won't be as bad, but we just see too much 288 00:14:36,960 --> 00:14:40,080 Speaker 10: capacity coming to most of the markets US airlines fly too, 289 00:14:40,120 --> 00:14:42,920 Speaker 10: and we think the REDA cross is probably even greater 290 00:14:43,520 --> 00:14:47,280 Speaker 10: to the budget very domestically focused and Latin American focused 291 00:14:47,280 --> 00:14:50,720 Speaker 10: carriers that be Southwest, that be Jet Blue, that be 292 00:14:50,800 --> 00:14:52,760 Speaker 10: all the low cost carriers, So the REDA cross is 293 00:14:52,800 --> 00:14:55,040 Speaker 10: probably even stronger for those carriers. 294 00:14:55,600 --> 00:14:58,240 Speaker 1: So Georgia, I kind of feel my just you know, 295 00:14:58,320 --> 00:15:02,960 Speaker 1: layperson's eye, United, Delta, and American. Are they all kind 296 00:15:03,000 --> 00:15:05,400 Speaker 1: of the same, kind of the same strategy. 297 00:15:06,400 --> 00:15:08,400 Speaker 10: No, No, not at all, all. 298 00:15:08,360 --> 00:15:09,600 Speaker 1: Right, So what's different? 299 00:15:10,440 --> 00:15:11,840 Speaker 3: God, exactly? 300 00:15:12,200 --> 00:15:15,440 Speaker 1: Well, I fly Delta, I'm like I fly United being 301 00:15:15,480 --> 00:15:18,680 Speaker 1: a Newark person myself. But so what's different about these guys. 302 00:15:18,920 --> 00:15:21,640 Speaker 10: Well, they each have their own, you know, their different strengths, right, 303 00:15:21,680 --> 00:15:25,560 Speaker 10: and so American really has very little presence in the 304 00:15:25,600 --> 00:15:28,760 Speaker 10: Pacific region, so they don't get much pickup fares there. 305 00:15:28,920 --> 00:15:31,920 Speaker 10: Are pretty strong, although coming down because capacity is getting added, 306 00:15:32,160 --> 00:15:34,280 Speaker 10: but they don't get any of the Pacific tailwind because 307 00:15:34,280 --> 00:15:37,400 Speaker 10: that's sort of the last recovering market right now. American 308 00:15:37,800 --> 00:15:41,560 Speaker 10: is very strong, has a lot of capacity into Latin America. 309 00:15:41,920 --> 00:15:45,920 Speaker 10: Latin America is very weak right now, especially near in 310 00:15:46,080 --> 00:15:49,440 Speaker 10: Latin America. You know, the sort of short haul narrow 311 00:15:49,440 --> 00:15:52,480 Speaker 10: body flying. There's just a lot of capacity going into 312 00:15:52,480 --> 00:15:55,680 Speaker 10: beach markets, a lot of capacity coming out of Mexico. 313 00:15:56,200 --> 00:15:59,240 Speaker 10: So that's a source of pain. American I think more 314 00:15:59,320 --> 00:16:03,840 Speaker 10: focused than United in Delta on the US domestic market, 315 00:16:04,120 --> 00:16:07,600 Speaker 10: where we're seeing United in Delta do more out across 316 00:16:07,640 --> 00:16:10,920 Speaker 10: the Atlantic, where yields are yields are stronger. 317 00:16:11,160 --> 00:16:12,200 Speaker 8: I kind of get the sense. 318 00:16:12,000 --> 00:16:15,160 Speaker 10: That America just doesn't get to pick up from Europe 319 00:16:15,200 --> 00:16:19,200 Speaker 10: like United in Delta do because I think they've just 320 00:16:19,240 --> 00:16:22,120 Speaker 10: got a strong partner there in British Airway that kind 321 00:16:22,120 --> 00:16:25,240 Speaker 10: of really runs Heathrow. So American gets some of it, 322 00:16:25,280 --> 00:16:27,920 Speaker 10: but they don't ever seem to get as much as 323 00:16:28,040 --> 00:16:30,840 Speaker 10: United in Delta do out of Europe. So they all 324 00:16:30,880 --> 00:16:32,040 Speaker 10: have sort of their nuances. 325 00:16:32,400 --> 00:16:35,040 Speaker 4: CCO is leaving, how long do they get back on track? 326 00:16:35,560 --> 00:16:39,200 Speaker 10: So you know, again, what we see is a marketplace 327 00:16:39,240 --> 00:16:42,440 Speaker 10: that isn't just this isn't an American anomaly. It's a 328 00:16:42,440 --> 00:16:45,160 Speaker 10: little bit of an American anomaly, but it's a larger 329 00:16:45,240 --> 00:16:48,880 Speaker 10: broader trend, and that is consumers running out of gas 330 00:16:48,920 --> 00:16:52,000 Speaker 10: a bit here, especially the lower end consumer, and a 331 00:16:52,000 --> 00:16:55,280 Speaker 10: lot of capacity coming to the US domestic market, the 332 00:16:55,320 --> 00:16:58,680 Speaker 10: beach markets and transatlantic so I think the rest of 333 00:16:58,680 --> 00:17:02,720 Speaker 10: them are coming American direction. America isn't going their direction 334 00:17:02,800 --> 00:17:06,240 Speaker 10: over the near term. Over this summer, we'll see. 335 00:17:05,960 --> 00:17:06,199 Speaker 7: All right. 336 00:17:06,200 --> 00:17:09,359 Speaker 4: Thanks to George ferguson Bloomberg Intelligence, Senior Aerospace, Defense and 337 00:17:09,400 --> 00:17:10,280 Speaker 4: Airlines analyst. 338 00:17:10,600 --> 00:17:13,120 Speaker 1: On Bloomberg Intelligence Radio, we bring you all the top 339 00:17:13,119 --> 00:17:15,600 Speaker 1: analysts providing in depth research and data on two thousand 340 00:17:15,640 --> 00:17:17,400 Speaker 1: companies and one hundred and thirty industries. 341 00:17:17,560 --> 00:17:19,840 Speaker 4: We also have something here at Bloomberg called Bloomberg New 342 00:17:19,920 --> 00:17:22,280 Speaker 4: Energy Finance, and the idea behind it is to provide 343 00:17:22,359 --> 00:17:27,600 Speaker 4: data on commodities, power, transport, industries, buildings, agriculture and new technology. 344 00:17:27,840 --> 00:17:31,840 Speaker 1: This week we looked into offshore winds. The industry, particularly 345 00:17:31,840 --> 00:17:33,440 Speaker 1: in the US, has been struggling. 346 00:17:33,520 --> 00:17:36,440 Speaker 4: This comes as inflation and supply chain challenges have driven 347 00:17:36,520 --> 00:17:40,879 Speaker 4: up capital expenditure, while financing costs have spiraljuterizing interest rates 348 00:17:40,960 --> 00:17:41,280 Speaker 4: for more. 349 00:17:41,280 --> 00:17:45,119 Speaker 1: We were joined by Oliver Metcalf BNEF, head of Wind Research. 350 00:17:45,480 --> 00:17:48,800 Speaker 1: We first asked Oliver where things stand now with offshore 351 00:17:48,880 --> 00:17:49,840 Speaker 1: winds in the US. 352 00:17:50,040 --> 00:17:52,440 Speaker 7: It's been a difficult last twelve months for the US 353 00:17:52,440 --> 00:17:55,840 Speaker 7: off shore wind industry. We saw around nine gigawatts of 354 00:17:55,840 --> 00:17:58,600 Speaker 7: off take contracts, so contracts for the generation of these 355 00:17:58,640 --> 00:18:01,840 Speaker 7: projects get canceled. That's around a third of the contracts 356 00:18:01,840 --> 00:18:03,960 Speaker 7: that were assigned in total for the US off your 357 00:18:03,960 --> 00:18:07,160 Speaker 7: wind pipeline. You mentioned there it was because of high inflation. 358 00:18:07,560 --> 00:18:10,320 Speaker 7: High interest rates have really hit the technology as well. 359 00:18:10,400 --> 00:18:14,560 Speaker 7: So it's a really capitally intensive technology and so a 360 00:18:14,600 --> 00:18:17,480 Speaker 7: higher cost of financing hits off your wind especially hard 361 00:18:17,560 --> 00:18:20,760 Speaker 7: compared with other technologies. We're beginning to see a bit 362 00:18:20,760 --> 00:18:23,679 Speaker 7: of a turning of the fortunes. So we're seeing the 363 00:18:23,720 --> 00:18:27,720 Speaker 7: first couple of commercial scale off your wind projects start 364 00:18:27,760 --> 00:18:29,320 Speaker 7: to come online in the US. One has already come 365 00:18:29,359 --> 00:18:31,639 Speaker 7: online off the coast of New York, and one that 366 00:18:31,680 --> 00:18:34,840 Speaker 7: will feed Parento Massachusetts is under construction at the moment. 367 00:18:35,280 --> 00:18:38,199 Speaker 7: So some good stories beginning, and we're also seeing states 368 00:18:38,240 --> 00:18:41,280 Speaker 7: willing to adjust their subsidy mechanisms to account for some 369 00:18:41,320 --> 00:18:43,960 Speaker 7: of the pain that projects have been feeling recently. So 370 00:18:44,040 --> 00:18:47,680 Speaker 7: offer developers more protection in the contracts, the off take 371 00:18:47,680 --> 00:18:50,719 Speaker 7: contracts they're offering, and just simply higher prices that these 372 00:18:51,000 --> 00:18:52,720 Speaker 7: developers need to make their return. 373 00:18:53,200 --> 00:18:56,560 Speaker 1: So talk to us about just wind power. How is 374 00:18:56,640 --> 00:19:01,879 Speaker 1: that from an efficiency perspective versus and versus other stuff 375 00:19:01,880 --> 00:19:03,720 Speaker 1: that's out there? How competitors is wind? 376 00:19:04,240 --> 00:19:06,640 Speaker 7: So you get kind of higher productivity from a wind 377 00:19:06,640 --> 00:19:10,640 Speaker 7: turbine compared with a solar panel, and that's even more 378 00:19:10,640 --> 00:19:14,120 Speaker 7: productive offshore, and so offshore wind you have more consistent 379 00:19:14,200 --> 00:19:17,520 Speaker 7: wind speeds, stronger winds as well. So that means kind 380 00:19:17,520 --> 00:19:20,040 Speaker 7: of if you imagine a wind turbine operating one hundred 381 00:19:20,040 --> 00:19:22,840 Speaker 7: percent of the time, that's kind of theoretical maximum. You 382 00:19:22,840 --> 00:19:25,880 Speaker 7: can get between forty to sixty percent of that generation 383 00:19:26,000 --> 00:19:29,640 Speaker 7: typically on a wind project. Now that sixty percent isn't 384 00:19:29,680 --> 00:19:32,120 Speaker 7: too far off the kind of percentage we could see 385 00:19:32,119 --> 00:19:35,359 Speaker 7: from a kind of conventional generator, a gas or a 386 00:19:35,359 --> 00:19:35,919 Speaker 7: cold plant. 387 00:19:36,200 --> 00:19:38,600 Speaker 3: What about like nuclear, It's a nuclear a lot better. 388 00:19:38,440 --> 00:19:40,920 Speaker 7: Than that nuclear it's much harder to ramp up and down, 389 00:19:41,000 --> 00:19:43,840 Speaker 7: and so they tend to operate completely as base loads, 390 00:19:43,840 --> 00:19:46,399 Speaker 7: so you get really high what we call capacity factors 391 00:19:46,440 --> 00:19:48,560 Speaker 7: for nuclear so it's operating almost all the time if 392 00:19:48,600 --> 00:19:49,680 Speaker 7: it's if it's part of the mix. 393 00:19:49,880 --> 00:19:52,600 Speaker 3: So part of the issue is the off take contract. 394 00:19:52,680 --> 00:19:55,680 Speaker 4: So basically, if I'm a developer, you know, Paul goes 395 00:19:55,720 --> 00:19:57,359 Speaker 4: and says, Okay, I'm going to buy this wind from 396 00:19:57,400 --> 00:19:58,959 Speaker 4: you for this amount of time. He's going to pay 397 00:19:59,000 --> 00:20:00,960 Speaker 4: me this, which gives me clear then how I can 398 00:20:00,960 --> 00:20:03,360 Speaker 4: go and invest that money? But my cost go up 399 00:20:03,440 --> 00:20:06,320 Speaker 4: and I'm kind of left naked at that point. How 400 00:20:06,400 --> 00:20:09,720 Speaker 4: is that being resolved? You mentioned subsidies, but like what else? 401 00:20:09,800 --> 00:20:12,680 Speaker 4: Because that gap is very unpredictable. And I remember talking 402 00:20:12,720 --> 00:20:15,600 Speaker 4: to Siemens North America ahead about that and they're like, 403 00:20:15,640 --> 00:20:18,080 Speaker 4: we took on all the commodity risk and they're trying 404 00:20:18,080 --> 00:20:20,600 Speaker 4: to change that now because they're not commodity traders, But. 405 00:20:20,600 --> 00:20:21,439 Speaker 3: Like, how do you do that? 406 00:20:21,840 --> 00:20:25,720 Speaker 7: Well, Yes, it's that unpredictability that hit developers especially hard. 407 00:20:26,240 --> 00:20:29,000 Speaker 7: So in the previous contracts, there's ones I was talking 408 00:20:29,040 --> 00:20:32,199 Speaker 7: about that got canceled. There was very little adjustment in 409 00:20:32,200 --> 00:20:35,119 Speaker 7: the contract price to account for moving commodity prices, to 410 00:20:35,200 --> 00:20:37,800 Speaker 7: account for inflation. So that's the kind of thing that 411 00:20:37,840 --> 00:20:41,000 Speaker 7: states are building into these contracts now to kind of 412 00:20:41,040 --> 00:20:43,800 Speaker 7: better share the risk between a state which is buying 413 00:20:43,840 --> 00:20:47,800 Speaker 7: the power and the developer that's building the project. So 414 00:20:47,920 --> 00:20:51,840 Speaker 7: we're seeing kind of these prices getting index to CPI 415 00:20:51,960 --> 00:20:55,679 Speaker 7: for example, to certain kind of producer price indexes and 416 00:20:55,720 --> 00:20:59,040 Speaker 7: to certain commodity prices to make sometimes a one time 417 00:20:59,080 --> 00:21:01,119 Speaker 7: adjustment from when you're reach that price to when you're 418 00:21:01,119 --> 00:21:05,240 Speaker 7: actually securing finance, and sometimes you see that adjustments accounting 419 00:21:05,240 --> 00:21:07,240 Speaker 7: for inflation right throughout the life of the project. 420 00:21:07,520 --> 00:21:08,160 Speaker 1: That's interesting. 421 00:21:08,359 --> 00:21:10,040 Speaker 7: That's the kind of structure we see in lots of 422 00:21:10,040 --> 00:21:12,600 Speaker 7: other countries that have managed to build large scale off 423 00:21:12,680 --> 00:21:16,040 Speaker 7: your wind projects globally, and so yeah, from the offs 424 00:21:16,040 --> 00:21:18,879 Speaker 7: your wind industry's perspective, it's good to see that happening 425 00:21:18,920 --> 00:21:19,720 Speaker 7: in the US as well. 426 00:21:19,920 --> 00:21:22,720 Speaker 1: You mentioned the project off the coast of New York. 427 00:21:23,000 --> 00:21:25,080 Speaker 1: Talked to us about the economics, how much does it 428 00:21:25,240 --> 00:21:28,520 Speaker 1: cost to build that thing, who paid for it, and 429 00:21:28,960 --> 00:21:29,960 Speaker 1: just the economics. 430 00:21:30,280 --> 00:21:32,879 Speaker 7: So that is a project called South Fork. It was 431 00:21:32,960 --> 00:21:36,159 Speaker 7: the kind of the first commercial scale offshore wind project 432 00:21:36,240 --> 00:21:39,919 Speaker 7: in the US that was significantly more expensive than a 433 00:21:39,960 --> 00:21:44,040 Speaker 7: project we expect to see getting installed today. That's partly 434 00:21:44,080 --> 00:21:46,400 Speaker 7: because it was it was almost like a proof of concept. 435 00:21:46,520 --> 00:21:49,679 Speaker 7: So up until then, there are only seven operational offshore 436 00:21:49,720 --> 00:21:51,960 Speaker 7: wind turbines off the coast of the US so far. 437 00:21:52,560 --> 00:21:54,920 Speaker 7: So this is the first kind of larger scale project 438 00:21:55,520 --> 00:21:58,720 Speaker 7: for one of the newer projects. You're probably looking between 439 00:21:58,760 --> 00:22:01,320 Speaker 7: two point eight to three billion dollars for a one 440 00:22:01,359 --> 00:22:03,840 Speaker 7: gigawap project, which is a really big offshore wind from 441 00:22:04,560 --> 00:22:07,040 Speaker 7: almost ten times the size of that early kind of 442 00:22:07,040 --> 00:22:09,920 Speaker 7: commercial scale project that just came off the coast of 443 00:22:10,160 --> 00:22:13,960 Speaker 7: New York. So these are a really sizeable infrastructure investments. 444 00:22:14,040 --> 00:22:16,600 Speaker 3: Yeah, what part is the hardest? 445 00:22:16,640 --> 00:22:19,560 Speaker 4: Because it seems to me that you know, moving the 446 00:22:19,680 --> 00:22:23,560 Speaker 4: energy from offshore to the grid on land, like you 447 00:22:23,680 --> 00:22:26,159 Speaker 4: got to like build a transmission line for that, Like 448 00:22:26,200 --> 00:22:29,520 Speaker 4: that seems really hard and dangerous. And then I also 449 00:22:29,600 --> 00:22:33,120 Speaker 4: hear of the transmission plug shortages, so basically the thing 450 00:22:33,160 --> 00:22:35,879 Speaker 4: you need to actually plug that wind into the grid, 451 00:22:36,119 --> 00:22:37,200 Speaker 4: there's a shortage of that. 452 00:22:37,440 --> 00:22:38,320 Speaker 3: And then you got to build it. 453 00:22:38,359 --> 00:22:40,040 Speaker 4: And there's all the raw material costs that come at 454 00:22:40,080 --> 00:22:41,480 Speaker 4: actually building the turbine. 455 00:22:41,640 --> 00:22:43,720 Speaker 3: Where's the biggest price increases? 456 00:22:44,119 --> 00:22:46,480 Speaker 7: I mean, we saw a lot of price increases across 457 00:22:46,480 --> 00:22:49,399 Speaker 7: the board over the last couple of years. Actually, when 458 00:22:49,440 --> 00:22:50,960 Speaker 7: you look at a lot of commodity prices that are 459 00:22:51,000 --> 00:22:55,000 Speaker 7: important for manufacturing of wind turbines, cables, that kind of thing, 460 00:22:55,040 --> 00:22:57,080 Speaker 7: a lot of those raw material costs have come down. 461 00:22:57,560 --> 00:23:00,439 Speaker 7: What we've seen is turbine prices have remained stubbornly high. 462 00:23:00,960 --> 00:23:03,960 Speaker 7: Wind turbine makers were hit just as hard by rising costs, 463 00:23:04,080 --> 00:23:07,919 Speaker 7: rising inflation, and many of them were having to deliver 464 00:23:08,080 --> 00:23:10,960 Speaker 7: on contract said signed at cheaper rates in this higher 465 00:23:10,960 --> 00:23:13,520 Speaker 7: priced environment. So that means many of the kind of 466 00:23:13,680 --> 00:23:15,879 Speaker 7: major wind turbine makers have suffered a lot over the 467 00:23:15,960 --> 00:23:19,159 Speaker 7: last couple of years, and so they they're maintaining higher 468 00:23:19,200 --> 00:23:21,760 Speaker 7: prices to kind of have a bit of a buffer 469 00:23:21,800 --> 00:23:26,080 Speaker 7: on their margin, trying to regain kind of stronger margins. 470 00:23:26,640 --> 00:23:29,080 Speaker 7: But that means that developers are left paying higher prices 471 00:23:29,080 --> 00:23:31,000 Speaker 7: for the turbines despite the fact that some of these 472 00:23:31,000 --> 00:23:32,560 Speaker 7: input costs have started coming down. 473 00:23:32,840 --> 00:23:35,920 Speaker 1: Who makes these big turbine things in the ocean. 474 00:23:36,000 --> 00:23:41,280 Speaker 7: So that's companies like vestas Semens Energy GE is a 475 00:23:41,320 --> 00:23:49,800 Speaker 7: big US player and so those are I recently spun out. 476 00:23:49,000 --> 00:23:51,359 Speaker 7: I mean, so also it is one of the one 477 00:23:51,400 --> 00:23:54,200 Speaker 7: of the companies that builds builds the project, so one 478 00:23:54,200 --> 00:23:56,680 Speaker 7: of the biggest project developers globally. But there'll be the 479 00:23:56,680 --> 00:23:59,200 Speaker 7: guys putting in the orders with your likes of vestors, 480 00:23:59,240 --> 00:23:59,919 Speaker 7: g semen. 481 00:24:01,160 --> 00:24:03,400 Speaker 1: I mean, how do you build these things? I mean 482 00:24:03,400 --> 00:24:07,520 Speaker 1: how do you install them? I mean difficulty, it's tough, 483 00:24:07,760 --> 00:24:10,359 Speaker 1: build them on land, ship them out there, then just 484 00:24:10,480 --> 00:24:12,600 Speaker 1: plug them in the sand. I mean, how does this work? 485 00:24:12,760 --> 00:24:14,560 Speaker 7: So most of what's getting built at the moment is 486 00:24:14,760 --> 00:24:17,000 Speaker 7: bottom fixed off your wind. So you go out there, 487 00:24:17,160 --> 00:24:19,639 Speaker 7: you build a foundation that's fixed to the seabed, and 488 00:24:19,640 --> 00:24:21,280 Speaker 7: then you come out and you build the turbine on 489 00:24:21,320 --> 00:24:23,239 Speaker 7: top of that. So you build up the tower and 490 00:24:23,280 --> 00:24:26,200 Speaker 7: then component by component kind of build the big fan. 491 00:24:26,280 --> 00:24:28,320 Speaker 8: You can see it at the top, I know. 492 00:24:28,800 --> 00:24:31,199 Speaker 4: And then also how do you Then that question is 493 00:24:31,240 --> 00:24:34,240 Speaker 4: like if something happens and it gets its broken, like 494 00:24:34,280 --> 00:24:35,080 Speaker 4: how do you fix it? 495 00:24:35,160 --> 00:24:37,280 Speaker 3: Like what's it like when you go off shore? I mean, 496 00:24:37,400 --> 00:24:39,840 Speaker 3: what happens when one of these things dies? It just 497 00:24:39,880 --> 00:24:41,959 Speaker 3: like what's the shelf life of a turbine? And how 498 00:24:41,960 --> 00:24:44,040 Speaker 3: do you recycle it? I don't, we haven't, we don't 499 00:24:44,080 --> 00:24:44,680 Speaker 3: know that yet. 500 00:24:44,840 --> 00:24:47,639 Speaker 7: Yeah, Well, well, going to your question on what happens 501 00:24:47,680 --> 00:24:50,119 Speaker 7: when it goes wrong or how you construct it. You 502 00:24:50,200 --> 00:24:52,919 Speaker 7: need really specialized vessels to build these things, so they 503 00:24:52,960 --> 00:24:55,439 Speaker 7: call them jack up vessels, So they're vessels that kind 504 00:24:55,480 --> 00:24:58,240 Speaker 7: of have legs that they extend down into the seabed. 505 00:24:58,840 --> 00:25:01,359 Speaker 7: Jacks up the vessels so it's sitting kind of above 506 00:25:01,400 --> 00:25:03,880 Speaker 7: the water, so you've got a solid platform by which 507 00:25:03,880 --> 00:25:05,960 Speaker 7: to install the components, or if something goes wrong, to 508 00:25:06,600 --> 00:25:08,639 Speaker 7: send it out there, take off one of the components 509 00:25:08,640 --> 00:25:11,800 Speaker 7: and replace it with a fixed one. But these are 510 00:25:11,800 --> 00:25:14,240 Speaker 7: really specialized vessels. They cost a lot of money to build. 511 00:25:14,359 --> 00:25:17,000 Speaker 7: Are estimates around three hundred to five hundred million dollars, 512 00:25:17,800 --> 00:25:20,000 Speaker 7: and there's a shortage of these things globally at the moment, 513 00:25:20,040 --> 00:25:23,119 Speaker 7: the kind of specialized vessels to install the foundations and 514 00:25:23,200 --> 00:25:25,640 Speaker 7: then and then the turbines. So if you're a developer, 515 00:25:25,640 --> 00:25:28,480 Speaker 7: you're struggling to find those slots where you can secure vessels. 516 00:25:29,080 --> 00:25:31,800 Speaker 7: And if something goes wrong on a recently installed project 517 00:25:31,800 --> 00:25:34,840 Speaker 7: with one of these big, big new turbines, then you 518 00:25:34,960 --> 00:25:37,320 Speaker 7: might struggle to get a vessel to come in and 519 00:25:37,320 --> 00:25:38,800 Speaker 7: do that do that replacement work. 520 00:25:39,119 --> 00:25:41,439 Speaker 1: Our thanks to Oliver medkef BN, the f head of 521 00:25:41,520 --> 00:25:42,360 Speaker 1: Wind Research. 522 00:25:42,520 --> 00:25:44,960 Speaker 4: Coming up on the program a logo Why Dick's Sporting 523 00:25:45,040 --> 00:25:48,000 Speaker 4: Goods raised it's outlook for the year even as athletic 524 00:25:48,040 --> 00:25:49,160 Speaker 4: where companies struggle. 525 00:25:49,400 --> 00:25:52,560 Speaker 1: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 526 00:25:52,600 --> 00:25:54,840 Speaker 1: depth research and data on two thousand companies and one 527 00:25:54,960 --> 00:25:57,720 Speaker 1: hundred and thirty industries. You can access Bloomberg Intelligence to 528 00:25:57,760 --> 00:25:59,639 Speaker 1: be a bi go on the terminal. I'm Paul Swinging 529 00:25:59,720 --> 00:26:00,920 Speaker 1: and Alex Steel. 530 00:26:00,680 --> 00:26:03,000 Speaker 4: And this is Bloomberg. 531 00:26:06,760 --> 00:26:10,520 Speaker 2: You're listening to Bloomberg Intelligence with Alex Steel. 532 00:26:10,280 --> 00:26:12,720 Speaker 1: And Paul Sweeney on Bloomberg Radio. 533 00:26:13,600 --> 00:26:14,800 Speaker 3: We move next to retail. 534 00:26:14,920 --> 00:26:17,520 Speaker 4: This week, dick Sporting Goods raised its outlook for the year, 535 00:26:17,640 --> 00:26:20,400 Speaker 4: reported quarterly sales it's their past analyst expectations. 536 00:26:20,680 --> 00:26:23,800 Speaker 1: This was due to strong demand for sports gear across categories, 537 00:26:23,880 --> 00:26:25,920 Speaker 1: even as athletic, where companies struggle. 538 00:26:26,280 --> 00:26:29,679 Speaker 4: Separately, the clothing retailer Abercrombie and Fitch also reported quarterly 539 00:26:29,720 --> 00:26:32,320 Speaker 4: sales that beat analyst estimates. For more on all of this, 540 00:26:32,440 --> 00:26:35,760 Speaker 4: we were joined by Lindsay Dutch Bloomberg Intelligence Consumer Hardlines, a 541 00:26:35,800 --> 00:26:36,600 Speaker 4: senior analyst. 542 00:26:36,800 --> 00:26:39,119 Speaker 1: We first asked A Lindsay why these companies are doing 543 00:26:39,200 --> 00:26:39,600 Speaker 1: so well. 544 00:26:39,920 --> 00:26:42,560 Speaker 11: I think when you think about the sporting goods, you know, 545 00:26:42,760 --> 00:26:46,440 Speaker 11: they do have a higher income sort of consumer base 546 00:26:46,920 --> 00:26:49,879 Speaker 11: and that definitely helps. They also sell sort of a 547 00:26:49,960 --> 00:26:53,200 Speaker 11: premium product, especially if you think about their footwear line, 548 00:26:53,520 --> 00:26:55,960 Speaker 11: and when we think about the consumer broadly, they are 549 00:26:56,119 --> 00:26:57,720 Speaker 11: you know, making some trade. 550 00:26:57,400 --> 00:26:59,359 Speaker 3: Offs, but people are still. 551 00:26:59,160 --> 00:27:03,280 Speaker 11: Willing to spend for that premium product, whether it be 552 00:27:03,320 --> 00:27:06,400 Speaker 11: in footwear or even if you're thinking about that apparel 553 00:27:06,480 --> 00:27:07,320 Speaker 11: like Abercrombie. 554 00:27:07,359 --> 00:27:10,560 Speaker 1: As you mentioned, how is there same store traffic? I 555 00:27:10,600 --> 00:27:12,720 Speaker 1: know in the retail space, that's important, So how was 556 00:27:12,760 --> 00:27:14,959 Speaker 1: it kind of in terms of the gross story traffic 557 00:27:15,040 --> 00:27:15,719 Speaker 1: versus pricing? 558 00:27:17,000 --> 00:27:19,520 Speaker 11: Right, So when you think about Dick's comp sales were 559 00:27:19,600 --> 00:27:21,960 Speaker 11: up over five percent in the quarter. That was a 560 00:27:22,000 --> 00:27:25,120 Speaker 11: surprise or really strong number. It was really driven by 561 00:27:25,240 --> 00:27:30,200 Speaker 11: number of transactions and ticket price. So they're seeing more 562 00:27:30,280 --> 00:27:33,600 Speaker 11: customers come in their door and those customers are spending 563 00:27:33,720 --> 00:27:37,320 Speaker 11: more and again I think that is driven by sort 564 00:27:37,320 --> 00:27:40,720 Speaker 11: of a broad assortment. If you're going in you're sort 565 00:27:40,760 --> 00:27:44,399 Speaker 11: of playing a new sport or continuing with your active wear, 566 00:27:44,800 --> 00:27:48,800 Speaker 11: like you're buying more things you know in that assortment 567 00:27:48,840 --> 00:27:50,280 Speaker 11: that Dix carries for you. 568 00:27:50,400 --> 00:27:53,119 Speaker 4: Really dumb question because you know I'm a big sports person. 569 00:27:53,280 --> 00:27:55,240 Speaker 4: That's not true, but like, why can't you just go 570 00:27:55,280 --> 00:27:57,280 Speaker 4: to like Target or Walmart for this stuff? 571 00:27:58,600 --> 00:28:01,040 Speaker 11: I think when you think about f letics, you know, 572 00:28:01,280 --> 00:28:06,880 Speaker 11: brands matter, performance matters, and I think, you know, when 573 00:28:06,920 --> 00:28:10,200 Speaker 11: I think about Dix's a great entry point when you're 574 00:28:10,240 --> 00:28:12,639 Speaker 11: starting or if your kids are starting a new sport. 575 00:28:13,119 --> 00:28:15,760 Speaker 11: You know, I'm a runner. If my kid is trying baseball, 576 00:28:15,800 --> 00:28:18,280 Speaker 11: I know nothing about baseball. I can go there and 577 00:28:18,320 --> 00:28:20,320 Speaker 11: figure out what do I need? And I can also 578 00:28:20,440 --> 00:28:22,159 Speaker 11: figure out, you know, where I want to be on 579 00:28:22,200 --> 00:28:23,080 Speaker 11: the price spectrum. 580 00:28:23,160 --> 00:28:23,360 Speaker 6: Right. 581 00:28:23,720 --> 00:28:26,000 Speaker 11: They have their own brands, so you can get sort 582 00:28:26,040 --> 00:28:28,080 Speaker 11: of a cheaper glove if you don't want that name 583 00:28:28,119 --> 00:28:30,679 Speaker 11: brand glove, and you can kind of get everything that 584 00:28:30,720 --> 00:28:33,800 Speaker 11: you need in one space. And I think that's where 585 00:28:33,920 --> 00:28:35,840 Speaker 11: Dix really does stand out. 586 00:28:36,400 --> 00:28:38,960 Speaker 1: How about inventories, How are they managing their inventories? Some 587 00:28:38,960 --> 00:28:43,160 Speaker 1: folks kind of surprisingly do a materially better job than 588 00:28:43,200 --> 00:28:44,400 Speaker 1: the others quarter to quarter. 589 00:28:44,880 --> 00:28:47,880 Speaker 11: Right, So when you think about this sporting industry as 590 00:28:47,880 --> 00:28:51,120 Speaker 11: a whole, it sounds like inventory is slightly better positioned 591 00:28:51,120 --> 00:28:54,160 Speaker 11: than it was about a year ago. Dicks in particular 592 00:28:54,760 --> 00:28:58,120 Speaker 11: seems very well positioned heading into the second quarter. Second 593 00:28:58,200 --> 00:29:02,000 Speaker 11: quarter is also seasonally better for that company when we 594 00:29:02,040 --> 00:29:03,920 Speaker 11: think about sort of the summer and like kind of 595 00:29:03,960 --> 00:29:06,960 Speaker 11: getting back to school, like fall sports kind of thing, 596 00:29:07,640 --> 00:29:10,320 Speaker 11: So inventory is in a better position. I think that's 597 00:29:10,360 --> 00:29:13,800 Speaker 11: helping Dix. I also think Dix has done a really 598 00:29:13,840 --> 00:29:18,040 Speaker 11: great job sort of scaling back promotions. They're not giving 599 00:29:18,040 --> 00:29:21,000 Speaker 11: out the discounts that they were pre pandemic. They've really 600 00:29:21,040 --> 00:29:23,680 Speaker 11: held a line on that and that has really helped 601 00:29:23,720 --> 00:29:26,760 Speaker 11: them in terms of profitability. Also, their consumer knows what 602 00:29:26,800 --> 00:29:28,760 Speaker 11: they're getting when they come there, so they're not just 603 00:29:28,800 --> 00:29:32,280 Speaker 11: like waiting for that fifty percent off deal. They know 604 00:29:32,680 --> 00:29:35,320 Speaker 11: when they go there, you know what brands might be 605 00:29:35,400 --> 00:29:37,560 Speaker 11: on sale, and that if they don't want to pay 606 00:29:37,720 --> 00:29:40,280 Speaker 11: full price for Nike, they might be able to get 607 00:29:40,320 --> 00:29:42,200 Speaker 11: their private label brand. 608 00:29:42,480 --> 00:29:45,440 Speaker 4: It was something similar with Abercrombie. Gross margin was sixty 609 00:29:45,480 --> 00:29:47,520 Speaker 4: six point four percent. Those higher than estimates. 610 00:29:47,760 --> 00:29:48,280 Speaker 3: Same deal. 611 00:29:48,360 --> 00:29:51,280 Speaker 4: Like, they're rolling back promotions and they have the power 612 00:29:51,320 --> 00:29:52,160 Speaker 4: with which to do that. 613 00:29:52,600 --> 00:29:53,680 Speaker 3: How is that possible? 614 00:29:53,800 --> 00:29:56,760 Speaker 4: Like I'm trying to distinguish what the macro read is 615 00:29:56,800 --> 00:29:59,040 Speaker 4: when like all indications point to a. 616 00:29:59,040 --> 00:30:01,600 Speaker 3: Discerning sol lowing consumer. 617 00:30:01,200 --> 00:30:04,080 Speaker 4: Base that is much more cash strapped and sensitive with 618 00:30:04,120 --> 00:30:08,479 Speaker 4: their wallet versus certain companies like Dick Sporting Goods or 619 00:30:08,480 --> 00:30:11,680 Speaker 4: Abercrombie and Fitch that have the power to keep their margins. 620 00:30:12,600 --> 00:30:15,280 Speaker 11: Yeah, it's so. I think sort of what happened is, 621 00:30:15,320 --> 00:30:17,600 Speaker 11: you know, in the pandemic, when we saw a surge 622 00:30:17,840 --> 00:30:20,800 Speaker 11: for in demand for a lot of these categories, sporting 623 00:30:20,800 --> 00:30:23,720 Speaker 11: goods and like athletic wear being one of them. You know, 624 00:30:23,760 --> 00:30:29,240 Speaker 11: these companies saw where their margins could go when demands 625 00:30:29,240 --> 00:30:31,400 Speaker 11: spike like that, and I think a lot of them 626 00:30:31,440 --> 00:30:35,560 Speaker 11: made a proactive decision that they would never go back 627 00:30:35,840 --> 00:30:39,880 Speaker 11: to that level of promotion that they had done before 628 00:30:40,040 --> 00:30:44,240 Speaker 11: in order to protect that profitability. Coming into twenty twenty four, 629 00:30:44,480 --> 00:30:49,600 Speaker 11: just broadly in retail, you know, profitability margins are majorly 630 00:30:49,680 --> 00:30:52,680 Speaker 11: in focus across the board because there is still pressure 631 00:30:52,720 --> 00:30:55,760 Speaker 11: on sales and everyone is looking to see how are 632 00:30:55,800 --> 00:30:58,760 Speaker 11: these companies managing margin, how are they managing costs? And 633 00:30:58,880 --> 00:31:02,200 Speaker 11: Dix has stood out there. I would say it's easier 634 00:31:02,320 --> 00:31:05,040 Speaker 11: for a company like Dix who has a higher income 635 00:31:05,840 --> 00:31:10,080 Speaker 11: customer base, or anybody that sort of has an assortment 636 00:31:10,120 --> 00:31:14,480 Speaker 11: that includes like a higher level premium type brand than 637 00:31:14,560 --> 00:31:17,200 Speaker 11: the retailers that are really trying to compete on value, 638 00:31:17,720 --> 00:31:21,120 Speaker 11: because if you have a value focused consumer and they 639 00:31:21,120 --> 00:31:24,680 Speaker 11: are only looking for the lowest price or the best deal, 640 00:31:24,800 --> 00:31:27,400 Speaker 11: it's very difficult to compete and you're going to have 641 00:31:27,560 --> 00:31:30,720 Speaker 11: to go back to that promotional environment. So you're sort 642 00:31:30,720 --> 00:31:35,440 Speaker 11: of seeing a split in strategy depending on what category 643 00:31:35,480 --> 00:31:38,240 Speaker 11: you're in. You know what level of assortment you have, 644 00:31:38,560 --> 00:31:41,200 Speaker 11: and you know whether you're going after that value customer 645 00:31:41,600 --> 00:31:44,440 Speaker 11: or whether you kind of hold firm try to protect 646 00:31:44,440 --> 00:31:48,480 Speaker 11: that margin and get that better sale, maybe more longevity 647 00:31:48,600 --> 00:31:51,200 Speaker 11: with a better consumer over time. 648 00:31:51,600 --> 00:31:54,760 Speaker 1: And for the retailers that you talk to in including Dix, 649 00:31:55,320 --> 00:31:57,400 Speaker 1: is there are there any supply chain issues left or 650 00:31:57,400 --> 00:31:59,200 Speaker 1: that is that all fixed? 651 00:31:59,240 --> 00:32:02,200 Speaker 11: I guess I think in sporting goods we're not really 652 00:32:02,240 --> 00:32:05,880 Speaker 11: seeing a lot of supply chain issues anymore. We've seen 653 00:32:06,040 --> 00:32:09,080 Speaker 11: transportation costs start to come down actually in the second 654 00:32:09,120 --> 00:32:12,200 Speaker 11: half of last year. Many retailers in the space are 655 00:32:12,240 --> 00:32:15,959 Speaker 11: still benefiting from those lower costs again helping the margin 656 00:32:16,480 --> 00:32:19,520 Speaker 11: this year, and that is where we're seeing some of 657 00:32:19,600 --> 00:32:21,840 Speaker 11: the improvement on that profit line. 658 00:32:22,120 --> 00:32:22,320 Speaker 5: All right. 659 00:32:22,360 --> 00:32:25,840 Speaker 4: Thanks to Lindsay Dutch Bloomberg intelligence, consumer hardline senior analyst. 660 00:32:25,960 --> 00:32:28,880 Speaker 1: Return now to Elon Musk and the ev giant Tesla. 661 00:32:28,960 --> 00:32:31,840 Speaker 1: The company appears to be in disarray as its stock 662 00:32:31,920 --> 00:32:34,720 Speaker 1: has been creatoring, sales have been weak, and some investors 663 00:32:34,760 --> 00:32:36,600 Speaker 1: say it has a distracted leader. 664 00:32:36,640 --> 00:32:38,520 Speaker 4: But what about some of the other companies that CEO 665 00:32:38,560 --> 00:32:41,280 Speaker 4: Elon Musk runs, like X and SpaceX. This is the 666 00:32:41,320 --> 00:32:44,080 Speaker 4: subject of a big Take piece this week titled Tesla's 667 00:32:44,080 --> 00:32:47,560 Speaker 4: Slump Exposes Elon Musk's distractions across his empire. 668 00:32:47,760 --> 00:32:49,920 Speaker 1: We were joined by one of the pieces co authors, 669 00:32:49,920 --> 00:32:52,920 Speaker 1: Bloomberg Tech reporter Kurt Wagner. We first asked Kurt for 670 00:32:53,000 --> 00:32:54,680 Speaker 1: more context on his story. 671 00:32:54,960 --> 00:32:58,040 Speaker 12: A big part of what you know working for Elon 672 00:32:58,200 --> 00:33:00,600 Speaker 12: is all about, is sort of working for Elon everywhere 673 00:33:00,680 --> 00:33:03,360 Speaker 12: he needs you, right, So you might be employed technically 674 00:33:03,400 --> 00:33:06,000 Speaker 12: by Tesla, but you might show up on you know, 675 00:33:06,040 --> 00:33:09,320 Speaker 12: a SpaceX project or an X project. And I think, 676 00:33:09,520 --> 00:33:12,360 Speaker 12: you know, not only are the people that he works 677 00:33:12,360 --> 00:33:14,880 Speaker 12: with sort of hovering around and all these various roles, 678 00:33:14,880 --> 00:33:17,600 Speaker 12: but I think his companies are becoming closer and closer together. 679 00:33:17,640 --> 00:33:19,960 Speaker 12: And that's why it's so important that you know when 680 00:33:20,000 --> 00:33:23,240 Speaker 12: Tesla is struggling, it has this trickle effect because that's 681 00:33:23,280 --> 00:33:26,280 Speaker 12: where he gets his wealth to fund XAI, to to 682 00:33:26,480 --> 00:33:29,000 Speaker 12: you know, deal with X, to deal with SpaceX, and so, 683 00:33:29,480 --> 00:33:31,160 Speaker 12: you know, what we wanted to sort of do is 684 00:33:31,200 --> 00:33:33,680 Speaker 12: show people that all of these different companies and all 685 00:33:33,680 --> 00:33:36,400 Speaker 12: the people who work them are interconnected. And we try 686 00:33:36,440 --> 00:33:38,960 Speaker 12: to do that with a pretty cool visual graphic that 687 00:33:39,440 --> 00:33:40,840 Speaker 12: folks can see on the website. 688 00:33:41,000 --> 00:33:44,040 Speaker 1: Kurt, what is the musconomy to find that? 689 00:33:44,520 --> 00:33:48,760 Speaker 12: Yeah, it's a term that represents or reflects these six 690 00:33:48,880 --> 00:33:53,640 Speaker 12: different businesses that he's running at any given time, and again, 691 00:33:53,800 --> 00:33:56,479 Speaker 12: sort of this idea that they all work together. They 692 00:33:57,000 --> 00:34:00,400 Speaker 12: they you know, in X's case, the data from X 693 00:34:00,440 --> 00:34:03,000 Speaker 12: which used to be called Twitter, is now sort of 694 00:34:03,000 --> 00:34:04,760 Speaker 12: powering XAI his startup. 695 00:34:04,920 --> 00:34:05,120 Speaker 5: Right. 696 00:34:05,360 --> 00:34:08,279 Speaker 12: The money from Tesla has historically been used to help 697 00:34:08,320 --> 00:34:11,960 Speaker 12: fund SpaceX and his purchase of X. And again, you 698 00:34:12,080 --> 00:34:16,280 Speaker 12: see the musconomy as this collection of businesses that Elon 699 00:34:16,400 --> 00:34:19,440 Speaker 12: runs and how they are all intertwined with one another. 700 00:34:19,760 --> 00:34:22,080 Speaker 3: Do the people in his orbit do they like this? 701 00:34:22,560 --> 00:34:23,760 Speaker 3: Like that to me sounds terrible. 702 00:34:23,960 --> 00:34:26,040 Speaker 4: Like I like predictability, which I know as funny as 703 00:34:26,080 --> 00:34:28,160 Speaker 4: I work in news. I like predictability. I like to 704 00:34:28,160 --> 00:34:29,480 Speaker 4: know what I'm doing. I do not want to be 705 00:34:29,520 --> 00:34:32,759 Speaker 4: pulled in seventeen thousand directions. Do people in his orbit like. 706 00:34:32,719 --> 00:34:36,400 Speaker 12: That, Well, I think the people at the very center 707 00:34:36,480 --> 00:34:38,800 Speaker 12: of this universe, the people who are closest to Elon. 708 00:34:39,280 --> 00:34:41,919 Speaker 12: Whether they like it or not, it's sort of a necessity, right, 709 00:34:41,960 --> 00:34:44,160 Speaker 12: because that's what it takes to be close to that 710 00:34:44,280 --> 00:34:46,880 Speaker 12: center of power. And so we've seen, for example, his 711 00:34:47,000 --> 00:34:50,680 Speaker 12: business manager Jared Burchell shows up pretty much across all 712 00:34:50,680 --> 00:34:53,279 Speaker 12: of these different companies. His lawyer Alex Spiro shows up 713 00:34:53,280 --> 00:34:55,759 Speaker 12: across all of these companies. So if you want to 714 00:34:55,800 --> 00:34:58,480 Speaker 12: be at the center of this universe, you have to 715 00:34:58,520 --> 00:35:00,920 Speaker 12: be willing to go where Elon go. And as we know, 716 00:35:01,040 --> 00:35:02,920 Speaker 12: he not only has these six companies, but he's doing 717 00:35:02,960 --> 00:35:05,279 Speaker 12: a million other things as well. And so whether they 718 00:35:05,320 --> 00:35:07,600 Speaker 12: like it or not, I'm not sure if it really matters, 719 00:35:07,880 --> 00:35:10,280 Speaker 12: because that's just what it takes to work for Elon Musk. 720 00:35:10,520 --> 00:35:11,239 Speaker 3: How do they all? 721 00:35:11,320 --> 00:35:15,640 Speaker 4: How do all the businesses though intersect? Because from a 722 00:35:15,680 --> 00:35:18,080 Speaker 4: broad look they don't. But then if you dive a 723 00:35:18,120 --> 00:35:20,719 Speaker 4: little deeper like they do, like X, you can use 724 00:35:20,760 --> 00:35:23,480 Speaker 4: all that stuff for large language models, for his AI 725 00:35:23,560 --> 00:35:25,760 Speaker 4: stuff and the AI stuff goes into the car stuff, 726 00:35:25,760 --> 00:35:27,640 Speaker 4: and the car stuff I guess goes into the rocket 727 00:35:27,640 --> 00:35:28,240 Speaker 4: ship stuff. 728 00:35:28,840 --> 00:35:30,839 Speaker 12: Yeah, I mean you kind of hit on it. Like 729 00:35:30,960 --> 00:35:34,560 Speaker 12: the connective tissue between these companies can be somewhat small. 730 00:35:34,920 --> 00:35:37,359 Speaker 12: In X's case, as you pointed out that data there 731 00:35:37,440 --> 00:35:41,799 Speaker 12: is being used to train a chatbot called Grock within XAI. 732 00:35:42,280 --> 00:35:45,359 Speaker 12: We know that, for example, the corporate plane, like small things, 733 00:35:45,400 --> 00:35:48,000 Speaker 12: the corporate plane that Elon uses at Tesla's the same 734 00:35:48,040 --> 00:35:50,160 Speaker 12: one that's used at SpaceX. We know that they share 735 00:35:50,239 --> 00:35:54,000 Speaker 12: certain employees, so you know, I mentioned Jared Burchell, his 736 00:35:54,080 --> 00:35:57,279 Speaker 12: business manager, Alex Biro, his lawyer. Like these are the 737 00:35:57,320 --> 00:36:00,480 Speaker 12: types of connective things that bring these companies together. Is 738 00:36:00,520 --> 00:36:03,440 Speaker 12: the people and and sort of you know, the smaller 739 00:36:03,480 --> 00:36:06,680 Speaker 12: parts of their business that are intertwined. And I feel 740 00:36:06,760 --> 00:36:09,640 Speaker 12: like Tesla is sort of the engine behind this whole thing. 741 00:36:09,760 --> 00:36:11,960 Speaker 12: If Tesla is humming and doing well, it kind of 742 00:36:12,040 --> 00:36:13,560 Speaker 12: enables everything else to grow too. 743 00:36:14,280 --> 00:36:17,040 Speaker 1: How about Twitter? You bought that for forty four billion dollars. 744 00:36:17,239 --> 00:36:19,200 Speaker 1: Kurt and a lot of analysts says the value of 745 00:36:19,200 --> 00:36:23,480 Speaker 1: Twitter's declined dramatically as advertisers have fled. Is there any 746 00:36:23,600 --> 00:36:26,640 Speaker 1: pushback from anybody or or folks just saying, hey, it 747 00:36:26,719 --> 00:36:28,279 Speaker 1: was his money, he can do with it what he wants. 748 00:36:28,680 --> 00:36:31,360 Speaker 12: Yeah, I mean, I do think it poses a challenge 749 00:36:31,400 --> 00:36:34,600 Speaker 12: because of this distraction with Elon's time, right. I think, 750 00:36:34,760 --> 00:36:37,400 Speaker 12: especially if you're a Tesla investor, you have to be 751 00:36:37,440 --> 00:36:40,360 Speaker 12: scratching your head and saying, what are you doing? You know, 752 00:36:40,440 --> 00:36:43,080 Speaker 12: why are you spending time on this money losing business 753 00:36:43,120 --> 00:36:45,520 Speaker 12: when you could be sort of you know, making money 754 00:36:45,520 --> 00:36:49,279 Speaker 12: for shareholders over here. And I think it's you know, 755 00:36:49,520 --> 00:36:51,799 Speaker 12: becoming a bit of a problem. I think what will 756 00:36:51,840 --> 00:36:54,880 Speaker 12: be interesting is to see whether X sort of gets 757 00:36:55,000 --> 00:36:58,479 Speaker 12: folded into x AI at some point. I could see 758 00:36:58,480 --> 00:37:01,040 Speaker 12: those two companies sort of merge so that you know, 759 00:37:01,080 --> 00:37:04,400 Speaker 12: again X provides the data for these large language models, 760 00:37:04,560 --> 00:37:06,560 Speaker 12: but it sort of gives him some cover to spend 761 00:37:06,640 --> 00:37:09,240 Speaker 12: time in X because now it's part of the AI business, 762 00:37:09,280 --> 00:37:11,719 Speaker 12: which is much more exciting, I think, for people than 763 00:37:11,760 --> 00:37:14,480 Speaker 12: the free speech business, which hasn't been very lucrative for him. 764 00:37:15,000 --> 00:37:17,400 Speaker 3: The free speech Businessho's in the free speech business? Like, 765 00:37:17,440 --> 00:37:18,760 Speaker 3: what is that mental lawyers? 766 00:37:19,040 --> 00:37:21,479 Speaker 12: That is Elon? Elon is the is in the free 767 00:37:21,480 --> 00:37:22,320 Speaker 12: speech business. 768 00:37:22,360 --> 00:37:22,800 Speaker 8: I guess. 769 00:37:22,880 --> 00:37:26,000 Speaker 4: So in your reporting, what emerges the biggest problem or 770 00:37:26,000 --> 00:37:26,720 Speaker 4: the biggest question. 771 00:37:27,280 --> 00:37:30,040 Speaker 12: Yeah, I think really it comes down to kind of 772 00:37:30,040 --> 00:37:32,000 Speaker 12: this we I haven't really talked much about this yet, 773 00:37:32,000 --> 00:37:35,520 Speaker 12: but Elon's pay package at Tesla is sort of up 774 00:37:35,560 --> 00:37:36,600 Speaker 12: for debate. 775 00:37:36,840 --> 00:37:37,000 Speaker 5: Right. 776 00:37:37,080 --> 00:37:39,000 Speaker 12: You may remember he was supposed to be paid I 777 00:37:39,040 --> 00:37:42,759 Speaker 12: believe it was fifty six billion dollars and that pay 778 00:37:42,840 --> 00:37:45,200 Speaker 12: package was I believe set up in twenty eighteen. It's 779 00:37:45,239 --> 00:37:48,680 Speaker 12: been challenged in court and a judge basically said this 780 00:37:48,719 --> 00:37:52,240 Speaker 12: isn't a fair you know, compensation, and Elon is fighting 781 00:37:52,239 --> 00:37:54,120 Speaker 12: this in court. But it's a huge deal, not only 782 00:37:54,160 --> 00:37:57,560 Speaker 12: because it's you know, his own net worth, but because 783 00:37:57,560 --> 00:38:00,640 Speaker 12: that money is then used to fund many of these 784 00:38:00,640 --> 00:38:03,520 Speaker 12: other projects. So if he's not able to secure this 785 00:38:03,680 --> 00:38:06,560 Speaker 12: pay package that he thought he had, it impacts the 786 00:38:06,600 --> 00:38:09,640 Speaker 12: loans that he takes out and impacts his liquidity to 787 00:38:09,719 --> 00:38:11,680 Speaker 12: be able to use on these other companies. And I 788 00:38:11,719 --> 00:38:14,759 Speaker 12: do wonder if he starts to lose a lot of 789 00:38:14,800 --> 00:38:17,279 Speaker 12: his net worth, his value, if that's going to have 790 00:38:17,280 --> 00:38:20,400 Speaker 12: an impact on XAI, Twitter, SpaceX and others. 791 00:38:20,719 --> 00:38:22,880 Speaker 3: All Right, Thanks to Kurt Wagner, Bloomberg Tech Reporter. 792 00:38:23,280 --> 00:38:26,040 Speaker 1: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio 793 00:38:26,120 --> 00:38:28,520 Speaker 1: providing in depth research and data on two thousand companies 794 00:38:28,560 --> 00:38:29,880 Speaker 1: and one hundred and thirty industries. 795 00:38:29,960 --> 00:38:32,640 Speaker 4: And remember you can access Bloomberg Intelligence through Bigo on 796 00:38:32,680 --> 00:38:34,200 Speaker 4: the terminal. I'm Alex Steel and. 797 00:38:34,200 --> 00:38:34,960 Speaker 1: I'm Paul Sweeney. 798 00:38:35,120 --> 00:38:35,680 Speaker 8: Stay with us. 799 00:38:35,719 --> 00:38:38,359 Speaker 1: Today's top stories and global business headlines are coming up 800 00:38:38,680 --> 00:38:39,160 Speaker 1: right now