Speaker 1: This is Bloomberg Business Wait Inside from the reporters and
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Speaker 1: global business finance and tech news the Bloomberg Business Week
Speaker 1: podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Speaker 2: It is for Capital Markets Day Today and Dearborn and
Speaker 2: having some fun and a I believe Coney Dog in
Speaker 2: downtown Detroit is her own Matt Miller radio and TV anchor,
Speaker 2: my co host at times, lever of all things, four wheels,
Speaker 2: two wheels and more that first of all, nice to
Speaker 2: have you here with justin myself. Where the heck are you?
Speaker 2: You look like you fit in.
Speaker 3: There, Coney.
Speaker 4: Anyone who's been to Detroit knows that the local food
Speaker 4: is a Coney Dog, right, which is basically a hot
Speaker 4: dog with chili on it. And there are really only
Speaker 4: two places to get those, the classic Coney's National Chili
Speaker 4: and then there's another chain that I won't mention while
Speaker 4: I'm in here. Nice, but yes, whenever I go to Detroit,
Speaker 4: I stop here first get my fix of Cony's, and
Speaker 4: then I go on and do whatever business I came
Speaker 4: here to do.
Speaker 2: I'm just going to tell you and get them at
Speaker 2: my kitchen too, because that's how my husband likes his
Speaker 2: hot dogs with chili on it. Okay, so tell us
Speaker 2: what you were in I mean, we know why you
Speaker 2: were in Detroit. You had some interesting conversations.
Speaker 5: Yeah.
Speaker 4: I had an interview with the CEO of Ford today
Speaker 4: and the reason that you know he invited me, along
Speaker 4: with the rest of his executive board and a ton
Speaker 4: of Wall Street analysts, is that Ford is trying to
Speaker 4: convince the Street that they can meet their goal of
Speaker 4: producing two million evs in twenty twenty six, and probably
Speaker 4: a lot more importantly, that they can actually make money
Speaker 4: on those evs, right, because they're slated to sell about
Speaker 4: three billion dollars worth of electric vehicles this year and
Speaker 4: they're slated to lose about three billion dollars on their sales.
Speaker 4: So currently their margin is like negative one hundred percent,
Speaker 4: but they say they are going to be able to
Speaker 4: boost it to eight percent on EV's by twenty twenty six,
Speaker 4: and that's what they want to convince analysts.
Speaker 3: I think I was curious about matt Is. I mean,
Speaker 3: we didn't get forwards earnings earlier this month, and they
Speaker 3: beat on first quarter profit, but they obviously warned on
Speaker 3: their outlook for this year. I'm kind of wondering how
Speaker 3: does the EV sort of fit into that dynamic and
Speaker 3: how much growth could that potentially When you're hearing and
Speaker 3: talking to the CEO for does he think that that
Speaker 3: could potentially help things moving forward?
Speaker 4: So the EV, you know, last year they only sold
Speaker 4: sixty one thousand evs in the US, and of course
Speaker 4: they sell millions of cars, so it's hardly anything, but
Speaker 4: hopefully that share is going to increase. Still, it's not
Speaker 4: the you know, the cold steel that they sell off
Speaker 4: dealership lots that makes them money. You know, they're hoping
Speaker 4: to get, like I said, margins back to eight percent
Speaker 4: and their traditional ic business they're hoping to be around
Speaker 4: ten percent, which is where they are right now. They
Speaker 4: make a ton of money on the f one fifty
Speaker 4: trucks that they sell with gas engines, but the real growth,
Speaker 4: according to Farley, is going to come from software and services.
Speaker 4: They have, for example, a business unit for pro that
Speaker 4: works with you know, contractors, plumbers, electricians, et cetera, and
Speaker 4: they make a ton of money, like big Fat Margins,
Speaker 4: selling software that can tell you, you know, if your
Speaker 4: engine has got a problem. If your door needs fixed.
Speaker 4: They even can tell that your windshield wiper is moving
Speaker 4: in a way that that means it's about to break.
Speaker 4: So that's where they see the growth coming and that's
Speaker 4: what they're hoping to see in the future.
Speaker 2: So Zach, it's not only the year of efficiencies at Meta,
Speaker 2: it's also at Ford Motor Company, and Matt did catch
Speaker 2: up with Ford CEO Jim Farley to talk about the
Speaker 2: efficiencies that it could put together, all of them in
Speaker 2: many different forms. Listen up, everybody, We're making progress.
Speaker 6: It needs to go faster. But a new culture setting
Speaker 6: in in the company. We have, you know a lot
Speaker 6: of other competitors that made a lot of personnel reductions.
Speaker 6: We see that as kind of more of an in
Speaker 6: our journey on cost and quality, more of an output metric.
Speaker 6: So we want to reduce is more like the bill
Speaker 6: material cost, the industrial cost, and the plants a lot
Speaker 6: of extra inventory we want to get out as well
Speaker 6: as our negotiated cost with the supplier. So our cost
Speaker 6: we want to get out is actually in the heart
Speaker 6: of our industrial system.
Speaker 5: It's not like just people.
Speaker 7: You have said in the past, you have twenty five
Speaker 7: percent more engineers working on the same output as your competitors.
Speaker 7: Does that mean you're going to reduce that twenty five percent?
Speaker 7: Are you letting it happen through attrition? How's it working?
Speaker 6: You know, we're very intentional about this, Matt. I think
Speaker 6: you're going to see from Ford over many years, a
Speaker 6: natural reduction, not through attrition, but skill mismatch, intentional transition
Speaker 6: of our teams, moving some of the engineering to lower
Speaker 6: cost labor sources. So it'll be a combination of things.
Speaker 6: But you know, it's obvious that we have we have
Speaker 6: to be more efficient uncompetitive advertising and marketing spend is
Speaker 6: also something that you've called out. Actually, I would say
Speaker 6: on our blue business we've underinvested in advertising. We want
Speaker 6: on our E business really not to do a lot
Speaker 6: of broadcast advertising.
Speaker 5: We want to practice speak for itself.
Speaker 6: And really the investment in the marketing there is really
Speaker 6: the ownership model, so people kind of come back and
Speaker 6: high loyalty.
Speaker 5: Same with pro on the blue business.
Speaker 6: You know, we are starting to see inventories grow for
Speaker 6: the whole industry. We're in a great space. We have
Speaker 6: a really fresh lineup of vehicles, but that merchandising capability,
Speaker 6: I would assume We're going to have to spend more
Speaker 6: this year and prices will come down, thankfully for the
Speaker 6: customer after all these years of tight supply.
Speaker 7: How much do you think prices are going to come
Speaker 7: down and what's going to drive.
Speaker 6: That we're assuming in our plan this year and next year,
Speaker 6: you know, five plus percent reduction. It's kind of in
Speaker 6: between where we were maybe in nineteen and where we've been.
Speaker 6: I don't think we see what we'ren't going to go
Speaker 6: back to the days a couple of years of one
Speaker 6: hundred day supply, so most people are in the fifty
Speaker 6: day supply range. You know, I think the natural discounting
Speaker 6: for someone who has an older product is going to
Speaker 6: be in the thousands. You're starting to see now low
Speaker 6: aprs from a lot of brands who have older product.
Speaker 5: What's unique of before.
Speaker 6: It is we're basically we have an all new lineup,
Speaker 6: soh you know, we're a bit of a unicorn. But
Speaker 6: I think the background pricing will be more difficult.
Speaker 7: You said in the past, or people have asked, you know,
Speaker 7: how do you get from eight percent on your ev
Speaker 7: business you want to do ten percent overall to like
Speaker 7: the seventeen percent that Tesla has Do you get up
Speaker 7: there or do they you think eventually see margin pressure.
Speaker 5: It's a good question. Both both are going to happen.
Speaker 6: We're seeing you know, look at what's happening in China
Speaker 6: with BYD.
Speaker 5: It looks what's happening with Tesla.
Speaker 6: They reduce their prices on model why their main product,
Speaker 6: you know, five seven thousand dollars. It goes up, it
Speaker 6: goes down, but it's it's pretty far down. I think,
Speaker 6: you know that they've had the market to themselves at
Speaker 6: a big head star kind of like what we do
Speaker 6: on pro and now they're seeing a lot more pressure. Obviously,
Speaker 6: I think we're going to definitely see that, especially in
Speaker 6: the two row crossover.
Speaker 5: We think there'll be like fifty to one.
Speaker 6: Hundred new models, so you know, and a lot of
Speaker 6: people want to grow, so there's going to be it's
Speaker 6: gonna be a great time to buy a two row
Speaker 6: electric EV for customers like Makey where we compete really
Speaker 6: in EV you know, pickup trucks, three row crossovers that
Speaker 6: we're going to show people today and the commercial vehicle
Speaker 6: EV commercial vehicles, we don't see as much price you know,
Speaker 6: competition because there's not as many vehicles choices there all.
Speaker 2: Right, That, of course is the Ford CEO Ji of
Speaker 2: Farley talking there with Matt. Matt, you know, I'm trying
Speaker 2: to understand if they're going to be cutting prices, they're
Speaker 2: projecting what billions of dollars of losses for their EV
Speaker 2: unit this year. I mean, how is it that they
Speaker 2: ultimately get to that eight percent return on EV's It's
Speaker 2: not going to be easy. I get the efficiencies, but
Speaker 2: it's gonna be tough.
Speaker 4: No, it's not going to be easy. But they're taking
Speaker 4: out two and a half billion dollars of costs this year,
Speaker 4: and they think that they have six to seven billion
Speaker 4: dollars of structural cost disadvantages compared to competitors that they
Speaker 4: want to take out by the middle of the decade.
Speaker 4: So you add that to the software and services revenue
Speaker 4: that they hope to really start generating, especially from the
Speaker 4: ED cars. And remember they're cutting prices on just like
Speaker 4: Tesla right on the cheaper vehicles. The more expensive vehicles
Speaker 4: are not getting cut. In fact, those prices are rising.
Speaker 4: So if you want you know, an F one to
Speaker 4: fifty lightning Er, if you want a Raptor R, or
Speaker 4: if you want a Bronco Wild Track. You're not getting
Speaker 4: a price cut on those. You're not getting a price
Speaker 4: cut on any of the Halo cars, just the cheaper stuff.
Speaker 2: You know what I really want? I want a Cony dog.
Speaker 2: Can you bring one back?
Speaker 7: Uh?
Speaker 4: Yeah, I'll get you a Coney to go.
Speaker 2: That'll be pretty ugly by the time it gets here.
Speaker 3: I'm loving that leather jacket.
Speaker 8: Math.
Speaker 2: He wears it, well, he wears it with you.
Speaker 5: You know.
Speaker 4: Mike McKee didn't like this. Apparently he doesn't like the look.
Speaker 4: It is an authentic nineteen forty three pilot's check.
Speaker 2: All right, we'll get Mike in and you the two
Speaker 2: if you can kind of debate it out, all right,
Speaker 2: My Matt safe travels back home, of course, our Matt
Speaker 2: Miller there in Detroit.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
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Speaker 1: or watch us live on YouTube.
Speaker 2: No business theres on our radar today. Nowhere to hide,
Speaker 2: because folks, we are tracking it. Because it does feel
Speaker 2: like from day to day there is news on the
Speaker 2: semi space, mostly because of Micron technology, certainly in today's
Speaker 2: trade stock under pressure after China cyberspace regulator said that
Speaker 2: its products failed to pass a cybersecurity review in the country.
Speaker 2: And this comes on the heels of a Bloomberg exclusive
Speaker 2: last week of Micron said to be getting one and
Speaker 2: a half billion from the Japanese government to make next
Speaker 2: gen memory chips in Japan. So let's get to what
Speaker 2: it all means, because it's certainly an important sector. I mean,
Speaker 2: we all know chips go into so much and how
Speaker 2: it really fits in, especially the Micron news into the
Speaker 2: overall semi space. So let's get to it. Paula pencal
Speaker 2: Is with US Bloomberg Intelligence Semiconductor's analyst in our Bloomberg
Speaker 2: Interactive Brokers studio. Also with us is I and King
Speaker 2: Bloomberg News, US semiconductor networking reporter on the phone in
Speaker 2: San Francisco and Ian. You were part of the team
Speaker 2: that put together that exclusive last week about the investment
Speaker 2: in Micron. Let's start with you. A lot of news,
Speaker 2: a lot going on with Micron. You always remind me
Speaker 2: not every semiconductor is the same. Tell us about the
Speaker 2: news around Micron and why it's important to follow what's
Speaker 2: going on.
Speaker 8: Yeah, I mean this is being seen as an escalation
Speaker 8: of the ongoing trade dispute, trade war, call it what
Speaker 8: you want, between the US, which is theest creator of semiconductors,
Speaker 8: and China, which is the largest market for semiconductors. And
Speaker 8: what's going on here really is that Micron is being
Speaker 8: told by the Chinese government we don't like your products,
Speaker 8: we don't think they're safe, and we're going to ban
Speaker 8: them from critical infrastructure. A lot of lack of clarity
Speaker 8: around what that actually means and what that impact is
Speaker 8: going to have, but obviously as a headline, it's not
Speaker 8: a pretty one.
Speaker 3: And Paul I want to bring you into this conversation.
Speaker 3: So as an analyst at Bloomberg Intelligence, what's your sort
Speaker 3: of big takeaway in the development and all this.
Speaker 9: Well, first of all, we don't really know what the
Speaker 9: impact is, as Ian had pointed out. Mark Murphy, the CFO,
Speaker 9: commented today at JP Morgan's conference, that the impact could
Speaker 9: be anywhere from single digit percent impact to top line revenue,
Speaker 9: or it could be low single digit up to high
Speaker 9: single digit. But then he went on to say, we
Speaker 9: really don't have a lot of clarity, China was light
Speaker 9: on what exactly it meant by this security risk. The
Speaker 9: one thing I would point out is it's clearly it
Speaker 9: does appear to be a political posturing because typically memory
Speaker 9: chips are not targeted by hackers just because they tend
Speaker 9: to have storage. They don't have a lot of like
Speaker 9: specific software that runs on it or code. So that
Speaker 9: sort of supports the fact that this is definitely likely
Speaker 9: a political move.
Speaker 2: I mean, yeah, right, you know, I mean it's a
Speaker 2: little wacky, right if you again you remind us that
Speaker 2: not all chips are the same Paul the same thing,
Speaker 2: But I mean it's a little weird. And I do
Speaker 2: wonder as you follow this space, is it just a
Speaker 2: case until this political football kind of calms down a
Speaker 2: little bit? I mean, is that the expectation? I mean,
Speaker 2: I feel like the rhetoric, especially when it comes to
Speaker 2: semis and high tech, just continues to get tougher and
Speaker 2: tough between the US and China.
Speaker 10: No.
Speaker 8: I think you're absolutely right. The general direction is towards escalation.
Speaker 8: And you know, the concern that overarching is of so
Speaker 8: called pea coupling, that these two markets will just learn
Speaker 8: to live without each other. But in the interim now
Speaker 8: cause an awful lot of pain. And the way to
Speaker 8: look at the Micron action, according to what some people think,
Speaker 8: is like China has not responded to a lot of
Speaker 8: what the US has done over the last couple of
Speaker 8: years because it couldn't because it didn't have anything to
Speaker 8: really fight back with. The Micron thing is the one
Speaker 8: thing that it could fight back with. They don't need Micron.
Speaker 8: They can get exactly the same chips from Samsung, exactly
Speaker 8: the same chips from Heinex, and therefore this isn't going
Speaker 8: to hurt them. They're not shooting themselves in the foot
Speaker 8: by taking action against Micron, and if perhaps for the
Speaker 8: political audience back in Beijing, this looks like they are
Speaker 8: doing something and it looks like they're being.
Speaker 3: Strong Paula, I'm curious as far as do we have
Speaker 3: any sort of scoop as far as how this could
Speaker 3: end up impacting Micron's financials.
Speaker 9: Well, again, they are unclear. The company has communicated to
Speaker 9: investors they are unclear as to the exact impact, but
Speaker 9: it could be anywhere from low single digits to high
Speaker 9: single digits, but they really don't know. I would say
Speaker 9: though that just to follow up on what you was saying.
Speaker 9: It is a little bit of a slippery slope for
Speaker 9: China though, because even though they don't need these memory
Speaker 9: chips because they can source them elsewhere, you know, there
Speaker 9: are other chips that they do need from the US.
Speaker 9: So it really is a battle between the two and
Speaker 9: Microns sort of stuck in the middle.
Speaker 2: Well, there was some great reporting. I think this might
Speaker 2: have been by Debi Wu, or maybe it was by
Speaker 2: you Ian. You know that Micron and I'm reading from
Speaker 2: the story Micron is still depend on the global electronic
Speaker 2: supply chains that often run through Chinese factories. I mean,
Speaker 2: this is the tricky stuff, right when we talk about globalization.
Speaker 2: That train has left the station, and when you look
Speaker 2: at some like semiconductors, right, it's a global supply chain.
Speaker 2: So how do we how do you look at something
Speaker 2: like that and ultimately where Micron lands, you know, with
Speaker 2: or without China.
Speaker 8: Yeah. No, to back up what Paula said and go
Speaker 8: back to what the CFO himself said, He's like, we
Speaker 8: don't know. First of all, yeah, we don't know, But
Speaker 8: guess what as much as a quarter of Micron sales
Speaker 8: somehow go through China, Whether it's Hong Kong headquartered companies.
Speaker 8: Whether it's through the distribution channel, we don't know, right,
Speaker 8: Because China the world is the world's device manufacturing center,
Speaker 8: so you really need to be there, you need to
Speaker 8: have those relationships. So anything that breaks up that chain
Speaker 8: that we've seen, you know, develop over the last thirty years, this,
Speaker 8: you know, interdependency is not good.
Speaker 2: So and go to the story that you and a
Speaker 2: colleague out of Asia broke last week about Micron getting
Speaker 2: one and a half billion from the Japanese government for
Speaker 2: next gen hip. So roll that into this story and
Speaker 2: in the reporting.
Speaker 8: Yeah, that's I think that's a that's a good way
Speaker 8: to perhaps segue into that because everybody in the world,
Speaker 8: you know, with the US, the Europeans, the Japanese, and
Speaker 8: the Koreans are like, look, we want chip independence too, right,
Speaker 8: we need to build our own factories. Japan's a little
Speaker 8: bit late to the game. But guess what, hey, Micron,
Speaker 8: come and build here. How does that look if you're China.
Speaker 8: Some song has a chip factory in China. Heinez has
Speaker 8: a chip factory in China. Micron doesn't, Right, How did
Speaker 8: I look? Yeah?
Speaker 2: Exactly? Paul come in on that Yeah, I would just say.
Speaker 9: I mean there's an element of Yeah, Micron's sort of
Speaker 9: like covering their bases just in case. And you know,
Speaker 9: I think like a couple of years ago they had
Speaker 9: planned to build in Japan and then you know, at
Speaker 9: their Hiroshima plan extend their capability there, but they backed out.
Speaker 9: I mean, the market went south and so on and
Speaker 9: so forth. But here they are back to the table.
Speaker 9: Everybody's sort of coming forth with their own equivalent to the.
Speaker 2: US Chips Act.
Speaker 9: Japan is you know, Singapore is even China is I'm
Speaker 9: hearing like one hundred and forty nine billion going to
Speaker 9: subsidize the sector. So Japan's taking advantage of this opportunity
Speaker 9: now to sort of establish itself and hopefully emerge as
Speaker 9: a new manufacturing hub within Asia.
Speaker 2: I do wonder too, though, Ian like, how ultimately does
Speaker 2: this work then if everybody's kind of developing their domestic
Speaker 2: JIP industry, yay, great, I guess right, it's in your backyard.
Speaker 2: But at some point, I mean, is it going to
Speaker 2: be problematic and require almost government support at some point
Speaker 2: because it's cyclical, right, I Mean, we always talk about this,
Speaker 2: and I do wonder is it going to ultimately end
Speaker 2: up in a glut of chips in a lot of markets.
Speaker 8: Well, Sanda Jah, the CEO of Micron, told me off
Speaker 8: saying that my thinking was too mid in the past,
Speaker 8: but that thinking is very much that this is a
Speaker 8: viciously cyclic industry. We've seen loads and loads of plans
Speaker 8: in the past about building factories here, there and everywhere.
Speaker 8: And guess what, when things get tight, those factories get
Speaker 8: built and they never get equipment put in them. Those
Speaker 8: factories get built and they end up doing something else.
Speaker 8: So believe that when you see the chips rolling off
Speaker 8: these lines would be my caution. But also, you know,
Speaker 8: take Sanjay Jar's word for it. Apparently my thinking is
Speaker 8: mired in the past.
Speaker 2: Well mine's apparently mired in the past too, because it
Speaker 2: just kind of makes sense to me. Any last final thoughts,
Speaker 2: Paula just got about twenty thirty seconds here.
Speaker 9: Now, I would just say that it's an ongoing process
Speaker 9: that we have to keep close eye on, and no
Speaker 9: one really knows what the final outcome is going to
Speaker 9: be on this front. And in terms of the impact, we.
Speaker 2: Can just hope that there's like the metaverse and AI
Speaker 2: everywhere and like we just need a million chips everywhere.
Speaker 2: I don't know, it's it's a very interesting time that
Speaker 2: we're living in. Paula, thank you so much. Paula Pancal.
Speaker 2: She's Semiconductor's analyst at Bloomberg Intelligence. Here in Studio Interactive
Speaker 2: Brokers Studio. I king our thanks oas our go to
Speaker 2: when it comes to all things global techs chips, usmconductor
Speaker 2: and networking reporter at Bloomberg News.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 2: So the aviation sector really set to thrive in twenty
Speaker 2: twenty three. You're just back from a trash.
Speaker 3: Just back from Maruba. Did not check bags because I'm
Speaker 3: always afraid I'm going to lose my.
Speaker 2: Bad You're helping setting a set up the next segment,
Speaker 2: so let's get to it with Sherry Stein. She's Chief
Speaker 2: Technology Officer of the America's at SITA. They are the
Speaker 2: IT provider for global aviation. They work at airports, on
Speaker 2: board planes at borders. They operate more than two hundred countries,
Speaker 2: which may explain why we find her on this Monday
Speaker 2: on zoom in Spain. Sherry, nice to have you here
Speaker 2: on Bloomberg. Talk to us a little bit about this organization,
Speaker 2: the history. It's been around for a long time, so
Speaker 2: just talk a little bit about the mission if you will.
Speaker 10: Sure, that's right, hey, Carole, just too nice to be
Speaker 10: here with you. Yeah. So CITA was formed in nineteen
Speaker 10: forty nine really to help bring the communications together between airlines,
Speaker 10: aircraft and the airports, so that you know, they could
Speaker 10: easily know when an aircraft was leaving one airport and
Speaker 10: when it was expected to arrive at the next, and
Speaker 10: so to help facilitate that air to ground communications. So
Speaker 10: we were formed on that basis and have been operating
Speaker 10: ever since.
Speaker 2: So we serve more than Yeah, that's what I was
Speaker 2: gonna say. Your members are like global correct nowadays?
Speaker 10: That's right. Yeah, we're a cooperative organization with about four
Speaker 10: hundred and fifty different members. Airlines airports around the world,
Speaker 10: So any airport that you're go into, about ninety five
Speaker 10: percent of the world's airports. Just look for that powered
Speaker 10: by seat a sticker on any of the computer equipment
Speaker 10: or kiosks or boarding gates or any of the devices
Speaker 10: that you see there. And then of course, you know,
Speaker 10: the network behind the scenes that you won't see is
Speaker 10: part of what helps keep that all working.
Speaker 3: So, Sherry, talk to us about these different innovative solutions
Speaker 3: that y'all are trying to rule out here that are
Speaker 3: already basically at a number of different airports that basically
Speaker 3: try to help travelers.
Speaker 10: Yeah, so big focus is on digitization and how to
Speaker 10: help eliminate the manual and paper laden processes that have
Speaker 10: plagued not only our industry but other industries. Right is
Speaker 10: how to move to a more seamless or frictionless process.
Speaker 10: So we done a lot of work around you know,
Speaker 10: biometrics for document validation, and then certainly the subject that
Speaker 10: you were talking about earlier, just with your flight to Aruba,
Speaker 10: includes not only work with biometrics and digital identity, but
Speaker 10: also around bag tracking and bag management and helping to
Speaker 10: make that whole process more seamless and easier for people
Speaker 10: to give that confidence to check their bags.
Speaker 2: Now I have to say I'm putting a little Apple
Speaker 2: tags in my luggage so that I can kind of
Speaker 2: track it. But I'm also noticing that more and more
Speaker 2: airlines are saying, hey, you check your bags, here's where
Speaker 2: they are, and they're giving you some information. I'm assuming
Speaker 2: you are involved in that.
Speaker 10: That's right exactly. So our platform suite as World Tracer
Speaker 10: is the brand name. Passengers might not know it because
Speaker 10: we're more of a B to B We provide services
Speaker 10: to the airlines and to the airports behind the scenes,
Speaker 10: but anything to do with the bag messaging. When you
Speaker 10: get the notification that your bag has been checked in,
Speaker 10: that your bag has been put onto the plane, that
Speaker 10: your bag is arriving at carousel three at your destination,
Speaker 10: that's all messaging powered by our platform. So it helps
Speaker 10: really help boost that confidence and provide the digitization for
Speaker 10: the automation of those processes to help you keep passengers
Speaker 10: informed and reduce some of the stress levels and anxiety,
Speaker 10: because nobody wants that when they travel.
Speaker 2: You want Actually, since we're being asked to do more
Speaker 2: and more at the plate, you know, like in check
Speaker 2: it and stuff, there's a lot that's being kind of
Speaker 2: put on us, like conversy, did you do did you
Speaker 2: check in yourself? Did you take the bag over?
Speaker 3: I did everything? Yeah, I did everything. That's why I
Speaker 3: was just I was worried. I've had lost baggage in
Speaker 3: the past, and I just didn't want to go again.
Speaker 10: I was curious.
Speaker 3: I know that you did a baggage It Insights study,
Speaker 3: and not surprisingly you had on there. The number of
Speaker 3: mishandled baggage nearly doubled from twenty twenty one to twenty
Speaker 3: twenty two. I mean as far as other things when
Speaker 3: it comes to delayed baggage or other forms that you're
Speaker 3: able to help people that are working through this. Is
Speaker 3: it just for lost baggage or what else can you
Speaker 3: do here as far as trying to help travelers kind
Speaker 3: of ease their travel burdens.
Speaker 8: Yeah.
Speaker 10: So really, when you look at kind of the end
Speaker 10: to end process, I suppose right there are more than
Speaker 10: forty organizations involved in helping to fulfill a trip. So
Speaker 10: everything that we can do to provide more information, more data,
Speaker 10: more tools to help give the passenger more information. Feeling control,
Speaker 10: because I think the biggest thing about travel is maybe
Speaker 10: feeling you know that you don't have control, you don't
Speaker 10: have access to information, you don't have always accurate information,
Speaker 10: So everything that we can do to help make that
Speaker 10: possible is really core to our mission. So, you know,
Speaker 10: the bag tracking details, certainly being able to provide accurate
Speaker 10: flight information and making sure that you get that single
Speaker 10: source of truth so you have consistent information regardless of
Speaker 10: you know, whether you're looking at the screen in the airport,
Speaker 10: the app on your phone, or you know, calling the
Speaker 10: reservation center that everybody has the same information about that
Speaker 10: flight or about your bag. Can I send all of
Speaker 10: those things?
Speaker 2: Are this ability to track your bag?
Speaker 5: Though?
Speaker 2: If there's a delay? I mean, how is it kind
Speaker 2: of helping to make sure that Indeed, like if you're
Speaker 2: sitting on the plane and then you realize, okay, my
Speaker 2: bag didn't get there, that's going to distress the hecatomy
Speaker 2: rather than not knowing until I get to the carousel.
Speaker 2: So I do wonder. I guess ultimately it's not just
Speaker 2: about like telling you information but hoping that it isn't delayed,
Speaker 2: it isn't lost. So I'm curious how it's all of
Speaker 2: this digitization and the work that you guys are doing
Speaker 2: with airports and airlines. How is it improving so log
Speaker 2: bags aren't delayed, aren't lost, aren't damaged.
Speaker 10: Yeah, so a couple of cases, I suppose, Like with
Speaker 10: the Luftanza, we've been working on this auto reflight system
Speaker 10: where if a bag happens to miss a connection because
Speaker 10: maybe it's a tight timeline or you know, flight was
Speaker 10: delayed for some reason, we have an auto reflight now,
Speaker 10: so it puts the bag automatically onto the next flight
Speaker 10: and then just without having to retag the bag, without
Speaker 10: having to require manual intervention. And so that's bringing fantastic
Speaker 10: savings for TANZA and so leading to the rollout of
Speaker 10: that system on a wider basis beyond the proof of concept.
Speaker 10: And then airlines like Latam are seeing like a forty
Speaker 10: percent increase in customer satisfaction through the implementation of self
Speaker 10: bag drop and the systems that they're doing there, because
Speaker 10: now they reduce the burden of the manual tagging processes
Speaker 10: and they can automate all of that as well. So
Speaker 10: a lot of things in that type of approach that
Speaker 10: give the passenger control again and help to make it
Speaker 10: more automated.
Speaker 2: We'll find to check in with you, certainly something we
Speaker 2: can all relate to, and it's interesting to kind of
Speaker 2: go behind the scenes and understand how it's all working.
Speaker 2: Sherry Stein is Chief Technology Officer of the America is
Speaker 2: at SITA, joining us on Zoom from Spain. I do
Speaker 2: have to say that when I see the app, tell me, hey,
Speaker 2: your bag has made it. I mean, I'll follow it. Yeah, Like.
Speaker 3: It's such a relief.
Speaker 2: It is totally all right, everybody you're listening to watching
Speaker 2: Bloomberg Business Weekend. This is Bloomberg Radio.
Speaker 8: Brother Marc.
Speaker 7: A journal how about you let me drive?
Speaker 2: No, no, no, no, honey, please, I'll do the riding gravels.
Speaker 1: Let's mate, I want to try it.
Speaker 10: It's a good question time.
Speaker 1: This is the drive to the clothes dot Com for me.
Speaker 5: I think we'll buy around.
Speaker 1: You don on Bloomberg Radio.
Speaker 2: All right, everybody just read eighteen minutes just under eighteen
Speaker 2: minutes left in today's trading session. Carol Master Along and
Speaker 2: Jests met in live in our Bloomberg Interactive Brokers studio
Speaker 2: on Bloomberg YouTube, or i should say, on YouTube and
Speaker 2: Blomberg Originals as well our streaming service. You heard Charlie
Speaker 2: talking about the market's Jess bouncing around. I mean, I said,
Speaker 2: I feel like over the last week or said, we've
Speaker 2: had a lot of met trading days. It felt like
Speaker 2: we did break out a little bit yet last week
Speaker 2: an optimism of maybe a deal getting done out of DC.
Speaker 2: But it just does feel like we're marking time a
Speaker 2: little bit until this gets done.
Speaker 3: Definitely, And obviously we've talked about the technicals there with
Speaker 3: the S and P five hundred as well as the
Speaker 3: NASAK one hundred. So especially after a gangbuster year, you know,
Speaker 3: it makes sense to some of my sources that we'd see.
Speaker 2: A little bit of a pullback from here. All right,
Speaker 2: So let's get into it with our drive to the closed. Guest.
Speaker 2: Max Wasserman is back with us, founder and senior portfolio
Speaker 2: manager at the independent investment advisory for a Mira mar Capital.
Speaker 2: He's joining us so once again on zoom from Northbrook, Illinois. Max,
Speaker 2: nice to have you here. Top of mind for you
Speaker 2: on this Monday.
Speaker 11: Well, thank you for having me. I think the biggest
Speaker 11: thing that I would focus on is disparity within the
Speaker 11: market itself. Really, five technology companies are accounting for eighty
Speaker 11: percent of the S and p's total return. It's Navidia's Amsen, Google, Microsoft, Apple,
Speaker 11: and if you look at it, From that perspective, it's
Speaker 11: really the nasdack that's carrying in the whole market. The
Speaker 11: equal weighted part of the market's actually up only one
Speaker 11: to two percent, So if you look at the market,
Speaker 11: it's really a Nasdaq retracement of what they lost last year,
Speaker 11: and it's concentrated in five stocks, which we think is
Speaker 11: not that healthy for the market.
Speaker 3: So if it's not that healthy for the market, how
Speaker 3: are you positioning in the stock market at this.
Speaker 11: Point, Well, we're staying we're diving in growth investors, so
Speaker 11: we're looking for valuations that make reasonable sense paces good yield.
Speaker 11: While we do have investments in some of the large
Speaker 11: cap techts, we're looking in cyclicals. We're looking in healthcare
Speaker 11: energy companies that we think have reasonable valuations. Right now,
Speaker 11: if you look at the top five stocks, they have
Speaker 11: a forward pe of thirty one times, So with the
Speaker 11: NASAK being up twenty percent, we don't think the risk
Speaker 11: reward is really favorable from this level in that area
Speaker 11: of the market. But there's other area the markets and
Speaker 11: the cyclicals, the energies, the healthcare. They're trading it, you know,
Speaker 11: mid teams, which is less than the S and P itself.
Speaker 2: You know, what I find interesting is that we have
Speaker 2: had this if you go back maybe years ago or
Speaker 2: so or I don't know, I'd have to look at
Speaker 2: my calendar to really denote the exact timeframes. But Max,
Speaker 2: we've had these conversations before that the overall gains of
Speaker 2: the market are really fueled by a handful of names,
Speaker 2: those big tech names, only for folks to say, yep,
Speaker 2: stepping back from them don't make sense, overdone, overdone, and
Speaker 2: then we just see more money go into it and
Speaker 2: we see them pop to the upside. Because so much
Speaker 2: of our economy is really a lot of what these
Speaker 2: companies are doing. So how do you kind of factor
Speaker 2: that in fundamentally, Well.
Speaker 11: If we look at you take a step back. If
Speaker 11: you look last year, for example, when the Nasdaq was
Speaker 11: down thirty two percent, right then the SMP was down
Speaker 11: around twenty. Equal weighted and dividend oriented stocks were down
Speaker 11: in the high single digits. So if you look at
Speaker 11: a company like Apple, which we have an investment in,
Speaker 11: it's back to where it was in August of twenty two.
Speaker 11: So the stock just made a complete retrenchment. If you
Speaker 11: look back into Navidio and some of these texts all
Speaker 11: these companies just made a retrenchment to where they were
Speaker 11: trading a year ago. So it's not like these are
Speaker 11: making ultimate new highs by tremendous amount. Making some new
Speaker 11: highs like Microsoft, but it's not by a significant amount.
Speaker 11: So what we're saying to people for new money, be
Speaker 11: cautious jumping into the nas deck. The S and P
Speaker 11: five hundred has become the ETFs if you will have
Speaker 11: become a mini Nasdaq one hundred. If you think about it,
Speaker 11: Apple and Microsoft account for almost fourteen percent of the
Speaker 11: waiting in the S ANDP. So as technology goes, so
Speaker 11: goes the general market. But there's a lot of other
Speaker 11: areas which have a better asymmetrical return. And if we
Speaker 11: look at somebody long term, if you bought the nas
Speaker 11: deck a year ago, all you're doing is barely breaking
Speaker 11: even now where it. Had you been a little bit
Speaker 11: more conservative and not chased into these stocks at highs,
Speaker 11: you wouldn't be hurt as much. But yeah, now you're todate.
Speaker 11: Everybody likes tech because it's up twenty percent. But if
Speaker 11: you take a longer perspective, they're just giving you back.
Speaker 11: They're just coming back to where they were a year ago.
Speaker 3: Have you made any sort of shorter term changes just
Speaker 3: based on what's happening with the debt ceiling, because when
Speaker 3: I've spoken with my sources, a lot of them feel
Speaker 3: like it's more of a bond story right now rather
Speaker 3: than a stock story.
Speaker 11: We look at the debt failing is more of a
Speaker 11: political issue than anything. The issues that we see is
Speaker 11: if you get a failed they failed to ratify the
Speaker 11: debt ceiling, you could get a five to ten percent pullback,
Speaker 11: But we think that's political and we would use it
Speaker 11: as a buying opportunity. We haven't changed anything based on
Speaker 11: the debt ceiling because it's day to day and it's
Speaker 11: not a strategy. It's just trying the whims of the politics,
Speaker 11: which you have to look at. Though that has affected
Speaker 11: people strategy. It's what's happening in the banking area. You know,
Speaker 11: regional banks are having a harder time. Large money center
Speaker 11: banks are had a hard time given the fact that
Speaker 11: the interest rate risk they took didn't pay off. So
Speaker 11: from that perspective, we deemphasized financials and we have been
Speaker 11: underwinting financials for some time. But we make the regional
Speaker 11: banks and we do have an investment in one. We
Speaker 11: still think there's some it's going to be languishing for
Speaker 11: a while until they fix the balance sheets a little
Speaker 11: bit better.
Speaker 2: How does what the Fed do and I don't want
Speaker 2: to get into what the Fed will do because we
Speaker 2: could go back and forth from day to day or
Speaker 2: week to week. But how does what the Fed ALTI
Speaker 2: mentally does and where it lands and for how long
Speaker 2: impact your strategy right now?
Speaker 11: Well, how it impacts is liquidity. So if the Fed,
Speaker 11: you know, we look as the Fed maybe maybe one
Speaker 11: or two more rises and interest rates and that's about it.
Speaker 11: We think the Fed's gonna be tightening and the economy
Speaker 11: is going to slow down. You think increases possibly, I do.
Speaker 5: I do now.
Speaker 11: They may pause it for a little bit, but inflation
Speaker 11: is still embedded in the economy. Wagers are still going high,
Speaker 11: Unemployment is still very low. So you could see an
Speaker 11: area where you get something called stagflation. So they may
Speaker 11: try to prevent that, and that's you know, that's a possibility.
Speaker 11: But they may pause next time just to try to
Speaker 11: digest everything that's going on. But I could still see
Speaker 11: another twenty five to fifty basis points by year end,
Speaker 11: which is contrary to what everybody's thinking the Fed's going
Speaker 11: to cut. I think people are hoping the Fed's going
Speaker 11: to cut to justify this enthusiasm in the NASDAK. And
Speaker 11: it's also the market's trying to talk the Fed into
Speaker 11: doing something. I mean, right now, the Fed gave so
Speaker 11: much liquidity for so many years. To take it back,
Speaker 11: they have to get rid of the embedded and and
Speaker 11: that's a bigger risk. So to us, the thing that
Speaker 11: we would change if we thought the Fed was going
Speaker 11: to shift policy and going to cut interest rates, then
Speaker 11: we probably moved to a little bit more higher beta
Speaker 11: type stocks, if you will, because they'll do better and
Speaker 11: lower interest rates. But right now we see no reason
Speaker 11: to change, especially with valuations. Technology is not offering it
Speaker 11: to us, and again we have investments in there. We
Speaker 11: just don't think the risk reward. But also if they
Speaker 11: cut interest rates or they slow it down, we think
Speaker 11: everything's going to be a fourth quarter story reflecting twenty
Speaker 11: twenty four, and there we see the market much stronger
Speaker 11: and we think the market will start reflecting that. So
Speaker 11: we think the Fed's not as big of an issue
Speaker 11: right now. It's just really digesting everything it's done all.
Speaker 2: Right, We're going to leave it, I think. On that note, listen,
Speaker 2: thank you so much some really thoughtful advice for us
Speaker 2: on this Monday. Max Wasserman. He's foundering senior portfolio manager
Speaker 2: and you're More Capital registered independent, registered investment advisory firm.
Speaker 2: Joining us on zoom from Northbrook, Illinois.
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