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US Consumer Confidence Falls, Biden UN Speech · Bloomberg Intelligence

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Speaker 3: And it feels like the worst act test of the
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Speaker 3: consumer data is definitely present. So let's get to Dana Peterson,
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Speaker 3: chief economist at the Conference Board, on this data. Hey, Dana,
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Speaker 3: what was your bigger, biggest takeaway? What's my takeaway from
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Speaker 3: the data this morning?
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Speaker 4: Sure, definitely the headline dipped and we're kind of at
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Speaker 4: the bottom of the range that we've seen over the
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Speaker 4: last two years. Much of it was because consumers are a
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Speaker 4: little less optimistic when it comes to employment.
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Speaker 5: Now.
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Speaker 4: The overall net from jobs hard to get versus jobs
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Speaker 4: easy to get is still positive, but it's come down
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Speaker 4: a lot. And even for expectations, consumers are a little
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Speaker 4: bit concerned about whether or not they're going to have
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Speaker 4: easy jobs prospects going forward.
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Speaker 6: Talk to us a little bit about the transmission mechanism.
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Speaker 6: I mean, when do we really think we're going to
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Speaker 6: see any evidence in the data from some of these
1:09
Speaker 6: cuts we're seeing here out of the FED.
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Speaker 4: Sure, well, I mean you're already seeing that mortgage rates
1:13
Speaker 4: have been falling for a couple of months now, and
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Speaker 4: they really accelerated after the Jackson Hole meeting, and they're
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Speaker 4: certainly going to continue to fall, and that the FED
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Speaker 4: is cut by fifty basis points. So we will see
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Speaker 4: some relief there in the housing market, but it's going
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Speaker 4: to take time because again we learn from cashial or
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Speaker 4: home price index this morning that prices are still very elevated,
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Speaker 4: and hence affordability is still challenged. In terms of the consumer,
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Speaker 4: I mean, as far as we know through July, consumers
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Speaker 4: continue to spend. They pulled back a little bit in
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Speaker 4: retail sales in August, but overall third quarter consumer spending
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Speaker 4: is probably going to be positive. So it's really what
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Speaker 4: happens in the balance of the year, and we do
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Speaker 4: think consumers are going to continue to pull back. However,
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Speaker 4: they're still working, and I think that as long as
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Speaker 4: consumers are working, they may complain about the job market,
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Speaker 4: but they still have some capacity to spend.
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Speaker 3: All right, Dana, We appreciate that, thank you very much.
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Speaker 3: It's that case shape recovery, but they're spending, but just
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Speaker 3: not a time. Basically at the end of the eight
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Speaker 3: day Dana Peterson joining us from the conference board.
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2:34
Speaker 3: President Biden delivering his final speech at the UN General Assembly,
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Speaker 3: making the point that he was elected back in nineteen
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Speaker 3: seventy two, so emphasizing his long career. But it was
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Speaker 3: a wide ranging speech, Damien, that talked very much about AI,
2:48
Speaker 3: the Center holding, peace and stability, ending the war on Gaza,
2:52
Speaker 3: as well the.
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Speaker 6: Generation of leadership. He alluded to it, so you know,
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Speaker 6: it was kind of a farewell party. It's almost it
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Speaker 6: almost brings a tear to my eye, Alex, I.
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Speaker 3: Mean, think about it, and he said too, that is
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Speaker 3: a very very long career. He's seen a lot of
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Speaker 3: change within that. But definitely talking about the Center holding,
3:07
Speaker 3: talking about democracy, bringing up Venezuela and different choices that
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Speaker 3: company that countries can also make as well, and he
3:14
Speaker 3: also spent a good amount of time on AI and
3:16
Speaker 3: the risks around AI and how to insulate that. So
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Speaker 3: let's go from more on that with Nick Wadams. He
3:21
Speaker 3: leads up our US national security team for Bloomberg. Nick,
3:25
Speaker 3: what did he accomplish in that speech?
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Speaker 7: Well, I mean it's a great question, you know. I
3:31
Speaker 7: think this was much more of a swan song for
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Speaker 7: President Biden looking back on his career. The thing that
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Speaker 7: may be most remembered obviously, as he mentioned AI, but
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Speaker 7: his plea to other leaders, essentially saying, listen, I decided
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Speaker 7: that my country was more important than my own political career,
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Speaker 7: and that's why I decided to step down. An admonition
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Speaker 7: to many leaders in the hall who have stayed in
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Speaker 7: power for decades, A plea for leaders to relinquish power
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Speaker 7: if they're no longer fit for office.
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Speaker 6: Nick, what do you think if you're sitting in that
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Speaker 6: auditorium and you're listening to the president, if you're a
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Speaker 6: foreign leader, a foreign head of state, what's your big takeaway?
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Speaker 7: Well, I mean a couple of things. One is President
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Speaker 7: Biden certainly is he made a joke about how he
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Speaker 7: looks only forty, but he certainly looks a little bit older.
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Speaker 7: I think though, in a hall where support for Palestinians
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Speaker 7: and anger toward Israel is pretty palpable, they are not
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Speaker 7: going to be terribly happy with what he said on Gaza.
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Speaker 7: He did call for a cease fire now, but every
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Speaker 7: indication that the US is going to continue the flow
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Speaker 7: of weapons and other support to Israel, So he's not
4:52
Speaker 7: going to budge on that.
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Speaker 3: So that brings up a good point. Then who was
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Speaker 3: he then talking to in that room?
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Speaker 7: Well, I mean, you know, he's trying to set an example,
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Speaker 7: but I mean this is something that leaders have traditionally
5:09
Speaker 7: used to sort of set their agenda for the next
5:12
Speaker 7: year on foreign policy. But obviously, given that he is
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Speaker 7: essentially a lame duck president at this point, that's not
5:20
Speaker 7: something that he's going to be able to do. I mean,
5:22
Speaker 7: you know, the other big thing that's going to be
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Speaker 7: on everybody's mind in that hall is, Okay, who's next?
5:28
Speaker 7: So what would we get Kamala Harris to continue his
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Speaker 7: policies or will we have Donald Trump, who you could
5:35
Speaker 7: almost be guaranteed would essentially blow up everything that Biden
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Speaker 7: did as he looks to chart his course. So you know,
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Speaker 7: President Biden very clearly is not making any promises. He
5:46
Speaker 7: didn't make any promises in that speech. Wanted to use
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Speaker 7: it essentially as a valedictory for his own presidency.
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Speaker 6: You know, Nick, I do find it interesting. You know,
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Speaker 6: it's the UN General Assembly. Obviously he's going to play
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Speaker 6: the foreign policy, but it's what wasn't said, and what
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Speaker 6: wasn't said for me is the US economy and lieu
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Speaker 6: of this consumer confidence data and some of the recent
6:06
Speaker 6: economic prints we've seen on the payroll side. You know,
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Speaker 6: is there any read through in your mind the fact
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Speaker 6: that he completely didn't even touch the state of the
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Speaker 6: US economy and inflation.
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Speaker 7: I mean, you know, very very brief mention on on
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Speaker 7: the US as like a global leader and the and
6:23
Speaker 7: the powerhouse in that way. But I mean, you know,
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Speaker 7: I think, for one thing, this is this is a
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Speaker 7: speech where President Biden very much sees himself as a
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Speaker 7: foreign policy president. He's he's explicit about understands very well
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Speaker 7: who who his audience is, and he doesn't feel like
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Speaker 7: this is a place where he wants to make that
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Speaker 7: case the foreign policy. He's said so many times that
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Speaker 7: foreign policy is really a defining element of his own career.
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Speaker 7: He mentioned that at the top, so I think it
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Speaker 7: was probably more a situation where he was trying to
6:57
Speaker 7: read his audience and play to what he sees one
7:00
Speaker 7: of his biggest strengths. I mean, when you look at
7:02
Speaker 7: the campaign when he was still in the race, he
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Speaker 7: was talking about all of his success and foreign policy
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Speaker 7: and not even really hitting the economic issues as hard.
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Speaker 7: So this is something where he thinks he can take
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Speaker 7: a victory left essentially.
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Speaker 3: All right, Nick, we really appreciate that. Thank you very much.
7:16
Speaker 3: Nick Wadams. He leads our US National Security team for
7:19
Speaker 3: Bloomberg News, commenting on President Biden's a final speech to
7:22
Speaker 3: the UN General Assembly.
7:25
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7:40
Speaker 3: I mean, I'm waiting, Damian, I'm waiting for the actual
7:43
Speaker 3: stimulus from China.
7:44
Speaker 6: Well, you know, I think what's interesting this time around
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Speaker 6: is the announced it all at once. China doesn't normally
7:49
Speaker 6: do that, and China doesn't normally give you forward guidance.
7:51
Speaker 6: In this time, the PBOC governor actually said he's probably
7:54
Speaker 6: going to cut rates before the end of the year. Again,
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Speaker 6: they don't often do exactly. China, well, the fiscal obviously
8:00
Speaker 6: is what we're all waiting for, but I don't even
8:01
Speaker 6: know if fiscal stimulus is really what we're waiting for. Again,
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Speaker 6: this comes down to the fact that unemployment is so high,
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Speaker 6: there so much wealth destruction, So people just don't want
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Speaker 6: to spend. It's not about them not having the capacity
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Speaker 6: to spend outs, it's about the willingness too.
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Speaker 3: Okay, so that monetary isn'tenough, But we definitely look at
8:14
Speaker 3: commodities kind of flying on that news. Let's get more
8:17
Speaker 3: with Cali Cox, a chief market strategist at Ritholt's Wealth Management.
8:20
Speaker 3: She joins us, we're just talking about China and sort
8:23
Speaker 3: of that helping the commodity market today. Materials are flying
8:26
Speaker 3: high within the S and P. Freeport is the best
8:28
Speaker 3: performing stock on the S and P. Is this enough
8:30
Speaker 3: from China to really get things moving?
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Speaker 8: So sure, Alex, I mean, China isn't a tough spot
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Speaker 8: right now, and I mean, like you mentioned, there's a
8:38
Speaker 8: dead situation going on over there. Unemployment is still quite
8:41
Speaker 8: high even though there is this capacity to spend. So
8:45
Speaker 8: it's kind of more of the same from China. I'm
8:47
Speaker 8: not sure what it can do on the commodity side
8:49
Speaker 8: of things. I mean, obviously China is a major player there,
8:52
Speaker 8: but from our perspective, I mean, emerging markets are still
8:56
Speaker 8: you know, quite attractive given the slide and the dollar
8:59
Speaker 8: that we've seen. But you know, China is the big
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Speaker 8: weak spot, and unfortunately it's the biggest part of emergent markets.
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Speaker 6: Callie, I've read your latest note when you're talking about
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Speaker 6: the tug of war between wages and prices and you
9:12
Speaker 6: reference the big Mac.
9:13
Speaker 5: Now, I went to McDonald's yesterday.
9:14
Speaker 6: I paid fifteen dollars and eighty three cents for a
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Speaker 6: twenty piece McNugget that doesn't include the sauce.
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Speaker 5: All to us.
9:19
Speaker 9: About big nuggets.
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Speaker 6: They were really good, actually, but they're smaller. There's the
9:23
Speaker 6: mcdugget's even smaller. So what's the read through from the
9:25
Speaker 6: price of a big mac today relative to years past?
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Speaker 5: Small?
9:30
Speaker 8: I have to give a shout out to the economists,
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Speaker 8: because the economist has been compiling historical prices of the
9:35
Speaker 8: big mac.
9:36
Speaker 9: Since nineteen eighty nine.
9:37
Speaker 8: But it gives you a really interesting use case on
9:40
Speaker 8: you know, measuring exactly how much daily purchases. Now, the
9:44
Speaker 8: big bag is not a daily purchase for me, but
9:46
Speaker 8: for some people it might be. And it's an item
9:48
Speaker 8: that we're all familiar with in the economy, and it
9:51
Speaker 8: can also show us how the economy is becoming more affordable,
9:54
Speaker 8: even though the price of a big Mac is at
9:56
Speaker 8: an all time high, and you know, a lot of
9:58
Speaker 8: things in our life are quite ex defensive compared to wages,
10:01
Speaker 8: and the big Mac has actually gotten a little cheaper,
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Speaker 8: a little more affordable based on the average you know,
10:08
Speaker 8: wage per hour worked, you know, over the past year
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Speaker 8: or so.
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Speaker 3: So, Kelly, based on that, and then the consumer confidence
10:17
Speaker 3: that we got today, how does one invest in that
10:20
Speaker 3: k shape consumer recovery when we are, though on a
10:24
Speaker 3: path of significant rate cuts.
10:28
Speaker 8: Consumer confidence today was actually quite worrying. Yeah, I just
10:31
Speaker 8: read the details, and we obviously saw a huge shop
10:34
Speaker 8: in confidence. For me, the worrying detail was the fact
10:37
Speaker 8: that we saw a drop in the evaluation of present
10:39
Speaker 8: conditions because for most of the cycle, and to remind everybody,
10:43
Speaker 8: confidence is a combination of what people feel right now
10:46
Speaker 8: and what people are expecting in the future. That's how
10:48
Speaker 8: the Conference board measures it. But the number that we
10:52
Speaker 8: got today was mostly driven by a drop in the
10:54
Speaker 8: evaluation of present conditions. People don't feel well about what's
10:58
Speaker 8: happening now before this, so it was mostly you know,
11:02
Speaker 8: souring on expectations. But the fact that president conditions and
11:06
Speaker 8: the fact that consumers are worried about what's happening now
11:10
Speaker 8: makes me a little more worried about the present situation
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Speaker 8: of the job market. And you know how able people
11:16
Speaker 8: are to afford these things, even though we've seen a
11:19
Speaker 8: pretty solid job market up until now.
11:24
Speaker 5: Calori.
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Speaker 6: History doesn't often repeat itself, but it does rhyme. And
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Speaker 6: so my question for you is, when you and Barrier
11:30
Speaker 6: in the war room at Ridthole's Wealth Management, you're looking
11:32
Speaker 6: at previous rate cutting cycles, and I believe you highlighted
11:35
Speaker 6: eighteen of them. I'm just curious, what cycle does this
11:38
Speaker 6: one most remant?
11:39
Speaker 5: I mean, what's most reminiscent to you? What does it
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Speaker 5: most look like.
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Speaker 8: I'd like to think that it's a rate cut cycle
11:45
Speaker 8: that won't overlap with a recession. And so far, so good.
11:48
Speaker 8: Even though I just mentioned that consumer confidence data has
11:51
Speaker 8: me a little worried right now. So, yeah, when Barry
11:54
Speaker 8: and I are looking at rate cut cycle data, you know,
11:57
Speaker 8: we usually note or we usually separate it at two.
12:00
Speaker 8: I mean, rate cuts that happened out of desperation and
12:02
Speaker 8: rate cuts that have happened out of celebration. More policy adjustments,
12:05
Speaker 8: because the FED has reached its goal on inflation and unemployment,
12:09
Speaker 8: so it can take policy back down to normal. And
12:12
Speaker 8: so far we think the latter case is what's going on.
12:16
Speaker 8: I mean, the job market, of course is stalling, but
12:19
Speaker 8: unemployment is still quite low. So right now we feel
12:22
Speaker 8: pretty confident that the FED can take this over the line.
12:25
Speaker 8: We just hope that the economy can hold out for a.
12:27
Speaker 9: Few more months.
12:30
Speaker 3: So does that mean by midcaps, small caps or where
12:32
Speaker 3: does that land you?
12:35
Speaker 8: Well, Alex, we really like small and mad caps. We
12:37
Speaker 8: think that there's a lot of opportunity there just because
12:40
Speaker 8: they haven't been able to keep up in this full market,
12:42
Speaker 8: and you know, speaking of emerging markets, small caps are
12:44
Speaker 8: more domestically focused. So if you believe that the US
12:47
Speaker 8: economy is the cleanest shirt in a dirty laundry pile,
12:50
Speaker 8: then you probably do want to be looking at the
12:52
Speaker 8: small and meg paps. But overall, you know, as long
12:55
Speaker 8: as the economy stays okay, as long as the job
12:58
Speaker 8: market can make it through the next few months, then
13:01
Speaker 8: we think that there are a lot of good reasons
13:03
Speaker 8: to be buying into this market as long as you
13:05
Speaker 8: focus on the right things.
13:06
Speaker 3: All right, Kelly, we appreciate it. Thank you so much,
13:08
Speaker 3: Kelly Cox joining us there for Matholt's wealth management and
13:12
Speaker 3: kind of setting us up. But you know, the consumer
13:14
Speaker 3: confidence data, if it continues to deteriorate, right, had to
13:17
Speaker 3: small caps and make that good investment.
13:18
Speaker 6: How many big macs do you think Calli's really tried
13:20
Speaker 6: in the last few years. I mean, I wonder if
13:22
Speaker 6: it tastes the same today as it did ten years ago.
13:25
Speaker 6: I would bet even with the secret sauce and everything,
13:27
Speaker 6: it probably does.
13:27
Speaker 3: Okay, So what does that tell you.
13:29
Speaker 6: Well, it tells me that you know, somebody's making fat
13:31
Speaker 6: margins I e.
13:32
Speaker 5: McDonald's, right, but probably to pay Paul.
13:35
Speaker 3: What did they just change the ingredients? Because you change
13:36
Speaker 3: ingredients and that's cool and you get fresher stuff. We're
13:39
Speaker 3: using that they're trying to.
13:39
Speaker 5: Like get I know where you're going here. It's not
13:42
Speaker 5: farm to table with McDonald's.
13:43
Speaker 6: But you know it did taste good. I mean, those
13:44
Speaker 6: McDonald's were delicious.
13:47
Speaker 3: Oh twenty piece nuggets. I don't even know they had
13:49
Speaker 3: twenty piece nuggets anymore. I was like a double cheeseburger
13:52
Speaker 3: with Burger King tons of cheese.
13:53
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Speaker 3: Joining us now is Nadia Calvino, President of the European
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Speaker 3: one trillion euros in order to do that.
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Speaker 9: How's it going, Yes, well, it's going well, it's going well.
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Speaker 9: We are on track to meet the target of one
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Speaker 9: percent of our our annual investments go to the climate transition,
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Speaker 9: to the green finance, so as to make it a success,
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Speaker 3: But why do I keep hearing then that the europe
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Speaker 3: the carrot approach with the IRA. How did they differ?
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Speaker 9: Well, I think that we have a shared endeavor, you know,
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Speaker 9: one of the largest investors in renewables in the in
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Speaker 9: the whole world, and right now here in the UN
15:47
Speaker 9: General Assembly. Around the General Assembly, I'm having lots of
15:51
Speaker 9: meetings exchanges to try to bring that agenda forward with
15:54
Speaker 9: a global perspective.
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Speaker 6: Well, Nadia, I mean, renewables is a very broad topic, solar, wind, water,
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Speaker 6: new nuclear. Talk to us about where you're deploying your
16:02
Speaker 6: balance sheet. I mean six hundred billions, a lot of money, well.
16:05
Speaker 9: More than fifty percent, as I said, is going to
16:07
Speaker 9: climate finance. And this is sustainable infrastructures, This is sustainable transport.
16:12
Speaker 9: This is also renewables, wind energy, greeds, solar, and also
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Speaker 9: new fuels, the fuels of the future, for example, green hydrogen.
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Speaker 9: We're supporting very innovative, large projects, also large traditional infrastructures
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Speaker 9: ones finding the technologies, the breakthrough technologies for all of us.
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Speaker 3: I mean we've seen with hydrogen though that a lot
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Speaker 3: that it's hard, that green hydrogen particular is quite hard.
16:37
Speaker 3: I mean Germany had a sort of backtrack from that,
16:40
Speaker 3: in particular with the war in Ukraine. In addition, like
16:43
Speaker 3: Oorsied dropped and had to ditch out on a hydrogen project.
16:47
Speaker 3: Can you do hydrogen profitably? And how do you do that?
16:50
Speaker 9: But we have to, we have to because it is
16:52
Speaker 9: can right now, well we are right now. We're investing
16:56
Speaker 9: in a number of projects in Europe which are more
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Speaker 9: having to do with industry hubs. So we are greening industry,
17:03
Speaker 9: highly polluting, highly energy intensive.
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Speaker 3: So like as the men industry.
17:07
Speaker 9: That yes, and still you know, all these large industry
17:11
Speaker 9: so we are we're seeing, for example, close to port
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Speaker 9: to Report in the south of Portugal, we're going to
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Speaker 9: have a green hydrogen hub, so that's very close to
17:20
Speaker 9: traditional industries and we're helping them become green and also profitable.
17:25
Speaker 9: Likewise in other parts of Europe. You know, we are
17:27
Speaker 9: at the early stages of these new technologies and it
17:30
Speaker 9: is only normal you know that some projects fail, that
17:32
Speaker 9: some projects are succeeding, and that's that's why we are.
17:37
Speaker 9: The European Investment Bank is a public investment bank to
17:39
Speaker 9: take the risk, to make sure that patient capital long
17:43
Speaker 9: term investors are taking those risks. So that also we
17:46
Speaker 9: mobilize private capital and we make this a success.
17:49
Speaker 6: Well, you know, other multi level finance institutions, I mean
17:51
Speaker 6: development banks out of for example, China, Korea, et cetera,
17:54
Speaker 6: have had a very poor track record of deploying capital profitably.
17:57
Speaker 6: And you know, I know the IB is different. I
17:59
Speaker 6: know the World Bank Group is very very different. And
18:01
Speaker 6: I know we're talking about perpetual capital, perpetual investments. But
18:04
Speaker 6: the end of the day, you do have to get
18:06
Speaker 6: a return on your investment. So talk to us about
18:08
Speaker 6: which sectors within the broader renewable space, within the border
18:11
Speaker 6: climate space carry the highest return on investment from your perspective.
18:15
Speaker 9: Well, actually, we are very profitable. Let me be very clear.
18:18
Speaker 9: The fact that we're a public bank doesn't mean that
18:20
Speaker 9: I don't have to deliver for a shareholders. So around
18:23
Speaker 9: two billion euros we had in profit last year. We've
18:25
Speaker 9: been profitable since the bank, since its inception. We have
18:29
Speaker 9: a very low, very low level of non performing assets.
18:33
Speaker 9: When I say very low, I mean like zero point
18:35
Speaker 9: four percent of our assets. Huh. So it is a
18:37
Speaker 9: very profitable bank. And what we have is a very
18:39
Speaker 9: large balance sheet and very balanced portfolio with large infrastructures
18:43
Speaker 9: traditional infrastructures which are very profitable, lower risk and also
18:48
Speaker 9: highly risky endeavors like innovative startups or large investments into
18:53
Speaker 9: new green technologies. And that's what's allowing us, I think,
18:56
Speaker 9: to make a difference in making projects bankable at the
18:59
Speaker 9: end of the day.
19:00
Speaker 3: So what have you noticed in terms of if you
19:01
Speaker 3: support a project that, does it bring in private investors
19:05
Speaker 3: in private capital.
19:06
Speaker 9: At the end of the day, it does absolutely. You know,
19:09
Speaker 9: the European Investment Bank is considered to be a reference
19:11
Speaker 9: in terms of technical expertise in some areas for example green,
19:16
Speaker 9: for example health. So once the EiV says yes, I'm
19:19
Speaker 9: going to invest in this project, immediately a number of
19:21
Speaker 9: investors say.
19:22
Speaker 5: I join, naddie. I'd love to ask you a question.
19:25
Speaker 6: I mean, in my world, the emerging market space, there
19:27
Speaker 6: has been an absolute explosion of sustainable finance vehicles and mechanisms,
19:31
Speaker 6: you know, green bonds, clean bonds, you name it.
19:34
Speaker 5: I'm curious to hear your thoughts about a lot of that.
19:35
Speaker 6: I mean, a lot of sovereign nations, a lot of
19:37
Speaker 6: countries are issuing dead under this green bond umbrella.
19:41
Speaker 5: You know, do you believe in that?
19:42
Speaker 6: Do you think they're just green washing or are they
19:44
Speaker 6: really deploying that capital in a clean and efficient way.
19:47
Speaker 9: We have to ensure, indeed that the green bond standards
19:50
Speaker 9: around the world are not green washing, and that that
19:52
Speaker 9: should be a top priority. Otherwise, you know, once you
19:55
Speaker 9: lose the credibility, then you lose everything in capital markets.
19:58
Speaker 9: I don't have to explain it to you. So that's
20:00
Speaker 9: why I think we have a very important shared interest
20:03
Speaker 9: in having global standards. You know, the taxonomies that are
20:06
Speaker 9: being developed in different parts of the world. In Europe
20:08
Speaker 9: has been a pioneer in that area. Also, the European
20:11
Speaker 9: Investment Bank, by the way, has pioneered green bonds, and
20:15
Speaker 9: we have to make sure that those standards are met
20:17
Speaker 9: and that green investments are really green, so that we
20:21
Speaker 9: make sure that this is providing sufficient finance to close
20:24
Speaker 9: the investment gap.
20:25
Speaker 3: How do you offset your risk? How do you offset
20:28
Speaker 3: risk when you're taking on riskier projects.
20:31
Speaker 9: Well, we have a capital base, but generally what we
20:34
Speaker 9: do is that we have riskier and less risky projects
20:37
Speaker 9: and we mobilize our capital in a very wise manner.
20:40
Speaker 9: You know, sometimes our shareholders and say you should take
20:43
Speaker 9: on more risk because that's what your capital is for.
20:45
Speaker 9: But I think that we have a relatively good balance
20:48
Speaker 9: in terms of you give me.
20:50
Speaker 3: A balance on that, like what would be considered a
20:52
Speaker 3: low risk project, what would be considered a high risk
20:54
Speaker 3: For example, well.
20:55
Speaker 9: An infrastructure in a European country, that is a low
20:59
Speaker 9: risk project. When we are building trains or rolling stock
21:03
Speaker 9: or or a metro or port. I mean this is
21:07
Speaker 9: I mean we are lending to a sovereign state which
21:09
Speaker 9: has a very high rating and this is our shareholders.
21:13
Speaker 9: So investments within the EU are considered to be generally
21:17
Speaker 9: lower risk. Or for example, we do also through the
21:20
Speaker 9: financial sector, we do lending to SMEs in Europe that
21:22
Speaker 9: is very proable, profitable, lower risk. Then if we are
21:26
Speaker 9: investing in a very large project one billion, two billion
21:29
Speaker 9: project in green hydrogen as you were seeing, you know, I'd.
21:33
Speaker 5: Like to take a variation on that question.
21:34
Speaker 6: That's important because you're right, it's a lot of these
21:36
Speaker 6: small medium enterprises. They're the ones who are actually proactively
21:39
Speaker 6: you know, taking risk in the market. What sort of
21:43
Speaker 6: risk hedges, transmission vehicles, carbon credits, offsets can they take
21:47
Speaker 6: advantage of it? I mean, what's available to them to
21:49
Speaker 6: help offset their risk in the space.
21:52
Speaker 9: But what we do is we provide guarantees and portfolio
21:55
Speaker 9: guarantees or other sort of financial support to the banks
22:00
Speaker 9: so that they can lend to SMEs with lower interest rates.
22:03
Speaker 9: That's basically what we do and again that allows us
22:07
Speaker 9: to reach a large share of European SMEs. And there,
22:10
Speaker 9: for example now investing in green technologies energy efficiency thanks
22:15
Speaker 9: to the support of the European Investment Bank. I don't
22:18
Speaker 9: know if many of them know it, you know, because
22:20
Speaker 9: they go to a bank, a commercial bank, and but
22:23
Speaker 9: you know, although they are they have to signal in
22:26
Speaker 9: their loans that this is supported by the European Investment Bank.
22:30
Speaker 9: I don't know if they always do. But the fact
22:32
Speaker 9: of the matter is the EiV is one of the
22:34
Speaker 9: key elements that is driving the European economy.
22:37
Speaker 3: Where does natural gas fall into this? For you guys, well,
22:42
Speaker 3: we have.
22:42
Speaker 9: To get away from natural gas.
22:44
Speaker 3: Right if need it.
22:45
Speaker 9: So it gets hard, I understand, and we all understand.
22:49
Speaker 9: We are in the midst of that transition. But if
22:51
Speaker 9: there is one thing that we have learned due to
22:53
Speaker 9: the war in Ukraine is that we cannot be dependent
22:56
Speaker 9: on Russia. And starting with Russia, but other parts of
22:59
Speaker 9: the world, be it talking about energy cheap, other elements
23:04
Speaker 9: of the of the supply chain, critical row materials. You know,
23:06
Speaker 9: Europe has to stand up on its two feet and
23:09
Speaker 9: become independent when it comes to energy. That's that's a
23:12
Speaker 9: clear idea I think.
23:13
Speaker 6: You know, I want to talk about economic disparity, but
23:16
Speaker 6: more in terms of the type of partners you choose
23:18
Speaker 6: to go into business with, right the types of banks,
23:20
Speaker 6: you know, I think of the Brookfields, the Blackstones, the
23:23
Speaker 6: macquarie Is, you know, these big infrastructure investors, the Morgans
23:25
Speaker 6: and analysts.
23:26
Speaker 5: You know, does that matter?
23:28
Speaker 6: Like, you know, can you partner with smaller banks, medium
23:31
Speaker 6: sized banks, international banks? I mean how often do you
23:33
Speaker 6: do that? Or do you kind of stick to the
23:35
Speaker 6: people you know and love best.
23:36
Speaker 9: No, we partner with a lot of financial institutions around
23:40
Speaker 9: the world. Of course, we do a very serious check
23:43
Speaker 9: when it comes to not only the financial strength of
23:46
Speaker 9: the counterparties, but also compliance and reputational risks. And also
23:52
Speaker 9: we are investing through funds, investment funds. We have a subsidiary,
23:56
Speaker 9: the European Investment Fund, which is partnering with private investment
23:59
Speaker 9: funds to then mobilize these other sort of venture capital
24:03
Speaker 9: and quasi capital investments.
24:06
Speaker 3: What's the thing that you guys are most excited about
24:08
Speaker 3: right now, either some kind of technology or a certain
24:11
Speaker 3: type of project that you feel like has real potential
24:14
Speaker 3: that can really unlock other opportunities.
24:17
Speaker 9: Well, I think there are two areas where let me
24:19
Speaker 9: focus on what I have been discussing here in New York,
24:22
Speaker 9: because back in Luxembourg there we discuss many others.
24:25
Speaker 5: Going on behind closed doors. Here.
24:27
Speaker 9: Indeed, that's why I'm going to give you a sneak review.
24:30
Speaker 9: Now we have been discussed. There's nothing so revolutionary or surprising.
24:34
Speaker 9: But actually I've been discussing. We've been discussing four main subjects. Green, climate, health,
24:41
Speaker 9: that's a big issue. I think that there's a lot
24:43
Speaker 9: of interest in health. Multilateral development institutions working as a system.
24:47
Speaker 9: We're working better than ever. We're cooperating with the World Bank,
24:51
Speaker 9: African Development Bank, Asian Development Bank, and we want to
24:54
Speaker 9: really be giving as much value for money to our
24:57
Speaker 9: shareholders in supporting the global economy and investment. And then
25:01
Speaker 9: fourth points has been women. I think that there is
25:03
Speaker 9: also a lot of There are lots of things going
25:06
Speaker 9: on around the world in terms of partnering and networks
25:10
Speaker 9: of women, and I think.
25:11
Speaker 3: We have to support that that endeavor aal so which
25:13
Speaker 3: definitely ties into help also at the same time. All Right, Dadia,
25:16
Speaker 3: thanks a lot. We really appreciate that was a wonderful
25:18
Speaker 3: sort of beneath the hood look on how you finance
25:21
Speaker 3: all of this. Ilmnik, president of European Investment Bank, thank
25:24
Speaker 3: you so much.
25:25
Speaker 9: Thanks to you, Bye bye bye.
25:28
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25:42
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25:46
Speaker 3: Alex Deo Launchai Damien's That's our Possmuni is in Ireland today.
25:50
Speaker 3: We are here at the earth Shot Summit right here
25:52
Speaker 3: at the Plaza Hotel in New York City. The summit
25:55
Speaker 3: celebrates innovators who are trailblazing solutions to repair our plan
25:58
Speaker 3: at The event as co hosted Boomberg Philanthropies, and it
26:01
Speaker 3: also brings together world leaders of all ilk to kind
26:04
Speaker 3: of get together and try and solve many of the
26:07
Speaker 3: crises that we have in our world today, in particular
26:09
Speaker 3: climate and one joins us today on set. Robbie Menon
26:12
Speaker 3: is Singapore's Climate Action Ambassador, but was also the former
26:15
Speaker 3: Monetary Authority of Singapore chief, and he joins us now
26:18
Speaker 3: right here on set. Robbie Danien's really excited to talk
26:21
Speaker 3: to you because he's an emerging markets credit guy. So
26:24
Speaker 3: let's just start with some ego for a second. What
26:26
Speaker 3: did you think of what China did today?
26:29
Speaker 10: Sorry? What did China do today?
26:32
Speaker 5: Yeah? Right, it's a great point.
26:34
Speaker 6: Let's talk about the nominal effect of exchange rate in Singapore. Now,
26:36
Speaker 6: I'm just kidding seriously, you're here, you're in these closed
26:39
Speaker 6: door meetings, you're at this conference, you're talking about climate change,
26:42
Speaker 6: you're talking about economies. But your former role as the
26:45
Speaker 6: head of the Monetary Authority of Singapore, you know, you
26:48
Speaker 6: set policy. What is that like in a world now
26:51
Speaker 6: that the FED has decided to cut rates by fifty
26:53
Speaker 6: basis points?
26:54
Speaker 5: You think Singapore comes next.
26:55
Speaker 3: And China unleash is a stimulus package that's it?
27:00
Speaker 10: Well, well, I've been a bit removed from that scene
27:03
Speaker 10: for quite a while now. So but if I were
27:05
Speaker 10: to reflect back two years ago when we were all
27:08
Speaker 10: facing a surge in inflation globally, and the conventional view
27:12
Speaker 10: at that time, which I subscribed to, also was that
27:16
Speaker 10: given how low interest rates were and how easy and
27:21
Speaker 10: accommodative monetary policies have been for ten years, the catch
27:25
Speaker 10: up to tighten rates to bring down this inflation is
27:28
Speaker 10: going to be unprecedented. And indeed, the heights in rates
27:31
Speaker 10: and the tightening of monetary policy, including in Singapore through
27:34
Speaker 10: the exchange rate, was quite significant, and I thought this
27:41
Speaker 10: was going to come at the cost of a severe
27:43
Speaker 10: slowdown in economic growth and rise in unemployment. I'm talking globally, right,
27:50
Speaker 10: and this has been the case in all previous instances.
27:54
Speaker 10: I think looking back, we've done not too badly. We've
27:58
Speaker 10: avoided major recession in the major economies. There hasn't been
28:04
Speaker 10: any sizeable increase in unemployment, the labor market has been
28:07
Speaker 10: quite resilient, and surely, but surely, you know, we've been
28:11
Speaker 10: bringing down inflation. I think this is a credit to
28:15
Speaker 10: many of my ex colleagues in the central banking world.
28:18
Speaker 10: I will not comment on specific policy moves, which as
28:21
Speaker 10: the one they made recently, but I think we should
28:24
Speaker 10: step back and see we actually did not too badly.
28:27
Speaker 10: It could have been much worse.
28:29
Speaker 9: To be able to ease this early, But.
28:33
Speaker 5: That itself is the right move.
28:35
Speaker 10: I would not comment, but the fact that we were
28:37
Speaker 10: even having this conversation or easing about stimulus, when not
28:41
Speaker 10: too long ago we were fighting inflation. It has come down,
28:44
Speaker 10: so I think this has been quite remarkable.
28:47
Speaker 3: And this also brings sort of the question of climate
28:50
Speaker 3: action and financing that part of the market as well,
28:53
Speaker 3: because part of the conversation here in the US with
28:56
Speaker 3: the Inflation Reduction Act is that that in essence is inflationary,
29:00
Speaker 3: and that the more money that every country spends on
29:03
Speaker 3: greeting stuff, the more you're going to create sort of
29:05
Speaker 3: an inflation bubble. Is that true? From where you sit?
29:10
Speaker 10: I think that that is going to be at best
29:12
Speaker 10: quite short term. Some stimulus through any new investments going
29:18
Speaker 10: into an area of scarcity will create some price pressures
29:22
Speaker 10: and demand pressures against limited supply. But the objective of
29:26
Speaker 10: the Inflation Reduction Act as it is, as is the
29:29
Speaker 10: objective of similar packages in every other country, is to
29:33
Speaker 10: expand the supplying capacity. Is to expand the supply capacity
29:37
Speaker 10: for renewables, for cleaner technologies and so on. So yes,
29:40
Speaker 10: in the short term that capacity has not increased, you
29:43
Speaker 10: will get momentary increase in inflation and price pressures as
29:46
Speaker 10: you put in demand. But when the supply capacity increases,
29:49
Speaker 10: that stabilized. So as with any industrial transformation or restructuring,
29:55
Speaker 10: there will be short term price effects, but that should
29:57
Speaker 10: even out once a supply and demanded back. In one thing,
30:00
Speaker 10: there's anything inherently inflationary in these packages.
30:03
Speaker 6: In Singapore's key position along the malacostraight, it sits between
30:07
Speaker 6: two of the largest polluting countries on the planet, that
30:10
Speaker 6: being China and India. Talk to us about your location
30:13
Speaker 6: in the world, your geostrategic location. How are you addressing
30:16
Speaker 6: those two nations their cability to enact climate change.
30:22
Speaker 10: I think both China and India have huge potential to
30:27
Speaker 10: address a climate challenge, particularly with respect to mitigation and
30:32
Speaker 10: renewable energy. The countries are large. We often forget that
30:37
Speaker 10: China is installing more renewable capacity each year than the
30:41
Speaker 10: rest of the world put together. India's a close second.
30:46
Speaker 10: So these two countries, in terms of their geography, are
30:49
Speaker 10: well endowed to deploy clean energy, but they're going to
30:53
Speaker 10: take time, because what we forget is that energy demand
30:56
Speaker 10: in these countries is also increasing rapidly. The energy consumption
31:00
Speaker 10: per capita in China and India, it's a fraction of
31:03
Speaker 10: that in the West, and there are still many villages
31:07
Speaker 10: without access to electricity. So even as they install solar capacity,
31:11
Speaker 10: they're having to build cold plants and keep their fossil
31:14
Speaker 10: fuel plants running to meet that, which is why they're going.
31:17
Speaker 2: To take longer.
31:19
Speaker 10: But surely they will get there because of the inherent
31:23
Speaker 10: capacity for renewable energy. Actually, where I worry more is
31:26
Speaker 10: Southeast Asia because similar situation, rapid growth and energy demand,
31:33
Speaker 10: rise of middle class urbanization, people having access to electricity.
31:37
Speaker 5: In Indonesia, Philippines, Vietnam.
31:39
Speaker 10: Yes, all the countries around US, including US, we are
31:44
Speaker 10: in many ways alternative energy disadvantaged. Singapore particularly so because
31:51
Speaker 10: we're a small island city state. Imagine New York, you know,
31:55
Speaker 10: deploys clean energy entirely within the city. But even in
32:00
Speaker 10: the countries that are relatively well endowed, they do have
32:03
Speaker 10: challenges with great for instance, is forested mountainous Laying those
32:07
Speaker 10: transmission lines is not easy, not straightforward, and the distribution
32:12
Speaker 10: of renewable energy capacity is very uneven geographically across Southeast Asia.
32:17
Speaker 10: So I think that's a very bigger challenge might be.
32:20
Speaker 3: What about financing? We have like thirty seconds left. What's
32:23
Speaker 3: the biggest hurdle to financing all of this? Right now?
32:27
Speaker 10: There is enough private capital in the world to solve
32:29
Speaker 10: the climate crisis. There is enough financing if you look
32:32
Speaker 10: at the annual flows of financial assets well in excess
32:36
Speaker 10: of the funding gap. The problem is you need to
32:39
Speaker 10: find bankable projects at appropriate risk return metrics, and this
32:44
Speaker 10: is where you need blended finance with public capital coming
32:47
Speaker 10: in to catalyze private capital. That synergistic combination is what
32:51
Speaker 10: we need and that will be enough to solve this.
32:54
Speaker 3: All right, Rabbie, it was great to check in with you.
32:56
Speaker 3: This is a great conversation. Please come back at Rabi
32:59
Speaker 3: man in a single or as Climate Action Ambassador plus
33:02
Speaker 3: a former Monetary Authority of Singapore Chief.
33:06
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
33:10
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33:12
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33:15
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33:18
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33:24
Speaker 3: Let's get into the market here, guys, you're looking at excellent.
33:26
Speaker 3: Stock is up by four tenths of one percent. California
33:29
Speaker 3: sues the company over plastic pollution and recycling myth. But
33:33
Speaker 3: what it does bring up questions is does recycling actually work?
33:36
Speaker 3: And how do you scale it? How is it profitable?
33:38
Speaker 3: How do you do it? Greenley while joining us now
33:40
Speaker 3: at scott Levine Bloomberg Intelligence senior industry analyst, and he
33:43
Speaker 3: joins us now to discuss you just had a recent
33:45
Speaker 3: note out that talked about waste companies and how they're
33:49
Speaker 3: managing and expanding their recycling operations.
33:52
Speaker 9: Is it efficient? Is it good?
33:55
Speaker 11: Yeah, it's an evolving story. So I think there's a
33:59
Speaker 11: lot of refe clignment that needs to take place for
34:01
Speaker 11: this to become a larger business. But yeah, this is
34:06
Speaker 11: probably one of the biggest growth areas within the recycling
34:10
Speaker 11: and more broadly speaking, the solid waste management business in general.
34:15
Speaker 11: So yes, is the is the answer to your question?
34:18
Speaker 2: In summary?
34:21
Speaker 11: I think what needs to happen.
34:22
Speaker 5: Great to see you, Hey, Hey, you doing DamID? No,
34:26
Speaker 5: I was going to just I was just gonna how
34:27
Speaker 5: you doing. I was just going to ask you.
34:29
Speaker 6: I mean, look, let's take a more broader approach to
34:31
Speaker 6: the question here about recycling, right, waste management the companies
34:34
Speaker 6: that you cover. We have an election coming up in November.
34:38
Speaker 6: What works best for your sector? Democrat Republican? What's going
34:42
Speaker 6: to be better for waste management in the broader sector
34:44
Speaker 6: at large?
34:45
Speaker 11: I think conventional wisdom is that Democrats are better. The
34:49
Speaker 11: greater regulation requires greater sophistications large companies that generally have
34:54
Speaker 11: greater sophistication when it comes to environmental stewardships. So, but
35:00
Speaker 11: that said, you know the I think it's not a
35:03
Speaker 11: really different answer in either scenario. There are some specialized
35:10
Speaker 11: topics within the environmental business where it does make more
35:13
Speaker 11: of a difference, like the cleanup of pfas for you know,
35:18
Speaker 11: for one example. But but by and large, Democrats generally
35:22
Speaker 11: are better for the environmental services industry. And I think
35:25
Speaker 11: that's true here.
35:29
Speaker 6: So Democrats are better for the environmental services industry, But
35:31
Speaker 6: what's better for their stock price?
35:33
Speaker 5: Scott?
35:33
Speaker 6: I mean, is that really like the mechanism, the transmit
35:36
Speaker 6: mission mechanism, the fact that a you know, a democratic
35:39
Speaker 6: power power structure is going to basically allow some of
35:42
Speaker 6: these companies to extract a higher margin will not really
35:45
Speaker 6: translate through into the stock price. I'm just curious to
35:47
Speaker 6: hear your thoughts on valuations.
35:49
Speaker 11: Yeah, well, the wastetocks has done very well this year.
35:52
Speaker 11: Wastetocks tend to do well. Uh, they're late cycle and
35:55
Speaker 11: light cyclicals, right, So you compare that to my energy
35:58
Speaker 11: services coverage universe, and the waste stocks are blowing them away.
36:02
Speaker 11: They were huge out performers in two thousand and eight
36:04
Speaker 11: when the economy was cratering, and they were huge underperformers
36:09
Speaker 11: when things came mooring back in two thousand and nine.
36:11
Speaker 11: So a lot of it kind of relates to the
36:13
Speaker 11: macro as far as the solid waste companies concerned. And
36:15
Speaker 11: the valuations are at high levels, but I think sustainable
36:20
Speaker 11: given the fact that the industry is doing well. Earnings
36:23
Speaker 11: performance has been good. As inflation has come in, cost
36:28
Speaker 11: inflation has has declined at a faster pace than pricing,
36:34
Speaker 11: and so margins have expanded. And so you're seeing a
36:36
Speaker 11: lot of good things happening within the waste industry overall,
36:40
Speaker 11: and that's led to very strong stock performance in twenty
36:43
Speaker 11: twenty four.
36:46
Speaker 3: What are the household waste management companies.
36:50
Speaker 11: So we've got waste management and Republic Services at the
36:53
Speaker 11: top of the list, waste connections as well. It's really
36:56
Speaker 11: an oligopoly. You know, the big three probably have about
37:02
Speaker 11: forty percent market share. I think publicly traded stocks generally
37:05
Speaker 11: have fifty percent market share. Another twenty percent or so
37:11
Speaker 11: is with municipal operators like New York City Sanitation Department,
37:14
Speaker 11: And of the thirty percent are your mom and pops,
37:17
Speaker 11: and they're always going to be out there. But it's
37:19
Speaker 11: a fairly consolidated industry, and it's fairly orderly in terms
37:22
Speaker 11: of everybody playing well in the sandbox together. Pricing discipline
37:27
Speaker 11: generally is held throughout the industry, and that's a lot
37:29
Speaker 11: of the reason you've seen the stocks do so well.
37:34
Speaker 6: I wonder if you can help me understand also globally,
37:36
Speaker 6: especially as it relates to China, who we know is
37:38
Speaker 6: a huge consumer of commodities and goods worldwide.
37:40
Speaker 5: You know, talk to us about you.
37:42
Speaker 6: Know, solid waste recycling and recycling more broadly speaking outside
37:46
Speaker 6: of the United States, I mean, what companies dominate that sector.
37:49
Speaker 11: Sure, I'm going to use as an opportunity to pivot
37:52
Speaker 11: to the recycling theme, which you mentioned at the outset
37:54
Speaker 11: as well. And so China, you know, historically had been
37:59
Speaker 11: the big dryver of the recycling business for the waste companies.
38:04
Speaker 11: The reason for that is because a lot of the biggest,
38:06
Speaker 11: the biggest piece of the recycling mix has been big
38:09
Speaker 11: brown boxes, and the demand for that has historically come
38:12
Speaker 11: from China. China takes our big brown boxes and they
38:15
Speaker 11: send them back with TVs or consumer electronics, and so
38:18
Speaker 11: they've used the US waste industry or recycling more specifically
38:23
Speaker 11: as a source of packaging. Okay, about five years ago,
38:27
Speaker 11: China really cracked down on recycling and in fact banned
38:32
Speaker 11: imports of US brown boxes UH as an initiative to
38:38
Speaker 11: really kind of grow their own recycling business UH and
38:41
Speaker 11: also source some of their fiber from other markets.
38:45
Speaker 5: UH.
38:46
Speaker 11: And so China has become less significant to the US
38:50
Speaker 11: recycling business ever since. The US has really had to
38:53
Speaker 11: diversify their exports to other markets like India, other sub
38:58
Speaker 11: in Southeast Asia as well. So China's become less of
39:00
Speaker 11: a driving force within recycling broadly speaking within the last
39:04
Speaker 11: five years.
39:05
Speaker 3: All right, Scott, Scott, we appreciate it, Scott Levine, joining
39:08
Speaker 3: us Bloomberg Intelligence and covers oil services as well as
39:11
Speaker 3: the recycling guys, so all the big players.
39:13
Speaker 9: This is the.
39:14
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