Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business
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Speaker 1: with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast.
Speaker 2: Carol is on assignment today. This past week, some good
Speaker 2: news for equities as the US and China reached a
Speaker 2: temporary truce in their trade war. Also, new inflation data
Speaker 2: indicated a more limited impact of tariffs, at least for now.
Speaker 2: In fact, we saw the stock market wipe out its
Speaker 2: losses for the year midweek. It also prompted US President
Speaker 2: Donald Trump to again pressure Federal Reserve charge your own
Speaker 2: power to lower interest rates. Yet cautious optimism lingers. We're
Speaker 2: going to dig into that a little bit later. Plus
Speaker 2: the President's first official overseas visit and to the Middle East.
Speaker 2: On the agenda, a trillion dollars in deals, AI dreams,
Speaker 2: and one very shiny private jumbo jet. We break down
Speaker 2: the Trump administration's relationships with Middle East allies and where
Speaker 2: Israel stands, plus China's export restrictions of rare earths are
Speaker 2: in focus. We speak with the CEO of USA Rare
Speaker 2: Earth on bringing manufacturing of these strategic mineral Stateside all
Speaker 2: that to come, We begin, though, with a pulse check
Speaker 2: on the US consumer US inflation rose by less than
Speaker 2: forecast in April that led economists to fear that the
Speaker 2: real effect of tariffs lie in the months ahead. Retail
Speaker 2: sales decelerated notably in April, reflecting a consumer pullback on
Speaker 2: imported goods amid concerns about rising prices from tariffs. Walmart
Speaker 2: delivered another quarter of solid sales and earnings growth, but
Speaker 2: caution that tariffs and increasing can turbulence means that even
Speaker 2: the world's largest retailer expects to raise prices. For the
Speaker 2: latest economic news, head on over to Bloomberg dot com
Speaker 2: or check it out on the Bloomberg terminal. And that's
Speaker 2: exactly where we want to go right now. Let's bring
Speaker 2: in Dana Telsey. She's found her CEO and Chief Research
Speaker 2: Officer of Telsey Advisory Group for Specialty all Things Retail.
Speaker 2: Dana I want to start with Walmart, even though this
Speaker 2: is not a company that you particularly follow. One of
Speaker 2: your colleagues does that. But the company did say that
Speaker 2: it is going to pass al on costs to consumers,
Speaker 2: not yet but soon. We saw shares fall. How do
Speaker 2: you take the results that we got from the company
Speaker 2: in the context of what we know about tariffs and
Speaker 2: also the way that you've been talking about potentially empty
Speaker 2: shelves in the next couple of weeks.
Speaker 3: A couple things, and thank you very much for having me.
Speaker 3: First of all, if a company like Walmart, with the
Speaker 3: skies and scale of Walmart is going to raise prices
Speaker 3: because of the external environment out there, what does it
Speaker 3: say for all the others? So every one, given the
Speaker 3: headwinds of carries and costs that are out there, price
Speaker 3: increases are coming. However, it may be selective. It's not
Speaker 3: going to be across the board. It'll be called surgical,
Speaker 3: whatever word you want to use, it'll be surgical in
Speaker 3: what it is. But I've even heard we have this
Speaker 3: price tracker where we've been tracking eighty items and it
Speaker 3: comes out every Tuesday, same eighty items, and we have
Speaker 3: seen of the eighty items we track around twenty percent
Speaker 3: of them have a price have had a price increase
Speaker 3: each week, and it changes. Sometimes there may be a promotion,
Speaker 3: sometimes there's an event. But just on a tracker basis,
Speaker 3: price increases are coming. There's a reason why, in my mind,
Speaker 3: there has been some pull forward to sales the tracker.
Speaker 2: This is fascinating to me that you have this tracker.
Speaker 2: Is is there a rhyme or reason too the types
Speaker 2: of products that are being that are increasing in.
Speaker 3: Price, Well, we track the same items every week, and
Speaker 3: it could their legacy items, whether it's a pair of
Speaker 3: Levi's or it's a Barbie doll, whatever it may be.
Speaker 3: There isn't a rhyme reason. But what's happening is that
Speaker 3: we expect when we heard about these tariffs, we need
Speaker 3: a way to be able to track it. And so
Speaker 3: this way, look what Walmart just said, prices increases are coming.
Speaker 3: Let's see what this tracker shows in the next four
Speaker 3: weeks in terms of pricing.
Speaker 4: So it's very interesting, you know the difference that we're
Speaker 4: seeing in the soft data and the hard data that
Speaker 4: consumers are saying that they're really pessimistic, but we're not
Speaker 4: necessarily seeing that yet in hard data. Or earnings reports.
Speaker 4: Are you do you agree with that thesis or are
Speaker 4: you seeing pockets in some of these earnings reports that
Speaker 4: consumers are feeling the pain.
Speaker 3: A little bit of each. When you think about where
Speaker 3: there's been a slow down, luxury brands has been a
Speaker 3: slow down. You take a look at the high end.
Speaker 3: LVMH reported a negative three percent same store sales decline.
Speaker 3: That's typically weaker for an LVMH. You're seeing other companies
Speaker 3: that are brand leaders at not the luxury price points,
Speaker 3: but where there's brand leaders, where there's innovation. Look at
Speaker 3: the results that came out of Birkenstock. You had a
Speaker 3: high teen sales increase, you increase the guidance for the
Speaker 3: year on sales the high end of the previous range
Speaker 3: seventeen percent plus, and you increase your ajusity. But da,
Speaker 3: what do they have? They have newness and innovation At
Speaker 3: the same time I met with Tapestry on Tuesday, I
Speaker 3: met with Levi's yesterday. Tapestry in Levi's and Birkenstock heritage
Speaker 3: companies with authenticity that are reinventing their product. You know
Speaker 3: what they're doing. They're capturing a younger consumer. And companies
Speaker 3: like Coach, which is owned by Tapestry, a fifteen percent
Speaker 3: increase in averaging retail selling price. Why it's new and different?
Speaker 2: Emile A and I are smiling right now because on
Speaker 2: our editorial called Ning, I said, we have to ask
Speaker 2: Dan about Birkenstock shares are up what six percent? You
Speaker 2: were on surveillance with Tom Keen and me last week.
Speaker 2: We asked you to name one company to watch. You
Speaker 2: said it was Birkenstock. You called this, why are you
Speaker 2: bullish on Birkenstock?
Speaker 3: Because their footwear overall has wide appeal. You have the
Speaker 3: flywheel of younger customers that are being attracted to the brand.
Speaker 3: It's not just open toe share sandals, it's closed toed shoes. Also,
Speaker 3: you look at the expansion opportunities they have with their
Speaker 3: own stores. They only have around ten stores in the US.
Speaker 3: They have wholesale accounts who have stores, but of their own.
Speaker 3: You take a look at Asia, which is a rising
Speaker 3: market for them. You look at the fact that they
Speaker 3: bring in goods they're made in Europe. They yes, they
Speaker 3: have terif exposure, but not the as significant teriff exposure.
Speaker 3: And look at their adjustinity. Bitdam Margins, I mean you're
Speaker 3: in excess to thirty one percent. I don't have many
Speaker 3: companies that are generating mid to high teen sales increases
Speaker 3: with increasing EBITDA margins in an environment where there's uncertainty.
Speaker 3: But you're seeing a little bit in footwear. You look
Speaker 3: at some of the other brands, Socony thirty percent increase
Speaker 3: in sales by Wolverine worldwide, Merrill up in excess to
Speaker 3: thirteen percent. So newness drives demand.
Speaker 4: Yeah, Maryls are having a comeback. I've seen a couple
Speaker 4: Maryls on the streets of New York City and that.
Speaker 2: Was like a shoe that I want, I like to hear.
Speaker 4: When I was like a child's But they're coming back,
Speaker 4: you know.
Speaker 5: You know.
Speaker 4: I was looking at at the S and P five
Speaker 4: hundred sectors, the group levels. What was the top performing
Speaker 4: this year so far?
Speaker 6: What's the worst?
Speaker 4: Consumer? Staples is one of the best performing groups. Consumer
Speaker 4: discretionary is one of the worst. How are investors supposed
Speaker 4: to invest in the consumer space at large? How should
Speaker 4: they be thinking about kind of the direction of travel
Speaker 4: when you use.
Speaker 3: When you think about exactly the difference with staples and discretionary,
Speaker 3: staples as essentials, it's what you need, not what you want.
Speaker 3: And when you think about this environment where we don't
Speaker 3: know what the price increases is going to be, we've
Speaker 3: all seen the backward looking data of consumer confidence and
Speaker 3: so they're being careful. And so with staples, that's careful.
Speaker 3: With discretionary, it feels you have spending power. There's always
Speaker 3: the old adage that goes when the stock market goes up,
Speaker 3: people feel great and spending can happen when the stock
Speaker 3: marketing comes down, you know, mind the hatchets, you know,
Speaker 3: be careful. And so look what we've had over the
Speaker 3: past two months. That's what you've had. Companies in the
Speaker 3: consumer area are reporting first quarter earnings. Now when you
Speaker 3: look at Walmart and what's to come, if they're saying
Speaker 3: prices are going up, that's going to be the mantra
Speaker 3: going forward.
Speaker 2: We got to get you to weigh in on Dick's
Speaker 2: buying foot Locker. What does it say to you? I mean,
Speaker 2: this is the end of an era for foot Locker.
Speaker 2: This is a company that's been a public company since
Speaker 2: nineteen eighty What does this M and A mean to you?
Speaker 3: So overall on the M and A, where's the scale
Speaker 3: and where's the synergies Footlocker on its own is taking
Speaker 3: a long time to undergo this transformation, even under a
Speaker 3: well recognized, well respected CEO, Mary Dillon. She came from
Speaker 3: Alta Right, did great things at Alta ed Stack Basically,
Speaker 3: you know legacy legacy Dix his father founded it, Lauren Hobart.
Speaker 3: They basically reinvented what Dix was with Dick's House of Sport.
Speaker 3: You talk to every real estate landlord. What do they
Speaker 3: all want Dick's House of Sport?
Speaker 7: Why?
Speaker 3: Because it brings traffic. What's the difference between Dix and Footlocker.
Speaker 3: The customer base of Footlocker the eighteen to twenty five
Speaker 3: year old guy. The customer base at Dix could be
Speaker 3: more families. What do you get with both of it?
Speaker 3: And granted the stock is down because the certainty of
Speaker 3: the execution at Dix's Dix alone was there, and you
Speaker 3: could basically see the path of growth with House the Sport.
Speaker 3: Putting it together, there's work to be done, transformation to
Speaker 3: be done. With fult Locker gives them more buying power.
Speaker 3: Let's see what Dix does, because what Edstach says is
Speaker 3: he's got the vision. He had the vision before with
Speaker 3: House of sport. Let's see what he can do with
Speaker 3: fullt locker just thirty second.
Speaker 2: Sounds like you're optimistic. This is a good deal.
Speaker 3: I think it's the valuation basically at six, six times
Speaker 3: and seventeen times pe not bad from that spectrum. What
Speaker 3: is it time length? And can you keep the focus
Speaker 3: on Dick's and Dick's house of sport while you're integrating
Speaker 3: foot lockers? The question go forward?
Speaker 2: All right, Dana, appreciate you joining us from talk to retail.
Speaker 2: Not a better voice out there, Dana Telsey, Founder, CEO,
Speaker 2: chief Research Officer of Telsey Advisory Group, joining us here
Speaker 2: in the at Bloomberg at BusinessWeek Studio.
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Speaker 2: President Trump this week toward the Middle East in his
Speaker 2: first scheduled overseas trip since taking office. Over four days,
Speaker 2: the President visited Saudi Arabia, the United Arab Emirates, and cutter.
Speaker 2: He was there for one simple reason to do business
Speaker 2: and make deals, and it appears to have worked. Saudi
Speaker 2: Arabia and the UAE unveiled commitments to increase investment with
Speaker 2: the US by as much as two trillion dollars over
Speaker 2: the next decade. In addition, cutter airways placed in order
Speaker 2: to give Boeing the single biggest deal in the US
Speaker 2: planemaker's history, not to mention the four hundred million dollar
Speaker 2: luxury jumbo jet the Qataris reportedly want to give the
Speaker 2: President as a temporary air force one. The strengthening of
Speaker 2: ties with Gulf nations have led some to raise alarm
Speaker 2: bells about the sphere of influence in the region. For
Speaker 2: more on US relations with the Middle East and what
Speaker 2: this means for Israel and China, we caught up with
Speaker 2: Greg Roman, executive director of the independent nonprofit Middle East Forum.
Speaker 8: Well.
Speaker 9: I think that what President Trump is looking for his
Speaker 9: partnership instead of ownership over the region. He expects that
Speaker 9: there be a quid pro quo between the United States
Speaker 9: and its trade, commercial, economic, and military relationships with Middle
Speaker 9: East allies. But there's also some sublayer here that I
Speaker 9: think the administration needs to be wary of. Where in
Speaker 9: countries like Saudi Arabia and the United Arab Emirates are
Speaker 9: looking to foster closer relations with the US, with our businesses,
Speaker 9: with our markets. There's other countries like Turkey and Katar,
Speaker 9: even though he's not potentially visiting Turkey, unlisters that deal
Speaker 9: with Putin and Zelensky on Thursday that are looking to
Speaker 9: influence the United States to outstretch their interests to the
Speaker 9: US's disadvantage. So there's two positive visits here and another
Speaker 9: one that I would be very aware of when he
Speaker 9: goes to do greg.
Speaker 10: The President saying, you know, now, there are our friends
Speaker 10: and our allies talking about Saudi Arabia, and I'm just curious,
Speaker 10: what does being friends and allies really look like going
Speaker 10: forward between the two and where does that kind of
Speaker 10: leave the US and its historical allies.
Speaker 9: Well, I think that Saudi Arabia and the United States
Speaker 9: have been historical allies since the meeting at y alt.
Speaker 10: I guess every relationship's complicated, but it feels like this
Speaker 10: one's been a little bit more complicated.
Speaker 8: Well, okay, let's go to nine to eleven for a second.
Speaker 9: Exactly after eleven, and you had fourteen years of animus
Speaker 9: between the United States and Saudi kings and princes because
Speaker 9: of their failure to own up to what was the
Speaker 9: result in relationship of having cover fur the bin Laden family.
Speaker 9: But Mohammed bin Salman becomes Crown Prince in twenty fifteen,
Speaker 9: he quickly starts to reform the kingdom, starts opening up
Speaker 9: its markets, asking for more investment in the United States,
Speaker 9: even goes so far as to invest money and the
Speaker 9: Israeli let Hedge Fund. For the last decade, MBS has
Speaker 9: been at the forefront of trying to crystallize and close
Speaker 9: in relations between the United States and Saudi Arabia. UAE
Speaker 9: going back to the early nineties, has been in a
Speaker 9: close defense relationship with the United States since the Gulf War.
Speaker 9: But the third country that I mentioned, the Guitaris, that's
Speaker 9: one that I'm still wary of, considering the fact that
Speaker 9: they have huge influence operations and even espionage against members
Speaker 9: of the United States and also people who are even
Speaker 9: close to Trump's family.
Speaker 2: Okay, so let's go there and give us exactly what
Speaker 2: you're concerned about, especially in the context of a potential
Speaker 2: gift of a presidential jet.
Speaker 8: Well, I think this goes beyond the presidential jet.
Speaker 9: I understand why the Defense Department would try to have
Speaker 9: an interim solution for the lack of Boeing being able
Speaker 9: to deliver on Air Force one, which is now expected
Speaker 9: by twenty twenty nine. But I think security considerations will
Speaker 9: put that aside and the Secret Service won't sign off
Speaker 9: on that, even though I understand the token gesture. The
Speaker 9: larger issue is the forty six to forty seven billion
Speaker 9: dollars that Guitaris have invested in American higher education k
Speaker 9: through twelve businesses or university systems, political lobbying to the
Speaker 9: tent of almost seventy eight million dollars over the past
Speaker 9: few years, all but the of trying to buy both
Speaker 9: sides of the political aisle. And I don't think this
Speaker 9: is anything that really extends to the administration. But what
Speaker 9: the Qutaris have done is try to create a white
Speaker 9: picket fence around their ears of influence on Republicans and
Speaker 9: Democrats that whichever way American politics go, the Kutaris will
Speaker 9: be there to win.
Speaker 10: So why, I don't know, Maybe this sounds naive. I mean,
Speaker 10: what is it that we need to be wary most
Speaker 10: when it comes to extending our relationship throughout the Middle East?
Speaker 10: I mean, we have relationships, right with other countries, with
Speaker 10: other regions, there are investments that we encourage. We have
Speaker 10: a White House and president who is big time encouraging
Speaker 10: investments by everyone outside the United States into the United States.
Speaker 10: So what is it in particular at this moment in time,
Speaker 10: especially with a nation like Saudi Arabia that is trying
Speaker 10: to move beyond oil right and kind of extend its
Speaker 10: economy in different ways, that does require maybe relationships beyond
Speaker 10: its borders. So I'm just curious what do you think
Speaker 10: Americans need to be worry about in this relationship as
Speaker 10: it seems to be deepening.
Speaker 9: I think with Plan twenty thirty under MBS in Saudi Arabia,
Speaker 9: the diversification of Saudi's economy, it'd being a key member
Speaker 9: of the IMEC, the Israel Sorry India, Middle East Europe
Speaker 9: Economic Corridor is great in terms of being able to
Speaker 9: have American companies invited to bid on infrastructure contracts there
Speaker 9: and to help them diversify it.
Speaker 8: It's a net gain for the US and Saudi.
Speaker 9: Same thing with the amrodis they've placed their bet on AI.
Speaker 9: I think the fact they're willing to invest close to
Speaker 9: a trillion dollars to this with check Tachnaun and his
Speaker 9: leadership through their ministries for infrastructure and development. It's a
Speaker 9: win win for the United States. But the one that
Speaker 9: I'm worried about is where in the UAE and Saudi
Speaker 9: Arabia don't have significant military relations with Iran, don't support Kamas,
Speaker 9: aren't actively supporting Siri and g hottis that Katari trip,
Speaker 9: the one in which you have a country which hosts
Speaker 9: one of the most egregious terror organizations to ever commit
Speaker 9: a tax against Americans, is one that I have to
Speaker 9: be very wary of because I don't see what the
Speaker 9: net gain is for the United States. If anything, it's
Speaker 9: to our citizens detriment to do any business with them.
Speaker 2: We're speaking with Greg Roman, executive director of the Middle
Speaker 2: East Forum. He joins us from Los Angeles. Greg, I
Speaker 2: want to dig into what you've described as an influenced
Speaker 2: campaign of the Katari government, specifically when it comes to
Speaker 2: higher education and indeed K through twelve here in the US.
Speaker 2: What can you tell us about what you've found and
Speaker 2: what you've reported on and really what the goals are
Speaker 2: of the government of the country.
Speaker 9: So if you think about all areas of American educational Excellence,
Speaker 9: Carnegie Mellon in cyber space, Northwestern in Business, Cornell and Medicine,
Speaker 9: Georgetown and Diplomacy, Texas A and M and Science and engineering.
Speaker 9: These are all places where the Katari government has invested
Speaker 9: hundreds of millions, if not billions of dollars in bringing
Speaker 9: those campuses and the intellectual property and the professors to Doha.
Speaker 9: So if you look at the number amount of students
Speaker 9: that study at Texas, A and M Doha, it's Iranian
Speaker 9: students who more than anything constitute the people who are
Speaker 9: there studying nuclear engineering, physics, applied sciences, and they take
Speaker 9: that IP which they wouldn't be able to access because
Speaker 9: the wouldn't get a visa to study in the United States,
Speaker 9: bring it back to Iran and then contribute to their
Speaker 9: nuclear program. Even in k through twelve. Their goal is
Speaker 9: to try to create a generation of Americans who are
Speaker 9: sympathetic to Katari foreign policy goals, so that maybe one
Speaker 9: person from a million who graduate from one of these
Speaker 9: universities ends up becoming president. That Kataris have their talents
Speaker 9: enshrined in them and are able to exert their influence
Speaker 9: on it. And we see this across business. Dozens of companies,
Speaker 9: hedge funds, investment funds, all taking Katari money and then
Speaker 9: when the right time comes, they use that investment and
Speaker 9: they activate it to have their influence.
Speaker 10: So what do you make or what do you believe
Speaker 10: is the significance of this being President Trump's first plan
Speaker 10: trip overseas. And you've also served, as I should point out,
Speaker 10: the political advisor to the Deputy Foreign Minister of Israel.
Speaker 10: You've worked for the Israeli Ministry of Defense. I mean,
Speaker 10: how do you think Israel and the Prime and Prime
Speaker 10: Minister and Yahoo are looking at this trip.
Speaker 9: I think that the US is executing its own entry.
Speaker 9: As much as we elect our president to be able
Speaker 9: to engage in policies that are pro American. The Israeli
Speaker 9: government decides what's best for Israel, and more often than not,
Speaker 9: the policies mesh where there's a strong close relationship between
Speaker 9: the two. But I think at the same time President
Speaker 9: Trump is saying, we have to have an America first policy,
Speaker 9: and that's not at juxtaposition where it's against Israel's interests.
Speaker 9: But the net gain for the United States in terms
Speaker 9: of strengthening its relationship with Arab countries will also be
Speaker 9: a positive gain for Israel. We sow the same exact
Speaker 9: pattern take place in twenty nineteen and then twenty twenty
Speaker 9: with the process that led to the Abrahamic Courts, and frankly,
Speaker 9: if I was Prime Minister net and Yahoo, I'd be
Speaker 9: looking at the dialogue between Mohammed and Salman and President
Speaker 9: Trump and seeing how close I am now today versus
Speaker 9: yesterday of having sauty recognition of Israel and economic relations
Speaker 9: between the two heavyweights in the region.
Speaker 10: I am curious do we look back at this moment
Speaker 10: in time in five years, Greg, and say three years.
Speaker 10: I always think about this, Is this a moment in
Speaker 10: time where we are really strongly changing our geopolitical alliances
Speaker 10: or midterms or new president come three and a half
Speaker 10: years or so, does that change things potentially again?
Speaker 9: I think we're at an inflection point. The abraham Accords
Speaker 9: was put on ice when President Biden came into office
Speaker 9: for other reasons where he was trying to seek deeper
Speaker 9: relations with non Arab Sunni contries with Iran. But now
Speaker 9: we're basically picking up from where we were in September
Speaker 9: and October of twenty twenty. More deals will be signed,
Speaker 9: trade relationships will be deepened, will finally be able to
Speaker 9: have an alternative trade corridor to the Chinese Belt and
Speaker 9: Road policy which has been going through China, Iran, Pakistan,
Speaker 9: Turkey and onto Europe. And this is I think the
Speaker 9: reemergence of America as a viable competitor on the global
Speaker 9: stage with China embracing our Gulf allies. And at the
Speaker 9: same time, it's also building closer connections between regional powers
Speaker 9: that for far too long haven't had the kind of
Speaker 9: relationship that they should have, whether it's trade, commerce, economy,
Speaker 9: or military. And President Trump is the glue that's helping
Speaker 9: cement all this together.
Speaker 2: We have thirty seconds left. The President said he wants
Speaker 2: an Iran deal. He warns it to take the olive branch.
Speaker 2: Just thirty seconds on Iran while we have you.
Speaker 9: The Iranians are going to play President Trump along until
Speaker 9: they don't say that they're willing to dismantle their uranium
Speaker 9: and richment infrastructure. I think we're going to get to
Speaker 9: a point where the Iranians are going to spit in
Speaker 9: the President's face. I understand why you have to try diplomacy,
Speaker 9: but at the end of the day, the only way
Speaker 9: for the Iranians to move forward is to eliminate their
Speaker 9: newclear program, either by themselves or by an American strike.
Speaker 10: Greg fifteen seconds China. Is this all happening as the world,
Speaker 10: the US increasingly is pushing back against China, and just
Speaker 10: very quickly.
Speaker 9: This is a global push against China. I think Europe
Speaker 9: in the United States have no daylight between them and
Speaker 9: engaging the golf is pushing China out of the region,
Speaker 9: which is something the US should have done for the
Speaker 9: last five years.
Speaker 8: It's a good thing that's happening now.
Speaker 10: Greg Grahman, thank you so much, Executive Director of the
Speaker 10: Middle East Forum, joining us from LA.
Speaker 1: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 2: Over the last three decades, Beijing has held an iron
Speaker 2: grip on the world's supply chain for rare earth elements,
Speaker 2: controlling nearly sixty percent of rare earth mining operations, more
Speaker 2: than eighty five percent of processing capacity and more than
Speaker 2: ninety percent of permanent magnet production. This is all according
Speaker 2: to the US Department of Commerce, but with cooling tensions
Speaker 2: in the trade war, China issued export permits to US
Speaker 2: buyers for these so called rare earths. Removing these restrictions
Speaker 2: was a priority for US negotiators because these elements are
Speaker 2: vital to high tech and defense manufacturing. But even if
Speaker 2: the US and China do reach an agreement on rare
Speaker 2: earth export restrictions, it's like that the US can no
Speaker 2: longer be fully reliant just on China. One solution become
Speaker 2: a domestic supplier of rare earths. One company in the
Speaker 2: United States is working on this. It's USA Rare Earth,
Speaker 2: roughly eight hundred and forty million dollar market cap magnet
Speaker 2: manufacturing company with facilities in Texas and Oklahoma. Joshua Ballad
Speaker 2: is the CEO of USA Rare Earth. I should note
Speaker 2: we spoke to Joshua last month before the US and
Speaker 2: China announced their tariff reprieve.
Speaker 11: This week, Well, it's affecting us in an interesting way.
Speaker 11: I mean, we're just getting started, right. We're building a
Speaker 11: large magnet facility out here in Oklahoma where I am
Speaker 11: today and for us. What it means is a lot
Speaker 11: of customers are calling, honestly, because there are few to
Speaker 11: none of these type of magnet facilities in the US.
Speaker 11: We're going to be the first and one of the
Speaker 11: largest domestic magnet facilities here, so we'll get a lot
Speaker 11: of phone calls, honestly.
Speaker 10: So give us an idea of the time frame, like
Speaker 10: when is it up and running?
Speaker 2: What do you have anything to sell them right now?
Speaker 5: Yeah?
Speaker 11: No, today. What we've done is we've commissioned a lab,
Speaker 11: so we're prototyping for customers. There's always a qualification process
Speaker 11: even in you know, times like these that we're commissioning
Speaker 11: the plant. We're targeting the first quarter of next year,
Speaker 11: so we're a few months away, but we can at
Speaker 11: least start working with the customers making the greater magnets
Speaker 11: that they need, get them comfortable that we're capable, so
Speaker 11: we can hit production hard as soon as we commission.
Speaker 10: What's going to be the output, like how much? I
Speaker 10: mean we talk about this rare earths and magnets and
Speaker 10: what they go into and so on and so forth.
Speaker 10: So give us an idea of what's needed in the
Speaker 10: US market and what you guys can ultimately supply.
Speaker 11: So what's needed in the US market. If you think
Speaker 11: about the global size of the magnet market today, it's
Speaker 11: probably around two hundred and fifty thousand or maybe to
Speaker 11: three hundred thousand tons of magnets per year. In the
Speaker 11: US outside of China, probably two thirds of that is
Speaker 11: being used. And if you take the US to twenty
Speaker 11: five thirty percent, or maybe around fifty thousand tons per magnets,
Speaker 11: thirty to fifty thousand tons, our facility itself, at our
Speaker 11: peak will be building up to five thousand tons. And
Speaker 11: to put that in perspective, five thousand tons is hundreds
Speaker 11: of millions of magnets. It's a lot of magnets going
Speaker 11: out the door for everything from auto supply to tavy manufacturing,
Speaker 11: to drones and defense, you know, everything across the board.
Speaker 10: What will be the price of those magnets in comparison
Speaker 10: to what folks have been getting out of China.
Speaker 11: Probably roughly double. So these tariffs are probably getting things
Speaker 11: into the realm of what we can manufacture here in
Speaker 11: the US. You have to realize, especially.
Speaker 10: All of that pre tariff. You're saying that pre tiff,
Speaker 10: it would be double about double of what it was Now,
Speaker 10: I understand tariff's change the equation, but you're saying it'll
Speaker 10: be double because why is it more expensive here?
Speaker 11: It's more expensive for a couple of reasons. One, it's
Speaker 11: just more We have none of the supply chain here,
Speaker 11: so everything has to come from overseas. We have a
Speaker 11: lot of extra logistical costs and profit being built into
Speaker 11: the supply chain as it gets here. And also generally
Speaker 11: our overheads and labor regulations and taxes are much higher
Speaker 11: here than they are in China, for example. It's just
Speaker 11: like it is with everything else, and all of that
Speaker 11: drives up costs and we're just not as efficient. I mean,
Speaker 11: we have a lot to learn. We've got to build
Speaker 11: these factories and really make them efficient here in the
Speaker 11: coming years so that we can start to really compete
Speaker 11: in the future.
Speaker 2: Where are you sourcing the rare earths right now?
Speaker 11: Right now, we're sourcing with our partners and good friends,
Speaker 11: Australia Strategic Minerals. They're working on a deposit in Australia
Speaker 11: and they're sourcing out of Vietnam Southeast Asia, and we
Speaker 11: make the metals in South Korea in order to bring
Speaker 11: them here to the US. We have no rare earth
Speaker 11: metal making here in the US either, so we have
Speaker 11: to do it all overseas until we build up.
Speaker 8: Here.
Speaker 2: Were you sourcing from China before the tensions earlier this year.
Speaker 11: No, we were not, So we did this. We did
Speaker 11: this off take agreement with them a couple of years
Speaker 11: ago and they've been our partners since.
Speaker 2: And what about when it comes to processing?
Speaker 11: So when we think about our deposit, but we're looking
Speaker 11: to build the first fully domestic rare earth supply chain
Speaker 11: here in the US. Processing in the US is mostly
Speaker 11: sent over to China in order to process the minerals
Speaker 11: that we're getting out of the rock. We've been working
Speaker 11: on our own processing for our deposital the last few years.
Speaker 11: So our plan is to process here in the US
Speaker 11: and Texas on site at our deposit at Round Top Mountain,
Speaker 11: which is near al Paso in West Texas.
Speaker 10: Josh, forgive me if I sound you know, we're all
Speaker 10: learning about rare earths, who, as we joke, not so rare,
Speaker 10: but you know, you find them in small quantity, so
Speaker 10: it takes a while to get them out and so
Speaker 10: on and so forth. But when you you say processing
Speaker 10: is at the same as mining, of what you're going
Speaker 10: to be doing or the processing that is currently in
Speaker 10: China that actually makes it all usable.
Speaker 11: Yeah, the processing is the science to get the minerals
Speaker 11: out of the rock. So rare earths are not like
Speaker 11: coal where you go in you have a big vein
Speaker 11: of coal that you can just dig it out and
Speaker 11: use it. Rare earths are actually they're in the rock
Speaker 11: and they're in maybe fifty parts per million or one
Speaker 11: hundred parts per million or five hundred parts per million.
Speaker 11: You have to actually use science and engineering to pull
Speaker 11: and leach out those minerals from the rock itself in
Speaker 11: order to process it to create the ore oxides that
Speaker 11: you use to make metals. So there's an entire science,
Speaker 11: an engineering outside of the mind itself, which is basically digging,
Speaker 11: breaking up rock, crushing it, and bleaching it in order
Speaker 11: to get the mineral. So there's a whole science to it,
Speaker 11: which right now China has controlled.
Speaker 2: You mentioned round top outside of El Paso. What is
Speaker 2: the goal for getting this online? Because my understanding is
Speaker 2: in order to process here in the US, we're still
Speaker 2: years away from seeing that.
Speaker 11: Yeah, and we're a few years away too. I mean
Speaker 11: our goal here at Andrew at a USA Rare Earth
Speaker 11: is to build our initial pilot plant over the next
Speaker 11: couple of years. We're getting through the signs of it.
Speaker 11: We're pretty comfortable on where we're headed. Like many of us,
Speaker 11: we had dark corners running into the walls a few
Speaker 11: years ago. You know, as you try to figure out
Speaker 11: the science around this processing. We made a lot of
Speaker 11: great progress. So we're just starting to push forward towards
Speaker 11: a pilot plant here over the next couple of years,
Speaker 11: and from there we would build the full mine and
Speaker 11: processing facilities in Texas. So we're a few years away,
Speaker 11: but not as far as if you look at a
Speaker 11: Greenland or a Ukraine that we've been taught talking about
Speaker 11: a lot in the news in the past months, they're
Speaker 11: decades away. We're talking about a few years.
Speaker 10: So let me clarify. So the magnet facility that you
Speaker 10: talked about in the first quarter of next year, that's
Speaker 10: going to actually be providing product or not yet it will.
Speaker 11: Absolutely, Yeah, the magnet facility will go online. Okay, Ultimately,
Speaker 11: ultimately we want our feedstock to come from that deposit
Speaker 11: in West Texas. But as we start, we'll get we're
Speaker 11: going to have to get feedstock from overseas, which for
Speaker 11: US is going to be South Korea specifically working with
Speaker 11: ks and and other partner.
Speaker 10: So the feedstock is what you're saying, is going to
Speaker 10: take a couple of years to get to.
Speaker 11: Yeah, through our deposit. Yeah, can I to have that
Speaker 11: fully integrated supply chain.
Speaker 10: Why haven't we done this in the US? If this
Speaker 10: was so important, why hasn't this happened sooner rather than later?
Speaker 11: Yeah, it's a great question, and the reason why it
Speaker 11: hasn't If you go back thirty forty years early nineties,
Speaker 11: there was a vice premiere in China who said, the
Speaker 11: Middle East has oil, China has rare earths.
Speaker 8: Right.
Speaker 11: They had a strategy around this for years and they've
Speaker 11: been very successful at it, auilding a very strong supply
Speaker 11: chain in China, which we gave up on. They did
Speaker 11: it more effectively, they did it cheaper. We've known this
Speaker 11: for years. None of what's happening today as a surprise
Speaker 11: to any of us in the industry. This was bound
Speaker 11: to happen. We had one choke point in China, you know,
Speaker 11: in these heavy rare earth that they focused on this
Speaker 11: export control. They control over ninety eight percent of it,
Speaker 11: I mean they chose these minerals for a specific reason,
Speaker 11: to say nothing for the fact that they're used in
Speaker 11: industry such as defense, where we really need them, and
Speaker 11: so we walked away from it. We were addicted to
Speaker 11: low costs. We heard from customers prior to all this
Speaker 11: as well that well, you can't do as cheap as China.
Speaker 11: You know, maybe maybe we won't do it. Now suddenly
Speaker 11: we're getting phone calls again as people realize the value
Speaker 11: of the risk and having a supply chain completely contingent
Speaker 11: on one choke point.
Speaker 2: Yeah, it's interesting that the US is just realizing this
Speaker 2: given that this kind of happened to Japan, you know,
Speaker 2: fifteen years ago or so, with that territorial dispute with
Speaker 2: I think fishing. So now Japan keeps like this one
Speaker 2: year supply of some of these rare earths because they
Speaker 2: didn't want to be at the whim of another country.
Speaker 2: What do investors need to understand about your company? Because
Speaker 2: correct me if I'm wrong, But my understanding is you
Speaker 2: originally focused on rare earths in particular, but then you've
Speaker 2: pivoted to becoming a magnet manufacturer. What's the distinction there?
Speaker 11: The distinction is magnet manufacturing first of all, is an
Speaker 11: execution story. So we're building a plant. We know how
Speaker 11: to build a plant, we know how to build magnets.
Speaker 11: We just need to produce good quality product for our customers.
Speaker 11: So it's all about execution. It's a near term event
Speaker 11: that occur early next year, and then we're going to
Speaker 11: scale up as quickly as we can after that up
Speaker 11: to our five thousand tons per year. So it's a
Speaker 11: near term story. The deposit, and I should say too
Speaker 11: on the magnet facility is we're going to be the first,
Speaker 11: really enlargest diversified facility to focus on the broader market.
Speaker 11: So there are other magnet facilities in the US today
Speaker 11: and our peers, but they've been bought by auto manufacturers
Speaker 11: and are really bespoke for an auto manufacturer. We're really
Speaker 11: looking to focus on the broader market, which is unique
Speaker 11: today in the market, will be one of the only
Speaker 11: ones in one of the first josh.
Speaker 10: If tensions ease between the United States and China and
Speaker 10: tariffs not are not as onerous as we are seeing today,
Speaker 10: what does that do to your mission? Does it back off?
Speaker 10: Especially if all of a sudden imports from China in
Speaker 10: rare earths and magnets are less expensive.
Speaker 11: I don't know. I don't think it backs off. I
Speaker 11: think the world has certainly woken up to the risk
Speaker 11: inherent in the supply chain. We were already getting interest
Speaker 11: before this. I think it's heightened now, obviously with tariffs
Speaker 11: and everything else. So maybe the full supply chain wouldn't
Speaker 11: move over're right away. We don't need the full supply chain.
Speaker 11: I'd be happy with ten percent or so. But there's
Speaker 11: still that risk has been heightened. People understand it. There's
Speaker 11: a cost to that risk. They have to diversify, they
Speaker 11: need to do domestically, and the patriotic play is important today.
Speaker 11: I think companies are going to want to talk about that.
Speaker 11: We had our first announcement today the great Smaller Customer,
Speaker 11: Great customer who wants it for the Patreon play right.
Speaker 11: They were talking to us well before these.
Speaker 10: Terariffs came out with all right, kenn to leave it there, Hey, listen,
Speaker 10: thank you so much, really appreciate it. Joshua Ballard, he's
Speaker 10: CEO of US Rare Earth. It's about an eight hundred
Speaker 10: and forty million dollar market cap company, magnet manufacturing company.
Speaker 10: We heard more of their mission.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
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Speaker 2: Ahead in our second hour of the weekend edition of
Speaker 2: Bloomberg Business Week, including President Donald Trump's cryptocurrency and the
Speaker 2: mystery investors buying for seats at an upcoming dinner to
Speaker 2: promote the Mean coin. Plus former Washington governor and yes,
Speaker 2: a Democrat, Jay Insley has a way to win over
Speaker 2: young Trump voters. We'll explain first up this hour, though,
Speaker 2: two things certainly top of mind for investors investing in
Speaker 2: Europe in investing in AI. Earlier this month, Carroll attended
Speaker 2: the Principal Asset Management Real Estate Investor Conference in Paradise Valley, Arizona.
Speaker 2: It was a gathering of experts in the industry who
Speaker 2: gave their perspectives on the macro environment, investment themes, and more.
Speaker 2: One theme that's certainly on the minds of many real
Speaker 2: estate investors is that of global opportunities, and particularly whether
Speaker 2: US policy is pushing investment outside of the US and
Speaker 2: instead into other regions such as Europe. Tim Hills, senior
Speaker 2: executive managing director for US and European clients at Principal
Speaker 2: Asset Management. He joined Carol in Arizona.
Speaker 12: Yeah, our experience in the UK in particular, I would say,
Speaker 12: right since the liberation Day has been quite frankly, keep
Speaker 12: calm and carry on, and again I think it's proven
Speaker 12: out here. We've seen it in the markets overall. I
Speaker 12: think from a real estate perspective, you know, we continue
Speaker 12: to see great interest in the strategies that we have.
Speaker 12: In particular, I think because we're a little bit more
Speaker 12: specialized data centers, particularly in Europe. Very attractive student housing
Speaker 12: be another area that we're looking at as well too,
Speaker 12: And we actually have seen across Europe some interest in
Speaker 12: our US strategies as well too, And I think that
Speaker 12: from our perspective, is a pleasant surprise. And today's announcement
Speaker 12: I think only served to sort of, you know, put
Speaker 12: a foundation underneath that.
Speaker 10: I'm guessing you're talking Tim to clients on a daily basis.
Speaker 10: I am just curious what you're hearing. Are they all
Speaker 10: kind of like, okay, We're going to wait and see
Speaker 10: where the dost settles. I know, long term are you know,
Speaker 10: when you think about real estate, it's a longer term
Speaker 10: investment play, right, so you're not necessarily in and out.
Speaker 10: But I'm just curious what's kind of the mood the
Speaker 10: narrative that you're hearing from them.
Speaker 12: Yeah, I mean, you're exactly right, one hundred percent. We're
Speaker 12: basically you know, wait and see. I think a lot
Speaker 12: of places are.
Speaker 10: Even through the month of you know, April, war was
Speaker 10: so volatile still wait and see.
Speaker 12: I would say it was more volatile was the conversations.
Speaker 12: The first fifteen minutes of every discussion with the client
Speaker 12: was quite intense, particularly I think in Europe. You know,
Speaker 12: the doesn't hold the monopula on chaotic governments, and so
Speaker 12: whether you're in London or Madrid or Paris, they've all
Speaker 12: had their own challenges and they're just trying to get
Speaker 12: a better understanding for us. You just had Seema on
Speaker 12: the demand for our macro and our insights has arisen
Speaker 12: dramatically in the month of April, and so having that
Speaker 12: type of content out there really helps them our clients
Speaker 12: to check what they're thinking and how they're planning for
Speaker 12: their portfolios.
Speaker 10: Tim, I love that you said that that like other
Speaker 10: governments have had their own problems, and I think for
Speaker 10: we as Americans, this is unusual for US yea, the
Speaker 10: level of volatility and just kind of a different type
Speaker 10: of administration. Some say maybe that's what the country needs.
Speaker 10: Some say no. But that perspective of what you're hearing
Speaker 10: from European investors, is there a lesson or kind of
Speaker 10: some you know, advice in terms of what we are
Speaker 10: going through as investors here in the United States.
Speaker 12: Yeah, I think so.
Speaker 5: For me.
Speaker 12: I started working with the teams in Europe about three
Speaker 12: years ago. So I'm a Midwest born and raised and
Speaker 12: so it's been a great experience. But I think a
Speaker 12: lot of it is they are not afraid to laugh
Speaker 12: at themselves and sort of absorb the situation, and so
Speaker 12: I think there are some lessons to take away. We
Speaker 12: don't I think, spend a lot of time laughing at
Speaker 12: the situation or trying to appreciate what's going on or
Speaker 12: the other sides of view. And you know, again, I
Speaker 12: think the first morning after liberation, I was sitting in London,
Speaker 12: you know, having a conversation with clients back and forth.
Speaker 12: It was interesting, but you know, there was no sharp
Speaker 12: elbows that have come out since then, and again clients
Speaker 12: are still looking to keep their allocations. They're not moving
Speaker 12: money away. But I will say there's a booyed confidence
Speaker 12: I believe across Europe in terms of what that means
Speaker 12: going forward.
Speaker 10: Is there a market that you think with surprise investors,
Speaker 10: especially when it comes to real estate, that maybe isn't
Speaker 10: being talked about a lot that is all of a
Speaker 10: sudden gaining some attention or at least clients are asking
Speaker 10: about it.
Speaker 12: Yeah, I think it's again less market and it's more
Speaker 12: what asset class within in real estate. I think it's
Speaker 12: not only real estate, but also infrastructure. Infrastructure really big,
Speaker 12: and it doesn't matter whether we're talking institutions or you're
Speaker 12: talking in Europe at the Global Financial Institute private banks.
Speaker 12: That's a big spot where we're seeing a lot of
Speaker 12: interest as well.
Speaker 10: It's interesting at Cake at Milkin, I think it was
Speaker 10: George Roberts of KKR, you know, Iconic was talking about infrastructure.
Speaker 10: I know they have been I think, beefing up some
Speaker 10: of their efforts in that area, but it's like all
Speaker 10: of a sudden people are talking about that play in
Speaker 10: all its different forms.
Speaker 8: Yeah.
Speaker 12: Yeah, I think It's unique because it matches up for
Speaker 12: a number of institutional clients, insurance companies, and then for
Speaker 12: public pensions the LDI space, where you're looking for more
Speaker 12: long dated paper to be able to match up with
Speaker 12: those liabilities. And the fact of the matter is when
Speaker 12: you look at the public fixed income markets, you tend
Speaker 12: to have a very narrow list of big issuers, and
Speaker 12: so from a diversification perspective, infrastructure is really interesting.
Speaker 10: What are clients asking for in terms of different strategies
Speaker 10: to play the real estate market? Are they comfortable with
Speaker 10: the products that are out there? Are they looking for
Speaker 10: something different? At this point, I would.
Speaker 12: Say, you know, the core space has been challenging the
Speaker 12: last couple of years, and you know, pretty.
Speaker 10: Much post pandemic, still dealing with some stuff.
Speaker 12: Correct hangover from that perspective, going into the end of
Speaker 12: Q one, we were starting to see some really good
Speaker 12: interest coming back into that, you know, indications of interest
Speaker 12: RFIs that we're putting out out there. You know, into
Speaker 12: the first two weeks of April, you know that just
Speaker 12: ground to a halt, and all of a sudden, here
Speaker 12: we are thirty forty days later, and we're right back
Speaker 12: into those same conversations again, So I think it's I
Speaker 12: think it's a pretty broad based interest.
Speaker 10: I want to go back to kind of how we started.
Speaker 10: We've just got about thirty forty seconds left here, Tim,
Speaker 10: But I mean you have seen you guys have been
Speaker 10: doing this for I think twenty five years. You've been
Speaker 10: involved with the bulk of them. In terms of this
Speaker 10: moment in time when it comes to real estate investing,
Speaker 10: how do you think about it? Always a different in
Speaker 10: comparison maybe to other cycles.
Speaker 12: Yeah, I mean, we just we had a deep dive
Speaker 12: on stage this morning talking about the different cycles, whether
Speaker 12: it's a Savings alone or the GFC. We don't think
Speaker 12: we're anywhere near that type of depth of concern and
Speaker 12: where we sit in a really great spot and in
Speaker 12: terms of returns that we've had since the pandemic, they're
Speaker 12: really not that bad and really put us in a
Speaker 12: position to take a step forward.
Speaker 10: Why does it feel so bad? Twenty seconds?
Speaker 12: Yeah, I don't know.
Speaker 10: You won't blame the media that we talk too much
Speaker 10: about it, but I'm just curious.
Speaker 12: I think there's a perception that where interest rates are
Speaker 12: at that things are dead from that perspective, and quite frankly.
Speaker 13: That's not the case.
Speaker 12: If we take a look over time, there's correlation there
Speaker 12: as well.
Speaker 10: This was fun. Thank you so much, awesome.
Speaker 13: Glad to be here.
Speaker 10: Tim Hill, Senior Executive Managing Director US in Europe client
Speaker 10: Group over at Principle.
Speaker 1: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 2: Eleven thirty we stay in Arizona for another conversation, this
Speaker 2: time discussing real estate infrastructure and more specifically the macro
Speaker 2: tailwinds leading to more infrastructure development, things like decarbonization prompting
Speaker 2: a more modern an electrical grid and the Boom and
Speaker 2: AI bringing about the growth in data center development. Mansy
Speaker 2: Patel is Senior Managing director and head of Infrastructure DEBT
Speaker 2: at Principal Asset Management. She joined Carol in Arizona.
Speaker 5: It's certainly an exciting time for the sector in the space.
Speaker 5: I've been in the project finance infrastructure markets for over
Speaker 5: two decades and then the momentum just in the last
Speaker 5: year and two years is incredible, both from macrotailwinds of decarbonization, digitalization, demographics,
Speaker 5: all those shifts creating this natural need tied with exactly
Speaker 5: what you described on high interest rate environments that create
Speaker 5: opportunity sets for investors and clients. And when you think
Speaker 5: about the macro need, there's a statistic out there of
Speaker 5: ninety trillion of investment needs over the next fifteen years.
Speaker 5: Of that, about fifteen trillion of a funding gap. So
Speaker 5: it's really an incredible time and all the tailwinds are
Speaker 5: supporting that growth.
Speaker 13: I love this said.
Speaker 10: I want to ask you. I want to kind of
Speaker 10: dig into some of what you said. You know, we
Speaker 10: have a going private newsletter and it said money managers
Speaker 10: rush to invest in the world's essential plumbing and they
Speaker 10: talked about all investors, alternative investors they want in on infrastructure.
Speaker 10: When you talk about the decarbonization, I think again we
Speaker 10: get kind of this American perspective, US perspective because of
Speaker 10: some of the policies coming out of the White House,
Speaker 10: that that that's it in terms of the green environment.
Speaker 10: But that's not the case globally, is it.
Speaker 14: Now?
Speaker 5: I think you're right. I think there's just this natural
Speaker 5: competitive dynamic of renewable generation and energy transition and even
Speaker 5: natural gas being part of the energy transition thesis and
Speaker 5: into its mid streams. It's pipelines, it's gas generation, it's
Speaker 5: renewable power, it's batteries, it's sort of all of that
Speaker 5: together to really modernize the energy and electric grids globally, right,
Speaker 5: And then also an interest in doing good and the
Speaker 5: sort of creating a macro environment to support broader policies.
Speaker 5: And so I think there's a lot of activity and
Speaker 5: energy and renewables and other sectors. But that's certainly a
Speaker 5: theme that hasn't slowed down because there's a natural need.
Speaker 10: Well, especially when you think about the AI data. Secondary
Speaker 10: people are talking about nuclear again, right, and it's in
Speaker 10: a way that we haven't heard in terms of for years.
Speaker 10: You guys actually did your own research, the Infrastructure Investors
Speaker 10: LPI Perspective Study for twenty twenty five. It's an annual
Speaker 10: barometer of investor confidence. Talked just about some of the
Speaker 10: findings of that research.
Speaker 5: You know, it's interesting infrastructure tends to be a safe
Speaker 5: haven a bit from an investor lens, right, It's a
Speaker 5: hard asset. It's collateralized its deals that are essential to
Speaker 5: local economies. It means moose, people's moose goods, water utility,
Speaker 5: think gives sort of core infrastructure that drives economies. And
Speaker 5: I think there's just a continued interest in the sector
Speaker 5: because of the growth and the need and the safe
Speaker 5: havenness of these assets.
Speaker 8: Right.
Speaker 5: It's driven by stable, predictable cash flows. And you continue
Speaker 5: to need airports, you continue to need ports, roads, And
Speaker 5: it's been proven through the GFC, through the COVID pandemic,
Speaker 5: the resiliency of the sector really has shined through.
Speaker 10: And the money is going to be there. I mean,
Speaker 10: like it's the investment base. It's also government's committing more
Speaker 10: money to this, aren't they.
Speaker 3: That's right?
Speaker 5: Yeah, I mentioned the ninety trillion number of that. When
Speaker 5: we calculate the funding gap, it's about fifteen trillion dollars
Speaker 5: of private sector needs, right, and so with the combination
Speaker 5: of public sector and private sector growth, that should fill
Speaker 5: that gap.
Speaker 10: How much is the global supply chain the conversations we
Speaker 10: are having so often today, obviously the news that comes
Speaker 10: out of the White House in terms of TIFFs and trades,
Speaker 10: but I also think it really started back after the
Speaker 10: global pandemic, where people were like, wait a minute, our exposure,
Speaker 10: we've got to kind of broadened out so that we're
Speaker 10: not so vulnerable. So, yeah, tell us a little bit
Speaker 10: about pandemic, but then kind of how that has continued.
Speaker 5: Yeah, No, we think that it's a sector that's viewed
Speaker 5: to be recession resilient and ethamic cycle resilient. It's because
Speaker 5: of what we just talked about in terms of essential
Speaker 5: assets and the flow of cash. So we think that
Speaker 5: trends has not slowed down. Away from seaports, which are
Speaker 5: impacted certainly by global trade, all other sectors are pretty
Speaker 5: resilient and self sustaining within their geographic location, so we
Speaker 5: don't see a dramatic impact. Green Field and development phase
Speaker 5: ACIDS certainly could have some impact to cost, but beyond that,
Speaker 5: the resiliency of operating ascids is quite remarkable.
Speaker 10: But is there expected mancy that there's it's going to
Speaker 10: be an additional build of people. You know, we obviously
Speaker 10: President Trump talks so much about, you know, the investment
Speaker 10: coming into the United States. Do you guys really expect
Speaker 10: as you know, talk to Apple, I mean, they slowly
Speaker 10: were doing things it sounds like in India and all
Speaker 10: of a sudden they're like, hey, we can supply all
Speaker 10: the iPhones you need in the United States out of India.
Speaker 10: Like it felt like it came out of nowhere. But
Speaker 10: they've obviously been doing this. But the builds are not easy.
Speaker 10: It's not like you flip a switch. So do you
Speaker 10: guys anticipate that that will be part of the real
Speaker 10: estate play going forward because people are doing redundant global
Speaker 10: supply ches.
Speaker 5: Although that's costly for a company, it is I think
Speaker 5: there is a blend for both. There's a world where
Speaker 5: you do have on shoring and there's a world where
Speaker 5: you do need both, and so we do feel optimistic.
Speaker 5: You're absolutely right, it's going to take multiple years and
Speaker 5: decades for the scale of some of these assets to
Speaker 5: actually get developed. But that theme is there and the
Speaker 5: trend is there, and so you think, you know, and
Speaker 5: that's across the world, right, not just not just here,
Speaker 5: and so we do think that creates growth and momentum,
Speaker 5: but it's going to shift a little bit of where
Speaker 5: capital flows go.
Speaker 10: Talk to us a little bit about the finance and
Speaker 10: capital structure that we're seeing in infrastructure deals today. What
Speaker 10: do they look like.
Speaker 5: Yeah, it's a great question. It's it's become a very
Speaker 5: creative subsector, I would say, and the sensitive clients. And
Speaker 5: in private credit more broadly, right, you've got I.
Speaker 10: Knew you're going to get a private credit because anytime
Speaker 10: it's creative, it's private credit.
Speaker 5: There's investment grade, traditional long duration insurance capital. Right, That's
Speaker 5: that's the bread and butter of infrastructure. And then there's
Speaker 5: a high yield infrastructure universe where there's creativity in terms
Speaker 5: of subordination solutions on core infrastructure or more technology risk perhaps,
Speaker 5: or development risk perhaps. So there is a place for
Speaker 5: every client appetite. In my opinion, depending on duration, needs
Speaker 5: and targets yields, we can create very bespoke customer solutions.
Speaker 10: When it comes to like, you know, I keep asking
Speaker 10: a lot of your team might not six or twelve
Speaker 10: months because it's real estate is just such a longer play.
Speaker 10: I mean, it sounds like there's optimism first of all, Right,
Speaker 10: despite the concerns and the volatility that we've seen, it
Speaker 10: sounds like when it comes to real estate, it's a
Speaker 10: lot more commer Maybe it is because of those longer
Speaker 10: term plays and when you're dealing with private credit or
Speaker 10: private money, right, those investments kind of don't move in
Speaker 10: and out so much.
Speaker 5: There is a little bit more resilience and stickiness to
Speaker 5: investment thesis, and you're investing into the long duration of
Speaker 5: these assets. So you're absolutely right the short term volatility,
Speaker 5: there is just fluidity in that you can pause and
Speaker 5: you can step back and evaluate, but that doesn't slow
Speaker 5: down the activity. Anytime there's public market disruption, that tends
Speaker 5: to help. In terms of private sector.
Speaker 10: You said you started and I like to kind of
Speaker 10: go back, is that you've been doing this for a while,
Speaker 10: and I love folks that have seen different cycles. How
Speaker 10: are you thinking about this cycle when it comes to
Speaker 10: real estate?
Speaker 5: Yeah, I think it's from an infrastructure real estate lens infrastructure, Yeah, yeah,
Speaker 5: from my lens. It's a really incredible time. You mentioned
Speaker 5: the comments at Milk and I think the growth is there,
Speaker 5: the need is there, it's essential, and the capital is
Speaker 5: eager and excited. So it's really the stars aligning for
Speaker 5: the sector. It's part of the reason Principle has made
Speaker 5: such a concerted effort into building out this capability and
Speaker 5: augment what we are already doing in private debt in
Speaker 5: a meaningful way. So I think that theme continues and
Speaker 5: it is quite positive and exciting, I think in the
Speaker 5: realm of everything else going on.
Speaker 10: Right and I think it's safe to say that when
Speaker 10: it comes to an infrastructure, I mean, they're just projects
Speaker 10: that just need to be done exactly.
Speaker 5: Yes, there's built roads that need cappex there is power
Speaker 5: needs with the data center build outs in the country.
Speaker 5: There's just very critical essential needs. Anybody driving or flying
Speaker 5: in this country is it's appreciative of the capital expenses
Speaker 5: needed to upgrade some of the infrastructure.
Speaker 10: It's funny that you say that. I think about like
Speaker 10: going through the airports now, certainly in the New York
Speaker 10: metro area, and it's just for so long that was
Speaker 10: just so terrible, and then all of a sudden you're like, well,
Speaker 10: wait a minute, it's finally happening. Yeah, and it's really
Speaker 10: great stuff. Nancy, thank you so much. Really appreciate it.
Speaker 5: Thank you for having me.
Speaker 10: Yeah, thank you for actually hosting us. We really appreciate it.
Speaker 10: Nancy Mittel, Senior Managing Director, head of Infrastructure Debt at
Speaker 10: Principal Asset Management, here at the Principal of Real Estate
Speaker 10: conference in Arizona.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch
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Speaker 2: On Monday, Coinbase, the largest crypto exchange in the US,
Speaker 2: will finally get a seat at Wall Street's main table
Speaker 2: when it officially joins the S and P five hundred.
Speaker 2: That announcement this past week let its stock to sore
Speaker 2: as much as twenty six percent in a single day.
Speaker 2: Coinbased CEO Brian Armstrong on Bloomberg TV this week reacted
Speaker 2: to the news.
Speaker 14: It means that crypto is here, to say, people are
Speaker 14: going to have crypto exposure in all their four oh
Speaker 14: one k's and it points a little bit to I
Speaker 14: think where the future of financial services is going. Crypto
Speaker 14: the technology to update the financial system.
Speaker 8: So it's a great moment.
Speaker 2: That was Coinbase CEO Brian Armstrong. We should note too
Speaker 2: that this past Thursday of The New York Times reported
Speaker 2: that coinbase is cooperating with the US SEC on an
Speaker 2: a agency probe into its previously reported user metrics. Meanwhile,
Speaker 2: Bloomberg reported that hackers had near constant access to some
Speaker 2: of Coinbase's most valuable customer data. Since January, Coinbase disclosed
Speaker 2: that hackers bribed customer representatives to steal the data and
Speaker 2: then demanded a twenty million dollar ransom to delete it.
Speaker 2: Check out the latest on this story on the Bloomberg
Speaker 2: terminal and at Bloomberg dot Com. Meantime, Robinhood agreed to
Speaker 2: acquire crypto platform operator Wonderfi. Morgan Stanley's digital asset marketshead
Speaker 2: is leaving the bank to start his own crypto and
Speaker 2: digital asset investment fund. Oh and the President is hosting
Speaker 2: a private dinner on Thursday to promote his Trump meme coin.
Speaker 2: Needless to say, there is a lot going on in
Speaker 2: the world of crypto. We broke down Coinbase and the
Speaker 2: presidential crypto dinner with Bloomberg News Investigations reporter Anthony Cormier
Speaker 2: and Bloomberg News Senior editor and Crypto Payments team leader
Speaker 2: Mike Reagan.
Speaker 15: In some ways, it was sort of inevitable that coinbase
Speaker 15: would get added to the S and P five hundred.
Speaker 15: If you look at its market cap before the announcement,
Speaker 15: something like fifty three billion. I mean, that's puts it
Speaker 15: in the top half of S and P five hundred
Speaker 15: stocks by market value.
Speaker 13: I think what kept it out.
Speaker 15: For a while is that Coenbase's earnings can be very
Speaker 15: volatile post a loss, some quarters big profits, some quoters,
Speaker 15: smaller profit the other quarter.
Speaker 13: So one of the S and P.
Speaker 15: Five hundred criteria's criteriu I guess is the word is
Speaker 15: consistent profitability. You know, they want them to be profitable
Speaker 15: in the last quarter and they want the trailing four
Speaker 15: quarters to be profitable for a company.
Speaker 13: So you know, there is sort of this.
Speaker 15: Rumblings you hear that they got snubbed in the last
Speaker 15: S and P five hundred reconstitution, but I think it
Speaker 15: was more likely and we never hear exactly what the
Speaker 15: SMP committee how they make their decision, but I think
Speaker 15: they were probably more worried.
Speaker 13: About that earnings volatility than anything else.
Speaker 8: You know.
Speaker 15: That said, it is obviously a much friendlier regulatory environment
Speaker 15: for coinbase, so a lot of those questions about the
Speaker 15: case with the SEC have sort of been a watchway.
Speaker 2: Yeah, speaking of the friendlier regulatory environment, that was the
Speaker 2: segue I.
Speaker 13: Wanted to use.
Speaker 2: Yeah, well, go okay, Well, speaking of the friendlier regulatory environment.
Speaker 2: I want to bring in Anthony Cormier because he's been
Speaker 2: doing some reporting around the Trump meme coin, the top
Speaker 2: Trump crypto buyers who've been vying for dinner seats. This
Speaker 2: dinner is happening supposedly on May twenty second. You and
Speaker 2: the team dug into the wall. It's did some digging,
Speaker 2: found some details about who these folks are, and it's
Speaker 2: actually not very clear.
Speaker 6: No, no, less now than when we started. But we
Speaker 6: find out we do, we do, we do. We did
Speaker 6: go hand by one by one through the.
Speaker 10: Twenty transparency on someone who's doing something in the crypto world.
Speaker 13: Holy no, Well, just to set.
Speaker 2: It up, this is the this is the dinner that
Speaker 2: is happening on May twenty second. It's going to be
Speaker 2: with the President at his Virginia golf club, and the
Speaker 2: top holders of his mean coin over a certain period
Speaker 2: of time would gain access to the dinner.
Speaker 6: Top twenty five get to meet him in person, get
Speaker 6: a special VIP tour. Two and twenty get to have
Speaker 6: dinner with him in Sterling, Virginia. And as you said earlier,
Speaker 6: it is quite difficult to know who or what are
Speaker 6: behind some of these wallets. So we went one by
Speaker 6: one and learned what we could, and that was that
Speaker 6: more than half of them are likely foreign. Six of
Speaker 6: the top twenty five are almost certainly acquired their shares
Speaker 6: from an exchange that doesn't allow you, doesn't allow Americans
Speaker 6: to acquire them. And before I walked in this room,
Speaker 6: I was going through Twitter looking for all of the
Speaker 6: people who have posted their invites online to see what
Speaker 6: we could learn.
Speaker 10: What's the law on that? And the reason I bring
Speaker 10: that up is I think about all of us who
Speaker 10: go through training, who work at US companies. We go
Speaker 10: through extensive training about who you do business with. If
Speaker 10: you're a business deal, a contractor, you've got to know
Speaker 10: exactly who they are, where the money's coming from, and
Speaker 10: if there's any any any questions. You don't do it.
Speaker 6: Banks do KYC all the time, all your customer stuff.
Speaker 6: There's anti money leadering programs that in fairness of the
Speaker 6: President and his is the mean point operators. They are
Speaker 6: saying that they you have to go through certain steps.
Speaker 6: We don't know what those steps are right in order
Speaker 6: to get to this dinner that we don't know what
Speaker 6: to quote KYCAT watch list you have to avoid to
Speaker 6: be in this dinner. All of those questions we've posted
Speaker 6: to the White House, they've thus far refused to answer.
Speaker 2: Mike, how are you looking at this as somebody who's
Speaker 2: covered markets for years. You're now heading up your senior editor,
Speaker 2: and you're also heading up the crypto team. There's this
Speaker 2: idea now that the idea of appearance of conflict of interest,
Speaker 2: you know, has kind of been thrown out the window
Speaker 2: at this point. It's a question that I asked Eric
Speaker 2: Trump about when I interviewed him a few weeks ago,
Speaker 2: and he basically said, you don't have to worry about this.
Speaker 2: I never talked to my dad about crypto and crypto policy.
Speaker 2: But the president does have a hand. He makes money
Speaker 2: when certain things happen.
Speaker 15: Yeah, I mean, I guess gobsmack is the word I
Speaker 15: got put in just how brazen it really is, you know,
Speaker 15: and some of the prominent Democrats are screaming from the hilltops,
Speaker 15: Elizabeth Warren and others, you know, not only about this,
Speaker 15: but World Liberty Financial. Trump's other crypto project introduced a
Speaker 15: stable coin, you know, a crypto token that's peg to
Speaker 15: the dollar.
Speaker 13: It was just used in a two.
Speaker 15: Billion dollar equity stake from a Dubai fund into finance, which,
Speaker 15: if you recall, was the crypto exchange that just two
Speaker 15: years ago, less than two years ago, settled some very
Speaker 15: major charges with US Justice Department about basically not having
Speaker 15: an anti anti you know, not having that KYC program
Speaker 15: in place that Anthony's talking about, or an anti money
Speaker 15: lundering system in place, or at least not a robust
Speaker 15: enough one to catch what the government alleged was, you know,
Speaker 15: terrorists and all sorts of criminals using that exchange launder money. So,
Speaker 15: you know, it's just shocking to see that. You know,
Speaker 15: what you thought were sort of checks and balances in
Speaker 15: the government don't really matter if the controlling party is
Speaker 15: on board with the president and willing to give him
Speaker 15: this type of latitude.
Speaker 10: Where's the financial community, and there are everybody and anybody
Speaker 10: in terms of the financial might globally, certainly in the
Speaker 10: United States, trillions of dollars right worth of capital assets
Speaker 10: under management. In the past, crypto has been a topic,
Speaker 10: but I got to tell you, we talked infrastructure, we
Speaker 10: talked supply chains, we talked tariffs, we talk private markets,
Speaker 10: and we talked democratization of things like private credit. I
Speaker 10: think we had one interview with someone who's like definitely
Speaker 10: into crypto in a big way, but I it wasn't
Speaker 10: a big thing. So where is the financial might and
Speaker 10: the folks on Wall Street and the big investors, Because
Speaker 10: who's doing all the activity? Why is crypto? Like is
Speaker 10: it just the White House?
Speaker 5: No?
Speaker 13: If you look at especially the SPAC.
Speaker 15: Deals being priced recently and being announced, you know, Kenner Fitzgerald,
Speaker 15: one of their SPACs is teaming up to create basically
Speaker 15: a company whose main purpose is just to buy bitcoin
Speaker 15: and keep it on its back.
Speaker 10: Nothing can go wrong with the SPAC. I'm just saying, like,
Speaker 10: like you know, I know there's ETFs and so on
Speaker 10: and so forth, but I'm just trying to get an
Speaker 10: idea of the buy in. Where's Anthony, Like, where it's
Speaker 10: all coming from.
Speaker 6: I can speak to institutionals, but doesn't coinbase. Now I'm
Speaker 6: making the SMP, doesn't that expose like my four O
Speaker 6: one K yeah to crypto for the first time? And
Speaker 6: I think that's a really interesting sort of context right here.
Speaker 6: It feels like a pivotal moment. Right if I'm a
Speaker 6: consumer and I don't I don't want to take that risk. Now,
Speaker 6: all of a sudden, I'm don't have a choice. I
Speaker 6: don't have a choice, right exactly. I think that's really
Speaker 6: a kind of key moment, right.
Speaker 11: I agree with you.
Speaker 2: I looked at it like that as well, Anthony. I
Speaker 2: want to go back to this idea of the dinner
Speaker 2: and because with the digging that you did into these
Speaker 2: wallets and you had them, you looked at different exchanges,
Speaker 2: you tried to identify folks. You said, as you were
Speaker 2: walking in here, you're actually looking on Twitter to see
Speaker 2: who's posted invitations? What have you found that's not in
Speaker 2: this piece, Like what have you reported on over the
Speaker 2: last few days than what have you've seen?
Speaker 6: What We're trying to figure out who is going to
Speaker 6: actually do the vetting of these people, and we're really
Speaker 6: keen to know whether this is happening on the Trump
Speaker 6: private end or the Secret Service end. I think it's
Speaker 6: a really vital question. The Secret Service is going to
Speaker 6: have a much different standard potentially than the White House.
Speaker 2: Well, when you say vetting perspective, do you mean from
Speaker 2: a safety perspective the background checks? I mean getting physically
Speaker 2: close to the president, and especially somebody who's been the
Speaker 2: target of not one, but two assassination attempts over the
Speaker 2: last year. I would imagine the Secret Service is very
Speaker 2: very serious about keeping him protect.
Speaker 6: You would think so, But I think the real concern
Speaker 6: is going to be on the anti money loundering front, right, Like,
Speaker 6: how much can you know about some of the operators
Speaker 6: who have bought their way into a personal meeting with
Speaker 6: the President.
Speaker 8: And I.
Speaker 6: Don't believe the Secret Service has the kind of tools
Speaker 6: that someone at like Vincent would in order to understand
Speaker 6: who's a bad actor and who's not. So I'm curious
Speaker 6: to know quite a bit more about that.
Speaker 15: Yeah, I've seen I've seen one of the invitations to
Speaker 15: the event, and they are you know you're going to
Speaker 15: get searched. Your vehicle is going to get searched. So
Speaker 15: I'm sure you know what is under the control of
Speaker 15: the Secret Service. To your point is you know they're
Speaker 15: going to They're going to do their best to protect
Speaker 15: the president.
Speaker 13: But you're right though it's often starts.
Speaker 10: I mean I've gone to the White House and they
Speaker 10: needed stuff up front before I even exactly step down ground,
Speaker 10: So like you do wonder about what kind of real
Speaker 10: vetting can they do before they even walk away?
Speaker 2: When I reported on the first Trump administration, I had
Speaker 2: to send my Social Security number to the White House,
Speaker 2: perhaps to the Secret Service before I even went to
Speaker 2: the White House.
Speaker 13: We don't know if that's the case. We truly don't know.
Speaker 10: So Mike, you know, I love what Anthony said about. Okay, guys, democratization,
Speaker 10: y'all now own some crypto, whether you like it or not,
Speaker 10: like that is an important turning point and kind of
Speaker 10: legitimate turning point.
Speaker 3: If you will.
Speaker 10: It feels like for crypto.
Speaker 13: Yeah, our tbd to see.
Speaker 15: Yeah, I mean it's it's been, you know, one of
Speaker 15: a series of sort of events that have further legitimized
Speaker 15: and brought it more mainstream. You know, I won't comment
Speaker 15: on whether or not that's a great idea for all
Speaker 15: of our four own case, but it like.
Speaker 13: It or not, here it is.
Speaker 15: Coinbase is not only a respectable company, a top you know,
Speaker 15: they're in the top half of market cap in the
Speaker 15: S and P five hundred, you know, and I don't
Speaker 15: think you know, it's it's not the beginning of the
Speaker 15: crypto exposure for sure, in you know, sort of passive
Speaker 15: index funds. You know, Tesla owns some crypto. If you
Speaker 15: look at micro Strategy, which is one of these companies
Speaker 15: that a lot of these SPACs are just trying to emulate.
Speaker 15: You know, that is already in the Nasdaq one hundred.
Speaker 15: So if you own that, that QQQ index, you want
Speaker 15: to chuck of that too.
Speaker 10: There are a lot of companies that have been out
Speaker 10: there that have had some really big market caps that
Speaker 10: have gotten.
Speaker 16: I don't know.
Speaker 10: I guess time we'll tell on all of this, will wait,
Speaker 10: Mike reagain, Anthony Cormier, thank you guys so much. What
Speaker 10: a great chat. You're listening and watching Bloomberg Business Week Daily.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch
Speaker 1: us live weekday afternoons from two to five eas during
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Speaker 10: All right, I do want to point out everybody, just
Speaker 10: a little bit of a backdrop. Two US science organizations
Speaker 10: are launching a new climate research initiative after the Trump
Speaker 10: administration dismissed expert authors of the National Climate Assessment. Now,
Speaker 10: the initiative will publish peer reviewed manuscripts and climate change
Speaker 10: in the US, aiming to create a library of information
Speaker 10: for government, academia, philanthropy, and business. The effort coming after
Speaker 10: the Trump administration terminated the contract for staff working on
Speaker 10: the sixth National Climate Assessment, which was expected to be
Speaker 10: released next year. We know that there's been a lot
Speaker 10: of moves pushback when it comes to green initiatives out
Speaker 10: of the Trump administration. Our next guest, I'm assuming we'll
Speaker 10: have some thought and all of this. Joining us Jay Insley,
Speaker 10: former three term governor of the state of Washington, former
Speaker 10: member of the US Congress, a twenty twenty Democratic presidential candidate,
Speaker 10: winner of twenty twenty five Time Earthward and he's also
Speaker 10: leading the accountability project at the policy and lobbying group
Speaker 10: of Climate Power, and he joins us from Bainbridge Island, Washington.
Speaker 10: Great to have you here with US Governor Insley. Thank you,
Speaker 10: thank you, Thank you.
Speaker 16: Appreciate your attention to this topic.
Speaker 10: Well, there's a lot of what I talk to you about,
Speaker 10: because I feel like you are someone who has seen
Speaker 10: lots of political and economic cycles in the United States.
Speaker 10: And before we get into jobs and green initiatives and
Speaker 10: green jobs in particular, the US China relationship, how do
Speaker 10: you see it, how important is it, and how do
Speaker 10: you assume it will ultimately have to play out because
Speaker 10: these are the two largest US economies and they're intertwined.
Speaker 16: Well, obviously, there's not much debate about how important this
Speaker 16: relationship is. And we're all very disturbed and concerned about
Speaker 16: the President's desire to make life more difficult for Americans
Speaker 16: by making them forcing them to play pay the Trump
Speaker 16: Tariff tax, which we know Americans will have to pay
Speaker 16: if he is successful of imposing these large tariffs. We
Speaker 16: are all pleased this morning that some news that Trump
Speaker 16: is already sort of giving up on this ruinous tariff
Speaker 16: of one hundred and forty five percent. That's good news,
Speaker 16: you know, But we shouldn't give him the Nobel Peace
Speaker 16: Prize because it's like, you, guys, the arson is starting
Speaker 16: a fire and then he wants credit for being the
Speaker 16: fire person to put the fire out. He started this fire.
Speaker 16: We hope it gets put out and that we have
Speaker 16: more reasonable trade relationships on a reasonable basis. We hope
Speaker 16: that that will be the case. Haven't hasn't brought out yet.
Speaker 10: Having said that, I think both Democrats and Republicans for
Speaker 10: several years now, and if you think about through the
Speaker 10: Biden administration, some of the imposed on China were certainly
Speaker 10: continued through the Biden White House that most on both
Speaker 10: sides of the political aisle have agreed that the relationship
Speaker 10: between US and China maybe wasn't a fair one, it
Speaker 10: wasn't balanced, and so something had to change, especially as
Speaker 10: China's economic might has changed and grown.
Speaker 16: Well, listen, there are some reasonable things you can do,
Speaker 16: and then you can do absolutely ruinous things. Is throwing
Speaker 16: a grenade into a relationship, and Trump threw a grenade.
Speaker 16: And you know, one hundred and forty five percent tariffs
Speaker 16: means that Americans are going to pay double for products
Speaker 16: that they're buying from China. And that's a significant thing.
Speaker 16: And it's already caused of job loss in my state
Speaker 16: because we're down, you know, the no ships coming in,
Speaker 16: no long shoreman jobs, no trucking jobs itself. So yes,
Speaker 16: there's always a spectrum of action, but I think that
Speaker 16: what he has proposed would be really ruinous for Americans.
Speaker 16: Hopefully this will get resolved, that he'll start to see
Speaker 16: pressure from bond markets as he did the other day,
Speaker 16: and that this will restrain his madness. We hope that
Speaker 16: we will be successful in that regard.
Speaker 7: I have a little bit of a curve ball here,
Speaker 7: if I may digress for a moment. Govern you're ready,
Speaker 7: and well, I don't know how you're going to answer this,
Speaker 7: because Washington State, I don't believe you have an income tax. Right.
Speaker 7: You made me think about the arson putting out the fire.
Speaker 7: You made me think about the salt deduction, right because
Speaker 7: President Trump and the Republicans capped the salt deduction that
Speaker 7: had been American policy tax policy for over one hundred
Speaker 7: years in twenty seventeen of the TCJA. And now there's
Speaker 7: a question about whether or not it survives or in
Speaker 7: what form it does. I wonder what you think about
Speaker 7: that is a state, As a former governor of a
Speaker 7: state that doesn't have an income tax, does it seem
Speaker 7: fair to allow state and local taxes to be deducted?
Speaker 8: You know?
Speaker 7: Does it avoid double taxation? Or do you think that
Speaker 7: we should have a cap?
Speaker 16: You know, It's something I have really thought that much about.
Speaker 16: It's one of those things that when you have a
Speaker 16: disaster looming, you pay less attention to your parochial issues.
Speaker 16: I will just say I hope it gets worked out.
Speaker 16: I will say that, and I hope that we don't
Speaker 16: end up killing clean energy jobs just to finance tax
Speaker 16: cuts for the rich. That's the thing that I'm focused on.
Speaker 16: More parochial issues to me are subordinate, and the national
Speaker 16: economic climate is so at risk right now. That's what
Speaker 16: I think we got to pitch attention to.
Speaker 10: All Right, So let's go there, because your team did
Speaker 10: share with us a report from Climate Power, you work
Speaker 10: with them, and it talks about clean energy jobs in
Speaker 10: particular created and those that might be clawed back as
Speaker 10: a result of President Trump's policies, executive actions, tariffs and more.
Speaker 10: I will say, coming off of Milkin and some of
Speaker 10: the discussion that I had with folks when it comes
Speaker 10: to clean energy, green energy in terms of investing, many
Speaker 10: said it's going to continue because you know, if you're
Speaker 10: a global company, you have to think about it on
Speaker 10: a global level, you have to think about it beyond
Speaker 10: a four year presidential term. And you know, just companies
Speaker 10: in many ways, their initiatives will continue going forward. But
Speaker 10: what's important about this report? What do you think our
Speaker 10: Bloomberg audience needs to know?
Speaker 16: Well, what I think the audiencies know is that we
Speaker 16: have to be very optimistic about the clean energy economy.
Speaker 16: The growth is spectacular. And the reason is is technology
Speaker 16: is advancing. It's such a rapid clip. The cost of
Speaker 16: solar energy has come down forty percent in the last
Speaker 16: ten years. When continue is to come down, we have
Speaker 16: ten times as much installation as we did ten years ago.
Speaker 16: So the rate of the the reindustrialization of America through
Speaker 16: renewable energies is quite profound. But unfortunately the President, because
Speaker 16: he has this phobia mania uh you know, he says
Speaker 16: wind turbines cause cancer, which is just nuts. It just
Speaker 16: caused jobs all over America. And that ideological fixation has
Speaker 16: already cost us or jeopardized sixty two thousand jobs in
Speaker 16: the United States, which is a spectacular way to shoot
Speaker 16: yourself in the foot. And the thing that's so disappointing
Speaker 16: to his multiple efforts, I mean these are multiple efforts.
Speaker 16: He threw fifteen one hundred people out of work who
Speaker 16: are building an offshore wind turbines off the East Coast
Speaker 16: over with twenty four hours notice. And he's doing that
Speaker 16: by refusing to permit these clean energy sources, by attacking
Speaker 16: the tax policies that allows these industrial jobs to be created.
Speaker 16: It's just really killing the number one job creator in
Speaker 16: the country. Right now is clean energy. So that's really
Speaker 16: threatening this and this engine of growth. And it doesn't
Speaker 16: make any sense whatsoever. You know what, here's the thing
Speaker 16: is so frustrating. I mean, he talks about he wants
Speaker 16: energy dominance. Well, if you want energy dominance, you shouldn't
Speaker 16: sideline some of your best athletes, which are folks building
Speaker 16: a clean energy economy. And so it's very disturbing, and
Speaker 16: I hope Congress will stop some of his maniac activities
Speaker 16: to hurt jobs in this country. Sixty two thousand jobs,
Speaker 16: a lot of job loss. What about what is right
Speaker 16: in my state?
Speaker 7: A reshoring of manufacturing jobs. Is that not something that
Speaker 7: you could be optimistic about that you think might benefit
Speaker 7: you know, the people of Washington State, the people of
Speaker 7: the United States of America.
Speaker 16: Well, there's two separate issues here. I think it's important
Speaker 16: to keep them distinct. There's the terrif issue that you're
Speaker 16: thinking of that potentially could get some reshoring. If that
Speaker 16: someday could happen, that would be a fine thing. What
Speaker 16: I'm referring to his efforts to basically needcap these new
Speaker 16: industries in a dozen different ways, starting with literally shutting
Speaker 16: down the development and construction of these projects like offshore win,
Speaker 16: like is a refusal to give permits for solar powers,
Speaker 16: like his effort to recap the Bondaville Power Administration, which
Speaker 16: is the group charged with the responsibility of building transmission
Speaker 16: lines so we can build these new energy generating capacity,
Speaker 16: like telling the Pacific Coast we're not going to be
Speaker 16: able to move forward with offshore wins. So these are
Speaker 16: two separate issues. And what I'm addressing are the facial
Speaker 16: attacks on the policies that we know do grow these
Speaker 16: jobs domestically, including the tax cuts which he and the
Speaker 16: Republicans are threatening right now to stop the tax breaks
Speaker 16: to allow these industries to grow, just to give it folks,
Speaker 16: to tax cuts for the wealthiest folks amongst us. And
Speaker 16: that's probably one of the most dangerous things going on
Speaker 16: right now.
Speaker 10: Governor in Isley just got about a minute left here.
Speaker 10: I mean, what we often find, you know, in terms
Speaker 10: of coverage of global financial markets is that money tends
Speaker 10: to go where it makes sense and ultimately, do you
Speaker 10: have enough favor No, just in terms of you know,
Speaker 10: if investors can make money, they're going to go there.
Speaker 10: If it makes sense, investors will continue to commit to
Speaker 10: green initiatives, and a lot of companies do think it
Speaker 10: still makes sense. Might that pick up the slack even
Speaker 10: if the political environment isn't supportive at this point.
Speaker 16: Yeah, listen, climate clean energy, this revolution is going to continue.
Speaker 16: There's no question about the technology. Is the cost curve
Speaker 16: coming down? This is going to continue. But these policies
Speaker 16: that the President wants to embraced in some degrees, Republic
Speaker 16: and Congress is going to retard that pace of change.
Speaker 16: And we're in a race right now. Look, we're a
Speaker 16: race for jobs, We're a race for the climate crisis
Speaker 16: won't make all our towns burned down on the West too.
Speaker 16: We're in a race. We don't want to slow down.
Speaker 16: We're going to win, but we rather ruin fast rather
Speaker 16: than slow.
Speaker 10: All Right, We're gonna have to leave it on that note.
Speaker 10: Jay Innsley, thank you so much, former governor of the
Speaker 10: state of Washington three times, three terms and if remember
Speaker 10: of the US Congress side joining us here on Bloomberg
Speaker 10: Business Week. He also leaves the Accountability Project at the
Speaker 10: policy and lobbying group Climate Power.
Speaker 7: And Tape say, beloved in the Pacific Northwest.
Speaker 10: I love the Pacific Northwest, having just gone to Seattle.
Speaker 10: In the last year of pre studying.
Speaker 7: GEL like you spent what two or three weeks out west?
Speaker 10: Just now well a week.
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