1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,880 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business app. 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:26,960 Speaker 1: us live on YouTube. 6 00:00:27,160 --> 00:00:29,840 Speaker 2: Let's go to Galit Alstein. She is a Bloomberg News reporter. 7 00:00:29,880 --> 00:00:32,919 Speaker 2: She is based in Tel Aviv, Ghale. Thanks so much 8 00:00:32,960 --> 00:00:36,479 Speaker 2: for joining us here. What's the feeling in Israel today 9 00:00:36,520 --> 00:00:38,640 Speaker 2: as these hostages come home? 10 00:00:38,880 --> 00:00:42,199 Speaker 3: I think for almost everyone in Israel, this is a 11 00:00:42,320 --> 00:00:45,760 Speaker 3: very happy day. We've been seeing tens of thousands of 12 00:00:45,800 --> 00:00:50,519 Speaker 3: Israelis flock since early this morning to Tel Aviv's Hostage Square, 13 00:00:50,920 --> 00:00:54,520 Speaker 3: which has become a sort of gathering point over the 14 00:00:54,560 --> 00:00:57,080 Speaker 3: past two years for those who have been advocating for 15 00:00:57,120 --> 00:01:00,960 Speaker 3: the release of the hostages. And it was quite a 16 00:01:01,000 --> 00:01:05,160 Speaker 3: sight today seeing about, like I said, sixty seventy thousand 17 00:01:05,160 --> 00:01:08,800 Speaker 3: people in the square and then all the surrounding streets 18 00:01:09,240 --> 00:01:12,560 Speaker 3: with a big stage that Tom kept broadcasting the images 19 00:01:12,600 --> 00:01:16,000 Speaker 3: of the hostages coming out. People were chanting and clapping 20 00:01:16,040 --> 00:01:20,560 Speaker 3: their hands and singing and cheering, and it was indeed 21 00:01:20,560 --> 00:01:23,480 Speaker 3: a very happy day and I think a sense of 22 00:01:23,560 --> 00:01:25,800 Speaker 3: relief for a lot of Israelis here. 23 00:01:26,360 --> 00:01:26,640 Speaker 1: Glik. 24 00:01:26,680 --> 00:01:29,000 Speaker 4: There was a moment in that speech when President Trump 25 00:01:29,560 --> 00:01:31,880 Speaker 4: was talking to Prime Minister Netniahoo directly and he said 26 00:01:31,880 --> 00:01:33,959 Speaker 4: he had a lot of guts for knowing when to 27 00:01:34,000 --> 00:01:36,640 Speaker 4: stop the fighting and for stopping the fighting when he did. 28 00:01:37,480 --> 00:01:38,840 Speaker 4: Just get us up to speed here on what these 29 00:01:38,920 --> 00:01:41,440 Speaker 4: last few days have been like. We had President Trump 30 00:01:41,520 --> 00:01:45,399 Speaker 4: unveiling this peace plan a couple of weeks ago. The 31 00:01:45,440 --> 00:01:47,040 Speaker 4: devil is in the details, of course, we were talking 32 00:01:47,040 --> 00:01:48,520 Speaker 4: about that just a few moments ago. What's going to 33 00:01:48,520 --> 00:01:51,680 Speaker 4: happen here in Egypt and going forward, But just explain 34 00:01:51,760 --> 00:01:54,120 Speaker 4: what President Trump was able to do, how he was 35 00:01:54,160 --> 00:01:56,800 Speaker 4: able to convince Prime Minister net Yahoo to stop that 36 00:01:56,800 --> 00:01:58,800 Speaker 4: assault on Gaza City that was underway. 37 00:02:00,240 --> 00:02:03,880 Speaker 3: Yeah, so we to be very honest and transparent. I 38 00:02:03,920 --> 00:02:06,120 Speaker 3: think we only know like part of the question, the 39 00:02:06,160 --> 00:02:10,680 Speaker 3: answer to that question at this stage. But overall, you know, 40 00:02:10,760 --> 00:02:15,400 Speaker 3: Natan Yao has generally insisted that Israel cannot stop fighting 41 00:02:15,400 --> 00:02:18,000 Speaker 3: in Gaza and cannot stop fighting Hamas until it is 42 00:02:18,200 --> 00:02:22,840 Speaker 3: totally defeated, until it's completely out of power, and until 43 00:02:22,960 --> 00:02:27,000 Speaker 3: all of its military capabilities are taken out. And what 44 00:02:27,160 --> 00:02:31,960 Speaker 3: happened here is that Trump, I think, along you know, 45 00:02:32,040 --> 00:02:35,880 Speaker 3: with Im, Steve Whitkoff and Jared Kushner, they managed to 46 00:02:35,960 --> 00:02:38,720 Speaker 3: do a few things. On the one hand, they managed 47 00:02:39,000 --> 00:02:44,440 Speaker 3: to convince Hamas by themselves, through mediators, that to give 48 00:02:44,520 --> 00:02:46,840 Speaker 3: up all the hostages at once, at least all the 49 00:02:46,880 --> 00:02:50,520 Speaker 3: living hostages, because there are still twenty eight dead hostages 50 00:02:50,560 --> 00:02:53,560 Speaker 3: that remain in Gaza, and we understand that only about 51 00:02:53,639 --> 00:02:56,440 Speaker 3: four of them are going to be brought back today. 52 00:02:57,360 --> 00:02:59,959 Speaker 3: So that's one thing they managed to do. But in terms, 53 00:03:00,480 --> 00:03:04,080 Speaker 3: what Hamas wanted was guaranteed that the war will in 54 00:03:04,120 --> 00:03:07,240 Speaker 3: fact end after that happens, and that Israel doesn't just 55 00:03:07,280 --> 00:03:09,840 Speaker 3: get all the hostages back and then goes back to fighting. 56 00:03:10,360 --> 00:03:15,240 Speaker 3: And you know, Trump has basically personally guaranteed that this 57 00:03:15,280 --> 00:03:17,560 Speaker 3: will happen and that the war will end. And we've 58 00:03:17,600 --> 00:03:20,080 Speaker 3: heard him say multiple times today on the way to 59 00:03:20,200 --> 00:03:22,440 Speaker 3: Israel and Air Force one when he came to the 60 00:03:22,480 --> 00:03:26,120 Speaker 3: Israeli parliament, that this is the end of war and 61 00:03:26,160 --> 00:03:29,600 Speaker 3: that the US will make sure that's what happens. So 62 00:03:29,639 --> 00:03:31,639 Speaker 3: I think these are, you know, the two things that 63 00:03:32,360 --> 00:03:35,520 Speaker 3: made a difference. You know, the biggest sticking point moving 64 00:03:35,600 --> 00:03:39,760 Speaker 3: forward will be whether Hamas some agrees to disarm. Trump's 65 00:03:39,760 --> 00:03:42,800 Speaker 3: twenty point Plans says that that's what Hamas has to do. 66 00:03:42,840 --> 00:03:45,600 Speaker 3: Hamas hasn't agreed to do that yet, and that's what 67 00:03:45,720 --> 00:03:49,560 Speaker 3: Israeli system. So we'll have to see how that plays out. 68 00:03:49,640 --> 00:03:52,840 Speaker 3: But the sense is that the war, at least as 69 00:03:52,880 --> 00:03:55,640 Speaker 3: if we as we've known it in the past two years, 70 00:03:56,040 --> 00:03:59,960 Speaker 3: has in fact come to an end that sort of 71 00:04:00,120 --> 00:04:00,920 Speaker 3: looks like today. 72 00:04:01,560 --> 00:04:03,480 Speaker 2: Glee, thank you so much for joining us. Really appreciate 73 00:04:03,520 --> 00:04:07,960 Speaker 2: your reporting from Israel. Gleed Alstein Bloomberg News in our 74 00:04:08,000 --> 00:04:09,760 Speaker 2: Tel Aviv euro Stay with us. 75 00:04:09,840 --> 00:04:12,320 Speaker 5: More from Bloomberg Surveillance coming up after this. 76 00:04:18,480 --> 00:04:22,080 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 77 00:04:22,160 --> 00:04:25,279 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 78 00:04:25,400 --> 00:04:28,799 Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app, 79 00:04:28,960 --> 00:04:30,520 Speaker 1: or watch us live on YouTube. 80 00:04:30,600 --> 00:04:33,680 Speaker 2: Let's check out with Lori Calvacina ahead of US equity 81 00:04:33,720 --> 00:04:38,279 Speaker 2: strategy for RBC Capital Markets. Laurie, it's kind of seems 82 00:04:38,279 --> 00:04:40,880 Speaker 2: to be trade as one of the drivers of kind 83 00:04:40,920 --> 00:04:43,960 Speaker 2: of market sentiment these days. We got maybe a little 84 00:04:44,000 --> 00:04:46,480 Speaker 2: bit of a softening of tone from President Trump as 85 00:04:46,520 --> 00:04:48,479 Speaker 2: it relates to China, and I guess that's what the 86 00:04:48,520 --> 00:04:50,080 Speaker 2: market likes to see here. What are you making of 87 00:04:50,160 --> 00:04:51,760 Speaker 2: today's pre market action? 88 00:04:52,960 --> 00:04:54,760 Speaker 6: Well, thanks for having me, Paul. Look, I mean, it's 89 00:04:54,760 --> 00:04:57,040 Speaker 6: not unexpected to get a bit of a bounce right 90 00:04:57,120 --> 00:04:59,279 Speaker 6: after kind of the big drop that we saw on Friday. 91 00:04:59,480 --> 00:05:01,520 Speaker 6: I think it's gon to be really interesting to see 92 00:05:01,520 --> 00:05:03,600 Speaker 6: how the S and P five hundred trades today. The 93 00:05:03,680 --> 00:05:06,160 Speaker 6: kids are out of school in New York City, I'm 94 00:05:06,160 --> 00:05:09,919 Speaker 6: guessing other parts of the country as well. They're thankfully 95 00:05:09,920 --> 00:05:12,719 Speaker 6: not running around here for me, but the you know, 96 00:05:12,800 --> 00:05:15,320 Speaker 6: it is a quiet day on Wall Street, right, so 97 00:05:15,440 --> 00:05:17,280 Speaker 6: let's see what we get in terms of the price action. 98 00:05:17,400 --> 00:05:20,359 Speaker 6: But I think tomorrow is really going to be, you know, 99 00:05:20,440 --> 00:05:22,159 Speaker 6: kind of the day where I think we start to 100 00:05:22,200 --> 00:05:25,000 Speaker 6: hear a bit more from folks, you know, in terms 101 00:05:25,040 --> 00:05:27,840 Speaker 6: of how they're digesting this. And look, i'll tell you, Paul, 102 00:05:28,040 --> 00:05:30,440 Speaker 6: as I think back over the last three weeks i've 103 00:05:30,480 --> 00:05:32,960 Speaker 6: been in the UK, I've been running around the US 104 00:05:33,080 --> 00:05:35,200 Speaker 6: to more cities than I can count and keep track 105 00:05:35,240 --> 00:05:38,120 Speaker 6: of at this point, and I heard a whole lot 106 00:05:38,160 --> 00:05:41,720 Speaker 6: of things about people that they were worried about valuations, 107 00:05:41,800 --> 00:05:45,040 Speaker 6: AI capex, right cut pricing got pulled forward in the 108 00:05:45,040 --> 00:05:49,120 Speaker 6: stock market, labor inflation, you know, is that going to 109 00:05:49,200 --> 00:05:50,839 Speaker 6: start to percolate soon or are we going to see 110 00:05:50,839 --> 00:05:53,520 Speaker 6: more of a growth response to tariffs in the market. 111 00:05:53,640 --> 00:05:55,800 Speaker 6: But the one thing I was not hearing about was 112 00:05:55,880 --> 00:05:58,839 Speaker 6: that things could you know, start escalating again with China. 113 00:05:58,960 --> 00:06:01,480 Speaker 6: So I think what we learned on Friday was that 114 00:06:01,800 --> 00:06:04,279 Speaker 6: a fair amount of you know, we're on a good path, 115 00:06:04,720 --> 00:06:06,880 Speaker 6: things are headed in the right direction. That was really 116 00:06:07,000 --> 00:06:09,200 Speaker 6: kind of a firm underpinning of this market. So we 117 00:06:09,240 --> 00:06:10,520 Speaker 6: need to see how that plays out. 118 00:06:11,360 --> 00:06:15,200 Speaker 4: It seems like quarter after quarter, Laurie, going into earning season, 119 00:06:15,320 --> 00:06:18,240 Speaker 4: financials are held up as a bell weather is something 120 00:06:18,240 --> 00:06:19,800 Speaker 4: that's going to tell us about the health of the market. 121 00:06:19,839 --> 00:06:21,560 Speaker 4: It's going to give us some insight into the economy 122 00:06:21,560 --> 00:06:24,440 Speaker 4: as well. So tomorrow we've got JP Morgan Goldben Sachs, 123 00:06:24,440 --> 00:06:26,560 Speaker 4: City Group on the heels of that, We've got Bank 124 00:06:26,600 --> 00:06:31,320 Speaker 4: of America and Morgan Stanley on Wednesday. In this odd economy, 125 00:06:31,400 --> 00:06:33,960 Speaker 4: in this moment, what are those particular companies going to 126 00:06:34,040 --> 00:06:34,400 Speaker 4: tell us? 127 00:06:35,760 --> 00:06:37,719 Speaker 6: So, you know what, we'll see what they have to say. 128 00:06:37,760 --> 00:06:41,240 Speaker 6: Earnings revisions have been pretty resilient there. So my guess 129 00:06:41,279 --> 00:06:43,040 Speaker 6: is that we're going to have, you know, some pretty 130 00:06:43,040 --> 00:06:44,839 Speaker 6: good messaging coming out of them, but we'll have to 131 00:06:44,880 --> 00:06:48,360 Speaker 6: see the reality though. You're common about the bell weather. 132 00:06:48,400 --> 00:06:50,400 Speaker 6: This was something we wrote about in our weekly today. 133 00:06:50,440 --> 00:06:52,640 Speaker 6: And if I go back the last couple reporting seasons, 134 00:06:52,880 --> 00:06:54,880 Speaker 6: you know, I could summarize, you know, what we've been 135 00:06:54,920 --> 00:06:57,360 Speaker 6: hearing from the banks, and especially the Big Bank says, 136 00:06:57,560 --> 00:07:00,000 Speaker 6: don't worry about the consumer. Everything's fine, the stats all 137 00:07:00,080 --> 00:07:02,800 Speaker 6: look good. You know, we're really you know, proud of 138 00:07:02,800 --> 00:07:05,680 Speaker 6: our consumers for being more choiceful in their purchases. 139 00:07:06,320 --> 00:07:07,799 Speaker 5: But don't worry. Things aren't cracking. 140 00:07:08,160 --> 00:07:10,840 Speaker 6: And that's that's not wrong, right, I mean, that's what 141 00:07:10,920 --> 00:07:11,920 Speaker 6: they're seeing in the data. 142 00:07:12,000 --> 00:07:13,120 Speaker 5: That's one perspective. 143 00:07:13,480 --> 00:07:15,640 Speaker 6: But the problem is that you have a lot of 144 00:07:15,640 --> 00:07:18,280 Speaker 6: people in the financial community that go around saying that 145 00:07:18,400 --> 00:07:21,280 Speaker 6: as evidence of there's nothing to worry about. And if 146 00:07:21,320 --> 00:07:23,800 Speaker 6: you actually go and listen to the consumer companies who 147 00:07:23,840 --> 00:07:26,000 Speaker 6: have the boots on the ground, feel you know, there's 148 00:07:26,040 --> 00:07:28,880 Speaker 6: some really you know, not troubling. That's not quite the 149 00:07:28,880 --> 00:07:30,840 Speaker 6: word I want to use, but there are some problems. 150 00:07:31,160 --> 00:07:33,600 Speaker 6: And so for example, what we've noticed in the recent 151 00:07:33,640 --> 00:07:36,840 Speaker 6: consumer companies kind of those late cycle off cycle reporters, 152 00:07:36,880 --> 00:07:38,320 Speaker 6: kind of that came at the last tail end of 153 00:07:38,320 --> 00:07:40,920 Speaker 6: the reporting season. They were talking not just about the 154 00:07:40,960 --> 00:07:43,880 Speaker 6: low income consumer being stressed, but the middle income consumer 155 00:07:43,920 --> 00:07:45,920 Speaker 6: being stressed. There was one company over the last few 156 00:07:45,920 --> 00:07:49,120 Speaker 6: weeks that said they were seeing stressed in the consumer worldwide. 157 00:07:49,120 --> 00:07:51,920 Speaker 6: We had another company that was talking about how socioeconomic 158 00:07:51,960 --> 00:07:56,080 Speaker 6: issues are pressuring consumers across cohorts. So I think that 159 00:07:56,160 --> 00:07:58,240 Speaker 6: we really need to take the financials with a grain 160 00:07:58,280 --> 00:08:00,800 Speaker 6: of salt. It's an important perspective, it's one that we 161 00:08:00,840 --> 00:08:03,560 Speaker 6: absolutely want to have and find valuable. But at the 162 00:08:03,560 --> 00:08:05,520 Speaker 6: same time, they're not able to give us the full 163 00:08:05,560 --> 00:08:08,120 Speaker 6: picture because only the consumer companies are really able to 164 00:08:08,120 --> 00:08:10,880 Speaker 6: tell us about the composition of the spend under the surface. 165 00:08:11,640 --> 00:08:15,440 Speaker 2: So, Laurie, given that earnings are kicking off here, let's 166 00:08:15,440 --> 00:08:17,840 Speaker 2: put that in context of valuation. Here, what are the 167 00:08:17,840 --> 00:08:20,400 Speaker 2: discussions you're having with your clients these days about valuation 168 00:08:20,920 --> 00:08:21,760 Speaker 2: across the market. 169 00:08:22,760 --> 00:08:26,160 Speaker 6: Everyone's worried, everyone's got sticker shock. And if you just 170 00:08:26,200 --> 00:08:28,600 Speaker 6: look at our charts on just say the SMP five 171 00:08:28,680 --> 00:08:30,960 Speaker 6: hundred market cap weighted PE you can do the same 172 00:08:30,960 --> 00:08:33,280 Speaker 6: thing on the Nasdaq one hundred, either cap weighted or 173 00:08:33,280 --> 00:08:35,280 Speaker 6: equal weighted. And we also look at the top ten 174 00:08:35,360 --> 00:08:37,160 Speaker 6: names in the S and P five hundred, and you've 175 00:08:37,200 --> 00:08:40,959 Speaker 6: basically got forward pe levels that are sitting in line 176 00:08:41,080 --> 00:08:44,000 Speaker 6: with the recent highs. Not necessarily tech bubble highs, not 177 00:08:44,040 --> 00:08:47,240 Speaker 6: necessarily all time highs, but highs that in recent years 178 00:08:47,280 --> 00:08:50,200 Speaker 6: have been difficult for the market to move past. So 179 00:08:50,240 --> 00:08:53,360 Speaker 6: you're not getting any valuation expansion in this market, and 180 00:08:53,440 --> 00:08:55,720 Speaker 6: I think that's something you know, the bottom up stock 181 00:08:55,760 --> 00:08:58,120 Speaker 6: pickers I talked to Frankly are picking up on and 182 00:08:58,160 --> 00:08:59,839 Speaker 6: I think there's somewhat alarmed at some of the levels 183 00:08:59,840 --> 00:09:03,120 Speaker 6: that they're scene in some of their portfolios. So I 184 00:09:03,160 --> 00:09:05,959 Speaker 6: do think that earnings are really the big driver here, 185 00:09:06,040 --> 00:09:08,320 Speaker 6: and we have seen a fade in earning sentiment. Now 186 00:09:08,360 --> 00:09:09,959 Speaker 6: that doesn't mean earnings are going to be a disaster, 187 00:09:10,360 --> 00:09:13,320 Speaker 6: but the big pop in earning surprises that we got 188 00:09:13,320 --> 00:09:15,560 Speaker 6: in the last reporting season, I don't think that we're 189 00:09:15,559 --> 00:09:16,559 Speaker 6: set up to repeat that. 190 00:09:17,400 --> 00:09:18,959 Speaker 4: Paul, you weren't here. I was filming in for you. 191 00:09:19,080 --> 00:09:20,840 Speaker 4: Laurie was on, and I brought up the fact that 192 00:09:20,880 --> 00:09:23,960 Speaker 4: it seemed like analyst after Analysts and strategist after Strategists 193 00:09:24,360 --> 00:09:27,000 Speaker 4: was touting how this was a moment for small caps, 194 00:09:27,000 --> 00:09:29,600 Speaker 4: and I asked Laurie if she agreed with that, and 195 00:09:29,640 --> 00:09:32,000 Speaker 4: Laurie rightly brought out her CV and touted her bona 196 00:09:32,040 --> 00:09:35,920 Speaker 4: fides when it comes to her experience analyzing small caps 197 00:09:36,080 --> 00:09:39,520 Speaker 4: in her previous life, and she was skeptical. I think 198 00:09:39,520 --> 00:09:41,599 Speaker 4: I could say about the prospects for small caps and 199 00:09:41,640 --> 00:09:43,080 Speaker 4: I would invite her to take a bit of a 200 00:09:43,160 --> 00:09:46,200 Speaker 4: victory lap here, Laurie, what is your sense of where 201 00:09:46,240 --> 00:09:47,679 Speaker 4: small caps are head and what does that tell you 202 00:09:47,720 --> 00:09:48,880 Speaker 4: about the market more broadly? 203 00:09:50,040 --> 00:09:52,240 Speaker 6: Well, look, David, I mean I always describe small caps 204 00:09:52,240 --> 00:09:54,400 Speaker 6: as my first professional child. So there's no one more 205 00:09:54,480 --> 00:09:56,640 Speaker 6: than me who wants them to succeed and wants them 206 00:09:56,640 --> 00:09:58,240 Speaker 6: to have that moment in the sun, and wants them 207 00:09:58,240 --> 00:10:01,440 Speaker 6: to have that leadership shift. Frankly, you know, I felt 208 00:10:01,440 --> 00:10:03,280 Speaker 6: a little bit like I was shouting into the abyss 209 00:10:03,360 --> 00:10:05,400 Speaker 6: over the last few months while the street was just 210 00:10:05,480 --> 00:10:08,720 Speaker 6: going bananas on talking about small caps and calling for 211 00:10:08,760 --> 00:10:11,439 Speaker 6: the beginning of this big outperformance cycle. And based on 212 00:10:11,480 --> 00:10:13,840 Speaker 6: what I'm seeing in the recent trading data, it looks like, 213 00:10:14,240 --> 00:10:16,000 Speaker 6: you know, it's kind of fizzled out once again. And 214 00:10:16,040 --> 00:10:19,040 Speaker 6: that's not to say there's not incremental upside and absolute terms, 215 00:10:19,040 --> 00:10:20,880 Speaker 6: but we're no longer seeing this part of the market 216 00:10:21,000 --> 00:10:24,280 Speaker 6: outperform the SMP or outperform the Nasdaq one hundred. It 217 00:10:24,280 --> 00:10:26,160 Speaker 6: looks like it may have just been another rate cut 218 00:10:26,200 --> 00:10:28,880 Speaker 6: bet that fizzled out pretty quickly, you know. 219 00:10:29,000 --> 00:10:29,520 Speaker 5: I think as we. 220 00:10:29,559 --> 00:10:31,800 Speaker 6: Kind of head into earning season, one of the interesting 221 00:10:31,800 --> 00:10:34,280 Speaker 6: things on small caps that's been coming up recently is 222 00:10:34,679 --> 00:10:37,960 Speaker 6: whatever challenges they're out there, you know, whether it's you know, 223 00:10:38,160 --> 00:10:40,720 Speaker 6: tariffs for example, back when we had the tight labor 224 00:10:40,800 --> 00:10:44,440 Speaker 6: market post COVID, small caps just have a difficult time 225 00:10:44,800 --> 00:10:48,000 Speaker 6: managing around those challenges relative to their big cap companies. 226 00:10:48,360 --> 00:10:49,840 Speaker 6: So that's one of the things I'm going to be 227 00:10:49,840 --> 00:10:52,079 Speaker 6: looking for in this reporting season is to see how 228 00:10:52,080 --> 00:10:55,160 Speaker 6: small caps are managing through relative to their big cap counterparts. 229 00:10:55,800 --> 00:10:59,760 Speaker 2: So, Laurie, given that backdrop, what screens well for you, 230 00:11:00,200 --> 00:11:02,320 Speaker 2: I'm not sure if you do it by sector or 231 00:11:02,360 --> 00:11:04,800 Speaker 2: by factor, something jumping out of you, guys that kind 232 00:11:04,800 --> 00:11:05,560 Speaker 2: of gets your interest. 233 00:11:06,480 --> 00:11:08,960 Speaker 6: So we mostly focus on sectors, and we continue to 234 00:11:09,040 --> 00:11:11,319 Speaker 6: like the financial sector. You know, Frankly, if we get 235 00:11:11,320 --> 00:11:13,120 Speaker 6: a pullback in the market, they may not, you know, 236 00:11:13,160 --> 00:11:15,560 Speaker 6: sort of hold up better on the way down. They 237 00:11:15,600 --> 00:11:19,000 Speaker 6: are cyclical in nature, but we're not really concerned about that. 238 00:11:19,040 --> 00:11:20,600 Speaker 6: What we've said is we like them on a six 239 00:11:20,640 --> 00:11:23,120 Speaker 6: to twelve month view, so as there is incremental weakness 240 00:11:23,120 --> 00:11:24,880 Speaker 6: on a relative basis in a short term, we'd still 241 00:11:24,960 --> 00:11:27,960 Speaker 6: use that as a buying opportunity. Earnings revisions have been 242 00:11:28,080 --> 00:11:30,800 Speaker 6: very resilient relative to other sectors. We're basically seeing the 243 00:11:30,880 --> 00:11:33,920 Speaker 6: rate of upward revisions fade for most sectors in the 244 00:11:33,960 --> 00:11:37,079 Speaker 6: S and P five hundred x. Technology Financials has had 245 00:11:37,080 --> 00:11:38,360 Speaker 6: a little bit of a fade, but it's kind of 246 00:11:38,360 --> 00:11:42,240 Speaker 6: paled in comparison to what we've seen elsewhere. Banks, consumer finance, 247 00:11:42,640 --> 00:11:46,079 Speaker 6: insurance all screen well on our valuation in Earning's work, and. 248 00:11:46,080 --> 00:11:47,080 Speaker 5: I didn't upgrade it. 249 00:11:47,120 --> 00:11:49,320 Speaker 6: But one of the things we have been talking about 250 00:11:49,360 --> 00:11:51,839 Speaker 6: in recent reports, and we actually said this specifically in 251 00:11:51,880 --> 00:11:54,600 Speaker 6: the weekly we put out this morning, is that healthcare 252 00:11:54,679 --> 00:11:56,800 Speaker 6: is starting to look a bit more interesting, especially if 253 00:11:56,840 --> 00:11:59,280 Speaker 6: you think there's a market pullback that's already started, or 254 00:11:59,320 --> 00:12:02,280 Speaker 6: maybe on the We are neutral all four of the 255 00:12:02,320 --> 00:12:05,360 Speaker 6: defensive sectors, but healthcare's one that's been coming up in 256 00:12:05,400 --> 00:12:08,880 Speaker 6: conversation recently. Valuations look good, Earnings revisions have been a 257 00:12:08,920 --> 00:12:11,160 Speaker 6: touch more resilient than other sectors, and the flows look 258 00:12:11,160 --> 00:12:13,560 Speaker 6: pretty good. Policy risk is still a big overhang, but 259 00:12:13,600 --> 00:12:16,319 Speaker 6: we've had some developments on that, so maybe investors will 260 00:12:16,360 --> 00:12:18,160 Speaker 6: be able to wrap their heads around that a little 261 00:12:18,160 --> 00:12:19,400 Speaker 6: bit better than they have in the past. 262 00:12:19,520 --> 00:12:22,360 Speaker 4: Laurie very quickly here. I'm curious what your processes as 263 00:12:22,400 --> 00:12:24,720 Speaker 4: we get into earning season in earnest, and I know 264 00:12:24,800 --> 00:12:27,080 Speaker 4: a lot of that involves you kind of going through 265 00:12:28,120 --> 00:12:31,920 Speaker 4: call transcripts looking for phrases that stand out. Paul asked 266 00:12:31,960 --> 00:12:34,840 Speaker 4: about tariffs, I asked, he asked about valuations as well. 267 00:12:34,880 --> 00:12:36,199 Speaker 4: What are you going to learn from those calls, do 268 00:12:36,240 --> 00:12:37,360 Speaker 4: you think, or what are you hoping to learn from 269 00:12:37,360 --> 00:12:39,040 Speaker 4: those calls with executives here in the weeks ahead. 270 00:12:39,960 --> 00:12:41,880 Speaker 6: So look, we do use tools, you know, sort of 271 00:12:41,960 --> 00:12:44,480 Speaker 6: help point us in the right places and earning's call transcripts, 272 00:12:44,520 --> 00:12:46,120 Speaker 6: but a lot of that's done after the fact. My 273 00:12:46,200 --> 00:12:48,560 Speaker 6: team we like to read top to bottom and we 274 00:12:48,600 --> 00:12:51,160 Speaker 6: do speed read, but we tend to divide up different sectors. 275 00:12:51,240 --> 00:12:53,360 Speaker 6: We have some knowledge that we've built up over time 276 00:12:53,400 --> 00:12:56,080 Speaker 6: of which companies tend to be more insightful than others, 277 00:12:56,240 --> 00:12:58,199 Speaker 6: and we look at the price action frankly to figure 278 00:12:58,200 --> 00:13:01,080 Speaker 6: out what transcripts we want to focus on. I'm really 279 00:13:01,120 --> 00:13:03,719 Speaker 6: curious to know more about inventory, so how much pre 280 00:13:03,800 --> 00:13:06,840 Speaker 6: tiff inventories are companies still sitting on. Another thing I 281 00:13:06,880 --> 00:13:09,320 Speaker 6: really want to understand in both the corporate and consumer 282 00:13:09,360 --> 00:13:12,560 Speaker 6: world is how much demand was or frankly, was not, 283 00:13:12,679 --> 00:13:14,920 Speaker 6: pulled forward from the back half of the year into 284 00:13:14,920 --> 00:13:18,480 Speaker 6: the second quarter as companies and consumers were trying to get. 285 00:13:18,360 --> 00:13:19,200 Speaker 5: Ahead of tariffs. 286 00:13:19,360 --> 00:13:21,800 Speaker 6: I don't think we got good indications about either of 287 00:13:21,840 --> 00:13:24,520 Speaker 6: those in the last reporting seasons. Companies were a bit 288 00:13:24,600 --> 00:13:27,319 Speaker 6: vague analysts. Frankly, I don't think we're pushing hard enough 289 00:13:27,360 --> 00:13:29,640 Speaker 6: to get answers to those questions. And on the issue 290 00:13:29,640 --> 00:13:31,720 Speaker 6: of pull forward, a lot of companies said they also 291 00:13:31,800 --> 00:13:34,280 Speaker 6: just they couldn't quite tell yet. So I think those 292 00:13:34,280 --> 00:13:36,800 Speaker 6: are some of my big questions. I'm also curious about 293 00:13:36,840 --> 00:13:40,760 Speaker 6: twenty twenty six. So far, companies are deferring, declining to 294 00:13:40,800 --> 00:13:43,680 Speaker 6: answer when asked about twenty twenty six tariff impacts. But 295 00:13:43,760 --> 00:13:45,320 Speaker 6: any clues we can get there I think are going 296 00:13:45,400 --> 00:13:45,959 Speaker 6: to be helpful. 297 00:13:46,320 --> 00:13:47,959 Speaker 2: Laurie, thank you so much for joining us. We always 298 00:13:47,960 --> 00:13:50,359 Speaker 2: appreciate getting a few minutes of your time, Lorie Cavalcina, 299 00:13:50,679 --> 00:13:55,280 Speaker 2: she said of a US equity strategy for OURBC capital markets, 300 00:13:55,320 --> 00:13:57,559 Speaker 2: and we appreciate getting some time from. 301 00:13:57,440 --> 00:14:00,240 Speaker 5: LORI stay with us. More from Bloomberg Surveillance coming up 302 00:14:00,520 --> 00:14:01,000 Speaker 5: after this. 303 00:14:07,160 --> 00:14:10,760 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live 304 00:14:10,800 --> 00:14:13,960 Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on 305 00:14:14,080 --> 00:14:17,720 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 306 00:14:17,880 --> 00:14:19,240 Speaker 1: watch us live on YouTube. 307 00:14:19,320 --> 00:14:21,880 Speaker 2: Let's talk about the residential real estate market here. Sma 308 00:14:22,040 --> 00:14:25,760 Speaker 2: joins here. She's the chief economist for Totality. She joins 309 00:14:25,800 --> 00:14:30,200 Speaker 2: us here, some of the the big issue in residential 310 00:14:30,200 --> 00:14:34,520 Speaker 2: real estate is just affordability, or the lack thereof. Is 311 00:14:34,560 --> 00:14:37,880 Speaker 2: there a solution to this affordability issue? I think about 312 00:14:37,920 --> 00:14:39,960 Speaker 2: the folks in their late twenties, early thirties looking to 313 00:14:39,960 --> 00:14:40,480 Speaker 2: buy a house. 314 00:14:41,200 --> 00:14:42,120 Speaker 5: That's tough out there. 315 00:14:43,720 --> 00:14:45,800 Speaker 7: Yeah, it's very tough. Well, first of all, thanks for 316 00:14:45,800 --> 00:14:49,320 Speaker 7: having me. I'm also happy to be here today. You know, 317 00:14:49,440 --> 00:14:52,880 Speaker 7: it's really a lot it is right now about mortgage rates, 318 00:14:53,160 --> 00:14:56,240 Speaker 7: and mortgage rates have retreated from recent highs, they are 319 00:14:56,240 --> 00:14:59,000 Speaker 7: now averaging between six and a quarter and six point 320 00:14:59,120 --> 00:15:02,080 Speaker 7: four for thirty years fixed, and that is the lowest 321 00:15:02,520 --> 00:15:06,040 Speaker 7: in about a year, which means that affordability is that 322 00:15:06,160 --> 00:15:08,800 Speaker 7: it's best now that it's been in over two and 323 00:15:08,880 --> 00:15:13,280 Speaker 7: a half years. So affordability is improving, and honestly, in 324 00:15:13,320 --> 00:15:16,880 Speaker 7: some markets you do have quite a bit, relatively quite 325 00:15:16,880 --> 00:15:19,840 Speaker 7: a bit more affordability than than other markets. So in Midwest, 326 00:15:19,920 --> 00:15:25,040 Speaker 7: for example, and also parts of Northeast, it's it is 327 00:15:25,440 --> 00:15:29,080 Speaker 7: clearly more affordable than markets coastal markets such as you know, 328 00:15:29,160 --> 00:15:32,640 Speaker 7: New York, Miami and LA and so in these markets 329 00:15:32,680 --> 00:15:36,160 Speaker 7: you do now continue to see relatively stronger rate of 330 00:15:36,200 --> 00:15:41,520 Speaker 7: compress appreciation despite all of these affordability challenges. So you know, 331 00:15:41,600 --> 00:15:47,880 Speaker 7: markets in Indianapolis, Chicago for example, uh, even even Boise 332 00:15:48,040 --> 00:15:51,440 Speaker 7: City at this point again are seeing relatively more appreciation 333 00:15:51,760 --> 00:15:55,160 Speaker 7: over the course of this summer h than other markets 334 00:15:55,160 --> 00:15:59,320 Speaker 7: where for example, in Florida and markets that have seen 335 00:15:59,440 --> 00:16:02,320 Speaker 7: culative so much more appreciation since Joan sort of the 336 00:16:02,360 --> 00:16:06,200 Speaker 7: pandemic and have as a result becomes so unaffordable and 337 00:16:06,200 --> 00:16:08,560 Speaker 7: how home prices are in those markets are declining, So 338 00:16:08,840 --> 00:16:12,680 Speaker 7: it just really depends where you are in the country. Somem, 339 00:16:12,680 --> 00:16:13,360 Speaker 7: I want to just ask. 340 00:16:13,200 --> 00:16:15,920 Speaker 4: You another question about consumer behavior here, Paul asking about 341 00:16:15,920 --> 00:16:17,600 Speaker 4: twenty year olds and thirty year olds. And I got 342 00:16:17,600 --> 00:16:19,800 Speaker 4: to give Lisa Mateo credit for this. She flagged the 343 00:16:19,800 --> 00:16:21,680 Speaker 4: piece in the Wall Street Journal for us this morning 344 00:16:21,680 --> 00:16:25,400 Speaker 4: about how young people in particular, faced with these higher 345 00:16:25,400 --> 00:16:28,720 Speaker 4: than we're accustomed to mortgage rates, have opted not to 346 00:16:28,720 --> 00:16:31,880 Speaker 4: buy and see is more promising putting money in the 347 00:16:31,880 --> 00:16:33,800 Speaker 4: stock market where you can get you know, nine ten 348 00:16:33,840 --> 00:16:36,280 Speaker 4: percent return over time, and that's just a better deal 349 00:16:36,360 --> 00:16:39,400 Speaker 4: for them as they pursue renting. Is that bearing out 350 00:16:39,480 --> 00:16:41,680 Speaker 4: sort of what you see in terms of consumer behavior? 351 00:16:41,760 --> 00:16:43,920 Speaker 4: What are young people doing if they're not buying homes 352 00:16:43,920 --> 00:16:45,520 Speaker 4: and what's it going to take for them to once 353 00:16:45,560 --> 00:16:49,200 Speaker 4: again consider home buying to be so integral to our 354 00:16:49,240 --> 00:16:50,680 Speaker 4: notion of what the American dream is. 355 00:16:52,040 --> 00:16:54,560 Speaker 7: Yeah, I mean, I think American dream is still alive 356 00:16:54,640 --> 00:16:57,440 Speaker 7: and well, you know, it's just been a little bit postponed. 357 00:16:58,160 --> 00:17:00,640 Speaker 7: And with the returns that they're getting in the talk market, 358 00:17:00,680 --> 00:17:03,560 Speaker 7: it allows them to make larger down payments down the road. 359 00:17:03,680 --> 00:17:07,600 Speaker 7: So we do see the median age of first time 360 00:17:07,600 --> 00:17:10,760 Speaker 7: home buyer and be higher than it's been previously. And 361 00:17:10,840 --> 00:17:12,880 Speaker 7: you know, they're now tend to be about ten years 362 00:17:12,960 --> 00:17:15,480 Speaker 7: older when they buy their first home than they used 363 00:17:15,520 --> 00:17:17,960 Speaker 7: to be. But I think survey after survey shows that 364 00:17:18,240 --> 00:17:21,879 Speaker 7: again American dream is live and well. And so what 365 00:17:21,880 --> 00:17:24,119 Speaker 7: they're doing is, you know, and the fact that we 366 00:17:24,200 --> 00:17:28,760 Speaker 7: can in many ways still work remotely or don't have 367 00:17:28,800 --> 00:17:32,040 Speaker 7: to go to offices five days a week. People are 368 00:17:32,160 --> 00:17:35,239 Speaker 7: moving to areas that are more affordable. They don't have 369 00:17:35,320 --> 00:17:38,080 Speaker 7: to be in central cities, especially if they have families, 370 00:17:38,119 --> 00:17:41,280 Speaker 7: and you know, they're looking for good school districts. You know, 371 00:17:41,320 --> 00:17:44,040 Speaker 7: they tend to move a little bit further outside the cities. 372 00:17:44,160 --> 00:17:46,520 Speaker 7: They tend to stay with their parents for longer to 373 00:17:46,640 --> 00:17:50,520 Speaker 7: save for down payments. But again, you know, in our survey, 374 00:17:50,600 --> 00:17:54,399 Speaker 7: in our data, for example, of mortgage applications, areas that 375 00:17:54,560 --> 00:17:58,199 Speaker 7: are more affordable in Midwest, for example, the share of 376 00:17:58,280 --> 00:18:00,960 Speaker 7: first time home buyer is really high. It's fifty or 377 00:18:01,040 --> 00:18:04,280 Speaker 7: sixty percent. So you know, it just again depends where 378 00:18:04,280 --> 00:18:07,040 Speaker 7: you are in a country and where it's more affordable 379 00:18:07,080 --> 00:18:10,080 Speaker 7: to buy. People are buying, and the younger buyers are buying, 380 00:18:10,480 --> 00:18:10,679 Speaker 7: and so. 381 00:18:11,000 --> 00:18:13,120 Speaker 5: Here again in the New York metro area. 382 00:18:13,160 --> 00:18:15,760 Speaker 2: We're dealing with the Northeastern here today, which just once 383 00:18:15,800 --> 00:18:20,520 Speaker 2: again highlights the cost of insurance, if people can even 384 00:18:20,560 --> 00:18:24,240 Speaker 2: get insurance, whether it's for hurricanes or fire or whatever. 385 00:18:24,280 --> 00:18:26,240 Speaker 2: Talk to us about insurance costs. I mean, we've been 386 00:18:26,280 --> 00:18:28,960 Speaker 2: hearing a lot about that is really oppressed on a 387 00:18:29,040 --> 00:18:29,600 Speaker 2: lot of people. 388 00:18:30,720 --> 00:18:33,439 Speaker 7: Yeah, insurance costs have been a big constraint on the market. 389 00:18:33,520 --> 00:18:37,159 Speaker 7: And in markets that have work costs have gone up 390 00:18:37,200 --> 00:18:40,720 Speaker 7: a lot or have higher risk of natural disasters, you've 391 00:18:40,760 --> 00:18:44,520 Speaker 7: seen home sales being impacted. So in those markets, home 392 00:18:44,560 --> 00:18:47,760 Speaker 7: sales do tend to fall out a contract because people 393 00:18:47,800 --> 00:18:52,880 Speaker 7: cannot get insurance. Overall, insurance costs have gone up about 394 00:18:52,920 --> 00:18:56,680 Speaker 7: forty to fifty percent again in some markets significantly more, 395 00:18:56,720 --> 00:19:00,360 Speaker 7: particularly in Florida and actually parts of Midwest to where 396 00:19:00,400 --> 00:19:03,360 Speaker 7: you don't think about insurance costs being high, but there are. 397 00:19:03,480 --> 00:19:08,040 Speaker 7: Because there's persistent tornadoes for example, or Hell and so 398 00:19:08,200 --> 00:19:11,800 Speaker 7: not big natural disasters, but more persistent natural disaster that's 399 00:19:12,280 --> 00:19:16,000 Speaker 7: where we see large increases in insurance costs. Again, it's 400 00:19:16,080 --> 00:19:18,600 Speaker 7: it's it is a big concern, but you do see 401 00:19:18,600 --> 00:19:21,639 Speaker 7: some stabilization in the markets. You know, there's been regulatory 402 00:19:21,760 --> 00:19:25,280 Speaker 7: changes in markets at Florida and California, for example, and 403 00:19:25,359 --> 00:19:29,440 Speaker 7: that's helped improve accessibility to insurance. But when you think 404 00:19:29,480 --> 00:19:32,400 Speaker 7: about you know, costs and insurance continuing to go up, 405 00:19:32,960 --> 00:19:35,879 Speaker 7: forecasts affter forecasts do show that those costs will go 406 00:19:36,200 --> 00:19:38,879 Speaker 7: continue to go up. You know. Really the big biggest 407 00:19:38,880 --> 00:19:43,600 Speaker 7: thing is concentration of residential valuation in areas that are 408 00:19:43,880 --> 00:19:46,200 Speaker 7: have high exposure to natural disasters. 409 00:19:47,080 --> 00:19:49,199 Speaker 4: Some Let me ask you lastly, just about what you 410 00:19:49,240 --> 00:19:51,879 Speaker 4: were seeing when you look at survey data about the 411 00:19:52,000 --> 00:19:55,080 Speaker 4: US consumer, How he or she's feeling about the economy, 412 00:19:55,760 --> 00:19:58,280 Speaker 4: is her prospects going going forward? A moment here we're 413 00:19:58,320 --> 00:20:00,280 Speaker 4: kind of struggling because we don't have the data that 414 00:20:00,320 --> 00:20:02,119 Speaker 4: we're used to having, the harder data that we're used 415 00:20:02,119 --> 00:20:04,840 Speaker 4: to having, because of the government shutdown from your surveys, 416 00:20:04,840 --> 00:20:06,840 Speaker 4: from the so called softer data. What are you learning 417 00:20:06,840 --> 00:20:09,359 Speaker 4: about the health and optimism of the US consumer today? 418 00:20:10,640 --> 00:20:15,400 Speaker 7: Well, unfortunately, especially unfortunately for the housing market, consumer confidence 419 00:20:15,480 --> 00:20:18,680 Speaker 7: does remain fragile. You know, there's been a lot of 420 00:20:18,800 --> 00:20:22,879 Speaker 7: as you said, economic certainty, policy and certainty. Most recently, 421 00:20:22,960 --> 00:20:26,680 Speaker 7: what seems to a weigh on consumer's mind is job 422 00:20:26,760 --> 00:20:31,360 Speaker 7: security and income stability versus, for example, fears of tariff 423 00:20:31,520 --> 00:20:34,520 Speaker 7: or tariffs earlier in the year. The other thing we 424 00:20:34,600 --> 00:20:37,840 Speaker 7: do see is again by furcation, income by furcation, So 425 00:20:38,520 --> 00:20:41,679 Speaker 7: upper income households are doing better, and when you look 426 00:20:41,720 --> 00:20:46,719 Speaker 7: at home sales activity, it's performing better. And price stability 427 00:20:46,880 --> 00:20:51,880 Speaker 7: is better in upper income or upper higher priced homes 428 00:20:51,920 --> 00:20:55,760 Speaker 7: than lower price homes. So again it's about income and 429 00:20:55,800 --> 00:21:00,720 Speaker 7: it's there's regional variation. But I would say that consumers 430 00:21:00,760 --> 00:21:03,840 Speaker 7: are continue to be very fragile and they are very 431 00:21:03,840 --> 00:21:07,639 Speaker 7: responsive though to mortgage rate changes, you know. So with 432 00:21:07,840 --> 00:21:12,280 Speaker 7: most recent decline in mortgage rates, we've seen consumers are 433 00:21:12,320 --> 00:21:15,520 Speaker 7: coming back in home buying. Home buying market. 434 00:21:15,760 --> 00:21:17,639 Speaker 2: Salma, thank you so much for joining us. Always appreciate 435 00:21:17,680 --> 00:21:19,560 Speaker 2: getting a few minutes of your time. Sama, he chief 436 00:21:19,560 --> 00:21:21,119 Speaker 2: e Commerce for Cocality. 437 00:21:21,359 --> 00:21:24,479 Speaker 5: Stay with us. More from Bloomberg Surveillance coming up after this. 438 00:21:30,680 --> 00:21:34,200 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 439 00:21:34,320 --> 00:21:37,480 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 440 00:21:37,560 --> 00:21:41,240 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 441 00:21:41,400 --> 00:21:42,720 Speaker 1: watch us live on YouTube. 442 00:21:42,800 --> 00:21:43,439 Speaker 5: Let's get right to it. 443 00:21:43,480 --> 00:21:48,560 Speaker 2: David Maxwell, Managing director of Sustainable Development Capital Co manages 444 00:21:48,640 --> 00:21:52,200 Speaker 2: a six hundred and fifty million euro green Energy Solutions 445 00:21:52,200 --> 00:21:57,200 Speaker 2: Fund investing in energy transition and infrastructure across the US, Canada, UK, 446 00:21:57,359 --> 00:21:59,480 Speaker 2: and your David, thanks so much for joining us here 447 00:21:59,520 --> 00:22:01,240 Speaker 2: in studio braving the nor reachter. 448 00:22:01,359 --> 00:22:02,119 Speaker 5: We appreciate that. 449 00:22:02,960 --> 00:22:07,479 Speaker 2: Is this administration supportive of the energy transition from your 450 00:22:07,480 --> 00:22:09,600 Speaker 2: perspective or is it kind of a headwind here? 451 00:22:09,960 --> 00:22:11,600 Speaker 5: What are you guys figuring out so far? 452 00:22:11,760 --> 00:22:13,919 Speaker 8: Yeah, it's a good question. I think the important thing 453 00:22:13,960 --> 00:22:16,520 Speaker 8: to focus on is the problem. So I think we 454 00:22:16,560 --> 00:22:18,639 Speaker 8: all know that in the United States there's going to 455 00:22:18,640 --> 00:22:23,199 Speaker 8: be a surge in electricity demand, driven by the AI boom, 456 00:22:23,640 --> 00:22:26,840 Speaker 8: by electrication, by on shoring, and the question is what 457 00:22:26,880 --> 00:22:29,320 Speaker 8: do you do about that? Because we don't necessarily have 458 00:22:29,680 --> 00:22:33,760 Speaker 8: the generation capacity or the transmission infrastructure to meet that 459 00:22:33,920 --> 00:22:37,480 Speaker 8: growth in demand. And so I think that the general 460 00:22:37,480 --> 00:22:40,639 Speaker 8: consensus is that an all of the above approach is required. 461 00:22:41,359 --> 00:22:46,000 Speaker 8: And in that context, certainly things like distributed generation and 462 00:22:46,119 --> 00:22:49,600 Speaker 8: energy efficiency are massively important in terms of filling the gap. 463 00:22:50,240 --> 00:22:52,000 Speaker 8: I think when it comes to things like the Big 464 00:22:52,000 --> 00:22:55,440 Speaker 8: Beautiful Bill, which was passed on July the fourth, certainly 465 00:22:55,520 --> 00:22:58,720 Speaker 8: there are going to be headwinds, some headwinds associated with 466 00:22:58,840 --> 00:23:03,480 Speaker 8: utility scale solar and electric vehicles. But at the same time, 467 00:23:03,840 --> 00:23:06,080 Speaker 8: if you really look at the text and the way 468 00:23:06,119 --> 00:23:09,600 Speaker 8: that the BBB has been discussed, there have actually been 469 00:23:09,640 --> 00:23:12,720 Speaker 8: lifelines thrown to in fact, major parts of the energy 470 00:23:12,760 --> 00:23:18,000 Speaker 8: transition and technologies associated with it. These include things like 471 00:23:19,000 --> 00:23:24,400 Speaker 8: some runway for distributed solar to continue to benefit from 472 00:23:24,440 --> 00:23:27,119 Speaker 8: investment tax credits until the end of twenty twenty seven. 473 00:23:27,760 --> 00:23:31,640 Speaker 8: You know, the big Beautiful Bill supports geothermal. It's quite 474 00:23:31,720 --> 00:23:37,560 Speaker 8: useful in terms of batteries, hydro electric power, carbon chatrum storage, 475 00:23:37,560 --> 00:23:40,520 Speaker 8: and other components. So I think that we just have 476 00:23:40,600 --> 00:23:43,520 Speaker 8: to take a pragmatic view. One of the positives that 477 00:23:43,560 --> 00:23:46,960 Speaker 8: has come out of discussions, and we recently hosted an 478 00:23:47,000 --> 00:23:50,480 Speaker 8: event during New York Climate Weeek, was that actually, the 479 00:23:50,520 --> 00:23:52,600 Speaker 8: fact that this has been passed and that there's policy 480 00:23:52,680 --> 00:23:55,480 Speaker 8: certainty is a very positive thing for the types of 481 00:23:55,480 --> 00:23:59,119 Speaker 8: sectors that we invest in, and certainly uncertainty is unhelpful. 482 00:23:59,359 --> 00:24:01,840 Speaker 8: And so actually we feel pretty good and comfortable and 483 00:24:01,920 --> 00:24:05,560 Speaker 8: quite bullish on the investment strategy that we deploy within SECR. 484 00:24:06,200 --> 00:24:09,160 Speaker 4: I'm curious how much you and investors can tune out 485 00:24:09,200 --> 00:24:11,560 Speaker 4: some of the politics surrounding energy right now. So I 486 00:24:11,560 --> 00:24:14,680 Speaker 4: think of friends who live in Rhode Island or Massachusetts 487 00:24:14,720 --> 00:24:18,160 Speaker 4: who have seen such great expenditure and investment in wind 488 00:24:18,200 --> 00:24:22,000 Speaker 4: farms on the ocean. Now we see administration taking a 489 00:24:22,040 --> 00:24:24,600 Speaker 4: very adversarial approach to that. Obviously, this is being fought 490 00:24:24,600 --> 00:24:26,520 Speaker 4: out in the courts. But when you look again at 491 00:24:26,520 --> 00:24:29,240 Speaker 4: that level of investment and put it in the crucible 492 00:24:29,400 --> 00:24:32,520 Speaker 4: of politics, is in your sense that cooler heads will prevail. 493 00:24:33,040 --> 00:24:35,760 Speaker 4: Enough has been built, these are close to being finished 494 00:24:35,760 --> 00:24:38,320 Speaker 4: that they'll end up being operational. Or is it something 495 00:24:38,320 --> 00:24:40,400 Speaker 4: that actually should be of concern to those who saw 496 00:24:40,440 --> 00:24:43,159 Speaker 4: the prospect of this kind of broader based energy future 497 00:24:43,200 --> 00:24:44,520 Speaker 4: and are now wondering if we're going to have wind 498 00:24:44,600 --> 00:24:46,320 Speaker 4: energy and other types of energy going forward. 499 00:24:46,960 --> 00:24:48,680 Speaker 8: I mean, I think the things focus on. I think 500 00:24:48,720 --> 00:24:52,199 Speaker 8: what will prevail is the concept of economic imperative. So 501 00:24:52,320 --> 00:24:54,679 Speaker 8: going back to the theme, there's going to be an 502 00:24:54,680 --> 00:24:57,639 Speaker 8: explosion in energy demand in the United States and there 503 00:24:57,640 --> 00:24:59,520 Speaker 8: has to be some way to meet out a growth 504 00:24:59,520 --> 00:25:01,560 Speaker 8: in demand. You know, if you look at the kind 505 00:25:01,600 --> 00:25:05,160 Speaker 8: of investment strategies that we deploy with an SDCL, they 506 00:25:05,200 --> 00:25:09,480 Speaker 8: focus on downstreams. They focus on energy efficiency where the 507 00:25:09,560 --> 00:25:14,080 Speaker 8: energy has consumed, how it's built, and those sorts of 508 00:25:14,160 --> 00:25:17,240 Speaker 8: themes are quite in some ways immune to the policy 509 00:25:17,400 --> 00:25:21,359 Speaker 8: because they don't rely on policy incentives. Energy efficiency distributed 510 00:25:21,440 --> 00:25:24,800 Speaker 8: generation can really stand on its own t feet, and certainly, 511 00:25:24,920 --> 00:25:27,200 Speaker 8: you know in discussions with some of the CEOs we 512 00:25:27,240 --> 00:25:31,320 Speaker 8: do business business within our portfolio companies, they are feeling 513 00:25:31,400 --> 00:25:33,800 Speaker 8: that in time to come, and not very long in 514 00:25:33,800 --> 00:25:36,520 Speaker 8: sort of two or three years post twenty seven, that 515 00:25:36,800 --> 00:25:39,480 Speaker 8: these types of technologies are should and can stand on 516 00:25:39,520 --> 00:25:42,679 Speaker 8: their nt feet. Ultimately, I think that's what's going to 517 00:25:42,720 --> 00:25:46,120 Speaker 8: drive the energy markets going forward. And actually you can 518 00:25:46,160 --> 00:25:49,760 Speaker 8: see that there's a confluence of opinions across the pond 519 00:25:49,800 --> 00:25:50,120 Speaker 8: as well. 520 00:25:50,119 --> 00:25:53,399 Speaker 2: In Europe and Europe one of the things and talking 521 00:25:53,440 --> 00:25:57,359 Speaker 2: to your colleagues is energy efficiency. How much energy is 522 00:25:57,480 --> 00:26:01,080 Speaker 2: lost from like where are the energy is created, like 523 00:26:01,119 --> 00:26:01,879 Speaker 2: an oil wall. 524 00:26:01,880 --> 00:26:03,520 Speaker 5: To before it gets into my home. 525 00:26:03,560 --> 00:26:06,439 Speaker 2: I mean energy loss and energy efficiency is it's a 526 00:26:06,480 --> 00:26:07,040 Speaker 2: huge issue. 527 00:26:07,040 --> 00:26:08,640 Speaker 5: How do you guys to talk about. 528 00:26:08,400 --> 00:26:12,159 Speaker 9: That two thirds of energy two thirds energy is lost 529 00:26:12,240 --> 00:26:15,680 Speaker 9: point of extraction to the point of use STA statistic. 530 00:26:15,920 --> 00:26:18,439 Speaker 9: It's a staggering statistic, and so That's one of the 531 00:26:18,480 --> 00:26:22,280 Speaker 9: things that we identified it when our company was established. 532 00:26:22,520 --> 00:26:24,359 Speaker 9: If you can go to a hospital, if you can 533 00:26:24,400 --> 00:26:26,960 Speaker 9: go to a data center, if you can go to 534 00:26:27,000 --> 00:26:30,439 Speaker 9: a school, and you can save them energy and you 535 00:26:30,480 --> 00:26:34,359 Speaker 9: can reduce some of their energy wastage by primarily two things, 536 00:26:34,359 --> 00:26:38,720 Speaker 9: by installing on site generation, which removes all the transmission 537 00:26:38,720 --> 00:26:42,439 Speaker 9: and distribution losses associated with that large two thirds energy loss, 538 00:26:42,960 --> 00:26:45,159 Speaker 9: and if you can go in and do retrofits to 539 00:26:45,800 --> 00:26:48,560 Speaker 9: make their energy plant and equipment more energy efficient. 540 00:26:49,000 --> 00:26:52,560 Speaker 8: These things are really good for business. They actually enhance 541 00:26:53,000 --> 00:26:57,040 Speaker 8: energy security on site, they reduce carbon emissions, they cut costs, 542 00:26:57,040 --> 00:26:59,920 Speaker 8: which is great for business, and also it represents a 543 00:27:00,080 --> 00:27:03,240 Speaker 8: fantastic investments opportunity for us and for the investors be represented. 544 00:27:03,440 --> 00:27:05,480 Speaker 5: I never heard that two thirds these guys. 545 00:27:05,880 --> 00:27:06,920 Speaker 4: I will never forget that either. 546 00:27:07,000 --> 00:27:07,200 Speaker 6: Yeah. 547 00:27:07,280 --> 00:27:10,240 Speaker 2: David Maxwell, Managing direct to Sustainable Development Capital. 548 00:27:10,640 --> 00:27:15,480 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 549 00:27:15,600 --> 00:27:19,400 Speaker 1: and anywhere else you get your podcasts. 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