WEBVTT - Apple EU Warning, Carnival Earnings 0:00:02.920 --> 0:00:07.280 Bloomberg Audio Studios, Podcasts, radio news. 0:00:10.600 --> 0:00:14.400 This is Bloomberg Intelligence with Alex Steinhl and Paul'sweenye. 0:00:14.520 --> 0:00:17.720 The real app performance has been the US corporate high yield. 0:00:17.880 --> 0:00:20.280 Are the companies lean enough? Have they trimmed all the fats? 0:00:20.320 --> 0:00:24.119 The semiconductor business is a really cyclical business. 0:00:23.600 --> 0:00:27.160 Breaking market headlines and corporate news from across the globe. 0:00:27.240 --> 0:00:29.880 Do investors like the M and A that we've seen? 0:00:30.080 --> 0:00:31.000 These are two. 0:00:31.000 --> 0:00:33.120 Big time blue chip companies. 0:00:33.320 --> 0:00:36.920 The window between the peak and cut changing super fast. 0:00:37.080 --> 0:00:41.680 Bloomberg Intelligence with Alex Steinhl and Paul'sweenye on Bloomberg Radio. 0:00:43.280 --> 0:00:45.639 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:45.680 --> 0:00:48.040 business stories impacting Wall Street in the global markets. 0:00:48.120 --> 0:00:50.040 Each and every week, we provide in depth research and 0:00:50.120 --> 0:00:51.879 data on some of the two thousand companies and one 0:00:51.960 --> 0:00:54.640 hundred and thirty industries our analysts cover worldwide. 0:00:54.680 --> 0:00:57.040 Today, we'll look at a story about how seventy two 0:00:57.080 --> 0:01:01.440 hours obliterated our Caago's capital management founder Bill Wang's thirty 0:01:01.440 --> 0:01:02.800 six billion dollar fortune. 0:01:02.880 --> 0:01:04.399 Plus, we're going to take an in depth look at 0:01:04.440 --> 0:01:06.000 the global carbon market. 0:01:06.000 --> 0:01:09.000 First, we dive into big tech and Apple. Apple's anti 0:01:09.040 --> 0:01:12.440 trust feud with the European Union over allegedly illegal practices 0:01:12.520 --> 0:01:14.280 on the App store Intensified. 0:01:14.520 --> 0:01:16.400 For more on this, we were joined by Tamlin based in 0:01:16.560 --> 0:01:19.520 Bloomberg Intelligence technology analysts, and we first asked Hamlin to 0:01:19.560 --> 0:01:21.880 talk to us about what is happening with Apple right now. 0:01:22.280 --> 0:01:27.440 The European Commission announced preliminary findings in an investigation into 0:01:27.480 --> 0:01:31.040 Apple under the Digital Markets Act. This is the sweeping 0:01:31.160 --> 0:01:34.520 new competition rules that the European Union is sort of 0:01:34.560 --> 0:01:37.640 implemented in March of this year. The findings of this 0:01:37.720 --> 0:01:42.240 probe relate to anti steering rules, so essentially to Apple's 0:01:42.760 --> 0:01:45.360 rules that it has in place to sort of prevent 0:01:45.440 --> 0:01:49.920 app developers from informing users of maybe cheaper subscription options 0:01:49.960 --> 0:01:52.720 outside of the app store. Now this might sound familiar, 0:01:52.760 --> 0:01:55.600 because just in early March, before the DMA took effect, 0:01:56.080 --> 0:01:59.360 the Commission did find Apple one point eight billion euros 0:02:00.120 --> 0:02:04.280 over sort of these same anti steering policies. Now, what 0:02:04.320 --> 0:02:07.880 their commission said is that Apple is still not complying 0:02:08.440 --> 0:02:13.200 now with the DMA in terms of really letting developers 0:02:13.320 --> 0:02:18.040 freely engage with users and direct them to cheaper options. Specifically, 0:02:18.080 --> 0:02:20.760 this kind of they want developers to be able to 0:02:21.040 --> 0:02:24.280 market within the app and show cheaper subscriptions within that. 0:02:24.800 --> 0:02:28.280 So it's really this kind of more pressure on those 0:02:28.320 --> 0:02:30.560 sort of app store revenues that Apple. 0:02:31.160 --> 0:02:33.280 So what does Apple say to that? Well, what's their 0:02:33.280 --> 0:02:35.440 defense to that, because presuly they had months to kind 0:02:35.440 --> 0:02:36.120 of get it together. 0:02:36.560 --> 0:02:38.800 What do they said is they think that they do 0:02:38.919 --> 0:02:41.680 comply with all of this. What's interesting about the DMA, though, 0:02:41.840 --> 0:02:44.680 is that this is the DMA. The European Commission did 0:02:44.800 --> 0:02:48.359 play a strong role in drafting these rules, and it's 0:02:48.400 --> 0:02:51.760 also responsible for enforcing them, and there are a lot 0:02:51.800 --> 0:02:57.040 of sort of subjective interpretations in terms of first complying 0:02:57.040 --> 0:02:59.200 with this. So I think what we are going to 0:02:59.200 --> 0:03:02.360 see is probably the European Commission taking a very strict 0:03:02.480 --> 0:03:07.320 view of what's reasonable in these circumstances and probably really 0:03:07.360 --> 0:03:10.160 try to get strict adherance here. So it's going to 0:03:10.520 --> 0:03:12.560 be going to be up to them to decide whether 0:03:12.560 --> 0:03:14.960 Apple is complying or not, and then Apple can then 0:03:15.200 --> 0:03:16.840 sort of appeal to the courts. But I do think 0:03:16.880 --> 0:03:19.200 it's pretty likely we're going to see another fine in 0:03:19.240 --> 0:03:21.920 this and some behavioral remedies coming down the line. 0:03:22.080 --> 0:03:24.560 We've seen this time and time again where the Europeans 0:03:24.560 --> 0:03:29.119 just start nitpicking at these US technology companies, tam what's 0:03:29.120 --> 0:03:31.840 the feeling within the regulatory environment of Europe as to 0:03:32.720 --> 0:03:35.320 really what they're trying to do here, because it just 0:03:35.360 --> 0:03:38.520 doesn't seem like it's even relevant. I mean, it just 0:03:38.520 --> 0:03:40.280 at the end of the day, they just whether it's 0:03:40.320 --> 0:03:43.720 Google or Facebook or they just write checks here to 0:03:43.760 --> 0:03:47.040 make it all go away. Do European regulators recognize that 0:03:47.600 --> 0:03:50.480 it just doesn't seem to be that material what they're doing. 0:03:51.080 --> 0:03:53.839 Yeah, So I think if you look at this specific investigation, 0:03:54.240 --> 0:03:55.920 you know, this is one that sort of came out 0:03:55.960 --> 0:03:58.840 of sort of Spotify, which of course is headquartered in Europe, 0:03:58.960 --> 0:04:02.160 and the app developers are complaining that the Apple is 0:04:02.160 --> 0:04:04.600 squeezing them too hard. So I think in some of 0:04:04.640 --> 0:04:08.280 these instances, Europe is trying to protect some local players 0:04:08.280 --> 0:04:10.840 by sort of ordering a sort of loosening of these 0:04:10.920 --> 0:04:14.240 rules that sort of maybe benefit the gatekeeper on the TNA, 0:04:14.240 --> 0:04:17.280 which would be at Apple, Google, Microsoft brothers, and they 0:04:17.320 --> 0:04:20.440 are sort of trying to show domestic industry that they 0:04:20.480 --> 0:04:23.520 are trying to pry open the markets. I do think 0:04:23.560 --> 0:04:25.960 you're right that I think at this point investors are 0:04:26.000 --> 0:04:28.200 sort of kind of just shrugging this off. This is 0:04:28.279 --> 0:04:30.800 just one thing after another. I will point a difference 0:04:30.839 --> 0:04:33.760 under the DMA is that the timeline is really much 0:04:33.839 --> 0:04:37.280 quicker than under of former case law, where it may 0:04:37.360 --> 0:04:40.440 take three four years until you got a result after 0:04:40.480 --> 0:04:44.160 an industiation. Here, this finding came just three months after 0:04:44.200 --> 0:04:47.200 the inquery opened, and we're going to have sort of 0:04:47.240 --> 0:04:50.839 a final remedial measure by early next year. So I 0:04:50.880 --> 0:04:54.120 do think the timeline is faster. Whether or not that 0:04:54.200 --> 0:04:56.800 this results and sort of the impact that the regulators 0:04:56.880 --> 0:04:59.880 might be looking for, I think definitely remains to be seen. 0:05:00.080 --> 0:05:02.600 I think investors are definitely looking a little bit of 0:05:02.600 --> 0:05:04.760 skew at it and thinking maybe this is sort of 0:05:04.880 --> 0:05:05.520 just more of the same. 0:05:05.600 --> 0:05:09.160 And Alex, I mean, you know, it's really almost, maybe 0:05:09.200 --> 0:05:11.839 even more than thirty years ago that Microsoft started going 0:05:11.880 --> 0:05:14.960 through the same whole thing with the European Union, and 0:05:15.040 --> 0:05:18.320 again it investors became conditioned to it's no big deal. 0:05:18.320 --> 0:05:19.840 They just write it check and it kind of goes away. 0:05:20.000 --> 0:05:22.680 The tobacco industry. You know, investors kind of said, put 0:05:22.680 --> 0:05:26.279 it in context, it's not that big a deal, and 0:05:26.360 --> 0:05:29.080 you kind of wonder, you know, given that the US 0:05:29.120 --> 0:05:32.240 regulators have taken a very light touch to technology and 0:05:32.240 --> 0:05:34.640 then allowing these companies to get so big. It seems 0:05:34.640 --> 0:05:36.960 like the Europeans are trying to do what they can 0:05:37.520 --> 0:05:39.320 to kind of rein it in, but it seems almost 0:05:39.360 --> 0:05:40.560 too little, too late, right. 0:05:40.640 --> 0:05:42.520 And also you can make the argument too that you know, 0:05:42.560 --> 0:05:44.800 Europe doesn't have a lot of technology companies. They have some, 0:05:44.920 --> 0:05:48.920 of course, like ASML for example, yes's fitty, Yeah exactly, SAP, 0:05:49.120 --> 0:05:50.520 But I mean, can you name anymore? 0:05:50.640 --> 0:05:52.240 No, I'm there's some. 0:05:52.480 --> 0:05:54.600 But I think that that's kind of the point if 0:05:54.600 --> 0:05:57.039 you take a look at you know, European stocks versus 0:05:57.040 --> 0:05:59.920 the SMP and market cap like twenty years ago versus now, 0:06:00.000 --> 0:06:03.080 Oh my gosh, forget that. Hey Tamlin, what's going on 0:06:03.120 --> 0:06:05.520 with Apple in general? It seems to be making a 0:06:05.560 --> 0:06:07.120 little bit of a comeback here. What do you make 0:06:07.120 --> 0:06:07.360 of that? 0:06:07.600 --> 0:06:09.480 Yeah, I mean I think some of this comes some 0:06:09.640 --> 0:06:12.640 sort of the recent announcement to sort of build AI 0:06:12.800 --> 0:06:16.080 into the iPhone, and maybe it made me sort of 0:06:16.120 --> 0:06:20.440 accelerate the recycle in terms of getting people to buy 0:06:20.480 --> 0:06:25.240 those zones. Definitely, I don't think the regulatory headwinds are 0:06:25.279 --> 0:06:29.080 really causing it much damage right now. I will point 0:06:29.080 --> 0:06:31.560 out that although the US is definitely, like well said, 0:06:31.600 --> 0:06:34.120 taking a light touch approach, the one area they are 0:06:34.120 --> 0:06:36.440 getting involved in is on sort of these apps for rules, 0:06:36.480 --> 0:06:39.440 where where Apple's obviously been in litigation with Epic for 0:06:39.520 --> 0:06:41.240 years and years and years. So I think on both 0:06:41.279 --> 0:06:43.960 sides of the Atlantic, there are some pressure on those 0:06:44.000 --> 0:06:46.760 services revenues that we might see shaking out over the 0:06:46.800 --> 0:06:48.760 next you know, nine to eighteen months to see how 0:06:48.760 --> 0:06:49.440 that plays. 0:06:49.160 --> 0:06:52.960 Out our thanks to Tamlin Basin Bloomberg Intelligence Technology Channels, we. 0:06:52.920 --> 0:06:55.240 Move next to the electric vehicle industry. This week we 0:06:55.279 --> 0:06:59.520 heard Beijing suggested Germany's luxury car manufacturers could benefit if 0:06:59.520 --> 0:07:02.880 Berlink convinces the European Union to drop tearraffs on Chinese 0:07:02.880 --> 0:07:04.159 electric vehicle exports. 0:07:04.440 --> 0:07:07.839 Beijing currently imposes a fifteen percent fee on passenger vehicles 0:07:07.920 --> 0:07:10.080 from the block. For more on this in the State 0:07:10.120 --> 0:07:12.160 of the ev Industry, we were joined by Steve Mann, 0:07:12.200 --> 0:07:15.480 Bloomberg Intelligence Global Autos and Industrials Research channelists. 0:07:15.520 --> 0:07:18.200 We first asked for his take on this week's news. 0:07:18.560 --> 0:07:21.760 It's a big deal for the Germans, especially the luxury 0:07:21.800 --> 0:07:26.680 automakers like BMW Mercedes and Audi, which Volkswagen owns Audi. 0:07:27.560 --> 0:07:30.480 You know, they have about eighty percent of the market, 0:07:30.800 --> 0:07:34.520 the luxury car market in China, so they sell a 0:07:34.840 --> 0:07:38.920 huge amount of cars in China. About a third to 0:07:39.280 --> 0:07:44.240 forty percent of these companies' revenues actually generate in China, 0:07:44.360 --> 0:07:46.760 so they Yeah, so they want to make good with 0:07:46.880 --> 0:07:50.760 the Chinese. As you know, Germany has been against the tariffs. 0:07:51.240 --> 0:07:56.360 So if the Germans are able to get something from 0:07:56.480 --> 0:08:00.600 China and help ease some of the terrors, or if 0:08:00.680 --> 0:08:02.840 China can get the Germans to help them eat some 0:08:02.920 --> 0:08:05.600 of the tariffs in the EU, I think it will 0:08:05.600 --> 0:08:09.880 benefit you know, potentially companies like Stelentis as well, which 0:08:09.960 --> 0:08:12.960 is which also has a new joint venture. 0:08:13.240 --> 0:08:16.160 But here's the thing that I get confused. Is it 0:08:16.240 --> 0:08:20.240 China's making a pitch to individual countries versus the European 0:08:20.320 --> 0:08:24.240 Union trying to operate as one body in relation to tariffs, 0:08:24.240 --> 0:08:27.400 and I wonder how that's going to work itself out. 0:08:27.640 --> 0:08:31.800 Yeah, I think it's it's that divine and conquer strategy 0:08:31.880 --> 0:08:35.640 they're taking. So, but you know, I think the Germans 0:08:35.960 --> 0:08:39.000 probably has the most to lose out of the global 0:08:39.040 --> 0:08:43.600 automakers here. You know, about sixteen percent of their battery 0:08:43.600 --> 0:08:46.920 electric vehicles that are produced in China, it's actually shipped 0:08:46.920 --> 0:08:50.480 out globally. So China plays an important part for the 0:08:50.559 --> 0:08:54.600 BEEV market as a low cost producer. So, you know, 0:08:54.760 --> 0:08:57.200 I don't think there's a lot of other automakers that 0:08:57.240 --> 0:09:00.280 are you know, that have that many bev's produce in 0:09:00.360 --> 0:09:02.640 China and sold elsewhere around the world. 0:09:02.960 --> 0:09:06.640 And Steve Canada now gets into the game. Canada announces 0:09:06.679 --> 0:09:10.800 planned to curb imports of Chinese made EV's. First of all, 0:09:10.840 --> 0:09:13.760 just give us a sense of how good, how competitive 0:09:13.800 --> 0:09:15.920 are these Chinese evs, because if you tell me they're 0:09:15.920 --> 0:09:18.079 good vehicles, let's bring them into the market. 0:09:18.080 --> 0:09:21.000 I don't know, Yeah, I think some if you talk 0:09:21.080 --> 0:09:23.720 to some of the our makers, they actually have the 0:09:23.760 --> 0:09:27.080 same thinking. Let's let's let's compete, right, I think competition 0:09:27.320 --> 0:09:30.480 will make the whole industry better. You saw that with 0:09:30.600 --> 0:09:35.480 Tesla being the you know, fourth or third automaker in 0:09:35.480 --> 0:09:38.120 the US and actually helped drive a lot of the 0:09:38.200 --> 0:09:42.360 b EV costs down. But you know, it's not surprising 0:09:42.400 --> 0:09:47.040 that Canada is is implementing tariffs. They are part of 0:09:47.120 --> 0:09:50.920 the US, Mexico, Canada free trade agreement, and I think, 0:09:51.400 --> 0:09:54.160 you know, they have to close that door, that back 0:09:54.240 --> 0:09:57.120 door where the Chinese EV's can come in. It is 0:09:57.640 --> 0:10:01.040 very competitive. I think, you know, Chinese evs are cheap 0:10:01.160 --> 0:10:04.480 enough that if some argue that even with the tariffs, 0:10:04.880 --> 0:10:09.240 even with some engineering changed so that they fit the regulatory, 0:10:09.840 --> 0:10:13.200 safety and mission rules here, is still be a very 0:10:13.240 --> 0:10:16.400 competitive price vehicle for North America. 0:10:17.440 --> 0:10:19.800 So then to that point, we're waiting for Mexico now, 0:10:19.880 --> 0:10:21.560 right because I think we talked about this before. So 0:10:21.640 --> 0:10:24.160 not only is Canada going to put tariffs on EV imports, 0:10:24.160 --> 0:10:27.240 they're also going to curb imports of Chinese made evs. 0:10:27.440 --> 0:10:29.079 The idea is that if Mexico doesn't have any of 0:10:29.080 --> 0:10:31.640 those restrictions, that they can just import EV's from China 0:10:31.720 --> 0:10:34.520 and then through Mexico go into the US. And that's 0:10:34.559 --> 0:10:37.319 a different way of operating. When do we get that 0:10:37.360 --> 0:10:38.080 from Mexico. 0:10:38.880 --> 0:10:42.880 I think there are some negotiation that's happening now with 0:10:43.080 --> 0:10:46.480 Mexico to kind of implement similar tariff. I've heard that 0:10:47.040 --> 0:10:51.080 VOVO is already kind of lobbying. VOVO is actually part 0:10:51.080 --> 0:10:55.440 of Chile, is actually lobbying the Mexican government to not 0:10:55.720 --> 0:10:59.480 implement to not put tariffs in place. So then negotiations 0:10:59.679 --> 0:11:04.040 are ongoing. I don't think we were gonna wait have 0:11:04.080 --> 0:11:06.120 to wait too long to hear any news from that. 0:11:06.720 --> 0:11:09.960 All right, So stepping back a little bit, give us 0:11:09.960 --> 0:11:13.680 the latest thinking out of Detroit and other auto capitals 0:11:13.679 --> 0:11:19.120 around the world about EV's versus the hybrids. Is the 0:11:19.200 --> 0:11:23.240 hybrid gonna be I guess the stepping stone to a 0:11:23.320 --> 0:11:26.480 pure EV environment? Do you think is that still the thinking? 0:11:27.320 --> 0:11:29.360 Yeah, I think that is still the thinking. I think 0:11:29.400 --> 0:11:35.480 with BEEV sales slowing down or growth slowing down, the 0:11:35.520 --> 0:11:40.560 automakers do need something else to meet the cafe the 0:11:41.000 --> 0:11:45.720 few economy regulation, the missions regulations. So hybrid is a 0:11:45.760 --> 0:11:49.640 stopgap measure. But if you talk to the all the automakers, 0:11:49.640 --> 0:11:52.280 there's still spending a lot of money on BEV. They 0:11:52.360 --> 0:11:54.719 think that is the future because at the end of 0:11:54.800 --> 0:11:58.880 the day, hybrid vehicles do still spell out pollution or 0:11:58.960 --> 0:12:03.360 greenhouse gases. So you know, these emission standards, these few 0:12:03.400 --> 0:12:07.000 economy standards, they're only going to get tighter and tighter. O. 0:12:07.120 --> 0:12:10.040 Thanks to Steve man bloomerg Intelligence, Global Autos and Industrials 0:12:10.040 --> 0:12:11.240 research channels. 0:12:10.920 --> 0:12:13.400 Coming up, We're going to look at Bloomberg Intelligence's midyear 0:12:13.440 --> 0:12:16.520 outlook for North American restaurants and food service companies. 0:12:16.640 --> 0:12:19.840 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing indiffer 0:12:19.880 --> 0:12:22.280 research and data on two thousand companies and one hundred 0:12:22.280 --> 0:12:25.200 and thirty industries. You can access Bloomberg Intelligence via Bigo 0:12:25.280 --> 0:12:25.840 in the terminal. 0:12:25.880 --> 0:12:28.960 I'm Paul Sweeney and I'm Alex Steele, and this is Bloomberg. 0:12:32.960 --> 0:12:36.839 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:36.920 --> 0:12:40.280 weekdays at ten am Eastern on Affocarplaying and broud Auto 0:12:40.360 --> 0:12:43.240 with the Bloomberg Business app. Listen on demand wherever you 0:12:43.320 --> 0:12:47.000 get your podcasts, or watch us live on YouTube. 0:12:48.320 --> 0:12:50.800 We look next at the restaurant and food service industry. 0:12:50.800 --> 0:12:54.120 It's Bloomberg Intelligence recently released it's midiar outlook for both 0:12:54.160 --> 0:12:54.960 in North America. 0:12:55.240 --> 0:12:57.280 For more on this, we were joined by Michael Halen, 0:12:57.440 --> 0:13:01.439 Bloomberg Intelligence Senior Restaurant and Food Service. We first asked Michael, 0:13:01.480 --> 0:13:03.440 what is expecting for the back half of the year. 0:13:03.920 --> 0:13:07.240 Sales are probably looking a little bit better just because 0:13:07.800 --> 0:13:09.600 than they were in the first half, because the year 0:13:09.640 --> 0:13:14.320 over year comparisons are getting easier, higher income consumers should 0:13:14.320 --> 0:13:19.000 have money to spend. Right, we see stock markets at 0:13:19.040 --> 0:13:21.720 all time highs, bitcoins having a rough day, but not 0:13:21.840 --> 0:13:24.840 far off the highs, and home prices have held in 0:13:24.880 --> 0:13:28.560 despite the higher rates, so that those should kind of 0:13:28.559 --> 0:13:32.559 booy restaurant sales. But on the other end, the other 0:13:32.640 --> 0:13:35.960 end of the k, the low income consumers continue to struggle. 0:13:36.240 --> 0:13:39.360 You know, consumers under seventy five thousand were cited by 0:13:39.440 --> 0:13:42.760 Darden the other day on their earnings call, is struggling, 0:13:42.840 --> 0:13:46.079 especially consumers you know that are earning less than fifty thousand. 0:13:46.200 --> 0:13:49.360 So we have kind of a push and a pull there. 0:13:50.000 --> 0:13:50.240 You know. 0:13:50.720 --> 0:13:53.680 Margins are okay, you know, we would like to. 0:13:53.679 --> 0:13:55.520 See better sales because that's really. 0:13:55.280 --> 0:13:58.200 What drives most of the margin expansion in that business. 0:13:58.320 --> 0:14:00.280 Right There's a lot of operating leverage in the mind model, 0:14:01.000 --> 0:14:05.960 so maybe some modest margin expansion. Then stocks generally haven't 0:14:05.960 --> 0:14:08.240 done so well this year. What we wrote is that 0:14:08.280 --> 0:14:11.520 we think we're going to see a larger spread between 0:14:11.559 --> 0:14:15.320 the stock market, you know, the market share winners and 0:14:15.320 --> 0:14:18.040 losers this year, you know, which we've largely seen in. 0:14:18.000 --> 0:14:18.640 The first half. 0:14:18.679 --> 0:14:22.120 You've seen stocks like Chipotle absolutely knocked the cover off 0:14:22.200 --> 0:14:25.960 the ball again and really appreciate where other chains like 0:14:26.000 --> 0:14:28.160 blooming Is kind of struggled in the first half and 0:14:28.200 --> 0:14:31.240 you've seen that stock, you know, sell off pretty precipitously. 0:14:31.480 --> 0:14:35.360 Talk to us about California and their new minimum wage law. 0:14:35.920 --> 0:14:38.520 What's the impact been on the fast food business. 0:14:38.960 --> 0:14:41.880 We just have like a famous Hollywood restaurant closed because 0:14:41.920 --> 0:14:44.880 of that, like the famous like Hollywood McDonald's. 0:14:44.440 --> 0:14:48.200 Or something San fran Yeah, so it's not been good 0:14:48.280 --> 0:14:48.720 so far. 0:14:49.200 --> 0:14:50.400 April results were. 0:14:50.320 --> 0:14:52.800 Kind of in line with the US in terms of 0:14:52.840 --> 0:14:55.760 same slore of sales at quick service restaurants, but I 0:14:55.800 --> 0:14:58.080 think everybody went in April and then they had got 0:14:58.240 --> 0:15:00.920 sticker shock and they didn't return in May. 0:15:01.040 --> 0:15:04.040 So the McDonald's are the world in the restaurants in 0:15:04.040 --> 0:15:07.960 general in California. Are they raising prices to cover their higher. 0:15:07.760 --> 0:15:11.960 Labor, Yeah, high single digits is typical, which is a lot, 0:15:12.040 --> 0:15:15.520 and that's not even covering it because the traffic loss 0:15:15.520 --> 0:15:18.640 that we've seen here in May, it's it's not even 0:15:18.640 --> 0:15:20.040 going to cover it. So they may even have to 0:15:20.080 --> 0:15:25.080 raise prices again if they can. Quick service California same 0:15:25.120 --> 0:15:28.640 store sales underperformed by almost four hundred basis points in 0:15:28.680 --> 0:15:31.040 May versus the US. Yeah, so you know what we 0:15:31.160 --> 0:15:34.760 wrote is that we expect quick service to continue to 0:15:34.840 --> 0:15:39.000 outperform casual dining just because it's a cheaper check. Even 0:15:39.000 --> 0:15:41.080 though it's gotten all the bad press about the eighteen 0:15:41.120 --> 0:15:44.520 dollars big mac meal, twenty two dollars smash burger meal, 0:15:44.600 --> 0:15:46.600 it's still you can eat there a lot cheaper on 0:15:46.640 --> 0:15:49.520 the value menu and stuff like that. Also, you know, 0:15:49.640 --> 0:15:52.600 chains are starting to discount more Burger King and McDonald's 0:15:52.640 --> 0:15:57.480 five dollars meals, things of that nature. But California is 0:15:57.520 --> 0:16:00.160 definitely going to weigh on quick service growth throughout your 0:16:00.280 --> 0:16:01.000 end for sure. 0:16:01.880 --> 0:16:05.480 So as the k shape recovery grows even wider, it 0:16:05.520 --> 0:16:08.040 feels like, so do the valuations of those companies that 0:16:08.120 --> 0:16:09.600 service those two lines. 0:16:09.680 --> 0:16:10.840 Is that a fair statement. 0:16:11.240 --> 0:16:13.720 Yeah, if you're a chain that can attract high income 0:16:13.760 --> 0:16:16.800 consumers like Chipotle has done such a good job of 0:16:16.880 --> 0:16:19.240 doing and McDonald's has done a good job of it 0:16:19.280 --> 0:16:21.800 as well since since the start of the pandemic. 0:16:21.880 --> 0:16:24.880 Chipotle is their Wednesday day, Paul, It varies, but it's 0:16:24.880 --> 0:16:26.720 seven one day week they get Chipotle. 0:16:26.880 --> 0:16:29.760 But here's a funny Chipotle story. They got slammed in 0:16:29.800 --> 0:16:33.240 social media for like underfilling their tacos and things like that. 0:16:33.640 --> 0:16:37.320 Now they've gone overboard and they overfill them. So the 0:16:37.360 --> 0:16:40.040 net result for me, instead of getting three hard tacos 0:16:40.120 --> 0:16:41.880 with chicken and I'd give you the whole order later, 0:16:42.040 --> 0:16:42.760 I only get two. 0:16:43.520 --> 0:16:44.040 There you go. 0:16:44.320 --> 0:16:46.320 So it's got to be hurting their sales. So that 0:16:46.440 --> 0:16:48.240 is an interesting tidbit. 0:16:48.440 --> 0:16:51.360 Thinking about doing some work into it, but we haven't 0:16:51.360 --> 0:16:54.440 done anything yet. There was definitely some some heat and 0:16:54.480 --> 0:16:56.960 some shade thrown at Chipotle for a little while there. 0:16:57.240 --> 0:16:58.800 I'm going to say a year and a half ago, 0:16:59.000 --> 0:17:00.880 somebody came in there, this kind of the beginning of 0:17:00.920 --> 0:17:03.640 this whole AI thing, and somebody came in to this 0:17:03.720 --> 0:17:06.440 studio said, one of the biggest areas is going to 0:17:06.480 --> 0:17:09.160 be like, for example, drive through going through a drive 0:17:09.160 --> 0:17:12.080 through McDonald's, it's gonna be all AI blah blah blah 0:17:12.080 --> 0:17:14.760 blah blah. So my question to you is, are local 0:17:15.520 --> 0:17:17.480 I don't know McDonald's or Burger Kings. Did they have 0:17:17.520 --> 0:17:20.840 fewer employees because they're using technology or at all like that? 0:17:21.440 --> 0:17:24.919 Well, there, they have tried to cut labor hours in 0:17:25.000 --> 0:17:29.400 other ways. That's a goal using AI for sure. It's 0:17:29.440 --> 0:17:33.240 been harder though at the drive through then anticipated a 0:17:33.280 --> 0:17:36.840 lot of things just like accents, you know, you know, 0:17:36.920 --> 0:17:39.639 something like that you know actually is has caused some 0:17:39.720 --> 0:17:43.040 issues up they're also using AI with these cameras that 0:17:43.040 --> 0:17:46.480 are using AI to see if orders are being packaged correctly, 0:17:46.800 --> 0:17:49.520 you know, since takeout and delivery has become such a 0:17:49.520 --> 0:17:52.080 big part of these businesses. But you know, one of 0:17:52.080 --> 0:17:55.919 the companies that was doing that got caught using people 0:17:56.000 --> 0:17:59.000 in India watching like screens. 0:17:58.840 --> 0:18:03.760 Videos supposedly quote unquote AI. So we're not quite there 0:18:03.920 --> 0:18:05.399 yet with the AI our. 0:18:05.440 --> 0:18:08.160 Thanks to Michael Hanlin, Bloomberg Intelligence Senior Restaurant and food 0:18:08.200 --> 0:18:09.000 service Analysts. 0:18:09.040 --> 0:18:10.520 Here at Bloomberg, we'd like to keep you up to 0:18:10.600 --> 0:18:13.159 date on all the fun, juicy Wall Street stories, and 0:18:13.200 --> 0:18:15.359 this week we focused on the Bloomberg Big Take story 0:18:15.440 --> 0:18:18.680 titled the Last seventy two Hours of our kegos for more. 0:18:18.720 --> 0:18:21.280 We were joined by one of the stories authors, Shreed Nanarajen, 0:18:21.400 --> 0:18:25.080 Bloomberg News Senior Finance reporter. We first asked Streid to 0:18:25.160 --> 0:18:27.280 walk us through what this story is about. 0:18:27.600 --> 0:18:29.800 This is a story that's fascinated Wall Street for much 0:18:29.800 --> 0:18:33.040 of the last three years, right Billhong out of nowhere, 0:18:33.680 --> 0:18:38.280 had built up such enormous wealth, had a family office, 0:18:38.320 --> 0:18:41.320 and yet hid wealth had gone from a billion to 0:18:41.400 --> 0:18:44.000 four billion, from four billion to thirty six billion in 0:18:44.000 --> 0:18:47.840 a span of six months. That all collapsed very publicly 0:18:47.920 --> 0:18:50.240 in March twenty twenty one, when in a matter of 0:18:50.320 --> 0:18:54.200 days he lost his entire fortune. Everyone on Wall Street 0:18:54.240 --> 0:18:57.040 has been trying to figure out what happened, how it happened, 0:18:57.080 --> 0:18:58.880 and a lot of the details have been dribbling out 0:18:58.880 --> 0:19:01.399 for the last few years. But over the last few 0:19:01.480 --> 0:19:05.399 weeks any court room in downtown Manhattan, Bill Huang is 0:19:05.480 --> 0:19:10.600 on trial. Prosecutors accused him of manipulating markets, of defrauding lenders. 0:19:11.160 --> 0:19:13.960 But after having spent a lot of time in the courtroom, 0:19:14.119 --> 0:19:17.480 another key takeaway from it all has been that Wall 0:19:17.520 --> 0:19:21.600 Street doesn't look all that great. Here was someone whose 0:19:21.640 --> 0:19:23.840 personal wealth might have been thirty six billion dollars, but 0:19:23.920 --> 0:19:26.719 he had another one hundred and twenty five billion dollars 0:19:26.720 --> 0:19:29.560 in borrowed money. He had a gross portfolio size of 0:19:29.600 --> 0:19:33.560 one hundred and sixty billion dollars, making concentrated bets on 0:19:33.720 --> 0:19:36.720 much of the same names, and all the banks were 0:19:36.800 --> 0:19:42.040 largely caught unawares. Yes, they got vague answers, evasive answers, 0:19:42.240 --> 0:19:45.800 but they also relied on pinky promises effectively to give 0:19:45.880 --> 0:19:48.399 him so much firepower for his bets. And in the 0:19:48.520 --> 0:19:51.359 end the banks were burnt badly, lost over ten billion dollars, 0:19:51.440 --> 0:19:53.919 and one of those banks, the most badly hit credit Squeeze, 0:19:54.200 --> 0:19:56.760 doesn't even exist anymore. And you could argue Bill Huong's 0:19:56.800 --> 0:19:59.159 firm played a key role in that. 0:20:00.240 --> 0:20:01.960 What I found fashionating about this article, and it's a 0:20:02.000 --> 0:20:04.880 great minute by minute walk through a seventy two hour 0:20:04.960 --> 0:20:07.000 period when it all kind of came to an end 0:20:07.040 --> 0:20:10.520 for everyone involved, was that the banks did not know 0:20:11.000 --> 0:20:14.800 that Piquang and his firm was layering on such concentrated 0:20:14.800 --> 0:20:17.560 bets across various firms. One bank didn't know what the 0:20:17.600 --> 0:20:20.000 other bank was doing. Therefore they didn't know the magnitude 0:20:20.359 --> 0:20:22.320 of the exposure. How did that happen? 0:20:22.440 --> 0:20:25.040 And look all the conversations we have, they will tell 0:20:25.080 --> 0:20:27.240 you we're not allowed to ask if you're in the 0:20:27.240 --> 0:20:29.440 prime brokerage business, if you're in the business of extending 0:20:29.520 --> 0:20:33.439 leverage to your client, the client doesn't necessarily have to 0:20:33.480 --> 0:20:36.560 tell you or show you their exact portfolio. They will 0:20:36.640 --> 0:20:40.440 claim secrecy, they will claim proprietary information. But at the 0:20:40.520 --> 0:20:42.760