Latest / Bloomberg Intelligence / Drug Prices, FDIC Rules, VinFast, and CoreLogic (Podcast)

Transcript

Drug Prices, FDIC Rules, VinFast, and CoreLogic (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: You want to turn next to the Bloomberg Markets Podcast
• 0:03
  Speaker 1: alongside my co host joining.
• 0:05
  Speaker 2: Every business day, we bring you interviews from CEOs, market crows,
• 0:09
  Speaker 2: and Bloomberg experts, along with essential market news.
• 0:14
  Speaker 3: Market podcast podcast or wherever Bloomberg.
• 0:19
  Speaker 1: Dot com and obviously fed and bond related. Now, walk
• 0:23
  Speaker 1: us through the latest that what we've been seeing in
• 0:26
  Speaker 1: the treasury market, and especially ahead of a number of
• 0:30
  Speaker 1: key data reports that are coming up as we know
• 0:33
  Speaker 1: when it comes to obviously the jobs report later this week,
• 0:35
  Speaker 1: as well as that PCE indicator that's coming on Thursday.
• 0:39
  Speaker 4: Yeah.
• 0:39
  Speaker 5: So obviously, like you said, we have these key data
• 0:42
  Speaker 5: points in a reasonably a liquid market time right now.
• 0:45
  Speaker 5: You look at this morning's data and obviously you had
• 0:48
  Speaker 5: the Jolts data Uh myss to the downside, which is
• 0:51
  Speaker 5: you know, FED friendly for sure. Uh, you had consumer
• 0:54
  Speaker 5: confidence lower, and now you have two year yields rallying
• 0:56
  Speaker 5: by thirteen bases points. That's you know, that that's not
• 0:59
  Speaker 5: showing that that the market is is liking this data
• 1:02
  Speaker 5: and certainly pricing out at least a little bit of
• 1:05
  Speaker 5: the hikes that we had the hike in November that
• 1:08
  Speaker 5: was starting to be priced into the market. So I
• 1:11
  Speaker 5: think the market's still looking for some direction. It's still
• 1:13
  Speaker 5: looking for exactly, you know, what the what the path
• 1:16
  Speaker 5: of the US economic environment is going to be and
• 1:19
  Speaker 5: how that might influence the Fed Reserve and their actions
• 1:22
  Speaker 5: on a going forward basis. So so I think you're
• 1:25
  Speaker 5: are going to see a lot of volatility, you know,
• 1:28
  Speaker 5: ten basis point moves in the five and ten year
• 1:31
  Speaker 5: sectors of it would not be complete surprise depending on
• 1:34
  Speaker 5: you know, how weak or how strong the data is
• 1:36
  Speaker 5: compared to expectations.
• 1:38
  Speaker 3: Now we have jobs numbers coming out at the end
• 1:40
  Speaker 3: of the week. Is is that the ultimate decisive bit
• 1:45
  Speaker 3: of data or you know, is it CPI?
• 1:47
  Speaker 6: What?
• 1:47
  Speaker 3: What? What do we what's your like top data point
• 1:50
  Speaker 3: that you're considering as we look ahead to kind of
• 1:53
  Speaker 3: mid September, next FED meeting.
• 1:55
  Speaker 5: Yeah, so, so next month's CPI report, I think is
• 1:58
  Speaker 5: going to be the really the key to whether or
• 2:01
  Speaker 5: not the market is going to price for a November hike.
• 2:03
  Speaker 5: I mean, so September I think at this point is
• 2:04
  Speaker 5: off the table. You keep seeing very mixed data and
• 2:08
  Speaker 5: that's not going to entice the Federal Reserve to need
• 2:11
  Speaker 5: to increase interest rates again. But I think as we
• 2:14
  Speaker 5: get toward towards the September meeting, where you get a
• 2:16
  Speaker 5: new summary of economic projections, you'd get a new dot plot,
• 2:20
  Speaker 5: you know, will the what will the Fed members think
• 2:23
  Speaker 5: they're going to hike rates to or cut rates to
• 2:26
  Speaker 5: in twenty twenty four based on changes in their economic outlook.
• 2:30
  Speaker 5: That's where the data from now until the next meeting
• 2:33
  Speaker 5: I think will be more impactful. So the two data
• 2:37
  Speaker 5: points from this later this week is the month over
• 2:40
  Speaker 5: month PC numbers, particularly those core PC numbers that Jay
• 2:44
  Speaker 5: Powell has mentioned on several occasions as being important to
• 2:47
  Speaker 5: their outlook. So if we do get an expectator, if
• 2:50
  Speaker 5: we do get as expected zero point two percent on
• 2:54
  Speaker 5: the core PC deflator, I think that's actually a good
• 2:56
  Speaker 5: thing because that's implying that inflation on a trend basis
• 3:00
  Speaker 5: is coming down.
• 3:01
  Speaker 7: And then it's not so much.
• 3:02
  Speaker 5: The headline payrolls number, you know, unless it really goes
• 3:06
  Speaker 5: gets crazy one way or the other. But the wage
• 3:08
  Speaker 5: data I think is the most important piece of Friday's
• 3:11
  Speaker 5: payroll report that I'll be focused on. So, so it's
• 3:15
  Speaker 5: aggregate labor income. So we do we continue to see
• 3:18
  Speaker 5: you know, point four month over month increases in wages.
• 3:23
  Speaker 5: That that's I think going to be key, because wages
• 3:26
  Speaker 5: are one of the things that's keeping spending his eyes,
• 3:28
  Speaker 5: it is number one and number two. It's also companies
• 3:31
  Speaker 5: are trying to at least pass some of the higher
• 3:34
  Speaker 5: labor costs along to consumers in the services sector. And
• 3:37
  Speaker 5: because of that, you know that is there is a
• 3:40
  Speaker 5: little bit of a wage push inflation, regardless of whether
• 3:42
  Speaker 5: or not members of the FED will admit it or not.
• 3:45
  Speaker 1: AIRA What about something else that's going on in the
• 3:47
  Speaker 1: background when we're talking about the balance sheet and the
• 3:49
  Speaker 1: runoff there because we talk so much about when it
• 3:52
  Speaker 1: comes to interest rates, but what about that aspect of
• 3:55
  Speaker 1: it and when investors are concerned about lack of liquidity
• 3:58
  Speaker 1: in the marketplace.
• 4:00
  Speaker 5: Yes, so I don't think that the lack of liquidity
• 4:02
  Speaker 5: right now is really an issue. There's still a lot
• 4:05
  Speaker 5: of reserves above what the banking sector needs for liquidity
• 4:10
  Speaker 5: purposes and to meet capital requirements. So the way that
• 4:14
  Speaker 5: I look at the Fed's balance sheet and how small
• 4:17
  Speaker 5: it needs to get or can get, really has to
• 4:20
  Speaker 5: do with how banks are complying with different vasal capital regulations.
• 4:26
  Speaker 5: So the single biggest one is the liquidity coverage ratio,
• 4:29
  Speaker 5: and assuming that banks get down to just above their
• 4:35
  Speaker 5: minimum requirements for those capital ratios, we estimate that the
• 4:40
  Speaker 5: balance sheet that the Fed balancee could decline about another
• 4:42
  Speaker 5: six hundred billion, seven hundred billion dollars or so. You know,
• 4:45
  Speaker 5: others use aggregate data. We don't think that that's the
• 4:48
  Speaker 5: best way to look at it because the challenge with
• 4:52
  Speaker 5: liquidity in the bond market and the repurchase agreement market
• 4:55
  Speaker 5: and all of the things that created the repo hiccup
• 4:57
  Speaker 5: in September of twenty nineteen, a single institution that doesn't
• 5:01
  Speaker 5: have enough liquidity that winds up switching us over the
• 5:05
  Speaker 5: tipping point and requiring more reserves to be added to
• 5:08
  Speaker 5: the system. And that's what you saw in September of
• 5:11
  Speaker 5: twenty nineteen. So you know, once that gets tripped, I
• 5:15
  Speaker 5: think that's a signal that the Federal Reserve is probably
• 5:18
  Speaker 5: going to think about reducing its balance or reducing quantitative tightening,
• 5:24
  Speaker 5: or even ending it and allowing the market to kind
• 5:26
  Speaker 5: of catch up to the new liquidity environment that we have.
• 5:31
  Speaker 3: I want to get your take on how housing prices
• 5:34
  Speaker 3: are going to play into the Federal reserves calculus. Jpewell
• 5:39
  Speaker 3: was talking about how he sees shelter costs coming down.
• 5:41
  Speaker 3: But you know, we got data out this morning the
• 5:44
  Speaker 3: FHFA House Price Index rising again zero point three percent. Mitally,
• 5:49
  Speaker 3: this was a little bit less than anticipated, but you know,
• 5:53
  Speaker 3: prices across all twenty major market areas surveyed by S
• 5:58
  Speaker 3: and B. Dow Jones in Disease says prices are going up.
• 6:03
  Speaker 3: Does this play into the calculus or is this such
• 6:05
  Speaker 3: a structural problem that the Fed just kind of puts
• 6:09
  Speaker 3: it aside.
• 6:10
  Speaker 5: Yeah, well, I think the Federal Reserve is, you know,
• 6:13
  Speaker 5: certainly looking at you know, the cost of everything.
• 6:15
  Speaker 7: I think housing.
• 6:18
  Speaker 5: Housing obviously is important to the Federal Reserve, but it's
• 6:20
  Speaker 5: only one component. It's it's really the cost of housing.
• 6:25
  Speaker 5: So things like rent rents and owner's equivalent rent that
• 6:28
  Speaker 5: make up the measures that we look at for for
• 6:32
  Speaker 5: how much housing's going up. And interestingly, if you think
• 6:35
  Speaker 5: about even if house prices had stayed constant and you
• 6:39
  Speaker 5: wound up with mortgage rates going up towards seven percent,
• 6:42
  Speaker 5: which Erica Adelberg, who's our mortgage strategist here at Bloomberg Intelligence,
• 6:45
  Speaker 5: looks at every day, you'd still have higher rents right,
• 6:51
  Speaker 5: So it would still cost more to rent a house
• 6:53
  Speaker 5: because you know the new mortgages that you receive are
• 6:58
  Speaker 5: are going to be higher, But that takes a long
• 6:59
  Speaker 5: time to filter into the overall economy. I think the
• 7:02
  Speaker 5: bigger issue with what's going on now in the housing
• 7:05
  Speaker 5: market is it's lack of supply, right, people with very
• 7:08
  Speaker 5: low mortgage rates. People with mortgage rates well below four percent,
• 7:11
  Speaker 5: they're not going to be refinancing and looking for a
• 7:13
  Speaker 5: new home unless they have to relocate for their jobs.
• 7:16
  Speaker 8: So because of.
• 7:17
  Speaker 5: That, you just don't have a lot of supply on
• 7:19
  Speaker 5: the market, and that's one of the things that's driving
• 7:22
  Speaker 5: home prices a bit higher, although that has stabilized quite
• 7:26
  Speaker 5: a lot when you look at the month on month.
• 7:27
  Speaker 1: All right, Ira, it's great always getting your perspective on
• 7:30
  Speaker 1: all things, Ira Jersey, Chief US Interest Rate Strategies for
• 7:33
  Speaker 1: Bloomberg Intelligence.
• 7:35
  Speaker 4: You're listening to the team Ken's a live program Bloomberg
• 7:38
  Speaker 4: Markets weekdays at ten am Eastern on Bloomberg dot com,
• 7:42
  Speaker 4: the iHeartRadio app, and the Bloomberg Business app, or listen
• 7:45
  Speaker 4: on demand wherever you get your podcasts.
• 7:50
  Speaker 1: I know this is something you've been watching very closely
• 7:52
  Speaker 1: smoon when it comes to what's been happening with these
• 7:55
  Speaker 1: pharmaceutical giants and the ruling when it does come to
• 7:58
  Speaker 1: President Biden's push to bargain with these drug makers to
• 8:01
  Speaker 1: lower the cost of medicare. So I want to get
• 8:03
  Speaker 1: straight to Dwayne and Bright, senior government analysts with Bloomberg
• 8:06
  Speaker 1: Intelligence joining us to talk the drug pricing negotiations. Duane,
• 8:10
  Speaker 1: thanks so much for joining us. We knew some of
• 8:12
  Speaker 1: this was coming. Walk us through what the latest news
• 8:14
  Speaker 1: is when it comes to this.
• 8:16
  Speaker 7: Yes, we knew this was coming.
• 8:18
  Speaker 9: The IRA passed twenty twenty two and the government had
• 8:23
  Speaker 9: a deadline of September one to release the list of
• 8:27
  Speaker 9: ten high expenditure drugs. Those drugs would be subject to
• 8:31
  Speaker 9: government negotiation. In other words, the government would negotiate prices
• 8:36
  Speaker 9: for those drugs that would be anywhere from twenty five
• 8:40
  Speaker 9: to sixty percent lower than they are now, and those
• 8:43
  Speaker 9: prices would become effective beginning January one, twenty twenty six.
• 8:47
  Speaker 7: We're starting with a list of ten.
• 8:50
  Speaker 9: That number of drugs will go up from ten to
• 8:53
  Speaker 9: fifteen in twenty twenty seven, in twenty twenty eight, and
• 8:56
  Speaker 9: there'll be twenty drugs per year.
• 8:58
  Speaker 3: Thereafter point, why these specific drugs.
• 9:02
  Speaker 6: Do you think.
• 9:04
  Speaker 9: The law requires that Medicare focuses on these drugs, So
• 9:10
  Speaker 9: we're not focused on price alone. We're focused on those
• 9:15
  Speaker 9: drugs that have high expenditures. So you may see some
• 9:18
  Speaker 9: drugs on this list that are low cost drugs, but
• 9:22
  Speaker 9: they're used by quite a number of people, so Eloquists,
• 9:25
  Speaker 9: for example, the data CMS provided this morning shows that
• 9:28
  Speaker 9: three million people used Eloquists. But you have another drug,
• 9:32
  Speaker 9: Stallara from Johnson and Johnson. Twenty two thousand people use
• 9:37
  Speaker 9: the drug, but it's very expensive. So Democrats when they
• 9:41
  Speaker 9: came up with a spill, really wanted to focus on
• 9:43
  Speaker 9: those drugs that are really high cost, high expenditure drugs,
• 9:48
  Speaker 9: not just those that are high priced drugs.
• 9:51
  Speaker 1: When you're looking across the spectrum, especially in Washington, was
• 9:54
  Speaker 1: this more of a broad based issue when you're talking
• 9:56
  Speaker 1: about Republicans and Democrats or was it more geared toward
• 9:59
  Speaker 1: the Democratic side.
• 10:01
  Speaker 9: This has been a Democratic goal since the Clinton administration,
• 10:05
  Speaker 9: So for the last twenty years, UH, Democrats UH were
• 10:10
  Speaker 9: longer Democrats have been trying to find a way to
• 10:13
  Speaker 9: inject the government or provide a government role in price
• 10:17
  Speaker 9: setting for these drugs. Now they've failed, and in fact,
• 10:21
  Speaker 9: UH when the Party law passed in two thousand three,
• 10:24
  Speaker 9: there was a an explicit prohibition against the government UH
• 10:29
  Speaker 9: dictating or setting prices. And that's largely because when that
• 10:32
  Speaker 9: law passed, it was passed by a Republican Congress and
• 10:36
  Speaker 9: signed by a Republican president.
• 10:38
  Speaker 7: Now, granted, Democrats voted.
• 10:40
  Speaker 9: For that bill, UH, but it did set up the framework,
• 10:43
  Speaker 9: but it also included UH more of a free market
• 10:46
  Speaker 9: uh approach to price setting. Over the past couple of years,
• 10:50
  Speaker 9: Democrats tried to advance similar legislation but failed because they
• 10:55
  Speaker 9: didn't have enough control. Now that they had uh the
• 10:59
  Speaker 9: full control of Congress and the White House, they were
• 11:01
  Speaker 9: able to pass some version of what they wanted to
• 11:04
  Speaker 9: do in terms of injecting government a government role for
• 11:09
  Speaker 9: price setting.
• 11:10
  Speaker 3: Well, the argument from pharmaceutical companies against call it negotiations
• 11:15
  Speaker 3: clent price setting has always been, you know, they spend
• 11:18
  Speaker 3: a lot of money developing these drugs. They feel that
• 11:22
  Speaker 3: they deserve them monopoly that they get in terms of
• 11:25
  Speaker 3: selling these drugs to consumers. Does this really put a
• 11:31
  Speaker 3: weight on the kind of innovation that they will do?
• 11:35
  Speaker 3: Do you think that's a long term shift or is
• 11:37
  Speaker 3: this something that these former companies are going to complain
• 11:40
  Speaker 3: about for a while, but you know, it's not really
• 11:41
  Speaker 3: going to affect their overall behavior.
• 11:45
  Speaker 9: I think there's some weight to their argument. It's definitely
• 11:49
  Speaker 9: going to change the way they pursue drugs moving forward.
• 11:54
  Speaker 9: They're going to think about what kind of indications they
• 11:57
  Speaker 9: come forward with.
• 11:58
  Speaker 7: First. They're gonna look at some.
• 12:01
  Speaker 9: Of those uh uh, those those areas where commercial commercialization
• 12:06
  Speaker 9: prospects are better. They'll maybe slow down those indications where
• 12:10
  Speaker 9: the commercializa commercialization aspects are probably lower.
• 12:15
  Speaker 7: Uh.
• 12:16
  Speaker 9: Keep in mind though, that these drugs, uh that the
• 12:19
  Speaker 9: administration released today, the list released today. These are a
• 12:23
  Speaker 9: list of ten drugs that have been on the market
• 12:25
  Speaker 9: for at least seven years.
• 12:27
  Speaker 8: Uh.
• 12:27
  Speaker 9: They don't have a generic competition or a bisimilar competition,
• 12:33
  Speaker 9: and and so, uh, we're really talking about those high
• 12:37
  Speaker 9: cost drugs where there isn't an alternative, and so there
• 12:42
  Speaker 9: will still be an opportunity for these manufacturers to perhaps
• 12:47
  Speaker 9: raise the prices when they go to the market for
• 12:50
  Speaker 9: that first year. In fact, the govern Congressional Budget Office,
• 12:53
  Speaker 9: which scores legislation, in other words, how much is it
• 12:57
  Speaker 9: gonna cost.
• 12:58
  Speaker 7: How much is it going to save?
• 13:00
  Speaker 9: Anticipates that pharmaceutical companies will pursue higher launch prices to
• 13:05
  Speaker 9: make up for the fact that in some of those
• 13:08
  Speaker 9: outer years later years, they won't be able to charge
• 13:12
  Speaker 9: the prices that they would otherwise charge.
• 13:15
  Speaker 1: What other potential legislation could be on the horizon.
• 13:19
  Speaker 9: In the drug pricing space. I think we're looking less
• 13:23
  Speaker 9: at legislation targeting drug manufacturers, potentially targeting pharmacy benefit managers,
• 13:31
  Speaker 9: and they were left out of the Inflation Reduction Act
• 13:35
  Speaker 9: for a handful of policy and technical reasons when Democrats
• 13:38
  Speaker 9: passed the bill. We could see as part of that
• 13:42
  Speaker 9: how PBMs are profiting from rebate dollars rebase they get
• 13:48
  Speaker 9: from manufacturers that are supposed to go to health plans
• 13:51
  Speaker 9: or even the employees in the individuals.
• 13:55
  Speaker 7: We could see some additional.
• 13:56
  Speaker 9: Regulatory efforts by this administration as it leads to TRUK pricing.
• 14:01
  Speaker 9: They Dibinding administration released a white paper earlier this year
• 14:07
  Speaker 9: focused on some other avenues which it can use to
• 14:12
  Speaker 9: lower the price of some drugs. They're targeting those drugs
• 14:17
  Speaker 9: approved through an Accelerated Approval pathway, which is a pathway
• 14:21
  Speaker 9: that allows manufacturers to get drugs on the market faster
• 14:25
  Speaker 9: and a level of safety and efficacy data. But in
• 14:29
  Speaker 9: many cases these acceleratate approval drugs still go through some
• 14:35
  Speaker 9: additional confirmatory trials. They actually work, so we could see
• 14:39
  Speaker 9: some more regulatory efforts.
• 14:41
  Speaker 1: There, right, Jane, thanks so much for joining us. That's
• 14:43
  Speaker 1: doing Wright, senior government analysts at Bloomberg Intelligence.
• 14:46
  Speaker 6: Perce.
• 14:46
  Speaker 4: You're listening to the tape cats are live program Bloomberg
• 14:49
  Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 14:53
  Speaker 4: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 14:56
  Speaker 4: You can also listen live on Amazon Alexa from our
• 14:59
  Speaker 4: flagsh New York station. Just say Alexa play Bloomberg eleven thirty.
• 15:05
  Speaker 1: You want to get straight to our next guest, Elliott Stein,
• 15:08
  Speaker 1: senior litigation analyst with Bloomberg Intelligence. As someone you know,
• 15:11
  Speaker 1: we were talking about the US court paving the way
• 15:13
  Speaker 1: for the first bitcoin ETF and this gray scale ruling.
• 15:16
  Speaker 1: If you're looking at the reaction in ETFs, here are
• 15:19
  Speaker 1: actually if you're just looking specifically in bitcoin, it's up
• 15:22
  Speaker 1: almost six percent, so now it's trading above the twenty
• 15:25
  Speaker 1: seven thousand level. I want to bring in Elliott Stein.
• 15:28
  Speaker 1: So Elliott walk us through the latest news that we
• 15:31
  Speaker 1: got from this. What do we know so far?
• 15:33
  Speaker 8: Yeah, So this morning we got a decision from the
• 15:37
  Speaker 8: DC Circuit Court of Appeals, which is the court that
• 15:40
  Speaker 8: was hearing gray Scale's challenge to the SEC's rejection of
• 15:44
  Speaker 8: gray Scale's application for a spot bitcoin ETF. The SEC
• 15:49
  Speaker 8: rejected it last year, they rejected that application. Gray Scale
• 15:52
  Speaker 8: sued the case was arguing to march. You know, people
• 15:58
  Speaker 8: on Twitter in particular, and vestors, crypto investors interested in
• 16:02
  Speaker 8: bitcoin and GBTC, the Great Scale Bitcoin traice. So they
• 16:05
  Speaker 8: have been waiting for this decision anxiously for some time,
• 16:09
  Speaker 8: and we finally got it today and the court vacated
• 16:12
  Speaker 8: the SEC's rejection, saying that the SEC's decision to reject
• 16:19
  Speaker 8: the application was arbitrary and caprecious and wasn't well reasoned
• 16:23
  Speaker 8: and sort of left it there. So next steps are
• 16:25
  Speaker 8: a little unclear, and I haven't even read the decision yet,
• 16:28
  Speaker 8: but that's where we are right now.
• 16:30
  Speaker 3: Elliott. We're broadly speaking, I mean, what's the thinking on
• 16:33
  Speaker 3: the part of the judges. You know, they had grilled
• 16:38
  Speaker 3: I believe the SEC about its decision back and hearing
• 16:41
  Speaker 3: in the case on marsh what's their thinking. What's the
• 16:44
  Speaker 3: rationale do you think?
• 16:46
  Speaker 8: Yeah, oh sorry, didn't mean to cut you off, but yeah,
• 16:50
  Speaker 8: the rationale is that the SEC previously approved too bitcoin
• 16:56
  Speaker 8: futures et F and so so you know, Gray Scales
• 17:01
  Speaker 8: argument was that the SEC was treating similar products differently
• 17:06
  Speaker 8: and arbitrarily because the risk of manipulation and fraud is
• 17:11
  Speaker 8: essentially the same in both the futures bitcoin market and
• 17:15
  Speaker 8: the spot bitcoin market, and so if the SEC was
• 17:18
  Speaker 8: concerned about fraud in the spot bitcoin market, that didn't
• 17:22
  Speaker 8: really make much sense because it had already approved these
• 17:25
  Speaker 8: futures bitcoin ETFs, and so as a result, to treat
• 17:28
  Speaker 8: similar products similarly, they had to after having already approved
• 17:32
  Speaker 8: the futures bitcoin ETFs, they had to then approve the
• 17:35
  Speaker 8: spot bitcoin ETF.
• 17:37
  Speaker 1: And when we're looking at bitcoin, we did mention up
• 17:39
  Speaker 1: five percent. What do you think the reaction to investors
• 17:42
  Speaker 1: to this, because this is something that has been really
• 17:44
  Speaker 1: highly anticipated for months now.
• 17:46
  Speaker 8: Yeah, I mean, you know, that reaction seems to make sense, right,
• 17:49
  Speaker 8: I mean this, you know, this does seem like it's
• 17:54
  Speaker 8: another step on the path to getting spot bitcoin ETFs approved,
• 17:58
  Speaker 8: which will just make it eat here for investors both
• 18:01
  Speaker 8: retail and institutional, I think, to get exposure to bitcoin.
• 18:06
  Speaker 8: And another interesting number to look at is the discount
• 18:10
  Speaker 8: for GBTC. You know, the discount meaning that the shares
• 18:14
  Speaker 8: in GBTC were trading at the time the case was
• 18:18
  Speaker 8: argued roughly forty percent lower than the value of the
• 18:20
  Speaker 8: underlying bitcoin that's the trust held Right now, I'm looking
• 18:23
  Speaker 8: at that number and it's about ten point six percent,
• 18:25
  Speaker 8: So that discount has dropped dramatically.
• 18:27
  Speaker 3: Yeah, it dropped dramatically just in the past couple since
• 18:30
  Speaker 3: the last close. It looks like I want to bring
• 18:32
  Speaker 3: in here. We have Matt Siegel, the head of digital
• 18:35
  Speaker 3: assets research at Van Eck. Matt, give me your thoughts
• 18:39
  Speaker 3: as well. We've just been discussing this with Elliott Stein
• 18:43
  Speaker 3: from Bloomberg Intelligence. What's the broader impact that we expect
• 18:48
  Speaker 3: to see from this decision moving forward? Does this just
• 18:52
  Speaker 3: become the first ETF of many?
• 18:58
  Speaker 10: I think the broader impact is that the government has
• 19:02
  Speaker 10: brought a range of lawsuits against this industry and using
• 19:07
  Speaker 10: their enforcement stick to try to chill activity stateside. And
• 19:11
  Speaker 10: now we've seen the second major court case that the
• 19:14
  Speaker 10: SEC has lost in as many months ripple and now
• 19:18
  Speaker 10: this great go. So we think the tide is turning
• 19:22
  Speaker 10: that when the facts play out in court, the law
• 19:25
  Speaker 10: is more ambiguous than the SEC is making it that
• 19:28
  Speaker 10: their logic and denying these applications was haphazard illogical, and
• 19:36
  Speaker 10: the judge was very clear in rejecting that logic.
• 19:39
  Speaker 6: So it's a vindication for the industry. Matt.
• 19:42
  Speaker 1: We do know the SEC has cited its opposition when
• 19:45
  Speaker 1: it comes to these prior proposals for bigcnytfs and for
• 19:48
  Speaker 1: the spot price crypto exchanges. What other moves could the
• 19:52
  Speaker 1: SEC have from here?
• 19:55
  Speaker 10: Well, it's important to note that the judge in this
• 19:58
  Speaker 10: case cannot approve the bitcoin ETF. So the judge has
• 20:02
  Speaker 10: sent the case back to the SEC to revise their logic.
• 20:07
  Speaker 10: So we'll see, you know, if they capitulate or if
• 20:11
  Speaker 10: they present new logic. But you know, the best case,
• 20:15
  Speaker 10: here's the base case here, is that the chances of
• 20:18
  Speaker 10: a spot bitcoin ETF have risen quite substantially. It will
• 20:24
  Speaker 10: take a fair bit of logistics to get all these
• 20:26
  Speaker 10: applications in order. We'll see if they are all allowed
• 20:28
  Speaker 10: to go effective at the same time or if there
• 20:31
  Speaker 10: is some privileged positions that are that are given.
• 20:34
  Speaker 3: Now is the thinking that there really would be a
• 20:37
  Speaker 3: substantial amount of inflows into these sort of ETFs it
• 20:43
  Speaker 3: provided that they can move forward, that that this would
• 20:46
  Speaker 3: suddenly bring in the retail investors that we've been missing.
• 20:52
  Speaker 10: I don't think just retail, I think institutional like the
• 20:54
  Speaker 10: the ETF structure is time proven way to get exposure
• 21:00
  Speaker 10: in a cost effective and liquid manner to all types
• 21:03
  Speaker 10: of commodities and security. So you know, this could be
• 21:07
  Speaker 10: the biggest ETF launch ever. We think both institutions and
• 21:12
  Speaker 10: retail investors will like the exposure to regulated custodians that
• 21:17
  Speaker 10: it will provide at good spreads.
• 21:20
  Speaker 6: Lots of different entities will want to hold this product,
• 21:22
  Speaker 6: we think.
• 21:23
  Speaker 1: Ellie, I want to bring you back into this conversation
• 21:25
  Speaker 1: and get your thoughts on what the timetable could potentially
• 21:29
  Speaker 1: be if this does come back into the SEC's hands
• 21:31
  Speaker 1: and where this could move forward, because obviously, like you
• 21:33
  Speaker 1: mentioned earlier, there's still a lot of uncertainty here, right.
• 21:37
  Speaker 8: Yeah, it's a great question, and you know, before we
• 21:39
  Speaker 8: even get there, the SEC, if they want, can ask
• 21:44
  Speaker 8: the full DC Circuit Court of appeals called called an
• 21:48
  Speaker 8: on bunk proceeding. They can ask for that that that's
• 21:53
  Speaker 8: up to the court to grant it. It's not automatic,
• 21:55
  Speaker 8: it's discretionary. But you know, that would be like in
• 21:59
  Speaker 8: terms of the litigation, the first step for the SEC.
• 22:01
  Speaker 8: They would have I believe sixty days to ask for that.
• 22:06
  Speaker 1: Uh.
• 22:07
  Speaker 8: And then you know, beyond that, they could also ask
• 22:09
  Speaker 8: for a Supreme Court review, although I doubt that, you know,
• 22:12
  Speaker 8: I really doubt it's going to go to the Supreme Court.
• 22:14
  Speaker 8: But then you know, put in the court aside. Yeah,
• 22:16
  Speaker 8: then it's like I said, you know, it's it's a
• 22:18
  Speaker 8: little unclear what happens next because the court you know,
• 22:22
  Speaker 8: didn't order the SEC right to do anything beyond vacating
• 22:27
  Speaker 8: the previous rejection. It is a court can't and didn't
• 22:31
  Speaker 8: order the SEC to approve an application. So it's a
• 22:36
  Speaker 8: little unclear what happens next. Interestingly, you know, I think
• 22:39
  Speaker 8: Grayscale sent a letter at some points of the SEC
• 22:42
  Speaker 8: asking the SEC to sort of just approve all the
• 22:45
  Speaker 8: various applications at once. I think I think, you know,
• 22:49
  Speaker 8: knowing that this kind of decision was going to come down,
• 22:52
  Speaker 8: and fearing that it might sort of be at the
• 22:54
  Speaker 8: end of the line at this point in terms of,
• 22:56
  Speaker 8: you know, having to go through the application process again,
• 22:59
  Speaker 8: whereas up until this decision it was sort of at
• 23:01
  Speaker 8: the front of the line.
• 23:03
  Speaker 3: Matt, your thoughts, I mean, do you think the SEC
• 23:05
  Speaker 3: will just sort of throw in the towel here? Say, okay, bitgoing, yeah,
• 23:10
  Speaker 3: let's basically deah, let's go.
• 23:15
  Speaker 6: It's a tough call.
• 23:16
  Speaker 10: This is political set at the very hot top of
• 23:20
  Speaker 10: the administration with the President's executive order to use all
• 23:23
  Speaker 10: for the agencies, to use all tools to crack down
• 23:25
  Speaker 10: on this industry. So like be curious to see what
• 23:29
  Speaker 10: type of logic they would employ, because we haven't found
• 23:32
  Speaker 10: any of it particularly compelling. You know, it could end
• 23:35
  Speaker 10: with Barry Gensler out of the SEC. That is not
• 23:37
  Speaker 10: uncommon for chair persons to leave after they've faced embarrassing losses.
• 23:41
  Speaker 6: They've now been two and two months, so.
• 23:45
  Speaker 1: We only have about a minute left. But I wanted
• 23:47
  Speaker 1: to get both of y'all's final thoughts here. I'll start
• 23:49
  Speaker 1: off with you, Elliott. As far as the next immediate
• 23:51
  Speaker 1: thing that you're going to be watching for on this, a.
• 23:55
  Speaker 8: Couple of things, I guess, well, first of all. I
• 23:57
  Speaker 8: think there's a bunch of other bitcoin ETF applications that's
• 24:02
  Speaker 8: sort of not you know, in the courts, right, that's
• 24:05
  Speaker 8: with the SEC. So we'll see if the SEC punts
• 24:09
  Speaker 8: on those further or if they grant them, and if
• 24:12
  Speaker 8: they grant them, you know, if they grant a whole
• 24:14
  Speaker 8: bunch of mass or just do them one at a time,
• 24:18
  Speaker 8: and then I'll be interesting to see any statements from
• 24:20
  Speaker 8: the SEC as to whether they're going to ask for
• 24:23
  Speaker 8: on block review and also sort of like what the
• 24:26
  Speaker 8: next steps would be just in terms of the grayscale
• 24:28
  Speaker 8: application if they go back to the SEC.
• 24:30
  Speaker 3: Right, yeah, Matt, very quickly, Yeah, what do you what
• 24:32
  Speaker 3: do you watch?
• 24:33
  Speaker 1: Like twenty seconds left?
• 24:35
  Speaker 10: Well, let's watch ethereum now, right, because the SEC is
• 24:38
  Speaker 10: poised to approve ethereum futures ETFs according to this ruling,
• 24:42
  Speaker 10: they would then have to prove SPOT So I'm sure
• 24:45
  Speaker 10: you're tend to be on the lookout for those filings,
• 24:47
  Speaker 10: all right.
• 24:48
  Speaker 1: Matt Siegel from Vanik along with Elliott Stein's senior litigation
• 24:51
  Speaker 1: analysts with Bloomberg Intelligence, walking us through what's going on
• 24:55
  Speaker 1: with this US core paving the way for the first
• 24:57
  Speaker 1: bitcoin ETF.
• 25:00
  Speaker 4: You're listening to the Team Can't Live program Bloomberg Markets
• 25:03
  Speaker 4: weekdays at ten am eastering on Bloomberg dot com, the
• 25:06
  Speaker 4: iHeartRadio app and the Bloomberg Business App, or listen on
• 25:10
  Speaker 4: demand wherever you get your podcasts.
• 25:15
  Speaker 3: Well, I want to talk about a name. Well, I'll
• 25:19
  Speaker 3: just give you a sense of what's happened to these
• 25:21
  Speaker 3: shares in the past. Couple of wild wild Ride. Okay,
• 25:25
  Speaker 3: last Tuesday, up over one hundred percent, up over thirty
• 25:29
  Speaker 3: percent on Thursday, forty on Friday. Now we're down just
• 25:33
  Speaker 3: about thirty percent today. The name then fast Auto and unprofitable,
• 25:38
  Speaker 3: thinly traded and yes, it went, just went, just made
• 25:45
  Speaker 3: its debut as a spacklisting on August fifteenth, and now
• 25:50
  Speaker 3: is the world's third most valuable car company. I don't
• 25:52
  Speaker 3: know if that holds up given the fall today, but
• 25:55
  Speaker 3: it's something like that.
• 25:57
  Speaker 1: Yeah, it's bigger than the market cap. If you're combining
• 25:59
  Speaker 1: GM and Forward.
• 26:01
  Speaker 3: It's nuts, a little nuts. Well, to sort this out
• 26:05
  Speaker 3: for us, we have Stephanie Brindley. She's Associate director of
• 26:09
  Speaker 3: Research and Analysis at SMP Global's gonna tell us what
• 26:14
  Speaker 3: is going on with this company? And the wild ride
• 26:17
  Speaker 3: that we have seen in stocks over the past or
• 26:19
  Speaker 3: in the stock over the past couple of days.
• 26:22
  Speaker 11: Good morning, how are you guys today, Good?
• 26:25
  Speaker 3: Thank you, thanks for joining us.
• 26:27
  Speaker 12: Good thanks, thanks for having me. Vin Fast is a
• 26:30
  Speaker 12: really interesting company to watch. They've just started to launch
• 26:35
  Speaker 12: in the US and Canada. What if you kind of
• 26:38
  Speaker 12: look at the background of that company. The founder has
• 26:42
  Speaker 12: has a mission of creating a manufacturing base out of
• 26:47
  Speaker 12: Vietnam and and becoming growing their own auto company. Part
• 26:52
  Speaker 12: of doing that includes manufacturing targets for the US and
• 26:55
  Speaker 12: for being in the US and Europe and in China
• 26:58
  Speaker 12: as well. It's a it's a very very long term
• 27:00
  Speaker 12: look for him. And what you're seeing too from that
• 27:05
  Speaker 12: company is is somebody with a with a will and
• 27:07
  Speaker 12: a mission that that kind of goes beyond what happens
• 27:10
  Speaker 12: in the next two or three years. So this is
• 27:12
  Speaker 12: a really one build.
• 27:13
  Speaker 1: Right, This is a Vietnamese ev maker. Give us some
• 27:16
  Speaker 1: context into the space of how this company. Obviously, when
• 27:19
  Speaker 1: you're thinking about the context you were just talking about this,
• 27:22
  Speaker 1: Simona and I're having a market cap larger than GM
• 27:24
  Speaker 1: and Ford. But when you're looking at this particular industry
• 27:27
  Speaker 1: where it sits at and how it's been able to
• 27:29
  Speaker 1: sort of get to where it is at this point.
• 27:32
  Speaker 12: It's it's interesting looking at market caps, which isn't ast
• 27:36
  Speaker 12: one hundred percent in my area. But electric vehicles, aside
• 27:40
  Speaker 12: from from Tesla, and it took them ten or ten
• 27:43
  Speaker 12: or fifteen years to get there, aren't profitable. So we've
• 27:47
  Speaker 12: got we've got market caps that are that are betting.
• 27:50
  Speaker 11: That ultimately these vehicles will be because today they're not yet.
• 27:53
  Speaker 8: And is that wrong? Is it wrong?
• 27:56
  Speaker 11: Oh jeez, that's a good question.
• 28:00
  Speaker 12: We're really talking long term, really long term, because for
• 28:04
  Speaker 12: the vehicles ebs to be profitable, they will be eventually.
• 28:07
  Speaker 12: Part of it is scale, part of it is a
• 28:09
  Speaker 12: broader piece of the market. Part of it is all
• 28:12
  Speaker 12: the regulations that are driving various markets to push thev's
• 28:16
  Speaker 12: internal combustion engines. But we're talking about a ten to
• 28:20
  Speaker 12: fifteen to twenty year transition. We aren't talking about something
• 28:23
  Speaker 12: that's happening in our.
• 28:24
  Speaker 11: Five so a couple decades. We'll see a lot more
• 28:26
  Speaker 11: growth in.
• 28:26
  Speaker 12: Five but we aren't going to get to an ev
• 28:28
  Speaker 12: dominant world. It's a long, long term vision for electric
• 28:34
  Speaker 12: vehicles being profitable and being transitioning froms or from internal
• 28:39
  Speaker 12: combustion engines to electric vehicles, and then Fast is in
• 28:42
  Speaker 12: this space trying to make a name for itself and
• 28:44
  Speaker 12: trying to build an industry for its country as well.
• 28:48
  Speaker 3: Yeah, I guess the distinguishing factor that you know, so
• 28:51
  Speaker 3: much of the exposure is to Asia. You know, admittedly
• 28:56
  Speaker 3: there are players in China that could potentially get in
• 29:00
  Speaker 3: the way. I suppose. I mean, we had Neo out
• 29:02
  Speaker 3: with its earnings today, but just I guess the idea
• 29:06
  Speaker 3: that it's in Vietnam is something a little bit special.
• 29:11
  Speaker 11: It's a little bit special.
• 29:12
  Speaker 12: I mean, they're younger as a company, they're younger, they're
• 29:16
  Speaker 12: learning as they go, and you see that in changes
• 29:20
  Speaker 12: that they've made and how they're going to market in
• 29:22
  Speaker 12: the US and in other places. They initially they were
• 29:25
  Speaker 12: talking about a battery leasing process where you would basically
• 29:29
  Speaker 12: lease by the vehicle, but lease the battery, and how
• 29:32
  Speaker 12: many miles a year that you drove would impact that
• 29:35
  Speaker 12: lease price. And the idea was that after the battery
• 29:39
  Speaker 12: got to maybe seventy percent usage, you would swap it
• 29:42
  Speaker 12: out and take away the concern from a consumer about
• 29:45
  Speaker 12: how long your battery is going to last because you'd
• 29:47
  Speaker 12: lease it and they would put a new one in
• 29:49
  Speaker 12: and you would pay your lease and it would go.
• 29:51
  Speaker 12: That concept is proving a little bit difficult for American
• 29:56
  Speaker 12: consumers to kind of get their heads around, and so
• 29:58
  Speaker 12: they've stepped away from that. Initially, the pricing was going
• 30:01
  Speaker 12: to be a little bit lower, so the idea is
• 30:04
  Speaker 12: you had luxury at a at A at a more
• 30:06
  Speaker 12: affordable price. But their prices that came out for the
• 30:10
  Speaker 12: for the VF nine are really on par with with
• 30:14
  Speaker 12: sort of the premium and.
• 30:16
  Speaker 11: Lower lower luxury, and so they're not really coming in
• 30:20
  Speaker 11: at at A at.
• 30:22
  Speaker 12: A more accessible price point. They're really in the mix
• 30:25
  Speaker 12: with everybody else that's out there.
• 30:26
  Speaker 11: So they keep making.
• 30:27
  Speaker 12: Changes as they go and as they learn how they're
• 30:30
  Speaker 12: going to come to market. Initially they were focusing on
• 30:32
  Speaker 12: direct selling. Now they're talking about having distributors and dealers
• 30:37
  Speaker 12: in the US and Canada. So that all of those
• 30:40
  Speaker 12: changes really reflect a company that's willing to evolve and
• 30:46
  Speaker 12: find its way because there's there's a kind of a
• 30:49
  Speaker 12: map and there isn't really They have to they have
• 30:51
  Speaker 12: to find their own space, and I think that's going
• 30:53
  Speaker 12: to make it complicated and it's going to make it
• 30:55
  Speaker 12: a rough ride for some points, but also it's what
• 30:58
  Speaker 12: they're going to need to do in order to find
• 31:01
  Speaker 12: their space.
• 31:02
  Speaker 3: I think it'd be challenging. You know, this is such
• 31:04
  Speaker 3: a cash flow intensive sort of business to just be
• 31:07
  Speaker 3: kind of changing tune all the time.
• 31:11
  Speaker 12: It is, and they haven't changed as much about the
• 31:13
  Speaker 12: product in and of itself. It's more about how they're
• 31:16
  Speaker 12: taking it to market, and the product is the investment.
• 31:19
  Speaker 12: Theres is improving it and making it better. The first
• 31:22
  Speaker 12: the first reviews from US media weren't fantastic on the
• 31:26
  Speaker 12: car and needed some more work.
• 31:27
  Speaker 11: To get there. But relative to their funding and their ability,
• 31:32
  Speaker 11: they are.
• 31:34
  Speaker 12: They're still related to group, and Vin Group has money,
• 31:38
  Speaker 12: and the founder has access to money. So I believe
• 31:42
  Speaker 12: that he's put sort of a cap and said this
• 31:44
  Speaker 12: is as far as I'm going to go for the
• 31:46
  Speaker 12: moment in terms of investing. But that's one of the
• 31:49
  Speaker 12: strengths that it has is one way or another, the
• 31:52
  Speaker 12: Vin Group can find a way to give infest and
• 31:55
  Speaker 12: more money if this is what they're really dedicated to achieving.
• 31:59
  Speaker 12: And again, you know, when you have a company that
• 32:01
  Speaker 12: has that kind of will and that kind of mission,
• 32:04
  Speaker 12: different things happen.
• 32:05
  Speaker 11: That's where Tesla sort of started. Tesla had a mission
• 32:08
  Speaker 11: more than yeah, of course you want to make money.
• 32:11
  Speaker 12: Of course you want to be profitable and successful, but
• 32:13
  Speaker 12: the mission was about getting people off fossil fuels. Vin
• 32:17
  Speaker 12: Fast has a mission of creating an automotive manufacturing industry
• 32:22
  Speaker 12: within Vietnam and growing and becoming.
• 32:24
  Speaker 11: A global player. So you've got a mission driven company
• 32:28
  Speaker 11: and along the way they make some different choices.
• 32:31
  Speaker 1: Could you consider to be some of their main rivals
• 32:34
  Speaker 1: in competitors, It really it's I mean.
• 32:37
  Speaker 11: It's everyone right now.
• 32:39
  Speaker 12: Are so unknown around for US customers, and they've brought
• 32:43
  Speaker 12: over a few thousand vehicles, mostly there in California right now,
• 32:47
  Speaker 12: so they really have to break through kind of everyone. Really,
• 32:51
  Speaker 12: they should be more going as kind of a Volkswagen brands,
• 32:56
  Speaker 12: maybe a Buick brand, Chevrolet would be more of the
• 32:59
  Speaker 12: brands that they should be going against.
• 33:02
  Speaker 11: But right now, it's really anyone. It's everyone just to
• 33:06
  Speaker 11: get and we're having the conversation now.
• 33:08
  Speaker 12: They're popping up in the news a lot more, but
• 33:10
  Speaker 12: there's a distance between this conversation and a consumer trying
• 33:14
  Speaker 12: to go find one on the street.
• 33:16
  Speaker 11: Through I believe June they only had one hundred and
• 33:18
  Speaker 11: thirty seven registered in the United States. Right, that speaks
• 33:23
  Speaker 11: to availability and awareness.
• 33:25
  Speaker 3: With respect to awareness, I mean, does it hurt a
• 33:27
  Speaker 3: company to be identified, you know, with these sort of
• 33:30
  Speaker 3: wild swings in the stock price or is that something
• 33:33
  Speaker 3: that you know, investors can kind of look as scancer, sorry,
• 33:38
  Speaker 3: look aside from and just quickly here because we only
• 33:41
  Speaker 3: have about thirty seconds, you know.
• 33:43
  Speaker 12: For car buyers, I'm not sure how much of a
• 33:46
  Speaker 12: difference it makes for investors. They're looking at things a
• 33:49
  Speaker 12: little bit differently and I'm not going to predict what
• 33:50
  Speaker 12: they're going to do.
• 33:51
  Speaker 11: So a car buyer, I'm not sure that it makes.
• 33:53
  Speaker 12: A huge difference. They need to have faith that the
• 33:55
  Speaker 12: company is going to be there. That's probably what the
• 33:57
  Speaker 12: car buyer needs most from a new car company.
• 34:00
  Speaker 3: That's so interesting. Seventy Thank you so much for taking
• 34:03
  Speaker 3: us through. I'll be honest, I've seen the major swings
• 34:06
  Speaker 3: in this company share price. They've been wild, they've been exciting,
• 34:12
  Speaker 3: but I haven't known exactly what they do or why
• 34:15
  Speaker 3: or why someone would buy a van fast vehicle, nor
• 34:19
  Speaker 3: less that it's part of much a much larger conglomerate.
• 34:23
  Speaker 4: You're listening to the tape cats are live program Bloomberg
• 34:27
  Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 34:30
  Speaker 4: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 34:33
  Speaker 4: You can also listen live on Amazon Alexa from our
• 34:36
  Speaker 4: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
• 34:42
  Speaker 1: I'll go straight to our next guest, Fernando Valley. He's
• 34:45
  Speaker 1: a senior analyst with Bloomberg Intelligence. He's joining us in studio,
• 34:49
  Speaker 1: which is exciting. Always great to have people here with
• 34:52
  Speaker 1: us to talk with us about the impact of possible
• 34:54
  Speaker 1: strikes at Chevron in Australia and obviously other global energy
• 34:58
  Speaker 1: markets and pressures and issues. Let's start off with what's
• 35:01
  Speaker 1: going on with Chevron kind of set the scene for
• 35:02
  Speaker 1: us about what's happening here and what we need to know.
• 35:04
  Speaker 13: Sure, so, there are two big projects that Chevron is
• 35:08
  Speaker 13: the operator in Western Australia, Gorgon and Wheatstone. They are
• 35:11
  Speaker 13: very large projects. They contribute about call it fifteen billion
• 35:16
  Speaker 13: dollars in total revenues a year at today's prices for LNG.
• 35:21
  Speaker 13: Chevron has call it about half of that in ownership
• 35:25
  Speaker 13: between those two projects. So they're very significant projects and
• 35:30
  Speaker 13: they contribute a lot to the overall energy security, and
• 35:33
  Speaker 13: they are exploited to both Asia and excess cargoes can
• 35:37
  Speaker 13: be exploited to Europe as well.
• 35:39
  Speaker 10: Well.
• 35:39
  Speaker 3: We've seen some weird moves in gas prices back and
• 35:43
  Speaker 3: forth essentially reacting to this. You know, the thing that
• 35:47
  Speaker 3: I wonder given that we had all these concerns about
• 35:50
  Speaker 3: a potential energy crisis in Europe last year, but supplies
• 35:53
  Speaker 3: like storage facilities are pretty close to full at this point,
• 35:57
  Speaker 3: if not completely full. How does how do energy issues
• 36:04
  Speaker 3: in Australia factor in. We're still at the end of summer,
• 36:08
  Speaker 3: you know, we're not in the key heating season. How
• 36:10
  Speaker 3: does that play into what we may see given these
• 36:15
  Speaker 3: production challeges.
• 36:16
  Speaker 13: Yes, sure, I think it's you know, if you know
• 36:18
  Speaker 13: the story of the cicada that prepares for winter, this
• 36:21
  Speaker 13: is what we do now, and this is the filling
• 36:23
  Speaker 13: season when we prepare for the winter ahead of time,
• 36:26
  Speaker 13: and we are, as you mentioned, close to the technical
• 36:32
  Speaker 13: limits on inventories in Europe. The issue is that those
• 36:35
  Speaker 13: technical inventories don't get us through the winter if it
• 36:39
  Speaker 13: is a normal to cold winter, so the if we
• 36:43
  Speaker 13: have demand for that, we will drain them and then
• 36:46
  Speaker 13: the prices will impact that. So if there's a shortage
• 36:49
  Speaker 13: on LNG, that will affect it, because we can't rely
• 36:53
  Speaker 13: on those storage alone, especially considering Belgium has closed all
• 36:57
  Speaker 13: their nuclear, Germany has closed all their nuclear, and we
• 37:00
  Speaker 13: no longer have supply coming from Europe from Russia rather
• 37:04
  Speaker 13: even in the case of a dire need.
• 37:07
  Speaker 3: So it's my understanding that a potential strike could begin
• 37:11
  Speaker 3: as early as September seventh, I believe, or is it
• 37:16
  Speaker 3: maybe the September seventh, but you know there is time
• 37:20
  Speaker 3: between which between now and when Europe needs to start
• 37:24
  Speaker 3: drawing down it supplies. I mean, if you didn't okay,
• 37:26
  Speaker 3: if you saw a strike, for example, it goes on
• 37:29
  Speaker 3: for a week, how much of an impact is that
• 37:33
  Speaker 3: to Europe's energy situation.
• 37:35
  Speaker 13: To Europe will be nearly none. It will be more
• 37:39
  Speaker 13: of an impact to the owners of those projects. You
• 37:42
  Speaker 13: can't really store l and g DAD easily, so it
• 37:46
  Speaker 13: needs to be regassified and as we said, near technical limits.
• 37:49
  Speaker 13: So it's not important as of now. What I think
• 37:53
  Speaker 13: it gives you is two factors First, you're seeing cost inflation,
• 37:59
  Speaker 13: and cost inflation is here to stay and that will
• 38:01
  Speaker 13: impact not just energy, but that will impact everything that
• 38:04
  Speaker 13: depends on energy, i e. The whole world and all
• 38:07
  Speaker 13: of our economy. And the second part is the frailty
• 38:12
  Speaker 13: of our supply chain on the energy side. So again
• 38:16
  Speaker 13: the strikes, they are also going to keep the assets running.
• 38:19
  Speaker 13: It doesn't require a lot of people to do it.
• 38:22
  Speaker 13: But the strikes show that a energy costs are still
• 38:25
  Speaker 13: going to go up because our lifting costs, the costs
• 38:28
  Speaker 13: to get it off the ground, are going up as
• 38:30
  Speaker 13: well as labor. And then b we are we have
• 38:35
  Speaker 13: lost a lot of the redundancy that gives us the
• 38:38
  Speaker 13: energy security and stability that we require.
• 38:40
  Speaker 1: When you talk about energy costs going up, obviously my
• 38:43
  Speaker 1: ears are going to prick up because covering a reserve
• 38:46
  Speaker 1: and macro and all things. When it comes to obviously inflation,
• 38:48
  Speaker 1: what that could impact for the economy, how much when
• 38:51
  Speaker 1: you're looking at your space with energy, do you think
• 38:53
  Speaker 1: that could translate into maybe some more broader issues when
• 38:57
  Speaker 1: you're talking about inflation and what obviously central banks are
• 39:00
  Speaker 1: trying to fight at this point.
• 39:02
  Speaker 13: I think that's the central tenet of our case in
• 39:05
  Speaker 13: oil because we think Oatpak is essentially trying to fight
• 39:08
  Speaker 13: the FED by raising prices and by creating the supply
• 39:12
  Speaker 13: shortage and everything. The central banks are trying to fight
• 39:15
  Speaker 13: against the inflation that you mentioned, and we're seeing gasoline
• 39:20
  Speaker 13: prices in the US much higher over three seventy on
• 39:23
  Speaker 13: average a gallon right now, and that all will impact
• 39:29
  Speaker 13: the inflation metrics. Remember, energy is part of the core,
• 39:32
  Speaker 13: is very central to everything that we do. We think
• 39:36
  Speaker 13: ultimately the demand side will win, which is what the
• 39:40
  Speaker 13: FED wants. And we're seeing things break, especially in China
• 39:43
  Speaker 13: and their real estate, and that will impact oil prices
• 39:48
  Speaker 13: and to us that's the determinating factor for the second
• 39:51
  Speaker 13: half of the year. Over the long term, we see
• 39:54
  Speaker 13: a short fall of supply, but in the meantime, the
• 39:57
  Speaker 13: FED is likely to win. They have a much bigger
• 39:59
  Speaker 13: b balance sheet that OPAC.
• 40:01
  Speaker 1: Yeah, one point, sorry to cut you. I was just
• 40:03
  Speaker 1: curious as far as when we'll see it translate into
• 40:05
  Speaker 1: some of these CPI numbers. I know analog over at
• 40:07
  Speaker 1: Bloomberg Economics is thinking that potentially if we're looking at
• 40:10
  Speaker 1: the month over month core numbers, obviously it strips out
• 40:13
  Speaker 1: food and energy, but if you're taking some of that
• 40:14
  Speaker 1: in with energy, potentially could take higher here.
• 40:17
  Speaker 8: Yeah.
• 40:17
  Speaker 13: I think if you just think about the pass through right,
• 40:21
  Speaker 13: it takes about thirty to forty five days for oil
• 40:24
  Speaker 13: to get to refine products, and then it will take
• 40:26
  Speaker 13: another couple of months, so it could be anywhere between
• 40:29
  Speaker 13: three to six months for if they really have an impact,
• 40:32
  Speaker 13: you can.
• 40:32
  Speaker 3: Talk about OPEK fighting the FED. One of the ways
• 40:36
  Speaker 3: I guess they're trying to do this is Saudi Arabia
• 40:39
  Speaker 3: has some voluntary cuts in play, but it looks it
• 40:43
  Speaker 3: looks like they're now considering or we're wondering if they're
• 40:45
  Speaker 3: considering extending those for another month. When would we get
• 40:50
  Speaker 3: some sort of decision there. What kind of immediate impact,
• 40:53
  Speaker 3: if any, would it have?
• 40:56
  Speaker 13: I think limited short term impacts. You're seeing massive draw
• 41:01
  Speaker 13: downs in US inventories and Saudi extend it through September,
• 41:05
  Speaker 13: so they would probably have to give you an update
• 41:07
  Speaker 13: in the next two to three weeks if they're going
• 41:09
  Speaker 13: to extend through October. But ultimately, the price of oil
• 41:14
  Speaker 13: is telling you we don't really care about supply. We
• 41:17
  Speaker 13: care about demand, we care about Evergrande, we care about
• 41:20
  Speaker 13: US economic activity. We care about Europe and we again
• 41:24
  Speaker 13: that's where we think we'll set oil prices for the
• 41:27
  Speaker 13: remainder of the year.
• 41:28
  Speaker 1: How much does seasonality also factor into it when you
• 41:30
  Speaker 1: think about the fall. Obviously you have different spectrums within energy,
• 41:33
  Speaker 1: but where you think potentially that pattern can fall there.
• 41:36
  Speaker 13: Well, on the oil side, mostly gasoline margins tend to
• 41:40
  Speaker 13: come down. There's a seasonal effect because our busy season
• 41:43
  Speaker 13: is during the summer. We're starting to see that now
• 41:47
  Speaker 13: that may help affordability, but crack spreads are less than
• 41:51
  Speaker 13: thirty percent of the overall price of gasoline, so oil
• 41:54
  Speaker 13: is the foremost impact. And then on the natural gas side,
• 42:00
  Speaker 13: it's quite the opposite. We think we're going to the
• 42:03
  Speaker 13: crux of the issue the winter. And as a reminder,
• 42:07
  Speaker 13: this past winter was the warmest in fifty years in
• 42:10
  Speaker 13: the northern hemisphere. So if we have a normal winter,
• 42:13
  Speaker 13: that could really spell trouble for not just natural gas
• 42:16
  Speaker 13: but diesel. We use a lot of diesel for heating
• 42:19
  Speaker 13: in New England, for example.
• 42:21
  Speaker 6: Yeah.
• 42:21
  Speaker 3: Interesting because natural gas prices have been so pressured for
• 42:24
  Speaker 3: such a long time in the United States, whereas the
• 42:27
  Speaker 3: European picture is just a little bit different. And I
• 42:31
  Speaker 3: should mention today oil prices up a little bit on
• 42:35
  Speaker 3: both WTI as well as Brent up about half a percent.
• 42:39
  Speaker 10: Yeah.
• 42:39
  Speaker 1: Fernando Valley, senior analysts with Bloomberg Intelligence, join us in
• 42:43
  Speaker 1: studio to talk about the latest impact of possible strikes
• 42:45
  Speaker 1: at Chevron in Australia. Always a pleasure chatting with you, Fernando,
• 42:49
  Speaker 1: so thanks so much for joining Simoon and myself this morning.
• 42:52
  Speaker 4: You're listening to the tape. Catch our live program Bloomberg
• 42:55
  Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, to
• 42:59
  Speaker 4: tune in app Bloomberg dot Com and the Bloomberg Business App.
• 43:02
  Speaker 4: You can also listen live on Amazon Alexa from our
• 43:05
  Speaker 4: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
• 43:11
  Speaker 1: We have talked so much about the jolt state of
• 43:14
  Speaker 1: this morning consumer confidence, but also according to the latest
• 43:17
  Speaker 1: case Shiller data, US home prices were flat over the
• 43:20
  Speaker 1: twelve months that did just end in June. And then
• 43:23
  Speaker 1: also prices are up at an annualized rate of just
• 43:26
  Speaker 1: over five percent in twenty twenty three. But the catch there,
• 43:28
  Speaker 1: the rate shock of the past year has resulted in
• 43:31
  Speaker 1: just two months of year year home price declined so
• 43:34
  Speaker 1: far if you can imagine that, simoon. So I want
• 43:36
  Speaker 1: to bring in our next guest, Mollie Basil, principal economists
• 43:40
  Speaker 1: at core Logic, joining us on zoom to discuss the
• 43:42
  Speaker 1: latest findings in core Logic's case Shiller Home price Index. MOLLI,
• 43:46
  Speaker 1: thank you so much for joining us. Walk us through
• 43:49
  Speaker 1: this latest data that you found.
• 43:51
  Speaker 14: Yeah, so, our case Shiller index in June saw that
• 43:54
  Speaker 14: prices were even from a year ago. But as you
• 43:57
  Speaker 14: alluded to, you know, while as zero change from a
• 44:00
  Speaker 14: year ago doesn't sound like a big deal, it's really
• 44:03
  Speaker 14: signaling a market ship because that comes off of a
• 44:05
  Speaker 14: few months of declines in your over year prices. So
• 44:08
  Speaker 14: we're seeing prices go even and we expect that they'll
• 44:11
  Speaker 14: gain a little bit through the end of the year.
• 44:14
  Speaker 3: Yeah, where are you seeing this trend most pronounced? I
• 44:18
  Speaker 3: should also should point out, I know we have a
• 44:21
  Speaker 3: radio audience here, but I'm looking at our case show index.
• 44:23
  Speaker 3: We are like almost exactly the same level that we
• 44:26
  Speaker 3: were in June of twenty twenty two, and that was
• 44:29
  Speaker 3: a high on the chart. So where were we seeing
• 44:33
  Speaker 3: most of this strength?
• 44:34
  Speaker 6: Lie?
• 44:35
  Speaker 14: Yeah, so places like you might not expect places that
• 44:38
  Speaker 14: hadn't seen large increases in the past, Chicago, Cleveland, though
• 44:42
  Speaker 14: I'm going to throw Miami in there that has seen
• 44:44
  Speaker 14: some large increases, just areas that were had lower increases.
• 44:49
  Speaker 14: But also we're relatively cheaper than the rest of the country.
• 44:52
  Speaker 14: You know, we're seeing the strength there, but we're still
• 44:55
  Speaker 14: seeing weaknesses in parts of the country that saw really
• 44:58
  Speaker 14: outsized gains in twenty twenty two, like Denver, Phoenix, and
• 45:03
  Speaker 14: San Francisco and Seattle.
• 45:04
  Speaker 1: We know that tight inventory was clearly an issue well
• 45:07
  Speaker 1: before the pandemic, which particular regions across the country, or
• 45:12
  Speaker 1: when it comes to home buyers trying to battle it
• 45:15
  Speaker 1: out to try and and find some of these houses
• 45:18
  Speaker 1: or having it harder more so than others.
• 45:21
  Speaker 14: You know, it's really an asia life phenomenon. And you
• 45:24
  Speaker 14: can think of mortgage rates are really what's driving that.
• 45:27
  Speaker 14: You've got the majority, probably about ninety five or more
• 45:32
  Speaker 14: percent of current owners have a mortgage rate that it's
• 45:37
  Speaker 14: really well below what the current rate is. So they
• 45:40
  Speaker 14: just aren't willing to give up their mortgage rates unless
• 45:42
  Speaker 14: they have to, and they're not putting their homes on
• 45:44
  Speaker 14: the market, So that's really hitting the entire country.
• 45:47
  Speaker 1: What I'm curious about is how much will that benefit homebuilders,
• 45:50
  Speaker 1: which really we're struggling after the housing crisis. But when
• 45:52
  Speaker 1: you're thinking about especially those stocks have been on a
• 45:54
  Speaker 1: tear this year with those anticipation from poorly managers that
• 45:57
  Speaker 1: they're going to continue to have to build. There about
• 46:00
  Speaker 1: the dynamic when you're looking at particular builders, say maybe
• 46:03
  Speaker 1: like a deor Horton or Lenar, maybe they're catering to
• 46:06
  Speaker 1: a particular type of income demographic, whereas what about maybe
• 46:09
  Speaker 1: lower income households.
• 46:11
  Speaker 14: Well, one of the things that the builders have going
• 46:13
  Speaker 14: for them that's that's helping what you said, have their
• 46:16
  Speaker 14: stocks on a tear is they're able to buy down
• 46:19
  Speaker 14: mortgage rates for buyers, so they have some flexibility there
• 46:23
  Speaker 14: and can charge buyers a lower rate where you know
• 46:26
  Speaker 14: resales you're just not going to get that same phenomenon.
• 46:29
  Speaker 3: Yeah, I think you look at Lenar, d R Horton,
• 46:33
  Speaker 3: they're offering five five and a half percent thirty year
• 46:36
  Speaker 3: fixed rates, I mean, and then and then you look
• 46:38
  Speaker 3: at the average Freddie mac right for a thirty year
• 46:42
  Speaker 3: fix to seven point two three last week, it's just nuney,
• 46:46
  Speaker 3: I mean, I wonder if there is any inconsistency in
• 46:49
  Speaker 3: that sort of data, just because so much of the
• 46:51
  Speaker 3: purchasing is really happening in the new home front rather
• 46:54
  Speaker 3: than the existing home. You know, should we believe the
• 46:58
  Speaker 3: seven point two three rate that we're we're seeing Molly.
• 47:02
  Speaker 14: Yeah, I think when they're reporting those rates, that's what
• 47:04
  Speaker 14: they are generally offering.
• 47:06
  Speaker 11: It's not necessarily what people are taking up.
• 47:08
  Speaker 14: So that's the rate that's offered out there. And if
• 47:11
  Speaker 14: builders are able to buy that down by one two
• 47:13
  Speaker 14: percentage coins, it sounds like then they're going to gain
• 47:17
  Speaker 14: a relatively a large share of this market.
• 47:19
  Speaker 3: You know, what also surprises me is just how much
• 47:23
  Speaker 3: household formation there is that these people feel that they
• 47:26
  Speaker 3: need to take advantage of or just need to go
• 47:31
  Speaker 3: and shell out for these seven plus percent fixed mortgage.
• 47:37
  Speaker 3: What do you watch for their any any trends you
• 47:40
  Speaker 3: can tell us about across the people that just are
• 47:43
  Speaker 3: simply making that decision to go buy homes.
• 47:45
  Speaker 14: Well, the thing is, while we do have these really
• 47:48
  Speaker 14: high mortgage rates, you know what's driving that. That's inflation,
• 47:51
  Speaker 14: and what's helping drive up inflation, but really great job growth.
• 47:56
  Speaker 14: And that's why you see people who are still willing
• 47:58
  Speaker 14: to go out there and buy homes at these mortgage rates.
• 48:01
  Speaker 14: You know, if they're able to find what they want
• 48:02
  Speaker 14: where they want it, they could see that mortgage rates
• 48:05
  Speaker 14: will most likely come down in the next couple of years.
• 48:08
  Speaker 14: And you know, we keep talking about the thirty year
• 48:10
  Speaker 14: fix rate, but you know they might be opting for
• 48:12
  Speaker 14: an adjustable rate mortgage, which we keep their monthly payments
• 48:15
  Speaker 14: down as well.
• 48:16
  Speaker 1: What's the level when you're looking at the rates, whether
• 48:18
  Speaker 1: you're looking at fifteen thirty year here as far as
• 48:21
  Speaker 1: when you think it might be a potential breaking point
• 48:23
  Speaker 1: for Americans.
• 48:27
  Speaker 14: A lot of them are at that breaking point now.
• 48:28
  Speaker 14: I mean we've seen that's part of the reason why
• 48:31
  Speaker 14: home prices were so weak last year through most of
• 48:35
  Speaker 14: twenty twenty two and into twenty twenty three. That has
• 48:39
  Speaker 14: to do with the high martgage rates when somebody's trying
• 48:41
  Speaker 14: to get in. And you know, previously, when rates are
• 48:44
  Speaker 14: around three percent, you know, housing was pretty affordable, even
• 48:48
  Speaker 14: though you have home prices shooting up. But you know
• 48:51
  Speaker 14: that just all came to a halt last year when
• 48:53
  Speaker 14: margage rates started going up.
• 48:55
  Speaker 3: You know, it was interesting to hear J Powell talking
• 48:58
  Speaker 3: about how he expects shelter costs to fall. And you know,
• 49:03
  Speaker 3: even though a lot of this is rents, if you
• 49:05
  Speaker 3: have high home prices, you're gonna have higher rents, right
• 49:09
  Speaker 3: or is there something I'm not seeing here?
• 49:11
  Speaker 14: Well, so that does you know, that does get into
• 49:14
  Speaker 14: a kind of a technical detail of the way inflation's measured,
• 49:19
  Speaker 14: and that is as a lag. Right, That's right, that's right,
• 49:22
  Speaker 14: that's prices exactly. There's about a one year lag. So
• 49:26
  Speaker 14: we we do measure rents as well core logic, and
• 49:29
  Speaker 14: we saw rents coming down about a year ago, and
• 49:32
  Speaker 14: you are now.
• 49:32
  Speaker 11: Starting to see that shelter index start to come down.
• 49:35
  Speaker 14: So they know that those those decreases from last year
• 49:39
  Speaker 14: are going to flow in through the inflation numbers this year.
• 49:42
  Speaker 3: But it's not necessarily good news for people who want
• 49:44
  Speaker 3: to go out and rent an apartment.
• 49:46
  Speaker 14: No, just because you saw things come down year to year,
• 49:49
  Speaker 14: there's still quite a bit from twenty twenty, so we're
• 49:53
  Speaker 14: not you know, with home prices coming you know, seeing
• 49:57
  Speaker 14: declines last year. Rent saw some declines last year. They're
• 50:01
  Speaker 14: just not going to get down to that level we
• 50:02
  Speaker 14: saw before the pandemic.
• 50:03
  Speaker 1: So we only have about a minute left. But when
• 50:05
  Speaker 1: you're looking at this latest data that you have with
• 50:08
  Speaker 1: home prices, Chicago still remained in the top spot there.
• 50:12
  Speaker 1: Why is that.
• 50:14
  Speaker 14: You just have some It's like you see in the
• 50:17
  Speaker 14: ones the places fall off that had the really outsized
• 50:20
  Speaker 14: games last year, and you just seeing the metros on
• 50:23
  Speaker 14: there that just keep plugging away at the kind of
• 50:26
  Speaker 14: relatively moderate rate of fourty five percent. So it's more
• 50:29
  Speaker 14: that everyone else is falling off than they're seeing the resurgence.
• 50:34
  Speaker 1: All right, Mollie Basil, Principal Economy is at core Logic,
• 50:38
  Speaker 1: joining us on zoom to discuss the latest findings in
• 50:40
  Speaker 1: that Core Logic Key Shuler Home Price Index. It's always
• 50:43
  Speaker 1: a pleasure speaking with you, Molly.
• 50:47
  Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
• 50:50
  Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
• 50:54
  Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
• 50:58
  Speaker 2: at Matt Miller nineteen seventy.
• 51:00
  Speaker 6: And I'm Fall Sweeney. I'm on Twitter at pt Sweeney.
• 51:03
  Speaker 2: Before the podcast, you can always catch us worldwide at
• 51:05
  Speaker 2: Bloomberg Radio.