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Speaker 2: Let's switch gears to logistics.
Speaker 3: Transportation UPS still having some challenges. US misses profit estimates
Speaker 3: amid heavy costs and uneven demand. Can't catch a break
Speaker 3: stock down double digits here, Lee Clasical joins US senior
Speaker 3: transport logistics and shipping analysts for Bloomberg Intelligence. Lee A,
Speaker 3: get another tough quarter for UPS?
Speaker 2: What's the story there?
Speaker 4: You know, I think it's a lot of things. You know,
Speaker 4: they are seeing buying growth, which is good, but that
Speaker 4: mix of growth is not good. What they're seeing is
Speaker 4: their shippers trading down. So if you were going to
Speaker 4: maybe send something via air, maybe you decide to go
Speaker 4: on the ground, which is you know, cheaper and lower margin.
Speaker 4: And then if you're using ground, maybe you're going to
Speaker 4: use one of their products like sure Posts, which is
Speaker 4: like an economy product, which is cheaper and again lower
Speaker 4: margin business. So you are seeing, you know, folks trading down.
Speaker 4: You're also seeing the mix.
Speaker 5: Of B B two B two C outpacing growth of
Speaker 5: B to B. B two C growth was around four percent,
Speaker 5: and B to B growth was down four percent and
Speaker 5: B to B.
Speaker 4: So think like a lawyer sending documents to another lawyer's
Speaker 4: office that business tends to have better margins because of
Speaker 4: the inherent density that follows that business, and density is
Speaker 4: really good for asset intensive networks like ups is. And
Speaker 4: then you also, you know, have another negative mixed impact.
Speaker 4: You had two you know, they called out on their
Speaker 4: call to large e commerce companies. I'm assuming that you know,
Speaker 4: these are companies out of China that are you know,
Speaker 4: are kind of using more economy services, so you're seeing
Speaker 4: a surge in that demand from from there as well
Speaker 4: as addition to the trade down trade that we were
Speaker 4: that I mentioned earlier.
Speaker 6: Is this the trough? Is this sort of the worst
Speaker 6: it's going to get?
Speaker 4: It's a great question. I mean, you know, I think so,
Speaker 4: you know, I think it feels like it's this is
Speaker 4: the worst. I mean, you know, the company has done
Speaker 4: pretty well in terms of meeting expectations or beating expectations.
Speaker 4: This is the first myths since I believe the first
Speaker 4: quarter of twenty twenty. So you know, Carol Toon May
Speaker 4: and her team have been on quite a role. They
Speaker 4: also have some easier comparisons going into the second half.
Speaker 4: You know, some of your listeners might have remembered they
Speaker 4: had a really you know, tough negotiation with their labor unions.
Speaker 4: They had a new contract that was really you know,
Speaker 4: heavily weighted in the first year that gets anniversaried in
Speaker 4: August first, So therefore, you know, those higher labor costs,
Speaker 4: the comparables will ease significantly, you know, after August first,
Speaker 4: so that should provide a better cost for them in
Speaker 4: a third quarter and going forward. Also, you know peak
Speaker 4: seasons here right, You know a lot of the companies
Speaker 4: that we cover are talking about we you know, most
Speaker 4: of them are expecting a real peak season and we're
Speaker 4: not talking about, you know, the peak seasons that maybe
Speaker 4: we've seen the nineteen nineties or early two thousands, but
Speaker 4: you're definitely going to see seasonal increase in demand. And
Speaker 4: that peak season is one of the shortest on record.
Speaker 4: You know, it's around seventeen days between Thanksgiving and Christmas,
Speaker 4: and that will allow ups to implement surcharges because they're
Speaker 4: going to have to you know, get those resources in
Speaker 4: a short amount of time for a short amount of
Speaker 4: time to make sure that you know, they're able to
Speaker 4: deliver at high service levels. So you should see probably
Speaker 4: some good volume I'm sorry, some good demand revenue growth
Speaker 4: in the fourth quarter from those surcharges. So you know
Speaker 4: that coupled with a lot of their cost cutting measurements. Uh,
Speaker 4: they they've they've reduced a lot of heads. You know,
Speaker 4: I think a lot of things are going to turn
Speaker 4: for this company once You're going to see you know,
Speaker 4: that B two B volume return and the company is
Speaker 4: doing a lot of things I think to position itself
Speaker 4: longer term, you know, whether that's you know, focusing on
Speaker 4: the healthcare logistics. Healthcare logistics obviously there's a lot of
Speaker 4: value add there and those margins are pretty high relative
Speaker 4: to you know, someone throwing a package on your porch,
Speaker 4: and so you know, they're really looking to grow that
Speaker 4: business and they want to be a leader in that business.
Speaker 4: Uh And and to be frank, it's it's it's a
Speaker 4: fantastic uh business to be in if you're a logistics provider.
Speaker 4: And then you know they're also trying to do new
Speaker 4: things with or more things, I should say, with what
Speaker 4: we call SMBs, which are small and medium sized businesses.
Speaker 4: You know that tends to have better margins than you know,
Speaker 4: dealing with these super large companies like Amazon, which you know,
Speaker 4: the business is good, but the margins could be better, right.
Speaker 3: You know, I had absolutely no loyalty between these two companies.
Speaker 3: I mean I have actually no loyalty between these two services.
Speaker 3: I mean the FedEx store and the UPS store kind
Speaker 3: of right next to each other in my little strip malls.
Speaker 2: Whichever's got the shorter line, that's kind of where I go.
Speaker 3: But well, you look at the stocks over the last
Speaker 3: five years, UPS is up about seven percent per year.
Speaker 3: FedEx is up almost fourteen percent, so twice the stock
Speaker 3: price performance. So lee from an investor's perspective, you know,
Speaker 3: you got thirty seconds herea what's the difference between these
Speaker 3: two companies from an investor perspective.
Speaker 4: Well, it's interesting. So like on fed X, I think
Speaker 4: they're dealing with more structural issues because that was a
Speaker 4: company that I would say was extremely bloated, you know,
Speaker 4: over the last decade, and they're kind of right sizing
Speaker 4: their network they're both making changes to their networks to
Speaker 4: kind of meet the new demands, you know, that change
Speaker 4: of increase in the home delivery versus you know, delivering
Speaker 4: to lawyers or doctors' offices or corporations.
Speaker 1: You know.
Speaker 4: I think the biggest difference is, you know, there might
Speaker 4: be more margin expansion opportunity at FedEx, just because they're
Speaker 4: starting from a lower base than the new ps.
Speaker 1: You know.
Speaker 4: But you know, these are two what I would consider
Speaker 4: blue chip companies that are you know, should benefit with
Speaker 4: the economy and they should probably be able to grow
Speaker 4: top line well passed Global GDP, just given some of
Speaker 4: the self help things that they have in front of them.
Speaker 7: All right, pley, super appreciated, Thank you so much. With Klasgow,
Speaker 7: he joins us from a Boomberg Intelligence. He covers all
Speaker 7: the logistics and transportation stuff for us.
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Speaker 7: Alex Steel alongside Paul Sweeney and John Tucker. Yeah, crude
Speaker 7: really getting hit by weaker China demand. We're going to
Speaker 7: talk about that in the next hour. This is Bloomberg
Speaker 7: Intelligence Radio. We bring you all the top news in business, economics, politics,
Speaker 7: and finance. We are broadcasting to live Interactor Broker Studio
Speaker 7: right here in rainy Midtown Manhattan. The latest news on
Speaker 7: the political front is Kamala Harris now has more than
Speaker 7: enough pledged delegates to clinch the Democratic presidential nomination after
Speaker 7: just a two day blitz that saw the Vice president
Speaker 7: consolidate her parties, backing to challenge Donald Trump in November.
Speaker 7: Want to get more details on all of this with
Speaker 7: Henrietta Trace, Managing partner and director of Economic Policy at
Speaker 7: Beta Partners. Henrietta, now, what happens? What does pledge delegates mean?
Speaker 8: Edge delegates basically means so the field is clear for
Speaker 8: Kamala Harris. She will be the Democratic nominee as expected.
Speaker 8: We will get that confirmed around August seventh. They're going
Speaker 8: to start virtual roll call voting at the DNC in
Speaker 8: the beginning of August and carried through until about the
Speaker 8: seventh when it'll become relatively official, and then we will
Speaker 8: have the convention on the nineteenth around then we should
Speaker 8: get to understand who her vice presidential pick is. So
Speaker 8: it's really all eyes on Democrats for the foreseeable future.
Speaker 3: Henrietta, can you give us a sense of the timing
Speaker 3: associated with the VP pick? Is there any rush to
Speaker 3: get it done sooner rather than later as it relates
Speaker 3: to maybe that virtual role call.
Speaker 8: No, not really and based on what we're seeing from
Speaker 8: the Democratic Party right now. And I would think back
Speaker 8: to know how long it took for President Biden to
Speaker 8: come to the conclusion that he was going to step aside,
Speaker 8: the slow approach that Speaker Meredith Nancy Pelosi took to
Speaker 8: President Biden, the slow approach that.
Speaker 9: The donor took.
Speaker 8: This is all orchestrated, not you know, necessarily on purpose,
Speaker 8: but designed to keep the attention on the democratic process
Speaker 8: that's playing out in the Democratic Party. Make sure that
Speaker 8: they're vetting a lot of these guys, the people that
Speaker 8: they're considering. The governors from the swing states, Mark Kelly
Speaker 8: and Arizona. These are folks that have very low name
Speaker 8: recognition outside of their state. So a lot of the
Speaker 8: vetting process is being done in real time. We're watching
Speaker 8: it all unfold, and I think it's going to take
Speaker 8: the remainder of this month and into the beginning of
Speaker 8: next month. Let's recall that former President Trump announced his
Speaker 8: by pick P pick on the Monday.
Speaker 9: Of his convention.
Speaker 8: I wouldn't be surprised if that's the set of timing
Speaker 8: that we get on the Democratic side as well, which
Speaker 8: means we've got another couple of weeks before we know
Speaker 8: for sure who it's going to be.
Speaker 7: We also keep hearing, you know, these rumors that Republicans
Speaker 7: are talking about. You know, we're hijacking democracy here. This
Speaker 7: is not democratic, which leads me to think, are we
Speaker 7: going to see lawsuits in relation to Kamala Harris being
Speaker 7: on the ballot? Are we going to see lawsuits concerning
Speaker 7: campaign funds? Are we going to see lawsuits preventing her
Speaker 7: from getting on the ballot in certain states?
Speaker 6: Is all of this just talking points? There is any
Speaker 6: of this real?
Speaker 8: No, These are all relatively frivolous lawsuits. The Democratic Party
Speaker 8: has until the convention to name a nominee. Once they do,
Speaker 8: I think the concerns around the democratic process or what
Speaker 8: you're seeing in terms of slow walking endorsements from former
Speaker 8: President Obama from Majority Leader Schumer from Minority Leader Hakeem Jeffries,
Speaker 8: this is Democrats trying to explain to American voters through
Speaker 8: illustration that they're going to take their time and not
Speaker 8: necessarily have an anointment of Kamala Harris. They chose the
Speaker 8: direction that I think was the only conceivable conclusion, which
Speaker 8: was that Kamala Harris, the current Vice President, who you
Speaker 8: know millions of people have already voted for to.
Speaker 9: Go into the White House, is going to be at
Speaker 9: the top of the ticket.
Speaker 8: And the endorsement from President Biden really sealed that when
Speaker 8: he wrote his letter over the weekend.
Speaker 9: So I think that the.
Speaker 8: Direction we're getting from the Democratic Party is clearly indicative
Speaker 8: of La Harris winning the delegation. There was no real primary,
Speaker 8: but the process has been playing out for so long now,
Speaker 8: even though it's only been a couple of weeks, it
Speaker 8: feels like an eternity, and I think the Democratic voters,
Speaker 8: as evidenced by their fundraising numbers, are clearly enthusiastic and
Speaker 8: happy to have Kamala at the top. There was some
Speaker 8: morning console pulling that came out this morning showing the
Speaker 8: Democrats prefer her to be at the top of the ticket.
Speaker 8: Petevodajin was next in line, but she clearly wins the
Speaker 8: majority of the Democratic voters, So I don't think there
Speaker 8: will be an uprising against Kamala from the Democratic voter base.
Speaker 2: And let's talk money.
Speaker 3: Just reading your notes here, I mean, like eighty one
Speaker 3: million dollars was raised just in the twenty four hours
Speaker 3: after President Biden endorsed VP Harris. Here, give us a
Speaker 3: sense of the magnitude of the fundraising and what it
Speaker 3: tells you, I guess about her candidacy and the support
Speaker 3: of the Democratic Party.
Speaker 10: Man.
Speaker 9: I mean, the numbers are staggering in and of themselves.
Speaker 8: They broke Democratic records, presidential records for a twenty four
Speaker 8: hour haul. She's up over one hundred and one million
Speaker 8: dollars as of right now. But the real said is
Speaker 8: the fact that sixty percent of those donors are new
Speaker 8: to the twenty twenty four CYC ball. That is, grassroots
Speaker 8: engagement momentum on par with, if not exceeding, what you
Speaker 8: see on the demo on the Republican side in terms
Speaker 8: of galvanization from Trump supporters. One of the reasons that
Speaker 8: my odds are sixty forty for Trump right now is
Speaker 8: because we don't have any hard data from polling to
Speaker 8: suggest that Kamala Harris has a shot to win in
Speaker 8: the swing states yet, But the fundraising numbers and the
Speaker 8: heat map that you see from the Act Blue campaign
Speaker 8: suggests that those same states that Kamala Harris would need
Speaker 8: to win are the ones that are donating amongst the
Speaker 8: highest mounts.
Speaker 7: What do you think is going to wind up happening? Like,
Speaker 7: how do you game out now? Like what happens in
Speaker 7: November and beyond? I mean, moving sort of money into
Speaker 7: any kind of asset class to been on it now
Speaker 7: seems crazy?
Speaker 6: How do you think about it?
Speaker 8: I really think that investors should focus on the momentum play.
Speaker 8: That is the main focus of my note from Life
Speaker 8: last night. The momentum story is now has been with
Speaker 8: the Republican Party on things that were planned and unplanned. Obviously,
Speaker 8: Trump winning the first presidential debate, you know, getting a
Speaker 8: failed assassination attempt was extraordinarily galvanizing. I think it's insane
Speaker 8: that you know, that's not the number one news story
Speaker 8: of the day. But the reality is, and I talk
Speaker 8: about this with clients a lot, the Republican momentum came
Speaker 8: and is now gone, and now it's all with the
Speaker 8: Democratic Party. And of course it would be ridiculous to
Speaker 8: assume in twenty twenty four that there won't be another
Speaker 8: wrench thrown in the gears here. But for right now
Speaker 8: and for the remainder of this month and next month
Speaker 8: going into the DNC, you know, we haven't even gotten
Speaker 8: to those events yet. So not only is the Democratic
Speaker 8: Party galvanized in a new way that we haven't seen
Speaker 8: for two years, but the groundswell of support, the pent
Speaker 8: up demand is so robust that I suspect it will
Speaker 8: compel Kamala Harris well into August and then into the
Speaker 8: critical months and the final countdown of the election into
Speaker 8: mid September. What's fascinating is twenty four percent of Independence
Speaker 8: don't decide how they're going to vote until after Labor
Speaker 8: Day historically, so even though we're, you know, only one
Speaker 8: hundred days out from the election, there's shockingly.
Speaker 9: There's a shockingly large amount of time still left in
Speaker 9: this race.
Speaker 3: What do you think the I guess the debate strategy
Speaker 3: should be for Kamala Harris and the president former President Bush.
Speaker 8: I mean sorry, I oh, can't go that back that far.
Speaker 8: I think at this point you just got to get
Speaker 8: Trump to the stage. I think that if you read
Speaker 8: his true social pronouncements, he is really definitely attempting to
Speaker 8: move the needle on the debates, and.
Speaker 9: The question is really whether he shows or not.
Speaker 8: I don't think it's optically possible for him not to
Speaker 8: debate the vice president and the ultimate Democratic kick nominee.
Speaker 8: That debate is tentatively set for September tenth. Kamala Harris,
Speaker 8: when she was vice president, has set a couple of dates,
Speaker 8: the twelfth and thirteenth, if I'm not mistaken, of September
Speaker 8: for a vice presidential debate, but the Republican ticket hasn't.
Speaker 9: Committed to any of those.
Speaker 8: I think the American public is going to demand the
Speaker 8: Trump debate Kamala Harris, and I think it would be
Speaker 8: a material show of weakness if you did it.
Speaker 7: Just some breaking news for US, confirmed by AP as
Speaker 7: well as ABC News, the Secret Service Director Kim Cheatle
Speaker 7: has now resigned. This comes, of course, after the attempt
Speaker 7: assassination attempt on president former President Trump's life.
Speaker 6: Henrietta, are you surprised by that news?
Speaker 8: Not really, I'm surprised that it lasted as long as
Speaker 8: it did.
Speaker 9: The Secret Service has come.
Speaker 8: Under fire for years now, and I think in the
Speaker 8: wake of the attempted assassination attempts, which was so shocking
Speaker 8: to so many Americans we haven't seen that, you know,
Speaker 8: in my lifetime, is really something that required a shake
Speaker 8: up at the top. The Republican Party has come out
Speaker 8: very strongly against her and has been very focused on
Speaker 8: the Secret Service. There are investigations that they're waiting for
Speaker 8: with a couple of different deadlines sixty days out from
Speaker 8: now for a thorough account of what went on.
Speaker 9: It makes sense that she would resign.
Speaker 2: Henrietta Trees, thank you so much. We really appreciate it.
Speaker 3: As always Henrietta Trees, she's a managing partner and director
Speaker 3: of Economic Policy at Data Partners, really one of our
Speaker 3: go to voices of all things political, and I think
Speaker 3: we're gonna be talking to her very frequently between now
Speaker 3: and election day, because, as Henrieta said, there's found to
Speaker 3: be more wrenches turned into the whole process.
Speaker 6: And then as an investor, what do you do?
Speaker 7: Gina Martin Adams and Boomberg Intelligence had a great point
Speaker 7: that said that high tax companies have underperformed low tax companies,
Speaker 7: and if you're betting on President Trump, you would probably
Speaker 7: buy high tax companies with the idea that those would
Speaker 7: be cut, that those taxes would be cut. Therefore, maybe
Speaker 7: what we're seeing in the market isn't based on the election,
Speaker 7: but on earnings and fundamentals, which brings us full circle
Speaker 7: back to a day where we get almost six trillion
Speaker 7: dollars at market cap earnings coming out.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 3: Let's switch gears in. Let's get right to the media space.
Speaker 3: Are we it's media companies reporting. We're also gonna have
Speaker 3: Google reporting air for the Clothes tonight. Keith Rong and
Speaker 3: Nathan joins us. She is the media analyst for Bloomberg Intelligence. Keith,
Speaker 3: I know we had comcasts today in that stocks shorting down,
Speaker 3: but let's let's go with a winner, a good story. Spotify. Now,
Speaker 3: I'm not a Spotify customer, per se. I'm going to
Speaker 3: venture that John Tucker neither is probably not as.
Speaker 6: Well, because here is his cassette tape.
Speaker 3: Yes, this cassette tapes.
Speaker 4: Very good.
Speaker 1: No, I just.
Speaker 2: Refuse to pay for it when I can get it free.
Speaker 6: No, you have cassette tapes?
Speaker 2: Okay, thank you, Yes, very good.
Speaker 6: I have eight track tapes.
Speaker 2: I have eight tract tape.
Speaker 6: And this is why we love you exactly.
Speaker 3: Keith. It talk to us about Spotify stocks really rallying today.
Speaker 11: Yeah, thank you so much, Paul and Alex. So Spotify
Speaker 11: really blew it out of the park. You're absolutely right there. Up,
Speaker 11: I think now thirteen fourteen percent, and really the number
Speaker 11: here for Spotify, and the main story has not just
Speaker 11: been great subscriber growth, so they've been adding a solid
Speaker 11: five six seven million premium subscribers every quarter. But for them,
Speaker 11: what it really has been over the past few quarters
Speaker 11: has been this inflection and profitability. Remember what we're now
Speaker 11: looking for streamers across the board, and this goes to
Speaker 11: Netflix and everybody else in video streaming, as well as Spotify,
Speaker 11: which is, you know, the main audio streamer with a
Speaker 11: thirty five percent market share. The narrative has really shifted
Speaker 11: now to profitability, and they absolutely blew it out of
Speaker 11: the park. So the gross margin guidance that they had
Speaker 11: given was twenty eight percent. They came in at twenty
Speaker 11: nine percent. But even better was the outlook. So for
Speaker 11: the longest time Spotify was stuck at like a twenty
Speaker 11: five percent gross margin. They were pointing to like longer
Speaker 11: term margins of thirty percent. But looks like they're going
Speaker 11: to be able to hit it right in the third quarter,
Speaker 11: and that's why we see the stock reacting the way
Speaker 11: that it is.
Speaker 7: So did it take anyone else's lunch or this was
Speaker 7: just a really good sort of management cost issue, Yeah.
Speaker 11: It's excellent manage. More importantly, it's also price increases they've done.
Speaker 11: They hadn't taken any price increase alex for more than
Speaker 11: ten years, and then in a span of two years,
Speaker 11: they've raised prices by twenty percent. And that's just because
Speaker 11: they know that people love Spotify. Nobody is going to
Speaker 11: churn from Spotify to let's say, Apple Music or YouTube Music.
Speaker 11: They have a thirty six thirty seven percent share of
Speaker 11: the global audio market and they're just adding so many
Speaker 11: features and so many new verticals that they're able to
Speaker 11: take those price increases. But of course, apart from that,
Speaker 11: you know It's also been a very good story when
Speaker 11: it comes to cost cuts. So they were investing heavily
Speaker 11: in their podcasting business, you know, like with the Joe
Speaker 11: Rogan Show and adding all these other exclusive podcasts. They're
Speaker 11: being much more prudent now on that front, and those
Speaker 11: cost cuts again have really driven profitability.
Speaker 3: How much of their revenue is subscription versus advertising versus
Speaker 3: other these days.
Speaker 11: Almost all of their revenue, Paul, is subscription. It's a
Speaker 11: very Yeah, it's a very very heavy subscription based business.
Speaker 11: They are trying to build the advertising business, but as
Speaker 11: you know, again that takes time. You know, that will
Speaker 11: drive the longer term margin story. But as of right now,
Speaker 11: the mixshift is really subscriptions.
Speaker 6: That's pretty impressive.
Speaker 7: Hey, can I ask you about Comcast and what you
Speaker 7: made of their earnings that came out earlier, reported second
Speaker 7: quarter revenue that misanalyst estimates they had. It was the
Speaker 7: movie season, you got theme parks, the whole thing.
Speaker 11: Yeah, So Comcast is an interesting story. So Comcast is actually,
Speaker 11: you know, your typical media conglomerate. They own both video distribution,
Speaker 11: broadband connectivity as well as the media side of the business.
Speaker 11: With NBC eighty percent of their ibida actually is related
Speaker 11: to just broadband subscriptions, and so what happened this quarter,
Speaker 11: we were expecting a little bit of softness in broadband,
Speaker 11: and as expected, yes, they did loose subscribers. Remember, the
Speaker 11: whole cable industry is really in a slump because of
Speaker 11: very very intense competition from some of the telecom offerings,
Speaker 11: both with fiber and fixed wireless acts. So we're kind
Speaker 11: of seeing that slump and it looks like Comcast is
Speaker 11: really not going to be able to get out of
Speaker 11: that slump. More interestingly, however, for both Comcasts as well
Speaker 11: as Disney, is that the theme park attendance is actually
Speaker 11: flailing and you know, a twenty four percent decline in
Speaker 11: their theme park ibadah. Yeah, and that's really because huge
Speaker 11: pull forward or what they're saying was a huge pull
Speaker 11: forward post COVID and now we're kind of seeing normalization.
Speaker 11: So that was a little bit of a disappointment, But
Speaker 11: I think overall the business is fine, but we are
Speaker 11: going to see some extended softness over the next few quarters.
Speaker 3: And you know, the stock is down about almost six
Speaker 3: percent today, down fifteen percent year to date. When you
Speaker 3: look at Comcasts, you know, great collection of assets, but
Speaker 3: none of which are really they're all facing serious headwinds.
Speaker 3: Is there a what's the feeling among analysts and investors
Speaker 3: you talk to, like, what can a Comcast actually do
Speaker 3: to become, you know, an attractive stock.
Speaker 11: So Comcast, of course, Paul, as you well know, it's
Speaker 11: always kind of been saddled by this conglomerate discount, I mean,
Speaker 11: the big question. And we know Brian Roberts has always
Speaker 11: been hungry for some kind of deals. So the wildcard
Speaker 11: of theyre obviously a wildcard when it comes to M
Speaker 11: and A. I guess once if the if the administration changes,
Speaker 11: and if it's more favorable for deals, I think Comcast
Speaker 11: will be a major player. I mean, we don't know
Speaker 11: whether they'll look to do some kind of joint venture
Speaker 11: with you know, Warner Brothers or Fox. It remains to
Speaker 11: be seen, but of course they will be a major
Speaker 11: player in the space. You know. Again, in terms of
Speaker 11: what would move their stock, maybe if they spin off
Speaker 11: their NBC business. I mean, Brian Roberts has not indicated
Speaker 11: any such thing, but I think over the near term,
Speaker 11: what really needs to happen to kind of move the
Speaker 11: sentiment on the stock is they have to show positive
Speaker 11: broadband subscriber growth.
Speaker 3: All right, great stuff, great analysis is always rock and Aathan.
Speaker 3: She covers all the media business for Bloomberg Intelligence. She's
Speaker 3: done in our Princeton office. And you kind of look
Speaker 3: at those two stocks. Spotify kind of the new met
Speaker 3: if you will, Comcast kind of the old media, if
Speaker 3: you will. When there's a time when I was covering Comcast,
Speaker 3: it was the new media versus some of the traditional
Speaker 3: media like newspapers, magazine.
Speaker 2: That kind of thing.
Speaker 3: But it's just this evolution and what technology is brought
Speaker 3: to the entertainment communications businesses. A lot of these traditional
Speaker 3: media comes happened really hard time at evolving.
Speaker 7: Yeah, and then how do you break it up when
Speaker 7: like one area is your revenue stream with the other
Speaker 7: areas your growth.
Speaker 6: Like I'm glad I'm not in their shoot.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 7: Let's go to energy for a moment. There's a couple
Speaker 7: different threads here that we kind of want to unravel here.
Speaker 7: Oil is trading a little heavy again, down by almost
Speaker 7: two percent. We're now at seventy six ninety eight on WTI.
Speaker 7: Chris Wright is CEO of liber Energy. He's very outspoken
Speaker 7: when it comes to how he thinks oil policy should be,
Speaker 7: and we love that about him.
Speaker 6: Chris.
Speaker 7: We're going to get to that in a moment. But
Speaker 7: I wanted to understand what's happening with crude. It's had
Speaker 7: a real meltdown over the last couple of weeks, along
Speaker 7: with copper, along with aluminum and nickel and iron ore.
Speaker 7: What is this telling us right now.
Speaker 12: Alex, I think it's fear of slowing economic growth ahead
Speaker 12: of US. China's the biggest buyer of hard commodities. They're
Speaker 12: by far the biggest importer of oil. They're building big
Speaker 12: strategic patrol strategic storage reserves for all commodities, including oil
Speaker 12: and so in China. You saw as cut interest rates recently.
Speaker 12: People are fearful of Chinese economic growth. If they slow down,
Speaker 12: that marginal buyer of oil and iron ore and copper
Speaker 12: is going to pull back a little bit. So oil
Speaker 12: prices are still around eighty dollars. I don't think they're
Speaker 12: in a bad place, but I think fear about economic growth,
Speaker 12: and specifically fear about China is probably the cause of that.
Speaker 3: Hey, Christian, in case you maybe didn't notice out there
Speaker 3: in Montana, but we're actually this is an election year.
Speaker 3: What is the energy industry? What are you and your
Speaker 3: energy industry palace? What do you think about? You know,
Speaker 3: Republican versus a democratic administration here as it relates to
Speaker 3: your industry.
Speaker 12: Look, I've been outspoken on my visits to Washington that
Speaker 12: the efforts of the current administration to make it harder
Speaker 12: to get a drilling permit, or to get a pipeline
Speaker 12: or to drill on these lands. What does that do?
Speaker 12: In fact, it just means we produce a little less
Speaker 12: oil and natural gas. It doesn't change demand at all,
Speaker 12: So it just pushes prices up. So look, our industry
Speaker 12: has been at record profitability. That's great for me, that's
Speaker 12: great for our industry, but that's not great for our country.
Speaker 12: If you have higher prices, it just makes people's lives
Speaker 12: a little bit tougher. And nothing the government does really
Speaker 12: impacts demand. Demand for hydrocarbons has grown at one point
Speaker 12: six percent compound annual growth rate for fifty years, a
Speaker 12: little faster than that in the last decade or two.
Speaker 12: So the president are not going to impact demand, but
Speaker 12: they are going to impact how much of that's produced
Speaker 12: in the United States and how much that's produced overseas.
Speaker 7: So here's my thing with that I don't quite understand
Speaker 7: is that oil production in the US is at a
Speaker 7: record high. It's higher than it was when President Trump
Speaker 7: was in office, So what's the problem.
Speaker 12: It would be higher, but you're right. You're right. Most
Speaker 12: of the productions on private lands here, so there's still
Speaker 12: room to grow production. We are at record high, will
Speaker 12: continue to set record highs, probably for another couple decades.
Speaker 12: The questions the pace at which US production grows, and
Speaker 12: how does that compare to growth in global oil demand,
Speaker 12: which is a little one to one and a half
Speaker 12: million barrels a day during the boom years of the
Speaker 12: Shelle Revolution. US production we're growing as fast as global demand.
Speaker 12: That really keeps oil prices down. If US oil production
Speaker 12: goes much slower than global oil demand, so other countries
Speaker 12: have to meet those incremental barrels. That's an upward. That's
Speaker 12: an upward push on prices. Good for our industry, but
Speaker 12: not necessarily great for the country.
Speaker 3: Where are we as an industry in terms of the
Speaker 3: fracking evolution, if you will, because it was such a
Speaker 3: such an amazing story to turn this country from a
Speaker 3: net importer to a net exporter. Where are we net
Speaker 3: process I.
Speaker 12: Would say midstream, mid inning, mid innings. There's still a
Speaker 12: lot of technology improvement going on, but the low hanging
Speaker 12: fruit in the first couple of decades, most of that's
Speaker 12: been picked, so the rise in productivity is much slower
Speaker 12: these days. We're still getting better at making each well better.
Speaker 12: But of course you drill the best locations first, the
Speaker 12: rocks and oil. You know that give up oil and
Speaker 12: gas the easiest. Most of those have been drilled, so
Speaker 12: we're drilling slightly lower quality rock, and we're trying to
Speaker 12: offset that by improving fracking technology. For many years, fracking
Speaker 12: technology out leaped to the decline in rock quality. Now
Speaker 12: you're seeing a slight decline in the productivity of each
Speaker 12: well because that degradation and rock qualities running a little
Speaker 12: faster than technology, but you know, not a huge change.
Speaker 12: A lot of room to run for US production.
Speaker 7: So, Chris, if President Trump gets in the White House
Speaker 7: and he opens up all federal land to drilling, really
Speaker 7: sort of opens up things in Alaska.
Speaker 6: Et cetera.
Speaker 7: If that really invites more production, then won't the oil
Speaker 7: price fall even more? Which then doesn't that hurt the
Speaker 7: break even So there's got to be some kind of
Speaker 7: middle ground.
Speaker 12: Exactly. The markets always find a balance. But there's no question,
Speaker 12: you know what, Trump administration would make it easier to
Speaker 12: produce US oil and gas product US oil and gas,
Speaker 12: so our production would grow. You'd see some offsetting factors though,
Speaker 12: We'd see faster permitting on LNG export terminals, so the
Speaker 12: US exports of natural gas would grow. I think you'd
Speaker 12: likely also see more industry relocated in the United States. Like,
Speaker 12: our natural gas resources in this country are just awesome,
Speaker 12: but yet most of the energy intensive manufacturing think steel
Speaker 12: and cement and solar panels that's done in China and
Speaker 12: that's powered by coal. If you brought more of that
Speaker 12: industry back to the US, it would be powered by
Speaker 12: US natural gas. You'd see lower air pollutant, lower greenhouse
Speaker 12: gas emissions, and more American jobs. So Trump administration, which
Speaker 12: certainly lead to more growth in US oil and natural
Speaker 12: gas production, but it might also lead to more consumption,
Speaker 12: more domestic consumption of those products as well.
Speaker 3: Chris, I'm looking at your balance sheet here. I'm going
Speaker 3: to call them not an industry analyst for energy. It
Speaker 3: looks really.
Speaker 2: Conservative to me.
Speaker 3: Four hundred and sixty seventy billion dollars of total debt,
Speaker 3: you got a billion of EBITDAH free cash flow positive?
Speaker 3: What do you do with that? That kind of dry powder,
Speaker 3: if you will.
Speaker 6: Are you media investment banker pitching him right now?
Speaker 2: I am something. I can do a lot of stuff
Speaker 2: with this balance sheet.
Speaker 7: So Chris, just so you know, Paul is a former
Speaker 7: investment banker for media, so you know, just set you
Speaker 7: up there.
Speaker 12: I appreciate that, Paul. But yeah, we always keep a
Speaker 12: conservative balance sheet because, look, our industry is very cyclical.
Speaker 12: We've had two violent downturns that have both been opportunities
Speaker 12: for US to buy distressed but good companies at cheap prices.
Speaker 12: So we're always ready for a downturn to be aggressive.
Speaker 12: And also, you're seeing a degradation in the US electricity market.
Speaker 12: Electricity is becoming more expensive and less reliable. That's very
Speaker 12: unfortunate for our country, another one of those bad energy policies.
Speaker 12: But it's an opportunity for Liberty to start selling electricity
Speaker 12: into the grid. We power our fract fleets, burning natural
Speaker 12: gas to generate electricity to power fract fleets, we can
Speaker 12: we can take that same electricity and sell it to
Speaker 12: data centers or towns that are struggling with an unstable grid.
Speaker 12: So I think you're going to see it a broadening
Speaker 12: of the shoulders of Liberty's business, and we're going to
Speaker 12: deploy a lot of our excess cash flow into a
Speaker 12: new business line, and we'll continue to buy back our stock.
Speaker 12: Of course, we still traded a single digit price or
Speaker 12: earnings ratio.
Speaker 7: Chris, that's actually tremendously interesting because sort of the conversation
Speaker 7: that was emerging at Sarah Week this last year was
Speaker 7: do energy companies need to rethink the kind of company
Speaker 7: that they are, that they can't just be a straight
Speaker 7: up oil and gas producer. Do they have to sort
Speaker 7: of become power providers? And that's a different business, it's
Speaker 7: a different outlook. It's kind of rethinking the structure of
Speaker 7: what a business looks like. It sounds like you are
Speaker 7: deeper in those conversations than maybe some of your peers
Speaker 7: would that be true.
Speaker 12: Yes, Look, I think most will not and most should not.
Speaker 12: You know, oil and gas is at an all time
Speaker 12: record high market share for US consumption. The sort of
Speaker 12: fears that oil and gas is going to be gone
Speaker 12: or demand will be gone in twenty or thirty years
Speaker 12: are just nonsense. So I don't think it's a necessary thing.
Speaker 12: But in our company, Liberty, we developed power production technologies
Speaker 12: the highest thermal efficiency, meaning most of the energy for
Speaker 12: burning natural gas turns into electricity on the planet. So
Speaker 12: we have these mobile power plants we're using in the industry.
Speaker 12: We already developed that technology. Of course, we're going to
Speaker 12: go ahead and deploy it outside of the oil and
Speaker 12: gas industry.
Speaker 3: Chris, do you have any appetite for being an acquirer
Speaker 3: of assets at this point?
Speaker 12: Well, you know where I would say we're mid cycle,
Speaker 12: maybe a little below mid cycle. We look at stuff
Speaker 12: all the time, but we only you know, we're mostly
Speaker 12: an organic builder. We only buy stuff if it's compelling.
Speaker 12: But you know, a different technology, a different business that
Speaker 12: maybe leveraged us faster into where we want to go. Sure,
Speaker 12: we're open to that. We're always looking at opportunities, and.
Speaker 7: Would that be in sort of the oil space to
Speaker 7: ramp up current positions. Would it be more to acquire
Speaker 7: some new technology since we already talked about how current
Speaker 7: wells not tapped out, but you know they're they're nearing
Speaker 7: that top out cycle. But it be more natural gas
Speaker 7: would be infrastructure, would be power?
Speaker 12: Power is certainly a possibility. We're going that direction anyway.
Speaker 12: Might we buy a smaller player to speed that entry.
Speaker 12: That's a real possibility. Technology is something we always look at.
Speaker 12: Or we frack twenty percent of all the wells drilled
Speaker 12: in the US and Canada, so you know, we're not
Speaker 12: really going to acquire to get market share. We're already
Speaker 12: the biggest and I would say, by a fair margin,
Speaker 12: the highest ranked quality provider in our space. So probably
Speaker 12: not in our core business, but certainly in peripheral businesses.
Speaker 2: Is possible.
Speaker 3: All right, Chris, thanks so much for joining us. Really
Speaker 3: appreciate getting some of your time. Chris Wright, he's the
Speaker 3: CEO and chairman of the board of Liberty Energy. That's
Speaker 3: a public traded company. Lb RT is the ticker stocks
Speaker 3: up about the fifteen percent year to date, so putting
Speaker 3: in some decent numbers. I got about equal number buys
Speaker 3: versus holds on Wall Street, so the street's kind of
Speaker 3: kind of mixed on that, which is probably true for
Speaker 3: energy in general.
Speaker 6: Yeah.
Speaker 7: Also see, here's the interesting part is that if you're
Speaker 7: a portfolio manager or a big investor, you can't own
Speaker 7: a lot of energy stocks like you really can't anymore.
Speaker 7: So you have to really pick and choose which ones
Speaker 7: you're gonna buy, which means the bigger have to get bigger,
Speaker 7: the mediums definitely have to get bigger.
Speaker 6: You have to really.
Speaker 7: Appeal to shareholders of why you are that one stock,
Speaker 7: which is why I also thought that his information about
Speaker 7: Power was interesting too, because that's a totally different type
Speaker 7: of company and a different business line and who would
Speaker 7: be good at and who would not be And that
Speaker 7: was definitely part of the conversation, do these guys really
Speaker 7: need to rethink who they are fundamentally right?
Speaker 3: And at three point five billion dollars in market cap,
Speaker 3: are you a natural buyer of more assets or seller?
Speaker 3: And he says, well, they're already roughly twenty percent of
Speaker 3: the francking in this country.
Speaker 2: So probably not gonna get much bigger. In that line,
Speaker 2: of business.
Speaker 3: So interesting to keep an eye on that company based
Speaker 3: in Texas.
Speaker 2: No, it's based in Denver, Colorado.
Speaker 6: Actually, you know it's in the Colorado.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 3: Alex Steel, Paul Swiney live here in our Bloomberg Interactive
Speaker 3: Brokers studio, streaming live on YouTube as well. Well, you
Speaker 3: look at Tesla the reporting after the close tonight. Stock
Speaker 3: you're to date is absolutely.
Speaker 2: Unchanged, But that does not tell the story.
Speaker 3: I mean, through kind of the end of April, that's
Speaker 3: not getting declined fifty percent, but since then it's up
Speaker 3: seventy five percent, So go figure. I think the market's
Speaker 3: trying to figure out what this company is here. Kevin Tynan,
Speaker 3: he knows. He's been covering the auto industry for decades.
Speaker 3: He's director of research at Presidio Group. Uh, Kevin, what
Speaker 3: are you looking for after the close here?
Speaker 2: Today?
Speaker 3: When Tesla reports, it's kind of a mystery, Jeff.
Speaker 10: Well, then the good thing, Paul is that they they
Speaker 10: their throughput was above one hundred percent, meaning they sold
Speaker 10: more than they produced for the first time in you know,
Speaker 10: several quarters. And what that does is, you know, it
Speaker 10: helps margins essentially. So what you've had is a lot
Speaker 10: of output difficulties selling it, and that's very You know
Speaker 10: that you're paying your cost of goods, but you're not
Speaker 10: booking any of that revenue as a direct seller. So
Speaker 10: what Tesla and all the direct seller and pure playev
Speaker 10: companies need to do is to distribute everything that they produce,
Speaker 10: and that's been a problem, but most of them are
Speaker 10: all three Rivian, Loocid and Tesla were able to do
Speaker 10: it in the second quarter. Now, the way they get
Speaker 10: there is by cutting production. So while it helps in
Speaker 10: terms of cost of goods, revenue, your income statement, and
Speaker 10: even your balance sheet, because you're not carrying that inventory
Speaker 10: as a growth company and trying to ramp your output,
Speaker 10: you're you're actually taking a step back. And I think
Speaker 10: Tesla's production in the second quarter was at actually the
Speaker 10: lowest it's been since the third quarter of twenty twenty two.
Speaker 10: So tightening up the throughput, but at much lower production rates.
Speaker 7: What is the main thing that I'm supposed to care
Speaker 7: about interning? So you're mentioning production throughput rate. Then there's
Speaker 7: like AI stuff. It's trying to position itself as an
Speaker 7: AI company. There's robots that are going to make cars.
Speaker 7: There may be a robot that's going to drive a car.
Speaker 7: I mean, I'm legit confused as to what the multiple
Speaker 7: is trading on and what I should care about come
Speaker 7: four h five.
Speaker 10: Well, that's exactly what you're supposed to think is as
Speaker 10: an automaker, right right, you're cutting production. So Tesla has
Speaker 10: the ability to distract in that way to say, hey,
Speaker 10: there's all these other great things coming. We're not simply
Speaker 10: a metal bending automaker like everybody else's. We can do
Speaker 10: these other things, and that's what our valuation is based on.
Speaker 10: Because as an automaker, again, you're in this cycle where
Speaker 10: inventory is getting very frothy and you need to cut production. Well,
Speaker 10: now you're not a growth company, but you're not an
Speaker 10: automaker either, right, so you can you can point to
Speaker 10: these non disprovables such as the robotaxi business or full
Speaker 10: self driving or whatever else is down the road that
Speaker 10: you can pin your valuation to that isn't really the
Speaker 10: nuts and bolts of auto manufacturing, and and for GM
Speaker 10: Stilantis basically everybody else doesn't have that benefit to distract
Speaker 10: to those other business units.
Speaker 3: All Right, you mentioned GM the stocks down six point
Speaker 3: seven percent today, but I thought that they're beat their numbers.
Speaker 2: So what's going on with General Motors?
Speaker 10: Yeah, I mean when you look at it, perhaps it's
Speaker 10: backing off the EV commitment a little bit. You know,
Speaker 10: if if you look at some of that Tesla valuation
Speaker 10: being tied to the EV market and most of the
Speaker 10: legacy automakers kind of taking a at least a half
Speaker 10: step back or extending the timeline in that, you know.
Speaker 10: But another one where GM's actually in a reasonably good
Speaker 10: spot at least when you look at North America and
Speaker 10: the US, you know, not oversupplied. They did increase production
Speaker 10: in the second quarter by about eight percent, So looking
Speaker 10: into the third quarter, there may be a little bit
Speaker 10: of price issue and profit margin issue because they are
Speaker 10: getting a little bit oversupplied, specifically in evs. I looked
Speaker 10: at it just now and there's about one hundred and
Speaker 10: fifty days supply of evs for General motors. It's about
Speaker 10: nine percent of their supply on the ground at the dealerships,
Speaker 10: but it only represents about three percent of their sales.
Speaker 10: So I think as we go through July and August,
Speaker 10: they're going to try and quietly sell that down and
Speaker 10: get that supply better aligned with demands.
Speaker 7: Right, so then them pushing out production of the factory,
Speaker 7: the EV factory, like pushing that out in Detroit, etc.
Speaker 6: Like this is good. Right for GM, it is.
Speaker 10: Good, And it seems like it being more acceptable to
Speaker 10: say those things and that it's not you know, full
Speaker 10: throttle EV. All the time we saw the announcement from
Speaker 10: Ford about, you know, trading an EV factory for a
Speaker 10: super duty factory. So it's starting to be acceptable to
Speaker 10: say like, and that's what the business is, and it
Speaker 10: always has been, right, it's that trade off. You have
Speaker 10: some models or business units or regions that are deficient
Speaker 10: in terms of profitability, and the question is where do
Speaker 10: you make it up? And we've sort of moved to
Speaker 10: this period now where the EV business is the deficient business.
Speaker 10: Also for GM, the cruise unit was a significant loss
Speaker 10: in the quarter too, so you're you're how do you
Speaker 10: make that up? And for gm Ford, even Stilantis. It's
Speaker 10: on the truck side of the business and that's where
Speaker 10: it comes from, and it's starting to be acceptable to
Speaker 10: talk about trucks again.
Speaker 3: So, Kevin, what's the updated consensus out of Detroit as
Speaker 3: to the timing of this transition to EV's It obviously
Speaker 3: feel like we've hit a significant bump in the road
Speaker 3: and it's going to be delayed in this evolution. What's
Speaker 3: the current thinking out of Detroit.
Speaker 10: Yeah, and I think there's been a little bit of
Speaker 10: a tailwind when you think about, you know, what's happening
Speaker 10: with the election in November, right, So.
Speaker 13: I think it feels like in Detroit that the pressure
Speaker 13: is off that we have to get to these targets
Speaker 13: by these dates, that there's a little bit more room
Speaker 13: to stretch it out and to say, hey, we can
Speaker 13: do the profitable things right now and work our way
Speaker 13: towards the ev thing and hope that those profit dynamics
Speaker 13: level out a little bit at some point.
Speaker 10: But it's really a little bit of breathing room.
Speaker 9: I think that the industry.
Speaker 10: Feels like it's getting and again there may be some
Speaker 10: some more uplift in November, depending how the election goes.
Speaker 7: Hey, Kevin, really appreciate it. It's so fun to chat
Speaker 7: with you. Congrats on the new gig. Kevin Tynan, director
Speaker 7: of Research at the Presidio Group, joining us on GM
Speaker 7: as well as Tesla.
Speaker 6: What to look out after the Closing Bell.
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