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Boeing to Vote on New Wage Deal · Bloomberg Intelligence

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Speaker 2: One of the names Abigail was talk to us about
0:25
Speaker 2: was Boeing, And we want to figure out are these
0:28
Speaker 2: folks going to be getting back to work because they
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Speaker 2: need planes to come off, you know the line, they
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Speaker 2: need the cash flow, they need to get.
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Speaker 3: Folks back to work.
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Speaker 2: George Ferguson covers all of the aerospace, all the defense,
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Speaker 2: and all the airlines for Bloomberg Intelligence. So, George, it
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Speaker 2: seems like the union's representatives have agreed to a deal
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Speaker 2: with Boeing. What do you think the actual workers are
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Speaker 2: going to do when they vote?
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Speaker 4: So, I think we're getting closer.
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Speaker 5: Look, I think what thirty five percent is the increase
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Speaker 5: over four years. Still, I think subs some of the
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Speaker 5: other union agreements we've seen in the marketplace.
1:06
Speaker 4: You know what, like the port workers.
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Speaker 5: But I would note that Textron had a similar strike
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Speaker 5: by its machinists out in Wichita, Kansas. I'm not sure
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Speaker 5: if you get through they're very often Paul were aware
1:20
Speaker 5: of that, but they just came back to they agreed
1:25
Speaker 5: to come back to work. It was kind of a
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Speaker 5: sub thirty percent increase over four years. So my guess is,
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Speaker 5: you know that the shore workers probably or the port
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Speaker 5: workers probably set the high end of the of the
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Speaker 5: mark these Wichita machinists for Textra and probably set the
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Speaker 5: lower end. Boeing probably lived somewhere in the middle of
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Speaker 5: the thirty five.
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Speaker 4: Sounds about right.
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Speaker 5: Workers have been out on strike for about a month now, right,
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Speaker 5: So my guess is that finances are probably starting to look.
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Speaker 4: Challenge at some of those those household I.
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Speaker 5: Think Kelly Orperg, you know, pulled out the Hey, we're
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Speaker 5: gonna raise twenty five billion dollars in cash and we're
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Speaker 5: ready to go the distance. So I think those combinations
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Speaker 5: and then throwing some of the four to one K
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Speaker 5: money at them, right, there was some plus ups on
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Speaker 5: how much they would match the four O one K.
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Speaker 4: I think some initial.
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Speaker 5: You know, incentives on the four to one K. I
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Speaker 5: think they're pretty close, although I note that the union
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Speaker 5: leadership wouldn't endorse it.
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Speaker 4: From everything I've read, they they're just.
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Speaker 5: Passing along this offer from Boeing to the workers, you know,
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Speaker 5: for for a vote.
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Speaker 4: My guess is this is pretty close.
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Speaker 5: I think they might make it here, but I guess
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Speaker 5: we'll get we'll get a chance to see by Wednesday,
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Speaker 5: you know how cranky the union is and how much
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Speaker 5: more they want.
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Speaker 4: But it seems like it's pretty close.
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Speaker 6: George, how important is an end to this strike for
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Speaker 6: Boeing and just broader sentiment there. I mean, shares are
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Speaker 6: down about thirty nine percent you're today, Yeah, it's.
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Speaker 4: Huge, right.
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Speaker 5: I think if it doesn't get agreed to, I think
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Speaker 5: Boeing almost needs to raise money anyways. I guess it
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Speaker 5: might help them decide what amount of cash you.
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Speaker 4: Need to raise.
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Speaker 5: You know, I'm hearing stories that the supply chain still
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Speaker 5: building at the rates prior to the strike. You know,
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Speaker 5: components are stacking up on their you know, on their
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Speaker 5: loading docks. I think the longer it goes, the harder
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Speaker 5: it is to restart the line. The longer it takes
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Speaker 5: to restart the line, and the longer it takes to
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Speaker 5: generate cash. And I think Kelly Orpberg would prefer not
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Speaker 5: to go to the equity markets for a lot of
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Speaker 5: money and prefer not to have to draw down any
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Speaker 5: additional debt, not that they've said they would do that
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Speaker 5: at this point.
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Speaker 4: So it's very important for the turnaround.
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Speaker 5: And again, timing is crucial to keeping the supply chain
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Speaker 5: I think healthy and ready to go.
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Speaker 2: George talked to us about I know in the past
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Speaker 2: you've you know, educated us about the cash and how
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Speaker 2: the cash comes.
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Speaker 3: In and cash leaves a company like Boeing.
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Speaker 2: And it's it's tied pretty tightly to those seven three
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Speaker 2: seven jets leaving the floor.
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Speaker 3: How quickly can they restart it?
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Speaker 2: And where do you think the build modes for that
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Speaker 2: seven thirty seven jet will.
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Speaker 3: Be and what do they need to be.
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Speaker 5: Yeah, so, I mean they need to get that jet
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Speaker 5: up into the into the mid forties and fifties.
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Speaker 4: I think it's going to take them, you know.
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Speaker 5: I think even if the strike ended today, I think
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Speaker 5: they're not going to hit sort of you know, the
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Speaker 5: forty ish Their target was thirty eight by the year end.
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Speaker 5: I don't think they're going to hit maybe a forty
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Speaker 5: ish level until midyear next year.
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Speaker 4: They ought to be.
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Speaker 5: Driving up towards towards fifty maybe hopefully by the end
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Speaker 5: of next year if this strike ended relatively soon. You know,
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Speaker 5: by comparison air buses competitor airplane the eight three twenty
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Speaker 5: that's being built right now in the mid forties, you know,
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Speaker 5: they're driving higher into the into the the they hope
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Speaker 5: to be driving higher to the mid sixties think over
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Speaker 5: the next year. So it hasn't gone as well for
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Speaker 5: them as they like, but their competitor product is doing
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Speaker 5: much better. This that is the cash cow for the company.
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Speaker 5: Defense is really you know, back on its heels right
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Speaker 5: now because of some of these big fixed price contracts
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Speaker 5: they signed that are that are out of water, which
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Speaker 5: makes it that much more important to get the seven
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Speaker 5: thirty seven rolling off lines. And just I think an
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Speaker 5: interesting point of comparison if you look at Poeing's inventory
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Speaker 5: level last time we saw it too q eighty five
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Speaker 5: billion dollars of inventory on their balance sheet. Their competitor
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Speaker 5: airbus was in the mid forty level billion dollars, So
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Speaker 5: you could tell that's just an example of how bloated
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Speaker 5: that inventory level is and how much they can unlock
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Speaker 5: as they start to deliver airplanes. But again seven thirty
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Speaker 5: seven is the is the key to that, and they
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Speaker 5: want to keep market share in that airplane too.
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Speaker 6: Speaking of market Chare, I did want to get your
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Speaker 6: take on how investors are thinking about Boeing. I mean,
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Speaker 6: of course it's had a really troubled year when we
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Speaker 6: think about twenty twenty four, but as you mentioned, they
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Speaker 6: have Airbus as a competitor, but not too many competitors
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Speaker 6: out there. So how do investors think about this when
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Speaker 6: they're thinking about Boeing and its longevity?
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Speaker 5: I think some of you know, what you've seen today
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Speaker 5: in the stock price gives you a sense investors know
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Speaker 5: it's a you know, it's a duopoly. And look, you know,
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Speaker 5: we've been doing some work recently on the backlogs. And
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Speaker 5: if you looked at Airbus's backlog for the competing airplane
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Speaker 5: in the A three twenty I was just talking about
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Speaker 5: competing to the seven thirty seven.
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Speaker 4: You know, we think it's probably ten years of backlog
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Speaker 4: in that airplane right now.
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Speaker 5: Right so even if you stepped into Airbus's sales office,
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Speaker 5: I'm sure it doesn't go, you know, all the way
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Speaker 5: full out for ten years, because there's some airlines that'll
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Speaker 5: come in and deliver or sorry, order out for a decade,
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Speaker 5: but you're probably into the twenty thirties before you get
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Speaker 5: that airplane.
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Speaker 4: So if you when you're.
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Speaker 5: Thinking about Boeing and you're thinking about the market share
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Speaker 5: risks around this, striking the problems they've had, at least
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Speaker 5: right now, if you want an airplane Boeing, you know
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Speaker 5: it's probably your best place to buy a narrowbody, single
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Speaker 5: aisle airplane, the seven thirty seven. So it's not like
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Speaker 5: anybody's walking away with this business while Boeing is having
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Speaker 5: their problems. I think investors know that the Chinese are coming,
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Speaker 5: you know, they Comac the C nine one nine that's
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Speaker 5: a narrowbody, single aisle airplane like the A three twenty
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Speaker 5: seven thirty seven that's just rolling out into fleets in China.
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Speaker 5: Now last week looked, I think there was eight or
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Speaker 5: ten of them. They don't get the service out of
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Speaker 5: them per day that Boeing and Airbus do. They get
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Speaker 5: about half, so they're still sort of you know, they're
7:44
Speaker 5: still up coming up the learning curve, learning how to
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Speaker 5: support that airplane in the marketplace. So that's no replacement yet,
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Speaker 5: but that will move insize inside China in their fleets
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Speaker 5: that's been a very important market for Boeing an airbus,
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Speaker 5: and then it'll start to expand into that developing world
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Speaker 5: around China. Bowling at Airbus I think would really like
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Speaker 5: to get you know, they'd like to build at the
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Speaker 5: at the highest rates possible, build their cash flows and
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Speaker 5: come out with successor products in the twenty thirties and
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Speaker 5: forties that stay ahead of the Chinese and keep them
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Speaker 5: from taking significant market share. But again going back to
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Speaker 5: your initial question, it's still a two airplane builder world.
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Speaker 5: We don't see him Braier really getting into this business.
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Speaker 5: So right now the narrow body the larger air commercial
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Speaker 5: aircraft game. So it's really still a two manufacturer business
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Speaker 5: and investors know that, and I think that's what, you know,
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Speaker 5: what's leading to some of the action today.
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Speaker 2: Well, I can see the fleet aging right before my eyes.
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Speaker 2: I flew back from Charleston last week, Alex Steele and
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Speaker 2: I did, and the seven thirty seven still had like
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Speaker 2: the old card reader to get a TV show. I mean,
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Speaker 2: that's like twenty year old tech technology.
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Speaker 3: So I told I blame George for all that. He's
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Speaker 3: got to get these people back to work.
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Speaker 2: George Ferguson, Thanks for joining us there. George Ferguson's senior Aerospace,
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Speaker 2: Defense and Airlines analyzes our go to person and all
9:05
Speaker 2: things as it relates to aerospace and airlines. He's a
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Speaker 2: Bloomberg Intelligence then in Princeton. But it just seems like,
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Speaker 2: you know, you think about I can just see all
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Speaker 2: the you know, the stuff coming into the Boeing factory
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Speaker 2: to make the plane and just sitting there and piling up,
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Speaker 2: piling and appiling up because the line, the construction line,
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Speaker 2: that the manufacturing line is not not running.
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Speaker 6: So and I wonder how many people are still looking
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Speaker 6: at what plane they're taking for flights. As you remember
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Speaker 6: months back, things were falling apart and people were apprehensive,
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Speaker 6: they were nervous about getting on Boeing planes. So I'm
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Speaker 6: curious how many people are still shopping around when it
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Speaker 6: comes to flights there.
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Speaker 3: I never did that, and I always felt like you did.
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Speaker 6: Guilty as charged, okay, because.
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Speaker 2: I always I feel like the seven thirty seven Max
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Speaker 2: is now the safest plane right because it's gone through
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Speaker 2: so much.
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Speaker 3: Testing in review, But I don't know, I mean, it's
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Speaker 3: continue to do.
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Speaker 2: Yeah, any of the USA or the Western airlines generally speaking,
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Speaker 2: you know the safety.
9:55
Speaker 7: Is what it is.
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Speaker 3: I think we feel pretty good about that.
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Speaker 3: Let's turn back to the US markets here again.
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Speaker 2: Yes, and p I'm kind of down about five points now,
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Speaker 2: off about one hundred and forty five and nasdak up
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Speaker 2: twenty five. We check him with Phil Orlando, Federator at Hermes.
10:27
Speaker 2: He is our go to guys we think about some
10:30
Speaker 2: of these markets. He's a chief US equity market strategist
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Speaker 2: and head of the client portfolio group there. Hey, Phil,
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Speaker 2: I don't know if you saw this, but Goldman sachs
10:38
Speaker 2: out with the note saying, you know, if you think
10:40
Speaker 2: about the SMP over the next ten years, think about
10:44
Speaker 2: low single digit returns as opposed to what we've seen
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Speaker 2: over the past ten years, which have been much better.
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Speaker 2: When you see some a note like that, how do
10:52
Speaker 2: you kind of digest that well?
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Speaker 7: I mean, Goldman's probably right, We've had such a phenomenal
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Speaker 7: recovery in equities coming out of the depths of the pandemic,
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Speaker 7: you know, four years ago, four and a half years ago,
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Speaker 7: and just over the last year or so, that how
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Speaker 7: much of this has borrowed from the returns that you
11:11
Speaker 7: might expect over the next decade. So Goldman, you know,
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Speaker 7: adjusting their capital market assumptions and saying, you know, mid
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Speaker 7: single digits over the next ten years probably feels right,
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Speaker 7: particularly in light of the fact that we're you know,
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Speaker 7: sitting here with thirty six trillion dollars in federal debt
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Speaker 7: and a total debt to GDP ratio of one hundred
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Speaker 7: and twenty five percent. Those numbers aren't sustainable, and you've
11:37
Speaker 7: got to believe that at some point Washington's going to
11:40
Speaker 7: find religion on trying to step away from the sugar
11:45
Speaker 7: high that we've seen over the last couple of years,
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Speaker 7: with all of this massive amount of spending that'll have,
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Speaker 7: you know, potentially a deleterious impact on economic growth and
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Speaker 7: ultimately equity prices. So directionally, I don't disagree with what
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Speaker 7: Goldman said. The case for active management, though, is that
12:05
Speaker 7: what you want to do, is you want to find
12:06
Speaker 7: good firms, good managers, good products that can do better
12:10
Speaker 7: than you know, the average. You know, those top quartile
12:15
Speaker 7: performers that will you know, will will help you generate
12:19
Speaker 7: the returns that you need for your you know, college
12:22
Speaker 7: funds or retirement funds or whatever else.
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Speaker 6: Well, Phil, let's talk rates. Of course, we just got
12:28
Speaker 6: that jumbo rate cut just what felt like yesterday, and
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Speaker 6: then here we're turning and we're going to be having
12:33
Speaker 6: another meeting in a matter of weeks. What do you
12:35
Speaker 6: expect to come out of that meeting? Of course, I know,
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Speaker 6: as you flag just a month later after that last cut,
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Speaker 6: we're seeing an economy that could be seen as reaccelerating
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Speaker 6: and a labor market that has strengthened. What does this
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Speaker 6: mean for markets? Do we see a rally continuing after
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Speaker 6: this next meeting? And what do you expect from the
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Speaker 6: next meeting to come?
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Speaker 7: So to take half a step back, we were surprised
12:56
Speaker 7: by the pace of the fifty basis point raycut that
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Speaker 7: the said gave us in September eighteenth. We think that
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Speaker 7: the FED needs to sort of get back to you know,
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Speaker 7: that quarter point level November seventh, December eighteenth, and then
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Speaker 7: looking out over the next year and a half a
13:16
Speaker 7: quarter point cut per quarter, and that would take us
13:19
Speaker 7: down to a terminal value of the funds rate, let's
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Speaker 7: say by the middle of calendar twenty sixth, at about
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Speaker 7: three percent. We think that's a reasonable pace. And then
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Speaker 7: to your point, given the seeming reacceleration that we've seen
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Speaker 7: in the US economy over the last month or so
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Speaker 7: and sort of the sticky nature of inflation, in the
13:42
Speaker 7: fact that the labor market in September was actually surprisingly strong.
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Speaker 4: You know.
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Speaker 7: Raphael Bostik, for one, the president of Atlanta FED, made
13:51
Speaker 7: a comment, I guess was last week where he said,
13:54
Speaker 7: you know what, maybe we should just skip November and
13:58
Speaker 7: you know, come back in December and see where we're at.
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Speaker 7: So our view is that that the fifty we saw
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Speaker 7: in September was probably a little too aggressive, and given
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Speaker 7: sort of the tone of the economic data we've seen
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Speaker 7: over the last month or so, you know, ratcheting back
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Speaker 7: to a more conservative quarter point pace is probably more realistic.
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Speaker 2: Phil We're just starting to get into the real teeth
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Speaker 2: of the earnings season here. What have we seen so
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Speaker 2: far from the big banks that have reported in and
14:27
Speaker 2: what do you think the market needs to see earnings
14:29
Speaker 2: wise from the corporate America.
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Speaker 7: Well, the earnings haven't been bad. We're probably up four
14:36
Speaker 7: percent or so year every year, which is fine. We're
14:39
Speaker 7: probably gonna end up beating expectations as we usually do.
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Speaker 7: But importantly, the earning season is going to be slower
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Speaker 7: than the eleven or twelve percent year on year earnings
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Speaker 7: we saw in the second quarter. And I think that's
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Speaker 7: consistent with our soft landing thesis. We're not going negative,
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Speaker 7: We're just gonna slow down, you know, sort of a
15:01
Speaker 7: trend to pace that that's you know, above zero, but
15:06
Speaker 7: nowhere near as hot as the double digit pace that
15:09
Speaker 7: we you know, we we saw in previous quarters.
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Speaker 6: So expectations for this earning season are low. Does that
15:17
Speaker 6: support a further rally when we're looking at equities more
15:20
Speaker 6: broadly coming out of this earning season, Well, you.
15:24
Speaker 7: Know, we've seen a backup in treasury yields. From three
15:27
Speaker 7: fifty three sixty, we're up to you know, north of
15:29
Speaker 7: four to ten. Now, remember, price earnings ratios are inversely
15:34
Speaker 7: proportionate with the direction of inflation and interest rates. So
15:39
Speaker 7: the backup and yields suggested multiple should price earnings ratio
15:42
Speaker 7: should be contracting. Yet the stock market hit another, you know,
15:46
Speaker 7: all time record high last week. You've got stocks trading,
15:51
Speaker 7: the S and P trading at a forward multiple north
15:54
Speaker 7: of twenty one times on next year's earnings. We're estimating
15:58
Speaker 7: two hundred and seventy five dollars for S and P
16:00
Speaker 7: next year. Yet the appropriate pe on stocks, given what
16:04
Speaker 7: treasury yields are, is probably south of eighteen times earning.
16:09
Speaker 7: So you've got a valuation gap right now, you know,
16:12
Speaker 7: of about twenty percent in round numbers. In my mind,
16:16
Speaker 7: the market's extraordinarily enthusiastic here. It's looking through and discounting
16:23
Speaker 7: very favorable federal reserve behavior, very favorable election results, very
16:29
Speaker 7: favorable trajectory of economic roles and inflation. There's a lot
16:35
Speaker 7: of enthusiasm built in here that you know, maybe we
16:38
Speaker 7: ought to see a little bit of a pullback.
16:41
Speaker 2: All right, Phil, thanks so much for that. I always
16:43
Speaker 2: appreciate getting your thoughts on these markets.
16:44
Speaker 3: It's Phil Orlando.
16:45
Speaker 2: He's a chief equity market strategist and head of the
16:47
Speaker 2: client portfolio MANAFIT team at Federated Hermes.
16:50
Speaker 3: Zooming it in there from New York.
16:54
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Speaker 2: you will find us. Tensions in the Middle East, the
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Speaker 2: military conflict in the Middle East still front and center
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Speaker 2: for markets. We like to get some smart internal voices
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Speaker 2: as well as external voices. And that brings us to
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Speaker 2: our next guest, Ned Lazarius, Associate Professor of International Affairs
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Speaker 2: at George Washington University, joining us via zoom from Washington, DC. Professor,
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Speaker 2: thanks so much for joining us here. I'm just not
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Speaker 2: sure what next steps are there in the Middle East.
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Speaker 2: I guess one of them is what or how Israel
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Speaker 2: will respond to the missile attack on Israel, as well
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Speaker 2: as I guess a potential attack on Netahu's home.
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Speaker 3: Where are we in that discussion?
17:59
Speaker 8: Well, you're quite right, this is a multi front war
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Speaker 8: now with active multiple active fronts, with Israeli troops fighting
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Speaker 8: in Gaza for over a year now, fighting on the
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Speaker 8: ground in southern Lebanon, as well as continuing airstrikes north
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Speaker 8: to the Dahia neighborhood of Beirutz, which is the Hesbalah stronghold.
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Speaker 8: We are still seeing missiles fired from Iraq from Yemen
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Speaker 8: from around the region, and we are waiting to see
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Speaker 8: what will be the Israeli response to the massive, second
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Speaker 8: massive Israel sorry Iranian missile barrage on Israel. We also,
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Speaker 8: as you know, there was a recent leak of potential
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Speaker 8: Israeli target plans that was leaked from the United States.
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Speaker 8: I believe there's now a secret meeting going on or
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Speaker 8: top secret meeting going on in Congress to discuss what
18:58
Speaker 8: happened and try to identify the source that seems to
19:01
Speaker 8: have leaked to the telegram social media Israeli planned that
19:07
Speaker 8: were shared with the United States, and it's possible that
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Speaker 8: that source has more documents that may come to light
19:15
Speaker 8: as well, so that may throw a wrench in Israeli plans.
19:20
Speaker 8: If the plans that were leaked are accurate, It's all
19:24
Speaker 8: unclear as has been the case throughout this war. The
19:30
Speaker 8: only things that seem to be well known or that
19:32
Speaker 8: Israel intends to strike back at Iran, that there has
19:39
Speaker 8: been a tremendous amount of coordination and discussion with the
19:44
Speaker 8: United States, given the sensitivity of our electoral calendar, with
19:49
Speaker 8: our election coming up in just over two weeks.
19:52
Speaker 6: Well, as you mentioned, we do have a presidential election
19:55
Speaker 6: in just a matter of weeks. In the US is
19:57
Speaker 6: hopeful for a cease fire before then, and it's been
20:00
Speaker 6: reported that the Secretary of State Anthony Blincoln is said
20:04
Speaker 6: to visit Israel among other countries in the area starting today,
20:07
Speaker 6: and this one his eleventh visit in the region since
20:10
Speaker 6: last October. Can you speak a bit more about how
20:12
Speaker 6: the US is playing a role.
20:16
Speaker 8: Blincoln is headed there almost Hochstein, the President's Special envoy,
20:21
Speaker 8: who has been back and forth between Lebanon, Israel, and
20:26
Speaker 8: Washington for months is there again this week. They're making
20:31
Speaker 8: every effort to i think, at least keep it from
20:35
Speaker 8: spiraling further out of control and to try and manage
20:41
Speaker 8: Israel's responses in line with US interests. But they certainly
20:47
Speaker 8: cannot control events, as we've seen events there, you know,
20:52
Speaker 8: are beyond anyone's control, and even include surprises such as
20:59
Speaker 8: the killing of Hamas leader Yehia Sinoar less than a
21:04
Speaker 8: week ago, who was killed by Israeli regular infantry troops
21:07
Speaker 8: who did not know that it was him. And this
21:12
Speaker 8: is a massively important event which may eventually help turn
21:17
Speaker 8: the course of the war. I do not expect a
21:20
Speaker 8: ceasefire before the US election. There is just simply too
21:25
Speaker 8: much going on. It's too escalated of a conflict at
21:30
Speaker 8: the moment. As you said, we were waiting for Israel's
21:32
Speaker 8: response to the Iranian attack. It is possible, not unthinkable,
21:38
Speaker 8: that Israel would delay until after the US election, but
21:42
Speaker 8: I would say that that seems less likely, and once
21:46
Speaker 8: Israel responds, then there will be an Iranian response. So
21:50
Speaker 8: a ceasefire, a total ceasefire on all the fronts, is
21:55
Speaker 8: not in evidence, and I think the probably the Biden
22:01
Speaker 8: administration is aware of that and is making every effort
22:05
Speaker 8: to keep this from against spiling out of control or
22:08
Speaker 8: escalating in a way that is contrary to US interests.
22:12
Speaker 8: The US has set up a special air defense battery,
22:17
Speaker 8: the Thaad Missile Battery, which Secretary of Defense Austin has
22:23
Speaker 8: announced is now on the ground in Israel. He didn't
22:27
Speaker 8: say whether it's operational, but obviously that's the plan, and
22:29
Speaker 8: I assume that it will be shortly and that's to
22:31
Speaker 8: help defend against further Iranian missile attacks.
22:35
Speaker 2: What are the end games for Israel now? Just in
22:39
Speaker 2: a year, it's gone from the initial strategy of neutralized
22:42
Speaker 2: hamas and get the hostages back to I.
22:44
Speaker 3: Don't know what it is now.
22:45
Speaker 2: Have they articulated what their endgame is here on this
22:49
Speaker 2: much broader front.
22:52
Speaker 8: Well, I think there are two levels to this. So
22:56
Speaker 8: one is the Israeli defense establishment, the state, the broader strategy,
23:03
Speaker 8: and one is the prime minister, Prime Minister Nataniao, who
23:06
Speaker 8: has his own political interests which may well be guiding
23:11
Speaker 8: some of his decisions and often put him at odds
23:15
Speaker 8: with his own defense establishment. I think that the in
23:20
Speaker 8: terms of the broader Israeli interest, I think that right
23:24
Speaker 8: now Israel has been on the offensive. After many months
23:29
Speaker 8: when it seemed that victory was you know, a ridiculous
23:32
Speaker 8: idea and that you know, things were not going well
23:37
Speaker 8: from an Israeli military point of view, Israel has been
23:39
Speaker 8: on the offensive. It's dealt severe blows to Hasbalah and
23:46
Speaker 8: to Hamas, and it has, you know, with help from
23:50
Speaker 8: the United States and regional allies, absorbed two massive Iranian attacks.
23:56
Speaker 8: Israel has killed you know, the leaders of Hamas Hasbola.
24:01
Speaker 8: So this has actually been, from an Israeli military point
24:04
Speaker 8: of view, the most productive period of the war. And
24:10
Speaker 8: I think that a goal is really to damage Hezbollah
24:15
Speaker 8: and Hamas as much as possible before the US election.
24:19
Speaker 8: I do think that they're sensitive to our role calendar
24:22
Speaker 8: and looking at that and thinking that after that election
24:25
Speaker 8: they may need to recalibrate, so they're trying to get
24:28
Speaker 8: all the blows in they can before that.
24:30
Speaker 2: Exactly, all right, Ned, thank you so much for joining us.
24:33
Speaker 2: Ned Lazarus, Associate Professor of International Affairs at George Washington University,
24:36
Speaker 2: giving us the latest out of the Middle East, a broadening.
24:40
Speaker 3: Conflict that we've witnessed over the past twelve months ago.
24:45
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25:05
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25:07
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25:10
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25:12
Speaker 3: Our next guest.
25:13
Speaker 2: It's been trialing all over the place Dubai Berlin, so
25:15
Speaker 2: we're gonna get some fresh color about what's going on
25:17
Speaker 2: in Global Wall Street. And Barry joins us. She is
25:20
Speaker 2: the founder and managing partner of Thread Needle. Joining us
25:22
Speaker 2: live here in our Bloomberg Interactive Broker Studio. Dubai A
25:25
Speaker 2: bunch of technology people.
25:27
Speaker 3: What were you doing in Dubai?
25:28
Speaker 9: Well, it was the world's biggest tech and investor startup conference,
25:32
Speaker 9: unbelievable scale, six hundred six hundred six and a half
25:35
Speaker 9: thousand companies, two hundred thousand tech executives and really leading
25:38
Speaker 9: a lot of the conversations around AI is at hype?
25:42
Speaker 9: Where are we in terms of cybersecurity and applications of AI? So, Paul,
25:45
Speaker 9: it was just a really interesting way of seeing where
25:48
Speaker 9: the energy around tech is going, and more specifically in
25:51
Speaker 9: the rest of the world, not just us entrepreneurs, but
25:54
Speaker 9: really getting a sense, what's the Middle East doing, what's
25:56
Speaker 9: Asia doing, and how is policy and government action meeting the.
25:59
Speaker 6: Private Sticking with tech, you're focus on the private side.
26:03
Speaker 6: I know you mentioned and recently invested in the software
26:05
Speaker 6: business that's focused on streamline contractor assessments. When they come
26:08
Speaker 6: to your house, I'll put in new HVAC systems. What
26:11
Speaker 6: are you seeing there? Can you talk a bit more
26:13
Speaker 6: about that?
26:14
Speaker 7: Sure?
26:14
Speaker 9: Well, Laura, I look at the tech sector a lot
26:15
Speaker 9: and talk about stocks out here at Bloomberg, and I've
26:17
Speaker 9: recently been getting wired with the rallies that if I
26:20
Speaker 9: thought that it was getting a little thin in terms
26:22
Speaker 9: of the air out there valuation wise, it's even more so,
26:25
Speaker 9: even more the case over the last couple of weeks,
26:27
Speaker 9: and so I've been looking a lot more at these
26:28
Speaker 9: sort of niche software as service businesses where people like
26:31
Speaker 9: the service Nows of the world, which is terrific company
26:34
Speaker 9: but extremely expensive. If you look at the multiples in
26:36
Speaker 9: that business right now, where that could be the choir
26:38
Speaker 9: of choice as it looks to roll up some of
26:40
Speaker 9: these niche businesses. So that's the kind of place I'm
26:42
Speaker 9: looking at HVAC. I'm a believer that there's a big
26:45
Speaker 9: CAPEX replacement cycle coming as you know, global warming continues,
26:49
Speaker 9: and those kinds of businesses I think will win over
26:51
Speaker 9: the long term.
26:52
Speaker 2: So and at this tech conference in Dubai, talk to
26:54
Speaker 2: us about kind of the discussion around regulation, because you know,
26:58
Speaker 2: just historically the last fifty years, you is how to
27:00
Speaker 2: relatively light touch on regulating the tech industry, and one
27:04
Speaker 2: can say that was maybe the reason why tech while
27:06
Speaker 2: Silicon Valley is Silicon Valley, can't say that about Europe
27:09
Speaker 2: broadly defined. How do they think about the next wave
27:13
Speaker 2: of technology to the Europeans today or maybe other parts
27:16
Speaker 2: of the world Asia, Do they think differently about regulatory control?
27:20
Speaker 9: I think quite differently. I think there's a core part
27:23
Speaker 9: of commonality though, and I think the core part of
27:25
Speaker 9: commonality is looking at how technology is going to impact
27:29
Speaker 9: national security. I think if you look at that specific point,
27:32
Speaker 9: the US, Europe, the Middle East, Asia are all aligned,
27:35
Speaker 9: which is trying to make sure that tech flourishes but
27:38
Speaker 9: doesn't pose as much of the risk that we fear
27:40
Speaker 9: when it comes to national security. That being said, you're
27:42
Speaker 9: right that EU has been leaning in in terms of
27:45
Speaker 9: AI regulation. What I saw in the United Arab Emirates
27:49
Speaker 9: and what I've seen in Singapore two actually is quite different,
27:52
Speaker 9: and it's less about regulation and it's more about government
27:54
Speaker 9: partnership with the private sector. In both of those nations,
27:57
Speaker 9: there's a really concerted effort by government aidencies to spend
28:01
Speaker 9: their money with startups and to take the risk on
28:04
Speaker 9: businesses that otherwise don't yet necessarily have the credibility of
28:07
Speaker 9: the track record to win those government contracts of their
28:10
Speaker 9: own volition, and they're leaning in to try and take them.
28:12
Speaker 9: They will take some of the tech risk, but will
28:15
Speaker 9: enable them to flourish as a result that I haven't
28:17
Speaker 9: seen quite so much in the US.
28:20
Speaker 6: How are you thinking about energy and secular consumer growth?
28:24
Speaker 6: But what's the play there? I mean, let's talk sotout
28:26
Speaker 6: East Asia, well.
28:28
Speaker 9: Southeast Asia. I find really fascinating and this really goes back,
28:31
Speaker 9: Nora to some time I spent in Singapore, in Taiwan
28:34
Speaker 9: and in Korea towards the end of last year, and
28:37
Speaker 9: there's been the secular shift in those nations where the
28:40
Speaker 9: middle class is rising and rising. You know, we've talked
28:43
Speaker 9: so much about the rise of the Chinese middle class
28:45
Speaker 9: consumer over the last twenty years. If you now look
28:47
Speaker 9: at these other Asian markets. You're seeing that happening with
28:50
Speaker 9: a plumb as well. And one of the key things
28:53
Speaker 9: that's so fascinating there is this particular demographic is really
28:56
Speaker 9: hungry for homegrown brands, and they're really hungry for homegrown
29:00
Speaker 9: travel and homegrown experiences. And so that I think is
29:04
Speaker 9: a little bit different where you saw the Chinese consumer
29:06
Speaker 9: hungry for Western brands, right, So, I think that shift
29:08
Speaker 9: for local and that shift for regional is a little
29:10
Speaker 9: bit different and provides opportunity.
29:13
Speaker 2: I know, you invest both in public securities and private securities.
29:16
Speaker 2: One could argue that public valuations are maybe too expensive
29:20
Speaker 2: for some people, so they're trying to look for opportunities
29:22
Speaker 2: in private. How do you think about valuations in public
29:24
Speaker 2: versus private, particularly in the tech sector.
29:27
Speaker 9: I do think that the public market at this point
29:29
Speaker 9: is throftly. I think it's been that way for a while.
29:31
Speaker 9: I think there are some really specific companies that have
29:34
Speaker 9: got great secular tailwinds. I think those interesting places for tech.
29:38
Speaker 9: But this rising tide has lifted all tech shifts. Has
29:41
Speaker 9: been quite worrying to me for a while. When I
29:43
Speaker 9: look at the private sector, whether it's in tech or
29:46
Speaker 9: it's sort of tech adjacent industries trying to adopt tech
29:49
Speaker 9: more quickly than before. I've been a long time private investor,
29:52
Speaker 9: and we haven't seen the pace, specifically of private equity
29:55
Speaker 9: activity I think, come back quite as much as we
29:59
Speaker 9: thought it would in twenty twenty four. That I think
30:01
Speaker 9: in twenty twenty five will change, and I think we're
30:04
Speaker 9: going to see more of a shift towards private market activity.
30:06
Speaker 9: I personally see more value there now than I do
30:08
Speaker 9: in the public markets, and so I think that's an
30:10
Speaker 9: interesting place to play in the next eighteen to twenty
30:12
Speaker 9: four months.
30:13
Speaker 6: What sectors are you favoring right now.
30:15
Speaker 9: I've always been a fannuner of business services, and I've
30:18
Speaker 9: always liked companies that have had really good opportunity to
30:21
Speaker 9: play the outsourcing wave now. In Pau's question on tech,
30:24
Speaker 9: the kinds of software businesses I like are outsourced solutions,
30:29
Speaker 9: whether it's things like Salesforce or palow outer networks right
30:31
Speaker 9: these are domain experts using tech to enable companies to
30:35
Speaker 9: outsource their non core competencies. I like that too in
30:38
Speaker 9: traditional businesses. I like that in terms of things like
30:40
Speaker 9: uniform outsourcing businesses like Centils, which have tended to do
30:43
Speaker 9: well really sort of no matter the macro environment. Those
30:46
Speaker 9: are the kinds of places I've enjoyed looking at now.
30:48
Speaker 3: So I also know you were in your notes that
30:50
Speaker 3: you were in Berlin for the World Department Store Summit. Yeah. Hey,
30:54
Speaker 3: I didn't know there was such a but I'm glad
30:56
Speaker 3: that there is.
30:57
Speaker 2: Yeah, And so I guess we're talking retail of the consumer,
31:00
Speaker 2: all that type of stuff.
31:01
Speaker 3: What are some of your takeaways from that event?
31:03
Speaker 9: You know it was the energy in Europe was really sad,
31:05
Speaker 9: to be honest, Paul, at that particular time, and Germany
31:07
Speaker 9: in particular. Not all parts of Europe polacy are the same.
31:10
Speaker 9: But the European consumer market domestically, it's been hit by
31:13
Speaker 9: continued inflation.
31:15
Speaker 4: Right.
31:15
Speaker 9: We've seen the fact of that in the sense we've
31:18
Speaker 9: seen more aggressive rate cuts happening from the ECB than
31:20
Speaker 9: we've seen here. We have seen consumer sentiment over there
31:25
Speaker 9: slow down much more dramatically than in other places, and
31:27
Speaker 9: we've seen the absence of the tourists from traditionally core
31:30
Speaker 9: markets like Russia, like the Middle East, like China. For Europe.
31:34
Speaker 9: When you look at the consumer though, again in other places,
31:37
Speaker 9: and it's fascinating. MasterCards is really interesting presentation with some
31:40
Speaker 9: great data on where they're seeing international tourists travel and
31:45
Speaker 9: where they're spending their money once they get there. And
31:47
Speaker 9: again it's the Asian tourists from Korea, from Taiwan, from
31:52
Speaker 9: Malaysia out there spending their money causing some really interesting
31:55
Speaker 9: patents and growth. Also from the United Arab Emirates, from
31:58
Speaker 9: Saudi Arabia, from Kutur, you know, the Middle East. Also,
32:01
Speaker 9: the consumer seems to be very robust at the moment.
32:03
Speaker 6: How would you compare that to here in the US
32:05
Speaker 6: when we think about consumer activity.
32:07
Speaker 9: Yeah, you know, I think the US, Nora, I look
32:09
Speaker 9: at that and I never cease to be amazed at
32:12
Speaker 9: how bifurcated the consumers in the US, where you've got
32:16
Speaker 9: the middle you know, the sort of upper a quartile
32:19
Speaker 9: and beyond of the middle class in the US actually
32:21
Speaker 9: doing very well. Right. They've continued to see their net
32:24
Speaker 9: worth increase, They've continued to see asset inflation support their
32:27
Speaker 9: consumer habits. You see that in terms of credit cards spending.
32:30
Speaker 9: You see that in terms of certain parts of niche
32:34
Speaker 9: specialty retail holding up a lot better. Where I actually
32:38
Speaker 9: see a difference this time. You know, if you go
32:40
Speaker 9: look at back at prior cycles, places like the dollar
32:43
Speaker 9: stores or the national visions of the world tended to
32:45
Speaker 9: do really well. And so when we weren't so sure
32:47
Speaker 9: here it looked like the consumer sentiment was beginning to break.
32:50
Speaker 9: At the end of last year, I started to buy
32:51
Speaker 9: those stocks, looking at history and saying, oh, I've seen
32:53
Speaker 9: this before. I was wrong. By the way, those names
32:56
Speaker 9: have actually done very poorly. They're not serving lower income
33:00
Speaker 9: demographic with the same success as they used to, and
33:03
Speaker 9: I think that just shows how compressed that demographic is.
33:05
Speaker 9: It also shows how their spending habits are changing. And
33:08
Speaker 9: so I do worry that that bifurcation has got implications
33:12
Speaker 9: that haven't yet shaken out in terms of the success
33:14
Speaker 9: of certain kinds of retail here.
33:17
Speaker 2: How do you think about opportunities just geographically maybe US
33:20
Speaker 2: versus Europe versus Asia, and absolutely different growth rate's, probably
33:24
Speaker 2: different valuation parameters. Where are you guys finding the most
33:27
Speaker 2: opportunities these days?
33:28
Speaker 9: Well, I just also in this sort of this bias
33:31
Speaker 9: of coming back from the sort of global tour, I
33:33
Speaker 9: do like businesses that have got really international exposure to
33:36
Speaker 9: some of those markets. We've talked about the high growth
33:38
Speaker 9: parts of the Middle East and Asia, but I do
33:39
Speaker 9: like them where they've got the US halo of quality
33:42
Speaker 9: and transparency and visibility around them. So two areas where
33:46
Speaker 9: I've tried to lean into. One's a little bit more controversial.
33:49
Speaker 4: Ups.
33:50
Speaker 9: I like logistics businesses. We've been in a freight procession.
33:52
Speaker 9: I did buy FedEx on that fifteen percent dip that
33:55
Speaker 9: we saw, and I think ups it's one of the
33:57
Speaker 9: world's biggest logistics companies. It does have exposure to a
34:00
Speaker 9: Chinese recovery, it's going through its restructuring. I like that
34:03
Speaker 9: global exposure, and I hope at least that we've come
34:07
Speaker 9: to a bit of a stabilization in the decline of
34:09
Speaker 9: the domestic business we've seen with Amazon compression, it took
34:12
Speaker 9: up the United States postal office. The other one, I
34:15
Speaker 9: would say back nor to your question earlier around what
34:18
Speaker 9: am I seeing in terms of different consumer patterns. One
34:22
Speaker 9: thing that is consistent globally about the consumer is they're
34:24
Speaker 9: looking for experiences. They really are leaning into spending more
34:29
Speaker 9: and more experiences, disproportionately more so than stuff. And so
34:33
Speaker 9: a company that I like that's leaning into this is Hilton.
34:37
Speaker 9: Hilton I think has got you know, some valuation upside.
34:39
Speaker 9: It's an asset light business. The streets upgraded some of
34:42
Speaker 9: its price outlooks. What I like about Hilton is they've
34:45
Speaker 9: really gotten the message on the rise on some of
34:47
Speaker 9: these markets like Bahrain for example, like other parts of Asia.
34:53
Speaker 9: And you know, one hundred and sixty five properties opened
34:56
Speaker 9: under the banner in Q two. More is coming or
34:59
Speaker 9: see the full run rate effect that in twenty twenty five.
35:01
Speaker 9: And again, those regional middle class consumers are hungry to
35:05
Speaker 9: stay at quality properties and they want to do it locally.
35:07
Speaker 3: And thank you so much for joining us. Really appreciate it.
35:09
Speaker 2: Love getting your global view and coming back from some
35:11
Speaker 2: of your recent travels. And Berry, she's a founder and
35:13
Speaker 2: managing partner at Thread Needle. Joining us live here in
35:16
Speaker 2: our Bloomberg Interactive Brokers Studio level.
35:19
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 1: weekdays at ten am Eastern on applecard Play and Android
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Speaker 1: Auto with the Bloomberg Business. You can also listen live
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35:37
Speaker 2: All right, normal, Linda sitting in for Alex steel On
35:39
Speaker 2: Paul Swiney. You're live here on our Bloomberg Interactive Brokers studio.
35:42
Speaker 2: We're streaming live on YouTube as well. A great Bloomberg
35:45
Speaker 2: Opinion column piece out today by mister Tim O'Brien. Trump
35:49
Speaker 2: goes all in on discord. Will voters follow him? Fascinating question.
35:54
Speaker 2: Tim O'Brien joins his senior executive editor Bloomberg Opinion joins
35:58
Speaker 2: us here on a Bloomberg Interactive Brokers student. The world
36:01
Speaker 2: knows what former President Donald Trump is. He is not
36:04
Speaker 2: going to change for anyone. Will he have the same
36:08
Speaker 2: support that he had or to pass several cycles I e.
36:11
Speaker 2: Seventy five million people voting for him? He can count
36:13
Speaker 2: on that, Kenny.
36:14
Speaker 10: I think he probably can. I mean, I think you know,
36:16
Speaker 10: the issues from the beginning has always been that middle swath.
36:19
Speaker 10: I'm saying nothing original here, but independent and moderate voters
36:24
Speaker 10: in the Swing States again to decide who the next
36:27
Speaker 10: president is.
36:27
Speaker 8: I think.
36:28
Speaker 6: I mean, when we think about Trump supporter is what
36:30
Speaker 6: differences have you seen in terms of those who rally
36:34
Speaker 6: behind him in this campaign versus previously? Have you seen
36:37
Speaker 6: more of an influx of individuals that are coming in
36:39
Speaker 6: and you.
36:40
Speaker 10: Know, we're really struck. Where it really struck me is
36:42
Speaker 10: when I was at the RNC in Milwaukee, and you know,
36:47
Speaker 10: Trump's base hates the media, they hate critics, and it's
36:51
Speaker 10: generally a pretty hostile environment. I've been to other Trump
36:55
Speaker 10: rallies and events, and at the RNC there was much
36:58
Speaker 10: less of that. It was they were writing very high
37:01
Speaker 10: at the time because they'd arrived. They were no longer
37:04
Speaker 10: the outsiders storming the gates. They have acquired power and
37:09
Speaker 10: are fairly certain how they want to now use it.
37:12
Speaker 10: And so I think there's more a sense of a
37:14
Speaker 10: rival and certainty among his supporters about what they'll do
37:21
Speaker 10: with the mandate he has given them. And I think that,
37:24
Speaker 10: you know, in my perspective, that's a dangerous thing. So
37:27
Speaker 10: I think it's a profoundly anti democratic and intolerant movement.
37:31
Speaker 2: What's happened to the GOP, the Republican Party that my
37:34
Speaker 2: father grew up with since World War Two and that
37:37
Speaker 2: I grew up with, is that gone forever?
37:39
Speaker 4: Yeah?
37:40
Speaker 10: You know, I grew up in the Midwest around traditional
37:43
Speaker 10: Republicans and traditional defined by you know, I think people
37:47
Speaker 10: who believed in judicial restraint, robust national security, fiscal probity,
37:55
Speaker 10: et cetera, et cetera. And I think those are all
37:58
Speaker 10: wonky bread and but are policy issues that have been
38:01
Speaker 10: replaced by movement culture issues defined around gender, race. I
38:07
Speaker 10: think avoidance and engagement with the outside world beyond the
38:10
Speaker 10: borders of the United States, and and and paranoia about
38:13
Speaker 10: the other. And it's it's proven to be a very
38:15
Speaker 10: effective path to power, So I think it's going to
38:17
Speaker 10: be with us for some time.
38:19
Speaker 6: I mean, can you speak to what aspects of what
38:22
Speaker 6: Trump stands for speaks to certain pockets of the Republican community,
38:25
Speaker 6: whether that be the affluent and finances well, I.
38:29
Speaker 10: Mean I think there are you know, like both within
38:31
Speaker 10: both parties. There are multifaceted members of both, you know,
38:35
Speaker 10: both parties. I think for working class Republicans, Trump is
38:39
Speaker 10: a guardian and against demographic and economic changes that they
38:44
Speaker 10: feel threatens their well being and their standing in the
38:46
Speaker 10: world socially and economically. I think are affluent Republicans, there's
38:51
Speaker 10: always been this idea that taxes wind up being pickpocketing
38:57
Speaker 10: more than anything else, because they don't need the help
39:00
Speaker 10: from the government that other members of society. Do You
39:02
Speaker 10: can have a debate around the virtues of that argument,
39:05
Speaker 10: but I think that's where they stand, and to a
39:07
Speaker 10: certain extent, I think they're willing to digest anything Trump
39:11
Speaker 10: says or does as long as he does that for them.
39:14
Speaker 2: So there is some concern there of I think some
39:16
Speaker 2: note out there in society that if former President Trump
39:20
Speaker 2: were to win again in this November, how he'll perform
39:23
Speaker 2: he'll behave once in office, and there are some concerns
39:27
Speaker 2: and fears about that behap behavior. How do you think
39:30
Speaker 2: that is as a risk perhaps.
39:32
Speaker 10: Well, I mean, you know, I've never believed that Donald
39:34
Speaker 10: Trump is a strategist. I think it's a mistake to
39:36
Speaker 10: have the word strategy in the same sentence with.
39:39
Speaker 3: As his name.
39:40
Speaker 10: But I think that he is a profoundly emotional and
39:45
Speaker 10: this frankly sensationalistic man, and he prides himself in that
39:48
Speaker 10: kind of emotional connection with his voters. And he's clearly
39:50
Speaker 10: been on a revenge tour. You don't have to be
39:54
Speaker 10: particularly insightful to know what he's planning on doing. He
39:56
Speaker 10: wants to weaponize the Department of Justice and the military
40:00
Speaker 10: against perceived enemies American citizens and critics. That is against
40:05
Speaker 10: the Constitution and is against the standards we've all lived with.
40:07
Speaker 10: I think he is intent on doing that. I think
40:09
Speaker 10: he wants to withdraw the US from the world, whether
40:12
Speaker 10: that's in East Asia, in the Middle East, or in
40:17
Speaker 10: Eastern Europe, and I think that that poses threats for
40:20
Speaker 10: national security.
40:21
Speaker 6: Have you noticed any differences in terms of tolerance in
40:24
Speaker 6: this election as we think about the controversy that comes
40:27
Speaker 6: out of rhetoric from Trump. Have you noticed that people
40:30
Speaker 6: have become a bit more tolerant of some of the
40:31
Speaker 6: controversial things that he says, and they may have been before.
40:35
Speaker 10: You know, what I think is that this has always
40:36
Speaker 10: been with us. You know, this is a country that
40:39
Speaker 10: was founded in a revolution. We fought a civil war
40:42
Speaker 10: to preserve the unity of the country. We have had
40:45
Speaker 10: all sorts of historical grotesqueries against indigenous people's, slaves, women,
40:55
Speaker 10: et cetera, et cetera, and have tried to work those out.
40:58
Speaker 10: It's one of the strengths in the United States is
41:00
Speaker 10: that we've tried to work through those differences. Few countries
41:02
Speaker 10: globally been able to. But I think all of the
41:05
Speaker 10: animosities and ugly thoughts that attend to those moments have
41:09
Speaker 10: always been with us, and I think the difference in
41:11
Speaker 10: the Trump moment is it's been made transparent by social media,
41:15
Speaker 10: and he's made it okay for us to entertain the
41:19
Speaker 10: worst angels round nature. And I think that he's challenging
41:23
Speaker 10: us to really examine what the United States is about
41:26
Speaker 10: and where we want to take it.
41:28
Speaker 3: Tim, thanks so much for joining us.
41:29
Speaker 7: Thank you.
41:29
Speaker 3: I appreciate it.
41:30
Speaker 2: Tim O'Brien, he's a senior executive editor for Bloomberg Opinion.
41:33
Speaker 2: He's got a wonderful piece out on the Bloomberg terminal today.
41:36
Speaker 2: You can also get it at Bloomberg dot com. That's out
41:38
Speaker 2: there as well. As we approach I guess fifteen days to.
41:42
Speaker 3: The election, so for some of us that can't come
41:44
Speaker 3: too soon. I kind of like for shorter periods.
41:46
Speaker 8: You know.
41:46
Speaker 3: It's kind of a you know, European.
41:48
Speaker 6: Style Last race.
41:49
Speaker 3: Yeah, kind of pretty interesting.
41:52
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42:00
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42:10
Speaker 3: Nor of Linda.
42:10
Speaker 2: She's sitting in for Alex steel On Paul Sweeney. We're
42:12
Speaker 2: live here in a Bloomberg Interactive Broker studio streaming live on.
42:15
Speaker 3: YouTube as well. An EF.
42:18
Speaker 2: We love our folks at Bloomberg n EF because they
42:21
Speaker 2: are the team within Bloomberg that tracks and analyzes the
42:25
Speaker 2: energy transition.
42:26
Speaker 3: So they are go to folks here.
42:28
Speaker 2: Chris Ganomski Joints is here at lead nuclear analyst for
42:31
Speaker 2: bn EF. Hey, Chris, talk to us about nuclear here
42:35
Speaker 2: because I'm seeing your first note here blooming away. For
42:38
Speaker 2: the first time since two thousand and seven, there are
42:40
Speaker 2: no nuclear reactors under construction in the US. Wow, talk
42:45
Speaker 2: to us about where we are with that technology, because
42:47
Speaker 2: I feel like it's got to be part of the
42:49
Speaker 2: transition somehow.
42:50
Speaker 11: You know, think about a football team or a basketball
42:54
Speaker 11: team and you're sitting your best player on the bench,
42:58
Speaker 11: and there's a lot of issues with regards to nuclear energy,
43:03
Speaker 11: but it is a very, very robust technology that can
43:07
Speaker 11: provide the twenty four to seven type of base load
43:11
Speaker 11: power that many customers are looking for and interested in having.
43:17
Speaker 11: We are, for the first time since two thousand and
43:19
Speaker 11: seven without a reactor under construction, which is very, very discouraging,
43:24
Speaker 11: especially in the context of the fact that China has
43:27
Speaker 11: got something like twenty seven to twenty eight reactors under
43:30
Speaker 11: construction and Russia is building twenty two or twenty three
43:33
Speaker 11: reactors around the world in six different countries. So what
43:37
Speaker 11: has happened to the US nuclear industry. We've kind of
43:40
Speaker 11: dropped the ball on large reactor construction. And there's a
43:44
Speaker 11: lot of hope and a lot of cheerleading that some
43:46
Speaker 11: of these advanced reactors are being developed by a whole
43:49
Speaker 11: slew of companies will carry the day and provide an
43:53
Speaker 11: alternative nuclear solution.
43:55
Speaker 6: Talk us through just how long it takes to license
43:58
Speaker 6: and build a lot of these large reactors.
44:01
Speaker 11: So though the AP one thousand that was built in
44:04
Speaker 11: Vogel at a budget a cost of thirty four billion dollars,
44:11
Speaker 11: it took about fifteen years to license and build, and
44:14
Speaker 11: that's quite a long period of time. What utility executive
44:18
Speaker 11: is going to look around and says, listen, let me
44:20
Speaker 11: grab another one of these and spend that type of
44:23
Speaker 11: cash and wait that long, especially since the new technologies
44:28
Speaker 11: intermittent renewables are coming on and they provide an alternatives
44:32
Speaker 11: and there's a lot of change in the utility industry
44:35
Speaker 11: and the electric power industry, and hence it becomes a
44:38
Speaker 11: pretty risky proposition to place a bet billions of dollars
44:43
Speaker 11: for a technology that's not going to come and return
44:48
Speaker 11: investment for several different years. And there's several examples not
44:51
Speaker 11: only in the US, but also in Europe where this
44:53
Speaker 11: is going on.
44:55
Speaker 2: Some of these smaller modular reactors that we hear about,
44:58
Speaker 2: that kind of seems like a reasonable solution to me.
45:00
Speaker 2: I don't have to build this monster, you know, generator.
45:03
Speaker 2: I do something smaller for maybe you know, much lower cost,
45:08
Speaker 2: presumably cheaper all the kind of stuff.
45:11
Speaker 11: Well, the question is that we anticipate that those reactors
45:15
Speaker 11: may be more expensive on a per kilowide basis, but
45:18
Speaker 11: the risk that they present to a utility executive deciding
45:23
Speaker 11: to invest this technology is less. You can build them sequentiously,
45:27
Speaker 11: sequentially so that you get a cash flow after the
45:30
Speaker 11: first one is up and running and now you're building
45:33
Speaker 11: the second one, as opposed to waiting the many years
45:36
Speaker 11: to get that. We anticipate that licensing and building an
45:41
Speaker 11: SMR will take about five to six years. Two years
45:44
Speaker 11: in the licensing process and three or four years optimistically
45:49
Speaker 11: for construction. We don't anticipate any of these advanced reactors
45:53
Speaker 11: coming online in North America until twenty thirty.
45:58
Speaker 6: How does this compare internationally?
46:00
Speaker 11: Well, the US is a leader in the development of
46:05
Speaker 11: advanced reactors and SMRs. There's only two SMRs that operate
46:10
Speaker 11: around the world, one in China, one in Russia, and
46:13
Speaker 11: only two under construction, one in China and allegedly in Russia.
46:19
Speaker 11: They're supposed to break around soon. We have a very
46:22
Speaker 11: interesting development in Wyoming with terror Power developing or replacing
46:28
Speaker 11: a coal plant with an advanced reactor, which is very,
46:31
Speaker 11: very exciting. But they have not received a construction permit
46:36
Speaker 11: for that reactor yet and they're still doing preliminary work,
46:40
Speaker 11: and we anticipate that coming online around the twenty thirties.
46:45
Speaker 2: What's the feeling within the halls of Congress about this
46:49
Speaker 2: power source? Is there any support for nuclear power or
46:53
Speaker 2: is ideologically divided or where are we on this?
46:56
Speaker 11: It's certainly changing from being very very questionable and very
47:00
Speaker 11: very nervous about it to be more accepting of the
47:04
Speaker 11: technology because they realize the certain advantages of nuclear power.
47:11
Speaker 11: I live in a solar powered house in California. I
47:14
Speaker 11: get all of my electricity from solar energy. But when
47:18
Speaker 11: you think about empowering a large city or so, you
47:21
Speaker 11: need something more than just intermittent renewables. Renewables are very
47:26
Speaker 11: good solution for part of the problem, but they're not
47:28
Speaker 11: a solution for the entire problem. So to displace some
47:32
Speaker 11: of the fossil fuel that we see being used now,
47:35
Speaker 11: we need to have a clean, carbon free source of
47:38
Speaker 11: nuclear power. SMRs have greater flexibility, easier to bring online,
47:43
Speaker 11: and hopefully they'll have a role to play in the future.
47:46
Speaker 6: Well, let's talk about AI. We think about data centers
47:49
Speaker 6: and the demands there, and when we think about nuclear
47:52
Speaker 6: supplying these data centers. I know you mentioned that this
47:55
Speaker 6: should be a pretty much a post twenty thirty phenomenon,
47:59
Speaker 6: apart from the revival of Three Mile Island by twenty
48:02
Speaker 6: twenty eight. Can you talk a bit more about that, Yes.
48:06
Speaker 11: I'd be There are several studies that suggest that there's
48:09
Speaker 11: a tremendous demand growth for nuclear power between now and
48:12
Speaker 11: twenty thirty. There are some questions will that growth continue
48:16
Speaker 11: after twenty thirty or will plateau for a while. I
48:20
Speaker 11: wish I could say that there'll be a solution from
48:23
Speaker 11: the advanced nuclear community before twenty thirty. But if it is,
48:28
Speaker 11: it's just going to be first of a kind, one
48:30
Speaker 11: or two reactors, and the challenge is developing a supply
48:35
Speaker 11: chain that can deliver a fleet of these advanced reactors
48:39
Speaker 11: to really respond to the growing demand for electricity from
48:43
Speaker 11: the data centers.
48:45
Speaker 3: Hi, Chris, thank you so much for joining us. Chris Kadomski.
48:47
Speaker 2: He is the lead nuclear analyst for b NFBNF. They
48:51
Speaker 2: are the team within Bloomberg that tracks and analyzes the
48:55
Speaker 2: energy transition.
48:56
Speaker 3: They do great, great work.
48:57
Speaker 2: They have extraordinary data, a lot of proprietary data for
49:00
Speaker 2: the BNF folks as well.
49:03
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