Latest / Bloomberg Intelligence / CVS Ousts CEO, China Data, Netflix Earnings

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CVS Ousts CEO, China Data, Netflix Earnings · Bloomberg Intelligence

0:02
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Speaker 2: One of the big stock stories of to day is CBS,
0:26
Speaker 2: the healthcare company. CBS stocks down today. Management change is
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Speaker 2: never a good thing. We wanted to get to the
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Speaker 2: bottom of it because a lot of people don't really
0:34
Speaker 2: know what CBS is. It's not CBS the television network.
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Speaker 2: It's c and Victor and s CBS. Jonathan Palmer, he
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Speaker 2: knows what's going on. He's a senior healthcare anles for
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Speaker 2: Bloomberg Intelligence. Hey, Jonathan, thanks so much for joining us.
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Speaker 2: I know you know this company. Well, can you tell
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Speaker 2: us what CBS is and why the stock is down today?
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Speaker 2: What's going on there?
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Speaker 3: Yeah, Paul, thanks for having me on. So you know,
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Speaker 3: most people think of CBS as their corner drug store,
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Speaker 3: but really it's a far bigger healthcare company in the
1:02
Speaker 3: ecosystem than just that pharmacy that you see around your corner.
1:06
Speaker 3: They own the benefits manager Etna, and they also own
1:09
Speaker 3: what's called a large PBM, a pharmacy benefit manager called
1:13
Speaker 3: care Mark. So really it's a vertically integrated enterprise that
1:17
Speaker 3: you know, most people knows their corner pharmacy, but actually
1:20
Speaker 3: has a far bigger reach through the insurance side of
1:23
Speaker 3: the business as well. So the stocks down today. They
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Speaker 3: pre announced earnings that missed. They announced the management change.
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Speaker 3: The CEO has left. They're calling it a resignation, but
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Speaker 3: this was really probably the last straw in her tenure,
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Speaker 3: and they promoted the head of care Mark, the benefits
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Speaker 3: manager and a longtime employee to become the new CEO.
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Speaker 4: Talk us through the build up to this management change
1:48
Speaker 4: what was going on exactly.
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Speaker 3: Yeah, So the story of CBS, or the narrative on
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Speaker 3: the stock, has been one of missed expectations. You know,
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Speaker 3: they've been trying to get back to the double digit
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Speaker 3: EPs growth and they've put that out in the in
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Speaker 3: the outer years, and they keep pulling back on that guidance,
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Speaker 3: you know, both reaching that milestone, but also every year
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Speaker 3: they've been kind of missing their EPs guidance, and so
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Speaker 3: they'd already revised guidance down last year they revised guidance
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Speaker 3: down with two Q earnings last quarter, and so really
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Speaker 3: I think it's a question of execution. The CEO just
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Speaker 3: hasn't executed on the game plan that she has spoused,
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Speaker 3: and so they've got little they can do to kind
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Speaker 3: of turn the story around other than making the management change.
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Speaker 2: Thirty seconds, Jonathan, do you think it can be done
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Speaker 2: and in what timeframe?
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Speaker 1: Yeah?
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Speaker 3: I do, you know, I think it's going to take
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Speaker 3: a lot of blocking and tackling. But the hard part
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Speaker 3: about this business is it's based on contracts, and contracts
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Speaker 3: are typically two to three years, and so it's going
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Speaker 3: to take it take some time to work through the
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Speaker 3: headwinds that they're facing and their benefits business on the
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Speaker 3: pharmacy side. But these can be overcome.
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Speaker 2: All right, Jonathan, thanks so much for joining us. Jonathan Palmer,
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Speaker 2: senior healthcare analyso Bloomberg Intelligence, joining us via zoom talking
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Speaker 2: about CBS Health the economics of the healthcare business. I
3:09
Speaker 2: don't pretend to understand that. I think one of the
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Speaker 2: most complex businesses to analyze. So we're glad we have
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Speaker 2: a smart people like Jonathan Parker.
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Speaker 5: The cupons are good.
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Speaker 4: The coupons are good. Coupons we get some really good
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Speaker 4: coupons for CBS through our CBS care Mark.
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Speaker 2: Yeah, but in New York City, in New York City Weekly, exactly,
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Speaker 2: you believe it, exactly. There you go, stock off eight
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Speaker 2: and a half percent today. So again, maybe this is
3:31
Speaker 2: a little bit of a kitchen sink moment for the company,
3:33
Speaker 2: and Jonathan Palmer suggested there is a path towards improved
3:36
Speaker 2: profitability there, So we'll see how they do their.
3:40
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3:58
Speaker 2: China it's front center, not just for folks that invest
4:01
Speaker 2: in China or in emerging markets, but it's one could
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Speaker 2: argue as the second largest economy in world. Everybody has
4:07
Speaker 2: to have a view on China. Our next guest, does
4:10
Speaker 2: Urar DiPippo, Senior geoeconomics analyst for Bloomberg Economics, joins us Geron.
4:16
Speaker 2: I guess the question a lot of people have as
4:18
Speaker 2: it releas to China is are their fiscal and monetary
4:21
Speaker 2: moves to support this economy? Are they enough? What do
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Speaker 2: you think at this stage?
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Speaker 6: So they've already announced monetary policies a few weeks ago,
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Speaker 6: those by their centers are fairly aggressive. The big question
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Speaker 6: is how big will the fiscal policies be. They the
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Speaker 6: Ministry of Finance had a press conference on Saturday where
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Speaker 6: reporters asked many questions, but they didn't provide any actual number.
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Speaker 6: The reason for that is that in China, they actually
4:49
Speaker 6: need the legislator to approve any change in fiscal policy
4:52
Speaker 6: like government borrowing. They won't be meeting until probably late October,
4:56
Speaker 6: possibly early November, so we don't actually know, but I
4:59
Speaker 6: think that the general consensus is that there was sort
5:01
Speaker 6: of this initial euphoria in late September, which explains the
5:05
Speaker 6: massive stock market rally, that they were going to do
5:07
Speaker 6: this big bang stimulus. They kind of are on the
5:10
Speaker 6: monetary side, but it's not exactly clear yet whether they're
5:13
Speaker 6: going to do it on the fiscal side. But what
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Speaker 6: sort of qualitatively what they're saying suggests that the early
5:18
Speaker 6: hopes of doing sort of a big consumer oriented fiscal
5:21
Speaker 6: stimulus that's likely not going to happen, but we're still
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Speaker 6: waiting for the top line number.
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Speaker 4: So what does this all mean for investors who are
5:27
Speaker 4: interested in equities in China?
5:31
Speaker 6: So I mean it was a good day for equities
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Speaker 6: in China. The two big things that happened today were
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Speaker 6: they put out their Q three data, which is generally
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Speaker 6: above consensus, and how well it did, including for GDP.
5:42
Speaker 6: The other thing that might have helped for the stock
5:43
Speaker 6: market was that the PBAC reiterated that it has these
5:47
Speaker 6: these swap facilities, including to help companies buy back shares,
5:51
Speaker 6: which then puts up the stock market. In general. The
5:53
Speaker 6: stock market has done well over the last few weeks,
5:56
Speaker 6: but over the past year not so much. The Chinese
5:59
Speaker 6: stock market has sort of a feast or famine tendency
6:03
Speaker 6: when it comes to sort of boom and bus. This
6:05
Speaker 6: has happened over the past decade or so. It often
6:07
Speaker 6: sort of appears to underperform. Then there's a lot of euphoria,
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Speaker 6: and then a lot of that is often based on
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Speaker 6: what the government is doing. So I think what everyone
6:14
Speaker 6: is waiting for now is again, what is the actual
6:16
Speaker 6: top line number for fiscal fiscal stimulus, Because if it
6:20
Speaker 6: comes in below expectations. The rally, which has already given
6:23
Speaker 6: up some of its gains, could give up even more.
6:25
Speaker 6: But if it's actually at that level three trillion R
6:27
Speaker 6: and B, maybe more than you could see some upside.
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Speaker 2: Hey, Gerard, I see that the China GDP numbers recently
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Speaker 2: came out at rows four point six percent from last year.
6:37
Speaker 2: That's the slowest pace in six quarters. Is there still
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Speaker 2: room to go in terms of decelerating booth or economists
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Speaker 2: out there are they saying, hey, maybe we're atur near
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Speaker 2: the bottom.
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Speaker 6: So at Bloomerg Economics, we think they're probably at the
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Speaker 6: bottom in terms of top line GDP growth, And in
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Speaker 6: general the data was fairly good, so industrial production, retail sales,
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Speaker 6: fixed ass and investment were all just slightly above the consensus.
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Speaker 6: But the sort of broader bad news is that those
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Speaker 6: things are still generally below the sequential trend. So consumption,
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Speaker 6: particularly retail sales, is still well below its pre pandemic trend.
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Speaker 6: And the bottom line is that even though the sort
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Speaker 6: of top line number might have bottomed out, the economy
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Speaker 6: needs more stimulus and that's what everyone's waiting for. And
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Speaker 6: the big thing in particular, it's really two that are
7:24
Speaker 6: related one is the property sector with the government that
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Speaker 6: intends to stabilize probably through stabilizing the purchases, not investment
7:31
Speaker 6: or prices per se. And the other thing that's related
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Speaker 6: to that is consumption or consumer confidence, which is integral
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Speaker 6: linked to the property sector, which is where people have
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Speaker 6: their savings.
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Speaker 4: So what further risks are out there, especially as we
7:44
Speaker 4: dig a bit deeper into the property market that they
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Speaker 4: did say has still yet to stabilize.
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Speaker 6: Well, so in the property sector, I mean, the main
7:53
Speaker 6: thing is that one of them is that the property
7:56
Speaker 6: developers are still in a tough spot. They are in
7:59
Speaker 6: the process of recapitalizing banks in parts of the banks
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Speaker 6: can lend to the property developers and help stabilize that,
8:05
Speaker 6: but ultimately you have to get sales back, you have
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Speaker 6: to basically get the confidence back in. And what's tricky
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Speaker 6: for the Chinese government is they actually wanted to deflate
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Speaker 6: the property center. It was a property bubble. They have
8:14
Speaker 6: deflated it. It needed to happen, But then what they
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Speaker 6: don't want to do is reinflate it to restabilize the economy.
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Speaker 6: So they're walking a sort of a tightrope at the moment.
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Speaker 2: With that, what are the next data points that we
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Speaker 2: need to be looking for for China here.
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Speaker 6: I mean we would be the high frequency indicators like
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Speaker 6: PMIS or in general things like retail sales. The thing
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Speaker 6: that the event to look forward to would be the
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Speaker 6: National People's Congress meeting that will be happening probably in
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Speaker 6: a few weeks, and that is when they'll announce the
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Speaker 6: big stimulus or whatever the number is.
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Speaker 2: That'll be interesting to see because a lot of folks
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Speaker 2: and a lot of I think investments are weighing in
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Speaker 2: large part on what the Chinese government will do. We here, Gerard,
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Speaker 2: thanks so much for joining us. Gerard to Pippo, senior
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Speaker 2: geoeconomics fist for Bloomberg Economics, giving us the latest on
9:03
Speaker 2: the monetary fiscal stimulus in China. Again, the GDP last
9:07
Speaker 2: period rows four point six percent from last year, but
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Speaker 2: that was the slowest pace in six years.
9:13
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9:28
Speaker 2: Our good friends over at Netflix and FLX is the
9:32
Speaker 2: ticker symbol. They reported numbers last night, beat the streets,
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Speaker 2: some good guidance, some good discussion around kind of the
9:38
Speaker 2: growth out look. The stock's up ten percent today fifty
9:41
Speaker 2: two week hig. I'm guessing that's probably close to on
9:43
Speaker 2: an all time high three hundred and twenty five billion
9:45
Speaker 2: dollar market cap. I don't know what's going on there,
9:49
Speaker 2: Keith rag and Othin does because she's the analyst of
9:51
Speaker 2: Bloomberg Intelligence who follows Netflix. Boy, what happened last night?
9:56
Speaker 2: What did Netflix report? Ethan?
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Speaker 7: Yeah, Netflix had an actually very very high quality earnings
10:03
Speaker 7: report last night, Paul. So they were up on subscriber metrics.
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Speaker 7: They came in ahead of consensus. But I think really
10:09
Speaker 7: what excited the street was they were ahead in terms
10:12
Speaker 7: of guidance both for the fourth quarter revenue guidance as
10:15
Speaker 7: well as operating margin guidance, and their outlook for twenty
10:19
Speaker 7: twenty five was slightly ahead of consensus. And mind you,
10:23
Speaker 7: it was slightly ahead of consensus just based on subscriber growth.
10:28
Speaker 7: So the two big growth levers that you know, everybody
10:30
Speaker 7: was expecting they would pull. One was, of course, the
10:33
Speaker 7: ad business that doesn't look like it's going to be
10:35
Speaker 7: a huge contributor in twenty twenty five looks more like
10:37
Speaker 7: a twenty twenty six event. And then, of course the thing,
10:40
Speaker 7: the event that we were all waiting for, which was
10:41
Speaker 7: you know, a price increase on their standard plan in
10:45
Speaker 7: the US, and they didn't announce that. And so the
10:47
Speaker 7: fact that they're able to guide to double digit, solid
10:50
Speaker 7: double digit revenue growth without pulling any of those growth
10:53
Speaker 7: levers just tells us that there's a lot more Jews
10:55
Speaker 7: left in this business, even with you know, just playing subscriber.
10:58
Speaker 4: Growth, right, good news coming out of this report. Where
11:02
Speaker 4: are some areas that they could have done better? Is
11:04
Speaker 4: there any areas that people are critiquing?
11:07
Speaker 7: I think the areas that people are critiquing is really
11:09
Speaker 7: just the lack of disclosure around advertising. And one can
11:13
Speaker 7: understand why they are holding their cards close to their chest.
11:16
Speaker 7: So this is still a very small business. They have
11:19
Speaker 7: not disclosed the number of subscribers that they have on
11:22
Speaker 7: the ad tear and that's you know, color that investors
11:26
Speaker 7: and the whole investment community has kind of been looking
11:28
Speaker 7: for for a long time. But they did give us
11:30
Speaker 7: some qualitative kind of guidelines, right, They said that, yes,
11:34
Speaker 7: we are growing pretty fast, but it's off a small base.
11:36
Speaker 7: Don't expect the advertising business to be a huge growth
11:39
Speaker 7: driver in twenty twenty five, but I think come twenty
11:41
Speaker 7: twenty six, that completely changes.
11:44
Speaker 2: Where we on programming budgets Keith, because I think one
11:46
Speaker 2: of the things that you and you and I worked together,
11:48
Speaker 2: we were just shocked at the early days of Netflix
11:51
Speaker 2: and the types of money they were willing to spend,
11:54
Speaker 2: the billions of dollars they're willing to spend on their
11:56
Speaker 2: programming budget, and that forced everybody else to kind of
11:59
Speaker 2: keep pace. Where are they with their spending their spending strategy.
12:02
Speaker 2: Do they have to keep spending to get subscribers?
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Speaker 7: I think they do, but they're doing it in a
12:08
Speaker 7: much more intelligent, much more efficient way. And the ROI
12:13
Speaker 7: on the content spend has absolutely, you know, increased so
12:16
Speaker 7: so much, Paul, And that's just because you know, it's
12:19
Speaker 7: been a function of just the operating leverage that they
12:20
Speaker 7: have in the model, with the scale and the way
12:23
Speaker 7: that they're able to spread those costs over you know,
12:25
Speaker 7: a two hundred and eighty five million subscriber base. So
12:29
Speaker 7: you know, yes, there has been some content cost rationalization
12:31
Speaker 7: across the board, including Netflix, They are still spending about
12:35
Speaker 7: seventeen billion dollars this year on content, which makes them
12:38
Speaker 7: one of the biggest spenders in the streaming space. They
12:41
Speaker 7: are planning to increase their budget a little bit going forward,
12:45
Speaker 7: so I think closed about eighteen billion dollars in twenty
12:47
Speaker 7: twenty five is what the general estimate is. But then again,
12:51
Speaker 7: remember they are looking to build out an AD business,
12:54
Speaker 7: and for ads you do need to invest in different
12:57
Speaker 7: kinds of programming, not really the entertainment programming. It probably
13:01
Speaker 7: has to be more a live sports or a live
13:03
Speaker 7: events type of strategy, and they I think are willing
13:06
Speaker 7: to kind of splurge on that to really build up
13:09
Speaker 7: and scale up that AD business.
13:11
Speaker 4: How's the debt looking on their balance sheet? I know
13:13
Speaker 4: there are big spenders, especially as we think about all
13:15
Speaker 4: the shows and the movies that they're rolling out. Are
13:17
Speaker 4: they staying above water?
13:20
Speaker 7: Oh, very very much so. They have about fourteen billion
13:22
Speaker 7: dollars in debt, but remember they have over seven billion
13:26
Speaker 7: dollars in cash on there on their balance sheet and
13:29
Speaker 7: they're going to throw out, you know, six billion this year.
13:31
Speaker 7: So absolutely in very very good shape.
13:34
Speaker 2: So the sixty four thousand dollars question geetha which I'm
13:37
Speaker 2: sure you get asked by your institutional investor clients all
13:39
Speaker 2: the time, is how about everybody else? When you see
13:42
Speaker 2: a Netflix quarter like this, you're like, boy, how's everybody
13:46
Speaker 2: else can to compete against these guys in the streaming world?
13:49
Speaker 2: What are you saying to them?
13:51
Speaker 7: Yeah, so they definitely Netflix has definitely won the streaming wars.
13:54
Speaker 7: They're going to keep it that way. You know, we
13:57
Speaker 7: know that they have about ten percent of all viewing
14:00
Speaker 7: time in the United States, so they obviously see much
14:03
Speaker 7: more upside for themselves to kind of grow. And I
14:06
Speaker 7: think that's exactly what's going to happen, you know, as
14:09
Speaker 7: they have more and more plans, you know, cheaper plans
14:13
Speaker 7: with of course the advertising based here, and of course
14:15
Speaker 7: as they have more and more must have content. So
14:18
Speaker 7: there's definitely the competitive intensity is absolutely easing, which allows
14:23
Speaker 7: them to be a dominant player. But I think also
14:25
Speaker 7: Netflix is really showing the other players how it's done.
14:29
Speaker 7: So one of the big points that came out yesterday
14:32
Speaker 7: from their earnings report was the fact that they've increased margins.
14:35
Speaker 7: Remember at the start of twenty twenty four they said
14:37
Speaker 7: twenty two percent operating margin. Yesterday, they're saying twenty seven
14:41
Speaker 7: percent operating margin for twenty twenty four. And remember, Paul,
14:45
Speaker 7: I mean you know this, well, the Bogie has always
14:47
Speaker 7: been about thirty thirty five percent margins, and it looks
14:49
Speaker 7: like they're going to be able to get there in
14:50
Speaker 7: the next couple of years. So this is going to
14:52
Speaker 7: be and probably even more profitable model than the traditional
14:56
Speaker 7: TV model, which is great news.
14:58
Speaker 2: Well can am I I'm not seeing that or are
15:02
Speaker 2: we going to see that with some of the other
15:04
Speaker 2: traditional media companies which are still chasing profitability Because you
15:07
Speaker 2: say it can be done, I'd go out there and
15:09
Speaker 2: take a flyer on Warner Brothers, Discovery. I take a
15:12
Speaker 2: flyer maybe even on Power Amount. If you're saying that
15:15
Speaker 2: model can be profitable, yeah, it.
15:17
Speaker 7: Can be profitable, but of course it depends on so
15:19
Speaker 7: many other factors. I think Disney is definitely in the
15:22
Speaker 7: strongest position to kind of replicate this success. The other
15:26
Speaker 7: is not so much because again, you know, scale is
15:28
Speaker 7: going to be a huge issue for them, Marketing costs
15:31
Speaker 7: is going to be a huge issue for them. They
15:32
Speaker 7: just don't have that cloud or the firepower that you know,
15:35
Speaker 7: Netflix and Disney kind of have with their IP and
15:38
Speaker 7: their franchises.
15:39
Speaker 4: I mean, after these results, it seems like a bit
15:41
Speaker 4: of a positive start so far. When we're thinking about
15:43
Speaker 4: those sort of former fameing names. What is the next
15:46
Speaker 4: thing that investors are looking for? Has the company talked
15:49
Speaker 4: anything about new projects that they're rolling out? What are
15:51
Speaker 4: investors on the watch for?
15:54
Speaker 7: Yeah, so the new projects right now? Rah. Of course,
15:56
Speaker 7: the big thing that everybody has kind of got their
15:58
Speaker 7: hat hanging on is the advertising business and how big
16:01
Speaker 7: that can potentially be when it takes off in a
16:04
Speaker 7: big way. They also, of course again are making this
16:07
Speaker 7: big you know splash or this big foray into live events.
16:10
Speaker 7: So you have you know, the NFL games that are
16:12
Speaker 7: going to come up, you have that Jake Paul Versus
16:14
Speaker 7: Mike Tyson event. The question is how many more of
16:16
Speaker 7: those are they going to do and will those actually
16:18
Speaker 7: be a big you know, needle mover for them, and
16:22
Speaker 7: then of course you would have them kind of taken
16:25
Speaker 7: you know, these baby steps in the in the gaming
16:27
Speaker 7: industry again not necessarily been a game changer so far,
16:31
Speaker 7: but over time it certainly can be. So they have
16:34
Speaker 7: these different ancillary revenue streams that can definitely build uh
16:39
Speaker 7: and kind of increase their not only their catalog of content,
16:42
Speaker 7: but also their competitive positioning as in strengthening their competitive positioning.
16:48
Speaker 8: I need I need some tips on how to get
16:49
Speaker 8: around the sharing.
16:50
Speaker 2: Well that's the thing. I mean, getha, that's sharing thing.
16:53
Speaker 4: Please?
16:54
Speaker 2: That's that that helps them out.
16:55
Speaker 7: Right them out huge, big time, big time, one hundred
16:59
Speaker 7: million subscribe versus the opportunity that they outlined there.
17:03
Speaker 2: So they've identified that. The Tucker offspring, I think is
17:07
Speaker 2: the dead beats like me to get around I know,
17:11
Speaker 2: all right, thanks so much. Keith wrong an oath and
17:14
Speaker 2: she's a medias for Bloomberg Intelligence. And I'll notice what's.
17:16
Speaker 8: The Netflix nowadays?
17:19
Speaker 2: Since I don't get it anymore? Oh you you were
17:22
Speaker 2: cripping off one of your kids.
17:24
Speaker 8: No, I'm not going to make yourself. It's called sharing,
17:28
Speaker 8: right is carring?
17:30
Speaker 3: Yes?
17:30
Speaker 2: Thank you? Sweeny shocked when this happened. Oh, I like
17:34
Speaker 2: they were calling like all like, Dad, would you do
17:37
Speaker 2: you cut us off?
17:38
Speaker 5: Said?
17:38
Speaker 2: I didn't cut you off.
17:39
Speaker 4: My dad was like, I don't even know how to
17:40
Speaker 4: work this cut it off.
17:43
Speaker 2: That's why we own the stock. It's one of the
17:45
Speaker 2: many reasons for Dead beats like you were off the
17:48
Speaker 2: doll So so that's important. And the advertising, is Keitha said,
17:52
Speaker 2: is a you know, twenty five twenty six event that
17:54
Speaker 2: investors can hold their hats on as they look for
17:56
Speaker 2: growth to continue to support that multiple.
17:58
Speaker 1: There you're listening to the Bloomberg Intelligence Podcast. Catch us
18:03
Speaker 1: live weekdays at ten am Eastern on applecar Play and
18:07
Speaker 1: Android Outo with the Bloomberg Business Act. You can also
18:10
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18:13
Speaker 1: station Just Say Alexa Play Bloomberg eleven thirty.
18:18
Speaker 2: SAMAS officials they have confirmed the dethical maas leader Yagat Sinwar,
18:23
Speaker 2: who was said to be the architect behind October seventh
18:25
Speaker 2: attack order. Today, President Joe Biden spoke on Sinewar's death,
18:29
Speaker 2: seeing it as a quote moment of justice and quote
18:33
Speaker 2: while also renewing the call for a cease fire dealist
18:36
Speaker 2: take a listen.
18:37
Speaker 9: The death of leader AMAS represents a moment of justice.
18:41
Speaker 9: He had the blood of Americans and Israelis, Palestinians in Germany,
18:44
Speaker 9: and so many others on his hands. I told the
18:48
Speaker 9: Prime Minister Visil yesterday, let's also make this moment an
18:52
Speaker 9: opportunity to seek a path to piece a better future
18:57
Speaker 9: in Gaza without Amas.
19:00
Speaker 2: All right, That was President Biden earlier today speaking about
19:03
Speaker 2: the death of Sinwar's death, again calling it a moment
19:06
Speaker 2: of justice. Let's break it down a little bit farther.
19:08
Speaker 2: We talked geopolitics in the Middle East. Some smart voices
19:11
Speaker 2: help us out there. Jonathan Schanzer, He's the senior vice
19:13
Speaker 2: president for research. He's at the non partisan Foundation for
19:17
Speaker 2: Defense of Democracies think tank. Joins us from Washington, DC
19:21
Speaker 2: via zoom. Jonathan, what do you make of this latest news?
19:25
Speaker 2: I mean, the Israeli seemed to be quite successful targeting
19:29
Speaker 2: leaders of Hamas and Hesbola. What do you think their
19:33
Speaker 2: strategy is right now?
19:36
Speaker 10: Well, first, I think we need to acknowledge something that
19:39
Speaker 10: yesterday's strike against Sinwar was dumb luck. The Israelis have
19:44
Speaker 10: pulled off a lot of serious operations and places like
19:47
Speaker 10: Lebanon and Iran. In Gaza, this was the result of
19:51
Speaker 10: a couple of younger IDF soldiers simply happenstance falling upon
19:57
Speaker 10: Sinhwar's position. After a brief altercation, they called in a
20:02
Speaker 10: tank strike and ended up killing him. Really just a
20:06
Speaker 10: remarkable turn of events. But what the Israelis have done,
20:09
Speaker 10: you know, outside of this particular strike that killed Sinowar
20:13
Speaker 10: is they have just been using their intelligence advantage. They've
20:17
Speaker 10: been using their technology advantage to effectively evisceerate Hamas. They've
20:22
Speaker 10: got his balla on the ropes. They're now preparing for
20:26
Speaker 10: a strike against the Iranians. I think the expectation there
20:30
Speaker 10: is they're going to take away some of Iran's capabilities.
20:33
Speaker 10: This has been not the war that the Israelis wanted
20:35
Speaker 10: to fight. It's been a war of attrition. It's been
20:37
Speaker 10: fought in some cases on their turf that runs one
20:40
Speaker 10: hundred and eighty degrees away from their doctrine, which is
20:44
Speaker 10: fighting fast wars on other people's turf. But I do
20:48
Speaker 10: you get the sense right now that through these precisions, strikes,
20:51
Speaker 10: through the technology, through their comparative advantage, they're starting to
20:55
Speaker 10: gain the upper hand against the Iranians and six or
20:59
Speaker 10: seven in other proxies, which is truly a formidable axis
21:04
Speaker 10: that they are fighting. But you do get a sense
21:06
Speaker 10: that they're starting to make some headway.
21:09
Speaker 4: Jonathan, this war has been going on for over a year.
21:12
Speaker 4: What chapter are we in? How much closer Are we
21:14
Speaker 4: to a truce? What are people saying?
21:17
Speaker 10: Yeah, Look, I think there's a possibility of possibly getting
21:20
Speaker 10: to a truce with Hamas because they've just been eviscerated, right,
21:25
Speaker 10: I mean, I think they have to at some point
21:28
Speaker 10: understand that fighting is just not worth it any longer,
21:30
Speaker 10: not for the people of Gaza, not for the organization itself.
21:34
Speaker 10: They're still holding one hundred and one hostages, including I
21:37
Speaker 10: believe seven Americans right now. A deal can be cut
21:41
Speaker 10: that would end the fighting in Gaza. But I think
21:43
Speaker 10: we need to all be clear about something. This seven
21:46
Speaker 10: front war that the Iranians are waging against Israel, that's
21:50
Speaker 10: going to keep going, and we're seeing it now. His
21:52
Speaker 10: Ballas declared that they're going to up the ante and
21:54
Speaker 10: possibly use more advanced weapons against Israel than we've seen
21:57
Speaker 10: so far deployed in that theater. The Huthi's are still
22:01
Speaker 10: at it, the SAI militias in Iraq and Syria are
22:04
Speaker 10: still at it. Various terrorist groups that have been attacking
22:07
Speaker 10: Israel out of the West Bank they're still at it.
22:09
Speaker 10: And then of course there's Iran itself, which recently lobbed
22:12
Speaker 10: one hundred and eighty one ballistic missiles at Israel in
22:14
Speaker 10: one night. So this war is going to continue on
22:17
Speaker 10: other fronts. But certainly it would be welcome to see
22:20
Speaker 10: the fighting finally stop in Gaza. It would be a
22:23
Speaker 10: welcome relief for the people of Gaza, who really do
22:26
Speaker 10: I think, need to see that place go under some
22:29
Speaker 10: serious reconstruction, both politically and physically. That needs to happen
22:33
Speaker 10: sooner rather than later. But the war, the broader war
22:36
Speaker 10: in the Middle East, is going to continue.
22:38
Speaker 2: Yeah, Jonathan, it seems like, you know, in this year
22:42
Speaker 2: that there's been this hostilities in Middle East, it's gone
22:45
Speaker 2: from a limited war in Hamas to simply you know,
22:48
Speaker 2: evistrate Hamas and get the hostages back to a much
22:51
Speaker 2: much broader regional conflict, something that the US wanted to
22:54
Speaker 2: avoid here. But it feels like the Israelis recognize this
22:58
Speaker 2: as a moment in time where they can settle everything
23:01
Speaker 2: everywhere in the region. Is that what you're thinking at
23:04
Speaker 2: this point?
23:05
Speaker 10: Look, you know, I think first to frame this properly,
23:08
Speaker 10: you have to understand that what started with Hamas, it
23:10
Speaker 10: was never about you know, Hamas versus Israel, or Israel
23:14
Speaker 10: versus the Palestinians, or you know, a war in Gaza.
23:18
Speaker 10: This was an Iranian proxy hamas you know, waging more
23:23
Speaker 10: against Israel and then opening up multiple fronts at once,
23:27
Speaker 10: and so now we're seeing all those fronts, it's become
23:29
Speaker 10: even more clear. I think it was a clarifying the
23:32
Speaker 10: moment yesterday. With sinwar gone, you begin to see that
23:35
Speaker 10: these other fronts haven't stopped. If anything, they may actually
23:39
Speaker 10: only get hotter. And so I think for many of
23:41
Speaker 10: us here in the West, it was kind of an
23:43
Speaker 10: aha moment where we say, Okay, wow, this really is
23:46
Speaker 10: a wider war in Iran is behind it now? Israel
23:49
Speaker 10: I think has some choices in front of it, right,
23:52
Speaker 10: it can try to fight to a ceasefire in Lebanon
23:57
Speaker 10: where you know, maybe his Bala is forced to withdraw
24:00
Speaker 10: above the Latani River, which is you know, what was
24:03
Speaker 10: enshrined the international law after the last war in two
24:06
Speaker 10: thousand and six. But it doesn't solve for all of
24:10
Speaker 10: the other challenges that Israel still facing, these Sheite militias
24:13
Speaker 10: that have been firing drones and rockets and missiles at
24:16
Speaker 10: Israel over the last year. There's still a problem. The
24:19
Speaker 10: regime itself is still the big problem, and the biggest
24:23
Speaker 10: problem of all is that Iran is still flirting with
24:26
Speaker 10: that nuclear weapon. They may use all of this as
24:29
Speaker 10: a distraction to make a dash to that bomb, and
24:33
Speaker 10: then the entire map changes. In the Middle East. You've
24:35
Speaker 10: got basically a regime that is as malign as North
24:39
Speaker 10: Korea in the heart of the Middle East, threatening to
24:43
Speaker 10: pull the trigger at any time, and using, by the way,
24:45
Speaker 10: in nuke as the ultimate insurance policy to be able
24:49
Speaker 10: to continue the kind of mayhem that we've been watching.
24:51
Speaker 10: So the Israelis, I think, are looking at all these
24:53
Speaker 10: and I think they're clear eyed about it. They see
24:56
Speaker 10: the need to bring down the regime in Iran. I
24:58
Speaker 10: don't know if they can do so without help from
25:01
Speaker 10: the United States or maybe more importantly, help from the
25:05
Speaker 10: Iranian people. These are people that truly hate their regime,
25:08
Speaker 10: and I think we're now starting to see a strategy
25:10
Speaker 10: take shape where the Israelis. The Israeli Prime Minister spoke
25:14
Speaker 10: directly to the Iranian people a little bit more than
25:17
Speaker 10: a week ago, enlisting them in the battle against their
25:20
Speaker 10: mutual enemy.
25:22
Speaker 2: Jonathan, thanks so much for giving us a few minutes
25:24
Speaker 2: of your time. Really appreciated. Jonathan Schanzer, Senior vice president
25:27
Speaker 2: for research at the non partisan Foundation for Defensive Democracies.
25:31
Speaker 2: That's a think tank in Washington, DC. There are a
25:33
Speaker 2: lot of smart people out there that help us understand
25:35
Speaker 2: what's going on in a very difficult part of the world.
25:38
Speaker 2: We appreciate getting few minutes of Jonathan's time there.
25:42
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
25:46
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25:49
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25:52
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25:56
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty Normal.
26:00
Speaker 2: Linda sitting in for Alex Steele. I am Paul Sweeney.
26:03
Speaker 2: We're live here in our Bloomberg Interactive Broker's studio. We're
26:05
Speaker 2: streaming live on YouTube as well. To check us out there.
26:08
Speaker 2: Sylvia Jablonski joins us. She's a chief executive officer and
26:11
Speaker 2: chief investment officer Defiance ETFs. So we're gonna talk to
26:14
Speaker 2: market with Sylvia, and I also want to talk ETFs
26:16
Speaker 2: because I'm just continue to be shocked at the amount
26:19
Speaker 2: of money going into the ETF space. It's one of
26:21
Speaker 2: the great stories of my during my career on Wall
26:24
Speaker 2: Street to see the fun flow there. Sylvia, thanks so
26:27
Speaker 2: much for joining us here. We've got a lot of
26:28
Speaker 2: economic data that looks pretty solid. Maybe a lot of
26:32
Speaker 2: folks in that soft landing camp, I think they're feeling
26:34
Speaker 2: pretty comfortable with that kind of backdrop. Where are you
26:37
Speaker 2: telling your clients to all k capital these days?
26:40
Speaker 11: Hi, Paul, Thanks for having me, And first of all,
26:43
Speaker 11: I would like to have a best but to whiz
26:44
Speaker 11: her on the jersey you are with that sounds like
26:46
Speaker 11: a lot of fun. Yeah, I think you know, I
26:50
Speaker 11: think the markets are in a good spot, right we
26:52
Speaker 11: it all kind of started, the momentum restarted, I should say,
26:55
Speaker 11: with that job's number that looked a little bit better
26:57
Speaker 11: after concerns of the report prior. Inflation is looking good.
27:02
Speaker 11: So we have the situation now where monetary policy is
27:04
Speaker 11: becoming a little bit more favorable. We have steady jobs,
27:08
Speaker 11: we have wage growth, we have consumer sentiment, you know,
27:10
Speaker 11: pretty solid, and consumer spending and then earnings earnings are
27:14
Speaker 11: holding up, right, So while valuations are high, companies are
27:17
Speaker 11: proving that they're profitable and that they're continuing to grow.
27:20
Speaker 11: So it does feel a little bit like a goldilocks
27:23
Speaker 11: market right now, particularly you know, we're going into that
27:26
Speaker 11: seasonally strong time of year next month, we have an
27:29
Speaker 11: election year. I think it's it's going to be a
27:32
Speaker 11: pretty good ending to the you know, to the S
27:33
Speaker 11: and P five hundred and NASDAC, and so where do
27:36
Speaker 11: you allocate? You know, whenever the market pulls back on
27:38
Speaker 11: dips and AI stocks, I always buy them. We've talked
27:41
Speaker 11: about that. You know, a lot of people probably already
27:43
Speaker 11: know my picks there right then, videos the AMD's super
27:46
Speaker 11: micro micro strategies. But I'm also starting to allocate to XMAG.
27:51
Speaker 11: So the other two hundred and ninety three stocks in
27:53
Speaker 11: the S and P five hundred that are kind of
27:55
Speaker 11: forgotten over the last couple of years, I think they're
27:57
Speaker 11: going to start having their day in the sun.
28:00
Speaker 4: What areas are you avoiding?
28:03
Speaker 11: You know, I think the breath is increasing in the market,
28:07
Speaker 11: and I think that the overall market is starting to perform.
28:09
Speaker 11: So it's not that I'm necessarily avoiding a particular sector.
28:13
Speaker 11: I think if I look at the MAG seven for example,
28:16
Speaker 11: actually there's only two of them that are now outperforming
28:18
Speaker 11: the S and P five hundred, and that's Nvidia and
28:22
Speaker 11: Meta and the others, although Apple might have picked up
28:25
Speaker 11: after the last couple of days, but the others are
28:26
Speaker 11: kind of slowing down in terms of outperformance, and so
28:29
Speaker 11: I'm not really looking to pick up like the classic
28:32
Speaker 11: mag seven. But that's not to say that I'm selling
28:35
Speaker 11: the positions that I already have. I think if I
28:37
Speaker 11: just put new money to work, I'm going to be
28:39
Speaker 11: a little bit more thoughtful about where I diversify it,
28:41
Speaker 11: and that probably will be away from some of these
28:44
Speaker 11: names that have flown high.
28:47
Speaker 2: You've got excellon in your notes here. That's the name
28:50
Speaker 2: we don't talk about, I think enough here John Tucker
28:53
Speaker 2: and I were just talking about oil coming back down
28:56
Speaker 2: now below seventy dollars a hour for WTA crude oil.
28:58
Speaker 2: What's the investor call on Exxon.
29:02
Speaker 11: Yeah, I mean that's why I like it, right. I
29:03
Speaker 11: think it's it's come down quite a bit. But if
29:05
Speaker 11: you look at what's going on in the rest of
29:06
Speaker 11: the world, to me, this is this is a bit
29:08
Speaker 11: of a you know, a bit of a diversifier to
29:11
Speaker 11: the portfolio. First of all, it's again it's not the
29:14
Speaker 11: Max seven. It's in that four ninety three it's a
29:16
Speaker 11: strong company with a solid balance sheet. They pay a dividend,
29:19
Speaker 11: and I think the company's also well positioned, you know,
29:21
Speaker 11: whether whether or not. Of course, they're tied to oil
29:25
Speaker 11: and whatnot, but I think that they're doing a lot
29:27
Speaker 11: of investing in kind of you know, green energy and
29:30
Speaker 11: going climate neutral to twenty fifty, they'll be big players
29:33
Speaker 11: in that space because I think they've learned that they
29:36
Speaker 11: have to be evolved. So I just like that company overall.
29:38
Speaker 11: But I do think that oil is going to be
29:40
Speaker 11: a story. You know, there's so much going on in
29:41
Speaker 11: the Middle East right now. I don't think it's necessarily
29:44
Speaker 11: over and that's an impetus for potentially oil to spike
29:48
Speaker 11: throughout the months coming ahead. And then the other thing is,
29:51
Speaker 11: you know China, if we keep seeing China, if we
29:53
Speaker 11: see that stimulus there and we see the second largest
29:55
Speaker 11: economy in the world growing. You know, they're one of
29:58
Speaker 11: the biggest consumers of X products, and so I think
30:01
Speaker 11: that that company has a shot of growing.
30:04
Speaker 4: Here talk to me about healthcare. I know this is
30:07
Speaker 4: an area that can get really nitty, griny and niche,
30:10
Speaker 4: but what's going on?
30:13
Speaker 11: So healthcare again, this goes to my to my ex
30:15
Speaker 11: mag right, if you look at if you look at
30:17
Speaker 11: the MAG seven and then kind of start going down
30:19
Speaker 11: the list and start trying to look at the companies
30:21
Speaker 11: that are outperforming the S and P five hundred. You know,
30:24
Speaker 11: Eli Lie Lily is one of them. Can't talk today.
30:28
Speaker 11: I think you know, part of that is is the
30:30
Speaker 11: GLP one craze and the weight loss drugs, and you
30:33
Speaker 11: have you know, Novo and Lily playing in that space.
30:36
Speaker 11: But that company in particular has a big portfolio of drugs,
30:40
Speaker 11: whether it's Manjaro, whether it's you know, cancer drugs and
30:43
Speaker 11: FDA trials, Alzheimer's disease drugs on trials and things like this.
30:46
Speaker 11: But I think it's a macro story that's starting to
30:49
Speaker 11: play out. To be honest, I thought that these companies,
30:51
Speaker 11: these you know, big pharma companies would do better than
30:53
Speaker 11: they have sooner than they have. They're getting some steam now,
30:57
Speaker 11: but you know, you have this massive aging baby boom
31:00
Speaker 11: population people started to consume medical services and you know,
31:04
Speaker 11: these these products post COVID. I think that's going to continue.
31:07
Speaker 11: And just strong balance sheet. They pay a nice dividend,
31:10
Speaker 11: good diversifier, you know, defensive play for the market. So
31:14
Speaker 11: I do think it's worth looking at Sylvia.
31:17
Speaker 2: You know, when I was growing up on Wall Street,
31:18
Speaker 2: it was all about the mutual funds. Now, the funds
31:20
Speaker 2: flows over the last decade plus have just been extraordinary
31:24
Speaker 2: to this new rapper called the ETFs at your platform
31:27
Speaker 2: defines ETFs. What are you seeing today trips of funds
31:29
Speaker 2: flows and kind of where are they going?
31:32
Speaker 11: Yeah, I mean this was our best year yet. I
31:34
Speaker 11: think it was the best year yet for the ETF industry.
31:37
Speaker 11: I know you guys have Eric talking about that pretty
31:40
Speaker 11: regularly out there, but it's it's a multi trillion dollar
31:44
Speaker 11: business and state of the world now. And if you
31:46
Speaker 11: look at you know, these big mutual fund companies, I mean,
31:48
Speaker 11: they're all trying to figure out how they can do
31:51
Speaker 11: these conversions to ETF products because I think it's the
31:53
Speaker 11: way of the future. I mean, I'll say something bold.
31:56
Speaker 11: I don't think that you know, I have young kids.
31:58
Speaker 11: I don't think that they'll know what a mutual fund
31:59
Speaker 11: is by the time they're teenagers right when they invest.
32:03
Speaker 11: I mean, it'll be some it'll be like a you know,
32:06
Speaker 11: rotary phone or something like that. But I just think
32:09
Speaker 11: ETFs are a better product. Right, you can trade them
32:11
Speaker 11: throughout the day. They're transparent, and they're a lot cheaper,
32:14
Speaker 11: I think the days of expensive mutual funds, I mean,
32:16
Speaker 11: give or take a few. Like the market leaders, it's
32:18
Speaker 11: just like have their client base. I think they'll have
32:20
Speaker 11: it for a while, but you kind of have to
32:22
Speaker 11: adapt and go you know, cheaper, more transparent, unless it's
32:25
Speaker 11: like a super sophisticated active strategy, but that probably still
32:28
Speaker 11: works better than an ETF forepper. So I think growth
32:31
Speaker 11: continues there.
32:32
Speaker 2: Yeah, but when I was, they're not as profitable to me.
32:35
Speaker 2: When I'm trading for Salomon Brothers, I'm wearing Stanley back
32:38
Speaker 2: in the day.
32:39
Speaker 11: You're not going to make its much money as an advisor,
32:41
Speaker 11: that's for sure. And that's you know, but I think
32:44
Speaker 11: if you you know, the good news is that the
32:46
Speaker 11: types of ETFs that are out there are are more interesting.
32:49
Speaker 11: You know, there's a lot of great thematic products, options
32:51
Speaker 11: based products and things like this, and so an advisor
32:54
Speaker 11: I think can now be you know, really providing a
32:58
Speaker 11: good service by alerting ret tell clients of theirs that
33:01
Speaker 11: there's all this other stuff out there that they can
33:02
Speaker 11: get exposure to, including bitcoin, right, I mean Bitcoin wasn't
33:05
Speaker 11: a thing a few years ago within an ETF product.
33:08
Speaker 11: Now people are putting it in their IRA, so it's
33:11
Speaker 11: a different world.
33:12
Speaker 2: It is a different world, and as you mentioned, it
33:14
Speaker 2: is arguably much better for investors, and that's the most
33:17
Speaker 2: important thing. Sovia Jablonski, thanks so much for joining us
33:20
Speaker 2: chief executive officer and chief investment Officer for Defiance at ETFs.
33:24
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
33:28
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
33:32
Speaker 1: Auto with the Bloomberg Business. You can also listen live
33:35
Speaker 1: on Amazon Alexa from our flagship New York station Just
33:38
Speaker 1: Say Alexa playing Bloomberg eleven thirty.
33:42
Speaker 2: Romelina sitting in for Alex Deel poul Swinging. You live
33:44
Speaker 2: here in our Bloomberg Interactive Brokers studio. I'm going to
33:47
Speaker 2: get right to our next guest here. A very cool
33:49
Speaker 2: story here, Roland Martineque, CEO of Data Bank. Data Bank
33:52
Speaker 2: is a private company. Tell us what you guys do
33:55
Speaker 2: role because I think a lot of people are really
33:57
Speaker 2: interested in your business.
33:59
Speaker 5: Sure be here.
34:00
Speaker 12: Thanks for having me so, data Bank we're a US
34:03
Speaker 12: based company. We're a data center developer, data center. So
34:06
Speaker 12: we have over seventy data centers in twenty seven markets,
34:09
Speaker 12: giving us the largest geographic footprint of data centers in America.
34:14
Speaker 12: A data center, I like to say, if you know,
34:16
Speaker 12: it's basically the foundation for technology adoption. Right, you think
34:20
Speaker 12: about anything on your phone, anything on your computer, it
34:22
Speaker 12: basically originates and terminates in a data center. So we
34:26
Speaker 12: support over twenty five hundred customers, you know, from the
34:29
Speaker 12: major hyperscalers to major enterprises to smaller businesses that want
34:34
Speaker 12: to put their critical data, their applications, their services inside
34:39
Speaker 12: a hard and facility that a data center. Because obviously
34:41
Speaker 12: in today's world, everyone's really dependent on on their digital footprint.
34:45
Speaker 4: Throw me a few names of your customers.
34:48
Speaker 12: So Amazon, Google, Netflix, JP, Morgan, just A and C Bank, Carnival, Cruiser.
34:56
Speaker 2: Right, so even simple people like Nora, and I know,
34:58
Speaker 2: nor is much smarter than is the real estate business.
35:01
Speaker 2: I know that the data center business is a good business, booming,
35:04
Speaker 2: really good business. Some people want to invest with you
35:08
Speaker 2: and you just raise some capital. Talk to us about that.
35:10
Speaker 12: Yeah, So one thing about data centers is they're really expensive. Right,
35:14
Speaker 12: you know, we measure everything in power. We call it,
35:17
Speaker 12: you know, by the megawatt, which is a million watts.
35:19
Speaker 12: It costs about ten to twelve million dollars per megawat
35:23
Speaker 12: to build out data centers, and we're building data centers
35:25
Speaker 12: that are sixty megawats, seventy two megawats, forty megawatts. So
35:30
Speaker 12: you know, we're now in the kind of the billions
35:32
Speaker 12: range when it comes to these investments across the sector.
35:35
Speaker 12: So this week we announced that we had raised two
35:38
Speaker 12: billion of equity capital with Aussie Super which is an
35:41
Speaker 12: Australian pension fund, as our new lead investor, with a
35:44
Speaker 12: one point five billion dollar commitment.
35:46
Speaker 4: So, I mean, the tech industry moves fast and breaks things,
35:49
Speaker 4: but if you think about the utility industry, it's a
35:51
Speaker 4: bit slower and tries never to break anything at all. Obviously,
35:55
Speaker 4: you work as the middleman here. I'm curious, how do
35:58
Speaker 4: you manage the relationships between both ends.
36:00
Speaker 12: Yeah, that's a great question. Yeah, these two kind of
36:03
Speaker 12: galaxies are really colliding now.
36:05
Speaker 5: You know.
36:05
Speaker 12: Obviously we always were good partners with utilities, but over
36:09
Speaker 12: the last twenty four months, with the advent of generative AI,
36:12
Speaker 12: the demand for data center capacity has just skyrocketed. To
36:15
Speaker 12: give you some example, in twenty twenty let's say twenty
36:18
Speaker 12: twenty one RIP. Before chat GPT, there was probably about
36:21
Speaker 12: a gigawats seven hundred and fifty megawatts of absorption in
36:24
Speaker 12: the United States for new data center capacity. This year,
36:28
Speaker 12: the estimate is six gigawatts of new data center capacity
36:31
Speaker 12: will be absorbed. So our relationships with ver utilities are critical.
36:35
Speaker 12: And yes, they are more on the slow moving side, right.
36:39
Speaker 12: They're utilities that are regulated. They think of things in
36:41
Speaker 12: ten year cycles. Meanwhile our customers think of things in
36:44
Speaker 12: twelve month cycles. So there's a lot of activity going
36:48
Speaker 12: on there. But the utilities are, you know, working hard
36:51
Speaker 12: to try to figure out how they're going to meet
36:53
Speaker 12: the expected demand of AI over the coming decade.
36:57
Speaker 2: So what do you do when you develop a data
36:59
Speaker 2: center g you us assume the utilities can be there
37:01
Speaker 2: to support you, or do you build your own power there?
37:03
Speaker 2: Like John Tucker lakes to talk about these small.
37:06
Speaker 8: Well, you couldn't build your own power, Like if a
37:09
Speaker 8: littleminum produce al CoA had to build its own power
37:13
Speaker 8: its own dam in the wherever it was. But you
37:16
Speaker 8: can't do something.
37:17
Speaker 12: Like that technically, you can, I mean that self generation, right,
37:21
Speaker 12: that is becoming a topic that is much more discussed
37:24
Speaker 12: now than it was before.
37:25
Speaker 5: But ultimately, what we do is, you know, before we.
37:27
Speaker 12: Acquire land, we're already working with the utilities to understand
37:30
Speaker 12: where they have capacity on their platform.
37:34
Speaker 5: Right.
37:34
Speaker 12: We look for, you know, transmission lines that obviously carry
37:38
Speaker 12: the electrons, and then we'll buy a land kind of
37:41
Speaker 12: in close proximity to those transmission lines so that we
37:43
Speaker 12: can tap into them to grab power. And that's exactly
37:46
Speaker 12: what we did with the three announcements we made this year.
37:49
Speaker 12: We're building a four hundred and eighty megawat data center
37:52
Speaker 12: campus in Texas South Dallas. We worked with Encore there
37:56
Speaker 12: to identify that spot. We're building one hundred and twenty
37:59
Speaker 12: megawat data center campus in Atlanta. We worked with Georgia
38:02
Speaker 12: Power to again identify a suitable location.
38:05
Speaker 5: And then we're building one hundred and ninety two.
38:07
Speaker 12: Mega walk campus in Culpepper, Virginia, which is about fifty
38:10
Speaker 12: miles south of kind of data center.
38:12
Speaker 8: Ally as when are you eyeing nuclear plants?
38:14
Speaker 12: No, most of the power here is kind of there's
38:17
Speaker 12: a it's a grid mix, right, So like in Texas,
38:21
Speaker 12: you know, Encore is you know, very proactive in terms
38:23
Speaker 12: of connecting new generation there, believe it or not. As
38:26
Speaker 12: an example, you know, on any given sunny day in Texas,
38:29
Speaker 12: you know, forty five percent of the power is coming
38:33
Speaker 12: from solar, wind and batteries. So there's been a huge
38:37
Speaker 12: investment in those kind of renewable power generation sources.
38:40
Speaker 2: You get in Dallas, right we are. We just had
38:43
Speaker 2: a story your pension. You've got a pension problem in
38:45
Speaker 2: your city, right and like an incredibly unfunded pension. And
38:50
Speaker 2: I looked at this story. I like, there's a million
38:52
Speaker 2: companies like your smart young companies fucking to Texas, fucking
38:56
Speaker 2: to Dallas. I don't know how you guys got yourself
38:57
Speaker 2: in that pickle in the city of Dallas. But that's
38:59
Speaker 2: another story for another time. So talk to us about
39:02
Speaker 2: this investment here. I mean, what are the Australians are they?
39:06
Speaker 2: Did they see this as an AI play for them?
39:08
Speaker 2: What's the angle for them?
39:10
Speaker 5: Yeah?
39:10
Speaker 12: I mean what's great about our business is that, you know,
39:13
Speaker 12: we're really a pick and shoble business, right. You know,
39:16
Speaker 12: data centers are agnostic. It doesn't matter what technology you
39:19
Speaker 12: put into a data center. All that matters is that
39:21
Speaker 12: people consume technology That's what I love about our business
39:25
Speaker 12: that you know, we're really indexed to technology adoption, and
39:28
Speaker 12: I would argue humans are addicted to technology, right, and
39:31
Speaker 12: that because of that, we think there's going to be
39:33
Speaker 12: you know, long term demand. So so you know, these
39:37
Speaker 12: investments are very long term investments. You know, we build
39:39
Speaker 12: a data center, you know, we expected to have an
39:41
Speaker 12: operational life of thirty to forty years. In fact, you know,
39:45
Speaker 12: there's the data center sector really has only been around
39:48
Speaker 12: for about twenty five years, so you still have assets
39:50
Speaker 12: that were.
39:50
Speaker 5: Built in the nineties.
39:51
Speaker 12: They're in the dot com bubble that are still relevant
39:54
Speaker 12: and active today. So Australian Super they're looking to support
39:58
Speaker 12: us as we build out this eight hundred and fifty
40:01
Speaker 12: megawatts that I just described over these three campuses, and
40:04
Speaker 12: this equity will help us build those facilities.
40:07
Speaker 4: I mean, there's insatiable demand right now in the market.
40:09
Speaker 4: How are you all thinking about sustainability, I know you
40:12
Speaker 4: mentioned renewable power.
40:13
Speaker 12: Yeah, so the good news is is that you know,
40:16
Speaker 12: there's a commitment with the sector, and there's a commitment
40:18
Speaker 12: from the largest consumers of data center capacity, which are
40:22
Speaker 12: the hyperscalers, to a renewable future, so ourselves obviously all
40:27
Speaker 12: the major hyperscalers, we all have kind.
40:29
Speaker 5: Of carbon neutral net zero goals.
40:32
Speaker 12: Ours is for twenty thirty and the major hyperscalers are
40:35
Speaker 12: also in that range. You know, they are the largest consumers.
40:40
Speaker 5: Of renewable energy in the world.
40:42
Speaker 12: I've just read recently because of Google's announcement about that
40:45
Speaker 12: nuclear that they consume fourteen gigawatts of renewable energy. So
40:49
Speaker 12: these companies have a corporate commitment to renewables and that
40:52
Speaker 12: creates a demand signal for people to invest because they
40:55
Speaker 12: know there's going to be a buyer for that product.
40:57
Speaker 2: Ro thank you so much for coming in. Really appreciate it.
41:00
Speaker 2: Fascinating story. Raoul Martineck. He is the CEO of a
41:04
Speaker 2: Data bank. Is the company sup private company based down
41:06
Speaker 2: in Dallas, Texas, the data center of business.
41:09
Speaker 1: Boy.
41:09
Speaker 2: I know that's a great business. So interesting story there.
41:13
Speaker 2: Of course.
41:13
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