WEBVTT - Risk, Rates, and Reddit 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.800 --> 0:00:14.880 This is the Bloomberg Surveillance Podcast. I'm Paul Sweeney along 0:00:14.880 --> 0:00:17.240 with Tom Keene. Join us each day for insight from 0:00:17.239 --> 0:00:20.760 the best in economics, geopolitics, finance, and investment. You can 0:00:20.800 --> 0:00:24.439 also watch the show live on YouTube. Visit the Bloomberg 0:00:24.480 --> 0:00:27.760 Podcast channel on YouTube to see the show weekday mornings 0:00:27.760 --> 0:00:30.400 from seven to ten Eastern Remark Global Headquarters at New 0:00:30.480 --> 0:00:33.720 York City. Subscribe to the podcast on Apple, Spotify, or 0:00:33.760 --> 0:00:36.800 anywhere else you listen, and as always on Bloomberg Radio, 0:00:36.840 --> 0:00:40.000 the Bloomberg Terminal, and the Bloomberg Business App. Let's check 0:00:40.000 --> 0:00:42.120 in with somebody who knows what's going on out there 0:00:42.120 --> 0:00:45.160 in the Market's Christina Hooper. She's a chief global market 0:00:45.200 --> 0:00:49.080 strategist for Investco. Christina, it's been a busy week here. 0:00:49.159 --> 0:00:51.920 I mean, we've had a lot of central bank movement here. 0:00:52.000 --> 0:00:55.160 We've had a lot of IPO markets or activity in 0:00:55.200 --> 0:00:58.360 the markets as well. Let's start with the Federal Reserve 0:00:58.400 --> 0:01:00.600 here and some of the other central banks. Quite frankly, 0:01:00.920 --> 0:01:02.320 what did you take from the Fed and the other 0:01:02.360 --> 0:01:02.960 central banks? 0:01:02.960 --> 0:01:03.920 Commentary this week? 0:01:04.040 --> 0:01:08.440 Paul, we are headed to an easier environment for monetary policy, 0:01:08.880 --> 0:01:10.720 and as I think you know, I've been a big 0:01:10.760 --> 0:01:16.679 believer that monetary policy has and will continue to drive markets, 0:01:17.000 --> 0:01:19.360 and that's why I think we've had such a good week. 0:01:19.480 --> 0:01:23.040 Even in terms of IPOs, Sentiment has gotten more positive 0:01:23.120 --> 0:01:26.240 because we know the end is insight and that we're 0:01:26.280 --> 0:01:28.480 going to start to see rate cuts. In fact, the 0:01:28.520 --> 0:01:31.559 Swiss National Bank gave us a nice surprise this week, 0:01:31.600 --> 0:01:36.839 our first present from major developed central banks in terms 0:01:36.840 --> 0:01:39.760 of cutting. But this is just the beginning, and this 0:01:39.920 --> 0:01:42.759 is so different than the environment we saw in twenty 0:01:42.840 --> 0:01:47.960 twenty two, where we had surprise rate hikes, a whole 0:01:48.040 --> 0:01:50.840 flurry of them, so much so that the World Bank 0:01:50.960 --> 0:01:54.640 warned in September of twenty twenty two that this synchronized 0:01:54.680 --> 0:01:57.800 tightening was something we hadn't seen in many decades. Well, 0:01:57.840 --> 0:02:00.200 now we're getting to see what I think will be 0:02:00.680 --> 0:02:04.200 synchronized cuts over the course of this year, which should 0:02:04.240 --> 0:02:05.920 be very supportive for markets. 0:02:06.120 --> 0:02:07.880 Yeah, could you talk a little bit more about what 0:02:07.920 --> 0:02:10.480 you see as the markets play here, because we've talked 0:02:10.560 --> 0:02:13.800 so frequently on this radio program about how frothy equity 0:02:13.840 --> 0:02:16.520 markets are getting. So where does an investor go here? 0:02:16.919 --> 0:02:20.160 Well, I think an investor needs to be well diversified. 0:02:20.480 --> 0:02:23.720 We shouldn't ignore the US, but we do know that 0:02:23.880 --> 0:02:28.440 valuations are much higher here than elsewhere, and so this 0:02:28.520 --> 0:02:32.359 is a great opportunity to sharpen pencils and look around 0:02:32.400 --> 0:02:38.279 the world for potential, and that potential can come from Japan. Interestingly, 0:02:38.560 --> 0:02:43.639 their central bag is in a different place, just beginning tightening, 0:02:43.720 --> 0:02:47.679 normalizing monetary policy. But that is a vote of confidence 0:02:47.680 --> 0:02:52.680 in the Japanese economy, and I think well really spur 0:02:52.919 --> 0:02:57.639 attention more investor interest in the Japanese stock market. Emerging 0:02:57.680 --> 0:03:03.200 markets valuation opportunity abound, and in particular Asia em looks 0:03:03.240 --> 0:03:08.720 attractive right now. There's growth potential there as well as valuations, 0:03:08.760 --> 0:03:11.800 and against supportive monetary policy, we're likely to see a 0:03:11.840 --> 0:03:16.440 weakening US dollar, which should help going outside the US. 0:03:16.760 --> 0:03:19.880 But again there's still opportunity in the US, so investors 0:03:19.880 --> 0:03:22.760 shouldn't ignore it, and I shouldn't be just talking about equities. 0:03:22.919 --> 0:03:26.320 There are opportunities in fixed income. We're in a different 0:03:26.320 --> 0:03:30.320 place than than where we've been for years in terms 0:03:30.320 --> 0:03:32.959 of yield. We had lived in a yield scarce environment. 0:03:33.240 --> 0:03:35.520 We're not there. I wouldn't say it's a golden age 0:03:35.520 --> 0:03:38.520 of fixed income. But fixed income looks very attractive, and 0:03:38.560 --> 0:03:40.560 there are a whole variety of areas that we can 0:03:40.640 --> 0:03:45.480 choose from to make a diversified portfolio. Investment great credit 0:03:45.480 --> 0:03:49.560 looks very attractive to me, but certainly opportunities in emerging markets, 0:03:49.640 --> 0:03:54.680 high yield municipals. Again, there is so much an abundance. 0:03:54.720 --> 0:03:57.320 So if you think about twenty twenty two as an 0:03:57.400 --> 0:04:02.160 anis horribilis for markets, I think that it's something different, 0:04:02.240 --> 0:04:04.960 a very different today and much better environment. 0:04:05.240 --> 0:04:06.800 I kin I want to go to fixed income because 0:04:06.800 --> 0:04:08.800 I'm wondering. I'm just looking at my screen here, Christina, 0:04:08.800 --> 0:04:11.320 and I can just go over to a two year 0:04:11.640 --> 0:04:14.280 United States Treasury and get four points six percent. That 0:04:14.360 --> 0:04:16.880 seems pretty darn good. I mean, is that the trade 0:04:16.920 --> 0:04:18.600 in fixing com or do I try to take some 0:04:19.560 --> 0:04:22.520 credit risk here and think about investment grade credit or 0:04:22.560 --> 0:04:25.440 maybe even what really has been the best performer in 0:04:25.480 --> 0:04:27.000 fixing them, which is high yield. 0:04:27.040 --> 0:04:28.520 How do I think about credit risk? 0:04:29.720 --> 0:04:32.159 Well, I'm a big believer in diversification and thinking for 0:04:32.200 --> 0:04:35.160 the longer term. I don't think it should be about treasuries. 0:04:35.720 --> 0:04:38.520 I think there's a lot of opportunity moving out on 0:04:38.560 --> 0:04:41.960 the risk spectrum, investment grade credit to me is a 0:04:41.960 --> 0:04:45.320 sweet spot. But certainly high yield has been a strong performer. 0:04:45.680 --> 0:04:50.560 And given what we're seeing in the US economy, how 0:04:50.680 --> 0:04:54.760 it looks like a softer landing than we had died. 0:04:55.240 --> 0:04:58.560 I think that makes the case for moving out having 0:04:58.640 --> 0:05:01.760 exposure to high yield. Don't forget Muni's where there's some 0:05:01.960 --> 0:05:06.360 very attractive yeals right now. So there is a lot 0:05:06.520 --> 0:05:09.560 of opportunity. And of course don't forget emerging market. It's 0:05:09.600 --> 0:05:10.320 dead in there. 0:05:10.640 --> 0:05:13.000 Is there anything that you like in particular in emerging markets? 0:05:13.000 --> 0:05:16.279 I mean you mentioned earlier Asia, but anything in Latin America, 0:05:16.320 --> 0:05:17.200 anything in Africa. 0:05:17.839 --> 0:05:23.279 Well, certainly Mexico benefits from a US economy, and so 0:05:23.640 --> 0:05:25.800 I think what we're going to see in the US 0:05:26.040 --> 0:05:29.159 is a pleasant surprise this year. I've been a believer 0:05:29.240 --> 0:05:31.719 that we'd see a bumpy landing. I don't think it's 0:05:31.720 --> 0:05:34.359 going to be as bumpy as I had anticipated, and 0:05:34.400 --> 0:05:36.920 that should be good news for country like Mexico. 0:05:37.680 --> 0:05:39.560 All right, Christina, thank you so much for joining us. 0:05:39.640 --> 0:05:44.000 Christina Hooper. She is the chief Global market strategist for Investco. 0:05:54.400 --> 0:05:56.720 Big Week in Technology let's get a couple of our 0:05:56.760 --> 0:05:58.120 top technology analysts. 0:05:58.120 --> 0:05:59.800 We got them together here on a Rock. 0:06:00.080 --> 0:06:04.360 Na joins us via zoom from Chicago, and Man Deep 0:06:04.400 --> 0:06:07.320 saying he's here in a Bloomberg interactor broker's studio on Rock. 0:06:07.400 --> 0:06:08.680 Let's start with you here. I want to start with 0:06:08.680 --> 0:06:10.960 Apple here. The more I read about this, I'm just 0:06:11.440 --> 0:06:13.599 you know about Apple have facing these anti trust suits 0:06:14.480 --> 0:06:18.960 both here in the US and abroad, have some regulatory challenges. 0:06:19.240 --> 0:06:22.560 I'm not sure if this is a Microsoft thing from 0:06:22.920 --> 0:06:26.119 kind of the nineties whereby I was kind of a 0:06:26.240 --> 0:06:29.520 casting a pall over the stock that just couldn't get 0:06:29.560 --> 0:06:32.320 out of or is it something that this story can 0:06:32.360 --> 0:06:34.960 power through. What's the early read when you talked to 0:06:35.000 --> 0:06:35.919 investors these days? 0:06:37.000 --> 0:06:39.560 Yeah, I mean I mouse confess I was surprised by 0:06:39.600 --> 0:06:42.479 the stock reaction yesterday. I mean, everybody knew this was 0:06:42.480 --> 0:06:45.320 going to happen, so why the surprise And that was 0:06:45.360 --> 0:06:48.440 a bit confusing. But having said that, you know, Apple 0:06:48.560 --> 0:06:50.880 generates so much for a cash flow. It is truly 0:06:50.920 --> 0:06:54.160 the bohemoth when it comes to their operating system, and 0:06:54.240 --> 0:06:56.479 people are taking shots at it and this is not 0:06:56.560 --> 0:06:58.479 going to end and it's a big overhang for the 0:06:58.480 --> 0:07:00.919 stock over the next Cinnicks several years. You know, this 0:07:01.040 --> 0:07:02.760 is not going to go through in the next six 0:07:02.800 --> 0:07:05.719 months or twelve months. This is a multi year problem now, 0:07:06.320 --> 0:07:06.880 I guess. 0:07:06.680 --> 0:07:09.840 Mandy, could you talk a little bit about another issue 0:07:09.840 --> 0:07:12.440 that Apple's been facing. It's had a string of pretty 0:07:12.440 --> 0:07:14.480 bad news about where it is on AI. We have 0:07:15.040 --> 0:07:17.440 these headlines that just have crossed that Apples and talks 0:07:17.440 --> 0:07:21.200 to use bydos Ai and it's Chinese iPhones. You know, 0:07:21.240 --> 0:07:23.640 we had this scoop earlier about the potential tie up 0:07:23.680 --> 0:07:26.240 with Google for AI. I mean, it doesn't look like 0:07:26.280 --> 0:07:28.720 it's really anywhere and the thing that is most hot 0:07:28.760 --> 0:07:30.880 among investors, I. 0:07:30.880 --> 0:07:33.720 Won't characterize it that way. I think in the end, 0:07:34.200 --> 0:07:37.440 Jenni is still so early that you know, when we 0:07:37.480 --> 0:07:41.240 think about who is the real beneficiary, obviously it's Nvidia, 0:07:41.360 --> 0:07:43.880 and when it comes to on device Jenni, which is 0:07:43.920 --> 0:07:48.080 where Apple plays in, nobody is a standout. Yes, Google 0:07:48.120 --> 0:07:51.440 has a model, and obviously Apple is talking about leveraging 0:07:51.480 --> 0:07:55.120 Google Gemini. But maybe it's a sound strategy to have 0:07:55.200 --> 0:07:58.480 a Chinese vendor provide the LM for the Chinese phones, 0:07:58.520 --> 0:08:02.760 because when it comes to LM chatbot functionality. It's all 0:08:02.800 --> 0:08:07.200 about the local language, the local knowledge that the LLLM embeds, 0:08:07.280 --> 0:08:10.000 and it may actually turn out to be a good 0:08:10.040 --> 0:08:15.040 strategy to use local llms wherever Apple has an install base. 0:08:15.400 --> 0:08:19.280 LLM definition Large Language model, which I know that because 0:08:19.320 --> 0:08:21.320 I read the research coming from nDEP and on a 0:08:21.400 --> 0:08:25.080 rock an rag another Apple issue here, and then maybe 0:08:25.120 --> 0:08:27.440 we can broad it out a little bit. But again 0:08:27.480 --> 0:08:29.880 I think I probably speak for most Apple investors is 0:08:29.920 --> 0:08:32.360 I'm still trying to get my head around China. What 0:08:32.600 --> 0:08:34.600 is the risk there for me China, both from a 0:08:34.679 --> 0:08:38.120 demand for my products in China and maybe to a 0:08:38.200 --> 0:08:40.880 lesser extent to supply chain, But that supply chain issue 0:08:40.880 --> 0:08:43.640 still on the table. Where are you where? Where's the 0:08:43.679 --> 0:08:47.480 street on kind of sussing out the China risk for Apple. 0:08:48.400 --> 0:08:50.200 So when you look at you know, Apple, let's over 0:08:50.200 --> 0:08:53.200 a ten year history. It really made inroads in the 0:08:53.280 --> 0:08:56.600 US and the Western world, controlling market share. But the 0:08:56.640 --> 0:08:59.360 next big market is China and that's they were doing well. 0:08:59.640 --> 0:09:03.240 The phone came out last year. It really underscored that 0:09:03.800 --> 0:09:06.600 there was refresh cycle for that particular phone that hasn't 0:09:06.600 --> 0:09:09.840 happened in years. Consumer weakness in China, and Apple's just 0:09:09.880 --> 0:09:12.280 losing market share at this point in terms of you know, 0:09:12.320 --> 0:09:14.680 every quarter when they come out, and it's been a 0:09:14.800 --> 0:09:17.280 very tough market. I don't see that changing at least 0:09:17.280 --> 0:09:21.120 this year. They really need a catalyst to really go 0:09:21.200 --> 0:09:22.960 out and say that, you know, we can we can 0:09:23.120 --> 0:09:26.400 really work in China. Maybe the LLM, maybe the bartorship 0:09:26.400 --> 0:09:28.880 with Baido is one of them. But having said that, 0:09:28.960 --> 0:09:31.199 I don't see any chances that they're going to have 0:09:31.240 --> 0:09:35.280 a big rebound in China at least this year, barning. 0:09:35.040 --> 0:09:37.160 It out a little bit. Another really big tech story 0:09:37.240 --> 0:09:40.240 this week is the Reddit IPO. I mean, that's gone 0:09:40.360 --> 0:09:43.160 incredibly well. Mandy, canase start with you just to talk 0:09:43.200 --> 0:09:46.600 about what your read is on how enthusiastic investors have 0:09:46.640 --> 0:09:48.160 been for this, and like, do you think that this 0:09:48.320 --> 0:09:50.720 is really an AI play? Paul is skeptical. 0:09:51.720 --> 0:09:54.640 So, I mean, as I mentioned yesterday when I was 0:09:54.679 --> 0:09:58.760 on your show, that look, Reddit has got something unique 0:09:58.760 --> 0:10:01.520 when it comes to the user data and you know, 0:10:01.640 --> 0:10:05.679 having the wide breadth of online communities, and that is 0:10:06.760 --> 0:10:10.320 I think, really something that stands out versus other social 0:10:10.360 --> 0:10:13.440 media platforms which are far bigger than Reddit. So the 0:10:13.480 --> 0:10:16.280 criticism that I get from investors is it's an eighteen 0:10:16.400 --> 0:10:19.480 year old company that it's not profitable, and for the 0:10:19.520 --> 0:10:22.080 first ten years of its existence it didn't even have 0:10:22.160 --> 0:10:24.640 an ADS model. So it's really in the last five 0:10:24.720 --> 0:10:28.480 years they've started layering ADS and the IPO is coming 0:10:28.520 --> 0:10:31.560 at a good time with this whole JENNYI wave because 0:10:32.080 --> 0:10:35.600 everybody needs to train their models and if you're looking 0:10:35.640 --> 0:10:39.839 for tech's corpus, Reddit is the go to place. So 0:10:40.280 --> 0:10:44.120 to my mind, any product with stickiness where users come 0:10:44.160 --> 0:10:46.520 to your platform every day, and in reddits case, they 0:10:46.600 --> 0:10:49.319 need to boost their daily active users. Their monthly active 0:10:49.400 --> 0:10:52.680 users is far higher than their daily active users. If 0:10:52.720 --> 0:10:55.320 they're able to execute on that, I think they'll do 0:10:55.440 --> 0:10:57.640 quite well in terms of the first six months of 0:10:57.679 --> 0:10:58.080 the IPO. 0:10:58.320 --> 0:10:59.800 Yeah, and you were dead on yesterday. 0:10:59.800 --> 0:11:03.800 You're bullsh yesterday you're against my skepticism here. Stock rallied 0:11:04.000 --> 0:11:07.359 just big time there, So good news for the redifilks, 0:11:07.360 --> 0:11:10.280 good news for the IPO market, even after we had 0:11:10.280 --> 0:11:13.520 that astera of the day before. Also a big aiplan 0:11:13.559 --> 0:11:15.880 net stock is training really well on the IPO market. 0:11:16.120 --> 0:11:19.000 Hey Anna Rod, I think you know the name that 0:11:19.040 --> 0:11:20.760 I know you've been panning the table on a lot. 0:11:20.880 --> 0:11:23.600 Is Microsoft here? What's the latest call here? 0:11:24.400 --> 0:11:24.520 On? 0:11:24.640 --> 0:11:27.000 Microsoft is still firmly in that magnificent I don't know 0:11:27.000 --> 0:11:29.120 whether it's five or seven, what it is these days, 0:11:29.120 --> 0:11:30.360 but what's the call here? 0:11:31.240 --> 0:11:32.960 I think in the software world, if you want to 0:11:33.040 --> 0:11:35.920 just pick one company that is truly exposed to AI 0:11:36.320 --> 0:11:38.920 in the most direct way, it is Microsoft right now. 0:11:38.920 --> 0:11:42.000 And I don't see anything changes. I'm actually surprised they 0:11:42.040 --> 0:11:44.040 can go out and pays sic center fifteen million and 0:11:44.120 --> 0:11:46.920 hire so many people and nobody says anything about it. 0:11:46.960 --> 0:11:49.200 I mean, maybe this is the new way of acquiring companies. 0:11:49.880 --> 0:11:51.920 I mean, it is remarkable the amount of money they're 0:11:51.960 --> 0:11:55.400 spending on both on expanding their data centers for cloud 0:11:55.480 --> 0:11:58.840 as well as AI. I see them, you know, differentiating 0:11:58.920 --> 0:12:02.000 their more compare to others over the next few years. 0:12:02.200 --> 0:12:03.880 But I guess one thing, can we just can I 0:12:03.960 --> 0:12:06.800 just keep with this point any ark, because with Microsoft 0:12:06.880 --> 0:12:10.320 they're spread across so many different areas. I mean, you 0:12:10.400 --> 0:12:12.840 start to feel like that old anti trust sort of 0:12:13.200 --> 0:12:15.760 vibe is starting to come back for Microsoft, that regulators 0:12:15.840 --> 0:12:17.280 might start getting really really worried. 0:12:18.240 --> 0:12:20.480 Yeah, as soon as you get a decent amount of 0:12:20.480 --> 0:12:22.760 free cash flow. You will see the regulators come in. 0:12:22.840 --> 0:12:25.240 But I mean, this is nothing that they haven't dealt 0:12:25.240 --> 0:12:27.679 with in the past. There's not one tech company right 0:12:27.720 --> 0:12:29.760 now that's not dealing with them, and I don't think 0:12:29.800 --> 0:12:30.720 that's going to change. 0:12:30.880 --> 0:12:32.600 I mean, it stocks up. I mean, first of all, 0:12:32.600 --> 0:12:36.480 it's a three point two trillion dollar market cap company. 0:12:36.480 --> 0:12:37.120 It's just amazing. 0:12:37.160 --> 0:12:40.400 Year to date, the stocks up fourteen percent, trailling twelve months, 0:12:40.480 --> 0:12:45.400 up sixty percent pe on the June twenty four it's thirty. 0:12:45.160 --> 0:12:47.199 Six times, you know. But you know a lot of 0:12:47.200 --> 0:12:49.200 folks will tell you, hey, we'll grow into that. All right. 0:12:49.280 --> 0:12:51.160 Mandy, you cover so much in the tech space. What's 0:12:51.160 --> 0:12:53.120 your top idea here? What are you guys talking about 0:12:53.120 --> 0:12:53.840 the most these days? 0:12:53.880 --> 0:12:56.640 I mean, right now, our top focus idea is Alphabet 0:12:56.840 --> 0:12:59.800 because all the criticism they've been getting and you know 0:12:59.800 --> 0:13:02.520 the fact that everyone is talking about them losing share 0:13:02.559 --> 0:13:05.920 and search. We got one validation that there are no 0:13:06.760 --> 0:13:09.400 more behind in terms of large anglid model race with 0:13:09.720 --> 0:13:13.400 Apple considering you know, Google Gemini to be the model 0:13:13.440 --> 0:13:16.080 and not Open AI or any other models out there. 0:13:16.440 --> 0:13:20.360 And look, when it comes to search, I think Google 0:13:20.480 --> 0:13:23.000 has the best platform when it comes to add tech 0:13:23.040 --> 0:13:24.840 and time and again we see that. You know, with 0:13:25.000 --> 0:13:28.199 other social media platforms, they're not able to monetize their 0:13:28.320 --> 0:13:32.200 user base and engagement as well as Google does. And 0:13:32.280 --> 0:13:34.400 you see that with Reddit, you see that with Twitter. 0:13:34.760 --> 0:13:37.680 That's why Google search is so unique, because they're able 0:13:37.720 --> 0:13:40.920 to monetize it far better than everyone else. So I'm 0:13:40.960 --> 0:13:42.760 in the camp that they will hold on to their 0:13:42.760 --> 0:13:45.560 search share. In fact, the search market will grow as 0:13:45.559 --> 0:13:48.199 a result of the large anglid models, and Google will 0:13:48.200 --> 0:13:49.000 be a beneficiary. 0:13:49.040 --> 0:13:52.880 All right, Google, googg I'm sorry. Goog l is a 0:13:52.920 --> 0:13:55.280 ticker for the pros out there. It's got a market 0:13:55.320 --> 0:13:57.480 cap at one point eight billion dollars. 0:13:57.480 --> 0:14:00.640 The stuck is trillion. Thank you very much for that correction. 0:14:00.679 --> 0:14:02.520 Thank you. You even beat out Rich Truman on that. 0:14:02.720 --> 0:14:04.640 Stocks up five percent year to date, up forty two 0:14:04.640 --> 0:14:07.120 percent trailing twelve month. Anurag Ran A man Deep Singh 0:14:07.240 --> 0:14:10.720 a couple of our top top leaders in technology research 0:14:10.760 --> 0:14:11.920 for Bloomberg Intelligence. 0:14:12.120 --> 0:14:13.120 They drive the business. 0:14:17.840 --> 0:14:21.520 Let's talk energy here and sustainable energy, and to do that, 0:14:21.560 --> 0:14:23.160 one of the folks we like to check in with 0:14:23.200 --> 0:14:25.240 is Jonathan Maxoy. He's a CEO and co founder of 0:14:25.320 --> 0:14:28.920 sustainable development capital. The name says it all. He joins 0:14:29.000 --> 0:14:30.920 us here on a Bloomberg Interactive Brokers studio. He was 0:14:30.920 --> 0:14:33.360 also the author of a new book which I will 0:14:33.400 --> 0:14:37.040 Plug the Edge, How competition for resources is pushing the 0:14:37.080 --> 0:14:39.360 world and its climate to the brink, and what we 0:14:39.400 --> 0:14:41.880 can do about it. Jonathan, thanks so much for joining 0:14:41.960 --> 0:14:45.440 us here. Did we have President Biden in the administration 0:14:45.560 --> 0:14:48.720 do something with liquefied natural gas and people in the 0:14:48.800 --> 0:14:50.640 energy patch? An, I'm so happy about it. What's going 0:14:50.680 --> 0:14:51.040 on there? 0:14:51.160 --> 0:14:54.480 Yeah, So, a couple of weeks ago there was a 0:14:54.800 --> 0:15:01.320 moratorium on exports new export licenses though export of liquefied 0:15:01.360 --> 0:15:04.920 natural gas to Europe. I'm in putting this into context. 0:15:05.440 --> 0:15:11.600 Europe had to scramble for gas after Russia's invasion of Ukraine. 0:15:11.640 --> 0:15:14.360 And where do you get it from? Well, you know, Kata, Norway. 0:15:14.400 --> 0:15:17.320 But actually one of the biggest, if not the biggest 0:15:17.440 --> 0:15:21.480 exporters is the United States. Right So now, having said 0:15:21.480 --> 0:15:24.800 all of that, we had an announcwerment this week from 0:15:24.840 --> 0:15:26.880 the White House to say, don't worry, you know it 0:15:26.960 --> 0:15:29.120 will be within a year. We'll let these new export 0:15:29.160 --> 0:15:32.120 licenses come back. There was already just to put this 0:15:32.160 --> 0:15:36.960 into context, about fifty billion cubic feet per day authorized. 0:15:37.120 --> 0:15:39.680 That's three times the level of today's exports. So this 0:15:39.760 --> 0:15:42.320 isn't anything to panic about in the short run. Now 0:15:42.400 --> 0:15:46.280 this was dressed or explained as a climate initiative. Now 0:15:46.280 --> 0:15:49.160 I'm in the sustainability business, I would love to think that. 0:15:49.280 --> 0:15:52.720 I'm also expecting having said that, that some thought has 0:15:52.760 --> 0:15:54.240 had to be given to what it could do to 0:15:54.840 --> 0:15:58.400 US prices. Do you know how much more expensive it 0:15:58.480 --> 0:16:01.600 is to buy gas in the versus the United States? 0:16:01.840 --> 0:16:04.480 A lot four to eight times on average over the 0:16:04.520 --> 0:16:07.640 last five years or so, And it's never really over 0:16:07.640 --> 0:16:10.600 the last decade been cheaper other than in one month, 0:16:10.640 --> 0:16:13.080 which was in COVID when everything went upside down. So 0:16:13.440 --> 0:16:15.320 you know, this is a big issue for Europe. It's 0:16:15.360 --> 0:16:18.040 a huge opportunity for the United States to step into 0:16:18.080 --> 0:16:19.040 Russia's shoes here. 0:16:19.240 --> 0:16:22.200 So if it's a huge opportunity for the United States, 0:16:22.440 --> 0:16:24.720 it does still seem to me that President brien has 0:16:24.720 --> 0:16:27.680 just kind of completely undercut that potential advantage, or am 0:16:27.720 --> 0:16:28.400 I missing something? 0:16:28.480 --> 0:16:31.960 I think there's a moratorium. The White House has effectively 0:16:32.000 --> 0:16:35.800 said the moratorium is pretty short lived, and it won't 0:16:35.880 --> 0:16:38.240 really affect anything in the short run. I think the 0:16:38.600 --> 0:16:42.720 bigger picture really for the US, it's an extraordinary energy position. 0:16:42.840 --> 0:16:47.720 It's energy independent, it's the largest largest exporter actually potentially 0:16:47.720 --> 0:16:49.640 of oil and gas in the world. So this is 0:16:49.720 --> 0:16:53.080 quite a challenge. Actually, this is now a big Petra state. 0:16:53.160 --> 0:16:57.600 What do you do in a changing environmental and climate world? 0:16:57.680 --> 0:17:00.880 All right, so we're a sustainable development capital. Where are 0:17:00.920 --> 0:17:02.880 you guys deploying your capital these day? Is where do 0:17:02.880 --> 0:17:04.800 you think is some of the greatest opportunities. 0:17:04.840 --> 0:17:07.920 So look, half of half of our investment, maybe more, 0:17:08.040 --> 0:17:11.440 is actually coming into the United States, So we invest 0:17:12.080 --> 0:17:15.400 in a different type of solution to everybody else, whether 0:17:15.600 --> 0:17:17.320 most of the money is focused. This is big business. 0:17:17.480 --> 0:17:19.080 Energy is one of the biggest business in the world. 0:17:19.200 --> 0:17:22.080 Nine trillion has been invested in renewables. So if you 0:17:22.119 --> 0:17:24.520 think of US as somebody in the clean energy sector, 0:17:24.520 --> 0:17:27.399 you would expect as maybe to be building wind farms 0:17:27.480 --> 0:17:30.600 or sellar parks and plugging it into the grid. The 0:17:30.600 --> 0:17:33.719 place that we get excited actually is what with the 0:17:33.720 --> 0:17:36.560 customer rather than the grid. You're going to have to 0:17:36.600 --> 0:17:38.760 spend California alone is going to have to spend eighty 0:17:38.880 --> 0:17:41.600 billion to build out its grid over the next decade, 0:17:41.680 --> 0:17:44.720 just to transport the existing energy systems. If I told 0:17:44.760 --> 0:17:46.320 you as I do when I come on your show, 0:17:46.600 --> 0:17:48.960 how nuts it is that in the United States in 0:17:49.040 --> 0:17:51.720 Europe about two thirds to seventy percent of the primary 0:17:51.800 --> 0:17:54.840 energy is wasted or lost before it gets to the point. 0:17:54.960 --> 0:17:57.680 I never understood that again, So after seventy percent of 0:17:57.720 --> 0:18:01.480 the energy produced just gets wasted, it goes up into 0:18:01.480 --> 0:18:04.400 the right the air, of the atmosphere, of the everywhere else. 0:18:04.440 --> 0:18:08.200 Yeah, I'll unpack it very quickly, but because it is extraordinary, 0:18:08.240 --> 0:18:10.520 it's the biggest dirty secret of the energy sector, and 0:18:10.560 --> 0:18:12.400 I'll just unpack it to begin. It's why I wrote 0:18:12.400 --> 0:18:14.639 the book actually, and thousands of people read it, and 0:18:14.640 --> 0:18:16.360 if anybody would like to take casure with it, I'd 0:18:16.400 --> 0:18:19.240 love to get your email. So the biggest loss of 0:18:19.359 --> 0:18:23.160 energy happens actually in centralized energy systems. Gas and nuclear 0:18:23.240 --> 0:18:25.119 are two of the largest other than coal, and the 0:18:25.119 --> 0:18:28.159 two of the largest producers of electricity, for example, in 0:18:28.200 --> 0:18:31.399 the United States. The problem is when you put either 0:18:31.440 --> 0:18:34.879 a gas molecule in a turbine or frankly nuclear fuel 0:18:34.880 --> 0:18:37.800 and a power station, only about half of it turns 0:18:37.800 --> 0:18:40.639 into electricity. What happens to the other half, it turns 0:18:40.640 --> 0:18:44.720 into heat. Now, if that heat is being produced very 0:18:44.760 --> 0:18:48.240 far away from the energy load, in other words, where 0:18:48.240 --> 0:18:51.720 the demand is what happens to it, well, not nothing, 0:18:51.760 --> 0:18:55.000 it gets it just disappears into the atmosphere. Ultimately, the 0:18:55.000 --> 0:18:57.240 bits that do escape into space, they don't need it 0:18:57.320 --> 0:18:59.760 up there. So that's the biggest part of the loss. 0:18:59.800 --> 0:19:01.640 It's what they call thermal loss is at the point 0:19:01.680 --> 0:19:04.600 of generation. The solution to that is to generate closer 0:19:04.640 --> 0:19:06.040 to where you need the energy, and then you could 0:19:06.080 --> 0:19:09.520 use the heat, but we don't. There are other bits 0:19:09.560 --> 0:19:12.280 of loss which happen. You lose about ten percent on 0:19:12.400 --> 0:19:15.560 extracting and converting oil and gas, for example, into pipelines. 0:19:15.600 --> 0:19:17.159 Why do I talk about oil and gas as a 0:19:17.200 --> 0:19:20.200 sustainability guy, because eighty percent of the world's energy still 0:19:20.240 --> 0:19:22.840 fossil fuels or oil, gas and coal. And then the 0:19:22.920 --> 0:19:26.760 last piece of it is transmission and distribution systems. Washington, 0:19:26.840 --> 0:19:29.680 I was there yesterday and I'm unbelievably happy to see 0:19:29.680 --> 0:19:31.320 that they're looking on the demand side of this too. 0:19:31.359 --> 0:19:33.919 Now because everything's been about grid, good grid, you know, 0:19:33.960 --> 0:19:36.160 we need to invest in more in the grid. That's 0:19:36.240 --> 0:19:38.480 just to get the energy for miles away into town. 0:19:38.800 --> 0:19:40.439 But do you know what, five to ten percent of 0:19:40.440 --> 0:19:43.159 it gets lost through transmission and distribution system. So you 0:19:43.160 --> 0:19:45.800 added out ten percent plus fifty percent plus ten percent. 0:19:46.119 --> 0:19:48.479 And the Lawrences live in more national laboratories. Numbers they 0:19:48.520 --> 0:19:52.200 produce every July show that now in the United States, 0:19:52.240 --> 0:19:54.800 seventy percent of primary energy is lost before it gets 0:19:54.800 --> 0:19:55.760 to the point of use. 0:19:56.840 --> 0:19:59.000 It's incredible, that's an incredible statistic. 0:19:59.000 --> 0:19:59.880 Well, we have just got back. 0:20:01.320 --> 0:20:02.879 But you know, I think, as I said I was 0:20:02.880 --> 0:20:05.280 in DC yesterday, I'm not going to give away in 0:20:05.480 --> 0:20:09.240