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BI Weekend: Walmart Earnings, SailPoint IPO · Bloomberg Intelligence

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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Intelligence
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Speaker 1: with Alex Steel and Paul Sweeney.
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Speaker 2: The real app performance has been in US corporate high yield.
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Speaker 3: Are the companies lean enough? Have they trimmed all the facts?
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Speaker 1: Breaking market headlines and corporate news from across the globe.
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Speaker 3: Do investors like the M and A that we've seen?
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Speaker 4: These are two.
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Speaker 2: Big time blue chip companies.
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Speaker 3: Window between the peak and cunt changing super fast.
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Speaker 1: Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio.
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Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big
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Speaker 2: business stories impacting Wall Street.
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Speaker 5: And the global markets.
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Speaker 2: Each and every week we provide in depth research and
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Speaker 2: data on some of the two thousand companies and one
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Speaker 2: hundred and thirty industries.
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Speaker 5: Our analysts cover worldwide.
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Speaker 2: Today, we'll look at how one e commerce company is
0:56
Speaker 2: being impacted by a US China trade war, Plus what's
1:00
Speaker 2: guess why the retail giant Walmart forecasts a lower than
1:02
Speaker 2: expected profit for the full year. But first we begin
1:05
Speaker 2: with the auto sector. This week, shares a Rivian Automotive
1:08
Speaker 2: tumbled after the company warning it's poised for a first
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Speaker 2: ever decline in electric vehicle deliveries in twenty twenty five.
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Speaker 2: For more on this and the EV sector, guest host
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Speaker 2: Emily Griffey when I were joined by Steven men Bloomberg
1:19
Speaker 2: Intelligence Global Autos and Industrials research journalist. We first asked
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Speaker 2: Steve how the company is doing.
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Speaker 6: I think they execute it very well in the fourth
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Speaker 6: quarter and for the most part in twenty twenty four,
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Speaker 6: they actually had a gross profit in the fourth quarter,
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Speaker 6: first ever if you take out some of the non
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Speaker 6: cash items and if you take out credit, they still
1:42
Speaker 6: broke even as they promised. But the only thing is
1:46
Speaker 6: they've you know, they have huge operating leverage and improved costs,
1:49
Speaker 6: but you know, they just can't get enough volume through
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Speaker 6: the plants to really benefit from the cost cutting initiatives.
1:57
Speaker 7: And what do you attribute to that not being able
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Speaker 7: to to.
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Speaker 6: Do so, Yeah, you know, their guidance were were lower
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Speaker 6: than expected. Uh, there's some concerns about you know, Trump
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Speaker 6: Trump administration cutting the seventy five hundred EV tax credit
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Speaker 6: denting sales, so you know, and then the other thing
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Speaker 6: that you know they're planning to do is shut down
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Speaker 6: the plant for part of the fourth quarter to really
2:24
Speaker 6: uh you know, bring to bring on the R two,
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Speaker 6: a smaller a smaller.
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Speaker 8: Mid sized vehicle next year.
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Speaker 6: So there's some kind of top line headwind that's impacting.
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Speaker 6: But then again, look, you know they've done a really
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Speaker 6: good job you step back, They've gonna done a really
2:39
Speaker 6: good job in rationalizing their capacity, their costs. I think
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Speaker 6: it's just a matter of time that we're going to
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Speaker 6: see huge profit windfall for them when they get the
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Speaker 6: volume up.
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Speaker 2: So, Steve, what's the feeling in the in the EV
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Speaker 2: marketplace these days about where demand is is on a
3:00
Speaker 2: global scale.
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Speaker 5: Here for EV's.
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Speaker 8: It's still strong.
3:05
Speaker 6: Now we're actually predicting that EV sales will be up
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Speaker 6: single digits similar to last year. And then in twenty
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Speaker 6: twenty six, twenty twenty seven, I think that's when things
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Speaker 6: will improve. Like if the seventy five hundred dollars EV
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Speaker 6: tax credit goes away, there are a lot of new
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Speaker 6: affordable vehicles coming into the market, so I don't think
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Speaker 6: the consumer will need the seventy five hundred dollars. So
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Speaker 6: I think the man will improve, and I think we'll
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Speaker 6: have to wait until twenty twenty six and specifically Rivian.
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Speaker 8: We're very positive.
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Speaker 6: I think they are going to launch a new mid
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Speaker 6: sized vehicle that's gonna resonate well with the consumers.
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Speaker 7: What did you learn in Rivian's report about just how
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Speaker 7: the company is reacting to the prospect of terras.
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Speaker 6: It's something they can't control, obviously, but you know, I
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Speaker 6: think they were anticipating the seventy five hundred dollars going away.
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Speaker 6: They they don't expect that to continue forever, and that's
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Speaker 6: why they took that cost cutting initiative at the the
4:14
Speaker 6: middle of last year and really reduce costs by more
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Speaker 6: than thirty percent, and that that will allow them to
4:22
Speaker 6: actually have more flexibility on pricing. And the second thing
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Speaker 6: they're doing is they're you know, they understand what the
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Speaker 6: what the consumer wants, you know, they want a more
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Speaker 6: affordable vehicle, and that's why they're going to launch the
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Speaker 6: R two in early twenty twenty six or late twenty
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Speaker 6: twenty five.
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Speaker 8: So they've anticipated that.
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Speaker 2: Steve, we can't talk to you without talking about Tesla.
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Speaker 2: You know, it's off about the fifteen percent year to date,
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Speaker 2: but it's you know, almost seventy five percent, little more
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Speaker 2: than seventy five percent or the trilliing twelve months. It's
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Speaker 2: kind of the typical volatility that we're I guess used
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Speaker 2: to with Tesla.
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Speaker 5: Here, what's the feeling out there today?
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Speaker 2: Is Elon Musk a net positive or or maybe even
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Speaker 2: a little bit of a net negative for this stock
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Speaker 2: right now?
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Speaker 6: I think I think the concern is really some of
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Speaker 6: the sales that's been pretty weak in the US and
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Speaker 6: as well as in Europe, and I think the rhetoric
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Speaker 6: and there's you know, there's news out there, there's surveys
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Speaker 6: out there saying that you know, Elon Musk is having
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Speaker 6: an impact, you know, his involvements with with Doge. But
5:24
Speaker 6: at the end of the day, you know, if I
5:26
Speaker 6: step back and look at you know, the product rollout,
5:30
Speaker 6: the product rollouts that they're coming up with this year
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Speaker 6: with a new model why, I think that you know,
5:36
Speaker 6: the model why rollout is having some impact on current
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Speaker 6: sales because customers are actually waiting for.
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Speaker 8: The new vehicle.
5:44
Speaker 6: And also there's an affordable model also from Tesla coming
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Speaker 6: out later this year. I think, you know, it's gonna
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Speaker 6: be a you know, a slower year for Tesla in
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Speaker 6: terms of sales. But I think in the second half
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Speaker 6: and in the fourth quarter it will definitely pick back up.
6:01
Speaker 6: There's already signs of, you know, strong demand for the
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Speaker 6: Model Y. If you look at China, they start delivering
6:09
Speaker 6: the new Model Y and and you know, and consumers
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Speaker 6: are really liking that vehicle.
6:13
Speaker 7: Right now, I have to ask about the cyber truck. Anecdotally,
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Speaker 7: I've seen this vehicle everywhere on the streets of New
6:20
Speaker 7: York City. But I'm not sure if like I'm just
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Speaker 7: noticing it more, but what are the sales looking like
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Speaker 7: for the cyber truck.
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Speaker 6: The cyber truck is It's not going to be like
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Speaker 6: a high volume vehicle like the Model Wi or three.
6:33
Speaker 6: It's still a niche market. I think it helps Tesla
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Speaker 6: build the brand as a high tech company. It doesn't
6:43
Speaker 6: resonate with everyone, but it does resonate with a large
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Speaker 6: group of consumer that I do believe that Tesla has
6:53
Speaker 6: the technology, the manufacturing technology and the vehicle technology. Autonomy
6:58
Speaker 6: of technology are thanks to Steve Man, Bloomberg Intelligence, Global
7:01
Speaker 6: autos and Industrials research analyst. We move next to the
7:04
Speaker 6: enterprise security software company sale Point Technologies. Toma Bravo backed
7:09
Speaker 6: sale Point recently completed its initial public offering on the
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Speaker 6: NASDAQ sale Point Race one point three eight billion dollars
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Speaker 6: in its debut, and this marked the first major tech IPO.
7:19
Speaker 5: Of the year.
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Speaker 2: For More, co host Alex Steele and guest host Norma
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Speaker 2: Linda were joined by Mark McLain, CEO of sale Point Technologies.
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Speaker 2: Mark's first asked whether sale Points IPO meshes well with
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Speaker 2: the company's long term vision.
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Speaker 9: Well, I think in general, we've tried to stay focused
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Speaker 9: as a business on building great business with our customers
7:38
Speaker 9: and winning in the market. In some ways, what happens
7:40
Speaker 9: in the financial ownership of the business matters a lot,
7:42
Speaker 9: but it doesn't actually affect our day to day lives,
7:44
Speaker 9: if you will. In finding and securing customers and making
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Speaker 9: them successful, that's certainly always our focus. We do think though,
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Speaker 9: that the IPO gets us back out in the public.
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Speaker 10: Eye a little more.
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Speaker 9: The importance of what we do and what's called identity
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Speaker 9: security is raising an awareness and important to the large
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Speaker 9: companies all around the world that we typically serve, and
8:03
Speaker 9: this will help with our visibility, it'll give us future
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Speaker 9: fuel to grow the business. We've had a great run
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Speaker 9: as a private company with Tomo Bravo.
8:10
Speaker 10: Some folks know this.
8:11
Speaker 9: We were public before and before that we were runed
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Speaker 9: by Toma Bravo. It's a little bit of an interesting
8:16
Speaker 9: story of a PE backed IPO, same PE backed IPO again.
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Speaker 9: But all the while, our focus continues to be on
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Speaker 9: doing great things for our customers and helping them secure
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Speaker 9: their enterprises with identity Well.
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Speaker 11: Cyber threats have continued to increase. How does sale Points
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Speaker 11: stay ahead in identity security?
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Speaker 9: Yeah, what's happened in the world of cybersecurity. There's a
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Speaker 9: lot of shifting things in the landscape. A simple metaphor
8:40
Speaker 9: that sometimes helps folks is that the.
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Speaker 10: Bad actors are the attackers.
8:43
Speaker 9: Not so long ago, their metaphor was to break the
8:45
Speaker 9: glass and grab the jewels and run. Quite often now,
8:48
Speaker 9: and we've seen this in breach reports, they'll try to
8:50
Speaker 9: sneak in the back of the jewelry store, poses an
8:53
Speaker 9: employee and eventually try to quote clean out the jewelry store.
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Speaker 9: And that's because they've been able to impersonate, so to speak,
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Speaker 9: an employee, and that's a comp reized identity. What we
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Speaker 9: do is help businesses, typically mid to large enterprises around
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Speaker 9: the world, focus on understanding all the identities they have,
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Speaker 9: both human and non human, all the data they care
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Speaker 9: about protecting and making sure that at any point in time,
9:14
Speaker 9: all of those connections are secure. It's a pretty complex
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Speaker 9: problem at scale.
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Speaker 3: Who are your competitors right now and how can you
9:20
Speaker 3: help differentiate?
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Speaker 9: Yeah, the truth is we've got more I like to
9:25
Speaker 9: call them PowerPoint competitors than real competitors.
9:27
Speaker 10: I mean, there's folks that are.
9:28
Speaker 9: Talking about this space quite a bit, but if you
9:30
Speaker 9: look at what happens day to day when we're out
9:32
Speaker 9: in the market, there's very few companies that are capable
9:34
Speaker 9: of delivering the success at scale that we have. We're
9:37
Speaker 9: fortunate to be in almost half of the Fortune five hundred,
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Speaker 9: about a quarter of the Fortune two thousand, and they're
9:43
Speaker 9: generally throwing out older legacy products like from Oracle and IBM.
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Speaker 9: There really hasn't been a strong challenger to us in
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Speaker 9: this key space, and that's part of what I think
9:52
Speaker 9: has gotten investors excited about our potential for long term,
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Speaker 9: durable growth.
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Speaker 11: So another thing that's been in conversation, I'm curious, how
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Speaker 11: are you all planning to address your debt load?
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Speaker 9: Well, you know, one of the key use of proceeds
10:04
Speaker 9: will be to pay down a lot of the debt.
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Speaker 9: We actually had a little more debt about six months ago.
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Speaker 9: Our backers Home of Bravo chose to take some of
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Speaker 9: that debt out with equity before the IPO, and we'll
10:14
Speaker 9: use the bulk of the proceeds from the IPO to
10:15
Speaker 9: pay that debt down significantly, putting ourselves in what they
10:18
Speaker 9: call it debt zero, meaning we'll have as as much
10:21
Speaker 9: more cash as we have debt, which from a financial
10:24
Speaker 9: profile standpoint makes investors really happy.
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Speaker 3: Why do you guys decide to do the IPO?
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Speaker 2: Now?
10:28
Speaker 3: We were just talking about IPOs in general, and I
10:30
Speaker 3: was talking about an LNG export that went public at
10:34
Speaker 3: seemingly a great time and it didn't go so well.
10:37
Speaker 3: So I wonder why strategically you guys chose right now.
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Speaker 9: Well, we've been watching markets as everyone has, and I
10:43
Speaker 9: think we were really pleased with the progress of the business.
10:46
Speaker 10: We went private about two and a half years ago.
10:48
Speaker 9: As part of our S one finaling, we talked about
10:50
Speaker 9: the fact that as of our third quarter last year,
10:51
Speaker 9: we'd grown the business at thirty percent. We've been able
10:54
Speaker 9: to deliver non gap margins of about fourteen percent, and
10:57
Speaker 9: had a strong sense that durable growth we can, and
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Speaker 9: that was at scale. We're over an eight hundred million
11:02
Speaker 9: dollars revenue business now and investors don't see a lot
11:05
Speaker 9: of profiles of growth at scale with profit. And I
11:08
Speaker 9: think our sense was that the markets were kind of hungry,
11:10
Speaker 9: so to speak, for new issuances, particularly I think in
11:13
Speaker 9: technology security has been considered a.
11:16
Speaker 10: Really good market for a long time.
11:17
Speaker 9: I think we looked like a company that would fit
11:20
Speaker 9: many of their requests, so to speak, for a durable
11:23
Speaker 9: growth company in the security space.
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Speaker 11: How are regulatory shifts driving demand for identity security solutions
11:30
Speaker 11: as enterprises continue shifting to the cloud? How a sale
11:32
Speaker 11: point evolving its offerings?
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Speaker 9: Well, it's interesting you mentioned that regulatory is indeed part
11:38
Speaker 9: of the landscape we're addressing. Sometimes, you know, audits or
11:40
Speaker 9: the threat of failed audits or not being able to
11:42
Speaker 9: comply with regulations is a driver. But increasingly our space
11:46
Speaker 9: is less about that. Not it hasn't moved away from that,
11:49
Speaker 9: but it's less about that than truly securing their data. Again,
11:53
Speaker 9: what's happened is this concern that data can be compromised
11:56
Speaker 9: through this lens of identity, if a bad actor can somehow,
11:59
Speaker 9: you know, get in, break in, steal an identity, or
12:03
Speaker 9: in some way get access to data through those identities,
12:06
Speaker 9: they can do a lot of damage. So that focus
12:09
Speaker 9: on truly protecting the data is really more of an
12:11
Speaker 9: issue today than just regulatory compliance.
12:13
Speaker 3: What's it like attracting talent right now in the market, Well, i'd.
12:18
Speaker 9: Attracting talent is never easy in a very competitive technology market.
12:21
Speaker 9: I think we're very fortunate at sale Point. One of
12:24
Speaker 9: the things that we pay a lot of attention to
12:26
Speaker 9: is our culture and our values and how that shows up.
12:29
Speaker 9: And as you probably are familiar, a glass Door runs
12:31
Speaker 9: around and surveys the world and tries to understand how
12:34
Speaker 9: companies are doing. We're super pleased they released those results recently.
12:37
Speaker 9: We were number seventeen in the world, and if you
12:40
Speaker 9: want to cut it by an interesting factor, we were
12:42
Speaker 9: the highest ranked tech company with under five thousand employees
12:46
Speaker 9: on glass Door. I think that speaks a lot about
12:48
Speaker 9: the kind of culture and the values we live out
12:50
Speaker 9: in our company. It attracts and retains very good talent,
12:53
Speaker 9: and we're very fortunate.
12:55
Speaker 2: Our thanks to Mark McClain, CEO of sale Point Technologies.
12:58
Speaker 2: Coming up, we'll look at how banks are nancing for
13:00
Speaker 2: the energy transition.
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13:32
Speaker 2: This week we focused on a Bloomberg Big Takes story
13:35
Speaker 2: entitled tem News Rise was aided by Trump? Now he
13:38
Speaker 2: poses a major threat. You can find it on Bloomberg
13:41
Speaker 2: dot Com and The Terminal. The story looks at the
13:44
Speaker 2: online marketplace Temu, operated by the Chinese e commerce company
13:47
Speaker 2: p d D Holdings, and it talks about the obstacles
13:50
Speaker 2: TU faces from US China trade war.
13:54
Speaker 5: For more, guest hosts Matt Miller and I.
13:55
Speaker 2: Were joined by Spencer Soper, Bloomberg News Technology and e
13:58
Speaker 2: Commerce reporter First ass Spencer to tell us about Timu
14:02
Speaker 2: and how it may be impacted by a China US
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Speaker 2: trade war.
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Speaker 4: Basically, this is an online marketplace full of discounts. It's
14:10
Speaker 4: kind of like a dollar tree in your phone. You
14:13
Speaker 4: can find all kinds of products. And the big differentiator
14:16
Speaker 4: here is that they're just really really cheap in terms
14:19
Speaker 4: of prices, oftentimes like half as much as say like
14:23
Speaker 4: Amazon or Walmart, or even even less than that. It's,
14:27
Speaker 4: you know, kind of sprang onto the scene in twenty
14:30
Speaker 4: twenty two, and it really capitalized on this deminimous loophole,
14:35
Speaker 4: which is basically a tariff loophole that originated in the
14:40
Speaker 4: nineteen thirties, and it's it's mainly for like travelers coming
14:43
Speaker 4: back with gifts and their suitcases and that sort of thing,
14:47
Speaker 4: so they don't have to get bogged down and paying
14:49
Speaker 4: tariffs and duties. But as e commerce emerged and cross
14:52
Speaker 4: border e commerce emerged, it became a way to ship
14:56
Speaker 4: products directly from like factories in China to shpe in
15:00
Speaker 4: the US without paying tariffs and duties, which has helped
15:04
Speaker 4: them beat some prices from US retailers.
15:07
Speaker 12: I love the way your story starts out, which is
15:11
Speaker 12: in a town that I'm not going to try and pronounce,
15:14
Speaker 12: but a Chinese town that's twice the size of Chicago
15:17
Speaker 12: with a lot of blade manufacturers. I actually looked on
15:20
Speaker 12: the Timu dot com website and the first thing I
15:24
Speaker 12: see is a sharp sword, a stainless steel sword for
15:28
Speaker 12: four dollars and seventy five cents and a nail cliper.
15:31
Speaker 4: Probably says that probably says more about you because of
15:34
Speaker 4: their algorithm than it does about FEMO.
15:36
Speaker 12: Well, I'm looking to be fair, I'm using the Bloomberg
15:40
Speaker 12: Radio Studio computer.
15:41
Speaker 5: I haven't logged on myself.
15:42
Speaker 12: But if they also have a nail clipper manicure set
15:45
Speaker 12: for a dollar eighty six which has twenty three different
15:49
Speaker 12: tools in it, so what a price. But you talk
15:52
Speaker 12: to a guy in China who has a clipper company, right,
15:56
Speaker 12: and he said he saw an opportunity during COVID. He
16:00
Speaker 12: used to manufacture and probably still does products for other brands,
16:06
Speaker 12: but now he's selling direct to consumer with this.
16:10
Speaker 4: Yeah, and that's the big thing is that the Chinese
16:13
Speaker 4: factories are really looking to diversify on you know where
16:17
Speaker 4: they sell, uh, and so this this factory in particular, Yeah,
16:21
Speaker 4: they made a lot of these components that were used
16:24
Speaker 4: in name brand raizors like Wall or Remington. Those sorts
16:28
Speaker 4: of things, and then they realized, you know what, we
16:30
Speaker 4: could actually sell direct to consumer, especially during the pandemic
16:33
Speaker 4: when people were giving themselves haircuts at home and getting
16:36
Speaker 4: pets and they need to give it, you know, groom
16:38
Speaker 4: the pets. So it basically gave life to this uh uh,
16:43
Speaker 4: you know, direct to consumer push for this company. And
16:46
Speaker 4: they had tried Amazon and they found that team who
16:49
Speaker 4: was just a lot a lot simpler for them in
16:51
Speaker 4: the sense that they weren't, you know, fighting for every
16:55
Speaker 4: sale on Amazon and paying for all the advertising and
16:58
Speaker 4: you know, you you really have to run a sophisticated
17:02
Speaker 4: business to sell on Amazon. And they found it a
17:04
Speaker 4: lot easier on Temu and Sense where they could just
17:07
Speaker 4: send the blades to Timu and tim who took care
17:09
Speaker 4: of everything.
17:10
Speaker 2: So what's the fate or the expected fate of this
17:13
Speaker 2: international tax exemption, this loophole, this eight hundred dollars loophole,
17:16
Speaker 2: because that seems a central strategy for TEAMU in terms
17:21
Speaker 2: of undercutting Amazon and pretty much everybody else.
17:25
Speaker 4: That's the million dollar question right now. I mean, it's
17:27
Speaker 4: not the only Evantage team who has it's certainly one
17:30
Speaker 4: of them, and it certainly helped them be a differentiator,
17:33
Speaker 4: and we're still not exactly sure what's going to happen.
17:36
Speaker 4: You know, Trump made this mandate to eliminate the loophole,
17:39
Speaker 4: but then backpedaled on it. You know, they have to
17:42
Speaker 4: figure out exactly how this is going to work. And
17:44
Speaker 4: once we know exactly how it's going to work, then
17:47
Speaker 4: businesses are going to look for potentially other loopholes or
17:49
Speaker 4: that sort of thing. So all of this stuff is
17:51
Speaker 4: still shaking out. The bottom line is you could see
17:54
Speaker 4: consumers take some price increases, you could see factories taking
17:58
Speaker 4: a little bit less to try to share in the pain,
18:01
Speaker 4: retailers cutting their profit margin. So generally, when these kind
18:05
Speaker 4: of things hit, it's not like a one size fits
18:09
Speaker 4: all solution. We'll see this. We'll see the pain of
18:12
Speaker 4: any of these tariffs supply differently, you know, throughout throughout
18:15
Speaker 4: all the players, depending on the position of strength that
18:17
Speaker 4: they're in.
18:18
Speaker 12: I mean, in reporting on this story, Spencer, did you
18:20
Speaker 12: note that many of Amazon's products are made in China
18:24
Speaker 12: as well. In fact, when I look through Amazon for
18:28
Speaker 12: any specific goods, I tend to notice a lot of
18:32
Speaker 12: brand names that I've never heard of or can't pronounce.
18:35
Speaker 12: A lot of times they are just a bunch of
18:36
Speaker 12: consonants thrown together.
18:38
Speaker 5: And those products are all made in China.
18:41
Speaker 12: So Jeff Bezos or you know, the other shareholders he
18:45
Speaker 12: only owns nine percent now, are also going to fall
18:50
Speaker 12: victim to this tax if if it's enacted.
18:55
Speaker 4: Yeah. What the difference here is Misson wants to offer
19:00
Speaker 4: you quick delivery. So oftentimes what you buy on Amazon
19:03
Speaker 4: is already in a warehouse in the US, meaning it
19:06
Speaker 4: was you know, put on a big cargo container shipped
19:09
Speaker 4: into to a US port, and the value of that
19:12
Speaker 4: cargo container was above this demnimous loophole, so they paid
19:15
Speaker 4: the tariff on those goods. The difference here is it's
19:18
Speaker 4: being you know, packed in China to be shipped directly
19:22
Speaker 4: to you, in which case, uh, you know, that individual
19:25
Speaker 4: item is coming in under this eight hundred dollars de
19:28
Speaker 4: minimous threshold, in which case no tariff supply. So that's
19:31
Speaker 4: the big that's the big differentiator. I mean, so much
19:35
Speaker 4: stuff is made in China, whether you buy it in
19:36
Speaker 4: a store, on Amazon or whatever. The the you know,
19:39
Speaker 4: source of a lot of these goods is still the same.
19:41
Speaker 4: It's just a matter of the of the you know
19:43
Speaker 4: how how it navigates into the US, all right?
19:46
Speaker 2: Thanks to Spenser Sober, Bloomberg News Technology and e Commerce Reporter.
19:50
Speaker 5: Each week we look at research from Bloomberg n EF.
19:54
Speaker 5: They're the team at.
19:54
Speaker 2: Bloomberg that tracks and analyzes the energy transition from commodities
19:58
Speaker 2: to power, transport, industries, buildings, and agricultural sectors. This week
20:03
Speaker 2: we look at how banks are currently financing the energy
20:06
Speaker 2: transition for more. We were joined by Trina White, Bloomberg
20:09
Speaker 2: b n e F Sustainable finance analyst. First ask Trina
20:12
Speaker 2: how she looks at banks and how they finance energy projects.
20:16
Speaker 13: So I focus on what's called our energy supplied banking ratios,
20:20
Speaker 13: and that's where we put bank financing for traditional energy supplies,
20:24
Speaker 13: so for fossil fuels things like yeah, coal, oil and
20:27
Speaker 13: gas into the context of what they're doing on sort
20:30
Speaker 13: of the newer energy and the cleaner energy side, so
20:34
Speaker 13: low carbon technologies like wind, solar, batteries, hydro, et cetera.
20:39
Speaker 13: So we take and nuclear, Yes, nuclear, we would consider
20:42
Speaker 13: it to be low carbon as well, and so that
20:44
Speaker 13: would be in the numerator and then we put that
20:46
Speaker 13: into the context of their continued support for fossil fuels
20:49
Speaker 13: and the denominator. And we're looking at this across both
20:53
Speaker 13: you know, a global average and then also for individual institutions,
20:57
Speaker 13: and of course that differs significantly by individol bank and
21:00
Speaker 13: the market that they're operating.
21:01
Speaker 12: So tell me about the change in sentiment that we've seen.
21:05
Speaker 12: Because last uh, in the last administration a few years ago,
21:11
Speaker 12: when we were watching Senate hearings of any kind with
21:15
Speaker 12: bank CEOs, the Democrats especially would gang up on these
21:20
Speaker 12: bankers and say, how can you finance fossil fuels? You know,
21:24
Speaker 12: almost as if it was somehow illegal to finance the
21:28
Speaker 12: operations of oil and gas companies. Now, it seems with
21:31
Speaker 12: this new administration like you're gonna see the exact opposite happen.
21:35
Speaker 12: Right as we see banks pull back from for example, DEI.
21:38
Speaker 12: There's a great story in the Bloemberg terminal about that.
21:41
Speaker 12: I wonder if we're gonna see banks also pull back
21:43
Speaker 12: on funding of solar and wind and other renewables.
21:50
Speaker 13: So when Wynn was boring, you know, in the opposite direction,
21:54
Speaker 13: and it was you know, very favorable both here in
21:57
Speaker 13: the US and internationally for banks to make these you know,
22:00
Speaker 13: really strong commitments to climate. We saw these climate alliances
22:04
Speaker 13: for financial institutions take off. So in twenty twenty one,
22:07
Speaker 13: we saw all the major banks sign up to the
22:10
Speaker 13: Net Zero Banking Alliance and sign on to reduce their
22:13
Speaker 13: emissions in line with one point five degrees their financed emissions.
22:18
Speaker 13: We've actually now seen all of the major US banks,
22:21
Speaker 13: Canadian banks, and a couple of other international banks pull
22:24
Speaker 13: out of the Net Zero Banking Alliance in just the
22:26
Speaker 13: past few months, and that's in direct response to the
22:30
Speaker 13: sort of switch in political pressure. None of these banks
22:34
Speaker 13: have actually you know, pulled back their internal commitments and
22:39
Speaker 13: particularly their sustainable financing commitments. So while they may see
22:43
Speaker 13: it very very difficult to decrease their financed emissions and
22:47
Speaker 13: their support for fossil fuels when you know the administration
22:51
Speaker 13: is pushing a drill baby, drill agenda, none of these
22:56
Speaker 13: banks want to, you know, stop supporting what they still
23:00
Speaker 13: of you as the future, which is these low carbon technologies.
23:02
Speaker 13: And so if it is profitable, if the returns are there,
23:06
Speaker 13: they're still going to be financing when they're still going
23:08
Speaker 13: to be financing solar. But that key question remains here
23:11
Speaker 13: in the US is you know, will the tax incentives
23:15
Speaker 13: that made some of these projects profitable, Will they remain
23:19
Speaker 13: in an administration that's not prioritizing it.
23:22
Speaker 2: What banks are doing well, maybe which banks are kind
23:24
Speaker 2: of lagging.
23:25
Speaker 13: Yeah, So a lot of the banks in Europe have
23:28
Speaker 13: really high ratios for all the reasons we might expect
23:30
Speaker 13: a favorable policy environment for renewables. They're not oil and
23:34
Speaker 13: gas exporting countries. So BNP Pariba had a ratio of
23:37
Speaker 13: more than three times as much low carbon financing as
23:40
Speaker 13: fossil fuels. That's actually up from one point four in
23:43
Speaker 13: twenty twenty two, and so they've more than doubled their ratio,
23:47
Speaker 13: and they did that primarily by shrinking their support for
23:49
Speaker 13: fossil fuels. So they said, we're not underwriting bonds for
23:53
Speaker 13: oil and gas expanders anymore. That is a pretty European
23:58
Speaker 13: specific strategy. That's not going to work for a Canadian bank.
24:01
Speaker 13: It's not going to work for a US bank. Among
24:04
Speaker 13: the US players, the highest ratio is about one point
24:07
Speaker 13: zero four. So Bank of America financed about equal parts
24:11
Speaker 13: low carbon solutions and fossil fuels, and that's primarily in
24:15
Speaker 13: part because of their long standing participation in the labeled
24:19
Speaker 13: debt markets, so underwriting green bonds or green loans.
24:24
Speaker 5: I wonder about specifically the finances to support a nuclear
24:30
Speaker 5: kind of revitalization.
24:32
Speaker 12: I always think it's an exciting story because of the
24:35
Speaker 12: vast amount of power it could provide, But it seems
24:39
Speaker 12: like a moonshot in terms of how much it would
24:41
Speaker 12: cost to build actually build nuclear plants, and how long
24:45
Speaker 12: it takes, how much regulation red tape.
24:47
Speaker 8: There is around it.
24:48
Speaker 5: I mean, we saw I think one plant open in.
24:50
Speaker 13: Georgia and three Mile Island and three.
24:52
Speaker 12: Miland is going to come back on, right, But it
24:54
Speaker 12: just takes so much money and time to get these
24:57
Speaker 12: things going.
24:58
Speaker 13: Yeah, that's absolutely right. I mean it is, you know,
25:02
Speaker 13: great that nuclear is sort of comparable in what it
25:04
Speaker 13: can power to cold right baseload and sort of dispatchable
25:09
Speaker 13: and and and cheap once it you know, once it's
25:12
Speaker 13: actually generating, it's just bids into the market and about
25:14
Speaker 13: zero but very very expensive upfront, very expensive, a lot
25:18
Speaker 13: of political capital, a lot of time actually a lot
25:21
Speaker 13: of the sort of intermittent renewables are much easier to build,
25:25
Speaker 13: much much easier overall to build solar and wind. But
25:28
Speaker 13: then we run into you know interconnection problems, so and
25:32
Speaker 13: intermittency issues where you need you know, battery storage to
25:35
Speaker 13: make up the gaps. So there's always straight offs to
25:37
Speaker 13: different types of energy. I think nuclear would be fantastic,
25:41
Speaker 13: but you know, wind and solar are probably what BDF
25:44
Speaker 13: projects to be kind of the majority of this low
25:47
Speaker 13: carbon solution.
25:48
Speaker 2: Our thanks to Trina White, Bloomberg b n e F
25:51
Speaker 2: Sustainable Finance analyst. Coming up on the program, a conversation
25:54
Speaker 2: with the founder and CEO of Token Metrics.
25:57
Speaker 5: On the crypto space. You're listening to.
25:59
Speaker 2: Bloom Burg Intelligence on Bloomberg Radio, providing in research and
26:03
Speaker 2: data on two thousand companies and one hundred and thirty industries.
26:05
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26:08
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26:17
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26:21
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26:35
Speaker 2: Move next to the retail giant Walmart. This week Walmart
26:37
Speaker 2: forecast a lower than expected profit for the full year.
26:40
Speaker 2: This suggests that the uncertain economic environment is hitting even
26:43
Speaker 2: the world's largest retailer. For more, guest hosts Emily Grafe
26:46
Speaker 2: and I were joined by Emily Cohne, Bloomberg Consumer team Leader.
26:49
Speaker 2: We first asked Emily for her take on the latest
26:52
Speaker 2: at Walmart.
26:53
Speaker 14: This was a consistent guidance in line with what they
26:56
Speaker 14: laid out last year for the full year as well,
26:59
Speaker 14: but signaled that the you know, the world's largest retailer, Walmart,
27:05
Speaker 14: isn't immune to the risks that are out there for
27:08
Speaker 14: the broader economic environment. Granted, Walmart has historically given conservative
27:14
Speaker 14: outlook to start the year off, but this definitely showed,
27:19
Speaker 14: you know, and they they used the word uncertain. I
27:22
Speaker 14: haven't checked, but a number of times on their analysts call.
27:27
Speaker 14: That was sort of like the theme of the call.
27:29
Speaker 7: What else did they say for this, I guess we
27:33
Speaker 7: could call it, yeah, conservative or negative outlook? Did they
27:37
Speaker 7: mention it's because consumers are pulling back, people are looking
27:41
Speaker 7: for bargains. I guess, like, what did we learn about
27:43
Speaker 7: the consumer in this report?
27:46
Speaker 14: Yeah, it wasn't it wasn't negative. It was it was
27:49
Speaker 14: in line with what they offered last year three to
27:51
Speaker 14: four percent growth. But I think, you know, and I
27:55
Speaker 14: think that's taking into account near term investments. So they
27:59
Speaker 14: mentioned things is like consumer trends and near term investments
28:04
Speaker 14: like the cost of the acquisition of the smart TV
28:06
Speaker 14: maker Visio. We're still seeing those costs take a hit
28:11
Speaker 14: on the bottom line. But yeah, they said they haven't
28:13
Speaker 14: incorporated yet the risk of tariffs into their guidance. We
28:17
Speaker 14: also saw US retail sales dip in January and core
28:20
Speaker 14: inflation pick up, So I think those are those are
28:24
Speaker 14: all things that are weighing on retailers, and Walmart certainly
28:28
Speaker 14: isn't immune.
28:30
Speaker 2: How about on the tariff front, I mean they uh
28:33
Speaker 2: am looking at your bloombergers right up here, talk about tariffs.
28:38
Speaker 2: Walmart imports food from Mexico and general merchandise products like
28:41
Speaker 2: microwaves in China. What are they saying about tariffs? Is
28:45
Speaker 2: that incorporated in their guidance.
28:46
Speaker 14: They said they have not incorporated tariffs into their guidance before.
28:51
Speaker 14: Tariffs aren't new for a company like Walmart. Obviously, we
28:54
Speaker 14: saw import tariffs, you know, during the last Trump administration.
29:01
Speaker 14: But they're doing what we've seen most companies do so
29:04
Speaker 14: far this year, which is say it's uncertain, we're not
29:07
Speaker 14: sure what's going to happen, and we're not incorporating tariffs
29:11
Speaker 14: into our guidance yet. But yeah, I mean, food prices
29:15
Speaker 14: were up for them. General merchandising prices I think came
29:20
Speaker 14: down a little bit.
29:22
Speaker 7: I actually learned something new about Walmart, and that's that
29:24
Speaker 7: you can buy a pre owned Chanel bag through their website.
29:30
Speaker 7: So I guess they're getting into online sales. They're beefing
29:34
Speaker 7: up their digital operation to include items like collectibles and
29:37
Speaker 7: pre owned Chanel bags. Wow, you think about that, I
29:41
Speaker 7: mean luxury items at like a discount retailer.
29:44
Speaker 8: Yeah.
29:44
Speaker 14: So Walmart is still small compared to Amazon, but in
29:48
Speaker 14: terms of e commerce, but that's an area where they're
29:52
Speaker 14: just continuing to see huge growth and e commerce in
29:55
Speaker 14: their their marketplace. So that's that that is something that
30:00
Speaker 14: you'll continue to hear them talk a lot about and
30:02
Speaker 14: there's a ton of upside there. Pharmacy delivery was another
30:06
Speaker 14: one that they shouted out. That's a new business for them.
30:09
Speaker 14: So these newer businesses continue to grow a lot for Walmart,
30:13
Speaker 14: and they would say there's still a big runway there
30:17
Speaker 14: when it comes to competing with Amazon.
30:19
Speaker 2: It's interesting comparable sales excluding fuel rose four point six
30:23
Speaker 2: percent at US Walmart, Star Wars open at least a
30:26
Speaker 2: year for the quarter into January thirty first. That's higher
30:28
Speaker 2: than Wall Street had been anticipating. So it doesn't seem
30:31
Speaker 2: like the consumer per se, at least in this quarter,
30:35
Speaker 2: was a problem.
30:35
Speaker 5: The consumer was still spending.
30:37
Speaker 14: So an interesting thing about the growth this quarter and
30:40
Speaker 14: actually last quarter as well, was that growth was mostly
30:43
Speaker 14: coming from higher income households. So households that are earning
30:47
Speaker 14: more than one hundred thousand dollars a year, not the
30:49
Speaker 14: person you typically think of as your average Walmart shopper.
30:53
Speaker 14: These are like wealthier people who are looking for deals,
30:56
Speaker 14: looking for value. Maybe they're coming to Walmart for groceries
30:59
Speaker 14: as oppost to whole foods this quarter because prices on
31:03
Speaker 14: food are so high. So that's really where the growth
31:06
Speaker 14: is still coming from, our wealthier shoppers.
31:10
Speaker 7: Does that tell you then that the consumers maybe weaker
31:14
Speaker 7: if these high income people are having to move down
31:16
Speaker 7: the spectrum, It's.
31:18
Speaker 14: Possible, and I think, you know, we are looking forward
31:21
Speaker 14: to the rest of the big Pox results coming this quarter.
31:25
Speaker 14: We're looking at home depot, we're looking at Target. I
31:28
Speaker 14: think they will tell us a bigger picture view of
31:31
Speaker 14: how the US consumer is doing. But yes, I have
31:34
Speaker 14: the same question, where are those shoppers coming from? Who's
31:37
Speaker 14: losing here?
31:38
Speaker 2: Our Thanks to Emily Cohen, Bloomberg Consumer Team Leader. We
31:41
Speaker 2: move next to the crypto space, and I was recently
31:44
Speaker 2: joined by crypto expert Ian Balina, founder and CEO of
31:47
Speaker 2: Token Metrics. We discussed the state of crypto at the
31:50
Speaker 2: start of the new Trump administration in the US and
31:53
Speaker 2: how artificial intelligence is transforming the industry. I first asked
31:56
Speaker 2: Ian about how the crypto community views the Trump administration
32:00
Speaker 2: and their current stance on crypto.
32:02
Speaker 15: The new Trump administration being pro crypto, they've mentioned that
32:05
Speaker 15: they anticipate having procrypto regulation within six months, so long term,
32:10
Speaker 15: this is amazing for crypto. For the first time in
32:12
Speaker 15: his history, cryptos running downhill, not uphill. But in the
32:16
Speaker 15: short term there has been a large correction in crypto
32:19
Speaker 15: from different sectors, from AI to DeFi, but crypto hasn't
32:23
Speaker 15: really taken off as people had anticipated. Trump entering office
32:27
Speaker 15: has led to essentially buy the room has seldom news,
32:30
Speaker 15: but long term this is bullsh for crypto long term.
32:33
Speaker 5: Well, how about you.
32:34
Speaker 2: You mentioned distributed finance AI crypto A lot of stuff
32:37
Speaker 2: wrapped up in that. Where do you see or where
32:42
Speaker 2: are you and your clients and your vests. Where do
32:44
Speaker 2: you see the most opportunity here?
32:47
Speaker 15: AI? AI still has the most opportunity. If you just
32:50
Speaker 15: take the total crypto mind share in the last one
32:53
Speaker 15: year or so peaked at about seventy percent being fully AI.
32:57
Speaker 8: What does that mean?
32:58
Speaker 15: That means the attention, the awareness in the crypto space
33:01
Speaker 15: was solely focused on AI sector AI projects, from products
33:05
Speaker 15: like A sixteen Z to products like ARC and others.
33:08
Speaker 15: People are seeing what's happening in just tech in general
33:11
Speaker 15: with open AI, XAI and know these other competitors, and
33:15
Speaker 15: that's leading into a rising tide loops all both kind
33:19
Speaker 15: of mentality in crypto in the crypto AI space because
33:21
Speaker 15: people see AI as the future. But why it's beautiful
33:24
Speaker 15: in crypto Crypto and AI are marriage made in heaven
33:28
Speaker 15: because in a digital world with digital AI agents, you
33:31
Speaker 15: have Sam Altman saying that AI agents is the biggest
33:33
Speaker 15: narrative in all of tech for this year.
33:36
Speaker 5: So define what that is. AI agents basically.
33:39
Speaker 15: Other AI is working together as a team of AIS.
33:44
Speaker 15: These teams of AI is working together, how do you
33:45
Speaker 15: trust each other? That's what crypto is about, cryptos built
33:48
Speaker 15: on cryptography, having people online transact through different currencies without
33:54
Speaker 15: having to trust each other. Applying that to AI agents
33:56
Speaker 15: to me, is does naturally makes sense.
33:59
Speaker 4: Well.
33:59
Speaker 2: One of the areas that I a lot of folks
34:02
Speaker 2: that maybe aren't as involved in AI, in crypto, in
34:05
Speaker 2: some of these new technologies is does there need to
34:08
Speaker 2: be regulation?
34:09
Speaker 5: If so, how much and by hume, where are we there?
34:16
Speaker 15: Yes, there's definitely does need to be regulation in the
34:18
Speaker 15: cryptic space, also in the AI space as well, but
34:20
Speaker 15: not to a level what it stops or restricts innovation,
34:24
Speaker 15: right because AI, as mentioned by the administration, is essentially
34:28
Speaker 15: a national security issue. China is basically just flying, but
34:31
Speaker 15: it's by the by their pants, and we can really
34:34
Speaker 15: allow the US to become backwards in terms of technology
34:38
Speaker 15: with AI and the same thing with crypto. So I
34:41
Speaker 15: don't think restriction that inhibits innovation makes sense. That's why
34:47
Speaker 15: I think David Sachs the AI cryptos are was actually
34:51
Speaker 15: a pointed to that role. Those two are tied together,
34:54
Speaker 15: AI and cryptoi tie together because for America to stay
34:57
Speaker 15: forward as a company, as a country in terms of
35:00
Speaker 15: the economy and just technology and advancement, they have to innovate.
35:03
Speaker 15: And for the last almost eight years in crypto, with
35:06
Speaker 15: the SEC and other different regulators, they have forced US
35:12
Speaker 15: entrepreneurs offshore, and now by the administration wanting to make
35:17
Speaker 15: crypto or rather make America the crypto capital of the world,
35:21
Speaker 15: they have to basically be open for business and they
35:23
Speaker 15: have to welcome innovation, not try to social offshore.
35:28
Speaker 2: So one of the uncertainties I guess of the Biden
35:30
Speaker 2: administration was who in fact would regulate some of these technologies,
35:34
Speaker 2: particularly across the crypto space. Was a Gary Gensler at
35:37
Speaker 2: the SEC. Was the CFTC, the Commodities Futures Commission Commission?
35:44
Speaker 5: Where are we going now?
35:45
Speaker 10: Where where's where's the.
35:46
Speaker 15: Wind taking us now? Who's going to regulate this thing?
35:50
Speaker 15: So right now it looks like it's basically a team effort.
35:53
Speaker 15: It's both does CFTC kind of taken the lead and
35:56
Speaker 15: also the SEC as well, But regardless of who's taking
35:59
Speaker 15: the lead, they all have to really understand crypto at
36:01
Speaker 15: a deep level. They can be crypto a sayers, yes,
36:04
Speaker 15: they are risking and crypto. Yes, scripture is not perfect,
36:06
Speaker 15: it's not ideal, it's new to technology is still being polished.
36:11
Speaker 15: But you have to kind of take a very optimistic
36:13
Speaker 15: approach in terms of seeing the future and the possibilities
36:16
Speaker 15: of crypto.
36:18
Speaker 2: So, you know, Bloomberg News did a story a couple
36:21
Speaker 2: of quarters ago when every single one of the S
36:24
Speaker 2: and P five hundred companies mentioned AI in their quarterly
36:29
Speaker 2: earnings release and comments that that's up from like, you know,
36:33
Speaker 2: a handful a quarter or two before that. Where do
36:36
Speaker 2: you see the real I guess applications of AI where
36:42
Speaker 2: most of us going to see it day to day?
36:44
Speaker 5: How are you guys thinking about that?
36:46
Speaker 15: So, what we're seeing with our customers and even people
36:49
Speaker 15: in the cry crypto space is AI is unlocking a
36:52
Speaker 15: completely new user experience. So, for example, take defined centralized
36:58
Speaker 15: finance and crypto space, whether yield optimization, whether it's trading agents,
37:03
Speaker 15: different complexities that you basically had to be a crypto
37:05
Speaker 15: expert or quant expert to leverage. You can now just
37:08
Speaker 15: use AI to help manage all that for you.
37:11
Speaker 10: What does that mean?
37:12
Speaker 15: Let's say you want to do a flash loan which
37:15
Speaker 15: is basically complicated. Where in crypto of borring money and
37:19
Speaker 15: making the trade and paying it back all in real time,
37:22
Speaker 15: all in one transaction, very hard to execute. But now
37:26
Speaker 15: with AI in the same way how Chad GPD has
37:28
Speaker 15: unlocked and given everybody pretty much a PhD on their computer,
37:33
Speaker 15: you can now have that same PhD person doing all
37:36
Speaker 15: kinds of innovations in the quipment space, from trading to
37:39
Speaker 15: investing to rebouncing your portfolio. For example, I talking abouts
37:43
Speaker 15: we're building trading agents to allow people to trade crypto
37:45
Speaker 15: using AI in a passive way. So we're seeing this
37:49
Speaker 15: completely unlock different elements that the average person didn't really
37:54
Speaker 15: tap into or have access to.
37:56
Speaker 5: And it's early in the Trump administration.
37:57
Speaker 2: Hell I guess domestic are folks in the crypto space
38:01
Speaker 2: that President Trump and his team will in fact deliver
38:04
Speaker 2: on being, you know, a very positive force for crypto.
38:09
Speaker 15: Very very optimistic, because if you just kind of zoom
38:12
Speaker 15: out and see the history of crypto, crypto has grown
38:15
Speaker 15: to become a three trillion dollar asset class. We think
38:18
Speaker 15: it can go to about eight to fourteen trillion by
38:21
Speaker 15: twenty twenty six. But that entire time it's been basically
38:25
Speaker 15: pushed down by an anti procrypto regulation. Right, and now
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Speaker 15: crypto finally has a seat at the table. From the
38:32
Speaker 15: Crypto Ball to the Crypto Council to the AI Crypto Zar,
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Speaker 15: there's finally a pathway to crypto having a seat at
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Speaker 15: the table and to crypto becoming a much bigger asset
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Speaker 15: class o.
38:43
Speaker 2: Thanks to Ian Balina, founder and CEO of Token Metrics.
38:47
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38:55
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