1
00:00:02,720 --> 00:00:10,600
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

2
00:00:10,640 --> 00:00:14,600
Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

3
00:00:14,640 --> 00:00:17,880
Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

4
00:00:17,960 --> 00:00:21,080
Speaker 1: Business App. Listen on demand wherever you get your podcasts,

5
00:00:21,400 --> 00:00:23,280
Speaker 1: or watch us live on YouTube.

6
00:00:24,360 --> 00:00:26,920
Speaker 2: Certainly, the news of the day from a company perspective

7
00:00:27,640 --> 00:00:30,280
Speaker 2: is Intel. We saw early this morning, we saw a

8
00:00:30,280 --> 00:00:34,159
Speaker 2: pretty cool story in Nvidia deciding to buy or invest

9
00:00:34,280 --> 00:00:39,800
Speaker 2: five billion dollars into Intel vis a vis a stock purchase,

10
00:00:39,840 --> 00:00:41,800
Speaker 2: a straight up purchase of common stock there. And that's

11
00:00:41,800 --> 00:00:44,640
Speaker 2: alongside the earlier investment by the US government of a

12
00:00:44,760 --> 00:00:49,040
Speaker 2: ten percent stake in Intel. On the stock reacting favorably

13
00:00:49,080 --> 00:00:53,639
Speaker 2: here today, shares of Intel up about twenty six percent today.

14
00:00:53,880 --> 00:00:56,600
Speaker 2: That sets a new fifty two week high. Stock's up

15
00:00:56,680 --> 00:00:57,880
Speaker 2: fifty seven percent here to date.

16
00:00:57,920 --> 00:00:58,560
Speaker 3: The stock was.

17
00:00:58,960 --> 00:01:01,640
Speaker 2: Really hurting as recently six months ago, but boy, it's

18
00:01:01,680 --> 00:01:03,640
Speaker 2: gotten a couple big shots in the arm as it

19
00:01:03,680 --> 00:01:06,360
Speaker 2: relates to their AI outlook. Let's check in with Man

20
00:01:06,400 --> 00:01:08,839
Speaker 2: Deep Singing. He's a senior tech analyst for Bloomberg Intelligence.

21
00:01:09,600 --> 00:01:13,520
Speaker 2: Mandy Wet, how surprised were you in Silicon Valley when

22
00:01:13,520 --> 00:01:16,160
Speaker 2: we woke up this morning and saw that a competitor

23
00:01:16,840 --> 00:01:19,360
Speaker 2: was going to take a make a five billion dollar investment.

24
00:01:19,840 --> 00:01:23,440
Speaker 3: Yeah, I was expecting something to happen in terms of

25
00:01:23,959 --> 00:01:27,880
Speaker 3: an investment in Intel after the administration took a ten

26
00:01:27,920 --> 00:01:33,120
Speaker 3: percent stake, but an investment from Nvidia that was the

27
00:01:33,200 --> 00:01:36,959
Speaker 3: last thing that I anticipated. So I was more in

28
00:01:37,000 --> 00:01:40,880
Speaker 3: the camp that one of the hyperscalers, whether It's and Amazon,

29
00:01:40,959 --> 00:01:43,759
Speaker 3: did have a partnership with Intel. It was announced back

30
00:01:43,800 --> 00:01:46,920
Speaker 3: in twenty twenty four, so I thought it would be

31
00:01:47,000 --> 00:01:49,440
Speaker 3: one of the hyperscalers that would make an investment. So

32
00:01:50,400 --> 00:01:54,080
Speaker 3: clearly the surprise element was the fact that the partnership

33
00:01:54,160 --> 00:01:57,400
Speaker 3: or the investment wasn't for foundry, but it was more

34
00:01:57,840 --> 00:02:02,639
Speaker 3: chip code design. And look, that's where Nvidia has taken

35
00:02:02,720 --> 00:02:06,840
Speaker 3: share from Intel over the past two years, is Intel

36
00:02:07,000 --> 00:02:10,800
Speaker 3: was a dominant force in data centers with their x

37
00:02:10,840 --> 00:02:14,680
Speaker 3: eighty six architecture. Nvidia with the shift to AI, really

38
00:02:14,760 --> 00:02:18,720
Speaker 3: took share from Intel. And so it is a big

39
00:02:18,760 --> 00:02:22,200
Speaker 3: surprise the fact that they are investing five billion dollars

40
00:02:22,240 --> 00:02:26,519
Speaker 3: and the plan is to develop a co design chip

41
00:02:27,400 --> 00:02:31,000
Speaker 3: for you know, PCs as well as data centers.

42
00:02:31,000 --> 00:02:33,919
Speaker 4: Them better compete against a MD which we see a

43
00:02:33,960 --> 00:02:35,200
Speaker 4: little under pressure today.

44
00:02:35,600 --> 00:02:39,720
Speaker 3: My mind, Nvidia is almost a monopoly in AI chips.

45
00:02:39,760 --> 00:02:43,800
Speaker 4: So the fact that got into trust regulators. Yeah, but

46
00:02:43,840 --> 00:02:45,360
Speaker 4: you know, I when I heard about this deal, I

47
00:02:45,440 --> 00:02:49,240
Speaker 4: just thought irony, right, this tie up between two Silicon

48
00:02:49,320 --> 00:02:51,840
Speaker 4: Valley rivals. But I think it also really underlines the

49
00:02:51,880 --> 00:02:54,000
Speaker 4: power shift. When you think about it, you would have

50
00:02:54,000 --> 00:02:57,520
Speaker 4: thought years ago, well, Intel would be the aggressor here, right,

51
00:02:57,560 --> 00:02:59,679
Speaker 4: But the sort of the tables have turned.

52
00:02:59,840 --> 00:03:03,640
Speaker 3: They have, and look, that's just a function of where

53
00:03:03,760 --> 00:03:07,040
Speaker 3: Intel is at right now, both in terms of their

54
00:03:07,120 --> 00:03:10,160
Speaker 3: foundry positioning as well as you know, the data center

55
00:03:10,240 --> 00:03:13,240
Speaker 3: market share that they have lost. Where they still have

56
00:03:13,360 --> 00:03:17,600
Speaker 3: a dominant share is in PCs and desktops, and that's

57
00:03:17,639 --> 00:03:23,640
Speaker 3: where everyone was anticipating a big refers cycle because of AI.

58
00:03:24,240 --> 00:03:26,280
Speaker 3: At the end of the day, you know, if AI

59
00:03:26,560 --> 00:03:29,880
Speaker 3: was to become pervasive, you know, we'll have to upgrade

60
00:03:29,880 --> 00:03:33,720
Speaker 3: our devices, whether it's PCs or smartphones. And to my mind,

61
00:03:33,840 --> 00:03:37,320
Speaker 3: Intel does have a good chance of being part of

62
00:03:37,360 --> 00:03:41,000
Speaker 3: that refer cycle. So what Nvidia has done is really

63
00:03:41,680 --> 00:03:46,040
Speaker 3: kind of put a stake in that refer cycle where

64
00:03:46,120 --> 00:03:49,280
Speaker 3: if they can develop a code design chip for the

65
00:03:49,400 --> 00:03:53,640
Speaker 3: PCs and laptops. Then that's where it could create another

66
00:03:53,760 --> 00:03:56,840
Speaker 3: line of business similar to gaming. So right now gaming

67
00:03:56,920 --> 00:04:00,640
Speaker 3: is about high single digital percentage of Nvidia's revenue. This

68
00:04:00,680 --> 00:04:03,560
Speaker 3: could be another line of business that they could add

69
00:04:03,680 --> 00:04:07,320
Speaker 3: if this partnership was to result in a product or

70
00:04:07,320 --> 00:04:09,200
Speaker 3: a chip that everyone would want to use.

71
00:04:09,240 --> 00:04:11,320
Speaker 2: All right, Mandy, I'm gonna put my cynical Wall Street

72
00:04:11,360 --> 00:04:13,960
Speaker 2: hat on this is simply I agree with a political

73
00:04:13,960 --> 00:04:16,400
Speaker 2: move by Jensen Wang, the cozy up to the Trump

74
00:04:16,440 --> 00:04:19,880
Speaker 2: administration by co investing alongside the US government and Intel.

75
00:04:19,920 --> 00:04:21,320
Speaker 2: Whether it's a good investment.

76
00:04:21,040 --> 00:04:23,839
Speaker 3: Or not, if five billion dollars is like change for

77
00:04:24,400 --> 00:04:27,120
Speaker 3: a company like in Vidia that's almost generating one hundred

78
00:04:27,120 --> 00:04:29,560
Speaker 3: billion dollars in free cash flow every year right now.

79
00:04:29,839 --> 00:04:32,599
Speaker 2: So there are the clients you talked to, the investage

80
00:04:32,600 --> 00:04:34,680
Speaker 2: you talked to, but they think there is some you know,

81
00:04:34,720 --> 00:04:38,239
Speaker 2: some soft upside to in Nvidia by investing alongside the government.

82
00:04:38,400 --> 00:04:40,719
Speaker 3: I mean, in Vidia right now is taking stakes in

83
00:04:40,800 --> 00:04:43,680
Speaker 3: a lot of companies Corvieve and a lot of neo

84
00:04:43,760 --> 00:04:46,680
Speaker 3: clouds because they want to make big bets. With that

85
00:04:46,800 --> 00:04:49,719
Speaker 3: kind of balance sheet that Nvidia has, they can afford

86
00:04:49,800 --> 00:04:52,520
Speaker 3: to do it. And so this is another one of

87
00:04:52,560 --> 00:04:55,720
Speaker 3: those minority stakes that they took. I don't think they

88
00:04:55,720 --> 00:04:59,599
Speaker 3: have any high expectations here, but still it does help

89
00:04:59,640 --> 00:05:00,680
Speaker 3: them politically.

90
00:05:00,720 --> 00:05:02,640
Speaker 2: I mean, these the numbers are blow me away. With

91
00:05:02,680 --> 00:05:05,359
Speaker 2: the tech companies that Man deep sings that follows this

92
00:05:05,520 --> 00:05:07,599
Speaker 2: year call it, you know the calendar of twenty five

93
00:05:07,600 --> 00:05:10,039
Speaker 2: fiscal year twenty six, one hundred billion dollars of free

94
00:05:10,080 --> 00:05:13,760
Speaker 2: cash flow. Next year one hundred and forty billion dollars

95
00:05:13,760 --> 00:05:16,839
Speaker 2: of free cash flow, free cash This is the stuff

96
00:05:16,880 --> 00:05:18,320
Speaker 2: like literally, we don't know what to do with it.

97
00:05:18,360 --> 00:05:21,080
Speaker 2: So we're either going to give it lders, we're gonna

98
00:05:21,400 --> 00:05:23,680
Speaker 2: I don't know, or we're gonna make or we make

99
00:05:23,760 --> 00:05:26,000
Speaker 2: investments in So there you go.

100
00:05:26,240 --> 00:05:29,520
Speaker 4: But Paul was talking earlier about how he thinks the

101
00:05:29,560 --> 00:05:32,000
Speaker 4: pie is big enough right for for all these players,

102
00:05:32,040 --> 00:05:34,240
Speaker 4: and that not to worry too much about AMD. Is

103
00:05:34,640 --> 00:05:37,080
Speaker 4: this tie up a threat to them? Do you think

104
00:05:37,520 --> 00:05:38,000
Speaker 4: it is?

105
00:05:38,120 --> 00:05:40,560
Speaker 3: If they come up with a product. So, if they

106
00:05:40,600 --> 00:05:43,799
Speaker 3: come up with a chip that can drive a PC

107
00:05:44,000 --> 00:05:48,159
Speaker 3: refresh cycle, it's gonna hurt AMD. But look, these design

108
00:05:48,240 --> 00:05:52,440
Speaker 3: wins take time to result in a product, and strategically, yeah,

109
00:05:52,480 --> 00:05:55,159
Speaker 3: they will develop something. That's why I go back to

110
00:05:55,200 --> 00:05:58,840
Speaker 3: what Amazon and Intel data year back. Did anything change

111
00:05:58,960 --> 00:05:59,400
Speaker 3: after that?

112
00:05:59,800 --> 00:06:00,680
Speaker 5: No good point?

113
00:06:00,839 --> 00:06:03,440
Speaker 4: Is there anybody out there that maybe AMD now should

114
00:06:03,520 --> 00:06:05,040
Speaker 4: start to cozy up to.

115
00:06:05,279 --> 00:06:08,560
Speaker 3: Probably one of the hyperscalers because the hyperscalers are doing

116
00:06:08,560 --> 00:06:11,720
Speaker 3: a lot of their custom chips and if MD is

117
00:06:11,839 --> 00:06:15,120
Speaker 3: part of that ecosystem, that certainly will help drive up

118
00:06:15,160 --> 00:06:18,039
Speaker 3: their order. So I expect them to partner with one

119
00:06:18,080 --> 00:06:19,080
Speaker 3: of the hyperscalers.

120
00:06:19,120 --> 00:06:22,200
Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.

121
00:06:25,880 --> 00:06:29,599
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

122
00:06:29,680 --> 00:06:32,720
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

123
00:06:32,760 --> 00:06:36,080
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

124
00:06:36,120 --> 00:06:39,680
Speaker 1: you get your podcasts, or watch us live on YouTube.

125
00:06:40,400 --> 00:06:43,279
Speaker 4: Want to talk supply chain now, and who better to

126
00:06:43,320 --> 00:06:46,520
Speaker 4: do that with than Jeene Soroca, CEO the busiest port

127
00:06:46,760 --> 00:06:49,200
Speaker 4: in the US, the Port of Los Angeles. And guess what,

128
00:06:49,279 --> 00:06:51,279
Speaker 4: he's here on the East coast, right here in our

129
00:06:51,320 --> 00:06:54,120
Speaker 4: New York studios. So Gene, thanks so much for joining us.

130
00:06:54,440 --> 00:06:55,880
Speaker 6: Great to see you, alexis great.

131
00:06:55,720 --> 00:06:58,480
Speaker 4: To see you. I know the LA Port handles a

132
00:06:58,520 --> 00:07:02,360
Speaker 4: lot of international cargo, especially from Asia. I know that

133
00:07:02,400 --> 00:07:05,479
Speaker 4: trade volumes in August were near all time records. Here

134
00:07:05,480 --> 00:07:07,840
Speaker 4: we are mid September. Where do things stand now.

135
00:07:08,080 --> 00:07:10,600
Speaker 6: It's been a roller coaster of a year. When hard

136
00:07:10,720 --> 00:07:13,760
Speaker 6: trade policy comes out, you see a real slowdown in

137
00:07:13,800 --> 00:07:18,080
Speaker 6: cargo flows. Then when that policy is softened and deadlines extended,

138
00:07:18,280 --> 00:07:20,680
Speaker 6: cargo picks up for that window of opportunity, and that's

139
00:07:20,680 --> 00:07:23,360
Speaker 6: what we've seen. But July and August combined are our

140
00:07:23,360 --> 00:07:25,960
Speaker 6: busiest two months in the one hundred and seventeen year

141
00:07:26,080 --> 00:07:28,960
Speaker 6: history of the court. Folks are bringing in inventory before

142
00:07:29,000 --> 00:07:31,840
Speaker 6: the next policy statement may come out, trying to protect

143
00:07:31,840 --> 00:07:35,120
Speaker 6: themselves from the all important year end holiday season for retailers,

144
00:07:35,320 --> 00:07:38,239
Speaker 6: and the parts for American factories are keeping a lower

145
00:07:38,400 --> 00:07:39,600
Speaker 6: but very steady flow.

146
00:07:40,080 --> 00:07:43,680
Speaker 2: So Gene, A lot of people are unsure how tariffs work,

147
00:07:43,760 --> 00:07:47,640
Speaker 2: But the reality is, I believe they occur your port.

148
00:07:48,080 --> 00:07:51,640
Speaker 2: The actual collection of the tariff occurs at.

149
00:07:51,720 --> 00:07:54,240
Speaker 6: On your turf, right That's right, Paul, and a cargo

150
00:07:54,320 --> 00:07:57,320
Speaker 6: container cannot leave the port without that tariff being paid

151
00:07:57,360 --> 00:07:59,520
Speaker 6: by the importer of records to US Customs.

152
00:07:59,760 --> 00:08:03,080
Speaker 2: There's customs office at your port, and what they do

153
00:08:03,200 --> 00:08:06,600
Speaker 2: is collect whatever tariffs may be on any particular good

154
00:08:06,680 --> 00:08:08,360
Speaker 2: and that's how that happens all the time.

155
00:08:08,400 --> 00:08:10,640
Speaker 6: I guess that's exactly right. And LA is the largest

156
00:08:10,640 --> 00:08:14,120
Speaker 6: customs district in the nation. Director Africa Bell runs that

157
00:08:14,280 --> 00:08:17,000
Speaker 6: shop for US Customs and her rank and final members

158
00:08:17,040 --> 00:08:19,200
Speaker 6: are working around the clock just trying to keep up

159
00:08:19,200 --> 00:08:21,480
Speaker 6: with what the tariffs are, how to apply them to

160
00:08:21,480 --> 00:08:23,960
Speaker 6: the shipments and keep the commerce moving.

161
00:08:24,080 --> 00:08:26,000
Speaker 4: It's got to be really confusing for them because I

162
00:08:26,040 --> 00:08:29,720
Speaker 4: just feel like they believe constantly. How many companies, though,

163
00:08:29,720 --> 00:08:33,240
Speaker 4: are really able to pull forward their inventory. Are you

164
00:08:33,280 --> 00:08:35,839
Speaker 4: still seeing that in a big way as we move

165
00:08:35,840 --> 00:08:37,120
Speaker 4: closer to the holiday shopping site?

166
00:08:37,160 --> 00:08:39,560
Speaker 6: Yeah, Alexis, here's the interesting fact. You've got about one

167
00:08:39,640 --> 00:08:42,600
Speaker 6: hundred and twenty five thousand companies that call Los Angeles

168
00:08:42,640 --> 00:08:44,960
Speaker 6: home to import their goods. Over the course of a year,

169
00:08:45,320 --> 00:08:47,560
Speaker 6: no one company has more than a five percent share.

170
00:08:47,920 --> 00:08:52,400
Speaker 6: So we're made up mainly of small to middle sized businesses,

171
00:08:52,640 --> 00:08:54,760
Speaker 6: some of whom are telling me now they're dipping into

172
00:08:54,760 --> 00:08:56,320
Speaker 6: savings to pay these tariffs.

173
00:08:56,960 --> 00:09:01,040
Speaker 2: So our is our customs office in fact keeping up

174
00:09:01,120 --> 00:09:05,200
Speaker 2: with the collection of tariffs on all these additional goods.

175
00:09:05,240 --> 00:09:08,240
Speaker 2: I mean, did they have the manpower to do it all?

176
00:09:08,240 --> 00:09:10,040
Speaker 2: Do they have the facilities to do all, the technology

177
00:09:10,040 --> 00:09:10,480
Speaker 2: to do it all.

178
00:09:10,640 --> 00:09:12,719
Speaker 6: They truly have risen to the occasion, Paul and doing

179
00:09:12,760 --> 00:09:15,200
Speaker 6: a great job. I look at those vital statistics of

180
00:09:15,200 --> 00:09:17,920
Speaker 6: the port through the Port Optimizer every morning, a ninety

181
00:09:17,920 --> 00:09:21,679
Speaker 6: second flash report. Our numbers on velocity are better than

182
00:09:21,720 --> 00:09:23,480
Speaker 6: they were before COVID.

183
00:09:24,120 --> 00:09:25,040
Speaker 5: Wow, you know, I was.

184
00:09:25,440 --> 00:09:27,880
Speaker 4: I think we also those dramatic photos of the cargo

185
00:09:28,120 --> 00:09:32,480
Speaker 4: falling off in Long Beach, not your report, but at

186
00:09:32,480 --> 00:09:35,280
Speaker 4: the Port of Long Beach. I think it highlights also

187
00:09:35,280 --> 00:09:37,199
Speaker 4: what a dangerous job this can be for those workers.

188
00:09:37,240 --> 00:09:40,080
Speaker 4: But I'm just curious, did that have any impact, knockoff

189
00:09:40,080 --> 00:09:41,040
Speaker 4: effect on your report?

190
00:09:41,360 --> 00:09:42,320
Speaker 6: That's right, Alexis.

191
00:09:42,400 --> 00:09:42,560
Speaker 1: You know.

192
00:09:42,600 --> 00:09:45,560
Speaker 6: The first thing is, thank goodness, no one got hurt.

193
00:09:45,880 --> 00:09:48,120
Speaker 6: The men and women of the International Longshore and Warehouse

194
00:09:48,200 --> 00:09:50,760
Speaker 6: Union are on the ground moving all this cargo, and

195
00:09:51,400 --> 00:09:55,840
Speaker 6: thankfully no one was in harm's way. The investigation will continue.

196
00:09:55,880 --> 00:09:57,600
Speaker 6: I was talking to some folks last night at a

197
00:09:57,600 --> 00:10:00,400
Speaker 6: big industry event back in Long Beach. I've been able

198
00:10:00,440 --> 00:10:03,360
Speaker 6: to get their cargo out yet, So the US Coast Guard,

199
00:10:03,440 --> 00:10:05,880
Speaker 6: National Transportation Safety Board are going to take a deep

200
00:10:05,920 --> 00:10:08,719
Speaker 6: look at this. See what the causals are and how

201
00:10:08,720 --> 00:10:11,839
Speaker 6: we can make sure it doesn't get repeated again. But effectively,

202
00:10:11,960 --> 00:10:14,520
Speaker 6: that particular terminal in the port of Long Beach is

203
00:10:14,520 --> 00:10:17,559
Speaker 6: an investigation site, So shipping lines are having a maneuver

204
00:10:17,720 --> 00:10:20,400
Speaker 6: around that as best they can, but no real slowdowns

205
00:10:20,440 --> 00:10:21,040
Speaker 6: because of it.

206
00:10:21,160 --> 00:10:21,559
Speaker 5: Amazing.

207
00:10:21,720 --> 00:10:24,720
Speaker 2: So the economic data seem to suggest that in terms

208
00:10:24,760 --> 00:10:26,960
Speaker 2: of Tariff's questions who pays for it? We know that

209
00:10:27,000 --> 00:10:30,400
Speaker 2: it gets collected at your port by the US Customers Office,

210
00:10:30,440 --> 00:10:33,199
Speaker 2: and then it's a question from that perspective, how much

211
00:10:33,280 --> 00:10:35,920
Speaker 2: gets passed along down the line to the wholesaler, to

212
00:10:35,960 --> 00:10:40,120
Speaker 2: the distributor, to the retailer, and then ultimately to the consumer.

213
00:10:40,720 --> 00:10:42,640
Speaker 2: What's from your view at the port, do you have

214
00:10:42,640 --> 00:10:44,719
Speaker 2: any understanding how that's happening, how that's playing it?

215
00:10:44,880 --> 00:10:48,240
Speaker 6: Yeah, Paul, Three real areas that importers have been focusing on.

216
00:10:48,360 --> 00:10:50,599
Speaker 6: Can I go back to my manufacturer and negotiate a

217
00:10:50,640 --> 00:10:52,640
Speaker 6: little bit on the price and see if we can

218
00:10:52,640 --> 00:10:57,080
Speaker 6: mitigate some mixed effect there? Do I just absorb it

219
00:10:57,200 --> 00:10:59,640
Speaker 6: and try to find efficiencies in my own company. We've

220
00:10:59,640 --> 00:11:02,240
Speaker 6: seen the results from the big auto companies in Detroit

221
00:11:02,400 --> 00:11:05,920
Speaker 6: that hasn't gone well either. Mary Barro announcing big, big

222
00:11:05,960 --> 00:11:08,800
Speaker 6: tariff hits on cost, same thing with Jim Farley over

223
00:11:08,840 --> 00:11:11,640
Speaker 6: at Ford, and then others are saying that they're trying

224
00:11:11,679 --> 00:11:13,880
Speaker 6: to pass on to their customers if they're in the

225
00:11:13,880 --> 00:11:17,920
Speaker 6: factory business manufacturing, or to consumers, and we have seen

226
00:11:18,000 --> 00:11:20,400
Speaker 6: that as well. So it's just kind of a spread

227
00:11:20,480 --> 00:11:23,680
Speaker 6: across those three categories, and I think we'll start seeing

228
00:11:23,720 --> 00:11:26,080
Speaker 6: even more of that hit towards the fourth quarter of

229
00:11:26,120 --> 00:11:26,480
Speaker 6: this year.

230
00:11:27,000 --> 00:11:29,199
Speaker 4: I know that in just a few weeks, if benefit holes,

231
00:11:29,440 --> 00:11:32,440
Speaker 4: we're supposed to be collecting tariffs on Chinese ships that

232
00:11:33,040 --> 00:11:36,000
Speaker 4: call it ports at US ports. I know that President

233
00:11:36,040 --> 00:11:38,600
Speaker 4: Trump's going to be speaking with Jijinping and a phone

234
00:11:38,600 --> 00:11:44,720
Speaker 4: call Friday tomorrow. So how do you guys at the

235
00:11:44,720 --> 00:11:47,360
Speaker 4: port sort of prepare for something like this?

236
00:11:47,360 --> 00:11:50,600
Speaker 6: This is another cost that probably will be passed on

237
00:11:50,679 --> 00:11:53,400
Speaker 6: as well, according to the shipping lines to their importers.

238
00:11:53,840 --> 00:11:58,160
Speaker 6: So right now early days the new penalty fee goes

239
00:11:58,240 --> 00:12:02,480
Speaker 6: into place on October fourteenth, be phased up, but right

240
00:12:02,520 --> 00:12:05,200
Speaker 6: now we are estimating that it could be anywhere from

241
00:12:05,200 --> 00:12:07,920
Speaker 6: about one hundred and twenty five to over three hundred

242
00:12:07,960 --> 00:12:10,800
Speaker 6: dollars per container. The shipping line will pass that to

243
00:12:10,840 --> 00:12:14,120
Speaker 6: the importer of record on these fees. About thirty percent

244
00:12:14,280 --> 00:12:17,600
Speaker 6: of all vessels they call Los Angeles today are built

245
00:12:17,720 --> 00:12:20,960
Speaker 6: or managed from China. There's going to have to be

246
00:12:21,040 --> 00:12:24,360
Speaker 6: some movement around this. Some companies may try to absorb,

247
00:12:24,440 --> 00:12:28,200
Speaker 6: others will shift different vessels into the rotation to avoid

248
00:12:28,200 --> 00:12:29,640
Speaker 6: this penalty as a whole.

249
00:12:29,800 --> 00:12:32,880
Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.

250
00:12:36,400 --> 00:12:40,120
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

251
00:12:40,200 --> 00:12:43,240
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

252
00:12:43,280 --> 00:12:46,600
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

253
00:12:46,640 --> 00:12:49,920
Speaker 1: you get your podcasts, or watch us live on YouTube.

254
00:12:50,880 --> 00:12:54,480
Speaker 2: It's been a busy day for the restaurant companies reporting earnings.

255
00:12:54,720 --> 00:12:57,560
Speaker 2: We had Cracker Barer, we had Darted earnings. Check in

256
00:12:57,640 --> 00:13:00,800
Speaker 2: with our expert on the restaurant business, because not only

257
00:13:00,840 --> 00:13:02,280
Speaker 2: is it a view just kind of what's happening out

258
00:13:02,280 --> 00:13:04,560
Speaker 2: there in the restaurant business, but I always view the

259
00:13:04,600 --> 00:13:06,800
Speaker 2: restaurant companies it's a pretty good gauge at how people

260
00:13:06,840 --> 00:13:09,240
Speaker 2: are feeling, consumers are feeling, and how they're spending their money.

261
00:13:09,240 --> 00:13:12,440
Speaker 2: Michael Hallin joins US Senior Restaurant and Food Service analysts

262
00:13:12,440 --> 00:13:15,880
Speaker 2: for Bloomberg Intelligence. Hey, Mike, let's start with maybe some

263
00:13:15,880 --> 00:13:18,160
Speaker 2: some good stuff Darted. What's going on with our friends

264
00:13:18,160 --> 00:13:18,560
Speaker 2: at Darted?

265
00:13:19,120 --> 00:13:21,480
Speaker 5: Yeah, you know Darting. It was an interesting quarter.

266
00:13:21,600 --> 00:13:29,360
Speaker 7: Sales were fantastic, but slightly below, you know, very high expectations,

267
00:13:29,800 --> 00:13:31,880
Speaker 7: and the most interesting part of their report was that

268
00:13:31,920 --> 00:13:37,079
Speaker 7: their margins contracted, largely due to beef costs and Uber

269
00:13:37,160 --> 00:13:41,680
Speaker 7: fees because they did this one million free delivery promotions

270
00:13:41,720 --> 00:13:45,320
Speaker 7: supported by you know, Uber eats marketing dollars, right, and

271
00:13:45,360 --> 00:13:48,000
Speaker 7: so it actually made up five percent of sales, and

272
00:13:48,000 --> 00:13:52,600
Speaker 7: that's very impressive for something that's been instituted, you.

273
00:13:52,559 --> 00:13:53,640
Speaker 5: Know, within a year.

274
00:13:53,840 --> 00:13:58,360
Speaker 7: So, yeah, the margins, you know this, this company has

275
00:13:58,400 --> 00:13:59,679
Speaker 7: best in class margins.

276
00:13:59,720 --> 00:14:01,600
Speaker 5: They've always protected their margins.

277
00:14:01,600 --> 00:14:04,040
Speaker 7: And so seeing a same story of sales gain that

278
00:14:04,400 --> 00:14:06,439
Speaker 7: you know, a very strong same star sales gain without

279
00:14:06,480 --> 00:14:11,120
Speaker 7: the margin expansion, I think shocked some investors today.

280
00:14:11,440 --> 00:14:14,040
Speaker 4: So what are they planning to do to widen those margins?

281
00:14:14,200 --> 00:14:17,319
Speaker 4: I heard the portions might not be as big? Are

282
00:14:17,360 --> 00:14:20,440
Speaker 4: they looking at possibly raising prices.

283
00:14:20,080 --> 00:14:20,560
Speaker 5: On the menu.

284
00:14:22,440 --> 00:14:26,560
Speaker 7: Well, they're going to raise prices, but not too aggressively.

285
00:14:26,720 --> 00:14:30,800
Speaker 7: So they're very careful about increasing their prices. A big

286
00:14:30,840 --> 00:14:33,960
Speaker 7: reason why we think they're outperforming is that they've increased

287
00:14:33,960 --> 00:14:38,400
Speaker 7: their prices a lot less than competitors since the pandemic, right,

288
00:14:38,440 --> 00:14:41,440
Speaker 7: and so they don't want to lose that advantage. So

289
00:14:41,600 --> 00:14:44,160
Speaker 7: they are going to raise prices this year, but it's

290
00:14:44,240 --> 00:14:47,800
Speaker 7: going to be modest and less than peers.

291
00:14:48,080 --> 00:14:51,920
Speaker 5: You know, you mentioned the smaller entrees. That's really a

292
00:14:51,960 --> 00:14:53,960
Speaker 5: move to boost traffic.

293
00:14:54,120 --> 00:14:56,760
Speaker 7: So what they're doing is they're taking seven of their

294
00:14:56,760 --> 00:15:01,080
Speaker 7: popular entrees. They're making an additional a lighter menu with

295
00:15:01,120 --> 00:15:05,040
Speaker 7: those seven items. They're shrinking the portion and they're lowering

296
00:15:05,080 --> 00:15:08,000
Speaker 7: the price, and they're hoping that actually brings in greater

297
00:15:08,160 --> 00:15:11,760
Speaker 7: traffic with low income consumers. So shrinking the size of

298
00:15:11,800 --> 00:15:15,720
Speaker 7: the entrees isn't isn't a major plan in terms of

299
00:15:15,920 --> 00:15:18,200
Speaker 7: saving the margins. With the margins, it's going to be

300
00:15:18,720 --> 00:15:23,080
Speaker 7: you know, executing, right, That's that's what they're known for,

301
00:15:23,320 --> 00:15:27,320
Speaker 7: you know, consistently becoming more productive in their restaurants.

302
00:15:27,360 --> 00:15:28,840
Speaker 5: That's how they're going to try to fund this.

303
00:15:29,080 --> 00:15:31,840
Speaker 7: You know, there will be some slight price increases, and

304
00:15:31,920 --> 00:15:34,160
Speaker 7: they mentioned they could be a little bit more aggressive.

305
00:15:34,200 --> 00:15:37,800
Speaker 7: If you know, the higher beef prices remain stubborn.

306
00:15:38,280 --> 00:15:41,400
Speaker 2: All right, let's move on to my favorite cracker barrel.

307
00:15:41,520 --> 00:15:45,440
Speaker 2: They're still paying the price for some of that rebranding issues.

308
00:15:45,560 --> 00:15:46,440
Speaker 2: What's going on there?

309
00:15:48,440 --> 00:15:50,520
Speaker 5: Yeah, that one, Oh man, it was.

310
00:15:50,920 --> 00:15:53,360
Speaker 7: It's the timing of this, of everything that happened to them,

311
00:15:53,480 --> 00:15:55,040
Speaker 7: is such a shame, because.

312
00:15:54,960 --> 00:15:56,920
Speaker 5: They were recorded a great quarter.

313
00:15:57,080 --> 00:15:59,280
Speaker 7: You know, Same Star sales were up five point four

314
00:15:59,320 --> 00:16:01,920
Speaker 7: percent in the rest truants, a couple hundred basis points

315
00:16:01,920 --> 00:16:06,400
Speaker 7: ahead of the street. But you know, sales have decelerated

316
00:16:06,440 --> 00:16:13,120
Speaker 7: pretty significantly here, you know, since August nineteenth and the

317
00:16:13,160 --> 00:16:16,480
Speaker 7: logo controversy. So you know, the stock is down a

318
00:16:16,520 --> 00:16:19,840
Speaker 7: little bit today. It opened much lower. You know, we

319
00:16:19,960 --> 00:16:22,120
Speaker 7: think Paul was a good one. I thought Julie Messino

320
00:16:22,200 --> 00:16:23,800
Speaker 7: did a great job in the call. I don't think

321
00:16:23,800 --> 00:16:26,760
Speaker 7: there was any panic in her voice. You know. I

322
00:16:27,080 --> 00:16:31,640
Speaker 7: think she's running a steady ship right now. And you know,

323
00:16:31,680 --> 00:16:34,400
Speaker 7: they're focusing on the things that they've been focused on

324
00:16:34,440 --> 00:16:38,040
Speaker 7: from the beginning, which is providing better service and higher

325
00:16:38,160 --> 00:16:42,160
Speaker 7: quality food at a good price point. I would say

326
00:16:42,240 --> 00:16:45,520
Speaker 7: it seems like they may have sandbag guidance as well.

327
00:16:45,560 --> 00:16:47,600
Speaker 7: I think that's a big part of the reason why

328
00:16:49,080 --> 00:16:52,920
Speaker 7: the stock's not down more right, is that they basically

329
00:16:53,000 --> 00:16:57,480
Speaker 7: are extrapolating current traffic trends throughout the rest of the quarter.

330
00:16:58,920 --> 00:17:00,920
Speaker 5: You know when second data.

331
00:17:00,720 --> 00:17:04,280
Speaker 7: That that Bloomberg owns, that that we follow is showing

332
00:17:04,320 --> 00:17:08,400
Speaker 7: that traffic may be stabilizing here over the last over

333
00:17:08,520 --> 00:17:09,000
Speaker 7: last week.

334
00:17:09,119 --> 00:17:11,520
Speaker 5: So I guess we'll see.

335
00:17:12,160 --> 00:17:12,320
Speaker 3: Yeah.

336
00:17:12,320 --> 00:17:14,520
Speaker 4: I mean, the latest CPI report showed that food away

337
00:17:14,560 --> 00:17:19,119
Speaker 4: from home so at restaurants actually outpaced what we're paying

338
00:17:19,119 --> 00:17:21,320
Speaker 4: for food at the supermarket. But I mean, if you

339
00:17:21,359 --> 00:17:24,119
Speaker 4: look at these two reports from Cracker Barrel and Darden restaurants,

340
00:17:24,280 --> 00:17:26,679
Speaker 4: are people eating out less or is that really not

341
00:17:26,720 --> 00:17:30,040
Speaker 4: holding true? When you look at the numbers, they both

342
00:17:30,080 --> 00:17:33,399
Speaker 4: reported five You know, Olive Garden was over five percent,

343
00:17:33,680 --> 00:17:36,680
Speaker 4: Longhorns over five percent, Cracker Barrels over five percent.

344
00:17:37,200 --> 00:17:40,040
Speaker 7: You know, a lot of these stories about the death

345
00:17:40,080 --> 00:17:43,040
Speaker 7: of the consumer I think are overstated. You know, we've

346
00:17:43,040 --> 00:17:45,520
Speaker 7: been saying it all year. Restaurants sales are going to

347
00:17:45,520 --> 00:17:48,560
Speaker 7: continue to be better than they were last year. Second

348
00:17:48,600 --> 00:17:52,680
Speaker 7: half is going to be better than first half. It's

349
00:17:52,720 --> 00:17:54,879
Speaker 7: not an issue to me. The bigger issue is what

350
00:17:54,920 --> 00:17:56,840
Speaker 7: we heard out of Darden. It's inflation.

351
00:17:57,000 --> 00:17:57,119
Speaker 5: Right.

352
00:17:57,160 --> 00:18:01,760
Speaker 7: The Fed just cut rates in an inflationary period, right

353
00:18:02,400 --> 00:18:04,960
Speaker 7: while we're seeing inflation go up, while we're seeing CPI

354
00:18:05,040 --> 00:18:08,479
Speaker 7: and PPI go up, right, and so beef prices are

355
00:18:08,480 --> 00:18:11,560
Speaker 7: stubbornly high. I mean, I look across my Bloomberg monitor

356
00:18:11,600 --> 00:18:15,000
Speaker 7: and MADI prices are up across the board today and

357
00:18:15,040 --> 00:18:18,800
Speaker 7: they've been up for basically this whole year. So you know,

358
00:18:18,920 --> 00:18:21,639
Speaker 7: I think through year end, margins are going to be

359
00:18:21,680 --> 00:18:23,159
Speaker 7: the bigger concern for restaurants.

360
00:18:23,320 --> 00:18:28,000
Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,

361
00:18:28,200 --> 00:18:31,680
Speaker 1: and anywhere else you get your podcasts. Listen live each

362
00:18:31,720 --> 00:18:35,440
Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,

363
00:18:35,560 --> 00:18:39,119
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.

364
00:18:39,520 --> 00:18:42,480
Speaker 1: You can also watch us live every weekday on YouTube

365
00:18:42,880 --> 00:18:45,960
Speaker 1: and always on the Bloomberg terminal