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Intel CEO Forced Out, France Turmoil · Bloomberg Intelligence

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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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Speaker 2: Bloomberg News is now reporting that the board has forced
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Speaker 2: out Intel's CEO Gelsinger. So definitely some concerns there at
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Speaker 2: Intel as it tries to play catch up on the
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Speaker 2: AI game against the videos of the world. Man Deep
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Speaker 2: Sing joins his senior technology Industrynals for Bloomberg Intelligence joins
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Speaker 2: us here on our Bloomberg Interactor Brokers studio. So again, Mandy,
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Speaker 2: by the reporting we're seeing out of Bloomberg News now
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Speaker 2: was that it was kind of the board forcing at
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Speaker 2: mister Gelsinger. And that kind of makes sense because you know,
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Speaker 2: as you mentioned earlier, board concern, investor concern about the
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Speaker 2: pace of which Intel was trying to, you know, really
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Speaker 2: become a bigger player in AI. What do you think
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Speaker 2: is going on.
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Speaker 3: And the overall strategy for turnaround like this, I mean,
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Speaker 3: we know turnarounds are rare in tech, and in this case,
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Speaker 3: I think the doubling down on the foundry side was
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Speaker 3: a big mistake in hindsight, I would be very surprised
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Speaker 3: if whoever their point, whether it's internal or external, really
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Speaker 3: wants to focus on the foundry side as opposed to
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Speaker 3: their core chip business, which is where they still generate
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Speaker 3: bulk of their operating free cash flow.
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Speaker 4: And you know, when you look at.
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Speaker 3: The PC business, it's a thirty billion dollar business, generates
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Speaker 3: ten billion dollars in free cash flow, and it's still there.
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Speaker 3: I mean, they're not gaining any share, but there's still
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Speaker 3: the dominant force when it comes to the client PC
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Speaker 3: desktop business, and I think that's the path to turn
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Speaker 3: around this company.
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Speaker 5: Were you surprised by this in that this happened before
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Speaker 5: there was a successor actually announced, considering that it meaning that,
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Speaker 5: like what's going to happen in the next, say, two
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Speaker 5: months while they were looking for a successor, that would
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Speaker 5: have meant that Pat Gelsinger had to leave.
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Speaker 3: I mean, this reminds me a little bit about Microsoft,
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Speaker 3: the way Steve Balmer left and the way Satya Nadella
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Speaker 3: was appointed. I wouldn't be surprised if one of the
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Speaker 3: co CEOs, Michelle Johnson, like she ends up being elevated
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Speaker 3: to the CEO. But when I look at the turnaround prospects,
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Speaker 3: I think this is a much harder turnaround than a
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Speaker 3: Microsoft simply because you've got a player in Nvidia that's
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Speaker 3: really taking share on the server side and then TSMC
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Speaker 3: on the foundry side. So on both the fronts, Intel
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Speaker 3: is really losing share. The only front where they still have,
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Speaker 3: you know, steady share is the client PC business, And
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Speaker 3: that's why I think breaking up the company is probably
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Speaker 3: the likely scenario here. I would be surprised if anyone
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Speaker 3: tries to turn this around as is.
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Speaker 2: So, I mean, it's just an attractive job for sir,
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Speaker 2: an external person. Let's say I'm a senior person in
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Speaker 2: n vidio, I can get the big chair at Intel.
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Speaker 6: Is that attractive?
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Speaker 3: It could be, but it sounds more like a Pe
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Speaker 3: playbook here. You know, look at the entity as a whole,
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Speaker 3: figure out the strategic options, lever up and look the
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Speaker 3: foundry business outside of Intel may actually end up doing well.
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Speaker 3: And the reason I say that is right now, no
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Speaker 3: one from an Amazon or a Microsoft, or Google or
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Speaker 3: Nvidia wants to use Intel foundry because they know Intel
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Speaker 3: is a competitor on the chip design side. Well, once
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Speaker 3: you take out the company and you know it's an
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Speaker 3: independent entity, everyone wants to have some onshore manufacturing of chips.
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Speaker 3: That's what the government wants. So these companies may be
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Speaker 3: forced and with the incoming administration, I won't be surprised
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Speaker 3: if they say, Okay, you guys have to use some
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Speaker 3: of the foundry options.
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Speaker 4: Within the US.
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Speaker 3: At TSMC or Samsung don't have that kind of capacity
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Speaker 3: that Intel has within the US.
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Speaker 5: So would the pitch be to spin off the foundry
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Speaker 5: business kind of thing and then keep the chips and
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Speaker 5: the AI chips.
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Speaker 3: Yeah, I mean, look, the foundry business is an eighteen
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Speaker 3: billion dollar revenue business, although most of it is Intel
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Speaker 3: outsourcing their business and counting as revenue, so it's not
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Speaker 3: external foundry revenue. But it's negative gross margins. So the
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Speaker 3: core PC business is about a forty to forty five
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Speaker 3: percent gross margin. The foundry business is negative gross margin,
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Speaker 3: and they're spending twenty five billion dollars a year on
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Speaker 3: capex just to buy the machines to keep up with
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Speaker 3: the advancement in nodes.
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Speaker 7: Why do I have a business that has negative gross margins?
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Speaker 3: Because it's it's like Intel is the vertical integrated player
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Speaker 3: in chip design and manufacturing, so they do it all
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Speaker 3: in house, and for a while, that's why Intel's gross
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Speaker 3: margins were the best because they were doing everything in house.
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Speaker 3: But the moment they missed out on that node advancement
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Speaker 3: where TSMC leap rocked against them, that's when it all
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Speaker 3: started to go wrong.
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Speaker 5: Amazing stuff, all right, Andy, thanks a lot, really appreciate it.
4:58
Speaker 5: We'll clearly be talking to you every day on this.
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Speaker 8: For a while.
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Speaker 5: Mandu Seing Bloomberg Intelligence senior technology analyst joining us on
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Speaker 5: Intel and reportedly Pat Gelsinger being asked to leave by
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Speaker 5: the board.
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Speaker 1: thirty Alex.
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Speaker 8: Stelier alongside Paul Sweeney. This is the Bloomberg Intelligence Radio.
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Speaker 5: cover two thousand companies and one hundred and thirty industries
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Speaker 5: all around the world. All right, let's get to one
5:42
Speaker 5: of them right now, super Micro devices. Super Micro, I
5:44
Speaker 5: should say, up solidly.
5:47
Speaker 8: At some point it was up.
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Speaker 5: Like thirty percent today, up twenty two percent now at
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Speaker 5: this point, the super Micro reviews finds no evidence of
5:54
Speaker 5: fraud and the CFO was replaced. Let's get more on this.
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Speaker 5: Ujin hoo boom. Bring intelligence and your technology analysts, joins us. Now,
6:03
Speaker 5: remind us what the problem is that super Micro is
6:06
Speaker 5: trying to create too correct.
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Speaker 10: Yeah, hey, Alex, thanks for having me on a couple
6:12
Speaker 10: couple of things. There was a short sell of report
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Speaker 10: back in August citing that there was some fraud you know,
6:21
Speaker 10: with internally, and essentially because of that, there was an
6:25
Speaker 10: internal investigation and they delighted their ten K and ten
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Speaker 10: Q filings. And what super Micro is essentially saying their
6:33
Speaker 10: internal investigation has found nothing or no evidence of fraud.
6:38
Speaker 10: But the ten K and ten Q filing still have
6:40
Speaker 10: yet to be filed.
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Speaker 2: But it's not every day that a big four accounting
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Speaker 2: firm does what happened here basically says, you know, they
6:47
Speaker 2: really can't rely upon the management team and they and
6:49
Speaker 2: they just walk away from an account that doesn't happen.
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Speaker 10: Yeah, problem, No, Paul, I think between your lifetime and
6:57
Speaker 10: my lifetime in the financial industry, probably four or five times, right, So, yeah,
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Speaker 10: it doesn't happen. It doesn't happen. They did find an
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Speaker 10: alternative BDO USA, and you know, quite quite frankly, with
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Speaker 10: the special investigation you know, being completed without evidence of fraud,
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Speaker 10: it actually almost gives them a BDO a safety net
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Speaker 10: to actually expedite the ten Q and ten K filing
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Speaker 10: sign off in my opinion.
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Speaker 5: So does this put all the questions to bed at
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Speaker 5: this point?
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Speaker 10: No, not necessarily, quite frankly. I mean, let's see what
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Speaker 10: BDO says. I do think they're going to try to
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Speaker 10: push along the filings as quickly as possible, possibly by
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Speaker 10: year end. You know, the deadline is sometime in late February.
7:45
Speaker 10: But you know, I do think they'll try to push
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Speaker 10: it along now, I will tell you.
7:50
Speaker 3: Uh.
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Speaker 10: The other question is is that was there so much
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Speaker 10: reputation damaged because of this? Did they lose business? And
7:59
Speaker 10: if you think about where the shares are today, it's
8:01
Speaker 10: still well off the peaks.
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Speaker 2: So assuming they can put this issue behind them, what
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Speaker 2: is the story for this company here, super Micro News,
8:09
Speaker 2: how do you position it within your tech stocks?
8:13
Speaker 4: Yeah?
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Speaker 10: Look, super Micro has been one of the hottest companies
8:17
Speaker 10: within the hardware industry. They were on the forefront or
8:21
Speaker 10: the poster child of AI servers, and you've seen a
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Speaker 10: rapid rise in sales, going from a billion dollars or
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Speaker 10: three billion dollars in annual sales, and they were on
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Speaker 10: track to about twenty six to thirty billion dollars in
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Speaker 10: annual sales in fiscal twenty twenty five. Right, and this
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Speaker 10: is over a span of four years. Now, they didn't
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Speaker 10: retract a guidance, but they didn't affirm guidance either. So
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Speaker 10: the question is is that, look, what is the real
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Speaker 10: sales going into fiscal twenty five. We do have a
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Speaker 10: scenarios scenario analysis that in a draconian way, it's going
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Speaker 10: to be sixteen billion dollars in sales.
8:56
Speaker 9: Right.
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Speaker 10: That's far off of the twenty six on the low end,
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Speaker 10: but you know, it's still sixteen billion dollars in sales
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Speaker 10: that super Micro could deliver on the AI story alone.
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Speaker 5: And this is AI netlike hardware right, versus AI chips
9:10
Speaker 5: for example from in video, right, So a competitor would
9:13
Speaker 5: be like Dell, right, like an.
9:15
Speaker 8: AI server play exactly.
9:17
Speaker 5: So if I was a customer and I was like,
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Speaker 5: you know what, super Micro, I need to go somewhere else.
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Speaker 8: Is the only other option Dell? Or are there other
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Speaker 8: players out there?
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Speaker 3: Oh?
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Speaker 10: Yeah, Look, if we go back to last May at
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Speaker 10: Video's conference, there were a host of AI server companies
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Speaker 10: that were willing to partner with Dell, I mean, with Nvidia.
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Speaker 10: So super Micro is not the only game in town.
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Speaker 9: Now.
9:41
Speaker 10: There is Dell nor Hpe. There are some Taiwanese ODMs
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Speaker 10: that are more than happy to assemble AI servers out there.
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Speaker 10: So we've seen the because of the growing competitive pressure,
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Speaker 10: we've seen margins compress as a result for the industry.
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Speaker 2: So they sacrifice. It feels like this. How does the
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Speaker 2: street feel about the rest of the management team, the
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Speaker 2: leadership as well as the board.
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Speaker 10: Well, look, the main issue in my mind was not
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Speaker 10: only the CFO, but also the board. When you have
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Speaker 10: the wife of the CEO as a member of the
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Speaker 10: board and a seventeen year old a person on the
10:23
Speaker 10: board who's been on for about seventeen years, there's very
10:26
Speaker 10: limited independence. Quite frankly, I do think there needs to
10:29
Speaker 10: be some sort of overhaul of the board. And I've
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Speaker 10: said in the past on this show, and I have
10:34
Speaker 10: written that I think the CEO may need to be
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Speaker 10: promoted to a chairman role and I may need a
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Speaker 10: new CEO.
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Speaker 5: Now, is this what part of all of this has
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Speaker 5: to do with just going from a company in the
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Speaker 5: Russell to the company in the S and P and
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Speaker 5: is growing super fast and having different kind of analysts
10:52
Speaker 5: coverage And how much of this was going to come
10:54
Speaker 5: kind of no matter what.
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Speaker 10: Yeah, you know, that's a good question, Alex. You know, look,
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Speaker 10: this used to be a Russell company or a mid
11:03
Speaker 10: cap company and it was under the radar for a
11:07
Speaker 10: lot of analysts. And now we're talking about being in
11:09
Speaker 10: the S and P five hundred index and you're gonna
11:11
Speaker 10: have a lot of magnifying glasses on the financials. And
11:16
Speaker 10: keep in mind, you know, it's only been about five
11:18
Speaker 10: to six years back where they were delicted from from
11:22
Speaker 10: the NASDAC and for them to do this again, it's
11:25
Speaker 10: quite frankly shameful in my mind. Now, if there is,
11:29
Speaker 10: if there is no wrongdoing here, shame on me, right,
11:33
Speaker 10: But you know, Fumi wants, you know, shame on them,
11:37
Speaker 10: fully twice shame on me. So you know you're gonna
11:40
Speaker 10: see a lot of scrutiny going forward. I don't know
11:42
Speaker 10: if they'll come back after this.
11:43
Speaker 2: Have they lost have they lost customers to any material basis?
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Speaker 10: Nothing reported as of yet. What they said on the
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Speaker 10: last earnings call was that there were a couple of
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Speaker 10: customers who you know, they're trying to retain.
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Speaker 5: That's a nice way of saying not yet. I think
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Speaker 5: from a CEO speak, how much more?
12:09
Speaker 8: Okay?
12:10
Speaker 5: So, just pure valuation perspective, how do we know how
12:12
Speaker 5: to value this company when they're all these questions.
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Speaker 10: Look at the end of the day, you know, and
12:18
Speaker 10: Paul taught me, well, it's all about cash flow and earnings.
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Speaker 10: Nice John, And I don't know what. I don't know
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Speaker 10: what earnings is. In our scenario model, we have a
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Speaker 10: buck sixty in earnings go going forward, and hardware companies
12:33
Speaker 10: of this ilk AI companies are ranging anywhere between ten
12:38
Speaker 10: to fifteen times. So if my buck sixty is right
12:41
Speaker 10: and it's going at around let's just say at the
12:43
Speaker 10: high end, fifteen to sixteen times. No, it seems like
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Speaker 10: from a valuation standpoint, it's training at the fundamentals.
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Speaker 2: All right, Wujin, thank you so much.
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Speaker 7: We appreciate it.
12:53
Speaker 2: Wujin Home senior technolog channels for Bloomberg Intelligence down there
12:57
Speaker 2: in Princeton, New Jersey, super Micro, they're trying to make
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Speaker 2: some headway here. They let go of their CFO, but
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Speaker 2: it looks like they're going to get their accounts to
13:06
Speaker 2: sign off on some of the financial statements that allow
13:08
Speaker 2: them to file their k's and queues and maybe get
13:11
Speaker 2: some of this accounting issues behind them, because, as Wujin
13:14
Speaker 2: was saying, before this accounting issue there was a high
13:17
Speaker 2: flying stock and really believed to be in discount of
13:20
Speaker 2: by the market is one of the plays for AI.
13:22
Speaker 1: Right here, you're listening to the Bloomberg Intelligence Podcast. Catch
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13:39
Speaker 5: Let's get more on the manufacturing data because for the
13:41
Speaker 5: first time in eight months, new orders entered expansion territory.
13:45
Speaker 5: Joining us for now is Tim Fiori, chair of the
13:47
Speaker 5: Institute for Supply Managements Manufacturing Business Survey Committee, and he
13:51
Speaker 5: joins US now Hey, Tim, what drove that expansion?
13:55
Speaker 4: A couple of things, Alex.
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Speaker 11: First off, the new order number finally broke fifty. I mean,
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Speaker 11: we broke fifty before in the last couple of years,
14:01
Speaker 11: but we've broken fifty here for a good reason. It
14:04
Speaker 11: feels like the man is starting to come back now
14:06
Speaker 11: that the uncertainty around the election is behind us.
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Speaker 4: That's a good thing.
14:10
Speaker 11: The other thing that validates that is that our manufacturing
14:12
Speaker 11: inventory number actually rose five point five points, which would
14:16
Speaker 11: also indicate that companies are more willing to invest in
14:18
Speaker 11: working capital to get ready for the twenty twenty five
14:21
Speaker 11: business here.
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Speaker 4: So overall, a good report. I think. The other point
14:25
Speaker 4: here is our employment.
14:26
Speaker 11: Although we're still destaffing, we're not destaffing as strongly.
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Speaker 4: You know, we came into forty eight point one.
14:31
Speaker 11: So the three of those together got us close to
14:33
Speaker 11: forty nine. And I'll tell you if the supplier delivery number,
14:37
Speaker 11: which surprisingly actually got faster, if it had remained slower,
14:41
Speaker 11: we would have broke forty nine and gotten closer to
14:43
Speaker 11: the fifty.
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Speaker 4: So overall, a good report from November.
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Speaker 11: A little bit surprising, a little bit more positive than
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Speaker 11: I would have thought this early, but very consistent with
14:51
Speaker 11: the fact that.
14:52
Speaker 4: Rate we're on a rate reduction cycle.
14:54
Speaker 11: The election is behind us, it's obviously going to be
14:56
Speaker 11: a positive thing for the economy, and off we go
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Speaker 11: into twenty twenty five.
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Speaker 12: Tim, great to have you with us.
15:01
Speaker 2: Tim Fury, chairman of the Manufacturing Business Survey for the
15:04
Speaker 2: Institute for Supply Management, zipping in here with some economic data.
15:07
Speaker 2: For word came in a little bit better and expected,
15:09
Speaker 2: so we'll take that. I wonder how much of that
15:11
Speaker 2: has to do with the election and some of the
15:13
Speaker 2: economic optimism that has felt in a lot of parts well.
15:16
Speaker 5: And also I wonder how that winds up looking as
15:18
Speaker 5: we go into twenty twenty five, because it will we
15:21
Speaker 5: see stockpiling ahead of any tariffs well, and will that
15:23
Speaker 5: change the inventory in new orders? That could be interesting
15:26
Speaker 5: to figure out too.
15:27
Speaker 4: Yep, very good.
15:29
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15:47
Speaker 5: Alex steal here alongside Paul Sweeney.
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Speaker 8: This is Bloomberg Intelligence Radio. We bring you all the
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Speaker 8: top news.
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Speaker 5: And business, economics and finance and politics from our lens
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16:00
Speaker 5: We also tap wonderful guests outside of Bloomberg Intelligence for
16:03
Speaker 5: their broader take on the market, particularly after a really
16:06
Speaker 5: stellar year.
16:07
Speaker 8: Here's some facts for you.
16:09
Speaker 5: SMP is up almost twenty seven percent on the year,
16:11
Speaker 5: the best performance through November since nineteen ninety seven, and
16:16
Speaker 5: going back fifty years, the SMP has always gained in
16:19
Speaker 5: December after rising twenty five percent or more in the
16:22
Speaker 5: first eleven months. That's a technical way of saying the
16:24
Speaker 5: rally could continue.
16:26
Speaker 8: I'll joining us more.
16:27
Speaker 5: For his take is David Awaddell, CEO and chief investment
16:30
Speaker 5: strategist at Waddell and Associates. He joins us now in
16:33
Speaker 5: the studio. David, good to see you, Thanks for joining.
16:35
Speaker 4: Good morning.
16:36
Speaker 3: Now.
16:36
Speaker 8: Is that the deal? Like, Hey, we're up just to
16:38
Speaker 8: keep buying it?
16:39
Speaker 5: Why not?
16:39
Speaker 6: I think the number of occurrence is in that sample
16:41
Speaker 6: space was rather small, but we'll go with him. Okay,
16:43
Speaker 6: I think the Santa claus rally can continue. And you
16:47
Speaker 6: know what's amazing is that earnings are accelerating from here, right,
16:51
Speaker 6: So as we look out over the next twenty four months,
16:54
Speaker 6: earnings grow fifteen percent next year, maybe fifteen percent the
16:57
Speaker 6: following year. And so with that as a backdrop, and
17:00
Speaker 6: by the way, here's a nice stat In years where
17:02
Speaker 6: there's not a recession, markets are higher eighty six percent
17:05
Speaker 6: of the time. So it bodes well for next year.
17:08
Speaker 6: And I think people are squaring that going into the
17:10
Speaker 6: end of this year.
17:12
Speaker 2: We're almost a month of past the election. When you
17:15
Speaker 2: look up the day after the election, did you and
17:17
Speaker 2: your team did you rethink maybe your outlook for asset
17:21
Speaker 2: allocation or maybe how you think about investing. Did the
17:25
Speaker 2: change in administration and the Republican controlled Congress did that changed
17:28
Speaker 2: how you looked at it?
17:29
Speaker 6: A great question. So to a certain extent, we were
17:32
Speaker 6: all so already anticipating a.
17:34
Speaker 4: Move down the cap spectrum.
17:35
Speaker 6: You know, I don't think the mag seven go to
17:37
Speaker 6: the LAG seven, but other people should participate, and they
17:40
Speaker 6: have in the second half of the year. So we'd
17:41
Speaker 6: already sort of moved down the cap spectrum, which is
17:44
Speaker 6: part of the Trump trade. The part I hadn't really
17:46
Speaker 6: anticipated was how strong the currency reaction was going to be,
17:49
Speaker 6: So our offshore holdings currently are unheedged. That's up for
17:53
Speaker 6: discussion now in terms of because the move in the
17:56
Speaker 6: currency has been dramatic, and that may be the big
18:00
Speaker 6: story for next year. Less so interest rates, since it
18:03
Speaker 6: pears that the markets like our new treasury nominee. But
18:07
Speaker 6: that's up for discussion. On the investment com me is
18:09
Speaker 6: whether it a hedge currency or not.
18:11
Speaker 5: Well, that's actually quite interesting because President elect Donald Trump
18:14
Speaker 5: has made no bones about the fact that he wants
18:16
Speaker 5: a week er dollar. But then the thread over the
18:19
Speaker 5: weekend to the bricks Nations about you has still have
18:21
Speaker 5: to use the dollar, and we know that tariffs are coming.
18:25
Speaker 8: How does that square itself?
18:28
Speaker 6: I don't know, and I keep going through that gymnastics
18:30
Speaker 6: in my head. But I'll tell you the most interesting
18:31
Speaker 6: thing to me is US imports are four trillion dollars.
18:36
Speaker 6: If Trump slaps ten percent tariff on that, you know,
18:41
Speaker 6: it's four hundred billion dollars in potential tax revenue. Now,
18:44
Speaker 6: my economics textbook says, well, that just means that ford
18:47
Speaker 6: producers are just going to raise their price is ten percent. Well,
18:49
Speaker 6: the dollars appreciated eight percent since the end of September,
18:53
Speaker 6: which almost negates that in the marketplace. So I think
18:56
Speaker 6: the interplay between the tariffs and the movement and the
18:59
Speaker 6: currents may be the most interesting thing going into next year.
19:02
Speaker 6: And again that may just be you know, state craft
19:05
Speaker 6: and jaw owning and not really policy but more negotiating positions.
19:09
Speaker 1: We won't know.
19:10
Speaker 6: But I think the currency is the most interesting.
19:12
Speaker 2: US versus non US. How do you guys position that
19:15
Speaker 2: generally speaking?
19:16
Speaker 6: Well, so we benchmark against the all world the ACLEE,
19:21
Speaker 6: and we've been tilted towards the US, but the valuations
19:25
Speaker 6: overseas are much more compelling. The earnings growth is okay,
19:28
Speaker 6: but Europe seems anemic and continues to struggle. I think,
19:33
Speaker 6: you know, the stock market in Germany and if you
19:36
Speaker 6: look at earnings in Germany and the size, that economy
19:38
Speaker 6: hadn't done anything in the past few years, and so
19:40
Speaker 6: it makes it somewhat challenging to defend that position. But
19:44
Speaker 6: right now, at the moment, with policy being so uncertain,
19:48
Speaker 6: you know, I don't think it's time to be making
19:50
Speaker 6: large transitions, either on shore or offshore. But obviously the
19:54
Speaker 6: bias is towards the US right now, and that's reflected
19:56
Speaker 6: in the currency markets.
19:58
Speaker 8: So what do you think it's.
19:58
Speaker 5: Going to take for you guys to make it as
19:59
Speaker 5: a and whether to hedge your XUS exposure? Like, what's
20:03
Speaker 5: going to take the scales for you guys?
20:06
Speaker 6: I would never fully hedge it, probably because again, currency
20:09
Speaker 6: markets are fickle and challenging, and things can change a
20:13
Speaker 6: lot with policy proclamations. Right now, we're fully unhedged. In
20:18
Speaker 6: terms of what portion of that to hedge.
20:20
Speaker 1: I don't know.
20:20
Speaker 6: That'd be a position by position decision.
20:23
Speaker 2: Okay, it seems like ever since I've been in this
20:25
Speaker 2: marketplace June sixteenth, nineteen eighty six, by the way, growth
20:30
Speaker 2: has been the story. Yeah, howpen if you're a value investor,
20:34
Speaker 2: what do you do here? How does this new world
20:36
Speaker 2: that we're kind of entering?
20:37
Speaker 8: How does that?
20:37
Speaker 4: You know?
20:38
Speaker 6: I've been making the standard deviation argument for a while,
20:41
Speaker 6: which is that performance and valuations have reached extreme levels.
20:44
Speaker 6: That is true, But if you look at this year,
20:48
Speaker 6: utilities have outperformed technology, right, Financials have outperformed, industrials have outperformed,
20:53
Speaker 6: and if you look at at the trade since Trump.
20:56
Speaker 6: You know, value has done very well. I mean the
20:58
Speaker 6: mag seven's done five but mid caps, for instance, which
21:02
Speaker 6: are more value latent, have outperformed small caps, which obviously
21:05
Speaker 6: have a lot more financials since June thirtieth, or up
21:09
Speaker 6: twice as much. So I think I hate to say,
21:12
Speaker 6: you know, we're overdue, because we've been overdue for a while,
21:15
Speaker 6: but I do think the value trade has some substance
21:18
Speaker 6: to it. And if what we're trying to do is
21:21
Speaker 6: drill another three million barrels of oil per day, which
21:24
Speaker 6: is a ton because we're drilling what thirteen and change,
21:28
Speaker 6: that's going to benefit materials companies, that's going to benefit
21:31
Speaker 6: industrials companies. And a lot of the Inflation Reduction Act
21:34
Speaker 6: infrastructure spending hasn't even come out yet, So I think
21:38
Speaker 6: industrials end up being kind of the darling you know
21:40
Speaker 6: in Trump one point zero energy actually was negative even
21:44
Speaker 6: though the S and P five hundred was up seventy
21:46
Speaker 6: percent over that period of time. So, you know, I'm
21:50
Speaker 6: not sure all value sectors benefit, but I would say
21:53
Speaker 6: industrials look good, Financials can continue to look good, especially
21:56
Speaker 6: with less regulatory pressures, and materials should look good. So
22:00
Speaker 6: and utilities. You know, the earnings, they are pretty substantial,
22:03
Speaker 6: and there's some obvious link with what's going on in AI.
22:07
Speaker 6: So it may be that values overdue and that twenty
22:10
Speaker 6: twenty five will be the year of value.
22:12
Speaker 8: We'll see, we'll see exactly.
22:14
Speaker 5: I was going to say, you know, who doesn't like
22:15
Speaker 5: three million barrels of oil a day? Extra oil oil company?
22:18
Speaker 6: That's right, the industrials.
22:20
Speaker 8: Exactly what do you do then? With tech?
22:23
Speaker 5: You said, you know, earnings earnings outlook for technology is
22:27
Speaker 5: definitely going to be lower next year, right, but it's
22:29
Speaker 5: not nothing. It's gonna be double digit's probably the mid teens.
22:32
Speaker 5: How do you invest in big tech currently?
22:35
Speaker 6: Well, it's kind of curious, you know, if you look
22:36
Speaker 6: at the socks, like.
22:38
Speaker 8: Half the Semi index, Yeah.
22:40
Speaker 6: Half the stocks in there are negative this year, and
22:42
Speaker 6: I think the index itself is up about thirteen percent.
22:45
Speaker 6: So it had a great twenty twenty three. It did
22:48
Speaker 6: not really have a great twenty twenty four. But if
22:51
Speaker 6: corporate taxes are four hundred and fifty billion, and Trump's
22:54
Speaker 6: going to cut them by another thirty three percent, that's
22:57
Speaker 6: going to create a lot of ammunition for CAPET. So
23:01
Speaker 6: I don't think the tech trade is over. It's just
23:04
Speaker 6: more fun when other people participate as well. So I
23:07
Speaker 6: think everything you.
23:08
Speaker 8: Don't like cell tech.
23:10
Speaker 6: No, I don't think you sell tech, but I do
23:12
Speaker 6: think you start moving towards more mid gap small cap exposures.
23:17
Speaker 6: In fact, since Trump, I think was elected, the number
23:21
Speaker 6: one performing factor was small cap growth, so MidCap tech,
23:26
Speaker 6: small cap tech, you know a lot of cap X.
23:28
Speaker 6: I see that all of that is bullish.
23:30
Speaker 2: Bond market to your treasury four point two percent, or
23:34
Speaker 2: take some credit risk here.
23:36
Speaker 4: You know.
23:37
Speaker 6: Here's the thing. So during Trump one point zero, nominal
23:40
Speaker 6: GDP was four point eight percent, Real GDP grew two
23:45
Speaker 6: point eight percent. Inflation was two point one. So we're
23:49
Speaker 6: sitting on the ten year, which is where the equity
23:52
Speaker 6: market really prices at four twenty two or something, call
23:56
Speaker 6: it whatever it says. That means that we're priced appropriately
24:00
Speaker 6: from a pe perspective for the stock market. So I
24:03
Speaker 6: think things have got it right. What'll be curious is
24:07
Speaker 6: when the Fed comes out on the eighteenth, they'll release
24:09
Speaker 6: their summary of economic projections and we'll see where they
24:13
Speaker 6: think the neutral is. You know, obviously the number of
24:15
Speaker 6: rate cuts has come off the table to about two
24:17
Speaker 6: and a half over the next twelve months. And so
24:20
Speaker 6: there's a lot more tensile strength in the economy that
24:23
Speaker 6: people thought. And we'll get I guess the isms this
24:25
Speaker 6: morning I'm looking for.
24:26
Speaker 8: Yeah, they're actually pretty good. Yeah, mana fashioning.
24:30
Speaker 5: So the new orders went into expansion territory for the
24:32
Speaker 5: first time in eight months. The other parts of the
24:34
Speaker 5: indices didn't, but it was close, and we heard the
24:37
Speaker 5: inventory started.
24:38
Speaker 8: To rise again. So really gearing up for a business
24:41
Speaker 8: cycle in twenty twenty five.
24:42
Speaker 6: Yeah, and where was service? I guess we'll get services
24:44
Speaker 6: there later. So if manufacturing turns the corner and starts
24:48
Speaker 6: being expansive, then where should the neutral rate be? So
24:51
Speaker 6: I think that's the big question mark. But I think
24:53
Speaker 6: I think we're back to two two and a half
24:55
Speaker 6: rate cuts, although you know, i'd love a Christmas cut
24:58
Speaker 6: on the eighteenth.
25:00
Speaker 8: Do you think we're going to get that?
25:01
Speaker 6: I mean, I don't know where the the CME tool is.
25:05
Speaker 6: It was at sixty six percent when I looked over
25:07
Speaker 6: the weekend.
25:08
Speaker 5: It looks like we are priced in for at least
25:09
Speaker 5: one but it'd be great, Okay, you like that? And
25:12
Speaker 5: im Services is coming up on Wednesdays. You'll break that
25:15
Speaker 5: down to you as well.
25:17
Speaker 2: David. You're based in Memphis, Tennessee, right Memphis in Nashville.
25:20
Speaker 2: Memphis talked to us about Memphis. I haven't been to Memphis.
25:23
Speaker 2: I don't think I've been to Memphis. Talk U about
25:25
Speaker 2: economy down there.
25:26
Speaker 6: What drives Memphis?
25:27
Speaker 13: Well?
25:28
Speaker 6: Right now Elon Musk because he just decided to build
25:31
Speaker 6: his AI data center in Memphis, Tennessee, Yes, exactly, and
25:36
Speaker 6: doubled the capacity immediately. And you know, they continue to
25:39
Speaker 6: raise money for XAI, which means more capital expenditures. So
25:43
Speaker 6: there's a lot of industrial you know, expansion going on
25:48
Speaker 6: right now. Because we have a great power grid, We've
25:51
Speaker 6: got a great logistics network. You know, our anchor tenant
25:54
Speaker 6: is FedEx, which is the you know, the global nervous
25:57
Speaker 6: system from a trade perspective. And so I would say
26:00
Speaker 6: Memphis is a value stock right with an opportunity to
26:04
Speaker 6: buy it you run three hours up the road. Nashville
26:07
Speaker 6: is a growth stock and headquarters just continue to move
26:10
Speaker 6: there almost every single day. So it's it's an age
26:15
Speaker 6: of renaissance in the state of Tennessee. Right now.
26:17
Speaker 2: I'll tell you, I mean, you read about it. I'm
26:18
Speaker 2: just looking around here. I mean's just yeah, Memphis, Nashville.
26:21
Speaker 2: You hear so much about Tennessee. It seems like every
26:24
Speaker 2: car company. What's it about Tennessee.
26:26
Speaker 6: Well, Corker was good at that too. Yeah, So we
26:29
Speaker 6: had great political leadership. Brettison was amazing, Corker was amazing,
26:32
Speaker 6: and Nashville has been very aligned on a growth agenda politically, philanthropically,
26:39
Speaker 6: you know, in the private sector obviously, and so it's just,
26:42
Speaker 6: you know, it's a great time to Nashville has.
26:44
Speaker 2: Become the which I don't know why, the bachelorette party
26:47
Speaker 2: capital of the world, you know, surpassing Vegas.
26:50
Speaker 5: I was in Nashville, was with you with radio, but
26:53
Speaker 5: I was so sick. I didn't leave the hotel like
26:54
Speaker 5: the whole time for three days.
26:55
Speaker 8: So it's good times.
26:57
Speaker 5: That hotel was nice, they had nice Starbucks. Sorry, we
27:00
Speaker 5: appreciate your time.
27:01
Speaker 8: Thank you so much.
27:02
Speaker 5: David Wodell, a CEO and chief investment strategist at Wodell
27:05
Speaker 5: and Associates.
27:07
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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27:14
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27:23
Speaker 1: eleven thirty.
27:25
Speaker 2: The political news today is coming out of France. The
27:28
Speaker 2: far right National Party of Marine Le penn will back
27:31
Speaker 2: a motion to topple the French government after Prime Minister
27:35
Speaker 2: Michel Barnier failed to agree to all of its demands
27:39
Speaker 2: on next year's budget. Let's get the latest reporting there
27:42
Speaker 2: with Ben Sill's Bloomberg Managing editor for European Economy and Government. Ben,
27:46
Speaker 2: do you educate us as to what's happening in Paris
27:49
Speaker 2: right now?
27:51
Speaker 4: Yeah?
27:51
Speaker 14: Well, you know, it's difficult to keep up, to be honest,
27:53
Speaker 14: We've got the headlines breaking on the terminal right now.
27:56
Speaker 12: I'm just in the last few minutes, as you.
27:58
Speaker 14: Say, the far right part Marine la penn has come
28:01
Speaker 14: out and announced that they are going to vote to
28:05
Speaker 14: bring down the current administration.
28:08
Speaker 12: It's been a really dramatic few days.
28:10
Speaker 14: The Barnier government has been walking on thin ice ever
28:15
Speaker 14: since it was formed in September. Their lack of a
28:21
Speaker 14: majority in the parliament meant that Marine la Penne effectively
28:25
Speaker 14: had the power of life and death over that government.
28:28
Speaker 14: Barnier has been desperately trying to get its budget through.
28:32
Speaker 14: Feels like every other day for the last week or so,
28:35
Speaker 14: he's been caving in to one demand or another. He's now,
28:40
Speaker 14: by my reckoning, given La penn three or four of
28:45
Speaker 14: the main demands that she wanted. She's still not happy
28:49
Speaker 14: and so she's decided to pull the plug on the.
28:51
Speaker 5: Government right and by forcing it through. Therefore, thus vote
28:55
Speaker 5: of no confidence can be called. Within the market, we
28:58
Speaker 5: are looking at a weaker euro. There's also been a
29:00
Speaker 5: lot of talk about how the difference between yield in
29:03
Speaker 5: Germany and yield in France, well France in Germany has
29:06
Speaker 5: blown out, and then it's at the level that we
29:08
Speaker 5: haven't seen since the European sovereign dead crisis back in
29:11
Speaker 5: twenty twelve. It's an easy comparison to make, but it's
29:15
Speaker 5: very different when you look kind of under the hood
29:17
Speaker 5: at that.
29:20
Speaker 12: Yeah, absolutely so.
29:22
Speaker 14: I mean the threshold that we were struck by last
29:25
Speaker 14: week was when the French bond spread actually went wider
29:29
Speaker 14: than the Greek bond spread. You know, those of us
29:31
Speaker 14: who are around a handle fifteen years ago, when the
29:35
Speaker 14: sovereign party with sovereign crisis blew up. Got used to
29:39
Speaker 14: tracking the Greek spread, but we never really thought that
29:41
Speaker 14: France would be in the same boat.
29:44
Speaker 2: So where do we go from here? Where did the
29:47
Speaker 2: French go from here? And kind of what's the timeframe here?
29:50
Speaker 12: I agree, Yeah, that's a question. I mean, I think that.
29:57
Speaker 14: In terms of the kind of the next steps, we'll
30:00
Speaker 14: be looking for the no confidence vote to happen in
30:03
Speaker 14: the next couple of days. We would expect that to
30:06
Speaker 14: go through. That doesn't really resolve anything though, because under
30:12
Speaker 14: the French constitutional rules they can't hold another election until
30:16
Speaker 14: next next July, I think, And so there's no way
30:22
Speaker 14: to put this to the vote to get a new
30:25
Speaker 14: kind of parliament there. So Macron is going to have
30:30
Speaker 14: the same complicated, divided legislature.
30:33
Speaker 12: To work with.
30:34
Speaker 14: The parties are going to have to try and come
30:36
Speaker 14: up with a new and a new agreement for governing.
30:43
Speaker 12: But I think everyone's gonna be looking at La Penn.
30:45
Speaker 12: She's she's setting the agenda here. She's the one who.
30:49
Speaker 14: Has decided to force the issue, and so it'll be
30:53
Speaker 14: there will be a sa onus on her to make
30:55
Speaker 14: the first move when we come out the other side
30:57
Speaker 14: of this crisis and one.
30:58
Speaker 5: Of the triggers for this was, of course, this Apple
31:00
Speaker 5: election that sort of set up the government like this
31:02
Speaker 5: in the first place. Are we at risk of having
31:04
Speaker 5: that happen again, having that happen again?
31:07
Speaker 12: Yeah, I think that. You know, this is something that's
31:10
Speaker 12: been building for a long long time in France.
31:13
Speaker 14: The Penn has been a fixture on the political scene
31:16
Speaker 14: there for you know, more than the decade. She had
31:21
Speaker 14: her first presidential run against against against Macrow in twenty seventeen,
31:27
Speaker 14: and so the French establishment has been coming up with
31:30
Speaker 14: a series of kind of increasingly creative ways to keep
31:33
Speaker 14: her out. But her stock is higher than it's ever
31:36
Speaker 14: been before at the moment, and you can see that
31:38
Speaker 14: by the way by the way she's leveraging her power
31:41
Speaker 14: this week. The endgame really sent us on the twenty
31:47
Speaker 14: twenty seven presidential election. That's when the Penn is really
31:51
Speaker 14: aiming to finally take power in France.
31:54
Speaker 12: The question is.
31:57
Speaker 14: Does Macron hold out to then There has been spect
32:00
Speaker 14: collation in France that he might quit, but you know,
32:03
Speaker 14: he's so that he's not going to do that. So
32:05
Speaker 14: that means we're kind of in this sort of slight
32:08
Speaker 14: limbog situation where no one can really government, but they
32:11
Speaker 14: can't force direction.
32:13
Speaker 2: Ben, thank you so much for that reporting appreciated. Ben Sills,
32:16
Speaker 2: Managing editor of Bloomberg News. He is coming in from
32:19
Speaker 2: our Berlin, the Germany studio on the latest news coming
32:23
Speaker 2: out of France. Some political instability right there. We're seeing
32:27
Speaker 2: that in the euro.
32:29
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32:37
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32:43
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32:47
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32:50
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32:52
Speaker 2: So the head over Bloomberg dot I mean, I'm sorry,
32:55
Speaker 2: YouTube dot Com and search of Bloomberg Podcast, and that's
32:57
Speaker 2: where you will find us. Let's check out with our
32:59
Speaker 2: next here, because what a lot of folks are trying
33:01
Speaker 2: to do is figure out how to reposition their investment outlook,
33:05
Speaker 2: their portfolio for a second term of President elect Trump.
33:09
Speaker 2: Any changes that need to be made. People trying to
33:11
Speaker 2: think about those right now. Peter Anderson is one of
33:14
Speaker 2: those folks, founder and chief investment officer for Anderson Capital Management,
33:18
Speaker 2: joining us from Boston, mass via zoom. So, Peter, we're
33:21
Speaker 2: almost a month removed from the election. We now have
33:25
Speaker 2: a Democrat Republican White House and a Republican Senate and
33:30
Speaker 2: Congress by thin margins.
33:31
Speaker 7: Yes, but still there.
33:34
Speaker 2: Given that backdrop, have you and your team made any
33:36
Speaker 2: changes to your outlook for investing?
33:41
Speaker 13: Normally this would be kind of a textbook exercise, but
33:46
Speaker 13: with the nature of President Trump, it's very, very difficult
33:50
Speaker 13: to make any kind of projections. And you know he's
33:53
Speaker 13: thrown several monkey wrenches into the works. Now there's certainly
33:56
Speaker 13: the tariff situation has everybody running and scrambling to analyze
34:02
Speaker 13: how this is going to work out. So I would
34:04
Speaker 13: say the past playbooks, you really have to throw them
34:07
Speaker 13: out and you have to look at something totally different,
34:10
Speaker 13: which is the dynamics of tariffs. How is that going
34:14
Speaker 13: to influence higher potentially higher interest rates, items like that.
34:18
Speaker 13: So we are looking, but I will tell you it's
34:22
Speaker 13: almost a fool's errand to try to work through all
34:25
Speaker 13: that and come out on the other end of that
34:27
Speaker 13: analysis with a highly confident, a highly confident outlook based
34:33
Speaker 13: on what the president is going to do.
34:36
Speaker 2: So all right, there's high level of uncertainty out there.
34:39
Speaker 2: We've heard that from a lot of market participants as well.
34:42
Speaker 2: Given that, where are you guys today, stocks, bonds, value, growth,
34:48
Speaker 2: How do you position right now?
34:50
Speaker 13: Well, I just run a single strategy, and it's a
34:54
Speaker 13: growth strategy. Equities, it's an all cap strategy. So what
34:57
Speaker 13: we're doing is we're looking at the current home holdings
35:00
Speaker 13: and we're asking ourselves how vulnerable are they to policy changes?
35:05
Speaker 13: And if there are stocks, in our opinion, that are
35:08
Speaker 13: more vulnerable to the uncertainties of those policy changes, we
35:11
Speaker 13: would probably look at selling. However, we've reviewed the entire
35:15
Speaker 13: portfolio and in our opinion, all these stocks that we hold,
35:19
Speaker 13: which are under fifteen in fact, are fairly invulnerable to tariffs,
35:26
Speaker 13: to interest rate changes, things of that matter.
35:30
Speaker 5: How much of that is going to be, say AI
35:32
Speaker 5: and big cap tech, A.
35:35
Speaker 13: Lot of big cap tech also. I was a big
35:40
Speaker 13: enthusiast of artificial intelligence, namely in Nvidia and super micro
35:44
Speaker 13: and some of the others. But we're thinking now that
35:48
Speaker 13: the enthusiasm is a little bit overspent. And anticipations of
35:54
Speaker 13: how much AI is going to actually accomplish and contribute
35:58
Speaker 13: to the bottom line we think is vastly, vastly exaggerated,
36:04
Speaker 13: and so we have trimmed those exposures dramatically coming into
36:07
Speaker 13: the next year.
36:09
Speaker 2: Peter, how many stocks do you own in your portfolio today?
36:11
Speaker 1: Roughly?
36:12
Speaker 2: Does that in lineer a little bit different in the
36:14
Speaker 2: past strategies.
36:16
Speaker 13: About well, actually exactly thirteen stocks. Wow, So it's fairly concentrated.
36:21
Speaker 13: I don't think you'll find another manager out there that
36:24
Speaker 13: runs a concentrated portfolio of that few numbers of stocks.
36:28
Speaker 13: So you can imagine that it takes great confidence in
36:33
Speaker 13: the holdings and understanding each one, and certainly now with
36:36
Speaker 13: the change in administration, it actually puts more of an
36:40
Speaker 13: emphasis on that and to try to play out what
36:43
Speaker 13: we think is going to happen. So, for instance, you
36:45
Speaker 13: mentioned artificial intelligence, but cybersecurity is a major exposure in
36:50
Speaker 13: the portfolio, and we think that regardless of who is
36:53
Speaker 13: in the administration, or where interest rates are going, or
36:57
Speaker 13: if we have one hundred percent tariffs that's been made
37:00
Speaker 13: mentioned recently in certain countries, we don't think cybersecurity would
37:04
Speaker 13: be impacted by that it just makes common sense to.
37:06
Speaker 2: Us thirteen stocks. What's your average holding period? I would
37:10
Speaker 2: think once a stock gets in your portfolio, it's not
37:13
Speaker 2: going anywhere.
37:15
Speaker 6: That is true.
37:15
Speaker 13: You know, the turnover is under thirty percent, averaging over
37:20
Speaker 13: the past ten years. And we really do spend a
37:24
Speaker 13: great deal of time looking at these stocks. And you know,
37:26
Speaker 13: compare we sometimes get criticism. Well, you know, it's so concentrated.
37:30
Speaker 13: What about your competitors. Your competitor is on anywhere from
37:33
Speaker 13: what's say, fifty to one hundred stocks, and we challenge
37:36
Speaker 13: them on understanding those holdings in as much detail as
37:41
Speaker 13: say a portfolio of under twenty stocks.
37:44
Speaker 5: So do you when you talk about the AI trade,
37:46
Speaker 5: like when you said that you think that it's an
37:48
Speaker 5: over promising one. I'm paraphrasing here, but the expectations are
37:51
Speaker 5: just too high. What do you mean by that? Is
37:53
Speaker 5: it just that it's not going to be this big
37:55
Speaker 5: revolutionary thing or that money eventually will stop being spent
37:58
Speaker 5: on it.
37:58
Speaker 8: Can you dissect that a little bit more for me?
38:00
Speaker 13: Of course? And thank you for asking, because I really
38:02
Speaker 13: do think this is a neglected point that investors really
38:05
Speaker 13: have to spend some time on. So I think investors
38:09
Speaker 13: have gotten a little bit over their skis and thinking
38:12
Speaker 13: that AI is going to be the cure all of everything.
38:15
Speaker 13: And one thing I can just mention to you is
38:18
Speaker 13: if they think there's going to emulate human thought, the
38:20
Speaker 13: brain is about the size of two fists. Look at
38:23
Speaker 13: the real estate of chat GPT for instance. I mean,
38:26
Speaker 13: it's enormous. And now we're thinking of dedicating nuclear power
38:31
Speaker 13: plans to powering these things. When the human brain works
38:34
Speaker 13: on a refrigerator light bulb wattage under ten watts. So
38:41
Speaker 13: we're going down the wrong path. We think in terms
38:45
Speaker 13: of formulating artificial intelligence and making it human like, we
38:49
Speaker 13: think that that's at least ten or fifteen Nobel prizes away,
38:53
Speaker 13: and investors have not caught onto that concept yet, nor
38:56
Speaker 13: have certain CEOs. They continue to spend warm us amounts
39:00
Speaker 13: of money and when you ask them what the rationale is,
39:04
Speaker 13: they say, well, because our competitors are spending just as
39:07
Speaker 13: much money.
39:09
Speaker 2: All right, Peter, thank you so much for joining us.
39:11
Speaker 2: A he's a pleasure chatting with you. Peter Anderson, He's
39:13
Speaker 2: a founder and chief investment officer Anderson Capital Management up
39:17
Speaker 2: there in the Boston area.
39:21
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
39:25
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39:39
Speaker 5: Alex Deel Here alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
39:42
Speaker 5: We bring you all the top news in business, economics
39:45
Speaker 5: and finance. There are lens of our Bloomberg Intelligence folks.
39:47
Speaker 5: They cover two thousand companies and one hundred and thirty
39:50
Speaker 5: industries all around the world. Now every Monday around this time,
39:53
Speaker 5: we also tap our great resources from Bloomberg BNF formerly
39:57
Speaker 5: known as Bloomberg New Energy Finance. They give great industry
40:01
Speaker 5: research on power, transport, industry, buildings, AG sectors as well
40:06
Speaker 5: as how to navigate change within this energy transition. And
40:09
Speaker 5: they look at it from a business and finance lens.
40:11
Speaker 5: So joining us now is on week Gonzales, Bloomberg BNIF,
40:14
Speaker 5: head of US Gas Research, and we're going to be
40:16
Speaker 5: talking about gas.
40:18
Speaker 3: Now.
40:18
Speaker 5: What's interesting about gas is that we make a lot
40:20
Speaker 5: of hay some hey about US oil exports, but in
40:24
Speaker 5: actuality it's US gas esport exports in the form of
40:27
Speaker 5: LNG that is a huge transformational part of the energy
40:31
Speaker 5: story here in the US. Where do we stand now
40:34
Speaker 5: and where do you think we stand once President Trump
40:36
Speaker 5: takes office?
40:38
Speaker 15: Yeah, so, as mentioned, the US is the largest exporter
40:42
Speaker 15: of LERG in the world. And in the short term,
40:46
Speaker 15: we have a considerable amount of new capacity coming online,
40:50
Speaker 15: and that was bound to happen regardless of whether we
40:54
Speaker 15: had Trump or Camala in office. But yeah, we have
40:59
Speaker 15: Plaque and Minds and the Corpus Christie Stage three expansions
41:02
Speaker 15: coming in this December or early next year, and then
41:07
Speaker 15: the Golden Pass LNG terminal as well, so giving US
41:11
Speaker 15: more than seven bc of the seven billion cubic feed
41:16
Speaker 15: per day of export new export capacity out of the US,
41:19
Speaker 15: so further consolidating that role. And then where the change
41:25
Speaker 15: could be more significant is in the medium term with
41:27
Speaker 15: the terminals coming later this decade for it, and especially
41:34
Speaker 15: with these discussions of Trump lifting the DOE Non Free
41:38
Speaker 15: Trade Agreement permit post because this is a key permit
41:43
Speaker 15: that the terminal terminals need to be able to reach
41:47
Speaker 15: their final investment decision. And there's a few high profile
41:51
Speaker 15: projects there, such as the the CP two expansion from
41:57
Speaker 15: Entry Global, and then we also have a sabine Pas
42:00
Speaker 15: Corpus Christi expansion alongside other projects that are targeted for them.
42:04
Speaker 5: So basically, if you're not exporting energy to a free
42:07
Speaker 5: trade agreement country, then you're no longer allowed to exit
42:10
Speaker 5: to do it. But many said that was like an
42:11
Speaker 5: export thing that they were doing that really wasn't going
42:14
Speaker 5: to hold. It was just an election thing. So that's
42:16
Speaker 5: what we're referring to. So that would really help get
42:18
Speaker 5: a lot more investment in.
42:20
Speaker 7: There is the expectation in your world of natural gas
42:24
Speaker 7: that a Trump administration combined with republic controlled Congress, this
42:29
Speaker 7: is going to be the time to get stuff done,
42:32
Speaker 7: whether it's a pipeline or refinery or anything.
42:37
Speaker 13: You know.
42:38
Speaker 15: Going back to the idea of the LERG terminals, it's definitely, yeah,
42:42
Speaker 15: you have more support to get this project still one.
42:45
Speaker 15: I think moving to the idea of pipelines new like
42:50
Speaker 15: interstate pipelines, that's a bigger There needs to be more change,
42:54
Speaker 15: It's a bigger conversation, but it is there's definitely more
42:59
Speaker 15: momentum that we would have otherwise had.
43:02
Speaker 5: So to that point and it's a good one that
43:04
Speaker 5: you make because a lot of the gas that we
43:05
Speaker 5: have is in Appalaysia and it's really hard to get
43:07
Speaker 5: that gas out. It's in the northeast, you don't have
43:09
Speaker 5: a lot of takeaway capacity, and you do get a
43:11
Speaker 5: ton of gas from also shale productions, so within New Mexican,
43:15
Speaker 5: within New Mexico as well as Texas. So there is
43:17
Speaker 5: that What do you think we're going to be able
43:21
Speaker 5: to do in terms of getting pipelines in to get
43:23
Speaker 5: gas out of Appalachia.
43:26
Speaker 15: Yeah, so I would say that's not my subject matter
43:29
Speaker 15: expertise the policy behind the pipelines, but I think there
43:35
Speaker 15: is space to have more discussions about what can be
43:38
Speaker 15: done to get some more.
43:40
Speaker 5: Gas from But if we don't, we wind up getting
43:42
Speaker 5: a glut at some point of gas because there's just
43:44
Speaker 5: too much we can't get it out. Therefore, gas prices
43:46
Speaker 5: here in the US kind of really sink.
43:47
Speaker 15: Yeah, and when we've already seen this happen, especially this
43:51
Speaker 15: early November when the weather was pretty warm, we've seen, yeah,
43:56
Speaker 15: Appalachia can't really send more gas out, there's no internal
43:59
Speaker 15: demand in the Bay. And then we've seen producers actually
44:03
Speaker 15: Curtel production because the prices have dropped below the level
44:09
Speaker 15: they need to continue producing even from existing wells, and
44:12
Speaker 15: they're well below the break events in some cases for
44:17
Speaker 15: new wells. So we've already seen that have an impact
44:20
Speaker 15: in production in Appalaysia and as well in other parts
44:25
Speaker 15: of the country. You have the Haynes Bill as well,
44:28
Speaker 15: that's closer to the Gulf and where a lot of
44:32
Speaker 15: the rhetoric is that we the production to meet the
44:35
Speaker 15: demand from these new Allen g terminals is going to
44:37
Speaker 15: come from there due to the location, but they do
44:40
Speaker 15: have higher break events and higher costs than in the Northeast.
44:46
Speaker 3: Coal.
44:47
Speaker 2: What's going on with coal and what do you expect
44:49
Speaker 2: under Trump administration? Happened to the coal industry in this country.
44:53
Speaker 15: Yes, so there's been a lot of discussion now about
44:56
Speaker 15: potentially rolling back some rules from the e or just
45:00
Speaker 15: having being easier on pollution from coal. I've seen I
45:06
Speaker 15: think it was Duke Energy as well discuss the possibility
45:10
Speaker 15: of keeping some of their coal plants operating for longer.
45:15
Speaker 15: So that is a possibility and what it could mean
45:18
Speaker 15: for gas and for power sector gas consumption could be
45:23
Speaker 15: pretty interesting because over the last ten years, one of
45:25
Speaker 15: the main roles of gas in the power sector has
45:28
Speaker 15: also been replacing right this retiring cult coal plants, which
45:35
Speaker 15: has been a benefit in the sense that we've seen
45:38
Speaker 15: lower emissions as well. But this could be more difficult.
45:43
Speaker 15: If the coal plants stay operating longer, you might not
45:47
Speaker 15: see gas taking over in the same way it hadn't been.
45:51
Speaker 8: That's interesting.
45:52
Speaker 5: That would remove like this very mechanical market function basically
45:57
Speaker 5: for gas and coal. Is the coal Is it green coal,
46:01
Speaker 5: is it like nice coal that we can all get behind,
46:04
Speaker 5: or is it still dirty coal that eventually is just going.
46:06
Speaker 8: To have to be phased out.
46:08
Speaker 15: Yeah, there's a lot of discussion as well about integrating
46:12
Speaker 15: carbon capture for coal, try to make make it cleaner,
46:18
Speaker 15: but yeah, the economics are difficult, and especially in the
46:21
Speaker 15: short term, we probably won't see a lot of that happen,
46:26
Speaker 15: so it could result in emissions even increasing.
46:32
Speaker 2: Is there the expectation on our Trump administration is that
46:34
Speaker 2: just a whole move to renewables will slow down, maybe
46:37
Speaker 2: slow down materially or is it just too much momentum.
46:41
Speaker 15: Yeah, No, definitely, parts for example, of the Inflation Reduction
46:46
Speaker 15: Act or are repealed, or there's some changes in that sense,
46:52
Speaker 15: we could see slower deployment of renewables. My colleagues in
46:57
Speaker 15: ven f IN or Clean Energy Tea look in a
47:01
Speaker 15: lot of detail into this, but yeah, this could lead
47:05
Speaker 15: to an interesting dynamic where you have less coal retirements,
47:09
Speaker 15: but maybe you have a slower deployment of renewables where
47:14
Speaker 15: GUS maybe doesn't grow because there's a less coal, but
47:18
Speaker 15: takes over some of this generation that would be needed
47:23
Speaker 15: that would otherwise come from renewables. So I think there's
47:26
Speaker 15: a very interesting, very interesting analysis and a conversation to
47:30
Speaker 15: have about how this gap is going to look.
47:33
Speaker 5: All right, Amikay, thanks a lot, Arika Gonzalez, Bloomberg b
47:36
Speaker 5: Andy apphead of US Gas Research, Thank you so very much.
47:40
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