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Nvidia Makes $5 Billion Investment into Intel · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am
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  Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg
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  Speaker 1: Business App. Listen on demand wherever you get your podcasts,
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  Speaker 1: or watch us live on YouTube.
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  Speaker 2: Certainly, the news of the day from a company perspective
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  Speaker 2: is Intel. We saw early this morning, we saw a
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  Speaker 2: pretty cool story in Nvidia deciding to buy or invest
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  Speaker 2: five billion dollars into Intel vis a vis a stock purchase,
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  Speaker 2: a straight up purchase of common stock there. And that's
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  Speaker 2: alongside the earlier investment by the US government of a
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  Speaker 2: ten percent stake in Intel. On the stock reacting favorably
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  Speaker 2: here today, shares of Intel up about twenty six percent today.
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  Speaker 2: That sets a new fifty two week high. Stock's up
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  Speaker 2: fifty seven percent here to date.
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  Speaker 3: The stock was.
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  Speaker 2: Really hurting as recently six months ago, but boy, it's
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  Speaker 2: gotten a couple big shots in the arm as it
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  Speaker 2: relates to their AI outlook. Let's check in with Man
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  Speaker 2: Deep Singing. He's a senior tech analyst for Bloomberg Intelligence.
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  Speaker 2: Mandy Wet, how surprised were you in Silicon Valley when
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  Speaker 2: we woke up this morning and saw that a competitor
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  Speaker 2: was going to take a make a five billion dollar investment.
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  Speaker 3: Yeah, I was expecting something to happen in terms of
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  Speaker 3: an investment in Intel after the administration took a ten
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  Speaker 3: percent stake, but an investment from Nvidia that was the
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  Speaker 3: last thing that I anticipated. So I was more in
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  Speaker 3: the camp that one of the hyperscalers, whether It's and Amazon,
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  Speaker 3: did have a partnership with Intel. It was announced back
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  Speaker 3: in twenty twenty four, so I thought it would be
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  Speaker 3: one of the hyperscalers that would make an investment. So
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  Speaker 3: clearly the surprise element was the fact that the partnership
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  Speaker 3: or the investment wasn't for foundry, but it was more
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  Speaker 3: chip code design. And look, that's where Nvidia has taken
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  Speaker 3: share from Intel over the past two years, is Intel
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  Speaker 3: was a dominant force in data centers with their x
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  Speaker 3: eighty six architecture. Nvidia with the shift to AI, really
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  Speaker 3: took share from Intel. And so it is a big
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  Speaker 3: surprise the fact that they are investing five billion dollars
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  Speaker 3: and the plan is to develop a co design chip
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  Speaker 3: for you know, PCs as well as data centers.
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  Speaker 4: Them better compete against a MD which we see a
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  Speaker 4: little under pressure today.
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  Speaker 3: My mind, Nvidia is almost a monopoly in AI chips.
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  Speaker 4: So the fact that got into trust regulators. Yeah, but
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  Speaker 4: you know, I when I heard about this deal, I
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  Speaker 4: just thought irony, right, this tie up between two Silicon
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  Speaker 4: Valley rivals. But I think it also really underlines the
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  Speaker 4: power shift. When you think about it, you would have
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  Speaker 4: thought years ago, well, Intel would be the aggressor here, right,
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  Speaker 4: But the sort of the tables have turned.
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  Speaker 3: They have, and look, that's just a function of where
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  Speaker 3: Intel is at right now, both in terms of their
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  Speaker 3: foundry positioning as well as you know, the data center
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  Speaker 3: market share that they have lost. Where they still have
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  Speaker 3: a dominant share is in PCs and desktops, and that's
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  Speaker 3: where everyone was anticipating a big refers cycle because of AI.
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  Speaker 3: At the end of the day, you know, if AI
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  Speaker 3: was to become pervasive, you know, we'll have to upgrade
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  Speaker 3: our devices, whether it's PCs or smartphones. And to my mind,
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  Speaker 3: Intel does have a good chance of being part of
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  Speaker 3: that refer cycle. So what Nvidia has done is really
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  Speaker 3: kind of put a stake in that refer cycle where
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  Speaker 3: if they can develop a code design chip for the
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  Speaker 3: PCs and laptops. Then that's where it could create another
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  Speaker 3: line of business similar to gaming. So right now gaming
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  Speaker 3: is about high single digital percentage of Nvidia's revenue. This
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  Speaker 3: could be another line of business that they could add
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  Speaker 3: if this partnership was to result in a product or
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  Speaker 3: a chip that everyone would want to use.
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  Speaker 2: All right, Mandy, I'm gonna put my cynical Wall Street
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  Speaker 2: hat on this is simply I agree with a political
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  Speaker 2: move by Jensen Wang, the cozy up to the Trump
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  Speaker 2: administration by co investing alongside the US government and Intel.
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  Speaker 2: Whether it's a good investment.
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  Speaker 3: Or not, if five billion dollars is like change for
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  Speaker 3: a company like in Vidia that's almost generating one hundred
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  Speaker 3: billion dollars in free cash flow every year right now.
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  Speaker 2: So there are the clients you talked to, the investage
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  Speaker 2: you talked to, but they think there is some you know,
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  Speaker 2: some soft upside to in Nvidia by investing alongside the government.
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  Speaker 3: I mean, in Vidia right now is taking stakes in
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  Speaker 3: a lot of companies Corvieve and a lot of neo
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  Speaker 3: clouds because they want to make big bets. With that
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  Speaker 3: kind of balance sheet that Nvidia has, they can afford
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  Speaker 3: to do it. And so this is another one of
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  Speaker 3: those minority stakes that they took. I don't think they
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  Speaker 3: have any high expectations here, but still it does help
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  Speaker 3: them politically.
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  Speaker 2: I mean, these the numbers are blow me away. With
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  Speaker 2: the tech companies that Man deep sings that follows this
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  Speaker 2: year call it, you know the calendar of twenty five
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  Speaker 2: fiscal year twenty six, one hundred billion dollars of free
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  Speaker 2: cash flow. Next year one hundred and forty billion dollars
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  Speaker 2: of free cash flow, free cash This is the stuff
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  Speaker 2: like literally, we don't know what to do with it.
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  Speaker 2: So we're either going to give it lders, we're gonna
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  Speaker 2: I don't know, or we're gonna make or we make
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  Speaker 2: investments in So there you go.
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  Speaker 4: But Paul was talking earlier about how he thinks the
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  Speaker 4: pie is big enough right for for all these players,
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  Speaker 4: and that not to worry too much about AMD. Is
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  Speaker 4: this tie up a threat to them? Do you think
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  Speaker 4: it is?
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  Speaker 3: If they come up with a product. So, if they
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  Speaker 3: come up with a chip that can drive a PC
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  Speaker 3: refresh cycle, it's gonna hurt AMD. But look, these design
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  Speaker 3: wins take time to result in a product, and strategically, yeah,
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  Speaker 3: they will develop something. That's why I go back to
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  Speaker 3: what Amazon and Intel data year back. Did anything change
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  Speaker 3: after that?
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  Speaker 5: No good point?
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  Speaker 4: Is there anybody out there that maybe AMD now should
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  Speaker 4: start to cozy up to.
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  Speaker 3: Probably one of the hyperscalers because the hyperscalers are doing
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  Speaker 3: a lot of their custom chips and if MD is
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  Speaker 3: part of that ecosystem, that certainly will help drive up
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  Speaker 3: their order. So I expect them to partner with one
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  Speaker 3: of the hyperscalers.
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  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
• 6:25
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
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  Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
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  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 6:40
  Speaker 4: Want to talk supply chain now, and who better to
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  Speaker 4: do that with than Jeene Soroca, CEO the busiest port
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  Speaker 4: in the US, the Port of Los Angeles. And guess what,
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  Speaker 4: he's here on the East coast, right here in our
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  Speaker 4: New York studios. So Gene, thanks so much for joining us.
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  Speaker 6: Great to see you, alexis great.
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  Speaker 4: To see you. I know the LA Port handles a
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  Speaker 4: lot of international cargo, especially from Asia. I know that
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  Speaker 4: trade volumes in August were near all time records. Here
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  Speaker 4: we are mid September. Where do things stand now.
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  Speaker 6: It's been a roller coaster of a year. When hard
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  Speaker 6: trade policy comes out, you see a real slowdown in
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  Speaker 6: cargo flows. Then when that policy is softened and deadlines extended,
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  Speaker 6: cargo picks up for that window of opportunity, and that's
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  Speaker 6: what we've seen. But July and August combined are our
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  Speaker 6: busiest two months in the one hundred and seventeen year
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  Speaker 6: history of the court. Folks are bringing in inventory before
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  Speaker 6: the next policy statement may come out, trying to protect
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  Speaker 6: themselves from the all important year end holiday season for retailers,
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  Speaker 6: and the parts for American factories are keeping a lower
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  Speaker 6: but very steady flow.
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  Speaker 2: So Gene, A lot of people are unsure how tariffs work,
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  Speaker 2: But the reality is, I believe they occur your port.
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  Speaker 2: The actual collection of the tariff occurs at.
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  Speaker 6: On your turf, right That's right, Paul, and a cargo
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  Speaker 6: container cannot leave the port without that tariff being paid
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  Speaker 6: by the importer of records to US Customs.
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  Speaker 2: There's customs office at your port, and what they do
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  Speaker 2: is collect whatever tariffs may be on any particular good
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  Speaker 2: and that's how that happens all the time.
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  Speaker 6: I guess that's exactly right. And LA is the largest
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  Speaker 6: customs district in the nation. Director Africa Bell runs that
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  Speaker 6: shop for US Customs and her rank and final members
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  Speaker 6: are working around the clock just trying to keep up
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  Speaker 6: with what the tariffs are, how to apply them to
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  Speaker 6: the shipments and keep the commerce moving.
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  Speaker 4: It's got to be really confusing for them because I
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  Speaker 4: just feel like they believe constantly. How many companies, though,
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  Speaker 4: are really able to pull forward their inventory. Are you
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  Speaker 4: still seeing that in a big way as we move
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  Speaker 4: closer to the holiday shopping site?
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  Speaker 6: Yeah, Alexis, here's the interesting fact. You've got about one
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  Speaker 6: hundred and twenty five thousand companies that call Los Angeles
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  Speaker 6: home to import their goods. Over the course of a year,
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  Speaker 6: no one company has more than a five percent share.
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  Speaker 6: So we're made up mainly of small to middle sized businesses,
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  Speaker 6: some of whom are telling me now they're dipping into
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  Speaker 6: savings to pay these tariffs.
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  Speaker 2: So our is our customs office in fact keeping up
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  Speaker 2: with the collection of tariffs on all these additional goods.
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  Speaker 2: I mean, did they have the manpower to do it all?
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  Speaker 2: Do they have the facilities to do all, the technology
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  Speaker 2: to do it all.
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  Speaker 6: They truly have risen to the occasion, Paul and doing
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  Speaker 6: a great job. I look at those vital statistics of
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  Speaker 6: the port through the Port Optimizer every morning, a ninety
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  Speaker 6: second flash report. Our numbers on velocity are better than
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  Speaker 6: they were before COVID.
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  Speaker 5: Wow, you know, I was.
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  Speaker 4: I think we also those dramatic photos of the cargo
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  Speaker 4: falling off in Long Beach, not your report, but at
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  Speaker 4: the Port of Long Beach. I think it highlights also
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  Speaker 4: what a dangerous job this can be for those workers.
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  Speaker 4: But I'm just curious, did that have any impact, knockoff
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  Speaker 4: effect on your report?
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  Speaker 6: That's right, Alexis.
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  Speaker 1: You know.
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  Speaker 6: The first thing is, thank goodness, no one got hurt.
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  Speaker 6: The men and women of the International Longshore and Warehouse
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  Speaker 6: Union are on the ground moving all this cargo, and
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  Speaker 6: thankfully no one was in harm's way. The investigation will continue.
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  Speaker 6: I was talking to some folks last night at a
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  Speaker 6: big industry event back in Long Beach. I've been able
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  Speaker 6: to get their cargo out yet, So the US Coast Guard,
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  Speaker 6: National Transportation Safety Board are going to take a deep
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  Speaker 6: look at this. See what the causals are and how
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  Speaker 6: we can make sure it doesn't get repeated again. But effectively,
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  Speaker 6: that particular terminal in the port of Long Beach is
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  Speaker 6: an investigation site, So shipping lines are having a maneuver
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  Speaker 6: around that as best they can, but no real slowdowns
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  Speaker 6: because of it.
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  Speaker 5: Amazing.
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  Speaker 2: So the economic data seem to suggest that in terms
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  Speaker 2: of Tariff's questions who pays for it? We know that
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  Speaker 2: it gets collected at your port by the US Customers Office,
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  Speaker 2: and then it's a question from that perspective, how much
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  Speaker 2: gets passed along down the line to the wholesaler, to
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  Speaker 2: the distributor, to the retailer, and then ultimately to the consumer.
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  Speaker 2: What's from your view at the port, do you have
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  Speaker 2: any understanding how that's happening, how that's playing it?
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  Speaker 6: Yeah, Paul, Three real areas that importers have been focusing on.
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  Speaker 6: Can I go back to my manufacturer and negotiate a
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  Speaker 6: little bit on the price and see if we can
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  Speaker 6: mitigate some mixed effect there? Do I just absorb it
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  Speaker 6: and try to find efficiencies in my own company. We've
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  Speaker 6: seen the results from the big auto companies in Detroit
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  Speaker 6: that hasn't gone well either. Mary Barro announcing big, big
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  Speaker 6: tariff hits on cost, same thing with Jim Farley over
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  Speaker 6: at Ford, and then others are saying that they're trying
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  Speaker 6: to pass on to their customers if they're in the
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  Speaker 6: factory business manufacturing, or to consumers, and we have seen
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  Speaker 6: that as well. So it's just kind of a spread
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  Speaker 6: across those three categories, and I think we'll start seeing
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  Speaker 6: even more of that hit towards the fourth quarter of
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  Speaker 6: this year.
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  Speaker 4: I know that in just a few weeks, if benefit holes,
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  Speaker 4: we're supposed to be collecting tariffs on Chinese ships that
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  Speaker 4: call it ports at US ports. I know that President
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  Speaker 4: Trump's going to be speaking with Jijinping and a phone
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  Speaker 4: call Friday tomorrow. So how do you guys at the
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  Speaker 4: port sort of prepare for something like this?
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  Speaker 6: This is another cost that probably will be passed on
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  Speaker 6: as well, according to the shipping lines to their importers.
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  Speaker 6: So right now early days the new penalty fee goes
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  Speaker 6: into place on October fourteenth, be phased up, but right
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  Speaker 6: now we are estimating that it could be anywhere from
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  Speaker 6: about one hundred and twenty five to over three hundred
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  Speaker 6: dollars per container. The shipping line will pass that to
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  Speaker 6: the importer of record on these fees. About thirty percent
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  Speaker 6: of all vessels they call Los Angeles today are built
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  Speaker 6: or managed from China. There's going to have to be
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  Speaker 6: some movement around this. Some companies may try to absorb,
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  Speaker 6: others will shift different vessels into the rotation to avoid
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  Speaker 6: this penalty as a whole.
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  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
• 12:36
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 12:40
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 12:43
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 12:46
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 12:50
  Speaker 2: It's been a busy day for the restaurant companies reporting earnings.
• 12:54
  Speaker 2: We had Cracker Barer, we had Darted earnings. Check in
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  Speaker 2: with our expert on the restaurant business, because not only
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  Speaker 2: is it a view just kind of what's happening out
• 13:02
  Speaker 2: there in the restaurant business, but I always view the
• 13:04
  Speaker 2: restaurant companies it's a pretty good gauge at how people
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  Speaker 2: are feeling, consumers are feeling, and how they're spending their money.
• 13:09
  Speaker 2: Michael Hallin joins US Senior Restaurant and Food Service analysts
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  Speaker 2: for Bloomberg Intelligence. Hey, Mike, let's start with maybe some
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  Speaker 2: some good stuff Darted. What's going on with our friends
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  Speaker 2: at Darted?
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  Speaker 5: Yeah, you know Darting. It was an interesting quarter.
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  Speaker 7: Sales were fantastic, but slightly below, you know, very high expectations,
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  Speaker 7: and the most interesting part of their report was that
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  Speaker 7: their margins contracted, largely due to beef costs and Uber
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  Speaker 7: fees because they did this one million free delivery promotions
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  Speaker 7: supported by you know, Uber eats marketing dollars, right, and
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  Speaker 7: so it actually made up five percent of sales, and
• 13:48
  Speaker 7: that's very impressive for something that's been instituted, you.
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  Speaker 5: Know, within a year.
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  Speaker 7: So, yeah, the margins, you know this, this company has
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  Speaker 7: best in class margins.
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  Speaker 5: They've always protected their margins.
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  Speaker 7: And so seeing a same story of sales gain that
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  Speaker 7: you know, a very strong same star sales gain without
• 14:06
  Speaker 7: the margin expansion, I think shocked some investors today.
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  Speaker 4: So what are they planning to do to widen those margins?
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  Speaker 4: I heard the portions might not be as big? Are
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  Speaker 4: they looking at possibly raising prices.
• 14:20
  Speaker 5: On the menu.
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  Speaker 7: Well, they're going to raise prices, but not too aggressively.
• 14:26
  Speaker 7: So they're very careful about increasing their prices. A big
• 14:30
  Speaker 7: reason why we think they're outperforming is that they've increased
• 14:33
  Speaker 7: their prices a lot less than competitors since the pandemic, right,
• 14:38
  Speaker 7: and so they don't want to lose that advantage. So
• 14:41
  Speaker 7: they are going to raise prices this year, but it's
• 14:44
  Speaker 7: going to be modest and less than peers.
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  Speaker 5: You know, you mentioned the smaller entrees. That's really a
• 14:51
  Speaker 5: move to boost traffic.
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  Speaker 7: So what they're doing is they're taking seven of their
• 14:56
  Speaker 7: popular entrees. They're making an additional a lighter menu with
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  Speaker 7: those seven items. They're shrinking the portion and they're lowering
• 15:05
  Speaker 7: the price, and they're hoping that actually brings in greater
• 15:08
  Speaker 7: traffic with low income consumers. So shrinking the size of
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  Speaker 7: the entrees isn't isn't a major plan in terms of
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  Speaker 7: saving the margins. With the margins, it's going to be
• 15:18
  Speaker 7: you know, executing, right, That's that's what they're known for,
• 15:23
  Speaker 7: you know, consistently becoming more productive in their restaurants.
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  Speaker 5: That's how they're going to try to fund this.
• 15:29
  Speaker 7: You know, there will be some slight price increases, and
• 15:31
  Speaker 7: they mentioned they could be a little bit more aggressive.
• 15:34
  Speaker 7: If you know, the higher beef prices remain stubborn.
• 15:38
  Speaker 2: All right, let's move on to my favorite cracker barrel.
• 15:41
  Speaker 2: They're still paying the price for some of that rebranding issues.
• 15:45
  Speaker 2: What's going on there?
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  Speaker 5: Yeah, that one, Oh man, it was.
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  Speaker 7: It's the timing of this, of everything that happened to them,
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  Speaker 7: is such a shame, because.
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  Speaker 5: They were recorded a great quarter.
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  Speaker 7: You know, Same Star sales were up five point four
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  Speaker 7: percent in the rest truants, a couple hundred basis points
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  Speaker 7: ahead of the street. But you know, sales have decelerated
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  Speaker 7: pretty significantly here, you know, since August nineteenth and the
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  Speaker 7: logo controversy. So you know, the stock is down a
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  Speaker 7: little bit today. It opened much lower. You know, we
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  Speaker 7: think Paul was a good one. I thought Julie Messino
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  Speaker 7: did a great job in the call. I don't think
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  Speaker 7: there was any panic in her voice. You know. I
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  Speaker 7: think she's running a steady ship right now. And you know,
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  Speaker 7: they're focusing on the things that they've been focused on
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  Speaker 7: from the beginning, which is providing better service and higher
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  Speaker 7: quality food at a good price point. I would say
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  Speaker 7: it seems like they may have sandbag guidance as well.
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  Speaker 7: I think that's a big part of the reason why
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  Speaker 7: the stock's not down more right, is that they basically
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  Speaker 7: are extrapolating current traffic trends throughout the rest of the quarter.
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  Speaker 5: You know when second data.
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  Speaker 7: That that Bloomberg owns, that that we follow is showing
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  Speaker 7: that traffic may be stabilizing here over the last over
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  Speaker 7: last week.
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  Speaker 5: So I guess we'll see.
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  Speaker 3: Yeah.
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  Speaker 4: I mean, the latest CPI report showed that food away
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  Speaker 4: from home so at restaurants actually outpaced what we're paying
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  Speaker 4: for food at the supermarket. But I mean, if you
• 17:21
  Speaker 4: look at these two reports from Cracker Barrel and Darden restaurants,
• 17:24
  Speaker 4: are people eating out less or is that really not
• 17:26
  Speaker 4: holding true? When you look at the numbers, they both
• 17:30
  Speaker 4: reported five You know, Olive Garden was over five percent,
• 17:33
  Speaker 4: Longhorns over five percent, Cracker Barrels over five percent.
• 17:37
  Speaker 7: You know, a lot of these stories about the death
• 17:40
  Speaker 7: of the consumer I think are overstated. You know, we've
• 17:43
  Speaker 7: been saying it all year. Restaurants sales are going to
• 17:45
  Speaker 7: continue to be better than they were last year. Second
• 17:48
  Speaker 7: half is going to be better than first half. It's
• 17:52
  Speaker 7: not an issue to me. The bigger issue is what
• 17:54
  Speaker 7: we heard out of Darden. It's inflation.
• 17:57
  Speaker 5: Right.
• 17:57
  Speaker 7: The Fed just cut rates in an inflationary period, right
• 18:02
  Speaker 7: while we're seeing inflation go up, while we're seeing CPI
• 18:05
  Speaker 7: and PPI go up, right, and so beef prices are
• 18:08
  Speaker 7: stubbornly high. I mean, I look across my Bloomberg monitor
• 18:11
  Speaker 7: and MADI prices are up across the board today and
• 18:15
  Speaker 7: they've been up for basically this whole year. So you know,
• 18:18
  Speaker 7: I think through year end, margins are going to be
• 18:21
  Speaker 7: the bigger concern for restaurants.
• 18:23
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