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Speaker 1: Here's the latest. Kamala Harrison President Biden are set to
Speaker 1: speak in Maryland today.
Speaker 3: It is their first joint trip.
Speaker 1: Since Biden dropped out of the race. This is coming
Speaker 1: ahead of Harris Israeli and North Carolina tomorrow, where she's
Speaker 1: expected to unveil details about her policy agenda. Joining us
Speaker 1: now is Tom Steyer, co founder of Galvani's Climate Solutions. Tom,
Speaker 1: great to have you back. Thank you so much for
Speaker 1: being with us. What are you hoping to hear from
Speaker 1: Harris's campaign given that we haven't heard so much in
Speaker 1: terms of how she differs from President Biden.
Speaker 4: Well, what I'm expecting to hear Lisa and hoping to
Speaker 4: hear is that her agenda around the economy is going
Speaker 4: to be about opportunity. Then in fact, she understands that
Speaker 4: America is the land of opportunity and it gives everything
Speaker 4: the chance to do the most, and that is exactly
Speaker 4: what drives this economy, what makes our capitalism capitalistic economy
Speaker 4: so strong. At the same time that I expect her
Speaker 4: to continue most of the policies of the Biden Hairris administration.
Speaker 5: So she will continue on this electrifying the grid. What
Speaker 5: more do you expect if she were to win, that
Speaker 5: they can add on to what Biden did. When it
Speaker 5: comes to the Inflation Reduction Act, well, I.
Speaker 4: Think to a large extent, it is going to be
Speaker 4: about implementing the Inflation Reduction Act, which is really two things.
Speaker 4: It's not just about the grid. It's about deploying the
Speaker 4: existing technologies when solar batteries evs, but it's also about
Speaker 4: innovating and creating the next generation of any related companies
Speaker 4: and technologies. So that second part is absolutely critical. We're
Speaker 4: seeing deployment happen spurred by the IRA, but very much
Speaker 4: driven by private money. What we need to see is
Speaker 4: new companies solving some of the problems around energy in
Speaker 4: ways that work for consumers and companies.
Speaker 5: Well, when it comes to the competition, and if you
Speaker 5: think climate is existential, why not let the cheap Chinese
Speaker 5: evs into the United States.
Speaker 3: I'm square.
Speaker 4: Here's my answer for you. Look, I am a huge
Speaker 4: believer in trade. I believe that the benefits, the dispersed
Speaker 4: benefits to American consumers of trade are huge and important,
Speaker 4: and we've all enjoyed them for a long time. And
Speaker 4: it's theoretically true too. What is true is that the
Speaker 4: Chinese economy is doing something strange. They are leading the
Speaker 4: manufacturing of almost every clean energy product wind turbines, solar arrays, batteries, evs.
Speaker 4: But what's also true is they're by far the biggest
Speaker 4: polluter in terms of carbon emissions, and they're using their
Speaker 4: carbon emissions to try and drive their economic program of
Speaker 4: leading this energy transition to pull their very weak economy
Speaker 4: out of the ditch. So, in fact, the idea that
Speaker 4: they should be charged for their emissions that are about
Speaker 4: a third of global emissions makes very good sense to me.
Speaker 4: And we're doing it in not direct way, but it's
Speaker 4: actually a way that turns out to be pretty fair.
Speaker 5: The other big issue, not just national security when it
Speaker 5: comes to China, but the other big political issue in
Speaker 5: the election is who's going to win the union vote.
Speaker 5: How does Kamala Harris strike that tone the fact that
Speaker 5: they want to see more evs in the road. But
Speaker 5: actually this unnerves a lot of rank and file of
Speaker 5: those labor unions in places like Michigan, which is critical
Speaker 5: to Democrats maintaining the White House.
Speaker 4: Absolutely, But let's take a step back, if we could, Henry,
Speaker 4: which is this We've all listened to Elon Musk and
Speaker 4: Donald Trump talk about their attitude towards organized labor and
Speaker 4: labor unions. In fact, they've been sued over what they
Speaker 4: said on Twitter. So the truth is, it's not a
Speaker 4: choice between Kamala, who is a very strong union person,
Speaker 4: and a blank person. It's someone who clearly is anti union,
Speaker 4: an anti working person. And that's been a long history
Speaker 4: over decades of where mister Trump has gone and where
Speaker 4: he's likely to go. So yes, it's absolutely clear that Michigan. Obviously,
Speaker 4: the UAW has a huge sway in Michigan and they're
Speaker 4: a really important part of the Democratic coalition. But the
Speaker 4: truth is that the person who supports working people and
Speaker 4: who supports organized labor is definitely Kamala Harris. And to
Speaker 4: go any other way is to ignore the facts of
Speaker 4: this week, let alone the last two decades.
Speaker 6: And Tom, you're painting quite a dichotomy between the two candidates.
Speaker 6: And I just wonder in your conversations with not just
Speaker 6: investors but portfolio companies that want to do clean technology,
Speaker 6: if there's a sense that they're holding back on investing
Speaker 6: because of the uncertainty of the race, and it might
Speaker 6: continue to do so if it is a Trump presidency.
Speaker 4: Well, I think when we talk about the possibility of
Speaker 4: a Trump presidency, let's break it down into two things.
Speaker 4: One is what's going to happen in the United States
Speaker 4: of America. And I think that to a very large extent,
Speaker 4: when it comes to the deployment of the existing technologies,
Speaker 4: they're just cheaper. You know, if you look around the
Speaker 4: world last year, so twenty twenty three of new electricity generation,
Speaker 4: eighty six percent of it was renewable. They're not doing
Speaker 4: that to be nice. They're doing it because it's a cheaper,
Speaker 4: better deal. And those lines have crossed and there's nothing
Speaker 4: that mister Trump can do to change the economic forces.
Speaker 4: What is really important from the standpoint of addressing the
Speaker 4: climate crisis more broadly, is this, This is obviously a
Speaker 4: global issue. It requires global cooperation and American leadership. That
Speaker 4: is something that a Trump administration will never do. I mean,
Speaker 4: they famously withdrew from the Paris Accords. He's talking about
Speaker 4: getting out of NATO, let alone cooperating with the UN
Speaker 4: efforts around climate. So from the standpoint of the American economy,
Speaker 4: we're going to continue to deploy. I think that's baked
Speaker 4: in the cake, just because it's a better deal. Texas
Speaker 4: has tripled its solar since twenty eighteen, and that's the
Speaker 4: state where they love to say how bad renewables are,
Speaker 4: but they're a bigger win producer and producer than California.
Speaker 1: Tell me, Joseph about thirty seconds. Do you think that
Speaker 1: Musk's friendship with Donald Trump will ensure that there will
Speaker 1: be a friendly environment for electric vehicles even if Trump
Speaker 1: gets since the office. No.
Speaker 4: I think that mister Trump doesn't really have policies and
Speaker 4: he doesn't have friendships. So whatever he said on said
Speaker 4: this week, that's something that'll change over time because they
Speaker 4: don't even have a platform. They literally don't have a
Speaker 4: platform because they don't have policies. They just have instincts
Speaker 4: urges and vengeance.
Speaker 1: Time Stier of Galvanized Climate Solutions, who really appreciate you
Speaker 1: coming in as always, thank you for being here. Here's
Speaker 1: the latest cruise lines of bucking the trend and travel industry.
Speaker 1: The signs of a consumer slowdown continue to mound, at
Speaker 1: least in certain corners. Norwegian Cruise Line Holdings, Carnival and
Speaker 1: Royal Caribbean all boosting their year end outlooks amid record
Speaker 1: setting demand. Harry Summer, Norwegian Cruise Line Holdings President and
Speaker 1: Chief executive Officer, joins us. Now, Harry, thank you so
Speaker 1: much for being with us. I want to just start
Speaker 1: with what you're seeing in terms of whether demand is
Speaker 1: sort of plateauing, accelerating or falling off. Just a touch
Speaker 1: on the.
Speaker 3: Margins, Well, good morning. Thank you for having me. On
Speaker 3: Demand in the cruise industry right now is great. We're
Speaker 3: very very happy with what we're seeing with the consumer.
Speaker 3: You know, keeping in mind that the demographic that we're
Speaker 3: pursuing is mostly upper middle class, upper class demographic across
Speaker 3: our three brands, and those consumers certainly continue to have
Speaker 3: money to spend and are continuing to spend it on crucifigations.
Speaker 1: At this point, Harry, I guess there's this key question
Speaker 1: of how divorced the upper echelons are from the rest
Speaker 1: of the economy. Essentially, do you find that your business
Speaker 1: is somewhat insulated from a cycle where you have consumers
Speaker 1: that aren't necessarily feeling the same kind of pinches elsewhere.
Speaker 3: So I think there's a number of criteria, a number
Speaker 3: of things that really do help insulate us, as you
Speaker 3: mentioned now. Number one, we are fishing in the upper
Speaker 3: demographic pool, as I mentioned, but we also have a
Speaker 3: very long lead time for booking. So unlike hotels and
Speaker 3: air which are dependent on a lot of close in bookings,
Speaker 3: our average booking curve is six eight months into the future.
Speaker 3: So we have tremendous visibility into trends. If there is
Speaker 3: ever any weakness that we're not seeing any but every
Speaker 3: once in a while there's a few sailings that perhaps
Speaker 3: are doing less well, we can make adjustments six eight
Speaker 3: months in advance, small adjustments that put things back on track.
Speaker 3: It's really a unique feature of the cruise industry that
Speaker 3: allows us to continue to have more stable and higher returns.
Speaker 3: You know, fundamentally, cruises is a tremendous value. Our average yield,
Speaker 3: you know, versus a hotel ADR is anywhere from thirty
Speaker 3: to forty percent below what they expend on a hotel.
Speaker 3: And I think consumers, whether times are good, but especially
Speaker 3: if times are less good, certainly recognize that value and
Speaker 3: that accrues to us. I mean, the last couple of quarters,
Speaker 3: we've reported eight and six percent year over year yield
Speaker 3: increases compared to last year, where we're guiding to another
Speaker 3: six percent for Q three. We see that as a
Speaker 3: very strong consumer.
Speaker 6: Harry, I just wonder about prices. I mean, are you
Speaker 6: in a position where you might even be able to
Speaker 6: rise raise prices given that level of demand?
Speaker 3: You know, I think, yes, great question. I think what
Speaker 3: we've showed in our financewers for the last few quarters
Speaker 3: is pricing has been going up. We're guiding in Q
Speaker 3: three and Q four for prices to go up. I
Speaker 3: mean you may imagine, you know, with the long lead
Speaker 3: time I described, Q three and Q four are substantially
Speaker 3: sold out, so we have great visibility and we stand
Speaker 3: behind the guidance we just issued a few weeks ago
Speaker 3: in our quarterly earnings goal. Pricing will absolutely go up
Speaker 3: in both quarters, and it looks that way for twenty
Speaker 3: twenty five certainly as well, Harry.
Speaker 6: I want to get your thoughts as a CEO of
Speaker 6: a major company. Lisa mentioned this fascinating statistics of CEO
Speaker 6: is being let go from companies at an unprecedented pace,
Speaker 6: going back to twenty seventeen. I wonder how you think
Speaker 6: about this moment in time. You're obviously the CEO of
Speaker 6: a company that's successful, but when you look among your
Speaker 6: peers again, not just the cruise industry, but CEOs of
Speaker 6: large companies, has something changed that there is more pressure
Speaker 6: in a way there hasn't been before.
Speaker 3: So I'm guessing there's always been pressure in the CEO role.
Speaker 3: But I think we're in a world of a rapidly
Speaker 3: involving consumer. You know, tastes change over time and consumers
Speaker 3: change over time, and we have to be constantly thinking
Speaker 3: and innovating in the future. I mean, right now, as
Speaker 3: an example, we're planning for ship deliveries through twenty thirty six.
Speaker 3: I mean, we have to have a pretty good crystal
Speaker 3: ball and a pretty good feel for what the consumers
Speaker 3: are going to want for you know, years, even a
Speaker 3: decade into the future, and it's really important to keep
Speaker 3: that future focus if we're going to be successful.
Speaker 5: Harry, we had the Sea of Marriott on yesterday and
Speaker 5: I'm talking about Marriotte yachts. Now, are you concerned on
Speaker 5: the higher end consumer the competition that's coming into the industry.
Speaker 3: You know, I've always said that our competition is not
Speaker 3: other cruises. I mean, cruises in general make up about
Speaker 3: two to three percent of the overall vacation market. You know,
Speaker 3: we're keenly focused on what hotels do in general, and
Speaker 3: we believe cruising is a wonderful vacation alternative to hotels.
Speaker 3: I mentioned before the huge gap in value or price
Speaker 3: thirty to forty percent below hotel. But also, you know,
Speaker 3: hotels have their asset light model as being a competitive
Speaker 3: advantage in their industry. It's also a competitive disadvantage because
Speaker 3: they lose control of the product. We own all thirty
Speaker 3: two ships in our fleet, fully own them one hundred
Speaker 3: percent ourselves. We have thirteen more ships on order, by
Speaker 3: the way, and we can ensure that we deliver an
Speaker 3: outstanding consistent product across the fleet, and I think guests
Speaker 3: are beginning to realize that that consistency is something you
Speaker 3: don't always get in the hotel space.
Speaker 5: I've been on cruises before, and when you get on
Speaker 5: board all the extras you have to spend more on,
Speaker 5: especially things like some of these excursions. Are you seeing
Speaker 5: consumers start to ratchet back some of that spending.
Speaker 3: You know, not at all. Our onboard spend continues at
Speaker 3: record levels, you know, you know, we get weekly reports,
Speaker 3: you know, as our ship's travel of our fifty five
Speaker 3: to sixty thousand guests that we're carrying at any given time,
Speaker 3: on board spend shows no cracks. We're very very happy.
Speaker 3: You know. It's another advantage I mentioned the long lee
Speaker 3: time that consumers have in making bookings, so they're paying
Speaker 3: for their cruises four or five months in advance. By
Speaker 3: the time they come on the cruise, that money spend,
Speaker 3: it's already paid for off their credit card. They come
Speaker 3: on the ship with the full whilet ready to spend more.
Speaker 3: And unlike hotels where people don't really stay at a hotel,
Speaker 3: although the tent to sleep, people stay on the ship
Speaker 3: to do everything, shop, spa casino, they arrange their short
Speaker 3: tours for us, so we really have we really getting
Speaker 3: much larger share the consumer's wallet on the ship as well.
Speaker 1: It is literally a captured audience. Harry Summer, Thank you
Speaker 1: so much for being with us. Harry Summer, Norwegian Cruise
Speaker 1: Line Holdings, President and chief executive Officer, bond market selling
Speaker 1: off of but yields Hire you are seeing good news
Speaker 1: is good news across the equity sphere. Joining us now
Speaker 1: Tom Porcelli a PGM fixed income which is a good
Speaker 1: and beautiful thing. Tom, always wonderful to see.
Speaker 3: Thank you for being here. Good to be with you all.
Speaker 1: So what's your initial take? This actually wouldn't suggest that
Speaker 1: the Fed is behind the curve and needs to cut
Speaker 1: rates aggressively.
Speaker 7: So I think it depends how you define behind curve, right,
Speaker 7: because I don't know that you're supposed to be looking
Speaker 7: for notable consumer weakness today. But let's just use the
Speaker 7: sort of the FED zone forecast against them for a second.
Speaker 7: If you look at what they're forecasting for the unemployment
Speaker 7: rate next year, what they're forecasting for inflation next year,
Speaker 7: and what they're forecasting for the FED funds rate next year,
Speaker 7: the unemployment rate and the inflation rate are we have
Speaker 7: that right now, and they have one hundred basis points
Speaker 7: of cuts next year. So I would argue that you
Speaker 7: pulled forward all of this. You've pulled forward the slowing
Speaker 7: and labor, you've pulled forward the slowing in the unemployment rate.
Speaker 7: So I think there is justification for pulling forward this
Speaker 7: hundred basis points worth of cuts that they actually are
Speaker 7: forecasting for next year to this year. So to me,
Speaker 7: that's the sort of the right calculus of it.
Speaker 3: I would actually also.
Speaker 7: Argue that, you know, when you think about cuts, even
Speaker 7: if and again it's not our forecast, we're not saying
Speaker 7: they're going to do one hundred basis points worth of cuts,
Speaker 7: But I have a lot of sympathy for the idea,
Speaker 7: which is what the market is pricing in.
Speaker 4: You know.
Speaker 7: I think what we have to keep in mind is
Speaker 7: you're even at one hundred basis points. If you cut
Speaker 7: one hundred basis points, defend is still restrictive. I mean,
Speaker 7: that's sort of the interesting thing. Policy was calibrated or
Speaker 7: is calibrated for a meaningfully higher inflation rate and is
Speaker 7: calibrated for meaningfully lower unemployment rate. But those things have
Speaker 7: now moved.
Speaker 1: Okay, that said, you have to wonder, if this is
Speaker 1: incredibly restrictive, why the economy isn't feeling it, why you're
Speaker 1: seeing an acceleration in retail sales.
Speaker 7: Yeah, So what I would say is that there have
Speaker 7: been so many buffers in place, right, Like, if you
Speaker 7: think back to how this whole thing started, all that
Speaker 7: fiscal stimulus, all of that excess saving, the idea that
Speaker 7: there was a wealth effect because home prices were rising
Speaker 7: a lot, equity prices were up a lot. This made
Speaker 7: people sort of, you know, sort of exist in this
Speaker 7: feel good environment, and I think that really sort of
Speaker 7: propelled consumption in so many ways. So I would argue
Speaker 7: that the hikes that we saw, that aggressive tightening cycle
Speaker 7: really didn't have a chance to sort of clamp down
Speaker 7: because of all of those sort of extra factors that
Speaker 7: were in play. But I would highlight that you are
Speaker 7: starting to see delinquency rates on the rise, modestly, but
Speaker 7: they're rising. You are starting to see the unemployment rate
Speaker 7: rise again. It's still relatively low, but it's up to
Speaker 7: seven ten to percent at this point. So I think
Speaker 7: you're starting to see some of the tight policy now
Speaker 7: start to show through.
Speaker 6: Well, it's this idea that you're not cutting to react
Speaker 6: or cutting just to get us in the right place.
Speaker 6: When you think about ray cuts, what even is that line,
Speaker 6: because I know you're saying, just what the Fed's projections
Speaker 6: one hundred makes sense? Or is the idea of cutting
Speaker 6: a hundred basis points something that looks like a recession?
Speaker 3: Where's kind of that cutoff for them?
Speaker 7: I think it's such an important idea, and that's why
Speaker 7: I think, you know, and I've said this before, I
Speaker 7: think when the FED starts cutting, I don't think classically,
Speaker 7: when the FED starts cutting, it's like, oh, you know,
Speaker 7: it's over right, the recession is here. I don't think
Speaker 7: that's what this is. I think the narrative coming from
Speaker 7: the FED has to be, hey, look, we're just looking
Speaker 7: to extend the cycle, right, We're looking to extend the expansion.
Speaker 7: I think so the FED has a real opportunity here
Speaker 7: to sort of shift the narrative. And I would argue
Speaker 7: that they're starting that process now. You know, when Powell
Speaker 7: finally shifted to focusing on labor over inflation, which I
Speaker 7: would argue is long overdue, I think that's that's step one.
Speaker 7: And I think the next step is, hey, look, we
Speaker 7: don't think that things are really sort of slowing in
Speaker 7: a notable way, but we are recognized that policies calibrated
Speaker 7: for a completely different inflation regime than what we have
Speaker 7: right now, and so we can take back some of
Speaker 7: that aggressive tightening.
Speaker 5: Well, Rauffa al Bostic certainly one of those individuals that
Speaker 5: is starting to recalibrate. But if that's the case, and
Speaker 5: they're going to message that this isn't in deterioration, but
Speaker 5: we're trying to land the plane, how do they do
Speaker 5: that before the US election?
Speaker 3: You know?
Speaker 7: So I love this question, and I have We've done
Speaker 7: this analysis. I'm sure so many others have.
Speaker 6: You know.
Speaker 7: We went back and we just went back to nineteen
Speaker 7: eighty four. It seemed like a fine round number. We
Speaker 7: looked at every single election from nineteen eighty four through
Speaker 7: to today, and what you see is that history, that
Speaker 7: modest history, is littered with examples of the FED adjusting
Speaker 7: policy during election years. In fact, not just during election years,
Speaker 7: but in and around the election month. All they needed
Speaker 7: was the sort of the justification from a data perspective,
Speaker 7: and I would argue that the unemployment rate being up
Speaker 7: as much as it is. Inflation being down as much
Speaker 7: as it is is your justification.
Speaker 1: How do we know though, that it isn't actually headed
Speaker 1: in the other direction that we already saw the slowdown,
Speaker 1: especially because Joba's claims are actually going down and you're seeing,
Speaker 1: for example, Walmart increasing its expectation for profits. You're seeing
Speaker 1: companies actually doing better out of the four hundred and
Speaker 1: ninety three other than the magnificent seven and accelerating earnings.
Speaker 1: How do we know are not the prespose of an
Speaker 1: acceleration that will only be turbocharged by rate cuts.
Speaker 7: So it's again a super important question. And what I
Speaker 7: would say is Walmart. Walmart is maybe the exception to
Speaker 7: what's going on broadly, right, because we know from a
Speaker 7: lot of other retailers that things are starting to they're
Speaker 7: starting to feel some of the pressure of the consumer
Speaker 7: that's really sort of really looking around for value. And
Speaker 7: if Walmart's really the value player, then it actually makes
Speaker 7: a lot of sense that they performed well. And I
Speaker 7: didn't look at the numbers directly today, but I heard
Speaker 7: that they did pretty well, So I think that that
Speaker 7: is an important idea. But again, I think this is
Speaker 7: this is exactly my point, I think, let this continue
Speaker 7: to roll out, right, Let the economy continue to sort
Speaker 7: of expand by just removing some of the aggressive tightening
Speaker 7: that they have in place. I don't know that unless
Speaker 7: you think that inflation is going to reaccelerate to you know,
Speaker 7: four handles, which is what this policy is calibrated for.
Speaker 7: I think the it can feel very comfortable that alls
Speaker 7: you're doing is taking back some of the aggressive commodation
Speaker 7: that we don't need anymore because inflation has slowed so much.
Speaker 7: And sorry this so I'll make this one last point.
Speaker 7: You know, just keep in mind when we think about inflation,
Speaker 7: just think about how labor it is doing. The unemployment
Speaker 7: rate again, I hate to say it again, but the
Speaker 7: unemployment is up. But in combination with that, hours are down.
Speaker 7: I think Mike mentioned that earlier, but that broadly speaking,
Speaker 7: hours are down a lot, wages are down a lot,
Speaker 7: quit rates are down a lot. The consumer's not feeling
Speaker 7: that great about labor right now. And if you think
Speaker 7: about the thing that really does the driving from a
Speaker 7: consumption perspective, it is the unemployment rate. The unemployment rate
Speaker 7: rises and consumption tends to slow just quickly.
Speaker 1: Here, what would you have to see in the non
Speaker 1: farm Payrolls report in September to change your view.
Speaker 7: So I think that you need a dud of a report,
Speaker 7: right Like you know, I don't know how you quantified
Speaker 7: dut I've fully acknowledged that, but I think you need
Speaker 7: a number that really sort of that that has even
Speaker 7: worse contours than the one that we saw last and
Speaker 7: last report. And I think if you get that, I
Speaker 7: think that's the FEDS justification from going.
Speaker 1: For Tom Prosellio of PGM Fixed Income. Always wonderful to
Speaker 1: see you, Thank you for being here.
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