WEBVTT - Surveillance: Biden's Reelection Bid

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<v Speaker 1>This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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<v Speaker 1>with Jonathan Farrow and Lisa Abramowitz. Join us each day

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<v Speaker 1>for insight from the best and economics, geopolitics, finance and investment.

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<v Speaker 1>Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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<v Speaker 1>anywhere you get your podcasts, and always on Bloomberg dot Com,

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<v Speaker 1>the Bloomberg Terminal, and the Bloomberg Business App. Henri Out

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<v Speaker 1>a trace with us right now director of Economic Policy

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<v Speaker 1>Research if out of Partners, but far more political economic

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<v Speaker 1>policy as well. When an election starts five hundred and

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<v Speaker 1>sixty days out, Henrietta, what's the gridlock look like? What

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<v Speaker 1>is the new gridlock after the election is engaged?

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<v Speaker 2>The new gridlock is, basically, we get this debt ceiling

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<v Speaker 2>past us, hopefully in the next month or two, and

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<v Speaker 2>then we move pretty much exclusively to and there will

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<v Speaker 2>be a focus on trying to craft a bipartisan bill,

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<v Speaker 2>any attempt to differentiate the Republicans from the Democrats on

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<v Speaker 2>that front, and I suspect they'll both be job owning

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<v Speaker 2>about what could come on the China front, including Tariff's

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<v Speaker 2>investment restrictions. Heading into seven that's what will.

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<v Speaker 1>Be, so that'll be the legislative debate. But does China

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<v Speaker 1>fold into election results? The maxim I've always heard is

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<v Speaker 1>that domestic issues are far more important in an election dash.

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<v Speaker 1>Does China play into the election dash?

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<v Speaker 3>I think so.

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<v Speaker 2>You have nearly eighty percent of the US population who

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<v Speaker 2>believes that China is something of an enemy to the

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<v Speaker 2>United States, so it's a very popular boogeyman. I think

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<v Speaker 2>you have to question what the underlying macroeconomic data is

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<v Speaker 2>going to look like.

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<v Speaker 3>What's unemployment?

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<v Speaker 2>You know, if it's still in the three and a

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<v Speaker 2>half even four percent range, it's not going to be

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<v Speaker 2>that striking topic like it has been in years past

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<v Speaker 2>and we were at eight nine to ten percent. If

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<v Speaker 2>inflation has come down and it similarly is not in

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<v Speaker 2>the eight nine to ten percent range, you're going to

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<v Speaker 2>have an opportunity to focus on foreign policy because domestic

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<v Speaker 2>politics or domestic economic policy data will have a cooler temperature.

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<v Speaker 2>It will be big enough to occupy headlines every single day,

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<v Speaker 2>so you can have an opening for China to be

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<v Speaker 2>a conversation.

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<v Speaker 4>A lot of shift right now when it comes to geopolitics,

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<v Speaker 4>a lot of shift when it comes to economics, and

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<v Speaker 4>there's not a lot of shift. When it comes to

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<v Speaker 4>the most likely matchup for the twenty twenty four election,

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<v Speaker 4>it is President Biden.

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<v Speaker 5>He is in the running.

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<v Speaker 4>That is what he said earlier this morning with the

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<v Speaker 4>official announcement, and former President Trump.

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<v Speaker 5>This is the likely matchup.

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<v Speaker 4>What does that say to you that it's the two

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<v Speaker 4>known entities going at it again.

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<v Speaker 3>You know, it's really interesting.

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<v Speaker 2>I'm trying to find a great way to say this,

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<v Speaker 2>but as an analyst, you know, we're always looking for

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<v Speaker 2>some sort of nuance or edge to share with clients

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<v Speaker 2>and help them have a little bit of extra juice

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<v Speaker 2>going into any kind of a.

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<v Speaker 3>Big event like this.

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<v Speaker 2>But realistically, we have a pretty solid run rate to

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<v Speaker 2>work with Democrats the midterm elections in twenty eighteen by

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<v Speaker 2>an overwhelming majority. Democrats won the twenty twenty presidential election,

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<v Speaker 2>picking up Arizona and Nevada, Georgia even we won the

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<v Speaker 2>special elections in Georgia twice, and then in twenty twenty

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<v Speaker 2>two ran in a super high inflationary environment coming out

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<v Speaker 2>of the pandemic in a race that Democrats had no

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<v Speaker 2>business winning, and the minority party lost in the most

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<v Speaker 2>epic blowout since the nineteen thirties.

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<v Speaker 3>So it's really difficult to.

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<v Speaker 2>Try to find a rationale for not knowing the outcome

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<v Speaker 2>of the twenty twenty four presidential election cycle. We've seen

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<v Speaker 2>this fight literally four times now and each one ends

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<v Speaker 2>the same way. So it's difficult to find a way

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<v Speaker 2>to explain or convince anybody, including my own brain, about

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<v Speaker 2>how you can see Republicans win in this environment with

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<v Speaker 2>the same candidate.

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<v Speaker 4>How much is this Democrats winning and how much is

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<v Speaker 4>this Republicans losing with respect to where the balance of

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<v Speaker 4>power is in that party.

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<v Speaker 2>I would definitely look at the key states. I mean,

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<v Speaker 2>all our clients know, and y'all know, it doesn't matter

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<v Speaker 2>what the national data is. It's really about key states

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<v Speaker 2>and the electoral College. So look at Arizona, look at Pennsylvania.

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<v Speaker 2>In those states, Joe Biden is ahead by four points

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<v Speaker 2>one point, and that's the outcome.

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<v Speaker 3>Of the cycle.

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<v Speaker 2>So you might have some scenarios where certain states are

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<v Speaker 2>going more aggressively for Trump, but mostly it's going to

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<v Speaker 2>be a national referendum in key states against the Republican

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<v Speaker 2>caucus and their policies.

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<v Speaker 1>Henry and I've brought up twice today a question of

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<v Speaker 1>progresses or liberals within the Democratic Party. I mean, in

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<v Speaker 1>the republican concept. There's this idea Republican in name only.

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<v Speaker 1>Is Joe Biden a Democrat in name only?

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<v Speaker 2>I think that if you were to pull a Bernie

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<v Speaker 2>Sanders or some of his supporters, they would say things

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<v Speaker 2>along those lines. But it's really difficult to look at

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<v Speaker 2>the track record and see a one point nine trillion

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<v Speaker 2>dollar Cares Act bill passed in the first month of

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<v Speaker 2>his administration, the Chips Act, which was bipartisan by Parson,

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<v Speaker 2>infrastructure bill, and then the Inflation Reduction Act. There is establishment, democratic,

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<v Speaker 2>democratic and name only agenda items like Chips and the

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<v Speaker 2>but then there's also those progressive items green energy tax

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<v Speaker 2>credits that are very expansive. And then obviously the one

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<v Speaker 2>point I joined down the COVID relief bill, which had

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<v Speaker 2>a lot of progressive agenda items in there.

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<v Speaker 1>So you can make thank you so much, Henry out

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<v Speaker 1>Tre's director of economic policy Vada Partners. There. We have

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<v Speaker 1>a wonderful guest with it that John's going to bring in.

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<v Speaker 1>But you know, John, it's going to be important. Newburger.

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<v Speaker 1>Berman is going to focus today on the four pm

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<v Speaker 1>earnings Thursday. On the four pm earnings tomorrow, every set

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<v Speaker 1>there will be shifted from financial media over to Manchester

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<v Speaker 1>City will not be watching Meta earnings tomorrow. How big

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<v Speaker 1>a game is that tomorrow that's going to constract Global Walls.

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<v Speaker 6>Told, this is six pointer? Don't we schouse epic? It's

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<v Speaker 6>a six pointer? How big is this for Arsenal? For

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<v Speaker 6>the gunners?

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<v Speaker 7>It's huge. I was at Hibury when I was four,

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<v Speaker 7>so I have a you really, I really was. My

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<v Speaker 7>dad was teaching at the London School of Economics and

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<v Speaker 7>he dragged me along to Hibury and I'm super excited

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<v Speaker 7>about Wednesday. So we'll have the three broombroog screens going

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<v Speaker 7>and one will have the matron and the rest will

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<v Speaker 7>have Meta.

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<v Speaker 6>I had to say to Tom on Friday when they

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<v Speaker 6>were throwing the game against Southampton away. I said, Tom,

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<v Speaker 6>you need to understand the phrase bottling it? Are they

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<v Speaker 6>bottling it?

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<v Speaker 7>They choking a little. It's tough to lead the whole

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<v Speaker 7>year from the front, and it's been remarkable and we'll

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<v Speaker 7>we'll know tomorrow. We'll know tomorrow.

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<v Speaker 6>Top of the league Arsenal going up against Manchester City,

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<v Speaker 6>the top two the face down tomorrow, so you won't

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<v Speaker 6>be watching meta earning, so I imagine you'll be looking at

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<v Speaker 6>Google and Microsoft a little bit later. These tech names

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<v Speaker 6>have had massive moves here today. Lisa talked about meta

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<v Speaker 6>of something like seventy to eighty percent so far in

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<v Speaker 6>twenty twenty three. Are you expecting the numbers to validate

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<v Speaker 6>the moves?

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<v Speaker 7>I think the two stories this afternoon will be a

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<v Speaker 7>little different. Microsoft's are going to be all about Azure

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<v Speaker 7>and the enterprise slowing and the large enterprise companies have

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<v Speaker 7>all kind of looked at their cloud spend and decided

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<v Speaker 7>to rationalize a little bit. But then on Microsoft, it's

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<v Speaker 7>going to be telling the long, long term story around

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<v Speaker 7>open Ai and their forty nine percent investment there. We've

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<v Speaker 7>done the math on some of that. The maths not easy.

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<v Speaker 7>You know, the AI market will be over a trillion

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<v Speaker 7>dollar market in by twenty thirty and Microsoft's magnificently positioned

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<v Speaker 7>there and can add at least maybe twenty percent to

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<v Speaker 7>their top line over the next five to six years.

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<v Speaker 7>So I think Microsoft is going to be You're going

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<v Speaker 7>to look through the valley to the next peak, so

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<v Speaker 7>to speak, kind of ignore the shorter term headwinds and

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<v Speaker 7>focus more on the longer term opportunity. Where Google, I

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<v Speaker 7>think it's they haven't provided the sizzle that Microsoft has

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<v Speaker 7>as as relates to open AI, So I think there

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<v Speaker 7>we're looking for a lot of clarity around their longer

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<v Speaker 7>term strategy. I think they magnificently position there as well.

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<v Speaker 7>But unlike Microsoft, we're going to be thinking through efficiency

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<v Speaker 7>and optimization as it relates to their to their cost structure.

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<v Speaker 7>They sell at two vastly different valuations. The point I'd

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<v Speaker 7>make maybe more generally about technology that maybe sometimes gets

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<v Speaker 7>gets lost. The by and large, the resiliency you've seen

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<v Speaker 7>in earnings out of the index, so to speak, is

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<v Speaker 7>because these businesses have magnificent income statement flexibility. And the

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<v Speaker 7>challenge with the financial companies is they they don't have

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<v Speaker 7>income statement flexibility. They are tied by their balance sheets.

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<v Speaker 7>And so I am quite optimistic that the very large

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<v Speaker 7>index contributors will will deliver earnings that are high quality

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<v Speaker 7>and they're protecting they're protecting their cash flows. This year

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<v Speaker 7>the market shifted, as you know, from rev you to

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<v Speaker 7>what matters, which is cash in the.

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<v Speaker 4>Bank, which they have magnificently displayed.

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<v Speaker 5>Will open AI be the new blockchain.

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<v Speaker 4>I mean, basically, have we already fully priced in just

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<v Speaker 4>saying chat GPT and then seeing your stock sore.

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<v Speaker 7>I don't think we have, and we certainly haven't at Microsoft,

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<v Speaker 7>and we certainly haven't at Google because Google sells it

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<v Speaker 7>ten times EV to enterprise value. That is not evaluation.

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<v Speaker 7>That suggests a lot of good news is priced in.

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<v Speaker 7>I like the analogy to the to blockchain. We think

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<v Speaker 7>the efficiency opportunity for people that adopt AI is two

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<v Speaker 7>x on the margin line relative to the blockchain. So

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<v Speaker 7>we're talking If you thought blockchain was a was a

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<v Speaker 7>two hundred basis points improvement to efficiency for companies adopting it,

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<v Speaker 7>we think open ai is probably five hundred basis points.

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<v Speaker 7>Think through the efficiency of that, and think through the productivity.

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<v Speaker 1>I want to focus on your courage to own a

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<v Speaker 1>few things on a big were down. I believe twenty

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<v Speaker 1>four percent last year in one portfolio, and maybe that

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<v Speaker 1>was a little worse than others because you had big

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<v Speaker 1>tech owning. I want to talk about the street. Focus

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<v Speaker 1>on that these stocks are too big, too dominant, and

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<v Speaker 1>people are diversifying away. Peter Lynch called it diversification in general.

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<v Speaker 1>Are people diversifying away where they should own more of

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<v Speaker 1>big tech.

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<v Speaker 7>It's it's a big question. We have the growth strategy,

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<v Speaker 7>a large cup growth strategy that was down twenty four

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<v Speaker 7>percent last year. We felt great relative to the large

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<v Speaker 7>cap growth indices. I think it proved out the high quality,

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<v Speaker 7>defense and nature of how we proceed with growth. I

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<v Speaker 7>think I gave you the analogy with with with Microsoft.

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<v Speaker 7>He as a company that can add you know, twenty

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<v Speaker 7>to city billion dollars to their revenues over the next

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<v Speaker 7>five years, and they're running at two hundred billion dollars

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<v Speaker 7>of revenue today. I don't know many companies that that

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<v Speaker 7>and operate at that scale with that type of opportunity.

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<v Speaker 7>And I think when you think through when you think

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<v Speaker 7>through Google, the challenge there is going to be can

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<v Speaker 7>It's a little bit of the innovator's dilemma. Can they

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<v Speaker 7>can they understand the threat that AI provides to their

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<v Speaker 7>core search business, which is kind of a ninety two

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<v Speaker 7>percent monopoly business while capturing the opportunity of AI. Not

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<v Speaker 7>different to how Netflix kind of attack themselves as they

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<v Speaker 7>went from you know, physical delivery of content to digital

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<v Speaker 7>and you've got a factor in valuation. Look in this environment,

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<v Speaker 7>I think you've got to quality up. You've got to

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<v Speaker 7>own income statement flexibility, you've got to be mindful of

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<v Speaker 7>the balance sheet, and you've got to own businesses that

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<v Speaker 7>if the tide was to go out, you feel really

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<v Speaker 7>good about their next three to five year positioning. And

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<v Speaker 7>I think you just find that today in the large

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<v Speaker 7>companies that are that are going to be massive beneficiaries

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<v Speaker 7>of all the compute spans. And that's going to take

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<v Speaker 7>place with AI. Microsoft magnificently positioned, so is Google, so

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<v Speaker 7>is Amazon, so is Meta. These folks own the largest

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<v Speaker 7>computers in the world, and they're going to rent them

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<v Speaker 7>out to everyone else, and everyone else is going to

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<v Speaker 7>enjoy a five hundred basis point margin improvement over time.

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<v Speaker 7>And that's going to be very good for for for

0:12:24.480 --> 0:12:27.160
<v Speaker 7>the economy. It's going to come with lots of headwinds,

0:12:27.200 --> 0:12:32.199
<v Speaker 7>no doubt, lots of regulatory scrutiny for sure. But but

0:12:32.200 --> 0:12:35.439
<v Speaker 7>but net net, it's it's it's it's it's massive.

0:12:35.559 --> 0:12:39.640
<v Speaker 6>I didn't hear around VMH or as up in quality.

0:12:39.679 --> 0:12:42.000
<v Speaker 6>That's all we're hearing about Europe, luxury players, all of

0:12:42.000 --> 0:12:43.679
<v Speaker 6>that good stuff. Then why you're not there?

0:12:44.400 --> 0:12:47.040
<v Speaker 7>I think I mean we we're not there necessarily with

0:12:47.160 --> 0:12:51.480
<v Speaker 7>that specific wonderful high end retail them. My wife's there

0:12:51.520 --> 0:12:57.480
<v Speaker 7>in shades spades. We were recently in Europe and there

0:12:57.559 --> 0:13:00.440
<v Speaker 7>is a currency heads, you know, currency of trash, so

0:13:00.520 --> 0:13:02.720
<v Speaker 7>to speak. So I'm familiar with the power of that brand.

0:13:03.080 --> 0:13:05.840
<v Speaker 7>They've bought a remarkable company. They've got to go through, uh,

0:13:06.280 --> 0:13:07.560
<v Speaker 7>you know, they've got to figure out which of the

0:13:07.600 --> 0:13:10.760
<v Speaker 7>five favorite kids are are going to run on the show.

0:13:10.800 --> 0:13:14.120
<v Speaker 7>But I think this morning from Pepsi and McDonald's, you

0:13:14.200 --> 0:13:19.000
<v Speaker 7>saw what quality and innovation and convenience and value delivered.

0:13:19.840 --> 0:13:22.600
<v Speaker 1>Charles character can segue from Lewis Wooten.

0:13:25.120 --> 0:13:28.240
<v Speaker 7>I know less about McDonald's from both all of that,

0:13:28.400 --> 0:13:29.920
<v Speaker 7>but it's just quality and and so.

0:13:31.440 --> 0:13:33.360
<v Speaker 5>McDonald's in the.

0:13:34.120 --> 0:13:36.000
<v Speaker 7>It's a function of who the consumer is. I mean,

0:13:36.040 --> 0:13:39.719
<v Speaker 7>the consumer of McDonald's ses tremendous value, as does as

0:13:39.760 --> 0:13:42.520
<v Speaker 7>does the LVMH customer in a different way.

0:13:42.720 --> 0:13:46.680
<v Speaker 1>You were acclaimed on Whole Foods. Amazon. Whole Foods is

0:13:46.720 --> 0:13:48.880
<v Speaker 1>now thrown on a towel. They're going to go low price,

0:13:49.040 --> 0:13:50.480
<v Speaker 1>lower price. Is it going to work?

0:13:51.000 --> 0:13:52.960
<v Speaker 7>I don't know if they're going to do that precisely

0:13:53.600 --> 0:13:56.600
<v Speaker 7>in your honor was back there on Saturday, just buying

0:13:56.640 --> 0:14:01.079
<v Speaker 7>a few things for dinner. Look, they have made wholesome

0:14:01.120 --> 0:14:05.640
<v Speaker 7>food affordable for all of America. You know what gets

0:14:05.679 --> 0:14:08.800
<v Speaker 7>lost with Amazon is they now have relationships with three

0:14:08.840 --> 0:14:12.560
<v Speaker 7>thousand local producers. That's way up from when Whole Foods

0:14:12.600 --> 0:14:15.360
<v Speaker 7>was a standalone company. And if you're a prime member,

0:14:15.640 --> 0:14:17.040
<v Speaker 7>you're getting value with Whole.

0:14:18.280 --> 0:14:19.720
<v Speaker 6>I don't know about you, but when I go into Whole

0:14:19.720 --> 0:14:22.680
<v Speaker 6>Foods to get dinner, I could have bought ms scaff.

0:14:25.240 --> 0:14:28.600
<v Speaker 7>It's not perfectly cheap, but it hasn't It hasn't come

0:14:28.640 --> 0:14:32.720
<v Speaker 7>down that much relative to fifteen seconds you pay for quality.

0:14:33.000 --> 0:14:33.920
<v Speaker 6>Do you miss Highbury?

0:14:34.600 --> 0:14:38.200
<v Speaker 7>I do miss Highbury And I haven't yet been to Emirates.

0:14:38.000 --> 0:14:39.800
<v Speaker 6>Into the Amates a couple of times, and my.

0:14:39.760 --> 0:14:42.200
<v Speaker 7>Guess is the seating at the Emirates is a little

0:14:42.200 --> 0:14:43.040
<v Speaker 7>bit no comfortable.

0:14:43.760 --> 0:14:47.440
<v Speaker 6>Those old stadiums I think a Fenway and Boston. Just

0:14:47.640 --> 0:14:49.200
<v Speaker 6>the romance of it.

0:14:48.840 --> 0:14:49.280
<v Speaker 1>It's great.

0:14:49.280 --> 0:14:50.240
<v Speaker 6>I wish that kept them.

0:14:51.640 --> 0:14:55.600
<v Speaker 1>Can talk to mister Levy. Canter's got you mass to.

0:14:55.520 --> 0:14:59.760
<v Speaker 6>Help him parachute in and parachuting and sports. I'm not sure,

0:14:59.800 --> 0:15:03.480
<v Speaker 6>but as a quality right now, something well that's.

0:15:02.760 --> 0:15:23.560
<v Speaker 8>A thank you everyone.

0:15:15.760 --> 0:15:18.120
<v Speaker 1>Right now in banking, and surely expert on is Christopher

0:15:18.160 --> 0:15:22.320
<v Speaker 1>Merinack JOINSUS director of Research Jenny Montgomery Scott Philadelphia and

0:15:22.400 --> 0:15:25.760
<v Speaker 1>in Atlanta this morning. Christopher, you know you and I

0:15:25.800 --> 0:15:27.720
<v Speaker 1>do the same thing when you get the Key Friette

0:15:28.040 --> 0:15:32.080
<v Speaker 1>Bank Index out of twenty two banks, and it's real simple.

0:15:32.080 --> 0:15:35.760
<v Speaker 1>Were the latest tobacco? They're priced back to nineteen ninety eight.

0:15:36.400 --> 0:15:39.600
<v Speaker 1>How many others are there like FRC? Do you do

0:15:39.640 --> 0:15:43.160
<v Speaker 1>you look at them as a discreet disaster or is

0:15:43.160 --> 0:15:47.080
<v Speaker 1>there enough of them out there to affect something like

0:15:47.120 --> 0:15:49.560
<v Speaker 1>the twenty two banks and the KBW index.

0:15:50.640 --> 0:15:52.920
<v Speaker 9>I think First Republic stands on its own, Tom, I

0:15:52.960 --> 0:15:57.400
<v Speaker 9>really think that it's at once opportunity. Unfortunately that was

0:15:57.480 --> 0:16:01.360
<v Speaker 9>hit by friendly fire and they have really struggled clearly

0:16:01.360 --> 0:16:05.240
<v Speaker 9>for the quarter. Deposits worse than we thought. As you said,

0:16:05.600 --> 0:16:07.640
<v Speaker 9>I think the conference call did not go well. I

0:16:07.680 --> 0:16:09.840
<v Speaker 9>think the market didn't like the lack of questions, and

0:16:09.880 --> 0:16:12.080
<v Speaker 9>I think there's real changes the company has to make.

0:16:12.520 --> 0:16:16.320
<v Speaker 1>The answer is combinations. The basic thing we've had is

0:16:16.360 --> 0:16:19.360
<v Speaker 1>four thousand banks, whether it's twenty two larger regionals or not.

0:16:19.960 --> 0:16:22.800
<v Speaker 1>When do we start to see the mergers that are

0:16:22.840 --> 0:16:23.880
<v Speaker 1>just to have to come.

0:16:25.240 --> 0:16:27.600
<v Speaker 9>Well for First Republic, it could happen very soon. I

0:16:27.600 --> 0:16:29.440
<v Speaker 9>mean they need to do something. They either need to

0:16:29.440 --> 0:16:31.360
<v Speaker 9>strength the balance you do, they need to find a buyer.

0:16:31.960 --> 0:16:34.080
<v Speaker 9>They're going to have to raise capital either way. So

0:16:34.160 --> 0:16:36.320
<v Speaker 9>if they sell the company, that avoids that, but they're

0:16:36.320 --> 0:16:38.800
<v Speaker 9>going to have to take action as soon as today.

0:16:39.120 --> 0:16:41.000
<v Speaker 9>I'm not sure they can wait a whole lot longer.

0:16:41.320 --> 0:16:43.680
<v Speaker 4>Christopher, who would want to buy a firm like this

0:16:44.040 --> 0:16:46.080
<v Speaker 4>when they can get the deposits some other way and

0:16:46.120 --> 0:16:47.560
<v Speaker 4>they're taking all the liabilities.

0:16:48.840 --> 0:16:51.160
<v Speaker 9>Well, there could be the attitude that you want the

0:16:51.480 --> 0:16:53.960
<v Speaker 9>wealth management business and the clients that they have, even

0:16:54.000 --> 0:16:57.400
<v Speaker 9>though they did lose advisors precipitously towards the end of

0:16:57.480 --> 0:17:00.040
<v Speaker 9>March and also here in April. I think trying to

0:17:00.080 --> 0:17:02.840
<v Speaker 9>get that business would be very attractive to a Goldman, Sachs,

0:17:02.840 --> 0:17:05.879
<v Speaker 9>to Morgan Stanley, to perhaps even JP Morgan. You'd have

0:17:05.960 --> 0:17:09.040
<v Speaker 9>to have some regulatory relief if you're JPM to get

0:17:09.040 --> 0:17:11.960
<v Speaker 9>that done from an asset perspective, but it's not impossible.

0:17:12.280 --> 0:17:14.720
<v Speaker 9>But certainly I think the wealth management business would be

0:17:14.760 --> 0:17:17.000
<v Speaker 9>the ticket that would be most attractive here.

0:17:17.160 --> 0:17:19.119
<v Speaker 4>I was struck this morning, Christopher, when I came in

0:17:19.480 --> 0:17:21.800
<v Speaker 4>that all the other regional banks are being punished as well.

0:17:21.840 --> 0:17:23.639
<v Speaker 4>It's not just First Republic, it's even those that have

0:17:23.720 --> 0:17:26.359
<v Speaker 4>reported earnings and came in better than people we feared,

0:17:26.400 --> 0:17:29.080
<v Speaker 4>whether it was Western Alliance, whether it was Zions, whether

0:17:29.119 --> 0:17:30.159
<v Speaker 4>it was any of the others.

0:17:30.400 --> 0:17:33.439
<v Speaker 5>Still they are lower. What does that tell you about

0:17:33.640 --> 0:17:34.680
<v Speaker 5>what is going on there?

0:17:34.720 --> 0:17:38.960
<v Speaker 4>But also more broadly about sentiment, Well, banks are leverage vehicles.

0:17:38.960 --> 0:17:41.119
<v Speaker 9>They work off of trust, and I think the confidence

0:17:41.119 --> 0:17:43.560
<v Speaker 9>and trust has slipped with the First Republic news, and

0:17:43.600 --> 0:17:45.280
<v Speaker 9>I think we just have to get through this air

0:17:45.320 --> 0:17:48.680
<v Speaker 9>pocket today and this week. Most of these companies are

0:17:48.800 --> 0:17:52.560
<v Speaker 9>very strong on capital, They have liquidity. They simply have

0:17:52.760 --> 0:17:55.520
<v Speaker 9>question marks with the confidence given the deposit run that

0:17:55.600 --> 0:17:58.120
<v Speaker 9>happened in the system in March, and so we're still

0:17:58.160 --> 0:17:59.879
<v Speaker 9>kind of working through that. Think of it as a

0:18:00.119 --> 0:18:03.400
<v Speaker 9>lou and the patient's not completely healed yet. I do

0:18:03.440 --> 0:18:06.000
<v Speaker 9>think that banks have to consider raising capital just to

0:18:06.000 --> 0:18:08.200
<v Speaker 9>show that they can. It would be a sign of confidence.

0:18:08.840 --> 0:18:11.200
<v Speaker 9>That to me is where this ultimately goes. Maybe we're

0:18:11.240 --> 0:18:13.320
<v Speaker 9>another six or eight weeks away from that, but I

0:18:13.320 --> 0:18:15.479
<v Speaker 9>think that's the answer to the problem.

0:18:15.560 --> 0:18:17.479
<v Speaker 6>And christ I think we've all forgotten this happened at

0:18:17.480 --> 0:18:20.240
<v Speaker 6>the very end of the first quarter in the month

0:18:20.280 --> 0:18:22.000
<v Speaker 6>of March, and I'm trying to work out what that

0:18:22.080 --> 0:18:24.880
<v Speaker 6>might mean for profits coming forward from here Q two,

0:18:25.040 --> 0:18:27.399
<v Speaker 6>Q three, Q four. What do you think that's going

0:18:27.440 --> 0:18:27.879
<v Speaker 6>to look like?

0:18:29.040 --> 0:18:31.399
<v Speaker 9>So for First Republic, I think it's a break even

0:18:31.440 --> 0:18:35.240
<v Speaker 9>at best, because if you reset their funding costs again

0:18:35.280 --> 0:18:37.520
<v Speaker 9>in the second quarter, it definitely takes away a lot

0:18:37.520 --> 0:18:40.040
<v Speaker 9>of the profitability. We also think they have to strength

0:18:40.080 --> 0:18:42.600
<v Speaker 9>the balance sheet, and that obviously hurts the revenue side.

0:18:42.760 --> 0:18:45.160
<v Speaker 9>If you sell securities, sell loans, etc.

0:18:45.520 --> 0:18:46.720
<v Speaker 3>And then capital of course.

0:18:46.480 --> 0:18:48.600
<v Speaker 9>Comes under pressure as you're going to have to sell

0:18:48.600 --> 0:18:51.439
<v Speaker 9>those assets at a loss. So that definitely puts pressure

0:18:51.480 --> 0:18:54.439
<v Speaker 9>on the revenue line and the earnings for sure. But

0:18:54.520 --> 0:18:56.600
<v Speaker 9>I think there's a case for the company to break even.

0:18:56.960 --> 0:18:59.600
<v Speaker 9>It's just a challenge to execute. And I think the

0:18:59.680 --> 0:19:01.399
<v Speaker 9>thing that we worry about is that this is a

0:19:01.440 --> 0:19:04.760
<v Speaker 9>company that has been a growth oriented company, not one

0:19:04.880 --> 0:19:06.040
<v Speaker 9>man's for profitability.

0:19:06.080 --> 0:19:07.440
<v Speaker 3>They haven't had a.

0:19:07.480 --> 0:19:10.680
<v Speaker 9>Quarter above a one percent hour away since twenty sixteen.

0:19:10.720 --> 0:19:12.480
<v Speaker 9>It's just not been in their DNA. They've been a

0:19:12.480 --> 0:19:15.520
<v Speaker 9>growth oriented bank, and it's a it's a very hard

0:19:15.560 --> 0:19:16.800
<v Speaker 9>pivot for them to do.

0:19:16.800 --> 0:19:18.800
<v Speaker 6>Does that mean they need new dataship?

0:19:20.480 --> 0:19:21.720
<v Speaker 3>Not sure about the leadership.

0:19:21.760 --> 0:19:23.240
<v Speaker 9>I think it's a change in mindset.

0:19:23.320 --> 0:19:25.520
<v Speaker 3>I think that they can do this if they.

0:19:25.520 --> 0:19:28.479
<v Speaker 9>Change from a growth company into a profit company and

0:19:28.560 --> 0:19:31.119
<v Speaker 9>make that immediate. I don't think it's impossible, but it

0:19:31.160 --> 0:19:34.240
<v Speaker 9>is a mindset change that would be relatively vague in

0:19:34.280 --> 0:19:34.840
<v Speaker 9>their history.

0:19:35.200 --> 0:19:39.080
<v Speaker 6>Listen, months changed, Tom forced on them after the events

0:19:39.080 --> 0:19:40.840
<v Speaker 6>of the Last Stand a few weeks.

0:19:41.200 --> 0:19:44.280
<v Speaker 1>You know, I'm thinking Johnavan to Charles Dickens novel eighteen

0:19:44.400 --> 0:19:49.240
<v Speaker 1>thirty England, where the banks were not growth vehicles.

0:19:49.520 --> 0:19:51.359
<v Speaker 6>I'm not sure to regulate to one banks to be

0:19:51.400 --> 0:19:54.320
<v Speaker 6>growth vehicles anyway.

0:19:53.520 --> 0:19:57.480
<v Speaker 1>I at leasta get out to surveillance, Cork, I'm going

0:19:57.560 --> 0:20:00.440
<v Speaker 1>to need it to protect the innocent here. I think

0:20:00.520 --> 0:20:04.399
<v Speaker 1>it's it's what I would say is the zombies are

0:20:04.400 --> 0:20:07.239
<v Speaker 1>going to get rolled up. How many First Republics are

0:20:07.240 --> 0:20:08.440
<v Speaker 1>out there is an important question.

0:20:08.480 --> 0:20:10.560
<v Speaker 6>I've seen people refer to this bank as a zombie.

0:20:10.600 --> 0:20:13.000
<v Speaker 6>I'm not going to reselves yesterday, Chris, thanks to that.

0:20:13.200 --> 0:20:16.399
<v Speaker 6>Good to catch up, Chris Famronak. There of Jenny Montgomery Scott.

0:20:20.520 --> 0:20:23.280
<v Speaker 1>As we lean forward with Charles Canter here of Newburger Berman,

0:20:23.400 --> 0:20:26.800
<v Speaker 1>we do better with RBC Capital Markets. Rishi Jaluia. Now

0:20:26.920 --> 0:20:30.840
<v Speaker 1>he's a software equity analyst, forget about it, expert on Microsoft.

0:20:31.040 --> 0:20:33.520
<v Speaker 1>Here we go, folks on the big stock you don't own.

0:20:34.280 --> 0:20:37.960
<v Speaker 1>Rishi twenty six percent per year total return over the

0:20:38.000 --> 0:20:42.520
<v Speaker 1>last ten years. The free cash flow blowout pre pandemic

0:20:43.040 --> 0:20:46.760
<v Speaker 1>is absolutely stunning. I mean, the cash flow growth out

0:20:46.800 --> 0:20:50.560
<v Speaker 1>five years to a model twenty twenty four is off

0:20:50.600 --> 0:20:54.880
<v Speaker 1>the chart. Is the story priced into the stock now

0:20:55.520 --> 0:20:58.440
<v Speaker 1>or will there be constructive surprises forward?

0:21:00.040 --> 0:21:00.240
<v Speaker 8>Yeah?

0:21:00.240 --> 0:21:02.640
<v Speaker 10>Thanks so much for having me. You know, I think

0:21:02.480 --> 0:21:05.320
<v Speaker 10>the big story around Microsoft is if we put maybe

0:21:05.320 --> 0:21:07.360
<v Speaker 10>the near term macro aside.

0:21:07.400 --> 0:21:08.520
<v Speaker 3>Is really AI.

0:21:09.000 --> 0:21:12.840
<v Speaker 10>And as we've outlined, we really think the opportunity with

0:21:12.960 --> 0:21:16.320
<v Speaker 10>generative AI for Microsoft is a call option on the stock.

0:21:16.400 --> 0:21:17.880
<v Speaker 3>It is not priced in today.

0:21:18.359 --> 0:21:20.960
<v Speaker 10>We actually needed to make money off Microsoft stock apps

0:21:21.000 --> 0:21:23.400
<v Speaker 10>in any AI story. But really that's where you gets

0:21:23.480 --> 0:21:26.479
<v Speaker 10>legive growth up and I do not think that's priced in.

0:21:26.520 --> 0:21:28.480
<v Speaker 10>You know, if you think about all the different ways

0:21:28.720 --> 0:21:31.640
<v Speaker 10>throughout Microsoft's portfolio that can that it can benefit from

0:21:31.960 --> 0:21:34.960
<v Speaker 10>generative AI, be it in Azure, from their agreement with

0:21:35.040 --> 0:21:39.479
<v Speaker 10>open Ai, be it competitively with the Microsoft through sixty

0:21:39.480 --> 0:21:42.879
<v Speaker 10>five suite, and the integration of co pilot throughout, be

0:21:42.960 --> 0:21:45.800
<v Speaker 10>it in their security, be it in GitHub. I think

0:21:45.800 --> 0:21:48.720
<v Speaker 10>there's so many ways Microsoft can benefit from generative AI,

0:21:48.720 --> 0:21:50.520
<v Speaker 10>and I think that's the next leg of growth up.

0:21:50.440 --> 0:21:52.159
<v Speaker 1>Here, Risha, I want to go to that. Okay, the

0:21:52.200 --> 0:21:55.280
<v Speaker 1>free casual in numbers, folks is thirty eight billion dollars

0:21:55.320 --> 0:21:58.359
<v Speaker 1>pre pandemic, and they went out to seventy three billion

0:21:58.400 --> 0:22:00.840
<v Speaker 1>dollars modeled off for two twenty four. That's the existing

0:22:00.880 --> 0:22:05.639
<v Speaker 1>company with two hundred thousand employees. Rishie explain how AI

0:22:05.880 --> 0:22:11.040
<v Speaker 1>is different than other new things, the bright, shiny new concept,

0:22:11.359 --> 0:22:14.600
<v Speaker 1>and that it's a call option on Microsoft that has

0:22:14.720 --> 0:22:15.760
<v Speaker 1>real durability.

0:22:17.280 --> 0:22:17.480
<v Speaker 3>Yeah.

0:22:17.520 --> 0:22:21.600
<v Speaker 10>I mean, look, this is the fourth big technological change

0:22:21.840 --> 0:22:25.399
<v Speaker 10>in my lifetime, right, going back to the Internet, going

0:22:25.440 --> 0:22:29.720
<v Speaker 10>back to mobility, the cloud, and now AI. And I

0:22:29.720 --> 0:22:31.679
<v Speaker 10>know we've been talking about AI for so long, but

0:22:32.119 --> 0:22:36.760
<v Speaker 10>chat GPT was that watershed moment that gets AI widespread

0:22:36.800 --> 0:22:39.280
<v Speaker 10>throughout the ecosystem. This is like when Netscape for the

0:22:39.280 --> 0:22:42.840
<v Speaker 10>Internet came out, or the iPhone for mobility, and that

0:22:43.040 --> 0:22:45.760
<v Speaker 10>is where we really think this has so much potential

0:22:46.119 --> 0:22:48.760
<v Speaker 10>not just for revenue, but to your point on the

0:22:48.760 --> 0:22:51.840
<v Speaker 10>bottom line, for free cash flow for Microsoft, that we

0:22:51.840 --> 0:22:54.560
<v Speaker 10>can see that number continue to move up. And because

0:22:54.560 --> 0:22:57.800
<v Speaker 10>of Microsoft's first mover advantage, because of how far ahead

0:22:57.800 --> 0:23:00.520
<v Speaker 10>of others open AI is, and because of how quickly

0:23:00.560 --> 0:23:02.679
<v Speaker 10>every other company is having to move to have a

0:23:02.720 --> 0:23:06.120
<v Speaker 10>generative AI strategy, we believe Microsoft will be an outside

0:23:06.160 --> 0:23:07.080
<v Speaker 10>beneficiary of that.

0:23:07.400 --> 0:23:09.359
<v Speaker 3>And if you look out throughout the entire.

0:23:09.280 --> 0:23:12.919
<v Speaker 10>Portfolio of Microsoft's products, all the growth rates will be

0:23:13.000 --> 0:23:15.960
<v Speaker 10>significantly different. Everyone's going to be talking about as your

0:23:16.000 --> 0:23:18.760
<v Speaker 10>growth rates, and you know, it seems it's realistic to

0:23:18.800 --> 0:23:21.440
<v Speaker 10>me that that's going to accelerate to probably twenty percent

0:23:21.480 --> 0:23:24.320
<v Speaker 10>growth over the coming quarters. But if once you start

0:23:24.359 --> 0:23:27.240
<v Speaker 10>layering in the benefits from generative AI, because this is

0:23:27.280 --> 0:23:30.600
<v Speaker 10>so much more resource intensive, not to mention, you'll probably

0:23:30.640 --> 0:23:33.520
<v Speaker 10>have an entire trillion dollar economy built on open AI,

0:23:33.720 --> 0:23:35.639
<v Speaker 10>just like you had a trillion dollar economy with the

0:23:35.640 --> 0:23:37.879
<v Speaker 10>iPhone and a trillion dollar economy with AWUS.

0:23:38.200 --> 0:23:40.560
<v Speaker 3>I think that as your number goes back above thirty.

0:23:40.359 --> 0:23:42.640
<v Speaker 4>Percent growth, Rishie, how much smaller can some of these

0:23:42.880 --> 0:23:45.719
<v Speaker 4>big tech companies be on a headcount level based on

0:23:45.760 --> 0:23:48.280
<v Speaker 4>some of the efficiencies that everyone keeps talking about with

0:23:48.400 --> 0:23:49.439
<v Speaker 4>artificial intelligence.

0:23:51.040 --> 0:23:52.359
<v Speaker 3>Yeah, I think that's a great question.

0:23:52.400 --> 0:23:54.760
<v Speaker 10>I would say, you know, number one, for Microsoft, I

0:23:54.760 --> 0:23:57.000
<v Speaker 10>think in contrast to a lot of the other big

0:23:57.040 --> 0:24:00.119
<v Speaker 10>tech they didn't over hire at the same rate. I

0:24:00.119 --> 0:24:02.680
<v Speaker 10>know they have done a riff. Some of that was

0:24:03.040 --> 0:24:06.440
<v Speaker 10>eliminating under performing employees, some of that was actual cost

0:24:06.440 --> 0:24:09.680
<v Speaker 10>savings and reallocating of employees. But I'd say Microsoft maybe

0:24:09.680 --> 0:24:12.520
<v Speaker 10>had more responsible hiring practices and a lot of other

0:24:12.560 --> 0:24:15.359
<v Speaker 10>big tech companies that have had to do significantly bigger riffs,

0:24:15.840 --> 0:24:17.159
<v Speaker 10>And if you benchmark.

0:24:16.800 --> 0:24:20.159
<v Speaker 3>Their employee efficiency relative to other companies enterprise software, they

0:24:20.240 --> 0:24:21.960
<v Speaker 3>were very high even prior to the riff.

0:24:22.480 --> 0:24:24.800
<v Speaker 10>Now, in terms of the cost savings from generator AI,

0:24:25.119 --> 0:24:27.359
<v Speaker 10>I think that's a big open ended question. You know,

0:24:27.560 --> 0:24:30.560
<v Speaker 10>we can talk about innovation and what general AI brings there,

0:24:30.720 --> 0:24:34.440
<v Speaker 10>but there is also It makes developers significantly more effective,

0:24:34.440 --> 0:24:37.879
<v Speaker 10>it makes marketers more effective, salespeople more effective, and I

0:24:37.920 --> 0:24:40.960
<v Speaker 10>wouldn't be surprised if we could see a company be

0:24:41.040 --> 0:24:43.600
<v Speaker 10>able to get away with significantly lower headcount.

0:24:43.600 --> 0:24:45.280
<v Speaker 3>I'm talking double digit, right, ten.

0:24:45.119 --> 0:24:48.840
<v Speaker 10>Percent plus lower headcount as a result of really embracing

0:24:48.880 --> 0:24:51.800
<v Speaker 10>and leveraging generative AI on the back end. You know,

0:24:51.840 --> 0:24:53.879
<v Speaker 10>that's maybe more of a three year story than a

0:24:53.960 --> 0:24:57.040
<v Speaker 10>near term one. But absolutely every company I talked to

0:24:57.240 --> 0:25:01.080
<v Speaker 10>is trying to use generative AI for greater operational efficiency, efficiency,

0:25:01.119 --> 0:25:04.240
<v Speaker 10>and then I think the terminal margins across enterprise software

0:25:04.240 --> 0:25:06.800
<v Speaker 10>and really across big tech has to be a higher

0:25:06.840 --> 0:25:08.760
<v Speaker 10>long term now because of this, just.

0:25:08.920 --> 0:25:12.040
<v Speaker 4>Real quick here, Who's going to win the generative AI game?

0:25:12.040 --> 0:25:13.919
<v Speaker 4>Will it be Google or will it be Microsoft?

0:25:15.560 --> 0:25:18.199
<v Speaker 10>Yeah, it's it's early to tell, but I think Microsoft

0:25:18.240 --> 0:25:21.440
<v Speaker 10>has such a huge lead from their early investment in

0:25:21.520 --> 0:25:23.919
<v Speaker 10>open ai, from the fact that open ai is an

0:25:24.000 --> 0:25:26.919
<v Speaker 10>arms length transaction. You look at the advantages you have

0:25:26.960 --> 0:25:29.640
<v Speaker 10>in chat, GPT versus all the other systems out there,

0:25:29.680 --> 0:25:33.119
<v Speaker 10>including Bard and Claude and any others that have been

0:25:33.119 --> 0:25:35.360
<v Speaker 10>out there, I think Microsoft has a huge advantage.

0:25:35.640 --> 0:25:36.720
<v Speaker 3>It is theirs to lose.

0:25:37.160 --> 0:25:39.520
<v Speaker 6>Richie Great to get your perspective on a case story.

0:25:39.520 --> 0:25:43.160
<v Speaker 6>A little bit later on this afternoon, Ritchie Delury of VOMBIEC.

0:25:53.119 --> 0:25:53.600
<v Speaker 1>Joining us.

0:25:53.600 --> 0:25:53.719
<v Speaker 10>Now.

0:25:53.800 --> 0:25:56.600
<v Speaker 1>The gentleman from Auburn, Paul Jacobson joins his chief financial

0:25:56.640 --> 0:26:01.480
<v Speaker 1>officer at General motors. Paul drive the Hummer EV. It

0:26:01.640 --> 0:26:05.280
<v Speaker 1>clocks in at eighty five thousand dollars marked up to

0:26:05.320 --> 0:26:08.720
<v Speaker 1>the proper Paul Jacobson level. It's maybe, oh one hundred

0:26:08.720 --> 0:26:12.800
<v Speaker 1>and four ninety five thousand, whatever it is. The answer is,

0:26:12.960 --> 0:26:16.360
<v Speaker 1>you boosted the range on a nine thousand pound vehicle?

0:26:16.880 --> 0:26:21.199
<v Speaker 1>Does America want that? Is there real demonstrable evidence that

0:26:21.400 --> 0:26:24.200
<v Speaker 1>Broad America wants to drive EV?

0:26:26.520 --> 0:26:30.280
<v Speaker 11>Well, Good morning, Tom and Lisa and John, Thanks so

0:26:30.280 --> 0:26:31.879
<v Speaker 11>so much for having me. First of all, let me

0:26:31.920 --> 0:26:35.480
<v Speaker 11>say thanks to the GM team for an excellent quarter

0:26:35.600 --> 0:26:37.920
<v Speaker 11>and the confidence that we have going into the year.

0:26:38.359 --> 0:26:40.680
<v Speaker 11>You know, when we're looking at EV's you know, we

0:26:41.440 --> 0:26:44.880
<v Speaker 11>have really strong demand for everything that we've produced so far,

0:26:45.520 --> 0:26:48.000
<v Speaker 11>and when you look at the order back logs and

0:26:48.040 --> 0:26:50.800
<v Speaker 11>the ramp up of cell capacity, we feel good about

0:26:50.800 --> 0:26:53.920
<v Speaker 11>our ability to ratchet up production to meet that demand.

0:26:53.960 --> 0:26:57.720
<v Speaker 11>But you know, consumers are speaking with their commitments to us,

0:26:57.800 --> 0:27:00.760
<v Speaker 11>and we feel good about the products, the vehicles that

0:27:00.800 --> 0:27:04.199
<v Speaker 11>we're producing. The Hummer EV is just a great vehicle

0:27:04.280 --> 0:27:07.240
<v Speaker 11>engineered by our team. Here we go and customers can't

0:27:07.240 --> 0:27:08.080
<v Speaker 11>get it fast enough.

0:27:08.720 --> 0:27:10.760
<v Speaker 1>You know, I look at this, Paul, and it is

0:27:10.920 --> 0:27:14.560
<v Speaker 1>unit and price. Mister Musk is playing with price, it

0:27:14.600 --> 0:27:18.159
<v Speaker 1>seems like on a weekly basis at Tesla. How I

0:27:18.160 --> 0:27:21.320
<v Speaker 1>was talking to our David Welch in Detroit, it's real simple.

0:27:21.440 --> 0:27:27.040
<v Speaker 1>How do you adapt to Tesla's price strategy. Is it

0:27:27.119 --> 0:27:30.000
<v Speaker 1>something you react to, is it something you ignore.

0:27:32.400 --> 0:27:35.520
<v Speaker 11>So we've actually been very consistent with our pricing on

0:27:35.600 --> 0:27:38.159
<v Speaker 11>our evs, and that's really a function of the demand

0:27:38.240 --> 0:27:41.919
<v Speaker 11>that we've seen for them. So, you know, there's been

0:27:41.960 --> 0:27:45.680
<v Speaker 11>a lot of industry noise around pricing all across the world,

0:27:45.760 --> 0:27:49.320
<v Speaker 11>and it's something that we've been very consistent with our

0:27:49.359 --> 0:27:52.600
<v Speaker 11>strategy and it's one that consumers are responding to over

0:27:52.640 --> 0:27:55.360
<v Speaker 11>the long term. Obviously, we've got a competitor that is

0:27:55.600 --> 0:27:59.000
<v Speaker 11>posting really strong results, really strong margins. We need to

0:27:59.000 --> 0:28:02.240
<v Speaker 11>make sure that we lower our costs, especially our structural costs,

0:28:02.240 --> 0:28:05.080
<v Speaker 11>and we're aggressively getting after that. We announced a two

0:28:05.080 --> 0:28:08.480
<v Speaker 11>billion dollar program today. We're talking about being at the

0:28:08.560 --> 0:28:11.719
<v Speaker 11>high end of that range in twenty twenty three, getting

0:28:11.960 --> 0:28:14.800
<v Speaker 11>about a billion dollars out this year, with the other

0:28:14.840 --> 0:28:17.280
<v Speaker 11>billion to follow next year. And it's just the first

0:28:17.280 --> 0:28:19.760
<v Speaker 11>step in the process of making sure that we're competitive

0:28:19.760 --> 0:28:21.000
<v Speaker 11>for the next generation.

0:28:20.720 --> 0:28:22.600
<v Speaker 5>Does cost savings mean mean layoffs.

0:28:24.800 --> 0:28:27.840
<v Speaker 11>We're actually not doing any layoffs, Lisa. So we at

0:28:27.880 --> 0:28:30.400
<v Speaker 11>the end of the day, we had a voluntary severance program.

0:28:30.600 --> 0:28:34.160
<v Speaker 11>We had over five thousand of our colleagues opt either

0:28:34.240 --> 0:28:38.120
<v Speaker 11>to retire or to move on, and that alone is

0:28:38.160 --> 0:28:39.800
<v Speaker 11>going to save us about a billion dollars in the

0:28:39.880 --> 0:28:42.040
<v Speaker 11>run rate, and that's something that we think we can

0:28:42.440 --> 0:28:44.880
<v Speaker 11>manage through and hit our goals on our two billion

0:28:44.920 --> 0:28:45.560
<v Speaker 11>dollar program.

0:28:45.800 --> 0:28:49.160
<v Speaker 4>You reported a full year expectations, Paul, that exceeded what

0:28:49.240 --> 0:28:51.880
<v Speaker 4>a lot of people were anticipating. How much does this

0:28:52.000 --> 0:28:55.240
<v Speaker 4>hinge on North America and not on China? How much

0:28:55.560 --> 0:28:58.160
<v Speaker 4>is this completely independent of an international story?

0:28:58.160 --> 0:28:59.480
<v Speaker 5>And very much us focused.

0:29:01.280 --> 0:29:03.880
<v Speaker 11>Well, the bulk of our business is obviously in our

0:29:03.920 --> 0:29:07.280
<v Speaker 11>North America segment, and we had a really strong quarter there.

0:29:07.800 --> 0:29:11.360
<v Speaker 11>Pricing is still up as we see, wholesale prices are

0:29:11.400 --> 0:29:14.200
<v Speaker 11>still lapping the increases we had last year that we

0:29:14.200 --> 0:29:16.720
<v Speaker 11>put through as a result of the higher input costs,

0:29:17.280 --> 0:29:20.479
<v Speaker 11>and demand still remained strong. So our volumes were up

0:29:20.480 --> 0:29:23.920
<v Speaker 11>about four percent, our inventories were flat, and I think

0:29:23.920 --> 0:29:26.520
<v Speaker 11>the team's doing a very good job of managing through that.

0:29:27.920 --> 0:29:30.040
<v Speaker 11>We've planned for the year and We alluded to this

0:29:30.120 --> 0:29:32.120
<v Speaker 11>and our guidance at the beginning of the year that

0:29:32.200 --> 0:29:36.280
<v Speaker 11>we were assuming a fifteen million unit market here in

0:29:36.320 --> 0:29:39.719
<v Speaker 11>the US, and we came in slightly above that. But

0:29:40.080 --> 0:29:42.440
<v Speaker 11>we've got some cushion built in in case we see

0:29:43.000 --> 0:29:46.280
<v Speaker 11>demand start to fall off in our expectations. But when

0:29:46.320 --> 0:29:48.880
<v Speaker 11>you look at our first quarter out performance and the

0:29:48.920 --> 0:29:52.640
<v Speaker 11>confidence of our cost reduction plan, we felt comfortable raising

0:29:52.680 --> 0:29:56.280
<v Speaker 11>the guide. Now, China obviously a very competitive they're still

0:29:56.280 --> 0:29:59.560
<v Speaker 11>coming out of coming out of COVID, and we see

0:29:59.600 --> 0:30:02.760
<v Speaker 11>demand covering, but it's also an incredibly competitive market. The

0:30:02.800 --> 0:30:05.320
<v Speaker 11>team there has done a great job. We were able

0:30:05.320 --> 0:30:08.720
<v Speaker 11>to maintain profitability in Q one, but we think second

0:30:08.800 --> 0:30:10.360
<v Speaker 11>quarter is going to be a little bit challenging and

0:30:10.400 --> 0:30:12.640
<v Speaker 11>then we start to see some improvement in the back half.

0:30:12.480 --> 0:30:12.880
<v Speaker 3>Of the year.

0:30:13.080 --> 0:30:15.520
<v Speaker 4>Given how exposed you are to the US market, Paul,

0:30:15.520 --> 0:30:17.640
<v Speaker 4>what is your concern level in terms of tightening credit.

0:30:17.640 --> 0:30:21.040
<v Speaker 4>We talk all about smaller banks and restricting credit on

0:30:21.120 --> 0:30:24.320
<v Speaker 4>the margins, in particular when it comes to auto lending.

0:30:24.360 --> 0:30:26.720
<v Speaker 5>Are you seeing that already? How aware are you of that?

0:30:28.760 --> 0:30:32.200
<v Speaker 11>We haven't seen that affecting our consumers and our customers,

0:30:32.800 --> 0:30:36.560
<v Speaker 11>and you know We obviously have a captive financing arm

0:30:36.560 --> 0:30:39.840
<v Speaker 11>through GM Financial. Their credit statistics we look at them

0:30:40.480 --> 0:30:44.080
<v Speaker 11>every week and they're still they're still quite strong. We've

0:30:44.120 --> 0:30:47.200
<v Speaker 11>seen a little bit of normalization but really back to

0:30:47.280 --> 0:30:49.720
<v Speaker 11>kind of pre COVID levels, but nothing that we've seen

0:30:50.320 --> 0:30:52.560
<v Speaker 11>that gives us any area of concern right now for

0:30:52.600 --> 0:30:53.280
<v Speaker 11>our consumers.

0:30:53.520 --> 0:30:57.440
<v Speaker 1>Paul, You've got a familiarity with Auburn, Alabama, and I

0:30:57.480 --> 0:31:01.360
<v Speaker 1>see in Auburn there's sixty two public charging stations, but

0:31:01.480 --> 0:31:07.320
<v Speaker 1>only six are free EV charging stations. Does General Motors

0:31:07.360 --> 0:31:10.800
<v Speaker 1>have to provide leadership and set up a grid of

0:31:10.840 --> 0:31:14.080
<v Speaker 1>electric charging stations across America?

0:31:16.320 --> 0:31:18.480
<v Speaker 11>So this is an area that we we got out

0:31:18.480 --> 0:31:20.680
<v Speaker 11>to an early start on TOM as we started to

0:31:20.680 --> 0:31:23.040
<v Speaker 11>build out that network, and we think it's an important

0:31:23.640 --> 0:31:27.440
<v Speaker 11>piece for EV adoption across the country for sure. But

0:31:27.480 --> 0:31:30.360
<v Speaker 11>we committed about seven hundred and fifty dollars to a

0:31:30.440 --> 0:31:33.840
<v Speaker 11>multi pronged charging strategy. The leading piece of it was

0:31:34.200 --> 0:31:37.720
<v Speaker 11>a partnership with Pilot Flying JA to help increase the

0:31:38.040 --> 0:31:41.760
<v Speaker 11>interstate system for road trip charging across the board. But

0:31:41.800 --> 0:31:45.040
<v Speaker 11>we also partner with our dealers in local communities to

0:31:45.120 --> 0:31:48.440
<v Speaker 11>locate chargers for those families that may not have one

0:31:48.480 --> 0:31:51.640
<v Speaker 11>in their home, and really we feel like we need

0:31:51.640 --> 0:31:55.239
<v Speaker 11>to provide solutions for everyone across the board. But you know,

0:31:55.400 --> 0:31:59.120
<v Speaker 11>paid charging is actually something that's I've found as far

0:31:59.160 --> 0:32:02.640
<v Speaker 11>more economical than even filling up your car with gas.

0:32:02.640 --> 0:32:04.960
<v Speaker 11>So it's something that ultimately we're committed to.

0:32:05.160 --> 0:32:07.240
<v Speaker 1>What are you to do in the dividend, I'm absolutely fair,

0:32:07.880 --> 0:32:10.000
<v Speaker 1>I've been talking about use of cash right now. I

0:32:10.000 --> 0:32:12.480
<v Speaker 1>got a gross yield to one percent. I'm not even

0:32:12.520 --> 0:32:15.520
<v Speaker 1>sure what dividend growth is. Describe the five year dividend

0:32:15.520 --> 0:32:17.480
<v Speaker 1>growth forward for General Motors.

0:32:19.280 --> 0:32:21.880
<v Speaker 11>So we look at our dividend as an important part

0:32:21.880 --> 0:32:26.120
<v Speaker 11>of our capital allocation priorities. You know, the first one

0:32:26.160 --> 0:32:28.400
<v Speaker 11>is obviously investing in the business. We have a lot

0:32:28.400 --> 0:32:34.040
<v Speaker 11>of capital that we are investing for the transformation, eleven

0:32:34.080 --> 0:32:38.400
<v Speaker 11>to thirteen billion dollars this year alone. But we're still

0:32:38.440 --> 0:32:41.280
<v Speaker 11>generating really sizeable amounts of free cash, and that's a

0:32:41.440 --> 0:32:43.760
<v Speaker 11>testament to both the team as well as the demand

0:32:43.800 --> 0:32:46.800
<v Speaker 11>for our products across the board. This past quarter, we

0:32:46.920 --> 0:32:49.640
<v Speaker 11>repurchased about three hundred and sixty five million dollars of

0:32:49.720 --> 0:32:53.920
<v Speaker 11>stock while also early retiring one point five billion dollars

0:32:53.920 --> 0:32:56.600
<v Speaker 11>of debt, so taking care of the balance sheet, being

0:32:56.880 --> 0:32:59.560
<v Speaker 11>prudent with our capital across the board and a dividend

0:32:59.640 --> 0:33:03.000
<v Speaker 11>is a part of that. But we also are actively

0:33:03.080 --> 0:33:06.480
<v Speaker 11>using share repurchases as a tool to return capital to shareholders.

0:33:06.640 --> 0:33:08.840
<v Speaker 6>Have you noticed how much more comfortable CFOs not to

0:33:09.000 --> 0:33:09.960
<v Speaker 6>when they beaten Rice?

0:33:10.360 --> 0:33:16.000
<v Speaker 12>Have you noticed that it is his voice change? Okay, yeah,

0:33:16.040 --> 0:33:21.040
<v Speaker 12>it's common, Jacobson. Thank you, say for sure, General Mode CFO.

0:33:21.480 --> 0:33:25.320
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0:33:25.480 --> 0:33:29.680
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