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Markets Slump on Tariff Anxiety · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the
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  Speaker 2: It's got an update here on what's happening down in Washington,
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  Speaker 2: DC with all these tariffs. Every single day there seems
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  Speaker 2: to be more and more news. Tyler Kendall joined us
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  Speaker 2: Bloomberg News reporter Tyler, what's the latest on the tariffs
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  Speaker 2: here where we heard some tough talk from mister Carney,
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  Speaker 2: the incoming Prime minister at Canada. What's the latest right.
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  Speaker 3: Well, we are expecting the next round of tariffs to
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  Speaker 3: go into effect this Wednesday. That's going to be on
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  Speaker 3: steel and aluminum tariffs at twenty five percent. We've been
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  Speaker 3: told not to expect any exemptions or carve outs at
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  Speaker 3: this moment, but of course, like many things, that remains
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  Speaker 3: to be seen and could be a moving target here
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  Speaker 3: at the White House, and I would just expect to
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  Speaker 3: hear this week rhetorics start to shift from senior administration officials.
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  Speaker 4: We've often talked about.
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  Speaker 3: Tariff's up to this point as being a way to
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  Speaker 3: advance President Trump's border policies. But now we're going to
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  Speaker 3: start to hear a lot more about these tariffs being
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  Speaker 3: about national security concerns. Recall, steel was a flashpoint on
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  Speaker 3: the twenty twenty four campaign trail with that proposed MEF
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  Speaker 3: on steel acquisition and where we heard national security come up. Notably,
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  Speaker 3: a Commerce Secretary, Howard Lutnick, over the weekend did say
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  Speaker 3: that Americans should start to prepare for foreign good prices
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  Speaker 3: to go up, although he contends that US good prices
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  Speaker 3: will ultimately go down over the long term, but that
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  Speaker 3: there might be that adjustment period as we've heard President
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  Speaker 3: Trump talk about. I just bring that up about the
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  Speaker 3: steel tariffs because we have to keep in mind that
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  Speaker 3: includes those downstream items and economists say that could hit
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  Speaker 3: consumers the most.
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  Speaker 5: Tyler Trump said of the U with economy faces a
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  Speaker 5: period of transition, how much pain are they willing to take?
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  Speaker 3: Right Well, the threshold for pain appears to be a
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  Speaker 3: little bit higher than most people believe. But the rhetoric
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  Speaker 3: right now of the White House is that there needs
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  Speaker 3: to be this short term adjustment period in order to
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  Speaker 3: have this longer term growth. And President Trump actually gave
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  Speaker 3: us a little bit of insight into his thinking during
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  Speaker 3: that interview that aired over the weekend, actually comparing the
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  Speaker 3: US to China, saying, in his words that China thinks
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  Speaker 3: in a one hundred year perspective, whereas the US likes
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  Speaker 3: to think in quarters. He then used that as a
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  Speaker 3: way to segue into doubling down on the claim that
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  Speaker 3: he says he is not watching the stock market, though
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  Speaker 3: he did noted that he has his eye towards interest rates.
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  Speaker 3: But it really does track with what we've been hearing
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  Speaker 3: from White House officials, which is that they are trying
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  Speaker 3: to have everybody look at the broader macroeconomic picture when
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  Speaker 3: concerns come up about inflation, or the labor market and
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  Speaker 3: workforce cuts, or even consumer sentiment. And I actually caught
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  Speaker 3: up with any C Director Kevin Hassett here on the
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  Speaker 3: White House North Lawn earlier this morning, and he told
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  Speaker 3: me that there's really not much they can do until
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  Speaker 3: the full Trump Agenda is implemented, which really means that
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  Speaker 3: they are banking on some things that haven't yet quite
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  Speaker 3: gone into effects, such as a terrorists as a revenue raiser,
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  Speaker 3: which goes hand in hand with importantly here President Trump's
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  Speaker 3: tax cut agenda, which Isabelle, we know is not going
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  Speaker 3: to necessarily be an easy task for this Congress.
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  Speaker 2: And Tyler, I guess the initial discussion surrounding these tariffs
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  Speaker 2: from President Trump's administration, where they were really not so
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  Speaker 2: much a trade war issue but a war against drugs
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  Speaker 2: and immigration. Is that still the argument that the administration
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  Speaker 2: is making.
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  Speaker 3: Well when it comes to those tariffs against Mexico and
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  Speaker 3: Canada that currently have this USMCA as well as auto
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  Speaker 3: exemption on them, This administration even over the weekend, said
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  Speaker 3: that any amount of fentanyl combing over the border is
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  Speaker 3: too much, and it doesn't really seem like they're moving
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  Speaker 3: off of that. We're going to them move into this
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  Speaker 3: national security argument with the steel and aluminum tariffs this week,
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  Speaker 3: but then we are really pushing ahead to that April
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  Speaker 3: second date that the administration keeps pushing us towards when
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  Speaker 3: it comes to the reciprocal tariff plans. We did learn
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  Speaker 3: that after President Trump had threatened reciprocal tariffs against Canadian
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  Speaker 3: lumber and dairy, for example, that that likely will not
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  Speaker 3: take effect until April second, even though he had threatened
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  Speaker 3: that those could have come sooner. So we're really going
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  Speaker 3: to start to see this argument of reciprocity as we
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  Speaker 3: start to expect some more leaders to come here over
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  Speaker 3: the next couple of weeks, as we beat the drum
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  Speaker 3: up to that April second date.
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  Speaker 5: How aligned is President Trump? And Secretary's caught Best that
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  Speaker 5: we have Trump saying that this is a transition period,
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  Speaker 5: and we have Best and saying this is a detox period.
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  Speaker 4: Right.
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  Speaker 3: Well, they're really trying to put forward this picture that
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  Speaker 3: the government does need to reduce government spending and that
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  Speaker 3: does go along with this tax cut agenda. We're going
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  Speaker 3: to need spending cuts in order to offset the tax cuts,
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  Speaker 3: and that's something that this Congress in particular is going
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  Speaker 3: to have to grapple with. Republicans in the House are
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  Speaker 3: really divided among this issue, particularly when it does come
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  Speaker 3: to government spending cuts and concerns about what it could
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  Speaker 3: mean for social programs such as medicaid. That is going
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  Speaker 3: to be a very complicated factor here as they try
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  Speaker 3: to get that over the finish line. And we got
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  Speaker 3: one indication this weekend that they are expecting this to
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  Speaker 3: be a month's long fight. The House Republicans introducing a
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  Speaker 3: stopgap measured keep the government funded until September thirtieth, with
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  Speaker 3: President Trump posting on truth Social that he had asked
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  Speaker 3: for that date in order to give enough time for
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  Speaker 3: Republicans to work out the rest of his agenda items.
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  Speaker 2: All right, Tyler, thank you so much for joining us.
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  Speaker 2: Really appreciate it. Tyler at Kendall. She's a reporter for
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  Speaker 2: Bloomberg News down to Washington, DC.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 2: So I've got a lot of volatility as the name
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  Speaker 2: of the game here in marketplaces, and we know that
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  Speaker 2: markets do not like volatility, so you see that in
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  Speaker 2: the price action here. Let's see what the.
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  Speaker 6: Pros are doing here.
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  Speaker 2: Tim o'bona, what's chief investment strategist at Innovator Capital Management.
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  Speaker 2: He's somewhere out there in Chicago, one of my favorite towns. Absolutely, Hey, Tim,
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  Speaker 2: talk to us about these markets here. You talk to
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  Speaker 2: your clients. How do you is it handholding? Is it
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  Speaker 2: what are the conversations these days.
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  Speaker 7: Oh, Paul, there's a lot of jitters out there, and
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  Speaker 7: every conversation that we are having right now all comes
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  Speaker 7: back to the question of what's going to be the
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  Speaker 7: net impact of all these different policies from the Trump administration.
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  Speaker 7: And you know, right now, I think there's this mindset
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  Speaker 7: shift that you know, everybody was really excited about the
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  Speaker 7: pro business policies of the Trump administration. Now I think
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  Speaker 7: it's becoming pretty clear that Trump realizes he needs to
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  Speaker 7: slow this economy down if he wants to get interest
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  Speaker 7: rates and inflation under control. And there's really two ways
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  Speaker 7: that he's going to be able to do that. One
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  Speaker 7: is pulling back in government spending and I think you're
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  Speaker 7: seeing that through through DOGE. And then also with the tariffs,
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  Speaker 7: and the tariffs we view that as really a tax
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  Speaker 7: on the consumer that is going to put additional pressure
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  Speaker 7: on consumers that are already under stress. And I think
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  Speaker 7: what he's going for here is long you know, long
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  Speaker 7: term gain with the fact that we know there's going
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  Speaker 7: to be continued short term pain, and he's okay with that.
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  Speaker 7: You know, you're not going to get the approval of
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  Speaker 7: the everyday American if the stock markets going up. You know,
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  Speaker 7: he counted that the first time constantly, that's not the case.
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  Speaker 1: This time.
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  Speaker 7: He's not talking about it at all. And I think
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  Speaker 7: it really comes back to that realization that if we
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  Speaker 7: are going to get interest rates down, if we are
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  Speaker 7: going to get inflation under control, there has to be
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  Speaker 7: some pain that comes along with that. And I think
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  Speaker 7: that's what you're seeing right now.
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  Speaker 5: And note you mentioned that the majority of investors were
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  Speaker 5: not taking Trump seriously when it comes to tariffs, So
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  Speaker 5: now it seems like he is serious and the velocity
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  Speaker 5: of the shift from excitement to fear has been swift.
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  Speaker 5: How are you trading this market? Where do you hedge?
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  Speaker 7: Well, you know, really in the bulk of what we
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  Speaker 7: do is risk management, you know, at all times. And
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  Speaker 7: if you look at the flows that we've seen here
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  Speaker 7: recently in the ETF market, we've seen a tremendous amount
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  Speaker 7: of inflows here to the tune of about a billion
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  Speaker 7: dollars over the last week and a half into buffered
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  Speaker 7: ETF strategies. And really what these do is they give
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  Speaker 7: you a known level of downside protection on an index
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  Speaker 7: like the S and P five hundred ETF or the
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  Speaker 7: Nasdaq with known upside exposure. And I think right now,
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  Speaker 7: we look at all the uncertainty that is out there,
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  Speaker 7: you know the fact that you know, on the flip
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  Speaker 7: of a switch, Trump could come out there pull back
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  Speaker 7: tariffs and this market could rip higher, or you could
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  Speaker 7: continue to see this tit for tat. There's so much uncertainty.
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  Speaker 7: And really, what these strategies do and why I think
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  Speaker 7: so many investors are gravitating towards these, is that they
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  Speaker 7: do help remove a lot of that uncertainty. They keep
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  Speaker 7: you invested, which is incredibly important, especially right now, but
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  Speaker 7: they also are going to help you really hedge out
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  Speaker 7: and mute a lot of this volatility that we're seeing,
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  Speaker 7: you know, coming from the Trump administration.
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  Speaker 2: Talk to us about the fixed income market.
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  Speaker 6: Here.
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  Speaker 2: We've got big moves today here in the in the
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  Speaker 2: bond market, treasuries of ten your ersury up twenty basis points,
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  Speaker 2: kicking the yield down the like four point two two percent. Here,
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  Speaker 2: where's opportunity if anywhere in the fixed income market.
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  Speaker 7: Well, Paul, I think we're starting to get a little
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  Speaker 7: more more bullish here, and this has been an area
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  Speaker 7: we've been very bearish on for the last couple of years,
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  Speaker 7: you know, simply for the fact that you know, most
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  Speaker 7: advisors that we're working with are using these as a
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  Speaker 7: risk management tool, right, and we continue to see BONN
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  Speaker 7: yields in equity prices moving in the same direction that
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  Speaker 7: you don't have that diversification that most advisors are going for.
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  Speaker 7: With that, I think with some of the changes that
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  Speaker 7: we've seen here recently, they're starting to become more opportunities.
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  Speaker 7: You know, if you look at BONN yelds and inflation
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  Speaker 7: really over the last several years, they followed this this
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  Speaker 7: government deficit as a percentage of GDP almost in lockstep
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  Speaker 7: with one another. So as we see more and more
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  Speaker 7: you know, hopefully more success from from the Department of
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  Speaker 7: Government efficiency from the Trump administration being able to pull
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  Speaker 7: back that spending, I think that gives us more hope
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  Speaker 7: that we can see, uh, you know, interest rates start
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  Speaker 7: to work, or that inverse correlation start to work a
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  Speaker 7: little bit better, that interest rates can come down. Uh
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  Speaker 7: and again a slowing economy too, that that should help
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  Speaker 7: us out on the longer end of the yield curve.
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  Speaker 7: So I still do think it's it's a risk with
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  Speaker 7: the environment that we're in right now with core inflation
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  Speaker 7: still elevated, but I think for the first time in
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  Speaker 7: a couple of years, we're starting to see signs, you know,
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  Speaker 7: that the long to intermediate duration bond trade could be
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  Speaker 7: showing some signs of life here.
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  Speaker 5: When it comes to inflation, we have Mohammed El Ariyan
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  Speaker 5: and an opinion piece today saying that the FEDS insistence
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  Speaker 5: and keeping inflation to two percent maybe limiting its flexibility.
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  Speaker 5: Where do you stand on that on your inflation views.
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  Speaker 7: Well, I don't think the Fed is going to move
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  Speaker 7: on it, so I think it's a fun thing to debate.
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  Speaker 7: I don't necessarily know if it helps investors in the
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  Speaker 7: short term. And look, you look back in the history
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  Speaker 7: of the US any time that we have seen core
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  Speaker 7: inflation starting off north of five percent or above, never
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  Speaker 7: before have we had a situation where we've gotten back
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  Speaker 7: down to two percent without a recessionary hit to the
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  Speaker 7: labor market coming. And you know what we've heard for
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  Speaker 7: the last several years, even from a lot of our
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  Speaker 7: you know, advisor clients, is that this time is different.
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  Speaker 7: And look, I hope it is. I hope this time
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  Speaker 7: is different where we can get back down to that
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  Speaker 7: two percent target without a huge hit to the labor
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  Speaker 7: market taking place. But we don't want to just go
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  Speaker 7: out there and position our portfolios like that's going to
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  Speaker 7: be the case, because it would, in fact be a
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  Speaker 7: unicorn event. And I think, you know, a lot of
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  Speaker 7: the you know, this comes back down to how strong
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  Speaker 7: the labor market has been over the last couple of years.
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  Speaker 7: Wage growth still running north of you know, well north
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  Speaker 7: of four percent. That's not conducive with a two percent
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  Speaker 7: inflation target at all. And you know, I think what
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  Speaker 7: gives me a little bit of hope that we are
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  Speaker 7: going to get back down there, you know, within the
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  Speaker 7: next year or so now is if you look at
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  Speaker 7: all the layoffs that are taking place within the government
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  Speaker 7: over the last couple of years, you've had about a
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  Speaker 7: quarter of all new jobs that have been created by
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  Speaker 7: the government. We're starting to pull that back. You're starting
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  Speaker 7: to see you know, a lot of those layoffs, which
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  Speaker 7: I've seen recent estimates in the three hunds to five
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  Speaker 7: hundred thousand range, those are going to be jobs that
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  Speaker 7: are going to be replaced in the private sectors. So
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  Speaker 7: there's going to be a lot more supply coming to market,
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  Speaker 7: which I'm hopeful that that will really soften things up
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  Speaker 7: to where we need to be.
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  Speaker 2: Tim, thank you so much for joining us. Timber Bouden,
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  Speaker 2: what's chief investment strategies from Innovator Capital Management.
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  Speaker 2: We talk every week to our good friends at Bloomberg
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  Speaker 2: New Energy Finance b n EF. Now we've got to
• 12:50
  Speaker 2: talk about tariffs and what that means for green sectors
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  Speaker 2: from energy to biofuels. Today we do that with Antoine
• 12:56
  Speaker 2: Wagner Jones, head of Trade and Supply Chains for bn Yeah, Antoine,
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  Speaker 2: thanks for being in our studio here. Tariffs cannot be
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  Speaker 2: good for the evolution into green energy. How do you
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  Speaker 2: guys think about the wrists that are being introduced into.
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  Speaker 8: That, Yeah, there's at a time where everything is whipsawing
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  Speaker 8: and we're seeing a lot of differences in terms of
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  Speaker 8: policy approaches. What's really interesting is to see areas of continuity.
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  Speaker 8: Trump is very much on board with manufacturing in the US.
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  Speaker 8: That was something that was very much a part of
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  Speaker 8: the Biden administration. The way in which that's happening is
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  Speaker 8: very different, however, as central planks of Biden's approach was
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  Speaker 8: to be Okay, we're going to onshore semiconductors, We're going
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  Speaker 8: to onshore clean energy manufacturing. And what we've seen now
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  Speaker 8: is attack on the Inflation Reduction Act rhetorically and a
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  Speaker 8: version that's starting to build on the Chips Act. These
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  Speaker 8: big sources of finance for a lot of these projects
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  Speaker 8: that are happening in the US at a time when
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  Speaker 8: tariffs are starting to be stepped up as a respon
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  Speaker 8: once and this is building on a lot of tariffs
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  Speaker 8: that we saw on the Biden administration front. That has
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  Speaker 8: to be twinned with support for some of these different sectors.
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  Speaker 8: When that's being pulled out, then it starts to become
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  Speaker 8: very uncertain, and when you're seeing the levels of volatility
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  Speaker 8: around tariff's being announced, being pulled back, being re announced
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  Speaker 8: when things are really unclear in terms of what's going
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  Speaker 8: to happen. That's not great for businesses that need to
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  Speaker 8: make decisions on investment that has quite a long payback period.
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  Speaker 8: And we're not quite seeing the upsurge in manufacturing investment
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  Speaker 8: that we're expecting to see over the first few months
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  Speaker 8: as a result. So it's an interesting time. There's a
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  Speaker 8: lot in flux. It's bad news for leek green energy,
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  Speaker 8: as you can expect, but it's also not necessarily great
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  Speaker 8: news for some of the objectives that are a central
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  Speaker 8: part of Trump's agenda, whether that's building out data centers.
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  Speaker 8: You need a lot of grid equipment, a lot of
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  Speaker 8: that comes from Mexico that suddenly becomes a lot more
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  Speaker 8: expensive if you need all the transformers that you need,
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  Speaker 8: and the examples along that line of thinking just on
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  Speaker 8: ever ending. So it's a lot of uncertainty and not
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  Speaker 8: a great outlook when it comes to to you know,
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  Speaker 8: this idea that tariff's equals manufacturing, but actually the path
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  Speaker 8: to getting there is a lot more is a lot
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  Speaker 8: more fraught than I think is appreciated.
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  Speaker 5: I was just going to ask what we see a
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  Speaker 5: shift into em Are they starting to ramp up imports
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  Speaker 5: of clean tech products? I mean maybe they could stand
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  Speaker 5: to benefit.
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  Speaker 8: Yeah, it's we generally speaking, yes, we could start to
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  Speaker 8: see arise from that perspective. But again, I think a
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  Speaker 8: lot of the constraining factors they're on grid investment rather
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  Speaker 8: than the cost of clean energy, and that's where we're
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  Speaker 8: starting to see some real pain points when already there's
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  Speaker 8: some big shortages of large power transformers, for example, and
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  Speaker 8: that's something that is repeatedly a huge concern and something
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  Speaker 8: that has made materially more difficult to integrate that sort
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  Speaker 8: of clean energy if you're making building out the grid
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  Speaker 8: a lot harder. So there's a lot of recurring themes
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  Speaker 8: that keep popping.
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  Speaker 6: Up, and that's one of them.
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  Speaker 2: How about near shoring. We thought about North America as
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  Speaker 2: near shoring Canada and Mexico, but that may not be
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  Speaker 2: enough because now we're talking putting tariffs on those folks
• 16:04
  Speaker 2: as well. So it sounds like if you want to
• 16:07
  Speaker 2: manufacture anything, it's going to be almost entirely United States based.
• 16:12
  Speaker 8: And that's what's fascinating. So over the last few years,
• 16:14
  Speaker 8: we've seen all these different buzzwords on shoring, reshoring, near shuring,
• 16:18
  Speaker 8: near shuring. This idea which was promoted by the Biden
• 16:21
  Speaker 8: administration that will have certain incentives for manufacturing, will extend
• 16:25
  Speaker 8: those incentives for manufacturing parts of evs, for example, to
• 16:28
  Speaker 8: our North American neighbors in Canada and Mexico. Now, when
• 16:33
  Speaker 8: you're starting to impose tariffs on those same neighbors, then
• 16:38
  Speaker 8: you're flying in the face of that trend, and it
• 16:41
  Speaker 8: really seems like that sort of dead in the water.
• 16:43
  Speaker 8: I don't think we're going to see the death of
• 16:45
  Speaker 8: integrated value chains for the automotive sector over the next
• 16:49
  Speaker 8: few weeks. That's going to remain in North America, across
• 16:52
  Speaker 8: North America because of the inertia in the system, the
• 16:54
  Speaker 8: efforts that are being made by lots of these the
• 16:56
  Speaker 8: big three automakers for example. But at the same time,
• 17:00
  Speaker 8: I don't think we're going to see the step up
• 17:01
  Speaker 8: in investment in Mexican manufacturing that was due to surf
• 17:05
  Speaker 8: the US market through this trend of nailshuring, which now
• 17:09
  Speaker 8: I really don't see as a poltical priority.
• 17:11
  Speaker 2: All interesting, All right, and Swan, thank you so much
• 17:13
  Speaker 2: for joining US. Antoine Vagno Jones, head of Trade and
• 17:17
  Speaker 2: Supply Chains for BNF. Joining us here on our Bloomberg
• 17:20
  Speaker 2: Interactive Brokers Studio.
• 17:23
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 17:27
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• 17:30
  Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
• 17:33
  Speaker 1: get your podcasts, or watch us live on YouTube.
• 17:37
  Speaker 2: Earlier today, Joe Dominguez see You, of Constellation Energy, spoke
• 17:41
  Speaker 2: with Bloomberg Intelligence co host Alex Steele about the impact
• 17:45
  Speaker 2: of tariffs on energy investments at Sarah Week in Houston.
• 17:48
  Speaker 2: Joe was first asked about the recession. It's slowing growth,
• 17:52
  Speaker 2: and he was asked if he's noticing any of that
• 17:54
  Speaker 2: at Constellations take a listen.
• 17:56
  Speaker 9: We don't see an end in sight right now. We're
• 17:58
  Speaker 9: starting to see it get rational, and by that I
• 18:01
  Speaker 9: mean we're not seeing the same request for data centers
• 18:04
  Speaker 9: popping up in five or six utilities. So I think
• 18:06
  Speaker 9: the hyperscalers are beginning to figure out where they want
• 18:10
  Speaker 9: to go. And it's not the frenzy of activity, but
• 18:13
  Speaker 9: in terms of the deal pace, it continues the same
• 18:16
  Speaker 9: way we saw it last year.
• 18:17
  Speaker 10: And how are the deals like, how is it to
• 18:19
  Speaker 10: get them done?
• 18:21
  Speaker 4: Is it hard? Is it coming up with a structure
• 18:23
  Speaker 4: the money? Like? What is it?
• 18:25
  Speaker 9: It's not hard, but they're complicated because they're multi billion
• 18:28
  Speaker 9: dollar deals, right, So we're talking about twenty year deals
• 18:31
  Speaker 9: for power that sometimes could cost five or ten billion dollars.
• 18:35
  Speaker 6: So, like any commercial deal of that scale, it's.
• 18:38
  Speaker 9: Going to take a long time to negotiate, and each
• 18:40
  Speaker 9: time you need to do that with a new party,
• 18:42
  Speaker 9: you have to go through all the terms and conditions again.
• 18:45
  Speaker 9: But I think we're going to get some some deals
• 18:47
  Speaker 9: done this year.
• 18:48
  Speaker 10: Can you give me some hints, like in maybe areas,
• 18:51
  Speaker 10: what kind of deals, like what kind of power?
• 18:55
  Speaker 9: Well, I think nuclear continues to be very attractive for
• 18:58
  Speaker 9: the hyper scalers because it operates twenty four to seven,
• 19:01
  Speaker 9: it's cleaned, so it meets their environmental goals, and it
• 19:04
  Speaker 9: matches up really well from a reliability standpoint.
• 19:07
  Speaker 4: So let's go Tom money then for a second.
• 19:08
  Speaker 10: So coming up with the deals is very interesting, particularly
• 19:11
  Speaker 10: the one you do with Microsoft to restart three Mile Island.
• 19:14
  Speaker 4: Are your costs going up right now?
• 19:18
  Speaker 6: A little bit?
• 19:19
  Speaker 9: But it's really labor inflation that we mostly see. Now,
• 19:22
  Speaker 9: Remember we have existing nuclear plants that are already built.
• 19:25
  Speaker 9: So a lot of the costs of the raw materials
• 19:28
  Speaker 9: that you're seeing, you know, potentially impacted by tariffs in
• 19:31
  Speaker 9: the long run, but in escalation through inflation. We're not
• 19:34
  Speaker 9: seeing much of that tiny bid on uranium pricing.
• 19:38
  Speaker 6: But most of what we're seeing is labor contracting.
• 19:40
  Speaker 10: So are you planning for a tariff increase that we
• 19:43
  Speaker 10: should be seeing on stealing aluminum on Wednesday?
• 19:45
  Speaker 4: Right? You would have no one that would have limited impact.
• 19:48
  Speaker 6: How do you see that pretty limited impact on us?
• 19:50
  Speaker 9: It would impact replacement parts and that sort of thing,
• 19:54
  Speaker 9: but it's going to be a deminimous impact on our budget.
• 19:57
  Speaker 10: And if you wind up seeing an increase in labor,
• 20:01
  Speaker 10: how does that change in your contracts? Like you already
• 20:04
  Speaker 10: said it, you have to go back to them and say, hey, listen,
• 20:06
  Speaker 10: we got to renegotiate my costs are going on.
• 20:08
  Speaker 9: No, there's no reopeners up or down for those sorts
• 20:12
  Speaker 9: of inflation.
• 20:12
  Speaker 4: So you're really taking on that risk.
• 20:14
  Speaker 9: Sure, yeah, yeah, and we're taking it on for over
• 20:16
  Speaker 9: twenty year period. And that's the importance of being able
• 20:19
  Speaker 9: to do this with nuclear Right, we know exactly what
• 20:22
  Speaker 9: our cost structure is going to be within a range
• 20:25
  Speaker 9: for ten and twenty years.
• 20:27
  Speaker 6: Harder to do with our.
• 20:28
  Speaker 9: Natural gas assets, where we don't know what the price
• 20:31
  Speaker 9: of natural gas is going to be ten years out,
• 20:33
  Speaker 9: or whether we're going to have a carbon tax, or
• 20:35
  Speaker 9: what the changes in environmental regulations are.
• 20:37
  Speaker 6: Going to be.
• 20:37
  Speaker 4: So how do you manage that risk?
• 20:39
  Speaker 9: Well, I think what's really difficult to do that in
• 20:42
  Speaker 9: the case of natural gas. I think they're what you're
• 20:44
  Speaker 9: doing is something that looks more like an index product
• 20:47
  Speaker 9: that is indexed to either inflation or natural gas prices.
• 20:51
  Speaker 10: When you talk about the different parts of your business,
• 20:54
  Speaker 10: how much of the capex that you're spending is going
• 20:56
  Speaker 10: to new stuff, beefing up old stuff, or just replacing
• 21:01
  Speaker 10: and making sure everything stays on track.
• 21:02
  Speaker 9: Yeah, So for us ALEX we face a critical decision
• 21:06
  Speaker 9: as to whether to relicnse the nuclear plants for another
• 21:09
  Speaker 9: twenty years, and we're facing that across the fleet.
• 21:12
  Speaker 6: So when you say.
• 21:13
  Speaker 9: New, if we don't do this, it's going to be retired,
• 21:17
  Speaker 9: very much like Three Mile Island was retired. So the
• 21:21
  Speaker 9: distinction between keeping existing open and something that's truly new
• 21:25
  Speaker 9: is immaterial.
• 21:27
  Speaker 6: Right If it's gone. It's gone. It's the same as
• 21:29
  Speaker 6: if it were never built.
• 21:31
  Speaker 9: So we are investing all of our monies to secure
• 21:34
  Speaker 9: that fleet for the future, and we're also doing uprights
• 21:38
  Speaker 9: and restarts and other things like that. In terms of
• 21:40
  Speaker 9: a percentage to your question, I would say ninety percent
• 21:43
  Speaker 9: of our spend is in the existing assets and getting
• 21:47
  Speaker 9: them ready to run for decades to come.
• 21:49
  Speaker 10: So when we talk about power demand booming and increasing
• 21:53
  Speaker 10: by multiple digits, right, I mean ten percent would be huge.
• 21:58
  Speaker 10: How do you play that it's not new, is it
• 22:01
  Speaker 10: just expanding?
• 22:02
  Speaker 6: Well, it is expanding.
• 22:03
  Speaker 9: A lot of our clients are interesting interested in operating
• 22:07
  Speaker 9: that's increasing the output of existing nuclear plants, and we're
• 22:11
  Speaker 9: doing that in a number of different regions. Obviously, the
• 22:14
  Speaker 9: restart is more limited. You had one plant there that
• 22:16
  Speaker 9: you could turn on, and I think there might be
• 22:18
  Speaker 9: another in the nation. And then the rest of that
• 22:22
  Speaker 9: is going to be probably spent on renewables, storage and
• 22:26
  Speaker 9: natural gas for the time being, and then the fullness
• 22:28
  Speaker 9: of time new nuclear m and a for that.
• 22:30
  Speaker 10: I know you just bought Calpine, so that really beefs
• 22:32
  Speaker 10: up your natural gas. Nuclear is now fifty percent of
• 22:35
  Speaker 10: your portfolio. Versus A seventy. That was a big shift.
• 22:38
  Speaker 10: What else is in your pipeline for.
• 22:39
  Speaker 6: That, Well, we've got a lot on our plate.
• 22:41
  Speaker 9: We've got a lot of food d Yeah, and so
• 22:44
  Speaker 9: this year we're going to spend making sure that we're
• 22:47
  Speaker 9: ready to integrate Calpine.
• 22:49
  Speaker 6: And prepared for regulatory approvals at the back end of
• 22:51
  Speaker 6: the year.
• 22:52
  Speaker 9: But as you said, it's a big deal, and I
• 22:54
  Speaker 9: think what we've indicated as a company is M and
• 22:56
  Speaker 9: A is a big part of our strategy.
• 22:59
  Speaker 10: Yes, M and A in beefing up nuclear, natural gas,
• 23:02
  Speaker 10: or you want to diversal all of the.
• 23:04
  Speaker 6: Above, all of the above.
• 23:05
  Speaker 9: I think storage is going to increasingly be a part
• 23:08
  Speaker 9: of the story, so we'll look at those opportunities as well.
• 23:11
  Speaker 10: Everyone now wants to get into power. It is the
• 23:13
  Speaker 10: coolest thing right now in the market. Whether you're looking
• 23:16
  Speaker 10: integrated utilities, regulated utilities, even energy companies, are you seeing
• 23:20
  Speaker 10: more competition.
• 23:21
  Speaker 9: I think what people are trying to figure out is
• 23:24
  Speaker 9: whether they too can secure longer term contracts. I don't
• 23:28
  Speaker 9: see people building spec power plants hoping, you know, the
• 23:31
  Speaker 9: demand will come. So I think there's going to be
• 23:35
  Speaker 9: a lot of interest there. But it's largely going to
• 23:38
  Speaker 9: be fossil. It'll continue to be renewables, but it always
• 23:41
  Speaker 9: has been renewables, and then we'll see whether they could
• 23:44
  Speaker 9: get deals done.
• 23:46
  Speaker 7: All right.
• 23:46
  Speaker 2: That was Alex Steel. Bloomberg is Alex Steel speaking with
• 23:48
  Speaker 2: Joe Dominga SI Constellation Energy down there in Houston at
• 23:52
  Speaker 2: the Sarah week At conference, talking about the energy bis,
• 23:55
  Speaker 2: particularly on the nuclear energy side, where Constellation has a
• 23:59
  Speaker 2: big plate.
• 24:00
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