Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is Bloomberg Intelligence with Alex Steinhl and Paul Sweeny.
Speaker 3: The real app performance has been in US corporate high yield.
Speaker 4: Are the companies lean enough? Have they trimmed all the fats?
Speaker 3: The semiconductor business is a really cyclical.
Speaker 2: Business, breaking market headlines and corporate news from across the globe.
Speaker 4: Do investors like the M and A that we've seen?
Speaker 3: These are two big time blue chip companies.
Speaker 4: The window between the peak and cut changing super fast.
Speaker 2: Bloomberg Intelligence with Alex Steinhl and Paul'sweeny on Bloomberg Radio.
Speaker 3: On Today's Bloomberg Intelligence Show, we dig inside the big
Speaker 3: business stories in pacting Wall Street and the global markets.
Speaker 3: Each and every week we provide in depth research and
Speaker 3: data on some of the two thousand companies and one
Speaker 3: hundred and thirty industries our analysts cover worldwide. Today, we'll
Speaker 3: look at why Tesla is looking to hire nearly eight
Speaker 3: hundred new employer after its largest round of layoffs. Plus
Speaker 3: we'll discuss why United Airlines gave disappointing guidance for the
Speaker 3: third quarter. But first we look at quarterly earnings from
Speaker 3: the world's largest money manager Blackrock. Blackrock called in fifty
Speaker 3: one billion dollars of client cash to its long term
Speaker 3: investment funds in the second quarter. As a result, the
Speaker 3: firm hit a record of ten point six trillion dollars
Speaker 3: of assets. For more, we were joined by Neil Sipes,
Speaker 3: Bloomberg Intelligence financials analyst. We first asked Neil to comment
Speaker 3: on this week's news.
Speaker 1: I think obviously over the past eighteen months, banks have
Speaker 1: been much more in the focus asset managers, maybe a
Speaker 1: little bit of a sleepier name, so to speak. But
Speaker 1: like you said, Blackrock eclipsing ten and a half trillion.
Speaker 1: Of course, a lot of that is due to markets.
Speaker 1: We're up, you know, fifteen twenty percent year to date,
Speaker 1: but Blackrock sort of that perennial grower in the industry.
Speaker 1: Organic growth, those flows from institutional retail clients have been
Speaker 1: harder to come by. Blackrock, having that breadth and diversity
Speaker 1: of the platform, has really been able to deliver growth
Speaker 1: through varying market cycles. We think that's one of their
Speaker 1: strengths and why they're the leader in the space in
Speaker 1: terms of size. In terms of the second quarter organic
Speaker 1: growth a little bit lighter than expected. Part of that
Speaker 1: due to the fact that we saw some larger institutional
Speaker 1: clients sort of rebalancing portfolios. That's just sort of natural
Speaker 1: in the business, especially when you're at all time highs. Nonetheless,
Speaker 1: margin really improved again, that's on the heels of stronger markets.
Speaker 1: Most of the revenue here is asset based fees, so
Speaker 1: as markets move higher, the top line expands as well.
Speaker 1: And so really, you know, you highlighted the last thing.
Speaker 1: I guess ETF's another strong suit. That's really the bread
Speaker 1: and butter of black Rock again, and obviously now with
Speaker 1: some of that private's markets push that we've seen in
Speaker 1: the past couple months, when do.
Speaker 4: They hit the law of large numbers thing?
Speaker 1: Yeah, I think that is becoming the more popular question
Speaker 1: for me to ask.
Speaker 4: This question forever, right, and it is still do it?
Speaker 1: Yeah? They and they continue to target this five percent
Speaker 1: organic based feed growth figure. They've been lagging that over
Speaker 1: the past couple of quarters. Obvious markets, you know, since
Speaker 1: the beginning of twenty twenty two, we're less conducive. They've
Speaker 1: been more conducive for the past three quarters or so.
Speaker 1: But the question still remains, how do you continue to
Speaker 1: grow at that five percent clip when You're talking about
Speaker 1: a ten trillion dollar asset base, and we think BlackRock's
Speaker 1: diversity when assets are in motion, they can continue to
Speaker 1: garner share from less diversified, less price competitors.
Speaker 3: Stock hasn't done anything this year, kind of up one
Speaker 3: percent just on the year, lagging the market. What's the
Speaker 3: investment called here on Blackrow? What are the investors saying?
Speaker 1: Yeah? So I think, you know a lot of what's
Speaker 1: been baked into this year is sort of market growth,
Speaker 1: which is going to be a benefit to all asset
Speaker 1: managers in the space. So I think the skepticism of
Speaker 1: are these gains lasting? What happens obviously in November when
Speaker 1: we get this eventual FED pivot to cuts, How is
Speaker 1: that going to impact you know, client allocations, How is
Speaker 1: that going to impact the business model? But we do
Speaker 1: think Blackrock is, you know, a is position to benefit
Speaker 1: in pretty much all market cycles, and a lot of
Speaker 1: that long term story is now shifting into that private
Speaker 1: market's focus with Prequeent acquisition just announced a couple weeks
Speaker 1: ago and Global Infrastructure Partners in January.
Speaker 4: Ask a really dumb question at this point, who are
Speaker 4: Blackrocks actual competitors, Like, who can actually compete with this company.
Speaker 1: Yeah, so there are plenty of competitors. I mean, asset
Speaker 1: management can be somewhat commoditized in a lot of spaces.
Speaker 1: You know, there's competitors like a Vanguard. There's competitors like
Speaker 1: a Schwab, in Vesco, Franklin, Tira. Price, There's plenty of
Speaker 1: names out there. The question is who's able to compete
Speaker 1: on price with Blackrock? And that's where scale really becomes
Speaker 1: paramount here because they can continue to innovate with new products.
Speaker 1: If a new competitor comes out with, you know, a
Speaker 1: new flashy product, Blackrock tends to match that and can
Speaker 1: sometimes beat it on price. And we know that Blackrock
Speaker 1: is entrenched with pretty much every institutional client, every retail client,
Speaker 1: so to speak, and that really gives them the strength
Speaker 1: of distribution to kind of leverage across its platform.
Speaker 3: Our Thanks to Neil SIPs Bloomberg Intelligence financials Analysts, we
Speaker 3: now look at this week's Bloomberg Business Week cover story
Speaker 3: about former President Donald Trump. It's titled Trump on Taxes Tariffs.
Speaker 3: Jerome pal and Moore for the story, BusinessWeek recently sat
Speaker 3: down with the ex president at mar A Lago for
Speaker 3: an exclusive interview. They discussed Trump's plans for the US
Speaker 3: economy and the world if he were to be re
Speaker 3: elected as president. For more and all this, we were
Speaker 3: joined by Bloomberg Business Week editor Brad Stone. We first
Speaker 3: asked Brad just how hard it was to gather details
Speaker 3: for this story.
Speaker 5: Well, I mean, look, he wanted to talk. We'd actually
Speaker 5: put queries out to both campaigns. We heard first from
Speaker 5: former President Trump. You know, this is BusinessWeek, so our
Speaker 5: mandate is business obviously, economics the world order, and we
Speaker 5: went there to interrogate him about an economic plan that
Speaker 5: many economists think is a bit contradictory. I mean, President
Speaker 5: Trump talks about lowering inflation.
Speaker 2: The agenda is.
Speaker 5: Higher tariffs, less immigration, you know, which potentially raises wages.
Speaker 5: He talks a lot about lowering interest rates and then
Speaker 5: bringing members of the business community into his administration. So
Speaker 5: this is a topic he wanted to talk about. To
Speaker 5: put it in context, we talked to him two days
Speaker 5: before the first presidential debate and about two weeks before
Speaker 5: the assassination attempt. But even then, I think, you know,
Speaker 5: he is writing what he believes, at least in his campaign,
Speaker 5: believes is a heightened sense of momentum.
Speaker 3: So, Brad, there's a lot of areas here in the
Speaker 3: terms of economics to explore. Talk about taxes. How does
Speaker 3: he feel about taxes these days? He certainly had some
Speaker 3: big tax legislation in his first term, that's right.
Speaker 5: And one part of his plan is to extend the
Speaker 5: Trump tax cuts. Another part, which he told us, was
Speaker 5: to lower the corporate tax rate. He told the Business
Speaker 5: Roundtable that he wanted to bring it down to twenty
Speaker 5: percent from twenty one percent for no other reason that
Speaker 5: he likes big, large numbers. But then he said he
Speaker 5: would even get it down to fifteen percent if he could.
Speaker 5: You know, the challenge here, of course, is they don't
Speaker 5: delineate any way to pay for this, to make the
Speaker 5: numbers parcel out and do anything other than raise the
Speaker 5: federal deficit. And there is really, I think a paucity
Speaker 5: of specifics here, which is one reason why proxies have
Speaker 5: kind of tried to fill the void with things like
Speaker 5: Project twenty twenty five, which then Trump really distanced himself from.
Speaker 5: But you know, I think, you know, with the broad
Speaker 5: brushstrokes we got is Trump wants to lower taxes and
Speaker 5: extend his tax cuts.
Speaker 4: What I also felt was very interesting is the myriad
Speaker 4: of views in relation to the tech industry. So on
Speaker 4: the one hand of k lower taxes ya tech industry,
Speaker 4: he seems to embrace crypto clearly with JD. Vans, there's
Speaker 4: sort of an embrace of vcs, but big tech is
Speaker 4: very complicated. How did you parse through that?
Speaker 5: There's some contradictions here, Alex. I mean, the first is
Speaker 5: he's obviously very pro American business, and yet he's he's
Speaker 5: turned on TikTok and believes that banning TikTok would only
Speaker 5: empower Mark Zuckerberg Facebook. The second thing is, you know,
Speaker 5: in the first term, he talked a lot about cryptocurrency
Speaker 5: and how it might engender fraud. He wasn't wrong about
Speaker 5: that obviously, but now he's flipped on that as well.
Speaker 5: The bottom line here, and the way I interpreted, is
Speaker 5: that for Trump it's all about personal relationships, and he
Speaker 5: went and talked a lot about Tim Cook and how
Speaker 5: smart he thought Tim Cook was, in large part because
Speaker 5: Tim Cook went to the White House to ask for
Speaker 5: relief from the first set of tariffs. You know, he
Speaker 5: likes it when people come and you know, paid their respects,
Speaker 5: or at least visibly look to be on what he
Speaker 5: considers to be Team Trump, and so, you know in
Speaker 5: terms of crypto and a lot of people in that
Speaker 5: community are now pro Trump, and you know in terms
Speaker 5: of TikTok, where he's very popular on TikTok, and of
Speaker 5: course jeff yass one of the backers of Byte Dance
Speaker 5: as a Trump supporter. You can kind of see why
Speaker 5: these contradictions are sort of bundled into his views on technology.
Speaker 3: Tariffs, certainly, it seems to be the topic we've had
Speaker 3: both sides of the aisle talking about tariffs and tough
Speaker 3: tariff talk. Mister Trump used tariffs.
Speaker 6: Quite liberally, liberally.
Speaker 3: How do you think about tariffs these days?
Speaker 5: It's interesting, Paul. You know, I have not spent much
Speaker 5: time thinking about President William McKinley, the twenty fifth president.
Speaker 5: He was from my former state of Ohio, and Trump
Speaker 5: brought him up repeatedly because here's this nineteenth century president who,
Speaker 5: before the age of a federal income tax, was raising
Speaker 5: tariffs and bringing in money. And he said that McKinley
Speaker 5: is overlooked. Who knows what book club he's part of,
Speaker 5: but clearly they've been reading histories and he wants to
Speaker 5: raise tariffs. He thinks tariffs are underrated. He's talking about
Speaker 5: a ten percent across the board tariff. He's talking about
Speaker 5: raising the tariff on Chinese goods to sixty percent or
Speaker 5: even one hundred percent. And you know, he says they're
Speaker 5: a great negotiating ployee. He tried that in the first term.
Speaker 5: And obviously then you know a lot of US companies,
Speaker 5: particularly tech companies, complained, and they did. They were quite
Speaker 5: generous in their carve outs. But this is a a
Speaker 5: big part of Trumpanomics, and most economists think that companies
Speaker 5: don't pay those tariffs, they turn around and pass them
Speaker 5: to customers in the form of higher prices. So there
Speaker 5: we pressed them on it, and I think there are
Speaker 5: some unresolved contradictions and tensions there.
Speaker 4: What's also interesting, I was reading a JP Morgan note
Speaker 4: about commodities and what the Trump administration would do to commodities.
Speaker 4: Obviously that's my beat, but what they made the point
Speaker 4: is it really depends on the sequencing. So if you
Speaker 4: go to corporate taxes first, tariffs come later. Like the
Speaker 4: sequencing of how all of this works will really depend
Speaker 4: then on what the market reaction is. Did you get
Speaker 4: any sense of that in terms.
Speaker 5: Of how we would do it, I didn't. But I mean,
Speaker 5: one thing that impressed us, or is impressed upon us,
Speaker 5: is that in twenty sixteen he was unprepared to win,
Speaker 5: and he surrounded himself with people, maybe a bit impulsively,
Speaker 5: and he says that he would do it differently this time,
Speaker 5: that he knows who's loyal and who's not, and he's experienced,
Speaker 5: and he knows everybody time. And it just seemed to us,
Speaker 5: you know, that he is prepared to move quickly in
Speaker 5: what order I don't know, but particularly if he controls
Speaker 5: both houses in Congress, that they have an agenda that
Speaker 5: they're pretty much willing to implement. A blitz Creed.
Speaker 3: Speed Jamie Diamond as Secretary of Treasury thirty seconds spread.
Speaker 5: Yeah, yeah, what did he call him an overrated globalist once? Look,
Speaker 5: he's courting the business community. I you know, who knows
Speaker 5: if Diamond would do that, particularly considering how former members
Speaker 5: of Trump's administration often ended up being treated somewhat badly
Speaker 5: or breaking with him. But yeah, I mean, I think
Speaker 5: Trump wants to go and it's very important to him
Speaker 5: that business leaders like him. I mean that comes through
Speaker 5: in the interview and so he's doing this but to
Speaker 5: court them as well.
Speaker 3: Thanks to Bloomerg Business Week editor Brad Stone. Coming up,
Speaker 3: we'll take a deep dive into how various industries would
Speaker 3: be impacted by a Donald Trump or Joe Biden presidency.
Speaker 3: In November, you're listening to Bloomberg Intelligence on Bloomberg Radio,
Speaker 3: so providing in depth research and data on two thousand
Speaker 3: companies in one hundred and thirty industries. You can access
Speaker 3: Bloomberg Intelligence via Bigo on the terminal. I'm Paul Sweeney.
Speaker 3: This is Bloomberg.
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Apple card Playing and
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Speaker 2: wherever you get your podcasts, or watch us live on YouTube.
Speaker 3: We move next to politics. The direction of government policy
Speaker 3: and the world's largest economy is at stake when the
Speaker 3: US Alexa president. In November, Bloomberg Intelligence took a deep
Speaker 3: dive into how various industries would be impacted with either
Speaker 3: Joe Biden or Donald Trump in office. For more on
Speaker 3: this research, we were joined by Nathan Dean, Bloomberg Intelligence
Speaker 3: Senior Policy analyst. We first asked Nathan to break down
Speaker 3: his findings.
Speaker 7: What we did is we started with the report by
Speaker 7: looking at what are the key sectors to watch, and
Speaker 7: we really had five of them. The first one was
Speaker 7: investment banks. If President Biden wins, you know, you could
Speaker 7: see somewhere between seven to ten eight percent increase in
Speaker 7: capital requirements. If President Trump wins, that could be off
Speaker 7: the table. We looked at electric vehicles. You know, the
Speaker 7: tax credits for the electric vehicles could be at risk
Speaker 7: during a tax reform debate next year. Like you mentioned,
Speaker 7: in terms of tax global manufacturers, President Trump has called
Speaker 7: for a fifteen percent corporate tax rate. Representative Steve Scalise
Speaker 7: said he's going to make the tax cuts for individuals permanent,
Speaker 7: so tax reform and the impact of manufacturing. And the
Speaker 7: other two were Healthcarecter that twenty five billion dollar subsidies
Speaker 7: that's really for seventeen and United Health. And then finally
Speaker 7: it was big tech. Because whether you get President Biden
Speaker 7: or President Trump, more likely than not you're going to
Speaker 7: get a very skeptical Washington towards big tech, certainly both
Speaker 7: in Congress and also on the enforcement side.
Speaker 4: Nate, then the question then becomes what can he and
Speaker 4: this has been the question throughout his four years. Also
Speaker 4: what can he do on his own? And what would
Speaker 4: he need a Republican Congress for?
Speaker 7: Yeah, So you know, I think one of the biggest
Speaker 7: questions we get from clients is what does the executive
Speaker 7: order landscape look like if President Trump wins? And I'd
Speaker 7: say about ninety percent of the time, an executive order
Speaker 7: is a fancy way of the president picking up the
Speaker 7: phone and saying to his staff, I expect you to
Speaker 7: do X, Y and Z. But there's a difference there.
Speaker 7: The difference is for trade, tariffs and foreign relations. The
Speaker 7: power of the presidency is a lot more powerful when
Speaker 7: it comes to that. So when President Trump uses words
Speaker 7: like nasty calling the European Union, you know, that's something
Speaker 7: that investors have to pay attention to.
Speaker 8: Now.
Speaker 7: When it comes to tariffs, the President can certainly go
Speaker 7: out there and say I want to do this, but
Speaker 7: then it's going to be up for Congress and the
Speaker 7: business community and so forth. But todentially try and influence
Speaker 7: the White House to either get to the appropriate amount
Speaker 7: or try in some cases stop it from even happening.
Speaker 3: So are there certain industries that you know, I think
Speaker 3: about the healthcare industry. I'm trying to think about regulated industries,
Speaker 3: and healthcare is certainly one of them. And you mentioned
Speaker 3: the subsidies. But the Republicans and the Democrats think differently
Speaker 3: about the economics of health care.
Speaker 7: Yeah, it does. And this is rarely where the process
Speaker 7: comes in the play, because that's subsidies. That twenty five
Speaker 7: billion dollars subsidies is Obamacare subsidies, and that requires an
Speaker 7: Act of Congress. And I think you don't need to
Speaker 7: be a Washington expert to know that gridlock is going
Speaker 7: to continue no matter who wins the presidency. So look
Speaker 7: for subdued actions from Congress when it comes to healthcare. Now,
Speaker 7: the difference is on the regulatory side. On the regulatory side,
Speaker 7: and this is where you look at the FDA and
Speaker 7: a lot of the actions they've been doing. You can
Speaker 7: bypass democratic opposition and just implement your own policies, but
Speaker 7: it takes time, and so I would say just general
Speaker 7: rule of thumb for a lot of the healthcare issues
Speaker 7: that are going out at the agencies after President Trump
Speaker 7: if he wins, where the input is new regulatory leadership,
Speaker 7: at that point, you probably have another eighteen months and
Speaker 7: twenty four month window for any regulatory change, So for
Speaker 7: the healthcare industry, there's a lot of time to prepare
Speaker 7: for any changes. You'll know exactly what's going to happen
Speaker 7: well before it does.
Speaker 4: Going back to the ev point, it feels like solar evs,
Speaker 4: stuff like hydrogen from the IRA, like those are the
Speaker 4: stuff maybe potentially on the chopping block potentially where the
Speaker 4: President Trump win. But then the Musk thing is weird
Speaker 4: because Elon Musk has definitely become a big supporter of
Speaker 4: President Trump donating to super packs, and I'm wondering if
Speaker 4: that relationship will change the calculus to how President Trump
Speaker 4: sees electric vehicles.
Speaker 7: Absolutely, you hit it right on the head and we
Speaker 7: even say this in the report. There's a difference between
Speaker 7: headline risk and reality. So if you look at the
Speaker 7: electric vehicles, you can look at statements that President Trump
Speaker 7: and other Republicans have said saying they do not like
Speaker 7: these electric vehicle tax credits out there and so forth.
Speaker 7: But then you balance it with the Elon Musk and
Speaker 7: even taking it to grander scale on the Inflation Reduction Act.
Speaker 7: A lot of the benefits of the IRA are going
Speaker 7: to gop led states. So what you have to do
Speaker 7: here is a take the statement. Okay, if President Trump
Speaker 7: says I want to do away with the electric vehicle
Speaker 7: tax credit, how am I going to do that? Most likely,
Speaker 7: I'll do that as part of tax reform and via
Speaker 7: the reconciliation, which means I probably won't have any Democrats
Speaker 7: going on board with me, so I need all Republicans
Speaker 7: on board at that point. If Elon Musk starts whispering saying, hey,
Speaker 7: we like these tax credits for the EB world, then
Speaker 7: that change may not even be a high priority anymore.
Speaker 7: So I would just say that for a lot of
Speaker 7: the statements, you have to remember short term risk versus
Speaker 7: long term risk. And as we see with every single election,
Speaker 7: politicians of both parties love to go out there and
Speaker 7: say I'm going to do X, Y and Z, but
Speaker 7: then when they get into power, it's XYZ minus a
Speaker 7: whole bunch of other stuff because I'm going to be
Speaker 7: a little bit more moderate now.
Speaker 3: And Nathan, how about for our good friends on Wall
Speaker 3: Street M and A bankers and lawyers. Under this administration,
Speaker 3: the regulator has been pretty tough, and it's been pretty
Speaker 3: tough to get big M and A deals approved, presumably
Speaker 3: that would be more Wall Street friendly M and A
Speaker 3: friendly with a Republican administration, it.
Speaker 7: Really depends on the leadership that President Trump, again, if
Speaker 7: he were to win, would put in place at the
Speaker 7: FTC and the DOJ. Because you have one side, you
Speaker 7: have the Republican business friendly view, the stereotypical Republican business
Speaker 7: friendly view. If you get somebody like Jamie Diamond, and
Speaker 7: I'm just picking on the banking execs. If you get
Speaker 7: somebody from Wall Street, like a Gary Cohne individual that
Speaker 7: was in his last administration, then you could just reasonably
Speaker 7: say that M and A activity will get a little
Speaker 7: bit easier. But if you get somebody that comes from
Speaker 7: the economic populist side of the party. For example, Senator Vance,
Speaker 7: the vice presidential candidate, spoke in favor of the FDAC
Speaker 7: chair will Lim and Kahn and said that she was
Speaker 7: one of Biden's best picks. And so if President Trump
Speaker 7: comes out and picks an economic populist for the heads
Speaker 7: of the FTC and the DOJ, M and A made
Speaker 7: very difficult for the next few years. It really just
Speaker 7: depends who's going to get that nod, and that would
Speaker 7: come right after inauguration to President Trump wins our.
Speaker 3: Thanks to Nathan Dean Bloomberg Intelligence senior policy analysts. We
Speaker 3: move next to the EV space and Tesla this way,
Speaker 3: if you heard, the ev maker is looking to hire
Speaker 3: nearly eight hundred new employees. This comes nearly three months
Speaker 3: after CEO Elon Musk ordered the largest round of layoffs
Speaker 3: in the company's history. From her on this and the
Speaker 3: state of the EV industry, we were joined by Craig
Speaker 3: Trudell bloom For a Global Autos editor first ask for
Speaker 3: more context on this week's news.
Speaker 8: This is very Elon Muskian of Tesla in that it
Speaker 8: sort of you know, depends on the day of what's
Speaker 8: going on at this company. So, yes, a few months
Speaker 8: back on the heels of Tesla selling about twenty percent
Speaker 8: fewer cars than it did in the fourth quarter, Elon
Speaker 8: Musk wasn't particularly happy with that quarterly showing he wanted
Speaker 8: the company to cut headcount by a commensurate amount, so
Speaker 8: roughly twenty percent, So you know, for context, you know,
Speaker 8: this is a company that you know, had quite a
Speaker 8: few employees at that time. They started the year with
Speaker 8: a round one hundred and forty thousand, so that would
Speaker 8: mean twenty eight thousand people being let go. It's unclear
Speaker 8: whether they got to that, but it is absolutely clear that,
Speaker 8: you know, certain parts of the company were decimated, I
Speaker 8: think most notably the super Charging team that really turned
Speaker 8: a lot of heads because it was a you know,
Speaker 8: aspect of this company that has been looked at as
Speaker 8: you know, such a sort of feather in their cap
Speaker 8: that they really invested where others didn't and built a
Speaker 8: charging that worked, whereas others have have not worked very well,
Speaker 8: particularly in the US, and so it is kind of
Speaker 8: shocking to see, you know, such a significant pulling of
Speaker 8: people followed by a you know, hiring spree of sorts.
Speaker 3: So do we know kind of what type of roles
Speaker 3: they're hiring for. Are they hiring people to bend metal
Speaker 3: or are they looking to like some software guys for
Speaker 3: AI and all that, the.
Speaker 4: Robotax An or the Superpower people superhero Yeah.
Speaker 8: I think we did report even weeks back that some
Speaker 8: of the Supercharger people who are you know, a part
Speaker 8: of the team that was really you know cut to
Speaker 8: a very significant degree, were brought back relatively quickly. Notably,
Speaker 8: the woman who was running that group, uh you know,
Speaker 8: has not been brought back, and there were some reports
Speaker 8: that maybe she you know, kind of tried to protect
Speaker 8: her team team and was dismissed as a result of that.
Speaker 8: So in terms of what parts of the company are hiring,
Speaker 8: it's it's it's pretty broad, but I would say, you know,
Speaker 8: the data that our very own care Carlson has crunched.
Speaker 8: Service is a big aspect, which is maybe no surprise,
Speaker 8: and that you know, the summer season is a busy
Speaker 8: one for Tesla. People are out, you know, driving for vacations.
Speaker 8: It's warm outs, they're running their air conditioners, you know,
Speaker 8: to the extent that you do need the service an
Speaker 8: electric vehicle, that's one of the things that is common. So,
Speaker 8: you know, one of the interesting aspects of this story
Speaker 8: is that we did speak with people who were a
Speaker 8: part of this job cutting, who you know, said that
Speaker 8: they were surprised that some of the service and salespeople,
Speaker 8: you know, that that the company you know, clearly needs
Speaker 8: at a time of you know, busy service work and
Speaker 8: you know, a company that's struggling to to sell more cars. Uh,
Speaker 8: you know, we're seeing you know, some people being brought
Speaker 8: back there, but it is very widespread. I think notably
Speaker 8: as well. You know, AI and robotics is definitely you know,
Speaker 8: an area where everybody's you know, looking at very closely
Speaker 8: because of you know what this sort of new priority
Speaker 8: is or emphasis is on the.
Speaker 3: Part of Musk, you know, Craig. GM's Mary Barris says
Speaker 3: the automaker won't sell a million evs next year, So
Speaker 3: just another story, another data point about kind of maybe
Speaker 3: where the ultimate demand or lack of demand may be
Speaker 3: for EV's. What's the latest feeling within the industry about
Speaker 3: how this thing's going to evolve at what pace.
Speaker 8: We've seen a really dramatic pullback on the part of
Speaker 8: GM and Ford in particular. I feel like, you know, Stillantis,
Speaker 8: you know, formerly Fiat Chrysler. They were sort of slow
Speaker 8: in the first place, you know, making this transition and
Speaker 8: have not necessarily had much to pull back from. But
Speaker 8: I would not be surprised if they sort of you know,
Speaker 8: joined the quote unquote party in terms of maybe dialing
Speaker 8: back sort of the ramp at which they tried to
Speaker 8: produce more electric vehicles and sell them. But it is
Speaker 8: very interesting to see you know, GM and Ford you know,
Speaker 8: really be sort of welcomed with open arms by the
Speaker 8: White House. You know, Mary Bara being lauded by Bidens
Speaker 8: as leading the EV transition. That really ticked off Elon
Speaker 8: Musk and helps explain why, you know, in the last
Speaker 8: few days we've learned that he's been planning to spend
Speaker 8: quite a bit of money on you know, contributing to
Speaker 8: packs to get to Donald Trump reelected.
Speaker 4: That was my thing. Is that the Musk Trump love
Speaker 4: affair I find to be quite interesting because if we
Speaker 4: can just game out that the love affair is also
Speaker 4: so President Trump would be more nice to EV's. Is
Speaker 4: the huge change that we're expecting with alternative energy and
Speaker 4: the IRA and a Trump administration maybe not going to happen.
Speaker 8: Yeah, it is surprising. I mean, maybe if you're trading Tesla,
Speaker 8: you sort of reckon that the CEO very publicly endearing
Speaker 8: himself to the candidate will sort of, you know, come
Speaker 8: back to benefit him down the line, and maybe some
Speaker 8: of these threats to do away with electric vehicle tax
Speaker 8: credits and so forth will fall by the wayside. Elon
Speaker 8: even went so far, you know, to sort of claim that,
Speaker 8: you know, doing away with subsidies would only help Tesla.
Speaker 8: I don't know how exactly he squares that circle. But
Speaker 8: perhaps it's a matter of Tesla is you know, the
Speaker 8: strongest of the companies that's trying to make this work
Speaker 8: and is for this along, and so taking subsidies away
Speaker 8: would hurt you know, competitors even more so than it
Speaker 8: would Tesla. But it certainly wouldn't be good for Tesla
Speaker 8: to lose access to seventy five hundred dollars for a
Speaker 8: lot of its customers in the US or would be customers.
Speaker 8: And so I do think it's very interesting, and we've
Speaker 8: we've heard very similar sort of intiev rhetoric on the
Speaker 8: on the part of jd Vance, his running mate, and
Speaker 8: so I think it's it's not only Trump who's you know,
Speaker 8: sort of campaigned against e but his running made.
Speaker 3: Our Thanks to Craig Trudell, Bloomberg Global Autos Editor. Coming
Speaker 3: up on the program, we'll break down a slew of
Speaker 3: bank earnings in the US. You're listening to Bloomberg Intelligence
Speaker 3: on Bloomberg Radio, providing in depth research and data on
Speaker 3: two thousand companies and one hundred and thirty industries. You
Speaker 3: can access Bloomberg Intelligence via Bigo on the terminal. I'm
Speaker 3: Paul Sweeney. This is Bloomberg.
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Speaker 3: We move now to US bank earnings. This week, we
Speaker 3: got quarterly results from Morgan Stanley, Bank of America, and
Speaker 3: Goldman Sachs, and all three firms posted double digit increases
Speaker 3: in investment banking revenue. From where we were joined by
Speaker 3: Alison Williams, Bloomberg Intelligence senior analysts Global banks and asset Managers.
Speaker 3: We first asked Allison what the street liked about Morgan
Speaker 3: Stanley's quarterly results.
Speaker 9: Really strong institutional numbers, I mean, it was a great
Speaker 9: quarter for trading and investment banking, so equities trading really,
Speaker 9: I think a source of strength. Morgan Stanley doing better
Speaker 9: than expected across the board, So equities trading I think
Speaker 9: was the standout. Fixed income you know, was sort of mixed,
Speaker 9: but really compared to a year ago, I think that's strong.
Speaker 9: Those revenues are turning out to be resilient and on
Speaker 9: the investment banking side, investors are excited that there could
Speaker 9: be momentum coming into the next quarter. You know, M
Speaker 9: and A still just historically low, so improving from a
Speaker 9: low base. Same thing with equities, but I think reasons
Speaker 9: for optimism, especially with the stocks in general doing so well.
Speaker 3: Now for Bank of America, when I think a Bank
Speaker 3: of America, I think it a corporate bank, you know,
Speaker 3: making big loans to big corporate customers around the world.
Speaker 3: What did you see there, so you know.
Speaker 9: I think the demand is for loans is still so
Speaker 9: something that we're looking more for the second half.
Speaker 6: If we do get the FED rate cuts, that is
Speaker 6: definitely going to be a help.
Speaker 9: And I think for Bank of America, what people are
Speaker 9: excited about is that it could be the trough. So
Speaker 9: Bank of America saying that it's going to be the trough,
Speaker 9: This will be the weakest quarter, but keep in mind
Speaker 9: that they are baking in the FED rate cut expectations
Speaker 9: and some loan growth in the second half, so we'll
Speaker 9: see if they can deliver that. But definitely telling investors
Speaker 9: what they want to hear in terms of the fourth quarter,
Speaker 9: a little bit higher entry rate, firming that up and
Speaker 9: again that the you know, the most of the weakness
Speaker 9: could be behind us.
Speaker 4: So does that mean that if we don't get FED
Speaker 4: cuts that Bank of America's going to have some problems here?
Speaker 9: I think where the disappointment will come will be loan growth.
Speaker 6: Spurred by FED cuts.
Speaker 9: Right, So I think that some of the loan growth
Speaker 9: that they're factoring in is based on that we heard
Speaker 9: from Wells Fargo where they're you know, still a lot
Speaker 9: more cautious on the loan growth side. And commercial and
Speaker 9: industrial has been.
Speaker 6: A weak spot. Credit card is it has been a
Speaker 6: strong spot.
Speaker 1: You know.
Speaker 3: When I was in banking, one of our most lucrative
Speaker 3: businesses that the Chasement had bank was this leverage lending,
Speaker 3: you know, lending to companies that don't have assets or
Speaker 3: inventory and any kind of just lending into cash flow.
Speaker 3: It's a little bit more risky. It's tough to show
Speaker 3: your credit officer where the collateral is for this loan.
Speaker 3: But we made a lot of money doing it. How's
Speaker 3: a private credit market been poaching on that business?
Speaker 9: So actually you would have been making this would have
Speaker 9: been a good quarter for you. I know, you'd be happy.
Speaker 9: The first quarter was good. Second quarter was good, and
Speaker 9: I think that if you look at some of the
Speaker 9: most recent statistics that we've seen, is that banks.
Speaker 6: Are still doing a lot of that refinancing.
Speaker 9: Right, So a lot of the business that's been happening
Speaker 9: in the debt markets, debt fees, a source of strength
Speaker 9: across the bank's disquorter has been refinancing, and that leverage
Speaker 9: lending business has been doing well at the bank. So
Speaker 9: even though private credit is certainly raising a lot of
Speaker 9: funds and a product and demand, banks are still getting
Speaker 9: their share of refinancing in their leverage one volumes.
Speaker 6: And that's you know.
Speaker 9: Sort of you saw like the huge growth at City
Speaker 9: Group and the numbers at Gold and Sachs where they
Speaker 9: have relative strength in those businesses.
Speaker 6: High yields another area that's doing really well.
Speaker 4: Back to the consumer so we'll have Paul Donmus and
Speaker 4: banking stuff, all the consumer stuff. What about chargeobs on
Speaker 4: their credit card losses for Bank of America? Was that
Speaker 4: higher lower?
Speaker 6: Where did that come out in general?
Speaker 9: I would say there, so their provisions overall came in
Speaker 9: in line. We did see, you know, charge offs in
Speaker 9: the car business, charge offs and commercial real estate, So
Speaker 9: those are areas that we're watching, but you know, controlled
Speaker 9: and in line with expectations. I think the area of
Speaker 9: weakness that we saw in CARD this quarter was at
Speaker 9: City Group. They have a private label business that tends
Speaker 9: to skew on the lower income side of things. You're
Speaker 9: seeing losses come in above their targeted range. There is
Speaker 9: seasonal pattern to that, and so there are expectations that
Speaker 9: that could come in, but I would say the second
Speaker 9: quarter did not give us confidence in those expectations. So
Speaker 9: I think that is continues to be an area for watching.
Speaker 9: It's not necessarily a big area for the big banks
Speaker 9: that we're talking about and the ones that I cover,
Speaker 9: but I think it's important to watch, you know, for
Speaker 9: the overall economy and to some of the other CARD
Speaker 9: names such as Synchrony.
Speaker 3: CEO at Morgan Stanle we have a new CEO, Ted Pick.
Speaker 3: I guess with a little bit of hindsight here does
Speaker 3: it seem like it's kind of working and everybody's kind
Speaker 3: of found their place.
Speaker 9: And so it seems like, you know, he's talking with conviction.
Speaker 9: I think the boldest statement he made was with regard
Speaker 9: to the margins and the wealth business. So the wealth business,
Speaker 9: as you know, under the former CEO and a lot
Speaker 9: of acquisitions. Wealth and asset management is the predominant revenue
Speaker 9: and profit engine.
Speaker 6: It's what investors are watching. The wealth margin was.
Speaker 9: Something where Pick early in the year took off some
Speaker 9: of the upside under the prior targets, and that thirty
Speaker 9: percent wealth target I think is a question among investors
Speaker 9: if they can get there, and Ted really trying to
Speaker 9: instill confidence that he is a believer the wealth flows
Speaker 9: at Morgan Stanley, I would say, you know, that is
Speaker 9: the probably the number one thing I think that that
Speaker 9: we watch for them, and that did come in week
Speaker 9: this quarter. The fee based part of those flows were
Speaker 9: relatively resilient, so some puts in takes there, but I
Speaker 9: think the wealth flows do bear watching and that that
Speaker 9: really has been the engine of optimism investors, like you know,
Speaker 9: the tilt towards the recurring fee based business, and so
Speaker 9: I think that they'll have to continue to deliver and
Speaker 9: deliver on that thirty percent margin that Pick is confident.
Speaker 4: And then I'll go to sort of what the macro
Speaker 4: read is for Morgan Stanley, because also on the call,
Speaker 4: Ted Pick said that you're going to see normal m
Speaker 4: and a return unless there's a full blown recession, and
Speaker 4: he thinks we're in the early stages of multi year
Speaker 4: investment banking leed cycle.
Speaker 9: Oh yeah, oh yeah, But we've been hearing that for
Speaker 9: so many quarters now and you're starting to definitely, you know,
Speaker 9: feel more of the doubt coming from analysts. Right, So
Speaker 9: the twenty twenty one, amazing twenty twenty two disaster, the
Speaker 9: lift that we got last year did not materialize.
Speaker 6: I would say that so far this.
Speaker 9: Year EM and A has been disappointing again, and you
Speaker 9: know you can see in terms of the reported fees
Speaker 9: and the announcements, right, so both of those have been disappointing.
Speaker 9: It does tend to pick up late in the year,
Speaker 9: It does tend to pick up after elections, So I
Speaker 9: think it'll be hard to get for that particular business line,
Speaker 9: you know, sort of the momentum people are looking for,
Speaker 9: perhaps until after the election. But on the underwriting side,
Speaker 9: I think is where you're seeing, you know, perhaps more
Speaker 9: the momentum and strength. Golden Sachs, though who is tends
Speaker 9: to be the biggest and reported revenue, did say significant
Speaker 9: uptick in their pipeline debt. Underwriting and advisory were the
Speaker 9: areas of strength all.
Speaker 3: Right, Thanks to Alison Williams, Bloomberg Intelligence Senior analysts, Global
Speaker 3: Banks and as a managers, we move next to the
Speaker 3: airline space. This weekend, Edited Airlines reported second quarter profit
Speaker 3: that grew thanks to strong travel demand, but the airline
Speaker 3: also said third quarter profit will fall short of Wall
Speaker 3: Streets expectations. United warned that price cuts by low cost
Speaker 3: carriers are weighing on the entire airline industry. For more
Speaker 3: guess sos, Matt Miller, and I were joined by George Ferguson,
Speaker 3: Bloomberg Intelligence senior Aerospace, Defense and airlines analysts. We first
Speaker 3: asked George for his take on this week's results.
Speaker 10: The industry is just suffering from overcapacity.
Speaker 2: Right.
Speaker 10: United confirmed that Delta told us the same thing earlier.
Speaker 10: We saw Alaska results come out, their load factors down,
Speaker 10: yields flat load factors down, telling me they can't fill
Speaker 10: airplanes at the right price point. We need capacity to
Speaker 10: come out. Everybody's pointing to an inflection point in three Q.
Speaker 10: United said that you know, they'd get down and maybe
Speaker 10: after mid August, maybe two to three percent growth in capacity.
Speaker 10: I think this is still a too high level of
Speaker 10: capacity growth, right, this isn't an economy that probably a
Speaker 10: year over year grew about a percent. I think that
Speaker 10: number ought to be tied much closer to GDP growth.
Speaker 10: You talked about unemployment rising, right, so the US economy
Speaker 10: appears to be slowing a bit. So I think those
Speaker 10: things are working against the airlines right now. A bunch
Speaker 10: of capacity has to come out, I think, to get
Speaker 10: back to pricing power, and that's what's needed to get
Speaker 10: profitability going.
Speaker 11: So how does that happen? I mean, do the airlines
Speaker 11: themselves pull capacity out? Don't they have competition in this market?
Speaker 11: Don't we have regulators to ensure that.
Speaker 10: Yeah, so how does it happen? We're starting to see
Speaker 10: some of it happen. Alaska announced that they were going
Speaker 10: to add more premium seeding to them.
Speaker 11: Can I just pause here for a fun fact, George,
Speaker 11: For a long time, Paul Sweeney thought that the Eskimo
Speaker 11: on the Alaska Airlines tail was actually a picture of
Speaker 11: Jerry Garcia.
Speaker 8: I did.
Speaker 10: Yeah, Actually he's told me that. I'm not sure what
Speaker 10: that says about Paul Sween.
Speaker 11: I mean, what an airline Jerry Garcia on the tail?
Speaker 3: They're so cool?
Speaker 6: All right? So sorry, sorry, go ahead.
Speaker 10: So we're starting to see capacity come out with these
Speaker 10: announcements like Alaska where they said, you know, we're gonna
Speaker 10: add more premium seating, which usually means a bit less
Speaker 10: capacity in the marketplace. Frontier is gonna block your middle seat,
Speaker 10: so you can get a premium seat out of Frontier.
Speaker 10: That obviously brings the capacity out. You know, what you
Speaker 10: really need is you need airlines to start parking airplanes.
Speaker 10: And I think that's hard too, right, So United Delta
Speaker 10: all jazzed up about this inflection point. But look, I
Speaker 10: would note that there's a lot of very fast growing,
Speaker 10: low cost airlines in the US, Frontier, Spirit, even Jet Blue, right,
Speaker 10: they lease a lot of airplanes. You fly airplanes you
Speaker 10: lease because you gotta pay that least payment no matter what. Right.
Speaker 10: So I think it gets difficult here and it takes
Speaker 10: a little while to get capacity out. Maybe next summer,
Speaker 10: you know, I don't know.
Speaker 11: I was talking with the CEO of JSX. They fly
Speaker 11: fascinating roots. For example, Well, they'll fly from the west
Speaker 11: Chester Airport to the Naples Airport, right or some airport
Speaker 11: outside of la into you know, Palm Beach. So are
Speaker 11: we gonna see more of these upstarts, George.
Speaker 10: Well, so we always do in the industry, right. So
Speaker 10: the beautiful thing about this industry is when people sell airplanes,
Speaker 10: someone buys them cheap and starts flying routes like that,
Speaker 10: and there's always someone of the wants that come to
Speaker 10: this industry, right It's it's got just a heavy allure.
Speaker 10: Everybody wants to own an airline. That becomes one of
Speaker 10: the challenges too, I think, and sort of making money
Speaker 10: in this industry. But the big folks, they'd love to
Speaker 10: have more, you know, more maybe the ultra low cost
Speaker 10: point at those smaller airports, but you just don't get
Speaker 10: the demand out of those smaller airports, you know, to
Speaker 10: really fill big airplanes, and so that becomes part of
Speaker 10: the challenge I think right now. One of the bigger
Speaker 10: parts of the challenge is definitely business is kinda We
Speaker 10: heard United say one hundred percent of what it was
Speaker 10: in twenty nineteen. Obviously that gives you sort of no
Speaker 10: growth since the pandemic. They're saying, the share of revenue
Speaker 10: in the cabin is lower. That's always at a really
Speaker 10: nice price point, and business likes to go different places
Speaker 10: than leisure does, so it diversifies your routes to a
Speaker 10: certain degree, but you need enough of it to go
Speaker 10: to those other destinations. So business just isn't back enough.
Speaker 10: I think to let the big full service carriers move
Speaker 10: into maybe some smaller sized airplanes, more diversified destinations, and
Speaker 10: get competition off those sort of heavy volume routes, and
Speaker 10: I think that's part of the problem too.
Speaker 3: Our thanks to George Ferguson, Bloomberg Intelligence, senior airspace, defense
Speaker 3: and airlines analysts.
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