Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: at Bloomberg dot com slash podcast. Let's talk. Get some
Speaker 1: news that's going to take place at downtown Manhattan today
Speaker 1: really fifteen former President Trump apparently reportedly is going to
Speaker 1: be indicted. Little team coverage here for bloom We're gonna
Speaker 1: round table to seeing Bloomberg's pretty Gupta. She is downtown
Speaker 1: right now as we speak, at Center Street, so we'll
Speaker 1: get the latest there and plus Boston Bloomberg Washington correspond
Speaker 1: and Joe Matthew joins us from DC. So Critty, let's
Speaker 1: start with you here. What is the scene downtown? Again?
Speaker 1: The President expected to be arraigned or indicted and arraigned.
Speaker 1: Two fifteen pm, I believe is the time. What are
Speaker 1: you seeing downtown? Yeah, so two pm you are going
Speaker 1: to see a President Trump around two pm. Get a
Speaker 1: range and basically what that means is he's going to
Speaker 1: come in to the District Attorney's office, which is where
Speaker 1: we are right outside, and he's reason going to have
Speaker 1: his charges told to him. Look, it's reported that his
Speaker 1: team doesn't yet know what the charges actually are. There
Speaker 1: suspicions the rage anywhere from twenty four to thirty different
Speaker 1: counts in charges, so really waiting to see what that
Speaker 1: actually means. He's going to go in. There are no
Speaker 1: cameras allowed for the arranged actual arrangement, but photographs can
Speaker 1: be taken beforehand. He's going to go in, He's going
Speaker 1: to submit his plea. The Trump's defense team has said
Speaker 1: that he's going to plead not guilty, and then it's
Speaker 1: going to be a quick, quick exit from there. He's
Speaker 1: going to get fingerprinted, he might have a mug shot potentially,
Speaker 1: we don't actually know because of security reasons, he might not,
Speaker 1: and then he's gonna head very quickly back to Marlago
Speaker 1: to make his comments out of the state about eight
Speaker 1: fifteen pm tonight, So a very quick turnaround. But let
Speaker 1: me just draw you a picture or paint you a
Speaker 1: picture if I can. We have this kind of layers
Speaker 1: of people, who's starting with a District Attorney's office have
Speaker 1: kind of barricades, a massive police presence, a massive press presence,
Speaker 1: and then separated from that in the park a right
Speaker 1: next door, right across the street from the District Attorney's
Speaker 1: office are protesters. And you're seeing protesters from both sides,
Speaker 1: but largely more pro Trumps than anti Trump. So he's
Speaker 1: got to get back to give his speech from Mara Lago,
Speaker 1: and I guess Alvin Bragg is going to give a
Speaker 1: statement afterwards as well. What do you think we're going
Speaker 1: to hear from these two guys. Well, so Alvin Bragg specifically,
Speaker 1: we're going to hear more about perhaps some of the
Speaker 1: allegations that are being made against him. Remember, he has
Speaker 1: been at the end of more attacking Congress as well,
Speaker 1: not just a Trump's defense team as well the Trump
Speaker 1: defense teams specifically if that have attacked his character is
Speaker 1: at attack of legitimacy, is the case. But there are
Speaker 1: members of Congress who are saying, why is Alvin Bragg
Speaker 1: taking this on now when this case was presented to
Speaker 1: him a year ago, So there is a lot of
Speaker 1: questions about that, how he's actually funding this as the
Speaker 1: use of federal funds to protecute the form of plesident
Speaker 1: is really justified. It's likely he may comments on that,
Speaker 1: but at the end of the day, it might be
Speaker 1: a very simple question, do we actually start to hear
Speaker 1: what the charges actually are. That's what we're expecting at
Speaker 1: least at three thirty pm. The mar Laudo comments, by
Speaker 1: the way, at eight fifteen PM, could go in any direction.
Speaker 1: I'll leave it to Joe to speculate on that one. Yeah, Joe,
Speaker 1: let's let's bring you in. Here's what's the feeling in
Speaker 1: DC as to these events today at two o'clock downtown Manhattan,
Speaker 1: and then what we might hear from the former president
Speaker 1: this evening. What's the feeling in DC right now? Look,
Speaker 1: everyone's looking to New York, and you've even got Marjorie
Speaker 1: Taylor Green there now. Is apparently not a big fan
Speaker 1: of your town. I don't know if you've seen some
Speaker 1: of the tweets, she says. On my way to my
Speaker 1: hotel in New York City, I've seen many people so
Speaker 1: drugged up they can't even stand up. They just fall
Speaker 1: over on the sidewalks from using drugs at mayor Adams
Speaker 1: Free drug use centers. I'm wondering if she's ever walked
Speaker 1: around the district of Columbia. But wait, where are the
Speaker 1: free drug use centers? I didn't know about this, just
Speaker 1: reply to her on Twitter. Actually, well, she's got she's
Speaker 1: got an event that starts very soon here ten thirty,
Speaker 1: about fifteen minutes, the rally for Trump with the New
Speaker 1: York Young Republican Club will begin across the street. She's
Speaker 1: also suggesting that she will be attacked with a sort
Speaker 1: of audio attack, as the counter protesters are bringing whistles
Speaker 1: and pots and pans to try to drown her out.
Speaker 1: The former President's going to be there early though, eleven
Speaker 1: am is what is being reported now, to surrender leading
Speaker 1: up to the indictment at two fifteen, at which time
Speaker 1: the indictment will be unsealed and will actually have the charges.
Speaker 1: As far as tonight goes, there actually were questions about
Speaker 1: whether he would have to navigate a gag order, but
Speaker 1: it looks like that will not be the case. He's
Speaker 1: going to return to Marrow Lago and will deliver what
Speaker 1: I suspect will be a fairly carefully written speech. Whether
Speaker 1: he sticks to the script is the big question here.
Speaker 1: But the idea is, you know, to have this sort
Speaker 1: of administration in waiting the shadow administration. He's back there.
Speaker 1: He's going to be in a suit and tie, not
Speaker 1: looking like a criminal in a jumpsuit, acting and a
Speaker 1: peer presidential. The big question we have is who's going
Speaker 1: to show up. He's invited a lot of lawmakers to
Speaker 1: go there, and it's a real moment here to choose
Speaker 1: whether you want to be seen tonight at Marlago as
Speaker 1: a loyal supporter of Donald Trump or you have other plans.
Speaker 1: By the way, it does seem like it would be,
Speaker 1: I mean, beyond ridiculous to take a mug shot of
Speaker 1: the former president, right. I guess fingerprints maybe aren't on record,
Speaker 1: but did they really have to do that? Kind of
Speaker 1: looks like it's not going to happen. I was really
Speaker 1: taken by that reporting because supposedly Donald Trump was hoping
Speaker 1: to use that, you know, as a campaign poster or
Speaker 1: as a fundraiser. He was mugging in the mirror to
Speaker 1: try to strike the perfect posture here and expression. I
Speaker 1: always go back to that Frank Sinatra mug shot. I'm
Speaker 1: just guessing he was looking at that. But it looks
Speaker 1: like there will not be a mug shot. He will
Speaker 1: be fingerprinted digitally so he will not have ink on
Speaker 1: his hands, and the Secret Service will be right there
Speaker 1: with him. The question is what happens between eleven and
Speaker 1: two fifteen. There's apparently going to be a move following
Speaker 1: the surrender to the internally connected courthouse. He will not
Speaker 1: likely go outside, but that could be the closest thing
Speaker 1: we see to a perp walk based on reporting. Whether
Speaker 1: they get pictures of it is another question. Some reporters
Speaker 1: will be allowed in for some still photos during the arraignment,
Speaker 1: they'll be ushered right back outside. There will not be
Speaker 1: any video, so you know, we might get a glimpse
Speaker 1: of this moment in history, but that's about it. Joe,
Speaker 1: What kind of response do you think we'll get from
Speaker 1: perhaps individual members of Congress on both sides of the
Speaker 1: aisle once the indictment is unsealed and we get a
Speaker 1: little bit more clarity, because it seems like his allies
Speaker 1: are remaining pretty staunch here. Yeah, it's suspect that it'll
Speaker 1: be pretty predictable, to be honest with you. You know,
Speaker 1: we've we've heard Democrats, at least on the progressive side
Speaker 1: of the party celebrating lots of exclamation points. This is
Speaker 1: about time justice finally being served, and then you've got
Speaker 1: Republicans calling this a witch hunt. It's the Center that
Speaker 1: has been awfully quiet, and the White House has been
Speaker 1: awfully quiet too. There's been a concerted decision there to
Speaker 1: not talk about this, to not get bogged down in it,
Speaker 1: and President, just like everybody else, is going to be
Speaker 1: watching this unfold today. Critty, let me ask you about
Speaker 1: what it's like down there right now. I'm sure that
Speaker 1: there are so many thousands of reporters that you can
Speaker 1: barely breathe. But are there any protesters or supporters? I mean,
Speaker 1: yesterday they were like a couple literally two right are
Speaker 1: there were there bus loads of people that are showing
Speaker 1: up now or is it still just all press. It
Speaker 1: is definitely showing up in full force with protesters, and
Speaker 1: you're seeing this again for both pro Trump and anti Trump.
Speaker 1: I did have I wouldn't say two scuffles earlier that
Speaker 1: we're broken up by the police. It looks like it's
Speaker 1: mostly peaceful. You are starting to see more and more
Speaker 1: people pile in to the parts that are pro Trump.
Speaker 1: I remember, you're also seeing some lawmakers come onto the
Speaker 1: scene as well. We had George Santos a spotting George
Speaker 1: Santos earlier about an hour ago, and it is reported
Speaker 1: that Representative Marjorie Tayler Green, who is a representative of
Speaker 1: the fourteenth District of Georgia and a Republicans has says
Speaker 1: she's point to be right here to protest the arraignment
Speaker 1: of the former president. So we are on Wash for
Speaker 1: more protesters, more politicians who are here too. As Joe said,
Speaker 1: say are you or are you not with President Trump?
Speaker 1: And in fact, as we're speaking right now, we are
Speaker 1: seeing some more police presidence and actually a motorcade. It
Speaker 1: doesn't look like this is necessarily President or former President
Speaker 1: Trump's motorcade just yet, but again a very high profile
Speaker 1: presence coming from Washing NDC. And just quick cretty the
Speaker 1: police presidence is it? Is it NYPD primarily and then
Speaker 1: I guess some secret service when when the president arrives
Speaker 1: former president define it is definitely NYPD mostly, But you
Speaker 1: are seeing to Joe's point about kind of that intersection,
Speaker 1: the internal intersection between the court and the District Attorney's office,
Speaker 1: it is completely walked off and that's where you are
Speaker 1: seeing some secret service details, so very mostly dominated by
Speaker 1: the New York Police Department, but there is again that
Speaker 1: presence from the White House as well. All right, great stuff, guys,
Speaker 1: really appreciate getting the inspectives there. Bloomberg's pretty Gupta. She
Speaker 1: is downtown live at Center Street with the Manhattan District
Speaker 1: Attorney's Office, and then down Washington, DC. Bloomberg's Watchington corresponded,
Speaker 1: Joe Matthew, giving us the perspective from this from Washington,
Speaker 1: d C. From the Capitol on this historic day. I mean,
Speaker 1: that's it is in historic day. Well, it'll be I'm
Speaker 1: sort some compelling images and we'll see what the indictment
Speaker 1: reads when we get that later this afternoon, and then
Speaker 1: we'll get the reactions from presumably members of Congress and
Speaker 1: then the former president himself at eight pm tonight from
Speaker 1: Marlago down in Palm Beach, Florida. That's so we'll have
Speaker 1: continued reporting on that throughout the day. You're listening to
Speaker 1: the Team Cancer Line program Bloomberg Markets weekdays at ten
Speaker 1: am eastering on Bloomberg dot Com, the I Heart Radio app,
Speaker 1: and the Bloomberg Business App. We're listening on demand wherever
Speaker 1: you get your podcast. I know it's a big deal
Speaker 1: because there's been so much pain in terms of of
Speaker 1: you know, losses and both money and jobs. So much
Speaker 1: hurt there domestically, there's such rage, outrage, and then we
Speaker 1: have UBS tomorrow. But I just don't know what difference
Speaker 1: the credit sweets agm makes. I was talking to Oliver
Speaker 1: Crook about this earlier. He's in Zurich, and he says, well,
Speaker 1: for one thing, they've got to have the team in
Speaker 1: place to hand off right bank to UBS. But who
Speaker 1: can we ask who will who has the best overview?
Speaker 1: I think I got somebody. I think I got somebody.
Speaker 1: Alison Williams, Bloomberg Intelligence. She does this stuff for a living.
Speaker 1: So Alison, let's start there where Matt was kind of
Speaker 1: talking about this meeting here. I mean, what's going on
Speaker 1: over in Zurch We've got UBS buying Credit Swiss. But
Speaker 1: I guess Credit Swiss had to have their annual general
Speaker 1: meeting today. But it just seems kind of odd timing,
Speaker 1: doesn't I mean, it does sound odd timing. And again
Speaker 1: to Matt's point two, I agree, it's it seems almost
Speaker 1: sort of pointless, right. But we're in a really unusual
Speaker 1: situation where, um, you know, the government came in and
Speaker 1: said they were going to skip shareholder votes and then
Speaker 1: you know, now we're having this meeting where these shareholders
Speaker 1: are basically not having a say in terms of this
Speaker 1: coming deal. So I think it's just perhaps, um, you know,
Speaker 1: a lot of the statements coming out of it are
Speaker 1: our people, you know, having their say verbally even though
Speaker 1: they're not able to sort of exercise the rights that
Speaker 1: a typical shareholder would have. So I mean, I guess
Speaker 1: as we got a little bit of hindsight here, Alison.
Speaker 1: For UBS, I mean again, is this a deal with
Speaker 1: hindsight that they wanted to have? It seems like a
Speaker 1: great opportunity. I think so Stock You're right in the
Speaker 1: stock won a big time, but they seem to be
Speaker 1: so wedded to their their their plan of kind of
Speaker 1: slimming down the bank focusing on wealth management. How do
Speaker 1: you think the bankers are feeling about it these days?
Speaker 1: So I think for UBS, again, you know it to
Speaker 1: the extent that they have the financial protections based in
Speaker 1: they do get you know, a fair amount of what
Speaker 1: they want right, which is, you know, of course there
Speaker 1: is the cultural issues and the like in terms of
Speaker 1: bringing these bankers in, but they want more us than
Speaker 1: the investment bank. They want that m and a business
Speaker 1: so to the extent that they can hire and keep
Speaker 1: those bankers and clients, that's a good thing. They want.
Speaker 1: Latin America and Southeast Asia, those are big ads and
Speaker 1: their wealth business and the asset management. Again there's some
Speaker 1: complementary stuff. And the investment bank had pretty much been
Speaker 1: gutted from a trading standpoint as it was so. And
Speaker 1: then finally, of course, I mean the position that they
Speaker 1: now have in Switzerland, which you know, I don't think
Speaker 1: would have been allowed if it weren't for the government
Speaker 1: orchestrating it because it is such a sizeable, concentrated position.
Speaker 1: The question remains, and I think people go back to
Speaker 1: sort of the playbook of the crisis. You know, what
Speaker 1: else are they inheriting. One of the things is, you know,
Speaker 1: sort of legal liabilities that obviously turned out to be
Speaker 1: hugely costly around the deals at the global financial crisis.
Speaker 1: But I think this is a little bit different. If
Speaker 1: you think about the depth and breadth of mortgage and
Speaker 1: the harm globally and you know, mom and pop consumers there,
Speaker 1: there's not I don't think the same stakes and I
Speaker 1: think but I do think that ubs bargain to get
Speaker 1: what they could and build some protections in and so
Speaker 1: at the end of the day that that will be
Speaker 1: you know what what says financially if it was a
Speaker 1: good deal. I think strategically they are getting sort of
Speaker 1: what they want and able to you know, sort of
Speaker 1: run down what they don't want. All right, let's get
Speaker 1: to you know, the godfather of big banks, Jamie Diamond,
Speaker 1: puts out his annual letter. Everybody reads it, and he
Speaker 1: doesn't even really hold back too much when criticizing regular
Speaker 1: leaders for the failure of SVB, says kind of, you know,
Speaker 1: you put these banks in this position and then you
Speaker 1: shut them down after they use these tools to to
Speaker 1: to fail. Um. What do you think about Jamie Diamond's
Speaker 1: missive here? So I think, you know, Jamie Diamond is
Speaker 1: always very vocal and you know, certainly he has given
Speaker 1: their their position and their size and the regulation they
Speaker 1: face because of those aspects. Um, you know there he's
Speaker 1: always very vocal about regulation broadly. UM, And I think
Speaker 1: that you know he is he is making the point
Speaker 1: and he doesn't by the way he does say you know,
Speaker 1: this doesn't excuse management, but I think he is you know,
Speaker 1: broadening out the picture in terms of the position that uh,
Speaker 1: you know, the bags are in in turn and and
Speaker 1: you know, if you look at it, it's a little wonky.
Speaker 1: But like you know, it comes down to the capital
Speaker 1: weights and the way the capital regulations are. And he
Speaker 1: has consistently consistently talked about, you know the fact that
Speaker 1: he thinks that a lot of the capital rules it's
Speaker 1: it's too complex because there's too overlapping, and that there
Speaker 1: are unintended consequences, and so I think he's using his
Speaker 1: form to point some of those out. All right, Alison,
Speaker 1: one of the I think brewing headwinds, if you will,
Speaker 1: for banks of all shapes and sizes, is commercial real estate.
Speaker 1: I'm hearing more and more about that. I suspect that
Speaker 1: we're gonna hear more about it when the banks start
Speaker 1: reporting earnings in a couple of weeks. I know you
Speaker 1: and your team have done some research on this. How
Speaker 1: big of a risk is commercial real estate to the
Speaker 1: banking system. So I think the important thing about commercial
Speaker 1: real estate is that you know, it's not sort of
Speaker 1: a broad brush. There are there are several different holders,
Speaker 1: there are several different properties. And the focus I think
Speaker 1: has come, you know, the regional because the regional banks
Speaker 1: had these issues with securities not being marked market, and
Speaker 1: then people are thinking about how loans are not marked
Speaker 1: to market and could there be weakness, And the regional
Speaker 1: banks are the biggest holders of this debt. So in
Speaker 1: some of the bigger global companies that I cover, it's
Speaker 1: not as critical or the exposures are not as big,
Speaker 1: but it is bigger for the regionals. And the one
Speaker 1: area that we're watching along with everybody else. I don't
Speaker 1: think we're unique in this is the office market because
Speaker 1: of the weaker cash flows, rising vacancy, and again this
Speaker 1: is sort of another unprecedented time where we have returned
Speaker 1: to office. We still don't know how that's going to
Speaker 1: shake out. So we think this is an area of
Speaker 1: focus for the largest banks. It's a smaller exposure, but
Speaker 1: this is going to be a long term time to
Speaker 1: play out. It's not going to be like how SVB
Speaker 1: sort of unwound in a couple of days, especially for
Speaker 1: the larger banks. But I think what investors will focus
Speaker 1: on is for the smaller banks. You know, could there
Speaker 1: be certain ones that are overexposed and at risk? Alison,
Speaker 1: you're running our banks coverage for Bloomberg Intelligence globally? How
Speaker 1: many humans do you still have on your team? A lot?
Speaker 1: Because I was thinking you might want to replace some
Speaker 1: of them at least with chat GPT. Well you know
Speaker 1: chat GBT, as you know, I think people are trying
Speaker 1: to find ways to leverage it. I would say that, Um,
Speaker 1: I just realized we have a Bloomberg GPT. Did you
Speaker 1: know that? You know? Yeah, I think we can do
Speaker 1: Bloomberg intelligence management can be I'm only joking around because
Speaker 1: Jamie Diamond mentioned that they have a tony you you are,
Speaker 1: I know you are, but but I guess I would
Speaker 1: just point to like, that's that's sort of how when
Speaker 1: you separate the week from the chaff? Right? Is it?
Speaker 1: You know? Is the analysis digging in and giving you
Speaker 1: what you need to know and looking past sort of
Speaker 1: the headlines or you know something that you could sub
Speaker 1: diving beneath the surface if you will. All right, so
Speaker 1: what's when you earnings coming up? About thirty seconds left
Speaker 1: house and earnings coming up in a couple of weeks.
Speaker 1: What's the number one thing we should be focusing on, well,
Speaker 1: aside from commercial real estate, what's happening was deposits number
Speaker 1: one thing deposits, What are the flows at for each
Speaker 1: bank and for the system as a whole, and is
Speaker 1: that just disclosed by the bank. That's not some data
Speaker 1: you get somewhere from the government. We do get data
Speaker 1: weekly from the government. It does come with a lag,
Speaker 1: and so that's why the last couple of weeks you've
Speaker 1: seen you have seen those outflows of those really relate.
Speaker 1: We're hoping that this week well, or we're expecting this
Speaker 1: week that we'll see some stabilization. The issue with that
Speaker 1: data though, is you know, there's a couple of different categories.
Speaker 1: One category is the top twenty five banks, So you're
Speaker 1: not going to see in there if some of the
Speaker 1: large regionals are seating share to sort of the top
Speaker 1: six banks. And I think it is going to be
Speaker 1: banked by bank, not just what's happening was deposits, by
Speaker 1: the way, but what's happening with the rate that people
Speaker 1: are paying on deposits, because that's another side effect that
Speaker 1: we're expecting that that will be going up. All right,
Speaker 1: all right, Alison, thank you so much for joining us.
Speaker 1: Really appreciate getting your perspective. There a lot of ground
Speaker 1: we covered, Alison Williams. She's a senior Banks analyst. She
Speaker 1: is a human. She is not a bot or a GPT.
Speaker 1: She's been doing this for a while, and she's a
Speaker 1: Bloomberg intelligence. You're listening to the tape. Ken's a our
Speaker 1: live program Bloomberg Markets weekdays at ten am Eastern on
Speaker 1: Bloomberg Radio, tune in app, Bloomberg dot Com, and the
Speaker 1: Bloomberg Business App. You can also listen live on Amazon
Speaker 1: Alexa from our flagship New York station. Just say Alexa,
Speaker 1: play Bloomberg eleven thirty. Well, yesterday's news in the global
Speaker 1: energy space was actually Sunday afternoon. Our time was OPEC
Speaker 1: plus cutting production by one million barrels, and we had
Speaker 1: a nice pop five six percent in global crude yesterday,
Speaker 1: up another half percent here today, Brent crude up sitting
Speaker 1: here at eighty five bucks. Talk about global energy, the
Speaker 1: fossil fuel stuff as well as the sustainable energy as well.
Speaker 1: And we could do that with Jonathan Maxwell. He's a
Speaker 1: CEO and co founder of Sustainable Development Capital. He's based
Speaker 1: in London, Piccadilly, but he's here in our Bloomberg in
Speaker 1: an actor broker studio in New York City. We appreciate
Speaker 1: it your offices aren't Piccadilly, So isn't that like having
Speaker 1: an office in Times Square? It is whipped just around
Speaker 1: the corner I talpped away, so we can even mind
Speaker 1: just off Piccadilly. They have some of the best clothing
Speaker 1: ancestry stores in London, right, I mean that's Hill Ditching
Speaker 1: Keys where I get my shirts. There you go Turnabowl
Speaker 1: and Asser is right up there. They're a number of
Speaker 1: such companies. So you know what, Jonathan, I'm glad that
Speaker 1: you're here today because I saw something in the Jamie
Speaker 1: Diamond letter that I thought you might find interesting. Now,
Speaker 1: no one's had time to read the whole thing yet
Speaker 1: because it's forty three pages and it just came out
Speaker 1: a couple of hours ago, but I did notice he
Speaker 1: encourages the government to use eminent domain when it comes
Speaker 1: to both sustainable energy and fossil fuel policy. I'm not
Speaker 1: sure exactly how he means it yet, but what do
Speaker 1: you think of an enlarged government role in you know,
Speaker 1: the industry that you work in. We've spent years subsidizing
Speaker 1: energy markets. America has a huge three hundred and sixty
Speaker 1: nine billion dollar program, the Inflation Reduction Act, But it's
Speaker 1: designed to onshore production of energy, particularly clean energy, as
Speaker 1: a core part of it, and to support energy security.
Speaker 1: So those are two critical features. America actually is now
Speaker 1: energy independent, I've right, it's a huge deal, but energy
Speaker 1: independent because of shale an oil. So we now have
Speaker 1: the opportunity in the America to really promote clean energy
Speaker 1: domestic production. And it actually puts America in an amazing
Speaker 1: position internationally. I'm saying that coming from Europe because Europe
Speaker 1: is not in an amazing position internationally. Europe is in
Speaker 1: a very bad position internationally. It's a net energy import
Speaker 1: prices in Europe for natural gas. People don't often talk
Speaker 1: about this, so it's some six to ten times higher
Speaker 1: depending on when we talk about it every day here
Speaker 1: and this is a huge issue. So what do you
Speaker 1: do as Europe as you're facing an import issue? And
Speaker 1: of course the NEXTUS now after the Russia Ukrane crisis,
Speaker 1: is that we've now shifted our supply from Russia to America. Well,
Speaker 1: but we have so energy independence in terms of fossil fuels, right,
Speaker 1: we have enough oil and gas here in the US
Speaker 1: for ourselves. The problem that we have is with the
Speaker 1: sustainable part. So in California, for example. Sometimes you're not
Speaker 1: allowed to charge your electric cars because the grids are
Speaker 1: too weak and frail to support it. And now we're
Speaker 1: asking people to increase their adaption of evs. I was
Speaker 1: driving in this morning. I'm test driving this BMWi x Oh.
Speaker 1: That's the electric suv, which is a mind blowing piece
Speaker 1: of kit. I mean, it is an incredible vehicle. But
Speaker 1: as I was passing like six or seven gas stations,
Speaker 1: I noticed there's nowhere for me to charge it. Well,
Speaker 1: I will come back to that. We're actually a big
Speaker 1: investor in fast charging infrastructure for electric vehicles to solve
Speaker 1: that problem. We're doing it in the UK and we'll
Speaker 1: bring it to the US. But here's the issue, right,
Speaker 1: You're absolutely right. Energy supply and particularly intermittent renewable power
Speaker 1: is a challenge to adopt onto the grid. I'll tell
Speaker 1: you a bigger challenge, and this is my gripe. Do
Speaker 1: you know how much primary energy in the United States
Speaker 1: actually ends up getting to the user if you look
Speaker 1: at the actual amount of energy you mean, in terms
Speaker 1: of energy that's wasted, right, not only going through pipelines
Speaker 1: and in ships, but also through generation, expisition, distribution, and extraction.
Speaker 1: I imagine it's very little that we actually put to use.
Speaker 1: You know, the Lawrence Livermore National Laboratory produces numbers every year.
Speaker 1: They have since the last global energy crisis, really in
Speaker 1: the seventies. It's seventy percent of primary energy is lost.
Speaker 1: That means only thirty percent gets to the end. Wait,
Speaker 1: where's it goal? Right, I'll unpack it. So, first of all,
Speaker 1: you take a oil and gas out of the ground,
Speaker 1: you lose about nine to thirteen percent on extraction and
Speaker 1: conversion into pipelines. Most of up eighty two percent of
Speaker 1: the world's energy is all gas and coal, so we
Speaker 1: have to be realistic. Then it goes into an energy machine,
Speaker 1: let's call it a natural gas turbine. Firmodynamic states who
Speaker 1: put a molecule in one end, only half can turn
Speaker 1: into electricity. What happens to the other physics? Right, it's physics.
Speaker 1: So the other half. If you're generating miles away from
Speaker 1: the point of vieuse, which is generally how we do it,
Speaker 1: that energies to get dumped. So straight before the power
Speaker 1: gets out of a power station, you've lost about fifty
Speaker 1: to sixty percent of the energy to start with, depending
Speaker 1: on the efficiency. You then lose another roughly ten percent
Speaker 1: getting to the point of view. So that's how you
Speaker 1: get to seventy percent of energy loss before it gets there.
Speaker 1: There is a solution to this, right, and renewables is
Speaker 1: part of that. But it's a tool in a bigger
Speaker 1: strategic issue of the US and Europe are going to
Speaker 1: have to face, which is the decentralized energy. If we
Speaker 1: just simply rely on these decades old centralized grid connect networks,
Speaker 1: we are going to have the same problem in ten
Speaker 1: twenty thirty years time. What we can do has been
Speaker 1: much more efficient, cut out many of those extraction, conversion,
Speaker 1: generation losses, transmission, transmission and distribution losses, decentralized energy, and
Speaker 1: may make sure that we don't waste most of it
Speaker 1: before it gets to the user. Before I take a breath.
Speaker 1: One last thing, do you know how much energy is
Speaker 1: lost even when it gets to the point of views? No?
Speaker 1: Another ten twenty percent plus right the wrong I pump
Speaker 1: it into my guest tank. I got the little cap there,
Speaker 1: so yeah, but you still the internal combined Merry engine
Speaker 1: to use. There's a lot of bleed off there right.
Speaker 1: In transport transports, about thirty percent of energy use. Seventy
Speaker 1: percent of it's in buildings industry, and it's on that's
Speaker 1: where we're just facing enormous losses. So here's the thing. Yes,
Speaker 1: we can build renewable power. It will take us ten
Speaker 1: twenty thirty years to start to By the way, on
Speaker 1: that note, if the Inflation and Reduction Act is successful,
Speaker 1: sixty percent of electricity in the America will be green
Speaker 1: by twenty thirty. Do you know how much energy in
Speaker 1: America comes from electricity? How much energy comes from electric
Speaker 1: twenty comes from where Well, we're talking about heat, gas, transport, fuels.
Speaker 1: So there was just this massive job to do on
Speaker 1: the energy transition. My business case is to say, yes,
Speaker 1: let's build renewable power. Let's make energy as clean as
Speaker 1: possible on the supply side, but let's look at the
Speaker 1: demand side. Let's think about attacking that seventy percent last
Speaker 1: before it gets to the point of views. Then we
Speaker 1: only got a minute left. Let me hear about the
Speaker 1: first charging networks that you're building. So how soon will
Speaker 1: they get here? So we started building them in the
Speaker 1: UK over the last ten to one or two years.
Speaker 1: It's fast charging networks. So if you want to charge
Speaker 1: your car in five to ten, fifteen, twenty minutes. You
Speaker 1: can park your car and you can get it completely
Speaker 1: duced up quickly. We've got a rollout of these sites
Speaker 1: across the UK. BP Pulse is a big client of ours.
Speaker 1: We've just announced the breaking ground on the largest one
Speaker 1: in the UK. It's over maybe two hundred charging points
Speaker 1: at the n EC in Birmingham in the UK, and
Speaker 1: we will be bringing this to the United States soon.
Speaker 1: How fast is a fast charger for you? We can
Speaker 1: get to full eighty percent to full charge in anything
Speaker 1: between fifteen and twenty minutes. That sounds pretty good. It's great,
Speaker 1: I can tell you it's it's difficult, and I don't know.
Speaker 1: I've talked. I've talked to all of the last three
Speaker 1: CEOs of BP about this. Why aren't they already at
Speaker 1: the gas stations? Why doesn't Shell already have these at
Speaker 1: every gas station. It's been a decade since Tesla started
Speaker 1: rolling out these vehicles. I think they're dragging their feet.
Speaker 1: They're dragging the feed all right. Jonathan Maxwell, thank you
Speaker 1: so much for joining us. Great discussion. Jonathan Maxwell as
Speaker 1: a CEO and co founder Sustainable Development Capital. Next time,
Speaker 1: Matt and I are are in London Piccadilly. We're stopping by.
Speaker 1: We're gonna say hi, you're gonna buy us some beverage
Speaker 1: of our choice by us the shirt, a turn bowl
Speaker 1: and asser. Oh nice, that's cool. That's even better, a
Speaker 1: considerably more expensive than a PIMS cop. Okay, very good,
Speaker 1: all right, we're gonna have more coming up markets on
Speaker 1: the red here sp off about three tenths of one percent.
Speaker 1: You're listening to the Team Cancer Line program, Bloomberg Markets
Speaker 1: weekdays at ten am, easting on Bloomberg dot com, the
Speaker 1: I Heart Radio app, and the Bloomberg Business app. We're
Speaker 1: listening on demand wherever you get your podcast. Let's talk
Speaker 1: a little M and A here, specifically some tech MNA.
Speaker 1: How did the collapse of Silicon Valley Bank impact the
Speaker 1: tech m and A market out there in Silicon Valley.
Speaker 1: It's checking with Ted Smith. He's a co founder and
Speaker 1: president of Union Square Advisors. So, Ted, we had some turmoil,
Speaker 1: you know, some real unease in the banking space over
Speaker 1: the last several weeks, with a failure of Silicon Valley
Speaker 1: Bank and a couple of other regional banks. How did
Speaker 1: that impact kind of tech m and A the view
Speaker 1: towards tech m and A what did you observe? Well,
Speaker 1: first of all, guys, thanks for having me back on
Speaker 1: I really appreciate it. I think you're right. A lot
Speaker 1: of uncertainty around the SEB collapse and related effects, and
Speaker 1: so everybody picked up the mantle of being cautious and
Speaker 1: reassessing their situation. Obviously, there's a whole host of companies
Speaker 1: that were depositors to and lenders, you know, lend these
Speaker 1: to SVB, and they all had to scramble to try
Speaker 1: to figure out sort of what the next step was.
Speaker 1: So that put a lot of things on hold. Processes
Speaker 1: that were in flight, processes that were about ready to
Speaker 1: get kicked off in some cases with which I'm familiar,
Speaker 1: processes that were almost ready to finish. That the pause
Speaker 1: button got pushed while everybody kind of figured out whether
Speaker 1: they were standing on firm ground or quick. I think
Speaker 1: we're largely through that, or at least the first wave
Speaker 1: of that. Most people kind of have a plan for
Speaker 1: going forward. We're seeing renewed activity. Those processes that I
Speaker 1: mentioned that we're in flight seemed to be back in
Speaker 1: flight for the most part, and the ones that I
Speaker 1: know of that we're almost done, actually completed, So I
Speaker 1: think I think folks quickly moved past the initial shock
Speaker 1: and uncertainty and kind of have Plan B in place
Speaker 1: at this point. I wonder what happens to the banks
Speaker 1: that are going to now have to compete though with
Speaker 1: money market funds and you know, short term treasury ETFs
Speaker 1: and the like. I mean, are they going to have
Speaker 1: to start offering four percent five percent on savings accounts?
Speaker 1: Can they do that? It's a good question, and I
Speaker 1: think the answer is they are going to have to
Speaker 1: compete at some level. Obviously there's a broader level of
Speaker 1: services these banks can provide, and so as a result,
Speaker 1: they may not have to compete sort of basis point
Speaker 1: for basis point, but we do see them needing to
Speaker 1: be competitive in the market. We also think that, you know,
Speaker 1: from away from the savings accounts themselves, that back on
Speaker 1: the lending side, the whole private credit asset class, which
Speaker 1: has grown to the north of two trillion dollars, is
Speaker 1: absolutely ready to push forward and be more a part
Speaker 1: on the lending side rather than just the regional banks
Speaker 1: and the large banks, particularly in tech, and so we
Speaker 1: see that activity picking up as well. So when I
Speaker 1: think about M and A TED, I think about you know,
Speaker 1: I guess confidence, confidence on the part of a management team,
Speaker 1: confidence on the part of a board of directors. You
Speaker 1: really have to have confidence in the macro environment, the
Speaker 1: micro part of your business to go out there and
Speaker 1: spend big money and acquire companies. Is that out there now?
Speaker 1: It seems like there's anything but confidence out there. I think.
Speaker 1: I think it's very situationally dependent, of course, and you're
Speaker 1: absolutely right, and in fact you're right twice, because you
Speaker 1: have to have confidence in your own business, and you
Speaker 1: have to have confidence that you know enough about the
Speaker 1: business that you may be acquiring that you can double
Speaker 1: down on that. And certainly in some cases there are
Speaker 1: we've talked to boards, talk to management teams who are saying, look,
Speaker 1: we're recasting our own view of the market as we
Speaker 1: go forward. Although I would say a lot of that
Speaker 1: started happening in twenty twenty two. This was not a
Speaker 1: twenty twenty three event. Yes, the SBB situation was a
Speaker 1: bit of a shock to the system, but in many
Speaker 1: cases that didn't really change the plans that it has
Speaker 1: been put in place from the larger potential acquirers. It
Speaker 1: was a bit of a It was a side note.
Speaker 1: It was an important side note in Silicon Valley, but
Speaker 1: it was, and so most of the large acquirers and
Speaker 1: certainly the private equity buyers that have confidence to do
Speaker 1: deals still have that confidence. I think the secondary piece
Speaker 1: that I mentioned where you have to have confidence in
Speaker 1: the target and do they have the right approach to
Speaker 1: their business? Are they ready to be acquired and contribute
Speaker 1: to the new combined organization. That's where all the scrutiny
Speaker 1: is going right now, and that may mean that bills
Speaker 1: take long going to get done. Are there lessons learned
Speaker 1: ted you think in terms of, you know, diversifying your
Speaker 1: cash you know, or or has the moral hazard proved that?
Speaker 1: You know, if the FED in the FDIC we're going
Speaker 1: to back up uninsured depositors last time, they're going to
Speaker 1: do it next time too. Yeah. I don't know that
Speaker 1: we can all count on that ladder point, although it
Speaker 1: certainly feels that way that the FED is prepared to
Speaker 1: step in and do what they need to do rather
Speaker 1: than create an awful tail spin, which is what I
Speaker 1: think would have happened had they not done that. I
Speaker 1: do think diversification is more on the minds of every CFO,
Speaker 1: every CEO, every board member now than it ever has been.
Speaker 1: So I think we will see more of that spreading
Speaker 1: deposits around a little bit. But I also think it's
Speaker 1: it's it's going to be, as we've seen over the
Speaker 1: last two or three weeks, it's going to be a
Speaker 1: flight in some cases to the larger banks who are
Speaker 1: deemed obviously much safer in this environment, and to other
Speaker 1: regionals that are deemed to be managing their risk on
Speaker 1: a more conservative basis. So money is going to move around,
Speaker 1: it is going to get more diversified. Um But I
Speaker 1: also do think to your point that we've learned that
Speaker 1: the FED is going to step in into a nasty
Speaker 1: situation and not let even these original banks fail. So ted,
Speaker 1: when you go ahead and talk to your your private
Speaker 1: equity clients, uh, their cost a capital just got a
Speaker 1: lot more expensive on the debt side, um Man. That
Speaker 1: changes the DCF model a little bit. How are what
Speaker 1: are you hearing? Yeah? Well, first of all, absolutely right,
Speaker 1: but they have an enormous amount of equity capital that
Speaker 1: they need to put to work. And what we're hearing
Speaker 1: in some cases is, look, let's just write the equity
Speaker 1: check and we'll worry about the debt down the road. Now,
Speaker 1: not every every fund is large enough to do that,
Speaker 1: except you know, some of the some of the largest,
Speaker 1: but they will do that in certain cases, and I
Speaker 1: think some of the midsize funds will do it as well,
Speaker 1: obviously for smaller deals. Um. But the reality of it
Speaker 1: is here is they can adjust their models, given you know,
Speaker 1: buyout level returns to reduce the amount of debt exposure,
Speaker 1: and certain cases amp up the equity check a little
Speaker 1: bit more and still get terrific returns if they might,
Speaker 1: if they make the right bets. And because there is
Speaker 1: so much of this private equity capital on the sidelines
Speaker 1: right now waiting to be deployed, and a group of
Speaker 1: LPs standing behind those funds expecting that capital to deployed,
Speaker 1: they didn't put it, you know, in a safe deposit
Speaker 1: box and say, you know, wait for another sunny day.
Speaker 1: They expect these folks to invest, whether it's raining or
Speaker 1: sunshiny out. And so we think that capital will get deployed.
Speaker 1: We just may see the debt equity mix change a
Speaker 1: little bit, or we may see people wait until the
Speaker 1: Fed loose you know, loosens a little bit, and we
Speaker 1: see interest rates come down a little bit before they
Speaker 1: fully spenanced some of these people. I have to ask,
Speaker 1: you know, because I've been going to super return for
Speaker 1: the last few years, and every year there's more and
Speaker 1: more dry powder. I mean it's it was one trillion,
Speaker 1: then it was two trillion, then it was two point
Speaker 1: seven trillion. I mean, how much cash is there and
Speaker 1: when is it going to get spent? Yeah, it's a
Speaker 1: really good question. I don't know what the total number
Speaker 1: is now, it's obviously well into the multiple trillions. As
Speaker 1: you point out, I think the log jam eventually breaks,
Speaker 1: and we think it breaks in the back half of
Speaker 1: this year. Every private equity firm we're talking about, he's
Speaker 1: gearing up for a very busy back half of twenty
Speaker 1: twenty three and on into twenty twenty four. Obviously, it's
Speaker 1: not all going to get to spend in one quarter,
Speaker 1: two quarters, even in the year. But we really do
Speaker 1: think it loosens up as we go into the back
Speaker 1: half of this year, because everybody seems to be poised
Speaker 1: to see a very active second half of the year.
Speaker 1: All right, Ted, thanks so much for joining us, Ted Smith,
Speaker 1: He's a co founder and president of Union Square Advisors
Speaker 1: based here in Midtown Manhattan. He's been all over the
Speaker 1: street doing m ANDA, So we're talking a little m
Speaker 1: and A tech m and A in particular, it's been quiet,
Speaker 1: like we've seen across the M and A space in general,
Speaker 1: as a buyers and sellers adjust to a new market,
Speaker 1: a new higher cost of capital, and some uncertainty out
Speaker 1: there in terms of the geopolitical environment as well. You're
Speaker 1: listening to the tape cancer our live program Bloomberg Markets
Speaker 1: weekdays at ten am Eastern on Bloomberg Radio to tune
Speaker 1: in a Bloomberg dot Com and the Bloomberg Business alf.
Speaker 1: You can also listen live on Amazon Alexa from our
Speaker 1: flagship New York station. Just say Alexa, play Bloomberg eleven thirty.
Speaker 1: Let's stock bonds here. I mean, you think about twenty
Speaker 1: twenty two, there was just no place to hide. Stocks
Speaker 1: down twenty percent, bonds down, you know, mid teens. You know,
Speaker 1: that's a performance we hadn't really ever seen. I'm looking
Speaker 1: at the US aggregate index so far this year done
Speaker 1: a lot better, up three point four percent, So that's
Speaker 1: helping a little bit offset some of the losses from
Speaker 1: last year. Let's check in with the professional does this
Speaker 1: every day, Natalie Trevithick, head of investment grade credit strategy
Speaker 1: at paid ind Regal. So, Natalie, after that bruising twenty
Speaker 1: twenty two, how did you guys approach the beginning here
Speaker 1: of twenty twenty three? We approached it as optimistic. I
Speaker 1: would say we thought we were all cowed up. We
Speaker 1: weren't quite fulls, but we were expecting to get the
Speaker 1: que ponds, which would be the milk from the cow.
Speaker 1: So we're looking at probably mid single digit returns and
Speaker 1: you want actually turned out way better than expected. As
Speaker 1: you mentioned, you know, corporate bonds are up three and
Speaker 1: a half percent, and after that March, you know, when
Speaker 1: we went through that banking crisis, March was up two
Speaker 1: point eight percent in corporate bonds. So so far, it's
Speaker 1: been a good year for us. So where in the
Speaker 1: investment grade space are you guys, you know, kind of
Speaker 1: traffick again in the shorter end, the longer end, where
Speaker 1: you guys kind of playing, we're trafficking in all of it.
Speaker 1: I'd say we've been more active in the five and
Speaker 1: ten year part of the curve, and there's been a
Speaker 1: lot of the man for long duration credit, but the
Speaker 1: friend end has become dislocated, so there's definitely opportunities there. Well.
Speaker 1: Banks of God and beaten up, so have some of
Speaker 1: the more defensive non financials. Healthcare bonds are doing well.
Speaker 1: We're looking at some of the other consumer cyclicals, Audios
Speaker 1: of God and Cheaper, so we're definitely seeing pockets of
Speaker 1: opportunity within the credit markets. Are you concerned about a
Speaker 1: credit crunch Natalie upcoming? We are a little bit concerned
Speaker 1: because well, more regulations for banks to actually be positive
Speaker 1: for bondholders, if not equity holders. It also means that
Speaker 1: that could cool down the economy quicker than expected, and
Speaker 1: the potential recession maybe more severe, which would be bad
Speaker 1: for banks. So all in all, we think spreads may
Speaker 1: trend a little bit wider from here in the aggregate,
Speaker 1: particularly within the banking sector, and funding costs may go
Speaker 1: up for them, But we'd say away from financials, most
Speaker 1: of them are well positioned with pretty strong balance sheets
Speaker 1: to weather recession. Yeah. I saw. I mean the world
Speaker 1: watched as holders of credit Swiss at ones gotten crushed,
Speaker 1: but there were different covenants for the Swiss at ones
Speaker 1: than there are for others and everyone you know was
Speaker 1: punished on price. So is there the possibility that you know,
Speaker 1: many babies were thrown out with the bathwater in that case,
Speaker 1: You're definitely right about that. There is different laws and
Speaker 1: Swiss that call those at ones to be knocked out fully,
Speaker 1: but there's also going to be a lot of lawsuits.
Speaker 1: It will take years to see if there's any recovery there.
Speaker 1: There is risk in other bonds and that they could
Speaker 1: still be you not written down completely in this case,
Speaker 1: while equities survive, but they still have that potential to
Speaker 1: be written down in a severe banking environment. So we
Speaker 1: think some of that punishment is warranted. But there's a
Speaker 1: lot of places within the banking sector which are still
Speaker 1: safe for bondholders. So how are you guys thinking about
Speaker 1: credit quality these days now? Because we really haven't had
Speaker 1: too much of an issue even during the lockdowns were
Speaker 1: so much liquidity pumped into the marketplace. How are you
Speaker 1: thinking about credit quality in what may be a recessionary environment. Yeah,
Speaker 1: we think credit quality isn't going to go down terribly.
Speaker 1: We did see a downgrade from Nissan from investment grade
Speaker 1: to high yield, but we think most companies can weather
Speaker 1: the storm. We're seeing just outside demand for non financial issuance,
Speaker 1: So there's still a lot of capital sitting on the
Speaker 1: sideline waiting to buy these corporate bonds that yields greater
Speaker 1: than five percent. We think companies have already extended their
Speaker 1: maturity walls pretty successfully, so we don't expect huge amounts
Speaker 1: of incremental issuance. But we think supply and demand are
Speaker 1: pretty well balanced at this point. There's more trouble I
Speaker 1: think within the financial sector, and their cost of funding
Speaker 1: could go up. Our new issuers coming to market here,
Speaker 1: I mean, I'm I've been I'm if I'm a CFO.
Speaker 1: I'm used to issuing paper, you know, treasures near zero,
Speaker 1: not where they are here. Yeah, we're still seeing an
Speaker 1: active calendar. We had general motors in the market today yesterday.
Speaker 1: Today we have a number more of one off issuers
Speaker 1: like Mass Mutual. But they're definitely taking opportunities to come
Speaker 1: to market because they aren't refinancing their entire balance sheets
Speaker 1: at these higher levels. Say, if their funding costs used
Speaker 1: to be three percent, now they you know, refinance about
Speaker 1: say ten percent. Their total funding costs are only going
Speaker 1: up marginally, and they want to be active in the
Speaker 1: in the market. I just think, well, a lot of
Speaker 1: people are are believing right now that the Fed could cut,
Speaker 1: that rates could come down. Is that unlikely in your opinion?
Speaker 1: You know, it's a tough called. Day by day. I
Speaker 1: think the probability of a fat hike and may has
Speaker 1: gone down. Whether they cut by the end of the
Speaker 1: years yet to be seen. That's not necessarily something we're
Speaker 1: calling for. But even if rights stay up here, bonds
Speaker 1: are still poised to you know, clip that keep on
Speaker 1: and generate decent returns even a spreads wide and a
Speaker 1: little bit further from here. So we still think we're
Speaker 1: looking at a nice return, positive returns for corporates in
Speaker 1: two and twenty three. Now, either you guys looking at
Speaker 1: particular sectors of the market here that you like better
Speaker 1: than some others. Yeah, we do like the healthcare sector.
Speaker 1: Utilities have actually come out with a lot of issuance
Speaker 1: that quite keep levels. Those are a rated. A lot
Speaker 1: of them are first mortgage secured bonds coming with thirty
Speaker 1: year paper, which we find quite attractive. You know. We
Speaker 1: like certain pockets of the consumer cyclical sector. Some of
Speaker 1: the autos were favorable on really though it comes down
Speaker 1: to bottom up credit selection here, so it's just about
Speaker 1: at the individual credits. You've got to do a lot
Speaker 1: of work in that case. Yes, absolutely, but there's also
Speaker 1: a lot of name avoidance. There's a lot of insurers
Speaker 1: out there we can just choose not to own in
Speaker 1: this market, so we really are focused on the ones
Speaker 1: which we think are going to be able to weather
Speaker 1: recession and continue to hold in well. There's a lot
Speaker 1: of opportunities within technology and communications as well. All Right, Natalie,
Speaker 1: thanks very much. We really appreciate getting a couple of
Speaker 1: minutes of your time. Natalie trevith Ak, head of investment
Speaker 1: grade credit Strategy at Payden and Regal. You're listening to
Speaker 1: the tape cancer our live program Bloomberg Markets weekdays at
Speaker 1: ten am Eastern on Bloomberg Radio, the tune in app,
Speaker 1: Bloomberg dot Com, and the Bloomberg Business App. You can
Speaker 1: also listen live on Amazon Alexa from our flagship New
Speaker 1: York station. Just say Alexa play Bloomberg eleven thirty. Well,
Speaker 1: if you're a Bloomber terminal user in here looking for
Speaker 1: some investment ideas, b I go is a good function
Speaker 1: to know that takes you to Bloomberg Intelligence, which Bloomberg
Speaker 1: Intelligence is Bloomberg's in house investment research department, four hundred
Speaker 1: analysts strong all over the world, covering two thousand companies
Speaker 1: about one hundred and thirty industries. And they got a
Speaker 1: lot of smart analyst They come up with a lot
Speaker 1: of good ideas. Let's get to some of them right now.
Speaker 1: We can do that with Tim Craighead. He's a research
Speaker 1: director and European strategists with Bloomberg Intelligence. He joins us
Speaker 1: on the phone from London. So Tim, I know, you guys,
Speaker 1: you've got your focus ideas that are out there for people,
Speaker 1: and then you look at that focus ideas lists, which
Speaker 1: are some of the most high high conviction ideas of
Speaker 1: Bloomberg Intelligence has, and then you whittle it down even
Speaker 1: more and you guys, guys have some focus ideas to
Speaker 1: watch here. Talk to us about some of these names
Speaker 1: and why you guys are highlighting them some pretty interesting
Speaker 1: opportunities for investors. Yeah, sure, thank Paul, thanks for thanks
Speaker 1: for having me on. Look, as you said, the focus
Speaker 1: ideas are those are those are views that combine three things,
Speaker 1: a high conviction point of view on fundamentals. Secondly, that
Speaker 1: high conviction should be differentiated from the market. It's it's
Speaker 1: anti consensus. And thirdly, they're catalysts or triggers that we
Speaker 1: see that can change the market's mindset. And this set
Speaker 1: of ten, which is as you said, is a subset
Speaker 1: of the broader list, which, by the way, you can
Speaker 1: find on bi space focus if you've got a terminal.
Speaker 1: But this this subgroup all have catalysts that are important
Speaker 1: coming up in the second quarter. So it is the
Speaker 1: focus ideas to watch for two Q and there are
Speaker 1: ten ideas. We kept it. We kept it focused US.
Speaker 1: It spans the region. There's five US, three European, two Asian.
Speaker 1: There's eight that are constructive, there's two that are a
Speaker 1: bit worrisome. So it's a cool bottom up list on
Speaker 1: analyst calls. All right, let's start with the US. Give
Speaker 1: us a couple of names that the analysts put pushed
Speaker 1: up to you and identified as interesting. Yeah. So I
Speaker 1: think it all revolves in the US by a large degree,
Speaker 1: around the consumer. And it's interesting because we have both
Speaker 1: positive and negative ideas here. The negative idea is a
Speaker 1: company called Casey's General Stores. If Paul, do you know
Speaker 1: this company? I do not yeah, so I didn't either
Speaker 1: until we started talking about this thing with our coverage.
Speaker 1: It's a Midwest convenience store, and yeah, we see them
Speaker 1: as basically being at risk of the general economic outlook
Speaker 1: and if we see slowing consumers, training down, et cetera,
Speaker 1: that this is a this is a risk to earnings
Speaker 1: estimates through this year. The other three that play on
Speaker 1: the opposite side of the consumer one is Alta Beauty,
Speaker 1: which is beauty shops across the US. Another is Gap stores.
Speaker 1: We all know Gap, and the third is Sketchers those
Speaker 1: that have very companies exactly company shoes. They all have
Speaker 1: really company specific element to it. So the Gap is
Speaker 1: a restructuring story. They've already proved what they can do
Speaker 1: with Banana Republic, and we think that's a blueprint for
Speaker 1: the Gap itself. An old Navy is actually half the
Speaker 1: business and there they had a merchandise in issue last year.
Speaker 1: It's been corrected, there's a new CEO coming in. There's
Speaker 1: a lot of cool stuff happening. Alta Beauty is all
Speaker 1: about going back to the office and getting back out
Speaker 1: post pandemic, and people want to look nice and their
Speaker 1: sales strands, we think are still underestimated, and Sketchers is
Speaker 1: expanding globally. They've got news distribution centers coming in Canada,
Speaker 1: in India, they've spent money on technology that's travling a
Speaker 1: loyalty program, and again we think there's upside estimates. So Tim,
Speaker 1: a lot of these names, as you mentioned for the
Speaker 1: US stock picks, are kind of centered on the consumer.
Speaker 1: What is really that bi's call on the consumer here?
Speaker 1: I mean, we've got pretty much full employment, but man,
Speaker 1: there's a lot of headwinds out there for the consumers
Speaker 1: relates to inflation and other things. Yeah, I mean, you're right,
Speaker 1: there is a there's a I think there's generally a
Speaker 1: worry that you've got high inflation, negative impact disposable income.
Speaker 1: If you don't have something special about your story, you
Speaker 1: are at risk to to discretionary income being impacted over
Speaker 1: the course of the year. And how much better can
Speaker 1: it get with employment being as low as it is.
Speaker 1: And if housing comes under some stress with higher interest rates,
Speaker 1: that has you know, another sort of different layer of
Speaker 1: pressure on what could be consumer spending. So you know,
Speaker 1: we look for example like these three, but there's others
Speaker 1: where there's something that's different beyond just simply the economic call. Right,
Speaker 1: all right, let's let's go over to Europe here for
Speaker 1: our friends over there. What are some of the names
Speaker 1: that kind of jump out to you guys there? So,
Speaker 1: so a couple here. One You're gonna think I'm crazy
Speaker 1: at first. I'm going to name him a bank Eba
Speaker 1: Banko bill val. This is one of the big Spanish banks,
Speaker 1: but importantly a chunk of their businesses in Mexico where
Speaker 1: loan growth is actually quite healthy. Another chunk is in Spain.
Speaker 1: Didn't that interest margins are improving with higher interest rates,
Speaker 1: basic bank story, and we think all of that is good.
Speaker 1: But everybody seems to be focused on Turkey because they
Speaker 1: do have a Turkish business and there's geopolitical risk there, etc.
Speaker 1: And with that, it's only now sudden percent of their business.
Speaker 1: It's smaller and smaller. We don't think it's a worry,
Speaker 1: and we think it market's too focused on it and
Speaker 1: not focused enough on the good part, So that we
Speaker 1: think is underappreciated. Tap Gemini, big global IT service company.
Speaker 1: It's focused on big strategic transformations. It's not that parculically
Speaker 1: exposed to troubles and technology and worries there. So we
Speaker 1: think that's well positioned. And the other is best thoughts,
Speaker 1: which if you're in to clean it energy, energy transition.
Speaker 1: This is one of the leading wind turbine producers globally.
Speaker 1: And you know, you think about the Inflation Reduction Act,
Speaker 1: which is really a energy transition bill. And in Europe
Speaker 1: there's this similar sort of big government initiative and push
Speaker 1: that's all going to drive business too. We think best
Speaker 1: us it's gotten sorry to say, a tailwind. Ye. So
Speaker 1: all right, all right, thirty seconds, Tim Asia, what do
Speaker 1: you guys have from there? It's all about China's reopening,
Speaker 1: think about Hong Kong ex changes, rising, set of IPOs coming.
Speaker 1: You and I have talked plenty about Laili Baba over time,
Speaker 1: expliting in the sixth repatriation of tech listenings in the
Speaker 1: US to Hong Kong and China. That's all the Hong
Speaker 1: Kong ex changes favor. And AIA is an insurance company.
Speaker 1: But you have mainland Chinese that are starting to travel,
Speaker 1: they go to Hong Kong, they buy new insurance policies
Speaker 1: as a as a offshore savings mechanism. Good for AI AIA,
Speaker 1: interesting stuff, all right, Tim, you're based in London. You
Speaker 1: live in London. How are things on the street of
Speaker 1: London these days? Packed? Busy crazy? You'd never know that
Speaker 1: there's any issue. Yeah, it feels good and it's starting
Speaker 1: to be spring. All right, that's good stuff because it's
Speaker 1: here in New York, it's it's we're not quite back,
Speaker 1: you know. It's a kind of that issue about getting
Speaker 1: people back in your office. But I understand it's a
Speaker 1: little bit better in London. Tim Craighead joined us. We
Speaker 1: appreciate getting a couple of minutes of his time. He
Speaker 1: is the research director for Bloomberg Intelligence over in London,
Speaker 1: running that business over there with our good friend Sam Fazzelli.
Speaker 1: He's also a macro strategist, kind of given us some
Speaker 1: good strategies, some good ideas with some catalysts. Thanks for
Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
Speaker 1: listen to interviews with Apple Podcasts or whatever podcast platform
Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt
Speaker 1: Miller nineteen seventy three on Falsewhinee. I'm on Twitter at
Speaker 1: pt Sweeney. Before the podcast, you can always catch us
Speaker 1: worldwide at Bloomberg Radient