Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast
Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. We're going to bring
Speaker 1: in Shinali bassik Uh. She is our Wall Street reporter
Speaker 1: to talk to us about the reaction to j Palell
Speaker 1: and what to expect the rest of the week and
Speaker 1: of course after the long weekend. First off, though, I
Speaker 1: want to remind everyone listening that Bloomberg Markets is brought
Speaker 1: to you by Commonwealth, supporting more than two thousand independent
Speaker 1: financial advisors with the solutions they need to grow a
Speaker 1: thriving business. Commonwealth go where you grow. Visit Commonwealth dot
Speaker 1: com to learn more. That was so good, Thank you, well,
Speaker 1: thanks Actually forgot that I had to do that until
Speaker 1: after I introduced Shnale, So that's a little bit awkward.
Speaker 1: That's okay, shally Um. What's going on? We basically the market.
Speaker 1: I noticed Katie Greifeld in her newsletter wrote the markets
Speaker 1: puked on Friday. I don't know if I love that terminology,
Speaker 1: but I guess that's a popular thing to say. Well,
Speaker 1: it's funny to think about the market puking. You do
Speaker 1: have volatility rising a little bit once again, it's at
Speaker 1: twenty six now if you look at the VIX and
Speaker 1: obviously all summer, even with volatility muted, you've had von volatility,
Speaker 1: the move in deck still moving around a bit. So
Speaker 1: what was the reaction you read one of my major
Speaker 1: notes that I got. When you look at how the
Speaker 1: by side is perceiving what happened at Jackson Hole, there's
Speaker 1: a lot of questions about not just what's going to
Speaker 1: happen in the next two months, but what happens in
Speaker 1: the next six to twelve months. The frustration here is, yes,
Speaker 1: they're happy that forward guidance went away, but at the
Speaker 1: same time they don't trust the FED to be consistent
Speaker 1: over the next six to twelve months, and well, because
Speaker 1: it has over the last six to twelve exactly. Actually,
Speaker 1: there was a great story out on the terminal that
Speaker 1: we me and my sources have been kind of sharing
Speaker 1: around by Katerina Suriva, and it's about the history of
Speaker 1: Jackson Hole over the last two years under Powell and
Speaker 1: how much of his manifesto has really held up over
Speaker 1: the last two years. So credibility is really the question
Speaker 1: here um and the willingness to combat inflation. What else
Speaker 1: are you watching? What else am I watching? We'll see
Speaker 1: we're talking. We started this talking about the Vicks at six.
Speaker 1: Why does that matter from a Wall Street perspective, from
Speaker 1: a banking perspective, the post Labor Day rush, should things
Speaker 1: stay muted, there was a sense that underwriting could come back,
Speaker 1: that maybe we can see an I p O or
Speaker 1: two again, a bigger one. There are some big names
Speaker 1: out there that we've been talking about instat cart for example.
Speaker 1: I know Emily Chain was talking to Venture Capitalist last
Speaker 1: week on her program about something like that. Can deal
Speaker 1: making comeback in true reform? It hasn't been that bad,
Speaker 1: but underwriting is really what the expectation has been. If
Speaker 1: you see the vix keep rising. And then also remember
Speaker 1: quantitative tightening is taking off in large reform in September
Speaker 1: and to talk October. Should markets tighten up again, then
Speaker 1: all the hopes of doing all the things that make
Speaker 1: the banker's real money start to go away again. Underwriting.
Speaker 1: What does trading look like into the second half of
Speaker 1: the year. You know, we talk about this. Paul, if
Speaker 1: he was here, would already be asking about it. Is
Speaker 1: what does it mean for bonus season? Paul cares about
Speaker 1: is what bankers get paid, because Paul was a banker
Speaker 1: and then all he cared about was what he got paid. Yeah.
Speaker 1: Well yeah, And and to be honest, you know, this
Speaker 1: is where the rubber hits the road. When you come
Speaker 1: back from Labor Day, there's a lot of travel. I know,
Speaker 1: I'm already going to be in Miami and Paris through
Speaker 1: the end of the year. We have our own conferences.
Speaker 1: Why are you going to Paris? Um to interview, to
Speaker 1: see you of Morgan Stanley and kick care and so
Speaker 1: you take like a week off before or after so
Speaker 1: you can just enjoy this. Okay, care to say this?
Speaker 1: I was literally over the weekend going to actually ASHIONALI
Speaker 1: if we should take a girl's trip to Paris. But
Speaker 1: now we can't do that because apparently James Warman is
Speaker 1: more important than me. Um, let's talk to Almir's that
Speaker 1: maybe you'll give us some time on both ends of
Speaker 1: the trip so that you and I can come back
Speaker 1: here super happy as we deliver reports. But you know
Speaker 1: the reality is two weeks right after Labor Day or
Speaker 1: the full week after that, you have a lot of
Speaker 1: things in New York as well. You have super Return
Speaker 1: to New York, so all the big private equity executives
Speaker 1: from across the US and internationally are going to be
Speaker 1: in New York. You also have Salt, which is that
Speaker 1: Anthony Scaramuchie Skybridge conference. So I know, you know September
Speaker 1: is heated, it's booked, but again the markets are choppy.
Speaker 1: Well with conferences and with interviews, but not with I
Speaker 1: p o S or with launches. R'm talk. It's a
Speaker 1: lot of talking to investors, it's a lot of preparing
Speaker 1: for more stable times ahead. But again to your point,
Speaker 1: today's conversations lead to tomorrow's deals, right, But this year,
Speaker 1: I mean, what's deal activity look like, what's ipe O
Speaker 1: activity look like? What's it seems? Kind of it's it's
Speaker 1: really bad out there. I don't even know what else
Speaker 1: to say, because remember last year, the year before that,
Speaker 1: people were excited about not just I P O S,
Speaker 1: people were also excited about direct listings, they were excited
Speaker 1: about spacks and now kind of the venue to go
Speaker 1: back just licking their wounds from all of those things
Speaker 1: that they unfortunately got involved in last year. Regrettably. Right,
Speaker 1: the hangover is real, and it'll probably be real into
Speaker 1: next year. Maybe one or two will squeeze through, but again,
Speaker 1: a lot of the things that really fueled the banking
Speaker 1: system this year does not seem to be continuing into
Speaker 1: next year. And again, VIX at today, we're in the
Speaker 1: last week of August. What does that look like into
Speaker 1: next year? The Future's curve is telling you that it's
Speaker 1: going to get choppier into the end of the year.
Speaker 1: It's pretty crazy. Although I have to say the VIX
Speaker 1: has been a pretty poor indicator of action. I mean,
Speaker 1: there were times last month when it felt incredibly heated
Speaker 1: and the VIX was doing a whole lot of nothing. Now,
Speaker 1: I know Friday was a big down day and that's
Speaker 1: when the VIX climbed up to basically twenty six, but
Speaker 1: it's it's not moving around that much today, and I
Speaker 1: I just don't know about the VIX as an indicator.
Speaker 1: We haven't jumped above thirty six, so I don't think
Speaker 1: the VIX needs to get all that high to stifle activity.
Speaker 1: Twenty five is the one year average. Now that that one,
Speaker 1: we haven't jumped above twenty six. You mean thirty six
Speaker 1: is where we were in March of right, Okay, so
Speaker 1: we haven't jumped above thirty six, and today we're at
Speaker 1: twenty six. But you can get to and things already
Speaker 1: still feel pretty choppy out there, all right, Join Allie Bassik,
Speaker 1: Wall Street Reporter, Thanks so much for joining us. Let's
Speaker 1: get over to Pete Anderson right now, joining us from
Speaker 1: Anderson Capital Management. Pete, I want to get first year
Speaker 1: take on um Powell's eight minute speech on Friday. It
Speaker 1: really the whole Jackson, whole event, Um that seemed to
Speaker 1: drag markets down pretty substantially last week. Well, good morning,
Speaker 1: and yes it did in eight minutes of really devastating testimony,
Speaker 1: in my opinion, very very frank uh uh narrative in
Speaker 1: terms of the way he had been speaking. So I
Speaker 1: think that's a pretty strong message. But you know, the
Speaker 1: other thing we have to keep in context is that's
Speaker 1: one speech of many, and he is trying to figure
Speaker 1: out where the heck we are in this market cycle,
Speaker 1: just like the rest of us. You know, they have data.
Speaker 1: We all have the same data. And it is very
Speaker 1: challenging right now to formulate, you know, a pretty rational
Speaker 1: picture about where we are and how we should handle
Speaker 1: where we are and where we're going. So he's trying,
Speaker 1: like the rest of us. Hats off to him, But
Speaker 1: there are many many possibilities in this scenario. Isn't there
Speaker 1: certainly longer term? Um, it's a big question mark about
Speaker 1: what the FED does. Of course, in the next few months,
Speaker 1: it seems they are determined to continue raising at a
Speaker 1: if not seventy five then fifty basis point clip. What
Speaker 1: do you expect, Well, I expect that in lation is
Speaker 1: probably going to take care of itself, uh not completely,
Speaker 1: but you know, we have already seen really pretty remarkable
Speaker 1: changes in gas prices, housing inventories, and even lumber applywood prices,
Speaker 1: all those types of things, and we didn't require FED
Speaker 1: intervention for that. That was just supply and demand taking
Speaker 1: over classic dynamics like that. So what I worry about
Speaker 1: is that the FED might be acting too aggressively, and
Speaker 1: as you know, there's a delay and the impacts of
Speaker 1: his decisions, so we might be heading to a period
Speaker 1: where he might overtighten. As we see naturally, inflation just
Speaker 1: kind of receding. So that's what I worry about. But
Speaker 1: I do think that he probably will do fifty five
Speaker 1: uh coming this next month, and I do worry a
Speaker 1: little bit about that because I think by then we
Speaker 1: will see even more signs of inflation, you know, our deflation. Sorry,
Speaker 1: where we're not really focusing on the natural dynamics that's applied.
Speaker 1: Demand has And remember where there is no playbook for
Speaker 1: this recovery because it is truly unique. So as we
Speaker 1: struggle to look back at history and say these are
Speaker 1: the rules of thumb, I don't really think we have
Speaker 1: many rules of thumb given this unique circumstance that we're in. Well, Peter,
Speaker 1: you say there's no playbook, But let's go back to
Speaker 1: just a couple of years ago, where you had a
Speaker 1: series of rate hikes, you had quantitative tightening, you had
Speaker 1: an equity market that even by then at that point
Speaker 1: was also considered extremely hot and extremely overvalued. Isn't that
Speaker 1: the playbook to go by, the idea that the stock
Speaker 1: market can actually handle this QT and can handle these
Speaker 1: rate hikes because it has before well very good points.
Speaker 1: And you know, I struggle with that myself, to be
Speaker 1: honest with you. But I do think when we look
Speaker 1: at the root cause, where we find ourselves presently very
Speaker 1: very different from anything in the past. I mean even
Speaker 1: two thousand eight for instance, which I think is the
Speaker 1: most comparable in terms of the state of confusion that
Speaker 1: we're in right now. So I look at what caused
Speaker 1: us to get here, and I find that the cause
Speaker 1: is unique. And because the cause is unique, I also
Speaker 1: think the solution might be unique. And you know, we
Speaker 1: are desperately hanging on to every single data point that
Speaker 1: comes out, and many of these data points are approximations,
Speaker 1: So I think you have to blend all that together.
Speaker 1: I know what you're saying in terms of, oh, say,
Speaker 1: yield curve dynamics and rules of thumb about you know,
Speaker 1: if the yield curve is inverted. But even that, this
Speaker 1: time I think might be different in terms of, uh,
Speaker 1: you know, what the FED can do. You said you're
Speaker 1: concerned about overtightening. What what does that look like? Overtightening?
Speaker 1: What happens to an economy of this economy? Because it
Speaker 1: is pretty unique. M Yeah, I think, um, if they
Speaker 1: acknowledge edge that lets let's assume they do overtighten. Okay,
Speaker 1: and that's the biggessumption. But let's just play that scenario
Speaker 1: out then. I do think, um, if they acknowledge that
Speaker 1: they have overtightened, that could be a market rally. However,
Speaker 1: if they are denying or ignoring that and the market
Speaker 1: starts to signal that to them, that could be more
Speaker 1: dangerous because then we don't know what the next steps
Speaker 1: the FED will take well, and the and the effect
Speaker 1: on business, the effect on investment, the effect on consumers.
Speaker 1: How how bad does it get for the economy. I
Speaker 1: think it could be very serious in that, Um, you know,
Speaker 1: higher rates could just stifle a natural recovery. And that's
Speaker 1: the problem. You know, if you play out just as
Speaker 1: I mentioned, say lumber prices or housing inventory, you know,
Speaker 1: just imagine how that could get crushed if we actually
Speaker 1: put the brake on too strong. So, you know, nobody
Speaker 1: had envies the Fed's position, but I am hopeful that
Speaker 1: they are intuitive enough. And I hate to use the
Speaker 1: word intuition when we're talking about these kinds of things,
Speaker 1: but I do think it does come to the forefront
Speaker 1: where you have to try to blend all the scenario
Speaker 1: and signals that you're getting and try to incorporate the
Speaker 1: fact that we got here from coronavirus and it has
Speaker 1: impacted the nation in the world. Those are the things
Speaker 1: you have to factor in that are very different this
Speaker 1: time coronavirus. And then you know, like trillions upon trillions
Speaker 1: upon trillions of fiscal spending. Pete, we never have enough
Speaker 1: time with you. I'm so glad we could spend we
Speaker 1: could get you on the show though, So thanks so
Speaker 1: much for joining us. Peter Anderson is the founder of
Speaker 1: Anderson Capital Management. Let's bring in a true expert here,
Speaker 1: I mean a Baker chief OPEC correspondent and Dubai deputy
Speaker 1: beau chief of Energy Intelligence. Uh, let me put that
Speaker 1: question to you. Thank you for joining us as always
Speaker 1: back or excuse me, I am standing corrected. Let me
Speaker 1: ask you why do we see that spread in oil
Speaker 1: at the moment? Hi, good morning and thanks for having me. Um. Yeah,
Speaker 1: there is a huge spread between the two, as you noted,
Speaker 1: and uh, perhaps I mean we're we're going to see
Speaker 1: a further spread. And I mean this wasn't the case
Speaker 1: a few weeks ago. You saw that Brent fell to
Speaker 1: ninety dollars. Now it's back to a hundred and three. Um,
Speaker 1: and this mainly happened really because after comments UH from
Speaker 1: the Saudi Energy Minister hinting that Okay Plus had previously
Speaker 1: cut production, and that comment was enough for the market
Speaker 1: to realize that cutting production might be on the table again.
Speaker 1: So we saw Brent rise based on on that news. UM,
Speaker 1: whether or not we're gonna see the Open Plus group
Speaker 1: go ahead with that hint of a cut remains to
Speaker 1: be seen. The group is supposed to meet on the
Speaker 1: fifth of September and they say all options are open,
Speaker 1: but I think I mean, just looking at Brent prices here, UM.
Speaker 1: The main reason I believe the Saudi Energy Minister hinted
Speaker 1: that at these cuts UM wasn't really to to raise prices.
Speaker 1: It was more about gaining UH control over the market.
Speaker 1: He was worried that overbarish or over bullish uses moving
Speaker 1: this market. Speculation is moving this market. Use um daily
Speaker 1: news that we're seeing that perhaps the US is going
Speaker 1: to reach a deal with Iran and Iran would supply
Speaker 1: more barrels into the market. I mean, there's the influx
Speaker 1: of news and that's influencing the market. So I would
Speaker 1: say the market in general oil is not reacting on fundamentals,
Speaker 1: it's more of a kind of psychological disturbance or to
Speaker 1: borrow a phrase the Saudi Energy minister used, he says,
Speaker 1: it's a it's in a stage of like instab pity
Speaker 1: uh and she's afraidia. Um. So that's that's the situation. Uh.
Speaker 1: What's the real likelihood from from your vantage point of
Speaker 1: Iranian barrels coming on to um, you know, the Western
Speaker 1: market from here from America, it looks incredibly unlikely that
Speaker 1: that something's really going to happen that would lead to,
Speaker 1: you know, those sanctions coming off. Sure, UM, I would
Speaker 1: agree with that. I mean, I know that from from
Speaker 1: the Iranian press or Iranian media, even from Iranian officials,
Speaker 1: they seem to be a lot more optimistic and they
Speaker 1: want to keep reminding the market that in order to
Speaker 1: uh to to to to move prices down, Iran needs
Speaker 1: to come back. Iran needs to fill that gap there
Speaker 1: isn't enough spirit capacity and they're able to do that.
Speaker 1: But just um, thinking about it in terms of signing
Speaker 1: a deal with the US, I I completely agree with
Speaker 1: what you're saying here that it's really complicated. Negotiation is ongoing,
Speaker 1: and I don't see the steal getting signed anytime soon.
Speaker 1: But that doesn't stop the market from reacting. Every time
Speaker 1: we see a proposal or talk of the proposals, we're
Speaker 1: seeing prices move on that. So that's that's a fair
Speaker 1: point in terms of spare capacity, I mean, talking about
Speaker 1: cutting production makes sense to be that the market would
Speaker 1: react to that. Talking about raising production, I mean, how
Speaker 1: much can they really raise production? Um, Well, let's look
Speaker 1: at the group as open plus. I would say that
Speaker 1: there are only two members out of that twenty three
Speaker 1: member group that have spare capacity left or have capacity
Speaker 1: that they could bring to the market and Saudi you
Speaker 1: Ai and Saudi. So between the two, I would say
Speaker 1: they're sitting at UM two point five two point three
Speaker 1: million barrels. Uh. So that's that's the amount that could
Speaker 1: be off to the market. But bear in mind that
Speaker 1: both countries they don't want to max out their capacity
Speaker 1: because we're at a time here where sitting on spare
Speaker 1: capacity is incredibly valuable. It's become more valuable than than
Speaker 1: actual production and provides these countries a lot of leverage
Speaker 1: and political leverage, and I think that part of why
Speaker 1: the Biden administration. Biden visited the Jedda recently was because
Speaker 1: Saudi Arabia still sits on that capacity, so they're not
Speaker 1: gonna max out to twelve anytime soon. And you know,
Speaker 1: UM not have that in their hands. So I mean,
Speaker 1: thus the supply side, speak to us a little b
Speaker 1: about the demand side. I mean, how do you go
Speaker 1: about calculating this kind of stuff? I really studying the
Speaker 1: demand picture When you do have the likes of China
Speaker 1: and India buying discounted crude from Russia, still, how does
Speaker 1: that affect the demand pressures on the commodity market? Um, well,
Speaker 1: we we saw. I mean OPEC predicts in three that
Speaker 1: there is gonna be an increment in demand. It's it's
Speaker 1: not going to be at the same level of two,
Speaker 1: but there's gonna be increased demand. The there's a risk
Speaker 1: of the recession still hitting and again that's uh that's
Speaker 1: impacting uh markets. But uh, I mean that small demand
Speaker 1: increase that really needs to be fulfilled by the remaining
Speaker 1: spare capacity, which isn't much. UM. OPIC members remain optimistic
Speaker 1: about the demand side, but also very cautious. UM as
Speaker 1: you noted that, yeah, Russia is diverting a lot of
Speaker 1: its crew that is normally sold into Europe. Now it's
Speaker 1: being sold at discounts to India and China, who we
Speaker 1: understand our our storing a lot of it and straight
Speaker 1: back to those Europeans at or straight back exactly doing
Speaker 1: that cycle, which which is happening. Uh so they're they're
Speaker 1: taking advantage of the situation. But at the same time,
Speaker 1: I mean we've we've gotten a lot of calls from
Speaker 1: from from people in India in China asking us if
Speaker 1: the Gulf is going to be reducing their their allocations
Speaker 1: there and looking to sell their oil at at higher
Speaker 1: prices to to europe um, which isn't the case. I mean,
Speaker 1: the Gulf states haven't cut their allocations well, and I
Speaker 1: mean a lot of a lot of European countries are
Speaker 1: also still buying Russian crude, right, I mean these uh Italy, Yeah,
Speaker 1: we we we can't pretend that everyone is UM following
Speaker 1: along and it doesn't even kick in. I don't think
Speaker 1: until February the real UM sanctions there. I mean a
Speaker 1: great having on. I hope we can get you back
Speaker 1: soon because your insight and your intelligence very key to
Speaker 1: helping us to understand these markets. I mean, a baker
Speaker 1: is chief OPEC correspondent at Energy Intelligence. We're watching uh
Speaker 1: brent crude At one oh three forty two. I got
Speaker 1: a great message from Dan Curtis earlier, who is he's
Speaker 1: one of one of our producers in London. I believe
Speaker 1: he's your ball um every something. That very cool, he said.
Speaker 1: The Tesla model s uh sixty, so that's the cheaper one.
Speaker 1: It has a sixty two kilowatt hour battery with a
Speaker 1: two mile range, meaning it's about zero point three kilowatt
Speaker 1: hours per mile um. So he has worked out through
Speaker 1: that at a thousand euros per megawatt hour, which is
Speaker 1: one europe Er kilowatt hour, that works out to like
Speaker 1: thirty euro cents per mile and as I said, red parody,
Speaker 1: so that's it about the same as thirty cents cents um.
Speaker 1: Fuel economy in Europe, the average is six leaders per
Speaker 1: hundred kilometers that's how they measure it, instead of miles
Speaker 1: per gallon or about zero uh point one leaders per
Speaker 1: mile um. Premium gas in Germany is one seventy nine
Speaker 1: and euros, which as we know is one dollar and
Speaker 1: seventy nine cents per leader um or seventeen cents per mile.
Speaker 1: So in order to have parody between a Tesla and
Speaker 1: an internal combush an engine car, one that burns gasoline. Um,
Speaker 1: with gas at these prices, electricity needs to drop to
Speaker 1: five and eighty six euros or dollars a kill one hour.
Speaker 1: Right now we're approaching a thousand, So right now it's
Speaker 1: more economical to drive a gas car in Europe, which
Speaker 1: I thought was that's is interesting. Actually, now that you've like,
Speaker 1: let's bring in Kevin Tynan from Bloomberg Intelligence. He's a
Speaker 1: senior automotive analyst and Kevin, you know, there are a
Speaker 1: couple of news events that prompted me to say, let's
Speaker 1: get Kevin on. First was the news out of California
Speaker 1: that they want to um ban uh the selling of
Speaker 1: internal combustion engines by so no more gas engines by then. Okay,
Speaker 1: it's a long way off, but is that possible? Uh,
Speaker 1: well saying it as possible. And and by the way,
Speaker 1: I'm with you on the James Taylor thing. Um but Kevin,
Speaker 1: that was a big trail. Yeah. Well I'm a big
Speaker 1: Carlie Simon fans, so anyway, but um but you know,
Speaker 1: I I laugh because I don't think any of these
Speaker 1: people are going to be making decisions in if we're
Speaker 1: put on that path now anyway. Um, And I still
Speaker 1: feel like, and you know this matter, right, we talked
Speaker 1: about this all the time, like there's so many unintended
Speaker 1: consequences of this technological singularity of going to e V
Speaker 1: right that that I feel like we're just looking at
Speaker 1: one very very short part of the process, I mean,
Speaker 1: from mining of materials to disposal of batteries that says
Speaker 1: this is better, this is the way we should go.
Speaker 1: And I'm just not sure. And I think we're starting
Speaker 1: to hear a little bit more about like, hey, maybe
Speaker 1: we need some diversity in how we're powering these things
Speaker 1: and what choices we have as consumers. Yeah, yeah, I
Speaker 1: mean I I just I just feel like we're so
Speaker 1: focused on this one on the tail pipe or lack thereof,
Speaker 1: and saying this is bad, and I'm just not I'm
Speaker 1: just not convincing. I'm not anti e V, I'm not
Speaker 1: pro internal combustion. I'm just saying I think we're being
Speaker 1: very very nearsighted on this hundred percent, because who can
Speaker 1: forecast out I mean, it's hard enough to forecast out
Speaker 1: the other story. I don't even know what's for lunch
Speaker 1: today exactly. Uh, well, if Paul Sweeney were here, he
Speaker 1: would tell us he always knows what. Yeah, sometimes I
Speaker 1: think there's actually a function on the terminal that tells
Speaker 1: you what's for lunch. At least here a Bloomberg cho
Speaker 1: chomp go. That's right. Another story over the weekend that
Speaker 1: is um closer on the horizon France, because I guess
Speaker 1: I promise by Macron during his campaign, France is now
Speaker 1: going to or at least it thinks it can allow
Speaker 1: any consumer to lease or rent an electric vehicle for
Speaker 1: one hundred euros a month, a hundred dollars a month,
Speaker 1: because we're at parody. Um, that to me seems nuts.
Speaker 1: I mean, what if too many people are takers? Yeah?
Speaker 1: And and this, you know, is one of those things
Speaker 1: that you know, you have to think about the entire transaction, right,
Speaker 1: And I've said this for years that really who controls
Speaker 1: this is the manufacturer. So what basically is being said
Speaker 1: here is like, yeah, you you can create demand at
Speaker 1: a hundred dollars a month, can we do the supply?
Speaker 1: And how are those manufacturers made whole by the government? Right?
Speaker 1: So the vehicle costs a certain amount and you can
Speaker 1: give it to somebody. You can sell things improfitably all
Speaker 1: day long if you want to. But does the government
Speaker 1: step in and say, like, hey, that least should be
Speaker 1: you know, four times that five times? I'm guessing there.
Speaker 1: I'm guessing they're going to make the manufacturer whole. But
Speaker 1: even if even if they said to the manufacturer will
Speaker 1: give you a million dollars a month, they still can't
Speaker 1: produce that many vehicles that fast time. That's exactly right.
Speaker 1: And where are you going to charge them? I mean
Speaker 1: I don't already can't find a charger, and you know,
Speaker 1: when I'm driving an e V just me around New York.
Speaker 1: Admittedly Paris could have more, but I don't think it's
Speaker 1: that manymore. All right, We don't have time, unfortunately, but Kevin,
Speaker 1: thanks so much for joining us. Pretty good here in
Speaker 1: the studio with me, Matt Miller and as you know, Cretty,
Speaker 1: I lived in Germany for many, many years. Um studied
Speaker 1: there for a little while and tubing in and worked
Speaker 1: there for Bloomberg couple of stints, and I love the country.
Speaker 1: So with all due respect, I'm gonna tell you something
Speaker 1: ridiculous about Germany under the current system. And this is
Speaker 1: regulated by law, energy producers in Germany that have lower
Speaker 1: costs or could charge lower costs to consumers, like wind energy.
Speaker 1: There tons of windmills around Germany, or solar power providers.
Speaker 1: Their prices are set by whoever has the highest price
Speaker 1: in the market, so they could offer lower prices to
Speaker 1: consumers with wind and solar. But since gas fired power
Speaker 1: plants demand higher prices, wind and solar prices are set
Speaker 1: at those levels. Is that not ridiculous? It so, just
Speaker 1: to be clear, it means that you can't actually afford
Speaker 1: the renewable energy. No, it means that they can't charge
Speaker 1: lower prices. The regulator makes them charge the same price
Speaker 1: as whoever has the highest price. Right now, I think
Speaker 1: Robert Habeck and some others in Germany want to reform that.
Speaker 1: Like obviously, let's bring in Maria today, a Bloomberg opinion reporter,
Speaker 1: and she is deep in it when it comes to
Speaker 1: energy pricing, energy shortages, and European law and regulation. Wait,
Speaker 1: first of all, where are you, Maria? I'm uh and
Speaker 1: you know what, I'm gonna giving a little secret, but
Speaker 1: just don't tell anyone. I'm on my way to meet
Speaker 1: our friend and colleague and Marie, and this time it's fun,
Speaker 1: not work. We're going to get to Vita. I mean,
Speaker 1: it didn't invite us to me, just sounds like work,
Speaker 1: but I get it. UM for young people, it's a
Speaker 1: great place to party around the clock. In terms of
Speaker 1: UM European energy prices UM, what is going on over there?
Speaker 1: I mean, you've already got a huge crisis due to
Speaker 1: supply shortage UM thanks to Vladimir Putin's war in Ukraine.
Speaker 1: But the regulatory framework seems ludicrous, not just in Germany
Speaker 1: but across the continent. What is ursula funder lyon UM?
Speaker 1: The EU President planning, on commission president planning on doing
Speaker 1: about it. Well, listen, Matt, I think to me the
Speaker 1: relevant thing today that Brussels finally woke up today. Remember
Speaker 1: for weeks and now already you know I wrote about
Speaker 1: this at length back on TV by the way next week,
Speaker 1: and essentially they kind of seemed to be in this
Speaker 1: illusion that yes, winter is going to be very tough,
Speaker 1: but somehow we'll manage. But there was no policy action
Speaker 1: behind it. I think last week, of course, where every
Speaker 1: record and you know this very well, was smashed on
Speaker 1: the gas market, the futures market, they really kind of
Speaker 1: something hid and and and it really quicked. The market
Speaker 1: is broken and the issue here is that it goes
Speaker 1: down to consumers and we're in for a very tough winter.
Speaker 1: Today Brussels finally woke up and to me, that's a
Speaker 1: positive spin on this. Today we heard from the head
Speaker 1: of the Commission of Underlying which she said this is
Speaker 1: not just about demand destruction, and nonetheless that is the
Speaker 1: key issue. By the way, they really say this behind
Speaker 1: the scenes. It has to be about demand destruction. It's
Speaker 1: the only way you can deal with a supply shock
Speaker 1: of this magnitude. But the other thing is the electricity market.
Speaker 1: The energy market in Europe's very complex, but it's this
Speaker 1: isn't a similar market. It really changes by country. You know,
Speaker 1: it's very well you're in Germany, I mean Brussels. We
Speaker 1: probably have a very different energy market the two of us.
Speaker 1: But one thing, and you alluded to this, is that
Speaker 1: gas is really setting the price for everything else. Gas
Speaker 1: is going through the roof. It trickles down to everything
Speaker 1: else renewable. The attitude that it priced all of this,
Speaker 1: and I think for European officials is now very clear
Speaker 1: that they have to aid stage and intervention and to
Speaker 1: change the way the market operated. So I think we're
Speaker 1: heading into a new space in which gas is not
Speaker 1: going to call the shops at least the price for it.
Speaker 1: And I was having a conversation with a contact of mind,
Speaker 1: and I asked him, you know, what does it mean?
Speaker 1: And he decided a terminator. I mean, we have to
Speaker 1: go all in into this market, but also change the
Speaker 1: fact that gas should not be the benchmark. So what
Speaker 1: about how do you actually decouple some of these markets.
Speaker 1: Is there any sort of methodology that's actually been put
Speaker 1: forward on how you actually do this or is this
Speaker 1: still just in the early idea stage. Look, I I
Speaker 1: think it's very early days. This is gonna warrant a
Speaker 1: big debate, the fact that this isn't a single market
Speaker 1: and the rules are not apply to all of the
Speaker 1: same way. But I think if I look at the
Speaker 1: countries like Spain and Portugal, and of course I always
Speaker 1: keep a very close eye on my home country, I
Speaker 1: have a national bias there. But to me and I
Speaker 1: bring up scene because in this case, the Spanish, I
Speaker 1: kind of thought is coming a year ago, and they
Speaker 1: looked at their own market and they went, we don't
Speaker 1: really use that much gas. We have a lot of
Speaker 1: renewables are electric that is jumping for ways that we
Speaker 1: do not think are warranted or actually reflect our energy
Speaker 1: mixed and consumption. So we want to break away from
Speaker 1: the gas. They pulled out of a single bunchmark. They
Speaker 1: were able to get exemptions from the country which they
Speaker 1: separate the gas from the actual cost of making the electricity,
Speaker 1: so they were able to low ball their bill. So
Speaker 1: there was an uncoupling there from the electricity price to
Speaker 1: the gas price. And if you look at bills, of
Speaker 1: course have jumped in Spain and Portugal, but there are
Speaker 1: nowhere near the prices that we're seeing in jur me
Speaker 1: and and the French or Belgian Tino. The pay maybe
Speaker 1: six time of years for Spanish castle was more a
Speaker 1: hundred fifty so plus there was an effector that really
Speaker 1: brought it down. Could this be replicated for the entire
Speaker 1: European market. I'm not sure, but it does also clues
Speaker 1: so there are ways to get flexibility and also break
Speaker 1: away from gas, which is now the big issues. And
Speaker 1: Maria today, oh thanks for joining us. I can't wait
Speaker 1: till you re emerge on Bloomberg Television in September. Everyone,
Speaker 1: have a fantastic Monday. Thanks for listening to the Bloomberg
Speaker 1: Markets podcast. You can subscribe and listen to interviews with
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
Speaker 1: I'm on Twitter at Matt Miller. Put on false Sweeney
Speaker 1: I'm on Twitter at pt Sweeney Before the podcast. You
Speaker 1: can always catch us worldwide at Bloomberg Radio