1
00:00:00,280 --> 00:00:11,440
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Intelligence

2
00:00:11,520 --> 00:00:13,520
Speaker 1: with Alex Steele and Paul Sweeney.

3
00:00:13,560 --> 00:00:16,759
Speaker 2: The real app performance has been the US corporate high yield.

4
00:00:16,960 --> 00:00:18,079
Speaker 3: Are the companies lean enough?

5
00:00:18,079 --> 00:00:19,320
Speaker 4: Have they trimmed all the fats?

6
00:00:19,400 --> 00:00:22,560
Speaker 2: The semiconductor business is a really cyclical.

7
00:00:22,160 --> 00:00:26,160
Speaker 1: Business, breaking market headlines and corporate news from across the globe.

8
00:00:26,280 --> 00:00:28,800
Speaker 4: Do investors like the M and A that we've seen?

9
00:00:29,080 --> 00:00:32,120
Speaker 2: These are two big time blue chip companies.

10
00:00:32,440 --> 00:00:35,839
Speaker 4: Window between the peak and cunt changing super.

11
00:00:35,520 --> 00:00:39,720
Speaker 1: Fast Bloomberg Intelligence with Alex Steele and Paul Sweeney on

12
00:00:39,840 --> 00:00:41,440
Speaker 1: Bloomberg Radio.

13
00:00:42,000 --> 00:00:44,400
Speaker 3: I'm Alex Steele and I'm normal Linda filling in for

14
00:00:44,440 --> 00:00:45,080
Speaker 3: Paul Sweeney.

15
00:00:45,120 --> 00:00:47,479
Speaker 4: On today's Bloomberg Intelligence Show. We're going to dig inside

16
00:00:47,479 --> 00:00:50,360
Speaker 4: the big business stories impacting Wall Street and the global markets.

17
00:00:50,479 --> 00:00:52,800
Speaker 3: Each and every week we provide in depth research and

18
00:00:52,880 --> 00:00:54,880
Speaker 3: data on some of the two thousand companies in one

19
00:00:54,960 --> 00:00:57,480
Speaker 3: hundred and thirty industries our analysts cover worldwide.

20
00:00:57,560 --> 00:00:59,320
Speaker 4: Today, we'll take a look at it TD Bank because

21
00:00:59,360 --> 00:01:01,080
Speaker 4: exiting it's in Charles Schwab.

22
00:01:01,360 --> 00:01:03,720
Speaker 3: Plus, we'll discuss why sales at the fast food giant

23
00:01:03,840 --> 00:01:05,720
Speaker 3: McDonald's improved last quarter.

24
00:01:05,640 --> 00:01:07,200
Speaker 4: But first we take a look at earnings from the

25
00:01:07,240 --> 00:01:08,720
Speaker 4: farm machinery leader Deer.

26
00:01:09,080 --> 00:01:11,800
Speaker 3: This week, Deer said that North American sales are expected

27
00:01:11,840 --> 00:01:14,440
Speaker 3: to be down thirty percent this year for Maura.

28
00:01:14,240 --> 00:01:16,759
Speaker 4: And Nora and I were joined by Christopher Chiolino, Bloomberg

29
00:01:16,800 --> 00:01:19,959
Speaker 4: Intelligence Senior US machinery analyst, and we first asked Chris

30
00:01:19,959 --> 00:01:22,039
Speaker 4: for his take on this week's earnings report.

31
00:01:22,240 --> 00:01:24,080
Speaker 5: We knew going into the quarter that was going to

32
00:01:24,080 --> 00:01:27,160
Speaker 5: be a pretty ugly print, but these results were really

33
00:01:27,640 --> 00:01:31,720
Speaker 5: well below even some of the most bearish expectations. The

34
00:01:31,800 --> 00:01:36,840
Speaker 5: company really continues to underproduce retail demand across the board

35
00:01:36,880 --> 00:01:38,959
Speaker 5: to bring down some of the excess inventories that the

36
00:01:39,000 --> 00:01:42,640
Speaker 5: industry has been plagued with. We also sounds like some

37
00:01:43,240 --> 00:01:45,920
Speaker 5: products there were some timing issues, so products got pushed

38
00:01:45,959 --> 00:01:50,560
Speaker 5: out to subsequent quarters, which which weighed on the one

39
00:01:50,640 --> 00:01:54,520
Speaker 5: Q performance. Now, Deer did reaffirm its twenty twenty five

40
00:01:54,600 --> 00:01:57,480
Speaker 5: net income outlook, and it certainly seems that we are

41
00:01:57,520 --> 00:01:59,760
Speaker 5: approaching a cyclical trough this year.

42
00:02:00,480 --> 00:02:01,080
Speaker 4: But just our.

43
00:02:01,000 --> 00:02:03,440
Speaker 5: Concern lies that you know, earnings may not be fully

44
00:02:03,480 --> 00:02:06,280
Speaker 5: de risked here. You continue to see further softness on

45
00:02:06,320 --> 00:02:10,880
Speaker 5: the largeag side used equipment inventories remain somewhat of an overhang.

46
00:02:11,600 --> 00:02:13,720
Speaker 5: Currency headwinds are going to be more pronounced in the

47
00:02:13,760 --> 00:02:16,960
Speaker 5: back half, and really we still have this uncertainty around

48
00:02:17,000 --> 00:02:20,000
Speaker 5: what the US trade policy is going to be and

49
00:02:19,520 --> 00:02:22,400
Speaker 5: what and what those retaliatory actions are going to be

50
00:02:22,440 --> 00:02:22,760
Speaker 5: as well.

51
00:02:22,800 --> 00:02:25,239
Speaker 4: Well, I was going to say, if they sound relatively

52
00:02:25,280 --> 00:02:28,040
Speaker 4: confident they'll be at trough, but then you add on tariffs,

53
00:02:28,040 --> 00:02:30,760
Speaker 4: how well does that confidence hold up?

54
00:02:31,840 --> 00:02:34,119
Speaker 5: Yeah, I mean that's the million dollar question, right, I mean,

55
00:02:34,200 --> 00:02:37,799
Speaker 5: I would say that AG historically has had a tremendous

56
00:02:37,840 --> 00:02:41,840
Speaker 5: amount of pricing power and deer in particular, this is

57
00:02:42,680 --> 00:02:45,480
Speaker 5: a company in a market that even gets positive price

58
00:02:45,560 --> 00:02:48,919
Speaker 5: in down markets. You know, this quarterly sales were down

59
00:02:48,919 --> 00:02:52,000
Speaker 5: over thirty five percent, earnings down significantly, and we were

60
00:02:52,000 --> 00:02:55,440
Speaker 5: still up on pricing. It will add costs, but they

61
00:02:55,480 --> 00:02:57,280
Speaker 5: have a history and the track record of being able

62
00:02:57,280 --> 00:02:58,239
Speaker 5: to pass those through.

63
00:02:59,120 --> 00:03:01,640
Speaker 3: What has really been concern for investors out of this

64
00:03:01,720 --> 00:03:03,079
Speaker 3: report as they're looking forward?

65
00:03:04,560 --> 00:03:07,480
Speaker 5: Yeah, I think there's two big concerns here. One is,

66
00:03:07,840 --> 00:03:11,079
Speaker 5: you know, the expectation is that yes, twenty five is

67
00:03:11,120 --> 00:03:12,960
Speaker 5: trough and that we should start to see that this

68
00:03:13,040 --> 00:03:16,560
Speaker 5: recovery build into twenty six. But I still think there's

69
00:03:16,560 --> 00:03:18,440
Speaker 5: a lot of uncertainty out there as to what the

70
00:03:18,919 --> 00:03:23,799
Speaker 5: recovery trajectory looks like, just given the uncertainty around trade

71
00:03:23,800 --> 00:03:26,200
Speaker 5: and tariffs, you know, I think we're probably looking at

72
00:03:26,240 --> 00:03:29,119
Speaker 5: a lower for longer type cycle. So maybe we don't

73
00:03:29,160 --> 00:03:32,840
Speaker 5: get that typical acceleration in the first year after a

74
00:03:32,880 --> 00:03:35,760
Speaker 5: cyclical trough. So I think investors are still trying to

75
00:03:35,840 --> 00:03:39,360
Speaker 5: digest that. And then too, you know, the costs side

76
00:03:39,400 --> 00:03:41,840
Speaker 5: of the equation. It certainly seems that costs are going

77
00:03:41,920 --> 00:03:43,920
Speaker 5: to go up. How are they going to mitigate that

78
00:03:43,960 --> 00:03:46,520
Speaker 5: through some of their you know, internal initiatives or even

79
00:03:46,640 --> 00:03:49,160
Speaker 5: from shifting some production around with their footprint.

80
00:03:49,720 --> 00:03:52,400
Speaker 4: I also am wondering where we are in terms of

81
00:03:52,800 --> 00:03:57,080
Speaker 4: the cyclicality of equipment, Like are are farmers operating on

82
00:03:57,160 --> 00:03:58,960
Speaker 4: older stuff that they're going to have to replace or

83
00:03:58,960 --> 00:04:01,440
Speaker 4: did they already do that during the pandemic. So they're

84
00:04:01,480 --> 00:04:03,080
Speaker 4: good for a while, and it's going to take like

85
00:04:03,200 --> 00:04:05,920
Speaker 4: really new high tech products to get them to fork

86
00:04:05,960 --> 00:04:08,080
Speaker 4: over that kind of cash.

87
00:04:08,160 --> 00:04:09,960
Speaker 5: I think we're good for a little bit a little

88
00:04:09,960 --> 00:04:11,840
Speaker 5: bit of time here. I mean, you have to remember,

89
00:04:12,000 --> 00:04:14,880
Speaker 5: up we had you know, three four strong years of

90
00:04:14,920 --> 00:04:18,880
Speaker 5: growth up to the twenty twenty three peak. Yes, twenty

91
00:04:18,880 --> 00:04:20,839
Speaker 5: four was a down year. We were down, you know,

92
00:04:20,920 --> 00:04:24,680
Speaker 5: fifteen sixteen percent in terms of units on high horsepower equipment.

93
00:04:25,279 --> 00:04:27,839
Speaker 5: We're looking at somewhere of a twenty five to thirty

94
00:04:27,880 --> 00:04:31,400
Speaker 5: percent decline in volumes this year. So that's going to

95
00:04:31,440 --> 00:04:34,839
Speaker 5: put us, you know, att lows of you know, over

96
00:04:34,880 --> 00:04:37,400
Speaker 5: the last two decades where we haven't seen before. So

97
00:04:38,120 --> 00:04:41,240
Speaker 5: from these levels, we think there's probably limited downside risk.

98
00:04:41,320 --> 00:04:44,680
Speaker 5: But you know, farmers still have the ability to you know,

99
00:04:44,760 --> 00:04:47,400
Speaker 5: push out some of these replacement purchases at least for

100
00:04:47,440 --> 00:04:49,039
Speaker 5: another few years, we think.

101
00:04:49,120 --> 00:04:53,000
Speaker 3: Our Thanks to Christopherciellino, Bloomberg Intelligence Senior US Machinery analyst,

102
00:04:53,279 --> 00:04:54,080
Speaker 3: we moved next.

103
00:04:53,880 --> 00:04:56,000
Speaker 4: To the energy sector. This week's shares of the British

104
00:04:56,000 --> 00:04:58,640
Speaker 4: oil giant BP surge the most is twenty twenty.

105
00:04:59,000 --> 00:05:01,839
Speaker 3: This came after news of the activist investor Elliott Investment

106
00:05:01,880 --> 00:05:03,800
Speaker 3: Management said it built a stake in BP.

107
00:05:04,320 --> 00:05:06,520
Speaker 4: And this comes as Elliott seeks to end years of

108
00:05:06,600 --> 00:05:09,880
Speaker 4: underperformance at BP by pushing for significant change for more.

109
00:05:09,920 --> 00:05:12,520
Speaker 3: Alex and I were joined by Will Harris, Bloomberg Intelligence

110
00:05:12,560 --> 00:05:13,599
Speaker 3: Global Energy analysts.

111
00:05:13,680 --> 00:05:16,240
Speaker 4: We first asked Will what all of the problems are

112
00:05:16,279 --> 00:05:17,479
Speaker 4: that Elliott wants to fix.

113
00:05:17,920 --> 00:05:21,120
Speaker 6: I think there's too many to really go through, given

114
00:05:21,160 --> 00:05:23,720
Speaker 6: there our time constraints here, but I think they can

115
00:05:23,839 --> 00:05:27,839
Speaker 6: really boil down to a significant moment, which was the

116
00:05:27,880 --> 00:05:32,320
Speaker 6: original rollout of their twenty twenty energy transition strategy. This

117
00:05:32,400 --> 00:05:36,159
Speaker 6: is the quickest, most risky energy transition of all the

118
00:05:36,240 --> 00:05:40,400
Speaker 6: energy global energy majors, and it sort of it depicted

119
00:05:40,680 --> 00:05:44,599
Speaker 6: a pretty quick drop in their upstream hydrocarbon production, a

120
00:05:44,640 --> 00:05:50,080
Speaker 6: really rapid rollout of their renewables portfolio. And obviously this

121
00:05:50,160 --> 00:05:54,880
Speaker 6: has not been taken well by the market. It's undermined

122
00:05:54,920 --> 00:05:58,719
Speaker 6: the sustainability of their distribution, it's hit their returns, and

123
00:05:58,839 --> 00:06:01,800
Speaker 6: especially now when we are seeing a sort of backlash

124
00:06:01,880 --> 00:06:06,200
Speaker 6: against ESG, we're seeing a slowing of energy transition paces

125
00:06:06,240 --> 00:06:10,040
Speaker 6: across this sector. It hasn't gone down well for BP's

126
00:06:10,440 --> 00:06:12,719
Speaker 6: financial performance or share evaluation.

127
00:06:13,080 --> 00:06:15,560
Speaker 4: So well, if we go back to that moment in

128
00:06:15,600 --> 00:06:18,280
Speaker 4: twenty twenty, and I was there when they laid out

129
00:06:18,279 --> 00:06:21,240
Speaker 4: this new strategy. Was that a bad strategy or is

130
00:06:21,279 --> 00:06:23,479
Speaker 4: it bad timing or some combination.

131
00:06:25,080 --> 00:06:27,440
Speaker 6: There is some part of me that has a little

132
00:06:27,440 --> 00:06:30,160
Speaker 6: bit of sympathy for BP because because I think they

133
00:06:30,160 --> 00:06:32,560
Speaker 6: were trying to do the right thing, and then of

134
00:06:32,800 --> 00:06:35,680
Speaker 6: course Russia's invasion of Ukraine sort of up ended the

135
00:06:35,680 --> 00:06:42,360
Speaker 6: global energy sector pretty materially. I also think that they were, yes,

136
00:06:42,680 --> 00:06:45,480
Speaker 6: trying to do the right thing, but doing the right

137
00:06:45,520 --> 00:06:49,680
Speaker 6: thing isn't isn't always what's best for investors, And I

138
00:06:49,680 --> 00:06:52,840
Speaker 6: think just comparing it to some of their their peers,

139
00:06:52,880 --> 00:06:56,320
Speaker 6: particularly Shell, which has taken a much much more capital

140
00:06:56,360 --> 00:06:59,719
Speaker 6: discipline approach, they have a very high bar for acquisitions.

141
00:07:00,040 --> 00:07:04,720
Speaker 6: They've been very prudent in their energy transition rollout, and

142
00:07:05,000 --> 00:07:08,520
Speaker 6: we can just see in the financial performance and how

143
00:07:08,560 --> 00:07:10,720
Speaker 6: the market is valuing them, which has been the more

144
00:07:10,720 --> 00:07:13,520
Speaker 6: successful strategy over the last four or five years.

145
00:07:13,920 --> 00:07:18,080
Speaker 3: As we think about BP in particular, what really can

146
00:07:18,120 --> 00:07:20,840
Speaker 3: they do in this moment? What are investors really looking for?

147
00:07:21,800 --> 00:07:25,880
Speaker 6: So I think I think I'll touch on what Elliott

148
00:07:26,600 --> 00:07:28,400
Speaker 6: is I think going to try and do. There's four

149
00:07:28,480 --> 00:07:30,520
Speaker 6: levers that I think Elliott might try and pull here,

150
00:07:30,760 --> 00:07:33,800
Speaker 6: and the first is transition business spin off, so this

151
00:07:34,600 --> 00:07:37,320
Speaker 6: can remove debt and capital intensity of these businesses off

152
00:07:37,360 --> 00:07:41,080
Speaker 6: the balance sheet. We think they'll push to focus on

153
00:07:41,200 --> 00:07:44,680
Speaker 6: growing their oil production. More, the current oil production is

154
00:07:44,680 --> 00:07:47,440
Speaker 6: supposed to be declining about ten percent to twenty thirty.

155
00:07:47,760 --> 00:07:51,240
Speaker 6: We can hope to see that flatten or increase over

156
00:07:51,240 --> 00:07:54,120
Speaker 6: that same time period, and I think there could be

157
00:07:54,160 --> 00:07:58,040
Speaker 6: a push for a board change. The chairman of the board,

158
00:07:58,080 --> 00:08:03,080
Speaker 6: helgat Lund, has overseen VP since twenty seventeen and compared

159
00:08:03,120 --> 00:08:07,080
Speaker 6: to peers, there's been pretty underwhelming performance there and then

160
00:08:07,120 --> 00:08:10,720
Speaker 6: finally a primary US listing. I think that this could

161
00:08:10,760 --> 00:08:12,960
Speaker 6: be a big game changer. It has not only been

162
00:08:13,000 --> 00:08:17,800
Speaker 6: discussed at BP, but amongst the other European majors. It's

163
00:08:17,840 --> 00:08:21,240
Speaker 6: seen as a major hurdle to starting to close that

164
00:08:21,360 --> 00:08:24,520
Speaker 6: valuation gap with Chevron and exon our thanks.

165
00:08:24,280 --> 00:08:27,520
Speaker 3: To Will Harris, Bloomberg Intelligence Global Energy Analysts, we.

166
00:08:27,520 --> 00:08:30,440
Speaker 4: Move next to the leisure sector. Bloomberg Intelligence recently gave

167
00:08:30,440 --> 00:08:33,640
Speaker 4: his twenty twenty five outlook on cruises and theme parks.

168
00:08:33,320 --> 00:08:35,760
Speaker 3: And for more. We were joined by Jody Lori, Bloomberg

169
00:08:35,760 --> 00:08:37,319
Speaker 3: Intelligence Senior Credit Analysts.

170
00:08:37,360 --> 00:08:39,560
Speaker 4: We first asked Jody what she expects to perform well

171
00:08:39,640 --> 00:08:40,720
Speaker 4: for cruise lines this year.

172
00:08:41,120 --> 00:08:44,160
Speaker 7: I will say that the most fascinating thing is the

173
00:08:44,200 --> 00:08:47,880
Speaker 7: momentum continues for the cruise lines. The booking rates continue

174
00:08:47,920 --> 00:08:50,480
Speaker 7: to be very high, and we're seeing that Royal Caribbean,

175
00:08:50,480 --> 00:08:53,000
Speaker 7: we're seeing that Carnival, and that's what management is communicating.

176
00:08:53,600 --> 00:08:55,959
Speaker 7: Whether or not that continues into twenty six is the

177
00:08:56,040 --> 00:08:58,679
Speaker 7: question that we're grappling with. But at least for twenty five,

178
00:08:58,880 --> 00:09:00,439
Speaker 7: it's very very positive moment.

179
00:09:00,720 --> 00:09:03,160
Speaker 2: Jody, it seems like demand out there for experiences is

180
00:09:03,160 --> 00:09:05,880
Speaker 2: still very strong. How about for a family that's thinking

181
00:09:05,920 --> 00:09:09,320
Speaker 2: about a theme park trip versus maybe a cruise, how

182
00:09:09,360 --> 00:09:10,800
Speaker 2: does that kind of shake out?

183
00:09:12,360 --> 00:09:15,600
Speaker 7: Yeah, So, Paul, I think you hit on the major

184
00:09:15,720 --> 00:09:19,480
Speaker 7: issue is that we're seeing these sort of two sets

185
00:09:19,480 --> 00:09:21,880
Speaker 7: of consumers, right the lower end consumers that are pairing

186
00:09:21,920 --> 00:09:25,640
Speaker 7: back or they're still doing experiences, but maybe not as

187
00:09:25,800 --> 00:09:27,600
Speaker 7: lavish an experience. And then you have the high end

188
00:09:27,600 --> 00:09:31,000
Speaker 7: consumers that are still doing very well. High end hotels

189
00:09:31,040 --> 00:09:34,080
Speaker 7: are doing well, high end cruise lines are doing well,

190
00:09:34,280 --> 00:09:36,680
Speaker 7: anything that's higher end. If you put that in the

191
00:09:36,720 --> 00:09:39,240
Speaker 7: perspective of theme parks, one thing that we saw in

192
00:09:39,280 --> 00:09:41,720
Speaker 7: our survey that we ran in November is that for

193
00:09:41,800 --> 00:09:45,839
Speaker 7: theme park vacations, the average consumers income level is a

194
00:09:45,880 --> 00:09:48,640
Speaker 7: little bit lower than the average consumer that's planning to

195
00:09:48,720 --> 00:09:51,760
Speaker 7: do a cruise vacation this year. So I think that's

196
00:09:51,760 --> 00:09:54,640
Speaker 7: pretty telling when you think about the cost of admission,

197
00:09:54,640 --> 00:09:58,040
Speaker 7: when you think about who the target audiences and what's

198
00:09:58,080 --> 00:10:02,360
Speaker 7: going to continue the cash flow generation for the cruise

199
00:10:02,360 --> 00:10:04,520
Speaker 7: lines versus what might be a little bit of a

200
00:10:04,600 --> 00:10:06,080
Speaker 7: sticking point for the theme parks.

201
00:10:06,640 --> 00:10:06,960
Speaker 2: Jody.

202
00:10:06,960 --> 00:10:09,079
Speaker 8: One of the earliest memories I have of the very

203
00:10:09,120 --> 00:10:12,439
Speaker 8: earliest days of the pandemic was these cruise lines rushing

204
00:10:12,520 --> 00:10:15,000
Speaker 8: out to the bond market. They're raise cash because they

205
00:10:15,080 --> 00:10:18,560
Speaker 8: knew that their business was in for a tough haul there.

206
00:10:18,960 --> 00:10:21,560
Speaker 8: How are the balance sheets of some of these big

207
00:10:21,600 --> 00:10:24,840
Speaker 8: cruise companies theme park companies, How are the balance sheets

208
00:10:24,880 --> 00:10:25,599
Speaker 8: these days?

209
00:10:26,280 --> 00:10:28,199
Speaker 7: So we're going to break it out to the cruise

210
00:10:28,440 --> 00:10:31,000
Speaker 7: versus the theme parks in terms of their balance sheets.

211
00:10:31,040 --> 00:10:33,559
Speaker 7: So for the cruise lines, you know, particularly Carnival and

212
00:10:33,679 --> 00:10:36,760
Speaker 7: Royal Caribbean, they are dead set on getting to investment

213
00:10:36,760 --> 00:10:39,640
Speaker 7: grade level metrics. Norwegian says that they want to as well,

214
00:10:39,640 --> 00:10:43,200
Speaker 7: They've never been investment grade rated. But Carnival and Royal

215
00:10:43,240 --> 00:10:46,920
Speaker 7: Caribbean are really set on keeping leverage very low. They're

216
00:10:46,920 --> 00:10:49,839
Speaker 7: focused on that. Carnival's targeting three point five times by

217
00:10:49,840 --> 00:10:53,480
Speaker 7: the end of next year, so twenty twenty six, Royal

218
00:10:53,559 --> 00:10:57,440
Speaker 7: is targeting below three times this year. What we've modeled

219
00:10:57,480 --> 00:11:00,280
Speaker 7: out is that they can both get there and their

220
00:11:00,320 --> 00:11:03,080
Speaker 7: relatively comfortably. I mean, they've been pretty aggressive in terms

221
00:11:03,080 --> 00:11:05,800
Speaker 7: of de leveraging bringing down the debt load. Viking is

222
00:11:05,840 --> 00:11:08,120
Speaker 7: pretty happy where it is, so we don't see them

223
00:11:08,240 --> 00:11:10,320
Speaker 7: improving much. But they also have a low leverage. Now,

224
00:11:10,360 --> 00:11:13,199
Speaker 7: if you think of the theme parks, they repaid their debt.

225
00:11:13,240 --> 00:11:15,439
Speaker 7: They had this gravy of a year in twenty twenty two,

226
00:11:15,480 --> 00:11:18,520
Speaker 7: everybody rushed to theme parks, regional theme parks. Since then,

227
00:11:18,559 --> 00:11:22,240
Speaker 7: it hasn't been as exciting twenty twenty two to twenty three,

228
00:11:22,440 --> 00:11:26,199
Speaker 7: I should say, And what we're seeing there is a

229
00:11:26,240 --> 00:11:28,920
Speaker 7: little bit more problem now. SeaWorld really doesn't have that

230
00:11:28,960 --> 00:11:31,320
Speaker 7: much debt outstanding. So where we're concerned there is that

231
00:11:31,320 --> 00:11:34,120
Speaker 7: they start getting creative with their balance sheet again, particularly

232
00:11:34,160 --> 00:11:37,160
Speaker 7: if they're finding issues in the business as a whole

233
00:11:37,160 --> 00:11:39,400
Speaker 7: and they need to propel sort of. You know, the

234
00:11:39,400 --> 00:11:42,720
Speaker 7: equity value improving for six Flags. You know, they had

235
00:11:42,720 --> 00:11:45,520
Speaker 7: the merger between six Fags and cedar Fare and that

236
00:11:45,840 --> 00:11:49,400
Speaker 7: is resulting in much higher leverage. Management already bumped out

237
00:11:49,400 --> 00:11:52,000
Speaker 7: the target of when they're bringing down leverage, and we

238
00:11:52,040 --> 00:11:54,360
Speaker 7: already think that it might be a little bit harder

239
00:11:54,400 --> 00:11:56,800
Speaker 7: to achieve even pushing it out by a year and

240
00:11:56,840 --> 00:11:57,199
Speaker 7: a half.

241
00:11:57,640 --> 00:12:01,280
Speaker 3: Our thanks to Jody Laurie Bloomberg Intelligency, your credit analysts.

242
00:12:00,840 --> 00:12:02,560
Speaker 4: All right, coming to have a conversation with the chief

243
00:12:02,559 --> 00:12:05,199
Speaker 4: financial officer over at Huntington National Bank on the firm's

244
00:12:05,200 --> 00:12:06,720
Speaker 4: outlook and opportunities ahead.

245
00:12:06,840 --> 00:12:09,840
Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in

246
00:12:09,880 --> 00:12:12,480
Speaker 3: depth research and data on two thousand companies and one

247
00:12:12,559 --> 00:12:15,640
Speaker 3: hundred and thirty industries. You can access Bloomberg Intelligence via

248
00:12:15,679 --> 00:12:18,480
Speaker 3: b I go on the terminal. I'm Normal Linda, and

249
00:12:18,520 --> 00:12:19,480
Speaker 3: I'm Alex Steele, and.

250
00:12:19,480 --> 00:12:20,520
Speaker 4: This is Bloomberg.

251
00:12:24,800 --> 00:12:28,600
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

252
00:12:28,679 --> 00:12:32,080
Speaker 1: weekdays at ten am Eastern on Apple CarPlay and Android

253
00:12:32,080 --> 00:12:35,000
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

254
00:12:35,120 --> 00:12:38,880
Speaker 1: you get your podcasts, or watch us live on YouTube.

255
00:12:39,280 --> 00:12:41,640
Speaker 3: I'm Alex Steele and I'm Normal Linda. Filling in for

256
00:12:41,640 --> 00:12:42,280
Speaker 3: Paul Sweeney.

257
00:12:42,600 --> 00:12:45,680
Speaker 4: We move next to the banking sector and Huntington National Bank.

258
00:12:45,800 --> 00:12:47,760
Speaker 4: Co host Paul Sweeney and I were recently joined by

259
00:12:47,880 --> 00:12:51,000
Speaker 4: Zach Wasserman, chief financial officer at Huntington National Bank.

260
00:12:51,240 --> 00:12:53,400
Speaker 3: He discussed where the firm's focus has been and how

261
00:12:53,440 --> 00:12:56,440
Speaker 3: it's never been better positioned to benefit from significant organic

262
00:12:56,480 --> 00:12:57,480
Speaker 3: opportunities ahead.

263
00:12:57,640 --> 00:13:00,000
Speaker 4: And Zach began this portion of the conversation by discussing

264
00:13:00,080 --> 00:13:02,400
Speaker 4: how the bank is now trying to expand beyond lending

265
00:13:02,440 --> 00:13:03,360
Speaker 4: to small businesses.

266
00:13:03,800 --> 00:13:07,319
Speaker 9: The business has been performing exceptionally well recently, and one

267
00:13:07,320 --> 00:13:11,040
Speaker 9: of the reasons is because we're driving expansion both geographically

268
00:13:11,200 --> 00:13:13,840
Speaker 9: and in our commercial business, expanding in a number of

269
00:13:14,160 --> 00:13:17,920
Speaker 9: special divertical areas and national business lines. Just this year,

270
00:13:17,920 --> 00:13:21,720
Speaker 9: we've launched into three new states, North Carolina, South Carolina,

271
00:13:21,720 --> 00:13:25,480
Speaker 9: and Texas, and we've also established eight new special verticals

272
00:13:25,480 --> 00:13:28,800
Speaker 9: that are national, for example of funds financed vertical that's

273
00:13:28,840 --> 00:13:33,280
Speaker 9: supporting private equity clients, one that's focused on the mortgage ecosystem,

274
00:13:33,320 --> 00:13:36,679
Speaker 9: and other national commercial areas.

275
00:13:37,080 --> 00:13:39,400
Speaker 10: Talk to us about loan growth. What I do know

276
00:13:39,440 --> 00:13:41,800
Speaker 10: about the bank business. That's an important driver. So talk to.

277
00:13:41,720 --> 00:13:44,240
Speaker 2: Shot loan growth, where it's coming from, where you're seeing it,

278
00:13:44,240 --> 00:13:45,559
Speaker 2: and is it kind of in line.

279
00:13:45,360 --> 00:13:47,240
Speaker 9: With what you were expecting You know, we've actually had

280
00:13:47,400 --> 00:13:49,560
Speaker 9: very strong loan growth of the last two years. If

281
00:13:49,600 --> 00:13:51,640
Speaker 9: you take a step back, much of the industry has

282
00:13:51,679 --> 00:13:55,720
Speaker 9: been in a pretty neutral position, not actually growing. Huntington

283
00:13:55,760 --> 00:13:58,559
Speaker 9: has grown outperformed that by about ten percentage points. And

284
00:13:59,040 --> 00:14:01,480
Speaker 9: for us, the growth is coming from both our core business,

285
00:14:01,960 --> 00:14:06,080
Speaker 9: which is consumer small business and then mid corporate typically

286
00:14:06,080 --> 00:14:09,599
Speaker 9: private commercial clients, and then also these new initiatives that

287
00:14:09,640 --> 00:14:12,599
Speaker 9: I just mentioned before launching into three New states, a

288
00:14:12,679 --> 00:14:14,200
Speaker 9: number of specialty businesses.

289
00:14:14,240 --> 00:14:16,199
Speaker 10: So we're seeing a nice breadth of growth.

290
00:14:16,240 --> 00:14:20,640
Speaker 9: Actually, one thing that's actually, you know, a nice indication

291
00:14:20,680 --> 00:14:23,760
Speaker 9: of the economic strength is we're seeing strong demand from

292
00:14:23,800 --> 00:14:27,000
Speaker 9: small businesses from our regional banking business, typically in the

293
00:14:27,080 --> 00:14:29,600
Speaker 9: kind of smaller middle market client sets. So it's a

294
00:14:29,720 --> 00:14:31,480
Speaker 9: it's been a healthy dynamic we've been.

295
00:14:31,360 --> 00:14:35,160
Speaker 4: Seeing before you were in this position. You also was

296
00:14:35,200 --> 00:14:37,800
Speaker 4: chief financial officer to Visa, and I know that Huntington

297
00:14:37,880 --> 00:14:40,240
Speaker 4: is trying to get into the payments business in a

298
00:14:40,240 --> 00:14:44,200
Speaker 4: particular way too. What's the what's the market for that

299
00:14:44,320 --> 00:14:46,080
Speaker 4: and how do you guys play and compete in that?

300
00:14:46,680 --> 00:14:49,400
Speaker 9: You know, the market for payments is incredibly broad, and

301
00:14:49,760 --> 00:14:51,040
Speaker 9: if you think if you took a step back.

302
00:14:50,880 --> 00:14:53,440
Speaker 4: To categorize it actually, like is that zell or like

303
00:14:53,440 --> 00:14:53,920
Speaker 4: what is that?

304
00:14:54,040 --> 00:14:55,840
Speaker 9: You know, it is so broad, the one that really

305
00:14:55,880 --> 00:14:58,800
Speaker 9: needs to zoom into it. You know, we have a

306
00:14:58,880 --> 00:15:02,640
Speaker 9: number of card based payment products, so think consumer cards,

307
00:15:03,080 --> 00:15:07,000
Speaker 9: commercial cards, but also importantly treasury management, and that's really

308
00:15:07,000 --> 00:15:09,600
Speaker 9: the biggest driver right now. We're seeing in payments growth

309
00:15:10,040 --> 00:15:14,080
Speaker 9: supporting commercial clients with the ability to accept payments and

310
00:15:14,120 --> 00:15:18,040
Speaker 9: then make payments in essentially every form you can imagine, Alex,

311
00:15:18,080 --> 00:15:21,040
Speaker 9: so big big growth driver there. One of the things

312
00:15:21,080 --> 00:15:24,760
Speaker 9: that we've done recently is invest to expand our merchant

313
00:15:24,760 --> 00:15:30,040
Speaker 9: acquisition capability. Merchant acquiring is when a company accepts payments electronically,

314
00:15:30,920 --> 00:15:34,320
Speaker 9: and it's often the lynchpin of their business. Saw the

315
00:15:34,360 --> 00:15:36,920
Speaker 9: lifeblood of the company is how they accept payments. So

316
00:15:36,960 --> 00:15:40,240
Speaker 9: we launched a merchant acquiring business just in October and

317
00:15:40,280 --> 00:15:42,720
Speaker 9: it's been going incredibly well. So, you know, kind of

318
00:15:42,960 --> 00:15:45,720
Speaker 9: almost every area there's growth in payments for sure, but

319
00:15:46,040 --> 00:15:49,240
Speaker 9: for us, treasury management and commercial payments in particular as

320
00:15:49,280 --> 00:15:50,120
Speaker 9: a major growth driver.

321
00:15:50,560 --> 00:15:53,600
Speaker 2: Talk to us about your long portfolio, specifically your exposure to.

322
00:15:54,240 --> 00:15:58,560
Speaker 9: Office, yeah, real estate, you know, office and commercial real

323
00:15:58,640 --> 00:16:00,000
Speaker 9: estate generally for Huntington is.

324
00:16:00,120 --> 00:16:01,479
Speaker 10: A very small exposure.

325
00:16:01,520 --> 00:16:06,640
Speaker 9: Actually, typically for large regional banks, the average commercial real

326
00:16:06,720 --> 00:16:09,160
Speaker 9: estate within the loan portfolio might be fifteen or twenty

327
00:16:09,160 --> 00:16:10,240
Speaker 9: percent of the loan book.

328
00:16:10,440 --> 00:16:12,000
Speaker 10: For us, it's nine percent, so.

329
00:16:12,160 --> 00:16:14,720
Speaker 9: We're relatively smaller and an office is only one percent

330
00:16:14,720 --> 00:16:16,360
Speaker 9: of that nine To give you a sense. With that

331
00:16:16,480 --> 00:16:19,160
Speaker 9: being said, you know what we're seeing in that commercial

332
00:16:19,160 --> 00:16:21,720
Speaker 9: real estate environment is this is gonna this is gonna

333
00:16:21,720 --> 00:16:22,400
Speaker 9: be a situation that.

334
00:16:22,360 --> 00:16:24,040
Speaker 10: Plays out over multiple years.

335
00:16:24,560 --> 00:16:29,400
Speaker 9: Thankfully, we are seeing a fairly orderly process of refinancing

336
00:16:29,960 --> 00:16:34,760
Speaker 9: and generally seeing pretty sound ability for our commercial real

337
00:16:34,840 --> 00:16:40,560
Speaker 9: estate developers to maintain their financing and to successfully.

338
00:16:40,400 --> 00:16:43,920
Speaker 10: Roll through maturities. But it'll take a while to run through.

339
00:16:44,160 --> 00:16:47,360
Speaker 9: To give you a sense, something like twenty percent of

340
00:16:47,400 --> 00:16:50,440
Speaker 9: the portfolio matures any given year, so this will be

341
00:16:50,480 --> 00:16:52,480
Speaker 9: you know, on average, it'll take five years to really

342
00:16:52,520 --> 00:16:54,440
Speaker 9: roll through. So I think that's a kind of an

343
00:16:54,440 --> 00:16:57,040
Speaker 9: industry dynamic we're seeing, which this is a dynamic that

344
00:16:57,080 --> 00:16:58,480
Speaker 9: will play out over quite sometime.

345
00:16:59,240 --> 00:17:01,760
Speaker 4: What part of this is encompasses any kind of m

346
00:17:01,800 --> 00:17:04,400
Speaker 4: and as is organic yees.

347
00:17:04,480 --> 00:17:07,560
Speaker 9: You know, for us we're focused on organic growth m

348
00:17:07,600 --> 00:17:10,520
Speaker 9: and A. It can be a tool for banks to grow.

349
00:17:10,600 --> 00:17:12,879
Speaker 9: Certainly we've seen m and A in the industry over time.

350
00:17:13,200 --> 00:17:16,080
Speaker 9: With that being said, it can also be distracting to

351
00:17:16,240 --> 00:17:19,160
Speaker 9: the progress that the company is making on organic growth.

352
00:17:19,200 --> 00:17:22,600
Speaker 9: And for US Alex, we're seeing so much progress on

353
00:17:22,640 --> 00:17:27,760
Speaker 9: our organic growth initiatives, both acquiring customers but also importantly

354
00:17:28,160 --> 00:17:30,480
Speaker 9: putting more and more focus around the value added fee

355
00:17:30,520 --> 00:17:33,800
Speaker 9: services that come around that come to them, namely payments,

356
00:17:33,840 --> 00:17:36,600
Speaker 9: wealth management, and capital markets, and so, you know, just

357
00:17:36,680 --> 00:17:40,080
Speaker 9: the customer acquisition. We're seeing the success in those businesses.

358
00:17:40,920 --> 00:17:42,720
Speaker 9: That's where our focus is. To give you a sense

359
00:17:42,760 --> 00:17:44,800
Speaker 9: in the fourth quarter just that we just closed a

360
00:17:44,880 --> 00:17:47,280
Speaker 9: ten percent year of year revenue growth, really driven by

361
00:17:47,320 --> 00:17:48,480
Speaker 9: those organic strategies.

362
00:17:49,040 --> 00:17:51,440
Speaker 8: What's a typical corporate customer for you guys?

363
00:17:51,800 --> 00:17:55,879
Speaker 9: You know, often, Paul, they are middle market companies that

364
00:17:55,960 --> 00:17:56,600
Speaker 9: are private.

365
00:17:56,880 --> 00:17:59,200
Speaker 10: That's the most typical company.

366
00:17:59,040 --> 00:17:59,240
Speaker 6: You know.

367
00:18:00,040 --> 00:18:03,360
Speaker 9: You know, the regional banks serve a really important niche

368
00:18:03,359 --> 00:18:06,280
Speaker 9: within the overall US economy because you know, the client

369
00:18:06,359 --> 00:18:10,440
Speaker 9: set that we are servicing are typically you know, focused

370
00:18:10,480 --> 00:18:11,520
Speaker 9: on their local market.

371
00:18:11,560 --> 00:18:13,520
Speaker 10: They want a bank with a company that.

372
00:18:13,520 --> 00:18:17,639
Speaker 9: Is deeply embedded in the community and knows them personally.

373
00:18:17,920 --> 00:18:21,080
Speaker 9: But importantly can bring down to them the power of

374
00:18:21,119 --> 00:18:24,840
Speaker 9: a large bank in terms of specialized capabilities. It's actually

375
00:18:25,119 --> 00:18:27,000
Speaker 9: one of the reasons why we've been so successful in

376
00:18:27,000 --> 00:18:28,320
Speaker 9: these new geographic launches.

377
00:18:29,760 --> 00:18:30,760
Speaker 10: How about private credit?

378
00:18:30,800 --> 00:18:32,840
Speaker 2: Is that a competitor to you?

379
00:18:32,840 --> 00:18:34,600
Speaker 9: You know, it's funny we get this question all the time,

380
00:18:34,880 --> 00:18:36,920
Speaker 9: and the answer generally is no, okay.

381
00:18:37,200 --> 00:18:38,840
Speaker 10: You know, private credit.

382
00:18:38,920 --> 00:18:42,320
Speaker 9: Is looking for the sort of you know, the kind

383
00:18:42,359 --> 00:18:45,639
Speaker 9: of loans that they finance are typically where there's more leverage,

384
00:18:45,920 --> 00:18:48,720
Speaker 9: where there's more yield to be had. Because of the risk,

385
00:18:49,080 --> 00:18:52,240
Speaker 9: that's not the core client for Huntington, and so our

386
00:18:52,440 --> 00:18:55,280
Speaker 9: head of Commercial Business mentioned that only in two cases

387
00:18:55,359 --> 00:18:58,480
Speaker 9: last year across our entire business did we see commercial

388
00:18:58,520 --> 00:19:01,480
Speaker 9: borrowers actually go to a price a credit facility away

389
00:19:01,480 --> 00:19:03,160
Speaker 9: from our own lending facility.

390
00:19:03,600 --> 00:19:06,560
Speaker 3: Art thanks to Zach Wasserman, chief financial officer at Huntington

391
00:19:06,680 --> 00:19:07,280
Speaker 3: National Bank.

392
00:19:07,520 --> 00:19:09,960
Speaker 4: I'm staying in finance. This week, Canada's TD Banks that

393
00:19:10,000 --> 00:19:12,399
Speaker 4: it's offloading its entire ten point one percent stake in

394
00:19:12,440 --> 00:19:14,720
Speaker 4: the financial services firm Charles Schwab.

395
00:19:14,520 --> 00:19:17,280
Speaker 3: And this comes as part of a corporate overhaul. In October,

396
00:19:17,280 --> 00:19:19,560
Speaker 3: TD Bank reached the settlement with the US Department of

397
00:19:19,680 --> 00:19:22,400
Speaker 3: Justice and bank regulators over its failure to catch money

398
00:19:22,440 --> 00:19:24,560
Speaker 3: laundering at several American branches.

399
00:19:24,760 --> 00:19:26,920
Speaker 4: For Moura and Nora and I were joined by Paul Goldberg,

400
00:19:26,920 --> 00:19:28,840
Speaker 4: Bloomberg Intelligence senior equity analyst.

401
00:19:29,040 --> 00:19:31,480
Speaker 3: We first asked Paul why TD Bank would offload it's

402
00:19:31,480 --> 00:19:32,880
Speaker 3: full stake in Charles Schwab.

403
00:19:33,240 --> 00:19:36,120
Speaker 11: I don't think it's necessarily strategic Cox. I think it's

404
00:19:36,520 --> 00:19:39,960
Speaker 11: partially to simplify the business. Also, TD got hit with

405
00:19:40,119 --> 00:19:45,240
Speaker 11: AML investigation and was fine, then got an asset cap

406
00:19:45,280 --> 00:19:47,480
Speaker 11: in the US, so they can really grow in the

407
00:19:47,600 --> 00:19:51,840
Speaker 11: US much larger on the bank inside. Sounds like they

408
00:19:51,920 --> 00:19:54,400
Speaker 11: trying to simplify the business, having the ability to buy

409
00:19:54,400 --> 00:19:57,400
Speaker 11: back some stock, have some extra capital in handhand.

410
00:19:58,240 --> 00:20:00,920
Speaker 3: Where does TD's business currently if you were to give

411
00:20:00,960 --> 00:20:04,480
Speaker 3: us a broader perspective, how is it lining up against competitors?

412
00:20:04,920 --> 00:20:06,719
Speaker 11: Well, I think that you have to look at it

413
00:20:06,760 --> 00:20:09,760
Speaker 11: in two different areas. One in Canada. So in Canada

414
00:20:09,800 --> 00:20:12,080
Speaker 11: with the one of the largest banks across personal and

415
00:20:12,080 --> 00:20:15,240
Speaker 11: commercial banking. In the US, they again one of the

416
00:20:15,320 --> 00:20:19,200
Speaker 11: largest banks, but they very much personally focused all over

417
00:20:19,240 --> 00:20:20,879
Speaker 11: the east coast of the US.

418
00:20:21,320 --> 00:20:23,000
Speaker 4: So what is going to take for them to get

419
00:20:23,000 --> 00:20:24,639
Speaker 4: their asset cap raised in the US.

420
00:20:25,600 --> 00:20:27,120
Speaker 11: I think it'll take a long time.

421
00:20:27,560 --> 00:20:30,200
Speaker 4: But what's the problem that the FED highlighted, Well.

422
00:20:30,119 --> 00:20:33,200
Speaker 11: The FEED highlighted is they mL deficiencies which they trying

423
00:20:33,240 --> 00:20:35,000
Speaker 11: to fix. It costs them a lot of money they

424
00:20:35,080 --> 00:20:38,080
Speaker 11: invested in it, but it can take years. So if

425
00:20:38,119 --> 00:20:41,560
Speaker 11: we'll look at what's happening to Wells farga we're in

426
00:20:41,640 --> 00:20:43,840
Speaker 11: eight years and they're still trying to get out from

427
00:20:43,880 --> 00:20:44,080
Speaker 11: under that.

428
00:20:44,200 --> 00:20:46,000
Speaker 4: Yeah, and it always seems like nebulous. It's like we

429
00:20:46,040 --> 00:20:47,720
Speaker 4: have an asset cap, but it's not like you check

430
00:20:47,760 --> 00:20:49,679
Speaker 4: these three boxes and it's gone. It's sort of like,

431
00:20:49,760 --> 00:20:51,840
Speaker 4: at least for Wells Fargo, because it's like risk management.

432
00:20:51,840 --> 00:20:54,119
Speaker 4: It's controls that's making sure that you know everyone's on

433
00:20:54,160 --> 00:20:55,920
Speaker 4: board doing the right thing at the right time, which

434
00:20:55,920 --> 00:20:56,919
Speaker 4: can be very difficult.

435
00:20:57,080 --> 00:20:59,000
Speaker 3: What do you take away from this idea of the

436
00:20:59,040 --> 00:21:01,560
Speaker 3: repurchasing of its for.

437
00:21:01,440 --> 00:21:05,280
Speaker 11: TD or for swap. They both do so for TD.

438
00:21:05,400 --> 00:21:07,840
Speaker 11: I think they repurchasing on the fraction of that. So

439
00:21:07,960 --> 00:21:10,480
Speaker 11: they's take in Canadian dollars is about twenty billions. That

440
00:21:10,560 --> 00:21:14,480
Speaker 11: fourteen billion they repurchasing only eight So the impact on

441
00:21:14,600 --> 00:21:17,760
Speaker 11: TV shares from this sale of from the sale of

442
00:21:17,800 --> 00:21:20,120
Speaker 11: Schwap shares is about seven percent of the earnings. They're

443
00:21:20,160 --> 00:21:23,120
Speaker 11: going to repurchase back six so mostly neutralize that kind

444
00:21:23,160 --> 00:21:26,520
Speaker 11: of impact. The rest is going to add a whole

445
00:21:26,560 --> 00:21:29,240
Speaker 11: point of capital to them so that they can be

446
00:21:29,280 --> 00:21:31,800
Speaker 11: invested in other sides of the business. But because they

447
00:21:31,920 --> 00:21:34,720
Speaker 11: kept in the US, which makes it very challenging because

448
00:21:34,720 --> 00:21:37,520
Speaker 11: they have they'll have to figure ways to invest adding

449
00:21:37,600 --> 00:21:42,719
Speaker 11: to capital markets, which they're doing right now, or domestically Schwab.

450
00:21:42,760 --> 00:21:46,080
Speaker 11: They only bind one percent of the ten percent stake

451
00:21:46,160 --> 00:21:51,120
Speaker 11: that's being sold, but TD is still keeping the depository relationships,

452
00:21:51,160 --> 00:21:53,920
Speaker 11: so I think it's strategic more on the TD's side

453
00:21:54,000 --> 00:21:56,439
Speaker 11: rather than having any impact on Schwap side.

454
00:21:56,600 --> 00:21:58,840
Speaker 3: Is this bad news for the Swap side of things?

455
00:21:58,920 --> 00:22:01,040
Speaker 11: I don't think, so that's what I'm saying. It's a

456
00:22:01,080 --> 00:22:04,480
Speaker 11: strategic decision on t D side to simplify their business.

457
00:22:04,840 --> 00:22:08,280
Speaker 11: They're still keeping the deposits relationship, which clearly says that

458
00:22:08,280 --> 00:22:11,679
Speaker 11: they're working well with Schwab and the TD is going

459
00:22:11,680 --> 00:22:13,640
Speaker 11: to put a decent gain on sale and this kind

460
00:22:13,640 --> 00:22:15,879
Speaker 11: of thing. So I think that's nothing wrong with the

461
00:22:15,880 --> 00:22:18,119
Speaker 11: schwab its, just big stake of the company's going up

462
00:22:18,119 --> 00:22:19,320
Speaker 11: in the open market, right.

463
00:22:19,880 --> 00:22:24,000
Speaker 4: Totally switching to TD and their actual Canadian business. How

464
00:22:24,000 --> 00:22:24,720
Speaker 4: are they doing there?

465
00:22:25,160 --> 00:22:29,240
Speaker 11: They're doing pretty well, right, So the second largest bank domestically,

466
00:22:30,200 --> 00:22:35,080
Speaker 11: right after the RBC. They've been very consistent right on

467
00:22:35,119 --> 00:22:39,439
Speaker 11: the mortgage side, on their commercial operations and everywhere, so

468
00:22:40,040 --> 00:22:42,480
Speaker 11: they've been doing well. But it's an extremely competitive market.

469
00:22:42,480 --> 00:22:44,399
Speaker 11: That's why the concern is that they're going to have

470
00:22:44,480 --> 00:22:47,080
Speaker 11: this all extra capital that they're going to try to

471
00:22:47,160 --> 00:22:49,880
Speaker 11: invest domestically into a super competitive.

472
00:22:49,320 --> 00:22:52,800
Speaker 3: Market and breakdown in Canada. There's fewer banks than we

473
00:22:52,840 --> 00:22:55,160
Speaker 3: have a million over here, so like, how do they

474
00:22:55,200 --> 00:22:59,320
Speaker 3: shake up in terms of their competition in Canada? How

475
00:22:59,320 --> 00:23:00,720
Speaker 3: do they line up the well.

476
00:23:00,600 --> 00:23:03,399
Speaker 11: Their competition there are six largest banks, or some people

477
00:23:03,440 --> 00:23:05,600
Speaker 11: call it five plus one because National Bank is a

478
00:23:05,640 --> 00:23:08,680
Speaker 11: little bit smaller, even though they just finalize in the

479
00:23:09,280 --> 00:23:12,040
Speaker 11: closure of Canadian Western Bank, that's going to expand them

480
00:23:12,040 --> 00:23:16,240
Speaker 11: a little bit. But some people describe that market as

481
00:23:16,240 --> 00:23:19,200
Speaker 11: a competitive monopoly between these banks. So there's some smaller

482
00:23:19,200 --> 00:23:22,640
Speaker 11: banks and credit unions, but these banks control ninety plus

483
00:23:22,720 --> 00:23:25,920
Speaker 11: percent of deposits and loans in the country, so very

484
00:23:26,119 --> 00:23:31,399
Speaker 11: very concentrated, and they compete very aggressively against everything, so

485
00:23:31,440 --> 00:23:34,359
Speaker 11: the market shares when you see them shift. We're talking

486
00:23:34,359 --> 00:23:37,080
Speaker 11: about basis points here and there from period to period.

487
00:23:37,240 --> 00:23:39,600
Speaker 4: All right, thanks to Paul Goldberg, Bloomberg Intelligence and your

488
00:23:39,640 --> 00:23:40,920
Speaker 4: equity analyst, you're.

489
00:23:40,760 --> 00:23:43,760
Speaker 3: Listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth

490
00:23:43,760 --> 00:23:46,680
Speaker 3: research and data on two thousand companies and one hundred

491
00:23:46,720 --> 00:23:49,639
Speaker 3: and thirty industries. You can access Bloomberg Intelligence via b

492
00:23:49,800 --> 00:23:52,359
Speaker 3: I go on the terminal. I'm normal ind and I'm

493
00:23:52,400 --> 00:23:53,240
Speaker 3: Alex Steele, and.

494
00:23:53,200 --> 00:23:54,280
Speaker 4: This is Bloomberg.

495
00:24:01,240 --> 00:24:04,800
Speaker 1: You were listening to the Bloomberg Intelligence podcast. Catch the

496
00:24:04,840 --> 00:24:08,159
Speaker 1: program live weekdays at ten am Eastern on Apple car

497
00:24:08,280 --> 00:24:11,240
Speaker 1: Play and Android Auto with the Bloomberg Business app. You

498
00:24:11,280 --> 00:24:14,480
Speaker 1: can also listen live on Amazon Alexa from our flagship

499
00:24:14,520 --> 00:24:18,159
Speaker 1: New York station, Just Say Alexa played Bloomberg eleven thirty.

500
00:24:19,119 --> 00:24:21,560
Speaker 3: I'm Alex Steele and I'm normal Linda filling in for

501
00:24:21,600 --> 00:24:24,040
Speaker 3: Paul Sweeney. We move now to earnings from the fast

502
00:24:24,080 --> 00:24:27,240
Speaker 3: food giant McDonald's. This week, McDonald's reported that its sales

503
00:24:27,320 --> 00:24:29,560
Speaker 3: rose in the fourth quarter, and this comes after growth

504
00:24:29,560 --> 00:24:32,160
Speaker 3: in the chains international business made up for a decline

505
00:24:32,240 --> 00:24:32,879
Speaker 3: in the US.

506
00:24:33,000 --> 00:24:35,360
Speaker 4: For Maura Nora and I were dorma Michael hallon Bloomberg

507
00:24:35,359 --> 00:24:37,960
Speaker 4: Intelligence and your Restaurant and food service Analyst, and we

508
00:24:38,000 --> 00:24:40,680
Speaker 4: first asked Michael for his broad read on these latest results.

509
00:24:41,200 --> 00:24:43,760
Speaker 12: You know, the most important piece of the report really

510
00:24:43,840 --> 00:24:47,920
Speaker 12: is the US recovery post e Coli, and we got

511
00:24:47,920 --> 00:24:50,640
Speaker 12: some good news on that front. So traffic was actually

512
00:24:50,720 --> 00:24:53,520
Speaker 12: positive in December, so I think that was much better

513
00:24:53,520 --> 00:24:57,520
Speaker 12: than anyone had expected. They cited kind of a choppy

514
00:24:57,680 --> 00:25:02,840
Speaker 12: January here, but the only the only region still impacted

515
00:25:02,840 --> 00:25:05,360
Speaker 12: by ECOLI seems to be the Rocky Mountain region where

516
00:25:05,400 --> 00:25:08,280
Speaker 12: the outbreak occurred, and they expect a full US recovery

517
00:25:08,320 --> 00:25:11,000
Speaker 12: by the beginning of the second quarter, which is good news.

518
00:25:11,440 --> 00:25:13,840
Speaker 4: What about the rest of the world versus the US,

519
00:25:14,040 --> 00:25:16,240
Speaker 4: It was the rest of the world that really performed well.

520
00:25:16,320 --> 00:25:19,720
Speaker 12: Yeah, yeah, And a big part of that was just

521
00:25:19,960 --> 00:25:23,879
Speaker 12: lapping like pretty weak year ago results, right, so we

522
00:25:23,920 --> 00:25:26,680
Speaker 12: wrapped the start of the of the Israel Hamas war,

523
00:25:26,800 --> 00:25:29,760
Speaker 12: and so the Middle East was stronger. Countries with large

524
00:25:30,200 --> 00:25:34,480
Speaker 12: Muslim populations were also stronger. And then also China lapped

525
00:25:34,480 --> 00:25:37,239
Speaker 12: a very weak result last year, and management cited some

526
00:25:37,280 --> 00:25:41,119
Speaker 12: stabilization in that market, which is encouraging for them. So

527
00:25:41,960 --> 00:25:46,240
Speaker 12: the easy comps was what really fueled international sales. You know,

528
00:25:46,480 --> 00:25:49,200
Speaker 12: we're kind of more bullish on the US moving forward

529
00:25:49,760 --> 00:25:53,120
Speaker 12: than international, you know, because outside of the Middle East,

530
00:25:53,119 --> 00:25:55,880
Speaker 12: in China, Europe is we think is going to continue

531
00:25:55,880 --> 00:25:58,919
Speaker 12: to kind of be an issue for them. The Arizona

532
00:25:59,160 --> 00:26:02,919
Speaker 12: is experienced it's seeing much higher inflation than the US

533
00:26:03,080 --> 00:26:07,639
Speaker 12: and that's really crimping low income and family spending on

534
00:26:07,680 --> 00:26:08,280
Speaker 12: the continent.

535
00:26:08,600 --> 00:26:10,000
Speaker 3: Are people still buying the Big Mac.

536
00:26:11,520 --> 00:26:14,159
Speaker 12: They don't break out Big Mac sales, but they cited

537
00:26:14,200 --> 00:26:17,119
Speaker 12: pretty strong results out of the Chicken Big Mac, which

538
00:26:17,800 --> 00:26:20,359
Speaker 12: I was kind of surprised about. You know, my associate

539
00:26:20,440 --> 00:26:24,200
Speaker 12: tried it, he was not a big fan. But but yeah,

540
00:26:24,280 --> 00:26:26,680
Speaker 12: they cited, you know, pretty strong results out of the

541
00:26:26,760 --> 00:26:29,200
Speaker 12: Chicken Big Mac in the United States and other markets.

542
00:26:29,560 --> 00:26:33,320
Speaker 12: I think France was who they called out specifically and

543
00:26:33,480 --> 00:26:36,199
Speaker 12: to the point where they're going to continue to you know,

544
00:26:36,880 --> 00:26:38,840
Speaker 12: bring it back as a limited time offerre.

545
00:26:38,600 --> 00:26:39,159
Speaker 10: In the future.

546
00:26:39,480 --> 00:26:42,280
Speaker 4: So I was actually talking to an ib user, a

547
00:26:42,320 --> 00:26:48,040
Speaker 4: Bloomberg user about this. Why are McDonald's franchises elsewhere like

548
00:26:48,080 --> 00:26:50,040
Speaker 4: at rest of world so much better than in the

549
00:26:50,119 --> 00:26:53,000
Speaker 4: US and that like you can get like super good

550
00:26:53,000 --> 00:26:55,800
Speaker 4: food that doesn't taste like fast food. Why is that?

551
00:26:56,920 --> 00:26:59,159
Speaker 12: Yeah, Jonathan Farrowe asked me the same thing, said he

552
00:26:59,200 --> 00:27:02,199
Speaker 12: wants them all to be like the you know McDonald's

553
00:27:02,200 --> 00:27:04,720
Speaker 12: in Italy, you know. And the answer I had there

554
00:27:04,880 --> 00:27:10,120
Speaker 12: was just more discerning tastes, right, that.

555
00:27:10,119 --> 00:27:12,080
Speaker 4: Might be it, No, but really, like is it? I mean,

556
00:27:12,520 --> 00:27:14,480
Speaker 4: does it affect margins? Like what are the margins like

557
00:27:14,480 --> 00:27:15,960
Speaker 4: in the US versus the rest of the world.

558
00:27:17,040 --> 00:27:19,760
Speaker 12: We don't We don't have that information, you know what

559
00:27:19,800 --> 00:27:22,920
Speaker 12: I mean. It's a franchise business, right, so.

560
00:27:25,200 --> 00:27:26,119
Speaker 6: You know what I mean.

561
00:27:26,240 --> 00:27:28,679
Speaker 12: So, so we don't have a ton of color on

562
00:27:28,840 --> 00:27:32,720
Speaker 12: all the different franchise markets and what kind of margins

563
00:27:32,720 --> 00:27:37,120
Speaker 12: they pull in. You know, the US generally is a

564
00:27:37,160 --> 00:27:42,119
Speaker 12: lower margin for the franchise business, just because they have

565
00:27:42,680 --> 00:27:46,000
Speaker 12: a lot more franchisees and need a lot more oversight.

566
00:27:47,040 --> 00:27:52,320
Speaker 12: The international franchise business tends to generate wider margins.

567
00:27:52,720 --> 00:27:54,600
Speaker 3: So I always used to think about McDonald's is a

568
00:27:54,600 --> 00:27:58,520
Speaker 3: really cheap place, a discount fast food place, but prices

569
00:27:58,520 --> 00:28:01,399
Speaker 3: are getting higher. Are we still seems demand from lower

570
00:28:01,440 --> 00:28:04,240
Speaker 3: income consumers for the brand.

571
00:28:04,640 --> 00:28:07,640
Speaker 12: You know, it continues to be the weak spot at

572
00:28:07,720 --> 00:28:10,320
Speaker 12: McDonald's and for anyone that has a lot of exposure

573
00:28:10,320 --> 00:28:13,159
Speaker 12: to low income consumers. So the entire QSR space, right,

574
00:28:13,240 --> 00:28:17,080
Speaker 12: Jack in the Box, Wendy's, Burger King. You know, a

575
00:28:17,119 --> 00:28:19,840
Speaker 12: lot a lot of chains, you know, struggled last year

576
00:28:19,840 --> 00:28:23,199
Speaker 12: because of their inability to draw low income consumers. You know,

577
00:28:23,480 --> 00:28:25,520
Speaker 12: they're impacted most by inflation.

578
00:28:25,720 --> 00:28:25,920
Speaker 2: Right.

579
00:28:25,960 --> 00:28:29,040
Speaker 10: We've had four plus years.

580
00:28:28,800 --> 00:28:33,200
Speaker 12: Of restaurant price hikes and higher costs across the board, right,

581
00:28:33,240 --> 00:28:37,239
Speaker 12: and so you know, chains that are exposed to low

582
00:28:37,280 --> 00:28:39,680
Speaker 12: income consumers are going to continue to press on value

583
00:28:39,720 --> 00:28:42,640
Speaker 12: to try to bring them into the fold. You know,

584
00:28:43,000 --> 00:28:47,120
Speaker 12: it seemed like it didn't seem like restaurants sales did

585
00:28:47,160 --> 00:28:49,520
Speaker 12: improve for a quick service in the fourth quarter, and

586
00:28:49,600 --> 00:28:51,280
Speaker 12: we think a big part of that is just a

587
00:28:51,320 --> 00:28:53,560
Speaker 12: re establishing of their value proposition.

588
00:28:53,720 --> 00:28:53,960
Speaker 2: Right.

589
00:28:54,160 --> 00:28:56,760
Speaker 12: McDonald's early last year got a lot of shade about

590
00:28:56,760 --> 00:29:00,480
Speaker 12: the eighteen dollars big Mac meal in Connecticut, and so

591
00:29:00,520 --> 00:29:03,680
Speaker 12: they decided to push hard on value, and prior to

592
00:29:03,680 --> 00:29:06,320
Speaker 12: the E Coli outbreak, you know, October.

593
00:29:05,840 --> 00:29:07,160
Speaker 10: Had some really good results.

594
00:29:07,200 --> 00:29:09,960
Speaker 12: They were drawing customers in with that five dollars meal

595
00:29:10,040 --> 00:29:14,640
Speaker 12: deal and traffic was positive for the first time during

596
00:29:14,680 --> 00:29:17,920
Speaker 12: the year. So value pushing on value has been successful

597
00:29:18,200 --> 00:29:22,120
Speaker 12: for McDonald's. That's not good for their competitors because McDonald's

598
00:29:22,120 --> 00:29:24,840
Speaker 12: has the most scale, right, But we think this is

599
00:29:24,880 --> 00:29:27,240
Speaker 12: going to continue throughout twenty twenty five in the quick

600
00:29:27,280 --> 00:29:28,040
Speaker 12: service industry.

601
00:29:28,200 --> 00:29:30,120
Speaker 3: So just to confirm, you're saying there was a meal

602
00:29:30,160 --> 00:29:31,640
Speaker 3: that came up to eighteen dollars.

603
00:29:31,720 --> 00:29:33,920
Speaker 4: She totally missed this. She totally missed this one.

604
00:29:34,200 --> 00:29:34,560
Speaker 10: Yeah.

605
00:29:34,680 --> 00:29:44,000
Speaker 12: Yeah, it was one franchisee in Connecticut. No comment, No,

606
00:29:44,040 --> 00:29:46,640
Speaker 12: fair enough, fair enough. But he was he was pushing

607
00:29:46,720 --> 00:29:49,200
Speaker 12: back because he, you know, he was dealing with a

608
00:29:49,200 --> 00:29:52,000
Speaker 12: lot of inflation and he was just, you know, he

609
00:29:52,320 --> 00:29:54,200
Speaker 12: wanted to make some money on the big McNeal. He

610
00:29:54,240 --> 00:29:55,320
Speaker 12: was trying to make a point.

611
00:29:55,560 --> 00:29:58,440
Speaker 3: Our thanks to Michael Halen, Bloomberg Intelligence senior Restaurant and

612
00:29:58,480 --> 00:29:59,720
Speaker 3: food service analysts.

613
00:30:00,000 --> 00:30:02,560
Speaker 4: Each week we look at research from Bloomberg n EF

614
00:30:02,680 --> 00:30:05,320
Speaker 4: previously known as New Energy Finance. They're the team at

615
00:30:05,320 --> 00:30:08,640
Speaker 4: Bloomberg that tracks and analyzes the energy transition from commodities

616
00:30:08,680 --> 00:30:11,880
Speaker 4: to power, transport, industries, buildings, and agricultural sectors.

617
00:30:12,080 --> 00:30:14,120
Speaker 3: This week we looked at the energy sector and how

618
00:30:14,120 --> 00:30:17,280
Speaker 3: it's being impacted by Donald Trump's presidency in the United States.

619
00:30:17,480 --> 00:30:20,160
Speaker 3: For more, Alex and I were joined by Derek Fletgall

620
00:30:20,520 --> 00:30:22,760
Speaker 3: b Any F lead US policy analysts.

621
00:30:22,800 --> 00:30:25,000
Speaker 4: We first asked Derek, where we stand today with the

622
00:30:25,120 --> 00:30:25,920
Speaker 4: energy transition.

623
00:30:26,400 --> 00:30:29,280
Speaker 13: Where we stand today is at a point of uncertainty

624
00:30:29,280 --> 00:30:33,080
Speaker 13: and early consolidation. At this point, we've heard a variety

625
00:30:33,120 --> 00:30:36,920
Speaker 13: of conflicting reports about the release or lack thereof, of

626
00:30:37,080 --> 00:30:40,400
Speaker 13: obligated federal funding for climate grants. We've heard reports that

627
00:30:40,480 --> 00:30:43,440
Speaker 13: EPA has released some others that are implicated by some

628
00:30:43,520 --> 00:30:46,960
Speaker 13: of the presidents DEI related orders, anything with an environmental

629
00:30:47,080 --> 00:30:51,080
Speaker 13: justice or a community benefits component have been more affected.

630
00:30:51,880 --> 00:30:55,160
Speaker 13: And meanwhile, at the executive level, we've seen some people

631
00:30:55,160 --> 00:30:57,960
Speaker 13: at Brook Rawlins the USDA, Doug Bergham at the Department

632
00:30:57,960 --> 00:31:00,480
Speaker 13: of Interior, and Chris Wright at the Department of Energy

633
00:31:00,680 --> 00:31:03,680
Speaker 13: get into place and put forward their formal priorities. So,

634
00:31:03,880 --> 00:31:08,320
Speaker 13: with that early staffing up in place and continued uncertainty

635
00:31:08,640 --> 00:31:11,400
Speaker 13: about the release of funds, we are kind of looking

636
00:31:11,480 --> 00:31:13,760
Speaker 13: at a wait and see period, seeing how things shake

637
00:31:13,800 --> 00:31:15,960
Speaker 13: out in the courts and in the executive branch itself.

638
00:31:16,400 --> 00:31:19,080
Speaker 3: Well, it definitely has been a massive makeover that Trump

639
00:31:19,160 --> 00:31:21,080
Speaker 3: has been planning to do and it is continuing to

640
00:31:21,120 --> 00:31:23,960
Speaker 3: do right now in terms of federal agencies. But are

641
00:31:24,040 --> 00:31:26,440
Speaker 3: there any areas in particular that you're keeping an eye on.

642
00:31:26,520 --> 00:31:28,520
Speaker 3: I know that there's things going on in terms of

643
00:31:28,800 --> 00:31:32,520
Speaker 3: EV charging funding right absolutely.

644
00:31:32,880 --> 00:31:36,200
Speaker 13: I mean sectors that were specifically named in Trump's executive orders,

645
00:31:36,200 --> 00:31:38,960
Speaker 13: oil and gas. They're supposed to be four momentum on that,

646
00:31:39,240 --> 00:31:42,360
Speaker 13: as well as electric vehicles and electricfical charging and offshor win.

647
00:31:42,440 --> 00:31:47,600
Speaker 13: In particular, EV charging saw a pause on existing dispersements

648
00:31:47,600 --> 00:31:50,400
Speaker 13: of funds from the National Electric Vehicle Infrastructure Program. That's

649
00:31:50,400 --> 00:31:52,800
Speaker 13: about five billion dollars if I recall correctly from the

650
00:31:52,880 --> 00:31:55,840
Speaker 13: Infrastructure Investment and Jobs Act, what about one billion dollars

651
00:31:55,840 --> 00:31:59,400
Speaker 13: if that had been allocated, So it's clearly a disruption

652
00:31:59,520 --> 00:32:02,040
Speaker 13: to those on going disbursements. Keep in mind that there's

653
00:32:02,080 --> 00:32:04,880
Speaker 13: also something called the Charging and Fueling Infrastructure Program, which

654
00:32:05,000 --> 00:32:08,560
Speaker 13: was not as directly targeted by that, that's obligated rather

655
00:32:08,680 --> 00:32:12,440
Speaker 13: more funding. So there's still some full momentum so far

656
00:32:13,000 --> 00:32:16,640
Speaker 13: to the EV charging sector. But what this does is

657
00:32:16,920 --> 00:32:19,320
Speaker 13: throw a bit more sand in the gears that continued

658
00:32:19,360 --> 00:32:20,040
Speaker 13: forward movement.

659
00:32:20,520 --> 00:32:24,120
Speaker 4: Do we know what the Republican's energy plan consists of,

660
00:32:24,320 --> 00:32:27,400
Speaker 4: versus just rolling back certain things, like I know, we

661
00:32:27,480 --> 00:32:30,280
Speaker 4: know that it's energy independence and we want more oil, Like,

662
00:32:30,320 --> 00:32:34,520
Speaker 4: I get that. But in terms of dismantling Democrat policies

663
00:32:34,640 --> 00:32:36,960
Speaker 4: versus their own support for different.

664
00:32:36,640 --> 00:32:39,840
Speaker 13: Industries, I don't think we do. And there's two different

665
00:32:39,840 --> 00:32:43,880
Speaker 13: reasons for that. Firstly, on the executive side, my sense

666
00:32:44,000 --> 00:32:46,000
Speaker 13: is that they are reviewing and looking to see which

667
00:32:46,040 --> 00:32:49,600
Speaker 13: aspects of existing policies are worth keeping in place for

668
00:32:49,680 --> 00:32:53,640
Speaker 13: goals like national security, energy independence, and so forth. Certainly,

669
00:32:53,680 --> 00:32:57,920
Speaker 13: we've seen emphasis that subsidies for nuclear critical minerals manufacturing

670
00:32:57,960 --> 00:33:01,440
Speaker 13: those should continue, and to the degree that renewables can

671
00:33:01,480 --> 00:33:04,040
Speaker 13: help meet new load for new factories for data centers

672
00:33:04,320 --> 00:33:07,320
Speaker 13: that might also be somewhat protected. We've seen these reversals

673
00:33:07,400 --> 00:33:10,120
Speaker 13: quite rapidly, even in the renewables permitting space. For example,

674
00:33:10,120 --> 00:33:13,400
Speaker 13: within the same day our colleagues at Bloomberg News reported

675
00:33:13,440 --> 00:33:16,920
Speaker 13: that federal permitting was paused and then unpaused by the

676
00:33:17,000 --> 00:33:20,280
Speaker 13: US Army Corps of Engineers. That's just the federal side,

677
00:33:20,600 --> 00:33:23,840
Speaker 13: executive side. On the legislative side, we are still waiting

678
00:33:23,880 --> 00:33:26,520
Speaker 13: for the Senate and the House to come together on

679
00:33:26,520 --> 00:33:31,880
Speaker 13: one core plan for the big tax and reconciliation bill

680
00:33:31,960 --> 00:33:33,840
Speaker 13: that's going to come later this year. They need to

681
00:33:33,840 --> 00:33:35,760
Speaker 13: find a lot of pay force to extend Trump's tax

682
00:33:35,760 --> 00:33:38,560
Speaker 13: cuts from twenty seventeen. And other than being sure they

683
00:33:38,680 --> 00:33:41,160
Speaker 13: want to sell more oil and gas leases and cut

684
00:33:41,160 --> 00:33:45,520
Speaker 13: back taxes on methane, they're not really consolidated around one

685
00:33:45,520 --> 00:33:47,800
Speaker 13: common plan of movement. The House wants to do one

686
00:33:47,840 --> 00:33:50,000
Speaker 13: big beautiful bill. The Senate wants to have an early

687
00:33:50,080 --> 00:33:52,560
Speaker 13: energy measure, And of course, the earlier you move on

688
00:33:52,640 --> 00:33:55,720
Speaker 13: some of these big unifying factors like the border or

689
00:33:56,760 --> 00:34:00,680
Speaker 13: increasing supplies of fossil fuel energy, the harder it will

690
00:34:00,720 --> 00:34:05,240
Speaker 13: be to have consensus on doing some other, maybe more

691
00:34:05,280 --> 00:34:09,000
Speaker 13: controversial things like pulling back clean energy subsidies that have

692
00:34:09,040 --> 00:34:12,840
Speaker 13: mostly benefited Republican districts and states. So we're really waiting

693
00:34:12,880 --> 00:34:15,560
Speaker 13: to see where these negotiations land. And I think the

694
00:34:15,560 --> 00:34:17,839
Speaker 13: more that businesses can continue to engage with the Trump

695
00:34:17,840 --> 00:34:21,080
Speaker 13: administration to make the case with their priorities in Trump's

696
00:34:21,080 --> 00:34:23,920
Speaker 13: own terms, the more we'll see clarity around where this

697
00:34:23,960 --> 00:34:25,040
Speaker 13: administration will land.

698
00:34:25,120 --> 00:34:26,319
Speaker 10: Ultimately, so with a.

699
00:34:26,239 --> 00:34:29,760
Speaker 3: New administration in power, where do things stand with Biden's

700
00:34:29,800 --> 00:34:32,800
Speaker 3: Inflation Reduction Act, particularly tax credits.

701
00:34:33,600 --> 00:34:36,200
Speaker 13: Right, So, the key thing about tax credits is that

702
00:34:36,320 --> 00:34:38,520
Speaker 13: these are a bit more of a complicated instrument than

703
00:34:38,640 --> 00:34:42,560
Speaker 13: simple grants and loans. Right there's legal obligations that are

704
00:34:42,560 --> 00:34:46,399
Speaker 13: associated with those, but there's also a lot of sort

705
00:34:46,400 --> 00:34:48,879
Speaker 13: of intervention points to try and keep that money back

706
00:34:49,480 --> 00:34:53,640
Speaker 13: with taxes. That's a thing that you file to the IRS,

707
00:34:53,680 --> 00:34:57,520
Speaker 13: the IRS eventually gives back to you. And further complicating this,

708
00:34:57,680 --> 00:35:01,080
Speaker 13: the IRA created a sellable tax credit mark. So right

709
00:35:01,160 --> 00:35:05,600
Speaker 13: now there's a lot of businesses that effectively have anticipated

710
00:35:05,640 --> 00:35:08,680
Speaker 13: getting tax credits from the government later and use that

711
00:35:08,760 --> 00:35:11,200
Speaker 13: to sort of set up some transfers with other businesses

712
00:35:11,239 --> 00:35:15,160
Speaker 13: in advance. Everything is kind of moving along before tax

713
00:35:15,239 --> 00:35:18,759
Speaker 13: day comes and before IRS disbursement needs to come back.

714
00:35:19,080 --> 00:35:21,600
Speaker 13: But because of all of that, there's a lot less

715
00:35:21,680 --> 00:35:25,319
Speaker 13: certainty right now about whether tax credits are affected by

716
00:35:25,320 --> 00:35:28,839
Speaker 13: this alleged funding freeze, and of course that it's sort

717
00:35:28,840 --> 00:35:32,799
Speaker 13: of like you know, the roadrunner running off of a

718
00:35:32,840 --> 00:35:35,520
Speaker 13: cliff in a cartoon. As long as you don't look down,

719
00:35:35,640 --> 00:35:37,480
Speaker 13: maybe there's not as much fall as you would expect.

720
00:35:37,600 --> 00:35:41,479
Speaker 13: We're going to see later on what real implications this has. Now,

721
00:35:41,640 --> 00:35:44,040
Speaker 13: from what I've read of legal analysis, it's going to

722
00:35:44,040 --> 00:35:46,560
Speaker 13: be particularly hard to try and hold back tax credit funding,

723
00:35:46,880 --> 00:35:48,920
Speaker 13: even if you know there's a longer wait on that.

724
00:35:49,400 --> 00:35:53,840
Speaker 13: But that level of uncertainty has yet to affect the market.

725
00:35:53,600 --> 00:35:54,560
Speaker 10: To my knowledge.

726
00:35:54,800 --> 00:35:56,120
Speaker 13: Later on though, we'll.

727
00:35:55,920 --> 00:35:59,000
Speaker 3: See our thanks to Derek flake Hall be an eapp

728
00:35:59,160 --> 00:36:00,680
Speaker 3: lead US pol analysts.

729
00:36:01,640 --> 00:36:06,040
Speaker 1: This is a Bloomberg Intelligence podcast, available on Apple, Spotify,

730
00:36:06,160 --> 00:36:09,439
Speaker 1: and anywhere else you get your podcasts. Listen live each

731
00:36:09,480 --> 00:36:12,600
Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,

732
00:36:12,640 --> 00:36:16,040
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.

733
00:36:16,200 --> 00:36:19,120
Speaker 1: You can also watch us live every weekday on YouTube

734
00:36:19,320 --> 00:36:21,160
Speaker 1: and always on the Bloomberg terminal