1 00:00:00,120 --> 00:00:04,360 Speaker 1: Bloomberg is now on your dashboard with Apple CarPlay and 2 00:00:04,360 --> 00:00:08,160 Speaker 1: Android Auto. It gives you access to every Bloomberg podcast, 3 00:00:08,280 --> 00:00:11,560 Speaker 1: live audio feeds from Bloomberg Radio, print stories from Bloomberg 4 00:00:11,640 --> 00:00:14,920 Speaker 1: News in audio form, and the latest headlines of the 5 00:00:14,920 --> 00:00:18,600 Speaker 1: click of a button with Bloomberg News. Now it's free 6 00:00:18,680 --> 00:00:21,439 Speaker 1: with the latest version of the Bloomberg Business App. That's 7 00:00:21,680 --> 00:00:24,400 Speaker 1: the Bloomberg Business App. Get it on your phone in 8 00:00:24,440 --> 00:00:27,760 Speaker 1: the Apple App Store or on Google Play. Just download 9 00:00:27,800 --> 00:00:30,560 Speaker 1: the app, connect your phone to your car and get started. 10 00:00:30,960 --> 00:00:34,400 Speaker 1: And it's all presented by our sponsor, Interactive Brokers. 11 00:00:35,400 --> 00:00:38,600 Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 12 00:00:38,640 --> 00:00:39,800 Speaker 2: my co host Matt Miller. 13 00:00:40,200 --> 00:00:44,279 Speaker 1: Every business day we bring you interviews from CEOs, market pros, 14 00:00:44,320 --> 00:00:48,160 Speaker 1: and Bloomberg experts, along with essential market moven news. 15 00:00:48,720 --> 00:00:51,839 Speaker 2: Find the Bloomberg Markets Podcast called Apple Podcasts or wherever 16 00:00:51,960 --> 00:00:55,080 Speaker 2: you listen to podcasts, and at Bloomberg dot Com Slash podcast. 17 00:00:55,720 --> 00:00:59,560 Speaker 2: Let's flip gears. Let's head back to the geopolitics of 18 00:00:59,560 --> 00:01:01,800 Speaker 2: it all impact it has on the market. You know, 19 00:01:01,840 --> 00:01:04,640 Speaker 2: the news coming out of Israel that I'm reading out 20 00:01:04,680 --> 00:01:08,160 Speaker 2: on the Bloomberg kerminal Here Israel and Hamas agreed to 21 00:01:08,200 --> 00:01:13,880 Speaker 2: her short truce for hostage release. Agrees to free fifty hostages, 22 00:01:13,920 --> 00:01:17,280 Speaker 2: possibly more in days ahead. The deal would mark the 23 00:01:17,400 --> 00:01:21,440 Speaker 2: first lull in the war since the attacks on October seventh. 24 00:01:21,440 --> 00:01:23,280 Speaker 2: So I guess if nothing else, that in and of 25 00:01:23,319 --> 00:01:26,120 Speaker 2: itself is probably some good news. Bobby Ghost joins is 26 00:01:26,280 --> 00:01:28,560 Speaker 2: he's an editor with Bloomberg Opinion. He joins his life 27 00:01:28,560 --> 00:01:31,080 Speaker 2: here in our New York studio. Bobby, I mean, just 28 00:01:31,120 --> 00:01:33,880 Speaker 2: to me, it feels like good news, maybe a little 29 00:01:33,920 --> 00:01:36,360 Speaker 2: bit of thawing here. How do you read it? 30 00:01:36,920 --> 00:01:38,680 Speaker 3: I wouldn't go quite so far as to say that 31 00:01:38,760 --> 00:01:42,040 Speaker 3: there's a thought it is good news. Okay, Look, it's 32 00:01:42,120 --> 00:01:45,160 Speaker 3: great news for the hostages and their families. It gives 33 00:01:46,040 --> 00:01:49,840 Speaker 3: ordinary civilians in Gaza a break from the bombing. It's 34 00:01:49,880 --> 00:01:52,480 Speaker 3: a cessation of hostilities for fort days. And Israel is 35 00:01:52,520 --> 00:01:56,440 Speaker 3: already saying Prime Minisnetnya, who's already saying, moment that ends, 36 00:01:56,600 --> 00:01:59,760 Speaker 3: we go back to bombing Gus, we go back to fighting. 37 00:02:00,400 --> 00:02:06,360 Speaker 3: So there's you know, it's not really a thaw. It's 38 00:02:06,360 --> 00:02:10,119 Speaker 3: a deal that was struck in Katar with very strong 39 00:02:10,520 --> 00:02:14,359 Speaker 3: pressure from the United States on all parties to make 40 00:02:14,400 --> 00:02:19,480 Speaker 3: this happen, and we should thank God for small mercies, 41 00:02:19,480 --> 00:02:22,000 Speaker 3: as they say, and as I said, for the people 42 00:02:22,040 --> 00:02:24,400 Speaker 3: who are benefiting the most from this deal, the mercies 43 00:02:24,440 --> 00:02:24,960 Speaker 3: are not small. 44 00:02:25,000 --> 00:02:26,000 Speaker 4: They're quite absolutely. 45 00:02:26,080 --> 00:02:29,080 Speaker 5: Yeah, we're seeing fifty hostages from Gaza will be freed 46 00:02:29,880 --> 00:02:32,440 Speaker 5: and the release of one hundred and fifty Palestinians who 47 00:02:32,440 --> 00:02:36,400 Speaker 5: are in Israeli jails at the moment. But tell us fabi, 48 00:02:36,480 --> 00:02:40,360 Speaker 5: because this is exactly what Israel has not wanted, in 49 00:02:40,400 --> 00:02:43,240 Speaker 5: the sense that any pause is a chance for Hamas 50 00:02:43,320 --> 00:02:47,399 Speaker 5: to regroup, get the military operations back together. I mean, 51 00:02:47,560 --> 00:02:50,840 Speaker 5: this is that something to be feared then that there 52 00:02:50,880 --> 00:02:54,600 Speaker 5: could really be maybe an escalation in the violence after this. 53 00:02:55,120 --> 00:02:57,080 Speaker 3: I think it's I think this is why it's taken 54 00:02:57,120 --> 00:02:59,240 Speaker 3: this long for the truth to happen. Israel had to 55 00:02:59,240 --> 00:03:04,120 Speaker 3: be absolutely certain that the chances of Hamas regrouping and 56 00:03:04,160 --> 00:03:09,480 Speaker 3: rearming we were as small as possible. If I mean, 57 00:03:09,639 --> 00:03:12,440 Speaker 3: there's always that possibility. But Israel would not have made 58 00:03:12,520 --> 00:03:15,040 Speaker 3: this deal if it didn't have a high degree of 59 00:03:15,040 --> 00:03:17,920 Speaker 3: confidence that it can prevent that from happening, or it 60 00:03:17,960 --> 00:03:23,679 Speaker 3: can manage how much Hamas rearms. Presumably this means it 61 00:03:23,680 --> 00:03:26,359 Speaker 3: will be paying much closer attention to the borders, much 62 00:03:26,360 --> 00:03:29,399 Speaker 3: closer attention to those tunnels through Egypt to make sure 63 00:03:29,400 --> 00:03:33,200 Speaker 3: that Hamas does not get and it has already brought 64 00:03:33,240 --> 00:03:37,400 Speaker 3: so much damage on Hamas infrastructure that there must be 65 00:03:37,440 --> 00:03:40,360 Speaker 3: a high degree of confidence that you know, Hamas's arms 66 00:03:40,400 --> 00:03:45,600 Speaker 3: making facilities in Gaza City, for instance, will be will 67 00:03:45,600 --> 00:03:47,080 Speaker 3: not easily be revived. 68 00:03:47,760 --> 00:03:49,440 Speaker 2: That's kind of where I wanted to go, because I 69 00:03:49,520 --> 00:03:52,120 Speaker 2: know that the stated objective of Israel is to destroy 70 00:03:52,200 --> 00:03:55,440 Speaker 2: Hamas and its leadership. How do you define that? How 71 00:03:55,480 --> 00:03:58,160 Speaker 2: do you know when it's happened? If I kind of 72 00:03:58,160 --> 00:04:01,320 Speaker 2: fear it's like the drug cartel, tick out one kingpin 73 00:04:01,400 --> 00:04:03,800 Speaker 2: and then the next person just rises right up again. 74 00:04:04,080 --> 00:04:06,720 Speaker 3: Yeah, this is not and they're not fighting a conventional military. 75 00:04:06,840 --> 00:04:12,040 Speaker 3: This is a terrorist group. And you know, the leadership 76 00:04:12,080 --> 00:04:15,240 Speaker 3: can change and has changed as well, has a long 77 00:04:15,360 --> 00:04:18,800 Speaker 3: history of taking out top Hamas leaders. The thing just 78 00:04:18,880 --> 00:04:21,360 Speaker 3: keeps coming back. And you also have to remember that 79 00:04:22,560 --> 00:04:25,960 Speaker 3: in the process of trying to eliminate Hamas in this way, 80 00:04:26,600 --> 00:04:31,719 Speaker 3: it's also creating the circumstances the for Hamas to be 81 00:04:31,720 --> 00:04:34,719 Speaker 3: able to recruit. You've got sure hundreds of thousands of 82 00:04:34,800 --> 00:04:39,320 Speaker 3: young Palestinians in Gaza and elsewhere who are outraged by 83 00:04:39,360 --> 00:04:43,720 Speaker 3: what they see, and a small proportion of that population 84 00:04:43,920 --> 00:04:48,039 Speaker 3: will be more amenable to joining Hamas now, shall we say, 85 00:04:48,040 --> 00:04:50,480 Speaker 3: than there were before. So it's you know, this is 86 00:04:50,520 --> 00:04:52,919 Speaker 3: not this is not the kind of war where where 87 00:04:52,960 --> 00:04:56,279 Speaker 3: which ends with people signing an armistice and making a 88 00:04:56,320 --> 00:04:58,960 Speaker 3: peace deal. And that's been the problem. The Biden administration 89 00:04:59,040 --> 00:05:03,440 Speaker 3: has said consistently from the beginning that they've been asking 90 00:05:03,520 --> 00:05:07,760 Speaker 3: the Israelis to define what victory looks like and explain 91 00:05:07,920 --> 00:05:12,560 Speaker 3: what happens the day after, and until now, the Israelis 92 00:05:12,600 --> 00:05:15,880 Speaker 3: have not provided that information. They've not communicated it in 93 00:05:16,680 --> 00:05:19,520 Speaker 3: private to the Biden administration. They certainly have not communicated 94 00:05:19,560 --> 00:05:20,400 Speaker 3: it publicly. 95 00:05:20,800 --> 00:05:23,599 Speaker 5: And of course whatever that timeline may be as well, 96 00:05:23,760 --> 00:05:27,679 Speaker 5: is probably pretty daunting to think of, Like the task ahead, 97 00:05:27,760 --> 00:05:30,880 Speaker 5: how long that may take makes me wonder if there 98 00:05:30,920 --> 00:05:34,600 Speaker 5: could be perhaps the need for more cease fires in 99 00:05:35,680 --> 00:05:37,480 Speaker 5: the time to get to that endpoint. 100 00:05:37,760 --> 00:05:42,680 Speaker 3: Yeah, So we'll see if this one works and everybody 101 00:05:42,720 --> 00:05:47,159 Speaker 3: shows good faith, and that then hopefully creates the circumstances 102 00:05:47,160 --> 00:05:49,720 Speaker 3: for another one down the line, and another one, and 103 00:05:50,400 --> 00:05:54,200 Speaker 3: maybe this is the kind of conflict where, because everyone 104 00:05:54,279 --> 00:05:56,719 Speaker 3: is so painted into their own corners and the opposite 105 00:05:56,800 --> 00:05:59,799 Speaker 3: ends of the room, that the advances that can only 106 00:05:59,839 --> 00:06:06,080 Speaker 3: be incremental. It might be that this is the only way, slow, painful, 107 00:06:06,360 --> 00:06:08,480 Speaker 3: deadly as it is, this might be the only way 108 00:06:08,520 --> 00:06:10,760 Speaker 3: we begin to move towards some kind of resolution. 109 00:06:11,080 --> 00:06:14,680 Speaker 2: Is there a scenario where Israel does not end up 110 00:06:15,120 --> 00:06:17,120 Speaker 2: occupying Gaza? I can't think of a scenario where they 111 00:06:17,120 --> 00:06:20,840 Speaker 2: don't to preserve the piece. I mean, does a UN 112 00:06:20,880 --> 00:06:22,440 Speaker 2: player role? I mean, what do we think about the 113 00:06:22,520 --> 00:06:22,960 Speaker 2: day after? 114 00:06:23,520 --> 00:06:26,200 Speaker 3: Well, so here's the thing. Now, Israel has a signal 115 00:06:26,400 --> 00:06:29,440 Speaker 3: that it is willing to do that in order to 116 00:06:29,480 --> 00:06:32,919 Speaker 3: make sure Hamas does not come back. But this is 117 00:06:32,960 --> 00:06:36,640 Speaker 3: not a popular idea among Israelis. For a start. Israelis 118 00:06:36,680 --> 00:06:39,840 Speaker 3: don't want an occupation of Gaza because they know what 119 00:06:39,880 --> 00:06:42,400 Speaker 3: that will entail, not just in terms of costs, but 120 00:06:42,480 --> 00:06:46,440 Speaker 3: also the risks that come with that. Nobody else wants 121 00:06:46,480 --> 00:06:49,120 Speaker 3: to do that. Nobody else wants to perform that role. 122 00:06:49,320 --> 00:06:53,479 Speaker 3: I don't think any Western peacekeepers would have credibility there. 123 00:06:54,440 --> 00:06:57,719 Speaker 3: The United Nations will eventually have to play a role, 124 00:06:57,720 --> 00:07:02,840 Speaker 3: but until now, you know, Secret General gu terrorists has 125 00:07:02,880 --> 00:07:06,279 Speaker 3: been sort of saying, look, we're not this is not 126 00:07:06,400 --> 00:07:10,880 Speaker 3: going to become a protectorate of the United Nations. The 127 00:07:10,960 --> 00:07:15,640 Speaker 3: Arab countries, who would logically be part of the biggest 128 00:07:15,640 --> 00:07:19,600 Speaker 3: part of any peacekeeping effort. Their view is why should 129 00:07:19,640 --> 00:07:24,040 Speaker 3: we clean up Israel's mess. This can't become a thing 130 00:07:24,080 --> 00:07:27,400 Speaker 3: where you go in and bomb Palestine or parts of 131 00:07:27,680 --> 00:07:31,840 Speaker 3: Palestinian territories to smithereens and expect us to come and 132 00:07:31,880 --> 00:07:34,080 Speaker 3: clean it up for you afterwards. So there's going to 133 00:07:34,080 --> 00:07:37,400 Speaker 3: be a lot of reluctance. The crucial question for everybody 134 00:07:37,480 --> 00:07:42,480 Speaker 3: is peacekeeping toward what end? If there is a clear 135 00:07:42,560 --> 00:07:46,560 Speaker 3: path after the fighting is over for a two state solution, 136 00:07:47,280 --> 00:07:50,440 Speaker 3: then I can see and their sort of cost iron 137 00:07:50,480 --> 00:07:53,160 Speaker 3: guarantees to that. Then I can see the Arab states 138 00:07:53,200 --> 00:07:56,040 Speaker 3: saying all right, we will take some of this responsibility 139 00:07:56,480 --> 00:07:59,040 Speaker 3: if there is a clear path that this never happens again. 140 00:07:59,160 --> 00:08:03,720 Speaker 2: All right, So on that two state solution, who is 141 00:08:03,760 --> 00:08:06,800 Speaker 2: the biggest impediment to that actually happening at this point? 142 00:08:07,400 --> 00:08:12,320 Speaker 3: I mean, there's so many impediments, and at different times 143 00:08:12,360 --> 00:08:17,560 Speaker 3: their you know, their relative weight changes, but Israel is 144 00:08:17,560 --> 00:08:21,360 Speaker 3: an impediment. The current administration Israel. The coalition government that 145 00:08:21,520 --> 00:08:24,360 Speaker 3: Benjamin Ettania who has put together has no interest in 146 00:08:24,400 --> 00:08:28,200 Speaker 3: a two states solution. Many of his partners have openly 147 00:08:28,240 --> 00:08:30,720 Speaker 3: said that's not what they want, that they will oppose it. 148 00:08:32,280 --> 00:08:37,280 Speaker 3: The Palaestine authority, which is deeply corrupt, deeply completely inept, 149 00:08:38,200 --> 00:08:41,840 Speaker 3: and has not dared to test its popularity with an 150 00:08:41,920 --> 00:08:44,920 Speaker 3: election in years and years and years. They are an impediment. 151 00:08:45,160 --> 00:08:48,920 Speaker 3: And of course Hamas and hamas is enablers is Iran 152 00:08:49,120 --> 00:08:51,800 Speaker 3: is a very big part of the piece problem too. 153 00:08:52,040 --> 00:08:56,400 Speaker 3: So yeah, the problem a problem, this intractable and this complicated. 154 00:08:56,920 --> 00:08:59,320 Speaker 3: There are lots of people who have to share the blame. 155 00:08:59,679 --> 00:09:01,960 Speaker 5: Just really quickly. Hear Bobby in our last thirty if 156 00:09:01,960 --> 00:09:04,840 Speaker 5: you could just explain to us what this second stage 157 00:09:04,880 --> 00:09:08,200 Speaker 5: could look like with a possible extension to free more hostages. 158 00:09:08,400 --> 00:09:11,320 Speaker 3: Well, so there's some talk that after these fifty, if 159 00:09:11,400 --> 00:09:15,080 Speaker 3: Hamas continues to release hostages in a sort of steady 160 00:09:17,040 --> 00:09:20,000 Speaker 3: set of ten and day fifteen a day, then there's 161 00:09:20,040 --> 00:09:24,040 Speaker 3: some hope that the cessation of hostility the truth can 162 00:09:24,160 --> 00:09:27,480 Speaker 3: be extended again. This is something we should all hope 163 00:09:27,480 --> 00:09:30,080 Speaker 3: for and keep our fingers crossed. It it happens, but 164 00:09:31,240 --> 00:09:32,360 Speaker 3: we'll believe it when it happens. 165 00:09:32,400 --> 00:09:34,040 Speaker 2: Yeah, absolutely, all right, Bobby, thank you so much for 166 00:09:34,080 --> 00:09:34,440 Speaker 2: joining us. 167 00:09:34,440 --> 00:09:34,760 Speaker 6: Bobby go. 168 00:09:34,880 --> 00:09:38,120 Speaker 2: She's a calmnist for Bloomberg Opinion, has got a tremendous 169 00:09:38,160 --> 00:09:42,480 Speaker 2: amount of experience in international affairs reporting, certainly in that 170 00:09:42,520 --> 00:09:44,040 Speaker 2: part of the world over there in the Middle East. 171 00:09:44,040 --> 00:09:46,480 Speaker 2: We appreciate getting a few minutes of his time. Here. 172 00:09:48,120 --> 00:09:51,959 Speaker 6: You're listening to the tenth Can't Live program Bloomberg Markets 173 00:09:52,000 --> 00:09:55,080 Speaker 6: weekdays at ten am Eastern on Bloomberg dot Com, the 174 00:09:55,160 --> 00:09:58,320 Speaker 6: iHeartRadio app and the Bloomberg Business App, or listen on 175 00:09:58,360 --> 00:10:00,000 Speaker 6: demand wherever you get your podcast. 176 00:10:00,120 --> 00:10:05,240 Speaker 2: All right, let's around table this open AI. I'm gonna 177 00:10:05,240 --> 00:10:08,000 Speaker 2: call it a debacle, and that's editorializing, but that's just 178 00:10:08,080 --> 00:10:09,920 Speaker 2: it just seems to me. It's a debacle, and I 179 00:10:09,920 --> 00:10:12,560 Speaker 2: think Silicon Valley should be embarrassed by what's happened over 180 00:10:12,559 --> 00:10:15,120 Speaker 2: the last four or five days. But we're gonna bring 181 00:10:15,160 --> 00:10:17,640 Speaker 2: some smart people who analyze this stuff much better than 182 00:10:17,679 --> 00:10:19,600 Speaker 2: I do. Man deep Seeing, he's a senior tech Analystrom 183 00:10:19,600 --> 00:10:25,040 Speaker 2: Bloomberg Intelligence Ed Ludlow Bloomberg Technology hosts out in San Francisco, 184 00:10:25,800 --> 00:10:27,280 Speaker 2: so that he has to take some of the blank 185 00:10:27,480 --> 00:10:28,600 Speaker 2: He's part of the culture out there. 186 00:10:28,760 --> 00:10:28,840 Speaker 5: Ed. 187 00:10:29,559 --> 00:10:32,600 Speaker 2: I mean, I guess we have Sam Altman going back 188 00:10:32,840 --> 00:10:37,040 Speaker 2: to open AI. I guess that's good news. The next 189 00:10:37,120 --> 00:10:39,360 Speaker 2: question I think most people have is who's going to 190 00:10:39,400 --> 00:10:41,600 Speaker 2: be on this board and will it be an effective board? 191 00:10:41,760 --> 00:10:42,280 Speaker 7: Yeah? 192 00:10:42,400 --> 00:10:46,440 Speaker 8: Yeah, I mean the mechanics of it are that Brett Taylor, 193 00:10:46,520 --> 00:10:50,800 Speaker 8: who was once the Coco of Salesforce, but he's I 194 00:10:50,800 --> 00:10:53,600 Speaker 8: guess he's more famous for being the chairman of Twitter 195 00:10:53,640 --> 00:10:57,200 Speaker 8: that's sold to Elon Musk, is taking a board seat. 196 00:10:57,760 --> 00:11:01,119 Speaker 8: Then you have Larry Summers, well known to this program, 197 00:11:01,160 --> 00:11:05,600 Speaker 8: this network. Reminder that Larry Summers is a pay contributor 198 00:11:05,760 --> 00:11:10,400 Speaker 8: to Bloomberg Television. I'm supposed to say that, and then 199 00:11:11,000 --> 00:11:14,439 Speaker 8: beyond that, The news for me is that and this 200 00:11:14,520 --> 00:11:16,440 Speaker 8: is you know, we've covered the ins and outs of 201 00:11:16,480 --> 00:11:20,160 Speaker 8: the negotiation pretty closely, right, guys that I know that 202 00:11:20,200 --> 00:11:24,360 Speaker 8: Sam Altman and Greg Brockman were pushing really hard to 203 00:11:24,400 --> 00:11:28,040 Speaker 8: get at least temporary board seats in this whole thing, 204 00:11:28,240 --> 00:11:32,760 Speaker 8: but they didn't. So this thing's far from settled. The 205 00:11:32,800 --> 00:11:34,560 Speaker 8: reason I'm late, and I apologize for that, is I 206 00:11:34,559 --> 00:11:36,599 Speaker 8: was on the phone with the source who's involved in 207 00:11:36,640 --> 00:11:39,480 Speaker 8: all of this, and Sam Altman goes back. Most people 208 00:11:39,480 --> 00:11:41,120 Speaker 8: get what they wanted, but it ain't the end of 209 00:11:41,120 --> 00:11:43,200 Speaker 8: the story. There's a lot we still have to find out. 210 00:11:43,520 --> 00:11:45,680 Speaker 5: Well, you know, I would like to bring in Man 211 00:11:45,720 --> 00:11:49,080 Speaker 5: Deep here because this has been, as Paul said, very 212 00:11:49,160 --> 00:11:52,720 Speaker 5: chaotic four or five days. And for those of us 213 00:11:52,760 --> 00:11:55,480 Speaker 5: who are maybe just joining Man Deep, if you could 214 00:11:55,480 --> 00:11:58,760 Speaker 5: take us back to when Sam Alman was suddenly ousted 215 00:11:58,800 --> 00:12:01,880 Speaker 5: from open Ai. Again, I don't think we have really 216 00:12:01,920 --> 00:12:04,760 Speaker 5: a reason yet as to why that happened, but maybe 217 00:12:04,760 --> 00:12:06,600 Speaker 5: if you could give us a timeline of what has 218 00:12:06,679 --> 00:12:07,960 Speaker 5: transpired from them to now. 219 00:12:09,080 --> 00:12:12,400 Speaker 4: Well, I mean clearly, you know, it was a shocker 220 00:12:12,480 --> 00:12:15,120 Speaker 4: to everyone in terms of the way he was outid 221 00:12:15,160 --> 00:12:18,600 Speaker 4: and there wasn't any transparency around the reasons. In fact, 222 00:12:18,600 --> 00:12:22,520 Speaker 4: when they made the three new board member announcement today 223 00:12:22,840 --> 00:12:25,880 Speaker 4: they said there will be an independent investigation. So clearly 224 00:12:26,280 --> 00:12:29,040 Speaker 4: there's a lot to unpack. As Ed was alluding to, 225 00:12:29,200 --> 00:12:32,720 Speaker 4: but look for a company like OpenAI that has a 226 00:12:32,800 --> 00:12:36,520 Speaker 4: convoluted structure. So last week they I think it came 227 00:12:36,559 --> 00:12:39,920 Speaker 4: into focus that they have a profit structure within a 228 00:12:39,960 --> 00:12:43,000 Speaker 4: nonprofit and now we are trying to you know, make 229 00:12:43,080 --> 00:12:46,520 Speaker 4: sense of what would a good governance structure look like. 230 00:12:47,080 --> 00:12:49,959 Speaker 4: We have three board members. We know, this is pretty 231 00:12:50,120 --> 00:12:53,000 Speaker 4: unusual the CEO not being on the board. So if 232 00:12:53,080 --> 00:12:55,720 Speaker 4: Sam is going back to be the CEO and he's 233 00:12:55,760 --> 00:12:58,040 Speaker 4: not on the board, who the other board members are? 234 00:12:58,160 --> 00:13:01,200 Speaker 4: There is so much to you know, talk about here, 235 00:13:01,240 --> 00:13:03,760 Speaker 4: and this is not the way it's going to pan out. 236 00:13:03,880 --> 00:13:07,560 Speaker 4: I mean, the reason why no one cared until last 237 00:13:07,559 --> 00:13:10,599 Speaker 4: week is because you know, open Aye was a startup 238 00:13:10,760 --> 00:13:13,000 Speaker 4: and you know it had the backing of Microsoft, so 239 00:13:13,440 --> 00:13:16,080 Speaker 4: corporate governance wasn't as big of a focus. But the 240 00:13:16,120 --> 00:13:19,240 Speaker 4: way he was ousted, it's like, this is so unusual, 241 00:13:19,280 --> 00:13:22,120 Speaker 4: and I'm sure a lot of the startups are thinking 242 00:13:22,160 --> 00:13:25,880 Speaker 4: about their corporate structure now, you know, and their backers, 243 00:13:25,920 --> 00:13:28,280 Speaker 4: the vcs and the early investors. 244 00:13:28,760 --> 00:13:30,440 Speaker 2: Ed, what are you hearing from your sources out there 245 00:13:30,480 --> 00:13:35,280 Speaker 2: as to maybe the value the impact on the value 246 00:13:35,360 --> 00:13:39,640 Speaker 2: of this company here that's been really impacted negatively and 247 00:13:39,679 --> 00:13:40,040 Speaker 2: how so. 248 00:13:41,800 --> 00:13:44,320 Speaker 8: I love this question for me. This is the question 249 00:13:44,640 --> 00:13:48,160 Speaker 8: because the story of the last five days is that 250 00:13:48,280 --> 00:13:51,960 Speaker 8: open aiyes valuation, which right now, based on a transaction 251 00:13:52,080 --> 00:13:55,240 Speaker 8: we can get into that's pending, is eighty six billion dollars. 252 00:13:55,840 --> 00:13:58,240 Speaker 8: I reported a couple of months ago. Revenue has a 253 00:13:58,480 --> 00:14:00,840 Speaker 8: run rate of about a billion dollar for this year 254 00:14:01,200 --> 00:14:03,720 Speaker 8: billion dollars of sales, eighty six billion dollar valuation. 255 00:14:03,960 --> 00:14:04,160 Speaker 5: Wow. 256 00:14:04,400 --> 00:14:06,720 Speaker 8: And the basics of this for the audience listening all 257 00:14:06,720 --> 00:14:09,720 Speaker 8: around the world is we care because open ai is 258 00:14:09,760 --> 00:14:13,280 Speaker 8: the leading AI startup. Let's just accept that as a baseline. 259 00:14:14,240 --> 00:14:17,720 Speaker 8: What we learned is that its value is intimately tied 260 00:14:17,760 --> 00:14:20,840 Speaker 8: to the intellectual capital that's there. In other words, Sam Altman, 261 00:14:20,920 --> 00:14:23,760 Speaker 8: Greg Brockman, and the seven hundred and sixty eight other 262 00:14:23,840 --> 00:14:27,800 Speaker 8: people that work there, all of them started a mutiny 263 00:14:28,000 --> 00:14:31,040 Speaker 8: to try and bring Sam back. They were successful, but 264 00:14:31,120 --> 00:14:34,520 Speaker 8: there was a real threat that all seven hundred and 265 00:14:34,600 --> 00:14:38,240 Speaker 8: seventy employees would just resign, They would just leave. Then 266 00:14:38,280 --> 00:14:40,160 Speaker 8: what are you left with? A very large building in 267 00:14:40,200 --> 00:14:43,600 Speaker 8: downtown San Francisco with incredible compute costs and no one 268 00:14:43,640 --> 00:14:46,200 Speaker 8: in it. That's the way to frame it, right, I 269 00:14:46,200 --> 00:14:49,200 Speaker 8: don't think that that's unreasonable. And sources this morning and 270 00:14:49,280 --> 00:14:54,080 Speaker 8: keep phoning me and saying that's the story like on paper. 271 00:14:54,760 --> 00:14:57,040 Speaker 8: You know the people behind this, there aren't that many 272 00:14:57,120 --> 00:15:01,080 Speaker 8: of them, And I think, yeah, sorry, guys, you know 273 00:15:01,320 --> 00:15:03,520 Speaker 8: I jump in, but for me, that's that's the kind 274 00:15:03,520 --> 00:15:04,080 Speaker 8: of key point. 275 00:15:04,400 --> 00:15:07,080 Speaker 5: Yeah, No, I think that's spot on. And I mean, Mandy, 276 00:15:07,240 --> 00:15:09,640 Speaker 5: maybe you can help us, like, you know, break down 277 00:15:09,640 --> 00:15:12,200 Speaker 5: this math a little bit here. As you know, as 278 00:15:12,200 --> 00:15:16,080 Speaker 5: we're just hearing that we've got one billion in revenue 279 00:15:16,400 --> 00:15:19,680 Speaker 5: to an eighty six billion valuation, I mean my head 280 00:15:19,680 --> 00:15:21,600 Speaker 5: is spinning. What does that make sense to you? 281 00:15:22,160 --> 00:15:25,400 Speaker 4: Well, so look at you know, all the startups and 282 00:15:25,760 --> 00:15:27,840 Speaker 4: you can go back in time in terms of, you know, 283 00:15:27,960 --> 00:15:31,720 Speaker 4: the companies that have ridden these technology waves. There is 284 00:15:31,800 --> 00:15:35,840 Speaker 4: that promise. Okay, if you have a breakthrough technology, investors 285 00:15:35,880 --> 00:15:38,560 Speaker 4: don't really focus that much on the revenue that you 286 00:15:38,640 --> 00:15:40,800 Speaker 4: have right now, but the potential. 287 00:15:40,560 --> 00:15:41,920 Speaker 2: And in the works problem. 288 00:15:42,560 --> 00:15:46,000 Speaker 4: Well, I think this is different. Opening Eye does have 289 00:15:46,120 --> 00:15:49,040 Speaker 4: an intellectual property and they are foundational. I mean think 290 00:15:49,120 --> 00:15:52,120 Speaker 4: of Nvidia, right, they are foundational to what is going 291 00:15:52,160 --> 00:15:54,720 Speaker 4: on in AI with their chips. Well, this is another 292 00:15:54,760 --> 00:15:58,000 Speaker 4: foundational element in terms of you know, a lot of 293 00:15:58,040 --> 00:16:03,280 Speaker 4: companies are standardizing on open Eeye's base model and they 294 00:16:03,320 --> 00:16:06,320 Speaker 4: have embedded it in their tech stack. Everything is happening 295 00:16:06,400 --> 00:16:09,840 Speaker 4: on top of what Opening Eye is offering at the baseline. 296 00:16:09,840 --> 00:16:12,560 Speaker 4: In terms of a large anglid model. But now I 297 00:16:12,600 --> 00:16:15,240 Speaker 4: think it puts doubts in the mind because think of 298 00:16:15,480 --> 00:16:19,760 Speaker 4: operating system like Windows operating system was the standard on 299 00:16:19,800 --> 00:16:22,840 Speaker 4: which all these applications were built. Opening Eye had that 300 00:16:22,960 --> 00:16:25,920 Speaker 4: kind of aura, and suddenly that has put doubts and 301 00:16:25,960 --> 00:16:29,320 Speaker 4: that's why there was this high valuation. So I'm not 302 00:16:29,400 --> 00:16:32,080 Speaker 4: surprised by the evaluation, but the chain of events has 303 00:16:32,160 --> 00:16:34,200 Speaker 4: kind of put doubts in people's mind right now. 304 00:16:34,480 --> 00:16:38,040 Speaker 2: Hey, ed to be honest, before this, I really didn't 305 00:16:38,080 --> 00:16:41,600 Speaker 2: know who Sam Altman was, and I certainly wasn't aware 306 00:16:41,760 --> 00:16:44,080 Speaker 2: of the kind of the presence he really does command 307 00:16:44,080 --> 00:16:47,400 Speaker 2: within a tech space and within Silicon Valley. How do 308 00:16:47,480 --> 00:16:50,280 Speaker 2: you think, I mean, where does he go from here? 309 00:16:50,360 --> 00:16:52,120 Speaker 2: I mean, it seems like he's gonna be the focus 310 00:16:52,120 --> 00:16:54,800 Speaker 2: of now I'm gonna pay attention to whatever he says 311 00:16:54,800 --> 00:16:57,480 Speaker 2: and does going forward. I mean, his role in all 312 00:16:57,520 --> 00:16:59,200 Speaker 2: of this, it's taken a much higher profile. 313 00:17:00,080 --> 00:17:00,280 Speaker 7: Yeah. 314 00:17:00,280 --> 00:17:04,320 Speaker 8: Look, Sam Altman is a serial entrepreneur, a serial founder. 315 00:17:04,440 --> 00:17:06,600 Speaker 8: He has been a name out here in Silicon Valley 316 00:17:07,119 --> 00:17:11,520 Speaker 8: for some time. He has really been thrust to prominence 317 00:17:12,200 --> 00:17:15,760 Speaker 8: as open Ai became the face of AI. You know, 318 00:17:15,840 --> 00:17:19,520 Speaker 8: that's the reality of it. In the last year, you know, 319 00:17:19,600 --> 00:17:23,000 Speaker 8: he's just beloved by the open Ai staff. You know, 320 00:17:23,480 --> 00:17:27,680 Speaker 8: I'm not exaggerating. Almost the entirety of open aas entire 321 00:17:27,680 --> 00:17:30,399 Speaker 8: company threatened to resign if he was not brought back. 322 00:17:30,760 --> 00:17:34,520 Speaker 8: The investors love him. The investors were adamant that he 323 00:17:34,560 --> 00:17:37,359 Speaker 8: came back, and that they were behind the scenes trying 324 00:17:37,400 --> 00:17:41,080 Speaker 8: to do that, including Microsoft. Right Satya Nadella, the Microsoft CEO, 325 00:17:41,200 --> 00:17:44,240 Speaker 8: was a real peace broker in all of this. We understand. 326 00:17:45,560 --> 00:17:48,080 Speaker 8: And yet this is why I say that this story 327 00:17:48,119 --> 00:17:51,080 Speaker 8: is not finished. There will be an independent investigation as 328 00:17:51,080 --> 00:17:53,119 Speaker 8: to why the board fired him in the first place. 329 00:17:53,400 --> 00:17:56,480 Speaker 8: We have got no idea, to be frank, why they 330 00:17:56,520 --> 00:17:59,760 Speaker 8: did that. I just, you know, without being self serving, 331 00:18:00,800 --> 00:18:04,320 Speaker 8: I did report on Saturday as an example, that he 332 00:18:04,560 --> 00:18:07,560 Speaker 8: was out there weeks, within the last few weeks raising 333 00:18:07,600 --> 00:18:11,360 Speaker 8: almost one hundred billion dollars for a new chip company 334 00:18:11,480 --> 00:18:14,840 Speaker 8: to take on Nvidia make custom silicon for training AI models. 335 00:18:15,080 --> 00:18:18,080 Speaker 8: One hundred billion dollars from a standing start. That's the 336 00:18:18,200 --> 00:18:22,160 Speaker 8: kind of command he has, and the investors, like SoftBank, 337 00:18:22,200 --> 00:18:24,320 Speaker 8: move battle La, they were willing to jump in. 338 00:18:25,359 --> 00:18:27,760 Speaker 4: I mean, the one thing I would point out is 339 00:18:27,760 --> 00:18:32,160 Speaker 4: you know, whenever a founder gets more attention than the company, 340 00:18:32,560 --> 00:18:34,840 Speaker 4: that's never a good thing. If you go back in time, 341 00:18:34,960 --> 00:18:37,600 Speaker 4: you know, the focus is just on the founder and 342 00:18:37,640 --> 00:18:41,120 Speaker 4: what he's doing that hasn't been viewed very well by 343 00:18:41,200 --> 00:18:44,320 Speaker 4: the investors. And if they are thinking about doing an IPO, 344 00:18:44,720 --> 00:18:47,320 Speaker 4: that's the last thing you want is the founder getting 345 00:18:47,320 --> 00:18:50,359 Speaker 4: all the focus and taking you know, the focus away 346 00:18:50,359 --> 00:18:53,280 Speaker 4: from the core product, which is the large acred model 347 00:18:53,280 --> 00:18:53,960 Speaker 4: they have developed. 348 00:18:54,040 --> 00:18:59,080 Speaker 5: Could say it sounds like another sam perhaps of fts. 349 00:18:59,240 --> 00:19:01,160 Speaker 2: Ed love, thank you so much for joining us, Ed Lolo. 350 00:19:01,200 --> 00:19:04,280 Speaker 2: He's in our San Francisco office. He is embedded in 351 00:19:04,280 --> 00:19:06,960 Speaker 2: that Silicon Valley space. And then man Deep Singh, he's 352 00:19:06,960 --> 00:19:10,480 Speaker 2: our senior technology analysts here at Bloomberg Intelligence. He's seen 353 00:19:10,520 --> 00:19:13,080 Speaker 2: it all. He's seen the tech come and go, he's 354 00:19:13,119 --> 00:19:15,960 Speaker 2: seen the tech mobiles come and go. So we appreciate 355 00:19:15,960 --> 00:19:19,760 Speaker 2: getting their perspective. So it seems like it's quieting down 356 00:19:19,840 --> 00:19:23,440 Speaker 2: there in Silicon Valley in Open AI. And now we'll 357 00:19:23,480 --> 00:19:25,680 Speaker 2: just see how it's kind of fleshes out the board 358 00:19:25,760 --> 00:19:28,520 Speaker 2: and some governance issues and some ownership and you know, 359 00:19:28,600 --> 00:19:31,439 Speaker 2: but I guess the last fridays it's kind of like 360 00:19:31,640 --> 00:19:33,680 Speaker 2: a do over, so we'll keep on top of that. 361 00:19:33,840 --> 00:19:36,960 Speaker 6: You're listening to the tape. Cat's are live program Bloomberg 362 00:19:37,000 --> 00:19:40,600 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the 363 00:19:40,680 --> 00:19:43,880 Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 364 00:19:43,920 --> 00:19:46,760 Speaker 6: You can also listen live on Amazon Alexa from our 365 00:19:46,760 --> 00:19:52,439 Speaker 6: flagship New York station, Just say Alexa play Bloomberg eleven thirty. 366 00:19:53,200 --> 00:19:56,320 Speaker 2: Street Kumark. He's the president of Street Kumar Global Strategies, 367 00:19:56,600 --> 00:20:00,000 Speaker 2: former Chief Global Strategists and Chairman Asset Allocation Commitie at 368 00:20:00,160 --> 00:20:03,400 Speaker 2: TCW Group. A little asset manager out there in LA. 369 00:20:03,480 --> 00:20:06,639 Speaker 2: But the highlight on his extensive resume for me for 370 00:20:06,800 --> 00:20:11,040 Speaker 2: your senior vice president at Drexel Burnham Lambert. Those folks, 371 00:20:11,480 --> 00:20:15,000 Speaker 2: they were slinging it back in Maybe they were slinging 372 00:20:15,000 --> 00:20:16,800 Speaker 2: it back in the day, folks, Shwi, thanks so much 373 00:20:16,800 --> 00:20:19,320 Speaker 2: for joining us. You're based out in LA, but we're 374 00:20:19,320 --> 00:20:21,400 Speaker 2: in New York, so we appreciate you. You coming in here 375 00:20:21,400 --> 00:20:24,560 Speaker 2: to our New York studio. Talk to us about how 376 00:20:24,640 --> 00:20:27,280 Speaker 2: you viewed twenty twenty three. We're closing out a pretty 377 00:20:27,320 --> 00:20:30,960 Speaker 2: decent year here for most you know, most markets here 378 00:20:31,320 --> 00:20:32,960 Speaker 2: closing out twenty twenty three, and how are you thinking 379 00:20:32,960 --> 00:20:34,120 Speaker 2: about twenty twenty four. 380 00:20:34,600 --> 00:20:37,480 Speaker 7: Paul, great questions, and I think twenty twenty three we 381 00:20:37,560 --> 00:20:40,320 Speaker 7: had expected by now to be in recession, which is 382 00:20:40,359 --> 00:20:43,800 Speaker 7: not come yep. The labor market is very strong, the 383 00:20:43,840 --> 00:20:48,520 Speaker 7: consumer spending is very strong. I think what was underestimated 384 00:20:48,680 --> 00:20:51,960 Speaker 7: was the extent of stimulus that was in the system, 385 00:20:52,000 --> 00:20:54,600 Speaker 7: both in terms of the fiscal stimulus, which came from 386 00:20:54,600 --> 00:20:57,680 Speaker 7: the final months of the Trump administration first few months 387 00:20:57,720 --> 00:21:02,440 Speaker 7: of the Biden administration. And don't forget the balance sheet 388 00:21:02,480 --> 00:21:06,040 Speaker 7: of the Federal Reserve doubled from bloated levels from the 389 00:21:06,080 --> 00:21:09,480 Speaker 7: beginning of COVID to the beginning of twenty twenty two. 390 00:21:09,960 --> 00:21:12,399 Speaker 7: And we had zero interest rates for a long period 391 00:21:12,440 --> 00:21:15,040 Speaker 7: of fact, so everybody loaded up. And one and a 392 00:21:15,080 --> 00:21:18,280 Speaker 7: half years later after the tightening began, I think we 393 00:21:18,320 --> 00:21:21,360 Speaker 7: are still not back yet. But the point I make 394 00:21:21,440 --> 00:21:24,480 Speaker 7: and I say to my clients is that recession is 395 00:21:24,520 --> 00:21:28,560 Speaker 7: something that has been postponed, but it's been delayed, but 396 00:21:28,640 --> 00:21:31,520 Speaker 7: it's not denied. So I think we are still going 397 00:21:31,560 --> 00:21:34,960 Speaker 7: to see signs of a recession. And what is me 398 00:21:35,040 --> 00:21:38,200 Speaker 7: the most is as you have interest rates, having risen 399 00:21:39,040 --> 00:21:41,760 Speaker 7: and the balance sheet of the FED is still being tightened. 400 00:21:41,800 --> 00:21:44,880 Speaker 7: It did not pause, and when the two of them 401 00:21:44,960 --> 00:21:47,200 Speaker 7: go together, that there is something that's going to break 402 00:21:47,240 --> 00:21:49,600 Speaker 7: in the system in the first half of twenty twenty four. 403 00:21:50,000 --> 00:21:52,760 Speaker 5: So how do you then distinguish between what a lot 404 00:21:52,760 --> 00:21:54,880 Speaker 5: of people will say right now are signs that we're 405 00:21:54,880 --> 00:21:58,640 Speaker 5: heading towards soft landing, and that you're in the camp 406 00:21:58,680 --> 00:22:00,880 Speaker 5: here that recession is so possibility. 407 00:22:01,680 --> 00:22:04,960 Speaker 7: Yeah, I do not believe in soft landing, Molly, and 408 00:22:04,640 --> 00:22:07,199 Speaker 7: I would think that when you look at what has 409 00:22:07,240 --> 00:22:10,879 Speaker 7: happened in past history, it all looks very nice until 410 00:22:10,920 --> 00:22:14,400 Speaker 7: the thing gets out of control. It happened with two 411 00:22:14,400 --> 00:22:17,280 Speaker 7: thousand and seven, and toward the end of the year 412 00:22:17,480 --> 00:22:20,639 Speaker 7: we had the FED Chairman Ben Bernanke say to us 413 00:22:21,040 --> 00:22:24,280 Speaker 7: that the subprime mortgage situation was just a fifty two 414 00:22:24,359 --> 00:22:27,960 Speaker 7: hundred billion dollar problem. We found out in the next year, 415 00:22:28,000 --> 00:22:31,120 Speaker 7: two thousand and eight, it was just a terrible situation, 416 00:22:31,320 --> 00:22:35,320 Speaker 7: not just a minor problem. Same thing happened in nineteen 417 00:22:35,400 --> 00:22:38,639 Speaker 7: ninety eight when you had long term capital management, a 418 00:22:38,680 --> 00:22:41,920 Speaker 7: small hedge fund which was never going to fail because 419 00:22:41,960 --> 00:22:43,640 Speaker 7: two Nobel Prize winners. 420 00:22:43,359 --> 00:22:45,680 Speaker 2: Ran its rank you. 421 00:22:46,960 --> 00:22:51,120 Speaker 7: And it was done again with no leverage, it was thought, 422 00:22:51,160 --> 00:22:54,159 Speaker 7: but then they had enormous amount of leverage and a 423 00:22:54,200 --> 00:22:56,760 Speaker 7: lot of risk and it failed as well. So it 424 00:22:56,880 --> 00:22:59,080 Speaker 7: is all I like to say that it is all 425 00:22:59,200 --> 00:23:02,399 Speaker 7: lit up till it darkens, the opposite of what we 426 00:23:02,480 --> 00:23:03,160 Speaker 7: normally say. 427 00:23:03,280 --> 00:23:05,679 Speaker 2: Is there some event out there that you're concerned? Could 428 00:23:05,680 --> 00:23:08,399 Speaker 2: be that long term capital management moment, or could be 429 00:23:08,480 --> 00:23:12,679 Speaker 2: the subprime issue for in two thousand and seven two thousand, 430 00:23:12,720 --> 00:23:15,800 Speaker 2: Is there something after that concerns you in terms of catalysts. 431 00:23:15,560 --> 00:23:18,640 Speaker 7: Paul, I have a few candidates. One is I had 432 00:23:18,640 --> 00:23:21,679 Speaker 7: said before the March regional banking crisis that might be 433 00:23:21,680 --> 00:23:25,000 Speaker 7: a credit event, but we survived that it was a 434 00:23:25,000 --> 00:23:28,720 Speaker 7: credit event. The next one, my top candidate is a 435 00:23:28,760 --> 00:23:33,400 Speaker 7: bigger banking institution, maybe an institution which is medium sized, 436 00:23:34,320 --> 00:23:37,000 Speaker 7: and why do they suffer. They suffer because they loaded 437 00:23:37,080 --> 00:23:40,920 Speaker 7: up on long dated bonds when Jerome Powell told us 438 00:23:40,920 --> 00:23:43,800 Speaker 7: inflation is going to be transitory. So in that case, 439 00:23:43,880 --> 00:23:47,160 Speaker 7: I should buy ten year treasuries to two percent because 440 00:23:47,160 --> 00:23:50,000 Speaker 7: I'm expecting it to go to one percent. Right it didn't. 441 00:23:50,040 --> 00:23:52,520 Speaker 7: It went the other way. So that's one candidate. 442 00:23:52,880 --> 00:23:55,880 Speaker 5: Commercip have already happened though by now if that were 443 00:23:55,920 --> 00:23:58,320 Speaker 5: to blow up, you know, similar to the small banks 444 00:23:58,320 --> 00:23:59,240 Speaker 5: that we saw in March. 445 00:24:00,800 --> 00:24:03,080 Speaker 7: Not yet, Molly, And I'll tell you why I think 446 00:24:03,119 --> 00:24:06,640 Speaker 7: it hasn't happened yet. If you look at the bank numbers, 447 00:24:07,320 --> 00:24:10,879 Speaker 7: the deposits with the US banking system has been steadily 448 00:24:10,920 --> 00:24:14,680 Speaker 7: going down, the delinquency rate is starting to pick up, 449 00:24:15,400 --> 00:24:18,800 Speaker 7: and the balance sheet is being reduced. As far as 450 00:24:18,840 --> 00:24:22,120 Speaker 7: the FED is concerned. When you put them all together, 451 00:24:22,440 --> 00:24:26,800 Speaker 7: suddenly something clicks. It doesn't happen gradually, so which is 452 00:24:26,880 --> 00:24:29,840 Speaker 7: why I think, timing wise, I would look for the 453 00:24:29,840 --> 00:24:33,720 Speaker 7: first quarter of twenty twenty four is when something breaks again. 454 00:24:34,240 --> 00:24:36,920 Speaker 7: So we talked about commercial real estate is the third. 455 00:24:37,280 --> 00:24:40,440 Speaker 7: You can also have again a crunch on the credit side, 456 00:24:40,440 --> 00:24:44,359 Speaker 7: which is already taking place. My final candidate is the 457 00:24:44,440 --> 00:24:48,360 Speaker 7: repeat of what happened in the United Kingdom September October 458 00:24:48,400 --> 00:24:51,800 Speaker 7: of twenty twenty two. Bond eels rise a lot. There 459 00:24:51,800 --> 00:24:54,000 Speaker 7: it was the guilt eels, and here we are talking 460 00:24:54,040 --> 00:24:58,640 Speaker 7: about treasury eels and pension funds incur huge losses. They 461 00:24:58,640 --> 00:25:02,159 Speaker 7: have not done well into of general performance, and that 462 00:25:02,240 --> 00:25:04,600 Speaker 7: situation worsens and puts pressure on the FED. 463 00:25:05,440 --> 00:25:07,440 Speaker 2: One of the things as we think about this economy 464 00:25:07,440 --> 00:25:10,800 Speaker 2: in a hard landing soft landing recession is the labor market. 465 00:25:10,840 --> 00:25:13,480 Speaker 2: We got some more labor data today. Initial JAMAS claims 466 00:25:13,480 --> 00:25:16,200 Speaker 2: came in at two hundred and nine thousand, below expectations, 467 00:25:16,320 --> 00:25:18,800 Speaker 2: less than we saw last month. I mean, this labor 468 00:25:18,840 --> 00:25:23,280 Speaker 2: market seems to defy most logic in how robust it is. 469 00:25:23,359 --> 00:25:25,000 Speaker 2: What do you make of the US labor market. 470 00:25:26,359 --> 00:25:29,320 Speaker 7: Yes, the labor market so far has been very robust, 471 00:25:29,359 --> 00:25:33,080 Speaker 7: and I think the reason that has been the case 472 00:25:33,160 --> 00:25:36,040 Speaker 7: once again traces back to the amount of stimulus. There 473 00:25:36,119 --> 00:25:38,000 Speaker 7: is so much money that you were able to give, 474 00:25:38,920 --> 00:25:42,119 Speaker 7: and also the shortage of labor which took place due 475 00:25:42,160 --> 00:25:45,760 Speaker 7: to COVID with one part of the working force typically 476 00:25:45,840 --> 00:25:49,639 Speaker 7: the wives who stayed behind to provide childcare, that in 477 00:25:49,680 --> 00:25:52,679 Speaker 7: turn reduce the workforce. I think we are just coming 478 00:25:52,800 --> 00:25:56,359 Speaker 7: back to it. But if you look at the layoff numbers, Paul, 479 00:25:56,920 --> 00:25:59,920 Speaker 7: you're seeing that after a period of very strong now 480 00:26:00,680 --> 00:26:06,200 Speaker 7: despite today's initial jobless claims, the unemployment has started to rise. Yep, 481 00:26:06,640 --> 00:26:10,159 Speaker 7: and they don't. Once again, it doesn't rise gradually, and 482 00:26:10,280 --> 00:26:14,320 Speaker 7: history tells you that when it rises, it just surges suddenly, 483 00:26:14,680 --> 00:26:16,760 Speaker 7: and I wouldn't be surprised to see that happen in 484 00:26:16,760 --> 00:26:17,960 Speaker 7: the next two to three months. 485 00:26:18,160 --> 00:26:20,600 Speaker 5: So let's go back to these stimulus payments, because there 486 00:26:20,680 --> 00:26:23,960 Speaker 5: right now is such a debate in economic circles of 487 00:26:24,040 --> 00:26:27,359 Speaker 5: how much excess savings the consumer has. I feel like 488 00:26:27,400 --> 00:26:29,880 Speaker 5: I see a different report on this every day that 489 00:26:30,240 --> 00:26:33,440 Speaker 5: savings are dwindling, there's nothing left. Another one will say 490 00:26:33,480 --> 00:26:35,640 Speaker 5: there's more than we really thought, and that's what's giving 491 00:26:35,640 --> 00:26:38,240 Speaker 5: the consumer still a lot of gas right now to 492 00:26:38,320 --> 00:26:42,200 Speaker 5: keep spending. And same with like the on the credit 493 00:26:42,240 --> 00:26:44,679 Speaker 5: side as well. You mentioned delinquencies are picking up, and 494 00:26:44,720 --> 00:26:48,000 Speaker 5: we've seen credit card balances getting higher, but as a 495 00:26:48,000 --> 00:26:51,160 Speaker 5: share of total deposit's still very low. So how do 496 00:26:51,200 --> 00:26:54,600 Speaker 5: you assess right now these conflicting messages about the health 497 00:26:54,640 --> 00:26:55,400 Speaker 5: of the consumer. 498 00:26:56,400 --> 00:26:59,439 Speaker 7: That's again a very timely question, and I would answer you, 499 00:26:59,480 --> 00:27:04,119 Speaker 7: Molly by saying that while the aggregate numbers in terms 500 00:27:04,119 --> 00:27:09,920 Speaker 7: of delinquency, the aggregate numbers still seem really benign. There 501 00:27:09,960 --> 00:27:14,320 Speaker 7: is a difference across income groups, meaning the numbers are 502 00:27:14,320 --> 00:27:17,879 Speaker 7: showing recently that even the consumer spending, a good chunk 503 00:27:17,920 --> 00:27:21,280 Speaker 7: of the increase is coming from the highest one or 504 00:27:21,320 --> 00:27:24,520 Speaker 7: ten percent maximum in terms of the income groups, and 505 00:27:24,560 --> 00:27:29,119 Speaker 7: the lower income groups are actually cutting back delinquency wise. 506 00:27:29,720 --> 00:27:32,600 Speaker 7: The credit card delinquencies are the first to show up. 507 00:27:32,640 --> 00:27:34,600 Speaker 7: And the reason is it is easy for you not 508 00:27:34,720 --> 00:27:37,000 Speaker 7: to pay. You don't have to go and ask anybody 509 00:27:37,040 --> 00:27:40,080 Speaker 7: to give you a loan, and so that is starting 510 00:27:40,119 --> 00:27:43,159 Speaker 7: to happen the next If it starts to happen also 511 00:27:43,240 --> 00:27:45,880 Speaker 7: in terms of what happens to the payments to the banks, 512 00:27:46,280 --> 00:27:48,880 Speaker 7: then I would be even more concerned. But it is 513 00:27:48,920 --> 00:27:52,919 Speaker 7: already happening with low middle income groups. It's not happening 514 00:27:53,000 --> 00:27:54,399 Speaker 7: yet with the high income groups. 515 00:27:54,840 --> 00:27:58,280 Speaker 2: Hey, Swebaut thirty seconds left a lot of geopolitical issues 516 00:27:58,280 --> 00:28:01,240 Speaker 2: out there for you know, investors to deal with. How 517 00:28:01,240 --> 00:28:04,639 Speaker 2: concerned are you with again the Middle East in Ukraine 518 00:28:04,680 --> 00:28:06,480 Speaker 2: and what that means for maybe the global economy. 519 00:28:06,800 --> 00:28:09,680 Speaker 7: I'm concerned again to reply to you very quickly, Paul, 520 00:28:09,920 --> 00:28:14,040 Speaker 7: that I'm concerned mostly from an economic side. What happens 521 00:28:14,080 --> 00:28:17,480 Speaker 7: to inflation? Okay, And yes today we are seeing a 522 00:28:17,520 --> 00:28:20,960 Speaker 7: big drop in oil prices. But if the Hamas Israel 523 00:28:21,160 --> 00:28:24,960 Speaker 7: ceasefire doesn't happen, or if it does, if it breaks up, 524 00:28:25,400 --> 00:28:28,640 Speaker 7: then you're talking about war escalating and that in turn 525 00:28:28,760 --> 00:28:33,160 Speaker 7: would mean much higher oil prices. Oil prices are nothing 526 00:28:33,640 --> 00:28:37,080 Speaker 7: or a huge problem, one extreme or the other. It 527 00:28:37,160 --> 00:28:39,239 Speaker 7: either goes down or the oil price goes to one 528 00:28:39,280 --> 00:28:41,400 Speaker 7: hundred and fifty dollars a battle, and that's a risk 529 00:28:41,440 --> 00:28:43,520 Speaker 7: we run for the geopolitical situation. 530 00:28:43,760 --> 00:28:44,360 Speaker 6: Absolutely. 531 00:28:44,480 --> 00:28:46,520 Speaker 2: Shre thanks you so much for joining us. Shri Kumar. 532 00:28:46,760 --> 00:28:50,320 Speaker 2: He's a president of Shri Kumar Global Strategies based somewhere 533 00:28:50,400 --> 00:28:52,680 Speaker 2: in California and one of those beaches or something like that, 534 00:28:52,680 --> 00:28:55,960 Speaker 2: but he's actually coming to the world capital, New York City, 535 00:28:56,000 --> 00:28:59,000 Speaker 2: so we appreciate him coming into our Bloomberg Interactive Brokers studio. 536 00:28:59,400 --> 00:29:02,480 Speaker 6: You're listening to the tape Can's are Live program Bloomberg 537 00:29:02,600 --> 00:29:06,200 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the 538 00:29:06,240 --> 00:29:09,480 Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 539 00:29:09,520 --> 00:29:12,320 Speaker 6: You can also listen live on Amazon Alexa from our 540 00:29:12,360 --> 00:29:18,360 Speaker 6: flagship New York station Just say Alexa playing Bloomberg eleven thirty. 541 00:29:19,240 --> 00:29:23,000 Speaker 2: Earnings Deer. They put out some numbers. I guess the 542 00:29:23,120 --> 00:29:26,560 Speaker 2: beat current quarter results, but their guidance was very disappointing 543 00:29:26,560 --> 00:29:28,640 Speaker 2: to the street. I see the stocks off about three 544 00:29:28,720 --> 00:29:31,520 Speaker 2: and a half percent, but that's the high intra day 545 00:29:31,600 --> 00:29:32,920 Speaker 2: high of the day, so it had been a lot 546 00:29:32,960 --> 00:29:36,560 Speaker 2: lower earlier. Let's bring on the anasto follows this compedy 547 00:29:36,640 --> 00:29:39,600 Speaker 2: Chris Chile, you know, he's the industrials analyst for Bloomberg Intelligence, 548 00:29:39,880 --> 00:29:43,360 Speaker 2: joining us via zoom from Princeton, New Jersey. So Chris, 549 00:29:43,680 --> 00:29:45,800 Speaker 2: talk to just about what we heard from your good 550 00:29:45,800 --> 00:29:46,480 Speaker 2: friends at Deer. 551 00:29:46,760 --> 00:29:50,760 Speaker 9: Fairly conservative guidance heading into the print, just given what 552 00:29:50,800 --> 00:29:54,520 Speaker 9: we've seen with softer commodity prices, lower farm income, and 553 00:29:54,560 --> 00:29:57,040 Speaker 9: I think it was pretty well anticipated that the cycle 554 00:29:57,120 --> 00:30:01,560 Speaker 9: was turning, but this outlook is material below what we 555 00:30:01,640 --> 00:30:05,440 Speaker 9: had anticipated. Deers projecting that income will drop to about 556 00:30:05,480 --> 00:30:08,040 Speaker 9: eight point eight billion dollars at the midpoint next year. 557 00:30:08,160 --> 00:30:12,840 Speaker 9: That implies roughly twenty eight twenty eight to fifty dollars 558 00:30:12,880 --> 00:30:17,800 Speaker 9: in earnings, which is thirteen percent below the street. You know, 559 00:30:17,840 --> 00:30:21,360 Speaker 9: commodity prices are still at historically high levels above long 560 00:30:21,440 --> 00:30:24,400 Speaker 9: term averages, the edge of the fleet is still quite old, 561 00:30:24,920 --> 00:30:27,160 Speaker 9: and farmer balance sheets are quite healthy, so we really 562 00:30:27,200 --> 00:30:30,400 Speaker 9: see a more modest downturn. This really sets just a 563 00:30:30,440 --> 00:30:34,040 Speaker 9: low bar and really an overly conservative outlook. 564 00:30:34,520 --> 00:30:37,200 Speaker 5: Yeah, it looks like, you know, this sector here Chris 565 00:30:37,280 --> 00:30:40,920 Speaker 5: is otherwise showing some other, you know, some other evidence 566 00:30:40,960 --> 00:30:44,680 Speaker 5: of slowing. We saw that the rival over to Deer. 567 00:30:45,080 --> 00:30:49,280 Speaker 5: CNH Industrial said that it's reducing salaried workers, that their 568 00:30:49,320 --> 00:30:53,640 Speaker 5: equipment sales are slumping. In Corteva, which makes seeds, has 569 00:30:53,640 --> 00:30:56,560 Speaker 5: also warned of a slow down in demand from farmers. 570 00:30:56,600 --> 00:30:59,200 Speaker 5: So tell us you know the broader outlook of the 571 00:30:59,200 --> 00:31:01,960 Speaker 5: farming sector right now and really why people should be 572 00:31:02,000 --> 00:31:02,600 Speaker 5: paying attention. 573 00:31:03,960 --> 00:31:06,960 Speaker 9: Yeah, I mean, we hit peak production this past year, 574 00:31:07,520 --> 00:31:10,800 Speaker 9: so twenty twenty four will be a slower or lower 575 00:31:10,840 --> 00:31:15,560 Speaker 9: growth year. This has been kind of well advertised by 576 00:31:15,600 --> 00:31:19,440 Speaker 9: the pullback we've seen in commodity prices. CNH certainly cautioned 577 00:31:19,480 --> 00:31:23,160 Speaker 9: when they reported that volumes will be down in twenty 578 00:31:23,280 --> 00:31:26,520 Speaker 9: twenty four, and we actually saw a Deer reduced production 579 00:31:26,640 --> 00:31:29,640 Speaker 9: too at their harvest Works factory in their fiscal four 580 00:31:29,720 --> 00:31:33,680 Speaker 9: q In North America, inventory seem to be in good condition, 581 00:31:33,880 --> 00:31:38,520 Speaker 9: but as you look globally Europe and particularly South America, 582 00:31:38,800 --> 00:31:41,880 Speaker 9: they plan to underproduce retail demand next year, so further 583 00:31:41,920 --> 00:31:43,120 Speaker 9: production cuts to come. 584 00:31:43,800 --> 00:31:46,160 Speaker 2: What's the lead time? Like, tell to us about the 585 00:31:46,200 --> 00:31:48,600 Speaker 2: cycle for a company like deer. I know it's a 586 00:31:48,600 --> 00:31:50,960 Speaker 2: cyclical business and it's based upon farming, but just give 587 00:31:51,000 --> 00:31:52,920 Speaker 2: us a describe as cycle for us. 588 00:31:54,160 --> 00:31:56,960 Speaker 9: Yeah, I mean, ultimately they're driven by where crop prices 589 00:31:57,000 --> 00:32:00,560 Speaker 9: are and that ultimately dictates farmer incomes. You know, we've 590 00:32:00,600 --> 00:32:04,640 Speaker 9: had three very strong years here in North America. So 591 00:32:04,960 --> 00:32:08,360 Speaker 9: we were roughly thirty percent above mid cycle in twenty 592 00:32:08,440 --> 00:32:11,120 Speaker 9: twenty three, which was you know, pretty comparable to the 593 00:32:11,200 --> 00:32:15,680 Speaker 9: twenty thirteen peak. So again it comes down to where 594 00:32:15,720 --> 00:32:18,640 Speaker 9: crop prices are. They're still you know, supportive of making 595 00:32:18,680 --> 00:32:21,360 Speaker 9: capital investments, just not at the level we had seen 596 00:32:21,360 --> 00:32:22,440 Speaker 9: over the last two years. 597 00:32:22,880 --> 00:32:25,280 Speaker 5: Tell us, Chris, about some other markets that are really 598 00:32:25,360 --> 00:32:29,520 Speaker 5: important for the farming space that you know, Brazil probably 599 00:32:29,640 --> 00:32:31,880 Speaker 5: being one of them, and maybe some other regions in 600 00:32:31,920 --> 00:32:35,160 Speaker 5: the world that are really important when we're thinking about 601 00:32:35,200 --> 00:32:36,240 Speaker 5: the outlook for farming. 602 00:32:37,520 --> 00:32:39,880 Speaker 9: Yeah, if you think about the markets that matter most 603 00:32:39,960 --> 00:32:43,080 Speaker 9: for deer, it's North America and it's Brazil. Those are 604 00:32:43,720 --> 00:32:48,520 Speaker 9: the larger crop producing nations. They are more conducive to 605 00:32:48,640 --> 00:32:53,320 Speaker 9: the larger high horsepower equipment, which which drives higher margins 606 00:32:53,360 --> 00:32:57,480 Speaker 9: for deer. And ultimately it is corn, soybeans, and wheat. 607 00:32:58,720 --> 00:33:00,760 Speaker 9: Those those are really move the needle. 608 00:33:01,400 --> 00:33:04,720 Speaker 2: All right, Chris, I'm a farmer. I'm in Moline, Illinois. 609 00:33:06,080 --> 00:33:09,480 Speaker 2: How often do I replace those big, big tractors that 610 00:33:09,520 --> 00:33:11,320 Speaker 2: I love to drive to help me, you know, get 611 00:33:11,360 --> 00:33:12,400 Speaker 2: my crops out of the ground. 612 00:33:13,280 --> 00:33:13,520 Speaker 6: Yeah. 613 00:33:13,600 --> 00:33:16,320 Speaker 9: So if you think about a piece of large farm equipment, 614 00:33:16,840 --> 00:33:20,440 Speaker 9: you know, typically the useful life runs about fifteen years, 615 00:33:21,200 --> 00:33:24,280 Speaker 9: but that includes a pretty robust trade cycle of four 616 00:33:24,360 --> 00:33:27,160 Speaker 9: or five different users. You know, some of the larger 617 00:33:27,200 --> 00:33:30,480 Speaker 9: operations we'll we'll swap out equipment more frequently, just given 618 00:33:30,520 --> 00:33:34,560 Speaker 9: some of the technology and upgrades you know, really make 619 00:33:34,600 --> 00:33:37,640 Speaker 9: farmers more productive and help lower some of the input costs. 620 00:33:38,800 --> 00:33:40,920 Speaker 9: And combines, you know, tend to have a little bit 621 00:33:40,960 --> 00:33:43,920 Speaker 9: shorter useful life, used a little bit more intensively, particularly 622 00:33:43,920 --> 00:33:45,720 Speaker 9: down in regions like South America. 623 00:33:45,800 --> 00:33:48,360 Speaker 2: So when I what's a combine? I gon to get 624 00:33:48,360 --> 00:33:50,360 Speaker 2: one of us big combines that I see, you know 625 00:33:50,360 --> 00:33:52,320 Speaker 2: with the big cabs and they got all the bells 626 00:33:52,360 --> 00:33:53,840 Speaker 2: and whistles. What's that going to set me back? 627 00:33:54,680 --> 00:33:57,200 Speaker 9: You're gonna have to break out the wallet, and you know, 628 00:33:57,400 --> 00:34:00,120 Speaker 9: a large combine could run you know, close to all 629 00:34:00,320 --> 00:34:04,080 Speaker 9: dollars with all the bells and whistles and the new technology. 630 00:34:05,000 --> 00:34:07,320 Speaker 9: They are a large capital investment. 631 00:34:06,960 --> 00:34:09,719 Speaker 2: And so I have to finance that, right, So if 632 00:34:09,760 --> 00:34:13,279 Speaker 2: I got interest rates, they're no longer zero. So it's 633 00:34:13,280 --> 00:34:15,760 Speaker 2: just like buying a car, isn't it's a lot more expensive. 634 00:34:16,440 --> 00:34:16,799 Speaker 3: It is. 635 00:34:16,840 --> 00:34:20,120 Speaker 9: But you know, interestingly enough, we've seen you know, higher 636 00:34:20,160 --> 00:34:22,560 Speaker 9: interest rates, you know, to this point, really haven't had 637 00:34:22,560 --> 00:34:26,719 Speaker 9: a detrimental impact on equipment sales. And I think a 638 00:34:26,719 --> 00:34:28,440 Speaker 9: lot of that has to do with you know, crop 639 00:34:28,440 --> 00:34:31,480 Speaker 9: prices were you know, historically elevated farm income. We set 640 00:34:31,480 --> 00:34:34,279 Speaker 9: a record in twenty twenty two, so farmers have had 641 00:34:34,320 --> 00:34:36,720 Speaker 9: a lot of money in their wallets, and we've actually 642 00:34:36,719 --> 00:34:39,200 Speaker 9: seen a lot of farmers go out and buy equipment 643 00:34:39,280 --> 00:34:43,000 Speaker 9: with cash, the exception being more at the smaller and 644 00:34:43,280 --> 00:34:47,120 Speaker 9: more consumer driven products those had ten historically been a 645 00:34:47,120 --> 00:34:50,040 Speaker 9: little bit more rate sensitive. That being said, now with 646 00:34:50,080 --> 00:34:54,040 Speaker 9: the pullback and crop prices and lower farm incomes, you're 647 00:34:54,080 --> 00:34:57,880 Speaker 9: starting to see some of that interest rates sensitivity deteriorate 648 00:34:57,960 --> 00:35:01,080 Speaker 9: some of the buying power for the law larger operations. 649 00:35:01,800 --> 00:35:06,560 Speaker 5: Let's go back to the deer earnings call that happened earlier. Today, 650 00:35:07,400 --> 00:35:11,680 Speaker 5: management brought up labor costs a lot as mentioning that 651 00:35:11,719 --> 00:35:15,720 Speaker 5: this is the largest inflationary item within their production bucket, 652 00:35:16,120 --> 00:35:18,520 Speaker 5: and that a lot of it is contractual, mentioning that 653 00:35:18,960 --> 00:35:21,560 Speaker 5: the labor contracts that they have in their factories have 654 00:35:21,640 --> 00:35:24,440 Speaker 5: these scheduled step ups in the year. So is that 655 00:35:24,600 --> 00:35:28,040 Speaker 5: saying that labor costs are going to get even more 656 00:35:28,239 --> 00:35:29,400 Speaker 5: expensive for Deer? 657 00:35:30,960 --> 00:35:35,160 Speaker 9: Yes, that being said, production costs we actually saw for 658 00:35:35,200 --> 00:35:38,520 Speaker 9: the first time in three years this fiscal quarter turned 659 00:35:38,560 --> 00:35:41,799 Speaker 9: into a tailwind. So while labor costs are going up, 660 00:35:42,560 --> 00:35:47,000 Speaker 9: other costs are coming down, which is helping mitigate some 661 00:35:47,040 --> 00:35:52,000 Speaker 9: of those higher and labor inflationary pressures. So net, they're 662 00:35:52,040 --> 00:35:55,759 Speaker 9: anticipating twenty twenty four that production costs will actually be 663 00:35:55,800 --> 00:35:56,480 Speaker 9: a tailwind. 664 00:35:57,280 --> 00:35:59,759 Speaker 2: So how's the supply chain here? I mean, I know, 665 00:35:59,800 --> 00:36:02,759 Speaker 2: for while they're like the automobile industry, you know, the 666 00:36:02,800 --> 00:36:05,839 Speaker 2: industrial equipment guys couldn't get the chips, they couldn't get 667 00:36:05,880 --> 00:36:08,840 Speaker 2: some of the parts they need to build these things, 668 00:36:09,120 --> 00:36:10,640 Speaker 2: how is the supply chain these days? 669 00:36:11,920 --> 00:36:15,920 Speaker 9: The supply base has you know, really normalized. It really 670 00:36:16,000 --> 00:36:19,160 Speaker 9: is not a factor at this point anymore. There are 671 00:36:19,239 --> 00:36:22,520 Speaker 9: pockets from time to time, but we've seen a normalized 672 00:36:22,560 --> 00:36:25,799 Speaker 9: supply chain. I'd expect you get a little bit of 673 00:36:25,800 --> 00:36:28,839 Speaker 9: tailwind some factory efficiencies as we move into next year. 674 00:36:29,360 --> 00:36:31,880 Speaker 9: But it's normal course of business. 675 00:36:32,640 --> 00:36:34,920 Speaker 5: A lot of times when we see companies set really 676 00:36:34,920 --> 00:36:38,440 Speaker 5: low guidance. My initial reaction, and maybe this is just 677 00:36:38,560 --> 00:36:41,440 Speaker 5: the cynical person in me, is thinking, oh, you know, 678 00:36:41,600 --> 00:36:44,000 Speaker 5: setting the bar low so that they can what's that 679 00:36:44,080 --> 00:36:47,040 Speaker 5: phrase to under expect to outperform? 680 00:36:47,239 --> 00:36:48,960 Speaker 2: Yeah, under promise, over deliver. 681 00:36:48,800 --> 00:36:50,640 Speaker 5: That there, thank you. I knew you would say everything 682 00:36:51,120 --> 00:36:53,600 Speaker 5: is that? Is that, Chris? What you think is happening here? 683 00:36:53,719 --> 00:36:56,080 Speaker 5: Or it really is as dire as Deer is making 684 00:36:56,080 --> 00:36:56,600 Speaker 5: it out to be. 685 00:36:57,719 --> 00:37:00,319 Speaker 9: No, I think that's exactly what's happening here. I think 686 00:37:00,320 --> 00:37:02,640 Speaker 9: they set a very low bar, and I wouldn't be 687 00:37:02,680 --> 00:37:06,480 Speaker 9: surprised to see beats and raises throughout the year. You know, 688 00:37:06,640 --> 00:37:10,279 Speaker 9: we had an anticipated fairly conservative guidance just given some 689 00:37:10,360 --> 00:37:14,440 Speaker 9: of the macro uncertainty, pharm economy uncertainty, so that was 690 00:37:14,440 --> 00:37:17,720 Speaker 9: to be expected. But to see you know, double digit 691 00:37:17,760 --> 00:37:22,520 Speaker 9: top line to crime declines across all businesses, pretty heavy 692 00:37:22,560 --> 00:37:26,600 Speaker 9: decremental margins, you know, thirty five percent plus, that's more 693 00:37:26,600 --> 00:37:30,040 Speaker 9: indicative of a more severe contraction. We just don't see 694 00:37:30,040 --> 00:37:32,440 Speaker 9: that as a realistic scenario at this stage. 695 00:37:33,200 --> 00:37:35,960 Speaker 2: I remember when Chris was young, he wasn't so cynical. 696 00:37:36,120 --> 00:37:38,759 Speaker 2: He would take management's guidance at face value. But now 697 00:37:38,760 --> 00:37:41,400 Speaker 2: he's calling him out, saying that maybe either kind of 698 00:37:41,400 --> 00:37:44,239 Speaker 2: thrown in the kitchen sink here. That's that's a mark 699 00:37:44,239 --> 00:37:46,640 Speaker 2: of a good analysts. He's become a great, great analyst 700 00:37:46,680 --> 00:37:49,480 Speaker 2: for us. Chris Gielino, industrials analyst at Bloomberg Intelligence. He 701 00:37:49,480 --> 00:37:51,719 Speaker 2: follows all the fun companies. I think like Deer. He 702 00:37:51,719 --> 00:37:53,799 Speaker 2: gets a ride around on tractors and stuff like that. 703 00:37:54,000 --> 00:37:54,839 Speaker 5: Is that part of the job. 704 00:37:54,920 --> 00:37:57,080 Speaker 2: Oh yeah, you go to an analystate, you got to 705 00:37:57,160 --> 00:38:00,839 Speaker 2: check out the merch so they take Yeah, it's okay. Yeah, 706 00:38:00,840 --> 00:38:02,600 Speaker 2: so it's good stuff. They have good time. Now my 707 00:38:02,760 --> 00:38:04,160 Speaker 2: job is better because I used to get to go 708 00:38:04,200 --> 00:38:07,280 Speaker 2: to movie premieres for the Disney, go out on cruise 709 00:38:07,280 --> 00:38:09,640 Speaker 2: ships with Disney and all that kind of fun stuff. 710 00:38:09,840 --> 00:38:11,960 Speaker 5: And now you're here in the album here one of 711 00:38:11,960 --> 00:38:14,880 Speaker 5: the biggest in person office proponents I've ever. 712 00:38:14,719 --> 00:38:18,520 Speaker 2: Met, exactly, and I've thrown into talent that I've kind 713 00:38:18,520 --> 00:38:20,839 Speaker 2: of figured it all out. My kids are saying forget 714 00:38:20,880 --> 00:38:22,359 Speaker 2: about it. You've lost that fight. 715 00:38:24,200 --> 00:38:27,319 Speaker 1: Thanks for listening to the Bloomberg Markets podcasts. You can 716 00:38:27,360 --> 00:38:31,120 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 717 00:38:31,200 --> 00:38:34,920 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 718 00:38:35,120 --> 00:38:38,200 Speaker 1: at Matt Miller nineteen seventy three and on Fall. 719 00:38:38,080 --> 00:38:40,920 Speaker 2: Sweeney I'm on Twitter at pt Sweeney. Before the podcast. 720 00:38:40,960 --> 00:38:43,439 Speaker 2: You can always catch us worldwide at Bloomberg Radio