Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Let's go to Ira Jersey.
Speaker 1: Ira Jersey, our chief US rate strategists from Bloomberg Intelligences. Right,
Speaker 1: and Ira, what do you think here? I'm calling your
Speaker 1: Federal Reserve? Your Federal Reserve looks at the inflation data
Speaker 1: we got today? What do you think it took away
Speaker 1: from that data? A happy happy holidays guys. Um, last
Speaker 1: last hit of the year here. Um, you know, I
Speaker 1: think the Fed takes away that we're continue to be
Speaker 1: on trend for lower but still not low inflation growth.
Speaker 1: And and when you look at a lot of the
Speaker 1: data today, like like I wanted to crunching some numbers,
Speaker 1: and when you look at the trends just from the
Speaker 1: last three months and things like personal income and then
Speaker 1: you use oaths, the core and the headline PC deflator,
Speaker 1: what you realize is actually real incomes at least at
Speaker 1: the aggregate level, are actually growing now, sow, and that
Speaker 1: the first month we've seen that, because I this morning,
Speaker 1: it's the second month. Um. But yes, it's it's actually
Speaker 1: you know, and and that that might actually be a
Speaker 1: um that I actually might be a worry for the
Speaker 1: Federal Reserve because when you have personal incomes that are
Speaker 1: higher than than inflation than that means that basically your
Speaker 1: real disposable income is higher, and that means people actually
Speaker 1: have more money to spend, which going into the holiday
Speaker 1: season might have been a pretty good, uh, you know,
Speaker 1: pretty good action potentially for for holiday shopping when you know,
Speaker 1: now all of a sudden, for the first time, you know,
Speaker 1: basically in a year and a half that we've seen
Speaker 1: but we've seen incomes higher than than inflation. Um. Now,
Speaker 1: by the way, personal income came in a growth of
Speaker 1: zero point four percent. The estimate was for zero point
Speaker 1: three percent, so take better. Per spending came in with
Speaker 1: the growth zero point one percent the estimates for zero
Speaker 1: point two percent, so a tick worse. If this happened
Speaker 1: in my household, I think my wife would love me again. Yeah,
Speaker 1: and but keeping keep in mind that um, you know,
Speaker 1: it's hard to judge some of these things on a
Speaker 1: one month basis because you know they are seasonally adjusted.
Speaker 1: And when we look at things like spending, UM, you know,
Speaker 1: over the pandemic period, you actually had people, you know,
Speaker 1: buying more online and doing more of their holiday shopping
Speaker 1: in November than you did in December. So so even
Speaker 1: though you know it was only up slightly UM, you know,
Speaker 1: compared to the last couple of years, it was still
Speaker 1: a pretty reasonably robust number UM on a nominal basis
Speaker 1: for for November spending UM. And keep in mind also
Speaker 1: October was revised up attempts, so when when you average
Speaker 1: those out, it was basically as expected UM. And and
Speaker 1: you know importantly UM, you know, with spending UH, you
Speaker 1: know continuing to grow even a little bit UM, you
Speaker 1: know that will continue to booie prices in some sectors
Speaker 1: and in particular services. So so again digging deep into
Speaker 1: this data and looking at things like core services spending
Speaker 1: UH and core good spending, goods prices have just been
Speaker 1: plummeting and goods prices are not growing anywhere near where
Speaker 1: they were earlier in the year. But services spending continue
Speaker 1: and services prices continue to be growing at a reasonably
Speaker 1: good clip. And because services spending and prices tend to
Speaker 1: be stickier. Um, that means that inflation might not come
Speaker 1: down as quickly as the FED would like. And again
Speaker 1: this is the reason why I think that the FED
Speaker 1: might be pretty reluctant to cut interest rates later in
Speaker 1: the year, even if we have a reasonably I gotta say,
Speaker 1: you're singing from the same hymnal as Barry Nap, with
Speaker 1: whom I spoke earlier this morning. Do you know this guy?
Speaker 1: Do you know Berry from I know he's I know
Speaker 1: he's a soccer guy. I mean I talked to you know,
Speaker 1: I know Rick Reader and some other people at AH
Speaker 1: at Black Rock, but I don't know Berry. Yeah, um
Speaker 1: not not not in the I'll get you two guys together,
Speaker 1: you can talk so anymore. Hey, now he's out in
Speaker 1: Veil I know. And so all right, so he went
Speaker 1: to Veil the first drop of a pandemic and he's
Speaker 1: never ever coming back. So anyway, so you know, I
Speaker 1: want to get him. I want to get his take
Speaker 1: if we could one where where does the market expect
Speaker 1: rates to go? Um? You know, we hit florin a
Speaker 1: quarter on the ten year what two months ago about
Speaker 1: and people are asking was that the peak? Was it? Not?
Speaker 1: What what's the consensus for the path of the ten
Speaker 1: year yield? In so so, actually there's there's kind of
Speaker 1: two camps. It's very it's a pretty bifurcated market. Very
Speaker 1: few people think that that the tenure yield are gonna
Speaker 1: stay where they are right now. Um, So you have
Speaker 1: a camp that's led by like Goldman Sachs and and
Speaker 1: some of my my friends over there calling four yields
Speaker 1: upwards of four and a quarter to four and a
Speaker 1: half percent again and making new yield ties in the
Speaker 1: tenure um. I think that's predicated in part on the
Speaker 1: idea that the Fed is actually gonna be too easy
Speaker 1: and that the economy is going to hold up much
Speaker 1: better um than than others think. And and we're probably
Speaker 1: in the other end of the spectrum. Actually we I
Speaker 1: actually think that we're going to see yields below three
Speaker 1: percent by the end of next year, in part because
Speaker 1: not because we're gonna be necessarily in a deep procession
Speaker 1: next year, but that the market is going to price
Speaker 1: for very deep interest rate cuts and and a slower
Speaker 1: economy come five. So it's really a timing issue. And
Speaker 1: and because of that, long term interest rates can fall,
Speaker 1: whereas short term interest rates might um follo at a
Speaker 1: much slower pace just because um, the the the economy,
Speaker 1: the market is going to anticipate very slow growth and
Speaker 1: much lower inflation on a forward basis. Alright, World Cup
Speaker 1: is over? Now what do I do for my soccer fix? Well,
Speaker 1: obviously Wednesday night you missed the MLS Uh, the College
Speaker 1: Super Draft. Um. You know, there were a lot of
Speaker 1: players and from us L League two who were taken
Speaker 1: by MLS teams and um. Unfortunately that the R two
Speaker 1: players that were draft eligible uh and we're on the
Speaker 1: draft list did not get drafted. Um. Although some big
Speaker 1: news about one of them. It will come out in
Speaker 1: the next week or two. Um. But importantly, I think
Speaker 1: you know, for soccer wise, Monday is a Boxing day,
Speaker 1: so there's always a full slate of games in England
Speaker 1: on Boxing Day. So that will be the next the
Speaker 1: next round of fixtures for people to watch fixtures, that's
Speaker 1: games I think their schedule or something I don't know. Alright,
Speaker 1: Ira Jersey he does the interest rate stuff for Bloomberg Intelligence.
Speaker 1: He also is our residence soccer person tells us kind
Speaker 1: of where we need to focus our soccer interests around
Speaker 1: the world. Nathan Dean, senior US policy analyst of Bloomberg
Speaker 1: Intelligence UH, and Joe Matthew most of Bloomberg Sound on.
Speaker 1: Joe's in the studio. As a matter of fact, All
Speaker 1: Star panel. I know, good stuff. I mean they have
Speaker 1: to deal with the sausage making that is Washington, d C.
Speaker 1: And they to let me start with you on on
Speaker 1: the policy side. Isn't there like a big bill winding
Speaker 1: us way through Congress, like about funding the government and
Speaker 1: stuff like that. Give us the latest. Yeah, so you
Speaker 1: know this is the government's spending bill, also known as
Speaker 1: the Omnibus. It's one point seven trillion and overall spending. Uh.
Speaker 1: The Senate's already passed it. The House has to go
Speaker 1: through today and try and get it out. But if
Speaker 1: not that the Senate has given them until December thirty.
Speaker 1: In terms of a short term funding, what this bill
Speaker 1: really does go for markets is really two things. One
Speaker 1: there's the funding angle and then there's the policy writer angle.
Speaker 1: On the funding side, you know, this gives sixties or
Speaker 1: seventy six billion dollars increase to the defense industry. The
Speaker 1: defense industry likes this obviously if they hadn't, uh Secretary
Speaker 1: of Defense that's said earlier this year or earlier this
Speaker 1: month that they were going to be problems other things
Speaker 1: in here, additional eighty billion dollars to speed up the
Speaker 1: Chips Act. So if you're in the semi conductor industry, uh,
Speaker 1: this is actually gonna speed up the fifty two billion
Speaker 1: dollars that they approved earlier. And then on the policy
Speaker 1: writer's side, look, there's tons of policy writers, but the
Speaker 1: one thing that we're really focused on right now is
Speaker 1: it's mandating employers to auto enroll their employees in for
Speaker 1: one case, So if you're a for one key provider,
Speaker 1: there could be quite a bit of increase in assets
Speaker 1: under management because you're gonna be forced to contribute three
Speaker 1: in your first year, all the way up to temper cent.
Speaker 1: So there's a lot of stuff in this bill, but
Speaker 1: we do think it's going to pass and we're not
Speaker 1: gonna have a government show and forced. Well, you mean
Speaker 1: it'll just be automatic unless you opt out. That's that's correct. Okay, Joe,
Speaker 1: how's this playing out politically? I mean, um, the Congress
Speaker 1: seemed to start splitting a little bit in terms of
Speaker 1: support for Ukraine. For example, there were a few Republicans
Speaker 1: who are vocally against at least continuing at these levels.
Speaker 1: And it also strikes me that so much spending I
Speaker 1: think it's one point seven trillion dollars in total, could
Speaker 1: be inflationary. It could be inflationary or stimulative according to some,
Speaker 1: although we tend not to think of budgets that way,
Speaker 1: since you know it's not a stimulus bill. But either way, yes,
Speaker 1: there are a lot of Republicans who are really upset
Speaker 1: about the way this was done. It's not a continuing resolution,
Speaker 1: as as we were just discussing here, this is an omnibus,
Speaker 1: which is which is a which is better um? And
Speaker 1: Republicans scored a couple of major wins here. Mitch McConnell,
Speaker 1: for instance, signed off on this early, having succeeded in
Speaker 1: getting a massive increase in defense spending, in fact, even
Speaker 1: more than was seen for domestic spending. And and he
Speaker 1: was whipping his members early and off and on this.
Speaker 1: You have to remember the period of time that we're
Speaker 1: in right now, is Republicans prepared to take the majority
Speaker 1: in the House. There's a lot of bluster. Kevin McCarthy
Speaker 1: was supposedly whipping against this bill, but if this had
Speaker 1: not passed, that would have been a huge problem for him.
Speaker 1: He was saved by the bell. He doesn't have to
Speaker 1: worry about now crafting a budget in a divided Congress.
Speaker 1: A couple of weeks from now, Hey, Joe asiphrom the
Speaker 1: policy issues when we get back, then, is there a
Speaker 1: postmortem here with a day or two in a rear
Speaker 1: view mirror about the January six committee and kind of
Speaker 1: just give us an update of where we are and
Speaker 1: what might be next steps. Well, they dropped the report
Speaker 1: last night, which is a pretty big deal. This is,
Speaker 1: by the way, that Omnibus four thousand, one fifty pages
Speaker 1: before the amendments. This report is eight hundred and fourteen pages,
Speaker 1: So you guys have a lot of reading to do
Speaker 1: this weekend. Um. Look, it's uh, it's a deep dive
Speaker 1: with a lot of information you've already heard, but it
Speaker 1: also adds more and they're going to continue adding more
Speaker 1: to this report. In terms of the verbate from these
Speaker 1: actual witness interviews, the testimony that we haven't heard were
Speaker 1: seen in their entirety. But there's a list of eleven recommendations,
Speaker 1: and I'll bring you back a couple of days because
Speaker 1: this has been a really busy week. Remember we had
Speaker 1: that final meeting just a few days back in which
Speaker 1: they voted to refer criminal charges against Donald Trump, John Eastman,
Speaker 1: and some others. This is the follow on the final
Speaker 1: document here that they believe is for posterity, the historical
Speaker 1: document people can look back many many years now as
Speaker 1: opposed to the Department of Justice investigation that may well
Speaker 1: end in criminal charges. But the eleven recommendations include one.
Speaker 1: We already checked this box, and it brings us back
Speaker 1: to the Omnibus bill. That's the Electoral count Act that
Speaker 1: clarifies that a vice president does not have authority to
Speaker 1: reject electoral slates. There'll never be another Mike Pence. There'll
Speaker 1: never be another January six, at least the way we
Speaker 1: saw it. Now that this is in there, all right,
Speaker 1: that's so, that's interesting. Eight hundred pages. I'll get to
Speaker 1: that as soon. How many did you say? We're in
Speaker 1: the omnibus four thousand, one hundred fifty five. And it's
Speaker 1: pretty sick that I know that four thousand, four thousand pages.
Speaker 1: Nathan's all over that well, Nathan, here's what last night.
Speaker 1: If it goes, if they're passing around the Congress, does
Speaker 1: anybody can they slip in a few pages about the
Speaker 1: state and local tax deduction? You know, it's funny. They
Speaker 1: had about fifteen amendments in the Senate yesterday. A couple
Speaker 1: of them did pass, so there will be more pages
Speaker 1: than that. And you know, if if you like the
Speaker 1: back room sausage making here. The only reason why the
Speaker 1: House didn't get the vote on it overnight, which was
Speaker 1: the original plan. Everyone was supposed to be gone by now,
Speaker 1: is because this thing is so big they have to
Speaker 1: actually have this transcribed on the parchment, and it takes
Speaker 1: all night to do that. So they didn't actually receive
Speaker 1: the bill until just about now, and then the House
Speaker 1: will do its work to pass this along. All right,
Speaker 1: So Nathan, let's let's be honest here. Let's just, I
Speaker 1: don't know, assume this gets done because if for no
Speaker 1: other reason the House wants to get to the airport,
Speaker 1: and will there be any safe banking in this that no,
Speaker 1: there's not the safe banking and nothing didn't didn't make
Speaker 1: it into the bill. That's a big blow for the
Speaker 1: folks that are invested in m S O s E
Speaker 1: t F and marijuana potstocks. There actually was a writer
Speaker 1: in this bill that prohibits states in the District of
Speaker 1: Columbia from using faralled dollars to actually implement legalization of
Speaker 1: marijuana state initiatives. So this this is gonna go to
Speaker 1: next year the fun police who you know, it was
Speaker 1: probably some Probably there was one person who really wanted
Speaker 1: it in there, and they got it in there. But
Speaker 1: when it comes to safe banking, when it comes to
Speaker 1: pot marijuana and legalization and so forth, I think legislators
Speaker 1: are going to hit a great pause. I don't see
Speaker 1: much momentum going into next year because you know, the House,
Speaker 1: sorry Republican leadership uh showed that they didn't want to
Speaker 1: actually support this. Senator McConnell made a pretty stringent statement
Speaker 1: about that, and you know, I just don't see the
Speaker 1: political capital being used to push this over the line. So, uh,
Speaker 1: it's certainly feasible, it's got to take time to cook.
Speaker 1: It may pass a year from now, but I just
Speaker 1: don't see anybody paying attention to it outside of April
Speaker 1: twenty when all these issues pop up. What's you're taking, Nathan,
Speaker 1: what's your take on salt. Is there any chance it's
Speaker 1: ever coming back? Uh? You know it's And I'm saying
Speaker 1: I'm apologizing to the folks in New New York and
Speaker 1: New Jersey right now, but there are a lot of
Speaker 1: tax issues, and I will say so, really, I don't
Speaker 1: think it's gonna come back, but I will say that
Speaker 1: the Trump air at tax cuts for consumers are going
Speaker 1: to expire in and that means that people who have
Speaker 1: already started talking about what can we do to extend
Speaker 1: those or make those permanent? And you know, I'm sure
Speaker 1: that the great you know, uh policymakers from New in
Speaker 1: New Jersey are going to be inserting a salt into
Speaker 1: those discussions. Hey, Joe, give us a sense of the
Speaker 1: next two years. Are Are we just in mode already
Speaker 1: in Washington? Oh? We are? I mean the idea. Of course,
Speaker 1: we know that Joe Biden's He's gonna be, I believe,
Speaker 1: somewhere very warm with the family, uh the next week,
Speaker 1: and they're gonna be talking about that, and it's expected
Speaker 1: he will announce his candidacy shortly after the holiday. So
Speaker 1: it's on. I mean, Donald Trump's already running. You're gonna
Speaker 1: have Joe Biden out there and that's gonna that's gonna
Speaker 1: drive the conversation. And in this divided government, it's right.
Speaker 1: I mean, there's there's very little that we're going to
Speaker 1: be passing through here. And in terms of the Safe
Speaker 1: Banking Act, that thing passed the House fifteen times ed
Speaker 1: Pearl Mutter is now retiring without safe Banking, which became
Speaker 1: his his career long cause up there. But to get
Speaker 1: that through Mitch McConnell's chamber, and in seeing Kevin McCarthy
Speaker 1: coming in the House, it's highly unlike Wait, Joe, has
Speaker 1: a sitting president ever been primaried? I mean, is is
Speaker 1: it possible that Biden says I'm gonna run and then
Speaker 1: the Democrats put someone else forth? That would be shocking.
Speaker 1: I can't imagine who it would be because you know, look,
Speaker 1: there's a lot of talk about the Democratic bench being
Speaker 1: a little bit thin. Uh. When you start talking about
Speaker 1: the Gavin Newsom's and some of the other players in
Speaker 1: the Democratic Party who might actually be able to stage
Speaker 1: a challenge Pete Buddha Jedge for instance, they could use
Speaker 1: a couple of years to cook. You know that that's
Speaker 1: probably a story we're looking at great stuff. Joe Matthew,
Speaker 1: Washington correspondent and he's host of Sound On that's weekdays
Speaker 1: at five pm Wall Street Time. He's with Bloomberg News
Speaker 1: down in our DC studio. Nathan Dean, he's our senior
Speaker 1: US policy There's a lot of Nathans, and we're going
Speaker 1: back to him. Nathan Dean, senior gust policy analyst who
Speaker 1: actually speaks with great enthusiasm about policy stuff. I don't
Speaker 1: know how he gets that enthusiast, but I'm so glad
Speaker 1: we have him. I'm so glad we have him because
Speaker 1: he's all over that stuff. He's with Bloomberg Intelligence based
Speaker 1: in Washington as well. Brutal, brutal ear for stocks when
Speaker 1: you look in the rear view, brutal year four bonds
Speaker 1: as you look in your rear view. But what area
Speaker 1: that actually ranked in two was energy? I'm like, you know,
Speaker 1: you look at some of these names up fifty six.
Speaker 1: I want to get a sense of have I missed it?
Speaker 1: Did I missed that trade? Or is there still something left.
Speaker 1: We're gonna break it down with David d senior investment
Speaker 1: strategist at Pepack Private Wealth Management and Rob Thummel, portfolio
Speaker 1: manager toward us. Uh, they're joining us on the phone. Rob,
Speaker 1: let's start with you here. Okay, I'm a little late
Speaker 1: to the party, I admit it. Have I missed the
Speaker 1: energy trade here? Not only so, Paul, I think you
Speaker 1: still have plenty of time if you just look at
Speaker 1: the energy stock, you know, and you look at what
Speaker 1: investors want. They want the dividend yields and high free
Speaker 1: cash flow, and the free cash flow yield. The energy
Speaker 1: sectors still probably doubled out of the so and the
Speaker 1: dividend yields probably double or or or maybe triple though
Speaker 1: to the and some in some stocks of the S
Speaker 1: and P five hundreds. So there's still plenty of room
Speaker 1: to run. The sectors still trading a discount to historical norms,
Speaker 1: and and have you know, we'll have delivered some very
Speaker 1: solid earnings into next year. So I still think there's
Speaker 1: a lot of opportunity and energy interesting. So David, how
Speaker 1: what are you? What are your clients? When when I
Speaker 1: think about the energy space, you know, it's back in
Speaker 1: the day when I started, energy was a really really
Speaker 1: big sector. Everybody wanted to talk about it, and then
Speaker 1: it really just shrink in size in terms of make
Speaker 1: up the SMP. How do you and your clients, you know,
Speaker 1: think about energy in the portfolio? Well, so, in the
Speaker 1: last few years, there's no question about it that because
Speaker 1: of the poor performance of energy stocks plus I think
Speaker 1: E s G concerns, energy was not considered to be
Speaker 1: a favorite area in people's portfolios. But quite frankly, we are,
Speaker 1: for the reasons that our other guests talked about, continued
Speaker 1: to be optimistic on the area. I mean, you look
Speaker 1: at the backdrop. The backdrop is policy makers, activists and
Speaker 1: so forth are discouraging further production of of fossil fuels.
Speaker 1: But the fact of the matter is that the production
Speaker 1: decreases I think will be faster than consumers can wean
Speaker 1: themselves off of using fossil fuels for their cars to
Speaker 1: heat their homes. So you're gonna have this mismatch, and
Speaker 1: that typically means prices have to rise higher to even
Speaker 1: out to reduce supply in consuming demand, Rob, what do
Speaker 1: you think about the demand? I mean, this is the
Speaker 1: first time in a long time I can remember that
Speaker 1: we actually have a debate about whether or not demand
Speaker 1: is going to rise or not. There's so many issues
Speaker 1: around energy, um but the main one I guess China.
Speaker 1: Is the reopening gonna boost demand or is everyone they're
Speaker 1: gonna get COVID and they're all going to stay home. Yeah. Yeah,
Speaker 1: And well I think we've we've seen we've seen that
Speaker 1: playbook play out already here in the US a certain extent.
Speaker 1: So probably in the short term there's probably some challenges,
Speaker 1: clearly some challenges in China's as the economy, uh, and
Speaker 1: then people start to open back up. But longer term,
Speaker 1: what you do know is that China is a big
Speaker 1: driver of demand for for for all energy, in particular
Speaker 1: oil and in natural gas to a large extent. So
Speaker 1: if you look into next year, at some point in time,
Speaker 1: you know, to Chinese demand for for oil was actually negative.
Speaker 1: We haven't had negative oil growth UM out of China
Speaker 1: for for decades, and so uh likely see pretty strong
Speaker 1: demand growth at some point in or into four out
Speaker 1: of China, and and that will really be the driver
Speaker 1: of of likely higher oil prices um going forward in
Speaker 1: the next And hey, David, you know when we talk
Speaker 1: about energy and energy stocks, you know, the conversation over
Speaker 1: the last four or five years has had to include
Speaker 1: discussions about e s G, environmental, social, and governance. How
Speaker 1: do your clients think about E s G is a
Speaker 1: front and center for them or is it just you know,
Speaker 1: invest wherever you wherever you get the best returns. Well,
Speaker 1: I think our typical client wants to do well with
Speaker 1: their portfolio if possible. And for many years, of course,
Speaker 1: you know, the tech stocks did so well which had
Speaker 1: higher E s G ratings, and so you could outperform
Speaker 1: and score high on those E s G scores. But
Speaker 1: now what we've seen in the least eighteen on since
Speaker 1: the E s G portfolios are starting to fall short,
Speaker 1: and that's where people are getting a little bit nervous
Speaker 1: here and taking another look at it. I think the
Speaker 1: other thing is this key Russia Ukraine conflict, you know,
Speaker 1: the you know, the question is, of course, is do
Speaker 1: you want to you know, support commodities and so forth
Speaker 1: through things that could in effect support Ukraine? Um and
Speaker 1: how's that going to conflict with your E s G concerns.
Speaker 1: So I think at this point people are getting a
Speaker 1: little bit more neutral on those E s G concerns.
Speaker 1: Are we looking at h are we looking at stock
Speaker 1: prices of the companies that pull this stuff out of
Speaker 1: the ground, refined it and ship it and sell it
Speaker 1: to us. Are they rising or have they risen commensurate
Speaker 1: with UM the underlying commodity rob well so, so that's
Speaker 1: good questions. If you look at oil prices, they're actually
Speaker 1: lower than they were last year. But yet as you highlighted,
Speaker 1: all those stocks across all the energy sector are are
Speaker 1: much higher. UM. So I think we've always wanted as
Speaker 1: investors that there to be a disconnect between the price
Speaker 1: UM and and and the actual stock performance. And then
Speaker 1: what I mean by the commodity price and because you
Speaker 1: know the underlying energy sector is going to be ripped,
Speaker 1: it's really essential. It's going to continue to increase as
Speaker 1: as demand for as really GDP and population grows. And
Speaker 1: these energy companies now that they have just over the
Speaker 1: last couple of years shifted their focus to capital discipline
Speaker 1: and focused on returning money to shareholders, UM, that will
Speaker 1: mean there's less of an emphasis on the commodity price itself,
Speaker 1: especially for stocks like pipeline stocks that that have that
Speaker 1: are less sensitive to commodity price fluctuations in terms of
Speaker 1: their cash lows. Hey, David, as we think about three UM,
Speaker 1: what are you suggesting to your clients in terms of
Speaker 1: on the equity sector allocation. Is it more cyclical like
Speaker 1: maybe an energy investment, or more growthy whether it's technology
Speaker 1: or healthcare. How are you thinking about that at this stage. Yeah,
Speaker 1: that's a great question. You know, fundamentally we're kind of
Speaker 1: bullish actually coming into two thousand twenty three. It's very
Speaker 1: rare to have two negative years back to back. Let's
Speaker 1: look at that, and we do. We do think that,
Speaker 1: you know, interest rations need to be coming down, inflation
Speaker 1: seems to be softening. The FED still probably ultimately they're
Speaker 1: going to be driven by the data and I don't think,
Speaker 1: um the FED is going to dictate the economy. And
Speaker 1: we are also a little bit more optimistic that we're
Speaker 1: not going to have a hard landing in recession. So
Speaker 1: we actually think the energy for all the reasons we've
Speaker 1: talked about, looks good here. But certainly you've got some
Speaker 1: opportunities in some of the growth and text sectors where
Speaker 1: you know, some blue chip names are down. You've got
Speaker 1: to take a look at that as well. Hey, Rob,
Speaker 1: you know, I don't, you know, focus that much on
Speaker 1: the energy space, but I guess what I do know is, Okay,
Speaker 1: the world's moving to e s g But what I
Speaker 1: think we've learned over the past year, maybe it's been
Speaker 1: exacerbated by Ukraine, is we still need the fossil fuels
Speaker 1: and we're probably gonna need them in size were decades,
Speaker 1: you know, plural and and gas is probably the cleanest. Yes,
Speaker 1: you were talking to Danny Rice, Yes um at Rice
Speaker 1: acquisition Carpon. His brother Toby runs EQUT. It was a
Speaker 1: great conversation. So Robert, as an equity investor, how do
Speaker 1: you get conviction about owning energy when man, I'm just
Speaker 1: not sure how the world views this migration to you know,
Speaker 1: green energy. Yeah, well you're talking to the right guy
Speaker 1: in Toby Rice and and we had so so from
Speaker 1: a big picture perspective, you know, EQT is the largest
Speaker 1: producer of natural gas in the US, and we're big
Speaker 1: fans of natural gas in general, and the potential that
Speaker 1: natural gas has, it's been proven to be decarbonizing. That's
Speaker 1: increased use of natural gas displacing coal is part of
Speaker 1: the reason why US carbon dioxide emissions of decline in
Speaker 1: the last ten years. And you know, you can take
Speaker 1: the same playbook and apply it to to China and
Speaker 1: India and and similar things will happen the other The
Speaker 1: other factor in the energy sector is it's not an
Speaker 1: either or, it's a These energy companies that have actually
Speaker 1: stopped resisting, uh, trying to DECARBONI can actually embrace the carbonizing.
Speaker 1: So there's a lot of other interesting things going on
Speaker 1: at the energy companies, in particular with regards to carbon
Speaker 1: capture and hydrogen development, uh, while while they continue to
Speaker 1: provide the essential products that are needed for us to
Speaker 1: continue to to live every day. Alright, So, David, as
Speaker 1: we think about three right here, right now, are your
Speaker 1: clients want you aggressive? Um? Well, they certainly, well, the
Speaker 1: sentiment is not good, but it's my job to lead
Speaker 1: them in the right direction. And I want to be
Speaker 1: aggressive here because I think with the stocks market down
Speaker 1: about with interestry starting to stabilize, people are going to
Speaker 1: do well next year. The time to be a little
Speaker 1: bit more aggressive is when your clients are a little
Speaker 1: bit skittish and quite frankly vice versa. All right, David,
Speaker 1: great stuff, as always really appreciated. David Deet's pepack Private
Speaker 1: Wealth Management A rob real quick. I gotta ask you,
Speaker 1: NBA from Kansas Undergrad and k State, what do you
Speaker 1: do when they play on the football field, who do
Speaker 1: you who do you root for? It's pretty simple, Paul.
Speaker 1: My wife went to the University of Kansas as well,
Speaker 1: so so my allegiance falls with them as a result
Speaker 1: of being married. So it's all good stuff. Smart man.
Speaker 1: We we we understand that. Rob Thummel, Senior Portfolio Manager,
Speaker 1: Managing Director Towardis Capital, joining us with David Diets at
Speaker 1: Pepack Private just getting kind of a overview of the
Speaker 1: energy space point it's been one of those sectors that
Speaker 1: just really had a great year. And it's interesting, is
Speaker 1: Matt pointed out, you know, we've had gas flat, I
Speaker 1: mean oil prices flat year over year, but those stock
Speaker 1: prices are up fifty six, so kind of a decoupling there.
Speaker 1: One of the things that keeps coming back to me
Speaker 1: is but we need like a lot of rare earth
Speaker 1: materials to kind of make the batteries and some of
Speaker 1: these components, and and a lot of folks are even
Speaker 1: telling me that's a risk because a lot of them
Speaker 1: come from Africa and other places that may or may
Speaker 1: not be accessible to us as we may think. Zane Kylin,
Speaker 1: he's a CEO and director of Infinity Stone Ventures. He
Speaker 1: joins us here, Zaying, thanks so much for joining us.
Speaker 1: Tell us what you guys are up to at Infinity Stone.
Speaker 1: Where where do you fit into this equation? Well, no,
Speaker 1: thank you for having me and um Yeah, effectively, I
Speaker 1: think you hit the nail on the head that for
Speaker 1: all of these initiatives that are being funded by government
Speaker 1: incentives and private industry investment and just this whole EV
Speaker 1: pushed towards EV manufacturing and building supply chains in North America,
Speaker 1: there really does need to be a lot more supply
Speaker 1: on the critical mineral space, and that's what we're doing.
Speaker 1: We're we're exploring for critical mineral deposits UM in North America,
Speaker 1: primarily in Quebec and Ontario, UM also in other parts
Speaker 1: of the US as well. But as you said, like
Speaker 1: China and Africa really are kind of the engine of
Speaker 1: growth in the critical mineral space, whether that be lithium
Speaker 1: or rare earth metals, etcetera. All of these medals come
Speaker 1: from primarily Africa China, and if they're not from Africa,
Speaker 1: not from Africa to being refined to China. So I
Speaker 1: think what is that, by the way, Zaying, is that
Speaker 1: the issue so rare earths? I don't know what they are,
Speaker 1: like neodymium or whatever. And lithium and cobalt are more
Speaker 1: of the critical metals that you're talking about. These things
Speaker 1: are not just in abundance in China underground, right, we
Speaker 1: have them here underground. What I understand is that it's
Speaker 1: just that they have the refining capacity in China, and
Speaker 1: we as a country or as a continent, haven't haven't
Speaker 1: invested in that, correct, Yeah, And beyond that, we haven't
Speaker 1: even invested in UM. A lot of the pieces that
Speaker 1: are necessary to even exploit these mineral deposits that we
Speaker 1: do have in North America. But I think every day
Speaker 1: you see this is changing. And with the i R
Speaker 1: A and UM numerous and UM initiatives in Canada as well,
Speaker 1: there's considerable opportunity to invest in these spaces. And you
Speaker 1: hear people like Elon Musk talk about the the lithium
Speaker 1: refinery and Lithium developed a lithium project development or is
Speaker 1: to print money, I think is how you described it
Speaker 1: earlier this year, So explain explain the i RA for
Speaker 1: those listening, that's the Inflation Reduction Act UM, and I
Speaker 1: guess part of that bill allows for tax credit for
Speaker 1: certain electric vehicles, right, what what what are the criteria
Speaker 1: that need to be met in order to get that
Speaker 1: tax credit. Well, so that's one big piece of it
Speaker 1: for sure, is that a lot of the I think
Speaker 1: it's the supermajority of the minerals going into the car
Speaker 1: UM critical minerals that includes lithium, um rarer, nickel, cobolt,
Speaker 1: et cetera, have to be manufactured in countries or have
Speaker 1: to come from countries that UM. The US has friendly
Speaker 1: tradulations with UM, so effectively that means the West and
Speaker 1: really today that's pretty much impossible. There isn't really a
Speaker 1: car today on the road that would actually qualify for
Speaker 1: that in the US. UM. There there's some consideration for
Speaker 1: different vehicles and how they are manufacturing where they're manufactured
Speaker 1: that maybe eligible, but until there's a little bit of
Speaker 1: clarification around those where it's gonna be really tough UM
Speaker 1: to be able to meet that criteria effectively. But kind
Speaker 1: of taking a step forward them that the IRA also
Speaker 1: has a lot of UM provisions and investment for grants
Speaker 1: and tax credits and just direct general investment in companies
Speaker 1: that are developing critical mineral projects. And I think that's
Speaker 1: the big opportunity that we see is that you're not
Speaker 1: only do you need to have the end consumers going
Speaker 1: to see the best that this with tax credits, these
Speaker 1: companies are able to get considerable investment um from government,
Speaker 1: from government spending, and if you look at what's going
Speaker 1: on with rising industrates, etcetera, and kind of the macroeconomic climate,
Speaker 1: there really is no other sector that the government's pouring
Speaker 1: money into like this, And I think if we were
Speaker 1: going into recession, I think it's relatively obvious at this
Speaker 1: point or there's a general consensus around it. I think
Speaker 1: in that environment, you're gonna need to find industries risk
Speaker 1: industries where there's potential for more direct investment, and that's
Speaker 1: where you're gonna be able to drive economic growth. And
Speaker 1: I think that's where also investors are gonna be able
Speaker 1: to see potential outside. So saying at Infinity Stone Ventures,
Speaker 1: what type of investments are you guys making, where are
Speaker 1: you putting your capital? Yes, so we're very focused on
Speaker 1: a number of projects in Quebec and Ontario. Quebeca Ontario
Speaker 1: um are two of the best mining jurisdictions to work
Speaker 1: with working in the world. I think the Fraser Institute
Speaker 1: rates Quebec is number six, in Ontario is number eleven.
Speaker 1: UM just very good rule of law obviously being in Canada.
Speaker 1: But then beyond that, there's really great investment opportunities. And
Speaker 1: then beyond that, we have great mineral deposits and great
Speaker 1: opportunity for exploration. So there's been a number of significant
Speaker 1: discoveries over the past call it two years, and in
Speaker 1: UM Quebec in Ontario, and we see a great opportunity
Speaker 1: to further develop those, invest in those UM, build out resources,
Speaker 1: and then eventually be in a position to build a
Speaker 1: really strong supply chain. You're already seeing UM lithium refineries
Speaker 1: being built in Ontario. You're already seeing big CARBONI Fat Cheers,
Speaker 1: Mercedes and Volkswagon signing deals with Ontario mineral expiration companies
Speaker 1: for supply of lithium to their factor to their factories
Speaker 1: in Germany. And I think you're just going to continue
Speaker 1: to see a lot of these initiatives grow and it
Speaker 1: really is the best spot to be in. So where
Speaker 1: does that UM put in? Finny and Infinity Stone Corp.
Speaker 1: Right now, Infinity UM as the company that you're running,
Speaker 1: and you've got I guess what venture capital rounds behind
Speaker 1: you and UM do you go for an I P O?
Speaker 1: Do you look to tie up with this back? How's that? How?
Speaker 1: What are your future plans like? Yes, so we we
Speaker 1: actually are publicly traded on the Canadian Stock Exchange currently. UM.
Speaker 1: We have raised probably in excess of about six million
Speaker 1: over the past year and a half UM, so it's
Speaker 1: relatively small where we the company just kind of started,
Speaker 1: was formed in January, really kind of start really got
Speaker 1: going in January UM, and we put some money in
Speaker 1: the ground already. We we're after developing two or three
Speaker 1: resources as we speak. UM. Our Rockstone graphite project is
Speaker 1: probably one of the more exciting projects really kind of
Speaker 1: further down the road and development and UM we're doing
Speaker 1: a lot of work to refine that graphic to battery grade,
Speaker 1: all the metal logic, coal work. We've done considerable drilling
Speaker 1: over the past six weeks. UM. And then we have
Speaker 1: another lithium project of Buddha Lithium project that we're also
Speaker 1: actually developing. UM. So yeah, really we are kind of
Speaker 1: our process for the next year is we're gonna raise
Speaker 1: probably another round of capital UM in Q one and
Speaker 1: the next year, and then with that we will be
Speaker 1: uh kind of deploying it more actively. We're also looking
Speaker 1: at bringing in some other projects UM in our investing
Speaker 1: in some other projects in the US. So there's a
Speaker 1: lithium Brian project in Depth Valley that UM we're in
Speaker 1: the midst of negotiating, as well as some other projects
Speaker 1: UM in the U S too. So I think, really
Speaker 1: when you look at kind of the company as a whole,
Speaker 1: we are an investor, we're project generator. We're putting money
Speaker 1: in the ground and all in all of these different
Speaker 1: initiatives across a different sector battery metals, not only lithium,
Speaker 1: but also looking at rare earth and UM and graphite,
Speaker 1: which is the graph it's a big I think, grab
Speaker 1: it's gonna be a big trend going into UM. So, yeah,
Speaker 1: that's stuff all right, Zane, great stuff. Appreciate you taking
Speaker 1: the time here giving us the update. Zaying Kalin. He's
Speaker 1: the CEO and director Infinity Stone Corporation. Looking at the UH,
Speaker 1: you know, the processing of a lot of these rare
Speaker 1: metals that are need for that are needed in you
Speaker 1: know a lot of electric transformation electric vehicles. Think for example,
Speaker 1: some of those UH components are tough to come by,
Speaker 1: tough to process and you want to get a better sourcing.
Speaker 1: That's kind of what I've been hearing from most of
Speaker 1: the folks in that industry, so it's good to get
Speaker 1: Zane's perspective. Thanks for listening to the Bloomberg Markets podcast.
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
Speaker 1: on Twitter at Matt Miller three. Pet On Ball Sweeney,
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
Speaker 1: can always catch us worldwide at Bloomberg Radio.