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- [00:00]
Carol Massar
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Tim Stenovec
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Carol Massar
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- [01:21]
Max Chafkin
By uniting science, technology and talent, we.
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Carol Massar
Work tirelessly to stay ahead of cancer together. Visit gsk.com to discover more.
- [01:33]
Tim Stenovec
Bloomberg Audio Studios Podcasts Radio News this is Bloomberg.
- [01:41]
Carol Massar
Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg businessweek Daily Podcast with Carol Massar and Tim Stanback on Bloomberg Radio.
- [02:03]
Tim Stenovec
Let's talk about some of the stories that are going on certainly out of the nation's capital. Transportation Secretary Sean Duffy warned that flight disruptions would continue across the US as the government shutdown drags into its fourth week. More than 13,000 air traffic controllers and 50,000 Transportation Security Administration agents are being forced to work during the shutdown without pay. Just one important part of the government, as you know, that is being impacted, Tim, by this breakdown between Republicans and Democrats, a breakdown that we seem to see over and over and over again.
- [02:34]
Carol Massar
Bloomberg News correspondent and host of the Big Take podcast, David Gura sat down for an interview with House Minority Leader Hakeem Jeffries to talk about the relationship between the US And Russia, the upcoming New York City mayoral Election and first and foremost, the ongoing government shutdown.
- [02:49]
Hakeem Jeffries
As Democrats, we continue to make clear to our Republican colleagues that we will sit down with them anytime, any place, in order to reopen the government, to negotiate a bipartisan agreement that actually makes life better for the American people in terms of spending and funding. But we also have to decisively address the Republican health care crisis. We've maintained that position from the very beginning, before Republicans shut the government down and during the entirety of the shutdown, because it is a real crisis that has been created at this moment, particularly as it relates to the urgent need to extend the Affordable Care act tax credits.
- [03:26]
David Gura
As you and I are speaking, the House speaker is doing a press conference just down the hall. What is the level of engagement? Do you pass one another? Are you speaking with one another? Are Democrats talking to Republicans right now?
- [03:36]
Hakeem Jeffries
The conversations have been very limited, unfortunately, because Donald Trump has not given House Republican leaders or Senate Republican leaders permission to negotiate, reinforcing the principle from our view that that he made the decision to shut the government down. They want to continue to inflict pain on federal employees. They've done that from the very beginning of Donald Trump's presidency. In fact, more than 200,000 federal employees had been forced off the job prior to the government shutdown. And this is something that we've continued to see them build upon during the shutdown. Until Donald Trump gets serious about reopening the government, unfortunately, we're going to remain in this situation, and everyday Americans are being hurt.
- [04:22]
David Gura
He's getting ready to take a trip to Asia. Is it appropriate for him to be doing that at this moment, when the government is shut down?
- [04:29]
Hakeem Jeffries
I think that the president has a responsibility both domestically and throughout the world. However, what has been irresponsible is that throughout this shutdown, he's found more time to golf than he has to engage with Democrats on Capitol Hill. He's decided to try to steal $230 million in taxpayer funds from the Department of Injustice. Donald Trump and his administration have found $40 billion to bail out a right wing wannabe dictator in Argentina and can't find a dime to extend the Affordable Care act tax credits to keep health care affordable for tens of millions of Americans. And on top of all of that, they are demolishing the east wing of the White House in ways that have appropriately horrified the American people.
- [05:21]
David Gura
I want to ask you about potential off ramps, and Tammy Baldwin, the senator from Wisconsin Democrats, said Trump is the off ramp at this point. Do you agree with that assessment? And has there been any kind of outreach or dialogue between you and the.
- [05:33]
Hakeem Jeffries
White House leader Schumer made clear earlier this week that we have reached out to the White House again to indicate that prior to Trump's departure for Asia, he should sit down with Democrats to find a path forward to reopen the government, to enter into a bipartisan spending agreement, and to address the health care crisis that Marjorie Taylor Greene acknowledges must be addressed and that traditional conservatives who are in the toughest seats in the country, have now publicly acknowledged this week needs to be addressed.
- [06:04]
David Gura
Can I ask you a question of congressional mechanics, and that is, can the Democratic leader pick up the phone, call the White House and reasonably expect the president's going to take that phone call? Are you able to do that? And if so, what's keeping you from having that dial?
- [06:16]
Hakeem Jeffries
Well, traditionally, that probably is the case, but in this White House, that's very much unclear. Donald Trump didn't have a meeting with House or Senate Democratic leadership until two days prior to the government shutting down.
- [06:30]
Tim Stenovec
That, of course, was House Minority Leader Hakeem Jeffries with Bloomberg's David Gore. David joining us from the Bloomberg News bureau in the nation's capital. Hey, David, you know, what I picked up from there is, you know, we hear the president and Republicans talk about the shutdown, then we hear Democrats separately talk about it, but again, nothing about leaders coming together to really work on the issues that separate them. And I kind of got that from the House minority leader as well.
- [06:55]
David Gura
Separately is the key word there, Carol. Suffice to say these two parties are not speaking with one another. And I should say, at the Capitol building today, it was incredibly quiet. You do have congressional leadership there holding press conferences, meeting among themselves. But it is. Sleepy isn't the right word. Empty is perhaps a better word. And it was clear from that conversation that the person who needs to be at the table, or at least giving the blessing to Republicans who are at the table, is President Trump. And there is, I think, a level of resignation among Democratic leadership that without that, this is just going to continue. So we're poised for President Trump, as we talked about in that interview, to take this trip for about a week to Asia. Again, there's a recognition there that with him absent, this is unlikely to advance or develop here over the coming days.
- [07:40]
Carol Massar
Yes, I guess the big question on the Democrat and Republican side is what can be done with the president on this trip? What can be done out of the country? Is there a chance that these two sides can come together and end the government shutdown, even if he's not around.
- [07:54]
David Gura
Well, there is some hope for optimism, of course, but there are a number of kind of pressure points that are on the horizon. I think that's pretty notable. So tomorrow is the first one, October 24th. That's when a lot of federal workers are not going to receive their paychecks for the first time in this shutdown. So the pain of the shutdown is going to be more acutely felt by, by more people. And I think what's kind of novel about this shutdown is you've had someone who heads the Office of Management Budget at the White House really moving things around, playing what he calls budgetary twister to make sure that a number of government employees are paid, certain programs are continued. All of that starts to become more and more difficult here as the days tick on. So tomorrow, a big pressure point, another one is next week, November 1, when some snap benefits are scheduled to expire and of course, when open enrollment begins for health care plans. That's the moment at which Democrats believe Americans are going to look at the prospects of their health care going up, becoming more and more expensive, and they're going to perhaps recognize the fact, as Democrats would say, that this is something that's real and important and that having the government shut down so that those subsidies can be restored is worth doing.
- [08:54]
Carol Massar
I will say I think that message is getting to Americans outside of the Beltway. I was in Arizona last week. The lead story on local news last weekend was about premiums going up for that, that Obama for Obamacare. That is story seems to be getting out there and people are actually talking about that, David, a lot in that interview. One thing you also touched on was what's coming here in New York in the next couple of weeks, early November, the mayoral election, and the way that Leader Jeffries has or has not yet communicated with Zoran Mamdani, the favorite to win the election here in November. What did he say about that?
- [09:27]
David Gura
They have spoken a couple of times and I was optimistic. I had my fingers crossed that he'd be willing to make an endorsement today. During that interview, he declined to do so. But he has said that he's going to speak with Zormandani again today and tomorrow as he prepares to do that, he talked about the obligation of doing that. I asked him did he watch the debate last night, the final mayoral debate, or did he watch the Knicks season opener? He admitted he watched the last few minutes of the basketball game and not the debate, but he kept up with it and kept up with what the conversation has been and after he declined to make an endorsement, I really pushed him on, on why. What the outstanding issues are and what he emphasized to me during our conversation is, look, he really applauds Mr. Mandani for his emphasis on affordability. He thinks that's a signal issue in New York City and one that's a signal issue across this country for Democrats, who really applauded him for focusing so much on that. But he acknowledged the fact that President Trump is likely to go after New York after this mayoral election takes place. Does Mandani have the capacity, the experience, to deal with the level of pressure that the federal government is going to bring to bear? So I personally a bit disappointed that we didn't get that endorsement during my interview today, but it does seem like that's likely. I mean, I think what he said over and over again as he plans to weigh in on this race before early voting begins. And as both of you know, early voting in New York City is scheduled to start on Saturday of this week. So time is nigh. And he's. He's going to do it, too. I should say. He was about like 98% there. I think during the course of our conversation, he really applauded Mandani for saying that he planned to keep Jessica Tisch as the New York Police Department commissioner if he is, if he is elected. He saw that as a positive step.
- [10:57]
Tim Stenovec
All right, last question, though, because this also came up, and I feel like people have said to me, why aren't you guys talking about this? But it's all over social media, active, you know, activity. And, David, that is what's happening at the White House. The actual physical demolishing of a piece of the White House. I know in the grand scheme of things maybe isn't as important as a lot of other things that are going on in this world, but it feels very symbolic, despite the actual physicality of what's happening, and indicative of a president that can kind of do whatever he wants. What did Mr. Jeffries say on that?
- [11:29]
David Gura
He expressed dismay over this happening, as I think a lot of people in this city have as well. Of course, it's a very old building that has been remodeled in the past, but this is pretty dramatic. And in the past, it would have gone through a lot of reviews. That hasn't happened here. The president said initially he planned to build this ballroom that was going to have no effect on the existing building. Of course, that's not the case. We have seen images and video of the demolition of the east wing of the White House that are startling to a lot of people, as the minority leader said. And then there's just the notion of what's being built there, this massive structure, this 90,000 square foot ballroom which the President says is essential for the leader of the United States to entertain foreign leaders who come through Washington, D.C. you know, an organization of architectural historians pointing out that just proportionality is wrong here. To have a building of that scale on the White House plant is just huge. So a lot of people just expressing dismay and stupefaction over what's happening here. And I should note as well, the price tag on this has gotten larger over the course of this construction, too. It started out at $200 million. The President said it'd be paid for by himself and private donors. Now the price tag is $300 million. So a lot of people just kind of wondering how this is happening, how it's happening so quickly. And I think that you hitting on kind of the metaphorical side of this is important too, Carol. A lot of people kind of looking at it as a way of the president here moving with some relative impunity.
- [12:41]
Tim Stenovec
Got to say, I have an old house, 1800s, and I can't even change a window without like a commission weighing in. So there's got to be something when we're talking about the People's House. David.
- [12:50]
Carol Massar
You're not the president, Carol.
- [12:51]
Tim Stenovec
That's what I'm saying. I'm nothing.
- [12:53]
Carol Massar
You're not nothing, but you're not the president.
- [12:55]
Tim Stenovec
I can't change a window without stuff coming down on me. And I'm just thinking about the historic significance of that building there on Pennsylvania Avenue. All right, David, thank you as always, Bloomberg News correspondent, host of the Big Tech podcast, David Gora.
- [13:08]
Carol Massar
Stay with us. More from Bloomberg businessweek Daily coming up after this.
- [13:15]
Tim Stenovec
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- [13:46]
Carol Massar
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- [14:10]
Max Chafkin
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- [14:28]
Carol Massar
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- [14:37]
Max Chafkin
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- [14:41]
Carol Massar
You're listening to the Bloomberg Businessweek Daily podcast. Catch us live weekday afternoons from 2 to 5pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube at Miami Heat guard Terry Rouser Rosier excus Portland Trailblazers head coach Chauncey Billups were arrested Thursday morning and charged as part of a sprawling sports gambling probe, federal prosecutors said in a press conference Thursday. FBI Director Cash Patel and Brooklyn federal prosecutor said at least 30 people were arrested across 11 states, including current and former NBA players and coaches, as part of two separate criminal schemes related to illegal sports betting. Here's FBI Director Cash Patel at a press conference this morning in New York.
- [15:26]
Elon Musk
Let's not, you know, mince words. This is the insider trading saga for the NBA. If you're participating in the legal gambling.
- [15:33]
Carol Massar
Industry, you got nothing to worry about.
- [15:34]
Elon Musk
If you're participating in illegal conduct, you got everything to worry about. In this case shows it.
- [15:40]
Carol Massar
That's FBI Director Cash Patel. Earlier today we got Miles Miller with us. He's Bloomberg News senior reporter. He covers Homeland Security and the FBI. He joins us here in the Bloomberg Interactive Brokers studio. Miles also covers, yes, city government here in New York City.
- [15:55]
David Gura
Scrambling.
- [15:55]
Miles Miller
I'm like one of these, you know, like.
- [15:58]
Carol Massar
So we're going to get to the sports, the sports, gambling and the NBA stuff in just a minute. It's fascinating. And we're going to bring in Ira Boudouaou in a minute, too. But first, let's talk a little bit about what's going on here in New York because New York City Mayor Eric Adams has endorsed Governor Cuomo for the mayoral election.
- [16:18]
Miles Miller
You'll remember Gracie Mansion, beautiful palatial mansion on the east side of Manhattan. We thought Eric Adams was going to drop out of the race and instead, what did he say? He said Andrew Cuomo is a snake and a liar. Asked today why he's endorsing Andrew Cuomo, he said brothers fight, but when families are attacked, brothers come together. He sees this as essential to Cuomo having any shot of winning the election against Mamdani. The cards are stacked against Cuomo, they're stacked against Sliwa, and they were stacked against Adams. And so this is the only way he sees that Cuomo could win, which would be by endorsing him. He's going to go out around the city with Cuomo.
- [17:01]
Tim Stenovec
Will he help? Will that help?
- [17:02]
Miles Miller
You know, it remains to be seen. He's going to go to. He's going to go to areas where he had support, which you would probably say are in south southeast Queens, probably Wakefield in the Bronx, those places. But those are places that Cuomo probably has support already. Yeah. Will it help? Unclear. But this is New York's second black mayor who is going to stand up, going to go to church with Cuomo and say, this is the person who is going to best support you, not Mamdani. And that is going to be critical in the last couple days of this election. And it shows how desperate the Cuomo campaign is.
- [17:37]
Carol Massar
What's Mayor Adams going to do next? There's been a lot of speculation about would he take a job? I mean, there was some reporting that said, okay, maybe he's being offered a job in the Trump administration. What's going on there?
- [17:49]
Miles Miller
I was told many, many years ago never to predict what Eric Adams is going to do because he can sit right in front of you on Business Week. Bloomberg Business Week, and tell you, no matter what, he is not going anywhere, and then sure enough, drop out of the race.
- [18:04]
Carol Massar
Like he did that for you.
- [18:05]
Miles Miller
Yeah, right. On my birthday. He tells me he's not leaving the race and then straight up leaves the race. He says he wants to get his PhD. You know what he really wants to do if he stays in government is have a source told me this is have any position where he can bring staff, have a detail, and do important things.
- [18:24]
Tim Stenovec
All right, so tell us about what happened earlier this morning. Couple of indictments coming down. I'm switching gears.
- [18:29]
Hakeem Jeffries
What?
- [18:30]
Carol Massar
I would like a staff and have a detail.
- [18:32]
Miles Miller
I've known Eric a long time. Let's just be honest about what he's told people.
- [18:36]
Hakeem Jeffries
Go ahead.
- [18:37]
Tim Stenovec
You know who have staffs in detail sometimes are NBA players. So let's go to what happened this morning. What did we find out?
- [18:44]
Miles Miller
So you've got two different scandals here involving the MTA. You've got one, the NBA. Sorry. So what'd I say?
- [18:51]
Carol Massar
MTA. I'm still thinking about this.
- [18:53]
Miles Miller
I've been up since 4:00 clock this morning.
- [18:54]
Tim Stenovec
Got it, got it.
- [18:55]
Miles Miller
You've got two different. Two separate scandals. You Got the first one involving, which is basically insider trading at the, at the NBA basketball player Terry Rozier telling a friend that he planned to take himself out of a game. That friend then places a bunch of bets worth more than $200,000 on that game, which would be fishy to any. And so it tipped off federal prosecutors. And so they knew that something was wrong there. And it exposed this big issue, including four players who were trading on things that, that was trading on private information so they could make money off of things that were not public. So that's the first case.
- [19:35]
Tim Stenovec
So knowing a player is in and out can determine the outcome, right?
- [19:37]
Miles Miller
Exactly. And LeBron James a victim of this.
- [19:41]
Tim Stenovec
You know, second indictment.
- [19:43]
Miles Miller
Exactly. Second indictment. You've got the mafia. You've got the four, four of the five New York crime families running rigged games on Lexington Avenue and running rigged games on Washington Place. They had a table set up where they could see live the card that was face down. And so the games are rigged. They use NBA players in order to get people to get enticed into the game. But the players they believe, prosecutors believe were in on it. They thought that. They believed that Chauncey Billups, coach of the, of the Trailblazers and MVP was part of this conspiracy to steal people's money. And he got a cut of it.
- [20:22]
Tim Stenovec
They say not nice.
- [20:23]
Carol Massar
No, not nice.
- [20:25]
Tim Stenovec
Again, indictments, stuff to be known. Right. And things like will carry out. Miles, thank you for breaking that down. A lot going on. Miles Miller Bloomberg News senior reporter covering Homeland security and the FBI.
- [20:35]
Carol Massar
I want to bring in Ira Budweise, global business of sports reporter for Bloomberg News. Ira, to just set the poker stuff aside for a second that the prop bets about the players is really what I want to talk about because you wrote in August for Bloomberg Businessweek that sports leagues are struggling to deal with so called player props for bets. Big focus of your story was the MLB if I recall correctly. But this is exactly what materialized here.
- [21:00]
Ira Boudway
Yeah, I mean it's a known problem, as you say. So there were these cases earlier this year. In July, MLB announced investigations involving two Cleveland guardians pitchers and they were alleged to have been throwing a ball on purpose. And you can bet just on the first pitch, right. That's how small some prop bets get. There had been a previous NBA case, John Tay Porter, actually the same federal investigation that brought the charges today. Involved actually is how John Tay Porter wound up pleading guilty to taking himself out of games early, saying he was sick and having co conspirators bet the under on a Prop. This is really the vulnerability for leagues.
- [21:42]
Tim Stenovec
I want to say. Are we surprised? I mean, the, the mixing meshing of gambling and sports, which was considered a no no for so long.
- [21:52]
Carol Massar
Look what happened to Pete Rose.
- [21:53]
Tim Stenovec
Exactly right. Like, no, don't do it, don't do it, don't do it. Here we are. And then this is happening.
- [21:59]
Ira Boudway
Yeah. I mean, it's really interesting. The question that is really hard to get to the bottom of is whether it's better or worse to have legal regulated sports betting. Right. Because clearly it's more widespread now. It's on your phone, it's advertised at you all the time. Right. So there's just more people involved, more.
- [22:16]
Tim Stenovec
Dyson sliced a million different ways.
- [22:18]
Ira Boudway
It's also much more closely monitored when it's legal because you can see every bet. And there. And there are these organizations that actually are watching for suspicious betting activity, which is how in many cases, including these cases, investigators get tipped off. They see unusual betting activity and they follow up.
- [22:37]
Tim Stenovec
All of the gaming apps on your phone, those are all regulated. People are monitoring or no.
- [22:43]
Ira Boudway
Yes. So if you're betting on FanDuel, DraftKings, other legal sportsbooks. Yes. Those bets are being monitored by these independent groups that have access to the data and whose job it is on behalf of the leagues and the sportsbooks, who, you know, if you listen to federal prosecutors, are the victims in these cases because people are using insider information to take out bets that then win and the sportsbooks have to pay out. So they participate in these monitoring systems that are set up to catch suspicious activity. Where often is a lot of action suddenly, a lot of bets very suddenly on a player to underperform, and very large bets for maybe betters who've never bet before. Those are the things that get flagged.
- [23:25]
Carol Massar
It does seem like, Ira, there could be a happy medium here where maybe the government comes out and says, okay, well, maybe we let the cat out of the bag a little too much. A few years ago with the Supreme Court decision, maybe the Supreme Court let the cat out of the bag. I don't know if they can legally. But what if there were a way to say, okay, we can allow you to bet on some stuff, the outcomes of games, but the granular prop bets that are 100% in the control of one single player, that just isn't working.
- [23:53]
Ira Boudway
Is that possible? We're seeing this happen. Prop bets on college players in some states are not allowed. The NBA, after the John Tay Porter case, convinced major US Sportsbooks to no longer offer under prop bets on the lowest paid players in the league and.
- [24:11]
Carol Massar
With the idea that the lowest paid players would be more incentivized to do vulnerable.
- [24:14]
Ira Boudway
So Jontay Porter was what's called the two way player on a $415,000 contract. What's interesting about the accusations today, the indictment today is that Terry Rozier, who's accused of doing this, making $26 million this year. So it may not be just a case of going after the most vulnerable players. Adam Silver, the NBA commissioner, has recently hinted that they're looking at other things they might be able to do to restrict prop betting. And you know, after the cases in Cleveland with the guardians pitchers, the governor there, DeWine asked their state gaming regulators to get rid of all prop bets. And so Ohio is looking into that. So there is movement to try to limit prop bets, but it's not clear kind of how that will shake out. And actually I think one of the other things that this might lead to is more pressure to have a federally regulated system, which is what Adam Silver has always been asking for.
- [25:05]
Carol Massar
You were part of a group of reporters a few years ago who did a big Bloomberg Business Week special on gambling and sports. And I'm just wondering if what we knew at then or now, we knew then, would it have turned out this way? Or in other words, has this, how has this gone? Has this gone okay?
- [25:22]
Ira Boudway
Yeah, I think the experiment, there's two big vulnerabilities, right? There's the, the erosion of trust and the corruption issue.
- [25:29]
Tim Stenovec
Right.
- [25:29]
Ira Boudway
Whether if you keep having cases like this, fans will no longer really believe in what they're watching on tv. That's a big problem. I think it grows today. We will see how persistent that is and how big it gets. The other thing that I think just more broadly in sort of the experiment of sports, of legal sports betting in this country, I think once you've had legalization and it's now on phones and mobile, what we're finding out is that addiction is a real problem and it's damaging the personal finances of a lot of particularly young men who get into this. So I think those are two things that it's not like we didn't know that problem gambling and manipulation existed. And it's not like those two things don't exist when you do this in black markets. But there is, I think, a real case to be made that opening it up this way has exacerbated those problems.
- [26:17]
Tim Stenovec
Yeah, I know. And then you've got the other story that's out there. Our Cat Doherty wrote, I think you are part of that, too. DraftKings acquiring a federal federally regulated trading venue, marking its most aggressive move yet into the contested world of prediction market. So this just melding of stuff is interesting. Come back soon so we can continue this Ira Budway, global business of sports reporter at Bloomberg News, joining us here in our Bloomberg Interactive Broker studio.
- [26:41]
Carol Massar
This is the Bloomberg Businessweek Daily Podcast. Listen live each weekday starting at 2pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa. Play Bloomberg 11:30.
- [27:00]
Tim Stenovec
Tesla shares, if you check them out, they have been bouncing around point four percent right now.
- [27:05]
Carol Massar
They turned positive later in the session, but for most of the day they were lower.
- [27:08]
Tim Stenovec
Yeah. Down almost 6% at their lows today. Right. Listen, the company came out, they posted earnings late yesterday, results largely disappointing profit, missing estimates despite record vehicle deliveries and operating income plunging 40% in the third quarter. Timing.
- [27:23]
Carol Massar
Meantime, the head of the company, the world's richest man, we are talking about Elon Musk. He hijacked the earnings call, pleading with investors to approve his $1 trillion pay package and blasting the shareholder advisory firms that have come out against the proposal.
- [27:36]
Max Chafkin
The point is, I just think that.
- [27:38]
Elon Musk
There needs to be enough voting control.
- [27:39]
Max Chafkin
To give a strong influence, but not, not so much that I can't be fired if I go insane.
- [27:45]
Carol Massar
That's it.
- [27:46]
Tim Stenovec
That's classic. Just in case I got insane. Hey, hey.
- [27:50]
Carol Massar
Just those two things, I guess that's the barometer. That's what we're doing. I guess so.
- [27:54]
Tim Stenovec
I don' all right. That's Elon Musk apparently making the case last night for that pay package on the earnings call. And really, I guess, his position at the company. Let's talk all things Elon and Tesla. With us is Bloomberg businessweek senior reporter Max Chaffkin, co host of the Everybody's Business podcast, author of the Contrarian Peter Thiel and Silicon Valley's Pursuit of Power right here in studio. All right. We got a lot to talk of. That's classic Elon.
- [28:16]
Miles Miller
It is.
- [28:17]
Elon Musk
I mean, there's probably no figure in modern life who so openly flirts with the idea of his own insanity as Elon Musk. And but of course, what he's talking.
- [28:27]
Tim Stenovec
About on an earnings call.
- [28:28]
Elon Musk
On an earnings call, of course, what he's saying essentially is you got to let me cook. And the only reason I should be fired is if I am going, you know, going crazy. And that would be crazier than he normally is because of Course, he's, he's pretty out there on a, on a normal day. And for, for believers, that's, that's kind.
- [28:48]
Carol Massar
Of part of the appeal, dare I say, Max. A lot of people would say, even though they would. Could be critical of $1 trillion pay package, they say, well, what would Tesla be without Elon Musk?
- [28:58]
Tim Stenovec
Yeah.
- [28:58]
Elon Musk
And that's kind of the difficult position that investors find themselves in this company where, yeah, there's some opposition to this pay package, and we've seen some of the shareholder advisory firms come out against it. But I think for most investors, you're kind of in a position where if you put, if you say no to this package and Elon Musk threatens to leave or even does leave, the stock falls. Right. It doesn't go up because so much of this company's value is about the future, and that future is all about Elon Musk. The other thing I'll say about this pay package, big as it is, it's mostly, it's requiring the company to get even bigger to, to, to hit milestones that, that seem almost cartoonish at this point. So if you're an investor, you're saying, well, I mean, you know, let's hope it works out. He's, he's, he's been effective before. Why not this time?
- [29:48]
Tim Stenovec
Well, I got to say, one investor, we're talking about New York State and The comptroller, Thomas DiNapoli, did say that Tesla pay package for Elon is overly generous, lacks clear performance metrics to justify the $1 trillion that he could earn under this proposal. He plans to vote against the compensation package and Tesla directors up for reelection on November6. He spoke with Bloomberg Surveillance on TV earlier today.
- [30:11]
Ira Boudway
When you see the excessive compensation package.
- [30:14]
Carol Massar
I mean, you know, credit to Mr. Musk.
- [30:16]
David Gura
He's already one of the richest men in the world.
- [30:20]
Max Chafkin
How much more rich does one person have to be?
- [30:23]
Tim Stenovec
I don't know. I'm not that rich. But so I think it's.
- [30:28]
Carol Massar
I don't know. I know that we joke about that, but I don't know if that's the right question to be asking Max. Is it about wealth or is it about control?
- [30:34]
Elon Musk
I think it's about both. I mean, you know, people always say, and you always hear things like, well, Elon Musk doesn't care. He's so rich. He is hundreds of worth hundreds of billion, doll. What's another couple hundred billion dollars? But I think, I think when you're talking about this level of wealth, you do like the amount of money he stands to make on this package would, you know, double his wealth potentially. So that is a big difference. And the other thing, Tim, as you said, Musk says this is about control. It's about being able to maintain his position, to essentially be able to operate without any kind of shareholder activism, a critic might say, without constraint.
- [31:12]
Tim Stenovec
You know, having said that, you go to the core business, right? And Evie is like, listen, for a long time he and Tesla did not really face much competition here in the US and he and Tesla, for a long time, promise, promise, promise, didn't deliver. And then they started to deliver. But the environment is changing, but so too is the evolution continuing for Tesla as a company, right? Whether it's battery storage and other businesses, but I don't know what is the business and does that business. Would it be able to hit some of these metrics to justify this pay package?
- [31:44]
Elon Musk
I mean, that is what's so difficult and to the point that Thomas Napoli is making in there. You know, Tesla has not done that great over the last couple of years. The stock price has been, has been phenomenal. Investors and particularly like the kind of retail investors who follow what Elon Musk says and buy his stock, like they, they are in love with this thing. There is a boom in AI. Elon Musk is talking a lot about AI, but you know, car sales have not been great. And even in this quarter, which was good, right, where sales went way up, margins went down and there is a sense among investors, and you've even heard this from the company itself, that this is going to be a bit of an aberration because what happened is the tax credit, the 7,500 bucks, is effectively making electric cars cheaper. It went away as part of the big beautiful bill that, you know, that Trump passed. So this is kind of like a one time thing where you have a bunch of people basically moving purchases forward. At the same time, lots of competition from lots of automakers. Now we talked about this really for years, for almost a decade, like GM and others are going to come. Well, they're here now. There are a bunch of really great electric cars that cost the same amount of money or in some markets less than a Tesla BYD has cars in Europe that are very, very competitive with Tesla and are cheaper. GM has cars now that are about the same price as the cheapest car and then are competitive. So, so that's a challenge. And then on the other hand, you have Musk's kind of fantastic promises around humanoid robots, around autonomy, and that stuff is hard to value. You Basically either value that at zero or you value it at like $20 trillion. And so, so it's kind of created in the discourse around this company.
- [33:28]
Carol Massar
So look, obviously none of us know the answer about how to value that business, but if, if, if increasingly these autos are becoming commodity and outside of the us, especially with competition BYD and show me, then it looks like a more insular market for Tesla, at least for autos here in the us if they don't lean into Optimus. If they don't lean into other technology.
- [33:49]
Elon Musk
Yeah, I think, well, I think there are two things. So one is Optimus humanoid robot. Elon Musk says, you know, very soon, like in a matter of years, we're going to have these things in our homes, are going to be like friends. You're like not even going to be able to tell. I think he said on the earnings call, you're not going to barely be able to tell it's a robot. Like if that's true, obviously that's great. The other thing, the other thing is, is sort of robo taxis, unsupervised self driving, which Tesla has yet to do, but it is, is trying to do. There is a question on how you value that, because Elon Musk has said for years and years and years, you know, basically, that is worth an unlimited amount of money. Your cars will increase in value.
- [34:28]
Tim Stenovec
Right.
- [34:28]
Elon Musk
Because of this thing. But you're seeing Chinese companies essentially give this stuff away. So that's why I say, like, we don't really know how valuable this is yet. Even though the idea of not having to drive your car and being able to take a nap, that obviously sounds great. It's just unclear how much people will pay for that and how much they will be asked to pay for that, given that a bunch of other automakers are giving away very similar technology.
- [34:53]
Tim Stenovec
It's also not quite, quite doable. Right. Like, listen, we've talked about Waymo, how much we love it, but I mean, it's still tricky and the infrastructure doesn't necessarily support it everywhere.
- [35:04]
Elon Musk
No, do not take a nap in your Tesla today, despite what you see on Twitter. Yeah, I mean there, there are huge question marks here and I think when you look at Waymo, it's a big success, but it's a success in a very narrow way, like a defined number of markets operating at slow speed. You know, they don't drive on highways yet that, you know, there's tons of supervision, there's remote supervision. We've talked about this. Is same thing with Tesla and Waymo has been very deliberate, you know, rolling this out in just in a handful of markets, moving very slowly. I think Tesla and I think most people who cover the Autonomy space closely believe that there is no way Tesla gets anywhere near the timelines that Elon Musk is talking about. What, you know, what we kind of expect is that it follows more like the Waymo path now, of course, and if it does that, it's worth a lot less money. Now of course, Elon Musk is telling a different story where, where one day he's going to just basically flip the switch and you're going to see this deploy everywhere.
- [35:58]
Carol Massar
We had an interesting conversation with Ross Gerber with that Ludlow yesterday on the academic differences between the radar lidar side of things with Waymo and the vision only stuff with Tesla. Where do you fall on that, Max? Is that, do you believe that? I mean, Ross Gerber doesn't think it's possible to have vision only self driving.
- [36:13]
Elon Musk
There are a lot of, a lot of experts who I've talked to who are very skeptical of the technical approach, which I think is a, is a problem. The great thing about lidar is it's like an additional safety feature. I also think again, there are so many reasons to think that the timeline is, is going to take much longer than what we're talking about that it's almost not worth parsing the technical differences. This is something that is going to take decades to pull off in the way that Elon Musk wants it to pull off.
- [36:43]
Tim Stenovec
Relevant when you've got a company that trades with a p e of 320 or forward p of about 262. Right? Like, because these are things that aren't going to happen so quickly. Got to run. Love, love, love. Max Chaffkin, senior reporter at Bloomberg businessweek, co host of the Everybody's Business podcast and author of the Contrarian Peter Thiel and Silicon Valley's Pursuit of Power.
- [37:03]
Carol Massar
Stay with us. More from Bloomberg businessweek Daily coming up after this.
- [37:10]
Tim Stenovec
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Carol Massar
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Carol Massar
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Max Chafkin
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- [38:36]
Carol Massar
You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5pm EAs, Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. We're watching a lot of different companies, but I want to home in on one and that would be intel share surging in the after hours, building the.
- [38:57]
Tim Stenovec
Momentum to the upside.
- [38:58]
Carol Massar
Yeah, 7% to the upside right now in the after hours. A little bit at the beginning, trepidation I think for shareholders, but I know it could have to do also with some corrected numbers that were coming back and forth over the terminal for the the results, the most recent results as you mentioned, shares, what up 90% going into the print this year?
- [39:16]
Tim Stenovec
Well, yeah, we know like there was the US Taking that position in intel, specifically an equity position and it is now the third largest investor in Intel. So that certainly has given it a jolt, if you will, this year. But again, I think what's interesting is the company CFO speaking in an interview. You can check out our Ian Kings right through on this. But intel saying the third quarter was stronger than it thought across the board. So yeah, server demand was a surprise positive. It feels like there's a lot of things that feel like the changes, the moves by Lip Bhutan, the CEO, maybe some of it's starting to pay off.
- [39:53]
Carol Massar
Well, I want to see what Jay Goldberg has to say about all this. He's Semiconductors and Electronics Senior analyst at Seaport Research Partners. He joins us from San Francisco. Jay, good to have you. You cover a lot of these companies, including Intel. You've got a neutral rating on Intel. Just give us your first reaction to these. This report that shows an encouraging forecast after a rebound in the PC chip market.
- [40:18]
Max Chafkin
Yeah, I think it's an encouraging step forward for the company. They've been through some rough times and I think the driver of this quarter's results are their new products coming on stream using their 18A, their new manufacturing process, as well as some help from tsmc. So a bunch of new products starting to ramp into production and volume. I think that's helping a lot. And I'm most encouraged by sort of the gross margin outlook for next quarter. I haven't run through all my numbers, but it looks like it's much better than expected, which is important not just for the financial weight of that, but also it's a good indicator into how their manufacturing process is tracking.
- [40:56]
Carol Massar
I don't. Sorry, go ahead.
- [40:57]
Tim Stenovec
No, no, no, no, go ahead.
- [40:58]
Carol Massar
I don't want to get you in trouble with compliance, but can you. Are you going to change your, your outlook, your rating on the stock?
- [41:06]
Max Chafkin
I just upgraded it about a month ago from sell to neutral. And my concern here is more that big picture question you all were talking about earlier. As much as this quarter is good progress and we're seeing tactically they're moving in the right direction, the looming question over the company is what are they going to do with the fabs? Last quarter, CEO Lip Bhutan said if they don't get a customer for Intel Foundry, an external customer for Foundry, they're going to stop doing advanced manufacturing. I think that's one of these tough analyst calls because in the near term, if they stop doing that, it removes a lot of expense numbers, go way up, stock goes up. It's a near term, easy thing to do. But long term, it's probably really bad for the company and it's just hard to square that long term forecast, multi year forecast. So I'm still on the fence.
- [41:56]
Tim Stenovec
Hey, one thing I want to just point out, Jay, is that it looks like they're talking about seeing a fourth quarter adjusted gross margin of 36.5%. Third quarter adjusted gross margin was 40% against an estimate of 36.1%. Is that the number you were looking for?
- [42:14]
Max Chafkin
Yeah, but there's a lot of adjustments in there, so I haven't worked through.
- [42:17]
Tim Stenovec
Them all, to be honest. Okay. Hey, listen, listen. This is a company that's been around for a long time. You know, you're entrenched in how you were what you were different executives coming in to try and right this ship. You know, it's a big ship to turn while also facing lots of growing competition. Do you feel like it is in the right direction?
- [42:41]
Max Chafkin
I think it's too soon to tell. I really hope it's in the moving in the right direction, but it's too soon to tell. Like what are they going to do with those fabs?
- [42:49]
Hakeem Jeffries
Right.
- [42:49]
Max Chafkin
And you know, I've been saying for years that Intel's biggest challenge is not external competitors or customers. Their biggest challenge is internal and fixing their culture on that. Mark, I think this is a step forward. Lippu, he has a plan and he's chipping away at this internal problem. But they really have to readjust their worldview internally and understand that they're not the dominant player that they were for 20 years. They're the upstart now and they got to act like it.
- [43:17]
Carol Massar
Jay, we spent a good portion of our program earlier talking about economic statecraft and the new role the US Government is taking in companies. The reporting around, potentially investing in some of these quantum companies. We of course have the intel among the US Government being among the biggest shareholders in Intel. US Steel, the golden share there, the critical minerals and mining companies that have taken investment or had interest expressed in them. From an intel perspective, how does the US Government investment change Intel?
- [43:52]
Max Chafkin
I think it is going to encourage other US chip companies to consider working with Intel Foundry. Right. Because you know, Nvidia's already invested in it, SoftBank's invested in Intel. Now do we see Apple or Amazon or Google or one of these other other potential intel customers sign up to work with Intel Foundry, take that risk, but because it could be seen as patriotic.
- [44:15]
Carol Massar
Well, that's okay. I'm glad you said that. Do they do it because it's the right thing for their business, because it's the best option for a foundry, or is it because it shows the Trump administration that they're supporting a business that the administration has invested in?
- [44:30]
Max Chafkin
So I think it can be both.
- [44:31]
Ira Boudway
Right.
- [44:32]
Max Chafkin
My view is that these companies need to work with Intel. They need to see Intel Foundry succeed. Because if they abandon Intel Foundry today and intel abandons it entirely, what happens in five years when they're, you know, TSMC has an effective monopoly today. In five years they'll have a true actual monopoly and that's going to be really challenging for all these companies. And so it's hard in the way that companies work. They're thinking on 90 day cycles. Somebody needs to be thinking of the 5, 10 year time horizon and maybe the government is the forcing function that gets us there.
- [45:07]
Tim Stenovec
You know who thinks in more than five or ten year cycles? A little country named China. They're pretty good about those long term plannings. Just having some fun with you, Jake. Well, having said that though, you know, on the other hand, are there companies are saying, I don't get involved with anybody who's involved in the government because just like the way the US Government for a long time has been or, you know, U.S. investors have been critical of, you know, sovereign held entities, you know, in other countries. So is there some, you know, justification in that as well? Or should we just assume that intel now has a massive, you know, backup called the US Government?
- [45:50]
Max Chafkin
So I think everybody's a little bit uncomfortable with the US Government taking stakes in companies. Everyone I know on Wall street, everyone I know in the Valley, just a little bit uncomfortable about it, sort of ideologically, it's not something we're used to. It's clear that the US Is moving towards some kind of national industrial policy. This is one way to achieve that. I'm not sure taking a stake in it is quite the right way to do it. But you know, there are merits for being a little bit more somewhere in between the government controlling everything and the government doing nothing. Maybe there's a happy medium we can.
- [46:25]
Tim Stenovec
Find hey, 30 seconds on the call or you're sitting down with intel execs. What do you want to ask them?
- [46:31]
Max Chafkin
Just quickly, what are you doing with Foundry?
- [46:34]
Tim Stenovec
Okay, that was great. So appreciate it. Jay Goldberg, Thanks. Have a good evening. Senior Analyst, Semiconductors and Electronics at Seaport.
- [46:42]
Carol Massar
Research Partners this is the Bloomberg Business Week Daily podcast available on Apple, Spotify and anywhere else you get. Your podcasts listen live weekday afternoons from 2 to 5pm Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch Watch Us Live Every weekday on YouTube and always on the Bloomberg Terminal.
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Tim Stenovec
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Carol Massar
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