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Let's switch gears to logistics.
Transportation UPS still having some challenges. US misses profit estimates amid heavy costs and uneven demand. Can't catch a break stock down double digits here, Lee Clasical joins US senior transport logistics and shipping analysts for Bloomberg Intelligence. Lee A, get another tough quarter for UPS?
What's the story there?
You know, I think it's a lot of things. You know, they are seeing buying growth, which is good, but that mix of growth is not good. What they're seeing is their shippers trading down. So if you were going to maybe send something via air, maybe you decide to go on the ground, which is you know, cheaper and lower margin. And then if you're using ground, maybe you're going to use one of their products like sure Posts, which is like an economy product, which is cheaper and again lower
margin business. So you are seeing, you know, folks trading down. You're also seeing the mix.
Of B B two B two C outpacing growth of B to B. B two C growth was around four percent, and B to B growth was down four percent and B to B.
So think like a lawyer sending documents to another lawyer's office that business tends to have better margins because of the inherent density that follows that business, and density is really good for asset intensive networks like ups is. And then you also, you know, have another negative mixed impact. You had two you know, they called out on their
call to large e commerce companies. I'm assuming that you know, these are companies out of China that are you know, are kind of using more economy services, so you're seeing a surge in that demand from from there as well as addition to the trade down trade that we were that I mentioned earlier.
Is this the trough? Is this sort of the worst it's going to get?
It's a great question. I mean, you know, I think so, you know, I think it feels like it's this is the worst. I mean, you know, the company has done pretty well in terms of meeting expectations or beating expectations. This is the first myths since I believe the first quarter of twenty twenty. So you know, Carol Toon May and her team have been on quite a role. They also have some easier comparisons going into the second half.
You know, some of your listeners might have remembered they had a really you know, tough negotiation with their labor unions. They had a new contract that was really you know, heavily weighted in the first year that gets anniversaried in August first, So therefore, you know, those higher labor costs, the comparables will ease significantly, you know, after August first, so that should provide a better cost for them in
a third quarter and going forward. Also, you know peak seasons here right, You know a lot of the companies that we cover are talking about we you know, most of them are expecting a real peak season and we're not talking about, you know, the peak seasons that maybe we've seen the nineteen nineties or early two thousands, but you're definitely going to see seasonal increase in demand. And that peak season is one of the shortest on record.
You know, it's around seventeen days between Thanksgiving and Christmas, and that will allow ups to implement surcharges because they're going to have to you know, get those resources in a short amount of time for a short amount of time to make sure that you know, they're able to deliver at high service levels. So you should see probably some good volume I'm sorry, some good demand revenue growth in the fourth quarter from those surcharges. So you know
that coupled with a lot of their cost cutting measurements. Uh, they they've they've reduced a lot of heads. You know, I think a lot of things are going to turn for this company once You're going to see you know, that B two B volume return and the company is doing a lot of things I think to position itself longer term, you know, whether that's you know, focusing on
the healthcare logistics. Healthcare logistics obviously there's a lot of value add there and those margins are pretty high relative to you know, someone throwing a package on your porch, and so you know, they're really looking to grow that business and they want to be a leader in that business. Uh And and to be frank, it's it's it's a fantastic uh business to be in if you're a logistics provider.
And then you know they're also trying to do new things with or more things, I should say, with what we call SMBs, which are small and medium sized businesses. You know that tends to have better margins than you know, dealing with these super large companies like Amazon, which you know, the business is good, but the margins could be better, right.
You know, I had absolutely no loyalty between these two companies. I mean I have actually no loyalty between these two services. I mean the FedEx store and the UPS store kind of right next to each other in my little strip malls.
Whichever's got the shorter line, that's kind of where I go.
But well, you look at the stocks over the last five years, UPS is up about seven percent per year. FedEx is up almost fourteen percent, so twice the stock price performance. So lee from an investor's perspective, you know, you got thirty seconds herea what's the difference between these two companies from an investor perspective.
Well, it's interesting. So like on fed X, I think they're dealing with more structural issues because that was a company that I would say was extremely bloated, you know, over the last decade, and they're kind of right sizing their network they're both making changes to their networks to kind of meet the new demands, you know, that change of increase in the home delivery versus you know, delivering to lawyers or doctors' offices or corporations.
You know.
I think the biggest difference is, you know, there might be more margin expansion opportunity at FedEx, just because they're starting from a lower base than the new ps.
You know.
But you know, these are two what I would consider blue chip companies that are you know, should benefit with the economy and they should probably be able to grow top line well passed Global GDP, just given some of the self help things that they have in front of them.
All right, pley, super appreciated, Thank you so much. With Klasgow, he joins us from a Boomberg Intelligence. He covers all the logistics and transportation stuff for us.
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Alex Steel alongside Paul Sweeney and John Tucker. Yeah, crude really getting hit by weaker China demand. We're going to talk about that in the next hour. This is Bloomberg Intelligence Radio. We bring you all the top news in business, economics, politics, and finance. We are broadcasting to live Interactor Broker Studio
right here in rainy Midtown Manhattan. The latest news on the political front is Kamala Harris now has more than enough pledged delegates to clinch the Democratic presidential nomination after just a two day blitz that saw the Vice president consolidate her parties, backing to challenge Donald Trump in November. Want to get more details on all of this with Henrietta Trace, Managing partner and director of Economic Policy at
Beta Partners. Henrietta, now, what happens? What does pledge delegates mean?
Edge delegates basically means so the field is clear for Kamala Harris. She will be the Democratic nominee as expected. We will get that confirmed around August seventh. They're going to start virtual roll call voting at the DNC in the beginning of August and carried through until about the seventh when it'll become relatively official, and then we will have the convention on the nineteenth around then we should
get to understand who her vice presidential pick is. So it's really all eyes on Democrats for the foreseeable future.
Henrietta, can you give us a sense of the timing associated with the VP pick? Is there any rush to get it done sooner rather than later as it relates to maybe that virtual role call.
No, not really and based on what we're seeing from the Democratic Party right now. And I would think back to know how long it took for President Biden to come to the conclusion that he was going to step aside, the slow approach that Speaker Meredith Nancy Pelosi took to President Biden, the slow approach that.
The donor took.
This is all orchestrated, not you know, necessarily on purpose, but designed to keep the attention on the democratic process that's playing out in the Democratic Party. Make sure that they're vetting a lot of these guys, the people that they're considering. The governors from the swing states, Mark Kelly and Arizona. These are folks that have very low name recognition outside of their state. So a lot of the
vetting process is being done in real time. We're watching it all unfold, and I think it's going to take the remainder of this month and into the beginning of next month. Let's recall that former President Trump announced his by pick P pick on the Monday.
Of his convention.
I wouldn't be surprised if that's the set of timing that we get on the Democratic side as well, which means we've got another couple of weeks before we know for sure who it's going to be.
We also keep hearing, you know, these rumors that Republicans are talking about. You know, we're hijacking democracy here. This is not democratic, which leads me to think, are we going to see lawsuits in relation to Kamala Harris being on the ballot? Are we going to see lawsuits concerning campaign funds? Are we going to see lawsuits preventing her from getting on the ballot in certain states?
Is all of this just talking points? There is any of this real?
No, These are all relatively frivolous lawsuits. The Democratic Party has until the convention to name a nominee. Once they do, I think the concerns around the democratic process or what you're seeing in terms of slow walking endorsements from former President Obama from Majority Leader Schumer from Minority Leader Hakeem Jeffries, this is Democrats trying to explain to American voters through illustration that they're going to take their time and not
necessarily have an anointment of Kamala Harris. They chose the direction that I think was the only conceivable conclusion, which was that Kamala Harris, the current Vice President, who you know millions of people have already voted for to.
Go into the White House, is going to be at the top of the ticket.
And the endorsement from President Biden really sealed that when he wrote his letter over the weekend.
So I think that the.
Direction we're getting from the Democratic Party is clearly indicative of La Harris winning the delegation. There was no real primary, but the process has been playing out for so long now, even though it's only been a couple of weeks, it feels like an eternity, and I think the Democratic voters, as evidenced by their fundraising numbers, are clearly enthusiastic and
happy to have Kamala at the top. There was some morning console pulling that came out this morning showing the Democrats prefer her to be at the top of the ticket. Petevodajin was next in line, but she clearly wins the majority of the Democratic voters, So I don't think there will be an uprising against Kamala from the Democratic voter base.
And let's talk money.
Just reading your notes here, I mean, like eighty one million dollars was raised just in the twenty four hours after President Biden endorsed VP Harris. Here, give us a sense of the magnitude of the fundraising and what it tells you, I guess about her candidacy and the support of the Democratic Party.
Man.
I mean, the numbers are staggering in and of themselves.
They broke Democratic records, presidential records for a twenty four hour haul. She's up over one hundred and one million dollars as of right now. But the real said is the fact that sixty percent of those donors are new to the twenty twenty four CYC ball. That is, grassroots engagement momentum on par with, if not exceeding, what you see on the demo on the Republican side in terms
of galvanization from Trump supporters. One of the reasons that my odds are sixty forty for Trump right now is because we don't have any hard data from polling to suggest that Kamala Harris has a shot to win in the swing states yet, But the fundraising numbers and the heat map that you see from the Act Blue campaign suggests that those same states that Kamala Harris would need to win are the ones that are donating amongst the highest mounts.
What do you think is going to wind up happening? Like, how do you game out now? Like what happens in November and beyond? I mean, moving sort of money into any kind of asset class to been on it now seems crazy?
How do you think about it?
I really think that investors should focus on the momentum play. That is the main focus of my note from Life last night. The momentum story is now has been with the Republican Party on things that were planned and unplanned. Obviously, Trump winning the first presidential debate, you know, getting a failed assassination attempt was extraordinarily galvanizing. I think it's insane that you know, that's not the number one news story
of the day. But the reality is, and I talk about this with clients a lot, the Republican momentum came and is now gone, and now it's all with the Democratic Party. And of course it would be ridiculous to assume in twenty twenty four that there won't be another wrench thrown in the gears here. But for right now and for the remainder of this month and next month going into the DNC, you know, we haven't even gotten
to those events yet. So not only is the Democratic Party galvanized in a new way that we haven't seen for two years, but the groundswell of support, the pent up demand is so robust that I suspect it will compel Kamala Harris well into August and then into the critical months and the final countdown of the election into
mid September. What's fascinating is twenty four percent of Independence don't decide how they're going to vote until after Labor Day historically, so even though we're, you know, only one hundred days out from the election, there's shockingly.
There's a shockingly large amount of time still left in this race.
What do you think the I guess the debate strategy should be for Kamala Harris and the president former President Bush.
I mean sorry, I oh, can't go that back that far. I think at this point you just got to get Trump to the stage. I think that if you read his true social pronouncements, he is really definitely attempting to move the needle on the debates, and.
The question is really whether he shows or not.
I don't think it's optically possible for him not to debate the vice president and the ultimate Democratic kick nominee. That debate is tentatively set for September tenth. Kamala Harris, when she was vice president, has set a couple of dates, the twelfth and thirteenth, if I'm not mistaken, of September for a vice presidential debate, but the Republican ticket hasn't.
Committed to any of those.
I think the American public is going to demand the Trump debate Kamala Harris, and I think it would be a material show of weakness if you did it.
Just some breaking news for US, confirmed by AP as well as ABC News, the Secret Service Director Kim Cheatle has now resigned. This comes, of course, after the attempt assassination attempt on president former President Trump's life.
Henrietta, are you surprised by that news?
Not really, I'm surprised that it lasted as long as it did.
The Secret Service has come.
Under fire for years now, and I think in the wake of the attempted assassination attempts, which was so shocking to so many Americans we haven't seen that, you know, in my lifetime, is really something that required a shake up at the top. The Republican Party has come out very strongly against her and has been very focused on the Secret Service. There are investigations that they're waiting for with a couple of different deadlines sixty days out from now for a thorough account of what went on.
It makes sense that she would resign.
Henrietta Trees, thank you so much. We really appreciate it.
As always Henrietta Trees, she's a managing partner and director of Economic Policy at Data Partners, really one of our go to voices of all things political, and I think we're gonna be talking to her very frequently between now and election day, because, as Henrieta said, there's found to be more wrenches turned into the whole process.
And then as an investor, what do you do?
Gina Martin Adams and Boomberg Intelligence had a great point that said that high tax companies have underperformed low tax companies, and if you're betting on President Trump, you would probably buy high tax companies with the idea that those would
be cut, that those taxes would be cut. Therefore, maybe what we're seeing in the market isn't based on the election, but on earnings and fundamentals, which brings us full circle back to a day where we get almost six trillion dollars at market cap earnings coming out.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Effo, car Playing and broun Otto with the Bloomberg Business. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Let's switch gears in. Let's get right to the media space. Are we it's media companies reporting. We're also gonna have Google reporting air for the Clothes tonight. Keith Rong and Nathan joins us. She is the media analyst for Bloomberg Intelligence. Keith, I know we had comcasts today in that stocks shorting down, but let's let's go with a winner, a good story. Spotify. Now, I'm not a Spotify customer, per se. I'm going to venture that John Tucker neither is probably not as.
Well, because here is his cassette tape.
Yes, this cassette tapes.
Very good.
No, I just.
Refuse to pay for it when I can get it free.
No, you have cassette tapes?
Okay, thank you, Yes, very good.
I have eight track tapes.
I have eight tract tape.
And this is why we love you exactly.
Keith. It talk to us about Spotify stocks really rallying today.
Yeah, thank you so much, Paul and Alex. So Spotify really blew it out of the park. You're absolutely right there. Up, I think now thirteen fourteen percent, and really the number here for Spotify, and the main story has not just been great subscriber growth, so they've been adding a solid five six seven million premium subscribers every quarter. But for them, what it really has been over the past few quarters
has been this inflection and profitability. Remember what we're now looking for streamers across the board, and this goes to Netflix and everybody else in video streaming, as well as Spotify, which is, you know, the main audio streamer with a thirty five percent market share. The narrative has really shifted now to profitability, and they absolutely blew it out of the park. So the gross margin guidance that they had given was twenty eight percent. They came in at twenty
nine percent. But even better was the outlook. So for the longest time Spotify was stuck at like a twenty five percent gross margin. They were pointing to like longer term margins of thirty percent. But looks like they're going to be able to hit it right in the third quarter, and that's why we see the stock reacting the way that it is.
So did it take anyone else's lunch or this was just a really good sort of management cost issue, Yeah.
It's excellent manage. More importantly, it's also price increases they've done. They hadn't taken any price increase alex for more than ten years, and then in a span of two years, they've raised prices by twenty percent. And that's just because they know that people love Spotify. Nobody is going to churn from Spotify to let's say, Apple Music or YouTube Music.
They have a thirty six thirty seven percent share of the global audio market and they're just adding so many features and so many new verticals that they're able to take those price increases. But of course, apart from that, you know It's also been a very good story when it comes to cost cuts. So they were investing heavily in their podcasting business, you know, like with the Joe
Rogan Show and adding all these other exclusive podcasts. They're being much more prudent now on that front, and those cost cuts again have really driven profitability.
How much of their revenue is subscription versus advertising versus other these days.
Almost all of their revenue, Paul, is subscription. It's a very Yeah, it's a very very heavy subscription based business. They are trying to build the advertising business, but as you know, again that takes time. You know, that will drive the longer term margin story. But as of right now, the mixshift is really subscriptions.
That's pretty impressive.
Hey, can I ask you about Comcast and what you made of their earnings that came out earlier, reported second quarter revenue that misanalyst estimates they had. It was the movie season, you got theme parks, the whole thing.
Yeah, So Comcast is an interesting story. So Comcast is actually, you know, your typical media conglomerate. They own both video distribution, broadband connectivity as well as the media side of the business. With NBC eighty percent of their ibida actually is related to just broadband subscriptions, and so what happened this quarter, we were expecting a little bit of softness in broadband,
and as expected, yes, they did loose subscribers. Remember, the whole cable industry is really in a slump because of very very intense competition from some of the telecom offerings, both with fiber and fixed wireless acts. So we're kind of seeing that slump and it looks like Comcast is really not going to be able to get out of
that slump. More interestingly, however, for both Comcasts as well as Disney, is that the theme park attendance is actually flailing and you know, a twenty four percent decline in their theme park ibadah. Yeah, and that's really because huge pull forward or what they're saying was a huge pull forward post COVID and now we're kind of seeing normalization.
So that was a little bit of a disappointment, But I think overall the business is fine, but we are going to see some extended softness over the next few quarters.
And you know, the stock is down about almost six percent today, down fifteen percent year to date. When you look at Comcasts, you know, great collection of assets, but none of which are really they're all facing serious headwinds. Is there a what's the feeling among analysts and investors you talk to, like, what can a Comcast actually do to become, you know, an attractive stock.
So Comcast, of course, Paul, as you well know, it's always kind of been saddled by this conglomerate discount, I mean, the big question. And we know Brian Roberts has always been hungry for some kind of deals. So the wildcard of theyre obviously a wildcard when it comes to M and A. I guess once if the if the administration changes, and if it's more favorable for deals, I think Comcast will be a major player. I mean, we don't know whether they'll look to do some kind of joint venture
with you know, Warner Brothers or Fox. It remains to be seen, but of course they will be a major player in the space. You know. Again, in terms of what would move their stock, maybe if they spin off their NBC business. I mean, Brian Roberts has not indicated any such thing, but I think over the near term, what really needs to happen to kind of move the sentiment on the stock is they have to show positive broadband subscriber growth.
All right, great stuff, great analysis is always rock and Aathan. She covers all the media business for Bloomberg Intelligence. She's done in our Princeton office. And you kind of look at those two stocks. Spotify kind of the new met if you will, Comcast kind of the old media, if you will. When there's a time when I was covering Comcast, it was the new media versus some of the traditional media like newspapers, magazine.
That kind of thing.
But it's just this evolution and what technology is brought to the entertainment communications businesses. A lot of these traditional media comes happened really hard time at evolving.
Yeah, and then how do you break it up when like one area is your revenue stream with the other areas your growth.
Like I'm glad I'm not in their shoot.
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Let's go to energy for a moment. There's a couple different threads here that we kind of want to unravel here. Oil is trading a little heavy again, down by almost two percent. We're now at seventy six ninety eight on WTI. Chris Wright is CEO of liber Energy. He's very outspoken when it comes to how he thinks oil policy should be, and we love that about him.
Chris.
We're going to get to that in a moment. But I wanted to understand what's happening with crude. It's had a real meltdown over the last couple of weeks, along with copper, along with aluminum and nickel and iron ore. What is this telling us right now.
Alex, I think it's fear of slowing economic growth ahead of US. China's the biggest buyer of hard commodities. They're by far the biggest importer of oil. They're building big strategic patrol strategic storage reserves for all commodities, including oil and so in China. You saw as cut interest rates recently. People are fearful of Chinese economic growth. If they slow down, that marginal buyer of oil and iron ore and copper is going to pull back a little bit. So oil
prices are still around eighty dollars. I don't think they're in a bad place, but I think fear about economic growth, and specifically fear about China is probably the cause of that.
Hey, Christian, in case you maybe didn't notice out there in Montana, but we're actually this is an election year. What is the energy industry? What are you and your energy industry palace? What do you think about? You know, Republican versus a democratic administration here as it relates to your industry.
Look, I've been outspoken on my visits to Washington that the efforts of the current administration to make it harder to get a drilling permit, or to get a pipeline or to drill on these lands. What does that do? In fact, it just means we produce a little less oil and natural gas. It doesn't change demand at all, So it just pushes prices up. So look, our industry has been at record profitability. That's great for me, that's great for our industry, but that's not great for our country.
If you have higher prices, it just makes people's lives a little bit tougher. And nothing the government does really impacts demand. Demand for hydrocarbons has grown at one point six percent compound annual growth rate for fifty years, a little faster than that in the last decade or two. So the president are not going to impact demand, but they are going to impact how much of that's produced in the United States and how much that's produced overseas.
So here's my thing with that I don't quite understand is that oil production in the US is at a record high. It's higher than it was when President Trump was in office, So what's the problem.
It would be higher, but you're right. You're right. Most of the productions on private lands here, so there's still room to grow production. We are at record high, will continue to set record highs, probably for another couple decades. The questions the pace at which US production grows, and how does that compare to growth in global oil demand, which is a little one to one and a half million barrels a day during the boom years of the
Shelle Revolution. US production we're growing as fast as global demand. That really keeps oil prices down. If US oil production goes much slower than global oil demand, so other countries have to meet those incremental barrels. That's an upward. That's an upward push on prices. Good for our industry, but not necessarily great for the country.
Where are we as an industry in terms of the fracking evolution, if you will, because it was such a such an amazing story to turn this country from a net importer to a net exporter. Where are we net process I.
Would say midstream, mid inning, mid innings. There's still a lot of technology improvement going on, but the low hanging fruit in the first couple of decades, most of that's been picked, so the rise in productivity is much slower these days. We're still getting better at making each well better. But of course you drill the best locations first, the rocks and oil. You know that give up oil and
gas the easiest. Most of those have been drilled, so we're drilling slightly lower quality rock, and we're trying to offset that by improving fracking technology. For many years, fracking technology out leaped to the decline in rock quality. Now you're seeing a slight decline in the productivity of each well because that degradation and rock qualities running a little faster than technology, but you know, not a huge change. A lot of room to run for US production.
So, Chris, if President Trump gets in the White House and he opens up all federal land to drilling, really sort of opens up things in Alaska.
Et cetera.
If that really invites more production, then won't the oil price fall even more? Which then doesn't that hurt the break even So there's got to be some kind of middle ground.
Exactly. The markets always find a balance. But there's no question, you know what, Trump administration would make it easier to produce US oil and gas product US oil and gas, so our production would grow. You'd see some offsetting factors though, We'd see faster permitting on LNG export terminals, so the US exports of natural gas would grow. I think you'd
likely also see more industry relocated in the United States. Like, our natural gas resources in this country are just awesome, but yet most of the energy intensive manufacturing think steel and cement and solar panels that's done in China and that's powered by coal. If you brought more of that industry back to the US, it would be powered by US natural gas. You'd see lower air pollutant, lower greenhouse
gas emissions, and more American jobs. So Trump administration, which certainly lead to more growth in US oil and natural gas production, but it might also lead to more consumption, more domestic consumption of those products as well.
Chris, I'm looking at your balance sheet here. I'm going to call them not an industry analyst for energy. It looks really.
Conservative to me.
Four hundred and sixty seventy billion dollars of total debt, you got a billion of EBITDAH free cash flow positive? What do you do with that? That kind of dry powder, if you will.
Are you media investment banker pitching him right now?
I am something. I can do a lot of stuff with this balance sheet.
So Chris, just so you know, Paul is a former investment banker for media, so you know, just set you up there.
I appreciate that, Paul. But yeah, we always keep a conservative balance sheet because, look, our industry is very cyclical. We've had two violent downturns that have both been opportunities for US to buy distressed but good companies at cheap prices. So we're always ready for a downturn to be aggressive. And also, you're seeing a degradation in the US electricity market.
Electricity is becoming more expensive and less reliable. That's very unfortunate for our country, another one of those bad energy policies. But it's an opportunity for Liberty to start selling electricity into the grid. We power our fract fleets, burning natural gas to generate electricity to power fract fleets, we can we can take that same electricity and sell it to data centers or towns that are struggling with an unstable grid.
So I think you're going to see it a broadening of the shoulders of Liberty's business, and we're going to deploy a lot of our excess cash flow into a new business line, and we'll continue to buy back our stock. Of course, we still traded a single digit price or earnings ratio.
Chris, that's actually tremendously interesting because sort of the conversation that was emerging at Sarah Week this last year was do energy companies need to rethink the kind of company that they are, that they can't just be a straight up oil and gas producer. Do they have to sort of become power providers? And that's a different business, it's a different outlook. It's kind of rethinking the structure of
what a business looks like. It sounds like you are deeper in those conversations than maybe some of your peers would that be true.
Yes, Look, I think most will not and most should not. You know, oil and gas is at an all time record high market share for US consumption. The sort of fears that oil and gas is going to be gone or demand will be gone in twenty or thirty years are just nonsense. So I don't think it's a necessary thing. But in our company, Liberty, we developed power production technologies the highest thermal efficiency, meaning most of the energy for
burning natural gas turns into electricity on the planet. So we have these mobile power plants we're using in the industry. We already developed that technology. Of course, we're going to go ahead and deploy it outside of the oil and gas industry.
Chris, do you have any appetite for being an acquirer of assets at this point?
Well, you know where I would say we're mid cycle, maybe a little below mid cycle. We look at stuff all the time, but we only you know, we're mostly an organic builder. We only buy stuff if it's compelling. But you know, a different technology, a different business that maybe leveraged us faster into where we want to go. Sure, we're open to that. We're always looking at opportunities, and.
Would that be in sort of the oil space to ramp up current positions. Would it be more to acquire some new technology since we already talked about how current wells not tapped out, but you know they're they're nearing that top out cycle. But it be more natural gas would be infrastructure, would be power?
Power is certainly a possibility. We're going that direction anyway. Might we buy a smaller player to speed that entry. That's a real possibility. Technology is something we always look at. Or we frack twenty percent of all the wells drilled in the US and Canada, so you know, we're not really going to acquire to get market share. We're already the biggest and I would say, by a fair margin,
the highest ranked quality provider in our space. So probably not in our core business, but certainly in peripheral businesses.
Is possible.
All right, Chris, thanks so much for joining us. Really appreciate getting some of your time. Chris Wright, he's the CEO and chairman of the board of Liberty Energy. That's a public traded company. Lb RT is the ticker stocks up about the fifteen percent year to date, so putting in some decent numbers. I got about equal number buys versus holds on Wall Street, so the street's kind of kind of mixed on that, which is probably true for energy in general.
Yeah.
Also see, here's the interesting part is that if you're a portfolio manager or a big investor, you can't own a lot of energy stocks like you really can't anymore. So you have to really pick and choose which ones you're gonna buy, which means the bigger have to get bigger, the mediums definitely have to get bigger.
You have to really.
Appeal to shareholders of why you are that one stock, which is why I also thought that his information about Power was interesting too, because that's a totally different type of company and a different business line and who would be good at and who would not be And that was definitely part of the conversation, do these guys really need to rethink who they are fundamentally right?
And at three point five billion dollars in market cap, are you a natural buyer of more assets or seller? And he says, well, they're already roughly twenty percent of the francking in this country.
So probably not gonna get much bigger. In that line, of business.
So interesting to keep an eye on that company based in Texas.
No, it's based in Denver, Colorado.
Actually, you know it's in the Colorado.
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Alex Steel, Paul Swiney live here in our Bloomberg Interactive Brokers studio, streaming live on YouTube as well. Well, you look at Tesla the reporting after the close tonight. Stock you're to date is absolutely.
Unchanged, But that does not tell the story.
I mean, through kind of the end of April, that's not getting declined fifty percent, but since then it's up seventy five percent, So go figure. I think the market's trying to figure out what this company is here. Kevin Tynan, he knows. He's been covering the auto industry for decades. He's director of research at Presidio Group. Uh, Kevin, what are you looking for after the close here?
Today?
When Tesla reports, it's kind of a mystery, Jeff.
Well, then the good thing, Paul is that they they their throughput was above one hundred percent, meaning they sold more than they produced for the first time in you know, several quarters. And what that does is, you know, it helps margins essentially. So what you've had is a lot of output difficulties selling it, and that's very You know that you're paying your cost of goods, but you're not
booking any of that revenue as a direct seller. So what Tesla and all the direct seller and pure playev companies need to do is to distribute everything that they produce, and that's been a problem, but most of them are all three Rivian, Loocid and Tesla were able to do it in the second quarter. Now, the way they get
there is by cutting production. So while it helps in terms of cost of goods, revenue, your income statement, and even your balance sheet, because you're not carrying that inventory as a growth company and trying to ramp your output, you're you're actually taking a step back. And I think Tesla's production in the second quarter was at actually the lowest it's been since the third quarter of twenty twenty two. So tightening up the throughput, but at much lower production rates.
What is the main thing that I'm supposed to care about interning? So you're mentioning production throughput rate. Then there's like AI stuff. It's trying to position itself as an AI company. There's robots that are going to make cars. There may be a robot that's going to drive a car. I mean, I'm legit confused as to what the multiple is trading on and what I should care about come four h five.
Well, that's exactly what you're supposed to think is as an automaker, right right, you're cutting production. So Tesla has the ability to distract in that way to say, hey, there's all these other great things coming. We're not simply a metal bending automaker like everybody else's. We can do these other things, and that's what our valuation is based on. Because as an automaker, again, you're in this cycle where
inventory is getting very frothy and you need to cut production. Well, now you're not a growth company, but you're not an automaker either, right, so you can you can point to these non disprovables such as the robotaxi business or full self driving or whatever else is down the road that you can pin your valuation to that isn't really the nuts and bolts of auto manufacturing, and and for GM Stilantis basically everybody else doesn't have that benefit to distract to those other business units.
All Right, you mentioned GM the stocks down six point seven percent today, but I thought that they're beat their numbers.
So what's going on with General Motors?
Yeah, I mean when you look at it, perhaps it's backing off the EV commitment a little bit. You know, if if you look at some of that Tesla valuation being tied to the EV market and most of the legacy automakers kind of taking a at least a half step back or extending the timeline in that, you know. But another one where GM's actually in a reasonably good spot at least when you look at North America and
the US, you know, not oversupplied. They did increase production in the second quarter by about eight percent, So looking into the third quarter, there may be a little bit of price issue and profit margin issue because they are getting a little bit oversupplied, specifically in evs. I looked at it just now and there's about one hundred and
fifty days supply of evs for General motors. It's about nine percent of their supply on the ground at the dealerships, but it only represents about three percent of their sales. So I think as we go through July and August, they're going to try and quietly sell that down and get that supply better aligned with demands.
Right, so then them pushing out production of the factory, the EV factory, like pushing that out in Detroit, etc.
Like this is good. Right for GM, it is.
Good, And it seems like it being more acceptable to say those things and that it's not you know, full throttle EV. All the time we saw the announcement from Ford about, you know, trading an EV factory for a super duty factory. So it's starting to be acceptable to say like, and that's what the business is, and it always has been, right, it's that trade off. You have some models or business units or regions that are deficient in terms of profitability, and the question is where do
you make it up? And we've sort of moved to this period now where the EV business is the deficient business. Also for GM, the cruise unit was a significant loss in the quarter too, so you're you're how do you make that up? And for gm Ford, even Stilantis. It's on the truck side of the business and that's where it comes from, and it's starting to be acceptable to talk about trucks again.
So, Kevin, what's the updated consensus out of Detroit as to the timing of this transition to EV's It obviously feel like we've hit a significant bump in the road and it's going to be delayed in this evolution. What's the current thinking out of Detroit.
Yeah, and I think there's been a little bit of a tailwind when you think about, you know, what's happening with the election in November, right, So.
I think it feels like in Detroit that the pressure is off that we have to get to these targets by these dates, that there's a little bit more room to stretch it out and to say, hey, we can do the profitable things right now and work our way towards the ev thing and hope that those profit dynamics level out a little bit at some point.
But it's really a little bit of breathing room.
I think that the industry.
Feels like it's getting and again there may be some some more uplift in November, depending how the election goes.
Hey, Kevin, really appreciate it. It's so fun to chat with you. Congrats on the new gig. Kevin Tynan, director of Research at the Presidio Group, joining us on GM as well as Tesla.
What to look out after the Closing Bell.
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