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Tech, Jobs, Ukraine, and WWE (Podcast) · Bloomberg Intelligence

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Speaker 1: Tesla. Welcome to the Bloomberg Markets Podcast Paul Sweeney. Alongside
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Speaker 1: every business day we bring you interviews from CEO, market
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Speaker 1: crows and Bloomberg experts, along with essential market moving news
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Speaker 1: on the Bloomberg Markets Podcast on Apple podcast or wherever
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Speaker 1: you listen to podcasting studios. Senior analyst to Wedboach Security
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Speaker 1: sporting his Rose Bowl hat hence state big win. We'll
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Speaker 1: get to that. I thought they played very well. Good
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Speaker 1: goodwin there. Man Deep Singh also joining us in studio here. Um, Dan,
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Speaker 1: I know you've been dealing with this issue for all
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Speaker 1: the year. Um what do you say to clients? Because
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Speaker 1: I know as an equity research analyst, your job over
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Speaker 1: the years has been kind of in part, educate your
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Speaker 1: clients on the EV market, on the opportunities, on the
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Speaker 1: investment opportunities, and the test of story had worked for
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Speaker 1: shareholders and your clients so well, and then a lot
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Speaker 1: of things have turned here into the last twelve months. Yeah,
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Speaker 1: I mean it's been a perfect storm. I mean the
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Speaker 1: first part was the most Twitter circuits were driven, but
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Speaker 1: this last part has been demand words and you look,
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Speaker 1: China's the hearts and loans of the Tesla story. Competition
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Speaker 1: clearly increasing within the country. Domestically, you're seeing price cuts
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Speaker 1: and some cracks in the armor. And I think right
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Speaker 1: now the big worry is you saw the price cut today,
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Speaker 1: what does that mean for demand? And especially what does
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Speaker 1: that mean for margins. Look, my view is that they've
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Speaker 1: actually have now the scale to expand margins, so they
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Speaker 1: have flexibility. They could cut prices even another four to
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Speaker 1: five percent and margins still, you know, I believe could
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Speaker 1: stay relatively range bound. But it's it's all about the
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Speaker 1: fear of the unknown. You obviously have a key earnings,
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Speaker 1: the key guidance coming around the corner January, and Musk
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Speaker 1: is the one that started the five alarm fire. He
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Speaker 1: is the only one that could extinguish it. Man deep uh,
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Speaker 1: you know that what caught me off guard was the
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Speaker 1: huge delta between what apparently Chinese consumers pay for a
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Speaker 1: Tesla and what I would pay if I bought one.
2:01
Speaker 1: Here are are these apples to apples? Because that would
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Speaker 1: make me very, very very angry if I were a
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Speaker 1: US consumer knowing that my Chinese counterparts are paying less
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Speaker 1: for the same product. Well, so one is a cost
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Speaker 1: of manufacturing will differ and because we are talking about
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Speaker 1: geo political landscape where you know, people want to move
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Speaker 1: their supply chains here. You will have a cost differential
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Speaker 1: more and more so this trend is not going away.
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Speaker 1: If you're moving things on shore, you will have higher
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Speaker 1: costs and then that's so cheaper price tag. That's for
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Speaker 1: a made in China test versus a maiden. It's all
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Speaker 1: about localized manufactur for got it. So, I mean Dave
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Speaker 1: Dan was talking about, you know, some of the challenges
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Speaker 1: they're just a test of fundamentally, but he also mentioned
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Speaker 1: that one of the big challenges for the stock has
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Speaker 1: just been Elon and Twitter. What are you hearing from?
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Speaker 1: I don't know the digital advertising community as it relates to,
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Speaker 1: you know, really the future of Twitter. Has he paid
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Speaker 1: forty four billion dollars for something that may be worth less?
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Speaker 1: I mean, look at Fidelity, they marked down Twitter's steak
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Speaker 1: by almost fifty So according to them, Twitter should be
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Speaker 1: valued at billion. Then forty four billion you'ren't paid for.
3:17
Speaker 1: So clearly, when you when you're private investors and they're
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Speaker 1: like four or five of them, they're marking down the investment,
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Speaker 1: it tells you something. And look, the ad market isn't
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Speaker 1: gonna get better anytime soon. And Twitter's positioning, I mean,
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Speaker 1: it was all brand advertising and that's the one that
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Speaker 1: got hit the most in this downturn. So clearly I
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Speaker 1: don't see a way back, you know, anytime soon. This
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Speaker 1: year is going to be awful for most of the
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Speaker 1: digital ad companies, more so for the ones exposed to
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Speaker 1: brand advertising, which is Twitter. So Dan, if if brands
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Speaker 1: want to get away from the Elon Musk brand, because
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Speaker 1: that's what it is, right, Um, do consumers want to
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Speaker 1: get away from the Elon Musk brand because I can't
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Speaker 1: imagine uh, you know, left leaning, progressive, middle class UM
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Speaker 1: couple wanting to buy a Tesla these days. Well, I
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Speaker 1: think brand deteration has been issue. We've talked about two
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Speaker 1: black eye from Musk, it's a black eye for Tesla.
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Speaker 1: I do think that this can be course corrected. Look,
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Speaker 1: if you look at the broader e V market, it's
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Speaker 1: still Tesla's world. Everyone else paying rent relative to market share.
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Speaker 1: Now competitions increasing. You look into three one three area code,
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Speaker 1: GM four and others, and I believe GM can be
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Speaker 1: very successful on evs. It's a fork in the road.
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Speaker 1: It's a moment of truth from musk and it all
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Speaker 1: starts gen you guys set realistic expectations to hit not
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Speaker 1: lofty ones. Guy named the CEO to Twitter to start
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Speaker 1: to get some sort of hands off here, and then
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Speaker 1: I believe the stock starts to correct itself. But right
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Speaker 1: now it's it's obviously earnings date for Tesla. Why by
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Speaker 1: the way, stepping back and looking at this over the
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Speaker 1: last ten, twelve, thirteen years, why has it taken and
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Speaker 1: come and automakers so long to get into this business
5:05
Speaker 1: that was clearly going to grow like gangbusters. I mean,
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Speaker 1: now you see GM and Ford getting into it, Folkswagen
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Speaker 1: obviously going full tilt, but over a decade later and
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Speaker 1: they're still you know, we had a great story about Toyota.
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Speaker 1: They pioneered the space in a sense with the with
5:21
Speaker 1: the what's that little thing called? And and they still
5:25
Speaker 1: gave up on this market. You know, Nissan had the
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Speaker 1: Leaf forever ago and they still haven't invested in what
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Speaker 1: they need to in this market. How come is it?
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Speaker 1: Is it a conspiracy with the oil producers or what's
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Speaker 1: the deal? It's historic as in, like they'll study this
5:40
Speaker 1: from decades and decades. It's a historic miss for the
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Speaker 1: traditional automakers, and ultimately Musk, you know, from an innovation perspective,
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Speaker 1: was really the one that drove Tessa to basically think
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Speaker 1: the box and create something that other automakers almost laughed
5:56
Speaker 1: at the time. Now, obviously they're following where Tesla is
5:59
Speaker 1: and then it comes down to like us two and
6:01
Speaker 1: a half percent autos were reviews. So we're still in
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Speaker 1: the early days. But ultimately Musk has done what new
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Speaker 1: competitor can do. He's created this sort of feel like
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Speaker 1: there's got to be some conspiracy. I feel like there
6:13
Speaker 1: has to be CEOs were I'm dead with Big Oil
6:15
Speaker 1: because at the I p O, at the test I
6:17
Speaker 1: p O, we all said, oh no, when the competition
6:19
Speaker 1: comes in, they're screwed. And it's been over a decade. Okay,
6:22
Speaker 1: we'll give him over a decade head start. No one
6:24
Speaker 1: says that. In the business answer per Kevin Tyne and
6:26
Speaker 1: the auto analysts for Bloomberg Intelligence, he says that GM
6:30
Speaker 1: four they're not in the car business. They're in the
6:32
Speaker 1: profitable car business. When they can make a profit on
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Speaker 1: a car I either demanded at a certain level and
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Speaker 1: the costs at a certain level, that's when they're going
6:41
Speaker 1: to get into the market. Elon Musk was a visionary
6:44
Speaker 1: for the technology, but he can't make a lot of cars,
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Speaker 1: and so now you've got FOURD and GM's and Volkswagen
6:50
Speaker 1: your car company. They're like, okay, now I can make
6:53
Speaker 1: it profitable, and I can, and we're gonna be all
6:56
Speaker 1: in the battery technology got to that point where that
7:00
Speaker 1: goes to my question to Dan, like, from a Tesla perspective,
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Speaker 1: you got Volkswagen coming in at Jim, where is Tesla's
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Speaker 1: I guess niche in the market? Where's the position in
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Speaker 1: the market. Yes, they were the first, but now if
7:12
Speaker 1: I've got a Porsche, I've got a Mercedes, if I've
7:15
Speaker 1: got a four I don't know. Well that's well, that's
7:18
Speaker 1: right now the quagmire because you start to go back
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Speaker 1: to you got to get a sub thirty k vehicle
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Speaker 1: in terms out there to compete. Right from a massive perspective,
7:27
Speaker 1: they obviously reviewed as the brand leader, the premium one,
7:31
Speaker 1: but now competition come from all angles. And that's why
7:33
Speaker 1: two thousand twenty three it is a huge inflection point
7:37
Speaker 1: year for them. How they navigate it. And you're saying,
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Speaker 1: it's like Man's talking about as you see a reflecting
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Speaker 1: the stock. This is really for the first time after
7:45
Speaker 1: Cinderella Ride, they got their back against the wall. Can
7:49
Speaker 1: I add just one more thing? So Tesla was valued
7:52
Speaker 1: as a tech company last year. Now it's being valued
7:55
Speaker 1: as an auto company. Suddenly the tech premiums being valued
7:59
Speaker 1: as three or four were auto companies, right, because it
8:01
Speaker 1: still has a bigger market GM plus Ford plus Toyota,
8:05
Speaker 1: which is by the way, the biggest automaker in the world.
8:08
Speaker 1: So it's still towers over the biggest automaker in the world.
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Speaker 1: And the reason it was valued as a tech companies
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Speaker 1: because they have their autonomous driving you know inside. I
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Speaker 1: mean basically, they were capturing a lot of data, they
8:20
Speaker 1: were making a lot of progress. Suddenly no one seems
8:23
Speaker 1: to care about it, and obviously the focus seems to
8:26
Speaker 1: have shifted to Twitter when it comes to Musk and
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Speaker 1: it's no more you know, a tech company, even though
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Speaker 1: I would argue and I agree with Damn that you know,
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Speaker 1: Tesla's miles ahead of GM and Wolkswagen and all the
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Speaker 1: competitors when it comes to the data and the autonomous
8:40
Speaker 1: side of things because they have built this system. It's
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Speaker 1: a full stack similar to Apple it's an ecosystem, and
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Speaker 1: that's an advantage that's not going of anything. Dan, Do
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Speaker 1: you really think we're gonna see legit competition this year? Man?
8:52
Speaker 1: I know there's a Porsche Ticon if I want to
8:55
Speaker 1: spend two hundred grand I know there's a Ford Lightning
8:57
Speaker 1: if I want to wait two years on a on
8:59
Speaker 1: a way list. Um. But you know, it just seems
9:03
Speaker 1: like either I'm getting a bolt right, or I'm on
9:08
Speaker 1: a waiting list, or I'm spending like my kids college tuition. Yeah,
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Speaker 1: I think the real competitions in China right now. I
9:15
Speaker 1: mean that's where where Neo x ping b y, That's
9:18
Speaker 1: where the real competition in the US look. I think
9:21
Speaker 1: you obviously have a lot of automakers going to have
9:23
Speaker 1: that GM. I do believe it's the real deal. I
9:26
Speaker 1: believe that they have a number of vehicles from Cadoact
9:29
Speaker 1: that you know some of the other driven in. It's
9:32
Speaker 1: not they've done where where marian Tea have done. Is
9:36
Speaker 1: is really game changing. But ultimately it's Tesla's market to lose.
9:41
Speaker 1: And that's why right now Musk he needs to be
9:44
Speaker 1: the pilot on the plane. Can't have a ted Striker
9:47
Speaker 1: movement that's for the kids. That's an airplane recerplane reference.
9:52
Speaker 1: Go google it. So, Dann, do we have any sense
9:54
Speaker 1: that he's gotten that message that it's going to happen.
9:57
Speaker 1: I haven't really heard a lot a lot from him. Reason.
9:59
Speaker 1: I think that's in ten. I think for the first
10:01
Speaker 1: time he's I think behind the scenes, he's trying to
10:04
Speaker 1: strategize reading the room, and I think he recognizes Look
10:09
Speaker 1: has been deep talks about Twitter. It's not just the
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Speaker 1: forty four billion dollar mistake. I'd argue it's a seven
10:15
Speaker 1: billion dollar mistake because of the mark Ap ultimately taking
10:19
Speaker 1: off of Tesla. That's really taken. So that's why this is.
10:22
Speaker 1: This is just the pivotal earnings, probably the most important
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Speaker 1: earnings for Musk maybe. Ever, Man, do you do you
10:29
Speaker 1: expect serious competition for Tesla in the West? I mean
10:33
Speaker 1: I saw a story that Mercedes is going to lead
10:35
Speaker 1: the charge with a new UM you know, like a
10:38
Speaker 1: supercharger network. But Tesla has had it for a decade,
10:42
Speaker 1: and I think a lot of consumers that's one of
10:44
Speaker 1: their main concerns. There's just you don't want to get
10:46
Speaker 1: stuck UM and it's so hard to find a charging
10:49
Speaker 1: station I mean, anytime you're selling a sixty thousand dollar vehicle,
10:53
Speaker 1: you have to think what is the potential in the
10:55
Speaker 1: average EV starts at sixty dollars and so what is
10:59
Speaker 1: the potential installed bates? How many cars can you sell
11:02
Speaker 1: at that price point? And I think that's where the
11:04
Speaker 1: market will get saturated unless you bring down the price.
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Speaker 1: So that's where I see competition, good stuff. Tesla January, Okay,
11:14
Speaker 1: that's the line. That's the date. Will focus on Mandy
11:16
Speaker 1: seeing senior technology analyst for Bloomberg Intelligence, and Dan I've
11:20
Speaker 1: senior equity Annalyso what Bush Securities? Both joining us here
11:22
Speaker 1: in our Bloomberg interactor Brooker Studio breaking down the story
11:26
Speaker 1: that is Tesla. That is Elon musk Uh stock down
11:30
Speaker 1: seven zero over the prior twelve months, so a tough
11:34
Speaker 1: another three percent today, another three percent, a tough ride
11:36
Speaker 1: for the shareholders of Tesla. Matt, you know it's c
11:43
Speaker 1: e S this week Consumer Electronic Show, but let's be honest,
11:46
Speaker 1: it's really the auto show with some gadgets around it. Uh.
11:49
Speaker 1: Lots of announcements coming out of Vegas here and CS
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Speaker 1: including Mercedes Benz partnering partnering with Charge point in North
11:56
Speaker 1: America for charging network. And this goes to one of
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Speaker 1: the issues I have as I trying to get smart
12:01
Speaker 1: on this whole e V businesses. Do we need it
12:03
Speaker 1: like as many charging stations as we have gas stations today?
12:06
Speaker 1: I don't know how that plays out, but unfortunately we
12:08
Speaker 1: got someone who's really in charge of the stuff right
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Speaker 1: on the point of a Pasquality romano. He's a CEO
12:12
Speaker 1: and president of charge Point, in charge point of Courses
12:15
Speaker 1: and your stock Exchange listed company c HPT as a
12:19
Speaker 1: taker you can load into your Bloomberg terminal. Pasquality. Thanks
12:22
Speaker 1: so much for joining us here. Tell us about you
12:23
Speaker 1: deal with Mercedes Benz. Well, it's a it's a I
12:31
Speaker 1: think government for drivers everywhere in the United States and Canada. Um,
12:37
Speaker 1: what we're doing with them is effectively curating a network
12:43
Speaker 1: aligned with the thirty minute retail economy. Um. We really
12:46
Speaker 1: believe the drivers need uh, not only charging when they
12:50
Speaker 1: were on a road trip, but they need something to do.
12:53
Speaker 1: They needed safety, they need um um, they need you know,
12:57
Speaker 1: the the usual locoutrements that you would act when you're
13:00
Speaker 1: on a road trip. And uh, you know, we're very
13:02
Speaker 1: excited that premium brand like Mercedes poses um really dove
13:07
Speaker 1: into this and willing to partner with us to really
13:10
Speaker 1: curate a great experience for the drivers. So I see
13:13
Speaker 1: um a graphic rendering of a Mercedes Benz charging hub
13:17
Speaker 1: in Bloomberg Story which looks um, you know, elegant, But
13:22
Speaker 1: I can't see the retail um, you know, extravaganza that
13:26
Speaker 1: I'm hoping for as a as a died in the
13:30
Speaker 1: wool consumer. What should I be looking for at a
13:33
Speaker 1: at a charge point experience? Well, I think, uh well,
13:40
Speaker 1: what stuff can I get? Look for is what they want? Well,
13:45
Speaker 1: it's what they it's it's what drivers really want to do.
13:47
Speaker 1: So we're going to align this with brands that exist.
13:50
Speaker 1: Uh so, So imagine locating the types of chargers that
13:55
Speaker 1: you see on the graphic, aligning those with good brands
13:59
Speaker 1: that people want to use when they are on a
14:02
Speaker 1: road trip. So this is not about Mercedes Benz developing
14:04
Speaker 1: their own food service brands, of their own retail brands.
14:07
Speaker 1: It is them sponsoring the placement of stations like that
14:12
Speaker 1: at locations that drivers already enjoy frequenting. So like the shop,
14:19
Speaker 1: right are we talking about here? Kind Yeah? Well, well
14:24
Speaker 1: I think I think there's some place for communions stores.
14:27
Speaker 1: But I think uh, you know, uh everything from food,
14:32
Speaker 1: you know, food services to coffee to potentially retail. It's
14:37
Speaker 1: aligned with something that you can do over about thirty minutes,
14:40
Speaker 1: thirty minutes. It's it's it's again, anything that that twenty
14:44
Speaker 1: thirty minute retail economy um uh you know can can
14:47
Speaker 1: afford you on a and something that's aligned with what
14:50
Speaker 1: you want to do on a road trip is where
14:52
Speaker 1: we where we're going to place these things. It's gotta
14:53
Speaker 1: be like an Apple store. That's must be the number
14:56
Speaker 1: one umer destination, right for a thirty minute stop? Yeah,
15:00
Speaker 1: you know, I don't. I you know, I think I
15:02
Speaker 1: think we already have too many gadgets, But that would
15:04
Speaker 1: be a good one. Pasquald helped me understand because I've
15:07
Speaker 1: driven exactly one e V in my life and it
15:10
Speaker 1: was a good one for def um, it was awesome.
15:13
Speaker 1: But how should I think about the rollout of a
15:17
Speaker 1: network of charging system stations around this country? Just help
15:21
Speaker 1: me put into perspectives. You know, I think about gas
15:24
Speaker 1: stations one on every corner, that kind of thing. How
15:26
Speaker 1: do I How should I think about the charging system infrastructure? Yeah?
15:30
Speaker 1: So charging is a lot. Driving any of the is
15:32
Speaker 1: a lot different than driving a gas car, and if
15:34
Speaker 1: you pattern match on gas stations, I think you get
15:37
Speaker 1: head fake to bit um. The the the charging experience
15:42
Speaker 1: for for most of your fuel, most of your electricity
15:45
Speaker 1: that's going to take you around where you need to go,
15:47
Speaker 1: is going to come in at home, at work, around town.
15:51
Speaker 1: You're gonna top it up, kind of like your piece
15:52
Speaker 1: of consumer electronics. It's fitting that it was announced to
15:55
Speaker 1: see yes because cars are behaving from refueling perspective more
15:58
Speaker 1: like your cell phone than they are the gasoline cars
16:02
Speaker 1: of old. Now for gas stations, the ones that are
16:06
Speaker 1: placed around uh, you know that everyday use for your
16:11
Speaker 1: everyday fuel, those really don't have that much reason to
16:13
Speaker 1: exist in the long term. In the e V world.
16:16
Speaker 1: It's the ones that are road trip position you know,
16:19
Speaker 1: in positions between metro areas that you're typically going to
16:24
Speaker 1: drive on a road trip when you're going beyond your
16:25
Speaker 1: battery range. Those are the ones that are likely to
16:28
Speaker 1: develop into EV charging sites. With the proviso that there's
16:32
Speaker 1: enough parking, there has to be enough parking. It takes
16:35
Speaker 1: four to six times the number of parking spaces because
16:39
Speaker 1: you're there longer than you would be at a gas station,
16:42
Speaker 1: so you need the real estate. So it's really a
16:44
Speaker 1: combination of the gas station locations that are the fueling
16:47
Speaker 1: locations that are road trip position, and enough parking. Alright,
16:52
Speaker 1: So bottom line, you want to build or Mercedes wants
16:56
Speaker 1: to build ten ultra fast chargers, how many is that
17:00
Speaker 1: um equate to in the US? And when are you
17:05
Speaker 1: When are we going to see like enough that Paul
17:07
Speaker 1: feels comfortable, you know, buying an e q V or
17:11
Speaker 1: whatever they're called. Well, I mean you can, first of all,
17:15
Speaker 1: you can, Uh, we've already got a partnership with Mercedes
17:18
Speaker 1: Benz where we're powering the in dash navigation and the
17:21
Speaker 1: Mercedes ME charging experience. So you already have access globally
17:26
Speaker 1: through Mercedes Benz to about a million charging stations around
17:30
Speaker 1: the world. Um and and and so there's there's a
17:34
Speaker 1: lot of charging that's already out there. This overlay network
17:38
Speaker 1: is essentially a highly curated Mercedes Benz kind of certified experience,
17:45
Speaker 1: and uh, you know there's there's there's going to be
17:48
Speaker 1: at least twenty four hundred stations. That means ports parking
17:53
Speaker 1: spaces at at least four hundred plus sites across the
17:59
Speaker 1: United States to enable this right for long haul driving,
18:04
Speaker 1: and that's at least. We're going to try to leverage
18:07
Speaker 1: other funding from some of the federal and state programs
18:12
Speaker 1: that you see that have already launched, and we're trying
18:15
Speaker 1: to get businesses, frankly to also subsidize this as well
18:18
Speaker 1: and and potentially contribute some funding to stretch the sites
18:23
Speaker 1: even further so we can potentially even go beyond four
18:26
Speaker 1: hundred sites. Pass quality give us a sense of where
18:29
Speaker 1: we are with the evolution of charging batteries. Are we
18:34
Speaker 1: are where we're gonna be for a while or is
18:36
Speaker 1: there a continuous evolution uh improvement here? Well, the chargers
18:42
Speaker 1: themselves are capable of delivering more than today's batteries can take.
18:47
Speaker 1: So if you've driven in an electric vehicle, which you'll
18:49
Speaker 1: notice is that they start out charging um at a
18:55
Speaker 1: at a fairly high rate if the charger can provide
18:57
Speaker 1: the energy, and then the charge rate uh drops over
19:01
Speaker 1: as the battery gets um more full, the charge rate
19:04
Speaker 1: begins to drop, and you're gonna see that behavior um extent.
19:10
Speaker 1: So you're gonna see batteries as as battery technology matures,
19:14
Speaker 1: and as battery management matures, you're gonna see batteries be
19:19
Speaker 1: able to take that higher charge rate for longer periods
19:22
Speaker 1: of time, and that will start to really shorten the
19:24
Speaker 1: charge cycle. We think that you know technology uh you
19:29
Speaker 1: know that's available today that will start showing up in
19:32
Speaker 1: in vehicles will get you from a ten percent battery
19:35
Speaker 1: level to an eight percent battery level in about eighteen minutes. Okay,
19:39
Speaker 1: that's interesting, all right, pascually great stuff, great announcement with
19:43
Speaker 1: the Mercedes Benz there Pasquality Romano CEO and president of
19:47
Speaker 1: charge Point HPT. Is a ticket to put into your
19:50
Speaker 1: Bloomberg professional terminal. Uh. You know, it's just gonna be
19:53
Speaker 1: a I guess not a slow build of building out
19:55
Speaker 1: this network of charging stations and uh, but it's something
19:58
Speaker 1: that I think, you know, it has to happened. Will happen.
20:03
Speaker 1: Is the latest on what's going on in work in
20:05
Speaker 1: the Ukraine. I guess some of the latest news is
20:07
Speaker 1: that Putin calls a surprise thirty six hour Ukraine ceasefire.
20:11
Speaker 1: But no one buys that. Nobody buys that. And you know,
20:13
Speaker 1: but that's supposedly today and tomorrow, so we'll have to
20:15
Speaker 1: see how that plays out. But let's get the latest
20:17
Speaker 1: on what's going on over there and how this may
20:19
Speaker 1: play out. Mick mulroy, co founder of the Lobo Institute.
20:23
Speaker 1: But that's just the beginning. Senior fellow at the Middle
20:25
Speaker 1: East Institute, Marine Officer CIA all this kind of craziness,
20:30
Speaker 1: but he joins this year, Hey, Mick, what do you
20:33
Speaker 1: make of this? Uh? This putin call for a ceasefire. Again,
20:37
Speaker 1: as Matt was suggesting, not many people are buying it. Yeah,
20:41
Speaker 1: so great to be with you, guys. I am one
20:43
Speaker 1: of those people that doesn't buy it. Essentially, I think
20:46
Speaker 1: what they were trying to do was to have a
20:49
Speaker 1: ceasefar of which the Ukrainians would I would agree to
20:52
Speaker 1: what they didn't, so that they could then resupply their
20:55
Speaker 1: troops in the front line, which they're having a very
20:58
Speaker 1: difficult time doing. So that was essentially, in my opinion,
21:01
Speaker 1: why they were doing it. It was never agreed to,
21:04
Speaker 1: so it essentially wasn't a ceasefire, and Russia has been
21:07
Speaker 1: engaging on the battlefield just like Ukrainians, so it is
21:11
Speaker 1: essentially a no go. Does anybody bias cease fires? I
21:15
Speaker 1: mean since the Ted offensive is it? Uh? Just something
21:18
Speaker 1: that no one really does anymore. So it's increasingly difficult,
21:25
Speaker 1: partly because nobody's rest our Russian I mean, they violate,
21:29
Speaker 1: They make an agreement and one day and violated the next.
21:32
Speaker 1: It's not just in Ukraine, you see that another areas
21:35
Speaker 1: of the world. If you might remember all the issues
21:38
Speaker 1: when it came to get grain out of the port
21:40
Speaker 1: of Odessa, uh, and they just continuously made an agreement
21:44
Speaker 1: and then broke it. So it's that does not bode
21:48
Speaker 1: well for how this could end. If there's any kind
21:50
Speaker 1: of peace agreement, I think the Ukrainians will be very
21:53
Speaker 1: skeptical that any of their efforts would actually amount to anything.
21:58
Speaker 1: What are the likely scenarior areas for how this ends? Mick?
22:01
Speaker 1: What do you think the options are? So from the
22:05
Speaker 1: Ukrainian perspective, they have to essentially keep winning. And what
22:11
Speaker 1: I mean is the Russians only stand might uh. And
22:15
Speaker 1: let's just be specific to President Putin, he only understands might.
22:19
Speaker 1: So they have to hit the spring after hopefully getting
22:22
Speaker 1: a lot of the equipment that we'll get over there
22:24
Speaker 1: and they'll be trained on hard and just start pushing
22:27
Speaker 1: the Russians out of the territory that they occupied. They've
22:30
Speaker 1: already came about the territory since February, since the Russians
22:35
Speaker 1: took their too back. So if the Russians realized that
22:38
Speaker 1: just they're just gonna lose, uh, that is potentially how
22:41
Speaker 1: they could come to the negotiation table. It's gonna be
22:45
Speaker 1: through force, quite preply, you know, Mick. We we heard
22:50
Speaker 1: recently from Adamal James Travitis that, you know, the Ukrainians
22:53
Speaker 1: have proven that they can in fact win and be
22:56
Speaker 1: successful on the ground, but now somehow they have to
22:58
Speaker 1: win the air um. How do you think they do that?
23:05
Speaker 1: So one way is to get this integrated air missile
23:08
Speaker 1: defense system. And what I mean by that integrated it's
23:12
Speaker 1: you know what, it could be a drone that shot
23:13
Speaker 1: at your cruise. Missis a little hypersonic missile. They have
23:17
Speaker 1: to have all the systems that can identify the threat
23:19
Speaker 1: and engages in the best possible manner. So Patriot is
23:23
Speaker 1: going to be a big part of that. That's really
23:26
Speaker 1: one of the best systems on Earth. Takes a little
23:27
Speaker 1: while to trade on it, but once they get that,
23:29
Speaker 1: you get multiple batteries. It will help them can test
23:32
Speaker 1: the air space. The other thing they gotta do is
23:35
Speaker 1: the drones that are coming from Roan they're about twenty dollars,
23:38
Speaker 1: but right now the only thing they have to shoot
23:40
Speaker 1: it down is around five hundred thousand dollars. So even
23:43
Speaker 1: if they're successfully shooting these things down, eventually they just
23:47
Speaker 1: keep launching sheat and you're in. You deplete your resources.
23:50
Speaker 1: So that integration of air defense I think is going
23:52
Speaker 1: to be key. So so um, in that case, Um,
23:57
Speaker 1: it seems like this is just going to drag on
23:59
Speaker 1: and on because you know, we've seen conflicts like this.
24:04
Speaker 1: The US was involved in one ourselves in the sixties
24:06
Speaker 1: and seventies, right that, you know, where the big power
24:10
Speaker 1: doesn't get the message until it's been a decade. Is
24:13
Speaker 1: that what what we're looking at here? Possibly? Unfortunately, it
24:18
Speaker 1: is possible, like at least in our case, we were democracy,
24:21
Speaker 1: so the people will have to say, um, they're not.
24:24
Speaker 1: They're an autocracy and they and it's really up to
24:27
Speaker 1: one man unless they depose him. Let's they kick him out,
24:29
Speaker 1: which is I mean, I don't want to hope for that.
24:32
Speaker 1: I mean, but you know, that would be the best
24:34
Speaker 1: case scenario in my opinion, But there was I mean,
24:37
Speaker 1: he spent a lot of time ensuring that doesn't happen.
24:39
Speaker 1: So because of the that situation, this could last for
24:43
Speaker 1: decades and it's going to be very difficult to keep
24:46
Speaker 1: all the allies together. But it's the right thing to do,
24:48
Speaker 1: not only like morally, but for NATO, for the United
24:52
Speaker 1: States national security interest to support Ukraine to the end.
24:55
Speaker 1: Exactly what I was just thinking, Mick. I mean, as
24:57
Speaker 1: we watched this new Congress struggle to even pick a speaker,
25:04
Speaker 1: what's the possibility that they wimp out in terms of
25:08
Speaker 1: support for Ukraine pretty quickly? So I I, you know,
25:14
Speaker 1: I'm not on the political side of this, but I
25:16
Speaker 1: think from what I've seen that they will continue to
25:20
Speaker 1: have support. There's a small handful that whatever reason, I
25:24
Speaker 1: would like to see that cut. But what I would
25:26
Speaker 1: tell them is we spent about the equivalent about five
25:30
Speaker 1: percent of our national security budget on Ukraine, and they've
25:34
Speaker 1: depleted or destroyed of Russian combat power. So even if
25:40
Speaker 1: you're looking at it from the U s. National security
25:42
Speaker 1: interest alone, that's a pretty good ratio. It's a really
25:45
Speaker 1: good ratio. Right, So, um, it's it isn't charity. Just
25:49
Speaker 1: like President Zelinsky said when he came to visit us.
25:52
Speaker 1: It isn't charity. We are actually they are taking on
25:55
Speaker 1: our second most significant adversary and they're winning. Mick, second
26:01
Speaker 1: most significant adversary yep, after the Chinese. I guess, so, Mick,
26:06
Speaker 1: talk to us about you know, as we think about
26:07
Speaker 1: the spring fighting season, there's an announcement that Germany and
26:11
Speaker 1: the US are sending you know, Bradley vehicles and the
26:14
Speaker 1: comparable German vehicle um and that how that will have
26:17
Speaker 1: a significant impact. Is there a scenario where when spring
26:20
Speaker 1: rolls around that this Ukrainian military will be able to
26:24
Speaker 1: have pushed for the remaining of territory that they lost.
26:28
Speaker 1: Can they have that type of rapid success? I think
26:33
Speaker 1: it's possible, And certainly they've already shown that they're capable
26:37
Speaker 1: soldiers and officers in in in maneuver warfare quite brightly,
26:42
Speaker 1: the most modern version of warfare. We're getting them the
26:45
Speaker 1: things that they like. For example, you just brought up
26:47
Speaker 1: the Bradley. It is not as effective as a tank,
26:52
Speaker 1: but it can kill tags, and it's faster and have
26:55
Speaker 1: longer range, and it will be a significant factor when
26:58
Speaker 1: it comes to their ability to who troops around the battlefield.
27:01
Speaker 1: To envelop the Russian forces and to not get basically
27:04
Speaker 1: caught a corner by the Russian forces. You've got our
27:07
Speaker 1: US setting them, We've got the French setting them, and
27:09
Speaker 1: the Germans. And I think if once that's done and
27:12
Speaker 1: they show how effectively they can use them, the next
27:14
Speaker 1: step would be to give a main battle tank like
27:16
Speaker 1: the M one. How about how about the any aircraft?
27:21
Speaker 1: Because there's a scenario where NATO or the US provides aircraft.
27:25
Speaker 1: Do you think I think there is a scenario the
27:30
Speaker 1: longer this, uh, this m constant plays out and in
27:34
Speaker 1: the US and NATO are gonna want to see any
27:36
Speaker 1: this come to an end, and so it's going to
27:39
Speaker 1: be that determination of whether an advanced fighter or aircraft. Obviously,
27:44
Speaker 1: I think we'll put caveats that can't be used to
27:46
Speaker 1: strike inside Russia, which is a handicap in the Ukrainians
27:50
Speaker 1: pretty significant. But we don't want to see this turn
27:53
Speaker 1: into a broader war that that would push I think
27:56
Speaker 1: the decision makers in the United States to to look
27:59
Speaker 1: at our fighter bar my aircraft, um, I think. But
28:02
Speaker 1: I think it's going to be in stages like fighting vehicle's,
28:04
Speaker 1: main battle tanks, and then potentially more significant advanged uh
28:10
Speaker 1: by aircraft in terms of uh Jack Ryan, I was
28:17
Speaker 1: wondering what you what you thought, Mick. I mean, we've
28:19
Speaker 1: got all these great um new pieces out. Obviously Tom
28:24
Speaker 1: Clancy is as older, but you've got Jack Carr right
28:28
Speaker 1: now with the Terminal List. I've read all of those books.
28:30
Speaker 1: They're pretty awesome, although he's incredibly political and it kind
28:33
Speaker 1: of as a turn off. Um, You've got Admiral Travities
28:37
Speaker 1: with four, which I thought was amazing and hopefully um
28:41
Speaker 1: not too prescient. What do you think about this stuff?
28:45
Speaker 1: This fiction? Does any of it appeal to you as
28:47
Speaker 1: someone who's been in the biz himself? So A, man,
28:51
Speaker 1: I don't. I don't watch the Jack Ryan stuff. But
28:54
Speaker 1: four who is the admiral and a friend of mine
28:56
Speaker 1: Elliot Ackerman Um who was former Range silverl Star recipients,
29:01
Speaker 1: So I would definitely give credits, but for both of
29:04
Speaker 1: those guys on on that work. And I'm a fan
29:08
Speaker 1: of that. And I'm a real big fan of looking
29:10
Speaker 1: ahead because YEA, oftentimes we just focus on the current conflict,
29:16
Speaker 1: and that's important. We have to have a lot of
29:17
Speaker 1: people doing that, but we always have to have people
29:19
Speaker 1: looking for the future because we don't want it to
29:22
Speaker 1: be a surprise, because that is one of the elements
29:24
Speaker 1: of warfare that you don't want to get wrong. And
29:27
Speaker 1: I think so out of those, I would definitely uh,
29:30
Speaker 1: I would definitely point to with that. All right, good stuff,
29:32
Speaker 1: Hey McK thanks so much for joining us. Really appreciate
29:34
Speaker 1: taking your time. You give us some good insight there
29:36
Speaker 1: and what's happening on the ground there in Ukraine. Mcmlroy
29:39
Speaker 1: he is the co founder of the Lobo Institute. Former
29:42
Speaker 1: US marine c i A. He's he's done it all
29:44
Speaker 1: on seeing it also, we appreciate getting his perspective. All right,
29:50
Speaker 1: let's switch gears. Let's pivot hard to w w E.
29:54
Speaker 1: World Wrestling Entertainment. Looks like Mr McVan I'm sorry, McMahon
29:59
Speaker 1: is coming back. The founder Jerry Smith, he covers all
30:03
Speaker 1: this media stuff, this sports stuff for Bloomberg News. He
30:05
Speaker 1: joins us on the phone here, Jerry, what's going on
30:08
Speaker 1: at w w E. Yeah, it's been a big shake up, um,
30:12
Speaker 1: you know this morning, Um Vince McMahon. Uh. W w
30:17
Speaker 1: E pad a statement saying that Vince would be returning
30:19
Speaker 1: to the board and as well as two former w
30:22
Speaker 1: w E executives and Vince would be removing three other
30:26
Speaker 1: board members from the board. So this is a big
30:30
Speaker 1: shake up Vince. To back up a little, Vince retired
30:35
Speaker 1: from w w E last year, UM amid allegations of
30:39
Speaker 1: infidelity and payments that he had made that um you know,
30:45
Speaker 1: the company has been investigating. UM. So now he is
30:49
Speaker 1: uh isn't that par for the course in w w E. Well,
30:54
Speaker 1: so this is a big moment for the company though,
30:58
Speaker 1: because Vince has come act and he can do this
31:01
Speaker 1: because he is a controlling shareholder of the company. So
31:05
Speaker 1: essentially what he says goes. And he wants to come
31:08
Speaker 1: back because this is a big moment where w w
31:12
Speaker 1: E is trying to renew its media deals. Uh. It's
31:17
Speaker 1: matches are broadcast on USA, which is part of Comcast
31:22
Speaker 1: and BC Universal as well as on Friday nights on
31:25
Speaker 1: Fox and UM you know, there's Uh. He wants to
31:30
Speaker 1: be back. He wants to be part of those negotiations.
31:33
Speaker 1: And he also said in a statement yesterday he thinks
31:36
Speaker 1: that these discussions about a media rights deal could also
31:40
Speaker 1: coincide with the potential sale of the company. Um you know,
31:44
Speaker 1: And he pointed out that the demand for live events
31:49
Speaker 1: has never been greater in the TV business right now,
31:52
Speaker 1: and a lot of media companies see value in owning
31:57
Speaker 1: the content that they're putting on their station. Is so
32:00
Speaker 1: he sees this as an opportunity to potentially negotiate a
32:03
Speaker 1: sale of the company, UM, perhaps with NBCUniversal or Fox
32:08
Speaker 1: or or maybe some other UM company that is interested.
32:13
Speaker 1: So Jerry on that front, I mean that's kind of
32:15
Speaker 1: what got my attention as a former banker. I started
32:17
Speaker 1: going through, uh, the digital equivalent of the rolodex scene.
32:21
Speaker 1: Who would be a potential buyer here? And and as
32:23
Speaker 1: you suggested, there's can I think it's a pretty long
32:26
Speaker 1: list here because this is some pretty compelling content that's
32:29
Speaker 1: shown over a long period of time that you know,
32:32
Speaker 1: incredibly loyal fan base, strong support from the sponsors. It
32:35
Speaker 1: seems I could be you know, really something that a
32:38
Speaker 1: lot of people would kick the tires on. Yeah. I
32:41
Speaker 1: mean it has built up an entertainment empire that is
32:44
Speaker 1: really quite impressive over the decades. UM. You know, Endeavor
32:49
Speaker 1: could be another company, uh that that might be interested
32:52
Speaker 1: in ww E. They they own UFC UM you know
32:57
Speaker 1: NBC actually by ball the w w E streaming service
33:02
Speaker 1: and put it on the NBC streaming service Peacock a
33:05
Speaker 1: few years ago. So there's already a deep relationship between
33:09
Speaker 1: those two companies. Any sense of when of timing here,
33:13
Speaker 1: like how quickly could this whole process move here? Because
33:16
Speaker 1: it seems like Vince McMahon is someone is something. If
33:19
Speaker 1: he wants to get something done, he can get it done.
33:21
Speaker 1: He controls the company. If he wants to sell the company,
33:25
Speaker 1: seems like it could happen sooner rather than later. I
33:28
Speaker 1: don't know, Yeah, I mean things are already moving fast.
33:33
Speaker 1: I mean the report. You know, they put out a
33:35
Speaker 1: statement yesterday where Vince said that he would like to
33:40
Speaker 1: come back to the board and um, you know, add
33:43
Speaker 1: a few board members, um that he's close with. And
33:46
Speaker 1: then today a day later, he's on the board and
33:49
Speaker 1: those board members that he wanted are are there. So yeah,
33:53
Speaker 1: he really um w W E's is fairly unique in
33:59
Speaker 1: the media landscape where one man really controls calls all
34:03
Speaker 1: the shots and um you know, so, uh, it's hard
34:07
Speaker 1: to say exactly what the timing will be. Um, he
34:10
Speaker 1: he wants to coincide, Uh, these media rights discussions with
34:15
Speaker 1: NBC and Fox about a potential sale Um, but yeah,
34:19
Speaker 1: Vince is the he's he calls the shots at w
34:22
Speaker 1: w E and how quickly he wants things to move
34:25
Speaker 1: along is really up to him. Is it still a
34:27
Speaker 1: big draw? I mean it was when I was a
34:29
Speaker 1: kid for some people. Um has it? Has it continued
34:34
Speaker 1: to be as strong? Uh? Property? Yeah? I mean the
34:39
Speaker 1: ratings are are are are still very strong, and I
34:43
Speaker 1: mean this is um, you know, just to step back,
34:46
Speaker 1: I mean, the whole television landscape now is really um.
34:50
Speaker 1: You know, people are cutting the cord. They're getting a
34:53
Speaker 1: lot of their dramas and their comedies on streaming services
34:55
Speaker 1: like Netflix. But you know, the cable bundle is really
34:59
Speaker 1: about five sports and w w E is is an
35:03
Speaker 1: attractive property for media companies for that very reason. All right, Jerry,
35:07
Speaker 1: great stuff. Really appreciate it. Jerry Smith. He's a media
35:09
Speaker 1: reporter for Bloomberg News. Looking at World Ward Wrestling a
35:12
Speaker 1: w w E up today, fifty two week high stocks
35:16
Speaker 1: up over the trailing twelve months. How about that. You
35:23
Speaker 1: had the Eco data today. Jobs numbers came out. I
35:25
Speaker 1: thought they were really good. MAT's a little bit not
35:29
Speaker 1: so well. No, they were good. I mean we added
35:32
Speaker 1: two hundred and twenty three thousand jobs in the month
35:36
Speaker 1: and record unemployment at a record low. That's good from
35:41
Speaker 1: from a social perspective, right, I'm just saying from a
35:45
Speaker 1: market's perspective, from a FED perspective, market, if they want
35:49
Speaker 1: to fight inflation, I think they have to get unemployment
35:54
Speaker 1: close to the non accelerating inflation rate of unemployment, and
35:58
Speaker 1: three and a half percent can't be there ages wage growth.
36:01
Speaker 1: Let's just go to some professionals who cares what we
36:03
Speaker 1: think had a fixed income for New Edge. Well, if
36:06
Speaker 1: he joined us the show in studio today in Jeffrey Cleveland,
36:09
Speaker 1: chief US economists of Paidon and Regal, joining us via
36:12
Speaker 1: a zoom. Jeff, let's start with you, how did how
36:15
Speaker 1: did you take this job's number report? Well, I think
36:18
Speaker 1: Matt is correct in that the whole goal that the
36:22
Speaker 1: FED is operated on their engineering. They're attempting to engineer
36:26
Speaker 1: arise in the unemployment rate to get nominal wage growth
36:31
Speaker 1: to slow, and then that's supposed to damp in inflation pressure.
36:34
Speaker 1: That's the whole point of all of these rate hikes.
36:37
Speaker 1: That that's it, and then boom you you open the
36:40
Speaker 1: UH Employment Situation Report at five thirty here on the
36:43
Speaker 1: West Coast and the unemployee rate fell, so it's it's
36:48
Speaker 1: not working in that sense, right. However, I do think
36:52
Speaker 1: it is interesting to consider that it's possible the FED
36:55
Speaker 1: is wrong about that inflation story, that inflation was I
37:00
Speaker 1: for all sorts of let's we can't use a transitory
37:04
Speaker 1: but you know, pandemic specific or two specific reasons, and
37:10
Speaker 1: then inflation does fade. And that's your soft landing scenario
37:15
Speaker 1: that I think cannot be ruled out we even had.
37:19
Speaker 1: I mean, Cloudy Assam has been writing for a while
37:21
Speaker 1: about how she thinks the Phillips curve is BS in
37:25
Speaker 1: at least some sense, and what she doesn't want is
37:28
Speaker 1: for the FED to fight inflation through, you know, destroying
37:33
Speaker 1: American lives. And I thought it was interesting. Rag Aram
37:37
Speaker 1: Rajan was on Bloomberg Television yesterday and he has come
37:41
Speaker 1: out and said he of the r b I and
37:44
Speaker 1: um where where he was chief economist at the ruh
37:49
Speaker 1: NO and he ran the rb I, and he was
37:51
Speaker 1: chief economist at like the I m F or something
37:52
Speaker 1: I can't remember, the World Bank, something big. Anyway, he's
37:55
Speaker 1: at the Boost Goal in Chicago now and he said,
37:58
Speaker 1: you know, the FED has to be ready for inflation
38:00
Speaker 1: to come down quickly to you know, low inflation territory
38:05
Speaker 1: or even disinflation. Um Ben Emmons, what do you think
38:10
Speaker 1: about the situation that FED finds itself in now? Do
38:12
Speaker 1: they have to raise unemployment to get inflation down or
38:14
Speaker 1: is it coming down naturally? It is coming down naturally
38:18
Speaker 1: through the good side of the economy. And I guess
38:21
Speaker 1: the dropping energy prices that is consistent now is really
38:26
Speaker 1: helping the cause. And that obviously is a one hand
38:29
Speaker 1: supportive for real income. On the other hand, it is
38:32
Speaker 1: a factor in the economy that leads them to lower
38:35
Speaker 1: inflation expectations and therefore the FED gets quicker to the
38:38
Speaker 1: goal of two percent inflation over time. But if you
38:42
Speaker 1: read the minutes, they're having a heated debate, though I
38:44
Speaker 1: think it felt to me I could heat a debate
38:46
Speaker 1: about how far to go with tightening or overtightening. And
38:50
Speaker 1: if you listen to Ballard yesterday, although his projection is
38:54
Speaker 1: coming down a little bit, it's still really high and
38:56
Speaker 1: he seems to be really driving the debata. So it
38:58
Speaker 1: seems that they with this Goldilocks quoteunquote goldilocks jobs supports
39:02
Speaker 1: vindicates a few like yes, moderating wages, maybe someone slowing
39:07
Speaker 1: and inflation with strong jobs report should allow us to
39:09
Speaker 1: raise rates here at least to restrictive level. And they
39:12
Speaker 1: was sure that inflation comes back to tust. So, Jeff,
39:15
Speaker 1: how do you think the Federal Reserve behaves over the
39:18
Speaker 1: next couple of meetings? What are you looking for again?
39:20
Speaker 1: And you know maybe this jobs data impacts that outlook. Well,
39:25
Speaker 1: I think it's difficult. You know, I always tell clients
39:27
Speaker 1: you have to take off your your investor hat, you
39:29
Speaker 1: have to put on the Fed hat. You have to
39:31
Speaker 1: see the world the way they see the world. And
39:33
Speaker 1: I think has been pointed out there is this very
39:35
Speaker 1: strong line throughout the Fed minutes that they by large
39:40
Speaker 1: the committee thinks that if the unemployment rate stays low,
39:44
Speaker 1: the labor market remains tight, that will feed through into
39:46
Speaker 1: nominal wage growth, and that will feed through into the
39:49
Speaker 1: non housing services component of core inflation. So goods prices
39:53
Speaker 1: may fall, rents may distilerate, but it's that non housing
39:58
Speaker 1: component which will still be eli because of the labor
40:01
Speaker 1: market story. So they've definitely view inflation through the labor
40:04
Speaker 1: market lens. I think you have to keep that in
40:06
Speaker 1: mind as an investor, because I think, as we see
40:09
Speaker 1: this morning, three and a half percent unemployment, right, you're
40:12
Speaker 1: looking at the world through that labor market lens, right
40:14
Speaker 1: or wrong, You're going to think we need to remain
40:17
Speaker 1: restrictive now, maybe that they don't need to keep hiking,
40:21
Speaker 1: maybe they pause in the second quarter, sort of our expectation.
40:24
Speaker 1: But do you cut with the unemployment rate of three
40:27
Speaker 1: and a half percent. No, I don't think so. Why
40:33
Speaker 1: on earth wouldn't you take advantage of a three and
40:35
Speaker 1: a half percent unemployment even if you're not fighting inflation, um,
40:39
Speaker 1: just to build up dry powder. And I know a
40:41
Speaker 1: lot of people been are against that argument, but if
40:44
Speaker 1: it were me, I would say, let me save up
40:46
Speaker 1: some basis points here. If I get unemployment at three
40:50
Speaker 1: point five percent, I'm raising fifty again in February. It's
40:53
Speaker 1: exactly through the fast ends. Like this is actually ideal
40:56
Speaker 1: scenario for them to say, look our rate heights and
40:58
Speaker 1: not the railing the rate the labor market and anyway,
41:01
Speaker 1: it's not in any recession. There's not any recession happening
41:04
Speaker 1: as we speak. There's slowdown happening, but that's you know,
41:08
Speaker 1: natural as you get from a major boom of this
41:10
Speaker 1: pandemic that we have, so you can continue to move
41:14
Speaker 1: this rate higher. Only they've decided on the slower basis
41:17
Speaker 1: may be appropriate because if you do continue with seventy
41:21
Speaker 1: five base points at the time on you know, let's
41:23
Speaker 1: say are not a three four meetings, that way, you
41:26
Speaker 1: probably get more of all. They gotta go fifty at
41:28
Speaker 1: the next meeting right then, because if they don't, if
41:30
Speaker 1: they only go twenty five, and then inflation comes roaring back,
41:34
Speaker 1: then Jerome Pale is Arthur Burns and all bets are off.
41:37
Speaker 1: So there's a great question, Matt, that that is the
41:39
Speaker 1: toss up here still of twenty five or fifty base
41:41
Speaker 1: on list report. As you see the market rallying today,
41:44
Speaker 1: it says no, will be twenty five, but there's actually
41:47
Speaker 1: a fifty base point rate hikes. What this report is, say, Jeffrey,
41:50
Speaker 1: what's the paidon in regal kind of recession call for? Well,
41:56
Speaker 1: we look at the yield curve, we look at rate hikes,
41:59
Speaker 1: we look at housing. Housing historically is the business cycle.
42:03
Speaker 1: So when housing rolls over, you generally have a recession
42:07
Speaker 1: that follows housing exactly. So it can happen with the lag.
42:11
Speaker 1: I mean you you probably remember very well. Housing to
42:14
Speaker 1: meet peaked in summer of oh five or arguably early
42:17
Speaker 1: oh six. The recession didn't officially begin until December of
42:21
Speaker 1: oh seven, so there can be lags. So we've been saying, hey,
42:24
Speaker 1: it might be that the economy skates by without a
42:27
Speaker 1: recession in twenty three. Maybe that's a story. The jobs
42:31
Speaker 1: report today, certainly, I think, uh talking bolsters that argument.
42:35
Speaker 1: The other thing I was gonna say, though, is the
42:37
Speaker 1: bondmarket seems to conclude the supporting that maybe there's only
42:40
Speaker 1: gonna be a twenty five basis point high, or maybe
42:41
Speaker 1: that FED is close to being done, but they hate
42:43
Speaker 1: to be the bear of bad news. We still have
42:45
Speaker 1: CPI uh coming up next Thursday, I believe, and then
42:49
Speaker 1: the FED prefers the employment cost Index over average generally learning.
42:53
Speaker 1: So e c I. E c I is coming out
42:56
Speaker 1: January thirty one, so right before the next FED meetings.
42:59
Speaker 1: So I think there's still uh, this narrative could still
43:03
Speaker 1: shift back, you know, if we get a stronger than
43:05
Speaker 1: expected course c p I, for example, which is coming out. Wait,
43:09
Speaker 1: isn't CPI coming out next week? Is that the specific? Yeah?
43:14
Speaker 1: And that's right. I do agree with Jeff, there, like,
43:17
Speaker 1: look at the European data today, right, so we peaked
43:19
Speaker 1: there were falling off with headline face shows. Yeah, I
43:21
Speaker 1: guess prices pomited, but the core rate is pretty sticky there.
43:25
Speaker 1: It's not really moving, right, So yeah, we have we
43:29
Speaker 1: have somewhat similar here too. And to Jeff's point, like
43:31
Speaker 1: this core PC ex housing that's been highlighted by Powell
43:35
Speaker 1: not put in the minutes to that's really the number
43:38
Speaker 1: to watch. It has come off a little bit in
43:40
Speaker 1: the last week reading, but it's way over four percent.
43:43
Speaker 1: So is that the four point six percent number set four? Yeah, exactly,
43:46
Speaker 1: So it's just too far above target. It's not like
43:49
Speaker 1: the official target, but it's like the number of the
43:51
Speaker 1: Jeff says, it's it's a wage linked number. And that's
43:54
Speaker 1: what we see is traditionally there go to number they're preferred,
43:59
Speaker 1: and I never know if they like, uh, they they've
44:01
Speaker 1: had They have specified in a number of papers that
44:04
Speaker 1: PC is their preferred measure, but they haven't specified if
44:06
Speaker 1: it's headline or core or core x housing. Um, I
44:09
Speaker 1: guess they don't want to let us in. No, that
44:12
Speaker 1: that's the fat watching game here and it keeps us all,
44:14
Speaker 1: you know, engaged, and but you know to to that
44:18
Speaker 1: is that I actually think that if you if you
44:21
Speaker 1: take headline is the broadest measure of inflation, and you
44:24
Speaker 1: could need to see negative month to month prints from
44:27
Speaker 1: here on, then that's definitely an indication inflation coming down faster.
44:31
Speaker 1: So I do think you need to watch that, and
44:33
Speaker 1: if you also watch jobless claims every week. I was
44:36
Speaker 1: thought of these two measures as you're you know, real
44:38
Speaker 1: time gauge on where we are with the economy in
44:40
Speaker 1: terms of inflation pressure. Hey, Jeff, you're based in l
44:43
Speaker 1: A thirty seconds, how's the economy there? How's the outlook there?
44:46
Speaker 1: What are you here when you're a day to day Well,
44:48
Speaker 1: we just endured, you know, several days of rain, which
44:51
Speaker 1: never rarely happens there. They've got four inches of rain
44:53
Speaker 1: in my neighborhood here, so that has been that has
44:56
Speaker 1: certainly been the top of the town. I think. Second
44:59
Speaker 1: to that, the thing everyone talks about is still the
45:03
Speaker 1: labor shortage that companies don't, you know, there's they have
45:06
Speaker 1: demand for labor, they can't find enough people who are
45:09
Speaker 1: willing or able or that wanted to fill those positions.
45:12
Speaker 1: So that's that's pretty dominant um weakness in the housing market, though,
45:15
Speaker 1: we are seeing pretty pretty substantial slowdown in activity, sales
45:19
Speaker 1: and prices of decilerated so it will probably be the
45:22
Speaker 1: top things that are being discussed here on the West Coast.
45:25
Speaker 1: Good stuff the moment, all right, Jeff, Great stuff, Jeff Cleveland,
45:27
Speaker 1: chief US economist, Payden and Regal and Ben Emmon's head
45:30
Speaker 1: of fixing come at New Edge Wealth joining us here.
45:35
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
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Speaker 1: subscribe and listen to interviews of Apple Podcasts or whatever
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