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Speaker 2: Let's go to Galit Alstein. She is a Bloomberg News reporter.
Speaker 2: She is based in Tel Aviv, Ghale. Thanks so much
Speaker 2: for joining us here. What's the feeling in Israel today
Speaker 2: as these hostages come home?
Speaker 3: I think for almost everyone in Israel, this is a
Speaker 3: very happy day. We've been seeing tens of thousands of
Speaker 3: Israelis flock since early this morning to Tel Aviv's Hostage Square,
Speaker 3: which has become a sort of gathering point over the
Speaker 3: past two years for those who have been advocating for
Speaker 3: the release of the hostages. And it was quite a
Speaker 3: sight today seeing about, like I said, sixty seventy thousand
Speaker 3: people in the square and then all the surrounding streets
Speaker 3: with a big stage that Tom kept broadcasting the images
Speaker 3: of the hostages coming out. People were chanting and clapping
Speaker 3: their hands and singing and cheering, and it was indeed
Speaker 3: a very happy day and I think a sense of
Speaker 3: relief for a lot of Israelis here.
Speaker 1: Glik.
Speaker 4: There was a moment in that speech when President Trump
Speaker 4: was talking to Prime Minister Netniahoo directly and he said
Speaker 4: he had a lot of guts for knowing when to
Speaker 4: stop the fighting and for stopping the fighting when he did.
Speaker 4: Just get us up to speed here on what these
Speaker 4: last few days have been like. We had President Trump
Speaker 4: unveiling this peace plan a couple of weeks ago. The
Speaker 4: devil is in the details, of course, we were talking
Speaker 4: about that just a few moments ago. What's going to
Speaker 4: happen here in Egypt and going forward, But just explain
Speaker 4: what President Trump was able to do, how he was
Speaker 4: able to convince Prime Minister net Yahoo to stop that
Speaker 4: assault on Gaza City that was underway.
Speaker 3: Yeah, so we to be very honest and transparent. I
Speaker 3: think we only know like part of the question, the
Speaker 3: answer to that question at this stage. But overall, you know,
Speaker 3: Natan Yao has generally insisted that Israel cannot stop fighting
Speaker 3: in Gaza and cannot stop fighting Hamas until it is
Speaker 3: totally defeated, until it's completely out of power, and until
Speaker 3: all of its military capabilities are taken out. And what
Speaker 3: happened here is that Trump, I think, along you know,
Speaker 3: with Im, Steve Whitkoff and Jared Kushner, they managed to
Speaker 3: do a few things. On the one hand, they managed
Speaker 3: to convince Hamas by themselves, through mediators, that to give
Speaker 3: up all the hostages at once, at least all the
Speaker 3: living hostages, because there are still twenty eight dead hostages
Speaker 3: that remain in Gaza, and we understand that only about
Speaker 3: four of them are going to be brought back today.
Speaker 3: So that's one thing they managed to do. But in terms,
Speaker 3: what Hamas wanted was guaranteed that the war will in
Speaker 3: fact end after that happens, and that Israel doesn't just
Speaker 3: get all the hostages back and then goes back to fighting.
Speaker 3: And you know, Trump has basically personally guaranteed that this
Speaker 3: will happen and that the war will end. And we've
Speaker 3: heard him say multiple times today on the way to
Speaker 3: Israel and Air Force one when he came to the
Speaker 3: Israeli parliament, that this is the end of war and
Speaker 3: that the US will make sure that's what happens. So
Speaker 3: I think these are, you know, the two things that
Speaker 3: made a difference. You know, the biggest sticking point moving
Speaker 3: forward will be whether Hamas some agrees to disarm. Trump's
Speaker 3: twenty point Plans says that that's what Hamas has to do.
Speaker 3: Hamas hasn't agreed to do that yet, and that's what
Speaker 3: Israeli system. So we'll have to see how that plays out.
Speaker 3: But the sense is that the war, at least as
Speaker 3: if we as we've known it in the past two years,
Speaker 3: has in fact come to an end that sort of
Speaker 3: looks like today.
Speaker 2: Glee, thank you so much for joining us. Really appreciate
Speaker 2: your reporting from Israel. Gleed Alstein Bloomberg News in our
Speaker 2: Tel Aviv euro Stay with us.
Speaker 5: More from Bloomberg Surveillance coming up after this.
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Speaker 2: Let's check out with Lori Calvacina ahead of US equity
Speaker 2: strategy for RBC Capital Markets. Laurie, it's kind of seems
Speaker 2: to be trade as one of the drivers of kind
Speaker 2: of market sentiment these days. We got maybe a little
Speaker 2: bit of a softening of tone from President Trump as
Speaker 2: it relates to China, and I guess that's what the
Speaker 2: market likes to see here. What are you making of
Speaker 2: today's pre market action?
Speaker 6: Well, thanks for having me, Paul. Look, I mean, it's
Speaker 6: not unexpected to get a bit of a bounce right
Speaker 6: after kind of the big drop that we saw on Friday.
Speaker 6: I think it's gon to be really interesting to see
Speaker 6: how the S and P five hundred trades today. The
Speaker 6: kids are out of school in New York City, I'm
Speaker 6: guessing other parts of the country as well. They're thankfully
Speaker 6: not running around here for me, but the you know,
Speaker 6: it is a quiet day on Wall Street, right, so
Speaker 6: let's see what we get in terms of the price action.
Speaker 6: But I think tomorrow is really going to be, you know,
Speaker 6: kind of the day where I think we start to
Speaker 6: hear a bit more from folks, you know, in terms
Speaker 6: of how they're digesting this. And look, i'll tell you, Paul,
Speaker 6: as I think back over the last three weeks i've
Speaker 6: been in the UK, I've been running around the US
Speaker 6: to more cities than I can count and keep track
Speaker 6: of at this point, and I heard a whole lot
Speaker 6: of things about people that they were worried about valuations,
Speaker 6: AI capex, right cut pricing got pulled forward in the
Speaker 6: stock market, labor inflation, you know, is that going to
Speaker 6: start to percolate soon or are we going to see
Speaker 6: more of a growth response to tariffs in the market.
Speaker 6: But the one thing I was not hearing about was
Speaker 6: that things could you know, start escalating again with China.
Speaker 6: So I think what we learned on Friday was that
Speaker 6: a fair amount of you know, we're on a good path,
Speaker 6: things are headed in the right direction. That was really
Speaker 6: kind of a firm underpinning of this market. So we
Speaker 6: need to see how that plays out.
Speaker 4: It seems like quarter after quarter, Laurie, going into earning season,
Speaker 4: financials are held up as a bell weather is something
Speaker 4: that's going to tell us about the health of the market.
Speaker 4: It's going to give us some insight into the economy
Speaker 4: as well. So tomorrow we've got JP Morgan Goldben Sachs,
Speaker 4: City Group on the heels of that, We've got Bank
Speaker 4: of America and Morgan Stanley on Wednesday. In this odd economy,
Speaker 4: in this moment, what are those particular companies going to
Speaker 4: tell us?
Speaker 6: So, you know what, we'll see what they have to say.
Speaker 6: Earnings revisions have been pretty resilient there. So my guess
Speaker 6: is that we're going to have, you know, some pretty
Speaker 6: good messaging coming out of them, but we'll have to
Speaker 6: see the reality though. You're common about the bell weather.
Speaker 6: This was something we wrote about in our weekly today.
Speaker 6: And if I go back the last couple reporting seasons,
Speaker 6: you know, I could summarize, you know, what we've been
Speaker 6: hearing from the banks, and especially the Big Bank says,
Speaker 6: don't worry about the consumer. Everything's fine, the stats all
Speaker 6: look good. You know, we're really you know, proud of
Speaker 6: our consumers for being more choiceful in their purchases.
Speaker 5: But don't worry. Things aren't cracking.
Speaker 6: And that's that's not wrong, right, I mean, that's what
Speaker 6: they're seeing in the data.
Speaker 5: That's one perspective.
Speaker 6: But the problem is that you have a lot of
Speaker 6: people in the financial community that go around saying that
Speaker 6: as evidence of there's nothing to worry about. And if
Speaker 6: you actually go and listen to the consumer companies who
Speaker 6: have the boots on the ground, feel you know, there's
Speaker 6: some really you know, not troubling. That's not quite the
Speaker 6: word I want to use, but there are some problems.
Speaker 6: And so for example, what we've noticed in the recent
Speaker 6: consumer companies kind of those late cycle off cycle reporters,
Speaker 6: kind of that came at the last tail end of
Speaker 6: the reporting season. They were talking not just about the
Speaker 6: low income consumer being stressed, but the middle income consumer
Speaker 6: being stressed. There was one company over the last few
Speaker 6: weeks that said they were seeing stressed in the consumer worldwide.
Speaker 6: We had another company that was talking about how socioeconomic
Speaker 6: issues are pressuring consumers across cohorts. So I think that
Speaker 6: we really need to take the financials with a grain
Speaker 6: of salt. It's an important perspective, it's one that we
Speaker 6: absolutely want to have and find valuable. But at the
Speaker 6: same time, they're not able to give us the full
Speaker 6: picture because only the consumer companies are really able to
Speaker 6: tell us about the composition of the spend under the surface.
Speaker 2: So, Laurie, given that earnings are kicking off here, let's
Speaker 2: put that in context of valuation. Here, what are the
Speaker 2: discussions you're having with your clients these days about valuation
Speaker 2: across the market.
Speaker 6: Everyone's worried, everyone's got sticker shock. And if you just
Speaker 6: look at our charts on just say the SMP five
Speaker 6: hundred market cap weighted PE you can do the same
Speaker 6: thing on the Nasdaq one hundred, either cap weighted or
Speaker 6: equal weighted. And we also look at the top ten
Speaker 6: names in the S and P five hundred, and you've
Speaker 6: basically got forward pe levels that are sitting in line
Speaker 6: with the recent highs. Not necessarily tech bubble highs, not
Speaker 6: necessarily all time highs, but highs that in recent years
Speaker 6: have been difficult for the market to move past. So
Speaker 6: you're not getting any valuation expansion in this market, and
Speaker 6: I think that's something you know, the bottom up stock
Speaker 6: pickers I talked to Frankly are picking up on and
Speaker 6: I think there's somewhat alarmed at some of the levels
Speaker 6: that they're scene in some of their portfolios. So I
Speaker 6: do think that earnings are really the big driver here,
Speaker 6: and we have seen a fade in earning sentiment. Now
Speaker 6: that doesn't mean earnings are going to be a disaster,
Speaker 6: but the big pop in earning surprises that we got
Speaker 6: in the last reporting season, I don't think that we're
Speaker 6: set up to repeat that.
Speaker 4: Paul, you weren't here. I was filming in for you.
Speaker 4: Laurie was on, and I brought up the fact that
Speaker 4: it seemed like analyst after Analysts and strategist after Strategists
Speaker 4: was touting how this was a moment for small caps,
Speaker 4: and I asked Laurie if she agreed with that, and
Speaker 4: Laurie rightly brought out her CV and touted her bona
Speaker 4: fides when it comes to her experience analyzing small caps
Speaker 4: in her previous life, and she was skeptical. I think
Speaker 4: I could say about the prospects for small caps and
Speaker 4: I would invite her to take a bit of a
Speaker 4: victory lap here, Laurie, what is your sense of where
Speaker 4: small caps are head and what does that tell you
Speaker 4: about the market more broadly?
Speaker 6: Well, look, David, I mean I always describe small caps
Speaker 6: as my first professional child. So there's no one more
Speaker 6: than me who wants them to succeed and wants them
Speaker 6: to have that moment in the sun, and wants them
Speaker 6: to have that leadership shift. Frankly, you know, I felt
Speaker 6: a little bit like I was shouting into the abyss
Speaker 6: over the last few months while the street was just
Speaker 6: going bananas on talking about small caps and calling for
Speaker 6: the beginning of this big outperformance cycle. And based on
Speaker 6: what I'm seeing in the recent trading data, it looks like,
Speaker 6: you know, it's kind of fizzled out once again. And
Speaker 6: that's not to say there's not incremental upside and absolute terms,
Speaker 6: but we're no longer seeing this part of the market
Speaker 6: outperform the SMP or outperform the Nasdaq one hundred. It
Speaker 6: looks like it may have just been another rate cut
Speaker 6: bet that fizzled out pretty quickly, you know.
Speaker 5: I think as we.
Speaker 6: Kind of head into earning season, one of the interesting
Speaker 6: things on small caps that's been coming up recently is
Speaker 6: whatever challenges they're out there, you know, whether it's you know,
Speaker 6: tariffs for example, back when we had the tight labor
Speaker 6: market post COVID, small caps just have a difficult time
Speaker 6: managing around those challenges relative to their big cap companies.
Speaker 6: So that's one of the things I'm going to be
Speaker 6: looking for in this reporting season is to see how
Speaker 6: small caps are managing through relative to their big cap counterparts.
Speaker 2: So, Laurie, given that backdrop, what screens well for you,
Speaker 2: I'm not sure if you do it by sector or
Speaker 2: by factor, something jumping out of you, guys that kind
Speaker 2: of gets your interest.
Speaker 6: So we mostly focus on sectors, and we continue to
Speaker 6: like the financial sector. You know, Frankly, if we get
Speaker 6: a pullback in the market, they may not, you know,
Speaker 6: sort of hold up better on the way down. They
Speaker 6: are cyclical in nature, but we're not really concerned about that.
Speaker 6: What we've said is we like them on a six
Speaker 6: to twelve month view, so as there is incremental weakness
Speaker 6: on a relative basis in a short term, we'd still
Speaker 6: use that as a buying opportunity. Earnings revisions have been
Speaker 6: very resilient relative to other sectors. We're basically seeing the
Speaker 6: rate of upward revisions fade for most sectors in the
Speaker 6: S and P five hundred x. Technology Financials has had
Speaker 6: a little bit of a fade, but it's kind of
Speaker 6: paled in comparison to what we've seen elsewhere. Banks, consumer finance,
Speaker 6: insurance all screen well on our valuation in Earning's work, and.
Speaker 5: I didn't upgrade it.
Speaker 6: But one of the things we have been talking about
Speaker 6: in recent reports, and we actually said this specifically in
Speaker 6: the weekly we put out this morning, is that healthcare
Speaker 6: is starting to look a bit more interesting, especially if
Speaker 6: you think there's a market pullback that's already started, or
Speaker 6: maybe on the We are neutral all four of the
Speaker 6: defensive sectors, but healthcare's one that's been coming up in
Speaker 6: conversation recently. Valuations look good, Earnings revisions have been a
Speaker 6: touch more resilient than other sectors, and the flows look
Speaker 6: pretty good. Policy risk is still a big overhang, but
Speaker 6: we've had some developments on that, so maybe investors will
Speaker 6: be able to wrap their heads around that a little
Speaker 6: bit better than they have in the past.
Speaker 4: Laurie very quickly here. I'm curious what your processes as
Speaker 4: we get into earning season in earnest, and I know
Speaker 4: a lot of that involves you kind of going through
Speaker 4: call transcripts looking for phrases that stand out. Paul asked
Speaker 4: about tariffs, I asked, he asked about valuations as well.
Speaker 4: What are you going to learn from those calls, do
Speaker 4: you think, or what are you hoping to learn from
Speaker 4: those calls with executives here in the weeks ahead.
Speaker 6: So look, we do use tools, you know, sort of
Speaker 6: help point us in the right places and earning's call transcripts,
Speaker 6: but a lot of that's done after the fact. My
Speaker 6: team we like to read top to bottom and we
Speaker 6: do speed read, but we tend to divide up different sectors.
Speaker 6: We have some knowledge that we've built up over time
Speaker 6: of which companies tend to be more insightful than others,
Speaker 6: and we look at the price action frankly to figure
Speaker 6: out what transcripts we want to focus on. I'm really
Speaker 6: curious to know more about inventory, so how much pre
Speaker 6: tiff inventories are companies still sitting on. Another thing I
Speaker 6: really want to understand in both the corporate and consumer
Speaker 6: world is how much demand was or frankly, was not,
Speaker 6: pulled forward from the back half of the year into
Speaker 6: the second quarter as companies and consumers were trying to get.
Speaker 5: Ahead of tariffs.
Speaker 6: I don't think we got good indications about either of
Speaker 6: those in the last reporting seasons. Companies were a bit
Speaker 6: vague analysts. Frankly, I don't think we're pushing hard enough
Speaker 6: to get answers to those questions. And on the issue
Speaker 6: of pull forward, a lot of companies said they also
Speaker 6: just they couldn't quite tell yet. So I think those
Speaker 6: are some of my big questions. I'm also curious about
Speaker 6: twenty twenty six. So far, companies are deferring, declining to
Speaker 6: answer when asked about twenty twenty six tariff impacts. But
Speaker 6: any clues we can get there I think are going
Speaker 6: to be helpful.
Speaker 2: Laurie, thank you so much for joining us. We always
Speaker 2: appreciate getting a few minutes of your time, Lorie Cavalcina,
Speaker 2: she said of a US equity strategy for OURBC capital markets,
Speaker 2: and we appreciate getting some time from.
Speaker 5: LORI stay with us. More from Bloomberg Surveillance coming up
Speaker 5: after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on
Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or
Speaker 1: watch us live on YouTube.
Speaker 2: Let's talk about the residential real estate market here. Sma
Speaker 2: joins here. She's the chief economist for Totality. She joins
Speaker 2: us here, some of the the big issue in residential
Speaker 2: real estate is just affordability, or the lack thereof. Is
Speaker 2: there a solution to this affordability issue? I think about
Speaker 2: the folks in their late twenties, early thirties looking to
Speaker 2: buy a house.
Speaker 5: That's tough out there.
Speaker 7: Yeah, it's very tough. Well, first of all, thanks for
Speaker 7: having me. I'm also happy to be here today. You know,
Speaker 7: it's really a lot it is right now about mortgage rates,
Speaker 7: and mortgage rates have retreated from recent highs, they are
Speaker 7: now averaging between six and a quarter and six point
Speaker 7: four for thirty years fixed, and that is the lowest
Speaker 7: in about a year, which means that affordability is that
Speaker 7: it's best now that it's been in over two and
Speaker 7: a half years. So affordability is improving, and honestly, in
Speaker 7: some markets you do have quite a bit, relatively quite
Speaker 7: a bit more affordability than than other markets. So in Midwest,
Speaker 7: for example, and also parts of Northeast, it's it is
Speaker 7: clearly more affordable than markets coastal markets such as you know,
Speaker 7: New York, Miami and LA and so in these markets
Speaker 7: you do now continue to see relatively stronger rate of
Speaker 7: compress appreciation despite all of these affordability challenges. So you know,
Speaker 7: markets in Indianapolis, Chicago for example, uh, even even Boise
Speaker 7: City at this point again are seeing relatively more appreciation
Speaker 7: over the course of this summer h than other markets
Speaker 7: where for example, in Florida and markets that have seen
Speaker 7: culative so much more appreciation since Joan sort of the
Speaker 7: pandemic and have as a result becomes so unaffordable and
Speaker 7: how home prices are in those markets are declining, So
Speaker 7: it just really depends where you are in the country. Somem,
Speaker 7: I want to just ask.
Speaker 4: You another question about consumer behavior here, Paul asking about
Speaker 4: twenty year olds and thirty year olds. And I got
Speaker 4: to give Lisa Mateo credit for this. She flagged the
Speaker 4: piece in the Wall Street Journal for us this morning
Speaker 4: about how young people in particular, faced with these higher
Speaker 4: than we're accustomed to mortgage rates, have opted not to
Speaker 4: buy and see is more promising putting money in the
Speaker 4: stock market where you can get you know, nine ten
Speaker 4: percent return over time, and that's just a better deal
Speaker 4: for them as they pursue renting. Is that bearing out
Speaker 4: sort of what you see in terms of consumer behavior?
Speaker 4: What are young people doing if they're not buying homes
Speaker 4: and what's it going to take for them to once
Speaker 4: again consider home buying to be so integral to our
Speaker 4: notion of what the American dream is.
Speaker 7: Yeah, I mean, I think American dream is still alive
Speaker 7: and well, you know, it's just been a little bit postponed.
Speaker 7: And with the returns that they're getting in the talk market,
Speaker 7: it allows them to make larger down payments down the road.
Speaker 7: So we do see the median age of first time
Speaker 7: home buyer and be higher than it's been previously. And
Speaker 7: you know, they're now tend to be about ten years
Speaker 7: older when they buy their first home than they used
Speaker 7: to be. But I think survey after survey shows that
Speaker 7: again American dream is live and well. And so what
Speaker 7: they're doing is, you know, and the fact that we
Speaker 7: can in many ways still work remotely or don't have
Speaker 7: to go to offices five days a week. People are
Speaker 7: moving to areas that are more affordable. They don't have
Speaker 7: to be in central cities, especially if they have families,
Speaker 7: and you know, they're looking for good school districts. You know,
Speaker 7: they tend to move a little bit further outside the cities.
Speaker 7: They tend to stay with their parents for longer to
Speaker 7: save for down payments. But again, you know, in our survey,
Speaker 7: in our data, for example, of mortgage applications, areas that
Speaker 7: are more affordable in Midwest, for example, the share of
Speaker 7: first time home buyer is really high. It's fifty or
Speaker 7: sixty percent. So you know, it just again depends where
Speaker 7: you are in a country and where it's more affordable
Speaker 7: to buy. People are buying, and the younger buyers are buying,
Speaker 7: and so.
Speaker 5: Here again in the New York metro area.
Speaker 2: We're dealing with the Northeastern here today, which just once
Speaker 2: again highlights the cost of insurance, if people can even
Speaker 2: get insurance, whether it's for hurricanes or fire or whatever.
Speaker 2: Talk to us about insurance costs. I mean, we've been
Speaker 2: hearing a lot about that is really oppressed on a
Speaker 2: lot of people.
Speaker 7: Yeah, insurance costs have been a big constraint on the market.
Speaker 7: And in markets that have work costs have gone up
Speaker 7: a lot or have higher risk of natural disasters, you've
Speaker 7: seen home sales being impacted. So in those markets, home
Speaker 7: sales do tend to fall out a contract because people
Speaker 7: cannot get insurance. Overall, insurance costs have gone up about
Speaker 7: forty to fifty percent again in some markets significantly more,
Speaker 7: particularly in Florida and actually parts of Midwest to where
Speaker 7: you don't think about insurance costs being high, but there are.
Speaker 7: Because there's persistent tornadoes for example, or Hell and so
Speaker 7: not big natural disasters, but more persistent natural disaster that's
Speaker 7: where we see large increases in insurance costs. Again, it's
Speaker 7: it's it is a big concern, but you do see
Speaker 7: some stabilization in the markets. You know, there's been regulatory
Speaker 7: changes in markets at Florida and California, for example, and
Speaker 7: that's helped improve accessibility to insurance. But when you think
Speaker 7: about you know, costs and insurance continuing to go up,
Speaker 7: forecasts affter forecasts do show that those costs will go
Speaker 7: continue to go up. You know. Really the big biggest
Speaker 7: thing is concentration of residential valuation in areas that are
Speaker 7: have high exposure to natural disasters.
Speaker 4: Some Let me ask you lastly, just about what you
Speaker 4: were seeing when you look at survey data about the
Speaker 4: US consumer, How he or she's feeling about the economy,
Speaker 4: is her prospects going going forward? A moment here we're
Speaker 4: kind of struggling because we don't have the data that
Speaker 4: we're used to having, the harder data that we're used
Speaker 4: to having, because of the government shutdown from your surveys,
Speaker 4: from the so called softer data. What are you learning
Speaker 4: about the health and optimism of the US consumer today?
Speaker 7: Well, unfortunately, especially unfortunately for the housing market, consumer confidence
Speaker 7: does remain fragile. You know, there's been a lot of
Speaker 7: as you said, economic certainty, policy and certainty. Most recently,
Speaker 7: what seems to a weigh on consumer's mind is job
Speaker 7: security and income stability versus, for example, fears of tariff
Speaker 7: or tariffs earlier in the year. The other thing we
Speaker 7: do see is again by furcation, income by furcation, So
Speaker 7: upper income households are doing better, and when you look
Speaker 7: at home sales activity, it's performing better. And price stability
Speaker 7: is better in upper income or upper higher priced homes
Speaker 7: than lower price homes. So again it's about income and
Speaker 7: it's there's regional variation. But I would say that consumers
Speaker 7: are continue to be very fragile and they are very
Speaker 7: responsive though to mortgage rate changes, you know. So with
Speaker 7: most recent decline in mortgage rates, we've seen consumers are
Speaker 7: coming back in home buying. Home buying market.
Speaker 2: Salma, thank you so much for joining us. Always appreciate
Speaker 2: getting a few minutes of your time. Sama, he chief
Speaker 2: e Commerce for Cocality.
Speaker 5: Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or
Speaker 1: watch us live on YouTube.
Speaker 5: Let's get right to it.
Speaker 2: David Maxwell, Managing director of Sustainable Development Capital Co manages
Speaker 2: a six hundred and fifty million euro green Energy Solutions
Speaker 2: Fund investing in energy transition and infrastructure across the US, Canada, UK,
Speaker 2: and your David, thanks so much for joining us here
Speaker 2: in studio braving the nor reachter.
Speaker 5: We appreciate that.
Speaker 2: Is this administration supportive of the energy transition from your
Speaker 2: perspective or is it kind of a headwind here?
Speaker 5: What are you guys figuring out so far?
Speaker 8: Yeah, it's a good question. I think the important thing
Speaker 8: to focus on is the problem. So I think we
Speaker 8: all know that in the United States there's going to
Speaker 8: be a surge in electricity demand, driven by the AI boom,
Speaker 8: by electrication, by on shoring, and the question is what
Speaker 8: do you do about that? Because we don't necessarily have
Speaker 8: the generation capacity or the transmission infrastructure to meet that
Speaker 8: growth in demand. And so I think that the general
Speaker 8: consensus is that an all of the above approach is required.
Speaker 8: And in that context, certainly things like distributed generation and
Speaker 8: energy efficiency are massively important in terms of filling the gap.
Speaker 8: I think when it comes to things like the Big
Speaker 8: Beautiful Bill, which was passed on July the fourth, certainly
Speaker 8: there are going to be headwinds, some headwinds associated with
Speaker 8: utility scale solar and electric vehicles. But at the same time,
Speaker 8: if you really look at the text and the way
Speaker 8: that the BBB has been discussed, there have actually been
Speaker 8: lifelines thrown to in fact, major parts of the energy
Speaker 8: transition and technologies associated with it. These include things like
Speaker 8: some runway for distributed solar to continue to benefit from
Speaker 8: investment tax credits until the end of twenty twenty seven.
Speaker 8: You know, the big Beautiful Bill supports geothermal. It's quite
Speaker 8: useful in terms of batteries, hydro electric power, carbon chatrum storage,
Speaker 8: and other components. So I think that we just have
Speaker 8: to take a pragmatic view. One of the positives that
Speaker 8: has come out of discussions, and we recently hosted an
Speaker 8: event during New York Climate Weeek, was that actually, the
Speaker 8: fact that this has been passed and that there's policy
Speaker 8: certainty is a very positive thing for the types of
Speaker 8: sectors that we invest in, and certainly uncertainty is unhelpful.
Speaker 8: And so actually we feel pretty good and comfortable and
Speaker 8: quite bullish on the investment strategy that we deploy within SECR.
Speaker 4: I'm curious how much you and investors can tune out
Speaker 4: some of the politics surrounding energy right now. So I
Speaker 4: think of friends who live in Rhode Island or Massachusetts
Speaker 4: who have seen such great expenditure and investment in wind
Speaker 4: farms on the ocean. Now we see administration taking a
Speaker 4: very adversarial approach to that. Obviously, this is being fought
Speaker 4: out in the courts. But when you look again at
Speaker 4: that level of investment and put it in the crucible
Speaker 4: of politics, is in your sense that cooler heads will prevail.
Speaker 4: Enough has been built, these are close to being finished
Speaker 4: that they'll end up being operational. Or is it something
Speaker 4: that actually should be of concern to those who saw
Speaker 4: the prospect of this kind of broader based energy future
Speaker 4: and are now wondering if we're going to have wind
Speaker 4: energy and other types of energy going forward.
Speaker 8: I mean, I think the things focus on. I think
Speaker 8: what will prevail is the concept of economic imperative. So
Speaker 8: going back to the theme, there's going to be an
Speaker 8: explosion in energy demand in the United States and there
Speaker 8: has to be some way to meet out a growth
Speaker 8: in demand. You know, if you look at the kind
Speaker 8: of investment strategies that we deploy with an SDCL, they
Speaker 8: focus on downstreams. They focus on energy efficiency where the
Speaker 8: energy has consumed, how it's built, and those sorts of
Speaker 8: themes are quite in some ways immune to the policy
Speaker 8: because they don't rely on policy incentives. Energy efficiency distributed
Speaker 8: generation can really stand on its own t feet, and certainly,
Speaker 8: you know in discussions with some of the CEOs we
Speaker 8: do business business within our portfolio companies, they are feeling
Speaker 8: that in time to come, and not very long in
Speaker 8: sort of two or three years post twenty seven, that
Speaker 8: these types of technologies are should and can stand on
Speaker 8: their nt feet. Ultimately, I think that's what's going to
Speaker 8: drive the energy markets going forward. And actually you can
Speaker 8: see that there's a confluence of opinions across the pond
Speaker 8: as well.
Speaker 2: In Europe and Europe one of the things and talking
Speaker 2: to your colleagues is energy efficiency. How much energy is
Speaker 2: lost from like where are the energy is created, like
Speaker 2: an oil wall.
Speaker 5: To before it gets into my home.
Speaker 2: I mean energy loss and energy efficiency is it's a
Speaker 2: huge issue.
Speaker 5: How do you guys to talk about.
Speaker 9: That two thirds of energy two thirds energy is lost
Speaker 9: point of extraction to the point of use STA statistic.
Speaker 9: It's a staggering statistic, and so That's one of the
Speaker 9: things that we identified it when our company was established.
Speaker 9: If you can go to a hospital, if you can
Speaker 9: go to a data center, if you can go to
Speaker 9: a school, and you can save them energy and you
Speaker 9: can reduce some of their energy wastage by primarily two things,
Speaker 9: by installing on site generation, which removes all the transmission
Speaker 9: and distribution losses associated with that large two thirds energy loss,
Speaker 9: and if you can go in and do retrofits to
Speaker 9: make their energy plant and equipment more energy efficient.
Speaker 8: These things are really good for business. They actually enhance
Speaker 8: energy security on site, they reduce carbon emissions, they cut costs,
Speaker 8: which is great for business, and also it represents a
Speaker 8: fantastic investments opportunity for us and for the investors be represented.
Speaker 5: I never heard that two thirds these guys.
Speaker 4: I will never forget that either.
Speaker 6: Yeah.
Speaker 2: David Maxwell, Managing direct to Sustainable Development Capital.
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