1 00:00:02,440 --> 00:00:09,119 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:09,160 --> 00:00:13,320 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:13,360 --> 00:00:15,800 Speaker 1: Eastern on fo car Playing and Broud Auto with the 4 00:00:15,840 --> 00:00:19,720 Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts, 5 00:00:19,960 --> 00:00:22,320 Speaker 1: or watch US live on YouTube. 6 00:00:23,160 --> 00:00:26,639 Speaker 2: In all this reporting about the new administration in the 7 00:00:26,680 --> 00:00:29,880 Speaker 2: Treasury pic, I've heard the number bending about that the 8 00:00:29,960 --> 00:00:33,280 Speaker 2: US treasury market is twenty eight trillion dollars in size. 9 00:00:33,960 --> 00:00:35,920 Speaker 3: It's large, So say that. 10 00:00:35,840 --> 00:00:37,600 Speaker 2: Means I have to be a little bit nicer to 11 00:00:37,640 --> 00:00:39,360 Speaker 2: our next guest than I typically. 12 00:00:39,400 --> 00:00:40,800 Speaker 4: Am Ira Jersey joins us. 13 00:00:40,840 --> 00:00:44,280 Speaker 2: I didn't know he was so influential. Twenty eight trillion dollars. Ira, 14 00:00:44,880 --> 00:00:47,120 Speaker 2: do you care or to what extent does your market 15 00:00:47,159 --> 00:00:50,920 Speaker 2: care about who President lect Trump selects as Secretary of 16 00:00:50,960 --> 00:00:51,440 Speaker 2: the Treasury. 17 00:00:52,760 --> 00:00:55,200 Speaker 5: Well, so people have been talking about who it's going 18 00:00:55,240 --> 00:00:58,840 Speaker 5: to be, and you know there's a mantra at the 19 00:00:58,840 --> 00:01:01,959 Speaker 5: Treasury Department that typical is they want to be regular 20 00:01:02,080 --> 00:01:05,360 Speaker 5: and predictable in terms of how they issue debt. So 21 00:01:05,600 --> 00:01:07,920 Speaker 5: if you wind up with any of the three main 22 00:01:07,959 --> 00:01:10,480 Speaker 5: picks that we've been hearing about, I don't suspect that 23 00:01:10,520 --> 00:01:12,840 Speaker 5: you'll see a major seed change from that. But they 24 00:01:12,880 --> 00:01:17,400 Speaker 5: do influence how many of which securities are issued. In fact, 25 00:01:17,400 --> 00:01:20,640 Speaker 5: when the Treasury Borrowing Advisory Committee, that's a committee of 26 00:01:20,680 --> 00:01:24,480 Speaker 5: investors and dealers and the like, when they get together, 27 00:01:24,560 --> 00:01:29,160 Speaker 5: they actually send a recommendation to the Treasury Secretary of how. 28 00:01:29,080 --> 00:01:30,080 Speaker 6: Things should be issued. 29 00:01:30,120 --> 00:01:33,080 Speaker 5: Now, in reality, you know, the Treasury Secretary kind of 30 00:01:33,120 --> 00:01:35,600 Speaker 5: signs off on it, but mostly the decisions are made 31 00:01:35,800 --> 00:01:39,240 Speaker 5: by the people under the Treasury Secretary. But I think that, 32 00:01:39,600 --> 00:01:42,880 Speaker 5: you know, all three of these picks are reasonably middle 33 00:01:42,920 --> 00:01:45,440 Speaker 5: of the road in terms of, you know, how they're 34 00:01:45,480 --> 00:01:48,840 Speaker 5: going to operate the Treasury Department in my opinion. And look, 35 00:01:48,880 --> 00:01:51,240 Speaker 5: I haven't had any discussions with any of these folks, 36 00:01:51,280 --> 00:01:55,120 Speaker 5: but I don't think that they're really outside of the 37 00:01:55,320 --> 00:01:58,240 Speaker 5: realm of what we might expect as normal, especially since 38 00:01:58,280 --> 00:02:00,680 Speaker 5: two of them are very much market people. 39 00:02:00,680 --> 00:02:02,200 Speaker 6: And they don't want to rock the boat. 40 00:02:02,200 --> 00:02:05,680 Speaker 5: They'll get feedback from markets and market participants and investors 41 00:02:05,920 --> 00:02:09,760 Speaker 5: before they make any sweeping changes to how treasuries are issued, 42 00:02:09,760 --> 00:02:10,880 Speaker 5: which treasuries. 43 00:02:10,440 --> 00:02:11,320 Speaker 6: Are issued, and the like. 44 00:02:11,880 --> 00:02:12,320 Speaker 4: T back. 45 00:02:12,480 --> 00:02:14,600 Speaker 3: So the cool kids call it IRA, it's good to 46 00:02:14,639 --> 00:02:17,519 Speaker 3: chat with you. So I was out of commission for 47 00:02:17,560 --> 00:02:19,440 Speaker 3: about a month and a half. And when that happened, 48 00:02:19,440 --> 00:02:21,720 Speaker 3: you know, we're looking at treasury yields, hey, around like 49 00:02:21,760 --> 00:02:23,960 Speaker 3: three point six percent. It was like, all right, guys, 50 00:02:23,960 --> 00:02:25,640 Speaker 3: we're going to move money out of treasuries and we're 51 00:02:25,680 --> 00:02:27,520 Speaker 3: going to put it into stocks. That's where the return 52 00:02:27,600 --> 00:02:28,920 Speaker 3: is going to be. And then I come into the 53 00:02:28,919 --> 00:02:31,200 Speaker 3: office and we're touching and we're close to four point five. 54 00:02:31,360 --> 00:02:34,120 Speaker 3: That's a big shift. How high do we stay for 55 00:02:34,200 --> 00:02:36,960 Speaker 3: how long? And is that thesis? Then look, guys, you 56 00:02:37,000 --> 00:02:38,760 Speaker 3: still got to put money in the long end. 57 00:02:39,680 --> 00:02:41,880 Speaker 5: Well, there's a so I do think that there's a 58 00:02:41,919 --> 00:02:44,080 Speaker 5: cap on how high treasury yields are going to be 59 00:02:44,080 --> 00:02:46,120 Speaker 5: able to go. There's going to be a kind of 60 00:02:46,120 --> 00:02:50,480 Speaker 5: this supply demand balance that probably is somewhere between four 61 00:02:50,520 --> 00:02:53,640 Speaker 5: and a half and five percent, particularly in long term treasuries, 62 00:02:53,680 --> 00:02:57,040 Speaker 5: just because the higher yields go from here, the more 63 00:02:57,080 --> 00:03:01,520 Speaker 5: we get into the place where lie ability managers tend 64 00:03:01,560 --> 00:03:05,000 Speaker 5: to really like like bond yields, and especially unless you 65 00:03:05,040 --> 00:03:08,320 Speaker 5: get you know, really big shift up in inflation, there's 66 00:03:08,320 --> 00:03:10,560 Speaker 5: no reason to think that we won't stabilize somewhere in 67 00:03:10,560 --> 00:03:13,040 Speaker 5: this area. So our view is will wind up staying 68 00:03:13,040 --> 00:03:15,079 Speaker 5: in a pretty wide range over the next year. 69 00:03:15,480 --> 00:03:17,240 Speaker 6: Smaller range and we had the past year. 70 00:03:17,320 --> 00:03:20,440 Speaker 5: Remember over the past year, we've been between five percent 71 00:03:20,480 --> 00:03:22,120 Speaker 5: and three and a half percent, right, so one hundred 72 00:03:22,120 --> 00:03:24,200 Speaker 5: and fifty basis point range. I think it's probably a 73 00:03:24,200 --> 00:03:27,160 Speaker 5: bit narrower than that over the next year, but we 74 00:03:27,320 --> 00:03:31,040 Speaker 5: still wind up being volatile in that range. More important 75 00:03:31,200 --> 00:03:32,760 Speaker 5: is going to be the or as important as going 76 00:03:32,800 --> 00:03:34,760 Speaker 5: to be the curve, I think, and where do two 77 00:03:34,840 --> 00:03:38,120 Speaker 5: year yields go, which is far less certain because we 78 00:03:38,160 --> 00:03:40,120 Speaker 5: don't know how far the Fed's going to cut. Right, 79 00:03:40,120 --> 00:03:41,720 Speaker 5: the Fed's probably going to cut at least a little 80 00:03:41,760 --> 00:03:43,600 Speaker 5: bit more. But are they only going to cut another 81 00:03:43,640 --> 00:03:46,120 Speaker 5: seventy five basis points as the market expects, or are 82 00:03:46,120 --> 00:03:47,880 Speaker 5: they going to cut another one hundred and fifty to 83 00:03:47,880 --> 00:03:49,760 Speaker 5: two hundred basis points like we thought. 84 00:03:49,520 --> 00:03:51,840 Speaker 6: Just when you know, before you went out on. 85 00:03:51,880 --> 00:03:54,960 Speaker 5: Break, Because that's really been the big move and the 86 00:03:55,040 --> 00:03:58,000 Speaker 5: reason why we've seen this massive selloff in treasuries is 87 00:03:58,080 --> 00:04:00,320 Speaker 5: just a shifting expectation for what the Fed's going to do. 88 00:04:00,840 --> 00:04:03,640 Speaker 2: So what will we get at the December eighteenth meeting 89 00:04:03,720 --> 00:04:07,080 Speaker 2: is I guess I've heard the word skip used. It's 90 00:04:07,080 --> 00:04:09,840 Speaker 2: the first time I've heard that. But is skipping the 91 00:04:09,880 --> 00:04:12,600 Speaker 2: December meeting in terms of rate cuts? Is that reasonable 92 00:04:12,720 --> 00:04:14,160 Speaker 2: or is what? Do you think they're going to move forward? 93 00:04:15,280 --> 00:04:17,719 Speaker 5: Yeah, Paul, I do think that they There is the 94 00:04:17,720 --> 00:04:21,120 Speaker 5: big distinct possibility that they skip in December. 95 00:04:21,760 --> 00:04:23,120 Speaker 6: You heard some language. 96 00:04:22,800 --> 00:04:25,080 Speaker 5: Out of out of Chair Powell over the last week 97 00:04:25,160 --> 00:04:28,440 Speaker 5: that basically hinted that they might do that. So you know, 98 00:04:28,480 --> 00:04:30,880 Speaker 5: you wind up getting an okay payroll report and okay 99 00:04:30,960 --> 00:04:34,839 Speaker 5: CPI report, and you wind up with maybe a skip. 100 00:04:35,080 --> 00:04:37,599 Speaker 5: The market right now, keep in mind, is basically pricing 101 00:04:37,640 --> 00:04:41,440 Speaker 5: a skip in either December or January. So basically one 102 00:04:41,480 --> 00:04:44,679 Speaker 5: cut between the two meetings. Kind of unsure which one 103 00:04:44,720 --> 00:04:46,880 Speaker 5: is of those two meetings is going to be the skip. 104 00:04:47,279 --> 00:04:49,080 Speaker 3: What's interesting, though, is that it feels like we priced 105 00:04:49,120 --> 00:04:51,920 Speaker 3: out a lot of the drama and the rate cuts 106 00:04:51,960 --> 00:04:53,800 Speaker 3: that we had already priced in and say over the summer. 107 00:04:54,080 --> 00:04:56,479 Speaker 3: So are we sort of at neutral in essence in 108 00:04:56,520 --> 00:04:58,640 Speaker 3: terms of what the market actually expects versus what the 109 00:04:58,640 --> 00:04:59,680 Speaker 3: Fed's actually going to deliver. 110 00:05:00,920 --> 00:05:02,800 Speaker 5: Well, I think, well, the market seems to think that 111 00:05:02,839 --> 00:05:04,880 Speaker 5: maybe if the Fed's going to get back to neutral, 112 00:05:04,920 --> 00:05:07,800 Speaker 5: that maybe the neutral rate is three and three quarters 113 00:05:07,800 --> 00:05:10,400 Speaker 5: to four percent, because that's what the market's priced for 114 00:05:10,440 --> 00:05:12,440 Speaker 5: where the Fed's going to get to. So again, a 115 00:05:12,440 --> 00:05:15,000 Speaker 5: little bit more in terms of cuts, but not the 116 00:05:15,320 --> 00:05:17,599 Speaker 5: not down to you know, two point seventy five percent, 117 00:05:17,640 --> 00:05:19,599 Speaker 5: where we were priced very briefly for a. 118 00:05:19,600 --> 00:05:21,080 Speaker 6: Cup of coffee back in September. 119 00:05:21,440 --> 00:05:25,000 Speaker 5: So I do think that the market believes that neutral 120 00:05:25,080 --> 00:05:25,520 Speaker 5: is higher. 121 00:05:25,800 --> 00:05:27,560 Speaker 6: I think the FED is skeptical of that. 122 00:05:27,600 --> 00:05:29,680 Speaker 5: Right, which is the reason why the FED, I think 123 00:05:29,720 --> 00:05:32,160 Speaker 5: thinks that they might need to remain restrictive a little 124 00:05:32,160 --> 00:05:34,080 Speaker 5: bit longer. And they do think that they're restrictive, right, 125 00:05:34,120 --> 00:05:36,480 Speaker 5: Almost every single member of the FED has said that 126 00:05:36,560 --> 00:05:39,360 Speaker 5: they that they're restrictive. But the question is how restrictive 127 00:05:39,480 --> 00:05:42,680 Speaker 5: and will the Fed, you know, get when they get 128 00:05:42,720 --> 00:05:45,080 Speaker 5: to restrictive, how long then will they stay there? And 129 00:05:45,120 --> 00:05:47,159 Speaker 5: that's when the reason why you have two year yields 130 00:05:47,160 --> 00:05:48,800 Speaker 5: that kind of can't make up their mind whether or 131 00:05:48,839 --> 00:05:50,880 Speaker 5: not they want to be at four percent or four 132 00:05:50,920 --> 00:05:53,000 Speaker 5: and a quarter percent. And I suspect that we'll want 133 00:05:53,320 --> 00:05:55,240 Speaker 5: a two year yields to wind up back back at 134 00:05:55,279 --> 00:05:58,280 Speaker 5: four even under four percent by the end of next year. 135 00:05:58,640 --> 00:06:03,200 Speaker 5: But there's still you know, that's that's incremental tightening or 136 00:06:03,240 --> 00:06:05,600 Speaker 5: easing by the Federal Reserve over the course of that 137 00:06:05,920 --> 00:06:08,960 Speaker 5: period of time. And you know, unless we get a recession, 138 00:06:08,960 --> 00:06:12,080 Speaker 5: it's hard to see how the yield curve significantly steepens 139 00:06:12,080 --> 00:06:14,200 Speaker 5: from here unless you wind up with some kind of 140 00:06:14,480 --> 00:06:18,040 Speaker 5: you know, deficit shock where where the Treasury Department has 141 00:06:18,080 --> 00:06:20,080 Speaker 5: to go out initial a whole lot of long term debt. 142 00:06:20,880 --> 00:06:23,800 Speaker 5: It's possible, but that I think is kind of an 143 00:06:23,880 --> 00:06:24,760 Speaker 5: educase scenario. 144 00:06:25,320 --> 00:06:27,640 Speaker 4: All right, Ara, thank you so much as I always appreciate it. 145 00:06:27,720 --> 00:06:31,039 Speaker 2: Our Jersey chief viewers, interest rates strategists for Bloomberg Intelligence 146 00:06:31,120 --> 00:06:34,839 Speaker 2: joining us from the b I headquarters down there in Princeton, 147 00:06:35,000 --> 00:06:35,640 Speaker 2: New Jersey. 148 00:06:37,120 --> 00:06:41,000 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 149 00:06:41,080 --> 00:06:44,600 Speaker 1: weekdays at ten am Eastern on applecard Play and Androud 150 00:06:44,640 --> 00:06:47,400 Speaker 1: Auto with the Bloomberg Business app. You can also listen 151 00:06:47,520 --> 00:06:50,600 Speaker 1: live on Amazon Alexa from our flagship New York station. 152 00:06:51,000 --> 00:06:54,680 Speaker 1: Just say Alexa play Bloomberg eleven thirty. 153 00:06:54,839 --> 00:06:57,000 Speaker 3: We alex you here alongside Paul Sweeney. This is Bloomberg 154 00:06:57,080 --> 00:06:59,400 Speaker 3: Intelligence Radio. We bring you all the top news and business, 155 00:06:59,400 --> 00:07:02,599 Speaker 3: economics and finance through our lens of our Bloomberg intelligence folks. 156 00:07:02,600 --> 00:07:04,640 Speaker 3: They cover two thousand companies and one hundred and thirty 157 00:07:04,640 --> 00:07:07,680 Speaker 3: industries all around the world. We also like to tap 158 00:07:07,720 --> 00:07:10,280 Speaker 3: them outside of Bloomberg as well to get a good 159 00:07:10,320 --> 00:07:12,680 Speaker 3: read on what's actually happening in the market. If you're 160 00:07:12,680 --> 00:07:14,680 Speaker 3: putting money to work, what's the smartest way to do that? 161 00:07:14,720 --> 00:07:17,520 Speaker 3: Fill Orlando, a chief equity market strategistic head of client 162 00:07:17,560 --> 00:07:21,760 Speaker 3: portfolio Management at Federated Hermes, joins me. Now, Phil, what's 163 00:07:21,840 --> 00:07:23,640 Speaker 3: the case for not being in equities? 164 00:07:26,120 --> 00:07:29,880 Speaker 7: Well, the stock market has had a phenomenal run here. 165 00:07:30,720 --> 00:07:34,720 Speaker 7: Animal spirits have returned and from the bottom of the 166 00:07:34,760 --> 00:07:38,400 Speaker 7: market in early to mid August, a lot of the 167 00:07:38,440 --> 00:07:42,720 Speaker 7: indices are up fifteen to twenty percent, So that the 168 00:07:42,840 --> 00:07:47,200 Speaker 7: case for not being in equities or being underweight equities 169 00:07:47,240 --> 00:07:50,240 Speaker 7: at the moment is perhaps you think stocks are overvalued 170 00:07:50,360 --> 00:07:54,400 Speaker 7: near term and you'd like to have you'd like to 171 00:07:54,400 --> 00:07:57,800 Speaker 7: be patient and get a better re entry point in 172 00:07:57,960 --> 00:08:01,480 Speaker 7: order to get back to an overweight. But if we're taking, 173 00:08:02,080 --> 00:08:06,680 Speaker 7: you know, a longer cycle position and looking at the 174 00:08:06,720 --> 00:08:12,640 Speaker 7: prospect of less regulation, lower tax rates both individual and corporate, 175 00:08:13,400 --> 00:08:17,200 Speaker 7: stronger economic growth, all of those things are good for 176 00:08:17,320 --> 00:08:23,240 Speaker 7: corporate earnings. Ultimately, share prices reflect stronger earnings, and we 177 00:08:23,320 --> 00:08:25,920 Speaker 7: could see the S and P five hundred, you know, 178 00:08:26,000 --> 00:08:29,560 Speaker 7: from six thousand. Now let's call it up into the 179 00:08:29,600 --> 00:08:33,160 Speaker 7: seventy five hundred neighborhood as we look out over the 180 00:08:33,160 --> 00:08:34,040 Speaker 7: next couple of years. 181 00:08:34,840 --> 00:08:38,920 Speaker 2: So, Phil, to what extent did your I guess market 182 00:08:38,920 --> 00:08:41,440 Speaker 2: call change the day after the election when it became 183 00:08:41,480 --> 00:08:44,000 Speaker 2: a parent that not only president like Donald Trump coming 184 00:08:44,000 --> 00:08:45,319 Speaker 2: back to the White House, but it looks like he's 185 00:08:45,320 --> 00:08:48,600 Speaker 2: going to have a pretty solid Republican support in Congress. 186 00:08:48,760 --> 00:08:50,040 Speaker 4: How has that impacted your call? 187 00:08:51,480 --> 00:08:54,840 Speaker 7: The good news, Paul, is it did absolutely nothing to 188 00:08:54,880 --> 00:09:00,600 Speaker 7: our call because we were we were expecting a a 189 00:09:00,640 --> 00:09:03,280 Speaker 7: red wave, if you will, and had positioned for that 190 00:09:03,400 --> 00:09:08,880 Speaker 7: accordingly in terms of overweights in domestic large cap value 191 00:09:09,080 --> 00:09:15,160 Speaker 7: and the small cap categories. We had been essentially fading 192 00:09:15,760 --> 00:09:19,400 Speaker 7: the dramatic outperformance of the mag seven names over the 193 00:09:19,440 --> 00:09:22,400 Speaker 7: eighteen month period into the middle of this year. And 194 00:09:22,840 --> 00:09:24,800 Speaker 7: you know, as you look back on the third quarter 195 00:09:24,920 --> 00:09:28,720 Speaker 7: and results over the last you know, six weeks or so, 196 00:09:30,120 --> 00:09:32,200 Speaker 7: the values and the small caps have had a pretty 197 00:09:32,240 --> 00:09:34,280 Speaker 7: good run of it. So we didn't need to make 198 00:09:34,320 --> 00:09:37,800 Speaker 7: any changes after the election results became known. 199 00:09:39,000 --> 00:09:40,800 Speaker 3: What other thing I was just talking about that struck 200 00:09:40,840 --> 00:09:43,880 Speaker 3: me was the rise in ten year yield almost a 201 00:09:43,920 --> 00:09:47,040 Speaker 3: four and a half percent and the continued money into 202 00:09:47,120 --> 00:09:50,360 Speaker 3: money market funds. Is that ever going to leave? 203 00:09:52,000 --> 00:09:57,200 Speaker 7: Well, there's a concern that's growing based upon developments over 204 00:09:57,320 --> 00:10:00,320 Speaker 7: just the course of the last week. L And I 205 00:10:00,320 --> 00:10:03,920 Speaker 7: think you know, we've seen this with the backup in 206 00:10:04,000 --> 00:10:07,120 Speaker 7: treasury yields. We were at three point fifty three sixty 207 00:10:07,240 --> 00:10:09,560 Speaker 7: or so a couple of months ago. You know, we're 208 00:10:09,559 --> 00:10:12,200 Speaker 7: now up in that four forty four to fifty neighborhood. 209 00:10:12,640 --> 00:10:14,520 Speaker 7: And the question is whether or not we're going to 210 00:10:14,559 --> 00:10:17,640 Speaker 7: go back and retest you know, the four seventy five 211 00:10:17,720 --> 00:10:21,320 Speaker 7: or five percent level we saw you know, October of 212 00:10:21,400 --> 00:10:24,960 Speaker 7: last year. The reasons for that backup, in our view 213 00:10:26,000 --> 00:10:31,079 Speaker 7: is that inflation is is is not going down anymore. 214 00:10:31,120 --> 00:10:34,000 Speaker 7: It's sort of stalled. And you know, based upon the 215 00:10:34,000 --> 00:10:37,120 Speaker 7: wholesale inflation metrics we saw last week are actually starting 216 00:10:37,160 --> 00:10:40,600 Speaker 7: to re accelerate. Is we look ahead to the core 217 00:10:40,720 --> 00:10:43,760 Speaker 7: personal consumption expenditure index that we're going to get I 218 00:10:43,800 --> 00:10:47,600 Speaker 7: think the day after Thanksgiving, the expectation is that that 219 00:10:47,679 --> 00:10:49,720 Speaker 7: number is going to continue to go up as well 220 00:10:50,160 --> 00:10:52,679 Speaker 7: to two point eight percent. Remember the Fed's target there 221 00:10:52,760 --> 00:10:57,520 Speaker 7: is two percent. You had some pretty strong economic growth 222 00:10:57,520 --> 00:11:01,840 Speaker 7: from the second and third quarters compared to the first quarter. 223 00:11:02,520 --> 00:11:07,360 Speaker 7: Last week's retail sales numbers upward, revisions in September, some 224 00:11:07,400 --> 00:11:10,520 Speaker 7: strong nominal or headline numbers out of October. So the 225 00:11:10,600 --> 00:11:15,719 Speaker 7: thinking is that the economy strong, inflation is sticky and persistent. 226 00:11:16,800 --> 00:11:19,880 Speaker 7: You've got a red waves here that in all likelihood 227 00:11:19,920 --> 00:11:23,320 Speaker 7: is going to result in stronger economic growth. Maybe the 228 00:11:23,360 --> 00:11:27,400 Speaker 7: Feds not on a glide path to you know, take 229 00:11:27,400 --> 00:11:30,920 Speaker 7: the funds right down at three percent, which was sort 230 00:11:30,960 --> 00:11:34,240 Speaker 7: of the gist of what most investors got out of 231 00:11:34,280 --> 00:11:37,280 Speaker 7: their SEP back on September eighteenth. 232 00:11:37,880 --> 00:11:42,040 Speaker 2: So given that backdrop, Phil kind of where's your best 233 00:11:42,120 --> 00:11:44,720 Speaker 2: opportunity after that? As you look at the equity markets here, 234 00:11:44,720 --> 00:11:46,520 Speaker 2: where are you guys focusing these days? 235 00:11:46,800 --> 00:11:49,640 Speaker 7: Well, again, we're taking a longer term view and that 236 00:11:49,720 --> 00:11:53,959 Speaker 7: if we're right that the issues that we just talked 237 00:11:54,000 --> 00:11:58,040 Speaker 7: about do result in you know, let's our forecast is 238 00:11:58,080 --> 00:12:00,600 Speaker 7: three hundred and fifty dollars in corporate earnings for the 239 00:12:00,679 --> 00:12:05,440 Speaker 7: S ANDP looking out to calendar twenty seven embedded in 240 00:12:05,520 --> 00:12:12,240 Speaker 7: that assumption is comparable or perhaps lower corporate tax rates 241 00:12:12,600 --> 00:12:15,320 Speaker 7: and extension of the individual tax rates at the end 242 00:12:15,320 --> 00:12:17,839 Speaker 7: of next year, the end of calendar twenty five when 243 00:12:17,840 --> 00:12:20,720 Speaker 7: they come up for renewal. So, as a result, as 244 00:12:20,720 --> 00:12:23,360 Speaker 7: we look out to twenty six and twenty seven, the 245 00:12:23,440 --> 00:12:26,120 Speaker 7: economy ought to do pretty well. So if we discount 246 00:12:26,120 --> 00:12:29,240 Speaker 7: back three hundred and fifty dollars in earnings into the 247 00:12:29,320 --> 00:12:32,160 Speaker 7: end of twenty six, that would suggest the seventy five 248 00:12:32,240 --> 00:12:36,079 Speaker 7: hundred SMP we're trading at six thousand now. So if 249 00:12:36,080 --> 00:12:38,679 Speaker 7: the market does pull back here, you know, let's say 250 00:12:38,679 --> 00:12:41,280 Speaker 7: we pulled back to the two hundred day moving average, 251 00:12:41,440 --> 00:12:44,000 Speaker 7: you know, roughly about fifty four hundred. That gives you 252 00:12:44,240 --> 00:12:47,160 Speaker 7: a couple of thousand points in the S and P 253 00:12:47,160 --> 00:12:49,720 Speaker 7: potentially the upside over the next couple of years. That 254 00:12:49,760 --> 00:12:51,520 Speaker 7: looks pretty attractive to us. 255 00:12:51,320 --> 00:12:54,200 Speaker 2: And sounds pretty attractive to me certainly. Phill Er, Orlando, 256 00:12:54,440 --> 00:12:57,080 Speaker 2: Chief Epity market strategist and head of Client Portfolio Management 257 00:12:57,080 --> 00:12:58,080 Speaker 2: and federator and Armies. 258 00:12:58,520 --> 00:12:59,480 Speaker 4: Thank you for your time. 259 00:13:00,920 --> 00:13:04,800 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 260 00:13:04,880 --> 00:13:07,599 Speaker 1: weekdays at ten am Eastern on Apple card Playing and 261 00:13:07,720 --> 00:13:10,560 Speaker 1: broud Auto with the Bloomberg Business App. Listen on demand 262 00:13:10,640 --> 00:13:14,359 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 263 00:13:15,080 --> 00:13:17,559 Speaker 3: Happy Monday, everybody. Alex Deal here alongside paulse We need. 264 00:13:17,559 --> 00:13:20,000 Speaker 3: This is Bloomberg Intelligence. We are broadcasting to live on 265 00:13:20,000 --> 00:13:22,920 Speaker 3: this lovely Monday morning for our interactive broker studio right 266 00:13:22,960 --> 00:13:26,440 Speaker 3: here in Midtown Manhattan. Maybe lovely morning for us, but 267 00:13:26,480 --> 00:13:31,240 Speaker 3: maybe not so much for Spirit Airlines. The company declares 268 00:13:31,400 --> 00:13:34,720 Speaker 3: Chapter eleven bankruptcy. It's seeking Chapter eleven protection in New 269 00:13:34,800 --> 00:13:37,520 Speaker 3: York to restructure about one point six billion dollars of debt. 270 00:13:37,640 --> 00:13:40,000 Speaker 3: It did tell customers on Monday that they should continue 271 00:13:40,000 --> 00:13:44,000 Speaker 3: feeling comfortable booking fights now and in the future. I 272 00:13:44,000 --> 00:13:48,040 Speaker 3: don't really I guess that stock is obviously halted for 273 00:13:48,080 --> 00:13:51,079 Speaker 3: bankruptcy protection filing. We wanted to get the latest now 274 00:13:51,080 --> 00:13:53,920 Speaker 3: with Francois do Flow. He is US airline analyst with 275 00:13:54,000 --> 00:13:59,240 Speaker 3: Bloomberg News. He joins us, excuse me, Bloomberg Intelligence. I think, yes, okay, 276 00:13:59,240 --> 00:14:02,160 Speaker 3: Bloomberg Elligence. That's important. We want to sparse that out. 277 00:14:03,520 --> 00:14:06,160 Speaker 3: What happens to Spirit, like, what does this process wind 278 00:14:06,200 --> 00:14:06,760 Speaker 3: up looking like? 279 00:14:08,000 --> 00:14:08,240 Speaker 1: Yeah? 280 00:14:08,320 --> 00:14:12,040 Speaker 8: So good morning. Spirit have been struggling struggling since twenty 281 00:14:12,120 --> 00:14:15,760 Speaker 8: twenty with losses and cashburns things. So God only was 282 00:14:15,880 --> 00:14:18,839 Speaker 8: since twenty twenty three after the merger with Jeed Blue 283 00:14:18,920 --> 00:14:21,680 Speaker 8: was blocked and Praught and Whitney and on the need 284 00:14:21,800 --> 00:14:25,480 Speaker 8: for some engines to be inspected and that granted some 285 00:14:25,600 --> 00:14:30,160 Speaker 8: twenty four aircraft for this year. So with everything, unicodes 286 00:14:30,200 --> 00:14:34,320 Speaker 8: have increased faster than revenue, both because of inflationary effects 287 00:14:34,360 --> 00:14:38,440 Speaker 8: and also from competition. And there was this need of 288 00:14:39,000 --> 00:14:43,240 Speaker 8: refinance one point one billion of debt raised during the 289 00:14:43,240 --> 00:14:46,800 Speaker 8: pandemic that was packed by loyalty program and that was 290 00:14:46,880 --> 00:14:49,760 Speaker 8: due on September twenty twenty five, and there is another 291 00:14:50,480 --> 00:14:53,600 Speaker 8: five hundred million compatible debt due in twenty twenty six. 292 00:14:54,080 --> 00:14:59,400 Speaker 8: And because of this cash burn and losses, this debt 293 00:14:59,680 --> 00:15:03,320 Speaker 8: was needed to be written, recognociated, or restructure one way 294 00:15:03,400 --> 00:15:05,840 Speaker 8: or another. And that's what's managed to do with this 295 00:15:05,920 --> 00:15:10,000 Speaker 8: announcement today. So eighty million or so of the date 296 00:15:10,160 --> 00:15:14,760 Speaker 8: will be equitized, an exit of about eighty million eight 297 00:15:14,840 --> 00:15:18,400 Speaker 8: hundred million will be issued and you on twenty thirty 298 00:15:19,000 --> 00:15:22,280 Speaker 8: and in the meantime, Spirit will get three hundred million 299 00:15:22,400 --> 00:15:27,320 Speaker 8: of debt in the orin position facility to go through 300 00:15:27,360 --> 00:15:31,000 Speaker 8: the winter and continue to operate and make sure that 301 00:15:31,080 --> 00:15:35,280 Speaker 8: the flyer passenger can still fly during this important radio season. 302 00:15:36,040 --> 00:15:39,360 Speaker 2: Is there an expectation about when Spirit will come out of. 303 00:15:39,480 --> 00:15:44,880 Speaker 8: Bankruptcy, so they expect they expect to end to exit 304 00:15:44,920 --> 00:15:49,680 Speaker 8: the bankruptcy early March twenty twenty five, so there is 305 00:15:50,080 --> 00:15:53,520 Speaker 8: an extension period of forty days that is possible. That 306 00:15:53,640 --> 00:15:56,400 Speaker 8: will still be early twenty five to twenty five, which 307 00:15:56,440 --> 00:15:59,720 Speaker 8: is a very fast process. But it's also because they 308 00:15:59,760 --> 00:16:03,080 Speaker 8: managed to arrange to play arrange most of the big 309 00:16:03,360 --> 00:16:05,240 Speaker 8: although before filing. 310 00:16:05,280 --> 00:16:11,320 Speaker 3: So what could a new administration under President Trump free 311 00:16:11,400 --> 00:16:15,040 Speaker 3: up some more merger possibilities that were kind of squashed 312 00:16:15,080 --> 00:16:18,400 Speaker 3: and does that sort of become Spirit's future in like 313 00:16:18,480 --> 00:16:19,640 Speaker 3: April of twenty twenty. 314 00:16:19,520 --> 00:16:21,800 Speaker 6: Five, good course, that could be. 315 00:16:22,720 --> 00:16:28,960 Speaker 8: Definitely Spirit will emerge from this bankruptcy a liner and 316 00:16:29,840 --> 00:16:34,000 Speaker 8: hopefully more profitable in the long term airlines, not necessarily 317 00:16:34,040 --> 00:16:36,560 Speaker 8: in twenty twenty five. They only help to get back 318 00:16:36,600 --> 00:16:39,520 Speaker 8: to profits in twenty twenty six, which can be event 319 00:16:39,600 --> 00:16:44,800 Speaker 8: though very very hard to achieve, but definitely liner and 320 00:16:45,200 --> 00:16:49,200 Speaker 8: better position and a more attractive airline for somebody else 321 00:16:49,280 --> 00:16:55,000 Speaker 8: to grab, and definitely a change of an administration would 322 00:16:55,120 --> 00:16:58,800 Speaker 8: luckily make that easier for a new buyer. 323 00:17:00,280 --> 00:17:04,320 Speaker 4: So what what kind of looking at Spirit are they do? 324 00:17:04,440 --> 00:17:06,600 Speaker 2: Are they a bad operator or do they just have 325 00:17:06,640 --> 00:17:07,960 Speaker 2: a bad capital structure. 326 00:17:09,200 --> 00:17:14,080 Speaker 8: No, they faced a lot of end winds from everywhere, 327 00:17:14,200 --> 00:17:18,399 Speaker 8: ending from exiting from the pandemic. They faced higher courts 328 00:17:18,520 --> 00:17:25,280 Speaker 8: because of pilots, because of everything getting more expensive, and 329 00:17:25,359 --> 00:17:29,520 Speaker 8: at the same time they faced strong competition from American Delta, 330 00:17:29,920 --> 00:17:34,920 Speaker 8: United Airlines who were looking for passengers to fill seats 331 00:17:34,920 --> 00:17:40,399 Speaker 8: at business travelers were we're not feeling and this was 332 00:17:40,480 --> 00:17:45,800 Speaker 8: pressuring yields at low cost airlines, including Spirit. So and 333 00:17:45,840 --> 00:17:48,879 Speaker 8: then on top of that you add their engine problems. 334 00:17:49,359 --> 00:17:53,200 Speaker 8: That makes only everything worse with one out of ten 335 00:17:53,280 --> 00:17:58,880 Speaker 8: airplane grounded, even though they got some conversation from Product win. 336 00:17:59,160 --> 00:18:01,879 Speaker 8: So it's a nation of plenty of things. Plus the 337 00:18:01,920 --> 00:18:06,240 Speaker 8: fact that it seems that travelers are moving away from 338 00:18:07,640 --> 00:18:14,440 Speaker 8: low cost ticket to more premium fly and that's why 339 00:18:14,520 --> 00:18:17,360 Speaker 8: they are also changing their business model a little bit, 340 00:18:17,600 --> 00:18:22,399 Speaker 8: offering more premium seats and services to their customers, and 341 00:18:22,440 --> 00:18:24,760 Speaker 8: they are trying to change their experience. 342 00:18:24,960 --> 00:18:26,120 Speaker 9: And this is not something that. 343 00:18:26,160 --> 00:18:30,160 Speaker 8: Is specific to Spirit. But we also say that at 344 00:18:30,160 --> 00:18:34,360 Speaker 8: a legend and frontier because of this change in customer behavior. 345 00:18:34,720 --> 00:18:36,879 Speaker 3: Yeah, and also you know then you add things they 346 00:18:36,920 --> 00:18:38,520 Speaker 3: make their money by. Hey, I'm going to check a 347 00:18:38,520 --> 00:18:40,440 Speaker 3: bag out, you pay for something. I want a pretty ticket, 348 00:18:40,440 --> 00:18:42,000 Speaker 3: you got to pay for I'm a coffee, you got 349 00:18:42,000 --> 00:18:43,760 Speaker 3: to pay for it at some point. It's like guys 350 00:18:44,320 --> 00:18:46,480 Speaker 3: enoup with that. All right, I think so much. FIRSTOI, 351 00:18:46,480 --> 00:18:49,760 Speaker 3: we appreciate Francois de Flow he joins us s Boomberg Intelligence, 352 00:18:49,880 --> 00:18:54,200 Speaker 3: US Airlines analysts joining us from Princeton, New Jersey. Again, 353 00:18:54,280 --> 00:18:58,080 Speaker 3: that tickers s a ve. Also the big guys get 354 00:18:58,160 --> 00:19:01,720 Speaker 3: Alta United, for example, they can really compete on lower 355 00:19:01,760 --> 00:19:03,760 Speaker 3: affairs if they want to want at the end of 356 00:19:03,760 --> 00:19:05,600 Speaker 3: the day too, So how do you compete with that? 357 00:19:05,760 --> 00:19:05,920 Speaker 6: Right? 358 00:19:05,960 --> 00:19:08,920 Speaker 2: And I didn't understand it, but now since Francois explained it. 359 00:19:09,320 --> 00:19:10,960 Speaker 2: During the pandemic, when they lost some of their business 360 00:19:11,000 --> 00:19:13,240 Speaker 2: passengers or a lot of their business passengers, they had 361 00:19:13,280 --> 00:19:15,760 Speaker 2: to fill those seats, and so let's discount some prices 362 00:19:15,800 --> 00:19:18,760 Speaker 2: and get those people in boom So I think your 363 00:19:18,840 --> 00:19:20,639 Speaker 2: question was the best, which is, now that we have 364 00:19:20,680 --> 00:19:23,040 Speaker 2: a new administration, can we get a deal done with 365 00:19:23,119 --> 00:19:26,439 Speaker 2: JetBlue or our Frontier one of those two, because it 366 00:19:26,480 --> 00:19:28,960 Speaker 2: doesn't seem like they can operate on their own and 367 00:19:29,359 --> 00:19:31,200 Speaker 2: it's a smaller market stick they get hurt. 368 00:19:31,440 --> 00:19:33,919 Speaker 3: Exactly because then you got to close maybe less flights, 369 00:19:33,920 --> 00:19:35,600 Speaker 3: and it actually went to hurting the people who need 370 00:19:36,240 --> 00:19:36,639 Speaker 3: the flight. 371 00:19:36,680 --> 00:19:42,000 Speaker 1: There, you're listening to the Bloomberg Intelligence Podcast. Catch us 372 00:19:42,040 --> 00:19:45,440 Speaker 1: live weekdays at ten am Eastern on applecar Play and 373 00:19:45,440 --> 00:19:48,359 Speaker 1: Android Auto with the Bloomberg Business app. You can also 374 00:19:48,440 --> 00:19:51,920 Speaker 1: listen live on Amazon Alexa from our flagship New York station. 375 00:19:52,280 --> 00:19:56,200 Speaker 1: Just say Alexa playing Bloomberg eleven thirty. 376 00:19:56,280 --> 00:19:58,240 Speaker 2: Else you'll Paul Sweeney, You're live here in our Bloomberg 377 00:19:58,280 --> 00:20:01,359 Speaker 2: Interactive Broker Studio. When you're streaming live on YouTube as well, 378 00:20:01,400 --> 00:20:04,200 Speaker 2: also head over to YouTube dot com search Bloomberg Podcast 379 00:20:04,200 --> 00:20:05,880 Speaker 2: and that's where you'll find it. So it's just listening 380 00:20:05,920 --> 00:20:09,000 Speaker 2: to Charlie's report here the NASDAK up almost nine tens 381 00:20:09,000 --> 00:20:11,000 Speaker 2: a one percent. Said what's pushing the NASDAC car and 382 00:20:11,000 --> 00:20:13,879 Speaker 2: I look, go over to the mov function Tesla. It 383 00:20:14,040 --> 00:20:16,439 Speaker 2: counts for forty five points of the move there in 384 00:20:16,480 --> 00:20:19,479 Speaker 2: the Nasdaq. So Tesla stock up set seven point two 385 00:20:19,520 --> 00:20:23,199 Speaker 2: percent today, leading the Nasdaq higher the question is the 386 00:20:23,240 --> 00:20:23,960 Speaker 2: Trump trade? 387 00:20:24,119 --> 00:20:26,560 Speaker 4: Is it a thing? How do you play it? Has 388 00:20:26,560 --> 00:20:27,240 Speaker 4: it played out? 389 00:20:27,720 --> 00:20:29,480 Speaker 2: Let's talk to somebody who does this stuff for a living. 390 00:20:29,520 --> 00:20:34,440 Speaker 2: Carol Schlife, chief investment officer for BEMO Family Office. Carol, 391 00:20:34,480 --> 00:20:38,960 Speaker 2: the world's a different place since the election on November sixth. 392 00:20:39,040 --> 00:20:42,240 Speaker 4: Here, how did your investment out look change? If at all? 393 00:20:45,080 --> 00:20:48,720 Speaker 10: It didn't really change. We're always very intent about building 394 00:20:48,800 --> 00:20:53,040 Speaker 10: durable and sturdy portfolios. And actually we had thought going 395 00:20:53,080 --> 00:20:56,159 Speaker 10: into the election that you know, of a variety of 396 00:20:56,200 --> 00:21:02,880 Speaker 10: potential outcome comes of red suite, Actually it was one 397 00:21:02,920 --> 00:21:06,240 Speaker 10: of the most likely outcomes, and we didn't have high 398 00:21:06,280 --> 00:21:08,840 Speaker 10: probabilities on any of them, if you will. It's not 399 00:21:08,920 --> 00:21:11,560 Speaker 10: like it was run away, but you know, it is 400 00:21:11,600 --> 00:21:14,240 Speaker 10: interesting because you are trying to make sure that you're 401 00:21:14,480 --> 00:21:19,040 Speaker 10: watching what the ten years doing and what treasuries are doing. So, 402 00:21:19,119 --> 00:21:22,520 Speaker 10: if anything, we've probably backed off a little bit on duration, 403 00:21:22,640 --> 00:21:27,160 Speaker 10: and we had been underweight on the duration side anyway, 404 00:21:27,480 --> 00:21:31,879 Speaker 10: and we'd leaned into growth and into the United States 405 00:21:31,920 --> 00:21:35,719 Speaker 10: and North American securities anyway. So we feel pretty good 406 00:21:35,760 --> 00:21:38,960 Speaker 10: about the positioning and trying to be very adaptive and 407 00:21:39,080 --> 00:21:40,679 Speaker 10: watching as things go forward. 408 00:21:41,600 --> 00:21:44,960 Speaker 2: You know, it appeared that the gridlock scenario was a 409 00:21:45,000 --> 00:21:47,399 Speaker 2: scenario that would work well for markets. But I'm not 410 00:21:47,440 --> 00:21:50,479 Speaker 2: sure we're going to have a gridlock Congress and an 411 00:21:50,520 --> 00:21:53,320 Speaker 2: executive branch. Looks like it's going to be a clear 412 00:21:53,320 --> 00:21:55,439 Speaker 2: swaite for the Republicans and maybe they can get a 413 00:21:55,440 --> 00:21:56,600 Speaker 2: lot of stuff done here. 414 00:21:57,119 --> 00:21:58,160 Speaker 4: How do you position for that? 415 00:22:00,040 --> 00:22:02,439 Speaker 10: Well, the interesting thing is is I think if you 416 00:22:02,520 --> 00:22:04,840 Speaker 10: go back and you listen to the way when Chairman 417 00:22:04,920 --> 00:22:09,080 Speaker 10: Powell was asked at the last FMC conference call how 418 00:22:09,119 --> 00:22:11,600 Speaker 10: they were going to adapt to the changes, and they said, look, 419 00:22:11,680 --> 00:22:15,240 Speaker 10: until policy is there, we can't really start trying to 420 00:22:15,280 --> 00:22:17,879 Speaker 10: model for it. And I think that's one of the 421 00:22:17,880 --> 00:22:20,960 Speaker 10: approaches to take because the market's trying to in advanced 422 00:22:21,040 --> 00:22:24,760 Speaker 10: discount which way things are going to swing that come 423 00:22:25,119 --> 00:22:29,080 Speaker 10: late January, depending on if we get across the board 424 00:22:29,160 --> 00:22:32,680 Speaker 10: tariffs in the first week or two of a Trump administration, 425 00:22:33,000 --> 00:22:38,959 Speaker 10: that's one potential policy response with portfolios as opposed to 426 00:22:39,240 --> 00:22:45,040 Speaker 10: a more gradual response or using tariffs as a negotiating 427 00:22:45,080 --> 00:22:51,159 Speaker 10: tactic and an opening bit. So to preposition portfolios is 428 00:22:51,200 --> 00:22:56,960 Speaker 10: probably a little premature, if you will, but keeping adept 429 00:22:57,080 --> 00:22:59,720 Speaker 10: at watching the way those things play out will be 430 00:22:59,720 --> 00:23:03,879 Speaker 10: import important, but it is ironic because historically markets have 431 00:23:04,040 --> 00:23:08,159 Speaker 10: preferred gridlock. I think under the assumptions that if the 432 00:23:08,240 --> 00:23:11,320 Speaker 10: legislators are all off bickering with each other, markets can 433 00:23:11,440 --> 00:23:15,480 Speaker 10: get on with being markets. But clearly this time I 434 00:23:15,480 --> 00:23:19,359 Speaker 10: think it was both not having to wait for the 435 00:23:19,400 --> 00:23:23,679 Speaker 10: election outcome and having a decisive sort of tilt to it. 436 00:23:24,359 --> 00:23:28,200 Speaker 10: The presumption is then okay, fine, we'll get policy quickly 437 00:23:28,640 --> 00:23:30,879 Speaker 10: and then we'll be able to adapt and adjust, and 438 00:23:30,960 --> 00:23:35,040 Speaker 10: so that unknown period shrunk from being what could have 439 00:23:35,160 --> 00:23:38,240 Speaker 10: been months and months to being basically just a matter 440 00:23:38,280 --> 00:23:38,760 Speaker 10: of weeks. 441 00:23:40,040 --> 00:23:41,680 Speaker 3: Something that's really stood out to me in the last 442 00:23:41,680 --> 00:23:44,760 Speaker 3: few weeks is the out performance of financials. Do you 443 00:23:44,800 --> 00:23:45,960 Speaker 3: think that that continues? 444 00:23:47,880 --> 00:23:48,639 Speaker 4: We do. 445 00:23:48,960 --> 00:23:51,119 Speaker 10: And one of the things that's interesting is when you 446 00:23:51,119 --> 00:23:55,000 Speaker 10: start digging into the stats and looking at how low 447 00:23:55,240 --> 00:23:58,919 Speaker 10: the level of initial public offerings and m and A is. 448 00:23:59,080 --> 00:24:01,639 Speaker 10: I saw once to to Stick recently that said something 449 00:24:01,720 --> 00:24:07,359 Speaker 10: like twenty seven thousand companies are sitting in venture capital portfolios. 450 00:24:07,400 --> 00:24:10,240 Speaker 10: Over half of them have been there for over four years. 451 00:24:10,640 --> 00:24:13,880 Speaker 10: So you've got a lot of really high quality potential 452 00:24:14,240 --> 00:24:17,400 Speaker 10: companies that just haven't come public. You have a lot 453 00:24:17,400 --> 00:24:20,439 Speaker 10: of M and A that hasn't happened, and that's teed up. 454 00:24:20,480 --> 00:24:22,880 Speaker 10: I think that's one of the primary reasons why you're 455 00:24:22,920 --> 00:24:26,600 Speaker 10: seeing Wall Street get pretty excited both and we hear 456 00:24:26,680 --> 00:24:30,320 Speaker 10: anecdotally there's a lot of bankers out there teeing up 457 00:24:30,359 --> 00:24:34,000 Speaker 10: deals and so that could be positive for the industry. 458 00:24:34,560 --> 00:24:36,360 Speaker 3: All right, Carol, we appreciate it. Thank you very much. 459 00:24:36,400 --> 00:24:40,840 Speaker 3: Carol's life joining us there over at FEMO Family office. 460 00:24:40,840 --> 00:24:42,720 Speaker 4: She cio over at that shop. 461 00:24:42,760 --> 00:24:43,760 Speaker 3: Thank you so very much. 462 00:24:45,440 --> 00:24:49,320 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 463 00:24:49,400 --> 00:24:52,920 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 464 00:24:52,960 --> 00:24:55,720 Speaker 1: Auto with the Bloomberg Business app. You can also listen 465 00:24:55,840 --> 00:24:58,960 Speaker 1: live on Amazon Alexa from our flagship New York station. 466 00:24:59,320 --> 00:25:01,679 Speaker 1: Just say to play Bloomberg eleven. 467 00:25:03,800 --> 00:25:06,520 Speaker 2: The Nasdak up almost nine tens a one percent of 468 00:25:06,560 --> 00:25:08,359 Speaker 2: So what's pushing the nasdak? Karr and we'll go over 469 00:25:08,480 --> 00:25:09,679 Speaker 2: to the mov function. 470 00:25:10,240 --> 00:25:10,640 Speaker 4: Tesla. 471 00:25:10,800 --> 00:25:13,280 Speaker 2: It counts for forty five points of the move there 472 00:25:13,320 --> 00:25:16,280 Speaker 2: in the Nasdaq. So Tesla stock up set seven point 473 00:25:16,320 --> 00:25:18,960 Speaker 2: two percent today, leading the Nasdaq higher. 474 00:25:19,320 --> 00:25:21,640 Speaker 4: The question is the Trump trade? Is it a thing? 475 00:25:22,200 --> 00:25:24,920 Speaker 2: How do you play it? Has it played out. Let's 476 00:25:24,920 --> 00:25:26,440 Speaker 2: talk to somebody who does this stuff for a living. 477 00:25:26,480 --> 00:25:31,439 Speaker 2: Carol Schleife, chief investment officer for BEMO Family Office. Carol, 478 00:25:31,440 --> 00:25:36,000 Speaker 2: the world's a different place since the election on November sixth. 479 00:25:36,000 --> 00:25:38,639 Speaker 4: Here, how did your investment out look change? 480 00:25:38,680 --> 00:25:44,680 Speaker 10: If at all, it didn't really change. We're always very 481 00:25:44,680 --> 00:25:49,320 Speaker 10: intent about building durable and sturdy portfolios, and actually we 482 00:25:49,400 --> 00:25:52,400 Speaker 10: had thought going into the election that you know, of 483 00:25:52,440 --> 00:25:59,200 Speaker 10: a variety of potential outcomes, a red suite actually was 484 00:25:59,200 --> 00:26:02,879 Speaker 10: was one of the most likely outcomes, and we didn't 485 00:26:02,880 --> 00:26:05,360 Speaker 10: have high probabilities on any of them, if you will. 486 00:26:05,440 --> 00:26:08,119 Speaker 10: It's not like it was run away, but you know, 487 00:26:08,200 --> 00:26:10,640 Speaker 10: it is interesting because you are trying to make sure 488 00:26:10,640 --> 00:26:13,399 Speaker 10: that you're watching what the ten years doing and what 489 00:26:14,840 --> 00:26:18,400 Speaker 10: treasuries are doing. So, if anything, we've probably backed off 490 00:26:18,400 --> 00:26:21,000 Speaker 10: a little bit on duration, and we had been underweight 491 00:26:22,119 --> 00:26:25,840 Speaker 10: on the duration side anyway, and we'd leaned into growth 492 00:26:25,880 --> 00:26:31,280 Speaker 10: and into the United States and North American securities anyway. 493 00:26:31,359 --> 00:26:34,800 Speaker 10: So we feel pretty good about positioning and trying to 494 00:26:34,800 --> 00:26:37,639 Speaker 10: be very adaptive and watching as things go forward. 495 00:26:38,600 --> 00:26:41,920 Speaker 2: You know, it appeared that the gridlock scenario was a 496 00:26:41,960 --> 00:26:44,359 Speaker 2: scenario that would work well for markets but I'm not 497 00:26:44,400 --> 00:26:47,439 Speaker 2: sure we're going to have a gridlock Congress and an 498 00:26:47,480 --> 00:26:50,280 Speaker 2: executive branch looks like it's going to be a clear 499 00:26:50,280 --> 00:26:52,399 Speaker 2: suite for the Republicans and maybe they can get a 500 00:26:52,400 --> 00:26:55,080 Speaker 2: lot of stuff done here. How do you position for that? 501 00:26:56,920 --> 00:26:59,399 Speaker 10: Well, the interesting thing is is, I think if you 502 00:26:59,480 --> 00:27:01,840 Speaker 10: go back and you listen to the way when Chairman 503 00:27:01,880 --> 00:27:06,040 Speaker 10: Powell was asked at the last FMC conference call how 504 00:27:06,080 --> 00:27:08,560 Speaker 10: they were going to adapt to the changes, and they said, look, 505 00:27:08,640 --> 00:27:12,199 Speaker 10: until policy is there, we can't really start trying to 506 00:27:12,240 --> 00:27:14,840 Speaker 10: model for it. And I think that's one of the 507 00:27:14,880 --> 00:27:17,920 Speaker 10: approaches to take because the market's trying to in advanced 508 00:27:18,000 --> 00:27:21,720 Speaker 10: discount which way things are going to swing that come 509 00:27:22,080 --> 00:27:26,040 Speaker 10: late January, depending on if we get across the board 510 00:27:26,119 --> 00:27:29,640 Speaker 10: tariffs in the first week or two of a Trump administration, 511 00:27:29,960 --> 00:27:35,919 Speaker 10: that's one potential policy response with portfolios as opposed to 512 00:27:36,200 --> 00:27:42,000 Speaker 10: a more gradual response or using tariffs as a negotiating 513 00:27:42,080 --> 00:27:48,119 Speaker 10: tactic and an opening bit. So to preposition portfolios is 514 00:27:48,160 --> 00:27:53,920 Speaker 10: probably a little premature, if you will, but keeping adept 515 00:27:54,040 --> 00:27:57,320 Speaker 10: at watching the way those things play out will be important. 516 00:27:57,560 --> 00:28:01,920 Speaker 10: But it is ironic because historic markets have preferred gridlock. 517 00:28:02,040 --> 00:28:06,120 Speaker 10: I think under the assumptions that if the legislators are 518 00:28:06,160 --> 00:28:08,760 Speaker 10: all off bickering with each other, markets can get on 519 00:28:08,840 --> 00:28:12,800 Speaker 10: with being markets. But clearly this time I think it 520 00:28:12,960 --> 00:28:17,280 Speaker 10: was both not having to wait for the election outcome 521 00:28:17,400 --> 00:28:21,639 Speaker 10: and having a decisive sort of tilt to it. The 522 00:28:21,680 --> 00:28:25,679 Speaker 10: presumption is then okay, fine, we'll get policy quickly and 523 00:28:25,720 --> 00:28:28,000 Speaker 10: then we'll be able to adapt and adjust, and so 524 00:28:28,720 --> 00:28:32,280 Speaker 10: that unknown period shrunk from being what could have been 525 00:28:32,400 --> 00:28:35,760 Speaker 10: months and months to being basically just a matter of weeks. 526 00:28:37,040 --> 00:28:38,640 Speaker 3: Something that's really stood out to me in the last 527 00:28:38,640 --> 00:28:41,920 Speaker 3: few weeks is the outperformance of financials. Do you think 528 00:28:41,920 --> 00:28:42,920 Speaker 3: that that continues. 529 00:28:44,840 --> 00:28:45,600 Speaker 1: We do. 530 00:28:45,920 --> 00:28:48,080 Speaker 10: And one of the things that's interesting is when you 531 00:28:48,080 --> 00:28:51,960 Speaker 10: start digging into the stats and looking at how low 532 00:28:52,200 --> 00:28:55,880 Speaker 10: the level of initial public offerings and m and A is. 533 00:28:56,040 --> 00:28:59,200 Speaker 10: I saw one statistic recently that said something like twenty 534 00:28:59,280 --> 00:29:04,960 Speaker 10: seven companies are sitting in venture capital portfolios. Over half 535 00:29:05,000 --> 00:29:07,760 Speaker 10: of them have been there for over four years. So 536 00:29:07,800 --> 00:29:11,720 Speaker 10: you've got a lot of really high quality potential companies 537 00:29:11,760 --> 00:29:14,440 Speaker 10: that just haven't come public. You have a lot of 538 00:29:14,560 --> 00:29:17,400 Speaker 10: m and A that hasn't happened, and that's teed up. 539 00:29:17,440 --> 00:29:19,840 Speaker 10: I think that's one of the primary reasons why you're 540 00:29:19,920 --> 00:29:23,560 Speaker 10: seeing Wall Street get pretty excited both and we hear 541 00:29:23,680 --> 00:29:27,760 Speaker 10: anecdotally there's a lot of bankers out there teeing up deals, 542 00:29:28,360 --> 00:29:30,960 Speaker 10: so that could be positive for the industry. 543 00:29:31,520 --> 00:29:33,320 Speaker 3: All right, Carol, we appreciate it. Thank you very much. 544 00:29:33,360 --> 00:29:37,760 Speaker 3: Carol's life joining us there over at FIMO family office. 545 00:29:37,800 --> 00:29:39,680 Speaker 4: She cio over at that shop. 546 00:29:39,720 --> 00:29:41,360 Speaker 3: Thank you so very much. All right, let's go to 547 00:29:41,400 --> 00:29:44,880 Speaker 3: Steve Mann, now Bloomberg Intelligence, Global Autos and Industrial Research Manager. 548 00:29:44,920 --> 00:29:48,960 Speaker 3: We were talking about Tesla earlier and how potentially the 549 00:29:49,000 --> 00:29:52,480 Speaker 3: Trump new Trump administration might loosen some regulation on self 550 00:29:52,560 --> 00:29:55,640 Speaker 3: driving cars. And this comes though as maybe ev subsidies 551 00:29:55,640 --> 00:29:56,960 Speaker 3: will be rolled back, which is a bit of a 552 00:29:56,960 --> 00:30:00,480 Speaker 3: head scratcher for me. Steve Mann joins us. Now, hey, Steve, 553 00:30:00,520 --> 00:30:01,920 Speaker 3: what do you make of the fact that maybe those 554 00:30:01,920 --> 00:30:05,400 Speaker 3: fully self driving vehicles is a is a now hallmark 555 00:30:05,520 --> 00:30:09,120 Speaker 3: or priority for the incoming Transportation Department? 556 00:30:10,160 --> 00:30:10,440 Speaker 4: Yeah. 557 00:30:10,640 --> 00:30:15,400 Speaker 11: I think it's important for self driving vehicles. It's it's 558 00:30:15,440 --> 00:30:20,040 Speaker 11: the next kind of technology evolution for cars. And one 559 00:30:20,040 --> 00:30:24,040 Speaker 11: of the biggest hurdles really in the US is regulations. 560 00:30:24,480 --> 00:30:27,280 Speaker 11: There's only two states that allow uh, you know, self 561 00:30:27,320 --> 00:30:31,000 Speaker 11: driving cars meeting without steering wheel and pedals on the 562 00:30:31,080 --> 00:30:37,320 Speaker 11: road today is uh, California and Texas, But nationally, the 563 00:30:37,400 --> 00:30:41,800 Speaker 11: other states or the National Highways Safety Board actually do 564 00:30:41,920 --> 00:30:47,080 Speaker 11: not allow these steering wheel lists and pedal list vehicles 565 00:30:47,120 --> 00:30:49,400 Speaker 11: on the road. So it's it's a huge it's a 566 00:30:49,520 --> 00:30:52,320 Speaker 11: huge evolution if they allow that. 567 00:30:52,680 --> 00:30:56,160 Speaker 2: So Elon Musk certainly having an influence there on this, 568 00:30:56,440 --> 00:31:00,280 Speaker 2: presumably on this policy direction. Here in Tesla, stock is 569 00:31:00,360 --> 00:31:04,920 Speaker 2: up seven point two percent today, Steve, how likely is 570 00:31:04,960 --> 00:31:08,080 Speaker 2: the federal government to kind of maybe follow California and 571 00:31:08,160 --> 00:31:10,320 Speaker 2: Texas and allow these on the road. 572 00:31:11,560 --> 00:31:14,360 Speaker 11: Well, the you know, first of all, Tesla is not 573 00:31:14,400 --> 00:31:18,120 Speaker 11: going to be the only one benefiting from it. GM 574 00:31:18,200 --> 00:31:22,240 Speaker 11: could benefit from it, way more cob benefit from it. 575 00:31:22,360 --> 00:31:22,560 Speaker 6: You know. 576 00:31:22,720 --> 00:31:28,120 Speaker 11: Actually, GM's Cruise division has actually lobbied the National Highway 577 00:31:28,520 --> 00:31:34,040 Speaker 11: Safety Board to really push rules and regulations, relax those 578 00:31:34,080 --> 00:31:39,440 Speaker 11: regulations to allowed you know, unsupervised vehicles, more unsupervised vehicles 579 00:31:39,440 --> 00:31:41,960 Speaker 11: on the road. But that's been held up for the 580 00:31:42,040 --> 00:31:47,360 Speaker 11: last two three years. And I mean, personally, I think 581 00:31:47,960 --> 00:31:50,840 Speaker 11: I think it's really important for the for the government 582 00:31:50,880 --> 00:31:55,360 Speaker 11: to actually relax that regulation. It's not just the US 583 00:31:55,440 --> 00:31:59,160 Speaker 11: trying to develop this technology, there's a lot of companies 584 00:31:59,160 --> 00:32:02,440 Speaker 11: in China, there's a lot of companies in Europe that 585 00:32:02,520 --> 00:32:07,120 Speaker 11: are trying to develop this uh kind of a driverless technology. 586 00:32:07,160 --> 00:32:10,120 Speaker 11: And I think, you know, US needs to do this 587 00:32:10,440 --> 00:32:12,200 Speaker 11: to to compete. 588 00:32:12,840 --> 00:32:15,040 Speaker 3: When you say that they need to do it to compete, 589 00:32:15,200 --> 00:32:17,520 Speaker 3: wouldn't it be the same with EV's And I'm wondering 590 00:32:17,600 --> 00:32:21,160 Speaker 3: from maybe Elon Musk's point of view, if Tesla is 591 00:32:21,160 --> 00:32:23,560 Speaker 3: able to make a lot of inroads with the robotaxis 592 00:32:23,600 --> 00:32:26,000 Speaker 3: and self driving cars that like that in essence will 593 00:32:26,000 --> 00:32:28,800 Speaker 3: also help prop up evs because oh, by the way, 594 00:32:28,800 --> 00:32:30,120 Speaker 3: those cars will be electric. 595 00:32:31,200 --> 00:32:34,920 Speaker 11: Oh that's that's very true. You know, those self driving 596 00:32:35,080 --> 00:32:41,960 Speaker 11: software is propulsion or powertrain agnostic, agnostic. But you know, 597 00:32:42,160 --> 00:32:47,080 Speaker 11: having an ev really helps help push that through, push 598 00:32:47,120 --> 00:32:50,600 Speaker 11: that into the evolution into the future, because they do 599 00:32:50,680 --> 00:32:53,440 Speaker 11: work better on evs than gasoline cars. 600 00:32:54,640 --> 00:32:57,040 Speaker 2: So, Steve, just give us a sense of these self 601 00:32:57,120 --> 00:33:02,840 Speaker 2: driving vehicles. Where is the technology to day and when 602 00:33:02,880 --> 00:33:05,480 Speaker 2: do you think it'll get to the point where Paul's. 603 00:33:05,160 --> 00:33:06,720 Speaker 3: Going to use one, which, by the way, let me 604 00:33:06,720 --> 00:33:08,640 Speaker 3: tell you it's going to be a while. 605 00:33:08,400 --> 00:33:12,200 Speaker 11: Where are we I mean, I you know, we still 606 00:33:12,280 --> 00:33:13,440 Speaker 11: think it's going to take a while. 607 00:33:13,640 --> 00:33:14,320 Speaker 6: Like when we. 608 00:33:14,240 --> 00:33:18,280 Speaker 11: Look at uh, you know folk, you know, autonomous vehicles 609 00:33:18,320 --> 00:33:22,400 Speaker 11: as a main driver to Tesla's revenue, we don't really 610 00:33:22,440 --> 00:33:25,960 Speaker 11: model that out until like twenty thirty five, So it's 611 00:33:26,000 --> 00:33:29,080 Speaker 11: going to be a while because it's really relying on 612 00:33:29,240 --> 00:33:33,920 Speaker 11: the AI technology, and specifically for Tesla, it's really using 613 00:33:34,080 --> 00:33:36,320 Speaker 11: a lot of the data that is collecting from its 614 00:33:36,320 --> 00:33:39,760 Speaker 11: cameras and all the vehicles are out there and teaching 615 00:33:39,760 --> 00:33:44,520 Speaker 11: the machine how to react and respond response appropriately in 616 00:33:44,640 --> 00:33:47,600 Speaker 11: various situations. As you know, as both of your drive 617 00:33:47,640 --> 00:33:49,880 Speaker 11: on the road, there's you know, there's an mptiene number 618 00:33:49,960 --> 00:33:53,200 Speaker 11: of scenarios that could happen, So it will take a 619 00:33:53,240 --> 00:33:56,160 Speaker 11: while for the machine to really learn and be proficient 620 00:33:56,960 --> 00:33:59,560 Speaker 11: at driving as as well as a human being. 621 00:34:00,400 --> 00:34:02,400 Speaker 3: Uh what else do you make of that? 622 00:34:02,560 --> 00:34:02,640 Speaker 8: Now? 623 00:34:02,680 --> 00:34:04,680 Speaker 3: If we just switch focus to just the EV part 624 00:34:05,120 --> 00:34:08,000 Speaker 3: of Tesla or other companies, if that subsidy winds up 625 00:34:08,000 --> 00:34:11,759 Speaker 3: going away for EV's, what do you think happens the 626 00:34:11,880 --> 00:34:15,120 Speaker 3: likes of like Rivian and Tesla and even the EV 627 00:34:15,360 --> 00:34:16,879 Speaker 3: parts of major automakers. 628 00:34:17,920 --> 00:34:21,120 Speaker 11: Well, I think, you know, the initial thought for us 629 00:34:21,239 --> 00:34:25,840 Speaker 11: is really it could be beneficial to companies like Tesla 630 00:34:25,960 --> 00:34:29,880 Speaker 11: and Rivian. You know, if if the credit goes away, 631 00:34:30,480 --> 00:34:33,279 Speaker 11: I think EV's will still be around. There's still gonna 632 00:34:33,320 --> 00:34:36,400 Speaker 11: be some buyers who are really interested in in in 633 00:34:37,320 --> 00:34:41,000 Speaker 11: driving evs. Will it you know, will it get past 634 00:34:41,040 --> 00:34:44,120 Speaker 11: the eight percent penetration rate or will it drop down 635 00:34:44,160 --> 00:34:47,239 Speaker 11: a little bit below eight It could, It could, But 636 00:34:47,560 --> 00:34:50,080 Speaker 11: what that means is gonna weed out a lot of competition. 637 00:34:50,320 --> 00:34:54,520 Speaker 11: The unprofitable EV makers will have to probably leave exit 638 00:34:54,960 --> 00:34:58,640 Speaker 11: the market. That will leave companies like Tesla, who's profitable. 639 00:34:59,080 --> 00:35:01,399 Speaker 11: And the reason I bring a Arrivian is because they 640 00:35:01,440 --> 00:35:04,680 Speaker 11: have a huge backing from Volkswagen right now to really 641 00:35:05,040 --> 00:35:08,920 Speaker 11: you know, to really uh fund their next affordable vehicle. 642 00:35:09,719 --> 00:35:11,400 Speaker 2: So when I look at the forwards, the gms of 643 00:35:11,440 --> 00:35:15,080 Speaker 2: the world, what's their level of commitment to the electric 644 00:35:15,160 --> 00:35:17,879 Speaker 2: vehicle business, Steve, has it changed in the last several 645 00:35:17,920 --> 00:35:19,400 Speaker 2: years or is it still there? 646 00:35:20,480 --> 00:35:21,719 Speaker 6: Uh? 647 00:35:21,840 --> 00:35:25,120 Speaker 11: It hasn't for GM. And that's that's a good point, Paul, 648 00:35:25,280 --> 00:35:29,040 Speaker 11: because I think the Trump administration will have to actually 649 00:35:29,360 --> 00:35:33,160 Speaker 11: take that into consideration. You know, with the Inflation Reduction 650 00:35:33,280 --> 00:35:36,080 Speaker 11: Act one hundreds you know, over one hundred billion has 651 00:35:36,120 --> 00:35:39,640 Speaker 11: been spent on kind of on shoring the EV supply chain, 652 00:35:40,120 --> 00:35:43,520 Speaker 11: and for these companies to actually give that up and 653 00:35:43,560 --> 00:35:46,520 Speaker 11: it's a you know, can convert that to a someunk costs, 654 00:35:47,000 --> 00:35:50,200 Speaker 11: it's not gonna go very well with the with the carmakers. 655 00:35:50,800 --> 00:35:54,000 Speaker 11: So you know, for GM, they've invested a lot. You know, 656 00:35:54,040 --> 00:35:56,920 Speaker 11: they're rolling out cheaper and cheaper evs. Next year you're 657 00:35:56,920 --> 00:35:59,960 Speaker 11: gonna launch the Bolt which is EV E Chevrolet Bulb 658 00:36:00,040 --> 00:36:02,759 Speaker 11: which is under thirty thousand. But Ford, on the other hand, 659 00:36:02,800 --> 00:36:06,640 Speaker 11: is quite different. They actually have retrenched, they delay the battery, 660 00:36:07,200 --> 00:36:10,880 Speaker 11: the new battery plant, and then they're also you know, 661 00:36:10,920 --> 00:36:13,960 Speaker 11: cutting back on a three three year row su E 662 00:36:14,080 --> 00:36:18,440 Speaker 11: V SUV. But so you know, depending on the different allmakers, 663 00:36:18,480 --> 00:36:19,480 Speaker 11: the different approaches. 664 00:36:19,640 --> 00:36:22,040 Speaker 2: Yeah, all right, Steve As I always thank you very much. 665 00:36:22,040 --> 00:36:26,160 Speaker 2: Steve Man, Global Autos and Industrials Analysts for Bloomberg Intelligencies 666 00:36:26,200 --> 00:36:29,799 Speaker 2: down there in our Princeton office. Again, it seems like 667 00:36:30,680 --> 00:36:34,400 Speaker 2: the presence of Elon Musk is certainly influencing some of 668 00:36:34,400 --> 00:36:36,319 Speaker 2: the transportation policy that may be coming down the pike. 669 00:36:36,480 --> 00:36:38,520 Speaker 3: Would you be more apt to buy an EV or 670 00:36:38,560 --> 00:36:40,080 Speaker 3: a self driving car EV? 671 00:36:40,680 --> 00:36:43,120 Speaker 2: Okay, yes, but you know I think about it every 672 00:36:43,120 --> 00:36:44,640 Speaker 2: morning I get in a car with some dude I've 673 00:36:44,680 --> 00:36:45,280 Speaker 2: never met before. 674 00:36:45,320 --> 00:36:46,080 Speaker 6: What's kind of the. 675 00:36:46,040 --> 00:36:49,399 Speaker 3: Difference between self driving in that? No, it's a good point. 676 00:36:49,440 --> 00:36:51,400 Speaker 3: I mean, at least when it comes to say transportation 677 00:36:51,560 --> 00:36:54,040 Speaker 3: like caps and taxis. Yes, would you get into a 678 00:36:54,080 --> 00:36:54,880 Speaker 3: self driving taxi? 679 00:36:55,239 --> 00:36:55,680 Speaker 6: I don't know. 680 00:36:55,760 --> 00:36:56,440 Speaker 3: He's not there yet. 681 00:36:56,560 --> 00:36:58,080 Speaker 4: Yeah, I don't know if I would. I don't know. 682 00:36:58,840 --> 00:37:04,000 Speaker 1: All right, you're listening to the Bloomberg Intelligence Podcast. Catch 683 00:37:04,080 --> 00:37:07,640 Speaker 1: us live weekdays at ten am Eastern on Applecarplay and 684 00:37:07,640 --> 00:37:10,560 Speaker 1: Android Auto with the Bloomberg Business App. You can also 685 00:37:10,640 --> 00:37:14,160 Speaker 1: listen live on Amazon Alexa from our flagship New York station, 686 00:37:14,520 --> 00:37:17,280 Speaker 1: Just say Alexa play Bloomberg eleven thirty. 687 00:37:18,640 --> 00:37:21,959 Speaker 3: Alex Steel here alongside Paul Sweeney. This is Bloomberg Intelligence Radio. 688 00:37:22,000 --> 00:37:25,000 Speaker 3: We bring you all the top news and business. Were 689 00:37:25,080 --> 00:37:28,520 Speaker 3: my business, economics and finance. Thank you very much. You know, 690 00:37:28,560 --> 00:37:30,680 Speaker 3: it's like riding a bike until you kind a speedbump 691 00:37:31,120 --> 00:37:34,120 Speaker 3: all across the world. We also love to tap into 692 00:37:34,200 --> 00:37:38,960 Speaker 3: our Bloomberg n EF folks. So Bloomberg n EF Research 693 00:37:39,520 --> 00:37:43,080 Speaker 3: basically powers data sets and models for everything from commodities 694 00:37:43,120 --> 00:37:47,120 Speaker 3: to power, transport, industry, buildings, AG sectors. It's all about 695 00:37:47,160 --> 00:37:52,160 Speaker 3: businesses helping to finance the energy transition dot dot dot. 696 00:37:52,520 --> 00:37:54,960 Speaker 3: What does a Trump two point zero mean for something 697 00:37:55,000 --> 00:37:59,800 Speaker 3: called the energy transition? Joining US now? Is Derek FLAKEL Bloomberg, 698 00:38:00,200 --> 00:38:03,759 Speaker 3: EF lead US policy analyst. What do we think a 699 00:38:03,840 --> 00:38:05,720 Speaker 3: Trump two point zero and energy means? 700 00:38:07,000 --> 00:38:08,759 Speaker 9: So, first of all, there's a lot of worries about 701 00:38:08,760 --> 00:38:11,320 Speaker 9: the future of the Insfalation Reduction Acts, the US Signature 702 00:38:11,680 --> 00:38:15,839 Speaker 9: Climate subsidy program. We expect that will mostly remain intact. 703 00:38:16,160 --> 00:38:19,480 Speaker 9: A lot of Republican district states are benefiting fourteen health 704 00:38:19,520 --> 00:38:22,120 Speaker 9: Republicans have signed a letter saying they don't want to 705 00:38:22,120 --> 00:38:24,520 Speaker 9: see those tax credits repealed hastily, and the Speaker of 706 00:38:24,520 --> 00:38:26,840 Speaker 9: the House has said that he wants to use a scalpel, 707 00:38:26,880 --> 00:38:28,520 Speaker 9: not a sledgehammer. So we think a lot of that 708 00:38:28,560 --> 00:38:30,640 Speaker 9: will survive. Where you're likely to see more change is 709 00:38:30,719 --> 00:38:35,200 Speaker 9: regulations and some voluntary initiatives like the procurement for clean 710 00:38:35,200 --> 00:38:36,400 Speaker 9: products from the federal government. 711 00:38:37,280 --> 00:38:41,160 Speaker 2: So I'm just looking. You have a great, great chart 712 00:38:41,239 --> 00:38:44,120 Speaker 2: graphic here. Fossil fuels are likely to farewell on our 713 00:38:44,120 --> 00:38:45,000 Speaker 2: Trump administration. 714 00:38:45,520 --> 00:38:47,640 Speaker 4: Electric vehicles are not. 715 00:38:48,280 --> 00:38:50,759 Speaker 2: Wouldn't mister Musk have something to say about the fate 716 00:38:50,800 --> 00:38:51,720 Speaker 2: of electric vehicles. 717 00:38:52,840 --> 00:38:54,840 Speaker 9: He certainly would, But the question is what if Tesla's 718 00:38:54,880 --> 00:38:57,680 Speaker 9: strategy going to be visa the via of electric vehicle producers. 719 00:38:58,000 --> 00:39:01,480 Speaker 9: Most of the valuation comes from the dream of a robotaxi. 720 00:39:01,480 --> 00:39:04,239 Speaker 9: And we've certainly seen some Bloomberg reporting recently saying that 721 00:39:04,360 --> 00:39:06,799 Speaker 9: Musk is likely to put for a favorable framework on 722 00:39:06,920 --> 00:39:10,319 Speaker 9: av's when it comes to evs or electric vehicles. You know, 723 00:39:10,480 --> 00:39:12,680 Speaker 9: he has said and the business and now may or 724 00:39:12,680 --> 00:39:15,760 Speaker 9: may not bear this out, that Tesla would do better 725 00:39:16,160 --> 00:39:19,400 Speaker 9: sort of survive the loss of the EV tax credits 726 00:39:19,440 --> 00:39:21,400 Speaker 9: in a way that some of his EV competitors might not. 727 00:39:22,040 --> 00:39:24,840 Speaker 9: It ultimately depends on what you and what he thinks. 728 00:39:24,880 --> 00:39:27,720 Speaker 9: Tesl's interest is whether it's dominating a smaller EV market 729 00:39:27,800 --> 00:39:29,840 Speaker 9: or having a smaller share of a larger EV market. 730 00:39:30,080 --> 00:39:31,600 Speaker 3: Let's move to some of the stuff that feels a 731 00:39:31,600 --> 00:39:34,200 Speaker 3: little bit disier, and those are the tax credits that 732 00:39:34,280 --> 00:39:37,960 Speaker 3: are part of the IRA. So one is a tax 733 00:39:38,000 --> 00:39:41,239 Speaker 3: credit for carbon that's captured, how you stored, how you 734 00:39:41,480 --> 00:39:43,680 Speaker 3: capture it is debatable in terms of how much tax 735 00:39:43,719 --> 00:39:45,920 Speaker 3: credit you receive, and the other has to do with hydrogen. 736 00:39:46,719 --> 00:39:50,280 Speaker 3: How do we feel about those two policies either staying 737 00:39:50,280 --> 00:39:51,880 Speaker 3: in place or getting reduced. 738 00:39:52,960 --> 00:39:56,440 Speaker 9: So these tax credits are favored by you know, industrial interests, 739 00:39:56,600 --> 00:39:59,400 Speaker 9: oil and gas interests. From what I've heard, there's not 740 00:39:59,400 --> 00:40:01,440 Speaker 9: a lot of republic appetite to appeal either of those. 741 00:40:01,560 --> 00:40:04,040 Speaker 9: But you're likely to see is looser regulations on both, 742 00:40:04,160 --> 00:40:06,560 Speaker 9: which actually strengthens the business case for both. We might 743 00:40:06,600 --> 00:40:09,239 Speaker 9: see a better outlook for both carbon castor and for 744 00:40:09,320 --> 00:40:13,320 Speaker 9: hydrants than under Trump administrations. Now, as for emmistance benefits, 745 00:40:13,360 --> 00:40:15,799 Speaker 9: the market acceptance of that, that might be a little 746 00:40:15,800 --> 00:40:20,400 Speaker 9: bit diceier, But nevertheless we see the economic case beouse 747 00:40:20,640 --> 00:40:22,839 Speaker 9: being a little bit easier as compliance costs go down. 748 00:40:24,040 --> 00:40:27,160 Speaker 2: So I'm just looking in again winners and losers here. 749 00:40:27,160 --> 00:40:29,719 Speaker 2: How much of this is a day one type of 750 00:40:29,760 --> 00:40:33,520 Speaker 2: policy thing versus boy, this is just take a while. 751 00:40:33,560 --> 00:40:36,160 Speaker 2: To the extent that Trump administration may want to shift 752 00:40:36,160 --> 00:40:40,319 Speaker 2: gears on this energy transition, it seems like a lot 753 00:40:40,320 --> 00:40:42,080 Speaker 2: of stuff has already been spent. There's a lot of 754 00:40:42,400 --> 00:40:45,080 Speaker 2: investment already pink around. What's the timing do you think? 755 00:40:46,400 --> 00:40:46,600 Speaker 1: Right? 756 00:40:46,680 --> 00:40:48,399 Speaker 9: Well, it depends on what you're talking about. If you're 757 00:40:48,400 --> 00:40:50,560 Speaker 9: talking about taxes, there's going to be a big tax 758 00:40:50,600 --> 00:40:53,239 Speaker 9: negotiation taking up probably most of twenty twenty five to 759 00:40:53,280 --> 00:40:55,560 Speaker 9: do with extending the Trump tax cuts. Seeing what happens 760 00:40:55,600 --> 00:40:58,480 Speaker 9: with the IRA et cetera. You're likely to see closure 761 00:40:58,520 --> 00:40:59,759 Speaker 9: on that by the end of the year. But after 762 00:40:59,760 --> 00:41:03,600 Speaker 9: that regulatory changes and so forth. In general, regulatory changes, 763 00:41:03,680 --> 00:41:07,560 Speaker 9: including those for existing tax credits, take usually about two 764 00:41:07,680 --> 00:41:11,799 Speaker 9: or three years, give or take, and so a lot 765 00:41:11,800 --> 00:41:13,800 Speaker 9: of the stuff can't really happen on day one. You 766 00:41:13,840 --> 00:41:17,600 Speaker 9: can't really shift the stiff on a dime. However, in 767 00:41:17,680 --> 00:41:20,479 Speaker 9: terms of carrick, those are things that can be done 768 00:41:20,760 --> 00:41:24,279 Speaker 9: more or less immediately, though politically that might not fly 769 00:41:24,360 --> 00:41:28,840 Speaker 9: too well. And programs that are sort of voluntary, like 770 00:41:28,840 --> 00:41:31,520 Speaker 9: again federal procurement of clean products, those could be killed 771 00:41:31,560 --> 00:41:33,600 Speaker 9: more or less day one by an executive order. 772 00:41:33,840 --> 00:41:36,359 Speaker 3: What about wind and solar, so to some extent, a 773 00:41:36,400 --> 00:41:38,759 Speaker 3: lot has already been thrown into that, and it's hard 774 00:41:38,800 --> 00:41:41,760 Speaker 3: to see onshore wind and solar, it's harder to reconcile 775 00:41:41,880 --> 00:41:46,360 Speaker 3: that being really stripped away. But the offshore wind space 776 00:41:46,440 --> 00:41:47,560 Speaker 3: that has question. 777 00:41:47,320 --> 00:41:50,120 Speaker 9: Marks for me, Yeah, it does have quite a few. 778 00:41:50,640 --> 00:41:53,840 Speaker 9: If you look at BNF's modeling for what might happen 779 00:41:54,040 --> 00:41:57,080 Speaker 9: if the IRA were repealed at the earliest opportunity, which 780 00:41:57,080 --> 00:41:59,160 Speaker 9: again we don't think will happen, but even if it did, 781 00:41:59,280 --> 00:42:01,840 Speaker 9: you would see about a seventeen percent drop overall in 782 00:42:01,880 --> 00:42:05,600 Speaker 9: the combination of wind, solar, and storage installations. Wind itself, though, 783 00:42:05,600 --> 00:42:07,960 Speaker 9: would see a much bigger drop because it's very expensive 784 00:42:07,960 --> 00:42:10,279 Speaker 9: and tax pres dependent. You might see about like thirty 785 00:42:10,280 --> 00:42:13,120 Speaker 9: percent drop in on store wind and an over forty 786 00:42:13,120 --> 00:42:15,600 Speaker 9: percent drop in offshore wind, and that's only based on 787 00:42:15,760 --> 00:42:16,800 Speaker 9: the financial subsidies. 788 00:42:16,880 --> 00:42:17,080 Speaker 6: Right. 789 00:42:17,360 --> 00:42:20,960 Speaker 9: Trump has a lot more control over offshore leasing as 790 00:42:21,000 --> 00:42:24,000 Speaker 9: well as federal permits. There's a pipeline of projects that 791 00:42:24,040 --> 00:42:26,520 Speaker 9: already have both offer leases and permits, but a lot 792 00:42:26,560 --> 00:42:29,160 Speaker 9: of proposed ones don't have that yet. And there's also 793 00:42:29,239 --> 00:42:31,840 Speaker 9: questions about how the even would approach litigate and against 794 00:42:31,880 --> 00:42:35,360 Speaker 9: existing off for wind permits. You might see some of 795 00:42:35,360 --> 00:42:37,880 Speaker 9: that fall by the wayside depending on how lawsuits go. 796 00:42:38,600 --> 00:42:42,920 Speaker 2: Derek just broadly defined how committed is Congress as a 797 00:42:43,040 --> 00:42:46,960 Speaker 2: legislative body to this whole energy transition. Do they feel 798 00:42:46,960 --> 00:42:50,600 Speaker 2: like it's real or how did they feel about it? 799 00:42:50,680 --> 00:42:52,520 Speaker 3: Are facilities being built in their states? 800 00:42:52,600 --> 00:42:52,839 Speaker 1: Yeah? 801 00:42:53,160 --> 00:42:55,160 Speaker 3: That could they. 802 00:42:55,040 --> 00:42:58,200 Speaker 9: Answer to that exactly from what we attracted in clean 803 00:42:58,239 --> 00:43:00,600 Speaker 9: tech factory deployments. I think about ninety sent is going 804 00:43:00,640 --> 00:43:03,799 Speaker 9: to red or purple, that is swing states. So there's 805 00:43:03,840 --> 00:43:06,480 Speaker 9: a lot of electoral consequences, especially if you zoom down 806 00:43:06,520 --> 00:43:09,719 Speaker 9: at the district level, where overwhelming with Republican districts with 807 00:43:10,280 --> 00:43:14,600 Speaker 9: the planned better labor costs Richthoor, these are the place 808 00:43:14,640 --> 00:43:16,399 Speaker 9: that they're seeing the most investment, and so I think 809 00:43:16,440 --> 00:43:20,759 Speaker 9: the commitment primarily is to economic development, local opportunity, as 810 00:43:20,760 --> 00:43:24,200 Speaker 9: well as to some degree on storing and supply chained 811 00:43:25,160 --> 00:43:28,200 Speaker 9: diversificate and de risking, and that I think is fairly 812 00:43:28,280 --> 00:43:30,120 Speaker 9: durable in a bipartisan manner. 813 00:43:30,160 --> 00:43:32,080 Speaker 2: All right, most important question of the day, Derek, for 814 00:43:32,120 --> 00:43:34,920 Speaker 2: you are the unc Tar Hills. Are they even going 815 00:43:34,960 --> 00:43:37,279 Speaker 2: to be able to field a basketball team this year? 816 00:43:37,719 --> 00:43:40,080 Speaker 6: Go but go up against my dookies. 817 00:43:41,280 --> 00:43:43,799 Speaker 9: Well, my wife's duke. So I'm I'm gonna not take 818 00:43:43,840 --> 00:43:45,200 Speaker 9: a position on that. 819 00:43:45,760 --> 00:43:47,879 Speaker 4: Man A very good all right, Derek, thanks so much 820 00:43:47,880 --> 00:43:48,480 Speaker 4: for you. Appreciate it. 821 00:43:48,480 --> 00:43:52,359 Speaker 2: Derek Flackle, lead US policy analysts for b n e F. 822 00:43:53,120 --> 00:43:54,520 Speaker 4: Again, one of my thoughts here, as. 823 00:43:54,400 --> 00:43:56,319 Speaker 2: We think about it from the energy perspective, it just 824 00:43:56,320 --> 00:43:58,280 Speaker 2: seems like there's so much or there is a certain 825 00:43:58,280 --> 00:44:02,400 Speaker 2: degree of just movement towards cleaner energy that I'm not 826 00:44:02,400 --> 00:44:05,120 Speaker 2: sure how you stop that much lessen slow it down, 827 00:44:05,200 --> 00:44:07,400 Speaker 2: but I guess there are certain things that you can do. 828 00:44:07,440 --> 00:44:08,720 Speaker 4: Executive Order day one. 829 00:44:08,840 --> 00:44:10,480 Speaker 3: Yeah, I just think it's also going to be sort 830 00:44:10,520 --> 00:44:12,960 Speaker 3: of a pick and choose, right, Like I mentioned sort 831 00:44:12,960 --> 00:44:15,600 Speaker 3: of the carbon credit tax credit. You could see that staying, 832 00:44:15,600 --> 00:44:17,719 Speaker 3: but hydrogen feels like a real question mark, maybe more 833 00:44:17,760 --> 00:44:20,239 Speaker 3: of a push into nuclear, So like there's some nuances there, 834 00:44:20,280 --> 00:44:22,560 Speaker 3: And also what happens with coal if you were going 835 00:44:22,600 --> 00:44:24,160 Speaker 3: to shut out a coal plant or you have a 836 00:44:24,200 --> 00:44:26,440 Speaker 3: clean coal plant, Like, does that change your calculus? 837 00:44:26,840 --> 00:44:31,360 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 838 00:44:31,560 --> 00:44:34,759 Speaker 1: and anywhere else you'll get your podcasts. Listen live each 839 00:44:34,800 --> 00:44:38,160 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com, 840 00:44:38,239 --> 00:44:41,680 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 841 00:44:41,800 --> 00:44:44,920 Speaker 1: You can also watch us live every weekday on YouTube 842 00:44:45,000 --> 00:44:46,880 Speaker 1: and always on the Bloomberg terminal