← Bloomberg Businessweek
Loading summary
Transcript140 lines
- [00:00]
Carol Massar
Pinpointing the genetic changes that predispose us to disease, identifying the roots of mental illness, treating congenital anomalies even before birth. At Boston Children's Hospital, we're investing in children's health today to ensure the well being of adults tomorrow. As home to the world's largest pediatric research enterprise and more than 260 specialty programs, Boston Children's is where the world comes for answers. The learn more@bostonchildrens.org running small and medium sized businesses is hard work Business owners need to be sure their ads are working just as hard as they do. Amazon Streaming TV ads makes your marketing dollar work harder With Amazon ads, trillions of insights help small and medium businesses reach the right customers that matter. Your ads will show up during the shows the people are actually watching and measurement tools show you what's working the hardest. Gain the edge with Amazon ads, your.
- [00:59]
Tim Stenovec
Next product launch is coming fast. Don't let billing slow you down. Legacy systems can't handle usage based billing.
- [01:05]
Bloomberg Announcer
That means your team is stuck gluing code together, piecing through spreadsheets and running ad hoc queries just to figure out what to bill. With Metronome, you can roll out new.
- [01:14]
Tim Stenovec
Pricing in minutes instead of months, whether.
- [01:17]
Bloomberg Announcer
It'S usage based, seat based or a hybrid model.
- [01:20]
Tim Stenovec
Visit metronome.com to see how companies like OpenAI and Anthropic launch billing as fast as they launch products.
- [01:26]
Bloomberg Announcer
That's metronome.com.
- [01:31]
Carol Massar
Bloomberg Audio Studios Podcasts Radio.
- [01:35]
Bloomberg Announcer
News this is Bloomberg 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 Business Week Daily Podcast with Carol Massar and Tim Stenevc on Bloomberg Radio Radio.
- [02:01]
Carol Massar
Let's stay with that visual because we are seeing President Trump and Israeli Prime Minister Benjamin Netanyahu at the White House shaking hands, just spending close to 45 minutes, 50 minutes at the podium. President Trump speaking for about a half an hour there but talking about a deal between the really laid out by President Trump the White House a 20 point plan designed to end the war between Israel and Hamas in Gaza following a meeting earlier today between President Trump and Prime Minister Benjamin Netanyahu. There were a lot of points discussed, but I would think it's safe to say, Tim, that there are still some big questions out there. And I thought it was interesting what Prime Minister Benjamin Netanyahu said at the end, President Trump saying maybe not appropriate to take questions. We'll have enough Time for questions. And I think it's safe to say that the Prime Minister agreeing with that, that we have to get the deal done and then we'll have time for questions.
- [02:59]
Tim Stenovec
Yeah, they spoke for from 227 to 309, Wall street time, Washington D.C. time. The president, as you mentioned, said it's not appropriate to take questions on the Gaza plan, despite there were many hands raised in the room from journalists, both Israeli journalists and American journalists there who were looking to have some questions answered. Prime Minister Benjamin Netanyahu said, I support President Trump's plan to end the war in Gaza. And the President said this will be Netanyahu's crowning achievement if the deal works. I think the biggest takeaway though is that there's still not, is there is still not approval of this plan by Hamas. And you'll notice there were only two podiums there. It was just President Trump and Prime Minister Netanyahu. There was nobody from Hamas there to either weigh in or to say whether or not they agreed with this plan.
- [03:45]
Carol Massar
Yeah, I mean there was no third podium there. The president, President Trump that is saying that Hamas may reject it. No one really knows what the future holds for Palestinians specifically. And he also went on to say that if Hamas is not dealt with, Israel has the full US Backing. Israel would have my backing to finish the job. He said that and we heard that several times, though not quite finished. Have to get Hamas to accept. And both Tim and I kind of perked up as Prime Minister Benjamin Netanyahu went through their five point plan that they have had. He said the 20 point plan from President Trump consistent with a plan that the Israeli Prime Minister has had a five point plan for the day after an end to the war and into Hamas. But what he said included Israel retaining security responsibility, will retain a security, security perimeter for the foreseeable future.
- [04:35]
Tim Stenovec
So what does security perimeter mean? Because many would argue that before that that's what Gaza has looked like. There was a security perimeter around the Gaza Strip for many years until today. Now there is certainly security responsibilities of Israel has security responsibilities in the region. Now the other question, Carol, is about what the ultimate end goal here is. And at the end of that plan there, there is a mention of a eventual independent. I don't want to use the term state. They do say I don't have the plan in front of me right now. But they, but they do talk about some ultimate.
- [05:13]
Carol Massar
Well, it does say number 19 out of 20 while Gaza redevelopment advances and when the PA reform program is fully, faithfully, excuse me, carried out. The conditions may finally be in place for a credible pathway to Palestinian self determination and statehood, which we recognize as the aspiration of the Palestinian people. I think it's safe to say that we need to find out where Hamas is on all of this. And then there are several state steps in order to see any kind of statehood. We know just coming off of the UN General assembly, which was held last week here in New York City, that I think it was more than 140 leaders and then some signing on to recognize a statehood, a Palestinian statehood. So global leaders have increasingly been weighing in as Israel has increasingly lost the support of the global leaders or leadership, if you will.
- [06:03]
Tim Stenovec
I want to bring in Dan Williams. He is Bloomberg News reporter based in Jerusalem. He joins us from Jerusalem right now. I know he was watching this very closely. Do you think that Hamas will agree to these 20 points? Dan, hi.
- [06:17]
Dan Williams
Good afternoon. Yes, an exciting turn of events, something we were all anticipating just to liven things up from my part of the world. Just 10 minutes ago, Gaza is about 50 kilometers to my rear and I heard two large explosions. The military operation there continues apace. I don't know if those were airstrikes. I don't know if they were the deliberate detonation of APCs packed with explosives in order to clear pathways for tanks. I don't know if it was the detonation of Hamas tunnels or bunkers. But in any event, there is a military option being pursued by Israel. And as you noted, what apparently is happening is this is a very detailed take it or leave it offer to Hamas to step down consensually, to hand over those hostages without a fight, to give over its guns and effectively to clear out. And although I imagine that the bulk of Hamas members would be given some sort of amnesty, a kind of local version of de Ba', athification, which we saw with limited success in Iraq back in the day. So yes, this is a plan that has been hatched by an impatient US President, by an exhausted Israeli prime minister. It will, I suspect, have the support of the majority of Israelis, including those who want to see Netanyahu gone for various reasons, simply because this has been a war of record length with record costs for Israelis. It's certainly been very, very costly for Palestinians in Gaza. That territory has largely been laid waste. But they had only more ruination to anticipate in the absence of a deal like this, because Israel is dead set on churning through the remaining 20% of the Gaza Strip that it has yet to run through thoroughly with its Ground forces both above and underground. That means further displacement of those who have yet to be displaced. And I think there's an appeal here to the survival instincts of Hamas. If not as an institution, Hamas as a governing armed institution in the Gaza Strip would effectively cease to be. But on an individual basis, some Hamas members may simply understand that it's game over and it's time to save their lives and accept whatever offer of immunity they're given. It's no mistake that this press conference, this news conference, was prefaced by an ice breaking, a conciliatory conversation between the Israeli prime minister and the Qatari leader. Now, the Qataris are calling this an apology by Israel. The Israelis and the Americans are calling it a voicing of regret by Israel over that September 9th airstrike on a Hamas delegation, the senior Hamas delegation in the Qatari capital, which killed a Qatari security officer, including in a small number of more junior Hamas officials. It would appear that all sides are looking to Qatar now that that overture has been done formally and openly by Israel to do everything it can to pressure Hamas into accepting. Hamas does owe Qatar a lot, that it's its main foreign base and Qatar wields a lot of clout here. So the real question is how Hamas will respond, whether Qatar will help bring it to the table and bring this over the line.
- [09:30]
Carol Massar
Well, that's what I'm curious, Dan. You know, we make note of two podiums, not three. Who was speaking for Hamas, who was speaking for Palestine? And I'm just wondering, is that still kind of a significant hurdle in this actually advancing? Because the way you laid it out, I thought it was very significant, what you just said, very detailed offer to Hamas to take it or leave it, that it's time to kind of clear out. Some members of Hamas may realize it's game over. So is that, is it kind of moments of desperation for Hamas at this point, or again, is it still a significant hurdle that there wasn't a third podium up there, someone speaking for the people of Palestine?
- [10:13]
Dan Williams
Well, as long as Hamas is listed as a terrorist organization by the U.S. state Department, as long as it preaches the destruction of Israel, it will not appear at a podium at the White House or most other places in the west, certainly not in Israel alongside the Israeli prime minister. As for the alternative Palestinian leadership, which has limited governance in the west bank, we've seen what Israel and the Trump administration think of its moves toward recognition of Palestinian statehood. They haven't been happy with that at all. So they're in rather bad odor Both in Washington and Jerusalem right now. So again, I think the appeal is here to a survival instinct. Hamas does not need to turn up in the White House to take what effectively would be a lifeline, at least for most of its members, and also, as I said, for the stakeholders, Qatar, Turkey, Egypt, to step in and do what remains of the work here.
- [11:06]
Tim Stenovec
So I know we can't see the future, we can't have you predict the future, but if Qatar is involved in this, if Hamas leadership is involved in this, is this, in your view, a deal that Hamas will take.
- [11:25]
Dan Williams
Given the level of destruction, given the level of suffering? If I have time, can I share an anecdote, please. I was just reading. I believe it's just come out in English. The account by Eli Shirabi is one of the former hostages. Memorably, he came out extremely gaunt, emaciated about five months ago. Only discovered after he was released during a truce that his wife and two children, his British born wife actually and two daughters, had been killed on October 7th. He didn't know this. He was separated from them, taken into captivity. It's a very cold eyed account of what it's like being in captivity, very unsentimental. He recounts at one and he got to know his captors very well. He lived with them for over a year. Two of them received orders from Hamas to go above ground and join the battle and they wept. They were not happy about that. They preferred the relative safety of being underground to the almost certain death of facing off with Israeli forces above ground. That suggests that at least some members of Hamas are ripe for a deal that would offer them survival, perhaps to turn a new page. And I think that's what's being banked on now. It's worth remembering that the ideological core of Hamas, the leadership, certainly the senior leadership, the middle leadership, have effectively been eliminated by Israel. There's one surviving leader from October 7th. He's now the overall leader of Hamas in the Gaza Strip, having been field promoted effectively twice after those senior to him were assassinated by the Israelis. So it may well be. And by the way, he had words with one of his Israeli captors, a woman who was shown on TV last week and said that that man, the overall leader of Hamas in Gaza now told her that if offered safe passage, immunity, he might be open to a deal with Israel. It's hard to know what to make of that because she spoke to him around a year ago. Hard to know if that account is true, if it still holds now. Nonetheless, the idea that this group is a Monolith, that it's not feeling the pain that all Palestinians are feeling in Gaza is, I think, a mistake. To address one of your points earlier, one of you raised the question about the security perimeter. Indeed there was a security perimeter, effectively a buffer zone around Israel's border with Gaza, which specifically, spectacularly failed on October 7th. What it did not include was an Israeli control of the Philadelphia corridor, the border between Egypt and Gaza, where the Israelis say Hamas received much of its weaponry, its military grade weaponry in recent years. According to the map issued by Trump this evening, this afternoon, Israel would retain that border with Egypt. It appears the Egyptians are okay with that. Like much of the Muslim and Arab world, all those leaders who consulted with Trump only a few years, a few days ago about this deal, that is a significant difference. Effectively, the Israelis, Israelis who are now very cautious and very hawkish about any threat along their borders, have effective control around the entire perimeter of the Gaza Strip for the foreseeable future. That would effectively let whatever next, whatever succeeding Palestinian administration comes about would give it some space to develop, but under strict Israeli control and the strict Israeli surveillance. The idea being that this would be an utterly demilitarized and as he's really put it, a de radicalized day after Gaza population. Time will tell if that will be possible. Much will depend obviously on the success of rehabilitation of what is a spectacularly wrecked piece of territory.
- [14:43]
Carol Massar
So, Dan, what would you expect to happen next? I mean, obviously the clock is already tipping when it comes to the release of the hostages. We've already heard about 72 hours. So I'm just curious, what are you going to be watching for next? Just quickly, Hamas's position.
- [15:00]
Dan Williams
We could hear about it a minute from now, could hear about an hour from now. We could hear about it tomorrow. There may be a Hamas rebuttal, a guarded, measured acceptance, but with lots of caveats and requests for a rewriting. There may be a back and forth here. I don't think the Americans or the Israelis have much of an appetite for a back and forth. This is a very detailed, very articulated plan. It was clearly worked on with great care by very, very Sen. Members of the staff and actually including Trump and Netanyahu himself, I'm not sure they'll be open for a great degree of re editing, relitigation, a rewriting, an addition of too many clauses here. I think there's also a ticking clock and this is on the periphery of the main concerns of those who want to end the war. And I think universally everyone wants this war to end, but on their terms. It's worth remembering that next week is traditionally when the Nobel Prize Committee announces its choice for the recipient of the Peace Prize. I think Trump would very much like to be named for that. And indeed the Israeli prime minister has already put his name forward to the Nobel Committee for that prize. And I think he would very much like to see this deal in hand and concluded by then. Also, next week is the second anniversary of the October 7th attacks. We're just over a week away from now. I think certainly the Israelis, certainly Netanyahu, pretty much everyone would like to see this war concluded before it becomes the two year old war. Definitely the longest war in Israel's history and certainly the most painful war for Israelis in recent memory, certainly for Palestinians in the Gaza Strip and for those on the other fronts that it ignited over the last two years.
- [16:39]
Carol Massar
Dan Williams, our reporter there in Jerusalem here at Bloomberg News, thank you, Dan, so much. And let's of course remind everybody that October 2023 Hamas attack on Israel that triggered the war. Hamas militants killed 1,200 people in that assault. They kidnapped another 250 and we've also seen 66,000 Palestinians killed. That's according to the Hamas run health ministry in Gaza.
- [17:02]
Tim Stenovec
Stay with us. More from Bloomberg businessweek Daily. Coming up after this.
- [17:10]
Carol Massar
Pinpointing the genetic changes that predispose us to disease, Identifying the roots of mental illness, Treating congenital anomalies even before birth. At Boston Children's Hospital, we're investing in children's health today to ensure the well being of adults tomorrow. As home to the world's largest pediatric research enterprise and more than 260 specialty programs, Boston Children's is where the world comes for answers. Learn more@bostonchildrens.org.
- [17:41]
Bloomberg Announcer
From providing extra support during busy seasons to replacing vacant roles, you need Express employment professionals on your team. Express can handle everything from contract placements to finding the right full time team member. Solve your workforce challenges when you let Express deal with the workers compensation, payroll, benefits and more so you can concentrate on what really matters growing your business. Go to expresspros.com if you've never used a staffing company, here's how Express has helped businesses like yours to balance their workforce to meet production demands. Reduce stress and burnout, which reduces turnover. Access a local talent pool ready to work for all types of jobs and a variety of reasons. Choosing Express employment professionals is the move to make this year with more than 870 locations. Find the one near you@expresspros.com that's expresspros.com in business.
- [18:41]
Tim Stenovec
They say you can have better, cheaper or faster, but you only get to pick two. What if you could have all three at the same time? That's exactly what Cohere, Thomson Reuters and Specialized Bikes have since they upgraded to the next generation of the cloud. Oracle Cloud Infrastructure OCI is the blazing fast platform for your infrastructure, database, application development and AI needs where you can run any workload in a high availability, consistently high performance environment and spend less than you would with other clouds. How is it faster? OCI's block storage gives you more operations per second cheaper. OCI costs up to 50% less for computing, 70% less for storage and 80% less for networking better. In test after test, OCI customers report lower latency and higher bandwidth versus other clouds.
- [19:33]
Bloomberg Announcer
This is the cloud built for AI.
- [19:35]
Tim Stenovec
And all your biggest workloads right now with zero commitment. Try OCI for free. Head to oracle.com strategic that's oracle.com strategic.
- [19:46]
Bloomberg Announcer
You're listening to the Bloomberg Business Week 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.
- [20:00]
Tim Stenovec
Looking at shares at Carnival Cruise Lines Carnival Corporation session down to 4.4%. Shares fell as much as 5.9% earlier in the session, reversing an earlier gain. I want to bring in Josh Weinstein, President CEO and Chief Climate Officer of Carnival Corporation. Josh, good to have you back with us. Out with earnings this morning. Record revenue adjusted earnings per share for the third quarter beat the average analyst estimate. The company raised its full year earnings forecast for the third straight quarter. You set at a record pace for forward bookings and improving net yields. What's going on with the stock today? Why are people selling?
- [20:36]
Josh Weinstein
I don't know. You know, to be honest with you, you gave some of the headlines and truly it's only, it's only some of the headlines. I mean we did set a record for, for demand for our yield and that was across North American brands and European brands Both coming in 4% higher year over year, which is great consistency. We also saw that that improvement was driven both by the ticket pricing and onboard spending. So all the trends that we have are really quite positive and it's all helped lead to 13% ROIC, something we haven't seen since, God about 20 years now. The highest operating income and EBITDA on a per unit basis that we've seen in 20 years record net income. So the teams are working hard and delivering over delivering and we'll continue, continue to try to do that, we're going.
- [21:24]
Tim Stenovec
To talk about all of that. Stifel, an analyst over at Stifel, pointing to a lower than expected fourth quarter net yields guidance. It's a measure of the amount of revenue you earn per available lower birthday. Are you just being conservative with this guidance? Because it sounds like things are going pretty well.
- [21:39]
Josh Weinstein
Yeah, things are going pretty well. It's consistent to what we said the guidance would be back in June if you backed into what the fourth quarter would be. As a matter of fact, we kept the second half overall consistent to where we were in December because we did experience a lot of volatility over the first half of the year given macroeconomic geopolitical events. But what we saw is, you know, we've outperformed every single quarter and that includes the third quarter. And we're going to work hard to try to outperform again. We're projecting yields in the fourth quarter that demand to be nicely over 4%, just like we ended the third quarter. So the trajectory is, the trajectory is good.
- [22:16]
Carol Massar
Josh, great to have you here. And I'm looking at your share price for the year, up almost 18%. So easily outperforming the broader market. I mean, what's going on with the consumer? You guys track the ins and outs of it in terms of bookings, what the spend is on the ship when they get off the ship. So I'm just curious, how do you characterize the consumer and who's, who's going on, who's jumping on board with you guys?
- [22:41]
Josh Weinstein
So I'd say the consumer is strong. I think that's a pretty consistent word that we've been using for the past couple of years. And, and yes, we do see ebbs and flows and we see gyrations in the backdrop in the macroeconomics. But at the end of the day, what we have to offer is a very, very amazing value to what you can get by doing any other type of holiday, any other type of vacation, and people pay for it. And the great thing is, even though they're paying more for our experiences than they did last year in before and the year before that, the gap to land based vacations is still huge. And so if there is a weakness and pullback in consumer sentiment, that bodes very well for us because people are looking to stretch their dollar even further and figuring out how do I get an amazing holiday because I need one and spend, you know, as, as thoughtfully as I possibly can. And we turn out very well when you line us up against the alternatives.
- [23:39]
Carol Massar
What's cool about talking with you. And I know Carnival is your big brand, but I mean you have multiple brands and I know you've consolidated in terms, in terms of some of the groupings. But are you talked about positive momentum on all of the brands or is there one in particular that you're really seeing some standout activity?
- [23:57]
Josh Weinstein
Well, you know, we have a, as I said in my notes this morning, we have an internal leaderboard obviously with our, with our eight world class brands and we encourage the competition and everybody sees who's on top of and who's marching forward. And you know, the two strongest brands on top of our leaderboard of returns are Carnival Cruise Line, which is America's cruise line, and Aida Cruises, which is, which is the equivalent in Germany. And the great thing is as strong as they are and as high as they are, they're looking over their shoulder because everybody is making improvement year over year. And that stretches across both North America and, and Europe as well. And the great thing is, despite the fact that we're showing so much improvement, only about half of our brands are back to where they were in returns since before our pause before 2020. Only half of them are at their historical peak. So I know the latent demand, pardon me, the latent potential that is in our brands. And they are, they are marching forward at pace and you can see the results on a unit, on a consolidated basis for the corporation.
- [25:01]
Carol Massar
Josh, one of the things we always talk about is, and we have folks here who are, they do one cruise, they do another cruise, they do another cruise. And I've been on a Carnival ship.
- [25:10]
Tim Stenovec
Where you're talking about Charlie Pell.
- [25:12]
Carol Massar
I am, I am. But I've been on an elevator where I've talked to people in the elevator and they're like, yeah, you know, this is our 10th cruise or our 5th cruise. I am curious, what's the mix between new passengers who are experienced Carnival for the first time versus those who are coming back for a second, third, fourth, fifth, whatever time on one of your ships.
- [25:31]
Joyce Wong
Relationships.
- [25:32]
Josh Weinstein
Yeah, so, so I'll speak holistically and then I can get a little bit more specific. But holistically, we got about a third of our guests at any one time are going to be new to cruise and the remainder is going to be a mix of brand loyalists and those who cruise in general and they might go on various brands and they're back on board one of our ships, one of our brands. It really is dependent on the profile of the brand and the cruise because there is a Huge difference between, between a three nighter quick getaway for the weekend out of Miami and going on a Cunard ship for 120 night world cruise. And you can imagine there's much more loyal guests on the 120nighter and much more first timers on a three night weekend type of getaway. And the thing to keep in mind for us because we have very, very measured capacity growth, we have no new ships next year, we only have one new ship a year for the next several years thereafter going to Carnival Cruise Line and then shift shifting a little bit to aid as well. Our capacity profile is such that we're not looking for first timers because we need first timers to fill this, this hole that we see on the horizon. We're in very strong shape and we're looking for loyalists and newcomers alike and whoever wants to spend what we're looking to charge to get on our ships.
- [26:46]
Tim Stenovec
Josh, I want to have a quick corporate finance question with you because you said something on the call that got my interest and I know a lot of interest from investors. Years leverage is now down to 3.6 times net debt to EBITDA. You'll be able to return cash to shareholders when that metric gets to 3.5%. Can you give more color here on the size and scope of that? Just 30 seconds, what a dividend would look like, what buybacks would look like and when exactly that would happen.
- [27:09]
Josh Weinstein
Well, what we said on the call this morning is, you know, we finally got that line of sight to three and a half times. And from a pro forma perspective, after we do a couple of things that we talked about on the call, we expect to get to that three and a half times, you know, very early in our fiscal 2026. And that really gives us freedom to not only continue to responsibly delever, but also start that process of returning cash to shareholders. Having a dividend is very important to us. Historically we've been a dividend paying company and we, we know that that opens new doors for investors. It gives ongoing yield and that's a great thing for a company, company to be able to guarantee to its shareholders. So that, that is really priority one after that continuing deleveraging. And that will happen in early 2026 and that will follow alongside buybacks, I'm sure in due course. But that's something that is really a board discussion that we're going to take on over the coming months with our board.
- [28:04]
Carol Massar
We got to run. Thank you so much as always.
- [28:07]
Tim Stenovec
Stay with us. More from Bloomberg Businessweek Daily Coming up after this.
- [28:16]
Bloomberg Announcer
From providing extra support during busy seasons to replacing vacant roles, you need Express employment professionals on your team. Express can handle everything from contract placements to finding the right full time team member. Solve your workforce challenges when you let Express deal with the workers compensation, payroll, benefits and more so you can concentrate on what really matters growing your business. Go to expresspros.com if you've never used a staffing company, here's how Express has helped businesses like yours balance their workforce to meet production demands, reduce stress and burnout, which reduces turnover. Access a local talent pool ready to work for all types of jobs and a variety of reasons. Choosing Express Employment professionals is the move to make this year with more than 870 locations. Find the one near you@expresspros.com that's ExpressPros.com.
- [29:14]
Joyce Wong
In the heat of battle, your squad relies on you. Don't let them down. Unlock elite gaming tech@lenovo.com Dominate every match with next level speed, seamless streaming and performance that won't quit and push your gameplay beyond limits with Intel Core Ultra processors. That's the power of Lenovo. With intel inside, maximize your edge by shopping@lenovo.com during their back to school sale. That's lenovo.com lenovo Lenovo.
- [29:47]
Dan Williams
If you're waiting for your AI to turn into ROI and wondering how long you have to wait, maybe you need to do more than wait. Any business can use AI. IBM helps you use AI to change how you do business. Let's create smarter business IBM.
- [30:16]
Bloomberg Announcer
This is the Bloomberg Business Week 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.
- [30:34]
Carol Massar
All right, that is certainly a busy day out of Washington. And there was something that actually started happening on Friday, late Friday that caught our attention and we finally got confirmation really today in terms of a deal.
- [30:47]
Tim Stenovec
Yeah, it's a parent company of, well, the maker of Battlefield, the Sims, Madden NFL. Carol's favorite, I think is Battlefield Total, it's Electronic Arts. It's agreed to sell itself to Saudi Arabia's sovereign wealth fund in a pair of private equity firms. It's a deal that values the company around $55 billion. It would be the largest leverage buyout on record. We got Liana Baker with us, managing editor of the Deals team for Bloomberg News. She joins us here in the Bloomberg Interactive Brokers studio. I want to start on the Deal. Because. Well, I want to really just, just talk about the deal because there's a lot notable in here. The size, the source, Middle east, sovereign wealth. There's been a lot of that lately. What do we need to know about this?
- [31:23]
Liana Baker
Well, Battlefield 6 is coming out October 10th.
- [31:26]
Tim Stenovec
Oh, Mark.
- [31:28]
Carol Massar
And my.
- [31:29]
Josh Weinstein
Yeah.
- [31:30]
Liana Baker
So there's just so much to unpack here. You mentioned that a pair of private equity firms have partnered with Saudi Arabia's sovereign wealth fund. And one of them was started by Jared Kushner, the, you know, president's son in law.
- [31:40]
Tim Stenovec
He was referenced in this press conference just in the last couple hours.
- [31:44]
Liana Baker
So I guess he's a big video game fan and his. Well, actually, I don't know that for sure, but his firm has ties to Middle east investors, including the Saudis. And so it's not hugely surprising that he'd be involved. Although it is a bit surprising to us, you know, deal watchers that he'd be involved in such a big M and a deal. Silver Lake is the other private equity firm, which we know well, they've also been in the news because they're involved in this US Tick tock deal. But they're more of like, which also.
- [32:15]
Tim Stenovec
Has a sovereign wealth fund from the Middle east too.
- [32:17]
Joyce Wong
Right.
- [32:18]
Liana Baker
So it's. All worlds are colliding with, you know, dealmaking in the Trump era. But there was also, you know, banks involved, Wall street. We have Goldman Sachs with EA and JP Morgan helping finance the deal with this group of investors.
- [32:33]
Carol Massar
A lot of hands in the pot, it sounds like. Give me. I think I thought I said that there was an assumption of about 20 billion in debt, but forgive me.
- [32:40]
Liana Baker
So JP Morgan has put together a $20 billion financing package. There's still details to work out of. Exactly, you know, what kind of debt it is, you know, getting into the details, but it looks like it's bank debt, which is a good sign that we're seeing, you know, the, the markets open and for lending open to see the largest leveraged buyout of all time with bank debt.
- [33:01]
Tim Stenovec
Not private credit.
- [33:02]
Liana Baker
No private credit that I could see.
- [33:04]
Josh Weinstein
Okay.
- [33:04]
Carol Massar
Is it manageable? Because this is a company that's been dealing with some things, right. And seeing some slowing growth and taking measures. I mean, is this manageable debt? And I mean, obviously once you are out of the public eye and you're not and you don't have to deal with those quarterly results, like you can do things, but is this enough and are they going to be able to manage kind of the financial structure of this?
- [33:27]
Liana Baker
So we'll have to see, but definitely bankrolled by the Saudis. And also just having you mentioned not being in the public eye, but this is a company that also makes money. This Battlefield 6 game that I joked about like that could make hundreds of millions of dollars when it comes out these things, you know, it's like a temple blockbuster movie when these games come out. So this is a real company founded in 1982, based in Redwood City and they, you know, have thousands of employees and they're all hard at work on different games. And our my colleague who covers the video game industry was telling me that a lot of EA's revenue comes from live services. So that's buying virtual costumes for your avatar, which I'm sure you do.
- [34:12]
Carol Massar
So like I don't but Tim does when he is playing.
- [34:16]
Liana Baker
So they've created a services business and that's, you know, sticky revenue. And it's not just going to, you know, what's left of GameStop to buy.
- [34:25]
Carol Massar
The latest for your avatar.
- [34:27]
Tim Stenovec
Well, if you get the game for free and in app purchases or what.
- [34:30]
Carol Massar
Do you really care what they're wearing?
- [34:32]
Tim Stenovec
Carol? I don't.
- [34:33]
Carol Massar
Does anybody in there?
- [34:34]
Tim Stenovec
Yes, a lot of people. Well, a lot of people care about that stuff.
- [34:38]
Liana Baker
So yeah, you know, I haven't, it's all but virtual. But the point is like think how profitable.
- [34:44]
Carol Massar
I know, I know the margins, I'm having fun. But it's but it right. And there is momentum around it. Like people care people. I shouldn't make fun because I know a lot of people like to play these games and they're big business.
- [34:54]
Liana Baker
So do the sports games, which is an interesting angle.
- [34:57]
Carol Massar
Should we assume that they're going to like sell this off and go public in a few years? Because there are investors just quickly.
- [35:02]
Liana Baker
It's funny that you mentioned that.
- [35:03]
Carol Massar
So just quick.
- [35:05]
Liana Baker
They have so many other video game companies that like they maybe they merge them all together. We don't have the reporting but that's just something to watch. This empire of Saudi backed video game.
- [35:15]
Carol Massar
Companies, typically you take it public, you take it private and maybe do something down the road. Liana Baker, thank you. Thank you. Managing editor of the Deals team for Bloomberg News here in our Bloomberg Interactive Broker studio. Check out the story.
- [35:26]
Tim Stenovec
Stay with us. More from Bloomberg businessweek Daily coming up after this.
- [35:36]
Bloomberg Announcer
From providing extra support during busy seasons to replacing vacant rolls, you need Express employment professionals on your team. Express can handle everything from contract placements to finding the right full time team member. Solve your workforce challenges when you let Express deal with the workers compensation, payroll, benefits and more so you can concentrate on what really matters. Growing your business. Go to expresspros.com if you've never used a staffing company, here's how Express has helped help businesses like yours to balance their workforce to meet production demands Reduce stress and burnout, which reduces turnover Access a local talent pool ready to work for all types of jobs and a variety of reasons. Choosing Express employment professionals is the move to make this year with more than 870 locations. Find the one near you@expresspros.com that's Express Pro.
- [36:34]
Joyce Wong
In the heat of battle, your squad relies on you. Don't let them down. Unlock elite gaming tech@lenovo.com Dominate every match with next level speed, seamless streaming and performance that won't quit and push your gameplay beyond limits with Intel Core Ultra processors. That's the power of Lenovo. With intel inside, maximize your edge by shopping@lenovo.com during their back to school sale. That's Lenovo lenovo.com.
- [37:06]
Dan Williams
So your AI agents, they make the team that uses them more productive, right? But if they aren't connected to other agents or your data or your existing workflows, how productive can they really make your teams? Any business can add AI agents. IBM connects your agents across your company to change how you do business.
- [37:28]
Tim Stenovec
Lets create Smile to business IBM.
- [37:35]
Bloomberg Announcer
You're listening to the Bloomberg Business Week 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.
- [37:49]
Carol Massar
I'm driving in my car.
- [37:51]
Joyce Wong
How about you let me drive?
- [37:52]
Dan Williams
How do you.
- [37:53]
Joyce Wong
No, no, no, no.
- [37:54]
Josh Weinstein
This is not a toy.
- [37:55]
Carol Massar
Who's going to drive you home?
- [37:57]
Bloomberg Announcer
Honey, please. I'll do the driving.
- [37:59]
Carol Massar
Drive on.
- [37:59]
Joyce Wong
Excuse me?
- [38:00]
Carol Massar
I want to drive. It's the question that drives us. This is the drive to the close.
- [38:10]
Tim Stenovec
That funky music will drive us till.
- [38:12]
Carol Massar
The dawn on Bloomberg Radio. All right, Everybody, just about 19 minutes to go until we wrap up the trade on this Monday. In fact, we're almost ready to wrap up the trade for the third quarter. We're getting ready to kick off the fourth quarter. Just one more day of trading. But having said that, we've been bouncing around on the equity trade. You just heard from Bill and Alexis. Just up about 15 points on the S&P 500, a gain of about 80 on the Dow Jones Industrial Average and the NASDAQ 100, a gain of nearly 100 points. Tim Good. For a gain of about 4. 10 of a percent.
- [38:43]
Tim Stenovec
I want to Begin. Joyce Wong watching the fixed income market slow closely. She is senior client Portfolio manager for fixed income at A American Century Investments. The firm has around $300 billion in assets under management. She joins us here in the Bloomberg Interactive Brokers studio. I want to start big picture because the notes that you sent to our producer Ari says that your base case is stagnation, at least for the next six months. Why is that? It's better than stagflation, I guess. But why stagnation?
- [39:10]
Joyce Wong
Yes, exactly. I mean it's really an interesting environment right now where at the beginning of 2025 we were actually more in the full range recession camp. And as some of the different policies came in as Trump was inaugurated, our tune started changing. The economy has remained strikingly resilient. And so we still believe that given that we are seeing some cracks in certain segments of the consumer market. We know consumer spending drives 2/3 of GDP. It's interesting to see that we that some consumers are stressed. We expect that segment to slow leading the US Economy to slow but not slip into the full recession state. Because we do think also next year it's kind of give me a tale of two halves where the first half is going to be more like what we've seen slow below trend growth. Second half, there's a good chance that a lot of these stimulus things that have been passed through the one big beautiful bill that starts kicking in on shoring investment investments in the US more of the air spending that could all kind of come into play in the second half of the year and lead to the reacceleration.
- [40:18]
Carol Massar
So is is cutting rates more about helping those if you look at the K shaped economy, those on the lower economic, I guess status of our economy, Is that what that's about or how do you see it? Because it sounds like what the scenario you lay out. Joy says to me, do we really need to cut rates?
- [40:41]
Joyce Wong
Yeah, I mean we're definitely in the camp that we didn't think that the Fed was going to cut until we saw the softening in the labor market. So we finally started seeing that at the end of the summer. Let's see what happens with the shutdown and if we get the Friday jobs report on time. But we expect that to continue to soften and so the rate cut at this point was probably necessary. Now the question is how many more do we need? What is the appropriate terminal rate? And I think that's what is going to cause volatility in fixed income yields going into year end and first quarter.
- [41:17]
Tim Stenovec
You spent A lot of time on the road visiting clients. I'm wondering what you're hearing from them, what worries them? Are they worried about valuations? Are they worried about the macroeconomic environment? Or are they like you guys in the sense of, of. We thought it was going to be a recession at the beginning of the year. As these policies started to become clearer or at least less murky, we're more comfortable.
- [41:40]
Joyce Wong
Yes. I mean as a fixed income specialist, I've actually over the summer it was kind of quiet and then as the first rate cut became more and more evident that it was going to happen in September, people started calling me and they're like, wait, the four and a half percent I'm getting in money markets and CDs is, is likely to keep falling. All of a sudden I'm not going to be able to get such a nice coupon from that. What about bonds? And what's funny is when I talk to a lot of our clients who are thinking about getting back into fixed income, they're shocked when I tell them that intermediate core bonds are up 7% for the year. You know, you've gotten really strong returns in fixed income because of the attractive yield carry. So we believe now is a great time, time to put money to work that's been sitting on the sidelines in cash in t bills, CDs and move it into bonds.
- [42:34]
Carol Massar
Where, where along? I mean in terms of the US curve, where do you like? And then in terms of fixed income generally, what do you like, Joyce?
- [42:41]
Joyce Wong
Yeah, so we're big fans as active managers of the multi sector approach because you know, you see little blips of volatility. We know credit spreads in both IG and high yield corporates are close to all, all time tights, but there are these little blips, you know, like who knows what goes on. You guys are experts at, you know, different happenings every day in the news. But sometimes you'll just see some spread widening and our traders rpms will be active and be like this is a great opportunity to add a little more here to sell here. And you know, we like the shorter end of the yield curve because like we said, there's less unclear expectations about what's going to happen at this point. But on the long end, government shutdown, deficit questions that all still lingers. Lingering inflation that could push rates up.
- [43:31]
Carol Massar
Twos, fives, what do you like? How short?
- [43:34]
Joyce Wong
Yeah, so we are actually, we have been short the two. We are moving that short out the curve. So again we think that the two is likely to stay where it is, there is more risk in the intermediate and long end of the curve to go up, especially as we get closer and closer to this uncertainty that's happening.
- [43:54]
Tim Stenovec
When do we, you know, if you're saying that the base case is stagnation for the next six months, your view in the first half of the year is a little different. What changes that view for you?
- [44:06]
Joyce Wong
How we get out of the stagnation?
- [44:08]
Tim Stenovec
Yeah. If we have an incredible print from the big banks or in commentary from the big banks in just a couple of weeks, is that going to change your view about stagnation?
- [44:18]
Joyce Wong
You know, we still think that there's been so much pressure built up due to higher rates. Consumers are still under stress. If people are not getting new jobs, if wage growth isn't going to continue to accelerate and people are going to get let go, that's still going to cause pressure. Right. So we don't see there is a chance. Right. I mean, we assign about a 20% probability that we will see above trend growth. So there is a chance, but likely, the likely case is that we will likely see the, you know, average to below average growth in the U.S. i mean, when you look at the, you.
- [44:52]
Carol Massar
Know, treasury, it's amazing in terms of yields, like we've been, you know, closer to five, we've been close below four just recently. What's more likely moving up from here and closer to five or going back below four?
- [45:12]
Joyce Wong
Right. So we do think that's why we're starting to think about going short more. The intermediate part is that because of that go up, the only reason it would really drop below 4 is if we actually moved more probability into the recession scenario.
- [45:29]
Tim Stenovec
That's the concern that I think a lot of people have right now. Okay, so then what becomes more what, what moves you to make a recession more probable?
- [45:37]
Joyce Wong
I would have to say, you know, if we do get more pressure on the tariff situation, you know, like, for example, you know, I'm working on a kitchen remodel, so I was a little bit nervous about this 50% tariff on kitchen cabinets and upholstery. You know, so if there's different surprises like that coming out, out going into the holiday season, I'm really watching what's happening with consumers this holiday season. If people are going to continue to spend or if they're just going to add to the credit card debt, you know, that's something we haven't talked about is just the growing debt.
- [46:07]
Carol Massar
We just talked to the carnival CEO. They're very upbeat. Their bookings I mean all the, I mean the spend is on.
- [46:13]
Joyce Wong
Yeah, it's pretty remarkable on the card.
- [46:16]
Carol Massar
Well, there is that there is that a good way to end and that can, that can create some problems. Joyce Wong, thank you so much. Always fun to have you in studio. Senior Client Portfolio Manager at American century investments. Approximately 300 billion in assets under management.
- [46:31]
Bloomberg Announcer
This is the Bloomberg Businessweek 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 us live Every weekday on YouTube and always on the Bloomberg Terminal.
- [47:01]
Joyce Wong
In the heat of battle, your squad relies on you. Don't let them down. Unlock elite gaming tech@lenovo.com dominate every match with next level speed, seamless streaming and performance that won't quit and push your gameplay beyond limits with Intel Core Ultra processors. That's the power of Lenovo. With intel inside. Maximize your edge by shopping@lenovo.com during their back to school sale. That's Lenovo.com Lenovo Lenovo every day has a to do list, but adding Enjoy Belvita to yours can help you knock out the rest of it. Belvita Breakfast Biscuits are a tasty and convenient breakfast option when paired with low fat yogurt and fruit that provide steady energy all morning while Belvita Energy Snack Bites give you the perfect mid morning refuel. Best part?
- [47:52]
Bloomberg Announcer
They both taste great, so make the.
- [47:54]
Joyce Wong
Most out of your morning with a bite of Belvita.
- [47:57]
Liana Baker
Pick up a pack of Belvita at.
- [47:58]
Joyce Wong
Your local store today.
- [48:01]
Bloomberg Announcer
This is Jacob Goldstein from what's yous Problem?
- [48:05]
Dan Williams
Business software is expensive and when you buy software from lots of different companies, it's not only expensive, it gets confusing. Slow to use, hard to integrate.
- [48:14]
Bloomberg Announcer
Odoo solves that because all Odoo software.
- [48:17]
Dan Williams
Is connected on a single affordable platform.
- [48:20]
Bloomberg Announcer
Save money without missing out on the features you need.
- [48:23]
Dan Williams
Odoo has no hidden costs and no limit on features or data.
- [48:27]
Bloomberg Announcer
Odoo has over 60 apps available for any needs your business might have, all.
- [48:31]
Dan Williams
At no additional charge. Everything from websites to sales to inventory to accounting. All linked and talking to each other.
- [48:39]
Bloomberg Announcer
Check out Odoo at o d o o.com that's o d o o dot com.