Latest / Bloomberg Intelligence / China, Real Estate, General Motors, and Roblox (Podcast)

Transcript

China, Real Estate, General Motors, and Roblox (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,
0:09
Speaker 2: and Bloomberg experts, along with essential market moving news.
0:14
Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever
0:17
Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
0:21
Speaker 1: One of the stories markets are dealing with today is
0:23
Speaker 1: some economic data coming out of China a little bit disappointing.
0:26
Speaker 1: Consumer and producer prices fell together for the first time
0:30
Speaker 1: in twenty twenty eight deflation deflation cycle. You could call
0:33
Speaker 1: it Tom Orlick. He knows a thing or two about China.
0:36
Speaker 1: He lived and worked in Beijing for many years. He
0:38
Speaker 1: is the chief economist for Bloomberg Economics. He joins us
0:41
Speaker 1: via zoom. Hey, Tom, you know, when we all came
0:44
Speaker 1: into twenty twenty three, I think most companies, most countries
0:48
Speaker 1: around the world said, hey, one of the stories of
0:50
Speaker 1: twenty twenty three is it going to be China reopening
0:52
Speaker 1: and that's going to be good for the global economy.
0:55
Speaker 1: That's not really playing out? Is it tell us what's
0:57
Speaker 1: going on with China and its economy.
1:00
Speaker 3: So I think that's right, Paul. If we go back
1:03
Speaker 3: to the end of twenty twenty two start of twenty
1:04
Speaker 3: twenty three, there was a lot of optimism. China exited
1:08
Speaker 3: its COVID lockdowns quicker than most people expected, and the
1:12
Speaker 3: rebound in the first quarter was stronger than most people expected.
1:16
Speaker 3: What we're seeing though, as we pushed into the second
1:18
Speaker 3: half of the year is that rebound really didn't have legs,
1:22
Speaker 3: and very quickly the story on China blung back to
1:25
Speaker 3: all of those significant structural problems. High debt, massive overcapacity
1:30
Speaker 3: in the real estate sector, growing tensions in relations with
1:33
Speaker 3: the United States, demographic drag, and these factors are dragging
1:37
Speaker 3: on growth, and they're also, as you know, dragging on prices.
1:42
Speaker 3: So in addition to all of those structural problems, China
1:44
Speaker 3: now battling with deflation as well.
1:47
Speaker 4: Also consumer spending not being quite as strong as economists
1:50
Speaker 4: were anticipating. Why is that.
1:53
Speaker 5: So?
1:54
Speaker 3: I think when you think about the household consumption story,
1:58
Speaker 3: there's a couple of significant challenges. So the first challenge is, well,
2:02
Speaker 3: when the economy is not doing very well, then households
2:06
Speaker 3: don't have big earnings growth, they don't have confidence in
2:08
Speaker 3: their future earnings, and that weighs on their consumption. You've
2:12
Speaker 3: probably seen the twenty percent use unemployment in China right now.
2:16
Speaker 3: If young people are worried about being unemployed, they're not
2:19
Speaker 3: going to be hitting the shops. They're not going to
2:20
Speaker 3: be spending on tauboo. The second big problem is that
2:24
Speaker 3: China's households have a lot of their wealth tied up
2:26
Speaker 3: in real estate, and when real estate prices were rising
2:30
Speaker 3: as they did for much of the last twenty years,
2:32
Speaker 3: well households felt richer. They wanted to go and spend
2:35
Speaker 3: some of that wealth. Now huge uncertainty about the real
2:39
Speaker 3: estate sector and prices in some secondier cities already heading down.
2:43
Speaker 3: That's a blow to household wealth. Means they're less likely
2:46
Speaker 3: to spend.
2:47
Speaker 1: Hey, Tom, some of these headwinds you're highlighting here, they
2:50
Speaker 1: seem pretty in long term in trench, not something easily fixed.
2:55
Speaker 1: What in fact can the government do and will the
2:59
Speaker 1: government do so?
3:01
Speaker 3: We've already seen the government starting to shift policy. We've
3:05
Speaker 3: seen mini rate cut by the PBOC. We've seen the
3:09
Speaker 3: PBOC China Central Bank also encouraging the commercial banks to
3:13
Speaker 3: guide mortgage rates lower. That's meant to give a bit
3:16
Speaker 3: more deuce to the real estate sector. We've heard the
3:19
Speaker 3: government talk about the importance of boosting consumption so far,
3:24
Speaker 3: though whilst there's been a sort of a steady drumbeat
3:28
Speaker 3: of pro growth policy announcements, it's really not adding up
3:33
Speaker 3: to the size of stimulus which I think markets are
3:35
Speaker 3: looking for to turn the short term narrative on China around.
3:39
Speaker 4: China is the world's, as you know, second largest economy
3:43
Speaker 4: behind the United States. How much of an issue with
3:46
Speaker 4: this slowing growth could it have more globally when you
3:48
Speaker 4: have the US seeing obviously when you think about these
3:50
Speaker 4: inflation numbers, we're getting another reading tomorrow with CPI but improving.
3:56
Speaker 3: Yes. So if we come back to the beginning of
3:59
Speaker 3: the year, there was a fear that a surging Chinese
4:04
Speaker 3: recovery would be great news for China, but by reducing
4:08
Speaker 3: commodity prices, by pushing up prices for oil and soft
4:13
Speaker 3: commodities like soybeans, it could give extra legs to the
4:17
Speaker 3: global inflation story, and that potentially could keep the FED
4:21
Speaker 3: and the ECB and the Bank of England hiking for
4:24
Speaker 3: longer than they would otherwise have had to do. Well
4:28
Speaker 3: here we are at the start of August, and the
4:30
Speaker 3: Chinese economy is pretty clearly run out of steam, and
4:33
Speaker 3: the stimulus so far has been not entirely missing in action,
4:38
Speaker 3: but still not adequate to the task. What that means
4:42
Speaker 3: is that impulse to global commodity prices, if anything, is
4:45
Speaker 3: in the other direction. So China isn't making the FEDS
4:48
Speaker 3: job harder by adding to global inflation, if anything, is
4:52
Speaker 3: making it a little bit easier by subtracting from global inflation.
4:56
Speaker 4: Do you think that investors in the US are too
4:58
Speaker 4: optimistic about a soft landed and maybe not thinking about
5:01
Speaker 4: some of the issues that are potentially going on in
5:03
Speaker 4: China and how that could obviously affect, like you were
5:05
Speaker 4: talking about the Fed's interest rate path.
5:09
Speaker 3: That's a really good question. I mean, I think there's
5:11
Speaker 3: just a lot of optimism about about the US right now,
5:16
Speaker 3: and clearly a bunch of the recent data sort of
5:20
Speaker 3: supports that soft landing narrative. Inflation has been coming down,
5:25
Speaker 3: labor markets have remained remarkably robust. At the same time,
5:30
Speaker 3: if we think about some of the dynamics in the
5:32
Speaker 3: United States, if we think about what's happening with credit
5:36
Speaker 3: growth and bank's willingness to make loans. If we think
5:39
Speaker 3: about about the amount of distress amongst household borrowers, there
5:43
Speaker 3: are some early indicators supporting continuing to support a hard
5:48
Speaker 3: landing narrative here, and then if we think more broadly,
5:52
Speaker 3: if we think around the world, well, China's growth slowing
5:56
Speaker 3: is giving the Fed a bit of an assist on
5:58
Speaker 3: controlling inflation, but a slumping Chinese economy is clearly not
6:03
Speaker 3: good news for global growth.
6:05
Speaker 1: Hey, Tom. Over the last several years, the Chinese government
6:08
Speaker 1: really cracked down on some of the tech companies, the
6:12
Speaker 1: leading technology companies in China that had listed their shares
6:16
Speaker 1: in the West, costing a lot of investors, including Western investors,
6:19
Speaker 1: a lot of money in losses. Is there any sense
6:23
Speaker 1: that that crackdown upon some of the big tech companies
6:26
Speaker 1: in China is contributing to maybe a softer than expected
6:29
Speaker 1: kind of reopening.
6:31
Speaker 3: Yeah. So, I think that the investors in the West
6:34
Speaker 3: didn't get the story on China's tech crackdown quite right.
6:39
Speaker 3: I think the view on Wall Street was this is
6:42
Speaker 3: hijin Ping against the entrepreneurs, this is the communist party
6:46
Speaker 3: against the markets. I think, in fact, what China was
6:49
Speaker 3: trying to do was wrestle with some of the big
6:52
Speaker 3: problems which governments in the US and Europe wrestled with
6:55
Speaker 3: as well. They were wrestling with the problem of excess
6:58
Speaker 3: power tech monopolies, wrestling with the problem of what's doing
7:03
Speaker 3: in information economy where big tech companies have so much
7:06
Speaker 3: access to data on everyone's lives. They did that in
7:10
Speaker 3: a way which am with the share price for these companies,
7:14
Speaker 3: but that wasn't the objective, right, they were trying to
7:16
Speaker 3: deal with these deeper social problems. Still, that added to
7:20
Speaker 3: the sense of malaise in China's economy, and it's also
7:23
Speaker 3: an area where Chinese policy makers have now pivoted right.
7:26
Speaker 3: So we've seen Lee Chang, Chine's premier, and other senior
7:30
Speaker 3: leaders out over the last few weeks saying, you know what,
7:34
Speaker 3: we get it. We understand that these big tech companies
7:37
Speaker 3: are drivers of growth, drivers of productivity, drivers of jobs,
7:41
Speaker 3: and whilst we don't want to let them run rier,
7:42
Speaker 3: we're not going to let them gauge the rest of
7:44
Speaker 3: the economy with their monopoly power. We do want them
7:47
Speaker 3: to succeed. So that's part of the policy pivot. Let's
7:50
Speaker 3: see in the next few weeks, if that starts to gain.
7:53
Speaker 4: Traction, what are your forecast for China's GDP growth for
7:56
Speaker 4: this year?
7:58
Speaker 3: So it's funny you look at the forecast for growth
8:01
Speaker 3: this year. It's really remarkably the headline numbers remarkably robust. Right.
8:06
Speaker 3: We still think that China is going to grow above
8:09
Speaker 3: five percent this year, and that's pretty much the consensus. Unfortunately,
8:15
Speaker 3: the reason for that five percent growth is not because
8:18
Speaker 3: China's got robust momentum. It's just because twenty twenty two
8:21
Speaker 3: was so disastrous. Right in twenty twenty two, we had
8:25
Speaker 3: Shanghai being locked down, we had other big parts of
8:28
Speaker 3: the country being lockdown. COVID was still a really big
8:31
Speaker 3: drag on activity. When those controls were removed at the
8:35
Speaker 3: end of twenty twenty two, we had activity surging back.
8:38
Speaker 5: Ye.
8:39
Speaker 3: What that means is we have the sort of artificial
8:41
Speaker 3: impression of very strong growth this year. In fact, it's
8:45
Speaker 3: just the base effect from those COVID lockdowns last year.
8:48
Speaker 3: The reality is much more sluggish.
8:50
Speaker 1: Tom, Thanks so much for giving us some of your time.
8:52
Speaker 1: We really appreciate getting your perspective. We know you lived
8:54
Speaker 1: and worked in Beijing for many years, so you have
8:57
Speaker 1: a unique person on the ground type of perspective, or
9:00
Speaker 1: he's a chief economist for Bloomberg Economics, joining us via
9:04
Speaker 1: zoom from Washington, DC. Again, the weaker economy in China
9:08
Speaker 1: probably not what the markets were anticipating coming into.
9:11
Speaker 4: The year and what that means potentially for the Fed.
9:13
Speaker 4: And we do think they are close to being done
9:15
Speaker 4: with their tightenings campaign.
9:16
Speaker 6: Yep, you're listening to the team. Ken's a our live program,
9:20
Speaker 6: Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com,
9:24
Speaker 6: the iHeartRadio app and the Bloomberg Business App, or listen
9:27
Speaker 6: on demand wherever you get your podcasts.
9:31
Speaker 1: All right, one of the big news items over the
9:33
Speaker 1: last twenty four hours was in the gaming space and
9:36
Speaker 1: evolving one of our favorite companies with Walt Disney Company
9:39
Speaker 1: doing a deal with Penn Entertainment and kind of getting
9:45
Speaker 1: into the sports betting business all in. It's amazing how
9:48
Speaker 1: that business has changed over the last three or four years.
9:51
Speaker 1: Let's round table with a couple of smart people that
9:53
Speaker 1: we happen to know. Githa Rang Andathan. She covers the
9:55
Speaker 1: media industry, including the Walt Disney Company for Bloomberg Intelligence,
10:00
Speaker 1: just to via Zoom and Brian Egger. He covers all
10:02
Speaker 1: the gaming stocks. He's been covering the gaming stocks for
10:05
Speaker 1: decades on Wall Street, starting back in DLJ, maybe even
10:09
Speaker 1: somewhere before, back in the day. We'll get a sense
10:11
Speaker 1: of what it means for the gaming space, he joins
10:13
Speaker 1: us here in a Bloomberg Interactive Broker studio. Githa, let's
10:16
Speaker 1: start with you here. Is it surprising to you that Disney,
10:20
Speaker 1: Mickey Mouse, Wholesome Walt Disney Company is getting into the
10:25
Speaker 1: sports betting business.
10:27
Speaker 7: Yeah, I mean this has kind of been this question always, Paul.
10:31
Speaker 7: You know, obviously Bob Iger and the Disney management team
10:34
Speaker 7: have always kind of wanted to keep that squeaky clean,
10:38
Speaker 7: you know, family friendly image and didn't really want to
10:40
Speaker 7: get into sports betting directly. And you know, Brian Eggers
10:45
Speaker 7: has told me so many times it's it's very difficult.
10:47
Speaker 7: You know that the sports betting business. Owning a sportsbook
10:50
Speaker 7: directly is very difficult. It's fraught with a lot of
10:53
Speaker 7: operational a lot of regulatory challenges, and so this kind
10:56
Speaker 7: of gives them nice exposures. So it kind of you know,
11:00
Speaker 7: they're getting that one and a half billion dollars in
11:02
Speaker 7: cash the five hundred million in stock options. So it
11:05
Speaker 7: gives them a good exposure without getting directly involved, and
11:10
Speaker 7: it kind of tells us that ESPN the brand definitely
11:12
Speaker 7: does have value. That is a question that some of
11:15
Speaker 7: the investors did have, and this kind of puts to
11:17
Speaker 7: rest any of those fears.
11:19
Speaker 4: Brian, I want to bring you into this conversation when
11:21
Speaker 4: you're looking at this deal here, how does this translate
11:24
Speaker 4: into what you think shareholders will want to see from
11:28
Speaker 4: this moving forward?
11:29
Speaker 8: So the pre existing bars sportsbook deal never really garner
11:33
Speaker 8: more than a mid single digit share in the sixteen
11:36
Speaker 8: states where Barstool Sportsbook have been active. This has the
11:41
Speaker 8: potential to be a much larger generating deal. Now, of course,
11:45
Speaker 8: it will involve Pen putting up a billion, basically a
11:49
Speaker 8: billion five to two billion dollars in commitments for marketing
11:52
Speaker 8: and other things. Basically to get that and rebrand all
11:56
Speaker 8: those Barstool sports books as ESPN much much more promising,
11:59
Speaker 8: and they are thinking about long term EBIT top potential
12:02
Speaker 8: annually of five hundred million dollars to billion dollars. We're
12:06
Speaker 8: going to still take some time to work the numbers
12:08
Speaker 8: on that, but that's really where the opportunity is because
12:11
Speaker 8: ESPN is such a coveted brand. Well, I should mention
12:15
Speaker 8: other media companies that have endeavored to team up with
12:17
Speaker 8: sportsbooks have had a tough time breaking through and taking
12:22
Speaker 8: on the likes of Draftkingks and FanDuel.
12:23
Speaker 4: Why has that been such a challenge.
12:26
Speaker 8: I think it's just a fairly competitive business with a
12:28
Speaker 8: lot of upfront customer acquisitions costs, and the more native operators.
12:34
Speaker 8: You know, you have draftkingks and fando which have been
12:36
Speaker 8: daily fantasy sports operators. You have the likes of bet
12:38
Speaker 8: MGM and Caesars, which were closely affiliated with big name
12:41
Speaker 8: brand casino companies. So for that reason, it's a pretty
12:44
Speaker 8: crowded landscape and it has not been as easy as
12:47
Speaker 8: one might think for even a well regarded media outfit
12:51
Speaker 8: to break into this space.
12:53
Speaker 1: So Githy, you highlight an inching point here that it
12:55
Speaker 1: just getting this deal done with Penn kind of highlights
12:59
Speaker 1: there is a lot of value associated with the ESPN brand,
13:03
Speaker 1: but the reality is it's not the profit engine that
13:05
Speaker 1: it used to be for the Walt Disney company. Walt
13:09
Speaker 1: Disney reports earnings after the close today. I think one
13:11
Speaker 1: of the many topics you and the analysts investors will
13:14
Speaker 1: want to discuss with management is the future of ESPN.
13:18
Speaker 1: What what's the current thinking here about the future of ESPN.
13:22
Speaker 7: Yeah, that is you know, obviously going to be front
13:24
Speaker 7: and center, Paul. So ESPN, it's it's been a real
13:29
Speaker 7: roller coaster here, right. So this used to bring in,
13:31
Speaker 7: as you pointed out, about thirty thirty five percent of
13:34
Speaker 7: the whole operating profits of Disney, but for the past
13:38
Speaker 7: few years they've kind of had this this double whammy, right,
13:40
Speaker 7: So they do generate about thirteen billion dollars in revenue,
13:44
Speaker 7: thirteen to fourteen billion dollars in revenue, but cord cutting
13:46
Speaker 7: is kind of pressuring that top line. And then you
13:49
Speaker 7: have rising sports costs, so about nine nine and a
13:52
Speaker 7: half billion dollars in sports rights fees every year. So
13:55
Speaker 7: again that's growing and that's pressuring the bottom line. So
13:58
Speaker 7: they're kind of press shout on both sides there, and
14:02
Speaker 7: the writing on the wall is clear, and Bob Biger
14:04
Speaker 7: has acknowledged this many times. He knows that he has
14:07
Speaker 7: to take ESPN over the top. They have to go
14:10
Speaker 7: all in as far as streaming is concerned. So it's
14:12
Speaker 7: not a question of when. It's a it's not a
14:15
Speaker 7: question of if, it's a question of when. But again,
14:17
Speaker 7: there are so many different things that need to be
14:19
Speaker 7: kind of ironed out. Because there's a new deal that's
14:21
Speaker 7: coming up with the NBA, there are existing TV deals
14:24
Speaker 7: in place, so again it's it's not going to be easy,
14:28
Speaker 7: but we'll have to wait and see what what bar
14:30
Speaker 7: Biger says.
14:31
Speaker 4: In speaking of how the NBA rights is the next
14:33
Speaker 4: big renewal that is going to happen. The current deal,
14:36
Speaker 4: like you were talking about ESPN and Turner does end
14:38
Speaker 4: after the twenty twenty four and twenty twenty five season,
14:40
Speaker 4: what do you think most likely would come out of that.
14:44
Speaker 7: Yeah, so there's been again a lot of interest from
14:48
Speaker 7: many parties, not just the media owners, not just Disney
14:52
Speaker 7: and Turner. NBC wants to get involved. And then of
14:55
Speaker 7: course you have the peroneal question with the tech giants.
14:57
Speaker 7: Will Amazon, Apple and Google make this big play? We
15:01
Speaker 7: know Amazon has not been shy about getting into the
15:04
Speaker 7: sports sports arena. They already have Thursday Night Football. Again,
15:08
Speaker 7: Apple is dabbling a little bit with MLS, so it's
15:11
Speaker 7: going to be interesting to see. And Google, of course
15:13
Speaker 7: has that big YouTube Sunday ticket deal. So they're all
15:18
Speaker 7: already made bets in the sports rights field. So it's
15:22
Speaker 7: going to be interesting to see whether they want to
15:23
Speaker 7: do the same thing with NBA. Now, NBA is a
15:26
Speaker 7: brand that travels globally. It also appeals to young males,
15:31
Speaker 7: which is really a coveted audience when it comes to,
15:33
Speaker 7: you know, advertising, so that you know, those deals negotiations
15:37
Speaker 7: are going to be really really interesting to watch.
15:40
Speaker 1: Hey, Brian, this deal with the walta Is company, to
15:42
Speaker 1: me highlights just the growth and the tractors of sports betting.
15:49
Speaker 1: Where are we in the evolution of sports betting? You
15:51
Speaker 1: said thirteen states, haven't you know?
15:53
Speaker 8: It's more like thirty five states with some form of
15:55
Speaker 8: it and over two dozen that have online sports betting,
15:58
Speaker 8: which is by fourth the biggest tributor. So it's it's
16:02
Speaker 8: rapidly growing things.
16:03
Speaker 1: And so what's the how does it change economics of Vegas?
16:06
Speaker 1: The sports books in Vegas? Some I like to just
16:08
Speaker 1: PLoP myself down the sports book at Caesars, sit there
16:11
Speaker 1: for a day and just watch sports. What's going on
16:14
Speaker 1: there now?
16:15
Speaker 8: Yeah, I think the brick and mortar sports book historically
16:17
Speaker 8: sports bedding has only been about two percent of gaming revenue.
16:20
Speaker 8: That's very different than online, which is really not as
16:23
Speaker 8: big in the VAD. It's very big in states like
16:25
Speaker 8: New York and New Jersey, and that's really where we've
16:28
Speaker 8: seen this penetration opportunity is the online part of sports betting.
16:32
Speaker 1: So it's and so the growth of that business. I mean,
16:35
Speaker 1: it's a long term growth story, right.
16:37
Speaker 8: It's longer term. I mean, if you get to the
16:38
Speaker 8: five hundred million to a billion dollar in long term
16:41
Speaker 8: annualized EBITDAT potential they see from this deal, it will
16:45
Speaker 8: take some time to get there. There'll be some upfront
16:47
Speaker 8: customer acquisition marketing costs a lot of money going through
16:51
Speaker 8: Disney and through through I should say through ESPN. But
16:54
Speaker 8: you know, there is enormous potential after getting to an
16:57
Speaker 8: additional upfront spend.
16:59
Speaker 1: Hey, you think we got about thirty seconds left? Will
17:01
Speaker 1: Bob Iger on the call tonight address succession plans?
17:05
Speaker 7: I certainly hope he does. And this has been such
17:08
Speaker 7: a paranial pain point for Disney. I mean, they do
17:11
Speaker 7: have another three and a half years with Bob Iygers.
17:14
Speaker 7: I think there is some near drum stability, but yeah,
17:17
Speaker 7: it still remains this biggest question mark for Disney.
17:20
Speaker 1: Yeah, it's just crazy. You know, he was doing so
17:22
Speaker 1: well with that succession planning for a while there and
17:25
Speaker 1: then it all fell apart, and nobody really knows why
17:28
Speaker 1: other than he likes a job and he doesn't want
17:30
Speaker 1: to give it up, as simple as that. So if
17:32
Speaker 1: you're looking to be a successor, good luck. Keith rung
17:35
Speaker 1: Onathan and Brian Egger. They cover the media, they cover
17:38
Speaker 1: the gaming spaces respectively for Bloomberg Intelligence to really the
17:42
Speaker 1: smartest voices out there on their respective industries. And if
17:45
Speaker 1: you want to get access to their research, it's really simple.
17:47
Speaker 1: If you've got a Bloomberg terminal, b I go on
17:50
Speaker 1: the terminal that I'll take you to Bloomberg Intelligence. We've
17:53
Speaker 1: got cover twelve hundred companies, two thousand companies, you know,
17:56
Speaker 1: one hundred and twenty industries, four hundred analysts are lost
18:00
Speaker 1: the globe, and they've got a covered soup to nuts.
18:03
Speaker 1: So Brian and Keith bring us up to date on
18:06
Speaker 1: Disney and Penn Gaming.
18:08
Speaker 6: You're listening to the tape. Catch are live program Bloomberg
18:12
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio. The
18:15
Speaker 6: tune in app, Bloomberg dot Com and the Bloomberg Business App.
18:18
Speaker 6: You can also listen live on Amazon Alexa from our
18:21
Speaker 6: flagship New York station. Just say Alexa, play Bloomberg eleven thirty.
18:27
Speaker 1: Does one have the courage to be in this market?
18:31
Speaker 1: Phil Palumbo, Founder, CEO and CIO of Plumbo Wealth Management. So, Phil,
18:35
Speaker 1: after disastrous twenty twenty two, investors are doing a little
18:38
Speaker 1: bit better this year, a good first, you know, seven
18:41
Speaker 1: months plus. Now what do we do?
18:44
Speaker 5: The bigger question for me is why didn't we get
18:48
Speaker 5: a recession yet? Right? So we think about coming into
18:50
Speaker 5: twenty twenty three, it was recession fears. Now it's recession delayed,
18:56
Speaker 5: and again, why do we get Why do we get
18:57
Speaker 5: a recession? So understanding that it's in important in my view,
19:01
Speaker 5: I look at it like there are three acts that happened.
19:04
Speaker 5: There was an American Rescue Act, there was the Infrastructure Act,
19:07
Speaker 5: and then there was the Inflation Act. All of that
19:09
Speaker 5: generated money into the economy for building infrastructure, et cetera,
19:14
Speaker 5: which really created this cushion within the economy. Because anybody's
19:19
Speaker 5: been in a business for a good amount of time
19:22
Speaker 5: knows that when you have leading indicators doing what they're doing.
19:24
Speaker 5: When you have inverted yield curve and you have a
19:27
Speaker 5: FED whereas moved rates up as aggressively as he has,
19:31
Speaker 5: you always have a really bad recession. And we just
19:34
Speaker 5: haven't gotten that yet. So what investors have to understand
19:38
Speaker 5: is that you have to be cautious in the short
19:40
Speaker 5: term because of what I just said with the FED
19:42
Speaker 5: and all those things that normally precede a recession, but
19:45
Speaker 5: with these other parts that I think a lot of
19:47
Speaker 5: prognosticators missed, which is this money that's been flooded into
19:50
Speaker 5: the economy. Now deficits have gone up, deficits up, it's
19:54
Speaker 5: tough to really get a recession because the government's spending.
19:57
Speaker 5: So you can't sit on your hands and just watch
20:00
Speaker 5: the market go up. You have to be active. But
20:03
Speaker 5: these are really kind of the push and pull that's
20:05
Speaker 5: going on today.
20:06
Speaker 4: So if you look at the US stock market obviously
20:08
Speaker 4: as a forward looking mechanism, what is it telling us
20:11
Speaker 4: that investors are betting ahead for the economy.
20:14
Speaker 5: So investors are betting ahead two things right. One is
20:17
Speaker 5: AI so AI. What you talked about this for is
20:20
Speaker 5: for real, it'll be productive for companies on the front end,
20:24
Speaker 5: which will expand margins and that'll be great for EPs
20:28
Speaker 5: as we think about twenty four to twenty five and
20:29
Speaker 5: twenty six. That's number one. Number two. Markets are betting
20:33
Speaker 5: that inflation is going to come down. The FED is
20:35
Speaker 5: going to be done with raising rates, and because of that,
20:39
Speaker 5: interest rates will come down and that'll be beneficial to stop.
20:43
Speaker 5: So that's what market participate, market participants are betting on.
20:47
Speaker 1: So, Phil, we're looking at WTI crude oil up another
20:50
Speaker 1: one percent today, eighty three dollars seventy nine cents. Is
20:55
Speaker 1: there an energy play out there you like?
20:57
Speaker 5: I do so so I like Occident Petroleum. I like
21:00
Speaker 5: the energy sector just in general. I think the economy here,
21:03
Speaker 5: you know, does seem to be reaccelerating here a bit,
21:06
Speaker 5: and you know with that commodities are starting to improve.
21:09
Speaker 5: You can see it in the pricing from a technical standpoint.
21:12
Speaker 5: So Oxy is a company that throws off really strong
21:15
Speaker 5: free cast flow, and as the price accruede continues to rise,
21:18
Speaker 5: free cast flow becomes that much better for Oxy and
21:21
Speaker 5: many other energy companies as well. So that's a play
21:24
Speaker 5: that I like a lot.
21:24
Speaker 4: What about Nike?
21:28
Speaker 5: Yeah, So Nike, as we all know is a wonderful brand.
21:32
Speaker 5: It's trading below it's intrinsic value by about twenty twenty
21:35
Speaker 5: five percent. Recently, it's come down in value from a
21:39
Speaker 5: pricing standpoint. I mean, the return on investment capital on
21:42
Speaker 5: average has been fifty percent the past three years. That's
21:45
Speaker 5: continued to be projected to be at that level or
21:47
Speaker 5: even greater than that. Their EPs is double over the
21:50
Speaker 5: past ten years. The story about Nike is not going away.
21:54
Speaker 5: I love their direct a consumer strategy, you know, eliminating
21:57
Speaker 5: in the middle man. I think that's really going to
21:58
Speaker 5: work well and be profitable to the company me. So
22:01
Speaker 5: we started buying into that about two or three days ago.
22:03
Speaker 5: We bought about a seventy point seventy five percent position
22:06
Speaker 5: within client's portfolios. You know, we will add if there's
22:08
Speaker 5: a continued weakness in that particular area, which may happen
22:11
Speaker 5: as a result of.
22:12
Speaker 4: China weakness and the latest results that we had from
22:14
Speaker 4: Nike toward the end of June, obviously seeing that sales strength,
22:18
Speaker 4: but this is a very discretionary company. If these are
22:20
Speaker 4: what consumers are going in and buying, especially these niche
22:22
Speaker 4: types of brands, does it really tell us that there's
22:25
Speaker 4: a recession on the horizon.
22:28
Speaker 5: Yeah, I mean, that's the thing. So it's kind of
22:30
Speaker 5: if you listen to Target and you listen to Tyson
22:32
Speaker 5: Foods and what they're saying, there is concern that the
22:35
Speaker 5: consumer is abating a bit. But if you listen to
22:38
Speaker 5: what Amazon is talking about, you know, which is one
22:40
Speaker 5: of the strongest areas where you're seeing consumers buy. You know,
22:43
Speaker 5: their numbers are very strong. So it goes back to
22:45
Speaker 5: said before, you know, the jobs numbers are very strong.
22:48
Speaker 5: If you have the jobs numbers that continue to be strong,
22:51
Speaker 5: consumers are getting a paycheck. Consumers are getting a paychecks
22:53
Speaker 5: and then go out there and spend money. And that's what
22:55
Speaker 5: we're going to continue see going forward. A lot of
22:57
Speaker 5: Nike is around China. China's strength out of COVID hasn't
23:00
Speaker 5: been as great as many as people anticipated, and a
23:03
Speaker 5: lot of Nike's EPs growth, we're estimating will come out
23:08
Speaker 5: of China. So we really need to see a strong
23:10
Speaker 5: China for Nike. It really work as we think about
23:13
Speaker 5: Nike over the next three to five years.
23:14
Speaker 1: We're gonna get some inflation data in the next couple
23:16
Speaker 1: of days. Where are you on kind of your inflation
23:20
Speaker 1: watch here for this economy.
23:22
Speaker 5: So it goes back to what you're asking before about
23:24
Speaker 5: the market overall. So the market overall is anticipating inflation
23:28
Speaker 5: to continue to decelerate and to FED to pause and
23:32
Speaker 5: be done. I don't know if it's going to be
23:34
Speaker 5: that easy. I do believe inflation has come down quite
23:37
Speaker 5: preciplusly from its peak, but I do think we may
23:40
Speaker 5: get sticky because of housing and wage pressures as we
23:45
Speaker 5: think about the CPI prints going forward, as it relates
23:49
Speaker 5: to core and if you take a if you take
23:52
Speaker 5: non core regular CPI which includes food and energy. Now,
23:56
Speaker 5: with energy prices increasing, you may actually see that number disappoint.
24:00
Speaker 5: So you know, if you're interesting, if you look at
24:02
Speaker 5: the ten year treasury, it's holding that four percent number.
24:04
Speaker 5: I mean there's I mean right now, there's a huge
24:06
Speaker 5: short on the third year based on various commentary that
24:10
Speaker 5: we've all probably know about and been reading about. So
24:13
Speaker 5: you see it. Everybody's waiting for this print tomorrow. I
24:17
Speaker 5: think it's going to be a print that's not going
24:19
Speaker 5: to be good, and concerned a lot of market participants
24:22
Speaker 5: that maybe the FED is not done.
24:25
Speaker 4: We only have about forty five seconds left. You were
24:27
Speaker 4: talking about occidental petroleum earlier. I'm curious when you're seeing
24:30
Speaker 4: this big rebound, especially to day and energy stocks up
24:33
Speaker 4: about one half percent in the S and P five hundred,
24:35
Speaker 4: do you think we've gotten to a range where it's
24:37
Speaker 4: a contrarian indicator, especially with the amount of massive outflows
24:40
Speaker 4: we've seen in energy, to where investors are going to
24:42
Speaker 4: come back in and start buying those shares.
24:44
Speaker 5: Yeah. Remember energy is one of the worst performing sectors
24:47
Speaker 5: you had to date, amongst healthcare and staples, Right, So
24:50
Speaker 5: if we started to see an area where there's value
24:54
Speaker 5: relative to technology consumed discretionary, which are sectors that have
24:57
Speaker 5: performed really well you had to date, if you're going
24:59
Speaker 5: to rebalance folio, if there's concerns about inflation, know, then
25:03
Speaker 5: then maybe energy is a place where you want to be.
25:06
Speaker 5: And again we'll see it tomorre with the print and
25:09
Speaker 5: how that trend's going forward. But I think that's what
25:11
Speaker 5: we're seeing with more participants.
25:13
Speaker 1: Phil, thanks so much for joining us. I always appreciate
25:15
Speaker 1: getting a few minutes of your time. Phil Palumbo, he's
25:18
Speaker 1: the founder, CEO, and CIO. I think he's pretty much
25:22
Speaker 1: in charge there.
25:22
Speaker 4: He's doing it all.
25:23
Speaker 1: And he's got his name on the door Plumbo Wealth Management,
25:25
Speaker 1: so that says it all still constructive on this market,
25:29
Speaker 1: and look at he's looking a little bit on the
25:31
Speaker 1: energy side, a little bit on the consumer side with Nike.
25:35
Speaker 6: You're listening to the team Ken's our live program Bloomberg
25:38
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot com,
25:42
Speaker 6: the iHeartRadio app and the Bloomberg Business App, or listen
25:45
Speaker 6: on demand wherever you get your podcasts.
25:50
Speaker 9: Mark, we really appreciate you joining us.
25:51
Speaker 2: This is a very powerful vehicle with four hundred and
25:55
Speaker 2: fifty miles range, but also a very high price tag.
25:58
Speaker 9: Who are you aiming this product?
26:00
Speaker 10: Well, if you look at the current Escalade, you know
26:02
Speaker 10: we sold over a million units and you know, one
26:05
Speaker 10: out of every three of these SUVs in this luxury
26:09
Speaker 10: segment is an Escalade. So we've got a very successful brand.
26:13
Speaker 10: It's been you know, an unbelievable vehicle for Cadillac and
26:16
Speaker 10: General Motors. But this has added to business. So we
26:19
Speaker 10: know there's people that are wanting an electric three row suv,
26:24
Speaker 10: full size suv. We're going to be the first ones
26:26
Speaker 10: that really bring it here with an iconic brand, so
26:30
Speaker 10: we know this is in addition to our internal combustion
26:33
Speaker 10: engine escalating. You can see it as the next step
26:36
Speaker 10: in the design language for Cadillac, both inside and out,
26:39
Speaker 10: and so this is going to be right on the
26:41
Speaker 10: cutting edge of everything. It's the Escalade standard of the world.
26:45
Speaker 11: It really is.
26:46
Speaker 2: So you already have the Hummer though, which is definitely
26:50
Speaker 2: on the cutting edge of everything, right, and early adopters
26:53
Speaker 2: who are waiting for a big electric vehicle, I'm assuming
26:56
Speaker 2: went out and got that.
26:57
Speaker 9: Who's left it to buy the Escalade at one hundred
26:59
Speaker 9: and thirty thousand to start.
27:00
Speaker 10: Yeah, I was going to say, well, the ultimate platform
27:02
Speaker 10: here that we're talking about is very flexible and it's
27:05
Speaker 10: very different than the suv offered from Hummer, and so
27:09
Speaker 10: you'll see it in the proportions here where we really
27:12
Speaker 10: are going after efficiency. With four hundred and fifty miles
27:15
Speaker 10: of range, that's a big deal for families and people
27:18
Speaker 10: who travel, So it's a big range vehicle, but it's
27:22
Speaker 10: also seven hud and fifty horsepower. The Hummers are in
27:25
Speaker 10: the thousand horsepower stand in that part of the part
27:28
Speaker 10: of the market there, so it's a little bit different
27:30
Speaker 10: customer it's very different from a duty cycle standpoint, but
27:33
Speaker 10: it's still built on the twenty four mod pack that
27:35
Speaker 10: we use in our datay electric truck platforms.
27:38
Speaker 2: There has been some criticism about these big battery packs.
27:43
Speaker 2: Bloomberg New Energy Finance, for example, wrote that you're using
27:46
Speaker 2: a lot of lithium that maybe should be left for
27:49
Speaker 2: the smaller electric vehicles.
27:51
Speaker 9: How do you respond to that?
27:52
Speaker 10: Well, General Motors is going to make both number one,
27:54
Speaker 10: So we're going to make everything from the Bolt with
27:56
Speaker 10: an LTM based pack here as we bring it back online,
28:00
Speaker 10: to the Equinox to the Blazer. So those are right
28:02
Speaker 10: in the biggest segments in the world at price points
28:06
Speaker 10: that are you know, the most affordable, right in the
28:08
Speaker 10: wheelhouse of those big buying segments. So we're going to
28:11
Speaker 10: do that too. But you know, technology changes, and so
28:14
Speaker 10: anybody that thinks that we're going to have the same
28:16
Speaker 10: technology even a year from now chemistry rise with our
28:20
Speaker 10: battery systems across the whole industry isn't thinking about it
28:24
Speaker 10: quite right. I think it's been mentioned before that the
28:28
Speaker 10: telem of communications industry, there is all these people that
28:30
Speaker 10: were fearful of copper, right that all changed, right and
28:35
Speaker 10: so you get into silicon, and you get into chips,
28:37
Speaker 10: you get into all those things that are new technologies
28:40
Speaker 10: on a breaking transformation of the industry. And I can
28:43
Speaker 10: tell you the history books will see this as just
28:46
Speaker 10: the first step.
28:47
Speaker 2: All Right, we're talking again with Mark Roy's, president of
28:49
Speaker 2: General Motors, at the introduction of their brand new Cadillacs
28:53
Speaker 2: brand new ev Escalade IQ.
28:56
Speaker 9: And you know I have driven.
28:58
Speaker 2: The Escalade, the v with also about seven hundred horsepower. Right,
29:03
Speaker 2: it's got a big V eight eats up a lot
29:05
Speaker 2: of gas. That's the problem you're trying to solve with this.
29:07
Speaker 2: But there are still gonna be people out there who
29:09
Speaker 2: want the V eight. How long are you going to
29:11
Speaker 2: sell the internal combustion engine Escalade next to the Escalade IQ.
29:16
Speaker 10: Well, are very different vehicles again in terms of the package.
29:19
Speaker 10: You know, we've got a huge amount of storage in
29:22
Speaker 10: this vehicle because of what we have up front where
29:24
Speaker 10: the engine used to be, and then also a longer
29:27
Speaker 10: wheelbase and the second row package is quite different too,
29:30
Speaker 10: So you have those things together, they're different vehicles, even
29:32
Speaker 10: though sort of the output on a power basis are similar.
29:35
Speaker 10: We're going to do both when as long as people
29:38
Speaker 10: want both, and so you know, if you look at
29:40
Speaker 10: this over the long term horizon, the market and the customer,
29:43
Speaker 10: we haven't sold a vehicle like this ever, the market
29:45
Speaker 10: has never seen a vehicle like this. This is the
29:48
Speaker 10: first standard of the world, and so we're going to
29:50
Speaker 10: see what people do.
29:52
Speaker 2: You are going to bring out the Silverado with I
29:54
Speaker 2: believe a similar battery pack and range at least as
29:57
Speaker 2: an option. Are you seeing price pressure because we're now
30:02
Speaker 2: seeing forward capitulate and cut prices. Tesla obviously driving that.
30:07
Speaker 2: How do you expect the pricing to work out?
30:08
Speaker 5: Well?
30:09
Speaker 10: The pricing We're starting with the Silverado with our work truck,
30:11
Speaker 10: so you know, our pricing and our ladders and our
30:15
Speaker 10: battery capacity and range capacity and duty cycle capacity on
30:20
Speaker 10: Silverado and Sierra are going to be for everybody's pocket
30:24
Speaker 10: put and price points, so you know, we know where
30:26
Speaker 10: people want it from a work truck and our fleet standpoint,
30:29
Speaker 10: and then it'll it'll go all the way up through
30:31
Speaker 10: the RST, which will you know, again be a high range,
30:34
Speaker 10: high module. But you don't have to just do that.
30:37
Speaker 10: So we're going to offer those things as options. Cutting
30:40
Speaker 10: price though, means that we didn't see it right, And
30:43
Speaker 10: I don't think that's true. I think we're right in
30:44
Speaker 10: that wheelhouse of what people can afford and want, and so,
30:47
Speaker 10: you know, I feel good about our pricing.
30:49
Speaker 2: Are these vehicles going to be profitable when you start
30:51
Speaker 2: selling them?
30:52
Speaker 6: Yes?
30:53
Speaker 2: And are you going to be able to make a
30:55
Speaker 2: million of them in twenty twenty five?
30:57
Speaker 9: Not not the escalade iq T vehicles?
31:00
Speaker 10: Yeah, electric vehicles, yeah, I think so. I think we're
31:03
Speaker 10: well on our track. You know, we're well. We did
31:06
Speaker 10: fifty thousand here the first half a year. That was
31:08
Speaker 10: our our target, and we did that. You got to
31:11
Speaker 10: bring cell plants along online as we do the assembly
31:14
Speaker 10: plans to make these. Our first plant in Lordstown, Ohio
31:18
Speaker 10: is now full capacity and running really well on the
31:21
Speaker 10: second one will be in spring Hill, Tennessee, right next
31:24
Speaker 10: to our lyric facility there, so that's coming online next.
31:28
Speaker 10: And the third one will be in Lansing, Michigan, and
31:30
Speaker 10: we're just you know, doing the construction on that right now.
31:33
Speaker 10: So once we get past the first plant in Lordstown, Ohio,
31:36
Speaker 10: we learned how to make them, we do it at volume.
31:40
Speaker 10: We duplicate that in spring Hill, and we duplicate that
31:43
Speaker 10: in Lansing. So the first ones out here, we knew
31:46
Speaker 10: we're going to be, you know, something we've never done before,
31:49
Speaker 10: and we tackled that and we're doing it with high
31:51
Speaker 10: quality and we're doing it rate. So those are you know,
31:53
Speaker 10: that's how you get into volume production.
31:55
Speaker 2: I got to ask about the negotiations with the UA,
31:58
Speaker 2: w are you prepared to make an expensive investment in
32:02
Speaker 2: raising those costs because their demands are I think they
32:05
Speaker 2: said pretty audacious. Yeah.
32:07
Speaker 10: I can't come on what people say or don't say
32:10
Speaker 10: about that. We are negotiating with our represented workforce in
32:14
Speaker 10: Earnest as we always do, and we're there to make
32:17
Speaker 10: a good agreement, a fair agreement, an agreement that works
32:20
Speaker 10: for everybody. And that's all I have to say.
32:22
Speaker 9: Mark, thanks very much for your time. Really appreciate.
32:24
Speaker 11: Mark rant is a pleasure President.
32:25
Speaker 2: Of General Motors talking to us about Cadillacs new Escalade IQ.
32:30
Speaker 1: Let's continue a little car talk here, Yes, too bad,
32:33
Speaker 1: Matt's not here. Detroit bureau chief for Bloomberg News David
32:37
Speaker 1: Welch joins us. So, David, we just heard Matt sitting
32:40
Speaker 1: down with the GM president Mark Royce, still sounding really
32:45
Speaker 1: confident in hitting some of their electric vehicle production goals.
32:48
Speaker 1: I think a million for next year. This is a
32:51
Speaker 1: major ramp up that not just GM, but you know
32:53
Speaker 1: all of Detroit is making. What's the feeling about this
32:57
Speaker 1: industry and as it transitions to EV.
33:00
Speaker 11: Yeah, I think a lot of people were skeptical, not
33:03
Speaker 11: just of GM, but just of late. We're seeing weakness
33:06
Speaker 11: and demand for evs to a certain degree, and that's
33:10
Speaker 11: reflected in pricing. In order to keep volumes of Tesla's
33:12
Speaker 11: had to cut prices. Other companies like Ford have had
33:15
Speaker 11: to follow a suit. Even with price cuts, we've seen
33:19
Speaker 11: Tesla volumes drop significantly in China. So everyone's wondering, well,
33:24
Speaker 11: if you still goes Tesla, so goes the rest of
33:27
Speaker 11: the industry. GM Itselvis had delays and production of its
33:31
Speaker 11: catllit lyric when off its first evs, the Hummer, they
33:34
Speaker 11: had to ground that for a while they weren't selling
33:36
Speaker 11: them due to a recall. So can they really get
33:38
Speaker 11: to a million vehicles next year? And what Royce is saying,
33:42
Speaker 11: you got to listen to GM's words on this careacter.
33:44
Speaker 11: They're saying that they will have the production and they'll
33:46
Speaker 11: be able to produce a million in twenty twenty five
33:49
Speaker 11: that we're casting they're going to sell them, and they're
33:53
Speaker 11: not saying they won't either, But I do think they're
33:55
Speaker 11: being a little bit careful about saying that they're going
33:58
Speaker 11: to sell the cars. Having the capacity in place and
34:00
Speaker 11: the battery plants up and running is a big step.
34:02
Speaker 11: But if consumers don't want them, but the prices you're
34:04
Speaker 11: going to charge, that's where the risk is. And I
34:07
Speaker 11: think that's why investors are kind of taking a wait
34:10
Speaker 11: and see on the other car companies that are that
34:12
Speaker 11: are trying to get David.
34:14
Speaker 1: That's kind of where I wanted to go. I guess
34:16
Speaker 1: my question is why is there not the demand in
34:20
Speaker 1: how much of it is because of the price, because
34:22
Speaker 1: we're seeing price tags that no one has ever seen
34:26
Speaker 1: before for a truck, a sedan, and even an escalade,
34:30
Speaker 1: just huge increases.
34:33
Speaker 11: That's right. Evs are more expensive than gasoline burning vehicles,
34:38
Speaker 11: and gasoline burning vehicles are at all time hides and
34:41
Speaker 11: pricing right now, even though they've come down a little bit,
34:43
Speaker 11: they're still really expensive. I think what's going on in
34:46
Speaker 11: the EV market is and Mary Borrow has said this
34:49
Speaker 11: for the longest time. EV's have been a second, third,
34:52
Speaker 11: fourth car in some affluent family's garage. And it started
34:56
Speaker 11: to get beyond that as Tessa came out with Model
34:59
Speaker 11: three and Model y. Even those who are not super
35:01
Speaker 11: cheap vehicles the Chevy Bolt Nissan Leaf do sell to
35:03
Speaker 11: people who it's their only car. But most of the
35:06
Speaker 11: EV's out there, and most of Tesla's trucs goes to
35:09
Speaker 11: people who have a lot of money. And I think
35:12
Speaker 11: you do get to a certain point where there are
35:14
Speaker 11: only so many sixty eighty one hundred thousand dollars luxury
35:18
Speaker 11: evs that the market can buy. And if you want
35:20
Speaker 11: to get back, get past that, past the wealthy people,
35:23
Speaker 11: past the early adopters. You need cheap reviews, you need
35:26
Speaker 11: more charging out on the highway and that kind of thing.
35:29
Speaker 11: And you know, we're seeing all of the we're seeing
35:32
Speaker 11: everybody go to Tesla's charging standard that gives everybody more
35:35
Speaker 11: access to charging. And then you saw seven car companies
35:38
Speaker 11: come together to put money, you know, pool their resources
35:41
Speaker 11: and build out on the highways charging infrastructure. So it
35:45
Speaker 11: takes away the fear that you'll be on a road
35:47
Speaker 11: trip and you'll get stranded in GM and others are
35:50
Speaker 11: coming out with cheap revis but it's going to be
35:52
Speaker 11: a few years. So I think we're sort of like
35:55
Speaker 11: technology always hits some of a geek out on you
35:57
Speaker 11: an S curve. I think we're at the middle of
35:59
Speaker 11: the We're the middle of that s where sales level
36:02
Speaker 11: off until prices come down and everything becomes more accessible
36:06
Speaker 11: for everybody.
36:07
Speaker 4: Mark Royce also did shrug off concerns as far as
36:11
Speaker 4: when it comes to why a copper shortage would threaten
36:14
Speaker 4: evs as well as green transition. But innovation in vvs
36:19
Speaker 4: has been seen as denting copper demand's growth potential. How
36:22
Speaker 4: do you view this and how potentially big of an
36:24
Speaker 4: issue when it comes to copper do you think this
36:26
Speaker 4: could be for EV makers?
36:28
Speaker 11: Yeah. One of the challenges for everybody going forth with
36:32
Speaker 11: the evs is you're in the commodities market. You know
36:35
Speaker 11: you're looking for with them, you're looking for cobal, you're
36:37
Speaker 11: looking for copper, and you are subject to the price
36:40
Speaker 11: fluctuations and everyone's going to be competing for availability. GM
36:44
Speaker 11: is one of the companies that's done a pretty good
36:46
Speaker 11: job of forming joint ventures, buying stakes in minds and
36:51
Speaker 11: securing access to these minerals. That'll basically give them enough
36:56
Speaker 11: materials to make the batteries to make the evs going
36:59
Speaker 11: out I think twenty twenty six, and in some cases beyond.
37:02
Speaker 11: Mark the answer is interesting. Anyone who thinks we're going
37:05
Speaker 11: to be using the same technology in the same battery
37:07
Speaker 11: chemistry in the next couple of years is looking at
37:10
Speaker 11: this the wrong way. So I think there are a
37:12
Speaker 11: couple of you know, GM and others. Ford has moved
37:14
Speaker 11: to do this too, and certainly Tesla has. They've they've
37:16
Speaker 11: got deals out there to secure production of some of
37:19
Speaker 11: these key minerals. But I think they're also looking at
37:22
Speaker 11: all kinds of chemistries where they can reduce the requirements
37:25
Speaker 11: for either expensive or tough to get materials. And but
37:30
Speaker 11: they're they're gonna be, you know, they're going to be
37:33
Speaker 11: in this game of kind of racing through either innovation
37:36
Speaker 11: or mining deals to make sure they're getting the right
37:37
Speaker 11: stuff at a decent price.
37:39
Speaker 1: So is there a sense within DC about how this
37:44
Speaker 1: industry is gonna, you know, kind of evolve from internal
37:47
Speaker 1: combustion to electric is it? Because Mark said also that hey,
37:52
Speaker 1: we're going to continue to make internal combustion engines as
37:55
Speaker 1: long as people want them as well. Is this something
37:57
Speaker 1: that can coexist or is at a definite phase in
38:00
Speaker 1: phase out process?
38:03
Speaker 11: It is, and I think, look, they're going to be
38:05
Speaker 11: people who just don't want to make the transition to
38:09
Speaker 11: EVS in the next five years, you know what. I
38:12
Speaker 11: think one of the challenges everyone talks about charging, Okay, there,
38:16
Speaker 11: I don't have charges in the highway. Some people will
38:17
Speaker 11: resist that. People talk about the price. People don't want
38:20
Speaker 11: to pay that much. Totally true, and you have to
38:23
Speaker 11: remember that, you know what, three quarters of the US
38:27
Speaker 11: vehicle market is use vehicles. Those people absolutely don't have
38:30
Speaker 11: the money to pay for a sixty or eight thousand
38:32
Speaker 11: dollar refie, So prices have to come down. But there's
38:34
Speaker 11: another thing here. People are kind of happy with their
38:36
Speaker 11: gasoline burning vehicles, and you really have to find a
38:40
Speaker 11: way to dislodge them from that, whether it's just getting
38:43
Speaker 11: them to try and EV and I've driven some of
38:45
Speaker 11: them on the market. It really is a better experience.
38:47
Speaker 11: I love driving them. But you still have to pull
38:52
Speaker 11: people out of something that right now they're pretty happy with.
38:54
Speaker 11: And that's a marketing and market challenge, so you know,
39:00
Speaker 11: and it's not going to be that easy for a
39:02
Speaker 11: lot of these buyers, evs have captured the imagination and
39:04
Speaker 11: a lot of people are shopping them, but you know,
39:07
Speaker 11: getting the fifty percent of the market, which is what
39:10
Speaker 11: some of the or more which is what some of
39:13
Speaker 11: the requirements in Washington are calling for by twenty thirty two,
39:18
Speaker 11: I think it's going to be tough given where the
39:20
Speaker 11: consumer mindset is right now.
39:22
Speaker 4: And to follow up on that, when Matt Miller asked
39:25
Speaker 4: Mark Rory's about whether these vehicles would be profitable when
39:28
Speaker 4: they start selling them, when they were talking about the
39:30
Speaker 4: Cadillac Escalade IQ specifically, which does has the one hundred
39:34
Speaker 4: and thirty thousand dollars price tag, not surprisingly he did
39:36
Speaker 4: immediately say yes. And you were just talking about these
39:39
Speaker 4: profitability challenges. What EV makers in this space do you
39:42
Speaker 4: think are maybe better equipped when it comes to sort
39:45
Speaker 4: of these marketing campaigns that you were just talking about
39:47
Speaker 4: versus others that you think might struggle with this.
39:50
Speaker 11: I TESTSA obviously, because they've already got a great brand
39:53
Speaker 11: and they're already profitable here. They spend very little on
39:56
Speaker 11: marketing because the brand is so great. I think all
40:00
Speaker 11: the major car companies have just big marketing budgets and
40:04
Speaker 11: they can really push this. You know, the question is
40:07
Speaker 11: for them, can they make money on these vehicles? And
40:11
Speaker 11: that was an interesting answer for Royce. I think part
40:13
Speaker 11: of the reason he's seeing the Escalator to be profitable
40:16
Speaker 11: out of the gate is it starts at one hundred
40:18
Speaker 11: and thirty thousand and it will probably go up to
40:19
Speaker 11: one hundred and fifty thousand per vehicle. You can hide
40:21
Speaker 11: a lot of battery cost in a sticker price that big.
40:25
Speaker 11: But look, one thing GM has and the reason that
40:29
Speaker 11: they aren't selling as many of their newest dvs as
40:32
Speaker 11: Ford is Ford basically took platforms of an F one
40:36
Speaker 11: fifty pickup and their mid size you know, crossover suv segment,
40:41
Speaker 11: and they converted them, heavily modified them to make the
40:44
Speaker 11: Machi and the F one fifty Lightning. GM took a
40:48
Speaker 11: step back. They said, look, we don't need to be
40:50
Speaker 11: here now because EV volume is not that big, and
40:52
Speaker 11: they made a dedicated TV platform and the whole idea
40:55
Speaker 11: there was you're basically using the same battery, same platform
40:59
Speaker 11: for the future Chevy Bolt small vehicle on up to
41:03
Speaker 11: the giant Escala, giant hummer, and they get economies that
41:06
Speaker 11: scale that way. So it's taking them longer to get there.
41:09
Speaker 11: But the plan is that you do get to scale
41:12
Speaker 11: the volume of all your evs over seven, eight, ten,
41:15
Speaker 11: twelve name plates over the next couple of years, and
41:18
Speaker 11: they're saying that they will be profitable by twenty twenty five.
41:21
Speaker 11: Now the catch there is again, they can build a
41:23
Speaker 11: million vehicles. If they sell them all, they probably will
41:25
Speaker 11: be profitable. What I'd like to know is how many
41:27
Speaker 11: of that one million worth of production capacity they need
41:30
Speaker 11: to sell to be a break even. One forecaster told
41:33
Speaker 11: where they see GMS selling about three hundred fifty twenty
41:36
Speaker 11: twenty five. Would they be profitable there? I don't know.
41:38
Speaker 11: I think it's tough at that point if you're tilling
41:40
Speaker 11: up for a million vehicles and you sell a third
41:42
Speaker 11: of that. But that forecaster could be wrong, you know.
41:45
Speaker 11: So sales volume matters, and whether or not they can
41:48
Speaker 11: get consumers to bite on all of this volume, that's
41:51
Speaker 11: what's going to determine their profitability on the programs all right.
41:54
Speaker 1: Well, in the meantime, Matt Miller can go test drive
41:57
Speaker 1: a whole new series of Elections vehicles in addition to
42:01
Speaker 1: the internal combustion, So who'll be happy and I'm sure
42:03
Speaker 1: David you did get your fair share of test drives
42:05
Speaker 1: as well, So good luck with that. David Welch, Detroit
42:08
Speaker 1: bureau chief for Bloomberg News. And before that, just commenting
42:13
Speaker 1: on the you know, the car business. And again before that,
42:16
Speaker 1: General Owners President Mark Royce with Matt Miller and like
42:20
Speaker 1: all the other most of the other major automakers around
42:24
Speaker 1: the world all in on electric vehicles. I guess, I
42:27
Speaker 1: guess you have to be.
42:28
Speaker 4: You almost have to be.
42:29
Speaker 6: In you're listening to the tape. Cans are live program
42:31
Speaker 6: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,
42:36
Speaker 6: the tune in app, Bloomberg dot Com, and the Bloomberg
42:38
Speaker 6: Business app. You can also listen live on Amazon Alexa
42:41
Speaker 6: from our flagship New York station. Just say Alexa, play
42:45
Speaker 6: Bloomberg eleven thirty.
42:48
Speaker 1: So get a little bit better understanding of the gaming business.
42:51
Speaker 1: We turn a hand. She's the CEO and chairwoman of
42:54
Speaker 1: Super League Gaming is a Nasdaq listed stock. Sl GG
42:59
Speaker 1: is the ticker hey, And again, one of the big
43:03
Speaker 1: news items on the tape today is the roadblocks earnings.
43:06
Speaker 1: I'm sure you've had a chance to take a look.
43:08
Speaker 1: What did you take away from that and are you
43:10
Speaker 1: seeing any of those issues at your company?
43:14
Speaker 12: Actually, it's really the inverse, and I think a lot
43:16
Speaker 12: of this is just because investors this is.
43:20
Speaker 13: A new category for them to really understand.
43:22
Speaker 12: You guys, I heard your intro and you're talking about
43:25
Speaker 12: the fact that about gaming and it being hits driven.
43:30
Speaker 12: You know, game platforms like Roadblocks are very different than
43:34
Speaker 12: the traditional video games we know and love. So, first
43:36
Speaker 12: of all, you guys nailed it. Gaming is at the
43:39
Speaker 12: center of entertainment. It was bigger than the film, box
43:43
Speaker 12: office and TV even prior to COVID. But what makes
43:46
Speaker 12: platforms like Roadblocks different is you don't play Roadblocks. You
43:50
Speaker 12: play thousands of games inside of Roadblocks. And what they've
43:53
Speaker 12: done effectively is they've put the tools in the hands
43:57
Speaker 12: to everyday gamers to make develop their own own game worlds.
44:01
Speaker 12: And so what's powerful about that is is that now
44:04
Speaker 12: you've been listed, you've democratized and enlisted you know, millions
44:07
Speaker 12: of people around the world to make those hits for
44:10
Speaker 12: you and for each other and to enjoy gameplay.
44:13
Speaker 13: And so when I look at you know the.
44:15
Speaker 12: Fact that Roadblocks is reaching over sixty five million daily
44:19
Speaker 12: active users you know, generating you know, billions and billions
44:23
Speaker 12: of hours of gameplay each quarter. It's really significant, the
44:28
Speaker 12: amount of engagement. I often say to investors, don't even
44:31
Speaker 12: think of it as gaming.
44:32
Speaker 13: What's so powerful about roadbloxes.
44:34
Speaker 12: Most of the people are there to either create or
44:36
Speaker 12: just to socialize, like a digital cul de sac. So
44:40
Speaker 12: think of it as more the next generation of social media.
44:43
Speaker 13: This is much more.
44:45
Speaker 12: Highly customizable, personalized, social interactive. And why that's powerful is
44:51
Speaker 12: it changes the landscape of how you can bring advertisers
44:54
Speaker 12: and brands into the game. So I think that for Roadblocks,
44:58
Speaker 12: investors should hang in there because what the going to
45:00
Speaker 12: see is is that the potential for the advertising model
45:03
Speaker 12: to really take off, it's in its nascent days.
45:06
Speaker 13: The best is jet to come.
45:08
Speaker 4: You did bring up daily active users, so that did
45:10
Speaker 4: fall about one percent last quarter to around sixty five million,
45:14
Speaker 4: up though twenty five percent from a year earlier. So
45:17
Speaker 4: still when you're looking at daily active user count and
45:19
Speaker 4: hours play, that did fall short of Wall Street analyst expectations.
45:22
Speaker 4: But I wanted to gauge your thoughts on this because
45:24
Speaker 4: Roadblocks typically doesn't provide financial projections how much of that
45:29
Speaker 4: goes into the sell off that we're seeing in the
45:30
Speaker 4: stock today when investors have a hard time kind of
45:33
Speaker 4: gauging potentially where the company sees things headed.
45:37
Speaker 12: Yeah, I mean, I do think there's an opportunity for
45:40
Speaker 12: them to paint maybe a more specific narrative around the
45:42
Speaker 12: ad model, because it's significant when you're reaching that type
45:47
Speaker 12: of scale. The other important thing to note about Roadblocks
45:50
Speaker 12: is their audience is aging up in a good way
45:54
Speaker 12: because a lot of those under thirteen players have now
45:57
Speaker 12: grown into sixteen, seventeen, over eighteen year olds, and that
46:01
Speaker 12: really opens up the nut even wider for the advertising opportunity.
46:05
Speaker 12: Keep in mind, the primary modeization model has always for
46:08
Speaker 12: them been consumer modelization, and so for them to now
46:11
Speaker 12: add this additional revenue stream for which Super League is
46:14
Speaker 12: one of their strategic partners in selling off, think about
46:18
Speaker 12: all those eyeballs are reaching and all the opportunity. I mean,
46:21
Speaker 12: this is like rocket fuel for Roadblocks and enlisting a
46:26
Speaker 12: partner like us to do that selling and that modization
46:29
Speaker 12: for them. But imagine what it does for a small
46:32
Speaker 12: cap company like super League to have Roadblocks and that
46:36
Speaker 12: engine and power and reach behind it to kind of
46:39
Speaker 12: help us really accelerate our revenue growth too. So I
46:42
Speaker 12: again do believe that while the daily active users felt
46:46
Speaker 12: a little bit flat, the mix is powerful, the portfolio is.
46:50
Speaker 13: Powerful, and it's still a crazy amount of reach.
46:54
Speaker 1: And can you define for us what metaverse gaming is
46:59
Speaker 1: an how big is it and howf az is it growing?
47:03
Speaker 12: Yeah, it's such an important point because again, it's so
47:07
Speaker 12: different than the games that I played growing up. I mean,
47:09
Speaker 12: first of all, we've already seen it that gaming isn't
47:12
Speaker 12: something anymore you grow out of.
47:14
Speaker 13: It's more of a lifestyle.
47:16
Speaker 12: And that's again because these game platforms have changed things.
47:20
Speaker 12: You know, traditional games that people like Activision and Take
47:24
Speaker 12: two make, those are games where they serve a map
47:27
Speaker 12: or a game up to you and you just play
47:29
Speaker 12: the game, and you know there's different strategies, but it's
47:32
Speaker 12: not something that you can modify and adapt.
47:35
Speaker 13: What's so different about Minecraft, Roadblocks and now Fortnite made
47:39
Speaker 13: by Epic Games is that what they're really doing is
47:42
Speaker 13: handing out the tools to empower other people to make experiences.
47:45
Speaker 13: And when I say experiences, it's not most of the times,
47:50
Speaker 13: it's not about points and winners and losers. It's experiences
47:54
Speaker 13: like a pop up concert or maybe you can tour
47:57
Speaker 13: through a museum. Today, the AP just put out a
48:01
Speaker 13: story about how Super League Is has been enlisted to
48:05
Speaker 13: recreate Hamilton inside of roadblocks, so you can now go,
48:10
Speaker 13: you can experience Hamilton and you can learn about American
48:14
Speaker 13: history in a very gamified way. And so the important thing,
48:18
Speaker 13: again just to denoteice, is that two D.
48:20
Speaker 12: And three D metaverse worlds or these game platforms are
48:26
Speaker 12: much more, as I said earlier, like an extension of
48:29
Speaker 12: someone's physical social life and everything that you can do
48:33
Speaker 12: in the real world you can have a digital twin of.
48:35
Speaker 12: And so I really think metaverse games people need to
48:39
Speaker 12: think super broadly because again it's not just about competition
48:44
Speaker 12: and winning and losing. It's much more about taking your
48:47
Speaker 12: physical life and having an expression of itself digitally.
48:50
Speaker 4: Really about we really have about forty seconds left, But
48:54
Speaker 4: how can advertisers use the metaverse as an additional marketing
48:57
Speaker 4: channel to make money?
49:00
Speaker 13: Yeah, so that's what's so important.
49:01
Speaker 12: When you look at what we did when we recreated
49:03
Speaker 12: Barbie's dream House in October last year, we drove sixty
49:07
Speaker 12: million visits to barbie Streamhouse. That's powerful engagement and the
49:12
Speaker 12: average to all time was about seven to eight minutes. Similarly,
49:14
Speaker 12: with Chipotle, we drove one of their highest digital food
49:18
Speaker 12: sales days and their highest digital app sale day by
49:21
Speaker 12: allowing first people to experience a pop up Chipottle in
49:25
Speaker 12: an immersive world and then that converted them into digital
49:28
Speaker 12: app downloads and food sales. We gave out one hundred
49:31
Speaker 12: and thirty thousand free burritos in real life in thirty minutes.
49:34
Speaker 12: So this is the new way for brands to find
49:37
Speaker 12: this next generation. They meet brands for the first time,
49:40
Speaker 12: forty seven percent through digital screens.
49:44
Speaker 13: That's where they need to.
49:44
Speaker 1: Be powerful stuff. I really appreciate getting some of your time,
49:47
Speaker 1: and it's an hand CEO and chairwoman of Super League
49:52
Speaker 1: Gaming talking about meta version gaming. I mean it's getting
49:55
Speaker 1: more immersive, interesting stuff.
50:00
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
50:03
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
50:07
Speaker 2: podcast platform you prefer. I'm Matt Miller, I'm on Twitter
50:11
Speaker 2: at Matt Miller nineteen seventy three, and I'm fall.
50:14
Speaker 1: Sweeney I'm on Twitter at pt Sweeney. Before the podcast,
50:17
Speaker 1: you can always catch us worldwide at Bloomberg Radio