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Tesla, Netflix Energy, and Chris Christie · Bloomberg Intelligence

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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 1: my co host Matt Miller.
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Speaker 2: Every business day we bring you interviews from CEOs, market pros,
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Speaker 2: and Bloomberg experts, along with essential market moving news.
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Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
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Speaker 1: All right, let's check in with Gena Martin Adams because
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Speaker 1: we just got through and we're getting through a week
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Speaker 1: of a big, big time earnings here. Gina Martin Adams
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Speaker 1: joins as she's the chief US chief strategist for calling
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Speaker 1: all the markets equity markets for Bloomberg Intelligence. Gina again, another,
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Speaker 1: a great first half of the year, a good July
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Speaker 1: here for these markets. We're getting into earnings. As you
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Speaker 1: step back a little bit, how do you think about
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Speaker 1: these markets here?
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Speaker 3: Yeah, I think the markets have largely followed along with
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Speaker 3: earnings trends, believe it or not. Because when you exclude
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Speaker 3: the energy sector from the S and P five hundred,
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Speaker 3: it's important to keep in mind that energy is is
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Speaker 3: an input cost for most of the rest of the sector.
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Speaker 3: So we want to exclude the energy sector and what
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Speaker 3: we find is earnings trends are actually improving pretty materially
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Speaker 3: for the rest of the groups and the index, at
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Speaker 3: least relative to where they were last year, and that
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Speaker 3: improvement has been pretty continuous throughout twenty twenty three. At
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Speaker 3: the very least, earnings are much less bad than anyone
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Speaker 3: has anticipated for the groups that are outside of energy,
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Speaker 3: and that seems to be powering a pretty significant market advance.
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Speaker 4: And is that why to your point, powering this advance
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Speaker 4: that we've seen, we're investors already looking ahead and seeing
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Speaker 4: that improvement, especially when you were talking about Energy masking
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Speaker 4: those improvements. I know that when you're looking at the
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Speaker 4: earnings revision momentum data on your team. Michael Casper was
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Speaker 4: talking to me about how, particularly when you're looking at
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Speaker 4: discretionary in industrials, those were the two key groups that
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Speaker 4: were leading those growth downturns at the beginning of last year.
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Speaker 4: But now those are starting to be marked up highers,
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Speaker 4: so more of those cyclically oriented corners of the market.
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Speaker 4: Did investors already foresee that? And that's why we in
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Speaker 4: part saw that big rebound at the beginning of this year.
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Speaker 3: Yeah, I think what happened was by the end of
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Speaker 3: last year, investors were largely pricing a pretty significant recession
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Speaker 3: in earnings to continue throughout twenty twenty three. So remember
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Speaker 3: X Energy, we did see earnings start to crash really
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Speaker 3: throughout twenty twenty two. By the end of last year,
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Speaker 3: really all hope for any kind of rebound was gone
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Speaker 3: and investors were only anticipating that earnings would get worse.
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Speaker 3: But what we've seen so far this year is the
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Speaker 3: turn in inflation has been very, very consequential for turning
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Speaker 3: around the sentiment towards select industries and most of the
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Speaker 3: X energy industries in the S and S and P
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Speaker 3: five hundred. Last year, remember when inflation was accelerating very rapidly,
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Speaker 3: and producer prices in particular were accelerating extremely quickly relative
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Speaker 3: to consumer prices. Most US companies were experiencing some degree
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Speaker 3: of inflation distress. At the same time, it was very
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Speaker 3: clear that tech and tech like industries were over hired,
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Speaker 3: had too many employees relative to the haste of sales
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Speaker 3: growth that they were experiencing, and needed to write size
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Speaker 3: the ships. So we saw that occurred late last year.
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Speaker 3: Early this year we started to see inflation pressures ease
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Speaker 3: and the combination of those two things has resulted in
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Speaker 3: much better performance across the space. Some of the segments that,
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Speaker 3: as as you point out, are very sensitive to inflation,
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Speaker 3: like some of the consumer discretionary's, consumer staples, industrials, communications,
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Speaker 3: even healthcare companies, have experienced a great degree of inflation reprieve.
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Speaker 3: The result of that is likely to show up in
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Speaker 3: better earnings growth into later this year and into twenty
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Speaker 3: twenty four, and I think that is starting to get
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Speaker 3: embedded in prices. I would not say that this has
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Speaker 3: been anticipated. I think that most investors are still quite
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Speaker 3: skeptical with respect to the macro outlook. Most investors are
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Speaker 3: looking at top line growth and very concerned about where
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Speaker 3: the economy is headed. But what's happening beneath the top
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Speaker 3: line is very very important and consequential their earnings trends.
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Speaker 3: And I think that's been the lesson of twenty twenty three.
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Speaker 1: Hey, Gina, I'm just looking at the SP five hundred
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Speaker 1: and off of the October low. We're up almost twenty
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Speaker 1: eight percent. Yeah, is that a bull market that I
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Speaker 1: just haven't been talking about.
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Speaker 3: Yeah, it's a great point. We actually did some work
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Speaker 3: on this this week. That gain from the October low
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Speaker 3: to date retraces seventy six more than seventy six percent
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Speaker 3: of the peak to trap decline. When we look back
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Speaker 3: in history and we look at all bear markets, that is,
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Speaker 3: all times the S and P five hundred has dropped
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Speaker 3: at least twenty percent, we look at those points in
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Speaker 3: time in which the SMP started to recover, and a
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Speaker 3: seventy six percent retracement of the peak to trough decline
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Speaker 3: after every single bear market since history, in US history
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Speaker 3: since nineteen twenty nine, suggests that that critical level never
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Speaker 3: gets broken again.
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Speaker 5: Right.
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Speaker 3: What we actually find is over the next year, a
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Speaker 3: role market continues. It is a critical marker for a
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Speaker 3: continuation of the bull market. You just don't see a
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Speaker 3: seventy six percent retracement and then a retest of new
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Speaker 3: lows or retest of those foam or former lows within
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Speaker 3: the next year. So, you know, our work would suggest
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Speaker 3: very consistently the degree to which we've rebounded is a
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Speaker 3: very bullish marker, at least historically. Now, you know, every
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Speaker 3: time there's a chance that this time is different. The
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Speaker 3: one thing that is different this time is the lack
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Speaker 3: of recovery in small caps the other thing we've never
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Speaker 3: seen in US history is small caps recover so little
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Speaker 3: of their peak to trough decline while large caps are
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Speaker 3: recovering so much. So we want to watch small caps
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Speaker 3: really carefully because I do think that that is an
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Speaker 3: area of risk in the market. If we can't get
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Speaker 3: some participation from small caps, we can't get that positive
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Speaker 3: signal out of small caps continuing to turn a bit higher,
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Speaker 3: we could be in for a rocky road ahead.
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Speaker 4: And Gina, you've written about recently about how this sort
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Speaker 4: of gloom coming into this year about the economy is
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Speaker 4: really a distraction when you're thinking about from the point
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Speaker 4: of view from an equity perspective, in what it means
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Speaker 4: when you're looking more towards what corporate America is signaling
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Speaker 4: on the profit outlook. Why do you think this typically
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Speaker 4: continues to happen when you look back at history and
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Speaker 4: potentially even just be a losing strategy for investors if
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Speaker 4: they're obsessing over what the timing could be on a
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Speaker 4: recession when all of a sudden, especially like you were
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Speaker 4: talking about energy excluded from s and P five hundred
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Speaker 4: outlook really improving moving forward.
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Speaker 3: Yeah, And this is I think is so key for
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Speaker 3: investors to really understand, and we were reminded of this
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Speaker 3: all year this year. The economy and the earning stream
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Speaker 3: are not the same thing, and stocks trade on earnings
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Speaker 3: and the outlook for earnings. Very clearly, we've seen earnings
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Speaker 3: growth come in much better than anticipated, like I said,
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Speaker 3: less bad than anticipated, but frankly, earnings have improved considerably
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Speaker 3: relative to what was priced in the equity market late
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Speaker 3: last year. And that is really important because the economists
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Speaker 3: are still thinking, well, we are going to we may
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Speaker 3: scaze by without falling into recession, but there's still a
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Speaker 3: lot of chatter about the macro outlook. Many people are
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Speaker 3: still really wringing their hands over what's going to happened
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Speaker 3: in the economy, and that really kind of misses the point,
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Speaker 3: because there just is there are commonalities, certainly, and if
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Speaker 3: the economy does fall into recession, there will be pain
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Speaker 3: points in the earning stream that emerge. But for now,
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Speaker 3: what is important is that margins appear to have formed
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Speaker 3: a bottom. They're starting to improve a little bit here.
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Speaker 3: We seem to be stable enough in the economy to
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Speaker 3: create some stability in the top line revenue for the index.
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Speaker 3: We're always on guard for something to change. But those
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Speaker 3: earnings are what really drives stock prices, and I think
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Speaker 3: this is so important. You know, the even the percentage
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Speaker 3: share of industries impact on the equity market is so
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Speaker 3: very different than the percentage share of those industries' impact
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Speaker 3: on the economy at large that trying to use the
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Speaker 3: economy as a forecasting tool for the market proves to
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Speaker 3: be a really dicey business.
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Speaker 1: All right, Gina, it looks like we're back in the
7:53
Speaker 1: business focusing on earnings, maybe a little bit less so
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Speaker 1: on the FED. And that's a good thing because maybe
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Speaker 1: we get some earnings momentum here, Gina. Martin Adams, chief
8:02
Speaker 1: equity strategist for Bloomberg Intelligence, joining us, giving us a
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Speaker 1: great overview of the market as we kind of pour
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Speaker 1: through these earnings, you know, really kicking in this week
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Speaker 1: in size, including today and then well through the next
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Speaker 1: couple of weeks.
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Speaker 6: So maybe a.
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Speaker 1: Little bit better than expected outlook on earnings, just what
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Speaker 1: to see how comes in?
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Speaker 4: And you brought up the Dow Jones industrial average actually
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Speaker 4: heading in today. It had been up for eight consecutive sessions.
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Speaker 4: It was as long as winning streak in about four years,
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Speaker 4: and so heading for potentially a ninth consecutive session for
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Speaker 4: also looking at more of those sickle co oriented and
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Speaker 4: pores in the market.
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Speaker 1: Yeah, I'd like to see that, And Gina suggested that's
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Speaker 1: a good thing to see a little bit of a
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Speaker 1: broadening out from the tech.
8:38
Speaker 7: So that's good. You're listening to the team. Ken's a
8:42
Speaker 7: live program Bloomberg Markets weekdays at ten am Eastern on
8:46
Speaker 7: Bloomberg dot com, the iHeartRadio app and the Bloomberg Business App,
8:50
Speaker 7: or listen on demand wherever you get your podcasts.
8:54
Speaker 1: Let's talk about earnings here, and let's talk about healthcare earnings.
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Speaker 1: We can do that with Ann Hines. She's from a
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Speaker 1: Zoo America's she's a managing director and senior healthcare services
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Speaker 1: equity analysts there. And thanks so much for joining us
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Speaker 1: via the phone here healthcare services, give us a sense
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Speaker 1: of about how this group has traded over the last
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Speaker 1: couple of years. Just give us a sense how investors
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Speaker 1: and how you position the healthcare services providers out there
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Speaker 1: to investors.
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Speaker 6: Sure, I would say this group has traded.
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Speaker 5: It's a tale of two groups mainly managed here in hospitals,
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Speaker 5: and it's really based on utilization remember during COVID baseline
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Speaker 5: utilization that's what everyone refers to. Healthcare utilization before COVID
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Speaker 5: was really below pre pandemic levels. And if you even
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Speaker 5: go even further, if you do it by payer mix,
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Speaker 5: whether it's commercial, whether it's Medicare advantage, whether it's Medicaid.
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Speaker 5: Definitely Medicare advantage, and Medicaid beneficiaries were not seeking care,
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Speaker 5: they didn't want to.
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Speaker 6: Go to the hospital.
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Speaker 5: Now we get to twenty twenty three and it's probably
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Speaker 5: the first year since the pandemic that trends and normal
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Speaker 5: people are going back to get to the doctors.
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Speaker 6: They're going back.
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Speaker 5: To get elective procedures, hip proscedures, things that they really
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Speaker 5: postponed during the pandemic. That's really good for any provider,
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Speaker 5: so HGA, big hospital companies, Tenant, Universal Surgery Partners. You know,
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Speaker 5: I don't came a medtech but meta companies, any company
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Speaker 5: that provides healthcare. It's been a little bit more difficult
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Speaker 5: for managed care companies this earning season, especially managed care
10:31
Speaker 5: companies that have exposure to Medicare because it's the Medicare beneficiaries,
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Speaker 5: they tend to use the system more and they were
10:39
Speaker 5: the ones that really didn't want to go into the
10:40
Speaker 5: system during the pandemic, So we're seeing increased utilization which
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Speaker 5: is really heard in the stocks here to date, whereas
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Speaker 5: you have the hospital providers that are really outperforming.
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Speaker 4: And to your point, I mean looking at stocks like
10:54
Speaker 4: Humanity ticker symbol HUM that's down about thirteen percent year
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Speaker 4: to date. Also looking over at what's happening with un AH,
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Speaker 4: also down about five percent, but the other side of
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Speaker 4: that HCA Healthcare that's up about twenty percent, and then
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Speaker 4: Tenant Healthcare looking at that ticker symbol THC up almost
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Speaker 4: sixty percent. How much longer do you think when we're
11:17
Speaker 4: looking at those types of stocks like Tenant and then
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Speaker 4: also when it comes to HCA, how long and how
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Speaker 4: much more room it could have for those stocks to
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Speaker 4: keep moving higher.
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Speaker 5: I would argue there is room to move higher for
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Speaker 5: two reasons. One earnings, and I like to prefer the
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Speaker 5: baseline earnings pre pandemic ex COVID. They are still hampered
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Speaker 5: because of labor costs. So to put it in perspective,
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Speaker 5: before the pandemic, HDA has been about nine hundred and
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Speaker 5: ninety million on temporary labor and at the height of
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Speaker 5: the pandemic, the company has been two point five billion.
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Speaker 5: That's a twelve percent EBITA headwind, a headwind to EBITA,
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Speaker 5: and if you annualize the last quarter, it's still a
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Speaker 5: two billion, so it's very elevated.
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Speaker 6: So there's there's a lot of drivers for upside.
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Speaker 5: For a company like HGA and Tenant because temporary labor
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Speaker 5: is coming down slowly, but it's coming down. And then
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Speaker 5: you also have this pent up demand utilization that's coming
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Speaker 5: back to the system. And if you look at Medicare,
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Speaker 5: they were I would say you have probably a two
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Speaker 5: year window of people catching up with procedures that they
12:23
Speaker 5: didn't do during the pandemic.
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Speaker 1: So as you talk to your institution, investor, clients, and
12:28
Speaker 1: what are the topics that come up the most, what
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Speaker 1: do you find yourself explaining or you know, kind of
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Speaker 1: discussing with your clients.
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Speaker 6: I'm utilization.
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Speaker 5: So it's all about healthcare utilization, but also pricing what
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Speaker 5: managed care companies price into their bids for twenty twenty
12:44
Speaker 5: four and did capture this utilization. I think all the
12:48
Speaker 5: companies expected utilization.
12:50
Speaker 6: To come back.
12:51
Speaker 5: I think they probably expected it to come back more
12:54
Speaker 5: over twenty twenty three twenty twenty four in twenty twenty five,
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Speaker 5: and a reason for that is nursing is an issue.
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Speaker 6: A lot of nurses left the field.
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Speaker 5: It caused capacity constraints, and I think what we're seeing
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Speaker 5: in twenty twenty three is more capacity opening that people
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Speaker 5: probably expected. So I would think that's the main thing.
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Speaker 5: And to your question, how long can the hospitals run?
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Speaker 5: And I would argue companies that have earning upside, they
13:21
Speaker 5: usually go up and not down.
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Speaker 1: So just so on the on the labor front, I
13:26
Speaker 1: mean at granted, I mean you just think back to
13:28
Speaker 1: the pandemic and the conditions under which all the healthcare
13:31
Speaker 1: providers had to operate. I mean they're just you know, saints,
13:34
Speaker 1: every one of them. But as you mentioned, a high
13:37
Speaker 1: toll on turnover in that space. So is this an
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Speaker 1: industry that just chronically is short on nurses and maybe
13:45
Speaker 1: to lesser extent, doctors. Is that something that's kind of
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Speaker 1: a chronic issue for the industry to a.
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Speaker 5: Agree, But what happened during the pandemic is that you
13:55
Speaker 5: have what we have a permanent nurse, a permanent nurse
13:57
Speaker 5: that obvious works full time, and then you have nurse
14:00
Speaker 5: who like to travel they get paid a little bit
14:03
Speaker 5: a little bit more on an hour, but they tend
14:05
Speaker 5: to travel. And what happened during the pandemic there was
14:07
Speaker 5: such a high demand, you had this phenomena that permanent
14:11
Speaker 5: nurses went temporary to get the higher hourly rage. Like
14:16
Speaker 5: to primitent perspective, a nurse might make fifty dollars an hour,
14:19
Speaker 5: but at the height pandemic, they were making.
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Speaker 6: Two hundred and fifty dollars an hour.
14:24
Speaker 5: I think what we're seeing is that some of these
14:26
Speaker 5: nurses that left their permanent position, they're coming back to
14:29
Speaker 5: full time positions in the workforce. But there's also a
14:34
Speaker 5: part that the average age of the nurses about fifty.
14:38
Speaker 5: Maybe that nurse is working less hours, less shifts.
14:42
Speaker 6: So it's a combination of both.
14:45
Speaker 4: And to Ball's point, because he was asking about some
14:47
Speaker 4: of the top questions you're getting, what about the top
14:50
Speaker 4: concerns among some of your clients as far as what
14:54
Speaker 4: this could mean as far as the outlook moving forward.
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Speaker 5: I would say the top concerns, like get is on
15:00
Speaker 5: the managed care sector because they have a few headwinds
15:03
Speaker 5: coming up. There's some changes to Medicare reimbursement that would
15:07
Speaker 5: impact Medicare advantage plans, and the big thing is all
15:10
Speaker 5: also Medicaid we determinations because I'm sure you know the
15:14
Speaker 5: Medicaid rolls to well during the pandemic. Because of the
15:17
Speaker 5: public health emergency, states would not allow to redetermine anyone
15:21
Speaker 5: on Medicaid and that ended in April, and over the
15:24
Speaker 5: next twelve to fourteen months, states will be rolling.
15:28
Speaker 6: Beneficiary is off. And that just causes a.
15:30
Speaker 5: Lot of uncertainty with numbers because a lot of these
15:33
Speaker 5: companies didn't benefit benefit from the public health emergency.
15:37
Speaker 1: All right, and top picks, what are you talking to
15:40
Speaker 1: your clients about? What do you like right here going forward?
15:44
Speaker 5: So I would say a top pick on the managed
15:46
Speaker 5: care side are Signa and Elevance and singing that for
15:50
Speaker 5: two reasons. One, they don't have a lot of Medicare
15:52
Speaker 5: advantage exposure, so a lot of the changes to reimbursement's
15:56
Speaker 5: not going to impact them. And they also don't have
15:58
Speaker 5: a lot of Medicaid determined exposure. So the two biggest
16:02
Speaker 5: worries in the managecure sector they don't.
16:04
Speaker 6: Have a lot of exposure to.
16:05
Speaker 5: There is some risk with PBM legislation, but I would
16:08
Speaker 5: argue that's already based in valuation at about ten times
16:12
Speaker 5: twenty twenty four earnings.
16:14
Speaker 6: I also like.
16:15
Speaker 5: I still like HGA, just because despite the run, there
16:18
Speaker 5: is a lot of upside to earnings in my opinion
16:21
Speaker 5: for twenty twenty three and twenty twenty four.
16:24
Speaker 4: And when you're talking about legislation, are there anything in
16:27
Speaker 4: particular coming up on Capitol Hill that you think infesstors
16:30
Speaker 4: should keep their eyes on when it comes to potential
16:33
Speaker 4: maybe regulations that could affect some of these companies.
16:36
Speaker 5: Yes, so Congress wants to pass PPM legislation that has
16:41
Speaker 5: that will result in increased regulatory scrutiny on the PBM.
16:46
Speaker 5: So companies with the biggest exposure would be United Healthcare
16:50
Speaker 5: CBS and Signa that's pretty well known. But the question
16:55
Speaker 5: is that if there's going to be a legislative vehicle.
16:58
Speaker 5: I believe there will be a legislator vehicle in December.
17:01
Speaker 5: And I'm also a believer that this has been a
17:04
Speaker 5: headline of us for a long time, and I think
17:07
Speaker 5: any type of legislation that passes will have not going
17:11
Speaker 5: to walk to twenty twenty six, which will allow these
17:13
Speaker 5: PBMs to change language and their contracts. So when all
17:18
Speaker 5: of a sudden done. I actually don't think it will
17:19
Speaker 5: have a meaningful impact on EPs, and it should remove
17:22
Speaker 5: a headline risk and we should get more details on that,
17:25
Speaker 5: but not until December. But that's the major thing because
17:27
Speaker 5: typically in healthcare, when there's a balance of power in Washington,
17:31
Speaker 5: not a lot of healthcare legislation is passed.
17:34
Speaker 1: And just about thirty seconds here, drug distributors, you're neutral
17:37
Speaker 1: on that group? Why really?
17:40
Speaker 6: Valuation?
17:41
Speaker 5: They've had a great run for a long time and
17:44
Speaker 5: they're reaching their ten year highs. Earnings visibility is very good.
17:49
Speaker 5: But I do think it's a crowded sector. It's a
17:51
Speaker 5: sector that a lot of journalists went in over the
17:53
Speaker 5: past couple of years when there was a lot of
17:56
Speaker 5: uncertainty in the market. But they are great companies and
17:59
Speaker 5: it's more valuation anything.
18:00
Speaker 1: All right, And thanks so much for giving us some
18:02
Speaker 1: of your time. An Heinz's senior healthcare Services Equity. An
18:06
Speaker 1: she's a managinging director over at Mizuho.
18:08
Speaker 7: You're listening to the tape. Cat's are live program Bloomberg
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18:27
Speaker 4: We want to switch things up for our next segment
18:29
Speaker 4: and do an energy outlook. And I'm excited because we
18:34
Speaker 4: do have in studio here Jonathan Maxwell, who's CEO at
18:39
Speaker 4: Sustainable Development Capital, who's joining us to discuss the outlook
18:42
Speaker 4: on oil and the renewable energy markets, particularly with the
18:46
Speaker 4: growth of tessel this year in the emergence of v evs.
18:50
Speaker 4: But before I actually get into that, I have to
18:52
Speaker 4: ask you about Ukraine. And we're seeing wheat prices soaring today.
18:57
Speaker 4: It's actually their three day gain is more than ten
18:59
Speaker 4: per after the US did warn that Russia has laid
19:02
Speaker 4: mines at Ukrainian grain ports. Now you've written a book
19:05
Speaker 4: recently tied to Ukraine. What's your take on this and
19:09
Speaker 4: how does this mean in what does it mean for
19:11
Speaker 4: the energy and commodity space.
19:13
Speaker 8: I think it has a huge story around resources and
19:17
Speaker 8: conflict over resources. Ukraine was really the conduit prior to
19:23
Speaker 8: the Russia Ukraine crisis for Russia's exports of oil and
19:28
Speaker 8: sorry of gas. Into Europe its pipe. It was piped
19:31
Speaker 8: through Ukraine. Europe needed to get forty percent of its
19:35
Speaker 8: gas from Russia. That's over. We saw energy prices skyrocket
19:41
Speaker 8: last year. We saw energy in Europe. We saw energy
19:44
Speaker 8: security become front page news in a way that it
19:47
Speaker 8: never had before. So the link between Ukraine and resources
19:52
Speaker 8: was the big headline last year was energy. Now, there
19:56
Speaker 8: was a deal struck which kept grain exports and other
20:00
Speaker 8: really critical resource exports going out of Ukraine. But Ukraine
20:05
Speaker 8: is one of the most important resource stories in the world.
20:10
Speaker 8: After America became energy independent in twenty nineteen, really this
20:15
Speaker 8: resource arena has shifted now into eastern Europe. You know,
20:19
Speaker 8: Russia and Ukraine are really the nexus for the balancing
20:22
Speaker 8: demand around or supply and demand around oil and gas
20:26
Speaker 8: on the one hand, another resources like grain on the other.
20:28
Speaker 8: So what we're seeing is a conflict which is partly
20:33
Speaker 8: driven by conflict over resources, but also it's having a
20:36
Speaker 8: dramatic impact on pricing.
20:38
Speaker 1: All right, So, as sustainable development capital, you guys look
20:42
Speaker 1: at kind of I guess this challenge about being sustainable,
20:46
Speaker 1: being eco friendly a little bit differently. Talk to us
20:48
Speaker 1: about the types of investments you make there. What do
20:51
Speaker 1: you like to what do you think you can add value?
20:53
Speaker 6: Right?
20:53
Speaker 8: Well, you know, one of the major responses that came
20:57
Speaker 8: up telling it back to Russia Ukraine. One of the
20:59
Speaker 8: major responses happened last year is given the fact that
21:02
Speaker 8: energy was being constrained in Europe, what should we do
21:04
Speaker 8: about it?
21:05
Speaker 4: So what?
21:06
Speaker 8: So there was a huge response build more energy, add
21:10
Speaker 8: more into the system, mostly renewable energy, until until it
21:15
Speaker 8: became clear how long that would take and how much
21:18
Speaker 8: money that would take, and the fact that that wasn't
21:20
Speaker 8: going to address energy security in the short term. In fact,
21:23
Speaker 8: there was an echo of the European Commissioner for Energy's
21:27
Speaker 8: response from the twenty fourteen invasion, which was really important
21:31
Speaker 8: in Europe last year. They said, for every every unit
21:33
Speaker 8: of gas that we don't use, is two point six
21:37
Speaker 8: units of gas we don't need to buy from Russia.
21:39
Speaker 8: So the implication was, actually, we're wasting so much energy,
21:44
Speaker 8: and about seventy percent of energy gets lost somewhere between
21:47
Speaker 8: getting extracted and used. But if you can stop, that's
21:49
Speaker 8: the number.
21:49
Speaker 7: I like.
21:50
Speaker 1: That's because I remember that from last time.
21:52
Speaker 7: One more time slowly for the Yeah.
21:53
Speaker 8: So in the United States, the Lawrence Livermore National Laboratory
21:57
Speaker 8: has charts each year produced everything year that show how
22:00
Speaker 8: much energy gets lost from the point of extraction to
22:03
Speaker 8: end use. About ten percent gets lost extracting and converting it.
22:07
Speaker 8: About fifty percent gets lost in heat because energy is
22:11
Speaker 8: generated typically in one place and used in a very
22:13
Speaker 8: different place, and you can't do anything with the heat.
22:15
Speaker 8: And then another ten percent gets lost in transmission and distribution.
22:19
Speaker 8: This is the basic fact of the way that we've
22:21
Speaker 8: done energies centralized energy systems, not just in the US,
22:24
Speaker 8: but in the UK, Europe, everywhere, and that is the
22:27
Speaker 8: part of the problem that needs to be solved.
22:28
Speaker 7: Here.
22:28
Speaker 8: We are trying to add more energy into the system,
22:31
Speaker 8: but the system's broken. It's unbelievably inefficient. And if we
22:34
Speaker 8: can generate energy close to or at the point that's
22:37
Speaker 8: needed and stop wasting so much at the point of use,
22:41
Speaker 8: ten twenty percent plus is typically wasted at the point
22:44
Speaker 8: of use, that's one of the most important largest sources
22:47
Speaker 8: of productivity economic gain, let alone carbon emission reductions available
22:53
Speaker 8: and worth.
22:54
Speaker 4: So then what is the key to reducing energy ways
22:57
Speaker 4: to meet climate goals?
22:58
Speaker 6: Ultimately?
23:00
Speaker 8: So I think the first point is generate energy were
23:04
Speaker 8: it close to or at the point of view. So
23:07
Speaker 8: let's look at the big problems.
23:09
Speaker 7: Right.
23:09
Speaker 8: Electricity is being greened, which is great, but it gets
23:12
Speaker 8: used mostly a residential context. If you look at industry,
23:15
Speaker 8: eighty five percent of industry is driven by fossil fuels,
23:18
Speaker 8: ninety eight percent of transports. So what can you do
23:20
Speaker 8: about that? You can generate the energy close to the
23:23
Speaker 8: point of use. So if you even if you're using
23:25
Speaker 8: natural gas, capture the heat and use it for heat
23:27
Speaker 8: processing an industry. If you can do that by recycling
23:31
Speaker 8: waste gases. On one of our funds, we earn a
23:34
Speaker 8: huge recycling project up in Indiana, Gary, Indiana where we
23:39
Speaker 8: recycle flue gases and use that to power the steel mills.
23:42
Speaker 8: So these sorts of a solar on site, solar on
23:46
Speaker 8: site storage, it's a massive part of the solution. The
23:49
Speaker 8: second part is actually just stopping wasting so much inside
23:52
Speaker 8: of buildings, motors, controls, lighting. You know, these are heating, ventilation,
23:59
Speaker 8: air conditioning, cool as the warm weather heats up the world.
24:02
Speaker 8: So these are the things that are going to make
24:04
Speaker 8: a tremendous difference and can be done quickly. It takes
24:08
Speaker 8: years to build a new renewable power system. We need
24:10
Speaker 8: to do as much of that as possible, but it
24:12
Speaker 8: takes months, maybe a couple of years to do any
24:16
Speaker 8: of the things that I'm discussing in terms of generating
24:19
Speaker 8: energy on site or indeed reducing demand.
24:21
Speaker 1: For So, what's a recent investment that your funds have
24:25
Speaker 1: made that you're very excited about.
24:27
Speaker 8: So I was in Upstate New York yesterday. We've owned
24:31
Speaker 8: one of the largest district energy systems in the United States,
24:34
Speaker 8: and that provides energy on site to one hundred and
24:36
Speaker 8: twenty customers in Rochester Business Park. We own an investment
24:41
Speaker 8: in a company here in Manhattan which is called Onyx Renewables,
24:45
Speaker 8: which does solar and storage nationwide, and that produces on
24:49
Speaker 8: site generation on people's rooftops, car ports, or in the ground,
24:52
Speaker 8: but were connected directly to buildings producing low carbon, low
24:56
Speaker 8: cost energy solutions. On the electric vehicle side, this is
25:00
Speaker 8: a huge opportunity electric vehicles around eighty percent efficient versus
25:06
Speaker 8: about thirty percent efficient.
25:08
Speaker 1: Efficient versus thirty percent efficient for internal combustion. Yeah, so
25:13
Speaker 1: do you how do you define that? Like, what's what's efficient?
25:15
Speaker 7: Right?
25:15
Speaker 8: So, if you track the energy, the primary energy coming
25:18
Speaker 8: out of a well what they call well to wheel,
25:20
Speaker 8: and you sort of you track the journey of the
25:22
Speaker 8: molecule to exactly what survives through the engine get lost
25:27
Speaker 8: through the generation, transmission, et cetera. It's roughly thirty percent.
25:30
Speaker 8: And an internal combustion engine what they call wind to wheel,
25:33
Speaker 8: that is taking the electricity out of a renewable power
25:36
Speaker 8: plant and the electricity broadly survives to get into the
25:39
Speaker 8: car and then that is then converted into power that
25:43
Speaker 8: actually goes along and moves this vehicle along. So it's
25:46
Speaker 8: it's very efficient. It's also frankly, yes, it will help
25:51
Speaker 8: reduce demand hopefully and displace fossil fuel use, but it
25:54
Speaker 8: also cuts pollution in town. So even even if you're
25:58
Speaker 8: not into the climate and you're ailing too and you
26:01
Speaker 8: don't like greenwashing or green hushing, then surely you don't
26:05
Speaker 8: want your kids to grow up in cities there were
26:07
Speaker 8: three or four times the level considered safe by the
26:10
Speaker 8: World Health Organization, like my hometown of London because of
26:13
Speaker 8: the cars to Texas and buses. So it's those sorts
26:16
Speaker 8: of things where you've got efficiency combined with better outcomes
26:18
Speaker 8: for people.
26:20
Speaker 1: We're having you back the next time you're in New York.
26:22
Speaker 1: I know you said you're back here a lot and
26:23
Speaker 1: back in New Orkrin get continue this conversation. Jonathan Maxwell's CEO,
26:27
Speaker 1: co founder Sustainable Development Capital.
26:30
Speaker 4: I like the Capital book out in the US and December.
26:34
Speaker 7: You're listening to the Team Can't Live program Bloomberg Markets
26:38
Speaker 7: weekdays at ten am Eastern on Bloomberg dot Com, the
26:41
Speaker 7: iHeartRadio app, and the Bloomberg Business App, or listen on
26:44
Speaker 7: demand wherever you get your podcasts.
26:48
Speaker 1: So let's head down to Washington, DC. Joe Matthew, radio
26:51
Speaker 1: and TV host Bloomberg's sound on in Bloomberg's Balance of
26:54
Speaker 1: Power joins us. Joe, You and Anne Marie Hordern interviewed
26:58
Speaker 1: Chris Christie on Bounce of Power last night. Here's a
27:01
Speaker 1: clip of your discussion.
27:02
Speaker 9: At our nation's secrets hanging out at Marvaco and at
27:07
Speaker 9: his Bedminster golf club. Think about the risk that that
27:09
Speaker 9: puts our men and women in uniform and our intelligence
27:13
Speaker 9: officers ad.
27:14
Speaker 1: That was a new Former New Jersey Governor Chris Christie's
27:17
Speaker 1: also at presidential hopeful for twenty four. Joe talked to
27:20
Speaker 1: us about kind of some of the highlights from your
27:23
Speaker 1: discussion with mister Christy.
27:25
Speaker 10: Well, we tried to take a different approach, as you
27:28
Speaker 10: might have noticed, because every time I see Chris Christy
27:31
Speaker 10: or hear Chris Christy in an interview, the entire thing
27:34
Speaker 10: is about Donald Trump, and of course you have to
27:36
Speaker 10: ask him about the front runner. But we tried to
27:38
Speaker 10: be a little bit different here for our audience on
27:40
Speaker 10: Luberg and actually talk about a couple of issues. I've
27:43
Speaker 10: never heard him be asked about the economy, about inflation,
27:47
Speaker 10: his thoughts on J. Powell, his thoughts on geopolitics, how
27:50
Speaker 10: he would handle China, his thoughts on Taiwan. A lot
27:54
Speaker 10: of things that we frankly learned for the first time
27:58
Speaker 10: in that conversation last evening, and we you've got to
28:00
Speaker 10: take a pretty deep dive with him on a number
28:02
Speaker 10: of issues here. So yeah, when it comes to Donald Trump, look,
28:05
Speaker 10: he's a former prosecutor and his view is that we
28:08
Speaker 10: have already seen what could be the most damaging case
28:11
Speaker 10: against him. That cut that you just played, he's talking
28:13
Speaker 10: about the classified documents case, and he sees that as
28:16
Speaker 10: the most damning legal action that the president former president
28:19
Speaker 10: is facing right now, even as we wait for yet
28:21
Speaker 10: another indictment likely to drop according to Donald Trump in
28:23
Speaker 10: the next few days.
28:24
Speaker 4: How do you think this shapes up for the race
28:27
Speaker 4: for the election, especially when you're looking at this latest
28:30
Speaker 4: poll from Warders where it has Trump up about forty
28:32
Speaker 4: seven percent of support him on Republicans, and then you
28:35
Speaker 4: look at Desanta's at abound nineteen percent, and kind of
28:39
Speaker 4: what you think this could mean as far as from
28:40
Speaker 4: a sentiment perspective.
28:43
Speaker 10: Well, you know, first of all, I would just caution
28:45
Speaker 10: everybody to throw a little bit of salt at you know,
28:48
Speaker 10: more than one grain at any national poll right now,
28:51
Speaker 10: because you know, if I bring you back to where
28:53
Speaker 10: we were in the race in twenty sixteen, right now,
28:55
Speaker 10: you'd be asking me when Jeb Bush was going to
28:58
Speaker 10: move into the White House. You'd be asking me when
29:01
Speaker 10: Scott Walker might be doing the same thing. Donald Trump,
29:04
Speaker 10: I believe was around four percent at that point. Now
29:06
Speaker 10: we cannot argue with this remarkable lead, this powerful lead
29:10
Speaker 10: that Donald Trump has at the moment. You're asking the
29:13
Speaker 10: right question about number two though, and we're watching Ron
29:15
Speaker 10: DeSantis attempt to relaunch reset his campaign. He actually laid
29:18
Speaker 10: off some workers, found himself spending too much money and
29:22
Speaker 10: hard to rationalize a polling data set that's been dropping
29:27
Speaker 10: essentially since he announced officially that he was coming into
29:31
Speaker 10: the campaign. So Ron DeSantis is dealing with an identity
29:33
Speaker 10: issue right now. He's trying to go out there and
29:35
Speaker 10: do more mainstream media talk to people other than those
29:38
Speaker 10: who agree with him, and it's really, frankly unclear. He's
29:41
Speaker 10: got a massive apparatus in a lot of money, but
29:43
Speaker 10: it's unclear that he can catch up to Donald Trump
29:45
Speaker 10: at this stage of the race. It's going to require
29:47
Speaker 10: an event, and I'll remind everybody's a big one next month,
29:50
Speaker 10: and that's the debate, the first Republican debate that'll be
29:52
Speaker 10: in Milwaukee that the RNC is running. And by the way,
29:55
Speaker 10: the aforementioned Chris Christy is among candidates who made the
29:58
Speaker 10: cut to go on that stage, but so far has
30:00
Speaker 10: not taken the pledge as the RNC is asking everyone
30:03
Speaker 10: to support the eventual nominee, because if you're Chris Christy,
30:06
Speaker 10: you can't say you're going to vote for Donald Trump
30:07
Speaker 10: if he does this again.
30:09
Speaker 7: Right?
30:09
Speaker 1: Interesting, All right, So, Joe, based upon your discussions with
30:12
Speaker 1: Amory and the governor last night, what do you think
30:15
Speaker 1: Governor Christy views as maybe his strategy going into the selection.
30:20
Speaker 1: A lot of folks are just suggesting he's nothing more
30:22
Speaker 1: than someone to just beat up on Donald Trump. But
30:25
Speaker 1: what did you live last night?
30:27
Speaker 10: I'm glad you asked that. It's the first question that
30:28
Speaker 10: I asked him. You know, everyone knows that you're here
30:31
Speaker 10: to be that you're the guy who's here to punch
30:33
Speaker 10: Donald Trump in the nose rhetorically, that's your brand. And
30:36
Speaker 10: many would argue, by the way, there would never have
30:38
Speaker 10: been at Donald Trump without Chris Christie. You remember he
30:40
Speaker 10: was to tell it like it is candy. Now he's
30:42
Speaker 10: facing somebody who actually became president on that idea. But
30:47
Speaker 10: there needs to be more than that. And when I
30:49
Speaker 10: asked him about what is it that you know beyond
30:51
Speaker 10: anti Trump? What is your brand? He said one word truth.
30:56
Speaker 10: I'm the only guy up there who will tell you
30:58
Speaker 10: the truth. Now, when you put that against some of
31:00
Speaker 10: the policy positions that we discussed, you might actually have
31:04
Speaker 10: a package there that a voter could consider. But when
31:06
Speaker 10: you're looking at him, between six and eight percent of
31:08
Speaker 10: the polls right now, he has yet to connect the
31:10
Speaker 10: dots with voters in that way.
31:13
Speaker 4: Have we heard from the Biden administration about Trump's legal
31:17
Speaker 4: woes right now.
31:19
Speaker 10: They're really careful to not talk about it. They don't
31:21
Speaker 10: want anyone to think that there's any contact between the
31:24
Speaker 10: President and Merrick Garland at the DOJ, never mind the
31:26
Speaker 10: Special Council. These degrees of separation are really important to
31:30
Speaker 10: the White House here because they're being accused of weaponizing
31:33
Speaker 10: the Department of Justice. Even the Speaker of the House
31:35
Speaker 10: said that the only reason it happened, he said, is
31:37
Speaker 10: because Donald Trump's poll numbers are higher, which is a
31:40
Speaker 10: little bit ridiculous because this investigation has been going on
31:43
Speaker 10: for a lot longer than Donald Trump had this lead
31:45
Speaker 10: in the polls. So for the White House, you know what,
31:48
Speaker 10: they treat it just like they do the FED. They differ.
31:51
Speaker 1: Joe, you're in Washington, DC, you're based in DC. You
31:54
Speaker 1: talk to everybody here. What is your sense at this
31:58
Speaker 1: early stage and what the Republican Party would like to see,
32:01
Speaker 1: How would they like to see things develop, Who would
32:03
Speaker 1: they like their nominee to be?
32:05
Speaker 7: Do you think.
32:07
Speaker 10: Impossible to answer because it's such a splintered party right now,
32:11
Speaker 10: and that's really a challenge. If you're running the RNC,
32:14
Speaker 10: you're trying to figure this out exactly, because thirty percent
32:17
Speaker 10: are just hard locked behind Donald Trump. Even if he
32:20
Speaker 10: does shoot somebody on Fifth Avenue, as he says, we're
32:22
Speaker 10: starting to believe him there that they will not budge.
32:25
Speaker 10: So now you're dealing with roughly seventy percent of the electorate,
32:28
Speaker 10: and the more candidates jump in this thing, they're splintering
32:30
Speaker 10: it along the way. I'm not sure anyone is resonating
32:33
Speaker 10: other than Donald Trump in a significant way that you
32:35
Speaker 10: could see them actually becoming the nominee. Yet, we have
32:38
Speaker 10: to get some debates under our belt. We need something
32:40
Speaker 10: to happen here. And I would also challenge the conventional
32:43
Speaker 10: wisdom on the idea of another indictment for Donald Trump.
32:46
Speaker 10: Well that may help him in the near term raise
32:48
Speaker 10: money and lift his polls, we could be looking at
32:50
Speaker 10: a very different dynamic with him walking into a re
32:52
Speaker 10: election cycle if we call it that for him, as
32:55
Speaker 10: a former president carrying four or five indictments, it would
32:59
Speaker 10: be historic and there's no historical measure to how that
33:04
Speaker 10: might impact the electorate.
33:06
Speaker 1: And just from the same question from the Democratic side,
33:09
Speaker 1: is a Democratic Party united behind President Biden making another
33:14
Speaker 1: run here?
33:15
Speaker 10: You know, as much as it's going to be, there's
33:17
Speaker 10: no clear alternative. And while some have asked, if you know,
33:21
Speaker 10: the president should drop out here and bring in a
33:24
Speaker 10: younger Democrat, no one exactly is raising their hands for
33:27
Speaker 10: that right now. So I think as long as he
33:28
Speaker 10: wants to do this, it's probably his. But if you
33:31
Speaker 10: look at the poll yesterday from Quinnipiac University, it found
33:36
Speaker 10: that nearly half I believe it was forty seven percent
33:39
Speaker 10: of voters from both parties would like to see somebody
33:44
Speaker 10: other than not only the names we're talking about, Paul,
33:48
Speaker 10: but they want to see a third party candidate, and
33:51
Speaker 10: that brings us to this whole idea of the No
33:53
Speaker 10: Labels Party. They held a big event in New Hampshire
33:56
Speaker 10: this week with Joe Manchin, and that's the one thing
34:00
Speaker 10: that upsets Democrats when you ask them about a third party,
34:03
Speaker 10: they say that is the most surefireway to reelect Donald Trump.
34:07
Speaker 10: That is what would keep Joe Biden out of the
34:08
Speaker 10: White House.
34:09
Speaker 1: All right, Joe, great, great analysis as always Joe Matthew.
34:12
Speaker 1: He is host of Bloomberg Sound On and Bloomberg's Balance
34:15
Speaker 1: of Power, Bounce of Power on Television, Sound On on Radio.
34:18
Speaker 1: So Joe Matthew is our multimedia Washington, DC source, and
34:22
Speaker 1: he and Annry Hordern last evening spoke with the presidential candidate,
34:27
Speaker 1: Chris Christi, former governor of my home state New Jersey.
34:31
Speaker 1: So lots to talk about there. It's going to be
34:33
Speaker 1: a fascinating run into the twenty twenty four election.
34:35
Speaker 6: It definitely is.
34:36
Speaker 4: And then him calling out how those classified documents case
34:40
Speaker 4: is the worst of the Trump charges at this point.
34:42
Speaker 1: Yeah, that's me to going to see how that plays.
34:44
Speaker 1: I will have obviously full coverage going forward.
34:46
Speaker 7: You're listening to the tape. Can's are live program Bloomberg
34:49
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
34:53
Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
34:56
Speaker 7: You can also listen live on Amazon Alexa from our
34:59
Speaker 7: flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
35:05
Speaker 1: Jess meant Paul Sweeney here in the Bloomberg Interactive Brokers studio.
35:08
Speaker 1: We are streaming on YouTube. You can just go over
35:11
Speaker 1: to YouTube and just search Bloomberg Global News and that
35:14
Speaker 1: I'll bring you right to the feed. In this hour,
35:16
Speaker 1: we are joined in studio with Barry Riodholts. He's a
35:19
Speaker 1: host of Masters in Business, little podcast he does with
35:22
Speaker 1: the good folks at Bloomberg. Has also got a day
35:24
Speaker 1: job with Ridholt's wealth management. Barry, thanks so much for
35:27
Speaker 1: joining us here.
35:27
Speaker 11: My pleasure. Always a blast to be here.
35:29
Speaker 1: All right, let's kick it off real quick here because
35:31
Speaker 1: one of the names that Charlie was just mentioning, and
35:33
Speaker 1: that thing was Netflix. After the closed last night reported
35:37
Speaker 1: some numbers stock us off nine percent. The revenue guidance
35:40
Speaker 1: missed here, So that's kind of the big issue, and
35:42
Speaker 1: it just kind of calls into question the whole profitability
35:45
Speaker 1: of the streaming business. And we want to bring in
35:47
Speaker 1: somebody who really knows this business well, Mark Douglass. He's
35:49
Speaker 1: a president and CEO of Mountain. He joins us via
35:52
Speaker 1: zoom here. So, Mark, what did you take away from
35:55
Speaker 1: what we heard from the company last night and what
35:57
Speaker 1: we saw on their results.
36:02
Speaker 12: Migration of building mode in terms of password sharing. The
36:05
Speaker 12: way I think of the password sharing, it's like a
36:08
Speaker 12: revenue backlock for Netflix that they can tap into. I
36:11
Speaker 12: don't think they're likely pushing one hundred percent on ending
36:16
Speaker 12: password sharing. They have an incentive to do it slowly
36:20
Speaker 12: and then have like essentially it's backlock. The app business
36:23
Speaker 12: still has some effort to ramp up, but I think
36:26
Speaker 12: the fact that they missed revenue hit earnings is an
36:28
Speaker 12: indication that you're going to see increased earnings at Netflix
36:33
Speaker 12: because the new consume, the new consumers have paying that
36:37
Speaker 12: they're coming off the password sharing, They have no increased costs,
36:40
Speaker 12: they have very little increased costs with the app business,
36:43
Speaker 12: that all of that revenue is going to go straight
36:44
Speaker 12: to the bottom line.
36:46
Speaker 11: So let's put some flesh on the bones. What are
36:49
Speaker 11: Netflix estimates of how many households are sharing passwords and
36:55
Speaker 11: how many potential new subscribers does this layout What sort
36:59
Speaker 11: of revenue bump could we say?
37:03
Speaker 12: I don't offhand know the exact numbers. I know it's
37:07
Speaker 12: a very significant portion of the users that use Netflix,
37:12
Speaker 12: you know or doing password sharing. I remember a few
37:14
Speaker 12: years ago there was a meme when one of their
37:17
Speaker 12: shows went viral right before Christmas, and it was like,
37:20
Speaker 12: how did fifty million people watch that movie with only
37:23
Speaker 12: ten you know, Netflix passwords? So I think, you know,
37:27
Speaker 12: everyone is sharing and Netflix is going to essentially do
37:31
Speaker 12: a migration over time from password sharing to fully paid
37:35
Speaker 12: subscriptions and do it now with that supported likely being
37:39
Speaker 12: right in the mix, which generates even more revenue for
37:42
Speaker 12: them and thus more profit.
37:44
Speaker 11: I honest understand, I'm watching Drive to Survive in the den.
37:48
Speaker 11: My wife puts something on in the bedroom and I
37:50
Speaker 11: get kicked out on Netflix. Yet everybody else seems to
37:54
Speaker 11: be seems to be sharing this. So how long do
37:57
Speaker 11: you think it'll take for them to migrate a substantial
38:00
Speaker 11: number of these people onto the platform as paying customers.
38:03
Speaker 12: I think they could do it in three months, but
38:05
Speaker 12: I think if I were them, I'd take three years
38:07
Speaker 12: and just always have this additional revenue stream. It sounds
38:11
Speaker 12: like your household has been identified as one with no
38:14
Speaker 12: password sharing a lot top.
38:16
Speaker 7: Of the list.
38:16
Speaker 12: I would have made it exactly.
38:19
Speaker 4: If you look at this stock Tickerson Ball nf Lex,
38:23
Speaker 4: it's been up more than one hundred percent of the
38:25
Speaker 4: past twelve months. If to Paul's point, you look at
38:27
Speaker 4: it today down nine percent, this would be its worst
38:30
Speaker 4: percentage decline of this year, and the worse since April
38:33
Speaker 4: of twenty twenty two. How much of this is also
38:35
Speaker 4: it's had such a huge run, would you expect it
38:38
Speaker 4: to see it pull back like this on a day
38:39
Speaker 4: like today after it got it turned its results.
38:42
Speaker 12: Yeah, I mean absolutely, And I think last year was
38:45
Speaker 12: an overreaction and that you know, the part of the
38:48
Speaker 12: reason they had such a big run up is because
38:50
Speaker 12: they fell off. The stock fell off at clift nine
38:53
Speaker 12: percent is not falling off a clift. It's a decline.
38:56
Speaker 12: And I honestly, I think you're going to see people
38:58
Speaker 12: buying into the stock. I personally am going to buy
39:01
Speaker 12: into the stock. I think it's I just expect this
39:05
Speaker 12: to start a new era of increased earnings and Netflix
39:08
Speaker 12: because of the profitability of the password sharing subscribers and
39:13
Speaker 12: the advertise and the advertising business.
39:16
Speaker 7: So I think you're going.
39:18
Speaker 12: To see, you know, this be a temporary blip and
39:20
Speaker 12: then they start to you see the stock price start
39:23
Speaker 12: to increase.
39:23
Speaker 4: What about other streaming platforms and those types of stocks.
39:27
Speaker 4: We're not gonna have Disney's earnings results until August ninth,
39:29
Speaker 4: but obviously when you're thinking about some of its rivals,
39:32
Speaker 4: maybe Roku, what about those particular types of stocks and
39:35
Speaker 4: are those potentially ones that you're buying or maybe selling.
39:38
Speaker 12: I think Netflix is kind of kind of uniquely positioned.
39:41
Speaker 12: I think there's opportunity obviously at Disney Plus, but then
39:44
Speaker 12: you're also buying in the Disney parks and all these
39:47
Speaker 12: Disney films, and there's a lot of complexity and a
39:51
Speaker 12: lot of issues there. Netflix is best when they operate
39:55
Speaker 12: like a tech company and not a Hollywood studio. And
39:59
Speaker 12: so the password sharing, the advertise, these are things that
40:02
Speaker 12: they are really led out of Mountain View, you know,
40:06
Speaker 12: in the tech side of Netflix. And whenever they do that,
40:09
Speaker 12: they lead the industry and innovation and then start to
40:13
Speaker 12: lead the industry in terms of growth. And that's happening
40:15
Speaker 12: now and that's I think that one statement is what
40:18
Speaker 12: I think makes Netflix, you know, like above their peers.
40:23
Speaker 12: So they say, and why I like the company.
40:26
Speaker 1: Hey, Mark, you're one of the really thought leaders in
40:28
Speaker 1: the digital advertising space. Give us a sense of just
40:30
Speaker 1: how you think this streaming advertising business is going to
40:34
Speaker 1: play out.
40:35
Speaker 12: Yeah, I think it's been very challenging. There's lots of
40:39
Speaker 12: demand to advertise on Netflix, but they have to navigate
40:43
Speaker 12: do they have rights on all the shows? And then
40:46
Speaker 12: there are a lot of big agencies involved, the big
40:48
Speaker 12: holding companies like WPP and Nomniicom, and so you know,
40:52
Speaker 12: they're they're underway. The content is very attractive the consumers
40:57
Speaker 12: that you know, the ads almost become like a new
41:00
Speaker 12: show because you're still not used to sing an ad
41:03
Speaker 12: on Netflix. So I think it's going to take roughly
41:06
Speaker 12: eighteen months from when they started let in Q four
41:09
Speaker 12: to like really truly ramp that up as they navigate
41:13
Speaker 12: kind of those relationships. But they're off to a good starter,
41:17
Speaker 12: and I think they have a lot of headroom that
41:20
Speaker 12: actually creates headwinds for everyone else. If Netflix gains share
41:24
Speaker 12: and advertising, another network is going to lose share. The
41:28
Speaker 12: overall brand advertising industry is actually not growing, and so
41:33
Speaker 12: they're gonna not The industry as a whole is going
41:36
Speaker 12: to have to find new customers in order to make
41:39
Speaker 12: up for increased competition.
41:41
Speaker 1: All right, Mark, great some of your time. Really appreciate
41:43
Speaker 1: getting your perspective, your analysis. Mark Douglas, he's a president
41:47
Speaker 1: and CEO of Mountain. He joined us via Zoom. Always
41:49
Speaker 1: appreciate getting his thoughts.
41:50
Speaker 7: You're listening to the tape. Catch a live program Bloomberg
41:53
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41:57
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42:00
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42:03
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42:09
Speaker 1: Let's switch gears to the other big earning story of
42:12
Speaker 1: the day. Tesla stocks off six point six percent, a
42:16
Speaker 1: little bit of some margin challenges there for Elon Musk.
42:20
Speaker 1: Let's put it in perspective here, folks. The stock is
42:22
Speaker 1: up one hundred and twenty percent year to date, so
42:24
Speaker 1: giving back six percent is nothing. Let's bring in Kevin Tynan.
42:27
Speaker 1: He covers all the auto industry for Bloomberg Intelligence, joining
42:31
Speaker 1: us via Zoom from the Princeton HQ for Bloomberg Intelligence. Kevin,
42:36
Speaker 1: what was your takeaway here? I mean price wars they
42:39
Speaker 1: have repercussions, don't they?
42:42
Speaker 11: Sure?
42:42
Speaker 13: Yeah, And I think, look, that's been the deal in
42:45
Speaker 13: the auto industry for a century plus. And I think
42:49
Speaker 13: the problem with Tesla is that this makes them look
42:52
Speaker 13: like an automaker, which is probably their biggest fear. So
42:56
Speaker 13: I think what you're going to start to hear now
42:57
Speaker 13: is all this talk of AI and full self driving
43:01
Speaker 13: and autonomous being you know, the path in the future,
43:04
Speaker 13: because when you look at the results and the margins specifically,
43:08
Speaker 13: you know eighteen percent at the gross line, ten percent
43:11
Speaker 13: at the operating line. It's those are automaker margins.
43:16
Speaker 4: And something I was curious about too, is when you're
43:18
Speaker 4: looking at Tesla's deliveries earlier this month, they did hit
43:22
Speaker 4: a record number after obviously those price cuts in the
43:25
Speaker 4: stock continue to go on a tear after it rose
43:28
Speaker 4: well above those February highs last month, and the next
43:32
Speaker 4: resistance level isn't until right over three hundred dollars. So
43:35
Speaker 4: does this make sense when you already saw a big
43:37
Speaker 4: run like that, especially after the deliveries and numbers came
43:40
Speaker 4: in better than expected, that you'd see another pullback like
43:42
Speaker 4: this in the stock. Yeah.
43:44
Speaker 13: Well, see what happens is he Elon Musk talks about
43:49
Speaker 13: sacrificing profitability for that volume growth. Obviously you see that
43:56
Speaker 13: coming right, This is for all automakers in the space
44:00
Speaker 13: now are going to be dealing with the same exact thing.
44:03
Speaker 13: So he sort of telegraphed the idea that they're doing
44:06
Speaker 13: this on purpose, right, we just want to maintain that
44:09
Speaker 13: fifty percent growth rate, which they probably won't hit, you know, so,
44:14
Speaker 13: so it's almost forgiven and telegraphed to the to the
44:17
Speaker 13: point of yeah, don't worry about margins. You know, we're
44:20
Speaker 13: going to direct your eye to this volume growth and look,
44:23
Speaker 13: record deliveries.
44:24
Speaker 6: For the quarter.
44:25
Speaker 13: But again, you know, all that does is make you
44:27
Speaker 13: an automaker that has no price power by giving up
44:31
Speaker 13: margin and puts you in the pack with pedestrian margins
44:35
Speaker 13: like everybody else. So I even I thought like, even
44:39
Speaker 13: if this quarter were worse in terms of margin and profitability,
44:43
Speaker 13: it would still be okay in the eyes of the
44:44
Speaker 13: market because he told you he was going to do
44:46
Speaker 13: that right, not that he had control of it, but
44:49
Speaker 13: he but he telegraphed it. He told you he was
44:51
Speaker 13: going to do it, and it and it's what happened,
44:53
Speaker 13: record deliveries in the quarter. And it's like, oh, look,
44:56
Speaker 13: executing right according to the plan. But it's really an
45:01
Speaker 13: issue now where now your margins are like everybody else,
45:05
Speaker 13: is where do you go from here? Do you keep
45:06
Speaker 13: cutting or do you stand on price and take the
45:11
Speaker 13: volume hit.
45:12
Speaker 11: Kevin Barry rittolts here. I was intrigued a couple of
45:16
Speaker 11: days ago, or maybe it's already a week or two ago,
45:20
Speaker 11: when Tesla announced they were opening up their network of
45:23
Speaker 11: superchargers to forward and gm evs. How big a deal
45:30
Speaker 11: is that and is that a potential revenue stream for
45:33
Speaker 11: Tesla in the future.
45:35
Speaker 13: Yeah, look, there's there's tax credits to Tesla for opening
45:42
Speaker 13: that up. Give that gives them some favorable treatment within
45:46
Speaker 13: Inflation Reduction Act to be able to do that. All
45:49
Speaker 13: the other automakers didn't have to invest in that technology.
45:53
Speaker 13: I'm just not sure how much profitability there is going
45:57
Speaker 13: forward in charging. And maybe it's not an Apple stapp comparison,
46:00
Speaker 13: but you know, we've heard it before. Nobody owns gasoline
46:03
Speaker 13: stations and there's actually no money in the pumping of
46:06
Speaker 13: the gas right and back in the day, those were
46:08
Speaker 13: the service bays that were connected to the gas station.
46:11
Speaker 13: Now it's the convenience store that sells Lotto tickets connected
46:15
Speaker 13: to the gasoline station. So you know, if there were
46:18
Speaker 13: to be this explosion in demand, I'm not sure how
46:20
Speaker 13: great a margin you would be getting at the actual pump.
46:24
Speaker 13: I think the value there is that you're going to
46:26
Speaker 13: have a captive audience for however much time forty five
46:29
Speaker 13: minutes to hours, and it may be the licensing of
46:34
Speaker 13: the retail space around the charge points that actually makes
46:37
Speaker 13: the money.
46:39
Speaker 4: I want to get your thoughts to switch things up
46:41
Speaker 4: a little bit. But also on Carvon, I'm looking at
46:43
Speaker 4: that ticker symbol CVNA. It was up more than about
46:47
Speaker 4: forty percent yesterday on that news that it will restruct
46:50
Speaker 4: your debt and sell stock in this comeback bit. It's
46:52
Speaker 4: one of those sort of pandemic type of really volatile
46:55
Speaker 4: stocks that we've seen. What's your outlook here when you're
46:57
Speaker 4: looking from an earnings perspective on a stock like A.
47:01
Speaker 13: Yeah, see, that's one that you know that business to
47:05
Speaker 13: me is just very focused. It's online only and it's
47:09
Speaker 13: pre owned only. So when you compare Carbon to the
47:11
Speaker 13: other full line dealerships, you know in Automation or Penske
47:15
Speaker 13: Auto Group or Group one or Lithia, you know, there's
47:18
Speaker 13: places that they can go when they use market is
47:21
Speaker 13: bad or when the new market is bad. You know,
47:24
Speaker 13: there's parts and service, there's finance and insurance. So there's
47:27
Speaker 13: a lot of revenue diversity for those companies that Carvana
47:29
Speaker 13: doesn't have. And this run up in the past couple
47:32
Speaker 13: of days. Ideally, I'm struggling to find the structural difference
47:37
Speaker 13: in the company today versus before this announcement, and I'm
47:41
Speaker 13: not sure it's there. And when you look at their
47:43
Speaker 13: you know, retail run rate unit sales, you know it's
47:47
Speaker 13: a it's about a three hundred thousand, a little bit
47:49
Speaker 13: more than three hundred thousand units, And they've talked about
47:51
Speaker 13: getting to two million and scaling, and that doesn't look
47:54
Speaker 13: like it's going to And that's in the ballpark of
47:56
Speaker 13: what CarMax does used only and it doesn't look like
47:59
Speaker 13: they're going to there anytime soon. So all these online
48:02
Speaker 13: used only vehicle retailers have really backed off the scale
48:08
Speaker 13: and growth for growth sake, to say, we need to
48:10
Speaker 13: focus a little bit on margin and profitability in the interim.
48:13
Speaker 11: So when we see the slew of new competitors, whether
48:17
Speaker 11: it's Mercedes or Hyundai or even some of the big
48:21
Speaker 11: Chinese manufacturers, is it unrealistic for anyone who's running a
48:28
Speaker 11: first mover EV company to expect to maintain just what's
48:34
Speaker 11: been a dominant market share. Isn't it inevitable that they
48:38
Speaker 11: have to become a smaller player tesla versus the rest
48:43
Speaker 11: of the world.
48:45
Speaker 13: Yeah, Look, I think that the issue is is that
48:48
Speaker 13: if there were profitability there, you know, like you said,
48:51
Speaker 13: the Mercedes, the Volkswagens, the Toyotas of the world would
48:55
Speaker 13: be there. The issue is that the mixshift that we've had,
48:58
Speaker 13: especially in the US the ten years, has been two
49:01
Speaker 13: truck from car, and that was profitable on the first day.
49:04
Speaker 13: Now automakers do need to figure out how to sell
49:08
Speaker 13: the same vehicles at higher prices because a lot of
49:11
Speaker 13: that mixshift truck from car is wrung out and it
49:14
Speaker 13: comes from technology, whether it's autonomous or electric. The problem
49:17
Speaker 13: is it's higher transaction prices, but the margins aren't as
49:20
Speaker 13: good or don't exist at all yet, So it's a
49:23
Speaker 13: very messy transition. At this point, everybody's being forced to
49:28
Speaker 13: go EV, but it doesn't carry the profitability that your
49:31
Speaker 13: existing legacy technology does, and that's why we're slow in
49:34
Speaker 13: this country.
49:34
Speaker 1: All right, Kevin, thanks so much. As always, we loved
49:37
Speaker 1: talking to Kevin Tyny getting the latest on the autobiz,
49:41
Speaker 1: including our good friends at Tessa. Kevin Tyny, senior automotive
49:44
Speaker 1: analysts for Bloomberg Intelligence, joining us from Princeton, New Jersey.
49:50
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49:53
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49:58
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49:59
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50:02
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50:03
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50:06
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