Speaker 1: This is Bloomberg Intelligence with Alex Steel and Paul Sweeney.
Speaker 2: The real air performance has been the US corporate high yield.
Speaker 3: Are the companies lean enough? Have they trimmed all the fats?
Speaker 2: The semiconductor business is a really cyclical business.
Speaker 1: Breaking market headlines and corporate news from across the globe.
Speaker 4: Do investors like the M and A that we've seen?
Speaker 2: These are two big time blue chip companies.
Speaker 3: The window between the peak and cut changing super fast.
Speaker 1: Bloomberg Intelligence with Alex Steel and Paul Sweeney on Bloomberg Radio.
Speaker 5: I'm Paul Sweeney. Alex Steel is out this week.
Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big
Speaker 2: business stories impacting Wall.
Speaker 5: Street and the global markets.
Speaker 2: Each and every week we provide in depth research and
Speaker 2: data on some of the two thousand companies in one
Speaker 2: hundred and thirty industries around on.
Speaker 5: Is covered worldwide.
Speaker 2: Today, we'll look at that fragility of the commercial mortgage
Speaker 2: backed securities market, as well as the impact that business
Speaker 2: leaders can make by advocating for safe and secure elections. Plus,
Speaker 2: with the US election just a few days away, a
Speaker 2: look at those sway US presidents have on fuel economy
Speaker 2: standards for cards, but first tech earnings. This week, Alphabet
Speaker 2: reported earnings that surpassed analyst estimates, with their cloud division
Speaker 2: seeing a thirty five percent rise in sales, while Meta
Speaker 2: warned of a worsening AI losses. Bloomberg Intelligence senior tech
Speaker 2: analysts Man Deep Seeing breaks down the reports.
Speaker 6: Search, Cloud, YouTube. These are three separate businesses doing extremely
Speaker 6: well at scale. I mean, double digit growth for search
Speaker 6: business is really stellar when you think of all the
Speaker 6: pressure they've been facing, you know, when it comes to
Speaker 6: new entrants like CHATGPT and Perplexity and whatnot. And everyone
Speaker 6: is of the belief that they would take at least
Speaker 6: some share from Google, at least in terms of AD revenue.
Speaker 6: Google hasn't lost any share. In fact, it's a very
Speaker 6: healthy growth at their scale. And YouTube look fifty billion
Speaker 6: plus revenue run rate seventy thirty split between subscriptions ads
Speaker 6: is seventy and thirty percent of subscriptions and subscriptions crew,
Speaker 6: you know, twenty eight percent. I mean, just think about
Speaker 6: fifteen billion dollar subscriptions business growing twenty eight percent. That's
Speaker 6: very impressive. So and we're not even talking about wevemo here.
Speaker 6: So when you look at you know, all the businesses.
Speaker 6: They clearly have a lot going on, and Vemo is
Speaker 6: a future bet, but something that could be huge in
Speaker 6: terms of you know, top line.
Speaker 2: You know, it's interesting you just mentioned fifty billion of
Speaker 2: run right revenue YouTube advertising subscription. That sounds a lot
Speaker 2: like the cable television business, the cable network business. I
Speaker 2: look at Paramount, Paramount Global, you know, all those cable networks,
Speaker 2: they have thirty billion of revenue. So YouTube is significantly
Speaker 2: bigger than some of the largest advertising and subscription German
Speaker 2: media companies out there. Yeah, in a dozen years, it's
Speaker 2: just extraordinary.
Speaker 4: I mean, you were talking about these massive and sms
Speaker 4: that Google in Alphabet obviously the parent company has been
Speaker 4: trying to catch up to the likes of obviously Microsoft
Speaker 4: and of course open Ai. Walk us through some of
Speaker 4: those investments and how they're starting to pay off.
Speaker 6: I mean, look, in the case of Alphabet, they have
Speaker 6: huge data center investments simply because they have a giant
Speaker 6: infrastructure that's powering these big businesses. So there's a lot
Speaker 6: of internal consumption of these chips. But also the cloud business,
Speaker 6: which saw a nice acceleration, you know, sequential acceleration from
Speaker 6: twenty nine percent growth to thirty five percent growth, I
Speaker 6: would say a lot of that is driven by the
Speaker 6: availability of GPUs in their cloud. So I'll be interested
Speaker 6: in seeing how much of Microsoft GPUs are being used
Speaker 6: for internal consumption versus what is being exposed on their
Speaker 6: Azure cloud because in my mind, Google having their own
Speaker 6: chips is making a difference in terms of their cloud growth.
Speaker 6: With Microsoft, at least they quantify the AI services contribution
Speaker 6: being ten billion dollars by next quarter, so that's huge.
Speaker 7: Still.
Speaker 6: You know, when it comes to Azure, the fact that
Speaker 6: growth is not accelerating like we saw with Google Cloud,
Speaker 6: it makes you wonder, you know, if capex is growing
Speaker 6: fifty percent, why is it not translating into faster Azure growth?
Speaker 6: Even though thirty three percent is a very solid number,
Speaker 6: but you want to see that acceleration which we saw
Speaker 6: with Google. In the case of Meta and Microsoft, the
Speaker 6: expectations were higher, and I would say Meta is somewhat
Speaker 6: different in the sense that they have their all large
Speaker 6: angrid model, they have their lead when it comes to
Speaker 6: you know, generative AI, but they don't have a separate
Speaker 6: AI revenue line like you see with you know, Microsoft
Speaker 6: or with Alphabet, And that's where you know, if they say,
Speaker 6: you know, capex is going to significantly increase for twenty
Speaker 6: twenty five without really quantifying how significant it will be.
Speaker 6: Whether it's going to be twenty percent which is the
Speaker 6: consensus number, or thirty percent of fifty percent. Nobody knows,
Speaker 6: and that's what I think created that uncertainty around Meta's
Speaker 6: capex spen. And we saw what happened in three qu
Speaker 6: of twenty twenty two where they had a very similar print,
Speaker 6: but they actually quantified that significant and you know, the
Speaker 6: stock dropped twenty percent after that, so clearly there is
Speaker 6: some nervousness and uncertainty around their cap expin How.
Speaker 2: Is AI impacting John Tucker justman's search results, right, I mean.
Speaker 6: Just the nature of search is changing in the sense
Speaker 6: you can ask you know, a lot longer queries. The
Speaker 6: prompts can be infinite and length. You can you know,
Speaker 6: have a video or an image prompt. It just doesn't
Speaker 6: have to be text. So that's what Google called out,
Speaker 6: that the queries are getting a lot more complex in
Speaker 6: nature and users are actually engaging with it. So it's
Speaker 6: not as if, you know, that's driving them to some
Speaker 6: of the platform users want to use what they call
Speaker 6: multimodal search, which is a combination of texts, videos, and
Speaker 6: images and audios. So that's why these lms are so powerful,
Speaker 6: because they give you that innate capability to search in
Speaker 6: whatever format you want and you can just throw it
Speaker 6: in that search box. So that search box is getting
Speaker 6: a lot bigger and a lot more complex on that
Speaker 6: Google page.
Speaker 2: Our thanks to Bloomberg Intelligence senior tech analysts Man Deep
Speaker 2: saying sticking with earnings, ELI Lilly lowered its guidance due
Speaker 2: to lackluster sales of its weight loss drug zet Bound
Speaker 2: and diabetes drug Montro. Each missed estimates by nearly nine
Speaker 2: hundred million dollars. For more on the drugmaker shocking results,
Speaker 2: we were joined by bloomerg Intelligence director of Research for
Speaker 2: Global Industries and senior pharmaceutical analyst Sam Fazzelli.
Speaker 8: When they reported we got a miss, right and I'm
Speaker 8: looking at it right now. They missed by six percent
Speaker 8: on revenue. That is not what do you do when
Speaker 8: you're a sixty pe company, right, It just that it
Speaker 8: is the world's not forgiving enough on that. Just breaking
Speaker 8: that down further, that miss was two drugs on Jarro
Speaker 8: and zep Bound, and those are the drugs that everybody
Speaker 8: talks about. This is the the obesity drugs that are
Speaker 8: on the market.
Speaker 9: They missed.
Speaker 8: Why did they miss The company said that it's because
Speaker 8: there was an inventory d stocking going on at some wholesalers.
Speaker 8: So people go, wait a minute, you're saying to me
Speaker 8: that demand cannot be satisfied, supply were supply limited, So
Speaker 8: why is there an inventory issue in the middle here?
Speaker 8: And of course that's what led to the question of
Speaker 8: oh my god, are we overestimating demand?
Speaker 9: Here? Is the company overestimated it? Why? It's the world?
Speaker 8: It sounds like with the twelve different forms of the
Speaker 8: drugs that they have.
Speaker 9: That no one in.
Speaker 8: This early launch phase we can call it the early launch, right,
Speaker 8: given that it's been a couple of years, is really
Speaker 8: able to manage and work out what they need to
Speaker 8: have as inventory. Because in such a massive product, you're
Speaker 8: going to have an impact on working capital, even for
Speaker 8: the wholesalers. It sounds like that that's the issue that
Speaker 8: even Lily themselves can't necessarily forecast here, right, I mean
Speaker 8: the actual details of how much of each product has made.
Speaker 8: If that's true, then and I think you get a
Speaker 8: little with of that in the fact that Folier guidance
Speaker 8: wasn't dropped by as much as the miss that at
Speaker 8: least currently they are optimistic about picking a whole bunch
Speaker 8: of that backup in the Q four that you should
Speaker 8: not worry about. Demand you talk to any doctor you want,
Speaker 8: do they say, oh, I have no patients left to
Speaker 8: asking me for he set bound or we go viaor whatever.
Speaker 8: So I think that's what's happening here. The difficulty in
Speaker 8: managing and thinking about how to manage your inventory.
Speaker 4: Something I wanted to pick your brain about was when
Speaker 4: it comes to knockoffs, because we saw a huge drop
Speaker 4: in hymns in hers earlier this month, so they were
Speaker 4: so they previously were allowed to manufacture copycap drugs when
Speaker 4: they're deemed in short supplied by the FDA, But the
Speaker 4: FDA at that time said when it came to Zebound
Speaker 4: and Manjaro specifically for Eli Lily, they weren't shortage anymore.
Speaker 4: So that's why you saw that drop there. But they
Speaker 4: still when it came to a Zempic and Wegovi when
Speaker 4: you think about Novo Nordisk, they were still able to
Speaker 4: offer compounded version actually versions of those, So I'm wondering
Speaker 4: when you think about Eli Lily versus what's happening with
Speaker 4: Novo nordis, how does that kind of come into play
Speaker 4: when you're thinking about when it comes to sort of
Speaker 4: the knockoffs and the copycat type drugs.
Speaker 9: Yeah.
Speaker 8: Sure, I mean I'm not even sure that people have
Speaker 8: stopped making compounded versions of zep pound and Manjara because
Speaker 8: the FDA kind of reeled back a little bit and said, oh,
Speaker 8: we're going to actually look at this again.
Speaker 9: So I don't think that story is finished.
Speaker 8: I think that these folks are some folks are still
Speaker 8: able to supply those from a compounded pharmacy perspective, So
Speaker 8: you know that is that's that's a lot. That's a
Speaker 8: root that the FDA does provide to people. If there's
Speaker 8: a shortage of a drug and someone else can.
Speaker 9: Make it, well let them do it.
Speaker 8: The interesting angle, of course, is that a whole bunch
Speaker 8: of people who are taking off the compounded pharmacists are
Speaker 8: probably paying less, and therefore if they're forced to go
Speaker 8: and take it from a prescription, they may have to
Speaker 8: pay more out of pocket. So that's not going to
Speaker 8: be a leaving a particularly good taste in folks. Mouths
Speaker 8: once that this actually happens, but it hasn't happened yet.
Speaker 8: So and they did say on the call that this
Speaker 8: is not because there's enormous demand being fulfilled by compounded pharmacies.
Speaker 8: It's literally to do with that inventory management issue.
Speaker 2: Where what are the companies saying Sam about getting this
Speaker 2: in an oral format? I think that might be one
Speaker 2: of the next big I guess mileposts for this type
Speaker 2: of treatment.
Speaker 8: Yeah, I remember, Paul, there's already an oral form of this.
Speaker 8: It's called Robels's. It's from over NOTICEK. It's just a
Speaker 8: tough drug to use because you have to have it
Speaker 8: within about half an hour of eating. You can't take
Speaker 8: it too close or too far from an eating because
Speaker 8: you need an empty stomach.
Speaker 9: Before you take the drug.
Speaker 8: And it's a big dose and maybe the side effect
Speaker 8: profile isn't as great and the weight loss isn't as great.
Speaker 8: So people are trying to develop oral versions of these drugs,
Speaker 8: but also oral drugs that are like normal drugs, small
Speaker 8: molecules that they can swallow as a pill.
Speaker 9: Once today, So that's coming.
Speaker 4: So what do you think shareholders need to watch for
Speaker 4: next when it comes to especially after its outlook disappointed.
Speaker 8: I think we need to see how Q four does.
Speaker 8: So let's hope that that they're current guidance. At least
Speaker 8: they meet it, maybe beat it, that would be nice.
Speaker 8: The issue is then we move into Q four. There's
Speaker 8: an interesting result from a clicker trial that's coming up.
Speaker 8: They've done this before. They're comparing zep bound with wig
Speaker 8: V and I suspect that they're hoping and that that
Speaker 8: data suggests that they might. They will show that it
Speaker 8: has better weight loss. Whether the side effect profile would
Speaker 8: be better or a different time will tell, but that
Speaker 8: there are not many farmer companies do these type of
Speaker 8: head to head trials.
Speaker 9: Did it take some Yeah.
Speaker 5: Yeah, no, I just wanted to get real quick.
Speaker 2: What's the latest thinking on the size of this market?
Speaker 5: I know you guys have done a lot of work
Speaker 5: on this.
Speaker 9: Yeah.
Speaker 8: I think my key's latest numbers that are at ninety
Speaker 8: three billion. I don't remember exactly. It's bag well out
Speaker 8: of nothing exactly.
Speaker 2: Our thanks to Bloomberg Intelligence, director of Research for Global
Speaker 2: Industries and senior pharmaceutical analyst Sam Fizzelli coming up on
Speaker 2: the program. The next US president will wield major power
Speaker 2: in shaping the future of electric vehicles. We'll find out
Speaker 2: in which direction each candidate wants to go. You're listening
Speaker 2: to Bloomberg Intelligence on Bloomberg Radio, providing in dipper research
Speaker 2: and data on two thousand companies and one hundred and
Speaker 2: thirty industries. You can access Bloomberg Intelligence via b I
Speaker 2: go on the terminal. I'm Paul Sweeney, and this is Bloomberg.
Speaker 1: This is Bloomberg Intelligence with Alex Steele and Paul Sweeney
Speaker 1: on Bloomberg Radio.
Speaker 5: I'm Paul Sweeney. Alex Steele is out this week.
Speaker 2: Each week we look at research from Bloomberg and EF
Speaker 2: previously known as New Energy Finance. They're the team at
Speaker 2: Bloomberg that tracks and analyzes the energy transition from commodities
Speaker 2: to power, transport, industries, buildings, and agricultural sectors. This week
Speaker 2: we took a look at the overall EV market and
Speaker 2: the sway US presidents have on fuel economy standards for cars.
Speaker 2: For more guests, Thost, Billy Lipschultz, and I were joined
Speaker 2: by Corey Kantor b n EF, lead US electric vehicle analyst.
Speaker 2: You first asked Corey, how would the EV market change
Speaker 2: under each presidential candidate?
Speaker 10: Everything from federal fuel economy standards. That's the kind of
Speaker 10: miles per gallon of new vehicles which electric vehicles help
Speaker 10: automakers achieve. To the implementation of the Inflation Reduction Act,
Speaker 10: So even though the law has passed now over two
Speaker 10: years ago, you're going to see those loans and grants
Speaker 10: from the federal government impacted all the way up to
Speaker 10: the seventy five hundred dollars Clean Car ev tax credit
Speaker 10: that people know and love in some cases.
Speaker 7: So depending on who wins.
Speaker 10: Obviously with the IRA, you're going to need Congresses input
Speaker 10: on that, but there are things that the Trump administration
Speaker 10: could do very early on on the implementation side to
Speaker 10: make those credits.
Speaker 7: A bit more restrictive.
Speaker 10: So it's going to be big, but also a split
Speaker 10: decision could have an impact too if you have, say
Speaker 10: a Republican Congress with Kamala Harris's president or vice versa,
Speaker 10: and how.
Speaker 11: Does that actually impact the ability for these car makers
Speaker 11: to sell cars? When I look at targets of Biden
Speaker 11: administration having a certain number of evs, I'm from California,
Speaker 11: where they lay out these overly ambitious goals five six,
Speaker 11: seven years down the road and then seemingly chop them
Speaker 11: down when they get closer.
Speaker 10: Yeah, Bailey, I mean even beyond that, there's been a
Speaker 10: kind of back and forth between California and the rest
Speaker 10: of the country for a long time, known as you know,
Speaker 10: the California Advanced Clean Cars to policy, which aims to
Speaker 10: have one hundred percent of all new sales by twenty
Speaker 10: thirty five is electric, eighty percent fully electric, twenty percent
Speaker 10: plug in hybrid. And so last time Trump was elected,
Speaker 10: there was a lot of lawsuits, a lot of uncertainty
Speaker 10: in the market. Makes it very difficult from an automaker
Speaker 10: perspective to actually plan. And so these automakers for a
Speaker 10: long time have wanted both the carrots, which are these
Speaker 10: IRA kind of subsidies and incentives on grants and loans,
Speaker 10: and then they'd be willing to take the stick, which
Speaker 10: is the fuel economy standards.
Speaker 7: So we have to see how it shapes out.
Speaker 10: But from the automakers that we speak to, it's a
Speaker 10: pretty confusing policy environment. But given that the globe is
Speaker 10: moving towards electric vehicles and cleaner cars in general, they
Speaker 10: have to kind of prepare to move that way regardless,
Speaker 10: and it's just how quickly in the US are they
Speaker 10: going to move in that direction.
Speaker 2: The Chinese are moving very aggressively. How do you expect
Speaker 2: them to do outside of China? Will there be market
Speaker 2: for Chinese evs in Europe?
Speaker 5: In the US?
Speaker 7: Yeah, it's a really good question, Paul.
Speaker 10: And you know, looking at the data which we do
Speaker 10: at BNEF, you can see Chinese automakers like BYD making
Speaker 10: upground in places like Brazil, in places like Latin America,
Speaker 10: in places like Israel, you know where you might not
Speaker 10: expect to see Chinese automakers. They've been moving into Europe
Speaker 10: and there's been a pushback with all the tariffs and
Speaker 10: back and forth there. I think that's also why the
Speaker 10: US election does have a big impact, because if there's
Speaker 10: no kind of counter bailing force coming out of the US,
Speaker 10: you see what's going on Volkswagen on the European side,
Speaker 10: it's going to maybe make the road easier for those
Speaker 10: Chinese automakers on electric to kind of shift into those
Speaker 10: export markets. Because if Tesla isn't focused on making more
Speaker 10: affordable EV's, then there's really only going to be one
Speaker 10: major player in town. It doesn't mean, you know, that
Speaker 10: Chinese automakers are going to be the only ones who
Speaker 10: are making mass evs, but it's a pretty big transformation
Speaker 10: at the global auto market level, just like when the
Speaker 10: Japanese automakers came onto the scene.
Speaker 7: So I think that's the way I like to think
Speaker 7: about it.
Speaker 10: It doesn't mean that you know, EV's are going to
Speaker 10: be sold everywhere overnight, but without a kind of other
Speaker 10: major automaker, that's where I think a lot of these
Speaker 10: countries are going to turn.
Speaker 11: And if we do see tariffs on some magnitude, yeah,
Speaker 11: what does that actually mean for the market for Elon
Speaker 11: Musk's Tesla, who he's had a very prominent role campaigning
Speaker 11: for Donald Trump as well as other companies.
Speaker 10: I think when it comes to US tariffs, you know
Speaker 10: that could buy you. I think some time you look
Speaker 10: at the one hundred percent tariff that the buy An
Speaker 10: Administration put on Chinese EV makers. While there weren't that
Speaker 10: many Chinese EV makers selling electric vehicles here currently, Jilie Group,
Speaker 10: which owns Volvo and Pollstar, was pretty much the major
Speaker 10: automaker impacted. So that's why you saw those prices. Or
Speaker 10: the Volbo Ex thirty, which is a really popular model
Speaker 10: globally not sold here yet. It's keeping byd Out for
Speaker 10: a little bit longer. But if the automakers like GM
Speaker 10: or Stillants or Forward aren't helped or don't move towards
Speaker 10: electric vehicles, you know, maybe.
Speaker 7: It buys you two, three, four years.
Speaker 10: But all the while, BYD and other Chinese automakers are
Speaker 10: making more investments in battery technology, and I think, regardless
Speaker 10: of who wins, you need to see more of those
Speaker 10: investments here on batteries because those are going to be
Speaker 10: important not only for electric vehicles but for the grid
Speaker 10: as well, and you're letting China get a major competitive advantage.
Speaker 2: What are the US manufacturers doing? Have they pulled back
Speaker 2: on their EV investments.
Speaker 10: We've definitely seen at a global level those EV targets
Speaker 10: moving back. I think for it in particular, you saw
Speaker 10: them move their new EV models out a couple of years,
Speaker 10: so it's less so on the dollar amount and more
Speaker 10: pushing it back.
Speaker 7: GM has seen better EV sales.
Speaker 10: In fact, the third quarter this year was the best
Speaker 10: in the US that they had seen to date, with
Speaker 10: the Equinox and Blazer and Lyric really taking off. To
Speaker 10: make one bright point, Bailey, your home state of California
Speaker 10: actually saw in that third quarter the best TV shriff
Speaker 10: sales they've ever had at twenty seven percent, So that's
Speaker 10: twenty three percent about almost twenty four percent fully electric,
Speaker 10: the rest plug in hybrid.
Speaker 5: So it's pretty good. Calif Like, what's the US average?
Speaker 10: US average has been at about ten percent now nine
Speaker 10: and a half ten percent.
Speaker 9: Just yeah, far.
Speaker 10: California twice twice the average. But what's significant about that
Speaker 10: is California had been stuck at about twenty five percent.
Speaker 10: Tesla actually for four quarters in a row in California
Speaker 10: has seen decline in deliveries because of I think some
Speaker 10: of the kind of Tesla or Musk fatigue, and so
Speaker 10: to see California begin to grow again from the other automakers,
Speaker 10: even if Tesla's pullback is pretty significant, we.
Speaker 2: Stick with the automotive space first. Chinese carmaker BYD notched
Speaker 2: up another win over Tesla this week, reporting quarterly revenue
Speaker 2: that beat Tesla for the first time since the pair
Speaker 2: have gone head to head, and global electric vehicle sales well.
Speaker 2: Volkswagen announced a cost saving proposal to keep its German
Speaker 2: plants open, after announcing plans earlier in the week to
Speaker 2: close at least three factories in Germany and eliminate thousands
Speaker 2: of jobs amid struggles with poor demand in Europe and
Speaker 2: intensifying competition in China. For more normal INNDON, I spoke
Speaker 2: with Bloomberg Intelligence senior auto analyst Steve Mann.
Speaker 5: B y D is on a roll.
Speaker 12: I mean, the whole EV market and China is on
Speaker 12: a role. It's displacing you know, ice vehicles, internal conventionment
Speaker 12: engine vehicles. Uh, and it's growing, you know, double digits.
Speaker 7: You know what b I D. You know, BID.
Speaker 12: Eclipsing Tesla's revenues. Is that's not the end of it,
Speaker 12: you know, I think the Chinese automakers have a really
Speaker 12: long term goal to really expand globally beyond their borders. Look,
Speaker 12: the Japanese are really good at controlling costs in making cars.
Speaker 12: You know, the Western automakers basically developed the current you know,
Speaker 12: automotive market around the world. So China wants to have
Speaker 12: a stake, have a claim in the automotive industry, and
Speaker 12: EV is the way to go, and they want to
Speaker 12: and they want to sell everyone they can build, not
Speaker 12: only locally but internationally.
Speaker 13: So, I mean, we know that Tesla has really been
Speaker 13: focus this year as we've been seeing sharers dipping into
Speaker 13: the red and then back into the green. And I'm
Speaker 13: looking at the company up about one point two percent
Speaker 13: this year. But then when I'm looking at bid, we're
Speaker 13: seeing shares up thirty one percent this year. So when
Speaker 13: you're looking at the comparison, it's definitely very drastic. What
Speaker 13: is keeping these US EV makers behind? Is it appetite
Speaker 13: from consumers? What exactly is the drag here?
Speaker 12: That's that's a great question. I think the Chinese automakers
Speaker 12: know their consumers a lot better than the Western automakers.
Speaker 12: You know, Chinese automakers, Chinese industry, auto industry has about
Speaker 12: two hundred EV models for the mass market. You know
Speaker 12: that it's it's a lot more than what you find
Speaker 12: in the US. You know, you can probably count them
Speaker 12: with your fingers in the US in terms of number
Speaker 12: of models under you know, fifty thousand dollars. So they,
Speaker 12: you know, the Chinese automakers know the Chinese consumer. They
Speaker 12: want cheaper evs, they want you know, cool user interface,
Speaker 12: high tech user interface, and you know, the Chinese automakers
Speaker 12: are able to deliver those what the consumer wants over there.
Speaker 2: So talk to us about just the rest of the world.
Speaker 7: In EV.
Speaker 2: Consumption here, Steve, because I think it differs around the world.
Speaker 2: It feels like it's it's much weaker than expected here
Speaker 2: in the US, but other parts of the world adoptions
Speaker 2: much better. How did how did the companies think about it?
Speaker 12: I mean, there's a there's a few things that actually
Speaker 12: are presenting our hurdles for EVA adoptions, especially in the
Speaker 12: Western hemisphere Western world. It's really the infrastructure. It's really
Speaker 12: the affordability of the vehicles. Look, you know, charging infrastructure.
Speaker 12: It's only in the US, it's only a fraction of
Speaker 12: what it is in China. And again EV models, I
Speaker 12: think EV models are lacking, you know, especially the ones
Speaker 12: under fifty thousand. But if you look in at twenty
Speaker 12: twenty six and twenty twenty seven, you know there's gonna
Speaker 12: be a whole slew of cheaper EV models from GM,
Speaker 12: from Ford. Volkswagen's thinking about launching the ID two, which
Speaker 12: is under thirty thousands. The Lentist is doing the same thing,
Speaker 12: working with the Chinese partner, Leap Motor.
Speaker 5: So I don't want.
Speaker 12: To write off the you know, EV market, especially in
Speaker 12: the West, just yet. I think there are hurdles to
Speaker 12: work through the automakers are doing that. They're expanding their
Speaker 12: supply chain to make sure they're able to build the
Speaker 12: vehicles as cheap as possible and more affordable for the
Speaker 12: mass market, the general consumer.
Speaker 13: So when we're thinking about ev companies here in the US,
Speaker 13: my main curiosity when I think about switching to an
Speaker 13: EVCR myself and I want to do that, is there
Speaker 13: enough infrastructure to support this transition. Of course, regionally maybe
Speaker 13: if you think about California, they're going to have charging
Speaker 13: stations everywhere. But it's also part of the concern is
Speaker 13: the consumer wondering whether or not they're going to be
Speaker 13: able to find a charging station as quickly as they
Speaker 13: can find a gas station. Have there been developments there?
Speaker 12: No, there is development there. There's a lot of charging
Speaker 12: stations going up, but we're nowhere near what we need.
Speaker 12: Like if you look at again comparing China in the US,
Speaker 12: US only, and the number of charging station in the
Speaker 12: US is only ten percent fifteen percent of what China has,
Speaker 12: So there's still a lot more to go. So you know,
Speaker 12: there's you know, there's the Infrastructure Act that's in place
Speaker 12: to help that, but I think there needs to be
Speaker 12: more private investments a lot of the consumers today that
Speaker 12: on evs have to install chargers at home just so
Speaker 12: that they can charge and not rely on the public
Speaker 12: public infrastructure.
Speaker 2: Our thanks to Bloomberg Intelligence. Senior Auto Adam Steve Mann.
Speaker 2: Coming up on the program, we explore the fragility of
Speaker 2: the commercial mortgage backed securities market.
Speaker 5: You're listening to Bloomberg.
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Speaker 2: I'm Paul Sweeney. It's thirty minutes past the hour.
Speaker 5: This is Bloomberg.
Speaker 1: You're listening to Bloomberg Intelligence with Alex Steel and Paul
Speaker 1: Sweeney on Bloomberg Radio.
Speaker 5: I'm Paul Sweeney. Alex Steel is off this week.
Speaker 2: For the first time since the Great Financial Crisis, buyers
Speaker 2: have top rated commercial mortgage backed securities are suffering losses,
Speaker 2: and within this market, pain is most acute in a
Speaker 2: new breed of bonds known as single asset single bars
Speaker 2: or Sasby's. For more guess sos Chessman and I were
Speaker 2: joined by Carmen Arroyo Bloomberg News Credit reporter.
Speaker 3: In May, we saw the first triple A bond commercial
Speaker 3: mortgage triple A bond being hit backed by a single
Speaker 3: office property, and then we started like digging into basically
Speaker 3: the data to see what other buildings could get hit
Speaker 3: and the results there's a few a ton of Like
Speaker 3: the office properties across across the US have been distressed
Speaker 3: for years, it just takes a long time for that
Speaker 3: to reach bond holders, and now it's starting to get there.
Speaker 3: So we kind of like analyze the data. We saw
Speaker 3: at least like twelve other buildings are said to have
Speaker 3: some type of loss. Some will be at the triple
Speaker 3: A level, some will be just the investment grade portion.
Speaker 3: There's definitely a lot of more pain to come.
Speaker 4: Which regions across the US are most vulnerable.
Speaker 3: It's all over, It's all over the US. Actually, we
Speaker 3: saw there's buildings in New York, of course, Chicago, lays
Speaker 3: And and Cisco, but there's also buildings in Kansas City.
Speaker 3: Like it's it's kind of everywhere.
Speaker 2: But if I'm holding a triple A bond, I expect
Speaker 2: to get paid back here. So what's happening to these bonds?
Speaker 2: Are they coming up for maturity and then the owner
Speaker 2: has to refinance the bond or how's this soft playing out?
Speaker 7: Sure?
Speaker 3: So every triple A bone holder thinks they're going to
Speaker 3: get paid back, that's why you buy it, But they,
Speaker 3: like a lot of these buildings have not been receiving
Speaker 3: interest on the bonds for a while, and the minute
Speaker 3: like the presoul's drop and kind of like the owners
Speaker 3: of the buildings get rid of them or like sell them.
Speaker 3: The losses are realized, and the the gist of it
Speaker 3: is that the buildings are worth like a fraction of
Speaker 3: where they were worth like a few years ago. So
Speaker 3: there's just not enough money to pay back everyone, not
Speaker 3: even the triple A holders, and that that's the whole issue,
Speaker 3: Like the real estate is just not worth it.
Speaker 4: When you're speaking to triple A bondholders, what are they
Speaker 4: telling you as far as why they might still be
Speaker 4: holding onto that? That's the risk reward.
Speaker 3: I A lot of the Triple A bondholders will get
Speaker 3: some money back, like the lower trenches won't. And I'm
Speaker 3: not sure if there's some market for that type of
Speaker 3: like those type of bonds at the bit they may want.
Speaker 2: Them, and I'm looking at I mean, you have a
Speaker 2: big take story, which means it has great graphics in
Speaker 2: addition to being.
Speaker 5: Well reported, well sourced.
Speaker 2: Some of these buildings, I mean New York, Chicago, La
Speaker 2: La West. I mean five fifty five West fifth Street,
Speaker 2: seven to twenty five South Figaroa.
Speaker 5: I know that building. But these scenes are being.
Speaker 2: Valued at significant discounts, right, and some not even covering
Speaker 2: the amount of the outstanding loan. So that's where the
Speaker 2: that's where the problems come in.
Speaker 3: Yeah, that's the problem. And it's also like a lot
Speaker 3: of those buildings depend on one single tenant. So the
Speaker 3: minute that tenant's like, look my leads is up, I'm leaving.
Speaker 3: I want a newer office. This building is really old,
Speaker 3: the bonds just shrop in price because that's where they're
Speaker 3: getting the income.
Speaker 4: I think anytime it comes to anything revolving around real estate,
Speaker 4: as we know very well, people want to harken back
Speaker 4: to the global financial crisis in two thousand e but
Speaker 4: this is a very different situation, especially coming out of
Speaker 4: the pandemic, and talk to us more about how this
Speaker 4: is a very small subset of the bond market.
Speaker 3: When you're looking at this, yes, definitely, like there's definitely
Speaker 3: some type of eco to the like similar to the
Speaker 3: financial crisis in the sense that like that you don't
Speaker 3: really see losses on the principal level and triple A
Speaker 3: bonds like that hasn't happened since OAIDM. But again, like
Speaker 3: it's just a few bonds within the commercial mortgage backed
Speaker 3: securities market.
Speaker 4: Right, So when you're speaking with your sources, I mean,
Speaker 4: what are the risks of other broader ripple effects or
Speaker 4: any sort of other red flags potentially brewing. And then
Speaker 4: maybe the off side of that where there's more optimism
Speaker 4: of what could happen.
Speaker 3: Yeah, I think like the risk is mainly for any
Speaker 3: building that's old and that the tenants are walking, there's
Speaker 3: going to be issues. But if any new building that
Speaker 3: like you know, has a great reputation has a lot
Speaker 3: of tenants, like there's that market is kind of booming
Speaker 3: like right now in new issue markets, like buyers are
Speaker 3: like just gobbling up the dead like, so it really
Speaker 3: depends on the building.
Speaker 2: Commentserve sense for you're reporting that the office real estate
Speaker 2: market is at are near bottom or anybody calling that
Speaker 2: or too, Yeah, a lot.
Speaker 3: Of people are calling that. Like when we start to
Speaker 3: see the office buildings get sold, that's where we've reached
Speaker 3: the bottom and then everything is going to go up.
Speaker 4: Is there a time period timeline as far as how
Speaker 4: long that could take.
Speaker 3: Yeah, it can take a long time because the leases
Speaker 3: are so long that tenants may be locked in for
Speaker 3: like years. But most people are saying it's between now
Speaker 3: in the next few months.
Speaker 2: Thanks to Bloomberg Credit reporter Carmen Arroyo. Next, we look
Speaker 2: at bank earnings. UBS posted third quarter profits that almost
Speaker 2: doubled expectations, adding to evidence that the bank's integration of
Speaker 2: Credit Suite is on track. For more guests. Alison Williams,
Speaker 2: Bloomberg Intelligence Senior Analysts, Global Banks Asset Managers breaks down
Speaker 2: the reports.
Speaker 14: So a really strong quarter. Fundamentals look good.
Speaker 15: I think there are some concerns about capital, but people
Speaker 15: look at their business. Sixty percent growth in their America's
Speaker 15: trading business, so wow is the word. It was a
Speaker 15: record record third quarter trading for them.
Speaker 14: Keep in mind that third quarter tends to be weak, so.
Speaker 15: But it was the strongest third quarter they've ever had
Speaker 15: and that was really due to cash, equities and derivatives
Speaker 15: strengths of the bank. So twenty seven percent growth really
Speaker 15: looking good and a lot of momentum coming into the
Speaker 15: fourth quarter.
Speaker 14: The other positive for UBS.
Speaker 15: You know, that core wealth franchise is really what sets
Speaker 15: them apart, and they did have very strong flows inflows
Speaker 15: across all the regions, especially Asia, so that's also very good.
Speaker 15: And then on the deal execution side, we also like
Speaker 15: what we're seeing there in terms of.
Speaker 14: The cost progress.
Speaker 15: You know, the grossed cost saves are over fifty percent
Speaker 15: the way there, so that's a positive. The non core unit,
Speaker 15: so that's you know, stuff they want to get rid of.
Speaker 15: They're making cuts there faster than expected. But capital, as
Speaker 15: I said, that was the one thing I think, you know,
Speaker 15: investors are still a little bit skittish on. They did
Speaker 15: actually take a cut to their capital ratio in the
Speaker 15: quarter basically because they voluntarily are kind of giving up
Speaker 15: some accounting relief. So you know, I think that that's
Speaker 15: you know, that's accounting is sort of just noise in
Speaker 15: my view. But they did say that, you know, they're
Speaker 15: not sure if when they report the fourth quarter of February,
Speaker 15: if they're going to be able to give.
Speaker 14: Guidance on buybacks.
Speaker 15: And that's because you know, while they're executing on this deal, fundamentally,
Speaker 15: regulators you know, are concerned about the size and they
Speaker 15: may force them to hold more capital.
Speaker 2: How representative is U B s ubs of kind of
Speaker 2: some of the other European banks, Allison, So.
Speaker 15: It's interesting that you know, you banced versus the other banks.
Speaker 15: They are more skewed to the equities business. They have
Speaker 15: a very strong US presence, as you said, they also
Speaker 15: tend to be strong in Asia, and we really saw
Speaker 15: a lot.
Speaker 14: Of strength their late quarter that benefited.
Speaker 15: You know, the companies such as JP Morgan and Morgan Stanley.
Speaker 15: Deutsche Bank does not have the equities business, but they
Speaker 15: were very strong in thick But generally we did hear
Speaker 15: about strength across regions, across cash and derivatives, and derivatives
Speaker 15: is a strength for those two French banks.
Speaker 2: We wrap up the show by looking ahead towards the
Speaker 2: US presidential elections, specifically the impact that business leaders can
Speaker 2: make by advocating for safe and secure elections. For more.
Speaker 2: Billy Lipschultz and I spoke with rhtt Budle, CEO of
Speaker 2: Public Private Strategies.
Speaker 16: So first of all, I mean, you know, America, as
Speaker 16: we know, you know, over the last you know, set
Speaker 16: of election cycles has primarily had very safe and secure elections.
Speaker 16: And I think we're feeling confident about all the elections
Speaker 16: to date, and many of the you know, state local
Speaker 16: officius have worked very hard to prepare. I think, you know,
Speaker 16: one of the big questions is, you know, we probably
Speaker 16: will not have the exact results of the election on
Speaker 16: election night, and so you know, it might be until
Speaker 16: Saturday or Sunday until we know an official winner. And
Speaker 16: so one of the pieces that we've been thinking a
Speaker 16: lot about is really making sure that folks are preparing
Speaker 16: for that, that they know that every vote is still
Speaker 16: being counted and that the process might just take a while.
Speaker 16: But that is the important role of democracy, making sure
Speaker 16: every vote gets counted, and particularly for business owners, understanding
Speaker 16: that this sort of period of uncertainty is a really
Speaker 16: important moment for businesses to be able to you know,
Speaker 16: bring some calm to the market, to be able to
Speaker 16: say this is how democracy plays out, not just in
Speaker 16: the role that they play in the markets, but also
Speaker 16: in the role that they play as community leaders. You know,
Speaker 16: for a lot of CEOs who have employees, this can
Speaker 16: be a fraught time, for example, and so it's really
Speaker 16: important to know that you know, every vote will be counted.
Speaker 16: The elections are on part of be very safe and secure,
Speaker 16: but we may have a period of uncertainty and that's okay,
Speaker 16: and we just need to understand that that might be
Speaker 16: the case. But it's an important part of letting democracy
Speaker 16: play out.
Speaker 11: Well, I think back to twenty twenty when it took
Speaker 11: a few days, but we were still in the midst
Speaker 11: of the pandemic. Now in twenty twenty four, people will
Speaker 11: be back into the office, back at work, back on
Speaker 11: subways here in the New York and commuting around the country.
Speaker 11: How does that actually kind of impact a delayed ruling
Speaker 11: or delayed decision on who in fact will win the election,
Speaker 11: especially as we see a number of contested seats across
Speaker 11: the House and Senate.
Speaker 5: Yeah.
Speaker 16: Look, we're so used to having everything, you know, be
Speaker 16: so instant instantaneous. We're used to obviously having a result,
Speaker 16: you know, called on election night. The reality is, at
Speaker 16: least for the national presidential election, we expect it to
Speaker 16: be very close, and there's a number of states that
Speaker 16: probably will take a few days to make sure that
Speaker 16: every ballot is counted. And so, you know, unlike where
Speaker 16: we were all sort of huddled in our homes around
Speaker 16: zoom screens or around TV screens before you know, we
Speaker 16: are going to have people going back into the office.
Speaker 16: And we know one of the things we learned in
Speaker 16: twenty sixteen was that, you know, elections can a lot
Speaker 16: of emotions with employees and start a lot of conversation.
Speaker 16: And the reality is is the workplace has become a
Speaker 16: really important square for civic engagement. Right It's one of
Speaker 16: the places where people interact, they talk to each other,
Speaker 16: and so it's become increasingly important that business leaders and
Speaker 16: CEOs think about the role they can play and sort
Speaker 16: of setting the tone of the role that they can
Speaker 16: play in sort of depoliticizing things and making sure that
Speaker 16: there's a safe space. We've see in a lot of
Speaker 16: companies with employee research groups that there's the opportunity to
Speaker 16: provide space for dialogue. And so part of the work
Speaker 16: that we've been doing under an initiative we created it's
Speaker 16: called the Business and Democracy Initiative, is we've been working
Speaker 16: with business leaders to help them prepare for this election,
Speaker 16: to not only sort of raise their voice in their
Speaker 16: communities to talk about how this is the normal part
Speaker 16: of democracy, but also to play an important role in
Speaker 16: sort of depolarizing, de escalating and making sure that everyone's
Speaker 16: voices are heard in this process over the next few weeks.
Speaker 2: And the business leaders that you do speak to, what
Speaker 2: is a concern level, if at all, that we have
Speaker 2: a recreation of something like January to that level.
Speaker 16: Look, I think overall people feel that the election is
Speaker 16: going to be safe and secure and that every vote
Speaker 16: is counted. So that's that is a good point, you know.
Speaker 16: I think generally what I hear from business leaders is,
Speaker 16: you know, increasingly, you know, risk has become an issue
Speaker 16: with just instability, and so even beyond the elections, you know,
Speaker 16: there's a broader issue with the government, for example, not
Speaker 16: being able to pass you know, funding bills that go
Speaker 16: on for years, or the debate over the debt selling
Speaker 16: for example, and not being able to reach resolution. So
Speaker 16: there's that broader sort of risk level. You know, America,
Speaker 16: as we all know, is the most important economy in
Speaker 16: the world, and so having that certainty is really important
Speaker 16: for business leaders. And I think over the last few years,
Speaker 16: businesses have become increasingly frustrated that the government hasn't been
Speaker 16: able to provide more stability and that partisanship is continued
Speaker 16: to sort of really, you know, make it difficult for
Speaker 16: business leaders to make decisions, especially businesses who rely upon
Speaker 16: the government for you know, a wide variety of factors.
Speaker 16: So it's a broader sort of risk appetite rather than
Speaker 16: just in this moment. But it's definitely something that boardrooms
Speaker 16: and businesses are starting to look at our.
Speaker 2: Thanks to Redbuddle, CEO of Public Private Strategies. That's this
Speaker 2: week's edition of Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries.
Speaker 5: And remember it.
Speaker 2: You can access Bloomberg Intelligence via Bigo on the terminal.
Speaker 2: I'm Paul Sweeney. Stay with us. Today's top stories and
Speaker 2: global business headlines are coming up right now.