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LA and the rest of Southern California facing a second week of fierce winds that are turning wildfires into blow torches, putting lives at risk, destroying homes, businesses, and cultural landmarks. Here with an update, we bring in Will Wade, He's Power and renewable Energy editor at Bloomberg News.
He joins us here in the Bloomberg Business Week Studio.
Will you're a Californian, You're from the southern California area. You have much family in Los Angeles. I know you spent a good portion of the weekend keeping in touch with them. Just give us your personal story, your personal connection to the area.
Yes, certainly, this one's personal for me. I grew up partly in Pasadena. I remember, you know, in the fall, the Santa Ana winds would come in. They blow from the east, and there are plenty of times we'd watch those hills go up in fire and the air would be smoky, But it's nothing compared to what we're seeing now. These fires are intense and it's hitting close to home. My aunt lives in North Pasadena. Her house is about two blocks from the firefront lines. That's the Eton Fire,
and she was evacuated a week ago. Last Tuesday night, she was allowed home briefly over the weekend to pick up some necessity. She said, air is bad, sood everywhere. We're just hoping that she gets to keep her house because so many people around there have lost everything.
Yeah, no doubt about it. I was like blown away by some of the footage and just you know, the winds as you talk to picking up the embers that are just being spread like crazy, and you get an understanding of why it was so difficult to fight this fire, contain this fire and prevent the spread. Where are we in terms of containment and spread.
At this point, Oh, we're not very far. The Palace Hades fire that's the biggest one, that's fourteen percent contained, the Eaton fire, and Pasadena the one threatening my aunt's house that's thirty three percent contained. I looked it up what that means is the firefighters have basically built a battle line around thirty percent of the you know, the fire. The rest of it is burning uncontrolled in other faces, so plenty of room for that thing to grow. And
so far they're just huge. Together, all these fires in LA have burned about forty thousand acres, which and I look this one up too. You know how big that is. It's a little bit bigger than Staten Island.
Wow, So it's massive.
It's massive.
It's massive.
Yeah.
The difference when you hear about that acreage, though, is oftentimes in the past, when we're talking about wildfires out west, we talked about acreage. These are areas that are uninhabited. They don't have they're not entire neighborhoods that have been leveled. They're not places where people are. That's what's different about this wildfire.
Yeah, it's going through homes, it's going through communities. Wildfires, Yeah, there's several of them. There's three main ones now, there were I think as many as six over the past week now, and it's just decimating entire communities, really wealthy communities too. Some of these houses are multimillion dollar homes.
I talked to my mom, she's on the central coast of California yesterday. She said, not a cloud in the sky in the forecast. We're not seeing rain for quite a while now. We know the Santa Ana win south of where she is and where my dad is is a huge issue this week. What else do we know about the weather and what it it'll do for the firefighters in the front lines.
Yeah, no rain forecast anytime soon. We got a little break on the winds at the end of last week, but they've come right back up again. We're we're seeing gusts of like seventy seventy five miles an hour a lot. It wasn't as much as at the peak last week when I heard we had some gusts as high as ninety miles an hour. But all of these winds, they just fan the flames that make it hard for the firefighters to do their job, and they can blow sparks. That's why the fires keep spreading.
You know, we talked so much about obviously, you know, the dry, dry conditions caused by climate change that have made it so difficult for these fires to be fought and just makes it right for their spread. Having said that we are also curious about what caused it. And I know it's early and on the game. Are we hearing anything. I know, I've seen people come up to me and say, well, they're hearing it's arson, or they're hearing it's you know, power companies or whatever. My reading
is that they're still not sure. What do we know on that front.
It's still too soon to tell, don't We don't know anything. But we do know that in the past power lines have been a significant culprit in wildfires out west. You know PGENI, the California's biggest utility, when bankrupt several years ago. Their power lines were tied to multiple wire wildfires, and it's.
A real thing.
What we've seen in the past few years is when it gets really windy, the power companies will cut power to entire neighborhoods ahead of the winds, just so this doesn't happen. So we're still trying to track what lines were live at the time, which lines weren't live at the time. We know the big utility down there southern California, Edison, has been told preserve evidence if you see anything, But so far there's no sign that anything has been found,
But that's because it's so early in the process. We're going to be looking at this really carefully.
Well, I just keep thinking about rebuilding, and this is an area that's very densely populated. It's probably too early to even be talking about this. But what we know about areas that are impacted such as these, is that people.
Want to go back home.
They want to rebuild, regardless of potential fire danger. That's how it's been in Los Angeles and California for years.
How should we be thinking about that.
Well, sure, people feel connected to their homes, even if the home is destroyed, they feel connected to the place, and they feel, you know what, they feel connected to the life that they had. That's what people want to rebuild. And certainly we will see a lot of rebuilding. But the thing to keep in mind is the world is changing from climate change, and there are places that have been built up that are not necessarily a great place to live now.
And we're not just talking about southern California. No, no, no, no, no, Florida comes to mind, for example.
Oh yeah, and like I know, like on the Gulf Coast, there's like whole communities like low lying coastal communities, and like every year, at certain times, the roads flood, and some of them have been told by the local governments, we're not going to pay anymore to fix those roads because they flood every year. And they're like, well, but we live here, how are we supposed to live there? And they're like, you may have to rethink this. This is the world that is changing around us.
This crazy part of what's going on to in California. They say the debris and scarred landscape also set the stage for a future disaster, since any rain that falls in the area threatens to trigger dangerous mud slides.
Oh yeah, that's a thing too.
It's right the next thing, which is something Californians are familiar with, but it's just kind of tragedy on top of tragedy. Meantime, the California Governor, Gavin Newsom says, let's clear the debris right and let's get ready for the rebuilds. So we'll see. And also the role of insurance companies and what they're going to help support going forward, because that increasingly is backing off. We'll wait. Thank you so
much for the update. Power and Renewable Energy editor here at Bloomberg News with the latest on the wildfires.
You're listening to Bloomberg Business Week with Carol Masser and Tim Steneveek on Bloomberg Radio and Television.
All Right, everybody, it's a new year. I got to say, I'm already regretting that maybe I bought a new iPhone last fall. I mean, I needed it, And yet when I read Mark German's Power On newsletter, I'm reminded that an overhaul is coming for Apple's most important product, along with some other cool things from the world's largest market cap company, maybe starting soon. Also later this year, with
more on that and news to that. Apple's iPhone sales declined about five percent globally in the final quarter of last year. A lot going on. We had to Bloomberg News chief technology correspondent markrom and he is in La, Mark, there is a lot we want to talk. Apple. Got to ask you the fires in La You grew up there, you have family there. How's everybody doing and how are you thinking about these fires?
Oh?
Thank you so much for having me. That's very kind of you to ask. Thankfully. I'm okay, only minor inconveniences here, but it just feels like everyone, including me, knows someone who's lost their home, right, And.
I've seen the death toll now has topped twenty.
Obviously one death is too much, but you know, twenty is a very big number, and my heart just goes out to everyone who has been impacted. It's the most horrific disaster that I've seen personally in my lifetime. In fact, it's the biggest disaster that we've had in LA. It's the ninety four earthquake that was between a six and a seven point zero. There were a lot of deaths, a lot of damage there. I happened to be born that day, so that's an interesting factoid. But this is
just this is just a miserable situation. And unfortunately, while you know, the pollution and the actual disaster itself, it's going to dissipate in the coming days.
The aftermath of this is going to.
I wouldn't be surprised if it takes ten twenty years for these homes to be rebuilt. And obviously many lives changed forever. So just it's a terrible thing, and I'm glad I get this little distraction with technology to put my mind elsewhere for now, all.
Right, So let's talk about that distraction that is Apple. That is something that's certainly when a story pops up done by you or your newsletter, we want to talk to you about it. Twenty twenty five. How big a year is this for the company, and why.
Twenty twenty five is going to be an instrumental year for Apple. You're not going to see anything pop out of there that's revolutionary or particularly innovative. What you're going to see are some stepping stones towards the future. Let me give you a few examples. One, you're going to see the introduction of the company's first smart home hub. That's something that would compete with the Amazon Echo Show,
the Google Nest Hub, and pub Max. This is a dedicated tablet like display in your home to control your smart home appliances. It's innovative in the sense that over time you'll see the smart home offerings from Apple expand so not this year, but probably next year, you'll see a really cool doorbell device from Apple. This would compete with Ring. It would use face ID, so when it sees you approach your door, it can automatically unlock it for you, right, But it also would have some of
those traditional doorbell features. They're also working on a very privacy centric in home security camera. I like to load up my house different security cameras indoors and outdoors. But Apple has really created its name in privacy in recent years, right, So having an Apple made system some thing that would probably help put people's minds at ease. Always concerns about who's looking at this footage, how accessible is the footage. Well, people can probably really trust the Apple brand when it
comes to storing their video footage. So I think those two smart home products are going to be successful. Later in the year, you're going to see a major iPhone overhaul. There are a lot of Apple employees excited about this. There's the iPhone Air that's going to come out later in the year. That's going to be the thinnest iPhone ever, probably going to be about twenty percent thinner than the current iPhone. So that's going to be interesting in terms
of stepping stones making that thinner iPhone. Apple's process of miniaturizing components is going to open the gate eventually for foldable iPhone, so that's going to be quite interesting. The other thing you're going to get this year are a slew of new macs and iPads, you're going to get an M four MacBook Air here in a matter of weeks. You're going to get new low end iPads and iPad airs. In a matter of months, you're going to get a
new low end iPhone. Right, they're going to replace the iPhone se finally with something that's a bit more up to speed with the modern iPhone design, probably come in around five hundred dollars. I think that's going to be a fairly successful device for them, especially and maybe some of the more emerging markets like India and other parts of Asia. But you know, the big thing for the year is obviously going to be the phones, and it's always the phones. And the big question is what comes
after the phone. That's not something Apple's going to answer this year, and so I think investors are going to be very curious about what's Apple's future at this point. Right, the headset's been a dud, the car is dead.
What's next? Right, they don't really have a major next big thing.
Speaking of what's next, let's talk a little bit about Sonos, because you're out with this big story this morning that everybody is talking about. Some people saying finally, because of all the issues and challenges Sonos's face. Patrick Spence out after eight years at the company. Tom Conrad of Pandora Fame, Snap Fame coming in and he fixed the company just in thirty seconds.
Look, Patrick's a great guy.
I've I've met with him and spoke to him countless times. I thought he did great job, but there was really no coming back from this app disaster. The app is at the very heart of how people control their Sonos ecosystems. They lost the plot on the app, they lost consumer confidence. Someone had to take accountability if they're going to get those sales back. Sales are going to fall again this quarter, according to our estimates, so putting in a new CEO
makes sense. This is an insturim CEO. I think he's gonna end up being the full time CEO. They won't probably find anyone better, so we'll see what happens.
All right, listen, kit out, Thank you so much and stay safe. Safe us to your family and friends as well.
Hey, he's already got a Sono's tattoo, Tom Conrad, so if he becomes full time CEO, it doesn't have to do anything about that tattoo.
Sona shares We're down as much as ten percent. Today's session still a decline of about three point three percent. All right, that's going to do it. Our Mark German, Bloomberg News Chief Technology correspondent.
You're listening to the Bloomberg Business Week Podcast. Catch us live weekday afternoons from two to five e's during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Carol.
We talked a little earlier about the White House unveiling sweeping new limits on the sale of AI chips by Nvidia and its peers. Also in the news today, Microsoft they've named Jay Perrick, who previously helped keep Facebook's infrastructure humming, executive VP for a new AI engineering division. We've got with us Ln Gwan, chief AI officer over at Accenture. Lan joins us from Mountain View, California. Lon, good to
have you with us this afternoon. You're just back from CES a big AI theme at ces Accenter out with a new report, their twenty twenty five Technology Vision Report. Is this the most prominent that AI has been featured within your career?
The short answer to that is absolutely. I would say that over the last twenty four months so I've being in this role for almost two years. Right, my life as a chief AI officer has can not be more exciting, even though I've been in this industry for more than
twenty five years. And I think CS just one example of why we're excited to talk to you know, global clients, global companies about impact of AI, about what are the things that they should be thinking about to accelerate AI adoption, But then most importantly, what are there some potential risks, what are there some barriers, what are some you know, pitfalls? So that pretty much is some of my you know, three day experience at the CS. As you pointed out,
it's all about AI. That's why we're so excited to you know, share our tech vision twenty twenty five. And Tim, you may not know this, this is actually our twenty fifth years of releasing technology trends. So, as you can imagine, AI is the main thing of the report, but I think the team has on a really good job and also taking to consideration a lot of fast moving technology that you just read it off earlier, and also some of the market dynamics right that we are we are addressing in a report.
Ron along these lines, our Surveillance Team caught up with Jack Hitory. He's the CEO of AI and quantum technology company Sandbox AQ. He has collaborated with MIT on a series of papers focused on AI and deep learning and had some interesting perspectives on kind of where we focus next. Let's share it with everybody.
At the core is numbers quantitative financial equations. Again, that AI is now hitting us this year, So I think we're going to start seeing the beef this year next year as we start seeing he to B applications using quant AI, quantitative AI l QMS large quantitative models versus just l LMS large language models.
That again was Jack Henry earlier on surveillance lnguan. You know your chief AI officer over at AC Center. You said you've been doing this for like twenty years. Is that the next focus? I'm curious if you could weigh on and on this that so much of what we've talked about the last year and a half has been consumer AI, chat, GPTs and so on. Now we're talking about quant AI. Tell us a little bit about what you think about that perspective.
Yeah.
Sure, we actually worked with Jacks team closely.
Uh.
I think for the for many many areas, right, But the enterprise AI, quantitative AI is absolutely what I see as the next frontier. I wouldn't even say next frontier, it's it's the frontier today. It's the uh you know, uh very massive mulket potential in front of companies like Essentric, more importantly, in front of the you know, global business, global organizations.
Uh.
I think the you know, just like what you pointed out right, the you know, the initially uh you know, business leaders jump on the bandwagon, you know, try out chat, GPT or you know, different kinds of models with a consumer mindset, right, because this is the first time that they, as a regular consumers, they were able to touch and feel right, the impact of AI on their daily life.
But I will tell you, Carol, very quickly, my clients, they did not wait, even like as early as January twenty twenty three, some of them came to us and basically said, Okay, what I experienced in the consumer world is amazing. You know, now what do I do with this kind of technology within my enterprise?
You know?
But enterprise world is very complex. I have all kinds of systems, I have invested in all kinds of technologies. So can you come in to help me invite some kind of II strategy And now you know, ten months later, twelve months later they're like, can I go faster?
I love it right, it's like setting it up and then right it's all about to be going forward. Lon Gowan, thank you so much. Really appreciate it. Important perspective, Chief AI officer over at Accenture on their latest AI report. This is Bloomberg.
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Drivin Don on Bloomberg Radio.
All right, TikTok, everybody, we've got about eighteen minutes left in today's trading session. Uh, it's been an interesting one. We're definitely off our worst levels of the session. You heard Charlie and Bill Maloney just breaking it down the doubt in the green, but the S and P call it flat on the day, and the Nasdaq one hundred down about six tensven percent, but much better than what it was earlier in the session.
I mean, it's honestly one of those days is where I was locked into my decliners early on.
I know that has it.
We're getting close on one of them to the green Carol.
All right, okay, so welcome to my world.
Yeah, I know.
Well, hey, you want to send me lose some Let's see what John Mallory has to say. John's chief investment officer at NFJA Investment Group, joining us this afternoon from Dallas. What do you make of a day where you see the bond market do what it's doing. We talked to Mike Mackenzie a little earlier in our program out with Today's Big Take about the relentless rise in bond yields that we've seen at the start of the year. When does that start to hit that equity market?
Well, I think it already has. If you look at you know what is occurring below the surface. I mean, the Russell two thousand is already off ten percent from its peak just back in December, so we've already we're already witnessing a pretty material correction. In fact, if you look at the bank stocks, those have given back all of their pre election gains that we saw just after November.
So what does that mean? What does that tell you? Does that just say wait a minute, folks, let's be real. Let's wait to see exactly what programs would initiatives come out of not only the soon to be president Donald Trump for a second term, but also what gets through Congress.
That is exactly correct.
There's no question that we are dealing with uncertainty around tariffs, around inflation. But I do think that there are pockets of opportunity that are emerging as investors look for ways to allocate capital. You know, if you think back about last year, we had significant gains in the S and P five hundred, the momentum factor had its best year since two thousand and I think as a consequence, it does create opportunities for investors to rebalance. And there are
two key areas that I would think about. The one is regarding style. So I think, you know, value oriented companies look particularly interesting here.
And then if you look down the.
Cap scale, if you look at those stocks that are, you know, in the small MidCap range, a lot of discounting has already occurred.
Okay, so let's talk about some of these picks that you sent to us. I got to be honest, looking, these are not household names for me, Carol. Yeah, but maybe I'm just, you know, exposing my ignorance a little bit.
No, I think it's safe to say that for a lot of people.
Rexford Industrial Ore ex R one of the companies that's on your radar.
What do you say, Yeah, I love that I picked some names that maybe are a little less common, so you know, Ran industry. Yeah, and you know that's fascinating given that yields are up, because this name has been hit by yields. But to take a step back, the industrial rates benefited tremendously during COVID because we had to move obviously indoors and we had to do a touchless society for a while, and the industrial rates got very expensive.
They also had record low interest rates.
Now you're in a position where because of the rise in interest rates and because of the risk on mood the last twenty four months, you've got significant valuation of dislocations. This is the largest pure play industrial rs in California. And I don't know about the audience, but I did a lot of my shopping online this year.
I don't think that's changing.
The industrial ruts are squarely positioned to benefit from e commerce, and ironically, it's pretty difficult to get new locations that hook up to the logistical networks either by train, rail or airplane that make be so vital to the American economy.
You know, it is in southern it's an LA based rate operating industrial properties in southern California markets. I am curious about the fires there and exposure anything that you're hearing on that front.
We have been looking into that.
So far.
It's our understanding that we haven't had any material challenges for the company based on those fires, but it is something that we're monitoring closely.
Yeah, it was down about three percent on Friday, up about two and a half percent, So I wonder if there's a little bit of a trade off of that. Give us another name that you like. Ffi N is the ticker First Financial Bank shares are certainly all in and focused on the big banks this week as they start to report earnings. This is one though that is I guess more of a regional play, and it's based in Texas.
That's correct.
So the regional banks really have their clearing event back in March of twenty twenty three with the challenges of Silicon Valley and First Republic. So that really created the trough invaluations that we hadn't seen since eight and the banks are still working their way through that. Now you have a yield curve that is definitively steepening after being inverted for nearly two years, the longest in version in history. And you have a situation where many of the banks
recapitalize themselves. They have very strong credit profiles, and particularly Making Texas that's growing and has been a beneficiary of all the movement out of the East Coast and the West coast. We think this is well positioned. And I would just add on to that that while tariffs are a concern, dollar strength is a concern, the regional banks won't be negatively impacted.
Buy that.
And you've had a valuation reset here recently with those games being wiped out since the election of President Trump.
So I think there's a real opportunity in regional banks.
We're going to be watching earnings reports closely, but I like the setup as we head into earnings and as we head into the start.
Of the year.
Okay, so we have banks, we got reads.
Let's talk a little cloud based software Viva Systems. It's a thirty four billion dollar market cap company based out there in Pleasanton, California.
This is when you're bullish on how come. Yeah.
No, So I'll make a comment on healthcare first, I mean healthcare. I mean there's definitely a theme if you pick up between healthcare and reads. Both those areas got very expensive during the pandemic and you have to be choosy. You know, you mentioned Maderna as we headed into the program. That's one that got very frothy, very expensive during the pandemic is still working off that overvaluation. Viva Systems is interesting because this is a name that is trading at
the lowest valuation in over a decade. It's got twenty five percent margins and is growing at twenty percent. And part of what's been impacting this company negatively is it does have a fair amount of revenues from overseas, which has been hurt by the dollar. But to be very candid, what we look for in companies are companies that are growing their top and bottom lines and have a dislocation and valuation, but not a dislocation and fundamentals, and healthcare
fits the bill. It was one of the sectors that was flat last year, and this is a name that you know, I would kind of think straddles between tech and healthcare. You've got significant recurring revenue, low valuations, and a group that has not participated. So I like reallocating capital from some of those names that did so so well last year into some less loved areas of the
market where you're getting significant valuation dislocations. And I think that that sets up nicely and is somewhat of a protection against.
What may occur in the bond market if rates continue to move higher.
All right, really fascinating your major risk here when you look at twenty twenty five and just got about thirty seconds here, you.
Know, I think that inflation ticking higher is definitely something we're going to be watching, watching very closely.
If that occurs, it's going to send you'll tire.
You know, you already have parity between FED funds and to your bond yield, So that's going to put the FED to a very challenging position.
I hope that does not occur, and I think.
That the probability of that's actually lower given that you see the rents continuing to come in at a moderating pace.
All right, Gonna leave it on that note, so appreciate it, John, Thank you so much. John Murray. He's chief investment Officer at NFJ Investment Group. Joining us there from Dallas.
This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm 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 terminal