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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

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Speaker 2: You're listening to Bloomberg Intelligence. Alex Steel here Paul Sweeney

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Speaker 2: recover all the industries and all the analysis from our

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Speaker 2: fabulous Bloomberg Intelligence arm of analysts two thousand companies, one

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Speaker 2: hundred and thirty industries all around the world. And for

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Speaker 2: that we're going to focus on Paramount for a moment.

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Speaker 2: That stock US down about four and a half percent.

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Speaker 2: The news is that they're letting go of hundreds of

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Speaker 2: employees just after an amazing number of people watch the

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Speaker 2: Super Bowl on all different platforms. There's only one person

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Speaker 2: that you go to for this analysis. Keith ar Monganathan,

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Speaker 2: Bloomberg Intelligence analyst on US Media gets too. You have

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Speaker 2: the layoffs and then you also wind up having this

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Speaker 2: amazing streaming number. Walkers through your take.

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Speaker 3: Yeah, I mean this is really more of course, they

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Speaker 3: did have a great Super Bowl, Alex, but I think

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Speaker 3: this is really more about the future outlook for the company,

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Speaker 3: and that is super super bleak. Yes, it was a

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Speaker 3: great night for TV advertising. We think they've gotten seven

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Speaker 3: hundred million dollars in roughly about four hours. But then

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Speaker 3: it's more about the spectcular challenges. I mean, throughout twenty

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Speaker 3: twenty three we've seen TV advertising decline by low double digits.

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Speaker 3: It was down almost thirteen percent in the latest quarter

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Speaker 3: that they reported, and it's not going to get too

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Speaker 3: much better. And it's not just the challenges on the

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Speaker 3: TV side of the equation for them. It's also about

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Speaker 3: their streaming business. And they've made good strides absolutely in

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Speaker 3: terms of you know, streaming subscribers, and again I anticipate

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Speaker 3: that they're going to have some good streaming numbers to

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Speaker 3: report thanks to the Super Bowl. But it is burning

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Speaker 3: a lot of money. Almost one point seven billion dollars

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Speaker 3: is what they will report in losses for twenty twenty

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Speaker 3: four and for twenty twenty three, and before that they

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Speaker 3: lost about one point eight billion, So it's just been

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Speaker 3: a continuous drain on the company.

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Speaker 4: So Githa, the stock is down over the trailing twelve

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Speaker 4: months about forty percent here, and I know there's a

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Speaker 4: lot of talk around, perhaps the controlling shareholder, Sherry Redstone,

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Speaker 4: will consider selling all a part of the company. What's

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Speaker 4: the latest on that?

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Speaker 3: So the latest actually in that saga, and this has

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Speaker 3: now been an ongoing drama for many months now, Paul,

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Speaker 3: the latest is that Byron Allen actually came up with

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Speaker 3: a bid for all of the company, not just for

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Speaker 3: the controlling stake held through National Amusements. And he actually

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Speaker 3: put up a pretty good bid. You know, it was

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Speaker 3: fourteen billion dollars in terms of equity, so thirty billion

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Speaker 3: dollars enterprise value. We think it was a pretty fair bid.

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Speaker 3: The problem is, you know, Byron Allen, I don't think

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Speaker 3: anybody is taking him too seriously. He's you know, had

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Speaker 3: this track of kind of coming up with these empty bids.

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Speaker 3: So while it is a number, again we've not really

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Speaker 3: seen a whole lot of action that we would have expected.

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Speaker 2: So this is a totally unfair question to Paul. Let's

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Speaker 2: pretend you're still an m and a banker here, investment banker.

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Speaker 2: What would you be talking to paramount about.

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Speaker 4: I would I would say, I think the best buyer here,

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Speaker 4: there's a strategic buyer, maybe Warner Brothers Discovery, but both

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Speaker 4: of those companies as githa wall and those balance sheets

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Speaker 4: are not great. I think I would be shopping into

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Speaker 4: a private equity because they're still good for free cash

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Speaker 4: flows here and let them deal with it. So gethe

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Speaker 4: what is what is the sense here as to I

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Speaker 4: think about Paramount, I think about Warner Brothers Discovery. I

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Speaker 4: don't know. I mean, what do we what is happens

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Speaker 4: to these companies because it just feels like against some

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Speaker 4: of the big tech companies, Uh, you know, they're just

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Speaker 4: not big enough here, and you know against Netflix are

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Speaker 4: just not big enough. What did they do?

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Speaker 2: So?

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Speaker 3: I think Warner Brothers Discovery actually had a pretty interesting

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Speaker 3: move last week, Paul, which was they banded together with ESPN,

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Speaker 3: Disney and Fox to kind of create this sports super

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Speaker 3: app which will launch in the fall. And that's one

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Speaker 3: way for them to kind of protect at least some

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Speaker 3: part of their linear revenue stream, because I mean, they've

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Speaker 3: kind of everybody's seeing the writing on the wall here.

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Speaker 3: We're seeing cord cutting, We're seeing about ten percent of

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Speaker 3: the subscriber based get eroded year after year. We've already

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Speaker 3: lost thirty million subscribers. So that's one good way for

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Speaker 3: them I think to kind of control their destiny a

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Speaker 3: little bit in terms of distribution. Again, remember Paramount is

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Speaker 3: not part of that bundle, so that again is a

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Speaker 3: little bit of you know, a strike against them. But

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Speaker 3: you know, you bring up a good point. I think

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Speaker 3: at the end of the day, we are going to

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Speaker 3: have to see consolidation. Of course, as you just pointed out,

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Speaker 3: there were rumors of actually Warner Brothers, Discovery being interested

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Speaker 3: in Paramount, but you're right, the market did not cheer

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Speaker 3: for that. That would be about more than you know,

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Speaker 3: fifty or sixty billion dollars I think in debt or

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Speaker 3: those combined companies. So yeah, it is it is definitely

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Speaker 3: going to be challenging, but I think consolidation is definitely

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Speaker 3: on the cards.

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Speaker 2: Okay, So then how does that happen? Because if like

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Speaker 2: three wrongs don't make a right, and you're not gonna

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Speaker 2: put all the media companies together because it's going to

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Speaker 2: create more problems. So is it private equity like to

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Speaker 2: split up different areas of media within the company.

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Speaker 3: Yeah, I think Paramount I think one of the things

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Speaker 3: has been, you know, to sell it for parts. Right,

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Speaker 3: there are some parts of the company, the TV networks

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Speaker 3: that could be very very attractive to private equity, as

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Speaker 3: you just pointed out, because of the cash flows. Right,

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Speaker 3: it's still a business. It used to throw out about

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Speaker 3: six billion dollars in ebit dah, but it will still

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Speaker 3: throw out about four and a half to almost close

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Speaker 3: to four point eight billion dollars in ebit DA. So again,

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Speaker 3: cash highly cash generative. Of course, the future you know

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Speaker 3: flows don't look so great. But then there have been

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Speaker 3: a lot of uh, there has been a lot of

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Speaker 3: interest in the studio part of the business, right, whether

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Speaker 3: that's you know, David Ellison with his guy Dance Media,

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Speaker 3: maybe somebody else, maybe even an Apple. We haven't necessarily

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Speaker 3: seen any of those, you know, bids kind of come

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Speaker 3: to fruition, but there definitely will be a lot of interest.

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Speaker 3: But I think the one thing that we kind of

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Speaker 3: have to wait to get some clarity on is definitely

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Speaker 3: the regulatory environment. We've seen big tech kind of really

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Speaker 3: shy away from anything too splashy, but who knows, maybe

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Speaker 3: when the government changes, all of that will change as well.

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Speaker 4: You know, Githa, when these networks bid and pay billions

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Speaker 4: of dollars for sports rights, and even if you know,

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Speaker 4: you put up that seven hundred million dollars of ad

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Speaker 4: revenue that you reference. You know, it's tough to make

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Speaker 4: a profit on that kind of business. So what the

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Speaker 4: networks have always said is, yes, but we promote other

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Speaker 4: shows on our networks, and that value is really worth

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Speaker 4: paying these big rights fees. But if you're promoting all

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Speaker 4: these shows on the CBS network that nobody's watching because

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Speaker 4: of cord cutting, how valuable is that? I mean, I

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Speaker 4: thought about that they were promoting all their shows that

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Speaker 4: I don't think anybody's watching because they've already cut the cord.

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Speaker 3: Yeah, you're absolutely right for them, though. The one that

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Speaker 3: Paramount has done really kind of well, and I don't

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Speaker 3: know whether this is a plus or a minus, but

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Speaker 3: it definitely helps them at least shore up. I think

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Speaker 3: the total value of their assets is they've actually all

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Speaker 3: of their sports properties, including the NFL. They've actually kind

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Speaker 3: of leaked it outside the muddle, so they were showing

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Speaker 3: it on Paramount Plus day one, and they did the

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Speaker 3: same thing with the Super Bowl as well. So I

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Speaker 3: think even if they're you know, even if you have

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Speaker 3: cord cutters, they could make the argument that yes, you know,

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Speaker 3: people can potentially sign up for that service. We saw,

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Speaker 3: of course Peacock do that with that Wildcat NFL game. Again,

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Speaker 3: what they know that they're losing subscribers on the PayTV bundle,

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Speaker 3: so they're trying to They're trying their best, I don't

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Speaker 3: know how successfully to kind of make it up on

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Speaker 3: the streaming side, but you're right, I mean it is

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Speaker 3: kind of the lose lose.

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Speaker 2: But you know, for me, I have become addicted to Survivor.

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Speaker 2: I've never seen it, and when I had a concussion,

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Speaker 2: that was the show that I decided that I was

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Speaker 2: going to watch. And now I'm paying like twenty five

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Speaker 2: bucks a season to watch it on iTunes and I'm like,

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Speaker 2: this is getting ridiculous. That's what they gotta do. I

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Speaker 2: got to get people like me to then go pay

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Speaker 2: for the streaming service because I'm like, wait a minute,

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Speaker 2: it's spen one hundred dollars on four seasons.

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Speaker 5: Certainly a great promo Survivor by more people with concussions, yes.

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Speaker 2: Exactly, but I mean I'm also like, wow, that's really

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Speaker 2: expensive to that is to put out there. Keitha. So

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Speaker 2: what's next? Like, what are you watching pre Paramount? Now?

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Speaker 3: For Paramount, it's definitely. It is an M and a place.

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Speaker 3: Something has to happen. It has to happen fast. Bob Backish,

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Speaker 3: the CEO, has pretty much said it. He you know,

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Speaker 3: he said he's evaluating Byron Allen's proposal. Again, not sure

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Speaker 3: whether that will necessarily pan out, but somebody has to

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Speaker 3: come up with something and it has to happen.

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Speaker 4: Quickly, all right, Keitha, thanks so much for joining us.

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Speaker 4: As always, Keitha wrong and nothing. She is the media

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Speaker 4: analyst Bloomberg Intelligence. Yeah, I don't know. I don't know

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Speaker 4: what you do with media in general. I mean because

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Speaker 4: I just don't with the cord cutting and the switch

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Speaker 4: to streaming, I don't know where the profits are going,

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Speaker 4: and I don't know what multiple to put on whatever

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Speaker 4: profits the companies tell me they're going to have.

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Speaker 2: When you're taking I mean, I'll look at somebody like us, right,

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Speaker 2: I mean you started in a different world. But for me,

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Speaker 2: like I'm an unair talent person, like this is where

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Speaker 2: I have grown up over the last you know, twenty years.

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Speaker 2: What do you do if there's like a next phase,

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Speaker 2: like where do you where is the media need going.

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Speaker 4: To be podcasts?

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Speaker 3: Right?

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Speaker 2: But at some point Armies, You laugh, because then we're

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Speaker 2: going to get saturated, right then, like all the money's

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Speaker 2: going to go into one thing and the pendulum switches back. However,

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Speaker 2: I have been hearing about the death of linear TV

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Speaker 2: for twenty years. Yes, so, and it's still kicking in

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Speaker 2: some form of another.

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Speaker 4: It is still it's still kicking. And we saw if

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Speaker 4: you want to get a big, big, big audience, partner

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Speaker 4: up with the NFL and do the Super Bowl thing

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Speaker 4: one hundred and twenty five million viewers.

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Speaker 2: If you're an advertiser, I'm probably not.

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Speaker 6: You're probably not.

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Speaker 4: But if you're an advertiser, you're like, there is no

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Speaker 4: other place, full stop, where I can get that kind

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Speaker 4: of reach, And seven million dollars at the end to

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Speaker 4: day doesn't seem like such a bad deal in the

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Speaker 4: world where everybody's audience delivery has been deluded.

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Speaker 4: basis points four point two seven percent, the short ends

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Speaker 4: up twelve basis points four point five nine percent. iRED

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Speaker 4: Jersey joins us. Thankfully he is safe at his home office.

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Speaker 4: He didn't trick that three minute drive to the Princeton office.

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Speaker 4: So I were glad that you're working from home and

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Speaker 4: you're safe and out there shoveling. What did you make

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Speaker 4: of the CPI print, and more importantly, what do you

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Speaker 4: think your friends at the Federal Reserve are going to say?

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Speaker 7: A couple of things. First, let me say my school district,

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Speaker 7: my daughter school district, does have a snow day today,

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Speaker 7: so they are not learning online. Second, the hill in

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Speaker 7: front of my house, I saw three cars slide down

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Speaker 7: it because there's a sheet of ice under the snow. So,

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Speaker 7: believe me, I'm glad I didn't go into the office

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Speaker 7: today just because of the treachery of getting there. Yeah,

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Speaker 7: today's CPI report obviously was stronger than expected, and in particular,

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Speaker 7: and I think this is something we've been harping on

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Speaker 7: for a little while. It's that the services component, so

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Speaker 7: that what they call super core inflation, so services excluding

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Speaker 7: housing services grew at over six percent on a year

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Speaker 7: on year basis, and that's, you know, that's really the

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Speaker 7: component that is really driving the fact that inflation is

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Speaker 7: finding it very difficult to come down as quickly as

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Speaker 7: I think some people had hoped. And you know, we've

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Speaker 7: priced out basically not quite a whole nother cut, but

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Speaker 7: we've priced out a large portion of another cut this year,

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Speaker 7: and we're getting now toward the idea that maybe the

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Speaker 7: FED is actually only going to cut three times this year,

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Speaker 7: which is what they've been saying. There's still a lot

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Speaker 7: of people and I was talking to some investors this

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Speaker 7: morning who are thinking, well, why is the FED going

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Speaker 7: to cut at all? If inflation keeps coming in like this?

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Speaker 7: And I think that that's a reasonable question to be asking,

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Speaker 7: is you know, is the Fed ever going to cut now?

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Speaker 7: I think that they probably will cut at least one

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Speaker 7: time before midyear, because if they don't, it'll be politically

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Speaker 7: difficult for them to cut in say September, right during

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Speaker 7: the election cycle, just because you know, they don't want

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Speaker 7: to be seen as being political. And I think that

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Speaker 7: they want to get at least one out of the way.

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Speaker 7: That way they can say, well, you know, if we

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Speaker 7: cut again, it's not it's not something that they haven't

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Speaker 7: done already.

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Speaker 2: So last week I was on TV and I brought

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Speaker 2: up the risk of inflation reaccelerating, and I was almost

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Speaker 2: kind of laughed off set a little bit by the guest,

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Speaker 2: how much do we have to worry about a reacceleration?

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Speaker 2: There is no hedging against, say, another hike, like there

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Speaker 2: is no hedging against a reacceleration necessarily, do we need

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Speaker 2: to start?

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Speaker 7: Yeah, that's that's an interesting point. So I think there's

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Speaker 7: a couple of things. One is, when you look at

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Speaker 7: the composition of inflation, it's not that inflation has reaccelerated.

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Speaker 7: I think you know, some people have said that to me.

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Speaker 7: It's just that they didn't come down as the market expected.

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Speaker 7: It's basically flat month on month more or less. The

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Speaker 7: The issue I think with a the potential of another

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Speaker 7: high is that you'd really need to see a meaningful

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Speaker 7: acceleration in goods prices, and goods prices continue to fall

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Speaker 7: at least very slightly. So the question is if we

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Speaker 7: do see like supply chain issues or something like that

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Speaker 7: that forces goods prices to increase another you know, even

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Speaker 7: if it's just a little bit, like another percent or

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Speaker 7: something like that, that will increase all of all of

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Speaker 7: CPI a little bit, and that would, you know, certainly

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Speaker 7: keep the Fed on the sidelines, you know, whether or

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Speaker 7: not they hike. I think you need to see a

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Speaker 7: string of that kind of reacceleration. And it seemed that

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Speaker 7: that would be the trend in order for the Fed

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Speaker 7: to hike again. But again, like we have to first

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Speaker 7: price out all the cuts that are still being priced.

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Speaker 7: Keep in mind, we're still pricing for the Federal Reserve

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Speaker 7: to cut interest rates two hundred basis points over the

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Speaker 7: next year and a half. So let we have to

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Speaker 7: price that out first before we start talking about talking

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Speaker 7: about the market pricing and heights.

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Speaker 4: So we talk to traders here, Ira, what are they

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Speaker 4: doing here? I mean it looks like they're I mean

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Speaker 4: today yields are up twelve basis points on a two

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Speaker 4: year Are people trading off of the are they investing

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Speaker 4: off of this number? What do they trade off of

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Speaker 4: this number?

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Speaker 7: Well, so, investors in aggregate, it seemed to have been

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Speaker 7: more or less flat to slightly underweight duration. So that

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Speaker 7: means that they're basically short interest rate risk, which which

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Speaker 7: means that they did pretty well today right with ten

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Speaker 7: years yields up about nine basis points right now. The

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Speaker 7: people had gotten long interest rates and then they started

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Speaker 7: to cut those when we got under four percent. So

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Speaker 7: I think things are a little bit more balanced now.

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Speaker 7: I haven't talked to a lot of like traders, like

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Speaker 7: high frequency traders, but the investors that I've talked to

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Speaker 7: over the last couple of days certainly are you know

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Speaker 7: a little bit, but they're looking for an entry point

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Speaker 7: to get long rates at least a little bit. You know,

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Speaker 7: they didn't like rates at three eighty, you know, well

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Speaker 7: they like rates at two and at four and a quarter.

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Speaker 7: Not sure, but there certainly is some appetite for people

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Speaker 7: maybe to you know, shorts to cover and to get

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Speaker 7: flat duration for example, and that could be coming. And

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Speaker 7: there definitely is demand. You look at the auction last

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Speaker 7: week and you know, you guys have been really in

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Speaker 7: front of the coverage on some of the auctions. On

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Speaker 7: the treasury auctions, they were really good. So there is

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Speaker 7: primary demand. Right investors still want to be owned treasuries.

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Speaker 7: The question is you know, how much do they want

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Speaker 7: to own visa VI. The the amount of supply coming

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Speaker 7: out outstanding, and it seems, you know, at least today,

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Speaker 7: you know, everyone was surprised by this last thing that

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Speaker 7: I have to say, most of this move, or at

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Speaker 7: least half of the move in in treasuries today comes

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Speaker 7: from inflation break evens. So this is the first time

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Speaker 7: in the last six months or so that we've really

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Speaker 7: seen inflation expectations move up significantly higher than they were,

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Speaker 7: so that that's something to keep an eye on today too.

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Speaker 2: So that explains and obviously also the short end is

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Speaker 2: getting hit too. But I gotta say, when the numbers

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Speaker 2: came out, I was like, okay, let's look at this

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Speaker 2: twenty basis point move. Twenty five basis point move we're

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Speaker 2: going to see and it's only twelve. I feel like

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Speaker 2: this feels orderly to some extent. And is that because

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Speaker 2: of those buyers that you're talking about or is it

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Speaker 2: a position thing?

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Speaker 7: Well, keeping mind, Alex, you know, we've priced out thirty

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Speaker 7: six bass points of cuts just in the last week,

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Speaker 7: so we had been selling off going into today's number,

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Speaker 7: So I think part of it was people, you know, again,

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Speaker 7: position squaring people getting you know, flatter the market, so

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Speaker 7: you know you didn't need to see a necessarily a

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Speaker 7: twenty basis point self. Really yields are probably you know,

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Speaker 7: reasonably close to fair value right here. So when I

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Speaker 7: say really yields, I mean the yields on tips on

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Speaker 7: treasury inflation protected securities. And I've been saying, and Paul,

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Speaker 7: I know I've mentioned this to you a number of

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Speaker 7: times over the past couple of months. Is I think

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Speaker 7: that inflation expectations, so inflation break evens, are habitually a

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Speaker 7: bit too low, and I think that those do need

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Speaker 7: to kind of recalibrate to the idea that hey, maybe

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Speaker 7: we'll have three percent inflation for a long period of

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Speaker 7: time instead of inflation continuing to come down toward two

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Speaker 7: percent like the market's currently pricing.

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Speaker 8: Yep, very good.

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Speaker 4: We've heard that from you before. We appreciate getting your

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Speaker 4: thoughts here today, iRED Jersey Gus interest Rate Strategises Forloomberg

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Speaker 4: Intelligence giving us some thoughts on the CPI data.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Affo car playing enroud

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Speaker 1: Otto with the Bloomberg business app listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 4: Market selling off today. CPI print came in a little

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Speaker 4: bit hotter than expected. So if you were in the

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Speaker 4: camp saying I think the Fed's going to cut sooner

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Speaker 4: rather than later, probably today's not your day.

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Speaker 1: Here.

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Speaker 4: Let's check in with somebody who does this stuff for

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Speaker 4: delivering Jeffrey Cleveland. He's a chief economist that Payden and Regal,

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Speaker 4: joining us on zoom from Los Angeles. So, Jeff, you know,

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Speaker 4: is this a bumping a road for the dubbish FED

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Speaker 4: folks or is this something more on the inflation front.

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Speaker 5: I think it's probably something more. I mean, this is

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Speaker 5: pretty disappointing if you thought the FED wasn't cut in

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Speaker 5: March or or even may really disrupts the trend. So

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Speaker 5: whether you look at core CPI up point four percent

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Speaker 5: months a month, or you know, as the policy makers

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Speaker 5: have counseled us, we've been looking at core services X shelter.

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Speaker 5: You know that was up point nine percent month to

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Speaker 5: month in January, the highest print in over two years.

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Speaker 5: So that's there's some inflation pressure still in the economy.

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Speaker 5: So I think this really should dampen expectations for cuts.

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Speaker 2: Jeffrey. Maybe what we're learning though, is that inflation is

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Speaker 2: just lumpy, that it's it's just gonna be hard. It's

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Speaker 2: not gonna be a straight line down for disinflation, but

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Speaker 2: it'll be sort of a volatile, evolving target. How is

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Speaker 2: an economist? Do you just kind of factor that in?

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Speaker 5: Yeah, So, I mean it's possible that January has has

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Speaker 5: some noise. I think we saw that to pre two

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Speaker 5: thousand and eight. If you go back to that era,

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Speaker 5: you would often see januaries where you'd see some price increase.

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Speaker 5: So maybe that's what we saw also last January January

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Speaker 5: of twenty three. So it's I don't want to over

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Speaker 5: overweight or over index to this particular number. So I

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Speaker 5: think that's important to keep in touch, you know, in mind,

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Speaker 5: it's possible by the time we get to summer that

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Speaker 5: core CPI will you know, have cooled off a bit.

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Speaker 5: And but I guess at that point you're still gonna

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Speaker 5: have three percent plus year on year core CPI. So

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Speaker 5: maybe something like three point four or three point five

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Speaker 5: Is that enough or is that cool enough to justify

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Speaker 5: rate cuts? I don't know that's gonna be a tough question.

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Speaker 5: So I think that months and month you could be lumpy,

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Speaker 5: you can have noise, but it's a question of Okay,

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Speaker 5: where are we going to be by mid year? Even

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Speaker 5: in the best case scenario, seems like we're three percent

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Speaker 5: plus on core CPI at mid year. Jeffy, what do

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Speaker 5: you guys at ping for rate cuts?

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Speaker 2: Yeah?

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Speaker 4: Hey, y, go ahead, Jeffrey, just want to what you

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Speaker 4: guys are thinking about in terms of kind of GDP

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Speaker 4: for the US and twenty twenty four here, I mean,

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Speaker 4: how measured is it going to be.

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Speaker 5: Well, we're pretty bullish, actually, I think, but compared to

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Speaker 5: the Bloomberg consensus right now, we have a two percent

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Speaker 5: GDP growth for twenty twenty four. I think the Bloomberg

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Speaker 5: consensus last time I looked was closer to one one

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Speaker 5: point one percent. So that is powered primarily by the consumer.

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Speaker 5: So we're still pretty upbeat at paid in about the

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Speaker 5: health of the consumer, the strength of the labor market,

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Speaker 5: the growth and consumer income has been.

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Speaker 7: Really, really key.

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Speaker 5: I think that's why a lot of forecasters maybe were

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Speaker 5: too barish in the last twelve eighteen months. They're just

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Speaker 5: not seen the consumer income growth was continuing, so pretty

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Speaker 5: upbeat on the growth prospects for the US economy at least.

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Speaker 2: What I love when we were just talking about inflation, though,

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Speaker 2: is that you sound like you're trying to work it

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Speaker 2: out just like we are. And I think if that

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Speaker 2: says a lot about how hard it is to probably

433
00:20:48,800 --> 00:20:51,960
Speaker 2: be an economist right now because something just don't make

434
00:20:52,080 --> 00:20:56,479
Speaker 2: consistent sense. So how do you then model out if

435
00:20:56,480 --> 00:20:58,320
Speaker 2: you taken to the growth that Paul was talking about

436
00:20:58,359 --> 00:21:01,600
Speaker 2: in the inflation confusion, when the FED cuts and what

437
00:21:01,640 --> 00:21:04,200
Speaker 2: that cutting cycle looks like, and if it's a normalization

438
00:21:04,960 --> 00:21:07,399
Speaker 2: versus oh gosh, growth is terrible, it's a recession. We

439
00:21:07,440 --> 00:21:09,919
Speaker 2: have to cut now. Yeah, it's not.

440
00:21:10,080 --> 00:21:12,760
Speaker 5: It's not that difficult. I mean, so we look at

441
00:21:12,800 --> 00:21:14,840
Speaker 5: what the market is pricing, and if you go back

442
00:21:14,880 --> 00:21:17,680
Speaker 5: a few weeks months, the market we thought had too

443
00:21:17,720 --> 00:21:22,440
Speaker 5: many rate cuts priced in. Why did we think that, well,

444
00:21:22,640 --> 00:21:24,919
Speaker 5: because we thought growth would come in better then the

445
00:21:24,960 --> 00:21:28,000
Speaker 5: market had anticipated. We thought you could have some you know,

446
00:21:28,119 --> 00:21:31,160
Speaker 5: lumpy inflation as we've seen this morning, So we had

447
00:21:31,320 --> 00:21:34,159
Speaker 5: we had fewer rate cuts penciled in. And what we

448
00:21:34,320 --> 00:21:37,040
Speaker 5: found over the years is, you know, this happens from

449
00:21:37,040 --> 00:21:39,200
Speaker 5: time to time, but the bomb market just gets ahead

450
00:21:39,200 --> 00:21:41,800
Speaker 5: of itself where has too many cuts priced in, and

451
00:21:41,840 --> 00:21:45,520
Speaker 5: then we can take advantage of that in portfolios by

452
00:21:45,600 --> 00:21:49,840
Speaker 5: positioning a little bit more conservatively, so we weren't adding

453
00:21:50,160 --> 00:21:53,280
Speaker 5: to duration and expecting that rates we're going.

454
00:21:53,280 --> 00:21:53,920
Speaker 3: To rally here.

455
00:21:54,040 --> 00:21:57,720
Speaker 5: So that's it' That's kind of the how we process

456
00:21:57,800 --> 00:21:58,920
Speaker 5: this information.

457
00:21:59,080 --> 00:22:01,959
Speaker 4: Jeffy, how you feel about to the labor market here?

458
00:22:02,000 --> 00:22:04,600
Speaker 4: That's been one strong part of this economy from the

459
00:22:05,080 --> 00:22:05,439
Speaker 4: get go.

460
00:22:05,600 --> 00:22:05,840
Speaker 1: Here.

461
00:22:06,640 --> 00:22:08,280
Speaker 4: Is it still a strong as it seems?

462
00:22:09,640 --> 00:22:11,399
Speaker 5: Yeah? In fact, it looks like it's picked up in

463
00:22:11,440 --> 00:22:14,000
Speaker 5: the last three months. If you look at the three

464
00:22:14,040 --> 00:22:17,080
Speaker 5: month moving average of non farm payroll growth, it says

465
00:22:17,119 --> 00:22:19,400
Speaker 5: of January two hundred and eighty nine thousand. I mean,

466
00:22:19,440 --> 00:22:22,200
Speaker 5: that's excellent, Paul. I mean the way to think about

467
00:22:22,200 --> 00:22:24,280
Speaker 5: that for me is just we need about one hundred

468
00:22:24,320 --> 00:22:27,280
Speaker 5: and five thousand jobs every month to keep the unemployment

469
00:22:27,320 --> 00:22:30,240
Speaker 5: rate at where it is. So if you're growing at

470
00:22:30,280 --> 00:22:34,240
Speaker 5: two hundred and eighty nine thousand, that's a pretty good

471
00:22:34,560 --> 00:22:37,000
Speaker 5: labor market. That's pretty strong labor market. So think things

472
00:22:37,040 --> 00:22:41,040
Speaker 5: look solid. We're looking at real time looking for signs

473
00:22:41,040 --> 00:22:43,320
Speaker 5: of layoffs. I mean, we're seeing it anecdotally talking to

474
00:22:43,359 --> 00:22:46,320
Speaker 5: clients in tech. We're seeing it there, but we're not

475
00:22:46,320 --> 00:22:48,680
Speaker 5: seeing broad based layoffs at least not yet. So the

476
00:22:48,720 --> 00:22:50,200
Speaker 5: labor market looks solid in my view.

477
00:22:50,840 --> 00:22:56,000
Speaker 2: Solid labor market gross, okay, inflational, lumpy, sticky, sticky, but

478
00:22:56,000 --> 00:22:59,320
Speaker 2: it's all right. Is the FED fueling this? Like, is

479
00:22:59,400 --> 00:23:02,520
Speaker 2: the FED cutting cycle that we're anticipating in the looser

480
00:23:02,560 --> 00:23:05,920
Speaker 2: financial conditions that have already happened, Is that fueling any

481
00:23:05,920 --> 00:23:06,080
Speaker 2: of this?

482
00:23:06,880 --> 00:23:07,040
Speaker 6: Well?

483
00:23:07,080 --> 00:23:09,200
Speaker 5: I think the FED has been pretty clear, like, hey,

484
00:23:09,240 --> 00:23:12,240
Speaker 5: we we think if things progress, if we continue to

485
00:23:12,280 --> 00:23:15,440
Speaker 5: see broad based inflation, uh, you know, on target month

486
00:23:15,480 --> 00:23:18,400
Speaker 5: to month inflation, we could later this year we could

487
00:23:18,440 --> 00:23:21,000
Speaker 5: reduce our policy rate. That's what they're saying. The bond

488
00:23:21,080 --> 00:23:23,440
Speaker 5: market is the problem. It gets ahead of itself. Said,

489
00:23:23,480 --> 00:23:25,200
Speaker 5: oh yeah, I mean they're they're going to be cutting

490
00:23:25,240 --> 00:23:27,920
Speaker 5: six or seven times. That was the probably the easing

491
00:23:27,920 --> 00:23:30,800
Speaker 5: of financial conditions. I go to really blame the FED

492
00:23:30,840 --> 00:23:32,800
Speaker 5: for that. When I listened to cher Pale, when I

493
00:23:32,880 --> 00:23:35,640
Speaker 5: listened to Christopher Waller, I think I feared a really

494
00:23:35,680 --> 00:23:39,320
Speaker 5: measured story, which is, hey, this is not a slam dunk.

495
00:23:39,640 --> 00:23:43,120
Speaker 5: It's we're not declaring victory. We'll see how things progress

496
00:23:43,280 --> 00:23:46,240
Speaker 5: over the next few months. It was the bond market,

497
00:23:46,240 --> 00:23:46,880
Speaker 5: it was bond trader.

498
00:23:46,920 --> 00:23:51,080
Speaker 2: I blamed bomb, it's our Jerseys ball.

499
00:23:50,400 --> 00:23:53,560
Speaker 5: Someone else I know, I don't even I don't want

500
00:23:53,560 --> 00:23:54,560
Speaker 5: to name particular names.

501
00:23:54,600 --> 00:23:55,119
Speaker 8: No, I'm kidding.

502
00:23:55,119 --> 00:23:57,439
Speaker 6: I'm all right.

503
00:23:57,440 --> 00:23:59,720
Speaker 2: Great stuff. Really appreciate it. Thank you very much. Jeffrey

504
00:23:59,760 --> 00:24:02,560
Speaker 2: clevel and a chief economist over at Paydon and Regal.

505
00:24:02,720 --> 00:24:03,840
Speaker 2: Thank you very much.

506
00:24:05,400 --> 00:24:09,320
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

507
00:24:09,400 --> 00:24:12,440
Speaker 1: weekdays at ten am Eastern on Apple car Play and

508
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Speaker 1: Android Auto with the Bloomberg Business. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station.

510
00:24:19,280 --> 00:24:25,920
Speaker 1: Just say Alexa play Bloomberg eleven thirty.

511
00:24:24,000 --> 00:24:26,160
Speaker 2: Because it's me. Now, I'm gonna make Paul talk about

512
00:24:26,200 --> 00:24:30,280
Speaker 2: natural gas. Yes, So, Williams is one of the largest

513
00:24:30,320 --> 00:24:32,760
Speaker 2: natural gas pipeline movers. While oil and natural gas, it's

514
00:24:32,760 --> 00:24:35,840
Speaker 2: a midstream company that means the pipes, that moves the stuff.

515
00:24:36,160 --> 00:24:38,320
Speaker 2: It's one of the biggest in the entire country. Alan

516
00:24:38,440 --> 00:24:42,600
Speaker 2: Armstrong is president and CEO. Williams reports tomorrow. So we're

517
00:24:42,600 --> 00:24:44,840
Speaker 2: not going to ask about earnings, but we can go Macro.

518
00:24:44,920 --> 00:24:46,840
Speaker 2: With the stock up about eight and a half percent

519
00:24:47,240 --> 00:24:50,840
Speaker 2: over the last year. Alan, you're in d C. What

520
00:24:50,840 --> 00:24:51,600
Speaker 2: are you doing in DC?

521
00:24:53,240 --> 00:24:56,600
Speaker 8: Yeah, Alex, good morning and great to speak with you.

522
00:24:56,640 --> 00:25:00,080
Speaker 8: As always, we are in d C because we have

523
00:25:00,119 --> 00:25:03,119
Speaker 8: a combination of both our analyst day that we'll do

524
00:25:04,280 --> 00:25:08,040
Speaker 8: tomorrow as well as today we're doing a clean energy expo,

525
00:25:08,640 --> 00:25:14,880
Speaker 8: and we've got a collection of regulators, legislators here with us,

526
00:25:14,920 --> 00:25:18,480
Speaker 8: as well as a lot of the startups that are

527
00:25:18,480 --> 00:25:23,399
Speaker 8: in the technology business associated with reducing emissions in and

528
00:25:23,440 --> 00:25:27,400
Speaker 8: around our business, and so we're really trying to demonstrate

529
00:25:27,440 --> 00:25:31,119
Speaker 8: all that we are accomplishing in terms of reducing reducing

530
00:25:31,119 --> 00:25:34,520
Speaker 8: emissions around our business and kind of the power of

531
00:25:34,600 --> 00:25:38,560
Speaker 8: natural gas in its ability to reduce emissions around the world.

532
00:25:38,640 --> 00:25:40,679
Speaker 8: So it's a great opportunity to bring and.

533
00:25:40,680 --> 00:25:44,600
Speaker 6: We've got parties from both sides of the aisle here

534
00:25:44,640 --> 00:25:49,880
Speaker 6: with us, and a lot of the regulators and agencies

535
00:25:49,920 --> 00:25:52,120
Speaker 6: that we engage with on the energy front as well

536
00:25:52,119 --> 00:25:52,399
Speaker 6: with us.

537
00:25:52,560 --> 00:25:54,600
Speaker 2: So, Alan, I know from just going back and forth

538
00:25:54,600 --> 00:25:56,840
Speaker 2: with your company that this was on the schedule before

539
00:25:57,240 --> 00:26:00,320
Speaker 2: the Biden administration put a moratorium on LERG XP words

540
00:26:00,359 --> 00:26:04,240
Speaker 2: to non FTA countries in terms of new approval for projects.

541
00:26:05,040 --> 00:26:07,800
Speaker 2: How does this playing into the conversation? They say it's

542
00:26:07,800 --> 00:26:12,760
Speaker 2: an environmental impact, right, you're exactly talking about the environmental impact.

543
00:26:13,280 --> 00:26:14,000
Speaker 2: What's the convo?

544
00:26:16,040 --> 00:26:20,480
Speaker 8: Yeah, you know, we are certainly trying to draw awareness

545
00:26:20,560 --> 00:26:23,640
Speaker 8: of all that the US has to offer. I think

546
00:26:23,880 --> 00:26:27,880
Speaker 8: a lot of people forget that the number one reason

547
00:26:28,560 --> 00:26:32,399
Speaker 8: that we were able to meet our Paris climate accord

548
00:26:32,440 --> 00:26:35,040
Speaker 8: here in the US was on the backs of natural gas,

549
00:26:35,680 --> 00:26:38,119
Speaker 8: and we want to bring awareness to that. But we

550
00:26:38,200 --> 00:26:40,280
Speaker 8: also want to show, you know, one of the things

551
00:26:40,280 --> 00:26:42,040
Speaker 8: that we hear from what I would say is the

552
00:26:42,119 --> 00:26:46,880
Speaker 8: serious environmental opposition is to concern around fugitive methane emissions,

553
00:26:46,920 --> 00:26:49,280
Speaker 8: and that goes for L and G as well. And

554
00:26:49,480 --> 00:26:52,680
Speaker 8: you know, really it's not that difficult to reduce fugitive

555
00:26:52,720 --> 00:26:56,520
Speaker 8: methane emissions from our industry, and we're doing that with

556
00:26:56,600 --> 00:26:59,439
Speaker 8: some great new technologies as well. So it's really a

557
00:26:59,480 --> 00:27:03,200
Speaker 8: combination those things. But but ll G really is such

558
00:27:03,240 --> 00:27:06,399
Speaker 8: a powerful tool that the US really needs to unleash.

559
00:27:06,560 --> 00:27:09,760
Speaker 8: I think we see it as a very unfortunate political

560
00:27:09,840 --> 00:27:12,879
Speaker 8: move that really does stand in the way of progress

561
00:27:13,000 --> 00:27:16,320
Speaker 8: of the US being a bigger and bigger player in

562
00:27:16,840 --> 00:27:20,959
Speaker 8: helping reduce submissions around the world. Hopefully that's all it

563
00:27:21,080 --> 00:27:24,800
Speaker 8: is as a political move. But it's difficult to convince

564
00:27:25,520 --> 00:27:31,000
Speaker 8: our customers around the world and consumers around the world

565
00:27:31,320 --> 00:27:34,879
Speaker 8: to make long term obligations to LNG. You can't. You

566
00:27:34,880 --> 00:27:37,960
Speaker 8: don't just decide one year to use LNG. In the

567
00:27:38,000 --> 00:27:40,199
Speaker 8: next year to go back to cole. You have to

568
00:27:40,240 --> 00:27:45,040
Speaker 8: make big long term obligations on the capital side to

569
00:27:45,200 --> 00:27:49,080
Speaker 8: use LNG. And so it is pretty damning when our

570
00:27:49,119 --> 00:27:54,119
Speaker 8: administration makes it unclear about whether or not we really

571
00:27:54,160 --> 00:27:57,600
Speaker 8: are serious about continuing to provide our allies with natural

572
00:27:57,640 --> 00:27:58,560
Speaker 8: gas around the world.

573
00:27:58,720 --> 00:28:02,639
Speaker 4: So Alan, unlike Alex, I am not an expert on energy,

574
00:28:02,680 --> 00:28:06,960
Speaker 4: but my lay person understanding is, you know, natural gas

575
00:28:07,080 --> 00:28:12,600
Speaker 4: versus coal versus burning oil, that's a pretty good trade anywhere.

576
00:28:13,160 --> 00:28:17,040
Speaker 4: So what is the I guess the opposition. What are

577
00:28:17,080 --> 00:28:19,320
Speaker 4: some of the key arguments for the opposition to l G.

578
00:28:21,000 --> 00:28:24,200
Speaker 8: Yeah, you know, the two primary arguments have been out

579
00:28:24,240 --> 00:28:29,040
Speaker 8: there is one is fugitive methane emissions and the second

580
00:28:29,359 --> 00:28:33,760
Speaker 8: is what people perceive to be stranded assets. Assuming that

581
00:28:33,880 --> 00:28:37,280
Speaker 8: down the road we come up with lower costs, better

582
00:28:37,359 --> 00:28:44,640
Speaker 8: technologies as a way to replace spinning reserve power generation

583
00:28:44,760 --> 00:28:48,400
Speaker 8: capacity around the world and things like steel making, fertilizer,

584
00:28:48,560 --> 00:28:51,000
Speaker 8: all the things that we use natural gas for. So

585
00:28:51,280 --> 00:28:53,240
Speaker 8: to the degree that we come up with a better solution,

586
00:28:53,320 --> 00:28:55,320
Speaker 8: people are concerned in the wow, why are we spending

587
00:28:55,320 --> 00:28:57,920
Speaker 8: all this capital on this now when we're going to

588
00:28:57,960 --> 00:29:01,760
Speaker 8: come up with better technology. Here's the struggle with that

589
00:29:01,800 --> 00:29:05,160
Speaker 8: second argument. In twenty two and again in twenty three,

590
00:29:05,520 --> 00:29:09,440
Speaker 8: we hit record levels of coal consumption around the world.

591
00:29:09,800 --> 00:29:13,440
Speaker 6: Here in the US, gas is sorry.

592
00:29:13,480 --> 00:29:17,880
Speaker 8: Coal is two point three times more CO two emissions.

593
00:29:17,520 --> 00:29:18,520
Speaker 6: Than natural gas.

594
00:29:19,080 --> 00:29:22,200
Speaker 8: But the first issue I mentioned was the fugitive methane

595
00:29:22,200 --> 00:29:25,360
Speaker 8: emissions and the IEA. So this isn't This isn't the

596
00:29:25,440 --> 00:29:28,920
Speaker 8: US government, This is the IEA. The International Energy Administration

597
00:29:29,440 --> 00:29:34,600
Speaker 8: just came out with their Fugitive methane or their methane

598
00:29:34,600 --> 00:29:37,560
Speaker 8: emissions report for twenty two. It takes a long time

599
00:29:37,560 --> 00:29:41,440
Speaker 8: to compile all that information. But in twenty two, natural

600
00:29:41,480 --> 00:29:45,120
Speaker 8: gas was only six percent of the total methane emissions

601
00:29:45,520 --> 00:29:51,720
Speaker 8: throughout the world. Coal was seven percent, and oil was

602
00:29:51,760 --> 00:29:54,600
Speaker 8: eight percent. So even when it is the product, we're

603
00:29:54,640 --> 00:30:00,680
Speaker 8: moving primarily natural gas, methane is primarily natural gas. Even

604
00:30:00,720 --> 00:30:03,840
Speaker 8: with that, we're still the lowest amongst the fossil fuels

605
00:30:03,880 --> 00:30:08,720
Speaker 8: of fugitive methane emissions, and in total, only twenty one

606
00:30:08,760 --> 00:30:11,360
Speaker 8: percent of the total methane emissions around the world are

607
00:30:11,360 --> 00:30:15,000
Speaker 8: coming from fossil fuels, So we are doing a lot

608
00:30:15,040 --> 00:30:19,920
Speaker 8: to reduce methane emissions. Great players like Schineer on the

609
00:30:21,040 --> 00:30:25,720
Speaker 8: LNG front and like EQT on the natural gas production

610
00:30:25,840 --> 00:30:29,920
Speaker 8: front are making huge strides in reducing emissions around fugitive

611
00:30:29,920 --> 00:30:32,920
Speaker 8: methane emissions. So it's not rocket science. It's not that

612
00:30:33,040 --> 00:30:36,040
Speaker 8: hard to reduce fugitive methane emissions, and we're taking it

613
00:30:36,120 --> 00:30:38,280
Speaker 8: down very rapidly across the industry.

614
00:30:38,520 --> 00:30:41,120
Speaker 2: So if I also just look at the idea and

615
00:30:41,160 --> 00:30:43,240
Speaker 2: I realize your pipeline right, But just in terms of

616
00:30:43,240 --> 00:30:46,680
Speaker 2: the export issue, it is hard to think about why

617
00:30:46,680 --> 00:30:49,560
Speaker 2: would I approve a project now that will be there

618
00:30:49,600 --> 00:30:53,320
Speaker 2: for decades when in theory, in decades we should be

619
00:30:53,360 --> 00:30:56,840
Speaker 2: all using solar and wind. What's the argument against that?

620
00:30:57,960 --> 00:30:58,880
Speaker 6: Yeah, great question.

621
00:30:58,960 --> 00:31:01,520
Speaker 8: Aut Well, first of all, you know, we have to

622
00:31:01,600 --> 00:31:07,960
Speaker 8: have backup to our renewable power. We don't have that today.

623
00:31:08,760 --> 00:31:14,840
Speaker 8: The reserve capacity available from from wind is ten to

624
00:31:14,880 --> 00:31:16,880
Speaker 8: thirty percent. In other words, you can only count on

625
00:31:16,920 --> 00:31:19,520
Speaker 8: ten to thirty percent of that capacity. And as we

626
00:31:19,560 --> 00:31:22,560
Speaker 8: all know, there are plenty of times obviously when the

627
00:31:22,600 --> 00:31:24,600
Speaker 8: sun isn't shining, but there's also a lot of times

628
00:31:24,640 --> 00:31:27,800
Speaker 8: when the wind isn't blowing, and there's longer periods of times.

629
00:31:27,800 --> 00:31:31,160
Speaker 8: So we're talking about batteries today that are four hours,

630
00:31:32,320 --> 00:31:35,160
Speaker 8: and frankly, we just don't have the materials to be

631
00:31:35,200 --> 00:31:38,120
Speaker 8: able to even build out that. But four hours is

632
00:31:38,160 --> 00:31:40,840
Speaker 8: not anything I think people want to depend on that

633
00:31:40,880 --> 00:31:42,600
Speaker 8: the wind's going to start blowing again.

634
00:31:43,040 --> 00:31:45,680
Speaker 2: And even for the next forty years, Ellen, like in

635
00:31:45,720 --> 00:31:46,360
Speaker 2: forty years.

636
00:31:46,320 --> 00:31:51,160
Speaker 8: Even listen, if we come up with a better solution, fantastic.

637
00:31:52,040 --> 00:31:55,760
Speaker 8: These are commercial, These are commercial contracts that are being made.

638
00:31:55,800 --> 00:31:58,600
Speaker 8: It's not like the government or the public is the

639
00:31:58,640 --> 00:32:01,560
Speaker 8: one that is stranding the ass sets here. You know,

640
00:32:01,600 --> 00:32:05,560
Speaker 8: these are private investments. They're not subsidized investments. And so

641
00:32:05,920 --> 00:32:08,040
Speaker 8: if we're wrong about that and we come up with

642
00:32:08,120 --> 00:32:12,800
Speaker 8: solutions that are affordable and cleaner than great, we'll move

643
00:32:12,840 --> 00:32:16,200
Speaker 8: ahead to society and we'll move on. But to deny

644
00:32:16,760 --> 00:32:20,960
Speaker 8: the ability to reduce emissions right here, right now, while

645
00:32:21,000 --> 00:32:24,800
Speaker 8: we continue to grow coal use around the world, and

646
00:32:24,880 --> 00:32:28,160
Speaker 8: the US is the is and can be the low

647
00:32:28,200 --> 00:32:31,240
Speaker 8: cost exporter of natural gas around the world. Really just

648
00:32:31,280 --> 00:32:34,760
Speaker 8: doesn't make any sense because it is right. Were continuing

649
00:32:34,800 --> 00:32:38,320
Speaker 8: to grow missions around the world unfortunately. Yeah, and coal

650
00:32:38,560 --> 00:32:41,320
Speaker 8: generation is one of the primary reasons. And so we're

651
00:32:41,360 --> 00:32:43,920
Speaker 8: not against coming up. In fact, we're investing in all

652
00:32:43,960 --> 00:32:47,920
Speaker 8: kinds of new technologies ourselves, but they're not there today

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00:32:47,960 --> 00:32:50,720
Speaker 8: at scale to reduce submissions the way that natural gas

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00:32:50,720 --> 00:32:51,680
Speaker 8: can reduce emissions.

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Speaker 2: Alan, we really appreciate you taking the time. I know

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Speaker 2: it's a really busy day for you. I think energy

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Speaker 2: literacy is so important, So thank you so much. Alan Armstrong,

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Speaker 2: President and CEO of Williams. Also will get you back

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Speaker 2: after your earnings. And this is kind of the point, Paul,

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00:33:04,720 --> 00:33:08,760
Speaker 2: is that everyone can be right. I don't understand why

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00:33:08,760 --> 00:33:11,880
Speaker 2: this issue becomes so black and white sometimes because it's

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00:33:12,000 --> 00:33:14,080
Speaker 2: very difficult. This is gonna be very difficult. And you

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Speaker 2: look at country like India, right, you're gonna put a

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00:33:16,640 --> 00:33:19,440
Speaker 2: bunch of solar panels, like, I mean, how are you

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00:33:19,480 --> 00:33:21,920
Speaker 2: going to power that country coal? Right? So what are

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00:33:22,040 --> 00:33:25,120
Speaker 2: different options aside from coal? Having that conversation is quite interesting.

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Speaker 1: This is the Bloomberg Intelligence Podcast available on Apples, Spotify,

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00:33:30,280 --> 00:33:33,200
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