Latest / Bloomberg Intelligence / Fiat Chrysler Ahead Of The Pack In Transition To SUVs: Kudla

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Fiat Chrysler Ahead Of The Pack In Transition To SUVs: Kudla · Bloomberg Intelligence

0:05
Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.
0:08
Speaker 1: Along with my co host Lisa Bramowitz. Each day we
0:11
Speaker 1: bring you the most important, noteworthy, and useful interviews for
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Speaker 1: you and your money, whether you're at the grocery store
0:17
Speaker 1: or the trading floor. Find the Bloomberg P and L
0:20
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. The
0:32
Speaker 1: shares of Ford Motor Company. They are hired by nearly
0:35
Speaker 1: three percent after the company says it's going to get
0:38
Speaker 1: rid of its sedan production in the United States except
0:41
Speaker 1: for the Mustang. Here to tell us about the company
0:44
Speaker 1: and its investment prowess is David Coudla. He is founder,
0:47
Speaker 1: chief executive in chief investment strategist for Mainstay Capital. David,
0:52
Speaker 1: thanks very much for being with us. All Right, so
0:54
Speaker 1: you've got, uh, you know what, two billion under management.
0:59
Speaker 1: You get a all from a customer and they say,
1:01
Speaker 1: all right, they heard that Ford is cutting costs, they're
1:05
Speaker 1: getting out of making a loss making sedans, and they
1:10
Speaker 1: tweet to you at David Underscore Coodla, and they say,
1:13
Speaker 1: what should we do? Should we buy Ford stock? What
1:15
Speaker 1: do you say? Well, we have been neutral on the
1:22
Speaker 1: auto since domesticatos since Pecato in sten. What's interesting is
1:28
Speaker 1: we've remained on a plateau essentially between seventeen and seventeen
1:32
Speaker 1: a half million vehicles. So I think, with you know,
1:36
Speaker 1: the news that we have on the cost reductions coming
1:41
Speaker 1: and the the transition a very big transition from cars
1:47
Speaker 1: to SUVs and trucks, Ford is an attractive stock right now.
1:51
Speaker 1: So you'd recommend to buy I'd recommend to buy Ford
1:55
Speaker 1: if you remember Ford earlier this year. You know, during
1:57
Speaker 1: the correction the overall market um sold off pretty steeply
2:02
Speaker 1: and along with a lot of the socks, but even
2:05
Speaker 1: how to bigger sell off. But we think, yeah, we
2:07
Speaker 1: think right now, uh, the autos are looking very attractive,
2:11
Speaker 1: all of them. You know, this is what I want
2:13
Speaker 1: to get to. So how much are we seeing some
2:16
Speaker 1: sort of rebound from a lot of bad news baked
2:19
Speaker 1: into forward shares? How much has the overall backdrop of
2:23
Speaker 1: slowing sales, higher costs of metals that go into the
2:28
Speaker 1: production of these vehicles, and basically challenges across the globe
2:32
Speaker 1: from competing automakers. How much has that backdrop changed? Well,
2:39
Speaker 1: what's interesting, say with let's take forward in GM, the
2:43
Speaker 1: commodity prices are definitely affecting UH the input costs. When
2:49
Speaker 1: you look at the first quarter, Ford had almost five
2:52
Speaker 1: million in an increase in commodities cost GM UM. We
2:58
Speaker 1: also see the tax reform will be good for those
3:00
Speaker 1: companies UH as we look forward, though, again, what's interesting
3:05
Speaker 1: is is where we've traditionally had this this economic cycle
3:09
Speaker 1: with autos, the ramp up we reach Piccato come back
3:13
Speaker 1: down the other side. We've called for this plateau, and
3:15
Speaker 1: that's what we've seen. So they're continuing to make cars,
3:19
Speaker 1: make cars with a ratio that's biased more and more
3:24
Speaker 1: towards trucks and suv is the most profitable. David, if
3:30
Speaker 1: you had to choose between GM, Ford and f A
3:34
Speaker 1: Fiat Chrysler, do you choose one or do you buy all?
3:39
Speaker 1: I actually would choose Fiat Chrysler right now. And the
3:42
Speaker 1: reason is the transition that GM and Ford are making
3:45
Speaker 1: right now. And Ford made a very bold statement about
3:48
Speaker 1: this that they will be by only making the Mustang
3:52
Speaker 1: in the focused crossover vehicle. But UH, Fiat Chrysler has
3:56
Speaker 1: already done this. They've done this over the last two years.
3:59
Speaker 1: They're in the process around a cadence converting four plants
4:03
Speaker 1: from car production to truck and suv production. So we've
4:07
Speaker 1: seen that stock you know, do very well and they're
4:11
Speaker 1: really very well positioned right now already with uh that
4:16
Speaker 1: that bias towards truck and suv production over cars. All right,
4:21
Speaker 1: cbre recommending f c A instead of putting money into
4:25
Speaker 1: Ford or putting money into my topic right now would
4:28
Speaker 1: be okay. Um, what effect do you think that NAFTA
4:31
Speaker 1: trade talks are going to have on investments in the
4:33
Speaker 1: auto sector. Uh, It's it's still hard to tell because
4:37
Speaker 1: it's it's such a complex equation about how the uh
4:42
Speaker 1: you know, parts moved from between the three countries when
4:46
Speaker 1: they get integrated into the car where the cars eventually
4:49
Speaker 1: made and shipped. But uh, you know, overall, net net,
4:55
Speaker 1: it will be bad for the autos because it will
4:57
Speaker 1: it will disrupt the supply chain and potentially at costs.
5:01
Speaker 1: And that is just just parts moving within the same
5:03
Speaker 1: company or uh you know, or those parts from suppliers. David,
5:10
Speaker 1: I want to turn our attention a little bit to
5:12
Speaker 1: the credit side of things. Auto loans. The total outstanding
5:15
Speaker 1: has surged over the past eight years. Now it's starting
5:19
Speaker 1: to get more expensive to borrow given the increase in
5:22
Speaker 1: short term rates. I'm just wondering did any of the
5:25
Speaker 1: companies have they addressed their concern about sort of rising
5:29
Speaker 1: credit costs crimping demand. Well, there's only there's only so
5:35
Speaker 1: much they can do. We buy cars in America, we
5:39
Speaker 1: buy cars on credit. That's how cars are bought. So,
5:43
Speaker 1: you know, your your question is a very good one.
5:45
Speaker 1: Is of concern to the autos because we see the
5:48
Speaker 1: cost of credit, the cost of of cost of money
5:52
Speaker 1: is rising, is certainly rising, and uh, you know, we've
5:56
Speaker 1: seen what's happened to the amount of credit that we
6:00
Speaker 1: have in in the car industry. So that is one
6:02
Speaker 1: concern we have as we see the ten year bond
6:06
Speaker 1: UH now is not only touched, but moved a little
6:09
Speaker 1: bit behind, a little bit above yesterday. And we think
6:12
Speaker 1: rates continue to go up, cost of credit goes up,
6:15
Speaker 1: that will eventually start to take have an impact on
6:19
Speaker 1: on the way that we buy autos in the US,
6:21
Speaker 1: and it will have an adverse impact. Thank you so
6:25
Speaker 1: much for joining us. David Coudla, founder, chief executive officer
6:28
Speaker 1: in chief investment strategist at Mainstay Capital, coming to us
6:33
Speaker 1: from the auto capital of the nation in Michigan. Deutsche
6:51
Speaker 1: Bank another year another pledge to cut a vast amount
6:56
Speaker 1: of their staff joining us Now y'allman owner and senior financer,
7:00
Speaker 1: a writer for Bloomberg News. Yeahman, we've heard this before,
7:03
Speaker 1: Deutsche Bank reporting results and saying that they're going to
7:07
Speaker 1: significantly curb their presence in the US and Asia. Do
7:12
Speaker 1: you think that this time will really be the time
7:15
Speaker 1: when they do make the thousands of cuts that they're
7:17
Speaker 1: basically implying with this statement. You know, one of my
7:21
Speaker 1: favorite books is called this Time is Different But Um
7:25
Speaker 1: a couple of professors who tried to explain why we
7:28
Speaker 1: keep ending in financial crisis and looked at about two
7:32
Speaker 1: hundred crisis in the last five hundred years, and every
7:35
Speaker 1: time everybody says this time is different, We're gonna we're
7:38
Speaker 1: not gonna end up in crisis and things aren't gonna
7:40
Speaker 1: fall apart. We did it better, we have a new paradigm,
7:43
Speaker 1: and we end up in crisis. Um, So I don't
7:46
Speaker 1: it's hard to believe this time is going to be
7:48
Speaker 1: different because Deutche Bank has been saying these things over
7:52
Speaker 1: and over over the last many years. Um, and they
7:56
Speaker 1: don't and they don't deliver. I mean, this is the
7:58
Speaker 1: third CEO UM and you know, the previous CEOs have
8:03
Speaker 1: come up with similar plans, as I keep bringing up
8:07
Speaker 1: over and over every time we talked to Bank. You know,
8:10
Speaker 1: two three years ago, they said they're gonna cut cut
8:12
Speaker 1: ten thousand jobs in addition to getting rid of post Bank.
8:16
Speaker 1: They did not get rid of post Bank. They did
8:18
Speaker 1: not cut ten thousand jobs. And now they're saying they're
8:21
Speaker 1: gonna cut jobs. So they it's easy to say this,
8:25
Speaker 1: but it doesn't seem to be that easy to implement.
8:29
Speaker 1: And you know they want to excuse is Germany. They
8:31
Speaker 1: it's very hard to get rid of people. Okay, but
8:34
Speaker 1: they even bargain with the labor unions there and actually
8:37
Speaker 1: reached conclusions and actually were supposed to start cutting in
8:41
Speaker 1: Germany and that hasn't happened. And and the non German stuff,
8:45
Speaker 1: I mean, they could have done the non Germans, you know,
8:47
Speaker 1: the employee cuts before. They haven't. So they just say
8:52
Speaker 1: and this time they don't even have details. They don't
8:54
Speaker 1: even come up with a number, like we're gonna cut
8:56
Speaker 1: X number of jobs. They're like, this is gonna be significant.
8:59
Speaker 1: It's gonna be great. It sounds a little bit like
9:02
Speaker 1: our president. You know. Well, I don't want to go there.
9:05
Speaker 1: I want to go more into the details of Deutsche Bank.
9:08
Speaker 1: Why do you think they can't do this? They can,
9:12
Speaker 1: I'm not sure they will. I mean, that's the problem.
9:14
Speaker 1: But why, I mean, is it because they don't want to? Ultimately? Mean,
9:17
Speaker 1: they got what a little bit more than thousand on
9:20
Speaker 1: record employees. What is preventing the new chief executive, Christian
9:27
Speaker 1: saving from actually making the cuts? Uh? I don't know
9:32
Speaker 1: if anything is preventing them from doing it. So so
9:35
Speaker 1: why why it hasn't it happened under several previous CEOs?
9:39
Speaker 1: They've I've never heard a proper explanation. As I said,
9:43
Speaker 1: you know that the typical excuse was, you know, in
9:47
Speaker 1: Germany it's very hard to fire people, but even it's
9:50
Speaker 1: it's hard, but it's not impossible, and they're all the time,
9:53
Speaker 1: you know, every every meeting that the CEO or CFO
9:56
Speaker 1: or others other executives would say, you know, this is
9:58
Speaker 1: what we're doing with the the unions. And eventually they
10:02
Speaker 1: actually reached the agreements with the unions. We reported that
10:04
Speaker 1: are people in Germany reported all that and still they
10:07
Speaker 1: couldn't really get rid of people. So so I'm not
10:10
Speaker 1: sure what's keeping dots Bank from from implementing these plans
10:15
Speaker 1: that they announced over and over and over and and
10:17
Speaker 1: and this one doesn't even sound that significant. If if
10:21
Speaker 1: the number, the only number they've given is that they're
10:24
Speaker 1: going to bring down their share of Corporate and Investment Bank,
10:28
Speaker 1: which is their big investment bank unit, UH down to
10:32
Speaker 1: from fifty three, that doesn't sound amazing. You know, I
10:36
Speaker 1: wanna I want to broaden our our our sort of
10:38
Speaker 1: view a little bit, because barclay Is also reported earnings
10:41
Speaker 1: seem to demonstrate a shift towards taking on more risk
10:44
Speaker 1: and toward expanding its horizons. With Deutsche Bank, even let's
10:49
Speaker 1: say that they do go through their plan to reduce
10:50
Speaker 1: their footprint in the US and Asia, with this crimp
10:55
Speaker 1: their ability to get clients in Europe and more look
11:00
Speaker 1: in Germany because they don't have as proud of a
11:02
Speaker 1: reach possibly as I and again you know we have
11:07
Speaker 1: all three of us have talked about tot Bank before
11:10
Speaker 1: and then as I bring it up before, um, they
11:13
Speaker 1: it's dotcha bank is an investment bank. Um. If they're
11:16
Speaker 1: now deciding to become a retail bank. That's not their DNA,
11:20
Speaker 1: it's never been their DNA. Plus Germany, where their home
11:24
Speaker 1: base for retail banking is where post Bank is based
11:28
Speaker 1: and and there are other retail branches, is completely over
11:31
Speaker 1: banked and there's no money to be made in Germany
11:34
Speaker 1: in retail banking. Um so where so I hope they're
11:38
Speaker 1: still staying in investment banking. I don't think they're getting
11:41
Speaker 1: out of it. As I said, fifty three to fifty
11:44
Speaker 1: as share of revenue is really for me nothing, and
11:46
Speaker 1: some analysts during the call earlier today in Europe we're
11:51
Speaker 1: complaining that it's it's too little. They're not really doing anything.
11:54
Speaker 1: Um they need to they need to recover their DNA
11:58
Speaker 1: in investment banking, which has been their core strength for decades. Uh,
12:03
Speaker 1: they were the biggest European investment bank, and they've lost
12:06
Speaker 1: that title. They've lost everybody. They've lost the US banks
12:08
Speaker 1: ship market share, they've lost the other European rivals market share.
12:12
Speaker 1: So why and it's not about cost cutting. This is
12:15
Speaker 1: something else, and and that why they're unable to recover
12:19
Speaker 1: when even Barclays is recovering, not even I mean, but
12:22
Speaker 1: every bank. You know, they went through all the European
12:24
Speaker 1: banks went through a couple of years of bad you know,
12:28
Speaker 1: investment banking trading results. They regrouped, they fixed, figured out
12:33
Speaker 1: where they're strong, and they managed to get back on
12:36
Speaker 1: the business. Thank you very much, y'all. I'm an owner
12:38
Speaker 1: on a senior writer for banking and finance for Bloomberg
12:45
Speaker 1: how to invest in the healthcare sector by lending money
12:49
Speaker 1: to healthcare companies, companies that are looking to create innovations
12:53
Speaker 1: in healthcare. Here to help us understand this market is
12:56
Speaker 1: Scott Lee. He is a principle with c r P
12:59
Speaker 1: helping demandag Jazz had some more than three billion dollars.
13:02
Speaker 1: He joins us here in our eleven three oh studio. Scott,
13:04
Speaker 1: thanks very much for coming in. Maybe just give people
13:07
Speaker 1: a brief history of snopsis of a c RP because
13:11
Speaker 1: I know that one of your founders, Charles Tate, he
13:13
Speaker 1: stepped down from the firm. I guess it was last
13:15
Speaker 1: April two thousand seventeen. And uh, Mr Tate is one
13:21
Speaker 1: of the names that people may know because of the
13:23
Speaker 1: famous private equity firm Hicks muse Tate and first tell
13:29
Speaker 1: us about the company. Sure it's it's c RG and
13:32
Speaker 1: Charles was was our founder and still UH our chairman emeritus,
13:36
Speaker 1: and we're glad he's he's UH still part of the family. UH.
13:41
Speaker 1: The c RG is a healthcare focused investment firm. UM.
13:44
Speaker 1: We invest across suspective healthcare companies, from UM the most
13:48
Speaker 1: innovative technology companies in in healthcare to more traditional services companies,
13:53
Speaker 1: and we use credit as our tool to invest in
13:55
Speaker 1: those companies. UM. We we have an unofficial motto that
13:59
Speaker 1: everything healthcare takes more time and takes more money, and
14:03
Speaker 1: using credit as a tool does help us provide more
14:07
Speaker 1: capital and more time to companies. All right, Well, given
14:10
Speaker 1: the fact that you do a deep dive and you
14:12
Speaker 1: really do specialize in the health care industry, I'd love
14:14
Speaker 1: to hear your perspective on Walmart's potential acquisition of Humanity
14:19
Speaker 1: and just how some of the biggest companies are thinking
14:21
Speaker 1: about managing healthcare costs. What's your take on this? Well,
14:25
Speaker 1: I think if if Walmart does ultimately acquire Humanity or
14:29
Speaker 1: UH form a tighter partnership with Humanity, it would be
14:32
Speaker 1: a brilliant move for for Walmart. UM when they when
14:35
Speaker 1: you think through Humanity members, Walmart employees, Walmart shoppers, um
14:40
Speaker 1: everyone in their ecosystem. UM, they can have an influential
14:44
Speaker 1: role in directing where and how they get care and
14:47
Speaker 1: then ultimately where they buy their UH medications, which should
14:51
Speaker 1: be at all the Walmart locations around the country. UM.
14:54
Speaker 1: So in terms of managing healthcare costs, it's it's browing
14:57
Speaker 1: in terms of driving more volume in to the higher
15:00
Speaker 1: margin pharmacy segment for for Walmart. And we shouldn't forget
15:05
Speaker 1: that Walmart is one of the big s pharmacies in
15:06
Speaker 1: the country. UH, It's brilliant on multiple levels. I wonder
15:10
Speaker 1: if you could use an example of one of your deals,
15:13
Speaker 1: one of your investments. This is Dynavax and you or
15:16
Speaker 1: you can pick another one. But I just chose this
15:18
Speaker 1: because it's a big deal and it's about vaccines for
15:21
Speaker 1: hepatitis B, and I think it was a hundred and
15:24
Speaker 1: seventy five million dollar financing, And I wonder if you
15:27
Speaker 1: could just use as an example to kind of demonstrate
15:30
Speaker 1: what it is you look for and how do you
15:32
Speaker 1: go into determine whether it's an investment that you believe
15:35
Speaker 1: is worthwhile. Well, when we look at investments from a
15:38
Speaker 1: you know, from a high level we try to find
15:40
Speaker 1: companies that are addressing truly on met medical needs or
15:44
Speaker 1: are our bringing costs out of the system UM. And
15:47
Speaker 1: so if you look at Dynavax, and it's a company
15:49
Speaker 1: we're very excited about. They have a very UH novel
15:52
Speaker 1: be vaccine UM that is pretty differentiated relative to the
15:57
Speaker 1: existing heavy vaccines. They've got a very promising imun oncology
16:01
Speaker 1: pipeline as well, and so this is one where we
16:04
Speaker 1: truly believe they're addressing this on that need. If you
16:06
Speaker 1: look at another another investment of ours in a company
16:10
Speaker 1: called m d Live, which is a tele medicine company,
16:14
Speaker 1: a tell mess and platform that enables patients or customers
16:17
Speaker 1: to access a position a counselor a therapist, a dermatologist
16:23
Speaker 1: online and uh and and and big part of that
16:27
Speaker 1: value proposition is they're they're reducing costs in the system
16:30
Speaker 1: by allowing people to access care when they need it, UM,
16:33
Speaker 1: not to let things fester and then access care too late,
16:37
Speaker 1: UM and UM. And so that's that's one where we
16:40
Speaker 1: really believe it's bringing costs in the system down. So
16:42
Speaker 1: since you focus on credit, I want to focus on
16:45
Speaker 1: the pessimism UH that that credit investors are known for.
16:49
Speaker 1: And I'm wondering whether there are any investments that you've
16:51
Speaker 1: passed over or that you view as being perhaps overvalued
16:57
Speaker 1: right now as the entire healthcare industry shifts to a
17:00
Speaker 1: very different model. Well, I think, UM, healthcare is no
17:05
Speaker 1: different than other industries where people feel it's a little
17:07
Speaker 1: you know, the evaluations are frothy, UM. But I think
17:11
Speaker 1: the evaluations in healthcare don't quite move along with you know,
17:14
Speaker 1: the broader economy or the broader market. UM. I wouldn't
17:17
Speaker 1: say there are particular investments that we've passed over that
17:20
Speaker 1: that we would look at and say, wow, look at
17:22
Speaker 1: that valuation. Now, UM, there are always some that that
17:26
Speaker 1: we wish we investments we could have made. I mean,
17:29
Speaker 1: I mean things that you're cautious about right now, areas
17:32
Speaker 1: of the market that you think that you think could
17:34
Speaker 1: see a real synkol in the near future. Well within
17:37
Speaker 1: the healthcare ecosystem, absolutely. You know, one thing we are
17:40
Speaker 1: concerned about, um a qute care facilities for instance. UM,
17:45
Speaker 1: there is quite a bit of consolidation happening in that
17:49
Speaker 1: in that field, some of it for survival reasons as
17:54
Speaker 1: opposed for as opposed to have being for growth motivations
17:58
Speaker 1: and UM, it's it's in that industry. We we as
18:03
Speaker 1: a country were probably overbetted in terms of a Q
18:06
Speaker 1: care facility. So there's there's consolidation that needs to happen,
18:09
Speaker 1: there's rationalization that needs to happen. UM. And these are
18:11
Speaker 1: companies that tend to be pretty over levered. And so
18:14
Speaker 1: that's for so many different reasons in this scenario that
18:17
Speaker 1: we're staying away from right now. As a company that's
18:20
Speaker 1: focused on investing through credit, does it matter to you
18:24
Speaker 1: whether there is a big acquisition pipeline that perhaps you
18:28
Speaker 1: know big farmer companies or other medical or healthcare companies
18:32
Speaker 1: are looking to acquire some of your your credits. It's
18:36
Speaker 1: it's helpful from a few different perspectives. One we we
18:39
Speaker 1: we love it when companies have both organic and inorganic
18:42
Speaker 1: growth opportunities in front of them. UM. It's certainly from
18:45
Speaker 1: a credit underrating standpoint, makes things easier UM. But then
18:49
Speaker 1: also it's great when there are larger companies who could
18:52
Speaker 1: potentially acquire companies we invest in. Healthcare is always an
18:56
Speaker 1: active m and a market UM. Even during the recession
18:59
Speaker 1: tenure years ago, the most active sector tended to be
19:02
Speaker 1: you know, aside from financial services, the most active sector
19:04
Speaker 1: tended to be healthcare. I'm curious about Amazon. They seem
19:09
Speaker 1: to have dampened some of the potential threat of them
19:12
Speaker 1: moving into the healthcare industry from your discussions with some
19:15
Speaker 1: of these suppliers and smaller companies that you invest in.
19:18
Speaker 1: How real do they think the Amazon threat really is?
19:21
Speaker 1: I think I think the threat is real. The timing
19:24
Speaker 1: is uncertain. UM. You know, we talked about Walmart and
19:27
Speaker 1: I mentioned uh driving volume to their pharmacies for low cost,
19:31
Speaker 1: high bargin prescriptions. I think with fairly reasonable effort, Amazon
19:36
Speaker 1: could be a big player in that mark UM and
19:39
Speaker 1: create just another battleground with with Walmart and and so
19:42
Speaker 1: I think Amazon's ability to be a major player and
19:47
Speaker 1: and and and really drive volume to them is real
19:51
Speaker 1: in many different segments of healthcare. UM, it's really a
19:54
Speaker 1: matter of when they think it's important to them. And
19:57
Speaker 1: just in one word or one phrase, which companies stand
20:00
Speaker 1: to lose the most of Amazon if Amazon gains a
20:02
Speaker 1: foothold here, I would say, every PBM pharmacy benefit manager,
20:07
Speaker 1: all right, there you go, Scott Lee, thank you so
20:09
Speaker 1: much for being with us. Really appreciate your time. Scott
20:11
Speaker 1: Lee is principle of c r G, which oversees about
20:15
Speaker 1: three billion dollars in New York City. Remember was it
20:33
Speaker 1: yesterday when people were worried about the Fang stocks? I
20:36
Speaker 1: think it lasted for about two hours. Evidently they're not
20:39
Speaker 1: anymore because Facebook did fine and their shares are up
20:43
Speaker 1: up more than nine percent. And here to explain why
20:46
Speaker 1: everything is rosy and wonderful again, as Shura O v
20:48
Speaker 1: D bloombergad Flight technology columnist who's joining us here in
20:51
Speaker 1: our eleven three oh studios. So we are going to
20:54
Speaker 1: be getting Amazon earnings after the bell, so we can
20:58
Speaker 1: hold our breath a little bit. But is is this it?
21:01
Speaker 1: I mean, did Facebook basically sound the all clear and
21:03
Speaker 1: everyone's like that we were freaking out about regulation and
21:06
Speaker 1: it's fine. I think it was a little bit of
21:09
Speaker 1: a sigh of relief. I don't think we can say
21:11
Speaker 1: that Facebook is sort of in the clear and everything
21:14
Speaker 1: will be golden for the rest of Facebook's history. Look,
21:17
Speaker 1: the fact remains that Facebook continues to be a revenue
21:21
Speaker 1: generating machine. I was certainly surprised and impressed that revenue
21:25
Speaker 1: the revenue growth rate accelerated in the first quarter, which
21:29
Speaker 1: is pretty impressive for a company that already has forty
21:32
Speaker 1: billion plus an annual sales. So that is certainly something
21:36
Speaker 1: to be impressed by if you're a Facebook stockholder. On
21:39
Speaker 1: the other hand, you know, there are some niggling points
21:42
Speaker 1: of worry that all of these data privacy scandals and
21:45
Speaker 1: misinformation scandals and Facebook they're not going to have an
21:48
Speaker 1: impact on a business like Facebook right away, but they
21:51
Speaker 1: might slowly over time. So the two things that kind
21:54
Speaker 1: of bothered me was, first, Facebook posted its slowest ever
21:59
Speaker 1: rate of increase and daily users in the first quarter
22:02
Speaker 1: UM and that's something that's slowed down really noticeably over
22:06
Speaker 1: the last six months to a year, so that's worth
22:08
Speaker 1: worth watching. And the other thing was Facebook used to
22:11
Speaker 1: give UM an average number of minutes that its users
22:15
Speaker 1: spend on Facebook and Facebook owned properties every day, and
22:19
Speaker 1: the company doesn't give that number anymore, which I think
22:22
Speaker 1: is telling it's obviously not going up or not going
22:25
Speaker 1: up very much. Should we shift to Amazon dot Com
22:28
Speaker 1: because releasing their results after the close of trading today,
22:33
Speaker 1: a hundred million prime customers. That's a new piece of
22:36
Speaker 1: information for the quarter, right, Yeah, that's right. And what
22:39
Speaker 1: is going to be the thing people look at Amazon
22:41
Speaker 1: Web services. Are they going to announce where they're going
22:44
Speaker 1: to be spending more money? Are we going to have
22:45
Speaker 1: a new mobile Alexa in the home? Maybe? Um? Look,
22:50
Speaker 1: the story for Amazon is always the same, which is
22:55
Speaker 1: the company sells a lot of stuff every quarter, and
22:59
Speaker 1: they will, I suspect, continue to sell a lot of
23:02
Speaker 1: stuff in the first quarter that ended in March. And
23:05
Speaker 1: the question mark is always about how much is Amazon
23:08
Speaker 1: spending on new and existing business initiatives and how much
23:12
Speaker 1: do investors care or not care about that spending. So
23:16
Speaker 1: you know, Amazon keeps plowing ahead that they keep telling people,
23:20
Speaker 1: you know, we're spending a lot of money on things
23:21
Speaker 1: like package warehouses and on Alexa technology and on prime
23:26
Speaker 1: video programming and things like that. And sometimes investors notice,
23:30
Speaker 1: um and care about that level of spending, and sometimes
23:33
Speaker 1: they don't. And it's a little bit hard to predict, um,
23:36
Speaker 1: which one it will be this time around? What's the
23:38
Speaker 1: track record with the Amazon sort of laying out their
23:41
Speaker 1: future plans, because I know there's so many questions about
23:44
Speaker 1: here shrugging and rolling your eyes and they um at Amazon,
23:48
Speaker 1: whether they're gonna get to healthcare or what they're going
23:51
Speaker 1: to do with the Whole Foods kind of uh empire
23:54
Speaker 1: that they've acquired. What are you expecting this time? So
23:56
Speaker 1: Amazon says almost nothing about its future plans. I mean,
23:59
Speaker 1: it's really know common well, people care, but there's nothing.
24:04
Speaker 1: I don't think there's anything anyone can do about it.
24:06
Speaker 1: That they're comically secretive about future projects, which is not
24:11
Speaker 1: not unusual. I would think, Um, they have been talking
24:15
Speaker 1: a little bit more about Whole Foods recently, and you
24:19
Speaker 1: know there's clearly this this vision that they hint at
24:22
Speaker 1: about trying to stitch together Amazon's various kind of fresh
24:26
Speaker 1: food and and packaged food businesses. So right now Amazon
24:30
Speaker 1: has this kind of jumble of food projects. So they
24:34
Speaker 1: own Whole Foods. They have Amazon Fresh, which is a
24:36
Speaker 1: ten year old plus gross online grocery delivery service. They
24:40
Speaker 1: have Pantry, which is you know, you buy a bunch
24:43
Speaker 1: of nonperishable goods on Amazon and get chipped in a
24:46
Speaker 1: box for subscription fee. Um. They have Prime now you
24:50
Speaker 1: get deliveries in a couple of hours or an hour
24:54
Speaker 1: or less. Again that's often food stuff. They have a
24:56
Speaker 1: restaurant delivery service, and they've hinted at least a little bit,
25:00
Speaker 1: and ways to kind of stitch that together and rationalize
25:03
Speaker 1: this jumble of food related projects. Um, but I don't
25:07
Speaker 1: know that we've sort of seen all of that laid
25:09
Speaker 1: out directly. Let's do some Apple, right. You're concerned that
25:14
Speaker 1: the trends for Apple are not as favorable as they
25:18
Speaker 1: used to be. Yeah, well, we're now in this So
25:20
Speaker 1: Apple reports earnings on Tuesday, that's right next week, and
25:25
Speaker 1: we're now in this period that seems to happen in
25:28
Speaker 1: the week or two ahead of every Apple earnings report
25:31
Speaker 1: in the last year, which is investors have gotten panicky
25:35
Speaker 1: about the trajectory, the potential trajectory of iPhone sales. So
25:38
Speaker 1: we've seen the last few days companies that either manufacture
25:42
Speaker 1: iPhones or supply components for iPhones, a lot of them
25:46
Speaker 1: have reported a little bit of weakness in sales or
25:49
Speaker 1: forecasted sales. So Samsung, for example, said yesterday that the
25:55
Speaker 1: particular kind of screens that it makes that are used
25:59
Speaker 1: in the i Phone ten models, that it's it's seeing
26:03
Speaker 1: some softness in demand. That's an organic light emitting diabyst
26:07
Speaker 1: O lead for the screen and nerds out there. And
26:10
Speaker 1: so there was another data point for people who are
26:13
Speaker 1: a little bit anxious about what iPhone sales are going
26:17
Speaker 1: to be, maybe not for the March quarter that Apple's
26:19
Speaker 1: reporting on Tuesday, but maybe for the June quarter. So
26:22
Speaker 1: you're starting to see Apple share price wobbled a little
26:24
Speaker 1: bit the last few days. And then also the estimates
26:28
Speaker 1: from analysts have been paired back, and it's just more
26:31
Speaker 1: of this kind of anxiety about you know, look what's
26:35
Speaker 1: happening to smartphone sales across the industry. They have slowed
26:38
Speaker 1: to a crawl. So I have any analysts who cover
26:41
Speaker 1: Apple actually recommended to sell That's interesting. I haven't looked
26:45
Speaker 1: in a little while. There. It's not. They're built up
26:48
Speaker 1: and happy to go. Yeah, although they're getting less bullish
26:52
Speaker 1: over time. But I don't know that too many people
26:54
Speaker 1: are out on a limb saying So I guess that
26:56
Speaker 1: my question, no cells. You've got sixteen holes into eight byes,
27:00
Speaker 1: all right, So I mean a hole is sort of
27:02
Speaker 1: a cell by Wall Street great inflation. Well, I mean
27:05
Speaker 1: I guess the reason why I ask is that you know,
27:07
Speaker 1: at what point does a slowdown and smartphone sales translate
27:12
Speaker 1: into a cell signal? And at what point is that
27:15
Speaker 1: just this might not be as much of a behemoth
27:17
Speaker 1: as we once thought. I think that's a fair question.
27:19
Speaker 1: I mean, look, the smart thing that Apple has done
27:23
Speaker 1: is they've done a lot of things to offset this
27:25
Speaker 1: trend of slowing smartphone sales. They're charging higher prices for
27:28
Speaker 1: a lot of their phones. They're focusing on new kinds
27:32
Speaker 1: of either add on hardware like air pods, like the
27:35
Speaker 1: HomePod speakers, or their internet services business, whether it's Apple
27:40
Speaker 1: Music or other things, and those things can help offset
27:44
Speaker 1: revenue if unit sales of iPhones are kind of flatlining.
27:49
Speaker 1: So you know, good for Apple for sustaining growth that way.
27:52
Speaker 1: Apple Watch, Um, Apple Watch. It's weird that a business
27:58
Speaker 1: like Apple watches almost a footnote, right, It's looking definitely
28:01
Speaker 1: an important business. We don't know exactly how many Apple
28:04
Speaker 1: watches are sold. Apple doesn't disclose it, but it's probably
28:08
Speaker 1: a five or six billion a year annual business, which
28:13
Speaker 1: is nice chunk of change for most companies, but again,
28:17
Speaker 1: kind of a drop in the bucket for a company
28:18
Speaker 1: of Apple size. Thank you very much. Shara Overday technology
28:22
Speaker 1: columnist Bloomberg a gadfly. Follow all her comments and her
28:26
Speaker 1: thoughts on Twitter at Shira over Day. Coming up, We've
28:30
Speaker 1: got a Bloomberg Politics, Policy, Power and Law with Amy Morris.
28:33
Speaker 1: Amy Morris, tell us what have we got to look
28:35
Speaker 1: forward to? The former Labor Secretary nominee has written a
28:38
Speaker 1: new book. We'll be talking with Andy put. We're gonna
28:41
Speaker 1: be listening. That's coming up right here on Bloomberg Politics, Policy,
28:45
Speaker 1: Power and Law. Thanks for listening. I'm Pim Fox, my
28:48
Speaker 1: colleague and co host Lisa Abramowitz. Thanks for listening to
28:54
Speaker 1: the Bloomberg P and L podcast. You can subscribe and
28:57
Speaker 1: listen to interviews at Apple Podcasts, sound Cloud, or whatever
29:00
Speaker 1: podcast platform you prefer. I'm Pim Fox. I'm on Twitter
29:04
Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo wits
29:08
Speaker 1: one Before the podcast. You can always catch us worldwide
29:11
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