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APA, TikTok, and Regional Banks · Bloomberg Intelligence

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Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 2: you listen to podcasts, and at Bloomberg dot com Slash podcast.
0:55
Speaker 2: It's Thursday, so Sunday, you know, Merger Monday. But there's
0:58
Speaker 2: a trade out there in the shale business and we've
1:03
Speaker 2: seen a lot of consolidation in the patch out there
1:07
Speaker 2: in really the last couple of years, and we have
1:09
Speaker 2: another deal here APA to buy shale oil driller calland
1:13
Speaker 2: Petroleum for four point five billion dollars. And we want
1:16
Speaker 2: to talk shale. We talk with Vince Piazza. He is
1:21
Speaker 2: our energy analysts for Bloomberg Intelligence. Hey, Vince, I know
1:24
Speaker 2: you've been busy recently kind of parsing through all these
1:28
Speaker 2: M and A trades in the shale patch here in
1:31
Speaker 2: the US. Talk to us about what APA is. What
1:34
Speaker 2: is APA doing here with this acquisition of Calent Petroleum.
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Speaker 3: Yeah, well, look in the Permian, Paul, and by the way, Paul,
1:42
Speaker 3: happy new here to you and yours. What we have
1:46
Speaker 3: here is a jump ball for acreage in the Permian.
1:53
Speaker 3: And we've seen this across several years. It paused and
1:58
Speaker 3: then kicked up again most recently. But this is really
2:02
Speaker 3: about larger players looking to gain scale and smaller players
2:08
Speaker 3: looking at the environment in front of them. With higher
2:12
Speaker 3: rates and big guys getting bigger, there's really not a
2:16
Speaker 3: lot of room for them. And you know, we cover roughly,
2:19
Speaker 3: we follow roughly fourteen to fifteen names in the Permium
2:23
Speaker 3: that are below five hundred thousand net acres and they
2:27
Speaker 3: need to do something. They need to do something to
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Speaker 3: survive or to put themselves up for sale and callan did.
2:35
Speaker 3: And we see this as a continuation of consolidation for
2:41
Speaker 3: scale and asset concentration. These guys are selling a commodity.
2:46
Speaker 3: There's very little differentiation. The way you gain efficiency, the
2:50
Speaker 3: way you gain productivity is to be big, to have scale,
2:55
Speaker 3: to have concentration across your region. And in case it's
3:00
Speaker 3: the Permian, we've seen a lot of M and A
3:03
Speaker 3: in the Permian on the oil side. We haven't seen
3:06
Speaker 3: a lot on the gas side. I think that's where
3:09
Speaker 3: the real story will be in twenty twenty four. You know,
3:13
Speaker 3: natural gas has likely bottomed. In twenty twenty two, we
3:16
Speaker 3: should see better conditions, better balances. We should see more
3:21
Speaker 3: consolidation in the gas side as well, especially with the
3:24
Speaker 3: curve of the way it looks, and we'll probably see
3:27
Speaker 3: that more in the Hainesville and also in the Marcellos.
3:30
Speaker 3: But what this really tells us is there is scarcity value, right,
3:35
Speaker 3: and so you are bidding up smaller operators, MidCap operators,
3:40
Speaker 3: operators that were privately sponsored, and the pe shops need
3:44
Speaker 3: to monetize these investments to recycle that capital as well.
3:48
Speaker 3: So you're seeing small, mid sized pe back names selling out,
3:53
Speaker 3: and you're seeing publicly traded names also selling out, especially
3:57
Speaker 3: in an environment where you have higher rates. In the
3:59
Speaker 3: case accoun, they were one of the higher levered names
4:04
Speaker 3: of the companies that we follow. So, you know, I
4:07
Speaker 3: think it is reality coming to call on them and
4:10
Speaker 3: other smaller operators.
4:11
Speaker 2: Yeah, I mean, I'm just you know, Bloomberg, it's got
4:13
Speaker 2: some good reporting here, just summarizing what's happened so far.
4:16
Speaker 2: Just recently, in October, Excellon Mobile reaches sixty billion dollars
4:19
Speaker 2: deal to buy Pioneer Natural Resources. Chevron followed it up
4:23
Speaker 2: with a fifty three billion dollar agreement for Hesse Corporation,
4:26
Speaker 2: and in December, Occidental Patrolling mcgreed to acquire Crown Rock
4:28
Speaker 2: for a ten point eight billion So, Vince, as you say,
4:31
Speaker 2: a lot of deals getting done here, talk to us
4:33
Speaker 2: about just the natural gas market in general, you know,
4:37
Speaker 2: because when we talk about energy, we tend to talk
4:39
Speaker 2: about oil more than that gas. Here, talk to about
4:42
Speaker 2: where we are in that market today. What's the outlook.
4:46
Speaker 3: Well, the outlook right now, just given the backdrop for
4:51
Speaker 3: weather and the rather mild temperatures that we've had here
4:55
Speaker 3: early on in the winter season, it's been it's been
4:59
Speaker 3: a tough go for natural gas. You know, we would
5:01
Speaker 3: have thought we would have seen a better bid into
5:04
Speaker 3: the winter, but with a very mild December and a
5:09
Speaker 3: little bit turning here in January as of cooler at
5:12
Speaker 3: tempts settle in. But it's been a pretty tough go.
5:16
Speaker 3: But then again, it's better than where we were last year,
5:19
Speaker 3: where we saw NAT gas go below two dollars very briefly,
5:24
Speaker 3: but we think we're past that point. We think twenty
5:27
Speaker 3: twenty four bounces will likely tighten. You know, right now
5:31
Speaker 3: we're in this mix of this two sixty two fifty spot,
5:37
Speaker 3: but we think that things will improve. There is a
5:40
Speaker 3: structural secular trend, and that is toward LNG exports. The
5:47
Speaker 3: US has grown its export capacity, it will continue to
5:51
Speaker 3: grow this export capacity through twenty twenty through twenty thirty,
5:57
Speaker 3: and we think this is a net positive to pull
6:01
Speaker 3: the excess capacity that we have in the US into
6:05
Speaker 3: the European corridor and in the Asia corridor. You know,
6:08
Speaker 3: last year we had a lot of flows go into
6:11
Speaker 3: the European corridor, just given the fact of Russia and
6:16
Speaker 3: the Ukraine War and what that meant for energy security.
6:20
Speaker 3: So the US was a buffer for that. We will
6:23
Speaker 3: continue to be a buffer for that. LNG export capacity
6:27
Speaker 3: gains will be a structural story that we'll hear more
6:30
Speaker 3: of and that will tighten balances for US. In the US.
6:34
Speaker 3: You also have gas in the power stack that has
6:38
Speaker 3: gain share and that will continue to be stable over
6:42
Speaker 3: the next year or so. We will continue to gain
6:45
Speaker 3: share there as well on the industrial side. So you
6:48
Speaker 3: have both a cyclical story, which is the weather component
6:51
Speaker 3: that we can control, but there is also a structural
6:54
Speaker 3: component to it that does provide longer term growth for
6:59
Speaker 3: natural gas, not just as a transition fuel, not just
7:03
Speaker 3: as a bridge fuel, but as a key component within
7:09
Speaker 3: the energy complex, the energy portfolio.
7:13
Speaker 2: Hey, Vince, you know, it's interesting that the US has
7:16
Speaker 2: become a net exporter of oil here and a lot
7:20
Speaker 2: of probably a lot of our listeners probably aren't aware
7:22
Speaker 2: of that, particularly the ones I kind of remember back
7:24
Speaker 2: in the seventies when we had those oil emergencies and
7:28
Speaker 2: shocks here, and a lot of that's due to the shale.
7:31
Speaker 2: Can you you're the expert on shale, You're the expert
7:34
Speaker 2: on fracking. Can you explain to us, when these fractors
7:37
Speaker 2: blast in a bunch of this water into the rock,
7:39
Speaker 2: what comes out in terms of oil versus natural gas?
7:42
Speaker 2: How does that typically work?
7:44
Speaker 3: Yeah, So, in a place like the Permium where most
7:48
Speaker 3: of the M and A activity is occurring, not only
7:50
Speaker 3: do you have your crude oil, but you also have
7:53
Speaker 3: what's called associated natural gas or associated gas. You know,
7:57
Speaker 3: typically you will have something to the effect of two
8:00
Speaker 3: thirds liquids, you know, one third gas. That gas has
8:03
Speaker 3: to go someplace, and it has been a big boon
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Speaker 3: to a place like the Permian, which is the third
8:13
Speaker 3: largest producer of natural gas as a standalone basin, which
8:18
Speaker 3: is really incredible when you think about we're really drilling
8:21
Speaker 3: for crude oil in that basin. But what we have
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Speaker 3: here is a plethora of natural gas, and the export
8:30
Speaker 3: market is the most likely area for it to move
8:36
Speaker 3: through in order to balance. In order to balance these
8:40
Speaker 3: markets in general, no matter where you drill, you're going
8:44
Speaker 3: to drill some natural gas if you're drilling for crude
8:48
Speaker 3: oil as well. So when we do talk about natural gas,
8:53
Speaker 3: it is a default to talk about crude oil as well,
8:57
Speaker 3: since that is the driver of what we come up
9:01
Speaker 3: with when we also drill for natural gas and oil,
9:05
Speaker 3: so it is the thing that stirs the drink for
9:08
Speaker 3: the natural gas market as well.
9:10
Speaker 2: So you know, I guess we all kind of got
9:13
Speaker 2: a little bit more smarter on liquified natural gas when
9:16
Speaker 2: Russia did invade Ukraine and that really cut off the
9:19
Speaker 2: supply of Russian gas to Europe. And we've got a
9:22
Speaker 2: lot of it, but it's not easy to transport. Is
9:24
Speaker 2: you got to do this whole liquification process. How is
9:28
Speaker 2: that whole part of the industry developing.
9:31
Speaker 3: It's developing very rapidly. We're growing capacity. We have become
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Speaker 3: a key exporter to only Europe, but also to Asia.
9:42
Speaker 3: One thing that is quite key for us here in
9:44
Speaker 3: the US. And we saw this last year as well,
9:48
Speaker 3: our ability to adapt quickly and move those move those
9:52
Speaker 3: molecules into the market that needed it the most. We
9:56
Speaker 3: were saved by a relatively warm winter in Asia, were
10:00
Speaker 3: able to move those molecules into Europe to help them
10:06
Speaker 3: restock their storage. We have here in Europe relatively stout
10:12
Speaker 3: storage at well over eighty three percent fulfilled, and so
10:20
Speaker 3: for this winter at least, natural gas storage is not
10:23
Speaker 3: going to be an issue and We've done an exceptional
10:27
Speaker 3: job in the European Union has done an exceptional job
10:30
Speaker 3: refilling its capacity to deal with any uncertainty that would occur,
10:36
Speaker 3: not only on the warfront, but also in terms of
10:40
Speaker 3: weather as well. So natural gas in the US being
10:45
Speaker 3: exported to other countries has been a key contributor to
10:50
Speaker 3: how we are looking to balance our market here in
10:55
Speaker 3: the US. And you know right now, with your being filled,
11:03
Speaker 3: the Asia market is looking quite quite attractive, and it
11:07
Speaker 3: is more profitable to move those molecules into Asia relative
11:11
Speaker 3: to the European market.
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Speaker 2: Vince, great stuff, great tortois force there on the energy
11:15
Speaker 2: space that guests Vince Piazza, senior industry analyst covering the
11:20
Speaker 2: energy space. We've got a great energy team, a global
11:23
Speaker 2: energy teams. You have to look at energy on a
11:25
Speaker 2: global basis, and that's what Bloomberg Intelligence does. We appreciate
11:29
Speaker 2: getting some time from Vince Piazza here again some more
11:31
Speaker 2: m and A in the natural gas spase here in
11:34
Speaker 2: the US in some of those shale basins, as Vince
11:37
Speaker 2: was saying, there's a lot of demand there and there's
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Speaker 2: a need for scale, particularly from some of these smaller companies.
11:42
Speaker 2: So again saw another deal today APA to Bai shale
11:46
Speaker 2: oil driller calend Petroleum for four point five billion dollars.
11:51
Speaker 2: So good stuff there.
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12:07
Speaker 2: Here's something that I don't do. I don't TikTok.
12:10
Speaker 3: I know.
12:10
Speaker 2: It is just a monster of a social media platform,
12:13
Speaker 2: particularly with the younger demos, and really a competitive threat
12:16
Speaker 2: to a lot of the existing social media platforms out
12:19
Speaker 2: there from certainly an advertising perspective and maybe even a
12:22
Speaker 2: e commerce perspective. And we've done some research in Bloomberg
12:25
Speaker 2: Intelligence on this, Man Deep Singh, he's our senior tech
12:28
Speaker 2: analyst for Bloomberg Intelligency. Man's our global tech team, which
12:31
Speaker 2: I'll tell you is one of the best tech research
12:33
Speaker 2: teams on the street.
12:35
Speaker 4: B I go.
12:36
Speaker 2: I know I just said that about our energy team,
12:38
Speaker 2: but that's also true with our tech team as well.
12:40
Speaker 2: We have folks Europe, North America, Asia, pretty much everywhere
12:44
Speaker 2: you need to be, So Man Deep, talk to us
12:45
Speaker 2: about TikTok here. I mean, my basic knowledge of these
12:49
Speaker 2: social media platforms is just get as many people as
12:51
Speaker 2: you can on your platform and then to try to
12:53
Speaker 2: monetize them by selling advertising, trying to get them to
12:57
Speaker 2: buy stuff. What's TikTok strategy here?
13:00
Speaker 5: Well, so they've done exactly that in terms of, you know,
13:03
Speaker 5: getting to one hundred million daily plus daily active users,
13:07
Speaker 5: monetizing the ads a fifteen billion dollar rund rate. And
13:11
Speaker 5: there is a real risk the fact that we're going
13:14
Speaker 5: into an election year, this company could be banned. We've
13:18
Speaker 5: been talking about it forever.
13:19
Speaker 2: They ban could be banned in the US, Yes, because
13:22
Speaker 2: of its Chinese ownership.
13:23
Speaker 5: Big yeah, Okay, yeah, And that's been the case, you know,
13:27
Speaker 5: in terms of a risk for the last couple of years.
13:31
Speaker 5: Hasn't happened, but we know this is an election year
13:33
Speaker 5: and so there will be more focus on that. And
13:37
Speaker 5: the fact that they announced this e commerce play, to me,
13:40
Speaker 5: it suggests they want to be out there for the
13:44
Speaker 5: small businesses because these are the companies that will advertise,
13:48
Speaker 5: that will create their storefront on TikTok. And once you
13:52
Speaker 5: have merchants on your platform, it gets all the more
13:55
Speaker 5: hard to ban such a platform because people are actually
13:58
Speaker 5: generating revenues. Strategy that seems to be the play here.
14:01
Speaker 5: But we know social commerce hasn't been successful in the US.
14:05
Speaker 5: Take a look at Facebook. They tried Facebook shops, Instagram
14:09
Speaker 5: shops never really took off. And so the play here
14:13
Speaker 5: is something that hasn't worked out in the US because
14:15
Speaker 5: the buying behavior of US consumers is very different from
14:19
Speaker 5: the Asia consumers where social commerce has been successful. Do
14:22
Speaker 5: you in which is the TikTok eqaluent is a two
14:25
Speaker 5: hundred billion dollar GMV business in China.
14:28
Speaker 2: So social commerce that's a kind of kind of a
14:31
Speaker 2: new term for me. But that's basically just taking social
14:33
Speaker 2: media users Facebook, whatever in this case TikTok and having
14:38
Speaker 2: them and drive I guess e commerce off of that platform,
14:41
Speaker 2: getting them to start buying stuff, and then TikTok will make.
14:45
Speaker 5: It, yeah, finishing the transaction within your social media app.
14:49
Speaker 5: So right now they show you an AD and that
14:51
Speaker 5: takes the user traffic to the e commerce website. In
14:55
Speaker 5: this case, the experience is in app.
14:57
Speaker 2: It makes a ton of sense.
14:58
Speaker 5: I mean, it makes for a good buying experience if
15:00
Speaker 5: I can do things within the app as opposed to
15:03
Speaker 5: going to another app.
15:04
Speaker 2: So why hasn't it worked here in the US, do
15:07
Speaker 2: you think?
15:07
Speaker 5: Because think of how an e commerce website works. You
15:11
Speaker 5: need logistics, you need payments, you need sourcing, you need inventory.
15:16
Speaker 5: Social media companies aren't doing that, okay, and Amazon is
15:19
Speaker 5: doing that. They've built so many warehouses just for doing that.
15:22
Speaker 5: They have their own delivery. So e commerce requires all
15:25
Speaker 5: these things. And for TikTok they're likely going to partner.
15:29
Speaker 5: So they have already partnered with Shopify and Walmart. They're
15:33
Speaker 5: gonna look for more partners. Obviously Amazon has done the
15:36
Speaker 5: same with other social media companies. Who would have never
15:39
Speaker 5: imagined Amazon partnering with Meta and Snapchat.
15:42
Speaker 2: They've done that. So what's the we need talk to
15:45
Speaker 2: the folks in the e commerce world. What's the feeling
15:48
Speaker 2: about the ability of bite Dance slash TikTok to actually
15:52
Speaker 2: has some success here in the US?
15:54
Speaker 5: Very unlikely at least from my lens, given you know,
15:58
Speaker 5: you need to match that Amazon experience that people have
16:02
Speaker 5: in the US right two day prime shipping, one day
16:05
Speaker 5: prime shipping, and so for them to do it, one
16:08
Speaker 5: they need the merchants on the platform. They need to
16:11
Speaker 5: offer a lot of stuff. But look, they appeal to
16:13
Speaker 5: the younger demographic. We know TikTok appeals to that ten
16:17
Speaker 5: to twenty five year olds and they can adopt a
16:21
Speaker 5: new platform much more quickly than other consumers. So I
16:25
Speaker 5: wouldn't be surprised if they use incentives to drive that
16:28
Speaker 5: e commerce shift. But in the end, there is a
16:31
Speaker 5: political bend to it, and the reason why they're doing
16:34
Speaker 5: it is just to make sure they have a lot
16:36
Speaker 5: of small merchants on the platform, which increases their odds
16:40
Speaker 5: that they won't be banned in the US.
16:42
Speaker 2: All right, So for those folks that aren't really that
16:44
Speaker 2: familiar with the business of TikTok, bike Dance, which owns TikTok,
16:48
Speaker 2: aims to grow the size of its US e commerce
16:51
Speaker 2: business tenfold to as much as seventeen point five billion
16:54
Speaker 2: dollars this year, according to people familiar with the matter,
16:56
Speaker 2: posing a bigger threat to Amazon Dot So that's laying
17:01
Speaker 2: it out there.
17:02
Speaker 5: Yeah, I mean, it's an ambitious goal, but we know
17:04
Speaker 5: the US e commerce market is huge, so it's still,
17:08
Speaker 5: you know, less than five percent of the overall e
17:11
Speaker 5: commerce market that's out there.
17:13
Speaker 2: And TikTok was last year on track to a master
17:16
Speaker 2: around twenty billion in global gross merchandise value, with Southeast
17:21
Speaker 2: Asia contributing the bulk of the sales through its platform,
17:23
Speaker 2: Bloomberg News reported. So now they're saying, okay, so they
17:25
Speaker 2: have a success, Yeah, some success in other parts of
17:28
Speaker 2: the world. Now the question is can they do it
17:30
Speaker 2: here in the US. Yeah, and you talk to Amazon,
17:32
Speaker 2: They're like, they're a fly. We're not even worried about it.
17:34
Speaker 2: It's that's the case.
17:35
Speaker 5: I think Amazon did pre empt that. So in December
17:38
Speaker 5: they announced this partnership with Meta, with Snapchat, with Pinterest.
17:42
Speaker 5: That didn't happen so far. So Amazon and the other
17:46
Speaker 5: social media platforms want to partner with these e commerce
17:50
Speaker 5: platforms because in the end, this is the next leg
17:53
Speaker 5: off the offline to online shift, the video shopping, the
17:57
Speaker 5: live stream shopping, which you have seen play out in
18:00
Speaker 5: China and the Asian regions where TikTok has had some success.
18:05
Speaker 2: All Right, I can't let you out of here without
18:06
Speaker 2: talking about AI whatever that is generative AI market. This
18:11
Speaker 2: is your research, dude. Generative AI market appears set to
18:14
Speaker 2: reach one point three trillion by twenty thirty two. What
18:18
Speaker 2: are you talking about?
18:19
Speaker 5: Well, so what we saw last year was a bumper
18:22
Speaker 5: year in terms of what Nvidia showed us, you know,
18:25
Speaker 5: their data center sales. So I don't think anyone can
18:29
Speaker 5: write off such forecasts now after what we saw with
18:32
Speaker 5: video last year. But look, it's going to happen in phases.
18:35
Speaker 5: Right now, we are still in that infrastructure phase where
18:38
Speaker 5: chip companies are seeing that demand, and more so around
18:42
Speaker 5: you know, the accelerator chips, the GPUs. Not every type
18:46
Speaker 5: of chip is in demand. Now you're seeing memory companies
18:49
Speaker 5: see that AI demand, and gradually you are going to
18:52
Speaker 5: see other types of infrastructure really get replaced. Within data centers,
18:56
Speaker 5: we are going through a massive data center refresh cycle,
19:00
Speaker 5: and then it will trickle through applications. The real disruption
19:03
Speaker 5: will be in how we use our application software because
19:08
Speaker 5: AI is going to redefine the way we use software.
19:10
Speaker 2: And that's the.
19:11
Speaker 5: One point three trillion component over ten years.
19:15
Speaker 2: Here's some more numbers, because you guys have a lot
19:16
Speaker 2: of numbers in your research generative. AI may expand to
19:19
Speaker 2: about ten to twelve percent of the total IT hardware,
19:23
Speaker 2: software services, AD spending and gaming markets by twenty thirty
19:27
Speaker 2: two from less than one percent. Based upon the bi calculations.
19:32
Speaker 2: That gives you some sense of kind of the growth here.
19:35
Speaker 5: Yeah, and that's the disruptive element. We're not talking about
19:38
Speaker 5: companies finding new dollars to put in generative AI. You
19:44
Speaker 5: are going to see some existing spend being migrated to
19:48
Speaker 5: generative AI for good reasons because of productivity. Copilots make
19:52
Speaker 5: you more productive, the workers more productive, and that is
19:56
Speaker 5: why companies are going to move some of their existing
19:59
Speaker 5: spend towards these any eye tools.
20:01
Speaker 2: You guys wrote a research report on this, right, Yeah,
20:03
Speaker 2: where can you? I can get a Bloomberg terminal users?
20:06
Speaker 2: I mean basically, this report tells you everything you need
20:08
Speaker 2: to know about AI. Yeah, get it onto the report,
20:12
Speaker 2: sixty page report. BI go gets you to Bloomberg Intelligence.
20:15
Speaker 2: That's where you can find it. Yeah, anywhere else for
20:17
Speaker 2: like the non subscriber, the non Bloomberg people, Oh, they.
20:21
Speaker 5: Could reach out to the media folks, and I'm sure
20:25
Speaker 5: they can share something.
20:26
Speaker 2: Because I'm telling you, folks, a lot of people, as
20:29
Speaker 2: we all know, in twenty twenty three, AI was not
20:31
Speaker 2: just the tech story. It was a US global marketplace
20:36
Speaker 2: story that you have a lot of the gains we
20:37
Speaker 2: saw in the equity markets in twenty twenty three, that
20:40
Speaker 2: weight loss drug. So and I know we've got a
20:42
Speaker 2: weight loss report out there. The GLP stuff from Sam Fizzelli.
20:45
Speaker 2: So again some great stuff coming out of Bloomberg Intelligence.
20:48
Speaker 2: Check it out on the Bloomberg terminal, big Man Deep
20:51
Speaker 2: saying thank you so much for joining us. He's a
20:52
Speaker 2: senior analyst for technology Bloomberg Intelligence. He's in the studio.
20:56
Speaker 2: He's in the office on like of some management level
20:59
Speaker 2: folks at BI. But take note of that who comes
21:01
Speaker 2: in and who doesn't, Man Deep sing. He is our
21:03
Speaker 2: senior guy on technology, along with anorog Rana, doing our
21:06
Speaker 2: global coverage.
21:07
Speaker 4: Here you're listening to the tape. Can's our live program
21:10
Speaker 4: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,
21:14
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21:17
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21:23
Speaker 4: Bloomberg eleven thirty.
21:26
Speaker 2: All right, let's check in with Ed Harrison. Why do
21:28
Speaker 2: we do that? Because he's a senior editor Bloomberg News.
21:31
Speaker 2: He's a smart person, has a ton of experience here
21:34
Speaker 2: covering the markets, and he's got a great column that
21:36
Speaker 2: a lot of people feel like is they must read
21:39
Speaker 2: the Everything Risk, a column for Bloomberg News. His latest
21:43
Speaker 2: one is this twenty twenty four is risk is a
21:45
Speaker 2: hot US economy? What do you mean by that? Ed,
21:48
Speaker 2: Senior Editor, Bloomberg News, joins us Ed, what do you
21:50
Speaker 2: mean by the twenty twenty four risk is a hot
21:54
Speaker 2: US economy?
21:56
Speaker 6: Hey? Happy new year to you, by the way.
21:57
Speaker 2: Cheers.
22:00
Speaker 6: I think the risk is that everyone really is expecting
22:03
Speaker 6: soft landing, Yes, but really they're expecting that soft landing
22:07
Speaker 6: to be associated with enough softness to get rate cuts.
22:12
Speaker 6: In fact, in the bond market, we have one hundred
22:14
Speaker 6: and forty basis points of cuts that are being priced in,
22:18
Speaker 6: and we're already saying that as soon as March we
22:21
Speaker 6: could have a rate cut. That's what the pricing for
22:24
Speaker 6: the market is. If the economy is too hot, and
22:28
Speaker 6: right now we have GDP now at two point five percent,
22:31
Speaker 6: that's too much for those kind of rate cuts to
22:34
Speaker 6: come through. And so if you have to look at
22:37
Speaker 6: where the path of least resistance is right now, it's
22:41
Speaker 6: towards lower yields generally. But this is going to be
22:46
Speaker 6: a huge headwind against that, and therefore that's going to
22:49
Speaker 6: be the pain trade yet again this year.
22:53
Speaker 2: So is there a reasonable call here that the Fed
22:57
Speaker 2: kind of knows all that and therefore they may hold
23:01
Speaker 2: back a little bit and push the rate cuts to
23:04
Speaker 2: mid or later in the year to try to, you know,
23:06
Speaker 2: kind of avoid some of that.
23:08
Speaker 6: Yeah, I mean, I think that that's what the teta
23:11
Speaker 6: tet that you're gonna have in the beginning of the
23:13
Speaker 6: year is the Fed versus the markets saying, yes, we're
23:17
Speaker 6: gonna cut rates, but how much are we gonna cut
23:19
Speaker 6: them by? With the with the market really you know,
23:22
Speaker 6: front running these these rates very aggressively. But you know,
23:25
Speaker 6: to a person, I think that the Fed officials have
23:28
Speaker 6: been saying over the last several weeks that yes, that's right,
23:32
Speaker 6: we're gonna do it in Q three, We're gonna do
23:34
Speaker 6: it in Q four, not in Q one. Maybe at
23:37
Speaker 6: the end of the second quarter. It all depends on, obviously,
23:40
Speaker 6: what the data say. And I think that this has
23:43
Speaker 6: all been spurred on by that December dot plot that
23:47
Speaker 6: we got, which so seventy five basis points have cuts
23:50
Speaker 6: more than we'd seen in the September dot plot, and
23:53
Speaker 6: then a very h you know, some people would say
23:57
Speaker 6: dubvish pow in the press conference after that.
24:00
Speaker 2: Yeah, we saw that. And as you've called out before,
24:03
Speaker 2: in the bond market, we had a you know, the
24:04
Speaker 2: ten year treasure, which, as Tom Keane likes to say, was,
24:07
Speaker 2: you know, fifty a cup of coffee ago was five percent.
24:10
Speaker 2: We traded it all the way down to like three
24:11
Speaker 2: and a quarter percent on the tenure. We packed it
24:13
Speaker 2: up a little bit here now at three point ninety
24:15
Speaker 2: seven percent, So you know, maybe the market's trying to
24:18
Speaker 2: adjust here. I guess the next big data point is
24:21
Speaker 2: can be the non farm payrolls tomorrow.
24:24
Speaker 4: Yeah.
24:24
Speaker 6: I mean I'm with the FX raids team, and we're
24:29
Speaker 6: anticipating that hotly, you know, especially because we had the
24:32
Speaker 6: ADP data that came out today that was higher than expected.
24:36
Speaker 6: We also had the jobless claims data, both continuing and
24:39
Speaker 6: initial claims were lower than expected. So there's a lot
24:42
Speaker 6: of angst, if you will, about where we're positioned in
24:47
Speaker 6: the bond market visa VI that that job support, Because
24:51
Speaker 6: if the job support is hotter than expected, exactly as
24:54
Speaker 6: I'm saying, that's the pain trade. Yep, then you could
24:57
Speaker 6: see the a big reaction to that.
25:01
Speaker 2: So what are your sources saying out there in terms
25:03
Speaker 2: of the positioning in the marketplace. I guess in twenty
25:06
Speaker 2: twenty three, a lot of the quote unquote smart money,
25:09
Speaker 2: the hedge funds, you know, had a net short position
25:11
Speaker 2: out there on the treasury market. You know, on the
25:15
Speaker 2: other side of that trade was long term investors like
25:18
Speaker 2: mutual funds like Warren Buffett saying, you know, I'm going
25:20
Speaker 2: to show up at every auction and keep buying US treasuries.
25:24
Speaker 2: Where do you think kind of the smart faster money
25:27
Speaker 2: may be with treasury positioning right now?
25:29
Speaker 6: Well, you know, that's that's an interesting question because ultimately, Matt,
25:34
Speaker 6: I think that we've seen such a big move that
25:37
Speaker 6: you would think that the shorts would move in. But
25:39
Speaker 6: I think people are now they're unwinding their lungs and
25:42
Speaker 6: we're moving to sort of a more neutral position. We
25:45
Speaker 6: haven't gotten to the point where there are a lot
25:47
Speaker 6: of people who are starting to reanimate the shorts yet.
25:51
Speaker 6: I think that's when we would see a bigger move
25:55
Speaker 6: to the upside for ye deals if we got that,
25:57
Speaker 6: But we weren't seeing that yet.
25:59
Speaker 4: Now.
26:00
Speaker 6: As a result, I'm thinking that you know, we're sort
26:02
Speaker 6: of in a range bound mode at this point, with
26:04
Speaker 6: four percent sort of the sweet spot within that mode.
26:07
Speaker 6: You know, BED funds at five to five sort of
26:09
Speaker 6: limits how much upside you can have because you curve
26:13
Speaker 6: would be too inverted. But then at the same time,
26:15
Speaker 6: how much higher can you go from here? I don't
26:19
Speaker 6: think that you're gonna get more than up to four
26:21
Speaker 6: twenty five, four thirty five at the max. So we're
26:25
Speaker 6: kind of in this this this this range where four
26:28
Speaker 6: percent is really kind of a sweet spot for the
26:31
Speaker 6: market at this point in time.
26:33
Speaker 2: W IRP GO World Interest Rate Probability Function on the
26:37
Speaker 2: Bloomberg terminal kind of tries to forecast where the Fed
26:41
Speaker 2: will go with a rates based upon FED funds futures.
26:44
Speaker 2: I don't know, it's pricing it up to six rate
26:46
Speaker 2: cuts this year, you know, starting I don't know what
26:51
Speaker 2: I mean, how do you feel about that? As a
26:53
Speaker 2: market just to ahead of itself and maybe not once again,
26:56
Speaker 2: I'll say, underlying once again not paying attention really or
27:00
Speaker 2: listening to FED chairman Pale.
27:02
Speaker 6: Well, you know, it's it's a good question about what
27:05
Speaker 6: the market's doing collectively. I mean, basically, you're you're trying to,
27:09
Speaker 6: you know, give your winners room to breathe. Uh. And
27:14
Speaker 6: you know, when the when the FED basically gave a
27:17
Speaker 6: green light in December, the people who were bullish in
27:20
Speaker 6: the market, they posted to the max. And there hasn't
27:23
Speaker 6: been any push There hasn't been enough pushback, and we
27:26
Speaker 6: haven't had enough data, we haven't any had any FED
27:29
Speaker 6: meetings to dispel the notion that you could get those
27:32
Speaker 6: six rate cuts, So people are putting those positions on.
27:37
Speaker 6: I think that as the data come in, likely those
27:41
Speaker 6: six rate cuts will get paired back to a more
27:45
Speaker 6: manageable number. The only way that you're going to get them, unfortunately,
27:49
Speaker 6: is if you have a recession. I think then you're
27:52
Speaker 6: actually going to get more than one hundred and fifty
27:54
Speaker 6: basis points of cuts. And I know that. I think
27:57
Speaker 6: it's Wells Fargo is the one. No, No, it's it's TD.
28:02
Speaker 6: They're the ones who are predicting two hundred based points
28:06
Speaker 6: of CODs.
28:06
Speaker 2: Wow. Wow, Yeah, that would suggests something's askew with there
28:11
Speaker 2: in the economy. Hey, thanks so much for joining us.
28:13
Speaker 2: Ed Harrison, he's a senior editor for Bloomberg News. Got
28:16
Speaker 2: tons of experience in the markets, He's also former diplomat
28:20
Speaker 2: at the US State Department. How about that, So he's
28:23
Speaker 2: kind of got a varied experience, a great worldview looking
28:26
Speaker 2: at these markets here as part of our Bloomberg News team.
28:28
Speaker 2: Appreciate geting a few minutes of his time.
28:31
Speaker 4: You're listening to the tape Cansur live program Bloomberg Markets
28:34
Speaker 4: weekdays at ten am Eastern on Bloomberg Radio, the tune
28:38
Speaker 4: in app, Bloomberg dot Com, and the Bloomberg Business App.
28:41
Speaker 4: You can also listen live on Amazon Alexa from our
28:43
Speaker 4: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
28:50
Speaker 2: Let's talk a little bit of ECONOMICUS. We've got some
28:52
Speaker 2: breaking news here. Michael McKee joins us. Michael, what's happening
28:55
Speaker 2: with our friends and your Saint Louis Fed.
28:57
Speaker 7: They are getting a new boss, really, Alberto Mussalam. He
29:01
Speaker 7: is a PhD economist and has worked on Wall Street
29:06
Speaker 7: for a significant amount of his career, also at the
29:08
Speaker 7: IMF and also at the New York Fed. He was
29:13
Speaker 7: most recently the non executive chair at the Man Group
29:16
Speaker 7: and a member of the board at Feddie Mack. He
29:18
Speaker 7: says he'll resign those two positions. He was the CEO
29:21
Speaker 7: of Events Asset Management and he was a managing director
29:25
Speaker 7: and partner at Tutor Investment. So he has got a
29:28
Speaker 7: broad Wall Street background and it looks like some experience
29:35
Speaker 7: at the FED. So he has straddled both worlds.
29:38
Speaker 2: So when of a bank regional bank gets gets a
29:40
Speaker 2: new head, how do how do you kind of view it?
29:44
Speaker 2: Is there a period of just kind of get to
29:46
Speaker 2: know each other, figures thing things out, or and is
29:49
Speaker 2: this new FED present given I guess authority over some
29:52
Speaker 2: period of time or how's that work? The transition?
29:54
Speaker 7: Well, Jim Bullard has already gone. He left class August
29:58
Speaker 7: and he's now at Purdue University. Now the first vice
30:04
Speaker 7: president for the Saint Louis FED takes over and represents
30:07
Speaker 7: the Saint Louis FED at all the FED meetings and
30:10
Speaker 7: things like that. Kathy O'Neil. She is not voting this year,
30:15
Speaker 7: so it's not an issue. She presents what information she
30:20
Speaker 7: has to the FED and takes part in the discussions.
30:27
Speaker 7: He is going to take over starting in April April second,
30:31
Speaker 7: so he will miss the first two meetings of the
30:33
Speaker 7: year and then begin to take part. He doesn't vote
30:36
Speaker 7: until twenty twenty five.
30:38
Speaker 2: Okay, what's the historically, what's the role of the Saint
30:41
Speaker 2: Louis Fed ben They have a rep reputation.
30:44
Speaker 7: Well, it evolved. It was known as one of the
30:47
Speaker 7: kind of monitorist banks where the money supply and that
30:53
Speaker 7: sort of thing mattered a lot. But under Jim Bullard
30:57
Speaker 7: that went away as monitorism sort of died out when
31:02
Speaker 7: it became hard to tell exactly what was money these days.
31:05
Speaker 7: And then the President Bullard rather sort of became one
31:15
Speaker 7: of the think leaders leaders at the FED. He came
31:19
Speaker 7: up with the idea of regimes where you didn't change
31:21
Speaker 7: monetary policy unless the whole regime of the economy changed,
31:26
Speaker 7: and he was one of the first to really get
31:29
Speaker 7: dubvish going into the going into COVID and coming out
31:35
Speaker 7: of the Great Financial Crisis. So that's kind of their reputation.
31:39
Speaker 7: We'll see what mister Musalem very goos to say.
31:42
Speaker 2: All right, sage news for this FED watcher. Saint Louis
31:44
Speaker 2: FED names ex tutor and New York FED executive as President. St.
31:48
Speaker 2: Louis the Gateway to the West. Alberto Musalem is now
31:53
Speaker 2: its new president.
31:54
Speaker 4: You're listening to the tape Cancer live program Bloomberg Markets
31:58
Speaker 4: weekdays at ten am Eastern on Bloomberg Radio, the tune
32:02
Speaker 4: in app, Bloomberg dot Com, and the Bloomberg Business App.
32:05
Speaker 4: You can also listen live on Amazon Alexa from our
32:07
Speaker 4: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
32:13
Speaker 2: I've been hearing a lot of people fund manager, strategist
32:16
Speaker 2: when they talk about twenty twenty four and maybe some
32:18
Speaker 2: of the sectors that we should be looking at. They
32:20
Speaker 2: say banks. Now, I think they mean like JP Morgan,
32:25
Speaker 2: Bank of America, those types of things. I'm not sure
32:27
Speaker 2: they're talking about the regional banks, the community banks that
32:31
Speaker 2: really had some problems in the beginning of last year.
32:34
Speaker 2: So I wanted to flush that out. And there's only
32:36
Speaker 2: one person to do. That's Emily. That's Herman Chan. He
32:38
Speaker 2: covers all of the regional banks for Bloomberg Intelligency Joints
32:42
Speaker 2: US here in our Bloomberg Interactive Brokers studio. So, Herman,
32:45
Speaker 2: is it too early to go back into regional banks yet?
32:48
Speaker 2: Because I know you were very good at telling us
32:50
Speaker 2: it's an earnings problem. It's an earnings challenge for these banks.
32:54
Speaker 2: It's not necessarily a credit risk problem, it's an earnings problem.
32:56
Speaker 2: So where are we right now?
32:58
Speaker 8: The market's been pretty optimistic. You've seen a big rally
33:02
Speaker 8: in regional banks over the past couple of months to
33:04
Speaker 8: end the year, and that's really driven by interest rates,
33:07
Speaker 8: right The markets now expecting you know, five six rate
33:12
Speaker 8: cuts in twenty twenty four, which would help alleviate some
33:15
Speaker 8: of the earnings issues, the revenue issues from higher funded costs.
33:20
Speaker 8: So that's really what's driving the rally. It remains to
33:23
Speaker 8: be seen if that will hold, but it's more optimism
33:26
Speaker 8: on rates more than anything else.
33:28
Speaker 2: So I see, I'm just kind of looking at my
33:30
Speaker 2: Bloomberg chart, you know, just from the lows back and
33:33
Speaker 2: I guess late October the spider s and P Regional
33:37
Speaker 2: Banking ETF, which is kr E, is the ticker up
33:40
Speaker 2: about a thirty three percent. So again that nice rally
33:43
Speaker 2: you were talking about, where are we in terms of evaluation?
33:46
Speaker 2: Is there still room to grow here? Do we still
33:49
Speaker 2: have earnings risk? How do you put it all together?
33:51
Speaker 4: Yeah?
33:51
Speaker 8: Sure, so evaluation is still fairly you know, attractive. We
33:56
Speaker 8: were towards that that October timeframe. We're about one times
34:01
Speaker 8: tangible book value on injusted basis, which is historically the
34:04
Speaker 8: traf levels. So now we're a bit higher than that.
34:08
Speaker 8: The revenue picture and the oarnings picture is going to
34:11
Speaker 8: be a wildcard with credit quality, right, So if the
34:16
Speaker 8: market's correct that we see rate cuts, the NENDI just
34:20
Speaker 8: margins for the banks could improve in twenty twenty four.
34:23
Speaker 8: But what's still in flux is really what's happening with
34:27
Speaker 8: credit quality. Are banks going to see higher loan losses
34:30
Speaker 8: from areas like commercial real estate, particularly office commercial real estate,
34:34
Speaker 8: multifamily commercial real estate. So those are the questions that
34:37
Speaker 8: still remain unanswered for twenty twenty four.
34:39
Speaker 2: So in terms of the commercial real estate exposure, is
34:44
Speaker 2: it at the JP Morgans of the world or is
34:46
Speaker 2: it at the M and T banks of the world.
34:47
Speaker 8: Yeah, sure, so it's more at the M and T
34:50
Speaker 8: banks at the world and increasing and higher as you
34:55
Speaker 8: go lower in scale and size for banks, right, So
34:58
Speaker 8: the smaller community banks have more commercial real estates, and
35:02
Speaker 8: it sort of grows as you become a large regional bank,
35:06
Speaker 8: and then the banks like JP Morgan have more diversification.
35:10
Speaker 8: So it really we parse the numbers looking at office
35:15
Speaker 8: commercial real estate. It's about two percent on average for
35:18
Speaker 8: the banks that I cover, the large regional banks, so
35:21
Speaker 8: it's a fairly manageable exposure. It really does create a
35:25
Speaker 8: lot of headline risk, and when you see a when
35:29
Speaker 8: the bank's reported in the fourth quarter, for example, there
35:32
Speaker 8: are a couple of flagged non performing loans in office
35:36
Speaker 8: commercial real estate, so let's spook the market a little
35:38
Speaker 8: bit for banks like ZIONCE and P ANDC for example.
35:40
Speaker 2: Right, all right, so where are we in terms of
35:43
Speaker 2: the earnings recovery for these banks? Have we seen trough earnings?
35:47
Speaker 2: Do you think ors are still risks to the estimates
35:49
Speaker 2: out there?
35:50
Speaker 8: Yeah, I think that's going to be a good question
35:53
Speaker 8: for banks heading into earning season over the next couple
35:56
Speaker 8: of weeks. The banks have talked about, even before the
35:59
Speaker 8: expectation and of rate cuts in twenty twenty four, that
36:02
Speaker 8: Nandager's margins would stabilize because there hasn't been any rate
36:06
Speaker 8: hikes in recent quarter. So that's something that's been beneficial
36:10
Speaker 8: for banks to stabilize their margins and not have their
36:14
Speaker 8: funding costs increased like they did in most of the
36:17
Speaker 8: twenty twenty three So that's helpful. And if you do
36:20
Speaker 8: get rate cuts that would even alleviate some of the
36:24
Speaker 8: pressures of higher deposit costs and banks happening to pay
36:28
Speaker 8: up to attract deposits into regional banks.
36:33
Speaker 2: All right, M and A. I bumped into my buddy
36:37
Speaker 2: on the train today. He's an M and A banker
36:39
Speaker 2: for an investment bank that specializes in banks. He has
36:44
Speaker 2: deferred his retirement for a while, much to his wife's chagrin,
36:48
Speaker 2: because he thinks he's going to print money over the
36:49
Speaker 2: next couple three years putting these banks together on the
36:52
Speaker 2: MNA front. I mean, I guess what I learned during
36:56
Speaker 2: the regional bank crisis from last year from reading your research,
36:59
Speaker 2: is that there's four thousand regional banks around the country.
37:03
Speaker 2: I don't know if that's a big number or small number.
37:05
Speaker 2: It seems like a lot. It seems like maybe there's
37:08
Speaker 2: ripe for some consolidation. How do you think that plays out?
37:10
Speaker 8: Yeah, we do think there's there's it's an industry that's
37:13
Speaker 8: very ripe for consolidation. That will happen over time. Regional banks,
37:19
Speaker 8: in particular the ones that I cover, are facing higher
37:22
Speaker 8: regulatory scrutiny, tougher regulatory costs, so that all entails a
37:29
Speaker 8: need for scale, and the banks have talked about that collectively,
37:34
Speaker 8: me saying that when costs are higher, especially on the
37:38
Speaker 8: regulatory side, you need scale to really absorb some of
37:40
Speaker 8: these costs. And so that's something that the banks are
37:44
Speaker 8: open to. Really, it depends on a couple of factors. One,
37:48
Speaker 8: the regulatory response for M and A. The Biden administration
37:52
Speaker 8: has been pretty cautious on bank M and A and
37:56
Speaker 8: and you've seen the FED be very slow in and
38:00
Speaker 8: approving bank deals over the past several years, So that's
38:05
Speaker 8: a factor. It creates a lot of uncertainty for the banks,
38:09
Speaker 8: for the buyer and acquire to deal with an elongated
38:13
Speaker 8: regulatory approval process. And number two, interest rates. When rates
38:19
Speaker 8: were as high as they were, it does create a
38:21
Speaker 8: bit of a challenge in putting the two banks together
38:24
Speaker 8: when you mark to market the target's balance sheet. So
38:27
Speaker 8: the merger math doesn't make sense right now. But if
38:29
Speaker 8: rates do come down even more, I think you'll see
38:32
Speaker 8: more and more conversations and potentially that's a twenty twenty
38:35
Speaker 8: four event.
38:36
Speaker 6: All right.
38:36
Speaker 2: So if I'm looking at this group here, do I
38:39
Speaker 2: stick with what I consider to be the high quality ones?
38:42
Speaker 2: I'm thinking again, an M and t A P and
38:44
Speaker 2: C bank the names I know or maybemight go down
38:48
Speaker 2: to some of the smaller cap names and maybe I
38:50
Speaker 2: get some better valuation here. How do the clients you
38:53
Speaker 2: talk to, how are they playing it?
38:54
Speaker 8: Yeah, I think at this point you're you're seeing some
38:57
Speaker 8: more appetite for some of the banks that felt more
39:01
Speaker 8: challenges in twenty twenty three. So banks like KeyCorp, like
39:05
Speaker 8: Comerica just got an upgrade earlier today from an analyst
39:09
Speaker 8: Western Alliance. Those are banks that were a bit more
39:14
Speaker 8: challenged by the rate backdrop in the falloff from the
39:16
Speaker 8: SVB and First Republic signature failures, and you've seen more
39:21
Speaker 8: of a bid for those banks over the past few months.
39:24
Speaker 8: So that's something I would point to as something to
39:28
Speaker 8: look at.
39:29
Speaker 2: The good news is we haven't had to talk to
39:31
Speaker 2: you much yet, and that means we haven't had much
39:35
Speaker 2: or anything really any notable failure or stress in the
39:39
Speaker 2: regional bank business. So with a little bit of hindsight,
39:41
Speaker 2: can we say this was kind of a handful of
39:45
Speaker 2: one off kind of issues or is there something that's
39:49
Speaker 2: going to have to change in the industry level?
39:50
Speaker 8: Right, I would point to the fact that the banks
39:53
Speaker 8: that did fail that I mentioned earlier, they had very
39:56
Speaker 8: different business models. They were fast growing. So I think
40:01
Speaker 8: what we learned from the turmoil last year is that
40:04
Speaker 8: it's maybe an oxymoron to say you're a fast growing bank.
40:08
Speaker 8: Maybe you don't want to be that because you're introducing
40:10
Speaker 8: a lot of risks to your balance sheet when you
40:12
Speaker 8: do that, risk to potential deposit flight when things go awry,
40:17
Speaker 8: and interest rate risk, especially when rates were lower and
40:20
Speaker 8: you were, you know, burdening your balance sheet with with
40:25
Speaker 8: securities that then were underwater when rates rose. So that's something.
40:29
Speaker 8: Those were the lessons learned, And the other regional banks
40:34
Speaker 8: in my coverage universe are much more stable in their
40:38
Speaker 8: in their strategies and business management and balance sheet management practices.
40:43
Speaker 8: So I think what happened was the the banks that
40:47
Speaker 8: had tougher business models were flush out.
40:50
Speaker 2: Penn State, you're Penn State, Grab. How how did you
40:53
Speaker 2: grade the season?
40:55
Speaker 8: I would say a bit of a disappointment going heading
40:58
Speaker 8: into the season, we wanted to win at least one
41:01
Speaker 8: of the games against the big two Ohio State or Michigan.
41:04
Speaker 8: That we failed that. Unfortunately, our offense let us down.
41:08
Speaker 8: Our defense was actually the number one defense from the
41:11
Speaker 8: in the nation.
41:11
Speaker 2: I don't know if we have a quarterback. I'm still
41:13
Speaker 2: not convinced.
41:14
Speaker 7: Yeah, he's a.
41:15
Speaker 8: Five star guy, but he seems a big jitter.
41:17
Speaker 2: Is Dan Ives, who's a huge supporter. He's been No,
41:20
Speaker 2: he's our guy, He's guy. I'm like, I'm just not
41:22
Speaker 2: sure he's our guy. I don't know. I have to see,
41:25
Speaker 2: but anyway, I mean, the good news is with the
41:27
Speaker 2: new teams coming into the Big Ten, we only have
41:29
Speaker 2: to play Ohio State Michigan only once, right, you know,
41:32
Speaker 2: we don't have to play both each in the season,
41:34
Speaker 2: so that'd be good news. Herman chen Bank, analyst Bloomberg Intelligence.
41:39
Speaker 2: This is Bloomberg.
41:40
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41:53
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