Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven News.
Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. So that's why we bring man Deep in here because he's the tech guy for along with Anna rog Ran and the team there Bloomberg Intelligence, a global tech team which Mandeep now runs with an iron fist. I am told Mandeep talk to us about these IPOs totally two
different companies, ARM and Instacart. How do you view ARM because that's kind of the one I think that's kind of got people's attention in the sense of is this an AI play or isn't it.
Well, So ARM clearly has a history in terms of, you know, being the core part of how AI has evolved and how chips have evolved because they are the IP providers when had come to computing and all the advancements that we've seen, and what they have told us is they have increased the royalty revenue. So basically they have increased the prices and everyone is on board in
terms of paying the higher prices for their technology. So that's a good sign ahead of the IPO, and I think from what we have gleaned so far, the IPO has been oversubscribed. Clearly everyone believes this is a technology that's not going away. It can be replaced, and hence, even though the growth was slow, the fact that they can raise prices like this, it's a good sign ahead of the IPO. Instacart, on the other hand, completely different
ballgame marketplace business. We know all the marketplace businesses haven't done very well, including Uber and lived since the IPO, but.
The marketplace business is Amazon and marketplace business as well.
Amazon is a two sided marketplace. Instacart is a three sided marketplace where you've got all the grocery kind of providers, you've got the shoppers, and then you've got the consumers. The problem and ride sharing, for example, is a two sided marketplace. You only have the consumers and the drivers,
so it's not a three sided marketplace. The problem in a three sided marketplace is your take rates are much lower because you have to split your take rates through you know two other providers in a two sided marketplace, it's a higher take rate. So instakarts business the unit economics look a lot better than you know, some of the other providers, whether it's storedash or Uber, simply because they leer a lot more ADS. For every dollar in
transaction revenue. They make about thirty cent in ADS. That's phenomenal for you know, unit economics. Problem is the top line is decelerating. They have flat order growth. Marketplaces are scale businesses. Once your top line slows, even if you make you know, thirty cents on a dollar for ADS, that's not good enough because you our scale isn't growing. And that is where I think they're pricing the IP appropriately to reflect that.
That's a good bet.
If you feel like COVID's coming back, Paul, I do not I know, but I'm saying if you do, you know, because that would grow their top line, that would masterfully.
That would at least for maybe there was a.
Pull forward during the Covid time. I mean, all these companies grew one hundred percent plus triple digit growth.
So I guess for Instacart one of the real questions will be valuation. So just walk us through kind of where the thing was valued at its peak, when people were going nuts getting stuff delivered home, maybe where it is now.
Yeah, so at its peak it was around thirty nine billion dollar valuation in twenty twenty one. And that's when you know.
See this, This is what I say, being in an old you know, old conjure Wall Street guy, that's Silicon Valley valuation. That's the kids you don't want to come to the public markets. Then you got to talk to people like me.
That's what happened here.
Well, and I think back in you know, twenty nineteen when Lyft went public, they went public at a twenty billion dollar valuation. There is more than two billion in an ipo. Well, clearly things have reset completely now and I think they're.
Worth a fifth of that now.
No lift is worth a gajillion, I mean no, they're worth a fifth. Yeah, yeah, exactly, I think uber Yeah.
So I think that's where instacart. Clearly the valuation is a lot more reasonable now. I can see the IPO pricing maybe revised upward to around ten to twelve billion, based on the initial pricing it's more a to nine billion. I can see it being revised slightly higher because of that ad revenue, and if they can convince investors at the road show that the top line will re accelerate, because right now, as I said, it's flat order growth. That's not good news when you're a growth story. So
clearly that top line acceleration is key. But the unit economics, as I said, for instacart to look a lot healthier than all the other marketplaces, including door, dash and Uber.
I'll tell you what, Paul, I'd rather get into IPOs in this climate then during the you know, the lift and Rivian, the heady days of massive valuations, because now we're also pessimistic about everything. Right now you have Mande coming on, going, Eh, the top line's not gonna grow very much. They're gonna have to cut what they are actually worth by like four times. And back then it
was like, who knows, this guy's the limit? You know, So at least now you can get in without that irrational exuberance.
I'd rather be a momentum investor than a value investor any day of the week because I don't have to be right on the names. I just have to jump on the mo here. I gotta pick the name, right, I gotta pick the valuation, right, I gotta be all kinds of right. So is this the beginning?
Man?
Deep?
I mean, this is gonna be a down round, to put it in the parlance of private equity.
Inventry for all of them, right, for arm, for Instacar.
So does this open up? I kind of feel like there's a stigma. There is a stigma to not doing down rounds. But now we're gonna have a couple of notable names doing down rounds in the public market. Do you think that's gonna have an influence on the other companies to maybe consider IPOs?
There will be And look, you're not gonna see a lot more delivery companies come to the scene now. Now the market is consolidating. That's good news for those ones that are left over. So previously you had gopuff and you know every new company coming to the scene trying to figure out delivery. Well, those days are over. I think vcs are quite cautious about investing in this space altogether.
And I feel once you have consolidation, which is what we are seeing with Door, Dash, Uber and to an extent, Instacart, that probably will good for the will be good for the unit economics. Of these companies.
ARMS said to consider here's Bloomberg story, ARM said to consider raising IPO price range about that that's like dull days.
Yeah, but that's because they've already brought it down by so much. You know, they had their own owner by a stake in them that it essentially already owned for far more than what they're doing public for now.
So it's just I mean, ARM, is this week right like maybe a Tuesday pricing Tuesday night for Wednesday trade. That'd be really interesting to see how that trades. Silicon Valleant in general? Is it still all AI right now? It's all about generator of AI. This year is the year of generator AI. You can lump in chatbots as well, and just overall large angrid models foundational models, which is why the Apple event. If they don't talk about generator AI at this event, they clearly have a problem.
Because really that's what everyone is hoping for.
That Apple three trillion dollar company hasn't mentioned generat AAI even once?
Is that right?
Yes?
What's why is that thirty seconds?
Well, because they probably haven't built their foundational model yet and they are focused on privacy. When you think about large anglid models. It's built on big data sets. Apple is a company that has always been focused on privacy, and that is what makes them hard to build their own large angrid model like a chat GPT or.
We're going to have you again on this one, because I mean, this kind of could be existential for Apple if they don't, at least in the minds of investors.
Dude.
This morning, Gina Martin Adams on Surveillance was talking about how important generative AI is for a hostess exactly if it's summers to a Twinkie maker.
That's what I say. When you hear Tom Keene mentioned Twinkie and AI in the same sentence, you know something's up, all right, Mandy, thanks so much for joining us men deep seeing he's a senior analyst. He runs all of our technology research where you have tech analyss literally all over the globe Europe, North America and of course Asia and Mendeep kind of runs that business for us, and we appreciate that.
You're listening to the team. Ken's live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or listen on demand wherever you get your podcasts.
We have Rick Caruso with us.
He's the founder and executive chairman of Caruso, starting out life as a lawyer and then transition to Kruso affiliated holdings, and they own, among other things, The Grove, which was ranked number two on Fortunes's list of the ten highest sales generating shopping centers across the country.
I've always been a fan.
Of the mall you haven't, Yeah, I love the Westchester up in White Plains, Jersey.
Person nosey, we do malls in New Jersey.
Yeah, I'm from the great state of Ohio. Of course, we have traditionally had a big mallsley state. They started I think when I was a kid, so I kind of grew up with them fast times. Ridgemont High was like the story of my middle school. Rick talk to us about the current state of commercial real estate because it had been, you know, kind of the one of the big fears I would say of twenty twenty three. But it seems to be fading a bit as a fear.
Well, thank you, I think on the retail site listen, we do outdoor malls, so all of our properties are not covered. I think that's a very different sector. But what we're seeing on our properties consumer is still strong, Consumer spending is still up. Our growth on our properties is double digit in terms of attendance, and our sales per square foot is up. So we're having a very good year. My fear is that with inflation, with rising
interest costs, I don't know how long that lasts. But right now we're running at at a really good pace.
What's the occupancy of your malls in general today? Maybe relative to pre pre pandemic.
We're very unique.
So I'm going to tell you this and you won't believe it, but we run at one hundred percent with a waiting list. But our properties are incredibly productive. We have three in the top ten in the United States.
We're a different business. Yeah, you know, it's a very.
It's not strip malls.
Well, what's the term thing?
It's like Ridge Hill we have up in Westchester, Polaris.
And Columbus is like this. What do you think different in downtown centers?
Yeah?
Like downtown Okay, So.
Well, what makes it different than a covered mall?
Because we're creating an environment. Listen, a covered mall is an artificial atmosphere that you're asking somebody to go into.
Right, And people always say.
Well, we have a good one over in New Jersey, the mall of what's it called the Dream Mall.
Well, you and I have never been there. Happens, that's good.
That one through a lot of problems.
I know, I know, but I.
Think the difference is we're creating an environment for people to come and enjoy themselves, relax, have fun, create an environment very very different. We have dwell time. We want people to stay, we want people to just relax, and people respond to it. You know, we're tapping into the consumer experience, which I think is all important.
They'll go without even knowing, without even thinking we're going to the mall. They'll go because they want to visit a restaurant. We're not even drive through occasionally.
We're not designing it with the idea that we want people to shop. We're designing it with the idea that we want people to enjoy themselves, and then they're going to go shop because they're there.
Why do you think though the grove is so popular?
I mean, where is.
The grove in Los Angeles? Los Angeles?
Okay, it's it's popular because it just it makes people feel better. It sounds corny, but it enriches your life.
And you can go.
There and hang out and have a cup of coffee and read the paper and really not spend a dime. Or you can go there and spend the day and spend a lot of money. But it's the trees, it's the fountain, it's the lawn, it's the flowers, it's everything. And the shopping is incidental to it in the restaurants, and it's curated with the best retailers and restaurants in the business.
Are you adding new malls? Are you taking over existing malls?
How we've got we've got a pipeline of new projects that we're doing, all in the format of outdoor centers, and we're going strong with it.
Are you putting them all in the Austin Texas of the world, the nationals and where.
We're now We're we're growing in southern California and we're going to continue to do that.
Now.
Listen, we're looking in Florida, and we're looking in other areas.
There are your primarily in southern California?
Yeah?
Gotcha? Okay, So I mean, so give us a sense of how southern California. Is you got strikes all across Los Angeles and all that type of thing. Give us a sense of to southern California general, because we have someone here at Bloomberg in our editorial who's very bullish on California.
H Matt Winkler, the guy who founded Blooo News.
He found a Bloomberg News and he's written a number of editorials extolling the virtues of not only Los Angeles, but you.
Can strength of the California economy essentially exactly exactly.
I think the California economy, listen, is strong. It's a massive economy right globally, but the reality is we have enormous challenges in California.
I have a viewer writing in for a question with a question for Rick, and essentially it comes down to the same thing.
It's about the economy.
Viewer, listener, we have you know, we're a radio, but we're also streaming on YouTube. He asked, is do you anticipate hiring to slow on your properties as the economy slows, or as inflation remains higher, or as the consumer weekends. Are you looking forward with concern to any of those things?
Well, I'm concerned about the consumer weekening. The consumer has to weaken, right, I mean, you've got rising interest rate and you still have inflation, and prices are high, and savings are getting lower, and the default rates on credit cards are coming up, which we've seen that data.
So it has to happen. It's just a question of time.
But I think all of us have to reorganize our companies around the fact that we've got a higher tenure and it's probably going to remain high for a while, and it's chewing into free cash flow of every company, and so we have to be smarter about how we spend our money, which may mean slowering our hiring and slowering growth and slowering cap X. I mean, it's going to have an impact, which I worry about.
Theft is something that I've heard more from retailers earnings calls, and they call it shrink. It's just been extraordinary and it looks organized.
It's insane.
So can you give us a sense kind of from your perspective what this means for the industry.
Well, here's a problem. In Los Angeles County. We have a no bail system, so you can get arrested and you're out within an hour, even if it's a felony. If you steal under nine hundred and fifty dollars plus or minus, it's a misdemeanor. And these theft rings are organized. I mean, it's organized crime, and they're mobs, and we've got to change the rules, and we've got to get elected officials that actually have some backbone and say we're not going to allow this to happen anymore. And let's
hold criminals accountable. They need to be incarcerated if they're a ring and they're repeat offenders. And then of course we've got to give people a chance for you know, rebuild their lives and whatnot. But what's happening in southern California right now with the smash and grabs are in San Francisco. You can't tolerate that.
In business, do you?
I mean, and it's killing small business, big business.
If you if you own you know, you know, essentially an outdoor shopping community like the grove, do you bring in an extra you know, police force, auxiliary cops. Do you try and you know, get the employees to do something about it?
I mean, how do you how do you We don't.
Want we don't want employees to engage. But what we do on all of our properties, we have armed security and we have extensive camera systems. We have equipment that can actually identify people, and so we're very sophisticated in our properties. But the problem is ninety percent of the businesses in LA are small businesses. They can't afford to do that, and they get one smash and grab that
could be their monthly profit. So what's happening I think in Southern California LA is the responsibility to keep people safe is getting pushed to the private sector because we have a shortage of cops and we have a shortage of again, elected officials. I think that are actually dedicated to making sure that our communities are safe, and we're picking that up, and that's not good business.
We're smart for the community long term.
Is that one of the biggest challenges for Southern California in general? Do you think?
I think so. I think it's a big challenge for California in general.
For New York right even though we have an ex cop here in office, and I think a lot of people expected the crime to change on the day he came in and it hasn't.
Yeah, and you have a big police force, which we don't have in LA Is that right? Yeah, I mean you have almost five times as many cops as we do in Los Angeles.
Really I didn't know that. Okay, very interesting stuff there, Ricrusia, thanks so much for taking the time to join us here today. Really fascinating discussion.
We ought to do the show from the growth. We should do that.
Let's go, let's go get out, get out to the west coast and really dive into the economics and businesses of California.
I think we can do that and get some support.
I would like to do that.
We hope they have you all right, Rick.
Thanks so much for joining us. Ricruso is a founder and executive chairman of Cruser talking about the retail business and the retail business on the outdoor malls, if you will, quite vibrant relative to kind of what you hear from other parts of some of the retail. But retail in general has been good, the consumer has been good. The question now is just kind of going forward with the higher rates and all that type of thing.
You're listening to The tape cats are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Big Takes story right down Matt's alley. Here, Monica Raymlandt joins this. She's the auto industry disruption reporter. How about that with Bloomberg News. She's got the story out there entitled Germany Frets Volkswagen is heading down the wrong or down the road to nowhere. Yeah, so, Monica, thanks much for joining us via zoom her. What's kind of the thesis thesis of your story? I thought v Volkswagen's going all in EV.
Oh, definitely. I wouldn't say that they're not focused on
their EV strategy. But really, what the concern is is that Volkswagen is sort of atrophying market share in China when it comes to EV's, when it comes to competing with Tesla, when it comes to competing with BYD, and basically the company needs to sort of catch up and redo their strategy and figure out how to deliver to the Chinese market what the Chinese have come to expect it's a unique situation because basically during the pandemic, when
everyone was sort of triaging their own issues back at home, China really went all in with EV's, with their infrastructure, with supporting their their startups there, and the scene completely changed.
They made leaps and bounds when it came to software technology, when it came to infotainment, when it came to in car experiences, and now Volkswagen and other legacy carmakers are looking at the market and realizing, you know, the Chinese are doing it really, really well when it comes to when it comes to EV's, and they have to sort
of find a way to catch up. And the bigger picture is that this is a big concern for Germany because the auto industry plays such a huge role in the macro environment, in the economy, and you know, if Folkswagen fails to get this right, it's going to have an impact on, you know, on their domestic situation, on the domestic.
I mean, I think it's an amazing story on so many levels, Monica. The first thing that I that I was wondering about is did Deese, Herbert Deese leave Folkswagen in the situation, or is Bluema, you know, not executing on the d strategy well enough. Then I also thought about, you know, if this is a security issue for Germany as well as an economic issue, how much ConTroll does the state feel like it can take over this behemoth?
Because if things go wrong, it's not just for the Porsche piche family a problem, It's a problem for the entire country and economy. So I think there's so many different threads that are fascinating. What happened to the tens of billions of dollars that Deese was investing in becoming an EV maker, becoming a software company. I remember headlines out from Rauvoald that were like thirty billion dollars or fifty billion dollars? Are they spending that money? Is it getting them anywhere?
Yeah?
Absolutely great questions all around on the investment question.
Sorry, I just thought the story moved me. Honestly, I really really think it's fantastic. I recommend to our listeners and viewers to check it out. I just it blew me away this morning, So I should have read it last night. I wouldn't have been able to sleep if I did.
All right, So the.
Money right, So on the money part No, and the investment is money is still there. Volkswagen is an investing I think total over the next five years something like one hundred and eighty billion, and two thirds of that is going to evs. Don't quote me on that, I have to The numbers are a bit fuzzy.
In my head, it's a lot, but.
They're still it's a lot. Yeah, and you're absolutely right. Deese was, in my mind and in my assessment, totally the innovator. He had the long term vision for where the where the car industry was going and where it needed to go, where Volkswagen needed to go if it really wanted to compete with Tesla and you know, eventually the Chinese and one of his big you know, one of his big strategic plans or moves, was this idea
of vertical integration. We got to get control of the battery supply chain and that was you know why he really went all in with Power Code, creating their own battery company. He thought, you know, we have to go in all in on software. We have to create our
own software unit. We have to control that as well, in order to control the profit pools that subsequently come from in car entertainment, and so he was all about sort of focusing on what Volkswagen could do on its own, making Volkswagen into sort of more of a tech company. As you know, the car becomes more of a sort of a living room on wheels or sort of more
like a mobile phone on wheels. That people's expectations, customer expectations have sort of moved in the direction of smartphone apps and services, and you needed to be able to offer that in car. And so his strategy was, well, let's do it on our own so we can control more of the more of the profit pools. And that maybe turned out to be sort of the Achilles Heel of Deese in addition to his his management style. That I would say, there's a big difference. There's a difference
between Dsee and Bluma, and that Dees, You're right. Deese did bring a lot of these innovative projects into the company and Bluma is now sort of carrying those forward and bringing those along. And I would say, you know, Bluma has totally Oliver Blooma, the new CEO, who is also currently the CEO of Porsha, he is really he's
he's going all in with the battery strategy. He's still supporting Carriot the software unit and saying we're still gonna, you know, back carry it's efforts one hundred percent to to create the premium platform for the Audi and Porsha vehicles, for the Emacon, for the Q six Etron, and then you know, using the company's resources to to you know, broaden their their offering for electric electric vehicles.
I feel like that just they're they're slow to catch up and they can't really knock the ball out of the park when it comes to you know, range, they don't do as well as GM has four hundred and fifty miles of range in their EV pickup trucks. Now they have gigantic batteries to support that two hundred ten kilowatt packs, but still they have it right, And.
It doesn't seem like, uh.
Porscha should only have one EV model out at this stage in the game. Why don't they already have an EMA Coon, Why don't they already have an E version of the nine to eleven?
Like?
What is taking them so long?
Yeah, it's definitely the software issue. So by creating, you know, by having a legacy car maker that really knows German engine engineering really well. To have them pivot and suddenly
start doing software, it's a completely different process. It's a completely different ballgame, it's a completely different sport, and they had to sort of learn from zero how to do it, how the processes work, how you develop software, and that led to, you know, delays when it came to the launch of the platform that the EMA coon is going to be based on. It was supposed to be out I think about two years ago already, and that was that was one of the things ai Audi and Pousha.
These models that are coming out for Audi and Posha, these electric models, the models that are going to come from between twenty twenty four and twenty twenty eight, are supposed to make up about fifty percent of folks swagging revenues in that time period. So there, you know, if they don't do that premium.
Platform, eleven or twelve brands.
Right, yeah, exactly. No, I mean Audi and Pousha are really the you know, the big money makers. I mean, Poorsha is no longer technically a cash cow since the I p O they're no longer sharing their profits with Volkswagen. But for Audi it's really key, it's really critical that they get this this platform, this uh premium platform from carry it out to build their their their model lineup, and they haven't been able to do that because of
the delays. Basically it was it was a struggle for carry it for the software unit because they've they've had to do one one software platform for the Volkswagen, this other premium platform for for Audi and Pousha, and then they also had this SSP platform, this scalable unified platform for all the brands. That's sort of the longtime vision that Deese had and that's you know, sort of up in the air at this point about if and when that's that's going to come to Fruition.
Hey, Monica, thanks so much for joining us. Really appreciate getting some of your time. Is Matt med a fantastic piece of work there, Monica Raymond, Auto's industry disruption reporter for Bloomberg News. Out the Big Take story today on the Bloomberg terminal entitled Germany Fretz Volkswagen is heading down the road to nowhere. So check that out on the terminal or Bloomberg dot com slash Big Take. Those are really deeply reported stories, great stuff. Highly recommend it.
You're listening to the Team Can't Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, or listen on demand wherever you get your podcasts.
There are old sky divers and Bold skyde divers, but there are no old Bold skydivers. That's a good one. I guess you can apply that to investing as a certainly. Our next guest does that very well. Jessica Rabe joins us. She's a founder of Data Trek Research. We love the folks at Data Trek. Lots of really smart research comes out of there.
Now, you said Rabe, think it's Raba.
Let's hear Jesse here. Let's say you Jessica Rade.
You are correct. Thank you so much for having me, Matt. I'm very excited to be.
On all right, Jessica. I like how you kind of bring together the skydiving thing, which, by the way, we have to talk about that at some point. Who does that willingly end investing? So how do you bring the two together?
Sure? Yeah, so to me, skydiving is an amplified version of life and even investing in that.
It's a masterclass in risk management.
So, like you said at the top, they saying they're in skydiving is very common. One. There are old skydivers and bold skydivers, but there are no old bold skydivers. So no matter anyone's experience, both skydiving and investing are processed, driven disciplines with small.
Margins for air for error.
So ultimately it helps helps teach you how to confront natural human fear and overcome it by sticking to a process, staying president and it's very important to remain calm and high pressure pressure situations.
All Right, So I have to say that I love now you skydiving, but I'm not licensed, so I still have to get strapped to a big man's back or to his chest, unlike Jessica, because I've gone seven times and uh, Jessica, I'm guessing you've done more. Uh.
Yes, I'm still a baby in the sport, but I've done one hundred and fourteen solo skydis at this point.
Wow, and do you pack your own shoot or how does that all work?
I'm wondering.
Yep, that's part of getting licensed. You have to know how to how to pack pack your own parachuting and quite frankly, you want to you want to know your own equipment, and uh, you want to know how to pack, because then you're the way that your can it be opened is more reliable.
I was strung.
I read your note as soon as I saw it hit my inbox, and I.
Thought it was really cool.
The parallels between investing in skydiving that I'd never thought of. The only difference for me and probably for most people listening in terms of retail investing is I don't pack my own shoot in the markets, right. I don't even have the ability to know how to do that. I need to leave it to people like you and Nick to pack my shoot for me because I just don't have the time to do the research, if you know what I mean.
Yeah, sure, absolutely, and yeah I mean so, there's.
So many parallels between investing in skydiving for and for really all levels of experience.
So you know, one of those is just sticking to a process.
There are fundamentals in skydiving that that keep you safe, whether it be checking your gear, remaining altitude a wear, or knowing how to fly in and land in different conditions so you can do most of the skydive right but make one wrong move in the last two hundred
feet or so and face serious consequences. The same as when it comes to investing straight from core guidelines for idea generation to taking profits or losses, and any type of investor from a novice to a twenty year year veteran can can pay the price.
All right, So I like this one. Anticipate other participants. So I guess in skydiving you're going to be have that situational awareness of no what's around you. But I guess that kind of makes sense in investing as well.
Oh yeah, so I can do everything right on a jump, but get hurt by another skydiver, whether that be colliding under free fall or under canopy. So you really have to prepare, not just for yourself, but you have to anticipate other people. It's it's just like riding a motorcycle, which I also do. You constantly have to have your head on a swivel. And that's much of investing, too, is anticipating not just what you're gonna do, but what other markets participants are going to do, especially when it
comes to how they respond ering crises. That's how a lot of volatility is created. Is by other market participants and how they respond under pressure.
Yeah, I would argue in motorcycling, especially I mean motorcycling on the highway or in you know, public roads, paying attention to what other people are doing is far more important than paying attention to you know, I'm not going to make many mistakes. The motorcycle stays up by itself as long as you know, I'm putting in the right inputs. So the most important thing is.
Watch out for that car ture, one of those crazy people in the Garden State Parkway that zoom in and out of cars doing like one hundred twenty miles an hour.
I try not to.
Jessica is laughing over there.
That's like a bold skydiver, right, Those people don't last very Yeah.
That's yeah. You don't want to you don't want to be too bold.
And that's why I mean the motorcycle riding too, is a perfect example. Whether it be skydiving or motorcycle riding or investing, is you just you have to plan for diverse events. There are certain forces out of our control, whether it be weather or other skydivers and skydiving, or economic and geopolitical shocks and investing the best we can do is stay aware of the risks plan for them.
I see skydivers with thousands of jumps, still practicing their emergency procedures and the plane ride up to altitude so that way muscle memory kicks, and should they need to cut away their main parachute and deploy their their reserve parachute.
In the event of an equipment malfunction. And the same with investing.
People know at data Track we have a long standing recommendation to add risk exposure when the VIX gets to twenty eight, thirty six, and forty four because these are one, two and three standard deviations above the long run mean and therefore.
Signal excessive investor fear.
So yeah, investing, skydiving, motorcycle riding, you always have to have to be on your toes and be ready for.
Anything, all right. So I'm looking at some of the photographs use attached to your note here, and they're making my stomach literally queasy as I look at them. What's the highest altitude that you've done a jump from?
So I jump at Skydives Sussex.
And the nice thing about that drop soon is they go all the way up to fourteen five hundred feet.
Yeah, is that you hanging off like a helicopter or a plane or something like that.
Yeah.
Yeah, I did my first few helicopter jumps a few weeks ago, so that was certainly.
Very very fun.
That is because the jumping out of a helicopter is different than a plane. With a plane, you have all the relative wind coming at you. With a helicopter, you jump into the dead air.
Jesus, that sounds like fun.
Yeah, now this I mean I was wondering if if you make these parallels. You know, with skydiving you want to be pretty conservative, and in investing you do have a little bit of a risk tolerance, right, So how do you limit yourself or how do you stop yourself from just buying ten year treasuries right now?
Yeah?
I would say that you have to inscat both skydiving and investing. You have to assess your abilities honestly. So in skydiving it's very important to know your skill level and also stay within your personal risk tolerance. So that means only jumping in wins or or or or joining group formation skydives that you believe that you're confident enough to be able to land safely, or also confident in others abilities that you can actually execute the skydiving plan
plans safely. There's a saying in skydiving it's better to be on the ground wishing you're in the sky than be in the sky.
Wishing you're on the ground.
That's been part of a part of the job for investors or financial advisors is just doing what will keep your clients in the game by knowing your own limits or your client's limits.
Just because you can doesn't mean you should.
And virtual currencies are are a great example that many many people are in that heart lesson over the past two years.
So virtual currencies.
So what's the like, what's the next step for you in terms of skydiving.
Uh, there's there's so many disciplines in the sport, so there's just always ways to constantly to constantly improve.
And uh and and learn something new.
So yet people a lot of people wonder they think they see they think skydiving is crazy.
You know what, what's the appeal?
And I'd say they're There are three main appeals to skydiving, at least for myself.
Number one, I like.
Pastimes that push limits and require mental focus. So skydiving obviously fits that description, as does motorcycle riding. As we discussed, the other thing about skydiving is it's a really wonderful.
Diverse and welcoming community. I have friends in the sport from all walks of life.
One's a famous rapper the the helicopter jump that.
That you referenced.
I did my first helicopter jump with the rapper Redman, so that was super fun. Other people are yeah, other people are computer coders to helicopter pilots.
I've met a bunch of women in the sport and we all connect.
Around a common passion, all right. Well, and thirdly, it just it allows me to be present and take a fun break from the grind of Watch Street as much as I love it. So in portfolio construction terms, I'd say it's my uncrrelated asset with high returns on invest Very nice.
I'll let you go with that. Jessica Ray found our data track research. Appreciate getting some of your time you're.
Listening to the tape cans are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Let's talk hole man. We talk a lot about you know, eco kind of green energy. We want to talk a lot about Cole. It gotta be tough to be in a cold business in a world that's going green. But we have found someone who does that very well, Randall Atkins. He's the CEO of Romanco Aramaco Ramica Resources trades on the Nasdaq, etc. I get it, I get the ticker met Cole. He joined his live here in our Bloomberg Interactive Brokers studio. Of course the highlight of his career
obviously graduated of the Duke University. But I finally found somebody who did it before I did. I mean so not, you know, just landed there.
Randall.
I'm looking at your background. It's not like you're one of these people that came up in the coal business. In your entire life, a lot of banking, a lot of investments, a lot of finance. Why did you get into the coal business.
Got into the coal business because it was sort of a distressed business.
It was to play that.
Frankly, we stepped back. Even five years ago, most of the public companies were all in bankruptcy. So if you could start one from scratch, kind of reverse engineer it correctly with little debt and sort of maximize the asset quality. You know, we have proven that you can make a very good go in this business. And it's our expression is we view coal in a manner which coal is too valuable to burn, so we approach it a little differently than most.
So how do you address what I assume must be a shrinking market?
Is it in this country? Do we use less and less coal every year?
Split the market into two different pots, one is thermal coal, And that answer to your question is yes, it's probably a declining market. Met coal, which is what we focus on, is basically a precursor to make steel, so that business is not declining.
And indeed, internationally, where.
We probably placed upwards of two thirds of our market is growing. Obviously the Asian market is the principal growth factor.
So okay, So two thirds of your businesses outside the US correct?
Okay, So.
Just about just the competitive landscape, I can't even think of other coal companies out there. Who else is out there that you compete with like who is the competitive marketplace?
Is it other US bulletin? Yeah?
I guess yeah, So what's competitive LAK.
They wouldn't compete so much in the in the Australian market, which is pretty much got a lock on a lot of the Asians just because of the proximity of logistics. But domestically we would compete with companies like Alpha Arch to a lesser extent, Peabody Warrior, those would be some of the names.
So met coal, cocin coal still desperately needed to create to produce all the steel that we need. What does the growth in that industry look like?
The growth in that industry is basically I always say met coal is a proxy for steel. Steel is a proxy for GDP. So if you look at basically general economic trends, whether it's in the US or overseas, it pretty well ties to medical ties to the growth in the generally economic situation most of the countries.
All right, So I'm looking at your financials here on the FA function on the Bloomberg terminal. I got top line going kind of mid single digits ibadam margins mid mid twenties, free cash a positive. What's the growth driver for your business, you acquire additional minds, do you develop further what you've got? How do you grow your business?
Sure?
Well, we're actually the only domestic coal company that's projecting the doublin size from where we sit right now.
So we have.
Decided to grow organically without buying existing minds. We basically have taken properties where we're in essence by the reserve and developed that planet and then.
Market it from there.
So we will jump from about two and a half million tons last year to about three and a half million tons of production this year, ultimately to about six six to seven million tons.
What do you I mean?
I look at the stock price and I wonder what happened two years ago? You know, all of a sudden, it just goes boom on the rise at the August September twenty twenty one part of the chart.
What happened there? Basically after that.
You had sort of an economically decline you had after effects of COVID, You had a different market situation. Basically in the August and September periods is when you find almost one hundred percent of the domestic sales occur in the US. So that was a tough period in domestic sales.
A lot of the coal companies dropped in that same time. No, but you jumped. I'm looking.
So twenty twenty one, your stock went from two fifty to I'm going to say twelve at the end of the year. It was the end of the pandemic, which is why I think it's so interesting. Usually you see these stock moves right around twenty twenty, depending on what the company is. But you climbed high into twenty twenty one, twenty twenty two, and now you're holding it about eight dollars right.
Our jump was primarily based on a market recognition that we had gone from being sort of a small time producer into coming into the ranks of a larger When we get to the six to seven million ton size, we will be almost an equal size in terms of the met coal production with most of the major coal companies, which frankly still have got a predominant thermal mix. And that's frankly, the drag on most coal stocks is that there's not a market differentiation between thermal and met.
So what's the future of coal in this country?
This energy?
You know?
I mean, is there always going to be a place for coal, or it just seems like, you know, if you talk to some of the more cleaner energy folks, they would like to see that go to zero.
Yeah.
So I have been a proponent for about ten years that, as I said, there's a higher and better use for coal. Coal is too valuable to burn. I go back to really one hundred years ago when coal was used for a variety of things that had more of a chemical nature.
So we have been working with the Department of Energy in some of the national labs in creating new uses for coal where you can convert it into things like synthetic graph fight and graphenes, carbon fiber, and frankly, that took us into the rare earth business, where you know, ten years ago, I didn't know the difference between rare current, rare coins, and rare earth, but we have found that
connected to coal seams. So the future of coal I see as having three legs of the stool, one for thermal production for combustion, one for steel production, and the third leg of the stool will be higher tech uses for alternative carbon products.
What are the rare earths that you're finding and how are you doing it? Getting them out.
We have found a spectrum of about fourteen different rare earths, and frankly, thirty percent of what we found are concentrated in the heavier magnetic rare earths, which are frankly the more valuable ones. Rare earths are measured in parts per million, so it's you know, it's unlike the bulk coal business. It's more like you're looking for diamonds almost, and it's more of an industrial chemical business than that's a mining business. Because once you find it, that's only half the battle.
The trick is to separate the rarer and get them processed in a way that they then become commercially usable.
Hey, Randal, thanks so much for joining us. Really appreciate you coming in here. We don't talk about cole that office, so it's fascinating discussion. Randall Atkins, he's the CEO of Romanco Resource Ramico Resources. Thank you, Symble, M E. T.
Seed. You're listening to the tape kent'sur live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty JM.
Smucker agreed to acquire Twinkies maker Hostess Brands for about five point six billion dollars, furthering a growing consolidation trend among the companies that stock the shelf stable aisles at the heart of supermarkets. Do we have an expert on this business? We appsolutely do, Diana rossettopenya. She's an equity research channels follow all the consumer space for Blueberg Intelligence. Diana, you're like one of our first bianos. You're like an
original original. You're aging me absolutely. I mean you're there from just the get go, and she's just become one of the top annos out there covering the consumer space. Diana, What do you make of this deal? Smucker's buying Hostess. What's going on here? Strategically?
Yeah, Well, strategically for Smucker, this will be a more of a mixed deal for Smucker in terms of on the cells side, it's definitely positive. It's a company that is growing in the mid single digits compared to consumer foods. The consumer foods segment for Smucker, which is growing in the low single digits, So definitely on the cell side is going to be a positive. Now if you go down the P and L, that's probably going to be a little bit more complicated.
Why is that.
Because Ebida margins are not necessarily going to be as as as positive as the company is stating in our view the company, the company's call these mornings said that they host this had a twenty three percent of that margin, which is going to probably be about uh the same as the consumer food segment for the company going forward, So we don't necessarily see a lot of accretion on that end.
I feel like there's a there's room for real improvement on execution of Hostess product sales.
You know.
I we have interviewed the CEO Hosts a couple.
Of times, and as a result, I always go out and look for their products and stores and I see that they do have like sometimes separate areas or specific displays, but the products aren't stocked very well and there's just not enough attention drawn to them in the in the in the points of purchase.
Couldn't they improve that?
I think that is something that attracted smockery. It seems that Hostess has been increasing innovation and points of sale, as you mentioned, and I think they're probably going to benefit from the supply chain leverage that Smucker has. And it's also in terms of Smocker, you will give them a little bit more exposure on the convenience side, which is about forty percent of Hostess sales.
So I'm a big fan of the Hostess brands. But there's some people out there that maybe even during the pandemic, I don't know, maybe they went to more of those you know, ringings and all that kind of good stuff that we all love, but maybe now they're coming back and going back to more healthier food. What are the trends you're seeing out there?
So basically it's consumers in the United States. They say they want one thing and they actually do another. So, yes, you're right, people want to be healthier. And definitely the pandemic was a big catalyst for people going and purchase more of the indulgence snacks. I think there's still a little bit of growth on that aspect. People seem to be a little bit more permissible in the indulgence side, and I think that is probably going to fuel growth going forward.
I mean Twinkies obviously, and then the cupcakes. I like the orange ones, but they have the chocolate and the ding Dongs are a classic. The ho hosp can't forget about those. I have always been a fan of the chocolate dial, which is a twinkie essentially dipped in chocolate. I've never really liked the snowballs, but they're there, the Zingers and then I mean they're just like classic brands.
I feel like instead of just selling them at you know, the seven eleven or the Dwayne Reid, they should be sold in you know, these trendy like urban outfitters should sell these things, right because.
But you can't fit on their clothes though, so that would be a little bit of lack of synergy.
Why is James muckerstock down six percent today?
Well, obviously it has, as you know, there's also the acquirer curves playing into that. But like I said, I think it's more of investors try it and I don't want to say not believing, but being a little bit wary about the bottom line for this acquisition and how accreative is going to be on the epidem margin.
Are we are we seeing more consolidation in the I don't know, the grocery space, If so why or what's happening out there?
Well, we actually, I mean I have been fairly active in terms of writing because Campbell's SUPA a few weeks ago bought Solos, So that is right, that's right. Yeah, So that is definitely it seems that because decisions seem to be ramping up in the second half of the year. It really is in terms of it's not unusual. I think we're going back to patterns compared to before the pandemic, that all of these big companies are looking for growth and they're paying a pretty high price for it.
How can host this, I mean going to bankruptcy not just once but twice?
Was that just?
I mean who can sell?
Yeah, who can sell twinkies?
What happened?
I mean there's maybe before your time, but was it just again it's mass suggested maybe just some bad management there.
Yeah, it was a commination of bad management. And at the same time, you know, it was lack of innovation. The brands were falling out of flavor. And I think you know, now with more innovation and with the strong supply chain leverage, I think that they're probably going to be expanding into that.
You expect more or m and a going forward in this space.
I think.
So I'm a little worried about the premiums that we're seeing and the leverage expansion. Obviously, Smucker it's their balance sheet is going that net leverage is going to be four point four after four point four times, that seems high.
After yeah, it's fine from my industry, the media industry, because we grow our EBITDA fifteen to twenty percent. You guys don't grow your IBITAD that fast exactly.
And usually we should be able to see leverage in the three times. But now when we're looking at deals that are expanding into four times, it makes people a little nervous.
I wonder, what the what are the other brands out there that are on the block. Do we know Hostess was on the block? Do we know? Or was this a surprise?
Well, apparently according to Smocker management, the acquisition was a surprise. There they themselves actually divested some of the food brands for pet so divestitors seem to be also be on the blog.
Smuckers has coffee, right, They make Duncan coffee for sale. They have folders, They obviously do Jeff peanut butter, and the and the jelly.
You're a Jiff guy.
I love I will eat gift peanut butter straight out of the jar in a spoon. I'm a jiff Wow. So you the tie and Crunchy, but Smuckers also does meow mix and milk bone.
Right, Are they getting out of that the pet food business.
Yes, they are.
Actually they're concentrating on the pet snacks category, which is paperoni, yes exactly, yes, milk bone. So, but that is I think one of the arguments against the deal is that is this going to be a big heart pet brand? A two point zero Back in twenty fifteen, the company acquired these company pig big Heart brands for five point something billion dollars. Leverage was also four four times ABDA, so it and now they're divesting a lot of brands of it. So you know, people are concerned about that.
What's what's your thoughts on Chewi We'll get about twenty twenty seconds Chewy.
They're growing on their nut cells per active consumers and active consumers seems to be a painful point for them so far.
All right, good stuff. A reader just kind of writes in Peter Pan peanut butter is word's.
At That's not the case that a strong well, you know what, I don't.
Actually, it's spent a long time.
I'll go I'm gonna go out right now because I'm leaving, okay, and I'm going to go get a jar of Peter Pan. I'll go over to the d Wayne Read and pick one up and see. I think Jeff is still the raining champ.
All right, Dan sat Open Equity Research channels for Bloomberg Intellent, just breaking down this deal.
You're listening to the tape Cat's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Let's talk about ad tech, digital advertising, all that fun stuff, the part of the advertising pie that continues to put up some really solid numbers. And you think about the digital advertising, the you know, the facebooks, the Googles, I use it the old school words, not meta or whatever the other one is. But there's technology behind that, and that is a fascinating part of the business. Our next guest is all over that stuff. Megan Clarkin joins us.
She's the CEO of Crytao or Critio Critia Critio. It's a Nasdaq traded company. C rt O is the ticker to put into your Bloomberg terminal. It's a French company based in Paris. Megan, thanks so much for joining us here in a Bloomberg interactive broker studio.
What do you guys do it?
Critio we're in at tech company. As you said, we focus in on commerce media, retail.
Media, retail media.
What is retail media, Well, retail media is the lighting up of advertising on retailer sites or even broader commerce sites like Uber. They're now selling advertising and it's incredibly successful. It's the fastest growing area of digital advertising. What Critio
does is we enable all of that for them. We make sure that the right ads gets to the right person on the right side at the right time, and we also make sure that their inventory is shown up for the demand side, or the advertisers and the agencies who are looking to spend their advertising dollars across sites. So it's competing, if you like, with traditional traditional media and advertising. It's competing with Google it's completely copeeding with search.
It is the new wave of advertising across retailers.
What's a typical advertiser in that part of the marketplace. Is it a Coca Cola trying to do some brand advertising. Is it a car agency trying to get me to go out and buy something tomorrow.
Yeah, it's all of that.
So they now see a real opportunity getting in front of audiences.
Who are actually shoppers.
They're actually on.
Their buy a journey, and they're really close to the point of sale posed to on a social site where it's a conversation that's happened, and they might happen to see the pepsi ad and it might spark a sort of thought to go. If you're actually on Costco and you're getting a pepsi ad and they stop Costco, you're very close to that point of sale. So it's a very viable advertising channel for all of those brands.
So your clients are the Costcos of the world as opposed to the Pepsis of the world.
Well, we service both because we light up the advertising for Costco, for Macy's, for Best Buy, for half of the biggest retailers in the US. We power that advertising, but we also make that advertising inventry available to the Pepsis, to the Cokes, to all of We have twenty six hundred brands that we support to try to bring their dollars into that retail media space.
All right, how has that market that's been When you think about the global advertising pie, and you take the traditional media not growing, declining depending upon what you're looking at, and you look at the digital piece continues to grow and that was when I used to cover this four or five years ago, still growing at twenty percent. Where is a digital dollar spend growth rate kind of over the next several years.
From your Well, if we think about retail media, retail media marketplace is by twenty twenty five going to be worth about one hundred and ten billion dollars. Now, if you think on top of that, there's a star player in there right now, which is Amazon. And Amazon's been doing this for six to ten years now. Amazon have last quarter posted about it eleven billion dollars worth of advertising and have a run rate to about forty billion
dollars by the end of the year. And if you think of traditional TV over all of the TV players, that's a sixty six billion dollar market. So Amazon in the retail space forty billion. All of TV over all of the years that it's been playing about sixty six. Is this real opportunity in retail media that's just exploding.
How are retailers in general, how are they as clients adapting to this whole concept of you can monetize your kind of your user base, that whole concept through advertising.
Another thing, Well, it's interesting because they're not media players. You know, there are retailers, but they look at Amazon, and they look at Walmart, they look at instacart, and
they look at how valuable this proposition is. And this is where critio comes in because we come into them and say, hey, we've got this platform, we will represent you, we'll make sure that the ad tech works for you, and we'll make sure that you're seen as compared to others for all of the advertisers that we represent and all of the agencies, the five big holding companies that
we represent. So we create an ecosystem around retail media and they love that because they don't have to think this through themselves.
Right, how do the agencies think about retail media. It's not going to ABC and buying a thirty second spot on the Super Bowl or whatever. So it's a different type of channel. How do they view it?
Yeah, it's different.
These are all tactics. So if you think of an agency, their job is to make money for their brand. And so depending on what the brand is and what they're objective is, they'll either go to broad based advertising, brand advertising across traditional TV, or they'll go into a big audience on a social environment or a search environment, or they'll go to a precision a point of sale across retailers.
And so they think about that as a new way to get a return on investment for those brands, for those advertisers.
So we think about retail, I think you know Amazon or Walmart, but there are adjacent retail industry, travel, hotels, all that kind of stuff. How's that business evolving because people are spending a lot of time on.
This exis well definitely, So we see retail media as sort of the core of this, and then there's this broader opportunity called commerce media. And that's exactly what you're talking about. So Uber was a client that we signed last quarter. And if you go to uber eats, you see critio and action, you see the sponsored ads appearing when you're searching for a product. You see their display advertising, their video advertising, and they look for all intensive center person purposes like Amazon.
When you go there.
So it's really interesting to see how that's going to unfold.
It's interesting we see this a lot companies, platforms have this audience, this unique audience, and the question is how do you monetize it. The current example I have, and I've mentioned this to the company is Peloton. They're searching for revenue, and I'm like, you've got X number of millions of people and they're crazy people. Because I am
one of them and as is my household. There's no you need to go down to Peloton people and start pitching them to monetize starts putting some ads on there.
But it's so true.
I mean, they're a valuable audience and they're if their shoppers or they're in that mindset, go sell me fire product related to physical fitness, and their prime candidate that.
Is that That is kind of kind of what you guys do and kind of what a lot of smart people in the ad tech space are trying to enable. Is the for folks to monetize their audience. Megan Clark and thanks so much for joining us. Megan is the CEO of Cridio again Ada traded stock. You know, I like to flip these things around all the time. Crt OH is the ticker seven buys six holds on the stock and oneself, so a little bit divided street there.
Thanks for listening to the Bloomberg Markets podcasts. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three.
And I'm fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio