1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,279 Speaker 1: at Bloomberg dot com slash podcast. You know what I 7 00:00:22,360 --> 00:00:24,160 Speaker 1: like to do on the Bloomberg terminals, Look at the 8 00:00:24,200 --> 00:00:26,720 Speaker 1: league tables, Matt, You know for the investment banks, and 9 00:00:27,160 --> 00:00:30,040 Speaker 1: you know who's doing what in equity underwriting? Don't you 10 00:00:30,040 --> 00:00:31,920 Speaker 1: get bored of that? It's always Goldman Stacks right at 11 00:00:31,960 --> 00:00:34,040 Speaker 1: the top. What's not this time, big guy? It is 12 00:00:34,680 --> 00:00:38,120 Speaker 1: China has an investment called citic C I T I 13 00:00:38,280 --> 00:00:41,400 Speaker 1: C and they're kind of number one interns of equity issuance. 14 00:00:41,400 --> 00:00:43,040 Speaker 1: I want to figure out what's going on there? So 15 00:00:43,400 --> 00:00:44,800 Speaker 1: what are we doing? When we want to talk about 16 00:00:44,840 --> 00:00:48,080 Speaker 1: Wall Street, we go to Alison Williams. She's been covering 17 00:00:48,200 --> 00:00:51,440 Speaker 1: the investment banks on Wall Street for decades, first at 18 00:00:51,479 --> 00:00:53,800 Speaker 1: Morgan Stanley Investment Management and for the last i'm gonna 19 00:00:53,800 --> 00:00:56,680 Speaker 1: say thirteen years. She was one of our absolute first hires. 20 00:00:57,440 --> 00:01:02,080 Speaker 1: At Bloomberg Intelligence. Umus Williams, Senior Global Banks and Asset 21 00:01:02,080 --> 00:01:06,000 Speaker 1: Manager Analysts for Bloomberg Intelligence. Allison talk to us about 22 00:01:06,040 --> 00:01:09,880 Speaker 1: CITIC securities. Who are they? What are they? And boy 23 00:01:09,959 --> 00:01:12,360 Speaker 1: they got they're pretty big here there. They beat up 24 00:01:12,400 --> 00:01:16,480 Speaker 1: Goldman Sacks, so they are. But there's two key things 25 00:01:16,560 --> 00:01:20,320 Speaker 1: going on, which is UM. You know, there's no denying 26 00:01:20,360 --> 00:01:23,120 Speaker 1: the slump here in the US in terms of I 27 00:01:23,319 --> 00:01:28,760 Speaker 1: P O S. And really Asia is the big driver 28 00:01:29,040 --> 00:01:32,160 Speaker 1: of of issuance that we're seeing here to date. CIDEC 29 00:01:32,520 --> 00:01:35,759 Speaker 1: is a key player in their local market, and so 30 00:01:36,319 --> 00:01:39,120 Speaker 1: UM to some extent. If we take a step back 31 00:01:39,240 --> 00:01:44,600 Speaker 1: and we look at equity issuance excluding Asia, you would 32 00:01:44,640 --> 00:01:48,160 Speaker 1: still see Golden Sacks at the top of that table. 33 00:01:48,240 --> 00:01:51,520 Speaker 1: So Goldman Sacks and Morgan Stanley City JP, Morgan Bank 34 00:01:51,560 --> 00:01:54,160 Speaker 1: America if we sort of exclude the Asia market, but 35 00:01:54,240 --> 00:01:58,160 Speaker 1: definitely in Asia, some of the local players doing very 36 00:01:58,200 --> 00:02:01,200 Speaker 1: well there. And given that that is where we're seeing 37 00:02:02,080 --> 00:02:04,720 Speaker 1: UM the majority of the action this year, it's not 38 00:02:04,760 --> 00:02:07,919 Speaker 1: surprising that that those local players are sort of topping 39 00:02:07,920 --> 00:02:13,880 Speaker 1: the global table. So Alison, with the SMP down this year, 40 00:02:14,080 --> 00:02:16,959 Speaker 1: no surprise that there having been a lot of new 41 00:02:17,000 --> 00:02:20,239 Speaker 1: equity issuance or equity issuance issues in general. Here is 42 00:02:20,280 --> 00:02:22,639 Speaker 1: there a sense that there's a huge backlog out there 43 00:02:22,720 --> 00:02:25,240 Speaker 1: and when the market, you know, rallies off the bottom, 44 00:02:25,240 --> 00:02:27,359 Speaker 1: that will see more activity. How does that typically work? 45 00:02:28,200 --> 00:02:31,359 Speaker 1: That's been the hope, and so I think for most 46 00:02:31,360 --> 00:02:33,880 Speaker 1: of this year what we've heard from the global investment 47 00:02:33,919 --> 00:02:38,919 Speaker 1: banks is that pipelines are stalled, and so we hadn't 48 00:02:38,960 --> 00:02:42,440 Speaker 1: necessarily seen pulling of deals. We've just seen sort of 49 00:02:42,480 --> 00:02:45,400 Speaker 1: the backlogs sitting there, and so it really has um 50 00:02:45,440 --> 00:02:51,360 Speaker 1: come down to lack of execution. UM. But I think 51 00:02:51,400 --> 00:02:53,640 Speaker 1: that some of the banks may have been sort of 52 00:02:53,680 --> 00:02:58,200 Speaker 1: holding out September and October sort of the key months 53 00:02:58,320 --> 00:03:00,720 Speaker 1: or you know, the key busiest and says, we get 54 00:03:00,760 --> 00:03:04,040 Speaker 1: into this second half UM, and with the tougher markets 55 00:03:04,040 --> 00:03:07,120 Speaker 1: in September, we wonder if we're going to be hearing 56 00:03:07,160 --> 00:03:09,560 Speaker 1: in a couple of weeks some of the decaying of 57 00:03:09,600 --> 00:03:13,639 Speaker 1: those pipelines from the investment banks. Alison, how important are 58 00:03:14,040 --> 00:03:16,160 Speaker 1: the league tables? I never worked at a bank. I 59 00:03:16,200 --> 00:03:18,520 Speaker 1: did cold calls at a bucket shop for a while, 60 00:03:18,560 --> 00:03:21,240 Speaker 1: and then I interned at a broker dealer. But in 61 00:03:21,360 --> 00:03:24,280 Speaker 1: terms of um, the IB guys how much and and 62 00:03:24,440 --> 00:03:27,280 Speaker 1: gals how much do they care about the league tables 63 00:03:27,280 --> 00:03:31,480 Speaker 1: and their their ranks? Well, two things they do care 64 00:03:31,720 --> 00:03:35,320 Speaker 1: very much. Um, they care about the bragging rights. Of course, 65 00:03:35,680 --> 00:03:39,920 Speaker 1: you know we do want to be the bankers, want 66 00:03:39,920 --> 00:03:42,840 Speaker 1: to be the ones getting deals. Um, they do care 67 00:03:42,840 --> 00:03:44,880 Speaker 1: about having the bragging rights. But as Paul will tell 68 00:03:44,920 --> 00:03:47,680 Speaker 1: you as someone who helped to drive the numbers behind 69 00:03:47,720 --> 00:03:50,400 Speaker 1: those league tables, is that you know, the league tables 70 00:03:50,440 --> 00:03:55,200 Speaker 1: can show any given bank as number one depending on 71 00:03:55,560 --> 00:03:59,640 Speaker 1: how you formulate the bad league table. Yes, you massage 72 00:03:59,680 --> 00:04:01,920 Speaker 1: those and the mom in the number of deals priced 73 00:04:01,920 --> 00:04:04,520 Speaker 1: between Tuesday and Thursday. You know that's how we did. 74 00:04:04,640 --> 00:04:06,280 Speaker 1: But a bank will a bank or us will you 75 00:04:06,320 --> 00:04:09,680 Speaker 1: walk in? Will you you walk into your boss's office 76 00:04:09,920 --> 00:04:12,400 Speaker 1: with the league table and say like, give me more money? 77 00:04:12,640 --> 00:04:15,000 Speaker 1: You know I moved us to number two from number 78 00:04:15,040 --> 00:04:17,599 Speaker 1: five or no. I usually just would just say pay 79 00:04:17,680 --> 00:04:19,560 Speaker 1: me more money. I'm walking across the street. But those 80 00:04:19,640 --> 00:04:23,279 Speaker 1: days are long gone. Allison remembers those days. Alison, let's 81 00:04:23,279 --> 00:04:27,680 Speaker 1: switch gears here. My good friends at Credit Swiss. Boy, 82 00:04:27,760 --> 00:04:30,400 Speaker 1: we were awesome back in the day, but they cannot 83 00:04:30,520 --> 00:04:33,080 Speaker 1: get out of their way. Here is there any future 84 00:04:33,680 --> 00:04:37,360 Speaker 1: for the Credit Swiss investment bank maybe outside of Switzerland? 85 00:04:37,680 --> 00:04:39,760 Speaker 1: What is it? What is it? We saw the cost 86 00:04:39,800 --> 00:04:43,560 Speaker 1: to ensure Credit Swiss debt rise fifteen percent, like over 87 00:04:43,640 --> 00:04:46,799 Speaker 1: the weekend, we saw the shares um you know, collapse 88 00:04:46,880 --> 00:04:49,719 Speaker 1: this morning. I don't know why, Alison, what, What's what's 89 00:04:49,800 --> 00:04:54,440 Speaker 1: driving that? What's driving that is that we have number one, 90 00:04:54,480 --> 00:04:58,800 Speaker 1: a tough global market, right and then on top of that, 91 00:04:58,839 --> 00:05:02,039 Speaker 1: we have a bank that has said they're considering their options. 92 00:05:02,240 --> 00:05:05,920 Speaker 1: There's a lot of uncertainty around what those options might be. UM. 93 00:05:05,960 --> 00:05:08,680 Speaker 1: If one of the options includes a capital raise, it's 94 00:05:08,720 --> 00:05:11,240 Speaker 1: always going to be tough UM for a stock to 95 00:05:11,440 --> 00:05:17,080 Speaker 1: study when the amount of potential issuance and delusion is unknown. 96 00:05:17,120 --> 00:05:20,160 Speaker 1: And so I think in general, it's always a tough 97 00:05:20,200 --> 00:05:22,600 Speaker 1: time when a bank says the strategy is coming and 98 00:05:22,640 --> 00:05:26,080 Speaker 1: then there's several weeks ahead of getting the actual effects 99 00:05:26,160 --> 00:05:33,000 Speaker 1: because UM investors getting patient. Tough markets increase the impatience, 100 00:05:33,160 --> 00:05:36,440 Speaker 1: and there's really nothing that management can say or do 101 00:05:36,560 --> 00:05:38,880 Speaker 1: in the meantime to sort of study that. And so 102 00:05:38,960 --> 00:05:42,280 Speaker 1: we've we've been seeing that with Credits Weasis management coming 103 00:05:42,279 --> 00:05:44,480 Speaker 1: out a few times and saying you know, we're working 104 00:05:44,480 --> 00:05:46,920 Speaker 1: on it. We're working on it. But um, as we 105 00:05:47,040 --> 00:05:51,880 Speaker 1: know from prior periods of market stress, UM, it's just 106 00:05:52,200 --> 00:05:57,680 Speaker 1: tough to instill confidence when the markets are behaving, especially um, 107 00:05:57,680 --> 00:06:01,520 Speaker 1: when the global broader market is tough. Alison, I mean, 108 00:06:02,120 --> 00:06:04,880 Speaker 1: is there any scenario where they merge with the ubs 109 00:06:05,000 --> 00:06:08,400 Speaker 1: or the Swiss government just not allow that. I still 110 00:06:08,440 --> 00:06:12,640 Speaker 1: think that's doubtful. UM. I think that probably the more 111 00:06:13,200 --> 00:06:17,400 Speaker 1: likely UM thing that happens is they do have to 112 00:06:17,600 --> 00:06:22,280 Speaker 1: capital intensive businesses, securitized products, trading, credit trading. These are 113 00:06:22,320 --> 00:06:25,479 Speaker 1: sort of less tied to their core wealth business as 114 00:06:25,480 --> 00:06:28,719 Speaker 1: we know, UM, A lot of investors with both UBS 115 00:06:28,760 --> 00:06:31,200 Speaker 1: and credit sweets, the focus is always they want to 116 00:06:31,240 --> 00:06:32,960 Speaker 1: own it for the wealth business. They don't like the 117 00:06:32,960 --> 00:06:37,520 Speaker 1: investment bank. I think that credit suites can, um, you know, 118 00:06:37,720 --> 00:06:39,599 Speaker 1: make a case that they do need like M and 119 00:06:39,640 --> 00:06:42,159 Speaker 1: A and things like that, but it's less likely to 120 00:06:42,200 --> 00:06:45,040 Speaker 1: make a case on those other types of businesses. All right, Allison, 121 00:06:45,040 --> 00:06:48,919 Speaker 1: good stuff as always. Alison Williams, Senior Global Banks Analysts, 122 00:06:48,920 --> 00:06:51,880 Speaker 1: one of the all time great analysts Boomberg Intelligence, and 123 00:06:51,920 --> 00:07:00,760 Speaker 1: there are many of them at the this boom looking 124 00:07:00,800 --> 00:07:03,479 Speaker 1: at the yields. Boy, the two years down twenty one 125 00:07:03,520 --> 00:07:06,080 Speaker 1: basis points four point zero seven percent, So back on 126 00:07:06,120 --> 00:07:09,120 Speaker 1: that four percent watch here after a big, big move 127 00:07:09,240 --> 00:07:11,679 Speaker 1: up in rates, the question is what does the fellow 128 00:07:11,720 --> 00:07:14,960 Speaker 1: reserve do from here? PREA miserable managing director and global 129 00:07:15,000 --> 00:07:17,560 Speaker 1: head of rate strategy at TV Securities joins us P. 130 00:07:17,840 --> 00:07:21,200 Speaker 1: Thanks so much for taking the time here. Really appreciate it. Alright. 131 00:07:21,240 --> 00:07:23,280 Speaker 1: The Fed has been very clear with its messaging it's 132 00:07:23,280 --> 00:07:27,440 Speaker 1: fighting inflation. Um, some folks are saying they need to 133 00:07:27,480 --> 00:07:29,800 Speaker 1: pause here, they need to take a break. What do 134 00:07:29,840 --> 00:07:33,400 Speaker 1: you think is gonna happen? Thanks for having me on, 135 00:07:34,080 --> 00:07:36,720 Speaker 1: so you know, I think it's much too early for 136 00:07:36,760 --> 00:07:39,200 Speaker 1: them to be taking a pause. Um. In fact, we've 137 00:07:39,200 --> 00:07:41,320 Speaker 1: heard from a bunch of FED officials in the last 138 00:07:41,560 --> 00:07:45,880 Speaker 1: week reinforcing the message from Jackson Hole or the September 139 00:07:45,920 --> 00:07:49,080 Speaker 1: FED meeting that they're on a mission. They need inflation 140 00:07:49,200 --> 00:07:53,520 Speaker 1: much lower. Inflation is sticky, inflation is broad based. It's 141 00:07:53,600 --> 00:07:55,880 Speaker 1: just too high. So I think they're still going we're 142 00:07:55,920 --> 00:07:59,320 Speaker 1: looking for another seventy five in November, fifty in December, 143 00:07:59,520 --> 00:08:02,320 Speaker 1: and then continued the hikes next year. I think they 144 00:08:02,400 --> 00:08:05,440 Speaker 1: really want to see inflation monthly prints getting to point 145 00:08:05,480 --> 00:08:10,600 Speaker 1: two point three in that range before they can stop hiking. So, 146 00:08:10,960 --> 00:08:12,960 Speaker 1: you know, we think there's still a long way to go. 147 00:08:13,160 --> 00:08:16,200 Speaker 1: I know, financial conditions have tightened, but inflation is too 148 00:08:16,280 --> 00:08:19,200 Speaker 1: high and the economy is slowing. But they wanted us 149 00:08:19,320 --> 00:08:21,480 Speaker 1: they will be paying ahead, and so I think we 150 00:08:21,520 --> 00:08:25,280 Speaker 1: all should be uh, you know, expecting that pain to 151 00:08:25,320 --> 00:08:27,240 Speaker 1: show up. I think the question is just how much 152 00:08:27,280 --> 00:08:30,720 Speaker 1: pain are they willing to tolerate? And this is just starting. Yeah, 153 00:08:30,720 --> 00:08:32,520 Speaker 1: I was going to ask the same the exact that 154 00:08:32,640 --> 00:08:34,920 Speaker 1: exact question, how much pain are they willing to tolerate, 155 00:08:35,040 --> 00:08:40,320 Speaker 1: especially considering it's going to hit lower income uh families 156 00:08:40,360 --> 00:08:44,600 Speaker 1: and consumers hardest. Um, And we're seeing in the UK 157 00:08:44,880 --> 00:08:47,480 Speaker 1: how bad that plays out. You know, when it's impossible 158 00:08:47,559 --> 00:08:51,960 Speaker 1: for two million people to remortgage or you know, too expensive, 159 00:08:52,000 --> 00:08:54,480 Speaker 1: they're gonna have to be fire sales on homes there. 160 00:08:54,840 --> 00:08:57,559 Speaker 1: And then when you start to see you know, insurance 161 00:08:57,600 --> 00:09:00,679 Speaker 1: markets um start to need a bank ail out. You know, 162 00:09:01,000 --> 00:09:04,760 Speaker 1: how close can we get to that before they back off? Sure? 163 00:09:04,800 --> 00:09:08,040 Speaker 1: So I would say inflation is also highly regressive, meaning 164 00:09:08,080 --> 00:09:11,400 Speaker 1: it hits the lower income parts of the population much harder, 165 00:09:11,760 --> 00:09:14,160 Speaker 1: and so if the FED is just focused on that, 166 00:09:14,280 --> 00:09:16,199 Speaker 1: and they will see the labor market is still strong, 167 00:09:16,280 --> 00:09:19,400 Speaker 1: and they'll see inflation being still too high. So that 168 00:09:19,520 --> 00:09:22,160 Speaker 1: still remains. I think inflation remains public and me number 169 00:09:22,160 --> 00:09:25,000 Speaker 1: one in terms of the insurance market that you're talking about, 170 00:09:25,000 --> 00:09:28,079 Speaker 1: I mean, I think financial stress. We're we're going to 171 00:09:28,200 --> 00:09:31,199 Speaker 1: have to deal with more financial stress. You look at this, 172 00:09:31,200 --> 00:09:33,600 Speaker 1: this is of our shock. We're living through these massive 173 00:09:33,640 --> 00:09:36,079 Speaker 1: moves and rates. I mean, treasury is moving twenty five 174 00:09:36,080 --> 00:09:38,920 Speaker 1: base points a day, the stock market all over the place. 175 00:09:38,960 --> 00:09:42,040 Speaker 1: I think credit spreads um in terms of bail. I mean, 176 00:09:42,040 --> 00:09:44,360 Speaker 1: I don't think the insurance industry in the U S 177 00:09:44,480 --> 00:09:47,800 Speaker 1: or the pension industry is as leveled to that trade 178 00:09:48,120 --> 00:09:50,679 Speaker 1: um as we saw in the UK. And we have 179 00:09:50,720 --> 00:09:53,400 Speaker 1: not had that level of moves in the tenure. I mean, 180 00:09:53,400 --> 00:09:55,680 Speaker 1: I'm shocked with the twenty basis point move, but the 181 00:09:55,720 --> 00:09:58,440 Speaker 1: tenure is still below four percent. We haven't had the 182 00:09:58,480 --> 00:10:01,800 Speaker 1: hundred two hundred basis point more higher. So I don't 183 00:10:01,880 --> 00:10:05,160 Speaker 1: see that particular industry in the US being as vulnerable 184 00:10:05,240 --> 00:10:08,240 Speaker 1: as it is in the UK. But in general, I 185 00:10:08,280 --> 00:10:11,280 Speaker 1: think when you get moves like this and growth is 186 00:10:11,320 --> 00:10:14,600 Speaker 1: slowing without a fit put insight. I think it just 187 00:10:14,640 --> 00:10:18,560 Speaker 1: tells you liquidity is paramount to prevent sort of forced 188 00:10:18,679 --> 00:10:21,640 Speaker 1: being forced to sell at a time when you know 189 00:10:21,679 --> 00:10:23,760 Speaker 1: liquidity is not great. So I think, is there enough 190 00:10:23,800 --> 00:10:26,000 Speaker 1: liquidity to soak up the bonds that are going to 191 00:10:26,120 --> 00:10:31,320 Speaker 1: get unleashed with quantitative tightening? So that's fair. But you know, 192 00:10:31,320 --> 00:10:34,120 Speaker 1: it's been well advertised that the FED is selling or 193 00:10:34,160 --> 00:10:39,240 Speaker 1: effectively letting nine between treasuries and mortgages run off a month. Um. 194 00:10:39,679 --> 00:10:42,200 Speaker 1: You know, I I struggled to find the marginal buyer, 195 00:10:42,240 --> 00:10:44,720 Speaker 1: and which is why treasuries have been selling off. But 196 00:10:44,840 --> 00:10:47,440 Speaker 1: at some point longer treasuries are going to be the 197 00:10:47,640 --> 00:10:51,200 Speaker 1: risk asset hedge because we should be pricing in a recession. 198 00:10:51,240 --> 00:10:53,240 Speaker 1: I think the recession is pretty much baked on the 199 00:10:53,280 --> 00:10:55,720 Speaker 1: cake for next year in the US, and I don't 200 00:10:55,760 --> 00:11:00,240 Speaker 1: buy the shallow short recession argument. This could be much 201 00:11:00,280 --> 00:11:02,840 Speaker 1: longer lasting because the FED is going to be reluctant 202 00:11:02,880 --> 00:11:05,559 Speaker 1: to start to ease. They're so worried about the nineties 203 00:11:05,600 --> 00:11:07,880 Speaker 1: seventies that I think they're going to be late on 204 00:11:07,920 --> 00:11:11,600 Speaker 1: the way to easing policy. So you know, if we're 205 00:11:11,600 --> 00:11:13,760 Speaker 1: in a recession, where should the tenure b I would 206 00:11:13,800 --> 00:11:16,440 Speaker 1: say the FED should when maybe it's twenty four or 207 00:11:16,440 --> 00:11:19,280 Speaker 1: twenty five that they start to cut rates, and they'll 208 00:11:19,320 --> 00:11:21,720 Speaker 1: cut I think at that point too well below neutral. 209 00:11:22,000 --> 00:11:25,080 Speaker 1: So the tenure is attractive as a risk hedge, and 210 00:11:25,120 --> 00:11:27,000 Speaker 1: so I think that's where the bias will show up 211 00:11:27,040 --> 00:11:29,599 Speaker 1: against risk castles. Pretty we had some I s M 212 00:11:29,679 --> 00:11:33,800 Speaker 1: manufacturing data today came out weaker than expected and even 213 00:11:33,880 --> 00:11:37,600 Speaker 1: new particularly on the new order side, uh forty seven 214 00:11:37,600 --> 00:11:41,600 Speaker 1: point one showing contraction there. What do you make of that? Yeah, 215 00:11:41,600 --> 00:11:43,800 Speaker 1: so we have been actually looking for the weakening to 216 00:11:43,840 --> 00:11:45,679 Speaker 1: show up because for a couple of reasons. I mean, 217 00:11:45,760 --> 00:11:48,480 Speaker 1: these were numbers were very high given that this was 218 00:11:48,520 --> 00:11:52,920 Speaker 1: a good driven recovery post COVID recovery and goods demand 219 00:11:53,040 --> 00:11:56,720 Speaker 1: we had seen starting to come off sharply. So I 220 00:11:56,760 --> 00:11:59,920 Speaker 1: think that slowing is expected. It's not a huge employe 221 00:12:00,120 --> 00:12:03,800 Speaker 1: mean indicator. So it's what I'm more interested in is 222 00:12:03,800 --> 00:12:06,520 Speaker 1: I s M services. Have we seen the consumer? And 223 00:12:06,600 --> 00:12:08,920 Speaker 1: I think that's going to be the early sign if 224 00:12:08,920 --> 00:12:14,920 Speaker 1: the consumer is reducing spending because real wage growth for 225 00:12:15,120 --> 00:12:18,640 Speaker 1: the U S consumers negative, meaning inflation is higher than 226 00:12:18,720 --> 00:12:22,760 Speaker 1: the average. Early earnings. I think if I s M services, 227 00:12:22,760 --> 00:12:26,640 Speaker 1: which is a huge employment uh early read, if that 228 00:12:26,720 --> 00:12:28,559 Speaker 1: starts to slow down, I think that tells you that 229 00:12:28,520 --> 00:12:31,160 Speaker 1: the economy slowing. I don't think that stops the FED, 230 00:12:31,240 --> 00:12:34,280 Speaker 1: though it gives them probably some caution about the pace 231 00:12:34,360 --> 00:12:37,280 Speaker 1: of hikes, but that endpoint, it's all about inflation in 232 00:12:37,320 --> 00:12:40,880 Speaker 1: the near term. Okay, really appreciate getting your time. Prove 233 00:12:40,880 --> 00:12:44,160 Speaker 1: you know you're busy. Premiser a managing director in Global 234 00:12:44,200 --> 00:12:47,720 Speaker 1: head of Rates Strategy at t D Securities here. So 235 00:12:48,320 --> 00:12:51,959 Speaker 1: some more movement up from the FED. Pre as talking 236 00:12:52,040 --> 00:12:57,439 Speaker 1: about a recession, um, but perhaps you know, not be long, 237 00:12:57,559 --> 00:12:59,720 Speaker 1: but maybe a little bit of a shallow recession there. 238 00:12:59,720 --> 00:13:02,240 Speaker 1: So uh some more. We have to pay attention to 239 00:13:02,280 --> 00:13:05,200 Speaker 1: this feed, of course, as it continues its fight against inflation. 240 00:13:08,360 --> 00:13:09,840 Speaker 1: I want to get to our next guest right away. 241 00:13:09,880 --> 00:13:13,000 Speaker 1: Jonathan Webb. He's the CEO and founder of app Harvest. 242 00:13:13,000 --> 00:13:17,120 Speaker 1: They are building some of America's largest greenhouses, combining conventional 243 00:13:17,120 --> 00:13:20,840 Speaker 1: agricultural techniques with today's technology to grow non gmo chemical 244 00:13:20,880 --> 00:13:23,560 Speaker 1: free produce. Jonathan, thanks so much for taking the time 245 00:13:23,880 --> 00:13:25,840 Speaker 1: to join us here. Talk to us about what you 246 00:13:25,880 --> 00:13:29,040 Speaker 1: guys are doing at APP Harvest. I know you're in 247 00:13:29,200 --> 00:13:33,000 Speaker 1: Kentucky and that Appalachia area there. Talk to us about 248 00:13:33,000 --> 00:13:36,160 Speaker 1: what you guys are up to. Yeah, So we're building 249 00:13:36,240 --> 00:13:40,320 Speaker 1: some of the world's largest controlled environment agriculture facilities to 250 00:13:40,480 --> 00:13:43,400 Speaker 1: grow fruits and vegetables with less land and less water. 251 00:13:43,520 --> 00:13:46,200 Speaker 1: And if you look at the US today, we imported 252 00:13:46,240 --> 00:13:49,480 Speaker 1: about two thirds of our fruits and vegetables UH into 253 00:13:49,520 --> 00:13:51,559 Speaker 1: the US and then the rest that we do grow 254 00:13:51,640 --> 00:13:55,000 Speaker 1: here are mainly grown in grouch drought stricken areas of 255 00:13:55,200 --> 00:14:00,920 Speaker 1: the Southwest in California. So UH, climate disruption continues to 256 00:14:00,960 --> 00:14:03,880 Speaker 1: impact farmers not just in the US but around the world. 257 00:14:03,920 --> 00:14:07,319 Speaker 1: So we we have to use technology, build infrastructure and 258 00:14:07,880 --> 00:14:10,320 Speaker 1: UH and be able to grow food year round with 259 00:14:10,320 --> 00:14:12,840 Speaker 1: with less water and less land. And that's ultimately what 260 00:14:12,840 --> 00:14:16,439 Speaker 1: we're doing doing here at a Harvest in Kentucky. So, 261 00:14:16,600 --> 00:14:19,960 Speaker 1: I know, your first greenhouse in Morehead, Kentucky, it's going 262 00:14:20,000 --> 00:14:23,280 Speaker 1: to span sixty acres and use less water. How do 263 00:14:23,320 --> 00:14:26,320 Speaker 1: you do that? Yes, So we by the end of 264 00:14:26,320 --> 00:14:30,360 Speaker 1: the year, we'll have four facilities operating um of about 265 00:14:30,440 --> 00:14:34,640 Speaker 1: eight million square feet in total. So just scale size 266 00:14:35,080 --> 00:14:40,680 Speaker 1: and we'll be across strawberries, salad, greens and tomatoes. But 267 00:14:40,840 --> 00:14:44,840 Speaker 1: ultimately we're we're using a host of different technologies that 268 00:14:44,920 --> 00:14:48,600 Speaker 1: we combine into one system. Um and you mentioned if 269 00:14:48,600 --> 00:14:51,880 Speaker 1: we we use about nine less water than open field 270 00:14:51,920 --> 00:14:56,360 Speaker 1: agriculture and can get to about thirty times yield per acre, 271 00:14:56,760 --> 00:14:58,520 Speaker 1: and we can do that no matter what the climate 272 00:14:58,600 --> 00:15:02,000 Speaker 1: is outside. So our general thesis is, you know, this 273 00:15:02,040 --> 00:15:05,600 Speaker 1: is the third wave of sustainable infrastructure. Twenty years ago 274 00:15:05,760 --> 00:15:09,760 Speaker 1: was renewable energy, ten years ago it was Tesla with 275 00:15:09,800 --> 00:15:12,960 Speaker 1: electric vehicles, and then right now it's controlled environment agriculture. 276 00:15:13,120 --> 00:15:15,160 Speaker 1: We're going to have to bring most of our fruit 277 00:15:15,160 --> 00:15:18,480 Speaker 1: and vegetable production around the world into a controlled environment. 278 00:15:19,040 --> 00:15:22,560 Speaker 1: Uh and and and ultimately were one solution, but there 279 00:15:22,560 --> 00:15:24,600 Speaker 1: are a lot of different solutions that are coming out 280 00:15:24,640 --> 00:15:28,400 Speaker 1: of the market. When I grew up in Ohio, so, um, 281 00:15:28,520 --> 00:15:30,960 Speaker 1: when I think of Kentucky and when I think of 282 00:15:31,040 --> 00:15:35,280 Speaker 1: controlled environment farming, I think of the weed they grew 283 00:15:35,320 --> 00:15:39,560 Speaker 1: there was very good. Reportedly, are you just doing um 284 00:15:39,880 --> 00:15:44,720 Speaker 1: produced Are you also in the cannabis business now we're 285 00:15:44,760 --> 00:15:47,280 Speaker 1: we're focused on fruits and vegetables. I mean the the 286 00:15:47,320 --> 00:15:51,480 Speaker 1: convergence of technologies that can be somewhat similar the LED 287 00:15:51,600 --> 00:15:56,480 Speaker 1: lighting Uh, that that's benefitted any any grower is something 288 00:15:56,480 --> 00:16:00,160 Speaker 1: that we're benefiting from. But ultimately, we're building facility US 289 00:16:00,280 --> 00:16:03,680 Speaker 1: to supply fruits and vegetables to the largest grocers, so 290 00:16:03,760 --> 00:16:09,440 Speaker 1: our our customers or Costco, Walmart, Cromer, Publics, um and 291 00:16:09,440 --> 00:16:11,880 Speaker 1: and a whole host of variety of fast food chains 292 00:16:11,920 --> 00:16:15,160 Speaker 1: and and just our focus as fruits and vegetables. But 293 00:16:15,200 --> 00:16:18,080 Speaker 1: you'll see those technologies kind of go back and forth 294 00:16:18,120 --> 00:16:20,520 Speaker 1: depending on on what the industry is. But we're we're 295 00:16:20,560 --> 00:16:23,280 Speaker 1: focused on bringing fruit and vegetable production back to the 296 00:16:23,360 --> 00:16:26,520 Speaker 1: US and doing it in control environment. Why do you think, Jonathan, 297 00:16:26,800 --> 00:16:31,680 Speaker 1: the stock price has suffered so severely? I mean a 298 00:16:31,800 --> 00:16:36,240 Speaker 1: year ago, um, app Harvest was trading for over six 299 00:16:36,280 --> 00:16:38,080 Speaker 1: and now we're looking at a dollar a D nine. 300 00:16:38,360 --> 00:16:41,960 Speaker 1: What what are investors misunderstanding? Yeah? In a year and 301 00:16:42,000 --> 00:16:46,320 Speaker 1: a half, we went to forty five bucks share forty 302 00:16:46,560 --> 00:16:49,960 Speaker 1: down to two bucks. Um Yeah, I mean, look, we're 303 00:16:50,040 --> 00:16:54,320 Speaker 1: we're investing and and and the long long term here 304 00:16:54,360 --> 00:16:58,000 Speaker 1: at app Harvest. We're building facilities that will operate twenty 305 00:16:58,120 --> 00:17:02,680 Speaker 1: thirty years. Uh E. Those four facilities are not operational yet, 306 00:17:02,680 --> 00:17:05,600 Speaker 1: they'll be operational later this year and you know, we 307 00:17:05,600 --> 00:17:08,359 Speaker 1: we had a couple of stumbles last year. It was 308 00:17:08,359 --> 00:17:11,879 Speaker 1: our first first crop, first season producing and selling to 309 00:17:11,920 --> 00:17:16,119 Speaker 1: a grocure and we we went public via SPACK. I mean, ultimately, 310 00:17:16,240 --> 00:17:18,280 Speaker 1: you know, you look at why are we down? Well, 311 00:17:18,880 --> 00:17:23,400 Speaker 1: you know, SPACs are down, Tech growth futures down, uh 312 00:17:23,520 --> 00:17:25,960 Speaker 1: E s G down. I mean, everything is down. We're 313 00:17:26,000 --> 00:17:28,760 Speaker 1: just on top of that. We're a little worse than others. 314 00:17:29,040 --> 00:17:31,919 Speaker 1: And I've talked to the founders of CEOs of a 315 00:17:31,920 --> 00:17:34,600 Speaker 1: lot of good companies that went public last year, and 316 00:17:34,680 --> 00:17:37,080 Speaker 1: we're focused on building a good business that will be 317 00:17:37,119 --> 00:17:39,480 Speaker 1: here the next twenty years. And you know, we have 318 00:17:39,520 --> 00:17:42,280 Speaker 1: to weather the storm the next two years with incredibly 319 00:17:42,400 --> 00:17:44,880 Speaker 1: terrible public mark. But do you have all the capital 320 00:17:44,920 --> 00:17:48,880 Speaker 1: you need? I'm you know you're not generating cash right, 321 00:17:48,920 --> 00:17:51,800 Speaker 1: so you need to invest in this business. As you said, 322 00:17:51,800 --> 00:17:53,520 Speaker 1: do you have everything or do you need to go 323 00:17:53,560 --> 00:17:57,440 Speaker 1: to the market again, Well, we're weighing our options and 324 00:17:57,440 --> 00:18:00,960 Speaker 1: and you know we're building facilities, so utimately, how we 325 00:18:01,119 --> 00:18:04,720 Speaker 1: finance those facilities could be private and you know, doing 326 00:18:04,760 --> 00:18:07,640 Speaker 1: a sale lease back type model for each facility. So 327 00:18:08,040 --> 00:18:10,399 Speaker 1: you know, every growth company is going to need capital. 328 00:18:10,440 --> 00:18:12,160 Speaker 1: It's for us how do we get the capital. We've 329 00:18:12,160 --> 00:18:16,040 Speaker 1: been able to secure attractive debt financing from JP Morgan 330 00:18:16,320 --> 00:18:18,600 Speaker 1: U s D, a robo bank, So you know, we're 331 00:18:18,640 --> 00:18:20,879 Speaker 1: constantly trying to field how to get capital at the 332 00:18:20,880 --> 00:18:24,479 Speaker 1: most attractive price. And obviously if the stock was at 333 00:18:24,480 --> 00:18:27,360 Speaker 1: fifty bucks, that would be ideal, but there's there's other 334 00:18:27,359 --> 00:18:30,280 Speaker 1: ways for us to access capital, and we'll do whatever 335 00:18:30,400 --> 00:18:33,600 Speaker 1: is prudent to do that to funder growth. Jonathan, I 336 00:18:33,680 --> 00:18:35,560 Speaker 1: spent a lot of time in central California, and there 337 00:18:35,600 --> 00:18:38,639 Speaker 1: are agricultural farms, you know, spending as far as I 338 00:18:38,720 --> 00:18:41,080 Speaker 1: can see, But also as far as I can see 339 00:18:41,080 --> 00:18:44,160 Speaker 1: are the irrigation systems that have the sprinklers just going 340 00:18:44,200 --> 00:18:47,760 Speaker 1: on forever into the horizon. You just got to think 341 00:18:47,760 --> 00:18:50,960 Speaker 1: that that the water issue is probably the biggest issue 342 00:18:51,000 --> 00:18:54,920 Speaker 1: facing agriculture in this country. What do you guys do 343 00:18:55,040 --> 00:18:58,640 Speaker 1: that's that's different, that tries to address that. I mean, 344 00:18:58,720 --> 00:19:01,600 Speaker 1: this will be the collapse and lifetime. I'm I'm thirty 345 00:19:01,640 --> 00:19:03,920 Speaker 1: seven years old. I grew up in Kentucky. I saw 346 00:19:03,960 --> 00:19:06,440 Speaker 1: the collapse of the coal industry when people said there 347 00:19:06,480 --> 00:19:09,400 Speaker 1: was no way you talk to any coal minor. Fifteen 348 00:19:09,480 --> 00:19:12,680 Speaker 1: years ago, Peabody Energy. Anyone couldn't get their head out 349 00:19:12,680 --> 00:19:15,679 Speaker 1: of the sand. Uh, and we saw a collapse of 350 00:19:15,680 --> 00:19:18,000 Speaker 1: an industry that people thought there was no way it 351 00:19:18,000 --> 00:19:21,879 Speaker 1: would collapse. We will not be farming leafy greens in California. 352 00:19:21,960 --> 00:19:24,200 Speaker 1: We're not going to be farming the way we're farming 353 00:19:24,200 --> 00:19:26,320 Speaker 1: in the southwest of the US. I mean, it is 354 00:19:26,359 --> 00:19:30,320 Speaker 1: an existential threat to those cities. We do not have 355 00:19:30,480 --> 00:19:33,919 Speaker 1: enough water. Eight of the water that's being consumed in 356 00:19:33,920 --> 00:19:38,240 Speaker 1: the West is consumed by agriculture. So you can talk 357 00:19:38,280 --> 00:19:41,680 Speaker 1: about like Kim Kardashian, you know, reducing her shower time. 358 00:19:41,720 --> 00:19:43,760 Speaker 1: I know it's made a lot of headlines in California 359 00:19:44,000 --> 00:19:47,080 Speaker 1: where cities have tried to restrict shower time or bout 360 00:19:47,160 --> 00:19:52,280 Speaker 1: that it's irrelevant. That's agriculture. So we're not going to 361 00:19:52,359 --> 00:19:56,080 Speaker 1: be growing leafy greens in Salinas, Cally Valley, California in 362 00:19:56,119 --> 00:20:00,639 Speaker 1: my lifetime. We we solve it by using facility like ours. 363 00:20:00,680 --> 00:20:04,280 Speaker 1: We're using less water. So you do the back back 364 00:20:04,280 --> 00:20:06,760 Speaker 1: to the envelope math. It's pretty simple. I mean, we're 365 00:20:06,760 --> 00:20:10,120 Speaker 1: close with Tom Vilsack. We knew the last at Secretary Purdue. 366 00:20:10,560 --> 00:20:12,280 Speaker 1: You know, there's a real lack of leadership in d 367 00:20:12,359 --> 00:20:14,280 Speaker 1: C on either side of the aisle. I mean, no 368 00:20:14,320 --> 00:20:17,960 Speaker 1: one wants to touch this topic. Which politician would want 369 00:20:17,960 --> 00:20:20,880 Speaker 1: to touch this topic and try to get reelected anywhere? 370 00:20:21,240 --> 00:20:24,080 Speaker 1: So it's a hot button issue. We're not talking about it. 371 00:20:24,800 --> 00:20:28,920 Speaker 1: The water issues of Colorado, River Lake, pal Lake Mead, 372 00:20:29,040 --> 00:20:31,520 Speaker 1: all through California. It's only going to get worse here 373 00:20:31,560 --> 00:20:34,240 Speaker 1: over a year. Uh. And maybe you'll have to get 374 00:20:34,280 --> 00:20:36,400 Speaker 1: really bad before it gets better. But the good thing 375 00:20:36,520 --> 00:20:39,760 Speaker 1: is there's technology and we can use that technology and 376 00:20:39,800 --> 00:20:43,280 Speaker 1: grow with less water. And the private markets can help 377 00:20:43,320 --> 00:20:45,760 Speaker 1: solve this. But ultimately we're going to need d C 378 00:20:45,960 --> 00:20:48,880 Speaker 1: to incentivize the private markets to put capital to work 379 00:20:48,920 --> 00:20:51,920 Speaker 1: across farms in the US. All right, good stuff, Jonathan 380 00:20:52,000 --> 00:20:54,560 Speaker 1: Johnson Webb. We appreciate you taking the time here, CEO 381 00:20:54,600 --> 00:20:59,240 Speaker 1: and founder of app Harvests symbol a p p H 382 00:20:59,320 --> 00:21:02,240 Speaker 1: and put that into a Bloomberg terminal. Uh. And you know, 383 00:21:02,240 --> 00:21:10,120 Speaker 1: talking about sustainable farming going farther into the future. When 384 00:21:10,160 --> 00:21:11,680 Speaker 1: we move over to M and A into the power 385 00:21:11,720 --> 00:21:14,560 Speaker 1: generation space, we had a German power generator r w 386 00:21:14,800 --> 00:21:18,000 Speaker 1: E announced today a six point eight billion dollar purchase 387 00:21:18,000 --> 00:21:20,960 Speaker 1: of Khan Edison assets. UM, I want to get to 388 00:21:21,000 --> 00:21:23,000 Speaker 1: the you know what's going on. We don't talk about 389 00:21:23,359 --> 00:21:26,240 Speaker 1: the green unit of Yeah, the green unit of CONDAD. 390 00:21:26,320 --> 00:21:30,000 Speaker 1: Let's bring in Patricia Alvarez, Equity research Channels for Bloomberg Intelligency, 391 00:21:30,080 --> 00:21:33,760 Speaker 1: joins us from the our Bloomberg's London studio. Patricia talk 392 00:21:33,840 --> 00:21:36,280 Speaker 1: to us about r w E. Who are they, what 393 00:21:36,359 --> 00:21:39,520 Speaker 1: are they? And talk to us about this deal. Sure so, 394 00:21:39,800 --> 00:21:43,040 Speaker 1: um are do we E is one of Europe's largest 395 00:21:43,160 --> 00:21:46,760 Speaker 1: coal fire generators of power, but as well they're also 396 00:21:46,880 --> 00:21:51,640 Speaker 1: one of the fastest growing renewable asset operators in the region, 397 00:21:52,040 --> 00:21:55,760 Speaker 1: with exposure to previous exposure to the US and the 398 00:21:55,880 --> 00:21:59,160 Speaker 1: UK UM and with their headquarters and sort of their 399 00:21:59,240 --> 00:22:03,680 Speaker 1: their core market in Germany UM. In terms of the acquisition, 400 00:22:03,920 --> 00:22:07,480 Speaker 1: we see this as part of their their longer term 401 00:22:07,520 --> 00:22:11,320 Speaker 1: strategy UH into pivoting into the US UM And while 402 00:22:11,400 --> 00:22:13,840 Speaker 1: it may surprise some investors to see r w E 403 00:22:13,960 --> 00:22:17,879 Speaker 1: sort of spending money outside of of Europe amid the 404 00:22:17,960 --> 00:22:21,200 Speaker 1: current energy crunch we're having here, we see this as 405 00:22:21,640 --> 00:22:26,040 Speaker 1: as a structurally sound strategic move for them, especially now 406 00:22:26,080 --> 00:22:29,359 Speaker 1: with the policy support coming in with the Inflation Reduction Act. 407 00:22:29,480 --> 00:22:33,840 Speaker 1: And considering that Conddition's assets are mostly solar assets, which 408 00:22:33,840 --> 00:22:35,760 Speaker 1: are the ones that are poised to benefit the most 409 00:22:35,840 --> 00:22:39,320 Speaker 1: from this policy shift. We see this as um as 410 00:22:39,400 --> 00:22:42,000 Speaker 1: as a sound sort of a strategic move for for 411 00:22:42,040 --> 00:22:45,320 Speaker 1: our W. So Patricio, um, you know, I've lived in 412 00:22:45,320 --> 00:22:47,920 Speaker 1: Germany the past five or six years. They were constantly 413 00:22:47,960 --> 00:22:51,200 Speaker 1: talking about reducing their reliance on coal. That is, until 414 00:22:51,880 --> 00:22:56,640 Speaker 1: um the Russians invaded Ukraine. Does that mean and now 415 00:22:56,680 --> 00:22:58,520 Speaker 1: of course they've had to go to coal because they 416 00:22:58,520 --> 00:23:01,399 Speaker 1: don't have as much gas they had previously. Does that 417 00:23:01,480 --> 00:23:05,040 Speaker 1: mean that our w is flush with cash as those 418 00:23:05,560 --> 00:23:08,800 Speaker 1: plants are just generating so much electricity and I guess 419 00:23:08,800 --> 00:23:12,040 Speaker 1: then revenue that they can use it in acquisitions like this, 420 00:23:13,280 --> 00:23:16,240 Speaker 1: So that that's an interesting point. Um so are do 421 00:23:16,320 --> 00:23:21,880 Speaker 1: we has has done well compared to other UM German utilities. 422 00:23:22,160 --> 00:23:25,160 Speaker 1: It's no surprise that other utilities that are more reliant 423 00:23:25,160 --> 00:23:29,440 Speaker 1: on both gas supply and also gas fire generations, such 424 00:23:29,480 --> 00:23:32,600 Speaker 1: as Uniper, which is now the poster child of the 425 00:23:32,720 --> 00:23:35,400 Speaker 1: energy crisis, being bailed out by by the German government 426 00:23:36,000 --> 00:23:40,960 Speaker 1: UM bought out. Yes, um UM of of the equity 427 00:23:41,040 --> 00:23:43,879 Speaker 1: is now going to be nationalized. But our do WE 428 00:23:44,040 --> 00:23:46,520 Speaker 1: does not have this type of exposure. Are do We 429 00:23:46,680 --> 00:23:49,760 Speaker 1: does have a significant fleet of gas fired power, but 430 00:23:49,800 --> 00:23:52,040 Speaker 1: at the same time it has the largest lg nite 431 00:23:52,080 --> 00:23:56,199 Speaker 1: fired power generation fleet. So in that sense they are 432 00:23:56,240 --> 00:23:59,600 Speaker 1: both covered from from the suppliers side, from Russia being 433 00:23:59,680 --> 00:24:02,359 Speaker 1: a thing supplies, but at the same time they have 434 00:24:02,480 --> 00:24:05,760 Speaker 1: been benefiting from from higher prices on their dispatchable power, 435 00:24:05,800 --> 00:24:09,480 Speaker 1: which is mainly lignite, which is also important important to 436 00:24:09,520 --> 00:24:14,280 Speaker 1: note that is mostly mined within Germany UM, which is 437 00:24:14,600 --> 00:24:17,240 Speaker 1: which is interesting to see because most of the hard 438 00:24:17,280 --> 00:24:20,520 Speaker 1: core coming into Europe comes from Russia UM, so, so 439 00:24:20,560 --> 00:24:22,399 Speaker 1: in that way are WE so it's sort of in 440 00:24:22,400 --> 00:24:25,480 Speaker 1: the sweet spot where it has been mining that lignite 441 00:24:25,480 --> 00:24:27,080 Speaker 1: as well, or they have to buy it from minors 442 00:24:27,119 --> 00:24:30,520 Speaker 1: before they burn in their plants. I most of their 443 00:24:30,560 --> 00:24:33,680 Speaker 1: of their lignite is is procured from their own minds 444 00:24:33,880 --> 00:24:38,040 Speaker 1: and uh or from domestic from domestic producers, so they 445 00:24:38,080 --> 00:24:41,160 Speaker 1: are not exposed to to any supply disruptions, which is interesting, 446 00:24:41,520 --> 00:24:44,800 Speaker 1: and they they're sort of an outsized and an outlier 447 00:24:44,840 --> 00:24:47,720 Speaker 1: i'd say within the energy crisis because they are both 448 00:24:47,760 --> 00:24:50,880 Speaker 1: fetching capturing these higher power prices. But at the same 449 00:24:50,920 --> 00:24:55,240 Speaker 1: time they're not having the same struggles as as other utilities. Alright, Patricia, 450 00:24:55,359 --> 00:24:57,359 Speaker 1: good stuff. We appreciate you hopping on the line with this, 451 00:24:57,440 --> 00:25:00,560 Speaker 1: Patricia Abas these equity research channels covering all that power 452 00:25:00,640 --> 00:25:06,400 Speaker 1: generation utility stuff across Europe for Bloomberg Intelligence. Uh, we've 453 00:25:06,440 --> 00:25:08,520 Speaker 1: got Kick Knolan who covers it here in the US. 454 00:25:08,560 --> 00:25:12,080 Speaker 1: We've got Patricio uh in all of Europe as well, 455 00:25:12,119 --> 00:25:14,080 Speaker 1: So we've got it covered for you from a Bloomberg 456 00:25:14,160 --> 00:25:17,359 Speaker 1: Intelligence perspective. We appreciate getting his thoughts there. So a 457 00:25:17,440 --> 00:25:20,159 Speaker 1: green deal, Yeah, I'm wondering why Conde. I wonder why 458 00:25:20,200 --> 00:25:23,400 Speaker 1: Conde isn't selling I mean, who sells green assets these days? 459 00:25:23,440 --> 00:25:26,560 Speaker 1: Well maybe it's um just for money. Yeah, you know, 460 00:25:27,200 --> 00:25:29,320 Speaker 1: you might want to take a high price when you 461 00:25:29,320 --> 00:25:32,200 Speaker 1: can get it. And said it's almost seven billion dollar deal. 462 00:25:32,200 --> 00:25:35,080 Speaker 1: I think it's the biggest green deal that I've seen. 463 00:25:35,200 --> 00:25:41,600 Speaker 1: Good stuff. Looking at Credit Swiss the a d r 464 00:25:41,680 --> 00:25:44,600 Speaker 1: s four dollars to share kids, Oh my goodness. Up 465 00:25:44,640 --> 00:25:46,480 Speaker 1: a couple of percent today, but down fifty eight percent 466 00:25:46,520 --> 00:25:48,439 Speaker 1: year today. People are really looking at Credit Swiss. Here 467 00:25:48,520 --> 00:25:52,919 Speaker 1: is you know, real concern for global Wall Street welcome 468 00:25:52,960 --> 00:25:55,240 Speaker 1: Shiney Basket, Wall Street reporter for Bloomberg News and our 469 00:25:55,240 --> 00:25:58,520 Speaker 1: Bloomberg Interactive Broker studio. Paul Daviess, Bloomberg Opinion columnists. I 470 00:25:58,560 --> 00:26:02,120 Speaker 1: believe in our London in studio will find out soon enough. 471 00:26:03,520 --> 00:26:05,840 Speaker 1: Credit Swiss it just seems like I can't get out 472 00:26:05,840 --> 00:26:09,199 Speaker 1: of its own way. What's the latest here from my 473 00:26:09,320 --> 00:26:12,280 Speaker 1: former employer. Listen, so much of this you saw coming 474 00:26:12,320 --> 00:26:14,280 Speaker 1: in the sense that if you were making comparisons to 475 00:26:14,320 --> 00:26:17,040 Speaker 1: Deutsche Bank or other banks here, you end up getting 476 00:26:17,040 --> 00:26:18,919 Speaker 1: into a bit of a vicious cycle when you're funding 477 00:26:18,960 --> 00:26:22,680 Speaker 1: cost rise at the same time your revenue is under pressure, 478 00:26:23,000 --> 00:26:25,400 Speaker 1: and the problem for credit swises. This is all happening 479 00:26:25,440 --> 00:26:28,640 Speaker 1: also when people are very worried about the larger macroeconomic outlook. 480 00:26:28,840 --> 00:26:32,040 Speaker 1: I really like what Boaz Weinstein tweeted about two hours ago, 481 00:26:32,440 --> 00:26:34,840 Speaker 1: and he wrote that I do think that European Bank 482 00:26:34,960 --> 00:26:39,080 Speaker 1: SUBSIDIS is a good catch all tailheage for the myriad 483 00:26:39,119 --> 00:26:41,680 Speaker 1: of problem swirling around, but he hated how this weekend 484 00:26:41,760 --> 00:26:44,760 Speaker 1: was full about Twitter, full of how CS is about 485 00:26:44,760 --> 00:26:47,440 Speaker 1: to go bust, because he doesn't believe that's going to happen. Now. 486 00:26:47,480 --> 00:26:50,320 Speaker 1: This morning I was talking to another large money manager 487 00:26:50,720 --> 00:26:54,080 Speaker 1: who has made the point here that the reason he's 488 00:26:54,080 --> 00:26:57,120 Speaker 1: not worried is because this is as a diamond of Switzerland. 489 00:26:57,240 --> 00:27:00,600 Speaker 1: No one's worried. Literally, no, everyone I've talked too said 490 00:27:00,680 --> 00:27:04,480 Speaker 1: Credit Sweez is fine, There're no liquidity problems. Paul Davis, 491 00:27:04,520 --> 00:27:07,720 Speaker 1: your story the title no Credit Sweez isn't on the brink. 492 00:27:08,280 --> 00:27:11,440 Speaker 1: I don't know who's aimed at, because I've heard no 493 00:27:11,520 --> 00:27:14,040 Speaker 1: one say that there are real problems here. And yet 494 00:27:14,080 --> 00:27:17,399 Speaker 1: the shares fell eleven and a half percent at the 495 00:27:17,440 --> 00:27:20,680 Speaker 1: start of trading today and it costs fifteen percent more 496 00:27:20,760 --> 00:27:23,120 Speaker 1: to ensure the bonds against default. Why is that? Why 497 00:27:23,160 --> 00:27:25,760 Speaker 1: is the market freaking out? Yeah, well I think that. 498 00:27:25,920 --> 00:27:28,560 Speaker 1: I mean there are people who are, you know, worried 499 00:27:28,600 --> 00:27:31,199 Speaker 1: about what's going on there. I don't think there are 500 00:27:31,240 --> 00:27:34,040 Speaker 1: people there are, not sensible people worried about it actually 501 00:27:34,119 --> 00:27:37,000 Speaker 1: falling over in you know, the coming days or weeks, 502 00:27:37,320 --> 00:27:39,760 Speaker 1: because like you say, it does have plenty of capital, 503 00:27:40,400 --> 00:27:42,679 Speaker 1: and it does have plenty of liquidity, but you know, 504 00:27:42,760 --> 00:27:44,760 Speaker 1: it has a real issue in that it's got to 505 00:27:45,359 --> 00:27:47,840 Speaker 1: work out how to restructure itself. It really wants to 506 00:27:47,920 --> 00:27:51,240 Speaker 1: change its investment banks significantly and This is a very 507 00:27:51,240 --> 00:27:54,280 Speaker 1: expensive thing to do in terms of how you deal 508 00:27:54,320 --> 00:27:57,159 Speaker 1: with assets that you're carrying, all the people and the 509 00:27:57,240 --> 00:28:00,520 Speaker 1: systems that you have. So you know Rose column the 510 00:28:00,560 --> 00:28:02,480 Speaker 1: other week saying you can either do it slowly and 511 00:28:02,520 --> 00:28:06,080 Speaker 1: expensively or quickly and expensively. It's you know, it's it's 512 00:28:06,160 --> 00:28:10,239 Speaker 1: just and for investors, for credit investors, quicker would be 513 00:28:10,240 --> 00:28:12,560 Speaker 1: better to pay for it. I have a question for you, 514 00:28:12,800 --> 00:28:15,639 Speaker 1: because you know, Deutsche Bank when they did this restructuring, 515 00:28:15,680 --> 00:28:18,560 Speaker 1: they did it generally into an upmarket, which means when 516 00:28:18,600 --> 00:28:20,840 Speaker 1: they sold assets they were probably able to get higher 517 00:28:20,880 --> 00:28:23,359 Speaker 1: evaluations for them. It means that they were able to 518 00:28:23,359 --> 00:28:25,800 Speaker 1: generate revenue at a at a faster pace because the 519 00:28:25,840 --> 00:28:28,679 Speaker 1: market was more normal. And so how much is this 520 00:28:28,760 --> 00:28:31,280 Speaker 1: broader macro environment going to burn cut it, sweetz as 521 00:28:31,320 --> 00:28:34,639 Speaker 1: it makes this restructuring work for them. It's going to 522 00:28:34,760 --> 00:28:37,720 Speaker 1: be really difficult for them. And it's and it's you know, 523 00:28:37,800 --> 00:28:39,560 Speaker 1: if they'd have if they'd have tried to do this 524 00:28:39,800 --> 00:28:42,640 Speaker 1: year eighteen months ago, it would have been so much easier. 525 00:28:42,680 --> 00:28:45,800 Speaker 1: And that's and that's because the two key areas where 526 00:28:45,800 --> 00:28:48,160 Speaker 1: they are biggest and most concentrated in, which is leverage 527 00:28:48,200 --> 00:28:51,280 Speaker 1: finance funding, private exty buyouts and what they call the 528 00:28:51,280 --> 00:28:54,480 Speaker 1: Security sized Products division, which is also do with packaging 529 00:28:54,520 --> 00:28:56,640 Speaker 1: up mortgages and leverage loans and this sort of stuff 530 00:28:56,680 --> 00:28:59,239 Speaker 1: and sending them into the market. Those things were so 531 00:28:59,320 --> 00:29:01,840 Speaker 1: much better. Those markets was so much better eighteen months ago. 532 00:29:01,920 --> 00:29:07,520 Speaker 1: Now they are really unattractive, I think unattractive businesses. Everybody's 533 00:29:07,560 --> 00:29:11,720 Speaker 1: been taking write downs on their liverage, blown positions, and 534 00:29:11,960 --> 00:29:14,400 Speaker 1: on top of all of that, you know, what we 535 00:29:14,480 --> 00:29:18,840 Speaker 1: saw in UK guilt market last week with with you know, 536 00:29:18,880 --> 00:29:21,640 Speaker 1: pension funds running up against problems with their with their 537 00:29:21,680 --> 00:29:24,800 Speaker 1: investing strategies illustrates a broader problem that we're going to 538 00:29:24,840 --> 00:29:29,480 Speaker 1: have continually in markets with rising interest rates, higher volatility, 539 00:29:29,600 --> 00:29:34,040 Speaker 1: and you know, more chance of you know, unexpected problems 540 00:29:34,040 --> 00:29:37,400 Speaker 1: emerging and just kind of you know, growth in exposure 541 00:29:37,440 --> 00:29:40,680 Speaker 1: between counter parties, more collateral calls, more margin calls, all 542 00:29:40,720 --> 00:29:43,360 Speaker 1: of this sort of stuff, and that is just a 543 00:29:43,440 --> 00:29:45,560 Speaker 1: much costlier environment in which the trade and what we're 544 00:29:45,560 --> 00:29:48,840 Speaker 1: seeing with credit sweezes, you know, CDs prices, credit folts, 545 00:29:48,880 --> 00:29:50,480 Speaker 1: what price which is one of the things that people 546 00:29:50,480 --> 00:29:54,320 Speaker 1: were getting very excited about over the weekend is is 547 00:29:54,360 --> 00:29:57,240 Speaker 1: a rise in the cost of guarding against the risk 548 00:29:57,320 --> 00:29:59,800 Speaker 1: of that bank as a counterparty. And again this is 549 00:29:59,800 --> 00:30:03,480 Speaker 1: what which banks or when it just lost revenues because 550 00:30:03,480 --> 00:30:06,680 Speaker 1: it became expensive to trade with. So you know, it 551 00:30:06,760 --> 00:30:09,880 Speaker 1: just speeds into credit sweet problems. The fact that everything 552 00:30:09,920 --> 00:30:12,160 Speaker 1: is more volatile, everything is more difficult, everything is more 553 00:30:12,200 --> 00:30:15,080 Speaker 1: uncertain h and everything is just more expensive to do. 554 00:30:15,400 --> 00:30:18,280 Speaker 1: But when do you know, Um, I was thinking when 555 00:30:18,320 --> 00:30:21,280 Speaker 1: I was reading these stories over the weekend, man, I 556 00:30:21,320 --> 00:30:24,360 Speaker 1: want to sell the insurance or maybe by the stock 557 00:30:24,480 --> 00:30:28,920 Speaker 1: because clearly they're well capitalized and a lot of this 558 00:30:29,040 --> 00:30:34,760 Speaker 1: is just market noise. So when do you see a turnaround? Uh? So, well, 559 00:30:34,800 --> 00:30:36,160 Speaker 1: they've got to come up with a good plan. They've 560 00:30:36,160 --> 00:30:40,120 Speaker 1: got to come exactly so I mean, I mean hopefully 561 00:30:40,160 --> 00:30:42,800 Speaker 1: if they were, if they could, they would be really 562 00:30:42,800 --> 00:30:46,040 Speaker 1: good to do it sooner than that, because um, you know, 563 00:30:46,320 --> 00:30:48,560 Speaker 1: the pressure is only going to build and and things. 564 00:30:49,480 --> 00:30:51,959 Speaker 1: Your panic has a way of feeding on itself and 565 00:30:52,000 --> 00:30:54,120 Speaker 1: that's that's that's the kind of a worrying thing. So 566 00:30:54,360 --> 00:30:56,080 Speaker 1: if they could come down it, that would be great. Well, 567 00:30:56,200 --> 00:30:58,120 Speaker 1: really quick question here, I know, and we don't have 568 00:30:58,160 --> 00:30:59,680 Speaker 1: a lot of time, laugh, But how quickly can a 569 00:30:59,760 --> 00:31:05,160 Speaker 1: third teen ct ratio falls to ten or even fifteenth 570 00:31:07,000 --> 00:31:09,920 Speaker 1: gotta fall to I mean, I don't have the numbers 571 00:31:09,920 --> 00:31:12,360 Speaker 1: off stuff my head that you would need to suffer 572 00:31:13,120 --> 00:31:16,880 Speaker 1: billions and billions and billions of dollars in losses, you know, 573 00:31:17,440 --> 00:31:21,280 Speaker 1: And this is why credit Swiss size losses well much 574 00:31:21,320 --> 00:31:23,959 Speaker 1: bigger than much bigger than ones that they've already suffered. 575 00:31:24,040 --> 00:31:26,120 Speaker 1: But I think you know, this is where Crede is 576 00:31:26,120 --> 00:31:28,240 Speaker 1: now is different from Deutsche Bank in twenty sixteen. Deutsche 577 00:31:28,240 --> 00:31:30,920 Speaker 1: Bank then had very same capital based and threats of 578 00:31:31,080 --> 00:31:34,440 Speaker 1: huge fines coming at it, and was was was in 579 00:31:34,480 --> 00:31:38,400 Speaker 1: a much weaker position, but still wasn't really in danger 580 00:31:38,440 --> 00:31:41,560 Speaker 1: of falling over credit sweezes. I mean it would take 581 00:31:41,800 --> 00:31:45,120 Speaker 1: it would take, would take more artgos and green sales, right, exactly, 582 00:31:45,160 --> 00:31:47,320 Speaker 1: all right, Paul Davis, thank you so much for joining us. 583 00:31:47,320 --> 00:31:51,240 Speaker 1: Paul Davis, Bloomberg Opinion joining us from our London offices 584 00:31:51,280 --> 00:31:54,440 Speaker 1: and chios actually covers all things Wall Street for Bloomberg 585 00:31:54,440 --> 00:31:56,240 Speaker 1: News here in New York. What do you talk to 586 00:31:56,240 --> 00:31:58,760 Speaker 1: her about league tables? We'll talk to her about league tables. 587 00:31:58,760 --> 00:32:01,680 Speaker 1: We have her on more often. You can always talk 588 00:32:01,680 --> 00:32:06,000 Speaker 1: about L E A G go on your Bloomberg terminal. 589 00:32:10,000 --> 00:32:13,840 Speaker 1: I want to get over to our Bloomberg intelligence analysts. 590 00:32:13,840 --> 00:32:17,680 Speaker 1: Who knows the most about cars? I'm pretty sure, both 591 00:32:17,800 --> 00:32:25,560 Speaker 1: in UH financial analysis terms and in actual UH motor terms. UM, 592 00:32:25,680 --> 00:32:27,600 Speaker 1: Kevin Tynan, We've got a lot to talk about with you, 593 00:32:27,800 --> 00:32:30,600 Speaker 1: but I want to start with Tesla Um. They made 594 00:32:31,360 --> 00:32:35,200 Speaker 1: three hundred and sixties six thousand vehicles in the quarter, 595 00:32:35,320 --> 00:32:38,400 Speaker 1: but they only sold three forty three thousand in a 596 00:32:38,480 --> 00:32:43,160 Speaker 1: time when people are waiting six, eight, twelve months for vehicles. 597 00:32:43,440 --> 00:32:48,240 Speaker 1: Why are they selling so many fewer than they produce. Well, 598 00:32:48,400 --> 00:32:52,160 Speaker 1: you could argue there's demand issue there, you know. And 599 00:32:52,200 --> 00:32:54,400 Speaker 1: I look, it's not just them. I think we're we're 600 00:32:54,440 --> 00:32:59,320 Speaker 1: in this little window here where UM. You're you know 601 00:32:59,440 --> 00:33:02,880 Speaker 1: that consuemer is a little bit is a little bit tentative. Um. 602 00:33:03,040 --> 00:33:05,360 Speaker 1: And you're going to see this from other automakers too. 603 00:33:05,360 --> 00:33:10,160 Speaker 1: But supply has been constrained to the point where you're 604 00:33:10,200 --> 00:33:13,720 Speaker 1: just not gonna throw good money after bad anymore. UM. 605 00:33:13,760 --> 00:33:16,000 Speaker 1: And I would think that they want this sorted out 606 00:33:16,080 --> 00:33:20,600 Speaker 1: and balance between supply and demand by Black Friday sales, 607 00:33:20,760 --> 00:33:24,000 Speaker 1: you know, November sales, end of the year clearance sales, 608 00:33:24,120 --> 00:33:27,240 Speaker 1: kind of thing. UM. So there's this little period I think, 609 00:33:27,520 --> 00:33:30,960 Speaker 1: you know, September October, maybe even the first half of November, 610 00:33:30,960 --> 00:33:35,600 Speaker 1: where UM, the automakers will let demand fall where it 611 00:33:35,640 --> 00:33:39,040 Speaker 1: will not chase it with incentives and discounting UM, and 612 00:33:39,040 --> 00:33:40,880 Speaker 1: then make a push towards the end of the year. 613 00:33:40,920 --> 00:33:44,040 Speaker 1: I mean that's what I was in Detroit last week, 614 00:33:44,080 --> 00:33:47,160 Speaker 1: and I sat down with Mark Royce Um, the president 615 00:33:47,160 --> 00:33:50,760 Speaker 1: of General Motors, drove around the Silverado EV, drove around 616 00:33:50,960 --> 00:33:55,920 Speaker 1: in the new Corvette zero six that was sick, flat 617 00:33:55,920 --> 00:33:59,959 Speaker 1: plane crank um. He was saying, you know there or 618 00:34:00,040 --> 00:34:03,840 Speaker 1: her book is full. Their pipeline is deep, um and 619 00:34:04,520 --> 00:34:06,680 Speaker 1: you know, going going into next year, and they had 620 00:34:06,720 --> 00:34:09,840 Speaker 1: a fantastic third quarter as well, but at some point, 621 00:34:09,880 --> 00:34:13,920 Speaker 1: you know, it can't continue to demand now GM, I 622 00:34:13,920 --> 00:34:17,319 Speaker 1: feel like it's not the high end for the most part. 623 00:34:17,400 --> 00:34:20,600 Speaker 1: That well, I say that and their truck selfer sometimes 624 00:34:20,600 --> 00:34:22,799 Speaker 1: over a hundred thousand dollars. But so that that we 625 00:34:22,840 --> 00:34:25,160 Speaker 1: imagine Tesla as more of a luxury car maker, right, 626 00:34:25,200 --> 00:34:28,640 Speaker 1: but GM brings out new models Tesla, I feel like 627 00:34:28,680 --> 00:34:32,040 Speaker 1: they've been making the same old tired designs for a decade. 628 00:34:32,200 --> 00:34:35,799 Speaker 1: My alone on that Kevin well again, you know, it's 629 00:34:35,840 --> 00:34:39,719 Speaker 1: more of a device maker than an automaker. And it's 630 00:34:39,960 --> 00:34:42,279 Speaker 1: and I've said this a million times, you know, and 631 00:34:42,520 --> 00:34:44,960 Speaker 1: from in the mindset of Tesla, it's not so much 632 00:34:45,000 --> 00:34:50,080 Speaker 1: about the vehicle right about um, what it looks like. 633 00:34:50,200 --> 00:34:52,080 Speaker 1: It's just what it can do, sort of the way 634 00:34:52,120 --> 00:34:54,399 Speaker 1: your phone is not about what it looks like. It's 635 00:34:54,440 --> 00:34:57,080 Speaker 1: about all the you know, Angry Birds games you can 636 00:34:57,120 --> 00:35:00,000 Speaker 1: play on it and whatever, um, you know. And I've 637 00:35:00,000 --> 00:35:03,799 Speaker 1: feel like that's where they positioned themselves a little bit 638 00:35:03,840 --> 00:35:06,359 Speaker 1: and then market positions them as a as a tech 639 00:35:06,440 --> 00:35:11,080 Speaker 1: company because it's not so much about changing design and 640 00:35:11,160 --> 00:35:15,480 Speaker 1: changing features and options and colors and content in the vehicle, 641 00:35:16,239 --> 00:35:18,719 Speaker 1: um in the way that we're used to seeing other 642 00:35:18,800 --> 00:35:22,200 Speaker 1: automakers address those issues. Kevin, give us a sense of 643 00:35:22,280 --> 00:35:25,080 Speaker 1: just the landscape here. I mean, you know, when I 644 00:35:25,160 --> 00:35:28,520 Speaker 1: was growing up Detroit and the others, they made seventeen 645 00:35:28,520 --> 00:35:30,799 Speaker 1: million cars every year. Are we going to go and 646 00:35:30,800 --> 00:35:33,520 Speaker 1: there's tons of cars on the lots. You could go 647 00:35:33,640 --> 00:35:36,560 Speaker 1: negotiate a little bit if you felt like it. What's 648 00:35:36,600 --> 00:35:40,160 Speaker 1: the Is that world ever coming back? I don't think so. 649 00:35:40,600 --> 00:35:44,520 Speaker 1: Um And and that's not to say never, but I 650 00:35:44,560 --> 00:35:48,080 Speaker 1: don't think the automakers want it there, The dealers don't 651 00:35:48,080 --> 00:35:51,120 Speaker 1: want it there. The consumer wants it there only because 652 00:35:51,520 --> 00:35:54,279 Speaker 1: of that haggling and the discounting and the incentives that 653 00:35:54,280 --> 00:35:57,960 Speaker 1: were really the way the business in the industry ran was, 654 00:35:58,080 --> 00:36:00,680 Speaker 1: We're going to produce these things to cover fixed costs 655 00:36:00,719 --> 00:36:04,160 Speaker 1: and create generate cash flow, and then we'll figure out 656 00:36:04,160 --> 00:36:06,920 Speaker 1: how to sell it tomorrow by throwing money at the problem, 657 00:36:06,920 --> 00:36:11,280 Speaker 1: which is hey, ten thousand cash back or gero percent 658 00:36:11,400 --> 00:36:14,479 Speaker 1: financing for you know, twenty months or whatever it winds 659 00:36:14,560 --> 00:36:17,920 Speaker 1: up being. And the automakers, now that the costs are rationalized, 660 00:36:17,920 --> 00:36:20,760 Speaker 1: and that's something that's been happening since the bankruptcy period 661 00:36:20,800 --> 00:36:24,839 Speaker 1: of eight oh nine UM through the pandemic, have gotten 662 00:36:24,880 --> 00:36:27,319 Speaker 1: to the point where they don't need to operate in 663 00:36:27,360 --> 00:36:32,040 Speaker 1: that way anymore. So, you know, an unhealthy seventeen million 664 00:36:32,120 --> 00:36:35,560 Speaker 1: is what we were used to and now we're at 665 00:36:35,560 --> 00:36:40,040 Speaker 1: a healthy thirteen, fourteen, fifteen million. And I think, you know, 666 00:36:40,200 --> 00:36:42,960 Speaker 1: from that side of it, from the business perspective of it, 667 00:36:43,360 --> 00:36:45,200 Speaker 1: this is where the industry wants to be and as 668 00:36:45,280 --> 00:36:50,240 Speaker 1: and has actually worked decades to get to. In terms 669 00:36:50,400 --> 00:36:54,800 Speaker 1: of the dealership model, I've never understood why the US 670 00:36:54,880 --> 00:37:00,319 Speaker 1: has this arcane system. How long until that's dead? I 671 00:37:00,360 --> 00:37:04,640 Speaker 1: mean surely Ford and GM and Harley are going to 672 00:37:04,760 --> 00:37:10,440 Speaker 1: sell their products through their own stores eventually. Look, I 673 00:37:10,440 --> 00:37:12,600 Speaker 1: I am on the side of the dealer in this. 674 00:37:12,800 --> 00:37:16,280 Speaker 1: I think if you hate the dealership experience, that means 675 00:37:16,320 --> 00:37:18,319 Speaker 1: that it needs to improve. And I and I don't 676 00:37:18,400 --> 00:37:23,040 Speaker 1: question that. But could you imagine an automaker trying to 677 00:37:23,080 --> 00:37:26,160 Speaker 1: sell what GM sells in the U, say, you know, 678 00:37:26,280 --> 00:37:29,960 Speaker 1: roughly three million vehicles in the US every year. Directly 679 00:37:30,480 --> 00:37:33,520 Speaker 1: they're a manufacturer that people would argue aren't very good 680 00:37:33,520 --> 00:37:35,560 Speaker 1: as a manufacturer. Now all of a sudden, they're going 681 00:37:35,600 --> 00:37:38,919 Speaker 1: to be a great retailer. I just don't understand how 682 00:37:38,960 --> 00:37:42,719 Speaker 1: people think that way, that at volume you're going to 683 00:37:42,840 --> 00:37:45,200 Speaker 1: be a better retailer than a retailer. I mean when 684 00:37:45,200 --> 00:37:47,440 Speaker 1: you need so they're gonna go there, right, I mean 685 00:37:47,480 --> 00:37:49,920 Speaker 1: GM not. It seems like, you know, Royce said, you know, 686 00:37:49,960 --> 00:37:52,480 Speaker 1: we debated this and we're going to stick to our 687 00:37:52,520 --> 00:37:56,400 Speaker 1: guns here. But the but Farley has split off the 688 00:37:56,440 --> 00:37:59,000 Speaker 1: e V s. It seems like that's why he hates 689 00:37:59,040 --> 00:38:02,720 Speaker 1: the dealerships. Um Harley just split off its EV business 690 00:38:02,840 --> 00:38:05,040 Speaker 1: to live Wire, which by the way, is on fire 691 00:38:05,080 --> 00:38:07,359 Speaker 1: today in the markets. I don't know why. I mean, 692 00:38:07,800 --> 00:38:10,080 Speaker 1: it seems they want to go direct to consumer as well, 693 00:38:10,320 --> 00:38:13,720 Speaker 1: but even Farley's model for now is not direct. They're 694 00:38:13,760 --> 00:38:16,080 Speaker 1: just telling dealers that they have to invest in a 695 00:38:16,200 --> 00:38:20,160 Speaker 1: charge point at their store. Uh, they have to train texts, 696 00:38:20,239 --> 00:38:23,640 Speaker 1: they have to train their salespeople to understand the technology. 697 00:38:23,640 --> 00:38:26,200 Speaker 1: They're not saying, we'll do it directly. And what they're 698 00:38:26,200 --> 00:38:28,680 Speaker 1: telling dealers also is if you don't want to invest 699 00:38:28,719 --> 00:38:31,440 Speaker 1: in these things, which the estimate is about one point 700 00:38:31,440 --> 00:38:34,640 Speaker 1: two million dollars per dealership, is to say, well, then 701 00:38:34,680 --> 00:38:37,239 Speaker 1: you can't have e V inventory and you can't have 702 00:38:37,400 --> 00:38:41,880 Speaker 1: EV demos um. So they're sort of forcing the dealers 703 00:38:41,920 --> 00:38:44,400 Speaker 1: into it, but it's not an issue. Or they'll say 704 00:38:44,920 --> 00:38:47,279 Speaker 1: you have to have an order for one before we 705 00:38:47,360 --> 00:38:49,840 Speaker 1: send you one. You can't. You can't have anything sold 706 00:38:49,880 --> 00:38:52,520 Speaker 1: off the lot um. So it's not direct. I mean, 707 00:38:52,520 --> 00:38:55,120 Speaker 1: it's a it's a way of doing it direct, but look, 708 00:38:55,120 --> 00:38:58,520 Speaker 1: it doesn't work at scale. I think you as a consumer, 709 00:38:58,680 --> 00:39:02,760 Speaker 1: we as a consumer, will have horrible experience buying vehicles 710 00:39:02,800 --> 00:39:07,320 Speaker 1: directly and trying to get them serviced um from manufacturers 711 00:39:07,400 --> 00:39:09,239 Speaker 1: if they assume the role of a retailer. I just 712 00:39:09,280 --> 00:39:11,719 Speaker 1: can't imagine having a good experience at a dealership here 713 00:39:11,719 --> 00:39:14,120 Speaker 1: in the US. You know, I've bought a fair amount 714 00:39:14,120 --> 00:39:17,160 Speaker 1: of cars and never enjoyed it. Now, on the other hand, 715 00:39:17,320 --> 00:39:21,280 Speaker 1: go buy a nine eleven at Porsche in Berlin, operated 716 00:39:21,280 --> 00:39:24,560 Speaker 1: directly by the company, and you have a great experience. Right. 717 00:39:24,600 --> 00:39:27,480 Speaker 1: But talk about three million a year though not not 718 00:39:27,680 --> 00:39:30,800 Speaker 1: a niche product or you know, a couple of thousands 719 00:39:30,800 --> 00:39:34,239 Speaker 1: of units a year. It's very different at scale. You 720 00:39:34,320 --> 00:39:36,640 Speaker 1: got I mean, as gmm, gonna go to Paduca, Kentucky 721 00:39:36,719 --> 00:39:38,840 Speaker 1: to sell a car and you gotta put some local 722 00:39:38,880 --> 00:39:41,120 Speaker 1: person here. I don't know. So next time I'm gonna 723 00:39:41,120 --> 00:39:43,200 Speaker 1: figure out what Kevin Tynan is driving because it changes 724 00:39:43,280 --> 00:39:45,040 Speaker 1: like everything. They probably have a fact that they build 725 00:39:45,040 --> 00:39:51,080 Speaker 1: corvettes in your Paduca exactly. Automotive analyst for Bloomberg Intelligence 726 00:39:51,160 --> 00:39:52,960 Speaker 1: Bowling Green is in Great Town. Spend a lot of 727 00:39:52,960 --> 00:39:57,480 Speaker 1: time there. Thanks for listening to the Bloomberg Markets podcast. 728 00:39:57,840 --> 00:40:01,080 Speaker 1: You can subscribe and listen to interviews a full podcasts 729 00:40:01,200 --> 00:40:05,120 Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm 730 00:40:05,120 --> 00:40:09,359 Speaker 1: on Twitter at Matt Miller three on Fall Sweeney. I'm 731 00:40:09,360 --> 00:40:12,000 Speaker 1: on Twitter at pt Sweeney before the podcast. You can 732 00:40:12,040 --> 00:40:14,239 Speaker 1: always catch us worldwide at Bloomberg Radio