WEBVTT - CPI in Focus as US-Iran Peace Talks Near 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.880 Business app. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.160 or watch us live on YouTube. 0:00:27.560 --> 0:00:30.200 Joining us. Now, boy, do we need an update? Tiffany 0:00:30.200 --> 0:00:32.000 Wilding with this. The last time she was on it 0:00:32.040 --> 0:00:35.919 was chaos. Kembergs. Can't we remember what the excuse was, 0:00:36.000 --> 0:00:39.680 but it was nuts. Let's get some sanity now. Tiffany 0:00:39.720 --> 0:00:45.080 wild with the Pacific Investment Management Company PIMCO on America's economy. 0:00:45.400 --> 0:00:49.199 Can you be co cool, common collected, Tiffany? Or is 0:00:49.240 --> 0:00:50.839 the unknown unknown killing you? 0:00:54.120 --> 0:00:54.400 Well? 0:00:54.520 --> 0:00:56.800 You know, I think for the inflation report that was 0:00:56.840 --> 0:01:00.520 released this morning, you know, the real news was the 0:01:00.560 --> 0:01:03.480 headline report, you know, and the surge and energy prices, 0:01:03.560 --> 0:01:06.240 and that should be no surprise to anyone who has 0:01:06.240 --> 0:01:09.200 filled up their tank with gasoline lately. I think, you know, 0:01:09.240 --> 0:01:12.280 in terms of the impact of the Iran war and 0:01:12.360 --> 0:01:15.120 higher energy costs, you know, I think the you know, 0:01:15.120 --> 0:01:16.959 I think was very obvious. It's going to raise inflation. 0:01:17.040 --> 0:01:20.959 I think the key unknown right now is to what extent. 0:01:21.040 --> 0:01:25.319 It's going to impact you know, consumers purchases, real purchases 0:01:25.360 --> 0:01:27.920 of everything else. If they have higher gasoline prices they 0:01:27.920 --> 0:01:31.080 have to pay. That leaves less discretionary income for for 0:01:31.160 --> 0:01:33.280 all other things, you know. And this was coming in 0:01:33.360 --> 0:01:37.399 a time when labor income was already you know, on 0:01:37.440 --> 0:01:39.759 the soft side. So so real labor income was already 0:01:39.800 --> 0:01:44.640 running around one percent, and this will further stretch, you know, 0:01:44.680 --> 0:01:47.480 the the incomes that people have, you know. So I 0:01:47.480 --> 0:01:50.280 think the effects on the economy from you know, some 0:01:50.320 --> 0:01:52.480 weaker consumption you know, is kind. 0:01:52.360 --> 0:01:53.520 Of yet to be seen. Now. 0:01:53.880 --> 0:01:56.880 The good news is is that people are receiving higher 0:01:57.400 --> 0:02:00.880 tax refunds right now as a result of OB three bills, 0:02:00.880 --> 0:02:03.240 So that's cushioning some of the blow, you know. But 0:02:03.280 --> 0:02:06.480 we'll be watching retail sales data pretty closely moving forward 0:02:06.480 --> 0:02:08.639 to see how how the effects are playing out here. 0:02:09.960 --> 0:02:13.080 So, Tiffany, have you taken your I don't know GDP 0:02:13.280 --> 0:02:15.840 numbers down? Have you raised your inflation forecast or is 0:02:15.840 --> 0:02:17.440 it still too early here? 0:02:19.040 --> 0:02:19.280 Well? 0:02:19.360 --> 0:02:22.560 No, I mean we are certainly seeing higher energy prices, 0:02:22.600 --> 0:02:25.000 so you know, you have to raise your your your 0:02:25.000 --> 0:02:28.639 inflation forecasts. You know, we know even with the you know, 0:02:28.680 --> 0:02:32.840 the ceasefire, you know, some of the decline in you know, 0:02:32.880 --> 0:02:37.040 in the front month oil futures prices. You know, Interestingly, 0:02:37.160 --> 0:02:40.600 the market is not really pricing in a decline versus 0:02:40.600 --> 0:02:43.760 what it had priced before in some of the longer 0:02:43.840 --> 0:02:45.640 dated futures contracts. 0:02:45.800 --> 0:02:47.280 You know, So this is still expected. 0:02:47.400 --> 0:02:49.639 The market is still expecting this to be a relatively 0:02:49.680 --> 0:02:52.760 temporary situation. But the current news, you know, has it 0:02:52.880 --> 0:02:56.040 really impacted kind of the market implied longer term outlook 0:02:56.040 --> 0:02:58.760 for energy, which is still twenty percent above where it was. 0:02:58.800 --> 0:03:00.639 So I would just say, you know, we are going 0:03:00.639 --> 0:03:03.919 to see higher prices. We think inflation accelerates to four 0:03:03.960 --> 0:03:06.880 percent headline inflation the next several months, you know, and 0:03:06.919 --> 0:03:09.639 then hopefully as things dissipate, you know, we'll get some 0:03:09.680 --> 0:03:12.440 relief later this year. But we do think that will 0:03:12.440 --> 0:03:14.560 shave some off of growth as well. So we have 0:03:14.639 --> 0:03:16.240 lowered our GDP forecasts. 0:03:16.280 --> 0:03:18.359 What does it do to yields? Link it into your 0:03:18.440 --> 0:03:23.160 day job, which is helping pimpco fixed income managers survive 0:03:23.280 --> 0:03:25.320 to the end of the quarter they got to get 0:03:25.320 --> 0:03:29.520 to June thirtieth. What does the wilding inflation four percent 0:03:30.280 --> 0:03:32.600 do to yield. 0:03:33.440 --> 0:03:35.920 Yeah, I mean, you know, so I think anybody has 0:03:35.960 --> 0:03:39.560 to do scenario analysis. We always do scenario analysis, but 0:03:39.920 --> 0:03:43.040 of course it's incredibly important now, you know, just given 0:03:43.080 --> 0:03:47.080 the wide range of potential outcomes with Iran. But when 0:03:47.120 --> 0:03:49.760 we think about, you know, our positioning the bond market, 0:03:50.360 --> 0:03:52.800 you know, we still think high quality bonds provide a 0:03:52.840 --> 0:03:55.760 lot of value safe store of account here. And the 0:03:55.800 --> 0:03:58.280 reason is because if this does turn into a more 0:03:58.320 --> 0:04:01.920 prolonged disruption, the CEA fire doesn't hold. You know, we 0:04:02.080 --> 0:04:05.960 really think global recessionary risks could increase there and the 0:04:05.960 --> 0:04:08.760 bond portfolio will will probably do better in that scenario. 0:04:09.200 --> 0:04:11.160 At the same time, if you do get a resolution, 0:04:11.800 --> 0:04:15.760 you get energy prices falling. You know, under our core forecast, 0:04:15.840 --> 0:04:18.560 with energy prices falling, you could see headline inflation moving 0:04:18.560 --> 0:04:21.840 below the fed's two percent target later this year, early 0:04:21.880 --> 0:04:24.440 twenty twenty seven. Really, so that's the other thing that 0:04:24.480 --> 0:04:26.840 we have to keep in mind here, you know, that 0:04:26.960 --> 0:04:29.840 will allow the Fed, we think, to cut interest rates 0:04:29.880 --> 0:04:31.159 back towards neutral stuff. 0:04:31.240 --> 0:04:34.279 You just all this morning, Tiffany, that was almost interesting 0:04:34.320 --> 0:04:37.000 thing I heard. Don't tell Margaret Brennan she was electric 0:04:37.839 --> 0:04:41.159 Lebanon tiffity wilding to get to a sub two percent 0:04:41.240 --> 0:04:45.560 tiffany wilding call correlate that over to a price of 0:04:45.600 --> 0:04:49.080 a barrel oil. Are you saying below seventy or like 0:04:49.160 --> 0:04:52.559 a collapse? No, Michael mcgloone collapse in oil. 0:04:54.040 --> 0:04:54.120 No. 0:04:54.240 --> 0:04:56.359 I mean if if we just look at if we 0:04:56.480 --> 0:04:59.599 just assume what is priced into the energy futures curve 0:04:59.800 --> 0:05:04.839 right now. Energy futures curve is basically suggesting that after 0:05:04.960 --> 0:05:08.120 oil and energy inflation peaks in April, you will see 0:05:08.120 --> 0:05:11.240 declines and energy prices which push the year on your 0:05:11.320 --> 0:05:14.120 rate down below two percent. Now, if we get a 0:05:14.279 --> 0:05:19.560 faster drop in oil prices relative to what's pricing the curve, 0:05:19.600 --> 0:05:23.120 that would happen before you know, that could happen as 0:05:23.200 --> 0:05:25.320 early as next late this year. 0:05:25.480 --> 0:05:27.320 I'm exhausted. Are we working tomorrow? 0:05:27.760 --> 0:05:27.839 No? 0:05:27.920 --> 0:05:29.520 That was the most important. 0:05:29.120 --> 0:05:31.320 Inside I know. Well, I'll tell you what I learned 0:05:31.360 --> 0:05:34.560 from Matt Million yesterday. If you want to see the 0:05:35.080 --> 0:05:37.760 crude curve where the futures are trading, you put in 0:05:37.880 --> 0:05:41.800 cl one Commodities space CT and that gives you the 0:05:41.839 --> 0:05:44.520 futures contract table. Matt Miller told me that I guess 0:05:44.560 --> 0:05:45.279 you what's you drive? 0:05:45.320 --> 0:05:45.840 You this week. 0:05:46.040 --> 0:05:48.200 I don't know, Hope has four wheels. 0:05:48.200 --> 0:05:50.040 Hopefully it has four wheels. That's all I know about. 0:05:50.200 --> 0:05:52.800 Real quick, Tiffany, talk to us about the US consumer here, 0:05:52.839 --> 0:05:55.719 because we found out time and time again you cannot 0:05:55.760 --> 0:05:57.360 count out this US consumer. 0:05:59.000 --> 0:06:00.320 Yeah, I mean the consumer. 0:06:00.400 --> 0:06:03.640 The US consumer has just you know, defied I think, 0:06:03.720 --> 0:06:07.719 all expectations for any slowdown since the pandemic. You know, 0:06:07.760 --> 0:06:10.720 you you do have a very big wealth buffer that 0:06:10.760 --> 0:06:14.520 consumers have have been able to you know, to accumulate 0:06:14.600 --> 0:06:17.360 post pandemic that remains pretty solid. 0:06:17.400 --> 0:06:17.560 You know. 0:06:17.640 --> 0:06:20.080 Now we've all talked about the K shaped economy. There 0:06:20.120 --> 0:06:23.520 are certain differences under the surface here. Lower end consumers 0:06:23.560 --> 0:06:25.719 are not doing that well. They are getting squeezed by 0:06:25.760 --> 0:06:29.000 higher energy prices, you know. But but middle to high 0:06:29.000 --> 0:06:32.359 income consumers they will be able to weather this uh 0:06:32.680 --> 0:06:34.800 energy shock, you know. And I guess the question is, 0:06:34.839 --> 0:06:36.760 you know, they will they will maybe smooth through this 0:06:36.880 --> 0:06:38.840 with through savings and and and wealth. 0:06:39.480 --> 0:06:41.040 You know. So the question is how how well do 0:06:41.120 --> 0:06:41.720 they hold up? 0:06:41.760 --> 0:06:43.919 And if they do, then this is the US economy 0:06:43.960 --> 0:06:46.040 is going to be continue to remain. 0:06:45.800 --> 0:06:50.719 Resilient, Tiffany. So next thing fed sit on its hands. 0:06:50.720 --> 0:06:52.840 I guess is the call for the remainder of this year, 0:06:52.880 --> 0:06:53.520 do you think. 0:06:54.680 --> 0:06:56.800 Yeah, I mean, that's that's basically our call. 0:06:56.880 --> 0:06:57.039 You know. 0:06:57.120 --> 0:07:00.440 We we actually moved out, we delay, We aid our 0:07:00.520 --> 0:07:03.960 expectations for when the Fed cuts interest rates. We do 0:07:04.000 --> 0:07:06.720 think they're probably on a prolonged pause as they see 0:07:07.040 --> 0:07:08.120 how this plays out. 0:07:09.160 --> 0:07:09.359 You know. 0:07:09.640 --> 0:07:13.920 But as I mentioned, you know, they they're the inflationary 0:07:13.960 --> 0:07:17.800 headwinds right now will turn into tailwinds at least from 0:07:17.840 --> 0:07:20.840 the energy side, you know, later this year and into 0:07:20.880 --> 0:07:22.720 next year. So we do think they probably will cut 0:07:22.760 --> 0:07:25.440 a couple more times. I think the market is sort 0:07:25.440 --> 0:07:28.000 of maybe pricing one cut in twenty twenty seven right now. 0:07:28.000 --> 0:07:29.800 We think they probably will get down to their. 0:07:29.680 --> 0:07:34.360 Midpoint three percent of their expectations for the kind of 0:07:34.400 --> 0:07:35.720 neutral rate of policy. 0:07:36.040 --> 0:07:37.080 We do think that'll happen. 0:07:37.120 --> 0:07:40.560 You also have the changeover from wash from Powell Tosh 0:07:40.640 --> 0:07:43.840 coming in. You know, he has you know, on the margin, 0:07:43.920 --> 0:07:46.160 we think a bit more of a dubbish reaction function. 0:07:46.480 --> 0:07:47.800 We think he probably will get the. 0:07:47.720 --> 0:07:50.400 Committee down to that three percent under at least under 0:07:50.400 --> 0:07:51.000 the base case. 0:07:51.200 --> 0:07:55.760 Jaw dropping Tiffany, Well, thank you so much, Stay with us. 0:07:56.040 --> 0:07:59.280 More from Bloomberg Surveillance coming up after this. 0:08:06.520 --> 0:08:10.119 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:08:10.160 --> 0:08:13.320 weekday afternoons from seven to ten am Eastern Listen on 0:08:13.400 --> 0:08:17.080 Applecarplay and Android Auto with the Bloomberg Business app, or 0:08:17.240 --> 0:08:18.720 watch us live on YouTube. 0:08:19.000 --> 0:08:24.760 Cancer Commission he joins Alpha Simplex just fabulous. Trend based work, Katie, 0:08:24.920 --> 0:08:29.320 is the general statement in then unknown massive uncertainty. You 0:08:29.440 --> 0:08:32.160 lead with a dreaded word, hope, how do you do 0:08:32.240 --> 0:08:35.880 a trend based analysis here or do you just step aside? 0:08:37.559 --> 0:08:39.600 Well, I mean, it's interesting you asked that we have 0:08:39.800 --> 0:08:45.600 seen that a lot of the former trends consolidated into 0:08:45.640 --> 0:08:49.520 this move. But honestly, energy was able to offset a 0:08:49.559 --> 0:08:53.720 lot of this deleveraging and the changing in the trend direction. 0:08:54.600 --> 0:08:56.960 But it is interesting this week we're starting to see 0:08:57.040 --> 0:09:00.800 some of the old trends sort of equities doing well again. 0:09:00.960 --> 0:09:04.320 So it has been sort of a difficult pivot for 0:09:04.360 --> 0:09:08.119 the last six weeks, but something that trend has navigated 0:09:08.160 --> 0:09:09.920 reasonably well, I would say. 0:09:10.360 --> 0:09:13.280 And Katie, one of the trends that a neophyte like 0:09:13.320 --> 0:09:17.200 myself could identify this year was a weaker US dollar, 0:09:17.960 --> 0:09:21.400 but that kind of got interrupted with this war in Iran. 0:09:22.240 --> 0:09:24.840 Can the dollar re establish a little bit more of 0:09:24.840 --> 0:09:26.600 a negative trend? Do you think? 0:09:27.800 --> 0:09:31.600 I definitely think it's possible. We saw a big sort 0:09:31.600 --> 0:09:34.920 of reversal in that sort of weak US dollar trend, 0:09:35.840 --> 0:09:38.400 with the exception of some of the em currencies where 0:09:38.440 --> 0:09:42.480 there was some differences. For example, the end was, you know, 0:09:42.559 --> 0:09:46.280 kind of one that still worked very well despite most 0:09:46.280 --> 0:09:47.000 of these moves. 0:09:47.920 --> 0:09:49.120 And so what I think. 0:09:48.960 --> 0:09:52.080 Is happening now is we need some more resolution, and 0:09:52.160 --> 0:09:54.960 right now it's pretty mixed. You don't see very strong 0:09:55.040 --> 0:09:58.680 signals in currencies yet, but it has been tilting back 0:09:58.720 --> 0:10:03.520 towards weaker dollar as escalation has reduced in the markets. 0:10:04.480 --> 0:10:06.679 You know, Katie, I've always joked that, you know, one 0:10:06.679 --> 0:10:08.560 of the roles on Wall Street that I could never 0:10:08.679 --> 0:10:11.440 do was be an oil trader. The volatility is just 0:10:11.640 --> 0:10:14.320 too crazy here. But do you think we're in an 0:10:14.400 --> 0:10:17.640 upward trend here just because we've got this uncertain industry 0:10:17.640 --> 0:10:20.360 of rome moves that maybe the trend is higher for 0:10:20.520 --> 0:10:22.040 longer for global energy. 0:10:23.080 --> 0:10:25.520 So this is a good question because what we have 0:10:25.720 --> 0:10:30.080 seen energy trend signals have been very very strong, almost 0:10:30.120 --> 0:10:34.480 exponential in the month of March, but you have seen 0:10:34.520 --> 0:10:38.120 some of that consolidation with volatility really sort of exploding. 0:10:38.840 --> 0:10:40.840 And then of course the type of reversal that you 0:10:40.880 --> 0:10:45.080 saw earlier this weekend energy was just spectacular. So you 0:10:45.320 --> 0:10:49.280 have seen net on net signals pointing towards long energy, 0:10:49.880 --> 0:10:54.320 but it is a little bit less extreme than before. 0:10:54.760 --> 0:10:57.480 And I think this to me makes sense because honestly, 0:10:57.520 --> 0:11:02.199 we haven't resolved the problem yet, so energy prices should 0:11:02.240 --> 0:11:07.360 stay somewhat elevated, maybe not as hyperbolic as they work before. 0:11:07.640 --> 0:11:09.480 How do you do the how much ittness? When I 0:11:09.520 --> 0:11:11.760 give speeches on this, Katie, I talk about, you know, 0:11:11.840 --> 0:11:14.520 going to make the Wells wilder and Thorpin and all 0:11:14.559 --> 0:11:16.520 of it. So much of this is okay. You have 0:11:16.600 --> 0:11:19.400 a belief, you have a setup, you got a trend, 0:11:19.480 --> 0:11:21.520 like Paul says, you're catching a knife in the dark, 0:11:21.960 --> 0:11:25.040 and then you go position sizing. How much do I 0:11:25.120 --> 0:11:27.440 want to put in? How do you do how much 0:11:27.480 --> 0:11:30.040 it iss? If you're going to get derailed by a 0:11:30.120 --> 0:11:33.160 Secretary of Defense press conference. 0:11:34.160 --> 0:11:36.559 That's a good question because what we see is it's 0:11:36.600 --> 0:11:40.360 all about the numbers. It's really about balancing the measurement 0:11:40.440 --> 0:11:44.000 of price moves over time and averaging those shocks out. 0:11:44.960 --> 0:11:47.560 And so what I would say is, even though we've 0:11:47.559 --> 0:11:51.280 had some pretty difficult schalks like earlier this week, being 0:11:51.280 --> 0:11:55.720 able to be long energies and somewhat dynamic and taking position, 0:11:56.520 --> 0:11:59.600 taking profit in some of those positions as Volatiley expands 0:12:00.880 --> 0:12:05.840 was a really good hedge for many other portfolio strategies 0:12:05.840 --> 0:12:08.040 that were down quite a bit in the last month. 0:12:08.120 --> 0:12:11.400 So I'd say it's perhaps easier than just being long oil. 0:12:11.440 --> 0:12:12.080 That would be hard. 0:12:13.520 --> 0:12:16.160 What is your plan you come in on a Friday morning, 0:12:16.880 --> 0:12:20.640 are you day trading, are you fifteen minute interval trading? 0:12:21.040 --> 0:12:23.200 Or are you saying what's going to happen in September? 0:12:24.480 --> 0:12:27.400 So we're much more thinking over sort of the shorter 0:12:27.640 --> 0:12:31.200 to mid short horizon period, so in weeks to months 0:12:31.240 --> 0:12:34.719 as opposed to minutes to seconds. And I think this 0:12:34.800 --> 0:12:38.760 is important because as we know, in the shorter time horizons, 0:12:38.800 --> 0:12:42.160 there's a lot of noise, So it's really about balancing 0:12:42.200 --> 0:12:45.880 the direction of where oil is going and sort of 0:12:45.920 --> 0:12:48.959 doing that on the weeks to months horizon to kind 0:12:48.960 --> 0:12:52.240 of capture the macro themes using a data driven approach. 0:12:53.160 --> 0:12:57.040 Katie Fixed Income globally. Are there some trends you guys 0:12:57.280 --> 0:12:59.480 can play these days? Where do you see some opportunities? 0:13:00.520 --> 0:13:05.359 Fixed income has been super difficult to trade, but very interesting, 0:13:05.400 --> 0:13:07.680 and I think the interesting part has been that we 0:13:07.840 --> 0:13:11.800 have seen short signals across the board and fixed income 0:13:12.240 --> 0:13:14.520 and that means that you know, fixed income in the 0:13:14.559 --> 0:13:20.280 short term has really reacted on inflation concerns. European fixed 0:13:20.280 --> 0:13:24.440 income in particular, particularly given how you know energy sensitive 0:13:24.480 --> 0:13:28.000 and as energy importers Europe is, so I think this 0:13:28.040 --> 0:13:31.080 could be a very interesting trade if we do see 0:13:31.280 --> 0:13:36.920 continued difficulty with supply and energy and continued energy I 0:13:36.920 --> 0:13:41.040 mean inflation uncertainty. Shorting fixed income and sort of higher 0:13:41.120 --> 0:13:43.920 yields because of inflation is an interesting trade. 0:13:44.000 --> 0:13:46.480 Paul mentioned this earlier off the mic. Let's do it 0:13:46.559 --> 0:13:50.240 on the mic, Katie. Do you hold positions over the weekend? 0:13:51.160 --> 0:13:54.320 Of course the positions are we usually trade in the 0:13:54.360 --> 0:13:56.880 futures marketed, so the positions are held, but then of 0:13:56.920 --> 0:14:00.520 course they don't settle and tell the futures markets open 0:14:00.720 --> 0:14:03.320 again the next week. But you can follow the you know, 0:14:04.200 --> 0:14:08.679 the the values over the weekend periods of time. So 0:14:08.720 --> 0:14:11.240 I think you do see that and that was particularly 0:14:11.280 --> 0:14:14.520 interesting when you're looking at asia hours let's say Tuesday 0:14:14.600 --> 0:14:18.040 this week, for example, where you saw things moving and 0:14:18.080 --> 0:14:20.120 you knew things would move even more the next day. 0:14:20.560 --> 0:14:23.640 You try to, I guess, de risk your portfolio, headge 0:14:23.640 --> 0:14:27.080 your portfolio maybe a little bit more these days than 0:14:27.120 --> 0:14:30.160 you would d our normal trading our times. 0:14:31.480 --> 0:14:34.680 So actually we have seen that across the board. Hedge 0:14:34.680 --> 0:14:39.000 funds as well as CTAs have been deleveraging, and overall 0:14:39.120 --> 0:14:42.000 this is for us, it's a systematic approach. You measure 0:14:42.080 --> 0:14:45.600 more risk, you take risk off, and so it's done 0:14:45.600 --> 0:14:49.080 in sort of a systematized manner. And so when volatility 0:14:49.120 --> 0:14:54.600 expands and signals and trends change and consolidate, you actually 0:14:54.600 --> 0:14:56.560 see sort of a de leveraging. And that's what most 0:14:56.600 --> 0:14:58.960 of the banks have reported as well, is that you know, 0:14:59.120 --> 0:15:01.160 people have been taking money off the table and sort 0:15:01.160 --> 0:15:04.680 of deleveraging in an environment where risk is just much higher. 0:15:04.720 --> 0:15:06.120 And that makes sense. 0:15:05.960 --> 0:15:11.200 Because geopolitical risk increases overall equity market risk historically, and 0:15:11.240 --> 0:15:14.000 so you're seeing an environment where you want to maybe 0:15:14.000 --> 0:15:15.800 be a little you need less on the table to 0:15:16.400 --> 0:15:19.400 participate when things are this volatile. 0:15:19.440 --> 0:15:22.400 Well, said Katie Kominski. Thank you so much, hugely valuable. 0:15:22.440 --> 0:15:29.440 She's doctor Kominski with Alpha Simplex in Boston. Stay with us. 0:15:29.680 --> 0:15:32.920 More from Bloomberg Surveillance coming up after this. 0:15:40.160 --> 0:15:43.760 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:15:43.800 --> 0:15:46.960 weekday afternoons from seven to ten am Eastern Listen on 0:15:47.040 --> 0:15:50.720 Applecarplay and Android Auto with the Bloomberg Business app, or 0:15:50.880 --> 0:15:52.320 watch US Live on YouTube. 0:15:52.680 --> 0:15:55.920 The last time he was on there was a massive impact. 0:15:55.960 --> 0:16:00.160 Andrew Gilbert Reducts is again with Energy Capital Partners today. 0:16:00.160 --> 0:16:02.920 If you were to write for Monday Morning given the 0:16:02.960 --> 0:16:05.280 oil upset, that wasn't hear the last time you were 0:16:05.320 --> 0:16:08.440 in that chair. If you were to write for Monday morning, 0:16:08.440 --> 0:16:09.400 what would you write about? 0:16:10.320 --> 0:16:13.920 So we're at Energy Capital Partners, we're electricity focused and 0:16:14.040 --> 0:16:16.200 fortunately in the US we don't have to burn oil 0:16:16.280 --> 0:16:21.040 for electricity anymore. Natural gas US natural gas is a 0:16:21.120 --> 0:16:24.040 huge advantage we have and that's a big reason why 0:16:24.040 --> 0:16:27.080 electricity prices are some of the lowest in the world. 0:16:28.000 --> 0:16:31.920 What the oil crisis does mean for natural gas is 0:16:31.920 --> 0:16:35.080 perhaps that more energy goes out longer term, right, and 0:16:35.120 --> 0:16:38.120 some of the export supply that many thought was going 0:16:38.160 --> 0:16:40.320 to be sort of overbuilt in the next few years, 0:16:40.720 --> 0:16:42.080 is likely going to be fully. 0:16:42.040 --> 0:16:45.000 You said in the world for energy capital partners with 0:16:45.080 --> 0:16:50.000 your massive global reach, is President Trump basically the president 0:16:50.120 --> 0:16:56.520 for Malaysia because of hydrocarbon challenges, or Indonesia or Hungry. 0:16:56.880 --> 0:17:00.400 It's a huge challenge for those countries and puts them 0:17:00.400 --> 0:17:05.159 at countries that are burning oil for everything and including electricity, 0:17:05.320 --> 0:17:07.119 are going to be a huge competitive disadvantage. I think 0:17:07.119 --> 0:17:09.600 there's no doubt about that. That's why I'm happy we're 0:17:09.720 --> 0:17:13.320 you know, we're focused. We're North America focused where we 0:17:13.359 --> 0:17:14.879 don't have that problem in electricity. 0:17:16.440 --> 0:17:19.280 Andrew, you say in your notes, if done the right way, 0:17:19.600 --> 0:17:24.360 large load like data centers, should lower electricity bills over 0:17:24.359 --> 0:17:26.480 the long term. What do you mean by that, Because 0:17:26.480 --> 0:17:29.159 the concern is I'm paying for it, You're paying for it, 0:17:29.160 --> 0:17:31.560 and maybe it's not the Googles and the Amazons. 0:17:31.080 --> 0:17:31.960 Of the world, of course. 0:17:32.040 --> 0:17:35.919 Yeah, So there has been a short term increase in 0:17:35.960 --> 0:17:39.119 electricity prices that is driven by this, and that was 0:17:39.200 --> 0:17:43.000 really about excess demand kind of being soaked up by 0:17:43.080 --> 0:17:47.040 data centers. But the vast majority of your electricity bill, 0:17:47.080 --> 0:17:49.639 two thirds of it comes from the wires, and so 0:17:50.359 --> 0:17:53.679 when you add incremental load, you've got more megawatt hours 0:17:53.720 --> 0:17:56.920 to spread that cost. And so for utilities that now 0:17:57.000 --> 0:18:01.200 have gigawatt plus data centers to connect and double right 0:18:01.280 --> 0:18:04.000 rate base, they have a much larger customer base to 0:18:04.040 --> 0:18:04.560 spread it over. 0:18:04.680 --> 0:18:07.040 Paul's got the smartest question of the morning so far, 0:18:07.160 --> 0:18:10.600 Trophy taking. Let me add to that. Why doesn't some 0:18:11.080 --> 0:18:15.320 jillionaire Silicon Valley idiot in a white T shirt and 0:18:15.400 --> 0:18:18.040 you know whatever, Why don't they just say we're going 0:18:18.119 --> 0:18:21.520 to build a data center in Cozed Nebraska and everybody 0:18:21.560 --> 0:18:25.119 has free electric bills for ten years. It's like a 0:18:25.240 --> 0:18:31.320 rounding error to somebody living in Atherton, California. 0:18:31.440 --> 0:18:35.639 I think increasingly you're seeing data center announcements come with 0:18:36.000 --> 0:18:40.240 not exactly that, but direct savings and tangible savings for customers. 0:18:40.440 --> 0:18:41.520 I think it's going to have to be part of 0:18:41.520 --> 0:18:43.880 the solution. You want to build a data center, you've 0:18:43.880 --> 0:18:46.240 got to make promises and events to lower Just. 0:18:46.200 --> 0:18:48.280 Put a data center next to Alexis's house. 0:18:50.680 --> 0:18:52.480 Please don't do that. How to move my mic You 0:18:52.520 --> 0:18:54.480 know you catch me off guard sometimes. Tell my mic 0:18:54.560 --> 0:18:55.800 is all the way to my right. 0:18:55.800 --> 0:18:57.800 So Andrew talk to us about renewables. You talk about 0:18:57.880 --> 0:18:59.879 natural gas. We got a lot of that gas in 0:19:00.119 --> 0:19:02.080 the United State. It's not about renewables because we've got 0:19:02.119 --> 0:19:05.720 an administration that is less supportive, we can say, than 0:19:05.760 --> 0:19:08.920 maybe some other administrations. How does renewables fit into this? 0:19:09.680 --> 0:19:13.199 So the cost of new gas turbines has more than 0:19:13.440 --> 0:19:15.720 doubled in a very short amount of time. It's nearly 0:19:15.720 --> 0:19:19.159 tripled in three or four years now. And at that level, 0:19:19.520 --> 0:19:23.480 solar is the cheapest form of electricity. It's intermittent, so 0:19:23.520 --> 0:19:26.480 it doesn't run around the clock. It's not dispatchable, so 0:19:26.520 --> 0:19:29.040 it's not exactly the same product. But it is really 0:19:29.080 --> 0:19:32.280 affordable today, even with tariffs and kind of the protectionist 0:19:32.280 --> 0:19:34.840 policy that's raising prices. It's got to be part of 0:19:34.840 --> 0:19:37.000 the solution. It can also be built a lot more 0:19:37.040 --> 0:19:38.840 quickly than natural gas. 0:19:38.880 --> 0:19:41.400 I kind of feel like the solution to energy demand, 0:19:42.119 --> 0:19:44.800 if we listen to all the piper scillers and the 0:19:44.920 --> 0:19:46.960 data center people, it seems like we're going to need 0:19:47.040 --> 0:19:50.720 everything absolutely, including nuclear. Talk to me about what you 0:19:50.720 --> 0:19:54.720 think is a reasonable nuclear go to market strategy. 0:19:55.240 --> 0:19:58.600 So I mentioned the cost of natural gas, which went 0:19:58.640 --> 0:20:01.040 from about a thousand of kilo lot four years ago 0:20:01.400 --> 0:20:04.720 to over twenty five hundred today nuclear is as well 0:20:04.720 --> 0:20:07.240 over ten thousand as best we know, and we really 0:20:07.320 --> 0:20:10.199 don't know, so it will absolutely be a part of 0:20:10.240 --> 0:20:12.240 the solution. I think it has to be. But it's 0:20:12.320 --> 0:20:15.159 quite expensive and there's a lot of risk involved in that. 0:20:15.960 --> 0:20:20.000 Is there Gougey like it with all your experience like it? 0:20:20.320 --> 0:20:24.080 You know what was it? Symbols D dominion? Sure, dominion? Yeah, 0:20:24.160 --> 0:20:28.080 the big utilities, how do they manage the pressures that 0:20:28.119 --> 0:20:30.760 people face? I mean, forget about Great Britain right here, 0:20:30.760 --> 0:20:33.359 it's terrible. We just did that in the last hour. 0:20:33.480 --> 0:20:37.680 But do the utilities, like do they understand the pressure 0:20:37.760 --> 0:20:38.560 people are under? 0:20:39.640 --> 0:20:42.159 Absolutely? I think they're doing the best they can. I 0:20:42.160 --> 0:20:45.320 think quickly they're figuring out ways to use data centers 0:20:45.359 --> 0:20:48.680 and the opportunity it presents to spread the cost over 0:20:48.800 --> 0:20:52.159 more over the right days, So spread the cost of 0:20:52.200 --> 0:20:54.400 those wires over the new customers. 0:20:54.720 --> 0:20:58.280 Okay, I got one final question. It's critical. N y 0:20:58.400 --> 0:21:00.800 U Stern was the first people to got behind me. 0:21:01.040 --> 0:21:04.760 They're the first people that advertised my act. What was 0:21:04.800 --> 0:21:08.200 it like your first day at NYU Stern. I was 0:21:08.240 --> 0:21:12.359 sort of shocked by what I saw the rigor was Oh, 0:21:13.640 --> 0:21:14.600 is that what it felt like? 0:21:15.240 --> 0:21:17.720 Coming from a town of about five or six thousand 0:21:17.760 --> 0:21:20.800 people in Massachusetts, My first day at NYU was a 0:21:20.800 --> 0:21:21.399