Speaker 1: This is the Bloomberg Surveillance Podcast.
Speaker 2: I'm Tom Keane, along with Jonathan Farrow and Lisa Abramowitz.
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Speaker 3: Peter Sheer talking about similarly November as an incredible year
Speaker 3: head of macrostrategy at Academy Security, is an incredible year
Speaker 3: that may or may not be repeatable in the coming year,
Speaker 3: that is December. How much do you lean against some
Speaker 3: of the moves that we saw last week, Pete so one.
Speaker 4: I'm starting to lean against tragedies a little bit. I
Speaker 4: think four twenty is a little bit too low given
Speaker 4: the data. I don't like the fact that either ten
Speaker 4: year real yields are right around two percent or five
Speaker 4: year five year break evens are back to right around
Speaker 4: two percent and its Last month's FED meeting was really
Speaker 4: about marketed done the work for the FAD. This month's
Speaker 4: meeting is going to be about well the market undid
Speaker 4: all that work, so I think rates have got ahead
Speaker 4: of themselves. On the equity side of things, I think
Speaker 4: we've seen for the last couple of weeks this move
Speaker 4: where the Russell two thousand disruptive stocks have outperformed from
Speaker 4: the broad indices, and I think that actually continues into
Speaker 4: you're at.
Speaker 2: Peter, you're so good at use of cash, and I
Speaker 2: want to go to the use of cash right now
Speaker 2: of one mister and missus Zuckerberg Bloomberg reporting on the
Speaker 2: sale of the Zuckerbergs of a very large amount of
Speaker 2: Facebook shares. It's a little bit smaller than what Peter
Speaker 2: share has in Meta if you will, but they are
Speaker 2: out right now with some news on that, and Peter,
Speaker 2: I think this does get the use of cash. It
Speaker 2: gets to dive, it an increase, it gets to share
Speaker 2: buyback and maybe executives unloading their stock after in this
Speaker 2: case one hundred and seventy two percent surge.
Speaker 1: Peter helped me here with where we are in use
Speaker 1: of cash.
Speaker 2: If we see people like the zucker Berg's selling shares.
Speaker 4: Listen, I think we've had this phenomenal run in the
Speaker 4: Magnificent seven. The leadership has been very narrow all year.
Speaker 4: People have been talking about that and since November ninth,
Speaker 4: and we brought up I think last week and video
Speaker 4: earnings were very telling as well, and video earnings were
Speaker 4: probably five. Stock went down, but markets rallied and I'm
Speaker 4: really looking the disruptive stocks are doing well. You see
Speaker 4: Spotify up there today for various reasons. I think you're
Speaker 4: going to see regional banks continue to do well, commercial
Speaker 4: real estate Russell two thousand, all the small caps, all
Speaker 4: the things that people have left behind. Is people are
Speaker 4: trying to think out where do I put my cash
Speaker 4: right now, especially if you missed five percent on the
Speaker 4: ten uere. Those kind of look interesting. I think have
Speaker 4: some momentum coming at a year end.
Speaker 2: I'm absolutely fascinating, Peter, let's meld the two together. I mean,
Speaker 2: are we going to see bond issuance to support equity ownership.
Speaker 2: I mean, whether it's the miracle of Zuckerberg's and Facebook up,
Speaker 2: Meta up is well, I mean, I think it's almost
Speaker 2: a jumble into next year.
Speaker 4: Yeah, I think we are going to see more bond issuance.
Speaker 4: If you know, we've been certainly talking to some of
Speaker 4: our corporate issuers recommending that they get out ahead of
Speaker 4: this right we are at ten percent or sorry, five percent.
Speaker 4: On ten years, we're at four point two percent. You
Speaker 4: can save some money there. Credit spreads have actually done
Speaker 4: very well. We're at the lowest spreads all year. So
Speaker 4: issue some bonds support your equity. Also, I think we
Speaker 4: could see some M and A activity finally start picking up.
Speaker 4: It's been look at. At the end of the summer,
Speaker 4: you might get a bit of that. But now you've
Speaker 4: had this stability reasonably long enough, I think you get
Speaker 4: some interesting transactions done coming into the new year.
Speaker 2: The phrase from twelve months ago and Lisa, I give
Speaker 2: you you coined this. It's almost a toxic brew of
Speaker 2: risk on is where we are.
Speaker 3: Which is the reason why a lot of people might
Speaker 3: say it might have gone too fast. But it's hard
Speaker 3: to lean against Peter. Just to Tom's point, the news
Speaker 3: is that Mark Zuckerberg is selling MetaStock for the first
Speaker 3: time in two years, and this comes after the incredible
Speaker 3: run up, and you're seeing the shares in pre market
Speaker 3: trading down about one and a half percent on Meta.
Speaker 3: It raises this larger question of what do you lean against.
Speaker 3: You said you think treasury is at rates have gone
Speaker 3: too far. A lot of people, I think are starting
Speaker 3: to pick that up, which is maybe why you're seeing
Speaker 3: a bit of a retracement today on the equity side.
Speaker 3: Are you hearing anyone lean against some of the tech
Speaker 3: names that have gone incredibly far so far this year
Speaker 3: and frankly the year that was November.
Speaker 4: I'm not sure if many people are actually leaning against them.
Speaker 4: I think it's still a fairly crowded trade to be
Speaker 4: long those, but I would be very comfortable being short QQQ,
Speaker 4: so the Nasdaq one hundred versus long IWM, the Russell
Speaker 4: two thousand. I think trades like that are actually well
Speaker 4: positioned for the next few weeks, and at some point
Speaker 4: I do think we probably want to turn barish on
Speaker 4: this market. Maybe we get to forty six fifty on
Speaker 4: the S and P, maybe the Russell two thousand can
Speaker 4: run another five percent. But if the economic date it
Speaker 4: starts coming in as week as probably needs to be
Speaker 4: to support for twenty ten years, then I think equities
Speaker 4: are going to roll over a little bit. But that's
Speaker 4: probably not this week, next week. That's probably closer to
Speaker 4: the end of year, early January.
Speaker 3: So how would Russell two thousand outperform Nasdaq in that scenario, right,
Speaker 3: because at this point, if you start thinking about weaker
Speaker 3: economic growth that supports the on call Why then with
Speaker 3: some of the most leveraged to the economy companies, the
Speaker 3: smaller companies do the best.
Speaker 4: Because I think people have been avoiding those stocks all
Speaker 4: year long and crowded into the other stocks. So it's
Speaker 4: all going to be about what's crowded, right, And if
Speaker 4: you start getting nervous about the economy, people are going
Speaker 4: to turn around and say, oh, we've got to cut
Speaker 4: our wrist. Well, guess what if you don't own a
Speaker 4: lot of Rustle two thousand, you can't sell the Russell
Speaker 4: two thousand, So you're gonna wind up selling what you have.
Speaker 4: And I think that's just the nature of this market
Speaker 4: right now. That's the crowded trade. That's where people piled into.
Speaker 4: So if we get nervous about the economy, that's actually
Speaker 4: going to sell off harder because that's where people are overweight.
Speaker 2: Peter, we're's sixty forty twelve months from now.
Speaker 4: No, probably where it's always been. That's kind of has
Speaker 4: this attraction. That's one of the things that kind of
Speaker 4: just keeps on going along with covered call writing people
Speaker 4: like those strategies. I think you want to be probably
Speaker 4: underweight treasuries right now in that sixty forty. You want
Speaker 4: to be more towards the front end because I think
Speaker 4: the next move should be slightly higher and yields back
Speaker 4: to four forty maybe on tenure, but you still want
Speaker 4: to play around that. You want these balanced portfolios, and
Speaker 4: you want to also see what can we do outside.
Speaker 4: Actually for the first time in multiple years, for the
Speaker 4: last two weeks and hasn't been working yet. I like
Speaker 4: Chinese stocks more on a trade. I think long term
Speaker 4: I don't want to invest in China, but for a
Speaker 4: trade they're fair.
Speaker 2: Peter, thank you so much for the comments, particularly they're
Speaker 2: on Meta as a Zuckerberg's unload stock as well.
Speaker 1: We're in good company right now.
Speaker 2: An FX George, Sarah Bellos's global head of FX research
Speaker 2: at Deutsche Bank. George, throughout your note, there's this speed
Speaker 2: towards very weak inflation, in abrupt disinflation. How do we
Speaker 2: play that in foreign exchange?
Speaker 5: So I think tom next year is still going to
Speaker 5: be about these policy gaps. Which central bank is going
Speaker 5: to cut first and which one is going to lag
Speaker 5: or is it all going to be symmetric.
Speaker 6: And the way I think we're being.
Speaker 5: Set up for next year is that the DC is
Speaker 5: most likely to go first. If we look at the
Speaker 5: most recent inflation data, I would argue that ECB should
Speaker 5: actually be cutting next week.
Speaker 6: Inflation. Core inflation over the last three.
Speaker 5: Months is running below one percent, so we're not that
Speaker 5: far away from having to start thinking about deflation risks
Speaker 5: when we're discussing Europe, and of course the economy is
Speaker 5: also at best instagnation, so I would argue the market
Speaker 5: is right to price more ECB easing, but perhaps versus
Speaker 5: the US is getting quite ahead of itself.
Speaker 7: It's George, you've got some aggressive calls on both central banks. Now,
Speaker 7: then you've got a call on the Federal Reserve. You
Speaker 7: and a team I think one hundred and seventy basis
Speaker 7: points one hundred and seventy five basis points of cuts
Speaker 7: starting in June next year. Now, George, is a range
Speaker 7: of forecasts, as you know, for next year, but that's
Speaker 7: certainly not consensus. Can you explain to us all why
Speaker 7: you think we start in June but go a whole
Speaker 7: lot deeper than a lot of people think.
Speaker 5: Well, I think John Back goes back to the recession
Speaker 5: versus as a soft landing debate. And now, if you
Speaker 5: look at what the market's pricing at the moment, we
Speaker 5: have FET funds going to around reasonable elements of neutral,
Speaker 5: slightly above three percent. So the market is perfectly priced for.
Speaker 6: A soft landing, so to speak.
Speaker 5: So I think if we're looking at next year, the
Speaker 5: strongest wee I'd probably have is this bond equity correlation,
Speaker 5: which has been very positive. So you've had higher bond
Speaker 5: prices and higher equities at the same time. That's very
Speaker 5: unlikely to last because you're either into a soft.
Speaker 6: Landing and therefore you can't price lower FET funds anymore
Speaker 6: risk and continue going well.
Speaker 5: But if you do go into recession, then you'll you
Speaker 5: can most certainly price more cuts, but it's not.
Speaker 6: Going to be possible for equities to still value.
Speaker 5: So the last three four months have been great from
Speaker 5: an masset perspective because you've had this bond and equities.
Speaker 6: Going up at the same time.
Speaker 5: I think that's going to be very difficult to repeat
Speaker 5: itself for next year.
Speaker 3: That's on the US side. I want to just get
Speaker 3: you to elaborate a little bit when you're talking about
Speaker 3: your belief that the ECB should cut next week. You
Speaker 3: think that the Eurozone is facing deflation and that that
Speaker 3: risk is rising. What do you think will be the
Speaker 3: follow on response if the ECB goes ahead and does that.
Speaker 3: Do you think that they could then engineer a soft
Speaker 3: landing or do you think that they could just avoid
Speaker 3: the depths of a pretty significant downturn that you think
Speaker 3: hasn't been fully recognized.
Speaker 5: So I think it's important to distinguish between growth and inflation,
Speaker 5: and in fact, if I look at Europe, I would
Speaker 5: say it's the perfect definition of a soft landing, because
Speaker 5: what you have is growth are slow down and at
Speaker 5: the moment it's around zero. So we're debating maybe we
Speaker 5: get one or two quarters of neck to GDP. But
Speaker 5: as long as the ECB cuts, and I need to
Speaker 5: be careful of what I say, I think they should
Speaker 5: be cutting next week, I don't think they will. I
Speaker 5: think it's more likely precisely because they were late on
Speaker 5: the way in, so to speak, they'll be late on
Speaker 5: the way out.
Speaker 6: But as long as the ECB say.
Speaker 5: Cuts by March April, I think actually Europe's going to
Speaker 5: be in a relatively okay place where the economy soft
Speaker 5: lands and inflation comes back down to two percent or
Speaker 5: potentially below, But that's actually pretty good outcome. It's also
Speaker 5: quite a negative outcome for the exchange rate, but given
Speaker 5: how quick inflation is coming down.
Speaker 6: Probably a week of euro is not a bad thing
Speaker 6: for Europe at the moment.
Speaker 2: Cheorge over the weekend was a lot of zeitgeist hope
Speaker 2: in prayer of a strong yen, off of some form
Speaker 2: of policy change in Japan, a way for people to
Speaker 2: make big, big, big figures fast Do you buy it?
Speaker 6: So there's two ways to get a strong yen.
Speaker 5: One is that the back of Japan finally starts a
Speaker 5: proper hiking cycle. And what I mean by that is
Speaker 5: they say they're going to start hiking every meeting. That
Speaker 5: looks pretty unlikely, especially as the rest of the world
Speaker 5: is moving into an easing cycle.
Speaker 6: So I'd probably say that's the least likely outcome. But
Speaker 6: if you are in an environment where the.
Speaker 5: Other central banks are starting to come because inflation has
Speaker 5: come down, then you can get yen strength because it
Speaker 5: will be the outlier, so to speak, on the way
Speaker 5: out as it was on the way in. So I've
Speaker 5: been much more inclined to think about your strength from
Speaker 5: the global perspective rather than the domestic Japanese perspective.
Speaker 7: Dear Christaine, George thinks you will count next week. What
Speaker 7: do you think, George? And I don't worry it's not
Speaker 7: being the headline. George sara Velos at Deutsche Bank. George,
Speaker 7: thank you.
Speaker 2: Right now we are going to look at the climate
Speaker 2: affairs of Dubai and this was the World Bank in
Speaker 2: transition from David malpass over.
Speaker 1: To mister Rogan.
Speaker 2: What's so important here is his corporate work with Neslie
Speaker 2: And I'm Domestercard and the general elector with a conversation
Speaker 2: with a president of the World Bank, are Jen Zabajaja
Speaker 2: in Dubai?
Speaker 8: Jen?
Speaker 9: Yeah, thanks so much, Tom a Jay. They were just
Speaker 9: Tom was just giving you a really great intro there
Speaker 9: about how your previous career. Now you're at the World Bank,
Speaker 9: and let's just talk. In the first few months of
Speaker 9: your role, you've made climate finance a priority. I mean,
Speaker 9: can you talk to us about where you've seen progress
Speaker 9: and whether you think this is really a turning point
Speaker 9: for this discussion.
Speaker 10: You know, I think it's very important because the reality
Speaker 10: is that you've had the hottest year on record, we're
Speaker 10: aiming for another hot year.
Speaker 8: Clearly this has to change.
Speaker 10: And you can't make climate and fight the climate issue
Speaker 10: without money coming to work on it.
Speaker 8: So it's one of the most important things.
Speaker 10: When I traveled around the world, I picked up the
Speaker 10: impression that dealing with poverty cannot be by itself. You
Speaker 10: have to deal with climate, pandemics, fragility. These are all
Speaker 10: intertwining crisis. That's why we change our mission to include
Speaker 10: livable planet in addition to eradicating poverty. So this is
Speaker 10: what we're on and what I'm trying to do here
Speaker 10: to show you the progress, is to make a commitment
Speaker 10: that we will get to forty five percent of our
Speaker 10: financing annually. We'll go to climate by twenty twenty five,
Speaker 10: two years from now, not ten years from today. That's
Speaker 10: forty billion dollars a year working on climate finance.
Speaker 9: How do you do that? How do you adjust your
Speaker 9: balance sheet to ensure that?
Speaker 10: Yeah, the good news is there's also raising capital along
Speaker 10: the way thanks to this whole capital adequacy framework with
Speaker 10: the G twenty Goddess going with and we're also doing
Speaker 10: things like looking at whether we can securitize parts of
Speaker 10: our baran sheet, existing balance sheet, free up some capital,
Speaker 10: and then partnerships so you don't really do all that
Speaker 10: financing yourself. You can also get partnerships going. You know,
Speaker 10: I have great partners with the other multilateral banks, AI,
Speaker 10: eib EBRD, these are all people who work with us.
Speaker 10: So there's multiple ways to go at this. But at
Speaker 10: the end of the day, the much bigger issue here is,
Speaker 10: even if I do all that, even if the other
Speaker 10: multilateral banks do what they can, even if governments do
Speaker 10: all they can.
Speaker 8: You do need the private sector.
Speaker 10: You're going to need their ingenuity and technology and numbers, right.
Speaker 9: And that's what you've been spending the past few days
Speaker 9: talking a lot with the private sector. This is your
Speaker 9: first Cough, can you talk to us about I mean,
Speaker 9: give us a sense of what it's like in the
Speaker 9: room where there's consensus and where there's still gaps within
Speaker 9: the private sector in the collaboration.
Speaker 8: That's a great question.
Speaker 10: So the private sector issue is the private sector now
Speaker 10: knows that's solar and wind power per unit is cheaper
Speaker 10: than fossil fuel. That's proven with scale and technology. They
Speaker 10: know that it takes longer sometimes as a gestation period,
Speaker 10: and they know, they may have some higher capexet front
Speaker 10: because they've got to build grids and you can't just
Speaker 10: build the installed capacity, right, So they understand that. So
Speaker 10: why is it then that they aren't burning down the
Speaker 10: doors of countries to go do this?
Speaker 8: For two or three reasons.
Speaker 10: One is does the country have the capacity to absorb
Speaker 10: this kind of projects coming in?
Speaker 8: Can they connect the grids up? Can they do all that?
Speaker 10: But second, much more critical is the two kinds of
Speaker 10: risks that private sector investors don't like because they don't understand.
Speaker 10: They don't understand political risk and they don't understand foreign
Speaker 10: exchange risk in the emerging markets.
Speaker 8: Now, political risk we can help it.
Speaker 10: We have this this institution called MEGA our Interviews or
Speaker 10: our Guarantee Agency. We've now got approval to use that
Speaker 10: for every multilateral development bank. They can use our back
Speaker 10: office to issue guarantees. This does political risk guarantees and
Speaker 10: then lays them off in the reinsurance market.
Speaker 8: We need to scale them. It's the FX risk that's
Speaker 8: the much harder.
Speaker 9: Well, how do you get around that? I mean, because
Speaker 9: that's not going away in a lot of them right now.
Speaker 10: So in fact, people keep talking about local currency markets
Speaker 10: is the way to do it. The reality is developing
Speaker 10: a local currency market. The right depth and width to
Speaker 10: be able to do this well can take five ten years.
Speaker 8: We don't really have five or ten years.
Speaker 10: So I think we have to find instruments like could
Speaker 10: we do some local currency bond issuance that we subsidize
Speaker 10: the difference in costs through our balance sheet or our
Speaker 10: concessual financing. Can we do things with others where there's
Speaker 10: an institution called TCX which is created to help take
Speaker 10: some of the FX risk in these markets. Can we
Speaker 10: scale them up and so on and so forth. Can
Speaker 10: we do creative swaps where using our rating we are
Speaker 10: at a lower price and of the country world.
Speaker 8: Hard FX risk is the hardest one. Yeah.
Speaker 9: I mean, so then a Jay, when we talk about
Speaker 9: the progress, then at the end of COP twenty eight,
Speaker 9: your first COP, I mean, what does that look like
Speaker 9: for you? What is it that you're shooting for? Because
Speaker 9: there have been a number of initiatives and pledges, of
Speaker 9: course the World Bank has been a part of some
Speaker 9: of those. I mean, what then does progress look like
Speaker 9: in the next few days.
Speaker 10: So I've got five very clear things I'm measuring on
Speaker 10: what we are doing. And the first one was getting
Speaker 10: that forty five percent of financing that we talked about
Speaker 10: in that fifty percent for mitigation, fifty percent for adaptation,
Speaker 10: So we don't only do emission avoidance. We also care
Speaker 10: about adapting and resilient infrastructure in the global cyll thing
Speaker 10: that's very important.
Speaker 8: The second big one is methane.
Speaker 10: Methane is eighty times more toxic than carbon dioxide, but
Speaker 10: it only gets two percent of climate financing. So what
Speaker 10: we are doing is we've got actual projects on the
Speaker 10: ground on rice tidy cultivation, livestock management and waste management.
Speaker 10: Is scaling those, is saying we're going to get to
Speaker 10: fifteen countries in eighteen months and over the course of
Speaker 10: these projects take out ten million tons of methane from
Speaker 10: the system.
Speaker 8: Third one is Africa. Six hundred million.
Speaker 10: People in Africa don't have access to electricity. We've got
Speaker 10: a project approved by our board five billion of finance
Speaker 10: from IDA, our lowest price guarantee kind of the cheapest
Speaker 10: fund location, ten billion through governments in private sector. We're
Speaker 10: going to connect one hundred million people in seven years.
Speaker 10: Two power solar power, including the grids that need to
Speaker 10: be existing to make this happen at scale. The fourth
Speaker 10: one is voluntary carbon markets. So I think the only
Speaker 10: way you transfer resources at scale from the developed world
Speaker 10: to the developing world for what the developing world deserves
Speaker 10: to be paid for, which is forests and natural resources,
Speaker 10: is voluntary carbon markets.
Speaker 9: So there's a lot of criticism about carbon market.
Speaker 10: Yes, there is, because people felt that the credits were
Speaker 10: coming weren't genuine credits. So you just picked on exactly
Speaker 10: the topic that's really important, verifiable genuine credits of integrity.
Speaker 10: How what determine whether these markets will work. So what
Speaker 10: I'm doing is I'm not doing a carbon market where
Speaker 10: I'm not involved. I'm doing carbon markets with projects for
Speaker 10: the World Bank is doing a forestry project in a country.
Speaker 10: So we're starting with four to fifteen by the end
Speaker 10: of next year. We think these countries will generate twenty
Speaker 10: four million credits next year itself, in one hundred and
Speaker 10: twenty five over five or six years. I'm certifying the
Speaker 10: environmental integrity through a jurisdictional loudic and I'm also certifying
Speaker 10: the social integrity that most of the money they earn
Speaker 10: will go to the communities and the indigenous.
Speaker 8: People in that area. I think if you do things
Speaker 8: like that, and you.
Speaker 10: Do them with consistency, you will create the right kind
Speaker 10: of carbon markets for tomorrow.
Speaker 8: You're only getting five bucks the.
Speaker 9: Credit right, so yes, but still a lot to go.
Speaker 9: But glad to have you here, Bloomberg. Excuse me, A
Speaker 9: j Bonga with the World Bank, A Ji, thank you
Speaker 9: so much.
Speaker 7: For your time, Thanks to join, Thank you, Thanks very
Speaker 7: John back to you, Hey, Jen, thank you. We've got
Speaker 7: to go, Jennifer Sabazangi there and at Jack Banker the
Speaker 7: World Bank President.
Speaker 2: David Turk joins us now with Secretary Grand Homiees US
Speaker 2: Deputy Energy Secretary David thank you so much for joining us,
Speaker 2: and you do so with your service to the nation
Speaker 2: of six seven and eight jobs in climate. The immovable
Speaker 2: fact is we're trying to do something about coal. My
Speaker 2: latest reading is China's really not doing something about coal.
Speaker 2: What is the Department's timeline in America to diminish coal usage?
Speaker 11: Well, first of all, Tom at Lisa, thanks for the time,
Speaker 11: and I really appreciate you being being with you today.
Speaker 11: So we've got to look across the board. It's not
Speaker 11: just coal, it's natural gas, it's oil. We've got to
Speaker 11: look at all the sources of emissions, and we've got
Speaker 11: to have a plan to build all the new clean energy.
Speaker 11: And this is what we've got in the US. We've
Speaker 11: got historic levels of funding through the pieces of legislation,
Speaker 11: the Bipartisan and Infrastructure legislation, the Inflation Reduction Act. We're
Speaker 11: building out our clean energy future like never before in
Speaker 11: our country. It's quite staggering.
Speaker 1: We're what we're doing.
Speaker 2: I go with that, and of course, of the ft
Speaker 2: this morning, a huge difference between a complete, compte, complete
Speaker 2: climate commitment in Europe to the fractured battle you fight
Speaker 2: every day in the United States. But to look at
Speaker 2: coal is one example, particularly with the Chinese just ignoring
Speaker 2: the debate on coal from everything I read, what is
Speaker 2: the administration's path to shut down or diminish coal usage
Speaker 2: across America.
Speaker 11: So we've seen dramatic declines in coal in our country
Speaker 11: and that's projected to continue going forward. It's because we
Speaker 11: have cheaper, better alternatives solar and wind. On the solar
Speaker 11: penetration we've got in our country, the wind, other clean
Speaker 11: energy technologies, they're just simply cheaper and better, and so
Speaker 11: the market is reacting to those incentives.
Speaker 3: David, I'm looking right now at WTI crew treated on
Speaker 3: the IMAX at seventy three dollars and forty six says
Speaker 3: this is a good time to start refilling the strategic
Speaker 3: petroleum reserve.
Speaker 11: So we have been and we're going to be optortunistic
Speaker 11: and we're going to take every advantage when the price
Speaker 11: is at the right level to make a good deal
Speaker 11: for taxpayers, we're going to refill. So we are refilling
Speaker 11: as much as we can. We've been doing that for
Speaker 11: the last several months, and at this price level, we'll
Speaker 11: keep doing it.
Speaker 3: And it's been about three million barrel a month purchase
Speaker 3: that the Energy Department has been making. Do you plan
Speaker 3: to accelerate that though, as prices do continue to fall.
Speaker 11: So that is the physical limit of how much we
Speaker 11: can buy back. We've got some lifetime extensions in some
Speaker 11: of our caverns. We actually have four separate facilities for
Speaker 11: separate sites for our strategic petroleum reserve, so we will
Speaker 11: be doing at least three million barrels, and we hope
Speaker 11: we can bring more capacity online at these price levels
Speaker 11: to buy as much as we can to refill to
Speaker 11: make sure we've got that available when we need it
Speaker 11: in the future, so we'll buy as much back as
Speaker 11: we possibly can, but there are some physical constraints given
Speaker 11: the way the caverns.
Speaker 5: Are set up.
Speaker 3: We've been talking a lot about some of the consolidation
Speaker 3: in the shale patch, with a number of companies coming
Speaker 3: to the latest coming this morning. Is a thing from
Speaker 3: the Energy Department standpoint or a bad thing.
Speaker 11: So as you know, a lot of decisions that are
Speaker 11: made in the energy sector, certainly in our country, or
Speaker 11: private sector decisions along those lines, and we're certainly seeing
Speaker 11: that happen as well. I think one good thing we've
Speaker 11: certainly seen is a focus from a lot of companies,
Speaker 11: including here at the Climate Conference, on reducing methane emissions.
Speaker 11: This is something we've been after for quite some time.
Speaker 11: Our EPA colleagues recently announced some big news here in
Speaker 11: terms of the new regulatory structure to really do what's
Speaker 11: the biggest no brainer I think in the history of
Speaker 11: no brainers on climate is reduced methane emissions in the
Speaker 11: oil and gas sectors. So we're really stepping up on that,
Speaker 11: and we're seeing some companies step up on that beyond
Speaker 11: what they're required to do in the US.
Speaker 1: I'll take your point on it. There's some real traction
Speaker 1: on that, you know. I want to go back here.
Speaker 2: You are an advisor fresh out of Virginia to Senators Biden,
Speaker 2: Senator Conrad, You've had eighteen jobs and energy. You've arguably,
Speaker 2: David Turk, Republicans and Democrats have more experience than anybody
Speaker 2: breathing today.
Speaker 1: Hey, how did we.
Speaker 2: Get to being an opex sized oil nation all of
Speaker 2: a sudden, We're like as big as a rocker.
Speaker 1: You know, I'll let you decide what it is.
Speaker 2: How did we get to this hydrocarbon success that America
Speaker 2: is today?
Speaker 11: Well, first of all, Tom, thanks for the compliment. I'll
Speaker 11: make sure my mom sees this. And here's such a nice,
Speaker 11: nice compliment. I think the short answer is, we are
Speaker 11: a private sector market. Unless you have federal laws, federal restrictions,
Speaker 11: the private sector will do what the private sector will do.
Speaker 11: And they found a lot of profit and a lot
Speaker 11: of opportunity, including and especially in shale in our country.
Speaker 2: What do you say to the critics of the Biden
Speaker 2: administration that it is not private sector centric?
Speaker 11: So look at the numbers, look at where the production
Speaker 11: levels are at. We also need to of course, focus
Speaker 11: on the emissions coming from all of that oil and gas,
Speaker 11: not only that produce in the US, but around the world.
Speaker 11: And one disappointment I have to say here at the
Speaker 11: Climate Conference is, while we've made some progress on methane emissions,
Speaker 11: that's a big deal, I don't think there's as much
Speaker 11: focus as there needs to be on oil and gas
Speaker 11: Scope three emissions. That is, those emissions produced when that
Speaker 11: oil that gasoline goes into the atmosphere. Scope three emissions
Speaker 11: are actually ten times the amount of Scope one in
Speaker 11: Scope two for many oil and gas companies. So we
Speaker 11: need a lot more focus on Scope three emissions. We
Speaker 11: need a real credible plan for dealing with those emissions.
Speaker 3: David, does it make it kind of awkward for the
Speaker 3: US to have a leadership position in reducing emissions at
Speaker 3: COP twenty eight given the fact that US production has
Speaker 3: increased to a record pace, even as it's cut in
Speaker 3: places like Saudi Arabia and cutter.
Speaker 11: So I feel incredibly proud to be part of this
Speaker 11: historic Biden administration when it comes to climate change. In fact,
Speaker 11: we're actually seeing our emissions decrease in the US three
Speaker 11: percent in twenty twenty three, despite GDP growth healthier than
Speaker 11: just about every other country in the world. And what
Speaker 11: you've seen is with the historic pieces of legislation all
Speaker 11: we're doing in this administration, we're expected already, just in
Speaker 11: these few short years of policy to actually double our
Speaker 11: emission reductions by twenty thirty forty plus reductions just from
Speaker 11: the actions from this administration. That's an impressive record, and
Speaker 11: we need to do more. All countries around the world
Speaker 11: need to do more given the climate challenges that we face,
Speaker 11: and we're already seeing in our world today.
Speaker 1: David Turk, thank you so much.
Speaker 2: She is a deputy US Energy Secretary, of course from Dubai.
Speaker 2: Looking at United Delta and American Airlines is Helene Becker,
Speaker 2: senior research channel is TD Cowen. Why did this happen?
Speaker 2: Is this too many dinosaurs mating? What's the why here
Speaker 2: versus UNI, Delta and American?
Speaker 12: Hi, tom So, I think the why is twofold. First
Speaker 12: of all, this is a continuation of the consolidation we've
Speaker 12: seen in the past for the industry, but also during
Speaker 12: the pandemic, we didn't have the consolidation we probably should
Speaker 12: have had we had the government stepping in to save
Speaker 12: the airline industry, and unfortunately they couldn't save everybody. So
Speaker 12: now you're getting that wash out. And I think for
Speaker 12: Alaska and Hawaiian specifically, it really will help them cross
Speaker 12: the bridge to the other side of the river, so
Speaker 12: to speak, where where they'll be able to survive as
Speaker 12: a consumer.
Speaker 1: Brand away from the financial part.
Speaker 2: Helene Becker, where is the where is the flight that
Speaker 2: really is going to add value?
Speaker 8: Here?
Speaker 2: Is it lax to Hawaii something John's taken a million times?
Speaker 2: What's the fly where you thought, Wow, this is where
Speaker 2: the synergy can happen.
Speaker 12: Yeah, I think it's more Hawaii to the mainland for
Speaker 12: people who come. First of all, Hawaii, as you know,
Speaker 12: is very remote. I think it's the most one of
Speaker 12: the most remote places on Earth and one of the
Speaker 12: hardest to get to. And so for people who live
Speaker 12: in the islands, they do tend to go either inter
Speaker 12: island or to the west coast. They don't really reach
Speaker 12: too much into the mainland, and if they want to,
Speaker 12: it's usually a one it's usually more than a one
Speaker 12: stop flight. For Alaska, it gives them the opportunity to
Speaker 12: be bigger. I think the combined airline will have over
Speaker 12: three hundred aircraft revenue will be about thirteen to fourteen
Speaker 12: billion dollars, So it's not like they're close right your
Speaker 12: comment before about American Delta United, those are fifty billion
Speaker 12: dollar revenue companies. These are small and they serve a purpose.
Speaker 12: People fly them. They fly eighty eighty five percent low factors.
Speaker 12: They both deliver a great product. You're not really changing
Speaker 12: a whole lot, unlike with Jeff Blue and Spirit, where
Speaker 12: you're changing more. Not to say that merger shouldn't occur,
Speaker 12: but we're looking at airlines to your right again, to
Speaker 12: your point, be four Hawaiians up what one hundred and
Speaker 12: eighty percent pre market, and that's primarily because under five dollars,
Speaker 12: the market's telling you these companies can't survive. And we
Speaker 12: have a lot of airlines in that under five dollars
Speaker 12: trading range right now, and so we're seeing that consolidation
Speaker 12: that should have probably already occurred.
Speaker 13: It's a direct Newark Hawaii United.
Speaker 1: No way you can fly directly from it.
Speaker 13: You can fly direct from Newark on United.
Speaker 1: I did not know.
Speaker 13: Yes, it did give me a break.
Speaker 7: Let's get into it a line. Not that the important
Speaker 7: stuff Jet Blue and Spirit. How do the between Jetlu
Speaker 7: and American Airlines crushed? What will they allow? What won't
Speaker 7: they allow? We can see this morning that Alaska are
Speaker 7: making a very clear statement that they don't think this
Speaker 7: is anti competitive. They're complementary businesses. The overlap is only
Speaker 7: twelve routes, three percent of their total seats. Can you
Speaker 7: frame for us what is allowed and what isn't?
Speaker 12: Yeah, I think this Justice Department doesn't like anything big.
Speaker 12: And it's not like these guys were going to be big.
Speaker 12: Jet bluin Spirit isn't big, right? They go to be
Speaker 12: the fifth largest, Jet Blue spiritus to be the fifth largest,
Speaker 12: Alaska Hawaiian is going to be right in there, five six,
Speaker 12: something like that. It's not like we're going to take
Speaker 12: over the fourth largest spot. Jet Blue and Spirit are
Speaker 12: nine percent on a combined basis. This is even smaller.
Speaker 12: So I suspect that if they look at this on
Speaker 12: a I don't know the right word, just the way
Speaker 12: they should on a not with a jaded eye where
Speaker 12: they're just looking at it, does this deal makes sense?
Speaker 12: They should come away with yes, this transaction does make sense.
Speaker 3: Well, Helene, just to put a bow on that, if
Speaker 3: they approve this transaction, do they have to approve Spirit
Speaker 3: and Jet Blue.
Speaker 12: Well Spirit Jeff Blue should have is where it belongs. Right,
Speaker 12: they're in court closing arguments start tomorrow, should take to
Speaker 12: the end of the week, I would think if even
Speaker 12: that long, and then the judge renders his decision. So,
Speaker 12: I mean, the one word answer releases yes, they should
Speaker 12: just move on and go fight other battles.
Speaker 3: How much is this going to be some sort of
Speaker 3: consolidation of aircraft's, consolidation of workers, consolidation of operations, and
Speaker 3: how much is it going to be just the actual
Speaker 3: geography of these places. People go to Hawaii in the
Speaker 3: winter time and people go to Alaska in the summertime,
Speaker 3: and they can offset each.
Speaker 12: Other right exactly. So two things there to think about.
Speaker 12: They're both kind of bucketless trips. Right from the mainland,
Speaker 12: especially the East coast. It's fifteen hours NonStop on the
Speaker 12: United flight out of Newark. Hawaiian flights out of JFK,
Speaker 12: they used to fly out of Boston. That flight I
Speaker 12: think came back post pandemic, so they do fly here
Speaker 12: on a NonStop basis, but those are a fifteen hour flights,
Speaker 12: so those are bucketless strips. If you're coming from the
Speaker 12: East coast. In terms of operations, they said last night
Speaker 12: that they're going to operate the two separately, one operating certificate,
Speaker 12: but two separate brands, sort of the way hotel chains
Speaker 12: do it, right, you have fourteen or fifteen brands under
Speaker 12: one major holding company. Same thing here. They're going to
Speaker 12: just operate Hawaiians separately and Alaska separately because both companies
Speaker 12: really do have great brands and they're well loved by
Speaker 12: the people who fly them a.
Speaker 7: Lot Alane, Just to wrap things up, to get your topic,
Speaker 7: the airlines have bounced recently, but it's still some twenty
Speaker 7: seven percent from the attitude we hit back in the summer.
Speaker 13: Do you like that?
Speaker 2: Yes?
Speaker 13: Like part of that line. What is your topic? At
Speaker 13: the moment?
Speaker 7: We have busiest day on record for US Airport's only
Speaker 7: a couple of Sundays ago and these stalks over the
Speaker 7: last few months. Yes, more recently of rally, but it's
Speaker 7: been difficult since the July peak.
Speaker 12: Yeah, people have been worried about the consumer recession, et cetera.
Speaker 12: So our best idea for twenty twenty three was United
Speaker 12: and our best idea for twenty twenty four is Delta.
Speaker 13: Why the change lane.
Speaker 12: So the change primarily came for two reasons. One, United
Speaker 12: it's been our best idea for the past two years
Speaker 12: and it's mostly worked. But they're embarking on a sixty
Speaker 12: billion dollars ten year capex program, and we don't think
Speaker 12: Delta's is going to be quite as suggressive. We think
Speaker 12: Delta's will be smaller than that. At some point they'll
Speaker 12: have to replace the seven to one sevens. They'll probably
Speaker 12: do that with E T twenties, but it's a much
Speaker 12: smaller capex program. Delta has a similar footprint to United.
Speaker 12: They're just a little bit bigger domestically than United. United's
Speaker 12: fifty to fifty domestic international, while Delta's more like sixty.
Speaker 12: So we just pivoted a little bit to to Delta.
Speaker 12: The balance sheet, the order book, those are a couple
Speaker 12: of the reasons why.
Speaker 13: I appreciate the update. Line A line back for a
Speaker 13: t account.
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