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All right, Well, Shares a Tesla our higher in the after hours right now as investors continue to digest those first quarter earnings numbers. Global vehicle inventory rose to twenty eight days. It's a huge jump from the fifteen days at the end of last quarter. Shares high right now by just about five percent. First quarter revenue coming in at twenty one point three billion dollars that was below
estimates of twenty two point three billion dollars. That also a missed when it comes to EPs adjusted EPs, I should say that coming in at forty five cents versus estimates of fifty two cents.
Shares A Tesla up about five and a half percent in the aftermarket. But also Tesla to accelerate the launch of more affordable models at getting a red sticky by our team here at Bloomberg. All right, so let's get to it with us Ross Gerber, president and CEO at Gerber Kawasaki Wealth and Investment Management, and also Bloomberg BusinessWeek columnist Max Chafkin Ross out there in Santa Monica, California. Max here in our Bloomberg Interactive Broker studio getting ready
for another round of Tesla. Bingo will get into in just a moment. Ross investors like it. What do you make of this report looking backwards looking forwards?
Well, I think the good part of the report, because this is really the only good part of the report, is them saying that they're going to accelerate the production of this next gen vehicle platform. And they were pretty vague about what their calling this or what Robotaxi is or is a model to coming, and I think that'll
be clarified on the conference call. So you know, once again, we don't really watch after hours trading because he really doesn't represent all the participants and so, and we haven't seen the conference call yet, so we'll see how this docras over the next several months. But there really isn't any other good news in that report other than them saying they're going to accelerate production, even though they just fire all the people that are in charge of accelerating production.
Hey Russ, remind everybody take a step back here, because Carol and I were looking at the terminal a little earlier. You've you know, you are a longtime Tesla bull until you weren't, and you were a longtime believer and have been a longtime believer in the company. You guys still own a substantial number of shares over at kerber Kawasaki. But what is your position right now in Tesla moving forward?
So my position is that Tesla is a wonderful company that has enormous potential with the CEO who has become so divisive that people won't buy the cars. And that's why saying is just going to produce more cars doesn't address the real issue is why they're not selling cars today, and that's the issue that needs to be addressed that isn't being addressed. So as a shareholder, we have to assess what the future earnings potential of a company is
based off what their business model is. And when we you know, we start investing in Tesla over ten years ago, and we've had a great run up until the purchase of Twitter, and so we've been lowering our position because what we feel is that Elon's behavior has hurt the brand in such a way that consumers actually don't want to buy a Tesla. It's just the best car on the road at the best price, so people buy the car reluctantly at this point.
So I think, you know, we've got.
These problems to solve, and I'm not sure if that will be addressed on the conference call today. And that's you know, And I don't like being called a Tesla bear because I actually think they could turn the company around pretty quickly if Elon changed his behavior and stopped attacking everybody.
But I just don't think that's going to happen. And so so I.
Think the bigger issue that isn't being addressed is doesn't matter how many cars Tesla makes if nobody will buy them.
All right, So Max chaff can come on in. You guys do the Elon Inc. Podcast. You're constantly looking at what he says, what he does. You're looking at his kind of his assets, his portfolio, your initial thoughts on kind of the headlines.
We got to yeah to kind of under Ross is saying something like this, but like the note about the new products is very vague. It doesn't say we're going to have a model too, and it's going to come out on this date, which is what investors, many investors have been hoping for. It says it sounds like it's saying I'm reading it correctly. They're going to try to essentially make the current models more affordable. Now that obviously
could allow them to sell more cars. But it's a slightly different spin on things than what many people have been inspecting. The other thing is, as Ross is saying, you know, on a Tesla earning's day, what Elon says, and more importantly, how he says it is just as important as as what's in these numbers, because he is
going to hopefully anyway clarify some of this. We also hopefully get a sense of like where things stand with robotaxi, where things stand with potential affordable cars, and investors seemed to react to based on his optimism, you know, a couple quarters ago, when he was in this kind of dowur mood, we saw the stock go down. So so it's like, do we get an optimistic version of Elon or the kind of very dour, pessimistic Elon.
Well, I wonder if you have a question for Ross Max.
Yeah, Ross, what is your reading on this, on this product, on this paragraph about the product?
Well, I think you're dead right about the two things you just said. Number One, they're of course vague because of the legality of it.
If they put this down and they don't do it right.
And since nobody seems to know what Elon's going to do, and I'm sure that everybody understands that nobody within Tesla knows what the business plan is either, because they just don't at this point. But I think secondly, a lot of it will be how does Elon answer these questions from investors during the conference call?
And what you said is right.
If we have sort of a very positive Elon and he's refocused and he's going to be working at Tesla more, and you know, he can play the room right, maybe we get a little rally in the stock, but it doesn't change the fundamentals. If he doesn't play the room right, this becomes a blood bath. So you know, I'm just hoping that he understands the damage that he's done and starts to mitigate this versus diving in and sort of doubling down.
It will be interesting to see if if Twitter comes up or sorry X comes up, you know, because there is this question in this sense that he's spent ge Whiz a lot of time talking about X, tweeting about X,
doing X related things. There's even a potential or they're going to have a Grock integration inside of the Tesla's And I think that to people who are really bought into the ev story rather than the you know, Elon Musk genius story, which those are two important constituencies here, I think for Tesla Stock, you know, they would like to see him spend less time on his social media network.
Yeah, well, it's not just less time, it's what he's saying, you know. It's like it's not the time, it's that what he's saying oftentimes is super divisive and basically racist. So it's like, it's really hard to sell products to people when the CEO says things that are really hurtful to people, including me for that matter.
Now and we've talked with you about that absolutely ross. What could Elon say on the call, or Elon and Company say on the call that would make you more excited about the company, or once again say you know kind of owe Elon really well.
If I had my dream come true.
He'd say, I'm coming back to work at Tesla, because he basically doesn't work at Tesla, and he would say, I'm done tweeting all this garbage and politics. I'm going to really focus on advancing sustainable transportation and energy and that we're going to release this lower you know, priced car and.
The strategy that we all bought into three years ago.
You know, and the stop was at all time highs, and earnings were going up, you know, fifty hundred percent a year.
You know, it was like it was like a different world than today.
And it's amazing to me he doesn't understand this difference that that really is his responsibility. And so as a shareholder, I have to say it's extremely just stressing time because the valuation of Tesla is premised off all these great technological innovations, none of which have come to fruition yet. So his focus is one hundred percent what needs to be happening right now.
Hey, Ross, I do want to just end with one last question about the cost of producing these vehicles. It seems like Tesla is doing everything I can to bring down the cost of producing these cars, the cost of goods sold to Are they what numbers do you want to see there?
Well, they are, but their margins continue to go lower. If you look at the report, which I've only had a minute to look at, you know, their vehicle margins continue to go lower, their operating margins go lower, their net margins go lower. So they're able to lower the price of the car. But what they're not able to do is keep that going as fast as they're they're lowering the price of the vehicles, so it's still hurting them even though they're lowering the cost of the car,
and it doesn't bring in a bigger market. But you're not creating any demand. And this is I have said it a hundred times. Every company in America average for a reason. People need to know why your products are superior. And all the Tesla people bought in Teslas, you know, So all these YouTubers can tweet all they want, but everybody wanted to Tesla bought a Tesla. So you've got
to get new customers. And the new customers are being told that charging sucks and evs are bad and this and that, and Donald Trump says they're bad, and this is all they see all day and then It's like, why would they go buy a Tesla because there's not one ad anywhere that tells you how great the cars are?
Because they are great.
Right and you still own them right real quickly?
Yes or no?
Yeah, I do.
I just don't understand why they don't tell people how great their vehicles are.
All right, Ross Gerbert so appreciated. We know you've got to I think run over to our TV guys, President Ceot Germer Kawasak, so appreciate you joining us. Max Chafkin is staying with us a Bloomberg Business Week and we want to roll into the conversation.
Ed Ludlow, Yeah, he's co host of Bloomberg Technology on Bloomberg TV. He joins us from the San Francisco Beer. I do want to note, Carroll, the Tesla first quarter automotive gross margin excluding regulatory credits is at sixteen point four percent.
Yeah, for the quarter, stack.
Up six point three percent in the aftermarket.
Hey, I'd come on in here and explain why you think the stock is moving higher given that a lot of these numbers came in below estimates.
Yeah.
I think that the print and the numbers in after has had nothing to do with the quarter gone, everyone's looked past it. Frankly, what the shareholder deck outlines is almost line for line exactly what Danna and I outlined in the Big Take on Sunday, which is on the affordable ev A big body of work had already been done at the component and production process level, and Tesla is moving forward with a more affordable lineup of evs
based on that technology. It was really misunderstood. It's like the world was banking on the Honda Civic of evs and Tesla to be the one to bring it. But my understanding from sources that was never the case. And if you read the shareholder deck, they spell it out pretty clearly. They've looked at this kind of more holistically and there will be more affordable evs coming late twenty twenty five. Caution caveat Musk has often miss his own deadlines.
You know that. I always say that, But it's like a sumthing for everyone. Yeah, you know that, And and that was me protecting myself from all the people who may go after me on social media. But explicitly it states that they are working on a purpose built robotaxi. And so we went into this saying if you're a Wall Street institutional giant who really wanted to see an affordable EV. Or you're the technology investor or the retail investor that's kind of all in on the Tesla thesis
around autonomy. You got that as well, and really I think the market adjoining in hands to play that in after hours.
You know, the question is like what is an affordable EV And I think one of the things one of the ways that Elon Musk could clarify is to is to sort of say that, you know, he over the weekend, amid all this speculation, he tweeted a screenshot showing the model. Why priced at twenty nine thousand dollars sounds pretty affordable. Course that includes tax credit, which you know not everybody gets, and a and like a five thousand dollars of assumption
of gas savings. So so like you could imagine a situation where he tries to argue, like, look, we're going to cut a bunch of costs out of this thing, and we're going to make it affordable as is, like we don't need an additional model, which is a really intriguing proposal. That is a huge, would you know, pretty big departure from how the car industry normally does things and in certain ways, like it is saying, maybe not that surprising, right, that's kind of you know, Elon Musk
has long model this company after Apple. You know, Apple sells a very you know, modest product line. All the products kind of look the same, They're all kind of expensive. You know, you could have sort of imagine his effort to do this and and you know, who knows if it's going to work, but it definitely is outside of what you know, a normal sort of car company, nor normal car company analyst would expect to see, would want to see.
You know, guys, I'm looking at a live blog Creik Canter weighing in our BNF Electric Vehicle Analysts and saying, you know where he talks about these new models and talks about I don't know, new models ahead of our previously communicated startup production in the second half of twenty twenty five, accelerating that launch, he writes by including these statements in the investor deck, it shays Tesla has identified that a lack of new models is a problem, but
are there actually actions being taken or just a continued lack of clarity? And I guess you know, I'm going to go back to you Max for a second. It feels like, right, we want a little bit more specifics, right, and what this means?
Yeah, again, it almost it does have the feel of a deck that's being written for maximum optionality.
And you know, this is all happening very very quickly.
You know, we saw we've seen Elon Musk get re engaged. It appears in any case, you know, connected this layoff in a way that has seemed, at least according to you know, the reports that the Bloomberg has published that Ed has has written very hasty, and so you do wonder like maybe they are trying to figure this out as we speak, and who knows if we're definitely going to get that level of clarity on the call from Elon Musk, although given Elon m he cannot help himself
but sort of say controversial things. You know, he's got that sort of trump characteristic of being sort of really really honest sometimes to a fault, he may, you know, spout something off that could send the stock in any number of directions.
And to that point, you know, what's what are you looking for on the call at if you're when you're tuning in the call.
So so I don't want to be inconsistent. You know, I posted in the blog before we kick things off clarity. But actually, to be fair, I think that Tesla has given us one single line of clarity. So I'm just going to read it. This update may resolve in a result in achieving less cost reductions than previously expected. So Carol read out the section in which they outline the explanation.
There will be multiple affordable models, but I think that the market, and indeed because Elon Musk kind of guided us there, was thinking this will be a brand new model, maybe it will be called M two, maybe it will specifically cost twenty five thousand US dollars. I think in that single line of the shareholder deck on page ten, they're saying it will be less expensive than the average cost of a while or three. Now it will not
be twenty five thousand dollars. And so now we go to the big picture clarity, how many of these things we build and what is the strategy with that visa v ROBOTAXI because they all occupy the same physical production space in Austin. Based on our understanding, I also would think maybe the tone of Elon Musk Tim to answer your question. I thought he'd be a bit combative and frazzled. Yeah, now I just don't know.
Wait, wait surprised? All right, Edlerler, We're gonna let you go because we know you've got a full play to continue. But of course Bloomberg Technology co host ed Ludlow. But we got to talk about with Max final minute here or so Elon bingo.
Right, you know again, I've talked about this three months ago. This is a thing that many Tesla watchers, balls bears, everybody in between Elon Musk, super fans, Elon Musk's haters tend to do, which is to kind of create a bingo card and look for some of his catchphrases. So we at the Elon Inc. Podcast, we've got a new episode out right now and we have this bingo card. Just want to flag a few items. A horse that would be one.
Now.
Elon Musk has said that anyone who's driving a non autonomous card, not a ROBOTAXI, it'll be like driving a horse compared to a car. So see if he tries that line on us, a few others and to Grock and for reasonably optimistic, he's often reasonably optimistic about lots of things. So so yeah, lots of fun to be had here and we'll see if anyone gets bingo.
It's a fun card hopefully to get you.
Back in three months and also earlier than three months. I'll be sure to check out the Elon Inc. Podcast wherever you get your podcast. That's Max Chafkin, a columnist for Bloomberg business Week.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brout Auto with a Bloomberg Business app, or want us live on YouTube.
Yeah, there's a lot going on today right and as we try to keep you certainly up to date on what's going on in DC, and it all has to do with the ninety five billion dollars in emergency supplemental funding that would be provided as we've been talking about for Ukraine, Israel and also the Indo Pacific region under that measure working its way right now on the Senate floor. The measure would also require TikTok's Chinese owner to divest the video sharing app impost sanctions on Iran and sees
Russian assets. So there's a lot of pieces, but the big one really has to do with military aid, in particular almost sixty one billion for Ukraine team.
Well, let's get to the interview. Angelas Stan is a Russia and foreign policy expert. She's senior Fellow at Brookings Institution, also a former National Intelligence officer for Russia and Eurasia at the National Intelligence Council, and you also served in the Office of Policy Planning at the US Department of State. She's the author of the twenty nineteen book Putin's World, Russia Against the West and With the Rest. She's also
Professor Emerita of Government and Foreign Service at Georgetown. She joins US from Washington, DC.
Yeah, and she's been a go to throughout the Ukraine Russian War. So Angela, good to have you here with US. Ukraine President Zelenski telling NBC's Meet the Press over the weekend that this US support quote will really strengthen the armed forces of Ukraine and that now we would have all the chance to stabilize the situation. From your perspective, how important is this US measure from a financial perspective, military perspective, and also from a show of support perspective.
So I think it's crucially important on all of those campts. This vote has been six months in the making, and in those six months, the Russians have made gains, particularly in the last few months, and the Ukrainians have literally been running out of ammunition and also air defenses. So what they really need is the artillery and they need
the air defenses. And frankly, if this vote had not taken place, and if Ukraine doesn't get the assistance, then I think their prospects would look pretty dim by the end of the year. If this all goes through, they have a fighting chance, if you like, to continue pushing back against the Russians and to do better in this war than they have been doing for the past six months.
A fighting chance. But what would you say to critics who say that even with this funding, you're just delaying the inevitable of Russian win here.
I don't think it's inevitable. Our European allies have also been stepping up and supplying more weapons, and they're financially doing more for Ukraine than we are. European Union with a fifteen billion a fifty billion euro financial instrument just a few months ago money that they've given to Ukraine. So it's not inevitable if one believes that at some point there will be a negotiation, and there will be There'll have to be some kind of a settlement over territory.
The Ukrainians can st gains with our assistance. And don't forget, we should never forget. Eighty percent of this money will go to US businesses and US jobs for people manufacturing those weapons.
Right.
We just talked with that Joe Matthew about replenishing the US defense dockpiles that have certainly been coming down as a result of this support. How is Ukraine doing in this fight? I feel like we've talked to you so many times about kind of where we are. Do we see an ending this year? Do we see an ending anytime soon?
I don't know.
How do you see it at this point?
Well, so, as I said, it's been, Ukraine has suffered some reversals in the past few months. Russians have taken a bit more territory. The Ukrainians really have a manpower shortage now, so a major challenge for Zelenski is to mobilize more young men. They've lowered the draft gage now from twenty seven to twenty five. Certainly they can go on fighting this year and into next year. What happens
after that really is anyone's guess. It depends also whether there's going to be more US assistance next year, which we don't know about. But the Russians seem to be doing pretty well now, and their economy is on a war footing, and they're just manufacturing weapons at a very high rate. And of course they're getting drones from Iran, and they're getting ammunition from North Korea, and the Russians do have more men that they can put in this fight than the Ukrainians do.
On the US front. What did you make of the change in position of House leadership, Professor? The idea that well that the Speaker was against it until he wasn't right.
I think Speaker Johnson listened to a lot of people. We know that he got briefings from the CIA director William Burns about just what the situation was actually like and how dire it was for the Ukrainians. He talked to a number of top Republicans, as we know in the Senate, starting with Mitch McConnell there and the people
who were very much in favor of this assistance. He talked to Ukrainian evangelicals who managed to tell him that what Marjorie Taylor Green had said about Christian's being persecuted
in Ukraine is just not true. They gain them. So he talked to a wide variety of other people, and in the end, I think the most important thing maybe was going to mar Lago and meeting with former President Trump, who himself understood that he didn't really want there to be a Russian victory, particularly if he were then in the White House, and therefore, despite his earlier opposition, President Trump, he was in favor of it as long as some of it is alone, and some of this money, I
think nine billion of it is alone, but I should say it's a forgivable loan.
Exactly exactly How are you thinking about Vladimir Putin at this point and how he could possibly end this war? Does he have to save face.
And what his.
Ambitions still are when it comes to his country and its ambitions.
Yeah, Well, the Kremlin is furious about the vote in the House, and they're furious about this assistance. We know that there was an emergency meeting in the Croun and very late at night after the House passed the bill. I don't think the Putin's ambitions in Ukraine have changed. He still wants Russia to dominate Ukraine, and he still wants there to be regime change in Kiev. He may understand now that it's going to be much more difficult to do, and he can always tell his people that
Russia has been victorious. He could settle for something less than the maximum demands, but that would involve territory that Russia has already taken since February of twenty twenty two. He might not be willing to give any.
Of that up.
So with them, I think until this House vote was passed, the Russian thought that they were really in the home stretch of winning this war. I think now they have to reevaluate that.
But I mean, in terms of ambitions beyond Ukraine, can we think, do you still think that in president Vladimir Putin Angela might have some ambitions beyond that?
Only no doubt does?
I mean?
I think the next country would be Moldova, which has a rather fragile political system and where we know that the Russians definitely have ambitions. The Baltic States and Poland are obviously very concerned. I don't think it would be possible for Russia to do another major invasion anytime of a different country anytime soon. But it can also chip away, particularly through the use of disinformation or in the case of Moldova, by supporting and funding pro Russian parties that
will undermine the political system there. But certainly, as long as he's in the Kremlin, I don't think he's going to give up any of these ambitions.
So you know, we have been speaking to you, doctor Sten many times over the last two plus years about Russia's invasion of Ukraine. Given where we are, where we are today, what is your realistic view on how it could And you did say that Putin might not go as far as regime change and actually taking over the entire country. But what's a realistic way for our audience to understand how we could see an end here?
Well, there could be there would be an end to it if both sides, first of all, agree that it's time to negotiate, and neither side agrees on that at the moment, and if Ukraine, the Ukrainian side is willing to accept a territorial settlement that falls short of their maximum goals which of course is taking back all territory that Russia has occupied since twenty fourteen, And if the Russians were willing, if the Kremlin were willing to accept
a settlement that again falls short of their maximum goals, which is taking over all of Ukraine. But I think what we would see would be much more a ceasefire, and then you might not it might be a Korean situation where you actually don't have a treaty between the two sides, but you have de facto ceasefire. But then you would have to have troops, you know, ensuring that
the ceasefire isn't broken. And I think the Ukrainians would have to get pretty strong security guarantees from all of the major Western countries to bolster them, to arm them, to try and deter any future Russian invasion.
Angela, how do you think about what happened in the US election, who is ultimately in the White House and what that means potentially this war is still going on, what it might mean.
Well, so I think if President Biden is reelected, you know, there will be continued support for Ukraine. Will the US be willing to do more? Will it be willing to supply Ukraine with the range of weapons that will actually reach deep into Russian territory.
That's a question.
If President Trump wins the election, he said that he would end the war quickly. We'll see whether that happens. But I think even if if he were instrumental in ending the war, I presume that a Trump administration would want to have a settlement in which Ukraine isn't completely defeated and Russia can say that it won. I'm not sure that that would be in their interest or in
the interests of the United States. So I'm not sure how they would do that, but I think that would that's ultimately determined what they do.
That's my question, doctor sent Short of actually using American force, how does the US and a war.
Well, I mean, if the Trump administration were to say to Ukraine, Okay, we're cutting off all funding, and if the Europeans began to cut off their funding, then of course it would be very difficult for the Ukrainians to continue fighting, although they would fight as long as they could with whatever they had now. So that's one scenario, which would be to force them to the negotiating table, but that would take some time too.
Hey, just to recap everybody. We are, of course talking with the Angela Stent Senior fell at the Brookings Institution. But again, just moments ago, the US Senate has enough votes to advance the ninety five billion dollar aid package providing funding to Ukraine, Israel, and Taiwan. The vote to limit debate and move to final passage as soon as today is though ongoing, and as we've mentioned also, there
were four pieces, if you will, to this measure. The package includes a measure that would force ByteDance to divest its ownership of TikTok or face a band here in the United States. But again, as we talked about with Joe Matthew earlier, this is very key in kind of basically putting an end to a lot of the debate that was happening on the floor and moving it along.
So it raises the question for you, doctor stan about if you think that this bill, potential bill, this measure goes far enough.
I think it goes far enough. So far, yes, I mean, if we're going to supply Ukraine with long range missiles, which we are, I do know that we already have some weapons over the border in Poland. President Biden to in Zelensky on Monday that some of those weapons can get to Ukraine very quickly as long as he gets the legislation on his desk to sign it. But I think hopefully it's not the last assistance package that they will be for Ukraine.
All Right, Kurn leave with there as always keeping us up to date on this and really giving us some perspective. Angela Stent, Senior fellow at the Brookings Institution. Her book Putin's World, Russia against the West and with the rest former policy and intelligence official joining us there. From the nation's capital.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station just Say Alexa playing Bloomberg eleven thirty.
Well.
We spent a good portion of our program earlier talking about the sweeping foreign aid package making its way through the capital, with emergency supplemental funding for Ukraine, Israel in the Indo Pacific region. Another part of the measure would also require TikTok Chinese owner to divest the video sharing app, and that's where we want to go.
Now, Yeah, we do, and we've got a great roundtable to do it. Bloomberg News Technology reporter Alex Barrinka and Bloomberg Opinion US Technology columnist Dave Lee are both here with us. Both of them have been all over this story from the very beginning. Alex joining us out there in our La Bureau Davis right here in our Bloomberg Interactive Broker studio. Alex, let me start with you. We've been talking so much about this measure making its way
through the Senate through lawmakers. It does have this provision for TikTok and a band. Specifically, let me just go to it sanctions the TikTok sanctions Russian assets other language. That's kind of the other fourth chunk of it. Long way though before we would see TikTok band here in the United States.
Certainly, if this bill does get signed into law, which a lot of folks who are watching the progression of it think will happen as soon as this week, there would be about a year for byte Dance to have some kind of separation from TikTok. That is, Byte Dance, TikTok's Chinese parent company who under this law would be forced to basically sell its stake. It is a company in a foreign adversary country. China has laws that potentially can allow for data from byte Dance to be seen
by the Chinese government. Those are the heart of the concerns from the Senate. But I will tell you if this law does pass and does force byte Dance to go through some separation, that's not the end of the fight.
Our sources familiar.
With the thinking both that Bite Dance and TikTok have said that this is going to head to the courts first before Byte Dance will be willing to just easily throw up its hands and say, hey, yeah, sure we'll get rid of this really valuable asset.
Yeah, well, you've got one hundred and seventy million US users. You don't just walk away from it. Dave, let's bring you into this. Should there even be a fight at all, because we do wonder about, you know, is the US, as you write in your column, you know, a little bit being you know, hypocritical in terms of the pushback against TikTok. How are you seeing it? How are you thinking about it?
Well?
I think one of the big questions about how this entire episode has happened, is, you know, the nature of which this has been very very quickly moved through the process, through the House, through the Senate, as we've just seen today, without much scrutiny of what exactly the concern about TikTok is. Now there's you know, there's one framing of the app as being and I think I described it this way and the pieces as like a coiled spring, right, a
method by which it's China. Should they ever want to be able to sort of exert this extreme influence over many people in America one hundred and seventy million users, many of them young users as well, that might be receptive to certain messaging. However, we haven't actually seen evidence
of that happening. And while we've heard a lot of discussion around how senators and representatives have had these briefings, these kind of behind closed doors briefings, I think it's going to take a little bit more to convince the public that this was a move done for those reasons. And also, as we're just hearing from from Alex you know, this is going to go to the courts, and the question there is going to be why Is this not something that tramples the free speech rights of the user
of TikTok? What is the national security argument?
Let's see it well, Alex, how would proponents of a bill to ban TikTok in the US respond to what Dave was just talking about? What is the national security argument here?
Like he said, it's.
Been kind of a trust us its scary type of argument. You've heard folks say that, oh, the government could get its hands on sensitive user data, things like your name, your address, what you're interested in, where your location is. They also have gone down this path, like Dave was talking about, around influence, saying, hey, well the Chinese government could influence what these vulnerable young minds could see. But on both sides of those issues, we haven't heard a
lot from lawmakers. We've actually heard also from some lawmakers who have been in these closed door briefings who said what they're hearing is really similar to their experience actually on other social media apps who are not owned by a Chinese parent company. As this does go to the courts, I think Dave's question is the right one. When are we going to see the proof? And is that the right venue? I will remind you guys. I think we talked about it a month ago when we published the
story and Business Week. There was a nineteen sixty five Supreme Court case where the US Postal Service was trying to limit Chinese propaganda going to American users, and Scotis actually ruled that Americans have every right to see Chinese propaganda and the government cannot intervene. So depending on kind of which legal battle lands, where there's an expectation that there could be several different arguments that are pushed against
this bill. If it's signed into law, it might be we might see some onus on the government to sort of justify some of these things, depending on what TikTok or other plaintiffs like creators or merchants, whoever ends up in those legal battles, whatever argument they bring forward, we might need to see some proof for the judicial system to work things out.
David, you know, I also do wonder this whole li. I feel like freedom of speech is just really a big issue we're trying to kind of grapple with in the US with it or globally really in a social media world. Having said that, you know, I'm trying to figure out what the real issue is it is it that China can just peep into things that have access
to the information. As you say, China could save itself a lot of time and effort by buying America's data from the many shady brokers happy to sell it to them. So there's a lot of information already out there. And to be fair, many would argue the US government also is tapping into things and accessing a lot of data on its adversaries.
Yes.
Absolutely, And you know one of the parts of this debate that comes up is that you know, China doesn't allow US apps to to become popular. Yeah, deliberation become popular in China. So you know there is this sort of back and forth here on this. I argue in the column that you know, America likes to think it holds itself to a higher standard than China on these kind of things, which is which you know historically has been true. But you know, the question of user data,
a lot of it comes down to this. The algorithm that TikTok hats, right, and this is you know, the most lucrative algorithm in the world. And it's interesting that even if TikTok was to be sold to a US owner China has signaled that the algorithm wouldn't be part of that sale, and so the question might then be, well,
use what value is the app? Anyway, even if it was to be divested, which you know, any buyer would be very, very aware of the fact that they weren't getting the secret source of what TikTok is.
Alex come in on this, like, I do think we're grappling with this idea of you know, data, who owned it, who gets access to it, and freedom of information or not freedom of information, but freedom of speech. Like, help me out how you're seeing this and how it's kind of working its way through the global tech industry.
Yeah, and it's kind of happening both in TikTok's argument, who's saying, Look, if we want to protect users, we need to have comprehensive data privacy policy and not just you guys coming after us and fighting on ownership issues. Obviously, the likes of some of TikTok's biggest competitors are not always the friendliest of the idea of new legislation. I'll also point to what I've seen from users.
I've been spending a lot of time on TikTok.
Per usual, it is my job, and a lot of folks are really upset that they feel like the government is getting in the way of a place that they feel is.
Very amicable to regular people.
Going viral and talking on the app, TikTok kind of changed the game to that extent. So when it comes down to this kind of freedom of speech argument, I'm also very fascinated to see how people take this bill if it becomes law going into the election. Are they looking at who their legislators are, who the president is, Joe Biden, who would be the one signing this, and taking that into account as they sign this bill, and also does TikTok maybe try to wait until there's a
friendly administration. Donald Trump, the president who signed the first executive order to ban the app, has now since changed his tune, saying the app should probably stay in America and that those are his feelings these days.
That argument will be one that I'm sure will come up, particularly.
In the eyes of users and in the eyes of TikTok will take this to the courts.
Hey, Dave, I'm wondering in your in your reporting in the column that you wrote the idea of it's not this is not necessarily part of the band. But one thing that I hear from parents all the time is that it's completely addictive. The algorithm serves up content that I don't necessarily want my kid to see all the time.
And there are arguments, and I don't know to what extent that these are baseless arguments about how the Chinese version of TikTok douyan Is serves different content than what Americans see on the Byte Dance TikTok version here in the US.
Yeah, I don't think they've actually been backed up by sort of firm da and the differences suggestion on Douyen you'll get think things about math and rights and where it was on TikTok, you'll get.
People love to talk about. But I get to see proof of that.
Yes, same s. I mean, I think it's an interesting fool that that could help be happening. I think one of the things that striking to me about how many people on TikTok are viewing this and like Alex, it's my job, that's my excuse I use for.
You all the time as well.
Right, ninety nine point nine percent is for work, point one might be for your own.
But this the reaction is many of them are saying, well, hold on, there's a bill to protect children online that's currently stalled in Congress.
There's another bill.
To put a data privacy law on the books finally in America. That seems like a big struggle to get that passed as well. I think many people look at this and said, why is it that this issue, that TikTok issue, has flown through like nothing else, and yet these fundamental laws that could protect users more broadly have just sort of time and time again.
I just want to be compensated for all my data that's helping people. Alex One last thought, and Dave has this in his story that it's interesting, you know, we do this all the time. We wonder about the folks in Washington. No disrespect lawmakers, but whether they really understand it. And Dave, you put in your story a senator asking Mark Zuckerberg how does Facebook make money? Or when TikTok CEOs was asked whether the app connects to home Wi Fi.
So there is this understanding that maybe not everybody understands how it all works. Last thirty seconds? Is that important? Like that maybe they're not so up on it.
The lawmakers users think it's really important.
They think that again, this is a place where folks have been there to be able to share their mind, and they feel like the government is taking away a place where a lot of the TikTok users feel like they're getting kind of a unvetted, raw view of what's happening in the world, and it's it's a kind of platform for them to share their thoughts. So certainly those kind of questions turn heads freezers of TikTok.
And Facebook makes money by advertising by their way and no you cannot connect it to you, and by selling.
Too.
Alex Barenka, Dave Lae, We wanted to do this round table. You did it so well. Thank you so much. This is Bloomberg, Markle.
The Journal.
Yeah, but you let me drive?
Oh no, no, no, no, honey, please, how do the gravels? Let's I want to drive.
It's a good question.
This is the drive to the globe. Do me well, Bern on Bloomberg Radio.
All right, everybody just got about eighteen minutes left in today's trading session, getting ready to wrap shortly the Tuesday trade. Having said that, our next guest says, large profitable tech companies are beneficiaries of higher interest rates. She goes so far to call them the new defensive companies. And yes, folks, she meets companies like Apple, Meta, Amazon, Microsoft, and Alphabet. So let's get to it.
We're talking about none other than Nancy Tangler, CEO and a chief investment officer at Laffer Tangler Investments, also the author of a women's guide to successful investing. She's here in our Bloomberg Interactive Broker's studio. So the new defensive. Typically when we see rates go up, the large well, a lot of tech companies, particularly unprofitable tech companies move lower. But why tech overall? Is it because of just the cash that they have on their balance sheets?
Well, I thank you for that intro.
I hope you're welcome.
I think the secular narrative is a tailwind for these companies and we're going to hear about that with AI in the coming earnings reports and how much it is impacting earnings. But yeah, I mean, if you look at a company like Meta, their earned interest earned on cash went up threefold. Google went up.
Seventy eight percent.
And the leader in this it's real money, it's real, real money, and the leader in this pack is Microsoft, which had a blowout second quarter last year and has continued to accumulate cash. And then you sort of add to that the fact that nobody can get any M and A through this FTC. I think you're going to start to see some return of capital shareholders.
Yeah, it's kind of interesting. I feel like there's momentum. I think courtesy of you. I think Abigail do that.
That's what I was thinking when I asked the question, or own Abigail do a little Chief Markets correspondent mentioned this a couple of weeks ago about the cash that these companies have on hand in the way it's generating money.
Well, in a higher rate environment, that means something, right, and so they're not as problematic. You're a smaller company in a higher rate environment, you don't have that access to cash so easily because you're and you probably are going to need to tap debt markets if you will. These guys don't. They're actually okay, all right. Having said that, then how do you think about you know, do you buy them when there's a little bit of a pullback, what's the role in the portfolio? Do you buy all
of them? How do you think about it?
Yeah, I don't think you buy all of them, Carol, but I will say this, we were trimming the names in February. We didn't know the market was going to peak in March, and we were pretty disciplined in that regard. When things get overweighted, we trim. I mean, I can make an argument.
Just a superweighted call that you would trim back.
Yeah, or valuation, but I could make a case, and as I do in my book, that you probably should never trim. I mean, all the great wealth has come from one stock in a founder's portfolio. But that's what we do as professional money man. We've been back in adding to some of the names after this pullback correction, whatever you want to call it, because I do think that they're well positioned, and it goes back to our
analogy of the nineties. You know this is we have so many similarities ex globalization to the nineteen nineties, and I think the most important of that is productivity. And like old economy company Raytheon reported today they're going to report two hundred million dollars in productivity improvements this year, and a lot of that is because they're digitizing their
factories and connecting them. That stuff really matters, and it's going to be what drives earnings growth, and we think that's the only thing that matters, and the FED matters a lot less.
Which stocks are you buying right now?
Where you've adding We've been adding to names like Oracle, where we will be adding to LAMB after they report because it's been pretty disappointing in the chip space the report, just because we think there's probably a little bit more room to the downside and it gives you clarity. But we are in many of these names at such much
lower levels. We've added to Microsoft, added to Google pretty significantly, And when you asked me this question, it's like in my head, Oh, in Adobe, we've been adding to on the weakness and Palwelto Networks, which sold off twenty eight percent after the last ernest reports.
I to hear Tesla, we will be you will be, Yeah, talk to us about that.
Okay.
So, I mean it's not the stock I'm really and Spotify, by the way, it's not the stock I really want to defend. But you know, this is a CEO who thrives in chaos, and the last time that it was this bad, the company didn't even have earnings. I bought the stock at one hundred names.
You spot up keeping no finish sorry, yes, yes, I know, I know, I know. The focus go ahead.
We bought about one hundred and eighty pre splits ten then yes, and then he was smoking pot on the Joe Rogan Show, drinking whiskey. People were quitting. The board was just super not independent. He was sleeping on the factory floor. You remember, right, we sold it. I felt like it was it was gambling documented, so I took a double and the stock's up five hundred and fifty five percent since then, including the recent pullback. So we've added to the stock.
A year ago.
We reinitiated it at about one hundred and four dollars a share. We sold some when it got in the two hundreds. We bought at some a little bit too soon at onoint eight, and at current levels, we think a lot of the bad news is priced in. And the last thing I'll say about it, it's only trading as an EV company. But the really interesting part of the business is the utility grade battery pack business, which is growing fifty percent a year and will dwarf the
EV business. At about one hundred and twenty billion in market valuation in about five years.
Is there anything that comes off at the earnings tonight that would make you, I don't know, either buy, sell or do something.
I mean, I don't know.
I don't They don't sound like you're very reactionary that way.
Now.
I don't think Elon Musk could say anything that would surprise me. If by chance, Donald Trump gets invested, I think he will no longer Elon that is be the man that everyone should hate. And we'll go back to parsing the tweets of another well known, outspoken Yeah, I want to go back.
To Spotify surging today, swing to profit boost and paid subscribers. You know, woa, I forgot to do this as one of my gainers today. But it's up about thirteen percent, was up as much as seventeen percent. When were you guys buying it?
We bought in the high eighties and this was this was a plant based on today at three to six.
Yeah.
Well, we sometimes get them right. We don't not waste get them right. But and we were just.
You know, we were convinced that they have a lot of room to raise prices. They'd held the business. You know, they were able to grow it. This notion where they went out and made it a more open format so you can get the Joe Rogan podcast on other platforms. That was brilliant. That was a pivot, and I think that the management team should be commended. Now they've been able to stick a couple of price increases because they waited so long, I think it is even more impactful
as opposed to some of the names. The consumer names came out today, they're still raising prices.
You know.
Okay, EPs is up, but volumes are down. At some point that party comes to an end.
What do you stand away from?
Uh, for the moment, we are underweight reats, we're underweight utility.
You happened treasures at all with the move up and rates? Yeah, well where are you so?
Personally, this is the first time I've ever runed a treasury in my entire life. We've been putting clients in short ladders and we just started to extend duration a couple of weeks ago.
How far out too?
Okay, we're not going very far out because we think there's an opportunity to morph into unis and corporates when when the treasury short game is done and so that's we've just been rolling these short ladders and it's worked out pretty well.
What I've been directed way too much.
We love it when you join us now, No, it's especially in person.
Well just twenty seconds. I mean, does it feel like things are going to be okay? Well you you actually hate it, Carol.
I think the economy is slowing somewhat okayst names have not performed well, you got the the S and P Global pm I stay manufacturer has gone from expansionary to contractionery, and the labor market is softening. I think I feel like there's that tone. Sorry, yeah, I think that's what I'm not sorry it is. I think that'll let the fat off the hook. Nancy Tangler, thank you so much.
I appreciate it. Of Laffer Tangler.
This is the Bloomberg Business Week podcast of a Little 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