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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 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Merger Monday, definitely here. Next Era Energy agreeing to pay

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Speaker 2: back sixty seven billion dollars in stock for Dominion Energy

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Speaker 2: and the biggest power acquisition ever. That's pretty cool. Dominion.

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Speaker 2: I know those folks are down there in Richmond, Virginia,

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Speaker 2: one of my favorite places. Emily Foregas Joints is here.

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Speaker 2: Energy reporter for Bloomberg News. Em we talk to us

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Speaker 2: about this deal. It's a monster sized deal. Why is

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Speaker 2: Next Era buying Dominion?

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Speaker 3: Yeah, it's such a great question. There are many answers.

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Speaker 3: The one that I've heard the most from analysts so

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Speaker 3: far is that Next there needs to rebalance its utility

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Speaker 3: business versus its unregular, non regulated development business. It's development

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Speaker 3: business for renewables has grown astronomically in the past few

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Speaker 3: years because of the demand, largely from data centers, and

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Speaker 3: it needs to rebalance more back to its regulated side.

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Speaker 3: That's what Credit rating agencies require of them, so they

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Speaker 3: either needed to sell generation or buy a regulated utility.

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Speaker 2: How is AI and the need for electricity, it's we're

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Speaker 2: seeing it all over. How is that driving this deal?

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Speaker 1: Yeah?

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Speaker 3: I mean Virginia, where Dominion operates mainly, is home to

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Speaker 3: Data Center Alley, which is the biggest concentration of data

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Speaker 3: centers in the US. And right, yeah, Northern Virginia, and

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Speaker 3: they the Virginia is struggling to meet that demand and

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Speaker 3: the demand forecasts for the next few years are completely

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Speaker 3: outstripped what these utilities can provide at this moment in time.

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Speaker 3: And that's the story across the country. And so Next

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Speaker 3: Sarah now being by far the biggest utility in the country,

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Speaker 3: once this goes through, would the challenge for next Ara

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Speaker 3: would be to try to provide energy for those data centers.

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Speaker 2: Wow, all right, you said they're going to create the

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Speaker 2: biggest So I'm thinking the regulators are just licking their

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Speaker 2: chops here to review this deal. What are the companies

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Speaker 2: saying about the regulatory hurdles they need?

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Speaker 3: Clear Yeah, there's a long list of regulatory bodies within

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Speaker 3: the power sector that will need to look at this deal.

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Speaker 3: Some analysts that I've talked to, though, have been pretty

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Speaker 3: positive about this going through, especially from the Virginia legislature

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Speaker 3: side and regulators in Virginia. Virginia really needs some help

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Speaker 3: with meeting this power demand, and next Era comes with

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Speaker 3: a whole host of renewables and a lot of development

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Speaker 3: on a strong utility side and are pledging to use

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Speaker 3: batteries in the area and things like that to meet demands.

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Speaker 3: So the analysts I've talked to have been pretty positive

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Speaker 3: from that perspective.

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Speaker 2: What we know, I don't know that much about next Tora.

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Speaker 2: I see they're down in Florida company. I think this

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Speaker 2: feels like the old Florida Power and Light or something

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Speaker 2: like that. But what do we know about next Era?

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Speaker 3: Yeah, so next Era has a utility in Florida, but

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Speaker 3: then also has a huge development business. It's become one

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Speaker 3: of the biggest renewable energy developers in the US in

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Speaker 3: the past couple of years. And as I said, that

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Speaker 3: demand has been proven by how big the renewable energy

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Speaker 3: arm of next Era has gone. And this is why

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Speaker 3: this rebalance is quite necessary.

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Speaker 2: Are analysts saying get ready for some more consolidation utility

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Speaker 2: industries is just the beginning. What are they saying.

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Speaker 3: Yeah, they are definitely saying get ready for more consolidation.

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Speaker 3: One of the reasons is that all of these utilities

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Speaker 3: are pledging to spend trillions of dollars on new generation,

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Speaker 3: new transmission, basically upgrades to the grid over the next

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Speaker 3: five years. And each one of these new a new

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Speaker 3: gas plant costs billions of dollars, and so these utilities

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Speaker 3: are striving to get bigger and bigger, bigger market caps,

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Speaker 3: more money behind them so that they can reasonably pledge

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Speaker 3: all of that money that's necessary to upgrade the grid

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Speaker 3: and add new generation.

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Speaker 2: I read the book called The Grid Ah this year. Yeah,

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Speaker 2: so I'm all in on this. But I guess one

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Speaker 2: of the questions is who's going to pay for all this?

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Speaker 2: Is it going to be the rate payers like me

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Speaker 2: and you and Charlie. Charlie is definitely gonna pay, or

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Speaker 2: is it going to be you know, if Google wants

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Speaker 2: this big uh you know data center you pay for Google.

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Speaker 3: Yes, So that's still the major million dollar question. But

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Speaker 3: I will say that there have been certain pieces of

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Speaker 3: legislation that are passed or in or being talked about

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Speaker 3: right now that would answer this question. What the big

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Speaker 3: tech companies have said that they are willing to pay

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Speaker 3: for the new generation that's necessary to meet their demand.

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Speaker 3: The question is whether or not they will pay for

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Speaker 3: all of the upgrades, or whether or not some of

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Speaker 3: that capex that these utilities are going to have to

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Speaker 3: spend will trickle down to rate payers. So far, Bloomberg

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Speaker 3: did an analysis that shows that so far the data

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Speaker 3: center boom has made electricity prices higher, and electricity prices

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Speaker 3: inflation outpaced overall inflation last month.

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Speaker 2: So and I would think in the like in the

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Speaker 2: metro Washington, DC area of and all that kind of stuff,

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Speaker 2: those folks are probably pretty sensitive to that.

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Speaker 3: Yeah, yes, exactly. And electricity prices are already forecasts to

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Speaker 3: be a really big part of the midterms this year,

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Speaker 3: and so that's always going to be the backdrop of

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Speaker 3: the conversation with a big deal like next airond Dominion.

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Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.

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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 Apple, Cocklay and Android

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Speaker 1: Auto 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 2: Once a quarter they get this thing called the thirteen

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Speaker 2: F SKIF files, so you can see what funds are

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Speaker 2: buying and selling. And there's a whole cottage industry out

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Speaker 2: there for people who do this. For Berkshire Hathaway, what's

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Speaker 2: Warren Buffett buying and selling? It's a little bit different

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Speaker 2: this time because we've got a new CEO, Greg Abel,

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Speaker 2: and I want to see what he's been buying and selling.

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Speaker 2: Here Matthew Palazola, he knows. He's a senior analyst covering

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Speaker 2: the insurance businesscluding Berkshire Hathaway for Bloomberg Intelligence. So what

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Speaker 2: do we learn from this thirteen F from Berkshire Hathway.

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Speaker 2: What does mister greg Able, the new CEO, what's he doing?

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Speaker 5: So we never know actually what's happening behind the scenes.

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Speaker 5: They don't talk to analysts and don't tell us anything.

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Speaker 5: Warren Buffett's is still around, he's the chairman. He goes

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Speaker 5: in the office every day, so there could be some

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Speaker 5: fingerprints on this, but maybe not because the biggest move

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Speaker 5: was a dramatic increase in their stake in Alphabet So

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Speaker 5: they had about four billion and now they have about

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Speaker 5: sixteen billion worth of Alphabet shares and that was the

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Speaker 5: biggest individual move in the quarter.

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Speaker 6: And Buffett is known for investing in things he understands.

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Speaker 4: That's kind of how he puts it, right.

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Speaker 6: He wants to be able to understand the business model

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Speaker 6: and then he's in on it. Does Greg Able have

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Speaker 6: like a self professed philosophy on investing?

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Speaker 5: Same That was pretty much what he said in interviews

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Speaker 5: was we think of it the same way. They took

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Speaker 5: this initial Alphabet's stake while Buffett was still there last year.

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Speaker 5: But it could have been it could have been able

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Speaker 5: then it could have been the investment deputy Ted Welscher.

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Speaker 5: So he does profess we want to understand the businesses,

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Speaker 5: So I guess he understands Google's business.

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Speaker 2: So any reason to think, first of all, give me

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Speaker 2: the what's that cash number that's on the Balandt sheet

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Speaker 2: that I.

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Speaker 5: Believe it's three eighty billion eight number was too high

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Speaker 5: because they had some settlements in there.

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Speaker 2: Okay, so give just give our listeners and viewers a

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Speaker 2: ballpark three hundred and eighty billion dollars that they have

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Speaker 2: on their Balundt sheet that supposedly they're supposed to invest

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Speaker 2: anything but that's been a problem because you can't find

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Speaker 2: stuff out there that can put a dent in three

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Speaker 2: hundred and eighty billion dollars correct, So is there anything

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Speaker 2: that greg Able may do to change that dynamic?

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Speaker 5: So we talked about this before. I think capital return.

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Speaker 5: I mean, so, what are you gonna You're gonna buy

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Speaker 5: something by a whole company? Yeah, return capital, which seems

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Speaker 5: to be a no.

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Speaker 7: No.

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Speaker 5: I don't think he's in any rush to by a

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Speaker 5: bit make a huge splash. And I also don't think,

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Speaker 5: you know, as long as Buffett is there, that he's

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Speaker 5: going to return capital in any meaningful way to investors.

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Speaker 5: So I think we'll see more of the same. I

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Speaker 5: think this was still so. The other story of this

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Speaker 5: quarter is they sold a lot of stock. But that

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Speaker 5: stock they sold was likely positions by one of the

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Speaker 5: former investment deputies who left the firm.

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Speaker 2: So they sold about I think the guy w Morgan, right.

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Speaker 5: Yes, toddcolmbs. So they sold about eleven billion in positions

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Speaker 5: that I think are related to him. Again, they don't

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Speaker 5: tell you if they are included, and that was a

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Speaker 5: visa and MasterCard. So they sold a lot in the quarter.

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Speaker 5: The net story then was they actually sold more than

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Speaker 5: they bought. But if they didn't do this, they would

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Speaker 5: have bought more than they sold. So the story is

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Speaker 5: he and for I think it was fourteen quarters prior

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Speaker 5: to this they had sold more than they bought, so

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Speaker 5: x that big move. They would have actually been a

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Speaker 5: net buyer of stock for the first time.

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Speaker 6: And I remember Warren Buffett a while ago talking about

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Speaker 6: how he was going to go elephant hunting with, you know,

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Speaker 6: his horde of cash.

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Speaker 4: What was the last major acquisition they did make and

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Speaker 4: how did that go?

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Speaker 2: So they've they've bought a couple of sizable things. I mean, like.

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Speaker 5: They bought the it was twelve billion dollars worth of

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Speaker 5: Google stock in the quarter, right. They bought a chemical

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Speaker 5: company from Occidental for about eleven billion dollars. Last year,

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Speaker 5: they bought Alleghany, which was an insurance company holding company

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Speaker 5: the owner of Kurby Squish Mellow Fame that they people

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Speaker 5: go crazy about at the annual meeting. So they've put

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Speaker 5: money to work. It's just they're they're generating a lot

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Speaker 5: of capital, so it's kind of offsetting. And I mean

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Speaker 5: they're doing like ten billion at a clip is not insignificant.

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Speaker 2: I think all of those deals.

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Speaker 5: I don't know about the oxychem deal that's still ongoing,

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Speaker 5: but I think the Alleghany deal was good for them.

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Speaker 5: It bolstered a bunch of insurance business is where they

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Speaker 5: could use more scale, and those additional businesses have been

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Speaker 5: good as well.

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Speaker 2: All Right, what else is going on in your world

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Speaker 2: of property and casually insurance here? I'm looking at the index.

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Speaker 2: It's kind of flat for the year. I guess. I'm

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Speaker 2: looking at the S and P property and casually insurance

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Speaker 2: things kind of flat.

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Speaker 5: So we're we're kind of so I started my career

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Speaker 5: in the tech boom and I got DejaVu all over again.

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Speaker 5: We're we're at the mercy of the the I guess

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Speaker 5: Stewey Robots of the world where these names sell off

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Speaker 5: when tech, you know, kind of gets more in favor.

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Speaker 5: Risk on. We are going to go into hurricane season,

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Speaker 5: so the forecasts four hurricane season are about average. So

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Speaker 5: you know, if maybe you want to see me a

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Speaker 5: little bit more, maybe we'll get more activity. I don't know,

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Speaker 5: but you've got two things. So you've got the El

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Speaker 5: Nino effect and then you've got hot sea surface temps.

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Speaker 5: So hot sea surface temps increase hurricane activity, but the

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Speaker 5: El Nino effect actually decreases it. So we've got two

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Speaker 5: kind of countervailing forces going on in the Atlantic, which

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Speaker 5: will kind of ned out to probably an average hurricane season.

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Speaker 5: So we'll see what happens.

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Speaker 6: I've been reading that the AI Weather Forecast will make

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Speaker 6: these forecasts a lot more accurate than they have been

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Speaker 6: in the past, so there'll be fewer surprises, or that's

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Speaker 6: what we should expect as possible.

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Speaker 5: I think the thing is, you can have a lot

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Speaker 5: of hurricanes, but they don't really hit high value areas

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Speaker 5: and it doesn't matter all that much for my companies,

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Speaker 5: you know, or society, or you can have just one

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Speaker 5: and it kind of slips through and hits Miami or

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Speaker 5: something like that, and then it's a disaster. I've heard

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Speaker 5: similar things that you know, the AI can help with modeling,

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Speaker 5: but I think there's always going to be the weather wildcard.

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Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.

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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 Apple, Cocklay and Android

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Speaker 6: Let's talk about what's going on in the bond market,

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Speaker 6: because we had this massive sell off in global bonds

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Speaker 6: on Friday, pushing yields higher in the UK, in Japan,

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Speaker 6: in the US, and we're getting a little bit of

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Speaker 6: relief today, but not so much because you look at

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Speaker 6: the ten year yield, it is still up at about

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Speaker 6: four point six percent, the thirty year yield at five

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Speaker 6: point one three percent. IRA Jersey is our chief US

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Speaker 6: interest rate strategist, and IRA this kind of makes things

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Speaker 6: difficult for a new FED chair Kevin Walsh, who doesn't

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Speaker 6: have to do anything right away, but he is gearing

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Speaker 6: up for the FMC later this later in June.

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Speaker 7: Yeah, it's going to be hard for him to make

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Speaker 7: the case that they should be cutting interest rates right now.

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Speaker 7: And you know, even though the market is higher, I

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Speaker 7: think the you know, the part of the issue is

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Speaker 7: here is that we're seeing this global sell off. So

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Speaker 7: this isn't all just about US treasuries. It's not all

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Speaker 7: about the US either inflation expectations or monetary policy expectations.

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Speaker 7: But it's the fact that you have in Japan and

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Speaker 7: the UK in particular, really serious questions about their fiscal

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Speaker 7: health in the longer term. So, you know, if we

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Speaker 7: want to call this bond vigilantes, I think that you

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Speaker 7: can make the case that there's at least a little

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Speaker 7: bit of that seeping into the markets via the kind

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Speaker 7: of the back door into the treasury market. So it's

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Speaker 7: not treasury specific, but it is a global developed market phenomena.

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Speaker 2: Scarlett. You know you're a player in the global interest

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Speaker 2: rate business if in your email inbox you received the

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Speaker 2: following document Bloomberg Intelligence Feder Reserve chair Transition Survey. If

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Speaker 2: you're a player, yeah, I know you sent this survey

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Speaker 2: out to the main players out there in the marketplace,

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Speaker 2: and you're talking about what does a new FED chairman

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Speaker 2: mean for the FED? What does survey? What'd you guys learn?

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Speaker 7: Yeah, So we put out that note this morning, Paul,

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Speaker 7: and you know, we we found it. The most surprising

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Speaker 7: thing in there was not that Kevin Warsh is expected

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Speaker 7: to be more dubbish than J.

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Speaker 2: Powell.

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Speaker 7: I think that that's certainly something that many people thought,

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Speaker 7: given that he's being appointed by President Trump. But it's

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Speaker 7: really that over two thirds of the respondents thought that

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Speaker 7: the yield curve would steep in and you haven't seen

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Speaker 7: that very much, so you know, it might be very

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Speaker 7: difficult for the yeld curve to stephen at this point,

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Speaker 7: especially if the market continues to think that the Fed's

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Speaker 7: going to be relatively hawkish. Okay, that's Donald Tickle in

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Speaker 7: my throat talking about Kevin Moore.

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Speaker 6: Yeah, Well, he's got a big, big, heavy task in

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Speaker 6: front of him. How does he fold in what's happening overseas?

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Speaker 6: I mean, does that factor into his thinking the FMC

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Speaker 6: is thinking at all. You talked about the returnal bond

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Speaker 6: vigilantes that's maybe seeping into the US.

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Speaker 4: Did they just not focus on that at the moment.

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Speaker 7: Yeah, So the Fed's going to focus on how the

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Speaker 7: international environment's going to affect the US economy, right, And

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Speaker 7: I think that when you think about higher oil prices,

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Speaker 7: when you think about the fact that you've had now

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Speaker 7: higher yields, In a way, the market's doing the Fed's

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Speaker 7: job for it, right. It's tightening financial conditions at a

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Speaker 7: time when when the growth is okay, right, the growth

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Speaker 7: isn't great, Like, it's very disjointed growth right now in

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Speaker 7: terms of the consumer. And we know that, right. We

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Speaker 7: call it the k shaped economy, so they will take

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Speaker 7: into account what's going on in Europe, what's going on

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Speaker 7: in the UK, what's going on in Japan. These are

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Speaker 7: our major trading partners, and these will have an effect

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Speaker 7: on the US. Right. We do export a lot, We

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Speaker 7: do have large trade balances, both positive and negative with

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Speaker 7: some of these countries, so all of that will be

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Speaker 7: taken into account for sure. Now, Kevin worsh I think,

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Speaker 7: would like the lower interest rates, but he wants to

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Speaker 7: do that by cutting the Fed's balance sheet. And one

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Speaker 7: of the things that did come out of the survey

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Speaker 7: today was not many people in the investment community think

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Speaker 7: that the FED is going to be able to actually

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Speaker 7: shrink its balance sheet.

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Speaker 2: Earlier today, I'm Bloomberg Surveillance. We had a gunat Dingra,

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Speaker 2: head of US REE strategy at BNP parryba On. He

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Speaker 2: was saying, basically, if you look at the third year,

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Speaker 2: five percent the new four percent, kids, you better get

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Speaker 2: used to it. How do you think about that?

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Speaker 7: Yeah, you know, we've been hovering kind of between four

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Speaker 7: and a half and five percent basically for a couple

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Speaker 7: of years now, and five percent might not be the

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Speaker 7: new four, but you know, four and a half percent

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Speaker 7: might be the new three and a half percent, And

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Speaker 7: I think that's that's pretty standard thinking, especially given that

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Speaker 7: the US fiscal situation has not improved any right, So

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Speaker 7: we yes, we've seen slightly smaller deficits than we had

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Speaker 7: a couple of years ago, but we also don't see

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Speaker 7: any relief from that in sight. So it's hard to

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Speaker 7: see why thirty year yields would go down very much

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Speaker 7: when you are worried about longer term inflation not being

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Speaker 7: your target, and also in particular the size of the

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Speaker 7: size of the government's dead outstanding ARA.

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Speaker 6: When you guys held your survey, you also asked about

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Speaker 6: the legacy of FED outgoing FED chair J Powell.

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Speaker 4: What did you get from that? What was the takeaway

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Speaker 4: for you?

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Speaker 7: Yeah, most most investors thought that Jay Powell did a

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Speaker 7: pretty good job on communication. He did a good job

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Speaker 7: maintaining the Fed's independence. You know. Part of this is

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Speaker 7: some people think that that Kevin Moorsh won't be quite

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Speaker 7: as independent as Jay Powell was. That that certainly was

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Speaker 7: one of the findings of the survey. But generally speaking,

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Speaker 7: people were fond of j. Palell. Most of them didn't

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Speaker 7: think he was perfect. So we asked an open ended

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Speaker 7: question at the end of the survey, and some people said, like, hey,

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Speaker 7: you know, he was not great determining that as saying

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Speaker 7: that inflation was transitory, but he also reacted relatively quickly

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Speaker 7: to that as well. So I think, you know, Jay

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Speaker 7: Powell will be seen as pretty fondly.

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Speaker 3: You know.

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Speaker 7: The other thing that we pointed out was J. Powell

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Speaker 7: is one of the few FED chairs that's had to

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Speaker 7: contend with two economic cycles. You know. Obviously Alan Greenspan

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Speaker 7: was in office for so long that he had to

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Speaker 7: deal with multiple cycles. But outside of him, there's been

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Speaker 7: very few FED chairs in the post war period that

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Speaker 7: have had to contend with raising interest rates, lowering interest rates,

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Speaker 7: raising interest rates, and then lowering interest rates again. And

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Speaker 7: J Powell, you know, guided the FED through that whole

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Speaker 7: process over the last over the last eight years.

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Speaker 2: Hivers thirty seconds. Is the US going to be competitive

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Speaker 2: at all in the World Cup?

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Speaker 7: I certainly hope so we should. We should get out

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Speaker 7: of the group stage. Turkey is probably the most challenging,

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Speaker 7: most challenging country that we're going to play in that group.

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Speaker 7: But yeah, it's exciting, you know, three weeks away from

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Speaker 7: the from the beginning of the of the World Cup.

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Speaker 7: I'm certainly excited. We've also started the club that that

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Speaker 7: that I that I co owned. We've started our our

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Speaker 7: season just this past weekend as well. So a lot

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Speaker 7: of soccer for me. The next time.

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Speaker 4: Are you going to go see the World Cup?

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Speaker 7: I'm going to one game. Yeah, I'm going down to

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Speaker 7: Philadelphia to see the Ivory Coast versus Corso.

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