This is Bloomberg business Week inside from the reporters and editors who bring you America's most trusted business magazine, plus global business finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Hi, everyone, Welcome to the weekend edition of Bloomberg Business Week. Carol Masser along with Matt Miller, who is in for tim our backdrop. This week, US inflation cooling sharply, perhaps marking a turning point for the FED. Earnings got underway courtesy of the big banks. Yes, all important and yet
top of mind for us. This week, Disney's succession plans and why the iconic company could struggle to gain ground in the streaming wars, a short seller living in fear, flying cars Yes they are maybe here, And Barbie hits the big screen. All of that to come. We begin with Meta's answer to Twitter, Meta platform signing up one hundred million users in four days on its latest venture Threads,
often described as a Twitter knockoff. This story and the Tech section of the new issue at Bloomberg BusinessWeek on newstands, now online at Bloomberg dot com, Slash BusinessWeek, and on the Bloomberg terminal. Let's get more from Bloomberg News social media reporter Asha Counts and our Big Tech team leader Sarah Fryar.
After all the times we've talked about meta's consoliding power and social media growing to have so much influence over our behavior, we're kind of vulteering on Zuckerberg in this land crab, which is not where I would have expected us to be. But you know, Elon Musk and what he's done with Twitter has really made an opening for him. And you know, even if it feels a lot like Twitter, there are people who don't want to be on that platform anymore because of all the changes Asia.
Is it really that successful a launch? I mean, they have two billion global users, so all they need to do to get to hundred million on threads is get ten percent of people who are addicted to Instagram and constantly checking it to click.
Well.
Look, some people have told me they're like, I'm not really impressed. Those people are just on Instagram. They don't have any new users, which I mean is partially true. A lot of those people were from Instagram. They did pull some Twitter people. I don't know that people are leaving Twitter, but they are signing up for Threads and you got to say, one hundred million in a couple of days is impressive, even though they have all these other apps and counting.
Hey guys, I love in your story this line medicineo. Mark Zuckerberg's business instincts are to acquire copy or some other rival social media products. Is that a good thing though? For people who are thinking, Okay, I'm done with Twitter, and so's it's kind of an easy switchover.
Yeah, I mean, I think it's it's just like Twitter in the sense that it's a it's a text based social networking situation. But I think that where it is different than Twitter now and the reason people have been moving over to it is because it has content moderation from a company that you know isn't that graded it but is better than Twitter Edit, and it has a
connection to an existing network. And as as Asha and I have reported over the last few months, there has been an exodus from Twitter, specifically to apps like massed on Blue Sky and we'll get to it in second, but those are apps that promise to decentralize the future of social media and say that you know, it won't be holding power by one company. So what they're promising with this one is this is not necessarily a land grab like we've done on the past, that cross copykill strategy.
This will actually be able to communicate with those other apps.
To me that, you know, Threads looks just like Twitter. The buttons are kind of the same. But the one place I was really hoping it would be different is in the kind of political partisan battle. Like the crazies are out on Twitter, you know, and I wonder if Mark Zuckerberg has any incentive to make Threads different in that sense, because the crazies are what these social.
Media companies count on. Right.
You need people to make incendiary comments and you know, lob bombs and start fights.
That's the whole point of social networks.
Well, look, starting fights increases engagement, right, Like if you have a bunch of replies and arguments on Twitter, it's actually kind of good for Twitter in a really weird way. But I mean, meta executives have come out saying like, we don't really want this to be about news and politics on Threads, which is really interesting because I think
it will set Threads apart from Twitter. But then are people going to want to be on there if they can't have some of those conversations and discussions, right, That's what made Twitter blow up was that a bunch of people were able to share real time news and information and talk about politics. So I think that will be the big difference between the two. And who knows whether that's good or bad. Maybe it's good and bad for different reasons.
Yeah. I have to say, you know, when it's going through the story to myself, two questions ads no, no ads, question mark question mark no news, question mark question mark. I mean Sarah like, how can it become kind of I'm going to steal like a tom Ki and the zeitgeist, like, how can it become the thing?
Oh?
No?
Hashtags?
No hashtag? How can it really become a thing without those two?
Well, it's gonna have ads eventually, it's meta. Yeah, So it's just a matter of time. And we've already been hearing from advertisers that they're interested in that. We've already seen a little brand sign up. I think that is also why it's people on Instagram who're trying to figure out how to be twittery, but they're not really that kind of person. So I do think it'll be different and really the opportunity here. The question about whether it will become like Twitter or not lies in how much
more Twitter deteriorates from its current state. Because it wasn't letting people see more than six hundred tweets unless you were paying. Twitter's putting up more paid walls around its API, around its around its users. So I think that if people get disenchanted with Twitter, they're going to look for an alternative. Maybe they'll pick Threads and try to make it work for them. But yeah, you're right, it doesn't have those same tone, the same urgency that Twitter does.
Can this be?
You know, we were talking with Laura Martin yesterday and she was basically saying, ever since Elon Musk took over, Twitter has become even more of a cluster show than it already was, and the aanchisers were just leaving in droves, and we're desperate for something like Threads. Is it possible, Sarah, that we see Twitter just crater and disappear?
Anything is possible in the world of Elon Musk. There is no There's no scenario that I would entirely rule out. We're prepare for them possible, But but yeah, I think I think people thought that would happen very quickly after he took over and hired Sorry, it's fired seventy five percent and lost a seventy five percent of the staff. They thought, you know, there's no way this is gonna this is gonna get a bugs right away. It's gonna it's gonna collapse, rip Twitter. It didn't turn out that way.
It's still kicking, it's still live. It just got a new CEO, right, so really anything is possible.
It's not winding down. He feels like he's winding up. Hey guys, One thing I did want to get into in your story, and I think it's important, is the open platform that you guys, the open system platform activity Pop because I do feel like this is an important part of it Asha coming on in that U and who they are, because this is part of you know, Meta is certainly doing this right, This is where it's Threads is using this platform for Yeah.
I mean the idea behind this idea of decentralized social media is that you're not going to have one social media platform that's going to have all this power. So users would be able to maybe vote on the features that they want or communicate with other apps, so it's
not all consolidated and to one place. The thing is, people we talk to in the sort of decentralized community are really skeptical about Meta being a part of it because they can say all this stuff, but they actually have to take the steps to integrate activity pub and actually activate it. And then are they going to really allow people to, let's say, take their followers onto mast
it on and take all of their data. I don't know, right So that's going to be the thing to watch over the coming months, But so far, people in the open source, sort of decentralized community are pretty skeptical about Meta being involved on Disney.
Right now, the board is extending Bob Eiger's contract as CEO through twenty twenty six. Is only going to stay on two years, and we already gone through twelve months of that. So through twenty twenty six, we're gonna see Bob Iger hang on and Sarah. I know this isn't your team specifically, but it's in the same zip code as Big Tech, and it's something that a lot of people have been talking about, especially as he hangs out in Sun Valley, Idaho at the Allen and Co.
Conference. What do you think about this failure.
To create the right kind of succession brings Bob Iger back, and now he has to do something about it in two years, and I guess they're saying, well, maybe four years.
I think it's a really tough time to be an entertainment company. And actually, you know, if I can put it in my wheelhouse a little bit more, it's because of social media, because we are all picking our own celebrities, We're following our own media, our own stars, or spending time on TikTok, spending time on reels for movies with Barbie and Oppenheimer. I can't think of the last weekend
that people were excited to go to the movies. No, it's really a tough time to be a company with that kind of classic entertainment cloud centralized in one creator that Disney is.
Bloomberg News Big Tech team leader Sarah Fryer and social media reporter Asha Counts with us there. Sarah, by the way, is the author of No Filter, the inside story of Instagram. Now we mentioned Disney and Bob Iger there at the end, and that's where we're going to head next.
These large entertainment companies can no longer actually afford the economics to compete against Amazon and Apple, which never ever need to make money from actually content creation.
Leading in longtime Wall Street Media analyst explains why the Magic Kingdom reigns as a prime takeover target. You're listening to Bloomberg Business Week. This is Bloomberg.
You're listening to the Bloomberg Business Week. Catch us live weekday afternoons from three to six Eastern Listen.
On Bloomberg dot com, the iHeartRadio app, and.
The Bloomberg Business app, or watch us live on YouTube.
This past week, investors were focused on the media entertainment business thanks to Alan and Company holding its annual gathering of billionaire moguls in Sun Valley, Idaho. And that's when we learned that the Walt Disney Company extended the contract of CEO Bob Iger for another two years to the end of twenty twenty six. The move gives the executive more time to implement his turnaround and find a successor.
There are other concerns at the entertainment and media giant, though, and a top ranked analyst who has watched and analyzed this sector for years thinks the iconic company will eventually become a takeover target Matt Miller and I as Needham and Company senior media analyst Laura Martin to expand on her take when it comes to Disney. We spoke with her just prior to the news of Iiger's extension.
So I think that these large entertainment companies can no longer actually afford the economics to compete against Amazon and Apple, which never ever need to make money from actually content creation because they have like a new device called like Vision pro over an Apple great example, where they need content in order to drive adoption of a device that's brand new, so that content is worth more to them, especially if they can do exclusive content for that.
Those new goggles that Apple is trying to drive adoption for worth a lot more. And you never need to make money from content.
As we know from these standalone content companies, they're all losing money thanks to streaming, So the economics have really gotten compressed in content, so we think they need to be purchased by larger companies that have sister subsidiaries that can fund them.
Paul Sweeney tells me you're his favorite analyst, so you must know a lot more about this industry than even he does. But when I hear about a device company looking to buy content for exclusivity, I think instantly about Microsoft and its attempt to buy Activision, which right now looks pretty good, but it didn't look that great for a while, and it still would be a problem if
they wanted Call of Duty exclusively on the Xbox. Won't this be you know, an issue for the FTC and for other regulators if if, for example, an Apple tried to buy a Disney Yeah.
So good question on the regulatory front. First of all, as you know, these kinds of things take multiple years.
So let's see who's in the president's seat.
Because that person appoints the head of the FTC, the DOJ. So if we end up with a Republican president, then suddenly, like all bets are off in terms of allowing consolidation, even if we stay with the democratic regime. I think one of the differences remember when Comcast was allowed to buy NBC, they said, look, you can have no exclusive content on Comcast rails meaning those the video like the
wires for seven years, and after that you can. So that's they have a way to make behavioral changes to make sure they can just force Apple to sell Disney content to everybody at the same price. But as you know, if Apple buys Disney's content, it's a transfer price, so they can double the price of Disney content.
Yeah.
By the way, the way you make money and content to sell it to everybody, So Apple really is in incentive to not sell it for a price to everybody. It's just that if I was Apple, I would have those fabulous storytellers at Pixar make three minute shorts that are only available on and probably I could offer it to anybody else.
But who else is buying a three minute short from Pixar. Probably nobody except for putting it on the goggles, I would guess.
That's also that's legit.
What goes around comes around, right, because yeah, Pixar, Steve Jobs sold Pixar to Disney, and it would be hilarious if Tim Cook then bought it back, right.
Yeah, totally.
I so agree with that, And so much of that happened because of Eiger's relationship with Steve Jobs, right, And I do think about Iger and his relationships with lots of folks. Having said that, one thing that disneylare you know, is so well known for buying some kind of content and putting it at the theme parks and making movies and selling stuff in blah blah blah. Is that a good strategy for Disney?
Look?
I think the big fundamental, the biggest question for Disney is how do you invest in this company today when you do not have a permanent CEO and you do not have a permanent CFO. And as we know from the failed attempt of a Disney trying to replace Iger for a decade and then picking a guy that didn't last two years, this issue of succession at the Walt
Disney Company is a really hard problem to solve. It becomes an easier problem to solve it is a division of a larger company, because now you just need a division ed. You don't need a world class politician, which is what Disney requires at the top level.
So I think it solves one of the big problems.
Which is it gives Disney a more permanent management structure and a clear sense of strategic vision if it's part of something larger.
Is there any way to make money if they stay in this business? I mean, is the streaming business? Can that be profitable?
I always think about ESPN, like I would pay so much money if I could stream all of ESPN's content without happening having to buy a cable TV package.
So maybe. But the problem is, as you know, bundle bundle, media bundles double economics. So when you unbundle ESPN, you.
Know that destroys value because now they're not getting paid twelve dollars a month for every cable subscriber, whether or not they use it or not.
The minue you unbundle it, you've got to take that price up two three x. So suddenly you may say today you'd be willing to buy it, but if the price point was one hundred dollars a month, you might not be.
Then I'd rather get the cable.
Yeah, exactly, exactly. So I think the answer is capitalism. Rit large has a lot of trouble funding negative growth businesses, and right now that linear TV ecosystem is really weighing on the revenue growth line of these big conglomerates like Warner Brothers and Disney and Paramount. And if you can put capital to work in something that's clearly growing, that's worth a lot more than something that has these declining you know, it has declining revenue or just single growth.
So Laura, so do you anticipate something coming out of Sun Valley or what are you watching for to come out about Disney?
They all get bought. I hope they all.
Merge and they all get bought, sharing Redstone Cells because she's the small but I hope they all get purchased. And I think the good news is, I mean there's a serious rain trust. Like you know, John Malone Sits is a large personal shareholder of Warner Brothers.
And I think all these guys are deal guys. Right, what's a film. It's a bunch of deals.
It's a bunch of contract So they're all deal guys at some level. And so I hope they all understand that they've got to get bigger to save costs, or they've got to sell out to somebody that doesn't need to make money in the content business.
But they are not.
I do not think these are standalone companies for the next three years.
I do not think they can be well, including including Netflix. Netflix has to get well, you.
Know, it could just merge with Warner Brothers, or it could buy Paramount and actually have a library of IP rather than always renting other people's IP. All of these companies make more money together than they do separately.
Hey, you know last year the boy that everybody talked about was Elon Musk right in Twitter. The boys.
I can see that, imagine if I don't.
Hey, we women have dealt with a lot for years and decades.
Fair enough.
Having said that, now we're all like talking about meta and threads. What's your take on that, Laura, So.
As you know, we have an wrongly, we have an underperform on meta because we're saying, look, we don't think it's social network business has a terminal value because we
think TikTok's going to win. But I got to say, I sort of think Elon Musk, in blowing up Twitter in a series of bad execution moves, actually has left a huge hole in the market where there was clearly a consumer demand for platform that met that, but it couldn't generate ad revenue because of the fact that he sort of let in the crazies once he got in and didn't have content moderation, so advertisers abandoned ship. So there is a need by advertisers to meet that. Needa,
guess what Facebook is best in class. It's sort of guaranteeing wall guard and access to premium advertisers. You know, he has a million advertisers, so she's got brands all the way down to long tail.
I think Meta does that really well.
So and we know they're good at ripping off other people's ideas because they did it with Snap and Instagram, so.
There and with Facebook that was friends her.
That's fair, okay, great, So that's their core skill, fast following and improving on somebody else's idea. So I think Elon Musk might have just lost all of his financiers forty billion dollars.
That was needed in company's senior media analyst Laura Martin on Disney and the social networking world as well. Still ahead, on Bloomberg Business Week, we turned to the fraught and often misunderstood world of short selling, as US regulators i a crackdown on some of its biggest players.
If making money in the market was as easy as knowing the information, it would be a different world. Trading the information, trading the market. Understanding the dynamics beneath markets mean a lot more.
Why Citron Research founder Andrew Left is living in fear of the Feds. This is Bloomberg.
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 Alexa from our flagship New York station, Just Say Alexa Play Bloomberg eleven thirty.
It was among our most read stories on the Bloomberg Terminal this past week about the short seller Andrew Left, who is well known to our Bloomberg audience, now living in fear of federal investigators showing up at his door, and who, as Bloomberg's Tom Schoenberg writes, terrorized more than one hundred companies and riled an army of memestock traders,
and now lives a life where he feels hunted. The founder of Citron Research joined me and Matt Miller to explain how his world has been turned upside down in the two years since FBI agents showed up at his California home to seize computers and phones.
Well, I wasn't home at the time I was written about agents. I guess they showed up and they took your computers. So I was I wasn't there, But someone's at my house.
Yes, but your life changed.
Yes, yes, yes, of course.
You know, whenever there's a DOJ investigation, any form of investigation, you have to take it serious. So despite me not understanding what it was about, I have you think?
Of course it changes.
The biggest fear here is that prosecutors will try and prove collusion.
Is that right?
Is that the one thing that's kind of the worst sin a short seller could commit.
I mean, I don't understand what collusion would be. You know, if we're long a stock and I say to you, Hey, I like Apple. Do you like Apple? You like Apple? I'm buying Apple. You're buying Apple. I'm buying Apple. Have we cluded?
I don't know.
I'm not a lawyer, but I guess that's the kind of market manipulation that they're trying to weed out. Have you seen any of that, even if you're not guilty of it, Have you seen any of that in the industry that you essentially have have pioneered here?
Yeah? I don't know.
I mean when you say collusion, it's a very Again, just like the example I brought up is you know, if two people say I like this stock, I mean, so when you say the collusion, I'll give you an example, I famously did Valiant. Devaliant story. How many people wrote about Valiant? Many short sellers wrote about it also, And during that process, I'm sure many people exchange notes saying, oh did you see this?
Oh my god, what about this? Did you see this?
When you do homework and you exchange notes to someone, is that collusion? The opposite side of that is, could you imagine if you didn't speak to anyone on anything, they would say, well, you didn't speak to anyone. You'd never checked this work with anyone. You did it all by yourself. You didn't want to see if they would.
Possibly you were wrong, So you know, I don't. I guess that's just verbage.
Well, and I guess, as Tom notes in his story that but what the government is looking for is whether firms are acting in concert right, so potentially amplifying a report yours or others impact on a stock. Did you, in any of your cases act in concert with others acting concert?
Again, I asked the question, which is if I'm if two people buy Apple and I say to you, I want to make sure my work is right.
Next year, I've had them selling X amount of phones. What about you?
And you're checking your work with someone who might also belong with the stock, you know, to see if your models in line maybe with their model. Okay, is that working in collusion with somebody? So have I ever discussed an idea with another person? I think most people have.
You know, if I get it, we're not gonna figure this out here.
I don't understand.
I get your point. I get your point.
The one of the other problems Andrew that people have is, you know, you you started off in a bucket shop, right with people pumping stocks and then dumping them after mom and pop got into it, and the concern I mean, now, I'm not saying that you were necessarily the inventor of this idea, but that's kind of famously how you got your start in markets, and people have a problem with pumping up a stock and then getting out of it right away, and short sellers.
Some of the mechanics are similar in terms of the timing.
Right you place your bet, then you make your case, and a lot of times they'll sell out quickly. Is that you think another one of the concerns that maybe the DOJ.
Has I mean, sure, I don't know their concerns.
If the information's correct you know, I can't tell you how many stocks I've covered too soon have gone much lower and same at the same time.
Let's say a stock like game Stock.
Imagine if I wrote said, hey, game stops are short and I was not able to cover it. But it just goes to three hundred and fifty dollars and I'm not able to cover it, right, you know? So trading, If making money in the market was as easy as knowing the information, it would be a different world. Trading the information, trading the market. Understanding the dynamics beneath markets
mean a lot more. I mean, a couple of years ago, I was short GSX, which was a Chinese the number one percentage gainer on the New York Stock Exchange, which Bill Wong from our Chagos manipulated up with Goldman Sachs and Morgan Stanley as you know, when he's been charred, and that stock just kept going up. It was a complete fraud. It kept going up every day. What am I not allowed to cover the stock?
Wait?
I should jump in just and say that I don't know the details of that, so you know, I don't know if we can. I don't want to make any allegations of fraud against Goldman Sachs and Morgan Stanley or even Bill Wanne.
No no, no, no, no no. But I'm saying they were the number one and two shareholders of GSX, which was a Chinese education company which in twenty twenty was the number one gainer on the New York Stock Exchange, which is you know, from Archagos, Bill Wong manipulating the stock hire.
That's all, okay, I'm sorry, but let's go on.
Well, so what can you tell us about what investigators have wanted to know from you specifically?
I really can't discussed the details. I don't know.
I've not spoken to them. I can't, so I don't know any details what they're looking at. I only know the way I've operated myself for twenty years. I think over twenty years, twenty two years, I've been doing this a high standard. I thought this before, let's say, in China a couple of years ago, like six years ago, with Evergrand, when I put my opinion out, I wrote it, I went to court in China, I lost, and then literally within months after losing, Evergrant default on their bonds.
Everything I said was going to be true happened. So you know I take.
I think I understand the SEC and the DJ have difficult jobs and they're trying to keep a regulated market. I think the markets did a good job regulating itself. I also think it's very tough to regulate people's opinions. I mean, look Twitter, me look thread now, it was one hundred million users in like four or five days. What you can't talk about a stock on there if you have a position, I mean.
Think about that.
I think Twitter is all people talking stock positions.
So what changed during meme stocks? You write in the story that Tom wrote on you, you said, during the run up, during the pandemic and memestocks, you realize something changed when it came to short sellers and you specifically.
Well what changed?
Well, first of all, what changed is the gamification of the market. So people realize the fact that, okay, who cares if the stock's garbage? And who cares if there's a high short interest in the stock. The stock can squeeze higher and if the higher it goes, the higher it can go. So once people understood the gamification of the market, it changed the way you were able to.
Allocate size on short selling.
Okay, So you couldn't you know, you couldn't be all in on a short regardless of how good.
Information you've had.
You understand, if you knew a complete fraud, you still couldn't say, okay'muting all my chips on this one because people say it doesn't make a difference.
Now, I mean or a bad business, Isn't.
It also the wrong direction to go because you.
Know, game Stop and AMC are not necessarily flourishing business is that are generating a ton of cash flow. In fact, exactly, there's no reason for game Stop to have brick and mortar stores.
I don't get it. I go in sometimes and they're empty.
Is it when you and Carson Block and Nate Anderson, when you guys kind of pull back a little bit, doesn't that allow a little bit too much irrational exuberance to flourish in the markets?
Uh?
Yeah, you know.
Similarly you can say that.
But then the flip side is as short ollers bring attention to it and there's a short interest, you get a stock that's wound up that could take off at anytime.
Look at game Stop.
So you know, the markets become gamified, and that is nothing to do with game Stop, just gamified. Many people get the fact that, Okay, we can you know, the markets can move around the algorithms.
To this day, we still don't really know what drove game stopped to those levels.
Was it, you know, was it algorithms or was it retail investors who were buying it at three hundred?
I don't know.
So hey, listen, there's a movie coming out about it.
By the way, we hit we only have about a minute and a half left here. You know, one of the things in this story by Tom Andrew you at one point asked him for a hug. How come?
Tom said that I was having a rough day personally that day, nothing to do with the market.
I had.
It's a rough family day. And I was looked at my phone. I was like, oh God knocked this. And I looked at Tom and I just I'm an emotional guy, So give me a hug.
Well, and you brought that?
Yeah?
Can you?
Can you?
Jess, We've just got about a minute left here. What this has been like on your life and your family?
Oh, it's been It's been difficult for me. Obviously.
It's difficult because I take what I do serious, and I treat it with respect and high regard for the law, so I don't even know what to be accused of, so that's been very difficult for me. And obviously being a patriarch of a family, everything's going to take effect on you know, your wife, your kids, and your life around you.
So yeah, it's it's been a difficult.
Challenging two and a half years and hopefully we get through this sooner than later.
Our thanks to sit You On Research founder Andrew Left. Be sure to stick with Bloomberg for the latest on whether the Justice Department in SEC pursue charges against him in their investigations of tactics used by activists short sellers. Be sure to read Bloomberg's Tom Schoenberg his story that's on the Bloomberg You're listening to Bloomberg BusinessWeek. Up next, we take a look at the leverage loan market in an era of higher interest rates and growing uncertainty about
the nation's commercial real estate market. This is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen.
On Bloomberg dot com, the iHeartRadio app, and.
The Bloomberg Business App, or watch us live on YouTube.
Bloomberg News reporting this past week that cooling US inflation will help fuel demand for leverage loans. The Federal Reserve is widely expected to end its policy tightening cycle after this month's meeting, and that should help these concerns about a recession leading to higher default rates. For a closer look at this corner of the financial markets, let's bring in ROBERTA. Goss, Senior managing director and head of the bank,
loan and clo platform at Predium. It's a specialized investment firm with approximately fifty billion dollars in assets under management, focused on US residential real estate, residential credit, and corporate credit.
So leverage loans this year have actually performed quite well through the first half of the year, the leverage loan index up close to seven percent six and three quarter percent, but that was with some degree of volatility. So as we went through the regional bank crisis in March, the loan market went from a high of ninety four to a low of ninety two and have largely recovered back
to the highs of February. That has been almost entirely driven by corporate earnings as we went through Q four and Q one, but I would expect a little more volatility as we go through the back half of this year, but I don't believe it will be as noted as we saw in March.
Really is that because companies were doing so well that they're able to continue to meet their you know, to make payments. Because if you borrowed money FIRS say four percent, and now you're paying twelve, that's that's problematics painful, right it is.
What is really driving the exceeding expectations over the course of this year is that we already experienced a lot of volatility through twenty twenty one and twenty twenty two. And I've talked about this in the past, which is this is largely a function of corporate margins, which were dramatically compressed over the last really twenty four months. We're starting to see as inflation starts to ease, that's helping on the margin side, even as we're seeing the top
line start to decelerate. On the interest rate impact, yes, we've seen libor effectively go from zero to mid five and a half percent over the last year, and most I would say fifty to sixty percent of most companies total loans outstanding in the loan market are hedged. That being said, there's some companies that are completely unhedged, but most leverage companies raise liquidity well ahead of expectations and need.
So we've seen companies, as a result of the inflation pressures, really try to raise cash out of working capital, raise liquidity in the loan market. And I think the majority of businesses are well positioned even with sort of continued rate hike expectations over the balance of this year.
So I am curious what's the demand, what's the default rate that you are seeing, and what it tells you about the health of maybe the corporate market.
So I think one of the indicators that we look at, or one of the stats we look at every day, is the percentage of loans that are trading below ninety, so ninety being a level where stress starts to become a concern for a company. In the mid sort lows of March, when we were in the midst of the banking crisis, that percentage reached over twenty percent since then, and as of this week that number has reduced to thirteen percent.
That was roberta Gossipredium with me and Matt Miller head over to our podcast feed to hear the entire conversation, and that wraps up the first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio. Ahead, in our next hour, we'll speak with the CEO of one of the biggest convenience store in pizza chains in the country, and chances are you've never been inside one. Plus they've been talked about and promised for years now it could
actually be happening. Personal flying cars coming to market. Plus our BusinessWeek cover story Barbie's one hundred million dollar rebirth on the silver Screen. I'm Carol Masser. Stay with us. Today's top stories and global business headlines are coming up.
Right now, 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 Alexa from our flagship New York station, Just Say Alexa play Bloomberg eleven thirty Carol.
Masser along with Matt Miller. He is of course filling in for Tim plenty. Ahead in our second hour of the weekend edition of Bloomberg Business Week, including a conversation with the CEO of Casey's General Stores on expansion catering to America's rural communities and an unusual spin on pizza, plus the founder and CEO of Darroni Aerospace on personal flying cars that are just around the corner. First though,
this hour this week's cover story. And I got to say, as someone who grew up playing big time with Barbie's, I still remember inheriting my older sisters, it was a big deal for me. I am definitely all in on Barbie as it heads to the movies in the big screen. And I gotta say it sounds like a lot of people are. This could turn out to be one of
the summer big blockbusters. And this story, by the way, it was a Bloomberg big take and the cover story for the latest issue of Bloomberg BusinessWeek, now at Bloomberg dot com, slash business Week, on newsstands and on the Bloomberg terminal. Bloomberg News Global Business editor Kelly Gilblom and entertainment reporter Thomas Buckley co wrote the piece. They joined us on Mattel's risky bet to prove that Barbie isn't hopelessly out of date.
I think the way we want to approach a story was trying to understand the history of Barbie and also kind of trying to understand what it meant for Mattel. You know, it's an iconic doll, and the reason that it is is because she was so aspirational to young girls when she came out in the fifties, and so I think we just wanted to understand how kind of her reputation fell over the years, and how this movie is going to help rehabilitate it and help change the business model at Mattel.
So, I mean, Barbie was a big hit when it first came out. You give some of that history and your story. I learned a lot reading it, So it's a fantastic piece. Have the sales numbers dipped as she's become kind of more controversial over the years.
Yeah, absolutely. In the two thousands, Mattel was in a true crisis. I mean, Barbie sales fell every year between twenty twelve and twenty fifteen because it was so out of touch with the culture. They revived the brand in twenty sixteen by introducing new body types, and that helped, you know, kind of set the stage for another sales
boom in the pandemic when all toy sales were up. However, that hasn't lasted due to just kind of inflationary pressures and economic malaise, so they have to keep those sales. Arrows kind of pointed.
Up, Thomas Buckley. You're with us as well, you and Kelly putting out and reporting out this story. You're an entertainment reporter with Bloomberg News. You two are in la joining us on zoom Come on in on the conversation. Because Barbie's iconic been around for decades, has this kind of incredible legacy in history, but she has definitely had her ups and downs.
That's as you right, and I think that as we think about her ups and downs over the years, what's very interesting is that she has never really been tested as a brand and as an icon on the big screen. And that's not to say that I haven't been iterations of Barbie on screen, you know, from TV shows to
video games. But this is the first half of time that she's going to get a full fledged theatrical release, and so that's in partnership with Warner Brothers that's produced the movie alongside Mattel with a budget of about one hundred million dollars, directed by Greta Gerwick, starring Marga Robbie as Barbie in the title role. And it's going to be very interesting to see how this film plays out. I mean, I think that, you know, the hype around
it is unlike anything that we've seen in months. The most recent example I can probably think of it is maybe the Avatar sequel, but since then that hasn't been very much. And this could really storm the box office. And Kelly and I have been tracking the numbers on a weekly basis to see how it's set to open, and it's set to open at the moment at a very impressive one hundred plus million dollars domestically.
Yeah, well, the social media presence has been just crazy. I mean, I've watched the videos and so on. What's interesting too, Thomas is I think about enon Cries of Mattel, the CEO, and they've gone through several CEOs over the years. You know, we've talked with him a lot, and he is very into intellectual property and he is thinking about the media world in terms of bringing you know, various properties to life.
Absolutely, and this is something that you know, Kelly and I have often discussed is the fact that Inon is very much as CEO, who considers himself increasingly a major player in the entertainment game, and he's previously had a
career mostly in entertainment. He's sold two very successful companies to Disney, and I think he's trying to apply that playbook to Mattel came in, as Kelly mentioned as CEO in twenty eighteen, looked at the stable of brands and thought, you know, all of these authora breads in the stable, and why should they only be toys when they can be so much more than that, including theatrical films, possible theme park rids, video games, and the rest of it.
Why hasn't Kelly Barbie had a starring role in a feature film before? I mean she was invented in like the late fifties early sixties, right, and all of the other iconic characters from Mickey Mouse to Superman have been in movies. Obviously that's a great way to sell the toys. So why didn't Mattel do this earlier?
I think the reason is because Barbie has some specific risks associated with her. You know, she was marketed as this toy of special personal importance. She's supposed to be aspirational and so therefore she kind of has to encompass every little girl's hopes and dreams, and that has also made her kind of a cultural lightning rod, especially because her body type has, you know, kind of been out of step with what women want to have people expect
of them and how they should look. And so I think they basically just thought there was a possibility for a huge backlash and kind of this emotionally charged environment and they couldn't afford that because Barbie is their biggest brand. It is the one responsible for the biggest portion of their sales, sometimes as much as half of their sales, and definitely one of the most profitable products.
I mean, there's a lot on the line, I feel like from the movie studio as well as for Mattel, right, no doubt about it. I Mean, this was what one hundred million dollars Kelly to put together.
Yeah, there's a lot online for Mattel. And keep in mind that their strategy doesn't include actually funding movies, so they license their brands out to the studios who pay for the movies, and they don't even get much box office returns. That'll be Warner Brothers that takes those ticket sales. But it's about reputation, it's about brand management, and it's about out creating a business model that's reliant on franchises that they can push out and create new streams of revenue,
kind of like what Disney does. Just think and Star Wars just.
Thinking Disney right, has a property and whether it goes in the theme parks, whether it goes on the screens, whether it goes into apps, whatever. I mean, that's what they do.
Thomas, How did they sell this film to.
Margot Robbie? She's been a pretty outspoken feminist. I guess I don't know exactly what that means anymore, but you know, Ryan Gosling, he's a fairly progressive actor. How did they sell this project to those, you know, huge Hollywood names.
Well, it's very interesting. I think people when they have a preconceived notion of what Barbie looks like, they probably think about somebody very akin to the looks of Margot Robbie. What's interesting. What's interesting is that, well, I think most audiences know Margot Robbie, you know, for the star actress that she is. What maybe fewer people know is just how incredibly talented she is a producing these films behind
the scenes. So Lucky Chapin's Atainment, which is a company, a production company that she manages with her husband, and you know, plays a major part in getting this film off the ground. And some of the earliest conversations revolved around, you know, who would be the right steward in the director's chair for a film such as this, you know, which is we've said, the sort of girl boss, post
feminist and the rest of it. And I think that it was actually Margot and Kelly knows this as well, who suggested Greta Gerwick as the potential director, and Enon was very much sold on that idea. So it's interesting to see it take off from the direction.
That it has.
Yeah, I mean, Greta girrig she's like incredible and if you think about the work she's already done. She's really young, but just has been so successful out of the gate. You know, in doing this story, Kelly, what kind of jumped out for you? Because you guys did dig into Ruth Handler and her family and her kids, Ken and Barbie, Like I mean, the history of this is a lot of fun. But what really jumped out in poorting out this story.
I think what jumped out is I guess I didn't realize how opinionated people are on Barbie. I mean, it's kind of shocking. Her recognition rate is something like ninety nine percent, Mattel says, and she's been literally the subject of like graduate feminist courses, and people feel very strongly. And I think that's just because you know, they're especially when she was introduced, not that many role models that
that little girls could could look up to. So I guess what shocked me was was just how important she was to kind of female culture. How few movies, how few entertainment properties in general are targeted at women. We you know, an analysis we saw with something like six percent of all major movies since the history of time have been targeted toward women. So that was one of
the things that really shocked me. And if you can understand that market, you can understand it well, then clearly you can have a big hit on your hands.
Yeah, I think, I mean I learned so much by reading this story. So you guys did really great work. Have you seen the movie? Do you like the movie?
We haven't seen it. Unbelievably, but there'll be a chance this weekend, so we're pretty excited.
Thomas real quickly thirty seconds here. What'd you get from doing all this story in this reporting?
You know, I got a free Bobby Baseball Capital spend time with Kelly, so the best of both worlds.
Great conversation with Bloomberg's Kelly Gilblum and Thomas Buckley on this week's cover story, joining Matt Miller and me. You're listening to Bloomberg Business Week. Coming up, Darren Rebellas, the CEO of Casey's General Stores, talks building for the future and how the company stays low key despite a footprint of twenty five hundred stores.
We really kind of consider ourselves in a category of one because we have those unique attributes, that rural footprint, our you know, our grocery, our alcohol and liquor, our pizza business.
More on the category of one. This is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen.
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Wait last month RBC Capital Markets put out a note praising the tone at Casey's General Store's recent investor day, the company announced a new three year strategic plan aimed at driving store growth, accelerating its food business, and enhancing operations, which RBC said was realistic and constructive. With more on those plans, Matt Miller and I caught up with Darren Rebellas. Darren is president and CEO of the nine billion dollar
market cap in Iowa based convenience store chain. He stopped by our New York studio on June twenty eighth.
We have twenty five hundred stores focused in the Midwest and sixteen Midwestern states, and about half of our stores are in rural communities, towns of five thousand people or less, and so in those communities we play a number of roles. We're the third largest commediance store chain in the US, and so we supply basic needs and groceries and that sort of thing. We're also the fifth largest pizza chain
in the US, so we're the pizza area. And in about fifteen hundred of our stores, we have full liquor licenses, so we're also the liquor store, so we wear a lot of hats and serve a lot of needs in those community.
Open twenty four hours.
In some of our stores. Yeah, but as you can imagine, in some of those more rural communities, there's not a lot happening between midnight and four in.
The morning, or there is sometimes.
Yeah, we don't want to be involved in So the ticker is I don't think the year to date move really tells the story because I look over the last five years and you've gone from one hundred dollars to two thirty five, so you've drastically outperformed the S and P five hundred. Of course, you're Nasdaq listed, right, and the ticker is c as Y.
That's rights.
It's interesting to be because of you have a rural pre you're a very big company that a lot of people on the coasts maybe haven't heard of, right, right, So does that make it harder to tell your story to shareholders?
You know, we just have to continue to tell it. And you know, we always invite shareholders to come to where our store support center is in Ancone, Iowa, and we can show them around, and we've done that a number of times. But yeah, I mean, people don't run into cases in their day to day lives, so we have to explain to them. And in certain markets, I'll take New York as an example, you wouldn't find anything that even resembles the cases here, so when we describe it, it takes a little bit of work.
But yeah, because you said, you have your own kitchens in the stores, so they make their pizza dough from scratch, and it's not when I think of convenience store, That's not what I think of.
That's right.
Yeah, So we really kind of consider ourselves in a category of one because we have those unique attributes, that rural footprint, you know, our grocery, our alcohol and liquor, our pizza business. We really are unique that respect.
So does it make sense to kind of just continue along those lines? Like I said to you, you know you're not here in New York, would you come to the New York metro area.
Well, the way we focus our development for the moment is we have three distribution centers as we supply all of our own stores, and so we look initially at the effective distribution radius around those and so we know we can continue to build a lot of stores in that geography. In fact, of our twenty five hundred stores, two thousand of them are in only nine of the states we operate in, and so we still have plenty
of white space. So it's not that we would never come to in New York, but we would probably do something a little more upstate if we were ever to get to that point.
So how have you dealt with inflation? How have your consumers been dealing with this?
With this inflation?
You know, I would say, so far, so good. Our guests have proven to be pretty resilient. What I'd tell you about the demographics of our guests, three quarters of of our folks make fifty thousand dollars a year or more. And while I know that doesn't sound like a lot in New York, in the states where we operate, that goes a long way. In fact, if your rank ordered all the states in the US in terms of cost of living, the most expensive state we operate in is ranked twenty second.
Interesting do you think about that in terms of where you want to open?
Well, we factor in a lot of things of where we want to open the economy and cost of living is definitely one of those that fit into the equation.
Talk to us a little bit about your new three year plan.
Yeah. You know, we've had a long track record of success in our company, and the last three or four years is really accelerated. But we've done that through a couple of ways. Our growth algorithm is pretty simple. We get about half of our growth from what we call the mothership, the base business, driving same store sales, improving the base business, and then the other half is from
new unit development. So that three hundred and fifty stores really represents a bit of an acceleration, but really a continuation of where we've been for the last few years. And we'll do that through a combination of organic growth and acquisitions. And our industry is highly fragmented. About ninety five thousand of the one hundred and fifty thousand Commence stores in the US or operate and change at ten
stores or less. Yeah, and as you can imagine, with the inflationary pressures and supply chain issue everything else that we've all been dealing with, those smaller operators really struggle and so provides a great opportunity for us to acquire and operate those stores.
Help us always supply chains, because I feel like they've eased and gotten better. Are they back to where they were pre pandemic.
I would say for the most part, yes, I mean it's gotten significantly better from where it was twelve eighteen months ago. There's still some lingering things on certain things like tractor trailer trucks that still been delayed. You know, some things that required chips have a little bit longer lead times. But for the most part, we're about back to normal.
Just trying to understand, you know, as inflation has certainly settled back in the past twelve months, but we still have a ways to go, and you still hear about inflationary pressures. I mean, I feel like I'm still paying a lot for a lot of stuff, and I'm trying to understand kind of whether you guys are seeing these pressures. Is wages also a decent pressure right now still for you.
Know, that's moderated. You know, after the peak of COVID, we saw a real acceleration in wages. That is somewhat
moderated a bit. But you know, what we've really been focused on is is employee engagement in retaining the team members that we have, and so if you looked at our results over the last year, we actually had a reduction in same store labor hours, and it was really driven by the fact that we reduced our turnover, so we have twenty percent reduction in overtime, twenty percent reduction and training hours and really focused on making the job in the store easier so we relieve some of that
pressure and so we don't have to throw money at people. We want to take care of them. We paid people fairly, but also making their job easier close a long one.
So the culture is extremely important to you.
Absolutely, and so they get benefits and everything. Yes, yeah, yes, Sam in our control room wants to know if you're going to run for political office.
We've all taken a poll and decided that we would vote for you. Yeah.
Well, there's probably fewer things I'd want to do.
Less for office. I could understand that. Talk to us about that.
I was an infantry guy in the Army, so I've done some pretty nasty things. I'd rather do that than run for a thank you for your service.
Talk to us about the pizza, because we hear it has a bit of a cult following. We already talked about the fact that it's handmade.
I'd like pizza is it's key here in New York. It's important, you know.
Yeah, yeah, it's well, it's it's iconic and we've been doing it since the eighties, so we've got a long track record. What I think is really cool one is that we make it from scratch and we use really quality and green so one hundred percent whole milk mozzarella cheese. Now you kind of think, well, doesn't everybody do that? But no, now most people don't. None of the large chains do. They use low fat mozzera because it's cheaper. We don't do that. We put extra cheese on the pizza.
So it's not a thing to get to order extra cheese on your pizza from a Casey's because you don't need it. But what really sets us apart is our breakfast pizza. And it's not pizza for breakfast, it's breakfast pizza. And so we have people coming into our stores every day.
What's that a breakfast pizza.
Oh, it's bacon and eggs, bacon, eggs, sausage, cheese, and then more cheese.
That's Darren Rebella's presidency of Casey's General Stores. That's stock, by the way, up more than eight percent so far this year. Still to come on Bloomberg Business Week, a former member of the Israeli Air Force, says his company's ready to make flying cars a reality, and there's no need to worry about air traffic.
We're not flying at an altitude of like thirty thousand feet like a regular What we're doing is a couple of one hundred feet like a drone. This is the comfortable zone for us. And you know, the whole idea is not just to get from point to point B, but the whole idea is to enjoy.
Djer Toroni, Aerospace CEO, joins us. On the other side, this is Bloomberg.
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 Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Well, everyone, stop the presses. Just found the next segment for what's Matt Miller driving or should I say flying? We're talking about personal flying cars And according to Vencat Biswanthonon, he's a Carnegie Mellon University professor who's worked with many leading battery startups. He says we could see a world of electric flying vehicles in the next decade, joining us with more on the nascent market for personal flying cars. The founder and CEO of Direct Aerospace, Jerome.
Murder car, this is the definition. Essentially, it's an evy talk electric vertical take off a landing vehicle. It's on electric personally use for a two seater, and you can park it home and charge it home. It's very easy and intuitive and safe to use.
So you're not I mean like some random inventure from the nineteen fifties who's just attached wings and a propeller to an old car. You were in the Israeli Air Force, serve air Force intelligence in Israel, you went got your MBA at the NYU Stern School of Business.
You're a serious man here.
How likely is it that I will have the opportunity to buy and operate a flying car in my lifetime?
Well, first of all, we're already doing it here. I mean, it's already happening. It's you know, some of the futuristic movies are showing, you know, get engines, but we are doing it with preparers electric autopilot system. So the target for US is to we already have over a three hundred requests for pre orders to start delivering by twenty twenty five, so it's it's pretty close. And if you look at what's going on in this market, it's divided
into three main segments. The biggest one of these, even to als called flying car, belongs to air Taxi, so as it's a ride sharing service and they are already out there, they claim that they're going to be the first one by twenty twenty four. And our vehicle is less complicated and in terms of certification and use, so we expect that you should be alignment as well, so very soon.
Well, but there's always regulatory oversight. And I'm just thinking about these crowded spot you know, like I'm assuming the demand will be well, the demand will be in big cities, but it's pretty crowded up in the air, So how does that work.
Yeah, So the goal for us is not immediately, is not to go into main cities like you know, your Boston, Chicago. This is really not where we want to you know, fly. At this point, there is enough space to fly everywhere around the US suburban area and outside, you know, it's so beautiful outside and unless congested. So as far as being crowded, we're not flying at an altitude of like thirty thousand feet like a regular aircraft. What we're doing is a couple of one hundred feet like a drone.
This is the comfortable zone for us. And you know, the whole idea is not just to get from point to point B, but the whole idea is to enjoy nature, and you can't.
Do that to that.
So it's not crowded. It will take a lot of time until that become crowded. This is you know, this is a myth that people you know were asking yo crowded, But it will take a long time for it to happen. If it will happen, I don't know.
But so it does look like fun and an amazing way to see nature. I think that's laudable to do it for that reason rather than you know, reducing congestion or whatever.
Describe to us your vehicle.
Because a lot of our listeners are on radio and can't see the picture behind you.
It looks like you've got what.
Four props main propulsion systems? How does it work?
So first of all, they can go into our website Doroni that I owe and they can see a lot of information there. As far as the way it works, yeah, we have all together ten motors, so we have four ducts and this is what sets us apart where unique to that we have ducted fans embedded into wings, so that gives us extra lift. So in each duct we have two motors for redundancy, so altogether we have eight for vertical and two pushers for a four efficient flight.
So it's very I mean it's very simple to use. Let's say that you're already out there and you want to fly, so three kicks of a button, you're going up. And this system is a semi autonomous system. If you fluid drone today, you know how it works like DJI, so it just goes up.
It knows exactly.
It's ok in our three dimensional world with multiple sensors which are already you know, working pretty good for the last.
So it's very drone like in other words, which is cool? Is it going to be piloted like a drone? Will you use you know, a screen with a joystick or how how does how do the controls look?
Yeah, so in our case, we have one big screen that you have everything, but the control really is just one simple joystick, very intuitive. You go forward, you go backwards, you go left, you go up with a throttle, and there's it's really it's really there's nothing much you need to know. I mean, because it's a semi toy of a system. It makes everything very simple for you essentially.
And we presented in Oshkosh Inertia the oshcostcier last year and the biggest reject that we go over there is like people saying, hey, guys, you know I learned to five for twenty years. I took all the complexities out of the flight because we're not flying like a regular helicopter, not like a regular you know, aircraft. Essentially it's a drone right like, So we have eight motors for redundancies as well for safety.
So how many motors can you lose before it becomes a problem.
Yeah, So that we design it in a way so you have a working motor for vertical and if any four motor is separate in different ducts, will will have an issue. The system can self stabilize itself and would commence automatic descent. So this is all you know that it's aware of. Like a gyroscope. Where is it in the three dimensional world?
Durone?
What what kind of license would I need to fly that? I mean if I buy one from you guys and I don't know park it at my ranch in Montana?
Do I have to take a course? Do I have to be a private pilot? What do I need?
So at this point what we have is called some CO called LSA Lightboard Aircraft type certification, which for now is for one reciprocal motor. You need at least twenty hours of course the premises of the factory, so at fifteen hours of you know, on the vehicle and fivur of solo. This is what we expect, you know, in our case as well as the rules and regulation are being now changed by the FAA. They're aware of that. We're sitting in committees advising them also to NASA and
to the FA as well. So it's very very simple, very straightforward, less complex than any aircraft. So the ED essay will enable you to fly up to ten thousand feet again we are good a couple of hundred feet to go.
So what's going to be the biggest market segment do you think? Is it military? Is it tourism? Is it just kind of an uber transportation kind of thing.
So we all the request that we have are for private people. At this point, we were kind of amazed. There was one article on us and just you know, people started to basically order pre order that.
So it's two hundred and fifty thousand, right, two.
Hundred and fifty to three hundred, it's about yeah. So yeah, private people very interested. You know, people have you know, maybe a collection of cars, a few cars, maybe aircraft, so it's a bunch of them. One of them, for example, is a doctor in our case, he lives is one of the first one. He lives in an airport community. Uh, it's essentially a private airport. He wants to fly to work.
You know, he's with But where do you see the growth, where do you see the business?
So business definitely, you know, private people. Again, the production the capacity at this point is like limited to what we can deliver, so we see that definitely. Personal were also in touch with the with the Air Force. They won't use these vehicles for SURVEILLISKA and also reconnaissance and you know, rescue a planet that ejected abundant out of you know, are in the territory for also getting from first respondents, police department. You can it's very fast, easy to deploy.
FEMA.
We're is getting them all the time from all. I mean, it's just it's hard for to say. But the perorders at this point, and we also from Canada, uh so the perioders are more personal, which has kind of amazed us. And I mean, we we do it what we get.
So a lot of official use cases though, even if the pre orders are person So how many do you expect to produce, like say twenty twenty five, how many are going to be rolling out of your factory?
So for twenty twenty five, we're you're talking about about one hundred and twenty twenty five units the first the first to twenty five, My apport is six units, the next year is one twenty five, and their scant up production to about twenty five hundred units a year. We will probably have to scat up because this technology is well just so revolutionary that will take place from you know, other market segments as well.
That was darn Merdinger, founder and CEO of d'roni Aerospace. You're listening to Bloomberg Business Week coming up, How tighter monetary policy in America is putting the squeeze on New York City's pricey residential real estate sector.
The problem with the market right now is that these high interest rates are causing people to be forced to pay lower prices.
This is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.
Bloomberg News recently reported on how more Manhattan buyers are paying cash than at any other time on record. In fact, some sixty five percent of purchases in the second quarter were done without financing. That's up from fifty seven percent in the first quarter and the largest share since appraiser Miller Samuel and Brokeridge Douglas Element real Estate began tracking
payment methods in twenty fourteen. For an update on what she is seeing firsthand, we welcome back Barbara Fox, president at Fox Residential Group and an Upper East sider for a post check on housing prices in the Big Apple.
The spring and early summer markets were a little were pretty active. There was a lot of activity there was sales being made. There were things coming on the market, surprisingly, but mainly it's that was in the smaller units one, two, and even three bedroom units, not the super luck stuff, but the the lower price stuff. But that's fallen off now we're in the summer doldrum.
You know.
Carol is talking about the fact that more buyers are cash now than ever before, and well, it's a very expensive place to buy real estate, so that means a lot of cash in these transactions. Is it only the very wealthy that are transacting right now?
No, actually it's not. The very wealthy always transact and they can pay cash. However, the bulk of the people who are buying in New York City really can afford to pay cash or don't want to pay cash. They do it if they have to because of the interest rates. The problem with the market right now is that these high interest rates are causing people to be forced to pay lower prices, and there is a there's a juxtaposition between what the buyers think and what the sellers think.
That still exists, doesn't that's very much in an existence now. It's uh, it's really a it's it's a difficult situation. And the sellers who are pretty savvy in New York have been gotten so used to these very high inflated prices that they aren't really coming down to reality at this point. And that's the only way to do transactions. I mean, the buyers are very cautious. They're not going to overpay. They will look at a million things.
Because they can. If they've got to higher interest rate and a mortgage, right, they've got to kind of reduce what they can pay essentially for the pass.
All right, So what kind of properties are moving then right now? Which ones are are are people willing to actually sell?
Well, the people that it's really an interesting market right now because most of the people who are selling, there's not a lot of product coming on the market because because of the people, because of the interest rate situation. If people are moving, they don't want to have to pay a higher interest rate for a new apartment, so they aren't. There's not a lot of movement in the in the market.
You're saying there's no movement or what what does sell?
Less expective, It does sell, and people are always having to sell for various reasons, moving or whatever. And what sells fastest are new developments and the nicely renovated apartment.
Is that because if you're a new developer, can you figure out a way to give people a four or five percent mortgage rather than a six or seven percent mortgage?
I presume I don't really think that's happening right now, but I'm sure what is.
The good happen between now?
Barbara, and you're not nearly old enough, but some people remember the eighties when rates were not.
Only this high, but a lot higher.
I remember I remember in the seventies and eighties when the rates were eighteen percent.
Our thanks to Barbara Fox, president at Fox Residential Group, for joining me and Matt Miller in studio. Head over to our BusinessWeek podcast feed for more on the New York City housing market. And that wraps up the weekend edition at Bloomberg business Week from Bloomberg Radio. Thank you so much for joining us. Be sure to tune into Bloomberg Business Week Monday through Friday starting at three pm Wall Street Time on Bloomberg Radio and on serious XM
Channel one nineteen. You can also watch our daily broadcast on YouTube. Just search Bloomberg Global News and we're summacast on Bloomberg Originals available at Bloomberg dot com, Slash Originals, and streaming platforms including Roku, Amazon, fireTV, Samsung TV Plus and more. Find our Bloomberg BusinessWeek podcast at Bloomberg dot com, Apple, or wherever you get your podcasts, and the latest edition of the magazine available on newstands now at Bloomberg dot com,
Slash Businessweekend, always on the Bloomberg Terminal. Have a good and safe weekend for Matt Miller. I'm Carol Masser. Stay with us. Today's top stories in global business headlines are coming up right now.
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