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Is Bloomberg Business Week inside from the reporters and editors who bring you America's most trusted business magazine, plus gloom O Business finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio well.
Talking about kicking into high gear.
The stock The buyback plan news early this morning from General Motors, announcing it it's biggest ever stock buyback plan, ten billion in total. It also boosted its dividend thirty three percent. Tim and reinstated earning's guidance after accounting for costs of its new labor contract.
CEO Mary Barra promised to better days are ahead, stressing confidence in the cast generation of GM, the execution of strategy, and expectation of growth and strong margins. This carol despite minimal EV sales, a troubled robotaxi business, and even more trouble at its battery pack facilities that has kept EV production in the low thousands.
That's right.
GM's ultimum battery pack was supposed to enable the company to make multiple types of electric cars off the same platform and beat competitors to market with a ton of vehicles.
Here's more for Mary Barra.
From an EV perspective, we have confidence in the portfolio we have. We're a bit disappointed this year that we were constrained by the automation to build modules. So this is not something that is fundamentally an issue with Altium. It was more manufacturing automation issue that we're working and we'll be out of it by middle of next year and making provement every quarter, all right.
That, of course, was the CEO of General Motors Mary Barrow, talking earlier today on Bloomberg. Let's get a little bit more into this story. Bloomberg News auto reporter Keith Noughton is on Zoom from Detroit.
We love our auto team. They know this world so well.
Keith. Good to have you here with Tim and myself. How do you make sense of the news today? I mean the stocks up, shares of General Motors up nine percent, doing a massive buyback and boosting your dividend. I get it why investors like it. But what does it say about the business if this is the best use of money?
Yeah, I mean it's really Mary Barrow kind of pleading for patients in a very expensive fashion, of course, because things have not been going so well on their technology bets. As you noted, the EV ramp has been very slow because of problems building batteries, and you know, Cruise, their autonomous vehicle unit, has been a bit of a umpster fire lately with all sorts of safety problems and the
CEO quitting abruptly a week ago. So and they're scaling back because they're losing you know, seven hundred million dollars a quarter at Cruise, so they really aren't getting the payoff yet on these very large technology investments. As a result, their stock's been down by double digits this year. So this is a way to ask investors to give them time.
Okay, so how much time do they need and what do they need that time for? Because Ford is running into similar issues when it comes to evs. The F one fifty Lightning isn't selling like it was in previous quarters. The mock e electric Mustang, same thing. It's there's there's this uh sort of shift in the way that consumers are thinking about EV's.
What's going on, Yeah, there's a there's a few things at work.
One on the production side, the legacy automakers are discovering what Elon Musk discovered a few years ago when he tried to go to mass production with Tesla. You might recall him describing that as production. Hell, well, that's what the legacy automakers are in right now. They're discovering that building electric vehicles is harder than building internal combustion engine vehicles, and so there are a lot of hiccups in both
battery production and the EV production itself. That's one problem, so they can't get them out the door of the factory. The other problem is this demand issue you're talking about.
There's still you know, rising demand for electric vehicles, but it has slowed considerably because we've gotten past the sort of early adopters who are willing to pay anything to have the latest and the greatest, and now we've gotten to that broad middle of the market and folks are bulking at the price of electric vehicles which are higher than standard cars, and the charging infrastructure which is still very spotty.
In the Hey Keith our Bloomberg Intelligence team says the move to offset the effects of higher costs from the new year UAW contract adds confusion to GM's electrification electrification strategy and is out of step with the practice of conserving cash when demand is uncertain. Should they be conserving cash right now?
Yeah, Well, you know, the electric vehicle business at GM and the other legacy automakers is just burning cash right now.
So if you take ten billion.
Dollars and diverted into a stock buyback, yeah, that's money that could have been spent to try and write your EV business or your autonomous vehicle business, either of those they both consume billions of dollars. So it is a good question to ask, is this the best use of capital?
At this time, So what would be what are investors saying could be better uses of capital?
Well, you can try and you know, buttress your EV production and strategy and model offerings so you can become a legitimate competitor to Tesla, which still controls more than half the market and makes money selling electric keeples.
Keith, I just want to know.
Sorry, I want to sort of like cut you off with my own with another one of my own questions here, So apologies. But there was an article over the weekend, I believe, in the Wall Street Journal about hybrids and the way that some companies now are are sort of you know, they said, you know, evs aren't necessarily the way that we think the future is going to work. We think it's going to be hybrids. Where where are Ford and GM on that.
Board predicts that it's hybrid sales will quadruple over the next four years, And they are pouring money into hybrids now because they recognize hybrids are more cost effective and they don't have the charging infrastructure issues, so they can be this sort of bridge to electrification.
So there's this.
Renewed focus on hybrids out of Detroit and with a lot of legacy automakers. Toyota never went away from hybrids. They said the market wasn't ready for full EVS. Hybrids is the first step you take on the electrification journey.
Well, you did that great story for Business Week they talk specifically about hybrids, and I thought it was really smart.
I read it a business week before I read it in the journal. Keith, I promise, okay.
Everybody, everybody follows what our auto team does. I'm just going to say that no, but it was so smart because it used to be hybrids and then EVS took over. But it was fascinating to hear the reporting that you did about what we are seeing when it comes to the hybrid market and the growth that we're seeing, and you do wonder is that does that continue? And you know it was I think early October that you did that story. Do we continue to see demand in the hybrid space?
Thanks Carol for reading And.
You might recall from that story one of the people I interviewed was this dentist who has a mobile dental practice.
She tows a trailer around.
Well, you know, you just can't do that with an electric pickup truck because it'll deplete the battery too.
Fast. But guess what you.
Can do it with a hybrid, which is what she has, because having the electric motor and the eternal combustion engine actually gives you more cork the thing you need to pull a trailer. So there are many benefits to hybrids that people are really kind of rediscovering or discovering for the first time.
And so and it does lower your carbon footprints, so it's.
A way to stay and start moving in that direction without any of the you know things you sort of have to give up to EV's Amber Labardi, that's.
How you did so well, go ahead, Kyl.
Well, so do we need to be worried about General Motor and their strategy.
No.
I just think it's going to take longer to get there, and that's that's the issue. And there was you know, we're sort of entering this trough of disillusionment on the way the EV ramp is going to happen. It's it's not linear. There's ups and downs and run it down.
And does the does do hybrids provide that bridge or do they displace evs.
I think the way the industry views it, and particularly Toyota, the hybrid leader, is that it is the bridge.
You know, you just.
Take that step into electrification and you live with that in a way that there's fewer compromises, and hopefully during that period and by the time you're ready for your next car, the price of evs have come come down, and there'll be more charging stations throughout the country, so you don't have to worry about running out of juice and having nowhere to plug in.
I might have to have you talk to my husband because he's waiting for hydrogen sales, fuel sales.
How long is he gonna be waiting?
Care?
But he's like, that's the answer.
I don't have a good question.
Keith Noughton, you are amazing. Thank you so much and highly recommend I'll put that story out that Keith wrote back in October about the hybrid marker because it says so much about what's going on right now.
You send it to me too.
I will want to appreciate it.
If you could read a couple of stories you just kidding, just kidding. Bloomberg's Keith Notton. Of course, he's Bloomberg News auto reporter joining us on zoom from Detroit.
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.
Well.
As pandemic worries have faded, the travel business has definitely come soaring back, with airline traffic more than doubling since its COVID era trough and waiting times for deliveries of new commercial airplanes mostly stretching through the end of this decade because of robust demand. But there is one travel segment that seems a little bit stuck in a holding pattern, and that is corporate owned jets so road.
Bloomberg's Thomas Black earlier this month, he reports on the aviation space and noted that even though the number of flights operated by the broader private aviation industry so that includes charter, fractional, individually owned aircraft managed by third party service companies pretty much all the ways that you fly around Carrol totally. Yeah, it's almost nineteen percent higher than it was back in twenty nineteen, that was the last
full year pre pandemic year. Company's in house flight departments are flying about the same as they did.
Carol four years ago.
It's interesting.
That's according to data from wing exit's Hamburg based provider of market data and analysis on the private aviation industry.
We've got a great.
Voice on this is back with us is Janiniannarelli. She is founder and president of the private aircraft broker Paravian, and she really sees daily what is going on, minute by minute in the private aviation world. She's here in our Bloomberg Interactive Broker studio. Welcome back, How are.
You delighted to be here.
Thank you for the invitation.
It's great to have you here. Tell me what you said though, when you walked into the studio and you were listening to our segment on the IPO market, which seems like it's having a tough time getting going, and how that kind of related to your industry.
Yeah, just take your last guest story and slash IPO and insert the word jet.
What's going on?
That's a good question. What we have observed throughout the course of twenty twenty three the buyers are sitting on their hands and they've created excuses, and I would say the trade has as well for them quarter over quarter.
So here we are.
We're at the end of the year. This should be the busiest time of the year in the aircraft trading marketplace, and it's relatively quiet.
Wait, I thought that we saw huge, huge announcements from companies like net Jets buying many many Cessna citations for example earlier this year. That doesn't count in a.
Way, no, because that's the fractional share and they need to meet demand. Actually, fractional flying is up year over year. I want to say the number is somewhere like seven point nine percent, whereas private flying is down eight point three percent year over year.
These are how can those things both be true?
And Thomas Black and his story said flights are fractional operators. So we're talking about net Jets, Flexjet. They've increased, have increased forty one percent from twenty nineteen levels.
You're still flying private when you use one of those operators. So make the distinction for our audience.
So the private sector and the corporate sector is whole ownership. These are individuals and corporations that go out and acquire the asset and the management.
The crewing. It's the company jet.
It's the company jet. Where's to fractionalize?
All the time.
You're buying a piece of an airplane, and so you have access to uplift pretty much on demand, but you don't own the whole aircraft and you don't control the.
Operation of it.
This is exactly what our own Thomas Black wrote about earlier this month. And the question is that I that I have for you is is that era kind of over when it comes to private ownership. We've seen pushback
from shareholders about flying private. So now about actually these companies owning corporate jets because of the carbon footprint, So companies are now not actually owning their jets outright and instead using those fractional services which do offer the on demand private flying, so the benefits of flying private without actually owning that asset.
So it's a conundrum. I don't think demand has diminished, it's just action has diminished. We really don't see people pushing away from private jets and looking for other means of transportation. It still is the most efficient form of moving goods and service goods and people around the country, around the world, but they.
Don't want to own it, not necessarily.
So I mean, I personally have not experienced people say sell the jet because of all the issues that you just cited. There are ways to reduce their carbon footprint. You know, smart flying, direct flying in the United States is going to lead the way. Operators within the United States are going to lead the way to that goal of twenty fifty. But I mean you brokeer deals, right, correct? So how much is your deal flow down this year from I don't know what's is it the peak post
pandemic that you measure against. I'd be curious about that, and also where it was maybe twenty nineteen.
So good questions.
My business is off significantly, but I attribute it to the aircraft that I'm actually offering. I mean, the market's sort.
Of you don't like your inventory.
I love my inventory, right, but it's not what people will It's not in favor with the market today. The most active segment of the business aircraft marketplace, I would have to say, is the small jet. That is the aircraft that initially led the decline and then started the rise back out of the global panel.
What is this like a six person exactly?
I put it more in a dollar perspective, but six to eight passengers somewhere two to seven million dollars, and the aircraft range is going to be anywhere from about a thousand nautical miles to fifteen hundred.
So what don't people want then?
Is it? Now?
Yeah? What is it that they don't want?
It seems to be the category that I would call the super mid size and the ultralong range aircraft.
Why don't they want those?
It's a good.
Question, it's a really good question. So first of all, if we talk about the ultra long range that that's the pinnacle of the marketplace, and the price point for those airplanes is anywhere from fifty million on.
This not be like a Golfstream G six fifty correct, Yes.
Tim's a little bit into planes, Ah, I can tell. So that seems to have fallen out of favor. I mean, there are there are buyers out there, and there are plenty of inquiries. I mean, if I just look at the number of inquiry as I've received, you're to date on every single aircraft I offer for sale. It just boggles my mind that not one person has stepped up to make an offer. Maybe more interesting is let's say I get two hundred inquiries over the course of three
months on an aircraft. My guess is ten percent are really going to buy an aircraft, But less than ten percent of that ten percent I've actually done.
Anything forgive me, But do interest rates matter? I mean, when we're talking at this type of money, they don't matter for real estate, but they matter for at least that's what real estate, high end real estate mean.
Do they finance these deals? Like, Yeah, that's a good question.
So another good question my personal history is that I can count, maybe on two hands, how many people actually needed financing throughout my entire.
Cash to me versus using financing are two different things. There are plenty of people who could pay, you know, outright for a forty thousand or sixty thousand dollars vehicle, but if they get zero percent financing, then they're going to take the finance.
Side exactly that.
Now, I have a number of prospective buyers that they may pay cash outright and then refinance later on. Most of them do that with a financial institution that they already have a business relationship with. The odd inquiry that I may receive for aircraft financing, frankly, is a little bit of a red flag for me, because they shouldn't be asking me.
They already should have had that in place, right, It's right, they've got their bankers they've got the bank that they've been working with for years on everything.
End qualified, the case comes in everything.
It's interesting. I'm thinking about our audience.
So how do you then use what you are seeing to maybe tell you what's.
Going on in the global economy.
Is it an indicator for you or is it just maybe your business, Your industry is going through some changes.
I would say flip that and say business jets are the indicator, and they always have been. Now I think we're writing new history and have been since twenty nineteen, because you could take the playbook throw it out the window. Looking back over twenty three, I was musing over the fact that we're going to chalk this year up to a year of rebalancing, and I'm wondering if this was not the downturn that always follows a great upswing. And twenty four, because I'm going to use it to project
a little bit, is going to be relatively quiet. But the driver for that is mostly the presidential election and the uncertainty that comes along with who will be our new administration and what policies will go into effect.
Well, President Trump was pretty friendly to private jets.
To a certain degree.
I mean some of those there were tax breaks that were given to people who used private jets during the coronavirus pandemic, for example.
Well, that's true.
The bonus appreciation was a huge driver to motivate people to buy aircraft.
Twenty seconds.
What are you worried about in terms of the presidential outcome and in terms of regulatory or overset?
And I've got to ask you to be very quickly.
I'm mostly concerned about tax implications. There's a lot of those expiring in twenty five. That's really the bigger concern.
Really fascinating, right, you can talk about this al, I know, I know, it's a world we love talking about. We didn't even get into evtalls, which I know is a big thing. Next time, come back soon. Love to continue the conversation. Janine Jannarelli, founder president of par Avion, a private aircraft broker. You can check out some of the stuff that she is involved in on her website here in studio.
Have a good holiday.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern 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 playing Bloomberg eleven thirty telling you.
Stop.
Yeah, that's right, everybody. Santa Claus Is come to town. At the most wonderful time of the year. The Aris Cris Bloomingdale's has its holiday window display up. People are decorating their Christmas trees and decking the halls, and a large team of Santa's are coming to town, appearing at malls and retail outlets around the country.
He's everywhere and sometimes she's everywhere. Explain that in a moment.
That's true. Hey, this year things are a little bit different than years past, though. Demand for Santa's is actually far exceeding supply, at least according to our next guest, who knows quite a bit about goings on at the Old North Pole. Mitch Allen is the founder and head elf of Higher Santa It's a Santa Claus talent and staffing agency, and what it does is it places Santa's at events, parties, malls and more all over the US. Mitch joins us on a zoom from South Lake, Texas. Mitch,
good to have you with us this afternoon. So the Santa Biz. You went pretty well in twenty twenty three.
No, it sure is. We've had more demand for Santa Claus entertainers than we've ever had before, and all types of it, whether it be a home office, retail establishment, malls. Everyone wants to associate themselves with Christmas through the use of Santa.
Totally get it. I'm also a fan of Healfa on the Shelf. Just going to put it out there.
Hey, Mitch, I mean, so our numbers up, demand is up from what pre pandemic levels, like, what is I don't know, Is it just been You've been seeing organic growth? Has there been a recent peak? Give us an idea, give us some perspective.
Sure.
So here at Hiresanta dot com, we've seen the demand for Santa's people reaching out to us is up over thirty six percent over last year, and last year was record demand, even higher than pre pandemic. And that's turned into more events. Our actual events that we've booked is up over one hundred and fifty two percent over last year and many times that over pre pandemic levels. So
people are using it. And what's interesting is we don't necessarily have a Santa index, but that's what I'm calling it, that small and medium sized businesses are really using Santa this year. I think that's going to be a blockbuster year for small and medium sized businesses. If the demand for Santa Claus at these establishments is any indication.
How much does it cost to rent to Santa?
Yeah, so it really depends date, time, location, and how long you need Santa.
Okay during the Christmas season, I'm not talking about it.
I'm not talking about it.
Your life Santa here, everybody's invited. We're talking about four hours I need Santa.
So if you need sand to come your home or office for just a couple of hours, you're talking about two to four hundred dollars per hour for a Santa Claus entertainer. Now, if you do it for a mall, the hourly rate is obviously much less.
So do Santa's like do those who really look like Santa?
Sorry, kids, I hope we don't know the kids. You know, man, we should have done a disclaimer. If there are kids in the room, get them out of the room.
I'm sorry for everybody in the control room. Yes, yeah, there is a Santa Claus.
Okay, I don't know where you were going.
I've gotta be really careful, but Mitch, I mean, so for those who you know, really look like Chris Kringle, do they get more money?
Absolutely so. At Hires, Santa are Santas, we like to say, have a real beard, a real belly, and a real jolly. You know, they've got that twinkle in their eye, that love and joy of Christmas in their heart, and they really do personify the image and personality of Santa Claus.
What about the demands the that you're getting right now from different people across the country who are saying, well, you know what, I don't actually want a Santa that looks or sounds like the traditional Santa Claus. We're looking for more diversity when it comes to.
Sand don't a Christine Clause rather than yeah, what do you what?
Are you getting requests for Chris Kringle.
So, diversity is one of the big trends that we're seeing in the Santa Claus entertainment space. You know, we have a number of black Santa Claus entertainers as well as Spanish speaking Santa's people are wanting to have a Santa that looks and sounds like that.
They do.
We even have a deaf Sanda that we send around the country. He's entirely deaf and it speaks asl American Sign language. So we've seen the demand for We've seen the demand for diverse Sanna's really grow up. And as you pointed out, we actually have a couple of female Sanna's who are terrific. You would not know that they are females. They look and act like Santa and are really great entertainers.
You mean, so they're not actually being a female Sanna, they're actually being a female that is pretending to be a male Sanna.
That's right.
You think of like tim Allen glue on beard. You would not know unless you actually saw them outside this suit that they were not actually Santa. But yeah, diversities are one of the big friends. We also see experiences. People just don't want to have their traditional picture with
their child on the knee of Santa. They want to have an entire experience, and so many of our clients are really increasing the experience where there's lots of sort of instagrammable pictures and other types of experiences cocoa, hot chocolate and those types of things along with.
The with Santa.
All Right, Mitch, is there a Santa School?
You know, this is one of the surprising things that people don't realize. There is a vibrant Santa Claus community out there, whether it be online or in person. Lots of organizations. There's Santa schools and conventions around the country, and that's where we go and recruit our Santa claus is for higher Santa dot Com.
Hey, how seasonal is your business?
Well, the actual delivery of our service is extremely seasonal, about six or seven weeks, but it's a full year business at Hire Santa. The first half of the year is really about seals. It's getting those large contracts, those malls, those retail establishments we're working and then we're trying to get those contracts as well as we're trying to get more Santas. This last year we added over eleven hundred Santa Claus entertainers to our database alone. And so it
is full season, but really it's go time. It's fourth quarter, during the last part of November and of course all of December.
All right, So what's interesting is you shared with us some research that you guys have done, and some of the Santa's talk about their best experiences of twenty twenty two, which are incredibly heartwarming, But I want to go to the.
Worst experiences of twenty twenty two. What are some of the rough experiences?
We have about forty five fifty seconds left, just give us a couple.
Well, you know, the rough experiences are really when Santa gets sick or injured. You know, every single year for us we lose Santa Claus entertainers. You can imagine, they're older gentlemen, they're susceptible to COVID and negative outcomes with that, or we've had this year alone, Santa's already in a
car accident, a wife got sick. So those are really heart breaking themselves as well as you really get the touching things whenever our child is wanting something, they're sick, or their parents are sick and they're wishing something for them. But it's a wonderful time, and Santa's really enjoys spreading that love and joy of Christmas.
I thought you were going to tell me about the Santa that flubbed the lyrics to Frosty the Snowman at a daycare. That's what I was opening for a little levity, A little levity.
Yeah, yeah, we get that a lot too. And you know, we've actually been on air and asked somebody Santas to you know, name the reindeer, and they just froze.
A lot of them.
Mitch Alan, Merry Christmas, Happy Holidays, Founder and head elf of Hire Santa joining us from Texas, where there Santas.
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, playing Bloomberg eleven thirty.
Every now and then a story hits so hard it gives you the chills, and this is certainly one of them. It's about deep fake pornography images that have been digitally manipulated to depict an individual doing something they did not like, in this case, posing naked, and about a group of young women in a New York City suburb horrified to learn that their photographs had been manipulated and posted online, and they ultimately took matters into their own hands.
It's the cover of the new issue of Bloomberg Business Week. It's out on newsstands later this week, but you can read the story now on the Bloomberg terminal and at Bloomberg dot com slash BusinessWeek. The story by Bloomberg News investigative reporter Olivia Carville and a Bloomberg News cybersecurity reporter Margie Murphy, both of whom join us now. Olivia here in our Bloomberg Interactive Broker studio. Margie joins us from
our San Francisco bureau. Margie, excuse me. Also, here's the editor of Bloomberg Business Week, Joe Weber here in our Bloomberg Interactive Broker studio. Wow, Joel, How did this story get on your radar?
Get on their radar?
Olivia and Margy pitched it, and from the moment they brought the idea to us, we were mesmerized and then more honestly horrified, and we felt like it was a story that we had to do, and we needed to do it on the cover to make sure that the world found out about it, because it is perhaps frightening sneak peek at the.
Future and the lack of.
Real common sense and laws about where generative AI might possibly take us, and the beginning of the story is like your worst nightmare, and Olivia, why don't you take us there? Because it's ultimately where.
There's sort it's about Cecilia.
So the story starts in Livettown, Long Island, which is an interesting place to start. This is the birthplace of American suburbia, the first post War US suburb, And this group of teenage girls who had all attended the same high school, discovered that their photographs that they'd posted on social media had been manipulated into deep fake pawn that is, fake pornography created using deep learning models or artificial intelligence.
And Cecilia Luke, who opens the story, discovered this while sitting in a car in a parking lot and a strip mall and Livettown. And as she's looking through this weird site that a friend had sent her who had also discovered the photos, she sees images that horrified, disgusted, really scared her. These are photos which showed her being digitally undressed, very graphic images. Content on the sex site
included people posting about her being raped and murdered. In some of the cases the images she was just a child, she was five years old. And she also saw photos of friends of hers who attended the same school, and it was that night New Year's Eve of twenty twenty that news of this website and these deep fake images really spread across the suburb in Long Island.
Not them at all.
In other words, those images obviously altered and they knew it, like they went through it, and they're like but.
Not obvious to anyone else exactly. And that's where the horrifying part comes in.
Go ahead of it.
Yeah, I was gonna just say that for the woman now, because they are twenty two to twenty three the time they were eighteen or nineteen years old. And the scariest thing was looking at these photos where they had been undressed and realizing that they look real enough that anybody else who sees them is going to believe it really
actually is their bodies. So for Cecilia, it was looking at this nude image and knowing that the breasts weren't hers, but also realizing that most people who saw this image would think that they were.
So Margie, let's bring you into this. An incredible story, so not a problem. You call the police and you say this isn't me, and it's done, and they take it down, right.
It's that easy. I'm being sarcastic.
Yeah, not quite at the moment.
There's no federal law prohibiting deepfake pornography. So the challenge that these girls had were, you know, they were so incredibly brave. They did this investigation mostly on their own, figuring out exactly who had created these images of them, and they took them to the police, and there was
very little legal recourse for them to get justice. And in fact, it was only after searching through everything that Patrick Carey, the former classmate who'd been posting these images, looking through everything that he'd posted, they'd seen that he'd actually accidentally posted real child sexual abuse material and that's what they got him on. It wasn't on the deep fake pornography at all. And that's an issue that's a
frustration being felt by women around the world. Even though certain states in the US do have laws around deep fake pornography, it's just so patchwork across the US and internationally there are issues with the law as well, because the technology has just advanced just at such a breakneck speed, just lawmakers haven't been able to keep up with it.
What about the companies in the platforms on the AI front, Like, what did we learn about what they can and can do or aren't willing to do.
Margie right.
So the issue with a lot of the technology that's around now and that from our reporting we saw was really popular for creating deep fake pornography and even child deep pornography, a lot of those tools are open source.
So there's this kind of divide in Silicon Valley. You've got the developers who've created this really incredible image generation technology that you know, they want to be used for good, who believe that it should be kept out in the open for everyone to use and not gate kept by like big tech platforms who have typically provided services, and you know, you might enter in a prompt and you get your image back. Whereas with the open source technology, anyone can go and interact.
With the code. Therefore you can play with it.
And even if a developer was to put a guardrail in place, like prohibiting adult content, it's relatively easy for someone to go in and change that. And so that's opened this Pandora's box. We've got all these open source technologies that even when a developer realizes a bit are being used for bad, the cats out of the bag and people are already exploiting it Olivia.
The story starts in Levittown, It's centered around Levittown, but it spans the globe. What happens in New Zealand, what's going on with a former police officer named will Wallace.
I think that was one of the most remarkable parts of reporting the story is that it really is a dual narrative. You have the girls in Leavittown investigating the predator who is posting images of them online on the sex site that an ex cop in New Zealand has discovered has already been posting images deep faked images of New z woman as well, and so he starts an
investigation into the man behind this website. And it's very rare in journalism, or at least in my own career, where you have a story that has this jewel narrative where you can weave them together and see an investigation unfolding in suburban New York and at the same time in New Zealand, of all places, which happens to be where I'm from, there's an ex cop trying to work
out who was behind this website. I remember one night I was driving back from Levettown to New York and I called Margie to talk to her about an interview i'd just done with Anna, who was in the story, and ultimately discovered the identity of Patrick Carey who been posting the images, and took that evidence to police. And I called Margie. I was excited because finally we had this key piece of the story to tell her about it. And that's when she responded, saying that she had discovered.
That there was also this whole other part to the.
Story where there were these vigilantes, this movement trying to track down who was behind this website, and there was an ex detective from New Zealand who had been leading this fight to kind of combat deep deep fake pawn and to take down this deplorable internet sex site.
So where do we go from here?
Because, as you mentioned, there's no federal law prohibiting any of this, Marguie, But what happened in New York State.
So in New York State, we have seen the District Attorney in Nassau County, which is where this case unfolded, actually put forward or introduced new legislation trying to target deep fakes. The problem is that, you know, what do you focus on is it the companies that are releasing this technology. Is it the regulators who can't catch up to this technology, is it's being rolled out? Or is it the predators and bad actors like Patrick Carrey who are abusing it?
And and yes, no, and I do also wonder and MARGI let's bring you back in. I mean in terms of police and law enforcement, you know how high up on the list is there in terms of prioritizing the things that they focus on.
Yeah.
Absolutely.
One thing that was really interesting about Will Wallace, who you know, you guys have just mentioned. He obviously deeply involved in this website. It was a passion project of his to kind of find out, you know, find help victims, find the people that were posting these pictures, but also.
Uncover who the admin of the website was.
But because he has a background in the police, he has this he really understands what it takes to be able to actually gather evidence, bring a good tip to law enforcement, and.
See that actually be followed through.
And he would say, he would tell me how frustrated he was every time he would give a tip to law enforcement in different local law enforcements all around the world and not hear anything back, But he also understood that it's so challenging when there are you know, there are certain skill sets you need to be able to
investigate this kind of crime. There needs to be better education so that when a victim comes forward in the first person they're speaking to, that they understand that, yes, there hasn't been a physical crime, but this cyber crime is just incredibly traumatic and super damaging, and that person is a true victim.
And additionally, you know, when the laws aren't.
Robust, laws aren't in place for prosecutors to deal with people once they've found a suspect, that all is just it's incredibly hard for police officers to do their work.
When Patrick Carey, when it finally did come down on him, Olivia, Tim and I were talking about this before we got going, before you guys came into the studio. So you ultimately was sentenced six months in prison, ten years probation, lifetime status as a sex offender, can on a smartphone anymore, or any device with a camera, or be withinred a thousand feet of a school or a playground. Six months, but he was out in four for good behavior. I don't seen in a good behavior here that to me
is not even a slap on the rest. So it just kind of speaks to law enforcement not really necessarily respecting the severity because you talked to these women and they definitely felt harm and pain and there was an impact.
Oh yeah, there's no doubt about that. I mean a lot of these women have sort out therapy since this. One lost twenty pounds from strees, one dropped out of college. Three I talked to Carrie Pipper spray in their handbags, and two carry knives with them. Now, they're so scared of what was done on the website, not only what Kerry was posting, but the hundreds, if not thousands of strangers in the world who saw those photos and tried
to reach out to them. One of the craziest parts about this case is that Kerrie also included the girl's names, addresses social media information, so they had these awful messages and phone calls coming through them, people harassing them for months, and one of the threads on the site had over thirty thousand views. That's thirty thousand people looking at a fake porn image of you where they're writing about you
being raped and murdered. You know, the fear was real when I was talking to these young women, and there is a deep seated frustration and live itt town from their families, teachers at the school, the girls themselves. That Carrie only received six months. He was out within four months and he's back in the neighborhood now.
It's amazing, I think the greater thing here And obviously the circumstances of this particular story are totally frightening, but it also does just speak to this greater challenge that we're going to be living through.
Now.
We have a technology that the world is not prepared for, and this shows you how unprepared we are for it. And sure there's a lot of good that can come from it, but there's also your total nightmare. And you know, props to Olivia and Marty for being able to tell this story.
Well and coming off of Open AI and the debate within that company about the ethics and the concerns about generative AI, where at.
Almost the perfect time for Aline, you did it once again. It does they did it once again.
You guys did do it once again. Olivia Carvell investigative reporter at Bloomberg News. Margy Murphy, she's a cybersecurity reporter at Bloomberg News. Incredible story, the cover story, most read, the Bloomberg Big Take, and.
Our thanks to Jill Weber. This is Bloomberg.
Brother Marc, a journal How about you let me drive?
No, no, no, no, honey, please, I'll do.
I want to drive.
It's a question.
This is the Drive to the Clothes Well on Bloomberg Radio.
All right, everybody getting ready to wrap up the Wednesday trade. Just about seventeen and a half minutes left in today's trading session. We have got when I look at the S and P five hundred, kind of half of the major industry groups are higher, half are lower. But it really is once again about what's going on in the treasury trade because we are down again.
I'm looking at a ten year you know, four point twenty six. Who to thunk?
I mean, we were talking a tenure at five percent just a few weeks ago.
Six percent. People were talking about, you know, for even like you know, the current.
We should have Katiekminski back on and see if she's still sticking to that.
We should bring her back. That's a really great idea.
All right, let's see what our Drive to the closed guest has to say about all of it, Amy Magnota. She's co CIO at the independent investment advisory firm Ata Gino's Capital. She is on Zoom from Pennsylvania. Amy, good to have you here with us this yield trade.
Let's go there.
Would you go as far to say we are at peak yield on the US Treasury yield curve? And uh, you know, and does it mean that ultimately we get to some kind of recession? Does the economy slow down that much?
Our view is that we're expecting the economy is growing pretty solidly. So we had the GDP revision come in today up to five point two percent real GDP growth in the third quarter, and we're running about two percent for the fourth quarter, So that's pretty solid, especially given what you know the FED has done to try to.
Bring down inflation.
So our view is more in mid twenty twenty four that we might hit some sort of soft patch or mild recession with just given the lag effects of these interest rate hikes on what that means for the consumer. And then we also have an unemployment and then we have a stimulus that's kind of run out.
Amy Magnotta, what is the uh evy vidents that you see today? End of November, end of being almost the end of a pretty incredible rally in bonds and stocks so far for the month of November. What's the evidence that you see out there right now to lead to your conclusion that we'll see some softness in the second half of next year.
I think there's some weakness, so our view just to be clear from now to kind of year end early January. We're still pretty positive on the equity markets, and a couple of reasons for that. Seasonality is very strong. November December tend to be very strong periods for equity market. Returns, breasts been pretty solid, momentum has been building, and credit spreads have been making new lows. So I think that's all very supportive for equity markets for the next eight
eight weeks or so. I think our concern is more as we hit twenty twenty four, could see some weakness in the consumer, could see some you know, there's a number on the confidence a consumer Confident and survey yesterday that job's hard to get increased a little bit, so we could see some maybe softening there and the employment in the labor market, and maybe some weakening in the consumer as we get through to twenty twenty four.
You know, it's funny, it's interesting to listen to you, and I feel like it's kind of you know, you hear it even among the FED speakers.
There's not just one narrative. Some of those FED.
Speakers that we are just even hearing over the last couple of days, some are saying, Okay, we're good. You know, we think we're done the bets we die and they're saying, yah, maybe not that inflation isn't weird it to'd be I'm hearing a lot it. I's could in your conversation and I get it because I think, as we talked with our Mike McKee, it's not an exact science in terms of getting of managing the.
Economy if it doesn't have a ton of tools.
And like I said, it's not like you just step on the brake and everything stops. There are delayed effects and cumulative effects. So having said that, you have conviction that maybe stocks continue to rally into this year, what else do you feel like you have strong conviction about when it comes to the investment environment.
So we're as I mentioned, we're pretty positive on equity markets. There's some other areas where when you look at equity markets, you're to dates certainly been driven by the index returns kind of mask underneath it's been driven by large cap megacap cup growth companies. So we're finding some opportunity in other areas as well, Like what so US infrastructure is
one area that we like today. We've had the Infrastructure Investment and Jobs Act in twenty twenty one, some allocation to infrastructure projects in the Inflation Reduction Act last year, and that money is just really starting to be allocated and spent. So we think that's an attractive area.
What specifically within it? So what specifically within infrastructure and the way.
We allocate portfolio, So we're acid allocators and we build you know, total portfolio solution for our clients. So we're going to allocate to a broad based ETF that's targeting companies that can benefit from from that increase in infrastructure spend.
That's an interesting thought on macro, on macro trends. What are some of the other macro trends in where you're allocating capital.
Japan is another theme that we like today in Japanese equities. A couple of reasons for that. Fundamentals have been improving earnings growth is improving a lot of the shareholder friendly policies that companies that we've been talking about for a number of years are really getting put into play in Japan. So that's also positive. Relatively loose monetary policy compared to some of the rest of the globe, and valuations are
pretty attractive, so that's another area where we liked. We've seen the dollar sell off a little bit here more recently, which could benefit international equities.
Yeah, and then the ni kid definitely has had quite you know, a bounce back certainly this year, certainly from some of the lows we saw earlier this year. When you talk about Japanese equities by the broader market or again, do you start to get picky about some specific sectors within Japan.
For us, again, this theme we feel is pretty broad based, so we're going to allocate more broadly through a broad based ETF in the Japanese equity markets.
Natural resources also a favor we just a favorite of yours. We've just got about forty five seconds left here. What specifically when you think about natural resources.
Sure, I think another area of the market that is attractably valued relative to the broad SMP five hundred companies there again better capital allocators. More recently, we still think some structural supply demand that's favorable, and then more short term with some turmoil in the Middle East might also cause a problem. And then just the regulatory environment is pretty tight for energy related companies and we think that's a positive.
Does that mean like the major integrated oil companies, the drillers, just real quickly, okay, yes, so you like the big names, the household names, yes.
The larger and so again we're allocating through a broad basingf but about eighty percent of that is energy companies.
All right, Good to know, Good to know, Amy Magnotta, she is Cocio at Atha Ginos Capital. She's joining us on zoom from Pennsylvania.
This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcast. Listen live weekday afternoons from three to six Eastern on Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg journalone