1 00:00:02,920 --> 00:00:08,240 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:10,560 --> 00:00:14,360 Speaker 2: This is Bloomberg Intelligence with Alex Steinhl and Paul Sweeny. 3 00:00:14,520 --> 00:00:17,720 Speaker 3: The real app performance has been in US corporate high yield. 4 00:00:17,880 --> 00:00:20,280 Speaker 4: Are the companies lean enough? Have they trimmed all the fats? 5 00:00:20,320 --> 00:00:23,480 Speaker 3: The semiconductor business is a really cyclical. 6 00:00:23,079 --> 00:00:27,200 Speaker 2: Business, breaking market headlines and corporate news from across the globe. 7 00:00:27,240 --> 00:00:29,880 Speaker 4: Do investors like the M and A that we've seen? 8 00:00:30,080 --> 00:00:33,159 Speaker 3: These are two big time blue chip companies. 9 00:00:33,320 --> 00:00:36,920 Speaker 4: The window between the peak and cut changing super fast. 10 00:00:37,080 --> 00:00:41,680 Speaker 2: Bloomberg Intelligence with Alex Steinhl and Paul'sweeny on Bloomberg Radio. 11 00:00:43,600 --> 00:00:46,200 Speaker 3: On Today's Bloomberg Intelligence Show, we dig inside the big 12 00:00:46,240 --> 00:00:48,960 Speaker 3: business stories in pacting Wall Street and the global markets. 13 00:00:49,000 --> 00:00:51,320 Speaker 3: Each and every week we provide in depth research and 14 00:00:51,440 --> 00:00:53,320 Speaker 3: data on some of the two thousand companies and one 15 00:00:53,400 --> 00:00:56,720 Speaker 3: hundred and thirty industries our analysts cover worldwide. Today, we'll 16 00:00:56,760 --> 00:00:59,160 Speaker 3: look at why Tesla is looking to hire nearly eight 17 00:00:59,200 --> 00:01:02,680 Speaker 3: hundred new employer after its largest round of layoffs. Plus 18 00:01:02,680 --> 00:01:06,000 Speaker 3: we'll discuss why United Airlines gave disappointing guidance for the 19 00:01:06,040 --> 00:01:08,760 Speaker 3: third quarter. But first we look at quarterly earnings from 20 00:01:08,800 --> 00:01:12,720 Speaker 3: the world's largest money manager Blackrock. Blackrock called in fifty 21 00:01:12,800 --> 00:01:16,000 Speaker 3: one billion dollars of client cash to its long term 22 00:01:16,040 --> 00:01:18,319 Speaker 3: investment funds in the second quarter. As a result, the 23 00:01:18,360 --> 00:01:20,320 Speaker 3: firm hit a record of ten point six trillion dollars 24 00:01:20,360 --> 00:01:22,800 Speaker 3: of assets. For more, we were joined by Neil Sipes, 25 00:01:22,800 --> 00:01:26,400 Speaker 3: Bloomberg Intelligence financials analyst. We first asked Neil to comment 26 00:01:26,560 --> 00:01:27,520 Speaker 3: on this week's news. 27 00:01:27,840 --> 00:01:30,480 Speaker 1: I think obviously over the past eighteen months, banks have 28 00:01:30,560 --> 00:01:32,920 Speaker 1: been much more in the focus asset managers, maybe a 29 00:01:32,959 --> 00:01:35,600 Speaker 1: little bit of a sleepier name, so to speak. But 30 00:01:35,720 --> 00:01:38,560 Speaker 1: like you said, Blackrock eclipsing ten and a half trillion. 31 00:01:38,920 --> 00:01:40,880 Speaker 1: Of course, a lot of that is due to markets. 32 00:01:40,920 --> 00:01:43,360 Speaker 1: We're up, you know, fifteen twenty percent year to date, 33 00:01:43,360 --> 00:01:46,680 Speaker 1: but Blackrock sort of that perennial grower in the industry. 34 00:01:47,080 --> 00:01:50,840 Speaker 1: Organic growth, those flows from institutional retail clients have been 35 00:01:50,880 --> 00:01:54,520 Speaker 1: harder to come by. Blackrock, having that breadth and diversity 36 00:01:54,560 --> 00:01:57,560 Speaker 1: of the platform, has really been able to deliver growth 37 00:01:57,840 --> 00:02:00,280 Speaker 1: through varying market cycles. We think that's one of their 38 00:02:00,280 --> 00:02:02,640 Speaker 1: strengths and why they're the leader in the space in 39 00:02:02,720 --> 00:02:05,760 Speaker 1: terms of size. In terms of the second quarter organic 40 00:02:05,760 --> 00:02:09,360 Speaker 1: growth a little bit lighter than expected. Part of that 41 00:02:09,520 --> 00:02:11,960 Speaker 1: due to the fact that we saw some larger institutional 42 00:02:12,000 --> 00:02:15,720 Speaker 1: clients sort of rebalancing portfolios. That's just sort of natural 43 00:02:15,760 --> 00:02:20,239 Speaker 1: in the business, especially when you're at all time highs. Nonetheless, 44 00:02:20,280 --> 00:02:24,200 Speaker 1: margin really improved again, that's on the heels of stronger markets. 45 00:02:24,280 --> 00:02:26,760 Speaker 1: Most of the revenue here is asset based fees, so 46 00:02:27,200 --> 00:02:30,520 Speaker 1: as markets move higher, the top line expands as well. 47 00:02:31,360 --> 00:02:33,640 Speaker 1: And so really, you know, you highlighted the last thing. 48 00:02:33,680 --> 00:02:36,760 Speaker 1: I guess ETF's another strong suit. That's really the bread 49 00:02:36,760 --> 00:02:39,799 Speaker 1: and butter of black Rock again, and obviously now with 50 00:02:40,200 --> 00:02:42,800 Speaker 1: some of that private's markets push that we've seen in 51 00:02:42,800 --> 00:02:44,400 Speaker 1: the past couple months, when do. 52 00:02:44,360 --> 00:02:46,160 Speaker 4: They hit the law of large numbers thing? 53 00:02:46,639 --> 00:02:49,800 Speaker 1: Yeah, I think that is becoming the more popular question 54 00:02:49,880 --> 00:02:50,639 Speaker 1: for me to ask. 55 00:02:50,520 --> 00:02:52,680 Speaker 4: This question forever, right, and it is still do it? 56 00:02:52,840 --> 00:02:55,359 Speaker 1: Yeah? They and they continue to target this five percent 57 00:02:55,480 --> 00:02:58,600 Speaker 1: organic based feed growth figure. They've been lagging that over 58 00:02:58,639 --> 00:03:01,800 Speaker 1: the past couple of quarters. Obvious markets, you know, since 59 00:03:01,840 --> 00:03:05,440 Speaker 1: the beginning of twenty twenty two, we're less conducive. They've 60 00:03:05,440 --> 00:03:07,639 Speaker 1: been more conducive for the past three quarters or so. 61 00:03:07,919 --> 00:03:10,160 Speaker 1: But the question still remains, how do you continue to 62 00:03:10,200 --> 00:03:13,000 Speaker 1: grow at that five percent clip when You're talking about 63 00:03:13,000 --> 00:03:16,520 Speaker 1: a ten trillion dollar asset base, and we think BlackRock's 64 00:03:16,600 --> 00:03:19,720 Speaker 1: diversity when assets are in motion, they can continue to 65 00:03:19,760 --> 00:03:24,320 Speaker 1: garner share from less diversified, less price competitors. 66 00:03:24,600 --> 00:03:26,720 Speaker 3: Stock hasn't done anything this year, kind of up one 67 00:03:26,760 --> 00:03:29,520 Speaker 3: percent just on the year, lagging the market. What's the 68 00:03:29,560 --> 00:03:32,000 Speaker 3: investment called here on Blackrow? What are the investors saying? 69 00:03:32,200 --> 00:03:35,000 Speaker 1: Yeah? So I think, you know a lot of what's 70 00:03:35,040 --> 00:03:38,120 Speaker 1: been baked into this year is sort of market growth, 71 00:03:38,160 --> 00:03:40,080 Speaker 1: which is going to be a benefit to all asset 72 00:03:40,120 --> 00:03:43,200 Speaker 1: managers in the space. So I think the skepticism of 73 00:03:43,360 --> 00:03:48,119 Speaker 1: are these gains lasting? What happens obviously in November when 74 00:03:48,120 --> 00:03:51,680 Speaker 1: we get this eventual FED pivot to cuts, How is 75 00:03:51,720 --> 00:03:54,240 Speaker 1: that going to impact you know, client allocations, How is 76 00:03:54,280 --> 00:03:56,800 Speaker 1: that going to impact the business model? But we do 77 00:03:56,840 --> 00:04:00,440 Speaker 1: think Blackrock is, you know, a is position to benefit 78 00:04:00,520 --> 00:04:03,160 Speaker 1: in pretty much all market cycles, and a lot of 79 00:04:03,200 --> 00:04:06,680 Speaker 1: that long term story is now shifting into that private 80 00:04:06,720 --> 00:04:10,680 Speaker 1: market's focus with Prequeent acquisition just announced a couple weeks 81 00:04:10,720 --> 00:04:13,120 Speaker 1: ago and Global Infrastructure Partners in January. 82 00:04:13,640 --> 00:04:16,040 Speaker 4: Ask a really dumb question at this point, who are 83 00:04:16,080 --> 00:04:19,719 Speaker 4: Blackrocks actual competitors, Like, who can actually compete with this company. 84 00:04:19,920 --> 00:04:22,880 Speaker 1: Yeah, so there are plenty of competitors. I mean, asset 85 00:04:22,880 --> 00:04:25,960 Speaker 1: management can be somewhat commoditized in a lot of spaces. 86 00:04:26,560 --> 00:04:29,680 Speaker 1: You know, there's competitors like a Vanguard. There's competitors like 87 00:04:30,040 --> 00:04:32,640 Speaker 1: a Schwab, in Vesco, Franklin, Tira. Price, There's plenty of 88 00:04:32,760 --> 00:04:35,960 Speaker 1: names out there. The question is who's able to compete 89 00:04:36,000 --> 00:04:38,680 Speaker 1: on price with Blackrock? And that's where scale really becomes 90 00:04:38,680 --> 00:04:42,280 Speaker 1: paramount here because they can continue to innovate with new products. 91 00:04:42,520 --> 00:04:45,680 Speaker 1: If a new competitor comes out with, you know, a 92 00:04:45,720 --> 00:04:48,880 Speaker 1: new flashy product, Blackrock tends to match that and can 93 00:04:48,920 --> 00:04:51,960 Speaker 1: sometimes beat it on price. And we know that Blackrock 94 00:04:52,000 --> 00:04:56,080 Speaker 1: is entrenched with pretty much every institutional client, every retail client, 95 00:04:56,160 --> 00:04:59,080 Speaker 1: so to speak, and that really gives them the strength 96 00:04:59,120 --> 00:05:02,680 Speaker 1: of distribution to kind of leverage across its platform. 97 00:05:03,000 --> 00:05:06,599 Speaker 3: Our Thanks to Neil SIPs Bloomberg Intelligence financials Analysts, we 98 00:05:06,720 --> 00:05:09,159 Speaker 3: now look at this week's Bloomberg Business Week cover story 99 00:05:09,279 --> 00:05:13,920 Speaker 3: about former President Donald Trump. It's titled Trump on Taxes Tariffs. 100 00:05:14,040 --> 00:05:17,680 Speaker 3: Jerome pal and Moore for the story, BusinessWeek recently sat 101 00:05:17,680 --> 00:05:19,839 Speaker 3: down with the ex president at mar A Lago for 102 00:05:19,920 --> 00:05:22,960 Speaker 3: an exclusive interview. They discussed Trump's plans for the US 103 00:05:23,000 --> 00:05:25,680 Speaker 3: economy and the world if he were to be re 104 00:05:25,760 --> 00:05:28,039 Speaker 3: elected as president. For more and all this, we were 105 00:05:28,080 --> 00:05:31,080 Speaker 3: joined by Bloomberg Business Week editor Brad Stone. We first 106 00:05:31,120 --> 00:05:33,800 Speaker 3: asked Brad just how hard it was to gather details 107 00:05:33,960 --> 00:05:34,640 Speaker 3: for this story. 108 00:05:34,920 --> 00:05:38,080 Speaker 5: Well, I mean, look, he wanted to talk. We'd actually 109 00:05:38,120 --> 00:05:41,599 Speaker 5: put queries out to both campaigns. We heard first from 110 00:05:41,960 --> 00:05:45,080 Speaker 5: former President Trump. You know, this is BusinessWeek, so our 111 00:05:45,120 --> 00:05:49,280 Speaker 5: mandate is business obviously, economics the world order, and we 112 00:05:49,320 --> 00:05:52,520 Speaker 5: went there to interrogate him about an economic plan that 113 00:05:52,640 --> 00:05:56,440 Speaker 5: many economists think is a bit contradictory. I mean, President 114 00:05:56,520 --> 00:05:58,880 Speaker 5: Trump talks about lowering inflation. 115 00:05:59,680 --> 00:06:01,080 Speaker 2: The agenda is. 116 00:06:01,800 --> 00:06:07,440 Speaker 5: Higher tariffs, less immigration, you know, which potentially raises wages. 117 00:06:08,120 --> 00:06:10,800 Speaker 5: He talks a lot about lowering interest rates and then 118 00:06:10,839 --> 00:06:13,719 Speaker 5: bringing members of the business community into his administration. So 119 00:06:14,000 --> 00:06:16,240 Speaker 5: this is a topic he wanted to talk about. To 120 00:06:16,279 --> 00:06:18,799 Speaker 5: put it in context, we talked to him two days 121 00:06:18,800 --> 00:06:21,799 Speaker 5: before the first presidential debate and about two weeks before 122 00:06:21,839 --> 00:06:24,760 Speaker 5: the assassination attempt. But even then, I think, you know, 123 00:06:24,839 --> 00:06:27,640 Speaker 5: he is writing what he believes, at least in his campaign, 124 00:06:27,720 --> 00:06:30,000 Speaker 5: believes is a heightened sense of momentum. 125 00:06:30,160 --> 00:06:32,479 Speaker 3: So, Brad, there's a lot of areas here in the 126 00:06:32,640 --> 00:06:35,080 Speaker 3: terms of economics to explore. Talk about taxes. How does 127 00:06:35,120 --> 00:06:37,600 Speaker 3: he feel about taxes these days? He certainly had some 128 00:06:37,720 --> 00:06:40,160 Speaker 3: big tax legislation in his first term, that's right. 129 00:06:40,240 --> 00:06:43,520 Speaker 5: And one part of his plan is to extend the 130 00:06:43,560 --> 00:06:47,080 Speaker 5: Trump tax cuts. Another part, which he told us, was 131 00:06:47,120 --> 00:06:49,679 Speaker 5: to lower the corporate tax rate. He told the Business 132 00:06:49,720 --> 00:06:51,640 Speaker 5: Roundtable that he wanted to bring it down to twenty 133 00:06:51,680 --> 00:06:54,479 Speaker 5: percent from twenty one percent for no other reason that 134 00:06:54,520 --> 00:06:58,320 Speaker 5: he likes big, large numbers. But then he said he 135 00:06:58,320 --> 00:07:00,679 Speaker 5: would even get it down to fifteen percent if he could. 136 00:07:01,200 --> 00:07:03,680 Speaker 5: You know, the challenge here, of course, is they don't 137 00:07:03,920 --> 00:07:06,120 Speaker 5: delineate any way to pay for this, to make the 138 00:07:06,200 --> 00:07:08,560 Speaker 5: numbers parcel out and do anything other than raise the 139 00:07:08,600 --> 00:07:11,760 Speaker 5: federal deficit. And there is really, I think a paucity 140 00:07:11,840 --> 00:07:15,320 Speaker 5: of specifics here, which is one reason why proxies have 141 00:07:15,440 --> 00:07:18,080 Speaker 5: kind of tried to fill the void with things like 142 00:07:18,120 --> 00:07:22,200 Speaker 5: Project twenty twenty five, which then Trump really distanced himself from. 143 00:07:22,560 --> 00:07:25,000 Speaker 5: But you know, I think, you know, with the broad 144 00:07:25,040 --> 00:07:28,120 Speaker 5: brushstrokes we got is Trump wants to lower taxes and 145 00:07:28,360 --> 00:07:29,520 Speaker 5: extend his tax cuts. 146 00:07:29,680 --> 00:07:32,560 Speaker 4: What I also felt was very interesting is the myriad 147 00:07:32,600 --> 00:07:35,360 Speaker 4: of views in relation to the tech industry. So on 148 00:07:35,400 --> 00:07:37,680 Speaker 4: the one hand of k lower taxes ya tech industry, 149 00:07:37,920 --> 00:07:41,000 Speaker 4: he seems to embrace crypto clearly with JD. Vans, there's 150 00:07:41,040 --> 00:07:44,360 Speaker 4: sort of an embrace of vcs, but big tech is 151 00:07:44,480 --> 00:07:46,960 Speaker 4: very complicated. How did you parse through that? 152 00:07:47,360 --> 00:07:50,400 Speaker 5: There's some contradictions here, Alex. I mean, the first is 153 00:07:50,920 --> 00:07:54,680 Speaker 5: he's obviously very pro American business, and yet he's he's 154 00:07:54,760 --> 00:07:58,320 Speaker 5: turned on TikTok and believes that banning TikTok would only 155 00:07:58,320 --> 00:08:02,440 Speaker 5: empower Mark Zuckerberg Facebook. The second thing is, you know, 156 00:08:02,520 --> 00:08:06,160 Speaker 5: in the first term, he talked a lot about cryptocurrency 157 00:08:06,360 --> 00:08:09,560 Speaker 5: and how it might engender fraud. He wasn't wrong about 158 00:08:09,600 --> 00:08:12,680 Speaker 5: that obviously, but now he's flipped on that as well. 159 00:08:12,960 --> 00:08:15,600 Speaker 5: The bottom line here, and the way I interpreted, is 160 00:08:15,600 --> 00:08:19,240 Speaker 5: that for Trump it's all about personal relationships, and he 161 00:08:19,280 --> 00:08:21,200 Speaker 5: went and talked a lot about Tim Cook and how 162 00:08:21,240 --> 00:08:23,880 Speaker 5: smart he thought Tim Cook was, in large part because 163 00:08:23,920 --> 00:08:26,280 Speaker 5: Tim Cook went to the White House to ask for 164 00:08:26,360 --> 00:08:28,720 Speaker 5: relief from the first set of tariffs. You know, he 165 00:08:28,960 --> 00:08:32,160 Speaker 5: likes it when people come and you know, paid their respects, 166 00:08:32,520 --> 00:08:35,760 Speaker 5: or at least visibly look to be on what he 167 00:08:35,800 --> 00:08:38,560 Speaker 5: considers to be Team Trump, and so, you know in 168 00:08:38,640 --> 00:08:40,680 Speaker 5: terms of crypto and a lot of people in that 169 00:08:40,679 --> 00:08:43,400 Speaker 5: community are now pro Trump, and you know in terms 170 00:08:43,480 --> 00:08:46,240 Speaker 5: of TikTok, where he's very popular on TikTok, and of 171 00:08:46,240 --> 00:08:48,880 Speaker 5: course jeff yass one of the backers of Byte Dance 172 00:08:48,920 --> 00:08:51,520 Speaker 5: as a Trump supporter. You can kind of see why 173 00:08:51,559 --> 00:08:55,280 Speaker 5: these contradictions are sort of bundled into his views on technology. 174 00:08:55,800 --> 00:08:58,200 Speaker 3: Tariffs, certainly, it seems to be the topic we've had 175 00:08:58,240 --> 00:09:00,960 Speaker 3: both sides of the aisle talking about tariffs and tough 176 00:09:01,080 --> 00:09:03,960 Speaker 3: tariff talk. Mister Trump used tariffs. 177 00:09:03,640 --> 00:09:05,040 Speaker 6: Quite liberally, liberally. 178 00:09:05,080 --> 00:09:06,640 Speaker 3: How do you think about tariffs these days? 179 00:09:06,720 --> 00:09:09,320 Speaker 5: It's interesting, Paul. You know, I have not spent much 180 00:09:09,360 --> 00:09:13,280 Speaker 5: time thinking about President William McKinley, the twenty fifth president. 181 00:09:13,440 --> 00:09:16,280 Speaker 5: He was from my former state of Ohio, and Trump 182 00:09:16,360 --> 00:09:21,000 Speaker 5: brought him up repeatedly because here's this nineteenth century president who, 183 00:09:21,320 --> 00:09:24,480 Speaker 5: before the age of a federal income tax, was raising 184 00:09:24,559 --> 00:09:27,719 Speaker 5: tariffs and bringing in money. And he said that McKinley 185 00:09:27,880 --> 00:09:31,240 Speaker 5: is overlooked. Who knows what book club he's part of, 186 00:09:31,280 --> 00:09:34,400 Speaker 5: but clearly they've been reading histories and he wants to 187 00:09:34,920 --> 00:09:37,720 Speaker 5: raise tariffs. He thinks tariffs are underrated. He's talking about 188 00:09:37,720 --> 00:09:41,000 Speaker 5: a ten percent across the board tariff. He's talking about 189 00:09:41,080 --> 00:09:44,760 Speaker 5: raising the tariff on Chinese goods to sixty percent or 190 00:09:44,800 --> 00:09:47,760 Speaker 5: even one hundred percent. And you know, he says they're 191 00:09:47,760 --> 00:09:51,240 Speaker 5: a great negotiating ployee. He tried that in the first term. 192 00:09:51,559 --> 00:09:54,280 Speaker 5: And obviously then you know a lot of US companies, 193 00:09:54,360 --> 00:09:57,560 Speaker 5: particularly tech companies, complained, and they did. They were quite 194 00:09:57,559 --> 00:10:00,400 Speaker 5: generous in their carve outs. But this is a a 195 00:10:00,440 --> 00:10:04,400 Speaker 5: big part of Trumpanomics, and most economists think that companies 196 00:10:04,440 --> 00:10:06,720 Speaker 5: don't pay those tariffs, they turn around and pass them 197 00:10:06,960 --> 00:10:09,800 Speaker 5: to customers in the form of higher prices. So there 198 00:10:09,920 --> 00:10:11,480 Speaker 5: we pressed them on it, and I think there are 199 00:10:11,480 --> 00:10:13,880 Speaker 5: some unresolved contradictions and tensions there. 200 00:10:14,120 --> 00:10:16,880 Speaker 4: What's also interesting, I was reading a JP Morgan note 201 00:10:16,880 --> 00:10:20,720 Speaker 4: about commodities and what the Trump administration would do to commodities. 202 00:10:21,120 --> 00:10:24,200 Speaker 4: Obviously that's my beat, but what they made the point 203 00:10:24,280 --> 00:10:27,040 Speaker 4: is it really depends on the sequencing. So if you 204 00:10:27,080 --> 00:10:30,400 Speaker 4: go to corporate taxes first, tariffs come later. Like the 205 00:10:30,400 --> 00:10:33,600 Speaker 4: sequencing of how all of this works will really depend 206 00:10:33,640 --> 00:10:36,160 Speaker 4: then on what the market reaction is. Did you get 207 00:10:36,160 --> 00:10:38,880 Speaker 4: any sense of that in terms. 208 00:10:38,679 --> 00:10:41,440 Speaker 5: Of how we would do it, I didn't. But I mean, 209 00:10:41,640 --> 00:10:45,120 Speaker 5: one thing that impressed us, or is impressed upon us, 210 00:10:45,840 --> 00:10:49,559 Speaker 5: is that in twenty sixteen he was unprepared to win, 211 00:10:50,000 --> 00:10:53,360 Speaker 5: and he surrounded himself with people, maybe a bit impulsively, 212 00:10:53,480 --> 00:10:55,480 Speaker 5: and he says that he would do it differently this time, 213 00:10:55,520 --> 00:10:59,000 Speaker 5: that he knows who's loyal and who's not, and he's experienced, 214 00:10:59,000 --> 00:11:02,079 Speaker 5: and he knows everybody time. And it just seemed to us, 215 00:11:02,240 --> 00:11:04,360 Speaker 5: you know, that he is prepared to move quickly in 216 00:11:04,360 --> 00:11:07,440 Speaker 5: what order I don't know, but particularly if he controls 217 00:11:07,480 --> 00:11:11,800 Speaker 5: both houses in Congress, that they have an agenda that 218 00:11:11,800 --> 00:11:15,079 Speaker 5: they're pretty much willing to implement. A blitz Creed. 219 00:11:14,840 --> 00:11:19,280 Speaker 3: Speed Jamie Diamond as Secretary of Treasury thirty seconds spread. 220 00:11:19,840 --> 00:11:24,760 Speaker 5: Yeah, yeah, what did he call him an overrated globalist once? Look, 221 00:11:24,800 --> 00:11:27,840 Speaker 5: he's courting the business community. I you know, who knows 222 00:11:27,880 --> 00:11:32,400 Speaker 5: if Diamond would do that, particularly considering how former members 223 00:11:32,440 --> 00:11:36,000 Speaker 5: of Trump's administration often ended up being treated somewhat badly 224 00:11:36,080 --> 00:11:38,960 Speaker 5: or breaking with him. But yeah, I mean, I think 225 00:11:39,320 --> 00:11:42,280 Speaker 5: Trump wants to go and it's very important to him 226 00:11:42,280 --> 00:11:44,760 Speaker 5: that business leaders like him. I mean that comes through 227 00:11:44,760 --> 00:11:46,840 Speaker 5: in the interview and so he's doing this but to 228 00:11:46,840 --> 00:11:47,640 Speaker 5: court them as well. 229 00:11:47,840 --> 00:11:50,679 Speaker 3: Thanks to Bloomerg Business Week editor Brad Stone. Coming up, 230 00:11:50,720 --> 00:11:53,320 Speaker 3: we'll take a deep dive into how various industries would 231 00:11:53,320 --> 00:11:56,320 Speaker 3: be impacted by a Donald Trump or Joe Biden presidency. 232 00:11:56,440 --> 00:11:59,960 Speaker 3: In November, you're listening to Bloomberg Intelligence on Bloomberg Radio, 233 00:12:00,000 --> 00:12:02,560 Speaker 3: so providing in depth research and data on two thousand 234 00:12:02,559 --> 00:12:05,080 Speaker 3: companies in one hundred and thirty industries. You can access 235 00:12:05,080 --> 00:12:08,320 Speaker 3: Bloomberg Intelligence via Bigo on the terminal. I'm Paul Sweeney. 236 00:12:08,559 --> 00:12:09,559 Speaker 3: This is Bloomberg. 237 00:12:14,440 --> 00:12:18,319 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 238 00:12:18,400 --> 00:12:21,120 Speaker 2: weekdays at ten am Eastern on Apple card Playing and 239 00:12:21,240 --> 00:12:24,080 Speaker 2: broud Otto with the Bloomberg Business App. Listen on demand 240 00:12:24,160 --> 00:12:28,280 Speaker 2: wherever you get your podcasts, or watch us live on YouTube. 241 00:12:29,040 --> 00:12:31,840 Speaker 3: We move next to politics. The direction of government policy 242 00:12:31,840 --> 00:12:33,880 Speaker 3: and the world's largest economy is at stake when the 243 00:12:33,960 --> 00:12:37,520 Speaker 3: US Alexa president. In November, Bloomberg Intelligence took a deep 244 00:12:37,559 --> 00:12:40,679 Speaker 3: dive into how various industries would be impacted with either 245 00:12:40,840 --> 00:12:43,520 Speaker 3: Joe Biden or Donald Trump in office. For more on 246 00:12:43,600 --> 00:12:46,640 Speaker 3: this research, we were joined by Nathan Dean, Bloomberg Intelligence 247 00:12:46,640 --> 00:12:50,000 Speaker 3: Senior Policy analyst. We first asked Nathan to break down 248 00:12:50,080 --> 00:12:50,800 Speaker 3: his findings. 249 00:12:51,000 --> 00:12:52,800 Speaker 7: What we did is we started with the report by 250 00:12:52,800 --> 00:12:54,960 Speaker 7: looking at what are the key sectors to watch, and 251 00:12:54,960 --> 00:12:57,319 Speaker 7: we really had five of them. The first one was 252 00:12:57,360 --> 00:13:00,280 Speaker 7: investment banks. If President Biden wins, you know, you could 253 00:13:00,280 --> 00:13:03,120 Speaker 7: see somewhere between seven to ten eight percent increase in 254 00:13:03,160 --> 00:13:06,360 Speaker 7: capital requirements. If President Trump wins, that could be off 255 00:13:06,400 --> 00:13:08,800 Speaker 7: the table. We looked at electric vehicles. You know, the 256 00:13:08,840 --> 00:13:11,600 Speaker 7: tax credits for the electric vehicles could be at risk 257 00:13:11,760 --> 00:13:14,720 Speaker 7: during a tax reform debate next year. Like you mentioned, 258 00:13:14,880 --> 00:13:18,120 Speaker 7: in terms of tax global manufacturers, President Trump has called 259 00:13:18,160 --> 00:13:21,439 Speaker 7: for a fifteen percent corporate tax rate. Representative Steve Scalise 260 00:13:21,520 --> 00:13:24,440 Speaker 7: said he's going to make the tax cuts for individuals permanent, 261 00:13:24,480 --> 00:13:27,240 Speaker 7: so tax reform and the impact of manufacturing. And the 262 00:13:27,240 --> 00:13:30,600 Speaker 7: other two were Healthcarecter that twenty five billion dollar subsidies 263 00:13:30,679 --> 00:13:33,520 Speaker 7: that's really for seventeen and United Health. And then finally 264 00:13:33,520 --> 00:13:35,760 Speaker 7: it was big tech. Because whether you get President Biden 265 00:13:35,880 --> 00:13:38,199 Speaker 7: or President Trump, more likely than not you're going to 266 00:13:38,240 --> 00:13:42,200 Speaker 7: get a very skeptical Washington towards big tech, certainly both 267 00:13:42,240 --> 00:13:44,200 Speaker 7: in Congress and also on the enforcement side. 268 00:13:44,360 --> 00:13:46,080 Speaker 4: Nate, then the question then becomes what can he and 269 00:13:46,120 --> 00:13:48,400 Speaker 4: this has been the question throughout his four years. Also 270 00:13:48,800 --> 00:13:50,560 Speaker 4: what can he do on his own? And what would 271 00:13:50,559 --> 00:13:51,920 Speaker 4: he need a Republican Congress for? 272 00:13:52,520 --> 00:13:54,720 Speaker 7: Yeah, So you know, I think one of the biggest 273 00:13:54,760 --> 00:13:57,360 Speaker 7: questions we get from clients is what does the executive 274 00:13:57,520 --> 00:14:01,520 Speaker 7: order landscape look like if President Trump wins? And I'd 275 00:14:01,520 --> 00:14:03,920 Speaker 7: say about ninety percent of the time, an executive order 276 00:14:04,000 --> 00:14:05,760 Speaker 7: is a fancy way of the president picking up the 277 00:14:05,800 --> 00:14:08,440 Speaker 7: phone and saying to his staff, I expect you to 278 00:14:08,480 --> 00:14:11,040 Speaker 7: do X, Y and Z. But there's a difference there. 279 00:14:11,080 --> 00:14:14,840 Speaker 7: The difference is for trade, tariffs and foreign relations. The 280 00:14:14,880 --> 00:14:17,120 Speaker 7: power of the presidency is a lot more powerful when 281 00:14:17,120 --> 00:14:19,960 Speaker 7: it comes to that. So when President Trump uses words 282 00:14:19,960 --> 00:14:23,160 Speaker 7: like nasty calling the European Union, you know, that's something 283 00:14:23,160 --> 00:14:24,720 Speaker 7: that investors have to pay attention to. 284 00:14:25,080 --> 00:14:25,200 Speaker 8: Now. 285 00:14:25,200 --> 00:14:27,240 Speaker 7: When it comes to tariffs, the President can certainly go 286 00:14:27,280 --> 00:14:29,800 Speaker 7: out there and say I want to do this, but 287 00:14:29,840 --> 00:14:32,000 Speaker 7: then it's going to be up for Congress and the 288 00:14:32,040 --> 00:14:35,520 Speaker 7: business community and so forth. But todentially try and influence 289 00:14:35,560 --> 00:14:37,920 Speaker 7: the White House to either get to the appropriate amount 290 00:14:38,040 --> 00:14:40,360 Speaker 7: or try in some cases stop it from even happening. 291 00:14:40,760 --> 00:14:44,760 Speaker 3: So are there certain industries that you know, I think 292 00:14:44,760 --> 00:14:48,200 Speaker 3: about the healthcare industry. I'm trying to think about regulated industries, 293 00:14:48,440 --> 00:14:51,200 Speaker 3: and healthcare is certainly one of them. And you mentioned 294 00:14:51,200 --> 00:14:54,400 Speaker 3: the subsidies. But the Republicans and the Democrats think differently 295 00:14:54,400 --> 00:14:55,840 Speaker 3: about the economics of health care. 296 00:14:56,720 --> 00:14:59,760 Speaker 7: Yeah, it does. And this is rarely where the process 297 00:14:59,800 --> 00:15:02,400 Speaker 7: comes in the play, because that's subsidies. That twenty five 298 00:15:02,440 --> 00:15:06,320 Speaker 7: billion dollars subsidies is Obamacare subsidies, and that requires an 299 00:15:06,320 --> 00:15:08,720 Speaker 7: Act of Congress. And I think you don't need to 300 00:15:08,720 --> 00:15:11,320 Speaker 7: be a Washington expert to know that gridlock is going 301 00:15:11,320 --> 00:15:14,240 Speaker 7: to continue no matter who wins the presidency. So look 302 00:15:14,320 --> 00:15:19,200 Speaker 7: for subdued actions from Congress when it comes to healthcare. Now, 303 00:15:19,320 --> 00:15:22,760 Speaker 7: the difference is on the regulatory side. On the regulatory side, 304 00:15:22,800 --> 00:15:24,520 Speaker 7: and this is where you look at the FDA and 305 00:15:24,560 --> 00:15:26,760 Speaker 7: a lot of the actions they've been doing. You can 306 00:15:26,800 --> 00:15:31,120 Speaker 7: bypass democratic opposition and just implement your own policies, but 307 00:15:31,200 --> 00:15:34,240 Speaker 7: it takes time, and so I would say just general 308 00:15:34,360 --> 00:15:37,040 Speaker 7: rule of thumb for a lot of the healthcare issues 309 00:15:37,080 --> 00:15:40,480 Speaker 7: that are going out at the agencies after President Trump 310 00:15:40,520 --> 00:15:44,239 Speaker 7: if he wins, where the input is new regulatory leadership, 311 00:15:44,680 --> 00:15:47,200 Speaker 7: at that point, you probably have another eighteen months and 312 00:15:47,280 --> 00:15:50,760 Speaker 7: twenty four month window for any regulatory change, So for 313 00:15:50,800 --> 00:15:53,880 Speaker 7: the healthcare industry, there's a lot of time to prepare 314 00:15:53,920 --> 00:15:56,440 Speaker 7: for any changes. You'll know exactly what's going to happen 315 00:15:56,440 --> 00:15:57,200 Speaker 7: well before it does. 316 00:15:57,560 --> 00:16:01,960 Speaker 4: Going back to the ev point, it feels like solar evs, 317 00:16:02,080 --> 00:16:04,760 Speaker 4: stuff like hydrogen from the IRA, like those are the 318 00:16:04,760 --> 00:16:08,040 Speaker 4: stuff maybe potentially on the chopping block potentially where the 319 00:16:08,080 --> 00:16:10,800 Speaker 4: President Trump win. But then the Musk thing is weird 320 00:16:10,840 --> 00:16:14,000 Speaker 4: because Elon Musk has definitely become a big supporter of 321 00:16:14,040 --> 00:16:17,720 Speaker 4: President Trump donating to super packs, and I'm wondering if 322 00:16:17,840 --> 00:16:21,160 Speaker 4: that relationship will change the calculus to how President Trump 323 00:16:21,160 --> 00:16:22,240 Speaker 4: sees electric vehicles. 324 00:16:23,320 --> 00:16:24,920 Speaker 7: Absolutely, you hit it right on the head and we 325 00:16:24,960 --> 00:16:27,160 Speaker 7: even say this in the report. There's a difference between 326 00:16:27,240 --> 00:16:29,600 Speaker 7: headline risk and reality. So if you look at the 327 00:16:29,600 --> 00:16:32,200 Speaker 7: electric vehicles, you can look at statements that President Trump 328 00:16:32,240 --> 00:16:34,840 Speaker 7: and other Republicans have said saying they do not like 329 00:16:34,920 --> 00:16:37,720 Speaker 7: these electric vehicle tax credits out there and so forth. 330 00:16:37,840 --> 00:16:39,720 Speaker 7: But then you balance it with the Elon Musk and 331 00:16:39,760 --> 00:16:42,840 Speaker 7: even taking it to grander scale on the Inflation Reduction Act. 332 00:16:43,080 --> 00:16:45,240 Speaker 7: A lot of the benefits of the IRA are going 333 00:16:45,240 --> 00:16:48,160 Speaker 7: to gop led states. So what you have to do 334 00:16:48,240 --> 00:16:51,320 Speaker 7: here is a take the statement. Okay, if President Trump 335 00:16:51,400 --> 00:16:54,200 Speaker 7: says I want to do away with the electric vehicle 336 00:16:54,240 --> 00:16:56,720 Speaker 7: tax credit, how am I going to do that? Most likely, 337 00:16:56,760 --> 00:16:58,880 Speaker 7: I'll do that as part of tax reform and via 338 00:16:58,960 --> 00:17:02,400 Speaker 7: the reconciliation, which means I probably won't have any Democrats 339 00:17:02,400 --> 00:17:04,480 Speaker 7: going on board with me, so I need all Republicans 340 00:17:04,520 --> 00:17:08,160 Speaker 7: on board at that point. If Elon Musk starts whispering saying, hey, 341 00:17:08,400 --> 00:17:10,880 Speaker 7: we like these tax credits for the EB world, then 342 00:17:11,080 --> 00:17:13,360 Speaker 7: that change may not even be a high priority anymore. 343 00:17:13,560 --> 00:17:15,280 Speaker 7: So I would just say that for a lot of 344 00:17:15,280 --> 00:17:17,879 Speaker 7: the statements, you have to remember short term risk versus 345 00:17:17,920 --> 00:17:21,440 Speaker 7: long term risk. And as we see with every single election, 346 00:17:21,800 --> 00:17:23,919 Speaker 7: politicians of both parties love to go out there and 347 00:17:23,960 --> 00:17:25,639 Speaker 7: say I'm going to do X, Y and Z, but 348 00:17:25,680 --> 00:17:28,399 Speaker 7: then when they get into power, it's XYZ minus a 349 00:17:28,440 --> 00:17:29,960 Speaker 7: whole bunch of other stuff because I'm going to be 350 00:17:30,000 --> 00:17:31,120 Speaker 7: a little bit more moderate now. 351 00:17:31,560 --> 00:17:33,920 Speaker 3: And Nathan, how about for our good friends on Wall 352 00:17:33,960 --> 00:17:36,800 Speaker 3: Street M and A bankers and lawyers. Under this administration, 353 00:17:36,840 --> 00:17:39,000 Speaker 3: the regulator has been pretty tough, and it's been pretty 354 00:17:39,040 --> 00:17:41,720 Speaker 3: tough to get big M and A deals approved, presumably 355 00:17:42,800 --> 00:17:45,399 Speaker 3: that would be more Wall Street friendly M and A 356 00:17:45,600 --> 00:17:48,560 Speaker 3: friendly with a Republican administration, it. 357 00:17:48,520 --> 00:17:51,520 Speaker 7: Really depends on the leadership that President Trump, again, if 358 00:17:51,520 --> 00:17:53,080 Speaker 7: he were to win, would put in place at the 359 00:17:53,160 --> 00:17:55,840 Speaker 7: FTC and the DOJ. Because you have one side, you 360 00:17:55,840 --> 00:17:59,359 Speaker 7: have the Republican business friendly view, the stereotypical Republican business 361 00:17:59,359 --> 00:18:01,720 Speaker 7: friendly view. If you get somebody like Jamie Diamond, and 362 00:18:01,760 --> 00:18:04,080 Speaker 7: I'm just picking on the banking execs. If you get 363 00:18:04,119 --> 00:18:06,560 Speaker 7: somebody from Wall Street, like a Gary Cohne individual that 364 00:18:06,720 --> 00:18:09,960 Speaker 7: was in his last administration, then you could just reasonably 365 00:18:10,000 --> 00:18:11,880 Speaker 7: say that M and A activity will get a little 366 00:18:11,880 --> 00:18:14,120 Speaker 7: bit easier. But if you get somebody that comes from 367 00:18:14,119 --> 00:18:17,560 Speaker 7: the economic populist side of the party. For example, Senator Vance, 368 00:18:17,600 --> 00:18:21,080 Speaker 7: the vice presidential candidate, spoke in favor of the FDAC 369 00:18:21,240 --> 00:18:23,399 Speaker 7: chair will Lim and Kahn and said that she was 370 00:18:23,440 --> 00:18:26,960 Speaker 7: one of Biden's best picks. And so if President Trump 371 00:18:27,040 --> 00:18:30,240 Speaker 7: comes out and picks an economic populist for the heads 372 00:18:30,280 --> 00:18:32,960 Speaker 7: of the FTC and the DOJ, M and A made 373 00:18:33,119 --> 00:18:35,359 Speaker 7: very difficult for the next few years. It really just 374 00:18:35,359 --> 00:18:37,720 Speaker 7: depends who's going to get that nod, and that would 375 00:18:37,760 --> 00:18:40,399 Speaker 7: come right after inauguration to President Trump wins our. 376 00:18:40,280 --> 00:18:43,760 Speaker 3: Thanks to Nathan Dean Bloomberg Intelligence senior policy analysts. We 377 00:18:43,880 --> 00:18:46,840 Speaker 3: move next to the EV space and Tesla this way, 378 00:18:46,840 --> 00:18:48,600 Speaker 3: if you heard, the ev maker is looking to hire 379 00:18:48,640 --> 00:18:51,640 Speaker 3: nearly eight hundred new employees. This comes nearly three months 380 00:18:51,680 --> 00:18:54,600 Speaker 3: after CEO Elon Musk ordered the largest round of layoffs 381 00:18:54,640 --> 00:18:56,879 Speaker 3: in the company's history. From her on this and the 382 00:18:56,920 --> 00:18:59,280 Speaker 3: state of the EV industry, we were joined by Craig 383 00:18:59,320 --> 00:19:02,720 Speaker 3: Trudell bloom For a Global Autos editor first ask for 384 00:19:02,840 --> 00:19:04,600 Speaker 3: more context on this week's news. 385 00:19:04,800 --> 00:19:08,560 Speaker 8: This is very Elon Muskian of Tesla in that it 386 00:19:08,720 --> 00:19:11,160 Speaker 8: sort of you know, depends on the day of what's 387 00:19:11,200 --> 00:19:14,720 Speaker 8: going on at this company. So, yes, a few months 388 00:19:14,720 --> 00:19:19,119 Speaker 8: back on the heels of Tesla selling about twenty percent 389 00:19:19,240 --> 00:19:22,760 Speaker 8: fewer cars than it did in the fourth quarter, Elon 390 00:19:22,840 --> 00:19:27,080 Speaker 8: Musk wasn't particularly happy with that quarterly showing he wanted 391 00:19:27,119 --> 00:19:31,080 Speaker 8: the company to cut headcount by a commensurate amount, so 392 00:19:31,240 --> 00:19:35,199 Speaker 8: roughly twenty percent, So you know, for context, you know, 393 00:19:35,240 --> 00:19:38,000 Speaker 8: this is a company that you know, had quite a 394 00:19:38,040 --> 00:19:41,520 Speaker 8: few employees at that time. They started the year with 395 00:19:41,560 --> 00:19:43,400 Speaker 8: a round one hundred and forty thousand, so that would 396 00:19:43,480 --> 00:19:47,480 Speaker 8: mean twenty eight thousand people being let go. It's unclear 397 00:19:47,560 --> 00:19:50,560 Speaker 8: whether they got to that, but it is absolutely clear that, 398 00:19:50,680 --> 00:19:53,679 Speaker 8: you know, certain parts of the company were decimated, I 399 00:19:53,680 --> 00:19:56,800 Speaker 8: think most notably the super Charging team that really turned 400 00:19:56,840 --> 00:19:58,679 Speaker 8: a lot of heads because it was a you know, 401 00:19:58,800 --> 00:20:01,240 Speaker 8: aspect of this company that has been looked at as 402 00:20:01,480 --> 00:20:04,359 Speaker 8: you know, such a sort of feather in their cap 403 00:20:04,440 --> 00:20:08,080 Speaker 8: that they really invested where others didn't and built a 404 00:20:08,200 --> 00:20:11,520 Speaker 8: charging that worked, whereas others have have not worked very well, 405 00:20:11,760 --> 00:20:14,840 Speaker 8: particularly in the US, and so it is kind of 406 00:20:14,840 --> 00:20:18,800 Speaker 8: shocking to see, you know, such a significant pulling of 407 00:20:19,280 --> 00:20:23,280 Speaker 8: people followed by a you know, hiring spree of sorts. 408 00:20:23,800 --> 00:20:26,320 Speaker 3: So do we know kind of what type of roles 409 00:20:26,400 --> 00:20:29,240 Speaker 3: they're hiring for. Are they hiring people to bend metal 410 00:20:29,440 --> 00:20:32,240 Speaker 3: or are they looking to like some software guys for 411 00:20:32,400 --> 00:20:33,320 Speaker 3: AI and all that, the. 412 00:20:33,359 --> 00:20:37,480 Speaker 4: Robotax An or the Superpower people superhero Yeah. 413 00:20:37,560 --> 00:20:40,680 Speaker 8: I think we did report even weeks back that some 414 00:20:40,720 --> 00:20:44,000 Speaker 8: of the Supercharger people who are you know, a part 415 00:20:44,040 --> 00:20:46,439 Speaker 8: of the team that was really you know cut to 416 00:20:46,480 --> 00:20:50,560 Speaker 8: a very significant degree, were brought back relatively quickly. Notably, 417 00:20:50,600 --> 00:20:53,639 Speaker 8: the woman who was running that group, uh you know, 418 00:20:54,040 --> 00:20:57,400 Speaker 8: has not been brought back, and there were some reports 419 00:20:57,440 --> 00:20:59,719 Speaker 8: that maybe she you know, kind of tried to protect 420 00:20:59,720 --> 00:21:03,359 Speaker 8: her team team and was dismissed as a result of that. 421 00:21:03,600 --> 00:21:07,040 Speaker 8: So in terms of what parts of the company are hiring, 422 00:21:07,040 --> 00:21:09,840 Speaker 8: it's it's it's pretty broad, but I would say, you know, 423 00:21:10,160 --> 00:21:13,240 Speaker 8: the data that our very own care Carlson has crunched. 424 00:21:13,760 --> 00:21:17,000 Speaker 8: Service is a big aspect, which is maybe no surprise, 425 00:21:17,119 --> 00:21:20,520 Speaker 8: and that you know, the summer season is a busy 426 00:21:20,560 --> 00:21:24,560 Speaker 8: one for Tesla. People are out, you know, driving for vacations. 427 00:21:24,560 --> 00:21:27,119 Speaker 8: It's warm outs, they're running their air conditioners, you know, 428 00:21:27,160 --> 00:21:29,040 Speaker 8: to the extent that you do need the service an 429 00:21:29,040 --> 00:21:32,080 Speaker 8: electric vehicle, that's one of the things that is common. So, 430 00:21:32,280 --> 00:21:34,560 Speaker 8: you know, one of the interesting aspects of this story 431 00:21:34,640 --> 00:21:38,000 Speaker 8: is that we did speak with people who were a 432 00:21:38,040 --> 00:21:41,480 Speaker 8: part of this job cutting, who you know, said that 433 00:21:41,480 --> 00:21:44,720 Speaker 8: they were surprised that some of the service and salespeople, 434 00:21:45,040 --> 00:21:47,920 Speaker 8: you know, that that the company you know, clearly needs 435 00:21:47,960 --> 00:21:52,440 Speaker 8: at a time of you know, busy service work and 436 00:21:52,760 --> 00:21:56,399 Speaker 8: you know, a company that's struggling to to sell more cars. Uh, 437 00:21:56,600 --> 00:21:59,440 Speaker 8: you know, we're seeing you know, some people being brought 438 00:21:59,480 --> 00:22:02,440 Speaker 8: back there, but it is very widespread. I think notably 439 00:22:02,480 --> 00:22:06,439 Speaker 8: as well. You know, AI and robotics is definitely you know, 440 00:22:06,480 --> 00:22:09,400 Speaker 8: an area where everybody's you know, looking at very closely 441 00:22:09,440 --> 00:22:12,720 Speaker 8: because of you know what this sort of new priority 442 00:22:13,119 --> 00:22:15,560 Speaker 8: is or emphasis is on the. 443 00:22:15,520 --> 00:22:19,200 Speaker 3: Part of Musk, you know, Craig. GM's Mary Barris says 444 00:22:19,240 --> 00:22:22,560 Speaker 3: the automaker won't sell a million evs next year, So 445 00:22:22,760 --> 00:22:25,840 Speaker 3: just another story, another data point about kind of maybe 446 00:22:25,920 --> 00:22:28,359 Speaker 3: where the ultimate demand or lack of demand may be 447 00:22:28,520 --> 00:22:31,720 Speaker 3: for EV's. What's the latest feeling within the industry about 448 00:22:31,760 --> 00:22:33,680 Speaker 3: how this thing's going to evolve at what pace. 449 00:22:34,680 --> 00:22:37,399 Speaker 8: We've seen a really dramatic pullback on the part of 450 00:22:37,520 --> 00:22:40,680 Speaker 8: GM and Ford in particular. I feel like, you know, Stillantis, 451 00:22:40,720 --> 00:22:45,280 Speaker 8: you know, formerly Fiat Chrysler. They were sort of slow 452 00:22:45,760 --> 00:22:48,680 Speaker 8: in the first place, you know, making this transition and 453 00:22:49,119 --> 00:22:52,720 Speaker 8: have not necessarily had much to pull back from. But 454 00:22:52,800 --> 00:22:54,720 Speaker 8: I would not be surprised if they sort of you know, 455 00:22:54,840 --> 00:22:58,159 Speaker 8: joined the quote unquote party in terms of maybe dialing 456 00:22:58,240 --> 00:23:01,359 Speaker 8: back sort of the ramp at which they tried to 457 00:23:01,640 --> 00:23:04,959 Speaker 8: produce more electric vehicles and sell them. But it is 458 00:23:05,119 --> 00:23:08,800 Speaker 8: very interesting to see you know, GM and Ford you know, 459 00:23:09,280 --> 00:23:11,680 Speaker 8: really be sort of welcomed with open arms by the 460 00:23:11,720 --> 00:23:15,480 Speaker 8: White House. You know, Mary Bara being lauded by Bidens 461 00:23:15,680 --> 00:23:19,000 Speaker 8: as leading the EV transition. That really ticked off Elon 462 00:23:19,119 --> 00:23:21,520 Speaker 8: Musk and helps explain why, you know, in the last 463 00:23:21,560 --> 00:23:24,480 Speaker 8: few days we've learned that he's been planning to spend 464 00:23:24,560 --> 00:23:27,119 Speaker 8: quite a bit of money on you know, contributing to 465 00:23:27,200 --> 00:23:29,200 Speaker 8: packs to get to Donald Trump reelected. 466 00:23:29,600 --> 00:23:32,000 Speaker 4: That was my thing. Is that the Musk Trump love 467 00:23:32,040 --> 00:23:36,159 Speaker 4: affair I find to be quite interesting because if we 468 00:23:36,240 --> 00:23:38,720 Speaker 4: can just game out that the love affair is also 469 00:23:39,040 --> 00:23:44,800 Speaker 4: so President Trump would be more nice to EV's. Is 470 00:23:44,840 --> 00:23:48,359 Speaker 4: the huge change that we're expecting with alternative energy and 471 00:23:48,400 --> 00:23:51,119 Speaker 4: the IRA and a Trump administration maybe not going to happen. 472 00:23:51,680 --> 00:23:55,040 Speaker 8: Yeah, it is surprising. I mean, maybe if you're trading Tesla, 473 00:23:55,160 --> 00:23:58,479 Speaker 8: you sort of reckon that the CEO very publicly endearing 474 00:23:58,560 --> 00:24:01,400 Speaker 8: himself to the candidate will sort of, you know, come 475 00:24:01,440 --> 00:24:04,320 Speaker 8: back to benefit him down the line, and maybe some 476 00:24:04,359 --> 00:24:07,080 Speaker 8: of these threats to do away with electric vehicle tax 477 00:24:07,119 --> 00:24:10,679 Speaker 8: credits and so forth will fall by the wayside. Elon 478 00:24:11,080 --> 00:24:14,280 Speaker 8: even went so far, you know, to sort of claim that, 479 00:24:14,520 --> 00:24:17,280 Speaker 8: you know, doing away with subsidies would only help Tesla. 480 00:24:17,359 --> 00:24:21,040 Speaker 8: I don't know how exactly he squares that circle. But 481 00:24:21,200 --> 00:24:24,840 Speaker 8: perhaps it's a matter of Tesla is you know, the 482 00:24:24,880 --> 00:24:28,080 Speaker 8: strongest of the companies that's trying to make this work 483 00:24:28,440 --> 00:24:31,440 Speaker 8: and is for this along, and so taking subsidies away 484 00:24:31,480 --> 00:24:34,520 Speaker 8: would hurt you know, competitors even more so than it 485 00:24:34,520 --> 00:24:37,719 Speaker 8: would Tesla. But it certainly wouldn't be good for Tesla 486 00:24:37,800 --> 00:24:41,399 Speaker 8: to lose access to seventy five hundred dollars for a 487 00:24:41,440 --> 00:24:45,040 Speaker 8: lot of its customers in the US or would be customers. 488 00:24:45,080 --> 00:24:48,200 Speaker 8: And so I do think it's very interesting, and we've 489 00:24:48,359 --> 00:24:52,119 Speaker 8: we've heard very similar sort of intiev rhetoric on the 490 00:24:52,200 --> 00:24:55,119 Speaker 8: on the part of jd Vance, his running mate, and 491 00:24:55,200 --> 00:24:58,520 Speaker 8: so I think it's it's not only Trump who's you know, 492 00:24:58,560 --> 00:25:01,640 Speaker 8: sort of campaigned against e but his running made. 493 00:25:01,520 --> 00:25:04,760 Speaker 3: Our Thanks to Craig Trudell, Bloomberg Global Autos Editor. Coming 494 00:25:04,840 --> 00:25:07,000 Speaker 3: up on the program, we'll break down a slew of 495 00:25:07,080 --> 00:25:10,400 Speaker 3: bank earnings in the US. You're listening to Bloomberg Intelligence 496 00:25:10,400 --> 00:25:13,240 Speaker 3: on Bloomberg Radio, providing in depth research and data on 497 00:25:13,280 --> 00:25:16,000 Speaker 3: two thousand companies and one hundred and thirty industries. You 498 00:25:16,000 --> 00:25:19,080 Speaker 3: can access Bloomberg Intelligence via Bigo on the terminal. I'm 499 00:25:19,119 --> 00:25:22,439 Speaker 3: Paul Sweeney. This is Bloomberg. 500 00:25:26,200 --> 00:25:30,119 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 501 00:25:30,160 --> 00:25:33,720 Speaker 2: weekdays at ten am Eastern on applecar Play and Android 502 00:25:33,720 --> 00:25:36,520 Speaker 2: Auto with the Bloomberg Business App. You can also listen 503 00:25:36,600 --> 00:25:39,720 Speaker 2: live on Amazon Alexa from our flagship New York station. 504 00:25:40,080 --> 00:25:43,919 Speaker 2: Just say Alexa Play Bloomberg eleven thirty. 505 00:25:44,080 --> 00:25:46,639 Speaker 3: We move now to US bank earnings. This week, we 506 00:25:46,720 --> 00:25:49,399 Speaker 3: got quarterly results from Morgan Stanley, Bank of America, and 507 00:25:49,440 --> 00:25:52,800 Speaker 3: Goldman Sachs, and all three firms posted double digit increases 508 00:25:52,800 --> 00:25:55,320 Speaker 3: in investment banking revenue. From where we were joined by 509 00:25:55,359 --> 00:25:59,720 Speaker 3: Alison Williams, Bloomberg Intelligence senior analysts Global banks and asset Managers. 510 00:26:00,080 --> 00:26:02,720 Speaker 3: We first asked Allison what the street liked about Morgan 511 00:26:02,760 --> 00:26:04,000 Speaker 3: Stanley's quarterly results. 512 00:26:04,200 --> 00:26:07,720 Speaker 9: Really strong institutional numbers, I mean, it was a great 513 00:26:07,840 --> 00:26:12,159 Speaker 9: quarter for trading and investment banking, so equities trading really, 514 00:26:12,840 --> 00:26:15,400 Speaker 9: I think a source of strength. Morgan Stanley doing better 515 00:26:15,440 --> 00:26:18,640 Speaker 9: than expected across the board, So equities trading I think 516 00:26:18,720 --> 00:26:22,600 Speaker 9: was the standout. Fixed income you know, was sort of mixed, 517 00:26:22,680 --> 00:26:26,919 Speaker 9: but really compared to a year ago, I think that's strong. 518 00:26:27,000 --> 00:26:29,320 Speaker 9: Those revenues are turning out to be resilient and on 519 00:26:29,320 --> 00:26:33,040 Speaker 9: the investment banking side, investors are excited that there could 520 00:26:33,040 --> 00:26:35,240 Speaker 9: be momentum coming into the next quarter. You know, M 521 00:26:35,280 --> 00:26:39,600 Speaker 9: and A still just historically low, so improving from a 522 00:26:39,600 --> 00:26:42,800 Speaker 9: low base. Same thing with equities, but I think reasons 523 00:26:42,800 --> 00:26:46,760 Speaker 9: for optimism, especially with the stocks in general doing so well. 524 00:26:47,119 --> 00:26:49,280 Speaker 3: Now for Bank of America, when I think a Bank 525 00:26:49,320 --> 00:26:51,080 Speaker 3: of America, I think it a corporate bank, you know, 526 00:26:51,160 --> 00:26:55,080 Speaker 3: making big loans to big corporate customers around the world. 527 00:26:55,160 --> 00:26:56,840 Speaker 3: What did you see there, so you know. 528 00:26:57,040 --> 00:26:59,879 Speaker 9: I think the demand is for loans is still so 529 00:27:00,000 --> 00:27:02,359 Speaker 9: something that we're looking more for the second half. 530 00:27:02,400 --> 00:27:04,959 Speaker 6: If we do get the FED rate cuts, that is 531 00:27:05,000 --> 00:27:06,119 Speaker 6: definitely going to be a help. 532 00:27:06,200 --> 00:27:08,520 Speaker 9: And I think for Bank of America, what people are 533 00:27:08,560 --> 00:27:10,600 Speaker 9: excited about is that it could be the trough. So 534 00:27:10,640 --> 00:27:13,760 Speaker 9: Bank of America saying that it's going to be the trough, 535 00:27:13,800 --> 00:27:16,320 Speaker 9: This will be the weakest quarter, but keep in mind 536 00:27:16,320 --> 00:27:20,320 Speaker 9: that they are baking in the FED rate cut expectations 537 00:27:20,320 --> 00:27:22,720 Speaker 9: and some loan growth in the second half, so we'll 538 00:27:22,960 --> 00:27:26,640 Speaker 9: see if they can deliver that. But definitely telling investors 539 00:27:26,640 --> 00:27:29,080 Speaker 9: what they want to hear in terms of the fourth quarter, 540 00:27:29,480 --> 00:27:32,119 Speaker 9: a little bit higher entry rate, firming that up and 541 00:27:32,200 --> 00:27:34,520 Speaker 9: again that the you know, the most of the weakness 542 00:27:34,520 --> 00:27:35,440 Speaker 9: could be behind us. 543 00:27:35,600 --> 00:27:37,320 Speaker 4: So does that mean that if we don't get FED 544 00:27:37,359 --> 00:27:40,120 Speaker 4: cuts that Bank of America's going to have some problems here? 545 00:27:40,359 --> 00:27:44,200 Speaker 9: I think where the disappointment will come will be loan growth. 546 00:27:44,240 --> 00:27:45,399 Speaker 6: Spurred by FED cuts. 547 00:27:45,520 --> 00:27:48,119 Speaker 9: Right, So I think that some of the loan growth 548 00:27:48,119 --> 00:27:50,600 Speaker 9: that they're factoring in is based on that we heard 549 00:27:50,600 --> 00:27:53,480 Speaker 9: from Wells Fargo where they're you know, still a lot 550 00:27:53,520 --> 00:27:57,240 Speaker 9: more cautious on the loan growth side. And commercial and 551 00:27:57,320 --> 00:27:58,680 Speaker 9: industrial has been. 552 00:27:58,600 --> 00:28:01,720 Speaker 6: A weak spot. Credit card is it has been a 553 00:28:01,760 --> 00:28:02,399 Speaker 6: strong spot. 554 00:28:02,960 --> 00:28:03,119 Speaker 1: You know. 555 00:28:03,119 --> 00:28:05,440 Speaker 3: When I was in banking, one of our most lucrative 556 00:28:05,440 --> 00:28:08,200 Speaker 3: businesses that the Chasement had bank was this leverage lending, 557 00:28:08,280 --> 00:28:10,840 Speaker 3: you know, lending to companies that don't have assets or 558 00:28:11,000 --> 00:28:13,200 Speaker 3: inventory and any kind of just lending into cash flow. 559 00:28:13,240 --> 00:28:15,040 Speaker 3: It's a little bit more risky. It's tough to show 560 00:28:15,040 --> 00:28:17,840 Speaker 3: your credit officer where the collateral is for this loan. 561 00:28:18,160 --> 00:28:20,399 Speaker 3: But we made a lot of money doing it. How's 562 00:28:20,400 --> 00:28:23,000 Speaker 3: a private credit market been poaching on that business? 563 00:28:23,080 --> 00:28:25,240 Speaker 9: So actually you would have been making this would have 564 00:28:25,280 --> 00:28:27,560 Speaker 9: been a good quarter for you. I know, you'd be happy. 565 00:28:28,560 --> 00:28:31,199 Speaker 9: The first quarter was good. Second quarter was good, and 566 00:28:31,240 --> 00:28:33,440 Speaker 9: I think that if you look at some of the 567 00:28:33,720 --> 00:28:37,320 Speaker 9: most recent statistics that we've seen, is that banks. 568 00:28:37,000 --> 00:28:39,080 Speaker 6: Are still doing a lot of that refinancing. 569 00:28:39,160 --> 00:28:42,160 Speaker 9: Right, So a lot of the business that's been happening 570 00:28:42,160 --> 00:28:44,479 Speaker 9: in the debt markets, debt fees, a source of strength 571 00:28:44,480 --> 00:28:49,200 Speaker 9: across the bank's disquorter has been refinancing, and that leverage 572 00:28:49,400 --> 00:28:52,720 Speaker 9: lending business has been doing well at the bank. So 573 00:28:53,320 --> 00:28:56,920 Speaker 9: even though private credit is certainly raising a lot of 574 00:28:56,920 --> 00:29:00,320 Speaker 9: funds and a product and demand, banks are still getting 575 00:29:00,360 --> 00:29:03,280 Speaker 9: their share of refinancing in their leverage one volumes. 576 00:29:03,320 --> 00:29:04,320 Speaker 6: And that's you know. 577 00:29:04,360 --> 00:29:06,760 Speaker 9: Sort of you saw like the huge growth at City 578 00:29:06,800 --> 00:29:10,120 Speaker 9: Group and the numbers at Gold and Sachs where they 579 00:29:10,120 --> 00:29:12,440 Speaker 9: have relative strength in those businesses. 580 00:29:12,960 --> 00:29:15,360 Speaker 6: High yields another area that's doing really well. 581 00:29:15,760 --> 00:29:17,960 Speaker 4: Back to the consumer so we'll have Paul Donmus and 582 00:29:18,000 --> 00:29:20,880 Speaker 4: banking stuff, all the consumer stuff. What about chargeobs on 583 00:29:20,880 --> 00:29:23,880 Speaker 4: their credit card losses for Bank of America? Was that 584 00:29:24,160 --> 00:29:24,880 Speaker 4: higher lower? 585 00:29:24,920 --> 00:29:26,400 Speaker 6: Where did that come out in general? 586 00:29:26,400 --> 00:29:29,320 Speaker 9: I would say there, so their provisions overall came in 587 00:29:29,320 --> 00:29:32,200 Speaker 9: in line. We did see, you know, charge offs in 588 00:29:32,240 --> 00:29:34,600 Speaker 9: the car business, charge offs and commercial real estate, So 589 00:29:34,600 --> 00:29:38,240 Speaker 9: those are areas that we're watching, but you know, controlled 590 00:29:38,240 --> 00:29:41,560 Speaker 9: and in line with expectations. I think the area of 591 00:29:41,640 --> 00:29:44,040 Speaker 9: weakness that we saw in CARD this quarter was at 592 00:29:44,160 --> 00:29:46,880 Speaker 9: City Group. They have a private label business that tends 593 00:29:46,880 --> 00:29:49,680 Speaker 9: to skew on the lower income side of things. You're 594 00:29:49,680 --> 00:29:53,440 Speaker 9: seeing losses come in above their targeted range. There is 595 00:29:53,680 --> 00:29:57,360 Speaker 9: seasonal pattern to that, and so there are expectations that 596 00:29:57,360 --> 00:30:00,760 Speaker 9: that could come in, but I would say the second 597 00:30:00,840 --> 00:30:04,600 Speaker 9: quarter did not give us confidence in those expectations. So 598 00:30:04,640 --> 00:30:07,000 Speaker 9: I think that is continues to be an area for watching. 599 00:30:07,040 --> 00:30:10,160 Speaker 9: It's not necessarily a big area for the big banks 600 00:30:10,160 --> 00:30:12,000 Speaker 9: that we're talking about and the ones that I cover, 601 00:30:12,720 --> 00:30:14,680 Speaker 9: but I think it's important to watch, you know, for 602 00:30:14,720 --> 00:30:18,400 Speaker 9: the overall economy and to some of the other CARD 603 00:30:18,480 --> 00:30:19,920 Speaker 9: names such as Synchrony. 604 00:30:20,000 --> 00:30:22,800 Speaker 3: CEO at Morgan Stanle we have a new CEO, Ted Pick. 605 00:30:23,560 --> 00:30:25,840 Speaker 3: I guess with a little bit of hindsight here does 606 00:30:25,880 --> 00:30:28,440 Speaker 3: it seem like it's kind of working and everybody's kind 607 00:30:28,440 --> 00:30:29,480 Speaker 3: of found their place. 608 00:30:29,240 --> 00:30:33,720 Speaker 9: And so it seems like, you know, he's talking with conviction. 609 00:30:33,840 --> 00:30:36,920 Speaker 9: I think the boldest statement he made was with regard 610 00:30:36,960 --> 00:30:39,600 Speaker 9: to the margins and the wealth business. So the wealth business, 611 00:30:39,600 --> 00:30:42,480 Speaker 9: as you know, under the former CEO and a lot 612 00:30:42,480 --> 00:30:46,960 Speaker 9: of acquisitions. Wealth and asset management is the predominant revenue 613 00:30:46,960 --> 00:30:47,840 Speaker 9: and profit engine. 614 00:30:47,880 --> 00:30:51,320 Speaker 6: It's what investors are watching. The wealth margin was. 615 00:30:51,280 --> 00:30:54,520 Speaker 9: Something where Pick early in the year took off some 616 00:30:54,640 --> 00:30:59,040 Speaker 9: of the upside under the prior targets, and that thirty 617 00:30:59,080 --> 00:31:01,600 Speaker 9: percent wealth target I think is a question among investors 618 00:31:01,600 --> 00:31:03,520 Speaker 9: if they can get there, and Ted really trying to 619 00:31:04,040 --> 00:31:08,080 Speaker 9: instill confidence that he is a believer the wealth flows 620 00:31:08,200 --> 00:31:10,800 Speaker 9: at Morgan Stanley, I would say, you know, that is 621 00:31:11,120 --> 00:31:13,840 Speaker 9: the probably the number one thing I think that that 622 00:31:14,080 --> 00:31:16,560 Speaker 9: we watch for them, and that did come in week 623 00:31:16,760 --> 00:31:20,160 Speaker 9: this quarter. The fee based part of those flows were 624 00:31:20,200 --> 00:31:23,760 Speaker 9: relatively resilient, so some puts in takes there, but I 625 00:31:23,800 --> 00:31:26,160 Speaker 9: think the wealth flows do bear watching and that that 626 00:31:26,600 --> 00:31:30,480 Speaker 9: really has been the engine of optimism investors, like you know, 627 00:31:30,520 --> 00:31:33,400 Speaker 9: the tilt towards the recurring fee based business, and so 628 00:31:33,480 --> 00:31:37,080 Speaker 9: I think that they'll have to continue to deliver and 629 00:31:37,760 --> 00:31:42,320 Speaker 9: deliver on that thirty percent margin that Pick is confident. 630 00:31:42,480 --> 00:31:44,160 Speaker 4: And then I'll go to sort of what the macro 631 00:31:44,200 --> 00:31:46,200 Speaker 4: read is for Morgan Stanley, because also on the call, 632 00:31:46,280 --> 00:31:48,720 Speaker 4: Ted Pick said that you're going to see normal m 633 00:31:48,720 --> 00:31:50,800 Speaker 4: and a return unless there's a full blown recession, and 634 00:31:50,840 --> 00:31:52,800 Speaker 4: he thinks we're in the early stages of multi year 635 00:31:52,840 --> 00:31:54,200 Speaker 4: investment banking leed cycle. 636 00:31:54,320 --> 00:31:56,520 Speaker 9: Oh yeah, oh yeah, But we've been hearing that for 637 00:31:56,600 --> 00:32:00,280 Speaker 9: so many quarters now and you're starting to definitely, you know, 638 00:32:00,360 --> 00:32:03,120 Speaker 9: feel more of the doubt coming from analysts. Right, So 639 00:32:03,920 --> 00:32:08,840 Speaker 9: the twenty twenty one, amazing twenty twenty two disaster, the 640 00:32:08,920 --> 00:32:11,480 Speaker 9: lift that we got last year did not materialize. 641 00:32:11,520 --> 00:32:13,600 Speaker 6: I would say that so far this. 642 00:32:13,600 --> 00:32:17,480 Speaker 9: Year EM and A has been disappointing again, and you 643 00:32:17,520 --> 00:32:19,640 Speaker 9: know you can see in terms of the reported fees 644 00:32:19,640 --> 00:32:23,600 Speaker 9: and the announcements, right, so both of those have been disappointing. 645 00:32:24,040 --> 00:32:26,680 Speaker 9: It does tend to pick up late in the year, 646 00:32:27,080 --> 00:32:30,320 Speaker 9: It does tend to pick up after elections, So I 647 00:32:30,360 --> 00:32:34,440 Speaker 9: think it'll be hard to get for that particular business line, 648 00:32:34,560 --> 00:32:36,320 Speaker 9: you know, sort of the momentum people are looking for, 649 00:32:36,680 --> 00:32:41,520 Speaker 9: perhaps until after the election. But on the underwriting side, 650 00:32:41,640 --> 00:32:44,400 Speaker 9: I think is where you're seeing, you know, perhaps more 651 00:32:44,440 --> 00:32:47,880 Speaker 9: the momentum and strength. Golden Sachs, though who is tends 652 00:32:47,920 --> 00:32:51,480 Speaker 9: to be the biggest and reported revenue, did say significant 653 00:32:51,600 --> 00:32:55,000 Speaker 9: uptick in their pipeline debt. Underwriting and advisory were the 654 00:32:55,040 --> 00:32:56,320 Speaker 9: areas of strength all. 655 00:32:56,280 --> 00:32:59,400 Speaker 3: Right, Thanks to Alison Williams, Bloomberg Intelligence Senior analysts, Global 656 00:32:59,440 --> 00:33:01,560 Speaker 3: Banks and as a managers, we move next to the 657 00:33:01,560 --> 00:33:04,880 Speaker 3: airline space. This weekend, Edited Airlines reported second quarter profit 658 00:33:05,080 --> 00:33:08,000 Speaker 3: that grew thanks to strong travel demand, but the airline 659 00:33:08,040 --> 00:33:10,600 Speaker 3: also said third quarter profit will fall short of Wall 660 00:33:10,600 --> 00:33:14,200 Speaker 3: Streets expectations. United warned that price cuts by low cost 661 00:33:14,280 --> 00:33:17,400 Speaker 3: carriers are weighing on the entire airline industry. For more 662 00:33:17,560 --> 00:33:19,960 Speaker 3: guess sos, Matt Miller, and I were joined by George Ferguson, 663 00:33:20,000 --> 00:33:23,560 Speaker 3: Bloomberg Intelligence senior Aerospace, Defense and airlines analysts. We first 664 00:33:23,600 --> 00:33:25,880 Speaker 3: asked George for his take on this week's results. 665 00:33:26,080 --> 00:33:28,040 Speaker 10: The industry is just suffering from overcapacity. 666 00:33:28,080 --> 00:33:28,200 Speaker 2: Right. 667 00:33:28,360 --> 00:33:32,479 Speaker 10: United confirmed that Delta told us the same thing earlier. 668 00:33:32,560 --> 00:33:35,640 Speaker 10: We saw Alaska results come out, their load factors down, 669 00:33:35,760 --> 00:33:38,880 Speaker 10: yields flat load factors down, telling me they can't fill 670 00:33:38,920 --> 00:33:42,600 Speaker 10: airplanes at the right price point. We need capacity to 671 00:33:42,600 --> 00:33:47,960 Speaker 10: come out. Everybody's pointing to an inflection point in three Q. 672 00:33:48,760 --> 00:33:50,960 Speaker 10: United said that you know, they'd get down and maybe 673 00:33:52,280 --> 00:33:56,600 Speaker 10: after mid August, maybe two to three percent growth in capacity. 674 00:33:56,840 --> 00:33:58,560 Speaker 10: I think this is still a too high level of 675 00:33:58,600 --> 00:34:02,160 Speaker 10: capacity growth, right, this isn't an economy that probably a 676 00:34:02,200 --> 00:34:04,560 Speaker 10: year over year grew about a percent. I think that 677 00:34:04,640 --> 00:34:07,320 Speaker 10: number ought to be tied much closer to GDP growth. 678 00:34:07,760 --> 00:34:11,160 Speaker 10: You talked about unemployment rising, right, so the US economy 679 00:34:11,160 --> 00:34:13,520 Speaker 10: appears to be slowing a bit. So I think those 680 00:34:13,560 --> 00:34:15,799 Speaker 10: things are working against the airlines right now. A bunch 681 00:34:15,800 --> 00:34:17,520 Speaker 10: of capacity has to come out, I think, to get 682 00:34:17,560 --> 00:34:20,279 Speaker 10: back to pricing power, and that's what's needed to get 683 00:34:20,320 --> 00:34:21,160 Speaker 10: profitability going. 684 00:34:21,320 --> 00:34:23,400 Speaker 11: So how does that happen? I mean, do the airlines 685 00:34:23,440 --> 00:34:27,720 Speaker 11: themselves pull capacity out? Don't they have competition in this market? 686 00:34:27,880 --> 00:34:29,520 Speaker 11: Don't we have regulators to ensure that. 687 00:34:30,760 --> 00:34:34,560 Speaker 10: Yeah, so how does it happen? We're starting to see 688 00:34:34,640 --> 00:34:38,000 Speaker 10: some of it happen. Alaska announced that they were going 689 00:34:38,040 --> 00:34:40,000 Speaker 10: to add more premium seeding to them. 690 00:34:40,080 --> 00:34:42,680 Speaker 11: Can I just pause here for a fun fact, George, 691 00:34:43,120 --> 00:34:48,240 Speaker 11: For a long time, Paul Sweeney thought that the Eskimo 692 00:34:48,440 --> 00:34:51,320 Speaker 11: on the Alaska Airlines tail was actually a picture of 693 00:34:51,400 --> 00:34:52,160 Speaker 11: Jerry Garcia. 694 00:34:52,360 --> 00:34:52,600 Speaker 8: I did. 695 00:34:52,760 --> 00:34:57,520 Speaker 10: Yeah, Actually he's told me that. I'm not sure what 696 00:34:57,560 --> 00:34:58,600 Speaker 10: that says about Paul Sween. 697 00:35:00,040 --> 00:35:02,919 Speaker 11: I mean, what an airline Jerry Garcia on the tail? 698 00:35:03,040 --> 00:35:03,800 Speaker 3: They're so cool? 699 00:35:04,360 --> 00:35:05,960 Speaker 6: All right? So sorry, sorry, go ahead. 700 00:35:06,320 --> 00:35:08,680 Speaker 10: So we're starting to see capacity come out with these 701 00:35:08,680 --> 00:35:11,439 Speaker 10: announcements like Alaska where they said, you know, we're gonna 702 00:35:11,440 --> 00:35:14,120 Speaker 10: add more premium seating, which usually means a bit less 703 00:35:14,120 --> 00:35:17,360 Speaker 10: capacity in the marketplace. Frontier is gonna block your middle seat, 704 00:35:17,560 --> 00:35:19,440 Speaker 10: so you can get a premium seat out of Frontier. 705 00:35:20,040 --> 00:35:22,440 Speaker 10: That obviously brings the capacity out. You know, what you 706 00:35:22,520 --> 00:35:25,440 Speaker 10: really need is you need airlines to start parking airplanes. 707 00:35:25,840 --> 00:35:28,680 Speaker 10: And I think that's hard too, right, So United Delta 708 00:35:29,080 --> 00:35:31,960 Speaker 10: all jazzed up about this inflection point. But look, I 709 00:35:32,000 --> 00:35:35,000 Speaker 10: would note that there's a lot of very fast growing, 710 00:35:35,040 --> 00:35:40,480 Speaker 10: low cost airlines in the US, Frontier, Spirit, even Jet Blue, right, 711 00:35:40,520 --> 00:35:43,400 Speaker 10: they lease a lot of airplanes. You fly airplanes you 712 00:35:43,520 --> 00:35:46,160 Speaker 10: lease because you gotta pay that least payment no matter what. Right. 713 00:35:46,600 --> 00:35:49,359 Speaker 10: So I think it gets difficult here and it takes 714 00:35:49,360 --> 00:35:53,120 Speaker 10: a little while to get capacity out. Maybe next summer, 715 00:35:53,719 --> 00:35:54,400 Speaker 10: you know, I don't know. 716 00:35:54,600 --> 00:35:57,640 Speaker 11: I was talking with the CEO of JSX. They fly 717 00:35:58,560 --> 00:36:01,480 Speaker 11: fascinating roots. For example, Well, they'll fly from the west 718 00:36:01,560 --> 00:36:07,400 Speaker 11: Chester Airport to the Naples Airport, right or some airport 719 00:36:07,440 --> 00:36:11,960 Speaker 11: outside of la into you know, Palm Beach. So are 720 00:36:11,960 --> 00:36:14,840 Speaker 11: we gonna see more of these upstarts, George. 721 00:36:14,920 --> 00:36:17,640 Speaker 10: Well, so we always do in the industry, right. So 722 00:36:17,840 --> 00:36:21,520 Speaker 10: the beautiful thing about this industry is when people sell airplanes, 723 00:36:21,560 --> 00:36:24,640 Speaker 10: someone buys them cheap and starts flying routes like that, 724 00:36:25,560 --> 00:36:27,080 Speaker 10: and there's always someone of the wants that come to 725 00:36:27,120 --> 00:36:30,280 Speaker 10: this industry, right It's it's got just a heavy allure. 726 00:36:30,320 --> 00:36:32,680 Speaker 10: Everybody wants to own an airline. That becomes one of 727 00:36:32,680 --> 00:36:35,600 Speaker 10: the challenges too, I think, and sort of making money 728 00:36:35,600 --> 00:36:38,520 Speaker 10: in this industry. But the big folks, they'd love to 729 00:36:38,680 --> 00:36:41,280 Speaker 10: have more, you know, more maybe the ultra low cost 730 00:36:41,320 --> 00:36:44,239 Speaker 10: point at those smaller airports, but you just don't get 731 00:36:44,239 --> 00:36:47,759 Speaker 10: the demand out of those smaller airports, you know, to 732 00:36:47,880 --> 00:36:51,520 Speaker 10: really fill big airplanes, and so that becomes part of 733 00:36:51,520 --> 00:36:53,520 Speaker 10: the challenge I think right now. One of the bigger 734 00:36:53,560 --> 00:36:57,080 Speaker 10: parts of the challenge is definitely business is kinda We 735 00:36:57,120 --> 00:36:59,239 Speaker 10: heard United say one hundred percent of what it was 736 00:37:00,040 --> 00:37:02,120 Speaker 10: in twenty nineteen. Obviously that gives you sort of no 737 00:37:02,239 --> 00:37:05,320 Speaker 10: growth since the pandemic. They're saying, the share of revenue 738 00:37:05,320 --> 00:37:08,520 Speaker 10: in the cabin is lower. That's always at a really 739 00:37:08,600 --> 00:37:11,800 Speaker 10: nice price point, and business likes to go different places 740 00:37:11,840 --> 00:37:14,759 Speaker 10: than leisure does, so it diversifies your routes to a 741 00:37:14,760 --> 00:37:17,120 Speaker 10: certain degree, but you need enough of it to go 742 00:37:17,160 --> 00:37:21,240 Speaker 10: to those other destinations. So business just isn't back enough. 743 00:37:21,360 --> 00:37:24,279 Speaker 10: I think to let the big full service carriers move 744 00:37:24,320 --> 00:37:29,920 Speaker 10: into maybe some smaller sized airplanes, more diversified destinations, and 745 00:37:30,040 --> 00:37:34,000 Speaker 10: get competition off those sort of heavy volume routes, and 746 00:37:34,040 --> 00:37:35,480 Speaker 10: I think that's part of the problem too. 747 00:37:35,719 --> 00:37:39,040 Speaker 3: Our thanks to George Ferguson, Bloomberg Intelligence, senior airspace, defense 748 00:37:39,040 --> 00:37:40,000 Speaker 3: and airlines analysts. 749 00:37:40,320 --> 00:37:44,799 Speaker 2: This is the Bloomberg Intelligence Podcast, available on apples, Spotify, 750 00:37:45,000 --> 00:37:47,920 Speaker 2: and anywhere else you will get your podcasts. Listen live 751 00:37:48,000 --> 00:37:51,600 Speaker 2: each weekday ten am to noon Eastern on Bloomberg dot com, 752 00:37:51,719 --> 00:37:55,120 Speaker 2: the iHeartRadio app, tune In, and the Bloomberg Business app. 753 00:37:55,239 --> 00:37:58,360 Speaker 2: You can also watch us live every weekday on YouTube 754 00:37:58,480 --> 00:38:01,919 Speaker 2: and always on the Bloomberg to fund