Latest / Bloomberg Intelligence / BI Weekend: Airline Mergers, TikTok Scrutiny, Auto-Dealer Sentiment

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BI Weekend: Airline Mergers, TikTok Scrutiny, Auto-Dealer Sentiment · Bloomberg Intelligence

• 0:02
  Speaker 1: This is Bloomberg Intelligence with Alex Steel and Paul'sweenye.
• 0:06
  Speaker 2: The real app performance has been the US corporate high yield.
• 0:09
  Speaker 3: Are the companies lean enough? Have they trimmed all the fats?
• 0:11
  Speaker 2: The semiconductor business is a really cyclical business.
• 0:15
  Speaker 1: Breaking market headlines and corporate news from across the globe.
• 0:18
  Speaker 3: Do investors like the M and A that we've seen?
• 0:21
  Speaker 2: These are two big time blue chip companies.
• 0:24
  Speaker 3: Window between the peak and cut changing super fast Bloomberg.
• 0:29
  Speaker 1: Intelligence with Alex Steel and Paul'sweenye on Bloomberg Radio.
• 0:34
  Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big
• 0:37
  Speaker 2: business stories impacting Wall Street and the global markets.
• 0:39
  Speaker 3: Each and every week we provide in depth research and
• 0:41
  Speaker 3: data on some of the two thousand companies and one
• 0:43
  Speaker 3: hundred and thirty industries our analysts cover worldwide.
• 0:46
  Speaker 2: Today we dive into the tech space as TikTok continues
• 0:48
  Speaker 2: its fight against investment in the US.
• 0:50
  Speaker 3: Plus, we take a look at new policy that could
• 0:52
  Speaker 3: create some purtals for future bank mergers.
• 0:55
  Speaker 2: But first we talked transportation and the outlook for an
• 0:57
  Speaker 2: airline acquisition that just got the green light from the DT.
• 1:00
  Speaker 3: For more on the Alaska Airlines Hawaiian deal. We spoke
• 1:03
  Speaker 3: with Bloomberg Intelligence and your Aerospace, Defense and Airlines analyst
• 1:06
  Speaker 3: George Ferguson.
• 1:07
  Speaker 4: I think it's a good deal for the US consumer
• 1:09
  Speaker 4: because I think there was a risk that potentially Hawaiian
• 1:13
  Speaker 4: could have gone out of business, and so I think,
• 1:15
  Speaker 4: really what this whole thing adds up to is Hawaiian was,
• 1:19
  Speaker 4: you know, was a bit distressed. They've had some problems
• 1:22
  Speaker 4: in their core businesses, especially from you know, wildfires, Japanese travel,
• 1:28
  Speaker 4: things like that. It just hurt their core business. Their
• 1:31
  Speaker 4: their balance sheet was stressed. And so Alaska coming in
• 1:35
  Speaker 4: and taking them over, you know, as sure as that
• 1:37
  Speaker 4: they continue to exist. The combined entity had you know,
• 1:40
  Speaker 4: has a footprint that looks like or route network that
• 1:44
  Speaker 4: looks like West Coast US into Alaska, and then Alaska
• 1:48
  Speaker 4: has some long haul into Asia. So it makes Alaska's
• 1:52
  Speaker 4: operations a little more complex with some long haul wide
• 1:55
  Speaker 4: body aircraft. For most US consumers, it's not They're not
• 1:59
  Speaker 4: going to really be able to tell. But I think
• 2:01
  Speaker 4: the US Department of Transportation, Department of Justice figured out that,
• 2:06
  Speaker 4: you know, like the spirit in the Spirit jet Blue
• 2:09
  Speaker 4: merger purchased by Jet Blue whatever you want to call it.
• 2:12
  Speaker 4: You know, I think letting that fail means it's Spirits
• 2:15
  Speaker 4: in difficult straits whining to have been similar place that
• 2:19
  Speaker 4: I think they've decided let's just let this go.
• 2:21
  Speaker 3: Does this mean that the Spirit deal could get another
• 2:24
  Speaker 3: look through or that's definitely dead.
• 2:26
  Speaker 4: I think that's definitely dead from a Jet Blue perspective.
• 2:30
  Speaker 4: I'm not sure if Justice would think differently about it now,
• 2:33
  Speaker 4: but I think it's dead.
• 2:35
  Speaker 2: George, what's the current status of just demand for air
• 2:38
  Speaker 2: travel these days?
• 2:39
  Speaker 4: I mean, you know, what we saw in two Q
• 2:42
  Speaker 4: was that budget travel definitely looked like it was taking
• 2:46
  Speaker 4: more of the demand. Although it looks like some of
• 2:50
  Speaker 4: those travelers are fading a little bit. And I say, although,
• 2:53
  Speaker 4: because we saw a bunch of capacity come to that marketplace, right,
• 2:57
  Speaker 4: I think, really, what we're starting to say see in
• 3:01
  Speaker 4: two Q this year was a fading of this bounce
• 3:06
  Speaker 4: back travel boom where people were paying anything it took
• 3:09
  Speaker 4: to go on vacation. And so I suspect we're going
• 3:12
  Speaker 4: to continue to see that as we get into three Q.
• 3:15
  Speaker 4: We're actually working through schedules right now for the US
• 3:18
  Speaker 4: airlines as we do kind of as we close the
• 3:22
  Speaker 4: quarters down, and you know, we're still seeing a decent
• 3:26
  Speaker 4: amount of capacity coming to the marketplace. So I say decent.
• 3:29
  Speaker 4: You know, we're looking at domestic the other day five
• 3:31
  Speaker 4: six percent growth in seat capacity, and you really can't
• 3:36
  Speaker 4: do that in a market that the US economies grow
• 3:39
  Speaker 4: in a couple percent and you don't have this bounce
• 3:43
  Speaker 4: back travel. So we still think three Q looks soft ish.
• 3:47
  Speaker 4: It's not as bad as two Q. Some of the
• 3:48
  Speaker 4: capacity growth isn't there. We're interestingly, we're seeing more capacity
• 3:53
  Speaker 4: growth come in from the big full service carriers than
• 3:56
  Speaker 4: we're seeing for the budget low cost and notable are
• 4:00
  Speaker 4: carriers like Southwestern, Jet Blue literally pulling back in capacity
• 4:04
  Speaker 4: as they go.
• 4:04
  Speaker 2: Into the end of the year.
• 4:06
  Speaker 3: Right, So you have the big guys are able to
• 4:07
  Speaker 3: compete a little more in capacity and then price, and
• 4:10
  Speaker 3: then the other guys can and that gets confusing. So
• 4:13
  Speaker 3: this is a dumb question. But if I take a
• 4:14
  Speaker 3: look at the big guys, like, can you rank these
• 4:16
  Speaker 3: for me?
• 4:16
  Speaker 5: Here?
• 4:16
  Speaker 3: So you get the Delta American United, They're gonna be
• 4:18
  Speaker 3: the top three, right, what comes after that?
• 4:20
  Speaker 6: Now?
• 4:21
  Speaker 4: Southwest Southwest is the number four. Okay, one of the
• 4:24
  Speaker 4: biggest carriers in the country, and then you go into
• 4:27
  Speaker 4: the Alaska's Jet Blues those folks, sorry, so.
• 4:30
  Speaker 3: Did Alaska and Hawaiian airlines like help them get a
• 4:32
  Speaker 3: big boost? Like are they in the top five now?
• 4:35
  Speaker 4: Well, Alaska is going to be four or five and
• 4:38
  Speaker 4: Jet Blue is going to be at four or five. Well,
• 4:41
  Speaker 4: Alaska Hawaiian combination probably jumps them a bit above jet Blue.
• 4:44
  Speaker 4: I haven't looked at this recently. Jet Blue is going
• 4:46
  Speaker 4: to be number five if they got spirit and those
• 4:49
  Speaker 4: two are kind of neck and necks, and I guess
• 4:51
  Speaker 4: is they're slightly ahead now Alaska.
• 4:53
  Speaker 2: All right, George, what we got in your phone? We
• 4:55
  Speaker 2: need our periodic update of Boeing. I know the most
• 4:58
  Speaker 2: recent news was Boeing freezing hiring to preserve cash, and
• 5:03
  Speaker 2: you know, what's the update on the strike and kind
• 5:06
  Speaker 2: of where we are with Boeing.
• 5:08
  Speaker 4: So it goes on obviously, you know, folks are talking
• 5:12
  Speaker 4: if it continues. I suspect that, you know, Boeing's draw
• 5:17
  Speaker 4: off suppliers, their off take of the components they're building
• 5:20
  Speaker 4: is going to have to slow to continue to preserve cash.
• 5:23
  Speaker 4: I just don't see hiring doing you know that much
• 5:25
  Speaker 4: for the cash flow of Boeing because again, as it
• 5:30
  Speaker 4: drags on, they have to start to really worry about
• 5:33
  Speaker 4: how much cash they're they're burning. They would prefer not
• 5:36
  Speaker 4: to go back to capital markets to show up their balances.
• 5:40
  Speaker 4: We think they're probably going to be close to nine
• 5:42
  Speaker 4: billion in balances as they end three Q and that's
• 5:46
  Speaker 4: going to be pretty tight because that's roughly around what
• 5:49
  Speaker 4: they say they need to run the company. I'm sure
• 5:52
  Speaker 4: everybody can tighten their belt, every company can tighten their
• 5:54
  Speaker 4: belt and get lower, but they need to be very
• 5:56
  Speaker 4: very mindful of cash burn here.
• 5:58
  Speaker 3: Yeah. I was like, oh, that's treading the line there.
• 6:01
  Speaker 3: We was talking to the guy over at Moody's who
• 6:04
  Speaker 3: is putting the company risk on downgrade. If they get
• 6:07
  Speaker 3: a downgrade from like fish S and P and Moody's,
• 6:10
  Speaker 3: what would that mean? That would be huge, a huge
• 6:13
  Speaker 3: fallen angel.
• 6:13
  Speaker 4: Right, Yeah, it's a big fallen angel. I mean it's
• 6:16
  Speaker 4: not the not the end of the world, right, Companies
• 6:19
  Speaker 4: managed through this. No, No, I mean it means you're
• 6:22
  Speaker 4: going to go to capital markets. If you go to
• 6:25
  Speaker 4: debt markets, it's just going to cost you more to
• 6:27
  Speaker 4: raise write your debt and a company like Bowing needs
• 6:31
  Speaker 4: this good mix of debt and equity to make the
• 6:34
  Speaker 4: returns work for the equity, and so you kind of
• 6:36
  Speaker 4: hate to be paying higher interest rates. You're going to
• 6:40
  Speaker 4: see you know, some funds that are debt funds can't
• 6:44
  Speaker 4: hold less investment grade paper. They'll end up having this discorged,
• 6:47
  Speaker 4: some of that Boeing paper. That means that you'll see
• 6:51
  Speaker 4: prices gap out in it. Again, it's not the end
• 6:54
  Speaker 4: of the world, but you prefer be prefer to be
• 6:57
  Speaker 4: raising money cheaper than what they will be in the
• 7:00
  Speaker 4: high yield markets. But you know, customers, I don't think
• 7:03
  Speaker 4: go away because of it. Nobody can break their commitments
• 7:07
  Speaker 4: for airplanes because of it. Suppliers don't really have other
• 7:11
  Speaker 4: places to go for aerospace. Yeah, business right. They could
• 7:14
  Speaker 4: go to Airbus, which is investment grade, and Boeing has
• 7:17
  Speaker 4: to continue to rebuild that balance sheet as they get
• 7:21
  Speaker 4: things like this strike past them.
• 7:23
  Speaker 2: Our thanks to Bloomberg Intelligence senior Aerospace, Defense and Airlines
• 7:26
  Speaker 2: analyst George Ferguson.
• 7:27
  Speaker 3: Staying with the transportation space, we moved to the automotive world,
• 7:30
  Speaker 3: where dealer sentiment is starting to wane.
• 7:33
  Speaker 2: For more on this, we spoke with Bloomberg Intelligence Global
• 7:35
  Speaker 2: Director of Credit Research Joel Livington.
• 7:38
  Speaker 7: The Cox Automotive folks put out as sentiment index and
• 7:41
  Speaker 7: it showed that it was the second lowest reading in
• 7:43
  Speaker 7: their history, which is probably not great news. So dealers
• 7:46
  Speaker 7: are thinking that there's going to be less demand for
• 7:49
  Speaker 7: used cars, and that really goes back to affordability of vehicles.
• 7:52
  Speaker 3: There wasn't didn't Carvana do like really well and is
• 7:55
  Speaker 3: like crushing on all cylinders, No pun intended.
• 7:57
  Speaker 7: Carvana is crushing it and they should crush it again
• 8:00
  Speaker 7: in the third quarter. But you have to remember like
• 8:01
  Speaker 7: they're starting from such a weak spot that you know it.
• 8:04
  Speaker 7: Sometimes it becomes a case of less worse is great,
• 8:07
  Speaker 7: and that's their case. For most of the other players,
• 8:10
  Speaker 7: it's the opposite of it's just overwhelming. The amount of
• 8:14
  Speaker 7: cost that's associated with a car. Insurance is up thirty percent.
• 8:19
  Speaker 7: Rates are ten to eleven percent for a used car,
• 8:23
  Speaker 7: So that's just weighing on consumer. So certainly recuts will
• 8:26
  Speaker 7: be a benefit for them in the future.
• 8:28
  Speaker 2: One of the things you should drive by a lot
• 8:30
  Speaker 2: pre pandemic and there'd be as cars as far as
• 8:32
  Speaker 2: I can see. They had a huge inventory and then
• 8:34
  Speaker 2: during the pandemic, they had like three cars on the lot. Yes,
• 8:37
  Speaker 2: literally nobody was building cars anymore. Where are we today
• 8:42
  Speaker 2: in that kind of scenario.
• 8:43
  Speaker 7: Yeah, Well, two years ago when nobody could build a
• 8:45
  Speaker 7: car because there were no semiconductor chips to put in
• 8:47
  Speaker 7: the cars, you had about twenty three days worth of inventory.
• 8:51
  Speaker 7: If you look today, that's up to about fifty six.
• 8:54
  Speaker 7: Now historically that's not bad. But I will tell you
• 8:57
  Speaker 7: depending on the auto company, Like if you go learn
• 9:00
  Speaker 7: no jeeparn no jeep out there in our area, you'll
• 9:04
  Speaker 7: see it's like outside the lot that you can't stuff
• 9:07
  Speaker 7: enough cars in there. Jeep Ram in particular. So the
• 9:10
  Speaker 7: Stilantas company has a huge amount of inventory ball and
• 9:14
  Speaker 7: so they have also the highest discounts going on. They're
• 9:17
  Speaker 7: discounting at about five and a half percent on your
• 9:20
  Speaker 7: average car, which is a huge amount for our company
• 9:22
  Speaker 7: where your profitability might be eight or nine percent.
• 9:25
  Speaker 2: Well, we used to have a top auto analyst of
• 9:27
  Speaker 2: Bloomberg Intelligence and he explained it to me. Pre pandemic,
• 9:30
  Speaker 2: they used to make like seventeen change million cars SAR
• 9:34
  Speaker 2: season only adjusted something really great. Then they went down
• 9:37
  Speaker 2: to the pandemic to way down fourteen to fifteen million,
• 9:41
  Speaker 2: but they were more profitable sales at that point because
• 9:43
  Speaker 2: they weren't they didn't have to offer incentives. Where are
• 9:45
  Speaker 2: we in that production It seems like to kind of
• 9:47
  Speaker 2: creeping back up in production.
• 9:48
  Speaker 7: Yeah, well, he's totally He was totally right in that
• 9:51
  Speaker 7: you can play that game as long as inventory is low. Unfortunately,
• 9:54
  Speaker 7: over the past year, all the like we were saying
• 9:56
  Speaker 7: it went from twenty three days and up to forty
• 9:58
  Speaker 7: six days. Now you're up to fifty six days, and
• 10:00
  Speaker 7: now you have too much inventory on the lots to
• 10:02
  Speaker 7: really play the game when your pricing is that high.
• 10:05
  Speaker 7: Average car in America costs forty seven thousand dollars and
• 10:09
  Speaker 7: your average American family makes sixty thousand dollars. So it's
• 10:12
  Speaker 7: the math just doesn't really work out. And then you
• 10:14
  Speaker 7: start hearing things like with ALI financial warning people. I
• 10:18
  Speaker 7: think their socks now about twenty percent on the news
• 10:20
  Speaker 7: that auto loans for them are starting to tick up
• 10:23
  Speaker 7: even higher than they expect it in terms of write offs.
• 10:25
  Speaker 7: So I think we're going to be seeing more of
• 10:27
  Speaker 7: that over the next couple of quarters.
• 10:29
  Speaker 3: I hate to say, you're painting a pretty grim picture
• 10:31
  Speaker 3: for me about some of these car dealerships and like
• 10:33
  Speaker 3: how they're going to kind of make it through all this.
• 10:36
  Speaker 7: Yeah, well, most of the dealers have enough financial flexibility
• 10:39
  Speaker 7: that I don't think it's a case of them making
• 10:41
  Speaker 7: it through, so at least the public companies, like that's
• 10:45
  Speaker 7: really not going to be an issue. But what I
• 10:46
  Speaker 7: do think you're going to see is resets and profitability
• 10:49
  Speaker 7: expectations that.
• 10:50
  Speaker 3: Hasn't happened yet.
• 10:51
  Speaker 7: That has not happened yet. I think you're going to
• 10:53
  Speaker 7: first see that at the dealers, and that's going to
• 10:55
  Speaker 7: eventually come back to both the suppliers and the OEM.
• 10:58
  Speaker 7: So I would suspect that in the second half of
• 11:00
  Speaker 7: this year you'll see a reset in the auto universe
• 11:03
  Speaker 7: for lower expectations for twenty twenty five.
• 11:06
  Speaker 2: You know, where are we Joel in the industry thinking
• 11:09
  Speaker 2: how to Detroit and other big auto companies about this
• 11:12
  Speaker 2: trend towards electric vehicles. It seems like we've hit a
• 11:15
  Speaker 2: bump in the road after the initial success of Tesla.
• 11:18
  Speaker 2: How do you think this is going to play out?
• 11:20
  Speaker 7: Yeah, I think it's gonna take a lot of time, Paul,
• 11:22
  Speaker 7: because even Tesla, you could say, if you strip out
• 11:25
  Speaker 7: the tax credits that they get for for selling electric credits,
• 11:30
  Speaker 7: they might not be profitable or at least on a
• 11:32
  Speaker 7: cashlowle basis this year, you know, out of the auto business.
• 11:36
  Speaker 7: So it's a very tough business to get in. Right now,
• 11:39
  Speaker 7: it seems like the market seems to be comfortable with hybrids,
• 11:42
  Speaker 7: which gives you the best of having an ice engine
• 11:45
  Speaker 7: but still giving you more green cars than up pure
• 11:49
  Speaker 7: ice engine. So the market's there. It's really that the
• 11:52
  Speaker 7: government has to either hugely change incentives or infrastructure, probably both.
• 11:58
  Speaker 7: And that's not like a quarter or two quarter fix.
• 12:00
  Speaker 7: That's a many year fix. So my guess is they're
• 12:02
  Speaker 7: going to have to reset their views as to what
• 12:04
  Speaker 7: their goals are for the future.
• 12:07
  Speaker 3: Really quick, dumb question. Can you recycle hybrids?
• 12:10
  Speaker 2: Like?
• 12:10
  Speaker 3: And what's that shelf life?
• 12:12
  Speaker 8: You can?
• 12:12
  Speaker 7: You know, there was an interesting story out just the
• 12:15
  Speaker 7: other day on the battery technology that it goes down
• 12:18
  Speaker 7: about one or one and a half percent a year.
• 12:20
  Speaker 7: So the batteries at this point are good enough that
• 12:22
  Speaker 7: they could probably last the life cycle of a car.
• 12:26
  Speaker 7: But you can recycle all of the componentry of the car,
• 12:30
  Speaker 7: which it will be a benefit down the road.
• 12:32
  Speaker 2: Thanks to Bloomberg Intelligence Global Director of Credit Research Joel Lovington.
• 12:36
  Speaker 3: Coming out. We're going to break down Intel's boundary expansion
• 12:38
  Speaker 3: plans and it's win with Amazon.
• 12:40
  Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
• 12:42
  Speaker 2: depth research and data on two thousand companies in one
• 12:45
  Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via
• 12:48
  Speaker 2: b I go on the terminal, I'm Paul.
• 12:49
  Speaker 3: Swinging and amlex Steel and this is Bloomberg.
• 12:56
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 13:10
  Speaker 3: After a recent Fleuria bad news, slashing fifteen thousand workers,
• 13:14
  Speaker 3: spending the company's dividend, and shuttering the construction of pivotal
• 13:17
  Speaker 3: factories in Germany and Poland, Intel's luck is looking up.
• 13:20
  Speaker 3: Earlier this week, the company ounce plans to create a
• 13:22
  Speaker 3: custom chip for Amazon Web services.
• 13:24
  Speaker 2: For more on the deal and the longer term outlook
• 13:26
  Speaker 2: for the company, Normal Linda and I spoke with Bloomberg
• 13:29
  Speaker 2: Intelligence Senior technology analyst man Deep Singh.
• 13:31
  Speaker 9: Everyone knows their foundery business is burning a lot of cash.
• 13:35
  Speaker 9: It lost seven billion dollars last year, and there's no
• 13:40
  Speaker 9: signs of you know, the business turning around anytime soon.
• 13:43
  Speaker 9: So what they've done is created an independent subsidiary for
• 13:47
  Speaker 9: that business. Obviously, they need more funding to upgrade the
• 13:52
  Speaker 9: you know, the fabs to make sure it can compete
• 13:55
  Speaker 9: with TSMC, But at least there's more transparency around how
• 13:59
  Speaker 9: much money they're losing in that foundry business, what sort
• 14:03
  Speaker 9: of gross margin profile it has, and it just as
• 14:05
  Speaker 9: an investor, it gives me more comfort to see, Okay,
• 14:08
  Speaker 9: how is the core PC business doing versus what is
• 14:12
  Speaker 9: it that the foundry is losing? And you know, if
• 14:15
  Speaker 9: they have to raise capital then they can do that.
• 14:17
  Speaker 9: So more to do with transparency. I don't think execution
• 14:20
  Speaker 9: changes in a quarter. So it's a long story. But
• 14:24
  Speaker 9: at least they're doubling down in the US here, so
• 14:27
  Speaker 9: they're stopping their investments outside of US. And what it
• 14:31
  Speaker 9: suggests is with the geopolitical tensions that there are a
• 14:36
  Speaker 9: lot of these hyperscalers will pivot to using Intel as
• 14:40
  Speaker 9: a foundry at least here in the US.
• 14:42
  Speaker 10: And you know, really, what's the thought behind the play
• 14:45
  Speaker 10: for investors that are investing in Intel. I mean, when
• 14:48
  Speaker 10: you look at his competitors, We've got Envidio, I'm looking
• 14:50
  Speaker 10: your Nate up one hundred and thirty six percent, We've
• 14:53
  Speaker 10: got Intel down about fifty six percent. So what is
• 14:55
  Speaker 10: the play? What type of investor is still investing in
• 14:58
  Speaker 10: Intel at this point?
• 14:59
  Speaker 9: I mean, census is overly negative on Intel. Any hint
• 15:04
  Speaker 9: of positive news is good for the stock. And look,
• 15:07
  Speaker 9: they have to give incremental proof points as we go along.
• 15:10
  Speaker 9: So this is by no means or turn around and
• 15:13
  Speaker 9: the making. No, you have to look at the incremental
• 15:16
  Speaker 9: data points. Everyone thought hyperskillers are the ones who are
• 15:19
  Speaker 9: spending over one hundred billion dollars in capex, who are
• 15:22
  Speaker 9: raising their capex. Why is Intel not exposed to that?
• 15:26
  Speaker 9: So now they have given a hint that maybe Amazon
• 15:29
  Speaker 9: will give a small order. I don't think they're making
• 15:31
  Speaker 9: all their chips with Intel anytime soon, and they're still
• 15:34
  Speaker 9: going to TSMC for all the leading node manufacturing. But
• 15:37
  Speaker 9: the fact that Intel could get a few orders from Amazon,
• 15:42
  Speaker 9: it's a positive.
• 15:42
  Speaker 2: Is there a technical reason that Intel just doesn't have
• 15:46
  Speaker 2: it to compete or absolutely? I mean they just don't
• 15:51
  Speaker 2: have them. They just don't have the products that customers want.
• 15:55
  Speaker 9: It's about the processed node technology. So when TSMC says
• 15:59
  Speaker 9: they have a three nanometer at scale where they're making
• 16:02
  Speaker 9: chips for Apple, Nvidia, all the fabulous guys, Intel doesn't
• 16:08
  Speaker 9: have the equivalent of three nanometer. They're still trying to
• 16:11
  Speaker 9: perfect that. They've lost a lot of engineering talent. Plus
• 16:15
  Speaker 9: their cost of manufacturing is seventy percent higher than TSMC's,
• 16:19
  Speaker 9: so it makes it very hard to justify. Why would
• 16:23
  Speaker 9: any company give an order to Intel for a leading
• 16:25
  Speaker 9: note when the costs are higher and they're not even
• 16:28
  Speaker 9: at parody. The only reason I can think of is
• 16:30
  Speaker 9: the geopolitical tensions. What if something happens to Taiwan, that's
• 16:34
  Speaker 9: where in Apple or an Nvidia or an Amazon would
• 16:37
  Speaker 9: want to diversify their exposure.
• 16:40
  Speaker 10: I mean, and Intel, you really used to be a powerhouse,
• 16:42
  Speaker 10: So I mean, what do they What would they need
• 16:44
  Speaker 10: to do to release some sort of comeback. Do they
• 16:46
  Speaker 10: need to be a bit more innovative and start looking
• 16:49
  Speaker 10: for something that's a bit more competitive or does it
• 16:51
  Speaker 10: seem like it's pretty much a universal loss cause? Is
• 16:54
  Speaker 10: that how Wall Street is viewing it?
• 16:55
  Speaker 9: I mean, look, the government is completely behind Intel, so
• 16:59
  Speaker 9: they're very few sectors where the government really supports you
• 17:03
  Speaker 9: in such a big way. Intel definitely has that tailwind
• 17:06
  Speaker 9: in terms of government support eight point five billion and
• 17:10
  Speaker 9: Chipsack funding another three billion dollar announcement, So they have
• 17:14
  Speaker 9: all the support from the government. It's about making sure
• 17:17
  Speaker 9: that translates into good yields, making sure their chips are
• 17:21
  Speaker 9: equivalent to the likes of TSMC. And that's where the
• 17:24
  Speaker 9: execution comes in. Do they have the engineering talent to
• 17:27
  Speaker 9: turn around their fab manufacturing and you know, their chips
• 17:30
  Speaker 9: being competitive to do.
• 17:32
  Speaker 2: Does Taiwan Semi connector manufacture all the chips in Taiwan? Yes,
• 17:36
  Speaker 2: that's a problem, dude. I mean a Chinese and a
• 17:38
  Speaker 2: Taiwanese both bump into each other in the night, it
• 17:41
  Speaker 2: could be all over.
• 17:42
  Speaker 9: I mean, they have plans to expand in the US.
• 17:44
  Speaker 2: And if I'm Tim Cook, I'm saying here, Intel, here's
• 17:48
  Speaker 2: the chip, just manufacturing it. I mean, it's my best
• 17:52
  Speaker 2: interest if I'm Apple, if I'm all these chips they
• 17:55
  Speaker 2: have Intel doing great, right?
• 17:57
  Speaker 8: Yeah?
• 17:57
  Speaker 9: But then Intel also is a design vendor as well.
• 18:01
  Speaker 9: So Intel makes a chip that's competitive to Nvidia, So
• 18:05
  Speaker 9: why would an Nvidia have Intel manufactured their tip? Intel
• 18:09
  Speaker 9: could also compete, right, And that's a problem that Intel
• 18:13
  Speaker 9: has had in separating those businesses because Intel is also
• 18:16
  Speaker 9: a competitor to all these fabulist companies MT you know, Invidia,
• 18:20
  Speaker 9: And that's the akain.
• 18:21
  Speaker 2: If I'm a buyer, I want as many chip suppliers
• 18:23
  Speaker 2: as possible, particularly ones that are like in Kentucky, your.
• 18:26
  Speaker 9: Favor to divest. It's clear that the founder businesses run
• 18:30
  Speaker 9: completely separately.
• 18:31
  Speaker 2: Our thanks to Bloomberg Intelligence senior technology jannalist Man Deep Singh,
• 18:35
  Speaker 2: sticking with.
• 18:35
  Speaker 3: Tech Let's move do to TikTok as a social media
• 18:37
  Speaker 3: company continues to face scrutiny from the US government.
• 18:40
  Speaker 2: The video sharing app went to court Monday, arguing that
• 18:43
  Speaker 2: a potential divest or ban request violates the company's free
• 18:46
  Speaker 2: speech rights. From more on the outcome of the hearing
• 18:49
  Speaker 2: and a potential path for TikTok normally, lind and I
• 18:51
  Speaker 2: spoke with Bloomberg Intelligence media litigation analysts Matt Sheltenham.
• 18:55
  Speaker 5: If TikTok wasn't concerned about a potential ban, should be concerned.
• 19:01
  Speaker 5: After that hearing did not go well for the company.
• 19:04
  Speaker 5: What's an issue here is in April, Congress passed a
• 19:09
  Speaker 5: law that said, unless TikTok is divested to a company
• 19:13
  Speaker 5: that doesn't have its parent in China, that companies in
• 19:17
  Speaker 5: the US can no longer carry the app in app stores,
• 19:22
  Speaker 5: companies can no longer host it in a way that
• 19:24
  Speaker 5: the app can be distributed, updated, or maintained in the
• 19:28
  Speaker 5: United States. All of as of January nineteenth, and TikTok
• 19:32
  Speaker 5: has said, look, we can't do a divestiture. It's certainly
• 19:36
  Speaker 5: not on that timeline. And so TikTok's only chance to
• 19:39
  Speaker 5: survive in the United States after January nineteenth is to
• 19:44
  Speaker 5: win this legal case. And the three judges on the case,
• 19:48
  Speaker 5: in my view, were not very sympathetic to the company's
• 19:52
  Speaker 5: First Amendment case.
• 19:54
  Speaker 10: And so is this isolated to the United States? Are
• 19:56
  Speaker 10: there any other countries that are also trying to crack
• 19:59
  Speaker 10: down on TikTok of its influence.
• 20:02
  Speaker 5: I think different countries are taking different approaches. The EU
• 20:06
  Speaker 5: has taken a harder approach to tech regulation generally, and
• 20:13
  Speaker 5: likely would apply that to TikTok without a specific ban
• 20:19
  Speaker 5: in the same way. According to our analyst Hamlin Basin,
• 20:22
  Speaker 5: there so This law is US specific It was passed
• 20:26
  Speaker 5: by Congress specifically to target the company, and so it's
• 20:32
  Speaker 5: a different remedy here in the US. But there's a
• 20:35
  Speaker 5: tendency I think, to think, you know, nothing's going to
• 20:37
  Speaker 5: happen in Congress. Nothing ever gets done there, just a
• 20:40
  Speaker 5: lot of talk. Well here, Congress did it. It's done.
• 20:43
  Speaker 5: It's law, and TikTok's only chance to overcome it is
• 20:48
  Speaker 5: to win this legal case.
• 20:49
  Speaker 2: So the parent company for TikTok is Byte Dance, a
• 20:52
  Speaker 2: Chinese controlled company. If I misstated that, let me know
• 20:57
  Speaker 2: what has Bite Dance said about theirs, what they plan
• 21:01
  Speaker 2: to do scenarios.
• 21:03
  Speaker 5: Yeah, so that's right that Byte Dance is the parent
• 21:07
  Speaker 5: company of TikTok. Now, TikTok is a is a US subsidiary,
• 21:12
  Speaker 5: it's a US company. TikTok is a privately owned company,
• 21:15
  Speaker 5: but it happens to have its headquarters in China, and
• 21:18
  Speaker 5: that's the concern. And you know, TikTok and Byte Dance
• 21:23
  Speaker 5: in this legal case have basically said, look, a divestiture
• 21:27
  Speaker 5: is just not technically or legally feasible. And so there's
• 21:31
  Speaker 5: really no indication that they're pursuing a divestiture at this point,
• 21:36
  Speaker 5: and at least that's their indication to the court. In fact,
• 21:39
  Speaker 5: the law allows a ninety day extension if the president
• 21:42
  Speaker 5: sees their making progress on a sale. But the company
• 21:46
  Speaker 5: they've made no indication they're pursuing that route. They say
• 21:49
  Speaker 5: this is a blatant violation of the Constitution, and so
• 21:52
  Speaker 5: they think they can win in court. But I'm not
• 21:54
  Speaker 5: so sure after that hearing.
• 21:56
  Speaker 10: I mean, so what do analysts think are the brought
• 21:59
  Speaker 10: would be the broader out for the corporate side of things.
• 22:01
  Speaker 10: I mean, of course, we know so many companies actually
• 22:04
  Speaker 10: promote their products and their companies on TikTok. I mean,
• 22:07
  Speaker 10: when I'm scrolling through, I'm always seeing a new pitch.
• 22:09
  Speaker 10: So what does that look like in terms of advertisement
• 22:12
  Speaker 10: and the ripple effects there?
• 22:14
  Speaker 5: Yeah, that's right. And part of the litigation yesterday was
• 22:17
  Speaker 5: brought by users of TikTok that say, look, there isn't
• 22:20
  Speaker 5: a good substitute. Yeah, there are other social media companies,
• 22:23
  Speaker 5: but we've built our businesses here. We are we are
• 22:26
  Speaker 5: expressing ourselves as a First Amendment matter on TikTok and
• 22:30
  Speaker 5: the government can't take that away. And and there's also
• 22:34
  Speaker 5: a big business impact in terms of TikTok's competitors. TikTok
• 22:39
  Speaker 5: is is, you know, one of the leading social media
• 22:41
  Speaker 5: apps in the country. So if it goes away, it's
• 22:44
  Speaker 5: a it's a great opportunity for the competitors, for Google,
• 22:48
  Speaker 5: for Meta and so there are serious business implications by
• 22:53
  Speaker 5: by forcing a divestiture that isn't going to happen and
• 22:56
  Speaker 5: effectively forcing a ban.
• 22:58
  Speaker 2: Is this something that could get to the Supreme Court.
• 23:02
  Speaker 5: Yes, So if TikTok loses in the DC Circuit, I
• 23:06
  Speaker 5: expect we'll see a decision by early December from the
• 23:10
  Speaker 5: DC Circuit. As I said, the key deadline is January
• 23:13
  Speaker 5: nineteenth here, so there's not a lot of time. If
• 23:15
  Speaker 5: we see a decision in December from the DC Circuit,
• 23:18
  Speaker 5: TikTok's realistic only chance at that point is going to
• 23:22
  Speaker 5: be a last ditch plea to the Supreme Court to
• 23:25
  Speaker 5: hit pause on this, to say, look, nothing should move
• 23:28
  Speaker 5: this fast when you have such a major restriction under
• 23:31
  Speaker 5: the First Amendment. The Supreme Court should issue a stay
• 23:34
  Speaker 5: and take up this case. That's going to be the
• 23:37
  Speaker 5: TikTok's last chance to dodge a man by January nineteenth.
• 23:40
  Speaker 5: If this ruling goes against it, and I'm not sure
• 23:43
  Speaker 5: the Supreme Court will necessarily take it. Yes, it's a
• 23:45
  Speaker 5: major question that they might be interested in. But if
• 23:50
  Speaker 5: TikTok gets a major loss at the d C Circuit,
• 23:53
  Speaker 5: the Supreme Court could say, look, you know they got
• 23:55
  Speaker 5: it right. We don't need to step in here. So
• 23:57
  Speaker 5: it's not even a sure thing that the Supreme Court
• 23:59
  Speaker 5: will take it. We'll have to watch that in after
• 24:02
  Speaker 5: the DC Circuit rules.
• 24:03
  Speaker 2: Our thanks to Bloomberg Intelligence media litigation analyst Matt Scheltenham.
• 24:07
  Speaker 3: Coming up on the program, we take a look at
• 24:09
  Speaker 3: commercial real estate and one side in Brooklyn that's working
• 24:11
  Speaker 3: to perfect the foot traffic floor plan.
• 24:14
  Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing inp
• 24:17
  Speaker 2: research and data on two thousand companies and one hundred
• 24:20
  Speaker 2: and thirty industries. You can access Bloomberg Intelligence via Bigo
• 24:23
  Speaker 2: on the terminal.
• 24:23
  Speaker 3: I'm Paul Sweeney and am Alex Deel, and this is Bloomberg.
• 24:31
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 24:35
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• 24:38
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• 24:41
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• 24:45
  Speaker 1: Just say Alexa play Bloomberg eleven thirty.
• 24:49
  Speaker 3: We move now to commercial real estate and one side
• 24:52
  Speaker 3: in Brooklyn that's making their way in the tough New
• 24:54
  Speaker 3: York City market.
• 24:55
  Speaker 2: Jim Simosa is the managing director of Industry City and
• 24:59
  Speaker 2: Multifaceted sh warehousing and Production space on New York's Bay Waterfront.
• 25:04
  Speaker 2: We spoke with them about the space's success.
• 25:06
  Speaker 6: You know, we have a lot of history doing adaptive
• 25:09
  Speaker 6: reuse projects like this, like in Inser City, like Chelsea Market,
• 25:12
  Speaker 6: which at one time, just like this project was you know,
• 25:17
  Speaker 6: a number of older buildings that were past their prime.
• 25:20
  Speaker 6: But people really like classic old buildings that you take
• 25:24
  Speaker 6: and redevelop into offices and retail and things that are fun.
• 25:29
  Speaker 6: So we've seen this before and we've done at other locations.
• 25:33
  Speaker 6: So look, I'm surprised we took on something as large
• 25:37
  Speaker 6: if you really want to know, that's six million square feet.
• 25:39
  Speaker 6: But we've been able to do it so as far.
• 25:41
  Speaker 6: But from a success standpoint, I'm not surprised.
• 25:44
  Speaker 2: Jim, talk to us about how you're thinking about real estate,
• 25:47
  Speaker 2: mixed use, real estate, office, real estate in the context
• 25:51
  Speaker 2: of what appears to be a post pandemic, you know,
• 25:53
  Speaker 2: different way people work and live and go to the
• 25:56
  Speaker 2: office and all that kind of stuff.
• 25:58
  Speaker 6: We've been at this since doing exactly what we do,
• 26:01
  Speaker 6: which is adaptive reuse and activation and fun place, you know,
• 26:07
  Speaker 6: creating a fun place to work. For a long time,
• 26:09
  Speaker 6: we didn't know a pandemic was coming. It just so
• 26:14
  Speaker 6: happens that it came and what we do was more
• 26:17
  Speaker 6: attractive to people. So what we do here is create
• 26:21
  Speaker 6: a place that people like to come and work. And
• 26:24
  Speaker 6: so we've actually been at eighty percent of the employees
• 26:29
  Speaker 6: that work I see have been back in the office
• 26:32
  Speaker 6: regularly for several years now, and so you know, that's
• 26:36
  Speaker 6: that's kind of what we do is create fun places
• 26:40
  Speaker 6: to work that are not commodity real estate. I worked
• 26:43
  Speaker 6: and by the way, I worked in many glass and
• 26:45
  Speaker 6: steel office buildings in my career, and these are just
• 26:49
  Speaker 6: more fun places to work, and people like coming to
• 26:53
  Speaker 6: work when they come to places like this.
• 26:56
  Speaker 3: How do you know when a project's going to work? Right?
• 26:58
  Speaker 3: Like you mentioned Chelsea Market in city, Like, what's the
• 27:01
  Speaker 3: secret sauce?
• 27:03
  Speaker 6: I will tell you the secret sauce is, So what
• 27:06
  Speaker 6: you first do is you start with the ground floor
• 27:09
  Speaker 6: and the placemaking. And for us, when you do something
• 27:13
  Speaker 6: like this, when you have a project, you need retail.
• 27:17
  Speaker 6: You need food and beverage, you need shopping, you need
• 27:20
  Speaker 6: things like that. But how do you do that without
• 27:22
  Speaker 6: any foot traffic? Nobody wants to come and do retail
• 27:25
  Speaker 6: with you when you do that. So what we did
• 27:28
  Speaker 6: at Chelsea Market and did the same thing here is
• 27:30
  Speaker 6: we went to wholesalers and commissaries and bakeries and things
• 27:34
  Speaker 6: like that. People that really were interested in the production
• 27:38
  Speaker 6: space more than retail.
• 27:41
  Speaker 1: But they had to do retail with us.
• 27:43
  Speaker 6: That was part of the deal, you know, And we
• 27:45
  Speaker 6: gave them a favorable rate in the beginning to do that.
• 27:48
  Speaker 6: But they need they needed ground floor space, they needed
• 27:51
  Speaker 6: space that had plenty of loading. Getting priced out of
• 27:54
  Speaker 6: New York City was something that they didn't want. They
• 27:56
  Speaker 6: wanted to be near their customers. So we would go
• 27:58
  Speaker 6: to those and you go back to Chelsea Market. Lobster
• 28:02
  Speaker 6: Place was a classic example wholesale fish a seafood place.
• 28:07
  Speaker 6: For us. It was bakeries such as Coulson's and Lilac
• 28:11
  Speaker 6: Chocolates and things like that. Companies that really were interested
• 28:14
  Speaker 6: in production space, but we wanted them to do retail.
• 28:17
  Speaker 6: So that way there are two businesses. You don't have
• 28:21
  Speaker 6: to worry about the foot traffic in the beginning while
• 28:24
  Speaker 6: you're getting this going, but you're starting to get retail
• 28:28
  Speaker 6: and amenity type tenants on the ground floor and placemaking,
• 28:32
  Speaker 6: and that's how you start to lease the upper floors.
• 28:34
  Speaker 6: Once you start to do that, then you have tenants
• 28:37
  Speaker 6: in the building that are just happened to be right
• 28:40
  Speaker 6: next door to those retailers, and then the retail takes off.
• 28:44
  Speaker 6: And if to answer your specific question, how do you know?
• 28:48
  Speaker 6: You know when those folks who, by the way, didn't
• 28:51
  Speaker 6: really want to do retail with you in the beginning
• 28:53
  Speaker 6: because you didn't have foot traffic. You know when those
• 28:55
  Speaker 6: folks come to you and say, how can you do
• 28:58
  Speaker 6: more marketing for me and can you get me more
• 29:01
  Speaker 6: foot traffic? This is fantastic because they're doing, you know,
• 29:04
  Speaker 6: retail margins instead of wholesale margins in their space. As
• 29:07
  Speaker 6: soon as that happens, that's when you know you got something.
• 29:11
  Speaker 2: So Jim, how about on on like the corporate tenant side,
• 29:14
  Speaker 2: what type of companies want to be in a space
• 29:16
  Speaker 2: like yours.
• 29:17
  Speaker 6: So we tend to have more creative type companies, lots
• 29:23
  Speaker 6: of designers, architects, marketing firms, things like that. You know
• 29:30
  Speaker 6: that that's kind of very consistent with the Brooklyn market.
• 29:34
  Speaker 8: We have a lot of that.
• 29:35
  Speaker 6: We are starting to see some more traditional type of
• 29:39
  Speaker 6: companies like finance firms and law firms and things like that,
• 29:42
  Speaker 6: which we did not see in the beginning. But we
• 29:45
  Speaker 6: have a lot of that. We have a lot of industrial.
• 29:47
  Speaker 6: We're six million square feet first of all, so that's
• 29:49
  Speaker 6: a lot of space to fill up with, you know,
• 29:52
  Speaker 6: with just one or two types of industries. So we
• 29:55
  Speaker 6: have a lot of distribution and warehouse still, but our
• 29:58
  Speaker 6: office itself focuses more on creative companies. And then we
• 30:02
  Speaker 6: have people like the Brooklyn Nets, you know, so the
• 30:05
  Speaker 6: Brooklyn Nets they're headquarters and players, player, personnel, and back
• 30:08
  Speaker 6: office are all here. So it's really it's a much
• 30:13
  Speaker 6: wider range of types of companies than you would normally
• 30:15
  Speaker 6: see in a project, partially because we are six million
• 30:18
  Speaker 6: square feet and sixteen buildings, so we have the ability
• 30:21
  Speaker 6: to do things differently building by building that you may
• 30:25
  Speaker 6: not be able to do. I fewer one or two buildings.
• 30:28
  Speaker 3: All right, thanks to Industry City Managing Director Jim Simosa.
• 30:31
  Speaker 2: Return now to banking, where a new FDIC policy could
• 30:34
  Speaker 2: be heightening the hurdles for future bank mergers.
• 30:37
  Speaker 3: For more, we're doing by Bloomberg Intelligence Senior policy analyst
• 30:39
  Speaker 3: Nathan Dean.
• 30:40
  Speaker 1: Yeah.
• 30:41
  Speaker 11: So, essentially, what it says is that it's going to
• 30:43
  Speaker 11: place more emphasis on certain aspects of bank M and A,
• 30:46
  Speaker 11: like the impact on communities, competition, and so forth like that,
• 30:50
  Speaker 11: And it changed the parameters that the FDIC in particular.
• 30:54
  Speaker 8: Is going to look at when going forward with approval.
• 30:56
  Speaker 11: So if I'm Bank A and I'm trying to merge
• 30:58
  Speaker 11: with Bank B, and as part of that merger, the FDIC,
• 31:02
  Speaker 11: for example, decides that the South side of Chicago is
• 31:04
  Speaker 11: going to be harmed either dude, you you know, branch
• 31:07
  Speaker 11: closures or lack of competition.
• 31:09
  Speaker 8: You know, the FDIC is going to come in and say, no,
• 31:11
  Speaker 8: you can't do this.
• 31:12
  Speaker 11: It shall also be noted the Office of the Control
• 31:14
  Speaker 11: or the Currency finalized something very similar, not exactly the same,
• 31:18
  Speaker 11: but essentially what we've been telling our clients is this one.
• 31:22
  Speaker 11: You've probably anticipated that bank mergers was difficult under the
• 31:25
  Speaker 11: Biden Air regulators, that's going to continue. And two, you know,
• 31:28
  Speaker 11: this is easily reversible. So if President Trump wins in November,
• 31:31
  Speaker 11: new leadership at the FDIC and the UCC next year
• 31:34
  Speaker 11: could walk some of this back if they so choose.
• 31:37
  Speaker 2: Is this a solution in search of a problem here?
• 31:39
  Speaker 2: I mean, if we had a swath of bank m
• 31:42
  Speaker 2: and A that's disadvantaged people, have I missed that?
• 31:44
  Speaker 11: So you know, there's really two sides to this story.
• 31:46
  Speaker 11: The first site is is that a lot of this
• 31:47
  Speaker 11: hasn't been updated since nineteen ninety five. In two thousand
• 31:50
  Speaker 11: and eight, so the bidenarraw regulators in the FDIC particular, say, look,
• 31:54
  Speaker 11: this is what we're just doing is codifying already what
• 31:56
  Speaker 11: we're looking at. We're just making sure that it's now,
• 31:59
  Speaker 11: you know, on paper, so that banks are at least
• 32:01
  Speaker 11: more transparent or at least get a little bit more
• 32:03
  Speaker 11: transparency in terms of that process.
• 32:05
  Speaker 8: If you talk to the.
• 32:06
  Speaker 11: Bankers, they're like, look, it's been difficult to begin with,
• 32:09
  Speaker 11: and you know, going to let's say the Capitol One
• 32:12
  Speaker 11: Discover merger, you know, this may not be so much
• 32:15
  Speaker 11: of an anti competitive issue, or there's not going to
• 32:18
  Speaker 11: be much of a community impact. So it's really which
• 32:20
  Speaker 11: side of the story do you believe in? In which
• 32:22
  Speaker 11: side of the story you are talking to. But you know, again,
• 32:25
  Speaker 11: this is a codification of already existing I think theory
• 32:30
  Speaker 11: and already existing behavior, and again something that could change
• 32:33
  Speaker 11: under a Republican administration.
• 32:35
  Speaker 3: I mean, that was totally one of my questions that
• 32:37
  Speaker 3: Paul took was like, what problem is this actually trying
• 32:40
  Speaker 3: to address? And at the same point that recently we've
• 32:43
  Speaker 3: had bank issues, just Jamie Diamond winds up buying the
• 32:46
  Speaker 3: bank on a discount help by the governments, Like, is
• 32:48
  Speaker 3: that helping any of those problems?
• 32:50
  Speaker 8: No, And you bring up a great point.
• 32:52
  Speaker 11: There were several comment letters to that exactly saying like, look,
• 32:55
  Speaker 11: you put these and these are some of the bank
• 32:57
  Speaker 11: comment letters saying, you know, look, you put these processes,
• 33:00
  Speaker 11: these procedures in place, but then when the market goes down,
• 33:03
  Speaker 11: you know, we buy a bank over the weekend and
• 33:05
  Speaker 11: you throw the playbook out and you say, let's just
• 33:07
  Speaker 11: save the system. And so the bank's response is somewhat
• 33:10
  Speaker 11: frustrating here because you know, they're frustrated because in their eyes,
• 33:15
  Speaker 11: the regulators put out these procedures, these processes to put
• 33:18
  Speaker 11: it everything on paper, and then you know, when the
• 33:20
  Speaker 11: market goes down and as solution needs to be found
• 33:22
  Speaker 11: on the fixed or on the fast, they just you know,
• 33:25
  Speaker 11: throw that all to the wey side and go forth.
• 33:27
  Speaker 1: You know.
• 33:27
  Speaker 8: Ultimately, though, this is a.
• 33:29
  Speaker 11: Little bit more of what we're seeing though with just
• 33:31
  Speaker 11: democratic financial regulation in general, placing more emphasis on the
• 33:35
  Speaker 11: community and the individual. Because before when these bank mergers
• 33:40
  Speaker 11: would have happened, you look at like capital levels, management,
• 33:43
  Speaker 11: risk to the system, and so forth like that.
• 33:45
  Speaker 8: But now they're looking at the individual impact.
• 33:47
  Speaker 11: Are people on the South side of Chicago going to
• 33:49
  Speaker 11: be harmed by this? Our price is going to go up?
• 33:52
  Speaker 11: So it's more of this economic populism side of the
• 33:54
  Speaker 11: Elizabeth Warren side of the Democratic Party that's now making
• 33:58
  Speaker 11: its way into these policy statements in the rules at
• 34:00
  Speaker 11: the banking regulators.
• 34:02
  Speaker 2: So have we heard anything from the industry per se,
• 34:04
  Speaker 2: Because one of the things I guess we at least
• 34:06
  Speaker 2: I learned during the recent round of weakness and failures
• 34:10
  Speaker 2: of some of these small banks in the last couple
• 34:12
  Speaker 2: of years was there's like five thousand small and community
• 34:16
  Speaker 2: and regional banks out there. That's a lot you know,
• 34:19
  Speaker 2: relative to like Europe, for example, which doesn't employ that
• 34:22
  Speaker 2: branch system as much. A lot of peopeople were saying,
• 34:25
  Speaker 2: aren't there too many branches anyway? Aren't there too many
• 34:27
  Speaker 2: banks out there anyway?
• 34:28
  Speaker 8: You know, it's funny.
• 34:29
  Speaker 11: I was actually looking at the number of banks on
• 34:31
  Speaker 11: the terminal, and you know, since nineteen eighty it's gone
• 34:34
  Speaker 11: down fairly significantly to that five thousand, you know, so level.
• 34:38
  Speaker 11: But to your point, yes, that is somewhat larger compared
• 34:41
  Speaker 11: to other countries. And there are a lot of small
• 34:43
  Speaker 11: community banks. But I would also just remember small community banks,
• 34:47
  Speaker 11: and you know, just we usually use the term community
• 34:49
  Speaker 11: banks for ten billion in assets in below. These community
• 34:52
  Speaker 11: banks usually have broad political support amongst both sides of
• 34:56
  Speaker 11: the aisle. Here in Washington, nobody wants to be seen
• 34:59
  Speaker 11: throwing capital requirements or heavy regulation on a small community
• 35:03
  Speaker 11: bank because there are a lot of aspects of this
• 35:05
  Speaker 11: country where they're the only places that offer credit to farms, small.
• 35:09
  Speaker 8: Businesses and so forth like that.
• 35:11
  Speaker 11: You know, a lot of the big banks are you know,
• 35:12
  Speaker 11: centralized in these cities. So you know, it's just a
• 35:15
  Speaker 11: debate that both sides pay attention to. But what we're again,
• 35:19
  Speaker 11: what we're telling our clients is this is that this
• 35:22
  Speaker 11: is Bank M and A is hard today, it will
• 35:24
  Speaker 11: be hard tomorrow because of this. It'll be hard tomorrow
• 35:26
  Speaker 11: if Kamala Harris wins the presidency. But if President Trump
• 35:30
  Speaker 11: wins the presidency, the onion, the you know, the layers
• 35:33
  Speaker 11: of the onion could begin to peel off, and Bank
• 35:35
  Speaker 11: and M and A could be a little bit easier,
• 35:37
  Speaker 11: say two, three, four years from now as a result
• 35:40
  Speaker 11: of that.
• 35:40
  Speaker 3: That's just so it must be so confusing as a
• 35:42
  Speaker 3: CEO or CFO of a company because you have to
• 35:45
  Speaker 3: make a business plan today that may or may not
• 35:48
  Speaker 3: have the same rules in play in eighteen months.
• 35:51
  Speaker 8: Yeah.
• 35:51
  Speaker 11: Absolutely, I mean just look at the Capitol and Discover
• 35:53
  Speaker 11: Card Discover Financial merger.
• 35:55
  Speaker 8: You know when then it came out, you know.
• 35:57
  Speaker 11: The CEO of Capitol one came out and said, look,
• 35:59
  Speaker 11: we it's going to be resolved by the tail end
• 36:02
  Speaker 11: of twenty twenty three. Here we are sitting in September,
• 36:04
  Speaker 11: and I'm not sure many people believe that, you know.
• 36:06
  Speaker 11: So the idea here is is that you know a
• 36:08
  Speaker 11: lot of companies want to have these speedy access to mergers.
• 36:12
  Speaker 8: They want to be able to get it done.
• 36:13
  Speaker 11: And from a you know, paper perspective of looking at it,
• 36:16
  Speaker 11: from the size a combined Capital one Discover card size
• 36:20
  Speaker 11: is still going to be below P and C. You're
• 36:21
  Speaker 11: not gonna have what's called the g SIP, you know,
• 36:23
  Speaker 11: one of the biggest banks of results.
• 36:24
  Speaker 8: So that should be fine.
• 36:26
  Speaker 11: But ultimately what the regulators are doing now is they're
• 36:28
  Speaker 11: looking at, you know, certain areas of the country saying,
• 36:31
  Speaker 11: and I pick on Chicago because I'm from Chicago.
• 36:34
  Speaker 8: Is the South side of Chicago going to be harmed
• 36:36
  Speaker 8: by this?
• 36:36
  Speaker 11: And they're going by postcode and if they think that
• 36:38
  Speaker 11: there's issues there, they're going to slow the process down,
• 36:41
  Speaker 11: investigate it even more. And it's much to the frustration
• 36:44
  Speaker 11: of the banking industry where they just want to get
• 36:46
  Speaker 11: these deals done and move on.
• 36:47
  Speaker 3: Are thanks to Bloomberg Intelligence and your policy analyst Nathan Dean.
• 36:50
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• 36:56
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• 37:01
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