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Stay with Autos for just a moment. Craig Trudella's Bloomberg Global Autos Editor and joins us now Craig. At the same time, we also got the news that Tesla's estimates were cut further by an analyst unquote unprecedented brand damage. What's the conversation with zeitgeist around that right now?
I think over here in Europe it's particularly bleak when you look at some of the numbers. Just yesterday we saw the full figures for Tesla and Germany in the first quarter for them to have some you know, some months in the beginning of this year, they were down
more than seventy percent. And that's in a country where they where they build vehicles, where you would think that they would perhaps have have built up some goodwill on the basis of employing quite a lot of people outside of Berlin at their factory, and yet for Musk to sort of intervene in the federal election in February in a way that was highly unpopular and for some of the protests that we've seen across the US to also you know carry over here where you know, we've seen
dealerships get you know, paint tossed on them, cars you know, set on fire. It's it's really intense the backlash that we've seen against Musk.
So Craig, I'm trying to get a sense how much of their sales weakness is due to some of that backlash against Elon Musk versus maybe some of the model why introduction and the change over there of lines. Do we have make any sense as to what's you know, the kind of the percentage between those two.
It's it's really difficult.
I think we are going to be spending the next you know, probably months, maybe quarters, uh, you know, unpacking what exactly the dynamics are here, because you know, to your point, they did have a sort of you know, self inflicted disruption that I should point out is not unusual in the auto industry, even very experienced you know, carmakers, when they go from one generation of vehicle to the next, they often need to do some retooling and take the factory,
you know, down a bit, you know, work on the production lines. Tesla in this case had to do that at all of its factories around the world because they make them model y everywhere, and you know, so that that was a substantial disruption for them in the first quarter that we shouldn't sort of lose sight of. I do think that, you know, it can't be a coincidence that in a place like Germany, where you've seen a Musk poll so poorly, and you know where he so
asserted himself so emphatically. You know, you look at those figures and even as you've seen some some weakness for Tesla and other parts of Europe, we haven't seen it
be as drastic as we've seen it in Germany. So I think, you know, to your question, I think there's there's absolutely a bit of both, and it's a little bit it's going to take us probably some months, maybe some quarters to sort out, you know, just how much sort of lasting damage has been done here and whether you know they can lure buyers back with this fresh product.
I have to say, you know, you look at if you do Tesla equity in the dees. You get all the good information on Tesla right away. You look at a PE ratio is still one hundred and twelve times. You look at the PE ratio of in Nvidia and it's thirty two times, just meaning that it is still incredibly expensive when you look at it from that metric. Hey, Craig,
really good perspective. Thank you so very much. Craig Trudel, Bloomberg Global Autos Editor, joining us on the overall impact of terroriffs but really brand reputational damage when it comes to Tesla.
Wow.
This is a week.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business Up. Listen on demand wherever you get your podcasts, or watch us live on YouTube's.
One of the things we want to do in this Bloomberg Intelligence programs talk to the analysts that Bloomberg Intelligence and talk to us about their sectors.
Let's do that right now.
With Herman changing all was the regional banks for Bloomberg Intelligence.
I was gonna say, it's never good when you see him in studio because it always something is going to be blown up we see Herman. Otherwise when we ignore Herman, it's like, oh, everything's.
Fine and kind good.
So how do you view from the banks perspective a world where it seems like we're in a trade war here, right?
Well, banks are ultimately a reflection of their economies that they operate in, and when the economic expectations are in flux, then typically there's some pain for the banks, and that's where we are today.
We have while all the.
Bad news has been reflected in the stocks, the fundamental performance is still sort of shaking out. I would say that we're coming up on first qu results in the next couple of weeks, and so we'll get a better picture of guidance changes performance going forward. But right now we're still waiting to see where the shoes going to drop in terms of loan growth, credit quality, et cetera.
And that's my question because I understand the big banks getting hit in part because the capital markets are just going to freeze up, Like forget IPOs, M and e's, we're going to put that on the side. Okay, that kind of makes sense, But the regional banks may not have the same kind of exposure, right, and the real economy the hard data is still fine, right, So were you surprised at the extent to which your sector got hit.
Every time there's worries about the economy, these bank stocks sort of get hit first and then investors ask questions later. So that's where we are today. Valuations have come down, and there's just a lot of worries about future credit quality, the guidance coming down, loan growth fees coming down, top lines coming down. So there's going to be a lot of revisions going forward if these terrorists do really materialize.
So I guess one of the things we're hearing, and we've heard it, you know, all the years we're building up to this tariff day. Now it's just kind of reflected in the financial markets is just I just don't feel like doing anything.
I don't know.
If I'm a CEO, I don't want to buy a company. If I'm a consumer, I don't want to make that big expenditure from the washing machine or the car or whatever, And that means I probably don't need growth capital, right.
So if I'm a bank, I'm probably not writing too many loans these days exactly.
And that's actually been happening over the past few years. Given the uncertainty with interest rates first and then regulation under the Biden administration, there was just a lot of demand that was just on the sidelines, and you've seen that reflected in loan growth for the industry. It really hasn't moved a lot over the past couple of years, and the expectations heading into this year was that Donald Trump and the administration was really going to unleash more
activity from a deep regulation. But now the trade spats and just the chaos that's happening over the past couple of days, everything really continues to be on the sideline.
Something any kind of like regional m and A that we've all been expecting for the last couple of years, that's not going.
To happen banks right right exactly.
There has been some news that the Discovery Capital wind deal could be pushed through with the dj giving the green light to that. So now we're waiting on the FED and other bank regulators the weigh in, so that could be a good litmus test going forward. But still there's a lot of uncertainty involved.
When you see an economy slow down like it. Here's the US economy is doing. Where's the first place you see it from a regional bank. Is it credit quality is slowing loan growth?
What do you see it first?
Yeah, well it's going to be slowing loan growth and it's going to be sort of the delinquencies, right So these thirty day past new metrics, ninety day past new metrics, so those will start trickling in. And then there's other early warning signs for credit quality that the banks talk about that there's some bank bank parlance, it's called criticized loans.
Loans that may not be passed due yet, but the bank knows that there's some problems with the borrower or the project, so they'll flag it as a potential problem. So those are sort of the metrics that we look out for every reporting season.
Which banks in your coverage are pretty well set up to manage this kind of environment right now?
Yeah, I think the market is telling you some things. We just put up something on MRR looking at the five day performance of the KBW index, and it shows the trust banks like Bank of New York, Mellon Northern Trust holding up fairly well. M and T and P and C are the ones in my region and bank coverage that are holding up very fairly well, and then there are others, smaller regionals that are are faring worse.
Can interest bring some breaking news to Yeah, the NASTAQ one hundred just entered a bear market, down twenty percent from it. I know it's just numbers, but.
But no, I mean a bear market. We haven't talked out of bear marketing quite some time.
But they're numbers, but they're also headlines. Yeah, that's you know, that's part of it too.
There's people's iras and the four to one case there.
I mean, I'm not looking at that. Who's looking at that? Any of you guys look at that? Look, I'm not one on one care I'm not looking for twenty more years.
Just gonna sit there.
And that's the story. Okay, And then before I let you go real quick, carman, what is like sort of the the type of bank that's going to struggle the most.
Yeah, it's going to be the banks that have still been dinged during the prior regional bank crisis. Probably they'll
be in the headline still. So yeah, the banks that have have sort of weathered it, but there's always that recent history that all investors going back to, so banks like Western Alliance and and others that that were sort of teetering during that time probably get pushed a bit more by investors, but we think that they're they're balance sheet and the deposits are really strong going forward.
All right, Herman, thanks a lot, really appreciate it. Herman Chan joining us in studio, always good to get your perspective.
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All right, let's go now to tech and where we are in that market after the big sell up on a rug run a Bloomberg Intelligence and your technology analysts. All right, Honora, what stops the bleeding here for tech?
That we need a few more of those announcements that other countries are willing to negotiate as well, because unless that happens, you know, it'll be very tough to figure out where the bottom is in terms of fundamentals for any of these companies.
Yeah, Onrack, we had Dan ives in studio earlier this morning on surveillance, and it's by far the most cautious. I've ever heard him in on Granted he's a very bullish analyst by nature, but he's saying, basically, this is a black swan event for technology and you know, unless it changes, you know, this is a long term head win for tech and I guess that kind of goes
is there. And he even went to the to the level on a Raja saying he'd be surprised that if many of his companies even provide guidance in the upcoming earnings here, So as you talk to clients, what's the mood at there? Is there anybody saying I feel the bottom here? These are great companies. I can buy him cheap here? What are the conversations like?
I think the biggest thing is like how long is this malay is going to last? On the uncertainty side of it, because you know, frankly, if you extrapolate and see what Nazdak has done over the last three years,
it has been phenomenal since Chad Gibaut came out. So you know, one could argue there is a lot to give on the price action point of view, but fundamentally these are very strong companies, really amazing balance sheets and also the growth profile down the road, and you know, we talked about the conference and everybody is looking to invest more in more AI related services. So the fundamentals
on paper are very good. But what happens is when you have a shock in this system like this, everybody freezes, hiding freezes, spending freezes. So you don't know what to do for the next six months. You don't know whether the revenue decline, how much is it going to be, the margin, you know, pressure because of the tartiffs. So there is so much uncertainty right now, and I think there's a there's a fair point that the guidance is going to be very tough at this point.
Oh yeah, tough for everyone. I should point out some more headlines coming out of President Trump saying that's a perfect time perfet shaired j Powell to cut rates. This is as Jay Powell is expected to speak in just about twenty minutes time. That's going to be a fascinating conversation to unfold. That's pretty tough, okay, Anna Rag. When we take a look at earnings estimates for these companies in your tech space, in what part, in what sub sector do they need to rerate more?
I think software numbers needs to come down quite a bit and something we you know, did a note a few days ago. We looked at the top fifty software companies and saw that the medium growth rate for those was thirteen point two percent on December thirty first, so that is f FI for calendar twenty five. Just a few days ago that number was twelve point four percent, so less than one percent decline in the expectations of a growth rate. You know, that number needs to come
down quite a bit. It needs to come down, you know, well under ten percent at this point before one could say that, Okay, we are at that point where fundamentals are now aligned with where the overall economic situation is.
So let's go down and talk about Apple here.
It's off another three point six percent today, off twenty one percent year to date.
ANAK, Is there any call here on Apple?
They're just so and we've known this for years and we've talked about it for years, how so dependent they are on China, but from a supply chain as well as an end market.
What's your current view on China in this environment? On Apple?
Yeah, I'm really getting worried about how the you know, how consumers will react in China or with this thing, because you know, it's one thing to say that, Okay, my phone buying has been pushed out by three months or six months or so, Okay, the demand comes back next year. You know, it's it's not that big of a deal. But once you really get a bad feeling about a company or a country, that sourness really impacts the fundamentals of it. You know, we have seen what's
going on with Tesla and Europe, for example. You don't want Apple to have that same feeling in China where consumer is saying, you know what, I don't want to touch an American brand. I would rather just buy the local one. And that's a very big problem in our view because Greater China region accounts for twenty percent of Apple's revenue.
Yeah, and this is what we're talking about. Now, we're not even talking super cycles anymore. I feel like six months ago is like now it's coming. Then it's well, I have wone supercycle. To that point, we've already seen save Ford talking about discounting their cars to get people in the door. Is this going to be a similar case for Apple because they're not a discountery kind of thing.
No, I don't think so. I mean, I think, you know, I think the Apple CEO has played it very well when it comes to China. He has gone to China few times, He's been seen with the commerce ministers. He's talking about investing more money here there, and I think he's playing the cards right, because you really don't want the world's you know, most nucrative market for your goods to basically have a very bad feeling about your products because at the end of the day in the US,
you know, they really cannot grow much. It's a saturated market for them. Their growth rate will come from emerging markets, whether it's China or in a few years from India. But you know, they really have to play it nicely in China in order to show growth rate over the next three to five years.
In terms of overall tech spending on a rag, how elastic is tech spending broadly defined? It is it something that these companies feel like they have to do no matter what, or like advertising. We're just talking to Etherrong andoth and that is very discretionary spending on a part of a company that tech.
I think you divided in two categories. One is your growth capex where you're going to invest for newer products, and that will remain the case. You know, AI spending. Let's say somebody is spending you know, one hundred dollars more, they will probably spend ninety five hundred dollars again, that's okay. But the problem comes in now it comes at the expense of something else. You know, you are going to upgrade the PCs in your department. That's not going to happen.
You're gonna push it out by six months. Servers, normal software that you use for day to day works. You know, you're going to scale back on some of those elements. Consulting, you know, is off the window at this point. I mean,
I'd be very surprised to see consulting. I you know, one could expect layoffs coming in the consulting world over the next few months because if there is no work, you know, these companies are going to count out consultants, you know, whether it's McKenzie, BCG or some of the other services companies. So you have to take money out from one to give it to the other person.
I'd say, is there rotation of money or just a non spend of money altogether? Like does one section spend more while the other spends less or is this a true pullback?
It was a mix of both. I think reallocation is definitely going to go, but I don't expect you know, if somebody is investing in AI to improve their operations, they're not going to stop that project. But to be very frank that number as a percentage of total spending is still not that big for a large bank or a retail company. It's really the day to day work,
and that's where you're going to see. I, you know, anticipating more layoffs coming in over the next one one and a half months from some of these vendors.
Oh man, that is a grim prediction on that point. How fast do you think spending could pick up? Like what would be a trigger for reset?
You know, the news like viatam. Please give me five or more of those news releases and all of this on turns and everything goes back to normal. Because frankly speaking, this is we are really on a thin line when it comes to business confidence. And I think really the the you know, in our view, these things are really they're playing with fire because once it takes the spiral downturn, it's very difficult to stop it. So if it stops over the next few weeks, I think we have we
can see a good end to the year. But otherwise, you know, once the layoff starts, then it's a vicious cycle.
So is there any safe names in tech? I mean, is Microsoft the safe name is?
That's a very good point, Paul. You know, we have been thinking a lot about it, and you know, discussions we have been having and and you know, with with works like you, we've been saying that companies that are really exposed to the large enterprises, so the Fortune five hundred companies or the Fortune one thousand companies, they will be less impacted than the ones that are impacted to the SMB spending. So I'll give you a very good
example here is Shopify. Look at how it's completely been you know, decimated yesterday and today because the bulk of their consumer base or the client base is small and medium businesses. Now somebody like a Microsoft or a Workday that deals primarily with larger companies and larger enterprises a lot less you know, disturbance in their revenue flow, they will also get hit. It's not that they're immune, but it'd be a lot less than somebody like a Shopify.
I also have to wonder if this does this change the ROI for AI for example, like you got to prove it harder and faster in this kind of environment.
See, one of the things is that's still in the experimentation state. So let's say if a company, if a bank is spending one hundred dollars in technology spending, you know, in total, they're not spending more than a dollar or two dollars in AI. So it doesn't really you know, that doesn't move the needles. It's really the bulk of the big hardware purchases, big computer purchases, that's the one that you know, gets gets pushed.
Out all right.
On ra grana, thank you so much. We appreciate that.
On a rog Rana covers all the technology for Bloomberg Intelligence. Joining us from Chicago via a zoom Here live.
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What we've been trying to do is kind of go industry by injury and see what potential impact could be on a world where there are much higher tariffs in most of the world. One of the areas we want look at now is the media business. It is a global business, and for that we go to KEITHA. Rounganath and she covers the media industry for Bloomberg Intelligence.
KEITHA.
I mean, I guess where do you see some of the risks to some of these big media companies to their business in a world that appears to be going through some type of trade and dislocation to say the least.
Yeah, sure, Paul, So I think in general what we're seeing is, of course, a lot of these media companies are heavily exposed to advertising, television advertising, and television advertising has already kind of been a little bit down in the dumps, and overall we're seeing, you know, kind of consumer confidence shaken up pretty badly. And with that, we're seeing ad projections, so ad growth projections actually come down
by quite a bit. So before all of this stuff started, you know, Magnat Global was projecting about five percent increase in US advertising spend for twenty twenty five. Now it's down. Actually, before the tariff News it was down to four percent, and I suspect it could go even lower. So that is going to be a big blow to the bottom lines of a lot of companies like a Warner Brothers or a paramount.
So let me just ask a stupid question for you too, smart media people. So I'm Nike. I usually do advertising, say on CBS, I'm making all of this up right, all of a sudden, I'm like, oh my gosh, I'm not being able to sell my product, so I'm going to pull that ad all together. And is that like the logical one plus one plus one equals three trickle down, Kita.
That is exactly what it is. We have seen, you know, it's great that you brought up Nike. We've seen commentary from a lot of these consumer facing companies that are saying that they are going to pull back on advertising quite a bit this year, and that's really just a way of them protecting their bottom lines. So we're seeing
that commentary actually across the board. We're seeing even you know, digital advertising, and remember digital advertising has kind of been the standout, has been the star of the show, if you will, for so many years now, you know, jumping up every year about fifteen to eighteen percent, and we've seen some pretty soft commentary even for digital advertising. So I think across the board there is definitely a lot of nervousness.
How about you know, I think about the Walt Disney Company and even Comcast. The theme park business, which has been such a great business for or It's been a great business just across the board, and Disney's really stepped up its capital spending for that business because they're so bullish on it. But if consumers sentiment is shaky, here is the expectation that they'll see see it in their top line.
I think so, Paul, I think this is going to be a real risk for Disney. Remember this is so so important for Disney. Parks make up sixty percent of the company's profits, so absolutely critical to their bottom line. Now, what management did is they already guided to six to eight percent profit growth in the theme park business for this year. But I think they might have spoken too soon.
So we've already kind of seen a little bit of softening in terms of theme park trends, and I think it's going to get even more and more difficult as kind of the year progresses. Disney also faces some competition from Comcast actually, because Comcast is opening Epic Universe on on May twenty seconds. So for Disney, it could almost be like a double blow here.
Which is so weird because weren't we saying just like a couple quarters ago, Oh, it's great because it's like a one stop shop. You get to go there. You're going to Universal or Comcast, but you're going to go to Disney at the same time. Now that's not the case.
Not the case because again there's going to be a lot of pressure on consumer wallets and we've seen some really clever pricing come out of Comcasts. So the way that they're packaging their promotions for you know, Epic Universe is it's a three or a four day package leaving you know, a family like very little time to go to Disney. So they know what they're doing.
Is there going to be an analyst day for this new theme park?
Not that I've heard.
I haven't heard.
See, that's what Comcasts and most other companies don't get that.
Disney gets Disney.
Whenever they do something from like a new crew Ship or open up Shanghai, they have all their investors' annals come and it makes everybody feel good and presumably that's good for your stock.
And they know how to play that game. Look like a bribe, yeah, but it's fun. They used to be missing and what's your points?
All right, Githa, thank you so much for you appreciate that, Geitha Ranganathan for Bloomberg Intelligence and the best one.
Of those I did.
It was in Canadian National opened up their tunnel through one of the rocky mountains that cut the trip the trans continent trip by like fifty percent. That we had a multi day rail trip through the Canadian ROCKIESWS.
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