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At Marsh, we believe that perspective powers progress. That's why our individual businesses have come together as one company, a new Marsh built to solve the world's most complex challenges and uncover new opportunities for our clients. We're better positioned than ever to help your business navigate obstacles and unlock potential across risk, reinsurance and capital, people and investments, and management consulting. Learn more@visitmarsh.com podcast did you know?
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Tide has been upgraded to provide an even better clean in cold water. Tide is specifically designed to fight any stain you throw at it, even in cold butter. Yep. Chocolate ice cream?
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Sure thing.
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Just remember, if it's gotta be clean.
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It'S gotta be tied.
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There we go.
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Get the Internet you need at the price you want. Verizon Business Starting price For LTE Business Internet 25 Mbps Unlimited Data Plan with select Verizon Business Smartphone Plan Savings Terms app this is Bloomberg Business Week Daily reporting from the magazine that helps global.
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Leaders stay ahead with insight on the.
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People, companies and trends shaping today's complex economy.
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Plus global business, finance and tech news as it happens.
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Bloomberg Business Week Daily with Carol Massar and Tim Stenovec on Bloomberg Radio.
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Hi everyone. Welcome to the weekend edition of Bloomberg Business Week. This past week, well, we saw the first FOMC meeting and decision of the year. And after three consecutive meetings where Fed policymakers lowered interest rates, well, those officials left rates unchanged, as expected, with nods to stabilization in the jobless rate and pointing to improvements in the US Economy.
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Federal Reserve Chair Jerome Powell saying downside risks to the economy have diminished and sidestepping January's controversies.
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We're getting through the distortions in the.
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Data from the shutdown.
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However big they were in November, they're smaller in December.
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So we're getting to a place where they're no longer material. We got a certain view of the economy from the chair of the Federal Reserve and certainly from that press conference. Also, we checked in with Fastenal CEO Dan Florness to better understand a different part of the economy or maybe a more concentrated sector, the manufacturing sector, and also more broadly, today's environment.
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Like AI, he has a great Story.
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D
Cool.
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It was one of our favorite moments in that conversation. There were a lot actually, and that's.
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Really where we start today. A big week for big tech. We got earnings from four of the Mag 7 metal platforms, stopping projections for quarterly revenue. Also giving a strong forecast for the current period, boosted by a robust online advertising business that's making it possible for the company to invest in AI at record levels this year.
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And.
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And Tesla revealed plans to invest about $2 billion into XAI, giving Elon Musk's artificial intelligence startup a cash infusion despite a shareholder vote last year that failed to win approval.
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And then there's Microsoft. Investors were disappointed after the company's spending surged to a record high and cloud sales growth slowed. That worried investors that it could take longer than expected for the company's AI investments to pay off.
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We caught up on how all these companies are faring when it comes to the AI play. We did that with Angelo Zeno, he's Senior VP and Equity Analys analyst over at CFR Research.
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At this point in time, after these numbers, I would actually be, I'd be more inclined to tell investors to buy Microsoft on this dip, on this 12% or so pullback. I mean the stock is now trading about 2021 times our calendar 27 estimate and actually is slightly or hair cheaper than our outlook for, for Meta. And when you kind of look at the, at the two companies, I mean, yeah, I mean you can make a case that matter is growing much faster and in some respects it's actually attributed to the decline, I think in Microsoft when you got to 30% growth and on the same day, you know, you've got to compete against that. I mean, you're just not going to look as good. But that being said, I mean, I think the valuation is very compelling here. I think the business model remains, you know, just as strong as it's ever been. But you know, you clearly have some concerns that have arisen, you know, post results primarily due to some of the concentration risk tied to open Air. And the other thing, maybe a hair shy in terms of the Azure growth number.
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D
Why isn't that concerning to you, Angelo?
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To be honest with you, the Azure number I thought was, was pretty darn good. It actually beat our expectation, didn't beat the streets. But, but that being said, I mean the Azure numbers continue to grow at a very good pace and I think, you know, if there was a slight miss to the expectation, it is due to the fact that they are partly supply constrained just like others across the industry are. And I think, you know, in the same respect, this is a company that also is looking to emphasize some of their productivity tools out there. They're still putting a lot of their capex spend on those type of offerings because in their belief, you know, there's higher revenue per token tied to that. And that is probably a longer term story and it is going to impact the fact that, hey listen, they create could have probably grown north of 40% if they had moved the, you know, that GPU demand to that side of things. The side.
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D
So let's hit on the other thing that you mentioned, the concentration risk. Nvidia, Microsoft and Amazon in discussions to invest as much as $60 billion in OpenAI as part of a new funding round. This according to the information, if concentration risk is a concern, then why is Microsoft putting more money into OpenAI?
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E
Yeah, it's a great question and I think it's just because those are some of the companies you mentioned are the ones that probably have most at stake in terms of, you know, Open Air succeeding here long term.
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Right.
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And if you look at Open Air today, clearly they need the money. They're not going to be able to get to where they need to be without receiving that funding. And at the very least they need to get this $100 billion funding, get themselves higher revenue and then potentially look at, you know, an IPO in the future to, you know, get additional funds. But at this point in time, I think it's one of those situations where they are heavily committed to open AI and they need Open Air to succeed.
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Going back to that number, the startup accounted OpenAI, that is 45% of Microsoft's backlog which stood at 625 billion at the end of December. So it is such an important part of AI for Microsoft.
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It's extremely important. I'd also say this though, you know, the company does have no north of $300 billion in bookings not tied to Open Air. So you kind of look at the next two to three years. You know, they do have that visibility in terms of being able to meet higher than, you know, that, that capacity additions that they plan to make here over the next couple of years. Not to mention, we do think that concentration risk does come down in the future as they continue to broaden their customer base as well. So yeah, I mean it's, it's a concern, it is a risk to be mindful of. But nonetheless, I think if there's anyone that can continue to navigate and prosper in this environment, it's going to be Microsoft, not to mention this is nowhere near, you know, an Oracle type of situation at the same time. Right. They've got the free cash flow potential to do what they need to do in any type of landscape.
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I know you don't cover Tesla, so don't get mad at me, but I do, I do want to ask you that. You know, more and more we have people come on and say it's not a car company, it's a technology company. And among the headlines, headlines that were highlighted on their earnings update is the investment, Tesla's investment in Elon's X AI. Is this though a company that you are starting to think about, you know, coming on your radar when it comes to tech and the AI spend and the build out and the AI impact?
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E
Absolutely. I think it's, you know, when you kind of look at the enterprise space, I mean, Musk is probably the biggest spender of AI in terms of GPU servers. So, you know, he's an extremely Tesla, the company X, you know, the company, that entire ecosystem that, that Musk owns, extremely important to the evolution of AI and what's going to transpire here over the next couple of years. I mean, you listen to Jensen Huang and you kind of look at where, you know that that next massive inflection is going to come from in the physical AI world. And he continues to talk about, you know, autonomous vehicles and clearly if there's anyone that's going to lead that path, it is going to be Elon Musk. So it's on our radar and it's something that I think is really critical to this broader AI story.
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Our thanks to Angelo Zeno, Senior VP and equity analyst at CFRA Research. And Apple also posted earnings Thursday, trouncing estimates for the first quarter. One of the key parts of the tech giant's beat. IPhone sales for the quarter hit more than $85 billion on Apple.
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Bloomberg's managing editor for global consumer Tech, we're talking about Mark Gurman, you know, breaks so many exclusives when it comes to Apple. He is our go to on this company. He helped make sense of the latest quarterly update.
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This is a massive, massive, massive quarter. This is a home run. Their greatest quarter ever by orders of magnitude. It's a gigantic beat on overall revenue. China is back. You have a big beat on the iPhone in particular. $85 billion quarter is just insane. The installed base, two and a half billion. The numbers are just beyond excellent. We could ignore the fact they missed on wearables, home and accessories. We can ignore the fact they missed On Mac we could ignore the fact that they barely, you know, crossed expectations on services. I guess none of that matters when the iPhone is selling so well. Yeah, but still there's the big existential question of what's next. It's an important question because of AI. And Apple absolutely needs to figure out its AI strategy. There needs to be an AI reckoning of some sort there. But they just bought themselves a very long time with this just insanely great quarter.
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D
So let's talk about a couple of the areas that, that you highlighted there. One is China and another one is the sort of the concerns that people had about memory chips in this quarter and the rising prices of memory chips. How was Apple able to navigate this so it didn't hit its margins like people thought it would?
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They buy components and memory components quarters and months in advance, sometimes years in advance. They have these deals struck. So they're working off of, of numbers and pricing and materials here that really give them extensive pricing power over competitors. So. But seems like they're fine.
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Mark, I love this. I mean, I'm looking at our live blog, so you must have like kicked this out before you jumped on air with us. But you did mention that the significant things on the call, you've already talked about the AI strategy succession. You've kind of said maybe that's off the table for now because this was such a blowout quarter. You talk about the long term viability of the business if it doesn't get its AI act together. It's hard to even think about that when you see the numbers here and just what a big company this is and how significant it is. I feel like in so many different people's lives, like I have an Apple household. I think Tim has an Apple household. Is that really the long term viability if they don't get AI together?
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D
They call me Tim Apple in fact.
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They do, yes.
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I said long term. Right. And I'm talking really long, the really long term here. Right. Like at some point there is going to be a need to fulfill these AI desires and you know, they're going to have to figure that out.
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Well, Anuragran of our BI team, he talked with Tim and I just moments ago and he talked about, you know, how they're working with Google when it comes to AI relying on them right now for their models and so they're not doing the big AI spend. That makes sense for now too. So do you agree that that's kind of a smart strategy now and kind of waiting it out a little bit but at some point, they've got to kind of do their own thing.
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It's not that they're waiting it out. It's that they have no choice. They have nothing internal. So it's not that they're waiting it out, it's that they need to do it. And so they're partnering with the best partner they can that's going to offer them the best pricing power, which for now, is Google. They initially wanted to work with Anthropic, but from a pricing standpoint, that didn't work out. They couldn't work with OpenAI because they're, you know, hardcore competitors at this point. So Google is all who was left. And obviously the judge didn't break up the search deal there. So it made sense and aligned pretty nicely for them.
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Okay, do we know yet how Apple was able to beat expectations in China once again? For the first quarter? The most recent quarter, greater China revenue came in at $25.53 billion. 21.82 was the estimate. You said it minutes ago. It is back in China. You're holding up an iPhone right now. That's what they did.
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E
I'm answering your question. I'm answering your question.
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D
It was the iPhone 7 color orange. Oh, it's the color orange.
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E
It's that easy as the pro Max? No, it's design. People buy the new designs. This is the first new design in half a decade. It got it done. That's why you do new designs, because you're trying to bring in new customers for upgrades. And that's the way to do it.
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Our thanks to Mark Gurman, Bloomberg News managing editor for Global Consumer Tech. For more on the earnings call and all things Apple, head to bloomberg.com or the Bloomberg terminal.
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Coming up on Bloomberg Business Week, we'll have more on earnings, including the thoughts from one analyst weighing in not just on airlines, but all the results that we got from defense companies, too.
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It's a sector that's been on a tear in the past year. That's next.
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This is Bloomberg.
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Business. Challenges and opportunities are never one dimensional. At Marsh, we believe that to thrive, you need perspective. That's why our individual businesses have come together as one company. A newmarsh where each layer of our organization works even more closely together to provide you with a stronger, more panoramic perspective. We're now one firm solving the world's most complex challenges and unlocking opportunities for you across risk, reinsurance and capital, people and investments and management consulting. As business continues to evolve, Marsh will always be here to help you overcome new challenges, answer new questions, and take advantage of new opportunities. We're better positioned than ever to provide the perspective you need to fuel progress forward. See how@visitmarsh.com podcast support for the show.
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Across the United States, Airlines spent most of the week trying to get passengers back on track after cutting more than 19,000 flights due to that major winter storm. It pelted the east coast and coated parts of the south and Mid Atlantic regions with ice. We're still digging out of this thing here in New York.
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Yeah, and this weekend we're going to.
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For a while, we are.
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And this weekend there were lots of we'll see how this other storm we'll see.
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We'll see. We'll see.
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Northeastern airports, though I should say by that storm one week ago, were hit especially hard. And in their earnings report, American Airlines warning the weather could clip revenue in the range of 150 million to $200 million.
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We spoke to Sheila Kayalu, managing director and equity research over at Jefferies about what she's seeing not just in airlines, more broadly, in the red hot aerospace and defense industries too.
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A
Let's just start with airlines and then we want to move into defense because you cover that really closely as well. It does feel like they're all finding their way back after the storm. In terms of the impact. Is it still a case of they're still trying to assess. How do you, as someone who covers some of these names, kind of factor that in?
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B
Yeah, in terms of airlines, we're looking for revenue growth. We've seen the same trend across American that we saw at United and Delta. Corporate was up 12%. Corporate momentum continues. I'm taking a very long flight this weekend. And then main cabin weakness, but it's getting a little bit better. And it's all about cost control. That's why I think United went up the most on earnings as they, they really beat out on costs when American Airlines margins came in 100bps below our estimate. So I think the most polarizing stock is going to be Southwest because they have some lofty targets. The stock's at $40 today. Some people think it's going to 30, some people think it's going to 80. It's all about they're adding extra legroom seats. And is the strategy going to work?
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D
But that's a huge shift for Southwest. I mean, they're essentially moving away from their DNA, what they're known for and the culture that they're known for. And that's alienated some people already.
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B
Yeah, it depends. So the average Southwest fair is about $109. So if you add an option for extra legroom or refundable or seating, if you add $50 to that cost of that airfare. So 159, that's a 50% increase. Almost. Does the passenger back away? I'm not sure. But then again, it's only $159. So how do we think about that and what adoption do we assume we're at? About 5% adoption in 26. They have a bunch of other benefits as well, baggage fees and cost optimization. So that's driving their EPS to $3, essentially. EBIT tripling off of, of a very low 25 base. So it's their first go at it and we'll see how it takes off.
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A
You have a $45 price target, so you're not at the 80 and you're not at the 30. So maybe a little bit higher from where we are.
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B
You know, I would prefer United where they've, you know, if you think about United, they're going to be accounting for 44% of the Y of the new premium seats through 2028. So they're going to be accounting for more than any other airline in the U.S. americans after that in Southwest because of their extra legroom. I prefer to bet on that corporate customer paying thousand plus $100 to achieve that additional corporate fare. And that higher margin where United is adding its seats, then Southwest adding on the, you know, I think both are given the multiples that they're currently trading at United is more appealing to me.
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D
Let's talk some defense and then we'll talk some Boeing, too. I want to look at shares of RTX. They're higher right now by about 3.4% profit topped Wall street estimates. A sign of momentum that the company awaits a potentially huge jump in US Military spending. That's kind of where I want to start that what we've heard from President Trump in the last few weeks, not just with the idea of a $1.5 trillion defense package, but also calling on some of these companies to do a better job, pay their executives less, and also build stuff for the US government more quickly. What are these CEOs to do?
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B
There's a lot going on in defense, and that's why I was saying it's an exciting sector to cover because this is the first time that the five primes might no longer exist as five primes by the end of the Trump administration, which is our our view. We think that there's going to be similar to what LHX announced 10 days ago. There's going to be more deconsolidation happening among among the primes. Their budget is going up by 500 billion from a trillion dollars. We don't know the time period of that spending. We don't know how much will be added to actual equipment and R&D versus military operations. But they're seeing an increase, whether it's to fund defense tech names like Firefly, voyager, the recent IPOs we've seen in the space, or the traditional primes or suppliers like Aero Environment. Kratos are up 100% on the year already and we're 27 days in. So it's really interesting to see what happens in defense. But there's a lot of shakeups that are, I think, are going to play out.
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E
So.
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B
So it's about seeing who has the best position positioned portfolio and who to Play from here.
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A
I was surprised. Like, I know when you walked in, we started talking and I mean, aerospace, defense, just the S and P broad index, up about 9% year to date, up about 46% last year. Is it just because defense spending all around the globe is just happening and, and everybody's amping it up?
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B
It's. Yeah, it's as simple as tremendous growth internationally, 20% plus NATO budgets, Japan, Korea. We're seeing countries like Serbia put in orders that never used to put in billion dollar orders for equipment to companies like Elbit and Israel, coupled with the defense budget going from a trillion to 1.5 trillion, makes defense very interesting. And the administration has been very supportive of defense tech. Emerging technology companies, companies that had stagnant revenues for the last decade, are seeing 30, 40% growth.
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A
But you know, as Tim mentioned, you know, when the President talks about an industry, it can be good or bad. So is it good that they're on his radar, but when he's not.
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B
$5 million, he did back off of the. He didn't quantify in the executive order, the pay and I.
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D
But he mentioned it.
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B
He mentioned it, yes.
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A
It's a headline that caught our attention.
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D
And $5 million, it sounds like a lot of money, but not for a CEO who's paid over $20 million.
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B
Right, the executive. Executive pay. The average executive pay, I would assume in any sector is over 20 million. And so the caliber of folks you would get into defense would be the opposite of what the administration's trying to achieve.
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A
So what do you hear from defense companies about getting some attention like that from the President? Do they, do they kind of brush it off a little bit like we're talking with them?
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B
Like, I think one interesting trend we've seen from the reports, whether it was Northrop or Raytheon today, is the lack of buybacks, because that's what the administration asked for, a focus on additional capex. Raytheon mentioned that, Northrop mentioned that, Boeing mentioned that. So across the board, everyone's like, sure, we're investing, we're going to get you supplies on time. That's our job. And it helps funnel the growth.
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A
The Northrop CEO saying Northrop is balancing the need for performance with affordability and speed to market to meet the U.S. defense Department's focus on speedy development.
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B
Yes. And I think Kathy Warden, the CEO of Northrop, said this was the best spending environment she's ever seen in her career. So most of these executives are very bullish.
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D
Do the upstarts in defense tech pose a threat to the incumbents. And I'm thinking of, you know, an Andoril that is not yet. And I say not yet because obviously this company, I'm guessing will IPO at some point soon. Do they, do they compete with these incumbents?
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B
Yes, clearly they're competing and they're collaborating. They're working together both internationally and domestically. The Primes are trying to work with, you know, Northrop has a partnership with Kratos on cci. It's a autonomous vehicle essentially. So we're seeing a lot more collaboration, but they're also trying to take share. But the budget is growing overall and that's the bottom line, although we're not really seeing it in 26. Northrop's guidance is 5% growth. They talk about an acceleration from there in 27, 28. Same thing with Raytheon. It was modest growth in defense. It didn't really pop. Yes, it grew in the second half versus the first half and we'll see how those trends continue.
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A
I feel like with all of the geopolitical tensions and the wars that we seen around the world, that everybody comes back to the US military might and the defense companies here in the United States. What is the global picture? Where's the competition? Is, is there not much global competition, Sheila, when it comes to the US defense companies?
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B
So I think it's focused on maybe a few things. First is missiles and munitions readiness. We need to have that available. And that's why we're seeing companies like Lockheed increase PAC3 production from 600 missiles a year.
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A
What's PAC3 production?
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B
It's a missile. Pack 3 is the name of the missile going from 600 units a year to 2000. That is significant to say the least. That's 8 billion of additional revenues to Lockheed over seven years. If they could ramp to those levels. The backlog's 20 years for a missile like that. We're seeing that across the board. LHX 10 days ago or 2 weeks ago now announced that they are seeing a government investment within their solid rocket motor business that powers missiles. They're going to open up 60 factories next year. LHX currently has 250 factories. So that's the magnitude of investment we're seeing from the government. So focus on missiles and munitions. And second, I think it goes back to old school warfare. Everybody thinks helicopters are over and F35 is a bad program. But if we think about Venezuela, if we think about Iran, what's the kind of equipment we're using? So, you know, it's not necessarily rebuilding an entire fleet for the Navy. But it's doing things that we could use pretty quickly.
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D
Just in the last 90 seconds, I want to hit Boeing with you. Shares are down today by about 1.8%. The company did report this morning a second straight quarter of generating cash, 57% bump in sales during the final three months of the year. Shares down though. Is it because of accounting charges for the KC46 tanker program? Is that it?
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B
No, everybody just assumes that's going to happen every quarter.
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D
So we're, we're, we're all good years down after.
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B
So the shares opened down. The call at 10:30 got it up to it reversed about four points and then they're down again. We're a believer in Boeing, their underwrite, their free cash flow was a loss of 2 billion 25. They're talking about positive 2 billion at the midpoint in 26 normalized for one time items. They're saying their free cash flow is high single digits. So say 8 billion. They're reaffirming their 10 billion target and then they're saying they could go above that. So you know, 10:15, it's giving long only as a reason not to dismiss the stock. If this company could actually earn 10 billion of free cash flow then it's quite compelling at its current valuation. So we're seeing a lot of fluctuations. Are they talking back 27, 28? No, I think that you're going to see 2 billion in 26 and an improvement in 27 and 28.
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A
So Boeing, let me just say you've got a 290 price target. It's at 244. You feel good about that?
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B
We are supportive of Boeing. We think there's a few positive catalysts. I think President Trump might be headed to China in April. We'll see if Boeing heads there. We haven't seen a China order since. I can't even recall. Maybe it was 2019, maybe earlier. So I think Boeing works from here. You know, depressed prices for Max's maybe 50% below what they historically sell at today.
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D
That was Sheila Kialu, managing director for equity research at Jefferies.
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A
Coming up on Bloomberg Business Week. Yes indeed we are a services led economy in the United States and yet with the White House focusing on bringing manufacturing back to the United States, getting a read on that. And the manufacturing economy, super important.
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D
And we get that from none other than Dan Florness, the CEO of Fastenal. Plus a story on AI, one of Carol's favorites, I think it's fair to say.
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E
Yeah.
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D
He joins us next. This is Bloomberg.
- [28:33]
C
Support for the show comes from public on public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index. With AI it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year. You can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete disclosures available@public.com disclosures these days it seems like AI agents are just about everywhere. You turn every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risk into opportunity. Secure every agent, secure any agent. Okta secures AI So have you heard.
- [30:14]
D
The story about the prescription plan? With savings automatically built in, it's where a family of any size can feel confident the cost of their medication won't hold them back. Go to CMK Co Stories to learn how CVS Caremark helps members save just by being members. That's CMK Co Stories. This is Bloomberg Business Week with Carol.
- [30:41]
C
Massar and Tim Stanwak on Bloomberg Radio.
- [30:45]
A
So something we've already touched upon and this is this letter from 60 CEOs of Minnesota based companies. More than 60, I should say, have called for an immediate de escalation of tensions between state, local and federal authorities as the state is reeling from another fatal shooting of an American by immigration agents. The chief executive officers of companies. They include Target, Best Buy, Land O', Lakes, Cargill, General Mills, UnitedHealth Group as well as professional sports teams including the Minnesota Vikings. Among the signatories of the letter that was shared yesterday Sunday by The Minnesota Chamber of Commerce, we're laying that out for those who are watching on streaming and tv. Just to get to the crux of it though, the open letter says we are calling for an immediate de escalation of tensions and for state, local and federal officials to work together to find real solutions.
- [31:37]
D
Our next guest is head of a company in the great state of Minnesota. We're talking about Fastenal recently reported earnings, the stock selling off on the day of the report but rallying the day after the most in nine months. That trade reaction had us scratching our heads. So we're grateful, Carol, to have back with us to talk about the release of the outlook. The CEO of the close to $50 billion market cap company Fastenal, Dan Florence is is back with us.
- [32:00]
A
Yeah. So delighted. Let's get to it. Dan, good to have you here. Happy New Year. We do love talking with you. We feel like we get a great read on the US Economy, the manufacturing world. You've seen a lot in your career. We want to get to all of this. But I really do feel like we'd be remiss to not ask you about what's going on in your home state. And I feel like those who are listening might be curious if you were asked to sign this letter of CEOs who want a de escalation of what's happening in Minneapolis specifically. So can you were you aware that this letter was happening or were you.
- [32:35]
F
Asked to sign it was first off Happy New Year and thanks for allowing me to participate today. I was not aware of it. We're outstate Minnesota. We're about two and a half hours from the Minneapolis St. Paul market. And so it's not uncommon. It's a, it's a pretty tight knit group up in the Twin Cities and was not aware of it going out with that Sid was not surprised by going out and it seemed to be pretty common sense of hey, that's dialed down the heat.
- [33:04]
A
So would you have signed it though if asked?
- [33:07]
F
Yeah, I would have signed that.
- [33:09]
A
What do you what's we talk so much about leadership at this time. And I am curious what you see as the responsibility of leaders in the United States when we see situations happening where it feels like and again, I don't want to get political, I don't want to take sides. But it does feel like Americans are being what some would say is targeted unfairly.
- [33:33]
F
Yeah. You know, I think as a leader one of our, one of our tasks are to create some calm in the air. You know, I think back A few years ago when Covid was going on, it seemed like everybody, every day turned everything into a political thing. And sometimes it's a case of, you know, if you're around a bunch of people that, that are high at risk. In the case of COVID put a mask on. If you're, if you're not and you don't want to be there, then go someplace else. You know, same thing here. Let's try to dial the heat down and focus on what we're trying to accomplish, not how we can see who can be the most boisterous in the market of throwing ideas out. And that's on both sides of the, of the fence.
- [34:18]
D
Dan, one thing that we're trying to figure out is getting a good read on the economy. And you guys have such a great read on it given that you touch so many sectors. I mean, if you're using nuts, bolts, screws, anchors, rivets, any kind of fastener, industrial, janitorial, safety supplies, you guys do it on earnings. You mentioned the broader market conditions remained mixed. What exactly did you mean by that when you say mixed, what's the good, what's the bad?
- [34:44]
F
Well, mixed from the standpoint, we focus a lot on the is the purchasing managers index published by ISM and that's been, you know, sub 50 for 36 of the last 38 months. So from the standpoint of the economy is not given us any lift. We are getting good traction in the marketplace and we, we finished out the last half of 2025 with double digit growth. That's really an exercise of taking market share more than the wind is to our backs.
- [35:14]
A
And I know we've talked about this too, Dan, with you about being in a prolonged downturn in the industrial economy. Any green shoots that you are seeing or signs of an inflection and if so, I'm just curious what markets might you be optimistic and which are maybe running weaker than you anticipated and maybe will continue to this year?
- [35:33]
F
Yeah, it's a little bit of an anecdotal answer, so I apologize for that. We're seeing in some of the published data some industrial production numbers improving late in the year. We aren't seeing that directly in our business, but for us, November, December is a seasonally weak period, so that doesn't surprise me that we won't see it. So don't know if there's some green shoots there. I can tell you this from my travel. If it's a business that's linked to certain industries and data center is an example from a Recent trip I had on the east coast where I was visiting a mechanical contractor and their business was on fire and 70% of their activity was around data centers.
- [36:13]
E
Hmm.
- [36:15]
D
So on. So go ahead.
- [36:17]
A
So that's the good part, right? And that, that's the good part. That story we keep hearing about the AI build out, the data center build out, you saw it firsthand.
- [36:25]
F
It's real, it's real, it's real. In fact I had a, I spend a big chunk of my time having conversations with our district leaders. We have about 240 district managers. They each run about a 35 million dollar business. You add them all up, that's an 8 billion dollar fastenal. So I had a conversation with our team in Atlanta this morning, one of our district managers and most of his discussion was about business pickup. He's seeing in his market because of data centers. Now Atlanta is unique in that it's one of a handful that are really being impacted by that buildup.
- [37:00]
D
What is the pricing power Dan, that the company has right now? Because historically during periods of inflation you've been able to be pretty aggressive with, with price increases. I think people would argue you weren't as aggressive as you could have been in 2025. What's the barrier to pushing price more aggressively?
- [37:18]
F
Well, you know, the one barrier is the size of the customer, the nature of the products, how much of it is production centered versus maintenance centered. And in, because when it's production centered business you have customers buying a very large volume of narrow band of SKUs and their price sensitivity is different than if it's MRO and they're buying, you know, $100 of this and $100 of that.
- [37:43]
A
You know one of the things I want to ask you too, there was a story on my read in this morning Dan, in terms of Volkswagen saying that they're going to had plans for a possible Audi factory in the United States. They're not progressing due to President Donald Trump's tariffs and unsuccessful talks for local incentives. So we have certainly seen an administration that talks about all the investment money coming into the US And I think we here at Bloomberg continue to try and figure out how much of this is actually going to play out. You can say you're going to invest and then there's the reality of actually building facilities. First of all, tariffs. And I know we've talked about this with you in the past, so forgive me if I'm repeating, but you're thinking about outsourcing. How have tariffs change that, especially when it comes to Fasteners, I think, primarily sourced from China and Asia. So I'm just curious how any of it's been shifting for you.
- [38:30]
F
Yeah, so you are absolutely correct. Most of the fasteners in this country, in North America in general, come from northern Asia, China primarily, obviously, huge impacts. And for us, what it's meant is over. For about the last six years, seven years, we've been actively expanding our ability to import fasteners because there's still not a lot of domestic production. And so when I think back to 2018, our primary sourcing entity was based in Shanghai, with a secondary location in southern Taiwan. Today, we have personnel in Bangkok, we have personnel in India. And that's where all of our growth and movement of sourcing personnel has occurred over the last seven, eight years to just broaden our ability to be a little more agile and where you source from, depending on the geography it's going into.
- [39:28]
D
So that's on the sourcing side.
- [39:29]
G
But.
- [39:29]
D
But what about on your customer side and about customers moving manufacturing back to the U.S. are you seeing that happen? Are you hearing discussions of that?
- [39:40]
F
Yeah, I guess, you know, anecdotally, yes. I can't say that we've seen tremendous influx. What I would say is I hear less about stuff leaving than maybe I would have, you know, 10 years ago or five years ago. And that in itself is a win from the standpoint of production. But, you know, a lot of it is folks are getting closer to where the end customer is for a lot of our customers. And so when I see customers expanding production facilities in North America, and I'll say more broadly than North America rather than just the United States, it's usually to service more efficiently the local market, which makes sense.
- [40:27]
A
Which we've seen that trend happening, I feel like, over time. Hey, Dan, you mentioned about maybe less companies leaving the U.S. speaking of leaving, you are stepping down as CEO come July. You've been CEO since 2016. You were CFO before that, going back to 2002. You've been there a long time. And I know last time you were on. I asked you a question about this cycle, and I was not very kind. I got yelled at by my team because I think I gave you 20 seconds, but I wanted. We do get yelled at.
- [40:58]
D
You get 25 seconds now.
- [40:59]
A
No, no, no. You've got almost two. Two minutes. How do you describe this cycle?
- [41:03]
B
Because it's.
- [41:03]
E
It.
- [41:04]
A
It feels unusual.
- [41:06]
F
Well, it's unusual in that, you know, you hear about everything. Whereas in years past, there was so much of this political stuff. That went on, but most of it, if you weren't in the midst of it, you were oblivious to. And you just, you just, you, you went around your, about your life. Now everybody hears about everything when it happens. So that's just a lot more noise. On the flip side, what's really different is I mentioned on that conversation with the team in Atlanta this morning. We were talking about data centers and one of the people on the call, he leads our business in the southern U.S. he said, hey Dan, I'm going to flip you something. And he punched in a bunch of questions and he came back with a 29 page report on the data center industry in the United States. And so I read through a bunch of it. It's actually pretty accurate and pretty good information. I mean, there's stuff in there I can pick apart, but it's pretty good.
- [42:05]
A
Yeah, I know. Well, you know. Okay.
- [42:08]
D
Now Dan still had to do the reading though. It didn't read the report for him.
- [42:11]
F
So I probably would have, but I'm old school, I guess.
- [42:15]
A
Is that just quickly? I know this is truly like 30 seconds. Is that the most transparent, transformative change you think we'll see over the next decade is just the continued impact of AI and things like ChatGPT and, and everything else connected. Just, just your quick thought on that.
- [42:29]
E
Yeah.
- [42:29]
F
Because I mean, when I think of our business, we're selling.
- [42:33]
A
Yeah.
- [42:33]
F
Tens of thousands of different parts to customers every day and the ability to improve the visibility for folks sourcing all that stuff.
- [42:41]
A
Got it.
- [42:42]
F
Is an incredible efficiency tool.
- [42:44]
D
That's Daniel Flornes, CEO of Fastenal.
- [42:47]
A
And that does it for the first hour of Bloomberg Businessweek Daily. Still ahead, consumers are shifting away from credit cards and towards debt or buy now, pay later programs. So what does that say about the health of the consumer? What kind of activity are we seeing around that?
- [43:01]
D
Plus a look back to some of the biggest stories that came out of the World Economic Forum in Davos, including one world leader's choice in eyewear. It was the look that everybody was talking about. So I promise this is a fun one.
- [43:14]
G
Okay.
- [43:14]
D
We don't usually go there.
- [43:16]
E
No.
- [43:16]
D
But this is a really fun one.
- [43:17]
A
You're going to love it. I'm just going to say that. All right. You're listening to Bloomberg Businessweek. I'm Carol Massar.
- [43:22]
D
And I'm Tim Stanweck. Stay with us. Today's top stories and global business headlines coming up. Right now.
- [43:31]
C
Support for the show comes from public on public. You can build a multi asset portfolio of stocks bonds, options, crypto and now Generated Assets which allow you to turn any idea into an investable index with AI it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete disclosures available@public.com disclosures these days it seems like AI agents are just about everywhere you turn every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risk into operation opportunity. Secure every agent. Secure any agent. Okta secures AI so have you heard.
- [45:13]
D
The story about the prescription plan? With savings automatically built in, it's where a family of any size can feel confident the cost of their medication won't hold them back. Go to CMK Co Stories to learn how CVS Caremark helps members save just by being members. That's CMK Co Stories. This is Bloomberg Business Insight from the reporters and editors that bring you America's.
- [45:43]
C
Most trusted business magazine.
- [45:45]
D
Plus global business, finance and tech news as it happens. Bloomberg Business Week with Carol Massar and.
- [45:52]
C
Tim Stenovec on Bloomberg Radio.
- [45:55]
A
Plenty ahead in our second hour of the week weekend edition of Bloomberg businessweek, including a read on the consumer from the CEO of the Buy Now, Pay later company afterpay.
- [46:04]
D
Plus more from the recent World Economic Forum's annual meeting in Davos, the discussions on creating affordable housing and tackling issues in the global supply chain, and the.
- [46:13]
A
Sunglasses at Davos seen around the world courtesy of one European leader. All of that to come. First up though, as CEOs are trying to navigate geopolitical tensions around the Globe. We wanted to get a gut check on the C suite and what the top business leaders are thinking. Someone we always turn to for that is Samadhis Santanas. He is chairman and chief executive officer of Synergy Maritime Holdings. He's also founder, chairman and CEO of United Maritime Corporation.
- [46:40]
D
The two firms together, they're micro caps, they're traded in the U.S. together, they have a total of 25 ships. They carry grains, wheat, corn, steel, copper, oil and more all over the world. We spoke to you last over the summer in July, and that was a time of geopolitical tension, too, but it was different type of geopolitical tension. Are things more or less stable in your view than they were then?
- [47:02]
H
Well, certainly they're less stable. I mean, you have so many things going on around the world. You have disruptions, you have, like potential wars, all these things happening. And you have all this new military drive that people need to start building things again, which is not just for real estate, but you need it for strategic reasons, defense and all that. So, you know, shipping and raw materials of steel, bauxite, iron ore and coal, they become more and more relevant all the time.
- [47:32]
A
So tell us what you're seeing. Like, I remember doing a trip to India during the financial crisis and trying to understand, you know, you got a great view of this being an emerging market and driving somewhere in the middle of the night and seeing all the big trucks and really understanding the build and the moving of materials around. You have such a great vantage point of that. So with the stuff that's going on around the globe, whether it's from the White House, whether it's from other regions, whether it's China, what has shifted in terms of where the ships are going and where activity is happening and what's being moved around?
- [48:05]
H
Well, first of all, you have a commodities rally, right? I mean, you have gold, you have silver, you have thin, you have copper, you have all these prices surging to these levels. And I strongly believe that you're going to see aluminum, you're going to have steel and all these things coming up a lot because demand is so strong for these products.
- [48:24]
A
So there's more movement of all of this.
- [48:26]
H
I strongly believe you can have a lot of movement for that because it's not just good to have real estate or a house, but it's strategic, it's defense, it's military. So you can have a lot of these things going on. On top of that, you also have the AI you need to upgrade the power grids, you need to create all these Data centers and all these things require vast amounts of metals, you know, that we transport. So it's pretty much important these days.
- [48:50]
D
The geopolitical disruptions as far as what's happening out there while you're, while the ships are out there are. Have you had to make changes to routes as a result of any issues, as a result of countries military doing operations? In certain places, we saw the disruptions around Venezuela, in that region, just to commercial airlines, for example, when Nicolas Maduro was brought to the United States. Have you been affected by any of that?
- [49:15]
H
Well, of course. I mean, Red Sea has been out of the question for more than a year now. Black Sea is out of the question because of missiles going on board ships. So. So we tend to avoid this kind of area. So the more places you avoid, the more diversions you have for the ships, the longer distances you make and the more ships you need. So freight rates go up, unfortunately.
- [49:35]
A
What are your biggest costs? Is it give us an idea? I mean, these ships are not cheap. Walk us through some of the dynamics or the financials here.
- [49:43]
H
Well, inflation is everywhere. Right. Building ships today has surged a lot because, you know, all these raw materials you need to build the ships and then you have fuel, but fuel has been quite stable, I must say. Yeah, but building the ship has actually gotten way more expensive. That's how it is. You. And that's also strategic. I mean, China has been building a lot of ships recently and prices keep going up and up all the time. So, you know, the US At a certain point need to start building ships.
- [50:09]
A
Are you building?
- [50:10]
H
We are. We. We are building some ships, yes.
- [50:13]
A
Okay.
- [50:13]
H
Yes. In China and Japan you are? Yes.
- [50:15]
A
Okay. But the US Is not.
- [50:18]
H
No. You don't see a lot of shipbuilding activity here?
- [50:21]
D
Well, the president hopes there will be some military shipbuilding activity here.
- [50:24]
H
We all hope that there's going to be some shipbuilding activity here as well, but we're just going to wait and see when that's going to take place.
- [50:32]
D
Do you think the US can build the ships that the President wants to see?
- [50:36]
H
Well, there's nothing that or that you want to buy. There's nothing that the US Cannot do, to be honest. It's just going to be a matter of cost and time.
- [50:43]
D
Yeah.
- [50:43]
H
So we're just going to wait and see.
- [50:45]
D
Hey, speaking of that, in the US over the last year, we've seen a push toward bringing manufacturing back to the United States. The tariffs that have gone into effect, the tariffs that have been used as a cudgel against countries to get what the President wants, in your view, does that eventually lead to fewer goods traded between countries, to fewer. The less of a need for your services?
- [51:10]
H
It should, but it doesn't happen. Global trade has been going up year after year. You have all these container ships actually being ordered and built and everything. So in theory that's a very correct statement. But in practical terms, I think global trade, this keeps going up every year after year and it's unstoppable.
- [51:29]
G
Why?
- [51:29]
D
Why is it unstoppable?
- [51:30]
H
Because you need infrastructure. So in order to create info. It's not just consumer goods. Consumer goods is only a part of shipping.
- [51:36]
E
Right.
- [51:37]
H
All the heavy things, which is oil, oil products, metals, iron ore, coal, bauxite and all that, I mean that keep increasing year after year all the time.
- [51:46]
A
What's the biggest part of your business in terms of the stuff that you move around?
- [51:49]
H
It's mostly iron ore and we do a lot of bauxite and coal. So we move around 20 million tonnes of raw materials every year. And that's a lot long hauls.
- [51:57]
A
That is long hauls. I am also curious about in terms of trap trade routes, I think, you know, with the US kind of pushing back and tariffs and so on and so forth, are you seeing more trade just in general between China and other parts of the world? Where are you seeing increases, where you're seeing decreases?
- [52:14]
H
Well, China has been increasing their imports in iron ore and coal year after year. China has been producing 56% of the global steel production. So wherever you need steel, you need to get it mostly from China.
- [52:25]
A
Right.
- [52:26]
H
That's how it works. You have about $5 trillion of committed infrastructure projects globally. So that's a huge amount of steel you're going to require in the next few years, excluding data centers and everything associated with that. So you're going to require a lot of steel in the next few years. And China has been very well prepared in importing a lot of raw materials.
- [52:45]
A
But I think we're also. That's fascinating because it's just a reminder of supply chains where things are. Right. But what about in of terms, terms of the pushback, is there more trade between China and Europe? I think we're trying to assess what are the relationships around the world. And the US continues, it feels like some say, to alienate certainly its allies in other parts of the world. But is that really happening from what you see in terms of the activity?
- [53:10]
H
Well, all this tariff talk and all this port use and everything that has been in discussions for the last year or so, that hasn't really Slowed down China at all. China has been importing big quantities of iron ore and bauxite and all that. So year after year, they continue to increase their production of steel and aluminum and all the strategic metals that you're going to require for the future. So, yes, China is still a very vital part of the global commodities and especially the metals.
- [53:38]
D
We're speaking with Stamatis Santanas. He's the chairman and CEO of Synergy Maritime holdings and founder, chairman and CEO of United Maritime Corporation. You transport oil around the world?
- [53:51]
H
We transport mostly iron ore, coal and bauxite. That's what we do.
- [53:55]
D
But also. But also, yeah, we used to have.
- [53:57]
H
A few oil transportation ships, tankers, but we sold them a few years ago.
- [54:02]
D
At the peak, would you get back into it?
- [54:04]
H
The answer is yes. At the next part of the cycle, we will definitely get back into tankers.
- [54:09]
D
What. What part of the cycle?
- [54:12]
H
Well, it's all times high right now, so asset values and freight rates are at this peak of all peaks. So we will wait for the right timing the cycle. Maybe it's going to be next year or the year after, and we're definitely going to get back into that.
- [54:23]
D
Do you see Venezuela as an opportunity for you to ship oil from to other parts of the world?
- [54:28]
H
Venezuela, it's still not a big part of the transportation of oil globally. They only do like a few hundred thousand barrels, so that's not really important and vital right now. Maybe it's going to get to a point in the next few years and I'm hopeful they will. But so far we don't really see them as making any material difference in seaborne oil.
- [54:48]
A
You're just back from Davos?
- [54:49]
H
Yes.
- [54:49]
A
Talk to us about what you heard on the ground, what you thought was interesting. We just talked with our David Westin of Wall Street Week and you know how so much of what the conversations evolved once again around President Donald Trump. But I'm just curious, your take on the ground and what you were hearing and seeing?
- [55:08]
H
Well, it's all about infrastructure, it's all about defense, it's all about military spending, it's all about alliances. So people don't talk so much about, you know, diversion and inclusiveness and all these things anymore. They talk about strategic stuff. So it's completely different. I mean, the narrative in Davos, it's all about the future of alliances, of infrastructure, real estate. I was at dinner with Eric Trump the other day and he'll talk about, you know, about the projects of the family in the Middle east and how spectacular that he expects to be in the next few years. So you hear a lot about the real estate infrastructure and of course defense and alliances. That's what you hear.
- [55:49]
A
What are you doing like between the, you know, with the Middle east that you can tell? I mean it just seems like they're certainly looking to diversify their economy, investing in sports, investing in lots of different projects, technology and so on and so forth. How do you see it in terms of what they're doing and the activity?
- [56:07]
H
The Middle east is a spectacular place. That's all I can say. I mean the amount of development you see there, everything's modern, everything's new, everything's in huge scale. So I'm very hopeful that the next few years the Middle east, especially the UAE and Saudi Arabia will continue to be investing hundreds of billions of dollars into these beautiful big buildings.
- [56:29]
A
Dumatis just got 30 seconds left here. A word or two that you would describe the global economy right now or for 2026 as you see it.
- [56:38]
H
Well, it will continue to be very, very challenging. I think that we're going to see way more important disruptions happening and trading routes being kind of broken down. But shipping has always been very agile to adopt in whatever geopolitical or what have you changes has happened. We've been to Covid, we did everything. So it's going to be fine.
- [57:00]
D
That was Tomato Santanas Chairman CEO of Synergy Maritime holdings and founder chairman and CEO of United Maritime Corporation.
- [57:07]
A
Coming up next, consumers are shifting away from credit cards at least some are and towards debt or really those buy now pay later programs. So what does that say about the health of the consumer? What kind of activity are we seeing around that? That's next. This is Bloomberg.
- [57:26]
C
Support for the show comes from public. On public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index with AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year. You can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by public Investing Brokerage services by open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors, llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete disclosures available@public.com disclosures these days it seems like AI agents are just about everywhere you turn every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risk into operation opportunity. Secure every agent, Secure any agent. Okta secures AI so have you heard.
- [59:08]
D
The story about the prescription plan? With savings automatically built in, it's where a family of any size can feel confident the cost of their medication won't hold them back. Go to CMK Co Stories to learn how CVS Caremark helps members save just by being members. That's CMK Co Stories. This is Bloomberg Businessweek with Carol Massar.
- [59:35]
C
And Tim Stanvac on Bloomberg Radio.
- [59:39]
A
President Donald Trump is taking aim at the credit card industry, demanding a 10% cap on interest rates for one year. It's something he mentioned as well at Davos.
- [59:48]
H
I'm asking Congress to cap credit card.
- [59:51]
C
Interest rates at 10% for one year.
- [59:56]
H
And this will help billions of Americans.
- [59:59]
A
Save for a home they have no IDEA they're paying 28%.
- [60:02]
H
They go out there a little late.
- [60:03]
A
In their payment and they end up losing their house.
- [60:07]
H
It's terrible.
- [60:08]
D
The president also targeting the interchange fees that businesses must pay to banks when customers use credit cards at checkout by endorsing legislation known as the Credit Card Competition act.
- [60:18]
A
For some context on credit card fees and a look at the buy now, pay later economy. We caught up with Nick Molnar. He's the co founder and CEO of Afterpay.
- [60:27]
D
Hey, I just want to start with with your view on a couple of different things and we'll pull out and talk about the business in a second. But we got to start with this idea of 10% caps on credit card companies, what the President has been talking about. Our team reporting last week that B of A and Citi are actually exploring options that could satisfy a 10% cap on credit card rates at least for a year. If the President were to follow through with this and we've heard the banks really push back, what would that mean for afterpay? What would that mean for your business?
- [61:00]
E
Yeah.
- [61:00]
G
I mean, look, it's a really interesting question, and it kind of takes me back to when we started the business. We started the business because we saw a fundamental shift, particularly by millennials at the time. Post 2008 financial crisis, millennials stopped using credit cards. They all moved to debit cards. And so the way we wanted to design our product was to disable someone's account the moment they're late on one payment, which no other credit card naturally does, because income's made when someone goes late. And secondly, we flip the economics on its head, where we primarily charge the consumer a fee, so the merchant a fee, not the consumer fee, which, again, is kind of the fundamental opposite of how the traditional financial services ecosystem works. So I'm excited to see some of these kind of millennial responsible behaviors starting to flow through. But the positives of buy now, pay later I believe are really well understood by the US Consumer today.
- [62:03]
D
Well, but maybe they're well understood, in your view, by some consumers. There are still a lot of skeptics out there, and I think, you know, everybody gets concerned when they understand the credit crises that consumers have faced in the past when they hear this idea of extending credit in untraditional ways. And, you know, a bank would argue, okay, well, that's why we actually do have rate credit card rates that are so high, because we're the ones taking out the risk here. Where's the risk for you if somebody doesn't pay back?
- [62:29]
G
Yeah. So if a consumer takes out a transaction and they don't pay back, we wear the risk. And our losses have consistently been below 1%, which is significantly lower than the broader financial services industry. And even when we look at kind of Black Friday Cyber Monday transactions, we're already seeing those transactions being paid back. 96% of our installments were paid back on time. 98% of our transactions incurred zero late fees. And so you're seeing this really responsible behavior continue to prevail through our book. And when we look at our brands being afterpay Cash App Square, we've Now lent over $200 billion around the world. And so to be able to lend differently, to lend responsibly, and to continue to see the consumer engage with us in incredibly responsible ways is really great to see.
- [63:26]
A
How do you, though, determine whether or not to allow someone to participate? And I guess because I feel like there's buy now, pay later popping up everywhere, you can buy so many different things. So where's the aggregator to say, all right, this person, you know, Credit cards, there's credit reporting agencies. Right. And so you have an idea of how much debt. But we don't, I don't think have that yet on Buy now, pay later. So how do you know whether or not to allow someone to do this on your platform?
- [64:00]
G
Yeah, I mean, again from personal experience, when I arrived in the US I didn't anticipate that I had to take out a credit card to build a credit score. It's a really US orientated situation. There's almost 100 million Americans that don't have access to affordable credit today. And our ability to start consumers off with small limits, as they pay back on time, we give them more flexibility and if they go late, we disable their account and we reduce their limits. You know, it's really put us in a great place to engage in this next generation consumer. If you think about it, this, this millennial consumer now using a debit card, not a credit card. They are very much anonymous to the credit bureau, but many of them are now approaching some of their peak earning years. And so you have really seen this fundamental shift away from credit cards to debit cards led by the millennial cohort and even more popular in Gen Z. And you know, these consumers exercising really responsible behavior, they prefer to spend their own money as opposed to taking out compounding debt.
- [65:09]
D
Nick, I want to talk a little bit more about the global consumer and where you're seeing customers actually take money out. Block recently said it's provided more than $200 billion to customers in global lending across credit products. Talk to us about which products are the products where you're seeing interest borrow afterpay, Square loans. Like where is the actual growth here?
- [65:32]
G
Yeah, so we're seeing, as you mentioned, we have, you know, working capital loans for small businesses through Square. We have our borrow lending product through Cash App and we have our Buy now, pay later product globally through through Afterpay. And we're seeing really strong growth in our lending businesses. As I mentioned before, even though we're seeing incredibly strong accelerated lending growth, we're seeing our losses stay at some of the lowest levels that we've seen to date. So really responsible lending behavior. Even though the number has now exceeded $200 billion of lending, each of those products in their own right lent differently. We had Square lending against a seller's actual sales they're processing through the platform. We have Cash App lending against money that's moving through the cash up ecosystem. And I've spoken extensively about how Afterpay works, which is flipping the Economics on its head and charging the retailer a small fee instead of the consumer. You know, each of those components has been why we're seeing, you know, such strong engagement with our lending products across all of our brands.
- [66:34]
A
What's the assumption in terms of accounts that will go delinquent? What are your kind of general assumptions in the business?
- [66:43]
G
Yes. So through our afterpay business, as I mentioned before, our losses have sustainably sat below 1%. And, you know, traditional financial services platform would see many multiples of that. The reason why we're able to manage our lending to such great rates is because we disable someone's account the moment they're late on one installment payment. You cannot keep shopping. You cannot revolve in debt. There's no compounding interest associated with our products. And that specific nuance not only sees responsible behavior, but you actually see our consumers illustrating a stronger desire to use afterpay because our consumers say, you understand us. You understand that we prefer to use a debit card over a credit card. And you've got the checks and balances in place to make sure that I don't get over my skis. And so to be able to see those loss rates, particularly in the present economic environment, is really, really encouraging to see.
- [67:40]
D
We're speaking with Nick Molnar, co founder and CEO of afterpay. I want to just talk a little bit about the macroeconomic environment over the last year and tariff announcements and what we heard from the administration. Did that affect demand for square loans?
- [67:59]
G
Yeah. So on the small business side, we've seen really strong strength in demand for our working capital loans. And then if I look even just on our consumer side as well, our average order value through Afterpay was up 10% over the black Friday Cyber Monday period as compared to last year. So you are seeing demand come through as consumers are navigating higher interest rates, inflation, et cetera. And the fact that consumers are moving towards more responsible sources of capital, I really think is illustrating two things. One is that Buy Now, Pay later is genuinely becoming more mainstream, is continuing to grow. But secondly, consumers are getting more nimble and agile into how they're looking for sources of capital, which is different to what we've historically seen.
- [68:50]
A
Do you expect there to be more competition? We've just got about 30, 40 seconds here. Now that the administration has become more open to approving bank charters for crypto and fintech Firms, Affirm and PayPal recently shared their applied for similar ILC charters to the one that Block holds. So do you anticipate more competition. And again, just got about 40 seconds.
- [69:09]
G
Yeah, I mean, as you referenced, Block has Square Financial Services and has had for many years. I do think there's going to be a continued push towards bringing innovative, customer friendly financial services products across all assets in the banking industry. And so I anticipate that, you know, A, that would just be a fantastic thing for both sellers and consumers. But B, I do believe that, you know, we'll continue to see more excitement in the space.
- [69:40]
A
Our thanks to Nick Molnar, the co founder and CEO of afterpay. And I have to say, these buy now, pay later programs, man, they are everywhere. And it does make me, it's something we brought up with him that you do wonder the oversight in terms of the aggregate of these programs. But he says people stop, you know, if they have any problems, they're cut off.
- [69:57]
D
Yeah, that's, that's true. And I think different generations think about this stuff differently. Like, you know, I grew up with credit cards. You grew up with credit cards.
- [70:05]
A
I have to say I remember when my parents got like kind of the first, like people just didn't do. My parents paid cash for everything. But there were layaway programs where you would put money on things and you didn't get the goods, though, until you paid it off.
- [70:17]
D
Yeah. A little deep tease for something we're going to be talking about in a few weeks. Tom Freston is going to be joining us, the founder of mtv. The beginning of his book is all about his travels all over the world. And he makes a point of talking about when he gets out of business school, he gets approved for the first American Express. And it's such a big deal because he can actually use it around the world. It's not something that he ended up using. But if you think back to the late 60s, early 1970s, it wasn't easy to pay for something in another country.
- [70:46]
A
I remember traveling and getting. What was it that we used to get? You'd go to a bank.
- [70:50]
D
Traveler's checks, travelers checks. He talks about that too.
- [70:52]
A
I remember doing that. Like, you think about how the world, world has changed dramatically. And so you and I talk a lot about fintech and with fintech companies and, you know, throw bitcoin or the blockchain into this. I think we're trying to figure out how this all fits in and what this means in terms of how we pay for things. I don't carry cash. We got rid of the penny or we're getting it right. We just, I just use my phone and I pay for everything.
- [71:14]
D
Yeah, it's frictionless, which is what the companies like to say. But I don't know if the Carol Massar household loves the idea of it being frictionless.
- [71:21]
A
I think about this the easier it.
- [71:23]
D
Is to part with money, the worse it is.
- [71:25]
A
Well, think about when you I remember as a kid getting, you know, you'd go on a class trip and you had X amount of dollars and you had to think about how you spent it or going on a summer vacation and you were given X amount of dollars and like you really thought it through. Whereas here it's like, you know, I just, I just use my phone. It's digital money.
- [71:41]
D
Listen, I'm old enough to remember when the App Store came out for Apple and a lot of analysts at the time were like, like it's so easy to actually spend money with this that it's going to be great for Apple, not so great for consumers because, you know, they're just easily separated from their cash.
- [71:56]
A
And I again, going back to our conversation with Nick Molnar at afterpay, how many things you go to buy and they're like, would you like to do this in force installments? It's like, I just want to pay for it.
- [72:07]
D
Well, still to come on Bloomberg Business Week, more highlights from the recent gathering of world leaders in Davos and how.
- [72:13]
A
One world leader changed the sunglass game. That's next. This is Bloomberg.
- [72:22]
C
Support for the show comes from Public. On public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index. With AI, it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated Assets are completely customizable and based on your thesis, not someone else's. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete disclosures available@public.com disclosure these days it seems like AI agents are just about everywhere you turn, every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risks into opportunity. Secure every agent, secure any agent. Okta secures AI So have you heard.
- [74:04]
D
The story about the prescription plan? With savings automatically built in, it's where a family of any size can feel confident the cost of their medication won't hold them back. Go to CMK CO Stories to learn how CVS Caremark helps members save just by being members. That's CMK CO Stories.
- [74:28]
C
This is Bloomberg Businessweek Daily with Carol Massar and Tim Stanweck on Bloomberg Radio.
- [74:35]
A
President Trump has promised to make it easier for Americans to buy homes ahead of the midterm elections as affordability issues take center stage.
- [74:44]
D
He's pledged to ban institutional investors from buying single family homes and at Davos directly spoke to the difficulties in tackling the problem.
- [74:52]
A
Every time you make it more and.
- [74:54]
H
More and more affordable for somebody to buy a house cheaply, you're actually hurting the value of those houses.
- [75:00]
A
Now if I want to really crush.
- [75:01]
H
The housing market, I could do that.
- [75:03]
C
So fast and people could buy houses.
- [75:05]
H
But you would destroy a lot of people that already have houses.
- [75:10]
D
That's President Trump earlier today. Jonathan Reckford knows what it takes to build affordable housing. He's CEO of Habitat for for Humanity. He joins us from the World Economic Forum in Davos, Switzerland. Jonathan, good to have you on the program is, you know, we spoke a lot last week about institutional investors owning single family homes in the US and the data are out there. It's actually a small percentage of the homes in the US Are owned by institutional investors. In your view, would banning these folks from owning single family homes ease the housing crisis in the US.
- [75:44]
I
Well, first we're just pleased the administration is talking about housing. And I think the housing crisis is such a huge issue in the US and globally and I'm glad it's on the agenda here at Davos as well. And we would say that now that middle class families, children cannot afford housing, the more invisible housing crisis has become visible. You know, we need, we haven't taken a stance on the issue that you've just raised. We still look at the details. There are certain markets nationally, it's a very small percent. There's small certain markets Like Atlanta, Charlotte, a few others where it's a meaningful percentage. But that's only one small piece of the broader housing issue. And what we really have is a supply problem. We have a massive shortage, particularly at the low end of the market, starter homes. And so our view is creating a lot more supply on the starter home side would not actually damage home values in the middle and upper ends because we have such a shortage right now. In fact, if we work more on the demand side without increasing supply, we'll drive house costs up further and it won't really solve the housing crisis. So we need really a little bit of everything. We do need demand side solutions, but the most important thing is to increase the supply of houses at the low end of the market.
- [76:55]
A
You know, I don't always understand. I mean, I understand giving developers breaks and tax breaks to build in certain areas that maybe need some juice and some help, right, to get it kind of back and bring back a community, bring back a city, bring back a town. But I'm amazed at, like, tax abatements that still get given in areas where things are good without any maybe provisions to make sure that there is housing for everybody in the community, not just just the wealthier folks. So how do we really fix this? I mean, I just don't understand what's the incentive to developers or builders to really help out here? And is that what it needs to be?
- [77:40]
I
I do think it requires incentives, but also requirements. And the best model for anywhere in the world is mixed income, mixed use, where families can be close to where they need to go to work and where they have economics, economic opportunity. But we haven't planned that way. And I think there's no magic bullet. But there are a whole series of things that can help. And I agree with you. If there are incentives that should come with expectations of mixed income or that they're. Because the math is tough. Covid was kind of a perfect storm on affordability. So the gap between what it costs to build a unit of housing for Habitat or for a private developer and what a family can afford is the widest in history. So we do have a real math problem, and I think there are different ways to solve it. We've seen at the local and state level. First, you can make it faster and easier to build. That doesn't cost cities a lot of money, but can make a big difference for builders and developers. You can address zoning at the local level, get rid of parking minimums, increase density, get rid of minimum lot sizes. A lot of 1980s strategies that aren't relevant today. That would increase supply. You can do accessory dwelling units and at the federal level, I think incentives. But incentives tied to building at the starter home level and increasing the supply. So discounted financing. As the Senate has a good bill we've supported on the road to housing, the House has a strong bill as well. I think there is bipartisan support for doing something on housing. So we're enthusiastic the administration wants to support it. We know it's one of the biggest drivers right now. One in three families in the world lives in inadequate or substandard housing. One in six families in America is spending over half their income on housing right now. So the level of cost burdened families is the highest it's ever been in a lot of historically affordable markets have more than doubled over the last six years.
- [79:25]
D
Our thanks to Jonathan Reckford, CEO of Habitat for Humanity. Now, something a little lighter to end this weekend. I mentioned it's not something we do all the time, but this is a very Bloomberg angle on a story that everybody was talking about. The blue aviator sunglasses seen from Davos around the globe.
- [79:43]
A
Yeah, this was really fun to do. Well, the world's leaders brought together in Switzerland to solve the toughest problems. But I gotta say what caught a lot of attention was one luxury pair of shades worn by French President Emmanuel Macron making headlines and becoming a hot item and in demand, according to the company that makes them.
- [80:01]
D
For more we head to Italy and to Stefano Fulcia, the CEO of iVision Tech. It's the parent company of the French luxury brand Henry Julienne, which made the glasses. Stefano, good to have you on the program. Take us through what happened since President Macron wore those glasses. What did you see in terms of demand? What did you see in terms of people buying them? Tell us everything.
- [80:23]
J
Yeah. Good evening and thank you to have invited me. So I think that the effect is like a wow effect. It was amazing because from Tuesday our website went in crash. Different times. We have received a lot of phone calls because everybody want to buy something like that, you know. And so they have realized that the the highway is from Richelienne. And so we are covered for full of requests. And now we have immediately restart to make power for the production of this model because everybody all over the world wanted so, you know, the sales impact reaction was also amazing. And we have sold in one day like the same quantity of one year of production of this model.
- [81:06]
G
Wow.
- [81:06]
J
Which is.
- [81:07]
A
Which is how many. Can you share with us what that number is?
- [81:11]
J
Yeah, sure. We are not talking About a very big numbers, because we are a luxury brand. So we produce this eyewear that is in gold lamination. So very particular. And now we are more than 200 pieces in only one day for this model. And so the demand is. We receive orders every minute. So we have blocked PayPal three times. So we need every time to make a restoration of the website. So it's amazing what's happening.
- [81:39]
D
Shares of the company up 40% so far this month. Today they're up more than 21%.
- [81:44]
A
I mean, off and running. Listen, did you know that he owned a pair? And I'm just curious, tell us about these glasses. What are they made of? I mean, how much do they go for?
- [81:54]
J
So everything happens in 2024, because we have received a call from the Elise, from the assistant of the president, and they want to buy one because they want to make a present for a minister in the period of G20. So I remember that I have received this call. And so when we have received this call, we say, wow, this is the president. So we have to do something more and we want to make a present also to give you something. But the assistant told us, okay, please, okay, but we want to pay. So, you know, they try to respect that and they ask us to have everything made in France. So they want something, you know, every phase, because you want to to represent a product from the history of France. And I have to tell to you that, you know, Henri Julienne is an historical brand. The company is born in 1921 and is a hundred years company. And so when we have sent them, we didn't have any news after that. And we recognized between our customers, because some customers during Monday they start to send me pictures and they say, is it that an original yen? And they say, yes. And so on Tuesday, everything happens, you know.
- [83:06]
D
So I want to talk a little bit about supply chains here, because what is notable about these frames is that they are made in France. In this day and age, most sunglasses are, and most glasses are actually made. At least the ones that come to the US are actually made in China. And I'm curious about the supply chain here. And in a conversation where we're talking a lot about domestic manufacturing in the United States, that's been a big focus of President Trump. How do you keep manufacturing in France and not outsource it to other parts of the world where it would be a lot cheaper?
- [83:40]
J
Yeah, thank you very much for this question, because I would like to start from the beginning, because our company was born six years ago because we have started in October 2020. So in the middle of the the COVID period. Because we have bought the Safilo plant in Udine, so one hour from Venice. And the idea is to restart the production of the eyewear in Friuli. So Friuli is our region where I live. And you know, in that period Safilo has closed the plant and we restart all the production inside. And we have a huge capacity here in Italy, because our main company in Italy has a capacity about 1 million highway per year. So if we are talking about our company Richelienne in France, we produce like 1,000 pieces per year. So we have a very niche market for this type of production. And what we have done, the idea when we have bought a Ritualienne in October 2023. So after our listing in the stock exchange, we have decided to create like a boutique. So our idea was, was to produce in France only some small pieces. Talking about the historical process, everything handcraft with a lot of faces. And I would like also to say to. To you that this eyewear is in gold lamination. So what is the particularity of that? That inside you can find gold. And so it's a very precious material. And the final price is not too amazing because we are talking about €650 each. And talking about gold is a very competitive price. But this is something that represents, you know, the story of the French production. And finally, I believe that we are based in the two most made in important all over the world. Because if we are talking about highway production, made in France is very important, like made in Italy. So you know, in France there is the Jura area that is. Is very famous. Like in Italy that we have Cadore. And Cadore is very famous for the eyewear companies, you know, so we have a lot of knowledge, a lot of people. And to create a good eyewear you need also to have a good staff, good people. Our people inside has 25 years of experience to create eyewear. So eyewear is not really easy to produce something like that.
- [85:55]
A
That was Stefano Fulcier, the CEO of iVision Tech. And that wraps up the weekend edition of Bloomberg Business Week from Bloomberg Radio. Thank you so much for joining us. I you thank think Tim is trying to order those sunglasses.
- [86:06]
D
They're expensive.
- [86:07]
G
How much?
- [86:08]
D
They're, they're. They're in the many hundreds of dollars.
- [86:10]
A
Oh, okay.
- [86:10]
D
You know, made in Europe.
- [86:12]
A
I love it.
- [86:12]
D
Yeah, they're pretty cool.
- [86:13]
A
He looked pretty good.
- [86:14]
D
He did look pretty good.
- [86:14]
A
Can I just say that?
- [86:15]
D
Yeah, I do have a pair of aviators but they don't have that blue tint and they were definitely not made in France.
- [86:19]
A
I got to say, if you don't have a pair of aviators, I mean, who are you? Who are you?
- [86:22]
D
Not Tom Cruise, are you?
- [86:24]
A
Or Joe Biden.
- [86:26]
D
It's true. Be sure to tune in to Bloomberg Business Week daily Monday through Friday, Friday starting at 2pm Wall street time on Bloomberg Radio and on Sirius XM Channel 121.
- [86:34]
A
You can also watch our daily broadcast on YouTube. Just search Bloomberg Global News where simulcast on Bloomberg originals, available at bloomberg.com originals and streaming platforms including Roku, Amazon Fire TV, Samsung TV plus and more.
- [86:48]
D
Find our Bloomberg Businessweek podcast at bloomberg.com apple or wherever you get your podcasts and the latest edition of the magazine. It's available on newsstands now@bloomberg.com and always on the Bloomberg Terminal.
- [86:59]
A
Have a good and safe weekend everyone. I'm Carol Massar. Stay warm.
- [87:03]
D
And I'm Tim Stanvik. Stay with us. Today's top stories and global business headlines are coming up right now.
- [87:11]
C
These days it seems like AI agents are just about everywhere you turn every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardy jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risk into opportunity. Secure every agent. Secure any agent. Okta secures AI this podcast is brought to you by Wise, the Smarter way to manage your money internationally if you're getting a headache from juggling different currencies in different bank accounts in different countries, there's a better way to receive money in the currency you need without the slow transfer times or hidden fees. Meet Wise, the savvy way to handle your money internationally. Hold balances in up to 40 currencies with the mid market exchange rate on every conversion. Whether you're receiving payments from tenants abroad, earning as a digital nomad, or converting dividends from your international investments, the Wise Multi Currency account is for you. Be Smart, get Wise, Download the Wise app today or visit wise.com Terms and Conditions apply. With Bali from Ishares, you get access to both monthly income and growth potential in one simple ETF. It's the best of both worlds. Discover Bali iShares Large Cap Premium Income Active ETF iShares the market is yours. Visit www.ishares.com to view a perspective for investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Risks include principal loss and the use of derivatives, which could increase risks and volatility. Monthly income is not guaranteed. Prepared by BlackRock Investments, LLC.