Latest / Bloomberg Intelligence / BI Weekend: 50 Companies to Watch, Ford Charges, McKinsey Cuts

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BI Weekend: 50 Companies to Watch, Ford Charges, McKinsey Cuts · Bloomberg Intelligence

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Speaker 2: On today's Bloomberg Intelligence Show, we dig inside the big
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Speaker 3: Each and every week we provide in depth research and
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Speaker 3: hundred and thirty industries are analysts covered worldwide.
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Speaker 2: Today, we'll look at how the automaker Ford is being
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Speaker 2: impacted by its struggling ev business.
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Speaker 3: Plus we'll dive into why the food and beverage giant
0:59
Speaker 3: Craft High is replacing its CEO.
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Speaker 2: But first we begin with research. Bloomberg Intelligence recently put
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Speaker 2: out on companies to watch for in the new year.
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Speaker 3: It's titled fifty Companies to Watch in twenty twenty six.
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Speaker 3: We were joined by Tim Craig head, Bloomberg Intelligence Global
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Speaker 3: Chief Content Officer.
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Speaker 2: We first asked Tim to break down this research put
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Speaker 2: a little bit of context.
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Speaker 4: This group of fifty are all part of what we
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Speaker 4: call focus ideas. It's a broader group of about one hundred.
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Speaker 4: These are all high conviction ideas. They have high confiction
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Speaker 4: ideas where we see something very different from what we
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Speaker 4: think is embedded in market expectations and there's catalysts ahead
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Speaker 4: to change the market mindset. Those catalysts coming up in
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Speaker 4: twenty twenty six, and that's where these fifty come into
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Speaker 4: and across the group this year. The biggest bucket are two.
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Speaker 4: One is just simply new product innovation that is being
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Speaker 4: rapped out into twenty twenty six. The other no surprise
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Speaker 4: AI related, and some of it's the tech companies. Some
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Speaker 4: of it are companies that are feeding into the process
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Speaker 4: and happy to get into some of those or other
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Speaker 4: topics as well. Suches, cyclical pressures and competitive concerns. On
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Speaker 4: the negative side, and there's a couple of other things
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Speaker 4: as well.
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Speaker 2: So on the new products, give us an example of
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Speaker 2: a new product that you guys think might really be
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Speaker 2: important for a company in a stock.
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Speaker 5: Yeah.
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Speaker 4: So, you know, it's interesting because some of these can
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Speaker 4: be quite technical, Paul. You know, you think a Nilan
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Speaker 4: Pharma or Bridge Bio are two biotech companies that have
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Speaker 4: new products coming. One of them relates to heart issues,
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Speaker 4: another relates to dwarfism. But it's new products that will
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Speaker 4: expand to market and drive we think, significantly better revenue
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Speaker 4: and earnings. On the other hand, there's some good old
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Speaker 4: fashioned names that you know and you love. Canada Goose
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Speaker 4: has new product flow coming through that we think reinvigorates
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Speaker 4: the top line. Brinker, I think Chili's the restaurant are
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Speaker 4: going through a whole new upgrade of their menu and
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Speaker 4: up selling clients with good stuff like Margarita's with Patron
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Speaker 4: and so the new product idea can expand across a
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Speaker 4: whole number of different segments. It's quite interesting.
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Speaker 5: Yeah.
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Speaker 3: I'm looking at Decker's as one of the new products
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Speaker 3: companies you highlight, and their ug is introducing styles to
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Speaker 3: stay relevant beyond the winter months. Let's talk a little
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Speaker 3: bit about AI because that's going to continue to be
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Speaker 3: a big theme, even as investors are starting to make
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Speaker 3: distinctions between companies that are in it for good and
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Speaker 3: those that maybe kind of fat ish. What are some
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Speaker 3: new names that surprised you in terms of their making
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Speaker 3: the list.
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Speaker 4: Yeah, it's it's interesting. I'll give you the new names
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Speaker 4: and the ones that aren't on here, and i'll do
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Speaker 4: the latter first. There's none of the big llms this
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Speaker 4: year that are on our list, or in Nvidia that's
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Speaker 4: not on a list. What you find are other either
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Speaker 4: enabling technologies, so I think LAMB Research. It's a semicap
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Speaker 4: equipment company that makes the gear that you make the
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Speaker 4: semiconductors with. That's quite well positioned. TSMC, the world's largest
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Speaker 4: foundry that's making the AI accelerator chips that feed into
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Speaker 4: the llms, or even back up in the channel of
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Speaker 4: how do you build out AI constellation, which is the
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Speaker 4: US's largest nuclear utility. That's quite important if you're going
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Speaker 4: to generate the electricity to drive the data centers to
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Speaker 4: drive AI acs. Interestingly, European construction company they own Turner,
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Speaker 4: which is the US's largest construction company. They've got the
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Speaker 4: biggest order book for building out data centers. There's a
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Speaker 4: host of different kinds of ways you can think about
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Speaker 4: leveraging AI beyond just simply the big lllms like Google
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Speaker 4: or Open AI or things along those lines that you
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Speaker 4: hear about.
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Speaker 2: Tim On this list, you and the bi analysts also
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Speaker 2: highlight stocks that might be have pressure on the downside,
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Speaker 2: whether it's cyclical pressure, competition, MNA, project delay. Give us
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Speaker 2: a name or two that might have some downside risk
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Speaker 2: this year.
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Speaker 4: Yeah, it's interesting on that think about what's going on
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Speaker 4: from the standpoint of you're just talking about airlines from
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Speaker 4: a European vantage point, we've got wage pressures that are
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Speaker 4: a rising and for Air France KLM, a big chunk
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Speaker 4: of their business is the Transatlantic market, which is getting
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Speaker 4: more and more competitive. And with both of those factors,
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Speaker 4: we think that there's risks to estimates. China Railway Group
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Speaker 4: it's a big state owned enterprise in China. It's one
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Speaker 4: of the big four engineering companies. And to the degree
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Speaker 4: that China is shifting towards more technology and innovation driven
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Speaker 4: investment and less away from bridges and roads and railroads
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Speaker 4: and things along those lines. China Railway Group we think
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Speaker 4: has downside risk. A couple little companies that are unusual
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Speaker 4: but intriguing. Dino Polska, which you've never heard of, I'm sure,
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Speaker 4: is a Polish supermarket company, but they've got two big
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Speaker 4: European competitors that are coming into the Polish market. Again,
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Speaker 4: downside risk to earnings. And the same thing can be
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Speaker 4: said about Joined Labs. We talked about a couple of
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Speaker 4: positive healthcare companies. This is one of the contract research
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Speaker 4: companies that helps a pharmaceutical do their drug development. China
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Speaker 4: is now looking to go broad and global with approvals
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Speaker 4: on new pharmaceutical products. Join, who focuses in all in
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Speaker 4: China is losing some of their business, So there's lots
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Speaker 4: of ways we can think about this our.
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Speaker 3: Thanks to Tim Kraik, head Bloomberg Intelligence Chief Content Officer, we.
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Speaker 2: Recently focused on a Bloomberg Big Takes story entitled Saudi's
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Speaker 2: Sisters wieled fifty billion dollar fortune as global powerbrokers. You
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Speaker 2: can find out on Bloomberg dot com and the Terminal.
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Speaker 3: The story looks at the Olion Group, a Saudi empire
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Speaker 3: led by sisters that has grown in influence. It has
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Speaker 3: a nearly thirteen billion dollars stock portfolio in the US,
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Speaker 3: as well as steaks and companies like black Rock and
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Speaker 3: JP Morgan Chase.
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Speaker 5: For more.
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Speaker 2: Scarlett and I were joined by Devin Pendleton, Bloomberg Wealth Reporter.
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Speaker 2: We first asked Devin to explain what the allion is
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Speaker 2: and who the sisters are behind it.
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Speaker 6: So it is.
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Speaker 7: Lubna and her sister Husam Allion. They're both in their
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Speaker 7: early seventies and they have been at the helm of
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Speaker 7: this family enterprise for decades, for more than forty years.
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Speaker 5: Wow.
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Speaker 3: And they have fairly low profiles too. That's the thing
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Speaker 3: that is striking. They have these low profiles, but they
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Speaker 3: are known as steally negotiators. Tell us what they've done.
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Speaker 7: Yeah, they've done an incredible job building this family business,
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Speaker 7: which was started by their father, who was a really
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Speaker 7: unbelievable character. He basically worked his way up from nothing.
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Speaker 7: You know, he's not a royal, was not connected to
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Speaker 7: the royals at a young age, but he built an
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Speaker 7: oil servicing company which he grew striking deals with all
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Speaker 7: sorts of consumer brand companies in the US, bringing them
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Speaker 7: to Saudi Arabia, everything from Coca Cola to cheese its
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Speaker 7: to Oreos, and he came over to the US in
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Speaker 7: the early nineteen sixties, was very inspired by what he
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Speaker 7: saw and bought some bank stocks, and basically his daughters
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Speaker 7: took over that business which was sprawling. I mean it
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Speaker 7: was in all sorts of sectors real estate, oil, filled services,
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Speaker 7: consumer goods, and hung on to those equity stakes, banking stakes.
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Speaker 7: So now they have this incredible portfolio of investments in
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Speaker 7: the US on Wall Street as well as this you know,
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Speaker 7: booming multi sector business in Saudi Arabia.
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Speaker 2: So but people in power know these two sisters, they
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Speaker 2: were at the White House recently tell us about that.
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Speaker 2: How do they subtlely wield their influence?
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Speaker 7: They are not noisy people. I think it's one thing
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Speaker 7: to do business and thrive in Saudi Arabia as you
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Speaker 7: have to really sort of be be quiet, be force full,
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Speaker 7: sort of no be a little bit deferential to you know,
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Speaker 7: who's really in charge, which would be the government and
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Speaker 7: the king and the Crown Prince. But they have had
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Speaker 7: long term ties with the US. I mean, you really
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Speaker 7: saw that at the White House dinner. You mentioned Paul,
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Speaker 7: she was sitting right next to Elon Musk. But you know,
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Speaker 7: arguably one of the most important people in the room
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Speaker 7: because she has these connections on Wall Street through their
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Speaker 7: long term equity investments. It's really important right now, especially
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Speaker 7: because the Kingdom is trying to bring in a lot
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Speaker 7: of inbound investment to transform their economy past oil. It's
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Speaker 7: a big deal for them to be bringing in money.
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Speaker 7: And these Alliance Sisters have had these connections for a
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Speaker 7: long long time, so they're more important than ever.
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Speaker 3: So they have the connections with the right people in
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Speaker 3: Saudi Arabia. How does their I mean when I think
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Speaker 3: about prominent investors in the kingdom, I think about Prince
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Speaker 3: Abolid beIN to Lull and how he's been very vocal
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Speaker 3: about his positions. He's often seen on media networks. You
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Speaker 3: don't hear about these Alliance Sisters at all, and I
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Speaker 3: wonder how much of that is, you know, is part
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Speaker 3: of their success story.
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Speaker 7: Totally, it's so so important. I think they are extremely discreet.
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Speaker 7: They are, like I said, like they really know their
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Speaker 7: role in the kingdom, like they're important. They step in
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Speaker 7: and help when they need to. For example, in Saudi
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Speaker 7: Ramco Ipo. Back in twenty nineteen, the kingdom was having
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Speaker 7: trouble kind of getting people excited and really getting the
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Speaker 7: investors they needed early to get backstop this IPO. They
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Speaker 7: ask some influential families and the Alliance were one that
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Speaker 7: you know, they really showed up. That matters for the kingdom,
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Speaker 7: and it also gives them, you know, license to really
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Speaker 7: expand their business as much as they need to into
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Speaker 7: being a position of power to help out, but also
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Speaker 7: you know, have favors in return.
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Speaker 2: And the Bloomberg the Rich Go function lists their wealth
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Speaker 2: of the family at approximately fifty billion dollars US.
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Speaker 7: Right, Yes, fifty billion dollars US. But I can guarantee
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Speaker 7: you that that is a conservative estimate.
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Speaker 2: Is that right now? I understand that they while they
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Speaker 2: keep a low profile of these sisters, they have good
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Speaker 2: relationships with some of the big folks on Wall Street
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Speaker 2: and like Larry Fink of black Rock and things like that.
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Speaker 2: So that's got to be useful.
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Speaker 7: Yeah, absolutely. I mean, just through one portfolio alone, they
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Speaker 7: have their big investors in Blackrock, the equity investors. They
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Speaker 7: have a one and a half billion dollar steak in
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Speaker 7: black Rock. They own an almost billion dollar steak in
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Speaker 7: JP Morgan. It's actually where lived No Lion first got
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Speaker 7: her start. She was initially working a low level banker
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Speaker 7: at JP Morgan right after college. So they're really worldly,
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Speaker 7: very well traveled and just tough, tough in this sort
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Speaker 7: of very you know, meaningful business sense, like negotiators. They're
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Speaker 7: very involved in their investments.
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Speaker 3: Our thanks to Devin Pendleton, Bloomberg Wealth Reporter. Coming up,
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Speaker 3: we'll move to the biotech sector and why my aloma
12:23
Speaker 3: patients are failing to get the treatment they need.
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Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
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Speaker 2: depth research and data on two thousand companies and one
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Speaker 2: hundred and thirty industries.
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Speaker 3: You can access Bloomberg Intelligence via bi go on the terminal.
12:35
Speaker 3: I'm Scarlet Food and.
12:36
Speaker 2: I'm Paul Sweeney, and this is Bloomberg.
12:41
Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
12:46
Speaker 1: on Bloomberg Radio.
12:48
Speaker 2: We moved now to loose in the auto sector.
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Speaker 3: This week, automaker Ford announced it will take nineteen and
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Speaker 3: a half billion dollars in charges tied to an overhaul
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Speaker 3: of its EV business. And this comes after years of
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Speaker 3: Ford struggling to make its electric vehicle business profitable.
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Speaker 2: From what we were joined by Steven Mann Bloomberg Intelligence
13:04
Speaker 2: Global Autos and Industrials research analysts.
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Speaker 3: We began by asking Steve for his reaction to the
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Speaker 3: nineteen and a half billion dollar charge.
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Speaker 8: Yeah, it is a very big number. It pretty much
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Speaker 8: backed up the truck on these charges. But the important
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Speaker 8: thing is it's clearing the deck for next year.
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Speaker 5: Right.
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Speaker 8: There is a couple of earning's tailwind for Ford and
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Speaker 8: actually to their competitors in Detroit as well. So the biggest,
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Speaker 8: I think the biggest write down. Two biggest write down
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Speaker 8: is writing down the losses on their Mustang Mochy. You
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Speaker 8: know they've been losing around twenty five thousand dollars on
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Speaker 8: the EBIT line per vehicle, so it's massive. The other
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Speaker 8: is the charges really on their joint venture with their
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Speaker 8: battery supplier in Korea. So you know they're going to
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Speaker 8: repurpose one of those plants for energy storage. So again
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Speaker 8: it's really clearing the deck. There's a couple of tailwinds
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Speaker 8: for twenty twenty six, which includes you know, Trump's loosening
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Speaker 8: the MPG miles per gallon rule.
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Speaker 2: Yeah, absolutely, does that reflect Steve. Investors want these auto
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Speaker 2: companies to kind of back away or proceed more cautiously
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Speaker 2: towards their move towards EV's.
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Speaker 8: Yeah, definitely, especially in the US. And look, Ford is
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Speaker 8: you know, not just pivoting in the US, but they're
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Speaker 8: also pivoting in Europe. You know, they just announced a
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Speaker 8: joint venture with Renault to develop EVS over in Europe.
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Speaker 8: And you know, Ford doesn't really have a big presence
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Speaker 8: in Europe, so they're taking that approach of partnership. GM
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Speaker 8: is doing the same thing. Remember they took one point
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Speaker 8: six billion dollar charge, much more modest than the nineteen
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Speaker 8: billion that Ford is taking. But you know, GM is
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Speaker 8: dialing back but keeping one foot on the EV's. I
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Speaker 8: think they I believe they still think that they're you know,
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Speaker 8: they still can succeed, especially when they introduce the Chevy
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Speaker 8: Bolt in the new year.
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Speaker 2: So, Steve, you know, we're many years into this transition
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Speaker 2: to EV's and you know, I know there are many
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Speaker 2: there are European country, Scandinavian countries where it's almost one
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Speaker 2: hundred percent of their fleets are are their new car
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Speaker 2: sales are EV's. That ain't the case here in the US.
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Speaker 2: With some hindsight here, why hasn't why haven't EV's taken
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Speaker 2: a better hold here in this US market.
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Speaker 8: Yeah, it definitely needs more, you know, regulatory support for
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Speaker 8: EV to take grow because you know, EV uh, there's
15:49
Speaker 8: a lot of three hurdles right that consumers have to
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Speaker 8: get over, which is the price, the range, and the
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Speaker 8: convenience right of charging infrastructure. You know, without government support
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Speaker 8: to actually build that out, it's going to take some
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Speaker 8: time for the electrification transition. I think a lot of
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Speaker 8: people in the industry still feels that electrification, battery EV,
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Speaker 8: maybe hybrids in between is the way to go in
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Speaker 8: the future. But you know, I think there's a huge
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Speaker 8: paradigm shift that consumers hair have to get over, and
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Speaker 8: it's really challenging to do that without government support.
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Speaker 2: Here our thanks to Steve Man Bloomberg Intelligence, Global, Autos
16:33
Speaker 2: and Industrials Research Channels.
16:35
Speaker 3: We move next to some news in the food and
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Speaker 3: beverage industry.
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Speaker 2: This week, craft Times announced it would be replacing its
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Speaker 2: CEO with former Kelenova CEO Steve Kahaling on January first.
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Speaker 3: This comes as the company plans to split into two
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Speaker 3: separate publicly traded companies. One will sell condiments and boxed meals,
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Speaker 3: while the other will include its slower growing grocery products
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Speaker 3: like lunchibles for.
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Speaker 2: More, Scarlett and I were joined by Christina Peterson Bloomberg
16:59
Speaker 2: Food Industry. We first asked Christina to break down the
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Speaker 2: CEO change.
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Speaker 6: We had expected in September that the current CEO would
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Speaker 6: lead one of the two new companies, specifically the one
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Speaker 6: that it's the grocery Staples. They actually don't have official
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Speaker 6: names yet, but that was a collection of the least
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Speaker 6: profitable or less profitable food items there, including things like
17:22
Speaker 6: lunch a Bowles and Oscar Meyer Deli Meats. The surprise
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Speaker 6: came this morning that he is in fact not going
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Speaker 6: to lead that company, and instead they are bringing in
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Speaker 6: Steve kay Helene from Kelenova to lead the second company
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Speaker 6: after the split has gone through. That is being called
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Speaker 6: the Global Taste Elevation Company, and that's going to have Heinz, Ketchup, Kraft,
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Speaker 6: mac and Cheese, some of those beloved iconic products.
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Speaker 3: So that's the fastcoring part of the company, and the
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Speaker 3: other one is kind of the you know, the equivalent
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Speaker 3: of CNN TNT and you know, the leave it behind
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Speaker 3: assets that you know are are you're managing the decline?
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Speaker 3: What can you tell us about Steve cal Lane, the
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Speaker 3: former Kelenova CEO. What is his approach his philosophy.
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Speaker 6: Well, I just spoke with him and he said that
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Speaker 6: he's going to be focused on bringing organic growth to
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Speaker 6: the company. We talked a little bit about focusing on
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Speaker 6: some of the health and wellness trends that consumers are
18:16
Speaker 6: looking for, increasing offerings with protein, with fiber, with shorter
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Speaker 6: ingredient lists, you know, the so called cleaner labels. So
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Speaker 6: they'll definitely be leaning into that. It sounds like a
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Speaker 6: little bit more. He also led Kellogg through its split.
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Speaker 6: The Kellig Company split into w K Kellogg and then Kelenova.
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Speaker 6: Both of those companies were then separately acquired. I asked
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Speaker 6: him if he thought that could be a path here,
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Speaker 6: and he said, it's hard to predict the future, so
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Speaker 6: not rolling it out.
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Speaker 2: So what's been the challenge for craft Minds over the
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Speaker 2: last number of years?
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Speaker 6: I mean, in general, the food companies are all struggling
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Speaker 6: with this shift as consumers move towards healthier, less processed food.
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Speaker 6: The company says that they just had too many brands
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Speaker 6: and that splitting into two will help them focus on
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Speaker 6: each component. I think that there is some analyst chatter
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Speaker 6: that that's what companies say when they just need to
19:13
Speaker 6: know spin off some of their less profitable items. But
19:17
Speaker 6: they will tell you that they expect both companies will
19:20
Speaker 6: have better value when there's an ability to focus more
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Speaker 6: on the condiments and box meals and then on some
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Speaker 6: of the other foods.
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Speaker 3: Put this all into context for us when Paul talks
19:28
Speaker 3: about how you know this group has been kind of
19:31
Speaker 3: struggling overall. We also saw that with PepsiCo with Coca Cola,
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Speaker 3: I mean, they have had to rethink their strategy completely.
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Speaker 6: Yet there's just been a lot of movement in the
19:41
Speaker 6: food industry right now. PepsiCo announced some pretty dramatic changes.
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Speaker 6: They're going to reduce the number of products they sell
19:47
Speaker 6: by twenty percent and lower prices in some of their
19:50
Speaker 6: key brands as part of agreement with activist investor Elliott
19:54
Speaker 6: Investment Management. Coke has a new CEO. I think coc
19:58
Speaker 6: is in pretty solid shape. They've been doing their shares
20:02
Speaker 6: have been doing really well compared to some of the
20:03
Speaker 6: other business companies. But yet, in general, the companies that
20:08
Speaker 6: I think are really tapping into this health and wellness
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Speaker 6: interest in consumers are often the smaller startup brands and
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Speaker 6: the big companies are playing catch up not only with them,
20:17
Speaker 6: but some of the private label companies too that are
20:19
Speaker 6: really nimble and able to get some of these new
20:21
Speaker 6: products to market really fast.
20:23
Speaker 3: Are thanks to Christina Peterson Bloomberg, a food industry reporter.
20:26
Speaker 2: We move next to the biotech sector. Bloomberg Intelligence recent
20:29
Speaker 2: came out with research which gives an overview of the
20:31
Speaker 2: blood cancer myloma.
20:33
Speaker 3: According to Bloomberg Intelligence, multiple maloma patient numbers are rising
20:37
Speaker 3: globally due to the aging population and just by an
20:40
Speaker 3: evolved treatment landscape that's leveraged the FDA's accelerated drug approval.
20:44
Speaker 3: There's still unmet need for more.
20:46
Speaker 2: On this and the latest in the biotech sector. We
20:48
Speaker 2: were joined by Sam Fazzelli, Bloomberg Intelligence, director of Research
20:52
Speaker 2: for Global Industries and senior pharmaceuticals analysts.
20:54
Speaker 3: We began by asking Sam, where we are in terms
20:57
Speaker 3: of treating maloma.
20:58
Speaker 5: Well, let me tell you about these cancers, treatments and
21:01
Speaker 5: these cancer areas where patient numbers in terms of those
21:05
Speaker 5: who live rather than those who die is fundamentally changing.
21:09
Speaker 5: Breast cancer has been one of them. Prostate cancers another one,
21:12
Speaker 5: melanoma is another one which of course people are familiar with,
21:16
Speaker 5: and of course myloma has been one that we've also
21:18
Speaker 5: got there. There are patients who are alive today who
21:21
Speaker 5: were diagnosed in nineteen ninety six, nineteen ninety eight, and
21:26
Speaker 5: there are and there have been people developments in that
21:29
Speaker 5: space that literally are changing completely the way that people
21:34
Speaker 5: end up living with their disease. Of course, it's not
21:36
Speaker 5: for everybody that ends up like that, but the average
21:42
Speaker 5: mortality or the average life expectance you have the patients
21:45
Speaker 5: with maloma has significantly changed. And what is it. It's
21:48
Speaker 5: a cancer of the bone marrow, which then of course
21:51
Speaker 5: translates to some changes in your blood, so he's a
21:54
Speaker 5: hematological cancer. And yet another major development in the last
21:58
Speaker 5: week or so that came out at Orlando, a conference
22:02
Speaker 5: that was held last week.
22:05
Speaker 3: What is the treatment landscape then for myloma?
22:08
Speaker 5: Yeah, so, given that it goes on for so long,
22:11
Speaker 5: now we've got first line, second line, third line, fourth line, fifth,
22:16
Speaker 5: et cetera. Right, there's so many patients. There are some
22:19
Speaker 5: patients that enter trials these days that have had eight
22:21
Speaker 5: lines of therapy. But that's I would say, a good thing.
22:24
Speaker 5: That means we have drugs to treat people every time
22:26
Speaker 5: they fail a previous one. The most exciting recent development
22:31
Speaker 5: was this data that came out of Johnson and Johnson's
22:33
Speaker 5: trial called Majestic three, which takes a special type of antibody,
22:39
Speaker 5: married it with a well known accepted drug on the
22:42
Speaker 5: market today called Darzelex. Also another J and J Rug
22:45
Speaker 5: and Lo and behold. At thirty six months therapy, eighty
22:49
Speaker 5: three percent of patients were alive versus the next big thing,
22:54
Speaker 5: best thing that we've just had recently added to the
22:57
Speaker 5: armamentarium at about fifty the massive shift in survival. I mean,
23:02
Speaker 5: these are things that we don't often see in oncology.
23:06
Speaker 5: Do you see it? You get standing ovations and you
23:08
Speaker 5: get celebrations because it makes a huge different to patience.
23:11
Speaker 5: So that's what we've been seeing recently.
23:13
Speaker 2: I say, I'm here in the United States. The Trump
23:15
Speaker 2: administration has taking a real hard line against some federal
23:18
Speaker 2: funding of universities, and I know a lot of universities
23:21
Speaker 2: are saying that's really hitting their funding for their medical centers,
23:27
Speaker 2: for example, some of the medical research. Are you seeing that?
23:30
Speaker 2: Are you hearing that from the companies? Is the effects
23:33
Speaker 2: are they being felt yet? Or is that something in
23:35
Speaker 2: the future.
23:37
Speaker 5: No, I would say that type of research funding is
23:40
Speaker 5: something that's going to translate into trouble in five to
23:43
Speaker 5: ten years time if indeed it sticks, and if indeed
23:47
Speaker 5: you really end up with people not being able to
23:50
Speaker 5: start a scientific career because they can't get money to
23:52
Speaker 5: do their research. Now, I had a conversation with somebody
23:56
Speaker 5: who said, actually, it's not as bad as it sounds,
23:59
Speaker 5: only some areas that are being caught. The budget hasn't
24:01
Speaker 5: been halved, And then others tell me something different. So
24:05
Speaker 5: let's see how this all pans out in twenty twenty six.
24:07
Speaker 5: But if it goes in the bad way that you
24:10
Speaker 5: were just referring to, you're going to end up with
24:12
Speaker 5: fewer scientists in five to ten years time in US
24:15
Speaker 5: universities developing these new ideas. And then of course betters
24:19
Speaker 5: that all go China and they are doing a fantastic
24:24
Speaker 5: job of getting their research funded and pushed. And that's
24:28
Speaker 5: where I think we all US and Europe need to
24:32
Speaker 5: watch because you will lose the competitiveness angle.
24:34
Speaker 2: Our Thanks to Sam Fazelli, Bloomberg Intelligence, Director of Research
24:37
Speaker 2: for Global Industries and Senior Pharmaceuticals analyst.
24:40
Speaker 3: Coming up, Well, look at why the global management consulting
24:43
Speaker 3: firm McKenzie is cutting headcount.
24:45
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio of writing
24:48
Speaker 2: in depth research and data on two thousand companies and
24:50
Speaker 2: one hundred and thirty industries.
24:51
Speaker 3: You can access Bloomberg Intelligence through b I go on
24:53
Speaker 3: the terminal. I'm Scarlett Faxe.
24:55
Speaker 2: And I'm Paul Sweeney, and this is Bloomberg.
25:05
Speaker 1: This is Bloomberg Intelligence with Scarlett foo and Paul Sweeney
25:09
Speaker 1: on Bloomberg Radio.
25:12
Speaker 2: We move next to some news at the global management
25:14
Speaker 2: consulting firm McKenzie and Company.
25:16
Speaker 3: This week, the firm announced its leadership is cutting about
25:18
Speaker 3: ten percent of headcount across non client facing departments.
25:21
Speaker 2: Good amount to a few thousand job cups over eighteen
25:24
Speaker 2: to twenty four months. And this comes even as the
25:26
Speaker 2: firm marks its one hundred year anniversary.
25:28
Speaker 3: McKenzie's revenue growth has flatlined in the last five years,
25:31
Speaker 3: leading to a reset after some rapid hiring over the
25:34
Speaker 3: prior decade.
25:35
Speaker 2: For more on all of this, we were joined by
25:36
Speaker 2: shri Na Aranjin, Bloomberg News Chief Wall Street correspondent.
25:40
Speaker 3: We began by asking Tree to breakdown why the firm's
25:42
Speaker 3: last five years have been so disappointing.
25:45
Speaker 9: Around twenty twenty one, McKenzie revenue at the fifteen billion
25:48
Speaker 9: dollar monk. Here we are in twenty twenty four to
25:50
Speaker 9: twenty five. By the timesas y RNZ, we're going to
25:52
Speaker 9: be sixteen billion, just a little bit over. So they've
25:55
Speaker 9: operated in this narrow band of fifteen billion dollars to
25:58
Speaker 9: sixteen billion dollars an annual revenue, which is great. Any
26:01
Speaker 9: other management consulting firm would absolutely love to post numbers
26:05
Speaker 9: like that. For McKinsey, it is a sense that their
26:07
Speaker 9: revenue has flatlined a little bit. And you did mention
26:11
Speaker 9: their one hundred year celebrations right which twenty twenty six,
26:15
Speaker 9: that is when they will turn one hundred. So they
26:17
Speaker 9: had this annual partner gathering which also doubled up as
26:20
Speaker 9: this kickoff for their one hundred year festivities. And for
26:23
Speaker 9: those who were there who listened to Bob's Turnfels, the
26:26
Speaker 9: global managing partner at McKenzie, the de facto leader, you
26:29
Speaker 9: could sense some plan spoken bravado. He was asking people,
26:33
Speaker 9: are you in for this mission? And those who say yes,
26:36
Speaker 9: I can assure you good times are ahead, because it
26:38
Speaker 9: is also an acknowledgment that the last few years have
26:41
Speaker 9: been rocky, not just from its standpoint of its financial health,
26:44
Speaker 9: but you have to think about some of the challenges
26:46
Speaker 9: in the controversies that McKenzie has had to navigate, the
26:49
Speaker 9: opioid scandal, some of the criticism over their work in
26:52
Speaker 9: China and Saudi Arabia and even back home here in
26:54
Speaker 9: the US with Ice for instance. These are questions that
26:58
Speaker 9: were asked and stuff that McKenzie has had to answer,
27:01
Speaker 9: and it presented an unwelcome distraction. But the bottom line
27:06
Speaker 9: is for this firm is when it looks at its numbers,
27:09
Speaker 9: it does realize people weren't like hearing this, but at
27:13
Speaker 9: management levels that's how they talk about it. It realized
27:15
Speaker 9: that there was some bloat and the message that's percolating
27:19
Speaker 9: through the firm right now is it's time to get leaner.
27:22
Speaker 2: I was interviewing with McKinsey when I was in business school,
27:25
Speaker 2: and like the second round, they asked me to get
27:27
Speaker 2: up in on a whiteboard and sketch out kind of
27:29
Speaker 2: like a business flow model. I just turned to them
27:32
Speaker 2: and said thank you, but no thank you and walked
27:34
Speaker 2: out the door. Anytime you bring a whiteboard, I'm out
27:36
Speaker 2: of there. I can't think like it. So when trade
27:40
Speaker 2: it stocks for a living? After that, shre Why has
27:43
Speaker 2: revenue been flat? Here? Is there some concern that maybe
27:47
Speaker 2: all this AI spending is taken away from other budgets
27:52
Speaker 2: where maybe I don't need the consulting or.
27:54
Speaker 9: That's certainly the concern on the forward perhaps, but just
27:58
Speaker 9: in the last few years, the the reality of the industry,
28:01
Speaker 9: and McKinsey in some ways is the flag bearer for
28:03
Speaker 9: the industry. But there are perhaps other major consulting firms
28:07
Speaker 9: that are struggling even more. And the fact is that
28:09
Speaker 9: the demand for traditional consulting services may not be as
28:13
Speaker 9: high as it used to be. Companies and clients are
28:16
Speaker 9: getting cost conscious. When your clients are not able to
28:20
Speaker 9: post great revenue growth, the only other level that they
28:24
Speaker 9: can pull is expenses, and consulting fees are the first
28:28
Speaker 9: ones thrown out.
28:29
Speaker 2: The window, right Advertising is the first one.
28:30
Speaker 3: I think, advertising, then consulting perhaps, But is mckensey's solutions
28:35
Speaker 3: so out of the box. I mean, at this point
28:37
Speaker 3: what McKinsey recommends is kind of dogma in corporate boardrooms.
28:40
Speaker 3: You don't need to hire McKenzie to tell you how
28:42
Speaker 3: to do some of these things.
28:44
Speaker 9: Look, and I think the way you're framing it is
28:46
Speaker 9: just a little bit more of a polite way of
28:49
Speaker 9: some of the memes that you see out there right,
28:51
Speaker 9: which is this idea that all that consulting firms do
28:55
Speaker 9: is prescribe, grow revenue and cut costs. You know, in
29:00
Speaker 9: the moment, it might be funny, but to some extent
29:02
Speaker 9: it is an oversimplification of what they do because if
29:07
Speaker 9: you look at the list of clients that they've wrapped up.
29:10
Speaker 9: We talked about them starting out in nineteen twenty six
29:13
Speaker 9: university professor who advised a local meatpacker, Armors and company.
29:19
Speaker 9: From that, what they've grown up to they are the
29:22
Speaker 9: go to advisor to blue chip companies from Coca Cola
29:25
Speaker 9: and Goldman Sacks to everyone else, and also countries that
29:28
Speaker 9: span the globe, and a lot of these people are
29:30
Speaker 9: repeat clients. So you have to assume that it's not
29:32
Speaker 9: as simple as wrote advice that they're doling out, because
29:36
Speaker 9: for these big companies to turn to McKinzie again and
29:39
Speaker 9: again tells you that they see value in most of
29:42
Speaker 9: what they do. There might be some extreme cases on
29:45
Speaker 9: either side. One it might be some undesirable work and
29:48
Speaker 9: two it might just be obvious advice. But for the
29:51
Speaker 9: most part, they're clearly doing something that companies value and
29:54
Speaker 9: country's value.
29:55
Speaker 3: Speaking of countries, you mentioned China and Saudi Arabia, China
29:59
Speaker 3: wants its company is to continue to bring in consults,
30:03
Speaker 3: but they just want them to be homegrown.
30:05
Speaker 9: Consultants, right and like that seems to be the push
30:07
Speaker 9: in China, which is a good job relying on all
30:10
Speaker 9: of these Western firms to figure out how you need
30:12
Speaker 9: to modernize and be ready to compete on a global scale,
30:15
Speaker 9: but they are also encouraging them now to turn to
30:17
Speaker 9: homegrown consulting firms. Saudi Arabia is a completely different channel.
30:21
Speaker 9: We have a person at McKenzie. You estimated that in
30:24
Speaker 9: the prior decades are twenty fourteen to twenty twenty for
30:26
Speaker 9: McKinsey earned at least five hundred million dollars a year
30:30
Speaker 9: from the kingdom, which is either with companies affiliated with
30:33
Speaker 9: Saudi Arabia or the government itself. But the challenge in
30:37
Speaker 9: Saudi Arabia is also obviously you've seen some of the
30:39
Speaker 9: recent headlines where they're pulling back on consulting expenses. Some
30:43
Speaker 9: of these pie in the sky projects are not working
30:45
Speaker 9: out as they had hoped for, and again consulting fees
30:48
Speaker 9: are going away. And Saudi Arabia had become one of
30:51
Speaker 9: mckinzie's most important clients globally, so that is obviously also
30:56
Speaker 9: a place where they don't necessarily see a lot of
30:59
Speaker 9: room for.
31:01
Speaker 2: Our Thanks to shred Narajen, Bloomberg News Chief Wall Street correspondent.
31:05
Speaker 3: This week we looked at another Bloomberg Big Take story
31:07
Speaker 3: called a Shadowy Global Network helped Trump make millions and
31:10
Speaker 3: meme coins.
31:11
Speaker 2: You can find out on Bloomberg dot Com and The Terminal.
31:14
Speaker 2: The story looks at how Donald and Melania Trump have
31:16
Speaker 2: made millions from meme cooin hip.
31:18
Speaker 3: For more on this, we're joined by one of the
31:20
Speaker 3: stories authors, Zeke Fox, Bloomberg investigative reporter.
31:23
Speaker 2: We first asked Zeke to give us more context on
31:26
Speaker 2: this story.
31:27
Speaker 10: During his first term, just a couple of years ago,
31:29
Speaker 10: Trump was calling crypto a scam. But as he prepared
31:34
Speaker 10: to take office this time, he and his family started
31:39
Speaker 10: two big crypto ventures. And for this story, I went
31:44
Speaker 10: deep on kind of the silliest one, which is the
31:48
Speaker 10: Trump and Millennia meme coins.
31:50
Speaker 2: I forgot about that one.
31:51
Speaker 5: Yeah.
31:51
Speaker 10: So this was on the eve of inauguration the president
31:54
Speaker 10: and then his wife both announced they were creating new
31:56
Speaker 10: cryptocurrencies that didn't do anything at all. And these are
32:01
Speaker 10: like transparently useless. It's kind of like a gambling game.
32:06
Speaker 10: And at the time this was really hot in crypto,
32:09
Speaker 10: so many people dived in that on paper for just
32:12
Speaker 10: a second, the Trump meme coin. The Trump family had
32:16
Speaker 10: fifty billion dollars of holdings of this meme coin. But
32:21
Speaker 10: this is a crypto world where things can go poof overnight.
32:25
Speaker 10: The best estimates we've found from chainalysis and bubble maps
32:29
Speaker 10: to crypto research firms were that the Trump family made
32:32
Speaker 10: about three hundred and fifty million dollars of real profit
32:35
Speaker 10: on these meme coins.
32:38
Speaker 3: Wow, help them market these coins? Who helped them, you know,
32:42
Speaker 3: presumably profit off of that. That's the gist of your story.
32:46
Speaker 3: And was it a difficult question to answer?
32:49
Speaker 10: Yeah, Like, on the one hand, the whole thing sort
32:51
Speaker 10: of happened in the open, and it felt like there
32:54
Speaker 10: was we sort of knew what happened. On the other hand,
32:57
Speaker 10: as I tried to dive in and figure out who
32:59
Speaker 10: was behind this. It was really tough. You'd think that
33:03
Speaker 10: people might be proud to say that they'd helped the
33:06
Speaker 10: president with an important business venture, but really nobody was talking.
33:10
Speaker 10: The trail took us in a very convoluted way, but
33:13
Speaker 10: it ended up with a guy who uses an icon
33:17
Speaker 10: of a cartoon cat wearing an astronaut suit on Twitter.
33:21
Speaker 10: He goes only by mew and he runs a crypto exchange.
33:26
Speaker 10: Or he was the co founder of a crypto exchange
33:28
Speaker 10: called Metiora that was actually home to a ton of
33:33
Speaker 10: these giant mean coin launches, and all of them were
33:37
Speaker 10: Most of them seemed to follow this pattern where they'd
33:40
Speaker 10: go up a lot on hype when they got announced
33:42
Speaker 10: and then soon crash, and we were trying to figure out,
33:46
Speaker 10: you know, who knew what When the trail took us
33:50
Speaker 10: to Istanbul to Singapore, you got to read the story
33:54
Speaker 10: to see how close we got.
33:56
Speaker 2: So what was Is the meme coins still in existence?
34:02
Speaker 10: Yeah, these things like never really die, but there's uh,
34:05
Speaker 10: there's no excitement around it anymore. The price is down
34:08
Speaker 10: about ninety percent from its peak.
34:11
Speaker 2: Do I find the price?
34:13
Speaker 10: You know, their coin market is a pretty big uh
34:16
Speaker 10: uh crypto tracking site. But one funny thing we found
34:21
Speaker 10: in reporting this was talking to meme coin traders. A
34:24
Speaker 10: lot of them said that Trump actually killed this boom.
34:28
Speaker 10: Like for a while, we were all having a lot
34:29
Speaker 10: of fun trading these meme coins, but the Trump's made
34:32
Speaker 10: so much money off theirs that the gamblers in the
34:36
Speaker 10: casino were like, you know what, we're we've emptied our pockets,
34:40
Speaker 10: we got We're done with this. We need bring on
34:42
Speaker 10: prediction markets. We need something different to gamble on.
34:45
Speaker 3: So are meme coins they peaked already, they've died or
34:48
Speaker 3: I mean they're still there, but no one's making money
34:50
Speaker 3: off of them the way they used to.
34:52
Speaker 10: Yeah, it's a little bit like if you remember the
34:54
Speaker 10: NFT bubble, the like uh digital crypto art. For minute,
35:00
Speaker 10: it's hot and people are making good money, they're telling
35:03
Speaker 10: their friends, and then at some point people just they
35:09
Speaker 10: crashes and people move on. So a lot of the
35:11
Speaker 10: same people who were in on NFTs got in on
35:14
Speaker 10: meme coins and while this was while this was running,
35:18
Speaker 10: it was a great business. We talked to one twenty
35:21
Speaker 10: two year old who started one of the biggest meme
35:24
Speaker 10: coin creation and trading apps, his company, which just had
35:28
Speaker 10: a few employees generated a billion dollars from the during
35:32
Speaker 10: this meme coin bubble. But now a lot of the
35:35
Speaker 10: people who are excited about meme coins have moved on
35:38
Speaker 10: to prediction markets, where the Trump family has its own
35:43
Speaker 10: interests as well.
35:45
Speaker 3: Yeah, Don Junior, right, has some pretty big stakes or
35:48
Speaker 3: it has a pretty key role in some of the companies.
35:50
Speaker 10: Yeah, he is an advisor to both Calshie and poly Market,
35:55
Speaker 10: the two big prediction markets. And then the Trump families
36:00
Speaker 10: social media platform truth Social has announced plans to create
36:05
Speaker 10: its own prediction market. But it's kind of a pattern
36:08
Speaker 10: where the Trump family has these business interests in this
36:12
Speaker 10: kind of gray area market, and then the Trump administration
36:16
Speaker 10: is creating rules that are legalizing these markets and helping
36:20
Speaker 10: make them grow.
36:22
Speaker 2: As President Trump or his family or his administration comment
36:25
Speaker 2: on your story or about the mean coin part of it, So.
36:30
Speaker 10: The Press secretary got back to us, not really getting
36:33
Speaker 10: into the specifics, but just saying, hey, the Trump family
36:37
Speaker 10: would never engage in conflicts of interest, but not really
36:40
Speaker 10: addressing how they manage having interests in both the business
36:45
Speaker 10: side and being in charge of drafting the rules.
36:49
Speaker 2: And I guess no one cares anymore.
36:53
Speaker 10: I'd like to think that people still care. But you know,
36:57
Speaker 10: when it came normally you have like let's say this
37:01
Speaker 10: was the stock market and somebody created like a penny
37:03
Speaker 10: stock that went up, you know, one thousand xs in trash. Yeah,
37:06
Speaker 10: somebody would be diving in. They'd be digging through people's messages.
37:09
Speaker 10: They've been trying to figure out what happened meme coins.
37:12
Speaker 10: A few weeks after Trump was elected, the SEC has
37:14
Speaker 10: put out a statement that basically said not our business, okay,
37:19
Speaker 10: And nobody has stepped up to look into these yet
37:22
Speaker 10: our Thanks.
37:23
Speaker 3: To Zeke Fox, Bloomberg Investigative Reporter.
37:25
Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
37:28
Speaker 2: providing in research and data on two thousand companies and
37:30
Speaker 2: one hundred and thirty industries.
37:32
Speaker 3: And remember you can access Bloomberg Intelligence via b I
37:34
Speaker 3: go on the terminal. I'm Scarlett Foo and.
37:36
Speaker 2: I'm Paul Sweeney. Stay with us. Today's top stories and
37:39
Speaker 2: global business headlines are coming up right now