1 00:00:02,920 --> 00:00:10,840 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,880 --> 00:00:15,040 Speaker 1: Bloomberg Intelligence podcast. Catch US live weekdays at ten am 3 00:00:15,080 --> 00:00:18,079 Speaker 1: Eastern on Apple card playing Android Auto with the Bloomberg 4 00:00:18,120 --> 00:00:21,440 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,640 --> 00:00:24,040 Speaker 1: or watch US live on YouTube. 6 00:00:25,000 --> 00:00:26,840 Speaker 2: Let's switch gears to logistics. 7 00:00:26,840 --> 00:00:33,080 Speaker 3: Transportation UPS still having some challenges. US misses profit estimates 8 00:00:33,240 --> 00:00:36,400 Speaker 3: amid heavy costs and uneven demand. Can't catch a break 9 00:00:36,560 --> 00:00:39,640 Speaker 3: stock down double digits here, Lee Clasical joins US senior 10 00:00:39,640 --> 00:00:44,680 Speaker 3: transport logistics and shipping analysts for Bloomberg Intelligence. Lee A, 11 00:00:44,680 --> 00:00:47,120 Speaker 3: get another tough quarter for UPS? 12 00:00:47,440 --> 00:00:48,280 Speaker 2: What's the story there? 13 00:00:50,320 --> 00:00:52,599 Speaker 4: You know, I think it's a lot of things. You know, 14 00:00:52,640 --> 00:00:54,959 Speaker 4: they are seeing buying growth, which is good, but that 15 00:00:55,160 --> 00:00:58,320 Speaker 4: mix of growth is not good. What they're seeing is 16 00:00:58,560 --> 00:01:00,960 Speaker 4: their shippers trading down. So if you were going to 17 00:01:01,000 --> 00:01:03,680 Speaker 4: maybe send something via air, maybe you decide to go 18 00:01:03,840 --> 00:01:06,520 Speaker 4: on the ground, which is you know, cheaper and lower margin. 19 00:01:06,840 --> 00:01:08,680 Speaker 4: And then if you're using ground, maybe you're going to 20 00:01:08,800 --> 00:01:11,120 Speaker 4: use one of their products like sure Posts, which is 21 00:01:11,120 --> 00:01:15,000 Speaker 4: like an economy product, which is cheaper and again lower 22 00:01:15,040 --> 00:01:19,640 Speaker 4: margin business. So you are seeing, you know, folks trading down. 23 00:01:20,160 --> 00:01:21,720 Speaker 4: You're also seeing the mix. 24 00:01:21,560 --> 00:01:27,880 Speaker 5: Of B B two B two C outpacing growth of 25 00:01:28,040 --> 00:01:31,800 Speaker 5: B to B. B two C growth was around four percent, 26 00:01:31,880 --> 00:01:35,039 Speaker 5: and B to B growth was down four percent and 27 00:01:35,160 --> 00:01:35,600 Speaker 5: B to B. 28 00:01:35,800 --> 00:01:40,120 Speaker 4: So think like a lawyer sending documents to another lawyer's 29 00:01:40,160 --> 00:01:43,160 Speaker 4: office that business tends to have better margins because of 30 00:01:43,200 --> 00:01:47,520 Speaker 4: the inherent density that follows that business, and density is 31 00:01:47,560 --> 00:01:51,720 Speaker 4: really good for asset intensive networks like ups is. And 32 00:01:51,760 --> 00:01:54,920 Speaker 4: then you also, you know, have another negative mixed impact. 33 00:01:55,240 --> 00:01:57,800 Speaker 4: You had two you know, they called out on their 34 00:01:57,840 --> 00:02:01,440 Speaker 4: call to large e commerce companies. I'm assuming that you know, 35 00:02:01,480 --> 00:02:05,360 Speaker 4: these are companies out of China that are you know, 36 00:02:05,600 --> 00:02:11,120 Speaker 4: are kind of using more economy services, so you're seeing 37 00:02:11,280 --> 00:02:14,480 Speaker 4: a surge in that demand from from there as well 38 00:02:14,560 --> 00:02:17,680 Speaker 4: as addition to the trade down trade that we were 39 00:02:18,320 --> 00:02:19,400 Speaker 4: that I mentioned earlier. 40 00:02:20,240 --> 00:02:22,760 Speaker 6: Is this the trough? Is this sort of the worst 41 00:02:22,760 --> 00:02:23,520 Speaker 6: it's going to get? 42 00:02:24,720 --> 00:02:29,040 Speaker 4: It's a great question. I mean, you know, I think so, 43 00:02:30,400 --> 00:02:32,720 Speaker 4: you know, I think it feels like it's this is 44 00:02:32,760 --> 00:02:35,239 Speaker 4: the worst. I mean, you know, the company has done 45 00:02:35,320 --> 00:02:40,200 Speaker 4: pretty well in terms of meeting expectations or beating expectations. 46 00:02:40,240 --> 00:02:42,280 Speaker 4: This is the first myths since I believe the first 47 00:02:42,360 --> 00:02:45,320 Speaker 4: quarter of twenty twenty. So you know, Carol Toon May 48 00:02:45,320 --> 00:02:49,040 Speaker 4: and her team have been on quite a role. They 49 00:02:49,080 --> 00:02:52,000 Speaker 4: also have some easier comparisons going into the second half. 50 00:02:52,840 --> 00:02:55,359 Speaker 4: You know, some of your listeners might have remembered they 51 00:02:55,400 --> 00:02:59,480 Speaker 4: had a really you know, tough negotiation with their labor unions. 52 00:03:00,240 --> 00:03:03,320 Speaker 4: They had a new contract that was really you know, 53 00:03:03,480 --> 00:03:06,640 Speaker 4: heavily weighted in the first year that gets anniversaried in 54 00:03:06,720 --> 00:03:10,040 Speaker 4: August first, So therefore, you know, those higher labor costs, 55 00:03:10,080 --> 00:03:15,480 Speaker 4: the comparables will ease significantly, you know, after August first, 56 00:03:16,120 --> 00:03:19,520 Speaker 4: so that should provide a better cost for them in 57 00:03:19,560 --> 00:03:22,919 Speaker 4: a third quarter and going forward. Also, you know peak 58 00:03:22,960 --> 00:03:25,560 Speaker 4: seasons here right, You know a lot of the companies 59 00:03:25,560 --> 00:03:28,519 Speaker 4: that we cover are talking about we you know, most 60 00:03:28,520 --> 00:03:30,799 Speaker 4: of them are expecting a real peak season and we're 61 00:03:30,800 --> 00:03:32,839 Speaker 4: not talking about, you know, the peak seasons that maybe 62 00:03:32,840 --> 00:03:35,720 Speaker 4: we've seen the nineteen nineties or early two thousands, but 63 00:03:35,800 --> 00:03:38,920 Speaker 4: you're definitely going to see seasonal increase in demand. And 64 00:03:38,960 --> 00:03:42,200 Speaker 4: that peak season is one of the shortest on record. 65 00:03:43,040 --> 00:03:46,880 Speaker 4: You know, it's around seventeen days between Thanksgiving and Christmas, 66 00:03:47,200 --> 00:03:53,520 Speaker 4: and that will allow ups to implement surcharges because they're 67 00:03:53,520 --> 00:03:57,320 Speaker 4: going to have to you know, get those resources in 68 00:03:57,360 --> 00:03:59,800 Speaker 4: a short amount of time for a short amount of 69 00:03:59,800 --> 00:04:02,880 Speaker 4: time to make sure that you know, they're able to 70 00:04:03,040 --> 00:04:07,400 Speaker 4: deliver at high service levels. So you should see probably 71 00:04:07,400 --> 00:04:11,760 Speaker 4: some good volume I'm sorry, some good demand revenue growth 72 00:04:11,920 --> 00:04:15,680 Speaker 4: in the fourth quarter from those surcharges. So you know 73 00:04:15,800 --> 00:04:19,360 Speaker 4: that coupled with a lot of their cost cutting measurements. Uh, 74 00:04:19,400 --> 00:04:22,560 Speaker 4: they they've they've reduced a lot of heads. You know, 75 00:04:22,640 --> 00:04:24,120 Speaker 4: I think a lot of things are going to turn 76 00:04:24,200 --> 00:04:27,400 Speaker 4: for this company once You're going to see you know, 77 00:04:27,480 --> 00:04:30,440 Speaker 4: that B two B volume return and the company is 78 00:04:30,480 --> 00:04:33,400 Speaker 4: doing a lot of things I think to position itself 79 00:04:33,520 --> 00:04:37,160 Speaker 4: longer term, you know, whether that's you know, focusing on 80 00:04:37,200 --> 00:04:40,960 Speaker 4: the healthcare logistics. Healthcare logistics obviously there's a lot of 81 00:04:41,040 --> 00:04:44,640 Speaker 4: value add there and those margins are pretty high relative 82 00:04:44,720 --> 00:04:46,839 Speaker 4: to you know, someone throwing a package on your porch, 83 00:04:47,839 --> 00:04:50,359 Speaker 4: and so you know, they're really looking to grow that 84 00:04:50,440 --> 00:04:52,600 Speaker 4: business and they want to be a leader in that business. 85 00:04:53,040 --> 00:04:55,159 Speaker 4: Uh And and to be frank, it's it's it's a 86 00:04:55,200 --> 00:04:59,000 Speaker 4: fantastic uh business to be in if you're a logistics provider. 87 00:05:00,000 --> 00:05:02,719 Speaker 4: And then you know they're also trying to do new 88 00:05:02,760 --> 00:05:06,160 Speaker 4: things with or more things, I should say, with what 89 00:05:06,200 --> 00:05:09,799 Speaker 4: we call SMBs, which are small and medium sized businesses. 90 00:05:10,640 --> 00:05:13,640 Speaker 4: You know that tends to have better margins than you know, 91 00:05:13,680 --> 00:05:17,720 Speaker 4: dealing with these super large companies like Amazon, which you know, 92 00:05:18,320 --> 00:05:21,280 Speaker 4: the business is good, but the margins could be better, right. 93 00:05:21,680 --> 00:05:24,280 Speaker 3: You know, I had absolutely no loyalty between these two companies. 94 00:05:24,320 --> 00:05:28,039 Speaker 3: I mean I have actually no loyalty between these two services. 95 00:05:28,080 --> 00:05:29,760 Speaker 3: I mean the FedEx store and the UPS store kind 96 00:05:29,800 --> 00:05:32,000 Speaker 3: of right next to each other in my little strip malls. 97 00:05:32,080 --> 00:05:34,080 Speaker 2: Whichever's got the shorter line, that's kind of where I go. 98 00:05:34,160 --> 00:05:35,920 Speaker 3: But well, you look at the stocks over the last 99 00:05:35,920 --> 00:05:39,480 Speaker 3: five years, UPS is up about seven percent per year. 100 00:05:39,960 --> 00:05:42,440 Speaker 3: FedEx is up almost fourteen percent, so twice the stock 101 00:05:42,480 --> 00:05:45,719 Speaker 3: price performance. So lee from an investor's perspective, you know, 102 00:05:45,760 --> 00:05:47,880 Speaker 3: you got thirty seconds herea what's the difference between these 103 00:05:47,880 --> 00:05:49,960 Speaker 3: two companies from an investor perspective. 104 00:05:50,600 --> 00:05:53,240 Speaker 4: Well, it's interesting. So like on fed X, I think 105 00:05:53,279 --> 00:05:57,000 Speaker 4: they're dealing with more structural issues because that was a 106 00:05:57,040 --> 00:06:01,000 Speaker 4: company that I would say was extremely bloated, you know, 107 00:06:01,120 --> 00:06:03,640 Speaker 4: over the last decade, and they're kind of right sizing 108 00:06:03,680 --> 00:06:07,839 Speaker 4: their network they're both making changes to their networks to 109 00:06:07,960 --> 00:06:10,679 Speaker 4: kind of meet the new demands, you know, that change 110 00:06:10,680 --> 00:06:15,120 Speaker 4: of increase in the home delivery versus you know, delivering 111 00:06:15,160 --> 00:06:18,039 Speaker 4: to lawyers or doctors' offices or corporations. 112 00:06:18,400 --> 00:06:18,600 Speaker 1: You know. 113 00:06:18,839 --> 00:06:21,920 Speaker 4: I think the biggest difference is, you know, there might 114 00:06:21,960 --> 00:06:26,440 Speaker 4: be more margin expansion opportunity at FedEx, just because they're 115 00:06:26,480 --> 00:06:29,120 Speaker 4: starting from a lower base than the new ps. 116 00:06:29,880 --> 00:06:30,080 Speaker 1: You know. 117 00:06:30,400 --> 00:06:32,880 Speaker 4: But you know, these are two what I would consider 118 00:06:32,960 --> 00:06:37,760 Speaker 4: blue chip companies that are you know, should benefit with 119 00:06:37,920 --> 00:06:41,159 Speaker 4: the economy and they should probably be able to grow 120 00:06:41,240 --> 00:06:45,960 Speaker 4: top line well passed Global GDP, just given some of 121 00:06:45,960 --> 00:06:48,320 Speaker 4: the self help things that they have in front of them. 122 00:06:48,440 --> 00:06:51,159 Speaker 7: All right, pley, super appreciated, Thank you so much. With Klasgow, 123 00:06:51,240 --> 00:06:53,600 Speaker 7: he joins us from a Boomberg Intelligence. He covers all 124 00:06:53,600 --> 00:06:55,880 Speaker 7: the logistics and transportation stuff for us. 125 00:06:57,520 --> 00:07:01,400 Speaker 1: You're listening to the Bloomberg Intelligence Pod. Catch us live 126 00:07:01,480 --> 00:07:05,000 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 127 00:07:05,040 --> 00:07:07,799 Speaker 1: Otto with the Bloomberg Business App. You can also listen 128 00:07:07,920 --> 00:07:11,000 Speaker 1: live on Amazon Alexa from our flagship New York station, 129 00:07:11,360 --> 00:07:14,400 Speaker 1: Just Say Alexa, playing Bloomberg eleven thirty. 130 00:07:15,880 --> 00:07:18,960 Speaker 7: Alex Steel alongside Paul Sweeney and John Tucker. Yeah, crude 131 00:07:18,960 --> 00:07:21,200 Speaker 7: really getting hit by weaker China demand. We're going to 132 00:07:21,200 --> 00:07:23,840 Speaker 7: talk about that in the next hour. This is Bloomberg 133 00:07:23,880 --> 00:07:27,680 Speaker 7: Intelligence Radio. We bring you all the top news in business, economics, politics, 134 00:07:27,680 --> 00:07:31,760 Speaker 7: and finance. We are broadcasting to live Interactor Broker Studio 135 00:07:31,840 --> 00:07:34,520 Speaker 7: right here in rainy Midtown Manhattan. The latest news on 136 00:07:34,560 --> 00:07:37,160 Speaker 7: the political front is Kamala Harris now has more than 137 00:07:37,240 --> 00:07:41,440 Speaker 7: enough pledged delegates to clinch the Democratic presidential nomination after 138 00:07:41,560 --> 00:07:43,960 Speaker 7: just a two day blitz that saw the Vice president 139 00:07:44,240 --> 00:07:48,440 Speaker 7: consolidate her parties, backing to challenge Donald Trump in November. 140 00:07:48,480 --> 00:07:50,120 Speaker 7: Want to get more details on all of this with 141 00:07:50,160 --> 00:07:53,360 Speaker 7: Henrietta Trace, Managing partner and director of Economic Policy at 142 00:07:53,360 --> 00:07:57,960 Speaker 7: Beta Partners. Henrietta, now, what happens? What does pledge delegates mean? 143 00:08:00,080 --> 00:08:02,760 Speaker 8: Edge delegates basically means so the field is clear for 144 00:08:02,840 --> 00:08:06,120 Speaker 8: Kamala Harris. She will be the Democratic nominee as expected. 145 00:08:06,840 --> 00:08:09,840 Speaker 8: We will get that confirmed around August seventh. They're going 146 00:08:09,880 --> 00:08:12,560 Speaker 8: to start virtual roll call voting at the DNC in 147 00:08:12,600 --> 00:08:15,000 Speaker 8: the beginning of August and carried through until about the 148 00:08:15,000 --> 00:08:18,440 Speaker 8: seventh when it'll become relatively official, and then we will 149 00:08:18,480 --> 00:08:22,000 Speaker 8: have the convention on the nineteenth around then we should 150 00:08:22,040 --> 00:08:25,520 Speaker 8: get to understand who her vice presidential pick is. So 151 00:08:25,560 --> 00:08:28,280 Speaker 8: it's really all eyes on Democrats for the foreseeable future. 152 00:08:28,960 --> 00:08:31,120 Speaker 3: Henrietta, can you give us a sense of the timing 153 00:08:31,120 --> 00:08:35,160 Speaker 3: associated with the VP pick? Is there any rush to 154 00:08:35,200 --> 00:08:37,079 Speaker 3: get it done sooner rather than later as it relates 155 00:08:37,120 --> 00:08:39,400 Speaker 3: to maybe that virtual role call. 156 00:08:40,400 --> 00:08:43,600 Speaker 8: No, not really and based on what we're seeing from 157 00:08:43,640 --> 00:08:46,720 Speaker 8: the Democratic Party right now. And I would think back 158 00:08:46,760 --> 00:08:49,360 Speaker 8: to know how long it took for President Biden to 159 00:08:49,559 --> 00:08:52,679 Speaker 8: come to the conclusion that he was going to step aside, 160 00:08:52,720 --> 00:08:57,000 Speaker 8: the slow approach that Speaker Meredith Nancy Pelosi took to 161 00:08:57,240 --> 00:08:59,640 Speaker 8: President Biden, the slow approach that. 162 00:08:59,520 --> 00:09:00,400 Speaker 9: The donor took. 163 00:09:00,520 --> 00:09:05,079 Speaker 8: This is all orchestrated, not you know, necessarily on purpose, 164 00:09:05,120 --> 00:09:08,280 Speaker 8: but designed to keep the attention on the democratic process 165 00:09:08,520 --> 00:09:11,160 Speaker 8: that's playing out in the Democratic Party. Make sure that 166 00:09:11,160 --> 00:09:13,480 Speaker 8: they're vetting a lot of these guys, the people that 167 00:09:13,520 --> 00:09:17,360 Speaker 8: they're considering. The governors from the swing states, Mark Kelly 168 00:09:17,400 --> 00:09:20,280 Speaker 8: and Arizona. These are folks that have very low name 169 00:09:20,360 --> 00:09:23,280 Speaker 8: recognition outside of their state. So a lot of the 170 00:09:23,360 --> 00:09:26,560 Speaker 8: vetting process is being done in real time. We're watching 171 00:09:26,600 --> 00:09:28,400 Speaker 8: it all unfold, and I think it's going to take 172 00:09:28,440 --> 00:09:31,079 Speaker 8: the remainder of this month and into the beginning of 173 00:09:31,160 --> 00:09:34,400 Speaker 8: next month. Let's recall that former President Trump announced his 174 00:09:34,600 --> 00:09:37,840 Speaker 8: by pick P pick on the Monday. 175 00:09:37,520 --> 00:09:38,319 Speaker 9: Of his convention. 176 00:09:38,400 --> 00:09:40,439 Speaker 8: I wouldn't be surprised if that's the set of timing 177 00:09:40,440 --> 00:09:42,320 Speaker 8: that we get on the Democratic side as well, which 178 00:09:42,360 --> 00:09:44,040 Speaker 8: means we've got another couple of weeks before we know 179 00:09:44,120 --> 00:09:45,240 Speaker 8: for sure who it's going to be. 180 00:09:45,920 --> 00:09:49,160 Speaker 7: We also keep hearing, you know, these rumors that Republicans 181 00:09:49,160 --> 00:09:51,880 Speaker 7: are talking about. You know, we're hijacking democracy here. This 182 00:09:52,000 --> 00:09:54,439 Speaker 7: is not democratic, which leads me to think, are we 183 00:09:54,480 --> 00:09:57,160 Speaker 7: going to see lawsuits in relation to Kamala Harris being 184 00:09:57,160 --> 00:09:59,920 Speaker 7: on the ballot? Are we going to see lawsuits concerning 185 00:10:00,120 --> 00:10:03,760 Speaker 7: campaign funds? Are we going to see lawsuits preventing her 186 00:10:03,760 --> 00:10:05,440 Speaker 7: from getting on the ballot in certain states? 187 00:10:05,640 --> 00:10:07,960 Speaker 6: Is all of this just talking points? There is any 188 00:10:07,960 --> 00:10:08,480 Speaker 6: of this real? 189 00:10:09,840 --> 00:10:14,120 Speaker 8: No, These are all relatively frivolous lawsuits. The Democratic Party 190 00:10:14,200 --> 00:10:17,560 Speaker 8: has until the convention to name a nominee. Once they do, 191 00:10:17,760 --> 00:10:20,000 Speaker 8: I think the concerns around the democratic process or what 192 00:10:20,000 --> 00:10:23,400 Speaker 8: you're seeing in terms of slow walking endorsements from former 193 00:10:23,440 --> 00:10:28,320 Speaker 8: President Obama from Majority Leader Schumer from Minority Leader Hakeem Jeffries, 194 00:10:28,800 --> 00:10:32,240 Speaker 8: this is Democrats trying to explain to American voters through 195 00:10:32,240 --> 00:10:35,160 Speaker 8: illustration that they're going to take their time and not 196 00:10:35,280 --> 00:10:39,080 Speaker 8: necessarily have an anointment of Kamala Harris. They chose the 197 00:10:39,160 --> 00:10:42,520 Speaker 8: direction that I think was the only conceivable conclusion, which 198 00:10:42,600 --> 00:10:45,200 Speaker 8: was that Kamala Harris, the current Vice President, who you 199 00:10:45,240 --> 00:10:47,600 Speaker 8: know millions of people have already voted for to. 200 00:10:47,600 --> 00:10:49,280 Speaker 9: Go into the White House, is going to be at 201 00:10:49,320 --> 00:10:49,959 Speaker 9: the top of the ticket. 202 00:10:50,000 --> 00:10:52,520 Speaker 8: And the endorsement from President Biden really sealed that when 203 00:10:52,520 --> 00:10:54,520 Speaker 8: he wrote his letter over the weekend. 204 00:10:54,760 --> 00:10:56,040 Speaker 9: So I think that the. 205 00:10:56,000 --> 00:10:59,640 Speaker 8: Direction we're getting from the Democratic Party is clearly indicative 206 00:10:59,679 --> 00:11:03,520 Speaker 8: of La Harris winning the delegation. There was no real primary, 207 00:11:03,760 --> 00:11:07,240 Speaker 8: but the process has been playing out for so long now, 208 00:11:07,400 --> 00:11:09,440 Speaker 8: even though it's only been a couple of weeks, it 209 00:11:09,480 --> 00:11:11,720 Speaker 8: feels like an eternity, and I think the Democratic voters, 210 00:11:11,760 --> 00:11:15,440 Speaker 8: as evidenced by their fundraising numbers, are clearly enthusiastic and 211 00:11:15,520 --> 00:11:17,400 Speaker 8: happy to have Kamala at the top. There was some 212 00:11:17,440 --> 00:11:19,800 Speaker 8: morning console pulling that came out this morning showing the 213 00:11:19,840 --> 00:11:21,840 Speaker 8: Democrats prefer her to be at the top of the ticket. 214 00:11:21,960 --> 00:11:24,960 Speaker 8: Petevodajin was next in line, but she clearly wins the 215 00:11:24,960 --> 00:11:26,640 Speaker 8: majority of the Democratic voters, So I don't think there 216 00:11:26,640 --> 00:11:30,080 Speaker 8: will be an uprising against Kamala from the Democratic voter base. 217 00:11:30,440 --> 00:11:31,400 Speaker 2: And let's talk money. 218 00:11:31,720 --> 00:11:33,480 Speaker 3: Just reading your notes here, I mean, like eighty one 219 00:11:33,520 --> 00:11:36,439 Speaker 3: million dollars was raised just in the twenty four hours 220 00:11:36,440 --> 00:11:41,079 Speaker 3: after President Biden endorsed VP Harris. Here, give us a 221 00:11:41,120 --> 00:11:43,160 Speaker 3: sense of the magnitude of the fundraising and what it 222 00:11:43,200 --> 00:11:46,600 Speaker 3: tells you, I guess about her candidacy and the support 223 00:11:46,600 --> 00:11:48,400 Speaker 3: of the Democratic Party. 224 00:11:48,800 --> 00:11:49,040 Speaker 10: Man. 225 00:11:49,160 --> 00:11:51,559 Speaker 9: I mean, the numbers are staggering in and of themselves. 226 00:11:51,600 --> 00:11:54,680 Speaker 8: They broke Democratic records, presidential records for a twenty four 227 00:11:54,679 --> 00:11:57,120 Speaker 8: hour haul. She's up over one hundred and one million 228 00:11:57,120 --> 00:12:00,680 Speaker 8: dollars as of right now. But the real said is 229 00:12:00,679 --> 00:12:05,520 Speaker 8: the fact that sixty percent of those donors are new 230 00:12:05,600 --> 00:12:08,559 Speaker 8: to the twenty twenty four CYC ball. That is, grassroots 231 00:12:08,640 --> 00:12:12,520 Speaker 8: engagement momentum on par with, if not exceeding, what you 232 00:12:12,559 --> 00:12:14,880 Speaker 8: see on the demo on the Republican side in terms 233 00:12:14,880 --> 00:12:18,600 Speaker 8: of galvanization from Trump supporters. One of the reasons that 234 00:12:18,640 --> 00:12:21,840 Speaker 8: my odds are sixty forty for Trump right now is 235 00:12:21,880 --> 00:12:24,160 Speaker 8: because we don't have any hard data from polling to 236 00:12:24,280 --> 00:12:26,439 Speaker 8: suggest that Kamala Harris has a shot to win in 237 00:12:26,480 --> 00:12:29,360 Speaker 8: the swing states yet, But the fundraising numbers and the 238 00:12:29,360 --> 00:12:33,120 Speaker 8: heat map that you see from the Act Blue campaign 239 00:12:33,200 --> 00:12:36,480 Speaker 8: suggests that those same states that Kamala Harris would need 240 00:12:36,520 --> 00:12:38,679 Speaker 8: to win are the ones that are donating amongst the 241 00:12:38,760 --> 00:12:39,760 Speaker 8: highest mounts. 242 00:12:40,480 --> 00:12:43,240 Speaker 7: What do you think is going to wind up happening? Like, 243 00:12:43,880 --> 00:12:46,160 Speaker 7: how do you game out now? Like what happens in 244 00:12:46,160 --> 00:12:50,080 Speaker 7: November and beyond? I mean, moving sort of money into 245 00:12:50,160 --> 00:12:52,040 Speaker 7: any kind of asset class to been on it now 246 00:12:52,080 --> 00:12:52,880 Speaker 7: seems crazy? 247 00:12:53,000 --> 00:12:53,880 Speaker 6: How do you think about it? 248 00:12:55,040 --> 00:12:57,839 Speaker 8: I really think that investors should focus on the momentum play. 249 00:12:57,880 --> 00:13:00,000 Speaker 8: That is the main focus of my note from Life 250 00:13:00,040 --> 00:13:03,200 Speaker 8: last night. The momentum story is now has been with 251 00:13:03,240 --> 00:13:07,000 Speaker 8: the Republican Party on things that were planned and unplanned. Obviously, 252 00:13:07,080 --> 00:13:11,440 Speaker 8: Trump winning the first presidential debate, you know, getting a 253 00:13:11,480 --> 00:13:15,720 Speaker 8: failed assassination attempt was extraordinarily galvanizing. I think it's insane 254 00:13:15,720 --> 00:13:17,600 Speaker 8: that you know, that's not the number one news story 255 00:13:17,600 --> 00:13:19,480 Speaker 8: of the day. But the reality is, and I talk 256 00:13:19,520 --> 00:13:23,000 Speaker 8: about this with clients a lot, the Republican momentum came 257 00:13:23,240 --> 00:13:25,880 Speaker 8: and is now gone, and now it's all with the 258 00:13:25,880 --> 00:13:28,840 Speaker 8: Democratic Party. And of course it would be ridiculous to 259 00:13:28,840 --> 00:13:30,720 Speaker 8: assume in twenty twenty four that there won't be another 260 00:13:30,760 --> 00:13:33,360 Speaker 8: wrench thrown in the gears here. But for right now 261 00:13:33,400 --> 00:13:35,920 Speaker 8: and for the remainder of this month and next month 262 00:13:35,960 --> 00:13:38,400 Speaker 8: going into the DNC, you know, we haven't even gotten 263 00:13:38,440 --> 00:13:41,760 Speaker 8: to those events yet. So not only is the Democratic 264 00:13:41,800 --> 00:13:45,120 Speaker 8: Party galvanized in a new way that we haven't seen 265 00:13:45,240 --> 00:13:48,679 Speaker 8: for two years, but the groundswell of support, the pent 266 00:13:48,800 --> 00:13:51,319 Speaker 8: up demand is so robust that I suspect it will 267 00:13:51,360 --> 00:13:55,160 Speaker 8: compel Kamala Harris well into August and then into the 268 00:13:55,160 --> 00:13:58,120 Speaker 8: critical months and the final countdown of the election into 269 00:13:58,200 --> 00:14:01,560 Speaker 8: mid September. What's fascinating is twenty four percent of Independence 270 00:14:01,600 --> 00:14:04,040 Speaker 8: don't decide how they're going to vote until after Labor 271 00:14:04,120 --> 00:14:06,600 Speaker 8: Day historically, so even though we're, you know, only one 272 00:14:06,679 --> 00:14:09,440 Speaker 8: hundred days out from the election, there's shockingly. 273 00:14:10,559 --> 00:14:12,680 Speaker 9: There's a shockingly large amount of time still left in 274 00:14:12,679 --> 00:14:13,120 Speaker 9: this race. 275 00:14:13,480 --> 00:14:16,560 Speaker 3: What do you think the I guess the debate strategy 276 00:14:16,600 --> 00:14:21,680 Speaker 3: should be for Kamala Harris and the president former President Bush. 277 00:14:21,720 --> 00:14:25,400 Speaker 8: I mean sorry, I oh, can't go that back that far. 278 00:14:26,040 --> 00:14:27,800 Speaker 8: I think at this point you just got to get 279 00:14:28,040 --> 00:14:30,680 Speaker 8: Trump to the stage. I think that if you read 280 00:14:30,680 --> 00:14:36,040 Speaker 8: his true social pronouncements, he is really definitely attempting to 281 00:14:36,040 --> 00:14:37,640 Speaker 8: move the needle on the debates, and. 282 00:14:37,600 --> 00:14:39,720 Speaker 9: The question is really whether he shows or not. 283 00:14:40,040 --> 00:14:43,840 Speaker 8: I don't think it's optically possible for him not to 284 00:14:43,880 --> 00:14:47,720 Speaker 8: debate the vice president and the ultimate Democratic kick nominee. 285 00:14:48,240 --> 00:14:51,880 Speaker 8: That debate is tentatively set for September tenth. Kamala Harris, 286 00:14:51,920 --> 00:14:54,160 Speaker 8: when she was vice president, has set a couple of dates, 287 00:14:54,720 --> 00:14:57,080 Speaker 8: the twelfth and thirteenth, if I'm not mistaken, of September 288 00:14:57,080 --> 00:14:59,760 Speaker 8: for a vice presidential debate, but the Republican ticket hasn't. 289 00:14:59,520 --> 00:15:00,520 Speaker 9: Committed to any of those. 290 00:15:00,840 --> 00:15:03,120 Speaker 8: I think the American public is going to demand the 291 00:15:03,160 --> 00:15:05,880 Speaker 8: Trump debate Kamala Harris, and I think it would be 292 00:15:06,120 --> 00:15:07,960 Speaker 8: a material show of weakness if you did it. 293 00:15:08,800 --> 00:15:11,520 Speaker 7: Just some breaking news for US, confirmed by AP as 294 00:15:11,520 --> 00:15:14,240 Speaker 7: well as ABC News, the Secret Service Director Kim Cheatle 295 00:15:14,760 --> 00:15:18,640 Speaker 7: has now resigned. This comes, of course, after the attempt 296 00:15:18,640 --> 00:15:22,680 Speaker 7: assassination attempt on president former President Trump's life. 297 00:15:22,760 --> 00:15:24,480 Speaker 6: Henrietta, are you surprised by that news? 298 00:15:26,120 --> 00:15:28,720 Speaker 8: Not really, I'm surprised that it lasted as long as 299 00:15:28,760 --> 00:15:29,160 Speaker 8: it did. 300 00:15:29,800 --> 00:15:30,960 Speaker 9: The Secret Service has come. 301 00:15:30,880 --> 00:15:35,080 Speaker 8: Under fire for years now, and I think in the 302 00:15:35,440 --> 00:15:38,520 Speaker 8: wake of the attempted assassination attempts, which was so shocking 303 00:15:38,600 --> 00:15:40,240 Speaker 8: to so many Americans we haven't seen that, you know, 304 00:15:40,280 --> 00:15:44,160 Speaker 8: in my lifetime, is really something that required a shake 305 00:15:44,240 --> 00:15:46,960 Speaker 8: up at the top. The Republican Party has come out 306 00:15:47,920 --> 00:15:52,000 Speaker 8: very strongly against her and has been very focused on 307 00:15:52,360 --> 00:15:55,680 Speaker 8: the Secret Service. There are investigations that they're waiting for 308 00:15:55,920 --> 00:15:58,240 Speaker 8: with a couple of different deadlines sixty days out from 309 00:15:58,240 --> 00:16:00,920 Speaker 8: now for a thorough account of what went on. 310 00:16:01,120 --> 00:16:02,720 Speaker 9: It makes sense that she would resign. 311 00:16:03,200 --> 00:16:05,480 Speaker 2: Henrietta Trees, thank you so much. We really appreciate it. 312 00:16:05,520 --> 00:16:08,320 Speaker 3: As always Henrietta Trees, she's a managing partner and director 313 00:16:08,360 --> 00:16:10,760 Speaker 3: of Economic Policy at Data Partners, really one of our 314 00:16:10,840 --> 00:16:13,920 Speaker 3: go to voices of all things political, and I think 315 00:16:13,920 --> 00:16:16,200 Speaker 3: we're gonna be talking to her very frequently between now 316 00:16:16,680 --> 00:16:20,000 Speaker 3: and election day, because, as Henrieta said, there's found to 317 00:16:20,040 --> 00:16:22,560 Speaker 3: be more wrenches turned into the whole process. 318 00:16:22,680 --> 00:16:24,160 Speaker 6: And then as an investor, what do you do? 319 00:16:24,240 --> 00:16:26,680 Speaker 7: Gina Martin Adams and Boomberg Intelligence had a great point 320 00:16:26,720 --> 00:16:31,440 Speaker 7: that said that high tax companies have underperformed low tax companies, 321 00:16:31,440 --> 00:16:33,800 Speaker 7: and if you're betting on President Trump, you would probably 322 00:16:33,840 --> 00:16:37,120 Speaker 7: buy high tax companies with the idea that those would 323 00:16:37,120 --> 00:16:40,000 Speaker 7: be cut, that those taxes would be cut. Therefore, maybe 324 00:16:40,040 --> 00:16:42,360 Speaker 7: what we're seeing in the market isn't based on the election, 325 00:16:42,480 --> 00:16:45,360 Speaker 7: but on earnings and fundamentals, which brings us full circle 326 00:16:45,400 --> 00:16:47,280 Speaker 7: back to a day where we get almost six trillion 327 00:16:47,320 --> 00:16:50,000 Speaker 7: dollars at market cap earnings coming out. 328 00:16:51,480 --> 00:16:55,360 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 329 00:16:55,440 --> 00:16:58,160 Speaker 1: weekdays at ten am Eastern on Effo, car Playing and 330 00:16:58,280 --> 00:17:01,640 Speaker 1: broun Otto with the Bloomberg Business. Listen on demand wherever 331 00:17:01,680 --> 00:17:06,040 Speaker 1: you get your podcasts, or watch us live on YouTube. 332 00:17:06,840 --> 00:17:08,920 Speaker 3: Let's switch gears in. Let's get right to the media space. 333 00:17:08,920 --> 00:17:11,200 Speaker 3: Are we it's media companies reporting. We're also gonna have 334 00:17:11,320 --> 00:17:14,040 Speaker 3: Google reporting air for the Clothes tonight. Keith Rong and 335 00:17:14,119 --> 00:17:18,880 Speaker 3: Nathan joins us. She is the media analyst for Bloomberg Intelligence. Keith, 336 00:17:19,119 --> 00:17:21,880 Speaker 3: I know we had comcasts today in that stocks shorting down, 337 00:17:21,960 --> 00:17:25,719 Speaker 3: but let's let's go with a winner, a good story. Spotify. Now, 338 00:17:25,720 --> 00:17:27,920 Speaker 3: I'm not a Spotify customer, per se. I'm going to 339 00:17:28,000 --> 00:17:31,320 Speaker 3: venture that John Tucker neither is probably not as. 340 00:17:31,280 --> 00:17:32,600 Speaker 6: Well, because here is his cassette tape. 341 00:17:32,680 --> 00:17:33,640 Speaker 3: Yes, this cassette tapes. 342 00:17:33,760 --> 00:17:34,120 Speaker 4: Very good. 343 00:17:34,280 --> 00:17:34,920 Speaker 1: No, I just. 344 00:17:34,920 --> 00:17:37,280 Speaker 2: Refuse to pay for it when I can get it free. 345 00:17:37,320 --> 00:17:38,520 Speaker 6: No, you have cassette tapes? 346 00:17:38,760 --> 00:17:41,920 Speaker 2: Okay, thank you, Yes, very good. 347 00:17:42,000 --> 00:17:43,320 Speaker 6: I have eight track tapes. 348 00:17:43,520 --> 00:17:44,680 Speaker 2: I have eight tract tape. 349 00:17:44,680 --> 00:17:46,480 Speaker 6: And this is why we love you exactly. 350 00:17:46,800 --> 00:17:50,159 Speaker 3: Keith. It talk to us about Spotify stocks really rallying today. 351 00:17:51,240 --> 00:17:54,000 Speaker 11: Yeah, thank you so much, Paul and Alex. So Spotify 352 00:17:54,760 --> 00:17:57,600 Speaker 11: really blew it out of the park. You're absolutely right there. Up, 353 00:17:57,640 --> 00:18:00,640 Speaker 11: I think now thirteen fourteen percent, and really the number 354 00:18:00,680 --> 00:18:03,280 Speaker 11: here for Spotify, and the main story has not just 355 00:18:03,359 --> 00:18:07,000 Speaker 11: been great subscriber growth, so they've been adding a solid 356 00:18:07,080 --> 00:18:10,960 Speaker 11: five six seven million premium subscribers every quarter. But for them, 357 00:18:11,000 --> 00:18:13,119 Speaker 11: what it really has been over the past few quarters 358 00:18:13,160 --> 00:18:16,400 Speaker 11: has been this inflection and profitability. Remember what we're now 359 00:18:16,440 --> 00:18:18,760 Speaker 11: looking for streamers across the board, and this goes to 360 00:18:18,840 --> 00:18:21,879 Speaker 11: Netflix and everybody else in video streaming, as well as Spotify, 361 00:18:21,960 --> 00:18:24,159 Speaker 11: which is, you know, the main audio streamer with a 362 00:18:24,200 --> 00:18:27,720 Speaker 11: thirty five percent market share. The narrative has really shifted 363 00:18:27,760 --> 00:18:30,399 Speaker 11: now to profitability, and they absolutely blew it out of 364 00:18:30,400 --> 00:18:33,119 Speaker 11: the park. So the gross margin guidance that they had 365 00:18:33,160 --> 00:18:35,840 Speaker 11: given was twenty eight percent. They came in at twenty 366 00:18:35,960 --> 00:18:38,919 Speaker 11: nine percent. But even better was the outlook. So for 367 00:18:39,000 --> 00:18:41,320 Speaker 11: the longest time Spotify was stuck at like a twenty 368 00:18:41,320 --> 00:18:45,399 Speaker 11: five percent gross margin. They were pointing to like longer 369 00:18:45,520 --> 00:18:47,720 Speaker 11: term margins of thirty percent. But looks like they're going 370 00:18:47,760 --> 00:18:49,400 Speaker 11: to be able to hit it right in the third quarter, 371 00:18:49,440 --> 00:18:51,600 Speaker 11: and that's why we see the stock reacting the way 372 00:18:51,600 --> 00:18:52,040 Speaker 11: that it is. 373 00:18:52,160 --> 00:18:54,199 Speaker 7: So did it take anyone else's lunch or this was 374 00:18:54,240 --> 00:18:59,160 Speaker 7: just a really good sort of management cost issue, Yeah. 375 00:18:58,960 --> 00:19:04,120 Speaker 11: It's excellent manage. More importantly, it's also price increases they've done. 376 00:19:05,119 --> 00:19:08,160 Speaker 11: They hadn't taken any price increase alex for more than 377 00:19:08,200 --> 00:19:12,040 Speaker 11: ten years, and then in a span of two years, 378 00:19:12,080 --> 00:19:15,040 Speaker 11: they've raised prices by twenty percent. And that's just because 379 00:19:15,080 --> 00:19:18,359 Speaker 11: they know that people love Spotify. Nobody is going to 380 00:19:18,440 --> 00:19:21,560 Speaker 11: churn from Spotify to let's say, Apple Music or YouTube Music. 381 00:19:21,600 --> 00:19:24,600 Speaker 11: They have a thirty six thirty seven percent share of 382 00:19:24,640 --> 00:19:27,680 Speaker 11: the global audio market and they're just adding so many 383 00:19:27,720 --> 00:19:30,800 Speaker 11: features and so many new verticals that they're able to 384 00:19:30,840 --> 00:19:33,080 Speaker 11: take those price increases. But of course, apart from that, 385 00:19:33,840 --> 00:19:36,280 Speaker 11: you know It's also been a very good story when 386 00:19:36,280 --> 00:19:38,640 Speaker 11: it comes to cost cuts. So they were investing heavily 387 00:19:38,720 --> 00:19:40,719 Speaker 11: in their podcasting business, you know, like with the Joe 388 00:19:40,840 --> 00:19:44,720 Speaker 11: Rogan Show and adding all these other exclusive podcasts. They're 389 00:19:44,800 --> 00:19:48,359 Speaker 11: being much more prudent now on that front, and those 390 00:19:48,400 --> 00:19:50,400 Speaker 11: cost cuts again have really driven profitability. 391 00:19:50,960 --> 00:19:54,080 Speaker 3: How much of their revenue is subscription versus advertising versus 392 00:19:54,160 --> 00:19:56,879 Speaker 3: other these days. 393 00:19:56,200 --> 00:20:00,280 Speaker 11: Almost all of their revenue, Paul, is subscription. It's a 394 00:20:00,400 --> 00:20:04,520 Speaker 11: very Yeah, it's a very very heavy subscription based business. 395 00:20:04,760 --> 00:20:07,720 Speaker 11: They are trying to build the advertising business, but as 396 00:20:07,720 --> 00:20:10,960 Speaker 11: you know, again that takes time. You know, that will 397 00:20:11,040 --> 00:20:13,800 Speaker 11: drive the longer term margin story. But as of right now, 398 00:20:14,000 --> 00:20:15,640 Speaker 11: the mixshift is really subscriptions. 399 00:20:15,680 --> 00:20:16,520 Speaker 6: That's pretty impressive. 400 00:20:16,560 --> 00:20:18,040 Speaker 7: Hey, can I ask you about Comcast and what you 401 00:20:18,080 --> 00:20:20,520 Speaker 7: made of their earnings that came out earlier, reported second 402 00:20:20,560 --> 00:20:23,000 Speaker 7: quarter revenue that misanalyst estimates they had. It was the 403 00:20:23,000 --> 00:20:25,200 Speaker 7: movie season, you got theme parks, the whole thing. 404 00:20:26,240 --> 00:20:29,480 Speaker 11: Yeah, So Comcast is an interesting story. So Comcast is actually, 405 00:20:29,720 --> 00:20:33,280 Speaker 11: you know, your typical media conglomerate. They own both video distribution, 406 00:20:34,240 --> 00:20:37,320 Speaker 11: broadband connectivity as well as the media side of the business. 407 00:20:37,320 --> 00:20:41,200 Speaker 11: With NBC eighty percent of their ibida actually is related 408 00:20:41,200 --> 00:20:44,280 Speaker 11: to just broadband subscriptions, and so what happened this quarter, 409 00:20:44,600 --> 00:20:47,959 Speaker 11: we were expecting a little bit of softness in broadband, 410 00:20:48,040 --> 00:20:51,720 Speaker 11: and as expected, yes, they did loose subscribers. Remember, the 411 00:20:51,760 --> 00:20:54,560 Speaker 11: whole cable industry is really in a slump because of 412 00:20:54,760 --> 00:20:58,040 Speaker 11: very very intense competition from some of the telecom offerings, 413 00:20:58,040 --> 00:21:00,920 Speaker 11: both with fiber and fixed wireless acts. So we're kind 414 00:21:00,920 --> 00:21:03,000 Speaker 11: of seeing that slump and it looks like Comcast is 415 00:21:03,040 --> 00:21:04,480 Speaker 11: really not going to be able to get out of 416 00:21:04,480 --> 00:21:08,000 Speaker 11: that slump. More interestingly, however, for both Comcasts as well 417 00:21:08,000 --> 00:21:11,960 Speaker 11: as Disney, is that the theme park attendance is actually 418 00:21:12,000 --> 00:21:16,000 Speaker 11: flailing and you know, a twenty four percent decline in 419 00:21:16,080 --> 00:21:20,800 Speaker 11: their theme park ibadah. Yeah, and that's really because huge 420 00:21:20,840 --> 00:21:22,920 Speaker 11: pull forward or what they're saying was a huge pull 421 00:21:22,960 --> 00:21:26,200 Speaker 11: forward post COVID and now we're kind of seeing normalization. 422 00:21:27,200 --> 00:21:30,280 Speaker 11: So that was a little bit of a disappointment, But 423 00:21:30,400 --> 00:21:32,719 Speaker 11: I think overall the business is fine, but we are 424 00:21:32,760 --> 00:21:35,679 Speaker 11: going to see some extended softness over the next few quarters. 425 00:21:35,840 --> 00:21:38,359 Speaker 3: And you know, the stock is down about almost six 426 00:21:38,440 --> 00:21:41,199 Speaker 3: percent today, down fifteen percent year to date. When you 427 00:21:41,240 --> 00:21:44,679 Speaker 3: look at Comcasts, you know, great collection of assets, but 428 00:21:44,800 --> 00:21:49,040 Speaker 3: none of which are really they're all facing serious headwinds. 429 00:21:49,119 --> 00:21:51,840 Speaker 3: Is there a what's the feeling among analysts and investors 430 00:21:51,920 --> 00:21:54,320 Speaker 3: you talk to, like, what can a Comcast actually do 431 00:21:55,119 --> 00:21:56,840 Speaker 3: to become, you know, an attractive stock. 432 00:21:58,200 --> 00:22:00,479 Speaker 11: So Comcast, of course, Paul, as you well know, it's 433 00:22:00,520 --> 00:22:03,600 Speaker 11: always kind of been saddled by this conglomerate discount, I mean, 434 00:22:03,640 --> 00:22:06,240 Speaker 11: the big question. And we know Brian Roberts has always 435 00:22:06,240 --> 00:22:08,680 Speaker 11: been hungry for some kind of deals. So the wildcard 436 00:22:08,720 --> 00:22:10,600 Speaker 11: of theyre obviously a wildcard when it comes to M 437 00:22:10,640 --> 00:22:15,280 Speaker 11: and A. I guess once if the if the administration changes, 438 00:22:15,359 --> 00:22:18,960 Speaker 11: and if it's more favorable for deals, I think Comcast 439 00:22:19,000 --> 00:22:21,119 Speaker 11: will be a major player. I mean, we don't know 440 00:22:21,160 --> 00:22:23,520 Speaker 11: whether they'll look to do some kind of joint venture 441 00:22:23,600 --> 00:22:26,840 Speaker 11: with you know, Warner Brothers or Fox. It remains to 442 00:22:26,880 --> 00:22:28,639 Speaker 11: be seen, but of course they will be a major 443 00:22:28,680 --> 00:22:31,679 Speaker 11: player in the space. You know. Again, in terms of 444 00:22:31,720 --> 00:22:33,520 Speaker 11: what would move their stock, maybe if they spin off 445 00:22:33,560 --> 00:22:37,359 Speaker 11: their NBC business. I mean, Brian Roberts has not indicated 446 00:22:37,400 --> 00:22:39,840 Speaker 11: any such thing, but I think over the near term, 447 00:22:39,960 --> 00:22:42,639 Speaker 11: what really needs to happen to kind of move the 448 00:22:42,680 --> 00:22:45,320 Speaker 11: sentiment on the stock is they have to show positive 449 00:22:45,680 --> 00:22:47,159 Speaker 11: broadband subscriber growth. 450 00:22:47,440 --> 00:22:51,760 Speaker 3: All right, great stuff, great analysis is always rock and Aathan. 451 00:22:51,840 --> 00:22:54,320 Speaker 3: She covers all the media business for Bloomberg Intelligence. She's 452 00:22:54,320 --> 00:22:56,560 Speaker 3: done in our Princeton office. And you kind of look 453 00:22:56,600 --> 00:22:59,960 Speaker 3: at those two stocks. Spotify kind of the new met 454 00:23:00,280 --> 00:23:03,360 Speaker 3: if you will, Comcast kind of the old media, if 455 00:23:03,400 --> 00:23:06,680 Speaker 3: you will. When there's a time when I was covering Comcast, 456 00:23:06,840 --> 00:23:09,000 Speaker 3: it was the new media versus some of the traditional 457 00:23:09,040 --> 00:23:11,080 Speaker 3: media like newspapers, magazine. 458 00:23:10,680 --> 00:23:11,159 Speaker 2: That kind of thing. 459 00:23:11,200 --> 00:23:14,120 Speaker 3: But it's just this evolution and what technology is brought 460 00:23:14,200 --> 00:23:17,719 Speaker 3: to the entertainment communications businesses. A lot of these traditional 461 00:23:17,760 --> 00:23:20,280 Speaker 3: media comes happened really hard time at evolving. 462 00:23:20,560 --> 00:23:22,160 Speaker 7: Yeah, and then how do you break it up when 463 00:23:22,240 --> 00:23:23,960 Speaker 7: like one area is your revenue stream with the other 464 00:23:24,000 --> 00:23:24,879 Speaker 7: areas your growth. 465 00:23:24,960 --> 00:23:26,680 Speaker 6: Like I'm glad I'm not in their shoot. 466 00:23:28,040 --> 00:23:31,920 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 467 00:23:32,000 --> 00:23:35,520 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 468 00:23:35,560 --> 00:23:38,320 Speaker 1: Auto with the Bloomberg Business app. You can also listen 469 00:23:38,440 --> 00:23:41,520 Speaker 1: live on Amazon Alexa from our flagship New York station 470 00:23:41,880 --> 00:23:45,080 Speaker 1: Just Say Alexa, playing Bloomberg eleven thirty. 471 00:23:46,480 --> 00:23:48,280 Speaker 7: Let's go to energy for a moment. There's a couple 472 00:23:48,359 --> 00:23:50,840 Speaker 7: different threads here that we kind of want to unravel here. 473 00:23:51,200 --> 00:23:53,960 Speaker 7: Oil is trading a little heavy again, down by almost 474 00:23:54,000 --> 00:23:57,720 Speaker 7: two percent. We're now at seventy six ninety eight on WTI. 475 00:23:57,920 --> 00:24:01,760 Speaker 7: Chris Wright is CEO of liber Energy. He's very outspoken 476 00:24:01,800 --> 00:24:04,439 Speaker 7: when it comes to how he thinks oil policy should be, 477 00:24:04,520 --> 00:24:05,720 Speaker 7: and we love that about him. 478 00:24:05,800 --> 00:24:06,119 Speaker 6: Chris. 479 00:24:06,400 --> 00:24:07,919 Speaker 7: We're going to get to that in a moment. But 480 00:24:07,960 --> 00:24:11,000 Speaker 7: I wanted to understand what's happening with crude. It's had 481 00:24:11,000 --> 00:24:13,320 Speaker 7: a real meltdown over the last couple of weeks, along 482 00:24:13,320 --> 00:24:16,280 Speaker 7: with copper, along with aluminum and nickel and iron ore. 483 00:24:16,680 --> 00:24:18,480 Speaker 7: What is this telling us right now. 484 00:24:19,960 --> 00:24:23,800 Speaker 12: Alex, I think it's fear of slowing economic growth ahead 485 00:24:23,840 --> 00:24:27,520 Speaker 12: of US. China's the biggest buyer of hard commodities. They're 486 00:24:27,520 --> 00:24:30,480 Speaker 12: by far the biggest importer of oil. They're building big 487 00:24:30,520 --> 00:24:35,200 Speaker 12: strategic patrol strategic storage reserves for all commodities, including oil 488 00:24:35,800 --> 00:24:39,080 Speaker 12: and so in China. You saw as cut interest rates recently. 489 00:24:39,920 --> 00:24:43,400 Speaker 12: People are fearful of Chinese economic growth. If they slow down, 490 00:24:43,440 --> 00:24:46,800 Speaker 12: that marginal buyer of oil and iron ore and copper 491 00:24:47,280 --> 00:24:49,280 Speaker 12: is going to pull back a little bit. So oil 492 00:24:49,320 --> 00:24:51,400 Speaker 12: prices are still around eighty dollars. I don't think they're 493 00:24:51,400 --> 00:24:53,920 Speaker 12: in a bad place, but I think fear about economic growth, 494 00:24:53,960 --> 00:24:57,679 Speaker 12: and specifically fear about China is probably the cause of that. 495 00:24:58,560 --> 00:25:00,760 Speaker 3: Hey, Christian, in case you maybe didn't notice out there 496 00:25:00,760 --> 00:25:03,080 Speaker 3: in Montana, but we're actually this is an election year. 497 00:25:03,840 --> 00:25:06,560 Speaker 3: What is the energy industry? What are you and your 498 00:25:06,640 --> 00:25:09,040 Speaker 3: energy industry palace? What do you think about? You know, 499 00:25:09,119 --> 00:25:12,239 Speaker 3: Republican versus a democratic administration here as it relates to 500 00:25:12,440 --> 00:25:13,280 Speaker 3: your industry. 501 00:25:14,560 --> 00:25:17,639 Speaker 12: Look, I've been outspoken on my visits to Washington that 502 00:25:17,720 --> 00:25:20,720 Speaker 12: the efforts of the current administration to make it harder 503 00:25:20,760 --> 00:25:23,000 Speaker 12: to get a drilling permit, or to get a pipeline 504 00:25:23,080 --> 00:25:25,679 Speaker 12: or to drill on these lands. What does that do? 505 00:25:25,920 --> 00:25:29,080 Speaker 12: In fact, it just means we produce a little less 506 00:25:29,119 --> 00:25:32,399 Speaker 12: oil and natural gas. It doesn't change demand at all, 507 00:25:32,760 --> 00:25:35,640 Speaker 12: So it just pushes prices up. So look, our industry 508 00:25:35,640 --> 00:25:38,840 Speaker 12: has been at record profitability. That's great for me, that's 509 00:25:38,880 --> 00:25:41,480 Speaker 12: great for our industry, but that's not great for our country. 510 00:25:41,800 --> 00:25:45,000 Speaker 12: If you have higher prices, it just makes people's lives 511 00:25:45,040 --> 00:25:48,679 Speaker 12: a little bit tougher. And nothing the government does really 512 00:25:48,760 --> 00:25:52,200 Speaker 12: impacts demand. Demand for hydrocarbons has grown at one point 513 00:25:52,280 --> 00:25:56,159 Speaker 12: six percent compound annual growth rate for fifty years, a 514 00:25:56,200 --> 00:25:58,360 Speaker 12: little faster than that in the last decade or two. 515 00:25:58,760 --> 00:26:02,560 Speaker 12: So the president are not going to impact demand, but 516 00:26:02,640 --> 00:26:05,359 Speaker 12: they are going to impact how much of that's produced 517 00:26:05,359 --> 00:26:08,199 Speaker 12: in the United States and how much that's produced overseas. 518 00:26:08,600 --> 00:26:10,879 Speaker 7: So here's my thing with that I don't quite understand 519 00:26:11,160 --> 00:26:13,760 Speaker 7: is that oil production in the US is at a 520 00:26:13,880 --> 00:26:17,399 Speaker 7: record high. It's higher than it was when President Trump 521 00:26:17,480 --> 00:26:20,720 Speaker 7: was in office, So what's the problem. 522 00:26:21,000 --> 00:26:24,040 Speaker 12: It would be higher, but you're right. You're right. Most 523 00:26:24,040 --> 00:26:27,639 Speaker 12: of the productions on private lands here, so there's still 524 00:26:27,760 --> 00:26:31,520 Speaker 12: room to grow production. We are at record high, will 525 00:26:31,520 --> 00:26:35,240 Speaker 12: continue to set record highs, probably for another couple decades. 526 00:26:35,640 --> 00:26:39,400 Speaker 12: The questions the pace at which US production grows, and 527 00:26:39,440 --> 00:26:43,120 Speaker 12: how does that compare to growth in global oil demand, 528 00:26:43,359 --> 00:26:45,080 Speaker 12: which is a little one to one and a half 529 00:26:45,119 --> 00:26:47,919 Speaker 12: million barrels a day during the boom years of the 530 00:26:47,960 --> 00:26:52,600 Speaker 12: Shelle Revolution. US production we're growing as fast as global demand. 531 00:26:53,000 --> 00:26:56,320 Speaker 12: That really keeps oil prices down. If US oil production 532 00:26:56,440 --> 00:26:59,920 Speaker 12: goes much slower than global oil demand, so other countries 533 00:27:00,080 --> 00:27:02,920 Speaker 12: have to meet those incremental barrels. That's an upward. That's 534 00:27:02,960 --> 00:27:05,840 Speaker 12: an upward push on prices. Good for our industry, but 535 00:27:05,880 --> 00:27:07,440 Speaker 12: not necessarily great for the country. 536 00:27:08,119 --> 00:27:11,159 Speaker 3: Where are we as an industry in terms of the 537 00:27:11,240 --> 00:27:14,199 Speaker 3: fracking evolution, if you will, because it was such a 538 00:27:14,840 --> 00:27:18,800 Speaker 3: such an amazing story to turn this country from a 539 00:27:19,040 --> 00:27:21,440 Speaker 3: net importer to a net exporter. Where are we net 540 00:27:21,600 --> 00:27:23,639 Speaker 3: process I. 541 00:27:23,640 --> 00:27:27,720 Speaker 12: Would say midstream, mid inning, mid innings. There's still a 542 00:27:27,760 --> 00:27:31,200 Speaker 12: lot of technology improvement going on, but the low hanging 543 00:27:31,200 --> 00:27:33,560 Speaker 12: fruit in the first couple of decades, most of that's 544 00:27:33,600 --> 00:27:37,200 Speaker 12: been picked, so the rise in productivity is much slower 545 00:27:37,240 --> 00:27:40,920 Speaker 12: these days. We're still getting better at making each well better. 546 00:27:41,280 --> 00:27:44,240 Speaker 12: But of course you drill the best locations first, the 547 00:27:44,359 --> 00:27:46,679 Speaker 12: rocks and oil. You know that give up oil and 548 00:27:46,720 --> 00:27:49,560 Speaker 12: gas the easiest. Most of those have been drilled, so 549 00:27:49,560 --> 00:27:53,159 Speaker 12: we're drilling slightly lower quality rock, and we're trying to 550 00:27:53,240 --> 00:27:59,119 Speaker 12: offset that by improving fracking technology. For many years, fracking 551 00:27:59,160 --> 00:28:02,560 Speaker 12: technology out leaped to the decline in rock quality. Now 552 00:28:02,600 --> 00:28:05,800 Speaker 12: you're seeing a slight decline in the productivity of each 553 00:28:05,840 --> 00:28:08,960 Speaker 12: well because that degradation and rock qualities running a little 554 00:28:09,000 --> 00:28:12,160 Speaker 12: faster than technology, but you know, not a huge change. 555 00:28:12,520 --> 00:28:14,960 Speaker 12: A lot of room to run for US production. 556 00:28:15,320 --> 00:28:17,800 Speaker 7: So, Chris, if President Trump gets in the White House 557 00:28:17,800 --> 00:28:21,200 Speaker 7: and he opens up all federal land to drilling, really 558 00:28:21,280 --> 00:28:23,520 Speaker 7: sort of opens up things in Alaska. 559 00:28:23,000 --> 00:28:23,480 Speaker 6: Et cetera. 560 00:28:24,680 --> 00:28:28,080 Speaker 7: If that really invites more production, then won't the oil 561 00:28:28,160 --> 00:28:31,159 Speaker 7: price fall even more? Which then doesn't that hurt the 562 00:28:31,200 --> 00:28:33,359 Speaker 7: break even So there's got to be some kind of 563 00:28:33,359 --> 00:28:34,360 Speaker 7: middle ground. 564 00:28:35,640 --> 00:28:40,080 Speaker 12: Exactly. The markets always find a balance. But there's no question, 565 00:28:40,200 --> 00:28:43,240 Speaker 12: you know what, Trump administration would make it easier to 566 00:28:43,360 --> 00:28:46,640 Speaker 12: produce US oil and gas product US oil and gas, 567 00:28:46,800 --> 00:28:50,760 Speaker 12: so our production would grow. You'd see some offsetting factors though, 568 00:28:51,040 --> 00:28:54,880 Speaker 12: We'd see faster permitting on LNG export terminals, so the 569 00:28:55,040 --> 00:28:58,520 Speaker 12: US exports of natural gas would grow. I think you'd 570 00:28:58,600 --> 00:29:03,800 Speaker 12: likely also see more industry relocated in the United States. Like, 571 00:29:03,880 --> 00:29:06,880 Speaker 12: our natural gas resources in this country are just awesome, 572 00:29:07,280 --> 00:29:11,520 Speaker 12: but yet most of the energy intensive manufacturing think steel 573 00:29:11,640 --> 00:29:15,400 Speaker 12: and cement and solar panels that's done in China and 574 00:29:15,440 --> 00:29:18,440 Speaker 12: that's powered by coal. If you brought more of that 575 00:29:18,560 --> 00:29:21,640 Speaker 12: industry back to the US, it would be powered by 576 00:29:21,880 --> 00:29:26,200 Speaker 12: US natural gas. You'd see lower air pollutant, lower greenhouse 577 00:29:26,240 --> 00:29:30,280 Speaker 12: gas emissions, and more American jobs. So Trump administration, which 578 00:29:30,320 --> 00:29:33,440 Speaker 12: certainly lead to more growth in US oil and natural 579 00:29:33,440 --> 00:29:36,640 Speaker 12: gas production, but it might also lead to more consumption, 580 00:29:36,800 --> 00:29:39,560 Speaker 12: more domestic consumption of those products as well. 581 00:29:40,040 --> 00:29:42,440 Speaker 3: Chris, I'm looking at your balance sheet here. I'm going 582 00:29:42,520 --> 00:29:44,800 Speaker 3: to call them not an industry analyst for energy. It 583 00:29:44,840 --> 00:29:45,640 Speaker 3: looks really. 584 00:29:45,440 --> 00:29:46,160 Speaker 2: Conservative to me. 585 00:29:46,240 --> 00:29:49,560 Speaker 3: Four hundred and sixty seventy billion dollars of total debt, 586 00:29:49,600 --> 00:29:52,960 Speaker 3: you got a billion of EBITDAH free cash flow positive? 587 00:29:53,280 --> 00:29:56,000 Speaker 3: What do you do with that? That kind of dry powder, 588 00:29:56,000 --> 00:29:56,640 Speaker 3: if you will. 589 00:29:56,480 --> 00:29:59,200 Speaker 6: Are you media investment banker pitching him right now? 590 00:29:59,240 --> 00:30:01,480 Speaker 2: I am something. I can do a lot of stuff 591 00:30:01,480 --> 00:30:02,320 Speaker 2: with this balance sheet. 592 00:30:02,400 --> 00:30:04,400 Speaker 7: So Chris, just so you know, Paul is a former 593 00:30:04,520 --> 00:30:07,120 Speaker 7: investment banker for media, so you know, just set you 594 00:30:07,200 --> 00:30:07,560 Speaker 7: up there. 595 00:30:08,600 --> 00:30:11,240 Speaker 12: I appreciate that, Paul. But yeah, we always keep a 596 00:30:11,280 --> 00:30:14,680 Speaker 12: conservative balance sheet because, look, our industry is very cyclical. 597 00:30:14,760 --> 00:30:18,760 Speaker 12: We've had two violent downturns that have both been opportunities 598 00:30:18,800 --> 00:30:22,960 Speaker 12: for US to buy distressed but good companies at cheap prices. 599 00:30:23,160 --> 00:30:25,840 Speaker 12: So we're always ready for a downturn to be aggressive. 600 00:30:26,200 --> 00:30:30,080 Speaker 12: And also, you're seeing a degradation in the US electricity market. 601 00:30:30,120 --> 00:30:34,560 Speaker 12: Electricity is becoming more expensive and less reliable. That's very 602 00:30:34,640 --> 00:30:37,680 Speaker 12: unfortunate for our country, another one of those bad energy policies. 603 00:30:37,920 --> 00:30:42,040 Speaker 12: But it's an opportunity for Liberty to start selling electricity 604 00:30:42,120 --> 00:30:45,160 Speaker 12: into the grid. We power our fract fleets, burning natural 605 00:30:45,160 --> 00:30:48,000 Speaker 12: gas to generate electricity to power fract fleets, we can 606 00:30:48,400 --> 00:30:51,160 Speaker 12: we can take that same electricity and sell it to 607 00:30:51,280 --> 00:30:54,480 Speaker 12: data centers or towns that are struggling with an unstable grid. 608 00:30:54,760 --> 00:30:56,560 Speaker 12: So I think you're going to see it a broadening 609 00:30:56,600 --> 00:30:59,000 Speaker 12: of the shoulders of Liberty's business, and we're going to 610 00:30:59,040 --> 00:31:01,680 Speaker 12: deploy a lot of our excess cash flow into a 611 00:31:01,720 --> 00:31:04,400 Speaker 12: new business line, and we'll continue to buy back our stock. 612 00:31:04,440 --> 00:31:06,960 Speaker 12: Of course, we still traded a single digit price or 613 00:31:06,960 --> 00:31:07,760 Speaker 12: earnings ratio. 614 00:31:08,080 --> 00:31:12,040 Speaker 7: Chris, that's actually tremendously interesting because sort of the conversation 615 00:31:12,120 --> 00:31:14,760 Speaker 7: that was emerging at Sarah Week this last year was 616 00:31:15,080 --> 00:31:17,680 Speaker 7: do energy companies need to rethink the kind of company 617 00:31:17,680 --> 00:31:20,600 Speaker 7: that they are, that they can't just be a straight 618 00:31:20,680 --> 00:31:23,840 Speaker 7: up oil and gas producer. Do they have to sort 619 00:31:23,840 --> 00:31:27,280 Speaker 7: of become power providers? And that's a different business, it's 620 00:31:27,280 --> 00:31:30,880 Speaker 7: a different outlook. It's kind of rethinking the structure of 621 00:31:30,880 --> 00:31:33,080 Speaker 7: what a business looks like. It sounds like you are 622 00:31:33,360 --> 00:31:35,960 Speaker 7: deeper in those conversations than maybe some of your peers 623 00:31:36,000 --> 00:31:36,960 Speaker 7: would that be true. 624 00:31:38,000 --> 00:31:41,000 Speaker 12: Yes, Look, I think most will not and most should not. 625 00:31:41,240 --> 00:31:43,320 Speaker 12: You know, oil and gas is at an all time 626 00:31:43,720 --> 00:31:47,200 Speaker 12: record high market share for US consumption. The sort of 627 00:31:47,200 --> 00:31:49,040 Speaker 12: fears that oil and gas is going to be gone 628 00:31:49,360 --> 00:31:51,320 Speaker 12: or demand will be gone in twenty or thirty years 629 00:31:51,520 --> 00:31:54,800 Speaker 12: are just nonsense. So I don't think it's a necessary thing. 630 00:31:55,080 --> 00:31:59,200 Speaker 12: But in our company, Liberty, we developed power production technologies 631 00:31:59,440 --> 00:32:02,800 Speaker 12: the highest thermal efficiency, meaning most of the energy for 632 00:32:02,920 --> 00:32:06,280 Speaker 12: burning natural gas turns into electricity on the planet. So 633 00:32:06,320 --> 00:32:09,480 Speaker 12: we have these mobile power plants we're using in the industry. 634 00:32:09,520 --> 00:32:12,440 Speaker 12: We already developed that technology. Of course, we're going to 635 00:32:12,480 --> 00:32:14,360 Speaker 12: go ahead and deploy it outside of the oil and 636 00:32:14,400 --> 00:32:15,080 Speaker 12: gas industry. 637 00:32:15,840 --> 00:32:18,160 Speaker 3: Chris, do you have any appetite for being an acquirer 638 00:32:18,240 --> 00:32:21,080 Speaker 3: of assets at this point? 639 00:32:21,800 --> 00:32:23,800 Speaker 12: Well, you know where I would say we're mid cycle, 640 00:32:23,880 --> 00:32:26,760 Speaker 12: maybe a little below mid cycle. We look at stuff 641 00:32:26,880 --> 00:32:29,720 Speaker 12: all the time, but we only you know, we're mostly 642 00:32:29,720 --> 00:32:32,680 Speaker 12: an organic builder. We only buy stuff if it's compelling. 643 00:32:32,920 --> 00:32:36,160 Speaker 12: But you know, a different technology, a different business that 644 00:32:36,280 --> 00:32:39,440 Speaker 12: maybe leveraged us faster into where we want to go. Sure, 645 00:32:39,520 --> 00:32:42,960 Speaker 12: we're open to that. We're always looking at opportunities, and. 646 00:32:43,040 --> 00:32:45,640 Speaker 7: Would that be in sort of the oil space to 647 00:32:45,800 --> 00:32:49,600 Speaker 7: ramp up current positions. Would it be more to acquire 648 00:32:49,680 --> 00:32:53,000 Speaker 7: some new technology since we already talked about how current 649 00:32:53,040 --> 00:32:56,040 Speaker 7: wells not tapped out, but you know they're they're nearing 650 00:32:56,080 --> 00:32:58,000 Speaker 7: that top out cycle. But it be more natural gas 651 00:32:58,040 --> 00:32:59,719 Speaker 7: would be infrastructure, would be power? 652 00:33:01,600 --> 00:33:05,200 Speaker 12: Power is certainly a possibility. We're going that direction anyway. 653 00:33:05,360 --> 00:33:08,960 Speaker 12: Might we buy a smaller player to speed that entry. 654 00:33:09,040 --> 00:33:13,280 Speaker 12: That's a real possibility. Technology is something we always look at. 655 00:33:13,760 --> 00:33:16,960 Speaker 12: Or we frack twenty percent of all the wells drilled 656 00:33:17,000 --> 00:33:19,120 Speaker 12: in the US and Canada, so you know, we're not 657 00:33:19,200 --> 00:33:22,000 Speaker 12: really going to acquire to get market share. We're already 658 00:33:22,040 --> 00:33:24,320 Speaker 12: the biggest and I would say, by a fair margin, 659 00:33:24,400 --> 00:33:28,000 Speaker 12: the highest ranked quality provider in our space. So probably 660 00:33:28,040 --> 00:33:31,600 Speaker 12: not in our core business, but certainly in peripheral businesses. 661 00:33:31,720 --> 00:33:32,360 Speaker 2: Is possible. 662 00:33:32,920 --> 00:33:34,720 Speaker 3: All right, Chris, thanks so much for joining us. Really 663 00:33:34,720 --> 00:33:37,080 Speaker 3: appreciate getting some of your time. Chris Wright, he's the 664 00:33:37,120 --> 00:33:39,800 Speaker 3: CEO and chairman of the board of Liberty Energy. That's 665 00:33:39,840 --> 00:33:44,520 Speaker 3: a public traded company. Lb RT is the ticker stocks 666 00:33:44,600 --> 00:33:46,920 Speaker 3: up about the fifteen percent year to date, so putting 667 00:33:46,920 --> 00:33:49,480 Speaker 3: in some decent numbers. I got about equal number buys 668 00:33:49,640 --> 00:33:52,400 Speaker 3: versus holds on Wall Street, so the street's kind of 669 00:33:52,520 --> 00:33:54,240 Speaker 3: kind of mixed on that, which is probably true for 670 00:33:54,360 --> 00:33:55,120 Speaker 3: energy in general. 671 00:33:55,280 --> 00:33:55,520 Speaker 6: Yeah. 672 00:33:55,680 --> 00:33:58,000 Speaker 7: Also see, here's the interesting part is that if you're 673 00:33:58,000 --> 00:34:00,720 Speaker 7: a portfolio manager or a big investor, you can't own 674 00:34:00,800 --> 00:34:03,160 Speaker 7: a lot of energy stocks like you really can't anymore. 675 00:34:03,200 --> 00:34:04,760 Speaker 7: So you have to really pick and choose which ones 676 00:34:04,760 --> 00:34:07,360 Speaker 7: you're gonna buy, which means the bigger have to get bigger, 677 00:34:07,360 --> 00:34:09,000 Speaker 7: the mediums definitely have to get bigger. 678 00:34:09,000 --> 00:34:09,760 Speaker 6: You have to really. 679 00:34:09,600 --> 00:34:12,360 Speaker 7: Appeal to shareholders of why you are that one stock, 680 00:34:12,400 --> 00:34:14,600 Speaker 7: which is why I also thought that his information about 681 00:34:14,719 --> 00:34:18,600 Speaker 7: Power was interesting too, because that's a totally different type 682 00:34:18,600 --> 00:34:21,640 Speaker 7: of company and a different business line and who would 683 00:34:21,680 --> 00:34:24,239 Speaker 7: be good at and who would not be And that 684 00:34:24,280 --> 00:34:26,399 Speaker 7: was definitely part of the conversation, do these guys really 685 00:34:26,440 --> 00:34:28,440 Speaker 7: need to rethink who they are fundamentally right? 686 00:34:28,440 --> 00:34:30,600 Speaker 3: And at three point five billion dollars in market cap, 687 00:34:31,080 --> 00:34:34,440 Speaker 3: are you a natural buyer of more assets or seller? 688 00:34:34,520 --> 00:34:36,680 Speaker 3: And he says, well, they're already roughly twenty percent of 689 00:34:36,680 --> 00:34:38,040 Speaker 3: the francking in this country. 690 00:34:37,719 --> 00:34:40,799 Speaker 2: So probably not gonna get much bigger. In that line, 691 00:34:40,800 --> 00:34:41,160 Speaker 2: of business. 692 00:34:41,200 --> 00:34:44,560 Speaker 3: So interesting to keep an eye on that company based 693 00:34:45,080 --> 00:34:45,760 Speaker 3: in Texas. 694 00:34:46,000 --> 00:34:47,200 Speaker 2: No, it's based in Denver, Colorado. 695 00:34:47,239 --> 00:34:49,640 Speaker 6: Actually, you know it's in the Colorado. 696 00:34:50,640 --> 00:34:54,560 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 697 00:34:54,640 --> 00:34:57,680 Speaker 1: weekdays at ten am Eastern on Apple car Play and 698 00:34:57,680 --> 00:35:00,600 Speaker 1: Android Otto with the Bloomberg Business A. You can also 699 00:35:00,680 --> 00:35:03,839 Speaker 1: listen live on Amazon Alexa from our flagship New York 700 00:35:03,920 --> 00:35:09,480 Speaker 1: station Just Say Alexa playing Bloomberg eleven thirty. 701 00:35:08,960 --> 00:35:11,320 Speaker 3: Alex Steel, Paul Swiney live here in our Bloomberg Interactive 702 00:35:11,320 --> 00:35:14,640 Speaker 3: Brokers studio, streaming live on YouTube as well. Well, you 703 00:35:14,680 --> 00:35:17,080 Speaker 3: look at Tesla the reporting after the close tonight. Stock 704 00:35:17,160 --> 00:35:19,120 Speaker 3: you're to date is absolutely. 705 00:35:18,600 --> 00:35:20,760 Speaker 2: Unchanged, But that does not tell the story. 706 00:35:21,040 --> 00:35:23,719 Speaker 3: I mean, through kind of the end of April, that's 707 00:35:23,760 --> 00:35:27,600 Speaker 3: not getting declined fifty percent, but since then it's up 708 00:35:27,680 --> 00:35:31,400 Speaker 3: seventy five percent, So go figure. I think the market's 709 00:35:31,400 --> 00:35:33,480 Speaker 3: trying to figure out what this company is here. Kevin Tynan, 710 00:35:33,800 --> 00:35:36,000 Speaker 3: he knows. He's been covering the auto industry for decades. 711 00:35:36,040 --> 00:35:39,880 Speaker 3: He's director of research at Presidio Group. Uh, Kevin, what 712 00:35:39,960 --> 00:35:42,480 Speaker 3: are you looking for after the close here? 713 00:35:42,520 --> 00:35:42,759 Speaker 2: Today? 714 00:35:42,800 --> 00:35:47,799 Speaker 3: When Tesla reports, it's kind of a mystery, Jeff. 715 00:35:47,880 --> 00:35:52,520 Speaker 10: Well, then the good thing, Paul is that they they 716 00:35:52,760 --> 00:35:55,960 Speaker 10: their throughput was above one hundred percent, meaning they sold 717 00:35:56,000 --> 00:35:58,960 Speaker 10: more than they produced for the first time in you know, 718 00:35:59,080 --> 00:36:03,560 Speaker 10: several quarters. And what that does is, you know, it 719 00:36:03,840 --> 00:36:09,480 Speaker 10: helps margins essentially. So what you've had is a lot 720 00:36:09,480 --> 00:36:13,640 Speaker 10: of output difficulties selling it, and that's very You know 721 00:36:13,680 --> 00:36:16,319 Speaker 10: that you're paying your cost of goods, but you're not 722 00:36:16,400 --> 00:36:19,560 Speaker 10: booking any of that revenue as a direct seller. So 723 00:36:19,600 --> 00:36:23,200 Speaker 10: what Tesla and all the direct seller and pure playev 724 00:36:23,560 --> 00:36:27,880 Speaker 10: companies need to do is to distribute everything that they produce, 725 00:36:28,040 --> 00:36:31,399 Speaker 10: and that's been a problem, but most of them are 726 00:36:31,440 --> 00:36:34,120 Speaker 10: all three Rivian, Loocid and Tesla were able to do 727 00:36:34,200 --> 00:36:37,200 Speaker 10: it in the second quarter. Now, the way they get 728 00:36:37,239 --> 00:36:42,400 Speaker 10: there is by cutting production. So while it helps in 729 00:36:42,480 --> 00:36:47,279 Speaker 10: terms of cost of goods, revenue, your income statement, and 730 00:36:47,320 --> 00:36:50,640 Speaker 10: even your balance sheet, because you're not carrying that inventory 731 00:36:51,480 --> 00:36:55,080 Speaker 10: as a growth company and trying to ramp your output, 732 00:36:55,520 --> 00:36:57,759 Speaker 10: you're you're actually taking a step back. And I think 733 00:36:57,800 --> 00:37:00,440 Speaker 10: Tesla's production in the second quarter was at actually the 734 00:37:00,480 --> 00:37:03,959 Speaker 10: lowest it's been since the third quarter of twenty twenty two. 735 00:37:04,400 --> 00:37:09,640 Speaker 10: So tightening up the throughput, but at much lower production rates. 736 00:37:10,520 --> 00:37:12,680 Speaker 7: What is the main thing that I'm supposed to care 737 00:37:12,719 --> 00:37:15,640 Speaker 7: about interning? So you're mentioning production throughput rate. Then there's 738 00:37:15,680 --> 00:37:17,759 Speaker 7: like AI stuff. It's trying to position itself as an 739 00:37:17,760 --> 00:37:20,520 Speaker 7: AI company. There's robots that are going to make cars. 740 00:37:20,600 --> 00:37:22,520 Speaker 7: There may be a robot that's going to drive a car. 741 00:37:22,840 --> 00:37:26,320 Speaker 7: I mean, I'm legit confused as to what the multiple 742 00:37:26,400 --> 00:37:29,000 Speaker 7: is trading on and what I should care about come 743 00:37:29,040 --> 00:37:29,640 Speaker 7: four h five. 744 00:37:31,640 --> 00:37:35,399 Speaker 10: Well, that's exactly what you're supposed to think is as 745 00:37:35,400 --> 00:37:40,279 Speaker 10: an automaker, right right, you're cutting production. So Tesla has 746 00:37:40,320 --> 00:37:43,160 Speaker 10: the ability to distract in that way to say, hey, 747 00:37:43,160 --> 00:37:46,240 Speaker 10: there's all these other great things coming. We're not simply 748 00:37:46,280 --> 00:37:49,680 Speaker 10: a metal bending automaker like everybody else's. We can do 749 00:37:49,719 --> 00:37:52,920 Speaker 10: these other things, and that's what our valuation is based on. 750 00:37:53,239 --> 00:37:56,520 Speaker 10: Because as an automaker, again, you're in this cycle where 751 00:37:57,080 --> 00:38:01,040 Speaker 10: inventory is getting very frothy and you need to cut production. Well, 752 00:38:01,040 --> 00:38:02,920 Speaker 10: now you're not a growth company, but you're not an 753 00:38:02,920 --> 00:38:06,040 Speaker 10: automaker either, right, so you can you can point to 754 00:38:06,120 --> 00:38:10,959 Speaker 10: these non disprovables such as the robotaxi business or full 755 00:38:11,000 --> 00:38:14,000 Speaker 10: self driving or whatever else is down the road that 756 00:38:14,080 --> 00:38:17,160 Speaker 10: you can pin your valuation to that isn't really the 757 00:38:17,239 --> 00:38:21,960 Speaker 10: nuts and bolts of auto manufacturing, and and for GM 758 00:38:22,120 --> 00:38:26,400 Speaker 10: Stilantis basically everybody else doesn't have that benefit to distract 759 00:38:26,440 --> 00:38:27,880 Speaker 10: to those other business units. 760 00:38:28,280 --> 00:38:30,919 Speaker 3: All Right, you mentioned GM the stocks down six point 761 00:38:31,000 --> 00:38:34,920 Speaker 3: seven percent today, but I thought that they're beat their numbers. 762 00:38:34,920 --> 00:38:36,520 Speaker 2: So what's going on with General Motors? 763 00:38:38,080 --> 00:38:41,040 Speaker 10: Yeah, I mean when you look at it, perhaps it's 764 00:38:41,080 --> 00:38:44,359 Speaker 10: backing off the EV commitment a little bit. You know, 765 00:38:44,400 --> 00:38:48,000 Speaker 10: if if you look at some of that Tesla valuation 766 00:38:48,200 --> 00:38:51,520 Speaker 10: being tied to the EV market and most of the 767 00:38:51,600 --> 00:38:54,640 Speaker 10: legacy automakers kind of taking a at least a half 768 00:38:54,680 --> 00:38:59,239 Speaker 10: step back or extending the timeline in that, you know. 769 00:38:59,280 --> 00:39:02,919 Speaker 10: But another one where GM's actually in a reasonably good 770 00:39:02,920 --> 00:39:04,920 Speaker 10: spot at least when you look at North America and 771 00:39:04,960 --> 00:39:08,840 Speaker 10: the US, you know, not oversupplied. They did increase production 772 00:39:08,960 --> 00:39:13,720 Speaker 10: in the second quarter by about eight percent, So looking 773 00:39:13,800 --> 00:39:15,879 Speaker 10: into the third quarter, there may be a little bit 774 00:39:15,920 --> 00:39:20,040 Speaker 10: of price issue and profit margin issue because they are 775 00:39:20,239 --> 00:39:23,680 Speaker 10: getting a little bit oversupplied, specifically in evs. I looked 776 00:39:23,680 --> 00:39:26,279 Speaker 10: at it just now and there's about one hundred and 777 00:39:26,320 --> 00:39:31,960 Speaker 10: fifty days supply of evs for General motors. It's about 778 00:39:32,239 --> 00:39:35,520 Speaker 10: nine percent of their supply on the ground at the dealerships, 779 00:39:35,520 --> 00:39:38,200 Speaker 10: but it only represents about three percent of their sales. 780 00:39:38,560 --> 00:39:40,520 Speaker 10: So I think as we go through July and August, 781 00:39:40,520 --> 00:39:43,040 Speaker 10: they're going to try and quietly sell that down and 782 00:39:43,080 --> 00:39:45,880 Speaker 10: get that supply better aligned with demands. 783 00:39:46,200 --> 00:39:49,880 Speaker 7: Right, so then them pushing out production of the factory, 784 00:39:49,920 --> 00:39:52,480 Speaker 7: the EV factory, like pushing that out in Detroit, etc. 785 00:39:52,800 --> 00:39:58,960 Speaker 6: Like this is good. Right for GM, it is. 786 00:39:58,960 --> 00:40:01,560 Speaker 10: Good, And it seems like it being more acceptable to 787 00:40:01,680 --> 00:40:04,479 Speaker 10: say those things and that it's not you know, full 788 00:40:04,520 --> 00:40:08,040 Speaker 10: throttle EV. All the time we saw the announcement from 789 00:40:08,160 --> 00:40:12,279 Speaker 10: Ford about, you know, trading an EV factory for a 790 00:40:12,320 --> 00:40:15,680 Speaker 10: super duty factory. So it's starting to be acceptable to 791 00:40:15,719 --> 00:40:17,560 Speaker 10: say like, and that's what the business is, and it 792 00:40:17,600 --> 00:40:19,759 Speaker 10: always has been, right, it's that trade off. You have 793 00:40:19,880 --> 00:40:25,440 Speaker 10: some models or business units or regions that are deficient 794 00:40:25,560 --> 00:40:28,120 Speaker 10: in terms of profitability, and the question is where do 795 00:40:28,160 --> 00:40:30,799 Speaker 10: you make it up? And we've sort of moved to 796 00:40:30,880 --> 00:40:34,560 Speaker 10: this period now where the EV business is the deficient business. 797 00:40:34,560 --> 00:40:39,120 Speaker 10: Also for GM, the cruise unit was a significant loss 798 00:40:39,120 --> 00:40:41,400 Speaker 10: in the quarter too, so you're you're how do you 799 00:40:41,440 --> 00:40:44,359 Speaker 10: make that up? And for gm Ford, even Stilantis. It's 800 00:40:44,360 --> 00:40:47,080 Speaker 10: on the truck side of the business and that's where 801 00:40:47,080 --> 00:40:49,239 Speaker 10: it comes from, and it's starting to be acceptable to 802 00:40:49,280 --> 00:40:50,400 Speaker 10: talk about trucks again. 803 00:40:51,600 --> 00:40:55,799 Speaker 3: So, Kevin, what's the updated consensus out of Detroit as 804 00:40:55,880 --> 00:40:59,840 Speaker 3: to the timing of this transition to EV's It obviously 805 00:41:00,000 --> 00:41:01,920 Speaker 3: feel like we've hit a significant bump in the road 806 00:41:01,960 --> 00:41:04,560 Speaker 3: and it's going to be delayed in this evolution. What's 807 00:41:04,600 --> 00:41:06,400 Speaker 3: the current thinking out of Detroit. 808 00:41:08,000 --> 00:41:10,200 Speaker 10: Yeah, and I think there's been a little bit of 809 00:41:10,239 --> 00:41:14,280 Speaker 10: a tailwind when you think about, you know, what's happening 810 00:41:14,280 --> 00:41:17,879 Speaker 10: with the election in November, right, So. 811 00:41:17,360 --> 00:41:20,520 Speaker 13: I think it feels like in Detroit that the pressure 812 00:41:20,600 --> 00:41:23,560 Speaker 13: is off that we have to get to these targets 813 00:41:24,080 --> 00:41:27,200 Speaker 13: by these dates, that there's a little bit more room 814 00:41:27,400 --> 00:41:29,279 Speaker 13: to stretch it out and to say, hey, we can 815 00:41:29,320 --> 00:41:34,320 Speaker 13: do the profitable things right now and work our way 816 00:41:34,360 --> 00:41:38,319 Speaker 13: towards the ev thing and hope that those profit dynamics 817 00:41:38,400 --> 00:41:40,040 Speaker 13: level out a little bit at some point. 818 00:41:40,080 --> 00:41:42,239 Speaker 10: But it's really a little bit of breathing room. 819 00:41:42,280 --> 00:41:43,560 Speaker 9: I think that the industry. 820 00:41:43,160 --> 00:41:45,800 Speaker 10: Feels like it's getting and again there may be some 821 00:41:45,800 --> 00:41:49,080 Speaker 10: some more uplift in November, depending how the election goes. 822 00:41:49,280 --> 00:41:51,879 Speaker 7: Hey, Kevin, really appreciate it. It's so fun to chat 823 00:41:51,920 --> 00:41:54,480 Speaker 7: with you. Congrats on the new gig. Kevin Tynan, director 824 00:41:54,520 --> 00:41:57,440 Speaker 7: of Research at the Presidio Group, joining us on GM 825 00:41:57,480 --> 00:41:58,240 Speaker 7: as well as Tesla. 826 00:41:58,320 --> 00:41:59,920 Speaker 6: What to look out after the Closing Bell. 827 00:42:00,320 --> 00:42:04,839 Speaker 1: This is the Bloomberg Intelligence Podcast, available on apples, Spotify, 828 00:42:05,040 --> 00:42:08,720 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 829 00:42:08,840 --> 00:42:11,800 Speaker 1: ten am to noon Eastern on Bloomberg dot com, the 830 00:42:11,920 --> 00:42:15,360 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 831 00:42:15,400 --> 00:42:18,560 Speaker 1: can also watch us live every weekday on YouTube and 832 00:42:18,760 --> 00:42:20,360 Speaker 1: always on the Bloomberg terminal