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Ukraine Fires UK Cruise Missiles, Target Earnings · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 3: All right, let's get to some geopolitical headlines that have
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  Speaker 3: definitely been moving the equity market. Ukraine firing UK Stormshadow
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  Speaker 3: missiles into Russia. That's according to an official Hesblah also
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  Speaker 3: saying that they are going to stay on the battlefield
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  Speaker 3: no matter what. And we do see the Nasdaq around
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  Speaker 3: down by one percent. We're now around the loads of
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  Speaker 3: the session when it comes to the equity market. Roz Mathison,
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  Speaker 3: Bloomberg News director for Your Middle East and Africa, joins us. Now, Roz,
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  Speaker 3: this doesn't tell me or push me towards some kind
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  Speaker 3: of negotiating table that we're all expecting to happen in
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  Speaker 3: the first quarter of next year.
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  Speaker 4: Well, in a way, I think escalating between Russia and Ukraine.
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  Speaker 4: Got the news that they use UK made storm Shadow missiles.
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  Speaker 4: It seems to strike just over the border inside Russia.
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  Speaker 4: That's after the use of the US attacking missiles to
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  Speaker 4: strike just over the border into Russia, so in the
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  Speaker 4: conflict zone in a way, a couple of one hundred
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  Speaker 4: miles at most across the border. But this all is
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  Speaker 4: in the realm of the idea of them both positioning.
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  Speaker 4: Russia trying to advance as much as possible inside Ukraine,
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  Speaker 4: Ukraine trying to hold on to as much land inside
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  Speaker 4: Russia that it's got as a negotiating tool, because we are,
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  Speaker 4: it seems, heading towards some kind of negotiating negotiating at
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  Speaker 4: some point early potentially in the next year. The incoming
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  Speaker 4: US President Donald Trump has made it clear that he
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  Speaker 4: wants this war to come to an end or he
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  Speaker 4: wants some kind of ceasefire to be negotiated, and he
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  Speaker 4: doesn't want to continue to send military and financial aid
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  Speaker 4: to Ukraine's there's a front running of a lot of
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  Speaker 4: aid to Ukraine that we're seeing at the moment, and
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  Speaker 4: again both Ukraine and Russia trying to position themselves the
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  Speaker 4: best they can for getting to the table.
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  Speaker 5: Ros We had a guest on earlier this morning who
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  Speaker 5: characterized the war in Ukraine is one in which Ukraine
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  Speaker 5: is losing slowly every single day, is that of you
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  Speaker 5: held by folks, you know, in the business of really
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  Speaker 5: thinking about these things.
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  Speaker 4: Well, it's definitely a concern. You can hear it in
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  Speaker 4: some of Ukraine's strongest allies that what they're were saying
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  Speaker 4: privately to themselves and each other, they're now saying more publicly,
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  Speaker 4: which is that, you know, the grinding war that's been
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  Speaker 4: going on for years now, and it's not just about
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  Speaker 4: you know, whether they've got access to long range missiles
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  Speaker 4: and sort of high tech kit, but it's also the
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  Speaker 4: reality that Ukraine is suffering very badly from a shortage
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  Speaker 4: of manpower. I mean, Russia has lost a lot of
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  Speaker 4: soldiers on the battlefield, but so is Ukraine, and with
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  Speaker 4: fewer met with less manpower to hand, and so a
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  Speaker 4: real concern is that Ukraine is slowly, slowly losing the
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  Speaker 4: fight and Russia is slowly, slowly increasing its hold on territory.
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  Speaker 4: And so, you know, bit by bit is Ukraine weakening
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  Speaker 4: its position to negotiate again. That's why there seems to
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  Speaker 4: be this push suddenly to get it into a stronger
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  Speaker 4: position to do so.
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  Speaker 3: I was reading a Bloomberg opinion piece by James Ravitas
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  Speaker 3: earlier today. He's an opinion columnist, but also retired you
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  Speaker 3: as maybe admiral and former Supreme Allied Commander of NIDO.
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  Speaker 3: And he's like, look, the solution is you just drop
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  Speaker 3: where you are right now and create a demilitarized zone
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  Speaker 3: like North Korea and South Korea have and that you
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  Speaker 3: just have what you have, and then there's this area
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  Speaker 3: that's going to be neutral. Is that something that could
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  Speaker 3: be palatable on negotiating table.
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  Speaker 4: Well, in a way, it's an extension of what we've
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  Speaker 4: got already or had already in Ukraine, because of course
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  Speaker 4: we have this area in Danesque in so the south
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  Speaker 4: and east of Ukraine. That's been a version of a
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  Speaker 4: line of control between Russia and Ukraine since twenty fourteen,
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  Speaker 4: and certainly with the addexation of Crimea as part of that,
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  Speaker 4: and it's been a low level conflict for years since
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  Speaker 4: twenty fourteen, and obviously a full blown invasion since twenty
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  Speaker 4: twenty two. And so do we revert to a version
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  Speaker 4: of that, but with Russia controlling more territory And it's
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  Speaker 4: clear that in any settlement Russia would want to control
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  Speaker 4: a lot more territory than it already did. Essentially inside Ukraine,
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  Speaker 4: and so really how much of that is palatable for
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  Speaker 4: Ukraine or how much choice does Ukraine end up having
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  Speaker 4: in that? And so you freeze the conflict. You don't
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  Speaker 4: end it, but you freeze it. And so obviously the
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  Speaker 4: question is just Russia then go back, regroup, re and
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  Speaker 4: come back again for something more exactly.
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  Speaker 5: All right, Ros, thank you so much for joining us.
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  Speaker 5: Russ Mathison news director for you in the Middle East
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  Speaker 5: and Africa for Bloomberg News. She is based in London,
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  Speaker 5: joining us vias IM getting the latest on the conflict
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  Speaker 5: in Ukraine.
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  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 3: Well, Alex, you al alongside pause. We need this a
• 5:11
  Speaker 3: Boomberg Intelligence Radio. We're broadcasting to live from our Inductor
• 5:14
  Speaker 3: Broker studio right here in Midtown Manhattan. Also check us
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  Speaker 3: out on YouTube. So the big event today obviously is
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  Speaker 3: going to be in Vidia reporting after the Bell for twenty.
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  Speaker 3: It's going to be a moment and as that one
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  Speaker 3: hundred dropping over one percent ahead of that. But what's
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  Speaker 3: making a lot of headlines is the option implied move,
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  Speaker 3: particularly if you look at potentially an eight percent move
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  Speaker 3: to the upper the downside, which we've been reporting can
• 5:36
  Speaker 3: translate into three hundred billion dollars worth of market cap
• 5:39
  Speaker 3: to the upper downside. That's pretty tremendous. So let's get
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  Speaker 3: some take here with Shelby McFadden investment analyst and Motley
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  Speaker 3: Fool asset Management. So, Shelby, how do you play in video,
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  Speaker 3: whether that's in Vidia specifically or is it going to
• 5:50
  Speaker 3: be an offshoot? How do you play the next twenty
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  Speaker 3: four hours?
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  Speaker 6: Well, when we think about the long term and active management,
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  Speaker 6: the way we play it is we kind of sit tight,
• 5:59
  Speaker 6: We wait for things to roll out, and then we
• 6:01
  Speaker 6: go ahead and adjust based off of what we get
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  Speaker 6: from there, because really we're not in the business of
• 6:05
  Speaker 6: trading per se. We're really in this sort of long
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  Speaker 6: term investing, So you have to sort of wait and
• 6:09
  Speaker 6: see not just how the performance was for the last quarter,
• 6:12
  Speaker 6: but get a read on the outlook. I think that's
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  Speaker 6: going to be what a lot of investors are looking for,
• 6:16
  Speaker 6: and then we sort of take that back to the models,
• 6:18
  Speaker 6: we take that back to the allocation meetings, and we
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  Speaker 6: decide what effect, if any, it has on our current
• 6:24
  Speaker 6: allocations and how we're thinking about the macro environment. So
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  Speaker 6: I think it's unfortunately that non answer of there's really
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  Speaker 6: not a way to play it that's not speculation.
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  Speaker 5: So where do you have high conviction areas? And or
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  Speaker 5: what are sectors that where you have high conviction areas today?
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  Speaker 6: Yeah, you know, we sort of being a bottom up team,
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  Speaker 6: we don't necessarily pick anyone sector or vertical. But something
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  Speaker 6: that's surprisingly been more exciting and doing a little bit
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  Speaker 6: well is advertising and advertising related type of companies, despite
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  Speaker 6: how related they are to the consumer space. So that's
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  Speaker 6: something that's been thriving in the portfolio, as well as
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  Speaker 6: payment networks. And then we're actually sort of reinvigorating some
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  Speaker 6: interest in medtech and biotech, not just because of the election,
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  Speaker 6: but because small cap med and biotech has been something
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  Speaker 6: that's been pretty interesting to a lot of our pms,
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  Speaker 6: and we've had some decent success across the portfolio there.
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  Speaker 1: What do you do with retail?
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  Speaker 7: Right?
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  Speaker 3: You got Walmart yesterday, Target just getting wiped out today
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  Speaker 3: and then you have Williams Sonoma up like twenty five percent.
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  Speaker 6: Yeah, retail is an interesting story, and I think it
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  Speaker 6: actually makes a pitch for active management because that example
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  Speaker 6: that you just made is how are all three of
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  Speaker 6: these so different. You've got three very different stores, but
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  Speaker 6: at the same time, you've got Target almost sitting in
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  Speaker 6: the middle of the two of them. So you've got
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  Speaker 6: Williams Sonoma where it's this place where you get a
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  Speaker 6: premium customer and they tend to face a lot less
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  Speaker 6: income elasticity, so they're a little bit sticky. Then you've
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  Speaker 6: got Walmart that is capturing not only their main customer base,
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  Speaker 6: but some of those Williams and Nooma customers who might
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  Speaker 6: be purchasing their actual bake weares from one place and
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  Speaker 6: getting ingredients other small things from Walmart. And then you've
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  Speaker 6: got Target kind of sitting in the middle where they're
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  Speaker 6: trying to figure out their value proposition. And so the
• 8:03
  Speaker 6: bottom up process helps us figure out who's going to
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  Speaker 6: be able to serve whom and over what parts of
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  Speaker 6: the cycle they're going to be able to do it.
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  Speaker 6: So you play retail by finding the value proposition that's
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  Speaker 6: really going to suit not just customers, but the shareholders
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  Speaker 6: as well.
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  Speaker 8: United Parcel Service talk to us about that name.
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  Speaker 9: Yeah.
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  Speaker 6: Ups has been really interesting. So when they had the
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  Speaker 6: Team Starves negotiation, the stock got absolutely whacked, but we
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  Speaker 6: stayed put. We really trusted Carol Tomey and her team,
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  Speaker 6: and they've shown us the value of going ahead and
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  Speaker 6: sticking with quality over volume, and they have been able
• 8:37
  Speaker 6: to claw back allow of the lost volume from the
• 8:40
  Speaker 6: concerns about that contract. They are now lapping their greatest
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  Speaker 6: costs in those negotiations, and they are still feeling pretty
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  Speaker 6: good about Peaks. So that's another great story of sort
• 8:50
  Speaker 6: of riding through, playing the long game, adding up when
• 8:53
  Speaker 6: the market is over punishing something and realizing that the
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  Speaker 6: greater macro environment does not necessarily determine exactly how well
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  Speaker 6: someone is going to do, and they can outperform their
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  Speaker 6: peers if they're better prepared.
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  Speaker 3: Right, And that's why you're a bottom up investor. Like
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  Speaker 3: that makes sense. But when we have something that feels
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  Speaker 3: somewhat binary in terms of taxes and tariffs incoming Trump administration,
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  Speaker 3: how do you layer that onto your bottom up models?
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  Speaker 6: I think what we do is we don't change our universe.
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  Speaker 6: So we continue to search for companies that are going
• 9:24
  Speaker 6: to meet our thresholds for quality. Where that sort of
• 9:27
  Speaker 6: macro comes in is when we're doing our allocations. So
• 9:30
  Speaker 6: we will definitely consider the environment in the same way
• 9:33
  Speaker 6: that we've considered this extended high rate environment and say,
• 9:36
  Speaker 6: you know what, this is something that we want to
• 9:38
  Speaker 6: have at a lower allocation in the portfolio. It's a
• 9:41
  Speaker 6: very high quality company, it's likely to beat out its peers,
• 9:44
  Speaker 6: but we need to kind of change these allocations because
• 9:46
  Speaker 6: of who's going to get affected. So it's the same
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  Speaker 6: thing where if we were to actually see some tariffs
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  Speaker 6: come through, especially thinking for example Walmart with a lot
• 9:54
  Speaker 6: of Chinese import exposure, that's something that we would consider,
• 9:57
  Speaker 6: probably not completely getting rid of it because we also
• 10:00
  Speaker 6: have it for the purpose of dividend yielding, but absolutely
• 10:04
  Speaker 6: considering those allocations and also looking at our discount rates
• 10:07
  Speaker 6: in our models and making those changes.
• 10:09
  Speaker 5: How do you typically view dividends? How important are they
• 10:12
  Speaker 5: in your stock selection?
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  Speaker 10: Overall?
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  Speaker 6: It's not something that we necessarily consider when we're looking
• 10:19
  Speaker 6: at our large cap dividend product. It's something that is
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  Speaker 6: at the top of the list. So when we have
• 10:24
  Speaker 6: companies that are three plus percent positions. We're definitely looking
• 10:29
  Speaker 6: core over quarter or at least on a half year basis,
• 10:32
  Speaker 6: how safe that dividend is. Looking we're looking at the
• 10:35
  Speaker 6: yield in and of itself, and not just the dividend yield,
• 10:38
  Speaker 6: but the total shareholder return there. So they tend to
• 10:40
  Speaker 6: also be the companies that are kicking back a lot
• 10:42
  Speaker 6: more capital to cash to shareholders. So it's very important
• 10:46
  Speaker 6: in that regard when we start to get into our
• 10:48
  Speaker 6: more aggressive growth products, traditional growth, especially when we're looking
• 10:52
  Speaker 6: at small that's not really something we consider. If we
• 10:54
  Speaker 6: do see a small company that is cash generative, they're
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  Speaker 6: positive earnings and they're cranking out a dividend, and that's
• 11:00
  Speaker 6: definitely going to boost their economics score, But overall, the
• 11:03
  Speaker 6: dividend is not something that we consider top of the
• 11:06
  Speaker 6: list for our entire universe.
• 11:08
  Speaker 1: What else do you like?
• 11:09
  Speaker 3: You mentioned like biotech and medical space. What kind of
• 11:13
  Speaker 3: stocks you guys like there?
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  Speaker 6: Well, unfortunately, for compliance reasons, there's a couple of small
• 11:18
  Speaker 6: names that are a little bit too low market cap
• 11:20
  Speaker 6: to discuss. But we have looked at a couple of
• 11:24
  Speaker 6: names that have some specific heart surgical sort of medical
• 11:28
  Speaker 6: devices that we've looked at in the past.
• 11:31
  Speaker 1: We did own and this.
• 11:32
  Speaker 6: Is I think more of a small mid We had
• 11:33
  Speaker 6: some shockwave and so that was really exciting to see
• 11:36
  Speaker 6: that get acquired. So that's sort of one of the
• 11:39
  Speaker 6: success stories. We tend to be in that sort of
• 11:41
  Speaker 6: niche space where you do have to sit and wait
• 11:44
  Speaker 6: through those Phase one, phase two, phase three, those FDA approvals,
• 11:48
  Speaker 6: but we have had some success in that space, and
• 11:50
  Speaker 6: it really just tends to be in those products where
• 11:53
  Speaker 6: they actually are innovating for professionals, and yes it may
• 11:57
  Speaker 6: be expensive, but if it is solving one particular issue
• 12:00
  Speaker 6: and they're the first to do it, that's where we've
• 12:01
  Speaker 6: found most success.
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  Speaker 8: Shelby.
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  Speaker 5: Two weeks ago today, the world woke up to a
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  Speaker 5: new US president elect and a Republican controlled both houses
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  Speaker 5: of Congress. That changed the way you guys think about
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  Speaker 5: asset allocation investing themes.
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  Speaker 6: Yeah, we actually we call the portfolio meeting right away,
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  Speaker 6: and it's something that right now we're sort of in
• 12:26
  Speaker 6: the waiting period, right it's the lane duck. So it's
• 12:30
  Speaker 6: the same for us where we're sitting here and we
• 12:31
  Speaker 6: are waiting for the administration to actually come in for
• 12:36
  Speaker 6: a lot of these different positions to be filled and
• 12:39
  Speaker 6: confirmed and then to start to see the policy rolling out.
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  Speaker 6: So something that we think about when it comes to,
• 12:44
  Speaker 6: for example, the potential extension of the tax plan where
• 12:49
  Speaker 6: there's the lower corporate taxes, the immediate expensing of R
• 12:53
  Speaker 6: and D. We do know that that's something that can
• 12:55
  Speaker 6: benefit the bottom line. However, we also have tried to
• 12:59
  Speaker 6: make sure we're not choosing companies that are holding out
• 13:01
  Speaker 6: on reinvesting in their business just for you know, how
• 13:05
  Speaker 6: the earnings look. We want to find operators that are
• 13:08
  Speaker 6: able to do that profitably. So we think that there'll
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  Speaker 6: be a little bit of a boost in that regard
• 13:13
  Speaker 6: from R and D, but not necessarily saying let's absolutely
• 13:17
  Speaker 6: pile into smalls or let's absolutely pile into these not
• 13:21
  Speaker 6: so profitable businesses because regulation and taxes are going down.
• 13:25
  Speaker 6: But it is something that we're aware of in terms
• 13:27
  Speaker 6: of how it's going to affect performance, and any businesses
• 13:29
  Speaker 6: that are very R and D heavy, we you know,
• 13:32
  Speaker 6: we might increase.
• 13:33
  Speaker 8: Our allocation a bit.
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  Speaker 5: All right, Shelby, thank you so much for joining us.
• 13:35
  Speaker 5: As always, Shelby McFadden investment analyst A Motley full asset
• 13:38
  Speaker 5: management down there in Alexandria, Virginia.
• 13:41
  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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• 14:23
  Speaker 7: All R.
• 14:23
  Speaker 3: Let's get back to the market here. So we may
• 14:25
  Speaker 3: have some geopolitical risk shaking in the market, but if
• 14:28
  Speaker 3: you take a look at some of the equities like
• 14:30
  Speaker 3: a Walmart still holding up fairly well. That' stock now
• 14:33
  Speaker 3: are on the highs of the session up almost five percent.
• 14:36
  Speaker 3: Joining us how to discuss as Emily Cohne and Bloomberg
• 14:38
  Speaker 3: Consumer team leader. I mean she heads all the stuff
• 14:41
  Speaker 3: of consumer stocks. She joins us now in studio, Emily,
• 14:43
  Speaker 3: wonderful to see.
• 14:44
  Speaker 1: You, Thanks AlCH.
• 14:46
  Speaker 3: What do we make about the reaction to Walmart stock?
• 14:49
  Speaker 3: Because consensus was already high, the stock had already moved
• 14:52
  Speaker 3: like we kind of knew it was going to be good.
• 14:55
  Speaker 10: So when you think about Walmart, Walmart is a bellweather
• 14:57
  Speaker 10: of the American economy, of the American con sumer.
• 15:00
  Speaker 1: What does Walmart earnings tell us about that?
• 15:03
  Speaker 10: Walmart beat expectations today sent a really strong signal that
• 15:08
  Speaker 10: the holiday season is off to a solid start, and
• 15:12
  Speaker 10: the market was excited about that.
• 15:14
  Speaker 1: The growth in the.
• 15:15
  Speaker 10: Number of transactions or checkouts slowed, the growth rate slowed
• 15:20
  Speaker 10: a little bit ticket the average ticket, the amount people
• 15:24
  Speaker 10: were paying in each checkout, was up, and a lot
• 15:28
  Speaker 10: of that growth was coming from higher income shoppers, people
• 15:32
  Speaker 10: in households making more than one hundred thousand dollars a year.
• 15:35
  Speaker 10: That cohort made up roughly seventy five percent of the
• 15:38
  Speaker 10: share gains.
• 15:40
  Speaker 3: So this was good.
• 15:41
  Speaker 10: It was a solid start to the holiday season, and
• 15:46
  Speaker 10: the stock is up a lot.
• 15:48
  Speaker 1: Four and a half percent is up a lot for
• 15:50
  Speaker 1: a company that.
• 15:51
  Speaker 5: Big stopstocks at all time high of sixty seven percent
• 15:54
  Speaker 5: year today, which I had no idea their e commerce business.
• 15:58
  Speaker 5: Talk to us about their e commerce business. I know
• 16:00
  Speaker 5: it's big, but Amazon's pretty big too, So how did
• 16:03
  Speaker 5: they talk about their e commerce business?
• 16:05
  Speaker 10: When they talk about e commerce, they just talk about
• 16:07
  Speaker 10: the potential to grow. It is big, but there is
• 16:11
  Speaker 10: still so much room to grow. So just in the
• 16:14
  Speaker 10: last couple of months, we saw them branching into categories
• 16:17
  Speaker 10: that you wouldn't find in a typical Walmart store. Pre
• 16:21
  Speaker 10: owned watches, collectible sneakers, stuff you would typically go to
• 16:26
  Speaker 10: another retailer for, but now you can buy at Walmart online. Also,
• 16:31
  Speaker 10: they're adding benefits to their services, like Walmart Plus.
• 16:34
  Speaker 1: You can now get discounts of Burger King if you're a.
• 16:36
  Speaker 10: Walmart Plus member. So they're really expanding their offering there.
• 16:41
  Speaker 10: Deliveries can get faster, and they see just endless potential there.
• 16:47
  Speaker 1: It's always growing.
• 16:48
  Speaker 3: My question I had before the break was those people
• 16:50
  Speaker 3: that make over one hundred thousand dollars or more, are
• 16:54
  Speaker 3: they sticky as in once the economy save recovers or
• 16:58
  Speaker 3: once they feel better about inflation or et cetera. Do
• 17:00
  Speaker 3: they flee then to go to Target or somewhere else,
• 17:02
  Speaker 3: or go to the fancy drug store, or.
• 17:04
  Speaker 1: Do they stay at Walmart.
• 17:05
  Speaker 10: I think that's a really good question and something we're
• 17:07
  Speaker 10: definitely watching for. You know, spending across the board at
• 17:11
  Speaker 10: Walmart was consistent. The growth, as you said, was coming
• 17:15
  Speaker 10: from these wealthier households. Maybe it's a shopper who typically
• 17:18
  Speaker 10: shops at Whole Foods but is feeling particularly pinched right
• 17:21
  Speaker 10: now and is going to Walmart for value. Do those
• 17:23
  Speaker 10: people stick around when they get a raise in their
• 17:26
  Speaker 10: next paycheck or their paycheck.
• 17:28
  Speaker 1: In the next couple of quarters.
• 17:29
  Speaker 10: That's something we're definitely watching for. I think it does
• 17:32
  Speaker 10: have limits.
• 17:34
  Speaker 5: So are they still opening stores? Isn't there a Walmart
• 17:38
  Speaker 5: pretty much in every town USA these days?
• 17:41
  Speaker 1: It's a good question. I think.
• 17:42
  Speaker 10: Like when they talk about growth now, they're talking about
• 17:44
  Speaker 10: e commerce growth. I think that's where they see the
• 17:48
  Speaker 10: highest potential for growth and they needed to get profitable.
• 17:53
  Speaker 10: That's something we heard the CEO talk about today. Not
• 17:56
  Speaker 10: that they're racing to it, but it's a long term
• 17:58
  Speaker 10: game they want their e commerce division into.
• 18:02
  Speaker 5: So they feel pretty okay about a holiday shopping season because.
• 18:05
  Speaker 10: Yeah holiday, right, Yeah, holiday shopping is off to a
• 18:10
  Speaker 10: strong start. So the interesting thing about the holiday season
• 18:12
  Speaker 10: this year is that it's shorter than in most years.
• 18:16
  Speaker 10: Thanksgiving is following later in the month of November, So
• 18:21
  Speaker 10: the answer to that is that they triggered the deals
• 18:24
  Speaker 10: even earlier than than the usual.
• 18:27
  Speaker 3: Coming in to Paul knows that I I shop on
• 18:29
  Speaker 3: the sales, Let's go to Low's because that is interesting
• 18:32
  Speaker 3: as well. That stock is off the loads of the session,
• 18:34
  Speaker 3: but still down over three percent. What did low say?
• 18:38
  Speaker 7: So?
• 18:38
  Speaker 10: Lowe's years fell before the bell and quarterly comps were
• 18:41
  Speaker 10: better than expected.
• 18:43
  Speaker 1: But still declining.
• 18:46
  Speaker 10: So high interest rates and a week housing market means
• 18:51
  Speaker 10: people are moving less than they were before. It means
• 18:54
  Speaker 10: they're spending less on big ticket home renovations. But despite
• 18:59
  Speaker 10: blooming gloomy sales, Lowe's actually raised its forecast for the year,
• 19:04
  Speaker 10: seeing positive growth in its professional business so selling goods
• 19:08
  Speaker 10: to contractors and builders, also in e commerce, and spending
• 19:14
  Speaker 10: on smaller ticket outdoor projects. Last week we saw Home
• 19:18
  Speaker 10: Depot similarly say that the weather was actually a bright
• 19:23
  Speaker 10: spot for its sales. So hurricane led to higher sales
• 19:27
  Speaker 10: for home depot. Warm weather meant that people were spending
• 19:31
  Speaker 10: more on grills because the Great Grilling Season was getting longer.
• 19:35
  Speaker 1: So in general, for these Los home depot.
• 19:40
  Speaker 10: Sales are down, but the outlook got a little bit
• 19:43
  Speaker 10: better this quarter.
• 19:44
  Speaker 5: Where do we see the weakness in the consumers like
• 19:48
  Speaker 5: in the dollar stores? Because I mean I can I
• 19:50
  Speaker 5: see a strong number from Walmart. To me, that is America.
• 19:54
  Speaker 8: So where is the American consumer hurting?
• 19:56
  Speaker 9: Is it?
• 19:57
  Speaker 8: I guess it's even at a lower.
• 19:58
  Speaker 10: End than wal Yeah, the end is definitely suffering. The
• 20:01
  Speaker 10: dollar stores are suffering. They don't offer the variety that
• 20:06
  Speaker 10: Walmart offers. Walmart sixty percent of Walmart's business today is
• 20:10
  Speaker 10: in groceries and you can go, wow, uh, you know
• 20:14
  Speaker 10: some pretty good stuff at Walmart these days, gluten free
• 20:17
  Speaker 10: items and organic produce and stuff that like you're not
• 20:22
  Speaker 10: going to necessarily find out your dollar store. And that's
• 20:25
  Speaker 10: really really helping them, especially when it comes to growing
• 20:28
  Speaker 10: an e commerce business where people are looking for a
• 20:30
  Speaker 10: one stop shop for everything.
• 20:32
  Speaker 8: So before I let you, I have a gluten free friend.
• 20:34
  Speaker 8: And it's a good job.
• 20:35
  Speaker 10: It's a thing.
• 20:36
  Speaker 3: It is a thing.
• 20:38
  Speaker 1: I have multiple friends.
• 20:40
  Speaker 8: I didn't know it was a thing. Oh, I've been educated.
• 20:43
  Speaker 3: You've been educated for that one friend before we let
• 20:45
  Speaker 3: you go. We get a lot of retailers out this
• 20:47
  Speaker 3: week as well. What are you going to be focusing
• 20:48
  Speaker 3: on the consumer trends land?
• 20:50
  Speaker 10: Definitely the holiday season? What are people seeing that's the
• 20:54
  Speaker 10: big question this year. Are people spending as much as
• 20:58
  Speaker 10: they usually spend? Are they buying as many gifts as
• 21:01
  Speaker 10: they usually buy? Also Thanksgiving? For the grocers, I think
• 21:06
  Speaker 10: a lot of people are just worn out from paying
• 21:08
  Speaker 10: really high prices for food. They're also worn out from
• 21:13
  Speaker 10: cooking a lot more than they have been since they're
• 21:15
  Speaker 10: eating out less. So how is that showing up in
• 21:19
  Speaker 10: consumer sales? Definitely trying to get a sense of how
• 21:23
  Speaker 10: the consumer is feeling about what is the most significant
• 21:27
  Speaker 10: shopping season of the year.
• 21:28
  Speaker 3: I know my husband's getting a little burnt by all
• 21:30
  Speaker 3: the cooking he's doing.
• 21:31
  Speaker 1: I'm really good at ordering takeout. He's the chef in
• 21:34
  Speaker 1: the family.
• 21:35
  Speaker 3: All right, thanks so much, it's really I really appreciate
• 21:37
  Speaker 3: it. It was wonderful to have you at Emily con joining us.
• 21:39
  Speaker 3: She heads consumer trends coverage for Bloomberg News.
• 21:44
  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 21:48
  Speaker 2: weekdays at ten am Eastern on Apple car Play and
• 21:51
  Speaker 2: Android Auto with a Bloomberg Business app. You can also
• 21:54
  Speaker 2: listen live on Amazon Alexa from our flagship New York station.
• 21:58
  Speaker 2: Just say Alexa play Bloomberg eleven.
• 22:02
  Speaker 3: I'm Alex you alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
• 22:05
  Speaker 3: We bring you all the top news and business, economics
• 22:07
  Speaker 3: and finance through our lens of our Bloomberg Intelligence folks. Now,
• 22:10
  Speaker 3: luckily Paul Sweeney was the guy who started Bloomberg Intelligence.
• 22:13
  Speaker 3: But now he says right next to me. So when
• 22:15
  Speaker 3: some of my Comcast breaks, I'm like, Paul, what's your
• 22:17
  Speaker 3: take what's your question?
• 22:19
  Speaker 1: Paul, what's your takeaway?
• 22:19
  Speaker 8: What's your bust? It's interesting.
• 22:21
  Speaker 5: I think Comcast is just acknowledging that the cable network
• 22:24
  Speaker 5: business is a tough business out there. Maybe it's a
• 22:26
  Speaker 5: better to be standalone and not part of the bigger Comcast.
• 22:29
  Speaker 5: But this is a pretty big move for the company.
• 22:32
  Speaker 5: Let's break it down. Let's go to an expert. I
• 22:35
  Speaker 5: know an expert on all this stuff.
• 22:36
  Speaker 8: Terry Kawajing.
• 22:37
  Speaker 5: He's a founder, he's the CEO of Luma Partners, Luma
• 22:40
  Speaker 5: Partners is an investment bank in New York City that
• 22:42
  Speaker 5: really works with digital advertising companies. Think about the companies
• 22:46
  Speaker 5: that kind of make all the plumbing for Facebook, Google, Amazon,
• 22:50
  Speaker 5: all that kind of stuff. Before that, Terry was an
• 22:52
  Speaker 5: m and a banker on Wall Street for many decades,
• 22:55
  Speaker 5: covering these big media companies, including a Comcast.
• 22:58
  Speaker 8: He's the author of a lot of.
• 23:00
  Speaker 5: The big media deals over the last twenty five thirty years.
• 23:03
  Speaker 8: Terry, what do you make a Comcast here?
• 23:05
  Speaker 5: What's kind of the strategy behind spinning out their cable networks?
• 23:10
  Speaker 11: So, yeah, you're right, I mean it feels like there's
• 23:13
  Speaker 11: a bit of a round trip. Having advised Comcast in
• 23:15
  Speaker 11: the build up of their cable systems and their cable
• 23:18
  Speaker 11: networks in the early nineties, so that was like a
• 23:21
  Speaker 11: long time ago last I checked.
• 23:24
  Speaker 7: This.
• 23:24
  Speaker 11: I think is a natural evolution of acknowledgment of a
• 23:28
  Speaker 11: sector in structural change.
• 23:31
  Speaker 7: It's the linear TV.
• 23:33
  Speaker 11: Business doesn't come as a surprise to anyone who's in
• 23:36
  Speaker 11: structural decline, and essentially you know, we've got Comcasts here.
• 23:42
  Speaker 11: In fact, the whole media industry tends to be fairly
• 23:46
  Speaker 11: strategically savvy and financially savvy. So we have seen other
• 23:51
  Speaker 11: media companies like Liberty, like IAC do spin offs when
• 23:59
  Speaker 11: a business will have a different growth trajectory or perhaps
• 24:03
  Speaker 11: have a different financial viability than the core. So we've
• 24:07
  Speaker 11: seen it written large across the media industry, and Comcast
• 24:11
  Speaker 11: is particularly strategically savvy and financially savvy. Here, this is
• 24:15
  Speaker 11: an acknowledgment that probably these are assets that are not
• 24:20
  Speaker 11: as necessary to the future of the digitally delivered peacock,
• 24:25
  Speaker 11: and yet they probably would do best on their own
• 24:30
  Speaker 11: to sort of viy for their future as a content
• 24:33
  Speaker 11: company purely content without the distribution.
• 24:37
  Speaker 3: How do they buy as a content company without that distribution? Like,
• 24:41
  Speaker 3: what does it need to do? And if I'm an investor,
• 24:43
  Speaker 3: why would I buy that stock?
• 24:46
  Speaker 11: So, I mean, look, historically, right media has has gone
• 24:51
  Speaker 11: back and forth from vertical integration of pure content versus distribution,
• 24:55
  Speaker 11: and then sometimes they get together and combine content and distribution.
• 25:00
  Speaker 11: This is simply an acknowledgment that these assets may best
• 25:04
  Speaker 11: live on their own. Now, some I have noticed have
• 25:07
  Speaker 11: described this transaction as a good bank bad bank type
• 25:11
  Speaker 11: of scenario, or you hive off the assets.
• 25:14
  Speaker 7: I don't believe that.
• 25:15
  Speaker 11: To be necessarily true here because it is a little
• 25:18
  Speaker 11: bit different. This isn't pure member. They did not put
• 25:21
  Speaker 11: Bravo into this asset group. They kept that with NBCU
• 25:27
  Speaker 11: to support Peacock.
• 25:29
  Speaker 7: What they did was they've set this on their own.
• 25:31
  Speaker 11: They didn't over or at least they're announcing they're not
• 25:34
  Speaker 11: going to overleverage it. They're putting the same leverage ratio
• 25:37
  Speaker 11: that exists with comcasts, and that means that this is
• 25:41
  Speaker 11: going to be a viable business and in other words,
• 25:44
  Speaker 11: is not going to be overburdened by debt and just
• 25:47
  Speaker 11: operated purely for its cash flows. In fact, I would
• 25:52
  Speaker 11: suggest that it would be a mistake to think that
• 25:55
  Speaker 11: this is going to be an entity the spin co
• 25:57
  Speaker 11: that's going to go quietly into the night.
• 26:00
  Speaker 7: Would fully expect that they will make their.
• 26:02
  Speaker 11: Own strategic and capital allocation decisions, and invariably they will
• 26:07
  Speaker 11: be making investments in digital to help, you know, grow
• 26:11
  Speaker 11: the business, because once it's independent, it's going to make
• 26:13
  Speaker 11: banking its own decisions. And I would fully expect, for example,
• 26:18
  Speaker 11: this spin co to launch fast channels right to take
• 26:21
  Speaker 11: advantage in a digital distribution delivery of the IP that
• 26:28
  Speaker 11: they now have wholly owned.
• 26:30
  Speaker 8: Well Alex.
• 26:32
  Speaker 5: This morning at seven am, I came on the air
• 26:33
  Speaker 5: and an answer to a question from Tom Keene, I
• 26:36
  Speaker 5: in fact said, this looks like a good bank bad
• 26:38
  Speaker 5: bank scenario to me. So, but I've learned it long
• 26:40
  Speaker 5: ago not to argue with Terry Kawaja because you'd rarely
• 26:43
  Speaker 5: come out on the on the good side of those arguments. Terry,
• 26:46
  Speaker 5: how are you guys thinking about just bigger picture for
• 26:49
  Speaker 5: these media companies. They've got these cable networks where you know,
• 26:52
  Speaker 5: the subscribers are declining, advertisings deepdeclining. It's a declining business,
• 26:57
  Speaker 5: but the streaming businesses are showing growth. How do you
• 26:59
  Speaker 5: think think about how these companies are managing that transition.
• 27:04
  Speaker 7: I think they're actually managing it quite well.
• 27:07
  Speaker 11: If you look at Comcast's third quarter narrative, Mike Cavanaugh
• 27:13
  Speaker 11: talks all about I mean you would you would, you
• 27:15
  Speaker 11: would swear if you didn't know the name of his company,
• 27:18
  Speaker 11: that he was at Telco, because he's talking about delivery,
• 27:21
  Speaker 11: he's talking about speeds, he's talking about products that enhance
• 27:25
  Speaker 11: a broadband. So all related to that as opposed to
• 27:28
  Speaker 11: the video business, the video business, the media business, whether
• 27:32
  Speaker 11: that be the broadcast or the streaming or the cable networks,
• 27:37
  Speaker 11: you know, is now a secondary business for those companies,
• 27:41
  Speaker 11: and I think you're going to see them do just
• 27:44
  Speaker 11: fine as a broadband delivery business. And I think there's
• 27:47
  Speaker 11: ample growth opportunities for them in that realm, which you know,
• 27:51
  Speaker 11: arguably is a bit of a reversal of that you know,
• 27:56
  Speaker 11: vertical integration strategy they essentially pursued in nineties with cable
• 28:01
  Speaker 11: networks and in twenty twelve with their NBCU acquisition.
• 28:05
  Speaker 3: So based on that, how long do you think it
• 28:08
  Speaker 3: has before we start talking about private equity getting in etc.
• 28:12
  Speaker 3: Or do you think that their runway to prove itself
• 28:13
  Speaker 3: is a bit longer?
• 28:16
  Speaker 7: Yeah, we'll see.
• 28:16
  Speaker 11: I mean, every private equity firm has looked at all
• 28:21
  Speaker 11: the major media companies from a variety of angles. Right
• 28:24
  Speaker 11: Recall twenty to twenty five years ago, all the big
• 28:28
  Speaker 11: telcos and some media companies hived off their Yellow Pages
• 28:32
  Speaker 11: business Why because and most of them one was to
• 28:37
  Speaker 11: spin off. Most of them were private sales to private
• 28:40
  Speaker 11: equity firms. Why is because those were businesses in structural decline.
• 28:44
  Speaker 11: Let me know when it starts sounding familiar, and essentially
• 28:48
  Speaker 11: the private equity firms made the bet that that decline
• 28:51
  Speaker 11: curve would not be as severe as what the market
• 28:54
  Speaker 11: was pegging, and sure enough, that in fact was the
• 28:56
  Speaker 11: case all the private equity firms that paid billions of
• 28:59
  Speaker 11: dollars for those that's yes, those assets did decline. You know,
• 29:02
  Speaker 11: we don't use yellow pages because we have the Internet now,
• 29:05
  Speaker 11: but that declined curve made for a positive equity investment
• 29:08
  Speaker 11: for them.
• 29:09
  Speaker 7: Here, I think there's a few more degrees of freedom.
• 29:11
  Speaker 11: Remember, they've announced the intention to spin this under the
• 29:15
  Speaker 11: same super voting structure that Comcast has.
• 29:19
  Speaker 7: So Brian Roberts Mike Cavana.
• 29:21
  Speaker 11: Will be in control of this entity and we'll see
• 29:24
  Speaker 11: whether it logically makes sense for it to become a
• 29:27
  Speaker 11: consolidation vehicle for maybe other like assets owned by Paramount
• 29:32
  Speaker 11: or water Rock.
• 29:33
  Speaker 5: All Right, Terry has always great stuff. Terry Quajer Folks,
• 29:35
  Speaker 5: founder and CEO of Luma Partners. He as the investment
• 29:38
  Speaker 5: banker to the media business, and we want to get
• 29:40
  Speaker 5: his thoughts there on Comcast spinning off their cable networks
• 29:43
  Speaker 5: here and so we'll see how that plays out here.
• 29:47
  Speaker 5: But there's a lot of movement in the media space
• 29:48
  Speaker 5: as we talk about all the time, Alex. People trying
• 29:50
  Speaker 5: to figure out how to manage that transition from you know,
• 29:52
  Speaker 5: the cable TV bundles that we always.
• 29:54
  Speaker 8: Paid for now to streamers. We're all streaming. We don't
• 29:58
  Speaker 8: know what we're streaming and what we're paying for, but
• 30:00
  Speaker 8: to look at our credit card.
• 30:00
  Speaker 3: Statements, Oh yeah, we have to go through that and
• 30:02
  Speaker 3: be like, okay, what what And now you can bundle
• 30:04
  Speaker 3: some of those together or they offer some bundles together.
• 30:06
  Speaker 3: So I guarantee you I'm probably paying three times and
• 30:09
  Speaker 3: YouTube for like Hulu, But nonetheless.
• 30:13
  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 30:17
  Speaker 2: weekdays at ten am Eastern on Apple card Play and
• 30:20
  Speaker 2: Android Auto with the Bloomberg Business. You can also listen
• 30:23
  Speaker 2: live on Amazon Alexa from our flagship New York station,
• 30:27
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• 30:31
  Speaker 5: Alex Steele, I'm Paul Sweeney. We're live here in our
• 30:33
  Speaker 5: Bloomberg Interactive Brokers studio. We're streaming live on that YouTube
• 30:36
  Speaker 5: things at overd YouTube dot com search Bloomberg Podcast. All right,
• 30:40
  Speaker 5: Nvidia after the close, it's AI.
• 30:43
  Speaker 8: I'm actually hosting a couple of panels on AI conference. Today,
• 30:46
  Speaker 8: I don't know.
• 30:47
  Speaker 3: And this is after or before the numbers come out,
• 30:49
  Speaker 3: And I was at four right at Oh, that's not stressful.
• 30:52
  Speaker 8: People going to be coming out.
• 30:53
  Speaker 5: So you know, I'm not even sure what my how
• 30:55
  Speaker 5: I feel about this whole thing. Anyway, Our next guest
• 30:57
  Speaker 5: has some thoughts there. Philipenera joints us. He's the founder,
• 30:59
  Speaker 5: former CEO the Boston Consulting Group. You're just up there
• 31:02
  Speaker 5: at a BCG event last year.
• 31:05
  Speaker 3: Last year you're giving me last year. I don't remember yesterday.
• 31:08
  Speaker 1: We were up there.
• 31:09
  Speaker 5: It was fun af there will we I can't remember,
• 31:11
  Speaker 5: all right, Philip, thanks so much for joining us here
• 31:13
  Speaker 5: in our studio. When you talk to your C suite clients,
• 31:17
  Speaker 5: how do you talk to them about AI?
• 31:18
  Speaker 8: How does a conversation typically go?
• 31:21
  Speaker 9: So from an AI perspective, it seems as though, you know,
• 31:24
  Speaker 9: only the hyper scale is truly understanding, which is why
• 31:28
  Speaker 9: Navidia has forty percent in a revenue. You know, with Mata, Microsoft,
• 31:32
  Speaker 9: Amazon and so on. It doesn't seem like it's fully
• 31:35
  Speaker 9: penetrated the four hundred and ninety five other corporate Fortune
• 31:39
  Speaker 9: five hundreds. And I always say this saying, you know,
• 31:42
  Speaker 9: it's like a beautiful Chinese poem. If you don't understand Chinese,
• 31:45
  Speaker 9: you don't know how beautiful the poem is, which means
• 31:47
  Speaker 9: they don't really understand the value of AI and the
• 31:50
  Speaker 9: type of productivity it actually can provide you.
• 31:53
  Speaker 3: So based on that, when we take a look at
• 31:56
  Speaker 3: whatever cycle AI chips may live in, how do we
• 32:00
  Speaker 3: know what that cycle looks like? Is it going to
• 32:02
  Speaker 3: be super fast? Is it super long? How do you
• 32:05
  Speaker 3: think about that?
• 32:06
  Speaker 9: Yeah, so I think we're barely in the first inning. Okay,
• 32:09
  Speaker 9: as you can see, if forty percent of the earnings
• 32:11
  Speaker 9: are with four or five companies, that leaves a lot
• 32:14
  Speaker 9: of room for growth. The problem is people don't understand
• 32:17
  Speaker 9: the use cases for AI and how that would actually
• 32:20
  Speaker 9: make things better. So I think a good benefit for
• 32:24
  Speaker 9: today is to actually talk about how you really could
• 32:27
  Speaker 9: apply AI. So when you talk about Nvidia, there's like
• 32:30
  Speaker 9: three drivers. There's the AI. There's also what people don't
• 32:34
  Speaker 9: talk about is the transition from Web two to Web
• 32:36
  Speaker 9: three and what that means in English is right now,
• 32:39
  Speaker 9: Web two is CPU driven. Web three is GPU driven,
• 32:43
  Speaker 9: which is three D. It's a more immersive technology. The
• 32:47
  Speaker 9: only way you drive that is through GPU chips, which
• 32:50
  Speaker 9: is what Nvidia has. And I'm not sure if you're aware,
• 32:53
  Speaker 9: but Morgan Stanley's, City Bank, Goldman Sachs have all given
• 32:56
  Speaker 9: an estimate of Web three being worth eight to twelve
• 33:00
  Speaker 9: trillion dollars and right now we're spending less than a trillion.
• 33:04
  Speaker 9: So my point is there's a massive growth, but there's
• 33:07
  Speaker 9: something also new that's come up, and I'm going to
• 33:09
  Speaker 9: talk about specific use cases for this. The Department of
• 33:12
  Speaker 9: Government Efficiency has just been put together by Musk and Vivek,
• 33:16
  Speaker 9: and what that will be is looking at how you
• 33:19
  Speaker 9: cut costs in the government. So if you want the
• 33:22
  Speaker 9: simplest way to cut costs, you actually digitize assets. What
• 33:26
  Speaker 9: does that mean in English? You basically create digital twins
• 33:29
  Speaker 9: of the buildings. The federal government has over three hundred
• 33:31
  Speaker 9: thousand buildings. You can digitize the building and by digitizing it,
• 33:36
  Speaker 9: you can actually run the building from your phone, and
• 33:39
  Speaker 9: that's how you drive AI. And once you create that
• 33:41
  Speaker 9: AI shell, you actually can start to drive the workflows
• 33:45
  Speaker 9: in it. So you can reinvent how the government manages buildings, infrastructure,
• 33:51
  Speaker 9: and also corporations.
• 33:54
  Speaker 5: I can't I can't depend upon my government to do
• 33:57
  Speaker 5: something like that, I mean, can they deliver the mail
• 33:59
  Speaker 5: on that?
• 34:00
  Speaker 9: Yeah, so with AI?
• 34:02
  Speaker 7: Maybe?
• 34:03
  Speaker 8: With AI maybe.
• 34:04
  Speaker 9: So if you think about in World War two they
• 34:06
  Speaker 9: had the Manhattan Project where Einstein pend message to Roosevelt
• 34:10
  Speaker 9: saying that the ways wars will be fought will be
• 34:13
  Speaker 9: different with atomic energy. Well, the way government will be
• 34:17
  Speaker 9: managed and the services provided will be with AI. And
• 34:22
  Speaker 9: so if they really want to say that's why the
• 34:23
  Speaker 9: Trump said that this is going to be Manhattan Project too.
• 34:26
  Speaker 9: If you really want to see how AI impacts the
• 34:29
  Speaker 9: government cut services as opposed to all the stupid redundant programs,
• 34:33
  Speaker 9: you can drive it through AI and Musk. You know,
• 34:36
  Speaker 9: he's the author of autonomous cars. So essentially, what does
• 34:39
  Speaker 9: that mean from a government perspective? You can have autonomous buildings,
• 34:44
  Speaker 9: you can have autonomous infrastructure, and eventually, as you already know,
• 34:48
  Speaker 9: the AI is already spreading to the military.
• 34:50
  Speaker 3: So what's autonomous building and infrastructure? What does that mean?
• 34:52
  Speaker 10: So?
• 34:52
  Speaker 9: Autonomous building is a cognitive building, which is a learning building,
• 34:56
  Speaker 9: which is basically it sees the patterns of what goes
• 34:59
  Speaker 9: on and as the resulted at it cuts the energy,
• 35:02
  Speaker 9: the waste, the air. In other words, it learns it
• 35:05
  Speaker 9: learns patterns. But in order to do that, you have
• 35:08
  Speaker 9: to create it from a digital perspective first, a digital twin.
• 35:11
  Speaker 9: So for your audience, a digital twin is nothing more
• 35:14
  Speaker 9: than a digital representation of the physical building. But what
• 35:18
  Speaker 9: you do is you put scanners on all the h facts,
• 35:21
  Speaker 9: the air, the waste, and you actually run the building
• 35:25
  Speaker 9: from the digital twin. And that's how all infrastructure should
• 35:29
  Speaker 9: be managed going forward. I've already had discussions. I don't
• 35:32
  Speaker 9: know if you're aware of this. The Biden administration appointed
• 35:35
  Speaker 9: AI heads for each of the major agencies and HUD
• 35:39
  Speaker 9: has you know whatever, three hundred thousand buildings, and I
• 35:42
  Speaker 9: had a discussion with the head of AI and the
• 35:46
  Speaker 9: CFO for that, and we discussed how we'd actually digitize
• 35:49
  Speaker 9: the assets and that if you want to talk about
• 35:52
  Speaker 9: how you actually drive costs down and run things more efficiently,
• 35:55
  Speaker 9: that's the way you do it. And guess who powers
• 35:57
  Speaker 9: all of that?
• 35:58
  Speaker 8: Who in video and video?
• 36:00
  Speaker 9: So my point is people keep on looking at like
• 36:02
  Speaker 9: the numbers and wondering these too expensive. What they don't
• 36:05
  Speaker 9: realize is right now the spending on Web three and
• 36:09
  Speaker 9: AI is less than a trillion, and it's scheduled to
• 36:11
  Speaker 9: go to ten ten trillion. So all the infrastructure in
• 36:14
  Speaker 9: the economy is going to move from Web two to
• 36:17
  Speaker 9: Web three. So what does that mean? There's nine trillion
• 36:20
  Speaker 9: dollars the left to spend and how do you power
• 36:22
  Speaker 9: it through? Nvidia?
• 36:24
  Speaker 5: Some investors really over the last several quarters or maybe
• 36:27
  Speaker 5: the last year, saying okay, I kind of have an
• 36:29
  Speaker 5: idea about the dollars that are being spent a billion,
• 36:32
  Speaker 5: maybe going to a trillion, maybe going to ten trillion.
• 36:36
  Speaker 5: I need to hear more about the return on investment,
• 36:38
  Speaker 5: and I think that's what some of the companies are
• 36:39
  Speaker 5: starting to get.
• 36:40
  Speaker 8: Questions a little bit more these days. How do you
• 36:42
  Speaker 8: answer that question.
• 36:43
  Speaker 9: Or how do you so I'm actually a practitioner. I
• 36:46
  Speaker 9: know most of the people come in here, they make
• 36:48
  Speaker 9: speeches and they write papers. I actually do the technology.
• 36:52
  Speaker 9: One thing that I actually did was actually built the
• 36:54
  Speaker 9: market surveillance system for the NASDAK. It reduced investigations from
• 36:58
  Speaker 9: four months to a minute. So if you want to
• 37:00
  Speaker 9: talk about how technology impacts productivity, there's your example. They
• 37:04
  Speaker 9: used to have around one thousand people in regulation when
• 37:07
  Speaker 9: they had less than they did only a couple of
• 37:09
  Speaker 9: hundred million in the mass there now they're doing billions. They
• 37:11
  Speaker 9: actually have less people now. So when you're talking about
• 37:14
  Speaker 9: an improvement from four months to a minute, that's the
• 37:16
  Speaker 9: impact of.
• 37:17
  Speaker 3: AI from an Nvidia story specifically, And I know you
• 37:20
  Speaker 3: say it's all powered by Nvidia. They also come out
• 37:23
  Speaker 3: with new chips a lot. So if I'm a customer,
• 37:27
  Speaker 3: why don't I just wait for the really good chip
• 37:29
  Speaker 3: that's going to come out in six months rather than
• 37:31
  Speaker 3: keep buying all the chips at the same time. Does
• 37:33
  Speaker 3: that make sense? It's like they're going so fast. They're
• 37:35
  Speaker 3: moving so fast, and they sort of trump themselves so much.
• 37:38
  Speaker 3: Do they eat their own lunch? Like, at what point
• 37:40
  Speaker 3: does that happen?
• 37:41
  Speaker 8: No?
• 37:41
  Speaker 9: I actually like exactly what they're doing. They've actually taken.
• 37:44
  Speaker 8: The Apple model, you.
• 37:46
  Speaker 9: Know, where Apple keeps on putting out a new phone
• 37:48
  Speaker 9: and it keeps on getting better and better. But not
• 37:51
  Speaker 9: to say anything against Apple, their improvements are way greater
• 37:54
  Speaker 9: than the iterations in the Apple phone. So if you
• 37:57
  Speaker 9: take and let's take an example, they have Hopper chip
• 38:00
  Speaker 9: that's the number one chip right now and it's being
• 38:02
  Speaker 9: replaced by Blackwell. If you look at the productivity of
• 38:07
  Speaker 9: a Blackwell chip, compared to HAPPA. It's four times the
• 38:10
  Speaker 9: amount for slightly more cost. So my point is they're
• 38:15
  Speaker 9: going to keep on producing things better and better and
• 38:17
  Speaker 9: for the hyper scale is frying them, Yeah, because I mean,
• 38:21
  Speaker 9: I'm sure you know about Sam Ultimately he made this
• 38:24
  Speaker 9: crazy statement he needed six trillion to build all these
• 38:26
  Speaker 9: data centers. There's actually some truth in that because all
• 38:30
  Speaker 9: the data centers are going to have to be built
• 38:32
  Speaker 9: to drive and run this. I know this thing came
• 38:34
  Speaker 9: up with the Nvidia Blackwell chip. You know they had
• 38:37
  Speaker 9: a cooling issue. That's because this is important for you guys.
• 38:40
  Speaker 8: Know that CPU.
• 38:41
  Speaker 9: We were in a CPU dominate environment, which is a
• 38:44
  Speaker 9: central processing unit, which is a single processing In order
• 38:47
  Speaker 9: to run AI, you need GPU. The data centers in
• 38:51
  Speaker 9: the US were set up for CPU because that was
• 38:54
  Speaker 9: the dominant thing. Now that we're going to have a
• 38:56
  Speaker 9: GPU dominated future, you're going to have to restructure those
• 39:00
  Speaker 9: data centers. But just so you're aware, it's not that complicated.
• 39:03
  Speaker 9: If you liquid cool the data center, which is what
• 39:05
  Speaker 9: Meta did, then those ships work fine.
• 39:09
  Speaker 8: Applications.
• 39:10
  Speaker 5: Are there certain industries, certain types of companies you think
• 39:12
  Speaker 5: will be at the forefront of really employing AI in
• 39:15
  Speaker 5: their business models, and if so, kind of.
• 39:17
  Speaker 8: Who do you think those might be?
• 39:19
  Speaker 9: Yeah, I mean I want to stick to the government example,
• 39:22
  Speaker 9: only because of the fact that that's in the news
• 39:24
  Speaker 9: and people want to know what the OGE is going
• 39:27
  Speaker 9: to be doing. I mean again, I go back to
• 39:30
  Speaker 9: the buildings. That's as simple as business case. A building
• 39:32
  Speaker 9: has energy costs, that has people who maintain it. Once
• 39:35
  Speaker 9: you build that digital twin of the building, you can
• 39:37
  Speaker 9: drive down the energy costs up to fifty percent and
• 39:40
  Speaker 9: reduce your manpower by fifty percent. But let's take another example.
• 39:44
  Speaker 9: Once you actually digitize that building, you can start producing
• 39:48
  Speaker 9: AI workflows. And I'll give you an example. Some embassies
• 39:51
  Speaker 9: have already started moving to this. I'm sure you've gone
• 39:53
  Speaker 9: to embassies. We have to physically stand the line and
• 39:55
  Speaker 9: give them all the information and it's a real pain.
• 39:58
  Speaker 9: In the future, there's already embass that are doing as
• 40:00
  Speaker 9: one Caribbean island, Barbados, has already started it. You can
• 40:03
  Speaker 9: actually go into the embassy through the metaverse and actually
• 40:08
  Speaker 9: do all your activities and services digitally. So my point
• 40:12
  Speaker 9: is all the government services are going to be moved
• 40:15
  Speaker 9: from physical to digital.
• 40:17
  Speaker 1: How long is that going to take. How long is
• 40:19
  Speaker 1: this transition?
• 40:21
  Speaker 9: The problem is this, and I want to be very
• 40:23
  Speaker 9: very straightforward with you. The reason why forty percent of
• 40:26
  Speaker 9: revenues are with those hypo scalers is they understand AI.
• 40:30
  Speaker 9: It's amazing, amazing. I talk to the top people at
• 40:34
  Speaker 9: the top firms. Consultants, the heads of technology don't even
• 40:38
  Speaker 9: understand AI. The CEOs of those other four hundred and
• 40:42
  Speaker 9: ninety firms don't understand AI. And the simplest example I
• 40:45
  Speaker 9: give them to the benefit is how we reduced inside
• 40:48
  Speaker 9: of trading from four months to a minute. And that's
• 40:50
  Speaker 9: the type of benefit they get. So they're very skeptical.
• 40:53
  Speaker 9: And just so you know, the US is in last place,
• 40:55
  Speaker 9: believe it or not, if you look at AI adoption.
• 40:58
  Speaker 9: We'll just take the simple building example. China already has
• 41:01
  Speaker 9: a lot of their stores that have been made digital
• 41:03
  Speaker 9: twins and they run them off their phone. I'm sure
• 41:06
  Speaker 9: you know China already has some autonomous cars, which your
• 41:09
  Speaker 9: driverless cars. So basically Asia is first an AI adoption.
• 41:13
  Speaker 9: Middle East the second, because Malisee wants to leap forward
• 41:16
  Speaker 9: SORDI raiders, particularly with the Neon project that you aware.
• 41:20
  Speaker 9: Europe is third, US is actually last interesting.
• 41:24
  Speaker 8: We could go on for this. Actually you can host
• 41:25
  Speaker 8: my panels.
• 41:26
  Speaker 3: There you go. Did you learn Sey write down?
• 41:28
  Speaker 7: Yeah?
• 41:28
  Speaker 8: I got speed.
• 41:29
  Speaker 5: Phil Pernaro, thanks so much for joining us. Fil Penaro
• 41:30
  Speaker 5: as a founder at former CEO of Boss Consulting Group.
• 41:33
  Speaker 8: Talking a little Technology, Talking a little AI.
• 41:36
  Speaker 2: Here you're listening to the Bloomberg Intelligence Podcast. Catch us
• 41:41
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• 41:45
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• 41:51
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• 41:56
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• 41:58
  Speaker 3: top news, business and I can and finance and politics.
• 42:01
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• 42:04
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• 42:06
  Speaker 3: around the world. We also tap our vast network of
• 42:08
  Speaker 3: Bloomberg reporters as well, and for that we're going to
• 42:11
  Speaker 3: go to Washington. Bloomberg Washington Senior correspondent Seleiah Molsen joins us. Now,
• 42:15
  Speaker 3: as we know, as time ticks towards President Trump picking
• 42:20
  Speaker 3: his Treasury secretary, who's on the list. Now do we
• 42:23
  Speaker 3: know the ranking? What's the state of play on the list?
• 42:27
  Speaker 12: Now? Alex are Scott Bessant, he's a hedge fund manager.
• 42:30
  Speaker 12: We have Mark Rowan of Apollo. We have Kevin worsh
• 42:34
  Speaker 12: the former Federal Reserve governor in the mix. And Bill Haggerty,
• 42:38
  Speaker 12: a senator. His name has also been mentioned. It's really
• 42:42
  Speaker 12: hard to know who's number one on that list, who's
• 42:45
  Speaker 12: a top contender. We know that the president wants someone
• 42:49
  Speaker 12: with Wall Street pedigree, like he did during his first
• 42:52
  Speaker 12: term when he had former Goldman Sachs banker Stephen Mnushan
• 42:57
  Speaker 12: as his Treasury secretary. And we also know that he
• 43:00
  Speaker 12: wants someone who is sort of full bore, is supportive
• 43:04
  Speaker 12: of Trump's tariff plans.
• 43:09
  Speaker 5: So is it a problem in and of itself, Selia
• 43:12
  Speaker 5: that Trump has not yet made a decision on the
• 43:15
  Speaker 5: Treasury secretary. Does that suggest that maybe there's some real
• 43:18
  Speaker 5: difference of opinion.
• 43:21
  Speaker 12: I think generally we you know, when we have a
• 43:24
  Speaker 12: change of power in the White House, we get a
• 43:26
  Speaker 12: pick before Thanksgiving, so we're kind of on track. Even
• 43:29
  Speaker 12: when Obama came in during in the midst of the
• 43:31
  Speaker 12: global financial crisis. Tim Geitner at the time was announced
• 43:35
  Speaker 12: mid to late November of that year. I think what
• 43:39
  Speaker 12: we're seeing is that the long term consequences here are
• 43:42
  Speaker 12: one it really will is showing how serious Trump is
• 43:47
  Speaker 12: about tariffs as a key tool of his trade policy,
• 43:51
  Speaker 12: and tariffs are one thing that have foreign allies, adversaries, investors,
• 43:56
  Speaker 12: everyone kind of wondering how is that going to play out.
• 44:00
  Speaker 3: So in terms of timing, we're we're on the same wavelength.
• 44:04
  Speaker 3: What do we think Elona Musk's role is in picking.
• 44:07
  Speaker 1: A Treasury secretary.
• 44:10
  Speaker 12: The only thing that we've heard from him on Treasury
• 44:12
  Speaker 12: was Saturday with his tweet. It was kind of a
• 44:15
  Speaker 12: big deal. He tweeted out and coming out in support
• 44:18
  Speaker 12: of Howard Lutnik, who has now been tapped as Commerce Secretary.
• 44:21
  Speaker 12: Lutnik was not a clear favorite among the Trump camp,
• 44:28
  Speaker 12: and he came out in support of Lutnik by saying
• 44:32
  Speaker 12: that while sanctions are going to be so important important,
• 44:35
  Speaker 12: that means you need a Treasure secretary who was willing
• 44:37
  Speaker 12: to blow things up, be a bit of a disruptor,
• 44:40
  Speaker 12: and that's Howard Lutnick. Since then, we have not heard
• 44:43
  Speaker 12: Musk talking or tweeting about it, and so I guess
• 44:47
  Speaker 12: you can read into that what you want to.
• 44:49
  Speaker 5: Sally, what's the thinking in DC about Senate confirmations of
• 44:54
  Speaker 5: some of the more I guess questionable or contested candidates
• 44:58
  Speaker 5: that President Trump has. I'm thinking Matt Gates and some others.
• 45:04
  Speaker 5: What's the Is there a feeling kind of growing down
• 45:06
  Speaker 5: there about how that will proceed?
• 45:08
  Speaker 12: Yeah, Paul, that's such a great question because I keep
• 45:10
  Speaker 12: thinking to myself that once Trump has chosen a Treasure secretary,
• 45:14
  Speaker 12: this person not only had to go through the last
• 45:16
  Speaker 12: ten days of rigmarole to get the job, possibly, but
• 45:19
  Speaker 12: also the real vetting work starts when you go through
• 45:22
  Speaker 12: the Senate confirmation process, which is your you know, all
• 45:24
  Speaker 12: your financial disclosures are made public. People are coming through
• 45:27
  Speaker 12: your information and your background, your family and your history,
• 45:30
  Speaker 12: and then you have a very public two hour long
• 45:33
  Speaker 12: grilling that anyone around the world can watch as you
• 45:35
  Speaker 12: interview with the Senate Finance Committee for this job. Yeah,
• 45:39
  Speaker 12: and everyone's talking about Matt Gates, whether that's really going
• 45:42
  Speaker 12: to be able to make it to the Senate. We
• 45:43
  Speaker 12: haven't heard a lot from John Thune, who is the
• 45:46
  Speaker 12: Republican senator who will be the Republican majority leader once
• 45:51
  Speaker 12: that session in Congress starts. I think that's where the
• 45:54
  Speaker 12: cues are going to come from. So far, he said
• 45:56
  Speaker 12: that a president should get to choose his own cabinet office,
• 46:01
  Speaker 12: but he does want a thorough vetting process.
• 46:03
  Speaker 3: And this goes to what Nathan dena Bloomberg Intelligence was
• 46:05
  Speaker 3: talking to us yesterday on radio in terms of the
• 46:08
  Speaker 3: populist versus Wall Street pick, And for most of the candidates,
• 46:10
  Speaker 3: it seems like it's going to be the populist pick
• 46:13
  Speaker 3: except when it comes to the money, and then maybe
• 46:15
  Speaker 3: it's more of a Wall Street type. Is that a
• 46:18
  Speaker 3: feel done in Washington?
• 46:21
  Speaker 11: You know?
• 46:22
  Speaker 12: I think one thing that we've realized here is that
• 46:24
  Speaker 12: economic populism is the policy of choice for both parties
• 46:29
  Speaker 12: here in Washington. Republicans and Democrats both favorite protectionism over
• 46:35
  Speaker 12: globalization right now, and so that shouldn't come as a
• 46:39
  Speaker 12: huge surprise. But I think kind of back to what
• 46:41
  Speaker 12: we've been talking about the reason that this fight maybe
• 46:44
  Speaker 12: has played out for so long is that there are
• 46:46
  Speaker 12: dueling forces here that if you are swearing an oath
• 46:50
  Speaker 12: to march forward with a plan to use terrace as
• 46:53
  Speaker 12: a strong tool of trade policy, that is somewhat at
• 46:57
  Speaker 12: odds with the way Wall Street minds tend to work.
• 47:01
  Speaker 8: So lay in addition to the Treasury Secretary, is what
• 47:04
  Speaker 8: else are we kind of waiting for of importance?
• 47:08
  Speaker 12: I mean, we've had a lot of the picks so far.
• 47:10
  Speaker 12: We have we don't have much of the Economic policy
• 47:12
  Speaker 12: team at all. We have Commerce Secretary, and that was interesting.
• 47:16
  Speaker 12: What Trump did was he made it so that Howard
• 47:19
  Speaker 12: Lutnik is Commerce Secretary and the US Trade Representative's office
• 47:23
  Speaker 12: reports to the Commerce Secretary, which is interesting because usually
• 47:27
  Speaker 12: the USTRH official is a member of the president's cabinet.
• 47:31
  Speaker 12: Now presidents do have sway, some say all to say
• 47:35
  Speaker 12: over which specific rule, which agency head is on a
• 47:39
  Speaker 12: member officially of his cabinet. We also are still waiting
• 47:42
  Speaker 12: for a pretty powerful, powerful position from the within the
• 47:45
  Speaker 12: White House. That's the National Economic Council Director. I mean,
• 47:49
  Speaker 12: I think people are they're such a big fight over
• 47:51
  Speaker 12: Treasury right now, we're forgetting how powerful that post can be,
• 47:55
  Speaker 12: and also OMB director and a couple of other jobs.
• 47:58
  Speaker 3: When we look at the transition, do we expect the
• 48:00
  Speaker 3: transition from January sixth to January twentieth to be smooth?
• 48:06
  Speaker 12: I think so, because right now Trump has a full mandate,
• 48:10
  Speaker 12: he won the electoral College, he won Republicans have all
• 48:13
  Speaker 12: of Congress, and he also won the popular vote. So
• 48:16
  Speaker 12: I don't know what would be the disruptive power there.
• 48:18
  Speaker 8: All right, Sally, thank you so much. We appreciate it. SLAYH.
• 48:21
  Speaker 5: Molsen, she's Washington senior correspondent for Bloomberg News from Washington.
• 48:25
  Speaker 5: T But I guess you have to ask that question
• 48:27
  Speaker 5: after what happened four years ago.
• 48:29
  Speaker 3: About well, well also just in terms of like will
• 48:32
  Speaker 3: the first lady meet with the first lady? Like will
• 48:35
  Speaker 3: the VP? You mean with the VP? Like will Advance
• 48:37
  Speaker 3: meet with Harris? Like is that happening? I don't know,
• 48:40
  Speaker 3: I mean, or does it matter in it as long
• 48:41
  Speaker 3: as well I.
• 48:42
  Speaker 8: Should expect it.
• 48:42
  Speaker 5: Yeah, yeah, I guess what we've seen so far is
• 48:45
  Speaker 5: President Biden did it welcome President elect Trump to the
• 48:48
  Speaker 5: White House right after the election.
• 48:50
  Speaker 8: So that did happen per protocol or per tradition.
• 48:53
  Speaker 5: I guess I don't believe Millennia Trump came on that visits.
• 48:58
  Speaker 3: Yeah, that's also is bidenpen Interestingly enough, you had Bridgewater
• 49:03
  Speaker 3: saying say that Trump's policies actually may push you as
• 49:05
  Speaker 3: inflation above that two percent target, which, if you game
• 49:08
  Speaker 3: that out in terms of who might lead the FED,
• 49:10
  Speaker 3: that I'll have to nominate a future FED chair who
• 49:13
  Speaker 3: might accommodate higher inflation and allow for rate cut. So
• 49:16
  Speaker 3: that's sort of their take on the longer term economic
• 49:19
  Speaker 3: policies from there.
• 49:21
  Speaker 2: This is the Bloomberg Intelligence Podcast, available on apples, Spotify,
• 49:26
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