July 14, 2025 • 40 mins
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US President Donald Trump threatened to impose stiff financial penalties on Russia if it does not end hostilities with Ukraine, while pledging fresh weapons supplies for Kyiv.
“We’re going to be doing very severe tariffs if we don’t have a deal in 50 days, tariffs at about 100%,” Trump said Monday during a meeting with NATO Secretary General Mark Rutte at the White House.
Trump said the levies would come in the form of “secondary tariffs,” without providing details. The US president has used the term in the past to describe duties imposed on countries for trading with American adversaries.
Asked later if Trump meant to refer to the more widely known tool “secondary sanctions,” Commerce Secretary Howard Lutnick told reporters that sanctions and tariffs were “both tools in his toolbox” and that “you can do either one.” A White House official said Russia could face both measures if it fails to sign a ceasefire deal by early September.
Today's show features:
- Angela Stent, Senior Fellow at the Brookings Institution, on President Donald Trump latest military and economic threats against Russia as the War in Ukraine shows no signs of abating
- Bloomberg News Senior Technology Reporter Dana Hull on Elon Musk’s xAI ambitions using Tesla as a funding source
- Bloomberg News Federal Reserve Reporter Amara Omeokwe on President Donald Trump and his allies criticizing Jerome Powell's handling of the Federal Reserve's headquarters renovation
- Daniel Florness, CEO of Fastenal on earnings and the state of US manufacturing
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Transcript
Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Weekdaily reporting from the magazine that helps global leaders stay
ahead with insight on the people, companies, and trends shaping
today's complex economy, plus global business, finance and tech news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:32):
President Trump threatened to impose stiff financial penalties on Russia
if it does not end hostilities with Ukraine that's within
fifty days, while pledging fresh weapons supplies for Kiev. Trump
said the levies would come in the form of secondary tariffs,
without providing details. The President has used the term in
the past to describe duties impost on countries for trading
(00:52):
with American adversaries. Angelas Sten is Senior Fellow at the
Brookings Institution. She's also the author of Putin's World, Russia
Against the West and With the Rest. She's a former
National Intelligence Officer for Russia and Your Asia at the
National Intelligence Council. Also served in the Office of Policy
Planning at the US Department of State. Angela good to
have you with us this afternoon. Secretary. Lutnik followed up afterward.
(01:15):
He said, it would be a secondary sanction or secondary sanctions.
I should say, what exactly does that mean for a
country that has had sanctions on it for years.
Speaker 3 (01:25):
So the actual tariffs or sanctions on Russia wouldn't mean
very much tariffs because we barely traded with Russia I
think five billion dollars last year. But what that would
mean is sanctions on China, sanctions on India. They're the
two largest purchases of Russian oil, probably a country like
(01:45):
Turkey as well, which purchases a lot of Russian oil,
So they are threatening those countries. I believe the President
Trump said one hundred percent tariffs. There's a Senate bill
which would impose five hundred percent tariffs secondary tariffs on
these countries that purchase Russian hydrocarbons. So that's the real threat,
(02:05):
not so much to Russia Angela.
Speaker 4 (02:07):
How meaningful would it be for these countries?
Speaker 3 (02:12):
So I mean it would be meaningful because they are
the largest purchases of Russian oil, But then we don't
know how they might retaliate. India, of course, is a
country that's being drawing closer to the United States, so
to have that kind of tariff on India would also,
I think affect other aspects of the US Indian relationship.
(02:37):
So I think they're kind of all waiting. I should
say that, you know, saying that Russia has fifty days
to end the war, you have to realize that Russia
is now in the middle of a very brutal summer offensive,
and if you give them fifty days, the summer will
be over by then. So Russia can still do an
enormous amount of damage to Ukraine in those fifty days.
Speaker 2 (02:58):
Well in terms of moving the needle on actually I
mean this conflict, Doctor sten, is this enough in your
view to actually push Russia to stop it's bombardment of Ukraine.
Speaker 3 (03:10):
Well, the most important thing at the moment of the
weapons supplies. I mean, the Ukrainians desperately need air defenses.
They need those Patriot batteries, and today President Trump said
that they're seventeen of them available. So what's going to
happen is European allies are going to purchase American Patriot
missiles and other weapons. They are then going to give
(03:31):
them to Ukraine. So that enables President Trump to say
to his base, well, we're not spending any more money
on Ukraine, whether that's enough to help Ukraine really give
the message to Putin that he cannot win this war.
I think that's doubtful. I mean, Putin's not going to
stop until he really believes that he's not going to
win this. And for that, the Ukrainians need an enormous
(03:54):
amount of weapons, including in the end weapons that could
strike Moscow. But we haven't said that we're going to
provide those yet.
Speaker 2 (04:01):
Well, let's listen to exactly what the President said earlier.
Here he is in the Oval Office with NATO's Secretary
General Mark Ruda, where we.
Speaker 5 (04:08):
Are going to be sending them weapons and they're going
to be paying for them. The United States will not
be having any payment made. We're not buying it, but
we will manufacture it and they're going to be paying
for it.
Speaker 6 (04:22):
This is a very big deal with made.
Speaker 7 (04:23):
This is billions of dollars worth of military equipment is
going to be purchased from the United States, going to NATO,
et cetera, and that's going to be quickly distributed to
the battlefield.
Speaker 5 (04:37):
Ukraine will take it up, and you know, say, what
do you want about Ukraine? When the war started they
had no chance.
Speaker 8 (04:44):
And they still would add no chance if the equipment
they had the best equipment, because we do make the
best planes and missiles, and we make the best military
equipment in the.
Speaker 6 (04:55):
World quite far.
Speaker 2 (04:57):
That was President Trump earlier today he was in the
Old Office with NATO's Secretary General Mark Ruda. Doctor Stead,
I want to talk about the weapons portion of this
and the significance that you see in an environment where
many in the Republican Party were happy not to provide
Ukraine with any aid. How do you view this politically
for President Trump, and also whether or not you think
(05:19):
this is enough of a move by the United States,
And again the President saying the United States is going
to provide them, NATO member states are going to pay
for them. If that's enough to give Ukraine the edge
against Russia.
Speaker 3 (05:32):
Well, so, first of all, this certainly has split the
Magabase because there's still significant numbers of people, beginning with
Vice President Vance, who think that we shouldn't be supplying Ukraine.
And then you had the undersecretary in the Defense Department,
Albert Kolby, apparently ordered the end of supplying Ukraine with
weapons because he thinks only the Europeans should do this.
(05:54):
President Trump reversed that order that apparently he hadn't heard
about before, so yes, I think this is still a
contentious issue within his base. Is not enough to help Ukraine.
I mean, Ukraine just needs an enormous amount of these
Patriot batteries. If it gets seventeen extra ones, that's terrific.
Ukrainians themselves are manufacturing their own drones now they're also
(06:18):
making deals with European countries to co produce them, but
we really don't know whether that is enough because the
Russians are also stepping up their production of weapons, and
they're also using their drones in very creative ways to
try and get round some of the barriers that the
ukrain Ukrainians are put in their way. So at the moment,
(06:39):
things are very difficult for Ukraine, and I think only
very significant numbers of weapons can help them push this back.
And they also do have a mobilization problem. Russia has
many more people that can mobilize. It's got North Koreans
fighting for the Russians, and Ukrainians do face the shortage,
and you know they are so far refusing to draft
(07:04):
eighteen to twenty five year olds, but they are under
pressure from some of the Western countries to do so.
Speaker 4 (07:10):
Angelo, We saw a report last week that North Korea
is supplying as much as forty percent of Russia's ammunition.
Just how much of an asset is this for Russia?
Speaker 3 (07:23):
Oh, North Korea is an enormous asset for Russia. Now
we now hear they may send as many as thirty
thousand more Koreans troops to Russia to help and with
the ammunition. So without North Korea, it would be very
difficult for Russia to do what it's doing. Iran is
less important now by the way, because the Russians are
producing their own drones. But I would say the single
(07:46):
most important country in terms of weapons supplies right now
is North Korea.
Speaker 2 (07:51):
Doctor Angelis Stan. We always appreciate you taking the time
and joining us on Bloomberg Business Week Daily. Doctor Angelistan
a senior fellow at the Brookings Institution, also the author
of Putin's World, Russia Against the West and with the rest.
Speaker 1 (08:04):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
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Speaker 2 (08:18):
Let's talk about the world of Elon Inc. The money
behind Elon Musk's trillion dollar empire is increasingly flowing in
one direction, and that's toward AI. Musk said on Sunday
that he plans to hold a vote by Tesla shareholders
on whether the company should invest in Xai, the cash
burning AI startup that he founded two years ago. Come
shortly after SpaceX, his mammoth rocket launch company, agreed to
(08:41):
invest about two billion dollars into the AI firm. This
according to people familiar with the matter. Dana Hole and
Ed Ludlow write about Elon turning to Tesla and SpaceX
to fuel his AI ambitions. Dana Hole is Bloomberg News
Senior technology reporter. She's also contributor to the Elon Inc. Podcast.
You can catch new episodes of that every single week
wherever you get your She joins us from our San
(09:01):
Francisco bureau. Dana Tesla is I know it's not a
car company because we're told it's not a car company.
I heard you chuckle there. We're told it's not a
car company. They do optimists, they do this self driving stuff.
But listen, what moves the company's stock, how many cars
they delivered? Do they have any business according to the
(09:23):
folks you talk to, making an investment in this money
losing AI company.
Speaker 9 (09:29):
Yeah, So the money needs of Xai are enormous. I mean,
billions of dollars are pouring into artificial intelligence. There's huge
need for compute and data centers. And you know Xai
is building out this big data center in Memphis called Colossus.
And as we've seen so often with Elon Musk, you
know he doesn't I mean, he runs.
Speaker 10 (09:48):
Five companies, but they're not really separate.
Speaker 9 (09:50):
They have overlapping investors, engineers, management, sometimes boards, and Musk
like often I don't want to say Rob's Peter to pay,
but he will, you know, co mingle his companies in
a way that is very unlike any other corporate CEO
that we've seen. And I think in his mind, Ai
is the future. Tesla is also an AI company. If
(10:12):
they can invest in Xai, they maybe get preferential access
to Groc. We're already seeing that Tesla is now integrating
Groc the chatbot into its cars. We know that Tesla
has sold Megapax to Xai for that Memphis data center,
so they already are working together quite a bit, and
I think you know, a lot of investors, particularly the
(10:32):
retail investors, see this as a way to get in
on Xai. I mean, so there probably is a fair
amount of shareholder support for this idea, at least from
the retail side.
Speaker 4 (10:42):
Yeah. And speaking of support, so of course MOSCA is
planning to hold a vote by Tesla's shareholders on whether
or not the av maker should invest in Xai. Does
Elon usually let other people, including his shareholders and supporters,
weigh in on his decision making, Yeah.
Speaker 9 (10:58):
I mean something like, so Tesla is a publicly traded
company and so this would be a management proposal that
would likely be spelled out in the proxy. We know
that Tesla is having a shareholder meeting on November sixth,
We have not seen a proxy yet, But this idea
is something that Musk has floated for over a year now.
I mean, I think he first polled people on x
like should Tesla invest five billion dollars in Xai?
Speaker 10 (11:21):
Like a year ago?
Speaker 9 (11:22):
And so it sounds like now it's likely to be
in the proxy. So I mean, because it is a
publicly traded company, Yeah, shareholders have to weigh in it
would be a sizable investment for Tesla.
Speaker 2 (11:33):
I want to read a post that you linked to
in the piece that you and Ed wrote. It's from
groc on x First off, we deeply apologize for the
horrific behavior that many experienced. We have removed that deprecated
code and refactor the entire system to prevent further abuse.
(11:53):
This was on Friday, Dana, and it was about the
horrific behavior. It was referred to itself as Mecha Hitler,
and it had posts that praised Adolf Hitler and appeared
to call the Holocaust quote effective. This is this is
the uh chat bot for XAI. Is this thing ready? Like, like,
(12:16):
if you're a Tesla investor, do you have pause about
sending money from Tesla to a company that has made
a mistake such as this in the in the AI race?
Speaker 10 (12:27):
I know right that that is a very good question.
Speaker 9 (12:29):
Well, I think like when you say Tesla investor, you
know there's sort of two camps of investors. There are
institutional investors, a lot of index funds. You know, Tesla
obviously joined the S and P five hundred back in
December twenty twenty, and then there's this very rabid you know,
retail shareholder base that is wildly enthusiastic, very on board
with the Elon uh and they're really betting on you know,
(12:51):
Elon in the future. And if the future, if the
future is not car sales, it's got to be something.
And so I see that this is all part of
Elon's big plan to really positioned himself as a leader
in AI. Remember that Xai was founded after Open Ai
by his rival Sam Altman came out with Chat Gibt,
and so you're seeing Groc try to be a big
(13:12):
player in this field. Yes, they have absolutely made mistakes.
The whole Hitler thing from last week was horrible. I
think it's notable that that Groc apologized or Xai apologize,
and like they seem to be sorting it out. But yeah,
I mean the other question I have is like do
Tesla owners want Groc in their cars? I mean, I'm
(13:32):
assuming there's a way to opt out or not not,
you know, enable that if you want, But I don't
think that when people buy a Tesla they necessarily signed
up for Groc.
Speaker 4 (13:42):
So Musk has of course really stepped away from that
whole political sphere that he was in for a little while.
Speaker 2 (13:48):
But except when he tweets.
Speaker 10 (13:49):
I was going to say, is it fair to say
that that's the case.
Speaker 4 (13:53):
He's trying to step away, Well, we'll say, I mean.
Speaker 9 (13:57):
I don't really buy that, to be honest. I mean,
he had to step away from DOGE because his time
as a special Government employee had like a limit, like
you can only serve x number of days per year
as an SGE, and so like that came to an end.
But he just can't help himself, like if he feels
strongly about something like, he cannot keep his mouth shut.
(14:18):
So we saw him tweeting over the weekend about the
Epstein files. I mean, and he is still talking about
creating a third party. He has, you know, for all
intents and purposes, quote unquote, stepped away from DOGE. But
I think he still has ambitions to be a player
in the midterms to potentially really start this third party.
(14:38):
And you know, he has poured so much money into
American politics already.
Speaker 10 (14:43):
I don't see him going quietly into the night on that.
Speaker 4 (14:46):
As we think about Xai, I mean, is there still
a conversation about his head being in too many places
right now with too many business ventures.
Speaker 9 (14:55):
I mean, that's an ongoing perennial criticism of Elon that
he's spread too thin, that he's distracted, that he's got
too many things on his plate, But like that's the
way he's operated for years. I mean, you know, he
simultaneously ran Tesla and SpaceX for decades, and SpaceX is
the most valuable company in the world right now, and
Tesla still has a one trillion dollar market cap. So
(15:17):
I feel like a lot of long term investors see
past that and they think that, you know, Elon is
a genius who can hyper focus where he needs to
and when he needs to, And you know that that
criticism doesn't hasn't like really held up. Like he is
able to execute when he's hyper focused, and he hyper
focuses a lot like every day.
Speaker 2 (15:36):
How can we look to Tesla's acquisition of solar City
close to a decade ago as sort of a blueprint
for a private investment or an investment in a private
company such as Xai.
Speaker 9 (15:48):
Well, it was the same kind of deal right where
Solar City was struggling and really needed a bailout, and
so Tesla bought solar City, which was rife with all
of these conflicts of interests because Elon was the chair
of the board, was the largest investor, so it was like,
you know, some people forget like Tesla acquired solar City.
I mean, solar City was a company that Elon founded
(16:08):
with his cousins. So this was and you know, and
now I mean Tesla still has a solar roof division somewhat,
but it's the same thing, like Tesla has money, Xai
needs money. Tesla, you know, Elon's going to go to
his board and say we should invest.
Speaker 10 (16:25):
They're going to bring it to the shareholders.
Speaker 9 (16:26):
I'm sure there'll be a campaign around it, like I
would imagine that it could pass, like unless there's really
strong institutional opposition. And you know, the Solar City deal
was rife with all these conflicts and it went to court,
but like ultimately Tesla prevailed and it ended up being
okay for shareholders. I mean they took they took a
bath initially, but like the company has still achieved great heights.
Speaker 4 (16:48):
Chief investment Officer Nancy Tangler said that an investment into
Xai will further dilute the declining ev business. Is this
something that you're hearing from sources as well?
Speaker 9 (17:01):
I mean absolutely, Like Tesla, you know, Tesla used to
be all about selling cars. The company used to say
that it was going to make twenty million cars years
by twenty million cars a year by twenty thirty. They've
completely abandoned that.
Speaker 11 (17:14):
You know.
Speaker 9 (17:14):
Elon now tweets things about how like owning a car
will be like owning a horse, like the future is
all about shared mobility and ride sharing and AI and optimists,
and you know, we haven't heard anything about the Mexico
plant in months. I mean, I think that that plant
is basically dead for all intentsive purposes. So yeah, I mean,
(17:35):
you know, Tesla has got to find a way to
make money, and if they can catch the AI wave
and get a return on their investment in XAI, ultimately
that's seen as a good thing.
Speaker 4 (17:45):
In about thirty seconds or less. How SpaceX doing in
regards to the everyone trying to do the space race
right now?
Speaker 9 (17:53):
SpaceX is the dominant launch provider in the United States
full spop. I mean, there's no other way to get
to the International Space Station and except for on SpaceX
in the United States. So I think that they and
they have starlink. So I mean, even though they've had
some some setbacks with Starship. They are the dominant provider
in the US.
Speaker 2 (18:13):
So next time the President threatens to cut off contracts
with SpaceX, just remember what Dana said. Full stop. There
the dominant provider of this technology.
Speaker 9 (18:24):
The Pentagon just gave the Pentagon just gave Xai a
contract today with some other AI companies as well, up
to two hundred million per each to do you know
AI for the government.
Speaker 10 (18:34):
So those contracts keep flowing.
Speaker 2 (18:36):
Dana Hall, Bloomberg News Senior Technology Reporter, are also a
contributor to the Elon Inc. Podcast. Catch new episodes of
the podcast each week.
Speaker 1 (18:46):
This is the Bloomberg Business Week Daily Podcast. Listen live
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Just say Alexa Play Bloomberg eleven thirty.
Speaker 2 (19:04):
President Trump and his allies have seized upon a new
way to criticize Bedchair Jay Powell his handling of an
expensive renovation of the Federal Reserves headquarters.
Speaker 5 (19:15):
I think if Jerome Powell stepped down, it would be
a great thing.
Speaker 2 (19:18):
I don't know that he's going.
Speaker 5 (19:19):
To but he should.
Speaker 2 (19:21):
Jerome Pale has been very.
Speaker 7 (19:22):
Bad for our countries. We should have the lowest interest
rates on Earth.
Speaker 6 (19:27):
How we don't.
Speaker 7 (19:28):
He just refuses to do it.
Speaker 5 (19:30):
And yet he's spending two and a half billion dollars
rebuilding the FED.
Speaker 2 (19:36):
That was President Trump just yesterday in Maryland. This construction
project offers the clearest example yet of how Trump and
those in his orbit are looking for every opportunity to
scrutinize Jerome Powell's leadership at the Central Bank, even beyond
his economics stewardship. Bloomberg News Federal Reserve reporter Amara Moakway
joins us now from our Washington, DC bureau. A two
(19:56):
point five billion dollar renovation. That's topic of the renovation
coming up. When j Powell defend the renovations as necessary
during his testimony to this Second Senate Banking Committee late
last month.
Speaker 12 (20:09):
Some of those are just flatly misleading. The idea of elevators,
you know, it's the same elevator, it'spinder since the building
was built, So that's a mischaracterization. And some of those
are no longer in the plans, you know, that's that's earlier.
We've the plans have continued to evolve.
Speaker 2 (20:24):
I do want to bring in Amara Moakway. She's been
writing about this. She's Bloomberg News Federal Reserve reporter. She
joins us from Washington, d C. Two point five billion dollars?
Is what is at issue here? What exactly is the
Federal Reserve renovation happening right now? And who started planning this?
Give us the details here.
Speaker 11 (20:44):
Yeah, So the FED is currently renovating two historic buildings
here in Washington, d C. And they've said those renovations
are basically meant to consolidate all their operations in one
place and really restore these two historic buildings that are
very old and that the FED says haven't been comprehensively
restored in quite some time. And so that's kind of
(21:05):
the FEDS rationale for these renovations. They were approved by
the Fed's board several years ago. So this project is
not a new project. The Trump administration scrutiny is new,
but this project has been going on for quite a while.
And so what we're seeing here is President Trump and
those in his administration now taking issue with the overall
price tag of the project, which has increased in recent years,
(21:29):
and then also taking issue with what FED cher Jerome
Palell said about some of the design features in the
renovation when he was on the hill last month talking
about these renovations, and some of the administration officials are
basically alleging that pal was not truthful in that testimony,
and that seems to be what they're using to kind
(21:50):
of lay the groundwork to say that perhaps President Trump
has cause to remove Chair pal from his position on
the Fed's Board of Governors. Because, of course, to move
someone from the Fence Board of Governors, you have to
meet a very high legal standard which has caused something
like malfeasance or neglect of duty. And so some administration
officials seem to be trying to use this renovation issue
(22:11):
to try and establish that cause.
Speaker 4 (22:13):
Amara, as you mentioned, this is not new. This renovation
has been going on for quite some time now. But
is this the first time that the magnitude of the
renovation is really being questioned?
Speaker 11 (22:24):
Yeah, I would say so. And what kind of set
this off was media reports about some of the features
in the renovation. Basically, there was a media report that
sort of characterized some of the features in the renovation
as very lavish, very extravagant, and so that led to
Republican senators when Chirpowell was on the hill last month,
that led them to sort of question him over why
(22:46):
there are some of these features, why the costs for
the project have increased over the years, And so that
is what kind of sort of brought this issue into
the forefront recently. And then we've really seen the administration
kind of seize upon it and use it as part
of their overall sort of criticism of Chair pal stewardship
of the FED both you know, when they're talking about
(23:06):
his interest rate, his stance on interest rates, and then
also when they're talking about how he has managed this
construction project.
Speaker 2 (23:13):
What are observers of the Federal Reserve saying about this?
And to what extent this could be? You know, this
is not this is not part of the Fed's dual
mandate by any means, right, stable prices, maximum employment. The
FED chair has laser focused on that mandate that comes
from Congress. He tells us that when we hear from
them every few weeks, what are observers saying about this
(23:34):
sort of I'm not going to call it a side show,
because that's you know, that's editorializing a little bit but
it's not core to the Fed's mission by any means,
and it's very political.
Speaker 11 (23:44):
It is very political, and I think what FED observers
are saying is that this is just a part of
this pressure campaign that President Trump and many in his
administration are putting on Chairpal and FED policy makers to
lower interest rates. Like FED observers don't see these things
as separate issues. They see it as part of the
same pressure campaign. And it also really matters because, of
course we know that Chairpal's term is up next year,
(24:07):
next May, and the search President Trump's search for the
next FED chair is also on, and so it really
does raise questions about what that search will look like
and who President Trump will ultimately pick. Is he going
to pick someone who is going to be more receptive
to his views and the pressure that he puts on
them when it comes to monetary policy and some of
(24:28):
these other issues about the institutional management of the FED.
And so I think even beyond chair power, it really
does raise these questions about what the FED looks like
when the next chair takes over.
Speaker 4 (24:41):
Amara In regards to this renovation, what can really be
done at this point, I mean, the builders are building,
this has been going on for some time. Does the
President then have the authority to come in and just
cancel the entire thing, scale it back? How does that look?
Speaker 11 (24:55):
I mean, I think the FED has said that a
lot of different input went into getting approved for this project,
including the National Capital Planning Commission, Like, there are a
lot of different bodies that sort of weighed in on
this project. And I don't think it's within the President's
purview to sort of stop the project. Like in the law,
the FED has authority over its own buildings because the
(25:17):
FED in so many ways is an independent agency. But
I think what the administration and what President Trump are
really trying to do it they're trying to sort of
question the optics around this.
Speaker 9 (25:27):
Right.
Speaker 11 (25:27):
Bill Pulte, one of the administration officials who has really
focused in on this renovation, will say things like, you know,
Jerome pal is keeping interest rates high and making affordability
difficult for Americans while he builds himself a two and
a half billion dollar palace.
Speaker 3 (25:43):
Right.
Speaker 11 (25:43):
Essentially, I'm paraphrasing, but that's essentially like some of the
lines of criticism, and so what you really see administration
officials doing is really calling in to question the credibility
of Chair pal And again, you can't separate those efforts
from the efforts that the administration is putting for to
try and make the FED follow their lead on interest rates.
Speaker 2 (26:03):
Amara, what happens to a federal reserve? If to the
Federal reserve if FED Chair Powell is forced out in
some way. There's a Deutsche Bank analyst who essentially says
that we could see a drop of at least three
to four percent in the trade weighted dollar. This is
George Sarahvellos of Deutsche Bank. There would be thirty to
forty basis points self and fixed income. He essentially argues
(26:25):
that all this is underpriced.
Speaker 11 (26:28):
Yeah. I mean, I think any economist you talk to,
any investor who you talk to, will say, look, if
FED Chair Jerome Powace pushed out, or if there's any
sort of inkling that the FED is bowing to President
Trump's pressure, and any questions start to arise about whether
the FED is continuing its independence, like that is not
good for the economy one, and then that is not
(26:49):
good for sort of the buy America trade.
Speaker 9 (26:52):
Right.
Speaker 11 (26:52):
We could see pressure on the dollar, we could see
pressure on treasuries, and so to be clear, President Trump
has continued to say that he's not going to that
he's not going to fire chair Pal. But I think
these sorts of questions again sort of raise the stakes
when it comes to what's going to happen with Sharepal's replacement,
because any feeling that the fed's independence is being compromised,
(27:13):
or that we have a person who's more likely to
listen to Trump could be bad for sort of the
buy America trade.
Speaker 2 (27:19):
Amara Mokway Bloomberg News FED a reserve reporter joining us
from Washington, DC.
Speaker 1 (27:23):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Applecarplay and Android Otto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (27:38):
Fast and All. Shares rising as much as six point
four percent earlier in the session, they're up right now
three point four percent. It's a new all time high
for the company after they reported net sales for the
second quarter that came in in line with estimates from analysts,
up eight point six percent over the same period last year.
This is a fifty two billion dollar market cap company.
(27:58):
They distribute construction and industrial supplies. Think nuts, bolts, screws, anchors, rivets,
and other fasteners, as well as industrial janitorial and safety supplies,
cutting tools as well. The company sells to builders, manufacturers, governments,
and more so. Really it's a great read on the
entire industrial and manufacturing economy, specifically here in the US.
(28:19):
We've got with us the CEO of Fast and All,
Daniel Flornes. He joins us from Winona, Minnesota. Dan, Welcome
to Bloomberg Business Week Daily. Shares up today. Shares up
more than twenty five percent so far this year, new
all time high. In the earnings release, though you said
that quote the market conditions remain sluggish. What conditions specifically?
Speaker 13 (28:40):
You know, we sell to a wide range of customers
and industries as you as you mentioned across North America
and in twenty six countries in total.
Speaker 6 (28:49):
But mostly in North America.
Speaker 13 (28:51):
Our customer base has been relatively subdued for the last
several years. In the fall of twenty twenty two, we
saw some indicators it was going to slide, and we
felt that as we moved into the second and third
quarters of twenty twenty three, and it's been really weak
since then. About thirty percent of our business is very
production centered business within manufacturing.
Speaker 2 (29:15):
So are there any signs that that part of the
business is improving that those customers are seeing sentiment improve?
Are you hearing anything from them?
Speaker 13 (29:25):
I think the biggest sign that we're seeing is the
knife has stopped dropping. You know, we were trying to
catch that falling knife for a two year period. When
I talk to our district and regional leadership throughout the
throughout the world, the feedback I hear is, you know,
they're not talking about this two hundred thousand dollars month
customer whose business is off sixty seventy percent.
Speaker 6 (29:49):
You have a much more stability now.
Speaker 13 (29:51):
Might be stable at a lower level than it would
have been two years ago, but it's much more stable,
and so it allows our inherent growth to shine through.
Speaker 4 (30:00):
Been in this prolonged downturn, especially in the industrial economy.
Are you seeing any particular green shoots or signs of inflection,
and if so, which markets are you most optimistic about.
Speaker 6 (30:13):
Yeah, so we're seeing some green shoots.
Speaker 13 (30:17):
For us, we're seeing some We are seeing some impact
and energy. However, I would say that's probably more us
taking market share than it is a lift in the tide.
About twenty five percent of our business is outside of
the industrial and within there we're selling.
Speaker 6 (30:37):
We're doing quite well.
Speaker 13 (30:38):
I hear a lot of commentary from our folks with
data centered builds with you even warehousing customers. And we've
made really good inroads over the last three years into
the government sector. And that primarily was an offshoot of COVID.
During COVID, when supply chains blew apart, we stepped in
(31:01):
to serve a lot of that market when they were
not being served, and those folks have remembered that and
we've grown our business there.
Speaker 4 (31:09):
So we need to, of course talk about terraffs. How
have tariffs really changed your thinking about product sourcing, particularly
for fasteners, which we know, of course are primarily sourced
in China Asia. What other options are you evaluating to
mitigate the tariff impact here?
Speaker 6 (31:24):
You know?
Speaker 13 (31:25):
So back in twenty eighteen we did some short term
moves of our supply chain, but it was fairly limited
because you just can't change there's so much QC involved
with vetting out cut suppliers that you couldn't move it
fast enough. What we had done quietly over the last
five six years is continue in that progress because the
(31:49):
tariffs that were put in place in twenty eighteen were
sticking and we expected more of it to happen, and
we wanted to better diversify the supply chain for our customer.
We did look at a lot of options. There aren't
a lot of options within North America. We looked at
some options of doing some manufacturing ourselves. The problem is
the economics still didn't work. So it was really for
(32:12):
us more about diversifying supplier base in general.
Speaker 2 (32:16):
Are the economics of that going to work now in
this new tariff regime. I think during the first Trump administration,
the goal was to move things out of China, But
as many companies are learning right now, it doesn't matter
if it's China, Vietnam, or India. If it's not in
the United States, there is going to be a terrify
on it. At least that's what it seems like is
going to be the case.
Speaker 13 (32:34):
Yeah, economics still do not work, and part of the
challenge there isn't just the economics, it's the amount of time.
When we were researching it very in depth two and
a half years ago. One of the challenges is it's
easy to find a site. It's relatively easy to get
(32:55):
a building up and get a supply chain set up.
When I say relatively easy, I mean timeframe of what
it takes to do it. The most challenging aspect was
the production equipment of how many months it would take
to get that, and so that aspect really pushed us
to look more at geographic dispersion of supply chain sourcing
(33:18):
because the economics are are still very challenging.
Speaker 2 (33:22):
So how much of what you sell right now is
actually made in the US?
Speaker 13 (33:29):
If I look across what we're sourcing, what our supply,
our branded suppliers are sourcing, We've always estimated less.
Speaker 6 (33:38):
Than fifty percent is coming from the US.
Speaker 2 (33:41):
And is that going to stay stable in this new
TAF regime.
Speaker 6 (33:46):
I suspect it will.
Speaker 4 (33:47):
Okay, So I know Fast and All raised prices back
in April, especially as a result of tariffs. Historically, I
mean the company has been able to pass on pricing costs.
What should even the feedback here from customers? Has there
been much push back in terms of the ability and
appetite for customers, frankly to take on additional pricing, especially
as we head into the second half of the year.
Speaker 13 (34:08):
First off, we sell into a very competitive market. There
is always push back. The real challenge in the equation
is his communication. And one thing that helps in our
supply chain, we're directly sourcing from the manufacturer that's producing
the product, more so than most of our competitors in
(34:29):
the marketplace, just because of our scale, and so we
have the ability to see into the future farther than
a lot of our competitors, and it puts us in
a position to communicate very well. It puts us in
a position that takes steps as the inventory is turning. Unfortunately,
the one unfortunate part of that it also can create
(34:52):
a fatigue for your customer, and I would say our
customer is at the fatigue.
Speaker 6 (34:55):
Point right now of where it has.
Speaker 13 (34:59):
It's become challenge thing, but it always is, and it's
all about communication and trust.
Speaker 2 (35:05):
We're speaking with fastinal CEO Dan Flornes. Company reported earnings earlier,
shares are higher reach a new record today. Shares up
right now by about three point seven percent. I want
to talk a little bit about the One Big Beautiful
Bill Act that became law on the fourth of July
this year. In the press release for your earnings, you
did mention it, but big picture, what does it mean
(35:26):
for your customers and for your business?
Speaker 13 (35:29):
You know, big picture, what it means for our customers
is if you look at some of the depreciation rules
and the timing, it's it's it makes it very advantageous
to make capital investment. And so that's the biggest piece
that we see impacting our customers because our customers have,
especially on the manufacturing side, an incredible amount of infrastructure
(35:52):
that they're investing in, and so anything that allows them
to depreciate faster and to improve the return profile is
advantageous for our marketplace.
Speaker 6 (36:03):
And that's a key element that we talked about in
the release.
Speaker 2 (36:06):
I know that you talked a little bit about to
US manufacturing your own products in the US and your
suppliers doing it. But I'm wondering about your customers and
the way that these so called America First policies might
help them reshore manufacturing back to the US. Are you
seeing any evidence or hearing discussion of your customers beginning
to move manufacturing back to the US.
Speaker 13 (36:27):
You know, I would say it's fairly limited, but again
that's not something that happens in six months that you
set up. We've had some customers set up assembly operations,
which you can do in a much shorter timeframe as
opposed to peter production where you're manufacturing components yourself, or
you're changing your supply chain to more domestic type supply.
(36:52):
But what we've seen is a lot more willingness of
making invest even beyond the manufacturing capacity in the short term.
Speaker 4 (37:04):
Fastenas refocused on growing with larger customers. What are the
key drivers there in what additional investments do you need
to make to enable growth with those customers.
Speaker 13 (37:15):
Yeah, so a position we've put ourselves in for a
number of years is we have very aggressively made investments.
Speaker 6 (37:22):
So this was starting back fifteen plus years.
Speaker 13 (37:24):
Ago of slowly building an infrastructure to move the supply
chain closer and closer to the point of use. And
what that involved for us is investing in a tremendous
amount of vending infrastructure and in more recent years a
lot more RFID type infrastructure to measure product movement within
a facility so that you don't have to with human
(37:48):
capital physically observe product being diminished. You can monitor it
electronically and remotely. And so we've made extremely large investments
over the last ten plus years in vending technology, and
I'm pleased to say that vending technology is all manufactured
(38:10):
in the United States.
Speaker 2 (38:11):
Yeah. I was surprised when I went to your website
earlier today as I was preparing for this to see
those of those vending machines. It's not something that I've
run into and certainly in my life, but it's pretty
cool to see that not just soda, it's a snack machine. Yeah,
that's what That's what I was thinking. It's like, it's
a snack machine, but you can't eat what's in there,
so exactly. Okay, Hey, we've got about a minute left,
and I just want to talk numbers real quick. Gross
(38:33):
profit up forty five points to forty five point three percent,
up from forty five point one percent over the second
quarter of last year. You said it was partially offset
by higher import duty costs and higher fleet and transport costs.
Are those costs, in your view, going to stabilize.
Speaker 13 (38:50):
The Uh, They're going to continue to rise because because
about the way our supply chain works, we carry a
fair amount of inventory because we have such dispersion in
our locations, so we carry quite a few months of inventory.
So that's going to keep ratcheting up as we're on
a fiful basis inventory, so as that inventory continues to turn,
that will continue to ratchet up a little bit as
(39:11):
we move into the third and fourth quarters and into
twenty twenty six. What really helped us during the quarter
and what drove the improvement our gross margin set aside
teriffs for a second, right, We've put in place a
faster expansion starting last summer to widen our inventory, and
(39:31):
that's really what drove our margin this quarter.
Speaker 2 (39:34):
Dan Florida, CEO of fasten All, I really appreciate you
joining us. Shares up today new all time highs three
point eight percent right now.
Speaker 1 (39:42):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
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(40:03):
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Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Weekdaily reporting from the magazine that helps global leaders stay
ahead with insight on the people, companies, and trends shaping
today's complex economy, plus global business, finance and tech news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:32):
President Trump threatened to impose stiff financial penalties on Russia
if it does not end hostilities with Ukraine that's within
fifty days, while pledging fresh weapons supplies for Kiev. Trump
said the levies would come in the form of secondary tariffs,
without providing details. The President has used the term in
the past to describe duties impost on countries for trading
(00:52):
with American adversaries. Angelas Sten is Senior Fellow at the
Brookings Institution. She's also the author of Putin's World, Russia
Against the West and With the Rest. She's a former
National Intelligence Officer for Russia and Your Asia at the
National Intelligence Council. Also served in the Office of Policy
Planning at the US Department of State. Angela good to
have you with us this afternoon. Secretary. Lutnik followed up afterward.
(01:15):
He said, it would be a secondary sanction or secondary sanctions.
I should say, what exactly does that mean for a
country that has had sanctions on it for years.
Speaker 3 (01:25):
So the actual tariffs or sanctions on Russia wouldn't mean
very much tariffs because we barely traded with Russia I
think five billion dollars last year. But what that would
mean is sanctions on China, sanctions on India. They're the
two largest purchases of Russian oil, probably a country like
(01:45):
Turkey as well, which purchases a lot of Russian oil,
So they are threatening those countries. I believe the President
Trump said one hundred percent tariffs. There's a Senate bill
which would impose five hundred percent tariffs secondary tariffs on
these countries that purchase Russian hydrocarbons. So that's the real threat,
(02:05):
not so much to Russia Angela.
Speaker 4 (02:07):
How meaningful would it be for these countries?
Speaker 3 (02:12):
So I mean it would be meaningful because they are
the largest purchases of Russian oil, But then we don't
know how they might retaliate. India, of course, is a
country that's being drawing closer to the United States, so
to have that kind of tariff on India would also,
I think affect other aspects of the US Indian relationship.
(02:37):
So I think they're kind of all waiting. I should
say that, you know, saying that Russia has fifty days
to end the war, you have to realize that Russia
is now in the middle of a very brutal summer offensive,
and if you give them fifty days, the summer will
be over by then. So Russia can still do an
enormous amount of damage to Ukraine in those fifty days.
Speaker 2 (02:58):
Well in terms of moving the needle on actually I
mean this conflict, Doctor sten, is this enough in your
view to actually push Russia to stop it's bombardment of Ukraine.
Speaker 3 (03:10):
Well, the most important thing at the moment of the
weapons supplies. I mean, the Ukrainians desperately need air defenses.
They need those Patriot batteries, and today President Trump said
that they're seventeen of them available. So what's going to
happen is European allies are going to purchase American Patriot
missiles and other weapons. They are then going to give
(03:31):
them to Ukraine. So that enables President Trump to say
to his base, well, we're not spending any more money
on Ukraine, whether that's enough to help Ukraine really give
the message to Putin that he cannot win this war.
I think that's doubtful. I mean, Putin's not going to
stop until he really believes that he's not going to
win this. And for that, the Ukrainians need an enormous
(03:54):
amount of weapons, including in the end weapons that could
strike Moscow. But we haven't said that we're going to
provide those yet.
Speaker 2 (04:01):
Well, let's listen to exactly what the President said earlier.
Here he is in the Oval Office with NATO's Secretary
General Mark Ruda, where we.
Speaker 5 (04:08):
Are going to be sending them weapons and they're going
to be paying for them. The United States will not
be having any payment made. We're not buying it, but
we will manufacture it and they're going to be paying
for it.
Speaker 6 (04:22):
This is a very big deal with made.
Speaker 7 (04:23):
This is billions of dollars worth of military equipment is
going to be purchased from the United States, going to NATO,
et cetera, and that's going to be quickly distributed to
the battlefield.
Speaker 5 (04:37):
Ukraine will take it up, and you know, say, what
do you want about Ukraine? When the war started they
had no chance.
Speaker 8 (04:44):
And they still would add no chance if the equipment
they had the best equipment, because we do make the
best planes and missiles, and we make the best military
equipment in the.
Speaker 6 (04:55):
World quite far.
Speaker 2 (04:57):
That was President Trump earlier today he was in the
Old Office with NATO's Secretary General Mark Ruda. Doctor Stead,
I want to talk about the weapons portion of this
and the significance that you see in an environment where
many in the Republican Party were happy not to provide
Ukraine with any aid. How do you view this politically
for President Trump, and also whether or not you think
(05:19):
this is enough of a move by the United States,
And again the President saying the United States is going
to provide them, NATO member states are going to pay
for them. If that's enough to give Ukraine the edge
against Russia.
Speaker 3 (05:32):
Well, so, first of all, this certainly has split the
Magabase because there's still significant numbers of people, beginning with
Vice President Vance, who think that we shouldn't be supplying Ukraine.
And then you had the undersecretary in the Defense Department,
Albert Kolby, apparently ordered the end of supplying Ukraine with
weapons because he thinks only the Europeans should do this.
(05:54):
President Trump reversed that order that apparently he hadn't heard
about before, so yes, I think this is still a
contentious issue within his base. Is not enough to help Ukraine.
I mean, Ukraine just needs an enormous amount of these
Patriot batteries. If it gets seventeen extra ones, that's terrific.
Ukrainians themselves are manufacturing their own drones now they're also
(06:18):
making deals with European countries to co produce them, but
we really don't know whether that is enough because the
Russians are also stepping up their production of weapons, and
they're also using their drones in very creative ways to
try and get round some of the barriers that the
ukrain Ukrainians are put in their way. So at the moment,
(06:39):
things are very difficult for Ukraine, and I think only
very significant numbers of weapons can help them push this back.
And they also do have a mobilization problem. Russia has
many more people that can mobilize. It's got North Koreans
fighting for the Russians, and Ukrainians do face the shortage,
and you know they are so far refusing to draft
(07:04):
eighteen to twenty five year olds, but they are under
pressure from some of the Western countries to do so.
Speaker 4 (07:10):
Angelo, We saw a report last week that North Korea
is supplying as much as forty percent of Russia's ammunition.
Just how much of an asset is this for Russia?
Speaker 3 (07:23):
Oh, North Korea is an enormous asset for Russia. Now
we now hear they may send as many as thirty
thousand more Koreans troops to Russia to help and with
the ammunition. So without North Korea, it would be very
difficult for Russia to do what it's doing. Iran is
less important now by the way, because the Russians are
producing their own drones. But I would say the single
(07:46):
most important country in terms of weapons supplies right now
is North Korea.
Speaker 2 (07:51):
Doctor Angelis Stan. We always appreciate you taking the time
and joining us on Bloomberg Business Week Daily. Doctor Angelistan
a senior fellow at the Brookings Institution, also the author
of Putin's World, Russia Against the West and with the rest.
Speaker 1 (08:04):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eastering. Listen
on Applecarplay and Android Auto with the Bloomberg Business app
or watch us live on YouTube.
Speaker 2 (08:18):
Let's talk about the world of Elon Inc. The money
behind Elon Musk's trillion dollar empire is increasingly flowing in
one direction, and that's toward AI. Musk said on Sunday
that he plans to hold a vote by Tesla shareholders
on whether the company should invest in Xai, the cash
burning AI startup that he founded two years ago. Come
shortly after SpaceX, his mammoth rocket launch company, agreed to
(08:41):
invest about two billion dollars into the AI firm. This
according to people familiar with the matter. Dana Hole and
Ed Ludlow write about Elon turning to Tesla and SpaceX
to fuel his AI ambitions. Dana Hole is Bloomberg News
Senior technology reporter. She's also contributor to the Elon Inc. Podcast.
You can catch new episodes of that every single week
wherever you get your She joins us from our San
(09:01):
Francisco bureau. Dana Tesla is I know it's not a
car company because we're told it's not a car company.
I heard you chuckle there. We're told it's not a
car company. They do optimists, they do this self driving stuff.
But listen, what moves the company's stock, how many cars
they delivered? Do they have any business according to the
(09:23):
folks you talk to, making an investment in this money
losing AI company.
Speaker 9 (09:29):
Yeah, So the money needs of Xai are enormous. I mean,
billions of dollars are pouring into artificial intelligence. There's huge
need for compute and data centers. And you know Xai
is building out this big data center in Memphis called Colossus.
And as we've seen so often with Elon Musk, you
know he doesn't I mean, he runs.
Speaker 10 (09:48):
Five companies, but they're not really separate.
Speaker 9 (09:50):
They have overlapping investors, engineers, management, sometimes boards, and Musk
like often I don't want to say Rob's Peter to pay,
but he will, you know, co mingle his companies in
a way that is very unlike any other corporate CEO
that we've seen. And I think in his mind, Ai
is the future. Tesla is also an AI company. If
(10:12):
they can invest in Xai, they maybe get preferential access
to Groc. We're already seeing that Tesla is now integrating
Groc the chatbot into its cars. We know that Tesla
has sold Megapax to Xai for that Memphis data center,
so they already are working together quite a bit, and
I think you know, a lot of investors, particularly the
(10:32):
retail investors, see this as a way to get in
on Xai. I mean, so there probably is a fair
amount of shareholder support for this idea, at least from
the retail side.
Speaker 4 (10:42):
Yeah. And speaking of support, so of course MOSCA is
planning to hold a vote by Tesla's shareholders on whether
or not the av maker should invest in Xai. Does
Elon usually let other people, including his shareholders and supporters,
weigh in on his decision making, Yeah.
Speaker 9 (10:58):
I mean something like, so Tesla is a publicly traded
company and so this would be a management proposal that
would likely be spelled out in the proxy. We know
that Tesla is having a shareholder meeting on November sixth,
We have not seen a proxy yet, But this idea
is something that Musk has floated for over a year now.
I mean, I think he first polled people on x
like should Tesla invest five billion dollars in Xai?
Speaker 10 (11:21):
Like a year ago?
Speaker 9 (11:22):
And so it sounds like now it's likely to be
in the proxy. So I mean, because it is a
publicly traded company, Yeah, shareholders have to weigh in it
would be a sizable investment for Tesla.
Speaker 2 (11:33):
I want to read a post that you linked to
in the piece that you and Ed wrote. It's from
groc on x First off, we deeply apologize for the
horrific behavior that many experienced. We have removed that deprecated
code and refactor the entire system to prevent further abuse.
(11:53):
This was on Friday, Dana, and it was about the
horrific behavior. It was referred to itself as Mecha Hitler,
and it had posts that praised Adolf Hitler and appeared
to call the Holocaust quote effective. This is this is
the uh chat bot for XAI. Is this thing ready? Like, like,
(12:16):
if you're a Tesla investor, do you have pause about
sending money from Tesla to a company that has made
a mistake such as this in the in the AI race?
Speaker 10 (12:27):
I know right that that is a very good question.
Speaker 9 (12:29):
Well, I think like when you say Tesla investor, you
know there's sort of two camps of investors. There are
institutional investors, a lot of index funds. You know, Tesla
obviously joined the S and P five hundred back in
December twenty twenty, and then there's this very rabid you know,
retail shareholder base that is wildly enthusiastic, very on board
with the Elon uh and they're really betting on you know,
(12:51):
Elon in the future. And if the future, if the
future is not car sales, it's got to be something.
And so I see that this is all part of
Elon's big plan to really positioned himself as a leader
in AI. Remember that Xai was founded after Open Ai
by his rival Sam Altman came out with Chat Gibt,
and so you're seeing Groc try to be a big
(13:12):
player in this field. Yes, they have absolutely made mistakes.
The whole Hitler thing from last week was horrible. I
think it's notable that that Groc apologized or Xai apologize,
and like they seem to be sorting it out. But yeah,
I mean the other question I have is like do
Tesla owners want Groc in their cars? I mean, I'm
(13:32):
assuming there's a way to opt out or not not,
you know, enable that if you want, But I don't
think that when people buy a Tesla they necessarily signed
up for Groc.
Speaker 4 (13:42):
So Musk has of course really stepped away from that
whole political sphere that he was in for a little while.
Speaker 2 (13:48):
But except when he tweets.
Speaker 10 (13:49):
I was going to say, is it fair to say
that that's the case.
Speaker 4 (13:53):
He's trying to step away, Well, we'll say, I mean.
Speaker 9 (13:57):
I don't really buy that, to be honest. I mean,
he had to step away from DOGE because his time
as a special Government employee had like a limit, like
you can only serve x number of days per year
as an SGE, and so like that came to an end.
But he just can't help himself, like if he feels
strongly about something like, he cannot keep his mouth shut.
(14:18):
So we saw him tweeting over the weekend about the
Epstein files. I mean, and he is still talking about
creating a third party. He has, you know, for all
intents and purposes, quote unquote, stepped away from DOGE. But
I think he still has ambitions to be a player
in the midterms to potentially really start this third party.
(14:38):
And you know, he has poured so much money into
American politics already.
Speaker 10 (14:43):
I don't see him going quietly into the night on that.
Speaker 4 (14:46):
As we think about Xai, I mean, is there still
a conversation about his head being in too many places
right now with too many business ventures.
Speaker 9 (14:55):
I mean, that's an ongoing perennial criticism of Elon that
he's spread too thin, that he's distracted, that he's got
too many things on his plate, But like that's the
way he's operated for years. I mean, you know, he
simultaneously ran Tesla and SpaceX for decades, and SpaceX is
the most valuable company in the world right now, and
Tesla still has a one trillion dollar market cap. So
(15:17):
I feel like a lot of long term investors see
past that and they think that, you know, Elon is
a genius who can hyper focus where he needs to
and when he needs to, And you know that that
criticism doesn't hasn't like really held up. Like he is
able to execute when he's hyper focused, and he hyper
focuses a lot like every day.
Speaker 2 (15:36):
How can we look to Tesla's acquisition of solar City
close to a decade ago as sort of a blueprint
for a private investment or an investment in a private
company such as Xai.
Speaker 9 (15:48):
Well, it was the same kind of deal right where
Solar City was struggling and really needed a bailout, and
so Tesla bought solar City, which was rife with all
of these conflicts of interests because Elon was the chair
of the board, was the largest investor, so it was like,
you know, some people forget like Tesla acquired solar City.
I mean, solar City was a company that Elon founded
(16:08):
with his cousins. So this was and you know, and
now I mean Tesla still has a solar roof division somewhat,
but it's the same thing, like Tesla has money, Xai
needs money. Tesla, you know, Elon's going to go to
his board and say we should invest.
Speaker 10 (16:25):
They're going to bring it to the shareholders.
Speaker 9 (16:26):
I'm sure there'll be a campaign around it, like I
would imagine that it could pass, like unless there's really
strong institutional opposition. And you know, the Solar City deal
was rife with all these conflicts and it went to court,
but like ultimately Tesla prevailed and it ended up being
okay for shareholders. I mean they took they took a
bath initially, but like the company has still achieved great heights.
Speaker 4 (16:48):
Chief investment Officer Nancy Tangler said that an investment into
Xai will further dilute the declining ev business. Is this
something that you're hearing from sources as well?
Speaker 9 (17:01):
I mean absolutely, Like Tesla, you know, Tesla used to
be all about selling cars. The company used to say
that it was going to make twenty million cars years
by twenty million cars a year by twenty thirty. They've
completely abandoned that.
Speaker 11 (17:14):
You know.
Speaker 9 (17:14):
Elon now tweets things about how like owning a car
will be like owning a horse, like the future is
all about shared mobility and ride sharing and AI and optimists,
and you know, we haven't heard anything about the Mexico
plant in months. I mean, I think that that plant
is basically dead for all intentsive purposes. So yeah, I mean,
(17:35):
you know, Tesla has got to find a way to
make money, and if they can catch the AI wave
and get a return on their investment in XAI, ultimately
that's seen as a good thing.
Speaker 4 (17:45):
In about thirty seconds or less. How SpaceX doing in
regards to the everyone trying to do the space race
right now?
Speaker 9 (17:53):
SpaceX is the dominant launch provider in the United States
full spop. I mean, there's no other way to get
to the International Space Station and except for on SpaceX
in the United States. So I think that they and
they have starlink. So I mean, even though they've had
some some setbacks with Starship. They are the dominant provider
in the US.
Speaker 2 (18:13):
So next time the President threatens to cut off contracts
with SpaceX, just remember what Dana said. Full stop. There
the dominant provider of this technology.
Speaker 9 (18:24):
The Pentagon just gave the Pentagon just gave Xai a
contract today with some other AI companies as well, up
to two hundred million per each to do you know
AI for the government.
Speaker 10 (18:34):
So those contracts keep flowing.
Speaker 2 (18:36):
Dana Hall, Bloomberg News Senior Technology Reporter, are also a
contributor to the Elon Inc. Podcast. Catch new episodes of
the podcast each week.
Speaker 1 (18:46):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Applecarplay and
Android Auto with the Bloomberg Business App. You can also
listen live on Amazon Alexa from our flagship New York station,
Just say Alexa Play Bloomberg eleven thirty.
Speaker 2 (19:04):
President Trump and his allies have seized upon a new
way to criticize Bedchair Jay Powell his handling of an
expensive renovation of the Federal Reserves headquarters.
Speaker 5 (19:15):
I think if Jerome Powell stepped down, it would be
a great thing.
Speaker 2 (19:18):
I don't know that he's going.
Speaker 5 (19:19):
To but he should.
Speaker 2 (19:21):
Jerome Pale has been very.
Speaker 7 (19:22):
Bad for our countries. We should have the lowest interest
rates on Earth.
Speaker 6 (19:27):
How we don't.
Speaker 7 (19:28):
He just refuses to do it.
Speaker 5 (19:30):
And yet he's spending two and a half billion dollars
rebuilding the FED.
Speaker 2 (19:36):
That was President Trump just yesterday in Maryland. This construction
project offers the clearest example yet of how Trump and
those in his orbit are looking for every opportunity to
scrutinize Jerome Powell's leadership at the Central Bank, even beyond
his economics stewardship. Bloomberg News Federal Reserve reporter Amara Moakway
joins us now from our Washington, DC bureau. A two
(19:56):
point five billion dollar renovation. That's topic of the renovation
coming up. When j Powell defend the renovations as necessary
during his testimony to this Second Senate Banking Committee late
last month.
Speaker 12 (20:09):
Some of those are just flatly misleading. The idea of elevators,
you know, it's the same elevator, it'spinder since the building
was built, So that's a mischaracterization. And some of those
are no longer in the plans, you know, that's that's earlier.
We've the plans have continued to evolve.
Speaker 2 (20:24):
I do want to bring in Amara Moakway. She's been
writing about this. She's Bloomberg News Federal Reserve reporter. She
joins us from Washington, d C. Two point five billion dollars?
Is what is at issue here? What exactly is the
Federal Reserve renovation happening right now? And who started planning this?
Give us the details here.
Speaker 11 (20:44):
Yeah, So the FED is currently renovating two historic buildings
here in Washington, d C. And they've said those renovations
are basically meant to consolidate all their operations in one
place and really restore these two historic buildings that are
very old and that the FED says haven't been comprehensively
restored in quite some time. And so that's kind of
(21:05):
the FEDS rationale for these renovations. They were approved by
the Fed's board several years ago. So this project is
not a new project. The Trump administration scrutiny is new,
but this project has been going on for quite a while.
And so what we're seeing here is President Trump and
those in his administration now taking issue with the overall
price tag of the project, which has increased in recent years,
(21:29):
and then also taking issue with what FED cher Jerome
Palell said about some of the design features in the
renovation when he was on the hill last month talking
about these renovations, and some of the administration officials are
basically alleging that pal was not truthful in that testimony,
and that seems to be what they're using to kind
(21:50):
of lay the groundwork to say that perhaps President Trump
has cause to remove Chair pal from his position on
the Fed's Board of Governors. Because, of course, to move
someone from the Fence Board of Governors, you have to
meet a very high legal standard which has caused something
like malfeasance or neglect of duty. And so some administration
officials seem to be trying to use this renovation issue
(22:11):
to try and establish that cause.
Speaker 4 (22:13):
Amara, as you mentioned, this is not new. This renovation
has been going on for quite some time now. But
is this the first time that the magnitude of the
renovation is really being questioned?
Speaker 11 (22:24):
Yeah, I would say so. And what kind of set
this off was media reports about some of the features
in the renovation. Basically, there was a media report that
sort of characterized some of the features in the renovation
as very lavish, very extravagant, and so that led to
Republican senators when Chirpowell was on the hill last month,
that led them to sort of question him over why
(22:46):
there are some of these features, why the costs for
the project have increased over the years, And so that
is what kind of sort of brought this issue into
the forefront recently. And then we've really seen the administration
kind of seize upon it and use it as part
of their overall sort of criticism of Chair pal stewardship
of the FED both you know, when they're talking about
(23:06):
his interest rate, his stance on interest rates, and then
also when they're talking about how he has managed this
construction project.
Speaker 2 (23:13):
What are observers of the Federal Reserve saying about this?
And to what extent this could be? You know, this
is not this is not part of the Fed's dual
mandate by any means, right, stable prices, maximum employment. The
FED chair has laser focused on that mandate that comes
from Congress. He tells us that when we hear from
them every few weeks, what are observers saying about this
(23:34):
sort of I'm not going to call it a side show,
because that's you know, that's editorializing a little bit but
it's not core to the Fed's mission by any means,
and it's very political.
Speaker 11 (23:44):
It is very political, and I think what FED observers
are saying is that this is just a part of
this pressure campaign that President Trump and many in his
administration are putting on Chairpal and FED policy makers to
lower interest rates. Like FED observers don't see these things
as separate issues. They see it as part of the
same pressure campaign. And it also really matters because, of
course we know that Chairpal's term is up next year,
(24:07):
next May, and the search President Trump's search for the
next FED chair is also on, and so it really
does raise questions about what that search will look like
and who President Trump will ultimately pick. Is he going
to pick someone who is going to be more receptive
to his views and the pressure that he puts on
them when it comes to monetary policy and some of
(24:28):
these other issues about the institutional management of the FED.
And so I think even beyond chair power, it really
does raise these questions about what the FED looks like
when the next chair takes over.
Speaker 4 (24:41):
Amara In regards to this renovation, what can really be
done at this point, I mean, the builders are building,
this has been going on for some time. Does the
President then have the authority to come in and just
cancel the entire thing, scale it back? How does that look?
Speaker 11 (24:55):
I mean, I think the FED has said that a
lot of different input went into getting approved for this project,
including the National Capital Planning Commission, Like, there are a
lot of different bodies that sort of weighed in on
this project. And I don't think it's within the President's
purview to sort of stop the project. Like in the law,
the FED has authority over its own buildings because the
(25:17):
FED in so many ways is an independent agency. But
I think what the administration and what President Trump are
really trying to do it they're trying to sort of
question the optics around this.
Speaker 9 (25:27):
Right.
Speaker 11 (25:27):
Bill Pulte, one of the administration officials who has really
focused in on this renovation, will say things like, you know,
Jerome pal is keeping interest rates high and making affordability
difficult for Americans while he builds himself a two and
a half billion dollar palace.
Speaker 3 (25:43):
Right.
Speaker 11 (25:43):
Essentially, I'm paraphrasing, but that's essentially like some of the
lines of criticism, and so what you really see administration
officials doing is really calling in to question the credibility
of Chair pal And again, you can't separate those efforts
from the efforts that the administration is putting for to
try and make the FED follow their lead on interest rates.
Speaker 2 (26:03):
Amara, what happens to a federal reserve? If to the
Federal reserve if FED Chair Powell is forced out in
some way. There's a Deutsche Bank analyst who essentially says
that we could see a drop of at least three
to four percent in the trade weighted dollar. This is
George Sarahvellos of Deutsche Bank. There would be thirty to
forty basis points self and fixed income. He essentially argues
(26:25):
that all this is underpriced.
Speaker 11 (26:28):
Yeah. I mean, I think any economist you talk to,
any investor who you talk to, will say, look, if
FED Chair Jerome Powace pushed out, or if there's any
sort of inkling that the FED is bowing to President
Trump's pressure, and any questions start to arise about whether
the FED is continuing its independence, like that is not
good for the economy one, and then that is not
(26:49):
good for sort of the buy America trade.
Speaker 9 (26:52):
Right.
Speaker 11 (26:52):
We could see pressure on the dollar, we could see
pressure on treasuries, and so to be clear, President Trump
has continued to say that he's not going to that
he's not going to fire chair Pal. But I think
these sorts of questions again sort of raise the stakes
when it comes to what's going to happen with Sharepal's replacement,
because any feeling that the fed's independence is being compromised,
(27:13):
or that we have a person who's more likely to
listen to Trump could be bad for sort of the
buy America trade.
Speaker 2 (27:19):
Amara Mokway Bloomberg News FED a reserve reporter joining us
from Washington, DC.
Speaker 1 (27:23):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Applecarplay and Android Otto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (27:38):
Fast and All. Shares rising as much as six point
four percent earlier in the session, they're up right now
three point four percent. It's a new all time high
for the company after they reported net sales for the
second quarter that came in in line with estimates from analysts,
up eight point six percent over the same period last year.
This is a fifty two billion dollar market cap company.
(27:58):
They distribute construction and industrial supplies. Think nuts, bolts, screws, anchors, rivets,
and other fasteners, as well as industrial janitorial and safety supplies,
cutting tools as well. The company sells to builders, manufacturers, governments,
and more so. Really it's a great read on the
entire industrial and manufacturing economy, specifically here in the US.
(28:19):
We've got with us the CEO of Fast and All,
Daniel Flornes. He joins us from Winona, Minnesota. Dan, Welcome
to Bloomberg Business Week Daily. Shares up today. Shares up
more than twenty five percent so far this year, new
all time high. In the earnings release, though you said
that quote the market conditions remain sluggish. What conditions specifically?
Speaker 13 (28:40):
You know, we sell to a wide range of customers
and industries as you as you mentioned across North America
and in twenty six countries in total.
Speaker 6 (28:49):
But mostly in North America.
Speaker 13 (28:51):
Our customer base has been relatively subdued for the last
several years. In the fall of twenty twenty two, we
saw some indicators it was going to slide, and we
felt that as we moved into the second and third
quarters of twenty twenty three, and it's been really weak
since then. About thirty percent of our business is very
production centered business within manufacturing.
Speaker 2 (29:15):
So are there any signs that that part of the
business is improving that those customers are seeing sentiment improve?
Are you hearing anything from them?
Speaker 13 (29:25):
I think the biggest sign that we're seeing is the
knife has stopped dropping. You know, we were trying to
catch that falling knife for a two year period. When
I talk to our district and regional leadership throughout the
throughout the world, the feedback I hear is, you know,
they're not talking about this two hundred thousand dollars month
customer whose business is off sixty seventy percent.
Speaker 6 (29:49):
You have a much more stability now.
Speaker 13 (29:51):
Might be stable at a lower level than it would
have been two years ago, but it's much more stable,
and so it allows our inherent growth to shine through.
Speaker 4 (30:00):
Been in this prolonged downturn, especially in the industrial economy.
Are you seeing any particular green shoots or signs of inflection,
and if so, which markets are you most optimistic about.
Speaker 6 (30:13):
Yeah, so we're seeing some green shoots.
Speaker 13 (30:17):
For us, we're seeing some We are seeing some impact
and energy. However, I would say that's probably more us
taking market share than it is a lift in the tide.
About twenty five percent of our business is outside of
the industrial and within there we're selling.
Speaker 6 (30:37):
We're doing quite well.
Speaker 13 (30:38):
I hear a lot of commentary from our folks with
data centered builds with you even warehousing customers. And we've
made really good inroads over the last three years into
the government sector. And that primarily was an offshoot of COVID.
During COVID, when supply chains blew apart, we stepped in
(31:01):
to serve a lot of that market when they were
not being served, and those folks have remembered that and
we've grown our business there.
Speaker 4 (31:09):
So we need to, of course talk about terraffs. How
have tariffs really changed your thinking about product sourcing, particularly
for fasteners, which we know, of course are primarily sourced
in China Asia. What other options are you evaluating to
mitigate the tariff impact here?
Speaker 6 (31:24):
You know?
Speaker 13 (31:25):
So back in twenty eighteen we did some short term
moves of our supply chain, but it was fairly limited
because you just can't change there's so much QC involved
with vetting out cut suppliers that you couldn't move it
fast enough. What we had done quietly over the last
five six years is continue in that progress because the
(31:49):
tariffs that were put in place in twenty eighteen were
sticking and we expected more of it to happen, and
we wanted to better diversify the supply chain for our customer.
We did look at a lot of options. There aren't
a lot of options within North America. We looked at
some options of doing some manufacturing ourselves. The problem is
the economics still didn't work. So it was really for
(32:12):
us more about diversifying supplier base in general.
Speaker 2 (32:16):
Are the economics of that going to work now in
this new tariff regime. I think during the first Trump administration,
the goal was to move things out of China, But
as many companies are learning right now, it doesn't matter
if it's China, Vietnam, or India. If it's not in
the United States, there is going to be a terrify
on it. At least that's what it seems like is
going to be the case.
Speaker 13 (32:34):
Yeah, economics still do not work, and part of the
challenge there isn't just the economics, it's the amount of time.
When we were researching it very in depth two and
a half years ago. One of the challenges is it's
easy to find a site. It's relatively easy to get
(32:55):
a building up and get a supply chain set up.
When I say relatively easy, I mean timeframe of what
it takes to do it. The most challenging aspect was
the production equipment of how many months it would take
to get that, and so that aspect really pushed us
to look more at geographic dispersion of supply chain sourcing
(33:18):
because the economics are are still very challenging.
Speaker 2 (33:22):
So how much of what you sell right now is
actually made in the US?
Speaker 13 (33:29):
If I look across what we're sourcing, what our supply,
our branded suppliers are sourcing, We've always estimated less.
Speaker 6 (33:38):
Than fifty percent is coming from the US.
Speaker 2 (33:41):
And is that going to stay stable in this new
TAF regime.
Speaker 6 (33:46):
I suspect it will.
Speaker 4 (33:47):
Okay, So I know Fast and All raised prices back
in April, especially as a result of tariffs. Historically, I
mean the company has been able to pass on pricing costs.
What should even the feedback here from customers? Has there
been much push back in terms of the ability and
appetite for customers, frankly to take on additional pricing, especially
as we head into the second half of the year.
Speaker 13 (34:08):
First off, we sell into a very competitive market. There
is always push back. The real challenge in the equation
is his communication. And one thing that helps in our
supply chain, we're directly sourcing from the manufacturer that's producing
the product, more so than most of our competitors in
(34:29):
the marketplace, just because of our scale, and so we
have the ability to see into the future farther than
a lot of our competitors, and it puts us in
a position to communicate very well. It puts us in
a position that takes steps as the inventory is turning. Unfortunately,
the one unfortunate part of that it also can create
(34:52):
a fatigue for your customer, and I would say our
customer is at the fatigue.
Speaker 6 (34:55):
Point right now of where it has.
Speaker 13 (34:59):
It's become challenge thing, but it always is, and it's
all about communication and trust.
Speaker 2 (35:05):
We're speaking with fastinal CEO Dan Flornes. Company reported earnings earlier,
shares are higher reach a new record today. Shares up
right now by about three point seven percent. I want
to talk a little bit about the One Big Beautiful
Bill Act that became law on the fourth of July
this year. In the press release for your earnings, you
did mention it, but big picture, what does it mean
(35:26):
for your customers and for your business?
Speaker 13 (35:29):
You know, big picture, what it means for our customers
is if you look at some of the depreciation rules
and the timing, it's it's it makes it very advantageous
to make capital investment. And so that's the biggest piece
that we see impacting our customers because our customers have,
especially on the manufacturing side, an incredible amount of infrastructure
(35:52):
that they're investing in, and so anything that allows them
to depreciate faster and to improve the return profile is
advantageous for our marketplace.
Speaker 6 (36:03):
And that's a key element that we talked about in
the release.
Speaker 2 (36:06):
I know that you talked a little bit about to
US manufacturing your own products in the US and your
suppliers doing it. But I'm wondering about your customers and
the way that these so called America First policies might
help them reshore manufacturing back to the US. Are you
seeing any evidence or hearing discussion of your customers beginning
to move manufacturing back to the US.
Speaker 13 (36:27):
You know, I would say it's fairly limited, but again
that's not something that happens in six months that you
set up. We've had some customers set up assembly operations,
which you can do in a much shorter timeframe as
opposed to peter production where you're manufacturing components yourself, or
you're changing your supply chain to more domestic type supply.
(36:52):
But what we've seen is a lot more willingness of
making invest even beyond the manufacturing capacity in the short term.
Speaker 4 (37:04):
Fastenas refocused on growing with larger customers. What are the
key drivers there in what additional investments do you need
to make to enable growth with those customers.
Speaker 13 (37:15):
Yeah, so a position we've put ourselves in for a
number of years is we have very aggressively made investments.
Speaker 6 (37:22):
So this was starting back fifteen plus years.
Speaker 13 (37:24):
Ago of slowly building an infrastructure to move the supply
chain closer and closer to the point of use. And
what that involved for us is investing in a tremendous
amount of vending infrastructure and in more recent years a
lot more RFID type infrastructure to measure product movement within
a facility so that you don't have to with human
(37:48):
capital physically observe product being diminished. You can monitor it
electronically and remotely. And so we've made extremely large investments
over the last ten plus years in vending technology, and
I'm pleased to say that vending technology is all manufactured
(38:10):
in the United States.
Speaker 2 (38:11):
Yeah. I was surprised when I went to your website
earlier today as I was preparing for this to see
those of those vending machines. It's not something that I've
run into and certainly in my life, but it's pretty
cool to see that not just soda, it's a snack machine. Yeah,
that's what That's what I was thinking. It's like, it's
a snack machine, but you can't eat what's in there,
so exactly. Okay, Hey, we've got about a minute left,
and I just want to talk numbers real quick. Gross
(38:33):
profit up forty five points to forty five point three percent,
up from forty five point one percent over the second
quarter of last year. You said it was partially offset
by higher import duty costs and higher fleet and transport costs.
Are those costs, in your view, going to stabilize.
Speaker 13 (38:50):
The Uh, They're going to continue to rise because because
about the way our supply chain works, we carry a
fair amount of inventory because we have such dispersion in
our locations, so we carry quite a few months of inventory.
So that's going to keep ratcheting up as we're on
a fiful basis inventory, so as that inventory continues to turn,
that will continue to ratchet up a little bit as
(39:11):
we move into the third and fourth quarters and into
twenty twenty six. What really helped us during the quarter
and what drove the improvement our gross margin set aside
teriffs for a second, right, We've put in place a
faster expansion starting last summer to widen our inventory, and
(39:31):
that's really what drove our margin this quarter.
Speaker 2 (39:34):
Dan Florida, CEO of fasten All, I really appreciate you
joining us. Shares up today new all time highs three
point eight percent right now.
Speaker 1 (39:42):
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