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Speaker 2: Steve Menushan is apparently targeting a purchase of TikTok from
Speaker 2: his Chinese parent company. This comes a day after House
Speaker 2: lawmakers passed a bipartisan bill that would ban the widely
Speaker 2: popular social media app in the US. Quite interesting, particularly
Speaker 2: after he led that buyout of a NYCB.
Speaker 3: I know, and I think it's even more interesting about
Speaker 3: it is because there was that whole issue with NYCB earlier.
Speaker 3: It cause a lot of concern about regional banking, a
Speaker 3: lot of concern about TikTok and the minds of teenagers
Speaker 3: all across the country and politicians.
Speaker 2: So let's go to Dan Ives. He joins US managing
Speaker 2: director and senior equity analyst ever at Web Securities. He
Speaker 2: always has opinions about these things. Hey, Dan, I guess
Speaker 2: it's twofold. What do you think about manution leading a
Speaker 2: group of investors to buy TikTok let's just start there.
Speaker 4: He's gonna join the long list, right, I mean, others
Speaker 4: haven't talked. If you a strategic financial you're gonna have
Speaker 4: a long list of buyers from Big TAC as well
Speaker 4: as outside looking to get TikTok because it's a unique
Speaker 4: golden asset that no one ever thought would become available.
Speaker 4: We still believe only a twenty five percent chance this
Speaker 4: ban actually happened.
Speaker 3: So what's gonna be the big sticking point for that
Speaker 3: kind of a bet? Is it the algorithm?
Speaker 4: It's all about the source code is not gonna lead
Speaker 4: by dance in China. Are not gonna allow the source
Speaker 4: code and the algorithm to go to a US company,
Speaker 4: And that's buying an F one car without the engine.
Speaker 4: That's the fundamental issue here is that because of the
Speaker 4: source code, it makes us extremely complex. The value is
Speaker 4: vastly different without the source code.
Speaker 2: Well, then here's my question in terms of what the
Speaker 2: government will allow. It's like, well, the government like a
Speaker 2: minus led investor takeover. Will the government like a Netflix
Speaker 2: or a Netflix I'm in, a meta or another social
Speaker 2: media company buying TikTok, like if you divest, like they
Speaker 2: have to be okay, with who's going to buy it?
Speaker 5: What do you think the devil's in.
Speaker 4: The details, right, I mean the problem is, Look, this
Speaker 4: is all a third rail issue. It's great theater in
Speaker 4: DC in front of the microphones. The reality is the
Speaker 4: selling and ban of TikTok. First, besides First Amendment, what
Speaker 4: could happen to other social media. There's a huge ripple effect,
Speaker 4: the negative retaliatory from China as well as ultimately, how
Speaker 4: could you sell this without the source code? And that
Speaker 4: and Bye Dance in Beijing are not going to allow
Speaker 4: source code to be sold.
Speaker 5: And that's the issue.
Speaker 4: Shoot for Senate, I mean, the Shumer you even let
Speaker 4: this get on the floor, that's going to be the problem.
Speaker 4: It's very good for grand standing, but the reality of
Speaker 4: it is very complex.
Speaker 3: I mean, and you add to that that Congress really
Speaker 3: just has not done well in the past of turning
Speaker 3: denunciations of these perceived tech abuses into law. I mean,
Speaker 3: you think about things about protecting children online, anti trust authority,
Speaker 3: data privacy. This is not something that has come into
Speaker 3: really forceful law. So I mean there's a chance this
Speaker 3: might just all fall apart anyway.
Speaker 5: That's why it goes. But like all the work.
Speaker 4: We've done twenty five percent chans a ban actually happens
Speaker 4: because to Alex to your point, Okay, so now a
Speaker 4: ban happens the twenty five percent chance, how do you
Speaker 4: sell it? So you're forcing them to they don't have
Speaker 4: to sell without source code.
Speaker 5: Then who's going to buy it? And then it comes
Speaker 5: down to this.
Speaker 4: Now let's say it gets sold to Microsoft, to Oracle,
Speaker 4: then is there anti trust issues from a government perspective?
Speaker 5: The problem is you can't put Genie back in the bottle.
Speaker 4: This is going to have huge complications because TikTok as
Speaker 4: well as the precedent and even the Spider Web in
Speaker 4: terms of how it gets sold.
Speaker 2: How much do you think TikTok's worth? Like, let's just
Speaker 2: game it out.
Speaker 4: One hundred billion with the source code, without the source code,
Speaker 4: thirty to forty billion.
Speaker 2: Wow, that is a big, big, big, big difference. So
Speaker 2: what do you watching next for it? Then? Like, what's
Speaker 2: the next trigger point for you?
Speaker 6: Well?
Speaker 4: I think now the soap opera, we'll see that in
Speaker 4: the two or two area. So it does it actually
Speaker 4: get to the Senate for what negotiations go behind the scenes?
Speaker 5: You have one hundred and fifty.
Speaker 4: Million users, So you know you're in election year too,
Speaker 4: So it goes back to that third rail issue. Voting
Speaker 4: down TikTok as a ban not good for the eighteen
Speaker 4: twenty four year old vote.
Speaker 5: So that's we got to see how this all puts out.
Speaker 4: Obviously Trump on one side, by none the other in
Speaker 4: terms of TikTok ban book, Manutian has the first shot
Speaker 4: across the bout in terms of you know, looking for
Speaker 4: you know, potential to line up as buyers. Others are
Speaker 4: clearly behind the scenes doing the same thing. But it's
Speaker 4: all a game of high stakes poker right now playing out.
Speaker 3: So on the assumption that somehow this algorithm and the
Speaker 3: source code does become part of the sale, who do
Speaker 3: you think is the best strategic fit for this as
Speaker 3: a buyer.
Speaker 4: Look, there's a better chance of me playing in March
Speaker 4: Madness next week than this being sold with source code.
Speaker 5: And that's what you never know.
Speaker 2: Man, they could never.
Speaker 4: Again and again three pointer decent but but look, but
Speaker 4: the point is, you never know in terms of now
Speaker 4: what Beijing and byte Dance are thinking to now even
Speaker 4: to just trajector you this out, what's do they do
Speaker 4: it without source code and there's buyers.
Speaker 5: Then the question is.
Speaker 4: Where does it is a big tact Is it a
Speaker 4: consortium like Ammunition other financial buyers? And this is gonna
Speaker 4: be just despite whoever regulatory it'll get, It'll go through
Speaker 4: the court system. And I think that's how this is
Speaker 4: all going to play out, is there's a huge ripple
Speaker 4: effect unintended consequences when you go down this path.
Speaker 2: Before I let you go, I got to ask Tesla.
Speaker 2: We talked about it earlier in the hour after that
Speaker 2: downgrade yesterday over at Wells Fargo, saying that it's a
Speaker 2: growth company with no growth, Uh correct, accurate, not accurate?
Speaker 4: Look for now, I mean clearly going through massive headwinds
Speaker 4: in China, but we've never called Tesla for the last
Speaker 4: decade in terms of the next thirty days sixty days.
Speaker 4: On the other side, growth is still going to be
Speaker 4: massive ev leadership AI. That's what we continue to be
Speaker 4: bullish here. But no doubt it is a white knuckle
Speaker 4: period that we're going through in you know, especially in
Speaker 4: China for Tesla, and that's why bears are all coming
Speaker 4: out of hibernation.
Speaker 3: Yeah, so what do you think is next for them
Speaker 3: in the next two quarters or so in terms of
Speaker 3: analysts coming out with dimmer views on it.
Speaker 5: Yeah, clearly numbers are getting caught.
Speaker 4: A lot that's getting probably, But it comes down to,
Speaker 4: like they got away out the goalpost. Are the price
Speaker 4: cuts done? We just came back from Asia. I think
Speaker 4: ninety five percent price cuts are done. If they put
Speaker 4: a line to stand, their street starts to look through
Speaker 4: second half of the year into next year, and I
Speaker 4: think then we sort of bought them out. It's also
Speaker 4: about Musk the twenty five percent ownership I think at
Speaker 4: the shareholder me and they formally go to Texas from Delaware.
Speaker 4: That continues to also be an overhang over the stock.
Speaker 4: I think a lot of that gets resolved. We've been
Speaker 4: here before. I don't view this as really the end
Speaker 4: of the Tessa growth story.
Speaker 2: Yeah, it's just sort of like delayed kind of thing.
Speaker 2: Hate real quick twenty seconds in video headed into their
Speaker 2: GTCAI conference, what do you think.
Speaker 4: The godfather of Ai Jensen I think continues to is
Speaker 4: going to show behind the curtains just what's coming and
Speaker 4: because they're going to continue to lead the revolution. And
Speaker 4: this is not a nineteen ninety nine moment, it's a
Speaker 4: nineteen ninety five and get out the popcorn parties you started.
Speaker 2: That's how you love Dana Ives. He gives you those
Speaker 2: wonderful soundbites. Dan Ives of Rodwood Bush. We appreciate your time. Today.
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Speaker 2: So one stock to watch is US Steel. It's down
Speaker 2: another one point three percent today. President Biden says that
Speaker 2: US Steel should stay in American owned and operate a company.
Speaker 2: This is nip On Steel over in Japan is trying
Speaker 2: to buy the company. JP Morgan now saying that it
Speaker 2: is possible that Cleveland Cliffs could rebid for US Steel.
Speaker 2: So it's a lot. It's a lot happening. At the
Speaker 2: end of the day, is we need the steal. We
Speaker 2: want to produce it. Prices are not that great, therefore
Speaker 2: the consolidation therefore a backstop. Who better to talk to
Speaker 2: Bloomberg Intelligence A senior analyst. He covers basic materials for
Speaker 2: US right here at Bloomberg Richard, How did this whole thing?
Speaker 2: I don't want to say fall apart, because it hasn't
Speaker 2: fallen apart, but like what happened?
Speaker 7: Really?
Speaker 8: Politics?
Speaker 2: Oh, that's so weird.
Speaker 8: If you look at US steel is located in Pennsylvania.
Speaker 8: Biden won Pennsylvania by a little over eight thousand votes
Speaker 8: last election twenty twenty. Steel Union members in Pennsylvania are
Speaker 8: about seven hundred and fifty thou Union members in Pennsylvania, and.
Speaker 2: They don't necessarily want this deal to go through.
Speaker 8: And the union does not want the deal go through.
Speaker 8: And you also had Trump come out saying that he would.
Speaker 9: Block the deal.
Speaker 8: You know, there's three or four you know, I'm not
Speaker 8: a election expert, but there's three or four critical states
Speaker 8: that probably will flip the election. In Pennsylvania's probably.
Speaker 9: One of them.
Speaker 3: So I guess I'm sort of wondering, knowing that that
Speaker 3: is the politics of the situation, what was the motivation
Speaker 3: to bring the deal in the first place.
Speaker 8: The motivation is if you look at the US steel
Speaker 8: market is actually with the Infrastructure Act and Inflation Reduction Act,
Speaker 8: is actually probably one of the more higher growth steel
Speaker 8: markets across the world. And Nippon Steel has said that
Speaker 8: they want to get to one hundred million tons of
Speaker 8: steel production a year. This was kind of helped them
Speaker 8: along that goal.
Speaker 2: Without them though, could they not do it? And is
Speaker 2: it because it's just expensive to get it done or
Speaker 2: is it because the prices are low so their margins
Speaker 2: are not great?
Speaker 8: Not quite falling?
Speaker 2: Oh that if the Japanese company Nippon Steel went away,
Speaker 2: and they you need all this product here in the
Speaker 2: US to help satisfy all the infrastructure acting the chips
Speaker 2: act without a buyer, why can't you still just do
Speaker 2: it on their own?
Speaker 5: Is no?
Speaker 8: US still can't do it on their own?
Speaker 2: Can Okay?
Speaker 8: And they have outlined a plan to get there, to
Speaker 8: improve their assets and build up. You know, they're building
Speaker 8: another plant in Arkansas, Big River Steel too, which they
Speaker 8: built you know, but back in August, Cliffs kind of
Speaker 8: put them in play. Cliffs came in with an offer
Speaker 8: for thirty five dollars a share, kind of put US steel,
Speaker 8: you know, said that they had to evaluate strategic alternatives,
Speaker 8: spent a few months doing this, and then came up
Speaker 8: with where Nippon was the highest bidder.
Speaker 3: So, I guess if you've got these competing bids for it.
Speaker 3: I mean, what's the expectation for how long this can
Speaker 3: go on?
Speaker 8: Well, it's it's currently under reviewed by SYPHIUS, which is
Speaker 8: the Committee for Foreign Investment in the US. Syphius deals with
Speaker 8: national security, so as people said, their deliberations are shrouded
Speaker 8: in secrecy. So you know, initially, when when we looked
Speaker 8: at the deal and we saw the union opposition, we said,
Speaker 8: what they should do is US steal and NIPHN should
Speaker 8: slow walk the deal locked approval get passed the November
Speaker 8: fifth election, and then maybe, you know, politicians attentions turn elsewhere.
Speaker 2: Is it possible that US steal says all right later
Speaker 2: and like the and they're just going to go on
Speaker 2: their own way.
Speaker 8: I don't think suareholders would appreciate that appen.
Speaker 2: So now they're like, okay, we want to get right right.
Speaker 8: I mean the steal, you know, the stock was traded
Speaker 8: like in the mid twenties, and you got a deal
Speaker 8: for fifty five dollars a share.
Speaker 2: You want to take that, you want to get something.
Speaker 2: I guess my question is, let's pretend that the the
Speaker 2: nip On deal falls through. Let's say Cleveland Clips comes
Speaker 2: back in and rebids, right, and the company's like, all right,
Speaker 2: I guess we're up for sale. Is the US government
Speaker 2: going to like that deal? Because that's gonna that's gonna
Speaker 2: be antitrust concern right.
Speaker 8: That's so it's just from national securities to anti trust concerns.
Speaker 8: And also the other thing one of the areas of
Speaker 8: anti trust would would come on our scrutiny. US still
Speaker 8: and clean Cliffs are two of the biggest players to
Speaker 8: the auto industry, so you have, you know, the auto companies,
Speaker 8: you know, not happy with the deal there.
Speaker 3: So to go back though to the politics of it,
Speaker 3: just thinking through some of the opposition to the npon bid,
Speaker 3: because a lot of that had to do with the
Speaker 3: objection from the steel workers. So if you think of
Speaker 3: it of an American bidder coming in, do you think
Speaker 3: that's an easier that's an easier thing for steel workers
Speaker 3: to accept?
Speaker 8: Well, it's you know, Cleveland Cliffs is has a very
Speaker 8: good relationship with the steel workers union, so that's why
Speaker 8: the union has been favoring Cleveland Cliffs. In fact, in
Speaker 8: the in the union agreements, there's a thing called right
Speaker 8: to bid where if a be under a with the
Speaker 8: US steel has a contract with the steel union gets
Speaker 8: acquired by somebody, the union has a right to bid.
Speaker 8: So in this whole escapade, the US steel Workers Union
Speaker 8: assign their right to bid to cliffs, so favoring cliffs
Speaker 8: and things along those lines.
Speaker 10: Can I just ask, like, what's the fear of a
Speaker 10: foreign company owning US steel? I mean, they're gonna nip
Speaker 10: on steel is going to pack it up and move
Speaker 10: it to.
Speaker 2: Japan because Japan is supposed to be like a friendly
Speaker 2: country like well, and it's.
Speaker 10: Not like they're going to like raise prices to the
Speaker 10: point where they're going to shoot themselves in the foot
Speaker 10: to like have sales decline. I mean what it's now
Speaker 10: part of this is jingoistic, is that agreed?
Speaker 8: And also Japan is the biggest number the number one
Speaker 8: a foreign direct investor in the United States. US has
Speaker 8: over five trillion dollars a foreign direct investment. Japan accounts
Speaker 8: for fifteen percent of it. It's the biggest foreign direct
Speaker 8: investor in the United States. So on that it doesn't
Speaker 8: really make sense either.
Speaker 2: Hence just pointing out the whole union politicking of it. Okay,
Speaker 2: so what do you think actually happens? Best guess?
Speaker 8: Best guess I think you got a lots smart people
Speaker 8: and at both companies.
Speaker 5: I think.
Speaker 8: I, like I said earlier, I would slow walk the.
Speaker 2: Deal and get something.
Speaker 8: Passed the elections and see what happens. You're probably going
Speaker 8: to have to pay the union a little bit more
Speaker 8: to get them on board. But Nippon still just could
Speaker 8: deal two to three days ago with the unions in Japan,
Speaker 8: so obviously they realized the worker landscape of wages are
Speaker 8: going up.
Speaker 3: Oh you know what, I wonder if the financing picture
Speaker 3: will be a little bit easier if they cancel walk
Speaker 3: the deal and get it past the election, because looking
Speaker 3: at the FED dot plot, we could have had a
Speaker 3: couple of industry cuts by then, so maybe it'll be
Speaker 3: a bit cheaper.
Speaker 8: They have everything all right align you know, companies have
Speaker 8: you know, signed up to provide them the fifteen billion
Speaker 8: dollars that don't need to buy all.
Speaker 2: Right, So banks have broadening out for a second, what
Speaker 2: is steel demand like right now globally and in the US,
Speaker 2: and how prices because if you want to find one
Speaker 2: ticker for steel prices, good luck, it is such a
Speaker 2: regional market. Yeah, give me the landscape.
Speaker 8: No steel prices are you know, what we had was
Speaker 8: kind of an interesting year. Usually you have steel prices
Speaker 8: at the beginning of the year increase because of seasonality.
Speaker 8: Obviously constructions construction is the biggest market summer, it's easier
Speaker 8: to do construction.
Speaker 11: Everybody's buying steel.
Speaker 8: What happened is that auto workers strike last year. Everybody
Speaker 8: held off buying steel because they thought steel prices would
Speaker 8: really go down because the auto workers strike was rumored
Speaker 8: to be prolonged. And really what happened is the auto
Speaker 8: workers strike didn't have as much effect as people thought.
Speaker 8: Everybody rushed back to the market and really pulled in
Speaker 8: pricing at the end of last year, so you had
Speaker 8: kind of that peak of pricing rather than coming in
Speaker 8: the first quarter. Actually prices peak back at the end
Speaker 8: of January. They've it looks like now they're probably've hit
Speaker 8: a bottom. Both New Core and Cliffs that come out
Speaker 8: with announcements that you know, eight hundred and twenty five
Speaker 8: dollars a ton we want and eight forty respectively, So
Speaker 8: that's kind of stopped the free falling prices. You have
Speaker 8: a lot uncertainty. What I would characterize across the world
Speaker 8: is hand the mouth buying. You're just buying what you need.
Speaker 8: You're not taking any speculative risk or anything like that
Speaker 8: to build up inventoris.
Speaker 2: Hi, Richard, thanks a lot. We super appreciate it. Richard Burg,
Speaker 2: Bloomberg Intelligence, Senior analyst on US Steel.
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Speaker 2: So let's get to the retail sales here. That disappointed
Speaker 2: and this just goes to my point. I tell everyone
Speaker 2: I'm on a budget and no one believes me, and
Speaker 2: yet these sales prove that it's true. Just putting that
Speaker 2: out there. Jill Blanchard is president of Enterprise Client Solutions
Speaker 2: over at Advantage At Solutions and she joins US. So
Speaker 2: I'm looking at Control Group flat for February back out autos,
Speaker 2: back out gas just up by three tenths. You also
Speaker 2: had January revised lower. What's the state of the economy
Speaker 2: When you look at consumption, you look at retail.
Speaker 12: So hello, thanks for having me back. I was listening
Speaker 12: before Happy Friday Eve. It still continues to be a
Speaker 12: struggle for consumers out there when we look at things
Speaker 12: like in consumer package, because the prices are still up
Speaker 12: six point eight percent.
Speaker 11: Versus last year.
Speaker 12: The good news is that in the recent Advantage Outlook survey,
Speaker 12: manufacturers fifty percent said that they don't have plans to
Speaker 12: increase prices, but we do have a that plan to
Speaker 12: increase prices on non core items, so think of things
Speaker 12: like a.
Speaker 11: Smaller size package or a low fat version.
Speaker 12: Where we really get concerned is with the value priced brands,
Speaker 12: and so those are the lower price brands that typically
Speaker 12: compete with like a private brand. Those those brands have
Speaker 12: increased their prices one point five points higher than a
Speaker 12: mainstream price or a premium price, and so essentially is
Speaker 12: the rising of the floor further squeezing consumers.
Speaker 3: So it's interesting, you've got the cheaper stuff is getting
Speaker 3: more expensive, and then you've got continued triflation. It sounds like,
Speaker 3: so you know, how much more of this can consumers take?
Speaker 3: Because you know, at the same time you've got an
Speaker 3: incredibly strong job market, so something's got to give.
Speaker 9: I would have thought at some point.
Speaker 12: We do see a lot of give actually out there
Speaker 12: in the form of a few things.
Speaker 11: One is trade down right or pare down.
Speaker 12: And so we see consumers you know, pairing down whether
Speaker 12: they're buying a you know, a used luxury car instead
Speaker 12: of a new luxury car, or they're trying to make
Speaker 12: meals at home instead of going out, and so we
Speaker 12: see a lot of shifting in that spending to lower
Speaker 12: price things. We see consumers buying more private brand boys.
Speaker 12: They're having a really good day. In fact, to seventy
Speaker 12: five percent of retailers say that they're number one growth
Speaker 12: strategy is private brand. We see consumers buying things on promotions,
Speaker 12: so we're definitely seeing a big shift in behavior. Promotions
Speaker 12: are a top strategy for manufacturers and for retailers, but
Speaker 12: they've got to be really careful not to sacrifice tomorrow
Speaker 12: by giving away today. And consumers are becoming more disloyal
Speaker 12: to brands because they're waiting for brands to be on
Speaker 12: sale or switching to a brand to be on sale.
Speaker 12: I mean, consumers new loyalty is disloyalty.
Speaker 2: That is such an interesting point because you've basically described
Speaker 2: my entire shopping habit for discretionary So I wanted to
Speaker 2: go to the point of sort of the macro and
Speaker 2: then the retail. So let's just pretend we get three
Speaker 2: or four rate cuts this year, right, does a consumer
Speaker 2: all of a sudden go out and spend a lot?
Speaker 2: Is their pent up demand in this area that you.
Speaker 12: See, No, I don't see. I don't see the consumers
Speaker 12: going out and spending more. Consumers are going to continue
Speaker 12: to well, actually they might tick up a little bit
Speaker 12: on the out of home spending. So think of things
Speaker 12: like the big ticket items like a car or vacation,
Speaker 12: a home remodel. That might tick up a little bit,
Speaker 12: but those are such big priced items that consumers really
Speaker 12: have been pairing that down or foregoing that in lieu
Speaker 12: of in home activities, in lieu of affordable indulgences. So
Speaker 12: think of things like getting your nails done at home
Speaker 12: instead of a spot.
Speaker 11: So I could see a little bit, but not a lot.
Speaker 3: So I guess what's next for retail because it doesn't
Speaker 3: sound like a particularly you know, enthusiastic outlook there for
Speaker 3: the consumer.
Speaker 12: Yeah, I mean both both manufacturers and retailers are really
Speaker 12: struggling to find a path to win for both of
Speaker 12: them as well as consumers.
Speaker 11: As I said upfront, it's a super challenging environment.
Speaker 12: Retailers have to find the right way to promote, and
Speaker 12: when they all have the same strategy, it's hard to win.
Speaker 12: And pretty much when you talk to any company out there,
Speaker 12: they've got a plan to win in an environment that's
Speaker 12: largely going to be stable flat to down. So they
Speaker 12: truly have to find a differentiated way to meet that
Speaker 12: consumer where they need to be met to win, whether
Speaker 12: that's a differentiated way with products, which is also pretty interesting.
Speaker 12: If you look at retailers, over forty percent plan to
Speaker 12: carry less products, but higher performing retailers carrying more product,
Speaker 12: which really speaks to consumers valuing choice and differentiation. So
Speaker 12: lots of different strategies, it's really going to be challenging
Speaker 12: to find the right one to win.
Speaker 2: Yeah, I would find it to be so hard, like
Speaker 2: so much that you have to anticipate and then stock
Speaker 2: up and then if not, you're looking at eighty eighty
Speaker 2: five ninety percent discounts, which I love, but can't be
Speaker 2: good for an investor. Who would you say has a
Speaker 2: good strategy, Like, what's a good formula to emulate.
Speaker 4: You?
Speaker 11: Right now? We see consumers.
Speaker 12: I talked about consumers pairing down. I think discount retailers
Speaker 12: are having a really good day and it's making it
Speaker 12: pretty challenging for mainstream retailers. So mainstream retailers need to
Speaker 12: look at why consumers are going there.
Speaker 11: Is it?
Speaker 12: Is it purely priced? Is it the ability to one
Speaker 12: stop shop? Is it the ability to you know, the
Speaker 12: the environment of the retailers, So retailers need to look
Speaker 12: at or is it their online strategy? So lots of
Speaker 12: different things to look at, But who's winning are largely
Speaker 12: discount retailers.
Speaker 3: You know, could you give us a sense of the
Speaker 3: bigger picture here for consumers because you know, I've certainly
Speaker 3: read a lot about consumers moving away from stuff and
Speaker 3: towards experiences. But everything is so expensive right now, so
Speaker 3: you know, for you're mentioning that it's the discounters that
Speaker 3: are winning, but that's a very you know, sort of
Speaker 3: centraded area in retail.
Speaker 9: I would have thought, So, you know.
Speaker 3: Is the thought there that retail is just perhaps too big.
Speaker 12: That retail too big? Now I think it's more that
Speaker 12: retail is really varied. So I would say, in response
Speaker 12: to your question about what does this mean for consumers,
Speaker 12: consumers behavior today is so drastically different than it used
Speaker 12: to be in twenty nineteen in terms of.
Speaker 11: You know, what we buy, how we buy, and when
Speaker 11: we buy.
Speaker 12: Think of online, think of discount, think of of you know, of.
Speaker 11: Being in the.
Speaker 12: Home versus outside the home. So the future for consumers
Speaker 12: is that continued shift, you know, towards more value based living.
Speaker 12: I'd say one thing that we talk about often is
Speaker 12: the is the baking aisle. And twenty nineteen in the
Speaker 12: grocery store that ale gather dust, and now it is
Speaker 12: the hot spot. Over twenty twenty and twenty twenty one,
Speaker 12: we actually created a lot of bakers, and today it's
Speaker 12: really one of the fastest growing aisles in the store.
Speaker 2: I did the baking thing before and then during the
Speaker 2: you were ahead of the curve. I was ahead of
Speaker 2: the curve, says no one ever.
Speaker 10: But what is it the bake? What is it? You
Speaker 10: bake like a chocolate I happen to love chocolate cake,
Speaker 10: so I actually.
Speaker 2: Have a fantastic chocolate cake recipe that is super east.
Speaker 10: I don't want the recipe.
Speaker 2: I'm going to give it to you. I'll bake it
Speaker 2: at some point. But I actually do like baking, like
Speaker 2: bread and clastants and things like that. But anyway, that
Speaker 2: was hard to do U during the pandemic before we
Speaker 2: let you go. So I gotta say, I go out
Speaker 2: to eat, you know, two adults and a kid, and
Speaker 2: it's like three hundred dollars. It's bananas. And I'm not
Speaker 2: talking like a super fancy restaurant, like I'm talking like
Speaker 2: the neighborhood place. At what point do you think that
Speaker 2: that's going to top out? And then we're gonna see
Speaker 2: people sort of readjust and then all of a sudden
Speaker 2: the stay at home stuff comes back.
Speaker 12: Yeah, I'm right right now, out of home food prices
Speaker 12: are are higher in terms of their increases than in
Speaker 12: home and so it really is making it challenging for
Speaker 12: families to do more things outside the home. That has
Speaker 12: already contributed to increased in home consumption, which will continue
Speaker 12: to grow if we if we continue to see the
Speaker 12: outside the home food prices elevate.
Speaker 3: That's really interesting because I feel like restaurants are just
Speaker 3: getting so squeezed. They've got the staffing issues, they've got
Speaker 3: the food costs, and so consumers just want to break.
Speaker 3: But you know, cooking at home is has its own
Speaker 3: challenges and you know, you're mentioning the point about food
Speaker 3: at home and people are so pressed for time. It's
Speaker 3: kind of like one of those things, how do you
Speaker 3: trade that down?
Speaker 12: I sometimes feel like the world that we're living in
Speaker 12: today is so circular, right, So the cost have increased everywhere,
Speaker 12: and it continues to go to be passed around. Right,
Speaker 12: So restaurants are paying more for their for their products,
Speaker 12: for transportation and distribution of the products, for their labor,
Speaker 12: and they're having to pass as much as they can
Speaker 12: onto consumers who in turn can't really afford that and
Speaker 12: are cutting back, and so it continues to have a
Speaker 12: circular effect on the overall economy.
Speaker 2: Well, great stuff, Jill, really appreciate it. Thank you so much.
Speaker 2: Jill Blanchard, President of Enterprise Client Solutions for Advantage Solutions
Speaker 2: time other weeker retail sales.
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Speaker 2: Blackstone President John Gray was in Rome tough gig attending
Speaker 2: the Bank of America Global Investor Summit conference, and here
Speaker 2: was the headline, Time to buy real estate as prices
Speaker 2: are at bottom, he says, quote the perception so negative,
Speaker 2: and yet the value decline has occurred. So when you
Speaker 2: get into this bottoming period, that's when you want to move.
Speaker 2: Let's get another perspective here. Lisa Nie is managing partner
Speaker 2: and head of real Estate over at Eisner Amper. She
Speaker 2: joins us here in the studio, is that true? I mean,
Speaker 2: who's going to disagree with John Gray, like clearly talking
Speaker 2: your book for Blackstone too, but price is bottom, time
Speaker 2: to buy?
Speaker 13: Well, first of all, thank you for having me. So
Speaker 13: his perspective is correct. And so what happened when Signature
Speaker 13: Bank went out and brought its portfolio out to market.
Speaker 13: The prices were at a really good rate for people
Speaker 13: to come in and take the opportunities and go purchase
Speaker 13: all those great assets that were in that portfolio. And
Speaker 13: so he was one of the companies that went out
Speaker 13: and was looking at those portfolios. So there's plenty of
Speaker 13: opportunities for that careful investor to go out and there
Speaker 13: is capital to go out there, whether you're saying it's
Speaker 13: a distressed asset or a really good investment. The market
Speaker 13: is set to go out and have an influx of
Speaker 13: capital within commercial real estate, whichever sector it is. So
Speaker 13: never going to disagree with him. He certainly is accurate
Speaker 13: on that one. And again it's for that investor who's
Speaker 13: making sure that they're really doing their due diligence and
Speaker 13: their background, making sure that the interest rates and the
Speaker 13: cash flows make sense. That's always first and foremost.
Speaker 9: I mean, I for one, definitely would not want to
Speaker 9: disagree with him.
Speaker 3: But one question I would have is the whole reason
Speaker 3: why we're in this commercial real estate crisis is because
Speaker 3: of the shift to working from home, and so is
Speaker 3: that crisis over? I mean, it still seems to me
Speaker 3: that you know, personal anecdote only, but the subway isn't
Speaker 3: nearly as full as it used to be, even though
Speaker 3: it's picked up a little bit. I mean, if people
Speaker 3: are still working from home, there's still quite a lot
Speaker 3: of risk there for somebody trying to get in at
Speaker 3: these low prices.
Speaker 13: Yeah, so real estate is cyclical, So every asset class
Speaker 13: goes through its highs and lows. It was retail, now
Speaker 13: it's we're at the lows of office, we're going to
Speaker 13: see some inflections and some differentiation within a multifamily as well.
Speaker 13: And when we look at what work from home concept did.
Speaker 13: I'm looking around here today and I'm seeing a great
Speaker 13: amount of activity where people are collaboration. And if you
Speaker 13: look back, I think two or three years ago, all
Speaker 13: the big tech companies that everyone gets to work from home,
Speaker 13: and they've changed their statements. They're coming and saying we
Speaker 13: want you back two to three days. And when you
Speaker 13: look at an office lease, you're leasing office space for
Speaker 13: five days, but.
Speaker 9: You're getting it for seven.
Speaker 13: And so it's just changing how you're looking at office
Speaker 13: and looking at some of the buildings that are out
Speaker 13: there in the marketplace, those older buildings that need some
Speaker 13: adaptive reuse. We're going to need that regardless of where
Speaker 13: we were in this cycle.
Speaker 2: Yeah, and you think there's people out here now, you
Speaker 2: just wait till the snacks come up around two. It's
Speaker 2: like a people wait online for that stuff. So to
Speaker 2: that point, just in terms of the capital being out there,
Speaker 2: do you notice the bid ask like, have we resolved
Speaker 2: for that gap yet or is that still to come.
Speaker 11: So that it hasn't been resolved.
Speaker 13: And what's happening is because of the banks and their
Speaker 13: underwriting and regulations, they're unable to go in and provide
Speaker 13: a capital at at a rate that's worthy of the
Speaker 13: what's being underwritten. So who's coming in the rescue capital,
Speaker 13: which is people who are opportunistic, So you're going to
Speaker 13: come in as a preferred equity or a mess lender,
Speaker 13: or you know, at a higher rate.
Speaker 2: And so those interest rates, if you're that.
Speaker 13: Really discerned investor, is going to be very good for you,
Speaker 13: but it's not going to be great for the owners
Speaker 13: and they're not going to get their cash flow back.
Speaker 13: So the rates right now for the rescue is really
Speaker 13: really high, So we're not at that time. Well, we've
Speaker 13: seen some preferred equity coming in between eighteen and twenty percent.
Speaker 13: That's very Remember those are for some distress deals that
Speaker 13: might need that rescuing and they just don't want to
Speaker 13: get back the properties.
Speaker 9: What's it going to take to broaden this out? But
Speaker 9: YEWND non rescue deals.
Speaker 11: What's it going to take?
Speaker 13: So it's we have to wait to see, as you
Speaker 13: mentioned before, what the Feds are going to be doing
Speaker 13: later in the year where interest rates are going to
Speaker 13: be who's going to be providing that capital? Is it
Speaker 13: going to be the banks getting back into the market.
Speaker 13: So once if the banks go back in and they're
Speaker 13: at a better point where we can pencil out.
Speaker 9: Some deals, it could take.
Speaker 13: It could just be a wait and see approach. Also,
Speaker 13: there's not a lot of trading going on, so people
Speaker 13: really don't have the true understanding what valuations are right now.
Speaker 13: So time's going to tell, and we really don't know
Speaker 13: where we're going to end up in the long term
Speaker 13: because consumer behavior is still so different than any one
Speaker 13: has anticipated in the past.
Speaker 2: So let's broaden out then and talk about say reshoring, onshoring,
Speaker 2: near shoring, all that stuff and logistics we were supposed
Speaker 2: to see like a ton of data centers, build, a
Speaker 2: ton of logistics, and then a ton of factories built.
Speaker 2: Are we still seeing all of those three things happen?
Speaker 13: So I love the fact that you brought up the
Speaker 13: concept near shoring, which is now Canada and Mexico really
Speaker 13: is coming in because so it's going to really change
Speaker 13: the landscape of where those industry and those warehouses were
Speaker 13: being built before they were built on the East and
Speaker 13: West coast. Now you're going to see them having to
Speaker 13: be built northern and southern because that's where the cheaper
Speaker 13: containers are going to be able to be brought in.
Speaker 13: Because so Mexico, which was our largest importer export of
Speaker 13: this year, and Canada coming in. So it's going to
Speaker 13: change where those industrial cities have been historically in the US,
Speaker 13: and it's going to change the landscape. So once you
Speaker 13: change the north and the south with the industries, you're
Speaker 13: also for an industrial center. Multi family is going to change.
Speaker 13: Commercial office center's going to change there. So to really
Speaker 13: look at where we are in the and those cycles
Speaker 13: could be really interesting when you're looking at the concept
Speaker 13: of near shoring versus right shoring.
Speaker 9: It's interesting.
Speaker 3: Can we shift gears a little bit to talk to
Speaker 3: us about a subject very near to my heart, which
Speaker 3: is residential realize, Oh, yes.
Speaker 2: We always go there.
Speaker 9: We always go there.
Speaker 10: We just take out an ad, you know, looking.
Speaker 2: She's looking to buy. It's not the best process.
Speaker 9: I might have a house, help me out, don't's get
Speaker 9: a house?
Speaker 2: Some long house applies coming online? Okay, cheap though, there
Speaker 2: you go.
Speaker 9: So what's the outlook? What am I looking for here?
Speaker 9: So I think you have it?
Speaker 13: Spot on is so the people who have the homes
Speaker 13: would be looking to go. We have no place to
Speaker 13: go to to sell, and so for us to replace
Speaker 13: our homes is there's no place for us to go
Speaker 13: at a low cost of capital. And so that's why
Speaker 13: that housing market is so difficult and why pricing is
Speaker 13: still so high for residential for single family homes. And
Speaker 13: if you look and you look at Biden's bill that
Speaker 13: he's proposing out there, when he's talking about housing, they
Speaker 13: are very well aware that we have we are do
Speaker 13: not have enough supply for the demand of single family homes.
Speaker 13: And so you are not alone with your frustrations. But
Speaker 13: for people who could be potential buyers, we're sitting and
Speaker 13: waiting because we.
Speaker 2: Don't know where our next home is going to be.
Speaker 13: And that's not helping your story at all.
Speaker 2: So I'm yeah, she pain, she feels your.
Speaker 10: Pain on it and a three twenty five, I think
Speaker 10: we're staying put.
Speaker 2: Really, yeah, we can't replace it.
Speaker 10: That's that's really what My mortgage is higher. My toll
Speaker 10: bills are higher than my mortgage.
Speaker 2: But that's a reflection how you feel about your toll bills.
Speaker 10: No, it's it's true though, no, I know it's true,
Speaker 10: but I.
Speaker 2: Also feel like you like to complain about toll.
Speaker 10: Bills, which is like a complain about everything.
Speaker 2: That's also fair. All Right, Lisa, thanks a lot, really
Speaker 2: great stuff. Definitely come back. Love that conversation. Lisa Nee,
Speaker 2: managing partner and head of real estate over at Eisner Amper.
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Speaker 2: Let's go now to Tesla. So that stock is down
Speaker 2: by another three percent. Let me just let me just
Speaker 2: see if I can pull up how bad it's been
Speaker 2: for Tesla, because I gotta say it has not been
Speaker 2: very good. The news from yesterday, of course, as well
Speaker 2: as Fargo con Langen says it'll be zero growth in
Speaker 2: sales volume for the ev maker this year. So can
Speaker 2: you be a company that's growth company if you have
Speaker 2: no growth in sales? And that stock has just really
Speaker 2: had a tough run of it, down eighteen percent just
Speaker 2: so far this month. Steve Mann is Global Auto's industrial's
Speaker 2: research analyst. He's standing by for Steve. What do you
Speaker 2: think growth company with no growth?
Speaker 1: Oh?
Speaker 7: I'm I tend to be more optimistic about the company.
Speaker 7: I really like the stuff they're doing behind the scenes
Speaker 7: with AI with full self driving, the optimist robot. I
Speaker 7: think the company is pretty much set up vertically integrated
Speaker 7: to actually succeed, So I'm not as negative. But there
Speaker 7: is a valley right that the company's going through right now.
Speaker 7: The problem is, you know, where is the bottom.
Speaker 10: Of that valley?
Speaker 7: Because prices for their cars just keeps coming down. You know.
Speaker 3: One of the issues that Elon Musk has faced with
Speaker 3: Tesla is what he gets out of cutting prices. And
Speaker 3: I wondered if you could talk a little bit about
Speaker 3: what you think he's going to be able to earn
Speaker 3: if he thinks that he's going to be able to
Speaker 3: institute more if he thinks he's gonna be able to
Speaker 3: get more sales with lowering prices.
Speaker 2: Yeah, I think so.
Speaker 7: I mean, the you know, pricing is pretty elastic. I
Speaker 7: think he will get some sales. The question is is
Speaker 7: how far and how much price cutting can he do
Speaker 7: from now on? Well, their gross margins are still in
Speaker 7: the mid teens. They still have room. I think relative
Speaker 7: to the legacy automakers, their margins are still relatively healthy.
Speaker 7: The issue is China. China's hype competitive market. Their main
Speaker 7: rival is BID. They're continue to cut prices, and if
Speaker 7: they do cut prices in China, they really have to
Speaker 7: do the same elsewhere in the world to eliminate the
Speaker 7: arbitrage that can actually occur if there's a price difference
Speaker 7: across the world.
Speaker 2: So here's my question. I hear that it's not as
Speaker 2: desperate as maybe Wells Fargo is saying, but we're still
Speaker 2: looking at an estimated price startings multiple at fifty four times,
Speaker 2: So is it worth that much based on everything we've
Speaker 2: just talked about, do we need to rewrate that in
Speaker 2: a more significant way?
Speaker 6: We do.
Speaker 7: I think we're in a cycle where we're going to
Speaker 7: see some rerating. But long term, what I'm really excited
Speaker 7: about is the company is actually very vertically integrated. They're
Speaker 7: actually behaving like an Apple where they're trying to create
Speaker 7: an ecosystem. We haven't seen it yet, but it's an
Speaker 7: interesting thing. There's doing a lot of interesting things with manufacturing,
Speaker 7: with their FSD and how it creates value for the
Speaker 7: long term owners of the vehicle over time, and that's
Speaker 7: you know, I don't think the market wants to look
Speaker 7: at that right now given the slowdown in EV sales.
Speaker 7: But again, like I said earlier, we're in that valley
Speaker 7: and there is I think light at the end of
Speaker 7: the tunnel. But you know, where are we at? Are
Speaker 7: we at the bottom of the valley? That's the main question.
Speaker 1: I don't.
Speaker 7: I don't think we're there yet.
Speaker 3: I want to pick up on your point, you know
Speaker 3: that we don't think we're that we're there yet because
Speaker 3: I feel like there might be more to come from analysts,
Speaker 3: potentially more people souring on Tessa.
Speaker 9: But do you agree on that or what's your expectation
Speaker 9: for the coming core I do.
Speaker 7: I do. If you look at consensus earning, the range
Speaker 7: is very wide. I think there's still still very bollish
Speaker 7: people out there, bullish analysts out there that's going to
Speaker 7: have to bring down earnings to more a little bit
Speaker 7: more realistic to the current growth rate that we're seeing,
Speaker 7: especially in the US market.
Speaker 2: When do you think we then get to the valley?
Speaker 2: And what is the vale?
Speaker 7: I think the I think one thing that we have
Speaker 7: to keep track of, and that's what we're doing as well,
Speaker 7: is a slowdown in price cuts. You know, we may
Speaker 7: be starting to see that at the moment because price cutting,
Speaker 7: the additional sales from price cutting is actually shrinking. That
Speaker 7: gap is shrinking, So I do see it. We're closer
Speaker 7: to that than maybe six months ago. So hopefully, you know,
Speaker 7: by midyear, second half the year, we can see some
Speaker 7: relief in price cutting.
Speaker 3: Talk a little bit about Tesla's margins, because we've got
Speaker 3: some analysis. It says that Tesla aims to slash production
Speaker 3: costs by about fifty percent, but maybe that's going to
Speaker 3: be wind up being more about like thirty three percent.
Speaker 9: What do you think about that?
Speaker 10: Yeah, I think their target.
Speaker 7: I think their target of fifty percent is a stretch target,
Speaker 7: especially as you know, as they ramp up the model too.
Speaker 7: This is the fifty percent that they're referring to, and
Speaker 7: cost cutting is really on their next generation of vehicles,
Speaker 7: the model too, and you know, they've done a huge,
Speaker 7: significant revolutionary change to how they built vehicles. You know,
Speaker 7: you haven't seen that since Toyota introduced the lean manufacturing
Speaker 7: in nineteen fifties. So the cutting price cutting of fifty
Speaker 7: percent likely unrealistic. Unrealistic, especially as they ramp up production
Speaker 7: in twenty twenty five, twenty twenty six. You know, maybe
Speaker 7: beyond twenty twenty six, we may get to fifty percent,
Speaker 7: but that's a little bit far out there to really forecast.
Speaker 2: So, Steve, I was interested in what you said about
Speaker 2: Apple in terms of sort of being all things to
Speaker 2: all people in one area. Right, So does that mean
Speaker 2: and I know that Apple is a harbor company, but
Speaker 2: they really want to be a services company, Like they
Speaker 2: want that to take up a lot of their space
Speaker 2: in terms of earnings and their revenue. Right makes sense?
Speaker 6: Right?
Speaker 2: Do you think the Tesla's going to do the same thing?
Speaker 2: Like they're going to get you know, your solar panel
Speaker 2: and they're going to get services from that. And I
Speaker 2: appreciate the tests is a little bit different than your
Speaker 2: battery storage and then your car, Like is that the
Speaker 2: company's going to be in twenty years?
Speaker 7: I you know, if you look at all the things
Speaker 7: that they do, right, the solar panel you just mentioned,
Speaker 7: the Starlink satellite system, you know those all can be
Speaker 7: connected where you know, I can imagine where Tesla not
Speaker 7: only you know, you have the uber or lift model
Speaker 7: that you know, robotaxi model, but you know, these cars
Speaker 7: are actually carrying heavy, high capacity batteries that you know,
Speaker 7: it can be moved around, redistribute power around, and you
Speaker 7: have the star Link system really connected to these vehicles
Speaker 7: to really manage that in a more efficient way. So,
Speaker 7: you know, we haven't really talked about energy. We only
Speaker 7: you know, I think the market really are focused on
Speaker 7: the current EV sales and how are they going to
Speaker 7: roll out the self full self driving, but the you know,
Speaker 7: long term, the next step could be you know, managing
Speaker 7: power with these mobile batteries that are in these cars.
Speaker 3: Can you talk a little bit more about demand for
Speaker 3: electric vehicles? And part of the thing I'm wondering about
Speaker 3: is if you see that Tesla is going to need
Speaker 3: a very particular policy environment in order to see sales
Speaker 3: continuing to pick up, and you know, in particular we've
Speaker 3: got the election coming up, a potential change of administration.
Speaker 3: Is there anything to think about there for what that
Speaker 3: would mean for Tesla?
Speaker 7: Actually, I think Tesla have a unique benefit where they're
Speaker 7: actually a very global company already, Like they have a
Speaker 7: third of sales in the US, third in Asia, mostly China,
Speaker 7: and then third in Europe, so they're very diversified regionally,
Speaker 7: So I don't think they really need any specific policy
Speaker 7: push from the US, you know, with their model to
Speaker 7: their next gen vehicle coming out in twenty twenty twenty
Speaker 7: five and twenty twenty six, that will really resonate to
Speaker 7: a lot of the emerging markets around world. So US
Speaker 7: is an important market, but I think their aim is
Speaker 7: really go even more global.
Speaker 2: Hybrids. Is hybrid is going to be a consistent thorn
Speaker 2: in tesla side or we think we overcome that.
Speaker 7: I think the world's gonna see a mix of powertrain
Speaker 7: to really get to kind of net zero emissions. So
Speaker 7: I think in the US, I think, you know, plug
Speaker 7: in hybrids will play a bigger role, potentially bigger role.
Speaker 7: But I think the rest of the world we're going
Speaker 7: to see, you know, significant growth in Southeast Asia, Southeast Asia,
Speaker 7: continued growth in China, Europe. You're kind of between the
Speaker 7: US and Asia. I think there's still a big enough space,
Speaker 7: a big enough market the pie. I think the pie
Speaker 7: for battery electric vehicles will continue to grow and absorb
Speaker 7: some of the newer competition that we're seeing from test
Speaker 7: that Tesla is facing.
Speaker 2: See, we're gonna leave it there. Steve Mann, Bloomberg Intelligence
Speaker 2: Automotive Analysts joining us. Really good stuff. Okay, so I
Speaker 2: know you're in the market to buy home, but what
Speaker 2: would it take you to buy a Tesla or an
Speaker 2: ev Hibar.
Speaker 3: I think the charging situation is just too horrible, Like
Speaker 3: there's just not enough around anywhere in New York City.
Speaker 9: Well, no, I take that back.
Speaker 3: There's a lot of man Henan, but you get to
Speaker 3: the out of Burrows and it gets a lot more tricky.
Speaker 2: There is a lot coming up in Brooklyn, like you
Speaker 2: can see dedicated charging spots. But I'm also in Parkslope,
Speaker 2: so that would make a lot more sense. But I
Speaker 2: wonder too, is that we put so much emphasis on
Speaker 2: the evs and we missed the hybrid there. And I
Speaker 2: feel like we're all playing a little bit of catchup
Speaker 2: because you can make an argument that while John Tucker
Speaker 2: waits for his hydrogen car, that you know a hybrid
Speaker 2: makes good sense.
Speaker 10: Yeah, I'm not disagreeing with you, right, just don't have
Speaker 10: any money, so I'm spending so much on my bathroom.
Speaker 9: Oh yeah, Well you've got to pick your poison.
Speaker 1: Don't you.
Speaker 2: That's true. One big purchase in the house, you do
Speaker 2: in the.
Speaker 10: Bath environmentally friendly bathroom.
Speaker 9: Well, it's gonna be a This could be really tough
Speaker 9: to get that fixed.
Speaker 2: Yeah, that's true. No floating toilets, no floating sings. I'm
Speaker 2: really glad we work that out.
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