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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 2: Worn Buffett and Berkshire have I recording some earnings over

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Speaker 2: the weekend. The question I always have is how much

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Speaker 2: cash do they have on their balantie?

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Speaker 3: Everybody always wants to watch that as a contrarian potential indicator.

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Speaker 2: Yeah, I just I just don't know what's going on

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Speaker 2: over there. But our next guest does. Matt Pelosola. He's

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Speaker 2: seen around us covering the insurance business for Bloomberg Intelligence

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Speaker 2: during us here in a Bloomberg Interactive Brokers studio, Matt,

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Speaker 2: wou'd you take away from the Berkshire's results on Saturday?

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Speaker 4: So pult to answer your first question. Three hundred and

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Speaker 4: twenty five billion dollars in cash. That's the most they've

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Speaker 4: ever had. So when you look at their earnings, there's

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Speaker 4: a couple of layers you have to unpeel. First, their

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Speaker 4: gap earnings were swayed by investment changes. Buffett himself has said,

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Speaker 4: you kind of just throw that out. We don't really

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Speaker 4: look at that. It was like twenty six I think

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Speaker 4: billion versus an eleven billion loss in the year ago.

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Speaker 4: Those numbers are a little bit irrelevant. The next part

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Speaker 4: is their earnings from operating companies. Those, if you look

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Speaker 4: at just the number they give you, those were down

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Speaker 4: about six percent. What happened there, though, was they have

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Speaker 4: a lot of yen debt and there was a big

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Speaker 4: four x loss in there, so peel that back. The

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Speaker 4: operating companies earnings were up a little bit, which was

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Speaker 4: less than I expected. The insurance operation had a couple

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Speaker 4: of unforeseen negatives in it, and that really turned it down.

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Speaker 4: Some of them I don't think are ongoing things, but

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Speaker 4: that was really the negative variance was in the insurance

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Speaker 4: business something.

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Speaker 3: Because we were actually chatting about this earlier. When it

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Speaker 3: came to the percent of their cash pilot Berkshire Hathaway

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Speaker 3: last time it was around this high. The stock market

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Speaker 3: to continued to move on to records over the following

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Speaker 3: fifty two weeks, but then the last time on this

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Speaker 3: opposite into that the lowest percent of cash he had

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Speaker 3: at any time over the past decade was right when

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Speaker 3: the S and P five hundred briefly peeged in twenty

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Speaker 3: twenty one. So what's your thoughts when ever, you're kind

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Speaker 3: of thinking about what this could mean more broadly for

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Speaker 3: where like major indexes and equities could potentially be headed.

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Speaker 4: Yeah, So, I mean Buffett is a more of a

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Speaker 4: time in than timing of the market right clearly, So,

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Speaker 4: I don't think he's making big moves on large expectations

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Speaker 4: on the market. If you look what happened, they sold

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Speaker 4: about twenty two billion dollars worth of Apple stock in

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Speaker 4: the quarter. That's along with about nine and a half

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Speaker 4: billion worth of Bank of America stock in the quarter.

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Speaker 4: I don't think you look at that and say, Okay,

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Speaker 4: he's completely parish on everything in the market. I think

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Speaker 4: those were, you know, unique things. They were highly concentrated

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Speaker 4: in Apple. Their Apple position is down seventy percent from

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Speaker 4: its high in terms of the shares they own, so

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Speaker 4: I think those things were unique to the stocks they own.

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Speaker 4: Buffett has repeatedly talked about taxes going up. I don't

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Speaker 4: think it's even an election cycle now, but he's just

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Speaker 4: saying even longer term, there's probably only one direction taxes

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Speaker 4: are going for us and that's up, so you'd not

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Speaker 4: be surprised to see them taking large gains off the board.

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Speaker 2: So three and twenty five billion dollars, is there any

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Speaker 2: realistic scenario for deploying that capital over a multi year period.

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Speaker 4: You know, it's tough. They are limited in how much

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Speaker 4: shares they can buy back just on the float.

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Speaker 2: We had wrote.

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Speaker 4: You know, it's tough to see them doing a tens

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Speaker 4: of billion dollar acquisition. There is the ownership in Chubb

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Speaker 4: out there, which is, you know, perhaps the megadeal that

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Speaker 4: may or may not ever happen if they do something.

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Speaker 4: They bought Allegheny, which was an insurance company kind of

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Speaker 4: conglomerate a couple of years ago. That was about twelve

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Speaker 4: billion dollar. It seems like that's going to be the

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Speaker 4: max on what they're going to do. But if I

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Speaker 4: could predict a Buffett would do, I'd be on an

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Speaker 4: island somewhere.

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Speaker 2: So but no dividend.

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Speaker 4: There will not be a dividend as long as Warren

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Speaker 4: Buffett is sitting in all is that. I mean, I

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Speaker 4: think he likes getting them, he doesn't like paying them.

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Speaker 4: He says, you know, look, I and I would agree

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Speaker 4: with him. I'm better off holding this money than giving it.

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Speaker 4: Your return on a divid end is going to be

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Speaker 4: less than my return investing it. That probably hasn't been

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Speaker 4: true actually recently, but I think that's his mindset.

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Speaker 3: You were mentioning about how claims they were years ago

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Speaker 3: are costing them more than expected. Walk us through that dynamic.

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Speaker 4: Sure, So this is called reserve development. So what happens

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Speaker 4: is insurance companies like so for example, Geico, they write auto,

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Speaker 4: some home, well not really home, but they'll write auto.

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Speaker 4: You're either going to have a car accident in a

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Speaker 4: year or you're not. But they'll write some liability business

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Speaker 4: where you may have a claim, and that you might

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Speaker 4: find out that I claim years into the future. And

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Speaker 4: what is happening is you set up a reserve for that,

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Speaker 4: and that reserve could be wrong or they're almost always

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Speaker 4: wrong right, but it could be wrong too low or

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Speaker 4: wrong too high. And what had happened in the quarter

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Speaker 4: was those were their reserve for their primary insurance business.

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Speaker 4: A specific unit of it was quite wrong, and there's

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Speaker 4: there's new management took over that unit, and usually when

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Speaker 4: that happens, they add to their reserves. If this was

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Speaker 4: If this was just a you know, X Y Z

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Speaker 4: insurance company, this would be really bad. But it's Berkshire.

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Speaker 4: Their financial strength is so superior to anything you might

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Speaker 4: see that it's kind of just a blip.

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Speaker 2: I got a invest with Scooter Progressive. Progressive wrote the policy.

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Speaker 4: I always wear a helmet.

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Speaker 2: That's all I do. Have the helmet. Progressive. Give me

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Speaker 2: thirty seconds on Progressive, because so far I'm happy with

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Speaker 2: the Yeah.

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Speaker 5: I mean, so.

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Speaker 4: Berkshire themselves has kind of been saying Progressives eight our

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Speaker 4: lunch for the past, you know. Progressive extremely innovative in pricing,

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Speaker 4: which allowed them to kind of take a lot of

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Speaker 4: market share. State Farms is kind of the big name

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Speaker 4: there in auto insurance, and they all State has just

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Speaker 4: been picking away, I mean not all State. Progressive has

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Speaker 4: been picking away at them the recent spike in auto

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Speaker 4: insurance prices. They navigated that a lot better than the

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Speaker 4: rest of the industry, which is allowing them to pull

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Speaker 4: more share. Geico is shrinking, Progressives growing really best operator

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Speaker 4: in the auto insurance space.

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Speaker 2: Progressive and actually Choice, my existing insurer, I've got like

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Speaker 2: five thousand lines with their pricing was twice where Progressive

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Speaker 2: was so I just.

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Speaker 3: Like see you.

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Speaker 4: They don't know how good of a risk you are.

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Speaker 2: Exactly right me the vest mouscooter's cruising the Jersey short

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Speaker 2: John Tucker, What that's a view? This is Blonimer.

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Speaker 3: You see him, Come and get out of the way.

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Speaker 2: All right, Jess Metton sitting in for Alex Steel on

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Speaker 2: Paul Sweeney. You're live here on a Bloomberg Interactive Brokers

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Speaker 2: studio streaming live as well on YouTube dot com. So

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Speaker 2: search there for Bloomberg podcast. The election tomorrow obviously one

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Speaker 2: of the key issues driving this market for some time.

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Speaker 2: It's got the latest analysis here. Mayo Wiley joins us.

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Speaker 2: She's president and CEO of the Leadership Conference on Civil

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Speaker 2: and Human Rights. Joining us if head that zoom thing here,

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Speaker 2: so it comes in handy, Mayo, thank you so much

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Speaker 2: for joining us here. I guess what we hear from

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Speaker 2: you know a lot of the experts is this is

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Speaker 2: too close to call. What are you hearing from some

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Speaker 2: of the folks that you talk to.

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Speaker 6: Well, certainly, what we know is that voters are going

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Speaker 6: to decide the outcome of this election and absolutely cannot

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Speaker 6: predict based on the polls.

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Speaker 7: What we can say is what we're seeing in.

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Speaker 6: The absolute enthusiasm to show up to these holes, even

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Speaker 6: in early voting. As we know, election day is tomorrow,

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Speaker 6: but I was in Pennsylvania on Saturday where thousands of

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Speaker 6: doors were being knocked all over the state.

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Speaker 7: Lots of high levels.

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Speaker 6: Of turnout across not just Pennsylvania, but other states. We're

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Speaker 6: hearing already for Detroit, Michigan, for example, fifty one percent

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Speaker 6: turnout for early voting. Michigan is also one of those

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Speaker 6: states that has same day registration, meaning people can show

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Speaker 6: up at the polls and register to vote and then

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Speaker 6: vote tomorrow. So what our own Civil Rights monitor polling

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Speaker 6: showed in September that the Leadership Conference did with Brilliant

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Speaker 6: Corners was enthusiasm is high on all sides in this

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Speaker 6: election and seeing that at the polls.

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Speaker 3: Talk to us Maya about what the mood is like

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Speaker 3: in some of these key states in these battleground areas well.

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Speaker 6: You know, I've been to Milwaukee, I've been to Detroit,

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Speaker 6: I was in Pennsylvania. I think the mood is everything

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Speaker 6: from completely motivated for folks to show up and have

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Speaker 6: their voices heard at the polls, and anxiety. I mean,

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Speaker 6: the anxiety is understandable. There is a lot at stake

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Speaker 6: in this election. People are feeling it. You know.

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Speaker 7: There's also been the.

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Speaker 6: Reality of disinformation and the flood both from foreign governments

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Speaker 6: like Russia, like China, like Iran trying to sow division

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Speaker 6: and confusion, and sadly, some political leaders, some organizational leaders,

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Speaker 6: some politicians picking up on that disinformation. So a lot

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Speaker 6: of work on the ground across the country to make

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Speaker 6: sure that voters know where to vote, how to vote,

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Speaker 6: and that their votes count and will be counted. Because

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Speaker 6: we do have an exceptionally impressive election system in this

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Speaker 6: country we should be proud of and that's a big

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Speaker 6: part of the work that people are doing on the ground.

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Speaker 2: And Miley, a lot of experts are telling them to

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Speaker 2: really be mindful of the turnout, that turnouts can be

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Speaker 2: really critical for both sides. Actually, what's your understanding of

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Speaker 2: maybe is one side better equipped to get the you know,

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Speaker 2: the word out in the turnout going.

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Speaker 6: Well, look, certainly it's a turnout election. I would argue

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Speaker 6: all elections are actually turnout elections.

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Speaker 7: When voters show up, they decide who lead us.

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Speaker 6: And so the more voters who show up, the more

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Speaker 6: we have a true reading of the country. The voter

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Speaker 6: motivation is very high. Turnout is exceptionally high. We're already

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Speaker 6: seeing numbers of turnout that are historic. They're approaching twenty

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Speaker 6: twenty numbers. Remember President Joe Biden won the most number

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Speaker 6: of votes of any president for over one hundred years

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Speaker 6: of voting history. This is on part of a historic

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Speaker 6: turnout election. I think the point about who does that benefit?

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Speaker 7: I mean both sides, all sides are showing up.

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Speaker 6: The real question is what do voters want and what's

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Speaker 6: a stake? And how many of these voters are new

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Speaker 6: votvoters or voters who did not show up in twenty

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Speaker 6: twenty or in twenty twenty two. A lot of the

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Speaker 6: get out the vote work has been focused in the

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Speaker 6: civil rights community and certainly by US at the Leadership Conference,

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Speaker 6: of making sure those people who can vote know where

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Speaker 6: and how to vote and feel that their vote matters

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Speaker 6: and will count, and that's why I think we're seeing

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Speaker 6: high turnout as people are feeling that.

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Speaker 3: Whenever you're speaking anecdotal lead to Americans across the country,

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Speaker 3: what is more specific when it comes to policy proposals

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Speaker 3: do they constantly keep bringing up to you?

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Speaker 6: Look, people are very concerned obviously about everything from the

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Speaker 6: state of our democracy and our freedoms, particularly abortion, but

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Speaker 6: in communities of color, criminal justice reform is a huge issue.

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Speaker 5: As is education.

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Speaker 6: But I think we also know that across the board,

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Speaker 6: costs are an issue. And you know, one of the

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Speaker 6: things that's been so clear in this campaign is, you know,

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Speaker 6: when Kamala Harris speaks about the fact that she is

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Speaker 6: not going to drive up the cost of groceries, but

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Speaker 6: Donald Trump obviously talking less about costs and more casting aspersions.

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Speaker 6: I mean, people are really trying to listen for how

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Speaker 6: is my life going to be better? And they're responding

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Speaker 6: to where and how They're hearing very clear messages about

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Speaker 6: what things they would see and feel in their own

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Speaker 6: households and communities. I think that's also why we're seeing

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Speaker 6: so many women vote because abortion and access to abortion

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Speaker 6: as an issue of healthcare. Reproductive freedom is not just

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Speaker 6: reproductive freedom, it's also the ability to get the care

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Speaker 6: you need, including if your life is in danger. And

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Speaker 6: we're seeing that as a huge motivator and topic of discussion,

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Speaker 6: and I think that's part of why we're seeing what

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Speaker 6: we saw in that Iowa poll, which showed frankly, that

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Speaker 6: women were turning out in droves, and we've seen that

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Speaker 6: gender gap so many women engaged in the selection, and.

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Speaker 2: That is a big reason, right, Maya, thank you so

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Speaker 2: much for joining us. We really appreciate getting some of

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Speaker 2: your time. Maya Wiley, she's a president and CEO of

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Speaker 2: the Leadership Conference on Civil and Human Rights, giving us

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Speaker 2: her peview of again the selection for tomorrow.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple car Playing and

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Speaker 1: broun Otto with the Bloomberg Business app. Listen on demand

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 2: Katie Kaminski joins us. She's a chief research strategist and

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Speaker 2: portfolio managed Alpha Simplex Group, joining us via that Zoom thing. Katie,

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Speaker 2: when you look at the markets broadly defined here, what

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Speaker 2: are they kind of telling me about the next twenty

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Speaker 2: four forty eight hours, or do you just try to

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Speaker 2: power through all that stuff and think about longer term?

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Speaker 7: Oh, this is tricky.

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Speaker 8: I mean, I'd say that as a trend fuller, we

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Speaker 8: tend to think about holding the course.

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Speaker 7: But it's really hard.

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Speaker 8: I mean, you're seeing today some reversal of trends that

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Speaker 8: have been following from the last month. Really, yields have

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Speaker 8: moved so much, yields have moved so much higher.

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Speaker 7: You're seeing the reversal of that today.

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Speaker 8: You've seen the dollar had been sort of on a

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Speaker 8: tear and then now as reverting again.

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Speaker 7: So there's just a lot of uncertainty in the short term.

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Speaker 8: So actually powering through is probably a better way to

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Speaker 8: sort of handle all of this volatility.

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Speaker 3: Katie, I wanted to pick your brain about poly market

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Speaker 3: because we've seen it a bit all over the place

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Speaker 3: in recent weeks, sometimes favoring at Trump, whereas over the

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Speaker 3: weekend you started to see that narrow out and begin

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Speaker 3: to favor Harris instead. So as a trading kind of strategy,

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Speaker 3: why would an investor use them for a trading strategy

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Speaker 3: over polls? And why are they using a betting website

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Speaker 3: over polling for judging sentiment because obviously, as we know,

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Speaker 3: it's not really correlated to who would actually end up winning.

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Speaker 8: Well, this is a good point, and I mean, I

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Speaker 8: think it has to do more with market price discovery,

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Speaker 8: and I think people a lot of faith in.

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Speaker 7: Sort of market pricing of odds.

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Speaker 8: But then you know, obviously polling could be sort of

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Speaker 8: a different demographic group. So what's really making a lot

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Speaker 8: of people, I think even myself, is you see the

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Speaker 8: news and it's just flipping back and forth, and there

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Speaker 8: are very different outlets pointing to different observations, and that

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Speaker 8: just suggests how incredibly uncertain and tight.

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Speaker 7: This race really is.

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Speaker 8: And people are probably also looking at those areas which

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Speaker 8: kind of they're used to, So I think the picture

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Speaker 8: is very mixed.

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Speaker 2: So Katie, from your perspective and just maybe your equity

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Speaker 2: allocation here have you made have you hedged it at all?

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Speaker 2: Or are you just position that we're going to be

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Speaker 2: fine no matter who's kind of controlling things down there

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Speaker 2: in Washington.

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Speaker 8: Well, this is a good question because as a trend follower,

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Speaker 8: our goal isn't really sort of to add a discretionary

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Speaker 8: view on what we do we're just measuring where market

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Speaker 8: directions are moving. And you have seen some momentum and

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Speaker 8: equities over the last six weeks. But I think the

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Speaker 8: biggest thing that people have been focused on is not

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Speaker 8: necessarily just equities. It's just how much long bond signals

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Speaker 8: have dissipated, even going short in US fixed income in

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Speaker 8: some ways. And also how much the dollar has moved,

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Speaker 8: but it's a short term moved and things are still

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Speaker 8: very mixed. But US equities seem to be the most

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Speaker 8: robust signal, which tells you maybe we're going to be

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Speaker 8: fine either way, let's hope.

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Speaker 3: So when it comes to Congress, in the makeup of

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Speaker 3: Congress and particularly gridlock, because when I've been speaking with

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Speaker 3: a lot of portfolio managers, especially when they're managing money

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Speaker 3: for longer term horizons, they haven't been making big bets

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Speaker 3: either way because a lot of times, even if they

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Speaker 3: have certain policy proposals, as you know, it would take

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Speaker 3: some time here to figure out whether or not those

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Speaker 3: would get passed. So how much to you when you're

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Speaker 3: thinking about gridlock in Congress, will that make certain trading

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Speaker 3: decisions in the coming months or even having to wait

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Speaker 3: on that, you know more of what that could look

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Speaker 3: like in Congress when you think about the House as

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Speaker 3: well as the Senate.

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Speaker 7: I think you make a good point.

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Speaker 8: It's just if you think about NPV or sort of

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Speaker 8: the value of the markets, it's really about weighing the

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Speaker 8: different possible outcomes. And even though we're going to have

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Speaker 8: at least hopefully some resolution in terms of the election,

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Speaker 8: it still is quite a long road for many different policies,

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Speaker 8: particularly if you have a gridlock in Congress, and that

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Speaker 8: means that status quo is probably closer than sort of

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Speaker 8: these extreme scenarios which people are trying to discount and valuate.

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Speaker 8: And so I think that that's why if you look

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Speaker 8: for the overall trend, equities still remain somewhat positive, because

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Speaker 8: the path to all of more extreme policy is actually

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Speaker 8: a long one and it could take time to know,

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Speaker 8: and we should have more information as that changes.

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Speaker 2: Katie. In the world of fixed income, how much credit

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Speaker 2: risk are you taking if any of these days?

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Speaker 8: So we don't focus on credit risk, but I know

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Speaker 8: that's in an area recently that has been very interesting,

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Speaker 8: especially with yields higher. I think the fact that you

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Speaker 8: didn't see a lot of credit deterioration in August was

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Speaker 8: something that surprised me. We're much more focused on the

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Speaker 8: directional level of yields, and we've really seen a major

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Speaker 8: pivot towards higher, longer, steadier fed reaction, and I think

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Speaker 8: that sort of is obviously going to impact credit as well.

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Speaker 2: Katie, thank you so much for joining us. We always

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Speaker 2: appreciate getting a few minutes of your time. Kati Kaminski.

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Speaker 2: She's a chief research strategist and she's a portfolio manager

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Speaker 2: over to Alpha Simplex Group.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on applecar Play and Android

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Speaker 1: Auto with the Bloomberg Business. You can also listen live

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Speaker 1: on Amazon Alexa from our flagship New York station Just

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Speaker 1: Say Alexa, play Bloomberg eleven thirty.

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Speaker 2: At Bloomberg Interactive Brooks Studio, or streaming live on YouTube

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Speaker 2: as well as to check us out there Trump trades,

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Speaker 2: which is basically long the dollar, short bonds. Are you

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Speaker 2: long the Trump trade? Are you not? It seemed like

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Speaker 2: the narrative maybe change a little bit over the weekends

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Speaker 2: of new polling. I don't know how if you're a trader,

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Speaker 2: you're playing this thing I don't know, but our next

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Speaker 2: guest has a great big take story. Honest, you know,

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Speaker 2: we love the big take stories coming out of Bloomberg News.

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Speaker 2: Great topics, deeply resourced, deeply sourced.

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Speaker 3: Always great visuals and charts like the pictures.

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Speaker 2: The pictures helped me. Katherine Burton joins us. She's a

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Speaker 2: senior reporter for Bloomberg News. She joins us here in

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Speaker 2: our Bloomberg Interactive Broker studio. So, Kathy, what are traders

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Speaker 2: on Global Wallstreet? What are they trying to do here

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Speaker 2: ahead of this election? Are they trying to play it?

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Speaker 2: Are they trying to hedge themselves? What are they doing?

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Speaker 9: They're trying to do both. Actually, I would say that

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Speaker 9: most of the traders have a slight tendency towards the

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Speaker 9: Trump trade that has maybe reversed a little bit overnight

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Speaker 9: with the new poll that showed Harris ahead and I

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Speaker 9: but there's also a lot of hedging going on. People

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Speaker 9: are betting on inflation, they're betting on a steeper yield curve,

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Speaker 9: and both those things should make money no matter who wins.

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Speaker 3: It's interesting because when I've been speaking to a lot

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Speaker 3: of portfolio managers who are managing money for longer term.

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Speaker 3: They're still kind of on the sidelines and are more

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Speaker 3: focused on the Federal Reserve and kind of the direction

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Speaker 3: of the economy. But when you're talking to say hedge funds,

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Speaker 3: which obviously have a much shorter type of timeframe, what

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Speaker 3: is the mood like there, and how exactly are there

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Speaker 3: priming their computer models for a moment like this and

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Speaker 3: how they're treating because obviously they have a different time

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Speaker 3: horizon than they say somebody who's managing money like five

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Speaker 3: ten years out right.

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Speaker 9: So we spoke to one of those managers who has

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Speaker 9: a pretty substantial quant aspect to their portfolio, and they

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Speaker 9: did over the past few months, and because it's only

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Speaker 9: been a few months since Harris came into the election,

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Speaker 9: they've been looking at polls and betting markets and trying

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Speaker 9: to put that into their models and isolate how set

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Speaker 9: classes move with a rise or a fall in the polls.

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Speaker 9: So people have been rejigging their models to try and

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Speaker 9: get a better idea of what to do.

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Speaker 2: Global Wall Street, I mean, they're getting ready for this thing.

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Speaker 2: JPMorgan Chase you report plans to increase staffing in Europe

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Speaker 2: and Asia to handle overnight volume and volatility. Glob and

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Speaker 2: Sachs expects to have hundreds from its sales and trading

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Speaker 2: teams on site in New York well into the night.

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Speaker 2: So Global Wall Street they're gear enough for this. It's

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Speaker 2: not just gonna wake up and see what happened.

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Speaker 9: Yeah. Absolutely, And we have even smaller brokers who have

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Speaker 9: never had people overnight before for an election saying that

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Speaker 9: this election they might well have to have someone there

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Speaker 9: throughout the night.

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Speaker 3: Something else I was keeping a close eye on is

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Speaker 3: when you're looking at the CFTC data, we get updates

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Speaker 3: every Friday at three thirty, so always convenient right before

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Speaker 3: the closing bell at the end of the week. But

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Speaker 3: hedgephnes were of course betting on bigger price wings coming up,

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Speaker 3: probably not surprisingly so when you're looking at large speculators

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Speaker 3: turning that long on vic's futures for the first time

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Speaker 3: since January of twenty nineteen. And so whenever you're speaking

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Speaker 3: with your sources, specifically when you're thinking about the options

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Speaker 3: equity side of things, what are they telling you with

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Speaker 3: as more specifically of how they're trying to hedge or

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Speaker 3: what they're trying to either buy or kind of shy

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Speaker 3: away from at this point.

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Speaker 9: Yeah, there's definitely been more vics buying because they do

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Speaker 9: expect that there's going to be more volatility m hm.

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Speaker 9: And also more futures as well.

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Speaker 3: Something I was wondering too, because you have such a

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Speaker 3: jam packed week and then other events coming up in

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Speaker 3: the coming weeks. Two obviously the election, the Federal Reserve,

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Speaker 3: we have a thirteen F filing deadline coming up to

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Speaker 3: we still have about nine percent of the S and

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Speaker 3: P five hundred by market cap reporting. And then of

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Speaker 3: course we have Nvidia actually coming up on November twentieth.

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Speaker 3: So when you're speaking with them, do they say there's

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Speaker 3: a specific event. Obviously we know the elections tomorrow, but

438
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Speaker 3: is there is it harder to decipher one event versus another?

439
00:22:51,119 --> 00:22:51,320
Speaker 6: Yes?

440
00:22:51,480 --> 00:22:52,120
Speaker 7: Absolutely.

441
00:22:52,240 --> 00:22:55,199
Speaker 9: I mean the Fed is really an huge thing, and

442
00:22:56,320 --> 00:23:00,240
Speaker 9: I think more people are looking at what's going to

443
00:23:00,280 --> 00:23:03,000
Speaker 9: happen there than really than anything else, even the election.

444
00:23:03,320 --> 00:23:07,600
Speaker 2: Right, So the popular Trump trade again long the dollars

445
00:23:07,720 --> 00:23:10,800
Speaker 2: short bonds, is that unwinding today a little bit because

446
00:23:10,800 --> 00:23:12,560
Speaker 2: of this new polling data that came out. It does

447
00:23:12,560 --> 00:23:14,320
Speaker 2: it move that short term?

448
00:23:14,560 --> 00:23:15,520
Speaker 7: Yes, it has.

449
00:23:16,119 --> 00:23:19,199
Speaker 9: The last time I left, the dollar was down almost

450
00:23:19,200 --> 00:23:22,760
Speaker 9: a percent. For example, I think crypto is down to yep.

451
00:23:22,720 --> 00:23:25,119
Speaker 2: Yeah, we got a crypto a bitcoined down one percent,

452
00:23:26,080 --> 00:23:28,800
Speaker 2: the Bloomberg Dollar index down about six tens to one percent,

453
00:23:30,920 --> 00:23:33,760
Speaker 2: and the people mind a tenure treasures up to twenty

454
00:23:33,760 --> 00:23:35,800
Speaker 2: four to thirty seconds. So it just day to day

455
00:23:35,800 --> 00:23:36,400
Speaker 2: it seems.

456
00:23:36,280 --> 00:23:39,280
Speaker 9: Like, yeah, absolutely, and what would be really as we

457
00:23:39,320 --> 00:23:43,360
Speaker 9: start getting results, it's going to be even more frequent, right.

458
00:23:43,520 --> 00:23:46,280
Speaker 3: Talk to us about the implied price swings that the

459
00:23:46,280 --> 00:23:48,720
Speaker 3: options markets pricing in the days.

460
00:23:48,440 --> 00:23:55,080
Speaker 10: After the election, meaning what exactly kind of like the elevator,

461
00:23:55,080 --> 00:23:57,560
Speaker 10: so City, for instance, du Kaiser at City he sees

462
00:23:57,800 --> 00:24:00,359
Speaker 10: on actually a Wednesday, So the day after the election,

463
00:24:00,400 --> 00:24:02,560
Speaker 10: the S and P five hundred could swing about one point.

464
00:24:02,359 --> 00:24:05,400
Speaker 3: Eight percent in either direction. But obviously we know we'll

465
00:24:05,440 --> 00:24:08,000
Speaker 3: have the FED decision on Thursday too. But do you

466
00:24:08,080 --> 00:24:10,639
Speaker 3: expect to see heightened kind of volatility, particularly in the

467
00:24:10,720 --> 00:24:13,959
Speaker 3: vis and then in options in futures markets, especially you know,

468
00:24:13,960 --> 00:24:15,960
Speaker 3: in the coming days and then the coming weeks two.

469
00:24:16,000 --> 00:24:17,840
Speaker 2: Oh, yes, particularly in the dollar.

470
00:24:17,960 --> 00:24:20,440
Speaker 9: People have told us that that's something they're really really

471
00:24:20,480 --> 00:24:22,760
Speaker 9: going to be watching because they feel like that's going

472
00:24:22,840 --> 00:24:25,960
Speaker 9: to be something that everyone will be looking on even

473
00:24:26,000 --> 00:24:31,240
Speaker 9: people outside the US because of the trade issues, right such.

474
00:24:31,080 --> 00:24:32,840
Speaker 2: I mean that makes sense, Yeah, but there's also a

475
00:24:32,920 --> 00:24:34,440
Speaker 2: chance that we're not going to know for some time.

476
00:24:34,520 --> 00:24:36,360
Speaker 2: If you know, this thing could drag on for days,

477
00:24:36,359 --> 00:24:39,959
Speaker 2: there could be legal challenges. So are fund managers are

478
00:24:39,960 --> 00:24:43,119
Speaker 2: they kind of positioning themselves for that or is that

479
00:24:43,160 --> 00:24:44,000
Speaker 2: just amount of hedging?

480
00:24:44,040 --> 00:24:46,720
Speaker 9: I guess yes, I think that would that's mostly hedging,

481
00:24:47,119 --> 00:24:49,800
Speaker 9: although some people I think Golden Sachs had a note

482
00:24:49,800 --> 00:24:52,919
Speaker 9: doubt that said that even if we don't have a

483
00:24:53,040 --> 00:24:56,240
Speaker 9: precise decision, that there will be certain things that will

484
00:24:56,359 --> 00:25:00,920
Speaker 9: let lead the market towards a conclusion of Trump or Harris.

485
00:25:01,960 --> 00:25:04,959
Speaker 2: How about just in terms of going forward, I mean

486
00:25:05,000 --> 00:25:06,960
Speaker 2: a lot of folks say, don't worry about who wins

487
00:25:07,320 --> 00:25:10,800
Speaker 2: the White House because it's going to have a gridlocked Congress.

488
00:25:10,600 --> 00:25:13,479
Speaker 3: Right the makeup of Congress. Ye, traders will usually focus

489
00:25:13,520 --> 00:25:13,840
Speaker 3: on that.

490
00:25:13,840 --> 00:25:16,160
Speaker 2: That's interesting too. Are traders are looking at that as well?

491
00:25:16,240 --> 00:25:19,520
Speaker 9: Absolutely? We definitely had people say it does not really

492
00:25:19,600 --> 00:25:23,280
Speaker 9: matter as much who as president, at least in the

493
00:25:23,359 --> 00:25:27,520
Speaker 9: short term, as whether we have a sweep in Congress

494
00:25:27,600 --> 00:25:27,840
Speaker 9: or not.

495
00:25:28,160 --> 00:25:31,280
Speaker 3: And specifically, when you think about policy proposals, whether they

496
00:25:31,520 --> 00:25:35,800
Speaker 3: affect obviously trade if you think about big tech regulation,

497
00:25:36,000 --> 00:25:39,159
Speaker 3: healthcare regulation, or there are particular types of policy proposals

498
00:25:39,160 --> 00:25:41,439
Speaker 3: that those traders are looking at that they want to

499
00:25:41,440 --> 00:25:44,320
Speaker 3: remain gridlock in Congress, so that obviously the status quote

500
00:25:44,320 --> 00:25:46,240
Speaker 3: would stay in place and there would be big changes

501
00:25:46,240 --> 00:25:48,440
Speaker 3: to different policies for those types of industries.

502
00:25:48,880 --> 00:25:51,600
Speaker 9: Yeah, definitely. I mean, I think crypto is one. I

503
00:25:51,640 --> 00:25:54,439
Speaker 9: think clean energy is another one that a lot of

504
00:25:54,440 --> 00:25:55,400
Speaker 9: people are looking at.

505
00:25:56,440 --> 00:25:56,560
Speaker 11: All.

506
00:25:56,640 --> 00:25:58,440
Speaker 2: Right, Catherine, thank you so much for joining us. Katherin

507
00:25:58,480 --> 00:26:01,119
Speaker 2: Burton Burton J'SUS senior report for Bloomberg News, joining us

508
00:26:01,119 --> 00:26:04,040
Speaker 2: here in our Bloomberg Interactive Broker's studio. The Big Takes

509
00:26:04,119 --> 00:26:05,919
Speaker 2: story at on the Bloomberg Trumbo. You can read it

510
00:26:05,960 --> 00:26:06,920
Speaker 2: on the terminal.

511
00:26:06,960 --> 00:26:07,480
Speaker 3: Great stuff.

512
00:26:07,520 --> 00:26:10,680
Speaker 2: Yeah, it's always great stuff. We love having talk about

513
00:26:10,680 --> 00:26:12,840
Speaker 2: these stories, so you can read it on the Bloomberg Tremol.

514
00:26:12,880 --> 00:26:16,360
Speaker 2: You can also go to Bloomberg dot com slash Big Take.

515
00:26:16,400 --> 00:26:18,919
Speaker 2: And it's interesting to see, you know, how the markets

516
00:26:18,920 --> 00:26:22,200
Speaker 2: are reacting to just seemingly daily swings and kind of

517
00:26:22,200 --> 00:26:24,639
Speaker 2: how the polls are moving here when you take a

518
00:26:24,640 --> 00:26:28,760
Speaker 2: look at some broadly traded asset classes like currencies like bonds.

519
00:26:30,359 --> 00:26:34,240
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

520
00:26:34,320 --> 00:26:37,840
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

521
00:26:37,880 --> 00:26:40,639
Speaker 1: Auto with the Bloomberg Business App. You can also listen

522
00:26:40,760 --> 00:26:43,840
Speaker 1: live on Amazon Alexa from our flagship New York station.

523
00:26:44,240 --> 00:26:48,720
Speaker 1: Just say Alexa play Bloomberg eleven thirty.

524
00:26:48,400 --> 00:26:51,240
Speaker 2: Alex Steel will'll be back in a couple of weeks.

525
00:26:51,320 --> 00:26:53,600
Speaker 2: That'll be a good and wonderful thing. We're here in

526
00:26:53,600 --> 00:26:56,720
Speaker 2: our Bloomberg INTERACTI Broker studio, streaming live on YouTube as well.

527
00:26:56,920 --> 00:26:58,600
Speaker 2: All right, I'm going back to that big takes story,

528
00:26:59,200 --> 00:27:01,960
Speaker 2: the trumpet trade, which is long the dollars short, the

529
00:27:02,040 --> 00:27:04,399
Speaker 2: bonds seems to be unwinding a little bit here. I

530
00:27:04,440 --> 00:27:06,879
Speaker 2: wonder if you're if you manage a jillion dollars like

531
00:27:06,880 --> 00:27:09,080
Speaker 2: the good folks at TCW, do do you even care

532
00:27:09,119 --> 00:27:11,399
Speaker 2: about that stuff? For you're looking through to the bigger picture.

533
00:27:11,440 --> 00:27:13,280
Speaker 2: I don't know how they do that stuff there. Rubin

534
00:27:13,520 --> 00:27:16,560
Speaker 2: have anician. He is a general generalist portfolio manager at

535
00:27:16,560 --> 00:27:19,760
Speaker 2: TCW's fixed income group. Rubin, what are you? And you

536
00:27:19,800 --> 00:27:22,119
Speaker 2: know the smart UCLA grads which seems to be you

537
00:27:22,119 --> 00:27:26,720
Speaker 2: guys own TCW. The UCLA School out there. What do

538
00:27:26,760 --> 00:27:28,600
Speaker 2: you guys when you sit around on your Monday morning meeting,

539
00:27:28,680 --> 00:27:30,879
Speaker 2: what do you say about the political backdrop period? Is

540
00:27:30,920 --> 00:27:32,800
Speaker 2: it factor into what you guys do or do you

541
00:27:32,840 --> 00:27:35,679
Speaker 2: just kind of plow through and focus on the building blocks.

542
00:27:37,880 --> 00:27:40,800
Speaker 5: Good morning, Thanks for having me back on the show.

543
00:27:41,880 --> 00:27:46,880
Speaker 12: We are we are not playing the political noise. We're

544
00:27:46,920 --> 00:27:51,200
Speaker 12: looking through the noise, and we're positioning based on our convictions,

545
00:27:51,240 --> 00:27:53,880
Speaker 12: based on our based on the value that we see

546
00:27:53,880 --> 00:27:55,119
Speaker 12: in rates, in duration and.

547
00:27:55,160 --> 00:27:56,240
Speaker 5: Certain parts of the rates.

548
00:27:56,880 --> 00:28:00,800
Speaker 12: And from that perspective, the trade that we all and

549
00:28:00,840 --> 00:28:03,320
Speaker 12: in the last materialized in the last month or so

550
00:28:03,400 --> 00:28:06,480
Speaker 12: since late September, where we've seen rates higher by fifty

551
00:28:06,560 --> 00:28:09,600
Speaker 12: sixty basisponts across the board. We saw it as an

552
00:28:09,600 --> 00:28:12,840
Speaker 12: opportunity to add to our duration explored in the front

553
00:28:12,920 --> 00:28:16,080
Speaker 12: end of the curve and do some other stuff, add

554
00:28:16,119 --> 00:28:19,239
Speaker 12: to some sectors that are that got sold off and

555
00:28:19,320 --> 00:28:24,320
Speaker 12: got you know, hurt by the duration by rates selling off.

556
00:28:26,000 --> 00:28:28,240
Speaker 12: We think that the sell off in rates, I mean,

557
00:28:28,280 --> 00:28:30,080
Speaker 12: as you can see this morning, we see a partial

558
00:28:30,119 --> 00:28:33,080
Speaker 12: reversal ofdea of the cell off that we saw since

559
00:28:33,160 --> 00:28:36,080
Speaker 12: late September, and I think it's a healthy reminder that

560
00:28:36,600 --> 00:28:39,440
Speaker 12: the you know, the we haven't heard if you think

561
00:28:39,480 --> 00:28:41,240
Speaker 12: about it, we haven't heard a lot of new information.

562
00:28:41,320 --> 00:28:43,480
Speaker 12: We knew it was a very close election. As of

563
00:28:43,600 --> 00:28:45,440
Speaker 12: this morning, we know exactly the same that is a

564
00:28:45,520 --> 00:28:46,320
Speaker 12: very close election.

565
00:28:46,680 --> 00:28:48,160
Speaker 5: So we're kind of splitting hair here.

566
00:28:48,600 --> 00:28:51,680
Speaker 12: And we think the markets got ahead of themselves in

567
00:28:52,120 --> 00:28:56,040
Speaker 12: pricing in a very extreme scenario and very high probability

568
00:28:56,120 --> 00:28:57,160
Speaker 12: of the Republican sweep.

569
00:28:57,240 --> 00:28:59,600
Speaker 5: So we saw it as an opportunity.

570
00:28:59,000 --> 00:29:04,239
Speaker 12: To express of our trades and our trades that are

571
00:29:04,240 --> 00:29:05,320
Speaker 12: based on the value.

572
00:29:05,080 --> 00:29:07,320
Speaker 3: That we've seen rates heading into some of these big

573
00:29:07,400 --> 00:29:10,160
Speaker 3: key events this week. What do you think speculative positioning

574
00:29:10,200 --> 00:29:12,080
Speaker 3: in the bond market is telling us.

575
00:29:14,400 --> 00:29:14,640
Speaker 5: Well?

576
00:29:14,680 --> 00:29:17,160
Speaker 12: Within the speculative positioning in the bar bond market, and

577
00:29:17,200 --> 00:29:19,160
Speaker 12: of course it's hard to decipher how much of this

578
00:29:19,800 --> 00:29:21,920
Speaker 12: sell off in We think the sell off that we've

579
00:29:21,960 --> 00:29:24,959
Speaker 12: seen in the last four or five weeks is driven

580
00:29:25,040 --> 00:29:27,640
Speaker 12: by a some better than expected data that we saw,

581
00:29:27,720 --> 00:29:30,600
Speaker 12: especially in the first half of October, which we would

582
00:29:30,600 --> 00:29:33,560
Speaker 12: recommend to take with a grain of salt, and then

583
00:29:33,760 --> 00:29:36,320
Speaker 12: some of it was the Republican momentum.

584
00:29:37,000 --> 00:29:37,920
Speaker 5: And it's telling you.

585
00:29:37,840 --> 00:29:40,680
Speaker 12: That investors are pricing in a very high Again, we

586
00:29:40,760 --> 00:29:43,320
Speaker 12: saw a partial reversal of that this morning, But generally speaking,

587
00:29:43,760 --> 00:29:46,400
Speaker 12: we think the data tells you that investors are pricing

588
00:29:46,440 --> 00:29:50,200
Speaker 12: in very high probability of a Republican sweep, and add

589
00:29:50,240 --> 00:29:55,920
Speaker 12: that a very high probability of some extreme, some extreme agenda.

590
00:29:55,560 --> 00:29:58,760
Speaker 5: Being enacted and implemented conditional on.

591
00:29:58,720 --> 00:30:02,600
Speaker 12: That Republicans, which we think is certainly a scenario, but

592
00:30:02,640 --> 00:30:05,480
Speaker 12: we think that the weight assigned to that scenario is

593
00:30:05,560 --> 00:30:08,320
Speaker 12: much higher than it's just the fuck end.

594
00:30:08,320 --> 00:30:10,800
Speaker 5: What we're seeing this morning is probly healthy reminder of that.

595
00:30:12,000 --> 00:30:14,480
Speaker 2: I'm looking at the end go function on the Bloomberg Turberton.

596
00:30:14,560 --> 00:30:17,880
Speaker 2: I see the best performing fixed income category. It's for

597
00:30:18,040 --> 00:30:21,960
Speaker 2: being US corporate high yielded almost seven and a half percent. There,

598
00:30:22,320 --> 00:30:24,680
Speaker 2: what's your call on a high yeld market? I thought

599
00:30:24,680 --> 00:30:29,400
Speaker 2: we were concerned about recessions, so.

600
00:30:31,200 --> 00:30:34,320
Speaker 12: We think that we are in a heart lending camp.

601
00:30:34,360 --> 00:30:38,400
Speaker 12: We remain in heart lending camp. But you know, we

602
00:30:38,520 --> 00:30:41,760
Speaker 12: have seen spreads compressed in credit in general. We have

603
00:30:41,800 --> 00:30:44,600
Speaker 12: seen spreads compressed across the board, both the investment grade

604
00:30:44,600 --> 00:30:47,520
Speaker 12: and below and high yield. In fact, if you look

605
00:30:47,560 --> 00:30:51,600
Speaker 12: at the spreads against their historical against their history. They

606
00:30:51,640 --> 00:30:55,840
Speaker 12: are currently comfortably in the top fifth percentile. Generally speaking,

607
00:30:55,880 --> 00:30:58,920
Speaker 12: if you look at investment grade credit spreads, they are

608
00:30:58,960 --> 00:31:02,400
Speaker 12: in the top one first percentile, meaning spreads have been

609
00:31:02,760 --> 00:31:05,440
Speaker 12: wider than where they are now ninety nine percent of

610
00:31:05,480 --> 00:31:08,040
Speaker 12: the times. The stats are a little better for high

611
00:31:08,080 --> 00:31:12,360
Speaker 12: yield but similar. So we think the market is, you know,

612
00:31:12,400 --> 00:31:16,520
Speaker 12: the market is very optimistic about the economic scenarios and

613
00:31:16,560 --> 00:31:20,560
Speaker 12: outcomes and is not pricing, it's not compensating investors sufficiently

614
00:31:20,600 --> 00:31:26,360
Speaker 12: for the potential volatility associated with the worst economic outcomes

615
00:31:26,120 --> 00:31:27,120
Speaker 12: than the market is.

616
00:31:27,040 --> 00:31:29,800
Speaker 3: Currently pressing in When you're going into a pivotal week

617
00:31:29,840 --> 00:31:33,520
Speaker 3: with a barrage of different events here, what is some

618
00:31:33,640 --> 00:31:37,080
Speaker 3: of the questions that your clients are asking you.

619
00:31:40,000 --> 00:31:42,240
Speaker 5: Well, the I mean, it's what you would expect.

620
00:31:42,240 --> 00:31:44,760
Speaker 12: It's the questions that the market that you know your

621
00:31:44,840 --> 00:31:46,840
Speaker 12: guests are asking you, or you're asking your guests.

622
00:31:46,960 --> 00:31:49,000
Speaker 5: It's what will be the politics, what will.

623
00:31:48,800 --> 00:31:50,680
Speaker 12: Be the outcome of the election, and what that really

624
00:31:50,720 --> 00:31:52,680
Speaker 12: means for the economy and.

625
00:31:52,560 --> 00:31:54,040
Speaker 5: What that really means for the markets.

626
00:31:54,760 --> 00:31:58,200
Speaker 12: And we think that there is apparently a lot of extrapolation,

627
00:31:58,280 --> 00:32:01,120
Speaker 12: there's some there's a lot of uncertainly that's probably an understatement,

628
00:32:01,160 --> 00:32:04,360
Speaker 12: and there's some fear and there is also some extrapolation

629
00:32:04,400 --> 00:32:08,040
Speaker 12: from twenty sixteen experience in terms of rates and what

630
00:32:08,160 --> 00:32:10,600
Speaker 12: the election will mean for rates. And we do think

631
00:32:10,680 --> 00:32:13,520
Speaker 12: that that those parallels that are being drawn by some

632
00:32:13,640 --> 00:32:20,600
Speaker 12: investors at least are probably, you know, not justified, because

633
00:32:21,400 --> 00:32:24,440
Speaker 12: we're sitting at a very different in a very different environment.

634
00:32:24,480 --> 00:32:27,320
Speaker 12: We're sitting in a different regime in twenty sixteen. In

635
00:32:27,360 --> 00:32:29,520
Speaker 12: late twenty sixteen, as you remember, the FET had just

636
00:32:29,600 --> 00:32:32,880
Speaker 12: embarked upon interest rate hiking path.

637
00:32:33,640 --> 00:32:35,280
Speaker 5: We had just come out of the.

638
00:32:35,360 --> 00:32:40,440
Speaker 12: Twenty fifteen sixteen mini prices and energy and commodities. This

639
00:32:40,600 --> 00:32:43,920
Speaker 12: time around, we think we're late cycle. The FAT has started.

640
00:32:43,960 --> 00:32:47,360
Speaker 12: It's cutting an interest rate cutting cycle. So it's a

641
00:32:47,440 --> 00:32:49,960
Speaker 12: very different environment and there should be a lot of

642
00:32:50,040 --> 00:32:53,320
Speaker 12: caution in extrapolating from twenty sixteen experience.

643
00:32:53,560 --> 00:32:55,200
Speaker 2: All right, Rubin, thanks so much for your time. I

644
00:32:55,200 --> 00:32:56,960
Speaker 2: always appreciate getting a few minutes of your time to

645
00:32:56,960 --> 00:32:59,840
Speaker 2: talk about these bond markets. Rubin, have an Asian general

646
00:33:00,160 --> 00:33:03,680
Speaker 2: portfolio manager at tc TCW's fixed income group. They're based

647
00:33:03,720 --> 00:33:07,200
Speaker 2: out there in Los Angeles, California.

648
00:33:07,600 --> 00:33:11,480
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

649
00:33:11,560 --> 00:33:15,120
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

650
00:33:15,120 --> 00:33:17,880
Speaker 1: Auto with the Bloomberg Business app. You can also listen

651
00:33:18,000 --> 00:33:21,120
Speaker 1: live on Amazon Alexa from our flagship New York station

652
00:33:21,480 --> 00:33:24,520
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.

653
00:33:25,640 --> 00:33:27,960
Speaker 2: Jess Meant sitting in for Alex Steele and Paul Sweney.

654
00:33:27,960 --> 00:33:30,080
Speaker 2: You're live here in on our Bloomerg Interactive Broker's studio,

655
00:33:30,080 --> 00:33:32,320
Speaker 2: streaming live on YouTube as well. I'd say one of

656
00:33:32,400 --> 00:33:35,400
Speaker 2: the best resources that we have at Bloomberg for our

657
00:33:35,440 --> 00:33:40,400
Speaker 2: clients is Bloomberg and EF originally known as New Energy Finance.

658
00:33:41,000 --> 00:33:44,320
Speaker 2: They're the team within Bloomberg that tracks and analyzes the

659
00:33:44,440 --> 00:33:47,040
Speaker 2: energy transition. They cover everything, and they do it on

660
00:33:47,080 --> 00:33:50,160
Speaker 2: a global basis and all that contents on the Bloomberg terminal.

661
00:33:50,200 --> 00:33:52,880
Speaker 2: Great stuff. Yajoe s Kenny joins us. She's head of

662
00:33:53,080 --> 00:33:57,760
Speaker 2: Energy Storage for Bloomberg n EF. Where are we ya, YOEI?

663
00:33:58,160 --> 00:34:03,320
Speaker 2: In terms of energy storage? Who's doing it? Well? Where

664
00:34:03,360 --> 00:34:05,160
Speaker 2: are we in the game? How much more do we

665
00:34:05,200 --> 00:34:07,560
Speaker 2: have to go in terms of the technology for energy storage?

666
00:34:07,720 --> 00:34:10,680
Speaker 11: All right, Well, thank you for having me today. So

667
00:34:11,160 --> 00:34:13,480
Speaker 11: I'm here to tell you a little bit about energy storage,

668
00:34:13,520 --> 00:34:17,520
Speaker 11: and a lot about clean power. So just for some context,

669
00:34:17,600 --> 00:34:19,440
Speaker 11: and we're going to talk about some of the analysis

670
00:34:19,480 --> 00:34:22,320
Speaker 11: that we actually published around the clean energy market outlook

671
00:34:22,400 --> 00:34:26,120
Speaker 11: specifically look at the US for some context. There's just

672
00:34:26,200 --> 00:34:28,839
Speaker 11: been a lot of investment that's been pouring into clean

673
00:34:28,840 --> 00:34:32,359
Speaker 11: power segments. We've seen a lot of that accelerated over

674
00:34:32,400 --> 00:34:35,280
Speaker 11: the last I guess two years, and since the Inflation

675
00:34:35,360 --> 00:34:38,799
Speaker 11: Reduction Act passed, facilitating a lot of new investments into

676
00:34:38,800 --> 00:34:41,759
Speaker 11: win solar and storage sectors, which are the sectors that

677
00:34:41,800 --> 00:34:46,240
Speaker 11: we cover in that particular report. There's about there's about

678
00:34:46,239 --> 00:34:50,120
Speaker 11: three hundred billion dollars invested across these sectors, so win solar,

679
00:34:50,160 --> 00:34:54,920
Speaker 11: storage and other clean transportation and other sectors in twenty

680
00:34:54,960 --> 00:34:58,319
Speaker 11: twenty three. That's about twenty two percent higher than we

681
00:34:58,360 --> 00:35:00,799
Speaker 11: saw in previous years. And then what we're doing this

682
00:35:00,880 --> 00:35:03,080
Speaker 11: report is to have a twenty thirty five view, so

683
00:35:03,120 --> 00:35:06,360
Speaker 11: in the next decade, what do we investments and capacity

684
00:35:06,520 --> 00:35:10,560
Speaker 11: editions look like around these clean sectors. There is actually

685
00:35:10,600 --> 00:35:13,239
Speaker 11: a lot that's that's bound to happen in terms of

686
00:35:13,360 --> 00:35:17,000
Speaker 11: just what's committed to date happening over the next few years,

687
00:35:17,680 --> 00:35:20,160
Speaker 11: and that's likely to unlock a lot more investment over

688
00:35:20,200 --> 00:35:22,600
Speaker 11: the twenty thirty five period. I can tell you a

689
00:35:22,640 --> 00:35:24,040
Speaker 11: little bit more about that if you want to hear

690
00:35:24,080 --> 00:35:24,440
Speaker 11: about it.

691
00:35:24,600 --> 00:35:26,640
Speaker 2: Well, I guess one of the risks is just political

692
00:35:26,719 --> 00:35:29,319
Speaker 2: risks to those numbers, to that type of investment. If

693
00:35:29,360 --> 00:35:30,920
Speaker 2: we get a change in Congress, if we get to

694
00:35:30,960 --> 00:35:33,239
Speaker 2: change in the White House more towards re Republican is

695
00:35:33,239 --> 00:35:36,120
Speaker 2: there are there risks to some of those moneies that

696
00:35:36,160 --> 00:35:38,000
Speaker 2: have already been committed or earmarked.

697
00:35:38,880 --> 00:35:41,799
Speaker 11: Yeah, So what we did, I guess the way we

698
00:35:41,840 --> 00:35:43,759
Speaker 11: think about it is to look at what is our

699
00:35:43,800 --> 00:35:46,960
Speaker 11: expectation in the market out to twenty thirty five. So

700
00:35:47,000 --> 00:35:49,759
Speaker 11: for some context, our expectation in terms of our forecast

701
00:35:49,800 --> 00:35:53,600
Speaker 11: for winds, solar and storage installations is about one point

702
00:35:53,680 --> 00:35:58,239
Speaker 11: one tarrawat of new yeah, new capacity editions out to

703
00:35:58,280 --> 00:36:03,319
Speaker 11: twenty thirty five. Context, in the US power grid, as

704
00:36:03,360 --> 00:36:05,440
Speaker 11: of the end of twenty twenty three, there was about

705
00:36:05,480 --> 00:36:10,200
Speaker 11: one point two trawat of cumulative installed power generation capacity.

706
00:36:10,480 --> 00:36:13,400
Speaker 11: So essentially we're about doubling in terms of capacity and

707
00:36:13,440 --> 00:36:16,200
Speaker 11: the grid out to twenty thirty five. But that addition

708
00:36:16,360 --> 00:36:18,560
Speaker 11: is just from when solar and storage, which is really

709
00:36:18,600 --> 00:36:21,960
Speaker 11: impressive in terms of the risk factors to your question.

710
00:36:22,719 --> 00:36:26,120
Speaker 11: So the way we were investigating that in the report,

711
00:36:26,200 --> 00:36:28,319
Speaker 11: or analyze that in the report is to try to

712
00:36:28,320 --> 00:36:31,520
Speaker 11: think about us in the worst case scenario. So there's

713
00:36:31,560 --> 00:36:33,640
Speaker 11: a lot of investment that's already been committed at the

714
00:36:33,680 --> 00:36:36,239
Speaker 11: back of the investment tax credits and some of the

715
00:36:36,280 --> 00:36:39,720
Speaker 11: other incentives in the Inflation Reduction Act, but we wanted

716
00:36:39,719 --> 00:36:43,040
Speaker 11: to look at, Okay, so what happens if these incentives,

717
00:36:43,080 --> 00:36:47,720
Speaker 11: So the investment tax credit actually gets repealed right away,

718
00:36:48,000 --> 00:36:50,279
Speaker 11: which is of course a worst case scenario. It's not

719
00:36:50,400 --> 00:36:52,680
Speaker 11: our expectation of what will happen, but it gives us

720
00:36:52,680 --> 00:36:57,200
Speaker 11: some benchmark of what could happen. And under that scenario,

721
00:36:57,200 --> 00:36:59,640
Speaker 11: it's about a seventeen percent decline, so it's a fifth

722
00:36:59,680 --> 00:37:02,920
Speaker 11: of of capacity that gets dropped or not built in

723
00:37:02,960 --> 00:37:06,719
Speaker 11: the twenty thirty five time frame. One additional component is

724
00:37:06,880 --> 00:37:09,840
Speaker 11: like if that actually were to happen, is that projects

725
00:37:09,840 --> 00:37:12,440
Speaker 11: would try to rush to try to be built before

726
00:37:12,520 --> 00:37:15,960
Speaker 11: that step down happens, which could happen in the end

727
00:37:15,960 --> 00:37:18,560
Speaker 11: of twenty twenty six or the end of twenty twenty five.

728
00:37:19,040 --> 00:37:22,120
Speaker 11: So essentially there's a rush to build a decline in

729
00:37:22,160 --> 00:37:24,160
Speaker 11: the market, and then the market picks up up again,

730
00:37:24,280 --> 00:37:26,279
Speaker 11: but not at the same rate or not to the

731
00:37:26,280 --> 00:37:29,160
Speaker 11: same degree as it would in a non repeal scenario.

732
00:37:29,320 --> 00:37:30,359
Speaker 11: So that's how we looked at.

733
00:37:30,239 --> 00:37:33,120
Speaker 3: That walk us through the key fundamentals that you think

734
00:37:33,160 --> 00:37:35,400
Speaker 3: have helped build the industry.

735
00:37:35,520 --> 00:37:39,080
Speaker 11: Absolutely, so I think we're obviously in an acceleration mode

736
00:37:39,080 --> 00:37:41,839
Speaker 11: at the moment. It's almost like certain key elements are

737
00:37:41,920 --> 00:37:44,680
Speaker 11: keeping the market from growing as quickly as it could.

738
00:37:45,239 --> 00:37:48,200
Speaker 11: But in terms of the fundamentals in the past, major

739
00:37:48,239 --> 00:37:50,960
Speaker 11: one is the fact that the cost of wind, solar,

740
00:37:50,960 --> 00:37:54,080
Speaker 11: and storage and batteries has come down significantly over the

741
00:37:54,120 --> 00:37:58,440
Speaker 11: last decades. That's really made the cost of these technologies

742
00:37:58,480 --> 00:38:03,200
Speaker 11: competitive against conventional generation, conventional fossil fuel generators in the

743
00:38:03,280 --> 00:38:06,680
Speaker 11: US that would be trying to displace gas, and we

744
00:38:06,760 --> 00:38:08,719
Speaker 11: do see in most of the markets of the US

745
00:38:08,800 --> 00:38:11,600
Speaker 11: wind and solar are competitive against gas. Of course, they

746
00:38:11,600 --> 00:38:14,520
Speaker 11: don't deliver energy at all, like twenty four to seven,

747
00:38:14,600 --> 00:38:18,000
Speaker 11: and that's where batteries comes in. So the cost of batteries,

748
00:38:18,320 --> 00:38:21,920
Speaker 11: like specifically Liteman batteries has fallen by more than ninety

749
00:38:21,920 --> 00:38:24,360
Speaker 11: percent over the last decade, which is significant.

750
00:38:24,480 --> 00:38:27,239
Speaker 2: How's the US doing quote some really big numbers here

751
00:38:27,400 --> 00:38:30,680
Speaker 2: in terms of investment in tara watts and all those.

752
00:38:31,120 --> 00:38:33,160
Speaker 2: How are we versus the rest of the world in

753
00:38:33,239 --> 00:38:35,520
Speaker 2: terms of, you know, just in terms of really embracing

754
00:38:35,880 --> 00:38:36,680
Speaker 2: cleaner energy.

755
00:38:37,400 --> 00:38:40,560
Speaker 11: Yeah, so on a country level basis, the US is

756
00:38:40,560 --> 00:38:43,840
Speaker 11: probably second in terms of stacked investments in these sectors.

757
00:38:44,200 --> 00:38:46,880
Speaker 11: That's because China is really the giant in terms of

758
00:38:46,920 --> 00:38:50,760
Speaker 11: attracting new investment into win, solar, and even batteries segments.

759
00:38:51,680 --> 00:38:53,239
Speaker 11: And there is a bit of a pickup game in

760
00:38:53,280 --> 00:38:55,000
Speaker 11: terms of some of the key segments in terms of

761
00:38:55,080 --> 00:38:58,319
Speaker 11: the manufacturing side, so the supply chain and trying to

762
00:38:58,320 --> 00:39:00,800
Speaker 11: invest that and bring that into the US. With mixed

763
00:39:00,960 --> 00:39:04,880
Speaker 11: levels of comparative success across different sectors.

764
00:39:05,080 --> 00:39:08,880
Speaker 3: What should we expect for wind and solar capacity build

765
00:39:09,000 --> 00:39:11,560
Speaker 3: in twenty twenty five for those forecasts.

766
00:39:11,719 --> 00:39:14,520
Speaker 11: Yeah, so we're expecting most of them to grow. That's

767
00:39:14,520 --> 00:39:18,600
Speaker 11: certainly true for solar and storage. When when more or

768
00:39:18,719 --> 00:39:24,640
Speaker 11: less keeping keeping a pace, generally, our expectation is that

769
00:39:24,680 --> 00:39:27,400
Speaker 11: there will be more investment going in. And that's because

770
00:39:27,840 --> 00:39:30,080
Speaker 11: there's just a lot of projects in the pipeline that

771
00:39:30,120 --> 00:39:34,600
Speaker 11: are essentially contracted to meet utility demands. So a lot

772
00:39:34,640 --> 00:39:37,480
Speaker 11: of the US utilities have been you know, contracting work

773
00:39:37,600 --> 00:39:40,960
Speaker 11: in power because they, as I said, they're cheaper, but

774
00:39:41,040 --> 00:39:44,160
Speaker 11: also because they might have some specific goals in order

775
00:39:44,239 --> 00:39:48,920
Speaker 11: to decarbonize. I guess. The other factors is just the

776
00:39:49,000 --> 00:39:51,080
Speaker 11: corporate side, so a lot of the you know, the

777
00:39:51,080 --> 00:39:54,680
Speaker 11: Amazons and Googles, these companies have increasingly also been looking

778
00:39:54,680 --> 00:39:58,960
Speaker 11: for cleaner portfolios of energy generation to be meeting their demand.

779
00:39:59,640 --> 00:40:03,960
Speaker 2: Yeah, Sacchini head energy Storage at Bloomberg at an EF,

780
00:40:03,960 --> 00:40:06,359
Speaker 2: thanks so much for joining us here. Again. The good

781
00:40:06,360 --> 00:40:08,680
Speaker 2: folks at the Bloomberg a ne EF, they look at

782
00:40:09,120 --> 00:40:12,320
Speaker 2: the I guess within Bloomberg they really track and analyze

783
00:40:12,320 --> 00:40:15,040
Speaker 2: the energy transition on a global scale. So they're really

784
00:40:15,080 --> 00:40:18,319
Speaker 2: doing some cutting edge work there, which is a keen

785
00:40:18,360 --> 00:40:20,840
Speaker 2: importance to a lot of folks, including the Bloomberg criminal

786
00:40:21,239 --> 00:40:23,640
Speaker 2: customers out there, So we appreciate getting a few minutes

787
00:40:23,840 --> 00:40:24,920
Speaker 2: of their time every week.

788
00:40:25,160 --> 00:40:29,640
Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify,

789
00:40:29,880 --> 00:40:33,080
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790
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