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Speaker 1: Bloomberg Intelligence with Alex Steinhl and Paul'sweeny.
Speaker 5: On Bloomberg Radio. I'm Paul sween and I'm John Tucker
Speaker 5: filling in for Alex Steele.
Speaker 2: On today's Bloomberg Intellivision show. We dig inside the big
Speaker 2: business stories impacting Wall Street and global markets.
Speaker 5: Each and head. Every week, we provide in depth research
Speaker 5: and data on some of the two thousand companies at
Speaker 5: one hundred and thirty industries our analysts cover worldwide.
Speaker 2: Today, we'll look at why Berkshire Hathaway's cash pile has
Speaker 2: reached a record plus.
Speaker 5: We'll discuss where wind and solar energy storage will be
Speaker 5: within the next decade.
Speaker 2: But first we begin with our top story, the twenty
Speaker 2: twenty four US election. This week, Donald Trump was elected
Speaker 2: the forty seventh President of the United States, reclaiming the
Speaker 2: White House and pulling off a stunning political comeback.
Speaker 5: If heated Vice President Kamala Harris after she replaced an
Speaker 5: unpopular President Joe Biden in the campaign's final months.
Speaker 2: For more on Donald Trump's election, guest host Damian Sasara
Speaker 2: and I were joined by Nathan Dean, Bloomberg Intelligence Senior
Speaker 2: policy analyst. We first asked Nathan how Trump's future presidency
Speaker 2: will impact different industries like banks.
Speaker 6: With the financial services industry, it all came down to
Speaker 6: this rule called the Basel three end game. You know,
Speaker 6: as outlined by the FED. You're talking about a nine
Speaker 6: percent increase for the GESIPS, the Bank America JP Morgan's
Speaker 6: of you will about three to four percent in terms
Speaker 6: of the regional banks. Now, with President Trump winning the
Speaker 6: office of the control of the currency is likely going
Speaker 6: to flip on day one of next year. So this
Speaker 6: rule is effective indefinitely delayed. You know this, you would
Speaker 6: need to FED, the OCC and the FDIC to move forward.
Speaker 6: Now we think at thirty percent chance of it being
Speaker 6: finalized by twenty twenty six. The reason why we're not
Speaker 6: down to zero is because there is potential out there
Speaker 6: that a Republican led regulator may try and move forth
Speaker 6: with it. But the idea is going to be completely different,
Speaker 6: and they're going to essentially start from scratch. So if
Speaker 6: you're talking about capital requirements on a global scale, remember
Speaker 6: the European banks have already implemented their version of this.
Speaker 6: There could be some questions here on if the Americans
Speaker 6: aren't going to do this, why should the Europeans on
Speaker 6: these same sides. So certainly a lot to play here
Speaker 6: in terms of the you know, deregulatory efforts amongst the
Speaker 6: investment banks.
Speaker 7: Nathan Dean, you are the consummate Washington insider. When I
Speaker 7: need to get my what ifs answered about what's happening
Speaker 7: in Washington, I call you. So I have a question here,
Speaker 7: What name should I be looking at more closely than others?
Speaker 7: Bill Lackman, Elon Musk's got Bess and Howard Luckneck. I mean,
Speaker 7: talk to us about what the potential for a Trump
Speaker 7: cabinet may very well look like.
Speaker 6: Yeah, so you know, obviously the big question is you're
Speaker 6: going to get the Wall Street President Trump? Or are
Speaker 6: you going to get a populist President Trump? And that's
Speaker 6: the question that I don't think anybody really has an
Speaker 6: answer to, because you know, for example, at the SEC,
Speaker 6: you know you have Commissioner Hester Purse, who I think
Speaker 6: would be a very popular SEC chair coming from more
Speaker 6: of the conservative wing the populist side of the party.
Speaker 6: But then there's also going to be folks like former
Speaker 6: JA Clayton. You know, obviously his name's been in there
Speaker 6: for a Treasury but you know, somebody like a disciple,
Speaker 6: if you will, a commissioner or chairman Clayton could be
Speaker 6: also a named at the SEC. So the question that
Speaker 6: we have, and we should find out about this more
Speaker 6: over the next few weeks, is are you going to
Speaker 6: get the populist Trump? Are the Wall Street Trump? And
Speaker 6: I think you're probably going to get a combination of
Speaker 6: the both, where if President Trump cares about your issue
Speaker 6: in terms of he specifically wants to be involved, you'll
Speaker 6: get a populist Trump. If it's something where he's happy
Speaker 6: to delegate to other folks in Washington, then I think
Speaker 6: you may get a Wall Street Trump.
Speaker 7: Well ly than it took a long time for Trump
Speaker 7: to pick his cabinet and his players back the first
Speaker 7: time around. Apparently he's much more prepared this time. Talk
Speaker 7: to us about timing around some of those selections. When
Speaker 7: can we expect to hear something there?
Speaker 6: Yeah, so I think you're gonna hear it, probably before
Speaker 6: probably within the next few weeks. I mean to your point,
Speaker 6: you know, they've been talking about this for some time.
Speaker 6: But I would also note that the Republican Senate is
Speaker 6: gonna be able to confirm a lot of President Trump's
Speaker 6: appointees on a much quicker basis than if you were
Speaker 6: to have a Democrat controlled Senate or even a fifty
Speaker 6: or fifty one. Now why do we care about this, Well,
Speaker 6: because the faster that those regulatory leaders come in place,
Speaker 6: the faster they can start these deregulatory efforts. You know,
Speaker 6: a regulatory leader, for the most part, can't just come
Speaker 6: in and say, right, this regulation, we're going to just
Speaker 6: completely roll it back on day one.
Speaker 2: It's gonna take.
Speaker 6: Nine months, twelve months, if not even two years to
Speaker 6: move forth on that effort. So the quicker those regulatory
Speaker 6: leaders come in place, the quicker the de regulatory effort
Speaker 6: can take place.
Speaker 2: Nathan, President elect Trump is se had lame duck president?
Speaker 2: Is that a fair way to look at it?
Speaker 1: Now?
Speaker 6: So generally, and I say this generally, in the second
Speaker 6: term of a presidential term, if you will, I think
Speaker 6: President Obama or President George W. Bush, you usually have
Speaker 6: about eighteen months to expend your political capital. First one
Speaker 6: hundred days of the presidency is critical. But as soon
Speaker 6: as Congress begins to think about their mid term elections
Speaker 6: and then as the result when they come back, you know,
Speaker 6: why should they stick their necks out for the president
Speaker 6: who's going to be gone? So what do presidents tend
Speaker 6: to do. They tend to go internationally, and they tend
Speaker 6: to travel because the power of the presidency is more
Speaker 6: powerful there. So, you know, we do think President Trump
Speaker 6: is going to be spending a lot of time abroad, Ukraine,
Speaker 6: Middle East, for example, China. There's a lot of stuff
Speaker 6: that he can do there. But I wouldn't call him
Speaker 6: a lame duck just yet, because again, the power of
Speaker 6: the presidency is more powerful there.
Speaker 7: You know that China tariffs are coming. You're betting, man,
Speaker 7: what kind of tariff regime do you think we're entering into?
Speaker 7: Is it going to be that ten percent broad is
Speaker 7: it going to be sixty percent on China? What are
Speaker 7: you hearing?
Speaker 6: So this is where I think the process of tariff
Speaker 6: is key. Now, remember, let's just say January twentieth, President
Speaker 6: comes in. You see a red line over the terminal.
Speaker 6: You say, President Trump signs an executive order saying tariffs
Speaker 6: are coming. In the language of that executive order, however,
Speaker 6: I think you'll see language that says the tariff is
Speaker 6: not coming for two hundred and seventy days or three
Speaker 6: hundred and sixty five days. Why, Because tariffs are negotiation tools.
Speaker 6: President Trump doesn't know what the reciprocal tariff on China
Speaker 6: from China would be, and President Trump wants to use
Speaker 6: this as a negotiation. So I think there's going to
Speaker 6: be language in there allowing flexibility. Allowed President Trump to
Speaker 6: come back and say, ah, maybe not sixty percent, maybe
Speaker 6: we'll go to ten percent because China gave us a
Speaker 6: win or something like that. So what we're saying is
Speaker 6: watch out for that headline risk in the first or
Speaker 6: second quarter of next year. But then you're gonna get
Speaker 6: probably six months to actually truly understand what that tariff
Speaker 6: will look like before it goes into fruition.
Speaker 4: All right.
Speaker 5: Thanks to Nathan Dean, Bloomberg Intelligence Senior policy analyst.
Speaker 2: Staying on the US election guest host Damian Sasaur and
Speaker 2: I were joined by Wendy Schuller, professor at Brown University.
Speaker 2: She gave us her take on the twenty twenty four
Speaker 2: US election, along with some of its political ramifications. And
Speaker 2: we first asked Wendy, what happens next for the Democratic
Speaker 2: Party during a Trump presidency?
Speaker 8: Well, you have to ask yourself why.
Speaker 9: You know, popular incumbent senators have been reelected before could
Speaker 9: not withstand the red wave, and so you can attribute
Speaker 9: it to Trump charisma the Trump followers. We can do
Speaker 9: that if we want to as observers, but you know
Speaker 9: this and deep, This reaction across voters, across different kinds
Speaker 9: of voters, from different backgrounds, different ages. This ran deep,
Speaker 9: and it was a signal that said, we don't like
Speaker 9: the policies that you're enacting, So what can they do?
Speaker 8: I think it's informative to go back to Obama. Obama
Speaker 8: had a much stricter border.
Speaker 9: Policy than Joe Biden, and I think he did that
Speaker 9: because he sensed there wasn't enough support in America for
Speaker 9: something more liberal and more open, so you can say
Speaker 9: to yourselves, the Democrats closed the border for too late.
Speaker 9: The Democrats didn't push hard enough to get those interest
Speaker 9: rates down. The Democrats didn't pay attention to the price
Speaker 9: of eggs, and that's unusual for the Democrats, who usually
Speaker 9: care a lot about the price of eggs. So I
Speaker 9: think this is not necessarily a reboot completely, but they
Speaker 9: have got to meet the voter where the voter is.
Speaker 8: The voter was not with the Democratic Party.
Speaker 7: Wendy, you mention the border, and let's look ahead here.
Speaker 7: Trump is about to embark on what many believed to
Speaker 7: be the largest deportation program in US history. How does
Speaker 7: he expect to round them all up? And does he
Speaker 7: intend to send him.
Speaker 9: Well, you know Trump, Trump always surprises us in the
Speaker 9: sense that he'll sort of.
Speaker 8: Go off the ranch and then I'll kind of moderate.
Speaker 1: You know.
Speaker 8: The idea is how long does Trump want to be president?
Speaker 9: You know, he's constitutionally prohibited from electing, being elected, and serving,
Speaker 9: not from running, and so you know, does he want
Speaker 9: to last long time?
Speaker 8: Maybe get rid of the twenty second Amendment. I don't
Speaker 8: know what he plans, but I think he.
Speaker 9: Will scale this idea back especially since the border has
Speaker 9: been shut down and you know, undocumented migration has slowed
Speaker 9: so much.
Speaker 8: Does he really have to do this? Does he have
Speaker 8: to disrupt the country this way? You know, he could
Speaker 8: do some of it, but I don't think the pressure's on.
Speaker 9: Him to do all of it, because Biden has already
Speaker 9: taken this step and he'll keep that policy in place.
Speaker 7: Wendy, you mention the twenty second Amendment. You're not the
Speaker 7: first one to talk about it, but you know what
Speaker 7: I'm most interested in, and it's the FED right. And
Speaker 7: Trump has made no secret about his intention to have
Speaker 7: a greater say and monetary policy here in the US.
Speaker 7: My question for you is what legal mechanisms can Trump
Speaker 7: take advantage of in order for the to give the
Speaker 7: over LA Office more control. More saying monetary policy, well,
Speaker 7: I mean the.
Speaker 8: Federal Reserve Act.
Speaker 9: I mean literally the Act creating Federal Reserve and all
Speaker 9: the bills that have come you know after that and
Speaker 9: reauthorizing it. You know, that's something that's been sort of
Speaker 9: a partnership with private monetary institutions, banks and the federal government.
Speaker 9: And the thing about Donald Trump is gonna need cash, right,
Speaker 9: you can't, you know, you can't crash the government and
Speaker 9: crash the economy by the federal government running out of cash.
Speaker 9: So there is a symbiotic relationship between really big banks
Speaker 9: and the Federal Reserve itself and the success of a president.
Speaker 8: So there's going to have to be negotiations there. But
Speaker 8: I don't think the.
Speaker 9: Heads of big banks you're just going to hand over
Speaker 9: the keys of the kingdom to the president of the
Speaker 9: United States and amount of who they are, and so
Speaker 9: that will be a negotiation, and Trump fancies himself as
Speaker 9: a very good negotiator.
Speaker 2: Wendy, does Kamala Harris have it future as a leader
Speaker 2: of the Democratic Party. I'm thinking maybe in four years time.
Speaker 2: I think.
Speaker 9: I think, all things considered, she ran a good campaign
Speaker 9: what she was given, the time frame that she had
Speaker 9: to work within, and her balancing act of trying to
Speaker 9: separate from the Biden record and also present some sort
Speaker 9: of plan for the future and bringing in and solidifying
Speaker 9: particularly younger women, even older women. I think there's still
Speaker 9: a block and a constituency that she can tap if
Speaker 9: she wanted to run again. I just don't see this
Speaker 9: as a Kamala Harris failed campaign. I see it as
Speaker 9: Trump being a former president and energizing their base and
Speaker 9: not making the same campaign mistakes they did in twenty twenty,
Speaker 9: and the Biden record. I don't know if anybody could
Speaker 9: have won in the face of those numbers.
Speaker 7: Wendy, I wonder if you could shift your attention here
Speaker 7: to what's going on in Ukraine. Obviously, Zelenski was the
Speaker 7: firebrand who rejected Trump's request for information on Hunter Biden's
Speaker 7: dealings back during his first tenure. And what comes next
Speaker 7: for the Ukraine, for Zelenski, for Central Europe, and for
Speaker 7: Russia under a Trump administration.
Speaker 9: Well, I think Trump is a fan of Putin, and
Speaker 9: I think Trump has said before that he thinks there's
Speaker 9: a deal that can be reached. So my guess is
Speaker 9: Trump says, listen, we're not going to send you the
Speaker 9: same kind of weaponry, We're not going to support the
Speaker 9: same way. Go to the table, cut a deal, give
Speaker 9: up crimea I mean literally, these are the things that
Speaker 9: he'll say. And maybe we'll make sure that more of
Speaker 9: your people don't get killed. I mean, I think that's
Speaker 9: what we'll do. And in the Middle East, you know,
Speaker 9: I think people who think that he'll be a diehard
Speaker 9: suborn of Israel maybe, but he may go to the
Speaker 9: Saudia's and say, what kind of deal you want to
Speaker 9: cut to get this thing over with against Iran. I mean,
Speaker 9: he wants to make deals and be the hero. And
Speaker 9: that's something we've seen before and we'll see again. So
Speaker 9: whatever whoever's dealing with him has to be able to
Speaker 9: give him some sort of victory he can walk away with.
Speaker 5: All right, thanks to Wendy Schilder, professor at Brown University.
Speaker 5: Coming up, we're going to talk more on why Donald
Speaker 5: Trump winning the US presidency is leaving banks hopeful.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
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Speaker 5: I'm Paul Sweeney and I'm John Tucker. This is Bloomberg.
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Speaker 2: I'm Paul Sween.
Speaker 5: And I'm John Tucker. Filling in for Alex Steele.
Speaker 2: We continue with another conversation related to the twenty twenty
Speaker 2: four US election.
Speaker 5: This week, Donald Trump was elected forty seventh president of
Speaker 5: the United States, and according to Bloomberg Intelligence Research, Trump's
Speaker 5: victory is giving banks optimism for less regulation.
Speaker 2: For more on this, John and I were joined by
Speaker 2: Alison Williams, Bloomberg Intelligence senior analysts covering the global banks.
Speaker 5: We first asked Allison why bank shares rallied afternoons of
Speaker 5: Donald Trump becoming president elect.
Speaker 10: So we see three things. So the big one is
Speaker 10: less regulation. Secondly higher industrates, and then third we really
Speaker 10: see some momentum for fee revenue, which has really been
Speaker 10: powering the big banks that I cover. So the regulation
Speaker 10: is the big one, and it's not just some of
Speaker 10: the specific issues for the banks as a whole in
Speaker 10: one or two banks, but it is just, you know,
Speaker 10: the feeling that the pendulum can swing the other way
Speaker 10: right so that there won't be new regulations and that
Speaker 10: some of the things that are sort of in the
Speaker 10: pipeline could be watered down or pushed out. That baso
Speaker 10: three endgame has been the big one for the largest banks.
Speaker 10: And you know, basil dictates that all jurisdictions around the
Speaker 10: world have to do some form of implementation. But the
Speaker 10: US proposal that came out in twenty twenty three was
Speaker 10: really much stricter than we saw in other regions. We
Speaker 10: had already had some expectations that that would be watered
Speaker 10: down from you know, comments that Powell had made and
Speaker 10: also comments from bar in September, so some of that
Speaker 10: was sort of in the stocks, but I think the
Speaker 10: feeling is, you know, from our regulatory group that the
Speaker 10: things could either get pushed further out or they could
Speaker 10: be water down even further. And so that's good for
Speaker 10: the banks because their excess capital is something like five
Speaker 10: to fifteen percent of their market caps. So definitely that
Speaker 10: was something aiding City Group in Wells Fargo as well
Speaker 10: as someone like Morgan, Stanley and Goldman, where even with
Speaker 10: the water even with the sort of lighter touch in September,
Speaker 10: they were still going to have a deficit in their capital.
Speaker 10: So some positive news.
Speaker 2: On that front.
Speaker 10: Also, as you know, you know, Wells Fargo has had
Speaker 10: this asset cap for a long time. City Group there's
Speaker 10: been some concerns, especially around when they reported their results,
Speaker 10: that they could face more scrutiny, So just a particular
Speaker 10: easing I think also benefited those couple of banks. And
Speaker 10: then there are some other things related to card and
Speaker 10: consumer and finance as well. On the interest rate funds,
Speaker 10: all these banks are positioned for higher rates, so we
Speaker 10: know that, you know, we'll be watching the FED in
Speaker 10: terms of short term rates. I think in general that
Speaker 10: also got a lift. And then finally from our viewpoint,
Speaker 10: the big thing is that we see momentum and fees
Speaker 10: and that's been a huge boost to the earnings for
Speaker 10: these banks.
Speaker 5: Just back to the Buzzo three endgame rules, the idea
Speaker 5: is give me the dummies version. You had to set
Speaker 5: aside more capital basically in case things went south, so
Speaker 5: the financial institutions wouldn't ruin the economy, right, So that's
Speaker 5: freed up. Does that now go back to shareholders? Is
Speaker 5: that the idea?
Speaker 10: That is the idea, and so Boso three endgame rules. So,
Speaker 10: as you know, Baso three is something that sort of
Speaker 10: came after the financial crisis, and there's been many iterations.
Speaker 10: Thus the reference to this last set of rules as
Speaker 10: endgame and basically what that dictated was that as they
Speaker 10: measure their risk weighted assets, there would be big increases
Speaker 10: in that, and thus they'd be having to hire a
Speaker 10: hole more capital against that. And so based on third
Speaker 10: quarter earnings and fourth quarter requirements, their excess capital was
Speaker 10: five to fifteen percent of their market cap. Under the
Speaker 10: Basil three rules, that would turn to deficits across the bank,
Speaker 10: so they would have to find a way to increase
Speaker 10: their capital. There is a timeline, so they probably would
Speaker 10: have done that through internal capital generation. But to your point,
Speaker 10: they that would have been capital that they could not
Speaker 10: return to shareholders.
Speaker 5: Can I just who has the most capital to be
Speaker 5: returned to shareholders?
Speaker 10: Well, based on the requirements today, City Group, their excess
Speaker 10: capital is something like fifteen percent of.
Speaker 2: Their market cap.
Speaker 10: Okay, all right, And I would and I would point
Speaker 10: out also that you know these banks have and so
Speaker 10: by the way, like the banks do sort of target
Speaker 10: holding a buffer to the requirements. So there's a little
Speaker 10: bit of that, but I think you know, in general,
Speaker 10: it is the fact that buybacks will likely go up.
Speaker 10: These banks already have buyback programs in place so they
Speaker 10: can execute on them. But it's also the math. If
Speaker 10: you have higher equity, your return on equity is going
Speaker 10: to be lower, and that's how investors value stock. So
Speaker 10: there is definitely the higher buybacks, but also I think
Speaker 10: it is the sentiment that is helping bank multiples. This
Speaker 10: specific regulation, but also less regulation in general. One other
Speaker 10: area I didn't talk about with regard to regulation is
Speaker 10: less antitrust. So that's good for M and A and
Speaker 10: that's really why you saw Goldman and Morgan Stanley very
Speaker 10: the stocks reacting to that.
Speaker 8: All right.
Speaker 5: Thanks to Alison Williams, Bloomberg Intelligence Senior analysts Global banks
Speaker 5: and asset Managers.
Speaker 2: Each week we look at research from Bloomberg n EF
Speaker 2: previously known as New Energy Finance. They're the team at
Speaker 2: Bloomberg that tracks and analyzes the energy transition from commodities
Speaker 2: to power, transport, industries, buildings, and agri cultural sectors. This
Speaker 2: week we took a look at Bloomberg neef's outlook for
Speaker 2: wind and solar energy storage over the next ten years.
Speaker 2: Guest host Jess Mett and I were joined by Yao Sachini,
Speaker 2: Bloomberg NEF head of Energy Storage. We first asked her
Speaker 2: where we are in terms of energy storage just.
Speaker 11: For some context, and we're going to talk about some
Speaker 11: of the analysis that we actually published around the clean
Speaker 11: energy market outlook specifically look at the US for some contexts.
Speaker 11: There's just been a lot of investment that's been pouring
Speaker 11: into clean power segments. We've seen a lot of that
Speaker 11: accelerated over the last I guess two years, and since
Speaker 11: then Inflation Reduction Act passed, facilitating a lot of new
Speaker 11: investments into wind, solar and storage sectors, which are the
Speaker 11: sectors that we cover in that particular report. There's about
Speaker 11: there's about three hundred billion dollars invested across these sectors
Speaker 11: a wind, solar, storage, and other clean transportation and other
Speaker 11: sectors in twenty twenty three. That's about twenty two percent
Speaker 11: higher than we saw in previous years. And then what
Speaker 11: we were doing this report is to have a twenty
Speaker 11: thirty five view, So in the next decade, what do
Speaker 11: we investments and capacity editions look like around these clean sectors.
Speaker 11: There is actually a lot that's that's bound to happen
Speaker 11: in terms of just what's committed to date happening over
Speaker 11: the next few years, and that's likely to unlock a
Speaker 11: lot more investment over the twenty thirty five period.
Speaker 2: Are the risks to some of those moneies that have
Speaker 2: already been committed ear marked.
Speaker 11: Yeah, So what we did, I guess the way we
Speaker 11: think about it is to look at what is our
Speaker 11: expectation in the market out to twenty thirty five. So
Speaker 11: for some context, our expectation in terms of our forecast
Speaker 11: for winds, solar and storage installations is about one point
Speaker 11: one tarrawat of new yeah, new capacity editions out to
Speaker 11: twenty thirty five. For context, in the US power grid,
Speaker 11: as of the end of twenty twenty three, there was
Speaker 11: about one point two terrawat of cumulative installed power generation capacity.
Speaker 11: So essentially we're about doubling in terms of capacity in
Speaker 11: the grid out to twenty thirty five. But that addition
Speaker 11: is just from when solar and storage, which is really
Speaker 11: impressive in terms of the risk factors to your question.
Speaker 11: So the way we were investigating that in the report,
Speaker 11: or analyze that in the report is to try to
Speaker 11: think about us in the worst case scenario. So there's
Speaker 11: a lot of investment that's already been committed at the
Speaker 11: back of the investment tax credits and some of the
Speaker 11: other incentives in the Inflation Reduction Act, but we wanted
Speaker 11: to look at Okay, so what happens if these incentives,
Speaker 11: so the investment tax credit actually gets repealed right away,
Speaker 11: which is of course a worst case scenario. It's not
Speaker 11: our expectation of what will happen, but it gives us
Speaker 11: some benchmark of what could happen. And under that scenario,
Speaker 11: it's about a seventeen percent decline, so it's a fifth
Speaker 11: of capacity that gets dropped or not built in the
Speaker 11: twenty thirty five timeframe. One additional component is like if
Speaker 11: that actually would were to happen, is that projects would
Speaker 11: try to rush to try to be built before that
Speaker 11: step down happens, which could happen in the end of
Speaker 11: twenty twenty six or the end of twenty twenty five.
Speaker 11: So essentially there's a rush to build. A decline in
Speaker 11: the market, and then the market picks up up again,
Speaker 11: but not at the same rate or not to the
Speaker 11: same degree as it would in a non repeal scenario.
Speaker 11: So that's how we looked at.
Speaker 4: That walk us through the key fundamentals that you think
Speaker 4: have helped build the industry.
Speaker 11: Absolutely, so, I think we're obviously in an acceleration mode
Speaker 11: at the moment. It's almost like certain key elements are
Speaker 11: keeping the market from growing as quickly as it could.
Speaker 11: But in terms of the fundamentals in the past, major
Speaker 11: one is the fact that the cost of wind, solar,
Speaker 11: and storage and batteries has come down significantly over the
Speaker 11: last decades. That's really made the cost of these technologies
Speaker 11: competitive against conventional generation, conventional fossil fuel generators in the
Speaker 11: US that would be trying to displace gas. And we
Speaker 11: do see in most of the markets of the US
Speaker 11: wind and solar are competitive against gas. Of course, they
Speaker 11: don't deliver energy at all, like twenty four to seven,
Speaker 11: and that's where batteries comes in. So the cost of batteries,
Speaker 11: like specifically lithiuman batteries has fallen by more than ninety
Speaker 11: percent over the last decade, which is significant.
Speaker 2: How's the US doing you quote some really big numbers
Speaker 2: here in terms of investment in tara watts and all those.
Speaker 2: How are we versus the rest of the world in
Speaker 2: terms of, you know, just in terms of really embracing
Speaker 2: cleaner energy.
Speaker 11: Yeah, so on a country level basis, the US is
Speaker 11: probably second in terms of staffed investments in these sectors.
Speaker 11: That's because China is really the giant in terms of
Speaker 11: attracting new investment into wins, solar and even batteries segments.
Speaker 11: And there's a bit of a pickup game in terms
Speaker 11: of some of the key segments in terms of the
Speaker 11: manufacturing side, so the supply chain and trying to invest
Speaker 11: that and bring that into the US. With mixed levels
Speaker 11: of comparative success across different sectors.
Speaker 4: What should we expect for wind and solar capacity build
Speaker 4: in twenty twenty five for those forecasts.
Speaker 11: Yeah, so we're expecting most of them to grow. That's
Speaker 11: certainly true for solar and storage. When when more or
Speaker 11: less keeping a pace, generally, our expectation is that there
Speaker 11: will be more investment going in. And that's because there's
Speaker 11: just a lot of projects in the pipeline that are
Speaker 11: essentially contracted to meet utility demands. So a lot of
Speaker 11: the US utilities have been you know, contracting working in
Speaker 11: power because they, as I said, they're cheaper, but also
Speaker 11: because they might have some specific goals in order to decarbonize.
Speaker 11: I guess the other factors is just the corporate side.
Speaker 11: So a lot of the you know, the Amazons and Googles,
Speaker 11: these companies have increasingly also been looking for cleaner portfolios
Speaker 11: of energy generation to be meeting their demand.
Speaker 2: Thanks to ye Josa Kenny Bloomberg, any head of energy storage.
Speaker 5: Coming up on a program, we're going to break down
Speaker 5: why Berkshire Hathaways cash pile has reached a record.
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Speaker 5: I'm Paul Sweeney and I'm John Tucker filling in for
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Speaker 2: We moved out of corporate earnings. Berkshire Hathaway recently reported
Speaker 2: third quarter earnings and said that it's cash power reached
Speaker 2: three hundred and twenty five billion dollars in the third quarter.
Speaker 5: And this comes as Berkshire's CEO Warren Buffett continued to
Speaker 5: refrain from major acquisitions while trimming some of the most
Speaker 5: significant equity stakes for.
Speaker 2: More at guests, Hos, Jess, Mett, and I were joined
Speaker 2: by Matthew Palizola, Bloomberg Intelligence Senior analyst P and C
Speaker 2: Insurance for First asked Matthew to break down berkshire most
Speaker 2: recent quarter.
Speaker 12: When you look at their earnings, there's a couple of
Speaker 12: layers you have to unpeel. First, their gap earnings were
Speaker 12: swayed by investment changes. Buffett himself has said, you kind
Speaker 12: of just throw that out. We don't really look at that.
Speaker 12: It was like twenty six I think billion versus an
Speaker 12: eleven billion loss in the year ago. Those numbers are
Speaker 12: a little bit irrelevant. The next part is their earnings
Speaker 12: from operating companies. Those, if you look at just the
Speaker 12: number they give you, those were down about six percent.
Speaker 12: What happened there, though, was they have a lot of
Speaker 12: yen debt and there was a big four x loss
Speaker 12: in there, so peel that back. The operating company's earnings
Speaker 12: were up a little bit, which is less than I expected.
Speaker 12: The insurance operation had a couple of unforeseen negatives in it,
Speaker 12: and that really turned it down, some of them I
Speaker 12: don't think are ongoing things. But that was really the
Speaker 12: negative variance was in the insurance business.
Speaker 4: Something because we were actually chatting about this earlier when
Speaker 4: it came to the percent of their cash pilot Berkshire Hathaway.
Speaker 4: So the last time it was around this high, the
Speaker 4: stock market continued to move on to records over the
Speaker 4: following fifty two weeks, but then the last time on
Speaker 4: this opposite into that the lowest percent of cash he
Speaker 4: had at any time over the past decade was right
Speaker 4: when the S and P five hundred briefly peid in
Speaker 4: twenty twenty one. So what's your thoughts whenever you're kind
Speaker 4: of thinking about what this could mean more broadly for
Speaker 4: where like major indexes and equities could potentially be headed.
Speaker 12: Yeah, so, I mean Buffett is a more of a
Speaker 12: time in than timing of the market right clearly, So
Speaker 12: I don't think he's making big moves on large expectations
Speaker 12: on the market.
Speaker 8: If you look what.
Speaker 12: Happened, they sold about twenty two billion dollars worth of
Speaker 12: Apple stock in the quarter. That's along with about nine
Speaker 12: and a half billion worth of Bank of America stock
Speaker 12: in the quarter. I don't think you look at that
Speaker 12: and say, Okay, he's completely parish on everything in the market.
Speaker 12: I think those were, you know, unique things. They were
Speaker 12: highly concentrated in Apple. Their Apple position is down seventy
Speaker 12: percent from its high in terms of the shares they own,
Speaker 12: so I think those things were unique to the stocks
Speaker 12: they own. Buffett has repeatedly talked about taxes going up.
Speaker 12: I don't think it's even an election cycle now, but
Speaker 12: he's just saying even longer term, there's probably only one
Speaker 12: direction taxes are going for us, and that's up. So
Speaker 12: you'd not be surprised to see them taking large gains
Speaker 12: off the board.
Speaker 2: So three twenty five billion dollars, is there any realistic
Speaker 2: scenario for deploying that capital over a multi year period.
Speaker 12: You know, it's tough. They are limited in how much
Speaker 12: shares they can buy back just on the float.
Speaker 5: We had wrote.
Speaker 12: You know, it's tough to see them doing a tens
Speaker 12: of billion dollar acquisition. There is the ownership in Chubb
Speaker 12: out there, which is you know, perhaps the megadeal that
Speaker 12: may or may not ever happen if they do something.
Speaker 12: They bought Allegation, which was an insurance company kind of
Speaker 12: conglomerate a couple years ago that was about twelve billion dollars.
Speaker 12: It seems like that's going to be the max on
Speaker 12: what they're going to do. But if I could predict
Speaker 12: a Buffet would do, I'd be on an island somewhere.
Speaker 2: So but no dividend.
Speaker 12: There will not be a dividend as long as Warren
Speaker 12: Buffett is sitting in all is that? I mean, I
Speaker 12: think he likes getting them, he doesn't like paying them.
Speaker 2: He says.
Speaker 12: You know, look I and I would agree with him.
Speaker 12: I'm better off holding this money than giving it. Your
Speaker 12: return on a divid end is going to be less
Speaker 12: than my return investing it. That probably hasn't been true
Speaker 12: actually recently, but I think that's his mindset.
Speaker 4: You were mentioning about how claims they were years ago
Speaker 4: are costing them more than expected. Walk us through that dynamic.
Speaker 12: Sure, So this is called reserve development. So what happens
Speaker 12: is insurance companies like so for example, Geico, they write auto,
Speaker 12: some home, well not really home, but they'll write auto.
Speaker 12: You're either going to have a car accident in a
Speaker 12: year or you're not. But they'll write some liability business
Speaker 12: where you may have a claim and that you might
Speaker 12: find out and they claim years into the future. And
Speaker 12: what is happening is you set up a reserve for
Speaker 12: that and that reserve could be wrong or they're almost
Speaker 12: always wrong right, but it could be wrong too low
Speaker 12: or wrong too high. And what had happened in the
Speaker 12: quarter was their reserve for their primary insurance business, A
Speaker 12: specific unit of it was quite wrong and there's there's
Speaker 12: new management took over that unit, and usually when that happens,
Speaker 12: they add to their reserves. If this was if this
Speaker 12: was just a you know, XYZ insurance company, this would
Speaker 12: be really bad. But it's Berkshire. Their financial strength is
Speaker 12: so superior to anything you might see that it's kind
Speaker 12: of just.
Speaker 5: A blip, all right. Thanks to Matthew Pallazola, Bloomberg Intelligence
Speaker 5: senior analysts P and C Insurance, it.
Speaker 2: Turned out to a recent deal in the data security business.
Speaker 5: Sofas agreed to buy secure Works for eight dollars fifty
Speaker 5: cents a share in cash at evaluation of eight hundred
Speaker 5: fifty nine million dollars for more.
Speaker 2: Guest host MLI, Grifeo and I were joined by Secure
Speaker 2: Works c CEO Wendy Thomas. We first asked Wendy to
Speaker 2: talk to us about why secure Works sold to sofos.
Speaker 13: This is a strategic combination of two longtime security market leaders,
Speaker 13: and so when you think about combining are two agnostic,
Speaker 13: very open platforms, decades of cybersecurity experience, and strong brands
Speaker 13: in the space. This is a way to really scale
Speaker 13: up and defeat the adversary at scale.
Speaker 3: What does it say about the current market for cybersecurity
Speaker 3: companies that this acquisition is going through.
Speaker 13: The market is really looking for a single partner for cybersecurity,
Speaker 13: sort of a consolidated platform play that a one organization
Speaker 13: can increasingly address multiple use cases for their security needs,
Speaker 13: from being proactive about vulnerability management to reactive to detection
Speaker 13: and response capabilities all the way to AI powered platforms
Speaker 13: that can predict the next cyber attack. And so the
Speaker 13: scale all of R and D required to make that
Speaker 13: a reality for customers is one that requires scale in organizations.
Speaker 13: So to take two cash low positive growing leaders in
Speaker 13: the space and put them together means more scaled R
Speaker 13: and D to be better, faster, stronger for customers.
Speaker 2: What are your customers doing with cybersecurity these days in
Speaker 2: terms of their spending their investment.
Speaker 13: They are increasingly moving from what I would call preventative
Speaker 13: cybersecurity investments to proactive cybersecurity posture and risk management. This
Speaker 13: is all about moving towards increasing prevention and the reason
Speaker 13: is that dwell times of thread actors in an organization's
Speaker 13: environment have gone from months to days to now hours.
Speaker 13: So with the power of an AI powered platform, in
Speaker 13: order to really be able to keep constant visibility about
Speaker 13: potential holes in their attacks, right those unlocked doors, as
Speaker 13: I like to talk about, it requires technology to do that,
Speaker 13: technology to detect that someone's rattling that door handle, and
Speaker 13: the ability to immediately protect the organization from someone getting
Speaker 13: in and taking those valuable data assets or encrypting their
Speaker 13: systems with ransomware.
Speaker 3: So you're using an AI powered you're an AI powered
Speaker 3: security platform. I'm wondering how difficult it is right now
Speaker 3: to be a company that's using AI when it seems
Speaker 3: like demand is outpacing supply. Is that a challenge for
Speaker 3: you guys?
Speaker 13: Well, if you think about AI, that's a pretty broad category.
Speaker 13: And while you know, natural language processing and generative AI
Speaker 13: is the is the hot topic right now, and it
Speaker 13: has its place in security in terms of things like
Speaker 13: changing cybersecurity detections into readable language of what's going on
Speaker 13: to a business person. We've been using AI for a
Speaker 13: very long time in our platform. We started building it
Speaker 13: in twenty seventeen for things like machine learning, deep learning,
Speaker 13: statistical learning, in order to sort through tremendous amounts of
Speaker 13: data and find patterns of behavior that we can match
Speaker 13: to thread actors, the way that they try to come
Speaker 13: into an environment, the software that they use in those
Speaker 13: tactics and techniques, and a platform like that that can
Speaker 13: filter through a lot of data and find those patterns
Speaker 13: is the key to being able to protect an organization.
Speaker 13: So it's home built for both sofas and for secure
Speaker 13: works their hub platform and our Tage's platform. It just
Speaker 13: makes a ton of sense to be able to take
Speaker 13: the best of both worlds and put those together.
Speaker 1: All right.
Speaker 2: So you and I, Wendy, we first chatted back in
Speaker 2: twenty twenty one. How is your company? How has the
Speaker 2: industry changed over the last several years.
Speaker 13: The industry is, I think, on a path for the
Speaker 13: first long time to really consolidate, and that is frankly
Speaker 13: as a result of customer demand to be able to
Speaker 13: run a holistic security program. Understand frankly, quantify their risk,
Speaker 13: demonstrate where they've protected against that risk, and then have
Speaker 13: the accountability around who is attacking their environment and how
Speaker 13: they've protected against it for their boards and c suite.
Speaker 13: It's become a boardroom topic for the last couple of years,
Speaker 13: and so the ability of a security professional to elevate
Speaker 13: sort of a technical pursuit into the language of business
Speaker 13: and risk. It's probably the biggest change that I've seen
Speaker 13: over the last few years.
Speaker 3: I want to zoom out and just talk about the
Speaker 3: cyber industry more broadly and how different corporation should be
Speaker 3: thinking about the current state of threat to their businesses
Speaker 3: when it comes to cybersecurity. Are we worse off than
Speaker 3: we were maybe five years ago as hackers get more advanced.
Speaker 13: I would say that the great things about AI that
Speaker 13: have enabled us as businesses security companies to leverage the
Speaker 13: power of that AI has also represented a certain amount
Speaker 13: of peril in terms of empowering those thread actors as well,
Speaker 13: and whether it's nation states or cyber criminals who are involved,
Speaker 13: their ability to use the same sort of natural language
Speaker 13: processing technologies to make that phishing email much more believable.
Speaker 13: It really does look like it's coming from your bank
Speaker 13: or from a vendor that you use. And so the
Speaker 13: last line of defense, always beyond technology, is people, and
Speaker 13: the need for all of us to become more educated
Speaker 13: and just cyber aware is more important than ever. So
Speaker 13: there's always that human edge that can make the difference
Speaker 13: on top of technology to keep us all a little
Speaker 13: bit safer. When cyber criminals cannot make money off of
Speaker 13: global citizens, then we start to break that economic model,
Speaker 13: all right.
Speaker 5: Thanks to Secure Work CEO Wendy Thomas.
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