Speaker 1: This is Bloomberg Business Wait inside from the reporters and
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Speaker 1: The Bloomberg Business Week Podcast with Carol Messer and Tim
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Speaker 3: I got to say investors not loving what they got
Speaker 3: from a Lift. That stock actually down thirteen percent. I
Speaker 3: think I might have said one percent, but I meant
Speaker 3: down about a buck fifty and it's actually down about
Speaker 3: fourteen percent in the aftermarket. It's really a killing here.
Speaker 3: Let's get to it with our Bloomberg Intelligence senior tech
Speaker 3: industry analyst, man Deep Singh here in our Bloomberg Interactive
Speaker 3: Broker studio going through his phone, going through the headlines.
Speaker 3: It's down eleven percent?
Speaker 4: What's up with this?
Speaker 5: Also top line growth to compare lyft to Uber and
Speaker 5: door Dash for just reported like Clift growing twelve percent.
Speaker 5: Fourteen percent is just not enough. And you know Uber
Speaker 5: had thirty percent growth in its mobility segment and you
Speaker 5: see the same way DoorDash growing twenty seven percent. And
Speaker 5: these companies have much higher base, you know, so Lift
Speaker 5: clearly has execution issues. You see that in the plateauing
Speaker 5: of their rider base. You know, it's been stuck around
Speaker 5: twenty million for the past four quarters, and they had
Speaker 5: a CEO change. But in a nutshell, I think they
Speaker 5: really are struggling with that smaller scale that they have,
Speaker 5: so they don't have that driver additions on their platform
Speaker 5: to drive more incremental growth.
Speaker 3: But they were cutting costs right to hopefully increase ridership.
Speaker 3: Is any signs in this release, And.
Speaker 5: That's the problem with this business model is either you
Speaker 5: need scale or you need to keep offering subsidies to
Speaker 5: bring more riders, to bring more drivers on the platform.
Speaker 5: Even though it's an asset light model, you need those subsidies.
Speaker 5: And once you start pairing back subsidies, it hurts your frequency.
Speaker 5: That's what we're saying with the LIFT is the right
Speaker 5: frequency has just fallen off.
Speaker 6: So what does LIFT need to do?
Speaker 5: I think at this point, you know, it's a four
Speaker 5: billion dollar enterprise value company. I think all options are
Speaker 5: on the table. If I have to look at you know,
Speaker 5: any company looking to do last mile delivery beyond right sharing.
Speaker 5: Lift's biggest mistake was it never expanded beyond right sharing.
Speaker 5: In hindsight, everyone kept saying right sharing is more profitable
Speaker 5: than food delivery. But that was a mistake because that's
Speaker 5: what DoorDash did. They bought a company in Europe to
Speaker 5: expand internationally. They have you know, branched out and I
Speaker 5: started offering white gloves services, you know, storefront. So they
Speaker 5: really expanded into adjacent verticals whatever they could find door Dash.
Speaker 5: Same thing with Uber. They kept expanding even though they
Speaker 5: were not profitable, and they got a lot of criticism
Speaker 5: for doing it. That was the right thing to do
Speaker 5: because without scale, you just can't keep the marketplace up.
Speaker 3: Because I was thinking, I don't even think it's fair
Speaker 3: to almost compare Uber versus Lyft because it feels like
Speaker 3: they have very different business models.
Speaker 4: Is that the case?
Speaker 3: Well, or in just in terms about Uber kind of
Speaker 3: keeps expanding some of the services it's providing to those.
Speaker 5: Its, and they are all marketplaces. They're all marketplaces where
Speaker 5: you want to drive frequency by bringing more like the
Speaker 5: writers need to have something that drives them to open
Speaker 5: the app every day. And look, there are no switching
Speaker 5: costs in this business. If I find lower price on Uber,
Speaker 5: I'm going to take that.
Speaker 3: No loyalty either, no loyalty at all.
Speaker 5: So the way to drive prices lower is by scale.
Speaker 5: That's how you drive the et is down. That's how
Speaker 5: you organically build that frequency.
Speaker 3: Can I just say one of the cool things I
Speaker 3: feel like when like Uber, if you order something that
Speaker 3: that something's popping up. Hey, if you add this or
Speaker 3: you want to go to this place as well, you.
Speaker 5: Can do this.
Speaker 3: Like They're very clever trying to create or increase the
Speaker 3: velocity of your usage on the platform.
Speaker 5: Yeah. And look, they are layering on ads now, so
Speaker 5: if you're bros browsing through the Uber app, they're going
Speaker 5: to show you some ads. That's an incremental revenue lift.
Speaker 5: Can't do that because it's so transactional. And that too.
Speaker 5: You know, the monthly active user is stuck at twenty million,
Speaker 5: so they can grow that user base and that's where
Speaker 5: you can't even think of ads right now because you
Speaker 5: don't have enough frequency. Right.
Speaker 6: Can they win on competitive pricing? Because I hate doing
Speaker 6: the anecdotal evidence thing, But the only times that my
Speaker 6: friends are taking Lyft is when it's cheaper than Uber,
Speaker 6: which in New York City is pretty frequently it is.
Speaker 5: But I think what Uber has done well is they've
Speaker 5: created tiered pricing for you know, really attracting all kinds
Speaker 5: of users. So if you're if you care about price,
Speaker 5: you can find that kind of ride on Uber. If
Speaker 5: you want that convenience, you can find an expensive ride
Speaker 5: and shorter ETA. Lift just is struggling to keep that
Speaker 5: driver's supply on the platform, and that's why the ETAs
Speaker 5: are going up. So you know, the user experience won't
Speaker 5: be as good because people don't want to wait. If
Speaker 5: you're looking to take away.
Speaker 6: Time is higher, even if the ride time might be
Speaker 6: a little bit lower.
Speaker 5: And the price may be lower, but the waytime is higher. Well, right,
Speaker 5: you're not going to do that.
Speaker 3: And I have to say, I've got both on my platform,
Speaker 3: and a lot of times I'll be like, I'll compare
Speaker 3: prices and I don't find that lift is always less expensive,
Speaker 3: and so I automatically go in one direction. All right,
Speaker 3: new CEO, This was a big quarter for him. He's obviously,
Speaker 3: you know, cutting costs, he's doing different things. What does
Speaker 3: he need to do going forward? What do you want
Speaker 3: to hear from.
Speaker 4: Him from somebody who follows this company?
Speaker 5: A B too B partnership. He came from Amazon. Yeah,
Speaker 5: they need to drive that velocity and frequency. B two
Speaker 5: B partnership with Amazon Target, any of the retailers would
Speaker 5: give it. So Lift really needs to branch, right, Yeah.
Speaker 3: What like say hey, Target, we'll deliver like people can
Speaker 3: order and deliver for you.
Speaker 1: Yeah?
Speaker 4: Really?
Speaker 5: Yeah? I mean Shopify just got out of their delivery
Speaker 5: business this morning because that wasn't profitable. So you are
Speaker 5: finding there will be fewer companies that are left in
Speaker 5: terms of last mile delivery because they want to compete
Speaker 5: with Amazon, Right, that's your bed in terms of partnering
Speaker 5: with Amazon Amazon as opposed to competing.
Speaker 3: Is there is there an acquisition to that they should
Speaker 3: be making or no?
Speaker 4: Is it more about partnership?
Speaker 5: I think partnership. I mean, what's in it for Amazon
Speaker 5: to buy Lifts? So everyone is coming to them to
Speaker 5: partner and I think they won't want to out. Yeah,
Speaker 5: so I think partnership is probably better for Lyft and
Speaker 5: Amazon just has the network.
Speaker 4: Really that's so interesting.
Speaker 6: Do you have any big questions still that you are
Speaker 6: looking to get answered on any Ornane's call?
Speaker 2: Yeah?
Speaker 5: I think the key to me is what is he
Speaker 5: going to do beyond cost cutting? Really? I mean there
Speaker 5: is a lot you could argue you could do with
Speaker 5: last mile delivery because there are a number of areas
Speaker 5: and that's where you know, having a network is powerful.
Speaker 5: They have the data, but at this point of time,
Speaker 5: really they need to act fast in terms of driving
Speaker 5: that frequency because Uber really is taking share, and they're
Speaker 5: taking share without spending on incentives. So Lift's problem is
Speaker 5: their balance sheet. They're burning cash. They'll run out of
Speaker 5: cash if they keep burning two hundred three hundred million
Speaker 5: dollars a quarter. They just have one point five billion
Speaker 5: on the balance Is there.
Speaker 3: Room enough for two ride sharing services as their core
Speaker 3: business meaning Uber and Lyft, and one where Lift can
Speaker 3: actually grow substantially in terms of market cap, revenues and share.
Speaker 5: I think, I mean, I would say, yes, this market
Speaker 5: could be a duopoly, but I would argue they will
Speaker 5: be more valued as logistics companies going forward as opposed
Speaker 5: to tech companies because the market is so fixated on
Speaker 5: profitability and you know, running things without burning cash. That's
Speaker 5: why it's a little tricky for Lyft given its smaller size.
Speaker 3: You're saying like logistics meaning delivery, that is wild?
Speaker 5: Love it?
Speaker 4: So that's wild.
Speaker 3: Okay, good stuff, Thank you so much. Always man Deep
Speaker 3: saying he is our Bloomberg Intelligence senior tech industry analyst
Speaker 3: here in studio, looking at shares of Lyft off there
Speaker 3: but still down about ten percent here in the aftermarket
Speaker 3: following their update on earnings.
Speaker 4: This is Bloomberg Radio.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 3: We are waiting those earnings out from Apple doing about
Speaker 3: six minutes time, so as soon as they cross the
Speaker 3: Bloomberg terminal, we will certainly bring them to you. In
Speaker 3: the meantime, we do want to check in with Dan Morgan.
Speaker 3: He's going to be here with us when those results
Speaker 3: come out. Dan, of course, you know a friend of
Speaker 3: the show, senior portfolio manager over at Sonova's trust company.
Speaker 3: They've got roughly just shy of twenty two billion in
Speaker 3: acids under management. Dan with us once again out of Atlanta,
Speaker 3: joining us on the phone. Excuse me, Dan, We are
Speaker 3: waiting Apple's earnings a little tickle here, so what we
Speaker 3: wait for that? I do want to ask you about
Speaker 3: Qualcom because this dock down the most since November of
Speaker 3: twenty twenty two, but we did see this stock trading
Speaker 3: off about five and a half percent.
Speaker 4: There was some.
Speaker 3: Disappointment over the results. I'm curious they came out with
Speaker 3: a forecast that really indicated the smartphone slump that we
Speaker 3: have been seeing is going to drag on. What was
Speaker 3: your take on Qualcom specifically.
Speaker 7: Well, Hi, Carol High Medicine. Yeah, it was obviously this
Speaker 7: isn't a good way to kick off to get ready
Speaker 7: for the Apple report, right because we know that Qualcomm,
Speaker 7: we've talked about them in the past, they about twenty
Speaker 7: five percent of their sales go into chipsets that they
Speaker 7: make that go into the modems for the iPhones. And
Speaker 7: what really was kind of disturbing was the QCT, which
Speaker 7: is their chipset division, which makes the CDMA based chips
Speaker 7: that they sell. Their guidance going into the upcoming third
Speaker 7: quarter was pretty shy of what the street was looking for.
Speaker 7: So the guidance was six point nine to seven point
Speaker 7: five billion, the street was at seven point eight. So
Speaker 7: that gives us a kind of preliminary indication that sales
Speaker 7: have been weaker than anticipated in terms of drawdowns of inventories,
Speaker 7: especially in that chipset segment which does sell directly into Apple.
Speaker 7: So we don't know, Carol and Madison, if this is
Speaker 7: kind of a ripple effect of what we're going to
Speaker 7: get here in a minute, which is going to be
Speaker 7: the second quarter Apple results rolling into this Qualcom report
Speaker 7: that we're getting, you know, a little bit ahead of
Speaker 7: the results hitting the tape on Apple.
Speaker 6: Can I talk to you about Apple then? Since you
Speaker 6: bring it up, Daniel, I mean, I wonder to what
Speaker 6: extent you've heard of investor concern that you know, all
Speaker 6: these buybacks can be used to hedge against slowing iPhone
Speaker 6: production because you know what's the longevity of that of
Speaker 6: that move?
Speaker 7: Well, Madison, you're giving up all Apple secrets here. So
Speaker 7: whenever the stock linguishes, this is historically speaking, and when
Speaker 7: iPhone revenues are flat and the other hardware categories are struggling,
Speaker 7: Apple has the ability, as you know, they have about
Speaker 7: one hundred and sixty five billion in cash to go
Speaker 7: out and increase their dividend. Matter of fact, they're supposed
Speaker 7: to increase it on this upcoming second quarter to about
Speaker 7: ninety eight cents a share and increase their share repurchase program.
Speaker 7: They're expected to grow that from four hundred and five
Speaker 7: billion to four hundred and ninety five billion. So, as
Speaker 7: your listeners know, if you're able to increase your dividend
Speaker 7: and lower the number of shares in your denominator of
Speaker 7: your EPs calculation, you're able to grow earnings on basically
Speaker 7: flat growth. And they've done that in the past. They've
Speaker 7: done a lot of financial engineering. They've split their stock
Speaker 7: like they did back in twenty fourteen. Everybody went crazy
Speaker 7: for it. So you're right, Madison, if these earnings act good,
Speaker 7: they'll just come out and announce all this great things
Speaker 7: they're going to do with all that cash they have
Speaker 7: sitting in the balance sheet.
Speaker 8: All right.
Speaker 3: So, having said that, if you look at what the
Speaker 3: stock has done ahead of earnings, DAN, it's up more
Speaker 3: than twenty seven percent year to date. Is that perform
Speaker 3: the Nasdaq one hundred?
Speaker 5: You know?
Speaker 4: But if you do look.
Speaker 3: At what we got from Microsoft and Meta, the bar
Speaker 3: is pretty high for APP. And I do think about
Speaker 3: any kind of disappointment, you know, causing a major reset
Speaker 3: in terms of what investors are really willing to pay
Speaker 3: up for this name right now?
Speaker 7: Yeah, I think what's happening, Carol is that we expect
Speaker 7: this second quarter to be basically flatted down. We expect
Speaker 7: guidance and their upcoming third quarter twenty three to be
Speaker 7: slightly down. But everyone's looking ahead, right We're looking six months,
Speaker 7: nine months ahead, and the glass seems kind of half
Speaker 7: full at this time. And you know, everyone's looking for,
Speaker 7: you know, these catalysts going forward, and that is you
Speaker 7: always want to buy Apple stock six to nine months
Speaker 7: ahead of a product launch. We know that the iPhone
Speaker 7: fifteen is scheduled for September. They're also going to be
Speaker 7: coming out, as you talked about before, a new virtual
Speaker 7: reality headset that's going to compete directly against Meta. There's
Speaker 7: also enthusiasm about the installation base continuing to grow. They
Speaker 7: have two billion users one point five billion users on
Speaker 7: the iPhone. Of course they can harvest that through their
Speaker 7: service revenue, right, that's how they monetize all these users.
Speaker 7: So that's how the glass looks half full right now.
Speaker 7: I think Right now, guys, everyone's looking ahead. Everyone's thinking, Okay,
Speaker 7: we know this server is not good, but wait, it's
Speaker 7: going to be good in September.
Speaker 3: Well it looks like just about a minute, yeah, right,
Speaker 3: exactly what are you going to do for me in
Speaker 3: the future. So about a minute before we get to
Speaker 3: Apple earnings, we're just watching the bloomberg for when they cross.
Speaker 3: But Dan, one thing I did want to ask you AMD.
Speaker 3: We saw that stock up more than six percent in
Speaker 3: today's session, twelve percent higher at its best levels of
Speaker 3: the day, but Microsoft helping finance AMD's expansion into AI
Speaker 3: processors as we wait those Apples results. Significance of that
Speaker 3: news because it certainly seemed to give a little bit
Speaker 3: of a pop two shares of AMD today.
Speaker 7: What's interesting, Carol Madison, as AMD is always behind Intel,
Speaker 7: and it seemed now that they have just been ahead
Speaker 7: of the game in terms of bringing chipsets to the
Speaker 7: market to get ahead of Intel on some offerings that
Speaker 7: they've been delayed on, and this is just another feather
Speaker 7: in their cap in terms of what they've been able
Speaker 7: to do, and not only in data center and servers,
Speaker 7: but also in the CPO space for PCs. So things
Speaker 7: really going well for them. Obviously there's a downturn in
Speaker 7: the PC unit volume sector right now in terms of
Speaker 7: buying PCs after the COVID splurge, but I think AMD
Speaker 7: is much better position now than they ever been. I'n't
Speaker 7: following the company for almost thirty years.
Speaker 3: But the idea that Microsoft is lending a hand and
Speaker 3: that connection and we know Microsoft sent you know, the
Speaker 3: world on fire, you know, with its its deal into
Speaker 3: Chatchipt specifically, so that combination and partnership big deal.
Speaker 7: Well, you know it's a big deal, Carol Madison, is
Speaker 7: that in the past, Microsoft would write directly to the
Speaker 7: l microprocess.
Speaker 3: You've got the numbers, yep, let's get to it, Apple crossing.
Speaker 3: Let's get to second quarter EPs a dollar fifty two, folks,
Speaker 3: that's nine cents better than what the street was expecting.
Speaker 3: I'm looking for the second quarter revenue in total ninety
Speaker 3: four point eighty four billion. That too, is a beat.
Speaker 3: The estimate was for ninety two point six billion dollars.
Speaker 3: So again that's our red sticky. So that's a highlight.
Speaker 3: That stopp is up about three percent in the after hours. Madison,
Speaker 3: you asked about buybacks. Apple to buy back up to
Speaker 3: an additional ninety billion dollars in shares and raising its
Speaker 3: quarterly dividend four point three percent to twenty four cents
Speaker 3: a share. So that is a big kick to the upside.
Speaker 3: Again in the stock up about two percent in the
Speaker 3: after market. Let's go through some of the segments. Second
Speaker 3: quarter service revenue twenty point ninety one billion, that's a
Speaker 3: slight miss.
Speaker 4: Twenty one point.
Speaker 3: Eleven billion, that was the estimate among analysts. iPhone revenue
Speaker 3: fifty one point thirty three billion, that's a beat the
Speaker 3: estimate on the street forty eight point ninety seven billion.
Speaker 3: Greater China revenue seventeen point eighty one billion. That two
Speaker 3: is a slight beat of seventeen point sixteen billion. Second
Speaker 3: quarter MAC revenue seven point seventeen billion, a slight miss.
Speaker 3: The estimate was seven point seventy four billion. iPad revenue
Speaker 3: that was pretty much in line. Six point sixty seven billion,
Speaker 3: the estimate was six point sixty nine billion. Then you
Speaker 3: had wearables, home and accessories eight point seventy six billion.
Speaker 3: The estimate was for eight point fifty one Again, the
Speaker 3: stock is up about one and a half percent in
Speaker 3: the aftermarket. Dan initial thoughts.
Speaker 7: Well, obviously, the big numbers that stand out to me
Speaker 7: Carol and Madison is this huge beat in iPhone revenue,
Speaker 7: because coming in this quarter, I had forty eight point
Speaker 7: ninety seven that came into fifty one point three and
Speaker 7: that forty eight point nine seven would have represented a
Speaker 7: negative growth rate of about three point two percent. This
Speaker 7: is going to put them, I think, probably flatter, even
Speaker 7: slightly up on iPhone revenue. I was looking for about
Speaker 7: fifty five million units, so that's a huge number for them.
Speaker 7: A little bit of a miss you mentioned, Carol on
Speaker 7: the service revenue, that's a little bit of a surprise.
Speaker 7: That's probably about a six percent growth rate. And then
Speaker 7: it's kind of a little bit of a mosh pit here,
Speaker 7: you know, Max missed, but kind of in line with iPads,
Speaker 7: you know, it's kind of a wash out. But I
Speaker 7: think the street's going to zero in, not only on
Speaker 7: that top line number terms of revenues. That was a
Speaker 7: huge beat, was it ninety four point eight versus ninety
Speaker 7: two point six? And a good beat on EPs, but
Speaker 7: that iPhone revenue is a bit of surprise. Guys, after
Speaker 7: we got that Qualcom number, right, we were kind of
Speaker 7: worried about that, but it looks like they were able
Speaker 7: to piece things together and put together a really strong quarter.
Speaker 6: Well, they also expected they had a three percent decline
Speaker 6: in revenue, which I'm sorry. The revenue number came in
Speaker 6: down three percent year over a year, which was better
Speaker 6: than analyst expectations, but that's still revenue down, Daniels, So
Speaker 6: I wonder if you can talk a little bit about
Speaker 6: the impact of that and whether or not you see
Speaker 6: that as a win or a miss for.
Speaker 7: Apple, Well, Madison, as we said before this quarter and
Speaker 7: next quarter, we're expecting slightly negative growth, so it's not
Speaker 7: too big of surprise. Even though they beat estimates, it
Speaker 7: was a negative number. Again, if you were to look
Speaker 7: at some of these other Fang stocks that reported earlier
Speaker 7: last week, it was a very similar type of environment,
Speaker 7: right It was kind of slightly up or slightly down.
Speaker 7: No one huge number beats, you know. I think Amazon
Speaker 7: got it five to ten percent top line growth in
Speaker 7: the next quarter, but we're all in single digit territory
Speaker 7: right now. Unfortunately, with the Fang stocks either plus or
Speaker 7: minus at this point.
Speaker 3: Well, and again we continue to see Apple shares in
Speaker 3: the aftermarket falling their latest update up just about two percent. Here,
Speaker 3: I'm looking at the press release Dan and Tim Cook,
Speaker 3: Apple CEO, of course, saying we are pleased to report
Speaker 3: an all time record and services and a March quarter
Speaker 3: record for iPhone despite the challenging macro economic environment and
Speaker 3: to have our installed base of active devices reach an
Speaker 3: all time high. We continue to invest for the long
Speaker 3: term lead with our values, including making major progress toward
Speaker 3: building carbon neutral products and supply chains by twenty thirty.
Speaker 3: And then they did say that, you know, given our
Speaker 3: confidence in Apple's future and the value we see in
Speaker 3: our stock, our board is author raised an additional ninety
Speaker 3: billion for share repurchases and then of course raising their
Speaker 3: quarterly dividend for the eleventh year in a row. Commentary
Speaker 3: seems pretty pretty safe, if you will. The macroeconomic challenges
Speaker 3: just gives us some idea and clarity.
Speaker 4: What is it that you want to know on the
Speaker 4: call today?
Speaker 7: Well, what is the best way to jump your stock
Speaker 7: price up? In Fangland talk about AI? So I would
Speaker 7: expect them to talk a little bit about their initiative
Speaker 7: and AI. So far, they've been a little bit quiet
Speaker 7: compared to Microsoft and some of the other Fang stocks.
Speaker 7: We know that their initiative is going to be using
Speaker 7: the phone as the apparatus to get you use artificial intelligence,
Speaker 7: opposed to let's say, a chat robot, so to speak.
Speaker 7: Er like we're seeing with some of the other players.
Speaker 7: So I think we're going to get a little more
Speaker 7: hopeful color on that because they've been.
Speaker 3: The one company that really hasn't said a lot.
Speaker 7: Right, they haven't said a lot, Yeah, Carol, they've been
Speaker 7: very quiet. I don't know if you saw the statistics
Speaker 7: of how often AI was mentioned on the conference calls
Speaker 7: with the Fang stocks last week, a lot like forty five,
Speaker 7: you know, plus times, and of course the stocks are reacting,
Speaker 7: so it's kind of like.
Speaker 3: One of those earnings per share AI per year over
Speaker 3: year AI per the other.
Speaker 7: Word exactly, and AN analysts are going to talk about it,
Speaker 7: They're going to ask about it, and you know, hopefully
Speaker 7: get a little more indication to guys in regards to
Speaker 7: some of these new products. And we mentioned iPhone fifteen
Speaker 7: in September, we're looking for virtuality headsets, so those are
Speaker 7: exciting things too, because new products always mean new growth,
Speaker 7: and the street's going to be really kind of zero
Speaker 7: on that. So I think new products and AI are
Speaker 7: the keys to this upcoming conference call on the AI.
Speaker 6: Thing, that thing being very very big, fair we're figuring
Speaker 6: it out the AI space. What would you specifically be
Speaker 6: listening to on the call to indicate that Apple is
Speaker 6: going to be a strong competitor to a Microsoft that's
Speaker 6: for the moment sort of been the front runner on
Speaker 6: the AI discussion.
Speaker 7: Well, Apple has done a lot of things in terms
Speaker 7: of buying kind of like startups, kind of companies that
Speaker 7: are not big names like chat GBT. You know, everybody
Speaker 7: knew about them before Microsoft infused that capital. So trying
Speaker 7: to get some more information from them in regards to
Speaker 7: what is their strategy. Is it to acquire smaller companies
Speaker 7: and kind of fold them under their umbrella or are
Speaker 7: they going to be doing things internally? And the other thing, guys,
Speaker 7: is is it more than just going to be some
Speaker 7: sort of artificial intelligence that's on one of their wearable
Speaker 7: watches that tells us what to do when we work
Speaker 7: out and what our heartbeat is and all that kind
Speaker 7: of stuff. You know what I mean. We're looking for
Speaker 7: transformational type of things, things that are like the Microsoft
Speaker 7: Chat EBT where everyone's very excited about it. So I
Speaker 7: think that's where we got to zero in. Because you're great,
Speaker 7: You're right, guy, Carol Madison that it's been a very
Speaker 7: unexciting announcements coming out of Apple so far in AI
Speaker 7: and they're a little lagging a little bit, I think right.
Speaker 4: Absolutely.
Speaker 3: All right, Hey Dan, thank you so much. Dan Morgan,
Speaker 3: Senior portfolio manager at Sonova's Trust Company.
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Speaker 3: Well, the Daily Wire is quote deliberately steering into the
Speaker 3: culture war, so it says the co CEO of The
Speaker 3: Daily Wire, the right wing media company that is the
Speaker 3: sixth largest podcast publisher in the US.
Speaker 5: Who knew.
Speaker 3: That's more than Walt Disney and more than the Fox
Speaker 3: Audio Network and more than twice as many as CNM.
Speaker 3: And now it's looking to spread its content wings this story.
Speaker 3: The upcoming new issue Bloomberg Business Week on newstands tomorrow,
Speaker 3: already online at Bloomberg dot com, slash BusinessWeek and on
Speaker 3: the Bloomberg Let's get to it back with us in
Speaker 3: our studio. Devin Leonard, He's Bloomberg BusinessWeek Senior Global Business writer,
Speaker 3: and I was kidding with you that when there's a
Speaker 3: wacky or weird story with some interesting players, I can
Speaker 3: just see like Joel on the team saying, all right,
Speaker 3: let's get Devin on this. You said, you said, I
Speaker 3: always look forward to your story. So I am curious.
Speaker 3: What was the pitch to Joel or did it come
Speaker 3: to you? Tell me what put this story on your radar.
Speaker 9: I want to do something about, you know, sort of
Speaker 9: the battle against the corporations. And actually Daniel Sachs, the
Speaker 9: features editor and the editor on the story and the
Speaker 9: editor on on the Ben and Jerry story, I did,
Speaker 9: but she she said, have you seen this commercial? And
Speaker 9: I was like, no, I haven't seen this commercial. And
Speaker 9: we watched the commercial and then it kind of went
Speaker 9: from there.
Speaker 4: Tell us about the commercial.
Speaker 9: The commercials. It's just really amazing. You know, it's for
Speaker 9: a product called Harry's razors.
Speaker 4: Which is a real product.
Speaker 9: Sorry, excuse me. It's for a product called Jeremy's Jeremy's razors.
Speaker 9: But yeah, and and and and uh so sort of
Speaker 9: you know, you watch the commercial online on.
Speaker 3: You know, you know, we're showing some video for those
Speaker 3: who are watching burg originals on YouTube.
Speaker 9: No, no, this this guy sort of drives drives up
Speaker 9: and you know, you know Mclair and you know, gets
Speaker 9: out in this in this Gucci jacket, and all of
Speaker 9: a sudden he starts talking about, uh, you know, the
Speaker 9: sort of you know, transgender you know stuff and remember
Speaker 9: when met when boys were boys and girls were girls.
Speaker 9: And then he goes to side, he winds up. He says,
Speaker 9: you know, Harry's canceled their advertising, you know, with the
Speaker 9: Daily Wire and and uh because of a comment that
Speaker 9: one of the Daily Wires hosts said about about you know,
Speaker 9: transgender people kind a slur and uh so but he's,
Speaker 9: you know, he's like, I'm going to start my own
Speaker 9: razor company basically, and he's fires a flamethrower a bunch
Speaker 9: of Harry's razors and Gillette razors because he doesn't like
Speaker 9: that anyway. It's just like yeah, you know, but but
Speaker 9: it's like, is this real or what? And literally, you know,
Speaker 9: Danielle told me to watch the video and I said, well,
Speaker 9: you know that's this. This sounds a good story. But
Speaker 9: you know, I had called the company. It's like, you know,
Speaker 9: is this a gag? And they're like no, but but
Speaker 9: but but I really I really didn't know, until I
Speaker 9: called them up.
Speaker 4: That is so fascinating.
Speaker 6: Can you just explain to me what their definition of
Speaker 6: a woke company might be and maybe some examples of
Speaker 6: things companies have done that make them woke.
Speaker 9: Well, I mean, you know, you know, you know, madison
Speaker 9: is I mean, obviously that's the term that kind of
Speaker 9: came out of the left, but it's been co opted
Speaker 9: but you know, you know, by the right. So it's
Speaker 9: tricky to it's tricky to use the term, but basically,
Speaker 9: you know, it's what you know, their argument is is
Speaker 9: sort of the major institutions in the United States have
Speaker 9: been co opted, you know, by the left, and so
Speaker 9: there are a lot you know, as part of this
Speaker 9: whole sort of crusade to you know, get your kids
Speaker 9: to you know, to turn transgender, to you know, like
Speaker 9: you know, like criminals out of out of uh jails,
Speaker 9: and you know, and also all I've said it and
Speaker 9: said it in there, you know, to encourage policies to
Speaker 9: discriminate against white people. I mean, they talk a lot
Speaker 9: about things that are anti white. But so going to
Speaker 9: the corporations though, I guess I guess a lot you know,
Speaker 9: it's it's it's either featuring trans people in in advertisements.
Speaker 9: So the bud Light advertisement with uh, Dylan Mulvaney's an
Speaker 9: obvious one. And then you know Hershey's uh, you know,
Speaker 9: had to head a Canadian uh you know, you know
Speaker 9: trans woman and and uh, you know, and also Harry's
Speaker 9: canceling ads over over the you know, the I guess
Speaker 9: there's sort of some of the anti transit things that
Speaker 9: have been sudden the Daily Wire, but you can going
Speaker 9: on obviously there's Di's Disney, right.
Speaker 4: Well, so tell us about this company.
Speaker 3: Who is the Daily Wire and the individual behind it
Speaker 3: or who's running it and what he's looking to do.
Speaker 9: Well, there's really three people. There's a guy named Caleb
Speaker 9: Robinson who's kind of a finance guy and who was
Speaker 9: I guess he was working for Ferris Wilkes, who's a
Speaker 9: big fracking billionaire and who put up the sort of
Speaker 9: the original sort of Steve Capital for the company. But
Speaker 9: then there's also Ben Shapiro, who you know we haven't mentioned,
Speaker 9: but who is the most popular conservative you know podcaster
Speaker 9: in the Country's you know, thirty nine year old kind
Speaker 9: of wonder kid control depending on what.
Speaker 1: Your thoughts are.
Speaker 9: But there's also a guy named who's the coach you
Speaker 9: named Jeremy Boring and he is sort of the entertainment
Speaker 9: guy and he's he's he's a guy I grew up
Speaker 9: in West Texas, kind of went out to Hollywood and
Speaker 9: kind of flopped got into conservative politics.
Speaker 2: Uh.
Speaker 9: Founded the Daily Wire with these three guys. It was
Speaker 9: sort of a you know, right of Fox, a news site,
Speaker 9: and you know, it's become a podcasting behemoth. They've also
Speaker 9: they've also you know, turned it into a big subscription business,
Speaker 9: scriptian driven business, I should say, the protically double subscriptions
Speaker 9: last year. And now that you know, they want to
Speaker 9: get into and they want to get into movies and
Speaker 9: TV shows and sort of become kind of a you know,
Speaker 9: quote unquote anti woke Disney, well an anti Trump. Well
Speaker 9: it's funny, Well, no, no, no, it's it's funny funny
Speaker 9: that you say that, Carol, because that was one of
Speaker 9: uh Ben Shapiro. I mean, he's sort of he's the
Speaker 9: face of the company. He drove a lot of the
Speaker 9: growth growth for a long time. Uh you know, he
Speaker 9: was already somebody, you know when they founded the company
Speaker 9: in two thousand and five, but he was against Trump
Speaker 9: early on Boring was too, but obviously he wasn't sort
Speaker 9: of the the face of the company. But so so
Speaker 9: so they you know, they get attacked by a lot
Speaker 9: of Trump people and you know, to hear Boring tell it,
Speaker 9: you know that you know that was going on right
Speaker 9: Averen the time they launched the company in twenty fifteen,
Speaker 9: he thought they was going to sink the company, but
Speaker 9: ultimately he thinks that helped the company. So they have
Speaker 9: this sort of reputation, as you know, it's kind of
Speaker 9: more of a straight shoot, not quite as MAGA, but
Speaker 9: they have, you know, a bunch of Trump people on staff,
Speaker 9: So to say they're anti Trump, you know, isn't really
Speaker 9: accurate either, Okay, sorry, no no no, no, no, I back
Speaker 9: no no, no, no no. Nobody says it's sort of
Speaker 9: they're playing kind of kind of a kind of a
Speaker 9: funny like we're independent except for like those guys anyway,
Speaker 9: But it.
Speaker 3: Is I am curious that those in the media industry,
Speaker 3: and it's not like they couldn't miss a fat or
Speaker 3: a trend or seeing a disruptor come in and do
Speaker 3: it differently. What do they say though about their plans
Speaker 3: to have a wider scope in terms of content.
Speaker 9: Well, I mean it it sort of goes back to
Speaker 9: to you know, the whole culture war thing. You know,
Speaker 9: when I was saying, or should say, you know their
Speaker 9: approach that you know, there's of like you know, they
Speaker 9: have a for profit you know model, you know, to
Speaker 9: fight the culture war. And their argument is like, look,
Speaker 9: half the you know, you know, half the country is
Speaker 9: basically you know, you know conservative, I mean's just based
Speaker 9: on sort of the election results. So so big corporations
Speaker 9: have basically taken the position that you know, this is
Speaker 9: again this is this is really where you know their works.
Speaker 9: But they've embraced you know, radical radical race in sort
Speaker 9: of queer theory, and they and knowing that it's going
Speaker 9: to offend half the half to have the country. But
Speaker 9: but you're still going to have to you know, you're
Speaker 9: still have to subscribe to Disney. Plus you're still gonna
Speaker 9: have to buy you know what you're buying from Parcter
Speaker 9: and Gambles. So it's like tough, we're gonna take your
Speaker 9: money anyway. And their argument is like no, right, right, right,
Speaker 9: But we know, you know, we know we're gonna we're
Speaker 9: gonna provide an entertainment and alternative. We're gonna provide, you know,
Speaker 9: an alternative and razors also also chocolates, well be you know.
Speaker 9: But but there's you know, there's half the companies out there.
Speaker 9: It's a big market.
Speaker 4: All right, We got to.
Speaker 3: Read it, folks, go online, get the magazine. Devin Leonard
Speaker 3: of Bloomberg BusinessWeek, thank you.
Speaker 2: This is makes console. I'm spadling. All right.
Speaker 3: We're going to talk a little bit about space exploration
Speaker 3: and when you think about it, Yeah, you think about
Speaker 3: the billionaires, you know, Musk, Bezos and Branson, But what
Speaker 3: about the former dishwasher engineer who is also successful sending
Speaker 3: rockets into space and giving Musk perhaps a run for
Speaker 3: his space money. This story is the cover of the
Speaker 3: new issue of Bloomberg Business Week, on newsstands tomorrow, already
Speaker 3: online at Bloomberg dot com, slash BusinessWeek, and it's on
Speaker 3: the Bloomberg Terminal. The story and excerpt from Ashley Vance's
Speaker 3: new book entitled When the Heavens Went on Sale The
Speaker 3: Misfits and Geniuses Racing to put Space within Reach.
Speaker 4: Excuse me, great.
Speaker 3: Title, Ashally, As you know, Bloomberg BusinessWeek features writer. He's
Speaker 3: also author of another book on Yeah one of those Spacebookllionaires,
Speaker 3: Elon Musk, Tesla, SpaceX and the Quest for a Fantastic Future.
Speaker 3: Ashley Jetning us on Zoom from Palo Alto, California along
Speaker 3: with the editor of Bloomberg Business with Joel Weber here
Speaker 3: in our Interactive Broker's Studio. Joel incredible story and we
Speaker 3: do focus on the billionaires, but there's so much more here,
Speaker 3: including what is in Ashley's book.
Speaker 10: Yeah, I'm really excited about this book because you know,
Speaker 10: BusinessWeek did a space issue of a number of years ago,
Speaker 10: and wow, it was ahead of its time, but not
Speaker 10: as quite as thorough as Ashley's book, which takes this
Speaker 10: idea of like, look, there's going to be a space
Speaker 10: economy and it's going to look completely different than anything
Speaker 10: that's come before it. It's going to involve a lot
Speaker 10: more satellites in space and this low Earth orbit thing.
Speaker 10: Just get ready to hear so much more about it
Speaker 10: and the entrepreneurs that this brings out. Obviously there's the
Speaker 10: Elon Musk and the SpaceX thing, and they really helped
Speaker 10: pioneer what this looks like. But they are not alone.
Speaker 10: And that brings us to the excerpt because there's this
Speaker 10: really unlikely SpaceX rival that Ashley found. And by unlikely,
Speaker 10: I mean you couldn't imagine a more unlikely candidate, right Ashley.
Speaker 8: Yeah, Well, you know it is a one of a
Speaker 8: kind story. You know, You've got this guy named Peter Beck,
Speaker 8: who's from New Zealand.
Speaker 1: I think a.
Speaker 8: Lot of times in space we think of, you know,
Speaker 8: either the billionaires or you're like a NASA veteran or
Speaker 8: some MIT PhD. But but Peter, you know, he essentially
Speaker 8: left school at sixteen, got his equivalent of the ged
Speaker 8: and and was working at a at a dishwasher maker,
Speaker 8: you know, as an apprentice, and then he worked at
Speaker 8: a government lab for a while. But he really just
Speaker 8: did He's like this possessed engineer who was doing all
Speaker 8: this rocketry stuff in his spare time and is in
Speaker 8: the shed outside of his house, and he made it work.
Speaker 8: I mean, like, for one hundred years, individuals had kind
Speaker 8: of tried to make a small rocket that could get
Speaker 8: to space, and Peter's the first one that actually managed
Speaker 8: to pull this off. And today Rocket Lab is like
Speaker 8: the second coming of space X. They're really the only
Speaker 8: two commercial rocket companies that are making a real go
Speaker 8: of it.
Speaker 10: So tell us more about this guy. Because New Zealand
Speaker 10: not exactly known for space exploration or rockets, and yet
Speaker 10: here we have a guy and planet Lab publicly traded company.
Speaker 10: How did this all come about? How do you get
Speaker 10: into rockets when there is no rocket industry around you?
Speaker 1: Yeah?
Speaker 8: I think just through force of will you know, I
Speaker 8: mean Peter is he must be like, I don't know
Speaker 8: what number you want to put on it, like a
Speaker 8: one and a billion kind of engineer. And and you know,
Speaker 8: he did a lot of this early work building sort
Speaker 8: of a small rocket and then a little bit bigger
Speaker 8: one and then and then finally getting to something that
Speaker 8: could could play in this commercial field. And he was
Speaker 8: able to Marshall. You know, there are these regulations around
Speaker 8: the space industry that that forbid American engineers from helping
Speaker 8: a New Zealand company like rocket Lab, and so Peter
Speaker 8: he didn't have anyone that had like built a rocket
Speaker 8: before on his team. Nobody was like real experience doing this,
Speaker 8: and he cobbled together this group of of twenty year
Speaker 8: old New Zealanders and Australians and they managed to pull
Speaker 8: this off. I mean, he's he's sort of like what
Speaker 8: I think of as the platonic ideal of engineer. It's
Speaker 8: just like runs in his blood. He, like Elon wants
Speaker 8: to go to Mars. Peter like just wants to make
Speaker 8: things that go fast and rockets and is just is
Speaker 8: just possessed to have to do that.
Speaker 6: Well, it's so so cool that someone with that perfect
Speaker 6: description of engineer's personality in mind ended up with the
Speaker 6: money needed to sort of take that vision and personality
Speaker 6: and turn it into what he was able to turn
Speaker 6: it into. Can you talk a little bit about how
Speaker 6: he got that money and the operation he built that
Speaker 6: you describe as something that might have looked absurd because
Speaker 6: it was three people in an office the size of
Speaker 6: my New York City apartment.
Speaker 8: Yeah, I mean, you know, this is like the story
Speaker 8: of commercial space right now. You know, for sixty seventy years,
Speaker 8: this was government backed stuff. It was the thing that
Speaker 8: nations did, and only a handful of nations had ever
Speaker 8: really been major players in space. And then we had
Speaker 8: this kind of like billionaire era, obviously led by Elon,
Speaker 8: who is the most successful, and now you know, we're
Speaker 8: in the venture capital era of space. Over the last
Speaker 8: two or three years, about two hundred and fifty billion
Speaker 8: dollars have been put into commercial space companies, and rocket
Speaker 8: Lab was near the front of that line of Peter.
Speaker 8: He was with these three guys in this research lab
Speaker 8: and they built this tiny rocket and sent it off
Speaker 8: and it was it was enough of a proof of
Speaker 8: concept that he seemed real that he could come to
Speaker 8: Silicon Valley. Coastal Adventures was one of the first companies
Speaker 8: to put to put money into it. But you know,
Speaker 8: there's a pretty funny story in my book. I mean,
Speaker 8: Peter comes to the valley, is this total outsider, you know,
Speaker 8: and he's like putting his engines and his rockets on
Speaker 8: the table and just like assuring these guys that he
Speaker 8: can do this. And he kind of like did it
Speaker 8: at the right time and has they're a public company now.
Speaker 8: I mean, you know, he's really gotten quite far with
Speaker 8: all this and paved the way for dozens to hundreds
Speaker 8: of other companies.
Speaker 10: I want to talk about just how crazy that is
Speaker 10: because that burst rocket he built. When you read about
Speaker 10: this in the book, and we excerpted this part, he
Speaker 10: ends up holding a bar of solid rocket fuel in
Speaker 10: this I can't imagine a more dangerous idea. But yet
Speaker 10: in order to do this, he had to figure out
Speaker 10: the propellants. So walk us through how that challenge, how
Speaker 10: he cracked that challenge.
Speaker 8: Yeah, I mean there's a guy who, like I'm not kidding,
Speaker 8: you know, he used to just he would make propellants
Speaker 8: on his own, you know, at his house. He used
Speaker 8: to dress himself up in like garbage bags just to
Speaker 8: keep this toxic stuff up.
Speaker 10: As a parent, when your kids like, I'm gonna go
Speaker 10: over to Peter Beck's house, You're like, no, you're.
Speaker 2: Not exactly right there.
Speaker 8: Like, you know, he as a kid, he had this
Speaker 8: like total freedom growing up. Like he would just go
Speaker 8: in the shed and his parents wouldn't see him for hours.
Speaker 8: And then yeah, he would put these plastic bags on.
Speaker 8: He was telling me, you know, you had this this apartment.
Speaker 8: At one point He's like, yeah, I don't. I did
Speaker 8: so many experiments. I don't think the grass is ever
Speaker 8: going to grow in that spot again. And and there's
Speaker 8: this amazing video that people can find on YouTube. The
Speaker 8: first rocket was called the at One. It's at EA
Speaker 8: and and you know it's Peter two other guys, you know,
Speaker 8: and Peter's got this white lab coat on to sort
Speaker 8: of add some kind of like semblance, so that he
Speaker 8: knows what he's doing. And they're just literally in a
Speaker 8: shed on an island in New Zealand and he hits
Speaker 8: this button and the rocket takes off and it works,
Speaker 8: and he's just out there shouting. I mean, there's something
Speaker 8: like kind of just very wholesome and authentic, and and
Speaker 8: you know, we write about it in the story. I mean,
Speaker 8: he's a bit of like the opposite the anti Elon.
Speaker 8: This is not like a this is not a guy
Speaker 8: on Twitter stirring things up, but you know, he's just
Speaker 8: very focused on what he wants to do.
Speaker 10: Okay, so we can definitely talk about the anti Elon,
Speaker 10: But in order to talk about the anti Elon, we
Speaker 10: also have to talk about the Elon because you know,
Speaker 10: SpaceX obviously has pioneered this. What does Elon have to
Speaker 10: say about Peter Beck and Planet Labs and the two
Speaker 10: of them have met, actually, right.
Speaker 5: They have.
Speaker 8: I mean I actually like arranged this dinner matchmaker. Elon's like,
Speaker 8: Peter wanted to have dinner. I was like, well, you
Speaker 8: better buy me a steak and bring me some flowers.
Speaker 8: But you know, I mean space X, Look, they are
Speaker 8: the giant in this this field, they're sort of lapping everybody,
Speaker 8: but the you know, rocket Lab is incredibly real and
Speaker 8: the only you know, other player. But I think for
Speaker 8: Elon at least he Elon claims, you know, rocket Lab
Speaker 8: was not on his radar. We were talking on the
Speaker 8: phone when I was in New Zealand and he's like, oh,
Speaker 8: what are.
Speaker 1: They up to?
Speaker 8: And then I did set up this this dinner with Peter,
Speaker 8: and I think maybe Elon's tune changed where Peter said,
Speaker 8: you know, it's kind of like, be careful of poking
Speaker 8: the bear. Because because shortly after they had this dinner,
Speaker 8: SpaceX started this program where they do these these ride
Speaker 8: shares for small satellites, and small satellites are like what
Speaker 8: rocket Lab specializes in, and space X drop the price
Speaker 8: drastically for what they charged to take these small satellites
Speaker 8: up to orbit, and it looked, you know, very much
Speaker 8: like a direct shot at rocket Lab. So I don't
Speaker 8: know if Peter regrets that invitation.
Speaker 3: It sounds like, yes, maybe, but it's interesting. I mean, actually,
Speaker 3: when you look at the entire space race again, if
Speaker 3: you will, it's a very different one than it was
Speaker 3: from the sixties, right under President Kennedy, and it was
Speaker 3: very government led, right, and all the money that was
Speaker 3: plowing into it. I had a dad who was involved
Speaker 3: in it, you know, from the government perspective and.
Speaker 4: Public private partnerships.
Speaker 3: When you look at it today, is it going to
Speaker 3: require Yes, the Elon Musks and SpaceX's of the world,
Speaker 3: but also the Peter Becks and the rocket labs of
Speaker 3: this world as well.
Speaker 8: Oh yeah, yeah, I mean things are so different. I
Speaker 8: mean it's kind of you know, sort of amazing. Like
Speaker 8: the from the Apollo era until about I don't know,
Speaker 8: ten or fifteen years ago, things really hadn't changed that much.
Speaker 8: The rockets, look to say, the satellite were on very
Speaker 8: antiquated technology, and we've had this huge shift. You know,
Speaker 8: SpaceX sort of kicked things off, but now we have
Speaker 8: we've got much cheaper rockets the satellites. Like for the
Speaker 8: first time, I write in the book, you know, we've
Speaker 8: brought Moore's law to space. It used to be these
Speaker 8: these very specialized computing systems that we're old we're using
Speaker 8: like consumer electronics. Now it's all very modernized. And you know,
Speaker 8: the biggest data point I can give people is that
Speaker 8: from the sixties until twenty twenty we had put up
Speaker 8: two thousand, five hundred satellites in lower tharbit from twenty
Speaker 8: twenty to twenty twenty two. Just the last two years
Speaker 8: that number doubled. It's going to double again this year
Speaker 8: and the next year. We're going to get to one
Speaker 8: hundred thousand satellites possibly like in the next decade. And
Speaker 8: so you know, it is not governments that are putting
Speaker 8: all those things up. These are companies that are building
Speaker 8: a sort of computing shell around the planet. And I
Speaker 8: think this is like our next is our next big
Speaker 8: technology infrastructure play, you know, like the next stage after
Speaker 8: sort of the dot com boom.
Speaker 6: So by the end of your book, do we know
Speaker 6: who is gonna win?
Speaker 3: No, this is still still I think it's gonna be
Speaker 3: AI generated, Ashley. It's something that we just don't even
Speaker 3: know yet.
Speaker 8: We already have, We've already got AI in space, you
Speaker 8: know for worse. But but you know, there's a couple
Speaker 8: of companies that are kind of clear winners, like Planet
Speaker 8: Labs is this satellite company. They pioneered sort of the
Speaker 8: low cost satellite and and they're doing great. Rocket Lab
Speaker 8: I'm sure will be around. I think we're going to
Speaker 8: have there was such this like frenetic explosion of activity.
Speaker 8: All this SPAC stuff helped, you know, add some gas
Speaker 8: to the fire. And I think we're going to have
Speaker 8: We just saw Virgin Orbit go bankrupt. I think we're
Speaker 8: gonna see a little retrenching here for a minute. But
Speaker 8: the underlying principle that like the economics of this, that
Speaker 8: this is a business as opposed to a government lad endeavor.
Speaker 8: You know, I think all of that stuff holds.
Speaker 10: Okay, So we got to talk about Rocket Labs here.
Speaker 10: Who else figures into the book that you were excited about?
Speaker 8: Yeah, I mean Planet Labs, the one I mentioned. They're
Speaker 8: the satellite company. They've surrounded the Earth with hundreds of
Speaker 8: imaging satellites. They take pictures of every spot on Earth
Speaker 8: all every day and sort of get this sounds like espionage,
Speaker 8: but it's not really. It's more like this this kind
Speaker 8: of like real time accounting system of human activity. You know,
Speaker 8: where is oil going, how many cars are in a
Speaker 8: Walmart parking lot, how many trees are in the Amazon
Speaker 8: sort of counting these things. There's another company called Astra,
Speaker 8: which is like the the opposite of Rocket Lab. It's
Speaker 8: this sort of like chaotic fast paced company that's trying
Speaker 8: to make the cheapest rockets ever created and are sort
Speaker 8: of going through some things and then maybe you know,
Speaker 8: one of my absolute favorite stories is this sky Max
Speaker 8: points Akhoff, who was the former owner of a company
Speaker 8: called Firefly. He was Ukrainian. He poured two hundred and
Speaker 8: fifty million dollars into this rocket company, and then you'll
Speaker 8: see in my book the US government tosses him out
Speaker 8: of the country right before the war with Russia.
Speaker 3: Unbelievable stories. Fifteen seconds. Elon, though in your view based
Speaker 3: on what you're seeing, because is still very central to
Speaker 3: what's going on.
Speaker 4: Just very quickly, is Elon Did you say yeah, Elon?
Speaker 8: Oh yeah, I mean SpaceX is just the dominant force
Speaker 8: looming over everything in commercial space. They're lapping everybody.
Speaker 4: Just watch if you have dinner with them, because he might.
Speaker 5: Might impact what he's going to do.
Speaker 3: Ashley always great stuff features writer a Bloomberg Business Week.
Speaker 3: Check out his new book, When the Heavens Went on Sale,
Speaker 3: The Misfits and Geniuses Racing to put Space within Reach.
Speaker 3: An excerpt in the new issue of Bloomberg BusinessWeek on newstands,
Speaker 3: online and on the Bloomberg and our thanks to Jill
Speaker 3: Webber as well.
Speaker 4: This is Bloomberg.
Speaker 1: This is Bloomberg Business. Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus.
Speaker 2: Global business, finance and tech news.
Speaker 1: The Bloomberg Business Week Podcast with Carol Messer and Tim
Speaker 1: Stenebek from Bloomberg Radio.
Speaker 3: All right, so, Maddie, we want a little bit more
Speaker 3: about the bank sector because a great story on the
Speaker 3: Bloomberg targets one number in particular. I would safe to
Speaker 3: say that the number is probably growing. Fifty four billion dollars.
Speaker 3: That's how much stock and bond investors have lost following
Speaker 3: the collapse of four regional banks. Some say this is
Speaker 3: how the market is supposed to work. With some size
Speaker 3: and scope though, and perspective of what more could come,
Speaker 3: Let's get to Bloomberg News Consumer finance reporter Paige Smith.
Speaker 3: She joins us from our DC Bureau page. Good to
Speaker 3: have you here with Maddie and myself. So let's start
Speaker 3: with the size and scope about the impact of those
Speaker 3: four regionals, both equity and bond sides of the financial
Speaker 3: markets being hit.
Speaker 4: Give us the perspective.
Speaker 11: Yeah, hi, folks, thanks for having me and gosh, it's
Speaker 11: kind of hard to follow herman, he's so good, you
Speaker 11: know so much. But I'll try to break it down
Speaker 11: as best as well as he did. But so we
Speaker 11: basically did a little math here and looked at the
Speaker 11: four US lenders that have collapsed that have collapsed, so Silvergate, Signature,
Speaker 11: Silicon Valley Bank, and First Republic Bank, and looked at
Speaker 11: basically tallied up all of the losses that investors have
Speaker 11: been saddled with since February twenty eighth, and this was
Speaker 11: calculated on May second, So to put that in perspective,
Speaker 11: it's around forty six point nine billion dollars of market
Speaker 11: capitalization that's been erased since February twenty eighth and around
Speaker 11: seven point five billion dollars gone from bonds and preferred shares.
Speaker 11: So that's totals to be around fifty four billion dollars
Speaker 11: lost just to break it up, Just to have broken that.
Speaker 6: Down, Yeah, it's an insane amount of money, obviously, AG,
Speaker 6: and thanks for breaking that down for us. Going back
Speaker 6: to what you were just mentioning preferred shareholders and bondholders,
Speaker 6: this does not include them, and is the bondholding space
Speaker 6: worthless now for these these investors.
Speaker 11: Well, no, just to clarify, so the that is actually
Speaker 11: how much has been lost, So there is still some
Speaker 11: combined I believe the market the share value still is
Speaker 11: total well as of Tuesday, was totaling around seven hundred
Speaker 11: and twenty five million dollars for those four lenders. But
Speaker 11: so not all is lost just yet or wasn't as
Speaker 11: of tuesday. But you know, a lot of this really
Speaker 11: has to do with, as a great professor said, how
Speaker 11: the market functions, right. You know, depositors were a number
Speaker 11: of depositors were guaranteed and were made whole. But you know,
Speaker 11: the stockholders and junior debt owners are sort of at
Speaker 11: the back of the line in terms of priority for
Speaker 11: for you know, being made.
Speaker 3: Hold here right, so maybe not worthless yet but close
Speaker 3: to it or could be. So how in terms of
Speaker 3: reporting out this story page and looking you know, we
Speaker 3: just as you said, just had herman on and you
Speaker 3: know the banks that we're watching today, Western Alliance and
Speaker 3: pack West, and who knows what else might come our way.
Speaker 3: What were you hearing about maybe the future potential impact
Speaker 3: if we continue to see problems in the sector.
Speaker 11: Gosh, I don't have a crystal ball in front of
Speaker 11: me at the moment. But all I can say is
Speaker 11: that prices are still extremely volatile. I mean to the
Speaker 11: volatilities sort of being felt and across across the market
Speaker 11: right now. And I mean, like you said, pack Western
Speaker 11: Western Alliance have looked a little roller coaster like today,
Speaker 11: I would say, right.
Speaker 3: But what I want to ask you about is you
Speaker 3: talk to somebody at Northwestern University and they talked a
Speaker 3: little bit right about if only half of uninsured depositors
Speaker 3: yank their funds, around a hundred and nine banks with
Speaker 3: assets of three hundred billion could be impaired. So we're
Speaker 3: talking about again, we're just guys. We're just guessing here,
Speaker 3: they're guessing, but right there is the impact that it
Speaker 3: could be a lot.
Speaker 11: More, absolutely, and we just don't know right now, but
Speaker 11: it is. You know, things are a little bit all
Speaker 11: over the place, we'll put it that way. The market
Speaker 11: is definitely still volatile right now. So yes, theoretically, if
Speaker 11: things sort of continue as they are, more could be lost.
Speaker 6: And what did your sources say page about you know,
Speaker 6: the big big question, which is is it fair and
Speaker 6: okay that investors are losing a lot of money as
Speaker 6: we all experience the regional banking turmoil. What were your
Speaker 6: sources responses about what that should look like or any
Speaker 6: changes that should be made to hedge against that.
Speaker 11: Well, to kind of address the last part of that question,
Speaker 11: there are a lot of changes being sort of batted around.
Speaker 11: As Herman sort of said a little bit earlier, you know,
Speaker 11: there talks about how FDIC insurance could change. There was
Speaker 11: a report that said perhaps it could be extended or
Speaker 11: sort of the ideal option would be extending that to
Speaker 11: more business deposits to kind of maybe calm things down
Speaker 11: a little bit theoretically, But we just don't really know
Speaker 11: right now. I did say I spoke with one source
Speaker 11: who did say it could get a lot worse before
Speaker 11: it gets better. But who knows, and we just aren't
Speaker 11: really sure right now.
Speaker 3: Page What did Mike Mayo say to you? And this
Speaker 3: is somebody that we have leaned on, We've leaned on
Speaker 3: certainly during the Great Financial Crisis. This is someone who
Speaker 3: has followed the bank sector, the big banks in a
Speaker 3: big way. Was he thinking that there's more pain to come?
Speaker 3: I'm curious kind of what his take was on all
Speaker 3: of this.
Speaker 11: Yeah, Mike Mayo essentially said that he says that there
Speaker 11: are no more banks that are going to fail right
Speaker 11: now in the S and P. Five hundred at least.
Speaker 11: But again, I would like to check in with Mike
Speaker 11: today perhaps again this report was published on was published
Speaker 11: early yesterday morning, so a lot of a lot has changed.
Speaker 11: Everything is still sort of in flocks. The market is
Speaker 11: still a little bit all over the place. I think
Speaker 11: that we just have to keep asking folks and keep
Speaker 11: making calls and checking in well.
Speaker 3: And as you said, you did report this story out yesterday.
Speaker 3: You do have a story on the Bloomberg though that
Speaker 3: hit the early this morning and the headline this is
Speaker 3: for a Bloomberg business week. In fact, regional bankquos didn't
Speaker 3: end with the first Republic rescue. And you remind us
Speaker 3: that banks run on confidence, right.
Speaker 4: If we all start to.
Speaker 3: Feel a little nervous about where our deposits are, we're
Speaker 3: probably going to yank them absolutely.
Speaker 11: And I think that that is really something that remains
Speaker 11: to be seen. It's a question. And as Herman said before,
Speaker 11: there are you know, if we look at the balance
Speaker 11: sheet of pac West and Western, at least PacWest there
Speaker 11: was sort of guests. They're in talks of determining what
Speaker 11: the best next step might be. But there were you know,
Speaker 11: we checked in on the banks during earnings most recently
Speaker 11: and there were extremely red flags being raised, or at
Speaker 11: least that was my interpretation of things. And we'll just
Speaker 11: have to kind of see how those deposit levels fare
Speaker 11: over the next days or weeks or however long this continues.
Speaker 3: I know you're sound exhausted, because we're all exhausted right
Speaker 3: just when we think it's over right. No, no, no, no, no,
Speaker 3: I don't mean it as a criticism. I just mean
Speaker 3: it's a reality. It's like how we felt reporting out
Speaker 3: the Great Financial Crisis. You know, you'd get some moments
Speaker 3: of common then it just picked up so much momentum.
Speaker 3: And you do wonder, just like the lag time for
Speaker 3: all of the FED rate increases to take effect, you
Speaker 3: do wonder what you know when we have moments of peace,
Speaker 3: are calm? Is it just a case of yeah, exactly?
Speaker 5: Well?
Speaker 6: And one big question I have then I was going
Speaker 6: to mention this to Harman earlier, is that we talk about,
Speaker 6: you know, the banks that are not necessarily struggling with liquidity,
Speaker 6: but the stock prices down, So the question is, you know,
Speaker 6: is there a problem. Is there an issue here? And
Speaker 6: I wonder whether our reporters have had any luck with
Speaker 6: getting some insights into how much that impacts consumer confidence.
Speaker 6: If the stock is tanking and the consumer is, you know,
Speaker 6: embarrassed to pull out their first Republic credit card, is
Speaker 6: that enough to make deposit outflows increase?
Speaker 5: Page?
Speaker 6: Are you hearing anything about that consumer reaction and your reporting?
Speaker 11: Frankly, I think that's kind of the the question of
Speaker 11: the day, you know, of whether what comes first, right,
Speaker 11: sort of the chicken or the egg of you know,
Speaker 11: we see these sort of stock price, we see the
Speaker 11: volatility in the markets, and then do we sort of
Speaker 11: we keep checking in on deposit levels, and this kind
Speaker 11: of going dinging back and forth between deposit levels and
Speaker 11: market continues. So I don't think we can even begin
Speaker 11: to try to answer those questions just yet, but it's
Speaker 11: sort of the continuing of asking those questions and monitoring
Speaker 11: and seeing and checking in with consumer confidence.
Speaker 3: I suppose it's just wild like this whole concept of
Speaker 3: thinking about you know, runs in this day and age
Speaker 3: on Paige good stuff. Thank you so much, Paige Smith.
Speaker 3: She's consumer finance reporter at Bloomberg News.
Speaker 2: I'm brother Marco.
Speaker 8: A journal.
Speaker 5: How about you let me drive?
Speaker 2: No, no, no, no, who's going to drive?
Speaker 5: Honey?
Speaker 2: Please?
Speaker 5: How do the riding gravels?
Speaker 2: Let's mate, I want to drive.
Speaker 8: It's a good question time.
Speaker 1: This is the drive to the clothes.
Speaker 2: Don com think we'll buy an yelled it on?
Speaker 1: I'm on Bloomberg Radio.
Speaker 3: All right, everybody, we've got just about uh, just under
Speaker 3: eighteen minutes left in today's trading session, getting ready to
Speaker 3: wrap up the day of trading, just before that monthly
Speaker 3: John's report.
Speaker 4: We'll get that tomorrow morning. Let's get to it with
Speaker 4: our Drive to the closed. Guest.
Speaker 3: Mark Travis is back with US president and chief executive
Speaker 3: officer over at the registered investment advisor Intrepid Capital, joining
Speaker 3: us once again on zoom from Jacksonville, Florida. Where we
Speaker 3: understand Mark, it is lovely in Jacksonville.
Speaker 4: It's not so lovely here.
Speaker 3: It's a little cold and gray again. But I hear
Speaker 3: it's pretty nice out there.
Speaker 12: Keryl. I think you should do what every other New
Speaker 12: York's done and pack up and move to Florida.
Speaker 4: That we can talk about later. I hear, yeah, I hear.
Speaker 2: You're right.
Speaker 4: There's a lot of people moving there.
Speaker 3: Having said that, I am curious in a week where
Speaker 3: I feel like we've had so many big picture stories,
Speaker 3: whether it's the regional banks, FED policy, We're still talking
Speaker 3: about inflation, recession. We've got the other stuff like US China,
Speaker 3: stress A, Russia, Russia and the rest of the world.
Speaker 3: I feel like that's always top of mine. What's kind
Speaker 3: of top of mind for you? What do you think
Speaker 3: is the really big macro story that you focus on
Speaker 3: when you are stock picking, which we're going to get
Speaker 3: to in just a moment.
Speaker 12: Well, I think, Carol, unfortunately most people buy high and
Speaker 12: sell low, and so I try to resist that the
Speaker 12: best I can. You know, I think we've definitely as
Speaker 12: everyone on the program knows how to reset and rate
Speaker 12: last now fourteen months up five hundred and something basis points.
Speaker 12: So you know, not that my compliance department likes me
Speaker 12: to say this, but I do think you're getting paid
Speaker 12: to wait much better than you have been in recent history.
Speaker 7: And so.
Speaker 12: As a fund manager that owns stocks, bonds, and cash
Speaker 12: and in one case just bonds, I think we're paid
Speaker 12: better now that we have been in some time. And
Speaker 12: I think we're closer to the end of the cycle
Speaker 12: at the beginning. Do I have some crystal ball here
Speaker 12: that tells me when? No, I don't, But I do
Speaker 12: think we've moved pretty fast and pretty hard, maybe one
Speaker 12: of the first or second fastest increases in rates and
Speaker 12: better reserve history. So it has lagging effects, as everyone knows,
Speaker 12: and we're waiting to see what those are. But I
Speaker 12: think there's opportunities out there if you're patient and have
Speaker 12: a longer than the next quarter time arise, in which
Speaker 12: I do.
Speaker 6: What do you think it is that markets are waiting on.
Speaker 6: I know you don't have the crystal ball, but is
Speaker 6: there a specific you know, ECO data point or earning
Speaker 6: cycle that you think will indicate that we're at the
Speaker 6: other side of this right, because.
Speaker 3: What you say we're closer to the end, And you
Speaker 3: said you don't have that crystal ball, But that's a
Speaker 3: really good question, like what is it that makes you
Speaker 3: say that?
Speaker 12: Well, because I guess history going back to the speed
Speaker 12: in which they've moved, I do say someonet sarcastilary, we're
Speaker 12: asking the people that cause the problem to fix it,
Speaker 12: and so we're now getting the antidote. But again, I
Speaker 12: think certainly the market's grasping for when does the FED cut.
Speaker 12: I think that's probably farther out than maybe some or many. Right,
Speaker 12: But again, when I look at some of the companies
Speaker 12: I'm happy to talk about, and it's you know, the
Speaker 12: compounding they've had over a long period of time is
Speaker 12: really quite phenomenal.
Speaker 3: Well, let's get to it, because that's one of the
Speaker 3: things we do, like that you come to play with
Speaker 3: and actually talk about some of the names that you do,
Speaker 3: like Garman is one of them, nineteen billion dollars in
Speaker 3: market cap, It's up about ten percent a year. Today,
Speaker 3: reported earnings early yesterday the stock was up about three
Speaker 3: percent on the news. You saw Barclay's and Morgan both
Speaker 3: raising their price targets on the company. Were you buying
Speaker 3: off of earnings or beforehand? Talk to us a little
Speaker 3: bit about your positioning.
Speaker 7: In this one.
Speaker 12: I've owned it for prior to that announcement, and I'm
Speaker 12: a patient holder and I think it's a great business.
Speaker 12: But again, and you may have seen in the last
Speaker 12: i don't know, three or four weeks of call them
Speaker 12: in the Wall Street by Jason's Wide talking about compounding
Speaker 12: of companies and how the human mind has a hard
Speaker 12: time getting around something that's compounded one thousand percent. But
Speaker 12: if you look at Garment, for example, I believe it
Speaker 12: went public in the early nineties with about two hundred
Speaker 12: million dollars in revenue, and today it's doing run rate
Speaker 12: probably four and a half billion in revenue. They had
Speaker 12: two hundred employees and the day they've got thousands. Yeah,
Speaker 12: and the stock price reflects that. So again, part of
Speaker 12: what I like is the family still ownership. The co
Speaker 12: founding families have a substantial stake in the environment where
Speaker 12: financing is hard to come by, they have billions of
Speaker 12: dollars in cash to buffer them and or acquire something
Speaker 12: or you know, optimously buy backed chair. So all those
Speaker 12: factors are reasons why I'm interested in that equity.
Speaker 6: Yeah, you mentioned buybacks, so I am forced to ask
Speaker 6: you about Apple today. Do you have any take on
Speaker 6: Apple's previous positioning when it comes to buybacks and what
Speaker 6: will your kind of analysis be if they do what's
Speaker 6: expected and continue to push forward on buybacks with some
Speaker 6: of their excess cash.
Speaker 12: Well, I guess I would answer that an indirect way,
Speaker 12: which is I was very much against the tax imposed
Speaker 12: on buybacks of one percent, and now the SEC's voted
Speaker 12: to make the kind of regulatory burden around that even higher.
Speaker 12: I just am against all that. I don't have a
Speaker 12: real strong opinion about Apple, but you know, you can
Speaker 12: certainly look at their balance sheet too and go, why
Speaker 12: isn't my dividend higher? Why aren't you buying back more shares?
Speaker 12: But again, it's it's one tool in the toolkit for
Speaker 12: you know, executive suites to make in terms of trying
Speaker 12: to grow their business and allocate capital. And I think
Speaker 12: now politicians are trying to take that away, which again
Speaker 12: I'm against.
Speaker 3: Hey, I do want to get to another name that
Speaker 3: you like, Watsco. It's an HVAC company, thirteen billion dollar
Speaker 3: market cap, quite a run this year, up about thirty
Speaker 3: four percent year to date. About twelve percent of the
Speaker 3: float is shorted, and we did see the stock rally
Speaker 3: eight percent to a record high when it reported earnings
Speaker 3: on April twentieth. It's got about a three percent dividend.
Speaker 3: What's been your story on this one, Mark.
Speaker 12: Well, I think this was a cultural story and it's
Speaker 12: also again a family business in this case a father
Speaker 12: son business family members of the nay Mad family out
Speaker 12: of basically Miami and I think the perception of some
Speaker 12: is they're going to be subject to a slowdown in housing.
Speaker 12: But they're really strong in their replacement cycle and they're
Speaker 12: very careful in their acquisitions. But they also just culturally
Speaker 12: have a very long tenured management team. They you know,
Speaker 12: have an ESOP that's been very effective. And again I'm
Speaker 12: kind of paid to wait. They two have very unencumbered
Speaker 12: balance sheet. So yeah, Harman and Watscar, I can collect
Speaker 12: a three percent dividend and I'd gott to take that
Speaker 12: than a ten year treasury in three and a half.
Speaker 3: I hear you, right, It's all about you got to
Speaker 3: kind of compare it once the returns on some of
Speaker 3: the different assets. Mark Travis over at Intreumpid Capital. Right
Speaker 3: here on Blomberg BusinessWeek, you are listening and watching Bloomberg Week.
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