WEBVTT - Macy’s Delays Earnings, Citi Bonuses 0:00:02.400 --> 0:00:09.119 Bloomberg Audio Studios, Podcasts, radio News. You're listening to the 0:00:09.119 --> 0:00:13.320 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:13.320 --> 0:00:16.320 Eastern on applecar Playing and broud Otto with the Bloomberg 0:00:16.360 --> 0:00:19.720 Business app. Listen on demand wherever you get your podcasts, 0:00:19.920 --> 0:00:22.280 or watch us live on YouTube. 0:00:22.960 --> 0:00:24.560 One of the stock stories of the day we've been 0:00:24.560 --> 0:00:30.440 reporting Macy's. They are disclosed that a employee may have 0:00:30.520 --> 0:00:32.360 hit as much as one hundred and fifty four million 0:00:32.400 --> 0:00:34.479 dollars of delivery expenses, so they don't know what's going 0:00:34.520 --> 0:00:37.479 on with their financials. They delayed their earnings release, so 0:00:37.640 --> 0:00:40.519 a lot of issues going on at macy Stocks off 0:00:40.520 --> 0:00:42.560 three and a half three point twenty five percent today 0:00:42.600 --> 0:00:44.479 on the news. Let's check in with the analysts who 0:00:44.520 --> 0:00:48.280 follows this company. Mary Ross Gilbert for Bloomberg Intelligence. He's 0:00:48.440 --> 0:00:51.680 senior equity analyst, Mary. What have you heard from the company? 0:00:51.720 --> 0:00:54.000 What's going on there? Really is an odd story. 0:00:55.960 --> 0:00:58.920 It is an odd story and something kind of wild 0:00:58.920 --> 0:01:03.120 to wake up on a Monday before Thanksgiving and Black Friday. 0:01:03.200 --> 0:01:09.360 But as you know, Macy's reported that one employee had 0:01:09.520 --> 0:01:12.240 hidden one hundred and thirty two to one hundred and 0:01:12.240 --> 0:01:18.039 fifty four million of cumulative costs. But when you look 0:01:18.040 --> 0:01:20.080 at it's over about a three year period, so it's 0:01:20.080 --> 0:01:23.120 about twenty cents a share impact, meaning that they might 0:01:23.200 --> 0:01:26.560 have to restate their earnings by about twenty cents. It's 0:01:26.680 --> 0:01:30.120 not a huge number in that respect, it's huge in 0:01:30.120 --> 0:01:33.320 this sense of well, what happened with the financial controls here. 0:01:34.160 --> 0:01:37.240 On the other hand, I think they can move past this, 0:01:37.760 --> 0:01:41.480 and I think if there were some positive snippets in 0:01:41.520 --> 0:01:43.679 the press release that came out this morning with their 0:01:43.760 --> 0:01:48.120 third quarter preliminary sales results. So they reported that their 0:01:48.320 --> 0:01:52.640 comparable sales on an owned plus license plus marketplace basis 0:01:53.160 --> 0:01:56.280 was down one point three percent for the company, and 0:01:56.360 --> 0:01:59.120 that was a little better than what analysts were looking for. 0:01:59.160 --> 0:02:00.520 They were looking for a while one and a half 0:02:00.520 --> 0:02:03.960 percent decrease. And if you look at the go forward stores, 0:02:04.200 --> 0:02:06.800 so this excludes the one hundred and fifty stores they 0:02:06.760 --> 0:02:09.720 are planning to close, the comp sales on that same 0:02:09.800 --> 0:02:13.680 basis were down just zero point nine percent. And in 0:02:13.720 --> 0:02:17.160 the third quarter, most apparel retailers have been negatively impacted 0:02:17.200 --> 0:02:24.760 by unseasonable warm weather related to in September primarily but 0:02:24.840 --> 0:02:28.440 also in October, and so when you look at the results. 0:02:28.600 --> 0:02:31.800 We're already seeing November Macy's reported, and we've seen this 0:02:31.840 --> 0:02:36.120 with other retailers. Sales are actually performing better than what 0:02:36.240 --> 0:02:38.520 we saw on the third quarter because the weather, of 0:02:38.560 --> 0:02:41.360 course has turned cooler. So we think those are some 0:02:41.480 --> 0:02:43.919 of the snippets of good news, including the luxury side 0:02:43.960 --> 0:02:46.760 of their business. With Bloomingdale's comp sales up three point 0:02:46.840 --> 0:02:50.000 two percent and Bloomergray up three point three percent. So 0:02:50.080 --> 0:02:53.720 I think that kind of outweighs this because that employee's 0:02:53.800 --> 0:02:57.280 now gone. And of course we'll learn more once this 0:02:57.480 --> 0:03:00.640 investigation is complete and they can report and their earnings. 0:03:00.680 --> 0:03:05.200 Call what's happened in terms of the financial controls. 0:03:06.000 --> 0:03:08.600 Talk to me about what we know about inventory for 0:03:08.800 --> 0:03:11.560 Macy's and any discounting. I'm just asking for a friend, 0:03:11.639 --> 0:03:13.239 particularly for Bloomingdale's. 0:03:15.200 --> 0:03:18.320 Yeah, well, of course going into Black Friday, and the 0:03:18.320 --> 0:03:20.920 one thing that we learned from a consumer survey that 0:03:20.960 --> 0:03:26.880 we recently completed, discounts and sales anything like that is 0:03:27.360 --> 0:03:31.680 a primary driver for sales, and the other one is weather. 0:03:32.040 --> 0:03:34.480 That comes second, is a change in weather, and that 0:03:34.520 --> 0:03:40.480 prompts apparel sales. So I think that we're already seeing 0:03:40.560 --> 0:03:43.960 pre Black Friday sales. Macy's is always top of mind. 0:03:44.000 --> 0:03:46.760 They're known for their promotions, known for their sales, so 0:03:46.800 --> 0:03:50.160 they're already out there with their Black Friday sales going on. 0:03:50.280 --> 0:03:53.040 And of course they're going to open early on Friday 0:03:53.560 --> 0:03:57.800 on Black Friday, so we'll actually be there in the stores. 0:03:57.480 --> 0:04:02.040 At that time. That Yeah, absolutely, all right, Mary, thank 0:04:02.080 --> 0:04:04.280 you so much. We appreciate that. Mary Ross Gilbert, senior 0:04:04.280 --> 0:04:07.720 equity analysts covering retail for Bloomberg Intelligence. Again, a wacky 0:04:07.760 --> 0:04:10.360 story or there Macy's. Macy's delays earnings after employee had 0:04:10.400 --> 0:04:13.480 millions and expenses. For me, it would just be you know, 0:04:13.560 --> 0:04:16.760 the the you know, the audit and control function for 0:04:16.880 --> 0:04:19.279 the company. Can I trust it? The other numbers that 0:04:19.320 --> 0:04:21.640 are out there? So that's kind of typically. 0:04:21.680 --> 0:04:23.120 Do you think it takes for that to sort of 0:04:23.160 --> 0:04:24.000 clear its way out? 0:04:25.200 --> 0:04:27.520 Well, I think what's most troubling is that it was 0:04:27.560 --> 0:04:30.320 over a multi year period. Yeah, you know, that's kind 0:04:30.360 --> 0:04:32.520 of goes to the quality of the controls both internally 0:04:33.240 --> 0:04:35.200 of the company and then from their auditor. I'd can 0:04:35.279 --> 0:04:36.920 be looking at my order saying, dude, I mean that's 0:04:36.960 --> 0:04:38.680 what we pay it for to kind of go through 0:04:38.680 --> 0:04:42.160 our statements. Make sure this stuff is, you know, in 0:04:42.240 --> 0:04:43.200 fine shapes, so we'll see. 0:04:43.279 --> 0:04:45.040 I cannot argue with Paul Sweeney on this one. 0:04:45.279 --> 0:04:46.080 Sorry, I can't do it. 0:04:47.600 --> 0:04:51.479 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:04:51.560 --> 0:04:54.600 weekdays at ten am Eastern on Apple car Play and 0:04:54.600 --> 0:04:57.520 Android Auto with the Bloomberg Business app. You can also 0:04:57.600 --> 0:05:00.800 listen live on Amazon Alexa from our flo New York 0:05:00.839 --> 0:05:03.799 station just say Alexa playing Bloomberg eleven. 0:05:05.120 --> 0:05:06.279 Let's get brought our take on the market. 0:05:06.360 --> 0:05:10.400 Kati Kaminski, chief research strategist and portfolio manager at Alpha Simplex, 0:05:10.920 --> 0:05:14.120 joins us. All right, Katie, this record high here, potentially 0:05:14.120 --> 0:05:17.719 another record high on the SMP. How long until we 0:05:17.720 --> 0:05:21.000 start to see re upgrading the S ANDB forecast for 0:05:21.040 --> 0:05:21.880 twenty twenty five. 0:05:23.560 --> 0:05:26.040 I mean this is exciting. I mean it's a positive day. 0:05:26.120 --> 0:05:27.440 I was actually surprised. 0:05:27.480 --> 0:05:30.360 So I think, you know, the last week or two 0:05:30.400 --> 0:05:32.680 we've seen a little bit of retraction, and I think 0:05:33.000 --> 0:05:36.800 in general the market is still parsing through some of 0:05:36.839 --> 0:05:38.920 the aftermath of the elections. 0:05:38.920 --> 0:05:39.880 So I do think that. 0:05:39.960 --> 0:05:42.880 People are forecasting and I'm seeing more and more positive 0:05:42.920 --> 0:05:47.680 sentiment about equities US equities in particular, are going into 0:05:47.760 --> 0:05:48.200 your end. 0:05:49.520 --> 0:05:51.960 So when you woke up the day after the election, 0:05:52.040 --> 0:05:54.039 did you and your team did you sit down and say, 0:05:54.680 --> 0:05:56.680 we got to redo our models here, we got to 0:05:56.760 --> 0:06:00.800 change some inputs. Did the market outlook materially changed for 0:06:00.800 --> 0:06:01.320 you guys. 0:06:02.520 --> 0:06:05.400 No, not at all, actually, And what's strange is that, 0:06:05.480 --> 0:06:10.960 as quantitative traders or trend followers, we systematically follow where 0:06:11.000 --> 0:06:12.040 prices are moving. 0:06:12.560 --> 0:06:13.800 And I think what was the. 0:06:13.720 --> 0:06:17.320 Most interesting to me about the election is the Trump trade. 0:06:17.600 --> 0:06:23.080 So for example, long equities, short fixed income, long dollar 0:06:23.839 --> 0:06:26.720 was actually playing out quite a few weeks before the election, 0:06:26.920 --> 0:06:27.159 and it. 0:06:27.320 --> 0:06:28.960 Just extended after the fact. 0:06:29.000 --> 0:06:31.560 It's not really working today, but it has you know 0:06:31.760 --> 0:06:35.400 pretty much what pre and post. 0:06:34.800 --> 0:06:37.240 Do you think that US exceptionalism, if would just call 0:06:37.279 --> 0:06:39.159 it like that, does that keep working? 0:06:41.320 --> 0:06:41.800 Hopefully? 0:06:41.839 --> 0:06:44.560 So, I mean, obviously since that's something we're seeing in 0:06:44.600 --> 0:06:46.800 the data and we're seeing in momentum signals. 0:06:47.240 --> 0:06:48.880 But it has been an interesting month. 0:06:48.920 --> 0:06:51.280 I mean, look at this month, like the Russell ahead 0:06:51.920 --> 0:06:56.119 US strongly ahead of em and Europe. So that's been 0:06:56.400 --> 0:06:59.360 sort of a US centric theme this month, and you're 0:06:59.360 --> 0:07:03.640 seeing that coupling from the US and other areas. So 0:07:03.839 --> 0:07:06.080 it does seem to have some steam so far. 0:07:06.760 --> 0:07:09.159 And how about the US dollar here, because that was 0:07:09.560 --> 0:07:13.160 a pillar of the Trump trade long US dollar? How 0:07:13.200 --> 0:07:13.840 do you think about that? 0:07:15.160 --> 0:07:17.960 So the US dollar, I mean, that's probably one of 0:07:18.040 --> 0:07:20.360 the bigger movers that I think a lot of investors 0:07:21.160 --> 0:07:24.240 don't realize how incredibly strong that move has been. We've 0:07:24.280 --> 0:07:27.520 had new highs on the dollar for eight weeks. It 0:07:27.600 --> 0:07:31.040 is selling off today for various reasons related to some 0:07:31.120 --> 0:07:33.080 of the you know, we can talk about that later, 0:07:33.200 --> 0:07:36.960 but basically the dollar has been an overall extremely strong 0:07:37.840 --> 0:07:40.640 especially versus the Euro. I think that it's up six 0:07:40.680 --> 0:07:43.960 point five percent versus the Euro and the last you know, 0:07:44.560 --> 0:07:46.480 two months, which is pretty huge. 0:07:46.800 --> 0:07:49.040 Yeah, it was one oh four we were talking about 0:07:49.200 --> 0:07:53.520 on Friday before we saw everything kind of calm down today. Okay, 0:07:53.680 --> 0:07:57.080 there is I keep getting notes though, to not discount Europe, 0:07:57.440 --> 0:07:59.560 in part because the economy could get better over in 0:07:59.560 --> 0:08:01.360 Europe because the ECB is going to have to cut 0:08:01.360 --> 0:08:03.360 more aggressively, and that that's going to be good for 0:08:03.400 --> 0:08:05.800 European equities, and that we can finally I've heard the 0:08:05.800 --> 0:08:08.640 story before, can finally sort of outshine the US a 0:08:08.680 --> 0:08:11.320 little bit. Are you seeing any trends or flows or 0:08:11.360 --> 0:08:14.000 momentum into that kind of trade? 0:08:15.320 --> 0:08:18.080 So I agree with that, but I also think that 0:08:18.200 --> 0:08:19.200 has two sides. 0:08:19.400 --> 0:08:21.760 If the ECB keeps cutting, that's going. 0:08:21.760 --> 0:08:24.800 To put more pressure on the euro, which is not 0:08:24.920 --> 0:08:27.800 going to be helpful. The one story that we will 0:08:27.920 --> 0:08:30.200 be looking for that we haven't seen so far is 0:08:30.280 --> 0:08:33.520 perhaps stronger growth at some point in Europe, So there 0:08:33.559 --> 0:08:37.280 will be potential for that rotation if we can see 0:08:37.280 --> 0:08:40.160 stronger growth. I think the euro trade is still a 0:08:40.240 --> 0:08:43.200 little bit more questionable because of what I said that. 0:08:43.600 --> 0:08:46.200 You know, if ECB continues to cut through next year 0:08:46.280 --> 0:08:48.680 and we see a more steady FED, that's actually going 0:08:48.760 --> 0:08:51.880 to be pro dollar. So I think there's going to 0:08:51.920 --> 0:08:53.840 be it's going to require quite a bit, especially with 0:08:53.880 --> 0:08:54.559 the weaker euro. 0:08:55.440 --> 0:08:58.280 Are you concerned about inflation here at the US economy 0:08:58.360 --> 0:09:00.000 or do you feel like the Fed's got that under control, 0:09:00.200 --> 0:09:02.520 Because I feel like I'm hearing more and more people 0:09:02.559 --> 0:09:05.160 say twenty twenty five that might be a thing in 0:09:05.240 --> 0:09:06.400 terms of researching inflation. 0:09:07.880 --> 0:09:12.400 So we definitely do see cross asset themes and movements 0:09:12.440 --> 0:09:16.200 to show some indication of concern for inflation. I think 0:09:16.280 --> 0:09:21.040 Initially post selection, there was a lot of concern. Today 0:09:21.200 --> 0:09:23.120 is a day where you're seeing some of that abate 0:09:23.400 --> 0:09:26.280 because given some of the you know, the choice of 0:09:26.400 --> 0:09:32.040 US Treasury Secretary by the incoming president suggests that, you know, 0:09:32.080 --> 0:09:35.080 there's a little bit more pro business, and recent commentary 0:09:35.160 --> 0:09:38.760 has also focused on maybe tariffs won't be as aggressive. 0:09:39.160 --> 0:09:43.000 So I think the general digesting of that information is 0:09:43.040 --> 0:09:46.560 about figuring out, you know, how much inflation could we 0:09:46.640 --> 0:09:49.199 actually have as a result of a change in policy. 0:09:49.920 --> 0:09:52.760 There's definitely still a good chance that that's something on 0:09:52.800 --> 0:09:55.640 the longer term, especially with the deficit as high as 0:09:55.640 --> 0:09:55.920 it is. 0:09:56.120 --> 0:09:57.960 This gonna be a really dumb question, but does better 0:09:58.120 --> 0:10:03.240 US economic growth than mean more inflation in that? Yeah? No, 0:10:03.320 --> 0:10:04.679 I mean, I mean just that, like in order to 0:10:04.720 --> 0:10:06.640 small caps and mid caps to really work, in order 0:10:06.640 --> 0:10:08.440 for value to really work, you really need a stronger 0:10:08.520 --> 0:10:10.440 US economy. But then that comes with demand, and then 0:10:10.480 --> 0:10:12.280 you add tariffs into that, and then that leads to 0:10:12.360 --> 0:10:13.040 higher prices. 0:10:14.480 --> 0:10:16.760 Yes, And I think that's part of the narrative that 0:10:16.840 --> 0:10:19.880 people are concerned about, is if we do have that 0:10:20.120 --> 0:10:24.000 coupled with high debt or high deficit, then at some 0:10:24.160 --> 0:10:26.480 point you have to have higher prices, which is kind 0:10:26.480 --> 0:10:30.880 of what happened post COVID, which is why people, especially us, 0:10:30.920 --> 0:10:32.800 we think a lot about what's going to happen to 0:10:32.840 --> 0:10:35.840 the yield curve because that's probably where you're going to 0:10:35.840 --> 0:10:40.240 see those price expectations for inflation baked in. It is 0:10:40.280 --> 0:10:42.720 interesting to see also how much gold has gone up 0:10:42.720 --> 0:10:43.600 this year, because that. 0:10:43.559 --> 0:10:45.080 Tends to be a play on inflation. 0:10:45.600 --> 0:10:48.280 So I think there are definitely enough people out there 0:10:48.400 --> 0:10:52.240 that have significant concerns about inflation longer term and the 0:10:52.280 --> 0:10:53.400 potential impact of that. 0:10:53.800 --> 0:10:56.079 Katie, thank you so much for joining us. Always appreciate 0:10:56.120 --> 0:10:58.760 getting a few minutes of your time. Katie Kaminski, Chief 0:10:58.800 --> 0:11:01.560 Research Strategy is important only a manatured alpha simplex up 0:11:01.600 --> 0:11:03.239 there in Cambridge. 0:11:03.280 --> 0:11:03.720 Massive. 0:11:05.000 --> 0:11:08.880 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:11:08.960 --> 0:11:12.079 weekdays at ten am Eastern on Affocarplay and then Broid 0:11:12.080 --> 0:11:15.200 Auto with the Bloomberg Business app. Listen on demand wherever 0:11:15.240 --> 0:11:19.079 you get your podcasts, or watch us live on YouTube. 0:11:19.960 --> 0:11:23.400 Alex still here alongside Paul Sweenie. This is Bloomberg Intelligence Radio. 0:11:23.480 --> 0:11:25.360 We bring you all the tap news and business economics 0:11:25.400 --> 0:11:27.720 and finance through our lens of our Bloomberg Intelligence folks. 0:11:27.720 --> 0:11:29.880 And because I love energy, we talk a lot about energy. 0:11:29.960 --> 0:11:32.559 We'll just throw that in there too, why not. So 0:11:32.720 --> 0:11:34.839 one company that you may not have heard of is 0:11:34.880 --> 0:11:38.839 called Bloom Energy. They are a fuel cell maker. They 0:11:38.920 --> 0:11:40.599 made a lot of headlines in the last couple of 0:11:40.640 --> 0:11:42.839 weeks and hid an all time high on November twenty 0:11:42.880 --> 0:11:46.280 second after it made a deal with American Electric Power. 0:11:46.320 --> 0:11:47.560 American Electric Power. 0:11:47.400 --> 0:11:49.960 Is going to use their fuel cells to bring electricity 0:11:50.000 --> 0:11:53.360 to say hyperscalers AEP is going to use up to 0:11:53.400 --> 0:11:56.959 one gigawatt of Bloom's fuel cells. Now, something that's quite 0:11:56.960 --> 0:11:58.720 interesting in this is that a lot of companies in 0:11:58.720 --> 0:12:02.000 the energy space do do cool stuff, but syncing up 0:12:02.040 --> 0:12:04.480 with the companies that could actually use their cool stuff 0:12:04.760 --> 0:12:07.440 isn't always easy. In fact, it is quite difficult. So 0:12:07.440 --> 0:12:09.560 we wanted to get an idea of how this came about. 0:12:09.920 --> 0:12:10.240 K R. 0:12:10.320 --> 0:12:13.560 Shweththar is CEO of Bloom Energy and he joins us 0:12:13.559 --> 0:12:15.800 now from Silicon Valley in California. 0:12:15.880 --> 0:12:17.880 K Or how did this deal come about? 0:12:19.640 --> 0:12:22.959 So we have been working with data centers for a 0:12:23.040 --> 0:12:26.680 very long time. Now we have over three hundred megawarts 0:12:26.720 --> 0:12:29.720 in multiple data centers across the country. These are the 0:12:29.800 --> 0:12:32.959 smaller data centers called the edge data centers that are 0:12:32.960 --> 0:12:35.439 located where customers are somewhere in. 0:12:35.400 --> 0:12:38.440 The five to ten megawat range in a particular site. 0:12:38.600 --> 0:12:41.640 So we have transacted close to three hundred megawards, so 0:12:41.679 --> 0:12:44.880 we are a known player to data centers. Now with 0:12:44.960 --> 0:12:48.920 the hyperscalers, what's the difference, it's a much larger data centers. 0:12:49.440 --> 0:12:51.920 These are now particularly. 0:12:51.320 --> 0:12:54.720 More important in terms of growth because of AI and 0:12:54.760 --> 0:12:59.360 the amount of power they need. And currently these hyperscalers, 0:12:59.400 --> 0:13:03.600 as they had growth going very fast, the transmission distribution 0:13:04.200 --> 0:13:07.440 is not able to keep up with providing those hundreds 0:13:07.440 --> 0:13:09.920 of megawats of power right at the site where you 0:13:10.000 --> 0:13:13.000 need it within the time that you need it maybe five. 0:13:12.840 --> 0:13:13.440 To six years. 0:13:13.480 --> 0:13:15.520 They may be able to provide the power, but the 0:13:15.600 --> 0:13:18.559 data center really wants it today, they want it now. 0:13:19.200 --> 0:13:24.040 So we are a perfect solution under those circumstances because 0:13:24.160 --> 0:13:26.840 our Bloom Energy servers can be deployed in a matter 0:13:26.920 --> 0:13:31.600 of months right where the customer is, thereby not worrying 0:13:31.640 --> 0:13:37.160 about the transmission distribution gridlock and providing that reliable, clean, 0:13:37.400 --> 0:13:39.720 always on power to the data center. 0:13:40.200 --> 0:13:42.160 So that's the reason this happened. 0:13:42.640 --> 0:13:48.640 And here what happened is the electricity provider AEP said, 0:13:48.800 --> 0:13:52.920 we don't make nuclear power plants, we don't make gas turbance, 0:13:53.240 --> 0:13:54.440 we don't make fuel cells. 0:13:54.720 --> 0:13:57.320 We're agnostic. We'll buy your systems. 0:13:57.480 --> 0:14:00.720 And similar to us using those other power sources to 0:14:00.760 --> 0:14:03.640 provide power to the customer. Here we can take your 0:14:03.640 --> 0:14:05.880 fuel cells and take the power you produce and give 0:14:05.920 --> 0:14:06.920 it to the data center. 0:14:07.320 --> 0:14:09.120 However, the big advantage here. 0:14:09.080 --> 0:14:12.599 Is we can put these fuel cells right where the 0:14:12.679 --> 0:14:16.199 data center is, thereby avoiding the transmission distribution issue. 0:14:16.400 --> 0:14:18.400 So carry I mean, just you know, I didn't know 0:14:18.480 --> 0:14:20.640 much about your company before, so just reading up here, 0:14:20.720 --> 0:14:24.480 it's like right company, right place, at the right time, 0:14:24.600 --> 0:14:27.840 with the right technology, and boom. Talk to us about 0:14:28.360 --> 0:14:31.560 how good your fuel cells are. How would I know 0:14:31.600 --> 0:14:34.760 whether your fuel cell is better more productive than say 0:14:34.760 --> 0:14:35.400 a competitor. 0:14:37.040 --> 0:14:37.920 That's a great question. 0:14:38.840 --> 0:14:41.720 So let me go away from fuel cells just into 0:14:41.760 --> 0:14:44.080 electricity for the customer. At the end of the day, 0:14:44.520 --> 0:14:48.360 we all provide a service or a product to our 0:14:48.480 --> 0:14:52.680 end customer. That electricity that a data center takes has 0:14:52.720 --> 0:14:55.960 to be clean, it has to be always on and 0:14:56.040 --> 0:14:59.240 reliable twenty four to seven. It needs to have a 0:14:59.360 --> 0:15:03.880 pay su grow characteristic, and it needs to be future proofed. 0:15:03.920 --> 0:15:08.080 In terms of sustainability. Bloom Energy is one of those 0:15:08.120 --> 0:15:11.600 solutions that offer all of the above no rs. 0:15:11.840 --> 0:15:13.960 It's the genius of end So. 0:15:14.040 --> 0:15:17.880 We are the most efficient way of taking natural gas 0:15:18.360 --> 0:15:22.400 and making electricity out of it without combusting. Because we 0:15:22.480 --> 0:15:26.160 don't combust, there is no knock stocks particulates anything going 0:15:26.160 --> 0:15:28.840 into the atmosphere, so there is no local air pollution. 0:15:29.560 --> 0:15:32.800 And if you look at our system they're like lego blocks. 0:15:32.840 --> 0:15:35.040 You put many of these lego blocks, hundreds of them 0:15:35.480 --> 0:15:37.880 to be able to provide power to a data center. 0:15:38.040 --> 0:15:40.400 If any one of them has to be serviced, you 0:15:40.440 --> 0:15:43.160 can just hot swap them in and out. So the 0:15:43.280 --> 0:15:46.240 reliability and the resiliency of our systems are very. 0:15:46.160 --> 0:15:47.200 High and. 0:15:48.800 --> 0:15:52.400 You can pay as you grow data centers. Even though 0:15:52.400 --> 0:15:55.960 they build a big data center, don't start that entire 0:15:56.040 --> 0:15:58.160 data center on day one. They may do one third 0:15:58.200 --> 0:16:00.480 of the load, and then a few months later they 0:16:00.480 --> 0:16:03.240 may add additional load. As they are adding the load, 0:16:03.400 --> 0:16:05.680 they can add more and more of our fuel cells. 0:16:05.960 --> 0:16:08.280 You can't do that with the gas turbine. You can't 0:16:08.320 --> 0:16:10.760 do that to the nuclear power plant. So we bring 0:16:10.840 --> 0:16:14.160 all these attributes in so I would say we are 0:16:14.240 --> 0:16:17.320 ideally suited for this AI data central market. 0:16:17.760 --> 0:16:20.840 Oh, now the financial terms were not disclosed. I appreciate that, 0:16:21.080 --> 0:16:23.120 So I'm going to ask about the money a different way. 0:16:23.440 --> 0:16:26.400 How easy was it or difficult was it to come 0:16:26.440 --> 0:16:29.040 to an agreement on price with AEP. 0:16:30.400 --> 0:16:33.160 In this particular case, it was fairly easy to come 0:16:33.200 --> 0:16:37.600 to that agreement. Nothing is easy, but relatively speaking, And 0:16:37.680 --> 0:16:42.640 here is why. There are three parties involved, actually four, 0:16:43.240 --> 0:16:49.520 the data center, customer, AP, the public at large where. 0:16:49.320 --> 0:16:52.920 This is being installed, and blow energy we. 0:16:52.720 --> 0:16:56.720 Were able to put together When when for all four 0:16:56.840 --> 0:16:58.560 of these stakeholders, why is. 0:16:58.520 --> 0:16:59.720 That number one? 0:16:59.760 --> 0:17:03.920 Let's started the public at large with other kind of 0:17:03.960 --> 0:17:08.520 provisions that were being contemplated. The fear of the rate 0:17:08.600 --> 0:17:11.480 payer was because the hyperscaler is going to get a 0:17:11.520 --> 0:17:15.400 large amount of power from the transmission distribution company, they 0:17:15.440 --> 0:17:20.080 will end up carrying the bill. In this construct, AEP 0:17:20.280 --> 0:17:23.840 made sure none of the costs associated with putting these 0:17:23.880 --> 0:17:27.359 fuel cells and providing that clean power to the data 0:17:27.359 --> 0:17:30.760 center will cost the rate payer any money. So that 0:17:30.880 --> 0:17:33.399 was a win for the ratepayer Number two for the 0:17:33.480 --> 0:17:37.119 data center. For the data center, the price of not 0:17:37.280 --> 0:17:41.160 having power on time is significantly greater than the cost 0:17:41.200 --> 0:17:41.679 of power. 0:17:42.119 --> 0:17:43.399 If you just think about. 0:17:43.160 --> 0:17:46.960 The race in AI and who has to get there competitively. 0:17:47.440 --> 0:17:50.679 So time to power was the key metric, and they 0:17:50.680 --> 0:17:53.560 would pay a slight premium to be able to get that, 0:17:53.920 --> 0:17:58.320 and that penciled out for AP. They were able to 0:17:58.359 --> 0:18:02.880 grow their customer base, give them their growth needs without 0:18:02.920 --> 0:18:06.000 disintermediating them and having them go to some of their 0:18:06.040 --> 0:18:08.919 stake which is what has been happening in places like 0:18:09.000 --> 0:18:12.320 Virginia where data centers are moving away from there because 0:18:12.359 --> 0:18:14.280 there is not enough power. So it was a win 0:18:14.400 --> 0:18:17.639 for AEP in retaining their customer and taking care of 0:18:17.640 --> 0:18:21.439 their customer and making money for Bloom. Whether we are 0:18:21.440 --> 0:18:23.600 in front of the meter or behind the meter, it 0:18:23.680 --> 0:18:26.119 is the same thing whether we sell it to AEP 0:18:26.760 --> 0:18:29.240 who then provides the power for the data center, or 0:18:29.320 --> 0:18:31.440 we sell to the data center and they provide it 0:18:31.960 --> 0:18:34.639 and they take their own power. You know, for us, 0:18:34.680 --> 0:18:37.080 we are agnostic because we get to make the sale 0:18:37.400 --> 0:18:39.240 and we get the gross margins and the product. 0:18:39.480 --> 0:18:41.480 So that's how it was constructed. 0:18:41.000 --> 0:18:42.199 Alex another story. 0:18:42.280 --> 0:18:42.720 I missed. 0:18:43.040 --> 0:18:46.520 Bloom Energy stocks up seventy two per year today, all 0:18:46.560 --> 0:18:50.000 time high today up ninety on a trolley twelve month basis, 0:18:50.040 --> 0:18:52.359 Where were you? Where was the story for me? Like 0:18:52.880 --> 0:18:53.800 fifty dollars ago? 0:18:53.920 --> 0:18:56.359 Yeah, sorry, man, missed that one for you. Yeah, my bad. 0:18:56.640 --> 0:18:58.680 All right, great to see you. Thank you so much 0:18:58.680 --> 0:19:02.879 for the great story. Archer reydar a CEO of Bloom Energy, 0:19:03.000 --> 0:19:05.720 and just sort of the idea that how you pair 0:19:05.800 --> 0:19:08.480 all these things together, whether you're an energy butt provider 0:19:08.520 --> 0:19:11.440 and then electricity provider and then a hyperscaler and getting 0:19:11.480 --> 0:19:13.760 all of that to match up sounds like it could 0:19:13.800 --> 0:19:17.360 be really simple, and sometimes it is, as Kara was saying, 0:19:17.359 --> 0:19:19.000 and sometimes it's really not. 0:19:19.320 --> 0:19:22.080 It doesn't, but it sounds like, again, they have a 0:19:22.119 --> 0:19:25.719 great product for this part of you know, the AI 0:19:26.200 --> 0:19:28.800 energy provision kind of scenario. 0:19:28.960 --> 0:19:31.280 Wow, you said, right time, right place. 0:19:31.119 --> 0:19:34.600 And again in San Jose, California. I mean, just the 0:19:35.040 --> 0:19:37.720 amount of innovation is in all parts of the industry 0:19:37.800 --> 0:19:40.000 in that part of the country is just amazing. 0:19:40.160 --> 0:19:40.440 Yeah. 0:19:40.600 --> 0:19:42.960 Fortunately, my youngest goes to college there, so I'm like, dude, 0:19:43.320 --> 0:19:44.000 get a job. 0:19:44.440 --> 0:19:47.880 You're like, just feel the feel the innovation, Get the innovation. 0:19:49.520 --> 0:19:53.440 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:19:53.520 --> 0:19:56.560 weekdays at ten am Eastern on Apple car Play and 0:19:56.560 --> 0:19:59.760 Android Auto with the Bloomberg Business. You can also listen 0:20:00.160 --> 0:20:03.040 I have on Amazon Alexa from our flagship New York station, 0:20:03.400 --> 0:20:06.440 Just Say Alexa playing Bloomberg eleven thirty. 0:20:07.520 --> 0:20:10.040 Dallas Steele, Paul Swingey. We're live here on a Bloomberg 0:20:10.040 --> 0:20:13.119 Interactive Brooker Studio and are streaming live on YouTube as well. 0:20:13.160 --> 0:20:15.560 So head over to YouTube dot com search Bloomberg Podcast 0:20:15.600 --> 0:20:17.440 and that's where you'll find us. A part of the 0:20:17.480 --> 0:20:20.480 Trump trade was to sell bonds, and the market certainly did. 0:20:20.480 --> 0:20:22.080 We had rached shoot up. We got a little bit 0:20:22.080 --> 0:20:24.720 of a pullback today, as Charlie was pointing out, But 0:20:25.440 --> 0:20:27.520 see what's happening in the world of fixing. Come today 0:20:27.560 --> 0:20:29.199 to do that. We check in with r J. Gallows, 0:20:29.200 --> 0:20:32.360 senior portfolio manager over the fixed income group at federatedt Hermes. 0:20:33.000 --> 0:20:37.080 They're in the great city of Pittsburgh, PA. RJ. When 0:20:37.080 --> 0:20:40.120 you and your team woke up the day after election Day, 0:20:40.200 --> 0:20:42.400 you sat down, you got to your next strategy meeting 0:20:42.400 --> 0:20:44.800 with your fixed income folks. Did you guys, change your 0:20:44.840 --> 0:20:47.120 outlook at all, or maybe how you approach the market. 0:20:49.400 --> 0:20:50.600 Yeah, we did. 0:20:51.880 --> 0:20:53.879 I know, plenty of people didn't want to bet on 0:20:53.920 --> 0:20:56.359 the election, and I would put us in that camp. 0:20:56.359 --> 0:20:59.160 I would say that the sharp increase in yields from 0:20:59.240 --> 0:21:03.000 mid September all the way up pretty much to election day, 0:21:03.800 --> 0:21:07.080 in part reflected that the betting markets had moved sharply 0:21:07.560 --> 0:21:10.760 in Trump's favor, and so the market was advancing to 0:21:10.920 --> 0:21:13.160 start pricing in a Trump trade even before the election 0:21:13.240 --> 0:21:16.800 outcome was known. We you know, we were a little 0:21:16.800 --> 0:21:20.680 cautious on duration during that period. You know, probably booked 0:21:20.680 --> 0:21:23.480 a few basis points of excess returners, was all. We 0:21:23.480 --> 0:21:25.840 didn't make a big bet a little bit for the 0:21:25.880 --> 0:21:30.040 actual election itself. The you know, the polls were closed, 0:21:30.080 --> 0:21:32.680 the betting markets weren't. As it turned out, the betting 0:21:32.720 --> 0:21:36.639 markets were much more accurate. And then following the election, 0:21:36.760 --> 0:21:39.880 we also got a little short duration, thinking that we 0:21:39.920 --> 0:21:43.480 would maybe test four fifty on the tenure, and that's 0:21:43.520 --> 0:21:46.160 exactly what happened. But as we looked this morning, we're 0:21:46.160 --> 0:21:47.680 back to four thirty pretty much. 0:21:47.960 --> 0:21:50.480 So yeah, so what does that mean then for the 0:21:50.520 --> 0:21:52.879 long end? Is it path of Lee's resistance lower, do 0:21:52.880 --> 0:21:53.600 we stay sticky? 0:21:55.800 --> 0:21:58.280 I think that this is sort of a tactical replacement. 0:21:58.480 --> 0:22:00.320 I think that the moves of four to fifty was 0:22:00.359 --> 0:22:03.440 pricing in as much as one could the idea of 0:22:03.480 --> 0:22:08.240 the Trump trade, a broader fiscal deficit, stimulative suite of policies, 0:22:08.320 --> 0:22:11.800 especially deregulation, and the prospect of tariffs and trade war 0:22:11.840 --> 0:22:14.919 which could boost inflation in the short run. That's what 0:22:15.040 --> 0:22:18.480 drove rates in part to where they were. I think 0:22:18.520 --> 0:22:21.000 the fact that we've had a retlacement that the market 0:22:21.040 --> 0:22:23.640 was sort of consolidating as we wait to see how 0:22:23.720 --> 0:22:28.920 all these policy plans actually get implemented, how successful would 0:22:28.920 --> 0:22:32.440 the Trump administration be in implementing them, How open to 0:22:32.560 --> 0:22:34.480 negotiation are they on tariffs. 0:22:34.960 --> 0:22:37.080 The fact that the market's responding with a bit of. 0:22:37.000 --> 0:22:40.119 A rally today yields sharply lower about almost ten eleven 0:22:40.160 --> 0:22:42.959 basis points in the tenure. It seems that the market 0:22:43.040 --> 0:22:45.560 views best int as a pretty conventional pick. I think 0:22:45.600 --> 0:22:48.159 I would agree with that. I wouldn't say it eliminates 0:22:48.200 --> 0:22:51.560 the Trump trade. It's just the next iteration of the 0:22:51.640 --> 0:22:54.800 unfolding of the actual Trump outcome, which is going to 0:22:54.800 --> 0:22:55.800 take time to see. 0:22:56.600 --> 0:22:59.720 So let's talk about this US economy here, man, how 0:22:59.720 --> 0:23:01.639 do you think that'll be reflected in the rates market. 0:23:01.680 --> 0:23:03.879 It seems some of the economic Now this is going 0:23:03.920 --> 0:23:06.680 to be a busy week for economic data, inflation data, 0:23:06.760 --> 0:23:10.879 jobs data. In terms of claims your thought on the 0:23:10.920 --> 0:23:13.520 economy and how that might be affecting this federal reserve. 0:23:15.359 --> 0:23:19.760 The economy has held up remarkably well. The once expected 0:23:19.840 --> 0:23:23.959 recession a year ago never showed up. The economy had 0:23:24.000 --> 0:23:27.439 a lot of tailwinds. Credit markets have done well. 0:23:27.880 --> 0:23:28.040 You know. 0:23:28.200 --> 0:23:31.280 The recipe for our performance and fixed income has been 0:23:31.320 --> 0:23:34.240 to own lower quality credit risk over higher quality credit risk. 0:23:34.840 --> 0:23:37.560 I'm glad to say broad fixed income indicies of all 0:23:37.560 --> 0:23:42.200 sorts have generated positive returns. The economic outlook from here 0:23:42.359 --> 0:23:43.840 is still relatively supportive. 0:23:44.440 --> 0:23:45.480 I worry a little. 0:23:45.280 --> 0:23:49.000 Bit that the overall suite of Trump policies that I've 0:23:49.000 --> 0:23:53.359 described previously might actually end up being stimulative in the 0:23:53.400 --> 0:23:57.360 short run, but at a meaningful cost in the longer run, 0:23:57.400 --> 0:24:00.359 in the sense that you'll have larger deficits, more debt, 0:24:01.160 --> 0:24:03.520 and the bond market might be left to be the 0:24:03.560 --> 0:24:07.520 source of discipline in terms of reacting to that outcome. 0:24:08.000 --> 0:24:12.160 With higher yields as we go into further into twenty 0:24:12.200 --> 0:24:14.679 twenty five, but a lot remains to be seen. We 0:24:14.760 --> 0:24:17.639 have to see how serious are is the Trump administration 0:24:17.720 --> 0:24:19.119 about the broader tear of threat? 0:24:19.440 --> 0:24:20.800 Is it in fact a negotiation. 0:24:21.760 --> 0:24:24.960 I do think that the Feds the lesser expectations for 0:24:25.000 --> 0:24:28.640 FED easing are in fact rational as the fiscal policy 0:24:28.680 --> 0:24:31.439 expansion is pushing in the other direction in terms of 0:24:31.440 --> 0:24:33.080 monetary policy expectations. 0:24:33.680 --> 0:24:37.439 So fiscal policy chain expand and the FED gets looser. 0:24:38.760 --> 0:24:41.600 No, no, no, the Fed gets less loose those but 0:24:41.640 --> 0:24:45.320 they're still loose. You look at so for futures, for example, 0:24:45.640 --> 0:24:48.919 they gap sharply higher and implied rate in terms of 0:24:48.960 --> 0:24:50.399 the terminal rate in this trough. 0:24:51.160 --> 0:24:53.800 Upon the election outcome, Really. 0:24:53.600 --> 0:24:56.000 As the market was moving to price in the Trump trade, 0:24:56.200 --> 0:25:00.680 less FED easing was expected. That is very rational monetary 0:25:00.680 --> 0:25:04.520 stimulus as the fiscal side opens up more with bigger deficits. 0:25:04.840 --> 0:25:07.040 The best performance by far and fixed to come this 0:25:07.119 --> 0:25:09.879 year RJ has been high yield and leverage loans in 0:25:09.920 --> 0:25:12.760 the US, So I guess the market the market's comfortable 0:25:12.760 --> 0:25:13.359 with risk. 0:25:13.440 --> 0:25:14.080 I guess. 0:25:15.440 --> 0:25:15.600 Well. 0:25:15.640 --> 0:25:17.919 I think once it became clear that the economy had 0:25:17.960 --> 0:25:22.879 significant tailwinds and corporate profits have held up relatively well. 0:25:23.200 --> 0:25:25.240 It's been sort of risk on in terms of where 0:25:25.280 --> 0:25:27.439 you put your capital up and down the credit quality 0:25:27.480 --> 0:25:31.840 spectrum and spreads have tightened, and you've generated very very 0:25:31.880 --> 0:25:36.280 favorable returns. To be frank in our multisector, you know, 0:25:36.680 --> 0:25:39.240 a strategy here at Federated we've been a little more 0:25:39.280 --> 0:25:41.560 cautious thinking that spreads had gotten too tight. 0:25:42.359 --> 0:25:43.960 As a result, we've been a little underweight. 0:25:44.760 --> 0:25:46.520 Fortunately, we've been able to make it up a little 0:25:46.520 --> 0:25:49.600 bit more on curve positioning. Theyll curve is steep and sharply, 0:25:50.000 --> 0:25:52.399 and a number of our strategies taking an active position 0:25:52.440 --> 0:25:55.240 to benefit from that has really worked very well. We've 0:25:55.240 --> 0:25:58.760 also been overweight mortgages, which have generated incremental outperformance. Not 0:25:58.800 --> 0:26:01.240 as much as how you corporate, but there's a lot 0:26:01.280 --> 0:26:03.520 of eras in the quiver of a fixed income manager 0:26:03.520 --> 0:26:05.399 and we've been shooting some of them in the right direction. 0:26:05.760 --> 0:26:07.919 The high yield one has been a little tough and 0:26:07.960 --> 0:26:10.880 the rally has outpaced us. We're still a little cautious 0:26:10.880 --> 0:26:13.479 that that might actually crack as we headed in next year, 0:26:13.560 --> 0:26:16.639 especially if rates start to rise in a sort of 0:26:16.640 --> 0:26:19.760 Bond benjel Ante theme around the Trump administration. 0:26:19.960 --> 0:26:22.320 All right, our Jay, super appreciate it. Have a good week. 0:26:22.440 --> 0:26:22.600 R J. 0:26:22.720 --> 0:26:26.200 Gallows, Senior portfolio Manager, Fixed Income at Federated Hermes. 0:26:27.800 --> 0:26:31.680 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:26:31.760 --> 0:26:35.280 weekdays at ten am Eastern on applecar Play and Android 0:26:35.320 --> 0:26:38.480 Otto with the Bloomberg Business. You can also listen live 0:26:38.560 --> 0:26:41.760 on Amazon Alexa from our flagship New York station Just 0:26:41.800 --> 0:26:44.440 Say Alexa playing Bloomberg eleven thirty. 0:26:45.720 --> 0:26:47.800 We have a great story out in the Bloomberg terminal. 0:26:48.000 --> 0:26:50.880 It talks about their new head of Wealth, Andy Sigg, 0:26:51.200 --> 0:26:54.960 and how the's revamping the wealth business and how that's going. 0:26:55.080 --> 0:26:56.879 Basically at the end of the day, joining us now 0:26:56.880 --> 0:27:00.320 from more Catherine Doherty, Bloomberg Finance reporter, joining ours on 0:27:00.520 --> 0:27:01.120 that story. 0:27:01.280 --> 0:27:03.040 So how is it going? 0:27:03.320 --> 0:27:06.000 So the story kind of goes in different directions on 0:27:06.040 --> 0:27:09.960 that exact answer, right. I mean, Andy is one year 0:27:10.160 --> 0:27:14.280 into his new role, and he came into it with 0:27:14.560 --> 0:27:19.720 a lot of difficulties, and the basic infrastructure that city 0:27:19.880 --> 0:27:23.600 was was working with in their wealth division was something 0:27:23.680 --> 0:27:29.159 that had been lagging peers. It was way behind in 0:27:29.280 --> 0:27:34.239 terms of speed execution and really that was something that 0:27:34.640 --> 0:27:38.320 Andy had focused on right when he came in, and 0:27:38.760 --> 0:27:42.239 upgrading the technology was one thing, then bringing talent was 0:27:42.560 --> 0:27:46.040 kind of the second pillar to improving the wealth division. 0:27:46.840 --> 0:27:50.720 And keeping talent is the hardest part about building a 0:27:50.720 --> 0:27:54.040 wealth business across Wall Street because you're it's a very 0:27:54.080 --> 0:27:58.560 competitive business. The pay is oftentimes used as a way 0:27:58.600 --> 0:28:03.800 to lure experience and advisors to competitors, and so not 0:28:03.840 --> 0:28:06.840 only are you trying to focus on keeping that talent, 0:28:07.080 --> 0:28:09.880 the talent is tied to the assets that they're managing 0:28:09.920 --> 0:28:13.640 for their clients. So anytime you lose some big advisors 0:28:14.040 --> 0:28:17.760 with millions or even billions in assets, that's going to 0:28:17.800 --> 0:28:19.640 affect your business moving forward. 0:28:19.920 --> 0:28:22.800 So Andy had a very big. 0:28:24.080 --> 0:28:26.119 Agenda in front of him in terms of having to 0:28:26.160 --> 0:28:28.440 clean up, and not just clean up, but then improve 0:28:29.520 --> 0:28:32.639 City's wealth business so that it could truly compete with 0:28:33.000 --> 0:28:34.760 the big peers on Wall Street. 0:28:34.840 --> 0:28:37.879 Yeah, because like when I think of Morgan Stanley, I 0:28:37.880 --> 0:28:40.320 think of wealth management I use, and that's different. When 0:28:40.320 --> 0:28:41.800 I grew up in the business, I thought about them 0:28:41.800 --> 0:28:43.440 as sales and trading and investment banking. 0:28:44.000 --> 0:28:44.800 City I don't. 0:28:44.640 --> 0:28:48.400 Necessarily think of wealth as part as a kind of 0:28:48.440 --> 0:28:50.560 a growth driver for them. But I know in their 0:28:50.600 --> 0:28:53.880 private bank, which generates two point three billion dollars in revenue, 0:28:54.280 --> 0:28:57.840 it is high touch service for the wealthiest clients, including 0:28:57.920 --> 0:29:01.640 a quarter of the world's billionaire minimum net worth twenty 0:29:01.680 --> 0:29:04.760 five million dollars. So is this a situation for City 0:29:04.800 --> 0:29:06.560 that Jane Fraser has to just put a flag in 0:29:06.600 --> 0:29:09.760 a ground sake? This is a core business for City 0:29:09.800 --> 0:29:11.160 and we will invest accordingly. 0:29:11.600 --> 0:29:14.480 Private bank is definitely one of their money makers. You 0:29:14.480 --> 0:29:17.800 can see that in the numbers. But also if you 0:29:17.920 --> 0:29:21.640 think two tiers down, you have City Gold and this 0:29:21.760 --> 0:29:25.160 is clients with average monthly balances of at least two 0:29:25.280 --> 0:29:29.000 hundred thousand. So it's definitely not at the private bank tier. 0:29:29.520 --> 0:29:32.280 The private bank tier. Why they're trying to keep that 0:29:32.720 --> 0:29:36.600 part of the wealth business up is because that's where 0:29:36.640 --> 0:29:40.080 the biggest assets are. That's where the revenue really gets generated. 0:29:40.160 --> 0:29:43.960 When you have the wealthiest and it's not just Americans, 0:29:44.360 --> 0:29:48.800 it's oftentimes billionaires in Asia. They're really focused on growing 0:29:48.840 --> 0:29:52.000 their business outside of the US, which is different from 0:29:52.000 --> 0:29:55.000 some of the other big Wall Street banks that are 0:29:55.080 --> 0:29:58.840 more US focused in terms of building up their own 0:29:58.920 --> 0:30:03.640 private bank assets and so City, their private bank, I 0:30:03.680 --> 0:30:06.040 would say, was their strong suit and continues to be 0:30:06.080 --> 0:30:08.600 their strong suit, but it doesn't mean that that's going 0:30:08.680 --> 0:30:11.240 to stay that way. So they really have to remain 0:30:11.320 --> 0:30:15.920 competitive keep their advisors that are catering to the wealthiest individuals, 0:30:15.960 --> 0:30:17.959 not just in the US, but across the globe. 0:30:18.000 --> 0:30:20.960 Did they lose advisors because they were posed or because 0:30:20.960 --> 0:30:22.800 they let them go because they were revamping it, and. 0:30:23.440 --> 0:30:27.360 So it's a combination. Just last week we reported that 0:30:27.720 --> 0:30:32.360 two of City's former private bank advisors defected to go 0:30:32.400 --> 0:30:35.680 to Bank of America actually in their private bank, which 0:30:35.680 --> 0:30:38.160 is interesting because that's where Andy sig had come. He 0:30:38.200 --> 0:30:40.480 worked in the Meryl division, but still it's under the 0:30:40.480 --> 0:30:44.680 Bank of America umbrella. And those two advisors they brought 0:30:45.360 --> 0:30:48.240 seven billion of assets that they managed. So that was 0:30:48.800 --> 0:30:52.200 a big kick to City. And so when you see that, 0:30:52.280 --> 0:30:55.600 but it's not i would say unique just to City. 0:30:56.360 --> 0:30:59.040 There's stories like that all the time of some of 0:30:59.080 --> 0:31:02.800 these really big, big advisors bringing their team to a 0:31:02.960 --> 0:31:07.680 competitor and oftentimes they're just looking for uh, it's it's opportunity, 0:31:08.040 --> 0:31:11.000 and most of the time that opportunity is translated and 0:31:11.080 --> 0:31:12.680 in pay and in compensation. 0:31:12.880 --> 0:31:15.480 Another risk to the talent is something that Alex and 0:31:15.520 --> 0:31:18.760 I work with Commonwealth people, those platforms that are non 0:31:18.880 --> 0:31:22.360 wire house investment banks. They say, hey, why are you 0:31:22.440 --> 0:31:24.480 working for Merrill Lynch or think you know, we have 0:31:24.520 --> 0:31:27.080 to sell their progress. Go on your own. We'll support 0:31:27.120 --> 0:31:29.040 you with all the technology, all the back office stuff, 0:31:29.120 --> 0:31:31.080 and you go run your business like you want to 0:31:31.160 --> 0:31:34.320 run your business. And that is also another risk to 0:31:34.760 --> 0:31:37.520 you know, the you know all these big wirehouses. So great, 0:31:37.520 --> 0:31:41.200 great story. Not surprisingly it's the second most read story 0:31:41.200 --> 0:31:45.640 in the entire Bloomberg terminalism. You talk about our terminal 0:31:45.720 --> 0:31:48.280 users and their businesses in their futures. They read it. 0:31:48.440 --> 0:31:53.760 Oh yeah, you're listening to the Bloomberg Intelligence Podcast. Catch 0:31:53.840 --> 0:31:57.200 us live weekdays at ten am Eastern on applecar Play 0:31:57.240 --> 0:32:00.680 and Android Auto with the Bloomberg Business and also listen 0:32:00.800 --> 0:32:03.840 live on Amazon Alexa from our flagship New York station, 0:32:04.280 --> 0:32:07.040 Just say Alexa playing Bloomberg eleven thirty. 0:32:08.120 --> 0:32:10.720 Happy Monday, everybody and Alexia alongside Paulus. We need this 0:32:10.760 --> 0:32:13.640 a Bloomberg Intelligence Radio. We are broadcasting to live from 0:32:13.640 --> 0:32:16.680 Interactive Brooker Studio right here in Midtown Manhattan. You can 0:32:16.680 --> 0:32:19.920 also check us out on YouTube as well. We also 0:32:20.000 --> 0:32:22.560 at this round this time every Monday, we tap our 0:32:22.600 --> 0:32:29.600 wonderful Bloomberg bn EF folks. They do amazing research on commodities, power, transport, industry, buildings, 0:32:29.680 --> 0:32:33.480 AG sectors, all in the terms of helping businesses and 0:32:33.600 --> 0:32:38.680 finances transition to green energy to the energy transition. That 0:32:38.760 --> 0:32:41.160 cover great stuff for US and Davies is a Bloomberg 0:32:41.160 --> 0:32:44.200 b andn EF's head of renewable fuels and she joins 0:32:44.280 --> 0:32:46.440 US now and has worn many hats also over at 0:32:46.480 --> 0:32:49.800 b and EF over time. And what kind of renewable 0:32:49.800 --> 0:32:52.760 fuel projects are there, Let's just say in the US, 0:32:52.880 --> 0:32:54.320 and let's at the stage because then we want to 0:32:54.320 --> 0:32:56.040 know what's going to look like four years from now. 0:32:56.400 --> 0:32:58.840 Sure, so there's a good number of projects in the 0:32:58.920 --> 0:33:02.120 US and needs to be here, and there's a wide range. 0:33:02.160 --> 0:33:03.960 The US is the biggest market at the moment, so 0:33:04.040 --> 0:33:06.520 a lot of the projects are based here, a lot 0:33:06.520 --> 0:33:08.560 of renewable fields. When we talk about reneable fuels, we're 0:33:08.560 --> 0:33:12.240 really talking about basically biofuels at the moment made from 0:33:12.320 --> 0:33:15.560 oils like soybean oil or even use cooking oil like 0:33:15.600 --> 0:33:18.640 the excess grease from your Fryer. The key here is 0:33:18.640 --> 0:33:22.600 that unlike ethanol or biodiesel or biofuels you usually think about, 0:33:23.000 --> 0:33:25.400 renewable fuels are a special term for ones that are 0:33:25.480 --> 0:33:28.520 drop in ready, which means they produce a diesel molecule 0:33:28.600 --> 0:33:31.040 or a jet fuel molecule that's basically the same as 0:33:31.160 --> 0:33:33.560 fossil dieseler jet fuel, So you could just blend it 0:33:33.600 --> 0:33:36.280 one for one into your dieseler jet fuel pool. There's 0:33:36.280 --> 0:33:39.640 no blending limit. It can just go in however much 0:33:39.640 --> 0:33:41.800 you have, so it's really cool in that regard. A 0:33:41.880 --> 0:33:44.800 lot of the projects in the US are based, especially 0:33:44.840 --> 0:33:47.080 out of California. You could take an old oil refinery 0:33:47.400 --> 0:33:51.320 and convert that to produce a biooil like a biofeedstock 0:33:51.360 --> 0:33:54.120 instead of a crude feedstock, so that's really common. There's 0:33:54.120 --> 0:33:56.920 also a lot of projects being developed to use other feedstocks, 0:33:56.960 --> 0:34:00.400 things like corn ethanol, because if you think about passenger 0:34:00.440 --> 0:34:03.440 vehicle fleet going electric, you're going to have less demand 0:34:03.520 --> 0:34:06.080 for gasoline or ethanol, so this could be another use 0:34:06.120 --> 0:34:08.240 for that ethanol in the world today. 0:34:08.640 --> 0:34:10.799 Got to ask the question everybody wants to ask, how 0:34:10.800 --> 0:34:14.720 will the Trump administration impact renewable fuel business? 0:34:15.080 --> 0:34:18.279 That is the million dollar question. Probably for every clean 0:34:18.400 --> 0:34:22.200 energy sector. I'd say that renewable fuels, compared to a 0:34:22.200 --> 0:34:24.799 lot of the other sectors of clean energy, might be 0:34:24.800 --> 0:34:28.480 a bit better insulated than most because this is a 0:34:28.480 --> 0:34:31.879 sector where it really promotes the agriculture industry by using 0:34:32.000 --> 0:34:34.960 biofuels as a new demand source. It also is a 0:34:35.000 --> 0:34:36.799 way for the oil industry to get a second life 0:34:36.800 --> 0:34:39.160 because they can't take this old refinery and convert it 0:34:39.160 --> 0:34:42.200 into something new. So in that regard, I don't think 0:34:42.200 --> 0:34:44.839 it's going to be completely in the crosshairs. There are ways, though, 0:34:44.840 --> 0:34:46.960 that the Trump administration might have a big impact on 0:34:47.000 --> 0:34:48.560 this sector. One of the big ones is if he 0:34:48.640 --> 0:34:51.520 puts a tariff on used cooking oil from China or 0:34:51.520 --> 0:34:51.879 some of the. 0:34:51.800 --> 0:34:53.880 Feet support use cooking oil from China. 0:34:53.960 --> 0:34:54.239 We do. 0:34:54.400 --> 0:34:56.160 China produces a lot of used cooking oil, a lot 0:34:56.160 --> 0:34:59.759 of fried food. They export the cooking oil to California, 0:34:59.760 --> 0:35:02.080 which they can then blend into these refineries. Use cooking 0:35:02.120 --> 0:35:05.760 oil is a really popular feedstock for renewable fuels because 0:35:05.800 --> 0:35:08.160 it has a low carbon intensity. Otherwise it's just wasted 0:35:08.520 --> 0:35:10.759 right you throw it out, it has to be collected. 0:35:12.719 --> 0:35:15.040 It was collected into dumped in probably a dump. 0:35:15.680 --> 0:35:16.759 But so we don't have. 0:35:16.840 --> 0:35:18.920 Enough fuse cooking oil here in the US as supplement 0:35:19.800 --> 0:35:22.320 if everything, we. 0:35:22.239 --> 0:35:24.400 Have a lot, but if you think about replacing you know, 0:35:24.440 --> 0:35:26.480 the diesel or the jet fuel pool, you can always 0:35:26.560 --> 0:35:26.879 use more. 0:35:27.000 --> 0:35:27.520 I see. 0:35:27.920 --> 0:35:29.959 So to that point, what is the price spread between 0:35:29.960 --> 0:35:32.360 renewable fuels and traditional fuels right now? 0:35:32.600 --> 0:35:37.360 TI renewable fuels, their cheapest are probably two to four times, 0:35:37.360 --> 0:35:39.760 which is a big range, but cheaper than more expensive 0:35:39.840 --> 0:35:42.920 sorry than fossil like jet fuel. And if you talk 0:35:42.960 --> 0:35:45.400 about some of the novel technologies, So one of the 0:35:45.400 --> 0:35:48.880 ways to make these renewable fuels is to take carbon 0:35:48.920 --> 0:35:51.440 dioxide and green hydrogen, which is great because then you're 0:35:51.480 --> 0:35:54.200 not using any biofeedstock that could be up to like 0:35:54.280 --> 0:35:56.560 ten times as expensive as jet fuel. These are pricey 0:35:56.560 --> 0:35:58.160 fuels and they're probably not going to get too much 0:35:58.200 --> 0:35:59.880 cheaper because a lot of it is just the technology. 0:36:00.680 --> 0:36:04.160 So but if as an airline am I'm mandated to 0:36:04.239 --> 0:36:06.799 use a certain percentage of clean fuel. 0:36:06.640 --> 0:36:09.480 Depends where you are in Europe starting next year, yes 0:36:09.800 --> 0:36:12.279 you are mandated to blend it in in the US, 0:36:12.320 --> 0:36:14.960 we don't have mandates yet. The biggest is we're doing 0:36:15.000 --> 0:36:17.520 a lot of carrot incentives. So the Inflation Reduction Act 0:36:17.600 --> 0:36:21.720 has a tax credit for producing renewable sustainable aviation fuel 0:36:22.000 --> 0:36:24.120 that would give a discount of about a dollar dollar 0:36:24.200 --> 0:36:26.799 twenty five to these producers. It's not enough to cover 0:36:26.840 --> 0:36:29.120 that bridge that cost. It could bring it down closer. 0:36:29.200 --> 0:36:30.840 And then if that goes away, then it makes it 0:36:30.840 --> 0:36:34.800 even worse. So what's the best way to lower that gap? 0:36:34.960 --> 0:36:38.759 Is it we need better technology, we need scalable technology, 0:36:38.880 --> 0:36:39.840 or more sourcing. 0:36:40.920 --> 0:36:42.719 I don't think technology is going to come down too 0:36:42.800 --> 0:36:44.680 much in cost because a lot of the cost technology 0:36:44.719 --> 0:36:46.400 is a big component, but the feedstock is a big 0:36:46.440 --> 0:36:50.719 component too, and it's hard China exactly, so that could 0:36:50.760 --> 0:36:53.279 make it worse. A lot of it is probably going 0:36:53.320 --> 0:36:56.440 to be a bit mix of mandates and subsidies. So 0:36:57.120 --> 0:36:59.000 if you have a mandate, then you just have to 0:36:59.000 --> 0:37:01.080 blend a certain amount. That's going to cause you know, 0:37:01.160 --> 0:37:03.799 maybe you put a premium on the cost of jet fuel, 0:37:03.800 --> 0:37:05.719 a tax on jet fuel that can cause that price 0:37:05.800 --> 0:37:09.600 gap to close, or if you offer an incentive to 0:37:09.760 --> 0:37:12.040 produce these fuels that can bring it down. There's a 0:37:12.040 --> 0:37:14.680 lot of research being done on nude feedstocks like something 0:37:14.719 --> 0:37:16.520 like cover crops. If you have a fuel you could 0:37:16.520 --> 0:37:18.680 just plant a new oil crop in the off season 0:37:18.960 --> 0:37:20.960 that can help retain the soil. You can use the 0:37:21.000 --> 0:37:22.920 same land. You don't have to have this issue of 0:37:22.960 --> 0:37:26.640 food versus fuel land use. But yeah, that's an dar 0:37:26.800 --> 0:37:27.920 question is how cheap can you get? 0:37:27.920 --> 0:37:29.920 It? So interesting it is. 0:37:30.080 --> 0:37:31.200 I'm glad we do this every week. 0:37:31.280 --> 0:37:32.440 Yes see if we learn stuff? 0:37:32.440 --> 0:37:35.280 All right, Anna Davis, thank you very much, really appreciate it. 0:37:35.520 --> 0:37:36.879 No easy solutions is. 0:37:36.840 --> 0:37:38.680 Basically at the end of the day, what we see, 0:37:38.840 --> 0:37:43.120 Anna Davies is Bloomberg bnif's head of renewable fuels. Here's 0:37:43.120 --> 0:37:44.799 something that caught my eye, apology, did you see this 0:37:44.840 --> 0:37:47.680 one that some colleges are cutting their tuition by fifty 0:37:47.719 --> 0:37:50.240 percent as Ivy's near one hundred thousand? 0:37:50.239 --> 0:37:50.719 Did you see this? 0:37:50.920 --> 0:37:50.960 No? 0:37:51.160 --> 0:37:53.240 So, I mean okay, So basically you got some private 0:37:53.239 --> 0:37:56.000 colleges like Bethel University in Minnesota, for example, cuts his 0:37:56.080 --> 0:37:58.920 tuition price from forty four thousand to twenty five twenty 0:37:58.920 --> 0:38:02.200 six thousand, effort to attract more students because other ones 0:38:02.200 --> 0:38:03.440 are just so expensive. 0:38:03.440 --> 0:38:05.560 But then can you survive if you slash your tuitions? 0:38:05.680 --> 0:38:05.759 Right? 0:38:06.080 --> 0:38:08.920 And small colleges that do not have an endowment. The 0:38:08.960 --> 0:38:14.239 answer probably is no, because they fund so much of 0:38:14.520 --> 0:38:17.600 their total funny comes from to tuition. They don't get 0:38:17.600 --> 0:38:20.719 income off the endowment like bigger schools do, so that's 0:38:20.760 --> 0:38:23.520 why they've always always had a very stretch of his 0:38:23.640 --> 0:38:27.080 business model. But having been involved in higher education for 0:38:27.120 --> 0:38:29.279 a long time at the board level, you got to 0:38:29.320 --> 0:38:31.880 cut your costs dramatically. There's no will to do that. 0:38:31.960 --> 0:38:34.160 You get to cut costs, you got to cut tuition, 0:38:34.280 --> 0:38:36.239 you got to enroll more students, and you also got 0:38:36.280 --> 0:38:37.400 to spend to attract the best. 0:38:38.000 --> 0:38:42.520 This is the Bloomberg Intelligence Podcast, available on Apples, Spotify, 0:38:42.719 --> 0:38:45.640 and anywhere else you will get your podcasts. Listen live 0:38:45.719 --> 0:38:49.320 each weekday ten am to noon Eastern on Bloomberg dot com, 0:38:49.440 --> 0:38:52.799 the iHeart Radio app, tune In, and the Bloomberg Business app. 0:38:52.960 --> 0:38:56.080 You can also watch us live every weekday on YouTube 0:38:56.160 --> 0:38:58.040 and always on the Bloomberg terminal.