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On Today's Bloomberg Intelligent Show, We're going to dig inside the big business stories impacting Wall Street and the global markets. Each week we provide in depth research and data on some of the two thousand companies and one hundred and thirty industries our analysts cover worldwide. Today, we're going to discuss how Chinese AI startup Deep Seek challenge Silicon Valley's assumptions about the cost of artificial intelligence, plus why shares of jeff Blue Airways took a hit last week. But first, a look into corporate earnings from one of the largest wireless carriers in the US. TEA Mobile reported fourth quarter results that beat analyst projections, and the results were driven by growth and wireless subscriptions and home internet customers. For more, guest host John Tucker and Paul Sweeney were joined by t Mobile CEO Mike Sievert, and they first asked Mike for his take on the company's most recent earnings.

On Today's Bloomberg Intelligent Show, We're going to dig inside the big business stories impacting Wall Street and the global markets. Each week we provide in depth research and data on some of the two thousand companies and one hundred and thirty industries our analysts cover worldwide. Today, we're going to discuss how Chinese AI startup Deep Seek challenge Silicon Valley's assumptions about the cost of artificial intelligence, plus why shares of jeff Blue Airways took a hit last week. But first, a look into corporate earnings from one of the largest wireless carriers in the US. TEA Mobile reported fourth quarter results that beat analyst projections, and the results were driven by growth and wireless subscriptions and home internet customers. For more, guest host John Tucker and Paul Sweeney were joined by t Mobile CEO Mike Sievert, and they first asked Mike for his take on the company's most recent earnings.

We're just consistently outperforming expectations, and that's what the market looks for in a business like ours. We're taking share, we're growing, and then across the board we beat expectations. We just finished the strongest growth here ever in our history. And that's saying something because we have a story to growth history in this company and a lot of people wonder is the big growth run behind us, and we just demonstrated yet again, No, it's not.

We're just consistently outperforming expectations, and that's what the market looks for in a business like ours. We're taking share, we're growing, and then across the board we beat expectations. We just finished the strongest growth here ever in our history. And that's saying something because we have a story to growth history in this company and a lot of people wonder is the big growth run behind us, and we just demonstrated yet again, No, it's not.

It's hard for me to get really excited about my mobile service provider. But your customers, it's like they were in a cult. What's the secret sauce? That's my softball question.

It's hard for me to get really excited about my mobile service provider. But your customers, it's like they were in a cult. What's the secret sauce? That's my softball question.

You know, our value, our corporate values start with this basic idea. Love our customers, you know, give them more, ask less of them.

You know, our value, our corporate values start with this basic idea. Love our customers, you know, give them more, ask less of them.

And they notice. That's it's just a huge part.

And they notice. That's it's just a huge part.

Of our brand, and we have this thing we do called T Mobile Tuesdays where every week customers come to our Tea Life app, which has fifty million users, and they engage to find out how are we rewarding them this week?

Of our brand, and we have this thing we do called T Mobile Tuesdays where every week customers come to our Tea Life app, which has fifty million users, and they engage to find out how are we rewarding them this week?

Do you know what this week's was?

Do you know what this week's was?

We gave away a shack Burger like the world's best burger for free to every single teams Reflix.

We gave away a shack Burger like the world's best burger for free to every single teams Reflix.

Absolutely so, Mike, this is you're in a competitive business. I think about the wireless business, the barriers to change are pretty minimal. Churn is always an issue. Your competitors are depocketed, they're good competitors. Is it just you guys switching customers all the time just for deals. Talk to us about the churn for your company.

Absolutely so, Mike, this is you're in a competitive business. I think about the wireless business, the barriers to change are pretty minimal. Churn is always an issue. Your competitors are depocketed, they're good competitors. Is it just you guys switching customers all the time just for deals. Talk to us about the churn for your company.

Your business well churns at historic lows across the industry, not just T Mobile. We just had our best churn year ever, So people aren't switching a lot when they are switching the net share takers tea Mobiles.

Your business well churns at historic lows across the industry, not just T Mobile. We just had our best churn year ever, So people aren't switching a lot when they are switching the net share takers tea Mobiles.

This is a great trend. You know.

This is a great trend. You know.

I don't need for others to fail in order for us to succeed in our business. This is a great neighborhood. We just happen to be the best house in the neighborhood, and so we're out growing everyone. But this is a healthy, vibrant sector. Everyone's you know, growing and making money. I think that's great. Part of it is people can't get enough of the service that we all offer at T Mobile. You know, we just guide it again to a big year of revenue gains per customer. And that's not because of pricing. It's because customers are self selecting up our rate card to our higher priced offers because they see the superior value and they want what we have to sell. That's a great dynamic, not just for T Mobile, but for the industry.

I don't need for others to fail in order for us to succeed in our business. This is a great neighborhood. We just happen to be the best house in the neighborhood, and so we're out growing everyone. But this is a healthy, vibrant sector. Everyone's you know, growing and making money. I think that's great. Part of it is people can't get enough of the service that we all offer at T Mobile. You know, we just guide it again to a big year of revenue gains per customer. And that's not because of pricing. It's because customers are self selecting up our rate card to our higher priced offers because they see the superior value and they want what we have to sell. That's a great dynamic, not just for T Mobile, but for the industry.

The growth strategy is organic or M and A or what.

The growth strategy is organic or M and A or what.

It's organic principally.

It's organic principally.

I mean, we do have a number of M and A deals in the pipeline that we're intending to close this year, centered around fiber, centered around you know, other add ons. We're also in, you know, acquiring a cellular company, US Cellular.

I mean, we do have a number of M and A deals in the pipeline that we're intending to close this year, centered around fiber, centered around you know, other add ons. We're also in, you know, acquiring a cellular company, US Cellular.

So but by far, the.

So but by far, the.

Growth is an organic growth story focused on taking share, adding revenues, deepening relationships with the existing customers that now number well past one hundred million.

Growth is an organic growth story focused on taking share, adding revenues, deepening relationships with the existing customers that now number well past one hundred million.

I don't understand like outdoor advertising, what does that have to do with your business.

I don't understand like outdoor advertising, what does that have to do with your business.

Yeah, we just announced the acquisition of a company called Vistar, and you know we are in We're a billion dollar advertising support company already, so it's a significant business for us. We call it marketing services for marketers buy marketers. T Mobile is a very famous marketer, and marketers want services from us, so we provide that already. But our Tea Life app part of what it does is it asks customers buy the millions whether they would like to opt in. Opt in to make their digital life better and their advertising more relevant.

Yeah, we just announced the acquisition of a company called Vistar, and you know we are in We're a billion dollar advertising support company already, so it's a significant business for us. We call it marketing services for marketers buy marketers. T Mobile is a very famous marketer, and marketers want services from us, so we provide that already. But our Tea Life app part of what it does is it asks customers buy the millions whether they would like to opt in. Opt in to make their digital life better and their advertising more relevant.

And then we can use.

And then we can use.

Data to provide marketers with an ability to put advertising in front of customers that they will actually appreciate.

Data to provide marketers with an ability to put advertising in front of customers that they will actually appreciate.

And our dream with place.

And our dream with place.

Based marketing, outdoor marketing, that's the Vistaar acquisition is to do that for the first time ever in outdoor advertising, so that for the first time outdoor advertising, place based advertising can become an addressable market.

Based marketing, outdoor marketing, that's the Vistaar acquisition is to do that for the first time ever in outdoor advertising, so that for the first time outdoor advertising, place based advertising can become an addressable market.

Yeah, it's interesting. I love the outdoor business. You can't switch channels on that.

Yeah, it's interesting. I love the outdoor business. You can't switch channels on that.

I took all those companies public back in the day. Apple, Mark German Bloomberg News. Apple has been working with SpaceX.

I took all those companies public back in the day. Apple, Mark German Bloomberg News. Apple has been working with SpaceX.

And T Mobile on starlink. What is starlink?

And T Mobile on starlink. What is starlink?

Okay, So this is the ability to connect your mobile phone directly to satellite service. This is a huge breakthrough. We announced our intention to partner with SpaceX over two years ago, and now finally it's coming to market. With opening of our beta a couple of weeks ago. We're bringing on thousands of users and soon way more than that. We're going to throw the doors open on this thing. If you can see the sky, you're connected.

Okay, So this is the ability to connect your mobile phone directly to satellite service. This is a huge breakthrough. We announced our intention to partner with SpaceX over two years ago, and now finally it's coming to market. With opening of our beta a couple of weeks ago. We're bringing on thousands of users and soon way more than that. We're going to throw the doors open on this thing. If you can see the sky, you're connected.

That's our visual the iPhone app.

That's our visual the iPhone app.

That's correct.

That's correct.

These are lower th orbit satellites, easier for your phone to find and vice versa. But this country, you guys, has five hundred thousand square miles uncovered by any cellular network, and it's a massive part of our land mass, and we're about to close that coverage.

These are lower th orbit satellites, easier for your phone to find and vice versa. But this country, you guys, has five hundred thousand square miles uncovered by any cellular network, and it's a massive part of our land mass, and we're about to close that coverage.

Okay, So if I uh on my bucket list is a trip to the South Pole, I don't need cellular service down there. I could just use a T mobile iPhone Starling.

Okay, So if I uh on my bucket list is a trip to the South Pole, I don't need cellular service down there. I could just use a T mobile iPhone Starling.

Well, I'm gonna have to check on how good the l EO coverage is. But one of the things you point out and very quickly to follow our terrestrial coverage across the continental US and big parts of Alaska is the world's oceans that. That's a big piece of this because you know now you'll be able to not right away, but as soon as we are able to turn it on, you'll be able to get your service across the US and as you travel around the oceans outside the reach of any cellular See.

Well, I'm gonna have to check on how good the l EO coverage is. But one of the things you point out and very quickly to follow our terrestrial coverage across the continental US and big parts of Alaska is the world's oceans that. That's a big piece of this because you know now you'll be able to not right away, but as soon as we are able to turn it on, you'll be able to get your service across the US and as you travel around the oceans outside the reach of any cellular See.

It's in beta testing right now. It's just confined to messaging.

It's in beta testing right now. It's just confined to messaging.

Hundreds of satellites are in the air where we have a free beta service going on. We're starting to let people into it. Right now it's text messaging only, but fast to follow will be light data services and eventually voice.

Hundreds of satellites are in the air where we have a free beta service going on. We're starting to let people into it. Right now it's text messaging only, but fast to follow will be light data services and eventually voice.

So I can get rid of my satellite phone. We don't need that anymore.

So I can get rid of my satellite phone. We don't need that anymore.

I think the time will come when that's the case.

I think the time will come when that's the case.

Top line growth four to five percent for you guys, that's how I think about the wireless business. Is that all pricing? If so, how do you think about the pricing environment out there?

Top line growth four to five percent for you guys, that's how I think about the wireless business. Is that all pricing? If so, how do you think about the pricing environment out there?

It's sharetaking and self selecting up our rate card, you know, very little pricing. And so those are the big dynamics. Postpaid service revenue growth eight percent, more than double the rate of our peers. And so this is you know, a dynamic that makes t mobiles so different in this space because we're not only growing the top line, but we're translating it into financial growth on the bottom line. Twenty five percent year over year growth and cash flows seventeen billion dollars are highest ever.

It's sharetaking and self selecting up our rate card, you know, very little pricing. And so those are the big dynamics. Postpaid service revenue growth eight percent, more than double the rate of our peers. And so this is you know, a dynamic that makes t mobiles so different in this space because we're not only growing the top line, but we're translating it into financial growth on the bottom line. Twenty five percent year over year growth and cash flows seventeen billion dollars are highest ever.

Now, how do you raise prices? You sort of touched on this just briefly before, but how do you raise prices without scaring away your cult members?

Now, how do you raise prices? You sort of touched on this just briefly before, but how do you raise prices without scaring away your cult members?

Cult members? Well, one thing is people. You know, we have a rate card with a variety of options, and people choose at an increasing rate the prices that are higher up because they want what we have to sell. Do you know that sixty percent of our new customers coming in the front door choose one of our two most premium plans because those are the ones that are most packed with value. And they you know, they're here for a reason. They want more data, they want the experience that T Mobile can provide with the world's best five G network.

Cult members? Well, one thing is people. You know, we have a rate card with a variety of options, and people choose at an increasing rate the prices that are higher up because they want what we have to sell. Do you know that sixty percent of our new customers coming in the front door choose one of our two most premium plans because those are the ones that are most packed with value. And they you know, they're here for a reason. They want more data, they want the experience that T Mobile can provide with the world's best five G network.

Subscriber acquisition costs have how are they trending for you guys these days?

Subscriber acquisition costs have how are they trending for you guys these days?

They're pretty flat, and that's good. We're very comfortable with this business model. It's a high CLV, you know, value exchange. One of the things about this business it's reliable, it's predictable. We do what we say, we try to exceed what we say, and it's growing and that's one of the things that really distinguishes us in a group of peers, not just in the US, but around the world.

They're pretty flat, and that's good. We're very comfortable with this business model. It's a high CLV, you know, value exchange. One of the things about this business it's reliable, it's predictable. We do what we say, we try to exceed what we say, and it's growing and that's one of the things that really distinguishes us in a group of peers, not just in the US, but around the world.

There is a fed meat today. Can you tell me how if it all rates affect your business?

There is a fed meat today. Can you tell me how if it all rates affect your business?

Well, we're a big debt issuer, so obviously it's relevant in the long haul.

Well, we're a big debt issuer, so obviously it's relevant in the long haul.

What's the debt right now?

What's the debt right now?

With two point five leverage against debit, so it's you know, it's very significant eve as in the thirty one, you know, very significant debt, but it's also a stack that's you know, investment grade, it's long term, it's you know, spread out, so it doesn't affect us in an immediate way, but in the long taul of course, as a debt.

With two point five leverage against debit, so it's you know, it's very significant eve as in the thirty one, you know, very significant debt, but it's also a stack that's you know, investment grade, it's long term, it's you know, spread out, so it doesn't affect us in an immediate way, but in the long taul of course, as a debt.

It what would you like that leverage ratio to be right where it is?

It what would you like that leverage ratio to be right where it is?

Okay?

Okay?

Market structure in the wireless business three main players? Okay, is there room for fourth? And I think about my old friend Charlie Oregon. I have for the last fifteen years, I had no idea what he's doing with a spectrum, and I don't think the market knows either.

Market structure in the wireless business three main players? Okay, is there room for fourth? And I think about my old friend Charlie Oregon. I have for the last fifteen years, I had no idea what he's doing with a spectrum, and I don't think the market knows either.

Well, he's operating you know, a major brand and Boost Mobile. And the other thing is the cable companies, Charter and Comcasts taken together, who don't overlap, kind of constant to an additional carrier ass going well, and you know, they are really growing their mobile service at a significant pace, not as significant as us. We're the growth leaders, but it's you know, it shows that this is a vibrant market.

Well, he's operating you know, a major brand and Boost Mobile. And the other thing is the cable companies, Charter and Comcasts taken together, who don't overlap, kind of constant to an additional carrier ass going well, and you know, they are really growing their mobile service at a significant pace, not as significant as us. We're the growth leaders, but it's you know, it shows that this is a vibrant market.

Yeah, with a lot of competition in the smaller market.

Yeah, with a lot of competition in the smaller market.

So that's a big deal for you too, right.

So that's a big deal for you too, right.

Yeah, forty percent of the country everything that's not the top one hundred markets we call smaller markets in rural areas.

Yeah, forty percent of the country everything that's not the top one hundred markets we call smaller markets in rural areas.

It's a huge source of our growth right.

It's a huge source of our growth right.

Now, thanks to Tea Mobile CEO Mike Sivert. We move next to the auto sector. This week General Motors gave a better than expected outlook for profit in twenty twenty five, but President Trump's recent tear of threats have raised uncertainty about the automaker's business. As a result, GM shares dropped as much as ten percent on Tuesday, and for more. We were joined by Steve Mann, Bloomberg Intelligence, Global Autos and Industrials research analyst.

Now, thanks to Tea Mobile CEO Mike Sivert. We move next to the auto sector. This week General Motors gave a better than expected outlook for profit in twenty twenty five, but President Trump's recent tear of threats have raised uncertainty about the automaker's business. As a result, GM shares dropped as much as ten percent on Tuesday, and for more. We were joined by Steve Mann, Bloomberg Intelligence, Global Autos and Industrials research analyst.

Yeah, I think the you know, Scott had a nice run up last year. You know, the management team has done a great job and actually managing and investors and managing the challenges that's in the US market that the other company, Ford and stilentas have been facing. I think the expectation has actually ran up through last year, and you know, we got some negative news, mixed news in terms of the outlook. You know, the tone has changed. You know, this is the first time that GM actually is a little bit worried about the end market since COVID.

Yeah, I think the you know, Scott had a nice run up last year. You know, the management team has done a great job and actually managing and investors and managing the challenges that's in the US market that the other company, Ford and stilentas have been facing. I think the expectation has actually ran up through last year, and you know, we got some negative news, mixed news in terms of the outlook. You know, the tone has changed. You know, this is the first time that GM actually is a little bit worried about the end market since COVID.

Well, what have we learned.

Well, what have we learned.

About GM and its actual EV units? Like, we're sales better than expected, Like is the trough passed?

About GM and its actual EV units? Like, we're sales better than expected, Like is the trough passed?

Yeah, it sales, especially in the fourth quarter, it did run up. Some of that may be some channel inventory stock building anticipation of better sales than twenty twenty five, and that's one of the key issues. I think the investors are concerned. There's a you know, there's going to be a mixed change. They think that EV sales increase EV sales will offset some of the more profitable truck sales in twenty twenty five. So, you know, based on our estimates, like it seems like even their adjusted EBIT margin of eight to ten percent, maybe a little bit too high, and they may fall actually at the low end of that range or maybe even below our.

Yeah, it sales, especially in the fourth quarter, it did run up. Some of that may be some channel inventory stock building anticipation of better sales than twenty twenty five, and that's one of the key issues. I think the investors are concerned. There's a you know, there's going to be a mixed change. They think that EV sales increase EV sales will offset some of the more profitable truck sales in twenty twenty five. So, you know, based on our estimates, like it seems like even their adjusted EBIT margin of eight to ten percent, maybe a little bit too high, and they may fall actually at the low end of that range or maybe even below our.

Thanks to Steve Mann, Bloomberg Intelligence Global Autos and Industrials Research channelist. Coming up, we're going to break down some key corporate earnings in the aerospace industry. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries. You can access Bloomberg Intelligence through Bigo. I'm the Terminal, I'm Alex Steele, and this is Bloomberg.

Thanks to Steve Mann, Bloomberg Intelligence Global Autos and Industrials Research channelist. Coming up, we're going to break down some key corporate earnings in the aerospace industry. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries. You can access Bloomberg Intelligence through Bigo. I'm the Terminal, I'm Alex Steele, and this is Bloomberg.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Easter what Apple CarPlay and the Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

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We move next to the aerospace industry. This week, Boeing report or did a four billion dollar operating loss in the fourth quarter. Boeing CEO Kelly Ordberg said he will realign the company around key business lines and cleave off fringe assets. Separately, Jet Blue shares had a record plunge after the carrier forecasted weaker than expected revenue and higher costs for twenty twenty five. For more, we were joined by George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense and Airlines analyst. We began by asking George about Boeing and one of the worst was over for the company.

We move next to the aerospace industry. This week, Boeing report or did a four billion dollar operating loss in the fourth quarter. Boeing CEO Kelly Ordberg said he will realign the company around key business lines and cleave off fringe assets. Separately, Jet Blue shares had a record plunge after the carrier forecasted weaker than expected revenue and higher costs for twenty twenty five. For more, we were joined by George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense and Airlines analyst. We began by asking George about Boeing and one of the worst was over for the company.

Look, it seems like it's always hard to say the worst is over. It seems like the trend is definitely going the right direction. It seems like twenty twenty five could be the year they thought twenty twenty four was going to be. Look, you know, I heard a lot of positive things about the manufacturing process in the call. I think that's why Boeing pre announced. They wanted to get some of the you know, the forward chargers out of the way so people could focus on the message. And I think the message was the factory, especially for the seven thirty seven, has restarted in the new year. It's building in the mid twenties range going to thirty eight. It sounded like somewhere near midyear, which is probably before where most of consensus thought it would get. I'm gonna and the year close to forty two is what I think I heard. I mean, management kept trying to solve pedal it to a degree, and what I heard is quality as spirit aerosystems improving. They're happy with it. They don't think it's a liminar. I mean, all that's positive for profitability and cash flow. Boeing should make this year a lot better than last year if it all comes true.

Look, it seems like it's always hard to say the worst is over. It seems like the trend is definitely going the right direction. It seems like twenty twenty five could be the year they thought twenty twenty four was going to be. Look, you know, I heard a lot of positive things about the manufacturing process in the call. I think that's why Boeing pre announced. They wanted to get some of the you know, the forward chargers out of the way so people could focus on the message. And I think the message was the factory, especially for the seven thirty seven, has restarted in the new year. It's building in the mid twenties range going to thirty eight. It sounded like somewhere near midyear, which is probably before where most of consensus thought it would get. I'm gonna and the year close to forty two is what I think I heard. I mean, management kept trying to solve pedal it to a degree, and what I heard is quality as spirit aerosystems improving. They're happy with it. They don't think it's a liminar. I mean, all that's positive for profitability and cash flow. Boeing should make this year a lot better than last year if it all comes true.

Where should that seven three seven build number be in a perfect world, Georgia, I'm trying to gauge the thirty eight number, the forty number, the forty two number, versus where it should be, maybe versus where Airbus is with their product.

Where should that seven three seven build number be in a perfect world, Georgia, I'm trying to gauge the thirty eight number, the forty number, the forty two number, versus where it should be, maybe versus where Airbus is with their product.

Well, I guess I would say if you were at the Boeing board level, would you not say it should be in the sixties, somewhere well above Airbus. Look Boeing ended the last decade before the pandemic sort of driving closer to sixty builds a month. They have plenty of back laws. I don't think it should be at sixty a month now, but I would expect they should be driving hard towards sixty a month as we go into the middle of the back half of this decade. That's a little complex, Sorry about that, but you know the twenty seven's twenty eighths. I think that sixties ought to be a number they'd be looking at given the backlog, And look, where should they be right now? Maybe they should be, you know, close to fifty. So they're I mean, they're what, they're halfway to that level they probably should be at right now. This is the money maker, this is the one they want to really optimize.

Well, I guess I would say if you were at the Boeing board level, would you not say it should be in the sixties, somewhere well above Airbus. Look Boeing ended the last decade before the pandemic sort of driving closer to sixty builds a month. They have plenty of back laws. I don't think it should be at sixty a month now, but I would expect they should be driving hard towards sixty a month as we go into the middle of the back half of this decade. That's a little complex, Sorry about that, but you know the twenty seven's twenty eighths. I think that sixties ought to be a number they'd be looking at given the backlog, And look, where should they be right now? Maybe they should be, you know, close to fifty. So they're I mean, they're what, they're halfway to that level they probably should be at right now. This is the money maker, this is the one they want to really optimize.

And no, no, I was going to say, I mean, it's always like at least it could be worse. I guess right, because it has been worse, So there's something there. I do want to switch and talk about Jet Blue for a second, because Paul and I are just really confused to the extent to which Jet Blue is getting beaten down. We know the costs will higher than estimated, but what do you make of that price action?

And no, no, I was going to say, I mean, it's always like at least it could be worse. I guess right, because it has been worse, So there's something there. I do want to switch and talk about Jet Blue for a second, because Paul and I are just really confused to the extent to which Jet Blue is getting beaten down. We know the costs will higher than estimated, but what do you make of that price action?

Yeah, so, I mean I think they're Look, the big service carriers, I think showed slightly better results than we had expected, right, And so I think if you were looking at the entire airline space, you could be confused that those better numbers would carry through to the economy carriers, to the more basic economy carriers. And I think what Jet Blue told us it didn't right. Jet Blue lives in a really difficult part.

Yeah, so, I mean I think they're Look, the big service carriers, I think showed slightly better results than we had expected, right, And so I think if you were looking at the entire airline space, you could be confused that those better numbers would carry through to the economy carriers, to the more basic economy carriers. And I think what Jet Blue told us it didn't right. Jet Blue lives in a really difficult part.

Of the market.

Of the market.

They are you know, they're low cost plus they have some premium seating and I say low costs, but they're not. Their costs are not as low as like a Frontier, a spirit an Allegiance. And so we think at the bottom of that market and the basic economy world, your best advantage is to be able to deliver seat miles as cheap as possible because you're getting customers on price, where if you're up in the United American right delta world you get people on loyalty programs and premium seating and things like that. We know the back end of this business is really competitive, and it's hard for like the Jet Blues in Southwest to survive in a world where you've got to just deliver the really cheapest seat price. And they're having a hard time doing that given the upstarts. And when they show us an eight percent increase in cost per available seat mile in one queue, no operating profit that gets concerning that the worst isn't behind us on excess budget seats in the marketplace.

They are you know, they're low cost plus they have some premium seating and I say low costs, but they're not. Their costs are not as low as like a Frontier, a spirit an Allegiance. And so we think at the bottom of that market and the basic economy world, your best advantage is to be able to deliver seat miles as cheap as possible because you're getting customers on price, where if you're up in the United American right delta world you get people on loyalty programs and premium seating and things like that. We know the back end of this business is really competitive, and it's hard for like the Jet Blues in Southwest to survive in a world where you've got to just deliver the really cheapest seat price. And they're having a hard time doing that given the upstarts. And when they show us an eight percent increase in cost per available seat mile in one queue, no operating profit that gets concerning that the worst isn't behind us on excess budget seats in the marketplace.

Can we get some consolidation in that lower end of the market now with this new administration, George.

Can we get some consolidation in that lower end of the market now with this new administration, George.

Look, we could. I think the bigger ones could. I think Jet Blue could consolidate somebody underneath them or somebody about the same size. I don't think they'd allow Southwest to go out and buy somebody, but I think you could at the bottom end. Plus, you have some that are hurting, right, you have Spirit airlines. Question is can they survive. That could take some capacity out of the marketplace. The challenges the planes don't go away. They're built, they're aluminum, they last third years. Someone gets the airplanes. Where do those airplanes go? Do they go out of market? They go in market. But you could get some consolidation too.

Look, we could. I think the bigger ones could. I think Jet Blue could consolidate somebody underneath them or somebody about the same size. I don't think they'd allow Southwest to go out and buy somebody, but I think you could at the bottom end. Plus, you have some that are hurting, right, you have Spirit airlines. Question is can they survive. That could take some capacity out of the marketplace. The challenges the planes don't go away. They're built, they're aluminum, they last third years. Someone gets the airplanes. Where do those airplanes go? Do they go out of market? They go in market. But you could get some consolidation too.

Thirty seconds RTX you cover some of the defense guys.

Thirty seconds RTX you cover some of the defense guys.

RTX doing well.

RTX doing well.

Yeah, they showed some nice numbers. The guidance for next year was nice as well. Look, they have a lower I think view on how much original equipment deliveries they'll make next year. That I think is probably practical, especially given what Boeing said. So they kind of looked for mid single digits growth in that original equipment deliveries. I think Boeing and Airbus alone with narrow body deliveries are going to be twelve ish percent. It'll be interesting to see how that plays out, because the more that original equipment they deliver, the more PRESSUREUS margins.

Yeah, they showed some nice numbers. The guidance for next year was nice as well. Look, they have a lower I think view on how much original equipment deliveries they'll make next year. That I think is probably practical, especially given what Boeing said. So they kind of looked for mid single digits growth in that original equipment deliveries. I think Boeing and Airbus alone with narrow body deliveries are going to be twelve ish percent. It'll be interesting to see how that plays out, because the more that original equipment they deliver, the more PRESSUREUS margins.

All right, thanks to George ferguson Bloomberg Intelligence and your Aerospace, Defense and Airlines analyst. This week we focus on a Bloomberg Big Take story titled deep Seek Challenges Silicon Valley's assumptions about AI costs. You can find it on Bloomberg dot Com and the Terminal. The story looks at how Chinese AI startup called deep Seek released a new open source AI model called r one that can mimic human reasoning, and the release sent shock waves to the US tech industry, with tech companies analyzing how deep Seek built its chatbot and whether it did as cheaply as it claimed. For more, we were joined by Rachel Metz, Bloomberry AI reporter, and we first asked Rachel what the feeling is in Silicon Valley after the latest news.

All right, thanks to George ferguson Bloomberg Intelligence and your Aerospace, Defense and Airlines analyst. This week we focus on a Bloomberg Big Take story titled deep Seek Challenges Silicon Valley's assumptions about AI costs. You can find it on Bloomberg dot Com and the Terminal. The story looks at how Chinese AI startup called deep Seek released a new open source AI model called r one that can mimic human reasoning, and the release sent shock waves to the US tech industry, with tech companies analyzing how deep Seek built its chatbot and whether it did as cheaply as it claimed. For more, we were joined by Rachel Metz, Bloomberry AI reporter, and we first asked Rachel what the feeling is in Silicon Valley after the latest news.

We're hearing a bunch of different things.

We're hearing a bunch of different things.

I mean, I think some people are a little alarmed, a little bit surprised, but I think there's also a lot of excitement. Frankly, I mean some of it may boil down to sort of what your goals are what your job is. I think you're seeing a lot of interest and excitement, such as from companies that sell these AI models to other people, like sell the usage of them, a company like Data Bricks or cohere. I think they're really interested in seeing where this goes. Data Bricks CEO told me that they have a ton of customer interest in us Deep seeks, so that's really interesting to them from a customer perspective. But you could also see how companies that are making these models might be like wait a minute, yeah.

I mean, I think some people are a little alarmed, a little bit surprised, but I think there's also a lot of excitement. Frankly, I mean some of it may boil down to sort of what your goals are what your job is. I think you're seeing a lot of interest and excitement, such as from companies that sell these AI models to other people, like sell the usage of them, a company like Data Bricks or cohere. I think they're really interested in seeing where this goes. Data Bricks CEO told me that they have a ton of customer interest in us Deep seeks, so that's really interesting to them from a customer perspective. But you could also see how companies that are making these models might be like wait a minute, yeah.

Well, and I guess the question is how soon can can Silicon Valley replicate the model that Deep Seek created.

Well, and I guess the question is how soon can can Silicon Valley replicate the model that Deep Seek created.

Well hugging face, which does a wide variety of things including deploying their own models, hosting other people's models, stuff like that. They're doing it right now, actually, so they were replicating it and making it available to people, and I think they're going along at a pretty good clip. So other people could be doing that as well. And that's the sense that I get that they that they are starting to you know.

Well hugging face, which does a wide variety of things including deploying their own models, hosting other people's models, stuff like that. They're doing it right now, actually, so they were replicating it and making it available to people, and I think they're going along at a pretty good clip. So other people could be doing that as well. And that's the sense that I get that they that they are starting to you know.

We've obviously Nvidia and other chip names took just a huge hit, and I guess that kind of calls into question. Investors are questioning do we need this much spending. If somebody can come in here and do it as such a discount, how is that argument kind of festering in your backyard.

We've obviously Nvidia and other chip names took just a huge hit, and I guess that kind of calls into question. Investors are questioning do we need this much spending. If somebody can come in here and do it as such a discount, how is that argument kind of festering in your backyard.

Yeah, I mean I think that people rightfully were a little bit concerned, right and you saw.

Yeah, I mean I think that people rightfully were a little bit concerned, right and you saw.

The stocks really drop.

The stocks really drop.

But on the other hand, you're still going to be needing chips for all kinds of things, including AI processes. And it's important to keep in mind that these AI models that are mimicking the ways that humans reason, they're still very new. There aren't that many of them at this point. They're just not very far along, so it's not clear yet how much compute. The compute in these cases is often you're using a lot more of it at the end of the process than you would have with different types of models, so it'll be interesting to see. It would be. One thing that's important to keep in mind, though, I think, is that a number of companies have been trying to make their models more efficient for a while. I mean, efficiency could be great, it could be great for the environment, it could be great for these companies in terms of keeping costs down. So I think that's why you see a lot of people excited about this.

But on the other hand, you're still going to be needing chips for all kinds of things, including AI processes. And it's important to keep in mind that these AI models that are mimicking the ways that humans reason, they're still very new. There aren't that many of them at this point. They're just not very far along, so it's not clear yet how much compute. The compute in these cases is often you're using a lot more of it at the end of the process than you would have with different types of models, so it'll be interesting to see. It would be. One thing that's important to keep in mind, though, I think, is that a number of companies have been trying to make their models more efficient for a while. I mean, efficiency could be great, it could be great for the environment, it could be great for these companies in terms of keeping costs down. So I think that's why you see a lot of people excited about this.

Well, Also, I thought it was interesting in Vidia's statement on deep Sea it was twofold. It was like, Hey, they totally have complied with any restrictions on chips from the government and they still were able to accomplish it, and we're super pumped about it. That feels like it's like, please don't put more tearffs on chips learning from the US.

Well, Also, I thought it was interesting in Vidia's statement on deep Sea it was twofold. It was like, Hey, they totally have complied with any restrictions on chips from the government and they still were able to accomplish it, and we're super pumped about it. That feels like it's like, please don't put more tearffs on chips learning from the US.

Is that in the zeitgeist at all in Silicon Valley, Not that I've heard, to be honest.

Is that in the zeitgeist at all in Silicon Valley, Not that I've heard, to be honest.

I mean, there may be people talking about that, but I feel like most people are concentrating more on the idea that this company has done something that appears to be quite interesting, and they've made some really smart decisions and they're a really smart team, and I think a lot of people just find that really fascinating and they want to know how they can do it too.

I mean, there may be people talking about that, but I feel like most people are concentrating more on the idea that this company has done something that appears to be quite interesting, and they've made some really smart decisions and they're a really smart team, and I think a lot of people just find that really fascinating and they want to know how they can do it too.

What do you expect to hear from some of the big tech companies that report over the next couple of weeks their earnings as it relates to AI and kind of maybe how the ball field maybe changing.

What do you expect to hear from some of the big tech companies that report over the next couple of weeks their earnings as it relates to AI and kind of maybe how the ball field maybe changing.

Ooh ah, that's a good question. I mean, I'm sure they're thinking about this and looking at this. I mean, what it would probably make sense to hear more remarks about efficiency. Frankly, I mean that seems to be what this company has done in a few different areas, and I would be curious to see if other companies are thinking about how they can do that. I mean, I would assume investors would like that if they're being more efficient with how they're spending money and using resources.

Ooh ah, that's a good question. I mean, I'm sure they're thinking about this and looking at this. I mean, what it would probably make sense to hear more remarks about efficiency. Frankly, I mean that seems to be what this company has done in a few different areas, and I would be curious to see if other companies are thinking about how they can do that. I mean, I would assume investors would like that if they're being more efficient with how they're spending money and using resources.

Thanks to Rachel Mattz, Bloomberg AI reporter, coming up in the program, a look at why HSBC will wind down it's investment banking operations in Europe, the UK and the Americas.

Thanks to Rachel Mattz, Bloomberg AI reporter, coming up in the program, a look at why HSBC will wind down it's investment banking operations in Europe, the UK and the Americas.

If you don't have the operations, say on Wall Street in the City of London, continental Europe, how meaningful can you be to those types of clients in Asia and the Middle East when they want to do stuff around the world. You know, it's all very well obviously saying you know, we're very big in Middle East and Asia, will service use there. But when it comes to being able to offer some kind of global perspective, maybe being somewhat lacking then and I think that's going to be the area that's going to be interesting to watch.

If you don't have the operations, say on Wall Street in the City of London, continental Europe, how meaningful can you be to those types of clients in Asia and the Middle East when they want to do stuff around the world. You know, it's all very well obviously saying you know, we're very big in Middle East and Asia, will service use there. But when it comes to being able to offer some kind of global perspective, maybe being somewhat lacking then and I think that's going to be the area that's going to be interesting to watch.

Here, you're listening to Bloomberg Intelligence. I'm Bloomberg Radio providing in depth research and data on two thousand companies and one hundred and thirty industries. You can access Bloomberg Intelligence through b I go on the terminal. I'm Alex Steele, and this is Bloomberg.

Here, you're listening to Bloomberg Intelligence. I'm Bloomberg Radio providing in depth research and data on two thousand companies and one hundred and thirty industries. You can access Bloomberg Intelligence through b I go on the terminal. I'm Alex Steele, and this is Bloomberg.

You were listening to the Bloomberg Intelligence Podcast. Catch the program live weekdays at ten am Eastern on Applecarplay 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.

You were listening to the Bloomberg Intelligence Podcast. Catch the program live weekdays at ten am Eastern on Applecarplay 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.

Moved next to the municipal bond market. It's looking like a big year for unis in twenty twenty five, with investors looking at high yield municipals to generate strong demand. For more on this, we were joined by Nora Whitstruck, chief Municipal Analytical Officer at SMP Global Ratings. We spoke to Nora live from BAM Mutual offices in New York City.

Moved next to the municipal bond market. It's looking like a big year for unis in twenty twenty five, with investors looking at high yield municipals to generate strong demand. For more on this, we were joined by Nora Whitstruck, chief Municipal Analytical Officer at SMP Global Ratings. We spoke to Nora live from BAM Mutual offices in New York City.

Generally in twenty twenty five, I like to say that the municipal sector is cautiously stable. A lot of state and local governments are coming into twenty twenty five still sort of writing some high liquidity and reserve levels based on the COVID relief based still oh yeah, you know, they had to commit it all by the end of last year, but they had to they have to spend it all by the end of twenty twenty six, so they still have some in their coffers generally, and I think also the economy has been pretty good and that helps state in local governments and other entities that we rate in terms of the demand that they see for their services.

Generally in twenty twenty five, I like to say that the municipal sector is cautiously stable. A lot of state and local governments are coming into twenty twenty five still sort of writing some high liquidity and reserve levels based on the COVID relief based still oh yeah, you know, they had to commit it all by the end of last year, but they had to they have to spend it all by the end of twenty twenty six, so they still have some in their coffers generally, and I think also the economy has been pretty good and that helps state in local governments and other entities that we rate in terms of the demand that they see for their services.

When it comes to something we've been talking about the last hour and a half or so, are the impact of natural disasters and the LA wildfires, Like how do you deal with ratings and natural disasters like that?

When it comes to something we've been talking about the last hour and a half or so, are the impact of natural disasters and the LA wildfires, Like how do you deal with ratings and natural disasters like that?

So we bake risk into our ratings, as you might imagine as credit analysts.

So we bake risk into our ratings, as you might imagine as credit analysts.

And but that probably wasn't on anyone's BINGO card.

And but that probably wasn't on anyone's BINGO card.

So we In California, the state has inverse condemnation, which means utilities, even if they are not negligent, can be.

So we In California, the state has inverse condemnation, which means utilities, even if they are not negligent, can be.

Liable for sparking a wildfire if any of their equipment is involved.

Liable for sparking a wildfire if any of their equipment is involved.

That's right, closet yep, absolutely so. Actually, LADWP, we lowered from double A to double A minus a few years ago because they choose as a decision not to de energize their lines relative to wildfires, and that's fine for them to do that. It's different than some of their peers in California who do do that. But because of that, they decide that because they're based in an urban area, they don't want to shut off their traffic lights. They think that the risk trade off between the wildfire and human costs are are not equal. So we lowered their ratings, and I think part of that is the inverse condemnation, but also it's just the fact that utilities are particularly susceptible to infrastructure damage during a severe weather event, whether it be a wildfire, a hurricane, flooding. So it's all been baked into our ratings. The actions that we took on LADWP, we're partly reflecting a recalibration of that risk as wildfires have come into more urban areas versus where they historically have a cur and rural communities.

That's right, closet yep, absolutely so. Actually, LADWP, we lowered from double A to double A minus a few years ago because they choose as a decision not to de energize their lines relative to wildfires, and that's fine for them to do that. It's different than some of their peers in California who do do that. But because of that, they decide that because they're based in an urban area, they don't want to shut off their traffic lights. They think that the risk trade off between the wildfire and human costs are are not equal. So we lowered their ratings, and I think part of that is the inverse condemnation, but also it's just the fact that utilities are particularly susceptible to infrastructure damage during a severe weather event, whether it be a wildfire, a hurricane, flooding. So it's all been baked into our ratings. The actions that we took on LADWP, we're partly reflecting a recalibration of that risk as wildfires have come into more urban areas versus where they historically have a cur and rural communities.

I guess in response to the LA fires, President Trump I think is voiced some displeasure with FEMA and even suggesting maybe some of the disaster relief responsibilities at the federal level FEMA be put down at the state and local level. Can states and local municipalties afford that kind of stuff?

I guess in response to the LA fires, President Trump I think is voiced some displeasure with FEMA and even suggesting maybe some of the disaster relief responsibilities at the federal level FEMA be put down at the state and local level. Can states and local municipalties afford that kind of stuff?

Well, we've historically said that FEMA is an important credit support for state and local governments. These disasters are increasing in frequency and increasing in cost, and absent federal aid, you know, that would be a significant pressure for them, and absorbing all of the costs is just probably a little unsustainable at the current reading levels. I think what we are watching for is what he actually decides to do. Does he still decide to maintain the federal aid and shift it to a block grant for states and then states are responsible for allocating it, or you know, does disaster relief go away entirely? Those are two very different dyna that we have to monitor in terms of how I relate.

Well, we've historically said that FEMA is an important credit support for state and local governments. These disasters are increasing in frequency and increasing in cost, and absent federal aid, you know, that would be a significant pressure for them, and absorbing all of the costs is just probably a little unsustainable at the current reading levels. I think what we are watching for is what he actually decides to do. Does he still decide to maintain the federal aid and shift it to a block grant for states and then states are responsible for allocating it, or you know, does disaster relief go away entirely? Those are two very different dyna that we have to monitor in terms of how I relate.

What are the different options.

What are the different options.

Then for those two scenarios, how would that impact How would each impact the mini market?

Then for those two scenarios, how would that impact How would each impact the mini market?

So I think if even a lower level of disaster relief for state and local governments, right now, they typically get somewhere between seventy and ninety percent of the costs reimbursed from the federal government. If that goes to twenty percent, that's something that we'd have to consider. If that goes to zero, that's a whole nother decision on our part to determine what the liquidity and reserves of state and local governments and entities that we rate need to maintain as a buffer against these types of disasters. Now, if it just shifts from FEMA being the allocator and the distributor of funds to states in terms of a block grant, that probably could be even like a non concern.

So I think if even a lower level of disaster relief for state and local governments, right now, they typically get somewhere between seventy and ninety percent of the costs reimbursed from the federal government. If that goes to twenty percent, that's something that we'd have to consider. If that goes to zero, that's a whole nother decision on our part to determine what the liquidity and reserves of state and local governments and entities that we rate need to maintain as a buffer against these types of disasters. Now, if it just shifts from FEMA being the allocator and the distributor of funds to states in terms of a block grant, that probably could be even like a non concern.

For us, if you will, all right, as a credit rating agency, you get paid to worry.

For us, if you will, all right, as a credit rating agency, you get paid to worry.

We get paid to work.

We get paid to work.

Aside from natural disasters, which can be an overwhelming topic, what are more of some pedestrian things that concern you?

Aside from natural disasters, which can be an overwhelming topic, what are more of some pedestrian things that concern you?

Well, you know, I think generally we look at long term liabilities, right, so pensions and how is state and local governments and other entities that we rate manage their pension systems. Typically it's managed at the state level.

Well, you know, I think generally we look at long term liabilities, right, so pensions and how is state and local governments and other entities that we rate manage their pension systems. Typically it's managed at the state level.

What does that mean?

What does that mean?

We are increasingly seeing more people retire, so how do those costs get baked into the budget? States in particular are a safety net for Medicaid, and that's something that President Trump has also spoken about in terms of modifying that plan. States get a lot of money to support people that are vulnerable and need to be in those programs. How could that change the way states function and what they need to allocate resources to. I think we also watch labor productivity and labor workforce dynamics. I think, you know, one of the things that we noted after the election is that immigration has been good for our workforce in the It has really lowered the cost and the tightness of the labor market. That has turned into high increases in salaries and personal costs for state and local governments and entities that we rate. So a major change in border security could tighten that labor market right back up, and that could put additional cost pressures back onto these entities that we rate.

We are increasingly seeing more people retire, so how do those costs get baked into the budget? States in particular are a safety net for Medicaid, and that's something that President Trump has also spoken about in terms of modifying that plan. States get a lot of money to support people that are vulnerable and need to be in those programs. How could that change the way states function and what they need to allocate resources to. I think we also watch labor productivity and labor workforce dynamics. I think, you know, one of the things that we noted after the election is that immigration has been good for our workforce in the It has really lowered the cost and the tightness of the labor market. That has turned into high increases in salaries and personal costs for state and local governments and entities that we rate. So a major change in border security could tighten that labor market right back up, and that could put additional cost pressures back onto these entities that we rate.

I mean, on the flip side, does it actually take away some of the state aid though?

I mean, on the flip side, does it actually take away some of the state aid though?

Also so it could definitely be a bit of a boost. Right So, New York City in particular, with asylum seekers, had to absorb a significant billions of dollars in additional costs to help those individuals as they come come into the city. That could definitely be a bit of a relief valve for them if that were to change. I think too, you know, there could be some cost savings relative to medicaid, relative to other social services that they need to participate in to you know, come survive once they get to in the US. So that definitely there could be some offsetting improvements in cost savings relative to credit quality.

Also so it could definitely be a bit of a boost. Right So, New York City in particular, with asylum seekers, had to absorb a significant billions of dollars in additional costs to help those individuals as they come come into the city. That could definitely be a bit of a relief valve for them if that were to change. I think too, you know, there could be some cost savings relative to medicaid, relative to other social services that they need to participate in to you know, come survive once they get to in the US. So that definitely there could be some offsetting improvements in cost savings relative to credit quality.

Maybe you can explain to me how life works in Florida. Yeah, okay, Texas, no state taxes. How do they build schools and roads and things like that? Because my stated my property taxes are really high. Yeah, you know New Jersey.

Maybe you can explain to me how life works in Florida. Yeah, okay, Texas, no state taxes. How do they build schools and roads and things like that? Because my stated my property taxes are really high. Yeah, you know New Jersey.

I mean I own a five hundred and fifty square foot condo and my property taxes are ten thousand dollars in New York City.

I mean I own a five hundred and fifty square foot condo and my property taxes are ten thousand dollars in New York City.

So I hear you on that.

So I hear you on that.

What happens in states that don't have an income tax, typically they securitize other forms of revenue. So they securitize gas taxes, they securitize sales taxes, they securitize property taxes, which is typically the way most state and local governments secure the debt obligations that they have outstanding is through property taxes. So, yeah, you're right, those taxes are high, and some of it will go to paying off debt obligations for the entities that we rate.

What happens in states that don't have an income tax, typically they securitize other forms of revenue. So they securitize gas taxes, they securitize sales taxes, they securitize property taxes, which is typically the way most state and local governments secure the debt obligations that they have outstanding is through property taxes. So, yeah, you're right, those taxes are high, and some of it will go to paying off debt obligations for the entities that we rate.

You don't feel good about that?

You don't feel good about that?

Yeah, why do I have to pay these high taxes. Everybody's moving to Florida to escape taxes.

Yeah, why do I have to pay these high taxes. Everybody's moving to Florida to escape taxes.

It's true. No one likes paying the taxes exactly.

It's true. No one likes paying the taxes exactly.

Yes, Well, what are some other key things that are, uh that you guys are talking about right now, like on the desk.

Yes, Well, what are some other key things that are, uh that you guys are talking about right now, like on the desk.

Yeah, so I think, you know, we're definitely watching federal policy. We're definitely watching how aspects of affordability cut across all of our sectors.

Yeah, so I think, you know, we're definitely watching federal policy. We're definitely watching how aspects of affordability cut across all of our sectors.

So, you know, I was the housing.

So, you know, I was the housing.

Sector lead before I was the chief analytical officer, and we were watching, you know, the lack of housing inventory and how that was affecting the entities that we rate, like state housing finance agencies and social housing providers, public housing authorities, how they're navigating that particular aspect. But it's playing out everywhere. So water utilities and public power utilities, some of which operate in La County.

Sector lead before I was the chief analytical officer, and we were watching, you know, the lack of housing inventory and how that was affecting the entities that we rate, like state housing finance agencies and social housing providers, public housing authorities, how they're navigating that particular aspect. But it's playing out everywhere. So water utilities and public power utilities, some of which operate in La County.

We've been watching how.

We've been watching how.

They're raising rates to not only pay for deferred maintenance, but also for investment for adaptation into wildfires and other severe weather events.

They're raising rates to not only pay for deferred maintenance, but also for investment for adaptation into wildfires and other severe weather events.

Some have been a little.

Some have been a little.

Bit lax in doing that because it's been expensive to live in America right We've had an inflationary environment, We've had higher costs associated with food. We've had a higher cost associated with utilities. Insurance premiums are going up for property and casualty insurance. So all of those things are weighing on management teams and they're looking at how they can dampen those costs as much as possible.

Bit lax in doing that because it's been expensive to live in America right We've had an inflationary environment, We've had higher costs associated with food. We've had a higher cost associated with utilities. Insurance premiums are going up for property and casualty insurance. So all of those things are weighing on management teams and they're looking at how they can dampen those costs as much as possible.

Our thanks to Norah Woodstruck, chief Municipal Analytics Officer at SMP Global Ratings, and to BAM Mutual for hosting us at their offices. We turn out as some news in the banking sector. This week, we heard that HSBC will wind down its investment banking operations in Europe, the UK, and the Americas. The firm roll instead focus on its operations in Asia and the Middle East.

Our thanks to Norah Woodstruck, chief Municipal Analytics Officer at SMP Global Ratings, and to BAM Mutual for hosting us at their offices. We turn out as some news in the banking sector. This week, we heard that HSBC will wind down its investment banking operations in Europe, the UK, and the Americas. The firm roll instead focus on its operations in Asia and the Middle East.

For more.

For more.

We are dorned by Harry Wilson, Bloomberg Finance reporter, and we asked Harry if this news was actually a surprise.

We are dorned by Harry Wilson, Bloomberg Finance reporter, and we asked Harry if this news was actually a surprise.

It's something that we've probably expected that could happen over the years. The truth is that HSBC has really been nowhere on Wall Street and in the city for some years now. It struggled to even get into the top ten when you look at sort of major league tables like equity underwriting or em and A. So the idea that they're just now kind of giving up on this thing, realizing that they can't compete with the likes of Gold and Sacks, JP Morgan, and that actually they'll just be better off focusing their resources on markets where they do have some scales, such as Middle Eastern Asia. Makes a lot of sense. So I guess short answer, timing wise, surprise. Longer term, no, I don't think it's particularly surprising that they're taking these actions.

It's something that we've probably expected that could happen over the years. The truth is that HSBC has really been nowhere on Wall Street and in the city for some years now. It struggled to even get into the top ten when you look at sort of major league tables like equity underwriting or em and A. So the idea that they're just now kind of giving up on this thing, realizing that they can't compete with the likes of Gold and Sacks, JP Morgan, and that actually they'll just be better off focusing their resources on markets where they do have some scales, such as Middle Eastern Asia. Makes a lot of sense. So I guess short answer, timing wise, surprise. Longer term, no, I don't think it's particularly surprising that they're taking these actions.

So, I mean this kind of goes to me, Harry kind of a bigger question, which is these European banks, can any of them be global investment banks? I mean, twenty years ago, I don't think we would have seen this happen.

So, I mean this kind of goes to me, Harry kind of a bigger question, which is these European banks, can any of them be global investment banks? I mean, twenty years ago, I don't think we would have seen this happen.

I think it's very difficult. European banks have faced these type of problems going decades now. Many have tried to make some kind of impact on Wall Street, and many of them have come back having spent hundreds of millions and got really nothing for their investment. The simple fact is that Wall Street is something of a lockout by the US major firms. And even when you get the likes to say Barklings, which was able to buy off the PEG the Leman operations in two thousand and eight even they've struggled to make much of it. And I guess the issue is that if even a bank like HSBC, the largest bank in Europe, can't really make this thing work, then it makes a question about how anyone else, without their type of scale, without their type of profitability, could expect to make much of an inroad.

I think it's very difficult. European banks have faced these type of problems going decades now. Many have tried to make some kind of impact on Wall Street, and many of them have come back having spent hundreds of millions and got really nothing for their investment. The simple fact is that Wall Street is something of a lockout by the US major firms. And even when you get the likes to say Barklings, which was able to buy off the PEG the Leman operations in two thousand and eight even they've struggled to make much of it. And I guess the issue is that if even a bank like HSBC, the largest bank in Europe, can't really make this thing work, then it makes a question about how anyone else, without their type of scale, without their type of profitability, could expect to make much of an inroad.

What's the opportunity, said, if you flip it to for Asia and Middle East for HSBC.

What's the opportunity, said, if you flip it to for Asia and Middle East for HSBC.

Obviously these are fast growing regions, so you've got a lot more economic activity, a lot of growth coming in Asia. You've got a lot of money in the Middle East. You know, every day we see headlines about a Middle East hedge fund being involved in some deal or another. So these are good places to be a big bank. The question really is is if you don't have the operations, say on Wall Street in the City of London, continental Europe, how meaningful can you be to those types of clients in Asia and the Middle East when they want to do stuff around the world. You know, it's all very well obviously saying you know, we're very big in Middle East and Asian will service you there. But when it comes to being able to offer some kind of global perspective maybe being somewhat lacking there, and I think that's going to be the area that's going to be interesting to watch here is whether HSBC, if it doesn't have the stuff around the world and is purely focused on Asian and Middle East, whether that is still a good proposition to its clients in those regions that maybe want a more worldwide global network offering.

Obviously these are fast growing regions, so you've got a lot more economic activity, a lot of growth coming in Asia. You've got a lot of money in the Middle East. You know, every day we see headlines about a Middle East hedge fund being involved in some deal or another. So these are good places to be a big bank. The question really is is if you don't have the operations, say on Wall Street in the City of London, continental Europe, how meaningful can you be to those types of clients in Asia and the Middle East when they want to do stuff around the world. You know, it's all very well obviously saying you know, we're very big in Middle East and Asian will service you there. But when it comes to being able to offer some kind of global perspective maybe being somewhat lacking there, and I think that's going to be the area that's going to be interesting to watch here is whether HSBC, if it doesn't have the stuff around the world and is purely focused on Asian and Middle East, whether that is still a good proposition to its clients in those regions that maybe want a more worldwide global network offering.

All right, thanks to Harry Wilson, Bloomberg Finance Reporter. That's this week's edition of Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies in one hundred and thirty industries. And remember you can access Bloomberg Intelligence through Bigo. I'm a terminal, I'm Alex Steel.

All right, thanks to Harry Wilson, Bloomberg Finance Reporter. That's this week's edition of Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies in one hundred and thirty industries. And remember you can access Bloomberg Intelligence through Bigo. I'm a terminal, I'm Alex Steel.

This is a Bloomberg Intelligence podcast available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal

This is a Bloomberg Intelligence podcast available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal