WEBVTT - Bloomberg Businessweek Weekend - January 31st, 2025 0:00:02.759 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.760 --> 0:00:12.800 This is Bloomberg Business Week, insight from the reporters and 0:00:12.960 --> 0:00:16.960 editors that bring you America's most trusted business magazine, plus 0:00:17.160 --> 0:00:20.959 global business, finance and tech news. The Bloomberg Business Week 0:00:20.960 --> 0:00:25.880 Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio. 0:00:27.800 --> 0:00:30.840 Hi, everyone, Welcome to the weekend edition of Bloomberg Business Week. 0:00:31.200 --> 0:00:34.280 A big week for the megacap tech companies and for 0:00:34.440 --> 0:00:38.919 artificial intelligence as the Chinese AI startup Deepseek up end 0:00:38.920 --> 0:00:42.599 of the conventional thinking about investment in AI. It all 0:00:42.680 --> 0:00:44.879 kind of came together as we passed through the earnings 0:00:44.880 --> 0:00:48.160 of Meta, Microsoft, Tesla, Apple, and Intel, just to name 0:00:48.200 --> 0:00:51.120 a few from the past week. Our take though on 0:00:51.159 --> 0:00:54.560 it all well on Harvard Business and law school professors 0:00:54.640 --> 0:00:58.680 take how the Mac seven companies are eating themselves. He'll 0:00:58.680 --> 0:00:59.600 be along to explain. 0:01:00.080 --> 0:01:03.360 Plus, speaking of earnings, it's not just about tech, as 0:01:03.400 --> 0:01:06.399 a lot of other companies posted quarterly updates this past week, 0:01:06.440 --> 0:01:09.320 giving us snapshots of many parts of the US economy, 0:01:09.720 --> 0:01:12.400 including a big one from the world of leisure. We're 0:01:12.440 --> 0:01:15.679 talking about Royal Caribbean, who shares wrote a record wave 0:01:15.800 --> 0:01:19.759 up following a profit forecast that blew past analyst expectations. 0:01:20.520 --> 0:01:23.680 The company also shared details about waiting into a new business. 0:01:23.920 --> 0:01:26.800 Royal Caribbean CEO stop by to talk all about it. 0:01:26.959 --> 0:01:29.440 All of that ahead, let's start with the big megacap 0:01:29.480 --> 0:01:33.080 tech earnings. As for the Magnificent seven reported results this 0:01:33.160 --> 0:01:36.840 past week, Meta, Microsoft, Tesla, and Apple all out with 0:01:36.880 --> 0:01:39.959 their quarterly updates and outlooks, and earlier in the week 0:01:40.160 --> 0:01:43.760 the narrative shifted around the AI spend thanks to deep seeks. 0:01:43.840 --> 0:01:46.319 So there was so much going on when it comes 0:01:46.440 --> 0:01:47.680 to the world of technology. 0:01:47.760 --> 0:01:50.360 Well, look what happened on Monday and vidfl seventeen percent 0:01:50.400 --> 0:01:52.520 in a single day, at erased five hundred and eighty 0:01:52.600 --> 0:01:55.520 nine billion dollars in value. It was the biggest single 0:01:55.560 --> 0:01:59.160 day decline in market cap for any company ever. Me 0:01:59.280 --> 0:02:01.440 here they saw was watching what happened in the stock 0:02:01.480 --> 0:02:05.240 market that day closely. He's the Mazuho Financial Group, Professor 0:02:05.240 --> 0:02:08.080 of Finance at Harvard Business School and a professor at 0:02:08.120 --> 0:02:12.119 Harvard Law School. He's also contributed to Bloomberg's weekend edition. 0:02:12.919 --> 0:02:14.799 After the Nvidia selloff, he wrote in The New York 0:02:14.840 --> 0:02:18.440 Times that the value destruction illustrates something concerning happening in 0:02:18.480 --> 0:02:21.520 financial markets and can best be explained by an ancient 0:02:21.560 --> 0:02:23.679 myth of a serpent eating itself. 0:02:24.040 --> 0:02:26.160 What I tried to put forward in this piece was 0:02:26.240 --> 0:02:29.880 just the theory that actually it's pretty unsustainable and that 0:02:29.919 --> 0:02:32.560 in effect, big tech is eating its own tail. This 0:02:32.639 --> 0:02:34.760 serpent image that you might have seen of a snake 0:02:34.800 --> 0:02:37.520 eating itself has been around for millennia, and I think 0:02:37.560 --> 0:02:39.240 that's kind of what's going on, which is just a 0:02:39.280 --> 0:02:43.200 way of saying this AI frenzy has in some sense 0:02:43.240 --> 0:02:46.520 been manifest by these big seven companies having a very 0:02:46.520 --> 0:02:49.000 low cost to capital. They've become the safe asset in 0:02:49.040 --> 0:02:51.200 the world. So if you are around the world you 0:02:51.240 --> 0:02:55.280 want a dollar denominated asset but with better management teams 0:02:55.280 --> 0:02:58.399 than maybe governments, better balance sheets than maybe governments, you're 0:02:58.400 --> 0:03:00.640 going to flock to them. Well what is that mean? Well, 0:03:00.720 --> 0:03:03.040 if that happens and they become the safe asset, then 0:03:03.040 --> 0:03:05.360 people don't expect much in terms of return, because that's 0:03:05.360 --> 0:03:06.600 what happens with safe assets. 0:03:07.080 --> 0:03:07.480 Well, how to. 0:03:07.520 --> 0:03:08.480 Managers respond to that? 0:03:08.520 --> 0:03:10.560 And the answer is you invest a lot. And that's 0:03:10.600 --> 0:03:12.200 what they've been doing, and they've been investing a lot 0:03:12.240 --> 0:03:14.920 in each other, and they've been spending like crazy. So, 0:03:15.200 --> 0:03:18.200 for example, in videos, more than half their revenues is 0:03:18.240 --> 0:03:21.359 coming from their siblings in the Big seven. So the 0:03:21.840 --> 0:03:24.959 Amazon Microsoft are spending literally two hundred million dollars a 0:03:25.080 --> 0:03:30.120 year in infrastructure spend, and they're doing buybacks hand over fist. 0:03:30.440 --> 0:03:34.000 So they are literally eating themselves and literally eating each other. 0:03:34.440 --> 0:03:36.680 And the underlying story, I think is going to be 0:03:36.840 --> 0:03:37.800 that these is going to end. 0:03:37.720 --> 0:03:38.640 Up having low returns. 0:03:39.480 --> 0:03:41.360 So when you end up giving them the prize of 0:03:41.360 --> 0:03:43.720 being a safe asset, you don't expect much from them, 0:03:43.800 --> 0:03:46.800 and they invest like crazy and then they deliver slow returns. 0:03:47.200 --> 0:03:49.320 That's what we are going to see. It won't happen 0:03:49.360 --> 0:03:51.760 today or tomorrow. It'll happen over the next five or 0:03:51.760 --> 0:03:53.920 ten years, like it happened at the beginning of the 0:03:54.000 --> 0:03:57.440 last century with railroads and steel. I think that is 0:03:57.480 --> 0:03:58.640 why it wasn't that big of surprise. 0:03:58.760 --> 0:04:00.200 I want you to take a limited to this. And one 0:04:00.200 --> 0:04:02.080 of the things that we love looking at here at 0:04:02.080 --> 0:04:06.160 Bloomberg is that the supply chain functions. You pull up 0:04:06.200 --> 0:04:09.280 something like Nvidia, and so Microsoft is responsible for about 0:04:09.360 --> 0:04:12.400 nineteen percent of their revenue. Meta is about ten percent 0:04:12.400 --> 0:04:15.440 according to our latest data, super Micro about eight percent, 0:04:15.520 --> 0:04:20.039 Alphabet Google about six percent, Amazon about five percent, Dell 0:04:20.080 --> 0:04:22.040 about three percent. Like, we love to kind of get 0:04:22.080 --> 0:04:25.680 an idea of who's who's buying and so the exposure, 0:04:25.760 --> 0:04:27.320 especially if we get bad news from them, what it 0:04:27.360 --> 0:04:30.719 means for an Nvidia. So you're saying, what to concentrated 0:04:30.920 --> 0:04:34.200 or what's what's your point about? You know that they're 0:04:34.279 --> 0:04:36.640 kind of it's like there's almost closed. 0:04:36.200 --> 0:04:38.000 Circles right rid of a closed circle. 0:04:37.839 --> 0:04:39.960 And they all are kind of like supporting one another. 0:04:40.160 --> 0:04:42.599 Yeah, so I mean effectively, what's happening is they're investing 0:04:42.600 --> 0:04:45.920 in spending money on each other and that closed circle. 0:04:46.160 --> 0:04:48.000 Why are they doing that? Because some would say that 0:04:48.040 --> 0:04:50.240 what we've seen over the last couple of years is 0:04:50.279 --> 0:04:52.680 that everybody has all of a sudden realized, oh my god, 0:04:52.720 --> 0:04:55.040 look at what Generator of AI can do. And so 0:04:55.120 --> 0:04:56.800 we have to build out our own. 0:04:56.560 --> 0:04:57.800 Systems exactly right. 0:04:57.880 --> 0:05:00.839 And the promise is that it is not a close circle, 0:05:00.920 --> 0:05:03.680 that one day it'll all be manifest to us what 0:05:03.760 --> 0:05:06.640 those revenues and profits are. And that is a huge bet. 0:05:06.680 --> 0:05:09.039 We are all levered to the mag seven in a 0:05:09.040 --> 0:05:10.760 way that I don't think we understand when one third 0:05:10.800 --> 0:05:13.560 of the market cap is mag seven, we're levered to it, 0:05:13.560 --> 0:05:15.920 and the global economy is levered to it, and all 0:05:15.960 --> 0:05:17.200 of that is going to be a function of the 0:05:17.200 --> 0:05:19.719 productivity of all this capital they're spending on each other. 0:05:20.200 --> 0:05:21.560 And what I tried. 0:05:21.360 --> 0:05:23.640 To raise in that article is it's not clear that 0:05:23.640 --> 0:05:25.719 that is going to be manifest and in fact, deep 0:05:25.760 --> 0:05:28.520 seek I think people misunderstood the Deep Seak lesson. 0:05:29.200 --> 0:05:29.719 In part. 0:05:29.960 --> 0:05:32.560 The story about Deep Seak is it is very hard 0:05:32.600 --> 0:05:35.760 to create a competitive advantage in this industry. You know, 0:05:35.920 --> 0:05:38.280 people think there's a lot of money to be made. Well, 0:05:38.560 --> 0:05:39.680 to make a lot of money, you need to be 0:05:39.720 --> 0:05:42.400 able to capture the rents. And what Deep Seak showed 0:05:42.839 --> 0:05:46.000 is that it's not clear that these rents are easily captured. 0:05:46.200 --> 0:05:48.479 And so if it's easily accessible to everyone, that doesn't 0:05:48.480 --> 0:05:50.240 mean it's not going to be transformational, Carol. 0:05:50.279 --> 0:05:51.120 What it means is. 0:05:51.160 --> 0:05:53.400 Because some would say that if it's more accessible, more 0:05:53.400 --> 0:05:55.640 people can tap into it, and first people who are 0:05:55.680 --> 0:05:59.159 supportive of it, like hence the software guys, right we 0:05:59.160 --> 0:06:01.480 all of a sudden said they were often running. 0:06:01.279 --> 0:06:03.799 Yeah, and it could be transformational, but will a company 0:06:03.839 --> 0:06:04.680 be able to capture it? 0:06:04.720 --> 0:06:04.840 All? 0:06:04.920 --> 0:06:07.719 Right, So the whole premise of their market capitalizations is 0:06:08.120 --> 0:06:10.159 there's going to be seven big winners and we know 0:06:10.200 --> 0:06:13.080 who they are. It's those seven companies. And maybe that's 0:06:13.120 --> 0:06:16.880 not right even if it is transformational. If it isn't transformational, 0:06:16.920 --> 0:06:20.680 then we're all really in trouble because they're literally deploying 0:06:20.720 --> 0:06:23.119 capital at really really low rates of return, maybe negative 0:06:23.160 --> 0:06:23.640 rates of return. 0:06:23.760 --> 0:06:26.280 Your question about a mode or differentiation is an interesting one. 0:06:26.279 --> 0:06:28.560 It came up yesterday during our conversation with Caroline Hide 0:06:28.560 --> 0:06:31.840 oft Bloomberg Technology about what the difference is between Gemini, 0:06:32.000 --> 0:06:37.159 a GPT, LAMA, you know, anthropics, Claude, What is the 0:06:37.160 --> 0:06:39.799 difference between these Apart from the way they look that question, 0:06:39.839 --> 0:06:42.080 I think still a lot of investors in the private 0:06:42.080 --> 0:06:43.880 markets and the public markets are asking themselves. 0:06:44.000 --> 0:06:47.279 Yeah, And one theory is that it's about scale. You 0:06:47.360 --> 0:06:49.119 have to get big and you have to get big fast. 0:06:49.200 --> 0:06:51.880 And the answer is maybe deep seek suggests maybe not. 0:06:52.560 --> 0:06:55.160 And also we should just remember that having access to 0:06:55.200 --> 0:06:57.719 a lot of capital and spending it is not a 0:06:57.720 --> 0:07:01.359 competitive advantage. That is not what a competit advantages. Capital 0:07:01.400 --> 0:07:03.520 is not like the scarce resource in the world, and so. 0:07:03.800 --> 0:07:05.680 Especially for some of these big tech companies, right, Like 0:07:05.720 --> 0:07:08.240 we talk about their balance sheets, and typically you would 0:07:08.240 --> 0:07:10.360 say a higher rate environment would bother them, but they 0:07:10.400 --> 0:07:13.360 have so much cash that they don't have to really 0:07:13.400 --> 0:07:14.760 tap into the capital markets. 0:07:15.240 --> 0:07:17.760 So so, but I think they're in a race, right, 0:07:17.760 --> 0:07:20.520 So they're spending cash hand over fist and the answers 0:07:20.560 --> 0:07:22.920 will weep. But if you don't have a sustainable advantage, 0:07:22.920 --> 0:07:26.080 then what is this race about? And I don't think 0:07:26.120 --> 0:07:28.200 there is a real mode there, and then you really 0:07:28.200 --> 0:07:29.240 have to question the whole story. 0:07:29.320 --> 0:07:30.800 So I think it raises a lot of questions about 0:07:30.800 --> 0:07:33.320 where investors should be putting their money in the public market. 0:07:33.680 --> 0:07:35.360 You know, we've been talking. We talk a lot about 0:07:35.360 --> 0:07:39.120 single stocks in retirement portfolios. A lot of people are 0:07:39.160 --> 0:07:41.760 invested in indexes. If you're not playing the stock market. 0:07:41.760 --> 0:07:44.000 All the experts say, hey, just invest in the S 0:07:44.040 --> 0:07:46.400 and P five hundred index funds. What happens though, when 0:07:46.440 --> 0:07:48.480 the S and P five hundred exactly is dominated by 0:07:48.480 --> 0:07:50.200 these companies, where should people put their money? 0:07:50.400 --> 0:07:52.640 Well, that's exactly right, because the unique circumstance is that 0:07:53.000 --> 0:07:55.440 you know, I talk about the unmagnificent four ninety three, 0:07:55.440 --> 0:07:57.560 because there's a magnificent seven and there's an unmagnifics in 0:07:57.600 --> 0:08:00.000 four ninety three. And the answer is that is still 0:08:00.080 --> 0:08:04.640 the best advice. However, I think it's a good time 0:08:04.680 --> 0:08:07.800 to rethink certain things. So, for example, as you know, 0:08:08.000 --> 0:08:10.920 we are living in the twentieth year of the value 0:08:10.960 --> 0:08:16.200 growth split, where growth has just outperformed value forever, and 0:08:16.240 --> 0:08:18.600 I think it's a good occasion to revisit that. And 0:08:18.960 --> 0:08:20.920 for those of you who are listening who want to 0:08:20.960 --> 0:08:22.400 bebb still. 0:08:22.160 --> 0:08:23.040 I just want to index. 0:08:23.040 --> 0:08:23.840 I just want to do that. 0:08:24.080 --> 0:08:26.520 Well, you want to think about broader indsease, you want 0:08:26.560 --> 0:08:28.520 to think about value in disease, and you want to 0:08:28.560 --> 0:08:30.720 think about whether that whole mantra that has been good 0:08:30.720 --> 0:08:33.439 for the last twenty years is good again, especially as 0:08:33.520 --> 0:08:37.079 rates stay relatively speaking high in a way they haven't 0:08:37.080 --> 0:08:38.199 been for fifteen twenty years. 0:08:38.280 --> 0:08:40.760 Although one challenge, though someone might push back and say, 0:08:40.760 --> 0:08:43.959 well VTI, which is the Vanguard Total Stock Market Index, 0:08:44.360 --> 0:08:47.040 is pretty heavily correlated to the S and P five hundred. 0:08:48.080 --> 0:08:49.959 That is true, and that's a challenge. If you want 0:08:49.960 --> 0:08:52.319 to buy the entire market, you're still just buying that's 0:08:52.320 --> 0:08:52.920 a company. 0:08:52.920 --> 0:08:53.320 That is true. 0:08:53.360 --> 0:08:55.320 I mean in a way that is a little bit 0:08:55.320 --> 0:08:56.440 of a point of the piece, which is we are 0:08:56.480 --> 0:08:58.640 all levered to the max seven in a way that 0:08:58.679 --> 0:09:00.840 we can't get away. I think the answer is though 0:09:00.880 --> 0:09:03.960 there are narrower, you know, value indices that can help you, 0:09:05.240 --> 0:09:08.319 and there are international ways to go. So I am 0:09:08.320 --> 0:09:10.520 not a huge believer in stock pickers, so I think 0:09:10.520 --> 0:09:13.920 indices are fantastic. But there are other kinds of indices. 0:09:14.240 --> 0:09:17.160 There's non us in disease, there's yield, there's fixing. Right, 0:09:17.240 --> 0:09:19.200 there's lots of things that we for the last fifteen 0:09:19.240 --> 0:09:21.680 years have forgotten about. My previous piece was about magical 0:09:21.720 --> 0:09:24.319 thinking and how kind of long periods of low rates 0:09:24.320 --> 0:09:26.840 have infected people to think like this goes on forever, 0:09:27.400 --> 0:09:30.319 and growth the stuff happens forever, and technology solves everything. 0:09:30.640 --> 0:09:32.880 And so look when rates get back up where they are, 0:09:32.880 --> 0:09:34.959 you've got to think hard in your portfolio about fixting, 0:09:35.040 --> 0:09:37.520 come in away and cash in a way that you 0:09:37.520 --> 0:09:38.920 haven't thought about it in a long time. 0:09:39.040 --> 0:09:42.559 All right, So, professor Veisi, so how does this potentially end? 0:09:43.520 --> 0:09:45.920 You know, people have made the comparisons to the tech 0:09:45.960 --> 0:09:49.280 bubble of nineteen ninety nine, two thousand. I don't know 0:09:49.280 --> 0:09:51.680 that it's the exact same thing, but you tell me 0:09:51.840 --> 0:09:54.080 that in terms of then how does this ultimately work 0:09:54.080 --> 0:09:58.560 its way out or do these companies possibly ultimately deliver 0:09:58.720 --> 0:10:01.800 if AI is at transformative as we think it might be. 0:10:02.000 --> 0:10:05.480 Yeah, So I think the analogy to the dot com 0:10:05.520 --> 0:10:09.480 bubble isn't that great in some ways because those a 0:10:09.480 --> 0:10:11.840 lot of those companies were not real companies and it was. 0:10:11.840 --> 0:10:12.760 All a little sketchy. 0:10:12.880 --> 0:10:15.800 Exactly, these are real companies, like this is these are 0:10:15.840 --> 0:10:18.240 really the best companies in the world, Okay, And so 0:10:18.320 --> 0:10:20.160 what's more likely to be true is something like the 0:10:20.240 --> 0:10:23.360 nifty to fifty going to the early seventies or the 0:10:23.400 --> 0:10:25.600 early part of last century, which is railroads and steel. 0:10:25.920 --> 0:10:28.960 And what does that tell you? It's a grind. It's 0:10:29.000 --> 0:10:31.679 not a pop of a bubble. It's like five years 0:10:31.679 --> 0:10:34.680 of like zero of like zero returns, right. 0:10:34.559 --> 0:10:35.480 So it's grind. 0:10:35.640 --> 0:10:38.440 So five years of this stuff just kind of going sideways. 0:10:38.520 --> 0:10:41.320 Yeahhaps like sideways, right, because it's not is it? 0:10:41.320 --> 0:10:43.120 Because the build takes so long, The build. 0:10:42.960 --> 0:10:45.280 Takes a lot, and then we realize that the returns 0:10:45.280 --> 0:10:47.880 aren't there. Right, and for us to realize that and 0:10:48.000 --> 0:10:50.599 understand that, I mean, these folks are spending hundreds and 0:10:50.640 --> 0:10:51.680 hundreds of billions of dollars. 0:10:51.800 --> 0:10:53.000 We won't really. 0:10:52.800 --> 0:10:55.720 Know the productivity of that capital spent for a long time, 0:10:56.320 --> 0:10:58.280 and that's why it takes longer. And they're not like 0:10:58.320 --> 0:11:01.880 fly by night folks, right, people, And so it's going 0:11:01.960 --> 0:11:03.840 to take years and that. I don't know if that's 0:11:03.880 --> 0:11:05.600 good news or bad news, Carol, but I think that 0:11:05.640 --> 0:11:07.320 is the right way to understand it. It's it's three 0:11:07.320 --> 0:11:09.520 to five years of a grind, which also helps you 0:11:09.679 --> 0:11:13.400 understand why valuation levels are high right now and how 0:11:13.440 --> 0:11:16.480 they come back down, just very slowly and in a 0:11:16.559 --> 0:11:18.520 very boring, unexciting way. 0:11:19.200 --> 0:11:23.640 It's interesting because we saw in the president's first week 0:11:23.720 --> 0:11:26.600 of his term an announcement where he was flanked by 0:11:26.720 --> 0:11:30.440 Larry Ellison of Oracle Pasco Shei's son of SoftBank, Sam 0:11:30.480 --> 0:11:33.360 Altman of Open Ai, and he was tatting a one 0:11:33.440 --> 0:11:36.400 hundred billion dollar up to five hundred billion dollar investment. Yeah, 0:11:37.080 --> 0:11:40.440 is that something that concerns you when we're talking about 0:11:40.440 --> 0:11:42.400 figures of that size, Well. 0:11:42.280 --> 0:11:45.040 What would concern me is if capital you know, this 0:11:45.080 --> 0:11:47.559 is all about capital allocation, like everything is in the economy, 0:11:47.760 --> 0:11:49.959 and so if capital allocation is going to be guided 0:11:50.000 --> 0:11:53.839 by political litmus tests, which is, you got to spend 0:11:53.840 --> 0:11:55.319 one hundred billion, and if you're not good for the 0:11:55.400 --> 0:11:57.400 hundred billion, you know, we're not sure if you're a 0:11:57.440 --> 0:11:57.920 real deal. 0:11:58.880 --> 0:12:01.040 If it becomes a political test and it's not. 0:12:00.920 --> 0:12:04.160 Being guided by the tenants of capital allocation, we're all 0:12:04.160 --> 0:12:06.400 going to suffer on that over the long run. So 0:12:06.480 --> 0:12:09.520 that's what concerns me. It's about whether this is becoming 0:12:09.559 --> 0:12:12.160 a political litmus test, like are you with us on 0:12:12.240 --> 0:12:14.920 AI or not? And then of course, as you know, 0:12:15.720 --> 0:12:17.640 CEOs had to respond, which you know, I'm good for 0:12:17.679 --> 0:12:20.840 one hundred billion, yeah, which now starts to feel like 0:12:20.840 --> 0:12:23.960 a poker match as opposed to fought full capital allocation 0:12:24.080 --> 0:12:27.200 and feels a little bit like a political litmus test. 0:12:27.360 --> 0:12:30.360 Me here they Sai Mizuoo, Financial Group professor of finance 0:12:30.400 --> 0:12:32.920 at Harvard Business School and a professor of law at 0:12:32.920 --> 0:12:35.760 Harvard Law School. Also he's contributed in the past to 0:12:35.840 --> 0:12:37.360 Bloomberg's Weekend edition. 0:12:37.400 --> 0:12:39.559 And be sure to check out all of our conversations 0:12:39.559 --> 0:12:42.079 breaking down the major earnings from four of the Magnificent 0:12:42.120 --> 0:12:45.720 Seven this past week, so from Meta, Microsoft, Apple, Tesla. 0:12:45.800 --> 0:12:48.160 We talked about it a lot. They can all be 0:12:48.200 --> 0:12:50.560 found on our podcast feed. Just head over to Bloomberg 0:12:50.559 --> 0:12:54.160 dot com. Slash podcasts coming up. We stay on earnings 0:12:54.240 --> 0:12:56.559 and on the stock that Road and investor Wave hire 0:12:56.600 --> 0:12:59.880 this past week following stellar quarterly results. 0:13:00.000 --> 0:13:03.400 Well Caribbean CEO on the quarter and what's next. You're 0:13:03.440 --> 0:13:06.400 listening to Bloomberg Business Week. This is Bloomberg. 0:13:06.880 --> 0:13:10.440 You're listening to the Bloomberg Business Week podcast. Catch us 0:13:10.520 --> 0:13:13.959 live weekday afternoons from two to five pm Eastern. Listen 0:13:14.000 --> 0:13:17.560 on Apple CarPlay and Android Auto with the Bloomberg Business app, 0:13:17.679 --> 0:13:20.319 or watch us live on YouTube. 0:13:22.240 --> 0:13:25.280 It was a big week for earnings overall among those reporting. 0:13:25.400 --> 0:13:28.520 Royal Caribbean shares of the cruise line company hit a 0:13:28.600 --> 0:13:30.959 record this past week, up the most in more than 0:13:30.960 --> 0:13:34.400 two years, lifting the whole cruise group after it reported 0:13:34.440 --> 0:13:38.079 a full year profit forecast that blue past expectations as 0:13:38.120 --> 0:13:39.960 cruise demand continues to ramp up. 0:13:40.559 --> 0:13:43.240 Royal Caribbean also talking about a new area of the 0:13:43.280 --> 0:13:46.720 cruising industry that it's setting sale for. We got more 0:13:46.760 --> 0:13:49.400 on the outlook and what's driving the business with President 0:13:49.440 --> 0:13:53.480 and CEO of Royal Caribbean Group, Jason Liberty. He joined 0:13:53.559 --> 0:13:54.640 us from Miami. 0:13:54.880 --> 0:13:57.520 Certainly, we have a lot of great demographics on our 0:13:57.640 --> 0:14:00.280 side in terms of more millennials coming into this space, 0:14:00.440 --> 0:14:03.840 multi generational travel, a lot of active wealth transfer, and 0:14:03.880 --> 0:14:05.320 we see that more and more, which has been a 0:14:05.320 --> 0:14:09.040 surprise to me, just how much multi generational travel where 0:14:09.040 --> 0:14:11.920 you have the patriarch or matriarch of the family paying 0:14:12.040 --> 0:14:13.680 And I think that's been a little bit of a surprise. 0:14:14.160 --> 0:14:16.439 And there's also been just a continued flight to quality. 0:14:17.320 --> 0:14:19.840 We've invested so much in our ships and our brands 0:14:19.880 --> 0:14:22.840 and our destinations for so many decades. We're really now 0:14:22.880 --> 0:14:26.720 seeing these flowers bloom as we see consumers who are 0:14:26.800 --> 0:14:29.360 very healthy, you know, they have great balance sheets, they 0:14:29.360 --> 0:14:32.800 have great jobs, and they're high paying jobs. Having this 0:14:32.880 --> 0:14:36.120 flight to quality for our brands and for our destinations. 0:14:36.320 --> 0:14:38.200 When you talk about that flight to quality, break that 0:14:38.280 --> 0:14:40.280 down for us, where there's strength in the business and 0:14:40.480 --> 0:14:42.680 where you're seeing particular strength and if there are any 0:14:42.680 --> 0:14:44.360 areas where you're not seeing strength. 0:14:44.720 --> 0:14:46.720 Yeah, well we're really we are actually seeing strength in 0:14:46.720 --> 0:14:50.040 all markets that we source from. We're also seeing strength 0:14:50.120 --> 0:14:52.120 for all the different places that our ships go, whether 0:14:52.160 --> 0:14:59.680 that's in the Caribbean, Alaska, the Northeast, Europe, Australia, Southeast Asia, China. 0:15:00.000 --> 0:15:02.040 We're seeing strong demand kind of across the board, which 0:15:02.080 --> 0:15:04.960 is I think really great. We're also, you know, seeing 0:15:04.960 --> 0:15:09.120 again elevated spend on our ships, and that's really across 0:15:09.160 --> 0:15:10.760 the board. A lot of it is in the gaming, 0:15:11.480 --> 0:15:16.600 the beverage area, on the culinary side, SPA, shore excursions. 0:15:16.760 --> 0:15:18.680 So people are really looking to make sure that they 0:15:18.680 --> 0:15:22.200 grab the experiences that they want to have and there 0:15:22.240 --> 0:15:24.040 and there, and and they're and they're willing to not 0:15:24.080 --> 0:15:25.840 only pay a little bit more money for that, but 0:15:25.840 --> 0:15:28.680 they're also willing to have more repetition of that, and 0:15:28.680 --> 0:15:31.000 that's how they're expanding the memories that they're building with 0:15:31.000 --> 0:15:31.920 their friends and family. 0:15:32.080 --> 0:15:34.440 How much is that wrapping up, Jason, That is something 0:15:34.480 --> 0:15:36.440 that I've seen throughout the cruise industry that it's not 0:15:36.520 --> 0:15:38.560 just about buying the ticket to get you on the ship, 0:15:38.600 --> 0:15:40.960 but it's about what you do once you're on the 0:15:41.000 --> 0:15:44.560 ship and possibly go off to other destinations. Those bookings, 0:15:44.680 --> 0:15:47.480 right that add to the experience, but they also add 0:15:47.520 --> 0:15:51.040 to your revenue line right in your profit line. 0:15:51.240 --> 0:15:53.720 Yeah, that's exactly right. One. I think that we we've 0:15:53.720 --> 0:15:57.120 gotten a lot better, whether it's you know, through AI 0:15:57.320 --> 0:16:01.040 or other other disruptive tech to really take friction out 0:16:01.040 --> 0:16:03.120 of the experience of shopping with us, whether that's on 0:16:03.160 --> 0:16:06.160 the ticket side, whether that's also on the on board side. 0:16:06.320 --> 0:16:07.920 And what we're doing is we're able to enhance the 0:16:07.960 --> 0:16:09.640 experience so they can do all the different things that 0:16:09.680 --> 0:16:12.880 they want to do. And in reality, while it's still 0:16:12.960 --> 0:16:16.640 very frustrating to me, while we're increasing share of wallet, 0:16:16.680 --> 0:16:21.080 we're still a very significant discounts to land based vacation. 0:16:21.560 --> 0:16:23.880 And so for us, like we focus a little bit 0:16:23.920 --> 0:16:26.480 less on what's happening with our cruise competitors, we're trying 0:16:26.480 --> 0:16:28.320 to take a larger share of the two trillion dollar 0:16:29.040 --> 0:16:33.040 marketplace and travel leisure, and for us, having the experiences 0:16:33.080 --> 0:16:35.240 that our guests want to do and also being able 0:16:35.240 --> 0:16:36.920 to make it easier for them to shop with us 0:16:37.440 --> 0:16:38.560 is winning for us. 0:16:38.840 --> 0:16:41.760 The pace of bookings this year relative to last year, 0:16:41.800 --> 0:16:44.120 what does that tell you about demand where we're you know, 0:16:44.160 --> 0:16:46.600 when we're a little over a month past what is 0:16:46.640 --> 0:16:48.240 referred to in the industry as wave season. 0:16:50.520 --> 0:16:53.400 Yeah, so you know, the past couple of years. You know, 0:16:53.440 --> 0:16:55.400 wave has been elevated not just for us, but also 0:16:55.400 --> 0:16:58.640 for the entire industry, and we're seeing we're continue to 0:16:58.640 --> 0:17:02.840 see those waters rise here on the on the Wave season. 0:17:02.880 --> 0:17:06.480 So we're seeing record booking weeks, We're seeing elevated pricing, 0:17:07.560 --> 0:17:10.240 and we're seeing a consumer that is not only willing 0:17:10.280 --> 0:17:13.399 to pay a little bit more money for their vacation experience, 0:17:13.640 --> 0:17:15.639 but they're also looking to book further out. So the 0:17:15.640 --> 0:17:19.360 booking window is continuing to extend, and they're also doing 0:17:19.400 --> 0:17:22.560 more and more pre cruise booking activities for the activities 0:17:22.560 --> 0:17:24.080 that happen on the ship and off the ship to 0:17:24.080 --> 0:17:26.560 make sure they get the vacation experience that them and 0:17:26.600 --> 0:17:28.080 their family and friends want to have. 0:17:28.760 --> 0:17:31.040 Are you surprised by it? You've been doing this a while, Like, 0:17:31.040 --> 0:17:33.040 are you surprised by the pace of demand? 0:17:36.040 --> 0:17:37.600 Well, I have been doing this. I mean I've been 0:17:37.600 --> 0:17:38.960 in the sea for a little over three years, and 0:17:39.000 --> 0:17:40.760 of course I was the CFO before that, so I've 0:17:40.800 --> 0:17:43.119 been in the industry a while. Certainly you're seeing an 0:17:43.200 --> 0:17:49.320 elevated demand for experiences. So clearly, coming out of COVID 0:17:49.840 --> 0:17:54.600 you've seen a few different changes in behavior one of 0:17:54.640 --> 0:17:58.760 which is very comfortable booking and interacting through technology, so 0:17:58.840 --> 0:18:01.080 we're able to take friction out of that experience. But 0:18:01.119 --> 0:18:04.600 you're also seeing just a trade by a lot less stuff. 0:18:04.600 --> 0:18:07.040 We want to buy experiences. We really appreciate the time 0:18:07.040 --> 0:18:09.119 with our friends and family, and we want to make 0:18:09.119 --> 0:18:12.159 sure that time that we have is one that is 0:18:12.480 --> 0:18:16.119 not only exceptional, but it's also with somebody who we 0:18:16.200 --> 0:18:17.919 trust will deliver that for us. And I think we 0:18:18.040 --> 0:18:21.359 have that trust. We value that trust with our customers 0:18:21.359 --> 0:18:22.040