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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moven news.

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Speaker 3: Find the Bloomberg Markets podcast called Apple Podcasts or wherever

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Speaker 3: you listen to podcasts, and at Bloomberg dot com Slash podcast.

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Speaker 3: Another deal in the energy space, this time Chesapeake Energy.

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Speaker 3: I'm going to buy Southwestern Energy for seven point four

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Speaker 3: billion dollars in an all stock deal.

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Speaker 1: So I mean crazy, which means we get the opportunity

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Speaker 1: to speak to our good friend Vince Piazza, senior industry

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Speaker 1: analysts covering all the energy space for Bloomberg Intelligence. Of course,

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Speaker 1: the highlight of his career, former sportscaster, talk show host

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Speaker 1: at the famed WFUV radio station at Fordham University, which

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Speaker 1: has launched so many legendary broadcasting careers, particularly in the

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Speaker 1: sports biz. Vince, we'll talk radio at another time. Let's

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Speaker 1: talk about this deal here. What's going on in your business?

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Speaker 4: Here?

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Speaker 1: It is the consolidation is fast and furious, isn't it?

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Speaker 4: It really is?

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Speaker 5: And we talked about this in our outlook for twenty

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Speaker 5: twenty four, the consolidation continues. You know, we have reached

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Speaker 5: a maturity phase in this industry. We had the shakeout

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Speaker 5: and now you have established players looking for increased scale

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Speaker 5: and concentration. You're selling a commodity, there's little differentiation. The

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Speaker 5: only way you can differentiate is by having more of

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Speaker 5: it so that you can gain efficiencies, economies of scale,

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Speaker 5: better productivity. And this is a prime example, Paul. Right,

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Speaker 5: So you have two very large players getting together to

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Speaker 5: form the third largest natural gas producer behind Chevron and Exxon.

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Speaker 5: So this is a globally relevant producer that will have

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Speaker 5: access via its exposure to the Hainesville shale, to Gulf

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Speaker 5: Coast markets, Seaborn markets, and being able to push those

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Speaker 5: flows out there in the international marketplace, which allows for

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Speaker 5: greater diversification of selling hubs. You know, they're going to

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Speaker 5: be exposed roughly twenty twenty five percent to that Seaborn market.

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Speaker 5: They're going to have various selling hubs that they can

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Speaker 5: push product through something like over two dozen. So the

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Speaker 5: deal makes sense on paper. What I don't think most

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Speaker 5: folks are really focusing on, and I invite you all

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Speaker 5: to touch base with the Jennifer Reesho's our anti trust specialist.

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Speaker 5: This deal will get lots of scrutiny. I think a

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Speaker 5: deal like EQT buying up Quantum assets for about four

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Speaker 5: and a half billion, that deal took about a year

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Speaker 5: to close. So this is a much larger deal. It's

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Speaker 5: much more concentrated in two very important specific plays, and

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Speaker 5: so I think that's going to get a lot more scrutiny.

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Speaker 5: So this isn't a done deal, but on paper, it

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Speaker 5: is a very rational approach to a commoditized marketplace.

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Speaker 6: Yeah, you read my mind, Vince, because I was going

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Speaker 6: to ask you what does FTC think on these you know,

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Speaker 6: large large gas and oil deals. I got to talk

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Speaker 6: about this whole trend of consolidation. Are we going to

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Speaker 6: see this continue into twenty twenty four? I mean, is

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Speaker 6: this going to be a big part of all these

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Speaker 6: companies gaining scale.

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Speaker 5: Yeah. As part of our outlook, we looked at gas

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Speaker 5: in general relative to oil, and we have we have

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Speaker 5: had all of these deals in the Permian, but gas

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Speaker 5: deals have been rather quiet in twenty twenty three, and

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Speaker 5: that's because of the way the benchmarks performed in twenty

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Speaker 5: twenty three. We think that that gas the worst is

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Speaker 5: the worst is passed that gas, we could see better

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Speaker 5: improvement in tighter markets for twenty twenty four. We think

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Speaker 5: the market tightness will show itself in the second half,

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Speaker 5: so we think we will have more consolidation in a

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Speaker 5: natural gas space. This will likely set things off. How

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Speaker 5: EQT responds, which was the largest producer, still is the

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Speaker 5: largest producer until this deal closes. How they respond will

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Speaker 5: be very important. And Taro and CNX have been relatively

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Speaker 5: absent from the M and A game. How they respond

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Speaker 5: will be very important as well. So it will likely

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Speaker 5: set off a mini way of decisions that many of

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Speaker 5: these operators will have to make in order to gain

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Speaker 5: that scale. The scale and concentration is very important when

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Speaker 5: you're selling a commoditized asset.

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Speaker 1: So Vince, I see the stock of Chesapeake Energy is

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Speaker 1: actually up about six percent. You don't often or always

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Speaker 1: see that when you Acquier makes a deal here because

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Speaker 1: there might be some delution concerns. Why do you think

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Speaker 1: this stock is up here? Is just a good good

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Speaker 1: valuation aside from the strategic side to it.

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Speaker 5: I think it's exclusively about the strategic rationale behind the deal.

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Speaker 5: And when you think about the twenty twenty five strip,

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Speaker 5: things should look better for natural gas, natural gas market,

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Speaker 5: natural gas sentiment in general. So I think it's a

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Speaker 5: vote of confidence about the deal, and I think it's

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Speaker 5: a voted confidence for nat gas going forward. You want

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Speaker 5: to have more assets in concentrated hands and more solid hands.

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Speaker 1: How fragmented vince Er does this natural gas and still

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Speaker 1: remain Are there private players out there that can be

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Speaker 1: rolled up? Or are we looking at a handful of

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Speaker 1: public companies that just have to figure out who's going

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Speaker 1: to go with who?

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Speaker 5: Yeah, So if you think about where Chesapeake came from

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Speaker 5: and where Southwestern came from, even EQT, you saw public

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Speaker 5: buying private as the pe firms monetize their legacy investments

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Speaker 5: to regenerate that capital. What we're going to see now,

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Speaker 5: I think is still a good amount of public buying private.

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Speaker 5: But I think now we're going to see public on

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Speaker 5: public mergers, mergers of equals, low premium consolidation as well,

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Speaker 5: because I think the next step is investors still want

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Speaker 5: to see free cash flow. They want to see the

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Speaker 5: return of excess cash. We had all this investment in

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Speaker 5: the space during shale one point zero, where a lot

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Speaker 5: of capital was sunk in the ground to prove up

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Speaker 5: the assets. We now have these assets proved up. It

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Speaker 5: is a manufacturing process now, and now we've hit the

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Speaker 5: point of maturity where there's not a lot of growth capital.

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Speaker 5: So it's really sucking out that excess cash, growing at

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Speaker 5: a more modest space, controlling your expenses because you have

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Speaker 5: that scale, because you have that concentration, and generating that

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Speaker 5: free cash flow that right now in general is in

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Speaker 5: the high to high a single digits to low team

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Speaker 5: for the industry, and giving back that capital to the

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Speaker 5: investor base. That is not really an issue, and a

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Speaker 5: lot of the maturities have been pushed out, so leverage

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Speaker 5: isn't merely a concern.

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Speaker 6: Haven's before you go, I have to ask APA's kal

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Speaker 6: on purchase.

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Speaker 1: I read j aricle.

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Speaker 6: You said, it's not all it's cracked.

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Speaker 1: Up to be.

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Speaker 5: Yeah. So it's interesting because usually when you consolidate, and

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Speaker 5: you consolidate for scale, you are buying up near acreage

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Speaker 5: or near assets. In this case, the assets seem to

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Speaker 5: be somewhat diffuse from where APA is historically located. So

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Speaker 5: I think this that deal was done to generate cash flow.

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Speaker 5: As a cash flow bridge for APA to get past

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Speaker 5: this period of uncertainty when their longer term, their longer

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Speaker 5: cycle assets come online.

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Speaker 1: Evin's always going to talk to you. That's a deal

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Speaker 1: flow in your space. We appreciate you giving us some

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Speaker 1: time here as we try to piece it all together.

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Speaker 1: Vince Piazza, he's a senior energy analyst at Bloomberg Intelligence.

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Speaker 1: Another deal in the natural gas space, the shale space.

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Speaker 1: So we stay on top of it. The good analysts,

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Speaker 1: the research channels go and keep on top of it

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Speaker 1: as well.

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Speaker 4: You're listening to the team.

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Speaker 7: Ken's our live program, Bloomberg Markets weekdays at ten am

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Speaker 7: Eastern on Bloomberg dot com, the iHeartRadio app and the

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Speaker 7: Bloomberg Business app, or listen on demand wherever you get

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Speaker 7: your podcasts.

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Speaker 1: James Safer joins us here and this is the guy

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Speaker 1: to speak to. He, along with Eric baltunis at Bloomberg Intelligence,

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Speaker 1: the leading research on ETF's period for as long as

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Speaker 1: we've been doing this at Bloomberg Intelligence, these are the

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Speaker 1: folks that really are on top of it, and they've

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Speaker 1: been on top of this Bitcoin ETF because it's such

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Speaker 1: a big deal in the world of ETFs. James, thanks

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Speaker 1: so much for joining us. I know you're super busy

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Speaker 1: here today. When we have eleven new bitcoin ETFs hit

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Speaker 1: the market, I don't know what to look at. Which

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Speaker 1: one should I look at? Which ones are important? What

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Speaker 1: are you guys looking at?

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Speaker 8: So I'm looking at all of them, Okay, I want

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Speaker 8: to see how all of them are doing. The thing

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Speaker 8: is everyone's going to try to figure out what happened

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Speaker 8: with flows right problem is we don't know what's happening

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Speaker 8: with flows right now. I'm sure there's some trading desks

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Speaker 8: and the authorized participants in the banks, that these brokerages,

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Speaker 8: they know what's happening with flows, but we won't see

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Speaker 8: it till after market clothes today that said, what we

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Speaker 8: can watch is volume, and that's what I'm watching. We're

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Speaker 8: right around two billion dollars already and traded in all

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Speaker 8: eleven of these ETFs. It's being led by GBDC from Grayscale,

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Speaker 8: and then I BIT from black Rock, and then you

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Speaker 8: have Fidelity and ARC are following suit. Now I think

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Speaker 8: there's no what like I said, there's no way to

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Speaker 8: know which way the flows are going in this volume.

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Speaker 8: It's significant, this is a huge launch, but I have

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Speaker 8: my guesses.

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Speaker 1: And the guess is we'll pay for the guests.

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Speaker 8: Yeah. Yeah, I'm fairly confident that this money. GBDC, they

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Speaker 8: are trading with the tightest spread too. That's something else

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Speaker 8: I'm watching, trying to see who's trading the tightest on

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Speaker 8: that bidass spread. GBDC is trading very tight, So we're

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Speaker 8: most of these other ones, there's no there's no one

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Speaker 8: really trading out of line. But I think GVTC is

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Speaker 8: seeing significant outflows. I've called for GVTC to see outflows

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Speaker 8: in my research because they left their fee at one

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Speaker 8: point five percent. All these other guys are at zero,

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Speaker 8: So there's significant capital in there. Might be locked up

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Speaker 8: with cap gains, but there's a lot of it that's

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Speaker 8: going to be leaving because they don't want to be

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Speaker 8: paying that fee anymore.

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Speaker 6: So how much money are these eleven likely to generate?

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Speaker 8: How much money generate is in flows or it generates

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Speaker 8: in revenue?

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Speaker 4: Yeah?

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Speaker 1: Coming in, I mean like we don't. Yeah, Like, are

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Speaker 1: they gonna all go out there and start buying bitcoin

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Speaker 1: kind of thing?

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Speaker 9: Yeah, I mean.

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Speaker 8: That's exactly what's happening, right, They are going to be

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Speaker 8: They're gonna be buying bitcoin. This money that's coming in.

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Speaker 8: It's the question is figuring out how much of it

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Speaker 8: is new money buying bitcoin versus shifting around like we're

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Speaker 8: seeing likely right now with greyscale, money's pouring out. As

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Speaker 8: far as how much money's being made, most the only

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Speaker 8: one making real money right now is greys Scale, who's

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Speaker 8: are charging I fee, but they're seeing money pour out

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Speaker 8: everyone else for the most part, most of them are

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Speaker 8: offering zero fee waivers, so it's literally free to hold

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Speaker 8: these things for the next six months. So there everyone's

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Speaker 8: doing everything they can to get assets for the long

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Speaker 8: term play to keep those assets and then earn fees

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Speaker 8: on them. And even the fees of the long term

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Speaker 8: they're really low. They're competitive with other ETFs in the

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Speaker 8: US landscape.

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Speaker 1: How big is this for I mean you guys, you

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Speaker 1: and Eric and your team, they have a team. I'm like,

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Speaker 1: we have to have a team for ETFs and they're like, yeah, yes,

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Speaker 1: so we built a team.

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Speaker 9: How big is this.

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Speaker 1: Bitcoin thing in the overall scheme of kind of ETFs.

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Speaker 8: So we we like to look at this and we

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Speaker 8: like the media tends to cover like ninety five percent

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Speaker 8: of what is in your Sorry, let me restart.

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Speaker 9: Yeah, the media tends to look at stuff.

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Speaker 8: It's five percent of your portfolio, but the media spends

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Speaker 8: ninety five percent of it.

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Speaker 9: And that's what's happening here with bitcoin, right.

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Speaker 8: Like we think these bitcoin ETFs could get to something

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Speaker 8: like one to two percent of overall ETF assets four

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Speaker 8: or five years from now crypto ETFs in general. But

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Speaker 8: that's it. That said, this is really interesting, it is fascinating.

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Speaker 8: There's politics at play, there's a lot of money at play.

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Speaker 8: There's a lot of big names at play. I mean

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Speaker 8: I just mentioned black Rock my shares in Vesco.

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Speaker 1: Well, like one of the things that we've been talking about,

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Speaker 1: like gold, how many gold atfs are there?

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Speaker 9: I mean gold is gold is gold?

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Speaker 1: How he differentiate one ETF versus another? So how many

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Speaker 1: goldietfs are there? I don't know the exact number of

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Speaker 1: the top of my head. It's somewhere around eight or nine, okay,

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Speaker 1: so you'd be surprised.

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Speaker 9: And a lot of them.

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Speaker 8: So State Street is the main one they offer GLD,

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Speaker 8: but Blackrock also one has one IAU and each of

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Speaker 8: those have a sibling that charges a quarter of what

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Speaker 8: the other one charges. So GLDM mini shares and IAU

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Speaker 8: M also mini shares essentially, and they just undercut themselves

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Speaker 8: because they have enough liquidity in the other products. And

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Speaker 8: then they offer this cheaper portfolio diversifire that people can

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Speaker 8: use and only charge like ten bases points to hold it.

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Speaker 6: My mind is blown, right, So the SEC approval, this

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Speaker 6: is not the SEC giving that, you know, stamp of

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Speaker 6: approval to bitcoin.

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Speaker 1: Correct?

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Speaker 4: Yes?

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Speaker 9: Correct?

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Speaker 8: I mean if you read the letters from some of

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Speaker 8: the Democratic Commissioners yesterday after they approved this thing, and

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Speaker 8: Chairman Gary Gensler he kind of approved this thing tongue

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Speaker 8: in cheeks that the courts were forcing us. But at

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Speaker 8: the end of the day, what they were saying is true.

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Speaker 8: It's the reason why we've been saying the SEC shouldn't

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Speaker 8: have been denying the Bitcoin ETFs in the most recent

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Speaker 8: denials because the SEC is not a merit regulator. Their

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Speaker 8: job is not to say whether an investment has merit.

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Speaker 8: Their job is to make sure that the proper disclosures

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Speaker 8: are made and let investors decide whether it has merits.

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Speaker 8: So they aren't supposed to be the ones dictating whether

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Speaker 8: there's value here. Let the end investors choose, which is

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Speaker 8: what's happening here and why I think it's right that

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Speaker 8: these things are now trading.

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Speaker 1: So just to be clear, because Rich Truman, my intrepid producer,

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Speaker 1: pointed out earlier, what did Gary Ginstler do from a

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Speaker 1: vote perspective that Gary Ginster the chairman of the SEC.

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Speaker 1: Did he vote for this against us? Did he vote

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Speaker 1: for it with like a big asterisk next to it

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Speaker 1: or what happened?

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Speaker 8: Yeah, I guess the way to think about it what

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Speaker 8: he's voted with an asterisk. So the way that the

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Speaker 8: SEC is set up is it's by a five member commission, right,

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Speaker 8: so typically it's two Democrats, two Republicans and a chairman

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Speaker 8: and the person who appoints the chairman as the president.

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Speaker 8: So typically, right now, it's run by the Democrats. Okay,

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Speaker 8: so what happened here is the two Democrats dissented on

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Speaker 8: this decision, the two Republicans agreed with it, and Gary

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Speaker 8: Gensler was the deciding vote that got this pushed through.

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Speaker 9: I think it was all a political move.

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Speaker 8: The Democrats didn't want to have to do this, They

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Speaker 8: didn't really have much of a choice as far as unconcerned,

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Speaker 8: so by Gary being the siding vote saying yeah, I

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Speaker 8: know we have to do this based in the courts

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Speaker 8: and these other things, but we really don't like it.

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Speaker 9: We didn't want to do it.

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Speaker 1: I hate to get into politics when we're talking money,

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Speaker 1: which is my preferred thing to talk about. But why

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Speaker 1: would the Democrats not want this?

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Speaker 5: Yeah?

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Speaker 8: They, I mean Elizabeth Warren specifically is since she's raising

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Speaker 8: an anti crypto army, she hates that.

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Speaker 9: She hates the cryptocrowd. I mean, I understand some of it.

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Speaker 8: There's been a lot of fraud, a lot of manipulation,

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Speaker 8: a lot of bad okay bad at space, So I

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Speaker 8: get why they don't like it, but that's not the

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Speaker 8: entire space. And like I said, the SEC shouldn't be

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Speaker 8: a merit regular that they shouldn't be deciding whether there's

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Speaker 8: merit and an investment. They should worry.

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Speaker 1: The SEC was also saying we regulate securities and we

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Speaker 1: don't think this is a security right. It's also one

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Speaker 1: of their arguments.

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Speaker 8: Correct, but we have I mean, gold is not a

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Speaker 8: security either, it's a commodity. So bitcoin technically is going

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Speaker 8: to be regulated, is regulard by the CFTC. But still

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Speaker 8: the bitcoin ETFs are regulated by the SEC because ETFs

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Speaker 8: are securities.

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Speaker 9: Which brings me to another point.

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Speaker 8: One of the reasons why these are so important is

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Speaker 8: many of these institutions they can't hold anything but securities

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Speaker 8: or bonds, what have you.

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Speaker 9: This puts them in rapper.

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Speaker 8: That now institutions, advisors and more people can can play

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Speaker 8: with bitpoint, they can't touch the underlying stuff for the

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Speaker 8: most part.

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Speaker 1: All right, So you and Eric are gonna come out

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Speaker 1: with some research tonight after the close that I have

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Speaker 1: what what are you guys like really tracking what's going

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Speaker 1: to be? I don't know what what's your call here?

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Speaker 1: We're ten forty eight am. It's just been a good

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Speaker 1: day for DTF biz and crypto.

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Speaker 9: It's been an obscenely good day.

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Speaker 8: I mean, we're probably I mean I haven't been at

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Speaker 8: my desk for a while looking at the volumes, but

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Speaker 8: I'm guessing we're over two billion in trading volume at

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Speaker 8: this point. I mean, that is a monster day. That's

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Speaker 8: not something you really.

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Speaker 1: That's a monster day for an ETF launch kind of

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Speaker 1: how you're phrasing it.

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Speaker 8: Yes, exactly, it even still like for a brand new ETF.

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Speaker 8: It's it's exceptionally well. I mean, even if you take

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Speaker 8: GBTC out which is trust that was trading over the

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Speaker 8: counter is now a ETF. These are still having very

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Speaker 8: big trading days. Like even if these things were only

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Speaker 8: trading this number two billion for the entire day after

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Speaker 8: we take out Gradescale, I would say that's a successful day.

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Speaker 8: I said, if they get over over a billion, over

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Speaker 8: two billion, I think that's a pretty successful day.

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Speaker 9: We're only uh, we're only an hour and change into

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Speaker 9: this day, so all.

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Speaker 1: Right, see how it goes. All right, we'll follow your

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Speaker 1: research folks, big on the terminal for terminal users, get

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Speaker 1: the research all on the EETF business James Seifert ETF

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Speaker 1: research channels for Bloomberg Intelligence. Thanks for taking the time,

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Speaker 1: but coming into our studio again. Some big ones I'm following, Grayscale,

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Speaker 1: Bitcoin Trust, GBTC, the I shares one ib it. That's

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Speaker 1: what I'm looking at.

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Speaker 5: This is Bloomberg.

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Speaker 7: You're listening to the tape catch are live program Bloomberg

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Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 7: tune in app, Bloomberg dot com.

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Speaker 4: And the Bloomberg Business app.

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Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

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Speaker 1: Let's talk about this market here. We're just talking with

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Speaker 1: Jess mettin there, but let's think about kind of where

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Speaker 1: we go in twenty twenty four after that stellar you know,

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Speaker 1: ten eleven week run there. At the end of twenty

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Speaker 1: twenty three, we got a professional in the Bloomberg Interactive

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Speaker 1: Broker studio. Joe Mazzoli's a managing director of trader Education

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Speaker 1: at Charles Schwab. Joe, again, that last finish we had

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Speaker 1: there in twenty twenty three, I haven't seen anything. I've

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Speaker 1: been doing this a long time. I haven't seen anything

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Speaker 1: like that in a while. What did you guys at

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Speaker 1: Schwab make of that performance? You're so both in the

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Speaker 1: equity markets and in the fixed income market.

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Speaker 4: You know, for me, there's one word rotation.

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Speaker 10: I think that that was a big change from what

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Speaker 10: we saw basically all at twenty twenty three. When you

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Speaker 10: think about the fact that in March of twenty twenty

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Speaker 10: three yet you know, the financial meltdown if you will,

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Speaker 10: that's when megacap just really caught a bit right. Everybody said,

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Speaker 10: we want to move into companies that have high free

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Speaker 10: cash flow. We feel a little bit more comfortable with that.

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Speaker 10: I mean people are looking at these megacaps as almost

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Speaker 10: like a I don't want to say a hedge, but

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Speaker 10: maybe a safe haven. And then as you get towards

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Speaker 10: the end of the year, what happens. You get a

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Speaker 10: dubbish fed if you will, you get CPI that's come

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Speaker 10: down quite a bit, and then people say, hey, we

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Speaker 10: can feel more comfortable rolling back into maybe some of

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Speaker 10: the sectors that hadn't performed as well. And that's exactly

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Speaker 10: what we saw from our clients.

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Speaker 6: Now, new Year, new things that you guys are launching.

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Speaker 6: I want to get into that Schwab Trading Activity index.

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Speaker 6: So what exactly does this offer?

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Speaker 1: What data comes out for December?

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Speaker 10: Yeah, it's a it's a cool name, stacks Y, right,

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Speaker 10: people remember that one, stacks.

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Speaker 4: I like that one.

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Speaker 10: Basically, stacks is it's a behavioral index, right. So we're

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Speaker 10: looking at kind of what our clients are doing. They're

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Speaker 10: trading activity in their accounts. So what's interesting is we

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Speaker 10: use like a you know, we have millions of clients, right,

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Speaker 10: so we look at a sample size and we say

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Speaker 10: where are the net buys versus what are the nets cells?

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Speaker 10: And we use that to come up with a medium

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Speaker 10: a median excuse me, sample, and that gives us a number,

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Speaker 10: generates a number. So right now, for December, we generated

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Speaker 10: number forty four and a half and the range traditionally

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Speaker 10: is around thirty to seventy thirty five to seventy, so

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Speaker 10: it's actually a moderately low end, but it is a

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Speaker 10: step up from what we saw in November. And interestingly enough,

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Speaker 10: you know, you might have thought that given the strength

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Speaker 10: that we saw in December, that would be higher. But

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Speaker 10: I think when you look at the equities that were

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Speaker 10: bought and that were sold, it makes it makes it different.

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Speaker 10: So we had net buyer, excuse me, we had net buyers,

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Speaker 10: but the equities that were bought were Pfizer, Ali Baba

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Speaker 10: really okay video and the ones that were sold, you know,

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Speaker 10: these were the ones that were a little bit that

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Speaker 10: had already moved up your apples, your metas you know

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Speaker 10: these are, and even Tesla.

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Speaker 4: So there was a rotation.

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Speaker 10: And like I said, the rotation that we saw within

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Speaker 10: our clients kind of mimicked what you saw in the

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Speaker 10: overall market.

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Speaker 1: So what are you telling your clients these days? I mean,

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Speaker 1: you know, Tom King has a nice expression.

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Speaker 9: The courage to be in the markets.

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Speaker 1: You know, what do you see from your retail clients?

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Speaker 1: Are they in the market? You feel like they're fully

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Speaker 1: invested their cash? I hear nothing I hear about is

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Speaker 1: there's six train dollars of cash on the sidelines. What

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Speaker 1: do you see at your place?

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Speaker 10: Is now you know we had you know, the old saying,

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Speaker 10: right time in the market versus timing the market.

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Speaker 4: Yep.

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Speaker 10: That's hard for me because I'm a trader, right and

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Speaker 10: for me, you know, I like to look at different indicators,

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Speaker 10: and that's kind of how I look at the stacks.

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Speaker 4: Right.

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Speaker 10: If you're if you're a short term trader or you know,

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Speaker 10: a day trader, stacks probably doesn't help you a lot

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Speaker 10: by looking at sentiment. But if you're an investor and

440
00:20:09,600 --> 00:20:11,399
Speaker 10: you think about, what are all the tools that I

441
00:20:11,440 --> 00:20:14,120
Speaker 10: have in my toolbox? Right, you got your fundamental analysis,

442
00:20:14,200 --> 00:20:16,720
Speaker 10: you got your technical analysis, Well now you have that

443
00:20:16,960 --> 00:20:19,960
Speaker 10: sentiment analysis that helps. So you know what we're what

444
00:20:20,000 --> 00:20:22,639
Speaker 10: we're telling clients right now is you know, be patient.

445
00:20:22,840 --> 00:20:25,760
Speaker 10: I think we expect some volatility throughout the year, and

446
00:20:25,760 --> 00:20:27,240
Speaker 10: I think a lot of that has to do with

447
00:20:27,280 --> 00:20:29,760
Speaker 10: the fact that you know, in the in the fixed

448
00:20:29,760 --> 00:20:33,520
Speaker 10: income market send five or six cuts. We don't see

449
00:20:33,520 --> 00:20:35,760
Speaker 10: that many. We see about three to four. So as

450
00:20:35,800 --> 00:20:38,520
Speaker 10: you get closer to that March date, what's going to

451
00:20:38,600 --> 00:20:39,400
Speaker 10: happen if it.

452
00:20:39,320 --> 00:20:40,760
Speaker 4: Doesn't look like the Fed's going to cut.

453
00:20:40,840 --> 00:20:44,080
Speaker 10: Does that start to creep volatility back into the fixed

454
00:20:44,119 --> 00:20:47,359
Speaker 10: income market, which you saw last year in turn, you know,

455
00:20:47,440 --> 00:20:49,080
Speaker 10: created equity volatility as well.

456
00:20:49,200 --> 00:20:51,639
Speaker 6: Joe, I got to touch on CPI on that came ount.

457
00:20:52,240 --> 00:20:54,360
Speaker 6: Do you think from the from the figures that came

458
00:20:54,400 --> 00:20:56,440
Speaker 6: out from it, I mean, is that showing that it's

459
00:20:56,440 --> 00:20:58,679
Speaker 6: going to take a little bit longer for these rate.

460
00:20:58,560 --> 00:20:59,200
Speaker 9: Cuts to happen.

461
00:20:59,440 --> 00:21:02,040
Speaker 10: Yeah, well, I mean, in my opinion, think about it

462
00:21:02,119 --> 00:21:04,600
Speaker 10: this way. I don't think anybody ever thought that it

463
00:21:04,640 --> 00:21:06,440
Speaker 10: was going to be a straight lined, down right straight

464
00:21:06,480 --> 00:21:07,359
Speaker 10: line down to two percent.

465
00:21:07,400 --> 00:21:09,280
Speaker 4: It's a bumpy road, but we've.

466
00:21:09,040 --> 00:21:11,679
Speaker 10: Made a lot of progress, I think instead of you know,

467
00:21:11,680 --> 00:21:15,119
Speaker 10: we're not talking deflation, we're talking disinflation. But it's gonna

468
00:21:15,119 --> 00:21:18,160
Speaker 10: take some time. I noticed that on the FED watch tool,

469
00:21:18,200 --> 00:21:20,119
Speaker 10: you know, you went from about a sixty five percent

470
00:21:20,200 --> 00:21:22,199
Speaker 10: chance of a cut in March down to fifty nine

471
00:21:22,240 --> 00:21:24,880
Speaker 10: percent or sixty percent. They're still pricing in a lot

472
00:21:24,880 --> 00:21:27,560
Speaker 10: of cuts, and I just I just don't know if

473
00:21:27,560 --> 00:21:29,480
Speaker 10: you're gonna get that. Maybe you get that in March,

474
00:21:29,480 --> 00:21:31,600
Speaker 10: but I think that the Fed's probably gonna say, if

475
00:21:31,600 --> 00:21:33,720
Speaker 10: we make this cut in March, let's play wait and

476
00:21:33,760 --> 00:21:35,360
Speaker 10: see and let's see what happens from there.

477
00:21:35,480 --> 00:21:38,280
Speaker 1: So the story today, Joe for us here at Bloomberg

478
00:21:38,359 --> 00:21:41,040
Speaker 1: Radio and TV is the Bitcoin ETFs.

479
00:21:41,119 --> 00:21:41,959
Speaker 9: Yeah.

480
00:21:41,960 --> 00:21:44,720
Speaker 1: So as now there's eleven ETFs that if people want

481
00:21:44,720 --> 00:21:46,720
Speaker 1: to get exposure to. I'm going to call it this

482
00:21:46,760 --> 00:21:50,840
Speaker 1: asset class. I'm not sure what Gary Gensel would agree,

483
00:21:51,280 --> 00:21:53,560
Speaker 1: but and ETFs have been such a growth story. I mean,

484
00:21:53,800 --> 00:21:56,480
Speaker 1: nobody knows it better than the good folks at Schwab.

485
00:21:57,200 --> 00:21:59,440
Speaker 1: How does what are your clients? How do you think

486
00:21:59,440 --> 00:22:02,240
Speaker 1: they're going to react to this opportunity, this investment opportunity.

487
00:22:02,320 --> 00:22:04,119
Speaker 4: Yeah, I mean I think they'll be demand. I do.

488
00:22:04,200 --> 00:22:06,600
Speaker 10: I think they'll be demand for the ETF, especially when

489
00:22:06,600 --> 00:22:09,040
Speaker 10: you think about client accounts. Right, if you want to

490
00:22:09,080 --> 00:22:12,080
Speaker 10: trade futures, you have to have a certain level of

491
00:22:12,880 --> 00:22:14,760
Speaker 10: you know, we call it level three, right, that gives

492
00:22:14,760 --> 00:22:17,080
Speaker 10: you permission to trade futures. So if you have the

493
00:22:17,119 --> 00:22:19,080
Speaker 10: ability to do that through an ETF. It opens up

494
00:22:19,119 --> 00:22:21,600
Speaker 10: a lot more possibilities for IRA accounts, you know, for

495
00:22:21,960 --> 00:22:25,080
Speaker 10: clients who don't have margin trading ability, So I think

496
00:22:25,119 --> 00:22:30,159
Speaker 10: there will be demand there. What I also question is, also,

497
00:22:30,440 --> 00:22:34,040
Speaker 10: you know, where does bitcoin fit within an investment portfolio.

498
00:22:34,640 --> 00:22:37,200
Speaker 10: I think this idea that in twenty two and twenty

499
00:22:37,240 --> 00:22:40,399
Speaker 10: three it was meant to be, you know, a hedge,

500
00:22:40,480 --> 00:22:43,320
Speaker 10: or it was meant to be an alternative asset. I mean,

501
00:22:43,359 --> 00:22:45,760
Speaker 10: basically what it did was it became a levered asset

502
00:22:45,800 --> 00:22:48,560
Speaker 10: of the Nasdaq. Right, So I don't know exactly where

503
00:22:48,560 --> 00:22:50,560
Speaker 10: it fits, but you know, that's up to the clients

504
00:22:50,560 --> 00:22:51,160
Speaker 10: to decide.

505
00:22:51,240 --> 00:22:53,119
Speaker 6: So speaking of where things fit, I mean, so we

506
00:22:53,160 --> 00:22:55,879
Speaker 6: talk about CPI, we talk about bitcoin. We can't forget

507
00:22:55,960 --> 00:22:58,680
Speaker 6: jobless claims came out today lower than expected. So where

508
00:22:58,720 --> 00:23:00,359
Speaker 6: does the labor or get fit into the picture.

509
00:23:00,560 --> 00:23:02,760
Speaker 10: Well, it's interesting because even though you got a good

510
00:23:02,800 --> 00:23:06,040
Speaker 10: print on last Friday for non farm payrolls, even though

511
00:23:06,080 --> 00:23:09,800
Speaker 10: you got jobless claims below, look at the revisions. The

512
00:23:09,880 --> 00:23:12,639
Speaker 10: revisions are actually moving in the wrong direction. So I

513
00:23:12,640 --> 00:23:14,280
Speaker 10: think that's something to kind of keep an eye on.

514
00:23:14,560 --> 00:23:16,639
Speaker 10: You know, you can look at that headline flash number

515
00:23:16,720 --> 00:23:19,240
Speaker 10: and it and it paints a rosy picture. But when

516
00:23:19,240 --> 00:23:21,000
Speaker 10: you look at the revisions and when you look at

517
00:23:21,080 --> 00:23:23,119
Speaker 10: kind of the the the we don't look at just

518
00:23:23,200 --> 00:23:25,760
Speaker 10: that number. We look at the momentum, and we look

519
00:23:25,840 --> 00:23:28,720
Speaker 10: at you know, what's happening over the last six months

520
00:23:28,840 --> 00:23:31,280
Speaker 10: or so. You're starting to see the jolts. Numbers come down, right,

521
00:23:31,359 --> 00:23:34,560
Speaker 10: job openings are less uh even, and even though you're

522
00:23:34,560 --> 00:23:37,680
Speaker 10: getting jobless claims that are better than expected, it's still

523
00:23:37,680 --> 00:23:40,040
Speaker 10: moving in a different direction. One thing I would keep

524
00:23:40,040 --> 00:23:43,040
Speaker 10: an eye on. I'd absolutely watch this is the you know,

525
00:23:43,160 --> 00:23:45,920
Speaker 10: the low, the low tick that we saw in unemployment

526
00:23:45,920 --> 00:23:48,360
Speaker 10: with three point four percent. If it gets to three

527
00:23:48,400 --> 00:23:50,920
Speaker 10: point nine percent, when you get that, that that half

528
00:23:50,920 --> 00:23:53,880
Speaker 10: a percent move, that's that that that trough to peak

529
00:23:53,920 --> 00:23:55,760
Speaker 10: or peak to trough, whoever however you want to look

530
00:23:55,800 --> 00:23:58,560
Speaker 10: at it, that's an indicator that maybe things aren't as

531
00:23:58,640 --> 00:23:59,560
Speaker 10: rosy as we believe.

532
00:24:00,240 --> 00:24:02,199
Speaker 1: How about volatility? Real quick, I got the VIX here

533
00:24:02,200 --> 00:24:05,760
Speaker 1: at thirteen. Are you surprised by the low vall shot? Yeah?

534
00:24:05,880 --> 00:24:09,639
Speaker 10: I mean it's interesting because with everything that we've seen

535
00:24:10,520 --> 00:24:13,280
Speaker 10: in the market in twenty three and heading into twenty four,

536
00:24:14,680 --> 00:24:17,400
Speaker 10: I would think, you know, given tomorrow you know, being

537
00:24:17,480 --> 00:24:20,080
Speaker 10: kind of the big day for the bank earnings. Ye,

538
00:24:20,800 --> 00:24:23,639
Speaker 10: you would have seen a lot more hedging in some

539
00:24:23,720 --> 00:24:26,000
Speaker 10: of those names, or even in the XLF. Well, one

540
00:24:26,000 --> 00:24:27,320
Speaker 10: of the things that I'm looking at right now is

541
00:24:27,320 --> 00:24:29,840
Speaker 10: that XLF is trading at an implied volatility in like

542
00:24:29,880 --> 00:24:33,119
Speaker 10: the tenth percentile, meaning ninety percent of the time it

543
00:24:33,160 --> 00:24:35,399
Speaker 10: trades at a higher ball. There's just not a lot

544
00:24:35,440 --> 00:24:37,640
Speaker 10: of hedger stepping into the market. Could that have something

545
00:24:37,680 --> 00:24:40,160
Speaker 10: to do with the zero DTE options. It's a possibility.

546
00:24:40,240 --> 00:24:44,560
Speaker 1: Yeah. Interesting. All right, I got to ask you, Loan Tree, Colorado.

547
00:24:44,800 --> 00:24:45,800
Speaker 1: Are you based in loan.

548
00:24:45,680 --> 00:24:47,639
Speaker 10: Tree com Now I'm a Bay Area guy, you're a

549
00:24:47,640 --> 00:24:50,440
Speaker 10: Bay Area A Bay Area guy live in Danville, California.

550
00:24:50,520 --> 00:24:52,160
Speaker 1: Okay, because I looked at it's just on the bio.

551
00:24:52,359 --> 00:24:55,280
Speaker 1: Did they there's a schwab way in Loan Tree, Colorado?

552
00:24:55,359 --> 00:24:56,080
Speaker 4: There's a schwab way.

553
00:24:56,160 --> 00:24:56,720
Speaker 9: Yeah, so did they?

554
00:24:56,920 --> 00:24:58,800
Speaker 1: The SHWUB relocate some people from the Bay Area to

555
00:24:59,040 --> 00:24:59,680
Speaker 1: Denver area.

556
00:25:00,280 --> 00:25:02,560
Speaker 10: So there's a big group in Denver. There's a big

557
00:25:02,600 --> 00:25:05,480
Speaker 10: group down in Fort Worth. And you know, we still

558
00:25:05,480 --> 00:25:06,640
Speaker 10: have our office in San Francisco.

559
00:25:06,720 --> 00:25:08,560
Speaker 1: That how San Francisco these days.

560
00:25:09,119 --> 00:25:09,640
Speaker 4: San Francisco.

561
00:25:09,760 --> 00:25:11,840
Speaker 10: San Francisco, you know, you're just not getting a lot

562
00:25:11,840 --> 00:25:13,200
Speaker 10: of people come downtown anymore.

563
00:25:13,200 --> 00:25:14,080
Speaker 4: It's a little sad.

564
00:25:14,359 --> 00:25:16,280
Speaker 1: Yeah, I mean, just you know, when people still a

565
00:25:16,280 --> 00:25:18,639
Speaker 1: beautiful city and it's a great city. And I'm thinking,

566
00:25:18,680 --> 00:25:22,280
Speaker 1: at some point, man, it's gonna turn. I don't know

567
00:25:22,280 --> 00:25:24,520
Speaker 1: when that's gonna be, but I know there's a lot

568
00:25:24,520 --> 00:25:26,480
Speaker 1: of issues there. But I always tell my friends that

569
00:25:26,480 --> 00:25:28,320
Speaker 1: are coming in from overseas, you know, we're gonna come

570
00:25:28,359 --> 00:25:30,560
Speaker 1: in for with the family for four or five weeks

571
00:25:30,560 --> 00:25:32,040
Speaker 1: to see us. I say, Okay, you can go to

572
00:25:32,040 --> 00:25:33,840
Speaker 1: New York and go to Bigas, go to mi Own, whatever.

573
00:25:34,359 --> 00:25:36,359
Speaker 1: Have to go to San Francisco and have to go

574
00:25:36,400 --> 00:25:38,720
Speaker 1: to the Bay Area. Yeah, I still think that's a case.

575
00:25:38,760 --> 00:25:40,920
Speaker 1: But it's amazing what happened there. I mean, so the

576
00:25:41,000 --> 00:25:43,520
Speaker 1: commercial real estate, Like, we have issues here in New

577
00:25:43,560 --> 00:25:46,919
Speaker 1: York City, but there's a lot of other states. But

578
00:25:46,960 --> 00:25:50,399
Speaker 1: if you're in the Bay Area downtown, it's pretty dead.

579
00:25:50,320 --> 00:25:52,720
Speaker 10: Right, it's pretty dead. And it also depends upon what

580
00:25:52,800 --> 00:25:54,680
Speaker 10: time you go down there. Right, I'm working market hours.

581
00:25:54,680 --> 00:25:56,639
Speaker 10: I'm getting in at four thirty five in the morning.

582
00:25:57,000 --> 00:25:59,600
Speaker 10: It's a different site than maybe you know, seven or

583
00:25:59,640 --> 00:26:02,200
Speaker 10: eight when everybody else is getting in, so it looks

584
00:26:02,200 --> 00:26:04,879
Speaker 10: a little bit different. You know, I have hopes. I

585
00:26:04,880 --> 00:26:06,720
Speaker 10: have hopes for the Bay Area. You know, like I said,

586
00:26:06,720 --> 00:26:09,600
Speaker 10: I live out there. It's beautiful area. It's just it

587
00:26:09,600 --> 00:26:12,280
Speaker 10: it needs we need an influx of people. Promise people

588
00:26:12,280 --> 00:26:13,959
Speaker 10: are leaving California. Yeah, exactly.

589
00:26:14,040 --> 00:26:16,280
Speaker 1: Well you can dump a snow up in Tahoe, so

590
00:26:16,720 --> 00:26:18,320
Speaker 1: I'm sure you're hitting up there all right, jims Ohl,

591
00:26:18,320 --> 00:26:20,879
Speaker 1: thanks so much, thanks for joining. Sarah Jomzol is a

592
00:26:20,880 --> 00:26:25,040
Speaker 1: managing director of Trader Education at Charles Schwab. They've got

593
00:26:25,600 --> 00:26:29,120
Speaker 1: the Schwab Trading Activity Index stacks. It's launching this week

594
00:26:29,119 --> 00:26:32,240
Speaker 1: and Schwap clients can access it under stacks on the

595
00:26:32,400 --> 00:26:34,200
Speaker 1: Think or Swim platform.

596
00:26:34,200 --> 00:26:34,920
Speaker 5: How cool is that.

597
00:26:35,920 --> 00:26:39,520
Speaker 7: You're listening to the tape Canser live program Bloomberg Markets

598
00:26:39,600 --> 00:26:42,960
Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune

599
00:26:43,000 --> 00:26:44,720
Speaker 7: in app, Bloomberg dot Com, and.

600
00:26:44,680 --> 00:26:45,960
Speaker 4: The Bloomberg Business App.

601
00:26:46,000 --> 00:26:48,840
Speaker 7: You can also listen live on Amazon Alexa from our

602
00:26:48,840 --> 00:26:52,840
Speaker 7: flagship New York station, Just say Alexa, play Bloomberg eleven

603
00:26:52,960 --> 00:26:55,320
Speaker 7: thirty domin Equity.

604
00:26:55,480 --> 00:26:57,879
Speaker 1: So I'm very optimistic and I think the stock's always

605
00:26:57,920 --> 00:26:59,479
Speaker 1: going up in that kind of thing. But I make

606
00:26:59,560 --> 00:27:03,000
Speaker 1: a big exception to that with our next guest, Jody Lorii.

607
00:27:03,080 --> 00:27:06,160
Speaker 1: She's a credit analyso Bloomberg Intelligence. She writes great research,

608
00:27:06,640 --> 00:27:09,720
Speaker 1: good stuff, cool sector she covers, and we're glad to

609
00:27:09,720 --> 00:27:13,080
Speaker 1: get a few minutes of her time. Hey, Jody Hurts,

610
00:27:13,880 --> 00:27:16,720
Speaker 1: I did not see this coming. They say they're going

611
00:27:16,800 --> 00:27:19,600
Speaker 1: to sell twenty thousand evs in a shift back to

612
00:27:19,680 --> 00:27:22,800
Speaker 1: guess powered cars. What's going on there? What's it mean for.

613
00:27:22,760 --> 00:27:23,560
Speaker 4: The credit.

614
00:27:25,200 --> 00:27:27,760
Speaker 11: I'm so glad that you like me as an exception

615
00:27:27,840 --> 00:27:33,399
Speaker 11: to credit analysts. So, yeah, Hurts is a name speaking

616
00:27:33,400 --> 00:27:35,679
Speaker 11: of like dislike. I feel like Hurts is a name

617
00:27:35,720 --> 00:27:38,080
Speaker 11: that people either love or love to hate. And so

618
00:27:38,119 --> 00:27:39,800
Speaker 11: it really just depends on which side of the coin

619
00:27:39,840 --> 00:27:43,840
Speaker 11: you're on. That said, it's sort of an interesting scenario.

620
00:27:44,119 --> 00:27:46,679
Speaker 11: So you have a relatively new CEO who came in.

621
00:27:47,160 --> 00:27:49,760
Speaker 11: They take a big stance of we're gonna buy a

622
00:27:49,840 --> 00:27:52,520
Speaker 11: ton of electric vehicles to outfit our fleet. We're going

623
00:27:52,560 --> 00:27:55,480
Speaker 11: to invest in charging stations, we're going to make you know,

624
00:27:55,520 --> 00:28:01,760
Speaker 11: the rental car system work for EV and you know,

625
00:28:01,760 --> 00:28:03,840
Speaker 11: they had very aggressive sort of plans with that and

626
00:28:03,920 --> 00:28:07,400
Speaker 11: hummed along, and then third quarter happened and they said, well, actually,

627
00:28:07,880 --> 00:28:12,240
Speaker 11: the damage and collision related to EV isn't as efficient

628
00:28:12,320 --> 00:28:16,160
Speaker 11: as your traditional internal combustion engine cars. And so now

629
00:28:16,240 --> 00:28:18,280
Speaker 11: they're backpedaling and they're saying, all right, we're going to

630
00:28:18,359 --> 00:28:20,600
Speaker 11: sell off a third of our fleet, a global fleet.

631
00:28:21,200 --> 00:28:23,280
Speaker 11: They didn't necessarily say from where, but we're going to

632
00:28:23,280 --> 00:28:25,200
Speaker 11: sell it off over the next year, and we are

633
00:28:25,240 --> 00:28:26,760
Speaker 11: going to take that money and put a portion of

634
00:28:26,800 --> 00:28:29,840
Speaker 11: it into internal combustion engine. So it is a little

635
00:28:29,880 --> 00:28:32,639
Speaker 11: bit of a backtrack, kind of an interesting scenario, to

636
00:28:32,720 --> 00:28:36,400
Speaker 11: say the least, not necessarily something that gives as much

637
00:28:36,400 --> 00:28:38,040
Speaker 11: confidence from a bond perspective.

638
00:28:38,560 --> 00:28:41,440
Speaker 6: Now they're talking about because of elevated costs. That's a reasoning,

639
00:28:41,480 --> 00:28:44,320
Speaker 6: but dig into to some of those costs and what

640
00:28:44,360 --> 00:28:45,160
Speaker 6: are we talking about.

641
00:28:46,720 --> 00:28:48,840
Speaker 11: Sure, So they talked a little bit about it on

642
00:28:48,880 --> 00:28:51,280
Speaker 11: the third quarter call, and then they mentioned it a

643
00:28:51,280 --> 00:28:56,040
Speaker 11: little bit in their press release today that the damage

644
00:28:56,040 --> 00:28:58,520
Speaker 11: and collision is a little bit higher than they expected,

645
00:28:58,560 --> 00:29:01,560
Speaker 11: and so it's eating into and cash flows, and so

646
00:29:02,360 --> 00:29:06,320
Speaker 11: to benefit from the cash flow generation that they're seeing

647
00:29:06,360 --> 00:29:09,480
Speaker 11: because guess what, used car prices are still in general

648
00:29:09,600 --> 00:29:11,440
Speaker 11: relatively high as compared to what they were a few

649
00:29:11,520 --> 00:29:15,600
Speaker 11: years ago. They aren't getting that same value when it

650
00:29:15,640 --> 00:29:18,440
Speaker 11: comes to ev right, and I think part of that

651
00:29:18,480 --> 00:29:20,160
Speaker 11: speaks to the fact that the EV market is so

652
00:29:20,320 --> 00:29:22,640
Speaker 11: much younger. We don't really know how to model out

653
00:29:22,640 --> 00:29:24,560
Speaker 11: appreciation the same way that we do for cars that

654
00:29:24,600 --> 00:29:27,840
Speaker 11: have been around for fifty sixty years. And so I

655
00:29:27,880 --> 00:29:29,760
Speaker 11: think that's really what it comes down to, is that

656
00:29:29,800 --> 00:29:32,360
Speaker 11: they have this element of growing pains as a result

657
00:29:32,400 --> 00:29:34,479
Speaker 11: of the fact that it's still relatively new industry. They

658
00:29:34,480 --> 00:29:37,400
Speaker 11: took a bold stance related to it, and something that

659
00:29:37,440 --> 00:29:40,040
Speaker 11: we like to highlight. Both Hurts and Evis have been

660
00:29:40,080 --> 00:29:42,480
Speaker 11: doing this over the past few years, more a function

661
00:29:42,560 --> 00:29:46,840
Speaker 11: of their counterparties than necessarily them, but they've taken on

662
00:29:46,880 --> 00:29:49,480
Speaker 11: more of what you call risk vehicles as opposed to

663
00:29:49,520 --> 00:29:53,400
Speaker 11: program vehicles. What risk vehicles are is the companies go

664
00:29:53,440 --> 00:29:56,640
Speaker 11: and buy vehicles and take the risk of selling them

665
00:29:56,680 --> 00:29:59,920
Speaker 11: in the aftermarket, as compared to program vehicles, where they

666
00:30:00,120 --> 00:30:03,000
Speaker 11: work with a GM, a forward, you name it. They

667
00:30:03,040 --> 00:30:06,200
Speaker 11: buy a certain amount of vehicles and then they have

668
00:30:06,480 --> 00:30:09,960
Speaker 11: a commitment to basically put those vehicles back at a

669
00:30:10,480 --> 00:30:13,920
Speaker 11: declared price, and so you don't have that put element

670
00:30:13,960 --> 00:30:17,600
Speaker 11: as much for their fleet as they used to have.

671
00:30:17,840 --> 00:30:19,760
Speaker 11: We've seen that sort of a road over time for

672
00:30:19,800 --> 00:30:20,480
Speaker 11: both companies.

673
00:30:21,000 --> 00:30:23,640
Speaker 1: So what's the meaning for the credit here? I mean,

674
00:30:24,000 --> 00:30:26,600
Speaker 1: I'm looking at the FA function quite frankly, the data

675
00:30:26,680 --> 00:30:28,120
Speaker 1: is a little wacky. I'm not sure kind of give

676
00:30:28,200 --> 00:30:31,600
Speaker 1: us a sense of where the leverage is and kind of,

677
00:30:31,800 --> 00:30:33,800
Speaker 1: you know, kind of what the forecast is. What are

678
00:30:33,800 --> 00:30:36,000
Speaker 1: the credit folks think about hurts credit?

679
00:30:37,400 --> 00:30:40,320
Speaker 11: Sure, So leverage is actually relatively low if you look

680
00:30:40,320 --> 00:30:43,240
Speaker 11: at it as a company leverage or corporate leverage standpoint,

681
00:30:43,520 --> 00:30:45,280
Speaker 11: you have to when you look at these companies, it's

682
00:30:45,480 --> 00:30:48,400
Speaker 11: it's sort of complicated because they have their vehicles which

683
00:30:48,440 --> 00:30:51,760
Speaker 11: are financed with asset b X securities, right, and then

684
00:30:51,840 --> 00:30:55,440
Speaker 11: you have the corporate leverage which is financing other operations

685
00:30:55,480 --> 00:30:58,600
Speaker 11: and other elements of business. And so Hertz's leverage is

686
00:30:59,480 --> 00:31:02,640
Speaker 11: relatively low, much lower than it was historically. It's blow

687
00:31:02,640 --> 00:31:05,880
Speaker 11: two times, but it has been creeping up each quarter.

688
00:31:06,320 --> 00:31:09,479
Speaker 11: And so you know, they come out of bankruptcy, they

689
00:31:09,480 --> 00:31:11,640
Speaker 11: wipe the slate clean, they have a nice balance sheet,

690
00:31:11,800 --> 00:31:15,280
Speaker 11: and they taped the det markets. They started to give

691
00:31:15,320 --> 00:31:18,960
Speaker 11: back to shareholders and they did all this all the

692
00:31:18,960 --> 00:31:21,320
Speaker 11: while that the used car market was particularly good, and

693
00:31:21,320 --> 00:31:24,000
Speaker 11: they had all these tremendous tailwinds. Now, used car prices

694
00:31:24,080 --> 00:31:27,360
Speaker 11: have been going down, not two levels what they were

695
00:31:27,400 --> 00:31:31,120
Speaker 11: in twenty twenty or earlier, but they have been going down.

696
00:31:31,840 --> 00:31:35,480
Speaker 11: And those tailwinds that they benefited from in twenty twenty two,

697
00:31:35,680 --> 00:31:39,440
Speaker 11: where they have record EBITAH levels, it's sort of eroding

698
00:31:39,600 --> 00:31:44,440
Speaker 11: and so we don't necessarily see the top line activities.

699
00:31:44,520 --> 00:31:49,120
Speaker 11: So the revenue element, the consumer piece of rental cars

700
00:31:49,160 --> 00:31:51,880
Speaker 11: being negative. We actually see that as a relatively big

701
00:31:51,960 --> 00:31:56,240
Speaker 11: tailwind this year, particularly as there's more business travel at

702
00:31:56,240 --> 00:31:59,000
Speaker 11: the same time. It's the sort of functions related to

703
00:31:59,440 --> 00:32:02,480
Speaker 11: outfitting your fleet, getting rid of your fleet, rotating your fleet.

704
00:32:02,520 --> 00:32:05,840
Speaker 11: That's always the piece that that can bring some troubles.

705
00:32:06,400 --> 00:32:09,440
Speaker 6: Now, I want to take this to the Paul. You're

706
00:32:09,520 --> 00:32:11,640
Speaker 6: you're a travel guy in your jet setter, so I

707
00:32:11,720 --> 00:32:14,880
Speaker 6: want to take this to the lead your outlook for travel.

708
00:32:15,320 --> 00:32:16,440
Speaker 6: Have you ever done a cruisewall?

709
00:32:16,520 --> 00:32:18,400
Speaker 9: No, No, he's okay.

710
00:32:18,600 --> 00:32:21,600
Speaker 6: But apparently the rise in leading dire activity is helping

711
00:32:21,800 --> 00:32:23,479
Speaker 6: the cruise market. Is that is that correct?

712
00:32:25,040 --> 00:32:28,400
Speaker 11: That is very correct? That is spot on. So you know,

713
00:32:28,880 --> 00:32:31,440
Speaker 11: people like to joke rising tides lift all boats, but

714
00:32:31,840 --> 00:32:34,040
Speaker 11: here I would say it's true. You know, the cruise

715
00:32:34,080 --> 00:32:36,720
Speaker 11: lines are the names that I think there are a

716
00:32:36,760 --> 00:32:38,120
Speaker 11: lot of people who sort of wrote them off for

717
00:32:38,200 --> 00:32:41,480
Speaker 11: dead a few years ago. They've been this tremendous turnaround story,

718
00:32:41,560 --> 00:32:45,120
Speaker 11: repaying their debt load, bringing you know, improving their balance sheets,

719
00:32:45,160 --> 00:32:50,200
Speaker 11: focusing on credit quality and you know, ratings improvements, and

720
00:32:50,200 --> 00:32:52,080
Speaker 11: and they've been saying all the right things. They've been

721
00:32:52,120 --> 00:32:55,080
Speaker 11: trying to time the market as they can. Some have

722
00:32:55,200 --> 00:32:57,240
Speaker 11: been a little bit more successful than others in terms

723
00:32:57,280 --> 00:33:01,200
Speaker 11: of pricing. But that said, they're all committed to deleveraging

724
00:33:01,320 --> 00:33:03,880
Speaker 11: into this year, and we're seeing that booking rates are

725
00:33:03,880 --> 00:33:07,880
Speaker 11: also still pretty positive. Consumers are latching onto the narrative

726
00:33:07,920 --> 00:33:11,680
Speaker 11: around cruises, and so I think it's still there's still

727
00:33:11,680 --> 00:33:14,200
Speaker 11: a lot of momentum around the cruise industry, at least

728
00:33:14,240 --> 00:33:15,040
Speaker 11: going into this year.

729
00:33:15,440 --> 00:33:17,840
Speaker 1: Yeah, one of my clearest memories of the early days

730
00:33:17,920 --> 00:33:23,160
Speaker 1: of the pandemic was the cruise companies rushing out to

731
00:33:23,200 --> 00:33:26,920
Speaker 1: the corporate bond market, and because they knew probably better

732
00:33:26,960 --> 00:33:29,280
Speaker 1: than anybody that their business was going to be shut down,

733
00:33:29,280 --> 00:33:31,120
Speaker 1: they probably didn't know what, we'd shut down for this long,

734
00:33:31,160 --> 00:33:34,000
Speaker 1: but they needed the cash does to survive. So just

735
00:33:34,000 --> 00:33:36,440
Speaker 1: take for example, I'm looking at Royal Caribbean aid at

736
00:33:36,480 --> 00:33:38,760
Speaker 1: the end of nineteen eleven point seven billion dollars a

737
00:33:38,760 --> 00:33:40,680
Speaker 1: total debt. By the end of twenty twenty h was

738
00:33:40,720 --> 00:33:43,120
Speaker 1: twenty billion of total debts, almost double their debtload as

739
00:33:43,120 --> 00:33:46,320
Speaker 1: they kind of loaded up. Where's the leverage of this

740
00:33:46,440 --> 00:33:49,960
Speaker 1: cruise industry? Where is it now? Where are you guys

741
00:33:50,120 --> 00:33:52,520
Speaker 1: in the credit space kind of think it should.

742
00:33:52,240 --> 00:33:58,160
Speaker 11: Be right, So where it should be. It's always you know,

743
00:33:58,200 --> 00:34:00,000
Speaker 11: as a credit alland as you say, the lowest possible

744
00:34:00,280 --> 00:34:02,440
Speaker 11: you can do while while being a good level of

745
00:34:02,480 --> 00:34:07,920
Speaker 11: investment grade. So but that said, outside of that, I mean,

746
00:34:08,160 --> 00:34:09,839
Speaker 11: you know, if you look at a name like Royal

747
00:34:09,840 --> 00:34:12,759
Speaker 11: Caribbean or like a Carnival. So Carnival, they had their

748
00:34:12,800 --> 00:34:15,320
Speaker 11: peak debt level was about thirty five thirty six billion.

749
00:34:15,400 --> 00:34:18,239
Speaker 11: They've now brought it down to below thirty billion, and

750
00:34:18,280 --> 00:34:23,600
Speaker 11: so that's a tremendous you know, sort of cut into

751
00:34:23,760 --> 00:34:27,160
Speaker 11: their debt load. And so it's less of an issue

752
00:34:27,160 --> 00:34:29,760
Speaker 11: related to refinancing their debt to push out the maturities

753
00:34:29,800 --> 00:34:32,160
Speaker 11: more so actually bringing down the debtload because what they

754
00:34:32,160 --> 00:34:35,520
Speaker 11: have currently is not sustainable even with their large fleet.

755
00:34:36,520 --> 00:34:40,400
Speaker 11: That said, you know, I think management is looking to

756
00:34:40,440 --> 00:34:43,840
Speaker 11: get somewhere below three seventy five if I had to guess.

757
00:34:43,920 --> 00:34:45,520
Speaker 11: The only reason why I say that is because that's

758
00:34:45,560 --> 00:34:49,600
Speaker 11: where the raiders have guided historically what they need to

759
00:34:49,640 --> 00:34:53,640
Speaker 11: stay investment grade. Both Royal and Carnival have communicated that

760
00:34:53,680 --> 00:34:56,200
Speaker 11: they want to be investment grade Royal by twenty twenty five,

761
00:34:56,440 --> 00:34:58,000
Speaker 11: Carnival by twenty twenty six.

762
00:34:59,000 --> 00:35:00,520
Speaker 4: I think, you know, we've.

763
00:35:00,320 --> 00:35:02,959
Speaker 11: Modeled out all scenarios where they could make it there.

764
00:35:03,040 --> 00:35:04,640
Speaker 11: They could take a little longer to get there. I

765
00:35:04,680 --> 00:35:07,359
Speaker 11: think it's really dependent on a few things. Number one,

766
00:35:07,440 --> 00:35:10,440
Speaker 11: the fact that the consumer still has an apptite to

767
00:35:10,440 --> 00:35:14,320
Speaker 11: go on cruises. But more so, you know, geopolitical risks

768
00:35:14,440 --> 00:35:16,680
Speaker 11: different sort of ways that there can be a monkey

769
00:35:16,719 --> 00:35:20,640
Speaker 11: wrench in this whole process. And so provided they can

770
00:35:20,680 --> 00:35:25,840
Speaker 11: still sort of maneuver these regional issues such as Russia.

771
00:35:25,960 --> 00:35:28,319
Speaker 11: You know, Saint Petersburg was a big port, and then

772
00:35:28,400 --> 00:35:30,640
Speaker 11: you had Tel Aviv, which was a big port in Haifa,

773
00:35:30,719 --> 00:35:33,560
Speaker 11: and so they had to sort of design around those

774
00:35:34,200 --> 00:35:39,120
Speaker 11: situations and are constantly adjusting I mean they adjust for

775
00:35:39,160 --> 00:35:41,319
Speaker 11: weather all the time, but now they're adjusting for weather

776
00:35:41,440 --> 00:35:42,520
Speaker 11: and geopolitical risk.

777
00:35:43,040 --> 00:35:45,160
Speaker 1: Jody, always a pleasure to speak with you. Jody Lori

778
00:35:45,520 --> 00:35:48,560
Speaker 1: credit analysts of Bloomberg Intelligence. She follows to travel, the

779
00:35:48,640 --> 00:35:52,520
Speaker 1: leisure lodgeing, gaming restaurants from the fixed income perspective. She

780
00:35:52,560 --> 00:35:55,520
Speaker 1: knows those industries backwards and forward. So we love chatting

781
00:35:55,640 --> 00:35:57,879
Speaker 1: with her. And again, that news that kind of jumped

782
00:35:57,880 --> 00:35:59,680
Speaker 1: out at a lot of people this morning was Hurts

783
00:35:59,719 --> 00:36:02,800
Speaker 1: to sell one third of their EV fleet in a

784
00:36:02,880 --> 00:36:04,400
Speaker 1: shift back to Guess powered cards.

785
00:36:06,120 --> 00:36:09,200
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can

786
00:36:09,239 --> 00:36:13,040
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

787
00:36:13,120 --> 00:36:16,840
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

788
00:36:17,040 --> 00:36:18,959
Speaker 2: at Matt Miller nineteen seventy three.

789
00:36:19,400 --> 00:36:21,800
Speaker 1: And I'm Faul Sweeney. I'm on Twitter at pt Sweeney.

790
00:36:21,920 --> 00:36:24,560
Speaker 1: Before the podcast, you can always catch us worldwide at

791
00:36:24,600 --> 00:36:26,359
Speaker 1: Bloomberg Radio