Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
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Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: The FED kicking off.
Speaker 3: It's a two day policy and meeting tomorrow, and Bloomberg
Speaker 3: Economics has this a really cool tool. It's called the
Speaker 3: FED Sentiment Index. It's powered by natural language processing. It's
Speaker 3: an algorithm based on more than sixty thousand FED headlines,
Speaker 3: and it shows that back in December, power delivered a
Speaker 3: major pivot. Okay, we knew that from just watching the
Speaker 3: markets and seeing how investors have reacting. There's a catch, though.
Speaker 3: Four months on, with demand powering ahead and inflation stuck
Speaker 3: above target, Powell has been forced into a reversal. The
Speaker 3: index now shows that there's more work to do to
Speaker 3: bring inflation back under control. Tom Morelick is Bloomberg Economics
Speaker 3: chief economist. He edited the story that's today's big take,
Speaker 3: also among the most read on the Bloomberg terminal. He
Speaker 3: joins us from our Washington DC Bureau. So Tom, explain
Speaker 3: what exactly the FED speak tool is, tell us how
Speaker 3: it works, and also how it can give us some
Speaker 3: sort of preview of what we may hear from j.
Speaker 3: Powell come Wednesday at the press conference.
Speaker 4: Well, great to be here, Tim. So what we've done
Speaker 4: is we've taken sixty thousand Bloomberg News headlines on fedspeak,
Speaker 4: the things which Powell and his team on the FOMC
Speaker 4: say to steer the markets on where policy is going,
Speaker 4: and we've trained a natural languaging natural language processing algorithm
Speaker 4: to read those headlines as hawkish, neutral, or dubvish. What
Speaker 4: that means is that anytime we get a new FED headline,
Speaker 4: our algorithm can read it, assign a score to it,
Speaker 4: and we can tell you whether the fair is trending
Speaker 4: towards cuts, towards hikes, or towards a hold at its
Speaker 4: next meeting. Now the index is right now is telling
Speaker 4: us something pretty interesting. It's showing that in December there
Speaker 4: was a major dubvish pivot that was well timed. We
Speaker 4: think it saved the US economy from a looming downturn.
Speaker 4: But in economics, as in life, there's no such thing
Speaker 4: as a free lunch, and the same impulse which propped
Speaker 4: up growth is now also giving an additional impulse to inflation.
Speaker 4: Our index shows that's already prompted a mini reverse pivot
Speaker 4: by Powell. He's already moved back in a hawkish direction.
Speaker 4: We think that pivot has further to travel, perhaps as
Speaker 4: soon as this week's FOMC.
Speaker 5: So, Tom, what did the natural language tool teach us
Speaker 5: in December that we wouldn't have been able to figure
Speaker 5: out without using the tool?
Speaker 4: So that's a really great question, Emily. So let's go
Speaker 4: back to a lady called Ellen Mead. Ellen Mead was
Speaker 4: a senior economist at the FED left a few years
Speaker 4: ago to become a professor at Duke University, and she
Speaker 4: was one of the pioneers of using data science, machine learning,
Speaker 4: natural language processing to understand FED communications. And what her
Speaker 4: early research demonstrated is that these data science tools they
Speaker 4: can reveal insights which aren't kind of visible when we're
Speaker 4: just reading the headlines ourselves. And when it comes to December,
Speaker 4: what our index is telling us is that really this
Speaker 4: was a very significant pivot, one of the biggest monetary
Speaker 4: policy surprises of the current cycle. What our index is
Speaker 4: currently telling us based on the latest readings from April,
Speaker 4: is that things have started moving back in a more
Speaker 4: hawkish direction. But really they've undone only a small amount
Speaker 4: of the stimulus that they unleashed with that December pivot.
Speaker 4: And that's why our US team are Chief US economist
Speaker 4: Anna Wong and her colleagues think that Powell has further
Speaker 4: to go in a hawkish direction.
Speaker 2: Hey, Tom.
Speaker 3: One interesting part of the story that is included in
Speaker 3: today's Big Take is this idea that well, with rays high,
Speaker 3: why are we still seeing inflation high? And different theories
Speaker 3: are put forth, and there's this theory that's gotten a
Speaker 3: little bit of attention over the last month when it
Speaker 3: comes to MMT and the idea that actually hikes from
Speaker 3: the Fed are a growth driver rather than a drag
Speaker 3: on the economy.
Speaker 2: Can you talk a little bit about that.
Speaker 4: Yeah, So it's an intriguing idea, Tim. Basically, it goes
Speaker 4: something like this, households businesses have got so much money
Speaker 4: in savings accounts and in bonds where they're getting higher
Speaker 4: returns when interest rates go up, that that's giving a
Speaker 4: boost to spending power. And so perhaps FED hikes aren't
Speaker 4: a drag on demand and a drag on inflation. Perhaps
Speaker 4: in the current cycle they're actually a driver, boosting spending
Speaker 4: power and actually keeping inflation lodged at a high level.
Speaker 4: So that's an intriguing idea. It's an idea which has
Speaker 4: caught the attention of the markets, including from some big
Speaker 4: investors moving a huge amount of money around. Our view
Speaker 4: is that it's a bit difficult to support with either
Speaker 4: the economic theory or the economic data. If you think
Speaker 4: about it from the theory perspective, well, actually it's not
Speaker 4: too far from the view set out by Turkey's president Urduan,
Speaker 4: who of course famously said rate hikes drive inflation, rate
Speaker 4: cuts reduce inflation. And look what happened to Turkey, right,
Speaker 4: Turkey had spiraling inflation a collapsing currency. So it doesn't
Speaker 4: seem like the theory worked out very well there. And
Speaker 4: then if we look at the data, well it does
Speaker 4: seem to us that interest income has actually been a
Speaker 4: drag on consumption this year, not a driver. So an
Speaker 4: intriguing theory, one that's fired the attention of the markets,
Speaker 4: not one which we give a huge amount of credibility to.
Speaker 5: So what should we be looking out for on Wednesday
Speaker 5: is this going to be a Powell that has to
Speaker 5: kind of walk back some of that dubbishness that he
Speaker 5: did present during this big December pivot that your tool
Speaker 5: is showing.
Speaker 4: So it's interesting, Emily, I mean, certainly we're not going
Speaker 4: to hear the same kind of dubvish messages from Powell
Speaker 4: that we heard in December. Already in April we heard
Speaker 4: from Powell that the data wasn't giving him confidence in disinflation,
Speaker 4: that the FED was prepared to wait with policy settings
Speaker 4: restrictive for as long as it takes to be convinced
Speaker 4: that disinflation is on track and price gains are coming
Speaker 4: back to their two percent target. The question at Wednesday's
Speaker 4: press conference is if he goes further than that and
Speaker 4: perhaps hints at the world where there are no rate
Speaker 4: cuts coming in twenty twenty four or maybe in a
Speaker 4: risk scenario, also raises the possibility not as a base
Speaker 4: case for the FED, but as a possibility that there
Speaker 4: could be cuts hikes coming if needed.
Speaker 3: Thanks to Tom Morel, like Bloomberg Economics chief economists, check
Speaker 3: out today's Big Take. It's just a fantastic read. The
Speaker 3: Natural Language processing tool, the FED Speak tool very cool,
Speaker 3: stuff and a Big Take or Bloomberg dot Com slash
Speaker 3: a Big Take.
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Speaker 3: Okay, something really interesting is happening in the world of
Speaker 3: electricity generation here in the US and the way that
Speaker 3: people are thinking about nuclear power right now. So more
Speaker 3: than a dozen US nuclear actors that have been shut
Speaker 3: down in recent years. Maybe they were too costly to operate,
Speaker 3: they were struggling to compete against renewable power, and also
Speaker 3: they were struggling to compete against plants that burn cheap
Speaker 3: natural gas. Conventional wisdom long held that these closures were permanent.
Speaker 3: Now the industry is rethinking that view.
Speaker 2: Well.
Speaker 3: Wade is Bloomberg News Power and Renewable Energy reporter. He
Speaker 3: joins us here in the Bloomberg Studio.
Speaker 2: So well, as you.
Speaker 3: Mentioned, this is a as you writ in the piece
Speaker 3: which I just read from this is this is a
Speaker 3: story about economics. It's a story about numbers. Here these
Speaker 3: are power plants that were once thought to be too
Speaker 3: expensive to operate. But something happened over the last few
Speaker 3: years that changed the equation.
Speaker 2: What was it?
Speaker 6: Well, so nuclear power plants are big, expensive to operate,
Speaker 6: they need a lot of security. It's a complex thing
Speaker 6: to build. I've been covering nuclear for about five years,
Speaker 6: and when I started, the only real story was which
Speaker 6: plant are we going to close down next? And I
Speaker 6: started keeping a spreadsheet a few years ago and I
Speaker 6: tracked thirteen reactors that shut down since twenty thirteen, and
Speaker 6: they were all shut down ahead of time before they
Speaker 6: were supposed to run out of operating time. And every
Speaker 6: time it was like, we just can't compete. Gas is cheap,
Speaker 6: solar is cheap, wind is cheap, nuclear is expensive. So
Speaker 6: they all shut down and I asked, Everyone's like, well,
Speaker 6: is that permanent. They're like, oh, yeah, yeah, we're never
Speaker 6: turning those six back on again. But in the past
Speaker 6: maybe two years or so, there's been a reversal and
Speaker 6: it's really about climate change. Nuclear is carbon free energy,
Speaker 6: and people are starting to say we really need those
Speaker 6: nuclear power plants.
Speaker 3: So it's it's not as much about how expensive natural
Speaker 3: gas became. In the wake of Russia's invasion of Ukraine
Speaker 3: that was an.
Speaker 6: Anomaly, went up, come down. It's pretty cheap right now.
Speaker 3: So it's it's less about economics and more about renew
Speaker 3: more about clean environmentalists.
Speaker 6: Yeah, it's it's about clean energy.
Speaker 3: But what's interesting about that is environmentalists hated nuclear power
Speaker 3: plants for so many years.
Speaker 6: And some still do. I mean, there's there's still reasonably
Speaker 6: strong opposition to nuclear power plants. And it's true the
Speaker 6: nuclear waste is really bad stuff, and it's not going away,
Speaker 6: it's still there. But what I like to say is
Speaker 6: that the prospect, the potential threat of a nuclear disaster
Speaker 6: is now being you know, compared to the definite threat
Speaker 6: of climate change.
Speaker 5: So who is actually behind these changes? This is environmentalists
Speaker 5: persuading politicians now to reopen this. This is just a
Speaker 5: science community.
Speaker 6: Oh, it's coming from all sorts of directions. One of
Speaker 6: my favorite stories from earlier this year, last year actually
Speaker 6: was about like Miss America, who was a huge pro
Speaker 6: nuclear activist. Well not the one we have now's she
Speaker 6: relinquished the crown, but last year's Miss America and all
Speaker 6: of these young kids, all these twenty somethings. There's a
Speaker 6: huge wave of young people saying we need nuclear energy.
Speaker 6: There's a groundswell of support for it. It's been coming
Speaker 6: from everywhere.
Speaker 3: Yeah, it's pretty wild to see. I mean, they're okay,
Speaker 3: So let's talk about certain plants in you piece. You
Speaker 3: mentioned a dozen plants over the last few years that
Speaker 3: have been shut down. You weren't able to figure out
Speaker 3: the names of the ones that could be reopened necessarily
Speaker 3: all of them.
Speaker 6: Okay, here's the name that you want to know. It's Palisades.
Speaker 2: Okay.
Speaker 6: So of all the plants that I tracked that were
Speaker 6: shutting down, Palisades was the last one that shut down
Speaker 6: in twenty twenty two, and almost immediately it's in Michigan,
Speaker 6: people were starting to think, oh, maybe that was a mistake.
Speaker 6: Like even before it shut down, like a couple weeks
Speaker 6: before it shut down, the governor was sending around a
Speaker 6: letter to the Energy Department saying, can we not shut
Speaker 6: it down? Can we figure out a way to keep
Speaker 6: it open. It did shut down, but almost immediately the
Speaker 6: company that bought it, his name is Hultech, started saying,
Speaker 6: we could keep it open. We can figure out a
Speaker 6: way to turn this around. They've got they just got
Speaker 6: a couple of weeks ago, one point five billion dollar
Speaker 6: loan from the Department of Energy to restart it. And
Speaker 6: there was another one in California, Dieblo Canyon that was
Speaker 6: going to shut.
Speaker 3: Down my hometown nuclear power plants.
Speaker 6: Right Tim, I know, Yeah, So that was that was
Speaker 6: slated to be next, but the California state government started saying,
Speaker 6: we actually should keep it open for the clean energy.
Speaker 5: What about Three Mile Island. You mentioned that one in
Speaker 5: the piece as well.
Speaker 6: Okay, so there's two Three Mile Island reactors. One of
Speaker 6: them everybody knows. They had the accident in nineteen seventy nine.
Speaker 6: It has been shot ever since. The other one shut
Speaker 6: down in twenty nineteen. It ran for decades without incident.
Speaker 6: That's one of the plants that I've heard mentioned by
Speaker 6: name as maybe it could reopen. I talked to the company.
Speaker 6: They're not saying there's no plans, they're not talking about
Speaker 6: doing it. So something to keep in mind is that
Speaker 6: the shift here. We don't have definite plans that I'm
Speaker 6: hearing about. We're definitely going to open this plant or
Speaker 6: that plant. But what I'm hearing is these things that
Speaker 6: everybody thought was like dead dead dead, never coming back.
Speaker 6: People are starting to think maybe we can bring them back.
Speaker 6: Now some of them they're already being dismantled and companies
Speaker 6: are tearing them apart. Those aren't coming back, like our neighbor,
Speaker 6: like in the point north of New York City.
Speaker 2: What's going on there?
Speaker 6: They're tearing out apart.
Speaker 1: Done.
Speaker 6: There's a big hole in the containment zone. You don't
Speaker 6: want holes in your containment.
Speaker 2: Don'ts No, then it's no longer contained.
Speaker 6: Right, so that you know that it would cost too
Speaker 6: much to try and fix that, there's no point. But
Speaker 6: there's others that have just been sort of mothballed and
Speaker 6: they're sitting there. Those could potentially be turned back on.
Speaker 6: It would take some work, if cost some money, but
Speaker 6: it's doable.
Speaker 3: What about forget turning on the old nuclear power plants
Speaker 3: that have been decommissioned. What about constructing new ones? Which
Speaker 3: we've had one in recent.
Speaker 2: Years open here in the US.
Speaker 6: You didn't see this is today?
Speaker 2: Okay, today there's a new one.
Speaker 6: Yes, Vocal four went online this morning.
Speaker 2: Okay, so this is in Georgia.
Speaker 6: It's this it's the only major nuclear project in America
Speaker 6: in recent decades. They were like, I don't know, ten
Speaker 6: years late and fifteen billion dollars over budget. They were
Speaker 6: building two reactors. One of them got switched on last year.
Speaker 6: The other one officially was announced this morning. So that's
Speaker 6: good news, but it's you know, it's clear, it's a
Speaker 6: big project, it costs a lot. The potential for going
Speaker 6: over budget is notable.
Speaker 3: Does it show that there is an appetite now that
Speaker 3: environmentalists have shifted their view? Does it show that there's
Speaker 3: an appetite for these expensive projects if they are indeed
Speaker 3: green save for the nuclear waste.
Speaker 6: Okay, well, here's another shift up in tracking. Because I
Speaker 6: watched the Vogel project for years, as it took longer
Speaker 6: and longer and longer, and the cost overruns got higher
Speaker 6: and high and higher. The only thing I ever heard
Speaker 6: is we're never doing that again. And maybe in the
Speaker 6: last year or so, I've started to hear maybe we
Speaker 6: could do that again. So like again, nobody's announcing plans
Speaker 6: to do it, but just the idea that people are
Speaker 6: starting to say, maybe we could. That tells me there's
Speaker 6: a big shift.
Speaker 5: Can we zoom out a little bit? What does this
Speaker 5: all mean then, for the future of renewable power? I
Speaker 5: guess with these reopenings like, how close are we getting
Speaker 5: to actually having a significant portion of the US's energy
Speaker 5: supply rely on nuclear.
Speaker 6: It's gonna happen, but it's a slow thing. Nuclear is
Speaker 6: really slow industry to cover. The next thing you want
Speaker 6: to be watching for small modular reactors. It's a different
Speaker 6: generation of nuclear technology.
Speaker 2: And there are a bunch of startups working on this.
Speaker 6: There's a couple dozen that I know of that are
Speaker 6: working on it. Probably not this decade, maybe one or
Speaker 6: two small ones this decade, but the twenty thirties we
Speaker 6: could see a decent amount of it.
Speaker 3: Okay, let's get to the waste issue here, because, as
Speaker 3: you mentioned, nuclear waste is not going away, Where does
Speaker 3: it end up going? And with this shifting view does
Speaker 3: it is it viewed differently at all?
Speaker 6: Well, the answer of where it goes right now is
Speaker 6: really simple. It goes nowhere. Every single reactor has a
Speaker 6: stash of waste in these giant steel and concrete casks
Speaker 6: out behind. There's no place to put it. There was
Speaker 6: initially a push to create a national repository that kind
Speaker 6: of fell by this yucka mountain would have been yucka
Speaker 6: mountain that was officially shot down after decades of talking
Speaker 6: about it. I remember people talking about it when I
Speaker 6: was in college. So for the moment, they all stay
Speaker 6: right there out behind the reactor. I was at a
Speaker 6: big nuclear power plant a couple weeks ago. They had
Speaker 6: a big stash way out back there's plant. There's some
Speaker 6: proposals to build sort of another consolidated site. It wouldn't
Speaker 6: be like yucka mountain. But there were two of them,
Speaker 6: ones in New Mexico, ones in West Texas. They're actually
Speaker 6: really close to each other. Both state governments have kind
Speaker 6: of passed sub legislation to make those projects unviable for
Speaker 6: the moment. So for the moment, none of it's going anywhere.
Speaker 3: Yeah, if you're a state, you don't necessarily want nuclear
Speaker 3: waste come into your backyard.
Speaker 2: I guess it's fair to say.
Speaker 6: The thing about nuclear waste is I mean, there's no
Speaker 6: denying it's dangerous, but everything is dangerous. You live near
Speaker 6: a coal plant, you might get asthma. You live near
Speaker 6: a gas plant, you're going to be exposed to gas.
Speaker 6: The people who run nuclear power plants, I've always been
Speaker 6: impressed with them. They handle this stuff very carefully. We
Speaker 6: don't have a lot of accidents from leaking nuclear waste casks.
Speaker 3: Well, very briefly that the way you sum that up
Speaker 3: to me sums up what environmentalists have said in recent
Speaker 3: years the idea of using nuclear power. The benefits outweigh
Speaker 3: the potential consequences, especially compared to burning fossil fuels.
Speaker 6: I think everything has a risk, everything has costs. You
Speaker 6: just have to figure out what risks you want to take.
Speaker 3: Well Wade Bloomberg newspower and renewable energy editor here in
Speaker 3: our Bloomberg studio. Check out his story and all his
Speaker 3: nuclear power coverage at the Bloomberg Terminal and of course,
Speaker 3: at Bloomberg dot com as well.
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Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 3: I mean, I don't know about you, but it really
Speaker 3: seems like Las Vegas is having a moment right now.
Speaker 2: What do you think it is? Yeah?
Speaker 5: I see the sphere on my Twitter all the time,
Speaker 5: different concerts and people.
Speaker 2: Do you see it on your Instagram though? Just on
Speaker 2: your Twitter? Just on your Instagram Twitter? Okay, Twitter?
Speaker 3: Interesting, Okay, so the sphere is part of it. I
Speaker 3: think the Super Bowl was a lot. There are a
Speaker 3: bunch of pro sports teams, some new, some having moved
Speaker 3: now calling the city home. Certainly seems like Las Vegas
Speaker 3: is shining. Also, got to think about gambling. It's also
Speaker 3: doing well in Vegas. According to the industry group, the
Speaker 3: American Gaming Association, last year, the Las Vegas Strip experienced
Speaker 3: the highest year over year gaining casino revenue growth out
Speaker 3: of any market in the US. For on the ground update,
Speaker 3: let's go to Patrick Nichols, president and CEO of the
Speaker 3: Venetian Resort. The pe firm Apollo Global Management bought the
Speaker 3: Venetian back in twenty twenty two. The resort now undergoing
Speaker 3: a one point five billion dollar renovation. Patrick, Welcome to
Speaker 3: Bloomberg Business Week. Give us a business update.
Speaker 2: How is business?
Speaker 7: Well, thanks for having me, Tim and Emily. Business is great.
Speaker 7: You know, we've seen, as you mentioned, a record twenty
Speaker 7: twenty three across the board of the Venetian and the
Speaker 7: industry benefit as well. I think what's interesting about Vegas
Speaker 7: in the past few years, is it's transitioned from really
Speaker 7: a gambling destination to something that's much more than that.
Speaker 7: And now with sports teams as you mentioned, Raiders, the Knights,
Speaker 7: the Aces, and the Sphere, it's become a very very
Speaker 7: durable destination for our guests.
Speaker 5: What about the impact of online gaming, because now with
Speaker 5: online gaming, people don't necessarily have to go to Vegas
Speaker 5: to actually make their bets. I know that you guys
Speaker 5: do have a new sports playbook partnership with Yahoo Sports.
Speaker 7: Yeah, we launched the ya Who's Sports Book powered by
Speaker 7: William Hill just in time for this football season last
Speaker 7: year in twenty twenty three. It's been doing remarkably well.
Speaker 7: Just one of many new additions to the Venetian over
Speaker 7: the past few years. And they answer your question about
Speaker 7: online gaming. I think what makes Vegas so special is
Speaker 7: that you can't get the Vegas experience online. So people
Speaker 7: come to Las Vegas into the Venetian for so much
Speaker 7: more than just, you know, to put a couple of
Speaker 7: dollars in a slot machine. It's about seeing fish at
Speaker 7: the Sphere, or seeing you two or coming to the
Speaker 7: Super Bowl, eating at one of the best restaurants in
Speaker 7: the world and staying in fantastic speeds. So you know,
Speaker 7: Vegas is a destination and the Venetian within Las Vegas
Speaker 7: really creates its own experience versus what you get online.
Speaker 3: I'm chuckling when you mentioned fish because I have a
Speaker 3: friend who traveled to Vegas just to see the Fish Show.
Speaker 3: I mean lots of friends actually who did this at
Speaker 3: the Sphere and they were like, it's indescribable, completely life changing.
Speaker 3: It's just sounded it like it was pretty cool. Speaking
Speaker 3: of the Sphere, how big of a boon is it
Speaker 3: to your business? Explain the partnership that the Venetian has
Speaker 3: with the Sphere and talk a little bit about what
Speaker 3: it means.
Speaker 2: To your business.
Speaker 7: I mean, the Sphere has been very impactful. You know,
Speaker 7: the Venetian has four theaters today, so we have you know,
Speaker 7: the resort was built twenty five years ago. We're celebrating
Speaker 7: our twenty fifth anniversary in a couple of days, and
Speaker 7: twenty five years ago theaters were a lot smaller than
Speaker 7: they are today. So our largest theta that we have
Speaker 7: in the resorts about eighteen hundred and twenty two hundred seats,
Speaker 7: which loves to do a lot of really fun programming
Speaker 7: with a lot of great bands and a lot of
Speaker 7: great entertainment concepts. But where the Venetian has historically kind
Speaker 7: of lack of competitive advantages is the scale really large
Speaker 7: entertainment offering. So the Sphere, with you know, almost twenty
Speaker 7: thousand seats now sets us apart. We have these intimate,
Speaker 7: great four intimate venues, and now we have the largest
Speaker 7: entertainment venue in Las Vegas physically connected to the resort.
Speaker 7: It's the easiest place to stay. If you want to
Speaker 7: see a show at the Sphere, you should be staying
Speaker 7: at the Venetian. And it's been great. You know, we've
Speaker 7: seen really strong results from you too, as well as Fish.
Speaker 7: I also had a lot of friends that I didn't
Speaker 7: know are Fish fans that showed up the show. And
Speaker 7: it's been great for business. I think it's been great
Speaker 7: for the city and we're excited to see some future
Speaker 7: residencies at the Sphere now soon.
Speaker 5: So you're doing a one point five billion dollar renovation.
Speaker 5: What is that going to look like? What can resort
Speaker 5: guests expect out of the new changes.
Speaker 7: Yeah, it's a big undertaking. You know, we're as I mentioned,
Speaker 7: we're celebrating our twenty fifth anniversary later this week on Friday,
Speaker 7: and there's no better birthday gift than a billion five
Speaker 7: So we're investing, you know, a billion and a half
Speaker 7: dollars into the resort. It starts first and foremost with
Speaker 7: our suite store an all sweet hotels, seventy and seventy
Speaker 7: one hundred rooms, excuse me, the largest hotel in North America.
Speaker 7: All of our suites are getting a complete redesign, so
Speaker 7: we're embracing kind of a modern Italian theme, like something
Speaker 7: you might find in modern day Venice or Milan, and
Speaker 7: we'll start the renovation in the next few months, with
Speaker 7: new renovated suites coming online in September of this year.
Speaker 7: We're also known as one of the largest convention hotels
Speaker 7: in the world, so if you have a big group
Speaker 7: of convention and expo, you're likely staying at the Venetian.
Speaker 7: We have about two point two million square feed of
Speaker 7: convention and expo space and we're investing just under two
Speaker 7: hundred million dollars to create a new, cutting edge meeting
Speaker 7: experience for our guests. And then, of course, you know,
Speaker 7: F and B entertainment restaurants have become such a big
Speaker 7: part of the Las Vegas experience that we're investing there
Speaker 7: to see some new announcements coming soon on some new
Speaker 7: culinary offerings at the resort, and we're leveling up our
Speaker 7: gaming spaces as well with some new high limit spaces
Speaker 7: a redesign. Can see a floor at the Venetian new
Speaker 7: poker room that opens later this summer. I'm just really excited.
Speaker 7: It's not just a cosmetic upgrade or cosmetic refreshing c elsewhere,
Speaker 7: really kind of a grounds up refresh at the resort.
Speaker 3: Hey, Patrick, I got to ask about the exit plan
Speaker 3: for the Venetian. As I mentioned, it was purchased by
Speaker 3: the private equity firm Apollo back in twenty twenty two.
Speaker 3: You were instrumental also in Blackstone's deal to sell the
Speaker 3: Cosmopolitan to MGM the previous year, back in twenty twenty one.
Speaker 3: I mean, it's private equity. I assume they want to return.
Speaker 3: What's the exit plan here?
Speaker 7: You know, my job as CEO of the Venetian is
Speaker 7: to generate as much cash flow and earnings and potential
Speaker 7: for this resort and take care of our team here
Speaker 7: on the ground, and I leave the exit plan to Apollo,
Speaker 7: you know, that's what they do, the most sopisticated investors
Speaker 7: in the world, and we'll let them take care of
Speaker 7: that side, where we focus on delivering the best experience
Speaker 7: we can do our guests and our team members and
Speaker 7: delivering fantastic.
Speaker 3: Do you see this as like a long term position
Speaker 3: that you have where you you their renovation and then
Speaker 3: you create a sustainable business moving forward, or do you
Speaker 3: see it as one where there's an exit and then
Speaker 3: you move on to your next thing.
Speaker 7: I think for me personally, I love the Venetian. You know,
Speaker 7: my I never had the dream when I was a
Speaker 7: kid to be running a casino, But now that I'm here,
Speaker 7: there's no more enjoyable business, no more complicated business, no
Speaker 7: more surprising business day to day than the casino industry.
Speaker 7: So it's a ton of fun. It's a blast being
Speaker 7: here every day and getting to work with and the
Speaker 7: best people in the industry every day is just kind
Speaker 7: of a dream come true. So I love it here.
Speaker 7: You know, I treat every job as kind of it.
Speaker 7: It's probably the last one I'm ever going to have,
Speaker 7: so I'm really excited to be here and we'll see
Speaker 7: what the future holds.
Speaker 5: Patrick, we don't have a ton of time left. But
Speaker 5: who would say, who would you say is your biggest
Speaker 5: competition in Vegas right now? Who are you losing business to?
Speaker 7: You know, thankfully, we're not losing business. We're actually growing
Speaker 7: our share. I think we're one of the few casinos
Speaker 7: in the city at the moment that is stealing share
Speaker 7: from our competitors, and I think that goes back to
Speaker 7: the investment we've made to Apollo's position of the resort.
Speaker 7: They're incredibly you know, competitive and also resourceful. I think
Speaker 7: we have resources and speed that our competitors don't have,
Speaker 7: and that's a huge advantage for us. So we're we're
Speaker 7: right now stealing sure. I think if we had to
Speaker 7: look at competitors, you know, there's the old saying, you know,
Speaker 7: you don't necessarily want to follow your competition because you'll
Speaker 7: end up there. So we are trying to set our
Speaker 7: own path and move forward at a clip that our
Speaker 7: competitors can't keep up with, and bring innovation to the
Speaker 7: market as fast as possible.
Speaker 3: Patrick Nichols, president and CEO of the Venetian Resort, joining
Speaker 3: us from Las Vegas. As we mentioned, a Pullo Global
Speaker 3: Management bought the Venetian back in at twenty twenty two.
Speaker 3: The resort now undergoing a one point five billion dollar renovation. Patrick,
Speaker 3: thanks so much for taking the time to join us.
Speaker 3: Really do appreciate it.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 3: Well, every manifestation of the dangerous weather wreaking havoc around
Speaker 3: the world has one thing in common.
Speaker 2: Water.
Speaker 3: As there is climate changes, the lack of water or
Speaker 3: its sudden abundance is reshaping the global economy and international trade.
Speaker 3: Think about it, from prolonged drought slowing down ships in
Speaker 3: the Panama Canal to deluge's halting industrial production in Japan.
Speaker 3: It's one of the most obvious ways that rising temperatures
Speaker 3: are affecting business. For more on what's going on and
Speaker 3: what companies are doing to try to alleviate it, we're
Speaker 3: joined by Susan Kennedy, the CEO of the water management
Speaker 3: and agricultural resources company Kadiz. She joins us from Los Angeles.
Speaker 3: Susan people who are regular listeners of the program. They
Speaker 3: know I grew up in California. I wasn't allowed to
Speaker 3: play with water guns when I was a kid because
Speaker 3: we were living through a historic drought. But the idea
Speaker 3: of a water management firm, I think would be foreign
Speaker 3: to a lot of people who are not from an
Speaker 3: area that has experienced major drought. So explain for people
Speaker 3: exactly Cadiz does.
Speaker 8: Well, very nice to be here with you. Thanks for
Speaker 8: thanks for the invite. You know, I've been in California
Speaker 8: for fifty years myself, and water is just something you
Speaker 8: don't think about. You turn on the faucet and there
Speaker 8: it is, But in fact it's, you know, the lifeblood
Speaker 8: of everything we do. Cadiz is one of the largest
Speaker 8: landowners in southern California. We own forty five thousand acres
Speaker 8: with water rights out in California's High Desert. Cadiz Ranch
Speaker 8: has been farming out there for almost forty years. We
Speaker 8: sit on top of this aquifer system that has more
Speaker 8: water in it than Lake Mead, the largest reservoir in
Speaker 8: the United States, and we've been developing these water assets
Speaker 8: for the last two decades. We've got water supply because
Speaker 8: we catch the water as it before it evaporates in
Speaker 8: the desert. We have water storage capacity, we have hundreds
Speaker 8: of miles of pipeline assets that we recently acquired, and
Speaker 8: we have a water treatment technology. So we're developing one
Speaker 8: of the largest new groundwater banks in the southwestern United
Speaker 8: States and that's going to be absolutely critical for California
Speaker 8: in particular, but for the entire Southwest in the coming years.
Speaker 5: What is the biggest problem when it comes to water
Speaker 5: and water transportation that Kadiz is trying to solve.
Speaker 8: Well, you know, the biggest problem is water storage. We
Speaker 8: don't we don't have a water scarcity problem. We have enough.
Speaker 8: We have the same amount of water on the planet
Speaker 8: as we've had for four billion years. Water doesn't leave
Speaker 8: the planet. What we have is a problem with water
Speaker 8: infrastructure because you have to store fresh water in order
Speaker 8: to make it usable for human consumption, right, and our
Speaker 8: entire infrastructure system was developed around the snow pack, So
Speaker 8: that's where we store most of our water is in
Speaker 8: This is in the mountains as snow for many months
Speaker 8: out of the year, and then when it melts, it
Speaker 8: goes down into reservoirs that we've created right at the
Speaker 8: bottom of the rivers where we catch that water and
Speaker 8: store it from the rest of the summer. But the
Speaker 8: problem is that where the climate has completely changed our
Speaker 8: ability to store water as snow, we're losing our snowpack.
Speaker 8: And that's happening in California, it's happening in the Rocky Mountains.
Speaker 8: So the major sources of water for the southwestern United States,
Speaker 8: which is a huge hot spot around the world when
Speaker 8: it comes to water access, is that we're not able
Speaker 8: to store our water anymore. It's coming down in sheets
Speaker 8: as atmospheric rivers, and it's washing out to the ocean.
Speaker 8: So the biggest problem is storing water, and that's where
Speaker 8: Kadiz's land has the ability to store. We have thirty
Speaker 8: forty to fifty million acre feet of water already in storage.
Speaker 2: We have, but do you have room for more?
Speaker 8: Yeah? But using with technology to control the evaporation, we
Speaker 8: can actually impourt water and store it through pipelines that
Speaker 8: we have connected to our property. So we can actually
Speaker 8: store a million acre feet of water in our aquif
Speaker 8: and hold it and there for years that we needed
Speaker 8: for drought.
Speaker 3: Is that infrastructure already in place? I mean when I
Speaker 3: was in middle school the California State Water Project went
Speaker 3: through essentially in my backyard, and this was like a huge,
Speaker 3: huge undertaking. And back then they were I don't know
Speaker 3: if these numbers were correct at the time, but everyone
Speaker 3: was quoting this was a long time ago, a million
Speaker 3: dollars a mile. I mean, this was expensive back then.
Speaker 3: Like you know, it's not like the subway here in
Speaker 3: New York, which is much more expensive than that.
Speaker 8: Five million a mile.
Speaker 2: Now, how much is it now?
Speaker 8: Five million a mile?
Speaker 3: Yeah, so that kind of makes sense that that kind
Speaker 3: of tracks here. Is that infrastructure though already in place
Speaker 3: or does it need to be built.
Speaker 8: Well, here's where it gets interesting. So you know the
Speaker 8: biggest problem with water storage building water storage is you
Speaker 8: have to get you have to have the pipelines to
Speaker 8: move it hundreds of miles, and you know, it's very
Speaker 8: very challenging to build anything that, you know, hundreds of miles,
Speaker 8: especially in California. But we Cadiz is actually an old
Speaker 8: railroad stop between where it was built. It was around
Speaker 8: the railroads when they had steam engines and so they
Speaker 8: used to stop with this little town called Kadiz and
Speaker 8: get water for their steam engines. So we're sitting on
Speaker 8: a bunch of railroad lines and a bunch of gas lines,
Speaker 8: and so we we've purchased idle gas pipelines that were
Speaker 8: built thirty five years ago that that aren't in use today,
Speaker 8: and they cross hundreds of miles, so we can actually
Speaker 8: con will be the first in the world to convert
Speaker 8: gas pipelines to actually carry water and be able to
Speaker 8: transport water to all the major infrastructure in southern California.
Speaker 3: Yeah, so I'm wondering, Yes, Susan, I'm curious. You know,
Speaker 3: it's a publicly traded company. Cadiz has a market cap
Speaker 3: about one hundred and fifty million dollars. It's a microcap.
Speaker 3: Shares are down twenty percent this year. What are investors,
Speaker 3: in your opinion, missing here?
Speaker 8: Well, you know, we're in the utility space. Water is
Speaker 8: in the utility space, right, and so we've been this
Speaker 8: project has been around for twenty years and we've we've
Speaker 8: been developing these assets, uh you know, the pipeline assets
Speaker 8: and everything in the in the most recent years. But
Speaker 8: investors don't really look at water as a as a
Speaker 8: as a place to invest as a water industry because
Speaker 8: it's usually done by public companies. And so, but everything
Speaker 8: changed in the last three years, and and now I
Speaker 8: think you're seeing some really creative public private partnerships with
Speaker 8: technology companies and with companies like ours to help build
Speaker 8: the assets and make them available for communities. So I
Speaker 8: think right now we're sort of we're invisible to the
Speaker 8: to the market for the most part. People aren't paying
Speaker 8: attention to us in the in the in the utility space.
Speaker 8: But I think you know, when you when you look
Speaker 8: at what's happening and the contracts that we've just recently
Speaker 8: entered into, you can see that this is going to
Speaker 8: be a massive project. Uh, and I think should be
Speaker 8: very attractive to investors.
Speaker 5: Susan, what kind of regulatory hurdles are you facing right now?
Speaker 8: You know, twenty years ago this project was going to
Speaker 8: be purchased by the largest water agencies and in southern
Speaker 8: California to build a new storage bank. No one needed
Speaker 8: water twenty years ago, and nobody needed storage because they
Speaker 8: had lake meat. And so the project, any major infrastructure projects,
Speaker 8: faces enormous environmental hurdles because nobody, nobody wants to build
Speaker 8: projects like this, and so you know, it hit all
Speaker 8: the barriers and we went through decades of litigation over
Speaker 8: the permits, and you know, came out of all of
Speaker 8: that with everything intact and ready to go. But we
Speaker 8: we've sort of had the twenty years of regulatory hell
Speaker 8: behind us, if you will. Yeah, And so we're now
Speaker 8: we're now in a place where we can actually start
Speaker 8: putting the pumping stations and infrastructure in place and start
Speaker 8: moving forward.
Speaker 3: Susan, you've been in California for years. You're pretty much
Speaker 3: your whole career there, and you were in the public
Speaker 3: sector for a long period of time. You were chief
Speaker 3: of staff to Governor Schwarzenegger, you were Cabinet secretary to
Speaker 3: Governor Gray Davis. I had a professor in college, this
Speaker 3: was not in California who essentially told me that people
Speaker 3: aren't supposed to live in California. It doesn't have the
Speaker 3: water infrastructure and doesn't have the water availability. It doesn't
Speaker 3: have the environment for humans to be living there. What
Speaker 3: would you say to him, I'd.
Speaker 8: Say that civilizations around the entire world, you know, developed
Speaker 8: around water resources, They around rivers, and then some of
Speaker 8: the aqueducts that we used today were designed by the
Speaker 8: Romans and the ancient Egyptians. I mean we've been moved,
Speaker 8: but humans have been moving water and storing water to create,
Speaker 8: you know, civilization for thousands of years. So it's it's
Speaker 8: not about where we're supposed to live or not live,
Speaker 8: it's about whether or not we can we can, you know,
Speaker 8: sustainably develop the water resources in order to feed our
Speaker 8: communities and maintain the environment.
Speaker 3: Susan Kennedy, she is CEO of the Water Management and
Speaker 3: Agricultural Resources Company, could ease. The publicly traded firm got
Speaker 3: a market cap about one hundred and fifty million dollars.
Speaker 3: Joining us from Los Angeles. Susan, thanks so much for
Speaker 3: taking the time. Really really appreciate it.
Speaker 7: I'm brother Marco, a journal Now about you let me drive?
Speaker 3: Oh no, no, no, no, who's going to drive?
Speaker 1: Honry, Please, I'll travel.
Speaker 4: I want to drive.
Speaker 7: It's good question.
Speaker 1: This is the drive to the globe. Well up, Dad
Speaker 1: on Bloomberg Radio.
Speaker 3: I can't believe it's that time already. B Maloney talking
Speaker 3: a little bit about Domino's pizza just now. Okay, I
Speaker 3: must confess we be a little hungry. They soon, right,
Speaker 3: They had it today today. Yeah, and look at this
Speaker 3: shares her up five percent right now? Uh they we're
Speaker 3: up as much as more than eight percent. They hit
Speaker 3: the highest intra day since January of twenty twenty two.
Speaker 3: This after the company reported stronger than expected domestic results.
Speaker 3: Same store sales up five point six percent for the
Speaker 3: period that ended March twenty fourth. This was a head
Speaker 3: of analyst estimates for a three point nine percent game.
Speaker 3: Here's what the CEO said quote. The US results came
Speaker 3: through positive order counts in both our carryout and delivery
Speaker 3: businesses for a second quarter in the row. Russell Wiener,
Speaker 3: the CEO, said that orders were generated from customers across
Speaker 3: all income cohorts.
Speaker 5: I like Dominoes, and you know, in Manhattan there's a
Speaker 5: lot of good people.
Speaker 2: I was gonna say, I mean it's there are also
Speaker 2: a lot of Dominoes.
Speaker 5: It has its own lane. If you want a classic
Speaker 5: New York slice, you don't go to Dominoes. But I
Speaker 5: have to admit sometimes I'm in the mood for that
Speaker 5: Dominoes thickness.
Speaker 2: Yeah, I love it. I love it. All right, let's
Speaker 2: get it.
Speaker 3: Drive to the clothes because I believe it or not,
Speaker 3: we are just about fourteen minutes away. Well, actually yeah, no,
Speaker 3: we're about seventeen minutes away from the Clifs. Here we
Speaker 3: got Tony Roth with US chief investment officer over at
Speaker 3: Wilmington Trust, joining us from Pennsylvania. Tony, good to have
Speaker 3: you with us this afternoon.
Speaker 2: How are you. I'm good, Thanks for having me. How
Speaker 2: are you guys? We're doing pretty well.
Speaker 3: So Emily and I are just kind of on pins
Speaker 3: and needles, waiting for the Fed on Wednesday, Jobs on Friday,
Speaker 3: and then before that Apple Thursday and Amazon tomorrow. What's
Speaker 3: kind of on your radar for the week.
Speaker 9: Probably more than anything else, focused on whether the FED
Speaker 9: meets expectations around starting to taper the quantitative tightening of
Speaker 9: its balance shape. So it's been, you know, sometime, it's
Speaker 9: been cutting ninety five billion a month, et cetera, and
Speaker 9: we'd like to be able to see the FED stop
Speaker 9: that because it's not helping the banking ecosystem. So that
Speaker 9: would be essentially an accommodative approach for the FED to
Speaker 9: start to no longer run down as balance sheet in
Speaker 9: that way, and the Fed is alluded to it, and
Speaker 9: we think it may actually put a plan in place
Speaker 9: this week, and it would be helpful for the banking
Speaker 9: ecosys if it were to do that and thereby the economy.
Speaker 5: So Tim I actually had the opportunity to meet Tony
Speaker 5: Well over a year ago at the Wilmington Trust twenty
Speaker 5: twenty three outlook event. I'm not sure if Tony remembers.
Speaker 5: I know he meets reporters all the time, but I
Speaker 5: remember that the theme of that event was that Wilmington
Speaker 5: Trust was making this big call that inflation was going
Speaker 5: to be sticky around three percent due to structural forces
Speaker 5: underlying the economy, labor force demographics.
Speaker 2: So Memory, I want to check in with you.
Speaker 5: Yeah, there was really good food there too, taco bar
Speaker 5: or something, which I totally wasn't swayed by. But yeah,
Speaker 5: maybe update us on your inflation call and what are
Speaker 5: you thinking about now about sticky inflation three the Fed?
Speaker 2: Yeah, so the inflation.
Speaker 9: The inflation data is really hard to understand, especially in
Speaker 9: the beginning of the year, because there are so many
Speaker 9: seasonal adjustments that come into it, and the focus has
Speaker 9: been on of course, as it typically should be, a
Speaker 9: CPI only because CPI and pc are so tightly correlated
Speaker 9: with one another and CPI comes out earlier in the month.
Speaker 9: But CPI has been very dominated by the housing market,
Speaker 9: and the fact that the shelter numbers take a long
Speaker 9: time to show up in the data, as well as insurance,
Speaker 9: which is a nasticleical price adjustment, if you will, due
Speaker 9: to a lot of factors that have to do with
Speaker 9: the pandemic, which probably won't be repeated, and which are
Speaker 9: not really susceptible to the influence from monetary policy from
Speaker 9: the Fed. So when you put all that together, suggests
Speaker 9: that the look that we're getting on inflation so far
Speaker 9: this year is not necessarily a good look on inflation.
Speaker 9: And what we see is when we look at the
Speaker 9: core PCEE going back twelve months, we see that we're
Speaker 9: about two points sep and two point eight percent going
Speaker 9: back twelve months. Now, when you look at the three
Speaker 9: month annualized numbers, admittedly it's higher. It's around three and
Speaker 9: some odd thro three three, three four, which is why
Speaker 9: we think that inflation is sort of sticky. But we're
Speaker 9: not seeing it as stopping its downward march. It's it's
Speaker 9: just a slow march downward. We're seeing in fact, about
Speaker 9: fifteen to twenty basis points per month of reduction and
Speaker 9: housing cost acceleration in the CPI and Ultimately, we think
Speaker 9: the FED is going to start to cut rates in
Speaker 9: July and cut either through the equivalent of either three
Speaker 9: to four times this year. And what's really driving that
Speaker 9: more than anything else is our view on the consumer,
Speaker 9: and we do believe that the consumer's moderating. Probably we're
Speaker 9: seeing that most clearly in clients than that own either
Speaker 9: restaurant chains or in retail shops, or on the part
Speaker 9: of sponsors that own portfolio companies that are also seeing
Speaker 9: significant slow down on the part of invatory build up
Speaker 9: and demand from both B two C and B to B.
Speaker 9: So we're definitely seeing a slowing in the economy which
Speaker 9: is going to plu throw we believe to the inflation data, but.
Speaker 2: Just not it's not going to push us all the way.
Speaker 9: To two percent to your point of our forecast from
Speaker 9: last year, because there are some structural factors like energy,
Speaker 9: the transition to green energy, labor markets, et cetera, tight
Speaker 9: labor markets that are going to keep inflation probably closer
Speaker 9: to two and a half or three percent.
Speaker 5: So what does that mean for stocks? Do we need
Speaker 5: to see a rate cut, you know, a move towards
Speaker 5: the two percent for stocks too? And the year you know,
Speaker 5: much higher than they are right now. I mean we're
Speaker 5: already up seven percent year to date. It seems like
Speaker 5: so far the stock market has been fairly resilient despite
Speaker 5: all of the is changing macro factors.
Speaker 9: Yeah, it's a really great observation in terms of the
Speaker 9: resilience of the market. In fact, we moved last week
Speaker 9: to add more money to equities. We were slightly overweight
Speaker 9: and now we're more overweight. We added to both US
Speaker 9: large cap and developed large cap, and the reason we
Speaker 9: did so was because we think the outlook has much
Speaker 9: more upside than downside.
Speaker 2: Right now.
Speaker 9: We're not seeing many scenarios that would result on a
Speaker 9: hard landing or recession. We're seeing a moderating consumer. And
Speaker 9: the question around the monetary direction of the FED or
Speaker 9: the speed at which they moved to a loosening posture,
Speaker 9: we think has more of an impact on where to
Speaker 9: invest with inequities than whether or not to move to
Speaker 9: an overweight. So if in fact it takes longer because
Speaker 9: the economy is stronger, we think that's going to continue
Speaker 9: to favor large cap tech stocks. Somewhat ironically, given get
Speaker 9: disposedly inversely correlated to interest rates, but that's not what's
Speaker 9: happening recently. If, on the other hand, the fad does
Speaker 9: move in July and moves maybe three or four times
Speaker 9: this year, then we're going to start to see, I think,
Speaker 9: a further broadening out into small caps and into some
Speaker 9: of the more fatly sensitive orders of the of.
Speaker 2: The stock market.
Speaker 3: That's Tony Roth, chief investment officer over at Wilmington Trust,
Speaker 3: joining us from Pennsylvania.
Speaker 1: This is the Bloomberg Business Week podcast of a Little Apple, Spotify,
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