1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:05,280 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day, we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,640 Speaker 2: and Bloomberg experts, along with essential market moving news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 6 00:00:17,400 --> 00:00:20,480 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. 7 00:00:20,720 --> 00:00:24,360 Speaker 1: All right, a lot of economic data to digest this 8 00:00:24,400 --> 00:00:26,760 Speaker 1: week on the inflation front, and you know we've got 9 00:00:26,760 --> 00:00:30,200 Speaker 1: the CPI yesterday, PPI today. My guest to take away 10 00:00:30,240 --> 00:00:32,279 Speaker 1: for a lot of folks is pretty darn good as 11 00:00:32,320 --> 00:00:34,040 Speaker 1: it relates to the Federal Reserve. But let's talk to 12 00:00:34,080 --> 00:00:37,000 Speaker 1: somebody who does this stuff for living. Jennifer Lee, Senior 13 00:00:37,040 --> 00:00:41,560 Speaker 1: economists and Managing director at BMO Capital Markets. Jennifer, again, 14 00:00:41,600 --> 00:00:44,239 Speaker 1: a lot of inflation data this week, what is your takeaway? 15 00:00:46,080 --> 00:00:48,120 Speaker 3: First of all, good morning, and thanks for having me on. 16 00:00:48,159 --> 00:00:50,920 Speaker 4: My takeaway is that finally, finally, finally, all of these 17 00:00:50,960 --> 00:00:54,920 Speaker 4: Fed rate hips are making an impact on inflation, bringing 18 00:00:54,960 --> 00:00:57,040 Speaker 4: it down to that what I used to think was 19 00:00:57,040 --> 00:00:59,760 Speaker 4: the elusive two percent target is finally starting to happen. 20 00:00:59,840 --> 00:01:02,520 Speaker 4: By down a two year low for the headline PPI 21 00:01:02,600 --> 00:01:04,720 Speaker 4: we saw this morning. I was just like glancing at 22 00:01:04,720 --> 00:01:06,600 Speaker 4: some of the details, but looks pretty good. 23 00:01:06,720 --> 00:01:07,319 Speaker 3: Only up a. 24 00:01:07,319 --> 00:01:11,640 Speaker 4: Tenth for both the headline and the core and down 25 00:01:11,640 --> 00:01:13,880 Speaker 4: to I think it was like three year lows or 26 00:01:13,880 --> 00:01:16,680 Speaker 4: something for the year of your basis. So again, all 27 00:01:16,720 --> 00:01:18,679 Speaker 4: those FED rate hikes are starting to kick in, and 28 00:01:18,720 --> 00:01:22,080 Speaker 4: we're finally starting to see the fruits of their labor. 29 00:01:22,360 --> 00:01:24,800 Speaker 5: We're finally starting to see it, but we are still 30 00:01:24,840 --> 00:01:28,199 Speaker 5: not at that two percent number. What do you think 31 00:01:28,280 --> 00:01:31,960 Speaker 5: might be the catalyst to finally get us down to 32 00:01:32,360 --> 00:01:34,080 Speaker 5: the FEDS desired inflation rate. 33 00:01:35,160 --> 00:01:36,800 Speaker 4: I think you will have to take well, first of all, 34 00:01:36,920 --> 00:01:38,520 Speaker 4: just in terms of our FED rate outlook. I mean, 35 00:01:38,520 --> 00:01:42,080 Speaker 4: we're still looking for that FED rate hike next or 36 00:01:42,160 --> 00:01:45,039 Speaker 4: in two weeks, I guess on July twenty sixth. You know, 37 00:01:45,120 --> 00:01:48,559 Speaker 4: even though we're seeing this, you know, promising inflation data, 38 00:01:49,640 --> 00:01:52,800 Speaker 4: the fact that we just are still arising, running pretty hot. 39 00:01:53,200 --> 00:01:56,440 Speaker 4: Job demand is still pretty strong, Housing is still has 40 00:01:56,480 --> 00:01:57,360 Speaker 4: already found a footing. 41 00:01:57,400 --> 00:01:59,080 Speaker 3: Business investment is decent. 42 00:01:59,280 --> 00:02:02,320 Speaker 4: Consumer spend took the leave of breather last month, and 43 00:02:02,360 --> 00:02:05,440 Speaker 4: but the month before that they're reading hot as well. 44 00:02:05,840 --> 00:02:08,440 Speaker 4: All that sort of sets the stage I think for 45 00:02:08,560 --> 00:02:13,320 Speaker 4: another rate hike in July, and this slower inflation data 46 00:02:13,320 --> 00:02:15,880 Speaker 4: I think gives them the door to or gives them 47 00:02:15,919 --> 00:02:19,040 Speaker 4: the leewage to sort of talk about moderating the pace 48 00:02:19,040 --> 00:02:22,040 Speaker 4: of rate hikes, needing more time to assess that economic 49 00:02:22,120 --> 00:02:24,839 Speaker 4: landscape that they've been talking about lately, and this will 50 00:02:24,840 --> 00:02:28,000 Speaker 4: do it. And of course, but keeping rates at these 51 00:02:28,040 --> 00:02:31,359 Speaker 4: restrictive levels will help bring down that level back down 52 00:02:31,440 --> 00:02:34,320 Speaker 4: to our inflation back down to two percent eventually. But 53 00:02:34,639 --> 00:02:37,120 Speaker 4: you know, definitely not a rate cut story just yet, all. 54 00:02:37,080 --> 00:02:39,080 Speaker 1: Right, So that's kind of where I think the market's 55 00:02:39,080 --> 00:02:41,480 Speaker 1: probably trying to go. I think the market is probably discounting, 56 00:02:41,880 --> 00:02:44,080 Speaker 1: you know, a July rate hike and then you know, 57 00:02:44,120 --> 00:02:45,120 Speaker 1: a pause again. 58 00:02:46,040 --> 00:02:46,840 Speaker 6: The question then. 59 00:02:46,720 --> 00:02:49,720 Speaker 1: Becomes how long is that pause? And is that a 60 00:02:49,800 --> 00:02:52,800 Speaker 1: twenty twenty four event that we might stay at these 61 00:02:53,160 --> 00:02:54,040 Speaker 1: levels of rates. 62 00:02:55,160 --> 00:02:57,600 Speaker 4: So our again first official pecast is just one more 63 00:02:57,680 --> 00:03:01,800 Speaker 4: rate hike and that will be it again base case, 64 00:03:01,840 --> 00:03:03,480 Speaker 4: but then staying at these levels, and so I don't 65 00:03:03,480 --> 00:03:05,080 Speaker 4: think rate cuts are going to be a story until 66 00:03:05,120 --> 00:03:08,400 Speaker 4: probably mid twenty twenty four. We used to talk about, 67 00:03:08,400 --> 00:03:10,200 Speaker 4: you know, early twenty twenty four for rate cuts. But 68 00:03:10,240 --> 00:03:12,560 Speaker 4: now we're thinking a little bit later, and that's because 69 00:03:12,560 --> 00:03:17,280 Speaker 4: we're also shifting our call for that elusive slow down again. 70 00:03:18,000 --> 00:03:21,200 Speaker 3: So now we're looking for more softer growth. 71 00:03:20,960 --> 00:03:23,640 Speaker 4: In around Q four Q one now, so around that 72 00:03:23,680 --> 00:03:25,799 Speaker 4: trend of the year, as opposed to Q three and 73 00:03:25,880 --> 00:03:26,240 Speaker 4: Q four. 74 00:03:26,400 --> 00:03:28,360 Speaker 3: So you just can't argue with the data. 75 00:03:28,600 --> 00:03:32,440 Speaker 4: It's been very resilient overall, you know, it's again difficult. 76 00:03:32,040 --> 00:03:34,160 Speaker 3: To argue with it. So we're pushing out that that 77 00:03:34,240 --> 00:03:35,680 Speaker 3: slow down a little bit by quarter. 78 00:03:36,000 --> 00:03:38,640 Speaker 5: Yeah, and another thing that you note is that the 79 00:03:38,800 --> 00:03:41,760 Speaker 5: greenback is struggling a little bit following some of this 80 00:03:41,880 --> 00:03:45,720 Speaker 5: economic softness, hitting a fourteen month low. I believe to 81 00:03:45,720 --> 00:03:49,240 Speaker 5: what extent is dollar weakness part of your calculation for 82 00:03:49,400 --> 00:03:51,240 Speaker 5: what our economy is going to look like in the 83 00:03:51,280 --> 00:03:52,280 Speaker 5: second half of the year. 84 00:03:53,440 --> 00:03:55,880 Speaker 4: The US dollar has been or had been running super 85 00:03:55,920 --> 00:03:58,680 Speaker 4: strong up until you know, yesterday, and so we're finally 86 00:03:58,800 --> 00:04:01,240 Speaker 4: going to see that dollar week to start kicking in, 87 00:04:01,280 --> 00:04:03,480 Speaker 4: and we're seeing it. And it's also helping because a 88 00:04:03,520 --> 00:04:06,600 Speaker 4: lot of the other central banks are not yet ready 89 00:04:06,640 --> 00:04:09,880 Speaker 4: to hit the pause button just yet, you know, aside 90 00:04:09,920 --> 00:04:12,600 Speaker 4: from the bank handa, you know, I think we're they're 91 00:04:12,600 --> 00:04:14,880 Speaker 4: probably that's probably it for the Bank Canada for the 92 00:04:14,960 --> 00:04:18,200 Speaker 4: for the rest of this year. RBA looks like they're 93 00:04:18,200 --> 00:04:19,880 Speaker 4: almost done. But you've got the ECB in the Bank 94 00:04:19,880 --> 00:04:22,160 Speaker 4: of England or is still going whole hog on that 95 00:04:22,240 --> 00:04:26,400 Speaker 4: rate tightening front, so that's also going to boost there. 96 00:04:26,480 --> 00:04:29,479 Speaker 4: That's so that's also helping their their currencies the same 97 00:04:29,520 --> 00:04:30,920 Speaker 4: time with the flip with the flip side of the 98 00:04:30,920 --> 00:04:31,760 Speaker 4: weaker greenback. 99 00:04:32,800 --> 00:04:38,000 Speaker 1: So can we take the recession talk off the table 100 00:04:38,200 --> 00:04:38,600 Speaker 1: right now? 101 00:04:40,800 --> 00:04:43,600 Speaker 3: Official recession? Yeah, it's possible. 102 00:04:43,680 --> 00:04:47,560 Speaker 4: I mean, we've always been in that soft, soft landing, 103 00:04:48,000 --> 00:04:50,560 Speaker 4: mild recession, moderate recession camp, but. 104 00:04:50,560 --> 00:04:52,280 Speaker 3: We were never in that hard landing camp. 105 00:04:52,279 --> 00:04:55,000 Speaker 4: And now I means it is quite possible that we 106 00:04:55,040 --> 00:04:57,080 Speaker 4: will see and some people always say, what the heck 107 00:04:57,080 --> 00:04:57,480 Speaker 4: does that mean? 108 00:04:57,520 --> 00:04:59,560 Speaker 3: But you know, no landing. At the very beginning, I 109 00:04:59,600 --> 00:05:00,600 Speaker 3: used to say landing. 110 00:05:00,360 --> 00:05:02,159 Speaker 4: Soft landing, no landing, And it's possible that we could 111 00:05:02,160 --> 00:05:05,120 Speaker 4: start seeing things glide and you know, like nothing is impossible, 112 00:05:05,160 --> 00:05:07,440 Speaker 4: but this is kind of looking more possible. But at 113 00:05:07,480 --> 00:05:10,279 Speaker 4: the same time, the longer they able rates up in 114 00:05:10,320 --> 00:05:13,800 Speaker 4: the in that restricted territory in order to get CPI 115 00:05:13,880 --> 00:05:16,080 Speaker 4: back down to two percent, we will probably need to 116 00:05:16,160 --> 00:05:18,000 Speaker 4: have that breaking in the economy. 117 00:05:18,120 --> 00:05:20,840 Speaker 5: Well, there's the recession for all of us, and then 118 00:05:20,880 --> 00:05:24,240 Speaker 5: there's the markets, right, and they don't always agree. Do 119 00:05:24,320 --> 00:05:27,800 Speaker 5: you envision us seeing a little bit more of a 120 00:05:27,920 --> 00:05:30,680 Speaker 5: risk on trade in the second half of the year 121 00:05:30,880 --> 00:05:35,120 Speaker 5: after the Fed does potentially start to tone down and 122 00:05:35,279 --> 00:05:38,320 Speaker 5: soften the rate height cycle that we're seeing. 123 00:05:38,880 --> 00:05:40,400 Speaker 3: We could see that's a good question. 124 00:05:40,440 --> 00:05:42,640 Speaker 4: So we could see risk on because of the fact 125 00:05:42,640 --> 00:05:45,760 Speaker 4: that the Fed is going to stop start talking about 126 00:05:45,839 --> 00:05:48,760 Speaker 4: leaving rates as is more firmly as opposed to talking 127 00:05:48,800 --> 00:05:51,720 Speaker 4: about needing more time. But at the same time, why 128 00:05:51,760 --> 00:05:54,360 Speaker 4: are they talking about needing more to aura staying on 129 00:05:54,400 --> 00:05:56,760 Speaker 4: hold is because the economy is finally starting to slow 130 00:05:57,040 --> 00:05:58,360 Speaker 4: and again this is when you're going to start to 131 00:05:58,400 --> 00:06:02,040 Speaker 4: see softer data. We're starting to talk about the debt 132 00:06:02,080 --> 00:06:05,280 Speaker 4: recession again, or at least that soft landing coming into 133 00:06:05,279 --> 00:06:07,279 Speaker 4: play in the fourth quarter or so. 134 00:06:07,279 --> 00:06:09,560 Speaker 3: So it's it's gonna be a little a little bit 135 00:06:09,520 --> 00:06:09,760 Speaker 3: of mix. 136 00:06:09,839 --> 00:06:11,320 Speaker 4: I don't know which one is going to oweigh the other, 137 00:06:11,400 --> 00:06:13,520 Speaker 4: because again, yes, it's good news for the markets that 138 00:06:13,560 --> 00:06:15,720 Speaker 4: the Fed's not going to keep tightening, but at least 139 00:06:15,720 --> 00:06:17,320 Speaker 4: at the same time, it's bad news because that means 140 00:06:17,360 --> 00:06:19,520 Speaker 4: the economy is slowing and it's not needed anymore. 141 00:06:20,520 --> 00:06:24,040 Speaker 1: So I guess one of the issues for a lot 142 00:06:24,040 --> 00:06:26,680 Speaker 1: of investors is just kind of you know, we think 143 00:06:26,720 --> 00:06:29,800 Speaker 1: beyond twenty four, I mean, yeah, beyond twenty three into 144 00:06:29,800 --> 00:06:32,039 Speaker 1: twenty four to twenty five, what kind of economic growth 145 00:06:32,360 --> 00:06:35,720 Speaker 1: do you think is reasonable for an economy that has 146 00:06:35,800 --> 00:06:37,200 Speaker 1: dealt with this much inflation? 147 00:06:38,600 --> 00:06:40,679 Speaker 4: So we're probably going to see at least some sub 148 00:06:41,240 --> 00:06:43,560 Speaker 4: below average at least for a little while. So we 149 00:06:43,640 --> 00:06:46,000 Speaker 4: you know, for this year, we have about one point 150 00:06:46,080 --> 00:06:48,200 Speaker 4: seven percent growth, and that was a little bit higher 151 00:06:48,240 --> 00:06:52,440 Speaker 4: than we had originally because of this delayed slow down. 152 00:06:52,640 --> 00:06:54,960 Speaker 4: But for next year, we've got I think it's a 153 00:06:55,200 --> 00:06:59,000 Speaker 4: half percent growth, which is obviously very sluggish. And then 154 00:06:59,040 --> 00:07:01,080 Speaker 4: for the year after we're going to start seeing some 155 00:07:01,200 --> 00:07:04,080 Speaker 4: improvement as the rate cuts start kicking in. But again, 156 00:07:03,880 --> 00:07:06,440 Speaker 4: I think we're probably going to see some sub average 157 00:07:06,480 --> 00:07:08,240 Speaker 4: growth at least over the next few years. 158 00:07:09,240 --> 00:07:11,920 Speaker 5: And where do you think that that sub average growth 159 00:07:12,000 --> 00:07:16,520 Speaker 5: is going to be the most prevalent in the coming years. 160 00:07:16,440 --> 00:07:18,440 Speaker 3: In terms of where? By by country or. 161 00:07:18,800 --> 00:07:23,480 Speaker 7: Yeah, yeah, like in terms of demo and geographic. 162 00:07:24,040 --> 00:07:26,960 Speaker 4: So I think the US will probably be just again 163 00:07:27,000 --> 00:07:28,720 Speaker 4: because America is you know, it's still going to be 164 00:07:28,720 --> 00:07:32,360 Speaker 4: the strongest with all the different positive fundamental factors behind it. 165 00:07:32,400 --> 00:07:35,640 Speaker 4: I think the US will still emerge, probably stronger than 166 00:07:36,680 --> 00:07:39,040 Speaker 4: emerge at a faster pace. I guess from this recept 167 00:07:39,040 --> 00:07:42,000 Speaker 4: from the slowdown than everyone else. The areas where I'm 168 00:07:42,040 --> 00:07:43,680 Speaker 4: going to be a little bit more worried will be 169 00:07:44,040 --> 00:07:47,000 Speaker 4: Europe and the UK, only because you know, they've already 170 00:07:47,040 --> 00:07:49,000 Speaker 4: had the other issues you know that are not related 171 00:07:49,000 --> 00:07:51,520 Speaker 4: to pandemic, you know, like Brexit for example. At the 172 00:07:51,520 --> 00:07:55,239 Speaker 4: same time, you also have higher inflation and higher interest 173 00:07:55,320 --> 00:07:58,600 Speaker 4: rates staying longer higher for longer there, and they're again 174 00:07:58,640 --> 00:08:01,200 Speaker 4: they're still going a whole hog on tightening front. I 175 00:08:01,240 --> 00:08:03,720 Speaker 4: think the ACB minutes today we're alluding to the fact 176 00:08:03,720 --> 00:08:06,200 Speaker 4: that you know, there are more governing Council members from 177 00:08:06,200 --> 00:08:09,040 Speaker 4: the ACV are thinking about September. I think it's a 178 00:08:09,080 --> 00:08:11,120 Speaker 4: bit early, but you know that's something that you know, 179 00:08:11,160 --> 00:08:14,240 Speaker 4: it's becoming more of a reality, possibly in the next 180 00:08:14,280 --> 00:08:15,080 Speaker 4: in the next little while. 181 00:08:15,480 --> 00:08:18,040 Speaker 1: Jennifer, you also got another initial job as claims number 182 00:08:18,080 --> 00:08:20,720 Speaker 1: today came in better than expected, uh and showing a 183 00:08:20,760 --> 00:08:23,880 Speaker 1: decline from from from last week. Again, just another data 184 00:08:23,920 --> 00:08:26,800 Speaker 1: point on what is kind of a very solid labor market. 185 00:08:26,880 --> 00:08:28,800 Speaker 1: What do you make of this labor market? Is this 186 00:08:28,880 --> 00:08:29,640 Speaker 1: surprised you at all? 187 00:08:29,640 --> 00:08:30,440 Speaker 6: The strength. 188 00:08:32,200 --> 00:08:32,680 Speaker 3: Broadly? 189 00:08:33,040 --> 00:08:35,040 Speaker 4: No, And then I mean it's still strong. At the 190 00:08:35,080 --> 00:08:37,000 Speaker 4: same time, it is starting to soften, you know that. 191 00:08:37,440 --> 00:08:40,280 Speaker 4: You know, two hundred thousand, nine thousand increases that we 192 00:08:40,280 --> 00:08:42,880 Speaker 4: saw on perros was still below expected. But like I 193 00:08:42,880 --> 00:08:45,800 Speaker 4: said before, any during any other given year, it's still 194 00:08:45,800 --> 00:08:48,240 Speaker 4: a very solid number. But I think there are still 195 00:08:48,280 --> 00:08:52,800 Speaker 4: some other issues that are coming in play, like again demographics, 196 00:08:53,000 --> 00:08:57,600 Speaker 4: people retire, changing retirement patterns, people retiring earlier, people having 197 00:08:57,600 --> 00:09:00,720 Speaker 4: the fewer kids, you know, so all and of course 198 00:09:00,760 --> 00:09:02,760 Speaker 4: the aging of the of the of the global population. 199 00:09:02,920 --> 00:09:06,240 Speaker 4: All that feeds into tighter lot but labor markets. So 200 00:09:06,280 --> 00:09:07,720 Speaker 4: this is an issue I think that's going to be 201 00:09:08,000 --> 00:09:09,640 Speaker 4: playing on for some time. It's not going to be 202 00:09:09,679 --> 00:09:12,000 Speaker 4: like what we saw earlier, like half a year ago, 203 00:09:12,200 --> 00:09:14,040 Speaker 4: but at the same time, it's not going to be. 204 00:09:15,480 --> 00:09:18,160 Speaker 3: As loose, I guess, as you know, one would expect. 205 00:09:18,760 --> 00:09:20,439 Speaker 3: It was interesting. I was looking at the NFI the 206 00:09:21,000 --> 00:09:22,400 Speaker 3: survey earlier this week. 207 00:09:22,640 --> 00:09:24,680 Speaker 4: I was looking at like over the past decades, Like 208 00:09:24,720 --> 00:09:27,240 Speaker 4: you know, the they were talking about the single biggest 209 00:09:27,240 --> 00:09:29,959 Speaker 4: problem that you're reporting. So over the last decade, I 210 00:09:30,000 --> 00:09:32,440 Speaker 4: think the inflation. Of course it was like up and down, 211 00:09:32,679 --> 00:09:35,360 Speaker 4: but overall it was still pretty modest, being the inflation 212 00:09:35,400 --> 00:09:36,720 Speaker 4: being the number one problem, but. 213 00:09:37,000 --> 00:09:40,320 Speaker 3: Labor market labor quality was like still owned around the. 214 00:09:40,320 --> 00:09:41,920 Speaker 1: Yeah, Jennif're gonna have to wrap it up right there 215 00:09:41,920 --> 00:09:43,520 Speaker 1: just because of the time, but appreciate getting your thoughts. 216 00:09:43,559 --> 00:09:46,440 Speaker 1: Jennifer Lee, Senior economist at BMO Capital Markets. 217 00:09:46,520 --> 00:09:47,360 Speaker 6: This is Bloomberg. 218 00:09:48,760 --> 00:09:52,640 Speaker 8: You're listening to the team can't Live program Bloomberg Markets 219 00:09:52,640 --> 00:09:55,760 Speaker 8: weekdays at ten am Eastern on Bloomberg dot Com, the 220 00:09:55,840 --> 00:09:58,960 Speaker 8: iHeartRadio app and the Bloomberg Business app, or listening on 221 00:09:59,040 --> 00:10:01,560 Speaker 8: demand wherever you good your podcast. 222 00:10:02,559 --> 00:10:03,920 Speaker 6: Tech Talk Today a good one. 223 00:10:04,360 --> 00:10:09,199 Speaker 1: We have folks at Huawei Technologies Steve Geisler, US Chief 224 00:10:09,240 --> 00:10:15,680 Speaker 1: Intellectual Property Council and Andy Perty, Huawei USA Chief Security Officer. 225 00:10:15,920 --> 00:10:18,240 Speaker 1: They joined us for a roundtable in Huawei's twenty twenty 226 00:10:18,240 --> 00:10:23,240 Speaker 1: three Innovation and IP form at its Chinese headquarters today. Steve, 227 00:10:23,280 --> 00:10:24,839 Speaker 1: before we get to kind of what you guys are 228 00:10:24,880 --> 00:10:28,600 Speaker 1: doing at your forum today in Shenzhen, China. Talk to 229 00:10:28,720 --> 00:10:32,480 Speaker 1: Steve what it's like at your company dealing with sanctions, 230 00:10:32,520 --> 00:10:37,560 Speaker 1: just particularly the US. How has that impacted your business? 231 00:10:39,080 --> 00:10:43,640 Speaker 9: So my business, I'm a lawyer within the Huawei corporate family, 232 00:10:43,840 --> 00:10:46,480 Speaker 9: so for me personally, it means more work. 233 00:10:47,000 --> 00:10:47,400 Speaker 10: It does. 234 00:10:47,440 --> 00:10:50,840 Speaker 9: However, me as an American, I have to always be 235 00:10:50,920 --> 00:10:55,720 Speaker 9: mindful of the export control and the distanctions laws. Because 236 00:10:56,000 --> 00:10:59,000 Speaker 9: I work in intellectual property. That does, of course put 237 00:10:59,000 --> 00:11:02,040 Speaker 9: some constraints on me. But by and large, my day 238 00:11:02,080 --> 00:11:06,480 Speaker 9: to day job deals with patents which are publicly known. 239 00:11:06,559 --> 00:11:09,280 Speaker 9: Of course, the word patent means open, so I deal 240 00:11:09,360 --> 00:11:13,000 Speaker 9: with technologies once they've already become public, and I deal 241 00:11:13,679 --> 00:11:17,280 Speaker 9: a lot with licensing with other companies, and so my 242 00:11:17,440 --> 00:11:20,480 Speaker 9: day to day job is not impacted nearly as much 243 00:11:20,520 --> 00:11:23,880 Speaker 9: as if I were, say an engineer working within the 244 00:11:23,960 --> 00:11:25,440 Speaker 9: Huawei corporate family. 245 00:11:26,080 --> 00:11:28,160 Speaker 5: Okay, well, because you're a lawyer, I know that you 246 00:11:28,200 --> 00:11:30,720 Speaker 5: are not going to answer this question, Steven, but just 247 00:11:30,760 --> 00:11:34,400 Speaker 5: to throw it to you, what does Huawe's return to 248 00:11:34,440 --> 00:11:37,040 Speaker 5: the five G phone market look like? And what does 249 00:11:37,080 --> 00:11:41,040 Speaker 5: the smartphone business continue to look like for Huawei given 250 00:11:41,080 --> 00:11:41,800 Speaker 5: these sanctions? 251 00:11:43,280 --> 00:11:46,160 Speaker 9: I will definitely give you the lawyerly answer, but the 252 00:11:46,160 --> 00:11:48,959 Speaker 9: correct answer. My job really is not to predict it. 253 00:11:48,960 --> 00:11:52,160 Speaker 9: It's just to prepare. So if Huawei were to return 254 00:11:52,200 --> 00:11:54,440 Speaker 9: to the five G phone market, I need to make 255 00:11:54,480 --> 00:11:57,880 Speaker 9: sure that we have the licenses in place, such as 256 00:11:58,360 --> 00:12:02,680 Speaker 9: the five G Standard Essential Path licenses with our licensing 257 00:12:02,720 --> 00:12:05,200 Speaker 9: partners to make sure that we would allow for that. 258 00:12:05,280 --> 00:12:08,640 Speaker 9: Quawei previously did have five five G phones, so we 259 00:12:08,720 --> 00:12:12,200 Speaker 9: have most of those patents patent license agreements already in place. 260 00:12:12,520 --> 00:12:15,719 Speaker 9: So I my part, my role in terms of preparation 261 00:12:16,480 --> 00:12:21,240 Speaker 9: for such a contingency is already underway. But in terms 262 00:12:21,240 --> 00:12:26,520 Speaker 9: of predicting and in the sales visibility of our product mix, 263 00:12:27,000 --> 00:12:29,360 Speaker 9: people like Andy certainly can can address that. 264 00:12:29,440 --> 00:12:30,959 Speaker 11: But for me, I prepare. 265 00:12:31,040 --> 00:12:34,319 Speaker 3: I don't predict, all right, so let me job. 266 00:12:34,520 --> 00:12:36,240 Speaker 6: So Andy, let's let's let's bring you in here. 267 00:12:36,280 --> 00:12:40,120 Speaker 1: Andy Purtty, chief Security Officer or Huawei Technologies in the US. 268 00:12:40,200 --> 00:12:43,120 Speaker 1: Talk to us about what you guys are doing, uh 269 00:12:43,160 --> 00:12:46,000 Speaker 1: with this innovation in ip form in Shenzen today. What 270 00:12:46,040 --> 00:12:47,959 Speaker 1: are some of the big products and services you guys 271 00:12:48,000 --> 00:12:49,079 Speaker 1: are talking about here. 272 00:12:49,760 --> 00:12:52,600 Speaker 12: Yeah, this is a part of our bigger effort that 273 00:12:53,200 --> 00:12:56,800 Speaker 12: you touched only with Steve A moment ago. Given the 274 00:12:56,920 --> 00:12:59,679 Speaker 12: situation that we face in the United States and around 275 00:12:59,679 --> 00:13:03,000 Speaker 12: the world, we've been trying to and we've been successful 276 00:13:03,400 --> 00:13:07,160 Speaker 12: at adjusting our business strategy and changing our portfolios with 277 00:13:07,240 --> 00:13:10,200 Speaker 12: a huge historic investment in R and B over twenty 278 00:13:10,200 --> 00:13:13,520 Speaker 12: five percent of our global revenues, so that we can 279 00:13:13,600 --> 00:13:17,559 Speaker 12: customize our products for our carriers, our enterprises, and our consumers. 280 00:13:17,760 --> 00:13:20,640 Speaker 12: But the three key things of technology that we are 281 00:13:20,679 --> 00:13:25,640 Speaker 12: embracing that are part of that are digitalization, intelligence, and 282 00:13:25,679 --> 00:13:29,240 Speaker 12: carbon neutrality. So our focus company has been on connectivity, 283 00:13:29,280 --> 00:13:35,520 Speaker 12: computing devices, intelligent auto solutions, and digitalization of power. And 284 00:13:35,559 --> 00:13:38,439 Speaker 12: you can see that in the example we talk about AI, 285 00:13:38,559 --> 00:13:42,080 Speaker 12: the pengu Ai three dot zero that we're going to 286 00:13:42,080 --> 00:13:44,600 Speaker 12: be talking about in this conference, which is heavily focused 287 00:13:44,640 --> 00:13:49,240 Speaker 12: on weather and the Nature magazine has just issued a 288 00:13:49,280 --> 00:13:52,240 Speaker 12: major article about weather prediction. It's very exciting about how 289 00:13:52,640 --> 00:13:56,080 Speaker 12: AI is making going to make every industry more productive 290 00:13:56,120 --> 00:13:59,240 Speaker 12: and efficient and it's going to reshape all industries with 291 00:13:59,320 --> 00:14:02,760 Speaker 12: a focus is really on industry industry AI. 292 00:14:03,920 --> 00:14:04,640 Speaker 6: So Andy just. 293 00:14:04,679 --> 00:14:08,880 Speaker 1: From the technology standpoint, the commercial standpoint, what are your 294 00:14:08,920 --> 00:14:12,240 Speaker 1: leaders in China telling you about, you know, kind of 295 00:14:12,280 --> 00:14:15,720 Speaker 1: their strategy for dealing with the West, whether as customers, 296 00:14:15,720 --> 00:14:20,800 Speaker 1: as supply chain, what scenario you're operating under, like how 297 00:14:20,840 --> 00:14:22,480 Speaker 1: you create a three to five year business plan. 298 00:14:23,640 --> 00:14:28,160 Speaker 12: Well, as I said, we have, we're leveraging the convergence 299 00:14:28,200 --> 00:14:33,480 Speaker 12: of technologies five G, cloud, censor technology, AI, catalyzing the 300 00:14:33,560 --> 00:14:36,760 Speaker 12: digitalization of industries that we've been working on, and actually 301 00:14:36,800 --> 00:14:38,600 Speaker 12: moving toward five point five G, which is some of 302 00:14:38,640 --> 00:14:40,800 Speaker 12: the other things we're going to be talking about today. 303 00:14:41,040 --> 00:14:44,040 Speaker 12: So we're heavily investing in what we can do in 304 00:14:44,080 --> 00:14:48,760 Speaker 12: terms of develop technologies to help the telecom carriers raise 305 00:14:48,840 --> 00:14:53,040 Speaker 12: their capabilities to supply five G and hopefully five point 306 00:14:53,080 --> 00:14:57,320 Speaker 12: five G, and to help the customers and industry spectors 307 00:14:57,360 --> 00:15:00,000 Speaker 12: around the world, such as you can see the benefits 308 00:15:00,120 --> 00:15:01,400 Speaker 12: the Panglo three dot ZHO. 309 00:15:02,840 --> 00:15:05,320 Speaker 5: So, given that, I'm curious if this kind of overall 310 00:15:05,360 --> 00:15:08,840 Speaker 5: push into IP licensing, does that mean that your focus 311 00:15:08,920 --> 00:15:13,440 Speaker 5: is more on back end technology versus more consumer facing products. 312 00:15:15,080 --> 00:15:17,240 Speaker 12: Steve, you may want to touch on this also, but no, 313 00:15:17,360 --> 00:15:21,480 Speaker 12: it's the smartphone issue has been what was dramatically affected 314 00:15:21,520 --> 00:15:24,960 Speaker 12: the ability of American companies to sell the nonsensitive five 315 00:15:25,040 --> 00:15:29,000 Speaker 12: G five G chips for our phones. So everything else 316 00:15:29,040 --> 00:15:31,840 Speaker 12: we've been emphasizing with the digitalization, and we've been able 317 00:15:32,240 --> 00:15:36,800 Speaker 12: to our enterprise business by thirty percent in twenty twenty two. 318 00:15:37,680 --> 00:15:41,480 Speaker 12: Using the themes of digitalization and digital transformation. We've leveled 319 00:15:41,480 --> 00:15:44,520 Speaker 12: off that drop in our consumer business and we expect 320 00:15:44,560 --> 00:15:48,360 Speaker 12: our carrier business to meet expectations. 321 00:15:49,760 --> 00:15:51,360 Speaker 1: Steve, you have any thoughts there as to kind of 322 00:15:51,360 --> 00:15:53,480 Speaker 1: how you guys are navigating some of the from a 323 00:15:53,520 --> 00:15:54,320 Speaker 1: patent perspective. 324 00:15:55,800 --> 00:15:59,000 Speaker 9: Yeah, so, as any said, so, the IP actually is 325 00:15:59,000 --> 00:16:02,240 Speaker 9: somewhat detached, and that's not completely detachedble we typically are 326 00:16:02,240 --> 00:16:05,080 Speaker 9: going to be patenting the same technologies that would be 327 00:16:05,120 --> 00:16:08,720 Speaker 9: in our product mix. However, just because we don't sell 328 00:16:08,760 --> 00:16:10,600 Speaker 9: a product in the United States does not mean we're 329 00:16:10,640 --> 00:16:12,240 Speaker 9: not going to get a US patent. 330 00:16:12,360 --> 00:16:13,760 Speaker 10: So, for instance, as of the end of. 331 00:16:13,760 --> 00:16:16,600 Speaker 9: Last year, we had one hundred and twenty thousand patents 332 00:16:16,640 --> 00:16:20,520 Speaker 9: globally that were active, including about twenty two thousand active 333 00:16:20,640 --> 00:16:24,400 Speaker 9: US patents. We had about forty thousand Chinese and European 334 00:16:25,120 --> 00:16:27,400 Speaker 9: patents each at the. 335 00:16:27,360 --> 00:16:28,280 Speaker 10: End of last year. 336 00:16:28,480 --> 00:16:33,200 Speaker 9: But in terms of the patenting, we just for instance, 337 00:16:33,840 --> 00:16:37,000 Speaker 9: Wi Fi six, which is the new version of Wi 338 00:16:37,000 --> 00:16:41,320 Speaker 9: Fi that is now being commercialized that's out on the market. 339 00:16:42,200 --> 00:16:46,760 Speaker 9: Quawei has about twenty percent nineteen to twenty percent of 340 00:16:46,800 --> 00:16:50,560 Speaker 9: the standard essential patents that would be used when someone 341 00:16:50,800 --> 00:16:53,880 Speaker 9: is making, using, or selling a Wi Fi six enabled product. 342 00:16:54,560 --> 00:16:57,000 Speaker 9: So that is the type of R and D that 343 00:16:57,120 --> 00:16:59,800 Speaker 9: as And said, we actually have increased R and D 344 00:17:00,040 --> 00:17:05,120 Speaker 9: funding up to twenty three billion US dollars last year alone, 345 00:17:05,240 --> 00:17:08,080 Speaker 9: and so Bawa has no choice but to continue to 346 00:17:08,280 --> 00:17:12,919 Speaker 9: innovate and still has product sales. However, those products sales geographically, 347 00:17:13,760 --> 00:17:17,600 Speaker 9: the footprint has changed since five years ago, and also 348 00:17:17,680 --> 00:17:21,240 Speaker 9: the product mix. There's a different focus for sure within 349 00:17:21,359 --> 00:17:22,280 Speaker 9: various industries. 350 00:17:22,520 --> 00:17:25,679 Speaker 5: Andy, in our final minute with you here, given what 351 00:17:26,560 --> 00:17:29,960 Speaker 5: Stephen was just talking about with ideation and R and D, 352 00:17:30,119 --> 00:17:32,760 Speaker 5: what do your plans look like for five G chip 353 00:17:32,800 --> 00:17:35,199 Speaker 5: procurement domestically in China. 354 00:17:36,480 --> 00:17:37,400 Speaker 11: Well, we have. 355 00:17:37,400 --> 00:17:41,040 Speaker 12: Been continuing to emphasize the diversification our portfolio of our 356 00:17:41,080 --> 00:17:44,320 Speaker 12: supply chain so that we can meet the needs of 357 00:17:44,359 --> 00:17:48,639 Speaker 12: our customers. I don't have any comment yet on the 358 00:17:48,680 --> 00:17:53,080 Speaker 12: explosion of news stories on what we're talked about, but 359 00:17:53,280 --> 00:17:55,920 Speaker 12: we are proceeding on the assumption that we have certain 360 00:17:55,960 --> 00:17:58,400 Speaker 12: limitations and we're going to continue to grow our businesses 361 00:17:58,440 --> 00:18:01,680 Speaker 12: in other areas such as small finding, smart roots, smartboards, 362 00:18:01,760 --> 00:18:05,920 Speaker 12: electric power railway and moving into five point five, which 363 00:18:05,920 --> 00:18:07,680 Speaker 12: is very exciting. Frankly, you know, when you talk about 364 00:18:07,720 --> 00:18:12,280 Speaker 12: the one piece of the technology innovation our leaders of 365 00:18:12,359 --> 00:18:14,399 Speaker 12: Ken who are vice chairman, is estimated we look at 366 00:18:14,440 --> 00:18:17,119 Speaker 12: AID ninety eight percent of all AI is going to 367 00:18:17,119 --> 00:18:20,640 Speaker 12: be industry and some agriculture, and only two percent is consumer. 368 00:18:20,800 --> 00:18:23,840 Speaker 12: And the focus recently has been on consumer, the generated AI, 369 00:18:24,119 --> 00:18:25,800 Speaker 12: but it's going to be much more important than that 370 00:18:26,119 --> 00:18:26,680 Speaker 12: to the world. 371 00:18:27,760 --> 00:18:29,600 Speaker 6: All right, Andy, thank you so much for joining us. 372 00:18:29,800 --> 00:18:34,120 Speaker 1: Andy Purty, chief security officer for Huawei Technologies in Steve Geisler, 373 00:18:34,320 --> 00:18:37,240 Speaker 1: US chief Intellectual Property Council, and I know both of 374 00:18:37,240 --> 00:18:41,200 Speaker 1: these gentlemen got their law degrees from the University of Virginia. 375 00:18:41,240 --> 00:18:42,240 Speaker 6: So wahu wa. 376 00:18:42,320 --> 00:18:45,440 Speaker 8: You're listening to the tape Can's our live program Bloomberg 377 00:18:45,520 --> 00:18:49,119 Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the 378 00:18:49,160 --> 00:18:51,240 Speaker 8: tune in app, Bloomberg dot Com. 379 00:18:50,960 --> 00:18:52,400 Speaker 13: And the Bloomberg Business app. 380 00:18:52,440 --> 00:18:55,239 Speaker 8: You can also listen live on Amazon Alexa from our 381 00:18:55,280 --> 00:19:00,359 Speaker 8: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 382 00:19:01,040 --> 00:19:03,840 Speaker 6: We're welcoming Randy swimmer into the studio as well. Always 383 00:19:03,880 --> 00:19:04,720 Speaker 6: left chatting with Randy. 384 00:19:04,760 --> 00:19:06,919 Speaker 1: He's co head of senior Lending and he's a senior 385 00:19:06,920 --> 00:19:09,920 Speaker 1: managing director Churchill Asset Management. Randy, one of the many 386 00:19:09,920 --> 00:19:11,679 Speaker 1: reasons we love speaking to you because you're an expert 387 00:19:11,680 --> 00:19:13,800 Speaker 1: in this private credit business out there, which has been 388 00:19:13,840 --> 00:19:17,040 Speaker 1: such a hot market getting lots of capital and has 389 00:19:17,080 --> 00:19:18,879 Speaker 1: really become a big part of the capital market. It's 390 00:19:18,920 --> 00:19:22,160 Speaker 1: really passed since the Great Financial Crisis. How is your 391 00:19:22,200 --> 00:19:25,600 Speaker 1: business today in what appears to be a market that 392 00:19:26,119 --> 00:19:30,479 Speaker 1: is seeing inflation moderate maybe taking the recession story off 393 00:19:30,560 --> 00:19:31,600 Speaker 1: the table a little bit. 394 00:19:31,640 --> 00:19:32,080 Speaker 6: How's that? 395 00:19:32,119 --> 00:19:34,920 Speaker 1: How are you seeing that in your business of directly lending? 396 00:19:35,040 --> 00:19:37,040 Speaker 14: Yeah, first of all, thanks again for having me on. 397 00:19:37,160 --> 00:19:39,439 Speaker 14: So I did some homework just for you, Paul. So 398 00:19:39,880 --> 00:19:43,679 Speaker 14: looked for the first half numbers for our business to 399 00:19:43,720 --> 00:19:46,520 Speaker 14: sort of get a sense for how we're doing. Turns out, 400 00:19:46,560 --> 00:19:48,960 Speaker 14: and we have a senior debt business and a junior 401 00:19:48,960 --> 00:19:52,040 Speaker 14: capital business all with you know, under the Churchill banner. 402 00:19:52,640 --> 00:19:55,879 Speaker 14: We did one hundred and seventy five deals in the 403 00:19:55,920 --> 00:20:00,320 Speaker 14: first half of the year. Okay, five billion dollars across 404 00:20:00,359 --> 00:20:01,320 Speaker 14: those two platforms. 405 00:20:01,400 --> 00:20:04,479 Speaker 6: Right, So, I was like whoa, that's your firm, by 406 00:20:04,480 --> 00:20:04,960 Speaker 6: the way. 407 00:20:04,880 --> 00:20:09,320 Speaker 14: So we're like total committed capital of about forty six billion, 408 00:20:10,080 --> 00:20:13,200 Speaker 14: and then you throw our Arkmont sister company in Europe, 409 00:20:13,240 --> 00:20:15,840 Speaker 14: they're another twenty twenty five billion, so you know. But 410 00:20:15,960 --> 00:20:18,680 Speaker 14: the thing that surprised me a little bit is that 411 00:20:19,080 --> 00:20:22,359 Speaker 14: despite a lot of the softness in M and A 412 00:20:22,480 --> 00:20:25,159 Speaker 14: that we saw on the first half, what's driving our 413 00:20:25,240 --> 00:20:29,520 Speaker 14: deal flow is the kind of migration from public credit 414 00:20:29,560 --> 00:20:32,560 Speaker 14: to private credit because the banks have been a bit 415 00:20:32,640 --> 00:20:36,080 Speaker 14: offline with some of the liquid loans. They don't have 416 00:20:36,280 --> 00:20:39,960 Speaker 14: clearing price, they don't have COLO formation, a lot of 417 00:20:40,000 --> 00:20:42,840 Speaker 14: the cache is coming out of retail funds not going in, 418 00:20:43,400 --> 00:20:45,080 Speaker 14: and so they're a bit offline, and so a lot 419 00:20:45,080 --> 00:20:46,879 Speaker 14: of that activity has come to the direct lender, so 420 00:20:46,920 --> 00:20:49,439 Speaker 14: that's helping us. And then we have the scale we 421 00:20:49,440 --> 00:20:52,439 Speaker 14: can commit you know, four or five hundred million dollars 422 00:20:52,800 --> 00:20:55,960 Speaker 14: per deal and get stuff done. So those combinations of 423 00:20:56,000 --> 00:20:57,720 Speaker 14: things makes it right now pretty attractive. 424 00:20:58,119 --> 00:21:00,719 Speaker 15: So so back when the FED was a zero in 425 00:21:00,760 --> 00:21:05,400 Speaker 15: the ten year, wasn't even at two percent, the demand 426 00:21:05,440 --> 00:21:09,960 Speaker 15: for private credit from investors was very high because a huge, 427 00:21:10,040 --> 00:21:13,840 Speaker 15: huge premium with not a whole lot more risk for 428 00:21:13,920 --> 00:21:17,800 Speaker 15: better returns. Now that you get five percent plus on 429 00:21:17,960 --> 00:21:21,560 Speaker 15: corporates and unis are not that far behind, how does 430 00:21:21,600 --> 00:21:24,800 Speaker 15: that affect your investor base? What are they looking at 431 00:21:24,880 --> 00:21:27,119 Speaker 15: in the world of private credit as a as an 432 00:21:27,160 --> 00:21:27,800 Speaker 15: asset class. 433 00:21:27,800 --> 00:21:30,640 Speaker 14: So Barry, that's exactly the question that comes up at 434 00:21:30,640 --> 00:21:35,320 Speaker 14: these investor meetings, and the answer is that the opportunity 435 00:21:35,359 --> 00:21:38,960 Speaker 14: in private debt is not necessarily a timing thing, because 436 00:21:39,320 --> 00:21:41,920 Speaker 14: to your point, it was very attractive two years ago. 437 00:21:42,440 --> 00:21:47,040 Speaker 14: It's more attractive from a pure yield perspective today relative 438 00:21:47,080 --> 00:21:50,560 Speaker 14: still relative to corporates. The question is how long will 439 00:21:50,600 --> 00:21:56,119 Speaker 14: that attractive corporate and high yield bond trade last. If 440 00:21:56,240 --> 00:21:58,120 Speaker 14: what Paul says, it's true, and we're starting to see 441 00:21:58,119 --> 00:22:00,320 Speaker 14: a little softening in the numbers which we saw today, 442 00:22:00,720 --> 00:22:02,600 Speaker 14: and it looks like the FED might you know, maybe 443 00:22:02,600 --> 00:22:05,680 Speaker 14: they raised once, maybe they you know, maybe once and done. 444 00:22:05,880 --> 00:22:08,159 Speaker 14: Then at some point rates are going to start to 445 00:22:08,200 --> 00:22:10,399 Speaker 14: come down. What's going to happen for investors who are 446 00:22:10,400 --> 00:22:14,200 Speaker 14: looking for long term income streams is they're going to 447 00:22:14,240 --> 00:22:17,200 Speaker 14: see those corporate bond rates start to come back down again, 448 00:22:17,520 --> 00:22:20,960 Speaker 14: and eventually whether it goes back down to where bonds 449 00:22:20,960 --> 00:22:23,240 Speaker 14: were kind of three to four percent the way they 450 00:22:23,280 --> 00:22:26,560 Speaker 14: were two years ago or something in between where they 451 00:22:26,560 --> 00:22:30,680 Speaker 14: are now. It's going to come down. Whereas the illiquidity 452 00:22:30,880 --> 00:22:34,199 Speaker 14: premium that investors in private debt get has been the 453 00:22:34,280 --> 00:22:38,040 Speaker 14: same throughout that period, roughly three hundred basis points. So 454 00:22:38,080 --> 00:22:41,919 Speaker 14: whatever liquid is getting, we're getting three percent more. 455 00:22:41,760 --> 00:22:45,560 Speaker 15: We've been discussing the window that has been opening up 456 00:22:45,920 --> 00:22:51,240 Speaker 15: to extenduration lock in higher rates after the better part 457 00:22:51,240 --> 00:22:55,000 Speaker 15: of a decade of you know, bonds not really generating 458 00:22:55,040 --> 00:22:59,640 Speaker 15: a lot. Suddenly, whether it's private credit or corporates vis 459 00:23:00,280 --> 00:23:03,200 Speaker 15: this whole asset class has become a whole lot more attractive. 460 00:23:03,640 --> 00:23:05,680 Speaker 15: But who knows how long that window is going to 461 00:23:05,720 --> 00:23:06,200 Speaker 15: be open. 462 00:23:06,040 --> 00:23:09,040 Speaker 14: For correct And so the thing about private debt is 463 00:23:09,040 --> 00:23:13,760 Speaker 14: that you can trace the higher yields and better structures 464 00:23:13,800 --> 00:23:17,159 Speaker 14: and all the things that you know back for decades. 465 00:23:17,520 --> 00:23:21,800 Speaker 14: So the opportunity really isn't a timing issue. It's more 466 00:23:21,840 --> 00:23:25,479 Speaker 14: of a strategic issue. You decide that you are going 467 00:23:25,560 --> 00:23:30,720 Speaker 14: to have some part of your portfolio always in private debt. 468 00:23:30,760 --> 00:23:32,920 Speaker 14: And so what we're seeing now with our investors and 469 00:23:33,080 --> 00:23:36,960 Speaker 14: increasing number of them are saying, you know, I want five, ten, fifteen, percent, 470 00:23:37,000 --> 00:23:40,679 Speaker 14: whatever that number is always in my overall portfolio. I 471 00:23:40,720 --> 00:23:43,520 Speaker 14: have room for fixed income, I've got room for public equities, 472 00:23:43,600 --> 00:23:46,040 Speaker 14: I've got room for real estate, but I really want 473 00:23:46,119 --> 00:23:47,760 Speaker 14: some core assets in private debt. 474 00:23:48,400 --> 00:23:52,120 Speaker 5: But does that allocation start to change as people maybe 475 00:23:52,160 --> 00:23:55,040 Speaker 5: get a little bit of FOMO for things like an 476 00:23:55,040 --> 00:23:56,600 Speaker 5: AI rally for example. 477 00:23:57,400 --> 00:24:02,359 Speaker 14: Well, what's happening in the public market is that things 478 00:24:02,440 --> 00:24:05,119 Speaker 14: will come and go depending on where the current trade is. 479 00:24:05,119 --> 00:24:09,080 Speaker 14: To your point, and we saw obviously rally and technology 480 00:24:09,080 --> 00:24:12,040 Speaker 14: stocks and so forth. But what happens is depending on 481 00:24:12,119 --> 00:24:16,000 Speaker 14: what's going on with the rest of the economic climate, 482 00:24:16,119 --> 00:24:20,280 Speaker 14: some of those opportunities tend to fade. We certainly saw 483 00:24:20,320 --> 00:24:23,240 Speaker 14: that with crypto. We've seen that, you know in other areas, 484 00:24:23,960 --> 00:24:27,520 Speaker 14: the Spack rally for example, that we were talking about 485 00:24:27,560 --> 00:24:30,360 Speaker 14: here in the studios a year or two ago. And 486 00:24:31,000 --> 00:24:33,600 Speaker 14: the thing that investors really want to focus on now 487 00:24:33,800 --> 00:24:38,480 Speaker 14: is stability. Okay, so yield is great, but stability of 488 00:24:38,520 --> 00:24:42,280 Speaker 14: income is even more important to them, and so going 489 00:24:42,359 --> 00:24:45,359 Speaker 14: into it with an manager that has a track record 490 00:24:45,400 --> 00:24:50,080 Speaker 14: to deliver these stable, higher returns is probably foremost in 491 00:24:50,119 --> 00:24:50,480 Speaker 14: their minds. 492 00:24:50,560 --> 00:24:53,160 Speaker 1: Right now, what sectors do you guys like these days 493 00:24:53,160 --> 00:24:55,760 Speaker 1: he did a Conjigian transactions in the first six months, 494 00:24:56,320 --> 00:24:58,159 Speaker 1: or some sectors you're you really like here, or some 495 00:24:58,200 --> 00:24:58,800 Speaker 1: of you're invoiding. 496 00:24:58,880 --> 00:25:01,199 Speaker 14: I know you're gonna ask this question, and so I 497 00:25:01,280 --> 00:25:04,080 Speaker 14: went back and that by far and away, it's business 498 00:25:04,080 --> 00:25:10,320 Speaker 14: services because things that companies like landscaping companies. I like 499 00:25:10,359 --> 00:25:14,360 Speaker 14: to use this because regardless of whether building is occupied 500 00:25:14,480 --> 00:25:17,720 Speaker 14: or not, you still have to modilawn, plow the snow, 501 00:25:18,200 --> 00:25:22,320 Speaker 14: had you trim the hedges, and so landscaping escaping companies 502 00:25:22,320 --> 00:25:25,480 Speaker 14: because they have to be there. Twenty four to seven 503 00:25:25,840 --> 00:25:29,399 Speaker 14: alarm companies, same thing. Security businesses, anything where you have 504 00:25:29,520 --> 00:25:32,200 Speaker 14: consistent cash flow and growth over a long period of time. 505 00:25:32,640 --> 00:25:36,840 Speaker 14: Those are the kinds of companies we like. Healthcare, technology, software, 506 00:25:37,760 --> 00:25:41,240 Speaker 14: logistics businesses, anything that requires moving boxes around. Right now, 507 00:25:41,240 --> 00:25:42,800 Speaker 14: I mean, I don't know about you, but my family's 508 00:25:42,920 --> 00:25:45,920 Speaker 14: ordering more boxes, delivering to the front door, and all 509 00:25:46,040 --> 00:25:50,679 Speaker 14: the support, the back office, the middle office related to 510 00:25:50,800 --> 00:25:52,840 Speaker 14: those kinds of businesses are doing well right now. 511 00:25:54,200 --> 00:25:59,479 Speaker 15: Really quite interesting. You know, last year, before we really 512 00:25:59,600 --> 00:26:03,200 Speaker 15: had a firm grasp of exactly how fast and far 513 00:26:03,720 --> 00:26:07,560 Speaker 15: CPI would would fall, a lot of people piled into 514 00:26:08,240 --> 00:26:11,879 Speaker 15: private debt, especially with a lot of younger companies. You 515 00:26:11,880 --> 00:26:14,840 Speaker 15: guys have been around for a long time. I'm wondering 516 00:26:14,960 --> 00:26:18,080 Speaker 15: how you look at the competition in the space and 517 00:26:18,480 --> 00:26:22,360 Speaker 15: how many people kind of top ticked the market last year. 518 00:26:22,440 --> 00:26:25,960 Speaker 14: Yeah, So one of the questions from a credit perspective is, 519 00:26:26,000 --> 00:26:28,439 Speaker 14: you know, did you go in with companies that are 520 00:26:28,520 --> 00:26:30,600 Speaker 14: now hurting as a result of some of the dynamics 521 00:26:30,640 --> 00:26:33,439 Speaker 14: inflation wise you've talked about. And the advantage that we 522 00:26:33,520 --> 00:26:36,480 Speaker 14: have is that we are we invest only with private 523 00:26:36,520 --> 00:26:39,880 Speaker 14: equity backed companies, and so the amount of cash equity 524 00:26:39,920 --> 00:26:42,560 Speaker 14: that they're putting into these businesses is like sixty five 525 00:26:42,600 --> 00:26:45,639 Speaker 14: percent of the total capital structure, which is a record high. 526 00:26:45,800 --> 00:26:47,320 Speaker 14: The other thing is, you know, they have their own 527 00:26:47,320 --> 00:26:51,840 Speaker 14: money at stake. They're helping us to find the best companies, 528 00:26:51,920 --> 00:26:55,560 Speaker 14: and even in that universe, we're still just kind of 529 00:26:55,560 --> 00:26:57,639 Speaker 14: picking the best of the best. So we see a 530 00:26:57,680 --> 00:27:01,080 Speaker 14: thousand deals a year and we do sixty and so 531 00:27:01,320 --> 00:27:05,000 Speaker 14: from that perspective, what we're looking for is to sift 532 00:27:05,040 --> 00:27:07,119 Speaker 14: through the ones that don't have that long track record, 533 00:27:07,200 --> 00:27:10,200 Speaker 14: sift through the ones that are not cyclical, that don't 534 00:27:10,200 --> 00:27:13,040 Speaker 14: have customer concentration. We just turned a deal down this morning. 535 00:27:13,440 --> 00:27:16,119 Speaker 14: Because the business has only been around for five years 536 00:27:16,960 --> 00:27:19,960 Speaker 14: and had customer concentration with three main customers. If you 537 00:27:20,000 --> 00:27:22,680 Speaker 14: lose any one of those three, you're in trouble. So 538 00:27:22,880 --> 00:27:24,320 Speaker 14: our job is to really pick winners. 539 00:27:24,480 --> 00:27:25,640 Speaker 6: I understand your tennis fan. 540 00:27:26,040 --> 00:27:28,720 Speaker 14: Yeah, going to Wimbledon this weekend, are you what are 541 00:27:28,760 --> 00:27:29,800 Speaker 14: you gonna What are you gonna say? 542 00:27:29,840 --> 00:27:32,159 Speaker 6: Women's finals, women's finals, Yes, sir, all right. 543 00:27:32,200 --> 00:27:35,000 Speaker 1: We had one of the semifinals that just got done earlier, 544 00:27:35,000 --> 00:27:36,480 Speaker 1: so we have one finalist in there. 545 00:27:37,080 --> 00:27:38,840 Speaker 6: It's funny. That should be great. That's have you been 546 00:27:38,880 --> 00:27:39,280 Speaker 6: there before. 547 00:27:39,359 --> 00:27:40,560 Speaker 14: I've known this my first time. 548 00:27:40,600 --> 00:27:41,720 Speaker 6: It's awesome. You're gonna love it. 549 00:27:42,040 --> 00:27:45,200 Speaker 14: I'm not playing, but I launch all right, very good. 550 00:27:45,720 --> 00:27:48,639 Speaker 1: H Randy schwimmert cohed of Senior Lendy and he's just 551 00:27:48,680 --> 00:27:51,040 Speaker 1: senior managing director Churchill Asset Management. 552 00:27:52,320 --> 00:27:55,720 Speaker 8: You're listening to the team Can's are live program Bloomberg 553 00:27:55,760 --> 00:27:58,000 Speaker 8: Markets weekdays at ten am Eastern. 554 00:27:57,840 --> 00:28:00,240 Speaker 13: On Bloomberg dot com, the iHeart Radio. 555 00:28:00,480 --> 00:28:03,360 Speaker 8: And the Bloomberg Business app, or listen on demand wherever 556 00:28:03,400 --> 00:28:04,480 Speaker 8: you get your podcast. 557 00:28:06,400 --> 00:28:09,280 Speaker 5: We are really excited about our next guest here because 558 00:28:09,280 --> 00:28:11,800 Speaker 5: we've got Laura Mody coming on. She is the CEO 559 00:28:11,960 --> 00:28:17,040 Speaker 5: and co founder of Bobby. This is an infinite formula company. 560 00:28:17,680 --> 00:28:20,480 Speaker 5: It's organic. They've got some big name investors on the 561 00:28:20,520 --> 00:28:24,320 Speaker 5: list here with Gwyneth Paltrow at twenty two million dollars, 562 00:28:24,320 --> 00:28:26,520 Speaker 5: and we're excited to talk with them, Paul and Barry, 563 00:28:26,520 --> 00:28:29,760 Speaker 5: because they've got some big news for us, this company 564 00:28:30,440 --> 00:28:34,240 Speaker 5: acquiring Nature's One. We don't have the exact details in 565 00:28:34,320 --> 00:28:36,719 Speaker 5: terms of the finances here, but it was a seventy 566 00:28:36,760 --> 00:28:41,000 Speaker 5: million dollar Series C round of funding to acquire Nature's One, 567 00:28:41,120 --> 00:28:43,400 Speaker 5: and this is part of their overall strategy to kind 568 00:28:43,440 --> 00:28:46,280 Speaker 5: of diversify their holdings here. 569 00:28:46,320 --> 00:28:48,480 Speaker 7: So I think we have Bobby. 570 00:28:48,680 --> 00:28:51,480 Speaker 5: We've got Bobby CEO on the phone here, Laura Mody. 571 00:28:51,480 --> 00:28:54,239 Speaker 5: Thank you so much for joining us, Laura, as I 572 00:28:54,280 --> 00:28:57,120 Speaker 5: was just explaining this acquisition of Nature's One. 573 00:28:57,560 --> 00:28:59,320 Speaker 7: How does that acquisition. 574 00:28:58,960 --> 00:29:04,160 Speaker 5: Factor into your our strategic push to increase domestic access 575 00:29:04,280 --> 00:29:06,760 Speaker 5: to infant formula here in the US. 576 00:29:07,640 --> 00:29:10,720 Speaker 16: Yeah, Hi, lovely to be back with you guys again. Look, 577 00:29:10,880 --> 00:29:14,720 Speaker 16: this acquisition is so much greater than Bobby and Nature's One. 578 00:29:15,240 --> 00:29:18,920 Speaker 16: The significance of our two companies coming together is the 579 00:29:18,960 --> 00:29:22,600 Speaker 16: biggest diversification move in the history of USNS and formula 580 00:29:23,080 --> 00:29:27,880 Speaker 16: and after last year's shortage, this is what the industry needs. 581 00:29:28,000 --> 00:29:31,560 Speaker 16: We need more competition, we need more options, and this 582 00:29:31,600 --> 00:29:33,480 Speaker 16: allows us to be able to serve more of the 583 00:29:33,560 --> 00:29:35,240 Speaker 16: market over the coming years. 584 00:29:36,200 --> 00:29:37,920 Speaker 6: So what does Nature's want do? 585 00:29:38,080 --> 00:29:40,680 Speaker 1: So talk to us about this distract what this company 586 00:29:40,720 --> 00:29:43,440 Speaker 1: does and kind of how it dovestail dovetails in with 587 00:29:43,520 --> 00:29:46,160 Speaker 1: kind of your business at Bobby and the baby formula 588 00:29:46,280 --> 00:29:47,680 Speaker 1: delivery business. 589 00:29:48,320 --> 00:29:52,360 Speaker 16: Yeah, so nature is One is actually you know, pioneers 590 00:29:52,400 --> 00:29:55,560 Speaker 16: in the world of organic impurity. They've been around for 591 00:29:55,560 --> 00:29:59,560 Speaker 16: the last twenty six years. They've spent the majority of 592 00:29:59,600 --> 00:30:02,560 Speaker 16: their time and focused on the popular formula. I would 593 00:30:02,600 --> 00:30:06,239 Speaker 16: actually refer to their founder and CEO really as the 594 00:30:06,280 --> 00:30:09,600 Speaker 16: godfather of formula here in the US, an organic formula. 595 00:30:10,560 --> 00:30:13,920 Speaker 16: He had the foresight back in two twenty and nineteen 596 00:30:14,320 --> 00:30:17,680 Speaker 16: to build a state of the art infant formula facility 597 00:30:17,760 --> 00:30:21,120 Speaker 16: in Ohio, and he had no idea what would come 598 00:30:21,240 --> 00:30:23,200 Speaker 16: in twenty twenty two when we were hit with the 599 00:30:23,320 --> 00:30:26,560 Speaker 16: national infant formula shortage. But in twenty twenty two, at 600 00:30:26,560 --> 00:30:29,880 Speaker 16: the end of last year, it got completed and he 601 00:30:29,960 --> 00:30:33,760 Speaker 16: became the first new infant formula facility to be built 602 00:30:33,800 --> 00:30:35,440 Speaker 16: in forty years from the ground up. 603 00:30:35,320 --> 00:30:36,440 Speaker 11: In the US. 604 00:30:37,200 --> 00:30:41,400 Speaker 15: Laura Barry Riddholts here, So it sounds like putting together 605 00:30:41,480 --> 00:30:45,520 Speaker 15: a couple of these parts. You're going for scale so 606 00:30:45,600 --> 00:30:48,560 Speaker 15: that if there is any sort of disruption in the future, 607 00:30:49,120 --> 00:30:52,400 Speaker 15: you'll be able to meet consumer demand. How large do 608 00:30:52,440 --> 00:30:55,200 Speaker 15: you have to be to avoid the sort of problems 609 00:30:55,480 --> 00:30:58,880 Speaker 15: that we saw during the pandemic and the lockdowns. 610 00:31:00,080 --> 00:31:00,320 Speaker 10: Question. 611 00:31:01,000 --> 00:31:06,280 Speaker 16: This is not just about and building one facility and 612 00:31:06,680 --> 00:31:10,160 Speaker 16: calling it a day. We need to build redundancy. This 613 00:31:10,240 --> 00:31:13,160 Speaker 16: industry needs resiliency so that we don't go through this again. 614 00:31:13,600 --> 00:31:17,200 Speaker 16: So today we've been using a contract manufacturer to make 615 00:31:17,240 --> 00:31:19,480 Speaker 16: our product, and we're going to keep doing that. We're 616 00:31:19,520 --> 00:31:22,120 Speaker 16: going to double down with them. We're going to stay 617 00:31:22,160 --> 00:31:25,880 Speaker 16: with them longer while we also build the resiliency to 618 00:31:25,920 --> 00:31:29,160 Speaker 16: get our own facility up and running to also produce 619 00:31:29,200 --> 00:31:32,800 Speaker 16: more products. The downside of last year was that there 620 00:31:32,880 --> 00:31:37,400 Speaker 16: was few facilities making too few products. So when one 621 00:31:37,440 --> 00:31:40,680 Speaker 16: of those facilities is no longer able to produce product, 622 00:31:40,800 --> 00:31:44,480 Speaker 16: we're going to be experiencing a shortage. Now, I will 623 00:31:44,520 --> 00:31:46,720 Speaker 16: admit that Bobby is not going to be the cure 624 00:31:47,080 --> 00:31:50,520 Speaker 16: solution to ensure that we avoid this. But I'm going 625 00:31:50,560 --> 00:31:53,200 Speaker 16: to do my damn best to make sure the Bobby's 626 00:31:53,240 --> 00:31:55,320 Speaker 16: never in the center of another shortage again. 627 00:31:56,120 --> 00:31:58,120 Speaker 1: And as many of our listeners know, we started speaking 628 00:31:58,160 --> 00:32:01,200 Speaker 1: with Laura back in the pandem again when this shortage 629 00:32:01,200 --> 00:32:02,880 Speaker 1: came to the fore and we needed to get real 630 00:32:03,040 --> 00:32:06,080 Speaker 1: smart on the baby formula business real quick, and Laura 631 00:32:06,160 --> 00:32:08,680 Speaker 1: was kind enough to speak with this several times during 632 00:32:08,720 --> 00:32:10,880 Speaker 1: that process. So it's great to see Laura and Bobby 633 00:32:10,920 --> 00:32:14,040 Speaker 1: continue to grow here. So Laar, give us the lay 634 00:32:14,040 --> 00:32:16,600 Speaker 1: of the land today. How have things changed in the 635 00:32:17,000 --> 00:32:21,520 Speaker 1: greater you know, baby formula business as it relates to logistics. 636 00:32:21,640 --> 00:32:23,360 Speaker 1: Are we in a better place today than we were 637 00:32:23,400 --> 00:32:25,240 Speaker 1: you know, a year ago, two years ago? 638 00:32:26,560 --> 00:32:30,160 Speaker 16: Well, i'd like to say chester yesterday's acquisition, we are. 639 00:32:32,080 --> 00:32:36,880 Speaker 16: The shortage itself is beginning to subside, which means shells 640 00:32:36,920 --> 00:32:40,400 Speaker 16: are getting stocked and there's access to more formula, but 641 00:32:40,480 --> 00:32:44,560 Speaker 16: it's spotty, and it's spotty because consumer buying behavior has 642 00:32:44,600 --> 00:32:47,880 Speaker 16: also changed, so there may be some shelves that remain 643 00:32:47,920 --> 00:32:51,280 Speaker 16: out of stock while others are plentiful. What we need 644 00:32:51,360 --> 00:32:53,520 Speaker 16: to do is we need to adjust to this changing 645 00:32:53,600 --> 00:32:56,440 Speaker 16: landscape and consumer behavior, which includes what are the products 646 00:32:56,480 --> 00:32:58,280 Speaker 16: that they need now and where do they need them? 647 00:32:58,840 --> 00:33:02,040 Speaker 16: That I would say is we're still somewhat in a crisis. 648 00:33:02,080 --> 00:33:05,040 Speaker 16: From that respect. The other thing that hasn't changed is 649 00:33:05,320 --> 00:33:08,080 Speaker 16: we're still putting out products from the same few facilities. 650 00:33:08,960 --> 00:33:10,880 Speaker 16: We are not in a position of the country where 651 00:33:10,920 --> 00:33:14,120 Speaker 16: we can turn around and confidently say that it's another 652 00:33:15,040 --> 00:33:17,840 Speaker 16: bacteria hits the facility that we wouldn't be in this again. 653 00:33:18,040 --> 00:33:20,480 Speaker 16: I actually think we are truly one bacteria away from 654 00:33:20,520 --> 00:33:23,760 Speaker 16: having another shortage like last year, and the only way 655 00:33:23,840 --> 00:33:27,840 Speaker 16: to get out of that is through the incentives and 656 00:33:28,000 --> 00:33:30,640 Speaker 16: investment made in further domestic manufacturing. 657 00:33:32,080 --> 00:33:34,280 Speaker 5: In our final couple of minutes with you, Laura, I 658 00:33:34,320 --> 00:33:36,720 Speaker 5: want to switch gears a little bit because I'm so 659 00:33:37,160 --> 00:33:41,600 Speaker 5: interested in your history and your previous life before Bobby, 660 00:33:41,600 --> 00:33:44,200 Speaker 5: when you were working at Google, and you've talked about 661 00:33:44,320 --> 00:33:47,000 Speaker 5: day trading as an important part of your time there 662 00:33:47,440 --> 00:33:49,480 Speaker 5: that helped you to buy your first home, and that's 663 00:33:49,520 --> 00:33:51,320 Speaker 5: why it was so important to you to kind of 664 00:33:51,560 --> 00:33:55,120 Speaker 5: open up investment into Bobby for women in particular, talk 665 00:33:55,160 --> 00:33:57,840 Speaker 5: to me about the other ways that being a trader 666 00:33:58,200 --> 00:34:00,960 Speaker 5: yourself has impacted the way that you run the business. 667 00:34:03,040 --> 00:34:05,239 Speaker 16: Great question. Did not see that coming here. 668 00:34:06,240 --> 00:34:08,040 Speaker 5: I'm a big fan of the Cut because I used 669 00:34:08,040 --> 00:34:09,680 Speaker 5: to work there, so that's where I'm getting that. 670 00:34:10,640 --> 00:34:16,400 Speaker 16: I love it. Look, my passion is really in women 671 00:34:16,719 --> 00:34:21,280 Speaker 16: having financial independence, and I think in a lot of ways, 672 00:34:21,320 --> 00:34:25,320 Speaker 16: whether it's trading or just understanding the financial system, women 673 00:34:25,360 --> 00:34:28,759 Speaker 16: are often left in the dark and behind. It can 674 00:34:28,840 --> 00:34:31,239 Speaker 16: be sometimes seen as an old boys club, whether it's 675 00:34:31,280 --> 00:34:35,120 Speaker 16: from the nomenclature to just the tools that exist. So 676 00:34:35,400 --> 00:34:38,600 Speaker 16: one of my deep passions is making sure that we're 677 00:34:38,640 --> 00:34:42,719 Speaker 16: in we are growing a business to allow women to 678 00:34:42,719 --> 00:34:44,960 Speaker 16: become financially savvy, and you see that in many of 679 00:34:44,960 --> 00:34:48,920 Speaker 16: our practices today. One of those is that I think 680 00:34:48,960 --> 00:34:51,319 Speaker 16: it was in our fundraise for our series day we 681 00:34:51,440 --> 00:34:54,520 Speaker 16: opened up a small portion of the round to allow 682 00:34:54,560 --> 00:34:58,839 Speaker 16: our own customers moms to invest in the business. And 683 00:34:58,960 --> 00:35:02,640 Speaker 16: instead of how having a minimum dollar to be able 684 00:35:02,640 --> 00:35:05,560 Speaker 16: to put in, we actually created a cap that allowed 685 00:35:05,640 --> 00:35:08,200 Speaker 16: several hundred moms to be able to invest in business. 686 00:35:08,280 --> 00:35:11,560 Speaker 1: Yep, that's a fat, I mean fascinating story all around here. 687 00:35:11,560 --> 00:35:13,400 Speaker 1: We're glad we get to stay in touch with you, 688 00:35:13,480 --> 00:35:15,359 Speaker 1: Lara and keep us up today. What's happening in your 689 00:35:15,360 --> 00:35:18,760 Speaker 1: business and your industry? Law Mody, CEO and co founder 690 00:35:19,080 --> 00:35:20,000 Speaker 1: of Bobby. 691 00:35:19,960 --> 00:35:23,040 Speaker 8: You're listening to the tape. Can's our live program Bloomberg 692 00:35:23,160 --> 00:35:26,759 Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the 693 00:35:26,800 --> 00:35:28,759 Speaker 8: tune in app, Bloomberg dot Com, and. 694 00:35:28,719 --> 00:35:30,040 Speaker 13: The Bloomberg Business App. 695 00:35:30,080 --> 00:35:32,880 Speaker 8: You can also listen live on Amazon Alexa from our 696 00:35:32,920 --> 00:35:38,000 Speaker 8: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 697 00:35:38,960 --> 00:35:41,280 Speaker 6: We'd be streaming on that thing called YouTube. 698 00:35:41,280 --> 00:35:43,759 Speaker 1: Just go to YouTube and search Bloomberg Global News and 699 00:35:43,760 --> 00:35:45,640 Speaker 1: that's you get the video feed there all right. The 700 00:35:45,680 --> 00:35:48,160 Speaker 1: absolute top media analyst on Wall Street in my opinion, 701 00:35:48,160 --> 00:35:51,000 Speaker 1: and it's an informed opinion. Michael nathan SI, founding partner 702 00:35:51,040 --> 00:35:54,800 Speaker 1: and senior Research Channels at Moffat Nathanson joins us via zoom. Michael, 703 00:35:54,800 --> 00:35:57,600 Speaker 1: thanks so much for taking the time. I got to 704 00:35:57,640 --> 00:36:00,760 Speaker 1: start with Disney. You know, back in the day, I 705 00:36:00,800 --> 00:36:03,600 Speaker 1: told a professor Buddy Mine and Harvard Business School, I 706 00:36:03,640 --> 00:36:06,439 Speaker 1: got a case study for you how to really do 707 00:36:06,600 --> 00:36:10,640 Speaker 1: an effective UH succession planning? And that was Bob Ayger 708 00:36:10,719 --> 00:36:14,040 Speaker 1: the Walt Disney Company. I'm thinking the Tom Staggs Jay 709 00:36:14,120 --> 00:36:16,160 Speaker 1: Russolo set up that nice race. 710 00:36:16,200 --> 00:36:18,080 Speaker 6: We thought everybody on the street was happy with it. 711 00:36:18,120 --> 00:36:19,600 Speaker 6: We thought, boy, these are two good people. 712 00:36:20,160 --> 00:36:23,240 Speaker 1: And then it didn't work out, and Bob kept extending 713 00:36:23,320 --> 00:36:25,520 Speaker 1: and extending, and all the executives left and here we 714 00:36:25,600 --> 00:36:28,439 Speaker 1: are again. So what do you make of what's going 715 00:36:28,480 --> 00:36:29,440 Speaker 1: on at Disney? 716 00:36:30,920 --> 00:36:34,000 Speaker 11: Yeah, thanks Paul, pretty nice, nice comments. That really means 717 00:36:34,000 --> 00:36:37,399 Speaker 11: a lot, So thank you for that. There's a lot 718 00:36:37,440 --> 00:36:40,800 Speaker 11: to unpack here, right, So start with where you began, 719 00:36:40,960 --> 00:36:45,160 Speaker 11: which is believe or not. There's there's not a bench 720 00:36:45,360 --> 00:36:50,600 Speaker 11: yes year that's ready to take over leadership. I think 721 00:36:50,640 --> 00:36:53,120 Speaker 11: part of it is that the company is in such 722 00:36:53,160 --> 00:36:58,360 Speaker 11: different businesses in different birth life cycles. Right. So Parks, 723 00:36:58,800 --> 00:37:02,000 Speaker 11: the guys you mentioned stagger In Resulo you know Staggers 724 00:37:02,040 --> 00:37:05,080 Speaker 11: a CFO. Rosulo was the head of Parks. Parks has 725 00:37:05,080 --> 00:37:08,080 Speaker 11: a different type of business model than Media. Now streaming 726 00:37:08,160 --> 00:37:10,240 Speaker 11: is their their big bet is. Streaming is a completely 727 00:37:10,280 --> 00:37:14,480 Speaker 11: different business model. So it's such a broad set of assets, 728 00:37:15,120 --> 00:37:19,399 Speaker 11: and you need someone who's who has got creative sensibilities 729 00:37:19,480 --> 00:37:23,319 Speaker 11: or trustworthiness. It's it's a hard job. But to your 730 00:37:23,320 --> 00:37:26,200 Speaker 11: first point, yeah, it's kind of amazing that this lead 731 00:37:26,320 --> 00:37:30,520 Speaker 11: into it. There hasn't been a bench of emerging candidates 732 00:37:30,520 --> 00:37:34,520 Speaker 11: besides Bob Kaipik in hindsight, was the wrong person. We 733 00:37:34,920 --> 00:37:39,799 Speaker 11: thought that almost right away. So that continues, right the 734 00:37:39,920 --> 00:37:42,279 Speaker 11: hunt for the next executive continues. We've got more time 735 00:37:42,320 --> 00:37:44,920 Speaker 11: on his hands. But that's just part of the story, 736 00:37:44,960 --> 00:37:45,279 Speaker 11: I think. 737 00:37:45,840 --> 00:37:48,200 Speaker 1: And so, Michael, the bigger issue, well not the big issue, 738 00:37:48,200 --> 00:37:50,760 Speaker 1: but the operating issue for Bob Byger and the management 739 00:37:50,760 --> 00:37:53,839 Speaker 1: team is, boy, how do you manage this transition from 740 00:37:53,920 --> 00:37:57,560 Speaker 1: the traditional business where you had cable companies and salt companies, 741 00:37:58,040 --> 00:38:00,480 Speaker 1: you know, giving you a steady profit, to now the 742 00:38:00,480 --> 00:38:03,439 Speaker 1: streaming business where the economics are really uncertain. Let's start 743 00:38:03,440 --> 00:38:06,600 Speaker 1: with ESPN. What would you recommend to Bob Eyer on 744 00:38:06,600 --> 00:38:07,920 Speaker 1: the board that they do with ESPN? 745 00:38:08,760 --> 00:38:11,400 Speaker 11: Yeah, so Paul started ESPN and is right. You know 746 00:38:11,440 --> 00:38:14,000 Speaker 11: when you covered the stock way back when it was 747 00:38:14,680 --> 00:38:16,320 Speaker 11: it was a driver of free cash flow and the 748 00:38:16,360 --> 00:38:22,399 Speaker 11: driver profitability ESPN and you'll laugh if and to us 749 00:38:22,600 --> 00:38:26,960 Speaker 11: a it's really unclear how ESPN could work on a 750 00:38:26,960 --> 00:38:31,839 Speaker 11: standalone basis as a drifting consumer service. Right, the price 751 00:38:31,880 --> 00:38:34,960 Speaker 11: point has to be quite high, the will be more 752 00:38:35,000 --> 00:38:37,960 Speaker 11: seasonal than it is now. We think the best idea 753 00:38:37,960 --> 00:38:41,080 Speaker 11: is to either create a sports only bundle with other 754 00:38:41,280 --> 00:38:47,040 Speaker 11: sports led programmers, or put sport into the Disney plus 755 00:38:47,040 --> 00:38:49,920 Speaker 11: Food bundle. Right, so you either have to go all 756 00:38:49,920 --> 00:38:53,200 Speaker 11: in on sports or use sports strategically. It's unclear at 757 00:38:53,200 --> 00:38:54,839 Speaker 11: this point what Disney wants to do. I think they 758 00:38:54,880 --> 00:38:58,759 Speaker 11: really want to maintain an ESPN brand as a standalone 759 00:38:58,840 --> 00:39:01,800 Speaker 11: APT we think, but even today when Baba's was talking 760 00:39:01,800 --> 00:39:04,760 Speaker 11: about it, it's unclear what the path looks like going forward. 761 00:39:05,440 --> 00:39:08,920 Speaker 11: We studied ESPN for a long time, you know, we 762 00:39:09,120 --> 00:39:11,720 Speaker 11: used to be more sanguine about the future of ESPN, 763 00:39:12,280 --> 00:39:15,479 Speaker 11: but cork cutting has gotten so bad and a cost 764 00:39:15,480 --> 00:39:18,800 Speaker 11: of sports keeps rising that it's not an easy, clear 765 00:39:19,480 --> 00:39:22,480 Speaker 11: answer that you you know, for your question. Our best 766 00:39:22,560 --> 00:39:25,600 Speaker 11: bet is to try to keep the bundle alive by 767 00:39:25,719 --> 00:39:28,120 Speaker 11: shrinking it down to sports only. When hit the bundle, 768 00:39:29,040 --> 00:39:32,239 Speaker 11: what remains the PATV bundle, So shrinking down to sports only. 769 00:39:32,440 --> 00:39:35,560 Speaker 1: So when you talk to institutional investors, Michael just about 770 00:39:35,960 --> 00:39:40,200 Speaker 1: you know, the big media companies, how confident are you 771 00:39:40,400 --> 00:39:44,800 Speaker 1: that they can make this transition broadly speaking, the industry 772 00:39:45,000 --> 00:39:47,520 Speaker 1: to a streaming economic model. Because if I'm an investor, 773 00:39:47,960 --> 00:39:50,040 Speaker 1: I'm like, I just don't know, and as a result, 774 00:39:50,080 --> 00:39:50,920 Speaker 1: I'm not going to invest. 775 00:39:52,600 --> 00:39:57,319 Speaker 11: Yeah for people, So if you're head our work, we 776 00:39:57,400 --> 00:39:59,960 Speaker 11: had a Noe doubt today where my partner Robert Fishman 777 00:40:00,120 --> 00:40:04,799 Speaker 11: covers a lot of media names equated today's linear TV 778 00:40:05,120 --> 00:40:10,399 Speaker 11: to radio and exactly. And it feels like that, right, Paul, 779 00:40:10,520 --> 00:40:14,520 Speaker 11: where the uncerting, the uncerting index is so high for 780 00:40:14,640 --> 00:40:18,759 Speaker 11: the future and the pivot here seems so complicated that 781 00:40:18,880 --> 00:40:22,200 Speaker 11: we're finding just a lack of interest even for Disney. Right, 782 00:40:22,200 --> 00:40:24,960 Speaker 11: So we upgraded Disney when Box came back in ninety, 783 00:40:25,000 --> 00:40:28,280 Speaker 11: Bucks stock went to one twenty. That's our price targets 784 00:40:28,280 --> 00:40:32,000 Speaker 11: back to ninety again. But even Disney has lost kind 785 00:40:32,000 --> 00:40:35,359 Speaker 11: of the goodwill of the instrutional investors that are out there, Right, 786 00:40:35,400 --> 00:40:38,880 Speaker 11: So there's just a lack of interest here, like radio, 787 00:40:39,360 --> 00:40:42,080 Speaker 11: which is a sad commentary. But a lot of this, 788 00:40:42,239 --> 00:40:44,919 Speaker 11: Paul and I've talked over the many years, has been 789 00:40:44,960 --> 00:40:48,160 Speaker 11: self inflicted. Right, didn't have to be this bad. They 790 00:40:48,239 --> 00:40:52,160 Speaker 11: licensed their content to Netflix. They then all pivoted hard 791 00:40:52,200 --> 00:40:56,080 Speaker 11: to streaming without much thought about profitability, and they've killed 792 00:40:56,080 --> 00:40:58,000 Speaker 11: the golden goose. Right, It's really sad, like, there'll be 793 00:40:58,040 --> 00:41:01,160 Speaker 11: a textbook written about how this was. You know, a 794 00:41:01,160 --> 00:41:03,480 Speaker 11: lot of this was self inflicted in terms of the 795 00:41:03,520 --> 00:41:04,720 Speaker 11: wounds in the industry. 796 00:41:05,320 --> 00:41:06,799 Speaker 1: I think in your next life you can write that 797 00:41:06,960 --> 00:41:09,760 Speaker 1: book in your spare time. Michael, Hey, let's talk about 798 00:41:09,800 --> 00:41:12,279 Speaker 1: a name that just jumps out of a lot of investors, 799 00:41:12,280 --> 00:41:15,680 Speaker 1: maybe of some interest, Paramount. What does this company do? 800 00:41:15,719 --> 00:41:17,680 Speaker 1: What does Sherry Redstone really want to do with this company? 801 00:41:17,680 --> 00:41:19,160 Speaker 1: Because you know, we kind of thought that they didn't 802 00:41:19,160 --> 00:41:22,279 Speaker 1: have this scale before. Nothing's changed, maybe even it's become 803 00:41:22,360 --> 00:41:23,359 Speaker 1: more pronounced that risk. 804 00:41:24,120 --> 00:41:26,200 Speaker 11: No, so we and Robert has a we have a 805 00:41:26,239 --> 00:41:29,719 Speaker 11: sell on Paramount. You may be shot to know or 806 00:41:29,719 --> 00:41:33,080 Speaker 11: not know that they generate no pre cash flow and 807 00:41:33,160 --> 00:41:37,040 Speaker 11: they're highly leveraged. And the bullet caase is simply that 808 00:41:37,080 --> 00:41:39,840 Speaker 11: someone is going to buy them. Yeah, you Warren Buffett's 809 00:41:39,840 --> 00:41:43,080 Speaker 11: an investor, and like that's hoss. Like if that's what 810 00:41:43,160 --> 00:41:45,120 Speaker 11: you have as a bullet case, and then we're worried 811 00:41:45,120 --> 00:41:48,720 Speaker 11: about it. We think just they're over leveraged to cable networks, 812 00:41:49,480 --> 00:41:51,719 Speaker 11: the lack of profitability and streaming. 813 00:41:52,680 --> 00:41:53,319 Speaker 15: It's just a. 814 00:41:53,239 --> 00:41:55,200 Speaker 11: Tough hand they have. And I think, you know, they 815 00:41:55,200 --> 00:41:58,200 Speaker 11: just got to give them a quarter, and I think 816 00:41:58,239 --> 00:42:00,400 Speaker 11: if you moved to like this arms dealer or you 817 00:42:00,480 --> 00:42:04,120 Speaker 11: start selling your content, I'm not sure there's a there there. 818 00:42:04,160 --> 00:42:07,200 Speaker 11: At the end of the day, eventually you're seeing Netflix, Amazon, 819 00:42:07,239 --> 00:42:11,040 Speaker 11: Apple make their own content. So maybe they'll buy the 820 00:42:11,080 --> 00:42:14,919 Speaker 11: mission impossible. Maybe they'll buy, you know, the top gun 821 00:42:14,960 --> 00:42:17,919 Speaker 11: from you, but they won't license all your content because 822 00:42:17,920 --> 00:42:20,520 Speaker 11: they don't have to anymore. I think you picked that one, 823 00:42:20,520 --> 00:42:24,160 Speaker 11: and that's a tough handpong. We're quite negative on the 824 00:42:24,160 --> 00:42:24,759 Speaker 11: outcome there. 825 00:42:25,680 --> 00:42:28,440 Speaker 5: Hey, Michael, this is Madison a question about this, and 826 00:42:28,440 --> 00:42:28,839 Speaker 5: it's funny. 827 00:42:28,880 --> 00:42:30,240 Speaker 7: I was talking to my friends last. 828 00:42:30,120 --> 00:42:33,880 Speaker 5: Night who all really hate the paramount app so not 829 00:42:33,960 --> 00:42:35,799 Speaker 5: a great sign for them. But when you look at 830 00:42:35,800 --> 00:42:39,880 Speaker 5: a Netflix in particular, they've really gone all in on 831 00:42:40,000 --> 00:42:45,080 Speaker 5: creating this really cheap reality TV content that can. 832 00:42:45,600 --> 00:42:47,800 Speaker 7: Air for them and does really, really well. 833 00:42:48,400 --> 00:42:52,520 Speaker 5: Disney doesn't really have an option for that necessarily. 834 00:42:52,560 --> 00:42:54,000 Speaker 7: Do you see Disney. 835 00:42:53,600 --> 00:42:59,040 Speaker 5: Going into a cheaper content creation strategy in order to 836 00:42:59,080 --> 00:43:00,600 Speaker 5: compete with the likes Netflix. 837 00:43:01,640 --> 00:43:05,000 Speaker 11: It's funny. We've studied that question by looking at Netflix. 838 00:43:05,000 --> 00:43:07,480 Speaker 11: Netflix the viewership that eight and ten percent of the 839 00:43:07,560 --> 00:43:11,520 Speaker 11: viewership would be unscripted reality every every month, every quarter, 840 00:43:11,560 --> 00:43:13,759 Speaker 11: eight ten percent. It's not a big number, but to 841 00:43:13,800 --> 00:43:17,520 Speaker 11: your point, the stuff they have probably out punches, you 842 00:43:17,560 --> 00:43:21,879 Speaker 11: know what the costs are making it. Disney has National 843 00:43:22,160 --> 00:43:26,520 Speaker 11: Disney Plus, is that Geo Whoo has The Bachelor. Our 844 00:43:26,600 --> 00:43:28,920 Speaker 11: vision is that at some point Disney Plus and Who 845 00:43:28,920 --> 00:43:32,680 Speaker 11: will get combined. Now Geo really hasn't sparked. It looks 846 00:43:32,719 --> 00:43:36,880 Speaker 11: like the same level of engagement that Netflix's reality shows have. 847 00:43:37,400 --> 00:43:39,160 Speaker 11: But we think that at some point when they combined 848 00:43:39,200 --> 00:43:42,480 Speaker 11: Disney Plus and Whulu to your comment, didn't have to 849 00:43:42,560 --> 00:43:46,720 Speaker 11: lean more into unscripted reality. You know, again the Bachelor, 850 00:43:46,760 --> 00:43:50,440 Speaker 11: it's made by warners, but it's it's a good observation. 851 00:43:51,200 --> 00:43:55,520 Speaker 11: The opposite side, Warner Brothers has now Max has great 852 00:43:55,640 --> 00:43:59,480 Speaker 11: HBO stuff and now all the Discovery content. They probably 853 00:43:59,480 --> 00:44:03,279 Speaker 11: have almost too much reality programming there. So as I 854 00:44:03,280 --> 00:44:06,040 Speaker 11: think Netflix has figured out the perfect blend, I think 855 00:44:06,080 --> 00:44:08,120 Speaker 11: to your point, others will have to follow that blend. 856 00:44:08,719 --> 00:44:11,080 Speaker 1: And if there isn't enough headwinds for just strategically for 857 00:44:11,160 --> 00:44:13,960 Speaker 1: the industry, now they've got, you know, potentially a pair 858 00:44:13,960 --> 00:44:17,640 Speaker 1: of strikes, one from the writers and now potentially one 859 00:44:17,680 --> 00:44:20,560 Speaker 1: from the actors. Boy, how big of a problem is 860 00:44:20,600 --> 00:44:22,480 Speaker 1: this for the industry? Michael, do you think these things 861 00:44:22,520 --> 00:44:23,280 Speaker 1: get resolved. 862 00:44:25,239 --> 00:44:28,760 Speaker 11: I think it's a huge problem. I think it's happening 863 00:44:28,800 --> 00:44:34,759 Speaker 11: at a time of great difficulties for the industry, a 864 00:44:34,880 --> 00:44:39,400 Speaker 11: kind of structural change. The directors have settled, the writers 865 00:44:39,440 --> 00:44:43,200 Speaker 11: have not, and the actress likely will go on strike. 866 00:44:43,880 --> 00:44:45,880 Speaker 11: I think it's gonna be really damaging. And the problem, 867 00:44:45,960 --> 00:44:48,280 Speaker 11: I think is that the sides are so far apart, 868 00:44:48,960 --> 00:44:52,160 Speaker 11: given that the writers are still in strike and the 869 00:44:52,160 --> 00:44:55,520 Speaker 11: economicy industry is we've just talked about it really really challenging. 870 00:44:56,120 --> 00:45:01,120 Speaker 11: So I think there needs to be some realization that 871 00:45:01,440 --> 00:45:04,279 Speaker 11: the music common ground here, something has to give. I 872 00:45:04,360 --> 00:45:06,839 Speaker 11: worry that this goes on through the summer is going 873 00:45:06,880 --> 00:45:09,200 Speaker 11: to really affect the fourth quarter and all the new 874 00:45:09,320 --> 00:45:13,360 Speaker 11: programming for broadcasts and some of the broadcast networks that 875 00:45:13,360 --> 00:45:15,680 Speaker 11: we cover will be in a really bad position. And 876 00:45:15,680 --> 00:45:17,880 Speaker 11: it's also going to hurt streaming companies that are looking 877 00:45:17,880 --> 00:45:20,879 Speaker 11: for new, fresh content by the first half of next year. 878 00:45:21,239 --> 00:45:24,760 Speaker 11: But it has real implications here. But it doesn't seem 879 00:45:24,760 --> 00:45:27,480 Speaker 11: to us to be settling anytime. In the fact, feels 880 00:45:27,480 --> 00:45:30,120 Speaker 11: like it could drag on Paul, which is not It's 881 00:45:30,160 --> 00:45:31,560 Speaker 11: not a good outcome for anybody. 882 00:45:31,680 --> 00:45:34,000 Speaker 1: Hey, Michael, just lastly, love to just get your your 883 00:45:34,040 --> 00:45:36,000 Speaker 1: top pick here. What are you guys in your team 884 00:45:36,080 --> 00:45:37,480 Speaker 1: kind of out there with your clients. 885 00:45:37,520 --> 00:45:41,799 Speaker 11: Okay, So in media all separate media and Internet, right, 886 00:45:41,840 --> 00:45:45,520 Speaker 11: so we keep adding coverage, So Robbins Media World, our 887 00:45:45,560 --> 00:45:48,600 Speaker 11: top picks would be Fox because Fox is just sports 888 00:45:48,600 --> 00:45:51,080 Speaker 11: and news, and Disney for a larg term view that 889 00:45:51,200 --> 00:45:54,680 Speaker 11: ninety bucks I share. You know, if Bob Ayer can 890 00:45:54,920 --> 00:45:58,400 Speaker 11: be successful, you know, we think there's thirty dollars of upside, 891 00:45:58,480 --> 00:46:03,560 Speaker 11: So Disney Fox top we have paramounts is short. In Internet, 892 00:46:03,680 --> 00:46:07,200 Speaker 11: we keep pushing Meta has been a really great nice 893 00:46:07,280 --> 00:46:10,920 Speaker 11: year for us and Alphabet because we think the AI 894 00:46:11,080 --> 00:46:15,400 Speaker 11: fears the chat, GPT killing Google Search will overstated. So 895 00:46:15,960 --> 00:46:19,239 Speaker 11: you know, we stay with those behemoth and you know 896 00:46:19,480 --> 00:46:21,879 Speaker 11: that's been an easy call. And we think that there's 897 00:46:21,920 --> 00:46:25,400 Speaker 11: this real dispersion of digital advertisements going to put up 898 00:46:25,440 --> 00:46:28,120 Speaker 11: really nice growth and linear networks going to have a 899 00:46:28,160 --> 00:46:31,600 Speaker 11: early heart iime growing Paul all our radio back when 900 00:46:31,760 --> 00:46:33,799 Speaker 11: when you and I were young, we were younger men. 901 00:46:34,120 --> 00:46:36,400 Speaker 1: That's right, exactly, all right, Michael, thanks for giving us 902 00:46:36,400 --> 00:46:37,880 Speaker 1: a couple minutes of your time. We really appreciate it. 903 00:46:37,880 --> 00:46:40,840 Speaker 1: Michael Nathanson again one of the the the top analysts 904 00:46:41,120 --> 00:46:42,799 Speaker 1: covering the media space, or just in a Wall Street 905 00:46:42,800 --> 00:46:45,840 Speaker 1: and General founding partner senior research analysts at Maffatt Nathanson. 906 00:46:46,160 --> 00:46:49,239 Speaker 8: You're listening to the tape Can's are live program Bloomberg 907 00:46:49,320 --> 00:46:52,880 Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the 908 00:46:52,960 --> 00:46:55,040 Speaker 8: tune in app, Bloomberg dot Com. 909 00:46:54,760 --> 00:46:56,160 Speaker 13: And the Bloomberg Business App. 910 00:46:56,239 --> 00:46:59,040 Speaker 8: You can also listen live on Amazon Alexa from our 911 00:46:59,040 --> 00:47:03,440 Speaker 8: flagship New York's Just Say Alexa playing Bloomberg eleven thirty. 912 00:47:04,920 --> 00:47:07,439 Speaker 1: We had some arnings today Pepsi. I'm a coke guy, 913 00:47:07,440 --> 00:47:09,319 Speaker 1: but I'm just as happy drinking Pepsi. I'll be honest 914 00:47:09,320 --> 00:47:11,960 Speaker 1: with you. I have no real loyalty Ken Shay. He 915 00:47:12,000 --> 00:47:14,440 Speaker 1: does this stuff for a living. He follows all these 916 00:47:14,480 --> 00:47:17,839 Speaker 1: consumer companies. He's a senior equity analyst to Bloomberg Intelligence. Ken, 917 00:47:17,880 --> 00:47:19,520 Speaker 1: thanks so much for joining us here on zoom What 918 00:47:19,560 --> 00:47:23,960 Speaker 1: did you learn from Pepsi today. 919 00:47:22,480 --> 00:47:26,400 Speaker 17: Hi, Paul, Well, we learned again the power of Pepsi's brands. 920 00:47:26,760 --> 00:47:29,319 Speaker 17: You know, I think everyone respects their brands and their 921 00:47:29,360 --> 00:47:32,640 Speaker 17: ability to pass on price increases. But I think there 922 00:47:32,680 --> 00:47:36,200 Speaker 17: may have been some underlying skepticism that it could continue 923 00:47:36,239 --> 00:47:40,440 Speaker 17: for so long, and it has, and you know, the 924 00:47:40,480 --> 00:47:42,719 Speaker 17: second half of the year, the company is mentioning that 925 00:47:42,760 --> 00:47:44,680 Speaker 17: commodity costs may ease a little bit, it may not 926 00:47:44,719 --> 00:47:48,000 Speaker 17: be as aggressive with pricing. I think that's giving people 927 00:47:48,040 --> 00:47:50,359 Speaker 17: a little relief. You know, pricing has been in double 928 00:47:50,360 --> 00:47:52,680 Speaker 17: digit for a while now with this company, but they're 929 00:47:52,680 --> 00:47:54,719 Speaker 17: investing in the brands. So what we learned is that 930 00:47:54,760 --> 00:47:57,759 Speaker 17: the company has really powerful brands. They're not afraid to 931 00:47:57,880 --> 00:47:59,520 Speaker 17: invest in them and price accordingly. 932 00:48:00,640 --> 00:48:03,800 Speaker 5: And to what extent do you see that price power, 933 00:48:03,960 --> 00:48:06,879 Speaker 5: pricing power continuing through the second half of the year, 934 00:48:06,920 --> 00:48:09,080 Speaker 5: because in the last earning cycle they were sort of 935 00:48:09,080 --> 00:48:12,320 Speaker 5: like bragging about their ability to increase prices. 936 00:48:12,400 --> 00:48:13,480 Speaker 7: Is that going to keep happening? 937 00:48:14,600 --> 00:48:17,319 Speaker 17: You that's the million doile of the question. You know, 938 00:48:17,400 --> 00:48:20,360 Speaker 17: I'd be reluctant to bet against them, though, you know, 939 00:48:20,400 --> 00:48:23,120 Speaker 17: this earnings report was their eighteenth beat in a row. 940 00:48:23,680 --> 00:48:28,920 Speaker 17: They have an ability better than their peers to manage 941 00:48:29,239 --> 00:48:33,680 Speaker 17: their volume and pricing such that revenues keep coming in strong. 942 00:48:34,560 --> 00:48:37,560 Speaker 17: They invest quite a bit. Their capecks is a little 943 00:48:37,600 --> 00:48:40,480 Speaker 17: bit higher than their peers, but they invest or a manufacturer, 944 00:48:40,520 --> 00:48:44,160 Speaker 17: they own their bottlers too, They invest in productivity. It's 945 00:48:44,520 --> 00:48:46,400 Speaker 17: really showing in the bottom line. So if they can 946 00:48:46,440 --> 00:48:49,600 Speaker 17: continue that top line strength and can continue to what 947 00:48:49,640 --> 00:48:52,520 Speaker 17: they're doing in the second half, then we're looking at 948 00:48:53,120 --> 00:48:56,000 Speaker 17: you know, another high single digit kind of EPs gain 949 00:48:56,040 --> 00:48:56,800 Speaker 17: in the second half. 950 00:48:57,239 --> 00:48:59,360 Speaker 1: Hey can this there's still any vestages left of that 951 00:48:59,520 --> 00:49:01,839 Speaker 1: old Cold war of years gone past, and they still 952 00:49:01,840 --> 00:49:04,040 Speaker 1: fight for market chair Coke and Pepsi or is it 953 00:49:04,160 --> 00:49:06,360 Speaker 1: kind of fizzled out for lack of a or. 954 00:49:07,719 --> 00:49:10,799 Speaker 17: Well, you know, they they don't speak about it that much, 955 00:49:10,800 --> 00:49:14,759 Speaker 17: PepsiCo market share because they really are a full, you know, 956 00:49:14,840 --> 00:49:18,280 Speaker 17: sweet portfolio beverage company, whether it's the Gator Raye sports 957 00:49:18,360 --> 00:49:21,920 Speaker 17: drinks or now they're investing heavily in energy drinks. The 958 00:49:22,040 --> 00:49:26,120 Speaker 17: juice is still tease now alcoholic beverage, you know, a 959 00:49:26,560 --> 00:49:29,359 Speaker 17: venture with Bustin Beer. It's small, but they don't get 960 00:49:29,400 --> 00:49:33,600 Speaker 17: caught up too much in the carbonate cola aisle share 961 00:49:33,719 --> 00:49:37,040 Speaker 17: like co Cola is much more concentrated in as much. 962 00:49:39,480 --> 00:49:42,320 Speaker 5: All right, we've got like twenty seconds left with you here. 963 00:49:42,400 --> 00:49:44,920 Speaker 5: But in those final twenty seconds, I did want to 964 00:49:44,920 --> 00:49:46,480 Speaker 5: ask you about. 965 00:49:46,520 --> 00:49:50,640 Speaker 7: The downside of the dollar. Do you think Pepsi's incredibly 966 00:49:50,640 --> 00:49:52,879 Speaker 7: excited about that? Or am I overblowing that. 967 00:49:52,880 --> 00:49:53,319 Speaker 9: A little bit? 968 00:49:54,719 --> 00:49:57,840 Speaker 17: No, you're not. I mean is it's been a Kurche's 969 00:49:57,840 --> 00:50:01,239 Speaker 17: been a drag for the last all year two or so. 970 00:50:02,000 --> 00:50:03,799 Speaker 17: You're still seeing a modest drag in the in the 971 00:50:03,800 --> 00:50:06,520 Speaker 17: second half. They may be a little conservative given a 972 00:50:06,560 --> 00:50:10,560 Speaker 17: dollar weakness of late, and we think there's still gonna 973 00:50:10,560 --> 00:50:13,200 Speaker 17: be a slight drag, but we think it's a good 974 00:50:13,200 --> 00:50:13,799 Speaker 17: thing for them. 975 00:50:13,880 --> 00:50:14,160 Speaker 13: You know. 976 00:50:14,560 --> 00:50:17,080 Speaker 17: All that's being equal, Let's drag it better, all. 977 00:50:17,040 --> 00:50:18,839 Speaker 1: Right, Ken, thanks so much for joining us, Ken Shay, 978 00:50:19,239 --> 00:50:22,040 Speaker 1: senior equity analysts. It covers all the consumer products companies, 979 00:50:22,080 --> 00:50:24,960 Speaker 1: a lot of the beverage companies, to tobacco companies, the 980 00:50:25,000 --> 00:50:27,640 Speaker 1: weed company, So he's got the whole portfolio there, and 981 00:50:27,640 --> 00:50:29,399 Speaker 1: we appreciate getting a few minutes of his time there. 982 00:50:29,600 --> 00:50:32,719 Speaker 8: You're listening to the tape Cat's are live program Bloomberg 983 00:50:32,760 --> 00:50:36,360 Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the 984 00:50:36,440 --> 00:50:38,520 Speaker 8: tune in app, Bloomberg dot Com. 985 00:50:38,200 --> 00:50:39,640 Speaker 13: And the Bloomberg Business App. 986 00:50:39,680 --> 00:50:42,520 Speaker 8: You can also listen live on Amazon Alexa from our 987 00:50:42,520 --> 00:50:48,440 Speaker 8: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 988 00:50:48,680 --> 00:50:51,600 Speaker 1: Madison Mills, Paul Sweene Here in our Bloomberg Interactive Workers studio, 989 00:50:51,960 --> 00:50:53,800 Speaker 1: a little bit of an M and A trade here 990 00:50:53,880 --> 00:50:56,840 Speaker 1: today exce on to by Denbury for four point nine 991 00:50:56,840 --> 00:51:00,600 Speaker 1: billion dollars in CO two pipeline push. Get the latest 992 00:51:00,640 --> 00:51:04,080 Speaker 1: on this transaction. Kevin Crowley joins this senior US oil 993 00:51:04,120 --> 00:51:05,520 Speaker 1: reporter for Bloomberg News. 994 00:51:05,719 --> 00:51:06,560 Speaker 10: Kevin, are you based in? 995 00:51:06,920 --> 00:51:07,680 Speaker 6: Are you in Houston? 996 00:51:08,960 --> 00:51:09,359 Speaker 10: That's right? 997 00:51:09,440 --> 00:51:09,600 Speaker 11: Yep? 998 00:51:09,719 --> 00:51:13,960 Speaker 10: I mean Houston yet where Egxon is just relocated you. 999 00:51:14,360 --> 00:51:16,320 Speaker 1: Okay, how hard is it going to be in Houston today? 1000 00:51:17,800 --> 00:51:18,920 Speaker 10: I think it's I think we're going to be a 1001 00:51:18,960 --> 00:51:20,799 Speaker 10: one hundred, but it feels like it's more than one 1002 00:51:20,840 --> 00:51:23,120 Speaker 10: hundred and ten or so. So we're staying firmly inside 1003 00:51:23,120 --> 00:51:24,480 Speaker 10: in the air conditioning. 1004 00:51:24,040 --> 00:51:26,440 Speaker 1: And judging by your accent, you're not a Houston native. 1005 00:51:26,520 --> 00:51:28,480 Speaker 1: I mean, you don't know you're genetically you're not made 1006 00:51:28,560 --> 00:51:29,680 Speaker 1: up for this weather, are you. 1007 00:51:30,640 --> 00:51:34,880 Speaker 10: That's that's right, that's right. Once it gets to about eighty, 1008 00:51:34,920 --> 00:51:36,120 Speaker 10: I start to start to melt. 1009 00:51:36,560 --> 00:51:39,560 Speaker 1: Ha hang out in the air conditioning there, talk to 1010 00:51:39,640 --> 00:51:42,480 Speaker 1: us about this Exon deal. What is Denbury and why 1011 00:51:42,600 --> 00:51:45,520 Speaker 1: is Exxon sholling out four point nine billion dollars? 1012 00:51:46,520 --> 00:51:48,359 Speaker 10: So it's a it's a really interesting deal. It's really 1013 00:51:48,520 --> 00:51:52,160 Speaker 10: it's really a low carbon play for for for Exxon, 1014 00:51:52,480 --> 00:51:59,040 Speaker 10: Denbury was is a what's called an enhanced oil recovery specialist. 1015 00:51:59,120 --> 00:52:05,080 Speaker 10: So they they move, they use carbon dioxide in old 1016 00:52:05,080 --> 00:52:07,560 Speaker 10: wells in order to produce more more oil. Now they 1017 00:52:07,600 --> 00:52:10,520 Speaker 10: have a key asset here, which is the which is 1018 00:52:10,520 --> 00:52:14,640 Speaker 10: a thirteen hundred one hundred mile pipeline network, which is 1019 00:52:14,640 --> 00:52:18,560 Speaker 10: the largest carbon dioxide pipeline network in the US. And 1020 00:52:18,640 --> 00:52:23,480 Speaker 10: Eggson really wants this pipeline network in order to boost 1021 00:52:23,520 --> 00:52:26,040 Speaker 10: its its carbon capture business. It's a really it's a 1022 00:52:26,040 --> 00:52:30,360 Speaker 10: really unique asset that Egxons saw as critical to its 1023 00:52:30,400 --> 00:52:33,040 Speaker 10: to its whole low carbon strategy, and that's why it's 1024 00:52:33,080 --> 00:52:34,880 Speaker 10: really paying this five billion dollars. 1025 00:52:34,880 --> 00:52:37,799 Speaker 6: What is a carbon dioxide pipeline? What is it? 1026 00:52:38,040 --> 00:52:41,040 Speaker 1: Transfers carbon dioxide? But from where to wear and for 1027 00:52:41,080 --> 00:52:41,439 Speaker 1: what reason? 1028 00:52:41,480 --> 00:52:42,200 Speaker 6: I don't understand? 1029 00:52:42,239 --> 00:52:45,680 Speaker 10: Right, that's right, trans right, it transports carbon dioxide. So 1030 00:52:46,640 --> 00:52:52,280 Speaker 10: so Denbury Denbury used to use carbon dioxide to push 1031 00:52:52,400 --> 00:52:56,040 Speaker 10: into old oil wells in order to extract crude. This 1032 00:52:56,120 --> 00:52:58,040 Speaker 10: is this is a very mature business. It's a very 1033 00:52:58,120 --> 00:53:00,480 Speaker 10: reliable business, but it's a very high cost business. And 1034 00:53:00,520 --> 00:53:05,520 Speaker 10: actually Denbury got Denbury went bankrupt in twenty twenty and 1035 00:53:05,600 --> 00:53:07,640 Speaker 10: so has been on the recovery track for the last 1036 00:53:08,239 --> 00:53:08,800 Speaker 10: three years. 1037 00:53:08,800 --> 00:53:09,080 Speaker 11: Now. 1038 00:53:09,480 --> 00:53:13,719 Speaker 10: With the world's focused now on carbon emissions and particularly 1039 00:53:14,080 --> 00:53:17,879 Speaker 10: the passing of the Inflation Reduction Act, these pipelines that 1040 00:53:18,000 --> 00:53:22,080 Speaker 10: move carbon dioxide are now being repurposed for carbon capture. 1041 00:53:22,160 --> 00:53:27,120 Speaker 10: So Egxon's plan here is to capture carbon emissions along 1042 00:53:27,120 --> 00:53:30,440 Speaker 10: the Gulf coasts, which is full of refineries, chemical plants, 1043 00:53:30,480 --> 00:53:34,840 Speaker 10: from the biggest concentration of industrial missions in the country. 1044 00:53:35,080 --> 00:53:37,760 Speaker 10: They want to capture those carbon emissions, move them along 1045 00:53:37,960 --> 00:53:41,759 Speaker 10: the Denbury pipelines and then bury them. 1046 00:53:41,400 --> 00:53:44,879 Speaker 6: In the ground, bury carbon dioxide. 1047 00:53:46,360 --> 00:53:48,560 Speaker 10: That's right, that's right. It's called carbon it's called carbon 1048 00:53:48,600 --> 00:53:52,960 Speaker 10: capture and sequestration. It's the sequestration part of it, which 1049 00:53:53,000 --> 00:53:55,720 Speaker 10: is which is where the magic happens really, whereas instead 1050 00:53:55,719 --> 00:54:00,360 Speaker 10: of emitting carbon dioxide into the air, you can capture 1051 00:54:00,360 --> 00:54:02,960 Speaker 10: it and you can bury it underground where they say 1052 00:54:03,000 --> 00:54:05,919 Speaker 10: it will stay forever. So it's it's it's a way 1053 00:54:05,960 --> 00:54:09,640 Speaker 10: of it's a way of being able to keep a 1054 00:54:09,680 --> 00:54:14,400 Speaker 10: refinery or chemical plant going, but without the without the emissions. 1055 00:54:14,680 --> 00:54:17,439 Speaker 7: Okay, so you mentioned the Inflation Reduction Act. 1056 00:54:17,520 --> 00:54:23,279 Speaker 5: How much of this acquisition is directly related to that legislation. 1057 00:54:24,520 --> 00:54:28,360 Speaker 10: Yes, it's absolutely critical. So I spoke. I spoke to 1058 00:54:28,760 --> 00:54:32,200 Speaker 10: the Eggson executive kind of leading this this morning, Dan Aman, 1059 00:54:32,719 --> 00:54:35,960 Speaker 10: who used to be at General Motors. He said, he 1060 00:54:36,000 --> 00:54:38,160 Speaker 10: said the the Inflation Reduction Act was it was a 1061 00:54:38,239 --> 00:54:41,640 Speaker 10: key catalyst. And without the Inflation Reduction Act, I think 1062 00:54:41,680 --> 00:54:43,600 Speaker 10: this deal would have been a bit more, a bit 1063 00:54:43,600 --> 00:54:46,320 Speaker 10: more challenged. And and what the what the Inflation Reduction 1064 00:54:46,400 --> 00:54:49,000 Speaker 10: Act is that does really is it provides tax credits 1065 00:54:49,360 --> 00:54:51,960 Speaker 10: for this whole process. I talked about capturing carbon and 1066 00:54:52,000 --> 00:54:55,640 Speaker 10: then burying it, and you know Eggson can do this. 1067 00:54:55,920 --> 00:54:58,319 Speaker 10: Eggxon think want to do this on a on a 1068 00:54:58,320 --> 00:55:01,879 Speaker 10: really large scale, and those tax credits will be really 1069 00:55:01,920 --> 00:55:04,879 Speaker 10: critical for Exon to really justify it to their shareholders 1070 00:55:04,960 --> 00:55:08,960 Speaker 10: as to as to why they're doing it and to 1071 00:55:09,080 --> 00:55:10,960 Speaker 10: ultimately make profits from this process. 1072 00:55:11,480 --> 00:55:14,759 Speaker 1: Kevin kind of help us understand the differences to the 1073 00:55:14,760 --> 00:55:17,880 Speaker 1: extent there are differences between how maybe some European energy 1074 00:55:17,920 --> 00:55:22,440 Speaker 1: companies like British Petroleum or Total view the transition to 1075 00:55:22,520 --> 00:55:26,880 Speaker 1: clean energy versus American energy companies like an Exxon Mobile. 1076 00:55:27,239 --> 00:55:29,560 Speaker 1: What are the differences in how they're pursuing it, how 1077 00:55:29,600 --> 00:55:30,200 Speaker 1: they view it? 1078 00:55:31,640 --> 00:55:34,000 Speaker 10: Right, So, there was there was a key split really 1079 00:55:34,000 --> 00:55:36,719 Speaker 10: around sort of four to five years ago where the 1080 00:55:37,040 --> 00:55:41,880 Speaker 10: European majors, particularly BP, SHELL Total to a lesser extent, 1081 00:55:41,960 --> 00:55:44,279 Speaker 10: decided that they were going they were going to go 1082 00:55:44,360 --> 00:55:47,320 Speaker 10: hard into renewable energy. They were not going to be 1083 00:55:47,320 --> 00:55:49,120 Speaker 10: oil and gas companies anymore, they were going to be 1084 00:55:49,239 --> 00:55:51,200 Speaker 10: energy companies, and they were going to really focus on 1085 00:55:51,640 --> 00:55:55,480 Speaker 10: things like winds, things like solar become big in power generation, 1086 00:55:56,360 --> 00:56:00,440 Speaker 10: whereas the US oil majors were very much slow to 1087 00:56:00,560 --> 00:56:05,480 Speaker 10: embrace like zero targets and things like that, and they 1088 00:56:05,960 --> 00:56:08,279 Speaker 10: they've decided to really stick much more closely to oil 1089 00:56:08,320 --> 00:56:10,839 Speaker 10: and gas, and their low carbon strategies were much more 1090 00:56:10,880 --> 00:56:14,759 Speaker 10: about things that they were specifically good at, and eggs 1091 00:56:14,840 --> 00:56:17,080 Speaker 10: on C's carbon capture is one of those things, which 1092 00:56:17,120 --> 00:56:20,480 Speaker 10: is which which it has unique capability in it. Now 1093 00:56:20,640 --> 00:56:24,080 Speaker 10: what's interesting now is we've seen this year in particular, 1094 00:56:24,120 --> 00:56:27,120 Speaker 10: the European majors have somewhat sort of pivoted their strategy 1095 00:56:28,280 --> 00:56:31,560 Speaker 10: to to come much more closely towards the towards the 1096 00:56:31,680 --> 00:56:34,920 Speaker 10: US players, because they found that investing in renewables was 1097 00:56:35,040 --> 00:56:38,080 Speaker 10: very very competitive, and that and that the returns were 1098 00:56:38,080 --> 00:56:40,799 Speaker 10: really not as good. Is in, there are plenty of 1099 00:56:40,840 --> 00:56:42,680 Speaker 10: people who can do wins, there are plenty of people 1100 00:56:42,680 --> 00:56:46,240 Speaker 10: who can do solar. There are plenty of existing power 1101 00:56:46,320 --> 00:56:49,600 Speaker 10: utilities all across the world. And BP and Shell really 1102 00:56:49,600 --> 00:56:52,840 Speaker 10: found that, you know, competing with those large established players 1103 00:56:52,840 --> 00:56:55,600 Speaker 10: and specialists in those areas was was not really a 1104 00:56:55,680 --> 00:57:00,000 Speaker 10: very high return business model. So they've decided to pivot 1105 00:57:00,080 --> 00:57:03,000 Speaker 10: bit more back to oil and gas and focus on 1106 00:57:03,680 --> 00:57:06,240 Speaker 10: the low carbon areas where they can add some unique value. 1107 00:57:06,520 --> 00:57:08,400 Speaker 10: That's certainly that's certainly Exon strategy. 1108 00:57:08,800 --> 00:57:12,600 Speaker 5: It sounds like a critical part of Exon's future proving 1109 00:57:12,680 --> 00:57:15,920 Speaker 5: strategy as well. But I'm curious, then, why are we 1110 00:57:16,160 --> 00:57:18,480 Speaker 5: seeing a little bit of negativity when it comes to 1111 00:57:18,560 --> 00:57:21,080 Speaker 5: the day's trade on the news the stock is down 1112 00:57:21,160 --> 00:57:23,040 Speaker 5: by just over two percent at the moment. 1113 00:57:24,360 --> 00:57:26,680 Speaker 10: Well, yeah, well they're paying they're paying all in stock, 1114 00:57:26,760 --> 00:57:29,720 Speaker 10: so they're playing five billion dollars in stock, So that's 1115 00:57:29,760 --> 00:57:32,520 Speaker 10: dilutive for the for the shares. So I think that's 1116 00:57:32,520 --> 00:57:35,360 Speaker 10: probably the technical reasons why Exton is trading is trading 1117 00:57:35,400 --> 00:57:35,880 Speaker 10: down today. 1118 00:57:35,920 --> 00:57:36,080 Speaker 11: Now. 1119 00:57:36,080 --> 00:57:40,960 Speaker 10: Exon's been buying back an enormous amount of stock of 1120 00:57:41,040 --> 00:57:43,920 Speaker 10: the next eighteen months now. They had a record record 1121 00:57:43,960 --> 00:57:46,400 Speaker 10: profits last year, so they're buying back a lot of stock. 1122 00:57:46,480 --> 00:57:50,360 Speaker 10: So this obviously dilutes that, that loutes that mechanism. So 1123 00:57:50,400 --> 00:57:52,400 Speaker 10: that's that's why eggsll is trading down today. It was 1124 00:57:52,400 --> 00:57:55,160 Speaker 10: interesting is Denbury is trading down and normally the acquired 1125 00:57:55,200 --> 00:57:59,240 Speaker 10: company would trade up. Some commentary in the in the 1126 00:57:59,240 --> 00:58:02,880 Speaker 10: markets that some aolysts think this is higgs on, this 1127 00:58:03,040 --> 00:58:05,440 Speaker 10: is paying is paying kind of a too lower price 1128 00:58:06,640 --> 00:58:09,800 Speaker 10: for Denbris. So that's that's that's certainly an interesting one 1129 00:58:09,840 --> 00:58:10,200 Speaker 10: to watch. 1130 00:58:10,760 --> 00:58:14,960 Speaker 1: All Right, So Kevin, you're an Englishman in Houston, but 1131 00:58:15,120 --> 00:58:18,080 Speaker 1: in Houston it's energy is business and job one. It's 1132 00:58:18,120 --> 00:58:20,560 Speaker 1: business number one. I got w T I crudal oil 1133 00:58:20,880 --> 00:58:23,280 Speaker 1: just under seventy six dollars a barrow here a little 1134 00:58:23,280 --> 00:58:24,800 Speaker 1: bit of a rally. What is it when you go 1135 00:58:24,840 --> 00:58:29,040 Speaker 1: to the local pub equivalent in Houston? What are the 1136 00:58:29,080 --> 00:58:31,560 Speaker 1: folks talking about in terms of where they think oil 1137 00:58:31,640 --> 00:58:31,919 Speaker 1: is going? 1138 00:58:31,960 --> 00:58:32,800 Speaker 6: In terms of the price. 1139 00:58:34,280 --> 00:58:36,520 Speaker 10: Everyone thinks it's going up. It's an oil town. It's 1140 00:58:36,560 --> 00:58:39,080 Speaker 10: always going up. We think it's going to the moon. 1141 00:58:39,120 --> 00:58:42,360 Speaker 10: One hundred dollars, one hundred dollars a barrel. It's it's 1142 00:58:42,480 --> 00:58:45,400 Speaker 10: it's just it's just a matter of time. So yeah, 1143 00:58:45,440 --> 00:58:50,120 Speaker 10: people people very very very very very very British as usual, 1144 00:58:50,680 --> 00:58:51,960 Speaker 10: and I think I think you kind of have to 1145 00:58:52,000 --> 00:58:53,600 Speaker 10: be to be in the oil business. It's a it's 1146 00:58:53,600 --> 00:58:56,680 Speaker 10: a tough it's a tough business, lots of lots of 1147 00:58:56,680 --> 00:58:59,439 Speaker 10: booms and busts. So it's certainly it's certainly the place 1148 00:58:59,480 --> 00:59:01,360 Speaker 10: for for optimists. 1149 00:59:01,520 --> 00:59:03,600 Speaker 1: How about nat gas, I mean natural gas has been 1150 00:59:03,760 --> 00:59:04,840 Speaker 1: a different story. 1151 00:59:04,960 --> 00:59:06,000 Speaker 6: What's the feeling about that? 1152 00:59:07,480 --> 00:59:11,000 Speaker 10: Yeah, Well, that gas is we've basically got too much 1153 00:59:11,040 --> 00:59:13,560 Speaker 10: of it. You know, there's huge amounts of gas comes 1154 00:59:13,600 --> 00:59:15,320 Speaker 10: out of comes out of the permium basin, which is 1155 00:59:15,360 --> 00:59:19,520 Speaker 10: primarily an oil basin, so natural gas is the essentially 1156 00:59:19,520 --> 00:59:23,320 Speaker 10: a byproduct. So so really people are really waiting for 1157 00:59:23,560 --> 00:59:28,720 Speaker 10: the liquefied natural gas export facilities along the Gulf coast 1158 00:59:28,720 --> 00:59:33,160 Speaker 10: to come online. We had a huge project stanctioned just 1159 00:59:33,240 --> 00:59:38,320 Speaker 10: last night actually, Brian Brownsville, South Texas, eighteen point four 1160 00:59:38,360 --> 00:59:42,160 Speaker 10: billion dollar project, massive, so that's that's gonna that's going 1161 00:59:42,200 --> 00:59:44,680 Speaker 10: to swallow up, so some of this excess gas and 1162 00:59:44,680 --> 00:59:48,040 Speaker 10: exports it around the world. There's been three other final 1163 00:59:48,080 --> 00:59:52,560 Speaker 10: investment decisions made, two other final investment decisions made on 1164 00:59:52,960 --> 00:59:57,120 Speaker 10: such similar facilities this year alone. And really the whole, 1165 00:59:57,440 --> 00:59:59,000 Speaker 10: the whole goal of this is to get sort of 1166 00:59:59,080 --> 01:00:02,520 Speaker 10: US gas on on the water around the world, you know, 1167 01:00:02,560 --> 01:00:05,240 Speaker 10: helping to replace Russian supplies, especially to Europe. 1168 01:00:05,360 --> 01:00:08,640 Speaker 1: All Right, great reporting as always, Kevin Crowley, Senior US 1169 01:00:08,640 --> 01:00:10,280 Speaker 1: oil reporter for Bloomberg News. 1170 01:00:10,320 --> 01:00:12,400 Speaker 6: Again an Englishman in Houston. Good luck with that. 1171 01:00:13,040 --> 01:00:15,560 Speaker 1: Before that he was in Johannesburg and then before that 1172 01:00:15,600 --> 01:00:17,560 Speaker 1: in London, so he's been all over the place for 1173 01:00:17,600 --> 01:00:18,360 Speaker 1: Bloomberg News. 1174 01:00:22,040 --> 01:00:25,160 Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can 1175 01:00:25,160 --> 01:00:28,960 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 1176 01:00:29,040 --> 01:00:32,760 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 1177 01:00:32,960 --> 01:00:34,880 Speaker 2: at Matt Miller nineteen seventy three. 1178 01:00:35,320 --> 01:00:37,720 Speaker 6: And I'm fall Sweeney. I'm on Twitter at pt Sweeney. 1179 01:00:37,840 --> 01:00:40,480 Speaker 1: Before the podcast, you can always catch us worldwide at 1180 01:00:40,520 --> 01:00:42,280 Speaker 1: Bloomberg Radio.