Latest / Bloomberg Intelligence / Oil, EVs, Arm IPO, and a Government Shutdown (Podcast)

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Oil, EVs, Arm IPO, and a Government Shutdown (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
0:04
Speaker 1: my co host Matt Miller.
0:05
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
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Speaker 2: and Bloomberg experts, along with essential market moven news.
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Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
0:17
Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
0:21
Speaker 1: Let's head down to Washington, DC. Nathan Dean. It's his
0:24
Speaker 1: task to follow and analyze all the shenanigans coming from
0:28
Speaker 1: our good friends in the halls of Congress. He's a
0:30
Speaker 1: senior analysts for US government for Bloomberg Intelligence. So, Nathan,
0:36
Speaker 1: you're joining us by zoom We appreciate that. My question
0:38
Speaker 1: is is this government going to be able to fund
0:41
Speaker 1: itself or we're going to get a shutdown at the
0:42
Speaker 1: end of this month. Can you give us a timeline
0:44
Speaker 1: and kind of where we are here?
0:46
Speaker 3: Yeah, so you know, the government's only back for you know,
0:48
Speaker 3: eight to ten days, you know, working days until this
0:51
Speaker 3: deadline of September thirtieth. And like you said, you know,
0:54
Speaker 3: we it's highly likely that we're going to end up
0:56
Speaker 3: with a government shutdown. Now, whether this is a thirty
0:58
Speaker 3: day shutdown. Look, under President Trump's administration probably not be
1:02
Speaker 3: the case.
1:03
Speaker 4: You know.
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Speaker 3: The Speaker McCarthy says that he wants to kick the
1:06
Speaker 3: can to early December to give more time over negotiations.
1:09
Speaker 3: But the note that we just put out on the
1:11
Speaker 3: terminal this morning essentially states that if you do have
1:13
Speaker 3: a shutdown, both markets and defense contractors shouldn't be all
1:17
Speaker 3: that concerned. You know, during that thirty days shutdown under
1:20
Speaker 3: President Trump, the markets didn't react all that well in
1:23
Speaker 3: the first couple of days. But then once realized, once
1:25
Speaker 3: people realize the economic you know, impact isn't all that great,
1:30
Speaker 3: markets pretty much just moved beyond. Same thing with defense contractors.
1:33
Speaker 3: If you're Boeing or you know, raytheon and so forth
1:36
Speaker 3: like that, you know your contracts are already funded in.
1:39
Speaker 3: They're funded in on a long term basis. So the
1:41
Speaker 3: real big impact for a government shutdown, if it lasts
1:44
Speaker 3: more than a week or two, is that folks like
1:46
Speaker 3: me in Washington, DC can't take their kids to the zoo.
1:49
Speaker 2: Well what about federal employees? Will they still get paychecks
1:53
Speaker 2: every two weeks or however that works. I mean, if
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Speaker 2: you work at the euro of Labor, and statistics putting
1:56
Speaker 2: together the CPI, for example, are you still going to
1:59
Speaker 2: get paid?
2:00
Speaker 3: So what they do is they deem employees to be
2:02
Speaker 3: essential and non essential. If you're an essential play it's
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Speaker 3: about fifteen percent of the US workforce.
2:07
Speaker 5: Obviously, that's right, people.
2:09
Speaker 2: Only fifteen percent of the people that we employ are essential.
2:12
Speaker 2: Everybody else we could do without exactly.
2:15
Speaker 4: So.
2:15
Speaker 3: But you know, what's what's happened in the past is
2:18
Speaker 3: when the shutdown is over, the Congress will actually pass
2:22
Speaker 3: a resolution or pass a bill that provides retroactive back pay.
2:26
Speaker 3: So if you're shut down for a couple of weeks,
2:28
Speaker 3: obviously that's not going to be good if you're living
2:30
Speaker 3: paycheck to paycheck, but you will get that pay back.
2:32
Speaker 5: That is not the case for smaller contractors.
2:35
Speaker 3: So if you work for a contracting agency and your agency,
2:39
Speaker 3: you know, decides to shut down all of a sudden,
2:41
Speaker 3: you're not going to get that pay back unless the
2:43
Speaker 3: contractor and self pays you back.
2:45
Speaker 5: You're not going to get any recourse from the government.
2:47
Speaker 6: You know.
2:47
Speaker 3: I should also note that, you know, even though I
2:49
Speaker 3: took light of the situation with the Zoo, certain things
2:52
Speaker 3: like economic releases BLS, you know, so forth like that
2:55
Speaker 3: those eventually could be delayed, which and then also could
2:58
Speaker 3: cause some you know, can fusion and disruption to the
3:01
Speaker 3: traders that are relying on that information.
3:03
Speaker 1: Well, what about these things you guys, don't Washington DC
3:06
Speaker 1: called continuing resolutions or cr can't we use one of
3:09
Speaker 1: those thing that jigs?
3:10
Speaker 7: Yeah?
3:11
Speaker 3: Absolutely, And that's what I think is gonna happen here.
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Speaker 3: You know, the Approachriate appropriations process is a twelve bill process,
3:17
Speaker 3: and they've only got an agreement on one. They have
3:19
Speaker 3: to pass eleven essentially in the next month. So what
3:21
Speaker 3: they're gonna do is they're gonna hit this continuing resolution.
3:24
Speaker 3: The challenge is is that Speaker McCarthy has had several
3:27
Speaker 3: people in the House Freedom Caucus just say, look, I'm
3:29
Speaker 3: not gonna vote for any continuing resolution unless you do
3:32
Speaker 3: fund the FBI or you you know, implement any of
3:35
Speaker 3: these policies. That has no chance whatsoever with President Biden
3:39
Speaker 3: in the Senate under Democratic control. So what's gonna happen
3:43
Speaker 3: here is Speaker McCarthy's in a hard place. He's got
3:45
Speaker 3: to figure out a way to pass up continuing resolution
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Speaker 3: probably to early December, maybe next year. But probably early
3:52
Speaker 3: December using Democratic support, and that's just something that he's
3:56
Speaker 3: not gonna be able to get to until the last moment.
3:59
Speaker 3: So you're looking at either a shutdown will occur, you know,
4:01
Speaker 3: I'm guessing less than five days, but you know, negotiations
4:05
Speaker 3: are gonna go way up to the high wire and
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Speaker 3: you're gonna see constant headlines over the next two to
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Speaker 3: three weeks of shutdown inncs, shutdown angst, and more shutdown ancs.
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Speaker 2: It's just kooky to me how much the far right
4:16
Speaker 2: and the far left have in common. You know, the
4:18
Speaker 2: lefties wanted to defund the police and now the Freedom
4:21
Speaker 2: Caucus wants to defund the FBI exactly. I mean, do
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Speaker 2: we not need law enforcement in this country?
4:25
Speaker 1: I thought the FBI were the good guys, all right?
4:27
Speaker 1: What else besides the shutdown is Congress focused on here
4:30
Speaker 1: we go. They're gonna actually work for a solid eight days.
4:33
Speaker 1: Good for them, But what else do they have to
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Speaker 1: get done here?
4:36
Speaker 3: So you know, you're gonna see a lot of negotiations
4:39
Speaker 3: or at least you know, we've heard the House Financial
4:42
Speaker 3: Services Chairman Patrick man Henry say that he wants to
4:44
Speaker 3: try and schedule a vote on crypto legislation, I'm not sure,
4:48
Speaker 3: and many of that's gonna get there in September. I mean,
4:50
Speaker 3: you have to reauthorize the FAA. The Farm Bill expiration
4:54
Speaker 3: is also in September thirtieth, So for the rest of
4:56
Speaker 3: the month, you're gonna see a lot of people try.
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Speaker 5: Things, but it's going to be focused on this government shutdown.
5:02
Speaker 7: Now.
5:02
Speaker 3: One thing that came out last week that was interesting
5:04
Speaker 3: is that Bloomberg News reported that the Department of Health
5:07
Speaker 3: and Human Services is going to recommend changing marijuana from
5:11
Speaker 3: Schedule one to Schedule three.
5:13
Speaker 5: We are good, you know.
5:14
Speaker 3: That is a big deal for the marijuana industry, and
5:17
Speaker 3: so we're gonna be looking to see what steps come
5:19
Speaker 3: from the DEEA. They are the ones that are gonna
5:21
Speaker 3: have to make this decision, and really we're looking to
5:24
Speaker 3: see if they get this done in twenty twenty four
5:26
Speaker 3: or is this going to be a multi year process.
5:29
Speaker 3: That's really key for the marijuana stocks.
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Speaker 2: Schedule one drugs include like heroin and Fenton myl and
5:34
Speaker 2: that's where marijuana is, and that's that's where they have
5:37
Speaker 2: had weed for decades now, you know, because you know
5:41
Speaker 2: Item nine, all right, So that's something that's probably not
5:45
Speaker 2: gonna happen salt, any any movement on salt at all. Nathan,
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Speaker 2: I got to always ask ask you the state and
5:51
Speaker 2: local tax deduction question.
5:53
Speaker 3: Yeah, you know, I hit my phone always before these
5:56
Speaker 3: hits to see what's gonna happen with the salt folks
5:57
Speaker 3: around town.
5:58
Speaker 5: But this is laying the work.
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Speaker 3: Look, the salt deduction is going to expire when the
6:03
Speaker 3: Trump tax cuts expire. That's not going to be that's
6:06
Speaker 3: actually coming up fairly soon. But this is one of
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Speaker 3: those situations where you have lawmakers from New New York
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Speaker 3: and New Jersey going out there and saying, look, we're
6:13
Speaker 3: going to fight tooth and nail to try and get
6:17
Speaker 3: salt back. I mean they're even saying we would just
6:18
Speaker 3: love to take a pinch of salt. But ultimately what's
6:22
Speaker 3: gonna happen here is if you're going to you know,
6:26
Speaker 3: the salt deduction brought a lot of money back to
6:28
Speaker 3: the government, or getting rid of the salt deduction brought
6:30
Speaker 3: a lot of money back to the government.
6:32
Speaker 5: That is money that can be used elsewhere.
6:34
Speaker 3: And there are a lot of lawmakers like, ooh, we
6:36
Speaker 3: like this New York New Jersey money.
6:38
Speaker 5: We can use this for something else.
6:40
Speaker 3: So we're just I think the New York and New
6:42
Speaker 3: Jersey lawmakers, the Salt Caucus, if you will, are just
6:44
Speaker 3: planting the seeds so that when these negotiations come back
6:48
Speaker 3: closer to the expiration date, you know, they can fight
6:51
Speaker 3: tooth and nail at that point to get some relief
6:53
Speaker 3: back to the you know, the the homeowners of the
6:55
Speaker 3: New York City area.
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Speaker 2: Is this is this yet another issue on which AOC
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Speaker 2: and Marjorie Taylor Green or in agreement.
7:02
Speaker 3: You know, this is going to be one of those
7:04
Speaker 3: issues where it's essentially New York, New Jersey, California, and
7:06
Speaker 3: Illinois against the world against everybody.
7:09
Speaker 1: All right, all right, I understand we've got some generals
7:11
Speaker 1: and some admirals that need to be approved for senior
7:14
Speaker 1: leadership positions. I thought this stuff just gets done like
7:18
Speaker 1: rubber stamp. What's going on?
7:20
Speaker 3: So this is coming out of Alabama. This is Senator Tubberville,
7:22
Speaker 3: you know, coach, you know, of Auburn. He's actually holding
7:26
Speaker 3: up these promotions in response to a federal policy related
7:32
Speaker 3: to abortion. And this is a classic standoff between the
7:35
Speaker 3: White House and one senator. And so you know, we've
7:38
Speaker 3: seen statements from Bloomberg News, you know, their interviews with
7:41
Speaker 3: other Republican senators. They wish that Senator Tuberville wasn't doing this.
7:45
Speaker 3: But this is just a standoff that's going to continue.
7:47
Speaker 3: And you know, we've seen other statements from both the
7:50
Speaker 3: Department of Defense and so forth that you know, American
7:54
Speaker 3: security could be harmed.
7:55
Speaker 5: But I don't think we've seen any end in sight.
7:57
Speaker 3: Both sides are pretty ducked in and so this is
7:59
Speaker 3: just one of those is where I'm not exactly sure
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Speaker 3: if there's a resolution anytime soon.
8:04
Speaker 1: I mean, poor Nathan Dean's got to analyze and focus
8:07
Speaker 1: on Congress like for a living.
8:10
Speaker 2: Yeah, that is, and a lot of other stuff, right,
8:11
Speaker 2: I mean, the Washington DC. The weed decision doesn't come
8:15
Speaker 2: from Congress. That's first gonna come from. Who's the weed
8:18
Speaker 2: decision come from? If they push it back to schedule
8:20
Speaker 2: three d DA?
8:21
Speaker 5: Right, the DA? Yeah, all right, he's got.
8:23
Speaker 4: To watch all those agencies. He's gotta be careful.
8:26
Speaker 2: You know, the FBI might be defunded, yep, exactly.
8:29
Speaker 1: Who knows? All right, Nathan, it's your you got to
8:31
Speaker 1: deal with this stuff. We appreciate it. You're demand Nathan Dean,
8:34
Speaker 1: senior policy analysts. He covers all the US government stuff
8:38
Speaker 1: for Bloomberg Intelligence. He is our go to person for
8:40
Speaker 1: all you know, kind of how the sausage is made
8:43
Speaker 1: down there.
8:43
Speaker 7: With you're listening to the team.
8:46
Speaker 6: Ken's are Live program Bloomberg Markets weekdays at ten am
8:50
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8:56
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9:00
Speaker 1: Let's talk global economics year. We're gonna got it from China,
9:03
Speaker 1: might head over to Europe. Who knows where else?
9:04
Speaker 6: Will go?
9:05
Speaker 1: Eddie vnderwaldt you can go anywhere. He is a deputy
9:07
Speaker 1: Managing Deputy Managing editor of Market's Live team from Bloomberg News.
9:13
Speaker 1: I want to as him about bitcoin first.
9:14
Speaker 2: So Eddie is an expert on crypto as well. And Eddie,
9:19
Speaker 2: you know, I was off last week, but I still
9:22
Speaker 2: read the news and I thought it was so exciting
9:26
Speaker 2: for crypto when we found the Grayscale SEC decision overturned
9:32
Speaker 2: by an appeals court. So I thought, man, this is
9:34
Speaker 2: great news. Bitcoin spot, bitcoin ETFs are happening. I'm sure
9:38
Speaker 2: that the underlying ASCID is surgeon. I come back in
9:41
Speaker 2: this morning to see it under twenty six thousand.
9:43
Speaker 5: What gives Bigcore.
9:46
Speaker 8: Really is struggling, And it's really fascinating to see this happen,
9:49
Speaker 8: right because not only did you have that, you're also
9:52
Speaker 8: coming towards the harving of supply next year. Every four
9:56
Speaker 8: years or so, they have the amount of output in
9:59
Speaker 8: the amount of coin. And if you see that, you
10:01
Speaker 8: also see an ETF launch bringing in more retail investors,
10:04
Speaker 8: making it easier for people to invest. Bitcoin really should
10:07
Speaker 8: be garnering some momentum going into next year, but it
10:10
Speaker 8: just isn't. And I think part of the reason is
10:13
Speaker 8: that we are seeing higher real interest rates, right, We
10:16
Speaker 8: are seeing interest rates pushing higher, and therefore, you know,
10:20
Speaker 8: people probably don't have as much speculative money lying around
10:24
Speaker 8: yet are there speculative assets like you know, your your
10:27
Speaker 8: bids on Nvidia and so on are really doing well.
10:30
Speaker 8: So maybe it's a case of not so much that
10:33
Speaker 8: you know that that people don't have the money, but
10:35
Speaker 8: but perhaps a little bit more that they that the
10:37
Speaker 8: AI story has taken the shine off of cryptocurrencies. I
10:41
Speaker 8: think AI is the new shiny thing, and that's where
10:44
Speaker 8: investor money is going.
10:46
Speaker 1: That's interesting take and thought about that, but that probably
10:48
Speaker 1: makes a lot of sense. All right, Eddie, let's I
10:50
Speaker 1: want to just go to China here. How concerned are you?
10:54
Speaker 1: How concerned should the global economy be about just it
10:58
Speaker 1: seems like day after day, you know, kind of disappointing
11:02
Speaker 1: economic data coming out of China, weakening data coming out
11:04
Speaker 1: of China. How do you put that in prospective?
11:06
Speaker 9: Wait?
11:07
Speaker 2: I thought they were finally giving a stimulus, were now
11:10
Speaker 2: stick giving money to parents of kids and kids of parents?
11:16
Speaker 10: Yep?
11:17
Speaker 8: Yeah, And look it's it's been this machine gun of
11:19
Speaker 8: stimulus literally the way you know, day after day you're
11:22
Speaker 8: coming in and you're hearing more and more more stimulus
11:25
Speaker 8: coming towards the Chinese economy. And yet today when the
11:28
Speaker 8: moment we got in a little bit of bad data,
11:31
Speaker 8: we got that pm I numbers showing that the services
11:34
Speaker 8: sector is slowing down, which we would think would be
11:36
Speaker 8: something that would would lead to further stimulus in China.
11:40
Speaker 8: What do we see We see the market actually reacting,
11:42
Speaker 8: you know, to the downside and saying, well, this is
11:44
Speaker 8: bad news in China? Is everything that is bad?
11:46
Speaker 5: Now?
11:47
Speaker 8: You ask how, you know, how does it play for
11:49
Speaker 8: the world economy. It's bad for the world economy. It
11:51
Speaker 8: says something bad about the world economy. It says that
11:54
Speaker 8: we are not buying Chinese stuff and we're not exporting
11:57
Speaker 8: it elsewhere. But it is very bad for Europe, right
12:00
Speaker 8: because it's it's you know, and I think that's why
12:02
Speaker 8: we saw Mercedes Benz perhaps you know, reacting to the
12:05
Speaker 8: downside today, even though they've got this fairly positive story
12:09
Speaker 8: vis A Vitesla. And the reason is that a lot
12:12
Speaker 8: of their cars go to China. A lot of the
12:14
Speaker 8: high end equipment that's manufactured manufactured in Germany, and a
12:18
Speaker 8: lot of the French luxury goods go to China. So
12:22
Speaker 8: if they are not spending, if their services sectors lows down,
12:25
Speaker 8: that's real trouble for Europe.
12:26
Speaker 2: I will say Ola Hellenius is now a little bit more.
12:30
Speaker 2: He's not as bullish on China as he wants. They
12:32
Speaker 2: have a great story, the CEO of Mercedes Benz on
12:35
Speaker 2: the terminal, even though they have you know, a concept
12:39
Speaker 2: car that has long range. Any takeaways I mean you well,
12:44
Speaker 2: my takeaway is that GM already has that kind of range,
12:47
Speaker 2: you know, the Cadillac Escalade IQ or the Silverado ev
12:51
Speaker 2: they already have.
12:51
Speaker 1: Four h fifteen miles of range.
12:53
Speaker 2: It's great to see it in a smaller package. And
12:55
Speaker 2: I think it's cool that Mercedes is doing it, but
12:59
Speaker 2: they're not as bullish on as they once were. Also,
13:01
Speaker 2: the pm I data on China, this is backwards. If
13:03
Speaker 2: they come out on Sunday or Monday and say, hey,
13:06
Speaker 2: we're going to give money to everybody with kids under
13:08
Speaker 2: three and everybody with parents over three, you know, and
13:11
Speaker 2: we're going to cut the foreign reserve requirements at banks
13:15
Speaker 2: from six percent to four percent. So that's all spec
13:18
Speaker 2: this will stimulut of going forward. Why do we care
13:20
Speaker 2: so much about the backward looking data release?
13:24
Speaker 7: Yeah?
13:24
Speaker 8: Absolutely? And and you know, so the PMI number being
13:29
Speaker 8: focused on the services sector, which is more important for
13:32
Speaker 8: the Chinese economy than the manufacturing, is because they want
13:35
Speaker 8: to put it away a little bit towards the services sector, right,
13:38
Speaker 8: So I think as long as we that should be
13:41
Speaker 8: a net positive because it should mean that they are
13:44
Speaker 8: more likely to deliver even more stimulus if more.
13:47
Speaker 5: Is needed down the road.
13:49
Speaker 8: Right, it shows that this this hurts the part of
13:52
Speaker 8: the the part of the economy that they're most concerned
13:54
Speaker 8: about is under pressure, and as long as that's the case,
13:57
Speaker 8: you know, stimulus will keep coming.
13:59
Speaker 5: But I think that.
14:00
Speaker 2: Drap the machine gun, eddie and grab a bazooka.
14:03
Speaker 8: You know, right, absolutely, But but but this, And you
14:06
Speaker 8: know what, if they did bring the bazuka, if they
14:08
Speaker 8: did say, hey, here's this massive stimulus package, all of
14:11
Speaker 8: these things that we've talked about over the last few
14:14
Speaker 8: weeks and they delivered all of that in one day,
14:16
Speaker 8: the markets would have said wow, shock and awe, and
14:19
Speaker 8: would have responded accordingly. But because it's a kind of
14:21
Speaker 8: drip feed, it just doesn't have that momentous feel to it.
14:25
Speaker 8: But I do think that this is more of what
14:28
Speaker 8: we're seeing today is more about reading what the market
14:32
Speaker 8: sentiment on China is than about what the outlook is,
14:34
Speaker 8: because I don't think the outlook has changed today. What
14:36
Speaker 8: you're saying is true, right, The PMI data is slightly
14:39
Speaker 8: more backward looking than the than than the fresh stimulus.
14:43
Speaker 8: But we are we asked, we are seeing something about
14:46
Speaker 8: the market wants to be negative because the market doesn't
14:48
Speaker 8: buy the China story.
14:49
Speaker 2: At the moment.
14:50
Speaker 1: Well, I mean, one of the things that I think
14:52
Speaker 1: we're trying to get a grip of is how bad
14:54
Speaker 1: is the real estate issue and the financing and of
14:58
Speaker 1: the real estate economy and China? How bad is it?
15:01
Speaker 1: How bad could it get?
15:03
Speaker 5: Yeah?
15:04
Speaker 8: And it is really bad? Right, And I think most
15:06
Speaker 8: of the stimulus has been targeted at that sector. Now,
15:09
Speaker 8: we had a Country Garden, which is one of their
15:10
Speaker 8: big property developers, who was very much distressed and still
15:14
Speaker 8: owes something like one hundred and eighty seven billion dollars
15:18
Speaker 8: worth of outstanding bonds. Now they met payment on a
15:22
Speaker 8: part two of their outstanding bonds today, but still you know,
15:27
Speaker 8: several billion are coming due in the next few months,
15:30
Speaker 8: and it's unclear whether they'll be able to meet most
15:32
Speaker 8: or any of that. The market currently pricing their bonds
15:35
Speaker 8: at something like, you know, nine cents to the dollar
15:37
Speaker 8: or fourteen cents of the dollar, depending, But you know,
15:40
Speaker 8: so this is but the authorities have targeted a lot
15:46
Speaker 8: of stimulus at that sector. What is interesting that they've
15:50
Speaker 8: done of late is that they pivoted also to things
15:53
Speaker 8: like the stock market. Right, So clearly stimulating the stock
15:56
Speaker 8: market by removing some of the costs and some of
15:59
Speaker 8: the taxes a social with that, and if you see
16:01
Speaker 8: the authorities really targeting the stock market. It tells you
16:04
Speaker 8: something about what they want to do to sentiment. It
16:07
Speaker 8: tells you something that they you know, when they're targeting
16:09
Speaker 8: the building sector, that tells you something about what they
16:13
Speaker 8: want to do to the economy when they when they're
16:15
Speaker 8: targeting the stock market, it tells you that they really
16:19
Speaker 8: worried about sentiment too.
16:21
Speaker 1: Hey, Eddie, you know everybody, I know, it seems like
16:23
Speaker 1: with a notable excession of John Tucker vacationed in Europe
16:27
Speaker 1: this summer, what's the economy like in Europe these days?
16:32
Speaker 8: Yeah, it's mixed, right, I mean, Europe is slowing down,
16:35
Speaker 8: no doubt. Europe is struggling.
16:36
Speaker 1: At the moment.
16:37
Speaker 8: We're seeing our manufacturing you know, deep below below fifty
16:41
Speaker 8: and on the PMIS, and we're seeing now with the
16:43
Speaker 8: latest revisions that we got in today, numbers in Europe
16:46
Speaker 8: have all been below fifty. Europe has really been struggling
16:49
Speaker 8: and it just hasn't been able to get gain that traction. Now,
16:52
Speaker 8: the situation in Europe is a little bit a little
16:53
Speaker 8: bit different from the from the from the US. Whereas
16:56
Speaker 8: the FED has a dual mandate growth and and inflation,
17:01
Speaker 8: in Europe, the central banks are supposed to be. The
17:04
Speaker 8: ECB is supposed to be focused on inflation, and that
17:08
Speaker 8: means that that that that you know, they're probably putting
17:11
Speaker 8: more pressure on the economy than they would have otherwise. Now,
17:15
Speaker 8: whether they will keep that line if they, you know,
17:18
Speaker 8: coming to see real trouble, real structural trouble.
17:22
Speaker 5: In the Eurozone.
17:23
Speaker 8: None of that we're seeing yet. But if that's the case,
17:25
Speaker 8: I think, I think the ECB will will start to
17:28
Speaker 8: rethink their policy despite inflation.
17:30
Speaker 1: Right, I don't know. I mean all those us I
17:32
Speaker 1: mean vacation dollars being spent in.
17:34
Speaker 2: The y Well, hotel prices are very high. You know,
17:37
Speaker 2: restaurants have been able to get a high ticket price.
17:40
Speaker 1: All right, I stayed on the Jersey shore. Did just
17:42
Speaker 1: find Eddie vanderwallt wut Managing Editor of Markets Life Team
17:45
Speaker 1: at Bloomberg News. Next so much.
17:46
Speaker 6: You're listening to the tape cancer Live program Bloomberg Markets
17:50
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17:54
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17:55
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17:57
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18:06
Speaker 1: In September's we head towards the end of the year.
18:08
Speaker 1: Part of that is the IPO space, and there is
18:09
Speaker 1: one of note that recently hit the tape. ARM is
18:13
Speaker 1: coming up with a big IPO, so let's get the
18:16
Speaker 1: latest on that. Bailey Lipschal Tease covers all the markets,
18:18
Speaker 1: including IPOs and spin offs and all that kind of
18:21
Speaker 1: fun stuff, and for a time they're even SPACs. He
18:23
Speaker 1: does that stuff for Bloomberg News. I'm psyched about this conversation.
18:27
Speaker 1: I know, well, I've got a lot of questions heare me.
18:28
Speaker 1: First of all, ARM, what is ARM? And tell us
18:32
Speaker 1: about the deal.
18:33
Speaker 4: ARM is a chip designer, so they essentially sell chip
18:37
Speaker 4: blueprints to customers like Nvidia, AMD, Apple, you name it, Samsung.
18:44
Speaker 4: So when they sell a chip, they pay a royalty
18:47
Speaker 4: fee to ARMS. So ARM they can just pulls together
18:49
Speaker 4: those royalties. It'll be it's expected to be, based on
18:52
Speaker 4: the term they laid out this morning, the largest IPO
18:56
Speaker 4: on a US exchange since Rivian in late twenty twenty one,
18:59
Speaker 4: so large than ken View, which was the consumer health
19:02
Speaker 4: spinoff split off from J and J earlier this year,
19:05
Speaker 4: which raised about four point four billion dollars. So ARM
19:07
Speaker 4: expected now to raise his up to four point eight
19:11
Speaker 4: seven billion, But we know, uh, that'll probably get higher,
19:15
Speaker 4: just based on how most of these ipeos go.
19:17
Speaker 2: Right, you got to add in the green shoe eventually.
19:20
Speaker 2: I don't even know where I say that.
19:21
Speaker 5: You know, we have to. We didn't.
19:23
Speaker 4: We weren't used to be able to write that. Oh
19:25
Speaker 4: really it was too jargoning.
19:27
Speaker 2: Anyway, it doesn't matter. I've been hearing a lot of
19:30
Speaker 2: people today say ARM wanted to raise more. Now Arm's
19:33
Speaker 2: gonna raise this And the fact is, I imagine ARM
19:36
Speaker 2: isn't gonna be getting any of this money, right.
19:39
Speaker 4: ARM doesn't care. ARM is just a pawn for soft Bank.
19:43
Speaker 4: Is that right? That's one way to put it.
19:45
Speaker 2: ARM is any is any are any of these proceeds
19:48
Speaker 2: gonna be invested by ARM?
19:49
Speaker 8: No, it is.
19:50
Speaker 4: Soft Bank is selling about a ten percent.
19:52
Speaker 1: None of the shares are primary shares, they are secondary shares.
19:55
Speaker 2: Is kind of so and and and and soft Bank
19:58
Speaker 2: recently bought twenty five per percent of ARM from the
20:02
Speaker 2: Vision Funds, which Sauce Bank owns. So soft Bank, at
20:06
Speaker 2: a higher valuation, took out a quarter of this company
20:10
Speaker 2: from a fund that it owns why.
20:14
Speaker 4: The view from the street and the view from soft
20:16
Speaker 4: Bank is that they wanted to have this all under
20:18
Speaker 4: one umbrella. When you look at the terms laid out
20:20
Speaker 4: in the filing as it detailed, that sixteen billion dollar
20:24
Speaker 4: deal buying back that twenty five percent stake held by
20:26
Speaker 4: its Vision fund was part of a bigger switch up,
20:29
Speaker 4: so not really clear kind of what was real.
20:31
Speaker 2: Well, they were like, we'd like to hold this all
20:33
Speaker 2: under one asset that we own rather than spread out,
20:36
Speaker 2: and we're gonna punish ourselves by paying a price much
20:38
Speaker 2: higher than it's worth. I don't buy that, Bailey. Are
20:42
Speaker 2: there other people who have stakes in the Vision Fund?
20:44
Speaker 2: Because it sounds to me like soft Bank is trying
20:48
Speaker 2: to pacify some of these other shareholders that have been
20:51
Speaker 2: walloped by huge losses.
20:53
Speaker 4: Yeah, that's the way that you could. The Cynic or
20:56
Speaker 4: the Matt Miller view is that you're basically satisfying those LPs. Okay,
21:00
Speaker 4: because it's just never explained, right.
21:01
Speaker 2: We always say, oh, SoftBank bought twenty five percent of
21:05
Speaker 2: ARM from its own Vision fund, and then we move
21:07
Speaker 2: on and the rest of the story and never say why,
21:09
Speaker 2: which is like what I will say that My favorite
21:12
Speaker 2: thing on social media was the spider Man meme where
21:15
Speaker 2: was pointing at each other and it was kind of
21:16
Speaker 2: like arm Vision Fund one and Masa Son basically like
21:20
Speaker 2: where this money is moving from one fund to the
21:22
Speaker 2: other fund to satisfy the underlying investors. But nonetheless it
21:26
Speaker 2: still will be a massive IPO key for the overall
21:30
Speaker 2: IPO sentiment, all things aside, which I know there are
21:34
Speaker 2: a number of skeptics as it relates to SoftBank, given
21:37
Speaker 2: the history of investing Big Road, the Big Wave with
21:39
Speaker 2: Ali Baba, but had more underwhelming IPOs, the likes of
21:42
Speaker 2: Uber obviously we work as one that comes to mind,
21:45
Speaker 2: and a number of other investments that went public Viaspac
21:47
Speaker 2: that I wrote about quite.
21:49
Speaker 4: A bit when the well and not just soft Bank.
21:51
Speaker 2: I mean you said yourself, this is the first IPOs
21:53
Speaker 2: and Drivian how'd that go for investors?
21:56
Speaker 4: So, I mean it's from the office question, No exactly Rivian.
22:02
Speaker 4: Rivian looked quite a bit like Vinfest where just pulling
22:05
Speaker 4: up the chart on the old terminal priced at where
22:10
Speaker 4: did the price at? I mean, was trading up got
22:14
Speaker 4: up to?
22:15
Speaker 1: Right now?
22:15
Speaker 4: It's at twenty three bucks?
22:16
Speaker 6: All right?
22:17
Speaker 7: All right?
22:17
Speaker 1: So here we are with arm Every underwriter based on
22:23
Speaker 1: Wall Street is on this deal.
22:24
Speaker 8: What's that?
22:24
Speaker 1: What's up with that?
22:25
Speaker 4: Pretty much everyone except for Morgan stands okay?
22:28
Speaker 1: Which liable exception.
22:29
Speaker 4: A notable exception. It's interesting, a lot of that being
22:32
Speaker 4: kind of the view in my colleague game you will
22:35
Speaker 4: report on this. The view kind of is that if
22:36
Speaker 4: you've done business with soft Bank in the past, whether
22:40
Speaker 4: it was related to loans or other kind of your basis,
22:43
Speaker 4: you're getting cut in on the deal. So when you
22:45
Speaker 4: look at those big four banks that are leading the IPO,
22:49
Speaker 4: you've got Goldman, JP, Morgan, Barclays, and Mazoo home Zoo
22:53
Speaker 4: obviously a little bit surprising, but based in Asia relationship
22:56
Speaker 4: with soft Bank, that's all kind of where the comes.
22:59
Speaker 1: So let's look at ARMED company and the fundamentals of
23:01
Speaker 1: the company.
23:01
Speaker 4: It's not growing, no, it's actually slowing. It is more
23:04
Speaker 4: and we wrote about it in.
23:05
Speaker 9: A few weeks.
23:06
Speaker 1: Chip company aren't chips and AI kind of the thing.
23:09
Speaker 4: This year, but they're so heavily based in smartphones, so
23:12
Speaker 4: smartphone sales have been weaked.
23:13
Speaker 1: So this is not an AI play.
23:15
Speaker 4: They're pitching it as an AI play, but it's still
23:17
Speaker 4: a question of how that fits in and what kind
23:19
Speaker 4: of premium will be baked in. Analysts from New Street
23:22
Speaker 4: kind of laid out their expectations that this thing could
23:24
Speaker 4: be worth, you know, eighty two billion dollars in three years,
23:27
Speaker 4: which is quite the pie and the sky view. But
23:30
Speaker 4: when you look at kind of as you mentioned, the
23:32
Speaker 4: underlying growth has slowed. It's pretty much flat year over
23:36
Speaker 4: year based on their last annual sales, pointing to the
23:38
Speaker 4: global semiconductor kind of glut that we've been working through.
23:42
Speaker 4: They are exposed us to smartphones and home devices and
23:46
Speaker 4: not quite yet really penetrating that AI.
23:49
Speaker 1: So the pitch when they go on the road, the
23:51
Speaker 1: pitches we're a chip company for the phones, but we
23:55
Speaker 1: are going to be an AI chip company in the
23:58
Speaker 1: future and that's what you should be buying today exactly.
24:01
Speaker 4: And they're pitching it as we're getting into data centers,
24:04
Speaker 4: which we know with Nvidia has been so lucrative and
24:06
Speaker 4: is where a lot of that money comes from. So
24:08
Speaker 4: that's kind of the view of yes, we've done smartphones,
24:11
Speaker 4: but this is where it.
24:11
Speaker 1: Was not a clean deal. I mean, they got to
24:14
Speaker 1: do some heavy lifting here, which it just feels like
24:16
Speaker 1: cause I got slow in growth. I've got to buy
24:18
Speaker 1: off on this leap towards AI, which I don't really
24:22
Speaker 1: have much in the in the numbers right now, you know,
24:26
Speaker 1: I can't really look at the as Matt was pointing out,
24:29
Speaker 1: the soft Bank valuation, because that's probably not a good
24:32
Speaker 1: comp even though it just happened. So there's some headlines
24:35
Speaker 1: it just happened.
24:35
Speaker 2: The soft Bank valuation was for like sixty four billion,
24:38
Speaker 2: right yep, And they're going to come to market at
24:39
Speaker 2: what kind of valuation.
24:40
Speaker 4: Fifty four and a half right now as the current
24:42
Speaker 4: high end.
24:42
Speaker 1: Yeah, that's that's crazy.
24:44
Speaker 4: Well, the other risk that a lot of investors have
24:46
Speaker 4: pointed out is China. They generate about a quarter of
24:48
Speaker 4: their revenue from China through a ARM called ARM Technology,
24:52
Speaker 4: which isn't actually controlled by ARM or soft Bank, so
24:57
Speaker 4: it's kind of this standalone subsidiary with arms shareh So
25:00
Speaker 4: there is kind of a bit of a headwind not
25:02
Speaker 4: only with pitching that future vision, but also exposure to.
25:05
Speaker 1: All Right, so what's the timing of this thing is
25:07
Speaker 1: There're gonna be a traditional road show and September thirteenth, right,
25:11
Speaker 1: road shows kicked off, Okay.
25:12
Speaker 4: So we're gonna see about a week long road show
25:14
Speaker 4: pricing expected post So.
25:16
Speaker 1: They're not doing any virtual stuff. They're going the rubber
25:19
Speaker 1: Chicken in New York and London and so on.
25:21
Speaker 4: So what we're hearing, we're hearing there hitting the road,
25:23
Speaker 4: no more, no more zoom calls. So interesting to me.
25:26
Speaker 2: The more interesting IPO talk is around a Ramco, even
25:28
Speaker 2: though it kind of comes and goes. They could do
25:32
Speaker 2: not an IPO, but they could raise I guess in
25:33
Speaker 2: the secondary another fifty billion dollars.
25:37
Speaker 1: Wait, So a Ramco's talking about doing more stock.
25:39
Speaker 2: Well, I saw a story in the Journal, sorry Bailly,
25:42
Speaker 2: a couple of days ago that said A Ramco may
25:45
Speaker 2: come back to market now. To be fair, they in
25:47
Speaker 2: the Journal, I think, cited another story from Bloomberg back
25:51
Speaker 2: in March. Well bred story comes and goes, but it
25:53
Speaker 2: could be a massive.
25:56
Speaker 1: Capital race with brinkrud at ninety bucks a bottle I
26:00
Speaker 1: issue more stock, wouldn't you?
26:02
Speaker 4: They really want to.
26:03
Speaker 2: But the thing is they can't do it on other
26:04
Speaker 2: exchanges because they don't want that regulations.
26:06
Speaker 1: They have to do it in riod.
26:08
Speaker 4: Yeah, that's definitely an interesting, interesting company and kind of
26:11
Speaker 4: that the prospects of raising cash. Obviously there is kind
26:15
Speaker 4: of the push. Broadly speaking, for Saudi you're able to diversify,
26:18
Speaker 4: and that's why we've seen.
26:19
Speaker 2: All big numbers that would be the biggest amount of
26:22
Speaker 2: money ever raised selling shares, right, I mean stock is
26:25
Speaker 2: the biggest IPO is like ant Group or something, right, Yeah,
26:30
Speaker 2: like thirty four billion.
26:31
Speaker 1: Yeah, all right, we got so, we got so from
26:33
Speaker 1: your perspective, we've got ARM. How's the rest of the
26:35
Speaker 1: calendar look In the next four or five six weeks.
26:38
Speaker 4: We've got Instacart. Expectations will be bubbling. They filed their
26:42
Speaker 4: S one a few days after ARM, as did Clavio,
26:45
Speaker 4: which is another tech company. So these are two real
26:50
Speaker 4: tests of what IPO demand will look like. When I
26:52
Speaker 4: talk to a lot of investors in bankers, they kind
26:54
Speaker 4: of see ARM as a one off, just given it's
26:56
Speaker 4: a big company, it's profitable, it's was public at one song,
27:00
Speaker 4: whereas now you have Instacart hasn't been public, was really
27:03
Speaker 4: expected to go during the pandemic, but has taken quite
27:07
Speaker 4: some time. In Claviyow, which is another one which will
27:09
Speaker 4: be closely watched just to see how investors are valuing
27:13
Speaker 4: some of these technology companies, especially those that are primarily
27:16
Speaker 4: owned by venture capitalists, again as opposed to SoftBank, take private,
27:20
Speaker 4: bring back public.
27:21
Speaker 1: Yep, all right, lots of stuff. Bailly, thanks so much.
27:23
Speaker 4: Just stop it in.
27:24
Speaker 1: Billy Lipsholt season markets reporter for Bloomberg News, bringing us
27:28
Speaker 1: the latest on the deal calendar. One of the notable
27:32
Speaker 1: names is a Ramca is arm arm so that that
27:36
Speaker 1: chip maker, so be inchating to see how that plays
27:39
Speaker 1: in this market.
27:40
Speaker 6: You're listening to the Team ken'shur Live program Bloomberg Markets
27:44
Speaker 6: weekdays at ten am Eastern on Bloomberg dot com, the
27:47
Speaker 6: iHeartRadio app and the Bloomberg Business app, or listen on
27:50
Speaker 6: demand wherever you get your podcasts.
27:55
Speaker 1: All right, we were talking about oil again, Brent. I'll
27:57
Speaker 1: just quote the Brent stuff, ninety one dollars per barrel.
28:01
Speaker 1: It's up two and a quarter percent. I don't know
28:03
Speaker 1: what's going on. I guess it's supply and demand. But
28:06
Speaker 1: let's bring on Fernando Valley. He knows what's going on
28:08
Speaker 1: because we pay him to know what's going on. He
28:10
Speaker 1: is the energy analyst for Bloomberg Intelligence. Fernando, is it
28:13
Speaker 1: just the SADIS and OPEC buddies talking tough. Is is that
28:18
Speaker 1: what's driving this crewe to oil higher.
28:21
Speaker 11: Well, it's been a little bit of a better demand improvement,
28:24
Speaker 11: and then people like you, Paul, who think we're going
28:26
Speaker 11: to have a soft lending and lower interest rates creating
28:30
Speaker 11: some momentum behind oil, which frankly, I think is a
28:34
Speaker 11: little misplaced considering that the Chinese real estate market continues
28:39
Speaker 11: to deteriorate. And I'm with Matt, I think that the
28:43
Speaker 11: higher interest rates are here to stack.
28:46
Speaker 2: The Chinese did start a little bit of stimulus, a
28:49
Speaker 2: little bit more, I.
28:50
Speaker 1: Should say, right with.
28:53
Speaker 2: Foreign reserves cut at their banks, and they're giving money
28:57
Speaker 2: to people to pay for their kids and for their parents.
29:00
Speaker 2: And it's been this, as Eddie Vanderwold said, kind of
29:03
Speaker 2: a drip drip drip of stimulus. But is this part
29:06
Speaker 2: of part of the run up in the oil price?
29:10
Speaker 2: People think China's going to come back?
29:13
Speaker 11: Absolutely China. I mean China has come back, and in
29:16
Speaker 11: a lot of ways. If you look at just their imports,
29:19
Speaker 11: they are much stronger than they were during the COVID
29:23
Speaker 11: zero policy in twenty twenty two. But even then, we're
29:27
Speaker 11: seeing some declines in the US inventories and global inventories,
29:31
Speaker 11: but we're not seeing the pace of demand that you
29:33
Speaker 11: would expect in an oil bull market, especially in the
29:37
Speaker 11: Western hemisphere. And then you know, we can talk about
29:41
Speaker 11: how higher rates are going to affect investments elsewhere, and
29:46
Speaker 11: then the employment picture. All of those will be the
29:49
Speaker 11: ultimate determinant of oil for the remainder of the year,
29:53
Speaker 11: and we see cracks in that window.
29:57
Speaker 10: But I think in the short term it's.
29:58
Speaker 11: Been as you mentioned this, Muli, the supply cuts, Saudi
30:02
Speaker 11: extending supply cuts to September, and then some positive momentum
30:06
Speaker 11: on the US inventory sign.
30:08
Speaker 1: So, Fernando, how about our buddies in the fracking space.
30:11
Speaker 1: How come they're not out there drilling or fracking whatever
30:14
Speaker 1: they do to If I if I saw Wtech Crudel
30:17
Speaker 1: with eighty bucks eighty seven dollars a bottle, I'd be
30:19
Speaker 1: pumping more out.
30:21
Speaker 10: Well, I think it's one thing you mentioned interest rates.
30:25
Speaker 11: Yes, you're higher, so your cost to drill is significantly higher,
30:29
Speaker 11: especially for the private players. Data availability is much smaller
30:34
Speaker 11: as well. And then we've talked about this, but the
30:38
Speaker 11: efficiency and shale has really peaked. You know, our colleagues
30:42
Speaker 11: at Bloomberg, and you have just put out a report
30:44
Speaker 11: with the productivity per well and they're down versus twenty
30:49
Speaker 11: twenty two levels.
30:51
Speaker 4: Why is that, Well, it's.
30:53
Speaker 11: A combination of a drilled some of your best acredge b.
30:58
Speaker 11: You are not making the same advances if you go
31:01
Speaker 11: back just you know, over ten years, we've been drilling
31:04
Speaker 11: longer and longer wells. We've been increasing how many fracts
31:08
Speaker 11: stages as we call them, are placed in each well,
31:11
Speaker 11: and we kind of peaked because we've realized that the
31:14
Speaker 11: cost benefit of adding more going longer is not worth
31:19
Speaker 11: the price anymore.
31:20
Speaker 10: We kind of hit that sweet spot and then we're
31:25
Speaker 10: drilling out.
31:25
Speaker 11: We're going to further and further out regions that don't
31:28
Speaker 11: have the same positive geology as the core of the place.
31:33
Speaker 2: By the way, in terms of the spr which we
31:37
Speaker 2: ran down, I guess to save Americans from higher gas prices,
31:41
Speaker 2: maybe to win the midterm elections, whatever, are we gonna
31:45
Speaker 2: build that back up because it seems like we certainly
31:48
Speaker 2: missed the chance in terms of price.
31:51
Speaker 11: Well, there could be more chances. One thing that's certainly
31:55
Speaker 11: in oil is the cyclicality, So there will be chances,
31:58
Speaker 11: but we don't really need to consuming. We are, you know,
32:02
Speaker 11: thirteen million barrels a day of oil output. Our neighbors
32:05
Speaker 11: to North and Canada four million barrels. That all gives
32:09
Speaker 11: you a significant cushion that when we started growing the
32:13
Speaker 11: SPR to the levels that they were now, we didn't
32:16
Speaker 11: have the US was not the biggest oil producer in
32:18
Speaker 11: the world. When we built the SPR to those levels.
32:22
Speaker 11: They're also commercial inventory, so we have available crew to Still,
32:29
Speaker 11: the bigger concern is really some regions like the Northeast
32:33
Speaker 11: and their lack of diesel inventory, rather than crude itself.
32:37
Speaker 1: All right, does it surprise you or is it surprising
32:40
Speaker 1: to the market that OPEC plus, I guess has this
32:45
Speaker 1: level of impact on the market. I kind of there's
32:48
Speaker 1: a time when I thought OPEQ would maybe I had
32:50
Speaker 1: lost some of its power. OPEC plus I don't.
32:54
Speaker 10: Think that they are having that big impact.
32:56
Speaker 11: I think it's really China right now and the expectations
33:00
Speaker 11: of a soft landing that are driving. Of course they
33:03
Speaker 11: can in a market that is so teetering on supply
33:07
Speaker 11: in balances, cutting as much supply as they have will
33:11
Speaker 11: have a significant impact, but over the long term they
33:16
Speaker 11: can't fight the FED. They don't have the balance sheet
33:20
Speaker 11: and they don't have the unity required for them to
33:22
Speaker 11: fight the FED. If rates remain higher for a long
33:26
Speaker 11: period and drives lower investment.
33:28
Speaker 1: All right, If I'm an investor here, I kind of
33:31
Speaker 1: thought that the energy game was played out. I had
33:34
Speaker 1: my run in twenty twenty one, twenty two, kind of
33:37
Speaker 1: thought the game was played out. But no, the stocture
33:40
Speaker 1: rolling here. How do I play it? Do I just
33:42
Speaker 1: go out and buy Exxon Mobile or what are you know?
33:45
Speaker 1: Energy investors that you talked to, how are they playing this?
33:47
Speaker 1: Did this run up here?
33:49
Speaker 10: Well, that's one way there.
33:50
Speaker 11: You can also look at oil services because as we
33:53
Speaker 11: said that we are a bit more bearish in the
33:56
Speaker 11: short term because of the demand picture, but in the
33:58
Speaker 11: long term this underinvestment and the high rates are leading
34:01
Speaker 11: to further on their investment. You can't find that more
34:06
Speaker 11: areas will become commercial. So oil services and exploration might
34:10
Speaker 11: start coming back in twenty twenty four to twenty twenty five,
34:13
Speaker 11: And it might even be as your earlier conversations on
34:15
Speaker 11: Man United, it might be why the glaziers are waiting
34:18
Speaker 11: till twenty twenty five. If oil prices get to one hundred.
34:21
Speaker 11: Maybe the Saudi's will give him a better offer.
34:23
Speaker 1: Yeah, it's a good point, Yep, Saudi's are everywhere these days.
34:27
Speaker 5: Mo money.
34:28
Speaker 11: Also, they lost in my arsenal this weekend, so that's
34:30
Speaker 11: probably why they're down.
34:31
Speaker 1: That's right. Wait, what's arsenal?
34:33
Speaker 7: Is that?
34:33
Speaker 4: Are you a gunner?
34:35
Speaker 1: Yes?
34:35
Speaker 10: Yes, okay, see look at you.
34:37
Speaker 2: Well I've been listening to surveillance, so you know, I'm
34:39
Speaker 2: learning more and more about British soccer from Tom Keane.
34:42
Speaker 1: All right, so what's what's kind of the bear case here?
34:45
Speaker 1: Because I know if I talked to Mike mcgloon, your
34:47
Speaker 1: your colleague of Bloomberg Intelligence, he follows all commodities, including oil.
34:51
Speaker 1: He's bearish on oil. He thinks we go to fifty.
34:54
Speaker 1: What is the fundamental bear case for global energy?
34:59
Speaker 11: I think the fundament case is bearish for the global economy.
35:03
Speaker 11: And that's Mike's point, is that the Chinese real estate
35:06
Speaker 11: market could collapse and that would drag along a lot
35:10
Speaker 11: of different industries, from petrochemicals to oil. I still think
35:13
Speaker 11: that at the end of the day, the oil chain
35:16
Speaker 11: looks very attractive in a long term basis, But I
35:19
Speaker 11: agree with Mike the short term, demand will be the
35:21
Speaker 11: biggest driver. And you know, you just can't raise rates
35:25
Speaker 11: as quickly and as sharply as we did without an
35:28
Speaker 11: impact on consumption. And we're starting to see that. You know,
35:33
Speaker 11: it's just a matter of how if China gets the
35:36
Speaker 11: soft landing, that's the biggest variables. Not even the US
35:39
Speaker 11: is because we're already not having that grade of a
35:42
Speaker 11: soft landing. As far as gasoline consumption, diesel consumption, those
35:46
Speaker 11: numbers are already kind of dismal.
35:48
Speaker 2: Wow, yeah, all right, not for us, like for you
35:52
Speaker 2: and me and Tucker right right, we're still buying as
35:54
Speaker 2: much gas as we can.
35:56
Speaker 1: Yep, regular unleaded. That's a role for an end of value,
35:59
Speaker 1: you guys a little bit more. Yeah, all right, Fernando,
36:02
Speaker 1: we appreciate it for an end of all. Senior analyst
36:04
Speaker 1: covers all the energy space for Bloomberg Intelligence.
36:08
Speaker 6: You're listening to the tape can's our live program Bloomberg
36:12
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
36:15
Speaker 6: tune in app, Bloomberg dot Com, and.
36:17
Speaker 7: The Bloomberg Business App.
36:19
Speaker 6: You can also listen live on Amazon Alexa from our
36:21
Speaker 6: flagship New York station. Just say Alexa Play Bloomberg eleven thirty.
36:27
Speaker 2: Now we've been promising to talk to you about more
36:30
Speaker 2: about cars. Nice all, but from chips perspective. Nicole Dougal
36:35
Speaker 2: joins US senior VP and General manager for Automotive over
36:39
Speaker 2: at Qualcomm, and Nicole, thanks so much for your time.
36:44
Speaker 2: I'm guessing that Qualcom is one of the biggest automotive
36:47
Speaker 2: chip suppliers in the world.
36:48
Speaker 1: Lay out the market for us.
36:51
Speaker 12: You know, the card is going through a tremendous amount
36:53
Speaker 12: of disruption. It is becoming a software defined platform.
36:57
Speaker 9: And a big shift that is happening in.
37:00
Speaker 12: In the car, especially as it become electric, is the
37:03
Speaker 12: entire electrical architecture of the vehicle is changing. Bigger chips,
37:07
Speaker 12: more complicated chips, all software driven, and that has created
37:11
Speaker 12: a significant opportunity for us to be able to bring
37:14
Speaker 12: our technology, our differentiation.
37:16
Speaker 9: Into the space.
37:17
Speaker 1: I've been going to go ahead and Nicole.
37:20
Speaker 12: We are an autonomous driving we are driving the cockpit
37:23
Speaker 12: of the vehicle.
37:24
Speaker 9: We connect the car to the cloud. Big opportunity.
37:27
Speaker 1: So I was just saying to Matt, you know, I've
37:29
Speaker 1: been going to the Consumer Electronics show for about thirty
37:31
Speaker 1: years and it's really not even that anymore. It's basically
37:33
Speaker 1: an auto show in Vegas in Vegas with some electronics
37:38
Speaker 1: around it. That's really the auto industry is really take
37:40
Speaker 1: it over and it shows how technology is coming into
37:42
Speaker 1: the automobile. So, Nicole, from your perspective, from the Chips perspective,
37:47
Speaker 1: is the industry capable to meet the demand that this industry,
37:52
Speaker 1: that auto industry is going to really drive over the
37:54
Speaker 1: next five to ten years.
37:56
Speaker 9: Absolutely.
37:57
Speaker 12: I think, you know, the the pandemic definitely highlighted gap
38:04
Speaker 12: in the resilience of the supply chain, but I think
38:08
Speaker 12: every automaker and their suppliers.
38:10
Speaker 9: Have understood how to go deal with that.
38:13
Speaker 12: We now have direct relationships with pretty much all of
38:16
Speaker 12: our major automotive customers, and you know, supply chain is
38:21
Speaker 12: a very complex part of the automaker's overall business, so
38:26
Speaker 12: a deep understanding of that part of the.
38:28
Speaker 9: Business is needed.
38:29
Speaker 12: It has actually allowed us to build very intimate, very
38:31
Speaker 12: approximate relationship with our automaker customers.
38:35
Speaker 2: So talk to us about the products that you make,
38:37
Speaker 2: what they actually enable in a vehicle. You know, I've
38:42
Speaker 2: been seeing I go to all the auto shows r
38:45
Speaker 2: I did before I moved back here. To the US
38:47
Speaker 2: and I have been seeing Qualcomm at every one What
38:51
Speaker 2: do you make possible that we enjoy doing in cars?
38:55
Speaker 9: So we've been connecting the car to the cloud for
38:57
Speaker 9: over twenty years.
38:58
Speaker 12: That's been our core business, you know, wireless communications, and
39:01
Speaker 12: we entered the telematics market back.
39:03
Speaker 9: In two thousand and two.
39:05
Speaker 12: Most cars that are connected to the cloud today use
39:08
Speaker 12: a lot of Fi wireless technology. We have everything from
39:11
Speaker 12: five G Wi Fi navigation systems, powerline communication, Bluetooth. We
39:18
Speaker 12: entered the in car experience market.
39:21
Speaker 9: As we like to call it, which is the cockpit,
39:23
Speaker 9: which is the in car.
39:24
Speaker 12: Navigation, and this is a big business that has grown
39:28
Speaker 12: over the last decade or so. That's about creating an
39:32
Speaker 12: experience for the consumer that is owned by the automaker.
39:35
Speaker 12: So automakers are always looking to find a way to
39:38
Speaker 12: connect to their consumers, to be able to find differentiators
39:41
Speaker 12: that pull the consumers in. As cars have gone electric,
39:44
Speaker 12: you know, you can see all of the new vehicles
39:46
Speaker 12: being launched. There is a complete change in terms of
39:49
Speaker 12: how the in car experiences evolved.
39:51
Speaker 9: Ray at I here in Munich, we announced a partnership.
39:55
Speaker 12: We have cars now with BMW that are running our
39:58
Speaker 12: technologies for both the cockpit and connectivity.
40:02
Speaker 9: Same with Mercedes.
40:03
Speaker 12: Their latest E class is running our cockpit technology and chips.
40:07
Speaker 12: So this is a trend that has started to really
40:10
Speaker 12: take off globally. In a market like China, we are
40:14
Speaker 12: one of the largest suppliers of cockpit chips just because
40:17
Speaker 12: of the pace at which we can move the technology.
40:20
Speaker 12: And then we entered the air ass business driver assistance
40:22
Speaker 12: and automated driving about five years ago. We announced a
40:26
Speaker 12: partnership with the BMW theres a few years ago we
40:29
Speaker 12: were going.
40:29
Speaker 9: To go commercial with them in twenty five.
40:31
Speaker 12: So the amount of silicon and semiconductor tech that is
40:35
Speaker 12: going into vehicles that is really expanding, and we are
40:39
Speaker 12: the partner part of all of that growth.
40:42
Speaker 1: All Right, You have to ask you about, just because
40:44
Speaker 1: it seems like we have to everywhere artificial intelligence AI.
40:48
Speaker 1: How does that kind of weave into your business and
40:50
Speaker 1: the products you're providing to the auto industry.
40:54
Speaker 12: You know, AI is very much part of everything that
40:57
Speaker 12: we do in driver assistance.
40:59
Speaker 9: That is underlying technology.
41:01
Speaker 12: But the big opportunity that we are seeing as generative
41:04
Speaker 12: AI starts to become very relevant is how cockpits become
41:08
Speaker 12: more intelligent. Something that we are showing here at the
41:10
Speaker 12: show is how is an automaker as they make their
41:14
Speaker 12: enterprise much more intelligent. How do they define products that
41:19
Speaker 12: are natively intelligent? For example, if you were to design
41:22
Speaker 12: the next generation cockpit, would you be able to bring
41:26
Speaker 12: the user manual, which is typically something that you have
41:28
Speaker 12: as a physical copy in your vehicle. Can they just
41:31
Speaker 12: be downloaded into the vehicle. Is that something that the
41:34
Speaker 12: user can interact with. We started to have those conversations
41:37
Speaker 12: really fascinating how many different things an automaker can actually do.
41:41
Speaker 9: If they're able to go embrace AI across the board.
41:44
Speaker 12: The consumer experience inside the car is extremely different as
41:47
Speaker 12: you think about AI, because the car is used not
41:50
Speaker 12: just going not just to go from A to B,
41:53
Speaker 12: but also the experience that the.
41:54
Speaker 9: Consumer wants within the vehicle.
41:56
Speaker 12: What are they trying to do, What is the context
41:59
Speaker 12: around which they're trying to do that specific thing.
42:03
Speaker 9: You have camera input, you have voice input that it
42:05
Speaker 9: can provide with the vehicle.
42:07
Speaker 12: That lends to the possible to create a wide variety
42:09
Speaker 12: of experiences.
42:10
Speaker 9: And the silicon that we put into.
42:12
Speaker 12: Vehicles is already defined to actually have enough AI capability
42:18
Speaker 12: that customers can just start to go build on top
42:20
Speaker 12: of that and k and these experiences.
42:23
Speaker 2: So who are your competitors and where do you stand
42:27
Speaker 2: in this market? I mean, there are a lot of
42:28
Speaker 2: other uses for chips besides connecting to the cloud and
42:32
Speaker 2: talking on your phone and watching TV. I think of
42:35
Speaker 2: you know, throttle by wire, electronic steering, all the advanced
42:42
Speaker 2: driving assistance systems.
42:44
Speaker 1: Do you do that stuff as well?
42:46
Speaker 12: There is a wide variety of opportunity inside the automotive space,
42:50
Speaker 12: and we compete across, you know, So our primary focus
42:53
Speaker 12: areas are connectivity, cockpit system and driver assistant systems. That's
42:57
Speaker 12: where we see more most of our competitors. Outside of that,
43:01
Speaker 12: we are not participating in the powertrain space or in
43:04
Speaker 12: you know, the domain controller space today. So our focus
43:07
Speaker 12: area are basically those three areas that I described.
43:10
Speaker 1: How about you know, driverless driving? I mean, yeah, I
43:14
Speaker 1: was gonna ask the same thing.
43:15
Speaker 2: When are we going to Actually I know that in
43:17
Speaker 2: San Francisco right there are you know, autonomous vehicles operating
43:23
Speaker 2: as like.
43:23
Speaker 5: Ubers or whatever.
43:24
Speaker 4: But when are we going to start seeing this everywhere?
43:27
Speaker 4: Is it like ten years out or is it like
43:30
Speaker 4: two years out to look.
43:32
Speaker 12: The technology around robot taxis I think is well prog
43:36
Speaker 12: and waymore and crews have had this deployed for many
43:39
Speaker 12: years in San Francisco and also in many other parts
43:42
Speaker 12: of the world.
43:43
Speaker 9: I think it's really a combination of the business case
43:45
Speaker 9: and I think it's.
43:46
Speaker 12: A conversation around societal adoption off of rover taxi. I think,
43:52
Speaker 12: you know, this is something that is definitely going to
43:54
Speaker 12: take a little bit of time. There is a cultural
43:56
Speaker 12: adjustment that people have to get used to. Cities have
44:00
Speaker 12: to be able to understand what it means for robotaxi,
44:04
Speaker 12: something that is driverless to apply in terms of the
44:07
Speaker 12: utility value, in terms of the benefit, there are certainly
44:10
Speaker 12: many use cases where I could see a robotaxi making
44:13
Speaker 12: a huge difference in terms of its mass deployment in
44:17
Speaker 12: all of our cities. I think it is going to
44:19
Speaker 12: be a slower journey because there is really going to
44:22
Speaker 12: be a question of consumer adoption, city adoption.
44:25
Speaker 9: How do you get the.
44:29
Speaker 12: Changes that you have to make to infrastructure, changes that
44:31
Speaker 12: you have to make to regulation to be able to
44:34
Speaker 12: make this technology takeaway. But the great thing is that
44:36
Speaker 12: the underlying technology is actually quite mature, and now it
44:41
Speaker 12: is at a stage where as you start to go
44:43
Speaker 12: deploy it, you have to be able to figure out
44:45
Speaker 12: what the kings are and keep controlling so that journey
44:48
Speaker 12: is started, and I think the pace will vary depending
44:50
Speaker 12: upon which part of the world you're in.
44:52
Speaker 1: All Right, fascinating stuff, Nicole, Thank you so much for
44:55
Speaker 1: joining us. Nicole DeGale, Senior VP and general manager in
44:58
Speaker 1: the automotive business for all Calm the chip Maker.
45:01
Speaker 6: You're listening to the tape Ken's are Live program Bloomberg
45:04
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
45:08
Speaker 6: tune in app, Bloomberg dot Com.
45:10
Speaker 7: And the Bloomberg Business app.
45:11
Speaker 6: You can also listen live on Amazon Alexa from our
45:14
Speaker 6: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
45:20
Speaker 1: Well, if you're the big media companies out there in Hollywood,
45:22
Speaker 1: you've got a lot of big issues ahead of you,
45:24
Speaker 1: most notably the transition from the traditional distribution system of
45:28
Speaker 1: cable TV and satellites to now that this new technology
45:32
Speaker 1: called streaming, and that has a lot of long term
45:35
Speaker 1: challenges for the industry. More near term is you got
45:38
Speaker 1: some strikes on your hands.
45:39
Speaker 7: You got your.
45:39
Speaker 1: Writers striking, some actors striking, big, big challenge for Hollywood
45:45
Speaker 1: right now, Let's see kind of what the legal issues
45:47
Speaker 1: are and how they might be resolved. Katie Charleston joins us.
45:50
Speaker 1: She's a founder of Katie Charleston Law. Katie, thanks so
45:53
Speaker 1: much for joining us here. Can you just frame out
45:55
Speaker 1: what the big issues there are between the writers in
46:00
Speaker 1: the big then the studios absolutely thank you.
46:04
Speaker 13: For having me. The main issues that we're looking at
46:07
Speaker 13: between the writers and the actors and the production companies
46:11
Speaker 13: are AI. For one, the writers and actors are concerned
46:15
Speaker 13: with the use of artificial intelligence, which could potentially replace them,
46:20
Speaker 13: at least that's the fear. They are also concerned with residuals,
46:24
Speaker 13: which is a payment structure where typically they would receive
46:28
Speaker 13: residual payments every time a rerun was shown on broadcast television,
46:32
Speaker 13: which is different than what we have today in streaming.
46:35
Speaker 13: And the last main issue is that of compensation. They're
46:38
Speaker 13: looking for complete, a better and complete compensation package with
46:42
Speaker 13: higher salaries and health benefits included.
46:45
Speaker 1: So I can see I can understand both sides here.
46:48
Speaker 1: I mean, certainly from the creator's perspective, the actors, the
46:50
Speaker 1: writers this AI risk is just really you could paint
46:54
Speaker 1: it as existential. Here be that as I made though,
46:58
Speaker 1: I would think this is something that smart lawyers like
47:00
Speaker 1: yourself could create some language to protect them, no matter
47:03
Speaker 1: how the technology.
47:04
Speaker 13: Changes exactly, and that is really what should be happening.
47:10
Speaker 13: Artificial intelligence and its use in copying or duplicating the
47:14
Speaker 13: likeness of an individual will generally not fly. State law
47:18
Speaker 13: prohibits using the likeness of someone without their permission in general,
47:22
Speaker 13: But there are contract provisions right Each one of these
47:26
Speaker 13: writers and actors are able to negotiate their contracts and
47:29
Speaker 13: make sure that terms are in the contract that protects
47:33
Speaker 13: them from the use of their voice or likeness without
47:36
Speaker 13: their consent.
47:38
Speaker 1: Talk to us about copyright because I thought copyright is
47:41
Speaker 1: really for something to get copyright protection, I thought it
47:45
Speaker 1: has to be created by a human. Is that the
47:46
Speaker 1: case and how's AI fit into that?
47:50
Speaker 13: That is correct, and in fact, there was a recent federal
47:53
Speaker 13: court ruling that upheld a copyright the Copyright Office registration
47:59
Speaker 13: rejection and a piece of art that was generated by AI.
48:03
Speaker 13: And basically the general rule is that you can only
48:07
Speaker 13: get copyright registration if a work is created by a
48:10
Speaker 13: human and the production companies themselves are not going to
48:15
Speaker 13: want to use artificial intelligence like chat GPT or chasp
48:20
Speaker 13: dot AI or any of these other tools to basically
48:25
Speaker 13: replace the actors or writers themselves, because if there is
48:28
Speaker 13: not human authorship of these works, then the studios will
48:32
Speaker 13: not be able to make any money, right because they
48:33
Speaker 13: will not be able to get a copyright, which would
48:36
Speaker 13: then allow them to protect any kind of duplication or
48:40
Speaker 13: derivatives of their works, which brings them profit.
48:45
Speaker 1: So how about get the stuff that I mean writers
48:48
Speaker 1: and actors. They care about the compensation, of course, but
48:50
Speaker 1: they also care about awards, oscars and think things like that.
48:53
Speaker 1: Can artificial intelligence? You can't? You know, something written by
48:57
Speaker 1: AI is not eligible for any awards?
48:59
Speaker 7: Is it not?
49:01
Speaker 13: As of today? However, I suppose that could change in
49:04
Speaker 13: the future. But as of now, I mean, it is
49:07
Speaker 13: these actual writers and actors, the humans involved, that are
49:12
Speaker 13: nominated and given the awards.
49:14
Speaker 1: So again, it just seems to this outsider that this
49:17
Speaker 1: is also something that can be negotiated. Why do you
49:19
Speaker 1: think we got to this point where a they went
49:22
Speaker 1: on strike on strike for such a getting to be
49:24
Speaker 1: a long period of time.
49:25
Speaker 13: Now, well, there's some things that have happened over the
49:29
Speaker 13: last several months. I think that basically emotionally charged several
49:34
Speaker 13: groups of people. One being that there were some background
49:39
Speaker 13: actors that have come forward and said that they've been
49:42
Speaker 13: asked to be scanned completely so that they can be
49:48
Speaker 13: really duplicated and used without permission in perpetuity, meaning these actors,
49:53
Speaker 13: their identities will be used without any kind of compensation
49:57
Speaker 13: or terms involved. And so I think that's an emotion
50:00
Speaker 13: charge trigger point. And I think, well, it's it's a
50:03
Speaker 13: real fear for these people. You can see the genuine
50:05
Speaker 13: nature of the fear. It's unlikely that that will ever
50:08
Speaker 13: be something that's upheld, especially without the consent of the individual.
50:13
Speaker 13: And again it goes back to contract terms. But there
50:17
Speaker 13: there's also you know, these unions have tend to strike
50:22
Speaker 13: regularly over the years, and I think we're at a
50:24
Speaker 13: point where overall the nation's been touched by inflation, right,
50:30
Speaker 13: and these actors, group of actors that are sort of
50:33
Speaker 13: at the beginning stages of their career, really are being
50:36
Speaker 13: hit with the emotional charge and the lack of resources
50:40
Speaker 13: and the inflation all at one time. And they are
50:43
Speaker 13: being brought together by a larger group of individuals who
50:46
Speaker 13: are more established in the industry, if you will, these
50:49
Speaker 13: big name actors that are out there that really they're
50:53
Speaker 13: sort of out of touch what compensation with what compensation
50:56
Speaker 13: should look like. And so when you have these two
50:59
Speaker 13: forces together, along with the emotional triggers, it really will
51:03
Speaker 13: create something like we're facing today with this strike.
51:06
Speaker 1: Is there I mean, again, we're multiple weeks into the
51:09
Speaker 1: strike here. Is there any sense in Hollywood how long
51:12
Speaker 1: this will go when it can be resolved? Because now
51:14
Speaker 1: you're getting to the point where you know, shooting schedules
51:17
Speaker 1: are being materially adjusted here and it's real money for
51:20
Speaker 1: both sides.
51:22
Speaker 13: Sure, I mean, it could go on for quite a while.
51:25
Speaker 13: Warner Brothers Discovery announced this morning that their outlook for
51:29
Speaker 13: profits for the year are down by a projected five
51:32
Speaker 13: hundred million based on the strikes, and that sort of
51:37
Speaker 13: would assume that they're predicting that this will go through
51:40
Speaker 13: the end of the year, so you know, this could
51:42
Speaker 13: continue on. Really the two sides need to come together
51:45
Speaker 13: and talk. There are viable and reasonable arguments on both
51:49
Speaker 13: sides to be made. You've got these movie studios and
51:52
Speaker 13: production companies on one side, where you know, this is
51:55
Speaker 13: a business that's changing. It's an evolving industry where we're
51:59
Speaker 13: no longer looking at broadcast television where ads are generating
52:04
Speaker 13: these residual payments. We're looking at streaming services like Netflix
52:08
Speaker 13: and Hulu that allow subscription low payment subscription options without commercials,
52:15
Speaker 13: so they are not generating that ad revenue to pay
52:18
Speaker 13: these residual payments. And you know that overall, the industry
52:22
Speaker 13: just needs to come up with a better type of
52:24
Speaker 13: contract and that could take a while to negotiate.
52:27
Speaker 1: All right, we'll have to stay on top of this
52:29
Speaker 1: story again, major major news for the media companies and
52:32
Speaker 1: all the folks that work with them, all the stakeholders
52:35
Speaker 1: quite frankly involved in entertainment and content creation. Katie Charleston,
52:39
Speaker 1: she is the founder of Katie Charleston Law, getting us
52:42
Speaker 1: up to speed on some of the legal issues here.
52:44
Speaker 1: Again it's we saw as Katie was mentioning Warner Brothers,
52:47
Speaker 1: Discovery warns of five hundred million dollars hit to profit.
52:52
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52:55
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52:59
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53:05
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53:11
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