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 moving news.
Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. Let's talk about WTI Crudo. Matt just called it at where Dan We hit eighty dollars a barrel yesterday on WTA Crude. I don't know where this is coming, so let's bring in some people.
And it was fast, right. We went from seventy eighty very quickly.
Exactly. We're blow sixty eight dollars in late June for w TA crude. Now here we are at eighty. Go figure Mike McLoone, though he knows what's going on. So does Fernando Valley. They are both analys covering the energy space for Bloomberg Intelligence. Hey, Mike, let's start with you. You're done in Bambi, Miami, Florida. How is it now, tough guy?
It's actually cooler here than you are there. You're high yesterday ninety in the low eighties, so you got it comes out the cool op.
All right, buddy. How did we get here with wtacrude oil at eighty bucks a barrel?
We were at seventy at the beginning of July, so within a month we're up ten bucks.
So let's look at it in the year. It's unchanged basically still actually down in the year, so it's basically bouncing from getting two over sold. But look at the macro big picture. What we did last year was one of the biggest pumps on a two year basis ever and it's in the back end of that. And the history of these things are very bad for crude oil, particularly if you have the federal reserve still tightening and disappointing data out of China. Those are current trends. So
I'm still very veriss crude oil. I see it at the upper end of the range. I still think it's more likely head towards forty and right now. One key thing that's really mattering for everything and muchly all risk asses, most notably copper and crude oils. The US stock market basically has to keep going just for these markets to stay stable. So that's the problem. If stock market actually drops a little bit. These assets are probably going to continue reverting last year's pumps.
So that's the trader perspective, Fernando, What do we know about and demand here?
Well, on the demand side, of course, Northern Hemisphere summer, Paul's driving more to the shore. Yep, they're driving a little bit more consumption, but it's been slightly underwhelming on the last few numbers of the EIA. In July, of course you had the start of the Saudi Arabia the additional cuts that they promised in the last so Pack plus meeting, so that's probably sapping a little bit on the supply side. But when we look at the inventory figures,
it hasn't changed drastically. It's really been this whole all right. We're coming to a soft landing in the economy, which Mike is just showing that the current data is not really pointing towards that direction. But there's an expectation that the soft landing is what will really put a pushes over the edge, and that's likely what's driving oil prices higher and the OPEC plus cut at least in the short term.
Excellent kind of missed numbers today. How do you do that if you're an energy company, I could make money as an energy company. What happened xceon.
They've made money, And to be fair, they told you they came right on in the range that they guided.
Okay, four weeks ago.
It's just going sense. It's a little slow to update sometimes. Okay, you know, unless they're a little stubborn, you wouldn't know anything about that. But they still generated significant free cash flow, not enough to cover their buybacks, but they generated enough free cash flow. The good thing is they came into the quarter with almost thirty three billion dollars in cash,
the debt under zero point two times. It stayed at that level, so they can still get to their thirty five billion dollars of buybacks by the end of twenty twenty four. Of course, that will probably mean higher leverage unless Brent goes above eighty five.
Mike, how do you play earnings as a trader or do you give us give us some trader insight for for those at home that want to play along. I mean, when an earning season comes around, usually analysts are low balling, right, but in this case is Fernando points out, they haven't caught up with the with the forecast cut that we got out of xceon how do you how do you play? Is an opportunity the earnings.
Well, the key thing to remember about energy equities versus underlying energy measures as measured by the Bloomberg Energy Commodity Index, is the equities typically outperforming. That was definitely the case last year, and it's still been the case this year. The key thing is you look like the XL that's like the major ETF the tracks energy prices they're up. It's almost almost the same thing as S and P
five hundred. So that's the key thing. Remember, the energy equities can create more with less every day, and the actual underlying commodities are succumbing to that, which is by the price of crudial. Now it's first traded in about two thousand and six. But the key thing I want to point out is a recent day that you mentioned
supplying demand. I enjoyed putting in my energy outlook is this month the latest estimates and Department Energy is this month in July that the US is consuming about nine million barrels a day of motor fuel gasoline, which includes that's and a I know Matt loves that compared to
twenty nineteen. In July, it's five percent below. And here's another statistic I really like pointing out that really accelerated is bloomb New Energy Finance point out that global EV sales are now about fifteen percent of new auto sales, compared to the same period in twenty nineteen, it was three percent. Wow, where's that going?
Yeah, that's crazy. And by the way, that's only going up right, I mean, who was it? I think I was talking a fatty b roll of the IA and he said he expects it to go over twenty percent this year.
So but those of us own ebs, I said, there's no way I'm going back. It's just a better way to get around, all right.
Fernando, I'm gonna go ahead and disagree with you.
There.
There's no replacement for displacement there, Mike, So, Fernando, our good friends. Then in the Permian, I mean, in other shell areas in US, they're pumping, aren't they.
Yeah, I mean, Chevron just broke their record seven hundred and seventy two thousand barrels a day in the second quarter, so they're trending towards that one million barrel a day by twenty twenty six that they aimed in excellent as well, producing significant barrels there. And I think we mentioned last time, but we think the five lar just producers in the Permian are going to account for nearly fifty percent of
production by the end of the decade. That's Excellent, Chevron, Conical, Phillips, Pioneer, and Occidental. So they are growing. It's just not as fast as that was once hoped. You know, the dreams of us getting to sixteen eighteen million barrels a day are probably in the rear view mirror.
So what do we do now?
We do about twelve and a half, just under twelve and a half.
Okay, how much do we We're net exporter.
Right, yes and no, it depends because we don't have all the crews that we need, so we import some. And yes, on a net.
Stait, I think I can go down to Texas, Houston, you know, raise some money from some good old boys and start putting some holes in the ground, and eighty dollars a barrel, I can make a lot of money.
You would.
My cost it's like forty.
Right, it's it's it's forty just on the drilling side. But then you have all the I mean, you're not cheap okay, and you have to pay for you you have to pay for your CFO, you have to pay taxes, so your overall fully loaded costs are higher.
Me a wildcat.
And then you don't get eighty dollars, you get a discount on that. And you don't only produce oil, you produce other things.
Hey, Mike, does does the SPR play any play at all into the equation here? I mean, I know that we we drained it, you know, to buy votes for the Democratic Party before the midterms, which is you know that's what the SPR was for.
Nice straight?
Are we gonna fill it back up? I thought the idea was we're going to do that when it was low, and it was low, and we didn't.
There was no hurry to do that. If you really compare it to when I was pumping gas at a gas station in nineteen seventy nine is a gas jockey and gas price went over a dour. We had a price in half gallons because of the analog tanks couldn't do that. There is a massive excess of supply. If you look at liquid fuels of US and Canada, around four million barrels a day. For those old days when
US was a net importer are over. So the only really reason you need the SPR notes for offsetting things like hurricanes and stuff, because we could ramp up that supply even more so if we want. I'm looking at liquid fuel products in his countries. Basically all new high include liquid fuels because they have to include ethnome from the farm. It's almost twenty million barrels a day. Our consumption peeked about fifteen years ago. So there's a very
bad trend for prices. And that's the key thing about SPR. President Biden might go down as one of the best oil traders in history.
All Right, all right, I heard it here. That's fascinating stuff.
Petroleum distribution engineer, that is the term.
That's what the gas jockey is. Were you pumping leaded gas?
Yes?
Was that leaded? Mike?
I guess he's yes. Stop all right, all right, Mike mcloan, he's back at on the pump. Mike mcgloan, Fernando Valley. They cover all the energy space for Bloomberg Intelligence. They put it in perspective for us.
You're listening to the Team ken'shar 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.
Some of these central banks share we've had a lot of activity, including the Bank at Japan today. It I mean, when I look at the ECB, when I look at the FED, it seems like they're saying we're pretty much done. Is that kind of your takeaway?
Yeah, I mean we knew that we were close to the end of the cycle, so the question was always would it take another turn of the screw basically to get us into the landing zone for both the FED and the ECB. And you know, the the central banks are signaling, are reinforcing that they essentially agree with the
markets that that we're near the end. I still feel that, you know, we are currently in the state of I was thinking of using the term disinflation euphoria, but I think that kind of is a little too prioritive disinflation optimism, because there is you know, there's there's a reason, there's reason for it. But broadly speaking, I think that through the course of this whole inflation cycle, the our kids and policy makers have underestimated the resilience of the economy.
They sort of look through a lot of the you know, the demand driven components of inflation, and people look very much at sort of you know, the the the subcomponents of you know of inflation used card.
I have no idea why economists ignore it. Seems like ignore the demand driven side of it. Yeah, I don't get why. Why is that?
Yeah, I think people want to declare victory, you know, and I think policy makers, everybody wants this to be over.
Well, yesterday we talked with Cam Harvey at Duke and he said, you know that the Fed's got it all wrong. It's not three percent inflation, It's like zero point one percent inflation. Like he said, the picture is completely skewed by the housing the way they calculate housing in there. And I think a lot of people agree with him that it's much lower than the FED expects. Are you worried that the FED put pushes us into a recession by hiking too much.
I'm not worried that the FED pushes us into recession. I think that it will take a recession, and I don't think the FED, the FED, the ECB everybody is now managing towards growth. So this is what's new here with this inflationary cycle. As we get closer to the to the top, they're more you know, looking on a two sided view, trying to balance the soft landing that
everybody's talking about. And you know, I don't want to policy error, as you know, maybe it's too easy of glib of a word to say, because I understand what
they're trying to achieve here. But you know, to the extent that spot inflationary numbers are showing a disinflationary trend, I think people really underestimate the self reinforcing elements of inflation, don't I think we have, you know, I mean I don't want to sound like you know all back in my day, but I think that that that you know, the that that the global central bank community, you know, back when they did the new Framework and all that,
they said, inflection, will we know how to deal with it when we see it, And you know, they were kind of caught deer in the headlights. They scrambled to catch up. But I think there's still this this this tendency to think that that to to underestimate the forces of inflation pressures once you unleash them. For example, you know the nominal spending. I mean we look in you know, corporate profits, and you look at how you have to think in nominal terms a lot here and you see,
you know, the corporate America is doing well. They're still able to pass the price pricing, you know, is being passed through to the consumers. Europe is a little bit different story. We're seeing obviously more slow down in Germany in particular, but uh, they're there. I think there are two things that really stand out to me. One is that the underestimating the self reinforcing elements of inflationary dynamics
once it sets in. And the other is that I think people still even today underestimate the power of the fiscal impulse that was put into the system. And economists and you know, the central bankers they don't like to especially the FED, they don't like to talk about fiscal policy, but you know, we still have you know this these it's.
Too big to be left out of the station, still feeding through, it's still feeding the Paul. This morning, as I was driving to work, I was on a call. I'm driving right now, I'm driving Alfa Romeo we'll talk about that. But I was on the phone with the CEO of.
Masarati apparently not paying tolls either.
No, John, what do you drive?
Uh?
Super a super got everybody off track?
Sorry, No, I was just no, No, Uh, Super is a great car. I was talking to CEO of Maserati, David de Grasso, and he said they still have inflation. They still feel it pretty strongly in their input costs, right, and so they're passing that along. To prove your point, the Maserati Gricalai Trofeo, which is a small suv, is going for over one hundred thousand dollars.
Yeah, yep, which no problem for Memlania. All right. Soissan, before you were found at sgh Macroadvisors in two thousand and nine, you made your living trading currencies here. So I gotta ask you. I got the dollar down, I don't know, ten percent from its high back in the fall.
Here.
What you call on the dollar here? Is there a bearish call on the Dollar's just just a little trade down?
No, I think there's a bearish call on the dollar. I think, as you know, I mean, it might seem at odds with the notion that we still have inflation we have more room to hike rates, but you know, we have to look at it, you know, and this is always a tricky part with currencies. You know, to have a dollar call is really you got to look at what dollar yen is kind of a different animal than.
Almoly goodness what happened yesterday.
But yeah, you know, I they pulled it off very nicely. I think, Yeah, the Bank of Japan, you know, they and you know, it's it's people were expecting this to be sort of a huge, you know, explosive event for markets.
We had to end still in the same range that it was one forty, right, US treasure you're still under four.
Yeah, And importantly, the JJB yields, you know, they they went up to like fifty six basis points and settled in like the mid fifties. So it's not like they lifted a fifty you know, fifty basis point ceiling and
it went and it went to one hundred. And you know the reason is, and this is why I think you Eda did a nice job on this is that and we've kind of been flagging this that the tactical window for them to do this what was going to be at a time when there wasn't a lot of bearish pressure on global bond markets, which you know, we look at what's happening in the US and what's happening the ed to be it was a really nice window for them to sort of, uh to walk in and
you know and manage it. So Dollar call, you know, I I think, you know, we're close to the end of the cycle. I don't think we're at the end of the cycle. I think we still have a couple more hikes, you know. I think we have at least one more hike left, you know, for for the fad And I sort of think that, you know, looking ahead, the central banks might need to, you know, put another turn on the screw on tightening because.
Well Pal said that, he said September, he kind of warned us about September.
Right, Yeah, yeah, I mean September. The market is a price to everything out you know, for the US right now. And I think that the issue with September is just that it's going to be hard for them to explain or to even want to, you know, press for a hike when you know, when when the when the inflation numbers are going to are most likely going to come in benign, you know, and markets have been expecting that, and I think there's no reason.
But they can prove their point. He can say, listen, I was telling you all year, I want to get to two percent. Three percent is not good enough. Yeah, you know. Yeah.
I think that's the broader point is that the both the ECB and the FAD, I think their current stance. I think the you know, putting aside the twenty twenty three numbers, if you look at kind of the twenty twenty four forecast, I think it's a little aspirational the pace at which that they expect that, you know, that inflation, the disinflationary trend is going to continue when that manifests itself. You know, I still think the UCB is going.
To hike in September summer.
Yeah, fun, I'm done. I'm done. I've taken a recession off the table. I'm done with rate hikes. I got earnings troughing here. I'm set up for a ripping market. That's my call.
I'm still one of the problems for traders has been that I think they haven't been able to square the circle with interest rate hikes versus stock market going up.
It can still happen.
Yeah, all right, Sissan, thank you so much. Sassan Goa Rimani, President, CEO and founder of sg H Macro Advisors. We appreciate you coming here.
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The Bloomberg Intelligence b I go on yourternal Bloomberg Intelligence is the biggest research department on Wall Street, and more importantly, I believe the best research department on Wall Street. So we have access to all their analysts, including Matt Hendrickson. He's a senior Ecura analyst covering medical technology. He joins
us here in our Bloomberg Interactive Broker Studio. And one of the things we like about our BI analysts often bring us companies that we never would have thought about, never would have really you know, think of as an investment. But here's dex Com. D x CM is a symbol. This is a fifty billion dollar market cap. Stock hit fifty two week high today, it's up twenty one percent. Matt. What is Dexcom and what's going on with this stock today?
Yeah, SOX makes what they're called cgms. It's that's short for continuous glucose monitors, And basically this technology is replacing what is antiquated, which is fingersticks, which is you have to prick your finger three or four times a day to get your glucose reading.
Wasn't there a company that kind of did that a little bit of their nose or something.
Oh, that's a that's a different story, but the same thing.
Though, prick your finger, get four ings a day, that's antiquated. It hurts, it's a pain in the butt. Yeah, exactly. So cgms come in. It's on your arm or on your abdomen. It does a reading every five minutes, so that's two hundred eight readings the day without pricking your finger. You get the trends, you get the ups the downs. It's predictive, so it says you're going to be up, you're going to be down. That's what Type one diabetes
patients need to be able to treat. You know, the highs and the lows.
So it's amazing that it's I mean, it's amazing that a fifty four billion dollar company just has one kind of trick. Yeah, I mean that's all they focus on.
That's all they focus on. But that's all the trick they need right now, because you have thirty five million diabetic patients in.
The US alone and climbing I'm assuming.
Climbing, yes, and we'll get into those type two patients a little bit more, but right now they're only focusing on the type ones and those patients that really.
What's the difference, by the way, type one type two.
Oh so type one is more genetic, and you your pancreas cannot create insulin, so you need to inject yourself with insulin to lower your blood sugar. But you know the problem with taking too much insulin is that your low blood sugar and then you could pass out or even worse. That's why you need the CGM or that's.
Why you need's that you inherit that's not yeah, that's all. That's drinking way too much No.
No, no, that's uh, that's that's when you get the type two and by drinking so much soda or eating so many candy bars. Your pancreas just cannot produce enough insulin anymore, and it kind of just shuts down because it's overloaded.
And that's the I guess the big problem that we're looking at in terms of the climbing numbers.
Right, yes, and so when you see like the climbing numbers, it's mostly type two and it's mostly due to these lifestyle decisions.
Just eating nerds all day long, yeah.
And you know, sitting at your desk all day long.
All right, So dex Com this is a way to play that market. And the day of some earnings recently or some.
Yeah, so they reported last night and their recent product there, it's the seventh generation so obviously called G seven that launched earlier this year, and that's helped boost revenue. So they beat in the quarter and then they raised their guidance. So now they're up to three and a half billion to three point five to five billion. That's twenty to twenty two percent growth on a three billion dollar revenue run rate. So the market like that, and so we've seen the kind of the rally today.
All right.
So in the world of kind of medical equipment, what are some of the hotters. What are the areas that that kind of get your attention?
Yeah, I mean, and so the big themes in medtech right now is is diabetes is one and robotics is another one. The main company participating in robotics is Intuitive Surgical.
Is Surgical I SRG.
Okay, and so you're talking about a fifty billion dollar company, this is one hundred billion dollar market cap.
You just don't know these companies. Where have I been?
All right?
What did they do?
So they are creating robotics systems that help with various surgeries. It can be anything from general surgery, so hernia repair, bariatric surgery.
Robot is doing this.
Yeah, well, I mean it's so this is where you get your kids to start playing video games.
Okay.
It's controlled by a video game or what looks like a video game controller.
Okay.
So the surgeon uses a joystick essentially to do things in extremely precise way exactly.
And but basically, you know, even you know, when you talk think about a surgeon, what do they have? They have a very steady hand. But even the steadiest hand, by the steady.
Yeah, you know, I would not want to it's John Tucker.
Yeah, Paul's hands are too shaky. I knew a surgeon in London he had to knock back basically a bottle of Scotch before he could do any kind of operation.
That's not good. Yeah, and this is the guy you went to.
Yes, it's a friend of mine.
Well, yeah, that's why you should never mix friends and work.
Right, So, so intuitive surgical. I wonder if there's any AI involved. I've noticed we've all noticed, I think lately, that every company seems to be using artificial intelligence. Are you seeing that in any of the companies that you.
Cover, Yeah, there's it's AI, and it's for medtech. It's specifically machine learning. So you're learning from the past procedures, whether it's surgery, whether it's knee replacements, and you're learning to see what went right, what went wrong. You're learning with these patients how the recovery is, and then you're trying to use those and you're trying to show the doctor, hey,
why don't we try this method next time? And so it's kind of you're building this big data machine learning aspect to try to really streamline and kind of make the surgery just more efficient.
All right, the two companies are three companies you've given us so far, they're all up twenty thirty percent this year. So in a medical technol and medical equipment business, this is just a play that post pandemic, we're now going back and getting procedures done. So your companies are doing well.
Yeah, I mean that's pretty much. Yeah, you're just answering for me. Yeah, I can do his job.
I go want into Fidelity tomorrow and say buy these stocks because.
Yeah, but you know what, the thing though, is that because of the rally of this year so far, this earnings, you've had to be have had a perfect report or
else the market's going to kick back. And you know, Intertutive Surgical, for example, they beat estimates, they raised guidance, but in their call they made one comment that there is slower growth in bariatric surgery, which is just a small portion of the total surgeries, and the reason was that patients are trying ozeenpic and other weight loss drugs before going to weight loss surgery, and so that big competition, a big competition there.
Yeah, why go under the knife if you can just give yourself a shot in the arm or wherever they get it and and lose weight. That way.
All right, are you gonna you're gonna come back and talk to U about zempek at zempic or whatever it is. I don't, I can't. Image.
Got to get me a prescription.
Man, You got a money buddy. All right, Matt, thanks so much for joining us. Matt Hendrickson, he's a senior equity analyst covering the medtech space for Bloomberg Intelligence and again, terminal users can find all the research at b I Go.
You're listening to the team. Ken's are 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.
All right, let's talk space. Let's talk investing in space. Justice Palmer joins this year. He's the CEO and founder for Tuna Investments. He joins us here in our Bloomberg Interactive Broker studio. He is streaming on YouTube. Justice talk to us about Fortuna, what do you guys do, And talk to us about kind of your investments in space.
Absolutely so. We're an award winning venture capital firm. We've had a tremendous track record in other industries. We famously made a name for ourselves back in twenty sixteen, twenty seventeen. That was back when Elon and Tesla were just beginning to take off. It wasn't the star. Tesla was not the star then that it is now. Just to give you context, Elon was selling like sixty thousand cars a year. He's selling two million cars a year now.
And you guys invested in So we didn't.
We stayed away from Tesla. But what we did was we realized it was the lithium ion batteries that were fueling this electrification. And so what we did is we founded and we co founded a couple companies in that industry. One went to a billion dollars on NASDAC and the other one was sold last year for four hundred and sixty million dollars. So we've had a tremendous track record in other industries. Now we've turned our attention to this
new space economy. We believe this to be a once in a lifetime opportunity and we're so happy to be on the front line.
And so Starfighters Space is the first investment that you're making. Tell us about this company is not everyone's heard of it.
Yeah, So it's a private company. They're they're located at the John F. Kennedy Space Center at NASA, right beside Jeff and Elon. And so what Elon and obviously SpaceX gets a lot of headlines. And so the secret sauce what Elon's doing is he's got this Falcon nine rocket cranking. He's he's taking it up every single week, and he's focusing on the heavy payload, big satellites, heavy payload. That's
what he's got going on. And so for us at Fortuna, we realize there's a void in the market because the small satellites are actually being neglected in a certain way and technology is actually getting smaller and smaller and smaller. So we've made a fifty million dollar commitment to Starfighters to help grow this beautiful space ecosystem that's that's starting to emerge.
So small satellites, they're like shoebox size satellites right that are getting launched in the dozens with these kind of you have a f one to zero four supersonic aircraft, How did they how do they launch those? They just fly up to the top and kick them out or what is their paid delivery, you know your stuff.
It's amazing.
So yeah, so the short answers, Yes, technologies getting smaller and smaller, and so they could be anywhere from like a pizza box all the way to even the size of your iPhone. And they're called small SATs nanosats. And so Starfighters with our funding is actually going to get their launch license. So they expect to have their launch license in the next eight to twelve months. And as soon as we get that launch license, as Paul said, we already have the nine F one oh four fighter
jets that fly mock two speeds tremendously fast. Obviously, and if you think about the nine fighter jets that we have, that's bigger than I don't know Switzerland's you know air force, are certain countries air force. Right, So we've got this as a private company, one hundred percent own, no debt, and we look really forward to taking this next step in terms of the launch game.
How do retail investors play, you know, investing in space.
Sure, and so it's a bit of a loaded question, but here's what I'll say. I believe that the mark So we've come off the worst market crash in the last twenty years, since two thousand and eight, almost twenty years, and so a lot of the stocks have been extremely depressed in that industry, in all industries, albeit obviously there's been an uptick in the last couple of months or so. But we have fortuna believe that the markets to perform
extremely well over the next couple of years. Reason being is there's trillions of dollars of cash on the sidelines. We've we've seen peak interest rates. We also realize that there's gonna be a many activity galore, and there's a lot and it's a US presidential here coming up, so there's a lot of really interesting catalysts coming up for the equity markets. We think the market's going to perform well.
And within their space has been a depressed category that we think is going to perform very well of the next couple of years.
So what I was gonna ask, what else is there besides launching satellites. We hear so much about space mining, but I don't think anyone's ever really achieved that, and it seems like it must be a decade away. So what else?
I mean?
I know Elon Musk wants to go to Mars and put a colony there. What are we talking about?
Yeah, so we at Fortuna. So we're blasted. We've got you know, almost thirty individuals, thirty folks on our team. You know, these are research analysts, these are investment bankers. CCFA is all sorts of brilliant people. So we actually get pitched three, four, up to five times a day from various space companies looking for investment. So to answer your question, Matt, we see it all or not all, but we see a lot of really really interesting things
coming through our desks. And so I agree with you. I think that the space mining is still maybe eight to twelve years out potentially, but there are interesting applications such as, for example, solar solar energy. We have for tune our big and solar energy. We've got solar energy
investments here in the US. But just conceivably, if you think about it, the Sun that we get on planet Earth here, it's actually diluted, It's diluted by the Earth's atmosphere, and we got a very deluded version of the Sun. And so if, if, and when we're able to have satellites with solar in outer space, you think about that it's gonna be ten times, ten thousand times more powerful.
Clean sun and things like this are going to be the few of this beautiful industries that's just starting to come together.
The scoard would be so long, you know, yeah, exactly.
So, I mean, kind of what's the VC world like today in terms of raising capital deploying capital. We've got higher interest rates. The world's really changed from that free money of just you know a couple of years ago. How has it kind of impacted your business?
Yeah, so that's just it. The growth stuff has been really really hurt. Vcs are very shy to put money out, although that might have changed in the last thirty days with this AI push. Aside from the AI, it's been a really really tight industry. A lot of guys are licking their chops because they've financed companies at extremely high valuations, many of which will probably never be seen before.
So it's really tricky.
But for us at Fortuna, we monitored the space industry. We actually thought it was a little bit two point over the last couple of years with the spack craze and some of these things are going on. We did our homework and we're actually using this as a perfect entry point in our opinion, where technology has been the furthest it's ever been, and valuations have actually been the cheapest.
We played a long game, We played five year, ten year cycles, and so for that reason alone, it's a tremendously exciting opportunity.
Did you see the congressional hearing the other day on UFOs.
Yeah, they're working on that.
So apparently we have some alien wreckage. It's top secret, totally classified.
So why are you saying it? You're just out the whole.
I mean, that was that was the big thing about this, uh, this congressional panel. If we could just if we could just get some of that technology, imagine how much you could, you know, supersize the space investment.
Yep. So I mean all right, so just moving.
I mean you know what I was thought. I thought of it because you asked how does a retail investor get in in space? And my immediate reaction is to type in ETF go on the Bloomberg terminal. So I do that, and I put space in the description, and then I get rc X is an ETF you.
Could use it?
And so Athy Wood UFO IF is another one rocket r O K T it is hitting fifty two week highs. Take a look at Rocket. It's a really nice basket. The stock looks from the bottom left to the top right General Electric for example. That's a great way, in my humble opinion, to play it.
Obviously, talk to.
Your own financial advisors, not financial advice, but you know, ge was a global congomerate. They're getting rid of everything, including healthcare, and they're only focusing on aerospace and avionics. And if you take a look at that chart, it's been one of the best performing stocks out there. And so that's another, you know, low access, easy way to
start to you know, look at these things. Because the reality is all the listeners at home and some of the folks they don't have the chance to necessarily buy the SpaceX is or the Relativities or the Fireflies or some of these private companies that the VC world are currently.
Can you buy SpaceX on the secondary market?
Yeah, we ironically, we had an opportunity to buy it back in twenty fifteen at a fifteen billion dollar valuation. Obviously we did not do that. Why would we still kind of kicking ourselves, but yeah, we do get offered the SpaceX rounds of financing absolutely, But what we try and look for we try and find the SpaceX is before they turn into the SpaceX, So we're not necessarily looking for a fifty billion dollar company. We're looking for an earlier stage.
Is private space industry? Is it primarily a US industry? Are there other countries doing it as well?
Though?
It is a global industry. It's a five hundred and forty billion dollar global industry. Of that, the US base US is over two hundred billion, so it's almost half of the global output. We Fortuna believe it's going to a trillion dollar industry this decade. It's going to be the fastest growing industry next to potentially AI coming up here, which is one of the reasons we're so excited about this industry.
A lot of those launches go out of French.
Guyana yep right, yep, yeap went down there once back in the day for one of the when the satellite industry is just kind of kicking off. It's a good trip. Actually, just as palm Our, CEO and founder Fortuna Investments, joining us here in our Bloomberg Interactive broken student's talking about space. Investing in space as a venture capitalist lots of opportunities. There SMP five hundred. There's opportunities right there. It's up over one percent today. The Nasdaq is up one point
nine percent, So there you go. The market's definitely liking what they heard from the earning side and liking what they heard from some of these central bankers, reflecting that in the marketplace.
You're listening to the tape catchur 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 bring that conversation. Intel C Pat Gelsinger. He joins Edla alone Caroline Height on Bloomberg Technology today after reporting earnings. Let's go to that conversation right now.
I wants to welcome our global Bloomberg TV and radio audiences. Intel shares are jumping, with investors buying into signs that the chip maker's long awaited comeback is underway. Inteler's forecasting sales in the current quarter of thirteen point nine billion dollars ahead of expectations.
The company also notched.
A surprise profit of thirteen cents a share in the quarter just gone as a slump him demand for personal computers appears to be come into an end. It's not all good news. Server demand isn't recovering as quickly. The company is still a little bit far from its heyday where margins where at sixty percent sales were nearer to twenty billion dollars. Even so, joining us now Intel's CEO
Pat Gelsinger. You know, Pat, this is the second consecutive quarter where investors have cheered the earnings results shares her up and I think before twenty twenty three, ten out of the eleven earnings prints that you had shares fell.
Is this job done for you?
In the turnaround at Intel?
Well ed?
We have a long way to go yet, but boy, having two good Beaten Ray quarters in a row, you know, is a super positive and really I think in THEKPI of that turning point for the company. But we still have a lot of work to do yet. You know, as we said, our client business is now healthy foot. You know, we've returned market shared to where it traditionally was a strong roadmap.
You know, the markets recovering. Inventory levels are.
Good, you know, Data Center, we still have work to do, but boy, you know two quarters in a row where we did a bit better than we expected, you know, but we still have challenges in AI, you know, and many of our really good products are only coming to market over the next year.
You know.
Networking is still a lot of inventory to work through, and our foundry business is still just a seedling, just starting to show some green shoots. So I'll say, boy, far from finished, but it is nice bouncing off the bottom a bit and feeling that momentum in the market.
Response, Pat, why do you have the confidence to kind of cool the end of the PC slump and also at the same time state that the server recovery is delayed to the end of the year.
Yeah, and the PC side, you know, inventory levels are now healthy, right, you know, everything that we've seen and a lot of the issues that we work through Q four, Q one and Q two were over inventory levels by the OEMs and the channel, and now everything is healthy. Our roadmap is very good. We've gained share multiple times
in a row. I think we're now at five out of six quarters where we've gained market share so I just say in the PC business healthy, Our position is good, and we're looking forward to the AI PC and with our launch of our next generation product, meteor Lake later this year. You know, we believe that ushers in the AI PC generation and I've compared that to like Centrino and Wi Fi, you know, two decades ago, a major new use case for why the PC is the best platform.
So we're quite excited about that.
On the data center side, you know, we still saw that, you know, the inventory levels still persist. You know, China was weaker than expected. Their recovery is going slower. And you know, cyclically we see the shift toward AI you know, these big training machines. Every cloud vendor is shifting their dollars to more focus on that. So those three things are leading to a bit longer recovery cycle on the
data center. Well, like I said, we performed a bit better than we thought on the data center in Q one m Q two, So we're feeling like our momentum and execution is rebuilding despite some of those headwinds that still persist in that area.
For our global TV and radio audience here at Bloomberg, we're speaking to Pat Gelsinger, the Intel CEO. Pat you're forecasting gross margin of forty three percent in the current period, but it's a long way from that sixty percent gross margin level. You know, Wall Street used to look at Intel and say sixty percent. You know, they cheer you as a leader in that space. Can you just explain to our global audience the timeline and path to getting back to profit at that level.
Yeah, and we're working our way back in margins and obviously a nice beat in Q two on margins, and we forecast Q three a bit better and Q four a bit better, you know. And part of it is the cyclicality. The semiconductor industry is brutal on margins. And when we had an oversupply situation inventory, you know, that just depresses margins because you know, the factories cost the same whether they're full or whether they're empty, so you end up with these charges that you burden the price
points and depressed margins. We also realize that our own product execution has weakened our product position, which doesn't have asps as strong as well, So that's another factor. And the last factor here is, you know, the plan that my CFO Dave and I have laid out is an expensive plan. We are making aggressive investments to build the capacity to get back to leadership, and thus we're moving
through nodes very rapidly. We said five nodes in four years, So that causes us to have a lot of undepreciated capacity that we're working through quite aggressively. Also building up a bit more capacity for our foundry initiatives. So all of those factors depressed margins to historically low levels in the first part of the year and we're just seeing ourselves now working to build back to margin levels. But we're still very confident that as we build our foundry
business get back to leadership and process and products. You know that those kind of margins, that's exactly what Dave and I aspire to to the future. And we feel like you two was a good marker you know that, Yes, we're building momentum to get back there.
Thank you for joining us here on Bloomberg Television and Radio worldwide. We're joined by Pat Gelsinger, Intel CEO. You described the foundry business as a seedling, but every time you and I have spoken, you've hinted that there is a big customer waiting in the wings to give life to that business. What can you tell us about that, Pat.
Yeah, and we're having good momentum, and as I said on the Ernie's call yesterday, we have two big customers in particular that we made very good progress over the last quarter for our foundry business. We did have one, i'll say confirmatory, not as big a customer, but the Ericsson announcement their commitment to eighteen A and our next generation work.
You know with them that we announced this quarter.
So I'll say overall, we're seeing good momentum and a really strong pipeline of customers, and we hope to make meaningful announcements later this year on that. We also pointed out on our earnings call that now we're seeing a lot of interest in our packaging technologies. So it isn't
just wayfer manufacturing, it's also package assembly and tests. And Intel has long term been a leader in packaging technologies, and because of key areas like high performance computing and AI, there's tremendous interest in these advanced packaging technologies and we're finding a lot of customer interest in that incremental area of the foundry business as well. So overall, you know, and the numbers were good for us in Q two for foundry, great pipeline of activities, Great progress on a
couple of these most major opportunities. So I'm feeling good like we're starting to really see that momentum build in this new business area for Intel or Intel Foundery services.
If we think about what a potential customer might be, you know, at the scale of Apple, Google, or Video, what is it that they want from you? What is it do you think that you can provide them?
Yeah? You know when I view it, you know, we have to go through four stages.
You know.
One is are my transistors good? You know?
Can they build good products using Intel? Second is do I have the design tools? You know, the cadences and synopsis, c das and the IP libraries. Have we gotten all of those basics done so that they can design on us?
You know?
Then third, you know, do we have good terms and conditions? Are they better off coming to me versus you know, TSMC or Samsung as an alternative?
And then finally are we customer oriented?
Can they really have the support because my factory becomes their factory, you know, So we have to work through all four of those stages before they're ready to commit major businesses to us, and that's why it takes a while. You know, they got to do designs and tests and pilots and you know, work through the financials, and you know, this isn't a mature business area for US. But I'll just say we're making great progress, and in particular, you know,
the two most significant opportunities. It was a really good quarter and I'm feeling very optimistic that yes, we'll bring them across the line and start to really accomplish what we've laid out, you know, with our reshoring and building the Western founder.
And we also had great.
Success with both the EU and the US chipsack this last quarter, which are affirming the strong support you know, of the Western governments on this strategy.
It's the right strategy at the right time. We're making good progress.
A big part of your smart capital approach, we have to talk about AI. You see a world in which the PC plays a role for localized running of l ends. But what are the use cases that you see pat the applications where PC with AI specific chips is relevant.
Yeah, you know, to some degree, they're numerous. Ed you know, let's just give one example. You know in the future, my word processor, you know, I'm going to hit a button and say, give me a legal brief that describes this, and it's going to get locally generated, you know, my video conferencing, my zine, my teams or zooms. I'm going to say, you know, give me, you know, real time translation across multiple languages, you know, for this meeting, and I'm going to have that in real time on my PC.
You know, my games, you know, for my you know, all of that is going to become synthetically generated worlds locally on my PC in real time. So we see it across creator, across productivity, you know. And as I've said, this is sort of like a Wi Fi moment, you know, for the PC of the future. And that begins with our meteor like launch in the second half of this year.
Pat quickly a one billion dollar pipeline for AI products through twenty twenty four. Just give me a sense of the pace at which that pipeline is growing.
Now, Yeah, we had a super exciting quarter. As I said, we six xt that pipeline in Q two, so we saw a huge uptick on that, you know, and I've deployed a lot more sales resources, software resources, you know, to jump on those opportunities worldwide. You know, when we have our Gouty two chip that is now in volume. You know, we've just seen the first wafers on the next generation Gouty three, which will be our twenty twenty four product, and then we have our twenty five and
twenty six products underway. So you know, we're seeing a lot of momentum there and the world is looking for a great alternative, an open alternative, a more cost effective alternative, and Intel is a trusted supplier. We think this is a great area for us to put a lot of energy into and we're seeing the response from the marketplace now.
Intel CEO Pat Gelis, you know, we appreciate your time here on Bloomberg TV and Radio. Thank you.
You're listening to the tape. Catch our 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.
I want to get to cars right now.
Oh there, we go.
I'm so happy to be back on this program and talk about the car industry. I've been covering it for twenty years now and as a result, as you know, manufacturers often give me vehicles to test out. It's the best part of the job. This week, I am driving the Alfa Romeo Tanali, which is a subcompact suv. It's a very crowded segment, but this one is electrified. It's
got a hybrid drive train. It has a very tiny gas motor one point three leader four cylinder motor driving the front wheels, electric motor driving the back, and it can do more than thirty miles of rain on the battery by itself, so it's a very interesting vehicle. Also joining us to talk about Alfa Romeo stilantis As, which is the owner as well as the broader car industry, is one of the few people who has driven more
cars than me. Bloomberg Pursuits. Hannah Elliott joins us from Los Angeles and I'm really glad hen I've been chasing after you for weeks to get you on the show. Thanks so much for joining us. What do you think, as you know, someone who is a huge car enthusiast, someone who loves older cars as well as newer cars. About the Alfa Romeo brand, the Alpromeo story, I mean.
First of all, thanks for keeping on the chase. I'm so happy to be here with you, Matt. Second of all, what's not to love? This is one hundred plus year old brand with real racing history. It was history, it was winning the Targa Florio in the early nineteen twenties. Of course we have you know, famous Alpha Romeo movie cars like the Little Spider and the Graduate. Of course everyone knows and loves It's got real history, it's Italian.
Who doesn't love Italians? And it's it's owned by the largest carbrand in the fourth largest sorry Carbred in the world, Stilantis. Like you said, there's a lot going for I actually like how even the modern cars look. I think they look distinctive, they look interesting, and they're pretty well built. They've got some great specs. They're competitive within the market share. But my caveat is, for whatever reason, Alpha Romeo has really struggled to gain real momentum and real ground.
It's very true. I looked at the stats and last year Alfa Romeo sold twelve eight hundred and forty five cars, which is very little, right. BMW sold more than three hundred thirty thousand, Mercedes sold more than three hundred forty thousand. Teslas sold almost half a million cars last year in the US market. So my question is, why doesn't Carlos Tavars, why doesn't Stilantis and this is sixty billion dollar company invest more in this brand. Listen to what Tavares told us on Wednesday, off.
Roll maybe is a big success since Stanatius was created. We made a huge turnaround of the business model. It's now a highly profitable brand. It's a growing brand, sixty per volume growth on the H one twenty twenty three compared to last year, so it's growing. It's highly profitable. We have turnaround, We are happy to be in Formula one, and we are going to increase our presence in the US, including at one pointeen ten.
So it's interesting that they're getting back into raising Hannah, And I'm sure that's key for an enthusiast like you, But the problem for me is not only well, this car that I was test driving is front wheel drive, which is already like forget about.
It for me.
Yeah, and I mean, that's just not my thing. But for some people it's a great vehicle because it has its good in the snow, good electric range it has I guess it's okay in the snow, and you could also take longer trips with the motor. But my problem is it breaks down so much much. In JD Power's initial quality survey, they showed two hundred and four issues per hundred vehicles, and that's only the first three months. So in the first three months, every owner essentially has
more than two mechanical problems. That's something that they.
Have to fix.
That's just completely untenable. And unfortunately in the US especially, that has been the existing reputation for Alfa Romeo so much so that it's kind of a joke, even for people who really love the brand and who collect the old cars and who want to buy the new cars. That is just the sticky reputation that they have. And you know, of course, of ours is saying they're pumping money into it and it's successful, but he's talking on a global level. In the US, Alfa Romeo has had
a very spotty history history. Let's not forget they were dormant and didn't sell any cars here for several decades. In twenty sixteen, they sold less than fewer than six six hundred cars for the full year in the US. These twelve thousand that they've sold last year were down from the previous year, and this year on they're on track to sell even fewer. There's probably gonna sell around
ten thousand. So in the US specifically, you're right. You know, when you think about Alpha Romeo being in the same competitive set as Audi, BMW, Mercedes, even Bolvo, even Jaguar, there's there are a lot of options, so when you're having reliability problems, it's an automatic no go.
It's too bad because the Julia and the Stelvio apparently are amazing performance cars, but if they break down, you know, that's that's kind of a deal breaker. Also, you know, Hannah, I was joking with you and you pointed out that everybody made the same joke about the new Ferrari suv. It kind of looks like a maz To Suv. This Alpha Romeo Tonale that I was test driving looks exactly like the Dodge Hornet. I think we might have video of the Dodge Hornet. The reason is that they're essentially
the same car. Dodge saw that Alpha was making this, they wanted an entry into the sub compact market, so they just stole it being a sister brand and changed like a couple pieces of sheet metal. But it's ten thousand dollars less, and I can't imagine why anybody would want to pay more for the Alpha when you could get the same car as a Dodge for so much cheaper.
Okay, this is where we may disagree, and in a good way, because I feel like you really understand, like the paper the paperwork says the Dodge is the better buy. But I still am a little bit shallow, and I like this sort of Italian cachet that Alpha Romeo has, even though all the things we already know about Alpha Romeo. To me, it does at least have this sort of Italian luxury cachet. So I'm going to still probably go
with the Alpha Mao over the Dodge. I also think the interior of the Alpha Romeo looks a little more interesting than the interior of the Hornet. Tell me if I'm wrong, but that's my take.
I think you're You're probably right.
By the way.
The good news is I went on a call it was way too early for you. But this morning at six thirty am, Maserati Ceo da Vido Grosso had a conference call and he said they have poured money into the quality issues to try and fix. Obviously it's a very different brand and a different segment, but they're still both owned by Stalantis. Said they're going to try and fix the quality issues there and they made great headway.
I mean, I'm glad to hear it. I do think perception lags behind reality, so maybe a few years before the public consumers pick up on this improvement. And I do think, you know, Alfa Romeo hasn't been marketed strongly in the US the same way that Audi's are marketed, so some of it could just you know, if they keep throwing money at it, we may be we may see some growth.
Who knows.
All right, Hanna, thanks so much for joining us. Hanna Elliot, staff writer for Bloomberg BusinessWeek from Los Angeles, talking to us. We card talk right there. Why not?
Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platf form you prefer. I'm Matt Miller, I'm on Twitter at Matt Miller nineteen seventy three, and I'm Paul Sweeney.
I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio