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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple Cardplay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Let's get back to the other story of the morning,

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Speaker 2: and that's what's happening with Google. So joining us as man,

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Speaker 2: you've seing Bloomberg Intelligence senior tech industry analyst on a

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Speaker 2: potential Google breakup. Okay, so the DOJ considering asking a

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Speaker 2: federal judge to force Google to sell off parts of

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Speaker 2: its business. What do you think is actually going to happen?

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Speaker 3: Well, so there are three big lawsuits out there against

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Speaker 3: Google in the US, two from DOJ. One is the

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Speaker 3: monopoly lawsuit with the lost and that's where we're looking

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Speaker 3: at remedies. The other one is also from DJ against

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Speaker 3: their ad tech business, where the DOJ is looking at

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Speaker 3: their at tech stack and how you know they control

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Speaker 3: all parts of this stack. The third one is from

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Speaker 3: the you know, different state attorney journals, again targeting their

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Speaker 3: attach business. So when I look at you know, everything

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Speaker 3: that obviously regulators want to change with Google. The ad

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Speaker 3: tech piece is the one which comes up over and

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Speaker 3: over again, the fact that they control different parts of

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Speaker 3: the ads TAC. Now in the monopoly lawsuit, they're talking

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Speaker 3: about a force breakup of the Chrome business or the

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Speaker 3: play store business, Android business. I think it's very hard

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Speaker 3: to take out, you know, a single product from a

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Speaker 3: company like Google and say this is a separate entity.

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Speaker 3: It's just like it's all run or shared infrastructure. I

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Speaker 3: can't imagine you know, doing that with Google, and you know,

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Speaker 3: doing it successfully in the sense that Android can be

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Speaker 3: a separate company. Maybe YouTube, But again with YouTube, it's

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Speaker 3: run on that same infrastructure that searches run on. So

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Speaker 3: how do you split that infrastructure. It's very hard to

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Speaker 3: do it at the product level.

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Speaker 4: All right, here's some inside Bloomberg for you. You can

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Speaker 4: get really smart on a new piece of information that

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Speaker 4: just hit the tape about a company type in the

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Speaker 4: ticker goog L for Google. Hit equity, then hit BECO

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Speaker 4: BICO for Bloomberg Intelligence company Research, and you'll get what's

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Speaker 4: called a recent event reaction. So I want to know

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Speaker 4: immediately what Mandeep Singh thinks about this stuff and what

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Speaker 4: I read. I didn't expect to read we see a

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Speaker 4: breakup of Google's add tech business as the most likely

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Speaker 4: outcome for remedy in the company's monopoly case with the

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Speaker 4: US Justice Department. I thought what I would have read is,

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Speaker 4: I don't worry about it, but this has some teeth here.

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Speaker 3: This is what you're kind of well, because the loss

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Speaker 3: that first lawsuit at the dog and the second one

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Speaker 3: the ad tech as well, it's very likely that the

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Speaker 3: judge will rule against Google. So when you lose the cases,

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Speaker 3: there has to be both behavior and structural remedy. And

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Speaker 3: in the case of behavior remedy, yeah, they can't make

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Speaker 3: those payments to Apple anymore. To be the default sir,

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Speaker 3: or any other hardware maker, they will have to open

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Speaker 3: up Android to offer search screens so that you just

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Speaker 3: don't have to use Chrome or Google Search. You can

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Speaker 3: use bing search for example. So choice screens is another

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Speaker 3: behavior elder. But the structured remedy in terms of a

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Speaker 3: forced sale, I find it hard to believe that the

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Speaker 3: dot will ask them to sell a product. It has

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Speaker 3: to be more at the technology stack level.

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Speaker 2: So when we go to the ad tech stack, maybe

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Speaker 2: that just demptail with what you were saying, so what

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Speaker 2: does control the ad tech stack mean when you're talking

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Speaker 2: about Google?

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Speaker 3: So think of how an ad exchange works. You have

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Speaker 3: the supply side, you know in terms of the publisher

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Speaker 3: ad inventory, and then you have the demand side, the

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Speaker 3: advertisers who are buying those ads, and then you have

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Speaker 3: the exchange in the middle, who is matching the supply

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Speaker 3: and the demand side for ads. Google has a products

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Speaker 3: across the stack where they have a man side platform,

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Speaker 3: They have a supply side AD platform. They are an

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Speaker 3: online exchange and they've built it over the years because

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Speaker 3: they made a few acquisitions. Double Click was the most

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Speaker 3: notable one where they acquired all the capabilities to really

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Speaker 3: operate as an entity that knows everything when it comes

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Speaker 3: to digital ads being sold in the marketplace. So they

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Speaker 3: control that stack end to end. That's why when you

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Speaker 3: compare Google's ad pricing to everyone else out there, they

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Speaker 3: are far superior. One they have the best targeting. The

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Speaker 3: other is when you're operating a stack where you have

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Speaker 3: the dominant product across the different pieces, you have a

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Speaker 3: pricing advantage. And that's what you know. The regulators are

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Speaker 3: saying that this company controls pretty much everything in the

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Speaker 3: ad stack.

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Speaker 4: But the advertisers themselves they're not complaining, of course not.

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Speaker 5: I mean they're getting like, who are they protecting?

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Speaker 4: This a solution in search of a problem here in

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Speaker 4: my opinion, because I have a competition in this market,

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Speaker 4: I think I have competition. I mean Google's huge, so Facebook,

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Speaker 4: and now I've got this little company in a Seattle

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Speaker 4: called Amazon. They're monster's advertising player. So where's the problem here?

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Speaker 3: So it all comes down to how you look at

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Speaker 3: the market. If you look at the market the way

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Speaker 3: you just described, where Meta is as formidable as Google

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Speaker 3: and Amazon is a big third player, then yes there

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Speaker 3: is competition. But when you look at certain type of ads,

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Speaker 3: whether it's on the desktop or you know the third

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Speaker 3: party ads that are going through Google Ad Exchange, these

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Speaker 3: companies don't overlap. Like remember, Meta is a walled garden,

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Speaker 3: even though it's big in terms of the digital ad advertising,

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Speaker 3: it's its own world garden. Amazon is its own walled

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Speaker 3: garden Google. So these companies have their own swim lanes.

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Speaker 3: They are big in terms of the digital ad dollars,

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Speaker 3: but they have their own swim lanes. They don't overlap.

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Speaker 3: And that's the objection that I think regulators have.

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Speaker 2: Okay, so if they wound up, you know, moving around

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Speaker 2: that ad tech stack and changing stuff up, what does

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Speaker 2: that change look like and how much money could then

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Speaker 2: Google lose?

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Speaker 3: Well, so Google Search obviously is a two hundred billion

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Speaker 3: dollar rund raiate business, still the cash cow for Google.

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Speaker 3: So that's where you know the Google network piece, which

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Speaker 3: is the ads that Google shows on third party platforms.

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Speaker 3: So one is Google showing ads on YouTube and their

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Speaker 3: own search page. The other is Google showing ad on

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Speaker 3: let's say New York Times or some other publisher. Because

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Speaker 3: it's going through the Google Ad Exchange. That's the part

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Speaker 3: that can be divested where and it's a thirty two

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Speaker 3: billion dollar rund rate business within that two hundred billion,

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Speaker 3: that's the part that's not growing. But you could argue

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Speaker 3: could be split up in a way where I think

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Speaker 3: Google maybe a smaller search ad business, But at the

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Speaker 3: same time that will appease the regulators because they're not

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Speaker 3: controlling different parts of the ads stack.

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Speaker 4: We talk to institutional investors out there these days, how

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Speaker 4: do they think about the regulatory risk over big tech

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Speaker 4: these days? And how's that change over the last three.

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Speaker 6: Or four years?

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Speaker 3: I mean right now, everyone wants to know who will

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Speaker 3: be the dominant player when it comes to LLMS and

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Speaker 3: you know, generative AI, whether Google will end up losing

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Speaker 3: its dominance in search because of these LLM players. And

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Speaker 3: that's where I think again, the products that Google has,

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Speaker 3: whether it's Android or YouTube or cloud, they're critical to

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Speaker 3: maintaining Google's lead in that LLLM and generative AI space

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Speaker 3: where they do have competition from Open AI, Microsoft, And

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Speaker 3: that's what investors are most focused on. It's always about

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Speaker 3: the future five ten years down the line, and that's

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Speaker 3: where the growth is. And the companies with the best

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Speaker 3: large languid models have an advantage. And Google, because of

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Speaker 3: the fact that they own these family of apps, they

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Speaker 3: have a data advantage. For the large anguid models, it's

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Speaker 3: their proprietary day, so they don't want to give away

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Speaker 3: YouTube or you know, just have that separate in terms

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Speaker 3: of all, Yeah.

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Speaker 2: It needs the beast in essence, for lack of a

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Speaker 2: better word, they don't have to buy to feed the beast. Okay,

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Speaker 2: So when we wind up hearing numbers and earnings, what

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Speaker 2: kind of growth are we going to see for these

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Speaker 2: big tech companies and what's going to be considered good,

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Speaker 2: like eighteen percent growth. Is that going to be good

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Speaker 2: enough for what I mean?

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Speaker 3: Right now? We look at Microsoft growing mid teens. Obviously

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Speaker 3: the growth part of the business is Azure Cloud. In

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Speaker 3: the case of Google, Look search business may probably grow

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Speaker 3: you know, low teens, it's still is growing double digit,

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Speaker 3: which is remarkable for you know, a business of two

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Speaker 3: hundred billion dollars round rate. That just goes to show

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Speaker 3: that Google Search still dominates and that's why they get

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Speaker 3: so much regulatory scrutiny. But the growth part of the

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Speaker 3: business is the Google cloud business. I think that's where

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Speaker 3: you will see the growth thirty percent growth, and it's

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Speaker 3: driven by companies deploying their you know, large angrid model,

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Speaker 3: deploying generative AI. Where do you do that? You do

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Speaker 3: that on the cloud. And the cloud side is big

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Speaker 3: enough for you know, all three players, whether it's Microsoft,

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Speaker 3: Amazon and Google, to do well. So I think we'll

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Speaker 3: see a lot of cloud business. And YouTube I think

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Speaker 3: is a great standalone business, but there is a cyclical

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Speaker 3: element to it, and that's why YouTube business growing as

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Speaker 3: fast as their cloud business.

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Speaker 4: The reason we have like twenty seven techannels of Bloomberg Intelligence,

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Speaker 4: I mean, they're all over the place is because I

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Speaker 4: think the US just said fifty years ago, just light

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Speaker 4: touch on regulatory let these guys in Silicon Valley do

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Speaker 4: their thing, and that's what created the great technology boom

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Speaker 4: in my opinion, as opposed to Europe, which you got

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Speaker 4: nothing right. So now I'm not sure if the cat's

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Speaker 4: out of the bag for a lot of these things.

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Speaker 2: Yeah, I don't know. I don't know. It makes life

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Speaker 2: more interesting though, for our intertrust to people and Mandy

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Speaker 2: a job, all right, many things a lot man you've

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Speaker 2: seeing joining us from Bloomberg Intelligence.

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Speaker 1: You're listening the Bloomberg Intelligence Podcast. Catch us live weekdays

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Speaker 1: at ten am Eastern on applecar Play and Android Auto

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Speaker 1: Say Alexa, playing Bloomberg eleven.

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Speaker 2: Thirty from Alex Steel alongside Paul Sweeney. This is Bloomberg

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Speaker 2: Intelligence Radio. We are broadcasting to live from Interactive Broker

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Speaker 2: Studio right here in Midtown Manhattan. For the last few days,

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Speaker 2: though Paul and I were in Orlando at a Commonwealth

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Speaker 2: Advisor's conference, and Orlando was getting a little bit dicey

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Speaker 2: the winds are picking up. You had rain, and it

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Speaker 2: looks like that Hurricane Milton is just barreling towards that

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Speaker 2: west coast and it's very, very dangerous, particularly for those

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Speaker 2: on that west coast. So you want to take a

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Speaker 2: little bit of a deep dive to kind of understand

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Speaker 2: what it means, say for power and utilities and the grid,

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Speaker 2: because no doubt power is going to go out, but

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Speaker 2: how long it stays et cetera is going to be

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Speaker 2: very pivotal. Mike Sullivan is Energy and Utilities consultant at

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Speaker 2: PA Consulting joining us. Now, Mike, this is a very

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Speaker 2: silly question, but how do's a hurricane like this impact

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Speaker 2: the grid and utilities? Like, what's the sequence of events

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Speaker 2: of how this plays out?

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Speaker 6: Okay, oh, good morning, and thanks for having me. At first,

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Speaker 6: it goes without saying that Milton is on track. This

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Speaker 6: will probably be one of the most destructive hurricanes in

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Speaker 6: Florida history, and there will be extended power outages, both

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Speaker 6: from wins and the wave surge, so both of those

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Speaker 6: things will be in play. I think the most important

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Speaker 6: thing is for the public to remember that the local

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Speaker 6: officials are first and foremost their choice for information there

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Speaker 6: These emergency management organizations, they are the glue that provide

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Speaker 6: coordination between the state organizations, federal organizations, and first responders

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Speaker 6: like utility workers. And right now there are some estimates

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Speaker 6: that's saying there were over thirty five thousand out of

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Speaker 6: state utility workers who have converged on Florida to help

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Speaker 6: in restoration. So it's it's going to be a huge effort.

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Speaker 6: It's going to take days to restore power, and it's

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Speaker 6: quite a job the utilities are up against.

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Speaker 4: So, Mike, give us a sense here of kind of

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Speaker 4: the risk to Florida here. I mean, they've been through

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Speaker 4: this so many times. Unfortunately, what can what have they done?

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Speaker 4: What can they do? What should they do to maybe

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Speaker 4: try to I don't know, safe proof their grid perhaps

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Speaker 4: a little bit more. Is there anything that can be done?

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Speaker 6: Sure, there's actually a state law in Florida that requires

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Speaker 6: that utilities file storm protection plans every three years. You know,

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Speaker 6: the basic construct or compact that utilities have is to

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Speaker 6: provide safe, reliable, and affordable power to all customers. Over

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Speaker 6: the last decade, so that has layered on top of

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Speaker 6: that has become that has come into play two other

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Speaker 6: objectives the clean energy transition and hardened and more resilient grids.

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Speaker 6: So all the utilities have filed these plans to make

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Speaker 6: their grid stronger to withstand events like this, to be

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Speaker 6: able to restore power faster, and then you know, to

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Speaker 6: think about the overall survivability of the communities that they serve.

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Speaker 6: I think goes without saying that the number and the

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Speaker 6: impact of the kinds of events we've been seeing in

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Speaker 6: recent years requires the greater investments be made. Those protection

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Speaker 6: plans are good starts, but these grids are expansive. They've

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Speaker 6: been built over one hundred plus years, and they need

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Speaker 6: to be hardened and also expanded to to support the

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Speaker 6: Queen Energy transition and greater electrification due to data centers

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Speaker 6: and a lot of other increasing electrical load.

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Speaker 5: Who pays for that?

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Speaker 2: Is it going to be utilities and the rate payers

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Speaker 2: or is it more of a grid operator? Is it

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Speaker 2: the government? Where does that come from?

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Speaker 6: So mostly, you know, I said part of utilities compact

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Speaker 6: is to keep rates affordable. All of these the investments

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Speaker 6: cost money. I mean, you're rebuilding major parts of the grid,

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Speaker 6: and yes, ultimately it does come down to raising rates

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Speaker 6: or rate payers, all right, So.

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Speaker 4: Mike, you think about our grid and you just look

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Speaker 4: at the wires strung on these poles, It just it

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Speaker 4: just seems like so technologically out of step with where

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Speaker 4: our economy is. Underground wires, isn't that the future? I mean,

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Speaker 4: as long stuff's above ground, it's going to be at

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Speaker 4: risk to hurricanes and it all kinds of weather.

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Speaker 2: Talk about being expensive and rapairers pan or.

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Speaker 6: Sure, sure, absolutely, And for the last thirty years or so,

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Speaker 6: all new communities are supplied with underground service, So that's

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Speaker 6: been going on for some time. It's the older infrastructure.

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Speaker 6: Oftentimes communities are served they were built in the thirties

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Speaker 6: and forties with what we call real lot construction. That's

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Speaker 6: the lines that run behind people's backyards and butt up

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Speaker 6: against other backyards. And those overhead lines are the ones

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Speaker 6: that are particularly susceptible to coming down and taking an

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Speaker 6: awfully long time to put back up because they serve

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Speaker 6: only a few customers.

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Speaker 2: So when you say that, okay, so a lot of

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Speaker 2: investment needs to go in to help all of these things,

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Speaker 2: whether it's the energy transition or it's weather proofing, etc.

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Speaker 2: And you mentioned that rate payers eventually are going to

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Speaker 2: have to pay. I mean, there's only so much tolerance

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Speaker 2: for that. Do we know an estimate of what weather

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Speaker 2: proofing this industry as well as energy transitioning this industry

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Speaker 2: is going to cost.

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Speaker 6: So part of the problem is that oftentimes regulators, state

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Speaker 6: regulators who approve these plans don't adequately consider what I

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Speaker 6: call stack value. Is you are trying to build and

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Speaker 6: upgrade your grid for more renewable resources, greater electrification. That is,

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Speaker 6: they have to have more capacity and at the same

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Speaker 6: time to build build them back more resiliently. Those two things,

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Speaker 6: when you think about them as a stacked value, it

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Speaker 6: becomes more understandable, more digestible. Estimates for undergrounding, it's very expensive,

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Speaker 6: and power White has a particularly extensive undergrounding program underway

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Speaker 6: right now, but you know, it's a million dollars to

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Speaker 6: two million dollars depending on which part of the country

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Speaker 6: you're talking about to underground lines. And most of the

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Speaker 6: lines that are are overhead and cause most of the

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Speaker 6: problems are ones that run up and down city streets,

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Speaker 6: commercial areas, that kind of thing. And even in the

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Speaker 6: best case, whether they're hardened or not. You know, oftentimes

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Speaker 6: in major hurricanes like this, it's not just trees toppling

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Speaker 6: on wines, but it's flying debris hitting poles and lines

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Speaker 6: and things like that. So an event like Milton is

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Speaker 6: particularly problematic, but increased investment can certainly help.

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Speaker 4: Hey, Mike, thanks so much for joining us. Really appreciate

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Speaker 4: getting your insights here. Michael Salvin, he's the energy and

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Speaker 4: you Tooty's consultant for PA consultant. They're based down in Annapolis, Maryland.

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Speaker 4: There so again the hurricane barreling towards the west coast

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Speaker 4: of Florida. John Sucker and I read the book The Grid,

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Speaker 4: so we consider our Oh you.

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Speaker 2: Did, wait, we're now already all right, all right, fine,

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Speaker 2: I'm under list.

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Speaker 4: The technology looks like nineteen twenty oh oh yeah, and

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Speaker 4: you know, like really, I mean, can't we do anything?

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Speaker 4: But as Mike Sulin was saying, the new stuff gets built,

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Speaker 4: it's getting built on the underground. So first, after our

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Speaker 4: good friends in Florida, this is Bloomberg.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple car Playing and

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Speaker 1: Broid Auto with the Bloomberg Business app. Listen on demand

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Speaker 1: wherever you get your podcasts or watch us live on YouTube.

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Speaker 2: All right, in the markets, what do you do if

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Speaker 2: it's still going to be higher for longer? In that

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Speaker 2: maybe we're pricing out some cuts by the Fed in

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Speaker 2: twenty twenty five this year, maybe a done deal next

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Speaker 2: year though the market has repriced a bit. So let's

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Speaker 2: get some details with Shelby McFadden investment analyst and Motley

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Speaker 2: Fool asset Management. Shelby, it's always so wonderful to speak

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Speaker 2: with you. One of my big questions is if we

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Speaker 2: do get a longer economic cycle and the idea is

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Speaker 2: higher rates for a little bit longer, lower than they

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Speaker 2: are today, but still relatively higher, can stocks continue to

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Speaker 2: beat bonds? And if so, wear in stocks?

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Speaker 7: Yeah, I do think that the battle starts to get

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Speaker 7: a little bit closer, because really the question is when

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Speaker 7: will consumers or investors rather make that switch from bonds

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Speaker 7: to risky assets. Right, So, the fact that stocks have

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Speaker 7: continued to beat bonds thus far has already been something

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Speaker 7: that's a bit more of a phenomenon, and we know

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Speaker 7: the main leaders that are driving that. So it would

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Speaker 7: really have to be a matter of in my view,

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Speaker 7: you know, yields coming down to such a level that

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Speaker 7: they are higher than we've been used to over the

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Speaker 7: last four years or so, but not quite high enough

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Speaker 7: to justify completely coming out of risk assets. So I

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Speaker 7: think that's the sort of fundamental part of it. I

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Speaker 7: think the second part really comes from the narrative, Right,

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Speaker 7: what is it that these growth companies claim to be offering.

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Speaker 7: What is the secular shift that's going to propel so

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Speaker 7: much of this growth? If the growth is not going

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Speaker 7: to be broad, if it's going to continue to be concentrated,

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Speaker 7: then I think it might be a little bit more

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Speaker 7: of a tussle between the two for stocks to keep

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Speaker 7: on winning.

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Speaker 4: Shelby, I'm just a little uncertain about the consumer. Yes,

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Speaker 4: I like rates coming down, and I think that's good

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Speaker 4: for the consumer, But how do you guys think about

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Speaker 4: the consumer and owning stocks that are dependent upon the

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Speaker 4: consumer and retail spending?

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Speaker 6: Yeah?

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Speaker 5: Absolutely.

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Speaker 7: I mean from what we've seen from a lot of

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Speaker 7: the banks, the payment processors thus far, and of course

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Speaker 7: knowing that we've got banks coming up soon, has been

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Speaker 7: that consumers for the most part are doing okay. That's

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Speaker 7: not to say that inflation is completely over. That's not

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Speaker 7: to diminish the fact that in some locales it's a

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Speaker 7: bit more significant and over certain goods and surfaces, but

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Speaker 7: for the most part, people seem to have adjusted. They

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Speaker 7: have definitely spent downsaving, so discretionary is a little bit lower,

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Speaker 7: but they have figured out how to live on the

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Speaker 7: income that they have. The job switching has slowed down

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Speaker 7: a lot, so we're not as barish on the consumer

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Speaker 7: as a whole some others might be. But in terms

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Speaker 7: of playing the consumer, that's where the active management comes in.

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Speaker 7: We take the time to pick the companies that are

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Speaker 7: run well. They have great operational leverage, they can go

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Speaker 7: ahead and move with the consumer as they need to.

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Speaker 7: So that's why we've got companies like Costco in our

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Speaker 7: Malipul one hundred in our Global Opportunities Fund. Those are

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Speaker 7: names that are consumer facing, but they tend to do

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Speaker 7: the best out of their peers because of how nimble

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Speaker 7: they are.

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Speaker 2: Which also on your list is American Express, and the

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Speaker 2: idea typically is that, oh, American Express caters to higher

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Speaker 2: income earners, so if you're looking at the K shape economy,

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Speaker 2: that part of the K is actually going to do

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Speaker 2: really well. BTIG actually cut the credit card company to

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Speaker 2: sell from neutral saying that fundamentals are slowing for those

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Speaker 2: super prime customers.

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Speaker 5: What do you see?

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Speaker 7: Yeah, so, for the one thing, we do know that

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Speaker 7: they're a little bit sticky, and yes we have that

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Speaker 7: slightly longer runway for higher end consumers, but they tend

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Speaker 7: to have already made the big decisions to get rid

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Speaker 7: of large bills, right, So if they've sort of held

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Speaker 7: on to that end fee card for about two years

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Speaker 7: in this tightening cycle, they tend to be in that

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Speaker 7: part of that what is it, a less seity curve

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Speaker 7: where it's kind of like, you know what, we're good

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Speaker 7: to go here, even though we may be in a

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Speaker 7: little bit of a higher for longer situation. There has

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Speaker 7: been some relief, right, There has been some relief on

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Speaker 7: credit conditions, and if we even get another twenty five

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Speaker 7: basis point cut this year and maybe another one in

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Speaker 7: Q one, that makes even better conditions for going a

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Speaker 7: little bit down market. Now in looking at American Express,

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Speaker 7: they're not interested in going completely down the river. That's

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Speaker 7: not really their prerogative, but there is an opportunity in

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Speaker 7: the high earning categories of gen Z and young millennials

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Speaker 7: that they have an opportunity to go ahead and catch,

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Speaker 7: but also knowing that these earners have a little bit

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Speaker 7: short of a credit history, so as credit conditions soften,

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Speaker 7: there is an opportunity there to go ahead and get

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Speaker 7: a little bit more of the market, to go ahead

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Speaker 7: and sort of adhere with they're already sticky premium base.

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Speaker 4: I'm still a Green card holder. They try to sell me,

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Speaker 4: upsell me for all the other stuff, like I'm staying

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Speaker 4: with the classic green card.

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Speaker 2: Okay, here's my thing with you.

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Speaker 7: What you need.

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Speaker 2: So my husband has the purple fancy one, right, somehow

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Speaker 2: I only have the silver one. But I'm the one

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Speaker 2: that spends all the money and pays the bills, and

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Speaker 2: I don't like them. But I don't like that at all.

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Speaker 2: And somehow I'm not in charge of this. It's still

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Speaker 2: in their hist him nothing me. I think it's five

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Speaker 2: hundred dollars.

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Speaker 4: Oh that's such a company.

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Speaker 2: Please, all right, Shelby, let's get remembers.

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Speaker 4: Let's go where John and I shop Costco. It's not

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Speaker 4: just for the dollar fifty hot dog. Talk to us

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Speaker 4: about the Costco story.

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Speaker 7: Yeah, the Costco story is one of just prime operators.

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Speaker 7: I mean, I think that's the simplest way to put it,

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Speaker 7: so they were able to navigate not only supply shortages

437
00:23:44,440 --> 00:23:47,119
Speaker 7: in sort of the mid days of the pandemic recovery period,

438
00:23:47,560 --> 00:23:50,879
Speaker 7: but also navigating the depths of inflation or the heights,

439
00:23:50,920 --> 00:23:53,640
Speaker 7: if you will. They were one of the few companies

440
00:23:53,680 --> 00:23:56,440
Speaker 7: that was boasting about lowering prices. So not only do

441
00:23:56,520 --> 00:23:58,560
Speaker 7: they have this annuity model where they're going to be

442
00:23:59,040 --> 00:24:01,760
Speaker 7: making the majority of their money in terms of absolute dollars,

443
00:24:01,800 --> 00:24:06,119
Speaker 7: but in margin on the annual fee that they're charging,

444
00:24:06,680 --> 00:24:09,359
Speaker 7: but they're able to garner more consumers by saying, hey,

445
00:24:09,440 --> 00:24:11,680
Speaker 7: we're going to give you the best deal you can get.

446
00:24:12,200 --> 00:24:13,879
Speaker 7: Obviously in a large amount, so as long as you

447
00:24:13,920 --> 00:24:16,119
Speaker 7: have another room in your house. But they're able to

448
00:24:16,240 --> 00:24:18,680
Speaker 7: keep people in that regard, and because it's an annual fee,

449
00:24:18,760 --> 00:24:22,280
Speaker 7: it's something you budget for once and then it stick. Also,

450
00:24:22,440 --> 00:24:24,880
Speaker 7: knowing that they were probably going to have more in stock,

451
00:24:25,000 --> 00:24:28,680
Speaker 7: having that really robust shifting network allowed them to hold

452
00:24:28,760 --> 00:24:31,840
Speaker 7: on to people. So I think consumers knowing that Costco

453
00:24:31,920 --> 00:24:33,960
Speaker 7: is sort of on their side is a breath of

454
00:24:34,040 --> 00:24:36,800
Speaker 7: fresh air compared to some of the other retailers. So

455
00:24:36,880 --> 00:24:39,520
Speaker 7: the operators they have the succession planning went fantastic Over

456
00:24:39,560 --> 00:24:41,960
Speaker 7: the last twelve months, no one's really had any concerns,

457
00:24:42,000 --> 00:24:44,080
Speaker 7: and there's a huge opportunity.

458
00:24:43,760 --> 00:24:44,320
Speaker 8: For e comm.

459
00:24:44,640 --> 00:24:47,000
Speaker 7: A lot of folks really just kind of trudged through

460
00:24:47,080 --> 00:24:50,480
Speaker 7: it on the sort of legacy platform. There's that Instacart

461
00:24:50,600 --> 00:24:53,080
Speaker 7: partnership they have right now, but we give Costco to

462
00:24:53,119 --> 00:24:55,000
Speaker 7: the five to ten years. They may really have something

463
00:24:55,080 --> 00:24:56,600
Speaker 7: to compete with some of the peers on e comm.

464
00:24:56,840 --> 00:24:58,800
Speaker 2: All right, Shelby, we always appreciate you. You have the

465
00:24:59,000 --> 00:25:01,520
Speaker 2: best stuff, honestly, thank you so much. Shelby mcfadd investment

466
00:25:01,560 --> 00:25:05,280
Speaker 2: analyst in Motley Fool Asset Management, joining us from Alexandria, Virginia.

467
00:25:05,280 --> 00:25:06,639
Speaker 2: Wait a second, they have one hundred. They have a

468
00:25:06,800 --> 00:25:07,800
Speaker 2: dollar fifty hot dog.

469
00:25:08,080 --> 00:25:10,040
Speaker 5: Still yeah, still fifty?

470
00:25:10,080 --> 00:25:10,359
Speaker 8: What is it?

471
00:25:10,440 --> 00:25:10,640
Speaker 3: John?

472
00:25:10,920 --> 00:25:11,840
Speaker 2: I buy him at bulk?

473
00:25:12,240 --> 00:25:13,440
Speaker 4: No, it's what is the dollar fifty?

474
00:25:13,600 --> 00:25:14,680
Speaker 2: But the one where you go and you get it

475
00:25:14,760 --> 00:25:17,359
Speaker 2: like in in maybe to get it long rack of the.

476
00:25:17,640 --> 00:25:18,920
Speaker 6: Door there, it's to die for.

477
00:25:19,880 --> 00:25:21,200
Speaker 1: I still don't have a membership.

478
00:25:21,400 --> 00:25:23,880
Speaker 2: I mean, at least happened your shot there without a membership.

479
00:25:24,400 --> 00:25:24,960
Speaker 4: He doesn't show you.

480
00:25:25,040 --> 00:25:27,439
Speaker 3: You want to tell her, oh, you.

481
00:25:27,520 --> 00:25:28,600
Speaker 2: Use someone else in membership?

482
00:25:28,760 --> 00:25:29,200
Speaker 5: I got it.

483
00:25:29,320 --> 00:25:31,800
Speaker 2: I admit, I admit to not pick look at me

484
00:25:31,920 --> 00:25:32,880
Speaker 2: being all smart.

485
00:25:33,040 --> 00:25:38,440
Speaker 1: All right, you're listening to the Bloomberg Intelligence Podcast. Catch

486
00:25:38,520 --> 00:25:41,520
Speaker 1: us live weekdays at ten am Eastern on Apple, card

487
00:25:41,600 --> 00:25:44,719
Speaker 1: Play and Android Otto with the Bloomberg Business. You can

488
00:25:44,760 --> 00:25:48,000
Speaker 1: also listen live on Amazon Alexa from our flagship New

489
00:25:48,080 --> 00:25:51,720
Speaker 1: York station Just say Alexa playing Bloomberg eleven thirty.

490
00:25:53,280 --> 00:25:56,119
Speaker 2: You know, so Disney was closing, Yes, Paul got in

491
00:25:56,200 --> 00:25:56,960
Speaker 2: in the nick of time.

492
00:25:57,080 --> 00:25:59,359
Speaker 4: Yeah, so I was there. When was that there?

493
00:25:59,560 --> 00:26:01,040
Speaker 2: Sunday, Sunday, Monday.

494
00:26:00,840 --> 00:26:04,359
Speaker 4: Sunday, Monday, a little bit Monday, and even during the

495
00:26:04,440 --> 00:26:07,359
Speaker 4: rain and it was raining, it didn't stop people at all.

496
00:26:07,480 --> 00:26:11,560
Speaker 4: You buy the poncho for like fifteen bucks each, but

497
00:26:11,720 --> 00:26:14,920
Speaker 4: you buy the poncho and they're just standing there and yeah, Yeah,

498
00:26:15,240 --> 00:26:17,520
Speaker 4: Disney's a place. It's kind of like when I go skiing,

499
00:26:17,720 --> 00:26:20,040
Speaker 4: I don't even think about the money I'm spending because

500
00:26:20,040 --> 00:26:22,639
Speaker 4: that would be too upsetting and impact your enjoyment of

501
00:26:22,680 --> 00:26:24,160
Speaker 4: what you're doing. She just kind of shut your eyes

502
00:26:24,200 --> 00:26:26,159
Speaker 4: and go That's how you do it at Disney. But

503
00:26:26,200 --> 00:26:28,719
Speaker 4: apparently there's gonna be a financial impact to this whole thing.

504
00:26:28,880 --> 00:26:30,600
Speaker 2: Interesting, and wonder how long it gets depends on how

505
00:26:30,600 --> 00:26:32,760
Speaker 2: long it's gonna be closed and if there's gonna be flooding.

506
00:26:33,080 --> 00:26:33,680
Speaker 8: And all the like.

507
00:26:34,119 --> 00:26:36,840
Speaker 4: Fortunately, we pay somebody to think about this stuff, Keitha Ranganath,

508
00:26:36,880 --> 00:26:39,080
Speaker 4: and she's a media analyst for Bloomberg Intelligence. One of

509
00:26:39,119 --> 00:26:41,600
Speaker 4: the big names that she covers is the Walt Disney Company.

510
00:26:41,680 --> 00:26:44,520
Speaker 4: She knows it back, you know, inside and out. And

511
00:26:45,119 --> 00:26:46,840
Speaker 4: you know, Githa, you know, I've covered Disney for a

512
00:26:46,880 --> 00:26:49,800
Speaker 4: long time and we never really cared that much about

513
00:26:49,880 --> 00:26:52,160
Speaker 4: the theme parks. They were in nice business, they contributed

514
00:26:52,280 --> 00:26:56,160
Speaker 4: nice profits, they kind of grew every year. But now

515
00:26:56,680 --> 00:26:58,560
Speaker 4: if you think about the Walt Disney Company investing in

516
00:26:58,600 --> 00:27:01,480
Speaker 4: the Walt Disney Company, you better be really bullish on

517
00:27:01,640 --> 00:27:03,920
Speaker 4: the theme park business because that's now the major part

518
00:27:03,960 --> 00:27:06,240
Speaker 4: of the profitability. So talk to us about the theme

519
00:27:06,280 --> 00:27:08,120
Speaker 4: park business and what might be some of the risks

520
00:27:08,160 --> 00:27:09,600
Speaker 4: for shutting down Walt Disney World.

521
00:27:10,640 --> 00:27:13,240
Speaker 8: Yeah, absolutely right, Paul. So it's it's about a third

522
00:27:13,320 --> 00:27:16,680
Speaker 8: of revenue, but it's about two thirds of profits.

523
00:27:16,720 --> 00:27:16,920
Speaker 1: Wow.

524
00:27:17,440 --> 00:27:20,880
Speaker 8: So almost yeah, almost sixty to sixty five percent of profits.

525
00:27:20,920 --> 00:27:24,120
Speaker 8: And that is a complete shift, as you correctly pointed out,

526
00:27:24,119 --> 00:27:25,840
Speaker 8: from just a few years ago, maybe even just five

527
00:27:25,920 --> 00:27:28,359
Speaker 8: years ago before they kind of went into the streaming

528
00:27:28,400 --> 00:27:31,240
Speaker 8: business before the linear TV business kind of is seeing

529
00:27:31,280 --> 00:27:33,720
Speaker 8: the circular declines that it is right now. So it

530
00:27:33,880 --> 00:27:35,960
Speaker 8: really the picture has kind of completely changed, and that

531
00:27:36,160 --> 00:27:38,399
Speaker 8: means there is a lot of attention and a lot

532
00:27:38,480 --> 00:27:42,119
Speaker 8: of focus on the theme parks. We do have, you know,

533
00:27:42,280 --> 00:27:45,439
Speaker 8: some prior hurricane closures to go by, So they had

534
00:27:45,520 --> 00:27:48,920
Speaker 8: one in twenty twenty two, which was Hurricane Ian when

535
00:27:49,000 --> 00:27:51,880
Speaker 8: they closed the park for two days. With Hurricane Ian,

536
00:27:51,920 --> 00:27:55,159
Speaker 8: they lost about sixty five million dollars. That was the

537
00:27:55,240 --> 00:27:59,080
Speaker 8: operating income impact. You had Hurricane Irma in you know,

538
00:27:59,160 --> 00:28:02,000
Speaker 8: twenty seventeen it was one hundred million dollar impact. We

539
00:28:02,160 --> 00:28:05,240
Speaker 8: think though that with more and more reliance on the

540
00:28:05,320 --> 00:28:08,080
Speaker 8: theme parks, just with the fact you know that it's

541
00:28:08,119 --> 00:28:11,520
Speaker 8: become a bigger revenue contributor, a bigger profit contributor, obviously

542
00:28:11,640 --> 00:28:15,360
Speaker 8: the financial hit is also going to be larger. Remember

543
00:28:15,680 --> 00:28:18,399
Speaker 8: just the Florida parks pull in roughly one hundred and

544
00:28:18,480 --> 00:28:21,320
Speaker 8: thirty five to one hundred and forty thousand visitors every

545
00:28:21,480 --> 00:28:25,240
Speaker 8: single day. It's fifty million visitors a year, so you know,

546
00:28:25,359 --> 00:28:28,520
Speaker 8: it obviously has huge ramifications it's losing roughly, you know,

547
00:28:28,680 --> 00:28:33,080
Speaker 8: fifty million dollars per day. We think the operating income

548
00:28:33,200 --> 00:28:35,720
Speaker 8: impact will be at least at least one hundred and

549
00:28:35,720 --> 00:28:36,440
Speaker 8: twenty five million.

550
00:28:36,720 --> 00:28:37,680
Speaker 7: So this is the first time.

551
00:28:39,080 --> 00:28:40,720
Speaker 4: This is the first time I've been to a Disney

552
00:28:40,720 --> 00:28:43,360
Speaker 4: property as a civilian. The other times I've been to

553
00:28:43,480 --> 00:28:46,320
Speaker 4: a Disney property is always with Bob Iger walking next

554
00:28:46,400 --> 00:28:48,280
Speaker 4: to me, so we have that analyst and investors and

555
00:28:48,320 --> 00:28:50,800
Speaker 4: things like that. When they either close the park so

556
00:28:50,880 --> 00:28:52,440
Speaker 4: we're the only ones there, or they give us like

557
00:28:52,520 --> 00:28:55,760
Speaker 4: some super duper passes that we can zip at any line.

558
00:28:55,960 --> 00:28:57,880
Speaker 4: This is the first time I wanted, like a civilian

559
00:28:57,920 --> 00:28:59,360
Speaker 4: red to kind of wait in line and do all

560
00:28:59,400 --> 00:29:02,360
Speaker 4: that kind of stuff. But and jillions of people do

561
00:29:02,400 --> 00:29:02,760
Speaker 4: it as key.

562
00:29:03,160 --> 00:29:03,320
Speaker 9: Yeah.

563
00:29:04,000 --> 00:29:07,600
Speaker 2: At the airport, there were definitely reports of little children

564
00:29:07,720 --> 00:29:10,720
Speaker 2: being just sobbing because they had to leave Disney. So

565
00:29:11,280 --> 00:29:13,520
Speaker 2: just okay, you said they're losing fifty million dollars per

566
00:29:13,600 --> 00:29:15,800
Speaker 2: day by shutting down Disney World, Like that's that's how

567
00:29:15,920 --> 00:29:20,360
Speaker 2: big that Florida resort is for them. I heard that right, Yes, absolutely, yes,

568
00:29:20,560 --> 00:29:23,760
Speaker 2: So it go ahead. Do they wind up? Do they

569
00:29:23,840 --> 00:29:26,600
Speaker 2: make that up? Is it in the pent up demand

570
00:29:26,760 --> 00:29:27,960
Speaker 2: or is this just lost.

571
00:29:29,160 --> 00:29:31,600
Speaker 8: This will pretty much be lost, because remember it's not

572
00:29:31,880 --> 00:29:34,200
Speaker 8: just the par closure. There is obviously going to be

573
00:29:34,480 --> 00:29:38,240
Speaker 8: some you know, longer ranging repercussions for you know, all

574
00:29:38,320 --> 00:29:42,120
Speaker 8: of the theme park businesses in Florida, in the Orlando area.

575
00:29:42,800 --> 00:29:46,720
Speaker 8: So we are actually expecting attendance itself for the fiscal

576
00:29:46,760 --> 00:29:49,120
Speaker 8: first quarter, which is the current quarter, to actually beat

577
00:29:49,160 --> 00:29:53,600
Speaker 8: down maybe about mid single digits. Attendance was flatish in

578
00:29:53,720 --> 00:29:56,680
Speaker 8: the you know, in the September quarter. It is definitely

579
00:29:56,760 --> 00:29:59,959
Speaker 8: that there is definitely pressure all around and this obviously

580
00:30:00,200 --> 00:30:02,560
Speaker 8: is not going to help them at all. The other

581
00:30:02,680 --> 00:30:05,080
Speaker 8: thing that we're watching for alex as we kind of

582
00:30:05,120 --> 00:30:07,880
Speaker 8: get into twenty twenty five, and this is going to

583
00:30:07,920 --> 00:30:11,080
Speaker 8: be a special pain point for Disney, is that Universal,

584
00:30:11,360 --> 00:30:14,440
Speaker 8: its closest rival, actually has a new theme part that

585
00:30:14,480 --> 00:30:18,840
Speaker 8: they're opening in Orlando, and that basically doubles Universal's footprint.

586
00:30:19,000 --> 00:30:23,320
Speaker 8: They're adding Epic Universe sometime in March April of next year. Again,

587
00:30:23,400 --> 00:30:26,120
Speaker 8: a lot of people have been holding back on their

588
00:30:26,880 --> 00:30:29,000
Speaker 8: you know, travel to Universal because they knew, they know

589
00:30:29,120 --> 00:30:31,280
Speaker 8: this new attraction is coming, and so again we think

590
00:30:31,320 --> 00:30:32,640
Speaker 8: that's going to be a little bit of a hit

591
00:30:32,760 --> 00:30:35,160
Speaker 8: for Disney once we get into twenty twenty five.

592
00:30:35,240 --> 00:30:37,320
Speaker 4: It's funny you mentioned that gig because I wrote Home

593
00:30:37,520 --> 00:30:40,120
Speaker 4: with a Scottish family. They're on their way back to

594
00:30:40,160 --> 00:30:43,080
Speaker 4: their home in Dundee, Scotland, and my seat my new

595
00:30:43,320 --> 00:30:45,479
Speaker 4: buddy Rarely. I thought he was eighteen. He turns out

596
00:30:45,520 --> 00:30:46,080
Speaker 4: he's thirteen.

597
00:30:46,480 --> 00:30:46,720
Speaker 7: Huge.

598
00:30:46,760 --> 00:30:48,800
Speaker 4: The girl in a big over there. But they came

599
00:30:48,880 --> 00:30:51,560
Speaker 4: as a family. They came over from Scotland to Orlando

600
00:30:52,200 --> 00:30:54,360
Speaker 4: just to go to Universal. They didn't go to Disney.

601
00:30:54,400 --> 00:30:56,600
Speaker 4: They're wait a minute, So I turned on to asked

602
00:30:56,640 --> 00:30:58,640
Speaker 4: this mom, this kid's tell me you guys came all

603
00:30:58,680 --> 00:31:01,040
Speaker 4: the way here and you just went Universal, and she said, yeah,

604
00:31:01,040 --> 00:31:02,840
Speaker 4: they're big like Harry Potter fans, so they do all

605
00:31:02,840 --> 00:31:05,240
Speaker 4: that kind of yeah stuff. So that's and that's a

606
00:31:05,320 --> 00:31:07,600
Speaker 4: Comcast property, Isn't that right, Keitha.

607
00:31:08,040 --> 00:31:10,320
Speaker 8: That is a Comcast dropped And you're absolutely right. I

608
00:31:10,400 --> 00:31:12,560
Speaker 8: mean it's for the younger kids, like the two to ten.

609
00:31:13,000 --> 00:31:15,080
Speaker 8: I think Disney still continues to be the go to,

610
00:31:15,440 --> 00:31:17,120
Speaker 8: but once you get into the teenage years, Yeah, you're

611
00:31:17,120 --> 00:31:19,440
Speaker 8: absolutely right. Harry Potter seems to be like the bigger

612
00:31:19,480 --> 00:31:22,560
Speaker 8: attraction you find a lot of families going there, and

613
00:31:22,640 --> 00:31:24,200
Speaker 8: Epic Universe is going to have a lot of that

614
00:31:24,320 --> 00:31:24,640
Speaker 8: as well.

615
00:31:24,760 --> 00:31:26,520
Speaker 2: Also, to be fair, can't they just like hop over

616
00:31:26,680 --> 00:31:28,720
Speaker 2: pairs to go to Disney World there? It's not the same,

617
00:31:28,760 --> 00:31:30,560
Speaker 2: it's not the same. Okay, well, fair enough.

618
00:31:30,440 --> 00:31:32,920
Speaker 4: Been there, done that. Hey, Keith it I know Disney

619
00:31:33,800 --> 00:31:36,160
Speaker 4: is really ramping up their investment in their parks, right,

620
00:31:36,360 --> 00:31:38,920
Speaker 4: Didn't they like double their capex over the next number

621
00:31:38,920 --> 00:31:39,280
Speaker 4: of years.

622
00:31:40,240 --> 00:31:44,000
Speaker 8: Yes, sixty billion dollars in capex spending over the next

623
00:31:44,040 --> 00:31:46,680
Speaker 8: ten years. Almost twelve to fifteen billion dollars of that

624
00:31:46,800 --> 00:31:49,360
Speaker 8: will just be for new cruise ships. They're really kind

625
00:31:49,360 --> 00:31:52,120
Speaker 8: of doubling down on the cruises, so that's going to

626
00:31:52,160 --> 00:31:54,800
Speaker 8: be a big part of their business going forward. But absolutely,

627
00:31:54,840 --> 00:31:57,840
Speaker 8: they're almost doubling their footprint in some of the areas,

628
00:31:57,880 --> 00:32:00,760
Speaker 8: like especially in California, they're kind of going to their footprint,

629
00:32:00,880 --> 00:32:05,080
Speaker 8: going to almost add a whole new park in you know,

630
00:32:05,240 --> 00:32:07,920
Speaker 8: in Orlando when all is said and done. So, yeah,

631
00:32:08,000 --> 00:32:10,480
Speaker 8: big investment in in the parks, and they're kind of

632
00:32:10,560 --> 00:32:13,440
Speaker 8: hoping that's going to pay off as they keep increasing prices.

633
00:32:13,720 --> 00:32:15,880
Speaker 2: So I sent Paul an article this morning. Was one

634
00:32:15,880 --> 00:32:17,640
Speaker 2: of the first things, I read that when it ran,

635
00:32:17,720 --> 00:32:20,680
Speaker 2: it came in that Disneyland raises prices by about six

636
00:32:20,800 --> 00:32:25,240
Speaker 2: percent on the most popular days. So the most expensive

637
00:32:25,280 --> 00:32:28,040
Speaker 2: tickets now, typically weekends and holidays, are climbing over six

638
00:32:28,120 --> 00:32:31,040
Speaker 2: percent two hundred and six dollars a day. At what

639
00:32:31,280 --> 00:32:34,440
Speaker 2: point here are we capping out on price increases. I mean,

640
00:32:34,440 --> 00:32:36,000
Speaker 2: if you have a family of four and there are

641
00:32:36,040 --> 00:32:38,680
Speaker 2: two parents, it's twelve hundred dollars for one day.

642
00:32:40,640 --> 00:32:42,320
Speaker 8: I don't think we're capping out. I think, you know,

643
00:32:42,400 --> 00:32:44,640
Speaker 8: Paul kind of summed this up perfectly. You know, once

644
00:32:44,720 --> 00:32:47,280
Speaker 8: you go there, you're not thinking of how much you're spending.

645
00:32:47,760 --> 00:32:50,400
Speaker 8: And so actually, as we kind of model out the

646
00:32:50,520 --> 00:32:53,200
Speaker 8: average prices, you know, it's close to about it's about

647
00:32:53,200 --> 00:32:55,960
Speaker 8: one hundred and ninety dollars right now, the average you know,

648
00:32:56,040 --> 00:32:59,480
Speaker 8: per capita spending per person. We think this pretty much

649
00:32:59,520 --> 00:33:02,160
Speaker 8: goes to a about three hundred dollars over the course

650
00:33:02,200 --> 00:33:03,520
Speaker 8: of the next four to five years.

651
00:33:04,120 --> 00:33:06,600
Speaker 4: And nobody does it better than Disney. I mean, you

652
00:33:06,680 --> 00:33:09,440
Speaker 4: get this little wristband, so you know, you're not even

653
00:33:09,520 --> 00:33:11,320
Speaker 4: physically taking out your credit card.

654
00:33:11,280 --> 00:33:13,400
Speaker 5: So easy to tap it and you just tap and go,

655
00:33:13,680 --> 00:33:15,560
Speaker 5: and you know, it's just and you.

656
00:33:15,520 --> 00:33:17,080
Speaker 2: Don't see it until you look at your credit card

657
00:33:17,120 --> 00:33:18,800
Speaker 2: statement in like a month or something exactly.

658
00:33:18,960 --> 00:33:22,040
Speaker 4: So it's nobody's better at it than Disney. All right,

659
00:33:22,080 --> 00:33:25,080
Speaker 4: So let's step back on the Disney story here, the

660
00:33:25,080 --> 00:33:27,920
Speaker 4: theme parks. We've got a good handle on that. Where

661
00:33:28,040 --> 00:33:31,440
Speaker 4: are we in terms of profitability of the streaming business?

662
00:33:32,400 --> 00:33:35,000
Speaker 4: Is this still a big big headwind for the company

663
00:33:35,040 --> 00:33:35,440
Speaker 4: in the stock?

664
00:33:36,520 --> 00:33:39,440
Speaker 8: Not anymore, Paul, So you know, the turnaround has finally

665
00:33:39,560 --> 00:33:42,720
Speaker 8: taken place. It happened last quarter, and we are actually

666
00:33:42,760 --> 00:33:45,440
Speaker 8: going to see the streaming business now become a major

667
00:33:45,640 --> 00:33:48,120
Speaker 8: contributor to actually the bottom line. So so far it

668
00:33:48,160 --> 00:33:50,720
Speaker 8: has been a huge drag. There were almost four billion

669
00:33:50,800 --> 00:33:53,280
Speaker 8: in losses just a few years ago. But now we're

670
00:33:53,360 --> 00:33:55,960
Speaker 8: seeing that it's breaking even. It's going to become a

671
00:33:56,000 --> 00:34:00,640
Speaker 8: positive profit contributor. Why, because they're increasing prices. You're going

672
00:34:00,720 --> 00:34:03,120
Speaker 8: to see a huge jump in your Disney Plus subscription

673
00:34:03,240 --> 00:34:07,360
Speaker 8: come October seventeenth. They're cracking down on password sharing. That's

674
00:34:07,400 --> 00:34:10,560
Speaker 8: something that you know, they're just copying from what Netflix did. Again,

675
00:34:10,600 --> 00:34:13,760
Speaker 8: that should lead to a nice bump in their average

676
00:34:13,800 --> 00:34:17,360
Speaker 8: revenue per user. And then they're also they've also introduced

677
00:34:17,400 --> 00:34:19,920
Speaker 8: the advertising tier, and so advertising, which is already a

678
00:34:19,960 --> 00:34:22,160
Speaker 8: pretty big business for them, they're really going to double

679
00:34:22,239 --> 00:34:25,080
Speaker 8: down on that as well. So they have multiple levers

680
00:34:25,160 --> 00:34:27,400
Speaker 8: that they're pulling now. As far as the streaming business

681
00:34:27,480 --> 00:34:28,319
Speaker 8: is concerned.

682
00:34:28,920 --> 00:34:31,760
Speaker 2: What how is the stock trading? Is the stock trading

683
00:34:32,040 --> 00:34:34,760
Speaker 2: encompassing all of this? Do you think it's undervalued? Overvalued?

684
00:34:34,800 --> 00:34:36,840
Speaker 2: I know you guys don't give actual valuations on the

685
00:34:36,880 --> 00:34:39,360
Speaker 2: equity market for that, but I'm just curious is to

686
00:34:39,400 --> 00:34:41,320
Speaker 2: see in terms of relative valuation.

687
00:34:42,360 --> 00:34:44,600
Speaker 8: I think in terms of relative valuation it's definitely a

688
00:34:44,680 --> 00:34:47,080
Speaker 8: little bit undervalued right now. And I think that's just

689
00:34:47,160 --> 00:34:49,160
Speaker 8: because you know, we kind of have to wait for

690
00:34:49,680 --> 00:34:52,560
Speaker 8: higher visibility in terms of the theme parks. So they

691
00:34:52,600 --> 00:34:55,520
Speaker 8: have clearly said that the theme park business is going

692
00:34:55,560 --> 00:34:58,759
Speaker 8: to be under pressure through most of fiscal twenty twenty five.

693
00:34:59,239 --> 00:35:03,080
Speaker 8: So we see like a nice ramp up in growth

694
00:35:03,320 --> 00:35:06,279
Speaker 8: with the parks. I think we're going to see that

695
00:35:07,280 --> 00:35:10,480
Speaker 8: somewhat of a negative sentiment and somewhat if that's sustained pressure.

696
00:35:10,480 --> 00:35:13,399
Speaker 4: Boy, because it seemed like it seemed for a while there.

697
00:35:13,520 --> 00:35:15,680
Speaker 4: Once they make that turn, that's when you want to

698
00:35:15,719 --> 00:35:17,759
Speaker 4: dive into the stock. But I guess that's at a

699
00:35:17,800 --> 00:35:20,279
Speaker 4: time where maybe the US consumers you know, a little

700
00:35:20,280 --> 00:35:22,319
Speaker 4: bit weaker on the margin, and that's going to hit

701
00:35:22,360 --> 00:35:26,480
Speaker 4: the theme parks compared to what yours or exactly yes,

702
00:35:26,800 --> 00:35:29,160
Speaker 4: spending like crazy. They're gonna have a blowout quarter this quarter,

703
00:35:29,239 --> 00:35:31,439
Speaker 4: gith that you can call it right now, all right, Githy,

704
00:35:31,440 --> 00:35:33,480
Speaker 4: thanks so much for joining us. Githa RANGANATHANCI is a

705
00:35:33,600 --> 00:35:36,960
Speaker 4: US media analyst for Bloomberg Intelligence. She covers all that stuff.

706
00:35:37,040 --> 00:35:40,439
Speaker 4: Disney obviously a huge, huge name in that sector, and again,

707
00:35:40,520 --> 00:35:43,400
Speaker 4: investors have been waiting for the turn and profitability for

708
00:35:43,480 --> 00:35:45,800
Speaker 4: the streaming business, and it looks like they're at that

709
00:35:45,880 --> 00:35:48,239
Speaker 4: point making that turn there to profitability. So we'll see

710
00:35:48,520 --> 00:35:50,480
Speaker 4: to what extent taken Rampant. I mean, you look at

711
00:35:50,520 --> 00:35:53,120
Speaker 4: the margins, the profit margins at Netflix, and I don't

712
00:35:53,120 --> 00:35:54,600
Speaker 4: think Disney is saying they're going to get to those

713
00:35:54,640 --> 00:35:57,160
Speaker 4: profit margage margins. But if they get to something close

714
00:35:57,239 --> 00:35:59,759
Speaker 4: to that, that's a lot of cash and a lot

715
00:35:59,800 --> 00:36:03,120
Speaker 4: of earnings here for the company. So but the stock, again,

716
00:36:03,160 --> 00:36:05,279
Speaker 4: it's one hundred and sixty seven billion dollar market cap stock,

717
00:36:05,320 --> 00:36:07,560
Speaker 4: but it's only up two percent year to date only

718
00:36:07,640 --> 00:36:11,440
Speaker 4: up about ten percent or trailing twelve months, badly trailing

719
00:36:11,680 --> 00:36:14,120
Speaker 4: the market there. And that's what Scott, that's been, you know,

720
00:36:14,160 --> 00:36:16,600
Speaker 4: a real concern for media investors, the sector tough for

721
00:36:16,680 --> 00:36:18,200
Speaker 4: that sector to work if Disney sstant work.

722
00:36:18,280 --> 00:36:20,840
Speaker 2: Yeah, yeah, absolutely U I've takeing a look at all

723
00:36:20,880 --> 00:36:23,640
Speaker 2: of that. As Hurricane Milton continues to bear down on

724
00:36:23,840 --> 00:36:26,640
Speaker 2: Florida with house toppling Wins.

725
00:36:28,280 --> 00:36:32,120
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

726
00:36:32,239 --> 00:36:35,760
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

727
00:36:35,800 --> 00:36:38,520
Speaker 1: Auto with the Bloomberg Business app. You can also listen

728
00:36:38,680 --> 00:36:41,719
Speaker 1: live on Amazon Alexa from our flagship New York station

729
00:36:42,120 --> 00:36:44,880
Speaker 1: just say Alexa playing Bloomberg eleven thirty.

730
00:36:46,560 --> 00:36:48,839
Speaker 4: I was just looking at an Nvidia that is within

731
00:36:48,880 --> 00:36:51,680
Speaker 4: a couple of points of its all time high again,

732
00:36:51,760 --> 00:36:53,040
Speaker 4: So there was a little bit of a solved there

733
00:36:53,080 --> 00:36:54,600
Speaker 4: in some of those AI names. But they seem to

734
00:36:54,640 --> 00:36:56,719
Speaker 4: be coming back a little bit, So see what's going

735
00:36:56,719 --> 00:36:59,120
Speaker 4: on there. Kim Forrest joins us. She's a founder and

736
00:36:59,200 --> 00:37:01,640
Speaker 4: she's a chief investment an officer at Boco Capital Partners.

737
00:37:01,640 --> 00:37:04,799
Speaker 4: She's at there in Pittsburgh and longtime technology analysts really

738
00:37:04,840 --> 00:37:07,359
Speaker 4: have some good views there and I love to Kim.

739
00:37:07,400 --> 00:37:09,279
Speaker 4: I love to get your thoughts kind of on this

740
00:37:09,480 --> 00:37:11,719
Speaker 4: AI traded. You know, had a little bit of a

741
00:37:11,840 --> 00:37:14,880
Speaker 4: lull there for a while, but it seems to be

742
00:37:14,960 --> 00:37:16,840
Speaker 4: coming back. How do you think about it?

743
00:37:19,200 --> 00:37:22,560
Speaker 10: Well, it's generative AI is the thing, and it has

744
00:37:22,640 --> 00:37:25,440
Speaker 10: been the thing for I don't know, maybe twenty four

745
00:37:25,520 --> 00:37:27,839
Speaker 10: months now, it seems like forever. But here we are,

746
00:37:28,600 --> 00:37:32,399
Speaker 10: and every once in a while people go, uh, oh, wait,

747
00:37:32,800 --> 00:37:36,520
Speaker 10: it's it's wrong, sometimes right, and then they go wait,

748
00:37:36,880 --> 00:37:39,520
Speaker 10: like it doesn't solve any problems, but we know it's cool,

749
00:37:39,680 --> 00:37:42,880
Speaker 10: So should we keep funding it, you know, as investors?

750
00:37:43,239 --> 00:37:46,200
Speaker 10: And the answer seems to be yes. But there are fears,

751
00:37:46,440 --> 00:37:50,160
Speaker 10: and I think rightly placed, that we don't really know

752
00:37:50,320 --> 00:37:53,120
Speaker 10: how big this market is. We keep being told that,

753
00:37:53,400 --> 00:37:56,120
Speaker 10: you know, data centers are going to take over large

754
00:37:56,200 --> 00:37:59,200
Speaker 10: swaths of America. I don't know that. I believe that.

755
00:37:59,640 --> 00:38:02,840
Speaker 10: I think think my biggest problem with generative AI is

756
00:38:03,320 --> 00:38:07,040
Speaker 10: there it's unclear about what problem it's solving, and then

757
00:38:07,120 --> 00:38:09,200
Speaker 10: that leads to the question how much would you pay

758
00:38:09,640 --> 00:38:12,040
Speaker 10: to solve this problem? And I don't have answers to

759
00:38:12,120 --> 00:38:13,839
Speaker 10: either one of those, And I think that's what makes

760
00:38:14,239 --> 00:38:15,920
Speaker 10: a lot of investors uncomfortable.

761
00:38:16,360 --> 00:38:19,640
Speaker 4: Well, maybe given that lack of comfort there and maybe

762
00:38:19,680 --> 00:38:22,480
Speaker 4: some of the finer points of the AI story, is

763
00:38:22,640 --> 00:38:26,759
Speaker 4: technology still a sector that can lead the broader markets higher,

764
00:38:26,840 --> 00:38:28,600
Speaker 4: like it's done for much of the last I don't know,

765
00:38:28,680 --> 00:38:29,600
Speaker 4: ten or fifteen years.

766
00:38:31,000 --> 00:38:35,279
Speaker 10: Absolutely, I'm a cute you know, even though I'm like

767
00:38:35,440 --> 00:38:37,360
Speaker 10: a little bit of a doubting Thomas here on the

768
00:38:37,400 --> 00:38:38,359
Speaker 10: whole generative AI.

769
00:38:39,120 --> 00:38:40,759
Speaker 3: I used to work in AI, and I.

770
00:38:40,880 --> 00:38:43,760
Speaker 10: Know the power of the problems that it can solve,

771
00:38:44,200 --> 00:38:47,360
Speaker 10: and they're much smaller than somebody talking to a computer

772
00:38:47,480 --> 00:38:50,399
Speaker 10: and say design me a new car. Computer, Like, that's

773
00:38:50,480 --> 00:38:53,799
Speaker 10: not a thing, you know, ridiculous, you know, just one

774
00:38:53,960 --> 00:38:58,040
Speaker 10: sentence problem solving, you know what I mean. But I

775
00:38:58,239 --> 00:39:03,239
Speaker 10: do think that productivity is the thing that drives businesses

776
00:39:03,320 --> 00:39:07,520
Speaker 10: to invest, and that drives technology companies to try to

777
00:39:08,040 --> 00:39:11,080
Speaker 10: solve those business problems. And at the end of the day,

778
00:39:11,320 --> 00:39:15,239
Speaker 10: that is what drives technology. Although people like to use it,

779
00:39:15,400 --> 00:39:18,440
Speaker 10: it's fun, it's interesting, but they don't pay nearly as

780
00:39:18,520 --> 00:39:20,879
Speaker 10: much as businesses do to run technology.

781
00:39:21,560 --> 00:39:24,160
Speaker 4: All Right, Kim, We've got a federal reserve that isn't

782
00:39:24,400 --> 00:39:26,759
Speaker 4: a rate cutting mode. Maybe there's some debate about how

783
00:39:27,200 --> 00:39:29,799
Speaker 4: far and how quickly they do that if you look

784
00:39:29,800 --> 00:39:33,000
Speaker 4: at the bond market. But earnings, I think they still matter,

785
00:39:33,239 --> 00:39:35,120
Speaker 4: and JP Morgan is going to really kick things off

786
00:39:35,160 --> 00:39:37,920
Speaker 4: on Friday. What are you looking for out of corporate

787
00:39:37,920 --> 00:39:38,920
Speaker 4: American this earning season?

788
00:39:40,040 --> 00:39:44,440
Speaker 10: Sure? Well, October is really the twitchiest earning season because

789
00:39:44,680 --> 00:39:48,160
Speaker 10: a lot of companies didn't know if they were going

790
00:39:48,280 --> 00:39:51,640
Speaker 10: to make their quarter because of the vacation schedule of everybody,

791
00:39:51,760 --> 00:39:55,160
Speaker 10: So that always adds a layer of uncertainty.

792
00:39:54,760 --> 00:39:55,439
Speaker 4: To this time.

793
00:39:56,000 --> 00:39:58,480
Speaker 10: But that being said, I think the bar was set

794
00:39:58,560 --> 00:40:01,440
Speaker 10: low enough. I haven't seen very many, if any pre

795
00:40:01,560 --> 00:40:06,680
Speaker 10: announcements from companies. That's still ongoing as they tally things

796
00:40:06,760 --> 00:40:10,800
Speaker 10: and the SEC forces a company to give in meaningful

797
00:40:11,000 --> 00:40:14,680
Speaker 10: material information to its investors, so we always look for that,

798
00:40:14,840 --> 00:40:17,200
Speaker 10: but I don't see very much much in the way

799
00:40:17,239 --> 00:40:20,319
Speaker 10: of pre announcements. Now. What we're going to now look

800
00:40:20,400 --> 00:40:23,560
Speaker 10: at is what do companies see going forward. I think

801
00:40:23,600 --> 00:40:26,240
Speaker 10: there are some questions about whether or not this economy

802
00:40:26,400 --> 00:40:30,080
Speaker 10: is truly as strong as some of the numbers forecast,

803
00:40:30,880 --> 00:40:33,040
Speaker 10: So that is what we're going to be looking for

804
00:40:33,320 --> 00:40:37,360
Speaker 10: all season long. All earning season is do the company

805
00:40:37,520 --> 00:40:40,520
Speaker 10: see the next six months to a year strong week

806
00:40:40,840 --> 00:40:42,040
Speaker 10: or somewhere in between.

807
00:40:43,200 --> 00:40:45,640
Speaker 2: Do you think it's going to be mag seven or

808
00:40:45,719 --> 00:40:47,799
Speaker 2: the other four hundred and ninety three stocks this time?

809
00:40:48,280 --> 00:40:50,560
Speaker 10: Oh my god, I wish Meg seven would just take

810
00:40:50,600 --> 00:40:54,640
Speaker 10: a break sometimes, you know, Oh gosh, But I think

811
00:40:54,719 --> 00:40:58,440
Speaker 10: mag seven still has that generative AI magic going on.

812
00:40:59,600 --> 00:41:03,120
Speaker 10: But there is room for other companies, especially in a

813
00:41:03,200 --> 00:41:07,440
Speaker 10: declining rate the smaller companies get bought by larger companies,

814
00:41:07,880 --> 00:41:10,520
Speaker 10: and that's really been in quite a lot because of

815
00:41:10,600 --> 00:41:13,719
Speaker 10: the high interest rate environment. Now that companies know that

816
00:41:13,920 --> 00:41:17,000
Speaker 10: the or have a pretty good idea that the interest

817
00:41:17,080 --> 00:41:20,359
Speaker 10: rates are dropping, they are going to go back into

818
00:41:20,440 --> 00:41:23,400
Speaker 10: the shopping mode, which is always exciting for me because

819
00:41:23,400 --> 00:41:24,960
Speaker 10: I own some of those smaller names.

820
00:41:25,880 --> 00:41:28,600
Speaker 4: So small cap again, we've heard it that maybe in

821
00:41:28,640 --> 00:41:30,880
Speaker 4: a lower interest rate environment they will do better on

822
00:41:30,960 --> 00:41:34,319
Speaker 4: a relative basis. Certainly there's valuation. There are there certain

823
00:41:34,440 --> 00:41:37,960
Speaker 4: sectors on a small MidCap that screen well for you guys.

824
00:41:39,200 --> 00:41:43,719
Speaker 10: Well you know, there's technology that's always good. And you

825
00:41:43,800 --> 00:41:48,640
Speaker 10: know one of our smaller companies is getting bought by Synopsis.

826
00:41:48,760 --> 00:41:52,840
Speaker 10: So that's really the key here is a small company

827
00:41:52,920 --> 00:41:56,200
Speaker 10: that can fit into the larger companies product suite or

828
00:41:56,280 --> 00:41:59,759
Speaker 10: expand its total addressable market. That's what you're looking for

829
00:42:00,040 --> 00:42:03,479
Speaker 10: in a takeover candidate. And I think just about every

830
00:42:03,600 --> 00:42:08,399
Speaker 10: industry has, you know, some smaller companies that could get

831
00:42:08,440 --> 00:42:10,200
Speaker 10: bought by larger companies.

832
00:42:10,600 --> 00:42:11,000
Speaker 4: You like.

833
00:42:13,719 --> 00:42:19,759
Speaker 2: Like, yeah, say individual names, just give me Like, where

834
00:42:19,760 --> 00:42:21,600
Speaker 2: are the sectors where that might make the most sense.

835
00:42:22,880 --> 00:42:26,520
Speaker 10: Well, there's banking, there's always banking, right, there's too many banks.

836
00:42:26,800 --> 00:42:31,080
Speaker 10: There's that technology. There's lots of point products that would

837
00:42:31,120 --> 00:42:35,719
Speaker 10: go nicely into a larger, larger companies suite of products.

838
00:42:37,600 --> 00:42:40,440
Speaker 10: Retail not so much, God knows, we love to talk

839
00:42:40,480 --> 00:42:44,399
Speaker 10: about retail, but I think that's that looks pretty good

840
00:42:44,520 --> 00:42:50,360
Speaker 10: for right now. Maybe industrials again, point products going into

841
00:42:50,480 --> 00:42:54,120
Speaker 10: a larger company to allow that larger company to satisfy

842
00:42:54,239 --> 00:42:57,960
Speaker 10: its customers with a broader suite of products. So those

843
00:42:58,000 --> 00:42:59,919
Speaker 10: are the key areas that I look at.

844
00:43:00,320 --> 00:43:02,040
Speaker 4: All right, Kim, thanks so much for joining us. Always

845
00:43:02,040 --> 00:43:04,760
Speaker 4: appreciate getting your thoughts. Kim Farst. She is the founder

846
00:43:04,960 --> 00:43:08,000
Speaker 4: and the chief investment officer Boca Capital Partners. There are

847
00:43:08,040 --> 00:43:09,760
Speaker 4: out there in Pittsburgh, PA.

848
00:43:11,440 --> 00:43:15,279
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

849
00:43:15,400 --> 00:43:18,920
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

850
00:43:18,960 --> 00:43:21,680
Speaker 1: Auto with the Bloomberg Business app. You can also listen

851
00:43:21,840 --> 00:43:24,919
Speaker 1: live on Amazon Alexa from our flagship New York station,

852
00:43:25,320 --> 00:43:28,320
Speaker 1: Just say Alexa play Bloomberg eleven thirty.

853
00:43:29,239 --> 00:43:31,480
Speaker 4: Alex Olpaul Sweeney. You live here in our Bloomberg Interactive

854
00:43:31,480 --> 00:43:34,840
Speaker 4: Brokers studio. We're streaming live on YouTube as well, so

855
00:43:34,960 --> 00:43:37,359
Speaker 4: go over to that internet thing, YouTube dot com, Charch

856
00:43:37,440 --> 00:43:40,080
Speaker 4: Bloomberg Local Radio, and that's where you'll find us. All right.

857
00:43:41,200 --> 00:43:44,560
Speaker 4: Sustainable aviation fuel, I didn't know it was a thing.

858
00:43:45,120 --> 00:43:46,600
Speaker 4: Alex knows it's a thing. I did not know it

859
00:43:46,680 --> 00:43:48,680
Speaker 4: was a thing. Fortunately, we have people actually do that

860
00:43:48,760 --> 00:43:51,200
Speaker 4: stuff here. Anna Davies is one of them. She's head

861
00:43:51,239 --> 00:43:54,839
Speaker 4: of Renewable Fuels at b n EF. Joining us live

862
00:43:54,840 --> 00:43:58,600
Speaker 4: here in our Bloomberg Interactive Brokers studio. And I just

863
00:43:58,960 --> 00:44:01,239
Speaker 4: use jet fuel, throw it in my jet and I go,

864
00:44:01,680 --> 00:44:02,000
Speaker 4: what is.

865
00:44:02,040 --> 00:44:03,839
Speaker 2: Sustainablen't have an actual private jet.

866
00:44:04,640 --> 00:44:07,680
Speaker 4: Just in my mind, what is a sustainable aviation fuel?

867
00:44:07,719 --> 00:44:08,080
Speaker 3: What is it?

868
00:44:08,239 --> 00:44:11,160
Speaker 4: And is it being used? And how well is it

869
00:44:11,239 --> 00:44:12,000
Speaker 4: being used these days?

870
00:44:12,239 --> 00:44:15,520
Speaker 9: So hey, nice to be here. What is sustainable aviation fuel.

871
00:44:15,600 --> 00:44:17,440
Speaker 9: You use it exactly like that. You can throw it

872
00:44:17,480 --> 00:44:19,920
Speaker 9: in your private jet and go and it'll work just

873
00:44:19,960 --> 00:44:23,239
Speaker 9: the same way. Really, it is in as simplest form,

874
00:44:23,560 --> 00:44:26,640
Speaker 9: molecularly pretty much identical to fossil jet fuel. The only

875
00:44:26,680 --> 00:44:29,640
Speaker 9: difference is it doesn't come from fossil fuels, so mostly

876
00:44:29,760 --> 00:44:32,400
Speaker 9: it comes at the moment from biofuels. So instead of

877
00:44:32,520 --> 00:44:36,200
Speaker 9: having a crude oil, you're using a biooil, so something

878
00:44:36,239 --> 00:44:39,040
Speaker 9: like soybean oil, or use cooking oil the leftover oils

879
00:44:39,080 --> 00:44:40,759
Speaker 9: from your deep fryer.

880
00:44:40,960 --> 00:44:44,160
Speaker 2: Which would be the issue now, supply or demand when

881
00:44:44,200 --> 00:44:45,040
Speaker 2: it comes to staff.

882
00:44:45,200 --> 00:44:47,320
Speaker 9: That is a very good question because everybody says we

883
00:44:47,400 --> 00:44:49,920
Speaker 9: need more, there's not enough produced. There's all this demand

884
00:44:50,000 --> 00:44:52,120
Speaker 9: that we need to replace fossil jet. But we have

885
00:44:52,239 --> 00:44:55,600
Speaker 9: seen both suppliers and actually airlines kind of push back

886
00:44:55,680 --> 00:44:57,040
Speaker 9: on roll back their targets.

887
00:44:57,719 --> 00:44:58,080
Speaker 5: Right now.

888
00:44:58,200 --> 00:45:00,360
Speaker 9: The problem is it's expensive and no but he is

889
00:45:00,480 --> 00:45:02,840
Speaker 9: really willing to pay it. So we see buyers not

890
00:45:02,960 --> 00:45:05,120
Speaker 9: quite willing or able to step in to take it,

891
00:45:05,200 --> 00:45:07,040
Speaker 9: and as a result, we don't see suppliers able to

892
00:45:07,239 --> 00:45:09,080
Speaker 9: secure financing to build their facilities.

893
00:45:09,120 --> 00:45:11,440
Speaker 4: So how do That's a chicken and Yan type type

894
00:45:11,480 --> 00:45:14,080
Speaker 4: of thing. How do you think you solve for that?

895
00:45:14,280 --> 00:45:16,440
Speaker 4: Is that bringing the cost of production down? Is it

896
00:45:16,480 --> 00:45:17,800
Speaker 4: trying to stimulate demand somehow?

897
00:45:18,120 --> 00:45:21,360
Speaker 9: So we anticipate the cost of production at pnof we

898
00:45:21,440 --> 00:45:25,480
Speaker 9: try and calculate and mart exactly, and we do not

899
00:45:25,600 --> 00:45:27,840
Speaker 9: see the cost coming down to reach parity. Really like

900
00:45:27,880 --> 00:45:29,960
Speaker 9: current jet fuel prices, it's always going to be orders,

901
00:45:30,160 --> 00:45:33,800
Speaker 9: a couple orders the magnitude above. So the real crux

902
00:45:33,840 --> 00:45:36,400
Speaker 9: that's needed is policy. You need to have a policy

903
00:45:36,480 --> 00:45:39,680
Speaker 9: push to either incentivize its uptake or force it, and

904
00:45:39,760 --> 00:45:41,800
Speaker 9: we're seeing both of those policies developing.

905
00:45:41,480 --> 00:45:44,000
Speaker 2: Which basically what that means is that you have to

906
00:45:44,040 --> 00:45:46,840
Speaker 2: subsidize the difference between staff and a regular jet fuel

907
00:45:47,080 --> 00:45:49,000
Speaker 2: And what the IRA did it was really helpful and

908
00:45:49,080 --> 00:45:51,920
Speaker 2: incentivizing the supply, but not the demand side of it.

909
00:45:52,640 --> 00:45:54,359
Speaker 2: How close do you think that is right now?

910
00:45:54,840 --> 00:45:57,880
Speaker 9: So the IRA, the Inflation Reduction Act, does offer a

911
00:45:58,000 --> 00:46:01,319
Speaker 9: tax credit for sustainable aviation fiel perdu, which does help

912
00:46:01,360 --> 00:46:03,640
Speaker 9: to project gap. There's still a lot of uncertainty as

913
00:46:03,719 --> 00:46:06,200
Speaker 9: to what will qualify. You need to have a certain

914
00:46:06,239 --> 00:46:08,880
Speaker 9: amount of types of feedstock in order to bring your

915
00:46:08,880 --> 00:46:11,640
Speaker 9: actual emissions reduction down. That's a big issue in the market.

916
00:46:12,520 --> 00:46:14,160
Speaker 9: It also is not only in place for a couple

917
00:46:14,160 --> 00:46:16,239
Speaker 9: of years, which isn't going to help finance a thirty

918
00:46:16,320 --> 00:46:20,600
Speaker 9: year facility. You see places like Europe taking the opposite approach,

919
00:46:20,640 --> 00:46:23,640
Speaker 9: where they're just mandating blending in. So they're saying airlines

920
00:46:23,760 --> 00:46:26,920
Speaker 9: and airports have to blend a certain amount and that's

921
00:46:26,960 --> 00:46:28,680
Speaker 9: going to ramp up of the next few years. Sort

922
00:46:28,719 --> 00:46:30,640
Speaker 9: it out, figure out the cost. And then you see

923
00:46:30,640 --> 00:46:34,040
Speaker 9: places like Singapore which is actually imposing a levee on

924
00:46:35,200 --> 00:46:37,360
Speaker 9: airline tickets and saying, okay, we think staff is going

925
00:46:37,440 --> 00:46:38,880
Speaker 9: to cost this much in order to blend in, we

926
00:46:39,000 --> 00:46:42,080
Speaker 9: have blending targets. We're just going to put an additional

927
00:46:42,200 --> 00:46:45,040
Speaker 9: cost on airline tickets in order to cover the cost

928
00:46:45,120 --> 00:46:45,480
Speaker 9: of staff.

929
00:46:46,160 --> 00:46:48,799
Speaker 2: I mean, see what works in theory? That makes sense, right,

930
00:46:48,960 --> 00:46:50,840
Speaker 2: Like you just pass it down to the consumer. But

931
00:46:50,880 --> 00:46:53,000
Speaker 2: it does point out that any anyergery transition that you

932
00:46:53,120 --> 00:46:56,240
Speaker 2: can do will eventually be then passed on to the consumer.

933
00:46:55,960 --> 00:46:57,000
Speaker 5: Consumer or tax payer.

934
00:46:57,080 --> 00:46:57,239
Speaker 8: Yeah.

935
00:46:57,320 --> 00:47:00,480
Speaker 4: Probably interesting. So what the US airlines are here, I'm

936
00:47:00,480 --> 00:47:02,239
Speaker 4: just reading some of your research here. So bn F

937
00:47:02,360 --> 00:47:06,040
Speaker 4: tracks airline net zero commitments and sustainable aviation fuel commitments,

938
00:47:06,320 --> 00:47:08,960
Speaker 4: and currently forty four airlines counting for just under half

939
00:47:09,040 --> 00:47:13,160
Speaker 4: of jet fuel consumed globally have some saf target usually

940
00:47:13,239 --> 00:47:16,160
Speaker 4: ten percent by twenty thirty. Is that good enough?

941
00:47:16,840 --> 00:47:19,200
Speaker 5: Well, it's a target, So the question is will they

942
00:47:19,280 --> 00:47:19,960
Speaker 5: hit those targets?

943
00:47:20,200 --> 00:47:20,600
Speaker 10: Is it real?

944
00:47:21,040 --> 00:47:23,280
Speaker 9: Can they do that? And that's where we are starting

945
00:47:23,320 --> 00:47:27,240
Speaker 9: to see some airlines procure SAFF volumes like United procures

946
00:47:27,239 --> 00:47:29,239
Speaker 9: a lot. If you fly out, if you fly on

947
00:47:29,400 --> 00:47:31,680
Speaker 9: say United out of San Francisco or La chances are

948
00:47:31,719 --> 00:47:33,000
Speaker 9: there some staff in the tank.

949
00:47:33,080 --> 00:47:33,680
Speaker 4: Can they blend it?

950
00:47:34,040 --> 00:47:35,640
Speaker 9: They can blend it one for one. That's one of

951
00:47:35,719 --> 00:47:38,040
Speaker 9: the beautiful things about sustainable aviation fuel.

952
00:47:37,920 --> 00:47:40,280
Speaker 2: Well all in that you can just like easy replacement,

953
00:47:40,920 --> 00:47:42,759
Speaker 2: you can take the jet full fuel allowed and put

954
00:47:42,760 --> 00:47:44,640
Speaker 2: it back in versus if you did a hydrogen plane

955
00:47:44,760 --> 00:47:45,760
Speaker 2: or some other kind of plane.

956
00:47:45,880 --> 00:47:48,080
Speaker 9: Yeah, so you don't need new tanks or new aircrafts.

957
00:47:48,600 --> 00:47:50,080
Speaker 9: You can blend it up to fifty percent.

958
00:47:50,200 --> 00:47:52,400
Speaker 5: Currently is the regulatory produces system.

959
00:47:52,920 --> 00:47:55,440
Speaker 9: It is currently produced in very small quantities. So right

960
00:47:55,520 --> 00:47:57,800
Speaker 9: now less than one percent of all jet fuel a

961
00:47:57,840 --> 00:48:00,319
Speaker 9: sustainable aviation fuel. So we're talking very Smalllliams.

962
00:48:00,560 --> 00:48:01,200
Speaker 5: It's produced.

963
00:48:01,400 --> 00:48:03,680
Speaker 9: A lot of oil and gas companies and refiners are

964
00:48:03,719 --> 00:48:06,600
Speaker 9: in on this space. So Neste, there's a company called

965
00:48:06,640 --> 00:48:09,240
Speaker 9: World Energy and one called Montana Renewables that are producing

966
00:48:09,280 --> 00:48:14,240
Speaker 9: at the moment. We're seeing P sixty six and Valero

967
00:48:14,400 --> 00:48:16,120
Speaker 9: through their partnerships with Darling Ingredients.

968
00:48:16,400 --> 00:48:19,480
Speaker 4: Those are regular refiners, so does like Valero regular who

969
00:48:19,560 --> 00:48:20,479
Speaker 4: does jet fuel today?

970
00:48:21,080 --> 00:48:22,520
Speaker 5: A lot of the refineries so if you think of

971
00:48:22,560 --> 00:48:23,400
Speaker 5: a refinery, go.

972
00:48:23,440 --> 00:48:24,920
Speaker 4: Talk to the refinery. So you guys need to put

973
00:48:24,960 --> 00:48:25,440
Speaker 4: out more.

974
00:48:25,400 --> 00:48:26,920
Speaker 9: And a lot of them are looking at it because

975
00:48:27,239 --> 00:48:29,080
Speaker 9: a lot of the process at the moment is similar.

976
00:48:29,120 --> 00:48:31,279
Speaker 9: You basically, instead of taking a crude oil, you take

977
00:48:31,280 --> 00:48:33,960
Speaker 9: a biooil, you put it through a refinery and get

978
00:48:34,360 --> 00:48:37,240
Speaker 9: sustainable aviation fuel. So you can actually convert some existing

979
00:48:37,360 --> 00:48:42,040
Speaker 9: oil refineries to take biofeedstocks and therefore make these biofuels.

980
00:48:42,440 --> 00:48:43,560
Speaker 5: So we are seeing them active.

981
00:48:43,680 --> 00:48:47,440
Speaker 2: What about the okay, so a different question, how do

982
00:48:47,520 --> 00:48:51,280
Speaker 2: you think this industry develops and where does the strength develop?

983
00:48:51,920 --> 00:48:53,520
Speaker 5: So a lot of this is policy led.

984
00:48:53,560 --> 00:48:55,800
Speaker 9: We are starting to see a lot of policies support

985
00:48:55,840 --> 00:48:57,840
Speaker 9: it though, because aviation is one of the crucks you

986
00:48:57,880 --> 00:49:01,799
Speaker 9: can make these types of sustainable fuels into a whole

987
00:49:01,800 --> 00:49:03,799
Speaker 9: lot of things. You can make diesel molecules, you can

988
00:49:03,880 --> 00:49:07,759
Speaker 9: make methanol molecules, petrochemicals, But aviation is the industry where

989
00:49:07,800 --> 00:49:10,279
Speaker 9: there aren't any really good alternatives, especially if you're looking

990
00:49:10,280 --> 00:49:13,200
Speaker 9: at like a twenty fifty SAP or net zero target,

991
00:49:13,360 --> 00:49:17,040
Speaker 9: because hydrogen aircraft, electric aircraft, it takes decades to get

992
00:49:17,040 --> 00:49:17,680
Speaker 9: those off the ground.

993
00:49:17,719 --> 00:49:19,200
Speaker 5: It takes decades for fleets to roll over.

994
00:49:19,280 --> 00:49:22,400
Speaker 9: So if you really want to decarbonize aviation by twenty fifty,

995
00:49:22,440 --> 00:49:24,919
Speaker 9: you're going to need to decarbonize the fuel that they're

996
00:49:24,920 --> 00:49:27,439
Speaker 9: currently using. So this is the area where we're seeing

997
00:49:27,440 --> 00:49:29,239
Speaker 9: a lot of policy start to move. I've mentioned a

998
00:49:29,320 --> 00:49:31,719
Speaker 9: few of them. We're starting to see some interest from

999
00:49:31,800 --> 00:49:34,560
Speaker 9: different producers. We're starting to see a lot of investment

1000
00:49:34,600 --> 00:49:37,160
Speaker 9: going into this because everybody assumes the market will get there. So,

1001
00:49:37,600 --> 00:49:40,239
Speaker 9: for instance, there's a different way of producing it where

1002
00:49:40,280 --> 00:49:43,200
Speaker 9: you take green hydrogen and captured carbon dioxide to make

1003
00:49:43,200 --> 00:49:46,239
Speaker 9: the fuel that's popular because you don't have the food

1004
00:49:46,320 --> 00:49:49,839
Speaker 9: versus fuel issues of a biofuel. Just earlier this month,

1005
00:49:49,920 --> 00:49:52,520
Speaker 9: we saw Brookfield invest over a billion dollars into one

1006
00:49:52,520 --> 00:49:53,920
Speaker 9: of these e fuel facilities.

1007
00:49:54,760 --> 00:49:56,160
Speaker 4: I need to go check out when these word are

1008
00:49:56,160 --> 00:49:58,640
Speaker 4: these things are? They just like in Texas and Louisiana.

1009
00:49:58,680 --> 00:49:59,960
Speaker 3: World they California calful.

1010
00:50:00,040 --> 00:50:01,719
Speaker 9: A lot of the fuel is sold in California and

1011
00:50:01,760 --> 00:50:03,839
Speaker 9: a lot of the old refineries are being converted there,

1012
00:50:03,920 --> 00:50:06,719
Speaker 9: but they are being produced everywhere. It depends on where

1013
00:50:06,719 --> 00:50:08,960
Speaker 9: the feedstock is. So you can see a lot of

1014
00:50:09,000 --> 00:50:11,080
Speaker 9: feedstock in the Midwest. A lot of the productions coming

1015
00:50:11,120 --> 00:50:14,200
Speaker 9: out there. We're starting to see fuels which are take

1016
00:50:14,280 --> 00:50:16,799
Speaker 9: green hydrogen. They need to be near cheap renewable energy,

1017
00:50:17,320 --> 00:50:19,040
Speaker 9: and so you'll see a lot of these.

1018
00:50:19,360 --> 00:50:23,239
Speaker 4: Fuel as efficient as carbon the regular fuel, because I

1019
00:50:23,239 --> 00:50:24,800
Speaker 4: don't want to be thirty five thousand feet in the

1020
00:50:24,800 --> 00:50:26,000
Speaker 4: air and then engine.

1021
00:50:26,080 --> 00:50:27,920
Speaker 2: As reliable thank you yeah.

1022
00:50:27,960 --> 00:50:31,680
Speaker 9: So it has to produce. It produces jet aspec fuel.

1023
00:50:32,560 --> 00:50:34,840
Speaker 9: There are questions if you had one hundred percent staff

1024
00:50:34,880 --> 00:50:37,600
Speaker 9: in your tank. Actually, a lot of the fossil jet

1025
00:50:37,680 --> 00:50:39,799
Speaker 9: fuels have some aromatics that end up in the jet

1026
00:50:39,840 --> 00:50:42,120
Speaker 9: fuel stream and that actually helps with seals in the engine.

1027
00:50:42,160 --> 00:50:44,920
Speaker 9: So they're testing that out, but nobody we don't have

1028
00:50:44,960 --> 00:50:47,000
Speaker 9: the quantities produced that you're anywhere near one hundred percent

1029
00:50:47,160 --> 00:50:48,840
Speaker 9: these days, and in general, you could think of it

1030
00:50:48,920 --> 00:50:50,640
Speaker 9: as exactly the same as jet fuel.

1031
00:50:52,120 --> 00:50:53,640
Speaker 4: I mean, all these people get we haven't had like

1032
00:50:53,960 --> 00:50:54,840
Speaker 4: a clunker yet at it.

1033
00:50:54,880 --> 00:50:58,120
Speaker 2: And for a long time she used to cover literally

1034
00:50:58,160 --> 00:51:02,919
Speaker 2: everything at Bloomberg Intelligence, no PF. It was like oil

1035
00:51:03,040 --> 00:51:04,600
Speaker 2: was gas, it was all. It was all the things,

1036
00:51:04,719 --> 00:51:05,920
Speaker 2: all right, and I was good to see you, Thanks

1037
00:51:05,920 --> 00:51:08,120
Speaker 2: so much. Anna Davis, a head of renewable fuels over

1038
00:51:08,160 --> 00:51:11,279
Speaker 2: at Bloomberg b n e F, where we get all

1039
00:51:11,440 --> 00:51:14,640
Speaker 2: the data that you need to know about the energy transition, honestly,

1040
00:51:14,719 --> 00:51:17,480
Speaker 2: from oil to gas to hydrogen. We'd get it all

1041
00:51:17,560 --> 00:51:17,759
Speaker 2: for you.

1042
00:51:18,360 --> 00:51:22,880
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1043
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1044
00:51:26,880 --> 00:51:29,840
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1045
00:51:29,960 --> 00:51:33,360
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1046
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1047
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