S&P 500 Hits Record on Vietnam Deal as Tech Climbs
45:06 Share

Pay later and all major cards so you can focus on scaling up.

When it's time to get growing, there's one platform for all business. PayPal Open. Grow today at paypalopen.com. Loans subject to approval in available locations. For enterprise organizations, managing all your food needs is a tall order.

But with Easy Cater, you get a single workplace food vendor with the tools and resources to make it easy. Giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs. Streamlining billing and payment and simplifying reporting. Easy Cater, your business tool for food. To learn more, visit easycater.com slash podcast.

In business, they say you can have better, cheaper, or faster, but you only get to pick two. What if you could have all three at the same time?

That's exactly what Cohere, Thomson Reuters, and Specialized Bikes have since they upgraded to the next generation of the cloud, Oracle Cloud Infrastructure. OCI is the blazing fast platform for your infrastructure, database, application development, and AI needs, where you can run any workload in a high-availability, consistently high-performance environment and spend less than you would with other clouds.

How is it faster? OCI's block storage gives you more operations per second. Cheaper? OCI costs up to 50% less for computing, 70% less for storage, and 80% less for networking. Better? In test after test, OCI customers report lower latency and higher bandwidth versus other clouds. This is the cloud built for AI and all your biggest workloads.

Right now with zero commitment, try OCI for free. Head to oracle.com slash strategic. That's oracle.com slash strategic.

Bloomberg Audio Studios. Podcasts. Radio. News. This is Bloomberg Businessweek Daily. Reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast. With Carol Masser and Tim Stenevek on Bloomberg Radio.

In 13 days, earnings season in the U.S. gets underway. JPMorgan Chase kicking it off before the market opened, along with a few other big banks. That will happen on July 15th. It is also what's so great about this, Matt. I love earnings season. I feel like it's a gut check on companies. And I know sometimes we feel like companies manage expectations in a big way. But we also do hear from the C-suites on those analyst and investor calls.

Yeah, absolutely. I mean, that's the most important part, right? It doesn't really matter once you get there how they did in the quarter they're reporting on. It really matters what the outlook is. Exactly. All right. And we're going to talk a little bit about outlook because our Michael McKee actually bringing this to our attention this morning, a survey out from the Atlanta Fed on the evolving impact of tariffs on CFOs outlooks. It was

as we said, I think, published this morning. Mike is, of course, Bloomberg News international economics and policy correspondent. He's right here in our studio. And joining us from Atlanta is Brent Meyer. He's assistant vice president and economist at the Economic Survey Research Center at the Fed Bank of Atlanta. Great to have you here with us both. Brent, Mike did share your survey with us this morning. Lay it out for us and what you guys found out.

Good afternoon. Thanks for having me. So basically, what we found is over the past few quarters, CFOs are seeing a darkening outlook.

And it seems to be connected to firms that are the most heavily exposed to tariffs. They have a much heavier exposure on inputs and supplies coming from abroad. And their outlooks deteriorated markedly. So their expectations for GDP growth, say, in 2025, they're down about a percentage point from where they were at the end of 2020.

Last year, their sales revenue growth projections are down. And then on the flip side, unit cost expectations and price expectations are up quite a bit. So, again, we see these things as sort of CFOC things darkening materially as we move throughout the remainder of the year. On the other hand, they're coming from a pretty good perspective.

level, right? We were talking with Nir Kesar earlier. He wrote a piece for Bloomberg Opinion and pointed out that profit margins for the S&P 500 Equal Weight Index are at a record high. So they do have some cushion into which to absorb tariffs if they have to. Yeah, potentially. And that's an interesting angle. So one thing we can look at is...

both firms cost and price projections for the year, their expectations for the year. And one thing that we see here is that the sort of margin squeeze seems to be strongest on those that are more heavily exposed to the potential tariffs and the tariff picture. The other thing that's kind of interesting here is that

So firms that aren't directly exposed to tariffs seem to be pushing up their price expectations a little bit more than where their costs are coming from. So we might see margin compression on those that are most heavily affected.

exposed and at the same time on those that maybe aren't as heavily exposed to the sort of terror picture, seeing a little bit of increased margin or something from a- - That's amazing. I mean, that is absolutely fascinating.

Mike, what do you make... I'm going to bring in Mike McKee here. What do you make of that? So firms that don't really need to pay for it are trying to take price for it. Well, it doesn't surprise anybody, I don't think. And it will add to inflation questions, shall we say. Not necessarily to inflation. We'll have to see how widespread that is. I'm curious, though, when you did your survey, the time frame on it, in other words, did anybody say...

We might feel a whole lot better come July 8th when we find out what the reciprocal tariffs are. So, no, we didn't ask that question. It would have been a great question to ask. Next time we go in the field, we'll definitely be able to pick that up.

But the survey was in the field during the first couple of weeks of June. So and we're comparing really what we wrote in this article compares to the end of last year. So we can see as they move forward from, say, right around the time of the election through the first quarter survey and the second quarter survey, this sort of march or deterioration on sales revenue growth and then the ratcheting up on the price picture.

You know, Brett, we love the stuff that we get from the various regional feds. I think about the GDP Now index that we get from, you know, you guys. And I'm sure stuff like this, you know, how it works into some of your thoughts about kind of where we're going. But as you are gathering information anecdotally, real data points, public-private sector, I mean, what's the picture that you are seeing in the U.S. economy right now?

Oh, that's a good question. So if I take a wholesome approach and look across all our surveys and here at the Atlanta Fed, we also have a regional economic information network. So this is a group of folks that are chatting face to face with businesses on a daily basis.

It's a picture of very heightened uncertainty, a picture with basically there are a lot of clouds on the horizon. We don't know exactly how things are going to play out. But at the same time, firms seem to be moving forward in a direction and expecting one to ratchet up prices as tariffs really hit their bottom line, and then at the same time,

anticipating as they're raising price, seeing some of that bite into their sales revenue. Did they suggest any actions they're going to take? Or is this a case of what we've been hearing in terms of the Beige Book and other Fed communications that companies are just sort of sitting and waiting to make decisions? No, that's a good question, Mike. So, yeah,

There tends to be some dispersion here across maybe firm size. So larger firms that are a bit more agile, that are able to make different moves, it seems like they're doing so. Smaller firms, I think the picture is a bit cloudier there, but I think the bite from all of this action to date is likely to hit them a little bit harder. They're a little bit less well-connected when we're talking about...

reconfiguring supply chains and things like that. I wonder how this affects the labor market, because it seems that the larger firms, from what I'm hearing you say, are going to be able to deal with this better. And that is, I think, what has been our assumption. The smaller firms are going to have a much bigger problem, especially if they're exposed to international supply chains. But those smaller firms, don't they make up a massive share of U.S. jobs and job creation? Yeah.

Yeah, I don't know what it is off the top of my head, but I think it's a very sizable share of overall employment on firms that are less than 250 employees in size. And yeah, that's right. So I think if you're looking in the rearview mirror, the employment picture looks reasonably positive. I mean, we've seen some slowing, but not

not a whole lot of quick deterioration. As we look forward, those small firms were paying a lot of attention to how their employment realizations and expectations evolve over the next couple of quarters. Mike, last question to you. I mean, it's a big day tomorrow, right, with that monthly labor report. I mean, any number that comes in weaker is certainly going to catch our attention. But what are you anticipating here?

Well, I think we'll see a weak number for a couple of reasons. One, that's been the trend. And two, the seasonal factors suggest that that could be the case. But weak being a matter of definition, I mean, if you had 110,000, which is the forecast, that would kind of fit in with what the Fed thinks the regular replacement number needs to be to keep the unemployment rate steady.

If we get anything significantly lower than that, it will put the idea of a July rate cut onto the markets a

agenda. But I don't think it'll do so to the Fed. We'd need a big rise in the unemployment rate for that. All right. Going to leave it there. Gentlemen, thank you so much. Really appreciate it. Of course, Brent Meyer, Assistant Vice President Economist at the Economic Survey Research Center at the Fed Bank of Atlanta out there in Atlanta. And Mike, thanks for bringing this to us. Really appreciate it. You're going to have a busy day tomorrow. You're here. I'm here. I'm here.

Pay later and all major cards so you can focus on scaling up.

When it's time to get growing, there's one platform for all business. PayPal Open. Grow today at paypalopen.com. Loans subject to approval in available locations. For enterprise organizations, managing all your food needs is a tall order.

But with Easy Cater, you get a single workplace food vendor with the tools and resources to make it easy, giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs, streamlining billing and payment, and simplifying reporting.

Easy Cater, your business tool for food. To learn more, visit easycater.com slash podcast. There's a myth a lot of us grow up believing that hair loss is just a part of life. It happens. It runs in the family. Once it starts, there's no stopping it. But here's the truth. That's outdated thinking. Scientific understanding of hair loss has advanced in recent years.

Today, we have a deeper knowledge of underlying causes, and we've developed science-backed solutions that are both effective and safe. And that's at the very root of Happy Head. Dermatologists-led innovation offering stronger, FDA-approved ingredients that work. But what really sets Happy Head apart is how personalized it is.

They don't do one size fits all fixes. You fill out a comprehensive consultation and their board certified dermatologists and sign a formula specifically for your hair loss pattern goals and lifestyle. And whether you're early in your journey or more advanced, happy head offers targeted options that actually work topical treatments, oral capsules, or potent dual action bundles, all delivered directly to you discreetly and freshly compounded in the U S most people start seeing results in three to six months, but the real magic,

It's sustainable. This isn't just about growing hair, it's about keeping it long-term.

So no, hair loss isn't inevitable anymore. Visit happyhead.com and find out what's possible when science, expertise, and personalization come together. Hair happiness starts here. You're listening to the Bloomberg Businessweek Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. ♪

Hey, the Republican-led House and Senate are planning to cut the Supplemental Nutrition Assistance Program, known as SNAP, which could leave millions of Americans without enough food, despite its importance as a safety net. We should point out that there have been some carve-outs in the Senate bill, so maybe not all states are impacted the same way. But we wanted to get into this story. It's on the Bloomberg Terminal. It's also...

can be found at Bloomberg.com slash businessweek. With the details, let's bring in Bloomberg Businessweek writer, Dina Shanker. She joins us in our Bloomberg Interactive Broker Studio. Dina, I think everybody knows what SNAP is, but let's just kind of lay out some of the basics. What is it? Who qualifies for it? How many Americans use it? Give us a little bit of background here. Sure. Thanks so much for having me. So SNAP is a food assistance program. It's a safety net program. It is

available to people based on their income level, either at or 100% below the poverty line. That's sort of the baseline. States can sort of make adjustments to that based on their cost of living. In 2024, there were more than 40 million Americans using SNAP, which is about 12% of the population.

That is disturbingly high. Why are that many Americans? Yeah. So it's it's really it's crazy. What actually happened was that the numbers ballooned during covid and never came really very far down because people, you know, we talk about in a K shaped economy. And this is a perfect example of some people have completely rebounded since covid. And as these snap numbers show, a lot of people have not. So.

Is there any way of assessing, and I was asking Mike Dorney this earlier, and I'm afraid the answer is going to be no, but...

Is there any way of assessing whether people are abusing these programs or whether those 40 million Americans actually cannot afford to feed themselves and their families? So the way the bill is structured is based on state error rates. Now, an error can be an overpayment or an underpayment. And so the higher your error rate as a state is,

than the higher percentage of the costs you're going to have to shoulder under the new bill. So the error rates really vary. Actually, the highest error rate belongs to it for 2023 belonged to Alaska, which had like a 60% error rate.

But I think it's really important to remember that, as one of the people I spoke with pointed out to me, she said, listen, errors get made. To be clear, these are errors being made by the state administrative staff. These are not being made by the recipients. And also, like... So the people who administer...

The program. It's the states making the errors. Okay. Yeah. And as she pointed out, she said, like, we all make errors in our bills. I mean, has anyone... I mean, I can say for myself, I've overpaid bills and then been like, oh, shoot, I have no money left in my checking account. I've underpaid and then had to pay late fees. And it's all...

just really by accident. So I think, uh, the idea of like freight fraud, waste and abuse, I'm sure somewhere somebody's doing something wrong, but it is not from anyone I spoke to. Um, it does not seem to be, you know, like a really, um, big issue. And one thing I will also add is that, um, food banks, which are not part of the snap program, but often support some of the same communities, they're seeing increased demand too. So it's,

the increased demand is very real. Yeah, it's I mean, I can imagine waste, fraud and abuse in Medicare and Medicaid, right? Because people who run health care facilities are likely trying to take advantage of the system. It's harder to understand that somebody would try and claim food stamps if he or she didn't have to. It doesn't sound like it's that lucrative for one thing. And it's also not. I mean, it's a

It wouldn't be a point of pride if you were using food stamps in a grocery store. So the problem, of course, isn't really the fact that we are paying for 40 million Americans to use food stamps. The problem is 40 million Americans find themselves in that position. And I'm wondering if anyone's doing anything to address the cause of that. Well, not in this bill, that much I can say. I mean, there are...

And there are all sorts of organizations out there, I think, that are really trying to help people meet their basic needs and as well as organizations trying to help people that, you know, are out of work, find work. But remember that it's obviously it's a huge issue. So I didn't mean to put you on the spot there because it starts with like childhood nutrition, education, love.

Like there are a lot of issues, right, that lead to unemployment and poverty. And there's also a lot of people, you know, are in jobs that don't they have jobs like a teacher who needs to take on. This was an example that was relayed to me who needs to take unpaid leave because she had a complicated pregnancy and birth. And now she needs to go on food assistance because that's the only way. And the husband has probably left.

That part of the story I have to say I didn't get. But we've talked a lot about people who just have a bad turn in their life. They lose a job. They've got debt or something. And all of a sudden they find themselves in a really, really bad way. But Matt, I agree with you. It's kind of staggering. We're supposed to be what? The wealthiest nation in the world, right? And yet we're dealing with these kind of statistics. So basically, though, Dina, what happens to these people?

If they're not going to be able to get this assistance. I agree with what you were talking about, Matt. Like, we have to figure out what's the root cause of this. But for now, they need food. Right. For now, they need food. And how many are kids? So one estimate said that about...

2 million households, SNAP-using households have children that will at least lose some benefits. The bills cut the benefits in a variety... I have to say, like, almost every conversation I had, I found out another way that they were cutting benefits. They are expanding work requirements. They are...

basically completely defunding, they are completely defunding a nutritional education program that really helped low-income families. And the biggest change is that they are shifting a portion of the cost to the states. So what used to be a completely federally funded benefits are now being switched to the states. But the states, unlike the federal government, they have to have a balanced budget. So how states are going to come up with

tens of millions, hundreds of millions, sometimes more than a billion dollars, depending on the state and how many recipients they have is really nobody knows. Like that's the answer is that nobody knows. By the way, how much money are we talking about being saved in spending? Because it goes up against four and a half trillion dollars in tax cuts. So the cost shifting, which is going to be the biggest portion, will save about 40 billion dollars. So a small

of those. Peanuts relative to. Exactly. And I should say that the average the average SNAP benefit is about six dollars a day per person. So we were here in New York City. How far would six dollars get you in food today? Especially if you live in a food desert. I mean, you basically would have like one fast food meal. Yeah. I mean, oh, but you can't spend it at you can't spend it on hot prepared.

Right. OK. Yeah. But you're going to go to a store that takes food stamps and they won't have any fresh produce. And your only choice is like hot talkies. Right. So, I mean, you're you're not going to have a lot of options and your family. I mean, if

It's these cuts with the people that I'm speaking to. And when they watched this pass in the in the Senate, they're they're just devastated. I think there's a big question of like, what are what are we going to do for every meal? A food bank provides nine cutbacks.

come from SNAP. So what happens when that number is drastically cut? And people really don't know. And I'll just throw one more number. And God forbid the economy slows, right? Or we go into a recession. And prices, food prices are expected to go up as well. So one more number I'll throw in is that in this country, about 40% of our food goes to waste. And so it is just

The whole picture is just mind boggling that we could have all these people who don't have enough food. We could have all these people throwing away food. I mean, it's it's really it's crazy. It makes no sense. It makes no sense. That much waste. And then to see, you know.

so many people going without food. And yeah, it's pretty sad. It's awful. Dina Shanker. It's a great read. Check it out at the Bloomberg.com and on the Bloomberg Business Weeks. Business Week writer, I should say Dina Shanker. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

If you're driving, pull over because you're going to want to listen to this story. Beneath layers of waste, landfills around the United States have been reaching scorching temperatures and neighbors have been getting sick. This is today's Bloomberg Big Take, where Bloomberg's Laura Bliss and Rachel Dottle write, for many of the more than two million Americans who live within a mile of a landfill, what all of this means is that they're living within a mile of a potential time bomb with little way to know when it might go off.

You can read this full story and more from the Bloomberg Big Take. It's on the Bloomberg Terminal and also at Bloomberg.com slash Big Take. Let's head to our San Francisco bureau and to Bloomberg Businessweek editor and writer Laura Bliss. Laura, sobering story. What is America's hot garbage problem?

Yeah, thank you so much for having me. The landfill that you mentioned in L.A. County is a great example. And pockets of buried waste in this landfill have been rising to temperatures over 200 degrees for the past three years. That's about 40 percent higher than the EPA safety standard.

California regulators suspect that what's causing this is too much oxygen getting into this landfill, which is a problem known to start fires. This goes against federal regulations.

The landfill operator says that's not the case, says nothing is on fire. And as I found out, these landfills that have been overheating are a phenomenon that we've seen across the U.S. over the last 20 years. And there's real debate. There's real controversy, you know, within the industry and between regulators about what's causing them and what to do about it.

Laura, first of all, I read your story this morning. The first thing I read on the Bloomberg and I could not put it down. And, you know, I'm the type of reader who typically goes through the first four paragraphs. I'm from the Matt Winkler School of Bloomberg and then I'm done. So fantastic job writing this. One question I did have is, isn't it pretty easy to determine whether something is on fire or not? I mean, it seems like you could gauge that pretty quickly. Yeah.

You would you would think so. You would think so. And a challenge with these incidents is that, you know, the the temperature climbs, you know, this is happening several feet below the surface of the landfill.

And so you don't necessarily see smoke. You don't necessarily smell, you know, what you might think of as a burning smell. You know, these events can manifest in a lot of different ways. And it's because actually that you don't necessarily see those, you know, classic fire symptoms that, you

the industry is saying, well, this is not a fire. We think it's something else that's going on here. But as the story shows, and thank you so much for reading it, I mean, regardless of what we call it, residents are getting sick. And there's a lot of challenges in really addressing the problem and kind of getting to the root cause. Exactly. What's crazy is people are getting caught up. Is it a fire? Is it not a fire? And there's all these terminology, subsurface oxidation, smoldering events.

But it's an important distinction because you write the distinction isn't trivial. Federal regulations explicitly forbid operators from running landfills in a way that starts fires. Why is that so important, especially when you so clearly write that people who are living nearby, they and their families are getting pretty sick?

Absolutely. I mean, it's been a well-known issue in the industry for years that these fires can create really dangerous and toxic situations. And among the few regulations that are out there at the federal level for landfills, don't start a fire is absolutely one of them. And one of the concerning things that I found is that

one of the key rules that environmental engineers and safety advocates say, you know, was really there to prevent fires was actually rolled back.

And so, you know, as far as like what is there to do about it, that is something that a number of scientists highlighted for me that we need the return of some of these rules, for example, to stop too much oxygen from getting in. Because as we all know, right, that can start fires when you mix that with hot enough temperatures. And the point is it starts fires, but it also gives off really dangerous gases, right? And talk to us about what's happening to people who live nearby. Yeah.

Yeah, I mean, so just to take the Chiquita Canyon landfill as an example, I mean, we see elevated levels of benzene, you know, a known carcinogen, carbon monoxide, other toxic gases that are known, you know, to cause the kind of respiratory, neurological, cardiovascular symptoms that people are reporting, you know, hand tremors, headaches, nosebleeds that won't end, you know,

people are having cancer also and wondering, is what's going on with the landfill having to do with my diagnosis? So what can these people do about it? I mean, as I was reading your story, I had a feeling of frustration in my chest because it's so hard to prove causation, right? People are getting sick who don't live near the landfill also. And these corporations have seemingly endless pools of

money for litigation. I think of Dark Waters. I think of Erin Brockovich. You know, what can the houses, who is the couple that you write about in your lead, what can they do about it? Yeah, I mean, it's a great question. There are like, I think, over a dozen mass torts moving through the legal system right now of residents trying to take legal action to represent themselves. Los Angeles County is also sued.

You know, at the state regulatory level, there have been a lot of enforcement actions. And I think what a lot of these efforts are all kind of pushing for are funds, you know, from the operator to fund the relocation of residents, right, to get out of this danger zone. And so I think that is what a lot of people want.

are pushing for at this point. But you know, there's also I write about in the story, Pilar Schiavo, who's an assembly member in California has a has a bill that's she's, you know, I think is awaiting a hearing in the state Senate, that would basically just attach more, you know, penalties, right to landfills in the future, that, you know, exhibit these symptoms that that are cause these kinds of problems for people. What do the companies say?

Well, just to reiterate, right, they say that this is not a fire. This is what they call an elevated temperature landfill, which is a term that, you know, the industry has applied to at least 10, you know, large landfills across the U.S. over the last 20 years that have exhibited similar symptoms. And, you know, they pointed to, you know, millions of dollars that they've spent in mitigating the problem, adding gas wells to trap the odors, putting a cover on top.

contributing some money to residents to buy air filters and things like that. Why don't they just go in there with cranes and dump trucks and move it away? I mean, there is a temperature regulation, right? They're not allowed to be above a certain temperature and you can just stick a thermometer in there and see that this does exceed that regulation.

It's true. It's absolutely true. I think the challenge is, you know, what do you do when these kind of hot temperatures become this kind of runaway problem? And again, the question of causation, what to call it, like this all matters, right? Because that drives it the question of what do you do about it and change.

California regulators say you need to dig a fire break, which is actually not unlike what you're saying. Right. You need to sort of create an almost a trench right to stop this reaction from progressing. The operator says that that would make things much worse. They say that the solution is to keep pulling heat out using these wells. So there's just there's a lot of disagreement there.

Well, you know, and I feel like it gets into a bigger problem in the United States, Laura, and that has to do with waste, right? Like, what do we do with it? You know, if you can't, you know, I think there's pushback against creating new waste facilities, right? Or waste or dumps, basically. I wouldn't want it in my backyard. Exactly.

Exactly. Exactly. So then what you have to do is deal with the existing ones and just pile more and more stuff into it. I mean, as you note in our in your story is that for a long time, people burn garbage. We thought that was the way to do it. And then we realized, OK, that's not the way. I mean, in doing kind of also some, you know, giving us a little bit of a history lesson in terms of dealing with garbage. I mean, this is, again, becoming another big problem, not only maybe potentially for the health of U.S. citizens, but also for the climate.

Yeah, I mean, absolutely. I think this this whole situation is a great and really alarming picture of the problems that can arise, like when we just keep kind of piling our trash higher and deeper. Right. And I mean, I will also add that, you know, safety advocates will say, you know, we don't

we're going to generate trash, right? We know that we're going to, that trash is going to generate methane emissions. And that's kind of part of the story too, because trapping these emissions, you use these wells that can actually lead to more oxygen intrusion, which is known to start these fires. Um,

And so, you know, advocates will say, like, we just need better monitoring, right? We need, you know, better technology to monitor emission levels, you know, real-time temperature monitoring, for example, so that, you know, operators and regulators can take action more quickly instead of, you know, letting problems kind of spiral. Well, and as Carol and I were talking about this yesterday, one of the great things to do would be to stop generating as much waste.

Right. I was over the weekend camping, looking for a spoon. And I went to a store and they had a box of 200 plastic ones if I wanted it. But that's part of the problem. Yeah. Like making things that you actually you've got to attack the problem at the root. Right. Laura, I'm sure you've thought about this a lot.

Absolutely. I mean, it's funny. I part of the way I celebrated publishing this story yesterday was taking the base of my dead electric toothbrush to a battery recycling facility.

which even in the city of San Francisco was not that easy to find. But that's another problem. That's another issue of this too, right? We're not just generating more waste. We also have a lot more flammable waste, you know, vapes, e-cigarettes, like these kinds of things. And so, you know, figuring out the right safest place to put it is, is important too. Yeah. And you bring on the recycling experts too. They'll say, you know, you think so much stuff is being recycled, but it recycled, but it's not necessarily the case. Doesn't everybody now have a drawer full of dead vape batteries? Yeah.

Not in my house. No? Not in my house. Laura, incredible story. Matt's right. We were talking about kind of the waste yesterday. And when he saw it this morning, he was like, oh, my God. Like, this is what we've been talking about. It's a great deep dive. And we so appreciate you giving us some time with it. Laura Bliss, Bloomberg Businessweek editor and writer. Check it out. You can find it on the Bloomberg and at Bloomberg.com slash businessweek. Every business has an ambition.

PayPal Open is the platform designed to help you grow into yours with business loans so you can expand and access to hundreds of millions of PayPal customers worldwide. And your customers can pay all the ways they want with PayPal, Venmo, Pay Later, and all major cards so you can focus on scaling up.

When it's time to get growing, there's one platform for all business. PayPal Open. Grow today at paypalopen.com. Loans subject to approval in available locations. For enterprise organizations, managing all your food needs is a tall order.

But with Easy Cater, you get a single workplace food vendor with the tools and resources to make it easy, giving teams across your organization an easy way to order from a huge variety of restaurants all on one platform, all while consolidating your corporate food spend so you can control costs, streamlining billing and payment and simplifying reporting.

EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. Did you know using your browser in incognito mode doesn't actually protect your privacy? Take back your privacy with IPVanish VPN. Just one tap and all your data, passwords, communications, browsing history, and more will be instantly protected.

IPVanish makes you virtually invisible online. Use IPVanish on all your devices, anytime you go online at home and especially on public Wi-Fi. Get IPVanish now for 70% off a yearly plan with this exclusive offer at IPVanish.com slash audio.

You're listening to the Bloomberg Businessweek Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. ♪

At the world's biggest asset manager, I don't know if you saw this, a Bitcoin exchange traded fund, Matt, now generates more revenue than its signature tracker of the S&P 500. So we're talking about the iShares Bitcoin Trust ETF generating more revenue than BlackRock's iShares Core S&P 500 ETF. Oh, yeah. Yeah.

And that's pretty wild, right? Yeah, but they try and keep the expense ratio way down on the index tracker. I understand. I understand. OK, all right. That's fair. That's fair. But they also talk about, you know, we've seen so much money going into Bitcoin ETFs in general because of U.S. regulators opening the doors to mainstream ETFs.

adoption. So let's talk about some of this because our next guest is sure to have some thoughts on today's regulatory environment. I know, Matt, you've talked with him a lot. He heads one of the world's biggest Bitcoin miners. Fred Thiel is chairman and CEO of the publicly held $6.1 billion market cap company, Mara. He joins us from Miami, Florida. The stock, by the way, as you reminded me, Matt, up 1,800% in the past five years, up 4% year to date, worth nearly 30% of the float short. Matt,

Fred, great to have you here. I know Matt and you have had several exchanges, macro and micro, in terms of the industry. But help me out here. And as I was kind of reading in here, you're an energy and infrastructure company. You're a Bitcoin miner. You lay this all out on your website. What really drives revenue growth at the company? Because our FAA page on the Bloomberg basically says it's Bitcoin mining. Is that what you guys do? Is that what leads you to profitability? Yeah.

Yeah, essentially we operate 16 data centers across four continents and the majority of the load that we operate, the compute that we operate is Bitcoin mining. And when we mine Bitcoin, the Bitcoin that we receive for doing that, um,

we keep and so that essentially we recognize as revenues but we're in the process of beginning our transition and expansion into inference ai which will be a growing portion of the workloads that we deploy we also are a vertically integrated technology company and energy company we own energy assets we own wind farms we generate energy off of flare gas and oil fields we're able to develop um

developed technologies around ASICs software orchestration layer. So we're a technology company that's very focused on maximizing the value of every electron we can get and we help energy companies take excess energy and turn it into profits. What make what's going to lead you to profitability? Well, a combination of things. One is obviously

hold on the balance sheet is constantly mark to market but more importantly- as Bitcoin continues to be accumulated by institutions you mentioned it in the. Your

You're kind of preamble as you're talking about, you know, BlackRock's Bitcoin ETF having garnered bigger fees than the S&P 500 fund. There's a huge amount of institutional interest in Bitcoin. There are a number of Bitcoin treasury companies springing up every day and you're seeing an accumulation of Bitcoin, which is driving the price up or almost at record highs again.

And as that continues to move upwards, it helps us generate considerable margins. The thing with our business, similar to the AI business, and I think you're going to find this if you look at any AI company that operates large data centers, is there's a huge CapEx investment up front in building these sites. And the profitability comes over time once the equipment has been depreciated. We depreciate our equipment over three years. And unlike our peers, we have the ability.

mining off of flare gas, we're able to essentially move our ASICs that have been depreciated to these low-cost marginal energy sites, marginal cost energy sites, and that drives much higher profitability and also better capital utilization.

I'm sure you've been following the back and forth between Jim Chanos and Michael Saylor. It's been really entertaining. But, you know, MicroStrategy stock is up even more than yours. I think like three or four thousand percent in the past five years. And these kind of leveraged stocks.

Bitcoin holding companies are popping up all over the place. What do you make of that? Because those companies don't really do anything else besides sell shares and borrow in order to buy Bitcoin.

So the model with Bitcoin treasury companies and the model that Michael Saylor has optimized is essentially buy Bitcoin, issue equity. And as the price and value of the Bitcoin that you have continues to go up, it drives your equity price up. And if you can raise capital at a higher price than Bitcoin, then your Bitcoin yield per share goes up.

which is very attractive. The problem is what happens if Bitcoin price stays flat or starts to go down. You said his stock was up over a five-year basis by a huge amount, which is true. But if you look from year to date at its performance compared to Bitcoin miners even, you're starting to see that that performance is

running into headwinds. In theory, a Bitcoin treasury company's price should increase by upwards of two times whatever Bitcoin's price is increasing on a daily basis because of the leverage that they're driving. And that's not the case anymore. I think what we're starting to see is the saturation of the Bitcoin treasury business market, because to your point,

They're not in any other business. They're taking over a company with a marginally profitable business, and they're turning it into an accumulator for Bitcoin. And at the end of the day, you have a bunch of people competing for capital, and that capital is going to go to the highest return, which means the lowest multiple to NAV. And over time, that multiple to NAV is eventually going to go to zero, not unlike what happened with Grayscale.

where for a long period of time, the Grayscale Trust, which held Bitcoin, was trading at a discount to its NAV. And I think there's risk, especially as you layer a lot of debt on these companies. If Bitcoin goes down by any considerable amount or stagnates for any length of time, there could be challenges for them to maintain that multiple.

You know, you're borrowing against Bitcoin as well. Obviously, you have other businesses that you're running. You mentioned the 16 data centers, the energy generation, inferencing, which is, I agree, going to be absolutely monstrous. But it's still risky. How do you manage those risks?

Well, we follow very much a capital allocation model where we look at our average weighted cost of capital and then we look at the types of investments that we're making to see that we're ensuring that we have

you know, are above a certain hurdle rate across a variety of places. And if you think about our business, you know, we were basically five people and a few miners four years ago. And today we're the largest in the world at what we do. And we're also the second largest holder of Bitcoin in the world of corporate entities.

And so I think we have built a very strong balance sheet. We've built the ability to execute. We're the only company of the publicly traded miners that has the geographic distribution that we have and that has the kind of breadth of business that we have. And I think that's going to pay off very much, not just in the near term, but the long term as Bitcoin becomes more and more of an institutional asset. Bitcoin data centers start becoming more and more integrated

into energy transformation plays with data centers. The grid has a huge need for flexible base load, which is essentially a type of compute that can turn on and turn off as needed by their grid. You guys saw with the heat bubble that happened in the Northeast, the grid was strained. Yet in Texas, they didn't have those issues. Why? Because in Texas, they have a large amount of Bitcoin mining on their grid,

where the grid operator can tell them, hey, shut off. I need the energy. And Bitcoin miners comply and shut off. If you had more Bitcoin mining across the grids in this country, especially the grids that are heavily loaded, you would not see the challenges that you have today, such as in PJM and other ISOs, where consumers are being impacted by increasing prices of energy because

Because AI loads, which are not flexible, are coming online and they're getting more and more strain on their grids. So we play a very unique role in helping balance grids and helping make grids more flexible. And I think what you're going to start seeing is embracing technology.

And a bit of a marriage between AI data centers, Bitcoin mining, and how the two can work together to optimize grids and make sure that there's plenty of available energy for consumers. If you want to do some research, Duke University did a study about four months ago on this topic that showed that there's more than enough energy on the U.S. grid to support flexible loads if they could flex 0.25 of a percent.

which is, you know, a quarter of a percent. And, you know, we flex upwards of 30, 40 percent. So we're clearly an answer to that problem. Let me just ask you, though, on this, you talked about the hot weather and that Texas, you know, managing it. But how has the hot weather increased the energy costs when it comes to Bitcoin mining and for all miners so far this summer?

Well, most of our sites in the U.S. operate in Texas, also Nebraska, North Dakota, Ohio, amongst other places. And so the northern regions don't sit on grids where you have really that challenge. In Texas, you've had a lot of hot weather and you've had a lot of what's called curtailment, which is when the grid operators contact us and say, hey, we need you to shut off.

And so the impact to Bitcoin miners is that we essentially don't operate, so we're not generating revenues those days. But the benefit to us is that we get lower price energy because of that. And providing that flexibility to the grid in Texas

Texas grid to not have to buy. Extra energy that is very expensive- if you think about the energy markets. Baseload is kind of the energy that runs all day long it has a fixed price. And then you have this variable.

or intermittent energy. Wind and solar farms create a problem for grids because the wind doesn't blow at a constant rate for a constant number of hours every day, neither does the sun. And so they're dealing with balancing this variable intermittent generation from solar and wind. And at the same time, demand is different all day long. So you need to match the two.

I totally get that. Just quickly, I know Matt wants to also ask something, but I want to ask you a quickie. Are you asking, I mean, are you looking for other areas of the U.S. or even the world when it comes to new Bitcoin mines? Yes, absolutely. We have a stated objective that 50 percent of our revenue will come from outside the U.S. by 2028. And we're quite a ways along in building a pipeline of opportunities there.

across places in the Middle East and Europe where we believe we'll be able to meet that goal quite handily. I would be happy in the great state of Ohio, you know, and not need to go anywhere else. Go Buckeyes! Fred, I want to ask quickly about, you have developed new technology for inferencing, including a proprietary two-phase immersion cooling technology, which I think is really neat. And...

But the thing is, with inferencing, you don't need nearly the power that you need for training, right? And I wonder about the hardware that you're using, because NVIDIA chips are obviously very expensive and maybe overkill for inferencing. Have you said or are you working with other chip makers to get your gear?

Yeah, absolutely. So the inferencing is very similar to Bitcoin mining that you're constantly chasing an efficiency curve in the world of inference. It's lowest cost per token. And, you know, obviously, an AI token is not what it is in the crypto world. But a token is a measurement of a certain amount of compute.

And so there's this constant need to lower the cost of token. As AI gets more intelligent, as there's more reasoning in AI, the cost to do a query and inference becomes more expensive in the number of tokens that it takes. And the single biggest challenge that if you talk to enterprise customers, they'll tell you, you know, the price per token is too high. We need a lower cost per token. And at the same time, they need to ensure that they can get access to tokens

very rapid responses. So these data centers have to be in close proximity to the customers and the energy costs have to be low. So we've been working with people all the way down the cost curve, all the way down to ASICs as we look at inference as a way to lower the cost. And we totally predict that there'll be a very extreme cost decline over the next two to three years in inferencing as new technologies come in place.

so that you won't have to use this huge infrastructure that you have for learning. One of the biggest challenges today is that a data center builder needs to get a payback on all that investment in under a year because the technology in their data center is obsolete after a year. Just look at what NVIDIA is releasing in the way of technologies. So glad we could get some time with you. I wish we had more. I wish we had more. Come back soon. Come back soon. Fred Thiel, thank you so much. Chairman and CEO of Mara.

This is the Bloomberg Businessweek Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

Did you know using your browser in incognito mode doesn't actually protect your privacy? Take back your privacy with IPVanish VPN. Just one tap and all your data, passwords, communications, browsing history, and more will be instantly protected. IPVanish makes you virtually invisible online. Use IPVanish on all your devices, anytime you go online at home, and especially on public Wi-Fi. Get

IPVanish now for 70% off a yearly plan with this exclusive offer at IPVanish.com slash audio. The data that matters for your investments. The entire auto sector is higher today. And analysis on the companies making news on Wall Street. Tesla's been a stock that's been in focus. Shares have really been all over the map this morning. Listen to the Stock Movers Report from Bloomberg. Let's talk about

We'll be right back.

Join us in Seattle, July 14th and 15th for Bloomberg Green, two days of powerful conversations and meaningful connections. We'll explore what's next in the climate economy, clean tech, policy, and greener living. Featured speakers include Jane Fonda, Brian Gellert, and Vinod Khosla. The title sponsor is Amazon. Official airlines are Alaska and Hawaiian Airlines. Learn more at BloombergLive.com slash GreenSeattle. That's BloombergLive.com slash GreenSeattle.

This is an iHeart Podcast.