1 00:00:02,400 --> 00:00:09,119 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:09,119 --> 00:00:13,320 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:13,320 --> 00:00:15,720 Speaker 1: Eastern on Apple car Play and then Broid Auto with 4 00:00:15,720 --> 00:00:18,800 Speaker 1: the Bloomberg Business app. Listen on demand wherever you get 5 00:00:18,840 --> 00:00:22,640 Speaker 1: your podcasts, or watch us live on YouTube. 6 00:00:23,239 --> 00:00:25,919 Speaker 2: Alex see you alongside Paul Sweeny and John Tucker. Let's 7 00:00:25,960 --> 00:00:28,400 Speaker 2: go back to that ism manufacturing data because an ism 8 00:00:28,400 --> 00:00:31,000 Speaker 2: manufacturing and read on the employment side was what really 9 00:00:31,080 --> 00:00:34,559 Speaker 2: preceded that weaker jobs report that we saw in August, 10 00:00:34,600 --> 00:00:37,000 Speaker 2: So it might set us up then for this Friday 11 00:00:37,200 --> 00:00:39,800 Speaker 2: and the jobs report. Tim Fury is a chair for 12 00:00:39,840 --> 00:00:44,520 Speaker 2: the Institute of Supply Managements Manufacturing Business Survey Committee. Hey Tim, 13 00:00:44,520 --> 00:00:47,080 Speaker 2: it's great to see you. So is this number good? 14 00:00:47,200 --> 00:00:48,480 Speaker 2: Is it bad? Is it the same? 15 00:00:49,800 --> 00:00:50,080 Speaker 3: Well? 16 00:00:50,080 --> 00:00:52,080 Speaker 4: Good morning, So you know, I think it's a little 17 00:00:52,120 --> 00:00:54,200 Speaker 4: bit of a misnomer. So you know, we came in 18 00:00:54,240 --> 00:00:56,000 Speaker 4: a little bit lighter than people thought. We're a little 19 00:00:56,040 --> 00:00:58,240 Speaker 4: bit better than last month. But if you look at 20 00:00:58,240 --> 00:01:00,920 Speaker 4: the three elements demand, output, in in puts, the biggest 21 00:01:00,960 --> 00:01:04,680 Speaker 4: reason for the lack of slowing down even further is 22 00:01:04,720 --> 00:01:09,039 Speaker 4: the fact that our manufacturing inventory number came up surprisingly. 23 00:01:08,400 --> 00:01:12,440 Speaker 3: So overall demand is still elusive. It's hard to find. 24 00:01:12,520 --> 00:01:13,399 Speaker 3: It's still not there. 25 00:01:13,920 --> 00:01:16,840 Speaker 4: Okay, fine, backlog is still contracting, not quite as bad, 26 00:01:16,840 --> 00:01:18,080 Speaker 4: but it's still pretty bad. 27 00:01:18,440 --> 00:01:19,640 Speaker 3: On the input. 28 00:01:19,319 --> 00:01:21,640 Speaker 4: Side, we had suppliers are living a little bit slower, 29 00:01:21,959 --> 00:01:24,240 Speaker 4: but not a big deal, probably stable month a month. 30 00:01:24,480 --> 00:01:27,240 Speaker 4: The big surprise there was really manufacturing inventory is popping 31 00:01:27,319 --> 00:01:30,720 Speaker 4: up to fifty point five when it's been historically. 32 00:01:30,240 --> 00:01:31,200 Speaker 3: Forty eight or less. 33 00:01:31,240 --> 00:01:33,920 Speaker 4: So, but I think that's really a timing issue between 34 00:01:34,319 --> 00:01:38,000 Speaker 4: reduced output and trying to slow down the inputs, because 35 00:01:38,040 --> 00:01:41,000 Speaker 4: the real story here is on the output side, with 36 00:01:41,080 --> 00:01:43,800 Speaker 4: production coming down again for the third straight month, which 37 00:01:43,840 --> 00:01:44,880 Speaker 4: really means revenue. 38 00:01:45,240 --> 00:01:47,200 Speaker 3: Good surrogate for revenue, And as you. 39 00:01:47,160 --> 00:01:50,960 Speaker 4: Mentioned, Alex, the employment numbers is continuing to sag and 40 00:01:51,000 --> 00:01:55,680 Speaker 4: in fact, in this month's evaluation, almost sixty five percent 41 00:01:55,720 --> 00:01:58,480 Speaker 4: of our force reduction actions were layoffs, which are the 42 00:01:58,560 --> 00:01:59,920 Speaker 4: highest number we've seen so far. 43 00:02:01,000 --> 00:02:01,280 Speaker 2: Tim. 44 00:02:01,320 --> 00:02:04,840 Speaker 5: When I'm looking at the ISM manufacturing data, what am 45 00:02:04,880 --> 00:02:08,440 Speaker 5: I looking at? What industries are most notably represented in 46 00:02:08,480 --> 00:02:08,920 Speaker 5: that data? 47 00:02:08,960 --> 00:02:09,360 Speaker 2: Point? 48 00:02:09,840 --> 00:02:12,400 Speaker 4: Well, the big six are you know, your first one 49 00:02:12,720 --> 00:02:15,760 Speaker 4: is chemical products, and you have transportation equipment, You've got 50 00:02:15,800 --> 00:02:18,960 Speaker 4: computer and electronics, food and beverage, those two are kind 51 00:02:18,960 --> 00:02:23,639 Speaker 4: of intermixed. You got fabricated metal products, machinery, and those 52 00:02:23,680 --> 00:02:26,000 Speaker 4: are the big six. Those make up seventy percent, seventy 53 00:02:26,000 --> 00:02:29,320 Speaker 4: two percent of manufacturing GDP, so you know, they're pretty 54 00:02:29,320 --> 00:02:30,040 Speaker 4: strong drivers. 55 00:02:30,040 --> 00:02:32,399 Speaker 3: And if you look at five of those top. 56 00:02:32,280 --> 00:02:35,919 Speaker 4: Six, the inventory number actually broke fifty, which we haven't 57 00:02:35,960 --> 00:02:39,959 Speaker 4: seen in probably a couple of years. So I really 58 00:02:40,000 --> 00:02:42,000 Speaker 4: think it's a timing issue. We weren't able to slow 59 00:02:42,040 --> 00:02:44,799 Speaker 4: down the inputs as fast as we really wanted, and I. 60 00:02:44,720 --> 00:02:47,480 Speaker 3: Think it will self correct itself. So if you take that. 61 00:02:47,480 --> 00:02:49,560 Speaker 4: Number and you do a normalization where it would have 62 00:02:49,560 --> 00:02:52,639 Speaker 4: been based on what's happening last month, you're probably down 63 00:02:52,720 --> 00:02:54,839 Speaker 4: that same range that we were at last month. So 64 00:02:55,280 --> 00:02:57,560 Speaker 4: you know, the summary on this is is that don't 65 00:02:57,560 --> 00:02:59,840 Speaker 4: really see demand coming back before the end of the year. 66 00:03:00,040 --> 00:03:01,560 Speaker 3: It's a combination of interest rates. 67 00:03:01,560 --> 00:03:04,239 Speaker 4: We got good news last week, obviously, but there's a 68 00:03:04,280 --> 00:03:06,160 Speaker 4: lot of other issues here around the election that are 69 00:03:06,200 --> 00:03:08,919 Speaker 4: really coming to play now. People are they're really holding 70 00:03:09,000 --> 00:03:11,960 Speaker 4: back waiting to see which party actually tastes control and 71 00:03:12,040 --> 00:03:17,160 Speaker 4: how significant that control will be. Demand is the problem 72 00:03:17,240 --> 00:03:20,320 Speaker 4: has been the problem inputs are kind of overwhelming the 73 00:03:20,360 --> 00:03:23,480 Speaker 4: output side. The output sides continuing to sag. So not 74 00:03:23,560 --> 00:03:25,840 Speaker 4: a great story here, but you know, no big surprise. 75 00:03:25,960 --> 00:03:27,320 Speaker 3: We saw this coming last month. 76 00:03:27,680 --> 00:03:30,160 Speaker 4: This report pretty much validates where we were last month, 77 00:03:30,160 --> 00:03:33,040 Speaker 4: and that is that manufacturing and slowing down. It's not 78 00:03:33,120 --> 00:03:36,760 Speaker 4: in a super dangerous category yet it's in a yellow area. 79 00:03:37,880 --> 00:03:41,680 Speaker 4: We had fifty three percent of overall manufacturing GDP contracting, 80 00:03:42,040 --> 00:03:44,520 Speaker 4: which was better than last month at eighty four percent. 81 00:03:44,560 --> 00:03:47,240 Speaker 3: I think it was. So, you know, not a great report, 82 00:03:47,280 --> 00:03:48,960 Speaker 3: but not catastrophic either, but. 83 00:03:49,160 --> 00:03:51,440 Speaker 2: Great, great insight and really helps set us up and 84 00:03:51,520 --> 00:03:54,200 Speaker 2: understand how we are headed into Friday Jobs Friday. All right, Tim, 85 00:03:54,200 --> 00:03:56,360 Speaker 2: thanks a lot. Tim Fiory, chair of the Institute for 86 00:03:56,360 --> 00:04:00,600 Speaker 2: Supply Management's Manufacturing Business Survey Committee. So then it's surprise 87 00:04:00,680 --> 00:04:02,240 Speaker 2: that you still the S and P off by one 88 00:04:02,240 --> 00:04:04,480 Speaker 2: point two percent. There may be some other factors obviously 89 00:04:04,520 --> 00:04:07,680 Speaker 2: going on in that, but it also explains the continued dip. 90 00:04:09,160 --> 00:04:13,040 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 91 00:04:13,120 --> 00:04:16,640 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 92 00:04:16,680 --> 00:04:19,440 Speaker 1: Auto with the Bloomberg Business app. You can also listen 93 00:04:19,560 --> 00:04:22,679 Speaker 1: live on Amazon Alexa from our flagship New York station. 94 00:04:23,040 --> 00:04:25,799 Speaker 1: Just say Alexa, play Bloomberg eleven thirty. 95 00:04:27,400 --> 00:04:30,320 Speaker 2: This is Bloomberg Intelligence Radio. We are broadcasting to you 96 00:04:30,440 --> 00:04:33,400 Speaker 2: live from Interactive Broker Studio right here in Midtown Manhattan. 97 00:04:33,520 --> 00:04:37,000 Speaker 2: And if you are listening in Boston, our new home 98 00:04:37,160 --> 00:04:40,760 Speaker 2: starting today will be ninety two nine FM Bloomberg Radio 99 00:04:40,839 --> 00:04:44,160 Speaker 2: moving to nine to nine FM in Boston starting today 100 00:04:44,400 --> 00:04:47,080 Speaker 2: at Newton So follow us on that, all right. Going 101 00:04:47,080 --> 00:04:48,680 Speaker 2: to the markets here, we're right around the lows of 102 00:04:48,720 --> 00:04:51,960 Speaker 2: the session. I have read so many notes about how 103 00:04:52,040 --> 00:04:55,240 Speaker 2: bad September is for equities. I'm very much not surprised 104 00:04:55,279 --> 00:04:57,960 Speaker 2: by the downdraft today. Grace Lee joins us now. She's 105 00:04:57,960 --> 00:05:00,800 Speaker 2: a senior portfolio manager at Columbia Thread. It'll joining us 106 00:05:00,920 --> 00:05:05,599 Speaker 2: from Boston, Massachusetts. Grace, do I just you know, glaze 107 00:05:05,680 --> 00:05:08,600 Speaker 2: over today and say yeah, okay, seasonality whatever and move on? 108 00:05:08,839 --> 00:05:10,520 Speaker 2: Or is there something real going on here? 109 00:05:12,040 --> 00:05:12,200 Speaker 6: Well? 110 00:05:12,200 --> 00:05:13,360 Speaker 7: Alex, thanks for having me. 111 00:05:14,360 --> 00:05:17,279 Speaker 8: I think we when when you look at August, August 112 00:05:17,360 --> 00:05:20,400 Speaker 8: was actually pretty strong. So uh, you know, when we 113 00:05:20,440 --> 00:05:23,159 Speaker 8: come back from vacation and people are kind of back 114 00:05:23,200 --> 00:05:27,200 Speaker 8: to reality and looking at what is historically a not 115 00:05:27,360 --> 00:05:30,240 Speaker 8: so great month for stocks. I think, I think it's worthwhile, 116 00:05:30,320 --> 00:05:34,840 Speaker 8: but this is not anything to be alarmed about. It's 117 00:05:35,040 --> 00:05:37,000 Speaker 8: it's a bit of a breather and the market certainly 118 00:05:37,040 --> 00:05:40,440 Speaker 8: need some of that every once in a while, So overall, 119 00:05:40,640 --> 00:05:45,200 Speaker 8: not not particularly concerned. It's I think it's somewhat normal. 120 00:05:45,320 --> 00:05:48,360 Speaker 8: And and again there there is still green on the 121 00:05:48,400 --> 00:05:52,120 Speaker 8: screen as well, So it just depends on where where 122 00:05:52,160 --> 00:05:54,840 Speaker 8: people choose to look. So I think there's there's a 123 00:05:54,920 --> 00:05:58,400 Speaker 8: number of defensive type names that are doing holding up 124 00:05:58,440 --> 00:06:02,000 Speaker 8: just fine, and even in a tough market today, in a. 125 00:06:01,960 --> 00:06:04,479 Speaker 5: Tough market like today, or just in general here as 126 00:06:04,520 --> 00:06:06,719 Speaker 5: we head into the last few months of the year, 127 00:06:07,240 --> 00:06:10,080 Speaker 5: am I still banking on the big tech stocks grace 128 00:06:10,240 --> 00:06:12,239 Speaker 5: or should I be looking for other areas in the market, 129 00:06:12,240 --> 00:06:15,120 Speaker 5: other sectors, maybe for value? 130 00:06:15,560 --> 00:06:19,960 Speaker 7: Yeah, I think as a value manager myself, I always 131 00:06:19,960 --> 00:06:24,240 Speaker 7: think value is an interesting place, but in particular given that, 132 00:06:25,640 --> 00:06:28,159 Speaker 7: you know, I think tech has certainly done very well 133 00:06:28,200 --> 00:06:32,400 Speaker 7: and continues to post very strong numbers. But I think 134 00:06:32,440 --> 00:06:34,279 Speaker 7: if you look at some of the estimates. 135 00:06:33,880 --> 00:06:38,520 Speaker 8: For the non mag seven stocks, those are projected to 136 00:06:38,560 --> 00:06:41,240 Speaker 8: do somewhat better in the second half of the year, 137 00:06:41,440 --> 00:06:45,479 Speaker 8: and I think We've already seen the broadening of the market, 138 00:06:45,680 --> 00:06:50,239 Speaker 8: you know, with sectors like utilities and reads posting double 139 00:06:50,279 --> 00:06:53,120 Speaker 8: digits in the last couple of months. Ever, since that 140 00:06:53,279 --> 00:06:56,560 Speaker 8: big July CPI print came out, I think that really 141 00:06:56,560 --> 00:06:59,640 Speaker 8: shifted the tone of the market to people looking forward 142 00:06:59,720 --> 00:07:01,680 Speaker 8: to the first rate cuts. 143 00:07:02,279 --> 00:07:04,160 Speaker 2: So before you move on to sort of what other 144 00:07:04,200 --> 00:07:07,600 Speaker 2: stocks are good, did you mentioned tech? However, everyone still 145 00:07:07,600 --> 00:07:09,800 Speaker 2: wants to own AI. So on days like today, like 146 00:07:09,800 --> 00:07:11,800 Speaker 2: do you buy the dip in video or do you 147 00:07:11,880 --> 00:07:13,920 Speaker 2: just sort of like hold those tech positions of where 148 00:07:13,920 --> 00:07:15,840 Speaker 2: they're at and then put the new money to work 149 00:07:15,880 --> 00:07:18,480 Speaker 2: somewhere else, like in consumer or staples or something. 150 00:07:19,680 --> 00:07:21,280 Speaker 8: Well, I think a lot of people are spending a 151 00:07:21,320 --> 00:07:23,760 Speaker 8: lot of time wringing their hands over how to be 152 00:07:23,880 --> 00:07:28,840 Speaker 8: positioned in in the big tech stocks like in video. 153 00:07:30,080 --> 00:07:31,200 Speaker 7: You know, I think. 154 00:07:31,000 --> 00:07:35,760 Speaker 8: There's still I think most people probably have enough exposure 155 00:07:35,760 --> 00:07:40,680 Speaker 8: at this point. You know, I think it's probably wise 156 00:07:40,800 --> 00:07:43,600 Speaker 8: to look at the other sectors where people have not 157 00:07:44,520 --> 00:07:46,679 Speaker 8: you know, they go to them every once in a while, 158 00:07:46,760 --> 00:07:49,760 Speaker 8: but I think people need to really change their habits 159 00:07:49,760 --> 00:07:53,920 Speaker 8: a little bit. It's been a always return to growth, 160 00:07:54,640 --> 00:07:57,640 Speaker 8: you know, after some of these shakeouts, and you know, 161 00:07:57,720 --> 00:07:59,840 Speaker 8: maybe people need to stick a little bit more to 162 00:08:00,280 --> 00:08:04,280 Speaker 8: the center or more toward value, especially as we are 163 00:08:04,360 --> 00:08:07,840 Speaker 8: seeing rate cuts and some of the sectors that have 164 00:08:07,920 --> 00:08:11,200 Speaker 8: been parked by that are poised to do a lot better. 165 00:08:11,840 --> 00:08:16,440 Speaker 8: And that if people are concerned about recession or so 166 00:08:16,720 --> 00:08:20,240 Speaker 8: then you know, you do have a little bit more 167 00:08:20,720 --> 00:08:22,640 Speaker 8: room in defensive names. 168 00:08:22,360 --> 00:08:27,640 Speaker 5: To hold up so grace. As a dividend focused manager, 169 00:08:27,760 --> 00:08:31,720 Speaker 5: if Tim Cook walked into your office today, what would 170 00:08:31,760 --> 00:08:33,720 Speaker 5: you tell him about or what would you what would 171 00:08:33,720 --> 00:08:35,959 Speaker 5: you suggest to him about a dividend policy For a 172 00:08:36,000 --> 00:08:38,080 Speaker 5: company that's got you know, one hundred and fifty billion 173 00:08:38,120 --> 00:08:40,080 Speaker 5: in cash on the balance sheet, one hundred million dollars 174 00:08:40,120 --> 00:08:42,360 Speaker 5: for free cash flow every year, what kind of advice 175 00:08:42,360 --> 00:08:44,640 Speaker 5: would you give him vis via a dividend policy. 176 00:08:46,240 --> 00:08:50,520 Speaker 8: Well, I think it's up to every management with that 177 00:08:50,720 --> 00:08:55,040 Speaker 8: type of cash flows. It's always welcome to have, and 178 00:08:55,080 --> 00:08:57,720 Speaker 8: I think it does broaden the investor base quite a 179 00:08:57,720 --> 00:09:01,240 Speaker 8: bit when you have a reasonably meet full dividend and 180 00:09:01,320 --> 00:09:04,439 Speaker 8: you're still able to invest plenty in your in your 181 00:09:04,480 --> 00:09:08,240 Speaker 8: business in order to grow, you know, but it's it's 182 00:09:08,240 --> 00:09:11,240 Speaker 8: it's a different balance for all all types of companies. So, 183 00:09:12,400 --> 00:09:15,280 Speaker 8: you know, but I think certainly dividend investors would welcome, 184 00:09:16,000 --> 00:09:19,000 Speaker 8: you know, an increase in any of the big tech 185 00:09:19,080 --> 00:09:23,119 Speaker 8: names if they wanted to to increase their dividends. 186 00:09:23,280 --> 00:09:24,800 Speaker 2: I don't know, Paul, what would you say. 187 00:09:25,000 --> 00:09:26,280 Speaker 5: I would say, give me a two and a half 188 00:09:26,320 --> 00:09:29,680 Speaker 5: three percent dividend yield. And I've said this one already 189 00:09:29,720 --> 00:09:33,520 Speaker 5: said university and campus. I've told him. Then he just 190 00:09:33,600 --> 00:09:33,800 Speaker 5: kind of. 191 00:09:33,840 --> 00:09:34,320 Speaker 3: Brushed me on. 192 00:09:34,400 --> 00:09:37,360 Speaker 2: He says, okay, thanks, Paul, Bye bye, I see you later. Okay, 193 00:09:37,400 --> 00:09:40,080 Speaker 2: So great's final word? If I want to get defensive here, 194 00:09:40,200 --> 00:09:41,080 Speaker 2: what's my best bet? 195 00:09:42,679 --> 00:09:45,959 Speaker 8: Well, we still think that that some of the real 196 00:09:46,080 --> 00:09:49,480 Speaker 8: estate stocks actually look pretty interesting were we've been involved. 197 00:09:49,559 --> 00:09:52,280 Speaker 8: But uh, you know, the other day I looked at 198 00:09:52,280 --> 00:09:55,320 Speaker 8: a couple of them, and they still look very attractive 199 00:09:55,360 --> 00:10:02,839 Speaker 8: in terms of absolute historical valuations and and getting the 200 00:10:03,320 --> 00:10:06,320 Speaker 8: tailwind from rake cuts. They've been probably some of the 201 00:10:06,320 --> 00:10:09,080 Speaker 8: most pressured names of the last couple of years. So 202 00:10:09,120 --> 00:10:13,000 Speaker 8: I think, you know, you've got names like Simon Property, 203 00:10:13,440 --> 00:10:16,040 Speaker 8: which is the big mall owner. 204 00:10:15,800 --> 00:10:19,480 Speaker 7: That is trading at fifty two week highs but is still. 205 00:10:19,280 --> 00:10:24,959 Speaker 8: Not extremely expensive and really is very well positioned overall. 206 00:10:25,080 --> 00:10:27,439 Speaker 8: And still has I think close to a five percent 207 00:10:27,520 --> 00:10:30,880 Speaker 8: dividend yield, so we think names like that still have 208 00:10:31,120 --> 00:10:31,640 Speaker 8: room to go. 209 00:10:32,720 --> 00:10:34,920 Speaker 5: Grace, thanks so much for joining us. Really appreciate getting 210 00:10:34,920 --> 00:10:35,480 Speaker 5: some of your time. 211 00:10:35,520 --> 00:10:35,920 Speaker 1: Grace Lee. 212 00:10:35,960 --> 00:10:41,520 Speaker 5: She's a senior portfolio manager at Columbia thread Needle in Boston. 213 00:10:41,679 --> 00:10:45,559 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 214 00:10:45,640 --> 00:10:48,320 Speaker 1: weekdays at ten am Eastern on Apple car Play and 215 00:10:48,320 --> 00:10:51,360 Speaker 1: Android Otto with the Bloomberg Business App. Listen on demand 216 00:10:51,400 --> 00:10:56,199 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 217 00:10:57,000 --> 00:10:59,960 Speaker 2: Happy Tuesday, Everybody. Alex steal Here alongside Paul Sweeney is 218 00:11:00,000 --> 00:11:02,640 Speaker 2: Boomberg Intelligence Radio. We bring you all the top news 219 00:11:02,640 --> 00:11:05,360 Speaker 2: and business, economics, finance, and politics. There are lens of 220 00:11:05,360 --> 00:11:08,320 Speaker 2: our Bloomberg Intelligence folks. They cover two thousand companies and 221 00:11:08,320 --> 00:11:10,920 Speaker 2: one hundred and thirty industries all around the world. We 222 00:11:11,000 --> 00:11:14,480 Speaker 2: also tap our deep resources coming from Bloomberg News and 223 00:11:14,559 --> 00:11:17,360 Speaker 2: print to cover all the top stories. Now this caught 224 00:11:17,400 --> 00:11:19,400 Speaker 2: my eye over the weekend. I try to check out 225 00:11:19,400 --> 00:11:22,160 Speaker 2: when I'm on VAK, but this one I really had 226 00:11:22,200 --> 00:11:27,160 Speaker 2: to read in because Volkswagen is turning on Germany that 227 00:11:27,200 --> 00:11:31,160 Speaker 2: the company is considering factory closures in Germany for the 228 00:11:31,160 --> 00:11:34,720 Speaker 2: first time and it's eighty seven year history. Not only 229 00:11:34,800 --> 00:11:37,360 Speaker 2: does it part with this tradition, but risks of feud 230 00:11:37,440 --> 00:11:41,400 Speaker 2: with unions in a step that truly reflects the heartache 231 00:11:41,480 --> 00:11:44,760 Speaker 2: that is happening within the European automakers. So we want 232 00:11:44,840 --> 00:11:48,280 Speaker 2: to get more on that with Stefan Nikola, European Automotive editor, 233 00:11:48,360 --> 00:11:51,439 Speaker 2: joining us from Berlin, Germany. So many layers to this 234 00:11:51,480 --> 00:11:54,439 Speaker 2: stuff on. But are they going to are they going 235 00:11:54,480 --> 00:11:56,599 Speaker 2: to cut factories or is this like a threat to 236 00:11:56,640 --> 00:11:57,559 Speaker 2: the government or something. 237 00:11:59,000 --> 00:12:01,240 Speaker 9: Well, we don't know for all, but what we know 238 00:12:01,400 --> 00:12:03,880 Speaker 9: for sure is that a lot of car makers in 239 00:12:03,920 --> 00:12:07,560 Speaker 9: Europe are having issues, and Volkswagen is right at the 240 00:12:07,559 --> 00:12:11,439 Speaker 9: front of that. There is over capacity in Europe. Car 241 00:12:11,520 --> 00:12:17,560 Speaker 9: sales never really returned to levels before the pandemic. EV 242 00:12:17,800 --> 00:12:21,920 Speaker 9: sales growth is slowing, and we have new competitors like Tesla, 243 00:12:22,040 --> 00:12:25,479 Speaker 9: like some of the Chinese entrants that make their life difficult. 244 00:12:25,559 --> 00:12:29,000 Speaker 9: So you know, it could very well be that one 245 00:12:29,160 --> 00:12:31,640 Speaker 9: or even more factories we'll have to close. 246 00:12:32,080 --> 00:12:35,560 Speaker 5: Stefan talk to us about that Chinese competition, because there's 247 00:12:35,600 --> 00:12:37,600 Speaker 5: no Chinese cars to speak of here in the US. 248 00:12:38,040 --> 00:12:39,679 Speaker 5: Talk to us about how it is in Europe. 249 00:12:41,160 --> 00:12:44,480 Speaker 9: Yeah, of course, in the US, the Chinese can't really 250 00:12:44,480 --> 00:12:46,719 Speaker 9: make an entry because of the tariffs there and the 251 00:12:47,280 --> 00:12:51,800 Speaker 9: trade tensions. The EU has answered, as you know, with 252 00:12:51,920 --> 00:12:55,960 Speaker 9: its own set of terraffs. But you know, the Chinese 253 00:12:55,960 --> 00:12:59,880 Speaker 9: car makers have started to expand here in Europe since 254 00:13:00,040 --> 00:13:05,360 Speaker 9: early last year, and the big brands by d MG, 255 00:13:05,559 --> 00:13:08,959 Speaker 9: which is now owned by a Chinese company, Jily, but 256 00:13:09,360 --> 00:13:13,720 Speaker 9: also some of the smaller ones are offering electric but 257 00:13:13,840 --> 00:13:18,520 Speaker 9: also combustion engine cars at a discount prices. So they're 258 00:13:18,600 --> 00:13:23,040 Speaker 9: really you know, producing very cheaply in China and selling 259 00:13:23,679 --> 00:13:28,520 Speaker 9: at a quite affordable and competitive competitive price here in Europe. 260 00:13:29,040 --> 00:13:32,520 Speaker 9: So you know, they're making in roads. They represent about 261 00:13:32,559 --> 00:13:37,040 Speaker 9: ten percent of new sales, so a significant you know, 262 00:13:37,160 --> 00:13:41,920 Speaker 9: competitive competition already, and they have plans to expand more 263 00:13:42,160 --> 00:13:45,079 Speaker 9: produced locally even so, yeah, it's only going to get 264 00:13:45,360 --> 00:13:47,280 Speaker 9: more intense competition here in Europe. 265 00:13:47,679 --> 00:13:51,080 Speaker 2: What I don't understand is my impression of just working 266 00:13:51,080 --> 00:13:53,960 Speaker 2: in Europe is that unions really rule the roost. I mean, 267 00:13:54,480 --> 00:13:57,920 Speaker 2: where unions allow this, Like, what what's that dynamic? 268 00:13:59,280 --> 00:14:03,320 Speaker 9: Yeah, it's a it's a difficult dynamic to say the least. 269 00:14:04,240 --> 00:14:08,800 Speaker 9: Unions will fight this, that's obvious. They will try to 270 00:14:09,280 --> 00:14:13,440 Speaker 9: sweeten any deal. You know, no company in Europe that 271 00:14:13,600 --> 00:14:17,959 Speaker 9: has a major union presence will be able to do 272 00:14:18,000 --> 00:14:21,520 Speaker 9: this on the cheap, So folk Sagen will have to 273 00:14:21,600 --> 00:14:26,480 Speaker 9: pay sort of considerable uh you know, payoffs to any any. 274 00:14:26,320 --> 00:14:27,480 Speaker 3: Workers it will let go. 275 00:14:28,120 --> 00:14:32,400 Speaker 9: But of course unions also understand that the European automotive 276 00:14:32,480 --> 00:14:37,800 Speaker 9: landscape is changing, that label costs are relatively high in 277 00:14:37,880 --> 00:14:42,400 Speaker 9: countries such as Germany, but also Belgium, where an Audi 278 00:14:42,520 --> 00:14:47,400 Speaker 9: plant might go. So it's a fine fine line that 279 00:14:47,480 --> 00:14:51,120 Speaker 9: they have to to walk. But for sure they will 280 00:14:51,200 --> 00:14:55,600 Speaker 9: not go down easily on this front. And and there's 281 00:14:55,720 --> 00:14:58,720 Speaker 9: there's gonna be hard negotiations to come in the coming months. 282 00:14:59,000 --> 00:15:00,960 Speaker 5: All right, Stefan, thanks so much for joining us. Stuff 283 00:15:00,960 --> 00:15:04,560 Speaker 5: on Nicola joining us. He's European automotive editor for Bloomberg News. 284 00:15:04,640 --> 00:15:07,920 Speaker 5: Joining us from Berlin, Germany via zoom Again. That looks 285 00:15:08,000 --> 00:15:11,160 Speaker 5: like tough times in the European One of the questions 286 00:15:11,200 --> 00:15:13,640 Speaker 5: I have just thinking about the longer termanys why are 287 00:15:13,680 --> 00:15:15,920 Speaker 5: they not buying as many cars as it did pre pandemic? 288 00:15:16,200 --> 00:15:18,040 Speaker 5: Are we not the same here in the US. I mean, 289 00:15:18,040 --> 00:15:18,480 Speaker 5: I don't know. 290 00:15:18,560 --> 00:15:19,960 Speaker 2: Oh, I don't know. Let's see you. I feel like 291 00:15:19,960 --> 00:15:21,160 Speaker 2: I should know this off the top of my head. 292 00:15:21,160 --> 00:15:22,520 Speaker 5: But I just I mean, I know they're not. 293 00:15:23,320 --> 00:15:24,680 Speaker 2: Yeah, I'm looking, so I'm like. 294 00:15:24,640 --> 00:15:26,040 Speaker 5: I mean, what are you doing if you're not buying 295 00:15:26,040 --> 00:15:29,080 Speaker 5: a car? How are you getting around? I mean, like me, 296 00:15:29,200 --> 00:15:30,360 Speaker 5: I go my Vespa scooter. 297 00:15:30,760 --> 00:15:34,800 Speaker 2: Maybe in Jersey, maybe talkers don't. Maybe you just don't 298 00:15:34,800 --> 00:15:37,080 Speaker 2: have as many. So I'm looking at where we're are 299 00:15:37,120 --> 00:15:40,160 Speaker 2: in cars. We're not where we were pre pandemic. Yet 300 00:15:40,480 --> 00:15:42,200 Speaker 2: we're definitely not where we were during a spike during 301 00:15:42,200 --> 00:15:44,480 Speaker 2: twenty twenty one, but also not during the pandemic, but 302 00:15:44,520 --> 00:15:47,560 Speaker 2: not by a terrible amount. I just think it's it's 303 00:15:47,560 --> 00:15:49,440 Speaker 2: also more about the cars that they are selling in 304 00:15:49,520 --> 00:15:51,760 Speaker 2: terms of say, evs are just not profitable, so they 305 00:15:51,800 --> 00:15:53,040 Speaker 2: have to spend all this money and then they don't 306 00:15:53,040 --> 00:15:55,120 Speaker 2: get the money back. Like that seems to be sort 307 00:15:55,160 --> 00:15:57,800 Speaker 2: of the issue and how Germany then deals with it. 308 00:15:57,840 --> 00:16:00,720 Speaker 2: But that was a story that really caught my eye. 309 00:16:01,160 --> 00:16:05,080 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 310 00:16:05,120 --> 00:16:08,640 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 311 00:16:08,680 --> 00:16:11,480 Speaker 1: Auto with the Bloomberg Business App. You can also listen 312 00:16:11,600 --> 00:16:14,680 Speaker 1: live on Amazon Alexa from our flagship New York station, 313 00:16:15,040 --> 00:16:20,000 Speaker 1: Just Say Alexa playing Bloomberg eleven thirty. 314 00:16:19,280 --> 00:16:21,600 Speaker 5: Ale Steel, Paul Sweeney live here in our Bloomberg Interactive 315 00:16:21,600 --> 00:16:25,520 Speaker 5: Brookers Studio, streaming live on YouTube as well YouTube dot 316 00:16:25,560 --> 00:16:27,800 Speaker 5: Com search Bloomberg Podcast. That's where you'll find us. And 317 00:16:28,320 --> 00:16:31,640 Speaker 5: if you're listening to us in Boston and in New England, 318 00:16:31,680 --> 00:16:34,520 Speaker 5: our new home starting today will be ninety two nine 319 00:16:34,680 --> 00:16:37,360 Speaker 5: FM Bloomberg Radio moving to ninety two nine FM in 320 00:16:37,400 --> 00:16:40,920 Speaker 5: Boston starting at noon today. How cool is that? That's 321 00:16:40,920 --> 00:16:43,000 Speaker 5: a big stick up there, So that'd be good for 322 00:16:43,040 --> 00:16:45,680 Speaker 5: our friends up there in New England. Marvin Lowe, he 323 00:16:45,760 --> 00:16:48,880 Speaker 5: joins US senior Global market strategist State Street. He's up 324 00:16:48,920 --> 00:16:50,680 Speaker 5: in Boston. He's all fired up for that move to 325 00:16:50,760 --> 00:16:53,680 Speaker 5: ninety two nine. Hey, Marvin, I got what is it? 326 00:16:54,840 --> 00:16:58,680 Speaker 5: You're in the marketplace here? I mean, twenty nine companies 327 00:16:58,720 --> 00:17:04,280 Speaker 5: hitting the bond market today. What does that tell you? You 328 00:17:03,040 --> 00:17:03,240 Speaker 5: know what? 329 00:17:03,280 --> 00:17:06,600 Speaker 6: I didn't realize that the calendar was that heavy. And 330 00:17:06,840 --> 00:17:09,040 Speaker 6: it's interesting, right, especially if you think that the FED 331 00:17:09,119 --> 00:17:11,480 Speaker 6: is going to start cutting that, you know, corporate America. 332 00:17:12,080 --> 00:17:16,320 Speaker 6: Corporate treasurers are just marvelous at really understanding the markets 333 00:17:16,960 --> 00:17:19,000 Speaker 6: in a lot of ways better than we do because 334 00:17:19,000 --> 00:17:20,600 Speaker 6: they're they're trying to figure out how to how to 335 00:17:20,640 --> 00:17:23,960 Speaker 6: deal with their funding costs. There must and and and 336 00:17:24,000 --> 00:17:26,560 Speaker 6: I think we're seeing that in some of the price actions. 337 00:17:26,640 --> 00:17:31,879 Speaker 6: There's got to be an increased amount of recessionary concerns 338 00:17:32,359 --> 00:17:34,879 Speaker 6: making their way into the market, because for them to 339 00:17:35,000 --> 00:17:37,520 Speaker 6: want to come in when they know rates are are 340 00:17:37,840 --> 00:17:41,440 Speaker 6: likely going lower must mean that they're worried about access. 341 00:17:42,000 --> 00:17:45,479 Speaker 6: And that's, you know, that's the telling market narrative, if 342 00:17:45,520 --> 00:17:45,840 Speaker 6: you will. 343 00:17:47,040 --> 00:17:50,600 Speaker 2: So what do you think that the potential for upside 344 00:17:50,640 --> 00:17:52,520 Speaker 2: or downside is for them? I mean, we have some 345 00:17:52,640 --> 00:17:55,840 Speaker 2: key risk events, right, so where is the where's the 346 00:17:55,960 --> 00:17:57,520 Speaker 2: risk profile at this point? 347 00:17:58,200 --> 00:17:58,880 Speaker 3: Yeah? For sure. 348 00:17:58,960 --> 00:18:03,680 Speaker 6: I mean the data this week is is top tier. 349 00:18:03,840 --> 00:18:06,560 Speaker 6: We're going to get a real perspective on this twenty 350 00:18:07,160 --> 00:18:10,160 Speaker 6: twenty five versus fifty. You know, we'll get a sense 351 00:18:10,200 --> 00:18:10,919 Speaker 6: of if. 352 00:18:10,840 --> 00:18:13,720 Speaker 3: Bad is good or bad is bad, if. 353 00:18:13,600 --> 00:18:17,560 Speaker 6: You will, you know, I think the real data point 354 00:18:17,640 --> 00:18:20,720 Speaker 6: that's going to define what this quarter looks like is 355 00:18:20,760 --> 00:18:23,080 Speaker 6: that job's number and whether or not kind of the 356 00:18:23,200 --> 00:18:26,560 Speaker 6: slowing that we saw at the end of the summer, 357 00:18:27,080 --> 00:18:29,800 Speaker 6: at least with the July job support which kind of 358 00:18:29,840 --> 00:18:33,359 Speaker 6: set off kind of the recessionary concerns. Is actually the trend? 359 00:18:33,440 --> 00:18:37,000 Speaker 6: You know, are are we really slowing the jobs market 360 00:18:37,240 --> 00:18:39,280 Speaker 6: to the degree that you know that one hundred and 361 00:18:39,320 --> 00:18:43,080 Speaker 6: fourteen thousand print last month indicates? And if we are, 362 00:18:43,680 --> 00:18:46,960 Speaker 6: then the som rule and everything about recession is a 363 00:18:47,320 --> 00:18:49,679 Speaker 6: legitimate market concern kind of going into the end of the. 364 00:18:49,720 --> 00:18:53,400 Speaker 5: Year, Marvin, for better or worse, it's is an election year. 365 00:18:53,720 --> 00:18:56,239 Speaker 5: How does that typically factor into your calculus or do 366 00:18:56,240 --> 00:18:58,280 Speaker 5: you kind of try to put that to the side. 367 00:18:59,240 --> 00:19:00,480 Speaker 6: You know, I try to put it to the side. 368 00:19:00,520 --> 00:19:03,480 Speaker 6: I mean, it's close. We know how heated this election is. 369 00:19:04,240 --> 00:19:07,560 Speaker 6: The FED itself kind of changed their November meeting to 370 00:19:07,600 --> 00:19:10,960 Speaker 6: Thursday rather than Wednesday in the event that the election 371 00:19:11,040 --> 00:19:13,159 Speaker 6: has created a lot of market volatility, So you know, 372 00:19:13,359 --> 00:19:17,000 Speaker 6: you have to take it seriously. The data leads us, however, 373 00:19:17,160 --> 00:19:21,360 Speaker 6: in terms of what the reaction function from a financial 374 00:19:21,359 --> 00:19:24,600 Speaker 6: conditions perspective is. So we're more focused on non farm 375 00:19:24,640 --> 00:19:27,200 Speaker 6: We're more focused on what the data is telling us 376 00:19:27,200 --> 00:19:31,120 Speaker 6: and whether or not what seems like a fairly aggressive 377 00:19:31,280 --> 00:19:34,680 Speaker 6: rate cutting path that's expected for the FED this year. 378 00:19:34,800 --> 00:19:39,159 Speaker 6: You know, four cuts this year potentially might be underestimating 379 00:19:39,200 --> 00:19:41,960 Speaker 6: the economic weakness, but the data is going to guide 380 00:19:42,040 --> 00:19:43,359 Speaker 6: us to the answer around that. 381 00:19:43,560 --> 00:19:45,680 Speaker 2: So already with one hundred basis points, we're looking at 382 00:19:45,720 --> 00:19:48,520 Speaker 2: one fifty basis point cut. It sounds like you're of 383 00:19:48,560 --> 00:19:50,679 Speaker 2: the mind that we should and maybe have more than 384 00:19:50,680 --> 00:19:52,560 Speaker 2: that if there's more economic weakness. 385 00:19:53,720 --> 00:19:56,720 Speaker 6: You know what, I'm still in the camp that's a 386 00:19:56,920 --> 00:19:59,760 Speaker 6: very methodical one per meeting through the end of the 387 00:19:59,840 --> 00:20:02,920 Speaker 6: year makes sense. I'm still in the soft landing camp. 388 00:20:03,280 --> 00:20:05,680 Speaker 6: But in terms of market pricing, if you're not worried 389 00:20:05,680 --> 00:20:08,800 Speaker 6: about reacceleration of debt, the only other part of the 390 00:20:08,840 --> 00:20:13,080 Speaker 6: discussion is that the economy performs worse than expected. And 391 00:20:13,119 --> 00:20:15,399 Speaker 6: from that perspective, you know, I think that the market 392 00:20:15,440 --> 00:20:17,639 Speaker 6: is going to price in a little bit more and 393 00:20:17,720 --> 00:20:21,280 Speaker 6: could probably get more aggressive if the data really starts 394 00:20:21,320 --> 00:20:23,240 Speaker 6: to move in that in that direction. We're not in 395 00:20:23,280 --> 00:20:25,679 Speaker 6: the camp of that. We haven't really seen it. The 396 00:20:25,760 --> 00:20:30,000 Speaker 6: jobs market still looks like it's creating a decent amount 397 00:20:30,080 --> 00:20:32,399 Speaker 6: of jobs to kind of keep the consumer engaged. But 398 00:20:33,160 --> 00:20:34,240 Speaker 6: every data point is live. 399 00:20:35,359 --> 00:20:38,520 Speaker 5: Marvin, You're a senior global macro strategist, Where do you 400 00:20:38,520 --> 00:20:42,080 Speaker 5: see the macro opportunities on a global basis these days? 401 00:20:43,119 --> 00:20:45,480 Speaker 6: Yeah, you know, I think I think on the currency 402 00:20:45,520 --> 00:20:49,720 Speaker 6: side of things, some of this dollar weakness probably went 403 00:20:49,800 --> 00:20:52,240 Speaker 6: a little bit too far. I think kind of this 404 00:20:52,320 --> 00:20:55,200 Speaker 6: volatility that we're seeing within the markets are going to 405 00:20:55,840 --> 00:20:59,160 Speaker 6: uh provide an opportunity to buy the dollar at least 406 00:20:59,160 --> 00:21:01,840 Speaker 6: against maybe some of thehigher data currencies. I think what 407 00:21:01,840 --> 00:21:06,400 Speaker 6: we're seeing out of Japan is super interesting. Uada and 408 00:21:07,000 --> 00:21:09,960 Speaker 6: Japan itself is in a bit of a bind when 409 00:21:09,960 --> 00:21:12,040 Speaker 6: it comes to inflation. They should have higher rates, So 410 00:21:12,840 --> 00:21:14,719 Speaker 6: you know, you kind of hope that that doesn't create 411 00:21:14,760 --> 00:21:18,480 Speaker 6: the amount of volatility that it did earlier this year. 412 00:21:19,119 --> 00:21:21,680 Speaker 6: But you know, certainly I think that the market is 413 00:21:21,720 --> 00:21:25,240 Speaker 6: on edge based on that, and really from a rates perspective, 414 00:21:25,280 --> 00:21:26,879 Speaker 6: if you don't think the Fed is going to be 415 00:21:26,880 --> 00:21:30,640 Speaker 6: able to be as aggressive as the market is pricing, 416 00:21:30,840 --> 00:21:33,520 Speaker 6: or if you think that it needs to be more aggressive, 417 00:21:33,520 --> 00:21:35,640 Speaker 6: you know that that's kind of your call. There definitely 418 00:21:35,720 --> 00:21:37,919 Speaker 6: is curve trades around it. You know, we're in the 419 00:21:37,920 --> 00:21:40,399 Speaker 6: camp that curve steepening is still a trade that you 420 00:21:40,400 --> 00:21:45,320 Speaker 6: could put on even if the FED doesn't necessarily reach 421 00:21:45,440 --> 00:21:47,000 Speaker 6: what the market is pricing right now. 422 00:21:48,440 --> 00:21:52,440 Speaker 2: Marvin, I guess my other question, though, is how influential 423 00:21:52,640 --> 00:21:54,520 Speaker 2: do you think the dollar is going to be to 424 00:21:54,680 --> 00:21:57,119 Speaker 2: all of this? Because we were talking AMIGAILT. Dilittle, she 425 00:21:57,240 --> 00:21:59,880 Speaker 2: does technical she also does market research for US here, 426 00:22:00,119 --> 00:22:01,920 Speaker 2: and she was saying that the carry trade could really 427 00:22:01,920 --> 00:22:05,120 Speaker 2: also be unwinding again with the yen rally, and I'm 428 00:22:05,160 --> 00:22:08,040 Speaker 2: just wondering, when you look at that global sphere in 429 00:22:08,040 --> 00:22:10,639 Speaker 2: addition to the US, how much is hinged on it 430 00:22:10,720 --> 00:22:12,680 Speaker 2: and how much of the is that US just making 431 00:22:12,720 --> 00:22:13,600 Speaker 2: a big deal out of nothing. 432 00:22:14,960 --> 00:22:17,560 Speaker 6: I mean, the dollar is always the most important currency 433 00:22:17,720 --> 00:22:21,480 Speaker 6: in the world. Our analysis in terms of where we 434 00:22:21,520 --> 00:22:25,000 Speaker 6: potentially are with the yen carry trade is that most 435 00:22:25,000 --> 00:22:29,080 Speaker 6: of it's been unwound, So I'm not expecting a lot 436 00:22:29,080 --> 00:22:31,560 Speaker 6: of volatility to come along with kind of the stronger 437 00:22:31,640 --> 00:22:35,040 Speaker 6: yen as we see now. It's ultimately one of the 438 00:22:35,080 --> 00:22:36,959 Speaker 6: harder things to try to figure out in the market. 439 00:22:37,359 --> 00:22:39,560 Speaker 6: You know, for the dollar not to be important, however, 440 00:22:39,680 --> 00:22:43,359 Speaker 6: really does have to get towards its position as a 441 00:22:43,359 --> 00:22:46,400 Speaker 6: reserve currency more of an intermediate term type of discussion, 442 00:22:46,440 --> 00:22:48,960 Speaker 6: and you know, I just don't see the dollar being 443 00:22:49,000 --> 00:22:53,680 Speaker 6: toppled anytime soon. In US exceptionalism when it comes to 444 00:22:53,760 --> 00:22:57,680 Speaker 6: our companies and the earnings potential and really the technology 445 00:22:57,720 --> 00:23:02,280 Speaker 6: advancements that are driven by US corporation still still seems 446 00:23:02,359 --> 00:23:03,320 Speaker 6: like it's intact. 447 00:23:03,000 --> 00:23:08,440 Speaker 5: To me, Marvin, American exceptionalism as it relates to the economy. 448 00:23:08,480 --> 00:23:11,080 Speaker 5: Is that something you buy and if so, how does 449 00:23:11,119 --> 00:23:13,120 Speaker 5: that reflect it in kind of your outlook? 450 00:23:14,400 --> 00:23:14,600 Speaker 3: Yeah? 451 00:23:14,640 --> 00:23:18,399 Speaker 6: I do buy it. I think that, you know, I 452 00:23:18,440 --> 00:23:23,280 Speaker 6: really think that the companies that are developed in the 453 00:23:23,400 --> 00:23:26,679 Speaker 6: US in terms of kind of new business models, the 454 00:23:26,760 --> 00:23:32,800 Speaker 6: ability to find capital, and really an advanced capital market 455 00:23:33,280 --> 00:23:37,240 Speaker 6: environment that allows companies to not only wind up in 456 00:23:37,280 --> 00:23:40,280 Speaker 6: the US, but really those ideas to incubate in the 457 00:23:40,359 --> 00:23:45,040 Speaker 6: US is something that that other countries other parts of 458 00:23:45,040 --> 00:23:47,320 Speaker 6: the world would like to replicate, but they just can't. 459 00:23:48,119 --> 00:23:50,040 Speaker 6: Some of that's because of the reserve currency. It's the 460 00:23:50,040 --> 00:23:53,040 Speaker 6: fact that we've got the liquidity that allows that to happen. 461 00:23:53,480 --> 00:23:55,679 Speaker 6: But you know, we were talking about in VideA. Everyone 462 00:23:55,760 --> 00:23:57,959 Speaker 6: was talking about in video pretty much around the world 463 00:23:58,720 --> 00:24:02,480 Speaker 6: all summer and certainly last week, that business model. It's 464 00:24:02,480 --> 00:24:05,000 Speaker 6: it's not an accent that it's here. You know, its 465 00:24:05,040 --> 00:24:08,320 Speaker 6: founders are not American, and I think that we're going 466 00:24:08,359 --> 00:24:11,440 Speaker 6: to continue to be able to germinate that type of 467 00:24:11,440 --> 00:24:13,800 Speaker 6: business model. She really puts the US in a position 468 00:24:13,800 --> 00:24:15,840 Speaker 6: where our capital flows benefit from that. 469 00:24:16,359 --> 00:24:18,720 Speaker 2: Yeah, but we're the ones with the huge deficits, not 470 00:24:18,760 --> 00:24:20,720 Speaker 2: that other countries don't, but we're the ones with the 471 00:24:20,800 --> 00:24:23,280 Speaker 2: ginormous death deficit that's not going to be fixed no 472 00:24:23,280 --> 00:24:24,399 Speaker 2: matter who's in the White House. 473 00:24:25,359 --> 00:24:27,600 Speaker 6: Yeah, yeah, I mean, it's it's it's one of my 474 00:24:27,640 --> 00:24:29,840 Speaker 6: self box issues for sure. I am in the camp 475 00:24:29,880 --> 00:24:33,080 Speaker 6: that I'm in the camp that that you know, Washington 476 00:24:33,240 --> 00:24:35,680 Speaker 6: needs to get it, get it right. They've got to 477 00:24:35,720 --> 00:24:39,280 Speaker 6: start to acknowledge it the correct way. And unfortunately, you know, 478 00:24:39,320 --> 00:24:42,560 Speaker 6: all the actors in Washington have weaponized the concept of 479 00:24:42,640 --> 00:24:45,560 Speaker 6: the deficit to the point that it doesn't exist from 480 00:24:45,560 --> 00:24:47,560 Speaker 6: that perspective. It's going to be up to the markets 481 00:24:47,560 --> 00:24:50,119 Speaker 6: to ultimately shutter and get them to focus on it. 482 00:24:50,680 --> 00:24:53,439 Speaker 6: But that doesn't really change the fact that the US 483 00:24:53,480 --> 00:24:57,080 Speaker 6: still has some advantages that you know, we're going to 484 00:24:57,119 --> 00:25:01,520 Speaker 6: be able to retain. But but hire yields, But I'm sorry, 485 00:25:01,640 --> 00:25:03,840 Speaker 6: but hire yields are something that we should definitely think 486 00:25:03,880 --> 00:25:06,240 Speaker 6: about from a longer duration perspective. 487 00:25:06,400 --> 00:25:08,080 Speaker 2: Yeah, exactly, like we're kind of stuck with them for 488 00:25:08,080 --> 00:25:10,400 Speaker 2: a little bit. Hey, Marvin, really appreciate it. Thanks so much. 489 00:25:10,400 --> 00:25:12,600 Speaker 2: Marvin Low joining us from Stay Streets. 490 00:25:14,080 --> 00:25:17,960 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 491 00:25:18,040 --> 00:25:21,560 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 492 00:25:21,600 --> 00:25:24,359 Speaker 1: Auto with the Bloomberg Business app. You can also listen 493 00:25:24,480 --> 00:25:27,600 Speaker 1: live on Amazon Alexa from our flagship New York station, 494 00:25:27,960 --> 00:25:30,720 Speaker 1: Just say Alexa play Bloomberg eleven thirty. 495 00:25:31,600 --> 00:25:33,240 Speaker 5: All right, Alex, you ol BOLSWEENI live here in our 496 00:25:33,240 --> 00:25:36,960 Speaker 5: Bloomberg in Director Broker Studio, streaming live on YouTube as well, 497 00:25:37,000 --> 00:25:38,960 Speaker 5: so you can check us out there Bloomberg Podcast. That's 498 00:25:38,960 --> 00:25:40,960 Speaker 5: how you can search for us, and in Boston ninety 499 00:25:41,000 --> 00:25:44,520 Speaker 5: two nine starting in just I've been called six or 500 00:25:44,600 --> 00:25:48,400 Speaker 5: seven minutes noon Eastern time up in Boston, Bloomberg Radio 501 00:25:48,400 --> 00:25:50,760 Speaker 5: will be a ninety two nine FM. How about that? 502 00:25:51,240 --> 00:25:51,640 Speaker 3: All right? 503 00:25:51,800 --> 00:25:55,760 Speaker 5: Citadel Securities Jane Street Group, two of the largest market 504 00:25:55,760 --> 00:25:58,320 Speaker 5: making firms in the US, are on track for record 505 00:25:58,600 --> 00:26:01,680 Speaker 5: annual revenue halls as they further encroach on the big 506 00:26:01,680 --> 00:26:05,240 Speaker 5: banks trading territory. Catherine Dodhugherty joins us here. She's a 507 00:26:05,240 --> 00:26:07,800 Speaker 5: financi reporter for Bloomberg News. She joins us here in 508 00:26:07,800 --> 00:26:11,000 Speaker 5: our New York studio. Where did these guys come from? 509 00:26:11,119 --> 00:26:14,600 Speaker 5: Citadel Jane Street? If I'm Fidelity, from I'm a hedge 510 00:26:14,640 --> 00:26:17,840 Speaker 5: fund X, I'm calling these guys to do my trades right. 511 00:26:18,160 --> 00:26:21,800 Speaker 10: So a lot of trading isn't happening by phone, and 512 00:26:21,840 --> 00:26:26,679 Speaker 10: that's part of the story of how these firms have 513 00:26:26,800 --> 00:26:30,840 Speaker 10: become so prominent with electronic trading, A lot of it 514 00:26:30,920 --> 00:26:35,360 Speaker 10: is happening offline or off of the phone. And so 515 00:26:35,520 --> 00:26:40,439 Speaker 10: these firms are developing algorithms technology that is helping just 516 00:26:40,520 --> 00:26:45,960 Speaker 10: facilitate faster trading and that trading. The pricing is becoming tighter, 517 00:26:46,680 --> 00:26:49,359 Speaker 10: and the banks are having to compete with these market 518 00:26:49,359 --> 00:26:52,959 Speaker 10: making firms because they need to provide pricing that is 519 00:26:53,320 --> 00:26:59,520 Speaker 10: competitive and gives their institutional or retail investors the best 520 00:26:59,600 --> 00:27:02,959 Speaker 10: price for what they're either looking to buy or sell. 521 00:27:03,000 --> 00:27:05,120 Speaker 2: How much money are these guys like Citadel and making 522 00:27:05,200 --> 00:27:06,760 Speaker 2: off of this, like is do they care? Is it 523 00:27:06,800 --> 00:27:07,639 Speaker 2: a lot for them or what? 524 00:27:07,760 --> 00:27:11,680 Speaker 10: It's billions? And these two firms are on track. Twenty 525 00:27:11,680 --> 00:27:15,240 Speaker 10: twenty two was record years for both of them, and 526 00:27:15,400 --> 00:27:19,320 Speaker 10: it's looking like twenty twenty four might beat that record year. 527 00:27:20,119 --> 00:27:24,320 Speaker 10: So for Jane Street that's over ten billion. For Citadel 528 00:27:24,440 --> 00:27:26,680 Speaker 10: it was seven and a half in twenty twenty two, 529 00:27:27,720 --> 00:27:31,480 Speaker 10: and that's not close to what the big US banks 530 00:27:31,800 --> 00:27:36,640 Speaker 10: are making in their trading arms, but it's a significant 531 00:27:37,240 --> 00:27:38,679 Speaker 10: increase when you just. 532 00:27:38,680 --> 00:27:40,719 Speaker 2: Look at the year over year jump. 533 00:27:41,480 --> 00:27:45,480 Speaker 10: So for Citadel Securities it was an eighty two percent jump. 534 00:27:46,040 --> 00:27:49,320 Speaker 10: I believe it was seventy eight for Jane Street. So 535 00:27:49,640 --> 00:27:56,600 Speaker 10: just the growth is extraordinary, and the banks are starting 536 00:27:56,680 --> 00:28:00,840 Speaker 10: to look over their shoulder and say, a second, it's 537 00:28:00,880 --> 00:28:04,359 Speaker 10: not if your b of A or your JP Morgan. 538 00:28:04,440 --> 00:28:09,119 Speaker 10: It's not your big US bank competitors that you're worried about, 539 00:28:09,200 --> 00:28:12,920 Speaker 10: or even European. It's these market making firms just looking 540 00:28:13,400 --> 00:28:16,439 Speaker 10: at the growth and the market share that they're taking 541 00:28:16,800 --> 00:28:17,439 Speaker 10: each quarter. 542 00:28:18,040 --> 00:28:20,880 Speaker 5: If I'm Morgan standing Goldman Sachs, do I care I'm 543 00:28:20,920 --> 00:28:23,680 Speaker 5: losing this share? Am I fighting to keep this share? 544 00:28:23,800 --> 00:28:26,199 Speaker 5: Is it a profitable business? How are they? 545 00:28:26,520 --> 00:28:28,520 Speaker 2: How would they fight for it? At some point? So 546 00:28:29,000 --> 00:28:30,640 Speaker 2: there you have to invest. 547 00:28:30,760 --> 00:28:34,600 Speaker 10: You have to invest in your people and your technology, 548 00:28:34,320 --> 00:28:35,560 Speaker 10: and yes they. 549 00:28:35,440 --> 00:28:37,240 Speaker 2: Are I don't. 550 00:28:37,359 --> 00:28:41,080 Speaker 10: I don't know if they're going to broadcast that they're saying, oh, 551 00:28:41,120 --> 00:28:43,480 Speaker 10: we're worried. I think that most of them would say 552 00:28:43,560 --> 00:28:49,080 Speaker 10: we're fine and we're competitive. But if you don't invest 553 00:28:49,120 --> 00:28:54,520 Speaker 10: in put money and balance sheet into supporting these trading businesses, 554 00:28:54,800 --> 00:28:57,920 Speaker 10: you're going to lose out. And in terms of the 555 00:28:58,240 --> 00:29:02,080 Speaker 10: big banks with investment bank with trading, that's a significant 556 00:29:02,200 --> 00:29:04,240 Speaker 10: portion of your yearly revenue. 557 00:29:05,000 --> 00:29:08,000 Speaker 2: So if they don't. Okay, so they say they're investing there, 558 00:29:08,000 --> 00:29:11,320 Speaker 2: say that they're competing, but clearly that must not be 559 00:29:11,400 --> 00:29:13,240 Speaker 2: the case in some ways. If you still have a 560 00:29:13,280 --> 00:29:16,760 Speaker 2: Citadel's Jane Street getting more and more market share, how 561 00:29:16,760 --> 00:29:19,720 Speaker 2: do you think that this plays out? Like? Who is 562 00:29:19,760 --> 00:29:20,720 Speaker 2: it more important to? 563 00:29:21,080 --> 00:29:24,320 Speaker 10: So the market is also expanding at the same time 564 00:29:24,320 --> 00:29:27,280 Speaker 10: that these marketing the pies are growing. The pie is growing, 565 00:29:27,800 --> 00:29:31,080 Speaker 10: So it's the banks are able to make more money 566 00:29:31,120 --> 00:29:33,560 Speaker 10: and these market makers are able to make more money 567 00:29:33,640 --> 00:29:38,560 Speaker 10: at the same time. Now the portion of the pie 568 00:29:39,160 --> 00:29:42,160 Speaker 10: will that change so that the market makers over time 569 00:29:42,640 --> 00:29:43,360 Speaker 10: take more. 570 00:29:43,280 --> 00:29:44,480 Speaker 2: Even as the pie expands. 571 00:29:44,800 --> 00:29:49,480 Speaker 10: That's what we're tracking, and it does look like they 572 00:29:49,720 --> 00:29:52,920 Speaker 10: if they keep up this momentum, it's it's going to 573 00:29:52,960 --> 00:29:57,640 Speaker 10: become potentially a problem for the big US banks, especially 574 00:29:57,680 --> 00:30:01,880 Speaker 10: those like Goldman that rely so heavily on their trading 575 00:30:02,640 --> 00:30:05,680 Speaker 10: as their core money making unit. 576 00:30:06,120 --> 00:30:10,080 Speaker 5: Jane Street Citadel Securities. These are private companies right, yes, 577 00:30:10,120 --> 00:30:12,560 Speaker 5: are there? I mean they seem like pretty good businesses 578 00:30:12,680 --> 00:30:14,360 Speaker 5: or do they think about going public anything? 579 00:30:14,600 --> 00:30:19,440 Speaker 10: So Citadel Securities has said that it would be right place, 580 00:30:19,520 --> 00:30:23,560 Speaker 10: right time, is kind of what they've broadcast. Their CEO 581 00:30:24,280 --> 00:30:28,240 Speaker 10: has talked about their expansion, but he said, we're in 582 00:30:28,360 --> 00:30:31,000 Speaker 10: no rush. It's definitely on their radar. 583 00:30:31,600 --> 00:30:32,080 Speaker 2: But they're not. 584 00:30:32,920 --> 00:30:36,320 Speaker 10: They're not forced into going public anytime soon. So they 585 00:30:36,320 --> 00:30:39,680 Speaker 10: would only do it, and they're positioning themselves to go public, 586 00:30:39,720 --> 00:30:41,880 Speaker 10: but they would only do it when they feel that 587 00:30:41,920 --> 00:30:46,840 Speaker 10: the market has stabilized that they would get the best pricing. 588 00:30:47,400 --> 00:30:50,800 Speaker 10: There's not as much uncertainty. I would say going into 589 00:30:51,480 --> 00:30:54,440 Speaker 10: the twenty twenty four election, it's not the best time 590 00:30:54,520 --> 00:30:57,960 Speaker 10: right now, but I would after the election, if things 591 00:30:58,000 --> 00:31:03,840 Speaker 10: have are looked stable, we could see a public offering 592 00:31:03,880 --> 00:31:06,640 Speaker 10: of Citadel in the next handful of years. 593 00:31:06,680 --> 00:31:07,960 Speaker 2: I mean, i'd be huge. I think this would be 594 00:31:08,000 --> 00:31:09,240 Speaker 2: an enormous IPO. 595 00:31:09,400 --> 00:31:13,080 Speaker 10: No, it would, I mean, just based on the financials, 596 00:31:13,840 --> 00:31:19,480 Speaker 10: their return on equity, it would likely be priced competitively. 597 00:31:19,600 --> 00:31:23,480 Speaker 10: I would say I'm not the one that I wouldn't 598 00:31:23,520 --> 00:31:25,520 Speaker 10: be here talking if I was the one doing the 599 00:31:25,560 --> 00:31:29,239 Speaker 10: financials to see what they would actually fetch if they 600 00:31:29,280 --> 00:31:33,360 Speaker 10: were to go public. But just looking at the appetite 601 00:31:33,400 --> 00:31:39,080 Speaker 10: in the credit market. Jane Street and Citadel both have loans, 602 00:31:39,600 --> 00:31:42,600 Speaker 10: so that's why they're going to their investors, and these 603 00:31:42,600 --> 00:31:48,320 Speaker 10: are credit investors to show their growth over time and 604 00:31:48,480 --> 00:31:53,920 Speaker 10: just the appetite for the debt that might reflect that. 605 00:31:54,120 --> 00:31:57,760 Speaker 10: In the equity market, they'd also be perceived quite positively. 606 00:31:57,960 --> 00:32:00,480 Speaker 5: Catherin Darty great, so I appreciate kath dartiy fan reporter 607 00:32:00,560 --> 00:32:01,400 Speaker 5: Bloomberg News. 608 00:32:02,760 --> 00:32:06,640 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 609 00:32:06,720 --> 00:32:10,640 Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto 610 00:32:10,680 --> 00:32:13,440 Speaker 1: with the Bloomberg Business app. You can also listen live 611 00:32:13,560 --> 00:32:16,720 Speaker 1: on Amazon Alexa from our flagship New York station. Just 612 00:32:16,800 --> 00:32:19,400 Speaker 1: say Alexa play Bloomberg eleven thirty. 613 00:32:21,320 --> 00:32:23,680 Speaker 2: This is Alex Steel alongside Paul Sweeney, and this is 614 00:32:23,680 --> 00:32:26,800 Speaker 2: Bloomberg Intelligence Radio. We cover all the tap news and business, 615 00:32:27,000 --> 00:32:29,960 Speaker 2: economics and finance through our lens of our Bloomberg Intelligence folks. 616 00:32:30,000 --> 00:32:32,479 Speaker 2: They cover three two thousand, two thousand companies and one 617 00:32:32,520 --> 00:32:35,840 Speaker 2: hundred and thirty industries worldwide. Once a week. We also 618 00:32:35,960 --> 00:32:39,480 Speaker 2: tap into our huge arm of resources over at Bloomberg 619 00:32:39,800 --> 00:32:43,120 Speaker 2: n EF. It's take it for New Energy Finance, and 620 00:32:43,280 --> 00:32:48,040 Speaker 2: they go through and they cover commodities, power, transport, industry, buildings, 621 00:32:48,120 --> 00:32:53,480 Speaker 2: agricultural sectors, technology, sustainability issues. It's all in part of 622 00:32:53,520 --> 00:32:56,239 Speaker 2: the energy transition, and a big part of that is 623 00:32:56,240 --> 00:32:59,800 Speaker 2: how we finance that well. Trina White is benef sustainable 624 00:33:00,080 --> 00:33:02,320 Speaker 2: finance analysts and she joins us now on the role 625 00:33:02,400 --> 00:33:05,959 Speaker 2: the big banks are playing in the energy transition. Trina, 626 00:33:06,000 --> 00:33:08,480 Speaker 2: how do you measure that? First of all, because you 627 00:33:08,520 --> 00:33:10,200 Speaker 2: can make an argument that, okay, we'll forget it. If 628 00:33:10,200 --> 00:33:12,360 Speaker 2: you're lending to Chevron then doesn't count, or a big 629 00:33:12,400 --> 00:33:15,680 Speaker 2: oil company. But those big oil companies also do other 630 00:33:15,720 --> 00:33:18,800 Speaker 2: stuff in the energy transition. So how did you measure 631 00:33:19,160 --> 00:33:20,400 Speaker 2: everything along this line? 632 00:33:20,480 --> 00:33:21,760 Speaker 11: It's a really great question. 633 00:33:22,160 --> 00:33:26,280 Speaker 12: The primary climate impact that banks in particular have it 634 00:33:26,320 --> 00:33:29,240 Speaker 12: looks a lot different from a real economy company like 635 00:33:29,640 --> 00:33:32,800 Speaker 12: an oil major or like a steel company. Instead of 636 00:33:32,840 --> 00:33:36,000 Speaker 12: their operations, it really lies in the deals that they're 637 00:33:36,000 --> 00:33:39,600 Speaker 12: doing with these companies, So the projects they're financing, the pipelines, 638 00:33:39,640 --> 00:33:44,040 Speaker 12: the drilling, but also the solar projects and these newer, 639 00:33:44,120 --> 00:33:47,560 Speaker 12: cleaner companies that they're helping to access capital. And so 640 00:33:47,680 --> 00:33:50,800 Speaker 12: how we measure this is through a ratio called the 641 00:33:50,920 --> 00:33:54,400 Speaker 12: energy supply banking ratio, and this is the proportion of 642 00:33:54,440 --> 00:33:57,920 Speaker 12: the financing that banks are facilitating toward low carbon projects 643 00:33:57,920 --> 00:34:02,560 Speaker 12: and companies to that of fossil fuels. And your specific 644 00:34:02,640 --> 00:34:05,440 Speaker 12: question on oil companies is a great point because all 645 00:34:05,480 --> 00:34:08,280 Speaker 12: of those oil majors are also beginning to make investments 646 00:34:08,320 --> 00:34:11,400 Speaker 12: in clean so will sort of portion the amount of 647 00:34:11,440 --> 00:34:14,840 Speaker 12: financing that is going to those oil companies the amount 648 00:34:14,880 --> 00:34:17,560 Speaker 12: that is going toward their low carbon projects versus their 649 00:34:17,640 --> 00:34:19,120 Speaker 12: existing fossil operations. 650 00:34:19,440 --> 00:34:22,600 Speaker 5: So I would think most banks, I'm i can say 651 00:34:22,600 --> 00:34:25,520 Speaker 5: all banks, but most banks they bank the energy sector. 652 00:34:25,680 --> 00:34:30,440 Speaker 5: Everybody's got an energy team. Are they banking both the 653 00:34:30,480 --> 00:34:33,680 Speaker 5: fossil fuels and the new energy? Are they doing both? 654 00:34:34,160 --> 00:34:34,759 Speaker 11: Absolutely? 655 00:34:34,800 --> 00:34:37,640 Speaker 12: So what we see globally is a ratio of about 656 00:34:37,680 --> 00:34:42,080 Speaker 12: seventy seventy three percent as much low carbon financing as 657 00:34:42,120 --> 00:34:45,440 Speaker 12: fossil fuels. So for every dollar going to fossil fuels, 658 00:34:45,719 --> 00:34:48,880 Speaker 12: about seventy three cents is going toward low carbon solutions 659 00:34:48,920 --> 00:34:51,520 Speaker 12: in twenty twenty two. Most of these banks have a 660 00:34:51,560 --> 00:34:56,120 Speaker 12: pretty diversified portfolio. It really depends regionally. So in Canada, 661 00:34:56,160 --> 00:34:59,400 Speaker 12: for example, where the economy is super tied to energy 662 00:34:59,400 --> 00:35:02,399 Speaker 12: exports of traditional oil and gas, we see really low 663 00:35:02,520 --> 00:35:06,280 Speaker 12: ratios about zero point three zero point four. In Europe, 664 00:35:06,320 --> 00:35:08,719 Speaker 12: where low carbon is much more developed and there's more 665 00:35:08,760 --> 00:35:11,640 Speaker 12: of these companies and projects for banks to finance, we 666 00:35:11,680 --> 00:35:14,800 Speaker 12: see a ratio of about one point eight, so much higher. 667 00:35:15,239 --> 00:35:18,960 Speaker 2: Are these banks making stuff on the loans to do 668 00:35:19,080 --> 00:35:21,760 Speaker 2: the green things? Or is it how do they manage 669 00:35:21,760 --> 00:35:22,239 Speaker 2: that risk? 670 00:35:23,960 --> 00:35:27,160 Speaker 12: So these are definitely still profitable deals. They're not making 671 00:35:27,200 --> 00:35:32,160 Speaker 12: any real concessions. It's really just are there the companies 672 00:35:32,200 --> 00:35:36,239 Speaker 12: looking for this financing are traditional companies also looking for 673 00:35:36,400 --> 00:35:39,760 Speaker 12: labeled like green and sustainable debt to raise as well, 674 00:35:40,480 --> 00:35:43,840 Speaker 12: So there's not necessarily a ton of control that banks 675 00:35:43,920 --> 00:35:45,800 Speaker 12: have over the demand. 676 00:35:45,520 --> 00:35:47,600 Speaker 11: From this underlying set of companies. 677 00:35:47,600 --> 00:35:51,200 Speaker 12: So in many ways it's also an indicator of who 678 00:35:51,200 --> 00:35:52,120 Speaker 12: their client base is. 679 00:35:52,560 --> 00:35:55,400 Speaker 5: So if I'm a banker JP, Morgan and chevrun's my 680 00:35:55,520 --> 00:35:58,359 Speaker 5: client all on the right, any kind of bond day one. 681 00:35:58,480 --> 00:36:00,080 Speaker 5: I don't care if it's green or not green, as 682 00:36:00,080 --> 00:36:00,799 Speaker 5: long as they pay me. 683 00:36:01,920 --> 00:36:04,719 Speaker 2: But he's a former banker, by the way, so don't 684 00:36:04,760 --> 00:36:06,439 Speaker 2: you know That's why I'm saying, that's all about. 685 00:36:07,040 --> 00:36:08,640 Speaker 11: That's what we hear from all our clients too. 686 00:36:09,160 --> 00:36:11,880 Speaker 5: So but I don't want to hold the you know, 687 00:36:12,160 --> 00:36:13,840 Speaker 5: the loan on my books. I want to syndicate it 688 00:36:13,840 --> 00:36:17,040 Speaker 5: out and syndicate the risk exactly. Do I feel okay 689 00:36:17,120 --> 00:36:19,960 Speaker 5: that there are investors out there the one own new 690 00:36:20,120 --> 00:36:23,600 Speaker 5: energy debt for example, or new energy financial instruments. Do 691 00:36:23,600 --> 00:36:24,720 Speaker 5: people want to own that stuff? 692 00:36:25,040 --> 00:36:26,360 Speaker 11: There's definitely demand for it. 693 00:36:26,400 --> 00:36:28,480 Speaker 12: I mean, we see it with the takeoff of the 694 00:36:28,600 --> 00:36:33,080 Speaker 12: labeled market, so giving investors visibility into you know, a 695 00:36:33,120 --> 00:36:35,200 Speaker 12: bond or a loan that's actually labeled as green or 696 00:36:35,239 --> 00:36:39,440 Speaker 12: sustainable use of proceeds. But in terms of what we 697 00:36:39,480 --> 00:36:42,239 Speaker 12: hear from banks, it is exactly that they follow where 698 00:36:42,239 --> 00:36:45,080 Speaker 12: the money is. And so in many ways this tends 699 00:36:45,120 --> 00:36:47,440 Speaker 12: to be a lagging indicator of what's going on in 700 00:36:47,480 --> 00:36:48,760 Speaker 12: the underlying real economy. 701 00:36:49,160 --> 00:36:52,080 Speaker 2: What other stuff are you looking for within this energy 702 00:36:52,120 --> 00:36:54,800 Speaker 2: bank ratio, sustainability ratio? Like, what else are you guys 703 00:36:54,800 --> 00:36:55,399 Speaker 2: focusing on? 704 00:36:55,680 --> 00:36:58,440 Speaker 12: So what we would really like to see is both 705 00:36:58,719 --> 00:37:02,600 Speaker 12: in the banking sector but also in the underlying real economy. 706 00:37:03,160 --> 00:37:06,799 Speaker 12: This measure of low carbon to fossil fuels more than 707 00:37:06,880 --> 00:37:11,759 Speaker 12: quadruple across this decade, so to be consistent with one 708 00:37:11,760 --> 00:37:15,400 Speaker 12: point five degree climate scenarios. So those are you know, 709 00:37:15,440 --> 00:37:18,360 Speaker 12: models that are put out by the International Energy Agency 710 00:37:18,360 --> 00:37:21,480 Speaker 12: for example, indicate that we would need to see four 711 00:37:21,520 --> 00:37:25,880 Speaker 12: times as much low carbon investment as fossil fuels this decade. 712 00:37:26,080 --> 00:37:28,760 Speaker 12: So whether or not it's you know, because the banks 713 00:37:28,800 --> 00:37:33,160 Speaker 12: don't have agency or these underlying companies are not quite 714 00:37:33,200 --> 00:37:35,640 Speaker 12: raising financing at the levels that we would need to see. 715 00:37:36,320 --> 00:37:39,280 Speaker 12: We're nowhere near hitting our one point five degree climate targets. 716 00:37:39,640 --> 00:37:42,600 Speaker 5: Are there certain banks or financial institutions that are doing 717 00:37:42,600 --> 00:37:45,040 Speaker 5: a better job of financing the green. 718 00:37:44,920 --> 00:37:47,279 Speaker 2: Economy, like European banks? Maybe or not. 719 00:37:47,480 --> 00:37:48,840 Speaker 11: There's large variation. 720 00:37:50,040 --> 00:37:54,520 Speaker 12: Last year, Santander had a ratio of about two to one, 721 00:37:55,160 --> 00:37:57,680 Speaker 12: just under two times as much low carbon financing as 722 00:37:57,719 --> 00:38:00,880 Speaker 12: fossil fuels. Again, it tends to be the North America 723 00:38:01,000 --> 00:38:05,000 Speaker 12: and the Canadian the US and also the Chinese banks 724 00:38:05,000 --> 00:38:09,280 Speaker 12: and emerging markets that tend to have much lower ratios. 725 00:38:09,320 --> 00:38:11,480 Speaker 5: In some ways, a bank in Texas isn't doing a 726 00:38:11,480 --> 00:38:13,520 Speaker 5: lot of green energy fuels, but. 727 00:38:15,120 --> 00:38:19,520 Speaker 2: Because they have the biggest wind area in the country. 728 00:38:19,680 --> 00:38:20,880 Speaker 11: Yeah, yeah, that's exactly right. 729 00:38:20,920 --> 00:38:22,759 Speaker 12: I mean, we're seeing a lot of the new tax 730 00:38:22,800 --> 00:38:26,040 Speaker 12: credits being claimed in Republican states like Texas. 731 00:38:26,800 --> 00:38:29,000 Speaker 2: And then also they have like more local banks too, 732 00:38:29,120 --> 00:38:31,640 Speaker 2: so I would wonder they don't have more. But I'm saying, 733 00:38:31,640 --> 00:38:34,400 Speaker 2: like I wonder if it's exclusively oil and gas. And 734 00:38:34,520 --> 00:38:37,000 Speaker 2: also to the point that again, like big oil does 735 00:38:37,040 --> 00:38:39,640 Speaker 2: do other stuff, so it's just harder I think to 736 00:38:39,680 --> 00:38:41,680 Speaker 2: break it down in a way that makes sense. But 737 00:38:41,719 --> 00:38:43,680 Speaker 2: they do other things than just you know, stick something 738 00:38:43,719 --> 00:38:44,759 Speaker 2: in the ground and get oil out. 739 00:38:44,840 --> 00:38:45,280 Speaker 11: Exactly. 740 00:38:45,320 --> 00:38:47,960 Speaker 12: Even within the oil companies, there's a big difference in 741 00:38:47,960 --> 00:38:51,239 Speaker 12: how they're spending their capital expenditures on low carbon infrastructure 742 00:38:51,320 --> 00:38:54,400 Speaker 12: versus fossil fuels. Like an Exon is very far behind 743 00:38:54,440 --> 00:38:57,279 Speaker 12: a Nesty, for example, which is investing heavily in their 744 00:38:57,280 --> 00:38:58,360 Speaker 12: renewable fuels. 745 00:38:58,360 --> 00:39:01,640 Speaker 2: Interesting, and do they have to like get loans out 746 00:39:01,680 --> 00:39:03,480 Speaker 2: to do that or can they sustain it with their 747 00:39:03,520 --> 00:39:04,280 Speaker 2: own cash. 748 00:39:04,080 --> 00:39:07,640 Speaker 12: Flow because they were so profitable in the past couple 749 00:39:07,719 --> 00:39:11,600 Speaker 12: of years. A lot of these oil companies are financing 750 00:39:11,680 --> 00:39:13,759 Speaker 12: off of their own balance sheets. So we did see 751 00:39:13,760 --> 00:39:16,080 Speaker 12: a bit of a dip in these large oil majors 752 00:39:16,160 --> 00:39:16,920 Speaker 12: raising financing. 753 00:39:18,600 --> 00:39:20,840 Speaker 5: I mean, I don't know. I mean I think I 754 00:39:20,840 --> 00:39:23,680 Speaker 5: would make a loan and I don't care, you know, right, but. 755 00:39:23,640 --> 00:39:25,839 Speaker 2: It has to have the right kind of return. That's 756 00:39:26,200 --> 00:39:27,160 Speaker 2: yeah problem that well. 757 00:39:27,120 --> 00:39:28,640 Speaker 5: Yeah, I can figure that out, I know. But I 758 00:39:29,160 --> 00:39:32,120 Speaker 5: want to make my loan, take my fee, and then 759 00:39:32,280 --> 00:39:34,759 Speaker 5: syndicate ninety to ninety five percent the loan out to 760 00:39:34,840 --> 00:39:36,759 Speaker 5: other banks. So I just hold a little piece. Yeah, 761 00:39:36,760 --> 00:39:38,400 Speaker 5: so I can get back into the clients and I 762 00:39:38,400 --> 00:39:39,120 Speaker 5: still own your paper. 763 00:39:39,200 --> 00:39:42,920 Speaker 2: But then what if those other banks are like, ooh 764 00:39:42,680 --> 00:39:44,480 Speaker 2: oh is that how green is that? I don't know 765 00:39:44,480 --> 00:39:47,080 Speaker 2: if I can take it because in my my clients 766 00:39:47,080 --> 00:39:47,719 Speaker 2: are going to be mad. 767 00:39:47,719 --> 00:39:49,160 Speaker 5: So I don't want to go to my syndication desk 768 00:39:49,239 --> 00:39:50,319 Speaker 5: and I say, can you sell this? 769 00:39:50,719 --> 00:39:50,919 Speaker 2: Right? 770 00:39:51,040 --> 00:39:53,360 Speaker 12: And these banks see the writing on the wall about 771 00:39:53,440 --> 00:39:54,879 Speaker 12: you know, how long are they going to be able 772 00:39:54,960 --> 00:39:57,799 Speaker 12: to do business with these traditional oil companies and so 773 00:39:58,239 --> 00:39:59,800 Speaker 12: are those companies that they're doing business with? 774 00:40:00,040 --> 00:40:02,719 Speaker 2: All right, we appreciate it, Thanks so much, Trina White. 775 00:40:02,719 --> 00:40:05,200 Speaker 2: Have been a really fascinating conversation. 776 00:40:05,320 --> 00:40:10,680 Speaker 1: There This is the Bloomberg Intelligence Podcast, available on apples, Spotify, 777 00:40:10,880 --> 00:40:14,520 Speaker 1: and anywhere else you'll get your podcasts. Listen live each weekday, 778 00:40:14,680 --> 00:40:17,640 Speaker 1: ten am to noon Eastern on Bloomberg dot com, the 779 00:40:17,760 --> 00:40:21,200 Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You 780 00:40:21,239 --> 00:40:24,400 Speaker 1: can also watch us live every weekday on YouTube and 781 00:40:24,560 --> 00:40:26,200 Speaker 1: always on the Bloomberg terminal