1 00:00:02,400 --> 00:00:09,119 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:09,119 --> 00:00:13,320 Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am 3 00:00:13,360 --> 00:00:15,800 Speaker 1: Eastern on Apple car Playing and Broud Auto with the 4 00:00:15,800 --> 00:00:19,720 Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts, 5 00:00:19,920 --> 00:00:22,280 Speaker 1: or watch us live on YouTube. 6 00:00:23,200 --> 00:00:25,720 Speaker 2: Let's switch gears here, little M and A. Here in 7 00:00:25,760 --> 00:00:28,280 Speaker 2: the satellite television space. I never thought i'd see the 8 00:00:28,400 --> 00:00:31,880 Speaker 2: day Direct TV and Dish they're going to merge to 9 00:00:31,920 --> 00:00:36,040 Speaker 2: create the largest US PayTV provider. Let's get the latest 10 00:00:36,040 --> 00:00:38,680 Speaker 2: on that. Keitha Raganathan joins as she's a US media 11 00:00:38,680 --> 00:00:41,440 Speaker 2: anas for Bloomberg Intelligence. Keitha, this is big news in 12 00:00:41,479 --> 00:00:44,240 Speaker 2: a satellite business. You've only got two satellite players out there, 13 00:00:44,280 --> 00:00:46,080 Speaker 2: and now looks like they're going to be merging. 14 00:00:46,120 --> 00:00:46,279 Speaker 3: Here. 15 00:00:46,320 --> 00:00:47,880 Speaker 2: What's driving this deal? 16 00:00:49,360 --> 00:00:53,000 Speaker 4: What's really driving this deal is desperate times kind of 17 00:00:53,040 --> 00:00:57,720 Speaker 4: call for desperate measures. Paul So, Satellite TV has steadily 18 00:00:58,280 --> 00:01:01,400 Speaker 4: seen an erosion of its subscripase. I mean, at one 19 00:01:01,440 --> 00:01:04,679 Speaker 4: point it was the only other game in town, along 20 00:01:04,720 --> 00:01:07,399 Speaker 4: with cable TV, for people to get access to different 21 00:01:07,400 --> 00:01:11,240 Speaker 4: PATV packages. Today the world is a completely different place. 22 00:01:11,280 --> 00:01:13,520 Speaker 4: I mean, you have cable you have satellite, which is 23 00:01:13,560 --> 00:01:16,880 Speaker 4: of course the traditional facilities based operators, but then you 24 00:01:17,000 --> 00:01:22,280 Speaker 4: also have a whole slew of new internet based options, 25 00:01:22,319 --> 00:01:24,800 Speaker 4: whether you know it's a YouTube TV which gives you 26 00:01:24,840 --> 00:01:27,560 Speaker 4: all of the linear TV options, or whether it's like 27 00:01:27,880 --> 00:01:31,640 Speaker 4: completely different what are known as sphalts services subscription video 28 00:01:31,640 --> 00:01:34,280 Speaker 4: on demand services like an Amazon Prime or Netflix, and 29 00:01:34,319 --> 00:01:36,600 Speaker 4: so the world today is completely different. And because of this, 30 00:01:36,920 --> 00:01:40,160 Speaker 4: satellite TV has seen a huge, huge erosion of its 31 00:01:40,160 --> 00:01:43,759 Speaker 4: subscriber base. Dish and direct TV once upon a time, 32 00:01:44,040 --> 00:01:46,759 Speaker 4: you know, they were some of the largest PATV operators. 33 00:01:46,800 --> 00:01:50,560 Speaker 4: They've lost about sixty three percent of their satellite subscriber 34 00:01:50,600 --> 00:01:52,360 Speaker 4: base just over the past seven years. 35 00:01:52,800 --> 00:01:57,280 Speaker 5: That's unbelievable. Did two wrongs then make a right slash 36 00:01:57,400 --> 00:01:59,760 Speaker 5: for regulators like it? 37 00:02:00,080 --> 00:02:04,160 Speaker 4: So regulators of course squashed this deal back, you know, 38 00:02:04,200 --> 00:02:06,480 Speaker 4: about twenty years ago, but then again it was a 39 00:02:06,480 --> 00:02:10,760 Speaker 4: completely different landscape. They have to kind of understand that 40 00:02:10,880 --> 00:02:13,600 Speaker 4: things have completely changed today. One of the main appeal 41 00:02:13,960 --> 00:02:16,880 Speaker 4: you know, or you know, appealing points of satellite TV, 42 00:02:16,880 --> 00:02:18,840 Speaker 4: why people even taken in the first place, is because 43 00:02:19,840 --> 00:02:22,799 Speaker 4: in a lot of areas in rural America, this is 44 00:02:22,840 --> 00:02:25,320 Speaker 4: the only way that you can get access to PATV. 45 00:02:25,360 --> 00:02:28,040 Speaker 4: But things have been changing because you know, we've had 46 00:02:28,320 --> 00:02:32,120 Speaker 4: this whole initiative to narrow the digital divide. So more 47 00:02:32,160 --> 00:02:35,400 Speaker 4: and more houses in rural America are getting wired up, 48 00:02:35,720 --> 00:02:38,160 Speaker 4: and with that they now have the option to switch 49 00:02:38,280 --> 00:02:42,160 Speaker 4: to internet based TV, which is you know, exactly what 50 00:02:42,200 --> 00:02:44,120 Speaker 4: Distion Direct TV are saying, this is the reason why 51 00:02:44,120 --> 00:02:46,680 Speaker 4: they've lost subscribers. So this is the reason why there 52 00:02:46,720 --> 00:02:50,119 Speaker 4: is more competition, and therefore regulators should allow the deal 53 00:02:50,160 --> 00:02:50,760 Speaker 4: to pass. 54 00:02:51,040 --> 00:02:53,800 Speaker 2: And I guess a parallel announcement here today is that 55 00:02:53,919 --> 00:02:56,400 Speaker 2: TPG Group, the private equity company, is going to acquire 56 00:02:56,440 --> 00:02:59,320 Speaker 2: AT and t's seventy percent stake in direct TV that 57 00:02:59,480 --> 00:03:03,120 Speaker 2: TVG doesn't already own. So in effect, a private equity 58 00:03:03,120 --> 00:03:06,120 Speaker 2: owner is now going to own the entire US satellite 59 00:03:06,120 --> 00:03:08,359 Speaker 2: television business. What's going on there? 60 00:03:08,440 --> 00:03:08,560 Speaker 1: Why? 61 00:03:08,560 --> 00:03:09,400 Speaker 2: Why is this happening? 62 00:03:10,040 --> 00:03:13,160 Speaker 4: Yeah, exactly, Paul. So it's you know, Charlie ergan walking 63 00:03:13,200 --> 00:03:16,240 Speaker 4: away from the PATV business, and in many ways again 64 00:03:16,440 --> 00:03:18,840 Speaker 4: T you know, AT and T also walking away from 65 00:03:18,840 --> 00:03:21,040 Speaker 4: the PATV business. And as you well know, AT and 66 00:03:21,080 --> 00:03:23,280 Speaker 4: T had invested heavily in the media businesses. They had 67 00:03:23,280 --> 00:03:26,200 Speaker 4: bought the whole Warner Brothers operation, which they kind of 68 00:03:26,240 --> 00:03:28,800 Speaker 4: got rid of selling that to Discovery. And then of 69 00:03:28,800 --> 00:03:31,600 Speaker 4: course they had also bought the Direct TV operations, which 70 00:03:31,639 --> 00:03:34,040 Speaker 4: they sold a thirty percent stake to TPG. They still 71 00:03:34,080 --> 00:03:36,520 Speaker 4: retained a seventy percent stake, and of course today with 72 00:03:36,600 --> 00:03:40,480 Speaker 4: that deal with TPG, they are completely exiting that business. 73 00:03:40,760 --> 00:03:42,240 Speaker 4: And for both of them, if you kind of look 74 00:03:42,280 --> 00:03:44,640 Speaker 4: at what you know is the final endgame here for 75 00:03:44,680 --> 00:03:48,600 Speaker 4: both AT and T and you know EchoStar or the 76 00:03:48,840 --> 00:03:52,280 Speaker 4: the other part of the dish business, it's they really 77 00:03:52,280 --> 00:03:55,160 Speaker 4: want to kind of focus on their core business, which 78 00:03:55,200 --> 00:03:57,000 Speaker 4: is the wireless business for AT and T. Of course 79 00:03:57,040 --> 00:04:00,400 Speaker 4: it's the wireless business for EchoStar. They have you know, built, 80 00:04:00,440 --> 00:04:03,000 Speaker 4: they've mastered a huge amount of spectrum, and they ultimately 81 00:04:03,040 --> 00:04:07,280 Speaker 4: want to become the fourth largest wireless player in the 82 00:04:07,400 --> 00:04:09,400 Speaker 4: United States and this deal really helps them do that 83 00:04:09,440 --> 00:04:12,640 Speaker 4: and kind of focus their resources, investments, time and energy 84 00:04:12,680 --> 00:04:14,040 Speaker 4: on just that part of the operation. 85 00:04:14,240 --> 00:04:17,359 Speaker 5: This might be a dumb question, but do they grow 86 00:04:17,440 --> 00:04:19,640 Speaker 5: their customer base at this point? Is there a customer 87 00:04:19,640 --> 00:04:21,720 Speaker 5: base to grow, or as you said, do they just 88 00:04:21,760 --> 00:04:24,719 Speaker 5: become better at execution and they kind of cut with 89 00:04:24,760 --> 00:04:27,400 Speaker 5: synergies and that's how they become successful. 90 00:04:28,600 --> 00:04:32,000 Speaker 4: Yes, so, yes, they are looking at about the outline 91 00:04:32,000 --> 00:04:34,360 Speaker 4: about a billion dollars in synergies. A lot of those 92 00:04:34,400 --> 00:04:36,640 Speaker 4: will of course be programming costs. They still will be 93 00:04:36,720 --> 00:04:39,800 Speaker 4: with the combination. They still will be the largest PATV operator. 94 00:04:40,080 --> 00:04:43,320 Speaker 4: They will have about nineteen to twenty million subscribers, but 95 00:04:43,360 --> 00:04:46,200 Speaker 4: there's not a whole lot to really grow ALEX. So 96 00:04:46,200 --> 00:04:49,520 Speaker 4: it's really more kind of stemming the declines, if you will, 97 00:04:50,440 --> 00:04:54,440 Speaker 4: just reducing the bleeding and becoming much much more efficient 98 00:04:54,520 --> 00:05:00,279 Speaker 4: in kind of delivering customized, tailor made packages for you know, 99 00:05:00,320 --> 00:05:01,520 Speaker 4: the PATV market. 100 00:05:01,760 --> 00:05:04,159 Speaker 2: He githin' about thirty seconds left. What's your forecast for 101 00:05:04,320 --> 00:05:07,760 Speaker 2: just the overall pay TV business? Are paying subscribers going to. 102 00:05:07,680 --> 00:05:08,200 Speaker 3: Go to zero? 103 00:05:08,279 --> 00:05:10,200 Speaker 2: Is where we're going to be all streaming stuff soon? 104 00:05:11,440 --> 00:05:14,520 Speaker 4: I hope not, but we're definitely seeing that. You know, 105 00:05:14,600 --> 00:05:17,680 Speaker 4: YouTube tv is becoming a major major player in the 106 00:05:17,720 --> 00:05:21,240 Speaker 4: market again. They are delivering linear TV channels. Uh they 107 00:05:21,320 --> 00:05:23,200 Speaker 4: right now are you know, about the third or the 108 00:05:23,200 --> 00:05:25,880 Speaker 4: fourth largest operator eight million subscribers, So they actually have 109 00:05:25,920 --> 00:05:28,640 Speaker 4: more subscribers than Dish has on a satellite business. But 110 00:05:28,720 --> 00:05:30,599 Speaker 4: we eventually in the next two to three years see 111 00:05:30,600 --> 00:05:33,719 Speaker 4: them becoming the largest player, and then that of course 112 00:05:33,800 --> 00:05:36,640 Speaker 4: changes the whole dynamics of the whole PATV market because 113 00:05:36,640 --> 00:05:39,960 Speaker 4: then you have a streaming based operator that's providing, that's 114 00:05:40,000 --> 00:05:42,680 Speaker 4: the largest operator of you know, the patv's market. 115 00:05:42,800 --> 00:05:46,719 Speaker 2: And again you know the DirecTV and Dish getting together. 116 00:05:47,160 --> 00:05:50,360 Speaker 2: DirecTV is paying one dollar for the equity and assuming 117 00:05:50,400 --> 00:05:53,200 Speaker 2: all the debts. So talk about a inglorious and to 118 00:05:53,240 --> 00:05:56,880 Speaker 2: the PATV business from the great Charlie Ergan, who you know, 119 00:05:56,920 --> 00:06:00,400 Speaker 2: built that satellite business from scratch about thirty years ago. 120 00:06:00,480 --> 00:06:00,680 Speaker 3: KEITHA. 121 00:06:00,760 --> 00:06:03,440 Speaker 2: Roganatha, thanks so much for joining us US media analysts 122 00:06:03,440 --> 00:06:06,720 Speaker 2: for Bloomberg Intelligence, joining us from Princeton and again kind 123 00:06:06,720 --> 00:06:08,960 Speaker 2: of an end of an ear for Charlie Ergen, again 124 00:06:09,160 --> 00:06:13,640 Speaker 2: one of the leaders in satellite television, in satellite technology 125 00:06:13,640 --> 00:06:17,000 Speaker 2: in general, and commercial telecommunications putting up the satellite thirty 126 00:06:17,040 --> 00:06:20,159 Speaker 2: forty fifty years ago. So just walking away from that 127 00:06:20,240 --> 00:06:24,159 Speaker 2: satellite television business, focusing on the wireless spectrum that he 128 00:06:24,279 --> 00:06:25,520 Speaker 2: still retains. 129 00:06:27,080 --> 00:06:30,960 Speaker 1: You're listening to the Bloomberg Intelligence podcast catch us live 130 00:06:31,040 --> 00:06:34,560 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 131 00:06:34,600 --> 00:06:37,760 Speaker 1: Auto with the Bloomberg Business You can also listen live 132 00:06:37,839 --> 00:06:41,039 Speaker 1: on Amazon Alexa from our flagship New York station Just 133 00:06:41,080 --> 00:06:43,719 Speaker 1: say Alexa playing Bloomberg eleven thirty. 134 00:06:45,000 --> 00:06:48,920 Speaker 5: Let's get to this story. Danny Berger, Bloomberg Television anchored 135 00:06:48,960 --> 00:06:49,800 Speaker 5: It joins us. Now. 136 00:06:49,920 --> 00:06:51,080 Speaker 6: She is at the. 137 00:06:51,240 --> 00:06:54,720 Speaker 5: Port Newark Elizabeth in Newark, New Jersey. So she's on 138 00:06:54,760 --> 00:06:58,239 Speaker 5: the ground. She's been talking to the people. Walk us through, Danny, 139 00:06:58,279 --> 00:07:00,839 Speaker 5: what's the scene there? Set the scene for us. What's 140 00:07:00,880 --> 00:07:01,120 Speaker 5: it like? 141 00:07:03,200 --> 00:07:07,360 Speaker 7: So we are at this point, just some sixteen hours 142 00:07:07,400 --> 00:07:10,600 Speaker 7: away from a potential strike. The next update we're waiting 143 00:07:10,600 --> 00:07:13,080 Speaker 7: for is the International Longshoreman. They're set to release an 144 00:07:13,120 --> 00:07:16,280 Speaker 7: update at eleven am New York time on the current 145 00:07:16,320 --> 00:07:19,320 Speaker 7: status of this strike, but by all accounts, it will 146 00:07:19,360 --> 00:07:22,520 Speaker 7: be going forward at twelve oh one am on Tuesday, 147 00:07:22,520 --> 00:07:26,000 Speaker 7: that's when the current contract expires. There are no scheduled 148 00:07:26,040 --> 00:07:28,480 Speaker 7: talks until then, so it seems like we're unlikely to 149 00:07:28,480 --> 00:07:31,240 Speaker 7: get an agreement. The two major sticking points. One is 150 00:07:31,280 --> 00:07:34,400 Speaker 7: about wages and benefits. They want a some eighty percent 151 00:07:34,520 --> 00:07:37,160 Speaker 7: increase in pay over the next six years. They say 152 00:07:37,160 --> 00:07:40,520 Speaker 7: what's currently on offer is quote stingy. They also want 153 00:07:40,600 --> 00:07:43,680 Speaker 7: language in the new contract that prevents further automation of 154 00:07:43,720 --> 00:07:46,720 Speaker 7: these ports. Automation, I should say, there's really prevalent in 155 00:07:46,760 --> 00:07:50,280 Speaker 7: other places like Amsterdam and Asia. It's pretty standard, but 156 00:07:50,320 --> 00:07:52,200 Speaker 7: they don't want it here because they don't want the 157 00:07:52,320 --> 00:07:54,880 Speaker 7: jobs removed. They have a pretty strong hand to play 158 00:07:54,880 --> 00:07:57,080 Speaker 7: at the moment. They have an administration in the Biden 159 00:07:57,080 --> 00:08:00,400 Speaker 7: administration that's very friendly to labor, and we also have 160 00:08:00,400 --> 00:08:02,880 Speaker 7: a supply demand issue. There's not enough people who want 161 00:08:02,920 --> 00:08:05,320 Speaker 7: these jobs, which of course is part of the reason 162 00:08:05,440 --> 00:08:09,240 Speaker 7: that the workers here, the employers want to automate these ports. 163 00:08:09,840 --> 00:08:12,800 Speaker 2: So what's the expectation here. It doesn't seem to be 164 00:08:12,920 --> 00:08:16,280 Speaker 2: any emergency feeling that they need to get something done here. 165 00:08:16,360 --> 00:08:17,960 Speaker 2: Is there a sense that this could be a long 166 00:08:18,440 --> 00:08:19,480 Speaker 2: potential strike here. 167 00:08:20,320 --> 00:08:22,560 Speaker 7: Most of the people that I've been speaking to think 168 00:08:22,560 --> 00:08:25,280 Speaker 7: that this will just last a couple of days, really, 169 00:08:25,360 --> 00:08:27,520 Speaker 7: just because there is so much pressure. There is so 170 00:08:27,600 --> 00:08:30,920 Speaker 7: much money at stake. Not to mention, as I said, 171 00:08:30,960 --> 00:08:33,920 Speaker 7: this is a friendly administration to them. If they stretch 172 00:08:33,960 --> 00:08:36,040 Speaker 7: this out and it gets closer to the November election, 173 00:08:36,240 --> 00:08:39,240 Speaker 7: what happens if they realize that the next administration coming 174 00:08:39,280 --> 00:08:41,440 Speaker 7: in won't be as friendly to them? 175 00:08:41,679 --> 00:08:41,920 Speaker 3: Now? 176 00:08:42,120 --> 00:08:44,320 Speaker 7: A lot of companies, a lot of retailers have been 177 00:08:44,360 --> 00:08:47,079 Speaker 7: trying to stock up in anticipation of this. So if 178 00:08:47,080 --> 00:08:49,000 Speaker 7: it just lasts a couple of days, the thinking is 179 00:08:49,000 --> 00:08:51,679 Speaker 7: is that most people could go around it. But if 180 00:08:51,720 --> 00:08:53,679 Speaker 7: it does last longer than a couple of days, it 181 00:08:53,720 --> 00:08:56,120 Speaker 7: takes time. Ships will kind of build up on the 182 00:08:56,160 --> 00:08:58,880 Speaker 7: ports around me, like you see, and they need to 183 00:08:58,920 --> 00:09:01,240 Speaker 7: offload it. So something last let's say a week, it 184 00:09:01,240 --> 00:09:04,320 Speaker 7: could end up taking months to resolve itself. There's not 185 00:09:04,360 --> 00:09:06,480 Speaker 7: also not a lot of other options for ships to 186 00:09:06,520 --> 00:09:10,959 Speaker 7: go to the West coast ports Canada. They can't handle 187 00:09:11,000 --> 00:09:13,199 Speaker 7: the same amount of volume and really absorb everything that's 188 00:09:13,240 --> 00:09:15,600 Speaker 7: supposed to be happening here on these East coast ports. 189 00:09:15,760 --> 00:09:18,080 Speaker 5: All right, Danny, thanks a lot, really appreciated Danny Berger 190 00:09:18,320 --> 00:09:20,640 Speaker 5: joining us there on the port strike. She joins us 191 00:09:20,679 --> 00:09:23,600 Speaker 5: from Port Newark, Elizabeth over in Newark, New Jersey. Let's 192 00:09:23,600 --> 00:09:26,240 Speaker 5: get more analysis with Lee las Gal Bloomberg Intelligence senior 193 00:09:26,280 --> 00:09:29,280 Speaker 5: transport logistics and shipping analysts joining us on this, Hayley. 194 00:09:30,160 --> 00:09:33,800 Speaker 5: What can be rerouted, what can't? And how does this 195 00:09:33,840 --> 00:09:34,319 Speaker 5: all work? 196 00:09:36,240 --> 00:09:41,199 Speaker 8: These are great questions. So what can be rerouted? 197 00:09:41,280 --> 00:09:44,880 Speaker 6: Are things that shippers needed to have the foresight to 198 00:09:45,040 --> 00:09:49,080 Speaker 6: reroute a couple months ago. So if a ship is 199 00:09:49,600 --> 00:09:54,040 Speaker 6: going to expected to hit the East coast sports, it's 200 00:09:54,080 --> 00:09:56,679 Speaker 6: not so easy for it to find another port of 201 00:09:56,800 --> 00:10:00,920 Speaker 6: call to find because they're schedules that these ships have 202 00:10:01,000 --> 00:10:01,600 Speaker 6: to adhere to. 203 00:10:02,080 --> 00:10:05,560 Speaker 8: So the more sophisticated shippers. 204 00:10:06,000 --> 00:10:11,760 Speaker 6: Probably have been plans in place that are currently you know, 205 00:10:11,840 --> 00:10:16,440 Speaker 6: bringing freight to the West coast or maybe East coast. 206 00:10:15,720 --> 00:10:18,319 Speaker 8: In Canada, and we're seeing that. 207 00:10:18,400 --> 00:10:22,480 Speaker 6: We're seeing that in the really huge volumes in imports 208 00:10:22,920 --> 00:10:26,840 Speaker 6: at La Long Beach last month. So we're seeing that 209 00:10:26,880 --> 00:10:31,520 Speaker 6: it's happening now obviously as if there is a strike 210 00:10:31,559 --> 00:10:33,360 Speaker 6: and it appears that there's going to be a strike 211 00:10:33,640 --> 00:10:37,160 Speaker 6: and there's high value, time sensitive freight that needs to 212 00:10:37,200 --> 00:10:40,199 Speaker 6: get somewhere on the East coast, there's always air freight. 213 00:10:40,240 --> 00:10:43,360 Speaker 6: We haven't seen that much movement into air freight right now. 214 00:10:43,400 --> 00:10:45,920 Speaker 6: It's really just being diverted to. 215 00:10:46,000 --> 00:10:49,360 Speaker 9: Other ports where they can come in and once they 216 00:10:49,400 --> 00:10:51,840 Speaker 9: come from the West Coast, they either can get shrucked 217 00:10:51,880 --> 00:10:54,640 Speaker 9: across the country or they can put on trains through 218 00:10:54,679 --> 00:10:57,679 Speaker 9: intermodal And this is actually a net positive for. 219 00:10:57,640 --> 00:10:59,920 Speaker 6: A lot of companies that I cover. So I cover 220 00:11:00,160 --> 00:11:03,800 Speaker 6: companies like Union Pacific and JB. Hunt and Werner and 221 00:11:03,920 --> 00:11:07,000 Speaker 6: night Swift. These are all companies that will probably benefit 222 00:11:07,080 --> 00:11:09,600 Speaker 6: from this in the short term because it's really should 223 00:11:09,679 --> 00:11:12,680 Speaker 6: provide a boost to spot rates in the market, and 224 00:11:12,720 --> 00:11:15,120 Speaker 6: a lot of this business is going to go in 225 00:11:15,200 --> 00:11:16,120 Speaker 6: the spot market. 226 00:11:16,720 --> 00:11:19,080 Speaker 2: Well, how about some of the shipping companies and logistics 227 00:11:19,080 --> 00:11:21,720 Speaker 2: companies that you cover. Are they what are they saying 228 00:11:21,720 --> 00:11:24,760 Speaker 2: from their perspective about how much pain they're willing to take, 229 00:11:24,800 --> 00:11:27,760 Speaker 2: how much flexibility they're willing to have in these negotiations. 230 00:11:28,559 --> 00:11:31,760 Speaker 6: Well, well, mask you know, mentioning that they're going to, 231 00:11:32,080 --> 00:11:35,640 Speaker 6: you know, put out a surcharge for the additional costs 232 00:11:35,640 --> 00:11:38,040 Speaker 6: that they're going to face. So they're looking to pass 233 00:11:38,080 --> 00:11:40,839 Speaker 6: on any additional costs that they might have, whether if 234 00:11:40,840 --> 00:11:43,959 Speaker 6: they're ships waiting by the ports and to unload or 235 00:11:43,960 --> 00:11:47,640 Speaker 6: whatever those additional costs might be. So they're hedging themselves. 236 00:11:48,280 --> 00:11:50,520 Speaker 6: But it really seems like the two sides are really 237 00:11:50,559 --> 00:11:54,120 Speaker 6: far apart from you know, what I've been able to glean. 238 00:11:54,160 --> 00:11:57,440 Speaker 6: It seems like, you know, the rays that the port 239 00:11:57,480 --> 00:12:01,600 Speaker 6: workers want the poor it's about fifty percent below what 240 00:12:01,640 --> 00:12:04,160 Speaker 6: they're looking for. So there's a lot of middle ground 241 00:12:04,200 --> 00:12:07,240 Speaker 6: that has to be made, and we do expect a 242 00:12:07,320 --> 00:12:10,880 Speaker 6: strike to act to happen, But like a lot of 243 00:12:10,920 --> 00:12:13,959 Speaker 6: the people that have been speaking before me, a strike 244 00:12:14,080 --> 00:12:16,560 Speaker 6: probably won't last that long, and if it lasts more 245 00:12:16,600 --> 00:12:19,040 Speaker 6: than a week or two, call it. I think the 246 00:12:19,280 --> 00:12:22,800 Speaker 6: federal government will definitely step in with the taff had Lay. 247 00:12:22,679 --> 00:12:27,080 Speaker 5: Act right, which basically says that they can get involved 248 00:12:27,120 --> 00:12:29,800 Speaker 5: and restrict the activities and power of labor unions when 249 00:12:29,800 --> 00:12:32,839 Speaker 5: it winds up upsetting the country basically and they can't 250 00:12:32,840 --> 00:12:35,360 Speaker 5: sort of function as a whole. So to this point, 251 00:12:35,400 --> 00:12:38,840 Speaker 5: then if we get something, let's just say fifty to 252 00:12:38,880 --> 00:12:42,720 Speaker 5: seventy percent wage increases over six years, what does that 253 00:12:42,760 --> 00:12:45,280 Speaker 5: look like for the companies that will be involved for that? 254 00:12:45,960 --> 00:12:49,680 Speaker 8: So I don't cover the coort operators themselves. I cover Maris, 255 00:12:49,760 --> 00:12:52,000 Speaker 8: which has some port operations. I mean, it will just 256 00:12:52,040 --> 00:12:53,559 Speaker 8: mean that their costs are arising. 257 00:12:54,360 --> 00:12:57,040 Speaker 6: Right now, those are pretty good businesses. 258 00:12:57,920 --> 00:13:01,000 Speaker 8: I think the more interesting thing for my repetive is. 259 00:13:00,920 --> 00:13:08,320 Speaker 10: The U the union's inability to accept the reality of automation. Obviously, 260 00:13:08,360 --> 00:13:10,920 Speaker 10: you know, they want to protect jobs, but in a 261 00:13:10,960 --> 00:13:15,640 Speaker 10: world of AI, you know, and productivity improvements whether that's 262 00:13:15,679 --> 00:13:17,520 Speaker 10: you know, in offices or on docks. 263 00:13:17,920 --> 00:13:20,840 Speaker 8: Uh, there's really a lot to be said there. Uh, 264 00:13:21,160 --> 00:13:23,199 Speaker 8: and it would be a shame that, you know, the. 265 00:13:23,120 --> 00:13:27,199 Speaker 6: US sports wouldn't be as competitive to other ports around 266 00:13:27,240 --> 00:13:27,680 Speaker 6: the world. 267 00:13:28,520 --> 00:13:30,160 Speaker 2: All right, Lee, thanks so much for joining us. Always 268 00:13:30,200 --> 00:13:33,080 Speaker 2: appreciate getting your time. Lee Clasgow. He's the senior transport, 269 00:13:33,160 --> 00:13:37,240 Speaker 2: Logistics and shipping analyst for Bloomberg Intelligence. He follows everything 270 00:13:37,240 --> 00:13:39,959 Speaker 2: the rails, the trucks, the sea ships, the all that 271 00:13:40,040 --> 00:13:44,280 Speaker 2: kind of stuff logistics companies, so he's our supply chain expert. 272 00:13:44,280 --> 00:13:48,560 Speaker 2: He joins us from b I down in Princeton, New Jersey. 273 00:13:48,960 --> 00:13:52,840 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 274 00:13:52,920 --> 00:13:55,640 Speaker 1: weekdays at ten am Eastern on fo card Playing and 275 00:13:55,760 --> 00:13:58,680 Speaker 1: broud Auto with the Bloomberg Business app. Listen on demand 276 00:13:58,720 --> 00:14:02,400 Speaker 1: wherever you get your pod, or watch us live on YouTube. 277 00:14:04,240 --> 00:14:06,480 Speaker 5: This is Bloomberg Intelligence Radio. We cover all the top 278 00:14:06,520 --> 00:14:09,040 Speaker 5: news and business, economic and finance through our lens of 279 00:14:09,080 --> 00:14:12,000 Speaker 5: our Bloomberg Intelligence folks. They cover two thousand companies in 280 00:14:12,040 --> 00:14:15,239 Speaker 5: one hundred and thirty industries worldwide. We alsotimes go outside 281 00:14:15,240 --> 00:14:17,000 Speaker 5: that and just take a look at the broader market 282 00:14:17,040 --> 00:14:19,360 Speaker 5: and get the nice macro view from some people who 283 00:14:19,440 --> 00:14:21,320 Speaker 5: run money, and for that we go to Jerry Kudzil, 284 00:14:21,520 --> 00:14:25,480 Speaker 5: Group Managing Director and Generalist portfolio manager over at TCW. 285 00:14:25,520 --> 00:14:27,960 Speaker 5: He joins us now from LA. There's lots of different 286 00:14:28,000 --> 00:14:29,400 Speaker 5: ways to go with this, but I'm looking at a 287 00:14:29,400 --> 00:14:31,880 Speaker 5: stock market that's a little softer. You have yields on 288 00:14:31,920 --> 00:14:35,320 Speaker 5: the front end there a little bit higher. What is 289 00:14:35,360 --> 00:14:38,080 Speaker 5: gonna What is the pain trade right now for you? 290 00:14:38,160 --> 00:14:41,600 Speaker 5: Considering the massive move into Chinese equities that we've seen. 291 00:14:41,880 --> 00:14:43,240 Speaker 5: Where's the pain trade right now? 292 00:14:44,560 --> 00:14:44,800 Speaker 3: Well? 293 00:14:45,600 --> 00:14:48,080 Speaker 11: Thanks a lot, I appreciate being on the show. 294 00:14:49,000 --> 00:14:51,080 Speaker 12: I'll tell you this this rumor about two to eighty 295 00:14:51,160 --> 00:14:54,200 Speaker 12: gas prices as me, I think you guys are. 296 00:14:54,120 --> 00:14:57,200 Speaker 11: Lying at lass. It's a five dollars Still. 297 00:14:56,800 --> 00:14:58,840 Speaker 5: You have a whole different problem there in LA. So 298 00:14:58,920 --> 00:14:59,480 Speaker 5: there's that we. 299 00:14:59,520 --> 00:15:01,160 Speaker 11: Have a for a whole different problem. 300 00:15:01,160 --> 00:15:02,440 Speaker 12: But I will what I will say is, you know, 301 00:15:02,480 --> 00:15:07,160 Speaker 12: pat trade for for markets appears to be a concern 302 00:15:07,200 --> 00:15:10,560 Speaker 12: about inflation, and what we would what we would say 303 00:15:10,640 --> 00:15:15,080 Speaker 12: is that that's not I don't think anyone anyone is 304 00:15:15,120 --> 00:15:16,120 Speaker 12: really concerned about that. 305 00:15:16,200 --> 00:15:16,840 Speaker 3: It feels like. 306 00:15:18,440 --> 00:15:21,440 Speaker 12: It feels like the Fed is trying to and I think, look, 307 00:15:21,480 --> 00:15:23,560 Speaker 12: how tip to have tip to the Fed? So far, 308 00:15:24,160 --> 00:15:26,880 Speaker 12: they've controlled the narrative really well. I mean, you've you've 309 00:15:26,920 --> 00:15:32,720 Speaker 12: reset expectations only from June first to move rates one 310 00:15:32,800 --> 00:15:35,480 Speaker 12: hundred basis points lower. We had we had one cut 311 00:15:35,520 --> 00:15:37,320 Speaker 12: priced in by the end of the year June first, 312 00:15:37,760 --> 00:15:39,160 Speaker 12: we're now going to have it, but we're now going 313 00:15:39,240 --> 00:15:41,520 Speaker 12: to have about six and. 314 00:15:41,120 --> 00:15:43,600 Speaker 3: And ultimately the. 315 00:15:42,800 --> 00:15:45,640 Speaker 11: Evaluations really have been have been unimpacted. 316 00:15:46,280 --> 00:15:47,960 Speaker 3: So so hat tip to the Fed. 317 00:15:48,040 --> 00:15:51,600 Speaker 12: So far feels like, you know, the market's embracing the 318 00:15:51,680 --> 00:15:54,560 Speaker 12: idea of a soft landing, uh, the idea that. 319 00:15:54,760 --> 00:15:56,960 Speaker 11: You know, lowering of inflation is a good thing. 320 00:15:57,560 --> 00:15:57,760 Speaker 3: Uh. 321 00:15:57,800 --> 00:16:01,000 Speaker 12: And we'll see ultimately, Ultimately, we'll see what proves out. 322 00:16:01,040 --> 00:16:04,160 Speaker 12: But I think the data, certainly there's something, there's something 323 00:16:04,200 --> 00:16:06,400 Speaker 12: in there for everyone as it relates to economic data 324 00:16:06,480 --> 00:16:07,680 Speaker 12: right now, the bulls. 325 00:16:07,400 --> 00:16:08,120 Speaker 3: And the bears. 326 00:16:08,480 --> 00:16:11,480 Speaker 2: How much risk should fixed income investors be taking these days, 327 00:16:11,560 --> 00:16:14,120 Speaker 2: given that rates are coming down? 328 00:16:15,440 --> 00:16:16,800 Speaker 3: That's a that's that's a good question. 329 00:16:16,840 --> 00:16:19,160 Speaker 12: Look, I think as we think about it, there's a 330 00:16:19,160 --> 00:16:20,920 Speaker 12: bunch of ways to answer that question, Paul. 331 00:16:20,960 --> 00:16:22,480 Speaker 11: But the reality is. 332 00:16:23,960 --> 00:16:28,080 Speaker 12: Rates rates are going to come down because inflation, inflation 333 00:16:28,240 --> 00:16:31,680 Speaker 12: expectations are are stable. I think the right question to 334 00:16:31,720 --> 00:16:34,280 Speaker 12: ask is why are rates coming down? Are rates coming 335 00:16:34,280 --> 00:16:39,000 Speaker 12: down because demand economy is slowing? Have a potential issue, 336 00:16:39,040 --> 00:16:41,840 Speaker 12: and I think we'll learn a lot more as we 337 00:16:42,000 --> 00:16:43,000 Speaker 12: as we moved through the week. 338 00:16:43,000 --> 00:16:44,560 Speaker 3: We're going to get We're going to get a you. 339 00:16:44,480 --> 00:16:47,760 Speaker 11: Know, a couple of a couple of economic numbers. 340 00:16:47,360 --> 00:16:50,239 Speaker 12: This week that that will probably be pretty pretty impactful. 341 00:16:51,040 --> 00:16:54,640 Speaker 12: I would say we we like fixed income broadly. You 342 00:16:54,640 --> 00:16:57,440 Speaker 12: can create income and portfolios. We like the belly of 343 00:16:57,480 --> 00:16:59,200 Speaker 12: the curve, but we do what we don't think you 344 00:16:59,240 --> 00:17:02,200 Speaker 12: should be doing, taking significant amount of credit risk in portfolios. 345 00:17:02,240 --> 00:17:04,800 Speaker 11: We talked about this a bunch on the on the show, 346 00:17:05,359 --> 00:17:06,960 Speaker 11: and the reality. 347 00:17:06,600 --> 00:17:12,280 Speaker 12: Is the risk free rate gives you eighty five percent 348 00:17:12,400 --> 00:17:15,800 Speaker 12: of your yield when you consider investment grade corporate bonds. 349 00:17:16,240 --> 00:17:18,680 Speaker 12: And when you pull this back historically, when you look 350 00:17:18,720 --> 00:17:21,280 Speaker 12: whether you're looking at high yield or you're looking at 351 00:17:21,359 --> 00:17:24,720 Speaker 12: investment grade credit, at the at the end of the day, 352 00:17:24,720 --> 00:17:27,920 Speaker 12: you can get the majority that yield in the risk 353 00:17:27,960 --> 00:17:28,440 Speaker 12: free rate. 354 00:17:28,480 --> 00:17:29,520 Speaker 3: And we like the belly. 355 00:17:29,600 --> 00:17:31,160 Speaker 12: We like the belly of the curve and the front 356 00:17:31,240 --> 00:17:34,480 Speaker 12: end of the curve because we think inflation expectations are stable, 357 00:17:34,800 --> 00:17:37,359 Speaker 12: the curve will continue to steep in, and you'll be 358 00:17:37,359 --> 00:17:41,639 Speaker 12: able to generate some some healthy income without taking this volatility. 359 00:17:41,640 --> 00:17:43,320 Speaker 12: We don't think you need to introduce that in your 360 00:17:43,359 --> 00:17:45,400 Speaker 12: portfolios with with significant amount of credit risk. 361 00:17:45,640 --> 00:17:48,160 Speaker 5: There's still money though, flowing into money market funds kind 362 00:17:48,160 --> 00:17:50,439 Speaker 5: of like unbelievably, and the money hasn't come out of 363 00:17:50,480 --> 00:17:53,560 Speaker 5: money market funds to say the least, When does it 364 00:17:53,640 --> 00:17:56,080 Speaker 5: and where does it belong? In fixed income? After that? 365 00:17:57,720 --> 00:17:59,120 Speaker 3: What's it that? 366 00:17:59,119 --> 00:18:02,840 Speaker 12: That's the seven trillion dollar question, right, that's the that's 367 00:18:02,880 --> 00:18:04,560 Speaker 12: the real where where's the where's. 368 00:18:04,320 --> 00:18:05,040 Speaker 3: The money gonna go? 369 00:18:05,720 --> 00:18:08,920 Speaker 12: The The market at the at the moment is comfortable 370 00:18:08,960 --> 00:18:10,960 Speaker 12: that rates are coming down, but ultimately you need the 371 00:18:11,040 --> 00:18:12,800 Speaker 12: rate to come You need the rate to come down. 372 00:18:12,840 --> 00:18:15,040 Speaker 12: We think to see that, to see that money move, 373 00:18:15,520 --> 00:18:17,480 Speaker 12: and where's where's that money gonna go? 374 00:18:18,560 --> 00:18:20,919 Speaker 3: Well, it's it's gonna kind of it's gonna kind of go, 375 00:18:21,040 --> 00:18:22,200 Speaker 3: It's gonna kind of go everywhere. 376 00:18:22,400 --> 00:18:26,000 Speaker 12: I think our our opinion is, our opinion is it 377 00:18:26,000 --> 00:18:27,680 Speaker 12: will it will benefit the markets. 378 00:18:27,920 --> 00:18:31,880 Speaker 3: But the reality I would just pause and and. 379 00:18:31,560 --> 00:18:33,480 Speaker 12: And for us, what we would what we would say 380 00:18:33,560 --> 00:18:37,680 Speaker 12: is we're a little bit more concerned about the direction 381 00:18:38,000 --> 00:18:40,960 Speaker 12: of the economy, uh, where it's heading and really a 382 00:18:41,000 --> 00:18:44,120 Speaker 12: function of of the labor market. And and I think 383 00:18:44,160 --> 00:18:46,679 Speaker 12: we're seeing some slowing in the labor market. Whether you 384 00:18:46,720 --> 00:18:48,800 Speaker 12: have a lot of money in monkeys or a little 385 00:18:48,840 --> 00:18:51,760 Speaker 12: money in money markets, when people lose their jobs, they 386 00:18:51,760 --> 00:18:54,640 Speaker 12: don't spend money, and that's slowing in the economy. 387 00:18:54,680 --> 00:18:56,800 Speaker 3: Is gonna, I think, we think is gonna gonna. 388 00:18:56,600 --> 00:18:59,800 Speaker 12: Overwhelm any kind of short term movement of money and 389 00:19:00,680 --> 00:19:03,600 Speaker 12: go to challenge risk assets at least performance or risk 390 00:19:03,640 --> 00:19:05,400 Speaker 12: assets in the near to medium term. 391 00:19:05,680 --> 00:19:07,720 Speaker 2: Hey, Jerry, thanks so much for joining us. Appreciate getting 392 00:19:07,720 --> 00:19:10,320 Speaker 2: your thoughts there. Jerry Kutzel, He's a group managing director 393 00:19:10,359 --> 00:19:13,600 Speaker 2: and a generalist portfolio manager at tc W. Joining us 394 00:19:13,800 --> 00:19:15,680 Speaker 2: from their home in Los Angeles. 395 00:19:17,080 --> 00:19:20,960 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 396 00:19:21,040 --> 00:19:24,560 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 397 00:19:24,600 --> 00:19:27,359 Speaker 1: Auto with the Bloomberg Business app. You can also listen 398 00:19:27,480 --> 00:19:30,600 Speaker 1: live on Amazon Alexa from our flagship New York station 399 00:19:30,960 --> 00:19:33,720 Speaker 1: Just Say Alexa playing Bloomberg eleven thirty. 400 00:19:35,720 --> 00:19:37,720 Speaker 2: Let's get to the other significant story I think out 401 00:19:37,720 --> 00:19:39,640 Speaker 2: of the day, which is just this real sell off 402 00:19:39,720 --> 00:19:43,000 Speaker 2: in global auto stocks. Here Stillantis with a profit warning 403 00:19:43,280 --> 00:19:45,920 Speaker 2: that came in much more egregious than maybe I think 404 00:19:45,920 --> 00:19:48,359 Speaker 2: people were discounting that stock US off thirteen fourteen percent. 405 00:19:48,600 --> 00:19:51,840 Speaker 2: Craig Trudell, Bloomberg Global Autos analyst, he's an editor or 406 00:19:51,840 --> 00:19:54,880 Speaker 2: there I'm sorry, Bloomberg Global Autos editor on a slow 407 00:19:54,920 --> 00:19:58,160 Speaker 2: down in the European auto industry. So, Craig, it seems 408 00:19:58,200 --> 00:20:01,360 Speaker 2: like this auto industry globally, certainly for the European operators, 409 00:20:01,440 --> 00:20:05,760 Speaker 2: the North American operators, this transition to electric vehicles is 410 00:20:05,800 --> 00:20:10,000 Speaker 2: proving much more, I guess, difficult than maybe the market 411 00:20:10,080 --> 00:20:12,800 Speaker 2: had anticipated. Where are we here, what's happening with these 412 00:20:12,960 --> 00:20:13,880 Speaker 2: big auto companies? 413 00:20:15,280 --> 00:20:17,760 Speaker 13: Yeah, I think that's spot on. I think in the 414 00:20:17,840 --> 00:20:20,080 Speaker 13: case of Stilantis, you had a company that, especially in 415 00:20:20,119 --> 00:20:22,840 Speaker 13: North America, was really taking its sweet time in terms 416 00:20:22,880 --> 00:20:26,760 Speaker 13: of going electric, and they're now really caught in a 417 00:20:26,800 --> 00:20:29,959 Speaker 13: buying because they've spent an awful lot on playing catch up. 418 00:20:30,760 --> 00:20:33,119 Speaker 13: They have, you know, some electric vehicles, some plug in 419 00:20:33,200 --> 00:20:36,560 Speaker 13: hybrids coming to market just as as that market really 420 00:20:36,600 --> 00:20:39,800 Speaker 13: slows down, and they've maybe invested in that at the 421 00:20:39,880 --> 00:20:42,400 Speaker 13: expense of some of you know, some of the vehicles 422 00:20:42,400 --> 00:20:45,200 Speaker 13: in their lineup that you know really were strong sellers 423 00:20:45,240 --> 00:20:47,480 Speaker 13: and and that dealers were quite fond of. If you 424 00:20:47,480 --> 00:20:50,600 Speaker 13: look at you know, Jeep or Ram, you know, some 425 00:20:50,640 --> 00:20:55,320 Speaker 13: of the major brands that you know, Chrysler, you know, 426 00:20:57,320 --> 00:21:00,159 Speaker 13: has for a long time been shepherding in the UI. Yes, 427 00:21:00,880 --> 00:21:02,840 Speaker 13: this is a company that you know, has way too 428 00:21:02,920 --> 00:21:05,600 Speaker 13: much inventory, has been trying to take too much price 429 00:21:05,640 --> 00:21:09,120 Speaker 13: for too long. And you know, the CEO, Carlos Tavares, 430 00:21:09,119 --> 00:21:12,639 Speaker 13: has taken some blowback over that, even from dealers, and 431 00:21:13,240 --> 00:21:16,719 Speaker 13: in a really unusual way, for the head of the 432 00:21:16,920 --> 00:21:20,680 Speaker 13: US Dealer Council to issue a public letter a few 433 00:21:20,680 --> 00:21:25,359 Speaker 13: weeks back criticizing him and criticizing the company was really remarkable. 434 00:21:25,800 --> 00:21:29,560 Speaker 5: What I'm having a hard time understanding is why it's 435 00:21:29,600 --> 00:21:32,320 Speaker 5: hard for these companies to get a true handle on 436 00:21:32,800 --> 00:21:35,639 Speaker 5: why things are bad. So just the idea that Stalantis 437 00:21:35,640 --> 00:21:39,680 Speaker 5: cuts its forecast again in just a few months, Why 438 00:21:39,760 --> 00:21:41,480 Speaker 5: is it so hard for them to get a read 439 00:21:41,560 --> 00:21:42,520 Speaker 5: on their own business? 440 00:21:44,080 --> 00:21:47,040 Speaker 13: Well, I think in the case of Stalantis, you've seen 441 00:21:47,520 --> 00:21:50,640 Speaker 13: actually sort of a reluctance for them to lower their guidance. 442 00:21:50,680 --> 00:21:55,159 Speaker 13: So they did release a very disappointing first half result 443 00:21:55,800 --> 00:21:59,679 Speaker 13: a couple months back. But you know, the the companies 444 00:21:59,720 --> 00:22:02,160 Speaker 13: that maybe have had a harder time getting a handle 445 00:22:02,200 --> 00:22:05,520 Speaker 13: on on earnings, I would I would put Volkswagen in 446 00:22:05,560 --> 00:22:08,040 Speaker 13: that camp. They've had their second warning in the matter 447 00:22:08,480 --> 00:22:11,520 Speaker 13: of a short period. I think Nissan maybe next. As 448 00:22:11,560 --> 00:22:14,720 Speaker 13: we reported earlier today, I do think that this is 449 00:22:14,760 --> 00:22:17,920 Speaker 13: a case where you know, automakers globally, you know, very 450 00:22:17,960 --> 00:22:21,160 Speaker 13: quickly went from this position of being you know, production 451 00:22:21,280 --> 00:22:24,719 Speaker 13: constrained and you know, looking to move as quickly as 452 00:22:24,720 --> 00:22:28,480 Speaker 13: they possibly could to ramp production back up. And you know, 453 00:22:28,720 --> 00:22:30,960 Speaker 13: once they were able to get through the many supply 454 00:22:31,080 --> 00:22:33,280 Speaker 13: chain issues that they've had over the last few years 455 00:22:33,320 --> 00:22:35,960 Speaker 13: coming out of the pandemic, they were it really took 456 00:22:36,000 --> 00:22:38,119 Speaker 13: them some time to adjust to the fact that, you 457 00:22:38,119 --> 00:22:40,560 Speaker 13: know what, at some point they were going to get 458 00:22:40,600 --> 00:22:44,240 Speaker 13: to where they were no longer you know, production constrained, 459 00:22:44,240 --> 00:22:46,760 Speaker 13: that you know, demand wasn't going to live up to 460 00:22:47,560 --> 00:22:50,159 Speaker 13: what everyone was making, and it was kind of a 461 00:22:50,200 --> 00:22:52,600 Speaker 13: matter of who was going to blink first. And you know, 462 00:22:52,640 --> 00:22:55,119 Speaker 13: I think Stillantis maybe is getting you know bonked on 463 00:22:55,200 --> 00:22:57,480 Speaker 13: the head today because they were one of the last 464 00:22:57,520 --> 00:23:00,560 Speaker 13: to really sort of bow to reality that they had 465 00:23:00,600 --> 00:23:03,719 Speaker 13: way too much supply relative to to the demand that 466 00:23:03,760 --> 00:23:04,240 Speaker 13: was out there. 467 00:23:05,080 --> 00:23:08,600 Speaker 2: So what do you Is there a consensus growing here, 468 00:23:08,720 --> 00:23:11,560 Speaker 2: Craig about how this industry is going to continue to 469 00:23:11,560 --> 00:23:13,680 Speaker 2: make this transition to EV because it seems like it's 470 00:23:13,720 --> 00:23:16,399 Speaker 2: slower than maybe they had thought as recent recently as 471 00:23:16,400 --> 00:23:20,040 Speaker 2: a year ago, more bumpier. How is this going to 472 00:23:20,080 --> 00:23:21,440 Speaker 2: play out? Is there any consensus building? 473 00:23:23,080 --> 00:23:23,240 Speaker 12: You know? 474 00:23:23,320 --> 00:23:27,439 Speaker 13: I think there's probably going to be more collaboration. We've heard, 475 00:23:28,200 --> 00:23:31,280 Speaker 13: you know, the CEO of Reno in France call for 476 00:23:31,359 --> 00:23:34,560 Speaker 13: an airbus of autos, you know, coming together of European 477 00:23:34,600 --> 00:23:38,840 Speaker 13: companies to try and you know, confront these challenges together. 478 00:23:39,160 --> 00:23:41,879 Speaker 13: I think you've seen some analysts call for more collaboration 479 00:23:42,040 --> 00:23:44,240 Speaker 13: among Western companies and Chinese companies. 480 00:23:44,800 --> 00:23:44,919 Speaker 2: Uh. 481 00:23:45,359 --> 00:23:48,119 Speaker 13: And we're seeing that in Stillantis right where they're teaming 482 00:23:48,240 --> 00:23:52,040 Speaker 13: up with Leap Motor, one of the smaller EV makers 483 00:23:51,800 --> 00:23:54,719 Speaker 13: in China. But I do think that there are some 484 00:23:54,840 --> 00:23:58,159 Speaker 13: real limits to that latter strategy, given this sort of 485 00:23:58,160 --> 00:24:01,120 Speaker 13: appetite for that in Washington, right. I think it's it's 486 00:24:01,119 --> 00:24:04,320 Speaker 13: the one thing that's really uniting Republicans and Democrats, is 487 00:24:04,359 --> 00:24:07,119 Speaker 13: this idea that you know, we shouldn't be at all 488 00:24:07,160 --> 00:24:11,160 Speaker 13: reliant on China going forward, and that there are enemy 489 00:24:11,200 --> 00:24:11,840 Speaker 13: and not our friend. 490 00:24:12,080 --> 00:24:14,000 Speaker 5: So what I also find interesting is that it's not 491 00:24:14,080 --> 00:24:17,480 Speaker 5: just China and it's not just EVS, I mean specifically 492 00:24:17,480 --> 00:24:21,199 Speaker 5: Salantas said jeep sales like. So it's easy to blame 493 00:24:21,359 --> 00:24:23,919 Speaker 5: China cheap EV's, It's easy to blame the fact that 494 00:24:23,960 --> 00:24:26,040 Speaker 5: people don't want to buy evs right now, but that's 495 00:24:26,520 --> 00:24:30,080 Speaker 5: not necessarily the only problem. 496 00:24:30,240 --> 00:24:32,199 Speaker 13: I think that's a really key insight. I think this 497 00:24:32,400 --> 00:24:36,920 Speaker 13: was a case of mismanagement on Stillantis's part, and you've 498 00:24:36,960 --> 00:24:39,520 Speaker 13: seen some analysts come out with really sort of harsh words, 499 00:24:39,600 --> 00:24:41,960 Speaker 13: not only for the way that they've sort of bungled things, 500 00:24:42,240 --> 00:24:45,400 Speaker 13: but the way they've communicated. You know, even just last week, 501 00:24:45,480 --> 00:24:49,160 Speaker 13: the CFO of the company, you know, was talking about 502 00:24:49,240 --> 00:24:52,160 Speaker 13: the sort of outlook, and you know, the company has 503 00:24:52,200 --> 00:24:55,400 Speaker 13: not necessarily been forthcoming, even as you know, one European 504 00:24:55,440 --> 00:24:59,920 Speaker 13: company after another was was issuing profit warnings for them too, 505 00:25:00,840 --> 00:25:02,680 Speaker 13: you know, sort of drag their feet and only do 506 00:25:03,320 --> 00:25:06,000 Speaker 13: so now when the writing maybe seemed to be on 507 00:25:06,040 --> 00:25:08,280 Speaker 13: the wall, even when they were doing first half results. 508 00:25:08,760 --> 00:25:11,080 Speaker 13: I think that's part of why you're seeing this negative 509 00:25:11,119 --> 00:25:13,480 Speaker 13: reaction because some are saying, you know, how can we 510 00:25:13,520 --> 00:25:16,840 Speaker 13: trust this management team, you know, going forward, giving the 511 00:25:16,880 --> 00:25:17,760 Speaker 13: way they've messaged this. 512 00:25:18,359 --> 00:25:20,360 Speaker 5: All right, Craig, thanks a lot, really appreciate it. Cred 513 00:25:20,400 --> 00:25:23,760 Speaker 5: Trudel joining us Bloomberg and no, you're not Bloomberg Intelligence, 514 00:25:23,760 --> 00:25:27,200 Speaker 5: he's Bloomberg Global Autos editor. I weirdly promoted him. 515 00:25:27,200 --> 00:25:29,000 Speaker 2: I think, yeah, I did the same thing. 516 00:25:29,040 --> 00:25:30,560 Speaker 5: You did the same thing, and yeah, so cool. It 517 00:25:30,600 --> 00:25:31,720 Speaker 5: just means that you're super smart. 518 00:25:33,160 --> 00:25:37,040 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 519 00:25:37,119 --> 00:25:40,640 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 520 00:25:40,680 --> 00:25:43,440 Speaker 1: Auto with the Bloomberg Business Act. You can also listen 521 00:25:43,560 --> 00:25:46,640 Speaker 1: live on Amazon Alexa from our flagship New York station 522 00:25:47,000 --> 00:25:50,720 Speaker 1: Just say Alexa playing Bloomberg eleven thirty. 523 00:25:51,560 --> 00:25:51,879 Speaker 13: All right. 524 00:25:51,920 --> 00:25:53,440 Speaker 5: Joining us now in the bond market because you're taking 525 00:25:53,440 --> 00:25:55,000 Speaker 5: a look at the sell off pretty much across the curve. 526 00:25:55,040 --> 00:25:56,879 Speaker 5: You got the two year yield up by five basis 527 00:25:56,880 --> 00:25:59,119 Speaker 5: points three point six. You're also looking at the tenure 528 00:25:59,200 --> 00:26:01,440 Speaker 5: up by about two three basis points up at three 529 00:26:01,480 --> 00:26:02,959 Speaker 5: point seven seven. Joining us now. 530 00:26:03,040 --> 00:26:03,199 Speaker 14: R J. 531 00:26:03,280 --> 00:26:07,320 Speaker 5: Gallow, Senior portfolio Manager, Fixed Income at Federated Hermes joining 532 00:26:07,440 --> 00:26:09,760 Speaker 5: us on the space. All right, what's your best bet 533 00:26:09,760 --> 00:26:10,800 Speaker 5: on the curve right now? 534 00:26:12,600 --> 00:26:13,320 Speaker 3: Well, good morning. 535 00:26:14,080 --> 00:26:16,320 Speaker 14: Our view on the curve has been for quite some time, 536 00:26:16,400 --> 00:26:19,000 Speaker 14: and this is a pretty widely held view, is that 537 00:26:19,080 --> 00:26:22,160 Speaker 14: the US economy is unlikely to turn into a recession. 538 00:26:22,560 --> 00:26:25,720 Speaker 14: But at the same time, the FED is completely shifted 539 00:26:25,720 --> 00:26:28,240 Speaker 14: their focus. They had been almost like a soul mandate 540 00:26:28,240 --> 00:26:31,560 Speaker 14: inflation fighting central bank when we had CPI north of 541 00:26:31,600 --> 00:26:33,840 Speaker 14: six percent all the way up to nine. If you recall, 542 00:26:34,440 --> 00:26:36,720 Speaker 14: they now have shifted gears and the sort of the 543 00:26:36,760 --> 00:26:39,400 Speaker 14: weight now is more on the employment side of the mandate. 544 00:26:39,720 --> 00:26:41,879 Speaker 14: So the Fed's an easy mode that should bring shorter 545 00:26:41,960 --> 00:26:45,040 Speaker 14: yields down. At the same time we're heading into an election. 546 00:26:45,119 --> 00:26:47,560 Speaker 14: The economy, according to the Atlanta Fed GDP is still 547 00:26:47,560 --> 00:26:51,120 Speaker 14: growing around three percent, so longer yields might not come 548 00:26:51,160 --> 00:26:53,320 Speaker 14: down nearly as much. That's a bit of a steepener, 549 00:26:53,359 --> 00:26:56,399 Speaker 14: and we've had a good success generating some excess returns 550 00:26:56,440 --> 00:26:59,040 Speaker 14: to that on a year to day basis. On duration, 551 00:26:59,320 --> 00:27:01,840 Speaker 14: we thought bonds we're gonna have a pretty good year 552 00:27:01,840 --> 00:27:06,919 Speaker 14: this year, and they are. Since April thirtieth, the US 553 00:27:06,960 --> 00:27:11,040 Speaker 14: Aggregate Index is up eight point twenty four percent, and 554 00:27:11,119 --> 00:27:14,359 Speaker 14: the Treasury Index is up seven point six percent. How's 555 00:27:14,359 --> 00:27:16,600 Speaker 14: that for a heck of a run for less than 556 00:27:16,560 --> 00:27:17,199 Speaker 14: a year's time in. 557 00:27:17,200 --> 00:27:20,720 Speaker 2: The bottom up exactly like these guys doing the lapse here. 558 00:27:21,160 --> 00:27:22,960 Speaker 2: How about the high yield business that's actually been the 559 00:27:22,960 --> 00:27:25,320 Speaker 2: best performer year to date r J. 560 00:27:26,160 --> 00:27:26,879 Speaker 15: Why is that? 561 00:27:27,000 --> 00:27:29,080 Speaker 2: And kind of how do you look at that market 562 00:27:29,119 --> 00:27:29,600 Speaker 2: going forward? 563 00:27:31,320 --> 00:27:34,840 Speaker 14: Yeah, it's you're absolutely right on an internet basis. Uh, 564 00:27:35,200 --> 00:27:37,800 Speaker 14: The Treasury Index, just to give some context, is only 565 00:27:37,880 --> 00:27:39,760 Speaker 14: up four point oh eight percent, the number I shared 566 00:27:39,800 --> 00:27:42,480 Speaker 14: before with some April thirtieth. So the Treasury Index is 567 00:27:42,560 --> 00:27:44,760 Speaker 14: just over four and the AG is around four to seventy. 568 00:27:45,040 --> 00:27:48,480 Speaker 14: High yield is almost eight seven point nine eight percent. 569 00:27:49,640 --> 00:27:50,199 Speaker 3: Why is that? 570 00:27:50,240 --> 00:27:55,119 Speaker 14: Well, the economy has proven resilient beyond nearly anyone's expectations 571 00:27:55,160 --> 00:27:58,920 Speaker 14: with respect to the drastic FED hiking and now easing 572 00:27:58,960 --> 00:28:02,240 Speaker 14: that has gone on and the disinflation process that has occurred. 573 00:28:02,720 --> 00:28:06,879 Speaker 14: The view of a soft landing is a risk asset winner. Really, 574 00:28:07,240 --> 00:28:09,360 Speaker 14: look at stocks, they're up double digits here to date. 575 00:28:09,960 --> 00:28:14,119 Speaker 14: If you can have the ability to slow down inflation 576 00:28:14,400 --> 00:28:18,119 Speaker 14: without sharply slowing down the economy, that's very favorable to 577 00:28:18,160 --> 00:28:20,240 Speaker 14: risk assets, and that's been win at the back for 578 00:28:20,440 --> 00:28:24,840 Speaker 14: high yield pretty much all year as a firm. I'll 579 00:28:24,880 --> 00:28:26,479 Speaker 14: be frank, this is a tough business. Sometimes you get 580 00:28:26,520 --> 00:28:29,280 Speaker 14: them right, sometimes you don't. We've been a little underweight 581 00:28:29,359 --> 00:28:31,880 Speaker 14: high yield in our multi sector portfolios and that's been 582 00:28:32,160 --> 00:28:34,520 Speaker 14: a little difficult. However, we've made up some of that 583 00:28:35,400 --> 00:28:39,000 Speaker 14: pain by being overweight mortgages and by playing the curve 584 00:28:39,040 --> 00:28:41,200 Speaker 14: it and the rates direction to some degree. So there's 585 00:28:41,200 --> 00:28:42,800 Speaker 14: a lot of levers to push and pool and fixing. 586 00:28:43,640 --> 00:28:46,920 Speaker 5: When we talk about say job's data that's going to 587 00:28:46,920 --> 00:28:48,720 Speaker 5: come out on Friday, right, I'm wondering, what do you 588 00:28:48,720 --> 00:28:51,320 Speaker 5: think the reaction function of the bond market is going 589 00:28:51,360 --> 00:28:52,240 Speaker 5: to be to that number. 590 00:28:54,400 --> 00:28:56,840 Speaker 14: With the FEDS shift and mandate. Like I was saying 591 00:28:57,120 --> 00:28:59,800 Speaker 14: a few moments ago, the job's data becomes all the more. 592 00:29:00,000 --> 00:29:02,320 Speaker 14: I we went through an extended period there where jobs 593 00:29:02,400 --> 00:29:06,040 Speaker 14: data took a backseat to inflation. Now that is the opposite. 594 00:29:06,400 --> 00:29:11,040 Speaker 14: I think that Chairman Powell at the podium recently after 595 00:29:11,120 --> 00:29:15,920 Speaker 14: the September FMC suggested that they're going to be sort 596 00:29:15,920 --> 00:29:19,800 Speaker 14: of mentally haircutting the employment report, especially the non farm 597 00:29:19,840 --> 00:29:22,120 Speaker 14: payroll numbers sort of the headline figure, and that has 598 00:29:22,160 --> 00:29:23,840 Speaker 14: everything to do with the fact that data out of 599 00:29:23,840 --> 00:29:26,960 Speaker 14: the Commerce Department, which is used to periodically revise the 600 00:29:27,520 --> 00:29:29,360 Speaker 14: payrolls data that we're familiar with from the Bureau of 601 00:29:29,400 --> 00:29:32,880 Speaker 14: Labor Statistics, the Commerce Department data has been weaker less 602 00:29:32,920 --> 00:29:35,640 Speaker 14: job creation, so that took about I think it was 603 00:29:35,680 --> 00:29:39,240 Speaker 14: eight hundred and ninety thousand jobs or so off the board, 604 00:29:40,000 --> 00:29:44,479 Speaker 14: and that is as a result, sort of casting some shade, 605 00:29:44,520 --> 00:29:46,480 Speaker 14: if you will, in terms of the quality of the 606 00:29:46,560 --> 00:29:48,840 Speaker 14: data that we get from your Bureau of Labor Statistics. 607 00:29:48,880 --> 00:29:50,880 Speaker 14: So if we get numbers like you know, one twenty one, 608 00:29:51,000 --> 00:29:53,680 Speaker 14: thirty one forty, I think that the market will view 609 00:29:53,720 --> 00:29:56,360 Speaker 14: that somewhat dubbishly in a bond friendly sense that it 610 00:29:56,440 --> 00:29:59,960 Speaker 14: sort of keeps the FED in the game of sequence 611 00:30:00,320 --> 00:30:03,960 Speaker 14: easing significant easing to come. Conversely, if the data is 612 00:30:04,000 --> 00:30:07,360 Speaker 14: really strong, I don't know if yields would rise that much. 613 00:30:07,400 --> 00:30:10,440 Speaker 14: I think that yield direction in your term is more symmetric, 614 00:30:10,480 --> 00:30:12,960 Speaker 14: in part because we're heading into an election season or 615 00:30:13,120 --> 00:30:15,240 Speaker 14: season we're heading into an election itself. We've been in 616 00:30:15,240 --> 00:30:17,840 Speaker 14: the season for a while, the outcome of which could 617 00:30:17,840 --> 00:30:21,400 Speaker 14: have a significant impact on overall fiscal policy, to include 618 00:30:21,680 --> 00:30:26,560 Speaker 14: stimulus from extending expiring tax cuts. If President Trump is 619 00:30:26,600 --> 00:30:28,760 Speaker 14: to return to the White House, we have tariff and inflation. 620 00:30:28,840 --> 00:30:32,680 Speaker 14: Tariffs and inflation concerns to think about. If it's if 621 00:30:32,720 --> 00:30:36,760 Speaker 14: it's Kamala Harris, then it's another picture. She also increases 622 00:30:36,760 --> 00:30:39,120 Speaker 14: the deficit, maybe a little less. Those are factors I 623 00:30:39,120 --> 00:30:40,960 Speaker 14: think that are going to become pretty important as we 624 00:30:41,280 --> 00:30:44,080 Speaker 14: get past the election and see what happens next. 625 00:30:44,600 --> 00:30:46,760 Speaker 2: I'm a big fan of municipal bond market RJ. I 626 00:30:46,840 --> 00:30:48,560 Speaker 2: love to get your thoughts on munich here. 627 00:30:48,600 --> 00:30:49,800 Speaker 5: You couldn't just wait till Friday. 628 00:30:49,880 --> 00:30:52,880 Speaker 14: Come on, man, I know you have the MUNI moment, 629 00:30:53,200 --> 00:30:55,880 Speaker 14: but I'm happy to do it here too. You know, 630 00:30:55,880 --> 00:30:57,800 Speaker 14: it's funny the muni market came into the year at 631 00:30:57,800 --> 00:31:01,840 Speaker 14: a relatively rich point, and for those who are in munis, 632 00:31:02,680 --> 00:31:05,760 Speaker 14: it tends to be a playground for individuals who want 633 00:31:05,800 --> 00:31:08,560 Speaker 14: relatively high quality investments. You know, the average credit quality 634 00:31:08,560 --> 00:31:10,600 Speaker 14: of the uni markets around double a much higher. 635 00:31:10,400 --> 00:31:11,440 Speaker 8: Than corporate bonds. 636 00:31:12,040 --> 00:31:15,640 Speaker 14: They also are very drawn by the tax benefits of 637 00:31:15,840 --> 00:31:19,360 Speaker 14: interest free tax free interest, and so that's going to 638 00:31:19,360 --> 00:31:21,160 Speaker 14: bring in people who can benefit the most from it, 639 00:31:21,200 --> 00:31:25,040 Speaker 14: people who are the top few tax brackets. So the 640 00:31:25,120 --> 00:31:27,760 Speaker 14: year started out with a lot of optimism on bond returns. 641 00:31:28,120 --> 00:31:31,160 Speaker 14: Higher absolute yields that increases the value of that tax 642 00:31:31,200 --> 00:31:34,680 Speaker 14: exemption in a sort of taxable equivalent sense. So demand 643 00:31:34,680 --> 00:31:37,120 Speaker 14: has been pretty good for muni's pretty much all year, 644 00:31:37,160 --> 00:31:38,760 Speaker 14: but that meant we started the year at a sort 645 00:31:38,760 --> 00:31:41,160 Speaker 14: of a rich point, and then supply has served. We've 646 00:31:41,160 --> 00:31:43,520 Speaker 14: had one of the busiest supply years in a very 647 00:31:43,520 --> 00:31:45,480 Speaker 14: long time. It's up like thirty five percent year of 648 00:31:45,520 --> 00:31:47,280 Speaker 14: a year. It might even be a record year when 649 00:31:47,280 --> 00:31:49,880 Speaker 14: it's all said and done. So when you supply and 650 00:31:49,960 --> 00:31:52,800 Speaker 14: demand and relative price matter, Muni's on a year to 651 00:31:52,840 --> 00:31:55,040 Speaker 14: day basis are not up quite as much. 652 00:31:55,480 --> 00:31:55,800 Speaker 3: I said. 653 00:31:55,800 --> 00:31:58,560 Speaker 14: Treasuries are up four the ags for eight Muni's with 654 00:31:58,600 --> 00:32:01,720 Speaker 14: no adjustment for their tax benefits are only up around 655 00:32:01,800 --> 00:32:05,680 Speaker 14: two point nine percent two point two percent, depending upon 656 00:32:05,720 --> 00:32:08,960 Speaker 14: which index you look at. And that's because of that 657 00:32:09,080 --> 00:32:12,640 Speaker 14: supplied demand pricing picture that we've seen. Right now, Muni's 658 00:32:12,640 --> 00:32:15,200 Speaker 14: look sort of reasonably valued, maybe a little bit to 659 00:32:15,240 --> 00:32:18,640 Speaker 14: the rich side, but their tax benefits are still bringing 660 00:32:18,720 --> 00:32:21,760 Speaker 14: people in. The Munique credit picture looks really good. A 661 00:32:21,840 --> 00:32:24,320 Speaker 14: number of years ago, people used to fret about unique 662 00:32:24,320 --> 00:32:27,480 Speaker 14: credit quality crumbling all over the place at the state level, 663 00:32:27,520 --> 00:32:31,000 Speaker 14: at the local level. Right now it's very strong, great stuff. 664 00:32:31,120 --> 00:32:34,520 Speaker 3: See Munich. Yeah yeah, yeah, yeah, Focus, Get Friday, Get ready. 665 00:32:34,640 --> 00:32:34,840 Speaker 3: R J. 666 00:32:34,920 --> 00:32:38,040 Speaker 2: Gallow, Senior portfolio manager Fixing Home and Federated at Hermes, 667 00:32:38,240 --> 00:32:40,840 Speaker 2: given us the breakdown here on the fixed income markets. 668 00:32:40,840 --> 00:32:41,120 Speaker 3: Again. 669 00:32:41,400 --> 00:32:43,479 Speaker 2: Year to date, returns across the fixed income space has 670 00:32:43,480 --> 00:32:46,960 Speaker 2: been solid, you know, kind of mid high single digits 671 00:32:47,120 --> 00:32:49,880 Speaker 2: and even better performs coming off that April low there 672 00:32:49,960 --> 00:32:51,240 Speaker 2: that we saw a little bit of a dip there, 673 00:32:51,280 --> 00:32:54,160 Speaker 2: so as good returns for fixed income investors, and that 674 00:32:54,280 --> 00:32:54,800 Speaker 2: is a good thing. 675 00:32:56,320 --> 00:33:00,000 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us Low 676 00:33:00,080 --> 00:33:03,320 Speaker 1: five weekdays at ten am Eastern on applecar Play and 677 00:33:03,320 --> 00:33:06,280 Speaker 1: Android Auto with a Bloomberg Business Act. You can also 678 00:33:06,320 --> 00:33:09,520 Speaker 1: listen live on Amazon Alexa from our flagship New York 679 00:33:09,560 --> 00:33:12,960 Speaker 1: station Just Say Alexa playing Bloomberg eleven thirty. 680 00:33:14,440 --> 00:33:17,920 Speaker 5: I'm Alex d alongside Paul Sweeney. This is Bloomberg Intelligence Radio. 681 00:33:17,960 --> 00:33:20,040 Speaker 5: We bring you all the top news and business, economics 682 00:33:20,040 --> 00:33:22,360 Speaker 5: and finance. There are lens of our Bloomberg Intelligence folks. 683 00:33:22,360 --> 00:33:24,720 Speaker 5: They cover two thousand companies and one hundred and thirty 684 00:33:24,720 --> 00:33:28,440 Speaker 5: industries all around the world. And every Monday at this 685 00:33:28,600 --> 00:33:32,560 Speaker 5: time we tap our great folks over at Bloomberg BNF 686 00:33:32,640 --> 00:33:35,440 Speaker 5: originally or previously known as New Energy Finance. They are 687 00:33:35,480 --> 00:33:38,520 Speaker 5: the team in Bloomberg that tracks and analyzes the energy transition, 688 00:33:38,600 --> 00:33:41,720 Speaker 5: and I mean like anything from power to transport, commodities 689 00:33:42,000 --> 00:33:46,240 Speaker 5: to financing and government and government policy basically. So joining 690 00:33:46,320 --> 00:33:49,000 Speaker 5: us now is Tommins Rowlands Rees. He is a b 691 00:33:49,400 --> 00:33:52,560 Speaker 5: an EF head of research, so he does it all. 692 00:33:52,760 --> 00:33:56,080 Speaker 5: We wanted to focus though today on the Inflation Reduction Act. 693 00:33:57,000 --> 00:33:59,320 Speaker 5: It is very much on the chopping block and it 694 00:33:59,320 --> 00:34:01,240 Speaker 5: feels like a buyinary trade when it comes to the 695 00:34:01,320 --> 00:34:05,040 Speaker 5: US elections come November. What has happened over the last 696 00:34:05,080 --> 00:34:07,840 Speaker 5: two years in terms of deployment and projects and what 697 00:34:07,960 --> 00:34:09,000 Speaker 5: is still left to do. 698 00:34:10,560 --> 00:34:12,680 Speaker 15: I think the main thing that has happened, you know, 699 00:34:12,760 --> 00:34:14,720 Speaker 15: you'll see most of the money will have flowed through 700 00:34:14,840 --> 00:34:17,759 Speaker 15: into the build out of the power sect, particularly into 701 00:34:17,840 --> 00:34:20,320 Speaker 15: solar and wind and storage. Now there's a question of 702 00:34:20,360 --> 00:34:22,640 Speaker 15: whether that was all going to get built anyway, and 703 00:34:22,680 --> 00:34:24,120 Speaker 15: what you would say the real value of the Inflation 704 00:34:24,200 --> 00:34:26,800 Speaker 15: Reduction Act. There is been more of a buffer against 705 00:34:26,920 --> 00:34:30,319 Speaker 15: changing commodities prices. So when the Act, when the Act 706 00:34:30,440 --> 00:34:33,680 Speaker 15: was passed, natural gas was pretty expensive. It's come down 707 00:34:33,719 --> 00:34:36,640 Speaker 15: a whole lot since then. So at the time it 708 00:34:36,920 --> 00:34:38,520 Speaker 15: you know, you might have argued that that stuff was 709 00:34:38,520 --> 00:34:42,719 Speaker 15: going to get built anyway, but it it it. Yeah, 710 00:34:42,760 --> 00:34:45,399 Speaker 15: with the drop in prices, I think that actually maybe 711 00:34:45,400 --> 00:34:48,160 Speaker 15: it wouldn't happen, So it gave that stability to that sector. 712 00:34:48,640 --> 00:34:51,160 Speaker 15: Then outside of that, one of the big things we've 713 00:34:51,200 --> 00:34:55,120 Speaker 15: seen is the development of supply chains. You know, where 714 00:34:55,200 --> 00:34:57,799 Speaker 15: the US was really at a standing start with regards 715 00:34:58,719 --> 00:35:01,799 Speaker 15: batteries and so in particular, now we're seeing a lot 716 00:35:01,800 --> 00:35:05,240 Speaker 15: of factories being announced in different states across the country. 717 00:35:06,320 --> 00:35:10,759 Speaker 15: And then finally a real uptick in investment in hydrogen 718 00:35:11,600 --> 00:35:16,200 Speaker 15: electoralizer orders have significantly ticked upwards. Those are some of 719 00:35:16,200 --> 00:35:19,040 Speaker 15: the it's kind of kept the power sector on the 720 00:35:19,040 --> 00:35:21,800 Speaker 15: steady path that was on, and then it's really poured 721 00:35:21,920 --> 00:35:24,120 Speaker 15: fertilizer on the ground of some of these more nascent 722 00:35:24,160 --> 00:35:26,359 Speaker 15: technologies in. 723 00:35:26,280 --> 00:35:29,320 Speaker 2: Your world of you know, kind of managing this transition 724 00:35:29,760 --> 00:35:33,919 Speaker 2: to a cleaner energy. What is the political risk that 725 00:35:34,200 --> 00:35:36,080 Speaker 2: for this market, for this part of the world, if 726 00:35:36,080 --> 00:35:39,040 Speaker 2: we were to get a reelection of former President Trump, 727 00:35:39,080 --> 00:35:39,799 Speaker 2: what would that mean. 728 00:35:40,480 --> 00:35:42,440 Speaker 15: It's something we get asked about a lot, and actually 729 00:35:42,480 --> 00:35:46,080 Speaker 15: we're producing some research right now to really answer that question. 730 00:35:46,760 --> 00:35:49,960 Speaker 15: I think one of the things that we have concluded 731 00:35:50,160 --> 00:35:53,840 Speaker 15: is that actually the main provisions of the Inflation Reluction 732 00:35:53,960 --> 00:35:56,719 Speaker 15: Act are probably safe for a couple of reasons. One 733 00:35:56,760 --> 00:36:01,279 Speaker 15: is that in the US, it's so hard to change legislation, 734 00:36:01,560 --> 00:36:04,279 Speaker 15: you know, with you don't have a trifector, and you know, 735 00:36:04,320 --> 00:36:07,320 Speaker 15: whatever the result of the election, a trifector is somewhat unlikely. 736 00:36:07,800 --> 00:36:10,719 Speaker 15: And even if there was a Republican trifector, a lot 737 00:36:10,719 --> 00:36:13,160 Speaker 15: of the investment from the Inflation Reduction Act is going 738 00:36:13,200 --> 00:36:17,000 Speaker 15: into states and into districts represented by Republicans, So there's 739 00:36:17,920 --> 00:36:19,800 Speaker 15: they would have to have a really big majority in 740 00:36:19,840 --> 00:36:23,120 Speaker 15: both chambers of the House. So I think there are 741 00:36:23,200 --> 00:36:26,240 Speaker 15: certain aspects of the Inflation Reduction Act that could change. 742 00:36:26,320 --> 00:36:28,719 Speaker 15: There's how the laws are implemented. There's a lot of 743 00:36:28,719 --> 00:36:31,600 Speaker 15: regulations still being written around some of the tax credits, 744 00:36:31,920 --> 00:36:35,239 Speaker 15: and that could be written differently because that happens in 745 00:36:35,280 --> 00:36:39,680 Speaker 15: government agencies which report up to the executive branch. But 746 00:36:39,840 --> 00:36:44,600 Speaker 15: I think there's less risk than maybe one might assume how. 747 00:36:44,560 --> 00:36:46,719 Speaker 5: Much money still needs to get deployed. I just was 748 00:36:46,760 --> 00:36:48,880 Speaker 5: really struck by Sarah Week for example. It's where all 749 00:36:48,880 --> 00:36:50,840 Speaker 5: the energy people go and talk about stuff. It's a 750 00:36:50,840 --> 00:36:53,320 Speaker 5: big conference, happens in Houston every year, happens in March, 751 00:36:53,520 --> 00:36:56,840 Speaker 5: and Senator Secretary Granholm is really like, guys, come and 752 00:36:56,880 --> 00:36:59,279 Speaker 5: get money, like we have it, we will give it 753 00:36:59,320 --> 00:37:01,840 Speaker 5: to you. Come to us to let us give us money. 754 00:37:02,040 --> 00:37:03,799 Speaker 5: And some people don't like that. Some people are like 755 00:37:03,840 --> 00:37:06,200 Speaker 5: that just shows that we're spending money on stuff that 756 00:37:06,239 --> 00:37:07,920 Speaker 5: we don't necessarily need to spend money on. 757 00:37:08,440 --> 00:37:11,160 Speaker 15: Yeah, I mean, it's it's an interesting one because for 758 00:37:11,200 --> 00:37:14,440 Speaker 15: the most part, the Inflation Reduction Act is not a 759 00:37:14,560 --> 00:37:20,560 Speaker 15: pot of money, in that the majority of the investment 760 00:37:20,600 --> 00:37:22,640 Speaker 15: would come through tax credits, which are really just dependent 761 00:37:22,680 --> 00:37:25,080 Speaker 15: on how much stuff gets built. Where there is a 762 00:37:25,120 --> 00:37:27,239 Speaker 15: pot of money, and I should have come in with 763 00:37:27,280 --> 00:37:30,800 Speaker 15: the actual figure is the amount that's been authorized for 764 00:37:30,800 --> 00:37:34,239 Speaker 15: the Loan Program's office. So and that is the one 765 00:37:34,239 --> 00:37:36,759 Speaker 15: that is really politically under threat because that you know, 766 00:37:36,840 --> 00:37:39,560 Speaker 15: that was the the program in the past that was 767 00:37:39,600 --> 00:37:43,319 Speaker 15: associated with Cylendra. So there is this perception that this 768 00:37:43,480 --> 00:37:48,640 Speaker 15: is money being allocated to two companies that may fail, 769 00:37:49,320 --> 00:37:51,799 Speaker 15: and there's there's a lot of that money still yet 770 00:37:51,840 --> 00:37:55,800 Speaker 15: to be spent currently, and it's it's it's an ongoing process. 771 00:37:56,600 --> 00:38:00,360 Speaker 2: What industries are doing relatively well versus their bench marks, 772 00:38:00,440 --> 00:38:02,399 Speaker 2: versus maybe some industries that aren't. We were just talking 773 00:38:02,440 --> 00:38:05,360 Speaker 2: to Brian Egger from Boomberg Intelligence about the cruise industry 774 00:38:05,400 --> 00:38:07,279 Speaker 2: and their carbon footprint and trying to manage that. Which 775 00:38:07,360 --> 00:38:09,280 Speaker 2: industries are doing well, which maybe you're struggling. 776 00:38:10,680 --> 00:38:12,640 Speaker 15: I suppose on I think of things on a really 777 00:38:12,680 --> 00:38:15,000 Speaker 15: macro level, so you know, I divide the world into 778 00:38:15,040 --> 00:38:18,399 Speaker 15: power and transport and industry, which obviously is a real, 779 00:38:18,600 --> 00:38:22,560 Speaker 15: real simplification. Most of them are. Momentum in decarbonization to 780 00:38:22,680 --> 00:38:25,360 Speaker 15: date in the US has been in the power sector, okay, 781 00:38:25,480 --> 00:38:28,200 Speaker 15: and most of that has been because of gas plants 782 00:38:28,239 --> 00:38:31,400 Speaker 15: replacing coal plants, which doesn't get you to zero. It 783 00:38:31,520 --> 00:38:35,359 Speaker 15: just brings emissions down in the near term. So wind 784 00:38:35,400 --> 00:38:38,200 Speaker 15: and solar is then the next wave, and that's really 785 00:38:38,239 --> 00:38:40,680 Speaker 15: starting to kick in now. So there is good progress 786 00:38:40,680 --> 00:38:45,600 Speaker 15: in power. Then transport historically hasn't had great success in 787 00:38:45,640 --> 00:38:48,200 Speaker 15: reducing its emissions, but I think we're just at the 788 00:38:48,239 --> 00:38:50,960 Speaker 15: start of the electric vehicle wave, which is gonna, I think, 789 00:38:51,000 --> 00:38:52,720 Speaker 15: be a slow burn over the a couple of decades, 790 00:38:52,719 --> 00:38:56,680 Speaker 15: because even if electric vehicle sales increase quickly, it takes 791 00:38:56,719 --> 00:38:58,840 Speaker 15: time for the whole vehicle fleet to turn over. But 792 00:38:59,080 --> 00:39:03,120 Speaker 15: there is a downward trajectory in transport. So it's really 793 00:39:03,640 --> 00:39:06,640 Speaker 15: industry where what we call the hard to abate sectors, 794 00:39:06,680 --> 00:39:07,320 Speaker 15: where there's. 795 00:39:07,080 --> 00:39:09,640 Speaker 5: More work to be done, like some men steel that 796 00:39:10,200 --> 00:39:12,440 Speaker 5: kind of fun stuff before I let you go. What 797 00:39:12,480 --> 00:39:14,600 Speaker 5: I've also noticed when it comes to the IRA specifically, 798 00:39:14,640 --> 00:39:17,080 Speaker 5: it really helped ignite the demand side of it, right 799 00:39:17,239 --> 00:39:19,400 Speaker 5: excuse me, the supply side of it with tax credits, 800 00:39:19,400 --> 00:39:21,479 Speaker 5: but not the demand side. So the gap between here's 801 00:39:21,480 --> 00:39:23,680 Speaker 5: my cool hydrogen thing that I just built and then 802 00:39:23,719 --> 00:39:25,880 Speaker 5: here's this company buying that cool hydrogen thing that I 803 00:39:25,960 --> 00:39:28,440 Speaker 5: just built is wide. Yes, how do we solve that? 804 00:39:28,760 --> 00:39:32,400 Speaker 15: I mean, that's very especially true for hydrogen, and that 805 00:39:32,520 --> 00:39:37,400 Speaker 15: is fundamentally the issue around the policy support that hydrogen 806 00:39:37,440 --> 00:39:39,640 Speaker 15: receives is it's so much has been focused on supply, 807 00:39:40,840 --> 00:39:43,040 Speaker 15: but I think it speaks to a deeper issue of 808 00:39:43,040 --> 00:39:45,279 Speaker 15: what policy has to come next, because I think the 809 00:39:45,360 --> 00:39:49,560 Speaker 15: nature of the Inflation Reduction Act was really throwing a 810 00:39:49,600 --> 00:39:52,600 Speaker 15: lot at all these different industries to get things kick started. 811 00:39:53,480 --> 00:39:56,399 Speaker 15: It's a bit like putting petrol in the engine. Maybe 812 00:39:56,440 --> 00:39:59,719 Speaker 15: not the best analogy such, but it put petrol in 813 00:39:59,719 --> 00:40:02,560 Speaker 15: the end of the energy transition in the US. But 814 00:40:02,640 --> 00:40:04,560 Speaker 15: whatever comes next needs to be more like a steering 815 00:40:04,560 --> 00:40:08,719 Speaker 15: wheel because it's established this momentum. But there are all 816 00:40:08,800 --> 00:40:10,839 Speaker 15: these questions now that are you know, we never knew 817 00:40:10,880 --> 00:40:13,680 Speaker 15: we'd have this problem of oh, there's too much supply, 818 00:40:13,800 --> 00:40:16,160 Speaker 15: where's the demand because at the time there was no 819 00:40:16,239 --> 00:40:18,520 Speaker 15: supply in no demand. Yeah, so the next wave of 820 00:40:18,520 --> 00:40:21,520 Speaker 15: a legislation has to address that, whether it's some hydrogen 821 00:40:21,600 --> 00:40:23,640 Speaker 15: or a steering wheel. 822 00:40:23,719 --> 00:40:24,080 Speaker 4: I like that. 823 00:40:24,080 --> 00:40:25,759 Speaker 5: We're gonna use that, We're gonna steal it, all right, Thomas, 824 00:40:25,800 --> 00:40:28,040 Speaker 5: thanks a lot. Thomas Rowlands rees he is a bl 825 00:40:28,760 --> 00:40:31,280 Speaker 5: Bloomberg be any app head of research. 826 00:40:31,320 --> 00:40:34,799 Speaker 1: Thank you so much for This is the Bloomberg Intelligence podcast, 827 00:40:34,920 --> 00:40:38,799 Speaker 1: available on apples, Spotify, and anywhere else you get your podcasts. 828 00:40:39,080 --> 00:40:42,120 Speaker 1: Listen live each weekday ten am to noon Eastern on 829 00:40:42,200 --> 00:40:45,560 Speaker 1: Bloomberg dot Com, the Ihart Radio app, tune In, and 830 00:40:45,640 --> 00:40:48,600 Speaker 1: the Bloomberg Business app. You can also watch us live 831 00:40:48,719 --> 00:40:52,120 Speaker 1: every weekday on YouTube and always on the Bloomberg terminal