Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Intelligence with Alex Steinhl and Paul'sweenye.

Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Intelligence with Alex Steinhl and Paul'sweenye.

The real app performance has been the US corporate high yield.

The real app performance has been the US corporate high yield.

Are the companies lean enough? Have they trimmed all the fats?

Are the companies lean enough? Have they trimmed all the fats?

The semiconductor business is a really cyclical business.

The semiconductor business is a really cyclical business.

Breaking market headlines and corporate news from across the globe.

Breaking market headlines and corporate news from across the globe.

Do investors like the M and A that we've seen?

Do investors like the M and A that we've seen?

These are two.

These are two.

Big time blue chip companies.

Big time blue chip companies.

The window between the peak and cut changing super fast.

The window between the peak and cut changing super fast.

Bloomberg Intelligence with Alex Steinel and Paul'sweenye on Bloomberg Radio.

Bloomberg Intelligence with Alex Steinel and Paul'sweenye on Bloomberg Radio.

On Today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets.

On Today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets.

Each and every week we provide research and data on some of the two thousand companies and one hundred and thirty industries our analysts cover worldwide.

Each and every week we provide research and data on some of the two thousand companies and one hundred and thirty industries our analysts cover worldwide.

Today, we'll look at why the ride sharing company Uber reported better than expected orders last quarter.

Today, we'll look at why the ride sharing company Uber reported better than expected orders last quarter.

L as we'll look at earnings from one of the world's biggest producers of heavy machinery, Caterpillar.

L as we'll look at earnings from one of the world's biggest producers of heavy machinery, Caterpillar.

First, we begin with the diversified holding company Berkshire Hathaway.

First, we begin with the diversified holding company Berkshire Hathaway.

The company recently slashed at steak in Apple by almost fifty percent. Now it was part of a massive second quarter sellings bree that sent billionaire Warren Buffets cash pile to a record two hundred and seventy six point nine billion.

The company recently slashed at steak in Apple by almost fifty percent. Now it was part of a massive second quarter sellings bree that sent billionaire Warren Buffets cash pile to a record two hundred and seventy six point nine billion.

Dollars for more. Guest host Jessman and I were joined by Matthew Palozola, Bloomberg Intelligence senior analysts Property and Casualty Insurance, and Matthew began by discussing why Buffett may have decided to trim mistake in Apple.

Dollars for more. Guest host Jessman and I were joined by Matthew Palozola, Bloomberg Intelligence senior analysts Property and Casualty Insurance, and Matthew began by discussing why Buffett may have decided to trim mistake in Apple.

They kind of telegraphed a little bit that they were probably going to sell more at their annual meeting in May. Buffett had warned about tax rates going up potentially in the future and maybe taking some gains off the table. Tim Cook was actually sitting there and the audience was kind of funny, and that they had sold I think it was like ten to thirteen percent of their holdings at that time, and they got questions on it, and it just seemed body language wise that they would be selling a little more. So I think tax rates, he if it's been a little weary on exposure to China for some company.

They kind of telegraphed a little bit that they were probably going to sell more at their annual meeting in May. Buffett had warned about tax rates going up potentially in the future and maybe taking some gains off the table. Tim Cook was actually sitting there and the audience was kind of funny, and that they had sold I think it was like ten to thirteen percent of their holdings at that time, and they got questions on it, and it just seemed body language wise that they would be selling a little more. So I think tax rates, he if it's been a little weary on exposure to China for some company.

So I think those two played a.

So I think those two played a.

Big role and actually had mentioned to you before when we're off air, kind of trying to pick your brain because Apple, if just for people to remind them, it was underperformed the S and P five hundred tremendously in the first quarter. It was one of its worst quarters relative to the index, probably like the fourth or fifth worse since the dot com bubble burst. But then it bottomed in April and has been up close to thirty percent since then, and so the S and P five hundred that span has only been up about four percent. So you were saying you didn't think even just the rally that we've seen was as much of a factor either as far as why they turn their stick.

Big role and actually had mentioned to you before when we're off air, kind of trying to pick your brain because Apple, if just for people to remind them, it was underperformed the S and P five hundred tremendously in the first quarter. It was one of its worst quarters relative to the index, probably like the fourth or fifth worse since the dot com bubble burst. But then it bottomed in April and has been up close to thirty percent since then, and so the S and P five hundred that span has only been up about four percent. So you were saying you didn't think even just the rally that we've seen was as much of a factor either as far as why they turn their stick.

Yeah, I don't think so. I mean, more buff it's not out there trying to time the market one way or another. And you know, he looks at these stock investments as if he's, you know, buying the company. So he also said at the annual meeting he expected Apple to be their biggest holding at the end of this year.

Yeah, I don't think so. I mean, more buff it's not out there trying to time the market one way or another. And you know, he looks at these stock investments as if he's, you know, buying the company. So he also said at the annual meeting he expected Apple to be their biggest holding at the end of this year.

It still is.

It still is.

So, I mean, it was that stock was about forty percent of their portfolio before this move. So I'm not surprised to see him take some cost of.

So, I mean, it was that stock was about forty percent of their portfolio before this move. So I'm not surprised to see him take some cost of.

How much cash did they have at Berkshire Hathaway today and so any any ideas what they might do.

How much cash did they have at Berkshire Hathaway today and so any any ideas what they might do.

With it always a tough one, Paul. It's I think at a two hundred and seventy eight billion dollars, which I thought was a mistake when I first saw it, because they were at like less than two hundred before the sale of the apples, like brought in a lot of cash. Higher interest rates have taken a lot of pressure off them holding cash. I was calculating that just a simple after tax return on the cash would help their earnings by at least five percent next year, right, so just holding it.

With it always a tough one, Paul. It's I think at a two hundred and seventy eight billion dollars, which I thought was a mistake when I first saw it, because they were at like less than two hundred before the sale of the apples, like brought in a lot of cash. Higher interest rates have taken a lot of pressure off them holding cash. I was calculating that just a simple after tax return on the cash would help their earnings by at least five percent next year, right, so just holding it.

Will be okay.

Will be okay.

They bought a big steak and chob that would be an interesting megadal and not really predicting that would happen, but just seeing that, I mean, I think the next deal Buffett does probably something we don't even really understand what it is, like, you know, makes unique parts for some materials or something like that.

They bought a big steak and chob that would be an interesting megadal and not really predicting that would happen, but just seeing that, I mean, I think the next deal Buffett does probably something we don't even really understand what it is, like, you know, makes unique parts for some materials or something like that.

It's interesting too because at a certain point they're holding an apple was so big that it took up basically half of its portfolio. So for in your kind of view, does it make sense to make a move like.

It's interesting too because at a certain point they're holding an apple was so big that it took up basically half of its portfolio. So for in your kind of view, does it make sense to make a move like.

That, Yeah, I mean you know, I don't know if anyone wants to have one stock makeup, you know, half of their portfolio. He had said he would love to have owned the whole company at one point or something. Also, keep in mind Bank of America was also their second biggest holding them and selling a lot of that in the third quarter, So I do think he's really looking at concentration.

That, Yeah, I mean you know, I don't know if anyone wants to have one stock makeup, you know, half of their portfolio. He had said he would love to have owned the whole company at one point or something. Also, keep in mind Bank of America was also their second biggest holding them and selling a lot of that in the third quarter, So I do think he's really looking at concentration.

So some reporting, I think it was in the Times about Bill Gates and Warren Buffett relationship maybe not as tight as before, any thoughts there.

So some reporting, I think it was in the Times about Bill Gates and Warren Buffett relationship maybe not as tight as before, any thoughts there.

So what has been happening is Buffett's part of the Giving pledge where he gives away a bunch of his wealth over time.

So what has been happening is Buffett's part of the Giving pledge where he gives away a bunch of his wealth over time.

And I am not I'm going to spend every least dollar.

And I am not I'm going to spend every least dollar.

I'm not either, I don't have enough wealth to give away. So, but he was giving a lot of his money annually to the Bill Gates Foundation. What happened, I don't remember when it was. I think it was probably the end of last year. He had announced that he would when he passes away, that his children are going to inherit the share in a foundation to be used for charity. I think I think before that the Gates Foundation was I don't know if it was official, but was at least thought was going to get some of that. I don't know about the relationship between the two of them.

I'm not either, I don't have enough wealth to give away. So, but he was giving a lot of his money annually to the Bill Gates Foundation. What happened, I don't remember when it was. I think it was probably the end of last year. He had announced that he would when he passes away, that his children are going to inherit the share in a foundation to be used for charity. I think I think before that the Gates Foundation was I don't know if it was official, but was at least thought was going to get some of that. I don't know about the relationship between the two of them.

I just know.

I just know.

That that was the case, and I think, you know he's given tens of billions to the Gates Foundation over time.

That that was the case, and I think, you know he's given tens of billions to the Gates Foundation over time.

Anyway, our thanks to Matthew Palisola, Bloomberg Intelligence Senior Analyst for Property and Casualty Insurance.

Anyway, our thanks to Matthew Palisola, Bloomberg Intelligence Senior Analyst for Property and Casualty Insurance.

We moved next to the media and entertainment company Walt Disney.

We moved next to the media and entertainment company Walt Disney.

This week, Disney reported mixed third quarter results and weakness had its fame theme parks all set its first ever profit in streaming for more.

This week, Disney reported mixed third quarter results and weakness had its fame theme parks all set its first ever profit in streaming for more.

We were joined by gither On Ganatan, Bloomberg Intelligence analyst on US media.

We were joined by gither On Ganatan, Bloomberg Intelligence analyst on US media.

We first asked for Geitha's reaction to Disney's numbers.

We first asked for Geitha's reaction to Disney's numbers.

As expected, there was weakness in the parts segment. But I think what kind of spooking investors is not just the magnitude. So they had expected kind of flatish profits for the quarter that they just reported. They actually reported a three percent profit decline. But I think I think what is more disconcerting is that they expect to see kind of this lingering weakness in the park segment, so they're saying a mid single digit operating income decline again in the next quarter, and they expect the softness to last out a few more quarters. So obviously the consumer is not going to come back in a big way for at least another three four quarters. And I think that is definitely creating some nervousness.

As expected, there was weakness in the parts segment. But I think what kind of spooking investors is not just the magnitude. So they had expected kind of flatish profits for the quarter that they just reported. They actually reported a three percent profit decline. But I think I think what is more disconcerting is that they expect to see kind of this lingering weakness in the park segment, so they're saying a mid single digit operating income decline again in the next quarter, and they expect the softness to last out a few more quarters. So obviously the consumer is not going to come back in a big way for at least another three four quarters. And I think that is definitely creating some nervousness.

Did I tell you I canceled my Disney trip?

Did I tell you I canceled my Disney trip?

Whoa?

Whoa?

I was like, you know what, I don't want to spend six grand on this. And I wasn't even like going anywhere fancy. I was just like, this is ridiculous for four days, no kidding.

I was like, you know what, I don't want to spend six grand on this. And I wasn't even like going anywhere fancy. I was just like, this is ridiculous for four days, no kidding.

Yeah, did you know? Did you tell your daughter this?

Yeah, did you know? Did you tell your daughter this?

I didn't tell we were going to be good, So I really saved myself on that one. Yeah. But we know that the consumer is slowing, right, We got that from Comcast, for example, in their parks. But they made a profit in streaming. I mean, come on, isn't that what we really care about?

I didn't tell we were going to be good, So I really saved myself on that one. Yeah. But we know that the consumer is slowing, right, We got that from Comcast, for example, in their parks. But they made a profit in streaming. I mean, come on, isn't that what we really care about?

That is streaming profitability has been a big focus. They have turned the corner and it's obviously going to continue to be a big earnings growth driver. Remember just yesterday they actually raised prices or they're planning to raise prices across all of their streaming tiers, including as much as a twenty five percent hike on their ad supported tier. So you know, this is going to become a significant earnings growth driver going forward. And then one of the things that we've really been complaining about with Disney, and I think investors have also been a little bit worried about, has been kind of their content engine.

That is streaming profitability has been a big focus. They have turned the corner and it's obviously going to continue to be a big earnings growth driver. Remember just yesterday they actually raised prices or they're planning to raise prices across all of their streaming tiers, including as much as a twenty five percent hike on their ad supported tier. So you know, this is going to become a significant earnings growth driver going forward. And then one of the things that we've really been complaining about with Disney, and I think investors have also been a little bit worried about, has been kind of their content engine.

But they're really kind of back with the bank.

But they're really kind of back with the bank.

So you know, obviously they had the huge success of Inside Out too in the quarter that they just reported, and then now you have Marvel's Deadpool and Wolverine, which I think is your favorite Alex and that, Yeah, it is so Githa.

So you know, obviously they had the huge success of Inside Out too in the quarter that they just reported, and then now you have Marvel's Deadpool and Wolverine, which I think is your favorite Alex and that, Yeah, it is so Githa.

Going back to Alex's point, I mean, if somebody like an ox steal cancels a Disney theme park trip concerned about price, is there a fundamental concern that this is just kind of outpriced themselves out of the market, that they're starting to hurt demand.

Going back to Alex's point, I mean, if somebody like an ox steal cancels a Disney theme park trip concerned about price, is there a fundamental concern that this is just kind of outpriced themselves out of the market, that they're starting to hurt demand.

Yeah, that definitely is is a huge concern right now. Poland so I think what we're going to see is they obviously are not going to be able to raise prices. We were seeing something like a forty percent increase in per capita spending, you know, across the park for many, many quarters. But I think what they kind of did was they over forecasted demand and under forecasted the reversal from from that pent up pandemic demand, And so that is what we really are going to see play out over the next few quarters. Having said that, though, I mean, you know, yes, the domestic park business is going to see some softness, but they do have the cruise business, which obviously is going to take off in a big way. They have three new ships that are coming on board over the next few quarters, So they are expecting some of that softness in the domestic parks to kind of get offset. But again it's going to be kind of a wait and see.

Yeah, that definitely is is a huge concern right now. Poland so I think what we're going to see is they obviously are not going to be able to raise prices. We were seeing something like a forty percent increase in per capita spending, you know, across the park for many, many quarters. But I think what they kind of did was they over forecasted demand and under forecasted the reversal from from that pent up pandemic demand, And so that is what we really are going to see play out over the next few quarters. Having said that, though, I mean, you know, yes, the domestic park business is going to see some softness, but they do have the cruise business, which obviously is going to take off in a big way. They have three new ships that are coming on board over the next few quarters, So they are expecting some of that softness in the domestic parks to kind of get offset. But again it's going to be kind of a wait and see.

Our thanks to keith I Mronggannath and Bloomberg Intelligence analyst on US media, we moved.

Our thanks to keith I Mronggannath and Bloomberg Intelligence analyst on US media, we moved.

To earnings from America's leading health solutions company see vs Health.

To earnings from America's leading health solutions company see vs Health.

This week's CBS lowered it's twenty twenty four earnings outlook for the third straight quarter.

This week's CBS lowered it's twenty twenty four earnings outlook for the third straight quarter.

The company also announced cost cutting measures to save two billion dollars over several year. This comes to as healthcare costs continue to soar.

The company also announced cost cutting measures to save two billion dollars over several year. This comes to as healthcare costs continue to soar.

For more, we were joined by Jonathan Palmer Bloomberg intelligence and your healthcare analysts, and we first asked him for his take on CBS's quarterly results.

For more, we were joined by Jonathan Palmer Bloomberg intelligence and your healthcare analysts, and we first asked him for his take on CBS's quarterly results.

Yeah, so this is the third consecutive downward revision to earnings, and it started with four Q earnings and one Q than two Q. And really it all comes back to higher medical costs. And so if you think about CVS, there's three legs at the stool. Here, there's the ETNA business, which is there big and sure, there's a PBM care mark, and the pharmacy that we all think about. The pharmacy stable there's some pressure and consumer the PBM's doing pretty well. But the medical business, the benefits business, is seeing all these revisions downward as people are visiting their doctor more.

Yeah, so this is the third consecutive downward revision to earnings, and it started with four Q earnings and one Q than two Q. And really it all comes back to higher medical costs. And so if you think about CVS, there's three legs at the stool. Here, there's the ETNA business, which is there big and sure, there's a PBM care mark, and the pharmacy that we all think about. The pharmacy stable there's some pressure and consumer the PBM's doing pretty well. But the medical business, the benefits business, is seeing all these revisions downward as people are visiting their doctor more.

So basically this is like if I own CVS Medical, I go to my doctor, I pay my forty buck cope or whatever, and then they bill CBS for that.

So basically this is like if I own CVS Medical, I go to my doctor, I pay my forty buck cope or whatever, and then they bill CBS for that.

Well, so the insurer this is on the Medicare side, the Medicare van plan. So a lot more seniors are visiting their doctors and that trend we saw it at the end of last year and we thought it would maybe subside by the midpoint of this year, but it's still elevated. Going into the back half and it's causing a lot of trouble for CBS.

Well, so the insurer this is on the Medicare side, the Medicare van plan. So a lot more seniors are visiting their doctors and that trend we saw it at the end of last year and we thought it would maybe subside by the midpoint of this year, but it's still elevated. Going into the back half and it's causing a lot of trouble for CBS.

Sorry, no, I was gonna say, but don't think it reimbursed by the government. Like how does that work though?

Sorry, no, I was gonna say, but don't think it reimbursed by the government. Like how does that work though?

Well, so, the way the plans work is they bid a certain amount and then that's how they get paid. And so if the trend trends higher, they don't make quite as much money based on what they bid initially on the plans.

Well, so, the way the plans work is they bid a certain amount and then that's how they get paid. And so if the trend trends higher, they don't make quite as much money based on what they bid initially on the plans.

So what can the company do to kind of Yeah, so there's.

So what can the company do to kind of Yeah, so there's.

A couple of things they can do. They can exit markets. They can ratchet down the benefits that they're providing, so Medicare advantage is a little bit different than traditional medicare, and that they can offer things like dental and vision. They can ratchet some of those extra benefits down, but it takes time because these are planned cycles, so like we won't see any benefit until next year.

A couple of things they can do. They can exit markets. They can ratchet down the benefits that they're providing, so Medicare advantage is a little bit different than traditional medicare, and that they can offer things like dental and vision. They can ratchet some of those extra benefits down, but it takes time because these are planned cycles, so like we won't see any benefit until next year.

This is like the whole issue with people living longer, right, Like you have people living longer they're on medicare, right, and then this is kind of what happens. How do we solve for this though? Long term? How does a company solve for this longer term?

This is like the whole issue with people living longer, right, Like you have people living longer they're on medicare, right, and then this is kind of what happens. How do we solve for this though? Long term? How does a company solve for this longer term?

Yeah, I think it's getting a better handle around the trends and how they price they're offering. Interestingly enough, CVS just let go of the executive who's in charge of this benefits and the CEO and CFO are stepping in to run the day today. So there's a lot of work to be done in a lot of wood to chop.

Yeah, I think it's getting a better handle around the trends and how they price they're offering. Interestingly enough, CVS just let go of the executive who's in charge of this benefits and the CEO and CFO are stepping in to run the day today. So there's a lot of work to be done in a lot of wood to chop.

There may be a dumb question who are CBS's competitors, considering they're in so many businesses.

There may be a dumb question who are CBS's competitors, considering they're in so many businesses.

Well, on the pharmacy side, it's Walgreens, it's Walmart, it's cost Co. On the PBM side, it's Signa's express Scripts, United Health's Optum, and then it's the whole smattering of insurers from Humanity and United Health.

Well, on the pharmacy side, it's Walgreens, it's Walmart, it's cost Co. On the PBM side, it's Signa's express Scripts, United Health's Optum, and then it's the whole smattering of insurers from Humanity and United Health.

Signa elevance political risk, Johnathan, I know your industry cares who's in the White House, who's in Congress. What's the feeling from the healthcare steg.

Signa elevance political risk, Johnathan, I know your industry cares who's in the White House, who's in Congress. What's the feeling from the healthcare steg.

Yeah, we generally are our regulatory analyst in Washington, Dwayne Wright doesn't see too much risk through this election cycle. You know, everybody talks about drug prices. Biden put in the IRA that's come to pass. There's a lot of saber rattling around PBMs, but usually nothing actually happens at the end of the day. It's more about the headline risk there, so we're not too worried about the regulatory landscape going into the election cycle.

Yeah, we generally are our regulatory analyst in Washington, Dwayne Wright doesn't see too much risk through this election cycle. You know, everybody talks about drug prices. Biden put in the IRA that's come to pass. There's a lot of saber rattling around PBMs, but usually nothing actually happens at the end of the day. It's more about the headline risk there, so we're not too worried about the regulatory landscape going into the election cycle.

What's the best part of your space, what's the name or the area that people are most enthused about.

What's the best part of your space, what's the name or the area that people are most enthused about.

Yeah, So on the healthcare technology side, there's a lot of interest there. You know, AI's kind of creeped into everything, and there was recently an IPO of a company called tempest Ai that does diagnostics and provides data to drug manufacturers, so they're kind of marrying those two data sets in a very interesting way.

Yeah, So on the healthcare technology side, there's a lot of interest there. You know, AI's kind of creeped into everything, and there was recently an IPO of a company called tempest Ai that does diagnostics and provides data to drug manufacturers, so they're kind of marrying those two data sets in a very interesting way.

Our thanks to Jonathan Palmer, Bloomberg Intelligence senior healthcare analysts.

Our thanks to Jonathan Palmer, Bloomberg Intelligence senior healthcare analysts.

Coming up, we're going to break down why Google recently lost an antitrust lawsuit in the US.

Coming up, we're going to break down why Google recently lost an antitrust lawsuit in the US.

You're listening to Bloomberg Intelligence on Bloomberg Radio, providing end up with research and data on two thousand companies in one hundred and thirty industries. You can access Bloomberg Intelligence via bi go in the terminal.

You're listening to Bloomberg Intelligence on Bloomberg Radio, providing end up with research and data on two thousand companies in one hundred and thirty industries. You can access Bloomberg Intelligence via bi go in the terminal.

I'm Paul Sweeney and I'm Alex Steele, and this is Bloomberg.

I'm Paul Sweeney and I'm Alex Steele, and this is Bloomberg.

Now.

Now.

You're listening to the Bloomberg Intelligence podcast. Catch us Live weekdays at ten am Eastern on Apple car Play, and then broun Otto with the Bloomberg Business app based on demand wherever you get your podcasts or watch us live on YouTube.

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We move now to earnings from the right sharing company Uber Technologies.

We move now to earnings from the right sharing company Uber Technologies.

Uber reported better than expected orders in the second quarter, with continued strength and demand for right share and delivery services for more.

Uber reported better than expected orders in the second quarter, with continued strength and demand for right share and delivery services for more.

We were joined by Mandeep Saying, Bloomberg Intelligence, senior tech industry analyst.

We were joined by Mandeep Saying, Bloomberg Intelligence, senior tech industry analyst.

We first asked Mandy first, key takeaway from Uber's results.

We first asked Mandy first, key takeaway from Uber's results.

Good print, solid top line growth. I think the fact that we're talking about a business that's generating forty billion dollar rund rate in a year. I mean, clearly they have the scale. The question for me when it comes to Uber five years down the line, you know, long term play, how disrupted their business model is going to be from the rollout of autonomous vehicles and robo taxis and Scott's right to help you to talk about it. But when you look at Veimo and how successful they've been in the three cities that they've launched, I mean, the part of the call was about how Uber is integrating Vemo inside their app.

Good print, solid top line growth. I think the fact that we're talking about a business that's generating forty billion dollar rund rate in a year. I mean, clearly they have the scale. The question for me when it comes to Uber five years down the line, you know, long term play, how disrupted their business model is going to be from the rollout of autonomous vehicles and robo taxis and Scott's right to help you to talk about it. But when you look at Veimo and how successful they've been in the three cities that they've launched, I mean, the part of the call was about how Uber is integrating Vemo inside their app.

What is Wemo?

What is Wemo?

Wemo is Google's autonomous driving unit. I mean they have about three hundred cars in San Francisco, similarly in a couple of other cities Arizona, and what they have shown is their technology is ready for primetime. I mean, they have to get regulatory approvals to do it at scale, but that changes the unit economics completely. Right now, we are talking about a business model where cost per mile is like five to seven dollars. Weimo can at scale, they can do it three or four times cheaper. So suddenly the take rate model gets to disrupted. Now again it's not hit primetime, but that's what Tesla is striving for, and the risk for Uber and Lyft is they will get disintermediated.

Wemo is Google's autonomous driving unit. I mean they have about three hundred cars in San Francisco, similarly in a couple of other cities Arizona, and what they have shown is their technology is ready for primetime. I mean, they have to get regulatory approvals to do it at scale, but that changes the unit economics completely. Right now, we are talking about a business model where cost per mile is like five to seven dollars. Weimo can at scale, they can do it three or four times cheaper. So suddenly the take rate model gets to disrupted. Now again it's not hit primetime, but that's what Tesla is striving for, and the risk for Uber and Lyft is they will get disintermediated.

Okay, So it's not the fact that Uber would just go get a bunch of robotaxis and use them and eventually payoff over time because they're not paying drivers. It's not that scenario.

Okay, So it's not the fact that Uber would just go get a bunch of robotaxis and use them and eventually payoff over time because they're not paying drivers. It's not that scenario.

It's not that scenario because both these companies want to roll out the robot axies themselves as opposed to using an Uber and even if Uber was to get involved, their take rates would be way lower than thirty percent. Right now, they are getting thirty percent of every ride. Let's say it's a fifty dollars ride, Uber makes at least thirty percent. That's a pretty healthy take rate, you know, autonomous driving equation. First, Tesla wants to go solo. They don't want to partner with any of the right sharing guys. That's one risk Vemo is on Uber. But my senses they also want to kind of broaden out their reach and they will deploy their technology themselves. And in fact, Alphabet allocated five billion dollars in capex this quarter on Vemo's rollout.

It's not that scenario because both these companies want to roll out the robot axies themselves as opposed to using an Uber and even if Uber was to get involved, their take rates would be way lower than thirty percent. Right now, they are getting thirty percent of every ride. Let's say it's a fifty dollars ride, Uber makes at least thirty percent. That's a pretty healthy take rate, you know, autonomous driving equation. First, Tesla wants to go solo. They don't want to partner with any of the right sharing guys. That's one risk Vemo is on Uber. But my senses they also want to kind of broaden out their reach and they will deploy their technology themselves. And in fact, Alphabet allocated five billion dollars in capex this quarter on Vemo's rollout.

So all right, I mean, all right, it's bad enough that I get in the car with somebody I've never met, a total stranger that's crazy enough to think about.

So all right, I mean, all right, it's bad enough that I get in the car with somebody I've never met, a total stranger that's crazy enough to think about.

Am I getting in.

Am I getting in.

A car that's a robo taxi? Is that really going to be a thing?

A car that's a robo taxi? Is that really going to be a thing?

And so when I mean, these vehicles are monitored.

And so when I mean, these vehicles are monitored.

So by the way, I have.

So by the way, I have.

A vest with scooter by the way, so I don't necessarily need them for the shore.

A vest with scooter by the way, so I don't necessarily need them for the shore.

But go ahead, but just go to San Francisco right now. You can order a Veimo ride. You can, you can and just get that experience. I think every consumer who has taken a Mo ride loves that experience. Uber talked about they acknowledged the thread on their call, but they also think the rollout will be slow, and they are positioning themselves by seeking all these partnerships. They're partnering with BYD for one hundred thousand vehicles, that was big news last week.

But go ahead, but just go to San Francisco right now. You can order a Veimo ride. You can, you can and just get that experience. I think every consumer who has taken a Mo ride loves that experience. Uber talked about they acknowledged the thread on their call, but they also think the rollout will be slow, and they are positioning themselves by seeking all these partnerships. They're partnering with BYD for one hundred thousand vehicles, that was big news last week.

Well, then why would it be exclusionary, Like if Tesla rolls it out themselves. It just means more competition. It doesn't mean it's exclusionary like with Lyft. Like you guys price compare with Lyft, there's room for more than.

Well, then why would it be exclusionary, Like if Tesla rolls it out themselves. It just means more competition. It doesn't mean it's exclusionary like with Lyft. Like you guys price compare with Lyft, there's room for more than.

Just one there is, but then it goes back to being the scale player and having that thirty percent take rates. The reason why Uber has done much better than Lyft is because it's a scale player and it can charge that thirty percent take rates because it has the liquidity in its marketplace, the supply demand matching, the best ETAs, the most options that it can offer to its riders. So like marketplaces are all about scale, the moment you have more than three or four competitors right now, it's a duopoly. And still we see how badly Lyft is doing relative to Uber. If you have more competition, that's not good news. But again this is for the route. This quarter was solid. Nothing goes wrong for Uber until this Robotaxi rollout plays out. So we're talking a few quarters.

Just one there is, but then it goes back to being the scale player and having that thirty percent take rates. The reason why Uber has done much better than Lyft is because it's a scale player and it can charge that thirty percent take rates because it has the liquidity in its marketplace, the supply demand matching, the best ETAs, the most options that it can offer to its riders. So like marketplaces are all about scale, the moment you have more than three or four competitors right now, it's a duopoly. And still we see how badly Lyft is doing relative to Uber. If you have more competition, that's not good news. But again this is for the route. This quarter was solid. Nothing goes wrong for Uber until this Robotaxi rollout plays out. So we're talking a few quarters.

Out scenario market cap for Uber one hundred and thirty two billion, market cap for Lyft four billion. What happened well?

Out scenario market cap for Uber one hundred and thirty two billion, market cap for Lyft four billion. What happened well?

I mean, Uber clearly has the scale and door Nash has done similarly very well on the food delivery side. So you've got two scale players when it comes to right sharing and food delivery, and they have the most supply. I mean, one challenge with this business model is gross margins can never be as attractive as your software companies, and that's what we keep finding with Uber. It's like there's still a forty percent gross margin business at an aggregate level.

I mean, Uber clearly has the scale and door Nash has done similarly very well on the food delivery side. So you've got two scale players when it comes to right sharing and food delivery, and they have the most supply. I mean, one challenge with this business model is gross margins can never be as attractive as your software companies, and that's what we keep finding with Uber. It's like there's still a forty percent gross margin business at an aggregate level.

Our thanks to Man Deep Saying, Bloomberg Intelligence senior tech industry analyst.

Our thanks to Man Deep Saying, Bloomberg Intelligence senior tech industry analyst.

We moved to big tech and Google. This week, a US district court judge rule that Google illegally monopolized the search market through exclusive deals.

We moved to big tech and Google. This week, a US district court judge rule that Google illegally monopolized the search market through exclusive deals.

This handed the US government a win in its first major antitrust case against a tech giant in more than two decades.

This handed the US government a win in its first major antitrust case against a tech giant in more than two decades.

For more, we were joined by Jennifer Ree, a Bloomberg Intelligence senior litigation analyst.

For more, we were joined by Jennifer Ree, a Bloomberg Intelligence senior litigation analyst.

We first asked jen to explain what exactly the accusation against Google was.

We first asked jen to explain what exactly the accusation against Google was.

Google basically was found to be a monopolist in general search services, and I think that's probably no surprise, right we all use Google. I think they have eighty or ninety percent of the search queries and market share. But specifically, what was found to be illegal was Google paying many other third parties, including Apple, Mozilla, Samsung, other OEMs to set Google Search as the default search engine at all the access points that where you need to access the Internet, so for instance, behind a browser, behind Mozilla Firefox, or behind Apple Safari. And so what the judge said is well, by placing Google as the default, this really blocks out all the other competitors, the search engine competitors. And at the end of the day, they can't get better if they can't get to customers, because search engines get better based on the number of searches done, and Google's got all those searches locked up. And that was anti competitive because it was exclusionary and probably hindered innovation, might have hindered choice and you know, possibly hindered equality.

Google basically was found to be a monopolist in general search services, and I think that's probably no surprise, right we all use Google. I think they have eighty or ninety percent of the search queries and market share. But specifically, what was found to be illegal was Google paying many other third parties, including Apple, Mozilla, Samsung, other OEMs to set Google Search as the default search engine at all the access points that where you need to access the Internet, so for instance, behind a browser, behind Mozilla Firefox, or behind Apple Safari. And so what the judge said is well, by placing Google as the default, this really blocks out all the other competitors, the search engine competitors. And at the end of the day, they can't get better if they can't get to customers, because search engines get better based on the number of searches done, and Google's got all those searches locked up. And that was anti competitive because it was exclusionary and probably hindered innovation, might have hindered choice and you know, possibly hindered equality.

Are there some remedies that might be really owners on Google.

Are there some remedies that might be really owners on Google.

The remedies have yet to be hashed out, and you know, that process could take six months, it could take even another year before we know what they are. And then Google will likely appeal and can seek to stay any remedy pending the appeal. And if that happens, you're looking at several years before there's any impact at all. But at the end of the day, the remedies could be onerous. First of all, the DOJ will seek structural change. I don't think they could win it here, but one of the requests they might have of the judge is to break apart parts of Google's business. Again, I think that's all long shot here. I don't think it'll happen. I think it's more likely that what the judge will say is Google, you can't pay anymore to have that default position. And maybe the judge will say, Google, you have to share some of your data with some of these other search engines or maybe some other new nascent search engine that comes into being after this remedy phase is finished.

The remedies have yet to be hashed out, and you know, that process could take six months, it could take even another year before we know what they are. And then Google will likely appeal and can seek to stay any remedy pending the appeal. And if that happens, you're looking at several years before there's any impact at all. But at the end of the day, the remedies could be onerous. First of all, the DOJ will seek structural change. I don't think they could win it here, but one of the requests they might have of the judge is to break apart parts of Google's business. Again, I think that's all long shot here. I don't think it'll happen. I think it's more likely that what the judge will say is Google, you can't pay anymore to have that default position. And maybe the judge will say, Google, you have to share some of your data with some of these other search engines or maybe some other new nascent search engine that comes into being after this remedy phase is finished.

Okay, So if that's the case, I wonder does this change if President Trump wins the White House or is this kind of like locked in.

Okay, So if that's the case, I wonder does this change if President Trump wins the White House or is this kind of like locked in.

You know, it's such an interesting issue right now. Alex because one might have said, if an administration changes from democratic to Republican, it could change and there might be more of a likelihood of a settlement. But you have JD. Vance as president former President Trump's vice presidential pick, and he actually is aligned with the idea of breaking up Google. He's pretty anti big tech. I don't know how much he would influence the policy decisions of a Trump DOJ or FTC, but if he did, he would be all in on continuing to go after Google. So I think that possibility of some kind of a settlement that's easier on Google happening down the road is low.

You know, it's such an interesting issue right now. Alex because one might have said, if an administration changes from democratic to Republican, it could change and there might be more of a likelihood of a settlement. But you have JD. Vance as president former President Trump's vice presidential pick, and he actually is aligned with the idea of breaking up Google. He's pretty anti big tech. I don't know how much he would influence the policy decisions of a Trump DOJ or FTC, but if he did, he would be all in on continuing to go after Google. So I think that possibility of some kind of a settlement that's easier on Google happening down the road is low.

Jen.

Jen.

I think if you stopped any person on the street, they would say, I.

I think if you stopped any person on the street, they would say, I.

Got no problem with Google.

Got no problem with Google.

They're actually, it's great, It's changed my life for the better. Is this one of those issues where there it's a solution in search of a problem here, and does that factor into remedies?

They're actually, it's great, It's changed my life for the better. Is this one of those issues where there it's a solution in search of a problem here, and does that factor into remedies?

You know, it's exactly you're thinking like a lawyer now, because there's a lot of commentary when this case was brought that the DOJ brought the case but they really don't have a solution, and they brought it before they knew what the solution would be. We're going to get into what they're going to suggest the solution. But Paul, exactly why you said, you know, people love Google, and this is exactly why I think the judge wouldn't do something structural, because he's not going to want to mess that up. People like Google. Google's essentially a free product, at least for people, not for advertisers, and it functions very well. And despite having a monopoly position, the judge did acknowledge that Google continues to innovate in the search area. So I think because of the desirability for consumers of the Google search engine, we're not going to see something structural. But I do think obviously the judge is going to have to impose some remedy because he found that the company is acting anti competitively.

You know, it's exactly you're thinking like a lawyer now, because there's a lot of commentary when this case was brought that the DOJ brought the case but they really don't have a solution, and they brought it before they knew what the solution would be. We're going to get into what they're going to suggest the solution. But Paul, exactly why you said, you know, people love Google, and this is exactly why I think the judge wouldn't do something structural, because he's not going to want to mess that up. People like Google. Google's essentially a free product, at least for people, not for advertisers, and it functions very well. And despite having a monopoly position, the judge did acknowledge that Google continues to innovate in the search area. So I think because of the desirability for consumers of the Google search engine, we're not going to see something structural. But I do think obviously the judge is going to have to impose some remedy because he found that the company is acting anti competitively.

This is a weirdly unfair question to ask you, is big tech too big? Like do we have a big tech problem?

This is a weirdly unfair question to ask you, is big tech too big? Like do we have a big tech problem?

Well, I think that's what the current administration thinks. Yes, But you know, there's a disalignment here with our Supreme Court, because our Supreme Court has ruled over and over that it's not illegal in the United States to have a monopoly, and in fact, that's what we want all companies to work toward because that's what will cause them to innovate and try to gain market share by lowering their prices. So at the end of the day, just being big isn't illegal. The problem is the conduct of a company that's really big, and that's really what the DOJ and FDC are going after.

Well, I think that's what the current administration thinks. Yes, But you know, there's a disalignment here with our Supreme Court, because our Supreme Court has ruled over and over that it's not illegal in the United States to have a monopoly, and in fact, that's what we want all companies to work toward because that's what will cause them to innovate and try to gain market share by lowering their prices. So at the end of the day, just being big isn't illegal. The problem is the conduct of a company that's really big, and that's really what the DOJ and FDC are going after.

Right now, How about other tech companies, what does this mean for them?

Right now, How about other tech companies, what does this mean for them?

You know, I think it's atmospherics because there are different facts, different issues, different markets, in different market positions. You know, the case against Amazon against Meta, case against Apple, they're quite different, and these cases rest on the facts and the specifics. But what this does do, at least for Google, we have one more case coming up, a big one against its ad tech stack that's going to trial this September. And now Google's been found to have monopolized two different parts of its business. It's play store and now Search. So psychologically, you know, it could influence a judge to think, well, they've been found to engage anti competitively in two areas, why not in a third as well?

You know, I think it's atmospherics because there are different facts, different issues, different markets, in different market positions. You know, the case against Amazon against Meta, case against Apple, they're quite different, and these cases rest on the facts and the specifics. But what this does do, at least for Google, we have one more case coming up, a big one against its ad tech stack that's going to trial this September. And now Google's been found to have monopolized two different parts of its business. It's play store and now Search. So psychologically, you know, it could influence a judge to think, well, they've been found to engage anti competitively in two areas, why not in a third as well?

You know, Paul, this goes to your ara too. I was reading that big tech's AI problem is just going to buy smaller companies and getting their talent right, and I wonder if that has to kind of go away now because if you have this kind of DOJ.

You know, Paul, this goes to your ara too. I was reading that big tech's AI problem is just going to buy smaller companies and getting their talent right, and I wonder if that has to kind of go away now because if you have this kind of DOJ.

Yeah, it's interesting. I mean, I think what I understand from people like gen is that some of these big tech comies that their hands are really tied in terms of big deals at least.

Yeah, it's interesting. I mean, I think what I understand from people like gen is that some of these big tech comies that their hands are really tied in terms of big deals at least.

Yeah, Jen, do you think, oh, absolutely, their hands have been tied for the last three years. Things could change a little bit with the new administration. I think there is no doubt no matter who's elected, there will be some change in the leadership positions the decision makers at the Department of Justice and Federal Trade Commission, and that could change things. But I do think big tech is still going to have a lot of trouble going forward trying to do any kind of a big deal.

Yeah, Jen, do you think, oh, absolutely, their hands have been tied for the last three years. Things could change a little bit with the new administration. I think there is no doubt no matter who's elected, there will be some change in the leadership positions the decision makers at the Department of Justice and Federal Trade Commission, and that could change things. But I do think big tech is still going to have a lot of trouble going forward trying to do any kind of a big deal.

Thanks to Jennifer Ree, Bloomberg Intelligence senior litigation.

Thanks to Jennifer Ree, Bloomberg Intelligence senior litigation.

Analysts coming up on the program a conversation with the CEO of Energy Vault on storing energy.

Analysts coming up on the program a conversation with the CEO of Energy Vault on storing energy.

You're listening to Bloomberg Intelligence on Bloomberg Radio, providing INFF research and data on two thousand companies in one hundred and thirty industries. You can access Bloomberg Intelligence via b I go on the terminal.

You're listening to Bloomberg Intelligence on Bloomberg Radio, providing INFF research and data on two thousand companies in one hundred and thirty industries. You can access Bloomberg Intelligence via b I go on the terminal.

I'm Paul Sweeney and I'm Alex Steele, and this is Bloomberg.

I'm Paul Sweeney and I'm Alex Steele, and this is Bloomberg.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with 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.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with 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.

We move next to Caterpillar, one of the world's biggest producers of heavy machinery.

We move next to Caterpillar, one of the world's biggest producers of heavy machinery.

The company is seen as a bell weather for industrial activity, and this week Caterpillar reported second quarter earnings that showed resilience that's despite growing worries about the global economy. To help recap, we were joined by Christopher Cilino, Bloomberg Intelligence senior US machinery analyst. We first asked Chris what he made of Caterpillar's most recent quarter.

The company is seen as a bell weather for industrial activity, and this week Caterpillar reported second quarter earnings that showed resilience that's despite growing worries about the global economy. To help recap, we were joined by Christopher Cilino, Bloomberg Intelligence senior US machinery analyst. We first asked Chris what he made of Caterpillar's most recent quarter.

I think there are a lot of positives to take away from this report, and I think investors could probably you breathe a little sigh of relief. The margins were really quite impressive. I mean they were up more than one hundred basis points, even with the softer top line. This quarter with better than expected profitability really across all of its businesses with particular strengths, and the Energy and Transportation unit again that really continues to be a big driver for them. We saw dealer inventories come down kind of a little bit more than we normally seasonally would, which is a positive sign. And then also the backlog improved sequentially, which I think will probably help alleviate some of those fears around the more or severe slow down and inventory build, which has been a big concern among investors.

I think there are a lot of positives to take away from this report, and I think investors could probably you breathe a little sigh of relief. The margins were really quite impressive. I mean they were up more than one hundred basis points, even with the softer top line. This quarter with better than expected profitability really across all of its businesses with particular strengths, and the Energy and Transportation unit again that really continues to be a big driver for them. We saw dealer inventories come down kind of a little bit more than we normally seasonally would, which is a positive sign. And then also the backlog improved sequentially, which I think will probably help alleviate some of those fears around the more or severe slow down and inventory build, which has been a big concern among investors.

Chris talk about geography or the any pockets of strength or notable weakness around the world.

Chris talk about geography or the any pockets of strength or notable weakness around the world.

Yeah, so if you think, you know, Europe has been weak for KAT for quite some time, We're starting to hear of some potential green shoots over there, but you know, I think KAT kind of dispelled some of those that it's a little too early for talk of a recovery there, so kind of bouncing along the bottom. China obviously continues to be at pretty depressed levels. You know, historically China's been five to ten percent of consolidated revenue at KAT will be well below that five percent lower end of the band this year. And then North America, while you know, some of the retail numbers this quarter were a little bit softer than they had anticipated, particularly with some of the rental dealers not maybe restocking as much as they had anticipated. That continues to probably be the resilient area of the business for Caterpillar this year. But i'd also call out actually Latin America was surprisingly strong this quarter on the back of Brazil.

Yeah, so if you think, you know, Europe has been weak for KAT for quite some time, We're starting to hear of some potential green shoots over there, but you know, I think KAT kind of dispelled some of those that it's a little too early for talk of a recovery there, so kind of bouncing along the bottom. China obviously continues to be at pretty depressed levels. You know, historically China's been five to ten percent of consolidated revenue at KAT will be well below that five percent lower end of the band this year. And then North America, while you know, some of the retail numbers this quarter were a little bit softer than they had anticipated, particularly with some of the rental dealers not maybe restocking as much as they had anticipated. That continues to probably be the resilient area of the business for Caterpillar this year. But i'd also call out actually Latin America was surprisingly strong this quarter on the back of Brazil.

So how much visibility does a company like Caterpillar have, Chris and what are they saying about their visibility?

So how much visibility does a company like Caterpillar have, Chris and what are they saying about their visibility?

Yeah, so the backlog increased sequentially here about two and a half percent in the quarter, were almost at twenty nine billion dollars. That gives them roughly, you know, three months of coverage, a little bit longer. It was longer le time. Products like some of the energy and transportation products, those have much longer lee time, but I think of it as roughly three months. Orders did come down a touch in the quarter, but you know, we saw some sequential improvement. There no signs of really kind of a more precipitous decline, which I think has been a concern just given some of the prints that we've seen from some other machinery names that really brought down their construction outlooks for the year. That really doesn't seem to be the case here.

Yeah, so the backlog increased sequentially here about two and a half percent in the quarter, were almost at twenty nine billion dollars. That gives them roughly, you know, three months of coverage, a little bit longer. It was longer le time. Products like some of the energy and transportation products, those have much longer lee time, but I think of it as roughly three months. Orders did come down a touch in the quarter, but you know, we saw some sequential improvement. There no signs of really kind of a more precipitous decline, which I think has been a concern just given some of the prints that we've seen from some other machinery names that really brought down their construction outlooks for the year. That really doesn't seem to be the case here.

So that's sort of their top line. How did they manage their cost profile, margins, et cetera.

So that's sort of their top line. How did they manage their cost profile, margins, et cetera.

Margins were phenomenal, and I think that's my takeaway. Yeah, I mean, if you look at energy and transportation one, pricing continues to be the biggest driver of the margin performance for the enterprise overall. But if you look into the energy and transportation unit margins well ahead of the street that is pricing and a little bit favorable mix. You also have lower freight costs, you have lower material costs. Execution here continues to be quite good, So I'd expect that strength really to continue throughout the balance of the year. And as you alluded to earlier, you know, they well the Caterpillar doesn't give explicit guidance. They're basically telling us that this year is going to be a lot stronger than they had anticipated, with margins above their long term framework. Earnings are going to be stronger than they had anticipated even coming into the quarter. So certainly, the margin performance it was quite good.

Margins were phenomenal, and I think that's my takeaway. Yeah, I mean, if you look at energy and transportation one, pricing continues to be the biggest driver of the margin performance for the enterprise overall. But if you look into the energy and transportation unit margins well ahead of the street that is pricing and a little bit favorable mix. You also have lower freight costs, you have lower material costs. Execution here continues to be quite good, So I'd expect that strength really to continue throughout the balance of the year. And as you alluded to earlier, you know, they well the Caterpillar doesn't give explicit guidance. They're basically telling us that this year is going to be a lot stronger than they had anticipated, with margins above their long term framework. Earnings are going to be stronger than they had anticipated even coming into the quarter. So certainly, the margin performance it was quite good.

Chris, How about the competitive landscape out there? Who does KAT compete with and how's that share game going globally?

Chris, How about the competitive landscape out there? Who does KAT compete with and how's that share game going globally?

It's primary. You know, there's a number of regional players, Kamatsu being the biggest one over in Japan, but they're a big competitor here in the United States, particularly on the mining side, but also construction. You have Volvo CNH Industrial and then obviously Deer here in the United States that kind of round out more of the local construction piers. There's a number of other players in Asia, whether it be a Hatachi and a few others, but it's really Caterpillar is the market leader and really can think about mining, it's essentially a doopoly and the mining truck business with them in Kamatsu.

It's primary. You know, there's a number of regional players, Kamatsu being the biggest one over in Japan, but they're a big competitor here in the United States, particularly on the mining side, but also construction. You have Volvo CNH Industrial and then obviously Deer here in the United States that kind of round out more of the local construction piers. There's a number of other players in Asia, whether it be a Hatachi and a few others, but it's really Caterpillar is the market leader and really can think about mining, it's essentially a doopoly and the mining truck business with them in Kamatsu.

When we take a look at what Caterpillar tracks like, I'm thinking I like looking at it because it feels like a nice global growth barometer. Is it a global growth barometer?

When we take a look at what Caterpillar tracks like, I'm thinking I like looking at it because it feels like a nice global growth barometer. Is it a global growth barometer?

Like?

Like?

If earnings grow at Caterpillar and their outlook is does that mean the global GDP is good? What's your correlation for that?

If earnings grow at Caterpillar and their outlook is does that mean the global GDP is good? What's your correlation for that?

Yeah?

Yeah?

No, you're you're absolutely right. It is a global economic bell weather. You know, half the business is still here in North America, but you think of it roughly twenty percent Emia and twenty percent Asia. And then Latin America, like I said, down around roughly ten percent of the business, but it certainly is is a bell weather for economic growth. And you know, North America continues to be probably one of the more resilient regions globally because of all this infrastructure spending that we have that has certainly kind of offset some of the weakness on the commercial side of the business. And then obviously it seems like we're you know, kind of approaching a bottom on the residential side, so maybe that provides a tailwind as we move into twenty five.

No, you're you're absolutely right. It is a global economic bell weather. You know, half the business is still here in North America, but you think of it roughly twenty percent Emia and twenty percent Asia. And then Latin America, like I said, down around roughly ten percent of the business, but it certainly is is a bell weather for economic growth. And you know, North America continues to be probably one of the more resilient regions globally because of all this infrastructure spending that we have that has certainly kind of offset some of the weakness on the commercial side of the business. And then obviously it seems like we're you know, kind of approaching a bottom on the residential side, so maybe that provides a tailwind as we move into twenty five.

Our thanks to Christielino, Bloomberg Intelligence Senior US Machinery antallys.

Our thanks to Christielino, Bloomberg Intelligence Senior US Machinery antallys.

Let's move now to my favorite space. Energy. So how to store energy is huge because if you want to diversify what energy you're using, like wind, solar, and hydrogen, you really need big, big batteries to be to store it. And storing energy for long periods of time has proved to be very difficult and expensive.

Let's move now to my favorite space. Energy. So how to store energy is huge because if you want to diversify what energy you're using, like wind, solar, and hydrogen, you really need big, big batteries to be to store it. And storing energy for long periods of time has proved to be very difficult and expensive.

One company that's trying to change that is Energy Vault nysee ticker NRGV.

One company that's trying to change that is Energy Vault nysee ticker NRGV.

Earlier this week, we were.

Earlier this week, we were.

Joined by Energy Vault CEO Rob Pconi, and we first asked Rop to describe what exactly his company does.

Joined by Energy Vault CEO Rob Pconi, and we first asked Rop to describe what exactly his company does.

So we broadly focus on energy storage and we focus on it with varying technologies and software. So we do shorter duration energy storage using latimon. We do long duration energy storage meaning things to get sort of in a six, eight, twelve, even twenty four hour so full day types of storage with a unique gravity solution where we lift in lower blocks or will shift water from different heights. And we also do ultralong duration meaning multi day storage using green hydrogen and microgrids.

So we broadly focus on energy storage and we focus on it with varying technologies and software. So we do shorter duration energy storage using latimon. We do long duration energy storage meaning things to get sort of in a six, eight, twelve, even twenty four hour so full day types of storage with a unique gravity solution where we lift in lower blocks or will shift water from different heights. And we also do ultralong duration meaning multi day storage using green hydrogen and microgrids.

Who are your customers, rob Our main customers are first and four almost utilities, so we can sell directly to utilities, and we also sell to independent.

Who are your customers, rob Our main customers are first and four almost utilities, so we can sell directly to utilities, and we also sell to independent.

Power producers, so the ones that will for example, build out solar wind and pair storage with that and have long term contracts with utilities. And the third group are the large industrial users. So our investors include people like Saudi Aramco a HP, the largest mining group in the world, and groups that are looking to make their own clean energy transition or that have desires to make streen hydrogen for example, where you can make that using solar an electoralizer, but you need long duration storage. So because our technologies focus across a series of durations, we can actually meet a lot of those needs and hence serving those three market segments.

Power producers, so the ones that will for example, build out solar wind and pair storage with that and have long term contracts with utilities. And the third group are the large industrial users. So our investors include people like Saudi Aramco a HP, the largest mining group in the world, and groups that are looking to make their own clean energy transition or that have desires to make streen hydrogen for example, where you can make that using solar an electoralizer, but you need long duration storage. So because our technologies focus across a series of durations, we can actually meet a lot of those needs and hence serving those three market segments.

So let's go back to the gravity storage solution thing. So this is from an article here at boomer from a few years ago, but it describes it and I feel like accurately and pretty well. An electric crane hoists up blocks of concrete and stacks them into a tower when power is plentiful, when power is needed, it uses gravity to take the structure apart brick by brick, and the weight of the descending blocks converts kinetic energy into electricity. That sounds really hard and complicated.

So let's go back to the gravity storage solution thing. So this is from an article here at boomer from a few years ago, but it describes it and I feel like accurately and pretty well. An electric crane hoists up blocks of concrete and stacks them into a tower when power is plentiful, when power is needed, it uses gravity to take the structure apart brick by brick, and the weight of the descending blocks converts kinetic energy into electricity. That sounds really hard and complicated.

You know what, gravity has been around for a while. I tell people it's not an idea, it's the law. So the whole physics of moving weights up and down has been around. But you're right to do that in a way that's economical to do that now with software where we can automate that entire process and dynamically look at the timing and dynamically accelerate and accelerate that lifting and lowering. And also we actually don't use concrete, so we avoid it because it's not really sustainable. It's one of the contributors. I think seven to eight percent to greenhouse gases. So we actually have a material science team and worked with SEMX to use dirt and even waste materials like coal ash, even concrete debris are the things that would go into land fills. We can utilize that to make these large blocks that are twenty five metric tons, So we try and avoid materials that are not sustainable to make those very same blocks.

You know what, gravity has been around for a while. I tell people it's not an idea, it's the law. So the whole physics of moving weights up and down has been around. But you're right to do that in a way that's economical to do that now with software where we can automate that entire process and dynamically look at the timing and dynamically accelerate and accelerate that lifting and lowering. And also we actually don't use concrete, so we avoid it because it's not really sustainable. It's one of the contributors. I think seven to eight percent to greenhouse gases. So we actually have a material science team and worked with SEMX to use dirt and even waste materials like coal ash, even concrete debris are the things that would go into land fills. We can utilize that to make these large blocks that are twenty five metric tons, So we try and avoid materials that are not sustainable to make those very same blocks.

So how is I guess your business changing to try to meet the changing sources and uses of energy these days?

So how is I guess your business changing to try to meet the changing sources and uses of energy these days?

About it? It's a great question, and it is one of the challenges. It's definitely focused globally on countries wanting to achieve energy independence, and to do that you need to be able to produce locally. Hence our gravity solution that's more long duration, of course, is ideal because you can produce most of that from local materials, local labor. I mean it's construction, you're building a building. When you get to the short duration, which is most of the market today, and we know about lithium ion, so that's two to four hours, that's this time shifting people trying to manage you're relying on the rare metals, which I believe Paul, what you're referring to and that's where through mechanisms like the IR that was put in place in the US, they're trying to get that localized. And to deal with that, you have to come up with mechanisms to try to bring some of that production local as much as you can in terms of getting content, and that's been a big focus area and leveraging technologies like hydrogen. For example, gree hydrogen can be made sustainably. We're using that to back up the city of Calistoga in northern California and near Napa to provide a sustainable backup solution for two to four days that otherwise would have taken natural gas. So it's a combination of technologies you really have to use to solve this issue of reliance on either you know, a few countries in the world or a few rare word metals.

About it? It's a great question, and it is one of the challenges. It's definitely focused globally on countries wanting to achieve energy independence, and to do that you need to be able to produce locally. Hence our gravity solution that's more long duration, of course, is ideal because you can produce most of that from local materials, local labor. I mean it's construction, you're building a building. When you get to the short duration, which is most of the market today, and we know about lithium ion, so that's two to four hours, that's this time shifting people trying to manage you're relying on the rare metals, which I believe Paul, what you're referring to and that's where through mechanisms like the IR that was put in place in the US, they're trying to get that localized. And to deal with that, you have to come up with mechanisms to try to bring some of that production local as much as you can in terms of getting content, and that's been a big focus area and leveraging technologies like hydrogen. For example, gree hydrogen can be made sustainably. We're using that to back up the city of Calistoga in northern California and near Napa to provide a sustainable backup solution for two to four days that otherwise would have taken natural gas. So it's a combination of technologies you really have to use to solve this issue of reliance on either you know, a few countries in the world or a few rare word metals.

So if I just look at your stock, it's had a tough road since it's spack, right. I mean, clearly there was a lot of enthusiasm in the beginning. You had a nice pop, and that's been really tough. In the last earnings estimate and the last earnings for second quarter, the headline is revenue missing estimates. How do you how do you manage this at this time? It's expensive to probably get all this done, even though the demand we know is still there.

So if I just look at your stock, it's had a tough road since it's spack, right. I mean, clearly there was a lot of enthusiasm in the beginning. You had a nice pop, and that's been really tough. In the last earnings estimate and the last earnings for second quarter, the headline is revenue missing estimates. How do you how do you manage this at this time? It's expensive to probably get all this done, even though the demand we know is still there.

Yeah, the demand is high, and the capital markets have been very challenging, in particular if you go back to mid twenty twenty two, when the interest rate environment changed and really fundamentally, I think the risk appetite for new emerging growth companies like ours really soured and changed. And for us, we focused on execution, and you know, we had one hundred and forty eight million in our first year revenue twenty twenty two, our second year almost three hundred and fifty millions. We more than doubled the size of the company. But at the end, investors are really focused on cash flow and minimizing risk. We've guided that that's going to happen next year, So in our third full year of revenue, we're going to be cash flow positive and even at positive. And I think until that happens, a lot of investors are on the sidelines. And what we can do is what we're doing, which is executing per customers and in different regions of the world, we announced new deals. In Australia, we announced a large gravity project in Italy at a coal mine, and I think filling up that order book Alex is going to be fundamental, so investors see it's not about if, it's just about when and as we fill that order book, then when that catflow roadmap becomes very clear, which we're getting there at twenty twenty five, which is what we guided, I think, then we'll see investor free entering the star that was.