1 00:00:02,920 --> 00:00:07,280 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:10,560 --> 00:00:14,400 Speaker 2: This is Bloomberg Intelligence with Alex Steinhl and Paul'sweenye. 3 00:00:14,520 --> 00:00:17,720 Speaker 1: The real app performance has been in US corporate high yield. 4 00:00:17,880 --> 00:00:20,240 Speaker 3: Are the companies lean enough? Have they trimmed all the fats? 5 00:00:20,320 --> 00:00:24,119 Speaker 1: The semiconductor business is a really cyclical business. 6 00:00:23,600 --> 00:00:27,200 Speaker 2: Breaking market headlines and corporate news from across the globe. 7 00:00:27,240 --> 00:00:29,880 Speaker 3: Do investors like the M and A that we've seen? 8 00:00:30,080 --> 00:00:33,120 Speaker 1: These are two big time blue chip companies. 9 00:00:33,320 --> 00:00:36,920 Speaker 3: 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'sweenye on Bloomberg Radio. 11 00:00:43,280 --> 00:00:45,559 Speaker 1: On Today's Bloomberg Intelligence Show, we dig inside the big 12 00:00:45,600 --> 00:00:47,839 Speaker 1: business stories impacting Wall Street and the global markets. 13 00:00:47,960 --> 00:00:49,880 Speaker 3: Each and every week we provide in depth research and 14 00:00:49,960 --> 00:00:51,760 Speaker 3: data on some of the two thousand companies and one 15 00:00:51,800 --> 00:00:54,480 Speaker 3: hundred and thirty industries our analysts cover worldwide. 16 00:00:54,600 --> 00:00:56,760 Speaker 1: Today, well look at why New York Community Bank posted 17 00:00:56,800 --> 00:00:58,640 Speaker 1: earnings that were better than analyst feared. 18 00:00:58,720 --> 00:01:01,360 Speaker 3: Plus we'll discuss how McDonald sales are being impacted by 19 00:01:01,400 --> 00:01:02,400 Speaker 3: war in the Middle East. 20 00:01:02,520 --> 00:01:05,640 Speaker 1: But first we dive into big tech and Amazon. Amazon's 21 00:01:05,680 --> 00:01:08,160 Speaker 1: cloud unit posted the strongest sales growth in a year. 22 00:01:08,319 --> 00:01:10,720 Speaker 3: It's really a sign that the retailer's most profitable unit 23 00:01:10,760 --> 00:01:13,720 Speaker 3: is recovering from a slump as businesses resume spending on 24 00:01:13,800 --> 00:01:16,360 Speaker 3: technology products, including AI services. 25 00:01:16,720 --> 00:01:19,640 Speaker 1: Despite this, Amazon sales forecast for the current quarter fell 26 00:01:19,680 --> 00:01:23,040 Speaker 1: short of analyst expectations, reflecting concern about the main e 27 00:01:23,080 --> 00:01:23,880 Speaker 1: commerce business. 28 00:01:23,920 --> 00:01:25,560 Speaker 3: From where We're doing Now by Anna ag Ran on 29 00:01:25,600 --> 00:01:28,480 Speaker 3: Bloomberg Intelligence Technology Analysts. We first asked him for his 30 00:01:28,560 --> 00:01:29,320 Speaker 3: big takeaway. 31 00:01:29,760 --> 00:01:32,399 Speaker 4: I think the big spike in AWS profit is something 32 00:01:32,400 --> 00:01:35,039 Speaker 4: that really alarmed us because you know, that was a 33 00:01:35,120 --> 00:01:38,040 Speaker 4: number we weren't expecting for I honestly a few years. 34 00:01:38,319 --> 00:01:41,679 Speaker 4: So if you look at it, AWS margins, operating margins 35 00:01:41,720 --> 00:01:44,679 Speaker 4: came close to thirty seven thirty eight percent, little over 36 00:01:44,760 --> 00:01:47,720 Speaker 4: thirty seven, and that was like eight points or eight 37 00:01:47,720 --> 00:01:50,880 Speaker 4: percentage points higher than what Street was looking for and 38 00:01:51,000 --> 00:01:55,160 Speaker 4: fourteen percentage points over last year. Absolutely phenomenal. I think 39 00:01:55,200 --> 00:01:58,360 Speaker 4: that's really what I am hoping that you know, investors 40 00:01:58,400 --> 00:02:00,440 Speaker 4: are focused on rather than all the other things. 41 00:02:00,680 --> 00:02:02,600 Speaker 1: All right, and give us a sense if we just 42 00:02:02,640 --> 00:02:05,120 Speaker 1: step back, give us kind of the market share layout. 43 00:02:05,160 --> 00:02:07,160 Speaker 1: How does this market look between some of these big 44 00:02:07,160 --> 00:02:09,440 Speaker 1: players like Microsoft, Google and Amazon. 45 00:02:10,440 --> 00:02:13,200 Speaker 4: So Amazon only plays on the infrastructure layer, which is 46 00:02:13,480 --> 00:02:16,320 Speaker 4: trying to give people raw material to build their applications. 47 00:02:16,720 --> 00:02:19,480 Speaker 4: And when that they have a commanding market share over 48 00:02:19,520 --> 00:02:22,480 Speaker 4: forty percent of the market, and in fact that they 49 00:02:22,520 --> 00:02:24,200 Speaker 4: have maintained that for a while, I mean, which is 50 00:02:24,200 --> 00:02:27,560 Speaker 4: surprising because Microsoft has been gaining share on it, you know, 51 00:02:27,639 --> 00:02:30,760 Speaker 4: for a very long period of time, but from smaller players. 52 00:02:30,760 --> 00:02:33,840 Speaker 4: And also the market's growing very much. So Amazon's currently 53 00:02:33,880 --> 00:02:36,400 Speaker 4: at you know, revenue off over one hundred billion dollars 54 00:02:36,440 --> 00:02:38,359 Speaker 4: in this market, but over. 55 00:02:38,240 --> 00:02:39,959 Speaker 5: To all tech spending is you know, north. 56 00:02:39,720 --> 00:02:42,560 Speaker 4: Of two trillion, frankly, so there's a lot of room 57 00:02:42,600 --> 00:02:46,360 Speaker 4: to grow for everybody, not just Amazon, but Amazon, Microsoft, Google, 58 00:02:47,080 --> 00:02:49,040 Speaker 4: you know, even Oracle, I mean, all of them will 59 00:02:49,080 --> 00:02:49,960 Speaker 4: grow in this market. 60 00:02:50,560 --> 00:02:52,600 Speaker 3: So if we take a look at the different layers 61 00:02:52,800 --> 00:02:57,359 Speaker 3: of how AI kind of plays into cloud, the one 62 00:02:57,400 --> 00:03:00,639 Speaker 3: area where Amazon maybe isn't getting as monch market share 63 00:03:00,680 --> 00:03:04,040 Speaker 3: and maybe they're still developing that is the consumer facing side. 64 00:03:04,720 --> 00:03:07,720 Speaker 3: What can they do there? What is their growth opportunity there? 65 00:03:08,040 --> 00:03:09,960 Speaker 4: Yeah, I mean they have a lot of you know, 66 00:03:09,960 --> 00:03:12,080 Speaker 4: I would say some apps that are working on it, 67 00:03:12,120 --> 00:03:15,160 Speaker 4: but really the reason why Microsoft is ahead right now 68 00:03:15,200 --> 00:03:17,760 Speaker 4: in that game is because of open Ai. They have 69 00:03:17,800 --> 00:03:20,440 Speaker 4: a partnership with open Ai, and they run open AI's 70 00:03:20,480 --> 00:03:22,519 Speaker 4: back end, which is when you do a search and 71 00:03:22,600 --> 00:03:25,720 Speaker 4: chat GPT, Microsoft is running those searchers in the background 72 00:03:26,440 --> 00:03:28,880 Speaker 4: or you know, the application runs on it, which is 73 00:03:28,880 --> 00:03:32,040 Speaker 4: why Microsoft is getting the benefit of it. For AWS, 74 00:03:32,080 --> 00:03:34,520 Speaker 4: the big benefit is going to come from companies or 75 00:03:34,560 --> 00:03:37,880 Speaker 4: big corporations when they go out and build their AI applications. 76 00:03:38,120 --> 00:03:40,080 Speaker 5: There's a high likelihood they're going to choose. 77 00:03:39,920 --> 00:03:43,160 Speaker 4: AWS as much as they're going to choose Microsoft or Google. 78 00:03:43,440 --> 00:03:45,240 Speaker 4: And that's really what Amazon's betting on. 79 00:03:45,680 --> 00:03:49,800 Speaker 1: So you mentioned the margins, high margins at AWS. Can 80 00:03:49,800 --> 00:03:52,520 Speaker 1: they maintain those margins? What are the risks for those margins? 81 00:03:53,160 --> 00:03:55,120 Speaker 4: Yeah, I don't think they can maintain them, only because 82 00:03:55,160 --> 00:03:57,080 Speaker 4: they have to spend a fair amount of money in 83 00:03:57,160 --> 00:04:01,360 Speaker 4: order to you know, fulfill the demand expanding in data centers, 84 00:04:01,400 --> 00:04:04,680 Speaker 4: buying new hardware, buying chips. So I'd be very surprised 85 00:04:04,680 --> 00:04:06,600 Speaker 4: if you see that number again for a very long 86 00:04:06,640 --> 00:04:07,280 Speaker 4: period of time. 87 00:04:07,520 --> 00:04:07,720 Speaker 6: You know. 88 00:04:07,840 --> 00:04:10,440 Speaker 4: Frankly speaking, I'll be happy with the thirty percent margin 89 00:04:10,520 --> 00:04:12,800 Speaker 4: for the next several years while they make sure that 90 00:04:12,840 --> 00:04:16,320 Speaker 4: they're doing the right investments to drive double digit growth 91 00:04:16,440 --> 00:04:17,480 Speaker 4: rate on their top line. 92 00:04:17,600 --> 00:04:19,560 Speaker 3: Let's talk about those investments. So they said they're going 93 00:04:19,600 --> 00:04:23,080 Speaker 3: to quote meaningfully step up their capex to pay for 94 00:04:23,160 --> 00:04:25,640 Speaker 3: all this AI infrastructure. But there was no like number 95 00:04:25,640 --> 00:04:29,040 Speaker 3: given when Meta said that market didn't like it. What 96 00:04:29,120 --> 00:04:31,440 Speaker 3: was the pass here that Amazon got? 97 00:04:32,279 --> 00:04:35,360 Speaker 4: Yeah, but you know, Amazon's basically showcasing that they actually 98 00:04:35,400 --> 00:04:38,360 Speaker 4: have been doing this successfully in terms of expanding data 99 00:04:38,360 --> 00:04:41,880 Speaker 4: centers based on the capacity, so you know, before going in, 100 00:04:42,360 --> 00:04:45,360 Speaker 4: you know, they had close to fifteen billion dollars yesterday 101 00:04:45,960 --> 00:04:48,719 Speaker 4: in the first quarter in terms of capex, and it's 102 00:04:48,760 --> 00:04:51,760 Speaker 4: going to go up over the next quarter. So we 103 00:04:51,880 --> 00:04:53,839 Speaker 4: think it's going to be north of sixty five billion 104 00:04:53,880 --> 00:04:56,599 Speaker 4: at this point for all of Amazon, with most of 105 00:04:56,640 --> 00:04:58,000 Speaker 4: it going to AWS. 106 00:04:58,320 --> 00:04:59,479 Speaker 5: But there's a reason for it. 107 00:04:59,520 --> 00:05:03,440 Speaker 4: They are in contracts to fulfill cloud demand or you know, 108 00:05:03,480 --> 00:05:06,200 Speaker 4: they need to be able to expand that to fulfill 109 00:05:06,240 --> 00:05:07,360 Speaker 4: that massive cloud demand. 110 00:05:07,640 --> 00:05:08,120 Speaker 5: An rug. 111 00:05:08,279 --> 00:05:10,320 Speaker 1: You know what I did not see an Amazon's report 112 00:05:10,440 --> 00:05:11,120 Speaker 1: a dividend. 113 00:05:11,320 --> 00:05:11,800 Speaker 7: Why is that? 114 00:05:12,480 --> 00:05:12,720 Speaker 5: Yeah? 115 00:05:12,760 --> 00:05:14,480 Speaker 4: I mean I I you know, again, they're going to 116 00:05:14,560 --> 00:05:17,679 Speaker 4: spend that sixty five billion dollars next year on capex also, 117 00:05:18,040 --> 00:05:20,479 Speaker 4: so I'm I'm okay with not having a dividend for 118 00:05:20,480 --> 00:05:22,400 Speaker 4: a while. I would rather you're a tech animals. 119 00:05:22,520 --> 00:05:25,040 Speaker 1: You guys think that if you if you put out 120 00:05:25,040 --> 00:05:27,240 Speaker 1: a dividend, it's signals that you're no longer a growth story. 121 00:05:27,760 --> 00:05:30,200 Speaker 5: Yeah, it's a kiss of death. I'm not a big fan. 122 00:05:30,400 --> 00:05:33,160 Speaker 3: Not Microsoft, Google. They disagree with you. 123 00:05:35,040 --> 00:05:37,680 Speaker 4: Yeahb IBM kind of agrees with me at this point 124 00:05:37,720 --> 00:05:40,640 Speaker 4: of that. So look at IBM. I mean, they have 125 00:05:40,680 --> 00:05:43,480 Speaker 4: a massive dividend yield. I would rather they you know, 126 00:05:43,520 --> 00:05:45,680 Speaker 4: they take that money and buy a bunch of new 127 00:05:45,720 --> 00:05:48,360 Speaker 4: Hashi corpse kind of companies that are growing at fifteen 128 00:05:48,360 --> 00:05:50,920 Speaker 4: to twenty percent. That will change the face of the company, 129 00:05:50,960 --> 00:05:52,920 Speaker 4: make them, you know, even more relevant in the tech 130 00:05:52,960 --> 00:05:53,560 Speaker 4: space than. 131 00:05:53,400 --> 00:05:54,239 Speaker 5: They are right now. 132 00:05:54,440 --> 00:05:57,000 Speaker 4: So I'm always in that camp that when you are 133 00:05:57,040 --> 00:06:00,599 Speaker 4: a tech company, you got to constantly reinvent yourself otherwise 134 00:06:00,600 --> 00:06:01,880 Speaker 4: somebody will come and eat your lunch. 135 00:06:01,880 --> 00:06:04,120 Speaker 1: I mean, on Rock and I we just fundamentally disagree 136 00:06:04,120 --> 00:06:05,840 Speaker 1: on this. We agree to disagree. We go to our 137 00:06:05,880 --> 00:06:06,520 Speaker 1: separate corners. 138 00:06:06,560 --> 00:06:08,159 Speaker 3: Can I ask a dumb question for the two of you, 139 00:06:08,200 --> 00:06:09,840 Speaker 3: then is there room for both of you to be right? 140 00:06:10,000 --> 00:06:10,080 Speaker 8: Like? 141 00:06:10,320 --> 00:06:12,560 Speaker 3: Can these tech companies throw off enough cash they can 142 00:06:12,600 --> 00:06:15,000 Speaker 3: reinvest in a healthy way and also pay a dividend. 143 00:06:15,240 --> 00:06:18,919 Speaker 4: Yes on our own Yes, yes, absolutely, Alex, I completely 144 00:06:18,960 --> 00:06:21,200 Speaker 4: agree with that because what happens is if you give 145 00:06:21,240 --> 00:06:24,800 Speaker 4: a very small token dividend, it opens the doors to 146 00:06:24,880 --> 00:06:28,080 Speaker 4: a lot of institutional investors that are bound by their 147 00:06:28,520 --> 00:06:31,120 Speaker 4: charter to only invest in companies that pay are dividend. 148 00:06:31,279 --> 00:06:33,440 Speaker 4: So there is a logical reason to do it. But 149 00:06:33,720 --> 00:06:35,480 Speaker 4: I'm okay with Amazon. It's going to take a year 150 00:06:35,600 --> 00:06:36,520 Speaker 4: or two years to get to. 151 00:06:36,520 --> 00:06:37,800 Speaker 5: That path, all right. 152 00:06:37,839 --> 00:06:38,640 Speaker 3: So there's a whorl where you. 153 00:06:38,640 --> 00:06:39,160 Speaker 6: Can both be ready. 154 00:06:39,200 --> 00:06:41,320 Speaker 1: We can there's a place where we can meet in them. 155 00:06:41,680 --> 00:06:44,520 Speaker 3: Is there a capex number that you wouldn't like from Amazon? 156 00:06:44,680 --> 00:06:45,440 Speaker 3: They didn't give a. 157 00:06:45,440 --> 00:06:48,599 Speaker 4: Number now, not at this point. The only reason is 158 00:06:48,640 --> 00:06:51,440 Speaker 4: because we see forward contracts. As of this morning, when 159 00:06:51,480 --> 00:06:53,839 Speaker 4: they filed their ten Q, we saw cloud commitments go 160 00:06:53,960 --> 00:06:55,040 Speaker 4: up twenty nine percent. 161 00:06:55,279 --> 00:06:56,640 Speaker 5: I mean that's a very big number. 162 00:06:56,720 --> 00:07:00,440 Speaker 4: And frankly, when on the enterprise side, we haven't seen 163 00:07:00,600 --> 00:07:03,560 Speaker 4: orders coming for AI at this point. AI orders are 164 00:07:03,560 --> 00:07:07,400 Speaker 4: only coming in from consumer applications like CHACKGBT, people running 165 00:07:07,400 --> 00:07:09,680 Speaker 4: that at this point, over the next few years, we 166 00:07:09,720 --> 00:07:12,960 Speaker 4: should see a massive spike in you know, people creating 167 00:07:13,000 --> 00:07:17,040 Speaker 4: new applications or companies creating new applications, and that's going 168 00:07:17,080 --> 00:07:20,560 Speaker 4: to only drive more growth for AWS, Microsoft and Google. 169 00:07:20,800 --> 00:07:24,720 Speaker 1: Our thanks to Anaagrana, Bloomberg Intelligence technology analyst. 170 00:07:24,160 --> 00:07:27,040 Speaker 3: We move next to the EV space in Tesla CEO 171 00:07:27,080 --> 00:07:29,680 Speaker 3: Elon Musk recently paid a quick visit to China and 172 00:07:29,680 --> 00:07:32,040 Speaker 3: it paid immediate dividends for the ev giant. 173 00:07:32,320 --> 00:07:35,840 Speaker 1: Tesla received an in principle approval from government officials to 174 00:07:35,880 --> 00:07:39,760 Speaker 1: deploy its driver assistance system in China. Also reached the 175 00:07:39,840 --> 00:07:43,000 Speaker 1: mapping navigation deal with Chinese tech giant Bydo, and met 176 00:07:43,000 --> 00:07:46,320 Speaker 1: requirements for how it handles data security and privacy issues. 177 00:07:46,040 --> 00:07:47,480 Speaker 3: From more on all of this, we were joined by 178 00:07:47,520 --> 00:07:50,760 Speaker 3: Craig Drudell, Bloomberg Global Autos Editor. Craig began by telling 179 00:07:50,840 --> 00:07:52,920 Speaker 3: us that his tentative China deal has been in the 180 00:07:52,920 --> 00:07:53,760 Speaker 3: works for some time. 181 00:07:54,160 --> 00:07:56,560 Speaker 9: It wasn't necessarily the case that this was, you know, 182 00:07:56,640 --> 00:07:59,320 Speaker 9: kind of an overnight saying, actually, the last time that 183 00:07:59,440 --> 00:08:02,520 Speaker 9: Musk was in China, this was something that we reported 184 00:08:02,560 --> 00:08:04,960 Speaker 9: at the time was on the agenda. It's been something 185 00:08:05,000 --> 00:08:08,040 Speaker 9: that Tesla has been after for quite some time, and 186 00:08:08,080 --> 00:08:11,720 Speaker 9: it's increasingly a way that you know carmakers are competing 187 00:08:11,760 --> 00:08:15,080 Speaker 9: in China is you know, how advanced is your driver 188 00:08:15,160 --> 00:08:17,960 Speaker 9: assistant system. You know that that keeps you from crashing, 189 00:08:18,040 --> 00:08:20,760 Speaker 9: that keeps you in your lane, that allows you in 190 00:08:20,800 --> 00:08:23,280 Speaker 9: some cases to take your hands off the wheel. But 191 00:08:23,560 --> 00:08:27,520 Speaker 9: in all cases, you know you absolutely are responsible for 192 00:08:27,520 --> 00:08:31,080 Speaker 9: for you know, the car, and you know no companies 193 00:08:31,240 --> 00:08:35,520 Speaker 9: are are taking responsibility legal responsibility if if you get 194 00:08:35,559 --> 00:08:38,559 Speaker 9: into a craft, you know, with the exception of of 195 00:08:38,679 --> 00:08:41,160 Speaker 9: some you know, very small sort of limited fleets and 196 00:08:41,600 --> 00:08:45,520 Speaker 9: contained areas, and you know there are quirks as you 197 00:08:45,600 --> 00:08:49,120 Speaker 9: might imagine, you know, by market for what is required 198 00:08:49,160 --> 00:08:51,679 Speaker 9: to be able to offer these systems that really need 199 00:08:51,760 --> 00:08:54,400 Speaker 9: to be safe and also need to have, you know, 200 00:08:54,480 --> 00:08:58,520 Speaker 9: controls for data collection and and you know, the cameras 201 00:08:58,640 --> 00:09:02,880 Speaker 9: used to navigate the surroundings that these cars are going 202 00:09:02,960 --> 00:09:05,920 Speaker 9: to need to to pilot around. And that's been a 203 00:09:05,960 --> 00:09:09,800 Speaker 9: hang up for Tesla and other international companies that you know, 204 00:09:09,840 --> 00:09:13,400 Speaker 9: they need to in all cases work with local Chinese 205 00:09:13,400 --> 00:09:17,559 Speaker 9: companies for things like mapping and navigation. So one of 206 00:09:17,640 --> 00:09:19,880 Speaker 9: the key sort of you know, takeaways from this trip 207 00:09:20,320 --> 00:09:26,400 Speaker 9: was Tesla agreeing to do that with bayd in China. 208 00:09:25,760 --> 00:09:28,000 Speaker 3: So who owns the stuff it. 209 00:09:27,960 --> 00:09:31,480 Speaker 9: Is importantly you know, it's a matter of ownership and 210 00:09:31,640 --> 00:09:34,160 Speaker 9: where it's kept. And so you know, this has come 211 00:09:34,240 --> 00:09:37,920 Speaker 9: up years ago. Actually, Tesla had a bit of a 212 00:09:37,960 --> 00:09:40,800 Speaker 9: hang up where their cars were banned from you know, 213 00:09:40,880 --> 00:09:44,560 Speaker 9: being in the area of military compounds and other sort 214 00:09:44,600 --> 00:09:47,560 Speaker 9: of sensitive parts of kind of out of concerns about 215 00:09:47,600 --> 00:09:51,440 Speaker 9: you know, any information that cars were gathering, and you know, 216 00:09:51,480 --> 00:09:54,480 Speaker 9: there were concerns about whether any data was going from 217 00:09:54,600 --> 00:09:58,680 Speaker 9: Tesla's China operations back to the US, and so Tesla 218 00:09:58,800 --> 00:10:02,040 Speaker 9: needed to sort of rea kinda that you know, any 219 00:10:02,160 --> 00:10:05,640 Speaker 9: data collected in China will stay in China, and so 220 00:10:05,720 --> 00:10:08,160 Speaker 9: that has been you know, something that they've had this 221 00:10:08,280 --> 00:10:11,360 Speaker 9: sort of acquiesce to as of you know, several years ago. 222 00:10:12,040 --> 00:10:14,960 Speaker 9: But they needed to still sort of you know, clear 223 00:10:15,240 --> 00:10:18,160 Speaker 9: you know, approval for you know, making sure that their 224 00:10:18,280 --> 00:10:20,559 Speaker 9: teas were crossed and eyes were dotted in that respect, 225 00:10:20,800 --> 00:10:23,319 Speaker 9: and they needed this deal with BAYD. It does seem 226 00:10:23,360 --> 00:10:24,920 Speaker 9: to be the case that they need to meet other 227 00:10:25,080 --> 00:10:29,800 Speaker 9: conditions in order for FSD to be offered in China. 228 00:10:29,840 --> 00:10:33,120 Speaker 9: It's still not a done deal, but what you know, 229 00:10:33,400 --> 00:10:35,439 Speaker 9: sort of hoops they still have to jump through are 230 00:10:35,559 --> 00:10:36,800 Speaker 9: a bit unclear at this point. 231 00:10:36,960 --> 00:10:40,240 Speaker 1: So how does this change, if at all, kind of 232 00:10:40,280 --> 00:10:43,080 Speaker 1: the competitive landscape for Tesla in China. I know, you 233 00:10:43,080 --> 00:10:44,880 Speaker 1: guys have been reporting a lot of how some of 234 00:10:44,880 --> 00:10:49,000 Speaker 1: the local ev makers have really become very good and 235 00:10:49,120 --> 00:10:49,840 Speaker 1: very competitive. 236 00:10:50,360 --> 00:10:54,120 Speaker 9: Yeah, I think it absolutely is something that's been missing 237 00:10:54,160 --> 00:10:57,720 Speaker 9: for Tesla that, assuming all goes well here, it will 238 00:10:57,760 --> 00:11:00,679 Speaker 9: no longer be a sort of strike against them among 239 00:11:00,760 --> 00:11:04,319 Speaker 9: consumers who really, you know, want the most cutting edge technology. 240 00:11:04,840 --> 00:11:07,040 Speaker 9: It remains to be seen how big a deal it 241 00:11:07,040 --> 00:11:09,920 Speaker 9: will be for Tesla from a revenue standpoint, because we 242 00:11:09,960 --> 00:11:12,160 Speaker 9: don't know at this point how much Tesla will be 243 00:11:12,160 --> 00:11:15,080 Speaker 9: looking to charge for it. We don't know, you know, 244 00:11:15,120 --> 00:11:17,320 Speaker 9: to what extent they may have to share some revenue 245 00:11:17,320 --> 00:11:19,439 Speaker 9: with some of their partners. It's not clear whether by 246 00:11:19,440 --> 00:11:21,640 Speaker 9: do maybe gets a cut. You know, in the US, 247 00:11:22,240 --> 00:11:25,559 Speaker 9: Tesla and you know throughout the world, Tesla has made 248 00:11:25,600 --> 00:11:27,560 Speaker 9: a point to really be you know, want to be 249 00:11:27,679 --> 00:11:31,480 Speaker 9: vertically integrated, and that's you know, fancy talk for in 250 00:11:31,520 --> 00:11:34,400 Speaker 9: control of its own destiny. Uh, they were willing to 251 00:11:34,559 --> 00:11:37,560 Speaker 9: sort of acquiesce in this case, I think because they 252 00:11:37,880 --> 00:11:40,920 Speaker 9: really could use this boost in China at a time 253 00:11:40,960 --> 00:11:43,440 Speaker 9: when their lineup is getting a bit tired and they're 254 00:11:43,480 --> 00:11:46,959 Speaker 9: losing a lot of market share to companies like byd Well. 255 00:11:47,000 --> 00:11:48,920 Speaker 3: This also raises the question too, it doesn't take a 256 00:11:48,960 --> 00:11:52,400 Speaker 3: lot of news to get Tesla stock moving, not that 257 00:11:52,480 --> 00:11:54,280 Speaker 3: a trip to China wasn't a big deal, but like 258 00:11:54,320 --> 00:11:56,440 Speaker 3: you said, there's so many questions as to the actual 259 00:11:56,480 --> 00:11:58,800 Speaker 3: revenue driver and what it's going to mean. 260 00:11:58,920 --> 00:12:00,480 Speaker 7: I mean, you have to wonder is. 261 00:12:00,440 --> 00:12:02,160 Speaker 3: Not going to take a lot for any kind of 262 00:12:02,200 --> 00:12:03,640 Speaker 3: shorts Craig to cover. 263 00:12:04,040 --> 00:12:06,720 Speaker 9: I think that's right. And this is also a name 264 00:12:06,760 --> 00:12:11,240 Speaker 9: that you know, options traders absolutely love. It's it's sort 265 00:12:11,240 --> 00:12:13,400 Speaker 9: of like the meme stock that has lasted as a 266 00:12:13,440 --> 00:12:16,640 Speaker 9: meme stock as that craze has sort of faded away. 267 00:12:17,120 --> 00:12:20,640 Speaker 9: And so you know, anytime to your point, you know, 268 00:12:20,800 --> 00:12:23,800 Speaker 9: Musk is able to sort of get the momentum with 269 00:12:23,920 --> 00:12:27,480 Speaker 9: you know, the narrative, it tends to lead to big swings. 270 00:12:27,520 --> 00:12:29,720 Speaker 9: So you know, early this year, I think he lost 271 00:12:29,920 --> 00:12:33,080 Speaker 9: control of that narrative. And it's not at all a 272 00:12:33,120 --> 00:12:35,160 Speaker 9: mystery as to why that is, you know, looking at 273 00:12:35,240 --> 00:12:38,000 Speaker 9: last week's earnings, but I think he was really able 274 00:12:38,000 --> 00:12:40,880 Speaker 9: to sort of change what people were talking about last week. 275 00:12:41,080 --> 00:12:43,640 Speaker 9: We'll see whether or not, you know, this is mostly 276 00:12:43,720 --> 00:12:46,920 Speaker 9: talk as opposed to you know, going to lead to real, 277 00:12:47,000 --> 00:12:50,839 Speaker 9: sort of meaningful change in Tesla's earnings trajectory, which has 278 00:12:50,920 --> 00:12:52,320 Speaker 9: not been trending in the right direction. 279 00:12:52,760 --> 00:12:55,559 Speaker 1: Our thanks to Craig Trudell, Bloomberg Global Autos Editor. 280 00:12:55,760 --> 00:12:57,160 Speaker 3: All right, coming up, we're going to break down why 281 00:12:57,240 --> 00:12:59,760 Speaker 3: McDonald's is now looking to focus on affordable prices in 282 00:12:59,760 --> 00:13:00,000 Speaker 3: the US. 283 00:13:00,440 --> 00:13:03,280 Speaker 1: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 284 00:13:03,320 --> 00:13:05,760 Speaker 1: depth research and data on two thousand companies from one 285 00:13:05,840 --> 00:13:08,760 Speaker 1: hundred and thirty industries. You can access Bloomberg Intelligence via 286 00:13:08,840 --> 00:13:10,160 Speaker 1: b I go on the terminal. 287 00:13:10,280 --> 00:13:13,240 Speaker 3: I'm Paul Sweeney, a Mlex Steel, and this is Bloomberg. 288 00:13:17,720 --> 00:13:22,160 Speaker 2: This is Bloomberg Intelligence with Alex Steel and Paul Sweeney 289 00:13:22,440 --> 00:13:23,679 Speaker 2: on Bloomberg Radio. 290 00:13:24,720 --> 00:13:27,200 Speaker 3: We look next at the food service industry. At McDonald's, 291 00:13:27,200 --> 00:13:29,640 Speaker 3: the fast food chain's quarterly sales fell short of analysts 292 00:13:29,640 --> 00:13:32,360 Speaker 3: expectations in the first quarter, and results were hurt by 293 00:13:32,360 --> 00:13:34,920 Speaker 3: slow and growth in the US and Boycott's related to 294 00:13:34,920 --> 00:13:36,000 Speaker 3: the Israel Hamas war. 295 00:13:36,360 --> 00:13:39,320 Speaker 1: The restaurant chain now looks to focus on affordable prices 296 00:13:39,320 --> 00:13:41,160 Speaker 1: in the US for more and all this, we were 297 00:13:41,200 --> 00:13:44,800 Speaker 1: joined by Michael Halen, Bloomberg Intelligence Senior restaurant and food 298 00:13:44,840 --> 00:13:47,720 Speaker 1: service analyst. We first asked Michael for his reaction to 299 00:13:47,800 --> 00:13:49,400 Speaker 1: McDonald's quarterly it results. 300 00:13:49,679 --> 00:13:52,360 Speaker 10: I'd say the biggest takeaway was, you know, the fact 301 00:13:52,400 --> 00:13:55,640 Speaker 10: that April's flat so far in the United States. That's 302 00:13:55,840 --> 00:13:59,000 Speaker 10: trailing the industry level, you know the industry data that 303 00:13:59,040 --> 00:14:02,720 Speaker 10: we get so and also you know, Burger King showed 304 00:14:02,760 --> 00:14:05,720 Speaker 10: an acceleration in the US and their US numbers, so 305 00:14:06,080 --> 00:14:08,120 Speaker 10: I would say that was the biggest surprise. You know, 306 00:14:08,480 --> 00:14:12,599 Speaker 10: McDonald's still on a five year trend, is vastly outperforming 307 00:14:12,640 --> 00:14:15,480 Speaker 10: Burger King almost the other quick service names, but there 308 00:14:15,520 --> 00:14:17,959 Speaker 10: seems to be some slowing if I was to guess 309 00:14:18,000 --> 00:14:21,280 Speaker 10: some of that bad press around the eighteen dollars big 310 00:14:21,320 --> 00:14:23,920 Speaker 10: mac meal in some markets, you know, could be hurting 311 00:14:23,960 --> 00:14:27,600 Speaker 10: because we are seeing US consumers really push back against 312 00:14:27,600 --> 00:14:30,720 Speaker 10: price increases right now, and they're being more picky about 313 00:14:30,720 --> 00:14:31,760 Speaker 10: where they spend their money. 314 00:14:32,280 --> 00:14:35,200 Speaker 1: Mike, I see just in the Bloomberg reporting here. Executives 315 00:14:35,480 --> 00:14:38,040 Speaker 1: have also said that low income consumers in the US, 316 00:14:38,120 --> 00:14:40,040 Speaker 1: which is an important part of the company's customer base 317 00:14:40,320 --> 00:14:42,480 Speaker 1: are pulling back. That does that mean we're going to 318 00:14:42,520 --> 00:14:45,400 Speaker 1: see more promotions which might put pressure on the margins. 319 00:14:45,840 --> 00:14:48,120 Speaker 10: Yeah, McDonald's has come out and said they're going to 320 00:14:48,160 --> 00:14:50,520 Speaker 10: focus more on their value menu. They're going to continue 321 00:14:50,560 --> 00:14:52,400 Speaker 10: to offer promotions, a lot of them. 322 00:14:52,200 --> 00:14:53,040 Speaker 7: Through the apps. 323 00:14:53,440 --> 00:14:56,600 Speaker 10: So it looks like a full on value war is here. 324 00:14:56,720 --> 00:14:59,320 Speaker 10: I mean, Burger King Borg Kings could be a little 325 00:14:59,360 --> 00:15:03,040 Speaker 10: bit more careful with their discounting because in the last 326 00:15:03,040 --> 00:15:05,560 Speaker 10: five years or so they've gotten too aggressive and it 327 00:15:05,720 --> 00:15:09,560 Speaker 10: hurt franchising margins. So they kind of hoopooed that a 328 00:15:09,560 --> 00:15:11,920 Speaker 10: little bit. But we think a full blown value war 329 00:15:12,160 --> 00:15:14,360 Speaker 10: is here and it's on the table for twenty twenty four. 330 00:15:14,520 --> 00:15:17,080 Speaker 3: So does the value war take into account a bigger burger? 331 00:15:17,320 --> 00:15:17,920 Speaker 3: Is that the deal? 332 00:15:18,360 --> 00:15:19,160 Speaker 5: Well? Value? 333 00:15:19,440 --> 00:15:21,520 Speaker 10: You know, it's measured in a couple of ways. It's 334 00:15:21,560 --> 00:15:23,760 Speaker 10: not just the price, but it's what you get for 335 00:15:23,800 --> 00:15:27,680 Speaker 10: the price, right, And so I'm sure McDonald's has done 336 00:15:27,680 --> 00:15:31,600 Speaker 10: their legwork and they have some customer feedback that says 337 00:15:31,760 --> 00:15:34,440 Speaker 10: that they want some Bigger burgers on their menu, and 338 00:15:34,480 --> 00:15:36,840 Speaker 10: so that's going to be interesting. They said they're going 339 00:15:36,920 --> 00:15:39,080 Speaker 10: to start testing it in the second half of this year, 340 00:15:39,200 --> 00:15:42,440 Speaker 10: so it may not hit the United States for quite 341 00:15:42,440 --> 00:15:44,720 Speaker 10: some time. But yeah, there's a couple of ways to 342 00:15:45,080 --> 00:15:46,000 Speaker 10: measure value. 343 00:15:46,200 --> 00:15:48,600 Speaker 1: Hey, Mike, what are the McDonald's of the world, and 344 00:15:48,640 --> 00:15:50,360 Speaker 1: you know, the other restaurant companies you talked to, what 345 00:15:50,400 --> 00:15:54,040 Speaker 1: are they saying about these GLP one drugs? Are they 346 00:15:54,240 --> 00:15:56,320 Speaker 1: really going to impact their business? 347 00:15:56,800 --> 00:15:59,360 Speaker 10: You know, I don't think there's too much worry about 348 00:15:59,360 --> 00:16:01,680 Speaker 10: that anymore. I know that was a big thing last 349 00:16:01,760 --> 00:16:04,680 Speaker 10: summer and into the fall, and it really impacted the 350 00:16:05,000 --> 00:16:07,520 Speaker 10: prices of some of these quick service restaurant chain stocks, 351 00:16:07,600 --> 00:16:11,280 Speaker 10: especially McDonald's. But I've seen a lot of different reports 352 00:16:11,320 --> 00:16:14,040 Speaker 10: out there, and you know, the amount of people on 353 00:16:14,160 --> 00:16:17,720 Speaker 10: these drugs ranges from you know, seven to twelve or 354 00:16:17,840 --> 00:16:20,960 Speaker 10: maybe fifteen percent best case if once they get to 355 00:16:21,040 --> 00:16:23,760 Speaker 10: like maybe a pill form instead of a shot, you know, 356 00:16:24,080 --> 00:16:27,080 Speaker 10: and we don't know about long term side effects from 357 00:16:27,120 --> 00:16:29,960 Speaker 10: some of these drugs, So I think initially there was 358 00:16:30,000 --> 00:16:33,760 Speaker 10: some concern, but over time McDonald's and these other chains, 359 00:16:33,800 --> 00:16:36,120 Speaker 10: they're going to figure out how to make a seven 360 00:16:36,200 --> 00:16:39,880 Speaker 10: to twelve percent smaller cheeseburger. Right They're getting smaller anyway, 361 00:16:39,920 --> 00:16:43,080 Speaker 10: because there's a historical situation in the cattle market right now, 362 00:16:43,120 --> 00:16:45,800 Speaker 10: and so beef prices are going to continue to stay 363 00:16:45,840 --> 00:16:48,000 Speaker 10: elevated in here for a couple of years, and so 364 00:16:48,560 --> 00:16:52,280 Speaker 10: chains are already starting to try to, you know, solve 365 00:16:52,320 --> 00:16:56,120 Speaker 10: for some of these problems, you know, ahead of broader adoption. 366 00:16:56,440 --> 00:16:58,160 Speaker 3: Yeah, I mean you have to think that translation is 367 00:16:58,160 --> 00:17:00,280 Speaker 3: going to hit in many different ways. But before we 368 00:17:00,360 --> 00:17:02,560 Speaker 3: let you go, we have about a minute left. So 369 00:17:02,840 --> 00:17:04,960 Speaker 3: who wins the value war right now? Based on what 370 00:17:05,000 --> 00:17:05,440 Speaker 3: you've seen. 371 00:17:05,760 --> 00:17:09,479 Speaker 10: It's interesting because you know McDonald's historically has and so 372 00:17:09,520 --> 00:17:14,040 Speaker 10: that's what's most interesting about them underperforming in April. Burger 373 00:17:14,119 --> 00:17:18,439 Speaker 10: King is an interesting one because you know, they have 374 00:17:18,560 --> 00:17:22,760 Speaker 10: easier comps. They struggled coming out of the pandemic for 375 00:17:22,800 --> 00:17:25,560 Speaker 10: a few years, right, and so they have easier comparisons 376 00:17:25,600 --> 00:17:28,240 Speaker 10: to lap lower average unit volumes at the store level, 377 00:17:28,280 --> 00:17:32,720 Speaker 10: and so there's room for some upside there. Chipotle absolutely 378 00:17:32,720 --> 00:17:36,000 Speaker 10: continues to knock the cover off the ball, and you 379 00:17:36,040 --> 00:17:38,960 Speaker 10: know McDonald's has scale, right, and so when they really 380 00:17:38,960 --> 00:17:42,159 Speaker 10: start pushing on value, everyone else is going to feel it. 381 00:17:42,200 --> 00:17:46,200 Speaker 10: So so you know, I'm confident that McDonald's can kind 382 00:17:46,240 --> 00:17:48,280 Speaker 10: of turn the tide here a little bit because they 383 00:17:48,280 --> 00:17:50,800 Speaker 10: can just offer burgers and other items at prices their 384 00:17:50,800 --> 00:17:52,080 Speaker 10: computers just can't match. 385 00:17:52,720 --> 00:17:55,880 Speaker 1: Thanks to Michael Halen, Bloomberg Intelligence Senior restaurant and food 386 00:17:55,880 --> 00:17:57,000 Speaker 1: service analysts, we. 387 00:17:57,040 --> 00:17:59,520 Speaker 3: Move now to regional banks. New York Community Bank posted 388 00:17:59,600 --> 00:18:01,960 Speaker 3: quarterly results that were better than analysts had feared, and 389 00:18:01,960 --> 00:18:04,320 Speaker 3: the lender also outlined a plan for reshaping it into 390 00:18:04,359 --> 00:18:06,280 Speaker 3: a more diversified and profitable bank. 391 00:18:06,600 --> 00:18:09,280 Speaker 1: For more, we were joined by Herman Chin, Bloomberg Intelligence 392 00:18:09,359 --> 00:18:12,600 Speaker 1: Senior analyst for US regional banks. We first asked Herman 393 00:18:12,720 --> 00:18:14,960 Speaker 1: for his key takeaways from the bank's earnings. 394 00:18:15,280 --> 00:18:18,720 Speaker 11: We learned a lot. So they gave a path forward 395 00:18:18,880 --> 00:18:20,879 Speaker 11: remains to be seeing if everything's going to go and 396 00:18:20,960 --> 00:18:25,399 Speaker 11: lockstep to their expectations. But they basically said they're moving 397 00:18:25,560 --> 00:18:29,600 Speaker 11: to a three year plan with a transition to be 398 00:18:29,680 --> 00:18:34,320 Speaker 11: more of a commercial bank and expecting any sort of 399 00:18:34,359 --> 00:18:37,919 Speaker 11: credit issues to be mostly cleaned up this year with 400 00:18:38,000 --> 00:18:41,000 Speaker 11: an earnings loss for the year. But it was a 401 00:18:41,040 --> 00:18:42,880 Speaker 11: low bar and they cleared up pretty healthily. 402 00:18:43,000 --> 00:18:46,840 Speaker 1: Okay, so just that review here. Their risk was rent 403 00:18:46,840 --> 00:18:50,280 Speaker 1: control departments in New York City, very focused business. They 404 00:18:50,320 --> 00:18:55,280 Speaker 1: were in, very niche Are they exiting that business. Are 405 00:18:55,320 --> 00:18:58,040 Speaker 1: they fixing that business is? How are they going to 406 00:18:58,040 --> 00:18:58,840 Speaker 1: make things right there? 407 00:18:59,119 --> 00:19:01,880 Speaker 11: The part of the three turnaround is de emphasizing that 408 00:19:02,040 --> 00:19:07,600 Speaker 11: multifamily rent regulated piece. There's thirty billion dollars of those 409 00:19:07,680 --> 00:19:10,520 Speaker 11: loans now on the balance sheets. They can't get rid 410 00:19:10,520 --> 00:19:12,520 Speaker 11: of them because there's not going to be a lot 411 00:19:12,520 --> 00:19:14,679 Speaker 11: of buyers, and if they would have to sell, they 412 00:19:14,800 --> 00:19:17,000 Speaker 11: take a big discount and take a big hit to 413 00:19:17,040 --> 00:19:19,560 Speaker 11: the balance sheet. So they're just going to manage through it. 414 00:19:20,480 --> 00:19:24,040 Speaker 11: They've been building their loan loss reserves on these over 415 00:19:24,080 --> 00:19:27,080 Speaker 11: the past couple quarters, so they're built up their reserves 416 00:19:27,080 --> 00:19:30,640 Speaker 11: to pretty much in line with peers. But that's one 417 00:19:30,680 --> 00:19:34,719 Speaker 11: of the unknowns is how credit quality is going to 418 00:19:34,760 --> 00:19:37,840 Speaker 11: perform going forward in a higher for longer rate scenario 419 00:19:38,040 --> 00:19:40,280 Speaker 11: with respect to these rent regulated loans. 420 00:19:40,520 --> 00:19:43,600 Speaker 3: There was an article at the Bloomberg today that talked 421 00:19:43,600 --> 00:19:46,960 Speaker 3: about how rent stabilized apartment buildings are Actually the rent's 422 00:19:47,000 --> 00:19:49,040 Speaker 3: going up and if you assigned two year leases, the 423 00:19:49,040 --> 00:19:50,960 Speaker 3: top can be like six and a half percent, And 424 00:19:51,040 --> 00:19:53,600 Speaker 3: I was in an americ control department it was like half 425 00:19:53,600 --> 00:19:56,720 Speaker 3: a percent, Like it was really really low. Are those 426 00:19:56,800 --> 00:20:00,720 Speaker 3: kind of increases enough to really help the likes of 427 00:20:00,720 --> 00:20:01,879 Speaker 3: a New York community bank. 428 00:20:02,359 --> 00:20:06,960 Speaker 11: Yeah, that's it helps. But a lot of the issues 429 00:20:07,000 --> 00:20:11,560 Speaker 11: that these borrowers, these landlords are facing is higher debt, 430 00:20:11,600 --> 00:20:15,560 Speaker 11: service coverage ratios and higher operating expenses. Right because if 431 00:20:15,600 --> 00:20:17,840 Speaker 11: you have to they gave an example, if you have 432 00:20:17,920 --> 00:20:22,200 Speaker 11: to replace the HVAC unit that costs thirty percent more 433 00:20:22,240 --> 00:20:24,879 Speaker 11: than it did two years ago. So all of these 434 00:20:25,040 --> 00:20:27,800 Speaker 11: operating expenses pile up. But then you can't raise your 435 00:20:27,840 --> 00:20:32,600 Speaker 11: rents to commensurate with your higher costs. So that's the issue, 436 00:20:32,640 --> 00:20:34,840 Speaker 11: and the higher rate issue where they have to refinance 437 00:20:34,880 --> 00:20:35,440 Speaker 11: at higher interest. 438 00:20:35,720 --> 00:20:38,880 Speaker 1: So rent stabilizers apartments, I was never I've never been 439 00:20:38,920 --> 00:20:41,600 Speaker 1: in one. Do they not just rise on the radar 440 00:20:41,600 --> 00:20:43,760 Speaker 1: of inflation or they really really fixed? 441 00:20:43,800 --> 00:20:44,719 Speaker 7: No, it's it's fixed. 442 00:20:44,880 --> 00:20:46,719 Speaker 1: Well, that's that's a tough business to be in if 443 00:20:46,720 --> 00:20:48,160 Speaker 1: you're a landlord, isn't right? 444 00:20:48,320 --> 00:20:52,600 Speaker 11: It is now And there was a change in the 445 00:20:52,600 --> 00:20:55,680 Speaker 11: New York state laws that really capped how much the 446 00:20:55,960 --> 00:20:58,520 Speaker 11: rents can go up every year. So we're seeing the 447 00:20:58,560 --> 00:21:00,880 Speaker 11: repercussions of that for banks like your community. 448 00:21:01,200 --> 00:21:04,240 Speaker 3: Just so, I lived in one twenty years ago. For 449 00:21:04,280 --> 00:21:07,159 Speaker 3: a while, I had a two bedroom apartment huge on 450 00:21:07,160 --> 00:21:09,440 Speaker 3: one hundred and eighty third Street. I paid eight hundred 451 00:21:09,440 --> 00:21:10,280 Speaker 3: and fifty dollars. 452 00:21:10,320 --> 00:21:11,800 Speaker 5: Wow, it saved me. 453 00:21:12,119 --> 00:21:12,880 Speaker 7: Like, there's no. 454 00:21:12,920 --> 00:21:15,640 Speaker 1: Man, why you would give that up on those things 455 00:21:15,640 --> 00:21:19,160 Speaker 1: you keep it in your I got married, okay. 456 00:21:18,840 --> 00:21:21,080 Speaker 3: And my husband owned his apartment, so that was just better. 457 00:21:21,400 --> 00:21:21,640 Speaker 5: Yeah. 458 00:21:22,200 --> 00:21:24,040 Speaker 3: But like the dream was that it would go co 459 00:21:24,119 --> 00:21:25,720 Speaker 3: op or something and then I could buy it for 460 00:21:25,800 --> 00:21:28,920 Speaker 3: like crazy, crazy cheap. But also there was no incentive 461 00:21:29,000 --> 00:21:30,600 Speaker 3: on that end to like fix it up, like it 462 00:21:30,640 --> 00:21:33,159 Speaker 3: hadn't been fixed in forever and twenty years and the 463 00:21:33,240 --> 00:21:36,359 Speaker 3: kitchen was horrendous, But there's no incentive to like spend 464 00:21:36,400 --> 00:21:38,280 Speaker 3: money to do it to just then raise your rent 465 00:21:38,320 --> 00:21:40,920 Speaker 3: ahenomenal amount because it's sort of like a utility, right, 466 00:21:41,040 --> 00:21:43,520 Speaker 3: Like you can only raise it a certain amount. Even 467 00:21:43,560 --> 00:21:44,959 Speaker 3: if you put a certain amount of work in then 468 00:21:45,000 --> 00:21:46,640 Speaker 3: you can raise it a little bit more. But it's 469 00:21:46,680 --> 00:21:49,200 Speaker 3: not a huge propa generator from that end. But man, 470 00:21:49,320 --> 00:21:50,960 Speaker 3: that was that was nice. 471 00:21:51,080 --> 00:21:51,600 Speaker 1: That was nice. 472 00:21:51,640 --> 00:21:54,880 Speaker 3: I had a lot of classt space. So when they 473 00:21:54,880 --> 00:21:58,840 Speaker 3: talk about this, you know it for a diversification, right, 474 00:21:58,840 --> 00:22:00,439 Speaker 3: they want to be a diversified bank. What does that 475 00:22:00,520 --> 00:22:01,320 Speaker 3: mean for them? 476 00:22:01,640 --> 00:22:01,840 Speaker 7: Yeah? 477 00:22:01,880 --> 00:22:03,920 Speaker 11: What that means is they want to tilt more towards 478 00:22:03,960 --> 00:22:08,040 Speaker 11: business lending, commercial lending. They talked about their business portfolio 479 00:22:08,080 --> 00:22:09,800 Speaker 11: is about twenty billion dollars. They want to grow it 480 00:22:09,840 --> 00:22:12,960 Speaker 11: over time to be thirty billion. And the CEO, the 481 00:22:13,000 --> 00:22:17,040 Speaker 11: new CEO who came from One West, who was former 482 00:22:17,400 --> 00:22:20,440 Speaker 11: head of the OCC, he alluded to the fact that 483 00:22:20,480 --> 00:22:22,760 Speaker 11: they're going to hire more folks that he used to 484 00:22:22,760 --> 00:22:25,160 Speaker 11: work with in the past to really build this commercial 485 00:22:25,240 --> 00:22:29,560 Speaker 11: lending franchise. The issue is that they're losing your existing 486 00:22:29,920 --> 00:22:34,520 Speaker 11: commercial bankers, your folks that are focused on deposit inflow, 487 00:22:34,920 --> 00:22:38,359 Speaker 11: and these are former Signature employees. And they talked about 488 00:22:38,400 --> 00:22:40,960 Speaker 11: losing thirty five teams out of one hundred and thirty four. 489 00:22:41,160 --> 00:22:43,760 Speaker 11: So you've got folks leaving, but then you got to 490 00:22:43,800 --> 00:22:46,040 Speaker 11: refill them. So there's there's a lot of work to 491 00:22:46,040 --> 00:22:46,560 Speaker 11: be done there. 492 00:22:46,960 --> 00:22:48,480 Speaker 1: All right, let's step back and take a look at 493 00:22:48,600 --> 00:22:51,600 Speaker 1: your coverage in general, the regional bank coverage. I'm looking 494 00:22:51,680 --> 00:22:54,840 Speaker 1: at the spider s andp regional banking EKF. What's the 495 00:22:54,920 --> 00:22:56,840 Speaker 1: call out there and you talk to institutional investors, is 496 00:22:56,840 --> 00:22:58,120 Speaker 1: it can we buy these things? 497 00:22:58,240 --> 00:22:58,600 Speaker 7: Yeah? 498 00:22:58,720 --> 00:23:01,160 Speaker 11: The dip was the low was in October and you've 499 00:23:01,280 --> 00:23:05,520 Speaker 11: seen banks come back a little bit. What's helpful is 500 00:23:05,560 --> 00:23:09,600 Speaker 11: that the banks are talking about troughing margins and then 501 00:23:09,680 --> 00:23:12,600 Speaker 11: interest income, so that's good to see, and they expect 502 00:23:12,680 --> 00:23:16,560 Speaker 11: a improvement and growth in the back half of the year. Really, 503 00:23:16,600 --> 00:23:19,200 Speaker 11: to us, it really hinges on what the rate backdrop 504 00:23:19,320 --> 00:23:21,360 Speaker 11: is and if rates are going to be higher for longer. 505 00:23:21,920 --> 00:23:25,400 Speaker 11: The optimism that bank management teams are talking about for 506 00:23:25,560 --> 00:23:29,000 Speaker 11: a back half return of loan growth maybe just won't 507 00:23:29,040 --> 00:23:33,240 Speaker 11: materialize as well as they currently expect. So there's a 508 00:23:33,240 --> 00:23:36,560 Speaker 11: lot of questions if we do get that second half resurgence, 509 00:23:36,600 --> 00:23:39,800 Speaker 11: but bank management teams are talking about it's on the 510 00:23:39,840 --> 00:23:43,040 Speaker 11: other side, we still haven't seen the shoe to drop 511 00:23:43,080 --> 00:23:47,239 Speaker 11: on the credit quality fronts, and really the strong and 512 00:23:47,280 --> 00:23:49,359 Speaker 11: resilient economy has really helped that front. 513 00:23:49,960 --> 00:23:50,840 Speaker 7: Remains to be seeing. 514 00:23:51,000 --> 00:23:52,840 Speaker 11: If things really do to deteriorate, then then you're going 515 00:23:52,880 --> 00:23:54,520 Speaker 11: to see a pickup in charge offs as well. 516 00:23:54,720 --> 00:23:57,199 Speaker 3: Are deposits moving anywhere? So I have a citizen's bank 517 00:23:57,240 --> 00:23:59,000 Speaker 3: a couple of blocks from my house and I'm seeing a 518 00:23:59,040 --> 00:24:03,080 Speaker 3: five percent CD Man, I'm not getting that at city. 519 00:24:03,720 --> 00:24:05,120 Speaker 3: Are we seeing deposits move? 520 00:24:05,720 --> 00:24:09,480 Speaker 11: We have seen stability, so in the first half of 521 00:24:09,520 --> 00:24:12,120 Speaker 11: last year when we went through the regional banking turmoil, 522 00:24:12,600 --> 00:24:15,119 Speaker 11: there was a lot of deposits that were leaving to 523 00:24:15,160 --> 00:24:18,320 Speaker 11: go to the Bank of Americas and the JP Morgans 524 00:24:18,359 --> 00:24:21,199 Speaker 11: of the world, especially the large corporate deposits, where they 525 00:24:21,240 --> 00:24:23,439 Speaker 11: thought it would be much safer to be in a 526 00:24:23,440 --> 00:24:27,280 Speaker 11: two big to fail bank. Banks have recalibrated their pricing, 527 00:24:27,680 --> 00:24:30,919 Speaker 11: like you talked about the five percent CDs, So that's 528 00:24:31,000 --> 00:24:35,240 Speaker 11: helped a stabilizer a deposit base, and. 529 00:24:34,320 --> 00:24:37,359 Speaker 3: That's a large payout, like that's not going to be nothing, right. 530 00:24:37,280 --> 00:24:39,359 Speaker 11: That's not going to be nothing. The good thing is 531 00:24:39,400 --> 00:24:42,520 Speaker 11: that overall, with short term rates now pretty much stable 532 00:24:42,560 --> 00:24:46,119 Speaker 11: for the passive recorders, the banks have been keeping their 533 00:24:46,200 --> 00:24:49,840 Speaker 11: deposit costs fairly manageable, so we're not seeing that big 534 00:24:49,960 --> 00:24:54,400 Speaker 11: jump in costs that we saw last year after seb's failure. 535 00:24:54,520 --> 00:24:58,080 Speaker 1: All Right, my personal proxy for equality regional bank is 536 00:24:58,240 --> 00:25:00,600 Speaker 1: M and T Bank, You're former employer up there in Buffalo. 537 00:25:00,800 --> 00:25:01,359 Speaker 5: In order for that. 538 00:25:01,440 --> 00:25:03,719 Speaker 7: Name to really work is loan growth. 539 00:25:03,960 --> 00:25:05,399 Speaker 1: The thing I need to focus on. I need to 540 00:25:05,400 --> 00:25:06,400 Speaker 1: see loan growth for this one. 541 00:25:06,400 --> 00:25:06,680 Speaker 9: In work. 542 00:25:06,720 --> 00:25:10,679 Speaker 11: You need to see more confidence in loan growth and 543 00:25:10,760 --> 00:25:14,760 Speaker 11: also their their asset quality. So the potential knock on 544 00:25:14,800 --> 00:25:17,919 Speaker 11: them is they tilt more towards commercial real estate exposure 545 00:25:18,400 --> 00:25:22,000 Speaker 11: just because of their historical leanings. They've been trying to 546 00:25:22,040 --> 00:25:25,119 Speaker 11: reduce that over time, but they do screen higher on 547 00:25:25,160 --> 00:25:26,080 Speaker 11: commercial real estate. 548 00:25:26,240 --> 00:25:29,120 Speaker 7: So if we get more stabilitia. 549 00:25:28,720 --> 00:25:32,280 Speaker 11: There and less loss content, then that's not going to 550 00:25:32,359 --> 00:25:35,800 Speaker 11: really work, even though the valuation is still higher than 551 00:25:35,840 --> 00:25:36,960 Speaker 11: your typical regional bank. 552 00:25:37,200 --> 00:25:40,159 Speaker 1: Our thanks to Herman Chan Bloomberg Intelligence, senior analysts for 553 00:25:40,400 --> 00:25:41,439 Speaker 1: US regional banks. 554 00:25:41,560 --> 00:25:43,320 Speaker 3: Coming up on the program, a look at why US 555 00:25:43,359 --> 00:25:46,280 Speaker 3: solar makers are seeking more tariffs and important equipment from 556 00:25:46,280 --> 00:25:47,240 Speaker 3: Southeast Asia. 557 00:25:47,320 --> 00:25:50,159 Speaker 1: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 558 00:25:50,160 --> 00:25:52,280 Speaker 1: depth research and data on two thousand companies and one 559 00:25:52,359 --> 00:25:55,199 Speaker 1: hundred and thirty industries. You can access Bloomberg Intelligence via 560 00:25:55,240 --> 00:25:56,199 Speaker 1: bi go on the terminal. 561 00:25:56,280 --> 00:26:00,480 Speaker 3: I'm Paul Sweeney and a Malex Steel and this is Bloomberg. 562 00:26:04,880 --> 00:26:08,840 Speaker 2: You're listening to Bloomberg Intelligence with Alex Steele and Paul 563 00:26:08,880 --> 00:26:10,879 Speaker 2: Sweeney on Bloomberg Radio. 564 00:26:11,920 --> 00:26:14,480 Speaker 3: We move now to Intel. The stagnating chip maker is 565 00:26:14,520 --> 00:26:17,080 Speaker 3: committing twenty eight billion dollars to build a factory in 566 00:26:17,080 --> 00:26:20,240 Speaker 3: Ohio called Ohio One, and it all goes well, Intel, 567 00:26:20,240 --> 00:26:23,240 Speaker 3: we'll be able to credibly compete for contracts to manufacture 568 00:26:23,280 --> 00:26:24,280 Speaker 3: state of the art chips. 569 00:26:24,520 --> 00:26:27,040 Speaker 1: This is a subject of the Bloomberg Big Take story 570 00:26:27,160 --> 00:26:30,679 Speaker 1: entitled Intel is betting twenty eight billion dollars on making 571 00:26:30,680 --> 00:26:33,920 Speaker 1: Ohio a global chips capital for where we were joined 572 00:26:33,920 --> 00:26:36,400 Speaker 1: by one of the story's co authors, Max Chafkin, Bloomberg 573 00:26:36,440 --> 00:26:40,160 Speaker 1: BusinessWeek Senior reporter. We first asked Max for more context 574 00:26:40,280 --> 00:26:40,959 Speaker 1: on his story. 575 00:26:41,280 --> 00:26:43,800 Speaker 8: So, Intel at one time was one of the world's 576 00:26:43,840 --> 00:26:46,880 Speaker 8: largest companies. It is essentially the one of the founding 577 00:26:47,440 --> 00:26:49,879 Speaker 8: parts of Silicon Valley. It's the reason it's called Silicon 578 00:26:49,960 --> 00:26:53,280 Speaker 8: Valley in fact. But over the last decade Intel has 579 00:26:53,320 --> 00:26:56,680 Speaker 8: really suffered. You know, they've they've sort of fallen behind 580 00:26:57,600 --> 00:27:01,359 Speaker 8: both the big chip makers in the un U, Nvidia, AMD, 581 00:27:01,720 --> 00:27:06,760 Speaker 8: and they've fallen way behind on manufacturing, behind TSMC and Samsung. 582 00:27:07,080 --> 00:27:09,480 Speaker 7: And that's a big problem for Intel. 583 00:27:09,640 --> 00:27:12,680 Speaker 8: This you know, large important American company, but of course 584 00:27:12,800 --> 00:27:15,160 Speaker 8: is also a problem for the United States because Intel 585 00:27:15,560 --> 00:27:18,040 Speaker 8: at this point is the only company making state of 586 00:27:18,080 --> 00:27:19,680 Speaker 8: the art ships or even trying to make state of 587 00:27:19,680 --> 00:27:22,720 Speaker 8: the art ships in the US. And over the last 588 00:27:22,720 --> 00:27:26,160 Speaker 8: few years they've pursued basically a turnaround, and that turnaround 589 00:27:26,520 --> 00:27:29,080 Speaker 8: is betting entirely on manufacturing. 590 00:27:29,280 --> 00:27:30,840 Speaker 7: You mentioned the project in Ohio. 591 00:27:31,280 --> 00:27:34,119 Speaker 8: President Biden has talked about that a fair number of times, 592 00:27:34,480 --> 00:27:36,240 Speaker 8: including bringing it up in the State of the Union address. 593 00:27:36,320 --> 00:27:39,160 Speaker 7: They're also major, you know, tens of. 594 00:27:39,080 --> 00:27:42,960 Speaker 8: Billions of dollars projects in Arizona and Oregon. This work 595 00:27:43,040 --> 00:27:44,960 Speaker 8: is being backed with a lot of money from Washington, 596 00:27:45,280 --> 00:27:48,000 Speaker 8: nineteen point five billion in grants and loans from the 597 00:27:48,000 --> 00:27:51,919 Speaker 8: Biden administration. So it's this big, ambitious attempt to turn around, 598 00:27:52,280 --> 00:27:54,280 Speaker 8: you know, a really important company that's fallen on some 599 00:27:54,320 --> 00:27:57,080 Speaker 8: hard times. It's also a big part of the White 600 00:27:57,080 --> 00:28:00,760 Speaker 8: House's geopolitical strategy. 601 00:27:59,359 --> 00:28:03,120 Speaker 1: The build a megafab? What is a megafab? And are 602 00:28:03,119 --> 00:28:04,399 Speaker 1: they going to get it done here? Because this is 603 00:28:04,400 --> 00:28:05,080 Speaker 1: the big numbers. 604 00:28:05,240 --> 00:28:08,720 Speaker 8: Intel's put twenty eight billion into this Ohio site so far. 605 00:28:08,960 --> 00:28:12,520 Speaker 8: The site is it's about forty five minutes north of Columbus. 606 00:28:12,680 --> 00:28:15,000 Speaker 7: You know, it's in a bunch of farmland. It's really muddy. 607 00:28:15,040 --> 00:28:17,439 Speaker 8: You go there now and what you really see is 608 00:28:17,480 --> 00:28:20,359 Speaker 8: just a ton of construction. The idea of a megafab 609 00:28:20,400 --> 00:28:24,159 Speaker 8: would be to have multiple chip factories each one of 610 00:28:24,200 --> 00:28:26,560 Speaker 8: these things. You know, you're talking on the order of 611 00:28:26,640 --> 00:28:27,560 Speaker 8: ten billion dollars. 612 00:28:27,600 --> 00:28:28,040 Speaker 7: They're going to. 613 00:28:28,040 --> 00:28:31,080 Speaker 8: Build two to start, and it sounds like a crazy 614 00:28:31,080 --> 00:28:33,320 Speaker 8: amount of money, but at this point, that is what 615 00:28:33,359 --> 00:28:35,200 Speaker 8: you need if you want to be able to compete 616 00:28:35,280 --> 00:28:39,600 Speaker 8: to make chips, say for the iPhone or for AI chips, 617 00:28:39,640 --> 00:28:42,200 Speaker 8: you know, to try to compete with Nvidia, which Intel 618 00:28:42,360 --> 00:28:44,840 Speaker 8: you know, really desperately would like to do, but it 619 00:28:44,960 --> 00:28:46,280 Speaker 8: just isn't quite there yet. 620 00:28:46,320 --> 00:28:48,080 Speaker 7: On the manufacturing side yet. 621 00:28:48,320 --> 00:28:50,760 Speaker 3: We have heard though of a lot of companies announcing 622 00:28:50,800 --> 00:28:53,640 Speaker 3: projects and manufacturing facilities and don't get done or the 623 00:28:53,680 --> 00:28:55,960 Speaker 3: timeline's pushed out or gets paired back. 624 00:28:56,640 --> 00:28:59,400 Speaker 8: Where's inteling, Yeah, yeah, we saw this of course during 625 00:28:59,400 --> 00:29:01,600 Speaker 8: the Trumpet minute. You know, there has been like a 626 00:29:01,640 --> 00:29:05,040 Speaker 8: political shift over the last i'd say decade where there's 627 00:29:05,080 --> 00:29:08,560 Speaker 8: a lot more enthusiasm both from Republicans and Democrats for 628 00:29:08,720 --> 00:29:11,200 Speaker 8: sort of state backed industrial projects. 629 00:29:11,560 --> 00:29:12,720 Speaker 7: Not all those have gone great. 630 00:29:12,920 --> 00:29:14,920 Speaker 8: You know, I mentioned this story that one of the 631 00:29:14,920 --> 00:29:18,520 Speaker 8: sites that Intel was looking at was this Wisconsin sight 632 00:29:18,560 --> 00:29:19,760 Speaker 8: outside of Racine. 633 00:29:19,840 --> 00:29:21,040 Speaker 7: People will remember. 634 00:29:20,720 --> 00:29:22,880 Speaker 8: That because Donald Trump called it the eighth Wonder of 635 00:29:22,920 --> 00:29:26,080 Speaker 8: the World. These eight or nine years ago talking about 636 00:29:26,120 --> 00:29:28,719 Speaker 8: Fox Cohn. You know, Fox Haunt opened there, but it 637 00:29:28,800 --> 00:29:31,239 Speaker 8: hasn't proven to be the job creator they want. And 638 00:29:31,280 --> 00:29:33,600 Speaker 8: there's a risk with this project as well. I will 639 00:29:33,640 --> 00:29:38,200 Speaker 8: say these semiconductor factories, they are like some of the 640 00:29:38,240 --> 00:29:41,040 Speaker 8: biggest and most ambitious kinds of factories you can build. 641 00:29:41,240 --> 00:29:44,240 Speaker 7: There are already It's like I said, it's muddy. There's 642 00:29:44,240 --> 00:29:45,120 Speaker 7: not a lot going on. 643 00:29:45,080 --> 00:29:47,600 Speaker 8: There right now, and there are Figura there are already 644 00:29:47,680 --> 00:29:51,640 Speaker 8: you know, fourteen hundred construction workers working on that site today. 645 00:29:52,120 --> 00:29:54,960 Speaker 8: Long run, they're saying it's going to employ something like 646 00:29:55,000 --> 00:29:57,800 Speaker 8: seven thousand. And you hear that, you think, okay, seven 647 00:29:57,840 --> 00:29:59,360 Speaker 8: thousand construction workers like that. 648 00:29:59,720 --> 00:30:02,000 Speaker 7: That's as a temporary job, not a full time job. 649 00:30:02,040 --> 00:30:05,040 Speaker 8: But the thing is with these sites, construction could go 650 00:30:05,120 --> 00:30:08,320 Speaker 8: on for decades. You know, it's conceivable if they really 651 00:30:08,320 --> 00:30:10,920 Speaker 8: built this thing out, that many of these construction workers 652 00:30:10,960 --> 00:30:14,160 Speaker 8: could work like their entire career building these things. Because 653 00:30:14,320 --> 00:30:15,920 Speaker 8: the nature of the business is you have to keep 654 00:30:15,920 --> 00:30:19,800 Speaker 8: reinvesting and you have to keep building new fabs. And 655 00:30:20,160 --> 00:30:22,200 Speaker 8: the way that you know, analysts and so on are 656 00:30:22,280 --> 00:30:24,320 Speaker 8: looking at this industry, there's gonna be a lot more 657 00:30:24,360 --> 00:30:26,840 Speaker 8: demand for chips, you know, in the coming decades and. 658 00:30:26,800 --> 00:30:29,640 Speaker 1: Avoid reading your story and in king story here. You know, 659 00:30:29,720 --> 00:30:32,720 Speaker 1: this is a great example or just certainly an expensive 660 00:30:32,720 --> 00:30:35,960 Speaker 1: example of onshoing the money for Intel in Ohio. But 661 00:30:35,960 --> 00:30:38,840 Speaker 1: then you guys also report twelve billion dollars for plant 662 00:30:38,880 --> 00:30:43,000 Speaker 1: being built in Arizona by Taiwan Semiconductor, six billion dollars 663 00:30:43,080 --> 00:30:46,120 Speaker 1: for one in Texas being built by South Korea Samsung Electronics. 664 00:30:46,320 --> 00:30:49,040 Speaker 1: So the money and is coming into the US for 665 00:30:49,200 --> 00:30:50,480 Speaker 1: to ensure this chip business. 666 00:30:50,520 --> 00:30:51,280 Speaker 7: Yeah, I think this. 667 00:30:51,200 --> 00:30:53,360 Speaker 8: May turn out to be, you know, a thing that 668 00:30:53,480 --> 00:30:55,800 Speaker 8: people are talking about in the next few months as 669 00:30:55,840 --> 00:30:58,120 Speaker 8: we get closer to November. You know, this has been 670 00:30:58,160 --> 00:31:01,760 Speaker 8: a big part of the Biden administrations industrial policy. It 671 00:31:01,840 --> 00:31:04,240 Speaker 8: has components of sort of a jobs program because like 672 00:31:04,280 --> 00:31:06,480 Speaker 8: as I was saying, you know, these are construction sites, 673 00:31:06,520 --> 00:31:09,719 Speaker 8: you know, potential good jobs for people. Even even in 674 00:31:09,760 --> 00:31:12,160 Speaker 8: these plants which are run by robots, the people still 675 00:31:12,160 --> 00:31:12,640 Speaker 8: work there. 676 00:31:13,040 --> 00:31:14,480 Speaker 7: And the other thing. 677 00:31:14,360 --> 00:31:17,680 Speaker 8: You have is this kind of competition with China and 678 00:31:17,800 --> 00:31:21,960 Speaker 8: the Biden administration really seeing you know, post COVID, post 679 00:31:22,000 --> 00:31:25,760 Speaker 8: chips shortage that the United States needs to sort of 680 00:31:25,880 --> 00:31:28,520 Speaker 8: be able to produce at least some of its own 681 00:31:28,640 --> 00:31:31,800 Speaker 8: high end chips, because right now that is not the case. Now, 682 00:31:31,920 --> 00:31:34,920 Speaker 8: the interesting thing is that idea, the sort of China 683 00:31:34,960 --> 00:31:38,840 Speaker 8: competition idea has devotees in both parties. You know, in Ohio, 684 00:31:38,880 --> 00:31:41,840 Speaker 8: Ohio is a state dominated by Republicans. The Republicans have 685 00:31:41,880 --> 00:31:44,880 Speaker 8: been touting this as well. However, you know, it's not 686 00:31:44,920 --> 00:31:49,000 Speaker 8: clear if Biden doesn't win, It's not totally clear like how. 687 00:31:48,920 --> 00:31:50,400 Speaker 7: Things might change with Trump. 688 00:31:50,520 --> 00:31:53,880 Speaker 8: But right now it really seems like, you know, the 689 00:31:54,000 --> 00:31:57,640 Speaker 8: US is all in on investing in chip factories. There's 690 00:31:57,680 --> 00:31:59,640 Speaker 8: even talk of a second chip sack, you know, the 691 00:32:00,000 --> 00:32:02,240 Speaker 8: idea that we might even appropriate more money for this stuff. 692 00:32:02,920 --> 00:32:05,120 Speaker 3: Not to talk about energy, but let's talk about energy. 693 00:32:05,280 --> 00:32:07,480 Speaker 3: How are they going to power these this kind of 694 00:32:07,600 --> 00:32:08,480 Speaker 3: fab excellent? 695 00:32:08,680 --> 00:32:10,440 Speaker 7: Yeah, I mean that is a huge issue. 696 00:32:10,480 --> 00:32:13,480 Speaker 8: And talking to Intel, that is like one of the 697 00:32:13,600 --> 00:32:15,920 Speaker 8: main issues in terms of where where you're going to 698 00:32:15,960 --> 00:32:17,800 Speaker 8: cite one of these things. So when you're talking about 699 00:32:17,800 --> 00:32:19,840 Speaker 8: building a fab, you're talking about essentially you need a 700 00:32:19,880 --> 00:32:22,960 Speaker 8: lot of space, you need energy, and you also need water. 701 00:32:23,640 --> 00:32:27,800 Speaker 8: Semiconductors use tons and tons of water. Now, Intel, what 702 00:32:28,120 --> 00:32:31,440 Speaker 8: they say is they are really mindful of their environmental stuff. 703 00:32:31,440 --> 00:32:34,080 Speaker 8: They're you know, you know, all in on sustainability and 704 00:32:34,120 --> 00:32:36,400 Speaker 8: so on a lot of the stuff that many companies say, 705 00:32:36,480 --> 00:32:39,760 Speaker 8: although I have to say they are already recycling a 706 00:32:39,880 --> 00:32:42,959 Speaker 8: huge amount of water at these plants, and and you know, 707 00:32:43,040 --> 00:32:45,080 Speaker 8: for this industry to have a future, it does have 708 00:32:45,120 --> 00:32:48,120 Speaker 8: to you know, continue you know, improving on sustainability. 709 00:32:48,320 --> 00:32:51,360 Speaker 3: Thanks to Max Chafkin Bloomberg, a BusinessWeek senior. 710 00:32:51,160 --> 00:32:54,000 Speaker 1: Reporter on Bloomberg Intelligence Radio, we bring you all the 711 00:32:54,040 --> 00:32:56,560 Speaker 1: top annulets, providing in depth research and data on two 712 00:32:56,600 --> 00:32:58,600 Speaker 1: thousand companies and one hundred and thirty industries. 713 00:32:58,920 --> 00:33:01,280 Speaker 3: We also have something here at Bloomberg called Bloomberg New 714 00:33:01,400 --> 00:33:04,240 Speaker 3: Energy Finance or BNF. The idea behind it is to 715 00:33:04,280 --> 00:33:08,320 Speaker 3: provide data on commodities and power, transport industries, buildings and 716 00:33:08,360 --> 00:33:10,760 Speaker 3: agriculture and also new technology. 717 00:33:11,000 --> 00:33:13,720 Speaker 1: This week we looked into US solar manufacturers and several 718 00:33:13,760 --> 00:33:16,239 Speaker 1: of them asking the US government to slap tariffs on 719 00:33:16,280 --> 00:33:20,080 Speaker 1: twelve point five billion dollars of imported equipment from Southeast Asia. 720 00:33:20,320 --> 00:33:22,680 Speaker 1: This is to help counteract what they say are unfair 721 00:33:22,720 --> 00:33:25,200 Speaker 1: practices by oversea rivals, but it also. 722 00:33:25,040 --> 00:33:27,440 Speaker 3: Sets the stage for a sweeping trade probe that threatens 723 00:33:27,440 --> 00:33:30,160 Speaker 3: to make power projects more expensive for more. We were 724 00:33:30,240 --> 00:33:32,680 Speaker 3: joined by Paul as Kano Bloomberg, an e f A 725 00:33:32,800 --> 00:33:35,760 Speaker 3: senior associate. We first asked Paul, if we can impose 726 00:33:35,800 --> 00:33:39,480 Speaker 3: tariffs on the stuff we need to decarbonize. 727 00:33:38,760 --> 00:33:39,280 Speaker 5: We should not. 728 00:33:39,840 --> 00:33:42,200 Speaker 6: And the US has been doing it for a while, 729 00:33:42,280 --> 00:33:45,680 Speaker 6: actually very quietly since twenty twelve, so it's not a 730 00:33:45,720 --> 00:33:49,360 Speaker 6: new thing, and it's really made solar more expensive in 731 00:33:49,360 --> 00:33:51,800 Speaker 6: the US and everywhere else in the world. So the 732 00:33:51,840 --> 00:33:54,600 Speaker 6: difference is the US has very generous has had very 733 00:33:54,600 --> 00:33:57,400 Speaker 6: generous subsidies for solar for a long time, and that 734 00:33:57,560 --> 00:34:01,000 Speaker 6: upsets some of those higher input costs. But is it 735 00:34:01,440 --> 00:34:04,640 Speaker 6: the most efficient way if you're trying to decarbonize quickly 736 00:34:04,720 --> 00:34:06,800 Speaker 6: and grow a sector quickly. Probably not. 737 00:34:07,320 --> 00:34:07,960 Speaker 5: So what are we. 738 00:34:07,920 --> 00:34:12,040 Speaker 1: Talking about here? The panels the more than the panels. 739 00:34:12,040 --> 00:34:13,120 Speaker 1: What are we talking about here? 740 00:34:13,400 --> 00:34:17,480 Speaker 6: Yeah, we're talking mostly cells and panels. 741 00:34:17,400 --> 00:34:20,319 Speaker 1: So the panel gets the sun. Where's it go from there? 742 00:34:20,520 --> 00:34:22,800 Speaker 6: Correct, it goes into an inverter, which is the brains 743 00:34:22,840 --> 00:34:26,320 Speaker 6: of the system, and the inverter translates that direct current 744 00:34:26,360 --> 00:34:29,440 Speaker 6: power that the panels produce into alternating current power. 745 00:34:29,200 --> 00:34:31,360 Speaker 1: Which is the one that we use thank you for 746 00:34:31,800 --> 00:34:34,040 Speaker 1: because I represent like ninety nine percent of our listeners. 747 00:34:34,040 --> 00:34:37,359 Speaker 3: It's true, Sorry about that. Yes, so what part of 748 00:34:37,400 --> 00:34:41,320 Speaker 3: that would be taxed with the teraroff the panels? 749 00:34:41,320 --> 00:34:44,640 Speaker 6: But what typically those tariffs target are the cells, which 750 00:34:44,680 --> 00:34:47,800 Speaker 6: is the cells is essentially what composes those panels. You 751 00:34:47,840 --> 00:34:50,960 Speaker 6: stack them together and you assemble them because the cells 752 00:34:51,000 --> 00:34:55,360 Speaker 6: is really the true, the true technological component of the panel. 753 00:34:55,400 --> 00:34:59,160 Speaker 6: The panel is just like cells assembled basically. So with 754 00:34:59,360 --> 00:35:02,040 Speaker 6: some of these companies are trying to do is impose 755 00:35:02,080 --> 00:35:04,720 Speaker 6: a new set of tariffs on Like there's already tariffs 756 00:35:04,760 --> 00:35:07,480 Speaker 6: on panels coming from Southeast Asia, and there will be 757 00:35:07,520 --> 00:35:09,799 Speaker 6: new tariffs coming in June, but this would be an 758 00:35:09,840 --> 00:35:12,080 Speaker 6: additional set of tariffs that they're trying to impost. 759 00:35:12,760 --> 00:35:15,720 Speaker 3: Why can't these companies, like at First Solar or something 760 00:35:15,800 --> 00:35:17,200 Speaker 3: make these panels themselves. 761 00:35:17,320 --> 00:35:20,120 Speaker 6: They do, so First Solar sits in a different league. 762 00:35:20,480 --> 00:35:23,399 Speaker 6: First Solar has a different technology this we're talking about 763 00:35:23,440 --> 00:35:27,520 Speaker 6: crystalin silicon technology. First Solo uses a different type of 764 00:35:27,520 --> 00:35:31,239 Speaker 6: technology called thin film, and they for Sola has been 765 00:35:31,239 --> 00:35:33,160 Speaker 6: producing their own panels for a long time and they 766 00:35:33,160 --> 00:35:34,840 Speaker 6: have really ambitious plans in the US. 767 00:35:35,200 --> 00:35:37,359 Speaker 3: But I guess that's the point, right, because they don't 768 00:35:37,360 --> 00:35:39,440 Speaker 3: want the cheaper ones coming in and diluting what they're 769 00:35:39,520 --> 00:35:41,520 Speaker 3: able to sell. So why can't I guess the better 770 00:35:41,600 --> 00:35:43,799 Speaker 3: question I should have is why can't they make it 771 00:35:43,840 --> 00:35:45,920 Speaker 3: for as cheap is the ones that Southeast Asia is 772 00:35:45,920 --> 00:35:46,279 Speaker 3: selling for. 773 00:35:46,400 --> 00:35:48,600 Speaker 6: Yeah, the question is probably the answer is not going 774 00:35:48,640 --> 00:35:52,959 Speaker 6: to surprise you. Just higher input costs, higher production costs, 775 00:35:53,040 --> 00:35:56,080 Speaker 6: higher labor costs. You cannot really reach the same scale 776 00:35:56,120 --> 00:35:57,960 Speaker 6: that you can in the Asian countries. In the US. 777 00:35:58,800 --> 00:36:00,759 Speaker 6: It's not just about the factory that you have that 778 00:36:00,840 --> 00:36:03,000 Speaker 6: you're where your assemble or making the cells or making 779 00:36:03,040 --> 00:36:05,680 Speaker 6: the panels. It's about all of the adjacent supply chain. 780 00:36:05,880 --> 00:36:08,960 Speaker 6: And China and some of these Asian countries, and by 781 00:36:09,040 --> 00:36:12,000 Speaker 6: extent from being so closely to China, they are able 782 00:36:12,080 --> 00:36:14,839 Speaker 6: to ramp up all of the adjacent supply that they 783 00:36:14,920 --> 00:36:18,759 Speaker 6: need in a very efficient way. Typically, those megabases in 784 00:36:18,840 --> 00:36:22,760 Speaker 6: China have massive solar factories, and if you go across 785 00:36:22,760 --> 00:36:25,799 Speaker 6: the road, that's where your aluminum frame supplier is going 786 00:36:25,840 --> 00:36:27,480 Speaker 6: to be. If you go in a little bit further 787 00:36:27,520 --> 00:36:29,399 Speaker 6: down the road, that's where your glass supplier is going 788 00:36:29,440 --> 00:36:33,200 Speaker 6: to be. So it works in in coordination quite quite nicely, 789 00:36:33,239 --> 00:36:36,000 Speaker 6: and that helps improve efficiencies and lower costs. 790 00:36:36,560 --> 00:36:37,880 Speaker 5: It doesn't seem high tech to me. 791 00:36:38,320 --> 00:36:40,640 Speaker 1: Why would I care if China is producing them other 792 00:36:40,760 --> 00:36:43,239 Speaker 1: than if at any time they could stop producing them. 793 00:36:43,400 --> 00:36:46,760 Speaker 3: Because you're saying that there's no like cybersecurity or security 794 00:36:46,760 --> 00:36:47,279 Speaker 3: measure for that. 795 00:36:47,320 --> 00:36:49,080 Speaker 1: Don't I just want the cheapest panel. 796 00:36:49,440 --> 00:36:52,919 Speaker 6: That's That's correct, And that's exactly what we've been trying 797 00:36:52,920 --> 00:36:55,920 Speaker 6: to say for a long time. Solar manufacturing is a 798 00:36:56,000 --> 00:36:59,120 Speaker 6: terrible business to be in competition is really fears where 799 00:36:59,360 --> 00:37:02,520 Speaker 6: typically go through all these swings of over capacity, a 800 00:37:02,520 --> 00:37:05,759 Speaker 6: bunch of bankruptcies, and then new companies arise from from 801 00:37:05,800 --> 00:37:09,480 Speaker 6: nowhere and there's again over capacity. The IP and really 802 00:37:09,520 --> 00:37:14,759 Speaker 6: that the technological know how there is really not that difficult. 803 00:37:14,880 --> 00:37:18,360 Speaker 6: And I really don't understand, We don't understand why you 804 00:37:18,360 --> 00:37:20,719 Speaker 6: would want to throw so much money at building this 805 00:37:20,800 --> 00:37:23,920 Speaker 6: industry in the US unless it's a geopolitical hatch, which 806 00:37:23,960 --> 00:37:27,680 Speaker 6: is something that obviously begs a very different question and 807 00:37:27,760 --> 00:37:29,200 Speaker 6: a very different set of analysis. 808 00:37:29,320 --> 00:37:31,960 Speaker 3: What kind of let's say that these tariffs do go through. 809 00:37:32,200 --> 00:37:36,080 Speaker 3: So this request could raise the prospect of tariffs as 810 00:37:36,160 --> 00:37:38,960 Speaker 3: high as two hundred and seventy one point five percent 811 00:37:39,280 --> 00:37:41,800 Speaker 3: later this year. Let's just pretend that that happens. Yeah, 812 00:37:41,840 --> 00:37:43,920 Speaker 3: and I want to install a solar panel on my 813 00:37:43,960 --> 00:37:46,279 Speaker 3: house in Massachusetts. What's that going to cost me? 814 00:37:46,360 --> 00:37:49,920 Speaker 6: Now, it's going to cost you a ton more money? 815 00:37:50,280 --> 00:37:52,439 Speaker 6: A ton I don't like a ton No, I mean, 816 00:37:52,480 --> 00:37:55,439 Speaker 6: the two hundred and seventy one percent is very unrealistic. 817 00:37:56,360 --> 00:37:59,520 Speaker 6: So what's happened Typically in these petitions, this is a 818 00:37:59,560 --> 00:38:03,200 Speaker 6: little bit of boring stuff, But what happens is what 819 00:38:03,280 --> 00:38:06,640 Speaker 6: happens is they file this petition and then if the 820 00:38:06,760 --> 00:38:10,880 Speaker 6: US agrees to investigate these companies, they have to prove 821 00:38:11,040 --> 00:38:14,000 Speaker 6: that the amount of subsidies that they receive is not 822 00:38:14,160 --> 00:38:17,640 Speaker 6: as high as what that country wide tariff would look like. 823 00:38:17,920 --> 00:38:20,359 Speaker 6: So typically they get a tariff rate that is much 824 00:38:20,400 --> 00:38:23,640 Speaker 6: lower than the two seventy one percent that you're referring to. 825 00:38:24,280 --> 00:38:27,360 Speaker 6: And it can range from like thirty to fifty percent. 826 00:38:27,440 --> 00:38:30,360 Speaker 6: It just really it just really depends. But the bottom 827 00:38:30,360 --> 00:38:34,080 Speaker 6: line is if that were to happen, obviously imports from 828 00:38:34,160 --> 00:38:37,160 Speaker 6: Southeast Asia would be completely ruled out in the US 829 00:38:37,600 --> 00:38:42,359 Speaker 6: and that would really trigger the renaissance of the US 830 00:38:42,440 --> 00:38:45,239 Speaker 6: manufacturing industry. But you would have to pay more for 831 00:38:45,280 --> 00:38:46,560 Speaker 6: your panels thanks. 832 00:38:46,400 --> 00:38:49,440 Speaker 3: To Paul as Kano, Bloomberg NEF Senior Associate. 833 00:38:49,600 --> 00:38:52,279 Speaker 1: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio, 834 00:38:52,360 --> 00:38:54,840 Speaker 1: providing in depth research and data on two thousand companies 835 00:38:54,840 --> 00:38:56,080 Speaker 1: and one of thirty industries. 836 00:38:56,200 --> 00:38:59,040 Speaker 3: And remember you can access Bloomberg Intelligence through Bigo on 837 00:38:59,080 --> 00:39:01,600 Speaker 3: the terminal. 838 00:39:00,480 --> 00:39:01,360 Speaker 1: And I'm Paul Sweeney. 839 00:39:01,480 --> 00:39:02,000 Speaker 5: Stay with us. 840 00:39:02,120 --> 00:39:04,880 Speaker 1: Today's top stories and global business headlines are coming up 841 00:39:05,080 --> 00:39:05,440 Speaker 1: right now. 842 00:39:09,040 --> 00:39:09,080 Speaker 8: M