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US CPI Cools, EU China EV Tariffs · Bloomberg Intelligence

0:02
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0:25
Speaker 2: Obviously, the big macro story is what we saw with
0:27
Speaker 2: CPI and then looking ahead to that FED meeting. This
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Speaker 2: is the first time since twenty twenty that we get
0:32
Speaker 2: the Central Bank decision on the same day as CPI,
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Speaker 2: and you could read the CPI in many different kind
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Speaker 2: of ways. So let's ask Jeffrey Cleveland. He's chief economist
0:41
Speaker 2: at Peydon and Regal. He joins us, Now, hey, Jeffrey,
0:43
Speaker 2: what was your read on CPI.
0:46
Speaker 3: Well, good morning, happy FED day. I think you put
0:50
Speaker 3: it in context. Sequentially, to start the year, we had
0:54
Speaker 3: a point four reading, then another point four reading, then
0:57
Speaker 3: I think we had another point for reading, and then
0:59
Speaker 3: we hado point three month to month percent change for
1:02
Speaker 3: April for four CPI, and then this morning point two
1:06
Speaker 3: or if you like, on the out to do two
1:08
Speaker 3: decimal places, it was point one six. So this is
1:11
Speaker 3: great news. This is great news. Uh, we you know,
1:15
Speaker 3: it shows a little cooling off in the underlying pace
1:17
Speaker 3: of inflation on goods. Goods prices were down, but also
1:21
Speaker 3: services price is cool during the month. So everything's sort
1:25
Speaker 3: of moving in the right direction or I think for
1:28
Speaker 3: the soft landing narrative, but you know, also in the
1:31
Speaker 3: direction that policymakers would like to see. So it's a
1:35
Speaker 3: great start to FED day.
1:36
Speaker 4: All right, Jeffrey.
1:37
Speaker 5: So given that, how do you think how do you
1:40
Speaker 5: think our good friends at the FED will digest this news.
1:44
Speaker 3: Well, I don't know if it's irony or it's the
1:47
Speaker 3: perfect day for this, but I suspect at you know,
1:51
Speaker 3: two pm your time, eleven am my time here in
1:54
Speaker 3: Los Angeles, we'll get some news in probably the median
1:59
Speaker 3: estimate for core PCE for twenty twenty four we'll be
2:03
Speaker 3: nudged up by policy makers. So they as of the
2:06
Speaker 3: last projections they gave us two point six, that probably
2:10
Speaker 3: gets pushed up to two point eight. So in a
2:12
Speaker 3: day where CPI came in soft inflation is seeming to soften,
2:16
Speaker 3: they're going to raise their inflation estimate for the year
2:20
Speaker 3: a little bit, just based on the math, similar maybe
2:23
Speaker 3: to what the ECB also did last week, so that's possible.
2:27
Speaker 3: They probably also reduced a number of ikes or sorry
2:30
Speaker 3: cuts cuts. I didn't say hikes an when I said
2:33
Speaker 3: cuts Italy in the dots.
2:36
Speaker 6: Yeah.
2:36
Speaker 3: Yeah, so they had three in there. That probably goes
2:39
Speaker 3: down to two. I could go down to one, but
2:42
Speaker 3: I think two is probably more likely. So that'll be
2:45
Speaker 3: interesting for the rest of the day. And then we'll
2:47
Speaker 3: see Chair Powell how he puts this into contest. I
2:50
Speaker 3: suspect he'll say this is good, this is good, but
2:53
Speaker 3: we need a few good months, not just one good month,
2:56
Speaker 3: so then we can argue later is that free? Is
3:00
Speaker 3: that four?
3:01
Speaker 2: I was saying, is it five? I've heard like how
3:03
Speaker 2: many months?
3:04
Speaker 6: Is that?
3:04
Speaker 2: Constant tute? Which brings me to that infletion point. You
3:07
Speaker 2: just pointed out that they might raise it to two
3:09
Speaker 2: point eight percent. Is the market going to take that
3:11
Speaker 2: as good news or bad news?
3:14
Speaker 6: You know?
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Speaker 3: I think this is pretty well telegraphed. I mean, if
3:17
Speaker 3: you're looking at these numbers in the forecasting community, I
3:19
Speaker 3: think that's not controversial. However, the market, yeah, could react negatively.
3:25
Speaker 3: The other thing might be alex would be not just
3:27
Speaker 3: the twenty twenty four dot but the twenty twenty five,
3:30
Speaker 3: so the median for PCEE for next year. If that
3:34
Speaker 3: moves up a little bit, that could maybe send a
3:36
Speaker 3: message that inflation is a bit stickier. That could disappoint
3:40
Speaker 3: the market. So that there's a lot of movie parts
3:43
Speaker 3: here that will have to play out over the course
3:46
Speaker 3: of the day.
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Speaker 5: So, Jeffrey, what do you think the Fed does here?
3:50
Speaker 5: I mean, I think the market is now pressing in,
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Speaker 5: you know, maybe certainly a November cut and bringing September
3:56
Speaker 5: back on to the table here. How do you think
3:59
Speaker 5: what kind of messaging we'll get around that?
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Speaker 3: Well, I think that's where it comes back to you. Okay,
4:03
Speaker 3: this is a good report. How many good reports do
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Speaker 3: the policymakers need to see to become confident? Is it three?
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Speaker 3: Is it four? Is it five? If it's four, I
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Speaker 3: think that rules out a cut before the election, so
4:15
Speaker 3: that we still have the first cut in December in
4:18
Speaker 3: our projection, I'm pretty comfortable with that. We'll have to
4:21
Speaker 3: listen to the bed share today and see if there's
4:23
Speaker 3: any reason to speed that up. I mean, the other
4:26
Speaker 3: thing to keep in mind here, talking to colleagues this
4:28
Speaker 3: morning doesn't need to do a lot I don't think
4:31
Speaker 3: they're in a good spot. I said that a few
4:33
Speaker 3: times over the months on this show. The stocks are,
4:37
Speaker 3: you know, at all time high. Labor market is holding
4:41
Speaker 3: up pretty solid.
4:41
Speaker 7: You know.
4:42
Speaker 3: Some of the concern was if the bed remained too
4:44
Speaker 3: high for too long, it would sink the labor market.
4:47
Speaker 3: That doesn't appear to be happening, and inflation is you know,
4:50
Speaker 3: things cooled off in May. This is good news, I
4:53
Speaker 3: fully admit it. But we're still above two percent on
4:57
Speaker 3: the year on year, whether you're looking at four piece
5:00
Speaker 3: or you're looking at course. Yes, still rush to do
5:03
Speaker 3: anything here, So I think, you know, we'll just wait
5:06
Speaker 3: and see see how the data comes in the next
5:08
Speaker 3: couple of months, then make a decision.
5:10
Speaker 2: And that is why Bank of America. So if you discim,
5:12
Speaker 2: Renni and who was on surveillance, said things are kind
5:15
Speaker 2: of awesome for stocks, like cue the Lego song, Like
5:17
Speaker 2: that's exactly the point that you're kind of laying out
5:20
Speaker 2: My big question that I just don't really understand or
5:23
Speaker 2: shelter costs. So I appreciate that they were the biggest
5:26
Speaker 2: component of the May price increase. Why are we not
5:31
Speaker 2: falling faster like we have been waiting for the rents
5:34
Speaker 2: to reset, for things to cool down and shelter for
5:37
Speaker 2: years at this point.
5:40
Speaker 3: Yeah, that's come up a lot with clients, and I
5:41
Speaker 3: think the issue is a lot of clients point to
5:45
Speaker 3: the you know measures, private sector rent measures that may
5:49
Speaker 3: be capturing the marginal renters cost of renting. So someone
5:54
Speaker 3: moving into a nice building there and in Manhattan, you
5:58
Speaker 3: know where they have a nice door person, you know
6:00
Speaker 3: the door for them, those rents may have come down.
6:02
Speaker 3: I don't know. You tell me, I don't know.
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Speaker 2: We don't live there.
6:05
Speaker 3: That's on a lot of those private sector rent metrics capture.
6:09
Speaker 3: The BLS is running a different exercise and trying to
6:12
Speaker 3: look at the average cost to all renters, and this
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Speaker 3: tend this series just tends to move a lot slower
6:19
Speaker 3: than investors at Hope. So you know, the patients from
6:22
Speaker 3: a lot of investors, it's like, hey, this we need
6:24
Speaker 3: to we're seeing it. We're seeing the disinflation in the
6:26
Speaker 3: private sector rent metrics. That's got to translate, and it's
6:29
Speaker 3: just taking it's taken longer to play out. So that's
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Speaker 3: my preferred story.
6:34
Speaker 5: Jeff for giving us an economic or inflation backdrop that
6:37
Speaker 5: we got I guess a better handle on today. What's
6:40
Speaker 5: your call in the US consumer? Can US consumer continue
6:42
Speaker 5: to power this economy?
6:44
Speaker 3: For yes, yes it can. I mean we look at
6:47
Speaker 3: the consumer, We look at how many people are employed,
6:49
Speaker 3: how much they're working, what they're getting paid, And when
6:52
Speaker 3: you look at that, that that measure, that aggregate measure
6:55
Speaker 3: PAUL is still running almost six percent year on year.
6:59
Speaker 3: So and we know the US consumer is not a
7:02
Speaker 3: big saber. What they earn, they tend to spend. So
7:05
Speaker 3: really earnings matter, and earnings are holding up through the
7:09
Speaker 3: main data, so I think the US consumer will have
7:13
Speaker 3: ample spending power. The other thing, if I have a
7:16
Speaker 3: few more seconds, is that in addition to income, US
7:19
Speaker 3: consumers can rely on borrowing capacity. We don't think borrowing
7:23
Speaker 3: capacity is maxed out, so people could borrow more. Some
7:27
Speaker 3: cohorts of the US consumer could also sell assets or
7:30
Speaker 3: borrow against assets to spend. Net worth is up a
7:33
Speaker 3: lot in the last few years, so we think that's
7:35
Speaker 3: a big component that could keep the consumer spending. So
7:38
Speaker 3: that's why when you look at our GDP call, we're
7:41
Speaker 3: still above trend for twenty twenty four. We think GDP
7:43
Speaker 3: will grow around two point four two point five percent
7:47
Speaker 3: this year, and that's driven by the consumer.
7:50
Speaker 2: You were just like so awesome. You have so much
7:53
Speaker 2: energy and so much enthusiasm. I don't know if you
7:55
Speaker 2: get off air and you just like go to sleep,
7:57
Speaker 2: but it's so nice and refreshing to hear like a
8:00
Speaker 2: solid opinion and some enthusiasm. To that point, you talked
8:05
Speaker 2: about the consumers holding in. What about like restaurants and
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Speaker 2: services and things that are directly tied to the consumer,
8:11
Speaker 2: of those prices coming down or is that demand and
8:14
Speaker 2: those sticky consumers keeping prices elevated.
8:17
Speaker 3: It's possible that just the pace of consumer spending will
8:21
Speaker 3: keep prices stickier. Doesn't mean an acceleration. It just means that,
8:25
Speaker 3: you know, on core, maybe we'll hang out three percent,
8:28
Speaker 3: three three and a half percent on core, we won't
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Speaker 3: get back to you know, the pre COVID sub two
8:33
Speaker 3: percent level. So that's entirely plausible. It's also, you know,
8:37
Speaker 3: possible that consumers are shifting away maybe spending less on
8:39
Speaker 3: some retail on goods, they're spending more on services. So
8:43
Speaker 3: that's a shift that's underway. You seeing that with air travel.
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Speaker 3: So I think that's that's one thing to keep in mind,
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Speaker 3: it's not necessarily a slow down in consumer spending, but
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Speaker 3: a shift in how consumers are spending those dollars.
8:54
Speaker 5: All right, Jeffrey Clevelan, thanks so much for joining us.
8:56
Speaker 5: Jeffrey Cleveland chief economists have paid in and regal joining
8:59
Speaker 5: us a via zoom from Los Angeles.
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9:21
Speaker 2: It is FED day, it is CPI Day. So what
9:23
Speaker 2: do we do? We talked to one of the best,
9:25
Speaker 2: Danielle di Martino Booth. She's CEO and chief strategist for
9:28
Speaker 2: QI Research. We love the strong opinions that you have,
9:31
Speaker 2: and we love how you look at the market. Okay,
9:33
Speaker 2: so you're pessimistic on the economy. Is that a fair
9:37
Speaker 2: statement to say?
9:39
Speaker 7: It's? Yes, it is fair. I'm right there with Anna Wong,
9:43
Speaker 7: and I've been saying it since January that we likely
9:45
Speaker 7: went into recession in October of twenty twenty three. That's
9:49
Speaker 7: when the McKelvey rule was first triggered. It's got a
9:54
Speaker 7: flawless track record back to nineteen sixty eight. It's kind
9:57
Speaker 7: of like the Psalm role, but it's devised differently by
9:59
Speaker 7: the former chief economist at Goldman's Acts. He was interviewed
10:04
Speaker 7: in January of two thousand and eight, and because his
10:07
Speaker 7: mckelvy rule had been triggered in December two thousand and seven,
10:10
Speaker 7: and they said they asked him at the time the
10:12
Speaker 7: Wall Street Journal, are are we in recession? And he said, oh,
10:16
Speaker 7: I'm gonna have to wait and see. So of his
10:18
Speaker 7: own rule, he said it might be different this time.
10:20
Speaker 7: But it wasn't. It wasn't. We didn't find out for
10:23
Speaker 7: three hundred and sixty six days from the National Bureau
10:26
Speaker 7: of Economic Research that it did. The recession had been
10:29
Speaker 7: dated to December two thousand and seven. But we know
10:32
Speaker 7: that once the mckelviy rule is triggered that we're typically
10:35
Speaker 7: in recession.
10:36
Speaker 2: But then we have this whole like record high in
10:38
Speaker 2: the equity market. Oh, everything's kind of awesome.
10:40
Speaker 7: It's supposed to be this way by bonds.
10:42
Speaker 2: Y'ls are lower, It's supposed to be like this right now.
10:44
Speaker 7: It is you typically get a good ten percent blowoff
10:47
Speaker 7: rally the time kind of when main Street starts to
10:50
Speaker 7: understand that we're in recession, which Bright Chairpowell acknowledged that
10:54
Speaker 7: last time he was at the podium, he mentioned indeed,
10:56
Speaker 7: dot Com, he mentioned University of Michigan and households starting
10:59
Speaker 7: to say, oh my gosh, if I lose my job,
11:01
Speaker 7: I'm not going to get another one. Kind of from
11:03
Speaker 7: that moment of the Fed recognizing that main Street sees
11:07
Speaker 7: that we're falling into recession, until when the Fed actually
11:09
Speaker 7: cuts rights for the first time, you tend to see
11:11
Speaker 7: a good ten percent rally in the stock market.
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Speaker 4: So what we'll be hear from our feeder reserve the
11:16
Speaker 4: cerconion you believe.
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Speaker 7: I think we're gonna hear either two or three. I
11:20
Speaker 7: would not be surprised to see the three rate cuts.
11:23
Speaker 7: Say on the table, the unemployment rate was not rounded
11:27
Speaker 7: up to four point zero percent. It was three point
11:30
Speaker 7: nine six percent. It was a good strong four percent.
11:34
Speaker 7: And given what we've seen in the past, when the
11:36
Speaker 7: unmployment rate moves up, inches up a tenth of a
11:39
Speaker 7: percentage point a tenth, a tenth a tent right, that's
11:41
Speaker 7: exactly what we've seen for the last thirteen months, very
11:44
Speaker 7: small movements. But typically when we see you know, your
11:48
Speaker 7: Bloomberg bc y function, when the when bankruptcy start to run,
11:52
Speaker 7: as they're running this month at the fastest pace since
11:54
Speaker 7: the pandemic, companies with fifty million in liabilities or more.
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Speaker 7: There was coach last night at five Transportation company. Typically
12:02
Speaker 7: when we see an acceleration in bankruptcy filings, we also
12:06
Speaker 7: see the increases in the unemployment rate tick up. So
12:09
Speaker 7: it's feasible that we could see in July and in
12:12
Speaker 7: August a large enough move to put the FED in
12:15
Speaker 7: play come September, September, November, December. Maybe those three dots
12:19
Speaker 7: stay on the plot today.
12:20
Speaker 2: So see why Go?
12:22
Speaker 7: You see why Go?
12:23
Speaker 2: It is really awesome. Has a nice little pie chart
12:25
Speaker 2: that shows where the bankruptcies are are coming and the
12:28
Speaker 2: most are coming from consumer discretionary and this is a
12:30
Speaker 2: period over one year. It breaks down industries, it breaks
12:33
Speaker 2: down the name and then the liability is very cool.
12:36
Speaker 7: One of the richest functions on the termin that.
12:39
Speaker 2: That's our desert island function.
12:40
Speaker 7: Is what you said, now, that is my desert island function.
12:42
Speaker 7: My desert island go to financial indicator would be the
12:46
Speaker 7: move index, which should be a pure play on treasury
12:50
Speaker 7: market volatility. However, when treasury rates fall and the move
12:55
Speaker 7: moves up, it's telling you what's going on in BCY
12:58
Speaker 7: that there's a credit event rumbling. So we're under the
13:00
Speaker 7: surface because if treasury rates are falling, then treasury volatility
13:05
Speaker 7: should fall. When they move in the opposite direction, there's
13:08
Speaker 7: a lot of tension in the system that typically starts
13:11
Speaker 7: to flag you know, there's issues with the banking system.
13:13
Speaker 7: We're lending and what are we seeing. We're seeing commercial
13:16
Speaker 7: industrial lending contract right now?
13:18
Speaker 4: Should the Fed have already been cutting likely?
13:22
Speaker 7: Likely? Right, We're eleven months in to the Fed holding
13:27
Speaker 7: after their last rate hike heading into the Great Recession
13:31
Speaker 7: December two thousand and seven, the Fed held off for
13:33
Speaker 7: fifteen months. It was the longest in history. So the
13:37
Speaker 7: longer they kind of hold off, hold off, hold off,
13:40
Speaker 7: the bigger the potential for a policy here that they've
13:43
Speaker 7: waited too long.
13:44
Speaker 2: So I have to say, when Danielle's on, I get
13:47
Speaker 2: right ins to be like, ask you this, ask for that,
13:49
Speaker 2: ask you this. So this comes from a listener. Do
13:52
Speaker 2: you think that the next rolling six months of economic
13:54
Speaker 2: data remains noisy, or does the deterioration remain consistent, So
13:58
Speaker 2: it's like a drip drip, or it's like a cliff.
14:01
Speaker 7: I think we're starting to see something that more closely
14:04
Speaker 7: resembles a cliff. You have essentials inflation at QI Research,
14:08
Speaker 7: we parse them out running at four point seven percent
14:10
Speaker 7: year over year. It also happens to be completely out
14:13
Speaker 7: of the Fed's control, pure discretionary inflation. It used to
14:17
Speaker 7: just be a goods deflation story, but what we saw
14:21
Speaker 7: this morning was goods and services that are discretionary in nature.
14:25
Speaker 7: These are things at households want to buy but do
14:27
Speaker 7: not need to have. That's at zero point one percent
14:31
Speaker 7: year over year. At the cusp of falling into negativity.
14:34
Speaker 7: We've got hotel rates falling, car rental rates falling, air
14:40
Speaker 7: airfares are coming down. So the services inflation that had
14:44
Speaker 7: been the happy story post, well, everybody's bought enough of
14:48
Speaker 7: what they need, so they're not going to build themselves
14:50
Speaker 7: an extra deck in the back of their house. We're
14:52
Speaker 7: actually seeing that combining now with massive disinflation on the
14:56
Speaker 7: services side. So the Fed's job is basically done because
15:00
Speaker 7: all they can can control is what's discretionary in nature?
15:04
Speaker 4: Do they not look at that data? Do they not
15:07
Speaker 4: value this high as maybe others do.
15:09
Speaker 7: Of course they look at the data. But but Powell
15:11
Speaker 7: seems for some reason to want to stay higher for longer.
15:14
Speaker 7: Maybe he gets up at the podium today and only
15:16
Speaker 7: talks about non farm payrolls and not the unemployment rate
15:19
Speaker 7: and not the zero print on headline CPI. Maybe he
15:23
Speaker 7: just says, that's an anomaly of energy prices.
15:25
Speaker 2: Who knows, where's the disinflation? You mentioned a lot of
15:29
Speaker 2: services disinflation where.
15:32
Speaker 7: Well, we're seeing it in hotels. They're down negative, they're
15:34
Speaker 7: one point seven percent uh year over year. We're seeing
15:37
Speaker 7: that play out in very weak occupancy trends. We get
15:41
Speaker 7: the str data on a weekly basis. City does a
15:44
Speaker 7: good job of providing reports on that. Outside of a
15:47
Speaker 7: bump at Easter, we've seen occupancy negative year over year,
15:51
Speaker 7: week after week after week, beginning the week after New
15:54
Speaker 7: Year's And that is telling you what a lot of
15:58
Speaker 7: ged Why is this hotel selling for pennies on the dollar.
16:01
Speaker 7: That doesn't make any sense. Americans are still spending on
16:03
Speaker 7: services unless we've pulled back, Unless we're just focused sheerly
16:09
Speaker 7: on okay, fine, auto insurance rates tick down just a
16:13
Speaker 7: little bit, they're still up twenty percent. You're over here
16:15
Speaker 7: the things we must buy. That inflation's running at four
16:19
Speaker 7: point seven percent year over year, you are pulling back
16:23
Speaker 7: on anything that is discretionary, including travel.
16:27
Speaker 4: Dot plots Do I care? I mean, I've got a
16:29
Speaker 4: function for it.
16:30
Speaker 7: We care a lot about the dot plots today because
16:32
Speaker 7: the dotstab you could have a mac truck between the
16:34
Speaker 7: difference between the market reaction of three staying or being
16:38
Speaker 7: whittled down from three to two. I do think that
16:41
Speaker 7: markets right now are assuming too given today's CPI print.
16:44
Speaker 7: If they keep three, then you're going to look to
16:47
Speaker 7: Powell at the podium to talk a lot more about
16:50
Speaker 7: the second mandate of maximizing employment.
16:54
Speaker 4: Great stuff, yep, always always.
16:56
Speaker 2: Danielle, thank you so much. We appreciate you stopping in.
16:58
Speaker 7: Great to be here.
17:00
Speaker 2: It's great to get a counterintuitive, passionate voice on stuff.
17:02
Speaker 2: Daniel de Martinez, Booth CEO and chief strategist for a
17:04
Speaker 2: q I Research. Interesting. I don't I don't want to
17:09
Speaker 2: be an economist. I feel like everything is a worst
17:10
Speaker 2: has test. Everyone has the same data, But then how
17:14
Speaker 2: you filter it through your models gets you to different conclusions,
17:17
Speaker 2: but you have to wonder.
17:18
Speaker 5: I tell you the market likes to today, the S
17:20
Speaker 5: and P five one and a quarter percent, the NASTAC
17:23
Speaker 5: up one point eight percent. The Russell will point out,
17:25
Speaker 5: that's kind of where the game is right now, up
17:27
Speaker 5: two point nine percent here today.
17:28
Speaker 4: So we're broadening out, which a lot of.
17:30
Speaker 5: Market strategies will tell you that's a healthy thing for
17:32
Speaker 5: the markets in general.
17:35
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17:50
Speaker 4: Alex Deal and Paul Sweeney.
17:52
Speaker 5: We're live here in our Bloomberg Interactive Brokers studio and
17:54
Speaker 5: we're also streaming live on YouTube, so you can head
17:56
Speaker 5: over to YouTube dot com and search Bloomberg Podcast and
17:58
Speaker 5: that's where you will find this. Charlie was just reporting
18:01
Speaker 5: S and P at record highs, just a big big
18:04
Speaker 5: I think, embraced by the marketplace and risk assets on
18:07
Speaker 5: what we saw was a little bit cooler than expected
18:08
Speaker 5: inflation data. Couple that with a FED meeting in the
18:11
Speaker 5: stair for noon. A lot of folks taking this as
18:13
Speaker 5: an opportunity to jump into the market's check in.
18:15
Speaker 4: With a professional on this whole thing.
18:16
Speaker 5: David Kodla, founder, chief executive officer and chief investment strategist
18:20
Speaker 5: at Mainstay Capital Management, joins us. David, the market likes
18:25
Speaker 5: what it heard this morning. I guess anticipating an accommodati
18:28
Speaker 5: of FED going forward.
18:30
Speaker 4: What's your take.
18:32
Speaker 6: I think that's exactly what we're seeing. Good morning, Paul
18:36
Speaker 6: and alex. I you know, we here's the quandary, right
18:43
Speaker 6: We have an inverty deal curve for the longest in
18:48
Speaker 6: history and an inversion very deep that is eight freight
18:53
Speaker 6: on predicting a recession. We have these stats out there,
18:58
Speaker 6: credit card interests at an all time high, delinquencies at
19:01
Speaker 6: an all time high, auto loan defaults rising rapidly. That
19:07
Speaker 6: is anecdotal data pointing towards problems in the economy. At
19:11
Speaker 6: the same time, we had positive GDP in the fourth quarter,
19:14
Speaker 6: first quarter, and GDP now from the Atlanta FED is
19:18
Speaker 6: currently above three percent for the second quarter, and that's
19:21
Speaker 6: a very volatile number. Earnings are beat expectations by a
19:29
Speaker 6: wide margin for the first quarter. We're expecting good earnings
19:32
Speaker 6: for the year. We're out of the earnings recession, strong
19:35
Speaker 6: earnings going forward. And the S and P Global PMI
19:42
Speaker 6: has manufacturing and services at twenty four and twenty five
19:46
Speaker 6: month highs. So there is a lot of conflicting data
19:51
Speaker 6: out there as to where the economy is at right
19:54
Speaker 6: now and where the economy is going. And as far
19:58
Speaker 6: as the Fed, UH, Yeah, we saw we saw another
20:02
Speaker 6: slight decrease in UH in CPI and we know though
20:07
Speaker 6: that it's going to be you know, Powell is, we'll
20:10
Speaker 6: see what we hear in the presser today and what
20:12
Speaker 6: kind of guidance we get what the dot plot shows.
20:15
Speaker 6: But we're you know, we're seeing we're seeing UH inflation
20:20
Speaker 6: being sticky. Even their preferred gauge services PMI is a
20:26
Speaker 6: two point eight. They're not a target yet, and it's
20:29
Speaker 6: and inflation is being is remaining sticky and stubbornly high.
20:33
Speaker 2: So you think the Fed eventually today takes away that
20:35
Speaker 2: punch bowl by sort of pouring some cold water here.
20:39
Speaker 6: Well, I think that, you know, and it's it's it's
20:43
Speaker 6: you know, become a parlor game like calling the the
20:47
Speaker 6: level of the S and P five hundred at the
20:48
Speaker 6: end of the years to win, the FED will cut
20:51
Speaker 6: and see economists and wirehouses with each data point jumping
20:55
Speaker 6: back and forth between July or December or September. Uh,
21:00
Speaker 6: but we see the fact of the matter is until
21:04
Speaker 6: it's clear to the fo MC that inflation or CPI
21:10
Speaker 6: is getting close or pc is getting close to their target,
21:14
Speaker 6: they're not going to cut. They're not going to cut.
21:17
Speaker 6: And there's plenty of economic data they can point to,
21:20
Speaker 6: uh that that that says the economy is really doing okay,
21:24
Speaker 6: although there's some economic data out there that scares the
21:27
Speaker 6: heck out of me.
21:29
Speaker 5: So given that backdrop here, how are you thinking about
21:33
Speaker 5: your portfolio construction?
21:34
Speaker 4: What kind of.
21:34
Speaker 5: Tweaks have you been making maybe over the last several months,
21:37
Speaker 5: would you anticipate and over the next several months.
21:41
Speaker 6: Well, and that's and that's what we we haven't We
21:44
Speaker 6: haven't really We've been on the on the equity side. Uh.
21:49
Speaker 6: You know, we continue to favor, we favor large cap
21:52
Speaker 6: over small cap, and we've seen that that valuation spread keeps,
21:56
Speaker 6: you know, setting multi year records as well, large cap
21:59
Speaker 6: over small cap, US over foreign growth over value growth
22:04
Speaker 6: over value being and large over small being very important.
22:08
Speaker 6: Mega cap tech continues to rock and roll. Look at
22:12
Speaker 6: what we've got today. I mean, how many how many?
22:18
Speaker 6: How many people have come on the show and talked
22:20
Speaker 6: about shortening the megacap stocks over the past year. Short,
22:26
Speaker 6: No one.
22:27
Speaker 2: No, I haven't heard anyone saying short the megacaps. No way.
22:30
Speaker 2: That's like standing in front of a train.
22:33
Speaker 6: Oh well, I agree with you, But but we have,
22:36
Speaker 6: I mean we have. And and likewise, on the income side,
22:41
Speaker 6: how many people have come on the show and said
22:43
Speaker 6: they're adding duration because the FED is going to cut rates.
22:46
Speaker 6: They've had their head handed to them. The US aggregate
22:49
Speaker 6: bond index is negative year to date, and what we've
22:53
Speaker 6: been saying is that where you want to be at
22:55
Speaker 6: a sixty to forty portfolio, whatever the income oriented portion
22:59
Speaker 6: your portfolio, has to be an ultra short maturity, high
23:04
Speaker 6: yielding with zero duration risk that produced about a seven
23:07
Speaker 6: and a half percent return last year with those types
23:11
Speaker 6: of all short bond funds about three and a half
23:13
Speaker 6: percent this year versus a negative US aggregate bond index.
23:18
Speaker 6: So that strategy, that combination of leaning towards large cap growth.
23:24
Speaker 6: On our equity side, ultra short, high yielding, zero duration
23:29
Speaker 6: risk in our bond funds ETFs bond allocation. It is
23:34
Speaker 6: continued to work very very well.
23:36
Speaker 5: And David, you know you mentioned the US AGG bond index,
23:40
Speaker 5: the Bloomberg Index down zero point nine percent year to date,
23:43
Speaker 5: But are you surprised that the corporate US corporate high
23:46
Speaker 5: yield is actually up a couple of percent here and
23:48
Speaker 5: has been outperforming really over the last couple of years.
23:51
Speaker 5: Given concerns about our recession. Are you surprised that the
23:54
Speaker 5: highield market set as well as.
23:55
Speaker 6: That has Yeah, I mean, crowdit spreads are tight, uh,
24:00
Speaker 6: And you know, we don't want to be high yield
24:03
Speaker 6: with long duration, right, We're talking about where we're holding
24:07
Speaker 6: high yield, where we're holding bank loan, where we're holding
24:11
Speaker 6: floating rate. I'm talking about an income portfolio or a
24:15
Speaker 6: credit debt portfolio with the duration of about zero point one,
24:19
Speaker 6: not five or six or ten. Right, So we want
24:23
Speaker 6: to you know, in each of those categories, we don't
24:26
Speaker 6: want the duration risk. We're not ready for that yet,
24:28
Speaker 6: because look, we don't we think we think. I said
24:32
Speaker 6: it my notes and I'll continue to say it.
24:34
Speaker 1: FED.
24:35
Speaker 6: The FED rate cut is the first FED rate cut
24:38
Speaker 6: is months away because they're nowhere near target or there's
24:42
Speaker 6: still far enough away on the target. We have a
24:44
Speaker 6: slight improvement, you know, in this in this release, but
24:49
Speaker 6: they've got a long way to go unless they change
24:51
Speaker 6: their target to get to two percent.
24:55
Speaker 2: I know this is sacrilege, like a couple hours before
24:57
Speaker 2: the FED. But what about x US with the ECB
25:00
Speaker 2: having already cut, but the politics situation there is really
25:04
Speaker 2: up ended. In France and also the UK. Anything our
25:08
Speaker 2: overseas that strikes your fancy.
25:11
Speaker 6: Yeah, a good question that you know when we when
25:14
Speaker 6: we look abroad Europe, you know whether the ECB should
25:19
Speaker 6: be cutting yet or not. They cut a quarter point
25:23
Speaker 6: in Japan. We've loved Japan for a long time now, uh,
25:27
Speaker 6: with with the weakness and the end uh just tremendous
25:30
Speaker 6: for their exporters. Other corporate reforms Japan has been we've
25:34
Speaker 6: had an allocation too.
25:36
Speaker 1: Uh.
25:36
Speaker 6: With all of this, you have to be very careful
25:39
Speaker 6: to hedge the currency because what's happening with the FED
25:42
Speaker 6: staying tight, ECB cutting, what's happening with the end. You
25:46
Speaker 6: don't want that, you know, you don't want to affects
25:48
Speaker 6: affecting your return. You don't want you need the currency
25:50
Speaker 6: hedge in there. But yeah, we're seeing more and more
25:53
Speaker 6: opportunities abroad in that respect. That's why I said our
25:56
Speaker 6: growth over value are large over small is the important
26:01
Speaker 6: US over FORORN. I still think it's America first, but
26:04
Speaker 6: there are opportunities abroad, specifically Japan, and I think coming
26:08
Speaker 6: on in Europe.
26:08
Speaker 5: Now, all right, David, thank you so much for joining
26:11
Speaker 5: us at David Kudla, Founder, chief executive officer and chief
26:13
Speaker 5: investment officer, Mainstay Capital Management. Appreciate getting a few moments
26:18
Speaker 5: this time sticking with the large cap growth names. And
26:21
Speaker 5: I guess why not. That's kind of where you know,
26:24
Speaker 5: we've seen all of the action.
26:26
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26:31
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26:45
Speaker 2: I'm Alex the alongside paulse We need this. At Bloomberg
26:48
Speaker 2: Intelligence Radio, we bring you all the top news and
26:50
Speaker 2: business and economics and finance. But there are lens of
26:52
Speaker 2: Bloomberg Intelligence analysts. They cover two thousand companies and one
26:55
Speaker 2: hundred and thirty industries all around the world. One top
26:59
Speaker 2: news item here and so interesting that it comes on
27:01
Speaker 2: the day of the shareholder TESLA vote, which would come tomorrow,
27:05
Speaker 2: is the European Union's decision to put tariffs of up
27:09
Speaker 2: to forty eight percent on ev imports from China. It
27:13
Speaker 2: just escalates trade tensions and adds to the cost of
27:16
Speaker 2: buying an EV. Craig Trudell is Global Auto's editor for
27:19
Speaker 2: Bloomberg News, and he joins us now from London. I
27:21
Speaker 2: got to ask questions on this one, but broad strokes,
27:24
Speaker 2: what are the details with these tariff increases.
27:28
Speaker 8: Yeah, this is huge news. It was anticipated, but the
27:31
Speaker 8: particulars are something that are very fresh. So the European
27:36
Speaker 8: Union launched this investigation last year into the extent of
27:40
Speaker 8: the subsidization of electric vehicles by China, which are are
27:45
Speaker 8: increasingly you know, coming into Europe and you know, really
27:49
Speaker 8: able to compete with local manufacturers. There's been concerns about
27:53
Speaker 8: you know, Chinese cars being able to undercut companies like
27:58
Speaker 8: Volkswagen and Stalantis and and renaut. The details here today
28:03
Speaker 8: sai See, the maker of MG, which is a British
28:06
Speaker 8: brand that you know, was sort of brought back from
28:09
Speaker 8: the brink by a state owned company in China. Sa see.
28:14
Speaker 8: They are going to be subject to a thirty eight
28:16
Speaker 8: percent additional tariff. And MG has really been sort of lighting,
28:21
Speaker 8: you know, lighting things on fire here in Europe and
28:23
Speaker 8: in the UK in terms of really, you know, being
28:26
Speaker 8: able to push a lot more volume the last couple
28:30
Speaker 8: of years. Another big manufacturer that's going to be subject
28:33
Speaker 8: to a substantial teriff will b g Le. They of
28:36
Speaker 8: course own Volvo and Pollstar and some other big brands.
28:40
Speaker 8: Byd is another company that will be subject to seventeen
28:44
Speaker 8: percent additional tariff, and the rest of the industry will
28:48
Speaker 8: be subject to an a weighted average duty of twenty
28:52
Speaker 8: one percent.
28:54
Speaker 5: So talk to us about just the EV market and
28:57
Speaker 5: the China's percentage, Like what's China's market share in Europe
29:00
Speaker 5: of evs forrady defined because you can't find one here
29:03
Speaker 5: in the US.
29:04
Speaker 8: Yeah, I mean, it's it's tricky because it of course
29:07
Speaker 8: depends a little bit on how you define it. And
29:09
Speaker 8: I think one of the things that's really interesting here
29:11
Speaker 8: is that it's not necessarily just Chinese companies that are
29:14
Speaker 8: that are doing this importing.
29:16
Speaker 6: UH.
29:16
Speaker 8: The biggest importer as a matter of fact is Tesla.
29:19
Speaker 8: They have the plant in Germany where they make Model Wise,
29:23
Speaker 8: but they don't make Model threes there, so they've been
29:25
Speaker 8: shipping an awful lot of Model threes from their plant
29:28
Speaker 8: in Shanghai.
29:29
Speaker 1: UH.
29:29
Speaker 8: They interestingly are going to try to to have a
29:33
Speaker 8: lower duty rate UH and make the argument to the
29:37
Speaker 8: European Commission that because they've been, you know, benefiting less
29:42
Speaker 8: than other manufacturers, uh, you know, from subsidies, that they
29:46
Speaker 8: should have a sort of commensurate duty rate. Other manufacturers
29:50
Speaker 8: are able to make that request and have you know,
29:54
Speaker 8: what's called a a you know, individually calculated rate. But
29:59
Speaker 8: if at this juncture the only company that we know
30:02
Speaker 8: that's asked for that and may get it as Tesla,
30:05
Speaker 8: Here's what I.
30:05
Speaker 2: Don't quite understand, and I know I'm kind of beating
30:08
Speaker 2: my head against a all on this one. But if
30:10
Speaker 2: the goal is to go green, why wouldn't they want
30:12
Speaker 2: to flood the market with a ton of Chinese ev
30:14
Speaker 2: imports and get the green stuff going. And I appreciate
30:18
Speaker 2: that they want to protect their current manufacturers, but you know,
30:21
Speaker 2: importing cheaper evs also spurs competition. So the line to
30:26
Speaker 2: thread the needle I find to be very confusing.
30:30
Speaker 8: It's absolutely needle threading or you know, tightrope walking, pick
30:33
Speaker 8: your metaphor, and it is a very valid question. And
30:37
Speaker 8: depending on who you ask, they're they're doing absolutely the
30:40
Speaker 8: right thing here or or they're really sort of shooting
30:43
Speaker 8: themselves in the foot Folks in Brussels. The debate here
30:48
Speaker 8: is is to what extent do you know, local manufacturers
30:52
Speaker 8: need to be protected from the fact that kinda has
30:55
Speaker 8: jumped up out to this huge lead. They're dominant in
30:58
Speaker 8: this space. They're able to, you know, bring electric vehicles
31:02
Speaker 8: to market with much cheaper batteries that people can actually afford,
31:06
Speaker 8: and that's been you know, the the major you know,
31:08
Speaker 8: sort of pain point for the industry is they have
31:12
Speaker 8: not been able to bring prices down far enough fast
31:16
Speaker 8: enough for you know, more mass market adoption. China has
31:20
Speaker 8: been able to pull that off, uh, you know, in
31:22
Speaker 8: large part European companies have not been able to do that.
31:26
Speaker 8: So while you know, we've seen quite a bit more
31:27
Speaker 8: momentum in Europe relative to to say the US, that
31:32
Speaker 8: momentum has really slowed of late, particularly as we've seen
31:36
Speaker 8: you know, the cost of living crisis and inflation really
31:39
Speaker 8: hitting consumers pocketbooks. We've not seen you know, the the
31:42
Speaker 8: growth rates that you know, just in the last few years.
31:45
Speaker 8: We're really eye popping and you know, getting a lot
31:48
Speaker 8: of people excited about you know, this transition being doable.
31:53
Speaker 4: So that's kind of where I wanted to go.
31:55
Speaker 5: Great because here in the US there really seems to
31:57
Speaker 5: be a palpable i guess, decline in the adoption rate
32:03
Speaker 5: for evs, and people debate whether it's price, whether there's
32:06
Speaker 5: some political issues out there, whether there's lack of autequate
32:09
Speaker 5: charging infrastructure, whatever, but there's been a palpable you know,
32:12
Speaker 5: kind of sense of the market's cooling off. Give us
32:14
Speaker 5: a sense of how the market is in the UK
32:16
Speaker 5: and the EU.
32:18
Speaker 8: Yeah, I would definitely recommend that listeners take a look
32:22
Speaker 8: to the extent they have access to the Bloomberg Neft's
32:25
Speaker 8: report out today, their annual ev outlook. It really goes
32:29
Speaker 8: into a great detail on just you know, sort of
32:32
Speaker 8: the ins and outs here. What we've been seeing is
32:35
Speaker 8: you know, one manufacturer after another coming out and really
32:38
Speaker 8: sort of dialing back there and ambitions. You know, Mercedes
32:42
Speaker 8: did a few years ago talked about being able to
32:45
Speaker 8: maybe go fully electric, you know, around twenty thirty. In
32:49
Speaker 8: certain markets, they've really walked that back. You've seen Ford
32:52
Speaker 8: and GM and Volkswagen, even Tesla you know, put off
32:56
Speaker 8: or sort of indefinitely delay factory investments. You know, Tesla
33:01
Speaker 8: of course, you know, made a big announcement about building
33:04
Speaker 8: a factory in Mexico that is very much on ice.
33:08
Speaker 8: Volkswagen canceled a plant in Germany. Uh, there's just a
33:12
Speaker 8: lot of concern among manufacturers about being able to profitably
33:15
Speaker 8: make affordable electric vehicles. And again, you know, the the
33:20
Speaker 8: way in which the Chinese have been able to achieve
33:24
Speaker 8: this has been driving down battery prices. And that's one
33:27
Speaker 8: of the most compelling things in this report for me,
33:29
Speaker 8: is just the amount of capacity that we've seen in China.
33:33
Speaker 8: So when you want to talk about you know, competition
33:35
Speaker 8: and fairness, that's something that Brussels in Washington they really
33:39
Speaker 8: highlight as what's problematic here is that they're essentially making
33:43
Speaker 8: the case that China is flooding the market and artificially
33:46
Speaker 8: driving down prices. That's good for the consumer. But you know,
33:50
Speaker 8: risks putting their companies, you know, out of out of
33:53
Speaker 8: business or you know, if that's too extreme at least
33:56
Speaker 8: you know, at a significant disadvantage.
33:58
Speaker 2: Greg really appreciate it. Thank you so much. Craig Trudel,
34:01
Speaker 2: a Bloomberg Global Autos editor, joining us there. Yes, and
34:04
Speaker 2: that Bloomberg ANI report that comes out is widely cited
34:08
Speaker 2: by most auto analysts on the street is really seen
34:11
Speaker 2: as the definitive ev demand outlook and supply outlooks. So
34:15
Speaker 2: if you can get your hands on it in any capacity,
34:18
Speaker 2: you should definitely do so. And it feels like a
34:20
Speaker 2: chicken and an egg thing. You need the supply and
34:23
Speaker 2: then you need the demand and the chicken in the egg.
34:28
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
34:32
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
34:36
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34:39
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34:42
Speaker 1: say Alexa play Bloomberg eleven thirty.
34:47
Speaker 2: So one thing in the market is if you look at, say,
34:49
Speaker 2: the top sectors in the SMP so far this year,
34:51
Speaker 2: you get tech, you get information, consumer communications. Thank you
34:56
Speaker 2: very much. But you also get utilities, and a big
34:59
Speaker 2: part of that utility story is sure you get some
35:01
Speaker 2: nice yield and it's that safety defensive play. Okay, but
35:04
Speaker 2: I'm starting to wonder how much of a growth sector
35:06
Speaker 2: it is also, as you see massive power demand build
35:09
Speaker 2: from data centers and AI in addition to the energy transition,
35:12
Speaker 2: utilities kind of sit in the middle of all of that.
35:15
Speaker 2: And one company is Next Era Energy. It's ticker n E.
35:19
Speaker 2: The stock has had a nice run up this year,
35:21
Speaker 2: it's not done so well in the last couple of days,
35:23
Speaker 2: and we'll get to that after an investor presentation. We'll
35:25
Speaker 2: get to that with the CEO and president, John Ketchum. Hey, John,
35:29
Speaker 2: it's so good to see you again. Thanks for coming
35:31
Speaker 2: in Alex.
35:31
Speaker 9: Great to see you.
35:32
Speaker 6: Good to be here.
35:33
Speaker 2: So tell our viewers first, what does Next Era Energy
35:37
Speaker 2: actually do well.
35:38
Speaker 9: We're made up of two businesses. One we own the
35:42
Speaker 9: nation's largest rate regulated utility floor to power and light,
35:48
Speaker 9: and two we are the world's leader in renewables when
35:53
Speaker 9: solar battery storage, a unique combination bringing those two companies together.
35:58
Speaker 2: But you still have like nuclear and too right like.
36:01
Speaker 4: We do for the utility side, we do, so we
36:03
Speaker 4: cover it all. We're in every part of the energy value.
36:06
Speaker 9: Chain, not only a renewables. We have six gigawatts of
36:10
Speaker 9: nuclear and we're one of the best operators in the
36:13
Speaker 9: country on the nuclear side. And we also own gas
36:16
Speaker 9: fire generation. Seventy two percent of our generation fleet in
36:21
Speaker 9: Florida is actually natural gas fired. So we view ourselves
36:25
Speaker 9: really as a very credible source in being able to
36:28
Speaker 9: advise our customers on what the lowest cost option is
36:32
Speaker 9: for generation.
36:33
Speaker 5: Owning a utility electric utility in Florida would seem to
36:37
Speaker 5: be a tough business with all the weather down there.
36:40
Speaker 5: What happens when these storms come through?
36:42
Speaker 4: How do you guys?
36:43
Speaker 5: You have to almost be in a constant state of
36:46
Speaker 5: emergency almost to be able to react.
36:48
Speaker 9: We are battle tested. That's one of the great things
36:50
Speaker 9: about our company is that nothing catches us up by surprise,
36:54
Speaker 9: and it comes from a culture of continuous improvement and innovation,
36:58
Speaker 9: and we practice and we drill, and we've had what
37:01
Speaker 9: forty nine hurricanes in the last twenty or thirty years.
37:05
Speaker 9: We're never caught by surprise. We're a company that is
37:09
Speaker 9: used to managing through diversity, and that's one of the strengths.
37:13
Speaker 2: So you mentioned catch by surprise and I mentioned the
37:16
Speaker 2: stock price in the last couple of days. So there
37:17
Speaker 2: was an investor presentation that you made and where you
37:21
Speaker 2: outline your forecast this year through twenty twenty six. You're
37:24
Speaker 2: also twenty twenty seven midpoint profit forecast. That's the one
37:28
Speaker 2: that analysts said that falls short of our estimates. Yeah,
37:32
Speaker 2: and I guess the question is if data demand and
37:34
Speaker 2: data power is going to drive so much demand for
37:37
Speaker 2: your stuff, why isn't that midpoint higher.
37:40
Speaker 9: Well, here's what we see, and we talked a lot
37:42
Speaker 9: about this at the analyst day yesterday. There are three
37:46
Speaker 9: things that I think really differentiate next Era as part
37:49
Speaker 9: of our value story. One, we're seeing an inflection point
37:53
Speaker 9: and power demand. Two, it's going to be met by
37:55
Speaker 9: renewables because it's low costs, fast to deploy, and it's clean.
38:00
Speaker 9: O companies better position to meet it than we are.
38:02
Speaker 9: And our business model has always been what I would
38:06
Speaker 9: call a replacement cycle. We're building new renewables to replace
38:11
Speaker 9: higher cost coal plants, higher costs, less efficient gas fired units,
38:17
Speaker 9: oil fired units. We now have this new opportunity that's
38:21
Speaker 9: really emerged in the last six to nine months, which
38:24
Speaker 9: is what I call our growth cycle opportunity. It's a
38:28
Speaker 9: new demand that has come and it's across industries. It's
38:32
Speaker 9: not just data centers get a lot of discussion, but
38:35
Speaker 9: it's industrial electrification, reshoring, and manufacturing as well. But when
38:40
Speaker 9: you think about it, we're having all these discussions with
38:44
Speaker 9: these customers now. Take data centers, for example, it takes
38:47
Speaker 9: two to three years to build a data center, so
38:49
Speaker 9: they won't need the power until twenty twenty seven. We
38:52
Speaker 9: might sign a contract today, but the power comes in
38:55
Speaker 9: twenty seven, which means it contributes in twenty eight. And
38:58
Speaker 9: so we're trying to explain to investors yesterday is look,
39:01
Speaker 9: we have a tremendous long term growth outlook, but a
39:05
Speaker 9: lot of this growth cycle demand is really going to
39:09
Speaker 9: start materializing and producing revenues and earnings in twenty seven,
39:13
Speaker 9: which means it really starts to contribute in twenty eight.
39:17
Speaker 5: As you walk through midtown Manhattan, you probably see some
39:19
Speaker 5: empty office space here. I think they all move down
39:22
Speaker 5: to your state. Talk to us about how that's impacted
39:25
Speaker 5: your business in terms of demand and maybe what you
39:28
Speaker 5: have to invest back into your grip.
39:30
Speaker 9: Yeah, and that's what's great about our business, right is
39:32
Speaker 9: the Barbell approach. We've got the nation's leading great regularly
39:36
Speaker 9: utility in Florida and the world's leader and renewables in Florida.
39:39
Speaker 9: We're seeing tremendous growth over the next twenty years. We're
39:43
Speaker 9: projecting a forty four percent increase in GDP. We have
39:47
Speaker 9: one thousand people a day moving to the state of Florida.
39:51
Speaker 9: Four of the five fastest growing metropolitan areas in the
39:55
Speaker 9: United States are in Florida.
39:58
Speaker 4: Florida.
39:58
Speaker 9: We're a country, it would have the fourteenth largest economy
40:02
Speaker 9: in the world, and we're there to power all that growth.
40:06
Speaker 9: So our growth story is not only about what I
40:09
Speaker 9: just discussed about all this renewable demand that we see
40:13
Speaker 9: power in AI and industry and manufacturing across the United States,
40:17
Speaker 9: but it's also all the growth that we see right
40:20
Speaker 9: in our own backyard in Florida.
40:22
Speaker 2: Talk to me about rates. So you're going to need
40:26
Speaker 2: to invest a lot, right, Like there's maybe an enormous
40:28
Speaker 2: investment cycle, as you mentioned, like the growth cycle for utilities. Right,
40:32
Speaker 2: what is it like on the regulated side of going
40:35
Speaker 2: back to the government and saying, Okay, guys, I got
40:36
Speaker 2: to invest it you've got to raise the rates.
40:39
Speaker 9: Yeah, And so what we do is we have done
40:42
Speaker 9: a terrific job of taking cost out of our business.
40:44
Speaker 9: So when you look at what we've been able to
40:47
Speaker 9: do over the last twenty years, our O and M
40:50
Speaker 9: on a dollar per megawate hour basis is seventy percent
40:54
Speaker 9: seventy percent lower than the national average. That's three billion
40:59
Speaker 9: dollars we put in our customer's pocketbook every single year
41:04
Speaker 9: compared to an average utility. And we've always been able
41:08
Speaker 9: to make really smart capital investment decisions around bringing low
41:12
Speaker 9: cost generation into the fold. And today the lowest cost
41:16
Speaker 9: generation option that we have in Florida is solar and storage.
41:20
Speaker 9: So although we're investing more capital, it's actually lowering the
41:24
Speaker 9: bill because it's a lot cheaper than other generation alternatives,
41:28
Speaker 9: combined with our ability to take cost out with the
41:31
Speaker 9: way we operate.
41:32
Speaker 4: But from your investors perspective, is a.
41:36
Speaker 5: Unit of power from a renewable source, what's a profit
41:39
Speaker 5: margin on that versus maybe an existing source.
41:43
Speaker 9: Well, when you think about renewables, I mean renewables you
41:46
Speaker 9: know have really strong returns and their low cost And
41:51
Speaker 9: you talked about, you know, interest rates being one of
41:54
Speaker 9: the factors. We pass those costs through to our customers,
41:57
Speaker 9: and so the cost of WHEN and solar has gone
42:01
Speaker 9: up a little bit as we've seen some pressure you
42:04
Speaker 9: know here from the macro environment, but so have cost
42:09
Speaker 9: increase for every other type of generation. Actually, gas fired
42:13
Speaker 9: generation has really gone up in price. And so you know,
42:17
Speaker 9: what we have seen with gas fire technology is a
42:22
Speaker 9: fifty percent increase in the last twelve months. That has
42:26
Speaker 9: not happened to renewables, making renewables even lower costs than
42:30
Speaker 9: they've ever been on a relative basis to gas turbine options.
42:35
Speaker 2: So what I hear is that everything is just more
42:38
Speaker 2: expensive because that's the environment that we're in. But because
42:41
Speaker 2: you're able to take costs out, the rate payer may
42:44
Speaker 2: not get hit as hard. Is that a fair statement?
42:47
Speaker 4: That's exactly right.
42:48
Speaker 9: And so what we've been able to do in Florida,
42:50
Speaker 9: our bill is thirty seven percent lower than the national
42:53
Speaker 9: average thirty seven percent. It's because of our ability to
42:57
Speaker 9: take all those costs out of the company and also
43:00
Speaker 9: offer them low cost renewable solutions as part of the
43:04
Speaker 9: generation mix. And when you put those two together, that's
43:08
Speaker 9: how we're able to achieve that thirty seven percent lower
43:11
Speaker 9: bill than the rest of the nation. That's a really
43:15
Speaker 9: compelling investor, customer value proposition and investor value proposition.
43:20
Speaker 2: Man, I have like seventy five more questions. We didn't
43:23
Speaker 2: get to nuclear, we didn't get to you know, hydrogen. Okay,
43:26
Speaker 2: you're coming back, John. This is so helpful, and you're
43:29
Speaker 2: really in those two parts like the here and now
43:31
Speaker 2: and then the future, and I think that's just so fascinating.
43:34
Speaker 2: So definitely come back. We'd love to further the perspective.
43:36
Speaker 2: John Ketchum, President and CEO of Next Era Energy, based
43:41
Speaker 2: in Florida. Great to see you.
43:43
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