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I got to say investors not loving what they got from a Lift. That stock actually down thirteen percent. I think I might have said one percent, but I meant down about a buck fifty and it's actually down about fourteen percent in the aftermarket. It's really a killing here. Let's get to it with our Bloomberg Intelligence senior tech industry analyst, man Deep Singh here in our Bloomberg Interactive Broker studio going through his phone, going through the headlines. It's down eleven percent?
What's up with this?
Also top line growth to compare lyft to Uber and door Dash for just reported like Clift growing twelve percent. Fourteen percent is just not enough. And you know Uber had thirty percent growth in its mobility segment and you see the same way DoorDash growing twenty seven percent. And these companies have much higher base, you know, so Lift clearly has execution issues. You see that in the plateauing
of their rider base. You know, it's been stuck around twenty million for the past four quarters, and they had a CEO change. But in a nutshell, I think they really are struggling with that smaller scale that they have, so they don't have that driver additions on their platform to drive more incremental growth.
But they were cutting costs right to hopefully increase ridership. Is any signs in this release, And.
That's the problem with this business model is either you need scale or you need to keep offering subsidies to bring more riders, to bring more drivers on the platform. Even though it's an asset light model, you need those subsidies. And once you start pairing back subsidies, it hurts your frequency. That's what we're saying with the LIFT is the right frequency has just fallen off.
So what does LIFT need to do?
I think at this point, you know, it's a four billion dollar enterprise value company. I think all options are on the table. If I have to look at you know, any company looking to do last mile delivery beyond right sharing. Lift's biggest mistake was it never expanded beyond right sharing. In hindsight, everyone kept saying right sharing is more profitable than food delivery. But that was a mistake because that's what DoorDash did. They bought a company in Europe to
expand internationally. They have you know, branched out and I started offering white gloves services, you know, storefront. So they really expanded into adjacent verticals whatever they could find door Dash. Same thing with Uber. They kept expanding even though they were not profitable, and they got a lot of criticism for doing it. That was the right thing to do because without scale, you just can't keep the marketplace up.
Because I was thinking, I don't even think it's fair to almost compare Uber versus Lyft because it feels like they have very different business models.
Is that the case?
Well, or in just in terms about Uber kind of keeps expanding some of the services it's providing to those.
Its, and they are all marketplaces. They're all marketplaces where you want to drive frequency by bringing more like the writers need to have something that drives them to open the app every day. And look, there are no switching costs in this business. If I find lower price on Uber, I'm going to take that.
No loyalty either, no loyalty at all.
So the way to drive prices lower is by scale. That's how you drive the et is down. That's how you organically build that frequency.
Can I just say one of the cool things I feel like when like Uber, if you order something that that something's popping up. Hey, if you add this or you want to go to this place as well, you.
Can do this.
Like They're very clever trying to create or increase the velocity of your usage on the platform.
Yeah. And look, they are layering on ads now, so if you're bros browsing through the Uber app, they're going to show you some ads. That's an incremental revenue lift. Can't do that because it's so transactional. And that too. You know, the monthly active user is stuck at twenty million, so they can grow that user base and that's where you can't even think of ads right now because you don't have enough frequency. Right.
Can they win on competitive pricing? Because I hate doing the anecdotal evidence thing, But the only times that my friends are taking Lyft is when it's cheaper than Uber, which in New York City is pretty frequently it is.
But I think what Uber has done well is they've created tiered pricing for you know, really attracting all kinds of users. So if you're if you care about price, you can find that kind of ride on Uber. If you want that convenience, you can find an expensive ride and shorter ETA. Lift just is struggling to keep that driver's supply on the platform, and that's why the ETAs are going up. So you know, the user experience won't
be as good because people don't want to wait. If you're looking to take away.
Time is higher, even if the ride time might be a little bit lower.
And the price may be lower, but the waytime is higher. Well, right, you're not going to do that.
And I have to say, I've got both on my platform, and a lot of times I'll be like, I'll compare prices and I don't find that lift is always less expensive, and so I automatically go in one direction. All right, new CEO, This was a big quarter for him. He's obviously, you know, cutting costs, he's doing different things. What does he need to do going forward? What do you want to hear from.
Him from somebody who follows this company?
A B too B partnership. He came from Amazon. Yeah, they need to drive that velocity and frequency. B two B partnership with Amazon Target, any of the retailers would give it. So Lift really needs to branch, right, Yeah.
What like say hey, Target, we'll deliver like people can order and deliver for you.
Yeah?
Really?
Yeah? I mean Shopify just got out of their delivery business this morning because that wasn't profitable. So you are finding there will be fewer companies that are left in terms of last mile delivery because they want to compete with Amazon, Right, that's your bed in terms of partnering with Amazon Amazon as opposed to competing.
Is there is there an acquisition to that they should be making or no?
Is it more about partnership?
I think partnership. I mean, what's in it for Amazon to buy Lifts? So everyone is coming to them to partner and I think they won't want to out. Yeah, so I think partnership is probably better for Lyft and Amazon just has the network.
Really that's so interesting.
Do you have any big questions still that you are looking to get answered on any Ornane's call?
Yeah?
I think the key to me is what is he going to do beyond cost cutting? Really? I mean there is a lot you could argue you could do with last mile delivery because there are a number of areas and that's where you know, having a network is powerful. They have the data, but at this point of time, really they need to act fast in terms of driving that frequency because Uber really is taking share, and they're taking share without spending on incentives. So Lift's problem is
their balance sheet. They're burning cash. They'll run out of cash if they keep burning two hundred three hundred million dollars a quarter. They just have one point five billion on the balance Is there.
Room enough for two ride sharing services as their core business meaning Uber and Lyft, and one where Lift can actually grow substantially in terms of market cap, revenues and share.
I think, I mean, I would say, yes, this market could be a duopoly, but I would argue they will be more valued as logistics companies going forward as opposed to tech companies because the market is so fixated on profitability and you know, running things without burning cash. That's why it's a little tricky for Lyft given its smaller size.
You're saying like logistics meaning delivery, that is wild?
Love it?
So that's wild.
Okay, good stuff, Thank you so much. Always man Deep saying he is our Bloomberg Intelligence senior tech industry analyst here in studio, looking at shares of Lyft off there but still down about ten percent here in the aftermarket following their update on earnings.
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We are waiting those earnings out from Apple doing about six minutes time, so as soon as they cross the Bloomberg terminal, we will certainly bring them to you. In the meantime, we do want to check in with Dan Morgan. He's going to be here with us when those results come out. Dan, of course, you know a friend of the show, senior portfolio manager over at Sonova's trust company. They've got roughly just shy of twenty two billion in acids under management. Dan with us once again out of Atlanta,
joining us on the phone. Excuse me, Dan, We are waiting Apple's earnings a little tickle here, so what we wait for that? I do want to ask you about Qualcom because this dock down the most since November of twenty twenty two, but we did see this stock trading off about five and a half percent.
There was some.
Disappointment over the results. I'm curious they came out with a forecast that really indicated the smartphone slump that we have been seeing is going to drag on. What was your take on Qualcom specifically.
Well, Hi, Carol High Medicine. Yeah, it was obviously this isn't a good way to kick off to get ready for the Apple report, right because we know that Qualcomm, we've talked about them in the past, they about twenty five percent of their sales go into chipsets that they make that go into the modems for the iPhones. And what really was kind of disturbing was the QCT, which is their chipset division, which makes the CDMA based chips
that they sell. Their guidance going into the upcoming third quarter was pretty shy of what the street was looking for. So the guidance was six point nine to seven point five billion, the street was at seven point eight. So that gives us a kind of preliminary indication that sales have been weaker than anticipated in terms of drawdowns of inventories, especially in that chipset segment which does sell directly into Apple.
So we don't know, Carol and Madison, if this is kind of a ripple effect of what we're going to get here in a minute, which is going to be the second quarter Apple results rolling into this Qualcom report that we're getting, you know, a little bit ahead of the results hitting the tape on Apple.
Can I talk to you about Apple then? Since you bring it up, Daniel, I mean, I wonder to what extent you've heard of investor concern that you know, all these buybacks can be used to hedge against slowing iPhone production because you know what's the longevity of that of that move?
Well, Madison, you're giving up all Apple secrets here. So whenever the stock linguishes, this is historically speaking, and when iPhone revenues are flat and the other hardware categories are struggling, Apple has the ability, as you know, they have about one hundred and sixty five billion in cash to go out and increase their dividend. Matter of fact, they're supposed to increase it on this upcoming second quarter to about ninety eight cents a share and increase their share repurchase program.
They're expected to grow that from four hundred and five billion to four hundred and ninety five billion. So, as your listeners know, if you're able to increase your dividend and lower the number of shares in your denominator of your EPs calculation, you're able to grow earnings on basically flat growth. And they've done that in the past. They've done a lot of financial engineering. They've split their stock like they did back in twenty fourteen. Everybody went crazy
for it. So you're right, Madison, if these earnings act good, they'll just come out and announce all this great things they're going to do with all that cash they have sitting in the balance sheet.
All right.
So, having said that, if you look at what the stock has done ahead of earnings, DAN, it's up more than twenty seven percent year to date. Is that perform the Nasdaq one hundred?
You know?
But if you do look.
At what we got from Microsoft and Meta, the bar is pretty high for APP. And I do think about any kind of disappointment, you know, causing a major reset in terms of what investors are really willing to pay up for this name right now?
Yeah, I think what's happening, Carol is that we expect this second quarter to be basically flatted down. We expect guidance and their upcoming third quarter twenty three to be slightly down. But everyone's looking ahead, right We're looking six months, nine months ahead, and the glass seems kind of half full at this time. And you know, everyone's looking for, you know, these catalysts going forward, and that is you always want to buy Apple stock six to nine months
ahead of a product launch. We know that the iPhone fifteen is scheduled for September. They're also going to be coming out, as you talked about before, a new virtual reality headset that's going to compete directly against Meta. There's also enthusiasm about the installation base continuing to grow. They have two billion users one point five billion users on the iPhone. Of course they can harvest that through their service revenue, right, that's how they monetize all these users.
So that's how the glass looks half full right now. I think Right now, guys, everyone's looking ahead. Everyone's thinking, Okay, we know this server is not good, but wait, it's going to be good in September.
Well it looks like just about a minute, yeah, right, exactly what are you going to do for me in the future. So about a minute before we get to Apple earnings, we're just watching the bloomberg for when they cross. But Dan, one thing I did want to ask you AMD. We saw that stock up more than six percent in today's session, twelve percent higher at its best levels of the day, but Microsoft helping finance AMD's expansion into AI
processors as we wait those Apples results. Significance of that news because it certainly seemed to give a little bit of a pop two shares of AMD today.
What's interesting, Carol Madison, as AMD is always behind Intel, and it seemed now that they have just been ahead of the game in terms of bringing chipsets to the market to get ahead of Intel on some offerings that they've been delayed on, and this is just another feather in their cap in terms of what they've been able to do, and not only in data center and servers, but also in the CPO space for PCs. So things
really going well for them. Obviously there's a downturn in the PC unit volume sector right now in terms of buying PCs after the COVID splurge, but I think AMD is much better position now than they ever been. I'n't following the company for almost thirty years.
But the idea that Microsoft is lending a hand and that connection and we know Microsoft sent you know, the world on fire, you know, with its its deal into Chatchipt specifically, so that combination and partnership big deal.
Well, you know it's a big deal, Carol Madison, is that in the past, Microsoft would write directly to the l microprocess.
You've got the numbers, yep, let's get to it, Apple crossing. Let's get to second quarter EPs a dollar fifty two, folks, that's nine cents better than what the street was expecting. I'm looking for the second quarter revenue in total ninety four point eighty four billion. That too, is a beat. The estimate was for ninety two point six billion dollars. So again that's our red sticky. So that's a highlight. That stopp is up about three percent in the after hours. Madison,
you asked about buybacks. Apple to buy back up to an additional ninety billion dollars in shares and raising its quarterly dividend four point three percent to twenty four cents a share. So that is a big kick to the upside. Again in the stock up about two percent in the after market. Let's go through some of the segments. Second quarter service revenue twenty point ninety one billion, that's a slight miss.
Twenty one point.
Eleven billion, that was the estimate among analysts. iPhone revenue fifty one point thirty three billion, that's a beat the estimate on the street forty eight point ninety seven billion. Greater China revenue seventeen point eighty one billion. That two is a slight beat of seventeen point sixteen billion. Second quarter MAC revenue seven point seventeen billion, a slight miss. The estimate was seven point seventy four billion. iPad revenue
that was pretty much in line. Six point sixty seven billion, the estimate was six point sixty nine billion. Then you had wearables, home and accessories eight point seventy six billion. The estimate was for eight point fifty one Again, the stock is up about one and a half percent in the aftermarket. Dan initial thoughts.
Well, obviously, the big numbers that stand out to me Carol and Madison is this huge beat in iPhone revenue, because coming in this quarter, I had forty eight point ninety seven that came into fifty one point three and that forty eight point nine seven would have represented a negative growth rate of about three point two percent. This is going to put them, I think, probably flatter, even
slightly up on iPhone revenue. I was looking for about fifty five million units, so that's a huge number for them. A little bit of a miss you mentioned, Carol on the service revenue, that's a little bit of a surprise. That's probably about a six percent growth rate. And then it's kind of a little bit of a mosh pit here, you know, Max missed, but kind of in line with iPads, you know, it's kind of a wash out. But I think the street's going to zero in, not only on
that top line number terms of revenues. That was a huge beat, was it ninety four point eight versus ninety two point six? And a good beat on EPs, but that iPhone revenue is a bit of surprise. Guys, after we got that Qualcom number, right, we were kind of worried about that, but it looks like they were able to piece things together and put together a really strong quarter.
Well, they also expected they had a three percent decline in revenue, which I'm sorry. The revenue number came in down three percent year over a year, which was better than analyst expectations, but that's still revenue down, Daniels, So I wonder if you can talk a little bit about the impact of that and whether or not you see that as a win or a miss for.
Apple, Well, Madison, as we said before this quarter and next quarter, we're expecting slightly negative growth, so it's not too big of surprise. Even though they beat estimates, it was a negative number. Again, if you were to look at some of these other Fang stocks that reported earlier last week, it was a very similar type of environment, right It was kind of slightly up or slightly down.
No one huge number beats, you know. I think Amazon got it five to ten percent top line growth in the next quarter, but we're all in single digit territory right now. Unfortunately, with the Fang stocks either plus or minus at this point.
Well, and again we continue to see Apple shares in the aftermarket falling their latest update up just about two percent. Here, I'm looking at the press release Dan and Tim Cook, Apple CEO, of course, saying we are pleased to report an all time record and services and a March quarter record for iPhone despite the challenging macro economic environment and to have our installed base of active devices reach an
all time high. We continue to invest for the long term lead with our values, including making major progress toward building carbon neutral products and supply chains by twenty thirty. And then they did say that, you know, given our confidence in Apple's future and the value we see in our stock, our board is author raised an additional ninety billion for share repurchases and then of course raising their quarterly dividend for the eleventh year in a row. Commentary
seems pretty pretty safe, if you will. The macroeconomic challenges just gives us some idea and clarity.
What is it that you want to know on the call today?
Well, what is the best way to jump your stock price up? In Fangland talk about AI? So I would expect them to talk a little bit about their initiative and AI. So far, they've been a little bit quiet compared to Microsoft and some of the other Fang stocks. We know that their initiative is going to be using the phone as the apparatus to get you use artificial intelligence, opposed to let's say, a chat robot, so to speak. Er like we're seeing with some of the other players.
So I think we're going to get a little more hopeful color on that because they've been.
The one company that really hasn't said a lot.
Right, they haven't said a lot, Yeah, Carol, they've been very quiet. I don't know if you saw the statistics of how often AI was mentioned on the conference calls with the Fang stocks last week, a lot like forty five, you know, plus times, and of course the stocks are reacting, so it's kind of like.
One of those earnings per share AI per year over year AI per the other.
Word exactly, and AN analysts are going to talk about it, They're going to ask about it, and you know, hopefully get a little more indication to guys in regards to some of these new products. And we mentioned iPhone fifteen in September, we're looking for virtuality headsets, so those are exciting things too, because new products always mean new growth, and the street's going to be really kind of zero
on that. So I think new products and AI are the keys to this upcoming conference call on the AI.
Thing, that thing being very very big, fair we're figuring it out the AI space. What would you specifically be listening to on the call to indicate that Apple is going to be a strong competitor to a Microsoft that's for the moment sort of been the front runner on the AI discussion.
Well, Apple has done a lot of things in terms of buying kind of like startups, kind of companies that are not big names like chat GBT. You know, everybody knew about them before Microsoft infused that capital. So trying to get some more information from them in regards to what is their strategy. Is it to acquire smaller companies and kind of fold them under their umbrella or are
they going to be doing things internally? And the other thing, guys, is is it more than just going to be some sort of artificial intelligence that's on one of their wearable watches that tells us what to do when we work out and what our heartbeat is and all that kind of stuff. You know what I mean. We're looking for transformational type of things, things that are like the Microsoft Chat EBT where everyone's very excited about it. So I
think that's where we got to zero in. Because you're great, You're right, guy, Carol Madison that it's been a very unexciting announcements coming out of Apple so far in AI and they're a little lagging a little bit, I think right.
Absolutely.
All right, Hey Dan, thank you so much. Dan Morgan, Senior portfolio manager at Sonova's Trust Company.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business App and YouTube. You can also listen live on Amazon Alexi from our flagship New York station Just Say Alexa, playing Bloomberg eleven thirty.
Well, the Daily Wire is quote deliberately steering into the culture war, so it says the co CEO of The Daily Wire, the right wing media company that is the sixth largest podcast publisher in the US.
Who knew.
That's more than Walt Disney and more than the Fox Audio Network and more than twice as many as CNM. And now it's looking to spread its content wings this story. The upcoming new issue Bloomberg Business Week on newstands tomorrow, already online at Bloomberg dot com, slash BusinessWeek and on the Bloomberg Let's get to it back with us in
our studio. Devin Leonard, He's Bloomberg BusinessWeek Senior Global Business writer, and I was kidding with you that when there's a wacky or weird story with some interesting players, I can just see like Joel on the team saying, all right, let's get Devin on this. You said, you said, I always look forward to your story. So I am curious. What was the pitch to Joel or did it come to you? Tell me what put this story on your radar.
I want to do something about, you know, sort of the battle against the corporations. And actually Daniel Sachs, the features editor and the editor on the story and the editor on on the Ben and Jerry story, I did, but she she said, have you seen this commercial? And I was like, no, I haven't seen this commercial. And we watched the commercial and then it kind of went from there.
Tell us about the commercial.
The commercials. It's just really amazing. You know, it's for a product called Harry's razors.
Which is a real product.
Sorry, excuse me. It's for a product called Jeremy's Jeremy's razors. But yeah, and and and and uh so sort of you know, you watch the commercial online on.
You know, you know, we're showing some video for those who are watching burg originals on YouTube.
No, no, this this guy sort of drives drives up and you know, you know Mclair and you know, gets out in this in this Gucci jacket, and all of a sudden he starts talking about, uh, you know, the sort of you know, transgender you know stuff and remember when met when boys were boys and girls were girls.
And then he goes to side, he winds up. He says, you know, Harry's canceled their advertising, you know, with the Daily Wire and and uh because of a comment that one of the Daily Wires hosts said about about you know, transgender people kind a slur and uh so but he's, you know, he's like, I'm going to start my own razor company basically, and he's fires a flamethrower a bunch of Harry's razors and Gillette razors because he doesn't like that anyway. It's just like yeah, you know, but but
it's like, is this real or what? And literally, you know, Danielle told me to watch the video and I said, well, you know that's this. This sounds a good story. But you know, I had called the company. It's like, you know, is this a gag? And they're like no, but but but but I really I really didn't know, until I called them up.
That is so fascinating.
Can you just explain to me what their definition of a woke company might be and maybe some examples of things companies have done that make them woke.
Well, I mean, you know, you know, you know, madison is I mean, obviously that's the term that kind of came out of the left, but it's been co opted
but you know, you know, by the right. So it's tricky to it's tricky to use the term, but basically, you know, it's what you know, their argument is is sort of the major institutions in the United States have been co opted, you know, by the left, and so there are a lot you know, as part of this whole sort of crusade to you know, get your kids to you know, to turn transgender, to you know, like you know, like criminals out of out of uh jails, and you know, and also all I've said it and
said it in there, you know, to encourage policies to discriminate against white people. I mean, they talk a lot about things that are anti white. But so going to the corporations though, I guess I guess a lot you know, it's it's it's either featuring trans people in in advertisements. So the bud Light advertisement with uh, Dylan Mulvaney's an
obvious one. And then you know Hershey's uh, you know, had to head a Canadian uh you know, you know trans woman and and uh, you know, and also Harry's canceling ads over over the you know, the I guess there's sort of some of the anti transit things that have been sudden the Daily Wire, but you can going on obviously there's Di's Disney, right.
Well, so tell us about this company.
Who is the Daily Wire and the individual behind it or who's running it and what he's looking to do.
Well, there's really three people. There's a guy named Caleb Robinson who's kind of a finance guy and who was I guess he was working for Ferris Wilkes, who's a big fracking billionaire and who put up the sort of the original sort of Steve Capital for the company. But then there's also Ben Shapiro, who you know we haven't mentioned, but who is the most popular conservative you know podcaster in the Country's you know, thirty nine year old kind of wonder kid control depending on what.
Your thoughts are.
But there's also a guy named who's the coach you named Jeremy Boring and he is sort of the entertainment guy and he's he's he's a guy I grew up in West Texas, kind of went out to Hollywood and kind of flopped got into conservative politics.
Uh.
Founded the Daily Wire with these three guys. It was sort of a you know, right of Fox, a news site, and you know, it's become a podcasting behemoth. They've also they've also you know, turned it into a big subscription business, scriptian driven business, I should say, the protically double subscriptions last year. And now that you know, they want to get into and they want to get into movies and TV shows and sort of become kind of a you know,
quote unquote anti woke Disney, well an anti Trump. Well it's funny, Well, no, no, no, it's it's funny funny that you say that, Carol, because that was one of uh Ben Shapiro. I mean, he's sort of he's the face of the company. He drove a lot of the growth growth for a long time. Uh you know, he was already somebody, you know when they founded the company in two thousand and five, but he was against Trump early on Boring was too, but obviously he wasn't sort
of the the face of the company. But so so so they you know, they get attacked by a lot of Trump people and you know, to hear Boring tell it, you know that you know that was going on right Averen the time they launched the company in twenty fifteen, he thought they was going to sink the company, but
ultimately he thinks that helped the company. So they have this sort of reputation, as you know, it's kind of more of a straight shoot, not quite as MAGA, but they have, you know, a bunch of Trump people on staff, So to say they're anti Trump, you know, isn't really accurate either, Okay, sorry, no no no, no, no, I back no no, no, no no. Nobody says it's sort of they're playing kind of kind of a kind of a funny like we're independent except for like those guys anyway, But it.
Is I am curious that those in the media industry, and it's not like they couldn't miss a fat or a trend or seeing a disruptor come in and do it differently. What do they say though about their plans to have a wider scope in terms of content.
Well, I mean it it sort of goes back to to you know, the whole culture war thing. You know, when I was saying, or should say, you know their approach that you know, there's of like you know, they have a for profit you know model, you know, to fight the culture war. And their argument is like, look, half the you know, you know, half the country is basically you know, you know conservative, I mean's just based
on sort of the election results. So so big corporations have basically taken the position that you know, this is again this is this is really where you know their works. But they've embraced you know, radical radical race in sort of queer theory, and they and knowing that it's going to offend half the half to have the country. But but you're still going to have to you know, you're still have to subscribe to Disney. Plus you're still gonna have to buy you know what you're buying from Parcter
and Gambles. So it's like tough, we're gonna take your money anyway. And their argument is like no, right, right, right, But we know, you know, we know we're gonna we're gonna provide an entertainment and alternative. We're gonna provide, you know, an alternative and razors also also chocolates, well be you know. But but there's you know, there's half the companies out there. It's a big market.
All right, We got to.
Read it, folks, go online, get the magazine. Devin Leonard of Bloomberg BusinessWeek, thank you.
This is makes console. I'm spadling. All right.
We're going to talk a little bit about space exploration and when you think about it, Yeah, you think about the billionaires, you know, Musk, Bezos and Branson, But what about the former dishwasher engineer who is also successful sending rockets into space and giving Musk perhaps a run for his space money. This story is the cover of the new issue of Bloomberg Business Week, on newsstands tomorrow, already online at Bloomberg dot com, slash BusinessWeek, and it's on
the Bloomberg Terminal. The story and excerpt from Ashley Vance's new book entitled When the Heavens Went on Sale The Misfits and Geniuses Racing to put Space within Reach.
Excuse me, great.
Title, Ashally, As you know, Bloomberg BusinessWeek features writer. He's also author of another book on Yeah one of those Spacebookllionaires, Elon Musk, Tesla, SpaceX and the Quest for a Fantastic Future. Ashley Jetning us on Zoom from Palo Alto, California along with the editor of Bloomberg Business with Joel Weber here in our Interactive Broker's Studio. Joel incredible story and we do focus on the billionaires, but there's so much more here, including what is in Ashley's book.
Yeah, I'm really excited about this book because you know, BusinessWeek did a space issue of a number of years ago, and wow, it was ahead of its time, but not as quite as thorough as Ashley's book, which takes this idea of like, look, there's going to be a space economy and it's going to look completely different than anything that's come before it. It's going to involve a lot more satellites in space and this low Earth orbit thing. Just get ready to hear so much more about it
and the entrepreneurs that this brings out. Obviously there's the Elon Musk and the SpaceX thing, and they really helped pioneer what this looks like. But they are not alone. And that brings us to the excerpt because there's this really unlikely SpaceX rival that Ashley found. And by unlikely, I mean you couldn't imagine a more unlikely candidate, right Ashley.
Yeah, Well, you know it is a one of a kind story. You know, You've got this guy named Peter Beck, who's from New Zealand.
I think a.
Lot of times in space we think of, you know, either the billionaires or you're like a NASA veteran or some MIT PhD. But but Peter, you know, he essentially left school at sixteen, got his equivalent of the ged and and was working at a at a dishwasher maker, you know, as an apprentice, and then he worked at
a government lab for a while. But he really just did He's like this possessed engineer who was doing all this rocketry stuff in his spare time and is in the shed outside of his house, and he made it work. I mean, like, for one hundred years, individuals had kind of tried to make a small rocket that could get to space, and Peter's the first one that actually managed
to pull this off. And today Rocket Lab is like the second coming of space X. They're really the only two commercial rocket companies that are making a real go of it.
So tell us more about this guy. Because New Zealand not exactly known for space exploration or rockets, and yet here we have a guy and planet Lab publicly traded company. How did this all come about? How do you get into rockets when there is no rocket industry around you?
Yeah?
I think just through force of will you know, I mean Peter is he must be like, I don't know what number you want to put on it, like a one and a billion kind of engineer. And and you know, he did a lot of this early work building sort of a small rocket and then a little bit bigger one and then and then finally getting to something that could could play in this commercial field. And he was
able to Marshall. You know, there are these regulations around the space industry that that forbid American engineers from helping a New Zealand company like rocket Lab, and so Peter he didn't have anyone that had like built a rocket before on his team. Nobody was like real experience doing this, and he cobbled together this group of of twenty year old New Zealanders and Australians and they managed to pull this off. I mean, he's he's sort of like what
I think of as the platonic ideal of engineer. It's just like runs in his blood. He, like Elon wants to go to Mars. Peter like just wants to make things that go fast and rockets and is just is just possessed to have to do that.
Well, it's so so cool that someone with that perfect description of engineer's personality in mind ended up with the money needed to sort of take that vision and personality and turn it into what he was able to turn it into. Can you talk a little bit about how he got that money and the operation he built that you describe as something that might have looked absurd because it was three people in an office the size of my New York City apartment.
Yeah, I mean, you know, this is like the story of commercial space right now. You know, for sixty seventy years, this was government backed stuff. It was the thing that nations did, and only a handful of nations had ever really been major players in space. And then we had this kind of like billionaire era, obviously led by Elon, who is the most successful, and now you know, we're
in the venture capital era of space. Over the last two or three years, about two hundred and fifty billion dollars have been put into commercial space companies, and rocket Lab was near the front of that line of Peter. He was with these three guys in this research lab and they built this tiny rocket and sent it off and it was it was enough of a proof of concept that he seemed real that he could come to Silicon Valley. Coastal Adventures was one of the first companies
to put to put money into it. But you know, there's a pretty funny story in my book. I mean, Peter comes to the valley, is this total outsider, you know, and he's like putting his engines and his rockets on the table and just like assuring these guys that he can do this. And he kind of like did it at the right time and has they're a public company now. I mean, you know, he's really gotten quite far with all this and paved the way for dozens to hundreds of other companies.
I want to talk about just how crazy that is because that burst rocket he built. When you read about this in the book, and we excerpted this part, he ends up holding a bar of solid rocket fuel in this I can't imagine a more dangerous idea. But yet in order to do this, he had to figure out the propellants. So walk us through how that challenge, how he cracked that challenge.
Yeah, I mean there's a guy who, like I'm not kidding, you know, he used to just he would make propellants on his own, you know, at his house. He used to dress himself up in like garbage bags just to keep this toxic stuff up.
As a parent, when your kids like, I'm gonna go over to Peter Beck's house, You're like, no, you're.
Not exactly right there.
Like, you know, he as a kid, he had this like total freedom growing up. Like he would just go in the shed and his parents wouldn't see him for hours. And then yeah, he would put these plastic bags on. He was telling me, you know, you had this this apartment. At one point He's like, yeah, I don't. I did so many experiments. I don't think the grass is ever going to grow in that spot again. And and there's this amazing video that people can find on YouTube. The
first rocket was called the at One. It's at EA and and you know it's Peter two other guys, you know, and Peter's got this white lab coat on to sort of add some kind of like semblance, so that he knows what he's doing. And they're just literally in a shed on an island in New Zealand and he hits this button and the rocket takes off and it works, and he's just out there shouting. I mean, there's something like kind of just very wholesome and authentic, and and
you know, we write about it in the story. I mean, he's a bit of like the opposite the anti Elon. This is not like a this is not a guy on Twitter stirring things up, but you know, he's just very focused on what he wants to do.
Okay, so we can definitely talk about the anti Elon, But in order to talk about the anti Elon, we also have to talk about the Elon because you know, SpaceX obviously has pioneered this. What does Elon have to say about Peter Beck and Planet Labs and the two of them have met, actually, right.
They have.
I mean I actually like arranged this dinner matchmaker. Elon's like, Peter wanted to have dinner. I was like, well, you better buy me a steak and bring me some flowers. But you know, I mean space X, Look, they are the giant in this this field, they're sort of lapping everybody, but the you know, rocket Lab is incredibly real and the only you know, other player. But I think for Elon at least he Elon claims, you know, rocket Lab
was not on his radar. We were talking on the phone when I was in New Zealand and he's like, oh, what are.
They up to?
And then I did set up this this dinner with Peter, and I think maybe Elon's tune changed where Peter said, you know, it's kind of like, be careful of poking
the bear. Because because shortly after they had this dinner, SpaceX started this program where they do these these ride shares for small satellites, and small satellites are like what rocket Lab specializes in, and space X drop the price drastically for what they charged to take these small satellites up to orbit, and it looked, you know, very much like a direct shot at rocket Lab. So I don't know if Peter regrets that invitation.
It sounds like, yes, maybe, but it's interesting. I mean, actually, when you look at the entire space race again, if you will, it's a very different one than it was from the sixties, right under President Kennedy, and it was very government led, right, and all the money that was plowing into it. I had a dad who was involved in it, you know, from the government perspective and.
Public private partnerships.
When you look at it today, is it going to require Yes, the Elon Musks and SpaceX's of the world, but also the Peter Becks and the rocket labs of this world as well.
Oh yeah, yeah, I mean things are so different. I mean it's kind of you know, sort of amazing. Like the from the Apollo era until about I don't know, ten or fifteen years ago, things really hadn't changed that much. The rockets, look to say, the satellite were on very antiquated technology, and we've had this huge shift. You know, SpaceX sort of kicked things off, but now we have we've got much cheaper rockets the satellites. Like for the first time, I write in the book, you know, we've
brought Moore's law to space. It used to be these these very specialized computing systems that we're old we're using like consumer electronics. Now it's all very modernized. And you know, the biggest data point I can give people is that from the sixties until twenty twenty we had put up two thousand, five hundred satellites in lower tharbit from twenty twenty to twenty twenty two. Just the last two years that number doubled. It's going to double again this year
and the next year. We're going to get to one hundred thousand satellites possibly like in the next decade. And so you know, it is not governments that are putting all those things up. These are companies that are building a sort of computing shell around the planet. And I think this is like our next is our next big technology infrastructure play, you know, like the next stage after sort of the dot com boom.
So by the end of your book, do we know who is gonna win?
No, this is still still I think it's gonna be AI generated, Ashley. It's something that we just don't even know yet.
We already have, We've already got AI in space, you know for worse. But but you know, there's a couple of companies that are kind of clear winners, like Planet Labs is this satellite company. They pioneered sort of the low cost satellite and and they're doing great. Rocket Lab I'm sure will be around. I think we're going to have there was such this like frenetic explosion of activity. All this SPAC stuff helped, you know, add some gas to the fire. And I think we're going to have
We just saw Virgin Orbit go bankrupt. I think we're gonna see a little retrenching here for a minute. But the underlying principle that like the economics of this, that this is a business as opposed to a government lad endeavor. You know, I think all of that stuff holds.
Okay, So we got to talk about Rocket Labs here. Who else figures into the book that you were excited about?
Yeah, I mean Planet Labs, the one I mentioned. They're the satellite company. They've surrounded the Earth with hundreds of imaging satellites. They take pictures of every spot on Earth all every day and sort of get this sounds like espionage, but it's not really. It's more like this this kind of like real time accounting system of human activity. You know, where is oil going, how many cars are in a Walmart parking lot, how many trees are in the Amazon
sort of counting these things. There's another company called Astra, which is like the the opposite of Rocket Lab. It's this sort of like chaotic fast paced company that's trying to make the cheapest rockets ever created and are sort of going through some things and then maybe you know, one of my absolute favorite stories is this sky Max points Akhoff, who was the former owner of a company
called Firefly. He was Ukrainian. He poured two hundred and fifty million dollars into this rocket company, and then you'll see in my book the US government tosses him out of the country right before the war with Russia.
Unbelievable stories. Fifteen seconds. Elon, though in your view based on what you're seeing, because is still very central to what's going on.
Just very quickly, is Elon Did you say yeah, Elon?
Oh yeah, I mean SpaceX is just the dominant force looming over everything in commercial space. They're lapping everybody.
Just watch if you have dinner with them, because he might.
Might impact what he's going to do.
Ashley always great stuff features writer a Bloomberg Business Week. Check out his new book, When the Heavens Went on Sale, The Misfits and Geniuses Racing to put Space within Reach. An excerpt in the new issue of Bloomberg BusinessWeek on newstands, online and on the Bloomberg and our thanks to Jill Webber as well.
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All right, so, Maddie, we want a little bit more about the bank sector because a great story on the Bloomberg targets one number in particular. I would safe to say that the number is probably growing. Fifty four billion dollars. That's how much stock and bond investors have lost following the collapse of four regional banks. Some say this is
how the market is supposed to work. With some size and scope though, and perspective of what more could come, Let's get to Bloomberg News Consumer finance reporter Paige Smith. She joins us from our DC Bureau page. Good to have you here with Maddie and myself. So let's start with the size and scope about the impact of those four regionals, both equity and bond sides of the financial markets being hit.
Give us the perspective.
Yeah, hi, folks, thanks for having me and gosh, it's kind of hard to follow herman, he's so good, you know so much. But I'll try to break it down
as best as well as he did. But so we basically did a little math here and looked at the four US lenders that have collapsed that have collapsed, so Silvergate, Signature, Silicon Valley Bank, and First Republic Bank, and looked at basically tallied up all of the losses that investors have been saddled with since February twenty eighth, and this was calculated on May second, So to put that in perspective, it's around forty six point nine billion dollars of market
capitalization that's been erased since February twenty eighth and around seven point five billion dollars gone from bonds and preferred shares. So that's totals to be around fifty four billion dollars lost just to break it up, Just to have broken that.
Down, Yeah, it's an insane amount of money, obviously, AG, and thanks for breaking that down for us. Going back to what you were just mentioning preferred shareholders and bondholders, this does not include them, and is the bondholding space worthless now for these these investors.
Well, no, just to clarify, so the that is actually how much has been lost, So there is still some combined I believe the market the share value still is total well as of Tuesday, was totaling around seven hundred and twenty five million dollars for those four lenders. But so not all is lost just yet or wasn't as of tuesday. But you know, a lot of this really has to do with, as a great professor said, how the market functions, right. You know, depositors were a number
of depositors were guaranteed and were made whole. But you know, the stockholders and junior debt owners are sort of at the back of the line in terms of priority for for you know, being made.
Hold here right, so maybe not worthless yet but close to it or could be. So how in terms of reporting out this story page and looking you know, we just as you said, just had herman on and you know the banks that we're watching today, Western Alliance and pack West, and who knows what else might come our way. What were you hearing about maybe the future potential impact if we continue to see problems in the sector.
Gosh, I don't have a crystal ball in front of me at the moment. But all I can say is that prices are still extremely volatile. I mean to the volatilities sort of being felt and across across the market right now. And I mean, like you said, pack Western Western Alliance have looked a little roller coaster like today, I would say, right.
But what I want to ask you about is you talk to somebody at Northwestern University and they talked a little bit right about if only half of uninsured depositors yank their funds, around a hundred and nine banks with assets of three hundred billion could be impaired. So we're talking about again, we're just guys. We're just guessing here, they're guessing, but right there is the impact that it could be a lot.
More, absolutely, and we just don't know right now, but it is. You know, things are a little bit all over the place, we'll put it that way. The market is definitely still volatile right now. So yes, theoretically, if things sort of continue as they are, more could be lost.
And what did your sources say page about you know, the big big question, which is is it fair and okay that investors are losing a lot of money as we all experience the regional banking turmoil. What were your sources responses about what that should look like or any changes that should be made to hedge against that.
Well, to kind of address the last part of that question, there are a lot of changes being sort of batted around. As Herman sort of said a little bit earlier, you know, there talks about how FDIC insurance could change. There was a report that said perhaps it could be extended or sort of the ideal option would be extending that to more business deposits to kind of maybe calm things down a little bit theoretically, But we just don't really know
right now. I did say I spoke with one source who did say it could get a lot worse before it gets better. But who knows, and we just aren't really sure right now.
Page What did Mike Mayo say to you? And this is somebody that we have leaned on, We've leaned on certainly during the Great Financial Crisis. This is someone who has followed the bank sector, the big banks in a big way. Was he thinking that there's more pain to come? I'm curious kind of what his take was on all of this.
Yeah, Mike Mayo essentially said that he says that there are no more banks that are going to fail right now in the S and P. Five hundred at least. But again, I would like to check in with Mike today perhaps again this report was published on was published early yesterday morning, so a lot of a lot has changed. Everything is still sort of in flocks. The market is still a little bit all over the place. I think that we just have to keep asking folks and keep making calls and checking in well.
And as you said, you did report this story out yesterday. You do have a story on the Bloomberg though that hit the early this morning and the headline this is for a Bloomberg business week. In fact, regional bankquos didn't end with the first Republic rescue. And you remind us that banks run on confidence, right.
If we all start to.
Feel a little nervous about where our deposits are, we're probably going to yank them absolutely.
And I think that that is really something that remains to be seen. It's a question. And as Herman said before, there are you know, if we look at the balance sheet of pac West and Western, at least PacWest there was sort of guests. They're in talks of determining what the best next step might be. But there were you know, we checked in on the banks during earnings most recently and there were extremely red flags being raised, or at
least that was my interpretation of things. And we'll just have to kind of see how those deposit levels fare over the next days or weeks or however long this continues.
I know you're sound exhausted, because we're all exhausted right just when we think it's over right. No, no, no, no, no, I don't mean it as a criticism. I just mean it's a reality. It's like how we felt reporting out the Great Financial Crisis. You know, you'd get some moments of common then it just picked up so much momentum. And you do wonder, just like the lag time for all of the FED rate increases to take effect, you do wonder what you know when we have moments of peace,
are calm? Is it just a case of yeah, exactly?
Well?
And one big question I have then I was going to mention this to Harman earlier, is that we talk about, you know, the banks that are not necessarily struggling with liquidity, but the stock prices down, So the question is, you know, is there a problem. Is there an issue here? And I wonder whether our reporters have had any luck with getting some insights into how much that impacts consumer confidence.
If the stock is tanking and the consumer is, you know, embarrassed to pull out their first Republic credit card, is that enough to make deposit outflows increase?
Page?
Are you hearing anything about that consumer reaction and your reporting?
Frankly, I think that's kind of the the question of the day, you know, of whether what comes first, right, sort of the chicken or the egg of you know, we see these sort of stock price, we see the volatility in the markets, and then do we sort of we keep checking in on deposit levels, and this kind of going dinging back and forth between deposit levels and
market continues. So I don't think we can even begin to try to answer those questions just yet, but it's sort of the continuing of asking those questions and monitoring and seeing and checking in with consumer confidence.
I suppose it's just wild like this whole concept of thinking about you know, runs in this day and age on Paige good stuff. Thank you so much, Paige Smith. She's consumer finance reporter at Bloomberg News.
I'm brother Marco.
A journal.
How about you let me drive?
No, no, no, no, who's going to drive?
Honey?
Please?
How do the riding gravels?
Let's mate, I want to drive.
It's a good question time.
This is the drive to the clothes.
Don com think we'll buy an yelled it on?
I'm on Bloomberg Radio.
All right, everybody, we've got just about uh, just under eighteen minutes left in today's trading session, getting ready to wrap up the day of trading, just before that monthly John's report.
We'll get that tomorrow morning. Let's get to it with our Drive to the closed. Guest.
Mark Travis is back with US president and chief executive officer over at the registered investment advisor Intrepid Capital, joining us once again on zoom from Jacksonville, Florida. Where we understand Mark, it is lovely in Jacksonville.
It's not so lovely here.
It's a little cold and gray again. But I hear it's pretty nice out there.
Keryl. I think you should do what every other New York's done and pack up and move to Florida.
That we can talk about later. I hear, yeah, I hear.
You're right.
There's a lot of people moving there.
Having said that, I am curious in a week where I feel like we've had so many big picture stories, whether it's the regional banks, FED policy, We're still talking about inflation, recession. We've got the other stuff like US China, stress A, Russia, Russia and the rest of the world. I feel like that's always top of mine. What's kind of top of mind for you? What do you think is the really big macro story that you focus on when you are stock picking, which we're going to get to in just a moment.
Well, I think, Carol, unfortunately most people buy high and sell low, and so I try to resist that the best I can. You know, I think we've definitely as everyone on the program knows how to reset and rate last now fourteen months up five hundred and something basis points. So you know, not that my compliance department likes me to say this, but I do think you're getting paid to wait much better than you have been in recent history.
And so.
As a fund manager that owns stocks, bonds, and cash and in one case just bonds, I think we're paid better now that we have been in some time. And I think we're closer to the end of the cycle at the beginning. Do I have some crystal ball here that tells me when? No, I don't, But I do think we've moved pretty fast and pretty hard, maybe one of the first or second fastest increases in rates and better reserve history. So it has lagging effects, as everyone knows,
and we're waiting to see what those are. But I think there's opportunities out there if you're patient and have a longer than the next quarter time arise, in which I do.
What do you think it is that markets are waiting on. I know you don't have the crystal ball, but is there a specific you know, ECO data point or earning cycle that you think will indicate that we're at the other side of this right, because.
What you say we're closer to the end, And you said you don't have that crystal ball, But that's a really good question, like what is it that makes you say that?
Well, because I guess history going back to the speed in which they've moved, I do say someonet sarcastilary, we're asking the people that cause the problem to fix it, and so we're now getting the antidote. But again, I think certainly the market's grasping for when does the FED cut.
I think that's probably farther out than maybe some or many. Right, But again, when I look at some of the companies I'm happy to talk about, and it's you know, the compounding they've had over a long period of time is really quite phenomenal.
Well, let's get to it, because that's one of the things we do, like that you come to play with and actually talk about some of the names that you do, like Garman is one of them, nineteen billion dollars in market cap, It's up about ten percent a year. Today, reported earnings early yesterday the stock was up about three percent on the news. You saw Barclay's and Morgan both raising their price targets on the company. Were you buying
off of earnings or beforehand? Talk to us a little bit about your positioning.
In this one.
I've owned it for prior to that announcement, and I'm a patient holder and I think it's a great business. But again, and you may have seen in the last i don't know, three or four weeks of call them in the Wall Street by Jason's Wide talking about compounding of companies and how the human mind has a hard
time getting around something that's compounded one thousand percent. But if you look at Garment, for example, I believe it went public in the early nineties with about two hundred million dollars in revenue, and today it's doing run rate probably four and a half billion in revenue. They had two hundred employees and the day they've got thousands. Yeah, and the stock price reflects that. So again, part of
what I like is the family still ownership. The co founding families have a substantial stake in the environment where financing is hard to come by, they have billions of dollars in cash to buffer them and or acquire something or you know, optimously buy backed chair. So all those factors are reasons why I'm interested in that equity.
Yeah, you mentioned buybacks, so I am forced to ask you about Apple today. Do you have any take on Apple's previous positioning when it comes to buybacks and what will your kind of analysis be if they do what's expected and continue to push forward on buybacks with some of their excess cash.
Well, I guess I would answer that an indirect way, which is I was very much against the tax imposed on buybacks of one percent, and now the SEC's voted to make the kind of regulatory burden around that even higher. I just am against all that. I don't have a real strong opinion about Apple, but you know, you can certainly look at their balance sheet too and go, why isn't my dividend higher? Why aren't you buying back more shares?
But again, it's it's one tool in the toolkit for you know, executive suites to make in terms of trying to grow their business and allocate capital. And I think now politicians are trying to take that away, which again I'm against.
Hey, I do want to get to another name that you like, Watsco. It's an HVAC company, thirteen billion dollar market cap, quite a run this year, up about thirty four percent year to date. About twelve percent of the float is shorted, and we did see the stock rally eight percent to a record high when it reported earnings on April twentieth. It's got about a three percent dividend. What's been your story on this one, Mark.
Well, I think this was a cultural story and it's also again a family business in this case a father son business family members of the nay Mad family out of basically Miami and I think the perception of some is they're going to be subject to a slowdown in housing. But they're really strong in their replacement cycle and they're very careful in their acquisitions. But they also just culturally have a very long tenured management team. They you know,
have an ESOP that's been very effective. And again I'm kind of paid to wait. They two have very unencumbered balance sheet. So yeah, Harman and Watscar, I can collect a three percent dividend and I'd gott to take that than a ten year treasury in three and a half.
I hear you, right, It's all about you got to kind of compare it once the returns on some of the different assets. Mark Travis over at Intreumpid Capital. Right here on Blomberg BusinessWeek, you are listening and watching Bloomberg Week.
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