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It's the Bloomberg Intelligence Radio. We are broadcasting to you live from our Interactive broker studio right here in midtown Manhattan. All right, So two days later, we finally get GM's conference call slashing guidance with up to five billion dollar hit from taruffs. Joining US now David Well to Bloomberg Detroit Bureau chief.
David.
I thought that these offsets that were announced on Monday or Tuesday, I forget, my time has no meaning, were supposed to help this part from the administration.
They did. I mean, some analysts had they hit to General Motors from tariffs being as high as ten billion dollars. Wow, so it did help some. You still have a twenty five percent tariff on imported vehicle. This does help offset some of the parts tariffs. And I think what GM's hoping for here is that eventually the Trump administration gets trade deals with South Korea for example, and some something new with USMCA, because that's where GM's really taking a
big hit. Here are those countries in terms of where they get imported vehicles from, and so it's four to five billion dollars. Two billion of that is from the vehicles they important, the rest is parts. So if the automotisy wants to escape heavy hit from tariffs, there's still a lot more to be done in terms of either resourcing parts or getting some new trade deals.
So, David, is the expectation this is kind of a worst case scenario, or this is a company positioning that as, hey, this is kind of what we know when this is kind of our best guess.
It's what they know based on the structure of the tariffs right now. So let's say next week the Trump administration cut a deal to lower tariffs with South Korea. GM gets a couple hundred thousand vehicles, all entry level models from its factories in Korea. That would lower this burden. If they got something that would reduce the tariffs on the non US parts in vehicles. GM makes some Canada
and Mexico that would also give them some relief. But right now those are the so called Ventanyl tariffs with Canada and Mexico. Those are still hanging out there. Those are still in force here, So they would need something that would either lower that or get rid of those to really get this burden down unless they start relocating vehicles and doing things like that.
David earlier the Wall Street Journal reporting that the board at Tesla may have started efforts to take a look at a search for a new chief executive officer to succeed Elon Musk. What's your take on.
That big company denied it about these things when there's there's a story written with conviction, uh, and then a denial with conviction. You know, you do wonder if maybe some people on the board started talking to other executives or executive search firms out there to get some ideas. But it wasn't maybe an official board search. That's me speculating, But look, Elon Musk has a lot of interest here and this has always been an issue with Tesla's shareholders.
And this is well before he was in the Trump administration and politically active with Doge. He had the boring company of course has SpaceX. Then he got Twitter now X and he's got Tesla, and then you add him to a big government role, and this is somebody who has a lot of different things going on. And when Tesla starts to struggle shareholders and the board has to
do it's fiduciary duty. If shareholders are asking questions, maybe there's maybe they're asking questions about when this guy is going to come back in the chair, and if he's not, then they need someone who's going to really take a look at getting their sales turned around.
If Elon Musk goes back, as it looks like he will to Tesla, does all the problem just go away?
Now?
It doesn't mean Tesla's got some real issues here. The product line is very stale, right. Most of these vehicles, the model esc goes back twelve years and the other vehicles in the lineup, with the exception of cyber truck, all kind of carry the same basic styling on the exterior, right, So nothing looks fresh. The cyber truck is obviously very fresh and different, but it's a niche product. It's an expensive pickup truck that a lot of people think is
pretty weird looking. So this is a company with stale product. A lot of new competition from the Korean automakers in the US from General motors, heavy competition in China. European automakers, especially on the high end, have a lot of new EV's in Europe, so they don't have an Olagaboli like they did five years ago, and they just haven't freshened up the product line. And then there's there's the AI and the autonomy UH strategy of Tesla's. I think that's
going to take a while. It took Waynwell a very long time of testing vehicles on public roads to actually launch a service. Tesla hasn't done any of that yet. So you're looking at turning around a product line that's pretty stale in the face of tough competition, and you're looking at going from you know, an announcement last year on autonomous vehicles to robotaxis on the road, which took
Waymewell about at least a decade. These are things that that are difficult to do, and you know, getting an active CEO back in the chair helps, but it's still it's still a lot of heavy lifting to get those initiatives going.
All right, David, thank you so much. Appreciate a lot going on in the world of the automobile. David Walsh, Bloomberg Detroit, a bureau chief.
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All right, let's get more on Cole's here. That stock readjusting after we saw the CEO being ousted from inappropriate behavior and a probe that uncovers personal ties to the vendor. Yet but overall, like the stock's not done well, as Nora was saying, Mary Ross Gilbert s Bloomberg Intelligence senior equity analyst who covers retail for us. Hey, Mary, if we just take out this ten minute pop, ten minute, ten percent pop on the CEO ouster, how is Coles actually doing?
So that's a good question, Alex, So really, what's happening here? Yes, we had the news that the CEO was ousted, but that that's a big It's big news, right because now we have Michael Bender stepping in as CEO, and he's the fourth and under three years. But let's give you a little bit of a backdrop since twenty twenty one, when the company added so far Warris shops to their stores.
Their revenues have fallen two point two billion, but in the meantime, so Fura added one point eight billion, So that means that their revenues are down almost five billion away from Beauty, So that kind of gives you the backdrop of what's happening operationally here and with these different CEOs, nobody has seemed to find the formula of how to
get back to growth. The reason why the stock has popped today is really because they came out with their first quarter preliminary figures showing that their comp sales were down four to four point three percent, when the company was guiding down six percent and consensus was at down six point four percent, and earnings were even higher. So what I mean by higher is from an operating income perspective, consensus was at six million, and they're guiding to, you know,
somewhere around forty million, So that's much better. And so from an EPs perspective, the loss is going to be about half of what analysts expected, and that's really the pop and the good news here is that the company is rich in real estate, and so if you look at the value potential value of the real estate holdings, which could be nearly six billion, And if you look at their stock and where it's trading and how it's
valuing the business, that's under five billion. So that kind of gives you, I sort of a framework.
When you start going to the value of the real estate, then you know the business. It's never a good sign trouble. We did that with Macy's and the value of their air rights in Manhattan. That's not good. So, Mary, what is Cole saying? What are some of the retailers that you cover. What are they saying about tariffs, their ability to manage terrorsts, how much they will take in their profit margin versus how much they'll try to pass along to consumers.
Paul, You're right, tariffs is really a big issue, and there was no commentary regarding that, neither in this call and neither in their.
Fourth quarter call.
But we do know that roughly thirty over thirty percent of their revenues they directly import. So there is going to be a hit here or some sort of exposure. And we're still early in the earnings for the first quarter, because that's where we're going to really get an update. Because when these companies reported their fourth quarter earnings. We were talking about tariffs in that sort of twenty percent range and now we're at one forty five for China.
So yeah, so we're going to learn more obviously when we get the call, but for now there's not a lot of disclosure around it, but we do know there is an impact.
All right, Mary, thank you so much. We always appreciate getting your thoughts on the global retailers here, Mary Ross, Gilbert Bloomberg Intelligence Senior Equdannilysty covers the retail space.
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One of the big stories here today from an earning's perspective is Facebook. Some of the kids call it meta metaight stocks up six percent here today on some pretty solid numbers. And you want to talk about this company, There's really only a couple of folks you want to talk to, and one of them is David Kirkpatrick, founder of Techomanie in New York, and of course he is the author of what I think remains the definitive book about Facebook in the early days of Facebook. It's called
The Facebook Effect. It's a great book, highly recommended. Hey David, what do you make of the numbers coming out of Meta these days?
Well, thanks, Paul, thanks for your nice comments.
Well, Meta really is the kind of Bellweather I think for what's happening with the digital economy, and their numbers were quite surprisingly good, almost spectacular, you might say.
I mean, they've been delivering very steadily for a long time.
But I think the most important thing that their numbers indicated, in the comments that Zuckerberg made yesterday, indicated are that, you know, this very crazy, unpredictable economic environment we're in right now, which you were just discussing regarding retail, is not likely.
To affect these companies as much as some feared, at least in the near term. And that's really good news.
There's a whole lot about AI and other stuff that we learned about what they're doing that was quite spectacular also.
Yeah, so let's get to that. So, as you mentioned, the advertising business, which is ninety eight percent of the company's revenue, is continued to grow.
So check that box.
Let's get to the AI because they unveiled a new standalone AI app called Meta AI. What is that? What's it going to do for me?
Well, thanks, Alex Meda.
You know, Meta is one of the top players in AI, there's no question.
And they are spending an extraordinary amount on this.
I mean they up their capital expenditure estimate to up to seventy two billion from a high of sixty five billion, and that's like a huge percentage above last year which was under forty billion. So they're really really ranking really hard on data center investment and AAR. And what they want to do is they want to compete head to head with chat, GPT and all the other claud et cetera, all the other AIS that are directed particularly at consumers.
And they have a unique advantage in doing that because they have this extraordinary, unique trove of data about all of us that they have been accumulating for decades and they can use that in the training of the AI to customize and personalize the results they give to people in a way that could be a major competitive differentiator down the road. And of course they'll use it in all the normal ways, you know, they bring it into.
A WhatsApp, Chat, et cetera.
But they I think are extremely well positioned to become a very very major force in especially consumer AI.
And Alexander Cockter parties. People often come up to me and say, hey, Paul, give me an example of AI. An example I give is just what David explained to you. So long these advertising companies like Google and Facebook, they can really get to know who the consumer is better and better and better and then charge more for the ads.
I mean, and that's what kind of what I think, right.
Well, that's true too, yeah, I mean, they're customizing the ads using AI.
That's the thing I didn't even mention. I'm talking about the.
Results before, but the ads themselves will be far more accurately targeted.
And they're already doing that tremendously often.
And isn't that just like free training because you have all the input from Instagram and threads and Facebook and all that.
Absolutely, they have the best train one of the best training maybe the best training purpose for consumer.
AI that anybody has.
I mean, this is the thing that has differentiated Facebook and Meta from the beginning was the depth and volume of their data about individuals. It continues to get more and more rich and they're figuring out new ways to mine it in the age of AI, and that is going to be a huge advantage.
Hey, Dave, you look at this stock chart. Since it's IPO, the only thing that's ever derailed this stock has been the metaverse. What's the latest on that whole thing? How are you positioning it?
Well, they don't talk about it nearly as much as they did, but you know, I think what they're finding is that there may be an overlap between the metaverse and AI. And you know, they're they're one of the things that I'd say they got into because of their metaverse obsession is hardware, and they are now saying that their hardware business, their ray Ban AI glasses, their Quest gaming and other virtual reality headsets, those are going to
be an incredible entree into the world of AI. And I think what we'll see is that they dovetail their work in metaverse in immersive content.
With their work in AI. I don't think we can exactly predict how that's going to.
Happen, but certainly, you know, glasses that sort of look at the world around you and make give you answers and information about everything you see. That's something we can all use, and it's starting to happen, and they would not be in that position had they not made that many, many tens of billions dollar investment in Metaverse.
Now was that a good investment? I don't know. I don't think Zuckerberg.
Would today say that metaverse is their future the way he did not very long real clearly AI is the future, but there will be an.
Overlat Just some breaking news here for you. Apparently the US is now weighing easing Navidia Chip curbs on the UAE. This comes as Trump is planning a visit to the region. Apparently it's his first overseas trip aside from going to the Pope s funeral, so that is definitely quite interesting. In Vidia and other tech companies have been pushing for this us A rule change, and Trump said President Trump sad to visit the UAE on a golf trip coming
later this month. All right, David, we're gonna leave it there. David Kirkpatrick joining us one of the best. He literally wrote the book on Facebook, founder of Teconomy, helping us to break through meta earnings. Here's my question. Oh well, went away, look at that question. Oh video and video got a celebrating yesterday from Seagate. Did you see that?
I did not see that.
Say AI is priced in and their customers are going to start making their own AI check.
Interesting. The stocks up five percent today, so a good move here, and again seems like when you think about these TIFFs, I think what we learned from the first Trump presidency to now is a very fluid situation. There's an announcement, then there's some negotiation, then there's some walk back, there's some change, and you're not really sure where you're going to end up. I just go back and look at kind of how everybody behaved back in the first
Trump administration. Stock market did okay? I mean, it's just everything.
It just relaxs.
Really with the UA is not China, I don't know.
I would suggest maybe those conversations are ongoing and we'll see, but it gives us something to talk about.
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Let's check in with the professional here, Marsha McGregor, head of Portfolio Strategy, where the CIO at Meryl and Bank of America Private Bank. I like keeping the Meryl name because the Meryl names wanted the great names on the makes a title really long. But I would have kept Marylyn the name. I worked at Maryland, so the Thundering heard all that kind of stuff. I think when I worked at Meryl's a biker, I felt like we could get any deal. I don't care who I was competing against.
I felt like we could beat them because that's how good I thought the Meryl folks were. So Marshie, thanks so much for joining us here. Boy volatility, I mean, if you like it, this is your kind of market. I guess what kind of conversations are you having with your clients these days?
Yeah, I mean we're trying to help our clients kind of navigate through what I think of almost as this dense fog of uncertainty of course, on the policy front, on the macro front, and really trying to get our clients to take a step back understand that being really well to versified, being really disciplined in a market that can be can probably continue.
To feel choppy.
From here is the most important thing we can do with investors. So I say, like, stay diversified, stay invested, really stick to our knitting here. This fog will lift and we'll be able to see through to the other side.
When you say diversify, everyone says that what does diversify mean to you over there at Bank of America, Meryl.
Yeah, when I think about our portfolio positioning right now, we do have a preference for equities over fixed income, and its global equities, so we have a pretty significant strategic weighting both to international developed equities and emerging markets. And then on the fixed income side, we're actually not taking huge positions on the fixed income side. We like to use fixed income as a diversifier, kind of as
that ballast of the portfolio. And then, of course, for our clients that are qualified investors, alternative investments makes a lot of sense, private markets makes a lot of sense in a well diversified portfolio, and of course those big overarching themes. So yes, we're in this moment of you know, I think peak uncertainty is behind us, fortunately, but we're in this moment of uncertainty about what the economy looks
like going forward. But I think there's a lot of trends and themes that aren't changing, like the innovation in our economy, like investment in infrastructure, data centers, areas like that. I don't think those big picture trends are necessarily going to change because they're so long term.
Marshie, we've seen over the list, I think, just here in twenty twenty five and maybe late twenty four kind of a move into international equities, maybe even fun flows material fun flows out of the US market into other parts of the world. How do you guys think about the US versus non US?
Yeah, when I think about international markets, certainly a dollar coming off the way I think of it like the eye popping strength that we had seen recently. So we have this dollar that's moderating. Our few is that the dollar likely continues to moderate from here, really kind of lending some support to international markets. But what keeps me from getting outright bullish outside of the US is we
haven't seen the earnings come through. While the US earnings picture expectations have clearly been trimmed over the last several weeks, we still think US corporate earnings stay positive in terms of a growth rate through all of this uncertainty, So I need to see the green shoots on the earning side to get me a lot more positive on international markets. But a dollar that is moderating I think will likely continue to help international from here, probably for the balance
of this year. So the answer is I want to own both, but I do still have a preference for US relative to the rest of the world.
What about other themes that we've seen. Energy has just gotten crushed, Utilities were kind of rising with the AI play. They became a growth story even though they're also considered a safe haven. What about those trends we were looking at like like eight months ago that now have kind of fallen out by the wayside.
Yeah, well, it's really interesting if we rewind before April. Second, this market weakness really started as a rotational correction away from kind of the most overvalued expensive magnificent seven tech names. So our view had been it would be the other four hundred and ninety three that led the way for twenty twenty five, and that's still the case. I think it's going to be this broader market participation. We're talking
to clients about playing defense end offense. So defense, as you mentioned, still looks like utilities a way to kind of think about playing that defense just through the S and P five hundred. I also like dividend paying stocks, especially in a world where we're wondering if the FED will or won't cut as the economy shows signs of softening. I think dividend paying stocks and dividend growers it's going
to be really interesting. You know, when I think about energy as a sector, it's the only sector I think that's in negative territory in the most recent period for the index this year. You know, I'm a little cautious on energy. I do think when I think about what else could come from Washington to provide a little bit of a cushion from growth, lower energy prices would be a boost to the consumer. We need the consumer to stay resilient here, so I would think about it is
less positive on energy. The area of the market that I think has the potential to continue to lead as we get to the other side of this uncertainty is financials. Financials are going to be insulated from some of this trade noise as long as the consumer hangs in and our base cases that the US economy avoids a recession. I think that tees up financials which have pretty strong
internals to once again emerges market leadership. But to your point, artificial intelligence innovation, none of those trends are going anywhere, So I think the investment cycle continues as we're in this kind of big picture arms race for technology and AI.
Marcy, my notes, tell me that you're based in Savannah, Orga. Please tell me.
That's not the case.
That is the case.
How did you wrangle that? He's just jealous, hugely jealous.
Well, if it makes you feel better, I'm in New York pretty regularly. But yeah, as I look out the window here, I.
Mean that might be, pound for pound, the prettiest city in all of America. It is awesome, is it down there?
Yeah?
And the word I mean, she went the Rutgers good, but then she ends up in Savannah, Georgia for banks a jealousy.
Marcia, thank you so much.
For joining us.
We'll have you back.
I really appreciate getting some of your thoughts on Marcia Gregor. She's had a portfolio strategy for the CIO at Merrill and Bank of America Private Bank from Savannah.
George Savannah.
Oh, it is just it's a great long weekend trip from New York. Yeah, it's good, it's I highly recommend.
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