Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: Search Bloomberg Clobal News. Well, Liz trush's government has set
Speaker 1: out the most radical package of tax cuts for the
Speaker 1: UK since nineteen seventy two, reducing levies both on worker
Speaker 1: pay and companies in an effort to boost the long
Speaker 1: term potential of the economy. The package is going to
Speaker 1: cost a hundred and sixty one billion dollars. It's aimed
Speaker 1: at stimulating the economy, but economists say that measures will
Speaker 1: add to inflation and debt. Very pleased with us this
Speaker 1: afternoon to have Philip Aldrich, senior UK economics reporter for
Speaker 1: Bloomberg News, joining us on the phone from London. Feel
Speaker 1: good to have you with us. Appreciate you staying up
Speaker 1: late on a Friday to join us on Bloomberg Business
Speaker 1: Week to lay out for us exactly what happened in
Speaker 1: exactly what's in this package and why markets are reacting
Speaker 1: the way they are. Yeah, so the big the big
Speaker 1: measures was a bunch of tax cuts. That we that
Speaker 1: we had some personal tax cuts Um. There was a
Speaker 1: surprise cut in the top rate of tax um for
Speaker 1: the wealthiest one percent of earners. We had a cut
Speaker 1: in the basic rate of income tax Um. There's also
Speaker 1: a change in payroll taxes and employers were given money
Speaker 1: off through corporation taxes and and also this this national
Speaker 1: insurance contribution tax cut. That there was also a tax
Speaker 1: cut on property transactions, and it was really quite an
Speaker 1: extraordinary sort of collection of tax cuts. And the idea
Speaker 1: was to accompany that with some with some sort of
Speaker 1: supply side reforms, these kind of these these regulatory deregulation
Speaker 1: agenda of the of the new government because of course,
Speaker 1: to be in power for about three weeks. So so
Speaker 1: what happens in a situation like this? I mean, you know,
Speaker 1: and not to not to totally show off my ignorance
Speaker 1: as an American, but with an understanding of how the
Speaker 1: British government works. If the prime minister says it is,
Speaker 1: so is it, so you've got to go so this.
Speaker 1: This will all go through the legislature. So, Um, much
Speaker 1: of this will have to have to be approved in law.
Speaker 1: So there will be votes on it. In reality, this
Speaker 1: trust has got a stalking majority in parliament, so the
Speaker 1: Tories will be able to get through everything she wants
Speaker 1: if they support her. But the problem is a lot
Speaker 1: of these policies because they're more of the libertarian wing
Speaker 1: of the Tory Party, Um, and that isn't, you know,
Speaker 1: the mainstream centrist part of the of the of the party.
Speaker 1: So she may face rebellion amongst her own truths, amongst
Speaker 1: her own MPs, but you know she will be these
Speaker 1: these tax cuts will be voted on and the regulatory
Speaker 1: reforms on planning and banking deregulation. They will be voted
Speaker 1: on and she's probably going to bathe more difficulty on
Speaker 1: the planning and the regulation stuff that she will on
Speaker 1: on the Finance Bill, which is the straightforward tax cuts.
Speaker 1: But you know, it's been a big, crazy day the
Speaker 1: markets have really reacted negatively to this. So you know,
Speaker 1: anything's on the table at the moment. Well, let's talk
Speaker 1: about what, at least George Saravellos of Geutsia Bank things
Speaker 1: should be on the table from the Bank of England.
Speaker 1: I got this note in my inbox earlier. The subject
Speaker 1: was what needs to be done and George Saravellos, he
Speaker 1: is currency strategists over at Geutsa Bank. He's calling for
Speaker 1: a quote large Inter meeting rate hike from the bank
Speaker 1: limp England as soon as next week. I was pretty
Speaker 1: surprised to see this. Philip, is there any chance of
Speaker 1: this actually happening? I doubt it. I don't think there
Speaker 1: would be. I mean, if it was, it would basically
Speaker 1: be a signal that, you know, a policy instetitions, a
Speaker 1: panicky Um. So I think it's unlike and he said
Speaker 1: that George was warning about Um, you know, the pound
Speaker 1: collapse a week or two ago and he was being dismissed.
Speaker 1: And then, of course, today we had three percent all
Speaker 1: and stirring against the dollar and that followed a series
Speaker 1: of other falls and the pounds fell below one dollar
Speaker 1: nine cents at one point, which is you know, astonishing.
Speaker 1: And you know people are now talking about parity with
Speaker 1: the dollar, which you know we we ta close to
Speaker 1: that in Um, you know, in the plaza. Of course
Speaker 1: stuff is happening, but the UH, you know, that would
Speaker 1: be absolutely astonishing, if you know, if we hit, if
Speaker 1: we hit parody with the dollar. But it doesn't look
Speaker 1: unfeasible any longer. Um. I don't think there will be
Speaker 1: an into, an into inter rate meeting, emergency rate hike,
Speaker 1: but you know, anything is possible at the moment. It's
Speaker 1: the marks. have been digesting this for for literally eight hours.
Speaker 1: So I think there would be some calmer responses next week.
Speaker 1: And is there any chance that you the trust government
Speaker 1: is looking at the widespread, uh just I don't even
Speaker 1: know what to call it, wildness in markets right now
Speaker 1: and rethinking at all? Uh. I would be hugely humiliating
Speaker 1: to have to rethink a policy after just a few hours.
Speaker 1: Actually quietly, quiet selling the chancellor who laid all of
Speaker 1: this stuff out. He Um, he did say that. You know,
Speaker 1: markets will do what they do. We're thinking for the
Speaker 1: longer term here. Um. So I don't think they were
Speaker 1: expecting a route the kind of massive self that we've seen,
Speaker 1: you know, sterling being guilt yields Um you know, rising
Speaker 1: where amongst the UK government broacasts are now amongst that
Speaker 1: that sort of euros own periphery, the Portuguese and Spanish
Speaker 1: government bond yields. So it doesn't it really doesn't look
Speaker 1: good at the moment. But the reason why they would
Speaker 1: reconsider things would be if there is an internal Tory
Speaker 1: rebellion and will not be based on the market reactions.
Speaker 1: That would be based on a calculation on their on
Speaker 1: their own elector elect electability in their constituencies, which will,
Speaker 1: you know, there will be poles about whether the whether
Speaker 1: these tax cuts for the super rich and non awful
Speaker 1: lot to the people on the incomes and that might
Speaker 1: not go down particularly well. Philip Aldric, really great to
Speaker 1: have you joined us this afternoon. Thank you so much
Speaker 1: that senior UK economics reporter Philip Aldrick joining us on
Speaker 1: the phone from London. This is Bloomberg Business Week with
Speaker 1: Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg radio. Well,
Speaker 1: in the new issue of Bloomberg Business Week magazine there's
Speaker 1: a story about social media companies. In fact, more than
Speaker 1: seventy lawsuits have been filed this year against such social
Speaker 1: media companies. We're talking about companies like Meta platforms, the
Speaker 1: company formerly known as Facebook, snap Tiktok, which is owned
Speaker 1: by byte dance, and Google, which owns YouTube. The lawsuits
Speaker 1: center on claims from adolescence and young adults who say
Speaker 1: they've suffered anxiety, depression, eating disorders and sleeplessness as a
Speaker 1: result of their addiction to social media. The story written
Speaker 1: by Joel Rosenblatt, legal reporter for Bloomberg News. Joel joining
Speaker 1: us this afternoon on the phone from San Francisco. Joel,
Speaker 1: good to have you with us. I gotta tell you
Speaker 1: reading this piece, the anecdotes at the top would make
Speaker 1: the stomach turn of really anyone, about kids who have
Speaker 1: died by suicide, kids who are addicted to social media. Um,
Speaker 1: I'm wondering, though, about liability here. Our social media companies
Speaker 1: reliable for what their users do? Well, thanks for having me.
Speaker 1: That's what these suits are going to get at and
Speaker 1: we're going to find out. The companies have, for a
Speaker 1: very long time, I mean decades now, stood behind a
Speaker 1: section to thirty of the Communications Decency Act, which holds
Speaker 1: that's a law that that provides. That showed. That says
Speaker 1: that the these companies can't be treated as a publisher
Speaker 1: or speaker of any information provided by or generated by
Speaker 1: a third party. So that you know, the argument being
Speaker 1: that these companies can't be held responsible for the content
Speaker 1: of what what what, what kids are seeing. So that's
Speaker 1: the big hurdle. Um, they have a novel argument. These
Speaker 1: lawsuits do. That's a little bit different from anything that
Speaker 1: I've seen and we can talk about that if you want,
Speaker 1: but that's that's the big question. That's the big hurdle.
Speaker 1: A live bility. Talk about that a little bit. Yeah, well,
Speaker 1: so the what they're doing. What's different about one student
Speaker 1: in particular that I write about is that they are
Speaker 1: they're targeting the algorithms that these companies are using and
Speaker 1: so instead of saying, Oh, this content is what created
Speaker 1: the problem or created the depression or or problems, it's
Speaker 1: the algorithms that you've designed, that you Meta have designed
Speaker 1: intentionally to Hook my kids to your platform, and so
Speaker 1: it's not the other users who've posted this or interacting
Speaker 1: with with people that way, it's it's the algorithm. What
Speaker 1: the Algorithm is actually serving to these kids exactly, and
Speaker 1: they claim is that it's designed intentionally that way, you know,
Speaker 1: by those companies, to keep them hooked and down this
Speaker 1: kind of spiral, are these holes of information that take
Speaker 1: them to these dark places. Okay, well, you make a
Speaker 1: parallel to cigarettes in here, and I want to bring
Speaker 1: in Katie Greifeld, my co anchor here, because, and this
Speaker 1: is I mean in all seriousness, when she had covid,
Speaker 1: she came back from from covid and said, you said, Katie,
Speaker 1: that you had fallen into this Tiktok hole about and
Speaker 1: and had talked about how well the algorithm got to
Speaker 1: know you and like, served you content that you would
Speaker 1: just eat up. It's actually a joke on tiktok. When
Speaker 1: really specific videos go viral, all the comments are to
Speaker 1: the effect of the Algorithm knows me too well, and
Speaker 1: people joke all the time that I'm so glad that
Speaker 1: social media wasn't around when I was younger. I have
Speaker 1: to say I am so glad that Tiktok was not
Speaker 1: around when I was younger. But, Joe, I'm curious to
Speaker 1: hear about what some of the law professors that you
Speaker 1: spoke to for this piece are saying in terms of
Speaker 1: the social media companies defenses. Well, I it's kind of
Speaker 1: a split. I mean mostly you have law professors, Uh
Speaker 1: Eric Goldman is is one in particular, is really expert
Speaker 1: in this area at Santa Clara University, who points out
Speaker 1: that the section to thirty defense is just going to
Speaker 1: be too difficult to get over explain. Because, yeah, the
Speaker 1: section to is the is the Communications Decency Act that
Speaker 1: we talked a little bit before, which they just say,
Speaker 1: they're just saying we're not responsible for the content. We can't,
Speaker 1: we can't be held reliable for the content. We're just delivering.
Speaker 1: We're just a delivery service, you know, we're just giving
Speaker 1: you the platform and we're we can't be held liable
Speaker 1: as the publisher or speaker of the content that you're seeing.
Speaker 1: So He's saying that that's, first of all, just a
Speaker 1: huge problem for these lawsuits. The second problem is that
Speaker 1: Professor's point out is that you can't you can't just
Speaker 1: point to Um, social media as a problem alone. In
Speaker 1: other words, isolating social media as the cause of depression,
Speaker 1: anxiety or even suicide is just too difficult. Let's take
Speaker 1: any number of things including, say, you know, the fact
Speaker 1: that the planet is melting there's all kinds of reasons
Speaker 1: that kids are suffering from from anxiety, and just to
Speaker 1: isolate social media. It's going to prove difficult. Many think, well,
Speaker 1: let's go through some historical parallels here that you touch
Speaker 1: on in your peace job. If we think about the
Speaker 1: way that auto manufacturers have been not necessarily held liable,
Speaker 1: but the public, public campaigns against them by Ralph Nader,
Speaker 1: for example, of perhaps the nineteen nineties. When it comes
Speaker 1: to tobacco companies, I mean I recall those tobacco executives
Speaker 1: sitting there and testifying in front of Congress Um. What
Speaker 1: can how does that paint some sort of picture about
Speaker 1: what could happen with social media companies, or does it?
Speaker 1: Is that accurate? Well, I think again, we kind come
Speaker 1: up with with you know, we'll see what the courts decide,
Speaker 1: because it's there's two there's at least two arguments. One
Speaker 1: is that again, these suits are pointing to the algorithm
Speaker 1: as a kind of almost identifying it as a product, Um,
Speaker 1: so pointing, pointing not to the effects so much but
Speaker 1: as this particular product that they've designed that's, you know,
Speaker 1: to follow the analogy defective Um. So that's, you know,
Speaker 1: right that's the kind of logic there. On the other hand,
Speaker 1: if you say let's follow the analogy of the of
Speaker 1: the tobacco suits. In the tobacco cases, I remember one,
Speaker 1: one particular part that was very compelling. There was that
Speaker 1: the tobacco companies were adding ammonia to to the tobacco.
Speaker 1: I don't know if you remember that, and you could
Speaker 1: point to them knowing that it caused cancer and knowing
Speaker 1: that this particular chemical reaction would would cause addiction and
Speaker 1: cause cancer. I think a problem there for these lawsuits
Speaker 1: is that that's a particular health consequence. You know, you
Speaker 1: could pinpoint cancer as a medical you know, scientifically a cancer,
Speaker 1: a cancer, a disease that's caused by this product. Again,
Speaker 1: harder to do that with social media, if not impossible.
Speaker 1: We'll find out. Are there, you know, just in the
Speaker 1: last forty seconds that we have with you, are there
Speaker 1: any uh proven health claims that can be tied to
Speaker 1: social media at this point the same way that that
Speaker 1: we can tie them to cigarettes? Well, I'm glad that
Speaker 1: you raise that because one, because one of the suits
Speaker 1: that I'm following closely points to the testimony of Francis Hogan,
Speaker 1: who you may recall testified to Congress about Meta, knowing
Speaker 1: that instagram was causing um all kinds of anxiety with
Speaker 1: with girls in particular, around their body image and so
Speaker 1: and they in her when it was they knew it
Speaker 1: and perpetuated this and are still using it and profiting
Speaker 1: from it. Joel Rosen, black legal reporter for Bloomberg News,
Speaker 1: joining us on the phone from San Francisco. Check out
Speaker 1: his story. It's in the current show of Bloomberg Business
Speaker 1: Week magazine. It's available now on newsstands and at Bloomberg
Speaker 1: Dot Com. You're listening to Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg radio.
Speaker 1: Let's turn to Crypto now and welcome in Danelle Dixon.
Speaker 1: She is CEO and Executive Director of the Stellar Development Foundation.
Speaker 1: It's a nonprofit organization founded in to support the development
Speaker 1: and growth of the open source stellar network. She joins
Speaker 1: us on the phone from San Francisco. Dinnell, great to
Speaker 1: have you with us. Just about a week ago you
Speaker 1: testified in front of the Senate Agriculture Committee. That hearing
Speaker 1: specifically was focused on the Digital Commodities Consumer Protection Act.
Speaker 1: That of course it's a bill focused on the CFCC's
Speaker 1: role in regulating the crypto markets. I feel like that's
Speaker 1: a big question. Which of the acronyms actually has oversight
Speaker 1: over the CRYPTO market? Yeah, thank you so much for
Speaker 1: having me again. Yeah, that is a big question, but
Speaker 1: I think that what we're gonna find. I and just
Speaker 1: that both of them, and I think you're referring to
Speaker 1: the SEC and the CFTC, are going to have a
Speaker 1: role and I think what we talked about last week
Speaker 1: with respect of this legislation was that it is really
Speaker 1: wonderful and empowers the CFTC with the authority that it
Speaker 1: needs to regulate the spot market for digital commodities and
Speaker 1: it provides a lot more clarity to the industry than
Speaker 1: we previously had. So it's bipartisan, which we love to see,
Speaker 1: and it's continued reinforcement that Crypto is not an issue
Speaker 1: that's divided by politics and that everyone is invested in
Speaker 1: it and they have to get this right. So I
Speaker 1: think we're going to see a lot more clarity if
Speaker 1: we see bills like this one come through the house
Speaker 1: and the Senate. What are the stakes here? The stakes
Speaker 1: are pretty high in terms of. Really what we want
Speaker 1: to see is a lot more players in the existing
Speaker 1: financial infrastructure come into the CRYPTO and blockchain space, because
Speaker 1: it really like what we focused on is payments and
Speaker 1: cross port remittances. We need to see stable coins. We
Speaker 1: think we need to see other players that are involved
Speaker 1: in those kinds of payments be participate in this, and
Speaker 1: I think that it not only gives clarity to the
Speaker 1: existing ecosystem, but it gives a lot more clarity to
Speaker 1: others who might want to participate but they're concerned because
Speaker 1: of the regulatory environment. How I'm trying to think of
Speaker 1: the word that I want to use, but I mean,
Speaker 1: how receptive are the lawmakers, specifically at last week's hearing,
Speaker 1: and other lawmakers that you speak with about the crypto industry?
Speaker 1: I feel like it's had some real black eyes, especially
Speaker 1: over the past few months, a lot of high profile
Speaker 1: blow ups. Do you think that's sort a bit of
Speaker 1: skepticism or mistrust along some of the potential regulators? Well,
Speaker 1: I think, and I think it's a great point to
Speaker 1: focus on, because I think that any industry that's new,
Speaker 1: you're going to have like thirty steps forward and then
Speaker 1: twenty steps back and you're going to have to climb
Speaker 1: your back, your way back to the spot that you
Speaker 1: were before, and I think what we saw over in
Speaker 1: the early days of the summer with respect to those
Speaker 1: algorithmic table coins and what happened with respect to the
Speaker 1: market there Um will really actually change a lot if
Speaker 1: we can get the focus to create stable coin legislation
Speaker 1: that makes it clear about a definition of what stable
Speaker 1: coins are, because that's a lot of what we saw.
Speaker 1: There was a lot of leverage in the market. I've
Speaker 1: had little to do with the infrastructure and more to
Speaker 1: do which is leverage. So if we see clarity around this,
Speaker 1: I think that we're going to see more and more
Speaker 1: lawmakers want to participate here right now, and particularly last week,
Speaker 1: there's so much support within the Senate, Senate Ad Committee,
Speaker 1: because they are truly a bipartisan committee that works together.
Speaker 1: So we saw a lot of really good conversation and
Speaker 1: a lot of really good inclusion about this particular uh,
Speaker 1: this the bill itself, but also just the industry, and frankly,
Speaker 1: I think we're seeing that across the board, even on
Speaker 1: the house side. So I feel really good and I
Speaker 1: think the promise of not just this legislation but we
Speaker 1: hear that there's also potentially stable coin legislation that could
Speaker 1: be brought together, and I think that could be that
Speaker 1: could come together also in a bipartisan fashion, so it'll
Speaker 1: really move the industry forward and create again that regulatory clarity.
Speaker 1: We all need it. One of the things that we
Speaker 1: hear a lot from the SEC is that the how
Speaker 1: we test, which is the one that defines that security,
Speaker 1: is it's clear. And, frankly, if it was clear, we
Speaker 1: wouldn't be in a situation right now of trying to
Speaker 1: gain more clarity. So I think that we all really
Speaker 1: want to see that happen and you know, we heard
Speaker 1: the big banks CEOS testify earlier this week and we won.
Speaker 1: One part that stuck out to me was what Jamie diamond,
Speaker 1: the CEO of JP Morgan Chase, said. Uh, he called
Speaker 1: Digital Tokens decentralized Ponzi scheme and even bitcoins specifically. He
Speaker 1: had some choice words for it. It's it kind of
Speaker 1: sticks with what he said in the past. Um, I'm
Speaker 1: wondering what you thought of when you when you heard
Speaker 1: him say that. Well, it wasn't new in terms of again, like,
Speaker 1: as you said, we've heard this in the past and
Speaker 1: I think part of the job that we have as
Speaker 1: industry is to really create a lot of educational materials
Speaker 1: and to really gain the focus and the attention of
Speaker 1: folks around the good things that are happening in with
Speaker 1: respect to blockchain and crypto. You know, on stellar we
Speaker 1: see a lot of really big promise and execution when
Speaker 1: we see the use of stable coins in payments. We
Speaker 1: have a relationship with moneygram where you can turn cash
Speaker 1: into crypto in four locations globally, and this really reaches
Speaker 1: the unbanked and the underbank and so I think if
Speaker 1: we really talk about what the good things that are
Speaker 1: happening in the CRYPTO and blockchain industry, it actually will
Speaker 1: help move that conversation away to talking about things like
Speaker 1: pondy schemes, because I think that you know, when any time,
Speaker 1: when you have a new piece of technology, there's going
Speaker 1: to be a lot of criticism and potential concern of
Speaker 1: it and we really need to get to the discussion
Speaker 1: around use cases, which will kind of obliterate that message.
Speaker 1: And now really quickly. We have about thirty seconds or so,
Speaker 1: but you've said clarity a few times and we need clarity.
Speaker 1: WHO NEEDS CLARITY. Is it just the industry or is
Speaker 1: it traditional finance, Trad Five, as well? Yeah, I know,
Speaker 1: I love that. Trad Fi um. That's another, another word
Speaker 1: that we like to hear. I think it's everybody. We
Speaker 1: all need clarity to bring Trad fit in so that
Speaker 1: we can actually really make this this technology work in
Speaker 1: the way that it should, which is in coordination with
Speaker 1: traditional finance, to really bring to the masses, uh, the
Speaker 1: opportunity that exists with watching. All right, you know, we're
Speaker 1: going to have to leave it there. Tonal Dixon, CEO
Speaker 1: and Executive Director of the Stellar Development Foundation, joining us
Speaker 1: this afternoon on the phone from the bay area. I'm
Speaker 1: a journal Yeah, but you let me drive. Oh No,
Speaker 1: no, no no, no, please, I'll do bride gravel. I want
Speaker 1: to drive. It's good question. This is the drive to
Speaker 1: the globe on Bluebird radio. All right, it's that time.
Speaker 1: We are less than ten minutes away from the close
Speaker 1: of Equity Trading here on this Friday afternoon. What a
Speaker 1: day it's been, what a week it has been. The
Speaker 1: SMP five hunded off of its lowest but still down
Speaker 1: about two in the SP five, energy by far the
Speaker 1: worst performing sector down close to seven percent this after
Speaker 1: we saw that w t I fell below eighty dollars
Speaker 1: for the first time since January. Let's get into it
Speaker 1: and specifically energy. We do that with Ben Cook, portfolio
Speaker 1: manager at Hennessy Midstream and energy transition funds. Ben Joining
Speaker 1: us on the phone from Dallas, Texas this afternoon. Ben,
Speaker 1: How are you? I'm doing well. Thanks, how are you?
Speaker 1: Thanks for having me, by the way. Yeah, we're really
Speaker 1: glad to have you, especially on a day like today,
Speaker 1: because we definitely want to talk energy. What's going on
Speaker 1: in the energy market? I mean it is just just
Speaker 1: flashing recession fear all over you know, I think it is.
Speaker 1: I think you know, the prospect of monetary tightening around
Speaker 1: the world is leading to a view that we're going
Speaker 1: to have to see some slowdown and economic activity or
Speaker 1: worser recession, and I think that's added to fears with
Speaker 1: China's zero covid lockdown policy, which has had a material
Speaker 1: impact on transportation fuel demand in that region of the world.
Speaker 1: I mean, I think that's all contributing to a narrative
Speaker 1: that the market may not be as tight as previously thought,
Speaker 1: but that's leading to fears of further weakness and crewed.
Speaker 1: And where does that leave you in terms of conviction here?
Speaker 1: I mean, would you expect a rebound or how long
Speaker 1: might this current slump in energy last? You know, that's
Speaker 1: a that's a great question. You know, we do have
Speaker 1: a favorable view of the commodity as we approached the
Speaker 1: fourth quarter and in the next year, and I think
Speaker 1: the demand fears are front and center and that's what
Speaker 1: we're dealing with today. But there are significant issues on
Speaker 1: the supply side as well that, in our view, will
Speaker 1: will continue to provide some support to the commodity. And
Speaker 1: you know, those points are several fold. I think you
Speaker 1: could if you look at inventories, not just crude oil
Speaker 1: but refined products on the global basis were below historical
Speaker 1: seasonal norms. OPEC is continuing to underproduce its targeted quota
Speaker 1: levels and, of course we're seeing a good financial discipline
Speaker 1: here in the United States by our our producers and
Speaker 1: that's limiting production growth here on a on a near
Speaker 1: term basis, will have the spr draws come to a
Speaker 1: close in in November and of course we've got embargoes
Speaker 1: on Russian oil exports into the you in December and
Speaker 1: refined product embargoes in February. So on a short term
Speaker 1: basis there's some supply uh support to be had, I think.
Speaker 1: On a near term basis, then, did the did the
Speaker 1: SPR did tapping the SPR as President Biden chose to do?
Speaker 1: Did that have an effect on the energy market? You know,
Speaker 1: I think it did. I mean the on a on
Speaker 1: a month to month basis. Actually, in a week to
Speaker 1: week basis, you know, we were seeing the addition of,
Speaker 1: you know, upwards of five or six million barrels and
Speaker 1: even more some weeks added to those sly here in
Speaker 1: the US, and that certainly put pressure on on crew prices.
Speaker 1: I think once those draws come to a close, once
Speaker 1: we eliminate that additional incremental barrel from the market, it
Speaker 1: certainly will add to support, some support to pricing. And
Speaker 1: then when I look over the course of this year
Speaker 1: at the sector level, energy, by far, the energy sector,
Speaker 1: is the winner. Uh, still up about twenty sent for
Speaker 1: the year, but I remember when that number was closer
Speaker 1: year to date and I would love to hear your
Speaker 1: perspective on you know, if you look at energy stocks
Speaker 1: specifically the sector, have we seen the high water mark,
Speaker 1: you know, for the year. I think going into the
Speaker 1: fourth quarter will probably be quite volatile. As we enter
Speaker 1: the winter heating demand period. We could see some volatility
Speaker 1: in commodities, which would lead to volatility in equity values. Um,
Speaker 1: it's hard to see the commodity retracing back to the
Speaker 1: previous peak of one plots over the next couple of months,
Speaker 1: given the headwinds we're seeing today. Um. But, as I said,
Speaker 1: you know, there's a good reason to believe that support
Speaker 1: on the supply side recruit and for natural gas for
Speaker 1: that matter, which we have a very favorable view of
Speaker 1: natural gas pricing in the next year, that that will
Speaker 1: add some buoyancy and support into pricing. So, while we
Speaker 1: might not retrace back to previous highs, we do feel
Speaker 1: like there's a good reason to believe that there's good
Speaker 1: outperformance relative to other sectors in the marketplace to come
Speaker 1: here the NE twelve or fifteen months. So, Ben What
Speaker 1: are you doing on a day like today? Are you
Speaker 1: are you sitting on your hands? Are you buying? You know, Um, always, uh. Now,
Speaker 1: we're we're always monitoring commodity price volatility and its impact
Speaker 1: on equity values as a part of our repeatable investment process.
Speaker 1: And managing the Hennessy Energy Transition Fund. We look at
Speaker 1: what a range of commodity price scenarios and what it
Speaker 1: might mean for the relative upside and downside and equity
Speaker 1: values and from for us. And when we look at
Speaker 1: equity values particularly, and we're taking the upstream sector in
Speaker 1: the US, we see an imputed price deck of roughly
Speaker 1: sixty five to seventy dollars per barrel implied by the
Speaker 1: current equity values across much of the upstream sector. So
Speaker 1: with the commodity on three basis the script, they're roughly
Speaker 1: in the seventy five to seventy six dollar range. We
Speaker 1: think the equity values are right now, or even though
Speaker 1: they're down five, they're pricing in a much die air
Speaker 1: scenario than what's currently reflected in the commodity market. So again,
Speaker 1: evaluation on that basis is attractive. We look at Um
Speaker 1: the free cash shields have been very, very strong in
Speaker 1: the sector, even with a dial down and commodity prices,
Speaker 1: as we've seen over the recent weeks, we still see
Speaker 1: very attractive free cash yield out of the sector. So
Speaker 1: on a day like today we're monitoring the portfolio, but
Speaker 1: we still believe very strongly in the outlook for the
Speaker 1: commodity and the financial returns and performance in the stoff.
Speaker 1: I should note that the Hennessy Midstream Fund has a
Speaker 1: year today performance of compared with the s and p five,
Speaker 1: which is down about yeah, energy, it's been a pretty
Speaker 1: good place to hang out. Ben, we only have about
Speaker 1: forty scents left with you, but I know you have
Speaker 1: some specific names that you're pretty bullishawn. What are they? YEA,
Speaker 1: as I mentioned, uh, we like the upstream sector here
Speaker 1: in the US, select integrated companies. We do like Exxon.
Speaker 1: We think they're integrated business how to affords flexibility to
Speaker 1: benefit from a variety of cyclical environments. Um they've shown
Speaker 1: some good strength and in upstream results exploration in Guyana
Speaker 1: and development activity in West Texas. We think they're going
Speaker 1: to continue to generate very strong financial results and continue
Speaker 1: to buy back shares. We like excellent EO G resources.
Speaker 1: Another name that we like, the US producer. They've got
Speaker 1: a great acreage in the lower us, lower fort l
Speaker 1: plays and demonstrated an acumen for optimizing production gains and
Speaker 1: efficiencies and that's translated to good sharehold return and so forth. Ben,
Speaker 1: we unfortunately have to leave it there. Ben We love
Speaker 1: having you on the program please do come back soon.
Speaker 1: Ben Cook, portfolio manager at Hennessey Midstream and energy transition funds,
Speaker 1: joining us from Dallas, Texas. Thanks for listening to Bloomberg
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