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McDonalds E. Coli Outbreak, Boeing Earnings · Bloomberg Intelligence

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Speaker 2: Let's go right to the man himself, Michael Halen. He's
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Speaker 2: a senior restaurant analyst for Bloomberg Intelligence. He's been all
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Speaker 2: over busy, busy day today with the McDonald's news, with
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Speaker 2: the Starbucks earnings. Hey, Mike, let's start with McDonald's here. Boy,
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Speaker 2: if I were a long term shareholder of McDonald's I
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Speaker 2: think I'd be buying stock here today because nothing's fundamentally
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Speaker 2: changed other than this short term, really unfortunate incident out
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Speaker 2: in the West.
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Speaker 3: Yeah.
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Speaker 4: I guess the question is going to be how short
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Speaker 4: term is it?
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Speaker 3: Right?
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Speaker 5: Obviously it was a tragedy. Somebody's passed away. You have
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Speaker 5: ten people in the hospital. That number could expand in
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Speaker 5: the coming weeks. So yeah, I guess it's going to
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Speaker 5: depend on when customers are going to feel comfortable going.
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Speaker 4: Back to McDonald's.
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Speaker 5: You know, we think, you know, we think that some
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Speaker 5: negative sentiment could linger. Obviously, this company has gotten ahead
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Speaker 5: of itself in terms of pricing, and customers, especially low
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Speaker 5: income consumers have pushed back by visiting less this year,
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Speaker 5: and so, you know, I think the timing of it
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Speaker 5: was kind of bad in terms of where the stock's at.
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Speaker 4: I mean, the stock's been ripping higher over the last
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Speaker 4: couple of months.
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Speaker 5: It makes us think that they finally kind of hit
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Speaker 5: on value and we're able to track people back with
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Speaker 5: this five dollars meal in the last quarter, right, but
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Speaker 5: with the stock near all time highs man, that's that's
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Speaker 5: you know, I guess that's a decision consumers investors are
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Speaker 5: going to have to make today.
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Speaker 6: So for the next earnings report out of McDonald's, do
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Speaker 6: you expect any type of hit either to the sales
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Speaker 6: or any earnings metrics that has to do with this
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Speaker 6: equal y outbreak news?
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Speaker 5: So this is gonna be, uh, this is gonna impact
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Speaker 5: a fourth quarter. So we think this is gonna have
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Speaker 5: a meaningful impact on the fourth quarter and it'll probably
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Speaker 5: bleed into early twenty twenty five as well. We think
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Speaker 5: traffic and Samsar sales are going to get it a
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Speaker 5: hit because you know, I've been on TV four times
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Speaker 5: already today. I'm sure all the major outlets are covering
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Speaker 5: this story. And so it's gonna turn a lot of
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Speaker 5: people off from McDonald's. And I think there's gonna be
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Speaker 5: a lot of people out there that just may not
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Speaker 5: feel safe eating in their local McDonalds. So I think
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Speaker 5: it's gonna it's gonna impact sales and traffic and earnings
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Speaker 5: for at least a few quarters.
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Speaker 2: And Mike, aren't most I mean, like the vast majority
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Speaker 2: of McDonald's. Aren't they franchised versus company owned?
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Speaker 5: Yes, yeah, they're They're ninety six percent franchised. So yeah,
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Speaker 5: the largest impact is gonna be to the franchisees. That's
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Speaker 5: a great point, Paul. Franchisees are gonna suffer the most,
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Speaker 5: you know, because McDonald's is so heavily franchised. You know
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Speaker 5: that they'll take a top line impact, but there's less
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Speaker 5: operating leverage in that model, right, and so because of that,
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Speaker 5: their earnings aren't going to get hurt.
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Speaker 3: You know.
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Speaker 4: The last big example of.
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Speaker 2: This was Chapotle.
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Speaker 4: Chapotle owned all their stores.
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Speaker 5: So when their same star sales drop twenty percent twenty seventeen,
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Speaker 5: their margins got decimated, right, because there's just a lot
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Speaker 5: more operating leverage in the model. So you know, for
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Speaker 5: that reason, there's a lot less risk to the McDonald's
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Speaker 5: story in this case versus what we saw the Chipotle
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Speaker 5: back then.
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Speaker 6: So Michael Paul said that he's been ordering the same
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Speaker 6: thing from McDonald since high school. I imagine that when
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Speaker 6: he first lets going back ordered it, maybe the burger
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Speaker 6: was two dollars fifty cent. I want to talk about
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Speaker 6: pricing though, How is McDonald's doing right now with being
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Speaker 6: able to raise prices with a consumer that is kind
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Speaker 6: of constrained by higher interest rates and inflation right now?
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Speaker 5: Yeah, it's not just them, it's it's it's all of
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Speaker 5: the restaurant, but especially quick service. Thirty percent of their
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Speaker 5: transactions are made by low income consumers. And there's this
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Speaker 5: ke shaped economy right where if you own assets, right,
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Speaker 5: if you have a lot of money in your four
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Speaker 5: oh one k and you own a house, and you
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Speaker 5: know you're doing pretty good, right, But inflation has squeezed
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Speaker 5: the hell out of low income consumers now for four years,
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Speaker 5: and they're they're just shopping at the grocery store more often.
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Speaker 4: They're cutting back on their visits.
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Speaker 5: You know, they're they're cutting back on their checks when
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Speaker 5: they do go to the restaurants, right, and so McDonald's
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Speaker 5: franchise ease because they're the ones that set the pricing,
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Speaker 5: you know, and everyone else in the restaurant industry is
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Speaker 5: struggling mightily to raise prices on their consumers this year.
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Speaker 5: And you know, and the rising you know, the seven
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Speaker 5: since of fifty basis points cut commodity prices have just
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Speaker 5: gone up since since September when we started pricing that in, right,
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Speaker 5: and so that's a big concern for restaurant tours.
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Speaker 4: I think in twenty twenty five.
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Speaker 2: All right, Mike, let's switch gears. Look at Starbucks. Sbux
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Speaker 2: is the ticker to put into your Bloomberg terminal stocks
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Speaker 2: off about a half of one percent today. It's pretty
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Speaker 2: much unchanged on the year, so badly, badly trailing the
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Speaker 2: S and P five hundred, which is up about twenty
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Speaker 2: two percent.
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Speaker 4: Here.
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Speaker 2: What's going on at Starbucks here, Michael?
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Speaker 5: Yeah, they they played catch up a bit once the
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Speaker 5: appointment of Brian Nickel was the hiring of Brian Nichol
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Speaker 5: was announced. You know, Brian Nickel started last month, and
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Speaker 5: you know, he's moving quickly.
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Speaker 3: Man.
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Speaker 5: He's making a lot of management changes, and he's aggressively
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Speaker 5: making moves to simplify operations. You know, they're going to rationalize,
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Speaker 5: rationalized menu items, make it easier to execute, and try
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Speaker 5: to bring.
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Speaker 4: Hospitality back to the coffee shops.
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Speaker 7: Right.
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Speaker 5: They want to free up their employees, their partners as
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Speaker 5: they like to call them, to get back to knowing
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Speaker 5: the names of their customers, right and being able to
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Speaker 5: greet them with a smile and friendly service.
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Speaker 3: Right.
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Speaker 5: And so that's that's going to be job one, and
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Speaker 5: then from there they're gonna expand on the marketing side.
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Speaker 5: You know, Starbucks has historically only marketed to its rewards members, right,
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Speaker 5: and Brian Nicol wants to expand that to everyone, right.
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Speaker 5: And we think that's a smart plan. We think they've
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Speaker 5: been under investing in marketing for a long time, and
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Speaker 5: we expected to pay dividends as early as fiscal twenty
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Speaker 5: twenty five.
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Speaker 6: What is the company said to explain the seven percent
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Speaker 6: decline in same store sales? Because before you came on,
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Speaker 6: we were talking about how you have to wait in
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Speaker 6: a really long line to get your Starbucks. There's less drive, right,
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Speaker 6: if you're doing it. There's I guess, well maybe some
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Speaker 6: teams in the store, but there's less people in the store.
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Speaker 6: What have they said about really what's driving that decline?
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Speaker 2: You know, part of what.
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Speaker 5: New CEO Brian Nichol has said this is like it's
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Speaker 5: largely about the experience. You know, it's become largely transactional. Right,
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Speaker 5: They've lost that customer service feel. They've had the trouble
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Speaker 5: executing the orders. You know, a big part of it is,
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Speaker 5: you know, and then he also mentioned that, you know,
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Speaker 5: all of these new menu items that they added to
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Speaker 5: try to bring people in didn't work right. And then
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Speaker 5: you know, to your point, pricing has gotten ahead of
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Speaker 5: itself at Starbucks as well, and then China China, there's
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Speaker 5: a huge price gap between the prices that they're charging.
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Speaker 5: Sometimes they're charging three times as much as as some
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Speaker 5: of their smaller competitors like Luck and Coffee and k Coffee. So,
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Speaker 5: you know, prices has also been a big part of
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Speaker 5: their issue, and it's something that they're they're going to
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Speaker 5: address right away.
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Speaker 2: You know, I've seen some crazy graphics in various articles
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Speaker 2: showing the permutations of the different orders that one could have,
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Speaker 2: and if you're bar barbista. There's it's virtually impossible to
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Speaker 2: learn all these Is there a sense that they kind
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Speaker 2: of simplified just the menu a little bit?
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Speaker 5: Yeah, that was They issued a video yesterday after the close,
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Speaker 5: and that was a big point of emphasis. It was
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Speaker 5: like making the jobs of their barista is a lot
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Speaker 5: easier and their employees a lot easier, right, And so
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Speaker 5: you know when an.
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Speaker 4: Employee stressed, it's very hard for.
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Speaker 5: Them to provide the customer with a good experience, right.
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Speaker 5: So this all flows downhill.
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Speaker 4: So making the barista's jobs easier.
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Speaker 5: Making it more and more enjoyable environment for them is
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Speaker 5: going to flow down to the consumer, and then it's
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Speaker 5: going to result in better traffic and same source sales.
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Speaker 6: We don't have a ton a ton of time left,
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Speaker 6: but I was curious to get your thoughts, you know,
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Speaker 6: Brian Nichols said. The company said that they're pulling back
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Speaker 6: this guidance because the CEO needs more time to kind
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Speaker 6: of think through all this. How unprecedented is that just
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Speaker 6: thirty seconds?
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Speaker 3: Uh?
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Speaker 4: No, it would be This is very common.
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Speaker 5: Any any good CEO, we're worth his soul is gonna
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Speaker 5: is going to suspend guidance. So they have more time
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Speaker 5: to get their initiatives in place. This is a huge company.
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Speaker 5: It's going to take a long time for momentum to
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Speaker 5: start building in the right direction.
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Speaker 4: And this is a wise move, all right.
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Speaker 2: Michael Halen busy busy analysts today here with Starbucks McDonald's
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Speaker 2: in the news. Michael Halen, senior restaurant and food service
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Speaker 2: analysts for Bloomberg Intelligence, joining us from the BI office
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Speaker 2: in Princeton, New Jersey.
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Speaker 2: Were live here in our Boomberg Arrective Brokers studio and
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Speaker 2: we're streaming live on YouTube as well. Bowing back in
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Speaker 2: the news again today with some earnings not a good
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Speaker 2: cash flow story, stocks down three and a quarter percent.
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Speaker 2: Boeing CEO Kelly Ortberg provided an unvarnished view of his
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Speaker 2: company at a crossolads absorbed by challenges ranging from huge
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Speaker 2: debt to serious performance lapses that it needs to address
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Speaker 2: before it can consider developing a new aircraft. Take it
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Speaker 2: Down Force. George Ferguson joins US Senior Aerospace, Airlines and
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Speaker 2: Defense anels for Bloomberg Intelligence. So what did you see
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Speaker 2: in this earnings release, George? What did you hear from
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Speaker 2: new CEO Kelly Ortberg as you think about this Boeing
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Speaker 2: story right now?
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Speaker 3: Yeah?
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Speaker 8: So I think you touched on the most important thing
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Speaker 8: we heard on the call. I don't think it was
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Speaker 8: that cash burn continues into twenty twenty five, you know,
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Speaker 8: that worse than the front half of the year.
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Speaker 4: It's not like in the back half of the year cash.
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Speaker 8: There could be some generation, but it'll finish the year negative,
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Speaker 8: which really leads to me to believe, right, they just
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Speaker 8: got to raise They got to raise cash here shortly
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Speaker 8: because they don't want to dip underneath that ten billion dollars,
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Speaker 8: you know, amount they need to run the company. I
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Speaker 8: think also I found it interesting away from his discussions
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Speaker 8: on you know, the culture Boeing and how it needs
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Speaker 8: to change. I think everybody understands that, we all agree.
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Speaker 8: I found it interesting too, you know, A couple of
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Speaker 8: analysts went out of him about selling divisions, didn't get
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Speaker 8: a lot out of them, I think on on selling
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Speaker 8: parts of Boeing to raise money. Look, I know he's busy,
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Speaker 8: he's been first couple of days. But my guess is
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Speaker 8: they've looked at ways to raise cash, and you know,
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Speaker 8: we didn't think there was much potential to sell big
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Speaker 8: chunks and raise cash. And it didn't sound like Kelly
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Speaker 8: had any of those on top of his list either,
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Speaker 8: So I thought.
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Speaker 4: It was the most interesting stuff.
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Speaker 6: What did the CEO say about the serious performance lapses
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Speaker 6: that Boeing has had over the last year.
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Speaker 8: Yeah, I mean you know what I heard was, you know,
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Speaker 8: the serious lapses. You know, I guess he kind of
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Speaker 8: owned up to them as well. But again I think
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Speaker 8: we all knew that and that and that, you know,
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Speaker 8: he thought companies still had, you know, potential for a
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Speaker 8: very bright future. They're part of a duopoly, large backlog,
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Speaker 8: and I think he understands that they need to bring
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Speaker 8: back the machinist as soon as they can in a
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Speaker 8: way where they're happy and ready to build product well,
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Speaker 8: and that's the path to success. And so but again
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Speaker 8: I think he kind of owned again the problems of
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Speaker 8: the company. But we've heard this before, right, I think
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Speaker 8: now that the question is how do you change it?
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Speaker 2: And you turn it around? All right? The most immediate
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Speaker 2: I guess mile post for this company is settling the striking.
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Speaker 2: Today is the day the rank and file out there
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Speaker 2: in the Pacific northwester they are going to vote today,
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Speaker 2: and he consents us how this might go.
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Speaker 8: I'm not seeing any I mean, I'm I'm in the
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Speaker 8: camp that it looks like he has a pretty good
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Speaker 8: shot of it, because again, I think, you know, I've
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Speaker 8: talked before that the union's been out now for about
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Speaker 8: a month, so I'm sure they're starting to feel the
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Speaker 8: pain of not having a paychecker at least a paycheck
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Speaker 8: as large as they're used to coming in. They're pretty
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Speaker 8: close to the terms that I think they're all looking for.
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Speaker 8: The union might have been looking for forty percent. I
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Speaker 8: think they'll get. You know, thirty five sounds pretty darn close.
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Speaker 8: I don't know if you really want to hold out
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Speaker 8: for the extra five percent. And they sweetened up some
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Speaker 8: of the four oh one k matching and some bonuses,
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Speaker 8: so to me, it feels like they're pretty darn close
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Speaker 8: and given the timeline, since they last all work, it
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Speaker 8: kind of feels like he might get it tonight.
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Speaker 2: All right. So the long term challenge I think for
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Speaker 2: this company, and I actually just happen to know a
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Speaker 2: couple of you know, long time really right out of
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Speaker 2: college engineers at Boeing, and it goes to that culture
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Speaker 2: issue of you know, the engineering first, maybe not necessarily
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Speaker 2: profitability metrics first, but engineering first, that there's a belief
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Speaker 2: in at least by some that the company needs to
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Speaker 2: get back there. A does a company believe that? And
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Speaker 2: B is there any sense that they can actually do it?
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Speaker 3: Yeah?
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Speaker 8: I mean I do think they can. I think it again,
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Speaker 8: it's going to take a wholesale I think change in
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Speaker 8: attitude here. I do know people as well inside Boeing,
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Speaker 8: and I hear a lot of stories about you know,
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Speaker 8: non engineers running around with clipboards trying to figure out
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Speaker 8: how to manage programs that are very technical, you know,
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Speaker 8: in very technical programs. And so I think it will
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Speaker 8: be hard to change. And I think they can't lose
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Speaker 8: sight of profitability. And I think even Kelly, as he
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Speaker 8: tells you we got to get back to engineering and
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Speaker 8: a manufacturing culture, he's canceling the seven to sixty seven
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Speaker 8: because he thinks the prospects for the future aren't as good.
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Speaker 4: Right, he said, Look, this program was.
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Speaker 8: Coming to an end anyways, let's just get distractions away
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Speaker 8: from us so they can't lose sight of profitability. But
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Speaker 8: they yeah, they have to get back to engineering prowess
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Speaker 8: and manufacturing skills.
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Speaker 6: The stock is down almost forty percent or over forty
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Speaker 6: percent the year to date. Is there a sense in
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Speaker 6: the investor community that this is we're near the bottom bowing?
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Speaker 8: So look the other day, I think Monday, when you
15:04
Speaker 8: saw the announcement of you know, the next proposal for
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Speaker 8: the union and a vote coming, you saw the stock move,
15:13
Speaker 8: and so I think that that alone is an indicator
15:17
Speaker 8: that you know, look on Wall Street and financial markets,
15:21
Speaker 8: hope hope is eternal. And there are some folks out
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Speaker 8: there that saying think they see value in this.
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Speaker 2: When do you if they do come to market with
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Speaker 2: either debt or equity capital, George, when do you think
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Speaker 2: that'll be now that they've got the earnings behind them,
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Speaker 2: Seemingly they have the green light.
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Speaker 8: I think that they want to see the vote tonight, right, Okay,
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Speaker 8: So my senses it's come in late this week, next week.
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Speaker 8: I think they want to see the vote tonight and
15:45
Speaker 8: figure out what they think they need. Right if Kelly
15:47
Speaker 8: doesn't get the vote, if the vote doesn't go his way,
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Speaker 8: it's going to be a larger chunk coming out of
15:51
Speaker 8: the coming out of.
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Speaker 2: The high see you're saying, yep, makes sense, all right, George,
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Speaker 2: thanks so much once again, and for give us a
15:58
Speaker 2: few minutes of your time. George fur He's a senior aerospace,
16:01
Speaker 2: defense and airlines animals for Bloomberg Intelligence. He's been our
16:04
Speaker 2: go to voice here on really the last several years
16:07
Speaker 2: on Boeing when they've had these you know, really serious
16:10
Speaker 2: safety issues and doors you know, flying off airplanes and
16:13
Speaker 2: things like that, cracks in the wings, and so they
16:16
Speaker 2: really need to, obviously, as they've been saying for a
16:18
Speaker 2: long time, get that focus back on quality. But now
16:22
Speaker 2: they've got the I guess the shorter term issue of
16:24
Speaker 2: managing this strike here, which again is well, I guess
16:27
Speaker 2: into its fifth week right now. So they will have
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Speaker 2: a critical vote the machinists tonight. Will they support what
16:34
Speaker 2: their union leadership has agreed to with the company and
16:37
Speaker 2: end their strike. So again a key key vote today
16:41
Speaker 2: for the striking workers and for the company, and for
16:43
Speaker 2: the industry. And you think about all the supply chains
16:46
Speaker 2: that fall back from Boeing, all the suppliers that supply Boeing,
16:49
Speaker 2: they're pretty much on standby waiting for this thing. So
16:52
Speaker 2: it just affects a lot more people and a lot
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Speaker 2: more companies than just Boeing. So keep an eye on that,
16:57
Speaker 2: and that'll be breaking news tonight in Bloomberg. Will certain
17:00
Speaker 2: they cover that as well.
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Speaker 2: Let's talk about the market. Chare Carol Pepper joined his
17:22
Speaker 2: founder and CEO of Pepper International, Carol, A lot of
17:25
Speaker 2: folks have been climbing this wall of worry about the stocks.
17:28
Speaker 2: Book get the S and p F twenty two percent
17:30
Speaker 2: this year. What are you telling people who are concerned
17:33
Speaker 2: that are saying, oh boy, this market's too far over
17:35
Speaker 2: its skis.
17:36
Speaker 9: What do you tell them?
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Speaker 10: I tell them relax, First of all, it's not too
17:40
Speaker 10: far over as skis.
17:41
Speaker 7: There's a lot of good news in the market.
17:43
Speaker 10: And really, as you guys know, I manage money for
17:46
Speaker 10: people with over one hundred million dollars, and we're starting
17:48
Speaker 10: to plan what should we be doing post election, post
17:52
Speaker 10: the next rate cup, because that's really where you want
17:54
Speaker 10: to look. Just like Wayne Gretzky said, don't skate to
17:57
Speaker 10: where the puck is, skate to where it's going to be.
18:00
Speaker 10: So we need to stop being focused on the election
18:03
Speaker 10: and terrified whoever wins it will be a fareom free election.
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Speaker 7: There will not be another January sixth, I don't believe.
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Speaker 10: So that means we really should be focusing on what
18:12
Speaker 10: is January twenty five going to look like and what's
18:14
Speaker 10: going to happen after the next rate cut, And that's
18:16
Speaker 10: all good news. The market is pricing in the fact
18:19
Speaker 10: that we will have lower rates, the election will be
18:22
Speaker 10: finally out of the way, so whoever's in will know
18:24
Speaker 10: how to position ourselves and there will be a relief rally.
18:27
Speaker 10: So you want to be looking during these fearful days,
18:30
Speaker 10: these worried days, what can I buy that I don't
18:32
Speaker 10: have that will do well in the good times, because
18:35
Speaker 10: believe me, the good times are coming no matter who wins.
18:38
Speaker 10: I think we'll have a really strong first quarter next year.
18:41
Speaker 10: And so let's position for that, which to me means growth.
18:45
Speaker 10: Let's look at growth again because you know during fear days,
18:48
Speaker 10: growth is what goes down. You see the nasdak drifting
18:51
Speaker 10: lower when people get scared, and then when people are excited,
18:54
Speaker 10: the nasdak shoots up. So when it's down, this is
18:57
Speaker 10: the time to look at your portfolio and say what
18:59
Speaker 10: am I under invested in? How do I get into
19:01
Speaker 10: the strong names that will do well when we're past
19:04
Speaker 10: the election?
19:05
Speaker 6: So what does growth mean to you? Is that mag
19:08
Speaker 6: seven or is that taking on a new I guess definition?
19:12
Speaker 2: Do you do?
19:12
Speaker 6: You prescribe?
19:13
Speaker 7: No, I think it's bag seven. I think it's in video.
19:16
Speaker 10: I think it's things that are going to be working
19:18
Speaker 10: as we go into the future. So that means artificial intelligence,
19:21
Speaker 10: big tech, The big leaders are going to stay strong
19:24
Speaker 10: and get stronger. Names like Starbucks will come back, McDonald's
19:28
Speaker 10: will recover from this blip of you know, bad onions,
19:32
Speaker 10: and so I always say be bet on the big
19:36
Speaker 10: growth names because that's really where you're going to see
19:39
Speaker 10: the turbo charging when things are going well. And don't
19:42
Speaker 10: forget these big AI companies need to have a lot
19:45
Speaker 10: of data centers. That's more manufacturing jobs. They need lower
19:49
Speaker 10: interest rates.
19:50
Speaker 7: Those are coming.
19:51
Speaker 10: So that is only even though in video looks like
19:53
Speaker 10: a crazy name with over five hundred percent return in
19:56
Speaker 10: three years, it's just getting started. Look at the long
19:59
Speaker 10: term turns of Microsoft and Amazon and some of the
20:03
Speaker 10: big names, how they've done over twenty years.
20:04
Speaker 7: And you'll be very glad if you put some of
20:06
Speaker 7: these new big names in your portfolio and just close your.
20:10
Speaker 10: Eyes, put the man on a fair day and leave
20:12
Speaker 10: them there and say, you know what, ten years from now, I'll.
20:14
Speaker 7: Thank myself that I did that.
20:16
Speaker 2: You also, so you have been consistent on your Nvidia
20:19
Speaker 2: call there for sure. Now you're talking to us a
20:21
Speaker 2: little bit about energy names, and I've looked at you know,
20:24
Speaker 2: we've seen WTA, cud oil just over the last several
20:26
Speaker 2: weeks really be volatile with some of the escalation intentions
20:29
Speaker 2: in the Middle East. What's your energy call here?
20:32
Speaker 10: Yeah, I really think that energy is going to stay
20:35
Speaker 10: below one hundred, but stay above fifty. I really think
20:37
Speaker 10: we're going to be in that band for quite a
20:39
Speaker 10: long time, and you know I do. I'm a great
20:42
Speaker 10: believer in renewable energy. I'm a great believer in the
20:44
Speaker 10: new carbon markets that are going to get started. That
20:46
Speaker 10: will be a whole new asset class that we can
20:48
Speaker 10: talk about next year and in twenty six where we
20:52
Speaker 10: are offsetting the emissions from these fossil fuels. But I
20:55
Speaker 10: do not believe fossil fuels are going away in any way,
20:58
Speaker 10: shape or form. It's just a question of have will
21:00
Speaker 10: all the various components of an energy market fit together.
21:04
Speaker 10: And for that reason, I think energy should be a
21:06
Speaker 10: core part of your portfolio. Will go up and we'll
21:08
Speaker 10: go down, but it's going to stay in a band
21:10
Speaker 10: certainly for the next ten years, and it's a great
21:12
Speaker 10: dividend payer generally. So again, stick with the big names,
21:16
Speaker 10: stick with the exxons and groups that are going to
21:19
Speaker 10: do well. And frankly, a lot of those companies are
21:21
Speaker 10: very committed to renewable energies, fossil fuels, offsetting their carbon footprint.
21:26
Speaker 7: They really have massive departments now who are doing that.
21:29
Speaker 7: That is not a conspiracy theory, that is a fact.
21:32
Speaker 7: And so for this reason, I think even for any
21:34
Speaker 7: ethical investors. It's an important part of your portfolio.
21:37
Speaker 6: Carol. How dependent is your bull thesis that you've laid
21:41
Speaker 6: out here on more rate cuts from the FED? Because
21:45
Speaker 6: we've seen traders kind of pair back the level of
21:49
Speaker 6: I I guess the number of rate cuts that we're
21:51
Speaker 6: going to see this year potentially next year. How many
21:55
Speaker 6: rate cuts does your bull thesis need.
21:58
Speaker 10: I don't think the number actually important. I think it's
22:01
Speaker 10: the trend and the trajectory. So is it four cuts
22:04
Speaker 10: over the next year or two? Is it three cuts?
22:07
Speaker 10: It will be fewer cuts if the market is strong,
22:09
Speaker 10: it will be more cuts if the market is weak.
22:12
Speaker 10: And where those numbers will turn out are up to
22:14
Speaker 10: the FED. Frankly, nothing that we can really project. But
22:17
Speaker 10: I don't see a situation where they're going to start
22:19
Speaker 10: raising interest rates, certainly because I think they did a
22:21
Speaker 10: great job of getting us a soft landing that we
22:23
Speaker 10: need in I think we're getting that soft landing, and
22:26
Speaker 10: again technology, we can't discount what technology is doing in
22:30
Speaker 10: terms of increasing productivity without increasing costs, but at the
22:34
Speaker 10: same time, frankly, allowing for higher wages for the workers.
22:38
Speaker 7: I mean, that's a nice sweet spot to be in.
22:39
Speaker 10: Where you can raise your wages and have more productivity
22:42
Speaker 10: at the same time.
22:44
Speaker 7: And I think we're going to see that trend continuing.
22:46
Speaker 10: So not really dependent on a particular number of rate cuts,
22:50
Speaker 10: because of course, if the FED announced fewer rate cuts
22:52
Speaker 10: in the beginning, the market will go down and be
22:55
Speaker 10: upset for a week or two.
22:56
Speaker 7: But the second there are good earnings coming out and
22:58
Speaker 7: we see that the corporations are still drow on, the
23:01
Speaker 7: market will come back.
23:02
Speaker 2: Hey, Carol, thanks so much for joining us. Always appreciate
23:04
Speaker 2: getting a few minutes of your time. Carol Pepper, founder
23:07
Speaker 2: and CEO of Pepper intern National.
23:10
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
23:14
Speaker 1: weekdays at ten am Eastern on Apple car Playing and
23:16
Speaker 1: broud Otto with the Bloomberg Business app. Listen on demand
23:19
Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
23:25
Speaker 2: Got Emily Graffeo sitting in for Alex Steel on Paul Sweeney.
23:27
Speaker 2: You live here in our Bloomberg and Director Broker Studio
23:29
Speaker 2: owners streaming live on YouTube as well, so check us
23:32
Speaker 2: out there. We had a deal in the data security
23:36
Speaker 2: business a couple of days ago, SOFOS. I think Tomo
23:39
Speaker 2: Bravo own Sofos acquiring secure Works in an all cash
23:44
Speaker 2: deal values the company secure Works about eight hundred and
23:48
Speaker 2: fifty nine million dollars. Secure Works as a publicly traded
23:51
Speaker 2: company SCWX is as symbol. We have Wendy Thomas. She
23:54
Speaker 2: is the CEO of secure Works. When you talk to
23:57
Speaker 2: us about this transaction, why why sell to sofos and
24:02
Speaker 2: what's the pro former company look like?
24:05
Speaker 11: Yes, good morning, Paul. This is a strategic combination of
24:08
Speaker 11: two longtime security market leaders. And so when you think
24:12
Speaker 11: about combining are two agnostic, very open platforms, decades of
24:18
Speaker 11: cybersecurity experience, and strong brands in the space. This is
24:22
Speaker 11: a way to really scale up and defeat the adversary
24:25
Speaker 11: at scale.
24:28
Speaker 6: What does it say about the current market for cybersecurity
24:32
Speaker 6: companies that this acquisition is going through.
24:38
Speaker 11: The market is really looking for a single partner for cybersecurity,
24:43
Speaker 11: sort of a consolidated platform play that a one organization
24:47
Speaker 11: can increasingly address multiple use cases for their security needs,
24:52
Speaker 11: from being proactive about vulnerability management to reactive to detection
24:58
Speaker 11: and response capabilities, the way to AI powered platforms that
25:01
Speaker 11: can predict the next cyber attack, and so the scale
25:04
Speaker 11: of R and D required to make that a reality
25:07
Speaker 11: for customers is one that requires scale in organizations. So
25:12
Speaker 11: to take two cash low positive growing leaders in the
25:17
Speaker 11: space and put them together means more scaled R and
25:19
Speaker 11: D to be better, faster, stronger for customers.
25:24
Speaker 2: All right, So what are your customers doing with cybersecurity
25:28
Speaker 2: these days? In terms of they're spending their investment.
25:34
Speaker 11: They are increasingly moving from what I would call preventative
25:38
Speaker 11: cybersecurity investments to proactive cybersecurity posture and risk management. This
25:45
Speaker 11: is all about moving towards increasing prevention and the reason
25:50
Speaker 11: is that dwell times of thread actors in an organization's
25:53
Speaker 11: environment have gone from months to days to now hours.
25:59
Speaker 11: So with the power of an AI powered platform, in
26:02
Speaker 11: order to really be able to keep constant visibility about
26:06
Speaker 11: potential holes in their attack surface, right, those unlocked doors,
26:11
Speaker 11: as I like to talk about, it requires technology to
26:14
Speaker 11: do that, technology to detect that someone's rattling that door
26:18
Speaker 11: handle and the ability to immediately protect the organization from
26:23
Speaker 11: someone getting in and taking those valuable data assets or
26:27
Speaker 11: encrypting their systems with ransomware.
26:29
Speaker 6: So you're using an AI powered you're an AI powered
26:33
Speaker 6: security platform. I'm wondering how difficult it is right now
26:37
Speaker 6: to be a company that's using AI when it seems
26:41
Speaker 6: like demand is outpacing supply. Is that a challenge for
26:45
Speaker 6: you guys.
26:48
Speaker 11: Well, if you think about AI, that's a pretty broad category.
26:51
Speaker 11: And while you know, natural language processing and generative AI
26:55
Speaker 11: is the is the hot topic right now, and it
26:58
Speaker 11: has its place in security in terms of things like
27:02
Speaker 11: changing cybersecurity detections into readable language of what's going on
27:07
Speaker 11: to a business person. We've been using AI for a
27:11
Speaker 11: very long time in our platform. We started building it
27:13
Speaker 11: in twenty seventeen for things like machine learning, deep learning,
27:17
Speaker 11: statistical learning in order to sort through tremendous amounts of
27:22
Speaker 11: data and find patterns of behavior that we can match
27:25
Speaker 11: to thread actors, the way that they try to come
27:27
Speaker 11: into an environment, the software that they use in those
27:30
Speaker 11: tactics and techniques, and a platform like that that can
27:33
Speaker 11: filter through a lot of data and find those patterns
27:36
Speaker 11: is the key to being able to protect an organization.
27:40
Speaker 11: So it's home built for both sofas and for secure works.
27:44
Speaker 11: Their hub platform and our Tage's platform. It just makes
27:47
Speaker 11: a ton of sense to be able to take the
27:49
Speaker 11: best of both worlds. And put those together.
27:51
Speaker 2: All right, So you and I, Wendy, we first chatted
27:54
Speaker 2: back in twenty twenty one. How is your company? How
27:57
Speaker 2: has the industry changed over the last several years.
28:02
Speaker 11: The industry is, I think, on a path for the
28:04
Speaker 11: first and a long time to really consolidate, and that
28:08
Speaker 11: is frankly as a result of customer demand to be
28:11
Speaker 11: able to run a holistic security program, understand, frankly, quantify
28:18
Speaker 11: their risk, demonstrate where they've protected against that risk, and
28:22
Speaker 11: then have the accountability around who is attacking their environment
28:27
Speaker 11: and how they've protected against it for their boards and
28:30
Speaker 11: c suite. It's become a boardroom topic for the last
28:34
Speaker 11: couple of years, and so the ability of a security
28:37
Speaker 11: professional to elevate sort of a technical pursuit into the
28:41
Speaker 11: language of business and risk. It's probably the biggest change
28:44
Speaker 11: that I've seen over the last few years.
28:47
Speaker 6: I want to zoom out and just talk about the
28:49
Speaker 6: cyber industry more broadly and how different corporations should be
28:54
Speaker 6: thinking about the current state of threat to their businesses
28:59
Speaker 6: when it comes to cybersecurity. Is are we worse off
29:03
Speaker 6: than we were maybe five years ago? As hackers get
29:07
Speaker 6: more advanced.
29:10
Speaker 11: I would say that the great things about AI that
29:13
Speaker 11: have enabled us as businesses or security companies to leverage
29:17
Speaker 11: the power of that AI has also represented a certain
29:20
Speaker 11: amount of peril in terms of empowering those thread actors
29:24
Speaker 11: as well, and whether it's nation states or cyber criminals
29:28
Speaker 11: who are involved, their ability to use the same sort
29:32
Speaker 11: of natural language processing technologies to make that phishing email
29:37
Speaker 11: much more believable. It really does look like it's coming
29:40
Speaker 11: from your bank or from a vendor that you use.
29:45
Speaker 11: And so the last line of defense, always beyond technology,
29:50
Speaker 11: is people and the need for all of us to
29:53
Speaker 11: become more educated and just cyber aware is more important
29:58
Speaker 11: than ever. So there's always is that human edge that
30:02
Speaker 11: can make the difference on top of technology to keep
30:05
Speaker 11: us all a little bit safer. When cyber criminals cannot
30:09
Speaker 11: make money off of global citizens, then we start to
30:13
Speaker 11: break that economic.
30:14
Speaker 2: Model, all right, Wendy, thank you so much for joining us.
30:17
Speaker 2: Wendy Thomas, she's the CEO of Secure Works. That's a
30:19
Speaker 2: public traded company SCWX. Just recently, in the last couple
30:22
Speaker 2: of days, agreed to be acquired by private company Sofos
30:26
Speaker 2: and a deal for eight dollars and fifty cents per
30:29
Speaker 2: sharing cash, which was a pre solid premium to the
30:32
Speaker 2: pre deal talk there. And Sophos is owned by the
30:37
Speaker 2: private equity firm Toma Bravo, so more consolidation than the
30:41
Speaker 2: data security business. That seems like an area that is
30:44
Speaker 2: just going to get significant investment for as far as
30:47
Speaker 2: I can see, because I mean, you have to continue to,
30:50
Speaker 2: I think invest in cybersecurity because as you mentioned, Emily,
30:53
Speaker 2: the you know, the state actors, the private actors are
30:56
Speaker 2: just getting smarter and smarter and more and more aggressive.
30:59
Speaker 6: Exactly you imagine the threat just gets worse.
31:01
Speaker 1: Yep, you're listening to the Bloomberg Intelligence podcast. Catch us
31:07
Speaker 1: live weekdays at ten am Eastern on applecar Play and
31:10
Speaker 1: androyd Otto with the Bloomberg Business App. You can also
31:13
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31:16
Speaker 1: station Just Say Alexa playing Bloomberg eleven thirty.
31:21
Speaker 2: Let's get a sense of what's happening with these markets,
31:23
Speaker 2: John just reporting we have a sell off in place
31:26
Speaker 2: here today, but otherwise we are at or near all
31:29
Speaker 2: time highs for these markets right smack in the middle
31:32
Speaker 2: of earning. So it looks like people feel pretty decent
31:34
Speaker 2: about the earnings that are coming about. Let's check in
31:37
Speaker 2: with somebody who does this stuff for a living. Loreen Gilbert,
31:40
Speaker 2: CEO of wealth Wise Financial, joins us via Dallas via
31:44
Speaker 2: zoom from Dallas, Texas. Laurene, thanks so much for joining
31:46
Speaker 2: us here. How do you What are the discussions you're
31:50
Speaker 2: having with your clients these days? As they had a
31:53
Speaker 2: pretty good twenty twenty four a year to date both
31:56
Speaker 2: in stocks and even bonds are giving you some some
31:58
Speaker 2: pretty solid returns. What's the conversation like these days.
32:02
Speaker 12: Well, it has been a really good year, and what's
32:05
Speaker 12: on everybody's mind is the upcoming election, and it's interesting
32:08
Speaker 12: to see how many people are holding this weight and
32:12
Speaker 12: see mentality on what to do with big life decisions,
32:16
Speaker 12: whether it's buying a house or making a move with
32:19
Speaker 12: a business. A lot of people are just playing wait
32:22
Speaker 12: and see. So the talk has been how will election
32:25
Speaker 12: this election affect my portfolio? And to that question, we
32:31
Speaker 12: say there shouldn't be a lot of allocation changes based
32:36
Speaker 12: on the general election because we already know that this
32:40
Speaker 12: year is a positive year for the market, so we
32:42
Speaker 12: don't expect that to change. It's been a fantastic year
32:44
Speaker 12: across the board, and so the real question is what
32:47
Speaker 12: happens next year, and to that we look to Congress.
32:51
Speaker 12: So more important for the markets would be what kind
32:54
Speaker 12: of legislation could be enacted in Congress, So who controls
32:57
Speaker 12: Congress could have an outcome as to what happens on
33:01
Speaker 12: corporate tax rates, on individual tax rates, on regulations. So
33:06
Speaker 12: all those things are of concern to people.
33:08
Speaker 6: When you think about where we are right now in
33:11
Speaker 6: the business and economic cycle and markets, is there still
33:16
Speaker 6: room for this bull market to run? We just had
33:20
Speaker 6: six straight weeks of S and P five hundred gains.
33:23
Speaker 6: That was the best winning streak for the index all year.
33:28
Speaker 6: Where are we are We still early? Are we mid cycle?
33:31
Speaker 6: What do you think?
33:33
Speaker 12: Well, we're in a light cycle, there's no doubt. But
33:36
Speaker 12: this rally now is two years really in the making.
33:40
Speaker 12: And the odds would say, or the history tells us
33:43
Speaker 12: in the markets that there is still room for this
33:46
Speaker 12: market to run. So where of the opinion that the
33:49
Speaker 12: market continues to run that we'll see right now we're
33:52
Speaker 12: seeing a pause in the market. A lot of that
33:54
Speaker 12: is profit taking from stock So even you know, looking
33:58
Speaker 12: this morning at next stare that report and beat on
34:02
Speaker 12: earnings missed a little bit on revenue, but at the
34:04
Speaker 12: end of the day is still flat on the price,
34:07
Speaker 12: and so there's been definite profit taking. Coca Cola is
34:11
Speaker 12: another example of reporting and then the stock going down.
34:14
Speaker 12: So I think what we're seeing is some profit taking
34:17
Speaker 12: before your end a pause. And yet I will say,
34:22
Speaker 12: we think there is definitely room to run. And fourth
34:25
Speaker 12: quarter expectations for earnings are very robout. So while third
34:29
Speaker 12: quarter is somewhat muted on your over year earnings, fourth
34:32
Speaker 12: quarter we're expecting quite a bit.
34:36
Speaker 2: Lauren, I kind of grew up in the age of
34:38
Speaker 2: the sixty forty portfolio, but I know that's kind of
34:40
Speaker 2: a thing of the past that in fact, a lot
34:43
Speaker 2: of not just institutional investors, but retail investors like they
34:47
Speaker 2: have some alternatives in their portfolio, whether that's you know,
34:50
Speaker 2: hedge funds, private equity, private credit. How does that conversation
34:54
Speaker 2: go with you and your clients.
34:57
Speaker 12: Alternatives definitely have a place in a space, and it
35:00
Speaker 12: all depends on the liquidity of the client and their
35:04
Speaker 12: risk tolerance. Definitely, equities, you know, public equities, there's nothing
35:09
Speaker 12: that can replace that because of liquidity and long term
35:13
Speaker 12: growth as well as dividend income, So your equities have
35:16
Speaker 12: a place right now. We were talking about bonds have
35:19
Speaker 12: done very well, and the expectation is over the next
35:21
Speaker 12: five years we see the bond market being very robust
35:25
Speaker 12: as rates come down, and that trend will be our friend,
35:27
Speaker 12: so that we'll see long term you know what I
35:31
Speaker 12: mean is three years to five years some robust returns
35:34
Speaker 12: on fixed income, So we can't negate that or neglect it,
35:38
Speaker 12: and so then you are left with alternatives as well.
35:42
Speaker 12: And what alternatives can do is diversify a portfolio. There
35:45
Speaker 12: are liquid alternatives and they're non liquid alternatives, so making
35:48
Speaker 12: sure you're using probably a combination of both of those,
35:52
Speaker 12: whether it's hedging a portfolio looking to commodities are considered
35:58
Speaker 12: in a sense an alternative looking at private equity as
36:02
Speaker 12: a long term hold. So there's lots of different avenues
36:05
Speaker 12: and ways to play at macro looking at macro elements too,
36:10
Speaker 12: so lots of ways to play alternatives, and we believe
36:13
Speaker 12: in that we've got double digit allocation in alternatives in
36:18
Speaker 12: our portfolio.
36:20
Speaker 6: I know you had mentioned that the election not really
36:25
Speaker 6: kind of a longer term concern for investors, especially those
36:28
Speaker 6: who have maybe a longer time horizon than traders. So
36:33
Speaker 6: when you do think about maybe the next year ahead,
36:36
Speaker 6: what are the risks to the market and your outlook.
36:41
Speaker 12: Yeah, so it really is there is a risk. The
36:45
Speaker 12: risk is we go into recession, and looking at history
36:49
Speaker 12: during a rate cut cycle, most of the time that's
36:52
Speaker 12: very positive for equity markets. And the reason it's positive
36:56
Speaker 12: is if you can go into a rate cut cycle
36:58
Speaker 12: and avoid a recession, then the markets do quite well
37:02
Speaker 12: and have double digit returns. If the rate cut then
37:07
Speaker 12: we go into a recession, then we're going to see
37:10
Speaker 12: negatives on stock market prices, no doubt. Now, we believe
37:15
Speaker 12: that we're going to still see continued growth in the economy.
37:20
Speaker 12: We don't see this economy even though the leading economic
37:23
Speaker 12: indicators we're seeing going down, we don't think that that
37:26
Speaker 12: means we're huating right now into a recession. So if
37:30
Speaker 12: we can avoid a recession, we see the stock market
37:34
Speaker 12: doing quite well in twenty twenty five. So right now,
37:36
Speaker 12: our base case is that there's not a recession, that
37:39
Speaker 12: Pharaohserve continues low rates, and that the market will continue
37:43
Speaker 12: to rally.
37:44
Speaker 2: All right, Lauren, thank you so much for joining us.
37:46
Speaker 2: Loreen Gilbert she's the CEO of wealth Wise Financial. Joining
37:50
Speaker 2: us fro Dallas, Texas via that zoom thing.
37:53
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
37:57
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38:00
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38:09
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38:12
Speaker 2: Sometimes a headline gets your attention, boy, this one does. Crackskull,
38:18
Speaker 2: fractured bones, show danger at Rivian's factory. That draws you
38:22
Speaker 2: right in. So I want to get right to the
38:23
Speaker 2: reporter on this story. It's a big take story. We
38:26
Speaker 2: love the big takes stories, really cool stories, deeply deeply reported,
38:30
Speaker 2: resourced and sourced, I mean, and great graphics, all the
38:32
Speaker 2: kind of good stuff. So it makes sure good long
38:34
Speaker 2: form journalism. Kyle Porter joins US Industrials reporter for Bloomberg News.
38:39
Speaker 2: Kyle talk to us about Rivian. I mean, I remember
38:41
Speaker 2: talking to Bloomberg Intelligence analysts years ago and they say, Hey,
38:46
Speaker 2: the technology of evs, that's one thing, but at some
38:49
Speaker 2: point they got to go start bending some metal. That's
38:52
Speaker 2: another whole thing, you know, entirely, and these companies don't
38:55
Speaker 2: have any experience in it. What did you find at Rivian.
38:59
Speaker 9: The kind of really struggling to build a safety culture
39:03
Speaker 9: that they can be proud of. In short, there's been
39:06
Speaker 9: numerous incidents, some of which you start that in the headline,
39:09
Speaker 9: others which we didn't put into the story, or this
39:11
Speaker 9: which I haven't been investigated by OSHA. If you talk
39:14
Speaker 9: to people out.
39:14
Speaker 4: There in normal Illinois, a lot of them.
39:17
Speaker 9: Go to work every day because it's the best paid
39:19
Speaker 9: employer in the region, but they don't feel safe.
39:24
Speaker 2: So I mean, again, they only have one plant here.
39:27
Speaker 2: I'm wondering how did Rivian, Like if I were starting
39:30
Speaker 2: up a new hot Cup and I'd just go over
39:31
Speaker 2: to Ford or GM or Stalantis, steal a bunch of
39:34
Speaker 2: their factory people and say, hey, guys, start building my
39:36
Speaker 2: car here. How did Rivian do it? How is Rivian
39:39
Speaker 2: kind of I guess learning on the job if you will.
39:42
Speaker 7: Well, Rivian got a deal.
39:43
Speaker 9: The original the plan that they have they purchased the
39:48
Speaker 9: sixteen million dollars have been abandoned by Mitsubishi when they
39:52
Speaker 9: were trying to make an electric car in the US.
39:54
Speaker 9: So it's sort of all fell into place. There were
39:56
Speaker 9: still workers from the time that it was owned by
39:58
Speaker 9: Mitsubishi that could come in work, so they felt that
40:01
Speaker 9: they could get some muscle memory. And then at the
40:03
Speaker 9: start they you know, it was designed to be a
40:05
Speaker 9: very niche carmaker, and then they got the Amazon deal.
40:08
Speaker 9: Things exploded and they had to ramp up.
40:11
Speaker 2: So what's the company responding, like, how they've kind of
40:15
Speaker 2: respond to this and do they have any policies in
40:17
Speaker 2: place to try to address this, because I'm just looking
40:19
Speaker 2: at another great graph you having a story that just
40:22
Speaker 2: shows a number of serious violation sited, and Rube's at
40:25
Speaker 2: the top of that list.
40:27
Speaker 9: Yes it is, and as you pointed out, it's only
40:30
Speaker 9: one factory with eight thousand staff. Most of the companies
40:32
Speaker 9: on that list have multiple sites and tens of thousands
40:35
Speaker 9: of workers the company, I'm sorry, continued no go.
40:39
Speaker 2: So I just want to know kind of how the
40:40
Speaker 2: companies responding here.
40:42
Speaker 9: They're responded in great detail to us.
40:44
Speaker 4: It's fair to say.
40:46
Speaker 9: They pointed out that most of the serious citations that
40:48
Speaker 9: they were issued were ultimately downgraded or in a couple
40:51
Speaker 9: of cases, dismiss which is true of most people that
40:54
Speaker 9: go through the citation process, and they pointed this to
40:57
Speaker 9: things that they've done to improve their safety process. An indeed,
41:00
Speaker 9: Osher itself has commended the company for being open and
41:04
Speaker 9: looking to improve its health and safety.
41:06
Speaker 2: So is Rivin any materially different than say a Tesla
41:11
Speaker 2: factory or you know the other ev makers.
41:16
Speaker 9: Well, it currently only builds two types of vehicle. You
41:20
Speaker 9: have the Amazon truck and then you have the R one,
41:24
Speaker 9: which comes into several bottles. It's an SUV in a truck,
41:27
Speaker 9: and they're looking to ramp that up with an expansion
41:29
Speaker 9: with the R two next year. So it's smaller. It's
41:34
Speaker 9: I think it's aiming to produce now that you actually
41:36
Speaker 9: cut their forecast this year about fifty thousand vehicles, so
41:39
Speaker 9: the scale of it is much smaller.
41:42
Speaker 2: Does Rivian have the money to invest in their plants
41:46
Speaker 2: into the safety because well, you look at the stocks
41:48
Speaker 2: of some of these companies that are just so volatile,
41:51
Speaker 2: and I wonder if they even really have the money
41:53
Speaker 2: to invest in safety protocols.
41:56
Speaker 9: It's a question to ask the company that they say
41:58
Speaker 9: that they have a real commitment to safety and they
42:00
Speaker 9: are investing in it.
42:03
Speaker 2: Is it is making an evy. I don't know, it
42:06
Speaker 2: seems like they're not building an internal combustion engine, so
42:09
Speaker 2: they're not actually building an engine, there is it? I
42:12
Speaker 2: would think the process is a lot different. Is it
42:14
Speaker 2: any more or less dangerous as the industry said versus
42:17
Speaker 2: say a you know traditional guess assembly plant.
42:21
Speaker 9: Oh, given that you're building this thing from scratch, you know,
42:26
Speaker 9: from the engine upwards, there's a lot of process that
42:29
Speaker 9: has to be learned. There's a lot of things that
42:31
Speaker 9: need to be learned. Indeed, one of the things that
42:33
Speaker 9: the company was cited for was a movement vehicle that
42:38
Speaker 9: the engineers are designed and you know, wasn't safe for
42:42
Speaker 9: employees to use. They were telling employees to be careful
42:44
Speaker 9: until I she cited them and they figured out a
42:46
Speaker 9: way to do it differently. And you could replicate that
42:48
Speaker 9: across a thousand examples, from how you attach the doors
42:51
Speaker 9: to how you put.
42:52
Speaker 4: The glass in.
42:53
Speaker 9: You could go on and on and on, and Ribbean's
42:54
Speaker 9: had to work out new and different ways of doing
42:56
Speaker 9: all these things for these new bespoke vehicles.
42:59
Speaker 2: But the employees, I guess they are. Are they aware
43:02
Speaker 2: of the hazards when they take these jobs.
43:07
Speaker 9: That's a very good question. It's rapidly becoming a company town.
43:13
Speaker 9: Most of the people that we spoke to for the
43:15
Speaker 9: story are one of several family members who work at
43:18
Speaker 9: the plant. They all talk about how when the plant
43:20
Speaker 9: first opened, it was very small, very welcoming. You saw
43:24
Speaker 9: members of senior management. It felt like a family. And
43:27
Speaker 9: as production as ramptup, that's gone away and there's been
43:30
Speaker 9: a pressure just to produce interesting.
43:33
Speaker 2: All right, interesting story. Kyle Appreciate a Kyle Porter, industrials
43:35
Speaker 2: reporter for Bloomberg News. It's got the Big Take story
43:39
Speaker 2: about Rivian and working in their plant in Normal, Ohio,
43:42
Speaker 2: some of the safety concerns there. You can read more
43:45
Speaker 2: of this story on the Bloomberg and at bloomberg dot
43:48
Speaker 2: com slash Big Take. Looking at the stock of Rivian,
43:52
Speaker 2: it's down about two percent today, it's down fifty six
43:56
Speaker 2: percent year to date. It's got a market cap of
43:59
Speaker 2: ten point three billion, so again reflecting some of the
44:01
Speaker 2: challenges of starting up some of these ev companies and
44:05
Speaker 2: the volatility around kind of the adoption of electric vehicles,
44:08
Speaker 2: which is really still i think pretty uncertain as to
44:10
Speaker 2: where the ultimate demand is for electric vehicles. We're seeing
44:13
Speaker 2: that in some different demand numbers we see out of
44:17
Speaker 2: some of these companies.
44:18
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