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Speaker 2: Let's transition to another story. Matt, And you know we
Speaker 2: talked about this.
Speaker 3: We've talked about it so many times. We continue to
Speaker 3: get this story on the Bloomberg terminal. The US government
Speaker 3: is considering asking a federal judge to force Google to
Speaker 3: sell off parts of its business.
Speaker 4: The last time.
Speaker 3: We had this story, it was people familiar. Now the
Speaker 3: company or sorry, the department. We've got a filing has
Speaker 3: confirmed it. Of course, there are other options as well,
Speaker 3: and we're not going to get even the beginning of
Speaker 3: this part of the trial until spring of next year.
Speaker 3: But I want to bring a Nyland as well as
Speaker 3: Man Deep Sing from Bloomberg Intelligence here to talk about this. Leah,
Speaker 3: We've got you know, there's a lot of time between
Speaker 3: now and when uh this, I guess sentencing maybe not
Speaker 3: the right word, but this part of the trial is
Speaker 3: gonna is gonna start. What kind of breakup is the
Speaker 3: federal government.
Speaker 4: Gonna go for.
Speaker 5: Yeah, so that remains a question. We'll find out next month.
Speaker 5: So what they filed yesterday was what they called sort
Speaker 5: of the menu of options that are on the table
Speaker 5: for the judge, And so at the one end is
Speaker 5: a breakup, and they have said that they may consider
Speaker 5: asking for forcing Google to sell off either Chrome, Android
Speaker 5: or Play, And probably if it was Android, it would
Speaker 5: be Android and Play because Android is the operating system
Speaker 5: and Play is the you know, the app store that
Speaker 5: goes with Android, And that's sort of like the extreme
Speaker 5: end in the middle. They sort of had these options
Speaker 5: to sort of force Google to share a lot of
Speaker 5: the information it scrapes from the web to make its
Speaker 5: underlying search results. And the government said that if they
Speaker 5: do that, you know, that could be used by other
Speaker 5: search engines. It could also be used by AI startups
Speaker 5: who sort of need this data to sort of create
Speaker 5: their models. And then the sort of like wimpiest one
Speaker 5: is you know, just sort of ending the contracts that
Speaker 5: the judge found to be illegal. These are the ones
Speaker 5: in which they paid other companies like Samsung and Apple
Speaker 5: billions of dollars to make their search engine the default.
Speaker 5: So these are our options, and they're going to officially,
Speaker 5: you know, set down what their request is in November,
Speaker 5: and then the judge is going to let them do
Speaker 5: some more discovery, asking Google some questions about how this
Speaker 5: would impact their business. And then we have our mini
Speaker 5: trial in April, and then the judge said that he
Speaker 5: will issue his decision by August of next year. So
Speaker 5: we still have how many months is that eight or
Speaker 5: nine months before we get to the end of just
Speaker 5: this part.
Speaker 6: But yeah, it's a busy.
Speaker 7: A lot to look forward there too. Man Deep Singh
Speaker 7: come into this conversation. You take a look at Google
Speaker 7: shares right now, currently off by about two point four percent.
Speaker 7: When we were looking at it in the morning, which
Speaker 7: feels like a long time ago, it was pretty much unchanged.
Speaker 7: But now taking a leg lower, let me put this
Speaker 7: into context for us. Of course, there's a lot of
Speaker 7: wood to chop before we get to any real action.
Speaker 7: But how much does this matter to Alphabet How much
Speaker 7: does this matter to Google?
Speaker 8: I mean, look some of the remedies that were suggested
Speaker 8: in terms of for sale of Android or you know,
Speaker 8: some of the businesses that they own, Chrome browser, I
Speaker 8: think is just so unlikely, simply because the way Google
Speaker 8: is run, it's all one shared infrastructure that's powering YouTube,
Speaker 8: that's powering the browser, that's powering the cloud business. How
Speaker 8: do you take an entity out? And so the one
Speaker 8: I guess area where there's another lawsuit, dog lawsuit on
Speaker 8: the ad has so many.
Speaker 3: There's lawsuits, dude, one on the ad tech marketplace. There's
Speaker 3: a bunch of states that are suing the ad tech
Speaker 3: for as your browser.
Speaker 4: There's the EU.
Speaker 3: Obviously, Margaret Vestiger is going to decide by the end
Speaker 3: of the year. She says breaking it up is the
Speaker 3: only solution she can imagine.
Speaker 4: I'm forgetting. There are other lawsuits, yes this year.
Speaker 8: Yeah, And the common thread I find across all those
Speaker 8: different lawsuits, the most commonly pointed issue is their ad
Speaker 8: tech stack, which is where I feel like you could
Speaker 8: make a case why does Google own you know, the
Speaker 8: supply side AD platforms, the demand ad platforms, the marketplace,
Speaker 8: and then it has a pricing advantage. Everyone can see that.
Speaker 8: And that was built on their Double Click acquisition back
Speaker 8: in two thousand and seven, so you could say they
Speaker 8: didn't build this organically. It is something they acquired and
Speaker 8: then over time they really had an advantage.
Speaker 4: But that's they've tuned it up.
Speaker 8: They did, and that you could say that even Android
Speaker 8: was an acquisition. YouTube was an acquisition for Google. So
Speaker 8: they've tuned all these things over time. But I think
Speaker 8: ad tech is the one that is the strongest or
Speaker 8: the most convincing, at least to me, out of all
Speaker 8: the things they are offering as remedies. I can't imagine
Speaker 8: you know, Google for sale of Android or you know,
Speaker 8: all these products that are integral to their LLLM strategy.
Speaker 4: I mean, that's the future. So Leo, what do you think.
Speaker 3: I mean, first of all, we haven't seen a big
Speaker 3: breakup in the US since like well none of us
Speaker 3: was born except for me, even when ma Bell got
Speaker 3: broken up. And then second of all, this is like
Speaker 3: a national security issue. Not only is Google dominant in search,
Speaker 3: but America's Google is dominant worldwide. Do you ever talk
Speaker 3: to anybody in your reporting who says, like Google is
Speaker 3: a champion, how could we break it up?
Speaker 5: That is a point that Google likes to make that
Speaker 5: by breaking it up it might make it less competitive,
Speaker 5: particularly against China. I will tell you the anti trust
Speaker 5: enforcers are not particularly persuaded by that. They don't like
Speaker 5: the idea of supporting a company simply because it's a
Speaker 5: national champion. I mean, America's competition policy is built on
Speaker 5: the idea that the more companies we have competing, the
Speaker 5: better products and services we have for consumers and for
Speaker 5: other businesses. So they would say, you know, maybe like,
Speaker 5: we don't really care that this makes Google a little
Speaker 5: bit less competitive globally. We want there to be other businesses.
Speaker 2: And I'm just curious.
Speaker 7: I mean, as a reporter, you cover anti trust, you cover,
Speaker 7: of course, the DOJ, you cover the FTC. It just
Speaker 7: feels like the anti trust landscape over the past few
Speaker 7: years has really gotten more aggressive, more emboldened. And I mean,
Speaker 7: just talk to us about that, about how your beat
Speaker 7: has changed before your eyes when you think about I
Speaker 7: don't know, just the last couple of years.
Speaker 9: Yeah.
Speaker 5: I have been on the anti trust beat for twelve years,
Speaker 5: and I have to say when I first started, I
Speaker 5: never expected that the stories I was covering would be
Speaker 5: like on the front page of the New York Times. Definitely,
Speaker 5: the Biden administration really took this as the thing that
Speaker 5: they was going to differentiate themselves from the Obama years.
Speaker 5: Because the Obama years were sort of seen as very
Speaker 5: beholden to business. They didn't do any of the things
Speaker 5: against the tech companies, and they feel that that was
Speaker 5: a big mistake. So Biden brought in a trio of
Speaker 5: very aggressive enforcers, Jonathan Canter at the Justice Department, Lena
Speaker 5: Kon at the FTC, and Tim Wu at the White House.
Speaker 5: Tim is now gone, but Lena and Jonathan are still
Speaker 5: there and they are still making moves. You know. The
Speaker 5: Google trial just ended a few weeks ago. They just
Speaker 5: sued Visa and the FTC, you know, just sued a
Speaker 5: bunch of the pharmaceutical benefit manufacturers. So they have been
Speaker 5: more aggressive in the past three years than people had
Speaker 5: been in the last four decades. It's very much a
Speaker 5: conscious decision on their part to sort of reject the
Speaker 5: more lays affair capitalism that they say was brought in
Speaker 5: by the Reagan years and they feel did not do
Speaker 5: very well for the average American consumer.
Speaker 7: And uh, Leah, I think we're twenty six days away
Speaker 7: from the presidential election, if you can believe it. And
Speaker 7: it's I mean, especially among the Wall Street firms that
Speaker 7: we talked through the Wall Street guys and gals that
Speaker 7: we talked to, there's been a lot of frustration that
Speaker 7: it feels like you can't get a merger done that
Speaker 7: with this FTC, with Lena Khan in charge, it's been really,
Speaker 7: really difficult to get any deals done. At the same time,
Speaker 7: jd Vance, we know, has had nice things to say
Speaker 7: about Lena Khan in the past.
Speaker 2: When you think about what.
Speaker 4: Does that mean that jd Vance loves.
Speaker 2: Her, I don't know.
Speaker 7: I want Leah Away in here because you think about
Speaker 7: the change in administration, even if Trump wins the White House,
Speaker 7: I mean, are you expecting much much change when it
Speaker 7: comes to the anti trust beat.
Speaker 5: It's a little bit hard to say, but the answer
Speaker 5: is not on tech because you know, a lot of
Speaker 5: these cases, including the one that we're talking about right
Speaker 5: now Google, was actually brought during the first Trump administration.
Speaker 5: So the Trump administration and Republicans like jd Vance really
Speaker 5: don't like the big tech companies. So I can't really
Speaker 5: see them pulling back on any of the cases that
Speaker 5: the Biden administration brought against the tech giants. Where you
Speaker 5: might see changes definitely in the merger area, because you
Speaker 5: do hear a lot that while the Republican folks maybe
Speaker 5: like what Lena Khan has done on big tech, they're
Speaker 5: not as thrilled with what she has done in the
Speaker 5: merger area, sort of chilling mergers and making it more
Speaker 5: difficult for businesses to sort of go about their regular business.
Speaker 3: I want to also point out that being on the
Speaker 3: Bloomberg top page is just as good as the front
Speaker 3: page of the New York Times, Lea, so you should
Speaker 3: be proud of the entirety of your career here man,
Speaker 3: Deep want to ask you about the stock obviously at
Speaker 3: Bloomberg Intelligence. You know most people are going to follow
Speaker 3: your research to see how that does. On the equity side,
Speaker 3: it's up over the last five years. One hundred and
Speaker 3: six seventy percent. Hasn't done great this year compared to
Speaker 3: the S and P, but compared to the other Fang
Speaker 3: or mag seven stocks minus and video, it's holding with
Speaker 3: the pack well.
Speaker 8: I mean, I think there is a clear overhang when
Speaker 8: it comes to the anti trust side of things and
Speaker 8: the scrutiny that Alphabet gets. But when you look at
Speaker 8: the sum of the parts, even in a worst case
Speaker 8: breakup scenario, you could argue the sum of the parts
Speaker 8: for Alphabet is way more than you know its current valuation,
Speaker 8: and it's just driven by the fundamentals of the cloud business,
Speaker 8: the YouTube business, the fact that they have a native
Speaker 8: LM advantage that even Microsoft doesn't have. Microsoft is reliant
Speaker 8: on open AI for the LLLM. So I think given
Speaker 8: everyone is so fixated on generative AI and LLLM, that's
Speaker 8: why all these products are core to Alphabet as a franchise,
Speaker 8: you know, when it comes to them deploying their LLM
Speaker 8: on the cloud or on Android, and I think it's
Speaker 8: a huge comparative mode.
Speaker 4: All right, Okay, thank you very much. Man Deep Singh.
Speaker 3: Coming to some Bloomberg Intelligence and leehon Island. Sometimes on
Speaker 3: the front page of New York Times maybe, but definitely
Speaker 3: on top Go Bloomberg News.
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Speaker 3: Now, we've been talking about commercial real estate as if
Speaker 3: it's the next year to drop for.
Speaker 4: A couple of years.
Speaker 3: Oh yeah, and even lately we've gotten sort of warnings
Speaker 3: from people involved in the industry.
Speaker 4: I think exactly exactly.
Speaker 3: Victor Koschlaw, the founder of credit investor Strategic Value Partners,
Speaker 3: recently said their problems galore.
Speaker 4: He says there's.
Speaker 3: Tsunami coming, but he's talking specifically about office and there's
Speaker 3: not only big regional differences, but also you know, if
Speaker 3: you are investing in student housing, you're doing fine right now.
Speaker 3: Medical is you know, still obviously a thriving business. So
Speaker 3: let's bring in an expert right now. Mark Gibson joins
Speaker 3: us in the Interactive Broker studio here at seven thirty
Speaker 3: one Lex. He is the America SEO of Capital Markets
Speaker 3: for JLLL. I know them as Jones langlessal. Have you
Speaker 3: gone through an official name change? Is it just JL
Speaker 3: now JLL? Okay, So, but you have really an incredible
Speaker 3: seat from which to watch all of this that's going on.
Speaker 3: Where would you say we are, say, if it were
Speaker 3: a baseball game, right and you know the fall of
Speaker 3: commercial real estate was in which inning would you say?
Speaker 10: That is a hard question to sound bite, Matt. But
Speaker 10: let me let me back up for a minute, because
Speaker 10: you started out with a tsunami of issues and you
Speaker 10: limited it to commercial office. But in reality, when you
Speaker 10: step back a minute and you look at in general
Speaker 10: what has occurred in commercial real estate, and there has
Speaker 10: been some centicism around, you know, any kind of risk
Speaker 10: that might be out there for a financial institution, systemic
Speaker 10: risk or things like that, But in reality, what has
Speaker 10: caused this is a fast increasing cost of capital. So
Speaker 10: when the demand has largely been there, including ironically in office.
Speaker 3: Although it's shifted right, it's come out of the city
Speaker 3: centers and gone out to urban it's.
Speaker 10: Exactly re emerging and there's in it again. It is
Speaker 10: very different story geographically, so it's hard to sound by
Speaker 10: it and talking global discussions, but in general it hasn't
Speaker 10: been a demand issue from a commercial real estate standpoint.
Speaker 10: It's been a cost of capital issue. So when you
Speaker 10: think about the fed's recent actions and you're an investor
Speaker 10: and you're worried about inflation, because you're concerned if you
Speaker 10: invest today in the cost of capital increases, you might
Speaker 10: look somewhat early, so you want to wait and see
Speaker 10: if that's really going to be con The investor community
Speaker 10: today believes the FED is indeed going to conquer inflation,
Speaker 10: and it may take a little bit longer because we
Speaker 10: have government stimulus in terms of building back infrastructure and
Speaker 10: things like that. But generally speaking, monetary policy has worked
Speaker 10: and so then when you have a normalizing YO curve.
Speaker 10: So if the issues and they have been limited relative
Speaker 10: to what was discussed earlier in the year, problems in
Speaker 10: commercial real estate because demand is not waned it was
Speaker 10: due to the cost of capital. When that starts reversing,
Speaker 10: then real estate by and large, and it's different for
Speaker 10: different product types. Self corrects.
Speaker 7: Yeah, well, just focusing on US office, it's interesting to
Speaker 7: hear what you're saying that this is a cost of
Speaker 7: capital problem, because some people might make the argument that, no,
Speaker 7: this is structural. You know, life changed during the pandemic,
Speaker 7: and the US office market is different. Now there's people
Speaker 7: who you know, are doing hybrid work and that's a
Speaker 7: trend that's here to stay. It sounds like you're you're
Speaker 7: making a different argument.
Speaker 10: No, I think it's a valid point. I do think
Speaker 10: that what I was talking about is in general, commercial
Speaker 10: real estate was thrown, to Matt's point, into one basket
Speaker 10: and discuss globally, which you really can't do. You have
Speaker 10: to back it down by product type. But on office specifically,
Speaker 10: the data would suggest otherwise in terms of what is
Speaker 10: currently happening now. So when you look at occupancy by
Speaker 10: cards wipes, and you look at the vibrancy of New York,
Speaker 10: for instance, and you see what is happening in the marketplace,
Speaker 10: it's a very different story than what we have been
Speaker 10: talking about for some time. So we think that office.
Speaker 4: Is not bad going to have issues, well, it is.
Speaker 10: Of all the product types, it will have issues for
Speaker 10: a host of reasons. We don't have time today to
Speaker 10: really go through it, but it will have more issues
Speaker 10: than other sectors in commercial real estate. But nonetheless, it's
Speaker 10: not where people believe it is from a from a
Speaker 10: distress standpoint. There's going to be quite a bit of
Speaker 10: distress in the space, but it will be a have
Speaker 10: and have not scenario. The better buildings are doing quite well.
Speaker 10: In fact, some of them are doing better than they
Speaker 10: have ever done in US history, and then others aren't.
Speaker 10: So of all the real estate classes, it's the largest divide.
Speaker 3: Of At the same time, it seems like there's a
Speaker 3: flood of capital that wants to get in. We talk
Speaker 3: about private credit more often than we talk about commercial
Speaker 3: real estate. Is it is there so much money there
Speaker 3: looking for a home that it helps ease the blow
Speaker 3: a bit.
Speaker 10: Yeah, it's good. It's a good view, Matt. What really
Speaker 10: is happening is there's no lack of liquidity for commercial
Speaker 10: real estate. And the fact of the matter is if
Speaker 10: you buy good real estate and you don't overleverage so
Speaker 10: you can survive cycles, it goes up and it's a
Speaker 10: good long term store of value. So people are looking
Speaker 10: at the right entry point to get into commercial real estate.
Speaker 10: Across the board, there's no lack of liquidity. It's been
Speaker 10: the cost of that liquidity that has been the issue
Speaker 10: of late. But now we're having a you said a
Speaker 10: light switch went on. It almost is a light switch
Speaker 10: in terms of what has occurred. So the amount of
Speaker 10: capital that wants to invest in commercial real estate is
Speaker 10: substantially higher than it was, and at the same time,
Speaker 10: you have people that are looking to absorb that capital
Speaker 10: and are willing to accept the cost of it and
Speaker 10: the various risks. So we're seeing a bit ass gap
Speaker 10: narrow which is why transactional volumes have been muted some
Speaker 10: wat and commercial real estate we're getting to see that.
Speaker 2: Tick up and we have only about a minute left
Speaker 2: with you.
Speaker 7: Mark, we have to have you back for a longer conversation,
Speaker 7: but talk to us about magnitude when it comes to
Speaker 7: the cost of capital coming down. Of course, the FED
Speaker 7: has started on the rate cutting cycle.
Speaker 2: A lot of questions about.
Speaker 7: The trajectory's trajectory though, I mean, how much do rates
Speaker 7: have to come down before you know you.
Speaker 2: Really see activity accelerate? Broadly?
Speaker 10: I don't think much, Okatie, it's a good question. Real
Speaker 10: estate investors tend to look longer term, so they're looking
Speaker 10: at the ten year bond versus necessarily the short end
Speaker 10: of the Yell curve. But nevertheless, as you see in
Speaker 10: normalizing yll curve, you will have more transactional activity. We're
Speaker 10: already beginning to see it, but no one is betting
Speaker 10: on that to have any significant impact across the commercial
Speaker 10: real estate industry.
Speaker 7: All right, Mark, great conversation. Really appreciate your time. Of course,
Speaker 7: joining us in studio. That is Mark Gibson. He is
Speaker 7: America's CEO of Capital Markets talking to us about real estate,
Speaker 7: the commercial real estate market, the cost of capital. That
Speaker 7: ten year treasury bond currently camped out at about four percent.
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Speaker 7: Let's talk about nuclear. We're talking about a lot more
Speaker 7: these past couple weeks. Of course, you think about Microsoft's
Speaker 7: announcement to partner with Constellation Energy reopen Three Mile Island,
Speaker 7: and of course has breathed a lot of life and
Speaker 7: excitement back into nuclear, back into uranium. Let's break it
Speaker 7: all down now with John Kotech. He is senior vice
Speaker 7: president of Policy Development and public Affairs over at the
Speaker 7: Nuclear Energy Institute.
Speaker 2: John, it's great to have you with us.
Speaker 7: Matt and I have spoken to the CEOs of a
Speaker 7: couple of different uranium miners in the past week or so,
Speaker 7: and the question I keep asking them is what does
Speaker 7: this moment feel like? Of course, it feels like there's
Speaker 7: been broad support for nuclear for a while now, but
Speaker 7: we were looking for a catalyst.
Speaker 2: Now we have one. How would you describe this moment?
Speaker 6: Yeah, well, first, thanks for having me. I described this
Speaker 6: moment as a long overdue recognition of the value of
Speaker 6: nuclear energy is part of a clean, reliable, and affordable
Speaker 6: energy system.
Speaker 9: What's happened in the.
Speaker 6: Last few years is as companies focus more and more
Speaker 6: on reducing the carbon intensity of their energy production or
Speaker 6: their energy use, to come to recognize that having something
Speaker 6: like nuclear power that's available twenty four to seven, that
Speaker 6: can run eighteen to twenty four months at a time
Speaker 6: while producing carbon free power is enormously valuable in addition
Speaker 6: to things like the job creation, the tax base, the
Speaker 6: other economic benefits that come from nuclear power. So we're
Speaker 6: seeing a moment where people are recognizing that it's really
Speaker 6: important to both keep the nuclear we have and get
Speaker 6: on a.
Speaker 9: Path to build more.
Speaker 3: I wonder about the affordable part of that. I mean,
Speaker 3: nuclear is clearly, you know, we don't there's no carbon emissions, right,
Speaker 3: you only have to deal with the waste, and we
Speaker 3: can talk in a bit about ways to deal with that.
Speaker 3: The affordability part is what always dogs me, and I
Speaker 3: talked to experts like our reporter William Wade. Is it
Speaker 3: really can we really get there? Because it seems like
Speaker 3: the cost, the initial layouts are so high.
Speaker 6: Yeah, and so great point. There's a couple of things
Speaker 6: you need to recognize here. One, yes, the initial layout
Speaker 6: is high, and frankly, when we built the nuclear power
Speaker 6: plants that we have today, they cost more than the
Speaker 6: coal plants, for example, that we're being built at the time.
Speaker 6: But they become an asset that's available for sixty eighty,
Speaker 6: even one hundred years, and once you've paid off that
Speaker 6: initial construction loan, what you've got is an asset that's
Speaker 6: producing very affordable zero carbon power. And so it really
Speaker 6: is something that is almost a gift of future generations.
Speaker 6: We're benefiting from the investments that were made in the
Speaker 6: plants that we have today back in the seventies and eighties.
Speaker 6: Future generations should benefit from the investments we make today.
Speaker 9: So that's one part.
Speaker 6: The second part is you've got to distinguish between the
Speaker 6: cost of a particular resource. In the CYSM, some costs,
Speaker 6: and what I mean by that is, look, we're going
Speaker 6: to build a lot more wind, We're going to build
Speaker 6: a lot more solar, but because of the intermittent nature
Speaker 6: of those technologies, to run a whole brid using just
Speaker 6: those technologies, you have to enormously overbuild both those technologies.
Speaker 6: And the storage that's needed to carry you through periods
Speaker 6: where you don't have.
Speaker 9: The wind or the sun that you need.
Speaker 6: You also need to build out enormous amounts of transmission,
Speaker 6: which is very difficult to get built.
Speaker 9: Nuclear helps you avoid having to do that.
Speaker 6: And so even though that particular increment of nuclear generation
Speaker 6: might look more expensive than a solar farm, for example,
Speaker 6: on a system basis, by having nuclear you can avoid
Speaker 6: a massive overbuild of these other technologies and ultimately save
Speaker 6: consumers money. And what matters at the end of the
Speaker 6: day is what are consumers paying?
Speaker 7: And of course you're talking about expenses here. Something that
Speaker 7: Matt and I have been talking about over the past
Speaker 7: couple of weeks is just the timeline. Of course, the
Speaker 7: point has been made to me that spinning up and
Speaker 7: turning back on these nuclear reactors it's not like switching
Speaker 7: a light switch necessarily.
Speaker 2: So even with all of.
Speaker 7: This momentum, of course, you have Google too thinking about
Speaker 7: using nuclear to power their.
Speaker 2: Data centers as well Amazon exactly.
Speaker 7: I mean you have to imagine all the big tech
Speaker 7: companies reported or not are looking at this. So I
Speaker 7: mean my question to you, John is what kind of
Speaker 7: timeline does it take to actually spin up.
Speaker 2: Some of these.
Speaker 6: Yeah, so as we look down the road to some
Speaker 6: of the new technologies that we're looking to bring online,
Speaker 6: those should be able to be constructed in a much
Speaker 6: shorter period of time than we've seen historical nuclear power
Speaker 6: plants built. If you look at the experience in Japan,
Speaker 6: for example, about twenty years ago. In South Korea more recently,
Speaker 6: they were building large reactors in about five years.
Speaker 9: The experience here in the US has.
Speaker 6: Been significantly longer than that, but that's because we haven't
Speaker 6: had a sustained program of new built.
Speaker 9: These are big machines, they're complicated.
Speaker 6: And so the more that you have experienced building them,
Speaker 6: the better you get at it.
Speaker 9: We've even seen that with the two new reactors.
Speaker 6: That came on in the State of Georgia recently, called
Speaker 6: Vowel Units three and four. As they went from Unit
Speaker 6: three to Unit four, they saw a twenty percent reduction
Speaker 6: in cost and a thirty percent increase in efficiency in
Speaker 6: the construction, just from the learning is going from.
Speaker 9: One unit to the next.
Speaker 6: If we can start building these things at scale, we're
Speaker 6: going to get very good at them, and we're going
Speaker 6: to shorten those timelines.
Speaker 7: It's an interesting point about the expertise needed, and of
Speaker 7: course nuclear it's a really exciting time. I mean, you
Speaker 7: put ai, you attached that to anything, and suddenly it's
Speaker 7: very exciting. I'm curious what talent retention and recruiting has
Speaker 7: been like over the past couple decades since again, nuclear
Speaker 7: it's been waiting for a catalyst, but it's been waiting
Speaker 7: for a long time.
Speaker 6: Yeah, And what we've seen is that we can attract
Speaker 6: nuclear into or we can attract people into nuclear jobs
Speaker 6: in a large part because people recognize these as very
Speaker 6: long term careers and very.
Speaker 9: Well paying careers.
Speaker 6: So when I've asked leaders of organized labor, for example,
Speaker 6: about their concerns in finding the workers to serve as
Speaker 6: the electricians or the construction workers, what have you in
Speaker 6: these facilities, they say, show me the jobs and I'll
Speaker 6: find you the people. Because the people see these jobs
Speaker 6: as a pathway to the middle class. They see a
Speaker 6: safe job, they see a long lasting job. Right, these
Speaker 6: reactors can run sixty eighty we think maybe.
Speaker 9: Up to one hundred years.
Speaker 6: So the type of facility that you can build a
Speaker 6: community around the type of career where you can set
Speaker 6: down roots in a particular in a particular community. So
Speaker 6: we thinks as these projects move from the planning stage
Speaker 6: into construction and operation, that will be very competitive in
Speaker 6: bringing new workers into nuclear.
Speaker 3: I want to talk about I always talk about the
Speaker 3: Bill Gates documentary on Netflix.
Speaker 4: I'm sure you've seen it as well.
Speaker 3: Inside Bill Gates' brain, he talks about small module or
Speaker 3: reactors and new technology that allows you to reuse the
Speaker 3: waste in terms of reuse spent fuel, and this has
Speaker 3: obviously been one of the big problems with nuclear. When
Speaker 3: you get the spent fuel, you've got to bury it
Speaker 3: under like the Shyenne Mountain Range or something and leave
Speaker 3: it there for the rest of eternity.
Speaker 4: Is is there a solution to that?
Speaker 9: Yeah, So first to the Bill Gates thing. I'm really
Speaker 9: excited about that technology.
Speaker 6: I actually worked at the facility in Idaho where the
Speaker 6: predecessor to that technology was demonstrated, and so it's really
Speaker 6: exciting to see that going into commercialization. I should point
Speaker 6: out there are actually several other reactors, both here in
Speaker 6: the US and in Canada where construction has started on building.
Speaker 9: Next generation reactors. So that's all very exciting in terms
Speaker 9: of the waste question.
Speaker 6: It's important to recognize that the waste generation from nuclear
Speaker 6: is very small. If you or I got our lifetime
Speaker 6: of energy, not just electricity, but total energy from nuclear,
Speaker 6: the waste from that could fit in a coke bop.
Speaker 6: So it's a small amount of material. We also know
Speaker 6: where it is. It's very well accounted for. I worked
Speaker 6: at the facility. I worked at an Idaho at several
Speaker 6: spent nuclear fuel storage sites within a couple hundred yards
Speaker 6: of my office, so we know.
Speaker 9: How to manage this as straightforward.
Speaker 6: You put the material, after a significant sufficient cooling period
Speaker 6: into a concrete and steel overpack and you can air
Speaker 6: cool these things.
Speaker 9: That part's not difficult.
Speaker 6: Ultimately, we are going to need to find a final
Speaker 6: resting place for this material.
Speaker 9: Fortunately we know how to do that too.
Speaker 6: You want to put it into a stable geologic environment,
Speaker 6: maybe fifteen hundred feet underground. Our friends in Finland have
Speaker 6: developed their repository.
Speaker 9: They're in their testing phase.
Speaker 10: Now.
Speaker 6: Sweden has selected a site. Our friends in Canada are
Speaker 6: down to two sites to host such a facility. So
Speaker 6: other nations are moving forward. We know how to do it.
Speaker 4: I would just shoot it off into space.
Speaker 9: John, You know it's.
Speaker 6: Funny you mentioned that people actually considered that back in
Speaker 6: the fifties and sixties, and then the Space Shuttle blew
Speaker 6: up and that that idea.
Speaker 4: That would be bad enough.
Speaker 9: Yeah, okay, yeah, that would be bad. But so other
Speaker 9: countries are moving forward with this.
Speaker 6: We are at a political impass here in the United States.
Speaker 6: I should note that funding to pay for this has
Speaker 6: been collected. The government put a tenth of a cent
Speaker 6: charge per kill a loot hour of electricity generated from
Speaker 6: nuclear a tax on spent nuclear fuel. As a result,
Speaker 6: there's more than forty five billion dollars sitting in the
Speaker 6: treasury to pay for this.
Speaker 9: When we can get Congress and the Administration of granted
Speaker 9: path forward.
Speaker 7: And John, I mean, we've been talking about Microsoft Alphabet,
Speaker 7: We've been talking about you know, Amazon, and I made
Speaker 7: the point that reported or not, probably all of these
Speaker 7: big tech companies are talking about partnering with you know,
Speaker 7: nuclear provider in some way.
Speaker 2: I mean, are you seeing that in your role at the.
Speaker 7: Nuclear Energy Institute again, your SVP of Policy Development and
Speaker 7: Public Affairs, I mean, what sense of you have of
Speaker 7: the conversations that are going on in the industry right now?
Speaker 9: Yeah.
Speaker 6: Absolutely, As more and more companies focus on decarbonization. They're
Speaker 6: coming to nuclear and so the big tech firms that
Speaker 6: you mentioned. Another thing is oil, gas, chemical, steel, pulp
Speaker 6: and paper, a wide variety of companies that need not
Speaker 6: just clean electricity, but also need clean heat. So nuclear
Speaker 6: power plants run it high temperatures. Next generation reactors like
Speaker 6: the Bill Gates when we talked about or will run
Speaker 6: it even higher open temperatures. As a result, that can
Speaker 6: serve as a source of process heat to help clean
Speaker 6: up some industrial processes that currently might rely on coal
Speaker 6: or on natural gas as their source of heat. So
Speaker 6: I think you're going to start seeing more than just
Speaker 6: the tech firms, but companies like Dow which is partnered
Speaker 6: with a company called ex Energy from Maryland to build
Speaker 6: a gas cooled reactor in Texas to help provide carbon
Speaker 6: free book heat and power.
Speaker 9: John clean up at that facility, So a lot of opportunities.
Speaker 3: I got to cut you off. Unfortunately, Katie and I
Speaker 3: could talk to you about this for hours. Truly fascinating.
Speaker 3: I didn't even get to ask you if it's annoying
Speaker 3: when people say nuclear, But thank you so much for
Speaker 3: joining us. John Kotek from the Animo Journal, how about
Speaker 3: you let me drive.
Speaker 1: Oh no, no, no, no, honey, please, I'll I want to drive.
Speaker 9: It's good question.
Speaker 1: This is the drive to the globe dot com for
Speaker 1: me effect well drug on Bloomberg Radio.
Speaker 7: All right, this is Bloomberg BusinessWeek. I'm Katie Greifeld alongside
Speaker 7: Matt Miller. Of course we are filling in for Tim.
Speaker 7: Sound of it, Carol Mass are on their way to
Speaker 7: Los Angeles and they're missing an interesting market. Of course,
Speaker 7: we are less than twenty minutes until the closing bells.
Speaker 7: Of course, we have green on the screen when it
Speaker 7: comes to the S and P five hundred currently of
Speaker 7: about seven tenths of a percent. We'll see if it
Speaker 7: can hold it for the next eighteen minutes or so.
Speaker 7: But let's zoom out and let's talk about these markets.
Speaker 7: We're going to do that with Max Wasserman. He is
Speaker 7: the co founder and senior portfolio manager over at Miramar Capital.
Speaker 7: He joins us from Northbrook, Illinois. And Max, of course,
Speaker 7: we are counting down to those CPI figures coming out
Speaker 7: tomorrow morning at eight thirty am Eastern.
Speaker 2: You think back to what we learned on Friday.
Speaker 7: When it comes of course to the US labor market,
Speaker 7: there was a little bit hotter than expected wage growth
Speaker 7: that seemed to spook the bond market a little bit,
Speaker 7: and Max it seems like that has raised the states
Speaker 7: a little bit.
Speaker 2: For the CPI numbers that we're getting tomorrow.
Speaker 7: Where do you stand when it comes to whether or
Speaker 7: not you know we can kind of look past them
Speaker 7: focused on all the good noises coming out of the economy,
Speaker 7: or whether you know this could be an issue for
Speaker 7: the market.
Speaker 11: I think it's gonna be a short term issue if
Speaker 11: it comes in hot, because then you may not get
Speaker 11: another fifty basis points that everybody's anticipating. But the Fed
Speaker 11: is telling you it's easy rates. They're seeing, you know,
Speaker 11: the long term trend of the CPI coming down, so
Speaker 11: you may have some hiccups along the way, but they're
Speaker 11: not going to go fifty basis point cut then turn
Speaker 11: around and hike it. So they just may two to
Speaker 11: twenty five basis points, but I think they're gonna cut
Speaker 11: it around another one hundred and eighty basis points in
Speaker 11: the next twelve to eighteen months, because if you have
Speaker 11: the FED funds rate around four eighty and they're anticipating
Speaker 11: the real trend on CPI is under three. That gives
Speaker 11: them almost two hundred basis points to bring it down.
Speaker 3: What if we get jumping inflation. Are you concerned at
Speaker 3: all about that? Because you know, with the labor market
Speaker 3: doing well, if inflation starts to look concerning again, maybe
Speaker 3: they won't hike, But they could skip a meeting.
Speaker 11: Yeah, they could, I mean, and I think that's a
Speaker 11: short term look, and that would spook the market a
Speaker 11: little bit because it's running on such optimism right now
Speaker 11: in light of all the catalysts that are out there.
Speaker 11: But if you still look at the long term trend,
Speaker 11: the long term trend is they're gonna cut. So I
Speaker 11: think they're still going to do a quarter and then
Speaker 11: maybe slow it down, or they may just say, well,
Speaker 11: skip it and see more information. There's a lot of
Speaker 11: other things. You have the hurricanes and what that's going
Speaker 11: to disrupt the economy. You have what's going on with
Speaker 11: the strikes, you have what's happening with booneing. There's a
Speaker 11: lot of issues out there. So I'm not convinced that
Speaker 11: they're going to stop cutting just because you have a
Speaker 11: slightly higher CPI. And I do expect, by the way,
Speaker 11: the inflation is going to be much more stubborn. I
Speaker 11: think the FED was too aggressive, in my opinion to
Speaker 11: go fifty. I would prefer they go quarter points along
Speaker 11: the way and let the data come in. But given
Speaker 11: the fact the already made a commitment to fifty, it'd
Speaker 11: be very hard for them to slow down too drastically.
Speaker 7: Well, it's interesting to sort of think about the different
Speaker 7: factors there with the strikes. Of course, any one union
Speaker 7: probably isn't going to show up in the national numbers,
Speaker 7: but you autom all together and you could say that
Speaker 7: maybe that's going to keep the pressure under wage growth
Speaker 7: for a while. And then you think about the hurricane.
Speaker 7: And this is a conversation we've had with our own
Speaker 7: Mike McKee that, of course hurricanes are horrible events and
Speaker 7: their natural disasters, but the cold economic fact is that
Speaker 7: you have, of course the rebuilding effort that comes after,
Speaker 7: which leads to an uptick in economic activity. And I
Speaker 7: guess I'm wrapping this all together for a question that is, basically,
Speaker 7: do you think that there's risk that the FED sort
Speaker 7: of overheats the economy and we see a bit of
Speaker 7: a melt up in the stock market.
Speaker 11: Yes, I do, because I think the euphoria based on
Speaker 11: the FED cutting drastically. You know, they're looking for another
Speaker 11: maybe another fifty to a quarter by year end. May
Speaker 11: be much too optimistic given what's actually happening. I think
Speaker 11: the FED is behind the curve so many ways. They
Speaker 11: were behind it when they were raising, they were behind
Speaker 11: it when they're cutting. But with all the data that's
Speaker 11: out there, there's no clear cut picture that says that
Speaker 11: se and inflation is going to drop right down to
Speaker 11: two percent. You do have strong employment, you do have
Speaker 11: a lot of catalysts that drive the economic recovery that
Speaker 11: we're going to experience with a you know, disasters that
Speaker 11: you're going to see in Florida. But I think the
Speaker 11: FED has made such a commitment with that fifty basis points.
Speaker 11: I think it was such a strong statement that says
Speaker 11: they want to cut rates because they think the long
Speaker 11: term trend of inflation's down. So I don't know that
Speaker 11: a small term hiccup inflation ticks up is going to
Speaker 11: spook the FED or to change their policy. I think
Speaker 11: they'll just slow it down. But they're they're leaning to cutting,
Speaker 11: and I think they're going to do it over the
Speaker 11: next twelve to eighteen. What they do in the next
Speaker 11: month or two that I don't know, but twelve to
Speaker 11: eighteen they're going to cut rates.
Speaker 9: So.
Speaker 3: That would I guess help smaller cap companies. In terms
Speaker 3: of the large caps, we know, you know, the AI
Speaker 3: play has been energized for so long energy because of
Speaker 3: AI and because of maybe what's happening in the Middle East.
Speaker 3: Pushing prices higher has also been a big a good bet.
Speaker 4: And of course if you look at.
Speaker 3: What's going on in the Middle East, I guess defense
Speaker 3: stocks also could be a good bet.
Speaker 4: But what about small caps?
Speaker 3: I mean, as the FED cuts, are the companies on
Speaker 3: the Russell two thousand going to be doing better and better?
Speaker 11: I think money's going to move around, and should they
Speaker 11: do better? Yes, I think lower interest rates would lead
Speaker 11: the market to go to small caps, just because the
Speaker 11: large cap tech play has been done, and I think
Speaker 11: it's a little extended, to be candid, but you know,
Speaker 11: I think the whole market will spread out. I think
Speaker 11: you're going to see it in the market spread out
Speaker 11: from just the strong you know, large cap tech, and
Speaker 11: you're going to see the mid caps. I think you're
Speaker 11: going to see the whole broader market take advantage of it.
Speaker 11: As money will go to where it's treated best, and
Speaker 11: at these multiples of technology, I don't think it's going
Speaker 11: to be treated that great going forward for the next
Speaker 11: six to eight months, but you could see it in
Speaker 11: other areas of the market with lower interest rates. But
Speaker 11: in order for that to happen, you need interest rates
Speaker 11: to really come down a lot more than they currently are,
Speaker 11: because money markets right now are still giving you four
Speaker 11: four and a half percent. The move that I think
Speaker 11: you need for even a broader, stronger market is you
Speaker 11: need another fifty to one hundred to come out where
Speaker 11: money markets are basically under three percent. Then people will
Speaker 11: be taking money and looking for a more aggressive place
Speaker 11: to get cash flow to get growth.
Speaker 7: Max is a great point, of course, it is hard
Speaker 7: to break up with cash when we're still talking about
Speaker 7: yields of four four and a half percent or so.
Speaker 7: Definitely a difficult sell there. But you talk about rates
Speaker 7: coming down and benefiting the market broadly. But I would
Speaker 7: like to get specific here because in your notes you
Speaker 7: talk about specifically the housing market, consumer discretionary stocks over
Speaker 7: the next twelve months. I mean, name some names here
Speaker 7: who do you think specifically.
Speaker 11: Will benefit well, sure, I mean, now it's you know,
Speaker 11: in the fact that what's happening with the hurricane, everybody's
Speaker 11: looking at the home depots and the lows. We have
Speaker 11: investments in home depot, but I'm looking at it. If
Speaker 11: rates are going to come down over the next twelve
Speaker 11: to eighteen, the market's going to forecast that. You're looking
Speaker 11: at home improvement stocks. If mortgage rates are coming down,
Speaker 11: people are going to more apt to refinance and go
Speaker 11: somewhere else and buy new homes or they're going to
Speaker 11: do home improvements because rates are lower. So to me,
Speaker 11: the home depots of the world, the lows would tend
Speaker 11: to do much better, even though they're trained at fifty
Speaker 11: two week highs now given what's happening, and also any
Speaker 11: rebuilding would do that. I think the consumer would do
Speaker 11: better because if they're less strained on higher interest rates,
Speaker 11: if they have more freedom capital, I mean you're going
Speaker 11: to see that Like in a McDonald's you're seeing I mean,
Speaker 11: they're becoming very successful at that five to ten dollars
Speaker 11: happy meals that they're putting out. So I look for
Speaker 11: those type of companies. Another one we like is General
Speaker 11: and Parts because people are keeping their cars longer and
Speaker 11: they're going to do the repairs on them, and they'll
Speaker 11: benefit for that because they own the Nappa stores. But
Speaker 11: anyone that puts more pocket in the consumer will ease
Speaker 11: up the pain that they're experiencing with inflation. So it's
Speaker 11: not just interest rates coming down, it's also cost coming down.
Speaker 4: All right, Max, Thanks so much for joining us.
Speaker 3: Max Washerman, their co founder and senior portfoliofolio manager at
Speaker 3: Miramar Capital.
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