November 29, 2023 • 50 mins
Bloomberg News Auto Reporter Keith Naughton discusses General Motors responding to critics of its unsteady push into electric vehicles and self-driving by showering shareholders with cash. Janine Iannarelli, Founder and President of Par Avion, shares her thoughts on the business of private aviation. Mitch Allen, Founder (and Head Elf) at Hire Santa, explains the high demand and low inventory for Santa “entertainers” this year. Bloomberg Businessweek Editor Joel Weber, Bloomberg Businessweek Investigative Reporter Olivia Carville and Bloomberg News Cybersecurity Reporter Margi Murphy provide the details of the Businessweek Magazine cover story Deepfake Pornography Victims Learn There Are No Laws to Fight It. And we Drive to the Close with Amy Magnotta, Co-CIO at Ategenos Capital. Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.
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Speaker 1 (00:00):
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Speaker 3 (00:36):
Is Bloomberg Business Week inside from the reporters and editors
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O Business finance and tech news. The Bloomberg Business Week
Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio well.
Speaker 4 (00:54):
Talking about kicking into high gear.
Speaker 2 (00:55):
The stock The buyback plan news early this morning from
General Motors, announcing it it's biggest ever stock buyback plan,
ten billion in total. It also boosted its dividend thirty
three percent. Tim and reinstated earning's guidance after accounting for
costs of its new labor contract.
Speaker 1 (01:10):
CEO Mary Barra promised to better days are ahead, stressing
confidence in the cast generation of GM, the execution of strategy,
and expectation of growth and strong margins. This carol despite
minimal EV sales, a troubled robotaxi business, and even more
trouble at its battery pack facilities that has kept EV
production in the low thousands.
Speaker 4 (01:28):
That's right.
Speaker 2 (01:29):
GM's ultimum battery pack was supposed to enable the company
to make multiple types of electric cars off the same
platform and beat competitors to market with a ton of vehicles.
Speaker 4 (01:39):
Here's more for Mary Barra.
Speaker 5 (01:41):
From an EV perspective, we have confidence in the portfolio
we have. We're a bit disappointed this year that we
were constrained by the automation to build modules. So this
is not something that is fundamentally an issue with Altium.
It was more manufacturing automation issue that we're working and
we'll be out of it by middle of next year
and making provement every quarter, all right.
Speaker 2 (02:02):
That, of course, was the CEO of General Motors Mary Barrow,
talking earlier today on Bloomberg. Let's get a little bit
more into this story. Bloomberg News auto reporter Keith Noughton
is on Zoom from Detroit.
Speaker 4 (02:14):
We love our auto team. They know this world so well.
Speaker 2 (02:17):
Keith. Good to have you here with Tim and myself.
How do you make sense of the news today? I
mean the stocks up, shares of General Motors up nine percent,
doing a massive buyback and boosting your dividend. I get
it why investors like it. But what does it say
about the business if this is the best use of money?
Speaker 6 (02:38):
Yeah, I mean it's really Mary Barrow kind of pleading
for patients in a very expensive fashion, of course, because
things have not been going so well on their technology bets.
As you noted, the EV ramp has been very slow
because of problems building batteries, and you know, Cruise, their
autonomous vehicle unit, has been a bit of a umpster
(03:00):
fire lately with all sorts of safety problems and the
CEO quitting abruptly a week ago. So and they're scaling
back because they're losing you know, seven hundred million dollars
a quarter at Cruise, so they really aren't getting the
payoff yet on these very large technology investments. As a result,
(03:20):
their stock's been down by double digits this year. So
this is a way to ask investors to give them time.
Speaker 1 (03:27):
Okay, so how much time do they need and what
do they need that time for? Because Ford is running
into similar issues when it comes to evs. The F
one fifty Lightning isn't selling like it was in previous quarters.
The mock e electric Mustang, same thing. It's there's there's
this uh sort of shift in the way that consumers
(03:49):
are thinking about EV's.
Speaker 7 (03:50):
What's going on, Yeah, there's a there's a few things
at work.
Speaker 6 (03:54):
One on the production side, the legacy automakers are discovering
what Elon Musk discovered a few years ago when he
tried to go to mass production with Tesla. You might
recall him describing that as production. Hell, well, that's what
the legacy automakers are in right now. They're discovering that
building electric vehicles is harder than building internal combustion engine vehicles,
(04:18):
and so there are a lot of hiccups in both
battery production and the EV production itself. That's one problem,
so they can't get them out the door of the factory.
The other problem is this demand issue you're talking about.
There's still you know, rising demand for electric vehicles, but
it has slowed considerably because we've gotten past the sort
of early adopters who are willing to pay anything to
(04:40):
have the latest and the greatest, and now we've gotten
to that broad middle of the market and folks are
bulking at the price of electric vehicles which are higher
than standard cars, and the charging infrastructure which is still
very spotty.
Speaker 2 (04:54):
In the Hey Keith our Bloomberg Intelligence team says the
move to offset the effects of higher costs from the
new year UAW contract adds confusion to GM's electrification electrification
strategy and is out of step with the practice of
conserving cash when demand is uncertain. Should they be conserving
cash right now?
Speaker 6 (05:12):
Yeah, Well, you know, the electric vehicle business at GM
and the other legacy automakers is just burning cash right now.
Speaker 7 (05:20):
So if you take ten billion.
Speaker 6 (05:21):
Dollars and diverted into a stock buyback, yeah, that's money
that could have been spent to try and write your
EV business or your autonomous vehicle business, either of those
they both consume billions of dollars. So it is a
good question to ask, is this the best use of capital?
Speaker 1 (05:39):
At this time, So what would be what are investors
saying could be better uses of capital?
Speaker 6 (05:45):
Well, you can try and you know, buttress your EV
production and strategy and model offerings so you can become
a legitimate competitor to Tesla, which still controls more than
half the market and makes money selling electric keeples.
Speaker 7 (06:00):
Keith, I just want to know.
Speaker 1 (06:01):
Sorry, I want to sort of like cut you off
with my own with another one of my own questions here,
So apologies. But there was an article over the weekend,
I believe, in the Wall Street Journal about hybrids and
the way that some companies now are are sort of
you know, they said, you know, evs aren't necessarily the
way that we think the future is going to work.
We think it's going to be hybrids. Where where are
Ford and GM on that.
Speaker 6 (06:22):
Board predicts that it's hybrid sales will quadruple over the
next four years, And they are pouring money into hybrids
now because they recognize hybrids are more cost effective and
they don't have the charging infrastructure issues, so they can
be this sort of bridge to electrification.
Speaker 7 (06:40):
So there's this.
Speaker 6 (06:41):
Renewed focus on hybrids out of Detroit and with a
lot of legacy automakers. Toyota never went away from hybrids.
They said the market wasn't ready for full EVS. Hybrids
is the first step you take on the electrification journey.
Speaker 2 (06:54):
Well, you did that great story for Business Week they
talk specifically about hybrids, and I thought it was really smart.
Speaker 1 (06:59):
I read it a business week before I read it
in the journal. Keith, I promise, okay.
Speaker 2 (07:03):
Everybody, everybody follows what our auto team does. I'm just
going to say that no, but it was so smart
because it used to be hybrids and then EVS took over.
But it was fascinating to hear the reporting that you
did about what we are seeing when it comes to
the hybrid market and the growth that we're seeing, and
you do wonder is that does that continue? And you
(07:24):
know it was I think early October that you did
that story. Do we continue to see demand in the
hybrid space?
Speaker 7 (07:31):
Thanks Carol for reading And.
Speaker 6 (07:35):
You might recall from that story one of the people
I interviewed was this dentist who has a mobile dental practice.
Speaker 7 (07:43):
She tows a trailer around.
Speaker 6 (07:44):
Well, you know, you just can't do that with an
electric pickup truck because it'll deplete the battery too.
Speaker 7 (07:49):
Fast. But guess what you.
Speaker 6 (07:50):
Can do it with a hybrid, which is what she has,
because having the electric motor and the eternal combustion engine
actually gives you more cork the thing you need to
pull a trailer. So there are many benefits to hybrids
that people are really kind of rediscovering or discovering for
the first time.
Speaker 7 (08:06):
And so and it does lower your carbon footprints, so it's.
Speaker 6 (08:09):
A way to stay and start moving in that direction
without any of the you know things you sort of
have to give up to EV's Amber Labardi, that's.
Speaker 8 (08:18):
How you did so well, go ahead, Kyl.
Speaker 2 (08:20):
Well, so do we need to be worried about General
Motor and their strategy.
Speaker 9 (08:25):
No.
Speaker 6 (08:25):
I just think it's going to take longer to get there,
and that's that's the issue. And there was you know,
we're sort of entering this trough of disillusionment on the
way the EV ramp is going to happen. It's it's
not linear. There's ups and downs and run it down.
Speaker 1 (08:39):
And does the does do hybrids provide that bridge or
do they displace evs.
Speaker 6 (08:45):
I think the way the industry views it, and particularly Toyota,
the hybrid leader, is that it is the bridge.
Speaker 7 (08:52):
You know, you just.
Speaker 6 (08:52):
Take that step into electrification and you live with that
in a way that there's fewer compromises, and hopefully during
that period and by the time you're ready for your
next car, the price of evs have come come down,
and there'll be more charging stations throughout the country, so
you don't have to worry about running out of juice
and having nowhere to plug in.
Speaker 2 (09:11):
I might have to have you talk to my husband
because he's waiting for hydrogen sales, fuel sales.
Speaker 8 (09:15):
How long is he gonna be waiting?
Speaker 9 (09:16):
Care?
Speaker 4 (09:16):
But he's like, that's the answer.
Speaker 8 (09:18):
I don't have a good question.
Speaker 2 (09:19):
Keith Noughton, you are amazing. Thank you so much and
highly recommend I'll put that story out that Keith wrote
back in October about the hybrid marker because it says
so much about what's going on right now.
Speaker 8 (09:30):
You send it to me too.
Speaker 1 (09:31):
I will want to appreciate it.
Speaker 2 (09:34):
If you could read a couple of stories you just kidding,
just kidding. Bloomberg's Keith Notton. Of course, he's Bloomberg News
auto reporter joining us on zoom from Detroit.
Speaker 3 (09:43):
You're listening to the Bloomberg Business Week podcast Catch US
Live weekday afternoons from three to six Eastern Listen on
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Speaker 10 (09:57):
Well.
Speaker 2 (09:58):
As pandemic worries have faded, the travel business has definitely
come soaring back, with airline traffic more than doubling since
its COVID era trough and waiting times for deliveries of
new commercial airplanes mostly stretching through the end of this
decade because of robust demand. But there is one travel
segment that seems a little bit stuck in a holding pattern,
and that is corporate owned jets so road.
Speaker 1 (10:17):
Bloomberg's Thomas Black earlier this month, he reports on the
aviation space and noted that even though the number of
flights operated by the broader private aviation industry so that
includes charter, fractional, individually owned aircraft managed by third party
service companies pretty much all the ways that you fly
around Carrol totally. Yeah, it's almost nineteen percent higher than
it was back in twenty nineteen, that was the last
(10:38):
full year pre pandemic year. Company's in house flight departments
are flying about the same as they did.
Speaker 8 (10:43):
Carol four years ago.
Speaker 4 (10:44):
It's interesting.
Speaker 2 (10:44):
That's according to data from wing exit's Hamburg based provider
of market data and analysis on the private aviation industry.
Speaker 4 (10:50):
We've got a great.
Speaker 2 (10:51):
Voice on this is back with us is Janiniannarelli. She
is founder and president of the private aircraft broker Paravian,
and she really sees daily what is going on, minute
by minute in the private aviation world. She's here in
our Bloomberg Interactive Broker studio. Welcome back, How are.
Speaker 4 (11:09):
You delighted to be here.
Speaker 11 (11:10):
Thank you for the invitation.
Speaker 2 (11:12):
It's great to have you here. Tell me what you
said though, when you walked into the studio and you
were listening to our segment on the IPO market, which
seems like it's having a tough time getting going, and
how that kind of related to your industry.
Speaker 11 (11:26):
Yeah, just take your last guest story and slash IPO
and insert the word jet.
Speaker 4 (11:32):
What's going on?
Speaker 11 (11:34):
That's a good question. What we have observed throughout the
course of twenty twenty three the buyers are sitting on
their hands and they've created excuses, and I would say
the trade has as well for them quarter over quarter.
Speaker 4 (11:47):
So here we are.
Speaker 11 (11:47):
We're at the end of the year. This should be
the busiest time of the year in the aircraft trading marketplace,
and it's relatively quiet.
Speaker 1 (11:55):
Wait, I thought that we saw huge, huge announcements from
companies like net Jets buying many many Cessna citations for
example earlier this year. That doesn't count in a.
Speaker 11 (12:09):
Way, no, because that's the fractional share and they need
to meet demand. Actually, fractional flying is up year over year.
I want to say the number is somewhere like seven
point nine percent, whereas private flying is down eight point
three percent year over year.
Speaker 8 (12:23):
These are how can those things both be true?
Speaker 2 (12:26):
And Thomas Black and his story said flights are fractional operators.
So we're talking about net Jets, Flexjet. They've increased, have
increased forty one percent from twenty nineteen levels.
Speaker 1 (12:35):
You're still flying private when you use one of those operators.
So make the distinction for our audience.
Speaker 11 (12:39):
So the private sector and the corporate sector is whole ownership.
These are individuals and corporations that go out and acquire
the asset and the management.
Speaker 4 (12:48):
The crewing. It's the company jet.
Speaker 11 (12:50):
It's the company jet. Where's to fractionalize?
Speaker 4 (12:54):
All the time.
Speaker 11 (12:56):
You're buying a piece of an airplane, and so you
have access to uplift pretty much on demand, but you
don't own the whole aircraft and you don't control the.
Speaker 4 (13:05):
Operation of it.
Speaker 1 (13:06):
This is exactly what our own Thomas Black wrote about
earlier this month. And the question is that I that
I have for you is is that era kind of
over when it comes to private ownership. We've seen pushback
from shareholders about flying private. So now about actually these
companies owning corporate jets because of the carbon footprint, So
(13:27):
companies are now not actually owning their jets outright and
instead using those fractional services which do offer the on
demand private flying, so the benefits of flying private without
actually owning that asset.
Speaker 11 (13:38):
So it's a conundrum. I don't think demand has diminished,
it's just action has diminished. We really don't see people
pushing away from private jets and looking for other means
of transportation. It still is the most efficient form of
moving goods and service goods and people around the country,
around the world, but they.
Speaker 2 (13:59):
Don't want to own it, not necessarily.
Speaker 11 (14:01):
So I mean, I personally have not experienced people say
sell the jet because of all the issues that you
just cited. There are ways to reduce their carbon footprint.
You know, smart flying, direct flying in the United States
is going to lead the way. Operators within the United
States are going to lead the way to that goal
of twenty fifty. But I mean you brokeer deals, right, correct?
(14:25):
So how much is your deal flow down this year
from I don't know what's is it the peak post
pandemic that you measure against. I'd be curious about that,
and also where it was maybe twenty nineteen.
Speaker 4 (14:36):
So good questions.
Speaker 11 (14:38):
My business is off significantly, but I attribute it to
the aircraft that I'm actually offering. I mean, the market's sort.
Speaker 4 (14:44):
Of you don't like your inventory.
Speaker 11 (14:46):
I love my inventory, right, but it's not what people
will It's not in favor with the market today. The
most active segment of the business aircraft marketplace, I would
have to say, is the small jet. That is the
aircraft that initially led the decline and then started the
rise back out of the global panel.
Speaker 8 (15:08):
What is this like a six person exactly?
Speaker 11 (15:12):
I put it more in a dollar perspective, but six
to eight passengers somewhere two to seven million dollars, and
the aircraft range is going to be anywhere from about
a thousand nautical miles to fifteen hundred.
Speaker 4 (15:24):
So what don't people want then?
Speaker 9 (15:26):
Is it? Now?
Speaker 4 (15:26):
Yeah? What is it that they don't want?
Speaker 11 (15:28):
It seems to be the category that I would call
the super mid size and the ultralong range aircraft.
Speaker 8 (15:34):
Why don't they want those?
Speaker 9 (15:35):
It's a good.
Speaker 11 (15:36):
Question, it's a really good question. So first of all,
if we talk about the ultra long range that that's
the pinnacle of the marketplace, and the price point for
those airplanes is anywhere from fifty million on.
Speaker 8 (15:45):
This not be like a Golfstream G six fifty correct, Yes.
Speaker 11 (15:49):
Tim's a little bit into planes, Ah, I can tell.
So that seems to have fallen out of favor. I mean,
there are there are buyers out there, and there are
plenty of inquiries. I mean, if I just look at
the number of inquiry as I've received, you're to date
on every single aircraft I offer for sale. It just
boggles my mind that not one person has stepped up
to make an offer. Maybe more interesting is let's say
(16:11):
I get two hundred inquiries over the course of three
months on an aircraft. My guess is ten percent are
really going to buy an aircraft, But less than ten
percent of that ten percent I've actually done.
Speaker 1 (16:23):
Anything forgive me, But do interest rates matter? I mean,
when we're talking at this type of money, they don't
matter for real estate, but they matter for at least
that's what real estate, high end real estate mean.
Speaker 4 (16:35):
Do they finance these deals? Like, Yeah, that's a good question.
Speaker 11 (16:38):
So another good question my personal history is that I
can count, maybe on two hands, how many people actually
needed financing throughout my entire.
Speaker 1 (16:47):
Cash to me versus using financing are two different things.
There are plenty of people who could pay, you know,
outright for a forty thousand or sixty thousand dollars vehicle,
but if they get zero percent financing, then they're going
to take the finance.
Speaker 4 (17:00):
Side exactly that.
Speaker 11 (17:02):
Now, I have a number of prospective buyers that they
may pay cash outright and then refinance later on. Most
of them do that with a financial institution that they
already have a business relationship with. The odd inquiry that
I may receive for aircraft financing, frankly, is a little
bit of a red flag for me, because they shouldn't
be asking me.
Speaker 2 (17:22):
They already should have had that in place, right, It's right,
they've got their bankers they've got the bank that they've
been working with for years on everything.
Speaker 11 (17:28):
End qualified, the case comes in everything.
Speaker 4 (17:32):
It's interesting. I'm thinking about our audience.
Speaker 2 (17:35):
So how do you then use what you are seeing
to maybe tell you what's.
Speaker 4 (17:40):
Going on in the global economy.
Speaker 2 (17:42):
Is it an indicator for you or is it just
maybe your business, Your industry is going through some changes.
Speaker 11 (17:48):
I would say flip that and say business jets are
the indicator, and they always have been. Now I think
we're writing new history and have been since twenty nineteen,
because you could take the playbook throw it out the window.
Looking back over twenty three, I was musing over the
fact that we're going to chalk this year up to
(18:08):
a year of rebalancing, and I'm wondering if this was
not the downturn that always follows a great upswing. And
twenty four, because I'm going to use it to project
a little bit, is going to be relatively quiet. But
the driver for that is mostly the presidential election and
the uncertainty that comes along with who will be our
(18:29):
new administration and what policies will go into effect.
Speaker 1 (18:32):
Well, President Trump was pretty friendly to private jets.
Speaker 4 (18:36):
To a certain degree.
Speaker 1 (18:37):
I mean some of those there were tax breaks that
were given to people who used private jets during the
coronavirus pandemic, for example.
Speaker 4 (18:46):
Well, that's true.
Speaker 11 (18:46):
The bonus appreciation was a huge driver to motivate people
to buy aircraft.
Speaker 4 (18:52):
Twenty seconds.
Speaker 2 (18:53):
What are you worried about in terms of the presidential
outcome and in terms of regulatory or overset?
Speaker 4 (18:58):
And I've got to ask you to be very quickly.
Speaker 11 (19:00):
I'm mostly concerned about tax implications. There's a lot of
those expiring in twenty five. That's really the bigger concern.
Speaker 2 (19:08):
Really fascinating, right, you can talk about this al, I know,
I know, it's a world we love talking about. We
didn't even get into evtalls, which I know is a
big thing. Next time, come back soon. Love to continue
the conversation. Janine Jannarelli, founder president of par Avion, a
private aircraft broker. You can check out some of the
stuff that she is involved in on her website here
(19:29):
in studio.
Speaker 4 (19:30):
Have a good holiday.
Speaker 3 (19:33):
You're listening to the Bloomberg Business Week podcast. Catch us
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Just Say Alexa playing Bloomberg eleven thirty telling you.
Speaker 12 (19:57):
Stop.
Speaker 2 (20:00):
Yeah, that's right, everybody. Santa Claus Is come to town. At
the most wonderful time of the year. The Aris Cris
Bloomingdale's has its holiday window display up. People are decorating
their Christmas trees and decking the halls, and a large
team of Santa's are coming to town, appearing at malls
and retail outlets around the country.
Speaker 4 (20:20):
He's everywhere and sometimes she's everywhere. Explain that in a moment.
Speaker 1 (20:24):
That's true. Hey, this year things are a little bit
different than years past, though. Demand for Santa's is actually
far exceeding supply, at least according to our next guest,
who knows quite a bit about goings on at the
Old North Pole. Mitch Allen is the founder and head
elf of Higher Santa It's a Santa Claus talent and
staffing agency, and what it does is it places Santa's
(20:44):
at events, parties, malls and more all over the US.
Mitch joins us on a zoom from South Lake, Texas. Mitch,
good to have you with us this afternoon. So the
Santa Biz. You went pretty well in twenty twenty three.
Speaker 13 (20:55):
No, it sure is. We've had more demand for Santa
Claus entertainers than we've ever had before, and all types
of it, whether it be a home office, retail establishment, malls.
Everyone wants to associate themselves with Christmas through the use
of Santa.
Speaker 4 (21:11):
Totally get it. I'm also a fan of Healfa on
the Shelf. Just going to put it out there.
Speaker 2 (21:15):
Hey, Mitch, I mean, so our numbers up, demand is
up from what pre pandemic levels, like, what is I
don't know, Is it just been You've been seeing organic growth?
Has there been a recent peak? Give us an idea,
give us some perspective.
Speaker 8 (21:28):
Sure.
Speaker 13 (21:28):
So here at Hiresanta dot com, we've seen the demand
for Santa's people reaching out to us is up over
thirty six percent over last year, and last year was
record demand, even higher than pre pandemic. And that's turned
into more events. Our actual events that we've booked is
up over one hundred and fifty two percent over last
year and many times that over pre pandemic levels. So
(21:51):
people are using it. And what's interesting is we don't
necessarily have a Santa index, but that's what I'm calling it,
that small and medium sized businesses are really using Santa
this year. I think that's going to be a blockbuster
year for small and medium sized businesses. If the demand
for Santa Claus at these establishments is any indication.
Speaker 8 (22:11):
How much does it cost to rent to Santa?
Speaker 13 (22:15):
Yeah, so it really depends date, time, location, and how
long you need Santa.
Speaker 1 (22:19):
Okay during the Christmas season, I'm not talking about it.
Speaker 8 (22:22):
I'm not talking about it.
Speaker 4 (22:23):
Your life Santa here, everybody's invited. We're talking about four
hours I need Santa.
Speaker 13 (22:28):
So if you need sand to come your home or
office for just a couple of hours, you're talking about
two to four hundred dollars per hour for a Santa
Claus entertainer. Now, if you do it for a mall,
the hourly rate is obviously much less.
Speaker 4 (22:41):
So do Santa's like do those who really look like Santa?
Speaker 2 (22:45):
Sorry, kids, I hope we don't know the kids. You know, man,
we should have done a disclaimer. If there are kids
in the room, get them out of the room.
Speaker 4 (22:51):
I'm sorry for everybody in the control room. Yes, yeah,
there is a Santa Claus.
Speaker 8 (22:56):
Okay, I don't know where you were going.
Speaker 2 (22:58):
I've gotta be really careful, but Mitch, I mean, so
for those who you know, really look like Chris Kringle,
do they get more money?
Speaker 13 (23:07):
Absolutely so. At Hires, Santa are Santas, we like to say,
have a real beard, a real belly, and a real jolly.
You know, they've got that twinkle in their eye, that
love and joy of Christmas in their heart, and they
really do personify the image and personality of Santa Claus.
Speaker 1 (23:24):
What about the demands the that you're getting right now
from different people across the country who are saying, well,
you know what, I don't actually want a Santa that
looks or sounds like the traditional Santa Claus. We're looking
for more diversity when it comes to.
Speaker 4 (23:37):
Sand don't a Christine Clause rather than yeah, what do
you what?
Speaker 8 (23:40):
Are you getting requests for Chris Kringle.
Speaker 13 (23:43):
So, diversity is one of the big trends that we're
seeing in the Santa Claus entertainment space. You know, we
have a number of black Santa Claus entertainers as well
as Spanish speaking Santa's people are wanting to have a
Santa that looks and sounds like that.
Speaker 8 (23:57):
They do.
Speaker 13 (23:58):
We even have a deaf Sanda that we send around
the country. He's entirely deaf and it speaks asl American
Sign language. So we've seen the demand for We've seen
the demand for diverse Sanna's really grow up. And as
you pointed out, we actually have a couple of female
Sanna's who are terrific. You would not know that they
are females. They look and act like Santa and are
(24:20):
really great entertainers.
Speaker 2 (24:21):
You mean, so they're not actually being a female Sanna,
they're actually being a female that is pretending to be
a male Sanna.
Speaker 8 (24:28):
That's right.
Speaker 13 (24:28):
You think of like tim Allen glue on beard. You
would not know unless you actually saw them outside this
suit that they were not actually Santa. But yeah, diversities
are one of the big friends. We also see experiences.
People just don't want to have their traditional picture with
their child on the knee of Santa. They want to
have an entire experience, and so many of our clients
(24:49):
are really increasing the experience where there's lots of sort
of instagrammable pictures and other types of experiences cocoa, hot
chocolate and those types of things along with.
Speaker 12 (24:59):
The with Santa.
Speaker 4 (25:00):
All Right, Mitch, is there a Santa School?
Speaker 13 (25:04):
You know, this is one of the surprising things that
people don't realize. There is a vibrant Santa Claus community
out there, whether it be online or in person. Lots
of organizations. There's Santa schools and conventions around the country,
and that's where we go and recruit our Santa claus
is for higher Santa dot Com.
Speaker 1 (25:21):
Hey, how seasonal is your business?
Speaker 13 (25:24):
Well, the actual delivery of our service is extremely seasonal,
about six or seven weeks, but it's a full year
business at Hire Santa. The first half of the year
is really about seals. It's getting those large contracts, those malls,
those retail establishments we're working and then we're trying to
get those contracts as well as we're trying to get
(25:46):
more Santas. This last year we added over eleven hundred
Santa Claus entertainers to our database alone. And so it
is full season, but really it's go time. It's fourth quarter,
during the last part of November and of course all
of December.
Speaker 2 (26:00):
All right, So what's interesting is you shared with us
some research that you guys have done, and some of
the Santa's talk about their best experiences of twenty twenty two,
which are incredibly heartwarming, But I want to go to the.
Speaker 4 (26:10):
Worst experiences of twenty twenty two. What are some of
the rough experiences?
Speaker 2 (26:13):
We have about forty five fifty seconds left, just give
us a couple.
Speaker 13 (26:17):
Well, you know, the rough experiences are really when Santa
gets sick or injured. You know, every single year for
us we lose Santa Claus entertainers. You can imagine, they're
older gentlemen, they're susceptible to COVID and negative outcomes with that,
or we've had this year alone, Santa's already in a
car accident, a wife got sick. So those are really
(26:39):
heart breaking themselves as well as you really get the
touching things whenever our child is wanting something, they're sick,
or their parents are sick and they're wishing something for them.
But it's a wonderful time, and Santa's really enjoys spreading
that love and joy of Christmas.
Speaker 2 (26:54):
I thought you were going to tell me about the
Santa that flubbed the lyrics to Frosty the Snowman at
a daycare. That's what I was opening for a little levity,
A little levity.
Speaker 13 (27:04):
Yeah, yeah, we get that a lot too. And you know,
we've actually been on air and asked somebody Santas to
you know, name the reindeer, and they just froze.
Speaker 8 (27:17):
A lot of them.
Speaker 2 (27:18):
Mitch Alan, Merry Christmas, Happy Holidays, Founder and head elf
of Hire Santa joining us from Texas, where there Santas.
Speaker 3 (27:26):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Easter on Bloomberg Radio,
the Bloomberg Business app and YouTube. You can also listen
live on Amazon Alexa from our flagship New York station
Just Say Alexa, playing Bloomberg eleven thirty.
Speaker 2 (27:45):
Every now and then a story hits so hard it
gives you the chills, and this is certainly one of them.
It's about deep fake pornography images that have been digitally
manipulated to depict an individual doing something they did not like,
in this case, posing naked, and about a group of
young women in a New York City suburb horrified to
learn that their photographs had been manipulated and posted online,
(28:06):
and they ultimately took matters into their own hands.
Speaker 1 (28:10):
It's the cover of the new issue of Bloomberg Business Week.
It's out on newsstands later this week, but you can
read the story now on the Bloomberg terminal and at
Bloomberg dot com slash BusinessWeek. The story by Bloomberg News
investigative reporter Olivia Carville and a Bloomberg News cybersecurity reporter
Margie Murphy, both of whom join us now. Olivia here
in our Bloomberg Interactive Broker studio. Margie joins us from
(28:30):
our San Francisco bureau. Margie, excuse me. Also, here's the
editor of Bloomberg Business Week, Joe Weber here in our
Bloomberg Interactive Broker studio. Wow, Joel, How did this story
get on your radar?
Speaker 8 (28:42):
Get on their radar?
Speaker 12 (28:43):
Olivia and Margy pitched it, and from the moment they
brought the idea to us, we were mesmerized and then
more honestly horrified, and we felt like it was a
story that we had to do, and we needed to
do it on the cover to make sure that the
world found out about it, because it is perhaps frightening
sneak peek at the.
Speaker 8 (29:03):
Future and the lack of.
Speaker 12 (29:07):
Real common sense and laws about where generative AI might
possibly take us, and the beginning of the story is
like your worst nightmare, and Olivia, why don't you take
us there? Because it's ultimately where.
Speaker 4 (29:21):
There's sort it's about Cecilia.
Speaker 14 (29:24):
So the story starts in Livettown, Long Island, which is
an interesting place to start. This is the birthplace of
American suburbia, the first post War US suburb, And this
group of teenage girls who had all attended the same
high school, discovered that their photographs that they'd posted on
social media had been manipulated into deep fake pawn that is,
(29:44):
fake pornography created using deep learning models or artificial intelligence.
And Cecilia Luke, who opens the story, discovered this while
sitting in a car in a parking lot and a
strip mall and Livettown. And as she's looking through this
weird site that a friend had sent her who had
also discovered the photos, she sees images that horrified, disgusted,
(30:08):
really scared her. These are photos which showed her being
digitally undressed, very graphic images. Content on the sex site
included people posting about her being raped and murdered. In
some of the cases the images she was just a child,
she was five years old. And she also saw photos
(30:28):
of friends of hers who attended the same school, and
it was that night New Year's Eve of twenty twenty
that news of this website and these deep fake images
really spread across the suburb in Long Island.
Speaker 4 (30:40):
Not them at all.
Speaker 2 (30:42):
In other words, those images obviously altered and they knew it,
like they went through it, and they're like but.
Speaker 12 (30:48):
Not obvious to anyone else exactly. And that's where the
horrifying part comes in.
Speaker 8 (30:54):
Go ahead of it.
Speaker 14 (30:55):
Yeah, I was gonna just say that for the woman now,
because they are twenty two to twenty three the time
they were eighteen or nineteen years old. And the scariest
thing was looking at these photos where they had been
undressed and realizing that they look real enough that anybody
else who sees them is going to believe it really
actually is their bodies. So for Cecilia, it was looking
(31:17):
at this nude image and knowing that the breasts weren't hers,
but also realizing that most people who saw this image
would think that they were.
Speaker 2 (31:26):
So Margie, let's bring you into this. An incredible story,
so not a problem. You call the police and you
say this isn't me, and it's done, and they take
it down, right.
Speaker 4 (31:37):
It's that easy. I'm being sarcastic.
Speaker 9 (31:41):
Yeah, not quite at the moment.
Speaker 10 (31:45):
There's no federal law prohibiting deepfake pornography. So the challenge
that these girls had were, you know, they were so
incredibly brave. They did this investigation mostly on their own,
figuring out exactly who had created these images of them,
and they took them to the police, and there was
(32:06):
very little legal recourse for them to get justice. And
in fact, it was only after searching through everything that
Patrick Carey, the former classmate who'd been posting these images,
looking through everything that he'd posted, they'd seen that he'd
actually accidentally posted real child sexual abuse material and that's
(32:29):
what they got him on. It wasn't on the deep
fake pornography at all. And that's an issue that's a
frustration being felt by women around the world. Even though
certain states in the US do have laws around deep
fake pornography, it's just so patchwork across the US and
internationally there are issues with the law as well, because
(32:50):
the technology has just advanced just at such a breakneck speed,
just lawmakers haven't been able to keep up with it.
Speaker 12 (32:58):
What about the companies in the platforms on the AI front, Like,
what did we learn about what they can and can
do or aren't willing to do.
Speaker 9 (33:09):
Margie right.
Speaker 10 (33:10):
So the issue with a lot of the technology that's
around now and that from our reporting we saw was
really popular for creating deep fake pornography and even child
deep pornography, a lot of those tools are open source.
So there's this kind of divide in Silicon Valley. You've
(33:31):
got the developers who've created this really incredible image generation
technology that you know, they want to be used for good,
who believe that it should be kept out in the
open for everyone to use and not gate kept by
like big tech platforms who have typically provided services, and
(33:51):
you know, you might enter in a prompt and you
get your image back. Whereas with the open source technology,
anyone can go and interact.
Speaker 9 (33:58):
With the code. Therefore you can play with it.
Speaker 10 (34:02):
And even if a developer was to put a guardrail
in place, like prohibiting adult content, it's relatively easy for
someone to go in and change that. And so that's
opened this Pandora's box. We've got all these open source
technologies that even when a developer realizes a bit are
being used for bad, the cats out of the bag
(34:23):
and people are already exploiting it Olivia.
Speaker 1 (34:25):
The story starts in Levittown, It's centered around Levittown, but
it spans the globe. What happens in New Zealand, what's
going on with a former police officer named will Wallace.
Speaker 14 (34:40):
I think that was one of the most remarkable parts
of reporting the story is that it really is a
dual narrative. You have the girls in Leavittown investigating the
predator who is posting images of them online on the
sex site that an ex cop in New Zealand has
discovered has already been posting images deep faked images of
New z woman as well, and so he starts an
(35:02):
investigation into the man behind this website. And it's very
rare in journalism, or at least in my own career,
where you have a story that has this jewel narrative
where you can weave them together and see an investigation
unfolding in suburban New York and at the same time
in New Zealand, of all places, which happens to be
where I'm from, there's an ex cop trying to work
(35:24):
out who was behind this website. I remember one night
I was driving back from Levettown to New York and
I called Margie to talk to her about an interview
i'd just done with Anna, who was in the story,
and ultimately discovered the identity of Patrick Carey who been
posting the images, and took that evidence to police. And
I called Margie. I was excited because finally we had
(35:45):
this key piece of the story to tell her about it.
And that's when she responded, saying that she had discovered.
Speaker 9 (35:51):
That there was also this whole other part to the.
Speaker 14 (35:54):
Story where there were these vigilantes, this movement trying to
track down who was behind this website, and there was
an ex detective from New Zealand who had been leading
this fight to kind of combat deep deep fake pawn
and to take down this deplorable internet sex site.
Speaker 8 (36:11):
So where do we go from here?
Speaker 12 (36:13):
Because, as you mentioned, there's no federal law prohibiting any
of this, Marguie, But what happened in New York State.
Speaker 14 (36:21):
So in New York State, we have seen the District
Attorney in Nassau County, which is where this case unfolded,
actually put forward or introduced new legislation trying to target
deep fakes. The problem is that, you know, what do
you focus on is it the companies that are releasing
this technology. Is it the regulators who can't catch up
(36:43):
to this technology, is it's being rolled out? Or is
it the predators and bad actors like Patrick Carrey who
are abusing it?
Speaker 2 (36:49):
And and yes, no, and I do also wonder and
MARGI let's bring you back in. I mean in terms
of police and law enforcement, you know how high up
on the list is there in terms of prioritizing the
things that they focus on.
Speaker 12 (37:04):
Yeah.
Speaker 9 (37:04):
Absolutely.
Speaker 10 (37:05):
One thing that was really interesting about Will Wallace, who
you know, you guys have just mentioned. He obviously deeply
involved in this website. It was a passion project of
his to kind of find out, you know, find help victims,
find the people that were posting these pictures, but also.
Speaker 9 (37:21):
Uncover who the admin of the website was.
Speaker 10 (37:26):
But because he has a background in the police, he
has this he really understands what it takes to be
able to actually gather evidence, bring a good tip to
law enforcement, and.
Speaker 9 (37:39):
See that actually be followed through.
Speaker 10 (37:41):
And he would say, he would tell me how frustrated
he was every time he would give a tip to
law enforcement in different local law enforcements all around the
world and not hear anything back, But he also understood
that it's so challenging when there are you know, there
are certain skill sets you need to be able to
investigate this kind of crime. There needs to be better
(38:04):
education so that when a victim comes forward in the
first person they're speaking to, that they understand that, yes,
there hasn't been a physical crime, but this cyber crime
is just incredibly traumatic and super damaging, and that person
is a true victim.
Speaker 9 (38:20):
And additionally, you know, when the laws aren't.
Speaker 10 (38:23):
Robust, laws aren't in place for prosecutors to deal with
people once they've found a suspect, that all is just
it's incredibly hard for police officers to do their work.
Speaker 2 (38:36):
When Patrick Carey, when it finally did come down on him, Olivia,
Tim and I were talking about this before we got going,
before you guys came into the studio. So you ultimately
was sentenced six months in prison, ten years probation, lifetime
status as a sex offender, can on a smartphone anymore,
or any device with a camera, or be withinred a
(38:57):
thousand feet of a school or a playground. Six months,
but he was out in four for good behavior. I
don't seen in a good behavior here that to me
is not even a slap on the rest. So it
just kind of speaks to law enforcement not really necessarily
respecting the severity because you talked to these women and
they definitely felt harm and pain and there was an impact.
Speaker 14 (39:18):
Oh yeah, there's no doubt about that. I mean a
lot of these women have sort out therapy since this.
One lost twenty pounds from strees, one dropped out of college.
Three I talked to Carrie Pipper spray in their handbags,
and two carry knives with them. Now, they're so scared
of what was done on the website, not only what
(39:39):
Kerry was posting, but the hundreds, if not thousands of
strangers in the world who saw those photos and tried
to reach out to them. One of the craziest parts
about this case is that Kerrie also included the girl's names,
addresses social media information, so they had these awful messages
and phone calls coming through them, people harassing them for months,
(40:02):
and one of the threads on the site had over
thirty thousand views. That's thirty thousand people looking at a
fake porn image of you where they're writing about you
being raped and murdered. You know, the fear was real
when I was talking to these young women, and there
is a deep seated frustration and live itt town from
their families, teachers at the school, the girls themselves. That
(40:26):
Carrie only received six months. He was out within four
months and he's back in the neighborhood now.
Speaker 12 (40:31):
It's amazing, I think the greater thing here And obviously
the circumstances of this particular story are totally frightening, but
it also does just speak to this greater challenge that
we're going to be living through.
Speaker 3 (40:46):
Now.
Speaker 12 (40:47):
We have a technology that the world is not prepared for,
and this shows you how unprepared we are for it.
And sure there's a lot of good that can come
from it, but there's also your total nightmare. And you know,
props to Olivia and Marty for being able to tell
this story.
Speaker 2 (41:04):
Well and coming off of Open AI and the debate
within that company about the ethics and the concerns about
generative AI, where at.
Speaker 12 (41:11):
Almost the perfect time for Aline, you did it once again.
It does they did it once again.
Speaker 2 (41:16):
You guys did do it once again. Olivia Carvell investigative
reporter at Bloomberg News. Margy Murphy, she's a cybersecurity reporter
at Bloomberg News. Incredible story, the cover story, most read,
the Bloomberg Big Take, and.
Speaker 4 (41:28):
Our thanks to Jill Weber. This is Bloomberg.
Speaker 2 (41:32):
Brother Marc, a journal How about you let me drive?
Speaker 3 (41:39):
No, no, no, no, honey, please, I'll do.
Speaker 7 (41:45):
I want to drive.
Speaker 15 (41:48):
It's a question.
Speaker 3 (41:53):
This is the Drive to the Clothes Well on Bloomberg Radio.
Speaker 2 (42:00):
All right, everybody getting ready to wrap up the Wednesday trade.
Just about seventeen and a half minutes left in today's
trading session. We have got when I look at the
S and P five hundred, kind of half of the
major industry groups are higher, half are lower. But it
really is once again about what's going on in the
treasury trade because we are down again.
Speaker 4 (42:20):
I'm looking at a ten year you know, four point
twenty six. Who to thunk?
Speaker 1 (42:24):
I mean, we were talking a tenure at five percent
just a few weeks ago.
Speaker 4 (42:28):
Six percent. People were talking about, you know, for even
like you know, the current.
Speaker 1 (42:31):
We should have Katiekminski back on and see if she's
still sticking to that.
Speaker 4 (42:34):
We should bring her back. That's a really great idea.
Speaker 2 (42:36):
All right, let's see what our Drive to the closed
guest has to say about all of it, Amy Magnota.
She's co CIO at the independent investment advisory firm Ata
Gino's Capital. She is on Zoom from Pennsylvania. Amy, good
to have you here with us this yield trade.
Speaker 4 (42:53):
Let's go there.
Speaker 2 (42:55):
Would you go as far to say we are at
peak yield on the US Treasury yield curve? And uh,
you know, and does it mean that ultimately we get
to some kind of recession? Does the economy slow down
that much?
Speaker 15 (43:12):
Our view is that we're expecting the economy is growing
pretty solidly. So we had the GDP revision come in
today up to five point two percent real GDP growth
in the third quarter, and we're running about two percent
for the fourth quarter, So that's pretty solid, especially given
(43:32):
what you know the FED has done to try to.
Speaker 4 (43:35):
Bring down inflation.
Speaker 15 (43:36):
So our view is more in mid twenty twenty four
that we might hit some sort of soft patch or
mild recession with just given the lag effects of these
interest rate hikes on what that means for the consumer.
And then we also have an unemployment and then we
have a stimulus that's kind of run out.
Speaker 1 (43:56):
Amy Magnotta, what is the uh evy vidents that you
see today? End of November, end of being almost the
end of a pretty incredible rally in bonds and stocks
so far for the month of November. What's the evidence
that you see out there right now to lead to
your conclusion that we'll see some softness in the second
half of next year.
Speaker 15 (44:17):
I think there's some weakness, so our view just to
be clear from now to kind of year end early January.
We're still pretty positive on the equity markets, and a
couple of reasons for that. Seasonality is very strong. November
December tend to be very strong periods for equity market. Returns,
breasts been pretty solid, momentum has been building, and credit
(44:41):
spreads have been making new lows. So I think that's
all very supportive for equity markets for the next eight
eight weeks or so. I think our concern is more
as we hit twenty twenty four, could see some weakness
in the consumer, could see some you know, there's a
number on the confidence a consumer Confident and survey yesterday
that job's hard to get increased a little bit, so
(45:04):
we could see some maybe softening there and the employment
in the labor market, and maybe some weakening in the
consumer as we get through to twenty twenty four.
Speaker 2 (45:12):
You know, it's funny, it's interesting to listen to you,
and I feel like it's kind of you know, you
hear it even among the FED speakers.
Speaker 4 (45:18):
There's not just one narrative. Some of those FED.
Speaker 2 (45:21):
Speakers that we are just even hearing over the last
couple of days, some are saying, Okay, we're good. You know,
we think we're done the bets we die and they're saying, yah,
maybe not that inflation isn't weird it to'd be I'm
hearing a lot it. I's could in your conversation and
I get it because I think, as we talked with
our Mike McKee, it's not an exact science in terms
of getting of managing the.
Speaker 4 (45:41):
Economy if it doesn't have a ton of tools.
Speaker 2 (45:44):
And like I said, it's not like you just step
on the brake and everything stops. There are delayed effects
and cumulative effects. So having said that, you have conviction
that maybe stocks continue to rally into this year, what
else do you feel like you have strong conviction about
when it comes to the investment environment.
Speaker 15 (46:03):
So we're as I mentioned, we're pretty positive on equity markets.
There's some other areas where when you look at equity markets,
you're to dates certainly been driven by the index returns
kind of mask underneath it's been driven by large cap
megacap cup growth companies. So we're finding some opportunity in
other areas as well, Like what so US infrastructure is
(46:28):
one area that we like today. We've had the Infrastructure
Investment and Jobs Act in twenty twenty one, some allocation
to infrastructure projects in the Inflation Reduction Act last year,
and that money is just really starting to be allocated
and spent. So we think that's an attractive area.
Speaker 2 (46:47):
What specifically within it? So what specifically within infrastructure and
the way.
Speaker 15 (46:53):
We allocate portfolio, So we're acid allocators and we build
you know, total portfolio solution for our clients. So we're
going to allocate to a broad based ETF that's targeting
companies that can benefit from from that increase in infrastructure spend.
Speaker 1 (47:07):
That's an interesting thought on macro, on macro trends. What
are some of the other macro trends in where you're
allocating capital.
Speaker 15 (47:14):
Japan is another theme that we like today in Japanese equities.
A couple of reasons for that. Fundamentals have been improving
earnings growth is improving a lot of the shareholder friendly
policies that companies that we've been talking about for a
number of years are really getting put into play in Japan.
So that's also positive. Relatively loose monetary policy compared to
(47:37):
some of the rest of the globe, and valuations are
pretty attractive, so that's another area where we liked. We've
seen the dollar sell off a little bit here more recently,
which could benefit international equities.
Speaker 2 (47:48):
Yeah, and then the ni kid definitely has had quite
you know, a bounce back certainly this year, certainly from
some of the lows we saw earlier this year. When
you talk about Japanese equities by the broader market or again,
do you start to get picky about some specific sectors
within Japan.
Speaker 15 (48:08):
For us, again, this theme we feel is pretty broad based,
so we're going to allocate more broadly through a broad
based ETF in the Japanese equity markets.
Speaker 2 (48:19):
Natural resources also a favor we just a favorite of yours.
We've just got about forty five seconds left here. What
specifically when you think about natural resources.
Speaker 15 (48:28):
Sure, I think another area of the market that is
attractably valued relative to the broad SMP five hundred companies
there again better capital allocators. More recently, we still think
some structural supply demand that's favorable, and then more short
term with some turmoil in the Middle East might also
cause a problem. And then just the regulatory environment is
(48:51):
pretty tight for energy related companies and we think that's
a positive.
Speaker 2 (48:55):
Does that mean like the major integrated oil companies, the drillers,
just real quickly, okay, yes, so you like the big names,
the household names, yes.
Speaker 15 (49:03):
The larger and so again we're allocating through a broad
basingf but about eighty percent of that is energy companies.
Speaker 2 (49:09):
All right, Good to know, Good to know, Amy Magnotta,
she is Cocio at Atha Ginos Capital. She's joining us
on zoom from Pennsylvania.
Speaker 3 (49:18):
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Speaker 4 (00:54):
Talking about kicking into high gear.
Speaker 2 (00:55):
The stock The buyback plan news early this morning from
General Motors, announcing it it's biggest ever stock buyback plan,
ten billion in total. It also boosted its dividend thirty
three percent. Tim and reinstated earning's guidance after accounting for
costs of its new labor contract.
Speaker 1 (01:10):
CEO Mary Barra promised to better days are ahead, stressing
confidence in the cast generation of GM, the execution of strategy,
and expectation of growth and strong margins. This carol despite
minimal EV sales, a troubled robotaxi business, and even more
trouble at its battery pack facilities that has kept EV
production in the low thousands.
Speaker 4 (01:28):
That's right.
Speaker 2 (01:29):
GM's ultimum battery pack was supposed to enable the company
to make multiple types of electric cars off the same
platform and beat competitors to market with a ton of vehicles.
Speaker 4 (01:39):
Here's more for Mary Barra.
Speaker 5 (01:41):
From an EV perspective, we have confidence in the portfolio
we have. We're a bit disappointed this year that we
were constrained by the automation to build modules. So this
is not something that is fundamentally an issue with Altium.
It was more manufacturing automation issue that we're working and
we'll be out of it by middle of next year
and making provement every quarter, all right.
Speaker 2 (02:02):
That, of course, was the CEO of General Motors Mary Barrow,
talking earlier today on Bloomberg. Let's get a little bit
more into this story. Bloomberg News auto reporter Keith Noughton
is on Zoom from Detroit.
Speaker 4 (02:14):
We love our auto team. They know this world so well.
Speaker 2 (02:17):
Keith. Good to have you here with Tim and myself.
How do you make sense of the news today? I
mean the stocks up, shares of General Motors up nine percent,
doing a massive buyback and boosting your dividend. I get
it why investors like it. But what does it say
about the business if this is the best use of money?
Speaker 6 (02:38):
Yeah, I mean it's really Mary Barrow kind of pleading
for patients in a very expensive fashion, of course, because
things have not been going so well on their technology bets.
As you noted, the EV ramp has been very slow
because of problems building batteries, and you know, Cruise, their
autonomous vehicle unit, has been a bit of a umpster
(03:00):
fire lately with all sorts of safety problems and the
CEO quitting abruptly a week ago. So and they're scaling
back because they're losing you know, seven hundred million dollars
a quarter at Cruise, so they really aren't getting the
payoff yet on these very large technology investments. As a result,
(03:20):
their stock's been down by double digits this year. So
this is a way to ask investors to give them time.
Speaker 1 (03:27):
Okay, so how much time do they need and what
do they need that time for? Because Ford is running
into similar issues when it comes to evs. The F
one fifty Lightning isn't selling like it was in previous quarters.
The mock e electric Mustang, same thing. It's there's there's
this uh sort of shift in the way that consumers
(03:49):
are thinking about EV's.
Speaker 7 (03:50):
What's going on, Yeah, there's a there's a few things
at work.
Speaker 6 (03:54):
One on the production side, the legacy automakers are discovering
what Elon Musk discovered a few years ago when he
tried to go to mass production with Tesla. You might
recall him describing that as production. Hell, well, that's what
the legacy automakers are in right now. They're discovering that
building electric vehicles is harder than building internal combustion engine vehicles,
(04:18):
and so there are a lot of hiccups in both
battery production and the EV production itself. That's one problem,
so they can't get them out the door of the factory.
The other problem is this demand issue you're talking about.
There's still you know, rising demand for electric vehicles, but
it has slowed considerably because we've gotten past the sort
of early adopters who are willing to pay anything to
(04:40):
have the latest and the greatest, and now we've gotten
to that broad middle of the market and folks are
bulking at the price of electric vehicles which are higher
than standard cars, and the charging infrastructure which is still
very spotty.
Speaker 2 (04:54):
In the Hey Keith our Bloomberg Intelligence team says the
move to offset the effects of higher costs from the
new year UAW contract adds confusion to GM's electrification electrification
strategy and is out of step with the practice of
conserving cash when demand is uncertain. Should they be conserving
cash right now?
Speaker 6 (05:12):
Yeah, Well, you know, the electric vehicle business at GM
and the other legacy automakers is just burning cash right now.
Speaker 7 (05:20):
So if you take ten billion.
Speaker 6 (05:21):
Dollars and diverted into a stock buyback, yeah, that's money
that could have been spent to try and write your
EV business or your autonomous vehicle business, either of those
they both consume billions of dollars. So it is a
good question to ask, is this the best use of capital?
Speaker 1 (05:39):
At this time, So what would be what are investors
saying could be better uses of capital?
Speaker 6 (05:45):
Well, you can try and you know, buttress your EV
production and strategy and model offerings so you can become
a legitimate competitor to Tesla, which still controls more than
half the market and makes money selling electric keeples.
Speaker 7 (06:00):
Keith, I just want to know.
Speaker 1 (06:01):
Sorry, I want to sort of like cut you off
with my own with another one of my own questions here,
So apologies. But there was an article over the weekend,
I believe, in the Wall Street Journal about hybrids and
the way that some companies now are are sort of
you know, they said, you know, evs aren't necessarily the
way that we think the future is going to work.
We think it's going to be hybrids. Where where are
Ford and GM on that.
Speaker 6 (06:22):
Board predicts that it's hybrid sales will quadruple over the
next four years, And they are pouring money into hybrids
now because they recognize hybrids are more cost effective and
they don't have the charging infrastructure issues, so they can
be this sort of bridge to electrification.
Speaker 7 (06:40):
So there's this.
Speaker 6 (06:41):
Renewed focus on hybrids out of Detroit and with a
lot of legacy automakers. Toyota never went away from hybrids.
They said the market wasn't ready for full EVS. Hybrids
is the first step you take on the electrification journey.
Speaker 2 (06:54):
Well, you did that great story for Business Week they
talk specifically about hybrids, and I thought it was really smart.
Speaker 1 (06:59):
I read it a business week before I read it
in the journal. Keith, I promise, okay.
Speaker 2 (07:03):
Everybody, everybody follows what our auto team does. I'm just
going to say that no, but it was so smart
because it used to be hybrids and then EVS took over.
But it was fascinating to hear the reporting that you
did about what we are seeing when it comes to
the hybrid market and the growth that we're seeing, and
you do wonder is that does that continue? And you
(07:24):
know it was I think early October that you did
that story. Do we continue to see demand in the
hybrid space?
Speaker 7 (07:31):
Thanks Carol for reading And.
Speaker 6 (07:35):
You might recall from that story one of the people
I interviewed was this dentist who has a mobile dental practice.
Speaker 7 (07:43):
She tows a trailer around.
Speaker 6 (07:44):
Well, you know, you just can't do that with an
electric pickup truck because it'll deplete the battery too.
Speaker 7 (07:49):
Fast. But guess what you.
Speaker 6 (07:50):
Can do it with a hybrid, which is what she has,
because having the electric motor and the eternal combustion engine
actually gives you more cork the thing you need to
pull a trailer. So there are many benefits to hybrids
that people are really kind of rediscovering or discovering for
the first time.
Speaker 7 (08:06):
And so and it does lower your carbon footprints, so it's.
Speaker 6 (08:09):
A way to stay and start moving in that direction
without any of the you know things you sort of
have to give up to EV's Amber Labardi, that's.
Speaker 8 (08:18):
How you did so well, go ahead, Kyl.
Speaker 2 (08:20):
Well, so do we need to be worried about General
Motor and their strategy.
Speaker 9 (08:25):
No.
Speaker 6 (08:25):
I just think it's going to take longer to get there,
and that's that's the issue. And there was you know,
we're sort of entering this trough of disillusionment on the
way the EV ramp is going to happen. It's it's
not linear. There's ups and downs and run it down.
Speaker 1 (08:39):
And does the does do hybrids provide that bridge or
do they displace evs.
Speaker 6 (08:45):
I think the way the industry views it, and particularly Toyota,
the hybrid leader, is that it is the bridge.
Speaker 7 (08:52):
You know, you just.
Speaker 6 (08:52):
Take that step into electrification and you live with that
in a way that there's fewer compromises, and hopefully during
that period and by the time you're ready for your
next car, the price of evs have come come down,
and there'll be more charging stations throughout the country, so
you don't have to worry about running out of juice
and having nowhere to plug in.
Speaker 2 (09:11):
I might have to have you talk to my husband
because he's waiting for hydrogen sales, fuel sales.
Speaker 8 (09:15):
How long is he gonna be waiting?
Speaker 9 (09:16):
Care?
Speaker 4 (09:16):
But he's like, that's the answer.
Speaker 8 (09:18):
I don't have a good question.
Speaker 2 (09:19):
Keith Noughton, you are amazing. Thank you so much and
highly recommend I'll put that story out that Keith wrote
back in October about the hybrid marker because it says
so much about what's going on right now.
Speaker 8 (09:30):
You send it to me too.
Speaker 1 (09:31):
I will want to appreciate it.
Speaker 2 (09:34):
If you could read a couple of stories you just kidding,
just kidding. Bloomberg's Keith Notton. Of course, he's Bloomberg News
auto reporter joining us on zoom from Detroit.
Speaker 3 (09:43):
You're listening to the Bloomberg Business Week podcast Catch US
Live weekday afternoons from three to six Eastern Listen on
Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app,
or watch US Live on YouTube.
Speaker 10 (09:57):
Well.
Speaker 2 (09:58):
As pandemic worries have faded, the travel business has definitely
come soaring back, with airline traffic more than doubling since
its COVID era trough and waiting times for deliveries of
new commercial airplanes mostly stretching through the end of this
decade because of robust demand. But there is one travel
segment that seems a little bit stuck in a holding pattern,
and that is corporate owned jets so road.
Speaker 1 (10:17):
Bloomberg's Thomas Black earlier this month, he reports on the
aviation space and noted that even though the number of
flights operated by the broader private aviation industry so that
includes charter, fractional, individually owned aircraft managed by third party
service companies pretty much all the ways that you fly
around Carrol totally. Yeah, it's almost nineteen percent higher than
it was back in twenty nineteen, that was the last
(10:38):
full year pre pandemic year. Company's in house flight departments
are flying about the same as they did.
Speaker 8 (10:43):
Carol four years ago.
Speaker 4 (10:44):
It's interesting.
Speaker 2 (10:44):
That's according to data from wing exit's Hamburg based provider
of market data and analysis on the private aviation industry.
Speaker 4 (10:50):
We've got a great.
Speaker 2 (10:51):
Voice on this is back with us is Janiniannarelli. She
is founder and president of the private aircraft broker Paravian,
and she really sees daily what is going on, minute
by minute in the private aviation world. She's here in
our Bloomberg Interactive Broker studio. Welcome back, How are.
Speaker 4 (11:09):
You delighted to be here.
Speaker 11 (11:10):
Thank you for the invitation.
Speaker 2 (11:12):
It's great to have you here. Tell me what you
said though, when you walked into the studio and you
were listening to our segment on the IPO market, which
seems like it's having a tough time getting going, and
how that kind of related to your industry.
Speaker 11 (11:26):
Yeah, just take your last guest story and slash IPO
and insert the word jet.
Speaker 4 (11:32):
What's going on?
Speaker 11 (11:34):
That's a good question. What we have observed throughout the
course of twenty twenty three the buyers are sitting on
their hands and they've created excuses, and I would say
the trade has as well for them quarter over quarter.
Speaker 4 (11:47):
So here we are.
Speaker 11 (11:47):
We're at the end of the year. This should be
the busiest time of the year in the aircraft trading marketplace,
and it's relatively quiet.
Speaker 1 (11:55):
Wait, I thought that we saw huge, huge announcements from
companies like net Jets buying many many Cessna citations for
example earlier this year. That doesn't count in a.
Speaker 11 (12:09):
Way, no, because that's the fractional share and they need
to meet demand. Actually, fractional flying is up year over year.
I want to say the number is somewhere like seven
point nine percent, whereas private flying is down eight point
three percent year over year.
Speaker 8 (12:23):
These are how can those things both be true?
Speaker 2 (12:26):
And Thomas Black and his story said flights are fractional operators.
So we're talking about net Jets, Flexjet. They've increased, have
increased forty one percent from twenty nineteen levels.
Speaker 1 (12:35):
You're still flying private when you use one of those operators.
So make the distinction for our audience.
Speaker 11 (12:39):
So the private sector and the corporate sector is whole ownership.
These are individuals and corporations that go out and acquire
the asset and the management.
Speaker 4 (12:48):
The crewing. It's the company jet.
Speaker 11 (12:50):
It's the company jet. Where's to fractionalize?
Speaker 4 (12:54):
All the time.
Speaker 11 (12:56):
You're buying a piece of an airplane, and so you
have access to uplift pretty much on demand, but you
don't own the whole aircraft and you don't control the.
Speaker 4 (13:05):
Operation of it.
Speaker 1 (13:06):
This is exactly what our own Thomas Black wrote about
earlier this month. And the question is that I that
I have for you is is that era kind of
over when it comes to private ownership. We've seen pushback
from shareholders about flying private. So now about actually these
companies owning corporate jets because of the carbon footprint, So
(13:27):
companies are now not actually owning their jets outright and
instead using those fractional services which do offer the on
demand private flying, so the benefits of flying private without
actually owning that asset.
Speaker 11 (13:38):
So it's a conundrum. I don't think demand has diminished,
it's just action has diminished. We really don't see people
pushing away from private jets and looking for other means
of transportation. It still is the most efficient form of
moving goods and service goods and people around the country,
around the world, but they.
Speaker 2 (13:59):
Don't want to own it, not necessarily.
Speaker 11 (14:01):
So I mean, I personally have not experienced people say
sell the jet because of all the issues that you
just cited. There are ways to reduce their carbon footprint.
You know, smart flying, direct flying in the United States
is going to lead the way. Operators within the United
States are going to lead the way to that goal
of twenty fifty. But I mean you brokeer deals, right, correct?
(14:25):
So how much is your deal flow down this year
from I don't know what's is it the peak post
pandemic that you measure against. I'd be curious about that,
and also where it was maybe twenty nineteen.
Speaker 4 (14:36):
So good questions.
Speaker 11 (14:38):
My business is off significantly, but I attribute it to
the aircraft that I'm actually offering. I mean, the market's sort.
Speaker 4 (14:44):
Of you don't like your inventory.
Speaker 11 (14:46):
I love my inventory, right, but it's not what people
will It's not in favor with the market today. The
most active segment of the business aircraft marketplace, I would
have to say, is the small jet. That is the
aircraft that initially led the decline and then started the
rise back out of the global panel.
Speaker 8 (15:08):
What is this like a six person exactly?
Speaker 11 (15:12):
I put it more in a dollar perspective, but six
to eight passengers somewhere two to seven million dollars, and
the aircraft range is going to be anywhere from about
a thousand nautical miles to fifteen hundred.
Speaker 4 (15:24):
So what don't people want then?
Speaker 9 (15:26):
Is it? Now?
Speaker 4 (15:26):
Yeah? What is it that they don't want?
Speaker 11 (15:28):
It seems to be the category that I would call
the super mid size and the ultralong range aircraft.
Speaker 8 (15:34):
Why don't they want those?
Speaker 9 (15:35):
It's a good.
Speaker 11 (15:36):
Question, it's a really good question. So first of all,
if we talk about the ultra long range that that's
the pinnacle of the marketplace, and the price point for
those airplanes is anywhere from fifty million on.
Speaker 8 (15:45):
This not be like a Golfstream G six fifty correct, Yes.
Speaker 11 (15:49):
Tim's a little bit into planes, Ah, I can tell.
So that seems to have fallen out of favor. I mean,
there are there are buyers out there, and there are
plenty of inquiries. I mean, if I just look at
the number of inquiry as I've received, you're to date
on every single aircraft I offer for sale. It just
boggles my mind that not one person has stepped up
to make an offer. Maybe more interesting is let's say
(16:11):
I get two hundred inquiries over the course of three
months on an aircraft. My guess is ten percent are
really going to buy an aircraft, But less than ten
percent of that ten percent I've actually done.
Speaker 1 (16:23):
Anything forgive me, But do interest rates matter? I mean,
when we're talking at this type of money, they don't
matter for real estate, but they matter for at least
that's what real estate, high end real estate mean.
Speaker 4 (16:35):
Do they finance these deals? Like, Yeah, that's a good question.
Speaker 11 (16:38):
So another good question my personal history is that I
can count, maybe on two hands, how many people actually
needed financing throughout my entire.
Speaker 1 (16:47):
Cash to me versus using financing are two different things.
There are plenty of people who could pay, you know,
outright for a forty thousand or sixty thousand dollars vehicle,
but if they get zero percent financing, then they're going
to take the finance.
Speaker 4 (17:00):
Side exactly that.
Speaker 11 (17:02):
Now, I have a number of prospective buyers that they
may pay cash outright and then refinance later on. Most
of them do that with a financial institution that they
already have a business relationship with. The odd inquiry that
I may receive for aircraft financing, frankly, is a little
bit of a red flag for me, because they shouldn't
be asking me.
Speaker 2 (17:22):
They already should have had that in place, right, It's right,
they've got their bankers they've got the bank that they've
been working with for years on everything.
Speaker 11 (17:28):
End qualified, the case comes in everything.
Speaker 4 (17:32):
It's interesting. I'm thinking about our audience.
Speaker 2 (17:35):
So how do you then use what you are seeing
to maybe tell you what's.
Speaker 4 (17:40):
Going on in the global economy.
Speaker 2 (17:42):
Is it an indicator for you or is it just
maybe your business, Your industry is going through some changes.
Speaker 11 (17:48):
I would say flip that and say business jets are
the indicator, and they always have been. Now I think
we're writing new history and have been since twenty nineteen,
because you could take the playbook throw it out the window.
Looking back over twenty three, I was musing over the
fact that we're going to chalk this year up to
(18:08):
a year of rebalancing, and I'm wondering if this was
not the downturn that always follows a great upswing. And
twenty four, because I'm going to use it to project
a little bit, is going to be relatively quiet. But
the driver for that is mostly the presidential election and
the uncertainty that comes along with who will be our
(18:29):
new administration and what policies will go into effect.
Speaker 1 (18:32):
Well, President Trump was pretty friendly to private jets.
Speaker 4 (18:36):
To a certain degree.
Speaker 1 (18:37):
I mean some of those there were tax breaks that
were given to people who used private jets during the
coronavirus pandemic, for example.
Speaker 4 (18:46):
Well, that's true.
Speaker 11 (18:46):
The bonus appreciation was a huge driver to motivate people
to buy aircraft.
Speaker 4 (18:52):
Twenty seconds.
Speaker 2 (18:53):
What are you worried about in terms of the presidential
outcome and in terms of regulatory or overset?
Speaker 4 (18:58):
And I've got to ask you to be very quickly.
Speaker 11 (19:00):
I'm mostly concerned about tax implications. There's a lot of
those expiring in twenty five. That's really the bigger concern.
Speaker 2 (19:08):
Really fascinating, right, you can talk about this al, I know,
I know, it's a world we love talking about. We
didn't even get into evtalls, which I know is a
big thing. Next time, come back soon. Love to continue
the conversation. Janine Jannarelli, founder president of par Avion, a
private aircraft broker. You can check out some of the
stuff that she is involved in on her website here
(19:29):
in studio.
Speaker 4 (19:30):
Have a good holiday.
Speaker 3 (19:33):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Eastern on Bloomberg Radio,
the Bloomberg Business app and YouTube. You can also listen
live on Amazon Alexa from our flagship New York station,
Just Say Alexa playing Bloomberg eleven thirty telling you.
Speaker 12 (19:57):
Stop.
Speaker 2 (20:00):
Yeah, that's right, everybody. Santa Claus Is come to town. At
the most wonderful time of the year. The Aris Cris
Bloomingdale's has its holiday window display up. People are decorating
their Christmas trees and decking the halls, and a large
team of Santa's are coming to town, appearing at malls
and retail outlets around the country.
Speaker 4 (20:20):
He's everywhere and sometimes she's everywhere. Explain that in a moment.
Speaker 1 (20:24):
That's true. Hey, this year things are a little bit
different than years past, though. Demand for Santa's is actually
far exceeding supply, at least according to our next guest,
who knows quite a bit about goings on at the
Old North Pole. Mitch Allen is the founder and head
elf of Higher Santa It's a Santa Claus talent and
staffing agency, and what it does is it places Santa's
(20:44):
at events, parties, malls and more all over the US.
Mitch joins us on a zoom from South Lake, Texas. Mitch,
good to have you with us this afternoon. So the
Santa Biz. You went pretty well in twenty twenty three.
Speaker 13 (20:55):
No, it sure is. We've had more demand for Santa
Claus entertainers than we've ever had before, and all types
of it, whether it be a home office, retail establishment, malls.
Everyone wants to associate themselves with Christmas through the use
of Santa.
Speaker 4 (21:11):
Totally get it. I'm also a fan of Healfa on
the Shelf. Just going to put it out there.
Speaker 2 (21:15):
Hey, Mitch, I mean, so our numbers up, demand is
up from what pre pandemic levels, like, what is I
don't know, Is it just been You've been seeing organic growth?
Has there been a recent peak? Give us an idea,
give us some perspective.
Speaker 8 (21:28):
Sure.
Speaker 13 (21:28):
So here at Hiresanta dot com, we've seen the demand
for Santa's people reaching out to us is up over
thirty six percent over last year, and last year was
record demand, even higher than pre pandemic. And that's turned
into more events. Our actual events that we've booked is
up over one hundred and fifty two percent over last
year and many times that over pre pandemic levels. So
(21:51):
people are using it. And what's interesting is we don't
necessarily have a Santa index, but that's what I'm calling it,
that small and medium sized businesses are really using Santa
this year. I think that's going to be a blockbuster
year for small and medium sized businesses. If the demand
for Santa Claus at these establishments is any indication.
Speaker 8 (22:11):
How much does it cost to rent to Santa?
Speaker 13 (22:15):
Yeah, so it really depends date, time, location, and how
long you need Santa.
Speaker 1 (22:19):
Okay during the Christmas season, I'm not talking about it.
Speaker 8 (22:22):
I'm not talking about it.
Speaker 4 (22:23):
Your life Santa here, everybody's invited. We're talking about four
hours I need Santa.
Speaker 13 (22:28):
So if you need sand to come your home or
office for just a couple of hours, you're talking about
two to four hundred dollars per hour for a Santa
Claus entertainer. Now, if you do it for a mall,
the hourly rate is obviously much less.
Speaker 4 (22:41):
So do Santa's like do those who really look like Santa?
Speaker 2 (22:45):
Sorry, kids, I hope we don't know the kids. You know, man,
we should have done a disclaimer. If there are kids
in the room, get them out of the room.
Speaker 4 (22:51):
I'm sorry for everybody in the control room. Yes, yeah,
there is a Santa Claus.
Speaker 8 (22:56):
Okay, I don't know where you were going.
Speaker 2 (22:58):
I've gotta be really careful, but Mitch, I mean, so
for those who you know, really look like Chris Kringle,
do they get more money?
Speaker 13 (23:07):
Absolutely so. At Hires, Santa are Santas, we like to say,
have a real beard, a real belly, and a real jolly.
You know, they've got that twinkle in their eye, that
love and joy of Christmas in their heart, and they
really do personify the image and personality of Santa Claus.
Speaker 1 (23:24):
What about the demands the that you're getting right now
from different people across the country who are saying, well,
you know what, I don't actually want a Santa that
looks or sounds like the traditional Santa Claus. We're looking
for more diversity when it comes to.
Speaker 4 (23:37):
Sand don't a Christine Clause rather than yeah, what do
you what?
Speaker 8 (23:40):
Are you getting requests for Chris Kringle.
Speaker 13 (23:43):
So, diversity is one of the big trends that we're
seeing in the Santa Claus entertainment space. You know, we
have a number of black Santa Claus entertainers as well
as Spanish speaking Santa's people are wanting to have a
Santa that looks and sounds like that.
Speaker 8 (23:57):
They do.
Speaker 13 (23:58):
We even have a deaf Sanda that we send around
the country. He's entirely deaf and it speaks asl American
Sign language. So we've seen the demand for We've seen
the demand for diverse Sanna's really grow up. And as
you pointed out, we actually have a couple of female
Sanna's who are terrific. You would not know that they
are females. They look and act like Santa and are
(24:20):
really great entertainers.
Speaker 2 (24:21):
You mean, so they're not actually being a female Sanna,
they're actually being a female that is pretending to be
a male Sanna.
Speaker 8 (24:28):
That's right.
Speaker 13 (24:28):
You think of like tim Allen glue on beard. You
would not know unless you actually saw them outside this
suit that they were not actually Santa. But yeah, diversities
are one of the big friends. We also see experiences.
People just don't want to have their traditional picture with
their child on the knee of Santa. They want to
have an entire experience, and so many of our clients
(24:49):
are really increasing the experience where there's lots of sort
of instagrammable pictures and other types of experiences cocoa, hot
chocolate and those types of things along with.
Speaker 12 (24:59):
The with Santa.
Speaker 4 (25:00):
All Right, Mitch, is there a Santa School?
Speaker 13 (25:04):
You know, this is one of the surprising things that
people don't realize. There is a vibrant Santa Claus community
out there, whether it be online or in person. Lots
of organizations. There's Santa schools and conventions around the country,
and that's where we go and recruit our Santa claus
is for higher Santa dot Com.
Speaker 1 (25:21):
Hey, how seasonal is your business?
Speaker 13 (25:24):
Well, the actual delivery of our service is extremely seasonal,
about six or seven weeks, but it's a full year
business at Hire Santa. The first half of the year
is really about seals. It's getting those large contracts, those malls,
those retail establishments we're working and then we're trying to
get those contracts as well as we're trying to get
(25:46):
more Santas. This last year we added over eleven hundred
Santa Claus entertainers to our database alone. And so it
is full season, but really it's go time. It's fourth quarter,
during the last part of November and of course all
of December.
Speaker 2 (26:00):
All right, So what's interesting is you shared with us
some research that you guys have done, and some of
the Santa's talk about their best experiences of twenty twenty two,
which are incredibly heartwarming, But I want to go to the.
Speaker 4 (26:10):
Worst experiences of twenty twenty two. What are some of
the rough experiences?
Speaker 2 (26:13):
We have about forty five fifty seconds left, just give
us a couple.
Speaker 13 (26:17):
Well, you know, the rough experiences are really when Santa
gets sick or injured. You know, every single year for
us we lose Santa Claus entertainers. You can imagine, they're
older gentlemen, they're susceptible to COVID and negative outcomes with that,
or we've had this year alone, Santa's already in a
car accident, a wife got sick. So those are really
(26:39):
heart breaking themselves as well as you really get the
touching things whenever our child is wanting something, they're sick,
or their parents are sick and they're wishing something for them.
But it's a wonderful time, and Santa's really enjoys spreading
that love and joy of Christmas.
Speaker 2 (26:54):
I thought you were going to tell me about the
Santa that flubbed the lyrics to Frosty the Snowman at
a daycare. That's what I was opening for a little levity,
A little levity.
Speaker 13 (27:04):
Yeah, yeah, we get that a lot too. And you know,
we've actually been on air and asked somebody Santas to
you know, name the reindeer, and they just froze.
Speaker 8 (27:17):
A lot of them.
Speaker 2 (27:18):
Mitch Alan, Merry Christmas, Happy Holidays, Founder and head elf
of Hire Santa joining us from Texas, where there Santas.
Speaker 3 (27:26):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Easter on Bloomberg Radio,
the Bloomberg Business app and YouTube. You can also listen
live on Amazon Alexa from our flagship New York station
Just Say Alexa, playing Bloomberg eleven thirty.
Speaker 2 (27:45):
Every now and then a story hits so hard it
gives you the chills, and this is certainly one of them.
It's about deep fake pornography images that have been digitally
manipulated to depict an individual doing something they did not like,
in this case, posing naked, and about a group of
young women in a New York City suburb horrified to
learn that their photographs had been manipulated and posted online,
(28:06):
and they ultimately took matters into their own hands.
Speaker 1 (28:10):
It's the cover of the new issue of Bloomberg Business Week.
It's out on newsstands later this week, but you can
read the story now on the Bloomberg terminal and at
Bloomberg dot com slash BusinessWeek. The story by Bloomberg News
investigative reporter Olivia Carville and a Bloomberg News cybersecurity reporter
Margie Murphy, both of whom join us now. Olivia here
in our Bloomberg Interactive Broker studio. Margie joins us from
(28:30):
our San Francisco bureau. Margie, excuse me. Also, here's the
editor of Bloomberg Business Week, Joe Weber here in our
Bloomberg Interactive Broker studio. Wow, Joel, How did this story
get on your radar?
Speaker 8 (28:42):
Get on their radar?
Speaker 12 (28:43):
Olivia and Margy pitched it, and from the moment they
brought the idea to us, we were mesmerized and then
more honestly horrified, and we felt like it was a
story that we had to do, and we needed to
do it on the cover to make sure that the
world found out about it, because it is perhaps frightening
sneak peek at the.
Speaker 8 (29:03):
Future and the lack of.
Speaker 12 (29:07):
Real common sense and laws about where generative AI might
possibly take us, and the beginning of the story is
like your worst nightmare, and Olivia, why don't you take
us there? Because it's ultimately where.
Speaker 4 (29:21):
There's sort it's about Cecilia.
Speaker 14 (29:24):
So the story starts in Livettown, Long Island, which is
an interesting place to start. This is the birthplace of
American suburbia, the first post War US suburb, And this
group of teenage girls who had all attended the same
high school, discovered that their photographs that they'd posted on
social media had been manipulated into deep fake pawn that is,
(29:44):
fake pornography created using deep learning models or artificial intelligence.
And Cecilia Luke, who opens the story, discovered this while
sitting in a car in a parking lot and a
strip mall and Livettown. And as she's looking through this
weird site that a friend had sent her who had
also discovered the photos, she sees images that horrified, disgusted,
(30:08):
really scared her. These are photos which showed her being
digitally undressed, very graphic images. Content on the sex site
included people posting about her being raped and murdered. In
some of the cases the images she was just a child,
she was five years old. And she also saw photos
(30:28):
of friends of hers who attended the same school, and
it was that night New Year's Eve of twenty twenty
that news of this website and these deep fake images
really spread across the suburb in Long Island.
Speaker 4 (30:40):
Not them at all.
Speaker 2 (30:42):
In other words, those images obviously altered and they knew it,
like they went through it, and they're like but.
Speaker 12 (30:48):
Not obvious to anyone else exactly. And that's where the
horrifying part comes in.
Speaker 8 (30:54):
Go ahead of it.
Speaker 14 (30:55):
Yeah, I was gonna just say that for the woman now,
because they are twenty two to twenty three the time
they were eighteen or nineteen years old. And the scariest
thing was looking at these photos where they had been
undressed and realizing that they look real enough that anybody
else who sees them is going to believe it really
actually is their bodies. So for Cecilia, it was looking
(31:17):
at this nude image and knowing that the breasts weren't hers,
but also realizing that most people who saw this image
would think that they were.
Speaker 2 (31:26):
So Margie, let's bring you into this. An incredible story,
so not a problem. You call the police and you
say this isn't me, and it's done, and they take
it down, right.
Speaker 4 (31:37):
It's that easy. I'm being sarcastic.
Speaker 9 (31:41):
Yeah, not quite at the moment.
Speaker 10 (31:45):
There's no federal law prohibiting deepfake pornography. So the challenge
that these girls had were, you know, they were so
incredibly brave. They did this investigation mostly on their own,
figuring out exactly who had created these images of them,
and they took them to the police, and there was
(32:06):
very little legal recourse for them to get justice. And
in fact, it was only after searching through everything that
Patrick Carey, the former classmate who'd been posting these images,
looking through everything that he'd posted, they'd seen that he'd
actually accidentally posted real child sexual abuse material and that's
(32:29):
what they got him on. It wasn't on the deep
fake pornography at all. And that's an issue that's a
frustration being felt by women around the world. Even though
certain states in the US do have laws around deep
fake pornography, it's just so patchwork across the US and
internationally there are issues with the law as well, because
(32:50):
the technology has just advanced just at such a breakneck speed,
just lawmakers haven't been able to keep up with it.
Speaker 12 (32:58):
What about the companies in the platforms on the AI front, Like,
what did we learn about what they can and can
do or aren't willing to do.
Speaker 9 (33:09):
Margie right.
Speaker 10 (33:10):
So the issue with a lot of the technology that's
around now and that from our reporting we saw was
really popular for creating deep fake pornography and even child
deep pornography, a lot of those tools are open source.
So there's this kind of divide in Silicon Valley. You've
(33:31):
got the developers who've created this really incredible image generation
technology that you know, they want to be used for good,
who believe that it should be kept out in the
open for everyone to use and not gate kept by
like big tech platforms who have typically provided services, and
(33:51):
you know, you might enter in a prompt and you
get your image back. Whereas with the open source technology,
anyone can go and interact.
Speaker 9 (33:58):
With the code. Therefore you can play with it.
Speaker 10 (34:02):
And even if a developer was to put a guardrail
in place, like prohibiting adult content, it's relatively easy for
someone to go in and change that. And so that's
opened this Pandora's box. We've got all these open source
technologies that even when a developer realizes a bit are
being used for bad, the cats out of the bag
(34:23):
and people are already exploiting it Olivia.
Speaker 1 (34:25):
The story starts in Levittown, It's centered around Levittown, but
it spans the globe. What happens in New Zealand, what's
going on with a former police officer named will Wallace.
Speaker 14 (34:40):
I think that was one of the most remarkable parts
of reporting the story is that it really is a
dual narrative. You have the girls in Leavittown investigating the
predator who is posting images of them online on the
sex site that an ex cop in New Zealand has
discovered has already been posting images deep faked images of
New z woman as well, and so he starts an
(35:02):
investigation into the man behind this website. And it's very
rare in journalism, or at least in my own career,
where you have a story that has this jewel narrative
where you can weave them together and see an investigation
unfolding in suburban New York and at the same time
in New Zealand, of all places, which happens to be
where I'm from, there's an ex cop trying to work
(35:24):
out who was behind this website. I remember one night
I was driving back from Levettown to New York and
I called Margie to talk to her about an interview
i'd just done with Anna, who was in the story,
and ultimately discovered the identity of Patrick Carey who been
posting the images, and took that evidence to police. And
I called Margie. I was excited because finally we had
(35:45):
this key piece of the story to tell her about it.
And that's when she responded, saying that she had discovered.
Speaker 9 (35:51):
That there was also this whole other part to the.
Speaker 14 (35:54):
Story where there were these vigilantes, this movement trying to
track down who was behind this website, and there was
an ex detective from New Zealand who had been leading
this fight to kind of combat deep deep fake pawn
and to take down this deplorable internet sex site.
Speaker 8 (36:11):
So where do we go from here?
Speaker 12 (36:13):
Because, as you mentioned, there's no federal law prohibiting any
of this, Marguie, But what happened in New York State.
Speaker 14 (36:21):
So in New York State, we have seen the District
Attorney in Nassau County, which is where this case unfolded,
actually put forward or introduced new legislation trying to target
deep fakes. The problem is that, you know, what do
you focus on is it the companies that are releasing
this technology. Is it the regulators who can't catch up
(36:43):
to this technology, is it's being rolled out? Or is
it the predators and bad actors like Patrick Carrey who
are abusing it?
Speaker 2 (36:49):
And and yes, no, and I do also wonder and
MARGI let's bring you back in. I mean in terms
of police and law enforcement, you know how high up
on the list is there in terms of prioritizing the
things that they focus on.
Speaker 12 (37:04):
Yeah.
Speaker 9 (37:04):
Absolutely.
Speaker 10 (37:05):
One thing that was really interesting about Will Wallace, who
you know, you guys have just mentioned. He obviously deeply
involved in this website. It was a passion project of
his to kind of find out, you know, find help victims,
find the people that were posting these pictures, but also.
Speaker 9 (37:21):
Uncover who the admin of the website was.
Speaker 10 (37:26):
But because he has a background in the police, he
has this he really understands what it takes to be
able to actually gather evidence, bring a good tip to
law enforcement, and.
Speaker 9 (37:39):
See that actually be followed through.
Speaker 10 (37:41):
And he would say, he would tell me how frustrated
he was every time he would give a tip to
law enforcement in different local law enforcements all around the
world and not hear anything back, But he also understood
that it's so challenging when there are you know, there
are certain skill sets you need to be able to
investigate this kind of crime. There needs to be better
(38:04):
education so that when a victim comes forward in the
first person they're speaking to, that they understand that, yes,
there hasn't been a physical crime, but this cyber crime
is just incredibly traumatic and super damaging, and that person
is a true victim.
Speaker 9 (38:20):
And additionally, you know, when the laws aren't.
Speaker 10 (38:23):
Robust, laws aren't in place for prosecutors to deal with
people once they've found a suspect, that all is just
it's incredibly hard for police officers to do their work.
Speaker 2 (38:36):
When Patrick Carey, when it finally did come down on him, Olivia,
Tim and I were talking about this before we got going,
before you guys came into the studio. So you ultimately
was sentenced six months in prison, ten years probation, lifetime
status as a sex offender, can on a smartphone anymore,
or any device with a camera, or be withinred a
(38:57):
thousand feet of a school or a playground. Six months,
but he was out in four for good behavior. I
don't seen in a good behavior here that to me
is not even a slap on the rest. So it
just kind of speaks to law enforcement not really necessarily
respecting the severity because you talked to these women and
they definitely felt harm and pain and there was an impact.
Speaker 14 (39:18):
Oh yeah, there's no doubt about that. I mean a
lot of these women have sort out therapy since this.
One lost twenty pounds from strees, one dropped out of college.
Three I talked to Carrie Pipper spray in their handbags,
and two carry knives with them. Now, they're so scared
of what was done on the website, not only what
(39:39):
Kerry was posting, but the hundreds, if not thousands of
strangers in the world who saw those photos and tried
to reach out to them. One of the craziest parts
about this case is that Kerrie also included the girl's names,
addresses social media information, so they had these awful messages
and phone calls coming through them, people harassing them for months,
(40:02):
and one of the threads on the site had over
thirty thousand views. That's thirty thousand people looking at a
fake porn image of you where they're writing about you
being raped and murdered. You know, the fear was real
when I was talking to these young women, and there
is a deep seated frustration and live itt town from
their families, teachers at the school, the girls themselves. That
(40:26):
Carrie only received six months. He was out within four
months and he's back in the neighborhood now.
Speaker 12 (40:31):
It's amazing, I think the greater thing here And obviously
the circumstances of this particular story are totally frightening, but
it also does just speak to this greater challenge that
we're going to be living through.
Speaker 3 (40:46):
Now.
Speaker 12 (40:47):
We have a technology that the world is not prepared for,
and this shows you how unprepared we are for it.
And sure there's a lot of good that can come
from it, but there's also your total nightmare. And you know,
props to Olivia and Marty for being able to tell
this story.
Speaker 2 (41:04):
Well and coming off of Open AI and the debate
within that company about the ethics and the concerns about
generative AI, where at.
Speaker 12 (41:11):
Almost the perfect time for Aline, you did it once again.
It does they did it once again.
Speaker 2 (41:16):
You guys did do it once again. Olivia Carvell investigative
reporter at Bloomberg News. Margy Murphy, she's a cybersecurity reporter
at Bloomberg News. Incredible story, the cover story, most read,
the Bloomberg Big Take, and.
Speaker 4 (41:28):
Our thanks to Jill Weber. This is Bloomberg.
Speaker 2 (41:32):
Brother Marc, a journal How about you let me drive?
Speaker 3 (41:39):
No, no, no, no, honey, please, I'll do.
Speaker 7 (41:45):
I want to drive.
Speaker 15 (41:48):
It's a question.
Speaker 3 (41:53):
This is the Drive to the Clothes Well on Bloomberg Radio.
Speaker 2 (42:00):
All right, everybody getting ready to wrap up the Wednesday trade.
Just about seventeen and a half minutes left in today's
trading session. We have got when I look at the
S and P five hundred, kind of half of the
major industry groups are higher, half are lower. But it
really is once again about what's going on in the
treasury trade because we are down again.
Speaker 4 (42:20):
I'm looking at a ten year you know, four point
twenty six. Who to thunk?
Speaker 1 (42:24):
I mean, we were talking a tenure at five percent
just a few weeks ago.
Speaker 4 (42:28):
Six percent. People were talking about, you know, for even
like you know, the current.
Speaker 1 (42:31):
We should have Katiekminski back on and see if she's
still sticking to that.
Speaker 4 (42:34):
We should bring her back. That's a really great idea.
Speaker 2 (42:36):
All right, let's see what our Drive to the closed
guest has to say about all of it, Amy Magnota.
She's co CIO at the independent investment advisory firm Ata
Gino's Capital. She is on Zoom from Pennsylvania. Amy, good
to have you here with us this yield trade.
Speaker 4 (42:53):
Let's go there.
Speaker 2 (42:55):
Would you go as far to say we are at
peak yield on the US Treasury yield curve? And uh,
you know, and does it mean that ultimately we get
to some kind of recession? Does the economy slow down
that much?
Speaker 15 (43:12):
Our view is that we're expecting the economy is growing
pretty solidly. So we had the GDP revision come in
today up to five point two percent real GDP growth
in the third quarter, and we're running about two percent
for the fourth quarter, So that's pretty solid, especially given
(43:32):
what you know the FED has done to try to.
Speaker 4 (43:35):
Bring down inflation.
Speaker 15 (43:36):
So our view is more in mid twenty twenty four
that we might hit some sort of soft patch or
mild recession with just given the lag effects of these
interest rate hikes on what that means for the consumer.
And then we also have an unemployment and then we
have a stimulus that's kind of run out.
Speaker 1 (43:56):
Amy Magnotta, what is the uh evy vidents that you
see today? End of November, end of being almost the
end of a pretty incredible rally in bonds and stocks
so far for the month of November. What's the evidence
that you see out there right now to lead to
your conclusion that we'll see some softness in the second
half of next year.
Speaker 15 (44:17):
I think there's some weakness, so our view just to
be clear from now to kind of year end early January.
We're still pretty positive on the equity markets, and a
couple of reasons for that. Seasonality is very strong. November
December tend to be very strong periods for equity market. Returns,
breasts been pretty solid, momentum has been building, and credit
(44:41):
spreads have been making new lows. So I think that's
all very supportive for equity markets for the next eight
eight weeks or so. I think our concern is more
as we hit twenty twenty four, could see some weakness
in the consumer, could see some you know, there's a
number on the confidence a consumer Confident and survey yesterday
that job's hard to get increased a little bit, so
(45:04):
we could see some maybe softening there and the employment
in the labor market, and maybe some weakening in the
consumer as we get through to twenty twenty four.
Speaker 2 (45:12):
You know, it's funny, it's interesting to listen to you,
and I feel like it's kind of you know, you
hear it even among the FED speakers.
Speaker 4 (45:18):
There's not just one narrative. Some of those FED.
Speaker 2 (45:21):
Speakers that we are just even hearing over the last
couple of days, some are saying, Okay, we're good. You know,
we think we're done the bets we die and they're saying, yah,
maybe not that inflation isn't weird it to'd be I'm
hearing a lot it. I's could in your conversation and
I get it because I think, as we talked with
our Mike McKee, it's not an exact science in terms
of getting of managing the.
Speaker 4 (45:41):
Economy if it doesn't have a ton of tools.
Speaker 2 (45:44):
And like I said, it's not like you just step
on the brake and everything stops. There are delayed effects
and cumulative effects. So having said that, you have conviction
that maybe stocks continue to rally into this year, what
else do you feel like you have strong conviction about
when it comes to the investment environment.
Speaker 15 (46:03):
So we're as I mentioned, we're pretty positive on equity markets.
There's some other areas where when you look at equity markets,
you're to dates certainly been driven by the index returns
kind of mask underneath it's been driven by large cap
megacap cup growth companies. So we're finding some opportunity in
other areas as well, Like what so US infrastructure is
(46:28):
one area that we like today. We've had the Infrastructure
Investment and Jobs Act in twenty twenty one, some allocation
to infrastructure projects in the Inflation Reduction Act last year,
and that money is just really starting to be allocated
and spent. So we think that's an attractive area.
Speaker 2 (46:47):
What specifically within it? So what specifically within infrastructure and
the way.
Speaker 15 (46:53):
We allocate portfolio, So we're acid allocators and we build
you know, total portfolio solution for our clients. So we're
going to allocate to a broad based ETF that's targeting
companies that can benefit from from that increase in infrastructure spend.
Speaker 1 (47:07):
That's an interesting thought on macro, on macro trends. What
are some of the other macro trends in where you're
allocating capital.
Speaker 15 (47:14):
Japan is another theme that we like today in Japanese equities.
A couple of reasons for that. Fundamentals have been improving
earnings growth is improving a lot of the shareholder friendly
policies that companies that we've been talking about for a
number of years are really getting put into play in Japan.
So that's also positive. Relatively loose monetary policy compared to
(47:37):
some of the rest of the globe, and valuations are
pretty attractive, so that's another area where we liked. We've
seen the dollar sell off a little bit here more recently,
which could benefit international equities.
Speaker 2 (47:48):
Yeah, and then the ni kid definitely has had quite
you know, a bounce back certainly this year, certainly from
some of the lows we saw earlier this year. When
you talk about Japanese equities by the broader market or again,
do you start to get picky about some specific sectors
within Japan.
Speaker 15 (48:08):
For us, again, this theme we feel is pretty broad based,
so we're going to allocate more broadly through a broad
based ETF in the Japanese equity markets.
Speaker 2 (48:19):
Natural resources also a favor we just a favorite of yours.
We've just got about forty five seconds left here. What
specifically when you think about natural resources.
Speaker 15 (48:28):
Sure, I think another area of the market that is
attractably valued relative to the broad SMP five hundred companies
there again better capital allocators. More recently, we still think
some structural supply demand that's favorable, and then more short
term with some turmoil in the Middle East might also
cause a problem. And then just the regulatory environment is
(48:51):
pretty tight for energy related companies and we think that's
a positive.
Speaker 2 (48:55):
Does that mean like the major integrated oil companies, the drillers,
just real quickly, okay, yes, so you like the big names,
the household names, yes.
Speaker 15 (49:03):
The larger and so again we're allocating through a broad
basingf but about eighty percent of that is energy companies.
Speaker 2 (49:09):
All right, Good to know, Good to know, Amy Magnotta,
she is Cocio at Atha Ginos Capital. She's joining us
on zoom from Pennsylvania.
Speaker 3 (49:18):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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