This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy, plus global business, finance and tech news as it happens. Bloomberg Business Week Daily with Carol Masser and Tim Steneveek on Bloomberg Radio.
Hi, everyone, welcome to the weekend edition of Bloomberg Business Week. This past week, well, we saw the first FOMC meeting and decision of the year, and after three consecutive meetings where FED policymakers lowered interest rates, well those officials left rates unchanged as expected, with nods to stabilization in the jobless rate and pointing to improvements in the US economy.
Better Reserve chair Jerome Powell saying downside risks to the economy have diminished and side stepping January's controversies.
We're getting through the distortions in the data from the shutdown. However big they were in November, their small in December, so we're getting to a place where they're no longer material.
We got a certain view of the economy from the chair of the Federal Reserve, and certainly from that press conference. Also, we checked in with fastenal CEO Dan Florines to better understand a different part of the economy or maybe a more concentrated sector, the manufacturing sector, and also more broadly today's environment like AI.
Here's a great story. Cool It was one of our favorite moments in that conversation.
There were a lot, actually, and that's really where we start today. A big week for big tech. We got earnings from four of the mag seven meta platforms, stopping projections for quarterly revenue, also giving a strong forecast for the current period, boosted by a robust online advertising business that's making it possible for the company to invest in AI at record levels this year.
And Tesla revealed plans to invest about two billion dollars into Xai, giving Elon Musk's artificial intelligence startup a cash infusion, despite a shareholder vote last year that failed to win a proof.
And then there's Microsoft. Investors were disappointed after the company's spending search to a record high and cloud sales growth slowed. That worried investors that it could take longer than expected for the company's AI investments to pay off.
We cut up on how all these companies are faring when it comes to the AI play. We did that with Angelo Zeno, he's senior VP and equity analyst over at CFI Research.
At this point in time, after these numbers, I would actually be I'd be more inclined to tell investors to buy Microsoft on this dip, on this twelve percent or so pulled back. I mean, the stockings is now trading at about twenty twenty one times our calendar twenty seven estimate and actually is slightly or hair cheaper than our
outlook for Meta. And when you kind of look at the at the two companies, I mean, yeah, I mean you can make a case that Meta is growing much faster, and in some respects it's actually attributed to the decline I think in Microsoft, when you got to thirty percent growth and on the same day, you know, you've got to compete against that, I mean just not going to look as good. But that being said, I mean, I
think the valuation is very compelling here. I think the business model remains, you know, just as strong as it's ever been. But you know, you clearly have some concerns that have origen you know, post results, primarily due to some of the concentration risks to open AI and the other thing maybe a hairshy in terms of the the Azure growth number.
Why isn't that concerning to you Angelo, To.
Be honest with you, the Azure number I thought was pretty darn good. It actually beat our expectation, didn't beat the streets. But that being said, I mean the Azure numbers continue to grow at a very good pace, and I think, you know, if there was a slightness to the expectation, it is due to the fact that they are partly supply constrained, just like others across the industry are. And I think you know, in the same respect, this is the company that also is looking to emphasize some
of their productivity tools out there. They're still you know, putting a lot of their CAPEX spent on those type of offerings because in their belief, you know, there's higher revenue per token tied to that, and that is probably a longer term story, okay, and it is going to impact the fact that, hey, listen, they could have probably grown north of forty percent if they had moved you know, the you know that GPU demand to that side of things, the editor side.
So let's hit on the the other thing that you mentioned the concentration risk and video Microsoft and Amazon and discussions to us as much as sixty billion dollars in open Ai as part of a new funding round. This according to the information, if concentration risk is a concern, then why is Microsoft putting more money into open Ai.
It's a great question, and I think it's just because those are some of the companies you mentioned are the ones that probably have most at stake in terms of, you know, open Ai succeeding here long term, right, And if you look at open ai today, clearly they need the money. They're not going to be able to get to where they need to be without receiving that funding.
And at the very least they need to get this hundred billion dollar funding, get themselves higher revenue, and potentially look at, you know, an IPO in the future to get additional funds. But at this point in time, I think it's you know, one of those situations where they are heavily committed to open ai and they need open Ai to succeed.
Going back to that number the startup accounted open Ai that is forty five percent of Microsoft's backlog, which stood at six hundred and twenty five billion at the end of December, so it is such an important part of AI for Microsoft.
It's extremely important. I'd also say this though, you know, the company does have north of three hundred billion dollars in bookings not tied to open AI, so you kind of look at at the next two to three years, you know that they do have that visibility in terms of being able to meet higher than you know, that that capacity editions that they plan to make here over
the next couple of years. Not to mention, we do think that concentration risk does come down in the future as they continue to broaden their customer base as well. So yeah, I mean it's it's a concern.
It is a risk to be mindful of.
But nonetheless, I think if there's anyone that can continue to navigate and prosper in this environment, it's going to be Microsoft. Not to mention, this is nowhere near you know, an oracle type of situation. At the same time, right, they've got the free cash flow potential to do what they need to do in any type of landscape.
I know you don't cover teslas, so don't get mad at me, but I do want to ask you that you know more and more we have people come on and say, it's not a car company, it's a technology company. And among the headlines that were highlighted on their earnings update is the investment Tesla's investment in Elon's x AI. Is this, though, a company that you were starting to think about, you know, coming on your radar when it comes to tech and the AI spend and the build out and the AI impact.
Absolutely.
I think it's you know when you kind of look at the enterprise space, I mean, Musk is probably the biggest spender of AI in terms of GPU servers, so you know, he is an extremely Tesla. The company x AI, you know, the company that entire ecosystem that must owns extremely important to the evolution of AI and what's going
to transpire here over the next couple of years. I mean, you listen to Jensen one and you kind of look at where you know that next massive inflection is going to come from in the physical AI world, and he continues to talk about, you know, autonomous vehicles, and clearly if there's anyone that's going to leave that pat it is going to be Elon Musk. So it's it's on our radar. And it's something that I think is really critical to this broader AI story.
Our thanks to Angelo Zino, Senior VP and equity analyst at CFRA Research. And Apple also posted earnings Thursday, trounsing estimates for the first quarter one of the key parts of the tech giants beat. iPhone sales for the quarter hit more than eighty five billion dollars.
On Apple Bloomberg's managing editor for Global Consumer Tech, we're talking about Mark German, you know, breaks so many exclusives when it comes to Apple. He is our go to on this company. He helped makes of the latest quarterly update.
This is a massive, massive, massive quarter. This is a home run. Their greatest quarter ever by orders of magnitude. It's a gigantic beat on overall revenue. China is back. You have a big beat on the iPhone in particular. Eighty five billion dollar quarter is just insane. The installed base two and a half billion, The numbers are just beyond excellent. We could ignore the fact that they missed on wearables, home and accessories. We can ignore the fact
they missed on Mac. We could ignore the fact that they barely you know, crossed expectations on services. I guess none of that matters when the iPhone is selling so well. But still there's the big existential question of what's next. It's an important question because of AI and Apple absolutely needs to figure out what's AI strategy. There needs to be an AI reckoning of some sort there, But they just bought themselves a very long time. This just insanely great quarter.
So let's talk about a couple of the areas that you highlighted there. One is China and another one is the sort of the concerns that people had about memory chips in this quarter and the rising prices of memory chips. How was Apple able to navigate this so it didn't hit its margins like people thought it would.
They buy components and memory components quarters and months in advance, sometimes years in advance. They have these deals struck, so they're working off of numbers and pricing and materials here that really give them extensive pricing power over competitors. But it seems like they're fine.
Mark, I love this. I mean, I'm looking at our live blog, so you must have like kicked this out before you jumped on air with us. But you did mention that the significant things on the call You've already talked about the AI strategy succession, You've kind of said maybe that's off the table for now because this was
such a blowout quarter. You talk about the long term vi ability of the business if it doesn't get its AI act together, it's hard to even think about that when you see the numbers here and just what a big company this is and how significant is I feel like in so many different people's lives, Like I have an Apple household. I think Tim has an Apple household. Is that is that really the long term viability if they don't get.
AI together, call me Tim Apple.
In fact they do.
That's yes, I said long term, right, and they're talking really long okay, the little, the little, the really long term here, right, Like, at some point there is going to be a need to fulfill these AI desires and you know they're going to have to figure that out well.
On o agranov our BI team, he talked with Tim and I just moments ago, and he talked about, you know, how they're working with Google when it comes to AI, relying on them right now for their models, and so they're not doing the big AI spend That makes sense for now too, So do you agree that that's kind of a smart strategy now and kind of waiting it out a little bit, but at some point they've got to kind of do their own thing.
It's not that they're waiting it out, it's that they have no choice. They have nothing internal, So it's not that they're waiting it out, it's that they need to do it, and so they're partnering with the best partner they can. It's going to offer them the best pricing power, which for now is Google. They initially wanted to work with Anthropic, but from a pricing standpoint, it didn't work out. They couldn't work with open Ai because they're, you know,
hardcore competitors at this point. So Google was all who was left. And obviously the judge didn't break up the search deal there, so it made sense and it'll aligned pretty nicely for them.
Okay, do we know yet how Apple was able to beat expectations in China once again for the first quarter the most recent quarter, Greater China revenue came in at twenty five point five to three billion dollars. Twenty one point eighty two was the estimate you said it minutes ago. It is back in China. You're holding up an iPhone right now. That's what they did.
I'm answering your question. I'm answering your question.
It was the iPhone seven color orange. Oh, it's the color orange. It's that easy.
Is the pro maax? No, it's design people buy. The new designs. Is the first new design in half a decade. It got it done. That's why you do new designs, because you're trying to bring in new customers. Why does for upgrades and but that's the way to do it.
Our thanks to Mark German, Bloomberg News Managing editor for Global Consumer Tech. For more on the earnings call and all things Apple, head to Bloomberg dot Com or the Bloomberg Terminal.
Coming up on Bloomberg BusinessWeek, we'll have more on earnings, including the thoughts from one analyst weighing in not just on airlines, but all the results that we got from defense companies too.
It's a sector that's been on a tear in the past year.
That's next.
This is Bloomberg.
This is Bloomberg Business Week Daily with Carol Masser and Tim Steneveek on Bloomberg Radio.
Across the United States, airlines spent most of the week trying to get passengers back on track after cutting more than nineteen thousand flights due to that major winter storm it pelted the East Coast and coded parts of the South and mid Atlantic regions with ice. We're still digging out of this thing here in New York.
Yeah, and this is going on for a while. Yeah, we are in this week, and there were lots of we'll see how this other storm we'll see, we'll see, we'll see. Northeastern airports, though, I should say by that storm one week ago, we're hit especially hard. And in their earnings report, American Airlines warning the weather could clip revenue in the range of one hundred and fifty million to two hundred million dollars.
We spoke to Shila Kayalu, Managing director in equity research over at Jeffreys about what she's seeing not just in airlines, more broadly in the red hot aerospace and defense industries too.
Let's just start with airlines, and then we want to move into defense because you cover that really closely as well. It does feel like they're all finding their way back after the storm in terms of the impact. Is it still a case of they're still trying to assess how do you, as someone who covers some of these names, kind of factor that in.
Yeah, in terms of airlines, we're looking for revenue growth. We've seen the same trend across American that we saw at United and Delta. Corporate was up twelve percent. Corporate momentum continues. I'm taking a very long flight this weekend and then main cabin weakness, but it's getting a little bit better. And it's all about cost control. That's why I think United went up the most on earnings is they really beat out on costs when American Airlines margins
came in one hundred BIPs belower estimate. So I think the most polarizing stock is going to be Southwest because they have some lofty targets. The stack's at forty dollars today. Some people think it's going to thirty. People think it's going to eighty. It's all about they're adding extra lug room seats and is the strategy going to work.
But that's a huge shift for Southwest. I mean they're essentially moving away from their DNA what they're known for and the culture that they're known for, and that's alienated some people already.
Yeah, it depends. So the average Southwest fair is about one hundred and nine dollars. So if you add an option for extra lug room or refundable or seating, if you add fifty dollars to that cost of that airfare, so one hundred and fifty nine, that's a fifty percent increase. Almost does the passenger back away? I'm not sure, but then again it's only one hundred and fifty nine dollars, So how do we think about that and what adoption do we assume We're at about five percent adoption in
twenty six. They have a bunch of other benefits as well, baggage fees and cost optimization, so that's driving their EPs to three dollars essentially, ebit tripling off of a very low twenty five base. So it's their first go at it and we'll see how it takes off.
You have a forty five dollars price target, so you're not at the eighty and you're not at the thirty. So maybe a little bit higher from where we are.
You know, I would prefer United where they've If you think about United, they're going to be accounting for forty four percent of the why of the new premium seats through twenty twenty eight, so they're going to be accounting for more than any other airline in the US Americans after that in Southwest because of their extra love room. I prefer to bet on that corporate customer paying one thousand plus one hundred dollars to achieve that additional corporate
fair and that higher margin. Where United is adding its seats than Southwest adding on the you know, I think both are given the multiples that they're currently trading at. United is more appealing to me.
Let's talk some defense and then we'll talk some Boeing too. I want to look at shares of RTX. They're higher right now by about three point four percent profit topped Wall Street estimates assign the momentum that the company awaits a potentially huge jump in US military spending. That's kind
of where I want to start. What we've heard from President Trump in the last few weeks, not just with the idea of a one point five trillion dollar defense package, but also calling on some of these companies to do a better job, pay their executives less, and also build stuff for the US government more quickly. What are these CEOs to do there's a.
Lot going on in defense, and that's why I was saying it's an exciting sector to cover because this is the first time that the five primes might no longer exist as five primes by the end of the Trump administration, which is our view. We think that there's going to be similar to what LHX announced ten days ago, there's going to be more deconsolidation happening among the primes. Their budget is going up by five hundred billion from a
trillion dollars. We don't know the time period of that spending. We don't know how much will be added to actual equipment and R and D versus military operations, but they're seeing an increase, whether it's to fund defense technaumes like firefly voyage or the recent IPOs we've seen in the space, or the traditional primes or suppliers like aero environment crados are up one hundred percent on the year already and we're twenty seven days in. So it's really interesting to
see what happens in defense. But there's a lot of shakeups that are I think are going to play out. So it's about seeing who has the best position positioned portfolio and who to play from here.
I was surprised, like I know, when you walked in we started talking, and I mean aerospace defense. Just the S and P broad Index up about nine percent year to date, up about forty six percent last year. Is it just because defense spending all around the globe is just happening and everybody's zamping it up.
Yeah, just as simple as tremendous growth internationally twenty percent plus NATO budgets, Japan, Korea. We're seeing countries like Serbia put in orders that never used to, put in billion dollar orders for equipment to companies like Elbet in Israel.
Coupled with the defense budget going from a trillion to one point five trillion, makes defense very interesting and the administration has been very supportive of defense tech emergent technology companies, companies that had stagnant revenues for the last decade are seeing thirty forty percent growth.
But you know, as to mention, you know, when the president talks about an industry, it can be good or bad. So is it good that they're on his radar?
But when he's five.
Million dollars talking about he did back off of that. He didn't quantify in the executive order the pay and I.
But he mentioned it, he mentioned it really, Yes, that's I love. That caught our attention. And five million dollars It sounds like a lot of money, but not for a CEO who's paid over twenty million dollars.
Right the executive executive pay. The average executive pay, I would assume in any sector is over twenty million. So the caliber of folks you would get into the defense would be the opposite of what the administration is trying to achieve.
So what do you hear from defense companies about getting some attention like that from the President?
Do they do?
They kind of brush it off a little bit, like we're talking.
With them, Like I think one interesting trend we've seen from the reports, whether it was Northrop or Raitheon today is the lack of buybacks because that's what the administration asked for a focus on additional cap x. Raith Yon mentioned that Northrop mentioned that Boeing mentioned that, so across the board, everyone's like, sure, we're investing, We're going to get use supplies on time. That's our job and it helps funnel the growth.
The CEO saying Northrop rebalancing the need for performance with affordability and speed to market to meet the US defense departments focus on speedy development.
Yes, And I think Kathy Ward and the CEO of Northrop, said this was the best spending environment she's ever seen in her career. So most of these executives are very bullish.
Do the off starts in defense tech pose a threat to the incumbents? And I'm thinking of you know, Ananderil that is not yet And I say, now, yeah, because obviously this company, I'm guessing well IPO at some point soon they do they compete with these incumbents.
Yes, clearly they're competing, and they're collaborating. They're working together both internationally and domestically. The primes are trying to work with you know, Northropez a partnership with Krados on CCI it's a autonomous vehicle essentially, so we're seeing a lot more collaboration, but they're also trying to take share. But the budget is growing overall, and that's the bottom line,
although we're not really seeing it. In twenty six Northrops Guidance's five percent growth, they talk about an acceleration from there in twenty seven twenty eight. Same thing with raytheon it was modest growth in defense. It didn't really pop. Yes, it grew in the second half versus the first half, and we'll see you how those trends continue.
I feel like with all of the geopolitical tensions and the wars that we've seen around the world, that everybody comes back to the US military might and the defense companies here in the United States. What is the global picture? Where's the competition? Is there not much global competition Shila when it comes to to the US defense companies.
So I think it's focused on maybe a few things first as missiles and munitions readiness, like we need to have that available, and that's why we're seeing companies like Lockheed increase Pack three production from six hundred missiles a year, which pack it's a missile Packtoray is the name of the missile. Going from six hundred units a year to two thousand. That is significant to say at least that's eight billion of additional revenues to Lockheed over seven years
if they could ramp to those levels. The backlogs twenty years for a missile like that. We're seeing that across the board. LHX ten days ago or two weeks ago now announced that they are seeing a government investment within their solid rocket motor business that powers missiles. They're going to open up sixty factories next year. LHX currently has two one hundred and fifty factories, so that's a magnitude
of investment we're seeing from the government. So focus on missiles, ammunitions, and second, I think it goes back to old school warfare. Everybody thinks helicopters are over and F thirty five is a bad program. But we think about Venezuela, if we think about Iran, what's the kind of equipment we're using. So you know, it's not necessarily rebuilding an entire fleet for the Navy, but it's doing things that we could use pretty quickly.
Just in last ninety seconds, I want to hit Boeing with you. Shares are down today by about one point eight percent. The company did report this morning a second straight quarter of generating cash, fifty seven percent bump in sales during the final three months of the year. Shares down, though, Is it because of accounting charges for the CAC forty six tanker program? Is that it?
No, everybody just assumes that's going to happen every quarter.
So we're all good.
There shares down after So the.
Share shares opened down. The call at ten thirty, got it up to write, it reversed about four points and then they're down again. We're a believer in Boeing. They're underwriting their free cash flow was a loss of two billion in twenty five. They're talking about positive two billion at the midpoint in twenty six, normalized for one time items. They're saying they're free cash flows had single digits, so
say eight billion. They're reaffirming their ten billion target, and then they're saying they could go above that, so you know ten fifteen. It's giving long only as a reason not to dismiss the stock. If this company could actually earn ten billion of free cash flow, then it's quite compelling at its current valuation. So we're seeing a lot
of fulctuations. Are they talking back twenty seven to twenty eight? No, I think that you're going to see two billion in twenty six and an improvement in twenty seven and twenty eight.
So Boeing, let me just say, you've got a two ninety price target, it's at two forty four. You feel good about that?
Yeah?
I want to know why is it we are supportive of Boeing. We think there's a few positive catalysts. I think President Trump might be headed to China in April. We'll see if Boeing heads there. We haven't seen a China order since I can't even recall. Maybe it was twenty nineteen, maybe earlier. So I think Boeing works from here, you know, depressed prices for Max's maybe fifty percent below what they historically sell at today.
That was she like Hayalu, managing director or for equity Research at Jeffrey's.
Coming up on Bloomberg BusinessWeek. Yes, indeed, we are a services led economy in the United States, and yet with a White House focusing on bringing manufacturing back to the United States, getting a read on that end the manufacturing economy super important.
And we get that from none other than Dan Flornes, the CEO of Fasten Now. Plus a story on AI, one of Carroll's favorites. I think it's fair to say, yeah, he joins us. Next, this is Bloomberg.
This is Bloomberg Business Week with Carol Masser and Tim Stenevak on Bloomberg Radio.
So something we've already touched upon, and this is this letter from sixty CEOs of Minnesota based companies. More than sixty, I should say, have called for an immediate de escalation of tensions between state, local, and federal authorities as a state is reeling from another fatal shooting of an American
by immigration agents. The chief executive officers of companies they include Target Best, Land of Lakes, Cargol, General Mills, United Health Group, as well as professional sports teams including the Minnesota Vikings, among the signatories of the letter that was shared yesterday Sunday by the Minnesota Chamber of Commerce. We're laying that out for those who are watching on streaming and TV, just to get to the crux of it.
Though.
The open letter says we are calling for an immediate de escalation of tensions and for state, local, and federal officials to work together to find real solutions.
Our next guest is head of a company in the great state of Minnesota. We're talking about Fasten Now recently reporter earnings, the stock selling off on the day of the report, but rallying the day after, the most in nine months. That trade reaction had us scratching our heads. So we're grateful Carol to have back with us. To talk about the release of the Outlook. The CEO of the close to fifty billion dollar market cap company Fasten Now, Dan Flornes, is back with us.
Yeah, so delighted. Let's get to it. Dan, good to have you here. Happy New Year. We do love talking with you. We feel like we get a read on the US economy, the manufacturing world. You've seen a lot in your career, and we want to get to all of this. But I really do feel like we'd be remiss to not ask you about what's going on in your home state. And I feel like those who are listening might be curious if you were asked to sign this letter of CEOs who want a de escalation of
what's happening in Minneapolis specifically. So can you Were you aware that this letter was happening or were you asked to sign it?
Was?
First off, Happy New Year and thanks for allowing me to participate today. I was not aware of it. We're outstate Minnesota. We're about two and a half hours from the Minneapolis Saint Paul market, and so it's not uncommon. It's a pretty tight knit group up in the Twin Cities, and was not aware of it going out with that, Sid was not surprised by going out and it seemed to be pretty common sense of hey, that' style down the heat.
So would you have signed it though, if asked.
Yeah, I would sign that.
What What's We talk so much about leadership at this time, and I am curious what you see as the responsibility of leaders in the United States when we see situations happening where it feels like and again I don't want to get political. I don't want to take sides, but it does feel like Americans are being what some would say is targeted unfairly.
Yeah, you know, I think as a leader, one of our one of our tasks are to create some calm in the air.
You know.
I think back a few years ago when when COVID was going on, it seemed like every everybody, every day turned everything into a political thing. And sometimes it's the case of, you know, if you're around a bunch of people that that are high at risk in the case of COVID, put a mask on if you're if you're not and you don't want to be there, then go
someplace else. You know, same thing here, Let's try to dial the heat down and focus on what we're trying to accomplish, not how we can see who can be the most boisterous in the in the market of thrown ideas out and that that's on both sides of the of the fils Dan.
One thing that we're trying to figure out is getting a good read on the economy, and you guys have such a great read on it given that you touch so many sectors. I mean, if you're using nuts, bolts, screws, anchors, rivets, any kind of fastener, industrial janitorial safety supplies, you guys do it. On earnings, you mentioned the broader market conditions remained mixed. What exactly did you mean by that when you say mixed? What's the good? What's the bad?
Well mixed?
From the standpoint, we focus a lot on the Pursing Managers Index, okay, published by ISM, and that's been you know, sub fifty for thirty six of the last thirty eight months. So from the standpoint of the economy has not given us any lyft. We are getting good traction in the marketplace, and we finished out the last half of twenty twenty five with double digit growth. That's really an exercise of taking market share more than the wind is to our backs.
And I know we've talked about this too down with you about being in a prolonged downturn in the industrial economy, any green shoots that you were seeing or signs of an inflection, and if so, I'm just curious what markets might you be optimistic and which are maybe running weaker than you anticipated and maybe we'll continue to this year.
Yeah, it's a little bit an anecdotal answer, so I apologize for that. We're seeing in some of the published data some industrial production numbers improving late in the year. We aren't seeing that directly in our business, but for us November December is a seasonally weak period, so that doesn't surprise me that we won't see it. So don't
know if there's some green shoots there. I can tell you this from my travel if it's a business that's linked to certain industries and data center is an example from a recent trip I had on the East Coast where I was visiting a mechanical contract and their business was on fire and seventy percent of their activity was around data centers.
On So that's the good part, right, and that that's the good part that story we keep hearing about the AI build out, the data center build out. You saw it firsthand.
It's real, it's real, it's real.
In fact, I had a I spent a big chunk of my time having conversations with our district leaders. We have about two hundred and forty district managers. They each run about a thirty five million dollar business. You had them all up, that's an eight billion dollar fastenal So, I had a conversation with our team in Atlanta this morning one of our district managers, and most of his discussion was about business pickup. He's seeing his market because
of data centers now. Atlanta is unique in that it's one of a handful that are really being impacted by that build up.
What is the pricing power, Dan that the company has right now? Because historically during periods of inflation you've been able to be pretty a great if with price increases. I think people would argue you weren't as aggressive as you could have been in twenty twenty five. What's the barrier to pushing price more aggressively?
Well, you know, the one barrier is the size of the customer, the nature of the products, how much of it is production centered versus maintenance centered, and because when it's production centered business, you have customers buying a very large volume of neuroal band of skews, and their price sensitivity is different than if it's MRO and they're buying, you know, one hundred dollars of this and one hundred dollars of that.
You know.
One of the things I want to ask you to there was a story on my read in this morning, Dan in terms of Volkswagen saying that they're going to the head plants for a possible out factory in the United States. They're not progressing due to President Donald Trump's tariffs and unsuccessful talks for local incentives. So we have certainly seen an administration that talks about all the investment money coming into the US, and I think we here at Bloomberg continue to try and figure out how much
of this is actually going to play out. You can say you're going to invest, and then there's the reality of actually building facilities. First of all, tire reffs and I know we've talked about this with you in the past, and forgive me if I'm repeating, but you're thinking about outsourcing. How have tariffs changed that, especially when it comes to fasteners. I think primarily sourced from China and Asia. So I'm just curious how many of it's been shifting for you.
Yeah, so you are absolutely correct.
Most of the fasters in this country, in North America in general come from Northern Asia, China primarily obviously huge impacts. And for us, what it's meant is over for about the last six years, seven years, we've been actively expanding our ability to import fasters because there's still not a lot of domestic production. And so when I think back to twenty eighteen, our primary sourcing entity was based in
Shanghai with a secondary location in southern Taiwan. Today we have personnel in Bangkok, we have personnel in India, and that's where all of our growth and movement of sourcing personnel has occurred over the last seven eight years to just broaden our ability to be a little more agile and where you have sourced from depending on the geography it's going into.
So that's on the sourcing side, But what about on your customer side and about customers moving manufacturing back to the US. Are you seeing that happen or hearing discussions of that?
Yeah, I guess you know anecdotally, Yes, I can't say that we've seen a tremendous influx. What I would say is I hear less about stuff leaving than maybe I would have, you know, ten years ago or five years ago. And that in itself is a win from the standpoint of production. But you know, a lot of it is folks are getting closer to where the end customer is
for a lot of our customers. And so when I see customers expanding production facilities in North America, and I'll say more broadly than North America rather than just the United States, it's usually the service more efficiently the local market.
Which makes sense, which we've seen that trend right happening. I feel like over time, Hey, Dan, you mentioned about maybe less companies leaving the US. Speaking of leaving, you are stepping down as CEO come July. You've been CEO since twenty sixteen, you were CFO before that, going back to two thousand and two. You've been there a long time. And I know last time you were on I asked you a question about this cycle, and I was not very kind. I got yelled at by my team because
I think I gave you twenty seconds. But I want to we do get yelled at you have twenty five seconds now. No, no, no, you've got almost two minutes. How do you describe this cycle, because it's it feels unusual.
Well, it's unusual in that, you know, you hear about everything, Whereas in years past there was so much of this political stuff that went on, but most of it, if you weren't in the midst of it, you were oblivious to and you just you just you went around about your life. Now everybody hears about everything when it happens, So that's just a lot more noise.
On the flip side. What's what's really different is I mentioned on that.
Conversation with the team in Atlanta this morning, we were talking about data centers and one of the people on the calls, he leads our business in the southern US. He said, Hey, Dan, I'm gonna flick your something, and he punched in a bunch of questions and he came back with a twenty nine page report on the data center industry in the United States, and so I read through a bunch of it.
It's it's actually pretty accurate and pretty good.
I mean, there's stuff in there I can pick apart, but it's pretty good.
Yeah, I know, well, you know, okay, Now.
Dan still had to do the reading though it didn't read the report for him.
So I probably would have. But I'm old school, I guess.
Is that just quickly, I know, this is truly like thirty seconds. Is that the most transformative change you think we'll see over the next decade is just the continued impact of AI and things like CHATCHYPT and everything else connected. Just your quick thought on.
That, Yeah, Because I mean, when I think of our business, we're selling tens of thousands of different parts to customers every day, and the ability to improve the visibility for for folks, sources, all that stuff is an incredible efficiency tool.
That's Daniel Floyes, CEO of Fasteno.
And that does it for the first hour of Bloomberg Business Week Daily. Still ahead, consumers are shifting away from credit cards and towards debt or buy now, pay later programs. So what does that say about the health of the consumer? What kind of activity are we seeing around that?
Plus a look back to some of the biggest stories that came out of the World Economic Forum in Davos. One World Leader's Choice in ewear. It was the look that everybody was talking about So I promise this is a fun one. Okay, we don't usually go there, no, but this is a really fun one.
You're gonna love it. I'm just gonna say that.
All right.
You're listening to Bloomberg Business Week. I'm Carol Masser and.
I'm Tim Stenovic. Stay with us today's top stories and global business headlines coming up right now.
This is Bloomberg Business Week Insight from the reporters and editors that bring you America's most trusted business magazine, plus global business, finance and tech news as it happens. Bloomberg Business Week with Carol Masser and Tim Steneveek on Bloomberg Radio.
Plenty ahead in our second hour of the weekend edition at Bloomberg Business Week, including a read on the consumer from the CEO of the buy now pay lead company after Pay, plus.
More from the recent World Economic Forums Annual meeting in Davos, the discussions on creating affordable housing and tackling issues in the global supply.
Chain, and the sunglasses at Davos seen around the world courtesy of one European leader. All of that to come first step, though, as CEOs are trying to navigate geopolitical tensions around the globe. We wanted to get a gut check on the c suite and what the top business leaders are thinking. Someone we always turned to for that is Somatis Santanas. He is chairman and chief executive officer of Synergy Maritime Holdings. He's also foundered chairman and CEO of United Maritime Corporation.
The two firms together, they're microcaps. They're traded in the US. Together, they have a total of twenty five ships. They carry greens, wheat, corn, steel, copper oil and more all over the world. We spoke to you last over the summer in July, and that was a time of geopolitical tension too, but it was a different type of geopolitical tension. Are things more or less stable in your view than they were then?
Well, suddenly they're less stable. I mean, you have so many things going on around the world. You have disruptions, you have like put themselves wars, all these things happening, and you'll have all the new military drive that people need to start building things again, which is not just for real estate, but you needed for strategic visions, defense and all that. So you know, shipping and draw materials of steel boux heed, I don't ore and coal. They become more and more relevant all the time.
So tell us what you're seeing. Like I remember doing a trip to India during the financial crisis and trying to understand you know, you've got a great view of this being an emerging market and driving somewhere in the middle of the night and seeing all the big trucks and really understanding the build and the moving of materials around.
You have such a great vantage point of that. So with the stuff that's going on around the globe, whether it's from the White House, whether it's from other regions, whether it's China, what has shifted in terms of where the ships are going and where activity is happening and what's being moved around.
Well, first of all, you have a commodity is raelly, right, I mean, you have gold, you have silver, you have thin, you have copper. You have all these prices surging to these levels. And I strongly believe that you're going to see aluminum, you can have steel, and all these things coming up a lot because demand is so strong for these products.
So there's more movement of all of this.
I strongly believe you can have a lot of movement for that, because it's not just a good to have real estate or house, but it's strategic, it's defense, it's military, so you can have a lot of these things going on. On top of that, you also have the AI you need to upgrade the power grids, you need to create all these data centers, and all these things require vast amounts of metals you know that we transport, So it's pretty much important these days.
The geopolitical disruptions as far as what's happening out there while the ships are out there, have you had to make changes to routes as a result of any issues as a result of countries military doing operations in certain places. We saw the disruptions around Venezuela in that region, just the commercial airlines for example, when Nicholas Maduro was brought to the United States. Have you been affected by.
Any of that, Well, of course, I mean Red Sea has been out of the question for more than a year now. Black Sea is out of the question because of missiles going on board ships, So we tend to avoid this kind of area. So the more places you avoid, the more diversions you have for the ships, the longer distances you make and the more ships you need, so frederigs go up.
Unfortunately, what are your biggest costs?
Is it?
Give us an idea? I mean, these ships are not cheap. Walk us through some of the dynamics or the financials here.
Well, inflation is everywhere, right, Building ships today has charged a lot because you know, of all these raw materials you need to build the ships and then have fuel. But fuel has been quite stable as yeah. Yeah, but building the ship has actually gotten way more expensive. That's how it is you and that's also strategic. I mean China has been building a lot of ships recently and prices keep going up and up all the time. So you know, the US at a certain point to start building ships?
Are you building?
We are building ships, yes, okay, yes, and China ends up on you are, yes, okay, but the US is not. No, you don't see a lot of superbuilding aclivity here.
Well, the President hopes there will be some military ship building activity here.
We all hope that there's going to be some superbuilding activity here as well, but just going to wait then, say when that's going to take place.
Do you think the US can build the ships that the President wants? To see.
Well, there's nothing that you want to buy. There's nothing that the US cannot do. To be honest, it's just going to be a matter of course and time. Yeah, so we're just going to wait and see. Hey, speaking of that.
In the US, over the last year, we've seen a push toward bringing manufacturing back to the United States, the tariffs that have gone into effect, the tariffs that have been used as a cudgel against countries to get with the president wants. In your view, does that eventually lead to fewer goods traded between countries, to fewer the less of a need for your services.
It's true, but it doesn't happen. Global trade has been going up year after year. You have all these container ships actually being ordered and built and everything. So in theory, that's a very correct statement. But in practical terms, I think global trade this keeps going up every year after year, and it's unstoppable.
Why is it unstoppable because.
You need infrastructure so in order to create in It's not just consumer goods. Consumer goods is only a partner shipping, right. All the heavy things, which is oil, oil products, metals, I don't or coal box side and all that I mean that keeps increasing year after year all the time.
What's the biggest part of your business in terms of the stuff that you move around?
It's mostly out and ore, and we do a lot of box side and coal, So we move around twenty million tones so for materials every year, and that's a lot lot holes.
That is long hauls. I am also curious about in terms of trade routes. I think you know, with the US kind of pushing back and tariffs and so on and so forth, are you seeing more trade just in general between China and other parts of the world. Where are you seeing increase is we're seeing decreases.
Well, China has been increasing their imports in iron and coal here after year. China has been producing fifty six percent of the global STEL production. So whatever you need stel, you need to get it mostly from China. That's how it works. You have about five trillion dollars of committed infrastructure projects globally, so that's a huge amount of STELL you're going to require in the next few years, excluding
data centers and everything associated with that. So you're going to require a lot of still in the next few years. And China has been very well prepared in importing a lot of FRAU materials.
But I think we're also that's fascinating because it's just a reminder of supply chains where things are right. But what about in terms of the pushback, is there're more trade between China and Europe. I think we're trying to assess what are the relationships around the world, and the US continues. It feels like some say to alienate certainly its allies in other parts of the world, But is that really happening from what you see in terms of the activity.
Well, all these stative talk, all these port views and everything that has been in discussions for the last year or so, that hasn't really slowed down China at all. China has been important big quantities of iron ore and baux side and all that. So a year after year they continue to increase their production of steel and aluminum and all these strategic metals that you're going to require
for the future. So, yes, China is still a very vital part of the global commodities and especially the metals.
We're speaking with. Stomatist santanas is the chairman and CEO of Synergy Maritime Holdings and founder chairman and CEO of United Maritime Corporation. You transport oil around the.
World with transport mostly iron ore, coal and boux side, Okay, we do, but also but also yeah, we used to have a few oil transportationships tankers, but we sold them a few years ago.
To pick, would you get back into.
It, The answer is yes, at the next part of the cycle, we will definitely get back into tis what part of the cycle, Well, it's all times high right now, so as at values and freight rates are at this peak of all picks, So we will wait for the right time in the cycle. Maybe it's going to be next year or the year after, and we're definitely going to get back into that.
Do you see Venezuela as an opportunity for you to ship oil from to other parts of the world.
Venezuela it's still not a big part of the transportation of oil globally. They only do like a few hundred thousand battles per day, so that's not really important and vital right now. Maybe it's going to get to a point in the next few years, and I'm hopeful they will, but so far we don't really see them as making any material difference in seaborn oil.
You just back from Davos, Yes, talk to us about what you heard on the ground, what you thought was interesting. We've just talked with our David Weston of Wall Street Week and you know how so much of what the conversations evolved once again around President Donald Trump. But I'm just curious your take on the ground and what you were hearing and seeing.
Well, it's all about infrastructure, it's all about defense, it's all about military spending. It's all about alliances. So people don't talk so much about you know, diversion and inclusiveness and all these things anymore. They talk about strategic stuff. So it's completely different. I mean, the narrative in Davos, it's all about the future of alliances, of infrastructure, real estate.
I was at a dinner with Eric Trump the other day and he all talked about, you know, about the projects of the family in the Middle East and how spectacular that he expects to be in the next few years. So you hear a lot about the real estate, infrastructure, and of course defense and alliances. That's what you're hear.
What are you doing like between the you know, with the Middle East that you can tell, I mean, it just seems like they're certainly looking to diversify their economy, investing in sports, investing in lots of different projects, technology and so on and so forth. How do you see it in terms of what they're doing and the activity.
The Middle East is a spectacular place, that's all I can say. I mean, the amount of development you see there. Everything's modern, everything's new, everything's in huge scale. So I'm very hopeful that the next few years the Middle East, especially the UAE and Saudi Arabia, will continue to be investing hundreds of billions of dollars into these beautiful, big new buildings.
Dematas just got thirty seconds left here a word or two that you would describe the global economy right now or for twenty twenty six as you see.
It, Well, it will continue to be very, very challenging. I think that we're going to see way more these important disruptions happening and trading routes being kind of broken down. But shipping has always been very agile to adapt in whatever geopolitical or what have you changed. This has happened. We've did COVID, we did everything, So it's going to be fine that was.
The modest Santana's chairman, CEO of Synergy Maritime Holdings and founder, chairman and CEO of United Maritime Corporation.
Coming up next, consumers are shifting away from credit cards at least some are, and towards or really those buy now pay leader programs. So what does that say about the health of the consumer. What kind of activity are we seeing around that? That's next. This is Bloomberg.
This is Bloomberg Business Week with Carol Masser and Tim Stenevak on Bloomberg Radio.
President Donald Trump is taking aim at the credit card industry, demanding a ten percent cap on interest rates for one year. It's something he mentioned as well at Davos.
I'm asking Congress to cap credit card interest rates at ten percent for one year, and this will help millions of Americans save for a home. They have no idea they're paying twenty eight percent. They go out there a little late in their payment, and they end up losing their house. It's terrible.
The President also targeting the interchange fees that businesses must paid at banks when customers use credit cards at check out by endorsing legislation known as the Credit Card Competition Act.
For some context on credit card fees, and I'll look at that buy now, pay later economy. We got up with Nick Mulner, he's the co founder and CEO of after Pay.
Hey, I just want to start with your view on a couple of different things. We'll we'll pull out and talk about the business in a second, but we got to start with this idea of ten percent caps on credit card companies with the President has been talking about our team reporting last week that BAA and City are actually exploring options that could satisfy a ten percent cap on credit card rates at least for a year. If the President were to follow through with this, and you know,
we've heard the banks really push back. What would that mean for after Pay? What would that mean for your business?
Yeah, I mean, look, it's a really interesting question, and it kind of takes me back to when we started the business. You know, we started the business because we saw a fundamental shift, particularly by millennials at the time post two thousand and eight financial crisis. Millennials stop you
in credit cards. They all moved to debit cards, and so the way we wanted to design our product was to disable someone's account the moment they're late on one payment, which no other credit card naturally does because income's made when someone goes late. And secondly, we flip the economics on its head where we primarily charge the consumer fee, not so the merchant a fee not the consumer, which again is kind of the fundamental opposite of how the
traditional financial services ecosystem works. So I am I'm excited to see some of these kind of millennial responsible behaviors starting to flow through. But the positives of buy now, pay later, I believe are really well understood by the US consumer today.
Well, but maybe they're well understood, in your view by some consumers. There are still a lot of skeptics out there, and I think you know, everybody gets concerned when they understand the credit crises that consumers have faced in the past, when they hear this idea of extending credit in untraditional ways, and you know, a bank would argue, okay, well, that's why we actually do have rate credit card rates that
are so high because we're the ones taking out the risk. Here, where's the risk for you if somebody doesn't pay back?
Yeah, So if a consumer takes out a transaction and they don't pay back, we wear the risk and our losses have consistently been below one percent, which is significantly lower than the broader financial services industry.
I mean, even when we look at kind of Black Friday Cyber Monday transactions, we're already seeing those transactions being paid back. Ninety six percent of our installments we're paid back on time, ninety eight percent of our transactions incurred zero late fees. And so you're seeing this really responsible behavior continue to prevail through our book and when we look at our brands being after pay cash app Square, we've now LANs over two hundred billion dollars around the world.
And so to be able to lend differently, to lend responsibly, and to continue to see the consumer, you know, engage with us in incredibly responsible ways is really great to see.
How do you, though, determine whether or not to allow someone to participate? And I guess because I feel like there's buy now, pay later popping up everywhere. You can buy so many different things. So where's the aggregator to say, all, right, this person, you know credit cards, there's credit reporting agencies, right, and so you have an idea of how much debt, but we don't I don't think have that yet on
buy now, pay later. So how do you know whether or not to allow someone to do this on your platform?
Yeah, I mean again from personal experience. When I arrived in the US, I didn't anticipate that I had to take out a credit card to build a credit score. It's a really US orientated situation. There's almost one hundred million Americans that don't have access to affordable credit today. And you know, our ability to start consumers off with small limits. As they pay back on time, we give them more flexibility, and if they go late, we disable
their account and we reduce their limits. You know, it's really put us in a great place to engage in this next generation consumer. You know, if you think about it, this millennial consumer now using a debit card not a credit card. They are very much anonymous to the credit bureau. But many of them are now approaching some of their
peak earning years. And so you have really seen this fundamental shift away from credit cards to debit cards led by the millennial cohort and even more popular in gen Z. And you know, these consumers are exercising really responsible behavior. They prefer to spend their own money as opposed to taking out compounding debt.
Nick, I want to talk a little bit more about the global consumer and where you're seeing customers actually take money out. Block recently said it's provide more than two hundred billion dollars to customers in global lending across credit products. Talk to us about which products are the products where you're seeing interest, Borrow, After Pay, Square loans, like, where is the actual growth here?
Yeah, So we're seeing, as you mentioned, we have you know, working capital loans for small businesses through Square, we have our borrow lending product through cash App, and we have our buying our pay later product globally through after Pay, And we're seeing really strong growth in our lending businesses. As I mentioned before, even though we're seeing you know, incredibly strong accelerated lending growth, we're seeing our losses stay at some of the lowest levels that we've seen today.
So really responsible lending behavior, even though the number has now exceeded two hundred billion dollars of lending. Each of those products in their own right lent differently. We had Square lending against a seller's actual sales they're processing through the platform. We have cash App lending against money that's moving through the cash our ecosystem, and I've spoken extensively about how after pay works, which is flipping the economics on its head and charging the retailer of small fee
instead of the consumer. You know, each of those components is being why we're seeing such strong engagement with our lending products across all of our brands.
What's the assumption in terms of accounts that will go delinquent? What are your kind of general assumptions in the business.
Yes, so, through our after paid business, as I mentioned before, our losses have sustainably sat below one percent, and you know traditional financial services platform would see many multiples of that. The reason why we're able to manage our lending to such great rates is because we disabled someone's account their moment they're late on one installment payment. You cannot keep shopping,
you cannot revolve in debt. There's no compounding interest associated with our products, and that specific nuance not only sees responsible behavior, but you actually see our consumers illustrating a stronger desire to use after pay because our consumers say, you understand us, You understand that we prefer to use a debit card over a credit card, and you you know you've got the checks and balances in place to make sure that I don't get over my skis, and
so to be able to see those those loss rates, particularly in the present economic environment, is really really encouraging to see.
We're speaking with Nick molnar O, co founder and CEO of after Pay. I want to just talk a little bit about the macroeconomic environment over the last year and tariff announcements and what we heard from the administration. Did that affect demand for square loans?
Yeah, So on the small business side, we've seen a really strong strength in demand for our working capital loans. And then if I look even just on our consumer side as well, our average order value through after pay was up ten percent over the Black Friday Cyber Monday
it as compared to last year. So you are seeing you know, demand come through as as consumers navigating higher interest rates, inflation, etc. And the fact that consumers are moving towards more responsible sources of capital, I really think is illustrating two things. One is that buy now, pay later is genuinely becoming more mainstream, is continuing to grow.
But secondly, you know, consumers are getting more nimble and agile into how they're looking for sources of capital, which is different to you know, what we've historically seen.
Do you expect there to be more competition? We've just got about thirty forty seconds here. Now that the administration has become more open to approving bank charters for crypto and fintech firms, A firm and Pepal recently showed they're applied for similar ILC charters to the one that Block holds. So do you anticipate more competition? And again, just got about forty seconds.
Yeah.
I mean, as you reference, Block has square financial services and has had for many years. I do think there's going to be a continued push towards bringing innovative, customer friendly financial services products across all assets in the banking industry. And so I anticipate that, you know, a that would just be a fantastic thing for both sellers and consumers. But b I do believe that, you know, we'll continue to see more excitement in the.
Space thanks to Nick Molnar, the co founder and CEO of after Pay, And I have to say, these buy now, pay later programs, man, they are everywhere, and it does make me it's something we brought up with him that you do wonder the oversight in terms of the aggregate of these programs. But he says, people start, you know, if they have any problems, they're cut off.
Yeah, that's that's true. And I think different generations think about this stuff differently, Like, you know, I grew up with credit cards. You grew up with credit cards.
I have to say, I remember when my parents got like kind of the first like people just didn't do My parents paid cash for everything, but there were layaway programs where you would put money on things and you didn't get the goods though, until you pay off.
Yeah, a little deep teas for something we're going to be talking about in a few weeks. Tom Freston is going to be joining us, the founder of MTV, and the beginning of his book is all about his travels all over the world, and he makes a point of talking about when he gets out of business school, he gets approved for the first American Express and it's such a big deal because he can actually use it around the world. It's not something that he ended up using.
But if you think back to the late sixties early nineteen seventies, it wasn't easy to pay for something in another country.
I remember traveling and getting what was it that we used to get You'd go to a bed travel travelers check.
He talks about that too.
I remember doing that. Like you think about how the world has changed dramatically, and so you and I talk a lot about fintech and with fintech companies, and you know, throw bitcoin of the blockchain into this. I think we're trying to figure out how this all fits in and what this means in terms of how we pay for things. I don't carry cash. We got rid of the penny, or we're getting it right. We just I've just you know, used my phone and I pay for everything.
Yeah, it's a friction list, which is what the company like to say. But I don't know if the Carol Master household loves the idea of it being frictionless.
I think about this.
The easier to spart with money, the worse it is.
Well, think about when you I remember as a kid getting you know, you'd go on a class trip and you had X amount of dollars and you had to think about how you spent it, or going on a summer vacation and you were given X amount of dollars and like you really thought it through. Whereas here it's like, you know, I just I just here's my phone. It's digital money.
Listen.
I'm old enough to remember when the App Store came out for Apple, and a lot of analysts a time were like, it's so easy to actually spend money with this, that it's going to be great for Apple, not so great for consumers because you know, they're just easily separated from their cash.
And I again going back to our conversation with Nick Molnor at After Pay, how many things you go to buy and they're like, would you like to do this in force installments, It's like, I just want to pay for it.
Well, still to come on Bloomberg Business Week. More highlights from the recent gathering of world leaders.
In Davos, and how one world leader changed the sunglass game. That's next.
This is Bloomberg.
This is Bloomberg Business Week Daily with Carol Masser and Tim Steneveek on Bloomberg Radio.
President Trump has promised to make it easier for Americans to buy homes ahead of the midterm elections as affordability issues take center stage.
He's pledged to ban institutional investors from buying single family homes, and at Davos directly spoke to the difficulties in tackling the problem.
Every time you make it more and more and more affordable for somebody to buy house cheaply, you are actually hurting the value of those houses. Now, if I want to really crush the housing market, I could do that so fast to people good buy houses, but you would destroy a lot of people that already have houses.
That's President Trump earlier today. Jonathan Reckford knows what it takes to build affordable housing. You CEO of Habitat for Humanity. He joins us from the World Economic Forum in Davos, Switzerland. Jonathan, good to have you on the program. Is you know, we spoke a lot last week about institutional investors owning single family homes in the US, and the data are out there. It's actually a small percentage of the homes in the US are owned by institutional investors. In your view,
would banning these folks from owning single family homes? E is the housing crisis in the US?
Well, first, we're just pleased the administration is talking about housing. And I think the housing crisis is such a huge issue in the US and globally, and I'm glad it's on the agenda here at Davos as well, and we would say that now that middle class families children cannot afford housing, the more invisible housing crisis has become visible. You know, we need We haven't taken a stance on the issue that you've just raised. We still want to
look at the details. There are certain markets nationally it's a very small percentage. There's small certain markets like Atlanta, Charlotte, a few others where it's a meaningful percentage. But that's only one small piece of the broader housing issue. We
really have as a supply problem. We have a massive shortage, particularly at the low end of the market, starter homes, and so our view is creating a lot more supply on the starter home side would not actually damage home values in the middle and up er ends because we have such a shortage right now. In fact, if we work more on the demand side without increasing supply, we'll drive house costs up further and it won't really solve the housing crisis. So we need really a little bit
of everything. We do need demand side solutions, but the most important thing is to increase the supply of houses at the low end of the market.
You know, I have to I don't always understand. I mean, I understand giving developers breaks and tax breaks to build in certain areas that maybe need some juice and some help, right to get a kind of back and bring back a community, bring back a city, bring back a town. But I'm amazing like tax abatements that still get given in areas where things are good without any maybe provisions to make sure that they're is housing for everybody in the community, not just the wealthier folks. So how do
we really fix this? I mean, I just don't understand what's the incentive to developers or builders to really help out here, and is that what it needs to be.
I do think it requires incentives, but also requirements. And the best model anywhere in the world is mixed income, mixed use, where families can be close to where they need to go to work and where they have economic opportunity. But we haven't planned that way, and I think there's no magic bullet. But there are a whole series of things that can help. And I agree with you if they're incentives that should come with expectations of mixed income or that they're because the math is tough. COVID was
kind of a perfect storm on affordability. So the gap between what a cost to build a unit of housing for habitat or for a private developer and what a family can afford is the widest in history. So we do have a real math problem, and I think there are different ways to solve it. We've seen at the local and state level. First, you can make it faster and easier to build. That doesn't cost cities a lot of money but can make a big difference for builders
and developers. You can address zoning at the local level, get rid of parking minimums, increased density, get a minimum lot size. There's a lot of nineteen eighty strategies that aren't relevant today that would increase supply. You can do accessory dwelling units. At the federal level, I think incentives, but incentives tied to building at the starter home level and increasing the supply, so discounted financing. As the Senate has a good bill we've supported on the Road to housing.
The House has a strong bill as well. I think there is bipartisan support for doing something on housing, so were enthusiastic administration wants to support it. We know it's one of the biggest drivers right now. One in three families in the world lives in inadequate or substandard housing.
One in six families in America is spending over half their income on housing right now, So the level of cost burden families is the highest it's ever been and a lot of historically affordable markets have more than doubled over the last six years.
Our thanks to Jonathan Reckford, CEO of Habitat for Humanity. Now something a little lighter to end this week. And I mentioned it's not something we do all the time, but this is a very bloomberg angle on a story that everybody was talking about. The blue Aviator sunglasses seen from Davos around the globe.
Yeah, this was really fun to do. Well, the world's leader is brought together in Switzerland to solve the toughest problems. But I gotta say what caught a lout of attention was one luxury pair of shades worn by French President Emmanuel Macone, making headlines and becoming a hot item and in demand according to the company that makes them.
For more, we head to Italy Anti Stefano full cheer, the CEO of Ivision Tech. It's the parent company of the French luxury brand Henry Julienne, which made the glasses. Stefano. Good to have you on the program. Take us through what happened since President Macrone wore those glasses. What did you see in terms of demand? What did you see in terms of people buying them? Tell us everything.
Yeah, good evening and thank you to have invited me. So I think the effect is like a one effect. It was amazing because from Tuesday our website went in crash.
Different times. We have received a lot of phone calls because everybody wants to buy something like that, you know, and so they have realized that the ivory is from a Julien and so we are covered full of requests and now we have immediately restarted to make power for the production of this model because everybody all over the world wanted so you know, the sales impact reaction was also amazing and we have sold in one day like the same quantity of one hour.
Of production of this model, which is how many can you share with us what that number is?
Yeah?
Sure, we are not talking about very big numbers because we are a luxury brand. So we've produced this iware that is in gold lamination, so very particular and now we are more than two hundred pieces in only one day for this model, and so the demand is we receive orders every minute, so we have blocked the PayPal three times, so we need every time to make a restritoration of the website. So it is amazing what's happening, which you.
Know shares the company up forty percent so far this month. Today they're up more than twenty one percent.
I mean often running listen, did you know that he owned a pair? And I'm just curious. Tell us about these classes? What are they made of? I mean, how much did they go for?
So everything happens in twenty twenty four because we have received a call from the Eliza, from the assistant of the president and they want to buy one because they want to make a present for a minister in the period of g twenty. So I remember that I ever received this call. And so when we have received this call, we say, wow, this is the president, so we have to do something more and we want to make a
present also to give you something. But the assistant told us okay, please, okay, but we want to pay, so you know, they try to respect that and they ask us to have everything made in France. So they want something, you know, every phase because you want to represent a product from the history of France. And I have to tell to you that, you know, rigially En is an historical brand. The company is born in nineteen twenty one,
and this is a one hundred years company. And so when we have sent them, we don't We didn't have any news after that, and we recognized between our customers because of some customers during Monday, they start to send me pictures and they say, is it that an originally En? And they say yes, and so on Tuesday everything happens, you know.
So I want to talk a little bit aboutupply chains here, because what is notable about these frames is that they are made in France. In this day and age, most sunglasses are and most classes are actually made at least the ones that come to the US are actually made in China. And I'm curious about the supply chain here in a conversation where we're talking a lot about domestic manufacturing in the United States that's been a big focus
of President Trump. How do you keep manufacturing in France and not outsource it to other parts of the world where it would be a lot cheaper.
Yeah, thank you, very much for this question, because I would like to start from the beginning, because our company was born six years ago, because we have started in October twenty twenty, so in the middle of the COVID period, because we have both the Sapphilo plant in Udine, so one hour from Venice, and the idea is to restart the production of the IWA in Friuli, so freely is our region where I live. And you know, in that period the Saphialo has closed the plant and we restart
the production inside. And we have a huge capacity here in Italy because our main company in Italy is a capacity about one million highware per year. So if we are talking about our company at lisually end in France we produce like one thousand pieces per year, so we have a very niche market for this type of production. And what we have done the idea when we have both at Julien in October twenty twenty three, so after our listing in the stock has change, we have decided
to create like a boutique. So our idea was to produce in France only some small pieces, talking about the historical process, everything handcraft with a lot of faces, and I would like also to say to you that this ire is in gold lamination, So what is the particularity of that that inside you can find gold? And so it's a very precious material. And the final price is not too amazing because we are talking about six hundred and fifty euros each and talking about gold is a
very competitive price. But this is something that represents, you know, the story of the French production. And finally, I believe that we are based in the two most mading important all over the world. Because if we're talking about hire production made in France is very important.
Like made in Italy.
So you know, in France there is the Jura area that is very famous, like in Italy that we have Cadore and Kadora is very famous for the iware companies.
You know.
So we have a lot of knowledge, a lot of people, and to create a good iWar you need also to have a good stuff, good people. Our people inside is twenty five years of experience to create iwors, So I were is not really easy to produce something like that.
That was the final fault, chair the CEO of Ivision Tech. And that wraps up the weekend edition of Bloomberg Business Week from Bloomberg Radio. Thank you so much for joining us. I think Tim is trying to order those sunglasses.
They're expensive. How much they're in the many hundreds of dollars. Okay, you know, made in Europe.
I love it.
Yeah, they're pretty he looks pretty good.
Can I just say that?
Yeah?
I do have a pair of aviators, but they don't have that blue tent and they're definitely not made in France.
I gotta say, if you don't have a pair of aviators, I mean.
You are who are you not? Tom Cruse olw are you yeah?
Or Joe Biden?
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