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Speaker 3: Hi, everyone, Welcome to the Bloomberg Business Wee Weekend Podcast. Well,
Speaker 3: another busy week on Wall Street. It was the last
Speaker 3: full week of trading in twenty twenty five. Hard to
Speaker 3: believe with investors parsing a few more earnings, and we
Speaker 3: got some data from the government on US jobs and
Speaker 3: inflation and what all of this might mean for FED
Speaker 3: policy in twenty twenty six. A lot to think about
Speaker 3: as we get ready for a new year. Another thing,
Speaker 3: who will be the next chair of the US Central
Speaker 3: Bank in twenty twenty six? On the latter, the whole
Speaker 3: spreading around that seemed to be in flux, kind of changing.
Speaker 3: For the latest on all of this, though, check it
Speaker 3: out on the Bloomberg terminal and at Bloomberg dot com.
Speaker 1: For a macro view of the economy, the underlying risks
Speaker 1: and the health of the banking sector, private credit, and AI.
Speaker 1: We caught up again with former investment banker Chris Whalen.
Speaker 1: That conversation in just a minute plus.
Speaker 3: The surge for power, getting the grids ready for it,
Speaker 3: and why these energy demands could slow down global economic growth.
Speaker 3: We get into that with the president of National Grid
Speaker 3: New York.
Speaker 1: And bitcoin, the notorious energy consumer headed for its fourth
Speaker 1: annual decline in its history. Could bitcoin fatigue be setting
Speaker 1: in on the industry.
Speaker 3: Then in our second hour, the cost of celebrating Christmas.
Speaker 3: It's climbing it.
Speaker 1: It depends on what you're buying.
Speaker 3: Hint hint, gold rings. Yeah, kind of pricey. All right,
Speaker 3: we're going to get into that. We're also going to
Speaker 3: get into what it may take to get the perfect
Speaker 3: custom ski boots by the way, Tim knows a little
Speaker 3: bit about that. And then we get the market for
Speaker 3: big experiences bane.
Speaker 1: All that to Colm. We begin with the macro and
Speaker 1: the micro, from private credit to banking and yes, even
Speaker 1: some AI. With someone who we turn to a lot
Speaker 1: during the Great Financial Crisis, we're talking about Chris Whalen.
Speaker 3: He is chairman of Whalen Global advisors. He worked at
Speaker 3: the New York Fed in the nineteen eighties. He has
Speaker 3: testified before Congress and the SEC. He worked on Wall
Speaker 3: Street at such storied firms that are no longer around.
Speaker 3: We're talking about Bear Stearns and Prudential securities. Chris is
Speaker 3: also co founder of the Institutional Risk Analytics newsletter It's eerie.
Speaker 4: The credit costs are trending down. Asset returns, thank god,
Speaker 4: are getting back to normal about one point five percent.
Speaker 4: But there's a lot we don't see, and that's what's
Speaker 4: worrying people. Whether you talk about Oracle, where you talk
Speaker 4: about private credit, what people are worried about today is
Speaker 4: what they don't see in the data because they know
Speaker 4: that a lot of this is being fudged. And that's
Speaker 4: what worries me as well.
Speaker 1: What do you think is being fudged things like loan losses.
Speaker 4: There's a lot of four bearents here in New York
Speaker 4: City for multi family apartments. Our new mayor is threatening
Speaker 4: to start taking over buildings the landlords are not keeping
Speaker 4: up to his standards. Well, the city in New York
Speaker 4: can't afford to take care of them either, and so
Speaker 4: we have this accumulation of pressures mostly caused by inflation,
Speaker 4: mostly caused by our friends at the FED. But in
Speaker 4: their defense, why did they do that? Because we told
Speaker 4: everybody they didn't have to pay their loans and their
Speaker 4: rent for two years during COVID. People forget that. In
Speaker 4: the mortgage industry in March of twenty twenty, we were
Speaker 4: all looking at one another going, what are we going
Speaker 4: to do? This is after President Trump declared the emergency
Speaker 4: and said, you don't have to pay your bills. Yeah, Well,
Speaker 4: the FED came to the rescue by dropping raised to zero.
Speaker 4: We cause a surge of home lending activity, record volumes,
Speaker 4: and that float was borrowed to help everybody pay their bills.
Speaker 3: So why aren't we seeing more stress in the credit markets?
Speaker 3: And why are we seeing records on Wall Street? And
Speaker 3: like it sounds like then some disconnect.
Speaker 4: I think part of the reason that the Street has
Speaker 4: been doing well listed stocks is because you have a
Speaker 4: lot of liquidity coming out of private markets. Going back
Speaker 4: into more liquid markets makes sense, right. Private equity private
Speaker 4: credit is a mess, and we all know this. Something
Speaker 4: like fifteen percent of private equity companies in the US
Speaker 4: are paying in kind rather than in cash. So you notice, waiting.
Speaker 3: For the year to like the exits and for things
Speaker 3: to move on.
Speaker 4: There's a lack of demand from banks for loans except
Speaker 4: in one category, non depository financial companies, which is another
Speaker 4: way of saying private equity funds, credit shops like Areas
Speaker 4: and Apollo. They're the ones that have been aggressively expanding
Speaker 4: their business using money in part from banks. So the
Speaker 4: banks are now the facilitators. And what does this remind
Speaker 4: us of Carol the two thousands?
Speaker 5: Right right?
Speaker 4: It's the same thing. You have non bank intermediation, relying
Speaker 4: on the bond market, equity markets, and bank credit. And
Speaker 4: the thing is eventually they're going to stumble, and that's
Speaker 4: what everybody's worried about it.
Speaker 1: So what does that stumble look like? What is the
Speaker 1: shoe that drops?
Speaker 4: It looks like First Brands, Hello, we're defaulting. And most
Speaker 4: people had never focused on that company. It was a private,
Speaker 4: totally institutional play. The same thing with Tricolor auto lender
Speaker 4: that you know half of their customers were illegal aliens
Speaker 4: that nobody had ever focused on this. It was an
Speaker 4: institutional story that suddenly surged.
Speaker 1: So you think those two instances are canaries in the
Speaker 1: coal mine.
Speaker 4: I think they are typical of what we're going to
Speaker 4: see more in the future, which is you're going to
Speaker 4: see more of the missteps in the institutional, non public market,
Speaker 4: which was supposedly better. Remember everybody was selling us the
Speaker 4: idea that private was better than public. No, we have
Speaker 4: public markets because they were open and relatively liquid.
Speaker 3: Chris, you know after the Jamie Diamond cockroach comment that
Speaker 3: there were many members in the private world that came
Speaker 3: out or a few, I should say, that came on
Speaker 3: our air, and that seemed to say, hey, listen, things
Speaker 3: are fine, And I understand many would say they're talking
Speaker 3: their book, but are they systemic risks, like what's the
Speaker 3: exposure with the traditional financial sector when it comes to
Speaker 3: the private markets, Because I think that's what we care
Speaker 3: most about right now.
Speaker 4: I think the private players can fail tomorrow. It will
Speaker 4: cause a bit of kurffluffle and volatility in the markets.
Speaker 4: But are they systemic like a big bank. No, But
Speaker 4: the big banks will take their lumps too because they
Speaker 4: are lending indirectly into these structures. They tend to take
Speaker 4: the most senior positions, but that may not save them.
Speaker 4: You see the assumption that Okay, I'm senior and three
Speaker 4: quarters of the stack is below me. And therefore I'm okay,
Speaker 4: that may not work this time around because you have
Speaker 4: leverage on leverage on leverage in some of these deals.
Speaker 3: When so when like the big banks report again, we're
Speaker 3: getting ready for another earning cycle, right, you know, we'll
Speaker 3: get that, you know, in early early January. So what
Speaker 3: do we look for for things like that? Like, what
Speaker 3: do you look for?
Speaker 4: Yours are going to be wonderful. That's what worries me,
Speaker 4: you know, just as an analyst. We were supposed to
Speaker 4: have a recession last year. Credit losses largely peaked last
Speaker 4: year third fourth quarter. Yeah, they've been coming down since then.
Speaker 4: So if you look at the picture, you say, god,
Speaker 4: everything is great. You don't see a lot of utilization.
Speaker 4: You don't see a lot of demand from the banks
Speaker 4: for credit. They've got a ton of unused credit out
Speaker 4: there that they wish people would use. But so you
Speaker 4: don't see stress in the published numbers. Where you see
Speaker 4: stresses when you talk to professionals, when you read the
Speaker 4: really interesting media like Bloomberg and others that cover some
Speaker 4: of these stories. There was a great piece in the
Speaker 4: Ft talking about Altus, a company that Jamie Dimond came
Speaker 4: to the rescue of paid off their most restrictive loans
Speaker 4: so that they go out and borrow my money's right,
Speaker 4: And all of the credit guys that you're talking about
Speaker 4: look at Jamie Dimond and they're going, hello.
Speaker 1: What are you doing?
Speaker 4: Yeah, he he's an enabler of bad behavior because Jamie
Speaker 4: has to go out and make money too in a
Speaker 4: market where there isn't a lot of what I would
Speaker 4: call quality demand, which reminds me.
Speaker 3: Of what would happen in the Great Financial Crisis of
Speaker 3: people saying, I know it's getting messy and ugly, but
Speaker 3: there was it. The CEO of City at the time,
Speaker 3: I think who I came out and made some comment
Speaker 3: about I got.
Speaker 1: To be in it, yes and no.
Speaker 4: I think that some institutions have the common sense to
Speaker 4: pull back and say no, others don't. I'll give you
Speaker 4: an example p and C. P and C has the
Speaker 4: lowest loss rate in the top seven banks. They've always
Speaker 4: also got one of the lowest funding costs. That's a
Speaker 4: fairly well run half trillion dollar bank that has managed
Speaker 4: to avoid risk. I think often by saying no, the
Speaker 4: street wanted them to get more involved in certain things
Speaker 4: like prime brokerage, dealing with private equity funds, that sort
Speaker 4: of thing, and they said no. So I think there
Speaker 4: are institutions that are very well run in this market.
Speaker 4: But again, the banks are under utili because the non
Speaker 4: bank financial companies have stolen their march and they are
Speaker 4: going to the customer and they're using wholesale funding from
Speaker 4: the big banks and they're in turn dis intermediating them.
Speaker 1: At the same tone, Chris, we want to talk a
Speaker 1: little bit about AI too in the time that we
Speaker 1: have left. We've talked about it with you before circular financing.
Speaker 1: We're not sure how it all plays out in the
Speaker 1: economy and what it has to do with productivity and
Speaker 1: with economic growth. Weighing in on AI and its potential
Speaker 1: economic impact. Ken Griffin of Citadel speaking with Bloomberg's Danny
Speaker 1: Berger the conference in Paris. Check out what he said.
Speaker 6: I think there is some chance that we will see
Speaker 6: meaningful progress in this field that will change the calculation
Speaker 6: that i'm or calculus that I'm setting forth, Like there
Speaker 6: are so many bright people in their twenties and thirties
Speaker 6: trying to unlock trying to unlock true intelligence that this
Speaker 6: does create the environment in which a breakthrough may happen.
Speaker 6: But I think that generit of AI as we know
Speaker 6: today will have a very pointed, but relatively limited impact
Speaker 6: on the broader economy.
Speaker 1: Appointed but relatively limited impact on the broader economy. Ken
Speaker 1: Griffin of Citadel, what, in your view is the impact
Speaker 1: of AI on this economy?
Speaker 4: I think it's incremental better search tools.
Speaker 1: You know, we're writers.
Speaker 4: So is he right? I think he is right. And frankly,
Speaker 4: I read a lot of the long haired stuff on
Speaker 4: AI some of the people in the scientific community, and
Speaker 4: they tell you the same thing. Because this is a
Speaker 4: third or four to fifth time that we have talked
Speaker 4: about AI. You go back to the seventies and the eighties.
Speaker 4: Remember Watson IBM, which was a fiasco, but it was
Speaker 4: their way of showing what new technology could do. But
Speaker 4: is it creating general intelligence?
Speaker 5: No? All this waste?
Speaker 1: Is all this waste?
Speaker 4: No, it's marketing, you know, never.
Speaker 3: Yeah, but that's market but to spend, Yeah, but.
Speaker 4: That's Look, everything in the US economy is about marketing. Okay,
Speaker 4: it doesn't matter what it is. And if it's attached
Speaker 4: to a stock, then you know it's marketing. I've made
Speaker 4: a ton of money on in video. I'm very grateful
Speaker 4: to mister Wang, but is he going to change the world. No,
Speaker 4: what we're doing is building a lot of infrastructure. We're
Speaker 4: spending a ton of money, not so much on building AI,
Speaker 4: but preparing to have the capacity to do it, mostly
Speaker 4: by studying the past.
Speaker 1: To me, that's not AI.
Speaker 4: AI is when a machine can start to observe what's
Speaker 4: around it and react and determine what to do next
Speaker 4: based on what it sees, not because of you know,
Speaker 4: it's studied our language for the last fifty years, so
Speaker 4: you're understood.
Speaker 3: Like the whole idea of AI is all the data
Speaker 3: that's put in from the past. Do you think that, Okay,
Speaker 3: that's your takes.
Speaker 1: All we have?
Speaker 3: Are you still on video?
Speaker 7: No?
Speaker 4: I got out, I got out, I wrote it up.
Speaker 4: It's split. I wrote it up again. It's split. But
Speaker 4: it gets to be a third of my portfolio. I've
Speaker 4: got to take the money and run, you know. With
Speaker 4: all due respect to Jim Kramer, who I'm very grateful
Speaker 4: to for getting me into the stock, but.
Speaker 1: It sounds like you're saying that that we're bubble with
Speaker 1: at least with the spat of course, we are.
Speaker 4: That's what humans do, that's what markets is what happens.
Speaker 4: We follow the shiny object. What happens when the bubble pops.
Speaker 4: We're going to see that a lot of the spend
Speaker 4: for AI will not be compensated with revenue growth that's
Speaker 4: going to help to pay it off. And Oracle, I think,
Speaker 4: unfortunately a great company, is the poster child for this.
Speaker 4: They were following the crowd. They decided to double down
Speaker 4: and do even more. And the truth of the matter
Speaker 4: is one large language model. If all of the tech
Speaker 4: companies have gotten together and said, look, let's do this together, right, right.
Speaker 1: But the other problem I.
Speaker 4: Think is the metaphors that we use in this conversation
Speaker 4: is race with China. The Chinese don't use metaphors like that.
Speaker 4: When you listen to them talk about AI. It's part
Speaker 4: of a broader range of initiatives that they're trying to
Speaker 4: use to give them an advantage in the global economy.
Speaker 4: They don't see it.
Speaker 5: As a race.
Speaker 4: This is all marketing hype, and we have to differentiate
Speaker 4: between the technology and the cell. It's like we used
Speaker 4: to say about a IBM, never mistake sales with delivery.
Speaker 3: No, All right, gott to leave it there. Thank you, Billy,
Speaker 3: appreciate it.
Speaker 4: Good pleasure.
Speaker 3: Chris Whaler and Chairman of Whale and Global Advisors, joining
Speaker 3: us here in studio.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
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Speaker 3: Global electricity demand in the US is surging that we
Speaker 3: know as massive data centers for AI begin to pop up.
Speaker 3: EV adoption rises and government incentives are boosting domestic manufacturing.
Speaker 3: All of that putting pressure on the power grid and
Speaker 3: the need for energy. This surge is outpacing older energy plants,
Speaker 3: straining power generation, transmission, and distribution systems.
Speaker 1: A report by the Albany Times Union mentioned National Grid,
Speaker 1: New York and other utilities spending more than four billion
Speaker 1: dollars to prep and modernize New York's electrical grid for
Speaker 1: a generational shift that includes things like AI data centers
Speaker 1: and more.
Speaker 3: The All Many Times Union goes on to say that
Speaker 3: this spending is for investments for which New Yorkers, many
Speaker 3: of whom are already struggling with utility costs will have
Speaker 3: to pay for in the coming years. Now we have
Speaker 3: the perfect voice to talk about all of this.
Speaker 1: Sally Librera, President of National Grid New York. It's the
Speaker 1: subsidiary of the publicly held electricity, natural gas, and clean
Speaker 1: energy utility National Grid. It serves millions in New York
Speaker 1: and Massachusetts. Sally joined us in our studio.
Speaker 8: So at National Grid in New York, we serve more
Speaker 8: than four million customers and we deliver natural gas and
Speaker 8: electricity to those customers, and our focus is on doing
Speaker 8: it safely, reliably and affordably. But the reality is there
Speaker 8: is increasing demand for energy across the entire state, and
Speaker 8: we serve through Upstate, we serve in Long Island, and
Speaker 8: we also serve in New York City, and it's our
Speaker 8: job to deliver that energy to meet that energy demand, where,
Speaker 8: when and how folks need it.
Speaker 3: How would you quantify that demand though, Give us some idea,
Speaker 3: because we're talking NonStop about deals of AI data centers,
Speaker 3: whether it's New York or elsewhere. Give us an idea.
Speaker 3: How stressed is the situation?
Speaker 8: So we work with our New York Independent System Operator,
Speaker 8: the NISO, and NISO manages a what we call the
Speaker 8: large load Q. So it's essentially the companies that have
Speaker 8: indicated wanting to hook into the New York grid that
Speaker 8: have large power needs. And they estimate that the cumulative
Speaker 8: power need across those companies that are essentially in line
Speaker 8: to connect sometime over the next five or so years
Speaker 8: is about ten gigawatts of energy. And so just to
Speaker 8: give you some context, at our peak in New York,
Speaker 8: we demand about three times that across the entire state.
Speaker 8: And another really important point is that one year ago
Speaker 8: that Q was one third the size. It literally tripled
Speaker 8: in just one year.
Speaker 1: All data centers, no, not all database What is it done?
Speaker 1: Because it does seem like for many years we thought
Speaker 1: that power demand across the country would actually stay relatively flat,
Speaker 1: and it did stay relatively flat, but just in recent
Speaker 1: years we've seen so much of an uptick in demand.
Speaker 1: What are you seeing on your grids?
Speaker 8: Well, there's definitely there, definitely is the impact of data centers.
Speaker 8: But New York is also very attractive to manufacturing and
Speaker 8: large scale manufacturing, particularly some of the modern manufacturing we
Speaker 8: see around semiconductors and computer components. It's very energy intensive,
Speaker 8: and companies with big power needs are drawn to New York,
Speaker 8: and we are working to make sure that they have
Speaker 8: the power that they need, not just today but well
Speaker 8: into the future.
Speaker 3: So it's interesting, right because we think about this White House,
Speaker 3: right and encouraging investment from foreign companies to build here.
Speaker 3: I mean, I guess you know that's the good thing, right,
Speaker 3: We want to see other companies investing into the United States.
Speaker 3: But there's a power grab on that right as a
Speaker 3: result of that. In order to meet that.
Speaker 8: I think it is important to note that even if
Speaker 8: we weren't at this unique moment in time with rapidly
Speaker 8: increasing demand for power, we still have a grid in
Speaker 8: New York and this is true across many places in
Speaker 8: the country. We have a grid that needs investment. We
Speaker 8: have assets that are close to one hundred years old.
Speaker 3: Why right, right? Tim Like? How many people like, why
Speaker 3: if it's one hundred years old, why are you twenty
Speaker 3: years ago?
Speaker 1: Right? Why did we make the investment?
Speaker 3: Then?
Speaker 8: Yeah, we have been very careful about balancing the bill
Speaker 8: impacts which customers bear with the investments that we make
Speaker 8: in our infrastructure. And even today, where we look at
Speaker 8: assets that are seventy eighty one hundred years old, we're
Speaker 8: very strategic and pinpointed about which of those assets, which
Speaker 8: of those parts of infrastructure we replace, because we want
Speaker 8: to keep customer bills low, So we look for those
Speaker 8: opportunities where we can do multiple things with an investment,
Speaker 8: where we can replace an aging asset with something that's
Speaker 8: more modern and something that can carry more energy, something
Speaker 8: that can unlock more energy that our generators have to
Speaker 8: connect into the grid, and something that's going to be
Speaker 8: more resilient to storms and better leverage technology so it's
Speaker 8: cheaper to maintain.
Speaker 3: How do you balance all of that, Like affordability, as
Speaker 3: you know, has become quite the word that we are
Speaker 3: hearing a lot, certainly in the political environment. So how
Speaker 3: do you keep your investors happy and the grid reliable
Speaker 3: without rising bills that make your customers furious and invite
Speaker 3: regulatory and political pushback. I mean, that is a hard mandate.
Speaker 8: It is a difficult balance, and it's one that we
Speaker 8: navigate every single day. We do it through a number
Speaker 8: of avenues. We certainly work closely with our customers to
Speaker 8: help them manage costs, and we do that through a
Speaker 8: variety of bill assistance programs and energy efficiency programs and
Speaker 8: rebates and we work. We have consumer advocates whose job
Speaker 8: it is to specifically work with folks and communities to
Speaker 8: help them manage their costs. We also, as I mentioned before,
Speaker 8: a very careful about where and how we invest in assets,
Speaker 8: and we make sure that if we're investing in an asset,
Speaker 8: that we're going to get more power from investing in
Speaker 8: that asset, that we're going to get more resiliency, and
Speaker 8: then we're going to get more efficiency from investing in
Speaker 8: that asset.
Speaker 1: The President has been outspoken about his disdain for certain renewables,
Speaker 1: especially wind power. Your investment in renewables, are sourcing energy
Speaker 1: from renewables? Has that changed under this administration?
Speaker 8: Well, we certainly support the all of the above energy
Speaker 8: approach and are pleased with the most recent version of
Speaker 8: the State Energy Report that leans into an all of
Speaker 8: the above approach. Given the rate at which demand for
Speaker 8: energy is increasing, we need to we need to be
Speaker 8: utilizing all of those opportunities, from renewables to natural gas
Speaker 8: to nuclear to make sure.
Speaker 1: Is that more difficult if the federal government is not
Speaker 1: supportive of certain renewables.
Speaker 8: We are working on the infrastructure to move power from
Speaker 8: point A to point B. So while we support projects
Speaker 8: like say the Nesty pipeline. That's a supply project. It's
Speaker 8: not our project, but we support it because we know
Speaker 8: how critical it is to the downstate community, and how
Speaker 8: reliant New York City and Long Island are on natural gas,
Speaker 8: and how thin that reserve margin is and their energy
Speaker 8: demand for energy is growing as well. So we support
Speaker 8: NeSSI for those reasons. The other side of our business
Speaker 8: is about building transmission. It's about building the highway over
Speaker 8: which the power moves. So the sourcing as to where
Speaker 8: it's coming from isn't a National grid decision. We work
Speaker 8: with generators of all kinds.
Speaker 1: That was Sally Librera, president of National Grid New York.
Speaker 1: And just this week after our interview with Sally, we
Speaker 1: got a new story from Noreen Malik, who covers energy
Speaker 1: here for Bloomberg News. She writes that calls are mounting
Speaker 1: for the largest US grid operator to make electricity more affordable.
Speaker 1: After power cost surge to a new high. Households and
Speaker 1: businesses will pay record sixteen point four billion dollars to
Speaker 1: secure electricity starting in June of twenty twenty seven. That's
Speaker 1: according to PJM Interconnection. It operates the thirteen state grid.
Speaker 3: And let's remind everybody that this power grab and AI
Speaker 3: build out is a global thing, because there was a
Speaker 3: story about what's going on in the Netherlands. The Dutch
Speaker 3: national electricity grid is under enormous stress because of the
Speaker 3: immense amounts of power from all sources of energy being
Speaker 3: injected into the grid that their small power lines cannot handle.
Speaker 3: Both of what Tim said this story, they really all
Speaker 3: highlight a major global issue because reliable electricity supports economic
Speaker 3: growth and vice versa.
Speaker 1: That's exactly what we talked about with oxshot Rothy, Bloomberg
Speaker 1: News senior climate reporter and host of Bloomberg Greens Zero podcast.
Speaker 1: He joined us earlier this week.
Speaker 9: For the last few decades in the US and in Europe,
Speaker 9: those two regions, really electricity demand was roughly flat or
Speaker 9: actually declining. It was mostly because of the industrialization that
Speaker 9: is now reversing, and it's not just because of AIA,
Speaker 9: of course is a big contributor, but electric cars, heat pumps,
Speaker 9: just the general electrification of the industry is starting to
Speaker 9: speed up and these regions have not been prepared for growth.
Speaker 1: I just want to jump in real quick because you
Speaker 1: said something that that I haven't had a chance to
Speaker 1: A lot of people said I having a chance to
Speaker 1: ask about it. If we're using evs and we're using
Speaker 1: electric heat pumps, doesn't that mean we're we're taking away Uh,
Speaker 1: We're still heating our homes and driving. We're just using
Speaker 1: different sources of energy to do that. Is one better
Speaker 1: than the other?
Speaker 9: Well, yes, we are definitely using a different form of energy,
Speaker 9: and one actually turns out to be way better. Because
Speaker 9: your electric car consumes about one unit of energy to
Speaker 9: move from electricity, it takes four units of gasoline to
Speaker 9: be able to move in the same distance. Same thing
Speaker 9: with heat pumps. Heat pumps take one unit of electricity
Speaker 9: to actually capture some of the heat outside, even in
Speaker 9: the cold weather, to heat your home. So you're getting
Speaker 9: three x the bang on the buck that you're spending
Speaker 9: on electricity then you would if you just burn gas
Speaker 9: or oil in your heat pumps. So electricity is the
Speaker 9: more efficient form of energy use, and the world wants
Speaker 9: more and more of it, and especially in North America
Speaker 9: and in Europe, the grids aren't ready to supply all that.
Speaker 9: So the Netherlands case that you pointed out quite an
Speaker 9: extreme case, but actually it's not the only one. Pretty
Speaker 9: much in any G twenty economy that we looked at,
Speaker 9: stress on the grid is growing, and Bloomberg Economics analysis
Speaker 9: which we report in our story shows that as that happens,
Speaker 9: economic growth slows down.
Speaker 3: I thought one of the lines also crucial in your reporting,
Speaker 3: asshat is that you say crucially The analysis done by
Speaker 3: Bloomberg Economics finds that increase in grid stress leads to
Speaker 3: a decline in capital outlay, which is government and business
Speaker 3: spending to acquire or maintain long term assets. So the
Speaker 3: idea is, as the stress is building, the capital needed
Speaker 3: to maybe build it out, expand the grid, improve the infrastructure,
Speaker 3: that is declining. To me, that just says, WHOA, we
Speaker 3: are headed for some really mega stress points.
Speaker 9: Indeed, and the Bluebook Economics analysis also is kind of
Speaker 9: self limiting because when they were trying to understand the stress,
Speaker 9: the rise and demand was one of the stress points
Speaker 9: that they had to account for. But turns out when
Speaker 9: you have so much stress on the grid that either
Speaker 9: you're not able to connect businesses or price of electricity
Speaker 9: rises as a result of you're not having enough supply.
Speaker 9: There is this demand signal in the market that is
Speaker 9: sent that we are not able to supply, and so
Speaker 9: demand comes down. And so the analysis itself is saying,
Speaker 9: we cannot tell you just how much worse it could be.
Speaker 9: It can give you just a rough estimate, but basically,
Speaker 9: if you can't get enough electricity supply, you're not going
Speaker 9: to help economic growth.
Speaker 3: Yeah, it just sounds to me like governments who are
Speaker 3: already spending in many ways as we we've seen kind
Speaker 3: of a pushback on companies, companies countries working together. They're
Speaker 3: building out their own defense more, they're building out their
Speaker 3: own industry more. I mean, all of this costs a
Speaker 3: lot from a government perspective, but it sounds like governments
Speaker 3: are going to have to be much more involved. But
Speaker 3: that just also potentially raises debt in countries, which for many,
Speaker 3: like the United States, is already problematic.
Speaker 9: Yes, and there's two sides of this equation over here
Speaker 9: on spending. One is the generation of electricity that actually
Speaker 9: is manageable. The stuff that governments have not been spending
Speaker 9: enough on is actually building out the infrastructure to supply
Speaker 9: that electricity. And just if you wanted that supply, say
Speaker 9: next year, you cannot really ramp up the build out
Speaker 9: of the.
Speaker 5: Grid that quickly.
Speaker 9: You could ramp up supply pretty quickly. You could burn
Speaker 9: more gas, you could deploy more solar panels which can
Speaker 9: be put within months for your solar farm. But to
Speaker 9: get your grid to be actually robust and supply more
Speaker 9: and more electricity to more and more places, yeah, that
Speaker 9: takes a much longer time. So the results I'm going
Speaker 9: to be coming anytime soon.
Speaker 1: That was Oshcott Rothy, Bloomberg new senior climate reporter and
Speaker 1: host of Bloomberg Greens zero podcast.
Speaker 3: Still ahead on Bloomberg Business Week. It's been a tough
Speaker 3: stretch for cryptocurrency, especially in the later part of the year.
Speaker 3: Might though the recent bitcoin fatigue be a setup for
Speaker 3: rebound in twenty twenty six.
Speaker 1: The CEO of Crypto Minor Mara weighs in, that's next.
Speaker 1: This is Bloomberg.
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Speaker 3: Bitcoin is headed for its fourth annual decline in its history,
Speaker 3: and the first one that didn't coincide with a major
Speaker 3: scandal or industry meltdown. The cryptocurrency is now down about
Speaker 3: five to six percent for the year. This as we
Speaker 3: were putting this show to bed down around thirty percent
Speaker 3: though from its October sixth all time high, with volumes
Speaker 3: low and investors bailing on bitcoin ETFs.
Speaker 1: The bear market means Bitcoin has decoupled from stocks, with
Speaker 1: the S and B five hundred closing at a record
Speaker 1: earlier this month, add up sixteen percent for the year. Well,
Speaker 1: bitcoin has struggled to find footing. Bitcoin minor and accumulator
Speaker 1: Mara Holdings knows all too well about the drop. Its
Speaker 1: own stock is down more than thirty six percent so
Speaker 1: far this year, and close to twenty eight percent of
Speaker 1: that float is short. So the question bitcoin is it
Speaker 1: set for a rebound next year?
Speaker 3: Those in the space certainly hope so on that. We're
Speaker 3: joined by Fred Tiel, chairman and CEO of Mara. He
Speaker 3: joined us from Paris.
Speaker 1: The decline in the asset price this year certainly, you
Speaker 1: know one hundred and twenty six thousand dollars that was
Speaker 1: a major high earlier this year. That was a big
Speaker 1: moment for the cryptocurrency, but down close to thirty or
Speaker 1: more than thirty percent from that, how much lower does
Speaker 1: bitcoin go?
Speaker 10: I think your Bitcoin at this level is finding support
Speaker 10: in the kind of eighty four thousand range, which.
Speaker 5: Is just about where the.
Speaker 10: Break even point is on most ETF purchases Bitcoin ETF purchases,
Speaker 10: and that seems to be a level of support where
Speaker 10: essentially people large investors who are trying to defend their positions.
Speaker 10: If you would want to keep it above that level,
Speaker 10: which if it falls below that, you'd see more sales
Speaker 10: must probably out of the ETFs back into liquidity and bitcoin.
Speaker 10: It's very much driven by global liquidity. You had the
Speaker 10: expectations of more from the FED and you know, more
Speaker 10: clarity around market structure. But I think what you really
Speaker 10: have to look at is there was a huge run
Speaker 10: up in the kind of August through September into October.
Speaker 5: Per period, and you.
Speaker 10: Know, a number of us felt the market was frothy
Speaker 10: in the beginning of Q three and things were getting
Speaker 10: little bit overheated, and you know, now we've seen some
Speaker 10: of that come off. You've also seen a lot of
Speaker 10: money that rotated into AI now rotating out of AI
Speaker 10: and starting to rotate into more Dow stocks. And so
Speaker 10: I think you're generally seeing a risk off environment. Risk
Speaker 10: off tends to drive people out of bitcoin, but the
Speaker 10: liquidity that the federal government is going to inject in
Speaker 10: the marketplace now that quantitative tightening is over, we're starting
Speaker 10: to see easing again. We believe that will bode well
Speaker 10: the dollars down, which also bodes well for bitcoin. And
Speaker 10: I think you're going to continue to see bitcoin appreciate.
Speaker 10: But you've got to realize it's a very large acid class.
Speaker 10: It's a couple of trillion dollars in size, and it
Speaker 10: takes a lot to move the price. And I think
Speaker 10: what we're seeing now is just some healthier tracement.
Speaker 3: Hey, if I may just jump in for a moment,
Speaker 3: you know, I am wondering, Fred, you say that it's
Speaker 3: it's a risk off environment, and yeah, I'm looking at
Speaker 3: an S and P five hundred that's still near its
Speaker 3: all time high, you know, and we've seen quite a
Speaker 3: bounce back when it comes to the S and P
Speaker 3: five hundred also a very big market. So I'm just curious,
Speaker 3: you know, how do you square that if we're seeing
Speaker 3: investors still willing to move into the equity markets but
Speaker 3: not crypto. That disconnect, Well.
Speaker 10: I think you have to in regards to crypto, you
Speaker 10: have to look at the derivatives market, which is much
Speaker 10: bigger than the actual spotpitcoin market, and you have to
Speaker 10: see the sheer amount of leverage and positions that have
Speaker 10: come off since the peak. You know, you've gone from
Speaker 10: the ninety billion dollars range down to the thirty billion
Speaker 10: dollars range of open positions, and so that's a huge
Speaker 10: amount of leverage that comes off, which essentially sucks wind
Speaker 10: out of the marketplace, and people have been moving their
Speaker 10: money out of bitcoin and into other things.
Speaker 5: I think you've all look at the AI stocks.
Speaker 10: Most of the second tiery AI stalks have all seen
Speaker 10: a pretty large come down since the peak, even stocks
Speaker 10: such as Oracle, look at Core, We've you know, look
Speaker 10: at these stocks and how they've performed, and I think
Speaker 10: what you're seeing is a rotation out of some of
Speaker 10: those and into other stocks. And big coin is associated
Speaker 10: with technology, it's associated with the risk on assets, and
Speaker 10: it's very associated with liquidity.
Speaker 3: So having said that, and you talked about the run
Speaker 3: up that we saw earlier in terms of crypto that
Speaker 3: where it got to maybe like frothy levels. We're now
Speaker 3: at what eighty seven thousand and eighty seven thousand, three
Speaker 3: hundred and two and change. So what do you think
Speaker 3: should be the level of crypto that makes more sense?
Speaker 10: I think you have to look at the long term trend.
Speaker 10: But more importantly, go back a little over a year
Speaker 10: ago and go fourteen fifteen months ago, no US money
Speaker 10: center bank would deal with crypto related companies, nor would
Speaker 10: they take crypto deposits, nor would they let you trade crypto,
Speaker 10: or would they let you wire money to crypto exchanges.
Speaker 10: Almost and today you have every bank, including JP Morgan,
Speaker 10: now moving ahead and doing all sorts of things with crypto.
Speaker 10: You're seeing tokenization of assets. DTCC has now gotten a
Speaker 10: no action letter from the SEC around tokenizing assets. You're
Speaker 10: seeing all sorts of activities around the traditional finance environment
Speaker 10: where they're embracing crypto. And I believe that what part
Speaker 10: of the effect of that is you're now going to
Speaker 10: see all sorts of things wrapped around crypto, which will
Speaker 10: make the space much more relevant.
Speaker 5: But it takes time for those products to take effect,
Speaker 5: get launched.
Speaker 10: And I think again, bitcoin has had a great run
Speaker 10: over the past fifteen years. It's been one of the
Speaker 10: best performing assets on record, and I think that and
Speaker 10: continue to see great performance out of bitcoin over the
Speaker 10: coming years.
Speaker 1: So, Fred, you're a bitcoin minor, you're also a bitcoin accumulator.
Speaker 1: We've spoken to Eric Trump of American Bitcoin and I'm
Speaker 1: curious he's also a minor, also an accumulator. What makes
Speaker 1: your company different than American Bitcoin.
Speaker 10: Well, any company that minds bitcoin is performing the exact
Speaker 10: same service for the bitcoin network, which is essentially assembling
Speaker 10: transactions into blocks, competing to win the right to essentially
Speaker 10: add that block to the blockchain. What differentiates Mara from
Speaker 10: American Bitcoin A. We own all our rather we own
Speaker 10: about seventy percent of our hosting operations. We're fully vertically integrated.
Speaker 10: We own power generation, We generate energy off of wind farms,
Speaker 10: off of flair gas and oil fields. We operate on
Speaker 10: four continents. We also are fully vertically integrated from a
Speaker 10: technology perspective. We operate our own pool. We co founded
Speaker 10: the only u u AC manufacturer for bitcoin mining A six.
Speaker 10: The rest of the market is all dominated by Chinese companies,
Speaker 10: and we have been very proactive in helping drive a
Speaker 10: lot of the growth of crypto around partnerships with energy companies,
Speaker 10: and I think you know, we're still considerably larger than
Speaker 10: American Bitcoin, not just in our mining operations, but also
Speaker 10: in the amount of bitcoin that we hold in our
Speaker 10: balance sheet.
Speaker 1: On the identity part of this, trying to understand what
Speaker 1: the company looks like. You guys issued a statement this
Speaker 1: week saying you're not a digital asset treasury firm. You
Speaker 1: should not, so you should not be excluded from MSCI,
Speaker 1: Whereas the company said it has been adopting a bitcoin
Speaker 1: treasury strategy by holding its mind coins. What is the
Speaker 1: difference between being a treasury company versus a company that
Speaker 1: adopts the treasury strategy. Help us with the nuance there.
Speaker 10: Sure, so, a bigcoin treasury company, for example, like Strategy
Speaker 10: or micro Strategy as it's formerly known as, has acquired
Speaker 10: all of its bitcoin by purchasing it. Mara has mined
Speaker 10: the majority of its bitcoin. We've also purchased bitcoin in
Speaker 10: the market, but most of our bitcoin is the product
Speaker 10: of our mining operations. We have chosen to hold our
Speaker 10: liquid assets in bitcoin because we believe again better to
Speaker 10: hold our cash in the best performing asset class over
Speaker 10: the past fifteen years than to hold it in fiat,
Speaker 10: which is continued in losing its value, or just to
Speaker 10: hold it in treasuries, which will only pay a dividend
Speaker 10: of the low single digit percentage points. So bitcoin has
Speaker 10: been an excellent place for us to hold our cash
Speaker 10: and we'll continue to be so, we believe over the
Speaker 10: long run. But we generate bitcoin by mining bitcoin. We're
Speaker 10: not out in the market buying bitcoin on a regular
Speaker 10: basis like micro strategy. We have from time to time
Speaker 10: gone into the market and bought it when we think
Speaker 10: it's very opportune. Last year, there was an opportunity to
Speaker 10: buy bitcoin when it was in the sixty ish thousand
Speaker 10: dollars range, and we bought bitcoin because we had a
Speaker 10: feeling it was a belief allow that it was going
Speaker 10: to go up, which it did, and there are times
Speaker 10: where we're all opportunistic like that. But we sell bitcoin
Speaker 10: that we produce to fund our operating expenses, so you know,
Speaker 10: we are not a company that holds our bitcoin. Every
Speaker 10: single bitcoin that we have we actually sell bigcoin from
Speaker 10: production to fund our business.
Speaker 5: So we're an operating business.
Speaker 10: Bitcoin mining is our primary business, and bitcoin just happens
Speaker 10: to be how we hold our funds.
Speaker 3: Fred One thing. I'm just curious though, going back to
Speaker 3: what we've seen in terms of the fatigue in the
Speaker 3: price and bitcoin coming down. You know, what's interesting is,
Speaker 3: and I'm just looking at some of our reporting and commentary.
Speaker 3: You know, you've got a White House that's very much
Speaker 3: favored or favoring the digital currency world. You have the
Speaker 3: President declaring crypto a national priority. US Congress has passed
Speaker 3: a landmark stable coin legislation, and bitcoin exchange traded funds
Speaker 3: we're raking in billions of dollars. You know, We've seen acquisitions,
Speaker 3: We've seen so much movement, and again I'm going back
Speaker 3: to the decline that we've seen in crypto. You it's
Speaker 3: a pretty favorable environment. So, I mean, is all of
Speaker 3: the good expectations in terms of news already priced in
Speaker 3: and it can't get much better.
Speaker 5: Now.
Speaker 10: I think, like anything, any asset will revert to mean,
Speaker 10: and bitcoin is simply reverted to mean. It has most
Speaker 10: probably overcorrected. But you had in the past six months
Speaker 10: a huge amount of accumulation by the plethora of digital
Speaker 10: asset treasury companies that were formed, you know, and the
Speaker 10: you go back not too long ago. It was basically
Speaker 10: micro strategy was the only real one you had met
Speaker 10: a planet. To a lesser extent, similar scientific was a
Speaker 10: smaller one, and we were a large holder of bitcoin.
Speaker 10: That was kind of it. And then all of a
Speaker 10: sudden you had all sorts of companies come out of
Speaker 10: the would work what they do? They raised cash, they
Speaker 10: went and bought a bunch of bitcoin, which drives the
Speaker 10: price up. Right, price comes up, people start putting money
Speaker 10: into ETFs. You start getting bigger derivative positions. Okay, it's
Speaker 10: a flywheel effect. And if you just draw a trend
Speaker 10: line over the past number of years, you'll see bitcoin.
Speaker 5: It's just proverted to name.
Speaker 3: Gotta run, Fred, Thank you so much, Fred Tiel, chairman
Speaker 3: and CEO of Mara.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube.
Speaker 3: Plenty ahead in our second hour of the weekend edition
Speaker 3: of Bloomberg Business Week, including two CEOs, two very different worlds,
Speaker 3: and both reshaping how we experience life and leisure.
Speaker 1: The CEO of the privately held ski book company Surefoot,
Speaker 1: on why the right fit can change everything on the
Speaker 1: ski slopes and beyond.
Speaker 3: Then, from carving turns to commanding crowds. The CEO of
Speaker 3: Feld Entertainment, the company behind some of the biggest live spectacles.
Speaker 3: I'm keeping audiences coming back generation after generation.
Speaker 1: First up this hour. The cost of celebrating Christmas. It's
Speaker 1: climbing yet again, at least according to data from the
Speaker 1: PNC Christmas Price Index CPI. See what they do there now?
Speaker 1: With its forty second year, PNZ has been keeping track
Speaker 1: of just how much the Twelve Days of Christmas costs,
Speaker 1: and spoiler alert, it's gone up again this year.
Speaker 3: The report highlights labor market pressures, not tariffs, to blame
Speaker 3: for some of the rising cost We mean you, Lord
Speaker 3: de leeping and oh one of the twelve days outshone
Speaker 3: all others in a price hike, breaking it all down
Speaker 3: for us. Amanda Gotti, chief investment officer at P and
Speaker 3: C Asset Management Group.
Speaker 11: It's almost always more expensive. Thanks guys so much for
Speaker 11: having me. On a year over year basis, the Christmas
Speaker 11: Price Index is up four point five percent, so we
Speaker 11: are handily outpacing Wow, the bls CPI version. So it's
Speaker 11: gonna cost true love this holiday season?
Speaker 3: All right? So wait, what's costing us more? Well?
Speaker 11: Sadly, I mean we talk about this every year, but sadly,
Speaker 11: my all time favorite gift is actually the biggest mover
Speaker 11: by far. So five golden rings? Do I have to
Speaker 11: elaborate on that?
Speaker 3: Gold was an outperforming acid?
Speaker 1: Nobody asked for five crypto rings Bitcoin?
Speaker 11: No, no, they didn't, although they would have done okay
Speaker 11: for at least part of the year. But the five
Speaker 11: Golden rings weren't up as much as the price of
Speaker 11: gold itself, still up a very hot thirty two and
Speaker 11: a half percent. It's really very much a reflection of
Speaker 11: what we think is a little bit of a margin
Speaker 11: squeeze right late endings of the cycle. Still positive growth
Speaker 11: story for the economy, but margin pressures are building, and
Speaker 11: so we are seeing that in the price of the
Speaker 11: golden rings being passed through or maybe not being quite
Speaker 11: fully passed through this holiday season.
Speaker 1: Okay, so those are the golden rings. What else was
Speaker 1: what's the second most expense not most expensive, but the
Speaker 1: thing that went up the second.
Speaker 11: Most you pear tree, Really, who which which nobody wants
Speaker 11: a partridge. Okay, so the partridge was flat on a
Speaker 11: year over.
Speaker 1: Your basis a gift that keeps on giving.
Speaker 11: It's an awful lot of work. But the pear tree
Speaker 11: is what we refer to as a proxy for housing costs.
Speaker 11: And so when we think about housing UH and the
Speaker 11: housing market in this country clearly running pretty hot on
Speaker 11: a relative basis year over year, affordability getting kind of challenged. Right,
Speaker 11: Even though mortgage rates have come down some, it hasn't
Speaker 11: made a huge difference in terms of UH supply and
Speaker 11: demand and inventory levels. We're still very short housing stock.
Speaker 11: So pear tree, also running hot on a year over
Speaker 11: year basis.
Speaker 3: Also performers, right, I mean the cost of labor. I
Speaker 3: guess you could kind of.
Speaker 11: Say, well, it's sometimes it is the cost of labor.
Speaker 11: Sometimes it's contractual escalators. This year, the big one is
Speaker 11: the ten Lords of Leaping. And I've been having fun
Speaker 11: all year talking about this one because Oasis has been
Speaker 11: the hottest concert ticket in town. You could refer them
Speaker 11: as the Lords of Rock perhaps, but so this is
Speaker 11: the real world concert tickets experiences demand driving up those
Speaker 11: ten Lords.
Speaker 1: Yeah, how do you measure that? Just on a on
Speaker 1: a basis, like are you just looking at at Oasis?
Speaker 1: Are you looking at everybody?
Speaker 11: No, I'm teasing. I just it's fun to try.
Speaker 1: I mean, you went to an Oasis concert. At two
Speaker 1: Oasis concerts, I know one of them. Where did you go?
Speaker 1: Tell you our producers? Yes, Scotland in LA. She traveled
Speaker 1: all the way for Oasis from New York. Like, so
Speaker 1: there's some serious fans amazing.
Speaker 11: Yeah, absolutely, as am I. But I don't have ten
Speaker 11: lords laying around here. So we do our best to
Speaker 11: try and talk to dance companies and theater companies on
Speaker 11: a year over year basis. There's a method to this
Speaker 11: scientific madness, and so so I'm just trying to make
Speaker 11: it a little bit relatable. The lords of all the
Speaker 11: performers or the biggest standout on a year of your basis,
Speaker 11: So naturally it must be the Oasis effect.
Speaker 3: If only I had ten lords deleeping, just hanging around somewhere,
Speaker 3: just kidding, just kidding. Hey, what stayed the same? Or
Speaker 3: did anything go down?
Speaker 11: Oh? Almost nothing goes down. Let's get real here. I
Speaker 11: would love to say, aside from the pandemic, when we
Speaker 11: had to shut the lights off, on a lot of
Speaker 11: the performers and experiences, just as a function of what
Speaker 11: was happening in the real world economy. A number of
Speaker 11: gifts did stay flat on a year over your basis,
Speaker 11: so two turtle doves, three French hens, four calling birds,
Speaker 11: the seven Swans, the eight maids, So there was a
Speaker 11: decent amount of stability on a year over year basis,
Speaker 11: but some pretty significant moves in the top three or
Speaker 11: four on a year of your basis.
Speaker 1: This is fun, and we do this because it's fun,
Speaker 1: but it's also does give us an opportunity to talk
Speaker 1: about the real world inflation that we're seeing and also
Speaker 1: real world asset price movements, Amanda. Overall, the index it
Speaker 1: moved more than headline figures. When it comes to CPI,
Speaker 1: it sure didn't.
Speaker 11: That's not always the case. But you have to think
Speaker 11: about the gifts in the Christmas Price Index as a
Speaker 11: very specialty gift basket of goods and services, so it's
Speaker 11: not really a reflection of the broad economy and the
Speaker 11: US consumer in total. It tends to lean higher end
Speaker 11: in terms of the spectrum there, but I think it
Speaker 11: is a good indicator for what some of the pricing
Speaker 11: trends may look like this holiday season, so the consumer
Speaker 11: is definitely hanging in there. On a relative basis, we
Speaker 11: definitely see consumers continuing to spend, and retail sales data
Speaker 11: continues to look solid. Holiday shopping looks good, but it's
Speaker 11: definitely going to cost consumers this holiday season.
Speaker 3: Yeah, what's the next I'm curious about what data points
Speaker 3: you're kind of keeping an eye on to get an
Speaker 3: idea of what happens maybe in the first half of
Speaker 3: twenty twenty six, or is it too soon to kind
Speaker 3: of make a bet on any thing we see over
Speaker 3: the next couple of weeks.
Speaker 11: Well, I don't know if it's too soon necessarily to
Speaker 11: bet on it. I think the challenge is that some
Speaker 11: of the data is stale, so it's hard to extrapolate
Speaker 11: a trend from data points that are old or maybe incomplete.
Speaker 11: So as it relates to consumer health, and we're obviously
Speaker 11: focused on how the holiday shopping season plays out, retail
Speaker 11: sales data, savings rates, even just consumer sentiment. There's a
Speaker 11: number of other, you know, components and indicators that we
Speaker 11: can use to gauge the success of this this holiday
Speaker 11: season and perhaps even the markets path forward in the
Speaker 11: new year.
Speaker 1: So good shape. We're in good shape.
Speaker 11: I think we're in good shape.
Speaker 3: Okay, yes, unless we're going to put golden rings or
Speaker 3: you're getting ten lords of leaping or pipers, might not be.
Speaker 11: Might not be in good shape. But the rest of
Speaker 11: us are in good shape.
Speaker 1: You're in good shape. Unless you're looking for Oasis tickets
Speaker 1: because apparently they're not touring anymore. So that's it. It's
Speaker 1: your chance.
Speaker 3: Amanda, thank you so much. Have a great holiday season,
Speaker 3: Happy New Year. Amanda Gotti, Chief Investment Officer, P and
Speaker 3: C Asset Management, joining us from Philadelphia. I love these
Speaker 3: kind of we're just fun.
Speaker 1: We have fun with this one.
Speaker 3: But it's you know, those gold rings.
Speaker 1: Sometimes the price of gold does not go up, so.
Speaker 3: No, right, and there was a long period where it
Speaker 3: did not. So yeah. But if you go at shopping
Speaker 3: and you're looking for jewelry.
Speaker 1: Gold rings, that's what you think. Uh, diamonds are a better.
Speaker 3: Dealer, might be a little expensive.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch US
Speaker 2: live weekday afternoons from two to five pm Eastern. Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch US Live on YouTube.
Speaker 3: We got another read on the economy this past week
Speaker 3: after Darden Restaurants, the owner of the Olive Garden and
Speaker 3: Longhorn Steakhouse, raised its comparable sales forecast, citing better than
Speaker 3: expected growth fueled by more affordable meal options and strong
Speaker 3: spending from higher income diners. The company also talked about
Speaker 3: beef prices the CFO, saying they are expected to fall
Speaker 3: next year as production increases.
Speaker 1: Some good news there, but overall, we've seen really mixed
Speaker 1: results from the restaurant sector this year. Sweet Green CEO
Speaker 1: stepping down this week after shares dropped about eighty percent
Speaker 1: so far this year, Cava is down sixty percent from
Speaker 1: this year's high, Chipotles down about forty five percent from
Speaker 1: last year's highs All.
Speaker 3: Right, so lots of questions out there when it comes
Speaker 3: to the restaurant industry. We wanted to know what's going
Speaker 3: on and how it and the US consumer may fare
Speaker 3: in twenty twenty six. On that, we caught up with
Speaker 3: Michelle Corsmo, president and CEO of the National Restaurant Association,
Speaker 3: that's the trade group for the industry.
Speaker 7: So we've seen one point five trillion dollars in restaurant
Speaker 7: industry sales in twenty twenty five, which is up from
Speaker 7: last year, but not as strong as it needs to
Speaker 7: be and not as strong as we want it to
Speaker 7: be in these really tight margin businesses. And what we
Speaker 7: found is it kind of depends on how you're leaning
Speaker 7: into that price certainty. For customers, value matters. Price certainty
Speaker 7: really matters, and so you see that making a difference
Speaker 7: as they're also navigating and all of the tariff and
Speaker 7: supply chain and beef price problems that you've just talked about.
Speaker 1: Yeah, we're going to get to some of the challenges
Speaker 1: in just a minute. So that's how your members are doing.
Speaker 1: Your members depend on consumers. From your perch, how's the
Speaker 1: consumer doing? And it's not monolithic by any means, but
Speaker 1: how would you describe the US consumer right now?
Speaker 7: So the US consumer right now, I would say is
Speaker 7: very deliberate. They want to be certain about what they
Speaker 7: are spending and how they're doing it. And that's really
Speaker 7: a place where restaurants have been able to lean into
Speaker 7: some of that certainty in the offerings they have in
Speaker 7: the pricing. But it's definitely been a situation where we're
Speaker 7: not seeing as much traffic as.
Speaker 3: We normally would.
Speaker 7: We always want to see those guest count numbers going
Speaker 7: up in restaurants, and it hasn't been going up at
Speaker 7: the level that people want.
Speaker 1: Okay, So I just want to go through some of
Speaker 1: the challenges you mentioned. Some of the challenges you said,
Speaker 1: the tariff related challenges, the beef price challenges. What is
Speaker 1: the biggest challenge that restaurants are facing Certainty.
Speaker 7: I think with every industry and with every business, what
Speaker 7: everyone is looking for is certainty. And we certainly know
Speaker 7: that the President has an aggressive agenda to try to
Speaker 7: make a strong economy for US consumers. But the lack
Speaker 7: of certainty actually creates something that feels quite the opposite.
Speaker 7: When restaurants are dealing with how to navigate different pricing,
Speaker 7: supply chain problems, tear iff price increases, changing from day
Speaker 7: to day. That definitely gets to be a bit of
Speaker 7: a challenge for restaurants trying to serve consumers that are
Speaker 7: looking for that certainty.
Speaker 1: You know, one thing that we're seeing certain about is immigration.
Speaker 1: And this note from Torsten Slock at Apollo really caught
Speaker 1: my attention. He writes from twenty twenty two to twenty
Speaker 1: twenty four, net immigration was around three million people per year.
Speaker 1: The CBO forecasting that annual immigration in twenty twenty five
Speaker 1: and twenty twenty six will be around five hundred thousand people.
Speaker 1: Torsten writing quote, this has important consequences for labor supply,
Speaker 1: wage growth, and housing demand. From a labor supply issue
Speaker 1: that affects your members, but also from a customer's perspective
Speaker 1: that affects your members. Which one is harder for the
Speaker 1: restaurants in the US right now? Is it the lack
Speaker 1: of workers from immigration? Yeah, that customers from immigration.
Speaker 7: That feels like a Hobson's choice. So, without a doubt,
Speaker 7: the restaurant industry really cares about ensuring that we've got
Speaker 7: enough workforce to help provide that great hospitality that makes
Speaker 7: people love restaurants. And there's nine hundred and eighty eight
Speaker 7: thousand open positions in restaurant and hospitality this month. So
Speaker 7: we need workers. And this is why it's been a
Speaker 7: significant issue for US to push for immigration reform. We
Speaker 7: need more legal pathways for guest worker programs, more opportunities
Speaker 7: for people to come in and do this work even
Speaker 7: as a guest worker, in a legal, documented fashion. And
Speaker 7: so getting to that solution is something we're really pushing
Speaker 7: for for Congress because we need to get people in
Speaker 7: jobs in restaurants. The consumers need it.
Speaker 1: Well.
Speaker 3: Big problem that's a lot of workers that aren't that
Speaker 3: the industry needs. Is the White House listening? Are members
Speaker 3: of Congress listening?
Speaker 7: We never feel like they're listening enough on immigration, so
Speaker 7: they're always seems.
Speaker 3: Are they listening less than maybe they were in years past,
Speaker 3: recent years past, this has been.
Speaker 7: A difficult issue. In fact, some would call this the
Speaker 7: third rail in terms of issues that Congress deals with
Speaker 7: for decades frankly, and we get close often, but we
Speaker 7: need to get it across the finish line. And so
Speaker 7: that's really what we're pushing is it's time for them
Speaker 7: to realize that it has to provide some legal pathways
Speaker 7: because we're seeing I mean, those numbers that you're talking
Speaker 7: about with immigration coming down, I think we're going to
Speaker 7: see in twenty twenty five in reports I've read that
Speaker 7: this will be the first year that the US population
Speaker 7: will not have increased and that's a significant impact on
Speaker 7: our workforce, and so we care a lot about making
Speaker 7: sure that we've got enough workers in the restaurant industry.
Speaker 7: You know, there's certainly a lot of places for technology
Speaker 7: to take jobs, but hospitality is still built on people
Speaker 7: and personal interactions. So we want those people to work
Speaker 7: in restaurants, and we want obviously a robust economy with
Speaker 7: lots of consumers that are coming in to enjoy those restaurants.
Speaker 3: Well, you know, and I just want to go back
Speaker 3: to the speech that President Trump gave last night, the
Speaker 3: primetime speech, and he talked a lot about immigrants and immigration,
Speaker 3: but he said a lot of the immigrants and forgive me,
Speaker 3: and I should have the exact quote in front of me,
Speaker 3: but basically that a lot of the immigrants that are
Speaker 3: coming in are criminals and so on, what's the restaurant
Speaker 3: industry's experience with immigrants who come into the United States?
Speaker 3: And I realized, there's legal, there's illegal. So I'm just
Speaker 3: but there's a lot of folks that maybe aren't legal
Speaker 3: that are in the restaurant industry that you might hear
Speaker 3: that kind of on the side. So I'm just curious
Speaker 3: about that commentary from the President and the reality of
Speaker 3: what it really is all about.
Speaker 7: We don't think that that commentary tells the full story.
Speaker 7: And I think we want to start with a complete
Speaker 7: agreement that people that are breaking laws, especially those laws
Speaker 7: that are hurting Americans, really aren't as illegal immigrants certainly
Speaker 7: not a place for them here, and so creating a
Speaker 7: safe environment for Americans is really important. But there's a
Speaker 7: lot of people who are showing up every day, working hard,
Speaker 7: being reliable, taking care of their families, doing the right thing,
Speaker 7: mowing their law, all of those things that make your
Speaker 7: neighbor somebody that is friendly and reliable that you want
Speaker 7: to see. And so this is why it's important to
Speaker 7: us that we push for more legal pathways to guest
Speaker 7: worker programs because those people need to be in our
Speaker 7: communities contributing. And obviously we need to deal with the
Speaker 7: people that are breaking the laws, but for those people
Speaker 7: that want to work hard and show up and contribute
Speaker 7: to our economy, let's find a place for them.
Speaker 3: To do that.
Speaker 1: Beef price is still up thirteen percent so far this year,
Speaker 1: though they're down from the highs that we saw in
Speaker 1: August and September of this year. We've spoken to you
Speaker 1: in the past and we've talked about inflationary concerns, but
Speaker 1: it hits restaurants different because the margins are so tight
Speaker 1: what are the biggest costs right now for your members.
Speaker 7: So beef costs for sure. We're seeing a lot of
Speaker 7: fluctuation on seafood. One of the things that we're seeing
Speaker 7: in the data that we're trying to figure out is
Speaker 7: a lot of data is showing seafood as a protein
Speaker 7: price going down. But what our members are telling us
Speaker 7: from our survey work is that they're seeing increase seafood prices,
Speaker 7: and so there's a lot more we've got to figure
Speaker 7: out there. And I think this is a place where
Speaker 7: tariffs or the threat of tariffs is really hurting that
Speaker 7: supply chain, especially as whatever happened to be in the
Speaker 7: warehouse under a pre tariff price really starts to deplete.
Speaker 7: And so I think anytime you're looking at proteins, that's
Speaker 7: going to be a place where people are concerned. And
Speaker 7: then anytime you're looking at any kind of vegetable or produce,
Speaker 7: we want to make sure that those tariffs stay off
Speaker 7: as well, because we can't produce in the United States
Speaker 7: the amount of produce that can we consume on a
Speaker 7: regular basis, and we certainly can't produce it year round.
Speaker 1: Michelle not in DC in the will that is true,
Speaker 1: and even in California, doesn't satisfy the entire country or
Speaker 1: provide for the entire country. Hey, before we let you go,
Speaker 1: we got to talk about cold hard cash, specifically the penny.
Speaker 1: Was surprised on our editorial call when our producer already
Speaker 1: said that this is a big issue for you guys,
Speaker 1: costing your restaurants thirteen to fourteen million dollars monthly enforced
Speaker 1: rounding losses will explain what's going on with the penny.
Speaker 7: Well, it is certainly interesting, and nobody really had on
Speaker 7: our Bingo card for twenty twenty five that we would
Speaker 7: be talking about penny shortages. But for some reason that
Speaker 7: we can't quite figure out, the Fed has stopped circulating pennies.
Speaker 7: So the Federal Reserve does a really important thing by
Speaker 7: keeping money and coins circulating around the country so that
Speaker 7: we've got the right level of those coins and bills
Speaker 7: in the right areas and regions, and right now they're
Speaker 7: not doing that with pennies, and so we're seeing pennage shortages,
Speaker 7: and so often consumers are coming in and paying cash.
Speaker 7: In fact, I think people would be surprised to know
Speaker 7: that one in four transactions and restaurants is a cash transaction,
Speaker 7: so people are coming in paying cash and often they
Speaker 7: can't get exact change. So that's creating a difficult situation
Speaker 7: for consumers. But also that difficult situation that you cited
Speaker 7: in the thirteen to fourteen million dollars a year in
Speaker 7: lost revenue for restaurants.
Speaker 3: Wow, that's a real number. It's interesting. My understanding is
Speaker 3: they stop mining them because I think it costs more.
Speaker 1: But this is different. This is the Federal Reserve in
Speaker 1: circulation versus the US not producing them new ones, so.
Speaker 3: They're pulling amount of circulation.
Speaker 7: Yeah, there are three hundred million pennies that are in
Speaker 7: circulation right now in the US, and so there should
Speaker 7: be enough pennies rolling around that we can keep using
Speaker 7: pennies even though they are not mint.
Speaker 1: They checked the couch cushions, that's right, my husband's or
Speaker 1: the washing machine that's usually where they end.
Speaker 4: Are true.
Speaker 3: Bring up those pennies, it matter, and those single socks. Michelle,
Speaker 3: Thanks so much. Michelle Cosmo, President and CEO of the
Speaker 3: National Restaurant Association trade group for the restaurant industries.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 2: New York station, Just Say Alexa played Bloomberg eleven.
Speaker 1: Thirty well from Utah to California. Ski resorts across the
Speaker 1: West to laid their opening days. This due to a
Speaker 1: lack of natural snow as well as temps were too
Speaker 1: warm to make snow. So we're talking about Jackson Hole
Speaker 1: and Wyoming Park City and Deer Valley in Utah, Schweitzer
Speaker 1: Mountain Resort in Idaho, Heavenly and North Star in California.
Speaker 1: They all opened later than originally planned.
Speaker 3: I'm going to let you keep going because you've been
Speaker 3: so excited about this.
Speaker 1: This has serious economic implications in the towns and states
Speaker 1: where these resorts operate. According to the Bureau of Economic Research,
Speaker 1: it came out last year and it said that snow
Speaker 1: activities in the economy for the US was a seven
Speaker 1: point seven billion dollar business in twenty twenty three, and
Speaker 1: that in Colorado, Utah, and California it was the quote
Speaker 1: largest conventional activity.
Speaker 3: It's a big deal.
Speaker 1: It's a very big deal. Yeah, for more on the
Speaker 1: ski industry and how this season is looking. We welcome
Speaker 1: Bob sha He's founder and CEO of Shurefoot. Surefoot is
Speaker 1: the biggest custom ski boot company in the world. They've
Speaker 1: got twenty nine locations in North America, Canada and Europe.
Speaker 1: Bob joins us here in the Bloomberg Interactive Brokers studio. Welcome.
Speaker 1: How are you?
Speaker 12: Thank you good?
Speaker 5: I'm really good.
Speaker 1: So for people who aren't familiar having step foot into
Speaker 1: a Surefoot, explained the process because I think people understand
Speaker 1: ski boots, but then sure if it takes the shell
Speaker 1: and then and then customizes it, what do you guys do?
Speaker 12: I mean, basically, a person comes in the door and
Speaker 12: then there's some conversation with them to find out their
Speaker 12: history of skiing and how much they've skied, what level
Speaker 12: they're at and everything, and then they're kind of evaluating.
Speaker 12: But then the technical part starts. We put your foot
Speaker 12: onto a three D imaging machine which makes an orthotic
Speaker 12: for underneath your foot the first step in there, and
Speaker 12: then we put you onto another image that takes a
Speaker 12: scan of your foot. So it really what we do
Speaker 12: with that scan is we match that to the shell.
Speaker 12: So we basically have a visual of your foot exactly
Speaker 12: and we match it into we find the right shell
Speaker 12: for you, so now that shell matches your ability, your
Speaker 12: history and skiing, what you enjoy about the sport, and
Speaker 12: then we put it together with a custom liner that
Speaker 12: we make, and we have numerous different ones, about five
Speaker 12: or six one so we you know, looking at your
Speaker 12: foot the side from there, which one's going to work
Speaker 12: best for you in the sport. And that whole process,
Speaker 12: because we've sort of packaged it all together on the
Speaker 12: same roof, just takes about an hour where we can
Speaker 12: go from you walking in the door to walking out
Speaker 12: with a boot that's totally custom fit for your foot,
Speaker 12: ready to ski in.
Speaker 1: You've done this, Yeah, I did this back in twenty
Speaker 1: twenty one. I finally got my first pair of Surefoot boots.
Speaker 1: I mean I've lived in places where Surefoot has had
Speaker 1: locations and finally I was like, you know what, I'm
Speaker 1: getting to my late thirties. I don't get ski boots
Speaker 1: very much. It's time for me to have like a
Speaker 1: really comfortable pair of boots. And I've wanted a pair
Speaker 1: of surefoots.
Speaker 3: And they haven't always been comfortable.
Speaker 1: No, they haven't. And you know the thing is is
Speaker 1: and you know, I had a scan done in like
Speaker 1: two thousand, let's say two thousand and seven maybe for
Speaker 1: a pair of orthotics for cycling shoes, and they were
Speaker 1: able to tell when I went to the store that
Speaker 1: my foot had actually changed. Yeah, since that so they
Speaker 1: had to make a a They did re scan it
Speaker 1: and do a new pair of orthotics based on the
Speaker 1: new scan, because I guess that's what happens when you age.
Speaker 12: Yeah, well, I think it's it's most feet do that,
Speaker 12: you know, if you have some flexibility mobility in your.
Speaker 3: Foot, were too, right, Yeah, but go ahead, Yeah.
Speaker 12: Yeah, over time, it really you know your foot's going
Speaker 12: to change a bit. And the scans are extremely precise,
Speaker 12: so it's you know, we can be talking about minute difference,
Speaker 12: but that minute difference.
Speaker 5: Is a big deal.
Speaker 12: It's a big deal in biking shoes if you're really
Speaker 12: into it, and it's a big deal in ski boots.
Speaker 3: Bob, how did you get to this point? Because to
Speaker 3: me it makes a lot of sense and obvious with you,
Speaker 3: I wear orthotics and just general and it just makes
Speaker 3: such a difference in shoes and sneakers and what have
Speaker 3: you how did you get to this point?
Speaker 1: You know, really it started.
Speaker 12: I grew up skiing and ski racing, and boots always
Speaker 12: just killed my feet, Like really, I have very wide
Speaker 12: fore foot and boots. You know, when you're trying to
Speaker 12: jam into a ski racing boot, it's just there's a
Speaker 12: lot of pain. And I really it took time off
Speaker 12: the slope. I couldn't stay out as long as I
Speaker 12: wanted to as a kid, and so over time it
Speaker 12: just started developing ways to make it a little better.
Speaker 12: And then as I got done with ski racing in college,
Speaker 12: is like, I don't want to leave this sport. I
Speaker 12: love the sport. I can make a differentference in it.
Speaker 12: So that was really the impetus for it, you know,
Speaker 12: thinking about it. And then then a lot of trial
Speaker 12: and error. I'm in crazy trial and error.
Speaker 3: What was the tell us? What was some of the error?
Speaker 1: I don't remember.
Speaker 12: One of my first employees is that John Higgins was
Speaker 12: you know, he was on the US ski team and
Speaker 12: collegiate ski racer, and we were together were trying to
Speaker 12: make a pair of boots for me with a new
Speaker 12: this foam material that we had found, so we injected
Speaker 12: into my foot and he gets it all over his hands, everything,
Speaker 12: and then I'm standing there and it feels like it's
Speaker 12: going to break the bones in my foot. I'm like, John,
Speaker 12: you got to get this off. You got to get
Speaker 12: this off my foot. It's breaking the bones. And a
Speaker 12: guy was walking by kind of through the back corner
Speaker 12: of the space that we were in, and he was
Speaker 12: a chemic Glen's yearne. He looks at John and goes,
Speaker 12: if you don't get that off your hands in the
Speaker 12: next like thirty seconds, it's never coming off. So now
Speaker 12: John takes off to get that off his hands, and
Speaker 12: I've got this on.
Speaker 1: My foot about me.
Speaker 12: I think it's breaking the bones in my foot, and
Speaker 12: I'm like, but luckily it didn't, and he got it
Speaker 12: off his hand, and we probably took a step back
Speaker 12: for a couple of years from that. But that's really
Speaker 12: how it began.
Speaker 1: So we're going to talk more about the origin story
Speaker 1: in a few minutes, and before we get there, one
Speaker 1: of the reasons we wanted to talk to you is
Speaker 1: because you serve this higher end consumer and we talk
Speaker 1: a lot about what the economy looks like right now,
Speaker 1: and just when you talk about skiing in general, you're
Speaker 1: already talking about a segment of the consumer that can
Speaker 1: afford to travel to a ski area, pay for an
Speaker 1: you know, expensive lift ticket, oftentimes stay in an expensive
Speaker 1: area and then do something that requires expensive equipment. Give
Speaker 1: us an idea. And you're a private company, so it's
Speaker 1: you know, we don't have access to a ton of
Speaker 1: your own data. But how is the consumer you're dealing
Speaker 1: with right now? How are sales? What are some numbers
Speaker 1: you can give us.
Speaker 12: I mean, I think all of us are always a
Speaker 12: little you know, you're just kind of have this tendency
Speaker 12: when you're in business. You know, you're a little worried.
Speaker 12: But right now things are actually going along pretty well.
Speaker 12: You know, we've this is we're up a little. But
Speaker 12: then as you were talking around about just before how
Speaker 12: we didn't have snow, we take a dip, you know
Speaker 12: with that when it's early. But in general terms, we
Speaker 12: see the consumer is fairly strong, you know, coming in
Speaker 12: and you know, you know what's really happened to him.
Speaker 12: I think that people recreation is just a bigger part
Speaker 12: of our lives. We all have, you know, we want
Speaker 12: to do that, we want to be out there, and
Speaker 12: luckily we're in the sport that people really love.
Speaker 3: Bob, have you seen that coming off the pandemic of
Speaker 3: people even like kind of that. Obviously after the pandemic,
Speaker 3: it was like I got to get out in the
Speaker 3: world because I couldn't for so long. But do you
Speaker 3: see it kind of lasting.
Speaker 12: Yeah, I mean, honestly, I see it my own company.
Speaker 12: How many people aren't in there. I think it became
Speaker 12: more important for everybody. You know, it's like you're out
Speaker 12: of the office a bit, you got outside and it
Speaker 12: just it seems healthy and that's good to me. It
Speaker 12: seems like half in to the mountains. We look at
Speaker 12: it like it's a healthy place to be to exec
Speaker 12: size and stuff, and so I think it's good for
Speaker 12: the it's good for my business, good for the sport,
Speaker 12: my life.
Speaker 1: Well, people in New York City know that you have
Speaker 1: a store in New York City. But it's kind of
Speaker 1: a unique store because it's it's not near a ski mountain.
Speaker 1: Every I think, every other store that you have maybe
Speaker 1: save for Vancouver or or London. Yeah, you know is
Speaker 1: right at the base of a scheme mountain is New York.
Speaker 1: You're you're like the biggest location in terms of what
Speaker 1: it does in sales.
Speaker 12: It was the first it was the first city store.
Speaker 12: It's not our biggest volume store, you know, we have
Speaker 12: that amountains, but many of our stores are very similar
Speaker 12: in size. But really why we put them here is because,
Speaker 12: you know, there's just people who want to there's different personalities.
Speaker 12: They want to get it done before they go to
Speaker 12: you know, on their trip, and those there and now
Speaker 12: you can get the exact same thing. So really, early season,
Speaker 12: our city stores flourish.
Speaker 3: I mean, how busy are you right now? Is it crazy?
Speaker 12: Really?
Speaker 5: Yeah?
Speaker 12: You know, honestly, it's the most fun part of my job.
Speaker 12: I was in the New York store this morning for
Speaker 12: you know, and it's just I love when it's just
Speaker 12: busy in there and everyone's talking about sport and skiing
Speaker 12: and enjoying it.
Speaker 1: Very briefly, you bought a company back in twenty twelve
Speaker 1: that is not a winter company. Yeah, and now that's
Speaker 1: attached to the store in New York City. In terms
Speaker 1: of running, how big of a growth area is running
Speaker 1: for you?
Speaker 12: You know, that's I mean, the reason we got into
Speaker 12: running was because we were runners to stay in shape
Speaker 12: for skiing. I mean, you know, we all run, and
Speaker 12: you know, it's part part of it. And then because
Speaker 12: of the orthotics that we make, the custom you know,
Speaker 12: the basis of the ski boot is used by so
Speaker 12: many athletes and runners like Boston Marathon winners and so
Speaker 12: many people. That's where it really came from, is that
Speaker 12: we knew a lot about feet and running and what
Speaker 12: we could do with that. It's great for us. It
Speaker 12: gives us more of a year round business for us,
Speaker 12: more opportunity for people.
Speaker 1: You also don't franchise at all. I'm sure this has
Speaker 1: come up when people have come, hey, you should franchise this.
Speaker 1: Why not?
Speaker 12: You know, we get asked once a week about the
Speaker 12: franchising thing at least. But you know, it's just that
Speaker 12: we wanted to have better quality control over it, and
Speaker 12: we want to give our employees opportunity. And that's what
Speaker 12: really comes down to is that we in order to
Speaker 12: open more stores, we train people and when they're ready
Speaker 12: to go to store. Like our most recent store we
Speaker 12: opened in Big Sky. Chrisciardo, the manager there, worked for
Speaker 12: us a long long time and he wanted to move there,
Speaker 12: so we opened the store there.
Speaker 1: That's pretty cool.
Speaker 3: I think that's pretty cool. I mean, I'm also assuming
Speaker 3: that folks have reached out to either invest in you
Speaker 3: buy you up, like yeah, and you just you're you
Speaker 3: want to continue to go it alone.
Speaker 12: Yeah, you know, I think it's it's we've had you know,
Speaker 12: we have my have had minority investors and stuff in there.
Speaker 12: But we've also had some hard knocks with those. And
Speaker 12: so as long as we control the business and we
Speaker 12: enjoy what we're doing, and you know, we have my
Speaker 12: daughter is in the business, my you know, we have
Speaker 12: family in the business, I want to do it for
Speaker 12: a long time.
Speaker 1: Please go ahead.
Speaker 3: What's your supply chain? Like, is everything done in the
Speaker 3: you and I in the US?
Speaker 12: I wish it was all done in the US. That's
Speaker 12: you know, it's I really wish that it was done here,
Speaker 12: but we're not able to. There's just things that or not. So, Yeah,
Speaker 12: we've had challenges with the supply chain right now. We
Speaker 12: try to mitigate them and the costs and.
Speaker 3: The territory costs have gone up.
Speaker 5: Yeah.
Speaker 12: Yeah, I mean that's a tough it's been a tough
Speaker 12: thing too. Yeah, And I really think I look back
Speaker 12: and say, wow, I was I'm glad this didn't happen
Speaker 12: when we're in business five years or something I don't
Speaker 12: I don't know how a small business gets through it.
Speaker 12: You know, we're a little able to manage it a
Speaker 12: little better.
Speaker 1: But yeah, there the biggest story in the ski industry
Speaker 1: obviously is snow and making sure that people can actually
Speaker 1: get on mountains. The second biggest story in pretty much
Speaker 1: any ski town that you go to is the cost
Speaker 1: of living. Yeah, and I'm wondering. You are known for
Speaker 1: having these long tenured employees who live in the communities
Speaker 1: where you have stores, and these are very transient communities
Speaker 1: because they're they're ski areas where people come for the
Speaker 1: season and then leave. How do you how do you
Speaker 1: make sure that you can have employees that can actually
Speaker 1: live somewhere like attracting and retaining a long term employee
Speaker 1: in a place where truly nobody can afford to live.
Speaker 12: Yeah, it really has. I mean, you know, we talk
Speaker 12: about it being so hard right now, but you know
Speaker 12: there's been many points where it has been. But are
Speaker 12: What we've always tried to do is make our employees
Speaker 12: really productive the whole system that they do, and then
Speaker 12: pay them the best that we can in there. But
Speaker 12: it is a challenge, you know, in there, and you
Speaker 12: have to yeah, we have to deal with that. I mean,
Speaker 12: look at some of these markets are crazy, crazy expensive now,
Speaker 12: so we have some employee housing, but the real thing
Speaker 12: is how we keep employee housing.
Speaker 5: Yeah, yeah, we do.
Speaker 12: We have employee housing all the big markets, but that's
Speaker 12: more for new new employees that are you know, coming
Speaker 12: into the company.
Speaker 3: To help them get settled and yeah, yeah, you know, their.
Speaker 12: First second year. But all of our you know, management
Speaker 12: and everything, we've always wanted the company, you know, I
Speaker 12: always say, if we're not going up, we're going out.
Speaker 12: We have to go up to give employees opportunity to
Speaker 12: keep growing, keep growing there. And that gives employees opportunity
Speaker 12: their stores keep growing, get bigger. They can be rewarded
Speaker 12: more for that and compensated. But no doubt, it's it's
Speaker 12: a big challenge.
Speaker 3: Where's the growth in your industry? Like, how do you think,
Speaker 3: I mean, forty years you've been doing this. It sounds
Speaker 3: like you still look for new opportunities constantly.
Speaker 12: I mean, really, what it comes down to is we're
Speaker 12: still a small percentage. You know, we're probably somewhere around
Speaker 12: three or four percent of the dollar volume of ski
Speaker 12: boots sold in the world, and so we have a
Speaker 12: lot of room to grow in that.
Speaker 1: Would you ever consider making your own ski boot? Just
Speaker 1: to remind everybody, the shell, you buy the shell from
Speaker 1: a company that makes the ski boot, and then you
Speaker 1: do the liner and kind of everything else. But would
Speaker 1: you ever make an actual surefoot ski boot?
Speaker 12: Yeah? I mean we have right now. We have three
Speaker 12: D technology that we're working on and with boots and everything.
Speaker 12: But I think as long as we can get the
Speaker 12: shell that we think is really great for a customer
Speaker 12: in the market, then we'll keep doing that. So what
Speaker 12: we really do is we buy the shell without the liner,
Speaker 12: so it saves the consumer money and then we have
Speaker 12: a great shell and the outside and the interior we've made.
Speaker 12: But we are always working on so if I come
Speaker 12: up with a great idea about a shell, you'll see it.
Speaker 3: But in terms of growth, like, okay, no offense, but
Speaker 3: I'm like thinking, wait, I got our thoughtics, but these
Speaker 3: sound better, like can you? In terms of the medical market,
Speaker 3: are people who go to foot doctors? What's the percentage
Speaker 3: like through your machine like that you have.
Speaker 12: It's a percentage even in that Yeah, we're small, even
Speaker 12: we're one of the largest makers of orthotics in the
Speaker 12: United States, but like, actually kind of a long shot.
Speaker 12: We are, but we make so many in our stores.
Speaker 12: If you combine what we do in our stores and
Speaker 12: what we do in our factory, we're by far the largest,
Speaker 12: but there's lots of room because a lot of people
Speaker 12: don't really know how beneficial they are to you. So
Speaker 12: if something happens to you, if all of suddeny up
Speaker 12: planar fasciitis, your foot's hurting, you're aching from running, that's
Speaker 12: when you start seeking us out.
Speaker 3: So, Bob, if somebody comes in and gets an orthotic
Speaker 3: through you, I mean, is it covered by insurance?
Speaker 12: It is if a doctor, you know, if they have
Speaker 12: a prescription for it. Majority of what we sell are not.
Speaker 12: That's not really true. In our medical division it's mostly prescription,
Speaker 12: and then in our consumer it's not. But you know,
Speaker 12: they are covered and they're the same scam so we
Speaker 12: can make we can do anything with that.
Speaker 3: You know this it just seems like a mass market,
Speaker 3: like it's major.
Speaker 12: It is a big market.
Speaker 1: Well, the reason you have that market is because you
Speaker 1: bought this company and fit the Orthotics company based in Vancouver, Washington.
Speaker 1: Back in twenty twenty three, you bought super Runner shops
Speaker 1: back in twenty twelve, any more acquisitions on the horizon.
Speaker 12: You know, right now we're doing something really big that
Speaker 12: We're about to introduce our own line of footwear. And
Speaker 12: the footwear is made specifically for orthotics to fit your
Speaker 12: orthotics in it, so you have a perfect platform. Like
Speaker 12: right now in ski boots, you have a perfect platform
Speaker 12: when we make the boot whole thing so you're standing
Speaker 12: totally aligned.
Speaker 1: But a pair of shoes you pull out the insul,
Speaker 1: the athotic's gonna be bigger than the insul, so it doesn't.
Speaker 12: Doesn't fit quite right, and you can't get it, you know,
Speaker 12: in there. So we are late in a few weeks,
Speaker 12: we're about to introduce a line of shoes that is
Speaker 12: just for that. So when you get a line, scan
Speaker 12: your bodies put into alignment, you put it to our shoes.
Speaker 12: You're you're going to stand in a very balanced, comfortable position.
Speaker 3: You guys are doing this on your own or is
Speaker 3: it a collaboration we're doing on our own.
Speaker 1: I think we're breaking some news here.
Speaker 12: You know, I've debated whether I should even say say
Speaker 12: the sun here. But it's a big deal. We've been
Speaker 12: working on it for years and It's really cool. We
Speaker 12: have some I was just at the World Cup and
Speaker 12: Veil and I had on a pair of the winter
Speaker 12: boots and I had like four or five people ask
Speaker 12: me about them?
Speaker 1: What are those?
Speaker 12: Where are they?
Speaker 5: Like?
Speaker 1: Oh?
Speaker 5: Nice?
Speaker 12: We have a little little luck here with the product.
Speaker 5: Men and women.
Speaker 12: Yeah, we have men and women. Yeah, of course we
Speaker 12: have men and women. Ski run everything.
Speaker 1: Very cool. Hey, Bob, come back and hang out any
Speaker 1: time you're in New York. Really appreciate foot here in
Speaker 1: the Blueberg Studio. This is Blueberg.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 3: Are you a circus kind of guy?
Speaker 1: I am a circus kind of guy.
Speaker 5: Are you really?
Speaker 1: Yeah? I'm a circus kind of guy, Carol. Do you
Speaker 1: remember a couple of weeks ago we spoke about the
Speaker 1: Tiger Global alum. His firm is betting on prying people
Speaker 1: off their screens. Yes, money goes to travel, live events,
Speaker 1: fitness of spectator sports.
Speaker 3: Right, and he's thinking about that in terms of investment places.
Speaker 1: Yeah, he's focused on.
Speaker 3: Yeah, So live events definitely our next guest focus our
Speaker 3: companies behind the Ringling Brothers and Barnumum Barnum and Belly,
Speaker 3: Monster Jam, also Disney and Ice, Monster Energy. I don't
Speaker 3: even know all of these things. Am a Supercross and
Speaker 3: the Supermotocross World Championship Room. Come on, Carol says the
Speaker 3: dad of a little boy.
Speaker 1: We're talking about Feld Entertainment's family owned and operated. Here
Speaker 1: with us now is Juliette Feld Grossman, ceofeld Entertainment. She
Speaker 1: joins us from Florida. Julie, welcome, good at you on
Speaker 1: the program Multiple events, eighty country, six continents. You've got
Speaker 1: a great view of the consumer Hou's business.
Speaker 13: So, as you mentioned, we represent a number of different properties,
Speaker 13: Ringling Brothers, farn Bailey, Circus, Monster Jam, Supermotocross and Disney
Speaker 13: on Ice and across all of those properties, we do
Speaker 13: about two thousand, eight hundred performances per year and two
Speaker 13: hundred and forty cities performing to about fourteen million audience members.
Speaker 13: And so we obviously see the economy from a lot
Speaker 13: of different vantage points, and we are in many different
Speaker 13: territories worldwide. I can tell you what we're seeing right
Speaker 13: now in the US is really a tale of two economies,
Speaker 13: which is playing out across a number of other industries
Speaker 13: as well. So we see the AFFLA consumer who's you know,
Speaker 13: excited to spend on VIP experiences, on merchandise, all of
Speaker 13: the plussing up they can get. And then of course
Speaker 13: we see you know, lower middle income consumers having a
Speaker 13: harder time, less discretionary income due to other costs in
Speaker 13: their lives. And so our focus is always on a
Speaker 13: very wide and diverse, you know, economic spectrum. So we
Speaker 13: put a lot of effort into reaching across that spectrum
Speaker 13: to customers and offering a variety of price points and
Speaker 13: reaching them through different marketing strategies to let them know
Speaker 13: that we're here and that we have we have all
Speaker 13: those options available.
Speaker 3: So who do you think your customer is? And I'm
Speaker 3: looking like at Barnumum, Ringling Brothers and Barnum and Ballet
Speaker 3: Circus tickets for the Barclay Center in twenty twenty six,
Speaker 3: and I'm just kind of scrolling up right now. I'm
Speaker 3: at tickets that are ninety five ninety nine.
Speaker 1: Are a reseller, Carol or are you Where are you going?
Speaker 3: Event ticketscenter dot com?
Speaker 5: Is that aseller?
Speaker 14: Well, we hope you'll go you we hope you'll buy direct.
Speaker 8: That is a reseller, all.
Speaker 3: Right, so talk to us about your pricing here all right,
Speaker 3: I'm going to your site. Sorry, Google, talking another wrong place.
Speaker 3: I'm blaming on Google. So in the venue, we've got
Speaker 3: thousands of seats.
Speaker 13: So based on you know, how close you are, what
Speaker 13: position you are, you know inside the venue, we offer
Speaker 13: different pricing and in some cases we may also have
Speaker 13: different experiences connected to you know, different price tickets. And
Speaker 13: so where we have you know, front row tickets at
Speaker 13: a at a higher price point, we also have tickets
Speaker 13: that are higher up in the venue at more affordable
Speaker 13: ticket prices. But what I will say is, you know,
Speaker 13: somebody who's been producing these shows for many years now,
Speaker 13: we always look to say, how can we make sure
Speaker 13: we have a great experience for everybody who comes to
Speaker 13: our shows. So we look at the quality of the
Speaker 13: production from many different vantage points. Is we're developing it
Speaker 13: so that no matter where you sit, you and your
Speaker 13: family have that great experience you take home those memories
Speaker 13: and hopefully you come back many more times.
Speaker 1: So in terms of the portfolio that you have, we're
Speaker 1: showing a lot of footage from Ringling Brothers and Barnum
Speaker 1: and Bailey right now, but you also do Disney on Ice,
Speaker 1: you do motocross events, monster truck stuff. The portfolio in
Speaker 1: terms of where revenue comes from, how is it divided?
Speaker 13: Well, we have many different tours, so by volume, we
Speaker 13: have eight tours of Disney on Ice that travel globally.
Speaker 13: We have five tours of Monster Jam, We have one
Speaker 13: tour of Super Motocross at thirty one events across the
Speaker 13: season that is also broadcast live, and then we have
Speaker 13: one tour of Ringling Brothers, barnm and Bailey. But we're
Speaker 13: very diversified in terms of our consumer touch points, so
Speaker 13: we also have a merchandise business that accompanies all of
Speaker 13: our tours. We have a very strong licensing program across
Speaker 13: our owned properties. We also have media and broadcast rights
Speaker 13: associated with some of our properties too.
Speaker 1: We're Bloomberg, so we love numbers. But you're a private
Speaker 1: family health company. Can you just give us an idea
Speaker 1: of size of revenue in twenty twenty five or twenty
Speaker 1: twenty four for example.
Speaker 13: We are privately held, so we don't disclose that information.
Speaker 3: Is it growing, Yes, it is growing.
Speaker 13: And one of the things that we've strategically been working
Speaker 13: on is, you know, we've been a company and business
Speaker 13: that's about that special day, that day you get to
Speaker 13: come to our event, and now we're increasingly working on
Speaker 13: building that three hundred and sixty five day presence with
Speaker 13: our customers, building out a more franchise oriented strategy. So
Speaker 13: with Monster Jam, we since twenty twenty, we've been the
Speaker 13: number one vehicle licensed worldwide, that's according to Sircana, and
Speaker 13: so we have a very robust retail program with Walmart, Target, Amazon,
Speaker 13: not only in the US globally. With Super Motocross, we
Speaker 13: are on NBC and Peacock with our live broadcast. We
Speaker 13: also have a video pass that goes to over one
Speaker 13: hundred and forty countries and that's a subscription. So we
Speaker 13: have a lot of different ways in which we're reaching consumers.
Speaker 13: We're building out those touch points so that we continue
Speaker 13: to stay with them all year round and be top
Speaker 13: of mind.
Speaker 3: I'm curious, it's your portfolio. How do you expand it?
Speaker 14: What would you like to add to it well, we're
Speaker 14: always looking at new opportunities. We continue to look at
Speaker 14: new ip because we are both a property owner and
Speaker 14: then we also license, and then we're also looking at
Speaker 14: new ways of growing. Along with the relaunch of Ringling
Speaker 14: Brothers Barnman Bailey in twenty twenty three, this fall, we
Speaker 14: launched a Ringling Kids channel, So we're developing premium kids
Speaker 14: content and a slate of characters that are introducing the
Speaker 14: circus arts and a lot of humor and circus talent
Speaker 14: into into families. And so we're looking there at building out,
Speaker 14: you know, more retail product line. We're building out media
Speaker 14: partnerships around that, and so we look at expanding our
Speaker 14: reach in that way. And with Monster Jam as well,
Speaker 14: we have you know, a number of media opportunities underway,
Speaker 14: and we're excited to be growing not only our number
Speaker 14: of properties, but also the ways in which we're connecting
Speaker 14: with consumers and the monetization of those channels.
Speaker 1: Hey, on the circus side of things, you've you produced
Speaker 1: the Circus for years. I've always wondered where you find
Speaker 1: these performers and how you find these performers.
Speaker 3: Is it is it miss thinking about Juliet, you know,
Speaker 3: it's this gig doesn't work out.
Speaker 1: Yeah, that's flexible, are you Yeah that ship is sales
Speaker 1: not flexible enough, But you know, is it like this
Speaker 1: is the major leagues are the farm teams, the regional
Speaker 1: stuff all over the world, and you basically have scouts
Speaker 1: go and you find them that way.
Speaker 13: We have an in house cast, seeing and talent team
Speaker 13: who travel all over the world and they're visiting the
Speaker 13: circus festivals, they're visiting schools. They're also in touch with
Speaker 13: the network of coaches and families and talent that they know.
Speaker 13: So we are sometimes looking at, you know, acts that
Speaker 13: are already developed and created, but we're often creating our
Speaker 13: own acts based on ideas we have for something that
Speaker 13: you know, the audience has never seen before. What we
Speaker 13: always want to do is surprise people and bring them
Speaker 13: something that they haven't seen in a really new and
Speaker 13: exciting way. So with this new production of Ringling Brothers,
Speaker 13: we are so excited. We have a bike troop from
Speaker 13: China that has never been to us before, and they're
Speaker 13: doing incredible acrobatics on bikes, including at the very end
Speaker 13: of the performance they have you know, about ten people
Speaker 13: riding on bicycles and then one performer who runs across
Speaker 13: the backs of all the people on the bicycles.
Speaker 3: It is unbelievable.
Speaker 2: It has never been.
Speaker 1: I did go to amazing, an amazing circus in China.
Speaker 3: Okay, I heard that. I was going to say, Juliette.
Speaker 3: You know, Tim does ride bike. So I'm just saying,
Speaker 3: like there is high wire. On a serious note, you know,
Speaker 3: I think about circuses and acrobats and performers and different things,
Speaker 3: and a lot of times it comes from you know,
Speaker 3: individuals who are from outside the United States. Immigration. How
Speaker 3: have you been impacted by immigration?
Speaker 13: We are fortunate we have a very good team here
Speaker 13: who work on immigration. But we have performers from seventeen
Speaker 13: different countries and it is quite challenging. So we do
Speaker 13: work very far ahead of time to ensure we can
Speaker 13: bring our performers in and the Sometimes there are challenges
Speaker 13: in doing that. This time we were fortunate that we're
Speaker 13: able to ring in everybody that we wanted to be
Speaker 13: a part of this show. But I can tell you
Speaker 13: in our last production, we have you know, a group
Speaker 13: of male comedians from the Ukraine, and we actually had
Speaker 13: to get a special notice from the Ukrainian Department of
Speaker 13: Defense to allow them to be a part of Ringling
Speaker 13: because they were not part of military service then. So
Speaker 13: we you know, we work very hard to work to
Speaker 13: bring the best performers here, and I think that's something
Speaker 13: that really makes us stand out. Because we have this
Speaker 13: infrastructure to support what we're doing, we can bring in
Speaker 13: the best performers. We have a lot of experience and
Speaker 13: a lot of credibility as the greatest shown ears well.
Speaker 3: Really great to get some time with you, So appreciated
Speaker 3: and I hope we can get you back in the
Speaker 3: new year. Good luck with the holiday season. Really great
Speaker 3: to have with us. Juliet feld Grossman. She's chief executive
Speaker 3: officer of FELED Entertainment, joining us.
Speaker 2: This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
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