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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day
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Speaker 3: Stocks hovering your record highs as investors wait more magnificent
Speaker 3: seven earnings. Stuart Heiser City Group writing this, the early
Speaker 3: reactions to earnings have been mixed. We remain positive US
Speaker 3: equity Beta with a quality tilt and preference for AI
Speaker 3: power generations. Stuart joins us. Now, so great to see you,
Speaker 3: good morning, Thank you for being here. I'm glad the
Speaker 3: Polar bears didn't meet you. I'm just curious going forward.
Speaker 3: What's your takeaway is? Are you still all in on
Speaker 3: power generation despite the fact that investors seem a little
Speaker 3: bit cautious about spending more than revenues are growing.
Speaker 4: Yeah, we're still very positive on that story, and I
Speaker 4: think you're going to get a lot of political headlines
Speaker 4: next week with Election Day coming up that puts even
Speaker 4: more focus on utility prices. To be completely honest with you,
Speaker 4: all the capex numbers that Emory mentioned, a lot of
Speaker 4: that is going straight into data center build out. I mean,
Speaker 4: one of the Meta data centers in Louisiana costs twenty
Speaker 4: seven billion dollars, which for New Yorkers that's three tunnels
Speaker 4: under the Hudson River, so an astounding amount of money.
Speaker 4: So yeah, we're still there. Look, there are obviously risks
Speaker 4: to that, you know, just one headline that these chips
Speaker 4: need know less power that we thought would be very
Speaker 4: destructive for that trade, like we saw with deep Seat
Speaker 4: back in January. But for now, we do think it's
Speaker 4: the best sharp ratio way to kind of have that.
Speaker 5: AI drain on.
Speaker 3: And frankly, the best example of this is Caterpillar. The
Speaker 3: fact that those shares pop and most since two thousand
Speaker 3: and nine on energy not necessarily bulldozers. I'm just curious
Speaker 3: what you're expecting to learn from Amazon and Apple and
Speaker 3: whether that could feed into the story or that these
Speaker 3: earnings are irrelevant to you based on the capex spend
Speaker 3: that we've already heard the likes of Microsoft and Alphabet and.
Speaker 5: Meta, I mean, definitely not irrelevant.
Speaker 4: I think Amazon in particular, because you're going to get
Speaker 4: you know a little bit of a site into AWS,
Speaker 4: but also consumer spending, so I think Amazon will be
Speaker 4: quite interesting. I think Apple surprised people a little bit,
Speaker 4: you know, just just giving the uptake on the iPhone,
Speaker 4: but definitely important. Last night was a little more important,
Speaker 4: and that's how it was priced. You know, Amazon earning
Speaker 4: something after that would be very important.
Speaker 6: Again, do you think the bar is just too high
Speaker 6: consider what we saw from Meta?
Speaker 5: Yeah, you know, Meta is interesting.
Speaker 4: I think there's some view that they're they're operating cash
Speaker 4: flows are starting to converge with their capex spend, and
Speaker 4: the question is how are they going to finance that?
Speaker 4: And the discussion of how do you finance all this
Speaker 4: build out is a very big one. I think I
Speaker 4: think Oracle was issuing about forty billion in death this week,
Speaker 4: so yeah, it's you know, there is a question here,
Speaker 4: I think about how this is going to be financed,
Speaker 4: you know, medium to long term, and certainly the Meta stuff.
Speaker 4: It looks like, you know, they're all in and as
Speaker 4: they should be. I think you know, you both mentioned
Speaker 4: the amount of spending. I think it's because these companies
Speaker 4: view this as exextential. They feel that they have to
Speaker 4: win the AI tright.
Speaker 6: You mentioned energy though, Could the energy story keep up
Speaker 6: to spend or they'll be a pause just because we
Speaker 6: don't have the resources to power this.
Speaker 5: That's a good question.
Speaker 4: I mean, instead of Caterpillar bulldozers, maybe you give your
Speaker 4: kids Caterpillar turbines.
Speaker 5: I don't know, but yes, there's an issue with that.
Speaker 7: I think.
Speaker 5: Look when Oracle report a month.
Speaker 4: And a half ago or some of that was the
Speaker 4: big commentary was amazing revenue forecasts, they might not have
Speaker 4: the chips or the electricity to actually get there. So,
Speaker 4: you know, our folks on the ai I side think
Speaker 4: you may have to start almost like carving out hyperscalers
Speaker 4: and have them paying a premium for power, because it
Speaker 4: does seem like your ability to compete and also your
Speaker 4: ability to get access to the chips is linked to
Speaker 4: your proof of concept on the energy side of it.
Speaker 5: So yeah, it could be that we're earlier innings to your.
Speaker 4: Point because of bottlenecks as opposed to anything else.
Speaker 3: Power Lion is, the energy trade, is the AI trade,
Speaker 3: and the idea of.
Speaker 1: Rates going lower.
Speaker 3: How much was yesterday's shock that maybe this wasn't an
Speaker 3: all in FED with respect to a Deeszember rate cut
Speaker 3: potentially the first sign of a real problem for this trade.
Speaker 4: It hasn't been up until now because these companies have
Speaker 4: amazing palance sheets and are generating so much cash. I
Speaker 4: think the fact that Oracle is issuing a lot of
Speaker 4: debt and these numbers are becoming so big it could
Speaker 4: be a little bit more of an issue going forward.
Speaker 5: But the fact is these are you know, these.
Speaker 4: Are some of the strongest balance sheets on the planet
Speaker 4: from a lot of these large captachs. I don't think
Speaker 4: rates is going to impact them too much because frankly,
Speaker 4: they're willing to self finance this stuff at levels that
Speaker 4: a lot of people wouldn't finance them at because they
Speaker 4: view that spend is so important.
Speaker 3: Right, So then why is it important at all whether
Speaker 3: the FED cuts in December or not, Because you're talking
Speaker 3: about how it doesn't affect the biggest trade out there,
Speaker 3: which has been fueling GDP, has been fueling economic growth.
Speaker 3: It doesn't necessarily affect the fact that we see credit
Speaker 3: conditions that a lot of people, for all intentsive purposes, have.
Speaker 1: Been calling extraordinary loose.
Speaker 3: And you've already seen the momentum trade. Yes, have hiccups,
Speaker 3: but do really well. So does it really matter if
Speaker 3: the FED cuts in December.
Speaker 5: It's a very bullish way to look at markets.
Speaker 4: I would say if FED cuts don't matter for equities, look,
Speaker 4: I think it would matter more if we had more
Speaker 4: data in the sense that if you could confirm the
Speaker 4: labor market was continuing to slow down and they actually
Speaker 4: wanted to get back to neutral, in that case, it
Speaker 4: would matter more. We're in a bit of a data vacuum.
Speaker 4: I think the issue in the market's going to have
Speaker 4: a little bit with the FMC yesterday is really trying
Speaker 4: to understand the reaction function here for then in December,
Speaker 4: because you know Chrishn earlier mentioned this, you know they had.
Speaker 5: A base case.
Speaker 4: If you look at the data that's come in since
Speaker 4: that base case, the inflation data was fairly friendly. They
Speaker 4: themselves have stated down to side risk to the labor
Speaker 4: market from the shutdown. That combination of data wouldn't suggest
Speaker 4: that you don't cut in December. So I think the
Speaker 4: question here is is what is your reaction function, what
Speaker 4: are you going to be looking at, and how are
Speaker 4: you weighing the dual mandate risk?
Speaker 6: So the market now start to care about the shutdown
Speaker 6: because it may impact whether or not the FED.
Speaker 4: Can move, you know, potentially, the market seems very uninterested
Speaker 4: in shutdown politics at this point. Look, I think coming
Speaker 4: into this meeting, you say, if we go into the
Speaker 4: FED blind, there could be.
Speaker 5: Some risks there.
Speaker 4: The market kind of priced that out. The issue with
Speaker 4: the next one is they update the SEP, which is
Speaker 4: another level detail they're going to have to provide, and frankly,
Speaker 4: your data at that point could be two or three
Speaker 4: months old, depending because it's going to you know, if
Speaker 4: they reopen, you can get two month old labor data
Speaker 4: out pretty quick. They haven't collected anything on either inflation
Speaker 4: or labor market data now for two months, so it's
Speaker 4: not like they can just you know, push a button
Speaker 4: and get the inflation print. They could go into that
Speaker 4: December meeting with a lot less information than we hoped,
Speaker 4: but yeah, it doesn't I think you're going to need
Speaker 4: to see more paychecks miss for the market to really
Speaker 4: care to be honest with you.
Speaker 3: At this point, though, people are trying to look at
Speaker 3: what they do have, which is corporate earnings. And we've
Speaker 3: seen pretty varied earnings. Right, there's a Chipotle story. I
Speaker 3: keep coming back to what I sound like a broken record. No,
Speaker 3: I'm not obsessed with Chipotle, but there is this feeling
Speaker 3: they are eating the margins insert your pun here, because
Speaker 3: they cannot pass along any price increases that are commensurate
Speaker 3: with the costs that are increasing on their end. And
Speaker 3: they're talking about real weakness, particularly in lower income consumers,
Speaker 3: at the same time that you're seeing higher end products
Speaker 3: in particular, our first class airline tickets for example, do
Speaker 3: really well. So, yes, it's the case shaped economy. At
Speaker 3: what point is that weakness going to start bleeding into
Speaker 3: the credit cracks, the cockroaches, whatever you want to call
Speaker 3: it that some people have been trying.
Speaker 1: To suss out.
Speaker 5: Yeah, it's a great question.
Speaker 4: I would say, first class plane tickets, you must have
Speaker 4: been doing very well.
Speaker 1: I'm not checking out myself to carry on.
Speaker 5: It's it can be an issue.
Speaker 4: But look, this has been almost like a slow motion
Speaker 4: you know, car crash on the labor side, right, I
Speaker 4: feel we've been talking about weakness in the labor market
Speaker 4: for eighteen or eighteen or twenty four months, and yeah,
Speaker 4: there are pockets of risk even you know Walmart's last earnings,
Speaker 4: you know they discussed that, you know, tariffs are going
Speaker 4: to be an issue in coming quarters. So yeah, there
Speaker 4: is a build into this and we we what we
Speaker 4: might start, we might see is the impact from tariffs,
Speaker 4: but it's it's very slow and kind of methodical how
Speaker 4: it bleeds in. I do think, you know, retailer earnings
Speaker 4: later in the quarter are going to be going to
Speaker 4: be very important because you know, the front half of
Speaker 4: earning has been you know, buyased towards larger cap stocks
Speaker 4: with a lot of exposure to capital markets and a
Speaker 4: lot of exposure to the AI theme, and those have
Speaker 4: generally come in well. But look that the market seems
Speaker 4: pretty happy to whistle by that cemetery, as they say,
Speaker 4: and until ven marks.
Speaker 1: Are going to rally, I think stay with us.
Speaker 6: More Bloomberg surveillance coming up after.
Speaker 3: This Leland Miller China base book writing this, the US
Speaker 3: has in fact offer deeper concessions to secure this truth
Speaker 3: once those details emerged this deal, we'll look far more
Speaker 3: one sided in China's favor and perhaps also less likely
Speaker 3: to hold Leland joins US.
Speaker 1: Now Leland, Why do you say that.
Speaker 3: What concessions do you see the US offering China to
Speaker 3: secure this deal that seem lopsided?
Speaker 8: Well, I think this is the beginning of the deal,
Speaker 8: not the end of the deal.
Speaker 9: So I think what we saw at the the you know,
Speaker 9: in the last twelve hours, was a successful start. You know,
Speaker 9: the President agreed to pull back tariffs in return for
Speaker 9: the Chinese agreeing to pull back where Earth their new
Speaker 9: rare Earth export control regime. You know, people may not
Speaker 9: be happy with the a lot of people may not
Speaker 9: be happy with the shipping fees being postponed, but in general,
Speaker 9: the low hanging fruit was addressed. What you didn't see
Speaker 9: was something that I think a lot of China Hawks
Speaker 9: were scared that they would wake up to, which is
Speaker 9: a whole bunch of export controls pulled back in some
Speaker 9: sort of quid pro quo.
Speaker 8: But again, President Trump announced.
Speaker 9: That he is heading to heading to China early next year,
Speaker 9: and there will be more concessions, and there will be
Speaker 9: more back and forth, and there will be a broader
Speaker 9: deal there that they're working on right now. So we're
Speaker 9: working on the margins of the deal, and as we
Speaker 9: get closer to the core, I think that's when things
Speaker 9: are going to a bit more controversial.
Speaker 6: Lew And what about AI chips because the President had
Speaker 6: said that they would discuss Blackwell, then he said they
Speaker 6: didn't discuss Blackwell, but they discussed other chips, and it's
Speaker 6: now for China to talk about that with in video.
Speaker 6: Where does this stand.
Speaker 9: I think what the President came to understand over the
Speaker 9: last you know, twenty four hours or so is that
Speaker 9: this is by far the most controversial aspect of any
Speaker 9: trade deal. When you start incorporating export control rollbacks are
Speaker 9: which are done for national security purposes as part of
Speaker 9: a trade deal where you're just trying to get China
Speaker 9: to buy more commodities, this becomes very, very problematic. And
Speaker 9: so I think what the President realized is that it
Speaker 9: is teaming to do a little bit more uh research
Speaker 9: on on what made sense here. Obviously that there's a
Speaker 9: you know, this is this is this is a very
Speaker 9: big issue. But you know, if the President is trying
Speaker 9: to build up, you know, a broader deal, this was
Speaker 9: the These are the low hanging branches, and then I
Speaker 9: think as they work towards the technology side, that's when
Speaker 9: things are to get more controversial.
Speaker 6: What about TikTok as well, we heard there's going to
Speaker 6: be some sort of deal regarding TikTok, and all that
Speaker 6: we heard from the Chinese Commerce Ministry is that they
Speaker 6: will keep talking.
Speaker 9: Yeah, I think there's a general sense that the Chinese
Speaker 9: side is not completely against any TikTok deal, but I
Speaker 9: think that they're holding their cards as close to the
Speaker 9: chest for as long as possible. Uh, and so you know,
Speaker 9: they can get the maximum maximum concessions possible. You know,
Speaker 9: keep in mind, if we would just announce every concession
Speaker 9: right now and then President Trump announced a trip to
Speaker 9: China and April, there'd be this whole scramble to try
Speaker 9: to understand what that's for. So I think some of
Speaker 9: the some of the things that people were talking about
Speaker 9: being released right now are actually being pushed back a
Speaker 9: number of months. And well, I think both sides are
Speaker 9: trying to see what the other side is willing to
Speaker 9: give before they have a final framework.
Speaker 6: So it's a Dave tant for about a year. But
Speaker 6: that doesn't mean this relationship cannot escalate. With any sort
Speaker 6: of truth that comes out of the White House, What
Speaker 6: would your message be to investors that think, potentially they
Speaker 6: could ignore this relationship for the next twelve months.
Speaker 9: I think, look, an agreement to not do something for
Speaker 9: a year only holds as long as the Chinese decide
Speaker 9: they're not going to do something they don't feel like
Speaker 9: they've been provoked or something else. There's an issue that
Speaker 9: one of your truths doesn't mean one of your truths.
Speaker 9: It means a truth until one of the sides the
Speaker 9: sides that truce doesn't work anymore. But the larger point is,
Speaker 9: I think on tariffs, so the President's moved back tariffs
Speaker 9: by ten percent, so you have a headline rate of
Speaker 9: fifty seven percent. That sound going down to forty seven
Speaker 9: or so. That sounds high. You've got an effective rate
Speaker 9: around thirty percent. So I think the larger picture here
Speaker 9: is they've gone down enough that they're getting very close
Speaker 9: to what competitor producers are actually being charged in the twenties,
Speaker 9: you know, Vietnam and the Mexicos and.
Speaker 8: Other Southeast Asian countries.
Speaker 9: If they get too close, all the de risking work
Speaker 9: that the president has done will start going the other direction,
Speaker 9: there will not be an incentive to move your supply
Speaker 9: chains out of China, so they're gonna have to look
Speaker 9: at that very closely. They're about at the end of
Speaker 9: what they could do in terms of terraff productions on
Speaker 9: China without reversing the president's terraf regime that he fought
Speaker 9: very hard to put in place.
Speaker 3: Well, and the optics of this trip have been pretty powerful,
Speaker 3: the idea of a Southeast Asia tour in Malaysia and
Speaker 3: inking some of the deals and the niceties between the
Speaker 3: likes of the Tie and the Vietnamese and the other
Speaker 3: leaders in the region, Japan as well.
Speaker 1: What do you make of that?
Speaker 3: Do you think that that does give the US closer
Speaker 3: allies in Southeast Asia? They gave it more clout, more
Speaker 3: ammunition heading into these meetings with China.
Speaker 9: Certainly, the more the United States interacts with its allies
Speaker 9: and partners in Asia, the more leverage have with China,
Speaker 9: and the smarter policy will be because you'll be able
Speaker 9: to de risk your supply chains outside of things that
Speaker 9: give China leverage points on your economy. So it's good politics,
Speaker 9: it's good economics. I think it's very helpful. You know,
Speaker 9: you look at what happened with the critical minerals. That
Speaker 9: Chinese released a very powerful export control regime that exerted
Speaker 9: dominance over the supply chains of the world in terms
Speaker 9: of rare earths and critical minerals. The US has immediately
Speaker 9: responded and tried to go out and have partnerships with Australia,
Speaker 9: with Southeast Asian countries. You know. So I think that
Speaker 9: what China did was quite momentous, but at the same
Speaker 9: time it has lit a fire under the United States
Speaker 9: to try to do something to fix the problem. Well.
Speaker 3: And one thing that China page book does so well
Speaker 3: as you track real time economic activity going on in China,
Speaker 3: there's been this stagnation that we've talked about on employment
Speaker 3: rate for youth, very high, and a real question about
Speaker 3: how much the economic backdrop is going to push Jijinping
Speaker 3: to the table to try to make sure that the
Speaker 3: relationship with the United States in front of the rest
Speaker 3: of the world isn't severed. How well are they doing
Speaker 3: rebalancing their aman to more of a consumption less of
Speaker 3: just simply an output based economic model.
Speaker 9: The contours of your question are really important because if
Speaker 9: you were asking how their economic performance is doing. I
Speaker 9: would say it's doing well enough for she, it's doing
Speaker 9: well enough. And so I don't think that they feel
Speaker 9: any pressure to come to the table with the United States.
Speaker 8: But if your question is, have they been you know.
Speaker 9: Creating this this this wave of you know, this shift
Speaker 9: from investment to consumption, which they've been promising the last
Speaker 9: ten years, No, there's absolutely no sign of that whatsoever.
Speaker 9: And I don't think you will see that. What you've
Speaker 9: see how the Chinese government is sort of resistance to this.
Speaker 9: It's been we got to produce more, we have to
Speaker 9: export more. We you know, we have to continue to
Speaker 9: use manufacturing and industry as our growth driver. That is
Speaker 9: running into a buzzsaw, which is which is global trade friction.
Speaker 9: So you know, the Chinese have talked a lot about
Speaker 9: a consumption, They've done very little on consumption. So I
Speaker 9: think that's something to watch in the future. But you know,
Speaker 9: rather than listening to what they say, I would urge
Speaker 9: everyone to watch what they do. And I think that's
Speaker 9: going to be very important because if they do not
Speaker 9: create the mechanisms to spur up more domestic demand in China,
Speaker 9: than these trade frictions will never go away. It's not
Speaker 9: a Trump thing, it's a China thing.
Speaker 1: Stay with us.
Speaker 6: More Bloomberg surveillance coming up after.
Speaker 3: This fetchair j Powell giving no guarantees that the Central
Speaker 3: Bank will deliver a third consecutive rate cut in December.
Speaker 3: Sanal Desiah Franklin Templeton, writing this, it's telling that Powell
Speaker 3: quickly shifted to the emphasis to December. It was a
Speaker 3: clever move to distract from the fact that the economic
Speaker 3: outlook did not really justify yesterday's cut, Sana joins us. Now, Sanal,
Speaker 3: I always love hearing your takes as they are different
Speaker 3: from what everyone else is talking about. Why do you
Speaker 3: think it is interesting that they did cut rates this
Speaker 3: meeting when it was completely expected and baked in two
Speaker 3: market expectations, given the fact that his rhetoric was a
Speaker 3: bit hawkish and casting doubt on December.
Speaker 10: So thanks Lisa for always fun being here. But here's
Speaker 10: the thing.
Speaker 11: What I'm what I'm saying here is certainly the market
Speaker 11: expected it, and the fair guided us towards rate cut,
Speaker 11: so of course they were going to cut. But that's
Speaker 11: a heck of a response if you're asked, why did
Speaker 11: you cut well because you expected us to cut. That's
Speaker 11: really not very convincing. What I was talking about really
Speaker 11: is that the underlying data, much the way that power
Speaker 11: is telegraphing, that December is not a done deal. Quite frankly,
Speaker 11: yesterday's cut should not have been a done deal either.
Speaker 10: And what I mean by this.
Speaker 11: Is that several people have pointed to benign inflation.
Speaker 10: I would actually beg to differ.
Speaker 11: Since the middle of twenty twenty three now, inflation hasn't
Speaker 11: really come down very much.
Speaker 10: We've been at about three percent and.
Speaker 11: It's been over two years now that inflation has been
Speaker 11: stuck at around three percent. Yes, we're down by zero
Speaker 11: point three percent since then, so inflation isn't actually actively
Speaker 11: coming down coming down the speed at wag inflation is
Speaker 11: coming down, it's glacial. In terms of the labor market,
Speaker 11: there aren't very good signs which indicate that the labor
Speaker 11: market is doing poorly. Powell indicated he talked a lot
Speaker 11: about the supply issues.
Speaker 10: That's absolutely correct. I fully concur with this.
Speaker 11: There was a Dallas Fed paper which talked about thirty
Speaker 11: k as being the new break even.
Speaker 10: Based on current ADP.
Speaker 11: Rolling four week numbers, we're looking at fifty to fifty
Speaker 11: five k for this last month.
Speaker 10: So, if anything, the labor market's doing rather well.
Speaker 3: So at this point you think that it might have
Speaker 3: been a mistake for them to cut rates by twenty
Speaker 3: five basis points.
Speaker 1: Where do you see it showing up going forward? Right now?
Speaker 3: Markets are not expressing concern. If anything, they're responding more.
Speaker 3: It's the lack of a December rate cut, and you're
Speaker 3: not saying the move that we saw last year when
Speaker 3: they cut rates, and you saw long End yeld's rise
Speaker 3: in response.
Speaker 10: So I actually do I wouldn't go as far as
Speaker 10: this is within what I would consider the margin of errol.
Speaker 11: If they took it to three percent, I think it
Speaker 11: would be inst Given the current state of the economy,
Speaker 11: I think three point seventy five four I think it
Speaker 11: should be four. They've cut to three point seventy five.
Speaker 11: It's not catastrophic in terms of why the market has
Speaker 11: not responded in the same way.
Speaker 10: I think with complete you can make the.
Speaker 7: Argument, very strong argument that whatever else you think about
Speaker 7: last year's ratecards, those four rate cards came against the
Speaker 7: backdrop of meaningfully higher inflation and lower unemployment and somewhat
Speaker 7: stronger growth.
Speaker 10: So it was a.
Speaker 11: Particularly odd time to deliver the size and number of
Speaker 11: rate cards they did. Nonetheless, if we look at where
Speaker 11: we are today, the FED is standing on the cusp
Speaker 11: of a first quota, which potentially is going to see
Speaker 11: tailwinds for both GDP and for infation, small tailwinds coming
Speaker 11: from say, tariffs on the inflation front and from the
Speaker 11: GDP front. We finally start seeing the impact of the
Speaker 11: Beautiful Bill on taxes, and I think that that's something
Speaker 11: which the Fed must take into account as we look forward.
Speaker 11: So I don't think that the December rate cut is
Speaker 11: a foregone conclusion. And I think potentially if they cut
Speaker 11: in December, it's a pretty risky thing to do in
Speaker 11: front or what we know is going to happen in
Speaker 11: Q one.
Speaker 6: What do you need to see between now and December
Speaker 6: to then in your mind think okay, they should be
Speaker 6: and we'll be cutting.
Speaker 11: I think it would basically be that weakness of the
Speaker 11: labor market, so we should And really, yes, it does
Speaker 11: depend on getting some data, and I know we've got
Speaker 11: problems getting the data given that the government is still
Speaker 11: shut down, But there are other higher frequency indicators we
Speaker 11: can look at. We also have earnings reports which continue
Speaker 11: to come down.
Speaker 12: If the mass of those earnings reports starts moving in
Speaker 12: the direction of pointing to a significantly weaker consumer and
Speaker 12: here I would be looking in particular in areas such as airlines,
Speaker 12: you know, the consumer dependent pieces of the economy which
Speaker 12: actually continue to show strength. And so if we started
Speaker 12: seeing a massive data moving in that direction, sure, I
Speaker 12: also actually do understand why if.
Speaker 10: They don't have more.
Speaker 11: Meaningful data showing significant weakness, they would err on the
Speaker 11: side of not cutting rather than cutting, because we do
Speaker 11: know that those AsSalt tax deductions are going to go
Speaker 11: up in the beginning of next year. Childher child's tax
Speaker 11: credits are going to go up. A lot of the
Speaker 11: pieces of the big beautiful bill which are not being
Speaker 11: discussed today, actually go into play as we start off
Speaker 11: in the next year. So I'm not sure where the
Speaker 11: gloom about the economy comes from, because we get fiscal
Speaker 11: tailwinds pretty early in twenty twenty six.
Speaker 3: So no, just quickly here, We've got about a minute
Speaker 3: meta just to put out this announcement that they're announcing
Speaker 3: six part dollars bond sale following their earning support yesterday.
Speaker 3: It follows what we saw from Oracle last week is
Speaker 3: almost forty billion dollars of debt being sold. I'm just
Speaker 3: wondering if that makes you concerned about the investment grade
Speaker 3: space given the glood of AI related supply coming to
Speaker 3: the fore.
Speaker 11: I don't think where I'd go as far as seeing
Speaker 11: we are concerned. The fact that the market is currently
Speaker 11: absorbing it, spreads are very tight.
Speaker 10: It probably makes.
Speaker 13: Sense for these companies to issue, But I would say
Speaker 13: that overall, we're starting from a position where credit as
Speaker 13: price pretty close to profection, not much spoke to error.
Speaker 1: Stay with us.
Speaker 6: More Bloomberg surveillance coming up after this.
Speaker 3: President Trump teasing an energy deal with China after both
Speaker 3: countries reach a tariff and rare Earth agreement, joining US now.
Speaker 3: I am so pleased to say, as US Energy Secretary
Speaker 3: Chris right from Toronto where he is in the G
Speaker 3: seven meetings with other world leaders talking about energy and
Speaker 3: what can be done to build out US Energy Secretary,
Speaker 3: thank you so much for being with us. I want
Speaker 3: to start with this deal that President Trump was hinting
Speaker 3: at with China, talking.
Speaker 1: About Alaska oil.
Speaker 3: What details can you provide us with what contours of
Speaker 3: this transaction?
Speaker 1: Do you expect to come to light.
Speaker 14: Look, China is by far the world's largest importer of
Speaker 14: oil and importer of natural gas. The US is by
Speaker 14: far the world's largest exporter of natural gas and by
Speaker 14: far the world's largest producer of oil. So there's so
Speaker 14: much space for mutually beneficial deals between the US and China.
Speaker 14: Alaska was mentioned in that deal Dialogue's enormous reserves on
Speaker 14: the Alaskan Slope. They've been strangled by the Biden administration
Speaker 14: and Alaskan production has been in decline, but lots of
Speaker 14: room for that production to grow, lots of room to
Speaker 14: bring natural gas from the North slope of Alaska and
Speaker 14: bring that to all of our allies along the East
Speaker 14: Asian ram or frankly anywhere in the world. But President
Speaker 14: Trump is just a master negotiator. He finds out what
Speaker 14: is it that's critical to the Chinese, what is it
Speaker 14: that's critical to the United States, and finds that sweet
Speaker 14: spot of a deal that works for both countries.
Speaker 6: Could potentially the United States fill a gap if China
Speaker 6: decides to buy less energy from Russia, especially since the
Speaker 6: US government sanctioned Royceneft and Luke Oil.
Speaker 14: Absolutely absolutely today the US produces fifty percent more oil
Speaker 14: than Russia or Saudi Arabia, and it just puts not
Speaker 14: just the United States, but the world in a better position.
Speaker 14: Can we squish out half of Russian oil exports and
Speaker 14: still have a roughly balanced oil market? Absolutely we can.
Speaker 5: Have you been in.
Speaker 6: Touch as well with your counterparts in South Korea? The
Speaker 6: President coming back on this strip, talked about the tariff
Speaker 6: rate in South Korea and the plan for them to
Speaker 6: buy oil and gas in vast quantities part of that
Speaker 6: trade deal.
Speaker 14: Yes, I've been in dialogues with the Korean staff since
Speaker 14: I arrived in the office. You know, Korea is a
Speaker 14: great industrial nation, also short on energy resources but long
Speaker 14: on other assets. So yeah, lots of room for United
Speaker 14: States to grow our role in supplying natural gas, oil,
Speaker 14: and frankly nuclear technology to South Korea.
Speaker 6: I bring this up because it sounds like, are you
Speaker 6: preparing some sort of trip to the Asia Pacific if
Speaker 6: you have to meet with your Chinese counterparts and your
Speaker 6: South Korean counterparts for the United States to send more
Speaker 6: energy to that part.
Speaker 1: Of the world.
Speaker 5: Oh, I go wherever the President tells me.
Speaker 14: But yes, I would be going to Asian in a
Speaker 14: few weeks, and heck, I may be going sooner than that.
Speaker 14: You know, I'll get debriefed from all the dialogues and
Speaker 14: all what must be done promptly in the follow up.
Speaker 14: Could be heading there very shortly, but I don't know
Speaker 14: about that right now. But of course Asia is the
Speaker 14: center of the world economy after the United States. So yeah,
Speaker 14: that's a critical alliances, critical partnerships, and critical oil demand sources.
Speaker 3: Mister secretary, I feel like we should have a map
Speaker 3: here of all the places where you've got trips planned,
Speaker 3: because I suspect that you're going to be heading to
Speaker 3: Grece soon too. And the old idea of how much
Speaker 3: the US is exporting in terms of energy to the
Speaker 3: European region, especially as they reduce reliance on Russia. Can
Speaker 3: you tell us anything about how that relationship is developing.
Speaker 14: Actually, it's been great dialogues. I think the European nations.
Speaker 14: The war in Ukraine really crystallized. Yes, it wasn't a
Speaker 14: good idea to have all of our key energy supply
Speaker 14: coming from Russia, largest supplier of oil to them, largest
Speaker 14: supplier of natural gas to them, largest supplier of coal
Speaker 14: to Europe, and the United States has slid in to
Speaker 14: displace Russia as the largest supplier of natural gas to Europe.
Speaker 14: We can do the same thing with oil, and I
Speaker 14: think we're today the second largest supplier of coal to Europe,
Speaker 14: So I think there's mutual agreement on both sides.
Speaker 5: There.
Speaker 14: Certainly there's some regulations in Europe cs Triple D, which
Speaker 14: is just a way overreach in the regulatory regime that's
Speaker 14: going to make it sticky to ramp up energy movement
Speaker 14: as fast as we'd like. But we're in constant dialogue
Speaker 14: to fix those problems. I'm excited about the future relationship
Speaker 14: between the European nations and the United States. It's always
Speaker 14: been good, but I think it's going to grow a lot.
Speaker 1: Mister Secretary.
Speaker 3: A lot of people come on the show talk about
Speaker 3: their concerns about higher energy prices in the United States.
Speaker 3: They talk about artificial intelligence, the power demands, the inability
Speaker 3: to really provide the energy that would be required to
Speaker 3: expand at the pace that a lot of AI giants
Speaker 3: are talking about.
Speaker 1: How do you plan to mitigate that?
Speaker 3: Is there a level at which power prices get so
Speaker 3: expensive that the United States will reduce some of the
Speaker 3: exports to the rest of the world.
Speaker 14: Well, they are actually different factors that control them. Like
Speaker 14: our large exports of natural gas today are actually still
Speaker 14: relatively modest compared to the amount of gas we produce,
Speaker 14: and we can easily produce vastly more natural gas today.
Speaker 14: So power prices. The problem isn't the price of natural gas.
Speaker 14: The problem is the infrastructure, generation facilities, transmission lines. The
Speaker 14: Biden administration for four years, forced the closure of a
Speaker 14: lot of coal plants, a few gas plants, prevented the
Speaker 14: building of new coal and natural gas power plants. They said,
Speaker 14: they built a lot of unreliable, intermittent electricity that's spread
Speaker 14: all over the country that takes more transmission assets. All
Speaker 14: of that goes into the rate base and has pushed
Speaker 14: up prices. Frankly, it's part of the reason why President
Speaker 14: Trump got elected.
Speaker 5: So we're having to reverse all those things.
Speaker 14: Stop the closure of coal plants, make it easier to
Speaker 14: build new natural gas plants, make new sources that want
Speaker 14: to come on be successful commercially, not dependent upon subsidies,
Speaker 14: and not require massive new transmission investments that all just
Speaker 14: go on to the rate payers. So we're doing a
Speaker 14: lot of things. At FIRK, we had a big announcement
Speaker 14: last Thursday. I probably can't go into here, but specifically
Speaker 14: aimed at artificial intelligence, how we can speed new firm
Speaker 14: generation without driving up the price of electricity. I share
Speaker 14: the American consumers' worries about the recent rises in price
Speaker 14: of electricity over the last four years, and I'm working
Speaker 14: seven days a week to stop those price rises and
Speaker 14: enable the United States to lead in artificial intelligence.
Speaker 6: We've seen one of the most significant significant announcements from
Speaker 6: this administration when it comes to nuclear The government is
Speaker 6: planning this partnership eighty billion dollars for nuclear reactors with
Speaker 6: a Canadian company, Westinghouse. Who will develop them?
Speaker 1: And where?
Speaker 6: Can you give us more details about this?
Speaker 14: Oh? I would call Westinghouse an American company. It's a
Speaker 14: legacy American company and it's majority owned.
Speaker 5: By the Americans.
Speaker 14: It has a Canadian partner in Camico, but it's an
Speaker 14: American company. This is a plan to partner across the
Speaker 14: country at a few different locations to build, as you
Speaker 14: saw in the announcement, gave dollar amounts, but a large
Speaker 14: amount of power. Think of order ten gigawatts of new
Speaker 14: electric generating production capacity, and to do it in a
Speaker 14: way that's efficient. So instead of one here and one
Speaker 14: starting a few years later, we want to stage in
Speaker 14: the construction of these plants to most efficiently use construction workers,
Speaker 14: assembler's fabrication, so that we lower the cost of nuclear
Speaker 14: generation restand up the supply chain in the United States.
Speaker 14: This is quite an exciting project and more details will
Speaker 14: come out as we fill in, as we fill in
Speaker 14: those dots. But the President Trump promised to relaunch nuclear
Speaker 14: energy Unlesia, nuclear renaissance in the United States.
Speaker 5: This is a big part of that.
Speaker 6: Effort, and just I wanted to get your take on
Speaker 6: a reversal we've seen from Bill Gates, someone who's long
Speaker 6: talked about climate change. He's sort of pivoting his stance
Speaker 6: and according to his staff, you recently met with him,
Speaker 6: did you have a hand in how now he's talking
Speaker 6: about energy.
Speaker 14: I've had multiple great dialogues with Bill Gates over the
Speaker 14: last last year, at multiple times and at some length
Speaker 14: of course, he's a very thoughtful, successful entrepreneur, and climate
Speaker 14: change is a real thing.
Speaker 5: It's a real challenge.
Speaker 14: It's just not remotely close to the world's top challenge.
Speaker 14: And the problem is by putting it the top challenge.
Speaker 14: The ineffective things governments have done have raised the price
Speaker 14: of energy, lowered the reliability of the energy system, and
Speaker 14: they've stood in the way of efforts to combat hunger,
Speaker 14: food insecurity, energy security, education, and all the other global challenges.
Speaker 14: So yeah, Bill and I have had great dialogues. He's
Speaker 14: done fabulous stuff in public health around the world, and
Speaker 14: I'm thrilled to see him talk in a more candid
Speaker 14: way about this issue.
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Speaker 13: Mm hmm