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Nike Sales Warning, U.S House Passes Spending Bill · Bloomberg Intelligence

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Speaker 2: Tough day to be a retailer here at Lululemon, Nike,
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Speaker 2: some disappointing number of stocks taking a hit here today.
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Speaker 2: Let's get the analysis and we can do that with Goyle.
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Speaker 2: She's the senior research channels covering all things on the
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Speaker 2: retail space for Bloomberg Intelligence. Joining us from Princeton via
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Speaker 2: zoom here pun them. Let's start with Nike here, stock
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Speaker 2: off about you know, eight percent here, I guess a
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Speaker 2: tough first half outlook here in Bloomberg reportings, talking about
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Speaker 2: some competition from upstarts on and Hoka talk to us
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Speaker 2: about Nike. What did you take away today?
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Speaker 3: Sure, the outlook is definitely much weaker than we would anticipated,
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Speaker 3: but I think they're positioning themselves for longer term growth.
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Speaker 3: So they talked a lot about innovation in the air
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Speaker 3: franchise that they have and really expanding that to other sneakers, aloettes,
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Speaker 3: and we think that will position them for longer term growth.
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Speaker 3: But definitely there is a softer start to the year.
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Speaker 3: The first half of fiscal twenty twenty five will be challenging.
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Speaker 3: The light at the end of the tunnel is that
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Speaker 3: two h twenty five will be better and will end
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Speaker 3: the year on a positive note based on their expectations.
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Speaker 3: And I think the real key here is to focus
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Speaker 3: on the product innovation that they're going to bring forward
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Speaker 3: over the coming twelve to eighteen months to really see
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Speaker 3: if Nike can continue its journey to maintain its brand lead.
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Speaker 3: It is a fifty billion dollar company owned Paul, So
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Speaker 3: when you know, folks talk about on in Hoka, when
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Speaker 3: you look at the size of the two versus what
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Speaker 3: Nike has, they're still very very very small in comparison, you.
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Speaker 4: Know, put them. I look at Nike and the one
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Speaker 4: of the other stocks you're watching Lulu Lemon today really
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Speaker 4: the big decliners in the S and P five hundred
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Speaker 4: and I wonder if there's any sort of broader takeaway,
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Speaker 4: sort of a macro takeaway to be had here about
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Speaker 4: the health of the consumer, or is this very much
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Speaker 4: you know, sort of just brand specific issues for these
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Speaker 4: two or is there sort of a return to office
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Speaker 4: story still at play with these two brands at all.
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Speaker 3: I think it's a combination of a multitude of things.
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Speaker 3: So I think the first is that, yes, there is
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Speaker 3: a consumer pullback that's happening. We heard that from Adidas
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Speaker 3: and Puma tou with their softer guidance, So that's not
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Speaker 3: necessarily a big surprise of the consumers pulling back on
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Speaker 3: discretionary spend, and we saw that with better numbers at
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Speaker 3: Walmart and Amazon, where you kind of push for value
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Speaker 3: a little more. On the other hand, you do have
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Speaker 3: to worry about the product because the one thing that
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Speaker 3: Little Lemon said that was interesting is yes, traffic was
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Speaker 3: down at stores, but conversion was also weaker, and that
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Speaker 3: means that there's something happening with the product. And they
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Speaker 3: did talk about the need to really up their product
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Speaker 3: cycle and replenished to have inventory in stock because they
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Speaker 3: did see some weakness from that. So I think it's
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Speaker 3: a culmination of a pullback in the consumer the product,
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Speaker 3: and also that the app leisure market I think is
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Speaker 3: still strong. I think there's still potential there Globally, I
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Speaker 3: do think coming off from the pandemic that you will
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Speaker 3: have some normalization of a wardrobe where it's going to
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Speaker 3: be more balanced today than it was let's say two
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Speaker 3: or three years ago. Oh, it was probably eighty percent
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Speaker 3: at leisure, twenty percent work life. Today it's probably leaning
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Speaker 3: back to fifty to fifty.
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Speaker 2: So you'll be relieved to know that I am not
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Speaker 2: a Lulu Lemon customer. But talk to me about like
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Speaker 2: fashion is it? I mean, it's all a similar type
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Speaker 2: of fabric and fit. So is it just colors and
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Speaker 2: patterns and things like that? How do you change that up?
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Speaker 2: Because I know getting the fashion right is so important,
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Speaker 2: you know for the companies that.
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Speaker 3: You follow, actually fall for Lululemon. Yes, it's about getting
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Speaker 3: the color and fashion right, but it's also about the
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Speaker 3: fit and the fabric. They're a ligne pan which are
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Speaker 3: their best sellers, you know, the biggest sell on that
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Speaker 3: is the way that they fit you. They make you
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Speaker 3: look good, and every woman wants to look good. So
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Speaker 3: that's the differentiator between a Lulu Lemon yoga pant and
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Speaker 3: let's say, on Nike yoga pant. There is a difference
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Speaker 3: in the quality of the pant that you're wearing and
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Speaker 3: the fit.
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Speaker 5: That it has.
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Speaker 4: Don't kid anyone. Paul's wearing yoga pants right now. Actually
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Speaker 4: their dress pants. They have some pretty good blue Lemonas
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Speaker 4: Rice men's dress pants.
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Speaker 2: Yeah, I've got a couple of pairs of those.
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Speaker 4: Ye, put them back to Nike. One headline I saw
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Speaker 4: that kind of shocked me is that Nike was able
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Speaker 4: to get the sponsorship of the German national soccer team,
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Speaker 4: taking it away from us from Audidos.
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Speaker 2: Yeah, which which is pretty Yeah, it's pretty you.
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Speaker 4: Know, shocking for a soccer fan. I mean, you grew
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Speaker 4: up watching Audidos on the shirts of every basically every team.
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Speaker 4: But how big of a deal is that as far
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Speaker 4: as that global soccer market for Nike and sort of
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Speaker 4: this rivalry with Adidas and that sponsorship.
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Speaker 3: Yeah, look, I think it's a big win for Nike
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Speaker 3: because Adidas is a German brand and has held that
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Speaker 3: sponsorship for I believe over seventy five years. So to
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Speaker 3: lose that to Nike is a big deal and it
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Speaker 3: puts Nike on a stronger foothold across the globe in
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Speaker 3: the field of soccer. So we do think that this
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Speaker 3: is a big win for them, But make no mistake
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Speaker 3: They paid a premium for this, so it wasn't something
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Speaker 3: that they took away at a steal. They definitely paid.
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Speaker 6: Up for it.
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Speaker 2: So I did just watch or recently watch it with
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Speaker 2: the Jordan, you know, and kind of story about how
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Speaker 2: he got and the relationship with Nike and kind of
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Speaker 2: how that all plays out. But now the dollars are
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Speaker 2: just so much bigger. So you know, so put me
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Speaker 2: as you look across the Punams, I mean the Nikes
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Speaker 2: of the world, and the Adidas and the Pumas and
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Speaker 2: things things like that. Is that still a huge part
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Speaker 2: of their marketing strategies is to align themselves with teams
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Speaker 2: with individual players. Is that still as big as it
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Speaker 2: always has been.
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Speaker 3: It is as big as it's always been, But now
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Speaker 3: it's harder to come up in that playing field with
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Speaker 3: some of the major players unless you have deep pockets.
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Speaker 3: So really only Nike and Adidas can afford to spend
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Speaker 3: the money that they're spending to win these leagues and
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Speaker 3: their players. These smaller companies like Puma you mentioned and
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Speaker 3: under Armour they're making a bet on rookies. So you
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Speaker 3: saw the success that under Armour has had with the
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Speaker 3: Curry franchise, and that bet was made a long time ago.
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Speaker 3: You're not going to see these smaller brands chase after
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Speaker 3: the established, bigger players and the bigger teams because they
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Speaker 3: don't have the pockets for it. And that's where Adidas
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Speaker 3: and Nike win, and that's what makes them really keep
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Speaker 3: their number one and number two positions in the global
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Speaker 3: sportsware industry.
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Speaker 4: Well put them. How about all the other sort of
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Speaker 4: also plays out there. Is there any sign of the
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Speaker 4: dominance of these two companies being threatened at all? You know,
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Speaker 4: we see a lot of these sort of Instagram brands,
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Speaker 4: you know, in Amazon brands. Is that a threat to
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Speaker 4: these these major players in this industry?
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Speaker 1: Yet?
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Speaker 3: I'd say that the industry is broadening, right, So in
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Speaker 3: the sports where world, traditionally it was all about performance
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Speaker 3: and being on the field playing. Today it's about walking
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Speaker 3: the roads and really wearing it in your day to
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Speaker 3: day life. So competition is growing, and there is also
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Speaker 3: competition growing on the perform in side with the Hokahs
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Speaker 3: and the Odds, they're very popular shoes and they've actually
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Speaker 3: taken share in the running category. So I do think
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Speaker 3: that both Arida and Nike have to step up their
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Speaker 3: game to really add more innovation, but they're still small,
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Speaker 3: so I don't think you know Nike is at risk
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Speaker 3: of losing its number one position just yet. They win
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Speaker 3: by a wide margin. But it's something to keep an
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Speaker 3: eye on over time.
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Speaker 7: Put them.
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Speaker 2: Let's step away from these two stories, share and look
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Speaker 2: at your overall coverage. You follow a wide range of retail.
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Speaker 2: You've done that for decades. One of the top retail
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Speaker 2: analysts on the street, What are some of the stories
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Speaker 2: that you think are interesting? Now? What are you talking
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Speaker 2: to your clients about these days?
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Speaker 3: I think we're talking about the consumer a lot, right.
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Speaker 3: The consumer is clearly pulled back and what does that
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Speaker 3: mean in an election year? So we think the consumer
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Speaker 3: is going to remain soft this year. But we think
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Speaker 3: the consumer is stretching their dollars so they're looking for value.
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Speaker 3: So value will remain top of mind. But that's that
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Speaker 3: they're traveling. So it's not that we're going into a
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Speaker 3: recession by any means. They're not going to fall off
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Speaker 3: a cliff, but they're spending money where they feel that
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Speaker 3: they're getting the most bang for it, and we think
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Speaker 3: there'll be a trend that we continue.
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Speaker 2: To see as a er on I mean, is that
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Speaker 2: a Walmart slash target story or does that steer me
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Speaker 2: to the maybe the dollar stores.
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Speaker 3: I'd say, you know, the winners here would probably be
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Speaker 3: and what we've seen in the past in the fourth
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Speaker 3: quarter is the Walmarts. Right, the Walmart's where you find
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Speaker 3: value and you find a broad range of assortment and
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Speaker 3: where you have a customer that's more broad based versus
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Speaker 3: the customer of a Dollar General, where there are more
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Speaker 3: low income and they are too pressured. Walmart attracts a
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Speaker 3: broader market and they offer the value that you get.
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Speaker 2: All right, put them excellent stuff, as always put them. Boil,
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Speaker 2: senior analyst. She covers all the retail space for Bloomberg Intelligence.
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Speaker 2: We were talking about Nike and Lulu Lemons some disappointing numbers.
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Speaker 2: Nike off about eight percent, but as Michael's reporting earlier,
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Speaker 2: Lululemon off about almost eighteen percent years so a big
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Speaker 2: pullback here for those two retail names. And the question
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Speaker 2: I think a lot of people might a lot of
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Speaker 2: investors when they look at their earnings from a Nike
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Speaker 2: er Lulu Lemma, what does it tell you about the consumer?
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Speaker 4: That's yeah, And it was interesting to hear put them
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Speaker 4: talk about that how they you know, it's not just execution,
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Speaker 4: it's not just market share. Story here, it does seem
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Speaker 4: like on top of everything else, there is a little
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Speaker 4: bit of some either spending pullback or at least bargaining hunt.
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Speaker 2: And then you compare that to what you hear from
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Speaker 2: like the cruise lines. They're still backing them. Yeah, I mean,
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Speaker 2: so people are spending money, They're just spending a little
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Speaker 2: bit differently than maybe a pre pandemic. I don't know,
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Speaker 2: still on that experiential track, I guess if you will,
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Speaker 2: because again you think about some of these the theme
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Speaker 2: park operators, the cruise directors of the hotels, the casinos
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Speaker 2: still sing really good traffic.
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Speaker 2: Let's get right to it. Lee Glasgow in the house,
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Speaker 2: darkening the door. Whenever we see them walking around, we
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Speaker 2: just grab them, you know, because it's a long walk
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Speaker 2: for me down to Princeton. So anyway, Lee, you've been
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Speaker 2: covering FedEx forever. You've been covering all these logistic companies,
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Speaker 2: the rails, the trucks, all the shippers, you know, this
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Speaker 2: stuff end to end. FedEx seems to me to be
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Speaker 2: a core core story within that global logistics. What went
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Speaker 2: wrong and then what have they been doing to fix it?
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Speaker 5: Yeah, so FedEx is a is a great story, and
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Speaker 5: it's an improving story. And the reality is that over
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Speaker 5: the years it got too big for itself and it
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Speaker 5: got too fat, and there was a lot of hesitation
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Speaker 5: to combine its network. So as an air network and
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Speaker 5: a ground network. Its ground network is mostly independent contractors
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Speaker 5: and its air network are employees, so they're you know,
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Speaker 5: there's it's not easy to integrate those networks, and a
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Speaker 5: lot of analysts have always said we should integrate them,
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Speaker 5: we should integrate them, and management say, you guys don't
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Speaker 5: understand our business. We can't do that. Well, fast forward,
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Speaker 5: they're doing it. And that's their Tricolor strategy where they're
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Speaker 5: you know, which is re re redesigning their air freight
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Speaker 5: network and they're also combining their express and ground and
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Speaker 5: services business into one.
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Speaker 1: Segment.
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Speaker 5: If you will. It's pretty much everything. But they're less
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Speaker 5: than truckload business, so they're doing a lot on.
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Speaker 2: This sounds like a good old fashion we got to
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Speaker 2: restructure our business.
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Speaker 5: Yeah, and they're gonna they're gonna emerge is a lot
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Speaker 5: more efficient. They're gonna emerge is a lot more profitable,
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Speaker 5: and that's the hope. You know, their express network has
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Speaker 5: really poor margins. I mean, their margins were two point
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Speaker 5: three percent in the quarter, and that was a real
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Speaker 5: good outperformance and what the street was expecting by one
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Speaker 5: hundred and ten basis points.
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Speaker 2: Oh function, Yeah, I'm just seeing that very good. Okay,
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Speaker 2: the numbers are the numbers are good. Yeah, okay, all right,
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Speaker 2: So what's next steps for them?
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Speaker 5: So, as you heard earlier, they announced a five billion
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Speaker 5: dollar stock buy back plan. I think that gives people
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Speaker 5: confidence in management's ability to execute execution. Risk is really
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Speaker 5: the number one concern I think the street might have.
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Speaker 5: As you probably saw in the Bloomberg terminal today, everyone's
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Speaker 5: raising their price targets and their estimates for physical twenty
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Speaker 5: twenty five and beyond, and that's really driven by you know,
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Speaker 5: they're they're cutting about one point eight billion and cost
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Speaker 5: this physical year, and they're going to do about two
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Speaker 5: point two billion next And if you think about it,
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Speaker 5: one point eight billion is about five dollars and fifty
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Speaker 5: five dollars and seventy five cents per share. And this
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Speaker 5: is a stock that you know was generating fifteen dollars
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Speaker 5: in EPs. So these are sizable increases in the overall
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Speaker 5: profitability company. You know, management, they've stumbled here and there,
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Speaker 5: but it really seems this last quarter that they're executing
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Speaker 5: and they're focused, uh, and they're building confidence and sentiment
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Speaker 5: is so important when it comes to FedEx, which has
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Speaker 5: struggled in the past.
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Speaker 4: You know, Lee, when you talk about saving cutting costs
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Speaker 4: by that degree, I mean, I assume that's that's mostly
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Speaker 4: headcount to some degree. Where are they cutting jobs? Is
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Speaker 4: it just redundancy between the separate units now that they're combined,
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Speaker 4: you know, a.
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Speaker 2: Coupany like fed X.
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Speaker 4: It seems like it'd be tough to cut those union jobs,
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Speaker 4: the drivers and that sort of thing. Is it middle
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Speaker 4: managers that are that are getting.
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Speaker 5: The FedEx is a non union show except for its pilots.
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Speaker 5: Their drivers are not UNI drivers. Most of their drivers
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Speaker 5: that come to your house or actually they don't work
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Speaker 5: for FedEx in the US drivers are union right correct
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Speaker 5: with the team stairs. So where they where are they
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Speaker 5: cutting heads? Well, it's they're not really cutting that deep.
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Speaker 5: What they're doing is they're getting rid of middle management.
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Speaker 5: Like I said in the beginning, they've gotten a little fat,
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Speaker 5: so they're getting rid of some middle management. A lot
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Speaker 5: of that is through attrition, some natural attrition.
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Speaker 4: Uh.
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Speaker 5: It's it's not like what was the guy's named Jack,
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Speaker 5: the chainsaw guy coming in with, you know, destroying companies.
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Speaker 5: I think it's going to be more of a gradual shift.
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Speaker 5: And as they combine networks, they're going to figure out
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Speaker 5: what where the redundancies lie. Uh, and they're going to
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Speaker 5: benefit from, you know, reducing those redundancies. And that's through
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Speaker 5: their their drive initiative and their network two point zero
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Speaker 5: initiatives that they have out.
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Speaker 2: There as FedEx or UPS or any other global shippers
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Speaker 2: that they talked about problems getting planes like from because
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Speaker 2: we Bowing's in the news every day. Unfortunately, we have
14:41
Speaker 2: to talk to George Ferguson every day because Bowing's always
14:43
Speaker 2: in the news. As any of these companies have ever said,
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Speaker 2: we're not getting the planes we need to far flow.
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Speaker 5: No, that's that's not a problem because what they're doing
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Speaker 5: is they're actually, you know, FedEx is trying to downsize
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Speaker 5: its fleet because with with this whole redesign of their
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Speaker 5: air fleet, they're going to need probably less planes over time,
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Speaker 5: and those planes that they're going to be operating are
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Speaker 5: going to be operating much more efficient. They're going to
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Speaker 5: have a more density. When you talk about freight and
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Speaker 5: transportation networks, it's all about density. How much stuff do
15:15
Speaker 5: you have in whether your truck or your train or
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Speaker 5: your plane. Uh, And so that's going to be key
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Speaker 5: for them to drive those margins higher in the express business.
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Speaker 4: You know, Leah, I've read that there's a lot of
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Speaker 4: sort of R and D looking at the automation of
15:31
Speaker 4: package delivery.
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Speaker 2: You know, is there a.
15:34
Speaker 4: Chance in our lifetime that we'll see you know, sort
15:36
Speaker 4: of driverless vehicles dropping our packages off that sort of thing.
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Speaker 5: I'm a a whole huge bull on like autonomous trucks
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Speaker 5: or delivery. But you know what they will be doing
15:47
Speaker 5: is we'll be leveraging technology and AI to make sure
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Speaker 5: a package gets into the right network and gets and
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Speaker 5: it has that delivery promise that they have whether it's
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Speaker 5: overnight or deferred. You know, what they're really and do
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Speaker 5: be doing is using technology to make sure that package
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Speaker 5: gets into the right network.
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Speaker 4: Yeah, but you don't think the technology is going to
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Speaker 4: be there to actually have a driverless type of.
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Speaker 2: Do not not anytime soon.
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Speaker 5: Maybe you know, little little niche markets they might have
16:15
Speaker 5: and kind of just highlighting you know, those little robots
16:17
Speaker 5: that grows that go around towns and you see pictures
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Speaker 5: of people beating up the poor little robots, right knocking
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Speaker 5: them over exactly.
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Speaker 2: So during the pandemic, Lee became, for better or worse,
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Speaker 2: kind of our supply chain grew, discovers all the companies,
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Speaker 2: like the shipping companies that get this stuff to our shore,
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Speaker 2: then the rails that take them into like you know,
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Speaker 2: Middle of America, and then the trucking companies that deliver
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Speaker 2: them to everywhere and all the all that kind of stuff.
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Speaker 2: So let's start with the rails here. I'm looking at
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Speaker 2: the trailing twelve months, these stocks have done pretty well.
16:49
Speaker 2: I mean, you know, they're all up mid thirties percent
16:51
Speaker 2: in NORFK, Southern CSX, Union Pacific, pretty good performance. What's
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Speaker 2: the story for the rails?
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Speaker 5: These stations Yeah, there's really not a homogeneous story with
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Speaker 5: the rails. Interestingly enough, it's really company specific. Norfolk Southern.
17:01
Speaker 5: It's all about activists investors. You know, they're dealing with Anquora,
17:07
Speaker 5: which is trying to kick out management and put their
17:09
Speaker 5: own precision scheduling railroad management team in. Norfolk Southern has
17:13
Speaker 5: come back and said, we have our own guy that
17:15
Speaker 5: we want to put in from PSR. Some investors might be, well,
17:18
Speaker 5: it's a little too late. You should have done that
17:19
Speaker 5: a couple of years ago. So no matter who wins
17:22
Speaker 5: the battle, Norfolk Southern will emerge as a much more
17:26
Speaker 5: profitable company. And then Union Pacific another story. They had
17:29
Speaker 5: a change in CEO Jim Venna as a PSR Persition
17:33
Speaker 5: Scheduling railroad and guy. And for those out there, PSR
17:36
Speaker 5: is really just six stigma for the railroads. It's just
17:39
Speaker 5: operating really efficient networks, sweating assets, that sort of stuff.
17:43
Speaker 5: And he's coming in and he's got, you know, his
17:46
Speaker 5: own vision of how that railroad should operate. And then
17:50
Speaker 5: the littlest one, even after a merger Canadian Pacific Kansas City,
17:56
Speaker 5: you know, they have their own growth story because now
17:58
Speaker 5: they are the only road that goes from Canada into Mexico.
18:02
Speaker 2: It's a great story.
18:03
Speaker 5: And so they are the only railroad that is probably
18:06
Speaker 5: going to grow earnings in the in this last quarter,
18:09
Speaker 5: the first quarter.
18:11
Speaker 2: How about the truckers. I'm looking and I put up JBHT.
18:15
Speaker 2: That's the ticker I always remember. You hit the BEQ function.
18:18
Speaker 2: It gives you the relative valuation relative to the what's peers?
18:21
Speaker 2: Truckers not doing as well. I'm looking at JBHD over
18:25
Speaker 2: the trailing twelve months, it's up eighteen percent, but some
18:27
Speaker 2: of the others are down. What's the word on the
18:29
Speaker 2: trucking biz?
18:30
Speaker 5: So, trucking has been not great, and that's really there's
18:33
Speaker 5: just too much supply out there, and that excess supply
18:37
Speaker 5: is killing the truckloads spot market, which is down, you know,
18:40
Speaker 5: mid teens from last year, and that is weighing on
18:44
Speaker 5: contractual rates and that's where most publicly traded trucking companies play.
18:48
Speaker 5: Some peer play truckload carriers are like Heartland expressed. Night
18:51
Speaker 5: Swift is a major truckload carrier, so as Werner, But
18:55
Speaker 5: you know a lot of them don't play in that
18:57
Speaker 5: really volatile spot market business. But it does impact their
19:01
Speaker 5: overall earnings ability, and a lot of them have been
19:05
Speaker 5: diversifying into less volatile Businesses Warner, for instance, it's a
19:10
Speaker 5: big dedicated carrier, so it's more like we're going to
19:14
Speaker 5: they'll go to Walmart and say we're going to haul
19:16
Speaker 5: stuff for you between Chicago and New York. We'll do
19:19
Speaker 5: ten trucks a week or between dcs and retail stores.
19:23
Speaker 5: And they even sometimes even you know, load the shelves
19:25
Speaker 5: at CBS. Them dedicated services. So that's one area. Freight brokerage,
19:29
Speaker 5: which is obviously non asset and higher ROIC, which is
19:34
Speaker 5: attractive to a lot of them. And you know when
19:36
Speaker 5: you started with JB Hunt, JBI Hunt, their trucking company
19:40
Speaker 5: is one of the the trucking company business is probably
19:42
Speaker 5: one of their smallest segments. It's really an intermodal provider
19:45
Speaker 5: and a brokerage provider and a dedicated provider.
19:49
Speaker 3: You know.
19:49
Speaker 2: Lee.
19:49
Speaker 4: The other getting back to FedEx, the other big headline
19:52
Speaker 4: was this five billion dollar share buy back. Is that
19:55
Speaker 4: what you think has investors excited or is it more
19:58
Speaker 4: the actual execute should end their performance?
20:01
Speaker 5: I think is actually both. I think I think they
20:03
Speaker 5: wouldn't have said five billion if management isn't confident on
20:07
Speaker 5: their ability to execute. Like I said, execution risk is
20:10
Speaker 5: high because things happen at you know, a lot of
20:13
Speaker 5: transportation companies like to say their businesses are outside sports,
20:16
Speaker 5: you have weather to deal with, you know. And that
20:19
Speaker 5: was something that was really interesting during the quarter. FedEx
20:22
Speaker 5: their express business and their Memphis hub, which is their
20:25
Speaker 5: biggest hub, dealt with a lot of bad weather and
20:27
Speaker 5: they were able to it really didn't impact it that much.
20:30
Speaker 5: And a lot of people were expecting low margins on
20:32
Speaker 5: that express business of around one percent because of the weather.
20:36
Speaker 5: And again they see that expectation by around one hundred
20:39
Speaker 5: and ten basis points.
20:40
Speaker 2: All right, so that'll step back, we'll put it all together.
20:43
Speaker 2: Supply chain, are we getting is it fixed? Are we
20:46
Speaker 2: back to new normal? Are we back to a new normal?
20:49
Speaker 2: If I order something, or for more importantly retail or
20:51
Speaker 2: order something, they expect to get it by a certain date.
20:53
Speaker 2: Are they going to get it by that date?
20:55
Speaker 8: Yeah?
20:55
Speaker 5: And like the biggest risks looking forward is that the
20:58
Speaker 5: East Coast ports are negotiating with their late that's in
21:00
Speaker 5: September that that contract comes due, and so what you
21:04
Speaker 5: could see is some work stoppages. You know, God forbid
21:07
Speaker 5: a strike, and that's putting a lot of retailers and
21:11
Speaker 5: shippers unnoticed. They might be moving freight to the West coast.
21:15
Speaker 5: They might start ordering for peak season a little earlier,
21:18
Speaker 5: so peak could be a little lumpier if you will
21:21
Speaker 5: start a little earlier. So I think that that's the
21:24
Speaker 5: biggest like risk I guess down the road. Obviously, the
21:27
Speaker 5: geopolitical stuff we can we can never guess when when
21:30
Speaker 5: when that's going to hit the fan.
21:31
Speaker 2: You know, during during the pandemic, we had Gene Soroka,
21:34
Speaker 2: who runs the Port of la He was on our
21:36
Speaker 2: show a lot. He's really helpful in understanding kind of
21:39
Speaker 2: where these ships are from China, you know, where they
21:41
Speaker 2: go on. How long did they have to sit out
21:42
Speaker 2: there and import and during their work issues. I guess
21:46
Speaker 2: I'm not sure if they actually had a strike, I
21:48
Speaker 2: can't recall, but they lost some business to the East coast, right,
21:52
Speaker 2: and you know he's been coming back here and kind
21:54
Speaker 2: of trying to get that business back for ye So
21:57
Speaker 2: it is competitive between ports. But now well I can't
22:01
Speaker 2: even get through the Panama Canal easily right because I
22:03
Speaker 2: got a water problem there.
22:04
Speaker 5: You gotta we got low water go fix that.
22:07
Speaker 2: You got to get you down there to fix that.
22:08
Speaker 2: I mean, what do you do with a low water
22:10
Speaker 2: in the Panama Canal? Start digging? I guess rain dance maybe,
22:15
Speaker 2: But that's a real issue, right, Yes, it is.
22:17
Speaker 5: And what happens is that the ships that normally transverse
22:20
Speaker 5: across traverse across the Panama Canal can do so, but
22:24
Speaker 5: they can do so with less freight in it, So
22:26
Speaker 5: it weighs it down because it's it's the canal is
22:31
Speaker 5: more shallow, so there are ships going through, but those
22:35
Speaker 5: ships are carrying less freight, and so therefore the cost
22:37
Speaker 5: per ton of whatever you're shipping increases.
22:41
Speaker 1: You know.
22:42
Speaker 5: The Sue West Canal is probably more of an issue
22:44
Speaker 5: of what's going on there with.
22:45
Speaker 2: The anything going through there these days.
22:48
Speaker 5: If you're a Chinese ship or an Iranian ship.
22:50
Speaker 2: Really don't let you go through.
22:52
Speaker 5: They'll let you go through.
22:53
Speaker 4: Yeah, they came out and said yesterday they won't touch them.
22:56
Speaker 2: Yeah.
22:56
Speaker 5: Yeah. And obviously you know, the Hoothies are aligned with
22:59
Speaker 5: the Iranians and their Indians are partners with the Chinese
23:01
Speaker 5: and the Russians, so I know they're able to traverse
23:05
Speaker 5: through there.
23:05
Speaker 2: See, I'm telling you logistics supply chain. It's fascinating to me.
23:10
Speaker 2: And you know what, I totally during business school when
23:12
Speaker 2: we had that class, I skipped it probably half the
23:15
Speaker 2: time to go across and play the do golf course.
23:17
Speaker 4: Was one of those things that no one really worried
23:19
Speaker 4: about until you had until it was crisis time, right
23:21
Speaker 4: And I mean Lee obviously worried about it. But Lee,
23:24
Speaker 4: how do you think sort of you know, now that
23:27
Speaker 4: we're on the other side of the pandemic, it was
23:30
Speaker 4: such a crisis with logistics and supply chains.
23:34
Speaker 2: Is there a legacy?
23:35
Speaker 4: You know, no company wants to sort of fight the
23:38
Speaker 4: last war, but are there sort of permanent changes that
23:41
Speaker 4: you can look at and say, these companies have been
23:45
Speaker 4: able to eke out some efficiencies or something about their
23:48
Speaker 4: business that they learned a lesson from these supply chain
23:51
Speaker 4: issues that they'll carry forward.
23:53
Speaker 7: Right.
23:53
Speaker 5: Well, the changes that we're seeing as an increase in
23:55
Speaker 5: near shoring and you know, de risking, and the reality
23:59
Speaker 5: is that this is not going to happen overnight. It's
24:00
Speaker 5: going to be you know, like watching grass grow. You know,
24:04
Speaker 5: it takes a long time to put a new facility
24:06
Speaker 5: up in Mexico or even the United States for that matter.
24:09
Speaker 5: So I think you're going to see more and more
24:11
Speaker 5: of that, and that's a that's a net positive for
24:14
Speaker 5: the domestic transportation companies. It's a net positive for like
24:17
Speaker 5: I mentioned earlier, Canadian Pacific, who has operations in Mexico, Werner,
24:21
Speaker 5: who does a lot of cross border business across Mexico.
24:24
Speaker 5: So these are companies that will definitely benefit from that
24:27
Speaker 5: from that movement, and it's a long term, slow secular
24:31
Speaker 5: growth story for transportation a.
24:33
Speaker 2: Right, Lee great Stuff is always always appreciate getting your time,
24:36
Speaker 2: Lee Classical. He's senior Transport Logistics and Shipping on us
24:38
Speaker 2: for Bloomberg Intelligence, Joining us life here in our Bloomberg
24:41
Speaker 2: Interactive Brokers studio.
24:43
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
24:47
Speaker 1: weekdays at ten am Eastern on focarplaying then broun Otto
24:51
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24:54
Speaker 1: get your podcasts, or watch us live on YouTube.
24:58
Speaker 2: Story out of Tesla Tesla trim's car output in China
25:03
Speaker 2: as EV sales growth slows, and that is probably the
25:06
Speaker 2: number one issue I would think for the stock, even
25:09
Speaker 2: for the industry A little bit is kind of what
25:11
Speaker 2: is the ultimate demand for electric vehicles here in near term,
25:15
Speaker 2: but then even also going forward, Tesla stock obviously is
25:18
Speaker 2: taking it on the chin. It's not about two percent today,
25:20
Speaker 2: but here to date it's off about thirty two percent.
25:22
Speaker 2: So there's real some concern out there about demands. Let's
25:25
Speaker 2: get right to it. Steve Man, he's our global autos
25:28
Speaker 2: research analyst for Bloomberg Intelligence. He's based out of Princeton,
25:31
Speaker 2: New Jersey, joining us via zoom here. So Steve talked
25:34
Speaker 2: to us about this news from Tesla trimming its output
25:37
Speaker 2: in China. What's driving that?
25:41
Speaker 7: Yeah, Paul, I mean the stock's down about one and
25:44
Speaker 7: a half percent. Like you said, I think the consensus
25:47
Speaker 7: have pretty much factored in the potential cuts in production
25:53
Speaker 7: given the demand. I think demand I think in in
25:57
Speaker 7: China it is slowing down. There's a lot of price cutting,
26:01
Speaker 7: not just from Tesla but from by D and GLY.
26:05
Speaker 7: It's a never ending price cutting cycle over there. In
26:09
Speaker 7: the US, we're actually forecasting to be up nine percent,
26:12
Speaker 7: definitely single digit, down from double digit growth in the
26:16
Speaker 7: past couple of years. So you know, I think the
26:21
Speaker 7: production cuts are probably mainly driven by the US and
26:25
Speaker 7: the China market. European to a lesser extent.
26:29
Speaker 4: You know, Steve, as you mentioned, BYD the big competitor
26:32
Speaker 4: to Tesla in China. I always hear how fierce that
26:36
Speaker 4: competition is. But I wonder how the vehicle stack up
26:39
Speaker 4: is BYD actually making a car that is as high
26:44
Speaker 4: performance as has all the bells and whistles of a Tesla.
26:48
Speaker 2: Were they a little bit behind?
26:50
Speaker 7: I think I think, you know, by D and other
26:54
Speaker 7: local Chinese automd makers, because they're so focused in the
26:57
Speaker 7: Chinese market. I mean, now they're starting to get you know,
27:01
Speaker 7: kind of extend beyond the China market. You know, they
27:05
Speaker 7: they're pretty nimble in addressing some of the needs from
27:08
Speaker 7: the consumer consumer side, especially on the connectivity and all
27:14
Speaker 7: the infultainment system that they have. So they are are
27:18
Speaker 7: you know, pretty much catered to the Chinese market. They're
27:20
Speaker 7: there a pretty good job on that. In terms of quality,
27:25
Speaker 7: they've come up to curve quite quite quite a bit.
27:29
Speaker 7: I think I remember covering I remember visiting the Boid
27:33
Speaker 7: plant probably around eight nine years ago. You know, I
27:36
Speaker 7: still see like hammers, people using hammers to punch vendors together.
27:41
Speaker 7: But now they're you know, they've moved well beyond that,
27:45
Speaker 7: I think, you know, not really nationalism, but you know,
27:50
Speaker 7: with their cheaper cars with lower cost of production, the
27:53
Speaker 7: Chinese have been very competitive and been taken market share
27:56
Speaker 7: from foreign brands.
27:58
Speaker 2: All right, So just what's your view kind of over
28:01
Speaker 2: the overall demand for electric vehicles globally. The concern is
28:06
Speaker 2: I think with a lot of investors that it is
28:08
Speaker 2: materially slowing down. A. Do you agree with that? And B?
28:12
Speaker 2: Why do you think that is?
28:14
Speaker 7: It's about affordability. If you look at a lot of
28:18
Speaker 7: the vehicles out there in the US and Europe, EV's
28:23
Speaker 7: out there, they're really expensive. You know, they're above fifty
28:27
Speaker 7: thousand dollars. There are a few that are below fifty.
28:31
Speaker 7: There's not that many that are below thirty. So it's
28:35
Speaker 7: really an affordability issues. A lot of the people that
28:38
Speaker 7: can afford EV have, you know, and like an EV
28:41
Speaker 7: have purchased one. But what's really exciting, I think in
28:46
Speaker 7: the next couple of years, and I think we'll see
28:49
Speaker 7: a potential psychicyclical improvement in evs is actually in twenty
28:54
Speaker 7: five and twenty twenty six, when there's a whole bunch
28:57
Speaker 7: of kind of sub thirty thousand EV's come to the marketplace,
29:02
Speaker 7: especially in the US.
29:04
Speaker 4: In Europe, you know, Steve, some days, anyone who is
29:08
Speaker 4: on the X social platform might actually forget that Elon
29:13
Speaker 4: Musk is head of Tesla and he's so focused and
29:17
Speaker 4: active on X in these sort of culture war issues.
29:21
Speaker 4: Is there any sign of that in the numbers yet?
29:24
Speaker 4: As far as affecting demand, is his you know, or
29:28
Speaker 4: his political stances moving the needle at all, turning any
29:33
Speaker 4: potential customers off?
29:34
Speaker 8: Do you think?
29:35
Speaker 2: I mean?
29:36
Speaker 7: I think yeah, I think you know, people who buy
29:40
Speaker 7: EV's and are looking to buy a car, I think
29:44
Speaker 7: they are disconnected for some of the rhetoric that comes
29:47
Speaker 7: out from Elon Musk. You know, their performance in terms
29:52
Speaker 7: of sales is actually no different than what everybody else
29:55
Speaker 7: is seeing. So I really don't think there's a huge
29:58
Speaker 7: impact on sales, you know, based on what he writes
30:03
Speaker 7: on aslor, he said, what he says on interviews, not
30:06
Speaker 7: at all talk to.
30:07
Speaker 2: Us about the profitability of the EV car manufacturing right now.
30:11
Speaker 2: If prices are being cut the unit profitability, what's going
30:17
Speaker 2: on there? Because they had achieved I believe some time
30:20
Speaker 2: ago positive unit profitability.
30:24
Speaker 7: They have and they still are. And look, you know,
30:27
Speaker 7: the one of the issues that was facing the industry
30:30
Speaker 7: in the past eighteen months is price cutting, and I'm
30:34
Speaker 7: hoping that, you know, we're right at the tail end
30:37
Speaker 7: of it, because Tesla actually has announced price increases in
30:42
Speaker 7: China starting April first. It's about a five percent five
30:46
Speaker 7: to eight percent increase if you also strip out some
30:50
Speaker 7: of the other incentives that are out there. And they're
30:53
Speaker 7: also planning those price increases in Europe as well as
30:57
Speaker 7: the US. And I think part of that is because
31:00
Speaker 7: the material costs for batteries are actually have ticked up
31:03
Speaker 7: a little bit, so, you know, the material costs for
31:07
Speaker 7: battery increasing could be a catalyst for an end to
31:12
Speaker 7: this seems like a never ending price cutting.
31:15
Speaker 4: How's the cyber truck doing, Steve? Is it is it
31:18
Speaker 4: meeting expectations.
31:21
Speaker 7: Cyber trucks? I think it's it is meeting expectation. They're
31:25
Speaker 7: still ramping that up. Uh, you know, sales have been
31:29
Speaker 7: there's you know, they're trying to fill the million unit
31:31
Speaker 7: back order. And according to you know what we're hearing
31:35
Speaker 7: in the marketplace, the used vehicles, uh, while used vehicles
31:39
Speaker 7: meaning a few weeks, few months old they're actually selling
31:42
Speaker 7: at you know, two times the amount that they they
31:48
Speaker 7: that they're selling with the new vehicles.
31:50
Speaker 1: Wow.
31:50
Speaker 2: Really so yeah, so I.
31:52
Speaker 7: Think there is demand for it, but again it's not
31:56
Speaker 7: going to be at the same volume as the Model three,
31:59
Speaker 7: in the Model Why, where they're selling over a million units,
32:02
Speaker 7: close to two million units. This is still going to
32:05
Speaker 7: be relegated to the to ane market, to a smaller
32:10
Speaker 7: group of consumers.
32:11
Speaker 2: All right, good stuff, Steve Man, Thank you so much
32:13
Speaker 2: for joining us. I always appreciate getting your thought. Steve Man,
32:15
Speaker 2: Global autos analysts for Bloomberg Intelligence.
32:21
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32:25
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32:28
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32:31
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32:34
Speaker 1: just say Alexa playing Bloomberg eleven thirty.
32:39
Speaker 2: All right, so we've had I'm gonna call it a
32:41
Speaker 2: really really good week for the IPO market. A lab
32:44
Speaker 2: which is a great particular I love that alab four
32:46
Speaker 2: astra that stucks up again. Ipude started trading wednesday. Reddit
32:52
Speaker 2: started trading yesterday, was up a gajillion percent. It's down
32:55
Speaker 2: nine percent to they given a little bit back. No
32:57
Speaker 2: big deal there, But I'm going to get into the
32:59
Speaker 2: story here because it seemed like very well received Reddit
33:02
Speaker 2: by the market yesterday. The IPO market. Mandy Singh Joints
33:07
Speaker 2: is here. He pitched me hard yesterday to go in
33:10
Speaker 2: size on this IPO. So I put a ten percent
33:12
Speaker 2: order and I'm not sure if I got anything but
33:14
Speaker 2: with the underwriters. But Mandy Singing joins us back here
33:16
Speaker 2: in our Bloomberg Interactive Broker studio. So I guess Reddit
33:21
Speaker 2: is a social media platform. You get a big audience,
33:23
Speaker 2: you sell advertising. We've seen that game before big cap
33:26
Speaker 2: ones or the facebooks, the Googles. The smaller caps are
33:29
Speaker 2: the snaps and all that kind of stuff. This fits
33:32
Speaker 2: into the smaller cap thing. Why can't they make money
33:35
Speaker 2: on that business?
33:37
Speaker 6: Well, one, if you compare the user base, it's still
33:42
Speaker 6: off the size of you know, Snap in Pinterest. But
33:44
Speaker 6: remember Snap and Pinterests are three to four times bigger
33:47
Speaker 6: in terms of revenue. So this platform is vastly under monetized.
33:52
Speaker 2: Why is that the thing?
33:53
Speaker 6: Well, they never had an app platform to begin with,
33:57
Speaker 6: and they started developing ad texts solutions over the last
34:01
Speaker 6: five years. The most exciting thing at the roadshow was
34:05
Speaker 6: really the data licensing business. That's what at least everyone
34:09
Speaker 6: thinks has a lot of potential. They're not going to
34:13
Speaker 6: take digital ads share from Meta or from Google. It's
34:16
Speaker 6: more about what can they do in this unique data
34:20
Speaker 6: licensing business, which if you believe in the GENAI story,
34:25
Speaker 6: then I think there will be a time when things
34:28
Speaker 6: investors will start looking beyond the pitent shovel semi plays,
34:32
Speaker 6: and that's where companies that have unique user generated data
34:37
Speaker 6: they will get a lot of attention. And we think
34:41
Speaker 6: Reddit is uniquely positioned, so it's it's sort of refreshing
34:45
Speaker 6: to see an IPO that goes beyond the semi plays
34:48
Speaker 6: and the hyperscaler the max seven that is getting all
34:52
Speaker 6: the attention, and I think that's part of the reason
34:55
Speaker 6: why you're seeing the IPO do so well well.
34:57
Speaker 2: Bettie, I wanted to ask you about that.
34:59
Speaker 4: I mean, I guess the no is that a generative
35:02
Speaker 4: AI company will license access to all the posts on
35:06
Speaker 4: Reddit to help AI sort of learn to speak like
35:10
Speaker 4: a human. Although I got to say from some of
35:12
Speaker 4: the posts I've read on Reddit, I don't know how
35:14
Speaker 4: good of an idea that is with the Wall Street
35:16
Speaker 4: bets type of posts. But how big of a potential
35:19
Speaker 4: sort of source of revenue for that is that for Reddit?
35:23
Speaker 4: I mean, there's a lot of hype around AI. I'm
35:25
Speaker 4: wondering if you can help us sort of really cut
35:27
Speaker 4: through that and figure out how big of a business
35:29
Speaker 4: could that be for Reddit.
35:30
Speaker 6: Yeah, so the Google license we know is about sixty
35:34
Speaker 6: five million dollars per year. So if you think at
35:37
Speaker 6: least there would be eight or ten large angrige model
35:40
Speaker 6: companies that will license the data that adds to you know,
35:43
Speaker 6: six hundred million, it's not exclusive at all. To at
35:47
Speaker 6: least we haven't read anything to suggest it's exclusive. So
35:50
Speaker 6: that just goes to show that there is a lot
35:52
Speaker 6: of potential in data licensing. And remember this is like
35:55
Speaker 6: a ninety five percent gross margin business. They don't have
35:58
Speaker 6: to spend any money in terms of rolling that out
36:01
Speaker 6: as a product. So that's one. And to your earlier
36:05
Speaker 6: point about you know, the quality of the posts and
36:07
Speaker 6: the data that's used for training, I think one of
36:11
Speaker 6: the things with large anguid models is not only do
36:14
Speaker 6: you need good quality data, you actually need bad data
36:17
Speaker 6: to put the guardrails. So it's it's and it's something
36:22
Speaker 6: that every LLLM company is doing is iterating to their models,
36:27
Speaker 6: making sure they're putting the right guardrails and with redded
36:30
Speaker 6: the unique advantages. This is human curated data. This is
36:35
Speaker 6: actual user data, not generated by machines. And obviously with
36:39
Speaker 6: the one billion posts they get every year, this keeps,
36:43
Speaker 6: you know, getting updated. So as an LM company, you
36:47
Speaker 6: want to make sure you have the most up to
36:49
Speaker 6: date user generated data to be able to design the
36:53
Speaker 6: chat pot functionality on top of it. Whether it's good
36:56
Speaker 6: data or bad data, you actually need both, I would argue,
36:59
Speaker 6: because that's how you put the guardrails in. And remember
37:02
Speaker 6: Reddit is only texts, so they don't plan the images
37:05
Speaker 6: or videos. That's more for you know, the YouTube and
37:09
Speaker 6: the tiktoks of the world. So this is a text
37:11
Speaker 6: focused LLLM play and I think that's where they are
37:14
Speaker 6: uniquely positioned.
37:16
Speaker 2: And just on that other IPO again, ASTERI labs a
37:18
Speaker 2: lab up about nine percent today, third day in a
37:21
Speaker 2: row that it's been higher, so that continues to be
37:25
Speaker 2: a really good story. So two good IPO stories this week.
37:28
Speaker 2: Hopefully that can get some of these equity capital market
37:31
Speaker 2: bankers off their fannies and can have to do some
37:33
Speaker 2: more deals. I mean, that's what I'm thinking. All right,
37:36
Speaker 2: let's switch gears Apple. I guess the question for a
37:40
Speaker 2: lot of people is how significant is this latest round
37:44
Speaker 2: of regulatory scrutiny, various suits by various regular regulators around
37:48
Speaker 2: the world. How material is this to the short, intermediate,
37:52
Speaker 2: long term investment story for Apple? Is this a nineteen
37:56
Speaker 2: nineties Microsoft overhang which is not good for the stock
38:00
Speaker 2: or is it something that the stock can power through.
38:04
Speaker 6: I mean, judging by the stock reaction it did, you know,
38:08
Speaker 6: suggest that this doesn't vote very well for Apple in
38:12
Speaker 6: the near term, given all the attention they're getting, both
38:14
Speaker 6: in the EU and now in the US. And I
38:17
Speaker 6: think one of the things that happens when you come
38:20
Speaker 6: into this kind of scrutiny is you can't make any
38:23
Speaker 6: product changes. You can't do even tuck in deals. I mean,
38:27
Speaker 6: I can't imagine Apple or Google buying any company. Microsoft
38:32
Speaker 6: sort of is circumventing that by breaking a company apart
38:35
Speaker 6: and you know, poaching all the employees as they did
38:37
Speaker 6: with Inflection. But it just goes to show that once
38:40
Speaker 6: you are in the cross heres like this it's very
38:44
Speaker 6: hard to you know, roll out a new product without
38:48
Speaker 6: getting more attention. And in this case, the monopoly argument
38:52
Speaker 6: is really geared towards their app store.
38:55
Speaker 2: So we all know that Epic.
38:57
Speaker 6: Systems trial has been going on for you know, three
39:01
Speaker 6: years almost, and even though Apple have one verdict in
39:04
Speaker 6: their favor, it looks more and more that Apple has
39:07
Speaker 6: to make changes to open up the platform, whether it's
39:10
Speaker 6: third party billing or other type of changes, and to me,
39:14
Speaker 6: that doesn't vote very well for the services line. Ultimately,
39:18
Speaker 6: that is the high margin business, and if they have
39:21
Speaker 6: to lower their take rates or open up the platform
39:23
Speaker 6: to third party billings, that's going to hurt their high
39:26
Speaker 6: margin services revenue.
39:28
Speaker 2: What do you think a resolution would look like.
39:30
Speaker 4: I mean, could we imagine them actually spinning off the
39:33
Speaker 4: app store as a separate business.
39:35
Speaker 6: Very unlikely. I mean, it's so hard to decouple app
39:38
Speaker 6: store from how Apple's operating system is set up and
39:42
Speaker 6: how you know, all the devices can interoperate, whether it's
39:47
Speaker 6: your iPhone, your iPad, or MacBook. So I can't imagine
39:50
Speaker 6: them decoupling their app store. At the same time, what
39:53
Speaker 6: they have to do to convince their regulators is basically
39:58
Speaker 6: a level playing field when it comes to heart party
40:00
Speaker 6: app store. So right now, there are a number of
40:02
Speaker 6: companies that sign up outside their apps, like namely Netflix Spotify.
40:09
Speaker 6: Because Apple takes a thirty percent cut for every subscription
40:12
Speaker 6: that goes through their app store. So that's where you
40:16
Speaker 6: know they have to show to the regulators that even
40:19
Speaker 6: if companies want to deploy their own app store with
40:22
Speaker 6: their own building systems, Apple is open to that. And
40:25
Speaker 6: you can move out of the Apple ecosystem to go
40:28
Speaker 6: to Android or any other operating system. So all these
40:31
Speaker 6: changes are what I think will happen over time.
40:34
Speaker 2: And and you've seen great stuff. As always, he never
40:36
Speaker 2: mails it in. He's in our Bloomberg in directive Broker Studios.
40:38
Speaker 2: He's the senior technology channels for a Bloomberg Intelligence. Appreciate
40:41
Speaker 2: getting some of his thoughts Here.
40:44
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
40:48
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40:51
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40:54
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40:58
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41:02
Speaker 2: All right, there, you have a crossing the Bloomberg terminal.
41:04
Speaker 2: House passes bill to fully fund the government and they're
41:07
Speaker 2: sending it on to the Senate to get more on this.
41:10
Speaker 2: Re Joined by Jenny Sheene Zeno, Professor, a Bloomberg Politics
41:13
Speaker 2: contributor and author of American Democracy in Crisis. Jenny thinks,
41:18
Speaker 2: so much for joining us here. I think, do we
41:22
Speaker 2: have her yet or are we still kind of working? Okay,
41:24
Speaker 2: we got it awesome, So what do we make of this?
41:26
Speaker 2: I mean, thank goodness they passed this here? But anything
41:29
Speaker 2: unusual going on here in DC? Or is this kind
41:31
Speaker 2: of more of the same let's get it done at
41:33
Speaker 2: the last minute.
41:35
Speaker 8: It is more of the same. Although I have to
41:37
Speaker 8: say this is highly unusual. We are, you know, six
41:40
Speaker 8: months late on this bill. But since this is a
41:43
Speaker 8: positive day, I'm going to try to be positive. They
41:46
Speaker 8: did pass at one point two trillion dollar government funding
41:49
Speaker 8: bill and they now are moving it to the Senate.
41:52
Speaker 8: And of course, you know, only half of the crisis
41:55
Speaker 8: is averted so far, because of course the Senate is
41:59
Speaker 8: you know, they're effected to take it up pretty quickly.
42:02
Speaker 8: But as the Senate works, any one senator can slow
42:05
Speaker 8: this thing down. And we know there are about a
42:07
Speaker 8: dozen amendments on the table. So you know, on the
42:10
Speaker 8: plus side, the senators all want to leave town so
42:13
Speaker 8: they can get their two week recess, so that may
42:15
Speaker 8: help them push it to the finish line quicker. But
42:18
Speaker 8: you know, we still aren't over the hunt yet, but
42:20
Speaker 8: we are on our way, so to speak.
42:23
Speaker 4: You know, Jen, one of the new pieces of news
42:26
Speaker 4: that's emerged over the last few minutes is punch Bowl
42:29
Speaker 4: is reporting that Representative Marjorie Taylor Green has filed a
42:34
Speaker 4: motion to vacate the speakership. Does that have any risk
42:40
Speaker 4: to this bill? I mean, I would guess not since
42:42
Speaker 4: it's passed. But how does that fit into all of this?
42:46
Speaker 8: Yeah? I mean we always expected this would happen, and
42:49
Speaker 8: this has been the way that the conservatives in the
42:52
Speaker 8: House have operated. You know, what's quite startling about this
42:56
Speaker 8: is that this bill is probably more you know, a
42:59
Speaker 8: little a little bit more liberal or progressive or pro democratic,
43:04
Speaker 8: if you will, pro White House then the bill which
43:07
Speaker 8: caused them to get rid of Kevin McCarthy. And so
43:11
Speaker 8: you know, it is not a surprise that one or
43:13
Speaker 8: more member of the Freedom Caucus House Freedom Caucus in
43:16
Speaker 8: this case, Marjorie Tayler Green has filed, but you know,
43:19
Speaker 8: at this point it won't impact this particular bill. And
43:22
Speaker 8: Mike Johnson always knew that this was going to be
43:26
Speaker 8: the result of him working across the aisle and of
43:30
Speaker 8: course waving the seventy two hour rule. There was a
43:32
Speaker 8: lot that happened in the last few days that conservatives
43:35
Speaker 8: and Republicans who are you know, not Freedom Caucus members
43:39
Speaker 8: didn't want, but you know, to avert a government shutdown,
43:42
Speaker 8: this is what they had to do.
43:44
Speaker 2: Okay, So for us amateurs who don't really know how
43:46
Speaker 2: this plays out, is this from Marjorie Tayler Green. Is
43:48
Speaker 2: this something that mister Johnson needs to be concerned about
43:51
Speaker 2: or no.
43:53
Speaker 8: You know, I don't think so at this point, if
43:55
Speaker 8: only because who would they replace him with? So you
43:59
Speaker 8: know this nobody wants to be Speaker of the House
44:02
Speaker 8: at this point, So yes, it's you know, it's one
44:04
Speaker 8: of those jobs nobody wants. So yes, you know he
44:07
Speaker 8: has to be concerned that you know a member is
44:10
Speaker 8: doing this, but not surprised. But the reality here is
44:13
Speaker 8: this rule needs to change. This rule that one disgruntled member,
44:18
Speaker 8: whether it's Matt Gates in the case of Kevin McCarthy
44:21
Speaker 8: or Marjorie Taylor Green now or anybody else in the
44:23
Speaker 8: future can hold up the entire House caucus in terms
44:28
Speaker 8: of the Republican Caucus and quite frankly, in some cases,
44:31
Speaker 8: the government. So I don't think there's much of an
44:33
Speaker 8: appetite for this at this point. We are, you know,
44:36
Speaker 8: so close in the midst of an election period. All
44:40
Speaker 8: these House members have to be back in their districts
44:43
Speaker 8: and they have to be running for reelection. So I
44:45
Speaker 8: don't think there's an appetite. But I think next term
44:49
Speaker 8: they really do need to change this rule that one
44:52
Speaker 8: member can do this, because it has really made this
44:56
Speaker 8: caucus ungovernable at this point.
44:58
Speaker 4: And you don't you mentioned that this is a more
45:01
Speaker 4: of a progressive leaning bill than what cost Kevin McCarthy
45:05
Speaker 4: the speakership. What did did the Republicans give up a
45:08
Speaker 4: lot of priorities in this bill?
45:12
Speaker 8: You know, they did a lot of that was procedural.
45:15
Speaker 8: For instance, having an omnibus or in this case, a
45:18
Speaker 8: minibus bill at all was something they didn't want. Waving
45:23
Speaker 8: the seventy two hours to review the bill something they
45:26
Speaker 8: didn't want. Allowing people to put all of these amendments
45:31
Speaker 8: in they didn't want, and we have seen that, so
45:34
Speaker 8: there's a lot here, of course, you know, just looking
45:37
Speaker 8: at one example, on something as important as immigration and
45:40
Speaker 8: homeland security, they wanted HR two, they didn't get it.
45:45
Speaker 8: This bill, you know, is, you know, has emboldened to
45:49
Speaker 8: a certain extent our ability for border patrol agents and
45:53
Speaker 8: others at the border, but it doesn't go nearly as
45:56
Speaker 8: par in terms of securing the border as the Republicans wanted.
45:59
Speaker 8: So they did get some up, but of course negotiation
46:02
Speaker 8: is what you gotta do if you're in a Vice
46:04
Speaker 8: vertise in Washington.
46:05
Speaker 2: All right, Gene, thank you so much for joining us.
46:07
Speaker 2: Genny Sheene Zeno, Professor, Bloomberg Politics, contributor and author of
46:10
Speaker 2: American Democracy in Crisis.
46:13
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