WEBVTT - Stocks Sink as Data Sparks Economic Concern 0:00:02.720 --> 0:00:10.560 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.560 --> 0:00:14.480 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.560 --> 0:00:18.479 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.600 --> 0:00:21.840 Listen on demand wherever you get your podcasts, or watch 0:00:21.920 --> 0:00:23.040 us live on YouTube. 0:00:23.520 --> 0:00:26.920 All right, you hit eco, go on your Bloomberg terminal, 0:00:27.000 --> 0:00:29.720 and you see a lot of economic data coming out today. 0:00:30.000 --> 0:00:30.440 I don't know. 0:00:30.440 --> 0:00:31.680 One of the ones that kind of jumped out of 0:00:31.720 --> 0:00:35.480 me is is GDP annualized quarter to quarter? 0:00:36.200 --> 0:00:37.080 The forecast was. 0:00:37.040 --> 0:00:39.640 For a decline of zero point two percent, came in 0:00:39.640 --> 0:00:43.000 a decline of zero point three percent. That's versus a 0:00:43.000 --> 0:00:46.760 gain of two point four percent last period. That kind 0:00:46.760 --> 0:00:48.680 of gets my attention. So we said, hey, let's ask 0:00:48.720 --> 0:00:51.560 Michael McKee. Does this stuff for a living international economics 0:00:51.800 --> 0:00:54.320 and policy correspondent for Bloomberg Newsy joints us here in 0:00:54.320 --> 0:00:57.880 our studio, Mike, is that a big deal that number 0:00:58.040 --> 0:00:58.800 that print? 0:01:00.160 --> 0:01:02.680 Yes, it's a big deal, but not for the reasons 0:01:02.800 --> 0:01:05.000 you might think. And I'm going to say something you've 0:01:05.080 --> 0:01:09.600 never heard me say that. Matt Miller just accused me 0:01:09.959 --> 0:01:13.319 of He said, I sound like Peter Navarro. 0:01:13.440 --> 0:01:16.800 Today. Yeah, I see. Did you see Alex's face when? 0:01:18.160 --> 0:01:23.480 Because I agreed with what Navarro's sentiment was on television 0:01:23.520 --> 0:01:25.240 a few minutes ago where he said. 0:01:25.040 --> 0:01:27.360 That this was not a bad report. 0:01:27.480 --> 0:01:31.479 I'm summarizing because the three tenths decline doesn't tell. 0:01:31.360 --> 0:01:32.000 The whole story. 0:01:32.040 --> 0:01:35.399 I mean, the story underneath GDP today is all tariffs. 0:01:36.000 --> 0:01:41.240 What happened. We saw tariffs bring in tariffs, get people 0:01:41.280 --> 0:01:44.200 to import a lot of stuff to try to get 0:01:44.240 --> 0:01:48.720 ahead of the tariff price increases, and that has totally 0:01:48.720 --> 0:01:52.960 distorted the numbers here. What we've seen is that imports 0:01:53.240 --> 0:01:58.320 subtracted five percent from GDP, A record inventories added to 0:01:58.440 --> 0:02:01.520 it a quarter percent because the jump in inventories was 0:02:01.680 --> 0:02:06.280 a record during the month and they didn't quite offset. 0:02:06.320 --> 0:02:10.440 But we did see all of this distortion in the numbers. 0:02:10.480 --> 0:02:13.280 That doesn't tell you the real story. If you look 0:02:13.320 --> 0:02:16.040 at consumer spending, it was up one point eight percent, 0:02:16.160 --> 0:02:19.240 which was a little more than expected. And business spending 0:02:20.000 --> 0:02:24.480 distorted by tariffs up nine point eight percent, well twenty 0:02:24.560 --> 0:02:28.600 two point five percent gain in imports of equipment. So 0:02:30.240 --> 0:02:32.920 it's really hard to tell. So what you do if 0:02:32.960 --> 0:02:35.400 you're an economists as you look at real final sales 0:02:35.800 --> 0:02:39.480 to domestic purchasers which takes out inventory and trade, and 0:02:40.200 --> 0:02:43.639 that was up by two point three percent. It's a 0:02:43.680 --> 0:02:46.640 little lower that it was in prior quarters, but that 0:02:46.760 --> 0:02:51.160 is still showing growth in the overall consumption economy. 0:02:51.160 --> 0:02:54.400 Well to that point. If we are seeing consumption okay 0:02:54.480 --> 0:02:57.280 and now you have incomes being okay, is consumption also 0:02:57.320 --> 0:03:00.799 being driven by pre buying tariffs or is this real 0:03:00.880 --> 0:03:01.960 underlying straight. 0:03:01.840 --> 0:03:05.760 No doubt, because people bought a lot of cars, and 0:03:05.800 --> 0:03:07.720 they've bought at least they've. 0:03:07.520 --> 0:03:12.840 Bought other things that we didn't see a big increase 0:03:12.919 --> 0:03:16.200 in durable goods spending, but there was a big increase 0:03:16.280 --> 0:03:20.320 in services spending, a relatively big increase, So Americans were 0:03:20.320 --> 0:03:23.160 out spending money. Now the question is where do they 0:03:23.200 --> 0:03:25.440 go from here? And for that you're what you're looking 0:03:25.520 --> 0:03:29.040 at is the other data we just got at ten o'clock, 0:03:29.120 --> 0:03:31.040 which is the PCEE data. 0:03:31.200 --> 0:03:32.080 Is this the one we care about? 0:03:32.120 --> 0:03:33.360 Is this the one get? This is the one we 0:03:33.360 --> 0:03:34.679 care about? 0:03:33.720 --> 0:03:37.640 This this is the monthly This is the monthly number, 0:03:38.200 --> 0:03:40.400 so it's the most recent data. This is if you're 0:03:40.400 --> 0:03:42.920 following the trend, which is what the Fed wants to do. 0:03:43.600 --> 0:03:45.880 We were up seven tents of eight percent, which is 0:03:45.960 --> 0:03:49.840 up from half a percent in February. So Americans spent 0:03:49.960 --> 0:03:54.520 more in March. The numbers were weighed down by what 0:03:54.560 --> 0:03:57.840 we got in January. In February, in the quarterly numbers 0:03:58.120 --> 0:04:01.360 and incomes were relatively strong. They're still up half a 0:04:01.360 --> 0:04:04.280 percent after a seven tenths rise the month before. If 0:04:04.320 --> 0:04:07.600 you look at the wages and salaries in that report, 0:04:07.680 --> 0:04:10.080 which is the most important thing because people spend what 0:04:10.120 --> 0:04:12.480 they make, they were up half a percent, which was 0:04:13.840 --> 0:04:17.240 up from February's four tenths and January's two tenths. So 0:04:17.279 --> 0:04:19.760 as the month went on, people got more money, they 0:04:19.760 --> 0:04:23.680 spent more money, and so it doesn't suggest we go 0:04:23.800 --> 0:04:28.120 into the second quarter with a real problem in terms 0:04:28.160 --> 0:04:29.560 of consumer momentum. 0:04:30.320 --> 0:04:30.960 That's my read. 0:04:30.960 --> 0:04:32.880 It seems like the consumer mic is still pretty good. 0:04:32.960 --> 0:04:37.240 When you're when you're looking at the consumer confidence numbers, 0:04:37.279 --> 0:04:42.040 it looks really terrible. But the numbers that we're seeing 0:04:42.080 --> 0:04:44.560 from consumers in terms of what they do, rather, that's 0:04:44.560 --> 0:04:45.640 a treasure. 0:04:45.720 --> 0:04:47.680 Secretary Bestin's been saying, I mean, you can look at 0:04:47.720 --> 0:04:50.240 all the survey numbers you want something. 0:04:50.040 --> 0:04:51.400 Like best into along with Navarro. 0:04:51.600 --> 0:04:53.520 Yes, exactly, but I mean that's what he's been saying 0:04:53.560 --> 0:04:55.600 and say, you can look at all the sentiment data 0:04:55.720 --> 0:04:58.080 you want, but people are still out there spending money. 0:04:58.240 --> 0:05:01.080 Well, the question now still backward looking. 0:05:01.120 --> 0:05:03.159 I mean, this is still from March. April was when 0:05:03.160 --> 0:05:05.480 we saw the tariff headlines and the volatility in the market. 0:05:05.560 --> 0:05:05.640 Right. 0:05:05.839 --> 0:05:09.240 Yeah, the PCE numbers are March that I'm talking about, 0:05:09.320 --> 0:05:11.480 and the rest of it is first quarter through the 0:05:11.560 --> 0:05:14.279 end of March. So what's happened in April that we 0:05:14.360 --> 0:05:17.200 don't know yet, We're going to have We're going to 0:05:17.240 --> 0:05:20.640 have to see. We have the sentiment indicators, and March 0:05:20.800 --> 0:05:22.800 was really the first month when there were. 0:05:22.640 --> 0:05:24.960 Any tariffs, and they weren't really tariffs on you and me. 0:05:25.000 --> 0:05:28.120 They were tariffs on the steel companies and things like that. 0:05:28.520 --> 0:05:32.240 So if people are paying more from for what they're getting, 0:05:32.720 --> 0:05:35.160 if they can get anything from China, now, maybe that 0:05:35.240 --> 0:05:38.120 does affect what they're going to be spending on. So 0:05:39.400 --> 0:05:42.240 somebody said to me this morning, this makes the fence 0:05:42.400 --> 0:05:47.000 job easy harder because you had higher inflation and lower growth. 0:05:47.040 --> 0:05:49.720 But I think it makes it easier. It just cements 0:05:49.760 --> 0:05:53.760 the case for doing nothing because this report is so 0:05:53.920 --> 0:05:57.800 distorted by the tariff stuff that it's impossible to say 0:05:57.839 --> 0:05:59.520 what it's going to mean going forward. 0:06:00.120 --> 0:06:01.599 Such a good point. He's so smart. 0:06:01.600 --> 0:06:03.159 That's when we get them on talking about a this time. 0:06:03.200 --> 0:06:04.320 So just like Peter Navarro. 0:06:04.520 --> 0:06:08.279 Yeah, Samesy, certainly the same. Michael McKee, Bloomberg International Economics 0:06:08.320 --> 0:06:10.120 and Policy correspondent, joining us in studio. 0:06:10.120 --> 0:06:11.159 Thank you so very much. 0:06:12.839 --> 0:06:16.520 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:06:16.600 --> 0:06:19.679 weekdays at ten am Eastern on Apple, Coarclay, and Android 0:06:19.720 --> 0:06:23.000 Auto with the Bloomberg Business App. Listen on demand wherever 0:06:23.080 --> 0:06:26.160 you get your podcasts, or watch us live on YouTube. 0:06:26.600 --> 0:06:29.679 Alex still here alongside Paul Sweeney. This is Bloomberg Intelligence Radio. 0:06:29.760 --> 0:06:31.880 We bring you all the top news in business, economics, 0:06:31.920 --> 0:06:34.320 and finance through our lens of our Bloomberg Intelligence folks. 0:06:34.360 --> 0:06:36.360 They cover two thousand companies in one hundred and thirty 0:06:36.360 --> 0:06:39.599 industries all around the world. Want to get an update 0:06:39.640 --> 0:06:42.039 here on super Micro. The stock gets hammered here after 0:06:42.080 --> 0:06:46.440 preliminary earnings results that fell well short of analyst estimates. 0:06:46.440 --> 0:06:49.000 Remember this was a darling that went into the mid 0:06:49.080 --> 0:06:51.479 cap stocks and had lots of issues with kind of 0:06:51.480 --> 0:06:54.120 revamping its accounting, etc. And they were trying to really 0:06:54.160 --> 0:06:57.000 find their footing. Bou Jinho is Bloomberg Intelligence and your 0:06:57.080 --> 0:06:59.880 technology analyst joins us now trying to find their footing 0:07:00.160 --> 0:07:02.359 then maybe pushed back a bit. What happened in their 0:07:02.400 --> 0:07:03.280 prilminary announcement. 0:07:04.200 --> 0:07:07.320 Yeah, hey, Alex, thanks for having me on. It looks like, 0:07:08.000 --> 0:07:10.960 you know, when you go big whale hunting and you 0:07:11.080 --> 0:07:13.200 miss those whales, you're going to miss results. Right, They 0:07:13.320 --> 0:07:18.120 essentially miss sales by about one billion dollars versus the 0:07:18.200 --> 0:07:21.120 midpoint of their guidance. And the fact of the matter 0:07:21.320 --> 0:07:24.120 is these AI deals are monster deals. That's why I'm 0:07:24.120 --> 0:07:27.880 saying it's big whale hunting. One hundred thousand GPU cluster 0:07:28.240 --> 0:07:32.480 that XAI or open Ai. Those are three point five 0:07:32.520 --> 0:07:35.200 billion dollar deals. So if you miss on you know, 0:07:35.320 --> 0:07:38.280 one or two of these, that accounts for easily a 0:07:38.320 --> 0:07:39.000 billion dollars. 0:07:39.640 --> 0:07:44.480 So is this a super micro computer specific issue or 0:07:44.640 --> 0:07:48.400 is this big tech spending kind of slung down here? 0:07:49.880 --> 0:07:54.240 Well, it's a product transition issue, right, So if we 0:07:54.280 --> 0:07:58.920 look at the Nvidia GPUs, they transitioned over from the 0:07:59.040 --> 0:08:03.880 last generation Hopper series to the next generation. Uh, the 0:08:04.680 --> 0:08:10.400 the Blackwell series and given the greater capacity and the 0:08:10.480 --> 0:08:13.960 more the stronger, the better computational power. The customers were 0:08:14.000 --> 0:08:15.960 actually waiting for this for quite some time now, and 0:08:16.040 --> 0:08:19.400 now they're clamoring for it. So essentially what customers appear 0:08:19.520 --> 0:08:23.080 to be doing is canceling their Hopper orders and moving 0:08:23.160 --> 0:08:27.160 over to Blackwell. Now, I will tell you they weren't 0:08:27.160 --> 0:08:29.720 the only one that had this issue. HPE a couple 0:08:29.760 --> 0:08:34.040 of months ago. Uh, they missed their expectations primarily because 0:08:34.080 --> 0:08:37.160 of this product transition as well. And it's biting super 0:08:37.240 --> 0:08:37.760 Micro now. 0:08:38.480 --> 0:08:43.200 So based on that, the chip cycles moving really fast 0:08:43.360 --> 0:08:47.040 for AI. So what's next after Blackwell? This is just 0:08:47.120 --> 0:08:49.199 going to keep happening and kind of rolling it downhill. 0:08:50.120 --> 0:08:53.040 Yeah, I mean, it's still probably a couple of years 0:08:53.120 --> 0:08:57.160 before we start seeing the new the newer series of 0:08:57.280 --> 0:09:00.800 chips really ramping up, So we probably have a two 0:09:00.880 --> 0:09:05.760 year product cycle before we get to that, Alex, I mean, 0:09:05.840 --> 0:09:10.400 let's see how the cloud Capex holds up in twenty 0:09:10.480 --> 0:09:14.880 six and twenty seven. But for now, you know, right 0:09:14.960 --> 0:09:17.200 now we have a neartim product cycle issue for at 0:09:17.280 --> 0:09:18.679 least super Micro and HPE. 0:09:18.880 --> 0:09:22.840 Which what are your companies kind of the tech hardware companies, 0:09:22.880 --> 0:09:27.319 what are they saying about this whole tariff climate, what 0:09:27.600 --> 0:09:28.640 is it going to be an issue for them? 0:09:29.760 --> 0:09:32.640 Yes, well, we published an update to our tariff note 0:09:33.000 --> 0:09:37.679 and surprisingly they've actually done a good job navigating the 0:09:37.720 --> 0:09:43.240 tariff issues. So far, I've had three companies report related 0:09:43.320 --> 0:09:46.520 that's hardware related. There's a couple of things we need 0:09:46.600 --> 0:09:48.720 to take into consideration. One, a lot of them are 0:09:48.800 --> 0:09:52.280 outside of China in terms of the manufacturing scope, so 0:09:52.640 --> 0:09:55.920 the tariff impact is fairly minimal. Two, there's a lot 0:09:55.960 --> 0:09:59.360 of manufacturing that comes out of Mexico. So you know, 0:10:00.160 --> 0:10:03.959 because of the US Mexico and Canadian Trader agreementt U 0:10:04.040 --> 0:10:06.480 S m c A, they're exempt for tariffs. So if 0:10:06.520 --> 0:10:09.240 you have anything that's built out of Mexico or Canada, 0:10:09.960 --> 0:10:12.840 whatever it's assembled there, you're except for tariffs. A lot 0:10:12.920 --> 0:10:16.040 of my company, the companies that have reported, uh, they're 0:10:16.200 --> 0:10:18.040 they're using your U S m c A to their 0:10:18.080 --> 0:10:21.880 advantage to win deals. And three and this is this 0:10:22.080 --> 0:10:25.040 was somewhat interesting to me. I thought there would have 0:10:25.080 --> 0:10:27.839 been some pull in deals because of tariff concerns in 0:10:27.880 --> 0:10:33.280 the second quarter. Uh, the guidance thus far, Uh, Yeah, 0:10:34.000 --> 0:10:38.200 Western Digital as well as Seagate, which manufactured hard drives. 0:10:38.440 --> 0:10:40.719 They don't see any pull in in deals. So the 0:10:40.800 --> 0:10:42.640 second half of the year, which was a concern of mine, 0:10:43.240 --> 0:10:46.200 we don't. We don't see a you know, we see 0:10:46.320 --> 0:10:49.400 actually smooth demand going into the second half in. 0:10:49.600 --> 0:10:53.200 Terms of spending from super Micro's customers. I know we're 0:10:53.200 --> 0:10:56.040 in the product cycle part, but are we seeing any 0:10:56.760 --> 0:10:59.920 change in customer spend, Like maybe they're spending the same amount, 0:11:00.080 --> 0:11:03.079 they're spending in different areas or are they holding spend 0:11:03.160 --> 0:11:05.080 all together or pulling back. 0:11:05.920 --> 0:11:06.120 Yeah. 0:11:06.280 --> 0:11:09.560 So, and let me let me clarify who super Micro 0:11:09.720 --> 0:11:10.079 sells to. 0:11:10.920 --> 0:11:11.280 They don't. 0:11:11.480 --> 0:11:15.480 They don't sell to the Metas or the Googles or 0:11:15.520 --> 0:11:17.600 the Amazon or the Microsofts of the world. I mean, 0:11:17.679 --> 0:11:19.880 there's some of that, but the bulk of their spend 0:11:20.040 --> 0:11:25.400 goes to Tesla, musks x AI or the core weaves 0:11:25.440 --> 0:11:30.160 of the world. This classification of neo clouds and for 0:11:30.280 --> 0:11:34.000 all intented purposes, it seems as if they're spending, they're 0:11:34.240 --> 0:11:37.800 maintaining their level of spend. They're not spending more. The 0:11:38.200 --> 0:11:41.120 one overhang or one concern that I do have is 0:11:41.200 --> 0:11:45.520 because of the tariff issue. So far, if they're not 0:11:45.600 --> 0:11:48.040 going to spend more. Are they going to buy less? 0:11:48.440 --> 0:11:52.120 Right because of the increase in taps. Now, if I'm right, 0:11:53.600 --> 0:11:57.920 we shouldn't see that much of a price increase from 0:11:58.240 --> 0:12:03.079 the server vendors or the GPU vendors because of some 0:12:03.280 --> 0:12:05.719 of the ways that they can avoid the tariffs. And 0:12:06.679 --> 0:12:09.120 you know, spending should be okay to the second half, 0:12:09.160 --> 0:12:10.839 and if the black wall cycle works out for them, 0:12:11.360 --> 0:12:14.880 super Micro should get back some of the law sales. 0:12:15.600 --> 0:12:18.240 So prior to three months ago, all we were talking 0:12:18.280 --> 0:12:22.719 about in the marketplace broadly defined was AI. Now I've 0:12:22.800 --> 0:12:25.160 gone three months really without really talking about AI because 0:12:25.160 --> 0:12:29.000 it's all about Terriss. Have your clients kind of are 0:12:29.040 --> 0:12:33.559 they still as enthusiastic about the real opportunities for a 0:12:33.679 --> 0:12:36.400 transformation in technology coming from AI? Is that still on 0:12:36.440 --> 0:12:37.000 the front burner? 0:12:37.800 --> 0:12:42.199 Well, so again, I'm gonna I'm gonna, I'm gonna bifurcate 0:12:42.280 --> 0:12:44.120 that from the cloud guys and as well as the 0:12:44.240 --> 0:12:48.400 enterprise guys. From the cloud perspective, they're continuing to spend. 0:12:48.840 --> 0:12:49.000 Right. 0:12:50.000 --> 0:12:53.640 If anything, there's a lot more excitement to spend, primarily 0:12:53.720 --> 0:12:57.079 because of some of these smaller language models like a 0:12:57.160 --> 0:12:58.040 deep seek. 0:12:58.280 --> 0:13:02.520 Up we have a blackout like a deep seek. 0:13:03.240 --> 0:13:04.839 Right, the studio light went out just for those of 0:13:04.840 --> 0:13:06.679 you be on radio, so your light went out on 0:13:07.000 --> 0:13:10.359 mujin Hell, there is no broad blackout space go ahead. 0:13:10.760 --> 0:13:14.120 Yes, like a deep seek. Or they are looking for 0:13:14.280 --> 0:13:17.120 dinner models. If anything, there's going to be higher demand 0:13:18.320 --> 0:13:23.000 for some of the products itself altogether, so there actually 0:13:23.080 --> 0:13:25.199 is a lot of excitement now on the enterprise side. 0:13:25.800 --> 0:13:29.200 If anything, there might be a pause on the enterprise 0:13:29.240 --> 0:13:33.079 side because of the high cost of acquisition. So the 0:13:33.240 --> 0:13:38.360 cycles for AI adoption may be more on twenty twenty 0:13:39.240 --> 0:13:41.439 later in twenty twenty six and into twenty twenty seven 0:13:42.200 --> 0:13:44.680 versus the second half of this year and into twenty 0:13:44.720 --> 0:13:46.480 twenty six on the enterprise side. 0:13:46.960 --> 0:13:49.520 All Right, Weich thanks a lot usenhel Bloomberg Intelligence senior 0:13:49.559 --> 0:13:52.959 technology analyst in the dark, but helping us illuminate what 0:13:53.080 --> 0:13:55.199 we're seeing when it comes to some tech names like 0:13:55.280 --> 0:13:55.920 super micro. 0:13:57.720 --> 0:14:01.400 You're listening to the Bloomberg Intelligence Pod. Catch us live 0:14:01.520 --> 0:14:04.600 weekdays at ten am Eastern on Apple Coarcklay and Android 0:14:04.640 --> 0:14:07.880 Auto with the Blueberg Business App. Listen on demand wherever 0:14:07.960 --> 0:14:11.439 you get your podcasts, or watch us live on YouTube. 0:14:11.160 --> 0:14:13.800 Your Caterpillar down by about half of percent, looking at 0:14:13.800 --> 0:14:16.880 slightly lower sales this year if Trump administration tear US 0:14:16.920 --> 0:14:20.040 remain in place. That's including an economy that dips into 0:14:20.080 --> 0:14:23.480 a recession in the second half. Chris Chiolino, Bloomberg Intelligence 0:14:23.480 --> 0:14:27.400 senior US machinery analyst joins US. Now, Chris, how do 0:14:27.480 --> 0:14:29.200 you look at this company then when there's like a 0:14:29.400 --> 0:14:32.960 huge variable, I'll throw off its earnings for the rest 0:14:33.040 --> 0:14:33.400 of the year. 0:14:34.640 --> 0:14:37.040 Yeah. So, I think the release really isn't as bad 0:14:37.080 --> 0:14:39.960 as initially feared, and there's actually a number of positive 0:14:40.040 --> 0:14:42.880 takeaways here. The quarter was weak, and we knew that 0:14:43.000 --> 0:14:44.960 going in, volumes were going to be down, pricing was 0:14:44.960 --> 0:14:48.120 gonna be under pressure, But the outlook is actually better 0:14:48.200 --> 0:14:51.480 than I think many had anticipated. Their two Q sales 0:14:51.520 --> 0:14:54.880 guide was actually above the street. We saw backlog improved 0:14:54.960 --> 0:14:57.920 to a record thirty five billion dollars, Orders were up 0:14:58.080 --> 0:15:01.400 double digits both year over year and sequentially. And really, 0:15:01.440 --> 0:15:03.600 if you look at their outlook X tariffs, it was 0:15:03.680 --> 0:15:07.440 really better than what they had expected prior so, and 0:15:07.560 --> 0:15:10.360 the tariff impact as of now at least the peers manageable. 0:15:10.400 --> 0:15:12.600 So I think the release, you know, should at least 0:15:12.600 --> 0:15:15.360 help delay some of those concerns over a more pronounced 0:15:15.360 --> 0:15:16.240 slowdown this year. 0:15:17.120 --> 0:15:20.720 Christa's kind of pillar build their equipment in the US. 0:15:21.280 --> 0:15:22.720 Is that where the manufacturing is? 0:15:22.880 --> 0:15:23.480 How do they do that? 0:15:25.360 --> 0:15:29.800 Short answer, they build everywhere. They are a net exporter 0:15:29.960 --> 0:15:31.800 out of the US. But you have to remember this 0:15:31.960 --> 0:15:36.320 is a large global manufacturer. They have manufacturing footprint and 0:15:36.440 --> 0:15:39.640 and supply base that really spans the globe. But if 0:15:39.680 --> 0:15:42.760 we're thinking about net exports, yes, they export more out 0:15:42.800 --> 0:15:45.720 of the US than they do import from a From 0:15:45.760 --> 0:15:48.200 a revenue perspective, you know, the US is you know, 0:15:48.320 --> 0:15:49.880 almost half their revenue today. 0:15:51.840 --> 0:15:52.960 What about for its peers? 0:15:53.040 --> 0:15:54.760 What does this mean for some of its peers and 0:15:56.040 --> 0:15:58.080 the trading environment that they were previously in. 0:15:59.680 --> 0:16:03.240 Yes, so, at least for some of the domestic US 0:16:03.360 --> 0:16:06.400 based manufacturers, I think this is maybe a little bit 0:16:06.400 --> 0:16:08.400 of a sigh of relief. By no means or we 0:16:08.480 --> 0:16:12.000 have the woods yet, but it certainly seems that the tariffs, 0:16:12.200 --> 0:16:16.200 as at least how they stand right now, are somewhat manageable. 0:16:16.840 --> 0:16:19.640 You know, cats expecting a net cost headwind of about 0:16:19.640 --> 0:16:22.000 two hundred and fifty is three hundred and fifty million 0:16:22.040 --> 0:16:25.440 dollars next quarter. If you kind of extrapolate that out 0:16:25.480 --> 0:16:27.520 over the balance of the year, you're talking you know, 0:16:27.760 --> 0:16:30.040 maybe somewhere in the one hundred hundred and fifty basis 0:16:30.080 --> 0:16:33.520 point headwinded margins. But that may even prove, you know, 0:16:33.640 --> 0:16:37.480 overly pessimistic, because you know, cats still evaluate and get implement, 0:16:37.800 --> 0:16:42.760 implement implementing some of these mitigation actions, so we could 0:16:42.760 --> 0:16:44.440 even see that come down from here. 0:16:45.040 --> 0:16:47.200 I was kind of surprised, I guess positively, Chris, that 0:16:47.480 --> 0:16:51.480 their backlog looks pretty darn good. It's not like their 0:16:51.520 --> 0:16:54.239 customers are saying are canceling orders or anything. 0:16:55.160 --> 0:16:57.800 Now, and it's it's a record backlog, right, So you know, 0:16:57.920 --> 0:17:01.720 we have coverage. You know, if you look at consensus revenue, 0:17:01.920 --> 0:17:04.880 you know, whether we call it flatter down slightly this year, 0:17:05.440 --> 0:17:08.000 they've got coverage for you know, nearly seventy percent of 0:17:08.040 --> 0:17:10.720 the year already. So I think that does help provide 0:17:10.800 --> 0:17:13.359 some kind of buffer. You know, there was a concern 0:17:13.440 --> 0:17:16.639 out there that do we see this pre buy you know, 0:17:16.720 --> 0:17:19.600 ahead of some of the tariff implementation, and KAT really 0:17:19.680 --> 0:17:22.520 kind of downplay that in conversations they're having with their 0:17:22.600 --> 0:17:25.280 dealers and with their customers. They're really not seeing any 0:17:25.359 --> 0:17:29.080 evidence of that. So yeah, these do seem like, you know, 0:17:29.280 --> 0:17:32.680 true orders and really a really healthy backlog, which you know, 0:17:33.240 --> 0:17:36.240 I think helps support you know, that flatish type revenue 0:17:36.280 --> 0:17:38.640 outlook that they're putting out there. 0:17:39.520 --> 0:17:42.119 All right, thanks a lot, Chris, really appreciate appreciate it, 0:17:42.200 --> 0:17:45.439 Chris Chile. You know, Bloomberg Intelligence Senior US machinery analyst. 0:17:47.160 --> 0:17:50.800 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:17:50.920 --> 0:17:54.280 weekdays at ten am Eastern on Applecarplay and Android Auto 0:17:54.400 --> 0:17:57.440 with the Bloomberg Business app. Listen on demand wherever you 0:17:57.520 --> 0:18:01.159 get your podcasts, or watch US live on to just get. 0:18:01.040 --> 0:18:02.760 Back to these markets we have as all offware. You're 0:18:02.840 --> 0:18:05.960 off the lows of the morning. The S and p's 0:18:06.040 --> 0:18:08.280 off eighty two points, that's one and a half percent. 0:18:08.720 --> 0:18:12.600 And Malletti joins us here, old buddy of mine. We've 0:18:12.640 --> 0:18:14.439 been into business a long time. She's head of equity 0:18:14.480 --> 0:18:18.240 investments in all Spring Global Investments. Dude, you're grinding it. 0:18:18.480 --> 0:18:19.640 Still working hard. 0:18:19.720 --> 0:18:22.280 And Malletti joins us here in studio and you and 0:18:22.359 --> 0:18:24.520 your colleagues at all Spring, I mean a lot of 0:18:24.560 --> 0:18:26.040 folks that have been in the market for a while. 0:18:26.160 --> 0:18:29.680 You've seen, you know, lots of different markets, whether it's 0:18:29.800 --> 0:18:31.680 the you know, the dot com bust or the you know, 0:18:31.720 --> 0:18:34.280 the financial crisis or the pandemic, A little bit of 0:18:34.320 --> 0:18:36.280 uncertain to hear this year in the market. How are 0:18:36.280 --> 0:18:39.320 you guys thinking about some of the very I guess 0:18:39.400 --> 0:18:41.320 the volatility we're seeing in a lot of these markets. 0:18:41.560 --> 0:18:44.800 Yeah, I mean, I think, Paul, you're right. There's when 0:18:44.840 --> 0:18:46.800 you when you have moments like this, you kind of 0:18:46.880 --> 0:18:50.000 always look back and you look at what rhymes to 0:18:50.119 --> 0:18:53.119 the past, and you know, even during COVID, that was 0:18:53.200 --> 0:18:56.160 something we never lived through before. So while history does 0:18:56.280 --> 0:18:59.600 kind of rhyme, it never perfectly repeats itself. And here 0:18:59.680 --> 0:19:02.200 we are again in something we've never lived through before. 0:19:02.320 --> 0:19:04.800 But there are lessons from the past that you definitely 0:19:04.880 --> 0:19:08.280 take forward. And some of those lessons really are like, 0:19:08.640 --> 0:19:12.680 look in the moment, it feels awful and uncomfortable, but 0:19:13.400 --> 0:19:17.120 history does suggest that equity market returns for those who 0:19:17.240 --> 0:19:22.080 stay invested and really think about bottom up fundamentals and 0:19:22.200 --> 0:19:26.439 companies that really can control their own destiny, those investors 0:19:26.560 --> 0:19:29.239 do well over a cycle. And so that's what our 0:19:29.280 --> 0:19:32.320 investment teams are focused on looking at trying to take 0:19:32.359 --> 0:19:36.080 advantage of emotion and take advantage of uncertainty and volatility. 0:19:36.359 --> 0:19:38.560 So is that on a sector level, an index level, 0:19:38.640 --> 0:19:39.880 or a stock specific level. 0:19:40.240 --> 0:19:44.040 It's more on you from a bottom up stock selection basis. 0:19:44.280 --> 0:19:48.359 And there certainly are, depending on the environment, different industries 0:19:48.400 --> 0:19:52.000 that might fare better than others. But I would say 0:19:52.119 --> 0:19:54.720 even within almost any industry, there are going to be 0:19:54.800 --> 0:19:56.440 companies that do better than others. 0:19:56.840 --> 0:20:00.560 How do your portfolio managers, how do your analysts, you know, 0:20:01.000 --> 0:20:03.159 assess a company when a lot of times these companies 0:20:03.200 --> 0:20:05.840 are coming on their conference calls and saying we're withdrawing 0:20:05.920 --> 0:20:07.879 guidance or we can't give guidance because we don't know 0:20:07.920 --> 0:20:10.080 what's happening in our business, or if they don't know 0:20:10.720 --> 0:20:11.960 how our investors supposed to know. 0:20:12.200 --> 0:20:14.639 Yeah, I mean, Paul, this is something you spent a 0:20:14.720 --> 0:20:17.400 lot of your career doing and our teams too too. 0:20:17.560 --> 0:20:21.080 So while the calls are critically important, as you know, 0:20:21.200 --> 0:20:23.879 kind of during reporting season, most of the past is 0:20:24.119 --> 0:20:26.399 the past. We're not focused on that. We're focused on 0:20:26.520 --> 0:20:28.720 going forward. And on the calls, they may not be 0:20:28.800 --> 0:20:31.399 able to give guidance, But if you know that company 0:20:31.560 --> 0:20:35.320 really well, and our teams do have deep expertise and 0:20:35.400 --> 0:20:39.160 fundamental research. They understand the model and they can kind 0:20:39.160 --> 0:20:42.239 of walk through with the management teams where do they 0:20:42.320 --> 0:20:45.760 have levers to pull if things get worse or if 0:20:45.800 --> 0:20:48.359 things get better? And how quickly can those levelers be 0:20:48.480 --> 0:20:52.159 pull and then asking them the same question you asked me, 0:20:52.520 --> 0:20:55.359 how do you look at this environment versus other environments? 0:20:55.560 --> 0:20:58.959 How can you manage through those? And understanding where they 0:20:59.119 --> 0:21:02.720 have control of their own versus where macro can kind 0:21:02.760 --> 0:21:05.160 of push them is really really important, and you will 0:21:05.200 --> 0:21:08.280