1 00:00:02,759 --> 00:00:11,800 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence 2 00:00:11,960 --> 00:00:13,039 Speaker 1: with Paul Sweeney. 3 00:00:13,200 --> 00:00:16,439 Speaker 2: The real app performance has been the US corporate high yield. 4 00:00:16,480 --> 00:00:20,160 Speaker 2: These are two big time blue chip companies. One person's 5 00:00:20,200 --> 00:00:22,960 Speaker 2: cast is another person's animal spirits. 6 00:00:22,680 --> 00:00:26,360 Speaker 1: Breaking market headlines and corporate news from across the globe. 7 00:00:26,440 --> 00:00:28,400 Speaker 3: Our viewer is if the economy is slowing. 8 00:00:28,080 --> 00:00:30,600 Speaker 2: Down, there is the possibility of the debt spirals. 9 00:00:30,680 --> 00:00:33,240 Speaker 4: Both tutum competing and AI are going to power the future. 10 00:00:33,320 --> 00:00:36,720 Speaker 1: People are just buying everything with tex Bloomberg Intelligence with 11 00:00:36,800 --> 00:00:41,680 Speaker 1: Paul Sweeney on Bloomberg Radio, YouTube and Bloomberg Originals. 12 00:00:42,360 --> 00:00:44,600 Speaker 5: I'm Paul Sweeney and I'm Lis Matteo filling in on 13 00:00:44,640 --> 00:00:45,760 Speaker 5: Bloomberg Intelligence. 14 00:00:45,880 --> 00:00:48,199 Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big 15 00:00:48,240 --> 00:00:51,040 Speaker 2: business stories impacting Wall Street and the global markets. Each 16 00:00:51,040 --> 00:00:53,160 Speaker 2: and every week, we provide in depth research and data 17 00:00:53,200 --> 00:00:55,240 Speaker 2: on some of the two thousand companies and one hundred 18 00:00:55,240 --> 00:00:58,480 Speaker 2: and thirty industries our analysts covered worldwide. Today, we'll look 19 00:00:58,520 --> 00:01:01,160 Speaker 2: at why the toymaker has broken is raising its full 20 00:01:01,240 --> 00:01:01,760 Speaker 2: year outlook. 21 00:01:02,000 --> 00:01:04,560 Speaker 5: Plus we'll look at how General Motors is being impacted 22 00:01:04,600 --> 00:01:06,880 Speaker 5: by President Donald Trump's tariffs. 23 00:01:06,520 --> 00:01:08,559 Speaker 2: But First, let's begin with the tech sector. 24 00:01:08,800 --> 00:01:11,680 Speaker 5: This week, tech giant Alphabet reported second quarter earnings that 25 00:01:11,760 --> 00:01:16,080 Speaker 5: beat analyst expectations. Alphabet said demand for artificial intelligence products 26 00:01:16,160 --> 00:01:20,000 Speaker 5: boosted quarterly sales and now requires an extreme increase in 27 00:01:20,080 --> 00:01:21,399 Speaker 5: capital spending for more. 28 00:01:21,560 --> 00:01:24,280 Speaker 2: Lisa and I were joined by Mandep Singh, Bloomberg Intelligence 29 00:01:24,319 --> 00:01:25,600 Speaker 2: senior tech industry analyst. 30 00:01:25,800 --> 00:01:27,920 Speaker 5: We first asked man Deep for his take on Alphabet's 31 00:01:27,920 --> 00:01:29,119 Speaker 5: most recent earnings. 32 00:01:29,480 --> 00:01:32,639 Speaker 6: The fact that they are able to grow their search 33 00:01:32,800 --> 00:01:36,160 Speaker 6: business double digit at that kind of run rate two 34 00:01:36,240 --> 00:01:39,920 Speaker 6: hundred ten billion dollar plus. Like, think of how many 35 00:01:40,080 --> 00:01:44,800 Speaker 6: incremental dollars they added just by virtue of that eleven 36 00:01:44,840 --> 00:01:48,920 Speaker 6: percent growth in the two hundred ten billion dollar business. 37 00:01:49,080 --> 00:01:53,400 Speaker 6: And that is where you know the real strength lies 38 00:01:53,440 --> 00:01:57,320 Speaker 6: with a company like Alphabet. They are overlaying Gemini across 39 00:01:58,200 --> 00:02:03,480 Speaker 6: their family apps. AI overviews is actually driving ten percent 40 00:02:03,640 --> 00:02:08,040 Speaker 6: more queries and AI Overviews is now used by two 41 00:02:08,120 --> 00:02:11,440 Speaker 6: billion monthly active users. So Google Search has five billion 42 00:02:11,480 --> 00:02:15,959 Speaker 6: monthly active users. Imagine AI overviews being used by two 43 00:02:15,960 --> 00:02:20,040 Speaker 6: billion monthly active users. So they got the UI part right. 44 00:02:20,520 --> 00:02:23,640 Speaker 6: Gemini as a standalone app has got four hundred and 45 00:02:23,639 --> 00:02:27,800 Speaker 6: fifty million monthly active users. Imagine if everyone started paying 46 00:02:27,800 --> 00:02:31,200 Speaker 6: a twenty dollars subscription like chatchipt, this could become one 47 00:02:31,240 --> 00:02:35,760 Speaker 6: hundred billion dollar business. In addition to search and then YouTube, 48 00:02:35,800 --> 00:02:38,280 Speaker 6: I'm not even talking about you know, I'll talk about 49 00:02:39,600 --> 00:02:42,280 Speaker 6: all the strengthen YouTube and way more. So this is 50 00:02:42,320 --> 00:02:45,080 Speaker 6: a powerhouse when it comes to four hundred billion dollar 51 00:02:45,120 --> 00:02:47,359 Speaker 6: run rate they will be at the end of the year. 52 00:02:47,840 --> 00:02:49,679 Speaker 5: So can you explain something to me, Because when the 53 00:02:49,720 --> 00:02:52,320 Speaker 5: shares dropped because they said capex was a little bit more, 54 00:02:52,400 --> 00:02:55,399 Speaker 5: well ten billion dollars more than expected a little bit, 55 00:02:56,240 --> 00:03:00,720 Speaker 5: how is that different for an alphabet versus metaphor to 56 00:03:00,760 --> 00:03:01,040 Speaker 5: say that? 57 00:03:01,200 --> 00:03:05,000 Speaker 6: So that's great. So look, let's frame the capex eighty 58 00:03:05,000 --> 00:03:08,760 Speaker 6: five billion dollars at potentially a four hundred billion dollar 59 00:03:08,800 --> 00:03:10,960 Speaker 6: revenue run rate by the end of the year. That's 60 00:03:11,000 --> 00:03:14,960 Speaker 6: like a twenty five percent capex intensity. Meta, on the 61 00:03:15,000 --> 00:03:18,400 Speaker 6: other hand, is already at a forty percent capex intensity 62 00:03:18,400 --> 00:03:21,440 Speaker 6: because their CAPEX will be seventy billion at a undred 63 00:03:21,440 --> 00:03:24,520 Speaker 6: of close to two hundred billion. So that just goes 64 00:03:24,560 --> 00:03:27,959 Speaker 6: to show Alphabet is still far lower than their peer 65 00:03:28,000 --> 00:03:30,960 Speaker 6: group when it comes to the capex intensity. I mean, 66 00:03:31,040 --> 00:03:34,040 Speaker 6: that's just the scale of the business that they are operating. 67 00:03:34,080 --> 00:03:37,720 Speaker 6: And look, I do think the ROI on their capex 68 00:03:37,800 --> 00:03:42,360 Speaker 6: is higher because Gemini's cost is much lower than all 69 00:03:42,480 --> 00:03:47,320 Speaker 6: the other large ANGLID models, including Microsoft, including Meta. They 70 00:03:47,440 --> 00:03:51,120 Speaker 6: do inferencing at a lower cost. And that's the advantage 71 00:03:51,120 --> 00:03:53,960 Speaker 6: of having your own chip, having your own large ANGLID 72 00:03:54,040 --> 00:03:57,600 Speaker 6: model that Microsoft or Meta don't have because they rely 73 00:03:57,720 --> 00:04:01,440 Speaker 6: on in video chips, whereas Google does most of their 74 00:04:01,520 --> 00:04:04,840 Speaker 6: inferencing from the TPU chip. So I think that just 75 00:04:05,000 --> 00:04:08,520 Speaker 6: vertical integration they have Alphabet has gives them such a 76 00:04:08,520 --> 00:04:11,840 Speaker 6: big cost advantage when it comes to running the AI infrastructure. 77 00:04:12,640 --> 00:04:16,320 Speaker 2: Where's the company on the various regulatory issues outstanding? What 78 00:04:16,360 --> 00:04:17,840 Speaker 2: are the one or two or three ones that we've 79 00:04:17,839 --> 00:04:20,960 Speaker 2: really got to focus on in what's the market telling us? 80 00:04:21,040 --> 00:04:24,240 Speaker 6: So that's the biggest risk with Alphabet. That has been 81 00:04:24,320 --> 00:04:27,479 Speaker 6: the biggest rag on their multiple and it remains because 82 00:04:27,520 --> 00:04:31,200 Speaker 6: we have a catalyst next month where Judge Meta is 83 00:04:31,240 --> 00:04:34,320 Speaker 6: going to make a decision on the remedies. And you know, 84 00:04:34,480 --> 00:04:38,560 Speaker 6: especially that Chrome split, that's still an overhang. Now the 85 00:04:38,600 --> 00:04:42,200 Speaker 6: base case is there won't be any Chrome divestiture, but 86 00:04:42,520 --> 00:04:45,440 Speaker 6: we still need to learn about what are the remedies 87 00:04:45,520 --> 00:04:48,240 Speaker 6: that may come about in terms of you know, proposed 88 00:04:48,240 --> 00:04:50,839 Speaker 6: by the judge, and that is where if they're asked 89 00:04:50,880 --> 00:04:54,359 Speaker 6: to you know, share search data or some other type 90 00:04:54,360 --> 00:04:58,080 Speaker 6: of remedy, that's going to hurt their position. I think 91 00:04:58,160 --> 00:04:59,320 Speaker 6: that is the big Overhay. 92 00:04:59,360 --> 00:05:02,520 Speaker 2: This one could be this one. If you have a 93 00:05:02,560 --> 00:05:05,160 Speaker 2: firm view on that. You buy the stock here and 94 00:05:05,160 --> 00:05:08,039 Speaker 2: there's there's a ton in this thing. Are people doing that? 95 00:05:08,080 --> 00:05:09,200 Speaker 2: Are people making bets here? 96 00:05:09,320 --> 00:05:09,480 Speaker 6: Think? 97 00:05:09,520 --> 00:05:10,960 Speaker 2: I bet you they have to be. 98 00:05:11,360 --> 00:05:14,480 Speaker 6: I mean, the narrative is still no netive, so negative. 99 00:05:14,560 --> 00:05:17,360 Speaker 6: Everyone is fixated on oh chat ChiPT my work. 100 00:05:18,120 --> 00:05:21,760 Speaker 2: Bobby Action Rod on billions would somehow figure out where 101 00:05:21,760 --> 00:05:24,320 Speaker 2: this judge is going to rule, make a bet one 102 00:05:24,320 --> 00:05:26,200 Speaker 2: way or the other. You know, there's the Bobby Action 103 00:05:26,320 --> 00:05:27,040 Speaker 2: Rods of the world out. 104 00:05:27,400 --> 00:05:30,240 Speaker 6: I agree. I think if you can figure out decisively 105 00:05:30,760 --> 00:05:34,160 Speaker 6: what the judges verdict is going to be, the multiple wise, 106 00:05:34,200 --> 00:05:37,200 Speaker 6: you could see easily a twenty five to thirty percent 107 00:05:37,360 --> 00:05:41,000 Speaker 6: multiple expansion and numbers will go up for sure after 108 00:05:41,200 --> 00:05:44,360 Speaker 6: print last night. But multiple expansion is like twenty five 109 00:05:44,400 --> 00:05:47,400 Speaker 6: to thirty percent. Just and when is that ruling that's 110 00:05:47,600 --> 00:05:51,280 Speaker 6: coming up in August September time frame to keep up with. 111 00:05:51,240 --> 00:05:52,320 Speaker 5: These things to do. 112 00:05:52,360 --> 00:05:57,960 Speaker 2: It's got like a huge team, global team behind him. 113 00:05:57,960 --> 00:05:59,599 Speaker 2: I mean all he does is come on radio, TV 114 00:06:00,000 --> 00:06:02,839 Speaker 2: and they give all the work. He's got everything everything. 115 00:06:03,320 --> 00:06:06,960 Speaker 5: So you mentioned YouTube before Google Video site, how is 116 00:06:07,000 --> 00:06:09,200 Speaker 5: its advertising still going? Still going strong? 117 00:06:09,800 --> 00:06:14,080 Speaker 6: So look, YouTube subscriptions is what it's really doing well 118 00:06:14,200 --> 00:06:18,680 Speaker 6: right now. So YouTube subscription growth is north of twenty percent. Imagine, 119 00:06:18,720 --> 00:06:23,600 Speaker 6: you know, Netflix growing sixteen seventeen percent, YouTube subscriptions actually 120 00:06:23,720 --> 00:06:27,280 Speaker 6: surpassing Netflix's growth. And then you layer ads on top 121 00:06:27,320 --> 00:06:29,720 Speaker 6: of that, which grew at a very healthy thirteen percent. 122 00:06:30,040 --> 00:06:33,720 Speaker 6: So ads is a forty billion dollar business. Subscriptions is 123 00:06:33,839 --> 00:06:37,640 Speaker 6: now close to you know, twenty billion dollars, and that 124 00:06:37,880 --> 00:06:41,920 Speaker 6: is where you're seeing, you know, combined cloud plus YouTube 125 00:06:43,040 --> 00:06:46,000 Speaker 6: arr is close to one hundred and fifteen billion. So 126 00:06:46,120 --> 00:06:49,599 Speaker 6: imagine when just these two segments growing at north of 127 00:06:49,720 --> 00:06:53,440 Speaker 6: twenty percent. I mean, it's it's just a phenomenal business 128 00:06:53,480 --> 00:06:56,960 Speaker 6: these to both cloud and YouTube and on a standalone basis, 129 00:06:56,960 --> 00:07:01,159 Speaker 6: there is so much runway for growing the to segment. 130 00:07:01,560 --> 00:07:04,200 Speaker 2: Our thanks to Man Deep Seeing Bloomberg Intelligence senior tech 131 00:07:04,240 --> 00:07:05,400 Speaker 2: industry analyst. 132 00:07:05,440 --> 00:07:08,240 Speaker 5: We moved next to consumer earnings. Earlier this week, Philip 133 00:07:08,240 --> 00:07:11,680 Speaker 5: Morris posted second quarter earnings that missed analysts expectations. 134 00:07:11,840 --> 00:07:14,720 Speaker 2: The results were due to the company's Zen nicotine pouch 135 00:07:14,720 --> 00:07:18,760 Speaker 2: shipments accelerating less than expected. Separately, Coca Cola reported second 136 00:07:18,800 --> 00:07:21,640 Speaker 2: quarter earnings that beat analse expectations. 137 00:07:21,080 --> 00:07:23,120 Speaker 5: And this came as a company announced it was launching 138 00:07:23,120 --> 00:07:25,720 Speaker 5: a new version of its coke product made with US 139 00:07:25,800 --> 00:07:28,920 Speaker 5: sugarcane this fall. President Donald Trump had urged a company 140 00:07:28,920 --> 00:07:29,360 Speaker 5: to do so. 141 00:07:29,720 --> 00:07:31,600 Speaker 2: For more Lisa and I were joined by Ken Shay, 142 00:07:31,640 --> 00:07:34,200 Speaker 2: Bloomberg Intelligence Senior consumer products analyst. 143 00:07:34,360 --> 00:07:36,880 Speaker 5: We first asked Ken to explain why Coca Cola is 144 00:07:36,960 --> 00:07:39,520 Speaker 5: making a switch to cane sugar and if pressure from 145 00:07:39,520 --> 00:07:41,320 Speaker 5: President Trump had an impact. 146 00:07:41,600 --> 00:07:43,560 Speaker 3: It certainly is in sync with what Coca Cola has 147 00:07:43,560 --> 00:07:45,920 Speaker 3: been doing for a long time, and that is keeping 148 00:07:45,960 --> 00:07:48,720 Speaker 3: its post on what the consumer wants to do. It 149 00:07:48,800 --> 00:07:51,920 Speaker 3: has a lot of assets at his disposal, and a 150 00:07:52,000 --> 00:07:55,720 Speaker 3: cane sugar product is not novel to Coca Cola. I mean, 151 00:07:55,840 --> 00:08:00,040 Speaker 3: it's produced it in the US, largely more outside of US, 152 00:08:00,080 --> 00:08:02,760 Speaker 3: but in the US on a selected basis, So it's 153 00:08:02,800 --> 00:08:05,880 Speaker 3: really just going to expand that it may have been 154 00:08:06,880 --> 00:08:10,600 Speaker 3: prompted to a degree by the President's tweets or whatever, 155 00:08:10,960 --> 00:08:13,920 Speaker 3: but it's certainly in synct. Like I said, you know, 156 00:08:13,960 --> 00:08:17,080 Speaker 3: there's a there's an audience out there that prefers sugar 157 00:08:17,160 --> 00:08:20,320 Speaker 3: based as opposed to high fructose corn cruit based, full 158 00:08:20,360 --> 00:08:23,280 Speaker 3: calorie sodas, and they're going to play into that. Most likely, 159 00:08:23,320 --> 00:08:25,640 Speaker 3: it's going to be a brand Coke extension, and it's 160 00:08:26,000 --> 00:08:28,240 Speaker 3: going to be sell at a premium price in selected 161 00:08:28,280 --> 00:08:31,880 Speaker 3: markets to give it, uh an aura of exclusivity. I'm 162 00:08:31,880 --> 00:08:35,760 Speaker 3: guessing to to command those prices, and so just as 163 00:08:35,760 --> 00:08:38,080 Speaker 3: a little more excitement. It's it's one of many things 164 00:08:38,080 --> 00:08:40,440 Speaker 3: Coke is doing now on the innovation front. 165 00:08:41,679 --> 00:08:45,160 Speaker 2: So from Coca Cola's economic perspective, do they care which 166 00:08:45,280 --> 00:08:46,360 Speaker 2: ingredient they use? 167 00:08:48,160 --> 00:08:50,880 Speaker 3: Well, it depends, Paul, It depends if they can capture 168 00:08:50,920 --> 00:08:53,200 Speaker 3: the premium price they're going to, you know, price it 169 00:08:53,200 --> 00:08:56,440 Speaker 3: at kin share costs more than high fructose corns herup. 170 00:08:56,480 --> 00:08:59,280 Speaker 3: You know, a corn is a heavily, heavily subsidized crop 171 00:08:59,320 --> 00:09:02,480 Speaker 3: in the US. UH they built their supply chain around 172 00:09:03,040 --> 00:09:06,640 Speaker 3: HFCs because of that, and most consumers early, you know, 173 00:09:07,000 --> 00:09:10,760 Speaker 3: they don't really notice the difference. Some do but buy 174 00:09:10,840 --> 00:09:13,839 Speaker 3: and large. You know, they've grown that franchise very well. 175 00:09:15,679 --> 00:09:17,720 Speaker 3: But I guess you know some tourists that go to 176 00:09:17,760 --> 00:09:21,439 Speaker 3: Mexico and they taste the sugar cane sugar coke down 177 00:09:21,440 --> 00:09:22,720 Speaker 3: there and they say, you know what, this is really 178 00:09:22,760 --> 00:09:25,560 Speaker 3: good and they want to capture the same experience in 179 00:09:25,600 --> 00:09:26,160 Speaker 3: the US. 180 00:09:26,320 --> 00:09:29,240 Speaker 2: I'm going to Chipotle and they do offer the Mexican 181 00:09:30,160 --> 00:09:33,080 Speaker 2: zoda there. Let me ask, let me shift gears here. 182 00:09:33,679 --> 00:09:35,319 Speaker 2: What is a zin patch? 183 00:09:36,440 --> 00:09:38,480 Speaker 3: A zin patch? You want a patch? 184 00:09:38,520 --> 00:09:38,600 Speaker 6: It? 185 00:09:38,720 --> 00:09:42,240 Speaker 3: I think they made a pouch pouch, Zin pouch, a pouch. 186 00:09:42,280 --> 00:09:45,280 Speaker 3: You know, it's a it's an oral tobacco product. Actually, 187 00:09:45,760 --> 00:09:48,600 Speaker 3: zin isn't. It really doesn't even contain tobacco. It's a 188 00:09:48,640 --> 00:09:53,920 Speaker 3: synthetic products. It's lads with nicotine that is a facsimile 189 00:09:54,000 --> 00:09:57,120 Speaker 3: for tobacco, which a lot of people will say causes harm, 190 00:09:57,160 --> 00:09:59,760 Speaker 3: and a lot of people are right. So this is 191 00:09:59,760 --> 00:10:02,760 Speaker 3: a product that you know, people can get their nicotine 192 00:10:02,800 --> 00:10:06,200 Speaker 3: buzz in a you know, hands off kind of way, 193 00:10:06,240 --> 00:10:09,440 Speaker 3: doesn't emit smoke, doesn't offend your neighbor that you're working with. Uh, 194 00:10:09,600 --> 00:10:11,960 Speaker 3: and it's done really really well. So those are really 195 00:10:12,080 --> 00:10:14,840 Speaker 3: the Zin pouches that are doing really well. Yeah, yeah, I. 196 00:10:14,800 --> 00:10:19,080 Speaker 2: Thought it was Zinfindel the wine. That's no kidding, no idea, 197 00:10:19,160 --> 00:10:22,800 Speaker 2: that pouch. So but I mean it's it's big enough 198 00:10:22,800 --> 00:10:25,320 Speaker 2: a business can that Philip mars would would call it out. 199 00:10:27,280 --> 00:10:30,199 Speaker 3: Oh yeah, I know it in it's about eight percent 200 00:10:30,240 --> 00:10:32,720 Speaker 3: of the sales, I believe at this point, but it's growing, 201 00:10:32,840 --> 00:10:36,120 Speaker 3: you know, a twenty thirty percent rate as opposed to cigarettes, 202 00:10:36,160 --> 00:10:39,439 Speaker 3: which are flat, if not down. But you know, Icoas 203 00:10:39,600 --> 00:10:43,160 Speaker 3: is their smoke free device segment, which is doing very well. 204 00:10:43,760 --> 00:10:45,960 Speaker 3: But if the low large numbers at some point, that's 205 00:10:45,960 --> 00:10:48,480 Speaker 3: going to slow and Zen is filling the gap. They 206 00:10:48,720 --> 00:10:52,959 Speaker 3: keep the overall volumes in a positive trend. They price 207 00:10:53,080 --> 00:10:55,199 Speaker 3: these things very high. There's not a lot of competition 208 00:10:55,800 --> 00:10:57,880 Speaker 3: in this space. So you know, one of the things 209 00:10:57,920 --> 00:11:00,520 Speaker 3: investors would say about the world of tobacco, because it's 210 00:11:00,520 --> 00:11:03,840 Speaker 3: so consolidated, they can pass on a very high pricing 211 00:11:04,000 --> 00:11:06,240 Speaker 3: and that's what really drives a top line and you know, 212 00:11:06,280 --> 00:11:09,360 Speaker 3: the cash flows and so on, and Zen plays very, 213 00:11:09,160 --> 00:11:11,200 Speaker 3: very very well into that model. 214 00:11:11,840 --> 00:11:13,920 Speaker 5: And how does it fair as far as we hear 215 00:11:13,960 --> 00:11:16,640 Speaker 5: about e cigarettes, vaping things like that, how has Philip 216 00:11:16,679 --> 00:11:19,360 Speaker 5: Marris been doing competing with this category. 217 00:11:20,800 --> 00:11:23,600 Speaker 3: So they have a product called viv which is their 218 00:11:24,160 --> 00:11:26,720 Speaker 3: e vapor product as opposed to what they call Heat 219 00:11:26,760 --> 00:11:30,360 Speaker 3: not Burn, which has actual tobacco in it, and they 220 00:11:30,400 --> 00:11:35,000 Speaker 3: would say as a more appealing alternative for smokers who 221 00:11:35,000 --> 00:11:38,800 Speaker 3: are trying to quit. It's a lower margin product. It's 222 00:11:38,880 --> 00:11:40,679 Speaker 3: kind of seen by Philip Morris as a kind of 223 00:11:40,720 --> 00:11:43,280 Speaker 3: an entry level product for those who are trying to 224 00:11:43,320 --> 00:11:46,640 Speaker 3: move away from combustible cigarettes. They can turn to e 225 00:11:46,760 --> 00:11:50,080 Speaker 3: cigarettes a low cost method, and their hope is that, 226 00:11:50,559 --> 00:11:52,600 Speaker 3: you know, even though it's a low margin product, their 227 00:11:52,600 --> 00:11:56,840 Speaker 3: hope is that they can get that consumer maybe at 228 00:11:56,840 --> 00:12:00,000 Speaker 3: some point to trade up to their heat not Burn product, 229 00:12:00,600 --> 00:12:03,960 Speaker 3: which is, you know, a more profitable product for them. 230 00:12:04,120 --> 00:12:07,320 Speaker 2: Our thanks to Ken Shay, Bloomberg Intelligence Senior Consumer Products analyst. 231 00:12:07,520 --> 00:12:09,800 Speaker 5: Coming up, well look at why the hotel chain Hilton 232 00:12:09,960 --> 00:12:12,120 Speaker 5: lowered expectations for net income this year. 233 00:12:12,400 --> 00:12:15,240 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 234 00:12:15,280 --> 00:12:17,480 Speaker 2: depth research and data on two thousand companies and one 235 00:12:17,520 --> 00:12:18,600 Speaker 2: hundred and thirty industries. 236 00:12:18,840 --> 00:12:22,280 Speaker 5: You can access Bloomberg Intelligence via Big on the terminal. 237 00:12:22,320 --> 00:12:24,160 Speaker 5: I'm Lis Matteo and I'm Paul Sweeney. 238 00:12:24,320 --> 00:12:25,400 Speaker 2: This is Bloomberg. 239 00:12:29,679 --> 00:12:33,400 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 240 00:12:33,480 --> 00:12:36,559 Speaker 1: weekdays at ten am Eastern on Apple Corplay and Android 241 00:12:36,559 --> 00:12:39,880 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 242 00:12:39,920 --> 00:12:43,520 Speaker 1: you get your podcasts, or watch us live on YouTube. 243 00:12:43,800 --> 00:12:46,240 Speaker 5: I'm Paul Sweeney and I'm Lis Mateo filling in on 244 00:12:46,280 --> 00:12:47,400 Speaker 5: Bloomberg Intelligence. 245 00:12:47,520 --> 00:12:50,640 Speaker 2: We move next to the telecommunication space. This week, Verizon 246 00:12:50,640 --> 00:12:54,160 Speaker 2: Communications posted second quarter revenue that surpassed analyst estimates, and 247 00:12:54,240 --> 00:12:55,920 Speaker 2: the company raised this profit outlook. 248 00:12:56,040 --> 00:12:59,360 Speaker 5: The results were fueled by wireless price increases and favorable 249 00:12:59,400 --> 00:13:01,040 Speaker 5: tax reform. 250 00:13:00,480 --> 00:13:02,280 Speaker 2: For more at Least and I were joined by John Butler, 251 00:13:02,280 --> 00:13:04,280 Speaker 2: Bloomberg Intelligence senior telecom analysts. 252 00:13:04,320 --> 00:13:07,120 Speaker 5: We first asked John, what's making the company so optimistic? 253 00:13:07,520 --> 00:13:11,360 Speaker 7: When I look at Verizon, I think of the phrase 254 00:13:11,440 --> 00:13:15,319 Speaker 7: game of the inches, right. I think the improvements here 255 00:13:15,480 --> 00:13:20,920 Speaker 7: quartering and quarter out are incrementally better. They're edging towards 256 00:13:21,000 --> 00:13:24,680 Speaker 7: that acquisition of Frontier, which is really going to change 257 00:13:24,720 --> 00:13:27,880 Speaker 7: the game for them. But in the meantime, they put 258 00:13:27,880 --> 00:13:30,920 Speaker 7: a lot of changes in place in terms of their 259 00:13:31,000 --> 00:13:36,480 Speaker 7: go to market strategy, how they're combating promotions coming from 260 00:13:36,559 --> 00:13:40,160 Speaker 7: T Mobile and AT and T and on the margin 261 00:13:41,080 --> 00:13:43,760 Speaker 7: quarterin and quarter out, I just see them doing a 262 00:13:43,920 --> 00:13:47,320 Speaker 7: better and better job. I think all the actions they've 263 00:13:47,360 --> 00:13:50,920 Speaker 7: taken are starting to work, and so taking the long 264 00:13:51,000 --> 00:13:57,560 Speaker 7: view here, I really think Verizon is improving just quartering 265 00:13:57,640 --> 00:14:01,360 Speaker 7: and quarter out. And this was another quarter where you 266 00:14:01,360 --> 00:14:04,040 Speaker 7: could look at it in isolation and say, you know, 267 00:14:04,120 --> 00:14:07,880 Speaker 7: it was a solid quarter, a little bit mixed on 268 00:14:07,960 --> 00:14:11,480 Speaker 7: some of the metrics, but I think I'm balanced better 269 00:14:11,679 --> 00:14:13,400 Speaker 7: than last quarter and last year. 270 00:14:14,280 --> 00:14:18,720 Speaker 2: John, what's kind of the positioning of Verizon in the marketplace? Like, 271 00:14:18,760 --> 00:14:20,960 Speaker 2: I've been a long time Verizon wireless customers since the 272 00:14:20,960 --> 00:14:24,640 Speaker 2: beginning of cillier service actually, and I guess I was 273 00:14:24,640 --> 00:14:26,560 Speaker 2: initially drawn to it because I thought they had the 274 00:14:26,600 --> 00:14:30,280 Speaker 2: best network. So quality, is that still the case because 275 00:14:30,320 --> 00:14:32,600 Speaker 2: it seems like T Mobile's gotten a lot better in 276 00:14:32,680 --> 00:14:34,920 Speaker 2: quality and AT and T. I don't know. 277 00:14:36,560 --> 00:14:38,720 Speaker 7: Yeah, you know, Paul, you bring up a good point. 278 00:14:38,800 --> 00:14:41,240 Speaker 7: I think there's a question mark out there as to 279 00:14:41,320 --> 00:14:46,040 Speaker 7: whether Verizon still has the best network versus T Mobile 280 00:14:46,080 --> 00:14:49,560 Speaker 7: and AT and T. But I think they have a 281 00:14:49,600 --> 00:14:53,200 Speaker 7: slight edge they are in terms of coverage. And it's 282 00:14:53,280 --> 00:14:56,120 Speaker 7: interesting a lot of people ask me about wireless, who 283 00:14:56,200 --> 00:14:59,440 Speaker 7: was the best network? Who should I choose? And the 284 00:14:59,680 --> 00:15:03,120 Speaker 7: one thing that people are always ask about is how's 285 00:15:03,200 --> 00:15:06,480 Speaker 7: their coverage. I think coverage is very important to people, 286 00:15:06,960 --> 00:15:09,480 Speaker 7: and I think when you think on that metric. In 287 00:15:09,600 --> 00:15:13,480 Speaker 7: terms of that metric, for Riizon delivers the bars on 288 00:15:13,520 --> 00:15:17,280 Speaker 7: your smartphone, probably more than T Mobile and AT and 289 00:15:17,320 --> 00:15:21,680 Speaker 7: T in terms of download speeds, though I suspect that 290 00:15:21,840 --> 00:15:24,760 Speaker 7: T Mobile probably is gaining the edge here. 291 00:15:25,200 --> 00:15:29,320 Speaker 5: Now, what about prices? Did Verizon increase their prices? If so, 292 00:15:29,360 --> 00:15:30,000 Speaker 5: did that help? 293 00:15:30,920 --> 00:15:31,000 Speaker 6: So? 294 00:15:31,120 --> 00:15:35,320 Speaker 7: We did see in all the carriers are increasing prices 295 00:15:35,440 --> 00:15:38,840 Speaker 7: right now as the market matures and new user growth 296 00:15:38,920 --> 00:15:41,880 Speaker 7: is slowing considerably. The only way you're going to grow 297 00:15:41,920 --> 00:15:46,800 Speaker 7: that important service revenue metric is by raising prices. They 298 00:15:46,840 --> 00:15:50,600 Speaker 7: tend to do it on older plans for riizing stunted 299 00:15:50,720 --> 00:15:54,040 Speaker 7: over the past six months. As if you look over 300 00:15:54,080 --> 00:15:57,280 Speaker 7: the past year, so as AT and T and T Mobile, 301 00:15:58,480 --> 00:16:02,440 Speaker 7: that's flowing through and it's helping to boost the service revenue. 302 00:16:02,880 --> 00:16:06,320 Speaker 7: I think over time they're adding in those little extras 303 00:16:06,520 --> 00:16:11,080 Speaker 7: like you know, device insurance and perks like you know, 304 00:16:11,240 --> 00:16:14,600 Speaker 7: added content that you can purchase at a discount through 305 00:16:15,280 --> 00:16:18,760 Speaker 7: through Verizon, and I think all that together is going 306 00:16:18,840 --> 00:16:23,600 Speaker 7: to continue to provide a lift to service revenue. It's 307 00:16:23,680 --> 00:16:24,520 Speaker 7: nothing special. 308 00:16:24,600 --> 00:16:24,920 Speaker 6: Again. 309 00:16:25,040 --> 00:16:28,560 Speaker 7: I'm looking forward to that Frontier acquisition where they're going 310 00:16:28,640 --> 00:16:33,880 Speaker 7: to buy, you know, access to two million Fiber broadband 311 00:16:34,000 --> 00:16:39,000 Speaker 7: subscribers and eight million fiber homes passed, because once they 312 00:16:39,080 --> 00:16:42,480 Speaker 7: get Frontier under the hood, they're going to be able 313 00:16:42,520 --> 00:16:46,800 Speaker 7: to bundle that wireless service with Fiber and I think 314 00:16:46,920 --> 00:16:51,600 Speaker 7: that's going to help to really drive renewed UH subscriber growth. 315 00:16:52,040 --> 00:16:55,120 Speaker 2: Our thanks to John Butler, Bloomberg Intelligence Senior Telecom Analist. 316 00:16:55,360 --> 00:16:57,120 Speaker 5: We move next to the toy industry. 317 00:16:57,480 --> 00:16:59,640 Speaker 2: This week, the toy maker has But reported second quarter 318 00:16:59,640 --> 00:17:01,400 Speaker 2: earnings that beat analyst expectations. 319 00:17:01,480 --> 00:17:04,119 Speaker 5: The company also said it's raising its full year outlook. 320 00:17:04,200 --> 00:17:07,159 Speaker 5: This comes after a record quarter for Hasbro's Magic the 321 00:17:07,200 --> 00:17:08,280 Speaker 5: Gathering card game. 322 00:17:08,640 --> 00:17:10,720 Speaker 2: For more, co host Isabelle Lee and I were joined 323 00:17:10,720 --> 00:17:14,840 Speaker 2: by Lindsey Dutch, Bloomberg Intelligence Consumer Hardlines Senior Analyst. You 324 00:17:14,920 --> 00:17:17,240 Speaker 2: first asked Lindsay to break down what we learned from 325 00:17:17,240 --> 00:17:18,159 Speaker 2: Hasbro this week. 326 00:17:18,560 --> 00:17:21,919 Speaker 4: Strong quarter are really a continuation from the first quarter 327 00:17:22,359 --> 00:17:25,520 Speaker 4: where all the strength is really coming from Magic the 328 00:17:25,560 --> 00:17:29,760 Speaker 4: Gathering Monopoly go and Hasbro's digital gaming business. What we 329 00:17:29,920 --> 00:17:32,639 Speaker 4: did not learn from the release is really about the 330 00:17:32,680 --> 00:17:35,720 Speaker 4: consumer and what the outlook is for toys in the 331 00:17:35,760 --> 00:17:39,720 Speaker 4: second half, and that's causing a lot of uncertainty what 332 00:17:39,760 --> 00:17:41,679 Speaker 4: that back half might look like. 333 00:17:42,440 --> 00:17:44,800 Speaker 8: I was going to ask how exposed is Hasbro to 334 00:17:44,920 --> 00:17:48,760 Speaker 8: current consumers spending trends, Like, especially in the toys and 335 00:17:49,040 --> 00:17:51,879 Speaker 8: entertainment area, do we see more middle income shoppers buying 336 00:17:51,920 --> 00:17:54,480 Speaker 8: Hasbro or what kind of consumers are you seeing? 337 00:17:55,200 --> 00:17:59,080 Speaker 4: Yeah, so the toy business typically grows with GDP. It 338 00:17:59,160 --> 00:18:01,960 Speaker 4: has been you know, coming down a bit challenge over 339 00:18:01,960 --> 00:18:04,679 Speaker 4: the past couple of years after the peak during COVID 340 00:18:04,720 --> 00:18:07,120 Speaker 4: when everyone was stuck at home buying a lot of toys. 341 00:18:07,400 --> 00:18:09,840 Speaker 4: This year was supposed to be a turnaround year four 342 00:18:09,880 --> 00:18:12,600 Speaker 4: toys and then early this year, you know, we got 343 00:18:12,680 --> 00:18:15,119 Speaker 4: hit with the tariff news, which created a lot of 344 00:18:15,200 --> 00:18:19,040 Speaker 4: uncertainty in the business. One is, you know, we don't 345 00:18:19,080 --> 00:18:21,560 Speaker 4: know how the consumer is going to react to broader 346 00:18:21,600 --> 00:18:26,800 Speaker 4: price increases, and we do expect increases on toys very specifically, 347 00:18:27,320 --> 00:18:30,320 Speaker 4: so companies like Hasbro and Mattel, you know what some 348 00:18:30,359 --> 00:18:33,600 Speaker 4: of the biggest toy makers in the globe you know, 349 00:18:33,640 --> 00:18:37,800 Speaker 4: are really faced with that challenge in second quarter. Normally 350 00:18:38,000 --> 00:18:42,440 Speaker 4: retailers already start buying their holiday inventory. That didn't happen 351 00:18:42,560 --> 00:18:46,320 Speaker 4: this year. Those retailers Walmart, Target, took a pause. So 352 00:18:46,400 --> 00:18:48,399 Speaker 4: normally by now we would sort of get a sense 353 00:18:48,520 --> 00:18:52,080 Speaker 4: of holiday But because of that pullback, you know, Hasbro 354 00:18:52,160 --> 00:18:55,280 Speaker 4: saw their consumer products segment see a sixteen percent decline 355 00:18:55,320 --> 00:18:57,920 Speaker 4: in the second quarter revenue because of that hold on 356 00:18:58,359 --> 00:18:59,040 Speaker 4: those orders. 357 00:19:00,080 --> 00:19:02,720 Speaker 2: Thought they would have tried to front run the tariffs. Here, 358 00:19:02,720 --> 00:19:04,919 Speaker 2: what's the company saying about when they expect some of 359 00:19:04,960 --> 00:19:08,840 Speaker 2: these retailers to place their orders, so. 360 00:19:08,760 --> 00:19:11,560 Speaker 4: They expect the orders to be sort of made up 361 00:19:11,600 --> 00:19:14,320 Speaker 4: in the third quarter. And the challenge with that is, 362 00:19:14,359 --> 00:19:16,720 Speaker 4: you know, some of those hotter toys that do sell 363 00:19:16,720 --> 00:19:20,120 Speaker 4: out maybe in the early holiday shopping season, there will 364 00:19:20,160 --> 00:19:22,680 Speaker 4: be very little time to sort of replenish on that end. 365 00:19:23,080 --> 00:19:26,679 Speaker 4: So Hasbro did continue their production, which you know they 366 00:19:26,680 --> 00:19:29,800 Speaker 4: do still make about fifty percent of their toy products 367 00:19:29,840 --> 00:19:32,680 Speaker 4: in China. They continued in May. You know, they took 368 00:19:32,680 --> 00:19:35,200 Speaker 4: some of that inventory on their books in the second quarter. 369 00:19:35,240 --> 00:19:37,679 Speaker 4: That's why we saw the inventory come up there. You know, 370 00:19:37,680 --> 00:19:40,200 Speaker 4: they're hoping that the retailers, you know, place more of 371 00:19:40,240 --> 00:19:43,560 Speaker 4: their orders in the third quarter, you know, ahead of holiday. 372 00:19:44,119 --> 00:19:46,600 Speaker 4: You know, the risk is they just don't really know 373 00:19:46,840 --> 00:19:49,399 Speaker 4: what those pre order will be and there will be 374 00:19:49,520 --> 00:19:53,439 Speaker 4: limited time for additional orders like in that fourth quarter 375 00:19:54,000 --> 00:19:55,560 Speaker 4: right before holiday. 376 00:19:56,320 --> 00:19:58,960 Speaker 8: To your point. In April, the company warned the tires 377 00:19:59,000 --> 00:20:02,360 Speaker 8: clid impact profit by as much as sixty million two 378 00:20:02,400 --> 00:20:04,480 Speaker 8: hundred and eighty million this year, and they did reduce 379 00:20:04,520 --> 00:20:07,199 Speaker 8: their Chinese manufacturing output to less than forty percent, or 380 00:20:07,200 --> 00:20:09,719 Speaker 8: at least plan to by twenty twenty six. If they 381 00:20:09,800 --> 00:20:11,920 Speaker 8: do that, will they pass on the cost to consumers? 382 00:20:11,960 --> 00:20:14,199 Speaker 8: And do you think consumers will bear the brand of 383 00:20:14,280 --> 00:20:14,800 Speaker 8: that burden. 384 00:20:15,280 --> 00:20:20,080 Speaker 4: Yes, so Hasbro is using multiple mitigation strategies. You know, 385 00:20:20,119 --> 00:20:22,359 Speaker 4: they have been very focused on cutting costs. You know, 386 00:20:22,400 --> 00:20:25,520 Speaker 4: prior to tariffs, they sort of accelerated some cost cutting 387 00:20:26,240 --> 00:20:30,399 Speaker 4: at the corporate level. They will be raising prices, I 388 00:20:30,440 --> 00:20:34,480 Speaker 4: think selectively on toys. They are also just going to 389 00:20:34,520 --> 00:20:38,200 Speaker 4: not sell certain toys in the US if it can't 390 00:20:38,240 --> 00:20:40,760 Speaker 4: it doesn't make financial sense to do so if they 391 00:20:40,760 --> 00:20:43,879 Speaker 4: can't raise the price and consumers would not buy it 392 00:20:43,920 --> 00:20:47,080 Speaker 4: at that price. So they're sort of using a mixed strategy. 393 00:20:47,119 --> 00:20:50,040 Speaker 4: They had predicted tariffs to cost sixty million to one 394 00:20:50,119 --> 00:20:54,359 Speaker 4: eighty million on an annual basis three months ago. They 395 00:20:54,400 --> 00:20:58,440 Speaker 4: sort of dropped that impact closer to the sixty million side. 396 00:20:58,600 --> 00:21:03,000 Speaker 4: That's because of lower rate on the Chinese imports. They 397 00:21:03,040 --> 00:21:05,960 Speaker 4: are working to diversify the supply chain, but that will 398 00:21:05,960 --> 00:21:08,880 Speaker 4: take time. The goal of less than forty percent that's 399 00:21:08,960 --> 00:21:12,240 Speaker 4: really by twenty twenty seven, So in terms of this year, 400 00:21:12,480 --> 00:21:14,320 Speaker 4: you know where their supply chain is. They're sort of 401 00:21:14,359 --> 00:21:17,840 Speaker 4: locked in with that at the moment, and they kind 402 00:21:17,840 --> 00:21:19,800 Speaker 4: of have to work with the price increases and sort 403 00:21:19,800 --> 00:21:22,800 Speaker 4: of balancing where do I increase price and not hurt 404 00:21:22,840 --> 00:21:23,720 Speaker 4: the demand even. 405 00:21:23,640 --> 00:21:27,400 Speaker 5: More our thanks to Lindsay Dutch, Bloomberg Intelligence Consumer Hardline 406 00:21:27,440 --> 00:21:28,840 Speaker 5: Senior Analyst, we've. 407 00:21:28,720 --> 00:21:31,320 Speaker 2: Moved next to the hospitality industry. This week. The hotel 408 00:21:31,400 --> 00:21:34,680 Speaker 2: chain Hilton Worldwide lowered expectations for net income for twenty 409 00:21:34,720 --> 00:21:38,240 Speaker 2: twenty five, while US hotel booking declined in the second quarter, 410 00:21:38,520 --> 00:21:39,359 Speaker 2: and this comes as. 411 00:21:39,280 --> 00:21:42,320 Speaker 5: US travel demand has faced headwinds in recent months, including 412 00:21:42,359 --> 00:21:45,520 Speaker 5: lower consumer confidence and a decline in international visitors. 413 00:21:45,760 --> 00:21:48,040 Speaker 2: For more co hosts, Isabelle Lee and I were joined 414 00:21:48,080 --> 00:21:51,280 Speaker 2: by Jody Lourie Bloomberg Intelligence credit analyst. We first asked 415 00:21:51,320 --> 00:21:53,440 Speaker 2: Jodie what we learned about Hilton from It's Ernie's call 416 00:21:53,520 --> 00:21:53,960 Speaker 2: this week. 417 00:21:54,240 --> 00:21:56,280 Speaker 9: I mean, I think what's so interesting is they definitely 418 00:21:56,280 --> 00:21:59,399 Speaker 9: tried to provide an upbeat, optimistic view. The amount of 419 00:21:59,440 --> 00:22:03,480 Speaker 9: times they talked about the thawing that after the freeze 420 00:22:03,480 --> 00:22:06,439 Speaker 9: from tariffs was sort of interesting to hear, and I mean, 421 00:22:06,480 --> 00:22:08,400 Speaker 9: I think it fits a little bit with the conversation 422 00:22:08,440 --> 00:22:10,600 Speaker 9: that we've been having with clients is that what we've 423 00:22:10,600 --> 00:22:15,280 Speaker 9: been seeing in our data is twenty twenty five summer 424 00:22:15,520 --> 00:22:18,320 Speaker 9: should still be pretty strong, but I think as we 425 00:22:18,359 --> 00:22:20,720 Speaker 9: get into the latter part of the year and then 426 00:22:20,800 --> 00:22:23,320 Speaker 9: into next year, it's a little bit uncertain. And I 427 00:22:23,320 --> 00:22:28,520 Speaker 9: think they were trying to suggest that economic data is 428 00:22:29,359 --> 00:22:32,960 Speaker 9: positive for them and will provide for additional sort of demand, 429 00:22:33,440 --> 00:22:36,320 Speaker 9: but it's still a little bit, you know, it's still 430 00:22:36,320 --> 00:22:39,359 Speaker 9: a little bit hazy, at least for me. And I 431 00:22:39,359 --> 00:22:41,240 Speaker 9: mean more than anything, you know, they're so focused on 432 00:22:41,320 --> 00:22:44,160 Speaker 9: giving back to shareholders that and. 433 00:22:44,119 --> 00:22:46,160 Speaker 2: There's a credit analyst that's not something. 434 00:22:46,200 --> 00:22:49,000 Speaker 9: Necessarily that's yeah, yeah, you know, Hilton's one of those 435 00:22:49,000 --> 00:22:51,400 Speaker 9: companies that we say, if they wanted to be investment grade. 436 00:22:51,480 --> 00:22:54,200 Speaker 9: They probably could work to it yesterday and would have 437 00:22:54,240 --> 00:22:58,160 Speaker 9: been investment grade five years ago. But you know, from 438 00:22:58,200 --> 00:23:00,679 Speaker 9: a margin standpoint, they're so much stronger than of their peers. 439 00:23:00,720 --> 00:23:03,480 Speaker 9: But from a leverage standpoint, they just they're happy being 440 00:23:03,800 --> 00:23:05,959 Speaker 9: around three times three and a half times, and they've 441 00:23:06,440 --> 00:23:08,800 Speaker 9: indicated that they want to be a little bit higher 442 00:23:08,800 --> 00:23:11,000 Speaker 9: than where they currently are. So I mean, I think 443 00:23:11,000 --> 00:23:13,840 Speaker 9: they're going to invest in organic growth and look at 444 00:23:13,920 --> 00:23:16,040 Speaker 9: ways to sort of grow some of their newer brands 445 00:23:16,040 --> 00:23:18,480 Speaker 9: like Spark, which they've been talking about. And the most 446 00:23:18,520 --> 00:23:21,480 Speaker 9: interesting thing related to that is it seems like they're 447 00:23:21,480 --> 00:23:25,640 Speaker 9: looking outside the US for growth opportunities, and maybe that's 448 00:23:25,640 --> 00:23:28,000 Speaker 9: a function of the fact that they while they think 449 00:23:28,040 --> 00:23:31,720 Speaker 9: the US is still having decent momentum, perhaps they need 450 00:23:31,760 --> 00:23:34,520 Speaker 9: to sort of look outside to sort of really see 451 00:23:34,520 --> 00:23:35,000 Speaker 9: the growth. 452 00:23:35,480 --> 00:23:37,880 Speaker 8: Where are they finding that growth elsewhere? And is that 453 00:23:37,960 --> 00:23:40,760 Speaker 8: in relation to just the lower consumer confidence in the 454 00:23:40,880 --> 00:23:43,760 Speaker 8: US and the decline of international travelers. So then they 455 00:23:43,840 --> 00:23:46,760 Speaker 8: just decided maybe looking elsewhere US better. What was the 456 00:23:46,920 --> 00:23:47,720 Speaker 8: rationale behind that? 457 00:23:48,680 --> 00:23:52,119 Speaker 9: So they actually talked about on the first quarter, they 458 00:23:52,160 --> 00:23:56,360 Speaker 9: talked about Canada and Mexico, demand and they said specifically 459 00:23:56,359 --> 00:23:58,359 Speaker 9: that it's such a small percentage, just like one percent 460 00:23:58,400 --> 00:24:01,720 Speaker 9: of their total revenues is Canada MC, and inbound US 461 00:24:01,800 --> 00:24:04,280 Speaker 9: is certainly a large portion, I think, larger than they 462 00:24:04,400 --> 00:24:07,960 Speaker 9: sort of indicate. But I think they're also sort of saying, Okay, yeah, 463 00:24:07,960 --> 00:24:09,119 Speaker 9: it's going to be an effect, but it's not that 464 00:24:09,200 --> 00:24:11,600 Speaker 9: much effect. I think they are seeing. And what we 465 00:24:11,840 --> 00:24:14,399 Speaker 9: sort of heard on this most recent call is that 466 00:24:14,440 --> 00:24:17,720 Speaker 9: there is an element of trickle down effect related to 467 00:24:18,480 --> 00:24:24,000 Speaker 9: what's going on in the US, the prevalence of travelers 468 00:24:24,040 --> 00:24:27,680 Speaker 9: coming into the US versus historically because of the tariff 469 00:24:27,720 --> 00:24:32,880 Speaker 9: and geopolitical environment, and so, you know, they mentioned Saudi Arabia, 470 00:24:32,880 --> 00:24:35,520 Speaker 9: they mentioned India, they mentioned turkeya on the call, and 471 00:24:36,040 --> 00:24:38,879 Speaker 9: I think they're looking at anywhere there's potential growth opportunities. 472 00:24:38,920 --> 00:24:42,120 Speaker 9: I mean, Hilton's so large and global that it's not 473 00:24:42,160 --> 00:24:45,120 Speaker 9: really surprising to me, but it is sort of interesting 474 00:24:45,119 --> 00:24:47,800 Speaker 9: when you hear a company that's seventy five percent US 475 00:24:48,000 --> 00:24:51,720 Speaker 9: dominant that they are sort of looking to expand elsewhere. 476 00:24:52,160 --> 00:24:55,520 Speaker 2: Our thanks to Jody Lourie Bloomberg Intelligence Credit Analyison coming up. 477 00:24:55,560 --> 00:24:58,320 Speaker 5: Well, look at how Elon Musk's recent political antics may 478 00:24:58,320 --> 00:24:59,880 Speaker 5: be affecting his business empire. 479 00:25:00,119 --> 00:25:03,080 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 480 00:25:03,119 --> 00:25:05,320 Speaker 2: depth research and data on two thousand companies and one 481 00:25:05,440 --> 00:25:06,560 Speaker 2: hundred and thirty industries. 482 00:25:06,720 --> 00:25:09,880 Speaker 5: You can access Bloomberg Intelligence via bi go on the terminal. 483 00:25:09,960 --> 00:25:13,080 Speaker 2: I'm Lisa Mattheo and I'm Paul Sweeney. This is Bloomberg. 484 00:25:21,200 --> 00:25:24,920 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 485 00:25:25,000 --> 00:25:28,080 Speaker 1: weekdays at ten am Eastern on Apple Corplay and Android 486 00:25:28,080 --> 00:25:31,400 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 487 00:25:31,440 --> 00:25:34,560 Speaker 1: you get your podcasts, or watch us live on YouTube 488 00:25:34,640 --> 00:25:35,159 Speaker 1: through on. 489 00:25:35,280 --> 00:25:38,480 Speaker 5: Paul Street and I'm Lisa Matteo filling in on Bloomberg Intelligence. 490 00:25:38,720 --> 00:25:40,320 Speaker 2: Next, return to the auto sector. 491 00:25:40,600 --> 00:25:42,760 Speaker 5: This week, General Motors will lease second quarter earnings that 492 00:25:42,800 --> 00:25:46,119 Speaker 5: beat analysts expectations, but the carmaker said it still suffered 493 00:25:46,119 --> 00:25:49,080 Speaker 5: a one point one billion dollar profit hit from President 494 00:25:49,119 --> 00:25:50,240 Speaker 5: Donald Trump's tariffs. 495 00:25:50,600 --> 00:25:53,119 Speaker 2: GM also revealed no plan for near term fixed to 496 00:25:53,160 --> 00:25:56,240 Speaker 2: return to pre tariff profit levels. For more, Lisa and 497 00:25:56,280 --> 00:25:59,520 Speaker 2: I were joined by David Welsh, Bloomberg News Detroit Buro chief. 498 00:25:59,720 --> 00:26:02,400 Speaker 5: First as David was he surprised by the one point 499 00:26:02,400 --> 00:26:03,760 Speaker 5: one billion dollar tariff hit. 500 00:26:04,119 --> 00:26:06,159 Speaker 10: Not surprised at all. GM said they were going to 501 00:26:06,200 --> 00:26:08,399 Speaker 10: take a fort to five billion dollar hit, or at 502 00:26:08,440 --> 00:26:10,760 Speaker 10: least that they had forty five billion dollars in exposure 503 00:26:11,119 --> 00:26:13,080 Speaker 10: this year to tariffs, and then they would only be 504 00:26:13,119 --> 00:26:17,720 Speaker 10: able to offset about thirty percent of it, and the 505 00:26:17,760 --> 00:26:19,920 Speaker 10: measures they're using to offset that you really won't see 506 00:26:20,000 --> 00:26:21,919 Speaker 10: to the second half. I thought there would be a 507 00:26:21,920 --> 00:26:25,560 Speaker 10: pretty big hit to it. I don't think the street 508 00:26:25,600 --> 00:26:30,320 Speaker 10: was surprised either, because the forecast for GM's earnings were 509 00:26:30,480 --> 00:26:32,480 Speaker 10: for a pretty big drop off of the second quarter 510 00:26:32,520 --> 00:26:35,000 Speaker 10: of last year. Already, GM did better than that because 511 00:26:35,040 --> 00:26:37,959 Speaker 10: they did have some things, better profits in China than 512 00:26:38,000 --> 00:26:41,359 Speaker 10: we saw a year ago and better sales in the 513 00:26:41,480 --> 00:26:44,120 Speaker 10: US that helped them. But overall, a pretty tough quarter, 514 00:26:44,160 --> 00:26:46,680 Speaker 10: and it really shows that the car companies are going 515 00:26:46,720 --> 00:26:50,600 Speaker 10: to have a tough time getting anything close to pre 516 00:26:50,760 --> 00:26:53,800 Speaker 10: tariff profits going forward because there's just no easy way 517 00:26:53,840 --> 00:26:54,600 Speaker 10: to get around them. 518 00:26:54,920 --> 00:26:57,600 Speaker 2: So I mean is what were to take away from 519 00:26:57,680 --> 00:27:00,680 Speaker 2: them is that the autom manufacturers, for what reason, maybe 520 00:27:00,720 --> 00:27:02,919 Speaker 2: they're just not able to or they chose not to 521 00:27:02,960 --> 00:27:06,520 Speaker 2: pass along the bulk of their cost increases to consumers 522 00:27:06,600 --> 00:27:09,400 Speaker 2: is at a policy or is that just an economic reality? 523 00:27:10,480 --> 00:27:13,040 Speaker 10: It's an economic reality. And look, we're at a period 524 00:27:13,119 --> 00:27:15,720 Speaker 10: right now where interest rates are at pretty high levels. 525 00:27:16,160 --> 00:27:19,919 Speaker 10: You have historically not record but pretty close to record 526 00:27:20,080 --> 00:27:22,920 Speaker 10: new vehicle prices in the US right now, average monthly 527 00:27:22,960 --> 00:27:25,199 Speaker 10: payment well over seven hundred dollars a month. We have 528 00:27:25,240 --> 00:27:27,159 Speaker 10: a record number of people I think paying more than 529 00:27:27,200 --> 00:27:30,359 Speaker 10: one thousand dollars a month for their monthly payment. Cars 530 00:27:30,400 --> 00:27:32,680 Speaker 10: are expensive, so you know, you can go out there 531 00:27:32,680 --> 00:27:35,200 Speaker 10: and say, hey, I'm going to pass this tariff cost 532 00:27:35,240 --> 00:27:37,520 Speaker 10: on to consumers or even some of it. But if 533 00:27:37,520 --> 00:27:40,360 Speaker 10: consumers don't pay it, then you just lose the sales. 534 00:27:40,920 --> 00:27:43,720 Speaker 10: And you haven't seen huge price increases. You've seen small 535 00:27:43,760 --> 00:27:46,399 Speaker 10: and you seen companies sneak in, you know, some bigger 536 00:27:46,440 --> 00:27:50,840 Speaker 10: fees for transporting the vehicle for example, things like that. 537 00:27:50,960 --> 00:27:54,439 Speaker 10: But it's just not they just don't really have the 538 00:27:54,480 --> 00:27:57,920 Speaker 10: ability to push in big price increases to you know, 539 00:27:58,040 --> 00:28:00,640 Speaker 10: to pass on. In GM's case, a billion hours worth 540 00:28:00,680 --> 00:28:01,639 Speaker 10: of tariffs in a quarter. 541 00:28:02,240 --> 00:28:05,320 Speaker 5: And it's not just terrors. What else affected profits for GM? 542 00:28:05,320 --> 00:28:07,280 Speaker 5: I mean, how's their inventory for electric vehicles? 543 00:28:08,640 --> 00:28:10,600 Speaker 10: They built that up in the quarter and since the 544 00:28:10,680 --> 00:28:13,400 Speaker 10: vehicles lose money, they have to count for that that 545 00:28:13,400 --> 00:28:16,320 Speaker 10: that costs them. I think it was six hundred million 546 00:28:16,400 --> 00:28:18,560 Speaker 10: dollars in the quarter they had three hundred million. Because 547 00:28:18,560 --> 00:28:22,000 Speaker 10: they've had a big engine recalls, they've had higher warranty costs. 548 00:28:22,160 --> 00:28:24,080 Speaker 10: It wasn't just because of that recall. They've had other 549 00:28:24,200 --> 00:28:27,399 Speaker 10: issues and they're working on that. Some of it, some 550 00:28:27,440 --> 00:28:30,120 Speaker 10: of these quality issues you're seeing that are costing companies 551 00:28:30,119 --> 00:28:33,560 Speaker 10: more in warranty and recall type costs, are all the 552 00:28:33,640 --> 00:28:37,240 Speaker 10: software that goes into electric vehicles. These are kind of 553 00:28:37,280 --> 00:28:42,360 Speaker 10: first times out with new software, new infotainment systems, power 554 00:28:42,400 --> 00:28:46,360 Speaker 10: management systems in these vehicles, and it's just tough for 555 00:28:46,400 --> 00:28:49,000 Speaker 10: them to go out there and not be buggy. 556 00:28:49,080 --> 00:28:49,240 Speaker 6: Right. 557 00:28:49,640 --> 00:28:51,640 Speaker 10: You know, think about how many times there's something on 558 00:28:51,760 --> 00:28:55,840 Speaker 10: your smartphone that you know needs an update, and fixing 559 00:28:55,840 --> 00:28:59,080 Speaker 10: that with the cars is often more expensive. So some 560 00:28:59,160 --> 00:29:02,000 Speaker 10: of it was related to that. And actually, you know, 561 00:29:02,040 --> 00:29:05,040 Speaker 10: they saw pricing go down with some of their fleet customers. 562 00:29:05,560 --> 00:29:07,520 Speaker 10: There's a lot of competition out there for the for 563 00:29:07,600 --> 00:29:11,440 Speaker 10: the corporate and fleet business, and they actually saw some 564 00:29:11,480 --> 00:29:13,560 Speaker 10: downward price pressure there too, and that cost them a 565 00:29:13,560 --> 00:29:16,200 Speaker 10: couple one hundred million dollars. So a lot of things 566 00:29:16,280 --> 00:29:18,880 Speaker 10: in the quarter that pushed profits down, But tariffs are 567 00:29:18,920 --> 00:29:20,840 Speaker 10: the real story here, David. 568 00:29:21,120 --> 00:29:23,520 Speaker 2: You're out there in Detroit. You live and breathe this 569 00:29:23,520 --> 00:29:25,960 Speaker 2: stuff every day. What's the feeling in Detroit as he 570 00:29:26,040 --> 00:29:30,560 Speaker 2: relates to this evolution to evs and how will the 571 00:29:30,720 --> 00:29:33,680 Speaker 2: tariff and the tariff impact on profitability? Is that going 572 00:29:33,720 --> 00:29:35,560 Speaker 2: to slow this down even more? 573 00:29:36,080 --> 00:29:36,600 Speaker 4: Do you think? 574 00:29:38,400 --> 00:29:38,760 Speaker 6: I do? 575 00:29:39,280 --> 00:29:43,600 Speaker 10: I think everything that Trump administration is doing is really 576 00:29:43,600 --> 00:29:46,720 Speaker 10: going to slow the EV transition. First of all, you know, 577 00:29:46,760 --> 00:29:49,320 Speaker 10: the obvious one is there, comes September, they're going to 578 00:29:49,320 --> 00:29:51,280 Speaker 10: be getting rid of the seventy five hundred dollars tax 579 00:29:51,280 --> 00:29:54,840 Speaker 10: break for qualifying electric vehicles. But you know, with tariffs, 580 00:29:54,960 --> 00:30:00,680 Speaker 10: you've got battery components, electronic components, wiring harnesses. There's more 581 00:30:00,680 --> 00:30:03,560 Speaker 10: wiring in an EV than in a conventional vehicle. All 582 00:30:03,640 --> 00:30:05,920 Speaker 10: that stuff adds to the cost of vehicles that already 583 00:30:05,960 --> 00:30:08,400 Speaker 10: lose money. Some of them are actually built overseas. In 584 00:30:08,400 --> 00:30:12,280 Speaker 10: the case of Hyundai, they make some of theirs overseas. 585 00:30:12,360 --> 00:30:15,479 Speaker 10: GM makes a couple of it's evs in Mexico. They 586 00:30:15,480 --> 00:30:18,960 Speaker 10: do qualify for US MCA, but there are still some 587 00:30:19,160 --> 00:30:23,240 Speaker 10: parts component tariffs that they can be hit with on 588 00:30:23,600 --> 00:30:27,320 Speaker 10: some of these vehicles, and so you add cost to 589 00:30:27,400 --> 00:30:31,520 Speaker 10: vehicles that are already pretty expensive, and you can't pass 590 00:30:31,560 --> 00:30:34,320 Speaker 10: it on. If you do, even fewer people will buy them. 591 00:30:34,600 --> 00:30:36,920 Speaker 10: Companies may have less incentive to build and sell them 592 00:30:36,920 --> 00:30:38,959 Speaker 10: if they lose a bit more money on these, So 593 00:30:39,040 --> 00:30:40,760 Speaker 10: that's going to hurt as well. And then of course 594 00:30:40,880 --> 00:30:45,320 Speaker 10: Trump's rhetoric for people who are you know, politically right 595 00:30:45,360 --> 00:30:47,719 Speaker 10: of center and pretty far right is that you know, 596 00:30:48,120 --> 00:30:50,120 Speaker 10: evs are a dumb purchase and they don't work for you, 597 00:30:50,880 --> 00:30:54,360 Speaker 10: and I think that hurts sales as well. So all 598 00:30:54,400 --> 00:30:57,080 Speaker 10: of this is just not good for the momentum that 599 00:30:57,200 --> 00:31:00,520 Speaker 10: EV's had in the US, you know, before Trump got 600 00:31:00,560 --> 00:31:01,120 Speaker 10: in office. 601 00:31:01,280 --> 00:31:03,440 Speaker 5: Yeah, so, David, last month the company said it would 602 00:31:03,440 --> 00:31:05,800 Speaker 5: shift some production to the US from Mexico. So what 603 00:31:05,840 --> 00:31:09,240 Speaker 5: other changes can we expect to see from the company. 604 00:31:09,400 --> 00:31:12,320 Speaker 10: Yeah, I think you'll see them try to bring more parts, 605 00:31:12,640 --> 00:31:14,400 Speaker 10: more of the parts they buy into the US, so 606 00:31:14,440 --> 00:31:17,480 Speaker 10: they'll be encouraging their suppliers to do what they're doing, 607 00:31:17,520 --> 00:31:19,640 Speaker 10: which is move some production to the United States. And 608 00:31:19,640 --> 00:31:22,640 Speaker 10: that'll take time, and you know, you may see them 609 00:31:23,840 --> 00:31:26,680 Speaker 10: make some more production related moves. What they've done is 610 00:31:26,720 --> 00:31:29,840 Speaker 10: pretty big, so I'm not anticipating any big announcements. But 611 00:31:30,520 --> 00:31:31,880 Speaker 10: you know, as they look at this and they find 612 00:31:31,920 --> 00:31:33,760 Speaker 10: other ways to do it, you might see more vehicles, 613 00:31:33,800 --> 00:31:35,040 Speaker 10: more parts built. 614 00:31:34,800 --> 00:31:37,000 Speaker 5: Here in the US our thanks to David Well, It's 615 00:31:37,040 --> 00:31:39,040 Speaker 5: Bloomberg News Detroit Bureau Chief. 616 00:31:39,320 --> 00:31:41,840 Speaker 2: This week we focused on a Bloomberg Big Takes story 617 00:31:42,000 --> 00:31:45,640 Speaker 2: entitled Elon musk Empire is Creaking under the Strains of 618 00:31:45,720 --> 00:31:48,520 Speaker 2: His Antics. You can find it on Bloomberg dot Com 619 00:31:48,560 --> 00:31:49,240 Speaker 2: and The Terminal. 620 00:31:49,400 --> 00:31:53,160 Speaker 5: The story looks at the state of Elon Musk's companies Tesla, SpaceX, 621 00:31:53,200 --> 00:31:56,200 Speaker 5: and Xai, and it gives insight into how much Elon 622 00:31:56,280 --> 00:31:59,000 Speaker 5: Musk's recent political antics are affecting his empire. 623 00:31:59,280 --> 00:32:00,920 Speaker 2: For more, Lisa I were joined by one of the 624 00:32:00,920 --> 00:32:04,960 Speaker 2: stories co authors, Max Chafkin, Bloomberg BusinessWeek senior reporter and 625 00:32:05,080 --> 00:32:07,120 Speaker 2: co host of the Elon Inc. Podcast. 626 00:32:07,240 --> 00:32:10,239 Speaker 5: We first asked Max if Elon musk political antics are 627 00:32:10,280 --> 00:32:11,760 Speaker 5: impacting his business empire. 628 00:32:12,360 --> 00:32:16,400 Speaker 11: I mean absolutely, and it's because as much as Tesla 629 00:32:16,760 --> 00:32:19,840 Speaker 11: is a car company, it is I think for many 630 00:32:19,840 --> 00:32:22,480 Speaker 11: investors really an Elon Musk company. It's a way to 631 00:32:22,520 --> 00:32:26,120 Speaker 11: bet on what they see as the singular genius of 632 00:32:26,160 --> 00:32:30,040 Speaker 11: this guy. And as you said, over the last few years, 633 00:32:29,840 --> 00:32:34,240 Speaker 11: it's gotten harder to see that there have been challenges, 634 00:32:34,400 --> 00:32:38,320 Speaker 11: and I think obviously the biggest challenges is this relationship 635 00:32:38,320 --> 00:32:41,440 Speaker 11: with Donald Trump, where you had, you know, in December, 636 00:32:42,040 --> 00:32:44,880 Speaker 11: Elon Musk, you know, helps get Trump elected and then 637 00:32:44,960 --> 00:32:47,960 Speaker 11: is in this position of extreme influence, you know, probably 638 00:32:47,960 --> 00:32:52,080 Speaker 11: more influence than almost any you know, executive ever and 639 00:32:52,080 --> 00:32:54,200 Speaker 11: and you had this kind of Trump trade where people 640 00:32:54,240 --> 00:32:56,600 Speaker 11: were bidding up the stock based on the idea that 641 00:32:56,640 --> 00:32:58,160 Speaker 11: Elon Musk was going to be able to get all 642 00:32:58,160 --> 00:32:59,880 Speaker 11: of these policies that were going to help his company. 643 00:33:00,080 --> 00:33:03,239 Speaker 11: His companies of course very very much enmeshed with the 644 00:33:03,240 --> 00:33:06,600 Speaker 11: government and heavily regulated. And then we're seeing that in reverse, 645 00:33:06,640 --> 00:33:09,840 Speaker 11: we're seeing that, you know, what happens when you get 646 00:33:09,880 --> 00:33:12,360 Speaker 11: when you have a business and a bunch of businesses 647 00:33:12,360 --> 00:33:14,440 Speaker 11: in fact, that are heavily regulated, and you're in a 648 00:33:14,440 --> 00:33:17,200 Speaker 11: fight with you know, the most powerful person in the world. 649 00:33:17,280 --> 00:33:18,040 Speaker 11: And Donald Trump. 650 00:33:18,400 --> 00:33:20,360 Speaker 5: You say in the article that really stood out to me, 651 00:33:20,400 --> 00:33:22,520 Speaker 5: you say, he is rich on paper, but he is 652 00:33:22,600 --> 00:33:25,560 Speaker 5: cash poor. So kind of explain that to us. 653 00:33:25,560 --> 00:33:27,800 Speaker 11: Stick into that, Yeah, I mean part of this has 654 00:33:27,840 --> 00:33:29,880 Speaker 11: to do with the fact that he's he's always making 655 00:33:29,920 --> 00:33:31,960 Speaker 11: these big bets. But when you look at his wealth, 656 00:33:32,080 --> 00:33:36,120 Speaker 11: it is mostly in Tesla's stock, Tesla stock and options, 657 00:33:36,840 --> 00:33:41,280 Speaker 11: and he's running this empire which you know obviously includes Tesla, 658 00:33:41,320 --> 00:33:44,200 Speaker 11: it also includes SpaceX. He's got a lot of SpaceX 659 00:33:44,240 --> 00:33:47,480 Speaker 11: stock as well. You know, neither of those companies. He's 660 00:33:47,520 --> 00:33:51,120 Speaker 11: able to borrow money against his positions in these companies, 661 00:33:51,120 --> 00:33:55,240 Speaker 11: and we have seen sort of company A buy equity 662 00:33:55,240 --> 00:33:56,760 Speaker 11: and company B that sort of thing. 663 00:33:57,160 --> 00:33:59,680 Speaker 2: But there isn't just like a huge. 664 00:33:59,640 --> 00:34:02,080 Speaker 11: Pile of cash and he has all these things he's 665 00:34:02,080 --> 00:34:04,480 Speaker 11: trying to do. You know, you there's there's really only 666 00:34:04,520 --> 00:34:08,400 Speaker 11: one company in the portfolio that is reliably profitable, and 667 00:34:08,440 --> 00:34:11,080 Speaker 11: that's Tesla. And then you have SpaceX, which of course 668 00:34:11,120 --> 00:34:14,040 Speaker 11: has a lot of promise and has a dominant position 669 00:34:14,239 --> 00:34:17,040 Speaker 11: in the launch market, but is not necessarily throwing off cash. 670 00:34:17,280 --> 00:34:20,320 Speaker 11: And so you have this empire that is very large, 671 00:34:20,640 --> 00:34:24,319 Speaker 11: but where different companies are supplying things to other Elon 672 00:34:24,400 --> 00:34:27,640 Speaker 11: Musk companies. And I'd say the most obvious example of 673 00:34:27,640 --> 00:34:31,080 Speaker 11: that is this in this Xai investment round, which is 674 00:34:31,200 --> 00:34:33,960 Speaker 11: already at Elon Musk has already said SpaceX is putting 675 00:34:34,080 --> 00:34:36,520 Speaker 11: two billion dollars in. He's also indicated he's going to 676 00:34:36,560 --> 00:34:40,640 Speaker 11: try to get Tesla to put five billion dollars into Xai. 677 00:34:40,880 --> 00:34:42,719 Speaker 11: And this is a company that is burning, you know, 678 00:34:43,040 --> 00:34:45,480 Speaker 11: a billion dollars a month. Now, this is the kind 679 00:34:45,520 --> 00:34:48,640 Speaker 11: of thing that for any other executive, you know, it's 680 00:34:48,680 --> 00:34:50,360 Speaker 11: like a pie. It's like a conflict of interest on 681 00:34:50,400 --> 00:34:52,560 Speaker 11: top of a conflict of interest. On the other hand, 682 00:34:52,840 --> 00:34:55,239 Speaker 11: you know, Elon Musk has this fan base that has 683 00:34:55,360 --> 00:34:58,279 Speaker 11: so far been willing to kind of go along with 684 00:34:58,320 --> 00:35:01,520 Speaker 11: things that no other investment in, any other company, whatever, 685 00:35:01,680 --> 00:35:02,239 Speaker 11: go along with. 686 00:35:02,480 --> 00:35:05,719 Speaker 2: Is there any reason to believe that the few, to 687 00:35:05,760 --> 00:35:09,160 Speaker 2: whatever degree it is at the moment, between President Trump 688 00:35:09,239 --> 00:35:11,120 Speaker 2: and Elon will de escalate. 689 00:35:11,840 --> 00:35:15,000 Speaker 11: Yeah, I mean, I definitely think that's possible, partly because 690 00:35:15,280 --> 00:35:18,360 Speaker 11: both Trump and Musk, you know, obviously they're both famously 691 00:35:18,840 --> 00:35:22,120 Speaker 11: kind of alpha, you know, very tough, but they also 692 00:35:22,360 --> 00:35:26,480 Speaker 11: both you know, they they forgive like this. People have 693 00:35:26,560 --> 00:35:29,560 Speaker 11: made this observation about Donald Trump that you know, although 694 00:35:29,560 --> 00:35:31,239 Speaker 11: there are there are a handful of people that are 695 00:35:31,280 --> 00:35:34,320 Speaker 11: sort of permanently outside of the circle of trust with Trump. 696 00:35:34,600 --> 00:35:37,040 Speaker 11: People fall in and out of love with Donald Trump, 697 00:35:37,200 --> 00:35:39,640 Speaker 11: and he is able to kind of look past FEUs. 698 00:35:39,800 --> 00:35:41,880 Speaker 11: Elon Musk is the same way, And there is a 699 00:35:41,960 --> 00:35:45,160 Speaker 11: mutual interest here. As I said, you know, Trump kind 700 00:35:45,160 --> 00:35:48,760 Speaker 11: of needs Musk because Musk was the most important financial 701 00:35:48,760 --> 00:35:52,200 Speaker 11: backer for Republicans during the twenty twenty four cycle. He 702 00:35:52,239 --> 00:35:54,239 Speaker 11: could very well be the most important backer in the 703 00:35:54,239 --> 00:35:57,560 Speaker 11: twenty twenty six cycle. And I'd say that Musk kind 704 00:35:57,560 --> 00:36:00,680 Speaker 11: of needs Trump, both from a branding perspective, from the 705 00:36:00,680 --> 00:36:04,600 Speaker 11: fact that, like, once you've alienated the entire universe of 706 00:36:04,600 --> 00:36:08,359 Speaker 11: Democratic voters, which must kind of has done, then what 707 00:36:08,440 --> 00:36:11,120 Speaker 11: do you have left? You have basically the Republicans, and 708 00:36:11,360 --> 00:36:13,719 Speaker 11: you don't really want to be on the outs with 709 00:36:13,800 --> 00:36:16,759 Speaker 11: Donald Trump as a cultural force. And then and then 710 00:36:16,840 --> 00:36:19,280 Speaker 11: on top of that, you have the sort of regulatory issues. 711 00:36:19,480 --> 00:36:22,440 Speaker 11: You know, self driving, which is what Tesla is betting 712 00:36:22,480 --> 00:36:26,000 Speaker 11: its future on, is a regulated industry, you know, rockets 713 00:36:26,120 --> 00:36:29,040 Speaker 11: government contractors. So there are always ways that Donald Trump 714 00:36:29,080 --> 00:36:31,640 Speaker 11: could either hurt or help Elon Musk, depending on what 715 00:36:31,680 --> 00:36:32,960 Speaker 11: the relationship looks like in. 716 00:36:32,960 --> 00:36:34,799 Speaker 5: The last minute. So we have left it seems like 717 00:36:34,840 --> 00:36:37,719 Speaker 5: someone else is kind of sliding into that position. Open 718 00:36:37,760 --> 00:36:40,319 Speaker 5: Ay Sam Altman is he kind of taken over where 719 00:36:40,400 --> 00:36:41,840 Speaker 5: Musk left the spot. 720 00:36:42,120 --> 00:36:46,400 Speaker 11: I mean incredible, right, like watching that happen, especially given 721 00:36:46,440 --> 00:36:49,319 Speaker 11: the fact that Sam Altman, you know, former Democrat course 722 00:36:49,320 --> 00:36:51,840 Speaker 11: Elon Musk at times has supported Democrats as well, but 723 00:36:51,960 --> 00:36:54,400 Speaker 11: Sam Altman much more recently was a Trump critic and 724 00:36:54,880 --> 00:36:57,719 Speaker 11: so on, and that is, you know, there there have 725 00:36:57,760 --> 00:37:01,839 Speaker 11: been a bunch of political sort of mistakes, missteps made 726 00:37:01,840 --> 00:37:04,200 Speaker 11: by Elon Musk, and that is you'd have to include 727 00:37:04,200 --> 00:37:07,839 Speaker 11: that in the list, just because Sam Almons certainly didn't 728 00:37:07,840 --> 00:37:10,879 Speaker 11: have the pole position. And now open Ai this you know, 729 00:37:11,120 --> 00:37:14,560 Speaker 11: AI large language model company competing with Xai is in 730 00:37:14,600 --> 00:37:18,000 Speaker 11: a position of proximity to the president and and so yeah, 731 00:37:18,000 --> 00:37:20,839 Speaker 11: that's that's yet another case where where this feud is 732 00:37:20,840 --> 00:37:21,920 Speaker 11: not helping Elon Musk. 733 00:37:22,320 --> 00:37:25,480 Speaker 5: Our thanks to Max Chafkin, Bloomberg BusinessWeek Senior reporter and 734 00:37:25,520 --> 00:37:26,839 Speaker 5: co host of the Elon Inc. 735 00:37:26,960 --> 00:37:27,520 Speaker 2: Podcast. 736 00:37:28,080 --> 00:37:32,799 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 737 00:37:32,960 --> 00:37:36,439 Speaker 1: and anywhere else you get your podcasts. Listen live each 738 00:37:36,480 --> 00:37:40,240 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com, 739 00:37:40,360 --> 00:37:43,880 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business App. 740 00:37:44,320 --> 00:37:47,240 Speaker 1: You can also watch us live every weekday on YouTube 741 00:37:47,640 --> 00:37:50,680 Speaker 1: and always on the Bloomberg Terminal