WEBVTT - BI Weekend: Delta, Constellation Brands Earnings 0:00:02.720 --> 0:00:11.480 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Intelligence 0:00:11.560 --> 0:00:13.680 with Alex Steel and Paul Sweeney. 0:00:13.760 --> 0:00:16.959 The real ap performance has been the US corporate high yield. 0:00:17.160 --> 0:00:19.520 Are the companies lean enough? Have they trimmed all the fats? 0:00:19.600 --> 0:00:22.760 The semiconductor business is a really cyclical. 0:00:22.360 --> 0:00:26.560 Business, breaking market headlines and corporate news from across the globe. 0:00:26.600 --> 0:00:29.040 Do investors like the M and A that we've seen? 0:00:29.240 --> 0:00:32.199 These are two big time blue chip companies. 0:00:32.479 --> 0:00:35.839 Window between the peak and cunt changing super fast. 0:00:36.120 --> 0:00:41.160 Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio. 0:00:42.600 --> 0:00:45.040 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:45.040 --> 0:00:47.479 business stories impacting Wall Street and the global markets. 0:00:47.520 --> 0:00:49.560 Each and every week we provide in depth research and 0:00:49.640 --> 0:00:51.559 data on some of the two thousand companies and one 0:00:51.640 --> 0:00:54.320 hundred and thirty industries our analysts cover worldwide. 0:00:54.360 --> 0:00:56.720 Today, we'll look at how drug makers are being impacted 0:00:56.720 --> 0:00:58.120 by policy in Washington, DC. 0:00:58.320 --> 0:01:00.880 Plus, we'll discuss how one bank is abandoning its net 0:01:00.960 --> 0:01:02.480 zero financed emission goals. 0:01:02.720 --> 0:01:05.120 At first, we begin with the airlines industry. This week, 0:01:05.160 --> 0:01:07.920 Delta Airlines withdrew its full year financial guidance due to 0:01:08.040 --> 0:01:11.320 uncertainty surrounding global trade, and this comes despite the airline 0:01:11.319 --> 0:01:13.520 reporting better than expected first quarter profit. 0:01:13.680 --> 0:01:15.640 For more on this and the state of the airline industry, 0:01:15.680 --> 0:01:18.880 we were drawn by George ferguson Bloomberg Intelligence in your Aerospace, 0:01:18.920 --> 0:01:20.240 Defense and Airlines analyst. 0:01:20.440 --> 0:01:22.520 We first asked George to break down what happened during 0:01:22.600 --> 0:01:24.280 Delta's first quarter earnings call. 0:01:24.959 --> 0:01:28.320 The call wasn't as bad I think as a lot feared. 0:01:29.000 --> 0:01:31.399 You know, A lot of what we heard was the 0:01:31.480 --> 0:01:35.399 premium markets are still good. Europe is still good, but 0:01:35.440 --> 0:01:40.479 they're watching it very closely. Asia Pacific was a good 0:01:40.480 --> 0:01:45.720 market as well. Non premium back of the airplane travel 0:01:45.880 --> 0:01:50.560 in the domestic market is poor. And because of all that, 0:01:50.800 --> 0:01:55.200 you know, they're gonna cap You're gonna flatline capacity, no 0:01:55.320 --> 0:01:58.920 growth for the second half of the year. So it 0:01:59.040 --> 0:02:04.280 sounded like things are okay. Maybe they're okay, but we're 0:02:04.280 --> 0:02:05.400 watching things very close. 0:02:05.520 --> 0:02:08.560 But I remember that Delta and the other US carriers 0:02:08.919 --> 0:02:12.280 probably several weeks ago cut their guidance. This was before 0:02:12.280 --> 0:02:16.440 I think an investor conference, so they've already cut guidance once. 0:02:16.520 --> 0:02:20.600 Here agree, So where are we there? I mean, do 0:02:20.639 --> 0:02:22.560 you feel like street estimates need to come down. 0:02:22.360 --> 0:02:26.000 Here, agreed. Well, so when I looked at the preliminary 0:02:26.000 --> 0:02:28.760 guidance for two Q, it did seem like street estimates 0:02:28.760 --> 0:02:33.080 for two Q had to come down, right because Delta 0:02:33.120 --> 0:02:35.760 gave some pretty broad ranges. But it looks like capacity 0:02:35.840 --> 0:02:38.760 is going to rise five percent when I look at 0:02:38.800 --> 0:02:41.480 schedules for them in the second quarter, and they said 0:02:41.520 --> 0:02:44.400 revenue could be up to to down two and if 0:02:44.400 --> 0:02:46.280 I did my math right, that means that I think 0:02:46.560 --> 0:02:52.320 either way fares are softening again. It's we're definitely working 0:02:52.360 --> 0:02:56.959 off lower expectations after they cut earnings expectations after the 0:02:57.080 --> 0:03:01.600 JP Morgan conference. But so Caesar Trappie here, Georgia. 0:03:01.680 --> 0:03:05.919 I know every year you take a boondoggle over to Europe, 0:03:05.960 --> 0:03:09.160 either to London or Parish for these air shows, and 0:03:09.160 --> 0:03:12.600 this is where these big airlines make place big orders 0:03:12.639 --> 0:03:16.280 with the airplane suppliers bowing and airbus principally. Are we 0:03:16.320 --> 0:03:19.240 going to get to a period, George where if they 0:03:19.240 --> 0:03:21.360 even allow you to go to Paris of the French 0:03:21.440 --> 0:03:26.160 late let you in, will European carriers buy Boeing planes 0:03:26.200 --> 0:03:30.920 and vice versa. Will European carriers by or you know, Airbus. 0:03:32.520 --> 0:03:35.520 I think they will. I think they will because the 0:03:35.600 --> 0:03:38.600 queues for airplanes are so long you're not going to 0:03:38.680 --> 0:03:40.160 get out of the queue you're in and go to 0:03:40.200 --> 0:03:43.520 someone else's queue and wait longer. You'd have to wait 0:03:43.560 --> 0:03:47.560 seven eight years for an A three twenty out of Airbus. 0:03:47.920 --> 0:03:49.520 I think, as near as we could tell from the 0:03:49.520 --> 0:03:52.560 backlog their show. But what I will tell you about 0:03:52.920 --> 0:03:58.280 discussions with Ed Bastion about taking Airbus airplanes and who 0:03:58.320 --> 0:04:01.440 pays a tariff? And he said he's not going to 0:04:01.480 --> 0:04:03.440 pay a tariff, and he's not going to take any 0:04:03.440 --> 0:04:07.920 deliveries or sorry, very few deliveries this year. So it 0:04:08.000 --> 0:04:11.320 does sound like Delta has a tariff problem and isn't 0:04:11.360 --> 0:04:14.520 ready to take new airplanes. Now I know, you know 0:04:14.520 --> 0:04:16.600 their flatlining capacity for the back half of the year, 0:04:16.640 --> 0:04:19.960 so maybe they don't need them. But if the market 0:04:20.040 --> 0:04:23.440 was growing significantly right now, I think he'd have a problem. 0:04:23.720 --> 0:04:25.960 So you mentioned kind of the weakness Delta was calling 0:04:25.960 --> 0:04:27.360 out in the back of the plane, maybe some of 0:04:27.400 --> 0:04:31.760 the more economy prices and seats. So does that mean 0:04:31.800 --> 0:04:34.960 the discount airlines they're really going to face some trouble. 0:04:36.800 --> 0:04:37.040 Yeah. 0:04:37.080 --> 0:04:39.960 I mean the funny thing is again when sort of Delta, 0:04:40.120 --> 0:04:44.719 United and American Ad justin earnings a month ago. The 0:04:44.760 --> 0:04:47.240 low cost carriers did a little bit, but the moves 0:04:47.240 --> 0:04:51.359 weren't as great, and the low cost carriers had already 0:04:51.400 --> 0:04:54.080 been cutting capacity, right if you think about it. Spirit 0:04:54.120 --> 0:04:58.640 Airlines went bankrupt. They cut forty percent out of their schedule, 0:04:58.680 --> 0:05:02.640 or something like thirty percent of their schedule. Southwest significantly 0:05:02.720 --> 0:05:07.520 slowed growth, they went close to zero. Jet Blue has 0:05:07.560 --> 0:05:11.359 been cutting and now Delta came in today and said, look, 0:05:11.560 --> 0:05:13.240 we're going to cut the back half of the year 0:05:13.320 --> 0:05:16.359 to flat. So I feel like the full service have 0:05:16.480 --> 0:05:20.239 to make up ground here because they had been growing 0:05:20.279 --> 0:05:22.200 a little bit too fast. We had seen that at 0:05:22.240 --> 0:05:24.800 the beginning of the year, we're going to see an 0:05:24.800 --> 0:05:28.000 earning season. Whether or not maybe low cost got ahead 0:05:28.000 --> 0:05:31.960 of the curve here. I still can't believe that Delta 0:05:32.000 --> 0:05:35.680 can deliver a seat as cheap as a low cost carrier. 0:05:36.040 --> 0:05:39.400 So I personally think the low cost carriers still have 0:05:39.480 --> 0:05:43.800 a valid business here and they'll fill airplanes and do okay. 0:05:44.160 --> 0:05:46.360 But when you get into times of trouble in this industry, 0:05:47.160 --> 0:05:49.240 Trouble is big in this industry. Right, there's a lot 0:05:49.240 --> 0:05:52.680 of operating leverage and so we're going to see, right, we're. 0:05:52.520 --> 0:05:56.800 Gonna jetfield prices are coming down. I mean they are, 0:05:56.960 --> 0:06:00.880 That's the thing. Thirty seconds top airline and to manage 0:06:00.880 --> 0:06:02.560 all of this right now, what do you think. 0:06:02.920 --> 0:06:04.000 I'd go with? Balance sheets? 0:06:04.080 --> 0:06:04.159 Right? 0:06:04.200 --> 0:06:07.280 And that's going to be companies like Southwest and Delta 0:06:07.560 --> 0:06:10.279 that have strong balance sheets and weather storms. 0:06:10.200 --> 0:06:13.520 Our Thanks to George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense 0:06:13.560 --> 0:06:14.440 and Airlines Analyst. 0:06:14.600 --> 0:06:17.120 We move next to the consumer goods industry. This week, 0:06:17.160 --> 0:06:19.960 Constellation Brands issued downbeat guidance for the year as new 0:06:20.040 --> 0:06:23.040 US tariffs im muted demand. Way on the beer, wine, 0:06:23.240 --> 0:06:24.599 and spirits maker. 0:06:24.440 --> 0:06:26.840 For more, We were joined by Ken Sha, Bloomberg Intelligence 0:06:26.880 --> 0:06:28.480 Senior Consumer Products Analyst. 0:06:28.760 --> 0:06:31.360 We first asked Ken for his take on Constellation's most 0:06:31.400 --> 0:06:32.120 recent guidance. 0:06:32.640 --> 0:06:36.080 There's so many moving parts to the Constellation storyline here. 0:06:37.279 --> 0:06:40.080 It's really a challenge of analysts to put it all together. 0:06:40.160 --> 0:06:42.320 But you touch on the right points, and that is 0:06:43.160 --> 0:06:46.080 the near term challenge is facing a Constellation and other 0:06:46.160 --> 0:06:50.080 brewers for that matter, is weak demand. A lot of 0:06:50.120 --> 0:06:54.279 it is economic. Constellation would also point to their key 0:06:54.320 --> 0:06:58.400 demographic is the Hispanic demographic, and they're having a little 0:06:58.400 --> 0:07:02.359 tougher time with the employment situation and slow down, but 0:07:02.440 --> 0:07:05.520 they have some longer term threats also. I mean, you 0:07:05.680 --> 0:07:10.560 have more substitute products. You have legal cannabis. You have 0:07:10.680 --> 0:07:14.760 the hemp based CBD THHC products that are now down 0:07:14.800 --> 0:07:16.520 main street. You don't have to go to a dispensary 0:07:16.560 --> 0:07:19.080 to buy THC anymore, you just go to the local 0:07:19.840 --> 0:07:23.640 liquor store. You have the GLP one drugs where people 0:07:23.640 --> 0:07:27.800 are Our studies show that are consuming less alcohol because 0:07:27.840 --> 0:07:30.440 they're on those drugs. All those things are weighing on 0:07:30.480 --> 0:07:34.360 the near term and perhaps longer term sales growth potential 0:07:34.720 --> 0:07:36.320 for beer. And that's what the anamals are trying to 0:07:36.320 --> 0:07:37.680 wrap our heads around right now. 0:07:38.120 --> 0:07:42.480 What is the price elasticity on alcohol? Can these companies 0:07:42.480 --> 0:07:43.680 pass along price increases? 0:07:45.000 --> 0:07:47.640 Well, it depends on the product pole. The good news 0:07:48.560 --> 0:07:53.800 among that other otherwise onerous outlook is that Constellation's Corona 0:07:53.840 --> 0:07:56.280 and Medello brands lead the market in terms of growth. 0:07:57.320 --> 0:08:01.840 Those products continue to command reamium prices. They're growing faster 0:08:01.960 --> 0:08:05.880 than the market, so they're they're generating best in class 0:08:05.960 --> 0:08:09.160 operating margins on those products, but you know, they're not 0:08:09.160 --> 0:08:12.800 immune to the slowdown, and clearly they lowered their guidance. 0:08:12.880 --> 0:08:14.760 Well the fourth their fiscal fourth quarter came in a 0:08:14.800 --> 0:08:17.600 little better than expected. Some of the concerns out there 0:08:17.720 --> 0:08:21.560 is they lowered their longer term sales growth projections. Used 0:08:21.560 --> 0:08:23.280 to be, you know, a high single digit kind of 0:08:23.320 --> 0:08:27.080 sales growing segment for many years. They came out and said, 0:08:27.120 --> 0:08:28.560 you know, over the next few years, you're going to 0:08:28.600 --> 0:08:31.600 see yeah, we're like low single digit. And the analysts 0:08:31.600 --> 0:08:33.840 were a little taken aback by that. And to Alex's 0:08:33.920 --> 0:08:36.320 question before, how much is that near term you know, 0:08:36.440 --> 0:08:40.359 cyclical economic issues and how much is longer term demographic 0:08:40.400 --> 0:08:43.680 things weighing on this category? So no one really knows. 0:08:43.679 --> 0:08:44.600 So we'll find out. 0:08:44.520 --> 0:08:47.280 Nobody knows, right, So then what does Constellation do about that? Like, 0:08:47.320 --> 0:08:49.400 do they go build a beer plant in the US, 0:08:49.520 --> 0:08:51.199 Do they look for some M and A, do they 0:08:51.240 --> 0:08:51.760 pair back? 0:08:51.840 --> 0:08:51.920 Like? 0:08:51.920 --> 0:08:52.480 What do they do? 0:08:52.840 --> 0:08:52.960 Well? 0:08:52.960 --> 0:08:55.880 They're innovating. I would argue that Constellation is one of 0:08:55.920 --> 0:08:59.240 the more innovative beer companies. So they're taking that that 0:08:59.320 --> 0:09:02.760 base of a real good brand family of Corona and Medelo, 0:09:02.840 --> 0:09:05.760 and they have Pacific go but they also are extending 0:09:05.920 --> 0:09:12.480 into chiladas, which are very flavorful malt based products. They're 0:09:12.480 --> 0:09:16.640 getting into the malt based seltzer markets a little bit. 0:09:16.880 --> 0:09:18.280 They used to do it, but I'm going to come 0:09:18.320 --> 0:09:20.440 back with a better product. Now they have a no 0:09:20.559 --> 0:09:24.000 alcohol version Corona, So it's innovation. I think that they 0:09:24.080 --> 0:09:28.200 believe can continue to drive sales growth. But there's no 0:09:28.240 --> 0:09:31.199 silver bullet. I mean, there's no big acquisition out there. 0:09:31.400 --> 0:09:34.360 I don't believe that they're going to make to enhance 0:09:34.400 --> 0:09:36.199 their growth. I think they have a good brand and 0:09:36.920 --> 0:09:41.360 a good asset to grow. But again, you're not going 0:09:41.400 --> 0:09:45.960 to escape the long term headwinds facing alcoholic products, alcoholic 0:09:45.960 --> 0:09:48.199 beverage products in general as a matter of fact. 0:09:48.200 --> 0:09:51.080 So can you follow the beverages, the tobacco and the 0:09:51.080 --> 0:09:53.480 cannabis companies? Is there a place to hide in your 0:09:53.720 --> 0:09:56.040 sector here in a world where where you're going to 0:09:56.040 --> 0:09:59.360 see potentially slower growth from some of these trade policies. 0:10:00.000 --> 0:10:03.040 Well, of the ones you mentioned, Paul, I mean the tobacco, 0:10:03.040 --> 0:10:06.200 particularly cigarette company lit cigarettes are some ninety percent of 0:10:06.200 --> 0:10:09.800 that business. Still they are pretty much immune to the 0:10:09.880 --> 0:10:13.720 tariff situation. It's pretty much a domestic business. Yes, there's 0:10:13.760 --> 0:10:16.080 some tobacco leaf imports that come in and so on, 0:10:16.120 --> 0:10:19.000 but by and large that's a domestic business. So if 0:10:19.160 --> 0:10:21.640 if you're worried about tariffs, perhaps that's a place where 0:10:21.760 --> 0:10:28.040 can can go in terms of, you know, beyond tariff threats. 0:10:28.080 --> 0:10:31.040 Really the soft drink side of beverages is a good 0:10:31.040 --> 0:10:35.600 place to be. I would argue that even the you know, 0:10:35.760 --> 0:10:39.120 tried and true carbonated beverage sodas, you know, the diet sodas, 0:10:39.160 --> 0:10:43.640 are still performing pretty well. They're innovating well. Cure Doctor 0:10:43.640 --> 0:10:47.440 Pepper continues to come out with new innovation that's moving 0:10:47.440 --> 0:10:50.240 that category. They're kind of leading that category's growth right now, 0:10:50.280 --> 0:10:52.200 but they're doing a pretty good job doing it. So 0:10:52.280 --> 0:10:54.120 that's a good place to go in terms of the 0:10:54.200 --> 0:10:57.000 universe that I cover. Cannabis is tough. Cannabis. You know, 0:10:57.040 --> 0:11:01.000 the regulation on cannabis is not easing. The Trump administration 0:11:01.120 --> 0:11:04.920 is not being kind to the acadamist industry, and we're 0:11:04.960 --> 0:11:09.160 not expecting much on the way of legalization liberalization near term, 0:11:09.600 --> 0:11:13.600 with the exception of some states. Some states will probably 0:11:13.679 --> 0:11:17.120 continue to legalize, but from a federal point of view, 0:11:17.240 --> 0:11:19.440 I would wait for the next Administration. 0:11:19.640 --> 0:11:23.400 Our thanks to Ken Shay, Bloomberg Intelligence senior consumer products analysts. 0:11:23.120 --> 0:11:26.240 Coming up a conversation with Workday's chief technology officer on 0:11:26.400 --> 0:11:27.640 artificial intelligence. 0:11:27.760 --> 0:11:30.640 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:11:30.679 --> 0:11:32.960 depth research and data on two thousand companies and one 0:11:33.040 --> 0:11:36.040 hundred and thirty industries. You can access Bloomberg Intelligence via 0:11:36.080 --> 0:11:37.120 bi go on the terminal. 0:11:37.200 --> 0:11:40.000 I'm Paul Sweeney and a Malex Steel, and this is Bloomberg. 0:11:45.480 --> 0:11:49.160 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:11:49.240 --> 0:11:52.360 weekdays at ten am Eastern on Apple, Cocklay and Android 0:11:52.360 --> 0:11:55.679 Auto with the Bloomberg Business app. Listen on demand wherever 0:11:55.720 --> 0:12:00.360 you get your podcasts, or watch us live on YouTube. 0:12:00.240 --> 0:12:03.520 We look at research from Bloomberg n EF previously known 0:12:03.520 --> 0:12:05.920 as New Energy Finance. They're the team at Bloomberg that 0:12:06.040 --> 0:12:11.120 tracks and analyzes the energy transition from commodities to power, transport, industries, buildings, 0:12:11.160 --> 0:12:12.880 and the agricultural sectors. 0:12:13.200 --> 0:12:15.560 We recently looked at the effect of President Donald Trump's 0:12:15.600 --> 0:12:19.360 policies on clean energy markets. This week, President Trump announced 0:12:19.360 --> 0:12:21.080 he's raising tariffs on Chinese goods. 0:12:21.200 --> 0:12:23.920 Many critical minerals and energy products come from China and 0:12:23.960 --> 0:12:26.480 are subject to these tariffs, and that could have a 0:12:26.520 --> 0:12:28.720 big impact on clean energy moving forward. 0:12:29.040 --> 0:12:33.320 Separately, a Trump administration executive order said it's exempting forty 0:12:33.360 --> 0:12:36.720 seven coal fired power plants from stringent air pollution mandates 0:12:36.920 --> 0:12:39.319 and the goal is to revitalize the coal industry. 0:12:39.600 --> 0:12:41.240 For more on all of this, we are joined by 0:12:41.240 --> 0:12:44.760 Derek flackl b any F, lead US policy analysts. 0:12:44.960 --> 0:12:47.560 We first asked Derek what he makes of the executive 0:12:47.679 --> 0:12:48.440 order on coal. 0:12:48.840 --> 0:12:51.160 Well, the executive order is interesting because this is sort 0:12:51.200 --> 0:12:52.880 of a replay of what Trump tried to do in 0:12:52.880 --> 0:12:53.480 his first term. 0:12:53.559 --> 0:12:53.719 Right. 0:12:53.760 --> 0:12:57.160 He had previously talked about increasing payments to or using 0:12:57.160 --> 0:13:01.240 emergency powers for preserving existing coal plants, maybe bringing old 0:13:01.240 --> 0:13:04.040 ones back online, and as we can see from the 0:13:04.080 --> 0:13:06.280 power generation data, that didn't really work out. Coal is 0:13:06.280 --> 0:13:09.080 now fifteen percent of generation in the US per year, 0:13:09.200 --> 0:13:13.120 down from considerably higher levels before. So there's a lot 0:13:13.160 --> 0:13:15.400 of different moving parts to this. You might see more 0:13:15.520 --> 0:13:19.760 say coal exports, more long term gathering of coal leases, 0:13:19.800 --> 0:13:22.280 which have been sort of moving back and forth from 0:13:22.360 --> 0:13:24.840 Obama to Trump one, to Biden and now to Trump two. 0:13:25.160 --> 0:13:28.319 But in general it's hard to say that this will 0:13:28.320 --> 0:13:32.040 be a huge boon to coal build out or restoration, 0:13:32.160 --> 0:13:34.640 especially when you have tariffs weighing on any kind of 0:13:34.640 --> 0:13:35.720 big capital project. 0:13:36.679 --> 0:13:40.439 All right, so talk about, you know, the energy ecosystem. 0:13:40.840 --> 0:13:43.960 Where do we get stuff for the energy ecosystem, whether 0:13:44.000 --> 0:13:47.600 it's fossil fuels, clean energy, where do we get the 0:13:47.840 --> 0:13:51.120 equipment and is that something that's going to be impacted 0:13:51.160 --> 0:13:51.920 by these tariffs? 0:13:52.640 --> 0:13:53.360 Oh, very heavily. 0:13:53.720 --> 0:13:57.040 Even for fossil fuels, which are often a very domestically 0:13:57.080 --> 0:14:01.880 extracted resource, there's reliance on steel, luminum, specialized equipment that's imported, 0:14:02.040 --> 0:14:04.600 which is why you saw the Dallas Fed register such 0:14:04.760 --> 0:14:08.840 negative opinions about the tariffs coming in generally, more broadly 0:14:09.440 --> 0:14:13.160 in terms of say solar equipment that mostly comes from 0:14:13.160 --> 0:14:16.520 Southeast Asia, because we've had batteries, we've had tariffs in 0:14:16.600 --> 0:14:18.960 China for a long time. Batteries themselves tend to come 0:14:19.000 --> 0:14:22.400 from China. Electric vehicles are imported from a variety of places, 0:14:22.800 --> 0:14:25.080 but especially you know, it's very domestic, with the fair 0:14:25.080 --> 0:14:27.680 amount of Canada and Mexico in there. And lastly, if 0:14:27.680 --> 0:14:31.640 you're thinking about say offshore wind, that's pretty dependent on Europe. 0:14:31.960 --> 0:14:36.360 The only thing that's really effectively on shore and minimally 0:14:36.520 --> 0:14:39.320 dependent on trade is onshore wind in the US. 0:14:40.480 --> 0:14:42.920 What is the future of offshore wind in the US? 0:14:42.920 --> 0:14:45.360 I mean, if we're talking about ramping up coal and 0:14:45.400 --> 0:14:49.520 sort of there's zero love from the administration on offshore wind. 0:14:49.600 --> 0:14:52.200 Have we seen sort of I don't know, leases or 0:14:52.240 --> 0:14:55.160 any contracts be broken or do you feel like companies 0:14:55.160 --> 0:14:57.720 that are still are still committed to the longer term 0:14:57.880 --> 0:14:59.080 world of offshore wind. 0:15:00.080 --> 0:15:02.080 Well, I mean what the offshore win companies will tell you. 0:15:02.440 --> 0:15:05.920 This is a multi year, long term process of building 0:15:05.920 --> 0:15:09.080 that's beyond any one administration. We have seen one lease 0:15:09.440 --> 0:15:13.080 be canceled by the federal government for an ongoing project, 0:15:13.520 --> 0:15:15.760 but generally speaking, we haven't seen a lot more movement 0:15:15.800 --> 0:15:17.960 for things that have already been permitted and leased. Now 0:15:18.000 --> 0:15:19.720 that's important because the federal government has a lot of 0:15:19.800 --> 0:15:22.040 leverage over that process. We're not seeing a lot more 0:15:22.040 --> 0:15:24.880 being added to the pipeline. But the real issue is 0:15:24.920 --> 0:15:27.880 going to come in the form of costs, inflation, and 0:15:28.000 --> 0:15:30.880 also potentially interest rates. We saw a major slowan an 0:15:30.880 --> 0:15:33.160 offshore win under Biden, which is a very supportive administration, 0:15:33.400 --> 0:15:35.520 simply because the cost of inputs went up and as 0:15:35.520 --> 0:15:38.120 inflation went up. The FED height rates and wind is 0:15:38.120 --> 0:15:41.360 a very large capital intensive project category and especially sensitive 0:15:41.360 --> 0:15:43.040 to those kinds of things. So if the terrorists lead 0:15:43.040 --> 0:15:45.000 to those broader impacts, we might see some fairly negative 0:15:45.040 --> 0:15:47.480 results for even the offshore win projects that are already 0:15:47.520 --> 0:15:48.360 allowed to go forward. 0:15:49.080 --> 0:15:51.720 Derek, I think even folks that are you know that 0:15:51.800 --> 0:15:55.360 question the value of the economic value of tariff in general, 0:15:55.400 --> 0:15:58.560 they kind of recognize that some of this strategically important 0:15:58.560 --> 0:16:02.160 stuff maybe that we ourn was strategically important from the 0:16:02.200 --> 0:16:06.160 pandemic when they trade the cycles were all disrupted, the 0:16:06.240 --> 0:16:09.320 trade routes were disrupted. That makes some sense. Is a 0:16:09.400 --> 0:16:13.000 clean energy did they have a focus on bringing this 0:16:13.000 --> 0:16:14.640 stuff on shore as much as possible. 0:16:15.000 --> 0:16:17.920 There's been a lot of discussion of that across multiple administrations. 0:16:17.960 --> 0:16:20.320 The Bide administration was in favor of that. The Trump 0:16:20.320 --> 0:16:23.800 administration is in favor of on shory manufacturing generally and 0:16:23.880 --> 0:16:27.160 of energy security independence, even dominance, as they like to 0:16:27.160 --> 0:16:30.360 say generally, but that's a hard thing to achieve with 0:16:30.400 --> 0:16:34.600 tariffs alone. Ultimately, a lot of the solar factories, battery factories, 0:16:34.600 --> 0:16:36.720 ev factories that are coming up in the US are 0:16:36.760 --> 0:16:40.040 dependent on imports, whether those are imports of upstream components 0:16:40.320 --> 0:16:43.200 or of the manufacturing equipment needed to make the final 0:16:43.200 --> 0:16:46.840 products solar panels and batteries themselves. And right now we're 0:16:46.840 --> 0:16:49.720 seeing costs go up on those across the board. Unless 0:16:49.880 --> 0:16:54.160 you have more reliable revenue streams like tax credits, for example, 0:16:54.280 --> 0:16:57.560 it's kind of hard to imagine new decisions to build 0:16:57.560 --> 0:16:59.840 that stuff out. Even things that are already being built 0:16:59.840 --> 0:17:02.560 are facing uncertainty not only from the Trump tariffs, from 0:17:02.600 --> 0:17:05.119 other investigations into tariffs being run at the Department of 0:17:05.119 --> 0:17:07.600 Commerce and US Trade Representative, but also on the fate 0:17:07.640 --> 0:17:09.640 of those tax credits, which is going to help guarantee 0:17:09.640 --> 0:17:10.760 their revenues in the long term. 0:17:10.880 --> 0:17:13.200 Yeah, there's a great point which leads us to the IRA, 0:17:13.359 --> 0:17:16.359 the Inflation Reduction Act, which I mean, clearly President Trump 0:17:16.440 --> 0:17:18.520 hates that thing, but there are is a lot of 0:17:18.600 --> 0:17:21.399 value in it through the tax credits and subsidies for 0:17:21.600 --> 0:17:24.480 companies that supposedly he is a fan of, like the 0:17:24.520 --> 0:17:27.199 oil industry for example. When do you think we're going 0:17:27.280 --> 0:17:30.160 to know the fate of the IRA and those tax credits. 0:17:30.680 --> 0:17:33.200 That's a great question, and I've been wondering at myself. Obviously, 0:17:33.200 --> 0:17:35.000 we're seeing a lot of wrangling between the House and 0:17:35.000 --> 0:17:37.840 Senate about the top lights on their big budget bill 0:17:37.920 --> 0:17:39.399 they're going to try and pass by the end of 0:17:39.440 --> 0:17:41.280 the year. Obviously, the end of the year is when 0:17:41.320 --> 0:17:43.080 individual tax rates go up, and so that's one of 0:17:43.080 --> 0:17:46.040 the big forcing functions. You also are seeing the x 0:17:46.040 --> 0:17:49.439 state the debt ceiling occurring somewhere between July and maybe September, 0:17:49.680 --> 0:17:51.040 and that's going to be a point where there's going 0:17:51.080 --> 0:17:52.800 to be a lot of pressure to pass a big 0:17:52.840 --> 0:17:56.160 budget package, raise the debt ceiling, and probably also get 0:17:56.240 --> 0:17:59.600 some of this tax material done. But we've seen a 0:17:59.640 --> 0:18:02.239 lot of debt lines blown already for when we were 0:18:02.280 --> 0:18:04.440 allegedly going to get top line packages, which are a 0:18:04.480 --> 0:18:06.640 preconditioned to figure out what's going to happen what tax 0:18:06.680 --> 0:18:09.200 credit and we don't even know that yet at this point. 0:18:09.240 --> 0:18:10.639 We don't even know if they're going to use this 0:18:10.640 --> 0:18:13.679 particular budget commit called current Policy, which would really reduce 0:18:13.720 --> 0:18:16.399 the pressures to cut more. And as they're trying to 0:18:16.480 --> 0:18:18.080 use that, we're seeing a lot of blowback from physical 0:18:18.119 --> 0:18:21.040 conservatives in both the Senate but especially in the House, 0:18:21.480 --> 0:18:23.120 and so we'll see. 0:18:23.000 --> 0:18:25.440 Thank you so much to Derek flackl bn EF lead 0:18:25.520 --> 0:18:29.600 US policy analyst. BLOOMERIG Intelligence recently hosted its fourth Generative 0:18:29.640 --> 0:18:32.800 Artificial Intelligence conference and there were some great lineups in 0:18:32.920 --> 0:18:35.720 terms of how you apply and make AI for more. 0:18:35.760 --> 0:18:38.680 Alex and I were joined by Jim Stratton Workday, chief 0:18:38.720 --> 0:18:42.760 technology officer the AI platform. Workday trades under the NASDAK 0:18:42.840 --> 0:18:44.479 ticker wday. 0:18:44.720 --> 0:18:48.040 We first asked Jim where workday sits in the AI space. 0:18:48.600 --> 0:18:54.600 Workday builds and deploys and serves enterprise finance and HR 0:18:54.840 --> 0:19:02.200 for major corporations, for state higher ed for large institutions, 0:19:02.480 --> 0:19:06.480 and AI really is built directly into the products that 0:19:06.520 --> 0:19:09.520 we build. So if you think about the different types 0:19:09.560 --> 0:19:13.440 of workflows around running a business, around running a major business, 0:19:14.000 --> 0:19:16.879 all of that is right to be infused with AI 0:19:17.160 --> 0:19:20.800 for automation, for ease of use, and that's really what 0:19:20.840 --> 0:19:21.480 we're building into. 0:19:21.480 --> 0:19:24.920 Pointing now, so to what extent, I guess a lot 0:19:24.960 --> 0:19:26.360 of US lay people we're trying to get a sense 0:19:26.400 --> 0:19:28.680 of this is just the next step in the evolution 0:19:28.760 --> 0:19:32.040 of tech or is AI elite a step function? How 0:19:32.040 --> 0:19:35.480 do you think about the technology of AI, the compute 0:19:35.480 --> 0:19:38.199 that it and the applications coming from that. 0:19:38.760 --> 0:19:42.160 It is the next step really the next evolution and technology. 0:19:42.760 --> 0:19:44.680 But I think the leverage that we can get out 0:19:44.720 --> 0:19:46.800 of AI, it really is a leap in terms of 0:19:46.920 --> 0:19:50.840 it's in exponential growth, in terms of productivity, in terms 0:19:50.880 --> 0:19:53.679 of enhancing humans and the capabilities of what we have 0:19:53.760 --> 0:19:56.480 in the workplace. It really is an exponential leap for 0:19:56.600 --> 0:19:58.440 us in the technology space. 0:19:58.560 --> 0:19:59.760 So give me a use case. So some of your 0:19:59.760 --> 0:20:02.119 client like GE or Visa, right, I come to you 0:20:02.119 --> 0:20:03.600 and say, hey, Jim, what are you going to do 0:20:03.680 --> 0:20:06.080 for me? And how does it help me and make 0:20:06.119 --> 0:20:08.240 me more productive or something along those lines. What does 0:20:08.240 --> 0:20:09.119 that use case look like? 0:20:09.320 --> 0:20:11.840 So if you think about across I'll give you a 0:20:11.880 --> 0:20:15.520 couple examples across HR and finance. So think about the 0:20:15.640 --> 0:20:20.119 recruiting space a talent acquisition. You have in many cases 0:20:20.160 --> 0:20:22.760 thousands of jobs, hundreds of thousands of jobs that are 0:20:22.800 --> 0:20:26.320 open across even just the US. Here within a particular 0:20:26.320 --> 0:20:29.760