WEBVTT - Fed on Disinflationary Path, Airbnb CBO on Paris Rentals 0:00:02.440 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.480 --> 0:00:12.360 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:12.440 --> 0:00:15.120 weekdays at ten am Eastern on Affo card Playing and 0:00:15.240 --> 0:00:18.160 Broun Auto with the Bloomberg Business App. Listen on demand 0:00:18.200 --> 0:00:21.880 wherever you get your podcasts, or watch us live on YouTube. 0:00:22.640 --> 0:00:26.080 Big economic week this week, lots of economic data coming 0:00:26.120 --> 0:00:29.080 down to Pike, including Jobs Day on Friday week at 0:00:29.080 --> 0:00:30.760 the non farm payroll which is now looking for one 0:00:30.800 --> 0:00:34.120 hundred and ninety five thousand jobs. So the Fed's gonna 0:00:34.120 --> 0:00:36.600 have a lot to digest. Let's check in with Ira Jersey, 0:00:36.680 --> 0:00:40.600 Bloomberg Intelligence US interest rate strategists. So, Ira, where do 0:00:40.680 --> 0:00:43.000 you think the FED is as it sits here today 0:00:43.080 --> 0:00:46.800 digesting you know Jolts number, and they're going to get 0:00:46.840 --> 0:00:48.839 a lot more data coming this week. Where do you 0:00:48.840 --> 0:00:50.160 think the Fed is today? 0:00:50.200 --> 0:00:50.400 Ira? 0:00:51.120 --> 0:00:54.360 Yeah, the Fed I think is looking for the opportunity 0:00:54.400 --> 0:00:56.640 to cut interest rates. I think they've made it pretty 0:00:56.640 --> 0:01:00.880 clear that they're done hiking obviously. Japwell just this morning 0:01:00.960 --> 0:01:04.240 reiterated some words. He's at a symposium with two other 0:01:04.880 --> 0:01:09.160 central bank governors out in Europe, and he said, like, 0:01:09.160 --> 0:01:11.319 look that he doesn't want to cut too early. But 0:01:11.360 --> 0:01:14.360 he also doesn't want to cut too late because if 0:01:14.400 --> 0:01:18.440 they cut too early, then they risk inflation reaccelerating, and 0:01:18.480 --> 0:01:21.280 if they cut too late, that could mean that, you know, 0:01:21.280 --> 0:01:22.360 they go into a recession. 0:01:22.400 --> 0:01:24.840 So I think they want to be cautious here. 0:01:25.520 --> 0:01:27.200 I'm still of the opinion that we're not going to 0:01:27.240 --> 0:01:29.920 have enough data that the Fed's going to be able 0:01:29.920 --> 0:01:33.520 to cut before the election. And I think there's other 0:01:33.560 --> 0:01:35.560 reasons in the back of people's minds will never ever 0:01:35.640 --> 0:01:37.679 admit it, but that they want to kind of in 0:01:37.800 --> 0:01:40.000 order to remain independent. They want to stay out of 0:01:40.000 --> 0:01:44.280 the political arena. So you know, they know that things 0:01:44.319 --> 0:01:47.520 are slowing, but they're not slowing quickly enough for them. 0:01:47.680 --> 0:01:49.480 I think to cut in the very near term. 0:01:49.920 --> 0:01:52.400 Yesterday, Morgan Stanley coming out with a note talking about 0:01:52.440 --> 0:01:55.800 steep inner trade into a potential President Trump. Basically, you're 0:01:55.800 --> 0:01:59.000 going to see higher inflation, slower growth, therefore go bet 0:01:59.000 --> 0:02:03.840 on steepeners. Think about that. These calls we're starting to see, well, I. 0:02:03.800 --> 0:02:06.520 Think eventually the curve will be meaningfully steeper. I mean 0:02:06.720 --> 0:02:09.040 the curve is still inverted if depending on where you're looking. 0:02:09.040 --> 0:02:10.520 So if you look at the two year versus ten 0:02:10.600 --> 0:02:13.400 year You know that has moved twenty ish basis points 0:02:13.400 --> 0:02:17.120 from around negative fifty basis points to negative thirty. I 0:02:17.200 --> 0:02:19.160 was actually I'm working on a note right now looking 0:02:19.160 --> 0:02:23.440 at market technicals, at technical analysis, and we're getting pretty 0:02:23.480 --> 0:02:29.400 close to an interesting and interesting technical resistance point. I 0:02:29.400 --> 0:02:33.480 think that that steepeners makes sense and are But the 0:02:33.480 --> 0:02:35.480 problem is, I think you're going to get stopped out 0:02:35.480 --> 0:02:38.400 once or twice if you get in now you know 0:02:38.440 --> 0:02:39.600 we've already steepened a bit. 0:02:39.840 --> 0:02:41.480 Ye, You're We're probably going to. 0:02:41.560 --> 0:02:44.600 Pull back at least at some point, and so there 0:02:44.639 --> 0:02:47.080 might be better entry levels for those types of trades. 0:02:48.240 --> 0:02:50.639 The I think one of the big questions is will 0:02:50.680 --> 0:02:54.079 we see what we've if Donald Trump is elected, will 0:02:54.120 --> 0:02:56.680 we continue to see bear steepeners? Right so, where two 0:02:56.760 --> 0:02:59.120 year yields basically have done nothing, all of this move 0:02:59.160 --> 0:03:02.360 has come from the ten your yield moving higher, and 0:03:02.400 --> 0:03:05.000 that's on the expectation that we'll have higher deficits, that 0:03:05.040 --> 0:03:07.880 we might have higher inflation, that the FED might not 0:03:07.960 --> 0:03:11.000 be as active. But I think at some point we're 0:03:11.000 --> 0:03:12.680 actually going to get the opposite. We're going to get 0:03:13.000 --> 0:03:15.399 what we're going to get. Bull steepeners where you see 0:03:15.440 --> 0:03:17.400 two year yields go down to four and a quarter 0:03:17.480 --> 0:03:21.360 four percent from where they are today, whereas ten year 0:03:21.440 --> 0:03:23.720 yields might not move quite as much even if Donald 0:03:23.760 --> 0:03:26.600 Trump is elected, because what's I think underappreciated by the 0:03:26.600 --> 0:03:28.560 market right now. They're all focused, A lot of people 0:03:28.600 --> 0:03:31.480 focus on the fiscal aspect of what Donald Trump might do, 0:03:31.840 --> 0:03:35.680 but he's also very likely to appoint a more dubvish 0:03:35.880 --> 0:03:39.880 Chair of the Fed and not reappoint Chair Powell. So 0:03:40.040 --> 0:03:42.040 so I think once the market wakes up to that fact, 0:03:42.120 --> 0:03:44.400 I think you could wind up seeing some steepening, but 0:03:44.480 --> 0:03:46.800 the other way, right, so bull steepening as opposed to 0:03:46.800 --> 0:03:47.440 bear steepening. 0:03:48.760 --> 0:03:50.760 I heard you just mentioned debt deficits, and we've heard 0:03:50.760 --> 0:03:52.720 that more and more of the last several weeks and months. 0:03:52.720 --> 0:03:55.320 But quite frankly, I've been hearing about the you know, 0:03:55.880 --> 0:04:00.240 the US debt concerns my entire life more I could 0:04:00.280 --> 0:04:00.680 really care. 0:04:01.080 --> 0:04:02.360 Well, they care a little bit, right. 0:04:02.400 --> 0:04:04.480 So, the way that I look at at Paul is 0:04:04.760 --> 0:04:08.440 as the debt burden grows and we're now at or 0:04:08.480 --> 0:04:12.600 above depending on how you count the deficit above, the 0:04:12.640 --> 0:04:16.160 debt is now bigger than GDP is. Sell offs will 0:04:16.200 --> 0:04:19.120 be more pronounced, and in rallies will be somewhat more limited, 0:04:19.360 --> 0:04:22.200 but we'll still rally. Right, So, if the inflation is lower, 0:04:22.279 --> 0:04:25.000 the economy is lowing, and the Federal Reserve is cutting 0:04:25.040 --> 0:04:28.080 interest rates, we will see treasury yields lower than they 0:04:28.080 --> 0:04:30.880 are you know, at the start of that environment. 0:04:31.000 --> 0:04:31.160 Right. 0:04:31.200 --> 0:04:33.919 So if we do have, in fact, a recession in 0:04:33.920 --> 0:04:37.600 twenty twenty five and inflation coming down and the FED 0:04:37.640 --> 0:04:40.960 cutting one hundred and fifty basis points, then interest rates 0:04:40.960 --> 0:04:42.440 are going to be lower, full stop. 0:04:43.560 --> 0:04:45.640 I think the reason. 0:04:45.360 --> 0:04:48.039 Why the debt burden isn't as big of a deal 0:04:48.120 --> 0:04:50.359 in countries like the US or indeed Japan, if you 0:04:50.440 --> 0:04:52.760 just look at Japan and you know how much debt 0:04:52.800 --> 0:04:54.960 that they have, their debt burden is way higher than 0:04:55.000 --> 0:04:58.080 ours in terms of the size of the economy is 0:04:58.080 --> 0:05:00.640 two things. One is that there's always a back up buyer, right, 0:05:00.680 --> 0:05:03.720 so the central banks can buy the debt if they 0:05:03.760 --> 0:05:06.159 really need to, if there's any kind of liquidity problems. 0:05:07.160 --> 0:05:10.040 There's other issues with that, right where you wind up 0:05:10.040 --> 0:05:12.120 having too much money in the system and too many 0:05:12.160 --> 0:05:15.720 reserves and that might cause inflation. But the other thing 0:05:15.800 --> 0:05:17.840 is is that all of our debt is in dollars, right, 0:05:17.880 --> 0:05:21.200 and we have dollars, so credit risk in countries like 0:05:21.240 --> 0:05:25.479 the US and like Japan, we don't have to worry 0:05:25.480 --> 0:05:27.360 about it. We don't have a lot of external debt. 0:05:27.400 --> 0:05:30.240 It denominates in other currencies, So we're not going to 0:05:30.240 --> 0:05:33.560 have a currency crisis or a credit crunch like you know, 0:05:34.040 --> 0:05:36.719 like Brazil had, or Argentina had, or Russia had back 0:05:36.800 --> 0:05:37.560 twenty years ago. 0:05:38.320 --> 0:05:39.960 That's just not a possibility. 0:05:40.480 --> 0:05:42.800 The risk is that we have to inflate our way 0:05:42.800 --> 0:05:44.920 out of it, and that's I think one of the 0:05:44.960 --> 0:05:47.880 issues that a lot of people are concerned about. 0:05:48.200 --> 0:05:50.760 Well said in good distinction there for sure, All right, 0:05:50.760 --> 0:05:54.520 before we let you go, what's your call for Friday? 0:05:54.720 --> 0:05:57.680 Well, I don't forecast non farm payrolls, but non farm 0:05:57.720 --> 0:06:02.839 payrolls is is I don't, that's WOGS groups mandate, But 0:06:04.240 --> 0:06:06.520 payrolls is by far the most important number to the 0:06:06.560 --> 0:06:09.640 treasury market. And keep in mind, like with with the 0:06:09.640 --> 0:06:12.920 holiday on Thursday and the weekend on Friday, it's very 0:06:13.000 --> 0:06:15.440 likely that trading desks are not going to be fully stabbed. 0:06:15.760 --> 0:06:17.600 So if we do get any kind of surprise, you 0:06:17.640 --> 0:06:21.000 could get either, you know, a really outsized move just 0:06:21.040 --> 0:06:23.880 because there's lack of risk takers kind of in the 0:06:23.880 --> 0:06:25.000 office and trading on. 0:06:24.920 --> 0:06:27.320 It real quick. How disappointed should we be that the 0:06:27.480 --> 0:06:29.200 US men's team did not make it out of the 0:06:29.240 --> 0:06:29.680 round of Stace? 0:06:29.720 --> 0:06:31.080 That's why I thought he was booked by the way. 0:06:31.200 --> 0:06:34.240 I mean, I'm very disappointed quite frankly, But it was 0:06:34.520 --> 0:06:37.320 all about the game against Panama, not so much Orguay. 0:06:37.360 --> 0:06:39.120 We I mean, one nil. 0:06:38.960 --> 0:06:41.719 Against the Orguay is actually a pretty solid result against 0:06:41.720 --> 0:06:44.279 a good team. I mean, obviously you'd want it. We 0:06:44.320 --> 0:06:47.080 wanted to draw or win, and that would have obviously 0:06:47.160 --> 0:06:50.240 put us through if we had won. So it's the 0:06:50.279 --> 0:06:53.080 Panama game that we have to really, you know, assess 0:06:53.160 --> 0:06:55.279 what went wrong. I mean, we know a red card 0:06:55.520 --> 0:06:57.640 early on in the game was the reason. But we 0:06:57.680 --> 0:06:59.680 need to be disappointed here that we didn't make it 0:06:59.680 --> 0:07:01.480 out of group all right? 0:07:01.520 --> 0:07:04.039 Fair enough? Literally and I read this, I thought of you, Ira, 0:07:04.120 --> 0:07:07.400 which means something in the eventually, I'll think about sports. 0:07:07.400 --> 0:07:11.880 I don't know, Ira Jersey, Bloomberg Intelligence GPUs Interest Rate Strategist. 0:07:17.880 --> 0:07:21.760 You're listening to the Bloomberg Intelligence podcast. Catch US Live 0:07:21.840 --> 0:07:25.400 weekdays at ten am Eastern on Applecar Play and Android 0:07:25.400 --> 0:07:28.160 Auto with the Bloomberg Business Act. You can also listen 0:07:28.280 --> 0:07:31.400 live on Amazon Alexa from our flagship New York station. 0:07:31.760 --> 0:07:34.800 Just say Alexa playing Bloomberg eleven thirty. 0:07:35.120 --> 0:07:37.960 Mary, let's go to our c suite discussion today. Ben 0:07:38.000 --> 0:07:42.480 Glitklitch Joints and Ceiz, the CEO of Element Solutions. ESI 0:07:42.640 --> 0:07:44.600 is a ticker. So I put an ESI ticker into 0:07:44.600 --> 0:07:47.160 my Bloomberg terminal. I hit des, which is the most 0:07:47.200 --> 0:07:49.280 widely used function every day on the Bloomberg terminal for 0:07:49.360 --> 0:07:54.000 description says it's a specialty chemicals company. I don't think so, Ben. 0:07:54.000 --> 0:07:56.720 I think Bloomberg got it wrong here. You know, the 0:07:56.840 --> 0:07:59.720 especially a chemel's company. That's not really what you guys do, 0:08:00.120 --> 0:08:01.280 is it. What is it that you get to do 0:08:01.320 --> 0:08:01.800 a SI. 0:08:01.920 --> 0:08:04.120 I'd hate to be in Bloomberg studio and say Bloomberg's 0:08:04.120 --> 0:08:07.280 got it wrong. We think about ourselves as a chemical 0:08:07.320 --> 0:08:13.400 technology company. So our company provides chemical solutions, process solutions 0:08:13.440 --> 0:08:17.000 that really enable outcomes for our customers and our supply chains. 0:08:17.080 --> 0:08:20.720 We're not selling a material, We're selling a process that 0:08:21.480 --> 0:08:25.280 enables the performance of high end electronics. 0:08:26.280 --> 0:08:29.280 So what is okay? So we use your stuff in 0:08:29.360 --> 0:08:31.400 highland electronics or not even that simple. 0:08:32.000 --> 0:08:34.880 So when you think about a typical chemical company, you're 0:08:34.920 --> 0:08:38.640 selling a material that has a chemical formula like commonium, 0:08:38.760 --> 0:08:40.600 like commonium or a titanium dioxide. 0:08:40.679 --> 0:08:41.160 Sure right. 0:08:41.320 --> 0:08:44.600 What we sell is a process that, for instance, turns 0:08:44.600 --> 0:08:47.360 a piece of plastic into a printed circuit board. So 0:08:48.040 --> 0:08:53.600 electronics rely on our material processes for their performance. When 0:08:53.640 --> 0:08:59.160 you think about evolution in computing power, higher end semiconductors 0:08:59.480 --> 0:09:02.920 require more complex solutions. It's not just the materials, it's 0:09:02.920 --> 0:09:06.400 the way they're used, the applications, and then the formulas. 0:09:06.400 --> 0:09:08.400 And that's what we do. We work with our customers 0:09:08.440 --> 0:09:12.240 to develop those solutions, not just in the lab, but 0:09:12.320 --> 0:09:16.040 how they're used in our customers manufacturing processes to deliver 0:09:16.120 --> 0:09:19.800 the performance that allows for breakthroughs like AI. 0:09:20.720 --> 0:09:23.960 Well, my specialty chemicals analyst who I hired, he's in 0:09:24.000 --> 0:09:26.880 with some questions here today, But I guess the real 0:09:26.960 --> 0:09:30.560 question is you just reported some numbers, raised your outlook 0:09:30.600 --> 0:09:33.880 for twenty four what's driving your business today? 0:09:34.320 --> 0:09:37.520 So there were two reasons that we raised our outlook. 0:09:37.559 --> 0:09:41.679 The first is margins, So we sell value. Our products 0:09:41.720 --> 0:09:44.439 are not cost plus, they're based on the value proposition 0:09:44.480 --> 0:09:46.760 to our customers, and so when our cost go up, 0:09:46.760 --> 0:09:49.360 we're able to pass that through, and when cost go down, 0:09:49.440 --> 0:09:51.600 as they have over the past nine months or so, 0:09:51.880 --> 0:09:55.040 we get to keep that and so profitabilities improved. But 0:09:55.120 --> 0:09:59.959 the real more exciting driver is traction in advanced electronics, 0:10:00.320 --> 0:10:03.920 and so all of these AI applications are lifting the 0:10:03.960 --> 0:10:07.240 electronics ecosystem and we have a lot more value in 0:10:07.280 --> 0:10:11.280 those applications, and so we're seeing pretty significant demand acceleration here, 0:10:11.679 --> 0:10:14.199 coming off of a very deep trough in the electronics 0:10:14.240 --> 0:10:15.640 market that we saw in twenty twenty three. 0:10:15.679 --> 0:10:16.760 Who are your customers? 0:10:17.640 --> 0:10:21.560 So we sell to the breadth of the electronics hardware 0:10:21.600 --> 0:10:24.880 supply chain. So we are selling the materials used to 0:10:24.880 --> 0:10:26.640 make printed circuit boards, as I said before, So that's 0:10:26.679 --> 0:10:30.040 printed circuit board fabricators. We are selling the materials that 0:10:30.080 --> 0:10:33.080 are used to make semiconductors, so that's semiconductor fabricators, and 0:10:33.080 --> 0:10:34.480 then we're selling materials that are used. 0:10:34.360 --> 0:10:35.120 To put them together. 0:10:35.240 --> 0:10:39.120 Think about assemblers. Increasingly, though, we have a seat at 0:10:39.120 --> 0:10:42.920 the table with OEMs and OSATs. So OSATs are the 0:10:42.960 --> 0:10:46.920 packagers and the test shops. Companies like Nvidia and amcorn 0:10:46.960 --> 0:10:50.400 AMD who were not actually making any of the hardware. 0:10:50.440 --> 0:10:55.400 They're designing it. And as they have more innovation requirements 0:10:55.760 --> 0:11:00.559 to get more computing power in smaller spaces, they're asking 0:11:00.600 --> 0:11:04.680 more from material suppliers, so they're sharing their technology roadmaps, 0:11:04.880 --> 0:11:07.920 which we then go into the lab and innovate to solve. 0:11:08.280 --> 0:11:10.920 So it's customized solutions for these supply chains. They're not 0:11:10.960 --> 0:11:14.839 direct customers, they're specifiers and they're driving business our way. 0:11:15.080 --> 0:11:17.080 So we're the only company in our industry with is 0:11:17.160 --> 0:11:19.080 breadth of capabilities. 0:11:19.800 --> 0:11:22.920 So I'm looking at your company. ESI is the ticker, folks. 0:11:23.280 --> 0:11:25.800 It's got a market cap of six point five billion dollars. 0:11:25.800 --> 0:11:28.800 Stocks up sixteen percent year to date, up forty percent 0:11:28.840 --> 0:11:32.240 over the trailing twelve months. Pe multiple looking forward about 0:11:32.240 --> 0:11:35.720 the eighteen nineteen times I look at your business. Forty 0:11:35.760 --> 0:11:39.959 percent of your business is the industrial and specialty chemicals business. 0:11:41.280 --> 0:11:43.320 Thoughts of spin that out and just be a focus 0:11:43.400 --> 0:11:45.640 on pure play on the electronics side. 0:11:45.840 --> 0:11:47.960 So what we do in that business is very similar 0:11:47.960 --> 0:11:50.160 to what we do in electronics, just with different customers. 0:11:50.440 --> 0:11:54.280 So our customers in this case automotive companies come to 0:11:54.360 --> 0:11:57.920 us to help solve problems around plating on plastic. So 0:11:57.960 --> 0:12:00.480 the hood ornament on your car looks like metal. It's 0:12:00.480 --> 0:12:03.280 a piece of plastic with a thin coating of chrome 0:12:03.400 --> 0:12:06.160 or nickel. That's our process. Now they might want that 0:12:06.280 --> 0:12:08.400 nickel to be matt they might want that nickel to 0:12:08.400 --> 0:12:11.240 be shiny, they might want that nickel to remove certain materials. 0:12:11.480 --> 0:12:13.640 We work in our labs to solve those problems for 0:12:13.679 --> 0:12:16.000 our customers as well. So this is a great business 0:12:16.000 --> 0:12:20.280 with great customer intimacy, interesting growth drivers, and generates a 0:12:20.320 --> 0:12:23.680 lot of cash. They fit, they fit. 0:12:24.240 --> 0:12:27.600 This might be a really silly question, who are your competitors? 0:12:28.600 --> 0:12:32.640 So we compete with different companies in different. 0:12:32.360 --> 0:12:33.560 Pockets of our business. 0:12:33.800 --> 0:12:35.720 So I said before that we're the only company in 0:12:35.760 --> 0:12:38.360 our market with his breadth of solutions, and that's a 0:12:38.480 --> 0:12:41.960 very important point of differentiation. Some companies are able to 0:12:42.160 --> 0:12:45.680 provide similar solutions to make a printed circuit board, others 0:12:45.920 --> 0:12:49.880 can provide similar solutions to put chips onto boards, but 0:12:49.960 --> 0:12:52.440 no one can speak to the breadth of what we do. 0:12:53.760 --> 0:12:58.800 And increasingly, the way these materials interact is important to performance, 0:12:59.440 --> 0:13:02.120 and so that gives us a real leg up against 0:13:02.120 --> 0:13:04.240 our competitors in our circuit board business. We compete with 0:13:04.280 --> 0:13:07.599 a company called at Tech that's part of MKS Instruments. 0:13:07.600 --> 0:13:10.640 We compete with DuPont in certain areas. We compete with 0:13:11.040 --> 0:13:14.280 really strong technical companies in Japan, but no one competes 0:13:14.280 --> 0:13:16.720 with the breadth of what we do, and that is 0:13:16.760 --> 0:13:19.600 giving us a real advantage in today's market. 0:13:19.880 --> 0:13:23.040 A lot of folks feel like AI has been hyped, 0:13:23.800 --> 0:13:27.920 that the demand is so much new incremental demand for spending, 0:13:27.960 --> 0:13:30.200 it's just maybe taken from other buckets it or something. 0:13:30.400 --> 0:13:34.079 How do you think about the ultimate demand for AI 0:13:34.240 --> 0:13:36.079 going forward and what does it mean for your business? 0:13:36.160 --> 0:13:40.120 Yeah, so AI is a huge demand driver for the 0:13:40.320 --> 0:13:44.680 long term in the electronics market, and that may have 0:13:44.760 --> 0:13:48.599 fits and starts, but the history of electronics hardware is 0:13:48.679 --> 0:13:51.360 there's always a next thing. We went from desktops to 0:13:51.440 --> 0:13:54.440 laptops to mobile phones to smartphones, and when you do 0:13:54.520 --> 0:13:57.960 those transitions, you don't stop using the legacy tech. It's 0:13:58.000 --> 0:14:01.959 all additive. What AI is is is electronics hardware moving 0:14:01.960 --> 0:14:04.319 from being a support tool to being a decision maker. 0:14:04.760 --> 0:14:09.440 And the addressable market for that is gigantic because eventually 0:14:09.480 --> 0:14:13.360 we're going to replace things like forklift operators with boxes 0:14:13.920 --> 0:14:16.760 and smartphones, which were the last big thing. We're sort 0:14:16.800 --> 0:14:20.320 of capacitated by the human population. People don't need two phones. 0:14:20.760 --> 0:14:25.200 Industrial automation doesn't have that. That's ceiling and we're still 0:14:25.240 --> 0:14:26.680 going to have our smartphones and they're going to be 0:14:26.720 --> 0:14:29.200 AI enabled, but then we're going to have industrial automation. 0:14:29.280 --> 0:14:32.800 It's all additive and so AI over the long term. 0:14:33.040 --> 0:14:35.760 I don't believe it's being hyped in the short term perhaps, 0:14:36.000 --> 0:14:37.560 but when you look at the price point for some 0:14:37.600 --> 0:14:40.760 of these GPUs, clearly there's a huge amount of demand 0:14:40.760 --> 0:14:42.560 that's outs driven supply that This is. 0:14:42.560 --> 0:14:46.000 My favorite question, do you know yet how cyclical the 0:14:46.040 --> 0:14:47.440 AI business part is going to be? 0:14:48.120 --> 0:14:52.600 So in the semiconductor market, there are two drivers of cyclicality. 0:14:52.640 --> 0:14:55.960 There's price and volume. Right, our business is driven by volume. 0:14:55.960 --> 0:14:58.160 It doesn't matter the price point of the semiconductor, just 0:14:58.160 --> 0:14:59.960 the number of chips that are being made. And price 0:15:00.240 --> 0:15:02.880 is the more volatile of those two variables. Because the 0:15:02.960 --> 0:15:05.000 new fab opens, a bunch of new supply comes online, 0:15:05.040 --> 0:15:09.480 the prices comes down, so there is cyclicality. There's less 0:15:09.480 --> 0:15:14.160 cyclicality in our business. There's cyclicality in electronics broadly defined, 0:15:14.200 --> 0:15:18.360 but it's cyclicality around an upward trend, right, So there's 0:15:18.400 --> 0:15:20.280 going to be air pockets and demand. We've seen it 0:15:20.280 --> 0:15:22.400 in the mobile phone market for example. Last year was 0:15:22.440 --> 0:15:25.880 a very difficult year, but it's coming back and the 0:15:26.040 --> 0:15:29.960 peak is in front of us, not behind us. For electronics, 0:15:30.280 --> 0:15:32.960 and so certainly there'll be cyclicality. I would say more 0:15:32.960 --> 0:15:35.800 in price than volume. AI and its applications are going 0:15:35.840 --> 0:15:38.960 to be a big volume driver for many years from here. Again, 0:15:39.040 --> 0:15:42.960 look at the price points of these chips. But it's 0:15:43.040 --> 0:15:46.520 cyclicality around a very positive trend. God about forty five 0:15:46.520 --> 0:15:48.520 seconds left. M and A to what extent is that 0:15:48.600 --> 0:15:51.720 a part of your growth strategy. We're very excited to 0:15:51.800 --> 0:15:54.600 deploy the strong cash flows this business generates. We have 0:15:54.880 --> 0:15:58.240 modest capital requirements, so we convert EBITDA our earnings into 0:15:58.240 --> 0:16:00.920 cash very efficiently. We're very idded to toplay those cash 0:16:00.920 --> 0:16:05.160 flows behind the business to add capabilities to support our 0:16:05.200 --> 0:16:10.400 customers and drive growth. There is an opportunity for incremental 0:16:10.520 --> 0:16:16.240 M and A within our businesses very attractive returns and 0:16:17.240 --> 0:16:20.880 to support what will be pretty compelling organic growth in 0:16:20.920 --> 0:16:21.600 the near term. 0:16:21.760 --> 0:16:24.160 All right, Ben, we appreciate it. Thank you very much. Ben, 0:16:24.360 --> 0:16:28.760 Ben Clickich, CEO of Element Solutions, working to be an 0:16:28.800 --> 0:16:34.680 ai so electronics provider solution company, nailed it. Yeah, okay, 0:16:34.760 --> 0:16:36.400 I'm going to work on that. I'm going to definitely 0:16:36.400 --> 0:16:38.200 work on that one. 0:16:38.560 --> 0:16:42.440 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:16:42.520 --> 0:16:45.240 weekdays at ten am Eastern on Apple card Playing and 0:16:45.360 --> 0:16:48.240 Broun Auto with the Bloomberg Business app. Listen on demand 0:16:48.280 --> 0:16:53.120 wherever you get your podcasts, or watch us live on YouTube. 0:16:53.560 --> 0:16:56.240 Okay, let's get to the big news of the Supreme 0:16:56.280 --> 0:16:57.840 Court over the last few days. It wasn't just the 0:16:57.880 --> 0:17:01.200 Trump Community trial. It was also the Supreme Court changing 0:17:01.240 --> 0:17:05.000 the Chevron Doctor and the Chevron deference, which basically means 0:17:05.000 --> 0:17:10.560 that state that federal agencies don't necessarily interpret laws that 0:17:10.600 --> 0:17:12.480 goes to the courts now and that could have a 0:17:12.480 --> 0:17:16.480 big ramification for lots of different agencies, and in particular 0:17:16.520 --> 0:17:19.160 when it comes to ESG in climate. So Andrew John Stevenson, 0:17:19.240 --> 0:17:22.600 BI Bloomberg Intelligence Senior ESG Climate analyst joins us now 0:17:22.600 --> 0:17:26.920 from DC walk us through how maybe the Chevron deference 0:17:27.000 --> 0:17:30.359 has helped the EPA or has led the EPA to 0:17:30.400 --> 0:17:32.600 make certain decisions that now may be in doubt. 0:17:33.480 --> 0:17:33.800 Sure. 0:17:33.840 --> 0:17:35.640 So we had the If you think about the Clean 0:17:35.640 --> 0:17:38.320 Air Act, that's the biggest thing the ep has ever done. 0:17:38.720 --> 0:17:42.560 It started in nineteen seventy with one document that said, basically, 0:17:42.600 --> 0:17:44.600 go to it. We need to reduce the amount of 0:17:44.640 --> 0:17:47.359 air pollution in the air. We need a lot of 0:17:47.359 --> 0:17:49.760 different levers to pull to make that happen. We're kind 0:17:49.760 --> 0:17:52.879 of deferring to experts to do that. Go at it. 0:17:53.400 --> 0:17:55.719 And they did it for about twenty years. And then 0:17:55.720 --> 0:17:58.600 they had another revision the Clean Air Act too, and 0:17:58.640 --> 0:18:01.280 that's the one that we're enjoying today with when they 0:18:01.800 --> 0:18:04.159 basically said, you did a decent job, let's keep going, 0:18:04.440 --> 0:18:07.040 let's keep driving down the air pollution. And you know, 0:18:07.080 --> 0:18:09.200 here we are today with the cleanest air we've seen 0:18:09.240 --> 0:18:12.800 in you know, since the early nineteen hundreds basically, So. 0:18:12.720 --> 0:18:14.159 It's been very, very successful. 0:18:14.359 --> 0:18:16.680 Yeah I'm not that old, but I remember first going 0:18:16.720 --> 0:18:18.920 the Los Angeles earlier in my career and you could 0:18:18.960 --> 0:18:22.400 see the smog. Literally it was brown, it was orange, 0:18:22.720 --> 0:18:25.440 kind of funky. Now, you rarely have ever have any 0:18:25.480 --> 0:18:27.399 problems out there, So I kind of have been a 0:18:27.400 --> 0:18:30.760 fan of the EPA all right. Given to Chevron ruling 0:18:30.760 --> 0:18:34.679 what does it mean for climate in your part of 0:18:34.720 --> 0:18:37.000 the world. What's the mean for the energy industry? 0:18:37.920 --> 0:18:38.160 Sure? 0:18:38.200 --> 0:18:41.000 So, I mean it's troubling on a couple fronts. The 0:18:41.040 --> 0:18:44.119 first is with respect to the oil and gas industry. 0:18:44.480 --> 0:18:47.359 They have the big oil companies have done it basically 0:18:47.400 --> 0:18:50.240 a fantastic job of driving down a big chunk of 0:18:50.320 --> 0:18:54.000 their pollution from methane. So methane is really the thing 0:18:54.080 --> 0:18:56.159 that you really want to address when it comes to 0:18:56.200 --> 0:18:58.000 the oil and gas industry, which is just sort of 0:18:58.080 --> 0:19:02.000 leaking natural gas into the atmosphere. And the bigger companies 0:19:02.040 --> 0:19:04.560 have done a fantastic job, but the smaller companies, basically 0:19:04.560 --> 0:19:07.119 are the private companies haven't moved on it. And so 0:19:07.200 --> 0:19:09.920 the leadership we've seen from Exon Mobile and others has 0:19:10.000 --> 0:19:13.520 been really, you know, got transformative in terms of what's 0:19:13.520 --> 0:19:17.240 happening for the bigger companies. But unless the EPA does 0:19:17.359 --> 0:19:20.840 work to kind of push along the rest, and we're 0:19:20.840 --> 0:19:23.359 talking about still half of the production comes from small 0:19:23.440 --> 0:19:26.800 companies that are private, we're not going to get anywhere 0:19:26.800 --> 0:19:28.840 near where we need to go on from an emission 0:19:28.880 --> 0:19:30.960 standpoint from the oil and gas industry. So that's sort 0:19:31.000 --> 0:19:33.639 of one the second is really with respect to the 0:19:34.640 --> 0:19:37.600 power sector. So the power sector, we need more power. 0:19:37.800 --> 0:19:41.720 We've basically gone from having a coma power growth over 0:19:41.720 --> 0:19:45.280 the last decade and now because of AI and EVS, 0:19:45.359 --> 0:19:47.280 we have power demand somewhere around two and a half 0:19:47.320 --> 0:19:50.480 percent a year and that has to be filled with something. 0:19:51.240 --> 0:19:52.960 And it looks like gas is going to be a 0:19:52.960 --> 0:19:55.800 candidate in the next several years because there's just so 0:19:55.880 --> 0:19:59.040 much demand that needs to come online. And there was 0:19:59.080 --> 0:20:01.760 a ruling at least from the APA that the gas 0:20:02.080 --> 0:20:03.680 companies that they were going to build a new power 0:20:03.680 --> 0:20:05.560 plant would have to capture that gas, and that doesn't 0:20:05.560 --> 0:20:08.200 look like it's going to happen. So because of the ruling, 0:20:08.760 --> 0:20:12.800 so we have growth, which is obviously challenging from an 0:20:12.880 --> 0:20:16.840 environmental perspective, but it's really going to affect our overall 0:20:16.840 --> 0:20:19.639 emission standpoint as a country going forward. 0:20:20.119 --> 0:20:22.240 I mean, the power coma that was actually a great 0:20:22.280 --> 0:20:25.040