1 00:00:02,720 --> 00:00:10,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,640 --> 00:00:18,560 Speaker 1: Eastern on Applecarclay, and Android Auto with the Bloomberg Business App. 4 00:00:18,640 --> 00:00:21,920 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:21,960 --> 00:00:23,120 Speaker 1: us live on YouTube. 6 00:00:23,840 --> 00:00:26,640 Speaker 2: All right, we've been touting his presence all week. 7 00:00:26,800 --> 00:00:30,200 Speaker 3: Ed Ludlow, Bloomberg Tech co host, is here in New 8 00:00:30,280 --> 00:00:32,239 Speaker 3: York for the week. He's about to take off, but 9 00:00:32,479 --> 00:00:34,760 Speaker 3: he did agree to speak with us before he does 10 00:00:34,800 --> 00:00:39,920 Speaker 3: so to talk about the stampede into data centers. Black 11 00:00:40,000 --> 00:00:43,880 Speaker 3: Rocks Global Infrastructure Partners the latest to move in that direction. 12 00:00:44,479 --> 00:00:47,159 Speaker 4: This is a really important piece of reporting because it 13 00:00:47,159 --> 00:00:50,200 Speaker 4: will help a lot of investors and readers understand all 14 00:00:50,200 --> 00:00:53,000 Speaker 4: the other stuff that's going into this movement outside of 15 00:00:53,080 --> 00:00:57,400 Speaker 4: just the chips and the compute. Black Rocks GP Partners, Geek, 16 00:00:57,400 --> 00:01:01,480 Speaker 4: glow winstorpus big player. So what we're reporting, citing sources, 17 00:01:01,560 --> 00:01:04,680 Speaker 4: is that they would acquire Aligned, which is basically a 18 00:01:04,680 --> 00:01:08,440 Speaker 4: company that builds data centers the actual buildings, you know, 19 00:01:08,720 --> 00:01:12,440 Speaker 4: the metal, the concrete, the sand, the water, the cooling, 20 00:01:13,160 --> 00:01:16,200 Speaker 4: and then decides on their locations and manages basically a 21 00:01:16,240 --> 00:01:20,760 Speaker 4: portfolio of them. What's interesting is you see a familiar name, MGX, 22 00:01:20,800 --> 00:01:24,120 Speaker 4: the investment vehicle backed by the UAE. 23 00:01:23,880 --> 00:01:25,279 Speaker 5: And its other sovereign wealth funds. 24 00:01:25,720 --> 00:01:29,840 Speaker 4: So the idea here is that Black Rocks GIP acquires 25 00:01:29,840 --> 00:01:33,560 Speaker 4: it and in parallel a separate equity investment from MGX. 26 00:01:34,240 --> 00:01:37,880 Speaker 4: And what is this signal? It's this idea that we 27 00:01:37,959 --> 00:01:41,320 Speaker 4: know about the compute demand. So we're basically thinking that 28 00:01:41,360 --> 00:01:43,440 Speaker 4: there's going to be four trillion dollars worth of demand 29 00:01:43,440 --> 00:01:45,920 Speaker 4: for the chips and the server designs. But if you 30 00:01:45,959 --> 00:01:49,240 Speaker 4: start to think about the concrete, labor, building materials, energy 31 00:01:49,280 --> 00:01:53,320 Speaker 4: supply utilities, water cooling systems, you can expand that number 32 00:01:53,320 --> 00:01:55,720 Speaker 4: out to seven trillion. And this is some really big 33 00:01:55,800 --> 00:01:59,920 Speaker 4: names making moves to make sure they have the name 34 00:02:00,040 --> 00:02:02,280 Speaker 4: that can build the actual things and then manage them, 35 00:02:02,320 --> 00:02:05,400 Speaker 4: you know, as a piece of real estate and as 36 00:02:05,480 --> 00:02:06,520 Speaker 4: as an asset class. 37 00:02:06,520 --> 00:02:10,440 Speaker 5: I suppose you know, I'm looking for tops in this 38 00:02:10,919 --> 00:02:14,560 Speaker 5: in this whole AI story, where's the top? And I'm 39 00:02:14,560 --> 00:02:16,520 Speaker 5: always like, man, when private equity gets. 40 00:02:16,320 --> 00:02:17,880 Speaker 2: In, that was a big side part. 41 00:02:17,919 --> 00:02:19,880 Speaker 5: Yeah, I don't know, I mean forty billion dollars for 42 00:02:19,960 --> 00:02:21,760 Speaker 5: real estate company? Is that what we're talking about. 43 00:02:22,639 --> 00:02:24,560 Speaker 4: You know, I also want to be honest with you 44 00:02:24,560 --> 00:02:26,799 Speaker 4: guys in the audience, like, like real estate is I'm 45 00:02:26,840 --> 00:02:28,760 Speaker 4: not so o fay with real estate. It's not a 46 00:02:28,800 --> 00:02:32,040 Speaker 4: world that I cover because we've been talking about San Francisco, right, yes, 47 00:02:32,160 --> 00:02:34,840 Speaker 4: So let me let me make a sort of weird 48 00:02:34,880 --> 00:02:37,480 Speaker 4: parallel example the open Aie story we did this week 49 00:02:37,520 --> 00:02:41,160 Speaker 4: on the five hundred billion dollar valuation on in San Francisco. 50 00:02:41,280 --> 00:02:44,079 Speaker 4: Right now, everyone's like, this is going to is going 51 00:02:44,120 --> 00:02:46,800 Speaker 4: to create a huge bubble in the housing market. Why 52 00:02:47,080 --> 00:02:51,680 Speaker 4: because you have about several hundred newly minted millionaires from 53 00:02:51,680 --> 00:02:52,400 Speaker 4: that transaction. 54 00:02:52,840 --> 00:02:55,120 Speaker 5: Seriously, wow, So like there's a not. 55 00:02:55,080 --> 00:02:59,640 Speaker 4: Fun the capital flow to individuals and companies. Did you 56 00:02:59,680 --> 00:03:02,000 Speaker 4: guys see the story that's also about this morning about 57 00:03:02,040 --> 00:03:04,320 Speaker 4: Jeff Bezos of all people saying that the AI spending 58 00:03:04,360 --> 00:03:05,160 Speaker 4: boom is a bubble. 59 00:03:05,639 --> 00:03:08,520 Speaker 5: Is oh, really interesting and his company is one of 60 00:03:08,520 --> 00:03:10,400 Speaker 5: the major spenders. Thank you. 61 00:03:10,720 --> 00:03:13,519 Speaker 2: He says it's a bubble that will pay off. 62 00:03:13,560 --> 00:03:17,160 Speaker 4: The bubble that will pay off is so like right now, 63 00:03:17,240 --> 00:03:22,280 Speaker 4: the equation for public market investors and debt market investors, 64 00:03:22,320 --> 00:03:25,079 Speaker 4: and I think the debt part's really important, is they 65 00:03:25,160 --> 00:03:28,079 Speaker 4: do want to see the evidence that top line growth 66 00:03:28,160 --> 00:03:31,840 Speaker 4: is materializing, particularly in software companies. If you're a bench capitalist, 67 00:03:31,919 --> 00:03:35,200 Speaker 4: you don't care, like that's not how that works. Growth 68 00:03:35,280 --> 00:03:37,680 Speaker 4: at all costs is okay. And so when we think 69 00:03:37,680 --> 00:03:40,680 Speaker 4: about opening ianthropic perplexity, all these names that we love 70 00:03:40,720 --> 00:03:45,320 Speaker 4: to talk about, you know, it's the money plowing in. 71 00:03:45,480 --> 00:03:47,240 Speaker 4: There's less focus on the money coming in out the 72 00:03:47,280 --> 00:03:47,680 Speaker 4: other side. 73 00:03:49,200 --> 00:03:52,320 Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this. 74 00:03:55,960 --> 00:03:59,600 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 75 00:04:00,000 --> 00:04:03,120 Speaker 1: today's at ten am Eastern on Applecarplay and Android Auto 76 00:04:03,240 --> 00:04:06,320 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 77 00:04:06,320 --> 00:04:11,040 Speaker 1: get your podcasts, or watch us live on YouTube through Boeing. 78 00:04:11,120 --> 00:04:13,000 Speaker 5: Back in the news and after a string of some 79 00:04:13,160 --> 00:04:17,080 Speaker 5: real positive news items over the past six to twelve months, 80 00:04:17,120 --> 00:04:18,359 Speaker 5: got a little bit of step back here on a 81 00:04:18,360 --> 00:04:21,320 Speaker 5: triple seven plan here, So let's check and with Sid Phillip, 82 00:04:21,520 --> 00:04:25,240 Speaker 5: Deputy team leader for Global Aviation at Bloomberg News, said, 83 00:04:25,279 --> 00:04:29,080 Speaker 5: what's going on with Boeing and the seven seven seven aircraft? 84 00:04:30,279 --> 00:04:32,960 Speaker 6: Good morning, So the seven seven seven aircraft has been 85 00:04:33,279 --> 00:04:36,040 Speaker 6: long delayed. So the aircraft was meant to enter service 86 00:04:36,040 --> 00:04:39,280 Speaker 6: in twenty twenty and the latest we heard from Boeing 87 00:04:39,440 --> 00:04:42,760 Speaker 6: was entering into service in twenty twenty six. Now we 88 00:04:42,920 --> 00:04:45,720 Speaker 6: understand that's going to go to twenty twenty seven, and 89 00:04:45,760 --> 00:04:48,599 Speaker 6: that sort of means that for Boeing, it's a massive 90 00:04:48,760 --> 00:04:52,120 Speaker 6: impact on cash because this aircraft has been years in 91 00:04:52,160 --> 00:04:55,040 Speaker 6: development and Boeing is looking to sort of convert all 92 00:04:55,040 --> 00:04:58,520 Speaker 6: those orders into cash flow, and so that just postpones it. 93 00:04:58,560 --> 00:05:01,120 Speaker 6: And we understand that Boy's and be having to take 94 00:05:01,520 --> 00:05:05,320 Speaker 6: a multi billion dollar charge on this program at the 95 00:05:05,440 --> 00:05:08,160 Speaker 6: next earnings because of the delay and essentially the fact 96 00:05:08,200 --> 00:05:11,200 Speaker 6: that they can't get cash in through the door for 97 00:05:11,320 --> 00:05:12,000 Speaker 6: those aircraft. 98 00:05:12,320 --> 00:05:15,239 Speaker 3: So this is essentially a profit warning from Boeing before 99 00:05:15,240 --> 00:05:21,240 Speaker 3: its latest results. Which companies, which airliners are most affected 100 00:05:21,240 --> 00:05:23,080 Speaker 3: by the delay of this Triple seven. 101 00:05:24,200 --> 00:05:26,479 Speaker 6: So the Triple seven X is a brand new aircraft 102 00:05:26,480 --> 00:05:29,320 Speaker 6: that's meant to replace the older A three eighty and 103 00:05:29,640 --> 00:05:32,679 Speaker 6: the seven four seven is the biggest aircraft that Boeing 104 00:05:32,720 --> 00:05:35,719 Speaker 6: has worked on, and essentially this would replace those aircraft. 105 00:05:35,800 --> 00:05:39,880 Speaker 6: And so the airlines like Lufthansa, we've seen Emirates place 106 00:05:40,040 --> 00:05:43,599 Speaker 6: the biggest customer for this cut. Our airways as ordered 107 00:05:43,600 --> 00:05:46,240 Speaker 6: some and so essentially the airlines that do long hold 108 00:05:46,279 --> 00:05:49,840 Speaker 6: services carrying lots lots of people, those are the ones 109 00:05:49,880 --> 00:05:53,840 Speaker 6: that are really affected. And essentially that delays the retirements 110 00:05:53,839 --> 00:05:56,800 Speaker 6: of older aircraft and the introduction of more sort of 111 00:05:56,800 --> 00:05:58,360 Speaker 6: fuel efficient, brand new aircraft. 112 00:06:00,040 --> 00:06:03,760 Speaker 5: I guess just just once more revives kind of the 113 00:06:03,800 --> 00:06:09,080 Speaker 5: concern about the engineering and production capabilities of Boring that 114 00:06:09,120 --> 00:06:14,080 Speaker 5: were highlighted over the last several years. Adam, is that fair, 115 00:06:14,120 --> 00:06:15,920 Speaker 5: do you think? Or were they kind of put a 116 00:06:15,920 --> 00:06:17,039 Speaker 5: lot of that behind them here. 117 00:06:18,080 --> 00:06:21,359 Speaker 6: They have put a lot behind them, and the indication 118 00:06:21,440 --> 00:06:24,360 Speaker 6: from Boeing I mean the CEO Kerry Otberg sort of 119 00:06:24,400 --> 00:06:26,560 Speaker 6: flagged these issues and he sort of said that this 120 00:06:26,760 --> 00:06:30,359 Speaker 6: was more a paperwork issue rather than an engineering setback issue. 121 00:06:30,560 --> 00:06:33,440 Speaker 6: But at the same time, this aircraft has been long delayed. 122 00:06:33,440 --> 00:06:36,240 Speaker 6: I mean, it was slated to enter into service in 123 00:06:36,320 --> 00:06:40,000 Speaker 6: twenty twenty, and so it's already five years late and 124 00:06:40,160 --> 00:06:42,760 Speaker 6: now it's possibly going to be seven years late. And 125 00:06:42,800 --> 00:06:45,920 Speaker 6: so it does sort of talk about the certification delays 126 00:06:45,920 --> 00:06:49,000 Speaker 6: that Boy's got to get through, including on the seven 127 00:06:49,000 --> 00:06:51,680 Speaker 6: three seven Max where the Max seven and the Max ten, 128 00:06:51,720 --> 00:06:54,039 Speaker 6: which are the smallest and the largest variants of the 129 00:06:54,080 --> 00:06:57,279 Speaker 6: MAX have still to be certified, and that is again 130 00:06:57,440 --> 00:07:00,719 Speaker 6: a very important sort of source of ash for Boeing, 131 00:07:01,040 --> 00:07:03,240 Speaker 6: and so it is one of the challenges that Kelly 132 00:07:03,320 --> 00:07:06,200 Speaker 6: Otberg has to get through as Boeing sort of goes 133 00:07:06,240 --> 00:07:09,120 Speaker 6: into the next phase of growth and essentially turns the 134 00:07:09,200 --> 00:07:12,160 Speaker 6: corner on its various challenges it's had in the last 135 00:07:12,200 --> 00:07:12,840 Speaker 6: couple of years. 136 00:07:13,640 --> 00:07:16,520 Speaker 3: So put this into context for us, where does Airbus 137 00:07:16,560 --> 00:07:19,400 Speaker 3: stand with the release of its latest versions. 138 00:07:19,040 --> 00:07:20,120 Speaker 2: Of its airliners. 139 00:07:20,160 --> 00:07:23,120 Speaker 3: If Airbus is also being held up by different reasons, 140 00:07:23,160 --> 00:07:24,920 Speaker 3: then maybe this isn't so bad for Boeing. 141 00:07:25,880 --> 00:07:28,400 Speaker 6: Yeah, so Airbus has a different problem. They have issues 142 00:07:28,440 --> 00:07:31,239 Speaker 6: with production and so they're unable to produce enough planes. 143 00:07:31,600 --> 00:07:35,240 Speaker 6: And so while Airbus doesn't have any aircraft currently in certification, 144 00:07:35,320 --> 00:07:38,880 Speaker 6: I mean the latest aircraft that triples the eight through 145 00:07:38,880 --> 00:07:43,080 Speaker 6: twenty one XLR has entered into service, they have a 146 00:07:43,080 --> 00:07:46,120 Speaker 6: different issue. They have issues with supply of parts and 147 00:07:46,240 --> 00:07:48,720 Speaker 6: they can't make those planes fast enough to get them 148 00:07:48,760 --> 00:07:52,080 Speaker 6: to customers. So the customer is really sort of struggling 149 00:07:52,080 --> 00:07:54,400 Speaker 6: on both ends, because on one end, if you've got 150 00:07:54,440 --> 00:07:58,520 Speaker 6: an ebbs audobook, you're waiting on delayed aircraft. If you're 151 00:07:58,800 --> 00:08:01,680 Speaker 6: a Boeing customer, you're waiting on aircraft that are still 152 00:08:01,720 --> 00:08:04,440 Speaker 6: to be certified. In both cases, you can't have those 153 00:08:04,440 --> 00:08:06,960 Speaker 6: planes in your fleet and flying around for you and 154 00:08:07,000 --> 00:08:09,800 Speaker 6: making money for you. So for the airline, regardless of 155 00:08:09,800 --> 00:08:12,400 Speaker 6: whether it's a certification delay or whether it's a production delay, 156 00:08:12,480 --> 00:08:13,160 Speaker 6: it is a delay. 157 00:08:13,360 --> 00:08:14,080 Speaker 2: It is a delay. 158 00:08:14,120 --> 00:08:17,000 Speaker 3: And we keep talking about this duopoly between Boeing and Airbus, 159 00:08:17,000 --> 00:08:20,280 Speaker 3: but is there any other aircraft manufacturer that could kind of. 160 00:08:20,200 --> 00:08:23,680 Speaker 2: Fill the hole in the meantime for these airliners. 161 00:08:24,680 --> 00:08:27,680 Speaker 6: Unfortunately not, I mean, the diopol is here to stay 162 00:08:27,800 --> 00:08:32,560 Speaker 6: for the conceivable future. And Comac, the Chinese aircraft manufacturer, 163 00:08:32,640 --> 00:08:34,839 Speaker 6: is talking about building. I mean they are building the 164 00:08:35,720 --> 00:08:38,720 Speaker 6: competitor to the seven three seven and the eight three twenty, 165 00:08:38,840 --> 00:08:41,640 Speaker 6: but they're building in very small numbers and it's going 166 00:08:41,679 --> 00:08:44,040 Speaker 6: to be a very long term before they're able to 167 00:08:44,120 --> 00:08:47,439 Speaker 6: scale up and match the production cadence that Boeing and airbusill. 168 00:08:47,840 --> 00:08:50,720 Speaker 6: And they don't have a white body aircraft. And similarly, 169 00:08:51,240 --> 00:08:54,760 Speaker 6: Brazil's Embryer builds smaller regional jets and so they aren't 170 00:08:54,800 --> 00:08:58,080 Speaker 6: really a competitor. So at the moment, the only options 171 00:08:58,120 --> 00:09:00,880 Speaker 6: for airlines if they want an aircraft, either buying or 172 00:09:00,920 --> 00:09:03,720 Speaker 6: ebbus and the boat struggling with all the books sold 173 00:09:03,760 --> 00:09:06,559 Speaker 6: out until the end of the decade, and essentially it's 174 00:09:06,559 --> 00:09:08,400 Speaker 6: going to be a tough struggle for them. 175 00:09:08,679 --> 00:09:11,800 Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this. 176 00:09:15,720 --> 00:09:19,400 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 177 00:09:19,480 --> 00:09:22,559 Speaker 1: weekdays at ten am Eastern on Apple Coarclay and Android 178 00:09:22,600 --> 00:09:25,880 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 179 00:09:25,960 --> 00:09:29,080 Speaker 1: you get your podcasts, or watch us live on YouTube. 180 00:09:29,960 --> 00:09:32,480 Speaker 3: Carnival Cruise Line, the stock is up sixteen percent so 181 00:09:32,520 --> 00:09:34,600 Speaker 3: far this year, just a bit of the ahead of 182 00:09:34,640 --> 00:09:36,960 Speaker 3: the S and P five hundred. But if you look 183 00:09:37,040 --> 00:09:41,160 Speaker 3: at other measures, there might be some concern and so 184 00:09:41,480 --> 00:09:43,320 Speaker 3: let's do that right now with Jody Lori. She has 185 00:09:43,320 --> 00:09:47,320 Speaker 3: Bloomberg Intelligence credit analysts on the outlook for this industry. 186 00:09:47,320 --> 00:09:51,280 Speaker 3: And Jody, you're looking at some alternative data, and the 187 00:09:51,320 --> 00:09:54,680 Speaker 3: alternative data suggests maybe there's a bit of moderation coming 188 00:09:54,720 --> 00:09:56,760 Speaker 3: for Carnival and its competitors. 189 00:09:58,520 --> 00:10:01,960 Speaker 7: Yes, Scarlett al d go and we look at the 190 00:10:02,000 --> 00:10:03,520 Speaker 7: cruise lines and one of the things we like to 191 00:10:03,559 --> 00:10:07,800 Speaker 7: focus on is new versus returning cruisers, and that data 192 00:10:07,800 --> 00:10:11,000 Speaker 7: is sort of indicative of how much adoptability there is 193 00:10:11,040 --> 00:10:11,600 Speaker 7: in the sector. 194 00:10:11,679 --> 00:10:14,360 Speaker 8: Now, if you remember, cruise lines are only two to three. 195 00:10:14,160 --> 00:10:17,679 Speaker 7: Percent of the total leisure sector, and so it's still 196 00:10:17,679 --> 00:10:20,600 Speaker 7: a relatively small percentage. But as you noted in the introduction, 197 00:10:21,360 --> 00:10:24,240 Speaker 7: people book out way earlier, so you get insight into 198 00:10:24,320 --> 00:10:26,439 Speaker 7: the psyche of the consumer going into next year in 199 00:10:26,720 --> 00:10:30,080 Speaker 7: the following year based on how they're booking. We are 200 00:10:30,120 --> 00:10:34,040 Speaker 7: seeing that returning cruisers are still booking pretty strong. We're 201 00:10:34,080 --> 00:10:38,120 Speaker 7: seeing that pre cruise onboard spending is still strong. But 202 00:10:38,400 --> 00:10:41,920 Speaker 7: I kind of question what that actual onboard spend is 203 00:10:41,960 --> 00:10:44,120 Speaker 7: going to look like in twenty six as the consumer 204 00:10:44,120 --> 00:10:47,360 Speaker 7: feels they're wallet a little bit more strained, as inflation 205 00:10:47,520 --> 00:10:50,960 Speaker 7: sort of really dips into not just the lowest income consumer, 206 00:10:51,000 --> 00:10:52,560 Speaker 7: but more of the middle market consumer. 207 00:10:53,520 --> 00:10:56,400 Speaker 9: Jody, as a credit analyst, would you rather see one 208 00:10:56,440 --> 00:10:59,599 Speaker 9: of your cruise companies build a new ship, put a 209 00:10:59,640 --> 00:11:03,280 Speaker 9: new ship in the water, or pay back debt? 210 00:11:03,880 --> 00:11:04,959 Speaker 8: What I rather see? 211 00:11:05,000 --> 00:11:07,960 Speaker 7: So I don't think that that's a one or the 212 00:11:08,000 --> 00:11:12,760 Speaker 7: other situation. You know, obviously, while they were working through 213 00:11:13,080 --> 00:11:16,000 Speaker 7: all of their balance sheet upheaval over the past few years, 214 00:11:16,200 --> 00:11:19,040 Speaker 7: paying down debt was definitely more favorable. But I think 215 00:11:19,080 --> 00:11:21,760 Speaker 7: that the companies can kind of do both because what 216 00:11:21,840 --> 00:11:25,240 Speaker 7: new ships do is they provide additional cash in the 217 00:11:25,320 --> 00:11:29,520 Speaker 7: door through onboard or through through bookings advanced bookings, and 218 00:11:29,640 --> 00:11:32,680 Speaker 7: so what that means is that they don't necessarily have 219 00:11:32,720 --> 00:11:35,400 Speaker 7: to rely on the debt markets to fill those cash 220 00:11:35,440 --> 00:11:37,960 Speaker 7: gaps the same way that they do when say they're 221 00:11:37,960 --> 00:11:41,000 Speaker 7: not able to cruise. Now, something to note about Carnival 222 00:11:41,040 --> 00:11:43,920 Speaker 7: and you know the cruise lines in general, is from 223 00:11:44,000 --> 00:11:46,880 Speaker 7: a capital structure standpoint and from a credit perspective, they've 224 00:11:46,880 --> 00:11:49,800 Speaker 7: actually done pretty well. And Carnival actually just finally got 225 00:11:49,880 --> 00:11:52,520 Speaker 7: upgraded to investment grade this week by Fitch. So it's 226 00:11:52,520 --> 00:11:55,720 Speaker 7: actually been a pretty strong tailwind for the company. 227 00:11:56,040 --> 00:11:57,640 Speaker 8: From the credit perspective. 228 00:11:57,200 --> 00:12:00,680 Speaker 7: That will likely feed into the relative value of the bonds. 229 00:12:01,240 --> 00:12:05,480 Speaker 7: But in terms of that growth story, that large momentum, 230 00:12:05,520 --> 00:12:06,920 Speaker 7: that might be stalling a little bit. 231 00:12:08,080 --> 00:12:10,800 Speaker 3: So cruise operators want to get a Paul Sweeney or 232 00:12:10,880 --> 00:12:13,240 Speaker 3: Lisa Matail to become a cruiser, and not just a 233 00:12:13,240 --> 00:12:16,120 Speaker 3: cruiser for the first time, but to become returning cruisers. 234 00:12:16,480 --> 00:12:19,320 Speaker 3: How expensive is it for them to acquire these kinds 235 00:12:19,320 --> 00:12:19,920 Speaker 3: of customers. 236 00:12:22,040 --> 00:12:24,760 Speaker 7: How expensive is it for them to acquire these customers. 237 00:12:24,960 --> 00:12:27,840 Speaker 7: I think it really depends. It depends on the cruise 238 00:12:27,880 --> 00:12:30,720 Speaker 7: line itself. And I think what's so interesting is that 239 00:12:30,760 --> 00:12:34,079 Speaker 7: we are seeing much of a differentiation in terms of 240 00:12:34,160 --> 00:12:36,640 Speaker 7: the different brands, to the point that we're now seeing 241 00:12:36,679 --> 00:12:40,120 Speaker 7: Four Seasons and Rich Carlton come into the space in 242 00:12:40,160 --> 00:12:44,040 Speaker 7: the form of really high end luxury yachts. We're seeing 243 00:12:44,160 --> 00:12:50,200 Speaker 7: Viking continue their position as very hid unfriendly, mostly just 244 00:12:50,360 --> 00:12:54,480 Speaker 7: older couples wanting to go on ships and having everything included. 245 00:12:54,760 --> 00:12:57,240 Speaker 7: And Royal Cribbean is finally entering into that space. So 246 00:12:57,679 --> 00:13:00,680 Speaker 7: when that happens, I'm a little curious to see who 247 00:13:00,760 --> 00:13:03,800 Speaker 7: decides to go to celebrity over Viking and if that 248 00:13:03,880 --> 00:13:08,600 Speaker 7: creates some sort of cannibalism in the sector. It's more 249 00:13:08,840 --> 00:13:11,400 Speaker 7: what's interesting is when you think about it in comparison 250 00:13:11,400 --> 00:13:14,240 Speaker 7: to Vegas, where you see that slow down in Vegas, 251 00:13:14,320 --> 00:13:15,959 Speaker 7: and the fact that a lot of the cruise lines 252 00:13:15,960 --> 00:13:21,080 Speaker 7: have been structuring their new island locations as this alternative 253 00:13:21,080 --> 00:13:23,600 Speaker 7: to Vegas. It has a very Vegas vibe, to the 254 00:13:23,640 --> 00:13:26,360 Speaker 7: swim up bar, to all the sort of activities you 255 00:13:26,360 --> 00:13:29,360 Speaker 7: can do all this sort of a la carte situations. Yeah, 256 00:13:29,400 --> 00:13:30,959 Speaker 7: I mean that's that's really where a lot of the 257 00:13:31,000 --> 00:13:34,439 Speaker 7: cruise lines are spending their money. And whether customers are 258 00:13:34,440 --> 00:13:36,800 Speaker 7: going to see that as a better alternative to Vegas 259 00:13:36,800 --> 00:13:37,640 Speaker 7: remains to be seen. 260 00:13:38,280 --> 00:13:40,040 Speaker 5: All right. Last month, I don't know if I told 261 00:13:40,040 --> 00:13:41,559 Speaker 5: you this jury Judia, I was. 262 00:13:41,720 --> 00:13:46,520 Speaker 9: Cruising the Amafi coast and I did no, I was 263 00:13:46,559 --> 00:13:51,160 Speaker 9: just we took a okay, but what I did see 264 00:13:51,360 --> 00:13:55,920 Speaker 9: is the ritz yacht and intrigued too. It was amazing. 265 00:13:55,960 --> 00:13:58,679 Speaker 9: So Jody talked us about that where you go and make, 266 00:13:59,040 --> 00:14:02,640 Speaker 9: you know, hell company go into the cruise business because 267 00:14:02,640 --> 00:14:03,400 Speaker 9: that look pretty. 268 00:14:03,160 --> 00:14:03,720 Speaker 5: Cool that boat. 269 00:14:05,080 --> 00:14:08,400 Speaker 7: Yeah, and they only have a few ships. Were talking 270 00:14:08,440 --> 00:14:11,439 Speaker 7: three ships at the moment. And for Marriott, I think 271 00:14:11,480 --> 00:14:13,200 Speaker 7: they're sort of dipping their toe in the water. No 272 00:14:13,280 --> 00:14:16,680 Speaker 7: pun intended just to kind of see the appetite, because 273 00:14:16,920 --> 00:14:19,240 Speaker 7: there is a certain customer if you talk the high 274 00:14:19,320 --> 00:14:22,240 Speaker 7: high end customer. They don't want to be on a 275 00:14:22,240 --> 00:14:24,720 Speaker 7: big ship. They don't want to be on the gigantic 276 00:14:25,040 --> 00:14:28,320 Speaker 7: icon class ship. That is not their speed. Even those 277 00:14:28,360 --> 00:14:30,960 Speaker 7: smaller ships are still a little bit too much for them. 278 00:14:31,160 --> 00:14:33,960 Speaker 7: I mean, why should they participate with the Pleaves, but 279 00:14:34,000 --> 00:14:36,239 Speaker 7: they don't want to have to own a yacht themselves, 280 00:14:36,480 --> 00:14:38,640 Speaker 7: so it's a nice middle ground for them. So I 281 00:14:38,640 --> 00:14:41,440 Speaker 7: do think that there is a little bit of an 282 00:14:41,440 --> 00:14:42,520 Speaker 7: opportunity there. 283 00:14:42,920 --> 00:14:45,400 Speaker 8: I'm not so sure it's going to get super. 284 00:14:45,360 --> 00:14:48,600 Speaker 7: Large in terms of the number of ships that they have, 285 00:14:48,920 --> 00:14:50,600 Speaker 7: but it definitely creates a different situation. 286 00:14:51,080 --> 00:14:53,440 Speaker 2: Yeah, the intimacy, the exclusivity is what. 287 00:14:53,440 --> 00:14:56,200 Speaker 3: Makes it appealing, especially to someone like Paul, who was 288 00:14:56,280 --> 00:14:58,880 Speaker 3: nodding along as you were describing all that you talked 289 00:14:58,880 --> 00:15:02,000 Speaker 3: earlier about on vard word spending. Talk to us about 290 00:15:02,000 --> 00:15:05,080 Speaker 3: the economics of having everything included, so you pay one 291 00:15:05,120 --> 00:15:07,800 Speaker 3: price and like all your needs are met, versus a 292 00:15:07,880 --> 00:15:09,840 Speaker 3: la carte pricing where they're really trying to get you 293 00:15:09,880 --> 00:15:13,080 Speaker 3: to spend more and splurge for different things, whether it's 294 00:15:13,120 --> 00:15:16,680 Speaker 3: extra drinks or excursions that you tack onto the crews itself. 295 00:15:18,240 --> 00:15:20,320 Speaker 7: And that Scarlett dips into a lot of the data 296 00:15:20,360 --> 00:15:22,400 Speaker 7: that we looked at through al D and by that 297 00:15:22,440 --> 00:15:24,720 Speaker 7: I mean is that we looked at ticket versus on 298 00:15:24,720 --> 00:15:28,800 Speaker 7: board spending data and what we're seeing is for the 299 00:15:28,840 --> 00:15:33,200 Speaker 7: brand name ships, so meaning the Royal Caribbean, the Carnival, 300 00:15:33,240 --> 00:15:38,359 Speaker 7: the Norwegian, the brands, those in particular might be reducing 301 00:15:38,480 --> 00:15:40,800 Speaker 7: the amount that they gain in terms of ticket price, 302 00:15:41,120 --> 00:15:43,840 Speaker 7: meaning the amount that they generate in revenue so that 303 00:15:43,920 --> 00:15:46,880 Speaker 7: they can get people on the ship and then charge 304 00:15:46,920 --> 00:15:49,400 Speaker 7: them and on board spending and on board spending they 305 00:15:49,440 --> 00:15:52,320 Speaker 7: actually they benefit a little bit from in terms of 306 00:15:52,360 --> 00:15:55,360 Speaker 7: cash flows. From a margin perspective, it's pretty attractive and 307 00:15:55,400 --> 00:15:57,520 Speaker 7: anytime you can get somebody to open their wallet and 308 00:15:57,560 --> 00:15:58,640 Speaker 7: spend money as attractive. 309 00:15:59,000 --> 00:16:01,200 Speaker 8: Now the big sur risk of that is. 310 00:16:01,160 --> 00:16:05,040 Speaker 7: If you, you know, if you appeal to a customer 311 00:16:05,120 --> 00:16:07,640 Speaker 7: that might feel a little bit more strained, They'll be 312 00:16:07,720 --> 00:16:10,200 Speaker 7: fine spending the ticket price, but they might not want 313 00:16:10,240 --> 00:16:12,760 Speaker 7: to spend as much on every single excursion that comes 314 00:16:12,800 --> 00:16:15,040 Speaker 7: their way. They might go for the sort of base 315 00:16:15,120 --> 00:16:19,040 Speaker 7: ship opportunity that's becoming less and less attractive. The companies 316 00:16:19,080 --> 00:16:21,800 Speaker 7: are making it so that that main dining hall experience 317 00:16:21,880 --> 00:16:24,440 Speaker 7: isn't what you want to do, and so we might 318 00:16:24,560 --> 00:16:26,720 Speaker 7: be at a little bit of an impasse when you 319 00:16:26,760 --> 00:16:29,360 Speaker 7: have customers getting on the ship saying I don't want 320 00:16:29,360 --> 00:16:31,200 Speaker 7: to spend so much, but the cruise line's saying, well, 321 00:16:31,240 --> 00:16:33,720 Speaker 7: if you really want the good experience, you have to spend. 322 00:16:33,480 --> 00:16:36,760 Speaker 8: More, so we'll see how that plays out into twenty six. 323 00:16:37,680 --> 00:16:40,880 Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this. 324 00:16:44,280 --> 00:16:47,960 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 325 00:16:48,080 --> 00:16:51,160 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 326 00:16:51,160 --> 00:16:54,480 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 327 00:16:54,520 --> 00:16:57,640 Speaker 1: you get your podcasts, or watch us live on YouTube. 328 00:16:58,720 --> 00:17:02,240 Speaker 5: This we're getting right smack into it, getting into the 329 00:17:02,280 --> 00:17:05,520 Speaker 5: holiday shopping season. I know it's only the beginning of October, 330 00:17:05,560 --> 00:17:08,439 Speaker 5: but we're starting to see it and the question is 331 00:17:08,440 --> 00:17:10,720 Speaker 5: what's it going to be like in there, particularly for 332 00:17:10,760 --> 00:17:13,879 Speaker 5: the toy part of the market. Lindsay Dutch Joints Is. 333 00:17:13,920 --> 00:17:18,280 Speaker 10: She's Bloomberg Intelligence Consumer Hardlines Senior analyst, and here we go. 334 00:17:18,400 --> 00:17:24,240 Speaker 10: Toy makers face demand, uncertainty and risk ahead of holiday buying. Lindsay, 335 00:17:24,320 --> 00:17:27,000 Speaker 10: talk to us about kind of the toy business as 336 00:17:27,040 --> 00:17:30,320 Speaker 10: we go into this all important holiday shopping season. 337 00:17:31,560 --> 00:17:33,040 Speaker 2: Hip, Well, thanks for having me. 338 00:17:33,720 --> 00:17:37,119 Speaker 11: I think the outlook for toys is really interesting, and 339 00:17:37,160 --> 00:17:40,000 Speaker 11: I'm really excited to hear more from management teams when 340 00:17:40,040 --> 00:17:44,080 Speaker 11: we get the third quarter earnings in late October. The 341 00:17:44,119 --> 00:17:47,200 Speaker 11: demand picture looks very uncertain You know, this was supposed 342 00:17:47,240 --> 00:17:50,720 Speaker 11: to be an up year for toys, but you know, 343 00:17:50,840 --> 00:17:55,320 Speaker 11: tariffs and just broader economic uncertainty has really weighed on 344 00:17:55,400 --> 00:17:58,840 Speaker 11: the sector. But I think the bigger issue in particular 345 00:17:59,000 --> 00:18:02,600 Speaker 11: this year is, you know, because of the tiff announcements 346 00:18:02,960 --> 00:18:08,560 Speaker 11: in April and lots of uncertainty, big retailers you're talking Walmart, Target, 347 00:18:09,119 --> 00:18:12,160 Speaker 11: basically held back on placing their orders which they would 348 00:18:12,240 --> 00:18:15,480 Speaker 11: normally place for holiday in the second quarter. 349 00:18:16,440 --> 00:18:17,880 Speaker 2: Where there did. 350 00:18:17,720 --> 00:18:21,440 Speaker 11: Place the orders, they're receiving them in the third quarter. 351 00:18:21,240 --> 00:18:23,760 Speaker 2: So we did, you know, get that back. 352 00:18:24,320 --> 00:18:27,679 Speaker 11: But because of that delay and because these retailers are 353 00:18:27,680 --> 00:18:31,639 Speaker 11: really looking to sell through their inventory, I think that 354 00:18:31,760 --> 00:18:34,800 Speaker 11: the opportunity for reorders for some of those like hot 355 00:18:34,840 --> 00:18:38,560 Speaker 11: holiday toy items is limited and that's really going to 356 00:18:38,600 --> 00:18:40,560 Speaker 11: weigh this year on those toy makers. 357 00:18:41,160 --> 00:18:43,840 Speaker 3: Is there going to be a shortage of toys that 358 00:18:43,920 --> 00:18:46,000 Speaker 3: people want to buy? Is that going to be a 359 00:18:46,040 --> 00:18:47,400 Speaker 3: problem in twenty twenty five. 360 00:18:48,680 --> 00:18:51,879 Speaker 11: I mean that could be a possibility if something is 361 00:18:51,920 --> 00:18:54,040 Speaker 11: like really really hot, we could go back to those 362 00:18:54,119 --> 00:18:57,119 Speaker 11: days where you're like standing at the store or early 363 00:18:57,160 --> 00:18:59,800 Speaker 11: on a black Friday morning to get the you know, 364 00:19:00,119 --> 00:19:03,560 Speaker 11: one of twenty that Walmart has. There's a possibility for 365 00:19:03,680 --> 00:19:07,040 Speaker 11: that because I don't really think that there's going to 366 00:19:07,080 --> 00:19:09,960 Speaker 11: be a lot of reordering. I do think the toymakers 367 00:19:10,080 --> 00:19:14,760 Speaker 11: are trying to prepare, they are taking on inventory because 368 00:19:14,760 --> 00:19:17,879 Speaker 11: the other thing that Walmart and Target did is because 369 00:19:17,920 --> 00:19:21,919 Speaker 11: of the tariffs, they would have typically imported, you know, 370 00:19:22,320 --> 00:19:24,640 Speaker 11: in their contract with Mattel or Hasbro or they would 371 00:19:24,640 --> 00:19:28,000 Speaker 11: have imported the product like direct to their own warehouse, 372 00:19:28,440 --> 00:19:30,840 Speaker 11: but they kind of switched their plan a little bit, 373 00:19:30,960 --> 00:19:33,280 Speaker 11: and it's really the toymakers that are importing it to 374 00:19:33,320 --> 00:19:37,399 Speaker 11: the US and sort of replenishing the Walmart or Target 375 00:19:37,440 --> 00:19:41,080 Speaker 11: warehouse from like domestically. So there's also a shift in 376 00:19:41,160 --> 00:19:43,600 Speaker 11: sort of how the order is being placed, and so 377 00:19:43,800 --> 00:19:46,919 Speaker 11: it just is creating a really uncertain environment in the 378 00:19:46,920 --> 00:19:47,440 Speaker 11: back half. 379 00:19:47,600 --> 00:19:51,840 Speaker 3: Lindsay, what about the closing of the deminimous exemption. You know, 380 00:19:51,920 --> 00:19:55,200 Speaker 3: before this, a lot of Americans were buying directly from 381 00:19:56,040 --> 00:19:59,480 Speaker 3: websites overseas and just getting stuff shipped to them from China, 382 00:19:59,560 --> 00:20:01,200 Speaker 3: from the from other parts. 383 00:20:00,960 --> 00:20:01,480 Speaker 2: Of the world. 384 00:20:01,760 --> 00:20:04,879 Speaker 3: And now that the consumers will be taxed on it, 385 00:20:04,880 --> 00:20:08,120 Speaker 3: they face a tariff that avenue might have been closed 386 00:20:08,119 --> 00:20:11,320 Speaker 3: off so that leaves them going to the traditional distributors 387 00:20:11,359 --> 00:20:11,879 Speaker 3: as a result. 388 00:20:11,880 --> 00:20:12,880 Speaker 2: How do you see that playing out? 389 00:20:14,240 --> 00:20:16,320 Speaker 11: Yeah, I think that could have an effect. I mean 390 00:20:16,359 --> 00:20:20,440 Speaker 11: when you think about these big toy makers, has Bro, Mattel, 391 00:20:20,880 --> 00:20:23,640 Speaker 11: even Spinmaster, which is a little bit on the smaller side, 392 00:20:23,760 --> 00:20:27,160 Speaker 11: you know, a lot of their product is flowing through 393 00:20:27,280 --> 00:20:30,639 Speaker 11: big box national retailers, so it might not have a 394 00:20:30,800 --> 00:20:36,320 Speaker 11: huge impact on them specifically. We could see the consumer, 395 00:20:36,480 --> 00:20:40,840 Speaker 11: you know, switch avenues a little bit, but Walmart, Target 396 00:20:40,840 --> 00:20:44,000 Speaker 11: are still and those big national retailers are still huge. 397 00:20:44,119 --> 00:20:47,159 Speaker 11: And where people do go to shop for toys. I 398 00:20:47,160 --> 00:20:49,240 Speaker 11: mean we still also have Toys r Us trying to 399 00:20:49,240 --> 00:20:53,680 Speaker 11: make a comeback, and Macy's stores and Kohl's also being 400 00:20:53,760 --> 00:20:56,480 Speaker 11: a bigger push into toys. So you could see a 401 00:20:56,520 --> 00:20:59,960 Speaker 11: little bit of shift in I guess where the consumer shops. 402 00:21:00,000 --> 00:21:02,639 Speaker 11: But we don't see that having a major impact on 403 00:21:02,680 --> 00:21:03,440 Speaker 11: these companies. 404 00:21:04,240 --> 00:21:07,000 Speaker 9: And are the toy makers viewing tariffs as a one 405 00:21:07,080 --> 00:21:09,320 Speaker 9: time thing they have to deal with or are they 406 00:21:09,600 --> 00:21:13,600 Speaker 9: thinking that it might be something longer term. 407 00:21:14,320 --> 00:21:18,159 Speaker 11: They have been working to diversify supply chains for some 408 00:21:18,400 --> 00:21:22,399 Speaker 11: time now. It's kind of wild to think about, but 409 00:21:22,440 --> 00:21:25,320 Speaker 11: when we came into this year. Hasbro and Mattel we're 410 00:21:25,359 --> 00:21:28,600 Speaker 11: forty to fifty percent of their toys manufactured in China. 411 00:21:28,680 --> 00:21:33,080 Speaker 11: That was actually almost half of the broader industry average. 412 00:21:33,080 --> 00:21:35,120 Speaker 11: And you know, when you think about toys in general, 413 00:21:35,640 --> 00:21:38,720 Speaker 11: upwards of eighty to eighty five percent we're made in China. 414 00:21:39,160 --> 00:21:43,640 Speaker 11: There's been a lot of diversification acceleration of diversification efforts 415 00:21:43,680 --> 00:21:49,400 Speaker 11: happening this year. You know, re distribution of sourcing, you know, 416 00:21:49,720 --> 00:21:53,439 Speaker 11: how they're sourcing US sold product. There's also been changes 417 00:21:53,480 --> 00:21:55,920 Speaker 11: in pricing and you know, are we going to be 418 00:21:55,960 --> 00:21:57,879 Speaker 11: able to sell this product in the US or not 419 00:21:58,160 --> 00:22:02,439 Speaker 11: because of tariffs. So there's been a lot of change 420 00:22:02,840 --> 00:22:06,280 Speaker 11: this year. We don't have disclosure on exact numbers anymore, 421 00:22:06,320 --> 00:22:09,959 Speaker 11: but I think that, you know, the companies will continue 422 00:22:10,040 --> 00:22:13,879 Speaker 11: to try to sort of maximize their efforts. But Hasbro 423 00:22:13,960 --> 00:22:16,280 Speaker 11: and Mattel have said that taroffs will be about one 424 00:22:16,359 --> 00:22:20,880 Speaker 11: hundred million dollars in twenty five in terms of costs. 425 00:22:20,880 --> 00:22:24,120 Speaker 11: That's even with price increases going into effect, and that 426 00:22:24,119 --> 00:22:26,600 Speaker 11: that cost could be about the same or more in 427 00:22:26,680 --> 00:22:27,720 Speaker 11: at least twenty six. 428 00:22:28,400 --> 00:22:33,080 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 429 00:22:33,280 --> 00:22:37,240 Speaker 1: and anywhere else you get your podcasts. 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