WEBVTT - BI Weekend: Homebuilder Sentiment, Natural Gas Outlook, Connie Chung 0:00:02.520 --> 0:00:11.320 Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence 0:00:11.400 --> 0:00:13.440 with Scarletfoo and Paul Sweeney. 0:00:13.560 --> 0:00:15.680 How do you think the FED is looking at tariffs? 0:00:15.800 --> 0:00:17.040 The uncertainty of terriffs. 0:00:17.079 --> 0:00:19.200 Let's take a look at the sectors and how they. 0:00:19.160 --> 0:00:22.160 Performed a lot of investors getting whipsaled every day by news. 0:00:21.960 --> 0:00:26.079 Events, breaking market headlines, and corporate news from across the globe. 0:00:26.120 --> 0:00:28.680 Could we see a market disruption of market events? 0:00:28.800 --> 0:00:30.840 So people just too exuberant out there? 0:00:30.920 --> 0:00:33.479 You see some so called low quality stocks driving this 0:00:33.560 --> 0:00:34.360 short term rally. 0:00:34.400 --> 0:00:39.880 Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, YouTube, 0:00:39.920 --> 0:00:41.240 and Bloomberg Originals. 0:00:41.680 --> 0:00:43.919 On today's Bloomberg Intelligence Show, we dig inside the big 0:00:43.960 --> 0:00:46.240 business story is impacting Wall Street and the global markets. 0:00:46.479 --> 0:00:48.720 Each and every week we provide in depth research and 0:00:48.800 --> 0:00:50.640 data on some of the two thousand companies and one 0:00:50.720 --> 0:00:53.240 hundred and thirty industries are analysts covered worldwide. 0:00:53.280 --> 0:00:55.360 Today, we'll look at the outlook for US oil and 0:00:55.440 --> 0:00:58.280 natural guests heading into the twenty twenty six and why 0:00:58.560 --> 0:01:00.880 it's well positioned to benefit from SAR structural demand. 0:01:00.960 --> 0:01:03.600 Plus, we speak with award winning journalist Connie Chung on 0:01:03.640 --> 0:01:05.960 the changes she is seeing in the media landscape. 0:01:06.040 --> 0:01:08.800 The first perspective, homeowners in twenty twenty five were boxed 0:01:08.800 --> 0:01:12.319 out by high borring cost and limited inventory, keeping affordability 0:01:12.600 --> 0:01:15.520 near record lows. That's according to the latest research from 0:01:15.520 --> 0:01:16.959 Bloomberg Intelligence. 0:01:16.520 --> 0:01:19.640 That pressure is now reshaping twenty twenty six as builders 0:01:19.640 --> 0:01:22.080 look to ramp up construction to meet pent up demand 0:01:22.400 --> 0:01:25.800 while still moving cautiously because of financing costs, labor shortages, 0:01:26.040 --> 0:01:27.759 and of course, uncertain economic growth. 0:01:27.880 --> 0:01:30.440 For more, I spoke with Drew reading Bloomberg Intelligence US 0:01:30.480 --> 0:01:33.240 home building analyst. I first asked Drew if lower interest 0:01:33.280 --> 0:01:35.160 rates will help the home building sector. 0:01:35.560 --> 0:01:38.000 So we actually think that twenty twenty six is going 0:01:38.040 --> 0:01:42.319 to be another challenging year from a fundamental perspective for 0:01:42.319 --> 0:01:44.320 the builders. If you think about the weakness that we've 0:01:44.319 --> 0:01:47.720 had in demand over the last several quarters, it leaves 0:01:48.080 --> 0:01:50.720 much of the group coming into the year with backlogs 0:01:50.720 --> 0:01:53.040 that are down anywhere from ten to forty percent, and 0:01:53.080 --> 0:01:56.880 that's ultimately what translates into revenue over the next called 0:01:56.880 --> 0:01:59.760 it three to nine months. In addition, I think you're 0:01:59.760 --> 0:02:02.480 going to see further pricing pressure as builders look to 0:02:02.480 --> 0:02:04.680 adjust prices to meet market demand. So we're going to 0:02:04.720 --> 0:02:07.880 have further base price reductions, and I think builders are 0:02:07.920 --> 0:02:11.080 going to have to continue to lean on incentives because 0:02:11.080 --> 0:02:13.720 it's something that home shoppers have become accustomed to, and 0:02:14.080 --> 0:02:15.680 you know, they're looking for deals when they're out there 0:02:15.720 --> 0:02:18.720 in the market. So, you know, slow top line growth, 0:02:18.760 --> 0:02:21.160 and I think that incentive dynamic is also going to 0:02:21.160 --> 0:02:24.800 continue to pressure gross margins as we get into next year. 0:02:25.200 --> 0:02:26.000 You know, on the on the. 0:02:25.960 --> 0:02:29.160 Positive side, we do have lower rates, so I do 0:02:29.200 --> 0:02:33.320 think that orders can grow next year. You know, we're 0:02:33.320 --> 0:02:35.880 looking at a six and a quarter rate call it 0:02:36.000 --> 0:02:38.320 right now last year, room as one hundred basis points 0:02:38.400 --> 0:02:41.919 higher heading into the spring. So lower rates and community 0:02:42.000 --> 0:02:45.120 count growth could support orders, but I think that revenue 0:02:45.120 --> 0:02:46.560 and margins are going to be down this year. 0:02:47.240 --> 0:02:51.680 What's the relationship historically drew between new housing and existing 0:02:51.680 --> 0:02:52.280 home sales. 0:02:54.120 --> 0:02:58.280 So the new home market is historically about fifteen percent 0:02:58.320 --> 0:03:01.520 of overall housing trands action, so a much smaller piece 0:03:01.520 --> 0:03:05.320 of the market. You know, they've they've performed vastly differently 0:03:05.360 --> 0:03:06.880 over the last couple of years. If you look at 0:03:06.919 --> 0:03:09.760 the existing home market, we've been bumping along a four 0:03:09.800 --> 0:03:13.079 million annualized run rate of home sales for about three 0:03:13.160 --> 0:03:16.840 years now, and that's about twenty percent below normalized levels. 0:03:17.480 --> 0:03:19.280 So there's been a lot of pressure because the mortgage 0:03:19.360 --> 0:03:23.360 rate lock in effect affordability. We have seen an improvement 0:03:23.360 --> 0:03:26.040 in demand in the resale market as rates have come down. 0:03:27.000 --> 0:03:29.800 You know, we're looking at purchase applications, which is the 0:03:29.800 --> 0:03:32.600 most high frequency data point that we have. So we 0:03:32.639 --> 0:03:34.520 have seen some improvement and we think, you know, looking 0:03:34.520 --> 0:03:37.240 into twenty twenty six, you could see growth in the 0:03:37.280 --> 0:03:40.440 resale market anywhere from five to ten percent call it, 0:03:41.240 --> 0:03:43.560 but keep in mind that's off a historically low level. 0:03:45.120 --> 0:03:49.560 What's the Has the tariffs impacted the new home building market? 0:03:49.600 --> 0:03:52.040 I'm thinking lumber and all the other materials used in 0:03:52.440 --> 0:03:55.280 building a home. Is that god an impact on the profitability? 0:03:56.120 --> 0:03:58.800 Yeah, good question. To this point, it really hasn't. 0:03:59.080 --> 0:04:02.080 We've heard from a number of builders who haven't seen 0:04:02.160 --> 0:04:04.880 much of a increase in twenty twenty five. I think 0:04:04.920 --> 0:04:06.920 you could see as you get into twenty twenty six 0:04:06.960 --> 0:04:09.480 that become more of a problem. You know, we did 0:04:09.480 --> 0:04:12.080 an analysis that looked at all the tariffs that have 0:04:12.120 --> 0:04:14.200 come through in it and you know, it shows that 0:04:14.240 --> 0:04:17.080 there could be a ten thousand dollars cost increase per 0:04:17.200 --> 0:04:20.520 home as it relates to tariffs. Now, when you think 0:04:20.520 --> 0:04:23.039 about who's likely to feel that the most, it probably 0:04:23.120 --> 0:04:26.880 won't be the large single family production builders. They've got 0:04:26.920 --> 0:04:28.680 a lot of scale, they've got a lot of leverage, 0:04:28.680 --> 0:04:31.800 and they've had success in pushing back against their suppliers. 0:04:32.440 --> 0:04:34.760 I think you're more likely to see the pinch among 0:04:34.880 --> 0:04:37.520 smaller private home builders who just don't have that scale 0:04:37.560 --> 0:04:40.560 and ability to push back. So to this point it 0:04:40.640 --> 0:04:42.640 hasn't had a bigger impact, but I think that's something 0:04:42.680 --> 0:04:44.320 you need to watch as we look in the next year. 0:04:44.640 --> 0:04:47.480 Are they still building like crazy down there in Florida 0:04:47.560 --> 0:04:50.480 and Texas and Tennessee and those kinds of states. 0:04:50.960 --> 0:04:52.240 Yeah, that's a good question. 0:04:52.279 --> 0:04:54.400 I mean, during the pandemic, that's where a lot of 0:04:54.400 --> 0:04:56.800 people were flocking to there was a lot of construction 0:04:56.920 --> 0:04:59.520 down there. If you look at inventory levels now in 0:04:59.560 --> 0:05:02.719 the South, they're actually at the highest level on record. 0:05:03.880 --> 0:05:05.839 So that's where we're seeing a lot of the weakness 0:05:05.839 --> 0:05:08.520 in the new home market. There's so much inventory, builders 0:05:08.600 --> 0:05:12.840 have had to get increasingly aggressive on prices, you know, 0:05:12.880 --> 0:05:16.360 to move inventory. A lot of incentives in the market, 0:05:16.400 --> 0:05:18.440 a lot of base price reduction. So that's really where 0:05:18.480 --> 0:05:20.880 we've seen the weakness, and if you can trast that 0:05:20.960 --> 0:05:23.200 to some of the stronger markets, it's really a tale 0:05:23.200 --> 0:05:25.640 of a couple of regions. You have the Midwest and 0:05:25.680 --> 0:05:28.719 the Northeast, which tend not to be boom markets. We 0:05:28.760 --> 0:05:31.520 didn't see the same type of inventory growth there, and 0:05:31.560 --> 0:05:34.680 you're seeing a lot more price stability. On the other hand, 0:05:34.720 --> 0:05:36.599 you mentioned the South, but you also have the West 0:05:36.640 --> 0:05:38.920 where there was a lot of inventory growth and we're 0:05:38.920 --> 0:05:40.359 seeing similar price and pressure. 0:05:41.320 --> 0:05:44.000 So is there still a housing shortage in this country? 0:05:44.040 --> 0:05:46.360 And if so, how does it right itself? 0:05:47.120 --> 0:05:50.520 Yeah, another good question and the one that's frequently debated. 0:05:50.680 --> 0:05:53.039 Just to take a step back, you'll hear estimates of 0:05:53.040 --> 0:05:55.960 anywhere to you know, a million to five million unit 0:05:56.000 --> 0:05:58.280 housing shortage. But I think, you know, I think it's 0:05:58.279 --> 0:06:02.400 a more complex answer that the shortage, so called shortage, 0:06:02.400 --> 0:06:05.159 is probably more at lower price points. So there's a 0:06:05.200 --> 0:06:09.680 mismatch between where there's theoretically demand, which would be at 0:06:09.680 --> 0:06:12.880 lower price points, and what's available out there in the market. 0:06:12.920 --> 0:06:17.200 So it's really a affordability problem that's holding things back 0:06:17.240 --> 0:06:19.280 and how do we get I mean, the government has 0:06:19.320 --> 0:06:21.760 talked of about all sorts of things in order to 0:06:22.040 --> 0:06:25.480 boost production and help builders to build more homes at 0:06:25.560 --> 0:06:29.640 reasonable prices. Whether it's you know, dangling carrots in front 0:06:29.640 --> 0:06:33.280 of local municipalities to get them to reduce their regulations, 0:06:35.000 --> 0:06:36.839 you know, whether it's trying to knock down the price 0:06:36.880 --> 0:06:38.000 of building materials. 0:06:38.000 --> 0:06:39.240 There's a lot of different things. 0:06:39.240 --> 0:06:42.159 But I don't really think that there's necessarily any one 0:06:42.279 --> 0:06:44.719 single silver bullet that's going to solve this problem. I 0:06:44.720 --> 0:06:46.719 think at the end of the day, you have home 0:06:46.720 --> 0:06:48.719 prices that are up, you know, more than fifty percent 0:06:48.760 --> 0:06:51.320 since twenty nineteen, and I think we need to let 0:06:51.560 --> 0:06:54.279 kind of the basic laws of supply demands kind of 0:06:54.279 --> 0:06:56.480 take course in order to write that our. 0:06:56.440 --> 0:06:59.280 Thanks to Drew Writing, Bloomberg Intelligence, US home building analyst. 0:06:59.600 --> 0:07:02.160 We move next to the consumer hardline space, focusing on 0:07:02.200 --> 0:07:06.760 the retail sector for durable, non consumable goods like electronics, appliances, tools, 0:07:06.800 --> 0:07:07.599 and sporting goods. 0:07:07.680 --> 0:07:10.679 Bloomberg Intelligence recently put out its twenty twenty six outlook 0:07:10.680 --> 0:07:13.800 for consumer hardlines in North America, and according to BI 0:07:13.960 --> 0:07:16.680 revenue gains should extend into twenty twenty six for most 0:07:16.680 --> 0:07:18.120 consumer hardlines retailers. 0:07:18.600 --> 0:07:18.920 For more. 0:07:19.040 --> 0:07:21.000 Guest hosts Isabelle, Leah and I were joined by Lindsay 0:07:21.040 --> 0:07:24.800 Dutch Bloomberg Intelligence Consumer hardline senior analysts. We first asked 0:07:24.800 --> 0:07:28.120 Lindsay to talk to us about her expectations for hardline 0:07:28.160 --> 0:07:29.480 retailers in twenty twenty six. 0:07:29.800 --> 0:07:32.480 I think if you look at, you know, the guidance 0:07:32.520 --> 0:07:34.560 for the rest of the year, I think a lot 0:07:34.640 --> 0:07:37.080 of these big hardline companies are baking in a lot 0:07:37.120 --> 0:07:40.440 of uncertainty with the consumer. But the reality is that 0:07:40.480 --> 0:07:43.560 if we look back, you know, to performance to date 0:07:43.640 --> 0:07:47.000 and results to date, results have you know, largely been 0:07:47.280 --> 0:07:50.360 better than expected, and a lot of these retailers are 0:07:50.360 --> 0:07:54.480 sort of tracking to the upper half of their guidance 0:07:54.560 --> 0:07:57.240 range for the year because that consumer has stayed pretty 0:07:57.560 --> 0:08:00.760 pretty resilient. You know, we see strength, you know, continuing 0:08:00.800 --> 0:08:03.640 to come from that higher income consumer, while the lower 0:08:03.640 --> 0:08:05.920 income might be you know, continuing to pull back a 0:08:05.920 --> 0:08:08.880 little bit. And if you think about companies like Best Buy, 0:08:09.320 --> 0:08:13.000 All To Beauty, Williams, Sonoma, dick Sboarding Goods, you know 0:08:13.120 --> 0:08:17.000 they are bringing you know, premium products, new products, exclusive 0:08:17.000 --> 0:08:20.080 products to that consumer and the consumers are willing to 0:08:20.240 --> 0:08:20.920 pay up for that. 0:08:21.760 --> 0:08:23.720 What was the one trend that shocked you this year? 0:08:23.760 --> 0:08:24.880 Now that you look back. 0:08:26.000 --> 0:08:27.520 I think a lot of the trends have been a 0:08:27.560 --> 0:08:31.360 continuation of what we've been seeing. I think, you know, 0:08:31.400 --> 0:08:33.640 if we go back to late twenty twenty two, that 0:08:33.800 --> 0:08:37.720 is when the first pullback in that discretionary spend has been. 0:08:38.200 --> 0:08:42.000 But this is the first year that we've seen more newness, 0:08:42.040 --> 0:08:46.840 and newness is really a key driver to getting consumers 0:08:46.840 --> 0:08:50.559 in the store and to fueling transactions. So the best 0:08:50.600 --> 0:08:54.720 retailers are getting both transaction and ticket growth. But I 0:08:54.760 --> 0:08:59.640 think those innovation pipelines that maybe we're you know, settled 0:08:59.640 --> 0:09:02.640 down a bit during COVID, they've picked up again and 0:09:02.960 --> 0:09:05.800 bring more newness is driving those transactions. 0:09:06.240 --> 0:09:10.600 How promotional do you think retailers will be in twenty 0:09:10.640 --> 0:09:13.440 twenty six to kind of drive the consumer to the 0:09:13.480 --> 0:09:15.400 store or to the mouse to click. 0:09:16.760 --> 0:09:21.640 So promotions are very important to bring shoppers to the store, 0:09:22.080 --> 0:09:24.800 you know, especially for someone like a best Buy. You know, 0:09:24.840 --> 0:09:29.280 promotions are very key, especially around holiday. We seen that 0:09:29.320 --> 0:09:32.720 promotions are about flat, you know, in twenty five versus 0:09:32.720 --> 0:09:35.800 twenty four, and I would sort of expect a continuation 0:09:35.920 --> 0:09:39.600 of that in twenty six unless we see a huge 0:09:39.640 --> 0:09:41.719 spike in demand, in which case the retailers might be 0:09:41.760 --> 0:09:44.640 able to pull back on that promotional lever a little bit. 0:09:44.760 --> 0:09:47.800 But this year so far it's been about flat. You 0:09:47.840 --> 0:09:52.559 do see companies like a William's Sonoma very select promotions. 0:09:52.600 --> 0:09:54.679 This has been a strategy coming out of COVID. They 0:09:54.720 --> 0:09:58.040 sort of have stuck with it. They're even sticking with it, 0:09:58.320 --> 0:10:01.079 you know, through this season going into next year. Pottery 0:10:01.120 --> 0:10:03.760 Barn was a big focus for them. You know, they 0:10:03.800 --> 0:10:06.600 need a rebound in that brand and growth is slowly 0:10:06.679 --> 0:10:10.240 coming back, but they are staying steadfast in keeping those 0:10:10.240 --> 0:10:11.760 promotions very limited. 0:10:12.520 --> 0:10:14.360 I was going through your notes and then I read 0:10:14.360 --> 0:10:17.520 that many retailers are resuming or accelerating brick and mortar 0:10:17.559 --> 0:10:21.560 expansion plants because this leads to installing online sales. And 0:10:21.600 --> 0:10:24.319 that's just kind of the reverse trend that I was expecting. 0:10:24.400 --> 0:10:26.360 But you made a point that gen Z shows a 0:10:26.400 --> 0:10:28.959 strong preference for in person shopping. Can you talk to 0:10:29.040 --> 0:10:31.840 us more about that and how each generation is different. 0:10:33.480 --> 0:10:37.560 Sure, Yeah, in store shopping is definitely back, and just 0:10:37.640 --> 0:10:41.640 meeting the consumer where they are so retailers I think 0:10:41.720 --> 0:10:46.520 are more focused on all channels, whether I'd said whether 0:10:46.559 --> 0:10:49.360 they have an app, they're online site, their brick and 0:10:49.360 --> 0:10:52.920 mortar stores, but brick and mortar as a whole. You know, 0:10:52.960 --> 0:10:56.199 we are seeing more openings than closings, and that has 0:10:56.200 --> 0:10:58.800 been a trend for the past couple of years. But 0:10:58.880 --> 0:11:01.320 when we think about sort of the retail real estate market, 0:11:01.440 --> 0:11:04.160 the demand has been solid coming out of COVID and 0:11:04.200 --> 0:11:06.880 so vacancy is starting to get low and there's really 0:11:06.960 --> 0:11:10.160 no new properties being built. So these retail are looking 0:11:10.200 --> 0:11:13.439 to expand, which is great for their businesses. You know, 0:11:13.679 --> 0:11:16.080 they really have to work hard to do so and 0:11:16.160 --> 0:11:18.680 find good space to open stores because there's just not 0:11:19.160 --> 0:11:22.000 that much of it. But best Buy has talked about 0:11:22.120 --> 0:11:25.760 gen Z's preference for instore shopping, so has Alta Beauty, 0:11:26.679 --> 0:11:29.840 and so we're definitely seeing that across the board, but 0:11:29.960 --> 0:11:31.360 especially that younger generation. 0:11:31.520 --> 0:11:34.240 There's plenty of retail space on Lexington Avenue and fifty 0:11:34.240 --> 0:11:38.080 eighth Street. Man hen Lindsay John from the Highlands rights 0:11:38.120 --> 0:11:40.920 in and you want to ask about Alta Beauty, ELF Beauty, 0:11:41.040 --> 0:11:42.880 So for how does that category look. 0:11:42.800 --> 0:11:48.360 For twenty twenty six, So demand has showed a strengthening 0:11:48.520 --> 0:11:51.400 sort of in the back half of twenty five. I 0:11:51.480 --> 0:11:54.320 think that momentum can continue into twenty six. I think 0:11:54.400 --> 0:11:57.360 for Alta in particular, they have done a great job, 0:11:57.920 --> 0:12:00.960 you know, bringing elevating their assort and bringing on. 0:12:01.200 --> 0:12:03.960 Exclusives and that has really helped them. 0:12:05.160 --> 0:12:07.640 Comps are going to get tougher next year and they 0:12:07.760 --> 0:12:10.840 need to continue to drive growth and I think for them, 0:12:10.920 --> 0:12:13.319 you know, leaning into their salon services could be a 0:12:13.400 --> 0:12:15.880 key way to do that. Leaning into wellness is a 0:12:15.960 --> 0:12:18.480 key way to do that. There's multiple levers that they 0:12:18.559 --> 0:12:21.520 can pull. The categories that are showing the most strength 0:12:21.800 --> 0:12:25.280 is really fragrance and skincare, and we would expect that 0:12:25.800 --> 0:12:27.720 demand to continue into next year. 0:12:28.200 --> 0:12:31.760 Our thanks to Lindsay Dutch, Bloomberg Intelligence Consumer Hardline Senior Analyst. 0:12:32.000 --> 0:12:34.240 Coming up, twenty twenty six should be a big year 0:12:34.320 --> 0:12:37.000 for natural guest producers. We'll explain why you're. 0:12:36.880 --> 0:12:39.719 Listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth 0:12:39.760 --> 0:12:42.079 research and data on two thousand companies and one hundred 0:12:42.080 --> 0:12:42.840 and thirty industries. 0:12:43.000 --> 0:12:46.000 You can access Bloomberg Intelligence via bi go on the terminal. 0:12:46.120 --> 0:12:47.520 I'm Scarlet Foo and I'm. 0:12:47.360 --> 0:12:49.200 Paul Sweeney, and this is Bloomberg. 0:12:54.240 --> 0:12:58.640 This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 0:12:59.080 --> 0:13:00.360 on Bloomberg Radio. 0:13:01.040 --> 0:13:03.199 The US continued to strong oil and gas production in 0:13:03.280 --> 0:13:06.240 twenty twenty five, with crude output near record levels and 0:13:06.360 --> 0:13:07.040 export growth. 0:13:07.360 --> 0:13:10.800 One sector that performed particularly well is liquefied natural gas, 0:13:10.960 --> 0:13:13.120 and that is set to continue into twenty twenty six. 0:13:13.440 --> 0:13:17.080 According to BI natural Gas Exposed, E andp's financial performance 0:13:17.120 --> 0:13:20.160 will gain momentum next year as winter fully kicks in 0:13:20.320 --> 0:13:22.000 and raises US gas benchmarks. 0:13:22.080 --> 0:13:24.040 For more on this, we were joined by Vincent Piazza, 0:13:24.160 --> 0:13:27.760 Bloomberg Intelligence senior equity research analyst. First ask Vincent what 0:13:27.920 --> 0:13:30.600 the outlook is for natural guests demand in twenty twenty six. 0:13:30.920 --> 0:13:36.400 From our perspective, we are definitely more constructive on natural 0:13:36.480 --> 0:13:40.199 gas commodity relative to oil, and there are three key 0:13:40.480 --> 0:13:45.160 drivers for natural gas in twenty twenty six. Number One, 0:13:45.360 --> 0:13:50.319 we have structural demand growth and that's from LNG exports 0:13:50.360 --> 0:13:54.480 and also pipeline exports down into Mexico. We have what 0:13:54.640 --> 0:13:59.040 the other presenter hinted at was AI demand growth. That's 0:13:59.080 --> 0:14:03.760 also a strong structural a growth driver for twenty twenty six. 0:14:04.080 --> 0:14:07.160 The demand side is really quite clear. It's really the 0:14:07.280 --> 0:14:09.760 production side that is running a little hotter this year 0:14:09.880 --> 0:14:13.199 versus last year, and that is our biggest risk to 0:14:13.600 --> 0:14:16.720 our twenty twenty six call. That's the first key driver. 0:14:16.920 --> 0:14:20.800 The second key driver is relatively robust free cash flow 0:14:20.880 --> 0:14:24.880 yields as balances tightened. So there is a great deal 0:14:24.920 --> 0:14:29.560 of cash flow sloshing around for this group. That gives 0:14:29.640 --> 0:14:33.560 them a great deal of optionality. And where we think 0:14:33.640 --> 0:14:37.640 that optionality is going to be targeted, aside from base 0:14:38.040 --> 0:14:42.600 and supplemental dividends, is really and a natural gas m 0:14:42.640 --> 0:14:45.120 and a lagged oil M and A. We think that 0:14:45.400 --> 0:14:48.720 turns in twenty twenty six. We saw the first real 0:14:48.960 --> 0:14:52.920 big hint of that in twenty twenty four and twenty 0:14:53.040 --> 0:14:58.040 twenty five when Expand Energy was created via the Seminal 0:14:58.160 --> 0:15:05.479 Acquisition Company between Chesapeak and Southwestern Energy. That created a goliath, 0:15:05.680 --> 0:15:10.880 the largest natural gas operator, natural gas producer, independent producer 0:15:11.000 --> 0:15:15.520 in the lower forty eight. We think that'll drive incremental 0:15:16.440 --> 0:15:19.280 M and A. Because the biggest central theme for us 0:15:19.360 --> 0:15:24.480 in twenty twenty six is concentration via consolidation, we think 0:15:24.600 --> 0:15:28.680 that continues for the natural gas operators as it did 0:15:29.240 --> 0:15:31.560 for the oil centric names in twenty twenty five. 0:15:32.360 --> 0:15:35.240 What are the folks down there in domestic production? What 0:15:35.320 --> 0:15:37.760 do they do with oil around these prices here? 0:15:38.680 --> 0:15:39.320 They don't grow. 0:15:39.920 --> 0:15:43.440 We think production has peaked. We think you will see 0:15:43.720 --> 0:15:47.400 a change in sentiment as we see more focus on 0:15:47.600 --> 0:15:50.920 natural gas relative to oil. What is interesting for the 0:15:51.000 --> 0:15:56.200 natural gas producers. As you produce less liquids, so less crude, 0:15:56.280 --> 0:16:01.480 you also produce a fewer molecules of what's called associated gas. 0:16:02.000 --> 0:16:04.720 That's great for the natural gas guys because that means 0:16:04.880 --> 0:16:08.120 balance is titaned. So when you think about relative prices, 0:16:08.520 --> 0:16:11.800 that's a net benefit for the natural gas producers relative 0:16:11.840 --> 0:16:15.720 to the oil producers. Since associated gases roughly call it 0:16:15.880 --> 0:16:20.160 one third of total production of natural gas, So lower 0:16:20.280 --> 0:16:23.080 oil actually good for natural gas. 0:16:23.560 --> 0:16:26.480 Which nat gas players are best positioned. I know Bloomberg 0:16:26.520 --> 0:16:29.520 Intelligence doesn't do by holed sell on individual companies, but 0:16:29.640 --> 0:16:32.440 surely there are some that are more attractive than others. 0:16:33.160 --> 0:16:37.840 Yeah, absolutely so. Again on this central theme of concentration 0:16:38.120 --> 0:16:44.040 via consolidation, expand has really gone out there and created 0:16:44.280 --> 0:16:50.360 a dominant player into the central basins EQT as well. 0:16:51.560 --> 0:16:54.760 Those are the two key names for twenty twenty six, 0:16:54.920 --> 0:16:58.280 given their size and relative importance in the market, not 0:16:58.480 --> 0:17:03.600 only in the lowerst Basin of Appalachia in the northeast, 0:17:03.920 --> 0:17:09.679 but also near Seaborn export markets around the Gulf around 0:17:09.800 --> 0:17:13.720 Haynesville as well. So expand EQT those are two names 0:17:13.760 --> 0:17:16.720 that we have focus ideas out for twenty twenty six. 0:17:17.119 --> 0:17:19.720 You can take a look at that on the terminal 0:17:19.960 --> 0:17:21.440 within the Bloomberg ecosystem. 0:17:21.920 --> 0:17:24.280 Nice, what's the OPEC plus do in these days? Do 0:17:24.359 --> 0:17:26.440 we really how much do we care about those folks? 0:17:26.520 --> 0:17:28.280 If we're a net exporter. 0:17:28.080 --> 0:17:32.760 These days, they are still the dominant player, the dominant 0:17:33.119 --> 0:17:40.639 governor of oil markets. They will still drive twenty twenty 0:17:40.720 --> 0:17:45.639 six supply balances. From the demand side, we think we 0:17:46.160 --> 0:17:49.600 are past that peak peak growth of demand here in 0:17:49.640 --> 0:17:54.040 the US, we pumped out roughly thirteen point six million 0:17:54.119 --> 0:17:56.440 barrels per day. We think we're past a peak there 0:17:56.600 --> 0:18:01.000 as well. In fact, the other central theme that we 0:18:01.160 --> 0:18:05.840 talked about for the oil players is really capital discipline. 0:18:05.880 --> 0:18:08.480 You're going to hear a lot more of that, similar 0:18:08.520 --> 0:18:10.600 to what we talked about in twenty twenty four and 0:18:10.680 --> 0:18:15.200 twenty twenty five. Investors, what your guys are telling people, 0:18:15.640 --> 0:18:18.240 Paul Scarlett is we don't want to see the production. 0:18:18.720 --> 0:18:22.600 We don't want to see a higher spending. What we 0:18:22.760 --> 0:18:26.240 really want to see is that free cashload coming back 0:18:26.359 --> 0:18:29.520 to the investor base. All that sung capital during the 0:18:29.640 --> 0:18:33.719 initial stage of the growth in shale. We are now 0:18:33.800 --> 0:18:37.280 at a maturity phase. We want to see those higher dividends. 0:18:37.359 --> 0:18:39.480 We want to see the based dividends. We want to 0:18:39.560 --> 0:18:43.560 see supplemental growth in dividends with buybacks taking a little 0:18:43.640 --> 0:18:46.520 more of a backseat. In order to clean up any 0:18:47.000 --> 0:18:49.359 equity issues via m and A market our. 0:18:49.280 --> 0:18:52.479 Thanks to Vincent Piazza, Bloomberg Intelligence senior equity research analyst. 0:18:52.840 --> 0:18:55.280 Staying with energy, we now look at how one of 0:18:55.320 --> 0:18:57.359 the nation's largest utility companies is faring. 0:18:57.600 --> 0:19:01.560 Excellent Corporation primarily engages in the generation of electricity from nuclear, 0:19:01.680 --> 0:19:04.720 fossil fuels, hydro electric and renewables. For one of the 0:19:04.760 --> 0:19:07.480 company's recent data center boom and some of the challenges 0:19:07.560 --> 0:19:10.600 in managing a large energy grid, we spoke to Callan Butler, 0:19:10.720 --> 0:19:11.640 CEO of Excellent. 0:19:12.280 --> 0:19:19.000 We're critical to the development of AI data centers and 0:19:19.280 --> 0:19:23.760 large load quantum and we take that responsibility very serious. 0:19:24.160 --> 0:19:28.879 And from a standpoint of building that infrastructure, protecting that grid, 0:19:29.160 --> 0:19:30.879 it's going to be the backbone of all this. We 0:19:31.000 --> 0:19:34.720 always say that the energy sector is five percent of 0:19:34.800 --> 0:19:37.359 the GDP, but we power the next ninety five and 0:19:37.480 --> 0:19:38.960 we take that very seriously. 0:19:39.880 --> 0:19:41.520 You take it seriously. So walk us through some of 0:19:41.560 --> 0:19:45.280 the plans you're making, how you're preparing for this transition, 0:19:45.480 --> 0:19:47.399 for this increase in demand. 0:19:48.520 --> 0:19:51.120 Yeah, thank you, Scarlett. What we have done, We've done 0:19:51.160 --> 0:19:55.800 a few things. Is one understanding for your listener's excellent. 0:19:56.359 --> 0:20:00.359 We are truly a transmission and distribution company, you know, 0:20:00.680 --> 0:20:04.240 proud to have six utilities operating the electric gas side 0:20:04.440 --> 0:20:07.280 through the pipes and wires. So, having said that, being 0:20:07.320 --> 0:20:11.159 the backbone of that, we're encouraging those data centers and 0:20:11.240 --> 0:20:14.520 large developers to come into the states in which we operate, 0:20:14.920 --> 0:20:18.840 and we put together a comprehensive plan to get them online, 0:20:19.040 --> 0:20:22.960 up and running sooner rather than later. Speed is everything 0:20:23.040 --> 0:20:27.159 for them, and so what it takes is a coordinated effort, 0:20:27.440 --> 0:20:31.240 and we've worked very hard to move upstream to get 0:20:31.280 --> 0:20:33.800 them online so they can do what they do, which 0:20:33.880 --> 0:20:37.080 is on the technology side. Now, as we do that, 0:20:37.680 --> 0:20:40.200 we have to keep in mind, first and foremost the 0:20:40.320 --> 0:20:43.840 affordability factor for all of our communities, and that's where 0:20:43.880 --> 0:20:48.480 we're working with them to identify sites that are more 0:20:48.640 --> 0:20:52.160 ready to put their equipment and their technology in place. 0:20:53.040 --> 0:20:56.560 We had a couple of governor races in New Jersey 0:20:56.760 --> 0:20:59.359 and in Virginia and affordability was one of the big issues. 0:20:59.400 --> 0:21:02.520 And in New Jersey, see the governor elect who actually won, 0:21:02.800 --> 0:21:05.920 one of our number one issues was bringing down electric 0:21:06.040 --> 0:21:09.159 utility bills. So this is an issue I we got 0:21:09.240 --> 0:21:12.679 to fund, we got to I guess, create and develop 0:21:12.720 --> 0:21:14.480 these data centers, but we've got to do it in 0:21:14.560 --> 0:21:17.720 a way that it doesn't cause everybody's power bills to 0:21:17.800 --> 0:21:21.120 go up. How do you think about that transition, Paul. 0:21:21.000 --> 0:21:24.520 You're absolutely right. It was a race in both New 0:21:24.680 --> 0:21:28.719 Jersey and Virginia an issue, and we believe it's going 0:21:28.760 --> 0:21:31.080 to be an issue in the twenty twenty six elections 0:21:31.160 --> 0:21:34.760