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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast

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Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. We're going to bring

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Speaker 1: in Shinali bassik Uh. She is our Wall Street reporter

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Speaker 1: to talk to us about the reaction to j Palell

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Speaker 1: and what to expect the rest of the week and

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Speaker 1: of course after the long weekend. First off, though, I

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Speaker 1: want to remind everyone listening that Bloomberg Markets is brought

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Speaker 1: to you by Commonwealth, supporting more than two thousand independent

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Speaker 1: financial advisors with the solutions they need to grow a

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Speaker 1: thriving business. Commonwealth go where you grow. Visit Commonwealth dot

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Speaker 1: com to learn more. That was so good, Thank you, well,

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Speaker 1: thanks Actually forgot that I had to do that until

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Speaker 1: after I introduced Shnale, So that's a little bit awkward.

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Speaker 1: That's okay, shally Um. What's going on? We basically the market.

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Speaker 1: I noticed Katie Greifeld in her newsletter wrote the markets

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Speaker 1: puked on Friday. I don't know if I love that terminology,

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Speaker 1: but I guess that's a popular thing to say. Well,

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Speaker 1: it's funny to think about the market puking. You do

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Speaker 1: have volatility rising a little bit once again, it's at

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Speaker 1: twenty six now if you look at the VIX and

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Speaker 1: obviously all summer, even with volatility muted, you've had von volatility,

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Speaker 1: the move in deck still moving around a bit. So

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Speaker 1: what was the reaction you read one of my major

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Speaker 1: notes that I got. When you look at how the

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Speaker 1: by side is perceiving what happened at Jackson Hole, there's

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Speaker 1: a lot of questions about not just what's going to

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Speaker 1: happen in the next two months, but what happens in

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Speaker 1: the next six to twelve months. The frustration here is, yes,

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Speaker 1: they're happy that forward guidance went away, but at the

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Speaker 1: same time they don't trust the FED to be consistent

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Speaker 1: over the next six to twelve months, and well, because

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Speaker 1: it has over the last six to twelve exactly. Actually,

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Speaker 1: there was a great story out on the terminal that

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Speaker 1: we me and my sources have been kind of sharing

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Speaker 1: around by Katerina Suriva, and it's about the history of

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Speaker 1: Jackson Hole over the last two years under Powell and

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Speaker 1: how much of his manifesto has really held up over

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Speaker 1: the last two years. So credibility is really the question

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Speaker 1: here um and the willingness to combat inflation. What else

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Speaker 1: are you watching? What else am I watching? We'll see

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Speaker 1: we're talking. We started this talking about the Vicks at six.

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Speaker 1: Why does that matter from a Wall Street perspective, from

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Speaker 1: a banking perspective, the post Labor Day rush, should things

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Speaker 1: stay muted, there was a sense that underwriting could come back,

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Speaker 1: that maybe we can see an I p O or

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Speaker 1: two again, a bigger one. There are some big names

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Speaker 1: out there that we've been talking about instat cart for example.

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Speaker 1: I know Emily Chain was talking to Venture Capitalist last

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Speaker 1: week on her program about something like that. Can deal

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Speaker 1: making comeback in true reform? It hasn't been that bad,

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Speaker 1: but underwriting is really what the expectation has been. If

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Speaker 1: you see the vix keep rising. And then also remember

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Speaker 1: quantitative tightening is taking off in large reform in September

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Speaker 1: and to talk October. Should markets tighten up again, then

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Speaker 1: all the hopes of doing all the things that make

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Speaker 1: the banker's real money start to go away again. Underwriting.

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Speaker 1: What does trading look like into the second half of

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Speaker 1: the year. You know, we talk about this. Paul, if

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Speaker 1: he was here, would already be asking about it. Is

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Speaker 1: what does it mean for bonus season? Paul cares about

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Speaker 1: is what bankers get paid, because Paul was a banker

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Speaker 1: and then all he cared about was what he got paid. Yeah.

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Speaker 1: Well yeah, And and to be honest, you know, this

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Speaker 1: is where the rubber hits the road. When you come

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Speaker 1: back from Labor Day, there's a lot of travel. I know,

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Speaker 1: I'm already going to be in Miami and Paris through

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Speaker 1: the end of the year. We have our own conferences.

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Speaker 1: Why are you going to Paris? Um to interview, to

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Speaker 1: see you of Morgan Stanley and kick care and so

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Speaker 1: you take like a week off before or after so

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Speaker 1: you can just enjoy this. Okay, care to say this?

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Speaker 1: I was literally over the weekend going to actually ASHIONALI

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Speaker 1: if we should take a girl's trip to Paris. But

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Speaker 1: now we can't do that because apparently James Warman is

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Speaker 1: more important than me. Um, let's talk to Almir's that

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Speaker 1: maybe you'll give us some time on both ends of

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Speaker 1: the trip so that you and I can come back

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Speaker 1: here super happy as we deliver reports. But you know

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Speaker 1: the reality is two weeks right after Labor Day or

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Speaker 1: the full week after that, you have a lot of

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Speaker 1: things in New York as well. You have super Return

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Speaker 1: to New York, so all the big private equity executives

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Speaker 1: from across the US and internationally are going to be

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Speaker 1: in New York. You also have Salt, which is that

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Speaker 1: Anthony Scaramuchie Skybridge conference. So I know, you know September

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Speaker 1: is heated, it's booked, but again the markets are choppy.

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Speaker 1: Well with conferences and with interviews, but not with I

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Speaker 1: p o S or with launches. R'm talk. It's a

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Speaker 1: lot of talking to investors, it's a lot of preparing

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Speaker 1: for more stable times ahead. But again to your point,

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Speaker 1: today's conversations lead to tomorrow's deals, right, But this year,

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Speaker 1: I mean, what's deal activity look like, what's ipe O

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Speaker 1: activity look like? What's it seems? Kind of it's it's

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Speaker 1: really bad out there. I don't even know what else

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Speaker 1: to say, because remember last year, the year before that,

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Speaker 1: people were excited about not just I P O S,

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Speaker 1: people were also excited about direct listings, they were excited

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Speaker 1: about spacks and now kind of the venue to go

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Speaker 1: back just licking their wounds from all of those things

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Speaker 1: that they unfortunately got involved in last year. Regrettably. Right,

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Speaker 1: the hangover is real, and it'll probably be real into

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Speaker 1: next year. Maybe one or two will squeeze through, but again,

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Speaker 1: a lot of the things that really fueled the banking

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Speaker 1: system this year does not seem to be continuing into

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Speaker 1: next year. And again, VIX at today, we're in the

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Speaker 1: last week of August. What does that look like into

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Speaker 1: next year? The Future's curve is telling you that it's

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Speaker 1: going to get choppier into the end of the year.

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Speaker 1: It's pretty crazy. Although I have to say the VIX

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Speaker 1: has been a pretty poor indicator of action. I mean,

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Speaker 1: there were times last month when it felt incredibly heated

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Speaker 1: and the VIX was doing a whole lot of nothing. Now,

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Speaker 1: I know Friday was a big down day and that's

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Speaker 1: when the VIX climbed up to basically twenty six, but

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Speaker 1: it's it's not moving around that much today, and I

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Speaker 1: I just don't know about the VIX as an indicator.

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Speaker 1: We haven't jumped above thirty six, so I don't think

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Speaker 1: the VIX needs to get all that high to stifle activity.

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Speaker 1: Twenty five is the one year average. Now that that one,

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Speaker 1: we haven't jumped above twenty six. You mean thirty six

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Speaker 1: is where we were in March of right, Okay, so

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Speaker 1: we haven't jumped above thirty six, and today we're at

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Speaker 1: twenty six. But you can get to and things already

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Speaker 1: still feel pretty choppy out there, all right, Join Allie Bassik,

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Speaker 1: Wall Street Reporter, Thanks so much for joining us. Let's

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Speaker 1: get over to Pete Anderson right now, joining us from

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Speaker 1: Anderson Capital Management. Pete, I want to get first year

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Speaker 1: take on um Powell's eight minute speech on Friday. It

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Speaker 1: really the whole Jackson, whole event, Um that seemed to

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Speaker 1: drag markets down pretty substantially last week. Well, good morning,

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Speaker 1: and yes it did in eight minutes of really devastating testimony,

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Speaker 1: in my opinion, very very frank uh uh narrative in

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Speaker 1: terms of the way he had been speaking. So I

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Speaker 1: think that's a pretty strong message. But you know, the

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Speaker 1: other thing we have to keep in context is that's

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Speaker 1: one speech of many, and he is trying to figure

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Speaker 1: out where the heck we are in this market cycle,

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Speaker 1: just like the rest of us. You know, they have data.

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Speaker 1: We all have the same data. And it is very

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Speaker 1: challenging right now to formulate, you know, a pretty rational

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Speaker 1: picture about where we are and how we should handle

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Speaker 1: where we are and where we're going. So he's trying,

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Speaker 1: like the rest of us. Hats off to him, But

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Speaker 1: there are many many possibilities in this scenario. Isn't there

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Speaker 1: certainly longer term? Um, it's a big question mark about

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Speaker 1: what the FED does. Of course, in the next few months,

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Speaker 1: it seems they are determined to continue raising at a

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Speaker 1: if not seventy five then fifty basis point clip. What

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Speaker 1: do you expect, Well, I expect that in lation is

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Speaker 1: probably going to take care of itself, uh not completely,

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Speaker 1: but you know, we have already seen really pretty remarkable

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Speaker 1: changes in gas prices, housing inventories, and even lumber applywood prices,

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Speaker 1: all those types of things, and we didn't require FED

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Speaker 1: intervention for that. That was just supply and demand taking

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Speaker 1: over classic dynamics like that. So what I worry about

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Speaker 1: is that the FED might be acting too aggressively, and

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Speaker 1: as you know, there's a delay and the impacts of

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Speaker 1: his decisions, so we might be heading to a period

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Speaker 1: where he might overtighten. As we see naturally, inflation just

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Speaker 1: kind of receding. So that's what I worry about. But

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Speaker 1: I do think that he probably will do fifty five

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Speaker 1: uh coming this next month, and I do worry a

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Speaker 1: little bit about that because I think by then we

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Speaker 1: will see even more signs of inflation, you know, our deflation. Sorry,

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Speaker 1: where we're not really focusing on the natural dynamics that's applied.

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Speaker 1: Demand has And remember where there is no playbook for

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Speaker 1: this recovery because it is truly unique. So as we

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Speaker 1: struggle to look back at history and say these are

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Speaker 1: the rules of thumb, I don't really think we have

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Speaker 1: many rules of thumb given this unique circumstance that we're in. Well, Peter,

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Speaker 1: you say there's no playbook, But let's go back to

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Speaker 1: just a couple of years ago, where you had a

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Speaker 1: series of rate hikes, you had quantitative tightening, you had

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Speaker 1: an equity market that even by then at that point

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Speaker 1: was also considered extremely hot and extremely overvalued. Isn't that

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Speaker 1: the playbook to go by, the idea that the stock

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Speaker 1: market can actually handle this QT and can handle these

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Speaker 1: rate hikes because it has before well very good points.

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Speaker 1: And you know, I struggle with that myself, to be

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Speaker 1: honest with you. But I do think when we look

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Speaker 1: at the root cause, where we find ourselves presently very

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Speaker 1: very different from anything in the past. I mean even

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Speaker 1: two thousand eight for instance, which I think is the

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Speaker 1: most comparable in terms of the state of confusion that

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Speaker 1: we're in right now. So I look at what caused

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Speaker 1: us to get here, and I find that the cause

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Speaker 1: is unique. And because the cause is unique, I also

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Speaker 1: think the solution might be unique. And you know, we

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Speaker 1: are desperately hanging on to every single data point that

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Speaker 1: comes out, and many of these data points are approximations,

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Speaker 1: So I think you have to blend all that together.

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Speaker 1: I know what you're saying in terms of, oh, say,

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Speaker 1: yield curve dynamics and rules of thumb about you know,

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Speaker 1: if the yield curve is inverted. But even that, this

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Speaker 1: time I think might be different in terms of, uh,

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Speaker 1: you know, what the FED can do. You said you're

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Speaker 1: concerned about overtightening. What what does that look like? Overtightening?

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Speaker 1: What happens to an economy of this economy? Because it

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Speaker 1: is pretty unique. M Yeah, I think, um, if they

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Speaker 1: acknowledge edge that lets let's assume they do overtighten. Okay,

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Speaker 1: and that's the biggessumption. But let's just play that scenario

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Speaker 1: out then. I do think, um, if they acknowledge that

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Speaker 1: they have overtightened, that could be a market rally. However,

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Speaker 1: if they are denying or ignoring that and the market

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Speaker 1: starts to signal that to them, that could be more

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Speaker 1: dangerous because then we don't know what the next steps

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Speaker 1: the FED will take well, and the and the effect

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Speaker 1: on business, the effect on investment, the effect on consumers.

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Speaker 1: How how bad does it get for the economy. I

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Speaker 1: think it could be very serious in that, Um, you know,

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Speaker 1: higher rates could just stifle a natural recovery. And that's

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Speaker 1: the problem. You know, if you play out just as

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Speaker 1: I mentioned, say lumber prices or housing inventory, you know,

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Speaker 1: just imagine how that could get crushed if we actually

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Speaker 1: put the brake on too strong. So, you know, nobody

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Speaker 1: had envies the Fed's position, but I am hopeful that

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Speaker 1: they are intuitive enough. And I hate to use the

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Speaker 1: word intuition when we're talking about these kinds of things,

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Speaker 1: but I do think it does come to the forefront

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Speaker 1: where you have to try to blend all the scenario

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Speaker 1: and signals that you're getting and try to incorporate the

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Speaker 1: fact that we got here from coronavirus and it has

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Speaker 1: impacted the nation in the world. Those are the things

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Speaker 1: you have to factor in that are very different this

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Speaker 1: time coronavirus. And then you know, like trillions upon trillions

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Speaker 1: upon trillions of fiscal spending. Pete, we never have enough

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Speaker 1: time with you. I'm so glad we could spend we

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Speaker 1: could get you on the show though, So thanks so

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Speaker 1: much for joining us. Peter Anderson is the founder of

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Speaker 1: Anderson Capital Management. Let's bring in a true expert here,

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Speaker 1: I mean a Baker chief OPEC correspondent and Dubai deputy

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Speaker 1: beau chief of Energy Intelligence. Uh, let me put that

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Speaker 1: question to you. Thank you for joining us as always

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Speaker 1: back or excuse me, I am standing corrected. Let me

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Speaker 1: ask you why do we see that spread in oil

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Speaker 1: at the moment? Hi, good morning and thanks for having me. Um. Yeah,

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Speaker 1: there is a huge spread between the two, as you noted,

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Speaker 1: and uh, perhaps I mean we're we're going to see

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Speaker 1: a further spread. And I mean this wasn't the case

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Speaker 1: a few weeks ago. You saw that Brent fell to

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Speaker 1: ninety dollars. Now it's back to a hundred and three. Um,

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Speaker 1: and this mainly happened really because after comments UH from

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Speaker 1: the Saudi Energy Minister hinting that Okay Plus had previously

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Speaker 1: cut production, and that comment was enough for the market

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Speaker 1: to realize that cutting production might be on the table again.

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Speaker 1: So we saw Brent rise based on on that news. UM,

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Speaker 1: whether or not we're gonna see the Open Plus group

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Speaker 1: go ahead with that hint of a cut remains to

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Speaker 1: be seen. The group is supposed to meet on the

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Speaker 1: fifth of September and they say all options are open,

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Speaker 1: but I think I mean, just looking at Brent prices here, UM.

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Speaker 1: The main reason I believe the Saudi Energy Minister hinted

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Speaker 1: that at these cuts UM wasn't really to to raise prices.

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Speaker 1: It was more about gaining UH control over the market.

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Speaker 1: He was worried that overbarish or over bullish uses moving

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Speaker 1: this market. Speculation is moving this market. Use um daily

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Speaker 1: news that we're seeing that perhaps the US is going

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Speaker 1: to reach a deal with Iran and Iran would supply

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Speaker 1: more barrels into the market. I mean, there's the influx

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Speaker 1: of news and that's influencing the market. So I would

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Speaker 1: say the market in general oil is not reacting on fundamentals,

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Speaker 1: it's more of a kind of psychological disturbance or to

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Speaker 1: borrow a phrase the Saudi Energy minister used, he says,

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Speaker 1: it's a it's in a stage of like instab pity

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Speaker 1: uh and she's afraidia. Um. So that's that's the situation. Uh.

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Speaker 1: What's the real likelihood from from your vantage point of

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Speaker 1: Iranian barrels coming on to um, you know, the Western

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Speaker 1: market from here from America, it looks incredibly unlikely that

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Speaker 1: that something's really going to happen that would lead to,

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Speaker 1: you know, those sanctions coming off. Sure, UM, I would

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Speaker 1: agree with that. I mean, I know that from from

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Speaker 1: the Iranian press or Iranian media, even from Iranian officials,

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Speaker 1: they seem to be a lot more optimistic and they

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Speaker 1: want to keep reminding the market that in order to

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Speaker 1: uh to to to to move prices down, Iran needs

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Speaker 1: to come back. Iran needs to fill that gap there

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Speaker 1: isn't enough spirit capacity and they're able to do that.

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Speaker 1: But just um, thinking about it in terms of signing

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Speaker 1: a deal with the US, I I completely agree with

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Speaker 1: what you're saying here that it's really complicated. Negotiation is ongoing,

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Speaker 1: and I don't see the steal getting signed anytime soon.

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Speaker 1: But that doesn't stop the market from reacting. Every time

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Speaker 1: we see a proposal or talk of the proposals, we're

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Speaker 1: seeing prices move on that. So that's that's a fair

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Speaker 1: point in terms of spare capacity, I mean, talking about

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Speaker 1: cutting production makes sense to be that the market would

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Speaker 1: react to that. Talking about raising production, I mean, how

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Speaker 1: much can they really raise production? Um, Well, let's look

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Speaker 1: at the group as open plus. I would say that

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Speaker 1: there are only two members out of that twenty three

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Speaker 1: member group that have spare capacity left or have capacity

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Speaker 1: that they could bring to the market and Saudi you

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Speaker 1: Ai and Saudi. So between the two, I would say

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Speaker 1: they're sitting at UM two point five two point three

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Speaker 1: million barrels. Uh. So that's that's the amount that could

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Speaker 1: be off to the market. But bear in mind that

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Speaker 1: both countries they don't want to max out their capacity

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Speaker 1: because we're at a time here where sitting on spare

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Speaker 1: capacity is incredibly valuable. It's become more valuable than than

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Speaker 1: actual production and provides these countries a lot of leverage

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Speaker 1: and political leverage, and I think that part of why

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Speaker 1: the Biden administration. Biden visited the Jedda recently was because

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Speaker 1: Saudi Arabia still sits on that capacity, so they're not

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Speaker 1: gonna max out to twelve anytime soon. And you know,

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Speaker 1: UM not have that in their hands. So I mean,

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Speaker 1: thus the supply side, speak to us a little b

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Speaker 1: about the demand side. I mean, how do you go

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Speaker 1: about calculating this kind of stuff? I really studying the

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Speaker 1: demand picture When you do have the likes of China

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Speaker 1: and India buying discounted crude from Russia, still, how does

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Speaker 1: that affect the demand pressures on the commodity market? Um, well,

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Speaker 1: we we saw. I mean OPEC predicts in three that

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Speaker 1: there is gonna be an increment in demand. It's it's

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Speaker 1: not going to be at the same level of two,

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Speaker 1: but there's gonna be increased demand. The there's a risk

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Speaker 1: of the recession still hitting and again that's uh that's

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Speaker 1: impacting uh markets. But uh, I mean that small demand

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Speaker 1: increase that really needs to be fulfilled by the remaining

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Speaker 1: spare capacity, which isn't much. UM. OPIC members remain optimistic

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Speaker 1: about the demand side, but also very cautious. UM as

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Speaker 1: you noted that, yeah, Russia is diverting a lot of

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Speaker 1: its crew that is normally sold into Europe. Now it's

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Speaker 1: being sold at discounts to India and China, who we

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Speaker 1: understand our our storing a lot of it and straight

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Speaker 1: back to those Europeans at or straight back exactly doing

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Speaker 1: that cycle, which which is happening. Uh so they're they're

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Speaker 1: taking advantage of the situation. But at the same time,

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Speaker 1: I mean we've we've gotten a lot of calls from

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Speaker 1: from from people in India in China asking us if

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Speaker 1: the Gulf is going to be reducing their their allocations

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Speaker 1: there and looking to sell their oil at at higher

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Speaker 1: prices to to europe um, which isn't the case. I mean,

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Speaker 1: the Gulf states haven't cut their allocations well, and I

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Speaker 1: mean a lot of a lot of European countries are

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Speaker 1: also still buying Russian crude, right, I mean these uh Italy, Yeah,

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Speaker 1: we we we can't pretend that everyone is UM following

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Speaker 1: along and it doesn't even kick in. I don't think

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Speaker 1: until February the real UM sanctions there. I mean a

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Speaker 1: great having on. I hope we can get you back

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Speaker 1: soon because your insight and your intelligence very key to

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Speaker 1: helping us to understand these markets. I mean, a baker

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Speaker 1: is chief OPEC correspondent at Energy Intelligence. We're watching uh

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Speaker 1: brent crude At one oh three forty two. I got

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Speaker 1: a great message from Dan Curtis earlier, who is he's

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Speaker 1: one of one of our producers in London. I believe

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Speaker 1: he's your ball um every something. That very cool, he said.

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Speaker 1: The Tesla model s uh sixty, so that's the cheaper one.

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Speaker 1: It has a sixty two kilowatt hour battery with a

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Speaker 1: two mile range, meaning it's about zero point three kilowatt

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Speaker 1: hours per mile um. So he has worked out through

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Speaker 1: that at a thousand euros per megawatt hour, which is

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Speaker 1: one europe Er kilowatt hour, that works out to like

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Speaker 1: thirty euro cents per mile and as I said, red parody,

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Speaker 1: so that's it about the same as thirty cents cents um.

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Speaker 1: Fuel economy in Europe, the average is six leaders per

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Speaker 1: hundred kilometers that's how they measure it, instead of miles

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Speaker 1: per gallon or about zero uh point one leaders per

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Speaker 1: mile um. Premium gas in Germany is one seventy nine

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Speaker 1: and euros, which as we know is one dollar and

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Speaker 1: seventy nine cents per leader um or seventeen cents per mile.

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Speaker 1: So in order to have parody between a Tesla and

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Speaker 1: an internal combush an engine car, one that burns gasoline. Um,

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Speaker 1: with gas at these prices, electricity needs to drop to

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Speaker 1: five and eighty six euros or dollars a kill one hour.

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Speaker 1: Right now we're approaching a thousand, So right now it's

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Speaker 1: more economical to drive a gas car in Europe, which

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Speaker 1: I thought was that's is interesting. Actually, now that you've like,

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Speaker 1: let's bring in Kevin Tynan from Bloomberg Intelligence. He's a

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Speaker 1: senior automotive analyst and Kevin, you know, there are a

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Speaker 1: couple of news events that prompted me to say, let's

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Speaker 1: get Kevin on. First was the news out of California

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Speaker 1: that they want to um ban uh the selling of

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Speaker 1: internal combustion engines by so no more gas engines by then. Okay,

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Speaker 1: it's a long way off, but is that possible? Uh,

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Speaker 1: well saying it as possible. And and by the way,

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Speaker 1: I'm with you on the James Taylor thing. Um but Kevin,

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Speaker 1: that was a big trail. Yeah. Well I'm a big

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Speaker 1: Carlie Simon fans, so anyway, but um but you know,

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Speaker 1: I I laugh because I don't think any of these

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Speaker 1: people are going to be making decisions in if we're

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Speaker 1: put on that path now anyway. Um, And I still

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Speaker 1: feel like, and you know this matter, right, we talked

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Speaker 1: about this all the time, like there's so many unintended

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Speaker 1: consequences of this technological singularity of going to e V

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Speaker 1: right that that I feel like we're just looking at

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Speaker 1: one very very short part of the process, I mean,

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Speaker 1: from mining of materials to disposal of batteries that says

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Speaker 1: this is better, this is the way we should go.

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Speaker 1: And I'm just not sure. And I think we're starting

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Speaker 1: to hear a little bit more about like, hey, maybe

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Speaker 1: we need some diversity in how we're powering these things

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Speaker 1: and what choices we have as consumers. Yeah, yeah, I

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Speaker 1: mean I I just I just feel like we're so

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Speaker 1: focused on this one on the tail pipe or lack thereof,

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Speaker 1: and saying this is bad, and I'm just not I'm

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Speaker 1: just not convincing. I'm not anti e V, I'm not

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Speaker 1: pro internal combustion. I'm just saying I think we're being

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Speaker 1: very very nearsighted on this hundred percent, because who can

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Speaker 1: forecast out I mean, it's hard enough to forecast out

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Speaker 1: the other story. I don't even know what's for lunch

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Speaker 1: today exactly. Uh, well, if Paul Sweeney were here, he

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Speaker 1: would tell us he always knows what. Yeah, sometimes I

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Speaker 1: think there's actually a function on the terminal that tells

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Speaker 1: you what's for lunch. At least here a Bloomberg cho

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Speaker 1: chomp go. That's right. Another story over the weekend that

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Speaker 1: is um closer on the horizon France, because I guess

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Speaker 1: I promise by Macron during his campaign, France is now

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Speaker 1: going to or at least it thinks it can allow

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Speaker 1: any consumer to lease or rent an electric vehicle for

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Speaker 1: one hundred euros a month, a hundred dollars a month,

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Speaker 1: because we're at parody. Um, that to me seems nuts.

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Speaker 1: I mean, what if too many people are takers? Yeah?

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Speaker 1: And and this, you know, is one of those things

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Speaker 1: that you know, you have to think about the entire transaction, right,

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Speaker 1: And I've said this for years that really who controls

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Speaker 1: this is the manufacturer. So what basically is being said

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Speaker 1: here is like, yeah, you you can create demand at

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Speaker 1: a hundred dollars a month, can we do the supply?

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Speaker 1: And how are those manufacturers made whole by the government? Right?

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Speaker 1: So the vehicle costs a certain amount and you can

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Speaker 1: give it to somebody. You can sell things improfitably all

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Speaker 1: day long if you want to. But does the government

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Speaker 1: step in and say, like, hey, that least should be

428
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Speaker 1: you know, four times that five times? I'm guessing there.

429
00:24:45,680 --> 00:24:47,840
Speaker 1: I'm guessing they're going to make the manufacturer whole. But

430
00:24:47,920 --> 00:24:51,280
Speaker 1: even if even if they said to the manufacturer will

431
00:24:51,320 --> 00:24:53,480
Speaker 1: give you a million dollars a month, they still can't

432
00:24:53,480 --> 00:24:57,440
Speaker 1: produce that many vehicles that fast time. That's exactly right.

433
00:24:57,480 --> 00:24:59,719
Speaker 1: And where are you going to charge them? I mean

434
00:24:59,760 --> 00:25:02,080
Speaker 1: I don't already can't find a charger, and you know,

435
00:25:02,119 --> 00:25:05,520
Speaker 1: when I'm driving an e V just me around New York.

436
00:25:05,560 --> 00:25:07,880
Speaker 1: Admittedly Paris could have more, but I don't think it's

437
00:25:07,920 --> 00:25:10,480
Speaker 1: that manymore. All right, We don't have time, unfortunately, but Kevin,

438
00:25:10,480 --> 00:25:15,960
Speaker 1: thanks so much for joining us. Pretty good here in

439
00:25:16,000 --> 00:25:19,600
Speaker 1: the studio with me, Matt Miller and as you know, Cretty,

440
00:25:19,640 --> 00:25:22,760
Speaker 1: I lived in Germany for many, many years. Um studied

441
00:25:22,800 --> 00:25:24,520
Speaker 1: there for a little while and tubing in and worked

442
00:25:24,520 --> 00:25:29,080
Speaker 1: there for Bloomberg couple of stints, and I love the country.

443
00:25:29,160 --> 00:25:33,119
Speaker 1: So with all due respect, I'm gonna tell you something

444
00:25:33,240 --> 00:25:37,720
Speaker 1: ridiculous about Germany under the current system. And this is

445
00:25:37,880 --> 00:25:43,400
Speaker 1: regulated by law, energy producers in Germany that have lower

446
00:25:43,480 --> 00:25:48,000
Speaker 1: costs or could charge lower costs to consumers, like wind energy.

447
00:25:48,119 --> 00:25:52,120
Speaker 1: There tons of windmills around Germany, or solar power providers.

448
00:25:52,960 --> 00:25:57,840
Speaker 1: Their prices are set by whoever has the highest price

449
00:25:58,000 --> 00:26:02,080
Speaker 1: in the market, so they could offer lower prices to

450
00:26:02,119 --> 00:26:07,439
Speaker 1: consumers with wind and solar. But since gas fired power

451
00:26:07,520 --> 00:26:12,359
Speaker 1: plants demand higher prices, wind and solar prices are set

452
00:26:12,440 --> 00:26:17,760
Speaker 1: at those levels. Is that not ridiculous? It so, just

453
00:26:17,840 --> 00:26:20,120
Speaker 1: to be clear, it means that you can't actually afford

454
00:26:20,359 --> 00:26:23,200
Speaker 1: the renewable energy. No, it means that they can't charge

455
00:26:23,240 --> 00:26:27,359
Speaker 1: lower prices. The regulator makes them charge the same price

456
00:26:27,440 --> 00:26:31,400
Speaker 1: as whoever has the highest price. Right now, I think

457
00:26:31,520 --> 00:26:34,000
Speaker 1: Robert Habeck and some others in Germany want to reform that.

458
00:26:34,080 --> 00:26:39,040
Speaker 1: Like obviously, let's bring in Maria today, a Bloomberg opinion reporter,

459
00:26:39,480 --> 00:26:42,480
Speaker 1: and she is deep in it when it comes to

460
00:26:42,800 --> 00:26:47,920
Speaker 1: energy pricing, energy shortages, and European law and regulation. Wait,

461
00:26:48,040 --> 00:26:53,000
Speaker 1: first of all, where are you, Maria? I'm uh and

462
00:26:53,080 --> 00:26:55,280
Speaker 1: you know what, I'm gonna giving a little secret, but

463
00:26:55,359 --> 00:26:58,440
Speaker 1: just don't tell anyone. I'm on my way to meet

464
00:26:58,600 --> 00:27:02,000
Speaker 1: our friend and colleague and Marie, and this time it's fun,

465
00:27:02,359 --> 00:27:07,199
Speaker 1: not work. We're going to get to Vita. I mean,

466
00:27:07,320 --> 00:27:10,760
Speaker 1: it didn't invite us to me, just sounds like work,

467
00:27:11,320 --> 00:27:13,520
Speaker 1: but I get it. UM for young people, it's a

468
00:27:13,520 --> 00:27:17,040
Speaker 1: great place to party around the clock. In terms of

469
00:27:17,480 --> 00:27:22,720
Speaker 1: UM European energy prices UM, what is going on over there?

470
00:27:22,760 --> 00:27:26,199
Speaker 1: I mean, you've already got a huge crisis due to

471
00:27:26,600 --> 00:27:32,040
Speaker 1: supply shortage UM thanks to Vladimir Putin's war in Ukraine.

472
00:27:32,440 --> 00:27:37,960
Speaker 1: But the regulatory framework seems ludicrous, not just in Germany

473
00:27:38,000 --> 00:27:42,400
Speaker 1: but across the continent. What is ursula funder lyon UM?

474
00:27:42,480 --> 00:27:45,800
Speaker 1: The EU President planning, on commission president planning on doing

475
00:27:45,840 --> 00:27:49,359
Speaker 1: about it. Well, listen, Matt, I think to me the

476
00:27:49,440 --> 00:27:55,160
Speaker 1: relevant thing today that Brussels finally woke up today. Remember

477
00:27:55,280 --> 00:27:58,960
Speaker 1: for weeks and now already you know I wrote about

478
00:27:59,040 --> 00:28:02,119
Speaker 1: this at length back on TV by the way next week,

479
00:28:02,640 --> 00:28:07,919
Speaker 1: and essentially they kind of seemed to be in this

480
00:28:08,080 --> 00:28:11,000
Speaker 1: illusion that yes, winter is going to be very tough,

481
00:28:11,119 --> 00:28:13,600
Speaker 1: but somehow we'll manage. But there was no policy action

482
00:28:14,040 --> 00:28:17,040
Speaker 1: behind it. I think last week, of course, where every

483
00:28:17,119 --> 00:28:19,920
Speaker 1: record and you know this very well, was smashed on

484
00:28:20,119 --> 00:28:24,159
Speaker 1: the gas market, the futures market, they really kind of

485
00:28:24,200 --> 00:28:26,600
Speaker 1: something hid and and and it really quicked. The market

486
00:28:26,680 --> 00:28:29,440
Speaker 1: is broken and the issue here is that it goes

487
00:28:29,480 --> 00:28:32,359
Speaker 1: down to consumers and we're in for a very tough winter.

488
00:28:32,760 --> 00:28:35,440
Speaker 1: Today Brussels finally woke up and to me, that's a

489
00:28:35,480 --> 00:28:38,960
Speaker 1: positive spin on this. Today we heard from the head

490
00:28:38,960 --> 00:28:41,600
Speaker 1: of the Commission of Underlying which she said this is

491
00:28:41,600 --> 00:28:44,680
Speaker 1: not just about demand destruction, and nonetheless that is the

492
00:28:44,840 --> 00:28:48,040
Speaker 1: key issue. By the way, they really say this behind

493
00:28:48,040 --> 00:28:50,800
Speaker 1: the scenes. It has to be about demand destruction. It's

494
00:28:50,840 --> 00:28:52,960
Speaker 1: the only way you can deal with a supply shock

495
00:28:53,240 --> 00:28:56,880
Speaker 1: of this magnitude. But the other thing is the electricity market.

496
00:28:57,080 --> 00:28:59,480
Speaker 1: The energy market in Europe's very complex, but it's this

497
00:28:59,640 --> 00:29:02,600
Speaker 1: isn't a similar market. It really changes by country. You know,

498
00:29:02,600 --> 00:29:04,880
Speaker 1: it's very well you're in Germany, I mean Brussels. We

499
00:29:05,080 --> 00:29:08,440
Speaker 1: probably have a very different energy market the two of us.

500
00:29:08,440 --> 00:29:10,760
Speaker 1: But one thing, and you alluded to this, is that

501
00:29:10,880 --> 00:29:14,760
Speaker 1: gas is really setting the price for everything else. Gas

502
00:29:14,840 --> 00:29:17,840
Speaker 1: is going through the roof. It trickles down to everything

503
00:29:17,880 --> 00:29:20,360
Speaker 1: else renewable. The attitude that it priced all of this,

504
00:29:20,720 --> 00:29:22,960
Speaker 1: and I think for European officials is now very clear

505
00:29:23,040 --> 00:29:26,000
Speaker 1: that they have to aid stage and intervention and to

506
00:29:26,640 --> 00:29:29,280
Speaker 1: change the way the market operated. So I think we're

507
00:29:29,360 --> 00:29:32,520
Speaker 1: heading into a new space in which gas is not

508
00:29:32,560 --> 00:29:35,240
Speaker 1: going to call the shops at least the price for it.

509
00:29:35,320 --> 00:29:38,200
Speaker 1: And I was having a conversation with a contact of mind,

510
00:29:38,280 --> 00:29:40,240
Speaker 1: and I asked him, you know, what does it mean?

511
00:29:40,280 --> 00:29:42,320
Speaker 1: And he decided a terminator. I mean, we have to

512
00:29:42,360 --> 00:29:45,200
Speaker 1: go all in into this market, but also change the

513
00:29:45,280 --> 00:29:48,560
Speaker 1: fact that gas should not be the benchmark. So what

514
00:29:48,600 --> 00:29:51,880
Speaker 1: about how do you actually decouple some of these markets.

515
00:29:51,920 --> 00:29:54,560
Speaker 1: Is there any sort of methodology that's actually been put

516
00:29:54,600 --> 00:29:56,440
Speaker 1: forward on how you actually do this or is this

517
00:29:56,520 --> 00:30:00,120
Speaker 1: still just in the early idea stage. Look, I I

518
00:30:00,120 --> 00:30:02,800
Speaker 1: think it's very early days. This is gonna warrant a

519
00:30:02,960 --> 00:30:06,080
Speaker 1: big debate, the fact that this isn't a single market

520
00:30:06,000 --> 00:30:07,880
Speaker 1: and the rules are not apply to all of the

521
00:30:07,960 --> 00:30:09,880
Speaker 1: same way. But I think if I look at the

522
00:30:09,920 --> 00:30:13,240
Speaker 1: countries like Spain and Portugal, and of course I always

523
00:30:13,320 --> 00:30:15,280
Speaker 1: keep a very close eye on my home country, I

524
00:30:15,280 --> 00:30:18,200
Speaker 1: have a national bias there. But to me and I

525
00:30:18,280 --> 00:30:20,840
Speaker 1: bring up scene because in this case, the Spanish, I

526
00:30:20,920 --> 00:30:22,880
Speaker 1: kind of thought is coming a year ago, and they

527
00:30:22,920 --> 00:30:25,200
Speaker 1: looked at their own market and they went, we don't

528
00:30:25,200 --> 00:30:27,160
Speaker 1: really use that much gas. We have a lot of

529
00:30:27,200 --> 00:30:30,080
Speaker 1: renewables are electric that is jumping for ways that we

530
00:30:30,200 --> 00:30:33,760
Speaker 1: do not think are warranted or actually reflect our energy

531
00:30:34,280 --> 00:30:37,280
Speaker 1: mixed and consumption. So we want to break away from

532
00:30:37,320 --> 00:30:39,920
Speaker 1: the gas. They pulled out of a single bunchmark. They

533
00:30:39,920 --> 00:30:43,040
Speaker 1: were able to get exemptions from the country which they

534
00:30:43,120 --> 00:30:47,200
Speaker 1: separate the gas from the actual cost of making the electricity,

535
00:30:47,280 --> 00:30:49,440
Speaker 1: so they were able to low ball their bill. So

536
00:30:49,480 --> 00:30:52,760
Speaker 1: there was an uncoupling there from the electricity price to

537
00:30:53,000 --> 00:30:54,840
Speaker 1: the gas price. And if you look at bills, of

538
00:30:54,920 --> 00:30:58,200
Speaker 1: course have jumped in Spain and Portugal, but there are

539
00:30:58,240 --> 00:31:00,120
Speaker 1: nowhere near the prices that we're seeing in jur me

540
00:31:00,600 --> 00:31:03,640
Speaker 1: and and the French or Belgian Tino. The pay maybe

541
00:31:03,680 --> 00:31:06,480
Speaker 1: six time of years for Spanish castle was more a

542
00:31:06,560 --> 00:31:09,400
Speaker 1: hundred fifty so plus there was an effector that really

543
00:31:09,400 --> 00:31:12,240
Speaker 1: brought it down. Could this be replicated for the entire

544
00:31:12,320 --> 00:31:15,200
Speaker 1: European market. I'm not sure, but it does also clues

545
00:31:15,360 --> 00:31:18,160
Speaker 1: so there are ways to get flexibility and also break

546
00:31:18,200 --> 00:31:20,720
Speaker 1: away from gas, which is now the big issues. And

547
00:31:20,800 --> 00:31:23,160
Speaker 1: Maria today, oh thanks for joining us. I can't wait

548
00:31:23,280 --> 00:31:28,200
Speaker 1: till you re emerge on Bloomberg Television in September. Everyone,

549
00:31:28,240 --> 00:31:32,800
Speaker 1: have a fantastic Monday. Thanks for listening to the Bloomberg

550
00:31:32,920 --> 00:31:36,320
Speaker 1: Markets podcast. You can subscribe and listen to interviews with

551
00:31:36,360 --> 00:31:41,160
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.

552
00:31:41,440 --> 00:31:45,680
Speaker 1: I'm on Twitter at Matt Miller. Put on false Sweeney

553
00:31:45,720 --> 00:31:48,360
Speaker 1: I'm on Twitter at pt Sweeney Before the podcast. You

554
00:31:48,360 --> 00:31:50,760
Speaker 1: can always catch us worldwide at Bloomberg Radio