WEBVTT - The Ukraine War And Energy Crisis 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.760 with essential market moving news. Find the Bloomberg Markets podcasted 0:00:15.760 --> 0:00:18.600 Apple Podcasts or wherever you listen to podcasts, and at 0:00:18.640 --> 0:00:24.320 Bloomberg dot com Slash podcast. Lots of moving pieces in Ukraine. 0:00:24.360 --> 0:00:28.000 Let's get the latest. We're so fortunate of Agricuntrill on 0:00:28.360 --> 0:00:31.040 the ground, I believe in Poland. She's a TV producer 0:00:31.080 --> 0:00:34.479 for Bloomberg News. Tell us where you are, generally speaking, 0:00:34.840 --> 0:00:36.680 what you can disclose and kind of what you're seeing 0:00:36.680 --> 0:00:40.600 on the ground here. Hi, Yes, So I'm at the 0:00:40.800 --> 0:00:44.120 station in Cemisal, which is a town in southeast Poland 0:00:44.200 --> 0:00:47.440 that has received a huge amount of refugees in the 0:00:47.479 --> 0:00:50.440 last several weeks. Um, I'm at the station here where 0:00:50.440 --> 0:00:54.560 a lot of refugees they're getting trained directly from Ukraine here, 0:00:54.840 --> 0:00:57.800 and also a lot of pedestrians that got went over. 0:00:57.880 --> 0:01:01.120 They came over the border on foot are then taken 0:01:01.200 --> 0:01:05.119 in busses from the border itself to this town. When 0:01:05.120 --> 0:01:08.480 you talk about not only the humanitarian aspect of this, 0:01:08.800 --> 0:01:13.240 but the economic aspect as well, Aggie, how we're both 0:01:13.240 --> 0:01:16.080 sides of this feeling the economic sanctions that have been 0:01:16.120 --> 0:01:18.080 put in place. Given as Paul said, I mean we're 0:01:18.240 --> 0:01:24.039 now entering week four, Yes, so we're clearly seeing from 0:01:24.120 --> 0:01:29.640 the European size that there is some sanction fatigue, potentially 0:01:29.720 --> 0:01:32.920 from countries that are worried about the impact to their 0:01:32.959 --> 0:01:36.479 own economies of the sanctions on Russia. The sanctions seem 0:01:36.560 --> 0:01:40.960 to have significant effect on the Russian economy, but Biden, 0:01:41.040 --> 0:01:43.560 who is coming to Europe in order to push for 0:01:43.600 --> 0:01:46.720 a harder hitting sanctions against Russia, is going to have 0:01:46.840 --> 0:01:50.280 to come up against a European Union that is quite 0:01:50.320 --> 0:01:52.760 split on how much they can double down on the 0:01:52.800 --> 0:01:55.920 sanctions in case it also hits parts of the European 0:01:55.920 --> 0:01:59.960 economy significantly, especially when we're looking at places like Germany, 0:02:00.040 --> 0:02:04.040 which is still so heavily dependent on Russian gas. Aggie. 0:02:04.120 --> 0:02:07.240 You're literally on the ground there, um as you see 0:02:07.240 --> 0:02:10.840 the refugees come in. How is Europe planning on dealing 0:02:10.919 --> 0:02:13.800 with what I've seen three to four million refugees and 0:02:14.000 --> 0:02:16.080 I guess that number is going to continue to grow. 0:02:17.000 --> 0:02:20.040 Is there a plan who's leading kind of the the 0:02:20.360 --> 0:02:23.440 way to house these refugees for what might be a 0:02:23.440 --> 0:02:28.480 fairly long stay. I think you're pointing at a key thing. 0:02:28.560 --> 0:02:31.639 There is the question of how long this day will be. 0:02:31.639 --> 0:02:35.120 Because in the short term the work has been quite 0:02:35.120 --> 0:02:39.280 efficient to manage to get people into places away from 0:02:39.320 --> 0:02:41.760 the border. For the most part, people are able to 0:02:41.800 --> 0:02:45.919 find accommodation, sort of ad hoc accommodation in other places, 0:02:45.960 --> 0:02:48.640 but that's putting a lot of pressure on cities. A 0:02:48.760 --> 0:02:51.680 huge amount of the refugees who arrived in Poland, for instance, 0:02:52.040 --> 0:02:54.680 are staying in Poland. The U N a c I. 0:02:54.680 --> 0:02:57.480 Sas is around all the refugees that came in to 0:02:57.600 --> 0:03:00.239 Poland are probably going to stay there, and that means 0:03:00.240 --> 0:03:02.520 that there's going to be a lot of pressure on Poland, 0:03:02.520 --> 0:03:05.799 a country that's already reeling from the coronavirus like many countries, 0:03:06.320 --> 0:03:09.519 and trying to find the funding in order to secure 0:03:09.840 --> 0:03:12.880 housing and access to the labor market. And also because 0:03:12.960 --> 0:03:17.119 so many of these refugees are minors, many are unaccompanied miners, 0:03:17.200 --> 0:03:19.079 it's also a question of how to get them into 0:03:19.080 --> 0:03:21.880 the education system. And so in the short term it 0:03:21.960 --> 0:03:24.360 seems to have worked but it is a question is 0:03:24.400 --> 0:03:27.160 that what this means in the long term and how 0:03:27.200 --> 0:03:30.520 that's going to look going forward. And you think about Ague, 0:03:30.560 --> 0:03:33.320 this is a not only a story about Poland, but 0:03:33.440 --> 0:03:36.200 the rest of Eastern Europe that responds any sort of 0:03:36.200 --> 0:03:38.840 additional help they can get from more of the Western 0:03:39.000 --> 0:03:43.520 European countries, how is the rest of Eastern Europe responding 0:03:44.160 --> 0:03:49.120 acting and the likes a huge amount of Eastern Europe 0:03:49.240 --> 0:03:52.680 it feels the pressure that Russia is putting on Ukraine 0:03:52.800 --> 0:03:56.480 also themselves, and so first and foremost there has been 0:03:56.520 --> 0:04:00.280 a lot of solidarity on the ground to help the refugee, 0:04:00.480 --> 0:04:04.640 but they are expecting more support, especially fiscal support from 0:04:04.680 --> 0:04:07.040 the European Union, and that is something that a lot 0:04:07.080 --> 0:04:10.760 of these countries have been pushing for. And so going forward, 0:04:10.800 --> 0:04:13.840 this is going to be a concern as to how 0:04:14.040 --> 0:04:19.560 the resource allocation works um for for instance, unlocking the 0:04:20.360 --> 0:04:24.120 Coronavirus Recovery Fund in order to support these countries that 0:04:24.160 --> 0:04:28.600 are dealing with these influxes of refugees. So, from your 0:04:28.600 --> 0:04:30.640 position on the on the ground there in Poland, is 0:04:30.680 --> 0:04:34.359 there a consensus as to how this might play out? Aggie? 0:04:36.120 --> 0:04:38.520 It's quite difficult to say, But the thing I hear, 0:04:38.720 --> 0:04:41.440 especially from a lot of the people coming over the border, 0:04:41.640 --> 0:04:44.000 is that they are really hopeful for this to be 0:04:44.080 --> 0:04:47.799 a temporary issue. Pretty Much everyone I speak to here 0:04:48.120 --> 0:04:51.239 has an intention to return to Ukraine at some point, 0:04:51.480 --> 0:04:54.520 and they do not want to settle completely in another country. 0:04:54.560 --> 0:04:56.960 They want to be able to return to their families. Also, 0:04:57.040 --> 0:04:59.440 because it is notable that so many of the people 0:04:59.440 --> 0:05:03.120 who left women and children, and they've often been split 0:05:03.200 --> 0:05:05.080 up from the men in their family who have remained 0:05:05.080 --> 0:05:07.840 in Ukraine. So there is a concern for a lot 0:05:07.880 --> 0:05:09.960 of them that they hope that this is short lived. 0:05:10.200 --> 0:05:12.400 But as the war goes into its second month, there 0:05:12.440 --> 0:05:14.919 are a lot of people now looking at what those 0:05:15.000 --> 0:05:20.040 next steps will all. Right, control, We appreciate getting your 0:05:20.080 --> 0:05:23.040 thoughts in perspective. A contral she's a TV producer for 0:05:23.080 --> 0:05:26.240 Bloomberg News. She has been she's based in Berlin, She's 0:05:26.279 --> 0:05:31.160 but she's been on that southeastern border of Poland and Ukraine, 0:05:31.279 --> 0:05:35.320 and she's getting us first hand reporting about the refugee 0:05:35.640 --> 0:05:38.280 situation and um as a continuous day by day and 0:05:38.520 --> 0:05:41.360 as she mentioned, going into the second month here, and 0:05:41.400 --> 0:05:45.000 I'm not sure anybody on either side thought that it 0:05:45.040 --> 0:05:47.680 would continue on here into its second month, but we 0:05:47.720 --> 0:05:50.599 will certainly continue our reporting, and we really thank Aggie 0:05:50.640 --> 0:05:53.200 for taking time out to share some of her first 0:05:53.440 --> 0:05:56.520 hand views of what's happening on the ground in that 0:05:56.600 --> 0:06:04.839 border of Poland and Ukraine. We've got a federal Reserve 0:06:04.880 --> 0:06:08.720 which has pivoted noticeably to a more hawkish view. We're 0:06:08.720 --> 0:06:13.160 talking about potentially seven eight rate hikes over the next year, uh, 0:06:13.320 --> 0:06:16.400 perhaps fifty basis point rate hikes. What are assets to 0:06:16.440 --> 0:06:18.039 do here? What are risk assets to do in that 0:06:18.080 --> 0:06:20.200 type of environment? Let's check them with Randy Swimmer, co 0:06:20.360 --> 0:06:22.839 head of Senior Lending and a senior managing director Churchill 0:06:23.120 --> 0:06:26.919 Asset Management. Randy, it's been a while since these financial 0:06:26.960 --> 0:06:31.360 markets have had to deal with a significantly um an 0:06:31.440 --> 0:06:35.080 environment that has significant rate increases in the offing. How 0:06:35.120 --> 0:06:38.400 do you think about that? Yeah, And in fact, it's 0:06:38.440 --> 0:06:41.240 the kind of thing that expectations for the kind of 0:06:41.279 --> 0:06:44.880 moves that have happened and that actually embarked on last 0:06:44.960 --> 0:06:49.159 week have been growing. And now that in fact that 0:06:50.240 --> 0:06:53.880 has been behind us. And in fact, if anything, UH 0:06:54.000 --> 0:06:57.160 FED j R. Powell has uh doubled down a little 0:06:57.160 --> 0:07:00.720 bit and said, hey, don't worry if things, if inflation 0:07:00.800 --> 0:07:03.920 doesn't get tamed, we're prepared to go even at fifty 0:07:03.960 --> 0:07:09.440 basis points. Uh per hike I think has given investors 0:07:09.600 --> 0:07:14.480 some kind of path to uh you know, less volatility 0:07:14.520 --> 0:07:17.440 in the sense that they know where this is headed. Now, 0:07:17.440 --> 0:07:21.800 what's into into the conversation has been ge do these 0:07:21.920 --> 0:07:26.000 federate hike because they potentially lead to a slowdown, and 0:07:26.000 --> 0:07:29.400 we're starting to see more observers coming out and starting 0:07:29.440 --> 0:07:32.440 to worry about that. UM Now, I still think that 0:07:32.560 --> 0:07:35.840 the signs, the economic signs that are around us, you know, 0:07:35.880 --> 0:07:41.720 with housing starts and commercial and manufacturing production still being 0:07:41.760 --> 0:07:46.480 up solidly, expectations for this year for GDP still you know, 0:07:46.520 --> 0:07:50.440 in that kind of high to the low threes range 0:07:50.640 --> 0:07:53.440 in a positive way, still is sending I think a 0:07:53.600 --> 0:07:57.960 very good growth message overall to UH two investors. So 0:07:58.000 --> 0:07:59.840 I don't think there's a chance of a recession and 0:08:00.120 --> 0:08:04.640 time soon, but it is at least giving certainly credit 0:08:04.760 --> 0:08:07.520 investors something to look at. But I do think that 0:08:07.680 --> 0:08:11.280 overall people are feeling now that if that's on a 0:08:11.360 --> 0:08:16.640 path removed some uncertainty regarding the direction certainly great and 0:08:16.800 --> 0:08:18.600 how many are going to be happening over the next 0:08:18.640 --> 0:08:22.160 year too, and then we'll see how this unfolds, you know, Randy, 0:08:22.200 --> 0:08:26.840 it's interesting I've heard a lot of commentary that Powell 0:08:26.920 --> 0:08:29.920 has been speaking a lot and talking about those big 0:08:29.960 --> 0:08:32.679 moves and the potential from maybe fifty basis points are 0:08:32.679 --> 0:08:36.679 moving faster than to make sure that the equity markets 0:08:36.679 --> 0:08:39.520 are doing a lot of his job for him when 0:08:39.600 --> 0:08:43.280 it comes to some of those fight UH tightening financial conditions. 0:08:43.480 --> 0:08:47.960 How are you thinking about the messaging from this Federal Reserve? Well, 0:08:48.000 --> 0:08:50.520 and in fact, they've done a very good job I 0:08:50.559 --> 0:08:54.320 think of removing a lot of a doubt once the 0:08:54.440 --> 0:08:58.960 pivot began in November when transitory was taken out of 0:08:59.040 --> 0:09:03.440 the out of their their playbook, and it became obvious 0:09:03.520 --> 0:09:05.600 that this was a pretty serious issue that was not 0:09:05.720 --> 0:09:09.280 going away in terms of inflation. Ever since November, you know, 0:09:09.360 --> 0:09:12.319 four months ago, we now have seen a pretty consistent, 0:09:12.440 --> 0:09:15.520 solid messaging coming out from the Fed. And I do 0:09:15.640 --> 0:09:19.000 think if you look at public equities as an example, 0:09:19.200 --> 0:09:23.880 have pretty much fully recovered values um, you know, certainly 0:09:23.880 --> 0:09:27.160 over the last thirty days as we saw following the 0:09:27.280 --> 0:09:32.480 Ukraine UH invasion February twenty four, so I think that 0:09:32.720 --> 0:09:38.040 generally markets have factored in both the worst case scenario 0:09:38.160 --> 0:09:41.360 at least we hope um for the Ukraine war, and 0:09:41.360 --> 0:09:45.080 then also to some extent where the ultimate endgame is 0:09:45.160 --> 0:09:48.200 for the FED, which they've advertised pretty much is going 0:09:48.280 --> 0:09:50.320 to end up at a kind of two to three 0:09:51.160 --> 0:09:55.040 uh FED funds rate, which would then match expected inflation. 0:09:55.080 --> 0:09:58.040 And I think we're seeing, um, you know, some stability 0:09:58.040 --> 0:10:00.880 in all markets. We still have not a new issue 0:10:01.559 --> 0:10:04.880 UH deal flow would turn to the high yield market 0:10:05.760 --> 0:10:08.400 or the leverage loan market in the great extent, but 0:10:08.480 --> 0:10:11.080 at least things have calmed down certainly over the last 0:10:11.080 --> 0:10:13.960 several days. Yeah, Randy, that that's where I wanted to go. 0:10:14.040 --> 0:10:16.319 I want, I want to take advantage of your experience 0:10:16.360 --> 0:10:20.840 in the leverage loan business, you know, with rising interest rates, 0:10:20.880 --> 0:10:23.240 how do you think you know, theo's private equity folks, 0:10:23.240 --> 0:10:27.240 which are such big consumers of of leverage debt leverage loans, 0:10:27.800 --> 0:10:29.520 how do you envision the M and A market over 0:10:29.520 --> 0:10:31.920 the next say, twelve months, we can see a pullback 0:10:31.920 --> 0:10:35.080 and activity. Do you think, Well, we came off a 0:10:35.160 --> 0:10:39.840 huge not just the Churchill but also just you know, 0:10:39.880 --> 0:10:43.600 with private equity deployment, private credit deployment. It was in 0:10:43.640 --> 0:10:45.880 many ways probably an environment that would be hard to 0:10:45.880 --> 0:10:49.400 replicate for this year. We still think activity UH and 0:10:49.640 --> 0:10:51.480 the M and A pipeline is going to be solid 0:10:51.520 --> 0:10:54.199 for this year. Certainly the economy. We believe people will 0:10:54.200 --> 0:10:57.600 continue to be constructive for credit. It doesn't have to 0:10:57.640 --> 0:11:00.559 be toward growth in order for credit to be two 0:11:00.640 --> 0:11:03.679 to work UM. And I think private equity, which has 0:11:03.800 --> 0:11:06.800 raised so much money over the last you know, three 0:11:06.840 --> 0:11:10.319 or four or five, seven years, UM, that dry powder 0:11:10.360 --> 0:11:12.800 which is going to be deployed, is going to be 0:11:12.840 --> 0:11:17.320 deployed UM in partnership with direct lenders such as Churchill 0:11:17.400 --> 0:11:21.080 that have worked with these private equity firms over many 0:11:21.120 --> 0:11:25.280 different texts of markets and through volatility when the public 0:11:25.320 --> 0:11:28.840 markets were either sidelinders set down, direct lenders such as 0:11:28.840 --> 0:11:31.920 ourselves had plenty of dry powder to help the dry 0:11:32.000 --> 0:11:35.440 powder of our private equi clients be deployed. So if 0:11:35.440 --> 0:11:37.240 you go back upstream and look at where the M 0:11:37.240 --> 0:11:40.679 and A market is, we're seeing evidence of another solid 0:11:40.720 --> 0:11:44.560 year with a number of EM and A bankers who 0:11:44.600 --> 0:11:49.400 are working on books to be launched over the next 0:11:49.440 --> 0:11:53.040 thirty days. Reports we get from them is it's going 0:11:53.080 --> 0:11:55.880 to be a very busy second quarter. And as long 0:11:55.920 --> 0:11:58.720 as the the p that we've just been talking about 0:11:58.880 --> 0:12:03.440 geopolitical and interest rates and inflation, which we think is 0:12:03.480 --> 0:12:05.840 going to get under control in most of the conomists 0:12:05.840 --> 0:12:09.560 believe it will as continue to go up. As long 0:12:09.600 --> 0:12:11.520 as those things continue on the path, we think the 0:12:12.280 --> 0:12:14.400 two is going to be poised for a little solid year. 0:12:14.480 --> 0:12:18.080 From her and then Nani, alright, good stuff, Randy, really 0:12:18.120 --> 0:12:20.400 appreciate you taking the time. Randy Schrimmer, co head of 0:12:20.400 --> 0:12:27.760 Senior Lending and Senior Managing Director Churchill Asset Management. One 0:12:27.840 --> 0:12:30.840 of the I guess the fallouts of the war in 0:12:30.960 --> 0:12:34.760 Ukraine is it's really highlighting the energy dependence that much 0:12:34.760 --> 0:12:38.440 of Europe, particularly Germany, has on Russia. And of course 0:12:38.440 --> 0:12:40.600 that raises a question I think here on these shores 0:12:40.720 --> 0:12:43.320 is how is the US position in terms of its 0:12:43.480 --> 0:12:47.440 energy independence. Checking with Marian Brown, she's a president of 0:12:47.640 --> 0:12:51.480 Southern California Gas Company, h Miriam, give us a sense 0:12:51.520 --> 0:12:53.480 of you know, I guess a lot of people are 0:12:53.480 --> 0:12:57.400 now probably thinking a little bit more about energy independence 0:12:57.960 --> 0:13:00.280 given what we're seeing in terms of the uncertain these 0:13:00.360 --> 0:13:05.120 and disruptions in Europe. How do you think about that? Yeah, 0:13:05.240 --> 0:13:07.600 thanks so much for the questions. So, when we think 0:13:07.600 --> 0:13:11.439 about energy independence, especially these days, we think about meeting 0:13:11.440 --> 0:13:16.600 the twin goals of energy security and the clean energy transition, 0:13:16.720 --> 0:13:20.280 and how best to meet that And obviously, I think, 0:13:20.440 --> 0:13:23.360 and you're hearing it from a lot of your viewers, 0:13:23.360 --> 0:13:28.440 as it's about investing in diverse domestic resources and that 0:13:28.520 --> 0:13:31.760 those resources need to increasingly be renewable over time. And 0:13:32.160 --> 0:13:34.520 I think the important thing there is that gas, like 0:13:35.160 --> 0:13:38.920 um like electricity, can be renewable. How do you make 0:13:38.960 --> 0:13:42.640 it reliable? Now? I mean, we've talked a lot about 0:13:42.640 --> 0:13:46.960 the importance of the shift to renewables, but when some 0:13:47.120 --> 0:13:49.000 of those fail or we've done it in such a 0:13:49.000 --> 0:13:51.959 way where it's so fast that it isn't reliable, how 0:13:51.960 --> 0:13:54.320 do you make sure that that transition is smooth and 0:13:54.360 --> 0:13:59.920 also reliable as well? Yeah, you complement renewable electricity, which 0:14:00.040 --> 0:14:03.720 can be intermittent, to your point, with renewable gases, which 0:14:03.760 --> 0:14:07.280 is what gives you that renewable and that reliability and 0:14:07.320 --> 0:14:10.640 that resiliency. And that's why you're seeing this tremendous momentum 0:14:11.200 --> 0:14:15.160 globally and also nationally on hydrogen. You know it is 0:14:15.200 --> 0:14:18.280 an energy dense gas, but it's not a greenhouse gas, 0:14:18.280 --> 0:14:23.040 and it makes renewables from sun and wind available seven 0:14:23.080 --> 0:14:26.360 three sixty five days a year. What role does how 0:14:26.440 --> 0:14:31.200 you're GM play. We think it's an important, growing part, 0:14:31.320 --> 0:14:34.120 important part of the mix that's going to help us 0:14:34.160 --> 0:14:38.119 to meet those twin goals around energy independence, energy security, 0:14:38.120 --> 0:14:42.200 and clean energy faster UM. We see UM from our 0:14:42.280 --> 0:14:45.600 end that the costs are coming down really significantly, and 0:14:45.640 --> 0:14:48.880 what it does is it adds to energy diversity. And 0:14:49.000 --> 0:14:52.080 any time you create a jump in the access to energy, 0:14:52.480 --> 0:14:55.240 you're going to have a positive impact on energy prices. 0:14:55.280 --> 0:14:57.920 And that's why you know our company has actually leaned 0:14:57.920 --> 0:15:00.920 in on hydrogen and we announced the Big Project UM 0:15:01.040 --> 0:15:03.840 a few weeks ago Angeles Link on it. Can you 0:15:03.880 --> 0:15:08.600 talk to us about the specific challenges that California faces 0:15:09.160 --> 0:15:11.600 In full disclosure, I'm from the Central Valley and in 0:15:11.640 --> 0:15:15.000 the summer we joke we're politely asked to unplug our 0:15:15.080 --> 0:15:18.320 appliances because it's a hundred and five degrees and there's 0:15:18.360 --> 0:15:21.040 no energy and no one can afford an eight hundred 0:15:21.040 --> 0:15:24.480 dollar electric bill when you're running the a C. So 0:15:25.080 --> 0:15:27.360 can you talk to us about the specific challenges that 0:15:27.400 --> 0:15:33.160 you're seen in California and particularly your southern California. Yeah. Absolutely, 0:15:33.200 --> 0:15:37.360 California is a bit of an island on energy and 0:15:37.400 --> 0:15:40.640 so UM we deal with a tense dynamic on supply 0:15:40.800 --> 0:15:43.520 and demand. And to your point, I think that there 0:15:43.600 --> 0:15:46.880 is an increased focus about needing to bring more supply 0:15:47.360 --> 0:15:52.480 um to customers and also managed demand with energy efficiency, 0:15:52.520 --> 0:15:55.320 and California does have a good story to tell on 0:15:56.000 --> 0:15:58.800 on energy efficiency per capita. But I think you're seeing 0:15:58.800 --> 0:16:03.600 a lot of focus in the state on bringing increased supplies. Miriam. 0:16:03.640 --> 0:16:07.000 About nuclear energy, how does that fit into the equation 0:16:07.240 --> 0:16:10.640 I'm hearing from certain folks within that space that you know, 0:16:10.680 --> 0:16:12.560 there's a lot of advances being made where you don't 0:16:12.560 --> 0:16:15.680 you don't need to build these huge nuclear facilities that 0:16:15.720 --> 0:16:17.720 pose a significant risk. Maybe you can do it on 0:16:17.720 --> 0:16:20.320 a much smaller, more nimble scale. How do you think 0:16:20.320 --> 0:16:25.360 about nuclear? Yeah, nuclear, that's a complicated issue here in California, 0:16:25.400 --> 0:16:28.440 But I think it's a complicated issue federally because we 0:16:28.520 --> 0:16:32.160 have a waste management issue. So I think it's whether 0:16:32.200 --> 0:16:35.600 it's a solution today maybe not, but can is it 0:16:35.640 --> 0:16:38.480 going to be a part of the solution eventually maybe, 0:16:38.560 --> 0:16:40.400 And so I think that we're in a place to 0:16:40.480 --> 0:16:43.760 accomplish the goals that we have. We need all technologies 0:16:43.800 --> 0:16:47.000 on the table, and I would include that one. How 0:16:47.040 --> 0:16:51.080 are you thinking about the impacts from Russia's invasion of Ukraine. 0:16:51.080 --> 0:16:54.080 We've talked a lot about the gas market in Europe. 0:16:54.120 --> 0:16:57.080 Your taking look at European gas prices already up thirty 0:16:57.120 --> 0:16:59.440 or four percent on the day is Putin had been 0:16:59.480 --> 0:17:04.119 looking to seek payment in rubles. Europe though, feels distant 0:17:04.400 --> 0:17:07.840 right from the US and from your southern California. But 0:17:07.960 --> 0:17:10.480 what do you see as the impacts if any UM 0:17:10.520 --> 0:17:14.800 already here on this market. I think the lesson of 0:17:14.840 --> 0:17:18.520 the last several weeks really is urgency. There was already 0:17:18.560 --> 0:17:21.280 a trend and you heard about it at SERO Week 0:17:21.440 --> 0:17:24.600 two weeks ago, on the drive for energy security and 0:17:24.640 --> 0:17:28.119 clean energy transition. And I think that the experience from 0:17:28.160 --> 0:17:31.800 from what's going on in Europe and Ukraine UM really 0:17:31.840 --> 0:17:34.280 has put in urgency because I think, you know, this 0:17:34.320 --> 0:17:36.520 won't be the last cold winter, and it won't be 0:17:36.560 --> 0:17:38.800 the last hot summer that we just had, and it 0:17:38.840 --> 0:17:41.080 won't be the last geo political event that we have 0:17:41.320 --> 0:17:44.520 history may not repeat itself, but it sure does rhyme. 0:17:44.640 --> 0:17:48.800 So we need to learn from this and UM accelerate 0:17:48.800 --> 0:17:52.560 our investments UM towards towards energy security and the clean 0:17:52.640 --> 0:17:57.400 energy transition. And Mariam just quickly here climate change. Boy, 0:17:57.640 --> 0:17:59.480 you just see coming out of the great state of California. 0:17:59.520 --> 0:18:02.120 If it's not wildfire, it's a mud slide, it's an earthquake. 0:18:02.320 --> 0:18:04.840 How does climate change factor into how you kind of 0:18:04.840 --> 0:18:10.679 think about your forecasting going forward? Climate policy is UM 0:18:10.800 --> 0:18:14.240 really needs to be a factor in investment decisions and 0:18:14.560 --> 0:18:18.280 managing climate risk is definitely part of our investment decisions. 0:18:18.320 --> 0:18:22.040 And part of that is future proofing our existing infrastructure 0:18:22.040 --> 0:18:23.720 and we've got a significant amount of it were the 0:18:23.800 --> 0:18:27.080 largest gas utility in the country UM. And another part 0:18:27.119 --> 0:18:30.879 of it is new infrastructure, so UM the announcement of 0:18:30.920 --> 0:18:35.960 the UM large green hydrogen project that we announced Angeles Link, 0:18:36.240 --> 0:18:39.360 that's part of it. And it's also as we modernize 0:18:39.359 --> 0:18:43.399 our infrastructure UM that we look to make it resilient 0:18:43.640 --> 0:18:47.440 to be able to adapt to changing climate and externalities. 0:18:47.680 --> 0:18:49.560 All Right, Marian Brown, thank you so much for joining us. 0:18:49.560 --> 0:18:57.480 Marian Brown, President of Southern California Gas Company. Let's switch 0:18:57.560 --> 0:19:01.960 ears a little bit and talk about recession hedges. We've 0:19:02.000 --> 0:19:04.320 been hearing a lot more. I think over the last 0:19:04.320 --> 0:19:07.280 couple of weeks, if people talking about recession as a 0:19:07.359 --> 0:19:09.960 result of this feder reserve action, then that might be 0:19:10.000 --> 0:19:11.720 a risk. And a lot of folks are saying, where 0:19:11.760 --> 0:19:14.920 do I go for some hedges? Is there any place 0:19:14.960 --> 0:19:17.359 in the commodity complex that I can go for some 0:19:17.440 --> 0:19:21.560 hedges on recession. Let's bringing Mike mcglogan's senior Commodity Strategies 0:19:21.600 --> 0:19:24.800 for Bloomberg Intelligence. Mike, if if I'm looking for a 0:19:24.840 --> 0:19:28.040 recession hedge, is there anything in your world of commodities 0:19:28.080 --> 0:19:30.560 that I should be looking at? Yes, But I think 0:19:30.640 --> 0:19:33.240 the first target should be gold because I think gold 0:19:33.320 --> 0:19:35.920 right now is almost entirely dependent on if the stock 0:19:35.960 --> 0:19:39.760 market goes down and if the Fed job owning works 0:19:40.080 --> 0:19:43.560 and if yields them bond y'll start declining from these levels. 0:19:43.720 --> 0:19:45.920 To me, that that would be the impetus for gold 0:19:45.920 --> 0:19:48.280 to just break out because it's so ready. It's really 0:19:48.359 --> 0:19:50.919 technically looks strong, fundamentally looks strong, but it has a 0:19:50.960 --> 0:19:54.159 major headman right now. It's tightening, stock markets going up, 0:19:54.359 --> 0:19:57.080 you know, higher rates, higher yields, if the stock market 0:19:57.600 --> 0:19:59.840 finally rolls over, gold should be the best place to be, 0:19:59.880 --> 0:20:03.119 in place that, you know, to really for a recession. 0:20:03.119 --> 0:20:04.679 I think gol would be the best heage. Because we 0:20:04.680 --> 0:20:08.000 get a normal recession, almost all commodity should collapse. And 0:20:08.040 --> 0:20:10.280 that's the problem. Crude oil right now is almost on 0:20:10.320 --> 0:20:12.880 the screen. It is almost triple that the US cost 0:20:12.960 --> 0:20:15.040 of production, which is part of that boom that we 0:20:15.040 --> 0:20:18.160 think we're going to have in commodity production in North America. 0:20:18.520 --> 0:20:20.320 Talked to us more about that. I mean taking a 0:20:20.320 --> 0:20:22.720 look at crude at a hundred and fifteen dollars of barrel, 0:20:22.760 --> 0:20:25.120 and it was two weeks ago when we were looking 0:20:25.160 --> 0:20:27.520 at one thirty five on some of the futures over 0:20:27.560 --> 0:20:29.920 on that big Sunday night movement. I remember that we 0:20:29.960 --> 0:20:31.199 saw and then there was a little bit of a 0:20:31.240 --> 0:20:34.720 relief as we briefly did below a hundred. But wow, 0:20:34.760 --> 0:20:37.119 I mean looking again back at one, what is that 0:20:37.240 --> 0:20:40.520 telling you? Yeah, it's tell me that we're more likely 0:20:40.560 --> 0:20:43.359 to have demand destruction now, because that's if history is 0:20:43.359 --> 0:20:45.560 a guy in the significance of this rally is it's 0:20:45.600 --> 0:20:49.600 the first one that's ever happened in crude oil futures 0:20:49.760 --> 0:20:54.840 with North America net energy, crudeil, liquid fuel exporter massive exporters. 0:20:54.880 --> 0:20:57.200 The most similar recent example was two thousand and eight 0:20:57.200 --> 0:20:59.960 crudel got to the all time high and then collap 0:21:00.040 --> 0:21:03.479 stated percent. The most recent example before that was from 0:21:03.960 --> 0:21:06.560 forty and then back to twenty that high put and 0:21:06.680 --> 0:21:09.200 then took fourteen years to take out. To me, we're 0:21:09.200 --> 0:21:12.920 at similar risk now because this demand destruction significant and 0:21:13.000 --> 0:21:15.119 virtually all that supply that people are saying is going 0:21:15.160 --> 0:21:17.520 to leave the market from Russia is going to China 0:21:17.760 --> 0:21:20.719 in virtually and China's demand has actually been declining. So 0:21:21.000 --> 0:21:22.560 to me, that's the key thing. And then one thing 0:21:22.600 --> 0:21:24.400 I'll leave you with. If you look on the forward 0:21:24.480 --> 0:21:28.080 curve one year from now, crude oil's training around ninety 0:21:28.160 --> 0:21:31.040 dollars a barrel. That's been a significant resistance and the 0:21:31.080 --> 0:21:35.280 curve for about fourteen years, and the high and the 0:21:35.359 --> 0:21:37.800 forward curve is still around one forty. So market price 0:21:37.880 --> 0:21:40.360 for the short term pain right now, and longer term 0:21:40.359 --> 0:21:44.000 supply comes back on and and the demand and goes backwards. 0:21:44.000 --> 0:21:46.720 To talk to me though about the differences in demand destruction, 0:21:46.800 --> 0:21:49.119 because I hear that if it's from a demand shock 0:21:49.280 --> 0:21:51.560 then that number is lower. But if it's a supply 0:21:51.680 --> 0:21:54.919 shock to where we are now, demand destruction may not 0:21:54.960 --> 0:21:57.119 be until we get up to one fifty barrel. Is 0:21:57.119 --> 0:21:59.680 there a difference in how you look at demand destruction 0:21:59.720 --> 0:22:02.600 based on what the shock is and where that shock 0:22:02.720 --> 0:22:04.520 is coming from. Yeah, well there's a fogg of a 0:22:04.520 --> 0:22:07.000 war here. So this is the most significant event of 0:22:07.040 --> 0:22:09.400 our lifetimes. And I've been around from the six decades. 0:22:09.720 --> 0:22:13.399 This is this compared to the Gulf War. This is 0:22:13.440 --> 0:22:16.240 nothing what Russia is doing and the destruction. I think 0:22:16.280 --> 0:22:19.159 the key thing to remember is the psychological impact of 0:22:19.320 --> 0:22:21.800 everybody in the world reading this on the tape. It's 0:22:21.840 --> 0:22:23.840 not going to increase consumer spending. It's going to do 0:22:23.880 --> 0:22:25.919 the opposite, and then there's a price factor. But the 0:22:26.000 --> 0:22:28.520 key thing to remember is short term. We just got 0:22:28.560 --> 0:22:31.520 the most stretched above you know, five year or four 0:22:31.600 --> 0:22:34.280