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Speaker 2: So the headline's coming fast and furious from everywhere when
Speaker 2: it comes to political risk.
Speaker 3: Joining us now is Nathan Dean.
Speaker 2: He's Bloomberg Intelligence Senior Policy a list Nathan, what is
Speaker 2: the rhetoric that we're going to see out of the
Speaker 2: White House this afternoon based on now Canada putting tariffs
Speaker 2: on US deal on aluminum and the EU threatening retaliation
Speaker 2: as well.
Speaker 4: I think it's going to.
Speaker 5: Be very similar to the truth social posts that we
Speaker 5: saw from yesterday from President Trump and responding to the
Speaker 5: Ontario premiere Doug Ford in terms of those tariffs or
Speaker 5: at least the export taxes that they was putting on
Speaker 5: electricity to those one point five million Americans up in
Speaker 5: Minnesota and New York, you know, And I think this
Speaker 5: is what you're gonna wait and you're gonna see this
Speaker 5: exactly the same thing coming from EU, because look, you know,
Speaker 5: we've always been telling our clients. When it comes to tariffs,
Speaker 5: President Trump goes out there with these big statements and
Speaker 5: that subsequently walks them back negotiates, and that doesn't really
Speaker 5: see the fruition. However, over the last few days, we
Speaker 5: begin to see that the you know, the small incremental
Speaker 5: tariffs take place, the twenty percent tariff on China, you know,
Speaker 5: the medals, the aluminum and steel tariffs on Canada just yesterday.
Speaker 5: So these tariffs are now coming into fruition. And so
Speaker 5: I think the writeric is going to continue. But we
Speaker 5: always have to just go back to the idea that
Speaker 5: there's one person that decides whether these tariffs happen or not.
Speaker 5: It's President Trump. So you always have to just keep
Speaker 5: your mind open that he could potentially walk some.
Speaker 4: Of this back.
Speaker 6: I've asked this before, I'll ask it again, And now
Speaker 6: now it's on this issue of taris where are the Democrats?
Speaker 7: Who's the voice?
Speaker 4: Yeah, so they're still trying to figure out their voice.
Speaker 5: I mean, obviously there's been a lot of push in
Speaker 5: terms of from House Democrat trying to tell their Senate
Speaker 5: colleagues that they should vote no on this government funding
Speaker 5: bill that's making its way through Congress, in response to DOJE,
Speaker 5: in response to tariffs, just in response to President Trump's agenda.
Speaker 5: The Senate Democrats are actually meeting today. They have to
Speaker 5: figure it out. There's going to need to be eight
Speaker 5: votes for the Democrats on Friday, because Senator Ran Paul
Speaker 5: is going to vote no.
Speaker 4: Otherwise we're going to risk a government shutdown.
Speaker 5: And I just do not think the Senate Democrats have
Speaker 5: a strategy yet in place that warrants what their response
Speaker 5: to President Trump will be. And as a result, you know,
Speaker 5: a lot of the news cycle continues to be dominated
Speaker 5: by President Trump and his actions.
Speaker 2: I have to say, the fact that we could have
Speaker 2: a government shutdown has not at all been on my radar.
Speaker 2: That seems like the least thing, the last thing we
Speaker 2: got to worry about here when it comes to being
Speaker 2: a market participant.
Speaker 3: So no, like, where are we though, will it shut down?
Speaker 3: Are we good?
Speaker 8: Well?
Speaker 5: Your view is absolutely correct from the mindset of those
Speaker 5: who pay attention to the markets, because when it comes
Speaker 5: to government shutdowns, there's very little impact to markets. I mean,
Speaker 5: the thirty five days cut down that occurred under President
Speaker 5: Trump's first administration, markets went down and then subsequently came
Speaker 5: back up. But where we are at the moment is
Speaker 5: yesterday the House Republicans passed a bill. It's not a
Speaker 5: clean bill, but a clean ish bill, mostly clean but
Speaker 5: has a lot of things in their Democrats don't like.
Speaker 5: But what Speaker Johnson did is he said, look, we've
Speaker 5: passed the bill.
Speaker 4: He sent the House home, everybody left town.
Speaker 5: So now it's up to the Senate Democrats to decide
Speaker 5: are we going to support this bill or are we
Speaker 5: going to risk shutting the government down. And because the
Speaker 5: House is gone, a shutdown will most likely occur. I
Speaker 5: think the Senate Democrats will ultimately take the deal. I
Speaker 5: maybe out of consensus, out of that, but I just
Speaker 5: do not think that the Senate Democrats right now are
Speaker 5: aligned on their strategy. And just as a few minutes ago,
Speaker 5: Representative Alexandria Acasio Cortez was tweeting out that people should
Speaker 5: be calling the Senate Dems because it looks like, in
Speaker 5: her words, they're going to start the cave. So I
Speaker 5: don't think the government's going to shut down. But again,
Speaker 5: for those people who pay attention to the markets, there's
Speaker 5: really no impact here. I mean, short term shutdown really
Speaker 5: even doesn't impact the equities like large defense contractors.
Speaker 6: What's the sense of timing, Nathan, When will we get
Speaker 6: a decision on a potential shutdown or what the Senate's
Speaker 6: going to do.
Speaker 5: I think tonight you'll start to see the comments from
Speaker 5: the Democratic senators giving indication of their position. You know,
Speaker 5: Senator John Fennerman has already come out and said he's
Speaker 5: going to vote for the bill. But all these other
Speaker 5: a lot of the other moderate Democrats who potentially could
Speaker 5: vote for this or keeping their powder dry, They're essentially saying, look,
Speaker 5: it's a choice of two bad choices President Trump's agenda,
Speaker 5: or we risk shutting the government down. But I don't
Speaker 5: think the Democrats are going to try and surprise this
Speaker 5: by Friday. I think we'll know either by late tonight
Speaker 5: or early tomorrow where they're going, because look, at the
Speaker 5: end of the day, it's not an easy choice for them,
Speaker 5: and the last thing they want, I think, in my opinion,
Speaker 5: is to surprise everybody and just say we haven't been
Speaker 5: saying anything for days and then oop, weights we're we're
Speaker 5: not gonna vote for this, but you know, anything can happen.
Speaker 5: We're in You know, these are times that a lot
Speaker 5: of people don't know what's going to happen.
Speaker 3: What okay, let me say something crazy.
Speaker 2: What I found really interesting was that we had Ontario
Speaker 2: putting a REFFS on hydro power right, and then all
Speaker 2: of a sudden moments later, like a day later, it
Speaker 2: was taken off. And then now the negotiation has started
Speaker 2: to happen between Ontario and the US.
Speaker 3: What do we make of that.
Speaker 2: Like do we make of the fact that, like any
Speaker 2: retaliatory tariffs won't have any teeth because it's all a
Speaker 2: negotiating ploy, and that Trump is going to get them
Speaker 2: to the table no matter what.
Speaker 5: Well, you know, I'll say, look, that's the primary objective
Speaker 5: is to get them to the table and to negotiate.
Speaker 5: But also if you look at the Canadian steel and
Speaker 5: aluminum tariffs, you know President Trump's truth social statement said look,
Speaker 5: we're going to fifty percent. Subsequently we're now at twenty
Speaker 5: five percent, so that tariff did actually take place. But
Speaker 5: you know, this process I think continues exactly how it's
Speaker 5: been for the last few months. President Trump puts out
Speaker 5: a statement, says we're going to do this, markets react
Speaker 5: to it, there's a negotiation, sometimes just hours later it's
Speaker 5: walked back, and there's additional open doors and additional nuggets
Speaker 5: that says, maybe this isn't going to happen, but in
Speaker 5: crementally tariffs are being put on place, that twenty percent
Speaker 5: tariff on China, for example. So you know, if investors
Speaker 5: have not already looked at the supply chain aspects of
Speaker 5: the companies that they're looking at, they need to do
Speaker 5: so now because we can't say with one hundred percent
Speaker 5: certainty that these tariffs aren't going to happen. So investors
Speaker 5: need to be prepared for that supply chain disruption or
Speaker 5: the tariff hit as a result of it.
Speaker 6: All Right, Nathan, let's be a glass half full type
Speaker 6: of view here and say the government will not shut down.
Speaker 6: What are the next couple of things on Congresses to
Speaker 6: do list?
Speaker 5: Do you think, Well, you know, Speaker Johnson is really
Speaker 5: trying to push forward with this House Reconciliation package to
Speaker 5: extend President Trump's tax cuts. This was going to cost
Speaker 5: around four point five trillion dollars to extend those.
Speaker 4: Now they have to do it by the end of
Speaker 4: the year.
Speaker 5: If a government does shut down, nobody's allowed to work
Speaker 5: on that, and so the Republicans not be able to
Speaker 5: work on that until the government reopens. Now, assuming the
Speaker 5: government reopens, Speaker Johnson even just said this morning that
Speaker 5: he hopes for all of this to be.
Speaker 4: Resolved by men.
Speaker 5: I'm not exactly sure that they're going to be able
Speaker 5: to get there, because even though the Republicans were unified
Speaker 5: yesterday in terms of keeping the government open in terms
Speaker 5: of a budget, it was only a six month continuing resolution,
Speaker 5: and it was a Cleanish bill. That's much different than
Speaker 5: asking New York State Republicans are you going to support
Speaker 5: not giving much in terms of salt.
Speaker 4: Relief, or asking other folks are you going to.
Speaker 5: Support taxes on tips which potentially could drive the deficit
Speaker 5: even higher.
Speaker 4: So the Republicans have to figure out.
Speaker 5: Because there's no Democrats involved in this, the Republicans are
Speaker 5: going to have to have some very strong and powerful conversations.
Speaker 5: And I'm not exactly sure that's going to take place
Speaker 5: in May. I think that's going to bleed throughout the summer.
Speaker 5: But that work will continue next week, assuming the government
Speaker 5: stays open again.
Speaker 2: I was just at an energy conference in Houston for
Speaker 2: a couple of days, and the theme is that CEOs
Speaker 2: are really confused. People are not pulling projects, but they're
Speaker 2: definitely pressing the pause button on many many things.
Speaker 3: Is the administration listening to CEOs?
Speaker 4: I think so.
Speaker 5: I mean, obviously, the President Trump met with the Business
Speaker 5: Roundtable yesterday. This is a collection of large CEOs from
Speaker 5: you know, Fortune five hundred companies, and you know, we
Speaker 5: heard the reporting that that was the message that President
Speaker 5: Trump gave. But I would also say that President Trump
Speaker 5: is very very much a believer in his strategy at
Speaker 5: the moment, and I don't think there's much of the
Speaker 5: business community is going to be able to.
Speaker 4: Say to change his mind.
Speaker 5: I think that it has to come from sticker shock
Speaker 5: from prices, because prices are what got drove a lot
Speaker 5: of voters to President Trump in the November elections, and
Speaker 5: prices is something that a lot of American consumers, especially
Speaker 5: Americans that don't have access to the markets, that don't
Speaker 5: have assets in the markets, want to see from President Trump.
Speaker 5: And so I think that price discussion, as we'll see
Speaker 5: over the next few months, is what ultimately may change
Speaker 5: President Trump's mind. But then again, you also liked seeing
Speaker 5: the stock market in the green, so you know, again,
Speaker 5: it's just it's very hard to predict.
Speaker 6: Did we get any meaningful news out of that meeting
Speaker 6: yesterday with the business leaders Nathan Now, not.
Speaker 4: That I would say to any of my clients.
Speaker 5: I think it was just more of the same that
Speaker 5: you know, business leaders were saying, Look, we're looking for deregulation.
Speaker 5: Deregulation is not a magic wand it's going to take time.
Speaker 5: I think there was a lot of sentiment around the
Speaker 5: election around deregulation. They're looking for clarity on tariffs. I
Speaker 5: don't think you're going to get that. I think the
Speaker 5: strategy of strong statements subsequently with negotiations, and then they're
Speaker 5: looking for clarity on this tax debate, and you know
Speaker 5: the problem with that is that it's just going to
Speaker 5: take a long time because you know, they have to
Speaker 5: figure out how to pay for a four point five
Speaker 5: trillion in tax scuts or they have to figure out
Speaker 5: a way to keep it as less impactful on the
Speaker 5: deficit as possible. And so I don't think there was
Speaker 5: a lot of clarity coming from the White House to
Speaker 5: the business leadership. I think it was business leadership talking
Speaker 5: points going to the White House.
Speaker 2: How much do you think all this is currently reflected
Speaker 2: in the equity prices are in equity prices.
Speaker 5: I think it's beginning to be a little bit more
Speaker 5: and more. I mean, because I think the realization is like, look,
Speaker 5: this isn't exactly turning out the way that I think
Speaker 5: a lot of investors thought after the election in terms
Speaker 5: of sentiment, you know, the tariff discussion. I think a
Speaker 5: lot of people have presumed that President Trump was going
Speaker 5: to back down on it, and look, he may, but
Speaker 5: President Trump is certainly asking some very difficult questions of
Speaker 5: the market when it says, look, starting tonight at midnight,
Speaker 5: I'm putting on a fifty percent tariff and then two
Speaker 5: hours later saying no, maybe not, We're going to negotiate instead.
Speaker 4: Markets don't like that.
Speaker 5: So I think what we're seeing right now is just
Speaker 5: this uncertainty and per your point about you know, pausing
Speaker 5: a lot of projects, I think a lot of investors
Speaker 5: are just saying, look, we need clarity on what's going
Speaker 5: to happen here, otherwise we're going to begin to really
Speaker 5: try and protect our positions.
Speaker 4: They're not there yet. But if this uncertainty in.
Speaker 5: This like you know, volatility continues from the political landscape,
Speaker 5: I wouldn't be surprised if you know, my investors react
Speaker 5: in a different way in the.
Speaker 4: Next few weeks.
Speaker 6: Nathan, thanks so much. We appreciate that Nathan Dean are
Speaker 6: man of reason. Nowt there in Washington, d C helps
Speaker 6: us understand some of these policy moves coming out of Washington, DC.
Speaker 6: Nathan Dean, senior policy analyst with Bloomberg Intelligence, joining us
Speaker 6: from Washington, d C.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 2: on YouTube dot com as well. All Right, yesterday, the
Speaker 2: US and Ukraine have reached a thirty day seaspire with
Speaker 2: Russia now it hinges on Russia's acceptance. While speaking to
Speaker 2: reporters at the White House, President Trump addressed that deal.
Speaker 3: Saying it's now up to Russia to agree.
Speaker 2: Your friends agreed to it, and hopefully Russia.
Speaker 9: Will agree to it.
Speaker 6: We're going to beat with them later on today and tomorrow.
Speaker 5: And hopefully we'll be able to wipe out a deal,
Speaker 5: but I think the CEASPI is very important.
Speaker 7: If we can get Russia to do it, that'll be.
Speaker 2: Greaty All right, joining us now is Oliver Krook, Bloomberg
Speaker 2: Gear correspondent on these talks. He joins us from Berlin.
Speaker 2: All right, Oliver, what do we know? What is the
Speaker 2: state of play?
Speaker 7: Yeah, so listen, it's is ceasfire agreement.
Speaker 10: We should just say cannot be agreed to by only
Speaker 10: sort of one set of parties. But we should say
Speaker 10: that the Youans now finally got on board, and that
Speaker 10: is not what they wanted to do even two weeks ago. Right,
Speaker 10: we were hearing from Zelensky in a number of top
Speaker 10: Ukrainian officials before that massive blow up in the Oval Office,
Speaker 10: saying that basically they do not want to come to
Speaker 10: a conversation about a ceasefire. They want to come to
Speaker 10: a conversation about the lasting just peace. That obviously changed
Speaker 10: after the United States posit its military equipment deliveries to Ukraine,
Speaker 10: stopped giving them intelligence, all that sort of thing that
Speaker 10: kicked off last week. And now they've come at the
Speaker 10: table and it sounds like they have agreed with the
Speaker 10: United States after those talks in Saudi Arabia with Secretary
Speaker 10: of State Mark Rubio to that thirty day seaspire. The
Speaker 10: US sees this as basically trying to create the conditions
Speaker 10: under which you can negotiate that permanent peace agreement. This
Speaker 10: thirty day seaspire would also include an exchange of prisoners
Speaker 10: of war, release of civilian detainees, the return of the
Speaker 10: forcibly transferred Ukrainian children, and really to put together these
Speaker 10: negotiating teams which haven't obviously had any contact between Russia
Speaker 10: and Ukraine since the beginning of the war, and that
Speaker 10: has led to the immediate resumption now of the un
Speaker 10: of American military kit to Ukraine as well as intelligence.
Speaker 10: And you know, it has been just basically the United
Speaker 10: States and Ukraine. And now, as you were just saying,
Speaker 10: you know, basically everything is in Putin's court right now
Speaker 10: as to whether or not he's going to even entertain
Speaker 10: these discussions.
Speaker 6: And to that end, Oliver Bloomberg News has some reporting
Speaker 6: out that Putin eyes way to truce terms, but with
Speaker 6: his own conditions.
Speaker 4: I'm not really sure what that means.
Speaker 6: So maybe the broad question is a do we think
Speaker 6: Putin's going to engage in this process right here now,
Speaker 6: with this agreement, and what did we think he wants.
Speaker 7: I suspect not just right here and now.
Speaker 10: I mean I think that forever, since the beginning of
Speaker 10: this war, for the last three years, time has been
Speaker 10: on the side of the Russians, So they have really
Speaker 10: in no rush, particularly since they've sort of gained momentum
Speaker 10: on the battlefield.
Speaker 7: Again.
Speaker 10: That could mean a great many things. We've heard a
Speaker 10: number of things from the Russians. They have said a
Speaker 10: number of things that are basically non starters. They want
Speaker 10: to take basically all of the eastern regions of Ukraine,
Speaker 10: so that's lu Hansk, Donetsk, Zaporisha, and Kurzon. These are
Speaker 10: not even territories that they fully occupy right now. So
Speaker 10: this would mean even further concessions. They would want legal
Speaker 10: recognition of that. They would want Ukraine to basically abandon
Speaker 10: its aims.
Speaker 7: To join NATO.
Speaker 10: They would say that also European troops a sort of
Speaker 10: deterrent or peacekeeping forces with Ukraine are non starter. So
Speaker 10: these are all things that the Russians have said in
Speaker 10: the past that they basically are non starters to any
Speaker 10: sort of agreement that begs the question of what really
Speaker 10: is in the interest of the Ukrainians or is this
Speaker 10: just going to be basically a pretense for the Americans
Speaker 10: to abandon Ukraine if they say, you know, they basically
Speaker 10: cannot surmount the terms. What I think is interesting and
Speaker 10: this was probably the most interesting thing we got out
Speaker 10: of the press conference for Marco Rubio yesterday, saying that
Speaker 10: basically they hope that the Russians will sign the deal,
Speaker 10: but if they do not, they'll know who the impediment
Speaker 10: to peace will be. That then provokes this question, and
Speaker 10: we don't really know the answer to this from the
Speaker 10: Trump administration.
Speaker 7: If the Russians refused to come to the table and.
Speaker 10: The United States is dissatisfied about.
Speaker 7: It, what is Trump prepared to do about it.
Speaker 10: We've had some talk about potential financial market regulations and
Speaker 10: potentially sanctions on banks and finance as well as fossil fuels.
Speaker 10: We haven't really fleshed out that side of things. We
Speaker 10: know the sort of the difficult circumstances they're willing to
Speaker 10: impose on Ukraine, but less so what they're willing to
Speaker 10: impose upon Russia.
Speaker 3: Does Europe have a seat at this particular.
Speaker 7: Table, emphatically not so.
Speaker 10: I think the best that the Europeans can basically hope
Speaker 10: for US to get kind of an update at the
Speaker 10: G seven Foreign ministers meetings that's happening right now in Canada.
Speaker 10: But basically, no, they do not have a seat at
Speaker 10: the table as it stands. I mean, I think that
Speaker 10: the US's plan, what they would like to see longer
Speaker 10: term is the Europeans to take more security responsibility, obviously
Speaker 10: in the continent, possibly in Ukraine. But again, this is
Speaker 10: a very thorny discretion even for the most hawkish voices
Speaker 10: within Europe. You hear it from the Polish, they are
Speaker 10: very reticent to ever commit any kind of troops, even
Speaker 10: as peacekeeping forces within Ukraine. So that is sort of
Speaker 10: a very difficult conversation have even nationally. So I think
Speaker 10: that their sort of role in this has been sort
Speaker 10: of ever diminishing, and I think, I suspect is not
Speaker 10: going to increase anytime soon.
Speaker 6: Oliver, what are the prospects for maybe timing of a
Speaker 6: potential meeting between mister Trump and Putin?
Speaker 10: Yeah, so listen, I think that Trump would like to
Speaker 10: see this happen sooner rather than later. I think again,
Speaker 10: Putin is proceeding with sort of extreme caution.
Speaker 7: They've got all this sort of groundwork sort of laid
Speaker 7: for it.
Speaker 10: They would like, we know, to have that meeting, or
Speaker 10: Trump would like to have that meeting in Saudi Arabia.
Speaker 10: At this point, though, I think it's way too early
Speaker 10: to tell when that could happen. We do know from
Speaker 10: our reporting that Steve Wikoff, who's actually technically the sort
Speaker 10: of special envoy for the Middle East but seems to
Speaker 10: be the kind of special envoy for ceasefires generally speaking,
Speaker 10: he's going to be in Moscow later this week to
Speaker 10: sort of get the ball rolling there. But again, I
Speaker 10: think it's very a little bit too early to say
Speaker 10: to give a timeline on that.
Speaker 2: At this precise moment, where are we in ramping up
Speaker 2: defense spending in Germany.
Speaker 10: So listen, I think this is going to be This
Speaker 10: was the kind of the bazooka that was dropped the
Speaker 10: other week by the leader of the CDU who's going
Speaker 10: to be the incoming chancellor of Frederick Mertz. Here they
Speaker 10: were talking about basically performing the debt break, and that
Speaker 10: is a huge deal here in Germany. The debt break
Speaker 10: is something that's not just a law within Germany. This
Speaker 10: is part of the German constitution. They put it in
Speaker 10: in two thousand and nine after the financial crisis.
Speaker 7: What's interesting is Mertz ran on a.
Speaker 10: Platform basically saying that they will not reform the debt break,
Speaker 10: and then, you.
Speaker 7: Know, five days after basically.
Speaker 10: Winning the election and not winning sort of a decisive majority,
Speaker 10: winning just sort of the biggest proportion within parliament, said
Speaker 10: that they're willing to sort of reform the debt break.
Speaker 10: That comes with its own issues within Germany at the
Speaker 10: sort of national level. I mean, you have the AfD,
Speaker 10: the far right that has been basically accusing a lot
Speaker 10: of this sort of German politicians to be acting undemocratically.
Speaker 10: What they are now trying to do is force through
Speaker 10: this debt break reform which requires two thirds of the
Speaker 10: parliament with the old parliament, despite the fact that they
Speaker 10: had an election in order to get this money through
Speaker 10: and listen, the market was very very pleased about this
Speaker 10: in many respects, and this was priced in basically all
Speaker 10: the way to the market, and then there was some
Speaker 10: doubt about whether or not they're going to get it through.
Speaker 10: It seems they're going to be able to get the
Speaker 10: compromise in the lower house in the Buddnestag, But it
Speaker 10: is not necessarily a done deal that they're going to
Speaker 10: be able to reform the debt break to get all
Speaker 10: that defense spending done.
Speaker 6: So when do we get clarity out of Germany there
Speaker 6: on this story, Oliver, Except obviously it's a big, big move.
Speaker 10: Yeah, we should get it over the next couple of weeks.
Speaker 10: Right now, where it's basically stuck is at the Bundestag,
Speaker 10: where the Greens they basically they need to get the
Speaker 10: Greens on board in order to reform this. At the
Speaker 10: first sort of step, the Greens have kicked up with
Speaker 10: a bit of a fuss because they've lost basically a
Speaker 10: large proportion of their representation in the next parliament and
Speaker 10: they want to put their stamp on things. I suspect
Speaker 10: they'll be able to get through that. But then there
Speaker 10: is the sort of the Bundesrat, which is the upper house.
Speaker 10: I don't want to get too into the weeds here
Speaker 10: of German politics, But then you need to get a
Speaker 10: sort of a lot more complex arithmetic. So we will
Speaker 10: get clarity of this over the next couple of weeks.
Speaker 10: But if they can't get this through. This would be
Speaker 10: an absolutely massive blow of all the sort of talks
Speaker 10: we've had about defense spending and stuff that they're doing
Speaker 10: at the EU level, This was by far the most
Speaker 10: significant thing we've seen out of European defense, and we've
Speaker 10: seen it priced into a lot of the stocks and
Speaker 10: a lot of the companies. You know, Ryan Mattel put
Speaker 10: out their earnings today. This is the biggest sort of
Speaker 10: defense contractor here within Europe. They're expecting twenty five to
Speaker 10: thirty percent growth in sales just this year. That could
Speaker 10: boost even higher if they get this through.
Speaker 2: Yeah, I mean we're talking almost one trillion euros and
Speaker 2: I jump changed at the end of the day, Oliver,
Speaker 2: thanks a lot, really appreciated Oliver Crook joining us. He
Speaker 2: is Bloomberg Europe, a europe correspondent.
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Speaker 3: Well, in case you didn't know, I was in Houston.
Speaker 2: Texas yes the last day and a half speaking to
Speaker 2: many energy CEOs and officials and Secretary of Energy, Secretary
Speaker 2: of the Interior.
Speaker 3: It was really great.
Speaker 2: We've got a lot of stuff going on there. I
Speaker 2: did sit down with the conversation with One Oak President
Speaker 2: Pierce Norton. So One Oak is a major US midstream
Speaker 2: energy company, which means they transport stuff like natural gas
Speaker 2: and GLS that's liquefied stuff and crude oil all across
Speaker 2: the US Energy Corridor. So I asked him, like, can
Speaker 2: you actually build? Can you build, baby build? If we're
Speaker 2: gonna tariffs on aluminum and steel.
Speaker 11: What I would give some stats behind that is in
Speaker 11: two thousand and seven, when the shell Revolution started, there
Speaker 11: was about twenty tcf a year of gas flowing in
Speaker 11: the United States. Last year was forty few today trading
Speaker 11: QP today. Now it's forty two trillion quit feet today.
Speaker 11: So we've doubled that just since two thousand. That took
Speaker 11: a massive build out. We've proven we can do it before,
Speaker 11: and I think we could do it again.
Speaker 2: What do you need to see though from the administration,
Speaker 2: Because it's permitting, it's now tariffs, it's now you know,
Speaker 2: putting a pipe in the ground, it's avoiding any lawsuits interestate, Like,
Speaker 2: what do you need to see to get it done
Speaker 2: sooner rather than later.
Speaker 11: Well, I think it's anything that actually accelerates, you know,
Speaker 11: the permitting is a help to us. But we have
Speaker 11: a slogan at one Oh that you know, we don't
Speaker 11: pick sides, We pick issues, and if the issue is
Speaker 11: getting energy as quick as we can, then we need
Speaker 11: to focus all aspects of that, not just on the administration.
Speaker 12: But what is it that we can do as an.
Speaker 11: Interstate company an interstate company, and what is it we
Speaker 11: can do as.
Speaker 3: In an industry aside from permitting.
Speaker 2: If we get aluminum steel tariffs of twenty five percent,
Speaker 2: what kind of headwind is that for build out?
Speaker 11: Well, it's it's a timing issue. You know, for us,
Speaker 11: we've already built out in most of our assets. We
Speaker 11: spent ten billion dollars since twenty and seventeen in building
Speaker 11: out growth projects, and then we spent another twenty five
Speaker 11: billion in mergers and acquisitions, so we've kind of gotten
Speaker 11: past that. So it's for on the pipe, it's a
Speaker 11: timing issue. It's where are you in the process of
Speaker 11: either trying to negotiate a deal or are you already
Speaker 11: putting it in the ground. In our case, you're already
Speaker 11: putting it in the ground, so it's not going to
Speaker 11: have a material impact on us.
Speaker 2: To that point, your capac span has rammed a lot
Speaker 2: as you're doing all those projects.
Speaker 4: Right, what.
Speaker 9: When is your peak capex?
Speaker 12: Probably not until the next couple of years.
Speaker 3: And what does that wind up looking like? Because that's
Speaker 3: a big that's a big spend. How do you reassure
Speaker 3: investors that, like, it's really going to end there? And
Speaker 3: what that looks like?
Speaker 11: Right, it's probably around two to three billion dollars a year.
Speaker 11: But given our size, we're now a sixty you know,
Speaker 11: billion dollar market cap company. We added, you know, from
Speaker 11: forty thousand miles of pipe to sixty thousand miles of pipe.
Speaker 12: We cover twenty three different states.
Speaker 11: We go all the way from the well head to
Speaker 11: water and also all the way to basically the trucks
Speaker 11: that bring the refined products, the jet fuel, the the
Speaker 11: diesel of the gasoline, you know, to the end user.
Speaker 2: So when do you think you would be more free
Speaker 2: cash flow focus versus investment focus?
Speaker 3: When what does that turn look like?
Speaker 12: We're already free cash flow focused?
Speaker 3: Okay?
Speaker 9: Can you you could be both.
Speaker 12: Like all that and kids?
Speaker 8: Okay?
Speaker 13: Yeah.
Speaker 11: And the reason is because if you have enough free
Speaker 11: cash flow, it opens up all levers, you know, for
Speaker 11: cap to allocation. Our first priority is to actually spend
Speaker 11: money on these high return projects. The second one is
Speaker 11: to look at an increases. The third one is reducing
Speaker 11: our debts. You do all that, and you do all
Speaker 11: of that kind of stuff, and we've announced the two
Speaker 11: billion dollars buyback program on our stock. We still have
Speaker 11: money left over from that, but our commercial people find
Speaker 11: a way to find those good projects for us.
Speaker 12: So I'm not worried about spending that in the right way.
Speaker 2: If oil prices slide, there were six months low yesterday
Speaker 2: of natural gas prices slide, does that hurt you?
Speaker 3: How does that affect Well.
Speaker 11: What we've seen is that the producers are way more
Speaker 11: resilient than they used to be used to. When prices
Speaker 11: would go up or down a small amount, they would
Speaker 11: either throw rigs, you know, at the issue, or they
Speaker 11: would you know, they would lay rigs down. Now that
Speaker 11: that gap seems to be a whole lot wider, and
Speaker 11: part of that is because they're much more efficient.
Speaker 12: Than they used to be.
Speaker 11: They can drill longer laterals, especially where we are really
Speaker 11: concentrated up in the Permi Basin and the Balking basin.
Speaker 12: They're drilling. You know, used to drill a two mile.
Speaker 11: Horizontal later announced almost three, so they can do it
Speaker 11: for less capital.
Speaker 2: I love you brought the Permian because we heard from
Speaker 2: Mike Worth yesterday of Chevron that the Permian eventually is
Speaker 2: going to plateau in the next few years.
Speaker 3: Do you see that on a takeaway capacity basis?
Speaker 11: Well, I've been in this business for forty years and
Speaker 11: one of the things that I've seen is every time
Speaker 11: you predict something like that, usually they find a way
Speaker 11: of even becoming more efficient, so therefore opening up more drilling,
Speaker 11: you know on you know, so you got your probable reserves,
Speaker 11: you got your possible reserves, and then but your proven
Speaker 11: reserves are what they're really after. So I would question,
Speaker 11: I can see what is it that the you know,
Speaker 11: is he talking about proven or probable reserves because they
Speaker 11: have different pricing points.
Speaker 2: When you take a look at the kind of infrastructure
Speaker 2: build out that we're seeing, and I know that you're
Speaker 2: already putting pipes in the ground, what do you think
Speaker 2: we need to move stuff in the next five to
Speaker 2: ten years? Like what stuff were we going to be
Speaker 2: moving around.
Speaker 12: We're going to move all kinds of molecules.
Speaker 11: What people typically talk about is natural gas, which in
Speaker 11: our business we call methane, but we're also going to
Speaker 11: meet molecules.
Speaker 12: For ethane for the petrick ems.
Speaker 11: We're going to move molecules for propane, in which we
Speaker 11: just announced the DOC down in Texas City with our
Speaker 11: partner Marathon to provide propane all over the world world
Speaker 11: scale DOC. We're going to be moving isive utane, normal utane, gasolines,
Speaker 11: and in our case we move jet fuel, we move
Speaker 11: gasoline for cars, and we also move diesel fuel. So
Speaker 11: all of those molecules. There will be more of those
Speaker 11: to move in the future.
Speaker 3: In your line of sight with those molecules.
Speaker 2: Any signs of a recession in the US, lowing economies,
Speaker 2: lowing demands.
Speaker 12: So far not not so.
Speaker 2: Definitive, not com here to Norton, I want to President
Speaker 2: and CEO of course is a major US menstream entergy companies,
Speaker 2: so they transport.
Speaker 3: All this stuff.
Speaker 12: Now.
Speaker 3: The biggest issue here, not to nerd out on you here.
Speaker 2: Is that in order to make all of us happen,
Speaker 2: and I mean all of this power demand data centers
Speaker 2: you name it. You need pipelines and stuff, You need
Speaker 2: transmission lines, which means you need permitting reform. And I
Speaker 2: know that people's eyes glaze over when when you hear that.
Speaker 3: But it's a mess.
Speaker 6: Now is this administration? Does the industry have expectations at industry?
Speaker 6: This industry? This administration will be.
Speaker 2: Better, yes and slash, But will it? Will it stay better?
Speaker 2: Will it be permanent permitting reform or will it be
Speaker 2: small tweaks? Because to get permitting reform and get all
Speaker 2: of the lawsuits potential lawsuits from states taken care of
Speaker 2: all your pricing, all your sourcing and pipe in the
Speaker 2: ground in four years could be very much impossible. So
Speaker 2: you need like permanent reform in order to make it happen.
Speaker 2: That part, I think is a little bit TBD.
Speaker 6: What has changed, though, is the reasons we need this energy,
Speaker 6: And I think that being AI, which most people don't
Speaker 6: know what AI is, and I might throw myself into
Speaker 6: that camp, but I know it's a thing, and I
Speaker 6: know it's generally not positive, and it's a strategic imperative
Speaker 6: for the United States. Therefore, in order for me to
Speaker 6: be a leader in AI, I have to be a
Speaker 6: leader in er supporter of energy.
Speaker 2: Yes, and I spoke to some of the big power players,
Speaker 2: so Constellation Energy, Energy, Next Era.
Speaker 3: These are all the guys like their stock moves like
Speaker 3: AI stocks because they're the power providers.
Speaker 9: Right.
Speaker 2: They were saying though that their demand growth that they've
Speaker 2: seen has nothing to do with AI. Oh, it's still cloud,
Speaker 2: it's still population growth, it's still just general demand. The
Speaker 2: AI is then layered on top of that. So these
Speaker 2: kind of forecasts, like the current money that they're making,
Speaker 2: has nothing.
Speaker 3: To do yet with those data centers.
Speaker 2: Interesting, which I found to be extremely interesting that we're
Speaker 2: way in the first inning when it comes to beefing
Speaker 2: up that kind of demand.
Speaker 6: What is the energy folks then are in Houston. What
Speaker 6: were they feeling about just the tariff discussion?
Speaker 2: Well, they love it, no, I'm kidding, yes, okay, So
Speaker 2: on the record, everyone was always talking about how that
Speaker 2: they're minimally exposed. It's demonymous. It's just you know, five
Speaker 2: percent of their costs. It's no big deal. Off the record,
Speaker 2: no one loves it. And they also don't love the
Speaker 2: uncertainty and as mentioning before, Like I asked, particularly Patrick Piane,
Speaker 2: who's the CEO of tautel energies who is offshore wind
Speaker 2: projects right? I said, are you throwing them in the trash?
Speaker 2: He's like nowhere, pausing, And I was like, why pausing.
Speaker 2: He's like, they're thirty year leases. This is a four
Speaker 2: year administration. But pause is still a pause, and pause
Speaker 2: is still like not putting capital into certain projects.
Speaker 6: When I think of energy projects, these things take time
Speaker 6: long and a lot of capital, So you have to
Speaker 6: have some level of certainty before you start putting all
Speaker 6: that money into the ground.
Speaker 3: Absolutely, and the buyers have do.
Speaker 7: To yep, all right, good stuff.
Speaker 6: I mean, we got plenty more to go too, But
Speaker 6: I mean it's it just goes to the issue of
Speaker 6: you know, the energy so is one of those industries
Speaker 6: that doesn't like uncertainty.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: I was in Houston, Texas over the last day and
Speaker 2: a half for a week long conference called Sarah Week.
Speaker 2: It's where all the energy CEOs, officials, energy ministers, you
Speaker 2: name it, are all there to discuss policy as well
Speaker 2: as make deals etc. I was privileged to talk to
Speaker 2: the CEO of ge Vernova, Scott Straisik. Now gie Rinova
Speaker 2: was spun off a year ago from ge. It's the
Speaker 2: gas and wind turbine manufacturer, so power generation, power grid.
Speaker 2: This is the company that makes all that stuff, the
Speaker 2: transformers that you plug into the grid to make all
Speaker 2: the power work. They make that stuff them and three
Speaker 2: other companies. I sat down with him and I said, look,
Speaker 2: we have tariffs coming on, there's recession fears everywhere, equities
Speaker 2: are getting hurt. How does this affect your business? Here's
Speaker 2: that part of the conversation.
Speaker 13: We've certainly experienced stock volatility over the last six months,
Speaker 13: but the end market's not so much at all. No,
Speaker 13: I mean, just like we started the year, I'd say
Speaker 13: we expect substantial growth in both our gas and our
Speaker 13: grid backlogs. It's substantially higher margin than when we started
Speaker 13: the year. Continue to work on operationally proving our winden business.
Speaker 13: So that's the one in a marketing that's a little
Speaker 13: bit softer for us, but certainly in our larger, faster
Speaker 13: growing business, there is really no change through the first
Speaker 13: two and a half months of the year.
Speaker 9: If we get.
Speaker 2: Tariffs on aluminum steel tomorrow at twenty five percent, how
Speaker 2: does that impact you At.
Speaker 13: The end of the day, these are technologies that are needed,
Speaker 13: and this is also an example of where it helps
Speaker 13: to be a US based company. I mean, we only
Speaker 13: buy about five percent of our raw materials from Canada, Mexico,
Speaker 13: China that gets imported into the US, so we'll have
Speaker 13: to navigate through whatever policies come, but we feel like
Speaker 13: we can manage through those disruptions.
Speaker 9: Do pricing power to push it through.
Speaker 13: In the end, it doesn't mean in between between now
Speaker 13: and then, there couldn't be some financial implications for us
Speaker 13: with only about five percent of our material buy being
Speaker 13: in those countries. We'll navigate through it, but we're not
Speaker 13: immune to tariff risks, but we're confident we can navigate
Speaker 13: our way through this.
Speaker 9: This has been a year for ge Bernova quite a year.
Speaker 2: Yeah, it's been spun out from GE and it's been
Speaker 2: quite a year in terms of AI and data center demand.
Speaker 2: What's been the biggest change you leading the company in
Speaker 2: the last year.
Speaker 13: Well, I mean, I'm proud of the first year, but
Speaker 13: most Importantly, it's really just the beginning for us because
Speaker 13: a lot of these trends, whether it be AI, whether
Speaker 13: it be the electrification of these industries, it's really just starting.
Speaker 13: So our end markets continue to strengthen. I think there's
Speaker 13: a more reality based focus on both the need for
Speaker 13: gas and nuclear, so the demand cycle for both of
Speaker 13: those continues to get even stronger today than where we
Speaker 13: were twelve months ago. And it really then comes back
Speaker 13: to how do we deliver safely and in a high
Speaker 13: quality way to serve this incredible market that we're walking into.
Speaker 9: Your backlog is huge, right, It's like seventy three billion dollars, right?
Speaker 2: Can you can be perspective like how much of that
Speaker 2: is AI demand driven?
Speaker 9: How much of that is like win stuff?
Speaker 2: How much of that is transformers which is the stuff
Speaker 2: you got to plug into the grid.
Speaker 8: You bet.
Speaker 13: It's still a very small proportion of our backlog is
Speaker 13: directly attached to AI. I mean, when you really think
Speaker 13: about even data centers in total, there's only about sixty
Speaker 13: gigawatts of data centers globally today, and only fifteen percent
Speaker 13: of that it's really explicitly related to AI.
Speaker 8: Most of it's still cloud and storage.
Speaker 13: So that's why there's so much growth to come because
Speaker 13: we're really just starting. But I'm sure us sitting down
Speaker 13: a few years from now, it's going to be a
Speaker 13: larger proportion of our backlog.
Speaker 9: How much do you think it would be.
Speaker 13: Best guess, Oh, it's gonna be a lot more, there's
Speaker 13: no question about it.
Speaker 9: Dear.
Speaker 8: No, I don't think we get to that proportion.
Speaker 13: But it's going to become more AI centric, and it's
Speaker 13: becoming even more US based because the amount of growth
Speaker 13: that we're going to see in the US the rest
Speaker 13: of the decade relative to the rest of the world,
Speaker 13: it's going to be more tomorrow than it's certainly been
Speaker 13: the last five to ten years.
Speaker 2: In the meantime, you cannot get a CEO on the
Speaker 2: stage at Sarah Week that isn't talking about GeV Ronova
Speaker 2: because everyone's buying your gas turbines.
Speaker 9: At the end of the day.
Speaker 2: How how much of this is firm contracting? How much
Speaker 2: of that is just like, yeah, yeah, we like it,
Speaker 2: we're gonna buy it. Can you give me some insight
Speaker 2: into that.
Speaker 13: Well, we're very firm in contracts, certainly with our gas turbine,
Speaker 13: our transformer, our switch gear backlog really through twenty seven
Speaker 13: into twenty eight. Right now, I would expect by the
Speaker 13: end of the summer will be largely sold out through
Speaker 13: the end of twenty eight with those equipment. But we're
Speaker 13: also looking to kind of find ways to get better
Speaker 13: every day and a culture of continuous improvement, and if
Speaker 13: we can increase capacity smartly as we figure out this ramp,
Speaker 13: we'll do that. But for context, last fall we announced
Speaker 13: a really almost thirty five percent increase in supply from
Speaker 13: twenty five levels to twenty seven. So thirty five percent
Speaker 13: increases a lot. It doesn't mean we stop there, but
Speaker 13: we've got to get there first and then re evaluate
Speaker 13: what the art of the possible really is.
Speaker 2: Okay, So to that point, what are the issues with execution?
Speaker 9: Then?
Speaker 2: Like, it's a lofty goal, right You're investing six hundre
Speaker 2: million dollars in plants in the US, it's a lot.
Speaker 9: How fast can that happen? And what are the roadblocks
Speaker 9: for you?
Speaker 13: It's got to happen in the next two years, you know,
Speaker 13: really this company is going to look very different between
Speaker 13: now and the summer at twenty six.
Speaker 9: What's the biggest hurdle for you to get that done.
Speaker 13: Workers, right, we're going to add over We're going to
Speaker 13: add over fifteen hundred employees. That's a combination of engineering
Speaker 13: and craft lay. That's all in the US. Take gas
Speaker 13: as an example. We've got to add over five hundred heavy.
Speaker 8: Duty pieces of machinery into.
Speaker 13: Our global factories to drive this growth in this ramp.
Speaker 13: So that's a lot in existing factory footprints. We're highly
Speaker 13: capable of doing it, but it's a lot between now
Speaker 13: and let's say the fourth of July of next year.
Speaker 13: So I like our chances, but there's a lot of
Speaker 13: work to do.
Speaker 2: Talk to me about the wind part, okay, because that's
Speaker 2: sort of like the cousin.
Speaker 3: No one wants to talk about right now, right or
Speaker 3: the auncle.
Speaker 2: If someone came to you and said, Hey, Scott, I
Speaker 2: like to buy your wind business, would you be like, yes,
Speaker 2: take it off my hands.
Speaker 5: No.
Speaker 8: I don't think it's that simple.
Speaker 13: I think at the end of the day, we've got
Speaker 13: a big onshore wind business today. Even in the US,
Speaker 13: we have over thirty five thousand wind turbans that are
Speaker 13: spinning creating electricity today. We see real opportunities to repower
Speaker 13: that existing install base using the infrastructure that's already been built,
Speaker 13: but putting longer blades onto the wind turbines that helps
Speaker 13: the world.
Speaker 8: We think there's a role for wind, and with that
Speaker 8: role for wind.
Speaker 13: We're focused today on just operationally running this business better
Speaker 13: every day, waiting for the growth and inflection that comes.
Speaker 13: So we really are a believer in all the above
Speaker 13: technology suite. But we'll also look at our portfolio every
Speaker 13: day with a steely eye on what creates value for
Speaker 13: our shareholders. But there's no binary yes or no answer
Speaker 13: to that question. But we're focused on running these businesses
Speaker 13: better and ultimately creating value.
Speaker 9: All right, So sticking to the wind.
Speaker 2: The other part of your business, which I think is
Speaker 2: so cool, are the transformers. So yes, you can have
Speaker 2: all the wind farms you want, all the solar that
Speaker 2: you want, but if you have to plug it into
Speaker 2: the grid, so I think it is like a big socket.
Speaker 3: I'm sure it's much more complicated than that.
Speaker 2: But talk to you about the growth there, because everyone
Speaker 2: talks about AI and data demand, but like, that's where
Speaker 2: the potential growth is.
Speaker 9: Walk me through the percentages.
Speaker 13: And that's also for context where a lot of our
Speaker 13: first interactions really came to be more intimate with the hyperscalers.
Speaker 8: I mean, we did over half a billion.
Speaker 13: Dollars of direct electrical equipment with the hyperscalers and orders
Speaker 13: last year with transformers with switch gears attached their data centers.
Speaker 13: That's a business that we see substantially growing from here.
Speaker 13: Two years ago, our backlog coming into twenty twenty three
Speaker 13: was about six billion dollars equipment backlog. It's north of
Speaker 13: twenty billion dollars today. So it's a growth rate.
Speaker 8: It'll stay growing.
Speaker 13: Our backlogs certainly will grow at that same level for
Speaker 13: another year here at expanding margins.
Speaker 8: So this is I think we can have debates.
Speaker 13: Between nuclear gas when what are the power generation sources
Speaker 13: that are going to power the world?
Speaker 8: Regardless, we need to invest in the grid, yes.
Speaker 2: And that then leads us to transformers. Before I let
Speaker 2: you go, North America's what like twenty twenty five percent
Speaker 2: of your business right now? Uncertainty is quite high. We
Speaker 2: saw it with the nfib A survey today of small businesses.
Speaker 2: Is now a good time to invest in the US
Speaker 2: and what part of that business do you think it
Speaker 2: could be in the.
Speaker 9: Next five years.
Speaker 8: I think it's a great time to invest in the US.
Speaker 13: Yes, we've gone through multiple decades with very little load growth,
Speaker 13: and it's really imposed possible to underwrite a case that
Speaker 13: we don't need substantially more electrical equipment and supply here
Speaker 13: over the next decade.
Speaker 8: And yeah, that's data centers, but it's not just that.
Speaker 13: We're reindustrializing parts of the US to an extent that
Speaker 13: is going to require more electrical load. You know, EVS,
Speaker 13: home heating, there's a lot of other factors and beyond that,
Speaker 13: we just need to modernize what we have for resilience
Speaker 13: and energy security.
Speaker 9: How big of a percentage could the US or North
Speaker 9: America be in your portfolio in five years.
Speaker 13: It's going to grow as a proportion, for sure, but
Speaker 13: it's not the only market. We're continuing to see real
Speaker 13: growth in Asia and in Europe. But we're very bullish
Speaker 13: on the US and we're going to keep investing in
Speaker 13: the US. You cited the six hundred million dollars and
Speaker 13: fifteen hundred jobs attached to that, but that's not the end,
Speaker 13: that's just the beginning as we continue to serve this market.
Speaker 3: That was Scott Straisik. He is the CEO of ge.
Speaker 2: Vernova and not much, just a touch of the many conversations,
Speaker 2: which is obviously bullish power, big big, big way for
Speaker 2: all the power players, you know, and the oil companies
Speaker 2: are having a tougher time because of the tariffs and
Speaker 2: what it means for global flows and all of that.
Speaker 2: Particularly if we see a peace deal in.
Speaker 3: Ukraine what that means for gas flows. But you know
Speaker 3: they're managing.
Speaker 6: Is the expectation if there is a peace deal that
Speaker 6: the Russian gas I mean the oil and gas coming
Speaker 6: out of Russia that we don't know where it's going,
Speaker 6: but we know it's out there.
Speaker 2: But expectation is, well, you're still buying some gas from Russia.
Speaker 2: The real thing is about the gas. The oil will
Speaker 2: be dictated more by opek plus. The expectation is that
Speaker 2: gas will come back online in Europe more, but not
Speaker 2: to the way it was. That's the that's the official line. Well,
Speaker 2: someone actually winds up happening.
Speaker 3: Have I bored you yet?
Speaker 4: From melody conversation, I'm all in, I'm all in.
Speaker 3: He'll be bored by Friday.
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