WEBVTT - What the Market Really Thinks About the May Jobs Report 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:31.360 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well, 0:00:31.400 --> 0:00:34.440 at a time like this, when markets are full of uncertainty, 0:00:34.479 --> 0:00:36.760 it works to UH talk with someone who's gotten a 0:00:36.760 --> 0:00:39.479 lot of very big predictions right. And I want to 0:00:39.520 --> 0:00:44.000 bring in, uh that person, Mark Grant, chief strategistic Hilltop Securities, 0:00:44.040 --> 0:00:47.120 who nailed the fact that President Trump was going to 0:00:47.320 --> 0:00:50.040 win the election in November and also has gotten bond 0:00:50.080 --> 0:00:52.320 calls right as well as oil calls. Mark, thank you 0:00:52.360 --> 0:00:55.639 so much for joining us now. Uh. In your latest note, 0:00:55.640 --> 0:00:59.000 you were talking about oil, and as we see right now, 0:00:59.040 --> 0:01:01.920 oil is pois for its biggest weekly drop in at 0:01:02.000 --> 0:01:06.399 least four weeks. Um are we heading lower here? I 0:01:06.440 --> 0:01:09.280 think so, Lea's I think, first of all, thank you 0:01:09.360 --> 0:01:11.479 for your kind comments. I feel like if I could 0:01:11.480 --> 0:01:17.080 bow on the radio, I would do it. Yes, I 0:01:17.120 --> 0:01:21.240 think oils had probably fifty where we are exactly at 0:01:21.240 --> 0:01:24.280 this moment is the technical support level. I think we're 0:01:24.280 --> 0:01:31.000 gonna break it and head down towards I think the 0:01:31.040 --> 0:01:34.679 American shale oil producers are in a fabulous position, the 0:01:34.720 --> 0:01:38.839 best position we've been in fifty years, to begin exporting 0:01:38.840 --> 0:01:44.200 oil and bringing in revenues, increasing our tax base, and 0:01:44.280 --> 0:01:46.560 in fact the numbers are so bigly said that it 0:01:46.600 --> 0:01:49.880 can literally balance the budget if we start moving in 0:01:49.880 --> 0:01:53.120 that direction. Mark Grant, I want you to talk about 0:01:53.360 --> 0:01:57.280 risk and several of the items that you've recently written 0:01:57.320 --> 0:01:59.960 about having to do with risk and how people see 0:02:00.080 --> 0:02:02.480 not to be able to perceive it, and you use 0:02:02.560 --> 0:02:05.440 the quote from Warren Buffett. Risk comes from not knowing 0:02:05.560 --> 0:02:09.280 what you're doing. Yes, but I think that's the correct statement. 0:02:09.320 --> 0:02:12.359 I think Mr Buffett nailed at the There are a 0:02:12.440 --> 0:02:15.000 number of ruth areas right now that I will not 0:02:15.480 --> 0:02:18.799 be involved in, uh, just because that's personally the way 0:02:18.840 --> 0:02:22.080 I do business. With the big institutional accounts I talked to, 0:02:22.480 --> 0:02:25.000 Fannie Mae and Freddie Mack are both a lot of risk. 0:02:25.160 --> 0:02:27.360 I don't want anything to do with their bonds because 0:02:27.360 --> 0:02:29.040 we don't know what they're gonna do with those two 0:02:29.440 --> 0:02:36.320 agencies Um, you could look at the European Bank deet right, 0:02:36.360 --> 0:02:39.280 the European Bank debt, the Tier one bonds I think 0:02:39.320 --> 0:02:42.880 have a tremendous amount of risk. Banco Popular Air is 0:02:43.000 --> 0:02:47.279 likely to go over the edge of the cliff and 0:02:47.320 --> 0:02:49.280 then we're gonna have to see how Europe deals with 0:02:49.320 --> 0:02:53.400 that situation. Uh. There have been big pain trades in 0:02:53.520 --> 0:02:57.040 both bonds. I said yields were going lower. I think 0:02:57.040 --> 0:02:59.480 I may have been one of the three people in 0:02:59.520 --> 0:03:03.520 the world at set it and everybody talked that everybody 0:03:03.639 --> 0:03:06.000 we're gonna have three percent yields right now in the 0:03:06.080 --> 0:03:10.600 tenure were to sixteen this morning. And as Lisa mentioned, 0:03:10.600 --> 0:03:15.960 oils the other big pain trade. OPEC keeps saying, you know, 0:03:16.040 --> 0:03:18.240 they're going to cut back and cut back. The problem 0:03:18.280 --> 0:03:21.200 they have is we can produce more than they can. 0:03:21.480 --> 0:03:25.520 So just to continue that thread, cheap loans to buy 0:03:25.560 --> 0:03:30.079 things such as automobiles, commercial mortgage backed securities. Right, those 0:03:30.080 --> 0:03:32.280 are two other areas PIM, and I'm glad you mentioned 0:03:32.440 --> 0:03:35.720 one would be subprime auto loans. I think the automobile 0:03:35.800 --> 0:03:39.440 market has been saturated in a way almost like the 0:03:39.640 --> 0:03:43.440 sub prime real estate market was. Was very cheap credit 0:03:43.960 --> 0:03:46.200 and I think we're about to end get to the 0:03:46.280 --> 0:03:48.240 end of that cycle, so I want nothing to do 0:03:48.280 --> 0:03:52.240 with those securities. And then c mbs, a commercial mortgage 0:03:52.400 --> 0:03:57.200 asset back bonds of real estate, especially anything connected with 0:03:57.320 --> 0:04:02.120 retail stores. Amazon On and the Internet companies are just 0:04:02.200 --> 0:04:06.720 eating the lunch of the traditional retail stores, and I 0:04:06.800 --> 0:04:10.120 see a huge problem in that area of credit as well. Well, 0:04:10.200 --> 0:04:12.680 let's talk about what you do. Like I'm wondering now 0:04:12.720 --> 0:04:14.680 that we see a ten year yield on the treasury 0:04:14.720 --> 0:04:18.159 of two point one six percent, do you think that 0:04:18.240 --> 0:04:21.440 yields go lower from here? Are you advising clients to buy. 0:04:22.520 --> 0:04:28.800 I'm advising clients to um go into a mixed picture, 0:04:28.800 --> 0:04:31.479 which I call cash flow investing, which is to buy 0:04:31.520 --> 0:04:35.040 corporate bonds five to ten years space to get a 0:04:35.120 --> 0:04:38.320 yield of around four percent. By the way, corporate bonds 0:04:38.400 --> 0:04:42.520 right now, even after taxes, have better yields, and municipal bonds, 0:04:43.040 --> 0:04:45.360 and then take half of their money and go into 0:04:46.240 --> 0:04:48.839 what I call closed in bond funds. They are about 0:04:49.040 --> 0:04:52.040 hundred or seven or so I like, and they're all 0:04:52.120 --> 0:04:55.320 yielding around at ten percent and higher, and they have 0:04:55.360 --> 0:04:59.240 a monthly check, which I think is critical. So a 0:04:59.279 --> 0:05:02.520 ten percent yield. Actually, because of the compound, interest is 0:05:02.520 --> 0:05:05.320 worth about eleven point one percent. So you put the 0:05:05.360 --> 0:05:08.800 two together, you're getting around seven and a quarter seven 0:05:08.839 --> 0:05:11.600 and a half percent on your money. And I think 0:05:11.680 --> 0:05:15.320 most of the run inequities is done, and I think 0:05:15.360 --> 0:05:17.240 that's a very good place to put money, both for 0:05:17.320 --> 0:05:20.880 institutions as well as for individuals. You know, Mark, I 0:05:20.960 --> 0:05:22.839 just want to push back a little bit because you 0:05:22.839 --> 0:05:27.080 said corporate bonds, in particular, leverage ratios have reached their 0:05:27.120 --> 0:05:31.000 all time highs with some of these particularly investment grade companies. 0:05:31.000 --> 0:05:33.760 They've been packing on debt at a faster pace than 0:05:33.760 --> 0:05:37.039 they've been increasing their revenues, and it's been heavily weighted 0:05:37.120 --> 0:05:41.320 towards telecommunication companies that face somewhat uncertain future. Does that 0:05:41.360 --> 0:05:44.800 concern you at least one? I think that's a fabulous 0:05:44.839 --> 0:05:47.480 point you're making. It. Does it concern me when interest 0:05:47.600 --> 0:05:50.919 rates are this low? No, that would be my short answer. 0:05:51.240 --> 0:05:53.400 You know, I pay attention to it, I look at it. 0:05:53.960 --> 0:05:57.600 But you have to bear in mind the additional debt 0:05:57.839 --> 0:06:00.520 is going in at such low interest rate. It's given 0:06:01.400 --> 0:06:04.680 profit margins that they're just increasing the size of their 0:06:04.720 --> 0:06:07.880 business we're doing stock buy backs in some cases, but 0:06:08.000 --> 0:06:10.960 I don't have a big concern about it now. So Mark, 0:06:11.160 --> 0:06:13.480 this looks like a very low yield picture that you're 0:06:13.520 --> 0:06:18.279 advising your clients to expect. How much have estimated forecasts 0:06:18.320 --> 0:06:21.880 for turns that you're talking with your clients about, how 0:06:21.960 --> 0:06:24.919 much have they come down? That've come down substantially. The 0:06:24.960 --> 0:06:28.440 reason we're in this very low interest rate environment, my opinion, 0:06:29.240 --> 0:06:33.400 is the ECB and the Japanese Central Bank now have 0:06:33.520 --> 0:06:36.479 bigger balance sheets and the FED. The yields in Europe 0:06:36.480 --> 0:06:40.640 and and Asia are much lower, some of them negative. 0:06:40.680 --> 0:06:43.560 At one point we had over eleven trillion dollars in 0:06:43.640 --> 0:06:47.800 negative yielding securities that we're now down to probably around 0:06:47.839 --> 0:06:53.080 eight trillion. But the the monetization of debt by the 0:06:53.120 --> 0:06:56.360 central banks all over the world has been huge, and 0:06:56.440 --> 0:07:00.680 that just is pushing yields down. And and then I think, 0:07:00.720 --> 0:07:03.680 of course with the FED, that Mr Trump has the 0:07:03.720 --> 0:07:06.240 ability at any point in time here to appoint four 0:07:06.279 --> 0:07:08.280 members of the FED, if not more, but we know 0:07:08.400 --> 0:07:10.560 for for sure. I think they are going to be 0:07:10.600 --> 0:07:12.880 business people. I think the FED is going to become 0:07:12.960 --> 0:07:15.800 much more pragmatic, and I think that a call for 0:07:15.960 --> 0:07:20.520 this return to normalcy, which is an economic theory I 0:07:20.560 --> 0:07:23.640 think is going to get too overturned. And as as 0:07:23.720 --> 0:07:26.800 the new members of the FED are appointed, Mark speak 0:07:26.800 --> 0:07:29.800 if you can just briefly about pension liabilities that exist 0:07:29.880 --> 0:07:33.200 in the United States when it comes to municipalities, their 0:07:33.280 --> 0:07:37.720 bond issuance and also UH, the risks that may be 0:07:38.160 --> 0:07:41.920 attended to those that people don't really understand. Certainly been 0:07:42.120 --> 0:07:47.720 the amount of pension liabilities is the biggest that's ever 0:07:47.760 --> 0:07:52.280 been unfunded pension liabilities. I've advised that the institutions I 0:07:52.320 --> 0:07:55.800 speak with, insurance companies, money managers to stay away and 0:07:56.000 --> 0:08:00.000 or take more assertive action in terms of I municipal 0:08:00.160 --> 0:08:04.120 pension funds. Uh, they're in a lot of them are 0:08:04.120 --> 0:08:08.200 in big trouble. We've seen, you know, some announcements in 0:08:08.200 --> 0:08:11.200 the press about some but it was recently estimated by 0:08:11.240 --> 0:08:16.600 the Houver Institute that Connecticut, for example, and their municipalities 0:08:16.640 --> 0:08:21.160 had about sixty five billion dollars and unfunded pension liabilities. 0:08:21.960 --> 0:08:24.400 We can look at Dallas, we can look at a 0:08:24.520 --> 0:08:26.880 number of other cities that have been mentioned in the 0:08:26.880 --> 0:08:32.680 press for worth, and they're just huge problems out there 0:08:32.720 --> 0:08:35.880 having to do with these pension funds. Thanks for sharing 0:08:35.880 --> 0:08:38.559 your thoughts with us. Smart Grant is the chief strategist 0:08:38.600 --> 0:08:42.440 at Hilltop Securities, giving us his view of risks that 0:08:42.480 --> 0:08:45.200 currently exist in the market that people may not be 0:08:45.280 --> 0:09:00.439 paying attention to. We were talking earlier about the report 0:09:00.480 --> 0:09:03.960 that came out today disappointing headline number also showing that 0:09:04.000 --> 0:09:07.840 wages are not going anywhere. But perhaps uh there is 0:09:08.040 --> 0:09:10.600 more optimism here uh than meets the eye. I want 0:09:10.600 --> 0:09:12.760 to bring in Neil Data, who's head of US economics 0:09:12.800 --> 0:09:16.840 for Renaissance Renaissance Macro Research, who joins us by phone. Neil, 0:09:17.080 --> 0:09:19.000 thank you so much for joining us. I want to 0:09:19.040 --> 0:09:23.640 start with the idea that perhaps this job's report shows 0:09:23.920 --> 0:09:27.280 that the FEDS policy of holding rates low is actually 0:09:27.320 --> 0:09:30.640 still helping get people off the sidelines. That was a 0:09:30.679 --> 0:09:33.160 sentiment that you seem to express in a Bloomberg News 0:09:33.280 --> 0:09:37.640 article yesterday. Uh is that how you read this? Well? 0:09:37.679 --> 0:09:40.680 I don't read this report that way, because the labor 0:09:40.720 --> 0:09:45.400 force participation rate uh fell and um you know, it 0:09:45.520 --> 0:09:49.120 fell for prime age workers as well, so to fifty 0:09:49.120 --> 0:09:51.560 four year old Um you know. But I think the 0:09:51.600 --> 0:09:55.240 general trend for for prime aged participation has been up 0:09:55.679 --> 0:10:00.360 broadly speaking since early UM. You know, if you look 0:10:00.400 --> 0:10:02.840 at UM, I think what you're trying to get at 0:10:02.960 --> 0:10:06.400 is UM. It is definitely true that UM. I think 0:10:06.440 --> 0:10:10.920 easy monetary policy generally is UM. You know, pulling people 0:10:11.480 --> 0:10:15.079 back into the workforce. UM. You know at the margins, right, 0:10:15.200 --> 0:10:19.240 so you know, for example, UM, part time for economic reasons, 0:10:19.280 --> 0:10:22.160 that's down, right, the U six unemployment rate, that's down. 0:10:22.200 --> 0:10:23.840 If you look at those not in the labor force 0:10:23.920 --> 0:10:27.520 that want a job right now, that's down. So UM. 0:10:27.559 --> 0:10:29.439 You know that's the sign of a healthy labor market, 0:10:29.480 --> 0:10:31.600 is that's your you know, long term unemployment is down. 0:10:31.720 --> 0:10:33.960 So I mean that that tells you that if the 0:10:34.000 --> 0:10:36.959 labor market is strong enough to pull down the unemployed, 0:10:37.040 --> 0:10:39.800 for the people that are the most difficult to bring 0:10:40.400 --> 0:10:43.840 into employment. UM, that's saying something. I mean. So if 0:10:43.880 --> 0:10:46.840 you take a look at, for example, within the Peril Report, 0:10:46.880 --> 0:10:51.720 I mean leisure and hospitality earnings, UM, that number relative 0:10:51.760 --> 0:10:54.600 to total private sector earnings hourly earnings is over six. 0:10:55.360 --> 0:10:57.880 So you know, when you have a sector like leisure 0:10:57.920 --> 0:11:01.160 and hospitality, which is you I think most would agree 0:11:01.480 --> 0:11:07.080 a low wage sector UM rising relative to other industries 0:11:07.120 --> 0:11:11.199 in terms of wage growth. Um, So that's that income 0:11:11.200 --> 0:11:15.040 inequality in some respects of declining. Right. So, UM, I 0:11:15.040 --> 0:11:17.960 mean I think the labor markets are tightening. Um, I 0:11:18.000 --> 0:11:21.040 think the FED is going in June. Um. I think 0:11:21.040 --> 0:11:23.400 there was enough in this report, and I mean it's 0:11:23.440 --> 0:11:26.160 about taking a holistic approach. I mean, I think there's 0:11:26.160 --> 0:11:28.760 been enough to date to suggest that, you know, the 0:11:28.760 --> 0:11:32.199 headline payroll number today is probably not quite as weak 0:11:32.320 --> 0:11:35.640 as as this was reported, and I think the underlying 0:11:35.640 --> 0:11:38.360 trend rather is is probably so much stronger than the 0:11:38.440 --> 0:11:42.040 number we got today. UM. So you know, and I'm 0:11:42.040 --> 0:11:44.560 and I'm I think there's enough in there to, um, 0:11:44.600 --> 0:11:47.240 you know, to kind of draw some encouraging signs about 0:11:47.240 --> 0:11:49.760 the outlook, Neil, Is there enough in there to draw 0:11:49.800 --> 0:11:52.720 any conclusion about what's going on with the yield curve 0:11:52.800 --> 0:11:56.640 and why it is flattening so much? Oh? Well, I 0:11:56.679 --> 0:11:58.679 mean I think that. I mean, I think that's um, 0:11:59.200 --> 0:12:01.080 that's me. That's all vious. I mean, the wage number 0:12:01.120 --> 0:12:04.800 was sluggish and labor force participation rate fell, which implies 0:12:04.840 --> 0:12:08.640 lower potential GDP. At the same time, I think, you know, 0:12:08.679 --> 0:12:11.319 the odds of a June hiker fairly much set in 0:12:11.320 --> 0:12:13.360 the stone at this point. Um. You know, while this 0:12:13.440 --> 0:12:15.760 number was weak, it's not quite as week to shift 0:12:15.800 --> 0:12:18.760 the odds of June. So you know, the FED hiking 0:12:19.120 --> 0:12:21.880 and potential growth is slowing someone at the margin based 0:12:21.880 --> 0:12:23.560 on this data point at least, and so you get 0:12:23.720 --> 0:12:26.960 you get a flatter yeel curve. UM. Now I do 0:12:27.080 --> 0:12:29.719 think that, you know, you have to weigh this, as 0:12:29.760 --> 0:12:32.360 I say, against the data that's come in, and GDP 0:12:32.559 --> 0:12:36.160 tracking is in the vicinity of around three to four 0:12:36.200 --> 0:12:39.320 percent in the current quarter. That was the Atlanta FED report, right, 0:12:39.840 --> 0:12:41.800 Well that was yesterday. I mean, we'll see what what 0:12:41.800 --> 0:12:43.440 what number they come up with today. I mean the 0:12:43.480 --> 0:12:46.480 trade numbers, for example, probably pushed that number a little 0:12:46.520 --> 0:12:49.240 bit lower. Um, you know, but at the end of 0:12:49.240 --> 0:12:51.720 the day, I mean GDP growth in the second quarter 0:12:51.760 --> 0:12:53.800 is going to show a meaningful rebound relative to the 0:12:53.840 --> 0:12:56.480 first UM. And you know, I think the odds are 0:12:56.600 --> 0:12:58.360 that when you average out the first two quarters of 0:12:58.360 --> 0:13:00.280 the year, you're growing at about two and alf for sense, 0:13:00.280 --> 0:13:04.120 So you have to weigh that against against this job's number. 0:13:04.160 --> 0:13:07.400 So if you have stronger GDP growth but somewhat slower 0:13:07.440 --> 0:13:09.880 employment growth, what does that mean? That means productivity is 0:13:09.920 --> 0:13:12.760 going up right, and that's yeah, sorry, good, No real 0:13:12.840 --> 0:13:16.319 quick question. If this report does signal some kind of 0:13:16.760 --> 0:13:21.400 slowing down of the the employment picture, do you think 0:13:21.480 --> 0:13:24.840 this takes the third hike for off the table for 0:13:24.840 --> 0:13:28.439 the Fed. It's possible. It's certainly possible. I mean, it's 0:13:28.440 --> 0:13:32.480 also possible that the GDP numbers are relatively healthy and 0:13:32.559 --> 0:13:35.920 that core inflation firms and the FED can still go 0:13:36.000 --> 0:13:39.240 in in um in September. I mean, I think the 0:13:39.240 --> 0:13:42.720 big story is, you know, in sten the FED needed 0:13:43.920 --> 0:13:47.480 overwhelming evidence to hike. Now they need overwhelming evidence not 0:13:47.559 --> 0:13:49.719 to and we're not there yet. I want to thank 0:13:49.720 --> 0:13:51.760 you very much for joining us. Neil Data is the 0:13:51.800 --> 0:13:56.080 head of US economics for Renaissance Macro Research, giving us 0:13:56.120 --> 0:13:59.720 his thoughts about today's jobs report and also about the 0:13:59.720 --> 0:14:11.800 future of US GDP performance. We want to take a 0:14:11.840 --> 0:14:14.239 moment to let you know about something new from Bloomberg. 0:14:14.480 --> 0:14:16.719 Starting right now, you can use our I O s 0:14:16.760 --> 0:14:19.920 app or our new Google Chrome extension to scan any 0:14:19.920 --> 0:14:23.360 news story on any website, instantly revealing relevant news and 0:14:23.400 --> 0:14:26.040 market data from Bloomberg and other sources related to the 0:14:26.040 --> 0:14:28.760 companies and people you're reading about. So no matter where 0:14:28.800 --> 0:14:30.720 you're reading the news. You can bring the power of 0:14:30.760 --> 0:14:34.280 Bloomberg's news and data with you. It's pretty amazing. Download 0:14:34.320 --> 0:14:36.840 our io s app or search for the Bloomberg extension 0:14:36.880 --> 0:14:39.040 on the Chrome Store to try it out. Learn more 0:14:39.080 --> 0:14:51.600 at bloomberg dot com slash lens. Yesterday we got the 0:14:51.640 --> 0:14:54.600 announcement from President Trump that he plans to withdraw the 0:14:54.680 --> 0:14:58.600 US from the Paris Climate Accord, making the US one 0:14:58.600 --> 0:15:01.760 of three nations g tobally that are not part of 0:15:01.800 --> 0:15:04.400 this pact. To get a better sense of what the 0:15:04.400 --> 0:15:07.200 implications really are, I want to bring in Rob Barnett. 0:15:07.320 --> 0:15:10.280 He is based in London, our senior energy policy analysts 0:15:10.280 --> 0:15:14.680 for Bloomberg Intelligence. Rob, you know, after some closer examination, 0:15:14.720 --> 0:15:17.360 we're getting a lot of reports that perhaps this will 0:15:17.360 --> 0:15:20.360 make no difference whatsoever with respect to the US is 0:15:20.480 --> 0:15:26.680 adoption of UH environmentally friendly sources of energy. What's your 0:15:26.680 --> 0:15:29.480 take on this, Well, depends on whether you have a 0:15:29.560 --> 0:15:33.280 medium term or long term view. In the medium term, 0:15:33.320 --> 0:15:36.440 it really doesn't make a difference. Trump had already signaled 0:15:36.440 --> 0:15:38.960 that we weren't going to do the Clean Power Plan 0:15:39.640 --> 0:15:43.920 and other types of policies in the US, so frankly, 0:15:43.960 --> 0:15:46.960 being in the Paris agreement or not didn't really change 0:15:47.680 --> 0:15:51.200 the landscape for policy in the US. But to your 0:15:51.200 --> 0:15:55.840 earlier point, the the industry has already been shifting to 0:15:55.960 --> 0:16:00.240 lower emissions without having the Paris Agreement or without having 0:16:00.640 --> 0:16:04.120 many of the policies that President Barack Obama was pushing for. 0:16:04.600 --> 0:16:07.680 Emissions were declining by an average of about one point 0:16:07.720 --> 0:16:11.040 three percent a year in the US for the last decade. 0:16:11.160 --> 0:16:15.400 So we've seen market declines without really having the policy. 0:16:15.680 --> 0:16:18.920 None of those fundamental underlying factors have changed that have 0:16:19.000 --> 0:16:22.280 been allowing for that decline to occur, Rob, Can you 0:16:22.320 --> 0:16:25.000 tell us a little bit about cap and trade programs, 0:16:25.040 --> 0:16:29.600 how they currently work, and whether they are successful. Sure? So, 0:16:29.920 --> 0:16:33.960 capin trade, one thing is that often gets used in 0:16:34.120 --> 0:16:39.840 almost synonymous terms with Paris, the Paris Agreement, or any 0:16:39.920 --> 0:16:42.760 of the policies being discussed in the United States. But 0:16:42.800 --> 0:16:45.600 the thing is cap and trade is far from the norm. 0:16:45.720 --> 0:16:48.800 Less than ten percent of emissions around the world are 0:16:48.880 --> 0:16:51.640 subject to cap and trade programs, and that's where you 0:16:51.680 --> 0:16:55.200 have a tradeable credit for where emitters trade for the 0:16:55.400 --> 0:16:59.640 right to emit carbon oxide into the atmosphere. Now there 0:16:59.640 --> 0:17:02.320 are use such programs in the US, for instance, out 0:17:02.360 --> 0:17:05.080 in California if you want to admit CEO too, it 0:17:05.240 --> 0:17:09.680 costs about a little over fourteen dollars per ton right now. 0:17:09.760 --> 0:17:13.160 But the interesting thing about that is for the jurisdictions 0:17:13.200 --> 0:17:17.600 that do have captain trade California, Europe, parts of Asia, 0:17:17.840 --> 0:17:20.480 they don't care whether Trump's in the Climate Paris Climate 0:17:20.520 --> 0:17:24.280 Agreement or not. So right now, the withdrawal of the 0:17:24.400 --> 0:17:29.360 US has very little impact on the resolve of lawmakers 0:17:29.400 --> 0:17:32.159 and those jurisdictions to continue with those kind of programs. 0:17:32.200 --> 0:17:34.359 You know, Robbie started out talking about how in the 0:17:34.480 --> 0:17:36.240 short term it's hard to see that there's going to 0:17:36.240 --> 0:17:39.520 be a significant difference. What about the long term, Well, 0:17:39.520 --> 0:17:43.840 over the long term, it is quite likely that policy 0:17:43.920 --> 0:17:47.320 is going to be needed to continue to drive emission's lower. 0:17:47.920 --> 0:17:50.119 Uh if we're going to hit this uh you know, 0:17:50.280 --> 0:17:54.520 two degree warming threshold, so having temperatures go no more 0:17:54.520 --> 0:17:59.240 in two degrees. So interesting to note that Paris itself 0:17:59.320 --> 0:18:02.320 didn't get us to that to degree threshold. So even 0:18:02.320 --> 0:18:05.199 if you if all countries complied with Paris, you wouldn't 0:18:05.240 --> 0:18:09.760 get there. So an incremental policy, new policy is needed 0:18:09.760 --> 0:18:13.240 to drive emissions lower over the long term, at least 0:18:13.280 --> 0:18:17.240 with the current technology mix. So if you had a 0:18:17.480 --> 0:18:21.280 future president who thought like President Donald Trump does on 0:18:21.320 --> 0:18:24.560 this issue, you might not see those kinds of policies 0:18:24.800 --> 0:18:28.600 coming in and driving those new technologies into the marketplace. 0:18:28.640 --> 0:18:31.520 But at least in the short run, it's not that meaningful. 0:18:31.840 --> 0:18:33.919 Long term though, if you look out over kind of 0:18:33.960 --> 0:18:37.959 twenty thirty, forty years, UH, it would be meaningful. So 0:18:38.080 --> 0:18:41.439 it just depends on how long we continue with the 0:18:41.480 --> 0:18:44.760 president who doesn't really want to tackle the issue. Well. 0:18:44.800 --> 0:18:47.840 The President yesterday and speaking in the Rose Garden about 0:18:47.840 --> 0:18:51.080 the US withdraw from the Paris Climate Accord, mentioned the 0:18:51.160 --> 0:18:54.680 coal industry. What are your thoughts about the coal industry 0:18:54.720 --> 0:18:58.439 and is there a revival likely to happen? Certainly not 0:18:58.680 --> 0:19:03.159 in the US, and we're seeing the UH use of 0:19:03.240 --> 0:19:07.680 coal slow globally, so uh the plants that have already 0:19:07.720 --> 0:19:10.880 closed in the United States, they're not coming back. It's 0:19:11.000 --> 0:19:14.640 interesting the note, even with President Trump and his pro 0:19:14.880 --> 0:19:20.040 coal rhetorical stance, we're continuing to see coal plants UH 0:19:20.240 --> 0:19:23.879 closures being announced from companies like A E. S and 0:19:24.040 --> 0:19:26.280 others that have said even since he's been elected that 0:19:26.280 --> 0:19:28.560 they're going to close their coal plants. And over in 0:19:28.640 --> 0:19:31.320 Europe and elsewhere, you're seeing a lot of resolve to 0:19:31.640 --> 0:19:35.600 tackle coal. So France, Emmanuel mccrolan has said he wants 0:19:35.600 --> 0:19:38.920 to close all of the coal plants in France. Bye. 0:19:39.200 --> 0:19:42.200 Here in the UK they're aiming to have all coal 0:19:42.240 --> 0:19:46.600 plants closed by so none of them is changing in 0:19:46.680 --> 0:19:50.879 spite of the rhetorics that's coming out of President Donald Trump. 0:19:51.040 --> 0:19:53.000 So in our view at least, it's going to be 0:19:53.160 --> 0:19:58.159 very difficult to uh drive incremental new coal demand from 0:19:58.400 --> 0:20:01.120 loosening some of this policy. In the U S. It's 0:20:01.160 --> 0:20:04.400 just not gonna work. Just gonna mention that just yesterday 0:20:04.520 --> 0:20:07.560 Brighton Point power Station in Somerset in Massachusetts, that's the 0:20:07.640 --> 0:20:11.359 largest qualifier plants in New England UM went dark on Wednesday. 0:20:11.600 --> 0:20:14.480 It's part of the shutdown. It's been underway for several years. 0:20:15.440 --> 0:20:17.760 That's right. You've got to keep in mind that New 0:20:17.760 --> 0:20:20.560 England is one of the parts of the US that 0:20:20.840 --> 0:20:23.639 is pushing very hard on the issue of climate whether 0:20:23.680 --> 0:20:26.280 you have a president like Donald Trump in place or not. 0:20:26.840 --> 0:20:29.840 In the Northeast, just like in California, they've got cap 0:20:29.880 --> 0:20:32.840 and trade in place, so Brighton Point would have been 0:20:32.880 --> 0:20:36.400 subject to that trading program and it and it increases 0:20:36.440 --> 0:20:39.600 the cost of using cold if you if you have 0:20:39.720 --> 0:20:43.320 to pay for those emissions. So uh certainly uh in 0:20:43.359 --> 0:20:46.600 any state where you have that kind of program in place, 0:20:46.960 --> 0:20:51.600 you're gonna see less uh less emphasis on using cole, 0:20:51.800 --> 0:20:55.400 more emphasis on natural gas and renewables. Thank you very much. 0:20:55.480 --> 0:20:59.280 Rob Barnett as our senior Energy policy analyst for Bloomberg Intelligence, 0:20:59.480 --> 0:21:01.960 joining us from London. Just go to b I go 0:21:02.119 --> 0:21:08.600 on the Bloomberg for more information. Thanks for listening to 0:21:08.600 --> 0:21:11.520 the Bloomberg P and L podcast. You can subscribe and 0:21:11.560 --> 0:21:15.560 listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast 0:21:15.560 --> 0:21:19.040 platform you prefer. I'm pim Fox. I'm on Twitter at 0:21:19.200 --> 0:21:23.119 pim Fox. I'm on Twitter at Lisa abramowits one before 0:21:23.160 --> 0:21:26.399 the podcast. You can always catch us worldwide on Bloomberg Radio.