Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg Intelligence with Alex Steinhl and Paul'sweenye.
Speaker 3: The real app performance has been the US corporate high yield.
Speaker 4: Are the companies lean enough? Have they trimmed all the fats?
Speaker 3: The semiconductor business is a really cyclical business.
Speaker 2: Breaking market headlines and corporate news from across the globe.
Speaker 4: Do investors like the M and A that we've seen?
Speaker 1: These are two.
Speaker 3: Big time blue chip companies.
Speaker 4: The window between the peak and cut changing super fast.
Speaker 2: Bloomberg Intelligence with Alex Steinhl and Paul'sweenye on Bloomberg Radio.
Speaker 3: On Today's Bloomberg Intelligence Show, we dig inside the big
Speaker 3: business stories impacting Wall Street in the global markets.
Speaker 4: Each and every week, we provide in depth research and
Speaker 4: data on some of the two thousand companies and one
Speaker 4: hundred and thirty industries our analysts cover worldwide.
Speaker 3: Today, we'll look at a story about how seventy two
Speaker 3: hours obliterated our Caago's capital management founder Bill Wang's thirty
Speaker 3: six billion dollar fortune.
Speaker 4: Plus, we're going to take an in depth look at
Speaker 4: the global carbon market.
Speaker 3: First, we dive into big tech and Apple. Apple's anti
Speaker 3: trust feud with the European Union over allegedly illegal practices
Speaker 3: on the App store Intensified.
Speaker 4: For more on this, we were joined by Tamlin based in
Speaker 4: Bloomberg Intelligence technology analysts, and we first asked Hamlin to
Speaker 4: talk to us about what is happening with Apple right now.
Speaker 5: The European Commission announced preliminary findings in an investigation into
Speaker 5: Apple under the Digital Markets Act. This is the sweeping
Speaker 5: new competition rules that the European Union is sort of
Speaker 5: implemented in March of this year. The findings of this
Speaker 5: probe relate to anti steering rules, so essentially to Apple's
Speaker 5: rules that it has in place to sort of prevent
Speaker 5: app developers from informing users of maybe cheaper subscription options
Speaker 5: outside of the app store. Now this might sound familiar,
Speaker 5: because just in early March, before the DMA took effect,
Speaker 5: the Commission did find Apple one point eight billion euros
Speaker 5: over sort of these same anti steering policies. Now, what
Speaker 5: their commission said is that Apple is still not complying
Speaker 5: now with the DMA in terms of really letting developers
Speaker 5: freely engage with users and direct them to cheaper options. Specifically,
Speaker 5: this kind of they want developers to be able to
Speaker 5: market within the app and show cheaper subscriptions within that.
Speaker 5: So it's really this kind of more pressure on those
Speaker 5: sort of app store revenues that Apple.
Speaker 4: So what does Apple say to that? Well, what's their
Speaker 4: defense to that, because presuly they had months to kind
Speaker 4: of get it together.
Speaker 5: What do they said is they think that they do
Speaker 5: comply with all of this. What's interesting about the DMA, though,
Speaker 5: is that this is the DMA. The European Commission did
Speaker 5: play a strong role in drafting these rules, and it's
Speaker 5: also responsible for enforcing them, and there are a lot
Speaker 5: of sort of subjective interpretations in terms of first complying
Speaker 5: with this. So I think what we are going to
Speaker 5: see is probably the European Commission taking a very strict
Speaker 5: view of what's reasonable in these circumstances and probably really
Speaker 5: try to get strict adherance here. So it's going to
Speaker 5: be going to be up to them to decide whether
Speaker 5: Apple is complying or not, and then Apple can then
Speaker 5: sort of appeal to the courts. But I do think
Speaker 5: it's pretty likely we're going to see another fine in
Speaker 5: this and some behavioral remedies coming down the line.
Speaker 3: We've seen this time and time again where the Europeans
Speaker 3: just start nitpicking at these US technology companies, tam what's
Speaker 3: the feeling within the regulatory environment of Europe as to
Speaker 3: really what they're trying to do here, because it just
Speaker 3: doesn't seem like it's even relevant. I mean, it just
Speaker 3: at the end of the day, they just whether it's
Speaker 3: Google or Facebook or they just write checks here to
Speaker 3: make it all go away. Do European regulators recognize that
Speaker 3: it just doesn't seem to be that material what they're doing.
Speaker 5: Yeah, So I think if you look at this specific investigation,
Speaker 5: you know, this is one that sort of came out
Speaker 5: of sort of Spotify, which of course is headquartered in Europe,
Speaker 5: and the app developers are complaining that the Apple is
Speaker 5: squeezing them too hard. So I think in some of
Speaker 5: these instances, Europe is trying to protect some local players
Speaker 5: by sort of ordering a sort of loosening of these
Speaker 5: rules that sort of maybe benefit the gatekeeper on the TNA,
Speaker 5: which would be at Apple, Google, Microsoft brothers, and they
Speaker 5: are sort of trying to show domestic industry that they
Speaker 5: are trying to pry open the markets. I do think
Speaker 5: you're right that I think at this point investors are
Speaker 5: sort of kind of just shrugging this off. This is
Speaker 5: just one thing after another. I will point a difference
Speaker 5: under the DMA is that the timeline is really much
Speaker 5: quicker than under of former case law, where it may
Speaker 5: take three four years until you got a result after
Speaker 5: an industiation. Here, this finding came just three months after
Speaker 5: the inquery opened, and we're going to have sort of
Speaker 5: a final remedial measure by early next year. So I
Speaker 5: do think the timeline is faster. Whether or not that
Speaker 5: this results and sort of the impact that the regulators
Speaker 5: might be looking for, I think definitely remains to be seen.
Speaker 5: I think investors are definitely looking a little bit of
Speaker 5: skew at it and thinking maybe this is sort of
Speaker 5: just more of the same.
Speaker 3: And Alex, I mean, you know, it's really almost, maybe
Speaker 3: even more than thirty years ago that Microsoft started going
Speaker 3: through the same whole thing with the European Union, and
Speaker 3: again it investors became conditioned to it's no big deal.
Speaker 3: They just write it check and it kind of goes away.
Speaker 3: The tobacco industry. You know, investors kind of said, put
Speaker 3: it in context, it's not that big a deal, and
Speaker 3: you kind of wonder, you know, given that the US
Speaker 3: regulators have taken a very light touch to technology and
Speaker 3: then allowing these companies to get so big. It seems
Speaker 3: like the Europeans are trying to do what they can
Speaker 3: to kind of rein it in, but it seems almost
Speaker 3: too little, too late, right.
Speaker 4: And also you can make the argument too that you know,
Speaker 4: Europe doesn't have a lot of technology companies. They have some,
Speaker 4: of course, like ASML for example, yes's fitty, Yeah exactly, SAP,
Speaker 4: But I mean, can you name anymore?
Speaker 3: No, I'm there's some.
Speaker 4: But I think that that's kind of the point if
Speaker 4: you take a look at you know, European stocks versus
Speaker 4: the SMP and market cap like twenty years ago versus now,
Speaker 4: Oh my gosh, forget that. Hey Tamlin, what's going on
Speaker 4: with Apple in general? It seems to be making a
Speaker 4: little bit of a comeback here. What do you make
Speaker 4: of that?
Speaker 5: Yeah, I mean I think some of this comes some
Speaker 5: sort of the recent announcement to sort of build AI
Speaker 5: into the iPhone, and maybe it made me sort of
Speaker 5: accelerate the recycle in terms of getting people to buy
Speaker 5: those zones. Definitely, I don't think the regulatory headwinds are
Speaker 5: really causing it much damage right now. I will point
Speaker 5: out that although the US is definitely, like well said,
Speaker 5: taking a light touch approach, the one area they are
Speaker 5: getting involved in is on sort of these apps for rules,
Speaker 5: where where Apple's obviously been in litigation with Epic for
Speaker 5: years and years and years. So I think on both
Speaker 5: sides of the Atlantic, there are some pressure on those
Speaker 5: services revenues that we might see shaking out over the
Speaker 5: next you know, nine to eighteen months to see how
Speaker 5: that plays.
Speaker 3: Out our thanks to Tamlin Basin Bloomberg Intelligence Technology Channels, we.
Speaker 4: Move next to the electric vehicle industry. This week we
Speaker 4: heard Beijing suggested Germany's luxury car manufacturers could benefit if
Speaker 4: Berlink convinces the European Union to drop tearraffs on Chinese
Speaker 4: electric vehicle exports.
Speaker 3: Beijing currently imposes a fifteen percent fee on passenger vehicles
Speaker 3: from the block. For more on this in the State
Speaker 3: of the ev Industry, we were joined by Steve Mann,
Speaker 3: Bloomberg Intelligence Global Autos and Industrials Research channelists.
Speaker 4: We first asked for his take on this week's news.
Speaker 6: It's a big deal for the Germans, especially the luxury
Speaker 6: automakers like BMW Mercedes and Audi, which Volkswagen owns Audi.
Speaker 6: You know, they have about eighty percent of the market,
Speaker 6: the luxury car market in China, so they sell a
Speaker 6: huge amount of cars in China. About a third to
Speaker 6: forty percent of these companies' revenues actually generate in China,
Speaker 6: so they Yeah, so they want to make good with
Speaker 6: the Chinese. As you know, Germany has been against the tariffs.
Speaker 6: So if the Germans are able to get something from
Speaker 6: China and help ease some of the terrors, or if
Speaker 6: China can get the Germans to help them eat some
Speaker 6: of the tariffs in the EU, I think it will
Speaker 6: benefit you know, potentially companies like Stelentis as well, which
Speaker 6: is which also has a new joint venture.
Speaker 4: But here's the thing that I get confused. Is it
Speaker 4: China's making a pitch to individual countries versus the European
Speaker 4: Union trying to operate as one body in relation to tariffs,
Speaker 4: and I wonder how that's going to work itself out.
Speaker 6: Yeah, I think it's it's that divine and conquer strategy
Speaker 6: they're taking. So, but you know, I think the Germans
Speaker 6: probably has the most to lose out of the global
Speaker 6: automakers here. You know, about sixteen percent of their battery
Speaker 6: electric vehicles that are produced in China, it's actually shipped
Speaker 6: out globally. So China plays an important part for the
Speaker 6: BEEV market as a low cost producer. So, you know,
Speaker 6: I don't think there's a lot of other automakers that
Speaker 6: are you know, that have that many bev's produce in
Speaker 6: China and sold elsewhere around the world.
Speaker 3: And Steve Canada now gets into the game. Canada announces
Speaker 3: planned to curb imports of Chinese made EV's. First of all,
Speaker 3: just give us a sense of how good, how competitive
Speaker 3: are these Chinese evs, because if you tell me they're
Speaker 3: good vehicles, let's bring them into the market.
Speaker 6: I don't know, Yeah, I think some if you talk
Speaker 6: to some of the our makers, they actually have the
Speaker 6: same thinking. Let's let's let's compete, right, I think competition
Speaker 6: will make the whole industry better. You saw that with
Speaker 6: Tesla being the you know, fourth or third automaker in
Speaker 6: the US and actually helped drive a lot of the
Speaker 6: b EV costs down. But you know, it's not surprising
Speaker 6: that Canada is is implementing tariffs. They are part of
Speaker 6: the US, Mexico, Canada free trade agreement, and I think,
Speaker 6: you know, they have to close that door, that back
Speaker 6: door where the Chinese EV's can come in. It is
Speaker 6: very competitive. I think, you know, Chinese evs are cheap
Speaker 6: enough that if some argue that even with the tariffs,
Speaker 6: even with some engineering changed so that they fit the regulatory,
Speaker 6: safety and mission rules here, is still be a very
Speaker 6: competitive price vehicle for North America.
Speaker 4: So then to that point, we're waiting for Mexico now,
Speaker 4: right because I think we talked about this before. So
Speaker 4: not only is Canada going to put tariffs on EV imports,
Speaker 4: they're also going to curb imports of Chinese made evs.
Speaker 4: The idea is that if Mexico doesn't have any of
Speaker 4: those restrictions, that they can just import EV's from China
Speaker 4: and then through Mexico go into the US. And that's
Speaker 4: a different way of operating. When do we get that
Speaker 4: from Mexico.
Speaker 6: I think there are some negotiation that's happening now with
Speaker 6: Mexico to kind of implement similar tariff. I've heard that
Speaker 6: VOVO is already kind of lobbying. VOVO is actually part
Speaker 6: of Chile, is actually lobbying the Mexican government to not
Speaker 6: implement to not put tariffs in place. So then negotiations
Speaker 6: are ongoing. I don't think we were gonna wait have
Speaker 6: to wait too long to hear any news from that.
Speaker 3: All right, So stepping back a little bit, give us
Speaker 3: the latest thinking out of Detroit and other auto capitals
Speaker 3: around the world about EV's versus the hybrids. Is the
Speaker 3: hybrid gonna be I guess the stepping stone to a
Speaker 3: pure EV environment? Do you think is that still the thinking?
Speaker 6: Yeah, I think that is still the thinking. I think
Speaker 6: with BEEV sales slowing down or growth slowing down, the
Speaker 6: automakers do need something else to meet the cafe the
Speaker 6: few economy regulation, the missions regulations. So hybrid is a
Speaker 6: stopgap measure. But if you talk to the all the automakers,
Speaker 6: there's still spending a lot of money on BEV. They
Speaker 6: think that is the future because at the end of
Speaker 6: the day, hybrid vehicles do still spell out pollution or
Speaker 6: greenhouse gases. So you know, these emission standards, these few
Speaker 6: economy standards, they're only going to get tighter and tighter. O.
Speaker 3: Thanks to Steve man bloomerg Intelligence, Global Autos and Industrials
Speaker 3: research channels.
Speaker 4: Coming up, We're going to look at Bloomberg Intelligence's midyear
Speaker 4: outlook for North American restaurants and food service companies.
Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing indiffer
Speaker 3: research and data on two thousand companies and one hundred
Speaker 3: and thirty industries. You can access Bloomberg Intelligence via Bigo
Speaker 3: in the terminal.
Speaker 4: I'm Paul Sweeney and I'm Alex Steele, and this is Bloomberg.
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Affocarplaying and broud Auto
Speaker 2: with the Bloomberg Business app. Listen on demand wherever you
Speaker 2: get your podcasts, or watch us live on YouTube.
Speaker 4: We look next at the restaurant and food service industry.
Speaker 4: It's Bloomberg Intelligence recently released it's midiar outlook for both
Speaker 4: in North America.
Speaker 3: For more on this, we were joined by Michael Halen,
Speaker 3: Bloomberg Intelligence Senior Restaurant and Food Service. We first asked Michael,
Speaker 3: what is expecting for the back half of the year.
Speaker 7: Sales are probably looking a little bit better just because
Speaker 7: than they were in the first half, because the year
Speaker 7: over year comparisons are getting easier, higher income consumers should
Speaker 7: have money to spend. Right, we see stock markets at
Speaker 7: all time highs, bitcoins having a rough day, but not
Speaker 7: far off the highs, and home prices have held in
Speaker 7: despite the higher rates, so that those should kind of
Speaker 7: booy restaurant sales. But on the other end, the other
Speaker 7: end of the k, the low income consumers continue to struggle.
Speaker 7: You know, consumers under seventy five thousand were cited by
Speaker 7: Darden the other day on their earnings call, is struggling,
Speaker 7: especially consumers you know that are earning less than fifty thousand.
Speaker 7: So we have kind of a push and a pull there.
Speaker 8: You know.
Speaker 7: Margins are okay, you know, we would like to.
Speaker 3: See better sales because that's really.
Speaker 7: What drives most of the margin expansion in that business.
Speaker 7: Right There's a lot of operating leverage in the mind model,
Speaker 7: so maybe some modest margin expansion. Then stocks generally haven't
Speaker 7: done so well this year. What we wrote is that
Speaker 7: we think we're going to see a larger spread between
Speaker 7: the stock market, you know, the market share winners and
Speaker 7: losers this year, you know, which we've largely seen in.
Speaker 3: The first half.
Speaker 7: You've seen stocks like Chipotle absolutely knocked the cover off
Speaker 7: the ball again and really appreciate where other chains like
Speaker 7: blooming Is kind of struggled in the first half and
Speaker 7: you've seen that stock, you know, sell off pretty precipitously.
Speaker 3: Talk to us about California and their new minimum wage law.
Speaker 3: What's the impact been on the fast food business.
Speaker 4: We just have like a famous Hollywood restaurant closed because
Speaker 4: of that, like the famous like Hollywood McDonald's.
Speaker 7: Or something San fran Yeah, so it's not been good
Speaker 7: so far.
Speaker 3: April results were.
Speaker 7: Kind of in line with the US in terms of
Speaker 7: same slore of sales at quick service restaurants, but I
Speaker 7: think everybody went in April and then they had got
Speaker 7: sticker shock and they didn't return in May.
Speaker 3: So the McDonald's are the world in the restaurants in
Speaker 3: general in California. Are they raising prices to cover their higher.
Speaker 7: Labor, Yeah, high single digits is typical, which is a lot,
Speaker 7: and that's not even covering it because the traffic loss
Speaker 7: that we've seen here in May, it's it's not even
Speaker 7: going to cover it. So they may even have to
Speaker 7: raise prices again if they can. Quick service California same
Speaker 7: store sales underperformed by almost four hundred basis points in
Speaker 7: May versus the US. Yeah, so you know what we
Speaker 7: wrote is that we expect quick service to continue to
Speaker 7: outperform casual dining just because it's a cheaper check. Even
Speaker 7: though it's gotten all the bad press about the eighteen
Speaker 7: dollars big mac meal, twenty two dollars smash burger meal,
Speaker 7: it's still you can eat there a lot cheaper on
Speaker 7: the value menu and stuff like that. Also, you know,
Speaker 7: chains are starting to discount more Burger King and McDonald's
Speaker 7: five dollars meals, things of that nature. But California is
Speaker 7: definitely going to weigh on quick service growth throughout your
Speaker 7: end for sure.
Speaker 4: So as the k shape recovery grows even wider, it
Speaker 4: feels like, so do the valuations of those companies that
Speaker 4: service those two lines.
Speaker 1: Is that a fair statement.
Speaker 7: Yeah, if you're a chain that can attract high income
Speaker 7: consumers like Chipotle has done such a good job of
Speaker 7: doing and McDonald's has done a good job of it
Speaker 7: as well since since the start of the pandemic.
Speaker 4: Chipotle is their Wednesday day, Paul, It varies, but it's
Speaker 4: seven one day week they get Chipotle.
Speaker 3: But here's a funny Chipotle story. They got slammed in
Speaker 3: social media for like underfilling their tacos and things like that.
Speaker 3: Now they've gone overboard and they overfill them. So the
Speaker 3: net result for me, instead of getting three hard tacos
Speaker 3: with chicken and I'd give you the whole order later,
Speaker 3: I only get two.
Speaker 2: There you go.
Speaker 3: So it's got to be hurting their sales. So that
Speaker 3: is an interesting tidbit.
Speaker 7: Thinking about doing some work into it, but we haven't
Speaker 7: done anything yet. There was definitely some some heat and
Speaker 7: some shade thrown at Chipotle for a little while there.
Speaker 3: I'm going to say a year and a half ago,
Speaker 3: somebody came in there, this kind of the beginning of
Speaker 3: this whole AI thing, and somebody came in to this
Speaker 3: studio said, one of the biggest areas is going to
Speaker 3: be like, for example, drive through going through a drive
Speaker 3: through McDonald's, it's gonna be all AI blah blah blah
Speaker 3: blah blah. So my question to you is, are local
Speaker 3: I don't know McDonald's or Burger Kings. Did they have
Speaker 3: fewer employees because they're using technology or at all like that?
Speaker 7: Well, there, they have tried to cut labor hours in
Speaker 7: other ways. That's a goal using AI for sure. It's
Speaker 7: been harder though at the drive through then anticipated a
Speaker 7: lot of things just like accents, you know, you know,
Speaker 7: something like that you know actually is has caused some
Speaker 7: issues up they're also using AI with these cameras that
Speaker 7: are using AI to see if orders are being packaged correctly,
Speaker 7: you know, since takeout and delivery has become such a
Speaker 7: big part of these businesses. But you know, one of
Speaker 7: the companies that was doing that got caught using people
Speaker 7: in India watching like screens.
Speaker 2: Videos supposedly quote unquote AI. So we're not quite there
Speaker 2: yet with the AI our.
Speaker 3: Thanks to Michael Hanlin, Bloomberg Intelligence Senior Restaurant and food
Speaker 3: service Analysts.
Speaker 4: Here at Bloomberg, we'd like to keep you up to
Speaker 4: date on all the fun, juicy Wall Street stories, and
Speaker 4: this week we focused on the Bloomberg Big Take story
Speaker 4: titled the Last seventy two Hours of our kegos for more.
Speaker 3: We were joined by one of the stories authors, Shreed Nanarajen,
Speaker 3: Bloomberg News Senior Finance reporter. We first asked Streid to
Speaker 3: walk us through what this story is about.
Speaker 9: This is a story that's fascinated Wall Street for much
Speaker 9: of the last three years, right Billhong out of nowhere,
Speaker 9: had built up such enormous wealth, had a family office,
Speaker 9: and yet hid wealth had gone from a billion to
Speaker 9: four billion, from four billion to thirty six billion in
Speaker 9: a span of six months. That all collapsed very publicly
Speaker 9: in March twenty twenty one, when in a matter of
Speaker 9: days he lost his entire fortune. Everyone on Wall Street
Speaker 9: has been trying to figure out what happened, how it happened,
Speaker 9: and a lot of the details have been dribbling out
Speaker 9: for the last few years. But over the last few
Speaker 9: weeks any court room in downtown Manhattan, Bill Huang is
Speaker 9: on trial. Prosecutors accused him of manipulating markets, of defrauding lenders.
Speaker 9: But after having spent a lot of time in the courtroom,
Speaker 9: another key takeaway from it all has been that Wall
Speaker 9: Street doesn't look all that great. Here was someone whose
Speaker 9: personal wealth might have been thirty six billion dollars, but
Speaker 9: he had another one hundred and twenty five billion dollars
Speaker 9: in borrowed money. He had a gross portfolio size of
Speaker 9: one hundred and sixty billion dollars, making concentrated bets on
Speaker 9: much of the same names, and all the banks were
Speaker 9: largely caught unawares. Yes, they got vague answers, evasive answers,
Speaker 9: but they also relied on pinky promises effectively to give
Speaker 9: him so much firepower for his bets. And in the
Speaker 9: end the banks were burnt badly, lost over ten billion dollars,
Speaker 9: and one of those banks, the most badly hit credit Squeeze,
Speaker 9: doesn't even exist anymore. And you could argue Bill Huong's
Speaker 9: firm played a key role in that.
Speaker 3: What I found fashionating about this article, and it's a
Speaker 3: great minute by minute walk through a seventy two hour
Speaker 3: period when it all kind of came to an end
Speaker 3: for everyone involved, was that the banks did not know
Speaker 3: that Piquang and his firm was layering on such concentrated
Speaker 3: bets across various firms. One bank didn't know what the
Speaker 3: other bank was doing. Therefore they didn't know the magnitude
Speaker 3: of the exposure. How did that happen?
Speaker 9: And look all the conversations we have, they will tell
Speaker 9: you we're not allowed to ask if you're in the
Speaker 9: prime brokerage business, if you're in the business of extending
Speaker 9: leverage to your client, the client doesn't necessarily have to
Speaker 9: tell you or show you their exact portfolio. They will
Speaker 9: claim secrecy, they will claim proprietary information. But at the
Speaker 9: end of the day, banks can also say, if you
Speaker 9: don't give me as many disclosures as possible, I will
Speaker 9: not give you that money. That never happened. These guys
Speaker 9: would come in and say, yes, we have a diversified portfolio,
Speaker 9: and yes, don't worry, we have all the controls in place,
Speaker 9: and it's across a mix of names, and the banks
Speaker 9: would believe that, yes, they expect honesty and truthful answers.
Speaker 9: And if they didn't get that, and you can see
Speaker 9: why the DOJ wants to go after Billhong and ArKade goes.
Speaker 9: But just think about it for a moment. You walk
Speaker 9: into a bank today as a retail customer and want
Speaker 9: a ten thousand dollars loan or a mortgage, or you
Speaker 9: are trying to get into a co op, the hoops
Speaker 9: that one has to jump through, the signatures you have
Speaker 9: to get. I mean, to get into a co op,
Speaker 9: you will need three witnesses, three friends, your high school teacher,
Speaker 9: your college professor, and so many other people.
Speaker 4: When you're first born man, and if you're getting into
Speaker 4: a co op.
Speaker 9: Pretty much and in this case, he as someone who
Speaker 9: said I would like five billion dollars in capacity, Actually,
Speaker 9: can we increase it ten billion now? Because my portfolio
Speaker 9: sizes increase and all the banks are doing you're sure
Speaker 9: you're good for that, right, and we can trust you
Speaker 9: that you're investing well and you're doing this responsibility.
Speaker 1: Yep, yep.
Speaker 9: Great. They didn't even require written declarations about what the
Speaker 9: portfolio looks like. These were phone conversations and that was
Speaker 9: convincing enough for them to extend this kind of money.
Speaker 9: And that's why for us. Yes, the legal process will
Speaker 9: follow its on path, and the jury of twelve New
Speaker 9: York kers will decide whether Bill Hoong his CFO, if
Speaker 9: they are guilty or not on the charges that have
Speaker 9: been brought against them. But it's not a great look
Speaker 9: for Wall three.
Speaker 4: So in terms of Wall Street, could this happen again
Speaker 4: or do you think now things will be rethought? Those
Speaker 4: pinky swears will be by the wayside.
Speaker 9: By the way I was told by one of the
Speaker 9: editors that pinky swears are the highest grade of promises
Speaker 9: out there. So if you can't rely on that, what
Speaker 9: do you rely on. I will make the point though,
Speaker 9: that the lack of copycats before our Chigoes or even
Speaker 9: after our Gooes, isn't necessarily a reflection of a new
Speaker 9: regime of banking, of strengthened controls, of great oversight. As
Speaker 9: much as in the case of our gegos, there was
Speaker 9: one man who was willing to take a pliant system
Speaker 9: to the extremes. There was a lot of noise about
Speaker 9: bringing in rules. Family offices don't face the same kind
Speaker 9: of oversight as hatch funds, and they will talk about
Speaker 9: what can be changed, how the rules need to be modified.
Speaker 9: Some have been put in place, but for the most
Speaker 9: part it's been a lot of talk, and these things
Speaker 9: take time. The worry still remains. And look, this happened recently,
Speaker 9: so the banks are perhaps shy of doing this with
Speaker 9: someone else, but it's not entirely clear to me how
Speaker 9: they avoid a repeat of this situation. If someone else
Speaker 9: comes along and follows this, you know, you may want
Speaker 9: to call it what might have looked like genius investing
Speaker 9: to start with, but really at the end of it
Speaker 9: reckless investing. If they follow the same pattern, can we
Speaker 9: be guaranteed that they won't be a repeat? I don't know,
Speaker 9: and Credit Swiss will tell you it doesn't even matter
Speaker 9: because they don't they don't exist anymore to be able
Speaker 9: to tell you if there will be a repeat or not.
Speaker 9: That was the kind of consequence we saw from the
Speaker 9: collapse of this one film.
Speaker 3: Say it's how this trial is gonna go, Sery.
Speaker 9: Well, it's fascinating. It's happening in the court room of
Speaker 9: a ninety year old judge, right, and you have a
Speaker 9: jury most of them, well all of them, had never
Speaker 9: heard of Billhong or our kaid goes before. And that
Speaker 9: kind of means that they have been getting a finance
Speaker 9: one o one finance one on one sounds challenging in itself,
Speaker 9: But then if the prosecutors and the defense lawyers have
Speaker 9: to spend much of their time trying to explain security
Speaker 9: based swaps, margin leverage, even discuss what memes talks and
Speaker 9: what they're not, and have to define for some of
Speaker 9: these people what Goldman Sachs is, it'll be very interesting
Speaker 9: to see how it pans out, because when you're listening
Speaker 9: to some of the arguments in court, when you hear
Speaker 9: prosecutors talk about a lot of heavy investing towards close
Speaker 9: of market, they were lifting the firm limit to try
Speaker 9: and drive the price up, and yet on counter you
Speaker 9: kind of understand that is how business is done on
Speaker 9: Wall Street. I mean, some of this jargon sounds sinister,
Speaker 9: but isn't necessarily sinister. But how we see and perceive
Speaker 9: it doesn't matter. It's what's getting through to the jury.
Speaker 9: The prosecution rests its case today, the defense gets another
Speaker 9: couple of days, and after the break next week we
Speaker 9: will come back with closing remarks and then we will
Speaker 9: get the final liddict on this one.
Speaker 3: Our thanks to Shri Natarajen, Bloomberg News Senior finance reporter.
Speaker 4: I coming up on the program, We're going to look
Speaker 4: at how the strong demand for cruises impacted Carnival's quarterly earnings.
Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 3: depth research and data on two thousand companies and one
Speaker 3: hundred and thirty industries. You can access Bloomberg Intelligence via
Speaker 3: bi go on the terminal, I'll Paul Swinging.
Speaker 4: And am Alex Steele, and.
Speaker 1: This is Bloomberg.
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Apple car Play and
Speaker 2: Android Auto with the Bloomberg Business. You can also listen
Speaker 2: live on Amazon Alexa from our flagship New York station.
Speaker 2: Just say Alexa Play Bloomberg eleven thirty.
Speaker 4: We move now to the cruise line industry and Carnival.
Speaker 4: This week, Carnival raised it's full year earnings outlook after
Speaker 4: strong demand for cruises helped it post a surprise profit
Speaker 4: last quarter.
Speaker 3: For more, we were joined by Brian Egg, Bloomberg Intelligence
Speaker 3: Senior Gaming and Lodging analyst.
Speaker 4: We first asked Brian to make sense of Carnival's positive results.
Speaker 10: I think what Carnival is seeing is going beyond pent
Speaker 10: up demand from the pandemic to genuine, ongoing, sustainable, disposable
Speaker 10: spending on leisure travel. So they're seeing it across the board.
Speaker 10: I mean, it really is broad base. They're seeing in
Speaker 10: Europe and North America. They're seeing it for both on
Speaker 10: board spending and ticket fare gains. And they're seeing it
Speaker 10: both on new hardware and you know, kind of legacy
Speaker 10: ships as well. So it is pretty broad based.
Speaker 3: So is it the typical cruising customer, is it new
Speaker 3: people coming into the industry? What are they seeing here?
Speaker 10: I think it's both. There's always a focus on new
Speaker 10: cruise customers and marketing the value relative value of cruises
Speaker 10: compared to other forms of vacation. I think it's really both.
Speaker 10: And you know, different brands attract different demographics and age groups,
Speaker 10: but you know, to the extent that it's broad based,
Speaker 10: and it seems to be happening not only in the
Speaker 10: first quarter, but continuing to the second quarter, and as
Speaker 10: Alex mentioned, next year as well. You know, I think
Speaker 10: it's we're seeing it across the board.
Speaker 4: If we go into a real slump or if inflation
Speaker 4: stays sticky, does that affect this sustainable leisure demand the
Speaker 4: Carnival and you were talking about.
Speaker 10: You know, it does. Certainly. Travel prices have increased, and
Speaker 10: we're seeing that dismanifested of the fact that Carnival raised
Speaker 10: its net revenue old growth outlook for twenty twenty four
Speaker 10: from nine point five percent to ten and a quarter percent,
Speaker 10: so they're partly benefiting from that price. But obviously, you know,
Speaker 10: inflation cost inflation does affect the disposition of consumers. But
Speaker 10: for now, at least, you know, the demand on the
Speaker 10: consumer discretionary side certainly seems to be there.
Speaker 3: How about on the cost side, I'm thinking fuel I'm
Speaker 3: thinking labor. What's going on on the cost side for
Speaker 3: a lot of these crews companies.
Speaker 10: Yeah, it's a factor certainly in terms of cost positioning.
Speaker 10: They've maintained I guess i'd say kind of a stable
Speaker 10: full year unit cost growth out look of about four
Speaker 10: and a half percent or so excluding the increases in
Speaker 10: the fuel. There are some increases going on there, but
Speaker 10: they're also to some degree being offset where they can
Speaker 10: by operating efficiencies and you know where they can refinancing
Speaker 10: of debt and interesting and they've also identified just operational
Speaker 10: cost savings throughout wherever possible. So it's a challenging cost
Speaker 10: environment generally for the economy, but they are, I think,
Speaker 10: seeing pockets of opportunity to manage and mitigate that cost growth.
Speaker 4: Is there a distinction between Disney Cruises and Norwegian Cruise
Speaker 4: like the ones that take it to Iceland and the
Speaker 4: Paul would go on versus the ones that like I
Speaker 4: would have to go on with my kid, Like, are
Speaker 4: there a distinction or is this like a broad stroke
Speaker 4: for the cruise like guys.
Speaker 10: I mean, there are so many distinction across brands to
Speaker 10: give you some sense of it, you know, like domestically
Speaker 10: or in terms of US brands, they saw yields up
Speaker 10: in the quarter seven percent, European brands up twelve percent.
Speaker 10: So it's pretty broad based, with some differences in comparisons.
Speaker 10: I will say that the level of yield growth expectation,
Speaker 10: it's ten percent ish, as I mentioned for Carnival, you know,
Speaker 10: it's nine and a half percent for a while, and
Speaker 10: it's a touch above seven percent for Norwegian. And while
Speaker 10: there are differences across companies in terms of comparisons, I
Speaker 10: think you can say those are roughly in the same
Speaker 10: ballpark in terms of the inertia momentum for bookings.
Speaker 3: This is an industry. Are they building new ships?
Speaker 10: There are new ships in order, you know, the level
Speaker 10: of supply growth slows down a little bit going into
Speaker 10: next year. It's kind of like a kind of a
Speaker 10: mid single digit long term supply growth rate, which historically
Speaker 10: is actually a little bit more modern than what we've
Speaker 10: seen over some past decades. So they are building new hardware,
Speaker 10: but they're also I mean, this is kind of key
Speaker 10: for Carnival. They have been repositioning some ships and rebranding
Speaker 10: a lot of the former Costa and Piano Australia ships
Speaker 10: as Carnival brands, so in addition to some new shipbuilding,
Speaker 10: there's also some rebranding and brand positioning going on.
Speaker 3: Our thanks to Brian Egg, Bloomberg Intelligence Senior Gaming and
Speaker 3: Launching analysts, and we.
Speaker 4: Have something here at Bloomberg called Bloomberg New Energy Finance.
Speaker 4: The idea behind it is to provide data on commodities, power, transport, industries,
Speaker 4: buildings and agriculture plus new technology.
Speaker 3: This week we took a look at the global carbon
Speaker 3: market and also some of the price trends in the
Speaker 3: US and global market.
Speaker 4: From where we are joined by Bocan Bloomberg bn EF
Speaker 4: lead US carbon analyst.
Speaker 3: We first asked both to define what a global carbon
Speaker 3: market is.
Speaker 8: Carbon market is a large market that is growing very quickly.
Speaker 8: What I look at particularly is compliance carbon market, where
Speaker 8: we set a cap on emissions and allow entities to.
Speaker 1: Trade under the cap.
Speaker 8: There are also another set of carbon market which is
Speaker 8: more focused on voluntary obligations and voluntary commitments. But the
Speaker 8: growing part here is really the compliance carbon markets, where
Speaker 8: we have seen a huge increase in not only traded
Speaker 8: value but also emissions covered. Today we have almost twenty
Speaker 8: percent of global greenhouse gas emissions covered mainly boosted by
Speaker 8: countries and regulators zero commitments. We have now almost one
Speaker 8: hundred and fifty countries with net zero carbon target and
Speaker 8: with one and forty five states and regions with a
Speaker 8: net zero carbon target as well. And with those they
Speaker 8: have been looking for different ways to reduce emissions, and
Speaker 8: carbon markets particular compliance carbon markets have become one of
Speaker 8: those tools to drive that emission reduction.
Speaker 3: So there isn't a federal carbon market for the entire US.
Speaker 3: It's state by state.
Speaker 1: Yes, so right now we don't have.
Speaker 4: To decide that which is weird because we all breed
Speaker 4: air and it's all the same air.
Speaker 1: That's also weird.
Speaker 3: But somebody to explain what a carbon market is.
Speaker 8: So the carbon market, basically it's a regular set of
Speaker 8: target and there are two types of carbon markets. So
Speaker 8: there's a cap and trade where the regular set a
Speaker 8: cap and the entities under the cap trade with each other.
Speaker 1: So the just passed for the second.
Speaker 4: So basically that means that a company is only allowed
Speaker 4: to have x amount of emissions, say a year, and
Speaker 4: then if they go over that, they have to trade
Speaker 4: those emissions and spend money buying them to then say,
Speaker 4: look I've offset that.
Speaker 1: Yeah, okay. It really actually depends on what kind of
Speaker 1: carbon markets. So there are two.
Speaker 8: Cap and trade is Basically you set a cap on
Speaker 8: over all markets, so it's comprising of all the sectors
Speaker 8: that you want to set a cap on. Then it
Speaker 8: doesn't really matter which company reduces. The advantage here is
Speaker 8: really that the one who has the cheapest abatement options
Speaker 8: they reduce first, and those that are more hard to
Speaker 8: abate they can basically chill and pay for the permits
Speaker 8: to pollute. Meanwhile, the cheaper sectors would abate for them.
Speaker 1: There are also other types of carbon market is.
Speaker 8: The other type would be a baseliner and credit where
Speaker 8: it's what you mentioned. You're start a baseline and then
Speaker 8: you if you're above the baseline, you have to buy credit.
Speaker 8: If you're below, then you can sell into that market
Speaker 8: and make money.
Speaker 1: Exactly exactly.
Speaker 3: I'm just a busy Google maps Finland because bo, you
Speaker 3: grew up in Finland. Yes, I mean I had to
Speaker 3: Google Map because I think I kind of knew generally
Speaker 3: part of the world where it was. But go on,
Speaker 3: olex you continue because this is fascinating to.
Speaker 4: But actually it's an interesting that you wind up in
Speaker 4: this industry coming from Finland, because I feel like the
Speaker 4: Scandinavian countries have done really well when it comes to
Speaker 4: managing their carbon emissions. Why do you think that they've
Speaker 4: done so well versus the rest of the world.
Speaker 8: I think at the end of the first is that
Speaker 8: Infinland or in Scandinavia, we have the motivations, so that
Speaker 8: first you start with the target, and.
Speaker 4: That's a government part right like you, they had strip
Speaker 4: government targets and they've had them for a while.
Speaker 8: Exactly, and then you find different tools that will guide
Speaker 8: you help you to get to that target. So pretty
Speaker 8: much is like a fitness plan, when you first set
Speaker 8: your fitness target and then you find the different tools
Speaker 8: to guide you there. And in Finland there in carbon markets,
Speaker 8: really we can't really deliver alone those nes target or
Speaker 8: whichever target you have set. We do work in collaboration
Speaker 8: with other policies. For example, you usually have subsidies for
Speaker 8: different technologies for carbon capture, hydrogen.
Speaker 1: Or renewable energy.
Speaker 8: In addition to having a carbon market, the advantage really
Speaker 8: with a carbon market is that you have a price transparency.
Speaker 8: You typically when we talk to people, they don't investors
Speaker 8: or policy makers or just normal people in the in
Speaker 8: the society. They don't know what the carbonization means and
Speaker 8: what it costs, and carbon market helps there. It helps
Speaker 8: bring that transparency and bring a number of value to
Speaker 8: what decarbonization mean today and in the future. Particularly it's
Speaker 8: in the future that's the area where a carbon market
Speaker 8: can help with because what for example, those carbon prices
Speaker 8: that you see today, we have seen just in America,
Speaker 8: we have seen those compliance carmerace. The California's price has
Speaker 8: doubled since twenty twenty one. Now we have drifted slightly downwards,
Speaker 8: but we had a record of forty four dollars per
Speaker 8: ton this year, which is quite significant. And we have
Speaker 8: seen here in Northeast. U asked, there's the.
Speaker 1: Power market, carbon market and.
Speaker 8: The value has tripled since twenty twenty one, really highlighting
Speaker 8: that the price for decarbonization has increased.
Speaker 1: And it is important for these.
Speaker 3: Dates about some of the huge developing economies like China,
Speaker 3: like India. Are they worried about their carbon emissions?
Speaker 1: Are they doing anything? Yeah? Yeah, they are healthy and
Speaker 1: as well.
Speaker 8: Okay, they have like China has done quite a lot
Speaker 8: in helping the energy transition globally. Well, first, they also
Speaker 8: have a carbon compliance carbon market they started, yeah a
Speaker 8: few years ago, and in terms of covered emissions, it's
Speaker 8: actually the world's largest.
Speaker 1: Everything was trying to it's.
Speaker 8: The largest, so it's four gigatons of emissions covered. It's
Speaker 8: only power sector at the moment, but they are looking
Speaker 8: into expanding it to cover industries as well, like cement.
Speaker 8: One of the things that has also drive in this
Speaker 8: carbon market expansion is not just the net zero targets
Speaker 8: that we have been talking about, but also there have
Speaker 8: been more carbon border adjustment mechanism being introduced. So you
Speaker 8: started first with their carbon border tariff and now UK
Speaker 8: also start is looking into setting one and announced that
Speaker 8: last last December.
Speaker 1: And there are also like Canon and.
Speaker 8: Australia looking into this and US we are also looking
Speaker 8: into it, but it's maybe hardier because we don't have
Speaker 8: as I mentioned before, we don't have a federal carbon pricing.
Speaker 1: Yeah.
Speaker 4: Thanks to both Ken Bloomberg b and E F lead
Speaker 4: US carbon analyst.
Speaker 2: This is the Bloomberg Intelligence podcast, available on Apples, Spotify,
Speaker 2: and anywhere else you get your podcasts. Listen live each
Speaker 2: weekday ten am to noon Eastern on bloomberg dot com,
Speaker 2: the iHeartRadio app tune In, and the Bloomberg Business app.
Speaker 2: You can also watch us live every weekday on YouTube
Speaker 2: and always on the Bloomberg terminal