Latest / Bloomberg Intelligence / BI Weekend: Healthcare, Energy, and Bank Outlook

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BI Weekend: Healthcare, Energy, and Bank Outlook · Bloomberg Intelligence

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Speaker 2: to some of the global themes for markets in twenty
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Speaker 2: twenty five, plus discuss how global asset managers may fare
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Speaker 2: this year. But first we dive into healthcare. Bloomberg Intelligence
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Speaker 2: recently put out its twenty twenty five Healthcare Tech Outlook,
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Speaker 2: and the research shows that drug distributors continue to shine
1:12
Speaker 2: in twenty twenty five, as pharmacies still show signs of weakness.
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Speaker 5: From More.
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Speaker 2: On this co host Alex Steele and I were joined
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Speaker 2: by Jonathan Palmer, Bloomberg Intelligence senior healthcare analysts. We first
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Speaker 2: asked Jonathan what he thinks some of the bright spots
1:25
Speaker 2: are in the healthcare sector.
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Speaker 6: There's a couple, so it's healthcare technology and distribution. That
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Speaker 6: includes a whole host of companies, everything from CBS and
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Speaker 6: Walgreens to the drug distributors and then to all the
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Speaker 6: healthcare technology names. And so there's some really inane idiosyncratic
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Speaker 6: themes that work here. Pharmacies, the news is not so good. Distributors,
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Speaker 6: it's very it's very positive in the world of tech. Again,
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Speaker 6: because these are all very idiosyncratic business models focusing on
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Speaker 6: different things. There's pockets of very good, pockets of okay,
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Speaker 6: pockets have not so great. My key themes are around
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Speaker 6: the drug distributors, and pharmacy distributors are doing very well.
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Speaker 6: They've got great underlying fundamentals. There's more people taking more drugs.
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Speaker 6: They've been utilizing their capital to buy what they call MSOs,
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Speaker 6: which are management service organizations, not to get too deep
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Speaker 6: in the weeds. But these are companies that manage practices
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Speaker 6: of like oncologists or other specialists.
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Speaker 7: And really that helps diversify.
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Speaker 6: Their income stream and not make them, you know, totally
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Speaker 6: captive to the trends in underlying drugs consumption. So that's
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Speaker 6: been a great trend for these guys. It's diversified them
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Speaker 6: and it's got a long shelf life here too.
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Speaker 2: Did the elections and the election of President elect Trump
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Speaker 2: and the Republican control of Congress.
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Speaker 5: How's that going to impact healthcare? What's the feeling out there?
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Speaker 6: Yeah, so I think it's a wait and see. You know,
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Speaker 6: the President elect Trump did not campaign on many healthcare issues,
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Speaker 6: although obviously there's stuff.
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Speaker 7: Swirling in the background.
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Speaker 6: You know what we saw out of the last administration
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Speaker 6: with some ideas around limiting PBMs that never came to pass.
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Speaker 6: There's a thought that maybe that will come back in
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Speaker 6: this administration.
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Speaker 3: So these are pharmacy benefit These are.
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Speaker 6: Pharmacy benefit managers. The big three are CBS Care, Mark,
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Speaker 6: Express Scripts, which is owned by Signa, and then United Healthcare.
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Speaker 6: They own optim Rx and so actually in December, Senators
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Speaker 6: Warren and Hawley introduced a bipartisan bill where they would
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Speaker 6: ban these PBMs or managed care companies from owning pharmacies.
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Speaker 6: We don't think there's very much chance of that bill passing,
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Speaker 6: but it still points to kind of the rhetoric and
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Speaker 6: saber rattling coming around out of Washington around some of
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Speaker 6: these healthcare models.
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Speaker 3: So does that just mean a harder year for CBS,
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Speaker 3: Signa and United Health even if that kind of split
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Speaker 3: doesn't happen.
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Speaker 6: Yeah, I think it's pretty unlikely that that split comes
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Speaker 6: to pass. But I think it points to the anger
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Speaker 6: that a lot of people have, you know, in the
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Speaker 6: marketplace around healthcare and who they have to deal with.
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Speaker 2: Tell us about the drug distribution business, why do you
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Speaker 2: like that business? And what are the names that sure?
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Speaker 6: So there's three big companies what you used to be
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Speaker 6: called Amerisource Bergen but it's now called Sancora, Cardinal Health,
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Speaker 6: and McKesson. I mean, these are really great, fundamental businesses.
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Speaker 6: They controlled ninety percent of the US drug distribution. It's
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Speaker 6: not just logistics. I think it's simplistic to think of
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Speaker 6: that way that they just get the drugs and they
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Speaker 6: take them from the manufacturer's warehouse to the local pharmacy.
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Speaker 7: They've built a whole host of these.
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Speaker 6: Service businesses around all of that, and that's where the
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Speaker 6: future of those businesses really is.
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Speaker 3: Well what does that mean? So why isn't it just
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Speaker 3: the logistics? So give it pin us a bigger picture.
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Speaker 6: Yeah, so I talked about it before those MSO businesses.
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Speaker 6: McKesson owns what they call us oncology, which is this
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Speaker 6: massive network of oncologists. It's about twenty percent of the
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Speaker 6: community oncologists in the country, and so that's really like
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Speaker 6: a captive, captive portal of business. There's all those oncologists
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Speaker 6: order through McKesson. McKesson manages their EHR, they manage the billing.
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Speaker 6: So it's actually really branching out outside of the pure
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Speaker 6: logistics peace SO healthcare.
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Speaker 2: I'm looking at the S and P five hundred up
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Speaker 2: twenty three percent last year at S and P healthcare
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Speaker 2: sector kind of flatish. So what's the investment backdrop for
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Speaker 2: just healthcare right now?
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Speaker 8: Yeah?
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Speaker 6: I think it depends where you're looking. I mean, I
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Speaker 6: don't focus in therapeutic so I'm probably not the best
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Speaker 6: person to ask about the biotech.
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Speaker 7: World or pharma.
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Speaker 6: But outside of that, you know, we've seen a lot
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Speaker 6: of pain in the managed care world around medicare. Most
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Speaker 6: of those companies, particularly CBS in particular, have suffered because
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Speaker 6: out of the pandemic we've seen a lot of utilization
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Speaker 6: of care that's caused margins to collapse in medicare advantage
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Speaker 6: and that's one of the big growth areas in the
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Speaker 6: managed care world. So managed care is a little bit
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Speaker 6: of a slog right now, you know. Outside of that,
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Speaker 6: and let's say like Life science technology, those companies have
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Speaker 6: been dealing with a poor demand from pharma and trouble
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Speaker 6: in China. China hasn't been the best market for them
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Speaker 6: for a while. And then on this on the more
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Speaker 6: like let's say service side or technology side, I think
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Speaker 6: it depends on where you play. DTC models were very popular,
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Speaker 6: things like telemedicine and virtual care during the pandemic. Those
6:19
Speaker 6: have come back, but some of the survivors, the Hymns
6:23
Speaker 6: and Rows which is a private company, are seeing a
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Speaker 6: lot of uptake around GLP one drugs and so it's
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Speaker 6: a little bit hit or missed depending on where you're playing.
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Speaker 3: What do you think the GLP one drug forecast is
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Speaker 3: for this year high? But like we'll ensures like finally
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Speaker 3: cover it.
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Speaker 6: Well, that's I think that's the big debate, I mean
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Speaker 6: around who's going to pay for what? And then it's
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Speaker 6: happening on the commercial side, you know, employers, it's happening
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Speaker 6: in medicare and medicaid. The demand is queerly there. It's
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Speaker 6: just you know, what can people afford to pay? And
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Speaker 6: so there's a whole host of business models that have
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Speaker 6: kind of arisen around you know, circum not circumventing, but
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Speaker 6: work outside of of the pure insurance. These are the
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Speaker 6: things like hymns, which I just mentioned, where if you
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Speaker 6: just want to pay out of pocket, you're gonna get
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Speaker 6: yourself a GLP one.
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Speaker 3: It was a whole compound thing, right, Like, wasn't there
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Speaker 3: compound right that you can.
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Speaker 2: Have hymns and all that kind of that's receipt I
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Speaker 2: think all the ads are around.
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Speaker 3: Yeah.
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Speaker 6: Yeah, So when drugs are in shortage, which many of
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Speaker 6: these GLP one drugs are, where the compound pharmacies can
7:22
Speaker 6: meet that demand by using kind of generic compounded drugs.
7:27
Speaker 2: Is AI in your space at all? I'm sure your
7:30
Speaker 2: research strugger said, write a research report on how AI impacted.
7:33
Speaker 3: You have to have it so you can search it.
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Speaker 7: Yeah, it's everywhere.
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Speaker 6: I mean my view is that a lot of there's
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Speaker 6: there's probably going to be a handful of kill raps,
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Speaker 6: things around voice and ambient listening. We've seen some of that.
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Speaker 6: Microsoft bought a company called Nuance a few years back.
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Speaker 6: I'm sure there's others a lot of it I think
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Speaker 6: is going to be table stakes, particularly for the stuff
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Speaker 6: that's back office, you know, for payment processing, claims, adjudication.
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Speaker 6: Everybody's going to do that, so it's definitely top of
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Speaker 6: mind for most management teams.
8:04
Speaker 2: Here our thanks to Jonathan Palmer, Bloomberg Intelligence Senior healthcare analyst,
8:10
Speaker 2: we turned out to the oil and gas industry. This week,
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Speaker 2: President Biden announced till block six hundred and twenty five
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Speaker 2: million acres of ocean from offshore oil and gas drilling.
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Speaker 2: He cited environmental and health risk for more. Co host
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Speaker 2: Alex Steel and I were joined by Simon Casey, Bloomberg
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Speaker 2: Managing Editor for Energy and Commodities. We first assignment if
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Speaker 2: Biden's actions will hurt oil production.
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Speaker 8: Offshore oil counts for I think fourteen percent of US output,
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Speaker 8: which is something, but it's not everything, and most of
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Speaker 8: the US oil outputs I think we all know comes
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Speaker 8: from shale. Shelle production grew substantially last year. It's probably
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Speaker 8: slowing a bit, but that's where the industry has really
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Speaker 8: grown enormously over the past decade and probably will continue
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Speaker 8: to grow for a few years to come. It could
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Speaker 8: slow this year, as I say, but there's huge wich
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Speaker 8: amounts resources toll long Land.
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Speaker 2: So is this something that President ELEC. Trump when he
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Speaker 2: is sworn in, he can turn this around with another
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Speaker 2: executive action he can try.
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Speaker 8: But if I think it was back in the beginning
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Speaker 8: of twenty seventeen, there was a similar band put in place,
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Speaker 8: not on such a grand scale by Obama. But Trump
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Speaker 8: came in, he made an order to reverse that decision
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Speaker 8: and it was stopped I think in the Supreme Court
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Speaker 8: in Alaska. I think I'm right in saying it didn't
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Speaker 8: go beyond that. So there's no legal precedent for an
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Speaker 8: incoming president to overturn an order such as this one.
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Speaker 3: And the argument that it would hurt oil and gas offshore,
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Speaker 3: even tho it's only fourteen percent, a large portion that
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Speaker 3: comes on the Gulf of Mexico is a Golf of
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Speaker 3: Mexico included in the six hundred and twenty five. Yes, yes,
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Speaker 3: it is how much of it is in that versus
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Speaker 3: say the East coast or around Florida, for example.
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Speaker 8: I don't have the numbers right in front of I mean, look,
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Speaker 8: the Gulf Mexico is an important component of US oil production.
10:03
Speaker 8: It's also we should note, it's low cost, it's relatively stable.
10:09
Speaker 8: But I mean, this is a very clear move by
10:11
Speaker 8: Biden to appease the environmental lobby, the left wing of
10:14
Speaker 8: his base. If you cast your mind back to the
10:17
Speaker 8: beginning of the Biden presidency, he came in on quite
10:20
Speaker 8: a sort of a progressive energy agenda. He was trying
10:23
Speaker 8: to clamp down on oil production. He was very emphasizing
10:28
Speaker 8: a great deal his priority to tackle climate change. What's
10:32
Speaker 8: happened in the year since then, of course, we had
10:35
Speaker 8: spikes and energy prices, we had the war in Ukraine,
10:39
Speaker 8: energy security came to the fore. So in all ways,
10:43
Speaker 8: this is sort of his parting gift, if you like,
10:45
Speaker 8: to that part of the environmental lobby into his supporters
10:49
Speaker 8: who wanted to see him all along try and clamp
10:51
Speaker 8: down on the oil industry to some extent.
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Speaker 2: All right, So like the deep water issue that happened
10:57
Speaker 2: in the golf. I guess that's kind of a worst
11:00
Speaker 2: case scenario for this offshore, you know. I guess I'm
11:04
Speaker 2: just trying to get a sense of the risk reward here,
11:06
Speaker 2: you know, and get away from the politics a little bit.
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Speaker 2: And it seems like with fracking, maybe you don't need
11:11
Speaker 2: it as much, but at some point you might need it.
11:15
Speaker 3: Context here. So Paul's watching land Man, so now he's
11:18
Speaker 3: a complete shale expert, but now we're talking offshore, and
11:22
Speaker 3: now it's DVD, so it's just the context here.
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Speaker 8: Yeah, de brought Horizon worst case scenario.
11:30
Speaker 5: It's not that movie.
11:31
Speaker 7: But I mean, you know, when.
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Speaker 8: That kind of thing happens maybe once in a decade,
11:35
Speaker 8: once every three decades, it's a catastrophe. As we all saw.
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Speaker 8: We all remember there are risks anyway you drill. To
11:42
Speaker 8: be sure, there are huge environmental issues on the shore,
11:45
Speaker 8: and we should sort of downplay those either. Biden, in
11:49
Speaker 8: his announcement this morning, may clear this is you know,
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Speaker 8: it's in relation to environmental risks. He also cited climate
11:57
Speaker 8: He also cited the risks to communities on im Sure,
12:01
Speaker 8: you know, let's not forget the sort of the infrastructure
12:04
Speaker 8: the industries. While they do provide a huge economic stimulus
12:07
Speaker 8: somewhere like on the Gulf Coast. They're also daily sort
12:11
Speaker 8: of environmental reminders, small oil leaks, the kind of things
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Speaker 8: we don't always reports on, frankly, but they do have
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Speaker 8: a cumulative impact. Did the impacts on wildlife? On BirdLife?
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Speaker 8: Let's not forget as well that you know President Trump
12:25
Speaker 8: when in his first term he tried to clam down
12:28
Speaker 8: on drilling off off the coast of Florida.
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Speaker 2: All right, thanks to Simon Casey, Bloomberg Managing editor for
12:33
Speaker 2: Energy and Commodities. Coming up, more breakdown how the energy
12:37
Speaker 2: sector may fare under an incoming Trump administration.
12:40
Speaker 5: We're listening to.
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Speaker 2: on two thousand companies.
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13:11
Speaker 2: We move now to some of the key market themes
13:14
Speaker 2: Bloomberg Intelligence is focusing on in twenty twenty five, mainly
13:17
Speaker 2: from a European and global perspective.
13:19
Speaker 5: This week, co host Alex Steele and I.
13:21
Speaker 2: Were joined by Tim Craig head, Bloomberg Intelligence Global Chief
13:24
Speaker 2: Content Officer. He discussed everything from earning season to how
13:27
Speaker 2: a Donald Trump presidency will impact the globe in terms
13:30
Speaker 2: of towers. We first asked him to break down his
13:33
Speaker 2: recent research.
13:34
Speaker 9: We're actually seeing some positive revisions to earnings in Europe
13:38
Speaker 9: and in particular in the UK, which actually flies in
13:43
Speaker 9: the face of an awful lot of other markets, including
13:47
Speaker 9: elements of the US market. Heading into urine earnings, where
13:51
Speaker 9: we're starting to see some negative revisions. Actually it started
13:54
Speaker 9: back a couple of few months ago, so that element
13:58
Speaker 9: of its cheap det jump in because it's that's an
14:01
Speaker 9: old argument, but if there's an earnings catalyst behind it,
14:05
Speaker 9: it gets interesting.
14:06
Speaker 3: What about tariffs? How we thinking about tariffs from the
14:09
Speaker 3: US on all the things?
14:11
Speaker 9: Yeah, well, I think our economists are pretty smart, arguing
14:17
Speaker 9: that terrorifts are more of a twenty twenty six thing
14:21
Speaker 9: than twenty five.
14:22
Speaker 7: It's more of a posture, of a.
14:24
Speaker 9: Posturing element for this year in front of working out negotiations. He's,
14:30
Speaker 9: you know, the art of the deal. He loves negotiating,
14:33
Speaker 9: and so you know, that's how tariffs will be will
14:37
Speaker 9: be used. Specifically from a European perspective, frankly, it's a
14:41
Speaker 9: lot less of an issue than you might guess. An
14:44
Speaker 9: awful lot of what Europe sells to the US is
14:47
Speaker 9: either services or it's stuff that's already manufactured over here.
14:50
Speaker 9: It's an interesting interview with Unilever, and you know, one
14:53
Speaker 9: of the queries that Francine Lacui had asked him is,
14:57
Speaker 9: you know, isn't this really bad for you? You know,
14:58
Speaker 9: because you're a European consumer product company. It's like, no,
15:02
Speaker 9: we're US consumer product company. We manufacture in the US
15:07
Speaker 9: with US brands. We happen to be headquartered in London.
15:10
Speaker 9: But I don't think it's that big of the deal, frankly,
15:14
Speaker 9: except in targeted, specific areas that you have to watch
15:17
Speaker 9: out for.
15:18
Speaker 5: Maybe that's autos.
15:19
Speaker 2: It's interesting here in the US since the election, there's
15:22
Speaker 2: been a poppable sense of optimism from the business community,
15:26
Speaker 2: thinking in that this administration would be pro business, pro growth,
15:28
Speaker 2: and that is argued as one of the drivers of
15:31
Speaker 2: the stock market performance we've seen since kind of you know,
15:34
Speaker 2: August September, when we became clear that gem President Trump,
15:37
Speaker 2: former President Trump might in fact win this thing.
15:40
Speaker 5: And is that what you're hearing from your European clients?
15:43
Speaker 2: How are your European clients thinking about the change we're
15:46
Speaker 2: gonna have here?
15:46
Speaker 7: I actually heard some.
15:47
Speaker 2: Europeans were putting more and more money into the US
15:50
Speaker 2: markets over the last few months.
15:52
Speaker 9: Yeah, I would totally agree with your conclusion. There's obviously
15:58
Speaker 9: lots of room to discuss and debate on the political
16:02
Speaker 9: side of things, whether you like it or you don't
16:04
Speaker 9: like it. Set all that aside, the idea that you're
16:07
Speaker 9: going to cut regulation and you're going to cut taxes,
16:11
Speaker 9: and maybe you're going to do things on immigration and tariffs,
16:15
Speaker 9: but that's to come. I don't that's that's not going
16:19
Speaker 9: to impact this year's earnings trends, and so yeah, I
16:22
Speaker 9: think it's I think it's a positive when you think
16:25
Speaker 9: about it from a business and economic perspective. For the moment,
16:28
Speaker 9: it's more of the earnings impetus that's good, and the
16:31
Speaker 9: inflation worry gets sort of pushed out a little bit
16:35
Speaker 9: and European companies who have they do so much business
16:40
Speaker 9: back and forth, with again a lot of it being domesticated.
16:44
Speaker 7: That's that's a good thing.
16:46
Speaker 3: What about the tariff risks when it comes to China,
16:48
Speaker 3: because if China gets hit hard, doesn't that wind up
16:51
Speaker 3: feeding into Europe particular when it comes to say luxury
16:54
Speaker 3: goods and cars.
16:55
Speaker 9: Well, I would agree with you to a degree. I mean, frankly,
17:02
Speaker 9: if the whole tariff thing really goes heavy and there's
17:05
Speaker 9: lots of retaliation. The Bloomberg Economist had done a really
17:09
Speaker 9: interesting piece you guys will recall that basically shows the
17:13
Speaker 9: biggest hit is Mexico. The second biggest hit the US.
17:18
Speaker 9: China has already curtailed so much of what they sell
17:22
Speaker 9: here other than certain products, it's less of an issue
17:26
Speaker 9: for the Chinese economy, and it'll end up importantly reglobalizing
17:32
Speaker 9: connections and supply chains. It could end up being good
17:35
Speaker 9: for Europe in a weird way, because they're now a
17:39
Speaker 9: big developed market participant with the US going more insular.
17:44
Speaker 2: Thanks to Tim Craig, d Bloomberg Intelligence Global Content Officer,
17:48
Speaker 2: we now turn to the energy space as Inauguration day approaches.
17:51
Speaker 2: The energy sector looks for signs of what to expect
17:54
Speaker 2: when President elect Donald Trump takes office. For more, co
17:57
Speaker 2: host Alex Deel and I were joined by Mike Summers,
18:00
Speaker 2: President and CEO of the American Petroleum Institute. We first
18:04
Speaker 2: asked Mike what day one under Trump administration will look
18:07
Speaker 2: like for the energy sector.
18:09
Speaker 10: Well, we've played out an API five point policy roadmap.
18:12
Speaker 10: You can find it at API dot org of the
18:14
Speaker 10: things that we're asking this president in this Congress to
18:16
Speaker 10: do during the first six months of the administration.
18:19
Speaker 7: But there are some things.
18:20
Speaker 10: That they can get done early in the administration, really
18:23
Speaker 10: on day one. So one of those things is lifting
18:26
Speaker 10: the LNG export pause. We're excited that we have a
18:29
Speaker 10: new president that's focused on that and he's committed to
18:32
Speaker 10: lifting it.
18:32
Speaker 7: On day one.
18:33
Speaker 10: So that's one thing we think that they can get
18:35
Speaker 10: done very quickly. The second thing that we think they
18:38
Speaker 10: can do is they can authorize a new five year
18:40
Speaker 10: leasing plan in the offshore golf of Mexico. We need
18:44
Speaker 10: a five year leasing plan that prioritizes new leases in
18:47
Speaker 10: the golf of Mexico, which continues to be a prolific
18:49
Speaker 10: region for the American oil and gas industry. About fourteen
18:52
Speaker 10: percent of American oil comes from the golf of Mexico,
18:55
Speaker 10: which is why what President Biden did in setting aside
18:59
Speaker 10: a new acreage that we will not be able to
19:02
Speaker 10: develop with so concerning and so disappointing.
19:04
Speaker 7: Another big thing that we're focused on.
19:05
Speaker 10: Is repealing the EPA tailpipe mandate, the ev mandate that
19:10
Speaker 10: they put in place early in the Biden administration, and
19:12
Speaker 10: we'll work with the Trump administration to get that repealed
19:15
Speaker 10: and replace the CAFE standards that are draconian and US
19:18
Speaker 10: automakers can't meet. So those are three of the key
19:21
Speaker 10: priorities that we want to focus on early in the administration.
19:24
Speaker 10: And then in addition to that, we need to get
19:26
Speaker 10: a new tax bill in place before the end of
19:28
Speaker 10: twenty twenty five. We're prioritizing things like the corporate tax rate,
19:33
Speaker 10: of course, and then really focusing on how we continue
19:37
Speaker 10: to build American geopolitical strength by expanding energy trade throughout
19:41
Speaker 10: the world.
19:42
Speaker 2: Green energy, how does green energy work with traditional energy?
19:46
Speaker 2: I'm not sure what the preferred term is for oil
19:48
Speaker 2: and gas, but how does green energy work with oil
19:51
Speaker 2: and gas and traditional energy sources?
19:53
Speaker 10: Well, the truth of the matter is is that we
19:55
Speaker 10: know that we're going to need all sorts of energy
19:57
Speaker 10: to meet the energy needs of the future. If Goldmen
19:59
Speaker 10: Sacks is right and we're going to need ten percent
20:01
Speaker 10: more energy for the next ten years to support data
20:04
Speaker 10: centers and AI growth, we're gonna need all sources of
20:08
Speaker 10: new energy, which is why it's important that we get
20:09
Speaker 10: a new permitting bill in place that we can build
20:11
Speaker 10: out not just oil and gas pipelines, but new transmission
20:14
Speaker 10: lines for that those new energy sources as well. The
20:18
Speaker 10: great thing about natural gas in particular is that it
20:20
Speaker 10: can support these alternative energy sources as well. Because we
20:25
Speaker 10: know that the wind isn't always blowing and the sun
20:27
Speaker 10: isn't always shining, You're gonna need something to back that up,
20:29
Speaker 10: and natural gas is almost always the preferred energy of
20:34
Speaker 10: choice when backing up those sources.
20:36
Speaker 7: So we know that we're going to need more energy.
20:38
Speaker 10: We don't just need all of the above, but more
20:41
Speaker 10: of all if we're going to be successful in leading
20:44
Speaker 10: the future, particularly when it comes to AI. So we
20:48
Speaker 10: want to work with our partners in the other energy
20:50
Speaker 10: system to make sure that we can continue to expand.
20:54
Speaker 3: So it might also, yeah, I would say a popular
20:57
Speaker 3: talking point for Republicans was that we need to get
21:00
Speaker 3: rid of the Inflation Reduction Act. But if you dig
21:02
Speaker 3: into a lot of the details, a lot of the
21:04
Speaker 3: oil guys and natural gas guys like the Inflation Reduction
21:06
Speaker 3: Act in things like carbon capture credits right forty five Q.
21:10
Speaker 3: New rules on the hydrogen tax credit forty five V
21:13
Speaker 3: were unveiled that people were pretty happy with because it
21:16
Speaker 3: had a broader swath of the energy that you could
21:19
Speaker 3: use to make hydrogen. Are you guys happy with those
21:22
Speaker 3: things right now?
21:24
Speaker 10: I actually feel pretty good about our ability to defend
21:26
Speaker 10: the forty five tax credits Q and V are the
21:29
Speaker 10: ones that are most important to us for carbon.
21:31
Speaker 7: Capture and hydrogen.
21:33
Speaker 10: We were pleased with the Biden administration rules, though we
21:35
Speaker 10: think they could be improved under President Trump on both
21:38
Speaker 10: ccs and hydrogen, so we'll work with the Trump administration
21:41
Speaker 10: to improve those. But there are provisions I think that
21:44
Speaker 10: under the Inflation Reduction Act that are vulnerable, particularly the
21:48
Speaker 10: funds from the Loan Program Office, which has just become
21:51
Speaker 10: a giant slush fund for favored industries under the Biden administration.
21:56
Speaker 7: So I do think the funds.
21:57
Speaker 10: That haven't been obligated yet under the Loan Program Office
22:00
Speaker 10: are very vulnerable as Congress that looks towards towards reconciliation.
22:06
Speaker 7: So that's where I think most of the purpose will be.
22:08
Speaker 3: But some of the money from the Department of Loan
22:10
Speaker 3: Office is going to like companies that produce a nuclear
22:14
Speaker 3: or have natural gas like it's it's it's not just
22:17
Speaker 3: like Rando green technology. How are you going to distinguish that?
22:20
Speaker 3: Because if you need the loan in order to say,
22:22
Speaker 3: restart a nuclear plan or work into small modular reactors,
22:27
Speaker 3: for example, what do you think about that?
22:29
Speaker 10: Well, I think that's going to be something that Congress
22:31
Speaker 10: is going to have to sort out and the administration
22:34
Speaker 10: is going to have to sort out. I'm pretty sure
22:35
Speaker 10: that at the beginning of the administration what they're going
22:37
Speaker 10: to do is they're going to freeze all new funds
22:40
Speaker 10: coming from the Loan Program Office until they get a
22:42
Speaker 10: better census to what to leave in and what to
22:45
Speaker 10: leave out. And that'll be up to the new Energy Secretary,
22:47
Speaker 10: Chris Right And you know, I'm confident that they'll be
22:50
Speaker 10: able to figure out what they should what they should
22:53
Speaker 10: focus on, and the things.
22:54
Speaker 7: That they need to leave behind, but that'll be up
22:57
Speaker 7: to the administration.
22:58
Speaker 10: You know, our focus is going to be on advancing
23:00
Speaker 10: a reconciliation bill that supports American energy, that means new
23:04
Speaker 10: leases in the offshore, new leases on shore, reopening Alaska,
23:08
Speaker 10: which President Biden has taken a particularly focus on in
23:12
Speaker 10: terms of cutting off the amount of oil and gas
23:16
Speaker 10: that we can produce in the state of Alaska. So
23:18
Speaker 10: we're confident that we're going to be able to prevail
23:20
Speaker 10: on the administration and the Congress to advance new leasing
23:23
Speaker 10: priorities as they get that big new reconciliation bill.
23:26
Speaker 7: One.
23:27
Speaker 2: What do we have you heard what have been I
23:28
Speaker 2: guess maybe any rubblings coming out of this new Trump
23:31
Speaker 2: administration about how aggressive they planned to be as a
23:34
Speaker 2: related to oil and gas.
23:36
Speaker 7: I think they plan to be very aggressive.
23:38
Speaker 10: I mean, as you know, the President has really focused
23:40
Speaker 10: on how do we continue to grow this tremendous American resource.
23:45
Speaker 10: We're producing about thirteen point four million barrels of oil
23:47
Speaker 10: every a single day, which is a record. We're producing
23:51
Speaker 10: records amounts of natural gas, but we also see record
23:54
Speaker 10: demand for these products, not just record demand for oil
23:56
Speaker 10: and gas, but also record demand for coal and other
23:58
Speaker 10: sources as well, and that's because we're starting to see
24:01
Speaker 10: this demand continue to increase. This we're in a different
24:05
Speaker 10: era than we were during the first Trump administration, where
24:07
Speaker 10: energy demand was relatively stable.
24:10
Speaker 7: During the first Trump administration. Everything's changed in the.
24:13
Speaker 10: Last eight years where you have new sources of demand,
24:16
Speaker 10: growing data centers of course AI more things being.
24:19
Speaker 7: Plugged into the electric grid.
24:21
Speaker 10: So I think with what President Trump understands is that
24:23
Speaker 10: we're going to need a lot of energy going forward
24:25
Speaker 10: if we're going to win the energy security race.
24:28
Speaker 2: Thanks to Mike Summers, API President and CEO coming up
24:32
Speaker 2: on the program, we'll break down some of the big
24:34
Speaker 2: staffing moves in the financial sector.
24:36
Speaker 5: You're listening to Bloomberg.
24:37
Speaker 2: Intelligence on Bloomberg Radio, providing in depth research and data
24:41
Speaker 2: on two thousand companies and one hundred and thirty industries.
24:43
Speaker 2: You can access Bloomberg Intelligence via Big on the terminal.
24:46
Speaker 5: I'm Paul Sweeney. This is Bloomberg.
24:54
Speaker 4: You were listening to the Bloomberg Intelligence Podcast. Catch the
24:58
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25:01
Speaker 4: and Android Auto with the Bloomberg Business app. You can
25:04
Speaker 4: also listen live on Amazon Alexa from our flagship New
25:08
Speaker 4: York station Just Say Alexa played Bloomberg eleven thirty.
25:12
Speaker 5: We turn next to the banking sector.
25:14
Speaker 2: Bloomberg Intelligence recently put out its twenty twenty five outlook
25:17
Speaker 2: for global asset managers ahead of US bank earnings next week.
25:21
Speaker 2: For more of bi's findings, co host Alex Steele and
25:23
Speaker 2: I were joined by Alison Williams, Bloomberg Intelligence senior analys
25:26
Speaker 2: global banks and asset managers. We first asked Allison about
25:29
Speaker 2: some of the themes to watch out for when bank
25:32
Speaker 2: earnings begin.
25:33
Speaker 11: The market's momentum is obviously the big story entering twenty
25:36
Speaker 11: twenty five, and the first quarter does tend to be
25:39
Speaker 11: the seasonally strongest quarter for the global investment banking business.
25:43
Speaker 11: We also do tend to get so good flows into
25:47
Speaker 11: the asset management business, so we think we're starting off
25:50
Speaker 11: the year with strength. Also noting that the world's market
25:56
Speaker 11: capitalization hit a new high in mid December. Since we've
26:00
Speaker 11: seen a little bit of a sell off in our
26:02
Speaker 11: global equity strategy team, led by Gena Martin Adams, has
26:06
Speaker 11: actually flagged the fact that they, you know, they are
26:08
Speaker 11: seeing some signs that are making them a little bit
26:12
Speaker 11: more embarrassed, but from an earnings perspective, you know, they
26:18
Speaker 11: keep in mind that we are so the markets are
26:21
Speaker 11: so far above a year ago. We're going to see
26:23
Speaker 11: good year over year growth. The etflows are strong, bond
26:28
Speaker 11: flows are strong. So we're expecting to hear good things
26:32
Speaker 11: from the banks when they report next week, and as
26:35
Speaker 11: I said, really some good momentum entering the year.
26:38
Speaker 2: Alie, I don't want to talk to you about asset management,
26:41
Speaker 2: the global asset managers, because the more I talk to
26:43
Speaker 2: this about Chunis guy, the more I kind of say,
26:46
Speaker 2: what's going to happen to all those great mutual fund
26:48
Speaker 2: companies that I grew up with as my clients, the
26:50
Speaker 2: fidelities of the world's, the capitals of the world, the
26:53
Speaker 2: alliances where you hung a.
26:54
Speaker 5: Shingle for a while, What is that business? What happens
26:57
Speaker 5: to that business?
26:59
Speaker 11: So consolidation has been something that, as you know, for
27:04
Speaker 11: for as long as we've been in the business, there's
27:06
Speaker 11: been huge calls for consolidation because that really makes sense
27:10
Speaker 11: on paper, right, you have a business that you can scale,
27:14
Speaker 11: You have this intellectual capital that you can scale, and
27:17
Speaker 11: I think Eric Belchuns will always say, hey, you know
27:20
Speaker 11: Wellington and Tiro why can't they get together? But as
27:23
Speaker 11: we also know, it's you know, it's all about culture
27:26
Speaker 11: for these asset managers. And really culture and process is
27:30
Speaker 11: what makes active managers great and really what they stick to,
27:35
Speaker 11: and so that's really what makes deals difficult. And also
27:39
Speaker 11: the fact that what you're buying really is, you know,
27:42
Speaker 11: a culture and a process and people. And so even
27:46
Speaker 11: though deals look good on paper, it's a lot harder
27:49
Speaker 11: to do practically speaking. But we think that you know,
27:53
Speaker 11: managers will continue to look to see for opportunities, you know,
27:57
Speaker 11: are there opportunities for fun consolidation, are their opperportunities within managers?
28:02
Speaker 11: So we do think that that continues. We've also seen
28:05
Speaker 11: the traditional managers buying into the alternatives business, so active
28:10
Speaker 11: fund management has been under pressure. It is still the
28:14
Speaker 11: biggest business buy assets worldwide. We just want to note
28:17
Speaker 11: that to Eric, But the alternative business is where all
28:25
Speaker 11: the growth is. Pe has been a phenomenal growth story
28:28
Speaker 11: for many, many years. Private credit really getting into it
28:32
Speaker 11: and seeing some faster growth.
28:34
Speaker 3: So I'm going to go back to banks, but there's
28:36
Speaker 3: kind of a tie over, especially when it comes to
28:38
Speaker 3: private credit. If we have William bar stepping aside. Do
28:41
Speaker 3: we anticipate less capital requirements, less stringent FED stress tests
28:45
Speaker 3: and does that bring them into sort of the private
28:48
Speaker 3: credit marketing world again.
28:50
Speaker 11: Well, I would say that the banks have already been
28:53
Speaker 11: participating through partnerships. And you know, one of the best
28:57
Speaker 11: examples that we always point to is what Golden Stats
28:59
Speaker 11: is been doing with their asset management business. Right, So
29:03
Speaker 11: for a long time, Golden Tex has had this merchant
29:05
Speaker 11: banking expertise and for many decades they were investing their
29:09
Speaker 11: own balance sheet. But you know, within the last you know,
29:13
Speaker 11: several years, what they've said is, look, we're going to
29:15
Speaker 11: use that expertise and we're going to manage clients money.
29:17
Speaker 11: We're going to charge you a fee. Investors like this
29:20
Speaker 11: because there's less direct balance sheet risk, there's more fees.
29:24
Speaker 11: That's a business that gains higher multiples. And so they
29:27
Speaker 11: have and they've been expanding in the private credit space
29:32
Speaker 11: with that business, and I think banks are also doing
29:35
Speaker 11: it with different partnerships, and so the banks have been
29:40
Speaker 11: active on that front, and we do expect that that
29:44
Speaker 11: business to continue to expand.
29:46
Speaker 2: So Allison, one of the trump trade sectors that I
29:51
Speaker 2: hear all the time has been financials because maybe the
29:56
Speaker 2: lighter deregulation touch, maybe lower taxes, that kind of thing,
30:00
Speaker 2: and the stocks have reacted generally speaking, how much of
30:04
Speaker 2: that trade is still left here? I'm looking over trailing
30:07
Speaker 2: twelve months, a lot of the big names are up
30:08
Speaker 2: thirty forty percent.
30:11
Speaker 11: Yeah, so I think, you know, we have seen the
30:14
Speaker 11: stocks move. Part of that is earning's driven. I talked
30:17
Speaker 11: about the capital markets momentum, and part of that is
30:19
Speaker 11: sentiment driven. And to Alex's point earlier, you know what
30:23
Speaker 11: we're seeing, you know, the news with regard to Barr,
30:25
Speaker 11: I think is really just reinforcing that Trump traded, reinforcing
30:29
Speaker 11: that expectation for less regulation, and so definitely the sentiment
30:35
Speaker 11: part of the sentiment driver. I think we saw the
30:39
Speaker 11: stocks gain seventeen percent in a very short period of time,
30:43
Speaker 11: where earnings estimates moved something like three percent. So that
30:46
Speaker 11: tells you that it really is the sentiment and the
30:48
Speaker 11: expectations that those earnings estimates can go even higher. I
30:52
Speaker 11: think where we're the most optimistic is the lesser antitrust scrutiny,
30:57
Speaker 11: which is going to add to M and A fees.
30:58
Speaker 11: We're very bullish that part of the investment banking fee
31:03
Speaker 11: revenue recovery within BI and with regard to the other regulations. So,
31:10
Speaker 11: as I said, a lot of optimism has been baked in,
31:13
Speaker 11: but I think what we're going to focus on next
31:15
Speaker 11: week is really the core fundamental outlook, and I think
31:18
Speaker 11: to the extent that that can give investors some confidence,
31:22
Speaker 11: it can build into the story because it is less
31:25
Speaker 11: regulation under Trump that I think is most exciting for
31:28
Speaker 11: some of these big banks. But also keep in mind
31:31
Speaker 11: the economic environment is better, the net income outlook is
31:36
Speaker 11: getting better. I already talked to for a while about
31:38
Speaker 11: capital markets, but on the credit loss front, we've had
31:41
Speaker 11: two years of rising provisions. We're going to see that
31:44
Speaker 11: flatten out, and that's also helpful to the bank's earnings.
31:46
Speaker 2: Right Thanks to Alison Williams, Bloomberg Intelligence Senior Analysts Global
31:49
Speaker 2: Banks and asset Managers, we turn next to some big
31:52
Speaker 2: news in the financial space.
31:54
Speaker 1: This week.
31:54
Speaker 2: We heard JP Morgan Chase is planning to bring its
31:57
Speaker 2: staff back to the office five days a week, ending
32:00
Speaker 2: hybrid work option, and separately, we were told the world's
32:03
Speaker 2: biggest hedge fund, Bridgewater Associates, dismissed seven percent.
32:06
Speaker 5: Of its workforce.
32:07
Speaker 2: For more, co host Alex Stale and I were joined
32:09
Speaker 2: by Michael Moore, Bloomberg Managing editor for Finance and the Americas.
32:13
Speaker 2: We first asked him about JP Morgan Chase and whether
32:16
Speaker 2: going back to the office full time is a surprise.
32:19
Speaker 12: Uh no, not really. I mean the majority of their
32:21
Speaker 12: staff was already doing that, but this is the this
32:26
Speaker 12: would be the rest of the staff. So we've seen
32:30
Speaker 12: some firms move in that direction. Others, you know, have
32:34
Speaker 12: used the flexibility as a recruiting tool. City has Yeah,
32:37
Speaker 12: City has stuck with three days a week for a
32:41
Speaker 12: good portion of its staff. So I think we will
32:43
Speaker 12: see a difference among the firms. Some of the European
32:47
Speaker 12: firms have have used it as a recruiting tool. So
32:50
Speaker 12: but you know, Jamie Diamond has been very vocal about
32:52
Speaker 12: his views that you know, people work better in the
32:55
Speaker 12: office together, it helps develop talent. So you know, I
33:00
Speaker 12: think it will be kind of you know, leader by leader,
33:02
Speaker 12: kind of setting the agenda.
33:05
Speaker 5: I don't know.
33:06
Speaker 2: I mean, the fact is it does work from home,
33:09
Speaker 2: so that does work. Let's get people back. So we'll
33:11
Speaker 2: see how goes Bridge Rotter associates huge hedge fund cutting staff.
33:16
Speaker 2: Is this just the normal culling of people or something
33:19
Speaker 2: different going on here?
33:20
Speaker 12: Yeah, it's an unusual one for just for the reason
33:23
Speaker 12: that they are coming off their best year in many
33:26
Speaker 12: years for the Flagship Fund. You know, I think the
33:31
Speaker 12: new CEO is definitely trying to shake things up a
33:35
Speaker 12: little bit. He has you know, replaced some of the
33:38
Speaker 12: top management. They've brought some people from the outside, which
33:40
Speaker 12: they hadn't historically done under Ray Dalio. So I think this,
33:46
Speaker 12: you know that the stated goal here is there are
33:49
Speaker 12: some areas where they want to hire. They don't want
33:52
Speaker 12: headcount to get too crazy. This kind of brings them
33:55
Speaker 12: back to where they were, you know, a little over
33:57
Speaker 12: a year ago in terms of headcount and allows them
34:00
Speaker 12: to kind of be a little more selective.
34:02
Speaker 3: Did they over hire or something or do they just
34:05
Speaker 3: want to like just move focus or something like that.
34:08
Speaker 12: Yeah, I think you know, you have seen them, you know,
34:10
Speaker 12: announced some you know, efforts on the AI front. They
34:13
Speaker 12: may want to do some more hiring there, but we
34:15
Speaker 12: have seen some of the hedge funds more broadly do
34:20
Speaker 12: some over hiring. You know, there has been a talent war,
34:23
Speaker 12: so this could be a bit of a correction there.
34:26
Speaker 2: It's a unique place to work, isn't it's I've heard that.
34:29
Speaker 2: What makes it unique a Bridgewater.
34:32
Speaker 12: Well, they have a you know, they have this you know,
34:35
Speaker 12: they've long had this culture of radical transparency, of being
34:40
Speaker 12: very blunt with each other. A lot of the senior
34:43
Speaker 12: people have been there since they were in their early twenties,
34:47
Speaker 12: have grown up there, haven't worked elsewhere, So there is
34:50
Speaker 12: a bit of an.
34:50
Speaker 7: Insular culture there.
34:52
Speaker 12: I think nearby Daya, you know, has came in a
34:56
Speaker 12: little bit later in his career, so it brings a
34:59
Speaker 12: different perspective. Did then Dalio who built this place, you know,
35:02
Speaker 12: around his principles, So I think you could see a
35:05
Speaker 12: bit of a relaxing of that culture while still you know,
35:09
Speaker 12: being kind of a unique beast out in Connecticut.
35:12
Speaker 3: JP Morgan the latest bank to quit the Climate Finance
35:15
Speaker 3: Group this fall. City Paul as Baba, how are we
35:18
Speaker 3: understanding it? Is this like a complete backlash against climate
35:22
Speaker 3: and DEI for example, or is this just sort of
35:24
Speaker 3: like we're going to move to the middle or we
35:26
Speaker 3: just rebranding it.
35:27
Speaker 7: I think it's a bit of rebranding.
35:29
Speaker 12: I think they were getting a lot of heat from
35:32
Speaker 12: some politicians over some of these pledges they wanted something with.
35:37
Speaker 3: These are pledges like we're not going to lend money
35:39
Speaker 3: to oil and gas kind of thing.
35:41
Speaker 12: That's how they were perceived. They weren't always written that way,
35:43
Speaker 12: but that's how they were perceived that. You know, they
35:46
Speaker 12: got the CEOs When they were in front of Congress
35:49
Speaker 12: a little over a year ago. Jd Vance made a
35:51
Speaker 12: big point on this. So I think they thought we
35:57
Speaker 12: can we can do this in ways of lending to
36:00
Speaker 12: renewable energy without taking such a public stance that will
36:05
Speaker 12: get us a lot of political backlash. So I think
36:08
Speaker 12: you'll still see efforts on this, but they won't be
36:11
Speaker 12: as grand as this climate pledge that they had all
36:16
Speaker 12: signed up to.
36:17
Speaker 1: What is this?
36:17
Speaker 2: I mean, the timing is not a coincidence time assuming
36:20
Speaker 2: given the new administration coming in. Is that how it's
36:23
Speaker 2: being read or is that are they saying anything about
36:25
Speaker 2: that the timing?
36:26
Speaker 12: I think yeah, I don't think it's a coincidence. I
36:28
Speaker 12: think the political winds have shifted on this, and in general,
36:33
Speaker 12: I think there is you know, these always these pledges
36:37
Speaker 12: always kind of came with an understanding of Okay, we
36:40
Speaker 12: need to help our oil and gas clients transition to
36:43
Speaker 12: this new world. So it's not going to be you know,
36:45
Speaker 12: cutting ties with the big oil companies. But I think
36:51
Speaker 12: they're being more cautious in that.
36:53
Speaker 3: And it's not just you know, banks. We should point
36:54
Speaker 3: at McDonald's today, the piece coming out saying that it's
36:57
Speaker 3: walking back it's de EI goal, saying it's two its
37:00
Speaker 3: approach to diversity, equity inclusion, no longer setting quote aspirational
37:04
Speaker 3: representation goals, instead focusing on embedding inclusion practices into its
37:09
Speaker 3: daily business. I don't know what that difference is, but
37:12
Speaker 3: that's why I wonder if it's just a rebrand like
37:13
Speaker 3: now you don't want to say ESG, but if you
37:16
Speaker 3: still have some sort of like net zero goals, maybe
37:19
Speaker 3: that terminology is more okay. It's just sort of a
37:22
Speaker 3: branding and moving away from something extreme.
37:25
Speaker 12: Yeah, I think it's not wanting to be seen as
37:27
Speaker 12: taking a political stance, more taking a This is good
37:30
Speaker 12: for our risk perspective.
37:34
Speaker 2: Thanks to Michael Moore, Bloomberg Managing Editor for Finance in Americas.
37:37
Speaker 4: This is a Bloomberg Intelligence podcast, available on Apple, Spotify,
37:42
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