WEBVTT - CPI, Cruises, Industrials, ETFs, and Cannabis 0:00:00.760 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.560 with essential market moving news on the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.239 at Bloomberg dot com Slash podcast. Let's get back to 0:00:22.360 --> 0:00:27.000 the inflation print we had today. It's high, but it's 0:00:27.000 --> 0:00:28.920 coming down, but maybe not coming down as fast as 0:00:28.960 --> 0:00:31.880 people would like. Alice Andrews joins us. She's US Interest 0:00:31.960 --> 0:00:36.320 Rates and FX reporter with Bloomberg News. Alice, what was 0:00:36.360 --> 0:00:40.560 your takeaway from the print we had today on CPI. Yeah, 0:00:40.640 --> 0:00:43.080 I really thought that the market reaction, especially on the 0:00:43.120 --> 0:00:46.199 treasury side, was just really wrong footed this morning. I 0:00:46.280 --> 0:00:48.920 was very uncomfortable with the bull flattening that we saw 0:00:49.080 --> 0:00:52.800 after the CPI number. I think that the market really 0:00:52.840 --> 0:00:56.000 focused on that lower headline number and that drop in 0:00:56.080 --> 0:00:59.360 year over year and inflation. But I think that the 0:01:00.000 --> 0:01:02.200 thing that the market was really missing was that big 0:01:02.280 --> 0:01:05.640 shelter component. And I really think that the whole thing 0:01:05.720 --> 0:01:07.840 was about shelter. I mean, I think that either way 0:01:07.880 --> 0:01:11.080 you slice or dice it, if you take shelter out 0:01:11.120 --> 0:01:13.640 of your analysis or put it back in. I think 0:01:13.680 --> 0:01:17.600 that inflation is still rising. So for example, if I mean, 0:01:18.240 --> 0:01:20.440 if you look at it, inflation is coming down whether 0:01:20.480 --> 0:01:24.440 you're looking at the headline, core or supercore. But the 0:01:24.480 --> 0:01:26.520 fact of the matter is is that the FED really 0:01:26.560 --> 0:01:31.560 targets the super core that excludes the shelter component of CPI. 0:01:31.680 --> 0:01:33.600 And if you take a look at it, it's running 0:01:33.600 --> 0:01:36.480 at five point seven percent year over year, and that 0:01:36.640 --> 0:01:41.080 surpasses core CPI at five point six percent, And to me, 0:01:41.400 --> 0:01:44.080 that's just an indicator that inflation is going to stay 0:01:44.080 --> 0:01:48.240 pretty sticky. Yeah, And I mean, so the core was 0:01:48.320 --> 0:01:51.240 higher than the headline, and you're saying the supercore is 0:01:51.280 --> 0:01:54.000 even higher than the core. That's right. And we're hearing 0:01:54.080 --> 0:01:58.200 more and more people Alice voice concerns about the stickiness 0:01:58.280 --> 0:02:00.840 of inflation at these levels black Rock. I heard Wailey 0:02:00.880 --> 0:02:03.320 this morning on Bloomberg Radio talking about that. But the 0:02:03.440 --> 0:02:06.240 ECB is also concerned about the stickiness. The Bank of 0:02:06.240 --> 0:02:10.320 England is also concerned about the stickiness. So is inflation 0:02:10.360 --> 0:02:15.839 at these levels, you know, five percent here to stay? Oh? 0:02:15.880 --> 0:02:19.960 I think it could stay there. Easily, if not go higher. 0:02:20.000 --> 0:02:22.840 I mean the indicators that things that I really like 0:02:22.919 --> 0:02:26.359 to look at is something like housing and cars. So 0:02:26.440 --> 0:02:29.720 what I'm seeing in the housing market is that you know, 0:02:29.720 --> 0:02:31.720 we have a spring market, right, so that's supposed to 0:02:31.760 --> 0:02:35.760 bring a lot of supply, but it's not. And the 0:02:35.760 --> 0:02:38.959 fact of the matter is low supply people still out 0:02:38.960 --> 0:02:42.760 there wanting to buy houses. It just artificially keeps housing 0:02:42.800 --> 0:02:45.520 prices strong because there's still so much competition to get 0:02:45.560 --> 0:02:47.960 the few houses that are coming on the market. The 0:02:48.040 --> 0:02:52.360 other thing is that rents, because housing market is staying high, 0:02:52.400 --> 0:02:54.160 I think that rents are going to stay high. And 0:02:54.200 --> 0:02:57.359 that's the big, you know, component that wants to take 0:02:57.400 --> 0:03:00.320 out or put back in of their of their analysis 0:03:00.440 --> 0:03:03.560 of inflation. And I think, again, anyway you slice it 0:03:03.639 --> 0:03:07.040 or dice it, with or without shelter, inflation is staying high. 0:03:07.120 --> 0:03:10.239 The other thing that I've been looking at is transportation, 0:03:10.280 --> 0:03:16.520 and actually this month, transportation contributed positively to CPI. And 0:03:16.639 --> 0:03:19.560 the thing is is that autos I think are going 0:03:19.600 --> 0:03:23.720 to actually stay high as well. I've noticed that I've 0:03:23.720 --> 0:03:27.800 noticed a big bag I've noticed resilience in used car 0:03:27.840 --> 0:03:31.320 prices and carback said that yesterday. Yeah, and you haven't 0:03:31.360 --> 0:03:36.520 seen you know, Tesla's price cuts. Notwithstanding you haven't seen 0:03:37.640 --> 0:03:42.080 new car prices come down at all, they continue to rise. 0:03:42.720 --> 0:03:46.080 So that's that's gonna be a problem as well. And 0:03:46.240 --> 0:03:49.360 what is really happening is that incentives are picking up. 0:03:49.480 --> 0:03:51.400 I don't know if you're noticing this, but you know, 0:03:51.440 --> 0:03:54.200 watching TV. I actually saw an ad last night on 0:03:54.240 --> 0:03:56.120 TV and I thought, oh, yeah, no, I haven't seen 0:03:56.160 --> 0:03:58.560 that in a while. But in doing a little bit analysis, 0:03:58.920 --> 0:04:02.960 incentives have and about five percent, we're starting to see 0:04:03.080 --> 0:04:07.480 zero percent financing, three percent financing, and huge double digit 0:04:07.560 --> 0:04:10.720 cash back, double digit cash back. Think about that. Those 0:04:10.760 --> 0:04:13.240 are on like more expensive cars, but still that's just 0:04:13.400 --> 0:04:16.880 that's a lot. And so I think that because the 0:04:16.880 --> 0:04:21.640 consumer is so savvy, right prices start to come down, 0:04:22.240 --> 0:04:25.880 people that are working with cash on hand, boom, they're 0:04:25.880 --> 0:04:28.840 going in and buying like you know, kind of pouncing 0:04:28.880 --> 0:04:31.000 like they're doing on housing. It something comes on the 0:04:31.040 --> 0:04:34.160 market on the right block that you like, Boom, you're 0:04:34.200 --> 0:04:39.680 going to buy it. Car prices showing some incentives, cash back, boom, 0:04:39.760 --> 0:04:43.360 consumers are pouncing. They're very you know, price sensitive and savvy. 0:04:43.440 --> 0:04:47.400 So I think that new car prices can stay firm 0:04:47.480 --> 0:04:50.600 with these incentives. But the thing is is that cars 0:04:50.720 --> 0:04:54.320 new cars are still really expensive, so that shifts a 0:04:54.440 --> 0:04:58.000 subsector into the used car market, which I think can 0:04:58.080 --> 0:05:01.520 stay strong. Yep. Absolutely kind of heard that from CarMax yesterday. 0:05:01.560 --> 0:05:05.000 I'm wondering, Alice, why does a FEDS like to strip 0:05:05.000 --> 0:05:10.000 out for this super core data point. Yeah, but doesn't everybody? 0:05:10.320 --> 0:05:12.880 It affects everybody, doesn't it everybody's got to pay rent 0:05:12.960 --> 0:05:16.279 or mortgage. Yeah, but I think that you know, it's 0:05:16.360 --> 0:05:20.440 just an indicator that the FED is targeting. They had 0:05:20.480 --> 0:05:24.600 talked a lot about, you know, housing prices remaining elevated 0:05:24.720 --> 0:05:28.360 and rents remaining elevated, and how they think that rents 0:05:28.360 --> 0:05:30.960 are going to reset lower once these liss come up. 0:05:31.560 --> 0:05:35.880 I just don't really get that logic, because if you're 0:05:36.520 --> 0:05:41.440 a landlord and you know that housing prices are high 0:05:41.520 --> 0:05:44.680 and you missed an opportunity to raise rents in the 0:05:44.800 --> 0:05:48.320 last year, I don't understand why you would think that 0:05:49.040 --> 0:05:51.920 lises are going to reset lower. I don't think that 0:05:51.920 --> 0:05:53.960 that's really going to happen. In terms of the wrong 0:05:53.960 --> 0:05:57.840 footed move in the markets, especially in rates, Alice, we 0:05:58.160 --> 0:06:00.480 saw a drop. I mean, I mean, looking ten year, 0:06:00.520 --> 0:06:02.240 we saw a drop in ten year yields. Now it's 0:06:02.279 --> 0:06:05.320 coming back to unchanged around three forty three forty one. 0:06:07.279 --> 0:06:10.040 How do you see this reaction and what does that 0:06:10.080 --> 0:06:14.239 mean the market expects from the Fed? Well, right after 0:06:14.279 --> 0:06:17.440 the data of the market priced in four percent that's 0:06:17.480 --> 0:06:21.080 funds rate in January. I mean that's a full point 0:06:21.160 --> 0:06:23.080 below where we're at right now. I thought that that 0:06:23.200 --> 0:06:26.120 was just crazy. And I think that you know what 0:06:26.200 --> 0:06:28.320 happens on these big numbers, right you know, you get 0:06:28.360 --> 0:06:32.080 a lot of emotional trading and position trading. And I 0:06:32.120 --> 0:06:34.160 think that what you're seeing right now is a market 0:06:34.160 --> 0:06:36.720 coming back a little bit to life. We're pairing some 0:06:36.839 --> 0:06:40.000 of that steepening that we saw and we're backing off 0:06:40.000 --> 0:06:44.839 of that rally. Rates are rising a little bit. I 0:06:44.960 --> 0:06:46.359 think that this is the right move, And you know, 0:06:46.400 --> 0:06:48.279 do you have to kind of remember sometimes it takes 0:06:48.279 --> 0:06:51.440 a day or two for you know, big numbers to 0:06:51.480 --> 0:06:56.039 get digested by the markets. And also participation isn't exactly 0:06:56.080 --> 0:06:59.360 that high. The other thing I wanted to mention us, 0:07:00.600 --> 0:07:02.520 we're gonna have to we'll get that next time because 0:07:02.520 --> 0:07:05.200 we gotta short on time. We'll get the We're gonna 0:07:05.200 --> 0:07:07.320 get you at Gang. Yeah, we want you back for sure. 0:07:07.320 --> 0:07:09.440 Talking about Rachel, you know, she's a former floor clark 0:07:09.440 --> 0:07:11.640 at bear Stern says she knows all that trading stuff. 0:07:11.680 --> 0:07:16.760 Alice Andre's US interest rate reporter for Bloomberg News. You're 0:07:16.800 --> 0:07:20.920 listening to the team ken'ser Line program Bloomberg Markets weekdays 0:07:20.920 --> 0:07:23.640 at ten amis daring on Bloomberg dot Com, the I 0:07:23.800 --> 0:07:26.640 Heart Radio app, and the Bloomberg Business App. We're listening 0:07:26.680 --> 0:07:31.720 on demand wherever you get your podcast. Story that caught 0:07:31.760 --> 0:07:36.000 my attention yesterday, Carnivals chief financial This is the cruise business. 0:07:36.000 --> 0:07:39.800 Carnivals chief financial officer David Bernstein isn't worried about rising 0:07:39.840 --> 0:07:43.320 interest rates, unlike other finance executives, as the cruise line 0:07:43.320 --> 0:07:45.880 operator looks to pay down debt rather than finance. And 0:07:45.920 --> 0:07:47.360 I was when I was reading that, I was saying, boy, 0:07:47.600 --> 0:07:50.400 their creditors are happy. Credit analysts must be happy that 0:07:50.400 --> 0:07:52.560 they're paying down debt. So I figured, let's check in 0:07:52.560 --> 0:07:55.240 with Jody Lori. She covers. She's a credit analyst for 0:07:55.280 --> 0:07:58.640 Bloomberg Intelligence covers this industry. Jody joins us here via 0:07:58.720 --> 0:08:03.320 zoom on her vacation day. Oh, we really appreciate Jody 0:08:03.400 --> 0:08:05.640 making some time there. Jody talked to us about Carnival 0:08:05.640 --> 0:08:08.360 Cruise Lines. Here. This is a company that's focused. I mean, 0:08:08.400 --> 0:08:10.600 a lot of these cruise operators right at the biding 0:08:10.600 --> 0:08:14.760 again pandemic mandate, rushed into the market, raised cash, sensing 0:08:14.760 --> 0:08:17.000 that this could be really bad for their business, and 0:08:17.040 --> 0:08:19.720 they were. Some of them had to pay like eleven 0:08:20.040 --> 0:08:22.840 twelve zack percent, right, I mean, some of them sold 0:08:22.880 --> 0:08:26.160 debt for way too much interest and the sign of 0:08:26.240 --> 0:08:31.560 the time. So what's Carnival doing now? Sure, so Carnival 0:08:31.640 --> 0:08:34.440 is certainly one of the more interesting companies under our 0:08:34.480 --> 0:08:37.280 coverage these days. I mean, let's let's take a little 0:08:37.320 --> 0:08:39.760 look back, right, So, the company added about twenty four 0:08:39.760 --> 0:08:42.800 billion or more to its balance sheet during the pandemic. 0:08:43.280 --> 0:08:45.360 It's about twenty four billion above where it was at 0:08:45.360 --> 0:08:48.080 the end of twenty nineteen. So you're talking about thirty 0:08:48.080 --> 0:08:51.160 five billion dollars sitting on the balance sheet that they 0:08:51.160 --> 0:08:53.920 have to deal with. Management is targeting it's going to 0:08:54.000 --> 0:08:55.719 get down to about thirty three thirty three and a 0:08:55.760 --> 0:08:57.959 half by the end of the year, which is music 0:08:58.000 --> 0:09:00.640 to our years, of course, But how they're going to do. 0:09:00.679 --> 0:09:03.720 That is always key. They're just getting to the precipice 0:09:03.800 --> 0:09:08.120 of generating free cash flow, and with that, obviously they're 0:09:08.120 --> 0:09:10.560 going to put it towards paying down debt. But I 0:09:10.559 --> 0:09:12.679 think there's a lot of finessing that needs to go on, 0:09:12.720 --> 0:09:15.560 and there's a lot that's dependent on the ability for 0:09:15.600 --> 0:09:19.120 them to get customers on their ships. I look at 0:09:19.160 --> 0:09:21.840 by the way DDIS, Paul, Okay, if you if you 0:09:21.880 --> 0:09:24.120 put in Carnival Cruise Lines, which I think is CCL 0:09:24.200 --> 0:09:26.600 equity and look at DDIS, you can see the debt 0:09:26.640 --> 0:09:28.840 distribution when these things are coming due, and you can 0:09:28.880 --> 0:09:33.320 see the average coupon is seven percent. So is that 0:09:33.480 --> 0:09:38.240 high with a weighted average of five years? How does 0:09:38.320 --> 0:09:42.400 their debt profile look to you? It's definitely a horse 0:09:42.400 --> 0:09:44.640 of a different color or a ship of a different 0:09:44.640 --> 0:09:46.840 color these days than it was at the beginning of 0:09:46.840 --> 0:09:50.760 the pandemic. They were investment grade rated previously, and so 0:09:50.800 --> 0:09:54.080 they commanded very good rates at that point. Now you 0:09:54.080 --> 0:09:56.400 think about this company a year ago, they tapped the 0:09:56.440 --> 0:09:58.319 debt markets and they actually got a lot of plaque 0:09:58.440 --> 0:10:04.079 or issuing double di issues, right, So similar coupon to 0:10:04.160 --> 0:10:07.360 what they issued in June of twenty twenty, during the 0:10:07.400 --> 0:10:10.839 depths of the pandemic. And so I think management is 0:10:10.880 --> 0:10:14.560 being very cautious about how and when they tapped the 0:10:14.559 --> 0:10:18.760 debt markets and why because even this past fall when 0:10:18.800 --> 0:10:21.560 they did issue debt, they issued about two billion dollars. 0:10:21.840 --> 0:10:23.920 They've got a little creative in how they did it. 0:10:23.960 --> 0:10:26.480 They created a new subsidiary where they put some of 0:10:26.480 --> 0:10:28.800 their vessels, and they made it a little bit more 0:10:28.840 --> 0:10:32.720 attractive to keep rates lower. That complicated their balance sheet. 0:10:32.760 --> 0:10:35.839 So if you're an average bond holder, you don't really 0:10:35.920 --> 0:10:39.760 understand which vessels are backing your bonds. You know, you're 0:10:39.760 --> 0:10:44.719 an insecured holder, so you're really just general company ability 0:10:44.760 --> 0:10:49.359 to pay. But the complicating factor of it is, Okay, 0:10:49.520 --> 0:10:52.520 in a theoretical bankruptcy, where would I be in line 0:10:52.960 --> 0:10:56.000 to receive any sort of money. Yeah, especially if it's 0:10:56.040 --> 0:10:59.920 in Panama. Yeah, I see, like twenty billion of their 0:11:00.080 --> 0:11:02.880 dead is at a Panama. Yeah, the Hamas and Caymans 0:11:02.880 --> 0:11:07.160 are usually generally the place that they go to for 0:11:07.200 --> 0:11:11.800 the issuing subsidiaries. But yeah, I mean, if you're saying, okay, 0:11:12.120 --> 0:11:14.760 I have these bonds, and even even if it's not 0:11:14.880 --> 0:11:16.679 you know, bankruptcy. If you're a high yield company, you 0:11:16.720 --> 0:11:18.800 always have to think about liquidation, right if you're a 0:11:18.840 --> 0:11:21.200 credit autai as you say, okay, what would this be 0:11:21.320 --> 0:11:24.960 in a theoretical liquidation standpoint, because it's high yield, and 0:11:25.040 --> 0:11:29.200 so that will dictate how the bonds trade. Now that said, 0:11:29.640 --> 0:11:32.200 you have higher risk, higher rewards. So there are some 0:11:32.360 --> 0:11:35.040 investors who say, oh, then it's worthwhile to sort of 0:11:35.120 --> 0:11:37.280 nibble at those There's other investors who say, you know what, 0:11:37.600 --> 0:11:41.200 there's still a lot of factors at play that could 0:11:41.240 --> 0:11:45.080 dictate how these bonds behave and and the you know, 0:11:45.120 --> 0:11:47.520 the forecast of this company. I think there's still very 0:11:47.600 --> 0:11:49.640 much in a turnaround phase, and I think there's still 0:11:49.640 --> 0:11:52.160 a little bit on the earlier side, although we're starting 0:11:52.160 --> 0:11:54.959 to get to the point that we're seeing the light 0:11:55.000 --> 0:11:57.360 at the end of the tunnel. So Jody, just give 0:11:57.440 --> 0:11:59.600 us a sensure. I'm just looking at the stocks of 0:12:00.320 --> 0:12:02.840 Carnival and it's peers and they're all down between twenty 0:12:02.880 --> 0:12:05.199 and forty percent, So the market's really skittish there. I'm 0:12:05.200 --> 0:12:09.239 sort of there's similar concerns in the credit markets as well. 0:12:09.280 --> 0:12:11.720 I kind of thought once this pandemic you know, they 0:12:11.760 --> 0:12:14.120 started lifting on the mass mandates and all that stuff, 0:12:14.480 --> 0:12:17.640 that this industry would just explode with demand and occupancies 0:12:17.679 --> 0:12:21.439 would be like sky high for years in pent up demand. 0:12:21.520 --> 0:12:25.839 That really hasn't happened, or has it. It's starting to happen. 0:12:25.920 --> 0:12:29.559 We actually wrote a note that specifically spoke to occupancy 0:12:29.640 --> 0:12:33.480 rates as well as to cash flow. So one thing 0:12:33.559 --> 0:12:36.080 that they have is advanced bookings, which is basically the 0:12:36.120 --> 0:12:39.000 cash they take in when people book their cruises. They 0:12:39.000 --> 0:12:41.360 can't book that as revenue until the person actually goes 0:12:41.400 --> 0:12:43.760 on a cruise, but they can take it in as cash, 0:12:43.800 --> 0:12:46.600 so that actually helps their business. It's an alternative form 0:12:46.600 --> 0:12:51.120 of cash compared to say raising debt. The piece when 0:12:51.160 --> 0:12:54.120 you think about it from an occupancy standpoint that's difficult 0:12:54.160 --> 0:12:56.320 for these companies is the cruise lines were unique and 0:12:56.320 --> 0:12:59.160 that they got a moratorium, meaning they were unable to 0:12:59.200 --> 0:13:01.920 actually cruise. They were unable to operate. You compare that 0:13:01.960 --> 0:13:03.520 to the theme parks, which I know you and I 0:13:03.520 --> 0:13:06.680 have talked about it before. Um and and the theme 0:13:06.720 --> 0:13:09.200 parks they were able to sort of get creative and 0:13:09.360 --> 0:13:12.560 how they operated. So you take someone like Cedar Fair, 0:13:12.679 --> 0:13:15.360 they were able to have a wine and cheese festival 0:13:15.600 --> 0:13:19.400 at Nottsbury Farm, you know, and and and six Flags. 0:13:19.400 --> 0:13:22.120 We actually my family actually went to Great Adventure and 0:13:22.120 --> 0:13:25.199 did the Safari tour in our own car. And you 0:13:25.240 --> 0:13:26.560 don't have to get out of the car, nor do 0:13:26.600 --> 0:13:28.120 you want to get out of the car, you know, Okay, 0:13:28.240 --> 0:13:30.680 And it is a little fun to have drafts like it, Yeah, 0:13:30.840 --> 0:13:36.200 absolutely out of draft actually in the yes, the baboons 0:13:36.320 --> 0:13:37.960 used to do that. I think they've been a little 0:13:38.000 --> 0:13:41.200 bit better about how they let you interact with them. 0:13:41.480 --> 0:13:43.680 But I was there one time as a kid where 0:13:43.679 --> 0:13:48.680 they did rip off our antenna from the Now I 0:13:48.760 --> 0:13:52.520 have something on my list that this weekend that sounds awesome. 0:13:52.840 --> 0:13:54.959 Yeah so, but but your point is that the very 0:13:54.960 --> 0:13:57.920 good time. Your point is that the cruise lines were 0:13:58.080 --> 0:14:03.959 sincerely disadvantaged these every other industries, right exactly. So getting 0:14:03.960 --> 0:14:05.840 back to the cruise lines, you compare that to the 0:14:05.840 --> 0:14:08.880 theme parks, and the cruise lines were literally unable to cruise. 0:14:09.080 --> 0:14:12.280 They had these massive vessels that were either sitting dormant 0:14:12.400 --> 0:14:14.400 or they had to staff it up so that they 0:14:14.400 --> 0:14:16.400 had a minimal amount of staff to just keep the 0:14:16.960 --> 0:14:20.760 basically keep the ships from getting stale. They also postponed 0:14:20.840 --> 0:14:23.640 some of their capex right, so that just the maintenance 0:14:23.680 --> 0:14:26.200 caffex that's required, and it just takes a lot of 0:14:26.240 --> 0:14:29.320 time to ramp up from zero. So even though these 0:14:29.360 --> 0:14:32.400 companies are seeing tremendous demand, I mean I'm hearing anecdotally 0:14:32.440 --> 0:14:34.600 because people hear that I you know, I'm a cruise analysts, 0:14:34.600 --> 0:14:37.280 they'd go, oh, actually, I just went on my first cruise. 0:14:37.840 --> 0:14:40.840 And you're definitely hearing that more and more, which is 0:14:40.920 --> 0:14:43.800 music to the cruise company's ears, because the challenge that 0:14:43.840 --> 0:14:47.560 they're dealing with isn't so much the diehard cruiser fans 0:14:47.600 --> 0:14:52.880 like my parents, but the people who have never stepped 0:14:52.880 --> 0:14:54.880 foot on a cruise ship before, the people who are 0:14:54.960 --> 0:14:59.840 skittish around cruises or it's just not within their generational appeal. 0:15:00.280 --> 0:15:02.880 And so that's where the cruise companies are trying to 0:15:02.960 --> 0:15:05.120 jump over. The hurdle is saying, Okay, let's get these 0:15:05.160 --> 0:15:07.480 new to cruise people on the ships and then grow 0:15:07.720 --> 0:15:11.880 our our pool of potential customers. Then they'll they'll see benefits. 0:15:12.160 --> 0:15:14.240 They'll see it as beneficial. That's it. I mean, there 0:15:15.320 --> 0:15:17.440 is only so much they can cruise. There's only so 0:15:17.440 --> 0:15:19.600 many days in the year. There's only so many rooms 0:15:19.600 --> 0:15:21.880 in a ship, and it takes a lot of time 0:15:22.000 --> 0:15:25.440 to get them from zero to one hundred percent operational. 0:15:25.720 --> 0:15:29.400 Are they these companies still investing in ships. I mean, 0:15:29.400 --> 0:15:32.040 that's to me is the sign of optimus. If you're 0:15:32.080 --> 0:15:35.280 bullish on you know, your future, five to ten years, 0:15:35.320 --> 0:15:37.520 you'll build a billion dollars ship or whatever they cost. 0:15:37.520 --> 0:15:41.920 These days. Yes, I mean the companies are still very 0:15:41.960 --> 0:15:44.840 much investing in ships. Carnival has a little bit of 0:15:44.840 --> 0:15:46.920 a gap in terms of when they're planning to take 0:15:47.360 --> 0:15:49.280 delivery of ships, which I think they're a little bit 0:15:49.280 --> 0:15:53.600 relieved by. It's less so indicative of what they've been 0:15:53.640 --> 0:15:57.760 planning more so of the hold up in the shipbuilders side. 0:15:57.920 --> 0:16:02.480 So obviously the shipbuilders, just like every other industry, dealt 0:16:02.520 --> 0:16:05.480 with the pandemic where they had shutdowns, they were unable 0:16:05.520 --> 0:16:08.400 to get parts. You know, everything you're hearing about the autos, 0:16:08.440 --> 0:16:10.680 similar sort of things we're going on with the shipbuilding. 0:16:11.000 --> 0:16:13.320 So a lot of the cruise ships had ships that 0:16:13.360 --> 0:16:16.360 were scheduled to be delivered that they got postponed, which 0:16:16.440 --> 0:16:19.640 was actually fortuitous for the cruise ships because it gave 0:16:19.680 --> 0:16:21.960 them a little bit more time to deal with the 0:16:22.000 --> 0:16:23.840 fact that they had all these ships that were just 0:16:24.000 --> 0:16:26.800 not being operating. Yep, all right, Jody, thank you so 0:16:26.880 --> 0:16:29.120 much for joining us. Really appreciate getting your thoughts here 0:16:29.160 --> 0:16:32.400 on Carnival and on the cruise industry as it ramps 0:16:32.480 --> 0:16:35.160 back up a post pandemic. Jody Lorie, she's a credit 0:16:35.160 --> 0:16:38.800 analyst for Bloomberg Intelligence. She's on her day off, but 0:16:38.880 --> 0:16:41.160 she took time out to give us the update on 0:16:41.200 --> 0:16:44.120 the cruise business. We appreciate that. Two gold stars for Jody. 0:16:44.440 --> 0:16:46.960 You're listening to the tape. Ken's a our live program 0:16:47.000 --> 0:16:50.960 Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, 0:16:51.080 --> 0:16:54.440 the tuning app, Bloomberg dot Com, and the Bloomberg Business App. 0:16:54.560 --> 0:16:57.320 You can also listen live on Amazon Alexa from our 0:16:57.360 --> 0:17:02.440 flagship New York station, Jo Say Alexa playing Bloomberg eleven thirty. 0:17:03.520 --> 0:17:06.160 I want to bring the all star to the microphone 0:17:06.200 --> 0:17:09.639 over here. Karen Uberhart, she's in Bloomberg Intelligence. She covers 0:17:09.640 --> 0:17:13.000 the industrial space. I mean talk about these are real companies. 0:17:13.000 --> 0:17:17.680 Met These are like dear Caterpillar, Emerson Electric. I mean, 0:17:18.000 --> 0:17:23.440 you're going hardcore industrial America. This is General Electric. Back 0:17:23.480 --> 0:17:25.360 in the day. I guess you could say, I mean 0:17:25.359 --> 0:17:28.640 back in the day, General Electric is still bigger than Emerson, right, 0:17:28.680 --> 0:17:32.040 I mean big. Emerson's just a forty seven billion dollar company. 0:17:32.080 --> 0:17:34.680 It will put up a I'm sure ge right now 0:17:35.560 --> 0:17:39.280 one hundred and two billion, so it's still bigger. It's 0:17:39.280 --> 0:17:41.960 not the world's biggest maker of earth moving equipment. No, 0:17:42.080 --> 0:17:44.359 this is they have all right. Karen Buberhart, Senior Industrial 0:17:44.400 --> 0:17:46.520 Annals Bloomberg Intelligen just joins us here in our Bloomberg 0:17:46.560 --> 0:17:49.520 Interactive Brokers studio because Emerson Electrics out there with a 0:17:49.640 --> 0:17:52.520 deal to buy National Instruments. Karen, thanks so much for 0:17:52.560 --> 0:17:56.520 joining us here in studio. What is Emerson Electric buying? 0:17:56.560 --> 0:17:59.840 What is National Instruments? It's one of the larger test 0:18:00.040 --> 0:18:02.399 and measurement companies, you know, like when you're in the 0:18:02.480 --> 0:18:05.440 R and D lab and you know, developing product etc. 0:18:06.040 --> 0:18:08.680 That is a platform that Emerson wants to develop. It's 0:18:08.680 --> 0:18:12.640 a higher growth platform. It fits with their automation focus 0:18:12.760 --> 0:18:15.359 now and they'd been looking. They did say they'd have 0:18:15.440 --> 0:18:18.560 to do a meaningful deal to get a footprint rather 0:18:18.600 --> 0:18:22.000 than their own, and they did it rather quickly. So 0:18:22.040 --> 0:18:24.320 what does Emerson's core business I mean, what do I 0:18:24.359 --> 0:18:29.040 go to Emerson for factory automation process, you know, plant 0:18:29.080 --> 0:18:32.960 automation like chemical plants, etc. Software They're getting involved. They 0:18:33.000 --> 0:18:35.600 took one of the biggest bets on software with buying 0:18:36.080 --> 0:18:39.280 Aspen Technologies to get them into industrial software. This is 0:18:39.280 --> 0:18:41.320 a new CEO about two and a half years. He's 0:18:41.320 --> 0:18:44.760 really trying to make the make the company into less cyclical, 0:18:44.920 --> 0:18:47.720 higher growth. Lots of companies are doing, but he's moving quickly. 0:18:47.880 --> 0:18:50.240 I saw Fordive was the biggest gainer in the S 0:18:50.320 --> 0:18:55.359 ANDP for not buying. And sometimes you know, you just 0:18:55.400 --> 0:18:57.880 feel good when you don't spend a ton of money. Well, 0:18:58.080 --> 0:18:59.960 you thought you were going to get I get the 0:19:00.040 --> 0:19:02.119 That's a shareholder reaction, but does it lead them in 0:19:02.119 --> 0:19:04.800 a disadvantaged position for not getting it? That was a 0:19:04.840 --> 0:19:08.200 financial stretch for Fortive. You know, it is a twenty 0:19:08.200 --> 0:19:10.600 three billion dollar company. They would have had to issue 0:19:10.640 --> 0:19:13.639 stock or some nearer stock to get it done. Leverage 0:19:13.640 --> 0:19:15.560 would have been very high. People were nervous about that. 0:19:16.200 --> 0:19:18.879 It did lead Emerson to pay sixty bucks, which is 0:19:18.920 --> 0:19:21.359 more than you know, some of us would have liked. 0:19:21.640 --> 0:19:25.119 The numbers still can work, but you know it was 0:19:25.200 --> 0:19:27.960 higher than So it's interesting here. So Emerson Electric paying 0:19:28.400 --> 0:19:31.399 eight point two billion dollars sixty dollars to share. The 0:19:31.440 --> 0:19:35.400 stock was at like fifty three before trading today, so 0:19:35.600 --> 0:19:38.920 a premium. Emerson's people know this. People must have known 0:19:38.920 --> 0:19:41.280 this is going on. Well, you know, it's funny. The 0:19:41.320 --> 0:19:43.719 CEO drew a line in the sand and said, if 0:19:43.760 --> 0:19:47.600 it's a sixty dollars bid, it's not ours. And so 0:19:47.720 --> 0:19:51.600 I was in the possive writing, this is a competitive bid. 0:19:51.760 --> 0:19:55.080 Maybe it's gonna be sixty bucks. And it is sixty bucks. 0:19:55.200 --> 0:19:58.639 You can still make the numbers work. The synergies are 0:19:58.680 --> 0:20:00.680 talking about one hundred and sixty f million and five 0:20:00.760 --> 0:20:02.280 years out. That's a stretch to get it all the 0:20:02.280 --> 0:20:04.920 way five years. But Emerson is a very good operating company. 0:20:04.960 --> 0:20:06.880 They're going to do better than the numbers they say 0:20:06.920 --> 0:20:09.119 on synergies and it is a creed of even at 0:20:09.119 --> 0:20:11.439 sixty bucks. I'm just saying for NATTY shareholders, right the 0:20:11.480 --> 0:20:16.320 ticker for National Instruments NATI, those shares were trading at 0:20:16.400 --> 0:20:19.920 thirty five, thirty six thirty seven dollars at the end 0:20:19.960 --> 0:20:22.640 of twenty two, beginning of twenty three, and then I'm 0:20:22.640 --> 0:20:25.720 guessing just by looking at the chart that shareholders became 0:20:25.760 --> 0:20:29.200 aware that they had something others wanted to buy, because 0:20:29.240 --> 0:20:34.920 the stock just shoots up in the beginning of January 0:20:35.040 --> 0:20:38.400 twenty three. Well, that's when they announced a hostile bid. 0:20:38.480 --> 0:20:40.520 They couldn't Emerson was trying to get a deal done. 0:20:40.560 --> 0:20:42.320 They went into forty eight, they couldn't get it done. 0:20:42.320 --> 0:20:44.200 They went into fifty three, they couldn't get it done. 0:20:44.400 --> 0:20:46.520 There was a lot of communication going back and forth. 0:20:46.840 --> 0:20:49.560 So Emerson broke the news, we're trying to buy this thing, 0:20:49.640 --> 0:20:52.920 and they published all the letters and communications to get 0:20:52.960 --> 0:20:55.959 them off. You get them moving, right. So then they 0:20:55.960 --> 0:20:59.560 went into a strategic planning situation and got other bidders 0:21:00.000 --> 0:21:01.840 and this is where it fell out and Emerson had 0:21:01.880 --> 0:21:05.640 to fight to sixty to get it from Fordive is 0:21:05.920 --> 0:21:08.720 or how is Emerson paying for this cash? They're selling 0:21:08.760 --> 0:21:11.879 their climate business, and that is part of that's probably 0:21:11.920 --> 0:21:14.320 what they want. They're going to have nine point nine 0:21:14.359 --> 0:21:17.919 point five billion dollars in cash from selling their refrigeration 0:21:18.119 --> 0:21:21.760 and climate you know, air conditioning components. That gets them 0:21:21.800 --> 0:21:25.600 out of a residential oriented cyclical business, gives them money 0:21:25.640 --> 0:21:28.600