Latest / Bloomberg Intelligence / Apple Revamps iPads, Disney Earnings, Tesla Probe

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Apple Revamps iPads, Disney Earnings, Tesla Probe · Bloomberg Intelligence

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Speaker 2: All right, Well, long term investors in and observers of
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Speaker 2: Apple know that a big part of the story is
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Speaker 2: product refreshes. New products. The newest versions of the iPads
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Speaker 2: and the iPhones and the watches and all the kind
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Speaker 2: of stuff is important for this company. And Apple had
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Speaker 2: an event today where they unveiled some new iPads. So questions,
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Speaker 2: is it time to upgrade your iPad? Man Deep sing
0:46
Speaker 2: Joints is here. He covers all the technology stuff for
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Speaker 2: Bloomberg Intelligence. Man Deep, I'm you know, looking at Apple
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Speaker 2: shares up about half a percent. Talk to us about
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Speaker 2: the new upgraded iPad. How what is it and how
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Speaker 2: important is it to the company these days? Yeah?
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Speaker 3: I mean, look, iPad line is about a high single
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Speaker 3: digit contributor to their overall revenue, so not as big
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Speaker 3: as the iPhone of course, but clearly you know they
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Speaker 3: are trying to put their latest chip in the iPad.
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Speaker 3: They showcase a new keyboard for the iPad, and there
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Speaker 3: were other battery announcements new all at display. So all
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Speaker 3: these are cool, but fundamentally you have to ask yourself,
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Speaker 3: is it, you know, worth to upgrade to a new
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Speaker 3: iPad with all these incremental features as I would like
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Speaker 3: to call And that's where I think the market is
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Speaker 3: anticipating more along the lines of what can you show
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Speaker 3: me in terms of AI and the wow factor around LLMS?
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Speaker 3: And I think that's what was missing at the event.
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Speaker 4: Well what could they show? I mean, when we talk
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Speaker 4: about AI and Apple, what do we think about Because
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Speaker 4: Mark German says that this is an AI focused pro model,
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Speaker 4: So I'm wondering, apart from the chip, what about it
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Speaker 4: is AI?
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Speaker 3: It's at the app level. So that's why that operating
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Speaker 3: system upgrade. And they did talk about the iOS eighteen.
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Speaker 3: Look right now, the current version of my iPad, which
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Speaker 3: is five generations behind what they launch, can run the
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Speaker 3: latest version of the iOS operating system. So why do
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Speaker 3: I need to upgrade? They have to give me a
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Speaker 3: reason to upgrade to the latest iPad because my current
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Speaker 3: version can't run the operating system and it's got some
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Speaker 3: cool apps. That is what was missing, Like what functionality
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Speaker 3: can you show me around Siri, around image editing, around summaries,
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Speaker 3: like all the cool stuff that we talk about from
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Speaker 3: Nvidia at the data center level. That's what a small
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Speaker 3: kind of version of it is what you want to
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Speaker 3: run on device instead of going to the cloud. And
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Speaker 3: that's what they got to showcase in terms of why
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Speaker 3: you need to upgrade to the latest hardware.
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Speaker 4: Okay, so Paul, this is not our first rodeo. You
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Speaker 4: and I have anchored before, and one thing that's different
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Speaker 4: than versus a few years ago. When I would walk
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Speaker 4: in here, you would have an iPad next to you. Yep,
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Speaker 4: And the iPad you told me, was like a really
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Speaker 4: big part of how you prepared for the show. Use
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Speaker 4: the Boomberg terminal on the iPad. You also have the
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Speaker 4: two screens for the terminal. You have no iPad anymore? Nope,
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Speaker 4: why not?
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Speaker 2: I still have the iPad, although it's probably the original version,
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Speaker 2: but now everything's on the phone.
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Speaker 4: So your phone has replaced your iPad absolutely.
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Speaker 2: And I have a very long train ride every day
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Speaker 2: which I need a very engaging device, and.
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Speaker 4: Your phone is that it's not the iPad. So man, deep.
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Speaker 4: How big of a problem is that for Apple?
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Speaker 3: I mean, look in their case, some of their newer
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Speaker 3: products do cannibalize. You know, if the iPad is very good,
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Speaker 3: it's going to cannibalize the max Hills, and if the
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Speaker 3: iPhone is very it's going to cannibalize the iPad sales.
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Speaker 3: So that's always been the case. But it's still a
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Speaker 3: very sticky operating system and you know, just ecosystem overall.
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Speaker 3: The only problem that I think people are trying to
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Speaker 3: grapple with here is what is the refresh cycle? Because
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Speaker 3: right now, the refresh cycle continues to get longer and longer.
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Speaker 3: It's not as if, you know, people are moving out
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Speaker 3: of the ecosystem, but they're not gaining more Android users
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Speaker 3: because they don't have the best looking phones or the
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Speaker 3: best features that Android phones can offer. And so that
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Speaker 3: is the part that is hurting their refresh rate and
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Speaker 3: also the share gain from Android users.
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Speaker 2: June meeting, their developer meeting, anything on the wow factor?
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Speaker 2: I mean, are they going to is there a chance
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Speaker 2: in your June developer meeting that they're going to come
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Speaker 2: out with something that's going to blow the street away
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Speaker 2: or expectations low?
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Speaker 3: I mean, I'm expecting more emphasis on the software side
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Speaker 3: in that developer meeting, and clearly they need to showcase
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Speaker 3: what they are doing around the LLLM strategy, whether an
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Speaker 3: L and large anguid model will be part of their OS,
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Speaker 3: and then how it influences the overall app ecosystem, because
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Speaker 3: that those are the features. If you look at the
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Speaker 3: latest pixel phone, they offer you a lot of those
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Speaker 3: features already on Android, and that's what the Android ecosystem
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Speaker 3: is looking to leverage more and more off look at
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Speaker 3: the latest Samsung phones. They are targeting a lot of
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Speaker 3: those JNAI features and Apple is really playing catch up
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Speaker 3: over there, and they need to showcase that at the
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Speaker 3: WWDC when they have all the developers over there.
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Speaker 4: Made this is something you think about a lot. So
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Speaker 4: lay out the ultimate vision for us. What does Apple
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Speaker 4: want its devices to be able to do for us
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Speaker 4: from an AI perspective, like how how is it going
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Speaker 4: to interact with me using AI?
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Speaker 3: I mean, the biggest kind of UI upgrade they can
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Speaker 3: offer is around this series. You know the fact that
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Speaker 3: theory is so underutilized right now as a voice assistant
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Speaker 3: if it has the right set of JENNYI features. Clearly
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Speaker 3: that will have a big influence and how we interact
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Speaker 3: with the next version offer of the phones they make.
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Speaker 3: And also, you know, some of the utility inside the app,
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Speaker 3: like you don't have to you know, kind of touch
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Speaker 3: everything or do everything manually. In terms of giving instructions,
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Speaker 3: there is this concept of AI agents that has to
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Speaker 3: be front and center in the next version of software
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Speaker 3: that Apple offers within their operating system, so that AI
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Speaker 3: agent can automate a lot of the tasks, not fully,
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Speaker 3: but pieces of it. And you want to see Apple
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Speaker 3: making progress on that front.
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Speaker 2: All right, Man Deep, thanks so much for joining us.
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Speaker 2: Appreciate it as always. Man Deep saying he's a senior
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Speaker 2: technology channels for Bloomberg Intelligence giving us the latest. Again.
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Speaker 2: Apple had their new product unveiling of the new Apple iPad,
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Speaker 2: and I think what I've heard from Mandeep and an
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Speaker 2: Aagrana also covers technology for Bloomberg Intelligence is in terms
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Speaker 2: of new product launches and refreshes, it's really just evolutionary.
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Speaker 2: They just iterate on the margins as opposed to something
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Speaker 2: really radically new that I'll cause everybody to run out
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Speaker 2: and buy a new product. Those days are probably behind Apple.
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Speaker 4: People have said that in the past though, Paul, So,
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Speaker 4: I see where you're coming from. But there would be
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Speaker 4: those people who said, you know what, they said that
7:26
Speaker 4: when Steve Jobs died, and look what's happened over the
7:28
Speaker 4: last ten years. I will say, I think they need
7:30
Speaker 4: to move the air pods from a hardware category to
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Speaker 4: services because I am just it's like I need a
7:36
Speaker 4: subscription to these things because I lose them.
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Speaker 2: So much, Yach, Exactly, that's the issue, Yeah, exactly so,
7:42
Speaker 2: but it's interesting so forward. That's why. You know, if
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Speaker 2: you do think that it's less of a product story,
7:47
Speaker 2: then you focus more on the services side of the business,
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Speaker 2: which is about twenty percent of their revenue, and it's
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Speaker 2: growing double digits, and that's and it's a higher margin business,
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Speaker 2: and that's and that's a good story.
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Speaker 4: The German has talked to us about the air pods
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Speaker 4: actually getting some AI features too, really okay, lenses, maybe
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Speaker 4: we'll see, all right, we'll see.
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Speaker 2: It goes to me if I'm an investor in Apple,
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Speaker 2: it's just all about China. I'm concerned that the demand
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Speaker 2: there for my products and services is going to be
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Speaker 2: less going forward. And that's a concern. That's one of
8:14
Speaker 2: the concerns for the stock. We'll certainly keep on top
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Speaker 2: of that.
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Speaker 5: Now.
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Speaker 2: I've been covering Walt Disney for thirty five years. There
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Speaker 2: was a time when I got paid for my research
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Speaker 2: on Walt Disney. So of course I looked at the
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Speaker 2: results this morning, so I had this stock will trade
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Speaker 2: up down eight percent? So what do I know? So
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Speaker 2: let's go to somebody who's much smarter than any of
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Speaker 2: us here about this kind of STU. That's Keitha Ranganath,
8:55
Speaker 2: and she is the media analyst for Bloomberg Intelligence. What
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Speaker 2: does the street not like? I thought it was pretty
9:03
Speaker 2: good print there for the company.
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Speaker 6: It certainly was Paul. But what the street didn't like
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Speaker 6: was the outlook. The outlook for the fiscal third quarter,
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Speaker 6: especially for the theme park business, was definitely weak and
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Speaker 6: not something that the street was expecting. So Consensus had
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Speaker 6: a twelve percent growth in operating income for the parks business.
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Speaker 6: What Disney said zero growth, Wow, and that kind of
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Speaker 6: really spooked investors, and they talked about different aspects here.
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Speaker 6: They said that they have, you know, three new cruise
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Speaker 6: ships that are basically coming on board, and you know
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Speaker 6: there are launch costs associated with that. They're also opening
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Speaker 6: this new kind of private island along with their vacation
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Speaker 6: club and cruise business. Of course that also, you know,
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Speaker 6: is contributing to that. But I think what really has
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Speaker 6: investors super nervous at the at this point is that
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Speaker 6: they spoke about a moderation in demand. And this has
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Speaker 6: been a constant, constant question for Disney. You know, can
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Speaker 6: that park's momentum sustain and how long can it and
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Speaker 6: will they have pricing power? And I think this is
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Speaker 6: where you're kind of seeing, you know, that the negative
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Speaker 6: reaction come in because people are not so confident anymore.
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Speaker 4: Is the moderation of demand about Disney's lack of exciting
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Speaker 4: things to draw in people to the parks, to draw
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Speaker 4: people to the theaters, or is it about a story
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Speaker 4: that has to do with the consumer and the way
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Speaker 4: that the consumer feels strapped.
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Speaker 6: I think it's a little bit of everything, Tim, So
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Speaker 6: you know, definitely the consumer, the overall health of the
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Speaker 6: economy and the consumer for certain, and you know, tremendous
10:30
Speaker 6: inflationary pressures. But of course for Disney, you know, one
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Speaker 6: thing that they've done over the past few years is
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Speaker 6: they've really raised prices in their parks pretty dramatically, and
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Speaker 6: it's becoming increasingly increasingly expensive for you know, a family vacation,
10:43
Speaker 6: so you know, the to the point of almost becoming prohibitive.
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Speaker 6: And you know, that's where kind of that whole pricing
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Speaker 6: power question comes in. I think they're going to have
10:51
Speaker 6: to do it much more cautiously and gently in the future.
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Speaker 4: Paul talking to some neighbors the other day who recently
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Speaker 4: took their kids to Disney. Yep, they were adding up
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Speaker 4: how much it costs for just a couple of days
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Speaker 4: down there. They were saying, probably about five grand is
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Speaker 4: what they spent in Florida, two kids, a few days
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Speaker 4: down there. Wow, it's a lot of money.
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Speaker 1: You need an advisor to like set all this stuff
11:12
Speaker 1: up because it's so complicated.
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Speaker 4: Yeah, So I've heard with these like I just.
11:15
Speaker 2: Called I just called Githa. She makes a phone call
11:17
Speaker 2: and I'm like the front line every time. Eithan. The
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Speaker 2: other part of this story, and for the longest time,
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Speaker 2: you know, the last four or five years, has been
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Speaker 2: their streaming business and when will that business term profitable?
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Speaker 2: They had some pretty good news on that front, didn't
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Speaker 2: they They.
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Speaker 6: Did, Paul, I mean, we're just on the cosp of
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Speaker 6: a major, major earning inflection point here for the first
11:36
Speaker 6: time ever in the in the streaming business's history, they
11:39
Speaker 6: actually posted a model that modest profit. Now again they
11:43
Speaker 6: said fiscal third quarter, which is the next quarter, is
11:45
Speaker 6: going to be a little bit choppy. But then what
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Speaker 6: they've said all along is that expect some really good
11:51
Speaker 6: results in the fiscal fourth quarter, and then they're really
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Speaker 6: going to build on that starting in you know, fiscal
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Speaker 6: twenty twenty five and beyond. They have a lot of
11:58
Speaker 6: initiatives in the works. You know, they're cracking down on
12:01
Speaker 6: password sharing a la Netflix, and remember that has been
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Speaker 6: a huge growth story at Netflix. The Netflix added almost
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Speaker 6: thirty five million subscribers after they started cracking down on
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Speaker 6: password sharing, So Disney can also hope to see quite
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Speaker 6: a lot of success with that. And then of course
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Speaker 6: they also have the Hulu integration as well as you know,
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Speaker 6: the ad tier, all of that kind of contributing. So streaming,
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Speaker 6: I think is going to be a considerable source of
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Speaker 6: earnings upside in the next few years.
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Speaker 4: How's Bob Iger doing?
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Speaker 2: Does he having successor?
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Speaker 6: He spoke about that actually on the call that that
12:31
Speaker 6: came up, and he said that they're, you know, they're
12:33
Speaker 6: kind of actively considering. They have four internal candidates the
12:36
Speaker 6: all of the division chiefs chiefs that are kind of
12:40
Speaker 6: up for consideration, and you know, he said that they're
12:42
Speaker 6: looking at them very carefully and the announcement will come
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Speaker 6: when the time is right.
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Speaker 4: Is this any replay of what happened a few years
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Speaker 4: ago when Bob Jpek took over. I mean it kind
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Speaker 4: of sounds familiar. A number of internal candidates, the person
12:54
Speaker 4: gets picked, the other ones leave, and then Bob Ager
12:57
Speaker 4: comes back because it didn't work out.
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Speaker 3: Yeah.
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Speaker 6: I mean, we've seen this movie play out so many
13:01
Speaker 6: times now at Disney. I hope and I think this
13:04
Speaker 6: time it really will be different. I mean, that was
13:07
Speaker 6: the whole bone of contention, you know, for the activist investors,
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Speaker 6: including Nelson Pals, and I think having this new succession
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Speaker 6: Planning committee suggests that this time they will do things
13:17
Speaker 6: probably a little bit differently, all.
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Speaker 2: Right, Githa. So clearly we're going at the stock down
13:21
Speaker 2: eight percent. The market clearly is focusing on that theme
13:23
Speaker 2: park business, and for good reason, it's become, you know,
13:26
Speaker 2: kind of on a kind of under the radars. Now
13:29
Speaker 2: become seventy seven zero percent of their operating income. So
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Speaker 2: it is the business here. What did the companies say
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Speaker 2: about their ability to potentially deal with maybe weaker demand.
13:40
Speaker 2: It's been a long time since we've seen them ever
13:43
Speaker 2: cut prices at the theme parks, promote, you know, at
13:47
Speaker 2: the theme parks, anything that would hurt profitability. It's been
13:49
Speaker 2: a long time since they've had to do that.
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Speaker 6: Yeah, I mean, the theme park business has been such
13:54
Speaker 6: a consistent story for them, Paul, as you just pointed out,
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Speaker 6: they have twenty five percent operating margin in that business,
14:00
Speaker 6: and they are really looking at this as a future
14:03
Speaker 6: earnings growth driver, which is why you know, they're investing
14:07
Speaker 6: sixty billion dollars in the theme parks over the next
14:10
Speaker 6: ten years. Over half of that is basically just adding capacity,
14:14
Speaker 6: adding new attractions, and I think it's it's it's a
14:18
Speaker 6: really timely and a good strategic mode they're also bringing
14:20
Speaker 6: on those cruise ships that that's going to cost them
14:22
Speaker 6: about twelve to fifteen billion dollars, so you know, they're
14:26
Speaker 6: definitely adding capacities. So I think, you know, overall, definitely
14:28
Speaker 6: the business is in good shape, but in the near term,
14:31
Speaker 6: obviously the sentiment has definitely soured.
14:33
Speaker 3: Well.
14:33
Speaker 4: Speaking of souring sentiment, curious about the media business here,
14:37
Speaker 4: apart from streaming the legacy media business, talking ESPN, talking ABC,
14:42
Speaker 4: what do we learn about that business?
14:45
Speaker 3: Bad?
14:45
Speaker 2: Bad, bad bad?
14:46
Speaker 6: So Legacy TV Networks the operating income was down twenty
14:51
Speaker 6: two percent. That's not surprising, but it's just the rate
14:54
Speaker 6: of decline. I mean, we were expecting, you know, you know,
14:57
Speaker 6: maybe high single digits. This is, you know, this really bad.
15:01
Speaker 6: And what gets worse is, you know, we're obviously hearing
15:04
Speaker 6: about all of the sports rights negotiations that are ongoing.
15:07
Speaker 6: If you look at the NBA deal for instance, that's
15:10
Speaker 6: basically looking at tripling the sports value. So their previous
15:14
Speaker 6: deal was twenty about twenty five billion, new deal will
15:16
Speaker 6: be over seventy five billion dollars, and so these companies
15:20
Speaker 6: are going to have to pay up just to kind
15:23
Speaker 6: of maintain the status score or maybe not not even
15:25
Speaker 6: maintain the status score and their TV networks business, which
15:28
Speaker 6: is really going to crimp profitability pretty significantly.
15:31
Speaker 2: So, I mean it begs a question. Your costs are tripling,
15:34
Speaker 2: your revenue is not tripling. Is streaming going to pay
15:37
Speaker 2: for all these sports rights? How does the company even
15:41
Speaker 2: position out in the marketplace.
15:43
Speaker 6: That's what they're betting on, Paul. I'm not sure that
15:45
Speaker 6: it's going to be Streaming is going to be able
15:47
Speaker 6: to reclaim all of that leakage that we're seeing on
15:49
Speaker 6: the linear TV side, but they're definitely betting that it
15:52
Speaker 6: will be able to salvage some of those losses. So
15:55
Speaker 6: you know, ESPN, for instance, they are having obviously their
15:58
Speaker 6: new standalone app that is going to come out sometime
16:00
Speaker 6: in twenty twenty five, and then they have this new
16:02
Speaker 6: sports JV that again is supposed to come out a
16:05
Speaker 6: little bit later this year, along with Warner Brothers Discovery
16:07
Speaker 6: in Fox, so they're doing different things. Again, not sure
16:11
Speaker 6: whether you know how successful it's going to be. That's
16:14
Speaker 6: a little still a little bit of a wait.
16:16
Speaker 2: And watch getha.
16:17
Speaker 4: We're so lucky we have you because you not just
16:19
Speaker 4: cover Disney, but you also cover Peloton and shares a
16:22
Speaker 4: Peloton hire by twelve percent right now. This after CNBC
16:26
Speaker 4: reported that a number of PE firms have been considering
16:28
Speaker 4: a buyout of the company. They cited people familiar with
16:31
Speaker 4: the matter. What could a private equity firm do with Peloton, Like,
16:35
Speaker 4: how could a PE firm make Peloton successful? Solve its problems?
16:39
Speaker 6: Good costs, I mean, that's what PE firms do best.
16:43
Speaker 6: And the Peloton really has had a huge cost problem.
16:47
Speaker 6: And the cost problem is because the costs haven't really
16:49
Speaker 6: been aligned to its revenue base. Its revenue has been
16:52
Speaker 6: steadily decreasing, just a combination of different factors. We demand,
16:56
Speaker 6: saturated market. Their new products haven't really taken off. You know,
17:01
Speaker 6: they've tried all kinds of different things with their whole
17:04
Speaker 6: new digital app revamp. Again, that's really not done the
17:07
Speaker 6: way that they've wanted it to kind of perform. They
17:09
Speaker 6: have all these other partnerships with Lulu, you know, they
17:12
Speaker 6: had this new hotel partnership. Again, nothing has really been
17:15
Speaker 6: a game changer. But the costs are still very very high,
17:18
Speaker 6: and that's just because it's cost them so much to
17:20
Speaker 6: manufacture their equipment, and so PE can kind of really
17:22
Speaker 6: come in and trim that cost space.
17:24
Speaker 2: All right, Githa, thanks so much for joining us. Keithan
17:27
Speaker 2: Raganath and she is the media anuals the Bloomberg Intelligence folks.
17:30
Speaker 2: She is over the last fifteen years has built up
17:32
Speaker 2: an amazing franchise on Wall Street as being one of
17:34
Speaker 2: the leading research voices on that space, and it's been
17:37
Speaker 2: going undergoing a tremendous amount of generational change in the
17:41
Speaker 2: media business from the traditional cable TV satellite delivery mechanisms.
17:45
Speaker 2: This whole thing called streaming has required a lot of
17:48
Speaker 2: work and a lot of folks on Wall Street pay
17:50
Speaker 2: attention to Keitha's researching. Can you find Getha's research and
17:53
Speaker 2: all of the Bloomberg Intelligence research on the Bloomberg terminal?
17:57
Speaker 2: B I go is the function that'll get you there.
18:00
Speaker 2: It's good stuff. Disney stock down around the seven eight
18:03
Speaker 2: percent here again, concerns about maybe peak theme park demand
18:08
Speaker 2: there coming out of the pandemic, maybe getting back to
18:11
Speaker 2: a more normalized level of attendance. But you know what
18:14
Speaker 2: we've seen over the years from Disney is they really
18:17
Speaker 2: know better than anybody else how to price their theme
18:20
Speaker 2: park product and how to invest in how to generate
18:22
Speaker 2: returns so longer trim. I think a lot of people
18:24
Speaker 2: feel pretty good about that.
18:28
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
18:31
Speaker 1: weekdays at ten am Eastern on Apple Card playing en
18:34
Speaker 1: Broud Otto with the Bloomberg Business App. Listen on demand
18:37
Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
18:43
Speaker 2: Our next guest, Sandy Briggar, joins us. She's a chief
18:45
Speaker 2: client officer at Experience, joining us live here in our
18:48
Speaker 2: Bloomberg Interactive Broker's studio. Sandy, it's funny this market here.
18:53
Speaker 2: A lot of folks, you know, we had that nice
18:55
Speaker 2: run off those October lows. People felt like maybe the
18:58
Speaker 2: market got ahead of itself, and then we had the
19:01
Speaker 2: FED saying, gee, maybe we're not going to cut race,
19:03
Speaker 2: maybe we're going to hype rates. And people got a
19:05
Speaker 2: little spook there for a while. But it seems like
19:07
Speaker 2: we're back on a positive trajectory here. How do you
19:09
Speaker 2: guys think about the markets and maybe get away from
19:12
Speaker 2: that day to day type of view of the market.
19:14
Speaker 5: Yeah, it's hard to get away from the day to day,
19:16
Speaker 5: especially when it's bouncing around so much and penning upon
19:19
Speaker 5: the day.
19:19
Speaker 7: You have a different view of what's happening.
19:21
Speaker 5: But our clients are corporate executives, family business owners, entrepreneurs, inheritors.
19:27
Speaker 5: They're really thinking about their portfolios for the long term
19:30
Speaker 5: and they're not so worried about what's happening on the
19:32
Speaker 5: day to day. So that takes a little bit of
19:33
Speaker 5: pressure off of us. Although we get questions about the
19:35
Speaker 5: day to day all the time, our best advice to
19:38
Speaker 5: our clients is really to be prepared for anything in
19:40
Speaker 5: this market.
19:41
Speaker 7: So we're playing both offense.
19:43
Speaker 5: And defense simultaneously in portfolios, just being prepared for a
19:47
Speaker 5: range of outcomes.
19:48
Speaker 4: What are the types of questions that you're getting, like
19:50
Speaker 4: when your phone is ringing, when your email inbox is
19:53
Speaker 4: hanging on days when we're seeing volatility, what's the question
19:55
Speaker 4: that your clients are asking.
19:56
Speaker 5: It's either should we raise more cash or should we
19:58
Speaker 5: put more cash in? And it might be the same
20:01
Speaker 5: question from different people in the same day.
20:03
Speaker 4: And let's be honest. When the question is should we
20:06
Speaker 4: raise more cash, your job is to say no.
20:09
Speaker 7: We think it's really important to be invested.
20:11
Speaker 5: And because we're putting together an investment portfolio based on
20:15
Speaker 5: our client's financial plans, we have a good sense of
20:17
Speaker 5: how much cash they need at any given moment, so
20:19
Speaker 5: everything else that they don't really need for the near term,
20:21
Speaker 5: we are recommending that they invest, and we talk about
20:25
Speaker 5: why we're investing the way that we are and really
20:27
Speaker 5: help hold clients' hands through that moment. Now, for the
20:30
Speaker 5: clients that are willing in wanting to put more money in,
20:34
Speaker 5: that's actually a good sign because for a while, people
20:36
Speaker 5: are so excited about yields.
20:38
Speaker 7: On money marketing funds.
20:39
Speaker 5: You know, I hadn't seen any return on cash, and
20:42
Speaker 5: so long that people were feeling really comfortable bulking up
20:46
Speaker 5: on cash, and so now they're ready to get invested,
20:49
Speaker 5: and those conversations go well too. Interestingly, we've started having
20:54
Speaker 5: clients take steps into bonds. On the longer term side,
20:59
Speaker 5: we think that in this environment where rates are high,
21:03
Speaker 5: it's nice to lock in some of the current rates,
21:05
Speaker 5: and if we do see some softening in the economy,
21:08
Speaker 5: that should do well for bonds, high quality intermediate, long
21:11
Speaker 5: term bonds. And then on the equity side, we're really
21:14
Speaker 5: focused on where are the opportunities, and we think because
21:18
Speaker 5: of the narrow range of the market over the last
21:21
Speaker 5: six months, that there's plenty of interesting stocks out there
21:24
Speaker 5: that haven't rallied, and it does look in recent days
21:27
Speaker 5: like maybe that's opening up.
21:28
Speaker 7: So we're excited about that.
21:30
Speaker 2: When you say playing offense, what does that mean to you, guys?
21:33
Speaker 5: So looking for opportunities to invest where there's a high
21:36
Speaker 5: likelihood of achieving a good return on that investment.
21:40
Speaker 7: So for US today, that would.
21:41
Speaker 5: Be in value stocks here in the US and overseas.
21:45
Speaker 5: I would say about fifty five percent of our overall
21:48
Speaker 5: equity allocation is overseas right now, with rare amountain emerging markets.
21:52
Speaker 7: Yeah, because I.
21:53
Speaker 5: Mean, the US has just been so strong, things are
21:56
Speaker 5: happening differently outside of the country.
21:58
Speaker 4: Is your argument that there's like a reverse into the
22:00
Speaker 4: mean here or because if you look at the past decade,
22:03
Speaker 4: I mean, the US is outperformed everywhere else.
22:05
Speaker 7: Yeah, evaluations are so high and it's been ugly.
22:08
Speaker 4: If you haven't been if you've been overweight international, it has.
22:11
Speaker 5: But we think there are great opportunities, especially as things
22:14
Speaker 5: get pricey here in the US when we look at valuations,
22:17
Speaker 5: we really do see some great opportunities overseas.
22:20
Speaker 2: Okay, Then conversely, on plain defense, what does that mean
22:23
Speaker 2: to you guys?
22:24
Speaker 5: So defense today is a fair amount of bonds. You know,
22:27
Speaker 5: for the last several years, we weren't putting very much
22:29
Speaker 5: emphasis in bonds and portfolios as rates were increasing. We
22:34
Speaker 5: think we have no idea what the FED will do,
22:36
Speaker 5: but we think we're much closer to a FED rate
22:39
Speaker 5: shift than we are too more increases, and so we
22:43
Speaker 5: think fixed income is a good place to be. We
22:44
Speaker 5: think it's going to play its traditional role in a portfolio,
22:48
Speaker 5: helping buffer to volatility and provide some solid returns. And
22:52
Speaker 5: right now returns are about two percent after inflation, so
22:56
Speaker 5: not so bad.
22:58
Speaker 4: Okay, So somebody comes to you with a pile of
23:00
Speaker 4: cash right now, they say, I need you to put
23:04
Speaker 4: this to work. Where do you put it to work?
23:05
Speaker 4: I know, it depends on their time horizon, how old
23:07
Speaker 4: they are.
23:08
Speaker 7: Yeah, so we're going to do the visual circumshensive plan.
23:10
Speaker 5: But assuming that there are folks with a long investment
23:13
Speaker 5: time horizon, we're probably putting about fifty five percent of
23:17
Speaker 5: the portfolio in equities, as I said, with about half
23:20
Speaker 5: of that a little more than half overseas. The rest
23:23
Speaker 5: of the portfolio we're managing defensively, so maybe thirty five
23:26
Speaker 5: percent in bonds and fifteen percent in liquid alternatives because
23:30
Speaker 5: we do think that they're nice buffers.
23:32
Speaker 7: For volatility as well and provide a different did you.
23:35
Speaker 4: Say liquid alternatives, liquid? Liquid alternatives, alternatives?
23:39
Speaker 2: So what is it like? I guess I was surprised.
23:41
Speaker 2: We were at a doing a remote broadcast at one
23:44
Speaker 2: of our RIA sponsors, and I was surprised that the
23:48
Speaker 2: average RIA at there, they're saying that red shirt investment advisor.
23:52
Speaker 2: They're saying that their clients really have an interest in
23:55
Speaker 2: alternative investments, like more than the five percent ten percent
23:58
Speaker 2: open that I would suggest much higher. What are you
24:01
Speaker 2: seeing in terms of all demand for alternative investments, whether
24:04
Speaker 2: it's edge funds or private equity or that that kind
24:07
Speaker 2: of stuff. And then where do you steer your clients.
24:09
Speaker 5: Yeah, so in terms of the more hedging, that's what
24:12
Speaker 5: we're doing in the liquid alternatives portfolio. So clients are
24:15
Speaker 5: feeling good about that. But we have seen in recent
24:17
Speaker 5: years and a bigger interest in private equity than ever before,
24:21
Speaker 5: and we think there is definitely a great place for
24:24
Speaker 5: private equity and portfolios, but we're really looking at portfolios
24:27
Speaker 5: that are twenty million dollars in up where people can
24:30
Speaker 5: really have a long investment time horizon and take some
24:34
Speaker 5: risk with their portfolios, because even though people have been
24:36
Speaker 5: really excited about p there's very few winners in that crowd.
24:41
Speaker 4: But I wouldn't consider private equity liquid by any means.
24:43
Speaker 5: No, no, no, no, So that would be in a liquid
24:45
Speaker 5: portion for sure, which is also why we're looking at
24:48
Speaker 5: clients with the much bigger portfolios for that.
24:51
Speaker 2: Who is a typical client for you guys, So.
24:54
Speaker 5: Corporate executives, family business owners, inheritors.
25:00
Speaker 4: To say, how do I I don't remember that being
25:01
Speaker 4: a choice when I was check majoring in school, Like
25:04
Speaker 4: nobody ever said, hey, inheritor, it could.
25:06
Speaker 2: Be I mean, do you guys buy off on this
25:09
Speaker 2: whole thing? Like I guess I had to read a
25:11
Speaker 2: lot about it, that the baby boomers have so much
25:14
Speaker 2: wealth and how do they get it to the next generation.
25:18
Speaker 4: The great wealth transfer?
25:20
Speaker 2: Yes, yeah, that is a motion And I tell my
25:22
Speaker 2: kids the last check I write is going to bounce, baby.
25:25
Speaker 4: That's how you do.
25:26
Speaker 7: That is a strategy. That is a strategy.
25:28
Speaker 2: I like that.
25:29
Speaker 5: But it is a conversation we're in with many many
25:31
Speaker 5: of our clients, and it actually presents some really interesting
25:34
Speaker 5: investment opportunities. Because when they are transferring assets out of
25:38
Speaker 5: their estate for the rising generations of their family, that's
25:41
Speaker 5: money that has a very long investment time horizon, and
25:44
Speaker 5: so they can get you know, quite risk loving if
25:47
Speaker 5: that's the direction that they want to go in.
25:49
Speaker 4: Okay, typical portfolio size for for you guys.
25:53
Speaker 7: Twenty five million, Okay, yeah, I think that's.
25:56
Speaker 3: O is it?
25:56
Speaker 2: Kind of sixty forty plus? We alc some alternatives. I mean,
26:01
Speaker 2: how do you start is I know it probably depends
26:03
Speaker 2: on the individual, but do you start like sixty forty
26:05
Speaker 2: then decide how much you want to take away from
26:07
Speaker 2: that put to alternatives.
26:09
Speaker 5: So we do take evaluation driven approach, so our allocations
26:12
Speaker 5: are based on where we're seeing valuations in the market.
26:15
Speaker 7: So we don't have a fixed asset allocation.
26:18
Speaker 5: We have dynamic ones where clients give us the discretion
26:21
Speaker 5: to move within bands. So today, as I was mentioning,
26:25
Speaker 5: we're more like fifty five, you know, forty five sort
26:29
Speaker 5: of allocations.
26:31
Speaker 7: On average, but there's a very big range.
26:33
Speaker 5: And then for a client when we're looking at their
26:36
Speaker 5: investment portfolio, there's a lot of conversation with that we're
26:38
Speaker 5: having with them, not only about their goals and what's
26:40
Speaker 5: most important to them and their long term plan. But
26:43
Speaker 5: how are they feeling about investment markets? You know, how
26:45
Speaker 5: have they reacted in the past when markets have gone south?
26:49
Speaker 5: Really trying to help hone them in on what's the
26:52
Speaker 5: right place on the risk return spectrum for them?
26:55
Speaker 4: Are you running in any challenges from clients coming and saying, look,
26:58
Speaker 4: I've seen how the S and P five has performed
27:01
Speaker 4: over the last ten twelve years. Howd I just put
27:03
Speaker 4: my money in Voo it would have outperformed my portfolio.
27:07
Speaker 5: There are some clients that feel that way, and you know,
27:10
Speaker 5: a lot of conversation about again, where are you relative
27:13
Speaker 5: to your plan and was the objective to get the
27:17
Speaker 5: highest return? Because in retrospect, it's really easy to see
27:19
Speaker 5: how we could have gotten there. But we've been living
27:24
Speaker 5: through very interesting time periods and what we've seen in
27:26
Speaker 5: the recent past we don't expect to continue going forward.
27:30
Speaker 5: So lots of conversations with clients to help meet them
27:32
Speaker 5: where they are and get them through these markets.
27:35
Speaker 2: Sandy, thank you so much for joining us. Sandy Bregor
27:37
Speaker 2: She is the chief client officer for Experient based in
27:40
Speaker 2: San Francisco, California, but joining us live here in our
27:43
Speaker 2: Bloomberg Interactive Broker Studio. Appreciate her making the tip all
27:46
Speaker 2: the way across the country just to see us. Go figure.
27:50
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
27:54
Speaker 1: weekdays at ten am Eastern on Apple car Play and
27:57
Speaker 1: Android Otto with the Bloomberg Business. You can also listen
28:00
Speaker 1: live on Amazon Alexa from our flagship New York station,
28:04
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.
28:08
Speaker 2: John Mandyke Joints is here because we're going to shift gears.
28:11
Speaker 2: He's the chief executive officer of Urban Green Council. He
28:13
Speaker 2: joins here on a Bloomberg and Arctor Brokeer studio. Welcome
28:16
Speaker 2: for coming in. You get extra points for not mailing it.
28:18
Speaker 2: Mailing it. In Electrification of buildings, how do we power
28:24
Speaker 2: our buildings today?
28:26
Speaker 8: Well, you know, in New York City, the largest source
28:28
Speaker 8: of carbon comes from furnaces, boilers, and hot water heaters.
28:32
Speaker 8: It's natural gas in the basement for heat and hot water. Okay,
28:36
Speaker 8: so that's our largest source of carbon. That's our biggest.
28:39
Speaker 2: Podcast was in clean burning energy.
28:41
Speaker 8: Well you know it was compared to coal.
28:43
Speaker 2: Okay, but that's still not good enough, but it's not
28:45
Speaker 2: good enough.
28:45
Speaker 4: Okay, Okay, So I recently moved from a hybrid electric
28:50
Speaker 4: powered and gas powered home where gas did our hot
28:54
Speaker 4: water and our stoven oven into an all electric place.
28:59
Speaker 4: And here's what happened. The oven doesn't work very well.
29:03
Speaker 4: The stove works incredibly well because it's induction the hot
29:07
Speaker 4: water heaters. It's kind of okay. Our electric bill is huge,
29:11
Speaker 4: but we got no gas bill. Our electric bill is
29:14
Speaker 4: so much now, it's more than it was before with
29:17
Speaker 4: gas added.
29:19
Speaker 8: Right. Well, you know, there are artificial incentives built in
29:22
Speaker 8: the system for natural gas, and those are starting to
29:24
Speaker 8: be addressed. For example, in New York State, if you're
29:28
Speaker 8: within one hundred feet of a gas line, you can
29:31
Speaker 8: demand to have service and everybody pays for that.
29:34
Speaker 2: Wow.
29:35
Speaker 8: And so we have to get to where electricity has
29:39
Speaker 8: the true price and gas has the true price, and
29:41
Speaker 8: so those two can compete. And over time, you know,
29:45
Speaker 8: with conflicts around the world and where we see climate
29:47
Speaker 8: policies going, there's going to be a carbon price built
29:50
Speaker 8: into natural gas.
29:51
Speaker 2: Okay, Well, how do we most sufficiently electrify a building?
29:57
Speaker 8: Right, Well, we do it by installing heat pumps for
30:00
Speaker 8: for heat and hot water and that's that's the main
30:03
Speaker 8: way to do it in New York. Like I said,
30:06
Speaker 8: our problem isn't lighting. Our problem is the heating and
30:09
Speaker 8: hot water. And then of course you need the grid
30:11
Speaker 8: to green at the same time, and that's happening as well.
30:14
Speaker 4: Is an electric powered hot water heater more or less
30:18
Speaker 4: efficient than a gas powered hot water heater? Same with
30:21
Speaker 4: like a dryer, for example, because you can get a
30:22
Speaker 4: dryer that's a gas has a gas heated element. But
30:26
Speaker 4: in these newer buildings where they don't allow gas, you're
30:28
Speaker 4: stuck with electric. Are they Is it as efficient? Right?
30:31
Speaker 8: And they're they're getting efficient for sure, and they're getting
30:34
Speaker 8: to pair of.
30:34
Speaker 4: Heat pump works really well.
30:35
Speaker 8: The heat pump is very efficient. It can be way
30:38
Speaker 8: more efficient than the natural gas boiler furnace that you
30:41
Speaker 8: already have.
30:42
Speaker 4: What about when it comes to the other appliances though.
30:44
Speaker 8: They're getting there and you know not yet hot water. No,
30:47
Speaker 8: there are hot water systems that are there, okay, And
30:50
Speaker 8: we need more technology to come on board when it
30:52
Speaker 8: comes to hot water, particularly to scale across all the
30:55
Speaker 8: different type of building types and cities. But you know,
30:59
Speaker 8: we have the largest decarbonization market in the world now
31:02
Speaker 8: in New York City, and that's going to spur innovation
31:04
Speaker 8: to help serve this market.
31:06
Speaker 4: The thing that's a challenge to me when thinking about this,
31:08
Speaker 4: and look, no question, I want to do what's right
31:10
Speaker 4: for the environment, what's right for the world. Where is
31:14
Speaker 4: this power being generated? Because it's not being generated at
31:17
Speaker 4: Indian Point anymore. That's shutdown, so it's not nuclear. Here
31:21
Speaker 4: in New York City, we're still relying on a lot
31:23
Speaker 4: of dirty sources to power. So whether or not we're
31:25
Speaker 4: heating with gas or electricity net net doesn't really matter
31:29
Speaker 4: if that electricity is generated by a dirty source.
31:32
Speaker 8: It does because today's heat pumps are so more energy
31:35
Speaker 8: efficient that you're just using less energy, which means you're
31:38
Speaker 8: using less carbon and it almost doesn't matter what the
31:40
Speaker 8: grid is.
31:41
Speaker 1: Right.
31:41
Speaker 8: But at that same time, the grid is greening in
31:43
Speaker 8: New York. Right, we did lose Indian Point that was
31:45
Speaker 8: about a third of our power in New York City
31:47
Speaker 8: that was fossil fuel free. That's being replaced by hydropower
31:51
Speaker 8: and renewable power that's coming in as soon as twenty
31:53
Speaker 8: twenty six. So the grid is greening and that's going
31:57
Speaker 8: to help when we start to plug more things into
31:59
Speaker 8: that grid.
32:00
Speaker 2: Is the grid? So I read the book The Grid.
32:02
Speaker 2: There is a book out there and I have John
32:04
Speaker 2: Tucker reading it now and it talks about the history
32:06
Speaker 2: of electricity in this country, which is fascinating. I look
32:08
Speaker 2: like a geek sitting on the Jersey shore too summer.
32:11
Speaker 4: You got to read that. I gotta read this book.
32:12
Speaker 2: No way to pick up girls. I think reading the
32:15
Speaker 2: book about the grid, you know, can our grid today
32:19
Speaker 2: handle increased electrical demand?
32:21
Speaker 8: It can for heating, right, So our organization modeled all
32:25
Speaker 8: one million buildings in New York City against the local
32:28
Speaker 8: kind of deis and grid. What we found is there's
32:30
Speaker 8: a forty two percent headroom in the winter to plug
32:33
Speaker 8: things into the grid. So said a different way. Our
32:36
Speaker 8: grid is built out for the hottest day of the year, right,
32:38
Speaker 8: and when we turn those air conditioners off, forty two
32:41
Speaker 8: percent of our grid goes dormant. It's actually a very
32:44
Speaker 8: inefficient use of assets. So there's forty two percent room
32:47
Speaker 8: to plug stuff into the grid. Because our heating source
32:50
Speaker 8: is not electrical based today, it's fossil fuel based.
32:53
Speaker 4: So what would you say is the biggest thing holding
32:56
Speaker 4: us back when it comes to widescale adoption of more
33:00
Speaker 4: electricity versus and less gas. Is it because these legacy
33:04
Speaker 4: systems are going to take so long to replace?
33:08
Speaker 8: It's that we have laws now in New York State
33:10
Speaker 8: and New York City and actually about one hundred jurisdictions
33:13
Speaker 8: around the country that are forcing the transition.
33:16
Speaker 4: So what that does is it tells developers, Okay, if
33:18
Speaker 4: you're gonna build this, you can't include a gas line here.
33:21
Speaker 8: It has to be all electric, right, correct, So in
33:23
Speaker 8: New York City, starting this year, buildings under seven floors
33:26
Speaker 8: new buildings have to be all electric, and then in
33:30
Speaker 8: twenty seven all new construction needs to be all electric
33:33
Speaker 8: in New York City.
33:33
Speaker 4: I've talked to developers who say, Okay, the regulations are
33:36
Speaker 4: not there yet, but it is such a pain for
33:38
Speaker 4: us to deal with gas these days that we're just
33:41
Speaker 4: going all electric.
33:43
Speaker 2: Are there? And so what are the incentives today for
33:45
Speaker 2: Like I'm just thinking of Jamie Diamond building that new
33:47
Speaker 2: building on Park Avenue. I mean talk about going to
33:51
Speaker 2: be state of the art when it's finished. I'm guessing
33:53
Speaker 2: he's gonna hang all the plaque how it's this compliant
33:55
Speaker 2: and that complaint and we won this award and we're
33:57
Speaker 2: triple green this what's a new building like that today?
34:00
Speaker 2: What are they trying to do for their energy?
34:02
Speaker 8: Well? Sure, but there's the heart of your question on incentives.
34:05
Speaker 8: There are way more incentives now than there's ever been
34:08
Speaker 8: the history of this issue, right primarily from the federal
34:10
Speaker 8: government through the Inflation Reduction Act, but also by states
34:13
Speaker 8: around the country that are you know, putting their mouth
34:17
Speaker 8: putting their money with their mouth is when it comes
34:19
Speaker 8: to public policies.
34:21
Speaker 4: Are you optimistic about the greenification of the grid, Like,
34:24
Speaker 4: is this something you know we talk about offshore wind
34:26
Speaker 4: for example, look at all the politics around that and
34:29
Speaker 4: look at all the issues it faces. We just talked
34:32
Speaker 4: last week to Will Wade, one of our reporters here,
34:33
Speaker 4: who wrote about nuclear power plants around the country that
34:37
Speaker 4: are coming back online potentially because they turn those things off.
34:41
Speaker 4: And they were like, oh, wait a second, this is
34:43
Speaker 4: actually a green source of power, anan point, not one
34:45
Speaker 4: of them because they're dismantling. It is the timeline here, realistic,
34:49
Speaker 4: I think it is.
34:50
Speaker 8: Look at you know, offshore wind went live at the
34:52
Speaker 8: end of last year off of Long Island. For a
34:55
Speaker 8: part of Long Island, there's two big mega projects for
34:57
Speaker 8: offshore wind. We're getting Canadian hydro power in there's upstate
35:01
Speaker 8: New York excess renewable power. We actually have a bottleneck
35:04
Speaker 8: and we're building transmission lines to get that into New
35:07
Speaker 8: York City. So I'm confident that that the grid is
35:09
Speaker 8: going to green. The impetus is there.
35:12
Speaker 2: Is that a state or is it a federal mandate,
35:14
Speaker 2: because I could see this breaking on political lines political
35:18
Speaker 2: you know, red states maybe being more open to green,
35:21
Speaker 2: you know, so on and so forth.
35:23
Speaker 8: Yeah, sure it does fall along political lines. But the
35:26
Speaker 8: renewable energy that's happening in New York is state driven.
35:29
Speaker 8: The offshore wind is controlled by the federal government. But
35:32
Speaker 8: those were cited years and years ago, and so those
35:34
Speaker 8: projects are moving forward.
35:35
Speaker 4: What about solar and solar efficiency? You know, I talked
35:38
Speaker 4: to some neighbors who are like, Okay, we want to
35:39
Speaker 4: do solar, but the payoff is it's a very expensive
35:41
Speaker 4: capital expense. Financing is really high now because of rates,
35:44
Speaker 4: and they're like, yeah, it pays off in like twelve years.
35:46
Speaker 4: That's a long time.
35:47
Speaker 8: Yeah, it is, And but we need all of the above, right,
35:51
Speaker 8: And so the issue in big cities is we just
35:53
Speaker 8: don't have a lot of place to put solar panels, right,
35:55
Speaker 8: and so offshore wind is going to be the future
35:57
Speaker 8: of renewable power, and that's where you see the projects going.
36:00
Speaker 4: We looked into covering it at our old apartment building,
36:02
Speaker 4: which was like five floors ninety units, and the assessment
36:06
Speaker 4: we got Paul was like, it'll cover five percent of
36:09
Speaker 4: your monthly usage. Really if you did the whole roof. Yeah, yeah,
36:12
Speaker 4: just because it's a big building and not a lot
36:14
Speaker 4: of roof space.
36:14
Speaker 3: Yeah.
36:15
Speaker 2: Well, Bloomberg, I mean our Bloomberg, our Princeton campus in
36:18
Speaker 2: New Jersey, huge wind solary down there. Yeah.
36:21
Speaker 4: So, and just depends on the location.
36:23
Speaker 2: Yeah, so they're all in. So I'm not sure we're
36:25
Speaker 2: Sunday get in New Jersey, but we'll see, all right,
36:27
Speaker 2: John Mandike, thanks so much for joining us. John Mandyke,
36:29
Speaker 2: he's a chief executive officer of the Urban Green Council.
36:32
Speaker 2: Join us here in our Bloomberg Interactive Broker's studio talking
36:35
Speaker 2: about I mean, you know, electric vehicles get a lot
36:37
Speaker 2: of the headlines about energy transition, but there's a similar
36:41
Speaker 2: trend going for buildings around the country, and so we'll
36:45
Speaker 2: see how that technology develops.
36:48
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
36:52
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37:02
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37:07
Speaker 2: Tesla more news out today that I think is buffeting
37:09
Speaker 2: the stock here, first and foremost, Tesla autopilot probe escalates
37:13
Speaker 2: with US regulator's data demand, so that's an issue for
37:16
Speaker 2: the company. And then also reported today that Tesla is
37:20
Speaker 2: going to have some April decline in China shipment, so
37:23
Speaker 2: again goes to that demand issue. Let's bring it all
37:26
Speaker 2: to bear here. Craig Trudell, Global autos editor for Bloomberg News.
37:29
Speaker 2: He joins us from London via zoom. Craig, again, a
37:33
Speaker 2: lot of issues, a lot of cross currents for Tesla.
37:35
Speaker 2: Let's start with issue number one today, which is just
37:38
Speaker 2: this autopilot probe here. Give us the background here and
37:41
Speaker 2: give us kind of the lay of the land on
37:43
Speaker 2: this particular issue.
37:45
Speaker 9: Yeah, this goes back quite a way. I mean, we
37:48
Speaker 9: saw federal scrutiny of autopilot almost from the beginning when
37:52
Speaker 9: there was a fatal crash the way back in twenty sixteen,
37:55
Speaker 9: around the time that Tesla started to market this technology.
38:00
Speaker 9: It sort of, you know, gives people the impression from
38:03
Speaker 9: the name, at least among some people, that you can
38:08
Speaker 9: maybe tune out, or that the driver will the car
38:11
Speaker 9: will run on autopilot. In this case and in the
38:15
Speaker 9: case of full self driving, however, you the driver are
38:19
Speaker 9: in control and are responsible for the vehicle. And one
38:23
Speaker 9: of the big problems that Tesla has had has been
38:25
Speaker 9: keeping drivers in control and attentive, and so you know,
38:32
Speaker 9: in August of twenty twenty one, the National Highway Traffic
38:35
Speaker 9: Safety Administration opened a probe into whether autopilot was defective.
38:40
Speaker 9: While it closed that probe recently, it opened a new
38:44
Speaker 9: one having to do with a recall. In December, so
38:48
Speaker 9: Tesla tried over the air software update to guard against
38:53
Speaker 9: misuse of the system, and there have been twenty craft
38:56
Speaker 9: is just in a handful of months since that over
38:59
Speaker 9: the air software update. So NITSA is looking into whether
39:02
Speaker 9: or not that recall was effective and whether more needs
39:05
Speaker 9: to be done.
39:05
Speaker 2: Here is there is there any feeling from Tesla or
39:08
Speaker 2: any statement from Tesla about how they plan to either
39:12
Speaker 2: fix this or maybe update the autopilot and improve the
39:16
Speaker 2: autopilot technology.
39:19
Speaker 9: I think we we will keep a close eye on
39:23
Speaker 9: Elon Musk's X feed that seems to be this sort
39:26
Speaker 9: of you know, only means in which this company communicates
39:29
Speaker 9: uh to some degree. But he I mean, I do
39:34
Speaker 9: think one of the interesting things here is we have
39:37
Speaker 9: seen him in the past sort of rail against you know,
39:40
Speaker 9: outdated uh you know language around recalls, and in the
39:44
Speaker 9: case of autopilot, you know, I mentioned the over the
39:48
Speaker 9: air nature of the fix that they ployed in December.
39:51
Speaker 9: I think one of the keys for investors is a
39:54
Speaker 9: concern as to whether or not that's going to be sufficient.
39:58
Speaker 9: Do they need to install a different type of camera
40:02
Speaker 9: or in some vehicles, even just a camera at all
40:05
Speaker 9: to pay attention to whether the driver is paying attention
40:10
Speaker 9: and monitoring the driver and doing more to to sort
40:14
Speaker 9: of measure and evaluate engagement. And you know, they're really
40:18
Speaker 9: being asked to cough up quite a bit of data
40:20
Speaker 9: here and are being given a deadline of July first
40:26
Speaker 9: to hand over that information, to give n it, you
40:29
Speaker 9: know what it needs to determine whether whether this recall
40:33
Speaker 9: did enough.
40:34
Speaker 2: Yeah, And This feels really important for Tesla because I
40:37
Speaker 2: think Tesla that in terms of the investment narrative, they're
40:39
Speaker 2: trying to get away from focusing on the number of
40:41
Speaker 2: vehicles sold, thinking more about Tesla as a AI company,
40:45
Speaker 2: as a robotaxi company, as just the technology that can
40:50
Speaker 2: maybe be used across the industry. So they need to
40:53
Speaker 2: get this stuff right, don't they.
40:55
Speaker 9: They do? And I mean to Tesla's credit. I mean,
40:57
Speaker 9: the over the air capability that they built into their
41:01
Speaker 9: vehicles was really novel when they were first, you know,
41:04
Speaker 9: sort of coming onto the scene. I'll never forget that.
41:07
Speaker 9: You know, the Model three was coming out and the
41:10
Speaker 9: break distance was was not up up to snuff for
41:13
Speaker 9: Consumer Reports, which was evaluating this, you know, new car
41:16
Speaker 9: that was really important to test at the time, and uh,
41:19
Speaker 9: you know, speaking of Musks, I guess then Twitter feed,
41:23
Speaker 9: uh you know, he you know, sort of said I'm
41:25
Speaker 9: on it. They they didn't over the air software update. Uh,
41:29
Speaker 9: Consumer Reports retested the car and and threw in over
41:33
Speaker 9: the air update they were able to shorten the breaking distance,
41:36
Speaker 9: and uh, you know, the question here is whether autopilot,
41:39
Speaker 9: if they do need to come up with a hardware pollution.
41:42
Speaker 9: To fix a defect with autopilot, that's going to be
41:46
Speaker 9: expensive or has the potential to be very expensive, especially
41:49
Speaker 9: since the company that doesn't have a franchise dealer network,
41:53
Speaker 9: they would have to you know, deploy service vans uh
41:56
Speaker 9: to to cars and and go fix the stuff, which
41:59
Speaker 9: is going to cost a heck of a lot more
42:00
Speaker 9: money than flapping a thoughtware update over the year.
42:03
Speaker 2: All right, issue number two, at least for today as
42:06
Speaker 2: it relates to the stock Preliminary data from the China's
42:09
Speaker 2: Passenger Car Association showed shipments from Tesla's Shanghai factory dropped
42:14
Speaker 2: eighteen percent year on year in April, even as the
42:18
Speaker 2: broader market for new new energy cars grew. Not good
42:22
Speaker 2: news for Tesla. What do we know?
42:25
Speaker 9: No, and it's it's been the case that this is
42:28
Speaker 9: a company that tends to have a lot of up
42:30
Speaker 9: and down months in terms of how they you know,
42:35
Speaker 9: build their cars. They've tried to move away from this,
42:37
Speaker 9: and I don't think we've necessarily seen a whole lot
42:40
Speaker 9: of follow through there where you tend to see you know,
42:44
Speaker 9: rolls in the beginning of each quarter, followed by a
42:47
Speaker 9: sort of end of quarter push and so you know,
42:50
Speaker 9: March December. You know, these end of quarter months you
42:55
Speaker 9: tend to see an uptick, but but then a sort
42:58
Speaker 9: of drop off in the squit months. I think in
43:01
Speaker 9: this case though, you know, the year over year change
43:04
Speaker 9: is you know, in and of itself plenty alarming, especially
43:10
Speaker 9: when you compare Tesla against you know, some of its
43:13
Speaker 9: Chinese competitor. A lot of these companies really are not
43:17
Speaker 9: having the demand problems that we're seeing Tesla have. And
43:21
Speaker 9: I think it's also problematic in the sense that, you know,
43:24
Speaker 9: wholesales from this plant in Shanghai are also a reflection
43:27
Speaker 9: of demand here in Europe because this this is a
43:30
Speaker 9: plant that has been a export hub for Tesla, and
43:34
Speaker 9: so it's not only an indication of some softness in China,
43:39
Speaker 9: but potentially in export markets including Europe.
43:42
Speaker 2: Interesting. Interesting, So that kind of goes to that. I
43:45
Speaker 2: think probably the overarching concern for Tesla and just for
43:48
Speaker 2: the EV business in general, is this the end demand,
43:52
Speaker 2: ultimate end demand for evs here. So I have to
43:54
Speaker 2: see how that plays out. Craig Trudell, thank you so
43:55
Speaker 2: much for joining us. Craig Trudell Global all those editor
43:58
Speaker 2: for Bloomberg News. From our beautiful New York headquarters in London,
44:03
Speaker 2: Queen Victoria Street. Coming at us via zoom again. Tesla
44:06
Speaker 2: stock off two point eight percent today, off twenty eight
44:09
Speaker 2: percent year to date on a trailing twelve month basis,
44:12
Speaker 2: eking out about a five and a half percent gain here.
44:15
Speaker 2: So there's definitely some concerns there for Tesla across the board.
44:18
Speaker 2: I think they're pretty well known, but again for me,
44:20
Speaker 2: it kind of all comes down to where is demand
44:22
Speaker 2: for evs in general, not just for Tesla. I think
44:26
Speaker 2: that's a big concern for a lot of investors and
44:28
Speaker 2: a lot of for the traditional automakers as well. Market
44:30
Speaker 2: cap five hundred and seventy billion dollars for Tesla.
44:34
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