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AutoNation CEO: We Had The Best Quarter Of All Time. · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Well, auto retailer Auto
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  Speaker 1: Nation reported this morning earnings better than expected. Stock is reacting.
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  Speaker 1: It's up three point three percent today and over the
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  Speaker 1: trailing twelve months, stock of all donation is up seven
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  Speaker 1: percent seven zero percent, So certainly a good run there.
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  Speaker 1: Let's get some color on the quarter and the strategy
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  Speaker 1: going forward for Auto Nation. We do that with Mike Jackson.
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  Speaker 1: He's the CEO of Auto Nation. Mike, thanks so much
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  Speaker 1: for joining us here. Good quarter this morning, You beat
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  Speaker 1: on revenue, beat on EPs. What were the key drivers
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  Speaker 1: in the quarter for you? Yeah, not only was it
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  Speaker 1: a good quarter, was the best quarter of all time.
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  Speaker 1: So are you. And that's back to back best quarters
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  Speaker 1: of all time. So the um environment is very good
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  Speaker 1: for auto retail. Whether there is unquestionably significant economic pain
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  Speaker 1: out there in America, which is difficult to watch in
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  Speaker 1: housing or auto retail. UH, there's been a reallocation of
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  Speaker 1: the pocketbook UH towards the space you live in, in
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  Speaker 1: the space you move around it. And people want personal
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  Speaker 1: space that that is nice and comfortable and they control.
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  Speaker 1: And you combine that with very attractive interest rates available
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  Speaker 1: and affordable gasoline and all the stimulusts that's going into
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  Speaker 1: the economy UH for auto retail and UH and the
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  Speaker 1: demand for automobiles. It's very strong within that auto nation
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  Speaker 1: is outperforming the marketplace. We have a terrific brand, a
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  Speaker 1: great customer experience, digital capability that's remarkable. And if I
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  Speaker 1: look at just our pre owned business, our revenue was
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  Speaker 1: up twelve in the quarter UH, and overall pre owned
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  Speaker 1: was probably flat for the industry, maybe even slightly down. Mike,
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  Speaker 1: whyatt Why Why is pre owned doing better than new
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  Speaker 1: car sales right now? Well, pre owned has always been
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  Speaker 1: a larger marketplace the new The new retail markets around
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  Speaker 1: fourteen million a year some years fifteen, and pre owned
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  Speaker 1: is between thirty five and forty each year. So the
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  Speaker 1: demand is strong across the entire spectrum of personal vehicles.
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  Speaker 1: From a price point of five thousand dollars through four
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  Speaker 1: thousand dollars. I mean people want personal space. That is
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  Speaker 1: what they're clamoring for now. On the new vehicle side,
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  Speaker 1: there is a production disruption that was triggered by the
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  Speaker 1: pandemic and now has been further complicated with a competition
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  Speaker 1: for chips and uh, the auto industry getting uh the
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  Speaker 1: short end of the stick as people spending more time
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  Speaker 1: in her home want more personal entertainment instruments. Um, and
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  Speaker 1: those chips are going into those industries rather than the
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  Speaker 1: automobile industry, and production is constrained. For me, there's no
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  Speaker 1: personal entertainment instrument like a Porsche nine eleven. Uh. That
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  Speaker 1: gives me your hat too. There. I fully agree you're
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  Speaker 1: in my camp. Whenever I get in a bad mood,
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  Speaker 1: I take the keys and say, I I'm getting in
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  Speaker 1: my nine eleven. I'm going to do a few laps.
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  Speaker 1: It is. I'm sure my face. I'm sure. Also well deserved, Mike.
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  Speaker 1: You've done such a great job leading the company. The
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  Speaker 1: stock is just off the charts right now. Um, you're
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  Speaker 1: gonna step down as CEO Nick next April. Have you
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  Speaker 1: found a successor No, But we've we've begun this process
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  Speaker 1: in the following sense. It's really two successions on both
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  Speaker 1: chairman and CEO, and we said over a year ago
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  Speaker 1: that when the time comes, we would have separate instinct
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  Speaker 1: independent chairman and the new CEO. Now, since we already
• 3:53
  Speaker 1: know who the chairman is going to be, the board
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  Speaker 1: met yesterday and selected and elected Rick Burdick as the Erman,
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  Speaker 1: assuming my responsibilities. Rick has been a director for the
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  Speaker 1: company third thirty years. He's been a lead director for
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  Speaker 1: the last several years. He's widely known and respected within
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  Speaker 1: the company, so we had half the answer to the
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  Speaker 1: question there. Rick is going to lead the selection team
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  Speaker 1: which will kick off in the spring for a new CEO,
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  Speaker 1: and the timing is really you can't bring in in
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  Speaker 1: a new CEO without the resumption of robust travel and meetings.
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  Speaker 1: I mean, I can do the Wizard of Os thing
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  Speaker 1: behind the curtain because everybody knows me. Just pick up
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  Speaker 1: the phone or do a zoom call and I can
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  Speaker 1: uh and everybody most of the time does what I say.
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  Speaker 1: So it's wonderful. But you're new, and this is something
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  Speaker 1: that companies are gonna have to deal with. If you're
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  Speaker 1: new to a company, new to an enterprise. I mean,
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  Speaker 1: you have to be out there and you can't responsibly
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  Speaker 1: resume travel without this vaccination. But we're optimistic about the
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  Speaker 1: vaccinations that will start our search in the spring and
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  Speaker 1: we'll find a terrific new see. You know, I'm I'm
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  Speaker 1: very optimistic. Hey, Mike. You know, just as recently as
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  Speaker 1: a couple of years ago, with the rise of uber
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  Speaker 1: and lift, there was a concern that we might have
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  Speaker 1: reached peak auto pandemics kind of changed that narrative. How
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  Speaker 1: do you view kind of demand for auto ownership going forward? Yeah,
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  Speaker 1: here's the key key word. If I look at the again,
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  Speaker 1: you're talking. If you talk a new vehicle market, you
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  Speaker 1: have a fleet or shared business, and you have personal
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  Speaker 1: use retail. I am extremely bullish on retail and personal use.
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  Speaker 1: I think it's a fundamental shift in thinking of America.
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  Speaker 1: I think this pandemic has been a scarring event. I
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  Speaker 1: can remember growing up as a kid meeting people who
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  Speaker 1: lived through the Great Depression and were frugal for the
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  Speaker 1: rest of their lives. And when I would say, how
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  Speaker 1: come we can't spend any money, they would say, well,
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  Speaker 1: if you've been through what I've been through, you you
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  Speaker 1: would be this way. I think I think this pandemic
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  Speaker 1: will ultimately be a scarring event with some permanent changes,
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  Speaker 1: and one of those will be around UM their home.
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  Speaker 1: They want more space, Uh, they wanted to be nicer,
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  Speaker 1: and they want personal transportation. So I think UM rates
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  Speaker 1: are going to be low for a long time. Guests
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  Speaker 1: is available for a long time, and and demand for
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  Speaker 1: personal transportation is strong. That sets up pretty well for
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  Speaker 1: auto ownership. Mike Jackson, thank you so much for joining us.
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  Speaker 1: Mike Jackson, CEO of Auto Nation. On earnings, Uh for
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  Speaker 1: the company, which we're very very strong, sock up sevent
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  Speaker 1: trailing twelve months. Uh, Matt, what do you what's your
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  Speaker 1: ride in Berlin? How do you get around? Well? I
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  Speaker 1: had the nine eleven here, uh, which which which I like,
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  Speaker 1: but it's a little bit too fast for um the
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  Speaker 1: mean streets of Berlin. So I got a little family
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  Speaker 1: truckster to haul around the wife and kids. All right,
• 6:44
  Speaker 1: good for you to hear motorcycle in there. We have
• 6:47
  Speaker 1: to talk about that. I've got it. I've got a
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  Speaker 1: few motorcycles as well. I've got a fleet that my
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  Speaker 1: wife is very unhappy about. I'm sure she is. All right,
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  Speaker 1: we're gonna have more coming up on Bloomberg Markets. Boy,
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  Speaker 1: one of those industries that has been hit the hardest
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  Speaker 1: by this pandemic has been the hotel industry. I mean
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  Speaker 1: that was day one that the hotels saw their business
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  Speaker 1: dry up, and it's been a tough road since. Now
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  Speaker 1: we're uh waiting for the reopening phase of the economy.
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  Speaker 1: Questions what does it mean for the hotel business? The
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  Speaker 1: value of Hotels GUILDA Perez Alvarado. She's the global CEO
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  Speaker 1: for j l L that's the Jones Lang LaSalle Group.
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  Speaker 1: She joins us and they have a investment outlook for
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  Speaker 1: the Hotel Business Guild. But what are some of the
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  Speaker 1: key takeaways here? Because, boy, the hotel industry was hit
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  Speaker 1: hard and it hasn't really gotten that much better. That's
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  Speaker 1: exactly right. We were, I would say, one of the
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  Speaker 1: hardest kid commercial wooded asset classes in the pandemic. Having
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  Speaker 1: said that, we're right now tracking the most amount of
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  Speaker 1: capital ever multency invest in the sector with the anticipation
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  Speaker 1: that Madgin was going to be the fastest asset class
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  Speaker 1: to with ever once the vaccine is made widely available
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  Speaker 1: and once traveled with Do you know, I don't think
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  Speaker 1: people I don't think the average person on street realizes
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  Speaker 1: how gigantic Jones Lang LaSalle is. I mean it's either
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  Speaker 1: the biggest, I think, or or the second biggest public
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  Speaker 1: brokerage firm in the world. This is a company that
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  Speaker 1: has its roots back in uh the seventeen hundreds in
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  Speaker 1: London and then has really spread around the world. How
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  Speaker 1: big is the business? You run? The J L L
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  Speaker 1: Hotels and hospitality business lets the we're about three hundred
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  Speaker 1: plus professionals around the world, and um, yes you're the
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  Speaker 1: number one broker, but we probably yourselves from just being
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  Speaker 1: overall advisers. So we do everything from investment sales, financings,
• 8:47
  Speaker 1: and strategic advisory and acid management. So the way that
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  Speaker 1: we're position has actually given us very good insights with
• 8:55
  Speaker 1: what is happening from an operating not just from an
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  Speaker 1: operating fundamentals, but also from a wider capital markets perspects.
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  Speaker 1: So it's it's very interesting to see U whid a
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  Speaker 1: happening this time around, just because this crisis just unlike
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  Speaker 1: any others soil they give us a sense of you know,
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  Speaker 1: what types of hotels were hit the worst, what types
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  Speaker 1: maybe a fair better during this pandemic and kind of
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  Speaker 1: have have we seen that reflected evaluations? Absolutely, So evaluation
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  Speaker 1: is just a bit tricky at the moment, and I'm
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  Speaker 1: going to address that second. But in terms of of
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  Speaker 1: which assets have been hit the hardest, I would say,
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  Speaker 1: as if you said at the onset of the conversation
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  Speaker 1: that the entire lodging industry has face unprecedented headwinds, I
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  Speaker 1: don't think any of us ever imagined a scenario where
• 9:43
  Speaker 1: literally their life are going to be shut shut down. UM.
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  Speaker 1: In terms of though, which markets or which asset classes
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  Speaker 1: have fair better, I would say anything that has to
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  Speaker 1: do with drive to lesser demand, those facets are doing
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  Speaker 1: fairly well, and they are the ones that are expected
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  Speaker 1: to recover the quickest. We're also paying a lot of
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  Speaker 1: attention on some of these geographies that are doing well,
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  Speaker 1: especially those that have a net positive migration patterns. You know,
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  Speaker 1: markets in Florida and Texas and the Carolina. Assets in
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  Speaker 1: those markets are doing relatively well. The assets that have
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  Speaker 1: been hit the hardest UM are those located in markets
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  Speaker 1: like in New York City, of Chicago, Boston, San Francisco. UM.
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  Speaker 1: And from a segmentation perspective, definitely those hotels that are
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  Speaker 1: catering more towards with demand and corporate travel. But it's
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  Speaker 1: not to say that we're not expecting a recovery across
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  Speaker 1: all after classes. I think we do expect that everything's
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  Speaker 1: going to come back. It's just a matter of when
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  Speaker 1: you know what I think about corporate travel, I can
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  Speaker 1: only think about the Weston because it's like the only
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  Speaker 1: hotel I stayed and for years and years. And of course, um,
• 10:56
  Speaker 1: in terms of M and A, one of the biggest
• 10:58
  Speaker 1: deals in hotels was Arnie Sorenson at Marriott buying the
• 11:03
  Speaker 1: SPG group and what an incredible customer loyalty program they
• 11:07
  Speaker 1: had Slash have. I don't I don't know how well
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  Speaker 1: they've done bringing it forward, but um, we had the
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  Speaker 1: sad news that Sorenson passed away at the I think
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  Speaker 1: very young age of sixty two. Really tragic, and he
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  Speaker 1: was such a huge figure in in the hotel industry,
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  Speaker 1: worked for Bill Marriott. Since what do you think about
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  Speaker 1: what does this mean to the industry? Oh, listen, we're
• 11:30
  Speaker 1: we're heartbroken. UM, this is it's it's devastating you. She
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  Speaker 1: was such an icon, you know, a leader at all
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  Speaker 1: of us. Have you know a bracing I guess what
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  Speaker 1: has been one of the most challenging moments in in
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  Speaker 1: our industry's history. And and he was there at the forefront.
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  Speaker 1: So you know, our thoughts are within his family and
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  Speaker 1: the Marriott family, but oh my gosh, he was definitely
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  Speaker 1: a pioneer and an inspiration to all of us. Gilda,
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  Speaker 1: given the real you know, disruption to this market, do
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  Speaker 1: you exct mean, who's investing in hotel assets right now
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  Speaker 1: that have to be a real risk taker. Yeah, that's
• 12:11
  Speaker 1: an it's a great question. We have all of the
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  Speaker 1: market participants that we have pre COVID are are very active,
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  Speaker 1: so you know, mostly private equity institutions, the publicly traded
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  Speaker 1: rates um. They are still bullish on the sector. And
• 12:26
  Speaker 1: what's really interesting is that right now we have newcomers
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  Speaker 1: into this space, so we're seeing more and more private investors,
• 12:33
  Speaker 1: family offices, and even hedge funds that are are looking
• 12:37
  Speaker 1: at the sector through an opportunistic lens. Um. Now, going
• 12:41
  Speaker 1: back to the question that you have earlier in valuations,
• 12:43
  Speaker 1: this is where it's gotten really tricky. So while if
• 12:45
  Speaker 1: there's a lot of capital out of the sidelines, there
• 12:48
  Speaker 1: haven't been a lot of transactions. So if you look
• 12:51
  Speaker 1: at what happened in transaction volume across the world was
• 12:54
  Speaker 1: found sixty percent it was DOUN in the US. And
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  Speaker 1: so this wave of the stretch we had to materialize.
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  Speaker 1: And so I wonder what happens to some of the newcomers,
• 13:05
  Speaker 1: you know, to have songs and more opportunistic investors there
• 13:09
  Speaker 1: may not be traded them. We're gonna We're gonna have
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  Speaker 1: to leave it there just because of time. But we
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  Speaker 1: really appreciate your time. Gilda Prez Alvarado, Global CEO of
• 13:16
  Speaker 1: J L L Hotels and Hospitality. What really is becoming
• 13:22
  Speaker 1: clear that the metrics that we all follow as a
• 13:24
  Speaker 1: religious to the pandemic in terms of hospitalization and other
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  Speaker 1: metrics are really trending and trending aggressively in the right direction.
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  Speaker 1: As the virus. Uh. You know, as we start to
• 13:33
  Speaker 1: have more and more vaccines into the marketplace, and is
• 13:36
  Speaker 1: perhaps the surge from the holidays fades a little bit,
• 13:38
  Speaker 1: the questions what's gonna be the intermediate and longer term
• 13:41
  Speaker 1: effects of this pandemic as the economy begins to reopen.
• 13:45
  Speaker 1: Let's welcome Cliff cup Chain. He's a chairman of your
• 13:47
  Speaker 1: raise your group. Uh, Cliff thanks so much for joining
• 13:50
  Speaker 1: us here. Again, the numbers seem to be trending in
• 13:52
  Speaker 1: the right direction for now, giving people some more I
• 13:56
  Speaker 1: guess hope for a reopening of this economy maybe mid year.
• 14:01
  Speaker 1: How are you guys thinking about it at your as
• 14:03
  Speaker 1: group as you look at it holistically, I think the
• 14:07
  Speaker 1: main takeaway we have it is not so fast. Even
• 14:12
  Speaker 1: just in the clip you just play optimism sweeps across
• 14:15
  Speaker 1: markets that has wrote it down well, we think that
• 14:19
  Speaker 1: the theme of easing restrictions is going to be slower
• 14:23
  Speaker 1: than consensus predicts that the politics of the virus, and
• 14:25
  Speaker 1: what we do here is the politics markets, the politics
• 14:27
  Speaker 1: of ideology, the new variance, the new variances, the mutations
• 14:31
  Speaker 1: are going to scare governments in publics and officials are
• 14:34
  Speaker 1: going to be a lot more reluctant than I think
• 14:36
  Speaker 1: consensus observes. Thanks believes these restrictions anning the variants, the
• 14:40
  Speaker 1: variants of becoming dominance. And yeah, a lot of this
• 14:43
  Speaker 1: public behavior to ease restrictions, and people are so scared
• 14:47
  Speaker 1: they's not going to go back to work. So our
• 14:50
  Speaker 1: fear is at the all clear sign. My fear is
• 14:52
  Speaker 1: being blown too soon. We're gonna have a rough, rough
• 14:56
  Speaker 1: still spring the rest of the winter, and and yes,
• 15:01
  Speaker 1: well we get to the early summer August or so,
• 15:04
  Speaker 1: things will be better. But until man, it's going to
• 15:05
  Speaker 1: be pretty tough. Cliff, let me ask you about the
• 15:09
  Speaker 1: new variants, because this seems to be, um, the most important,
• 15:14
  Speaker 1: scariest variable and also kind of the weirdest because during
• 15:18
  Speaker 1: the Spanish flu pandemic, the variants that came after a
• 15:24
  Speaker 1: couple of years were less deadly, and I'm not sure
• 15:28
  Speaker 1: about the fatality of these new variants, but they certainly
• 15:32
  Speaker 1: spread more quickly. Um, do you not expect the virus
• 15:37
  Speaker 1: to get easier to live with over time? Is it
• 15:39
  Speaker 1: going to be harder to live with like we've seen
• 15:41
  Speaker 1: with the British and South African variants. Well, there's no
• 15:45
  Speaker 1: way of knowing. The best probability is that they will
• 15:51
  Speaker 1: be easier to live with it. They won't mutate in
• 15:53
  Speaker 1: a very worrisome direction, but that's a guess. What's really
• 15:57
  Speaker 1: scary about these new mutants is that transmissibility goes up.
• 16:03
  Speaker 1: As trus transmissibility goes up, the chance of inmutation goes up.
• 16:08
  Speaker 1: Now it could be less less lethful, but it could
• 16:12
  Speaker 1: also be much more lethal, and that's that's going to
• 16:15
  Speaker 1: scare people, and there's reason for you for concern. They're
• 16:17
  Speaker 1: just nobody knows. So Cliff, you know, this is obviously
• 16:21
  Speaker 1: a global pandemic. There are different capabilities or there's different policies,
• 16:26
  Speaker 1: I guess in different parts of the world, different different countries,
• 16:29
  Speaker 1: different capabilities to fight this pandemic. How concerned are you
• 16:33
  Speaker 1: about There will be some has and have nots here
• 16:36
  Speaker 1: as we I guess come out on the other side
• 16:38
  Speaker 1: of this, Well, there's a lot of reasons for concern.
• 16:42
  Speaker 1: In the US and the industrialized democracy is the ability
• 16:47
  Speaker 1: to get vaccines and rule them out is much much
• 16:51
  Speaker 1: greater than it is in the emerging markets, where you
• 16:54
  Speaker 1: both have less infrastructure, less ability to get vaccines in
• 16:59
  Speaker 1: any kind, and certain of the best vaccines, which right
• 17:01
  Speaker 1: now are the Madarian and Advisor vaccine, So that there's
• 17:04
  Speaker 1: a real half and half not there's a real discrepancy
• 17:07
  Speaker 1: between north itself, and that is going to hit sentiment
• 17:11
  Speaker 1: towards global inequity as as we move forward. So it's
• 17:14
  Speaker 1: a concern. One of the other um interesting differences that
• 17:19
  Speaker 1: we see between the coronavirus and Spanish flu is older
• 17:22
  Speaker 1: people are affected much more seriously and in health terms
• 17:28
  Speaker 1: it was the younger people during the Spanish flu. Is
• 17:30
  Speaker 1: this going to change demographics at all? I mean, because
• 17:34
  Speaker 1: the numbers appear on the service to be big in
• 17:37
  Speaker 1: terms of global deaths. I don't think it will change
• 17:41
  Speaker 1: things much more than they have for the simple reasons
• 17:44
  Speaker 1: that the vaccines are ruling out right now that it
• 17:48
  Speaker 1: provides a durable protection the vaccines among older people from
• 17:51
  Speaker 1: everything we know, even against the variants, and what the
• 17:55
  Speaker 1: good news so far, The good news is that the
• 17:58
  Speaker 1: UK variant, the South Africa variant, and the Brazil variant
• 18:02
  Speaker 1: severe cases and fatalities are all controlled very well by
• 18:07
  Speaker 1: existing vaccines. It's among the younger populations where which is
• 18:09
  Speaker 1: some of the trouble now in Israel left the little
• 18:12
  Speaker 1: through the United States, the unvaccinated younger people will become
• 18:14
  Speaker 1: more at risk so to the extent of death so
• 18:19
  Speaker 1: far in United States have been older people. That's certainly
• 18:21
  Speaker 1: affected the numbers. But but as far as the tetonic
• 18:24
  Speaker 1: lasting change in demographics, I think kind of what you
• 18:28
  Speaker 1: see is what you get, and hopefully unless there is
• 18:30
  Speaker 1: this new variant which is usually didn't have in the
• 18:31
  Speaker 1: Spanish flow this new killer variant out that the develops,
• 18:36
  Speaker 1: We're not going to see a big change in demographics now, Cliff,
• 18:39
  Speaker 1: I know in your Eurasia Group report, yeah, you took
• 18:42
  Speaker 1: a look at Israel, and Israel has had probably some
• 18:45
  Speaker 1: of the best success in terms of the vaccinations. What
• 18:48
  Speaker 1: have they done right? They have a public health system
• 18:51
  Speaker 1: which we don't have. They've kept data very very well,
• 18:55
  Speaker 1: They've rushed out everything that they have just thrown vaccines.
• 18:59
  Speaker 1: That's the problem the Kelly out with Israel, though, it
• 19:03
  Speaker 1: really is the canary in the coal mine of a guinea.
• 19:05
  Speaker 1: Thing that we're looking at right now is among young people.
• 19:08
  Speaker 1: They have until very very recently seen a surge in
• 19:11
  Speaker 1: infection among younger people. It seems that the UK stream
• 19:15
  Speaker 1: has become dominant there Again, the UK strange is more lethal,
• 19:18
  Speaker 1: is much more transmissible. So they've done it right. But
• 19:22
  Speaker 1: but they've also shown what we in the United States
• 19:24
  Speaker 1: have to be great wary of, which is indeed, if
• 19:27
  Speaker 1: that UK stream becomes dominant by March, we're going to
• 19:31
  Speaker 1: be facing higher infection right as Israel is right now
• 19:34
  Speaker 1: with with younger people. So they've done things right. We
• 19:37
  Speaker 1: also have to look at what's not gone so well
• 19:38
  Speaker 1: right there. From from from my seat here in Berlin, Um,
• 19:44
  Speaker 1: the US actually looks like they've they've got it right
• 19:48
  Speaker 1: as well. I mean, I know Americans, all my family
• 19:51
  Speaker 1: and friends in the States complain about how slow the
• 19:54
  Speaker 1: rollout is, but it looks so great compared to you know,
• 19:57
  Speaker 1: the snail's pace that we've got here. What has Europe
• 20:01
  Speaker 1: done wrong? And um, will they ramp it up quickly?
• 20:07
  Speaker 1: Europe has just not been nimble and setting up the
• 20:10
  Speaker 1: kind of infrastructure, has not had the vaccine supplied, not
• 20:13
  Speaker 1: had the sort of nimble infrastructure which is ah gosh,
• 20:18
  Speaker 1: beauties and the eye to beholder. The United States under
• 20:20
  Speaker 1: Biden certainly has even the short time he's been president,
• 20:23
  Speaker 1: wrapped up it's distribution efficacy, has better access to vaccine.
• 20:29
  Speaker 1: So both on distribution efficacy and on access to excuse,
• 20:32
  Speaker 1: the US is ahead of well, not the UK, you guys,
• 20:34
  Speaker 1: and quite well, but but the EU condental Europe has
• 20:37
  Speaker 1: just been quite slow on both counts. Hey, Cliff, thank
• 20:41
  Speaker 1: you so much for joining us. We really appreciated Cliff
• 20:43
  Speaker 1: cup Chain, chairman of the Eurasia Group, giving us his
• 20:46
  Speaker 1: thoughts on the pandemic longer term. So that you are
• 20:49
  Speaker 1: in Berlin and that the filling there is great frustration.
• 20:52
  Speaker 1: Is that what you're saying? Yeah, absolute frustration. I mean
• 20:55
  Speaker 1: we look at um, this liberal multilateral government in Brussels
• 21:00
  Speaker 1: just didn't do nearly as well as America first Donald
• 21:04
  Speaker 1: Trump and Brexit's Boris Johnson. They got all the supply.
• 21:07
  Speaker 1: Even if you don't like them politically, you've got to
• 21:10
  Speaker 1: appreciate what they did for the vaccine rollout. Yeah, and
• 21:13
  Speaker 1: it looks like again the numbers in terms of that
• 21:15
  Speaker 1: MATT here in the US are really looking positive. And
• 21:18
  Speaker 1: now the question is, you know, how quickly can they
• 21:20
  Speaker 1: get supply into the marketplace. Well, I'm looking at w
• 21:26
  Speaker 1: T I crewed here just under sixty dollars a barrel
• 21:30
  Speaker 1: higher again due in large park to supply disruptions, particularly
• 21:34
  Speaker 1: out of Texas the Permian basin as the Midwest deals
• 21:37
  Speaker 1: with this incredible cold snap weather coming all the way
• 21:41
  Speaker 1: down into Texas. Let's get the latest. We can do
• 21:43
  Speaker 1: that with Marien Malick. Marina is a natural gas and
• 21:46
  Speaker 1: power markets reporter for Bloomberg News. Marien, it is brutal
• 21:50
  Speaker 1: in terms of a weather perspective, it's wreaking havoc on
• 21:53
  Speaker 1: the US energy infrastructure. What's the latest. Yeah, we still
• 21:57
  Speaker 1: have millions of people without power, and it seems like
• 22:00
  Speaker 1: that the power crisis is expanding. Like the Texas grid
• 22:05
  Speaker 1: has had rolling blackouts since early in the morning on
• 22:09
  Speaker 1: on Monday, and we've had rounds of blackouts on the
• 22:13
  Speaker 1: Southwest Power Pool Gride, so just to the west of
• 22:16
  Speaker 1: Texas the grid there and then to the east of
• 22:18
  Speaker 1: Texas UM the grid UM operated by Miso, which UM
• 22:23
  Speaker 1: extends from the midwest to UM the Gulf Coast. Their
• 22:26
  Speaker 1: southern region is also experiencing forced blackouts. And you know,
• 22:32
  Speaker 1: it's unclear when this is going to end. There's people
• 22:35
  Speaker 1: that have been out without power for over a day
• 22:39
  Speaker 1: in Texas and UM, the Southwest Grid thinks that we
• 22:43
  Speaker 1: could they could probably see UM rotating outages UM or
• 22:48
  Speaker 1: rounds of them for the next forty eight hours. So
• 22:50
  Speaker 1: it's not going away anytime soon. Yeah. I saw that
• 22:53
  Speaker 1: actually a lot of power producers, including nuclear plants, had
• 22:57
  Speaker 1: gone offline. Do we know why. It's a combination of things.
• 23:02
  Speaker 1: One of course, like infrastructure is just freezing, so wind
• 23:06
  Speaker 1: turbans are just getting frozen but on Monday or A
• 23:10
  Speaker 1: lot of the generation outages are are things like natural
• 23:14
  Speaker 1: gas plants, which are such a key plate, such a
• 23:16
  Speaker 1: key role in in the grid. There're the main supplier
• 23:19
  Speaker 1: of of fuel and power to the Texas grid and
• 23:22
  Speaker 1: much of the US. You've also had coal plants that
• 23:26
  Speaker 1: are experiencing mechanical issues. Um, You've had a nuclear plants
• 23:30
  Speaker 1: that tripped offline on Monday morning. The South Texas Project
• 23:33
  Speaker 1: had one of two reactors because of like uh, some
• 23:37
  Speaker 1: steam generator issues, a pump field. So there's a lot
• 23:40
  Speaker 1: of different issues that are contributing to the outages. UM.
• 23:45
  Speaker 1: Fuel prices, like natural gas prices have skyrocketed. They just
• 23:49
  Speaker 1: hit a thousand or close to a thousand dollars NS
• 23:52
  Speaker 1: in Oklahoma. Production is way down in the Permian, and
• 23:57
  Speaker 1: like Oklahoma, which Texas is, are like the largest producer
• 24:03
  Speaker 1: of fuel, but we can't get it to the right
• 24:05
  Speaker 1: places at the right time. Hey, Marine, you know, a
• 24:07
  Speaker 1: couple of years ago, I read a book entitled The
• 24:10
  Speaker 1: Grid and it's I know it's a little nerdy, but
• 24:12
  Speaker 1: it kind of, you know, kind of walked us through
• 24:14
  Speaker 1: the development electricity in the United States. And one of
• 24:17
  Speaker 1: the things I learned that is Texas is kind of
• 24:19
  Speaker 1: really not on the United States grid. They've got their
• 24:22
  Speaker 1: own grid, it's not regulated at the federal level. Is
• 24:25
  Speaker 1: that contributing to any of the problems in Texas? So
• 24:30
  Speaker 1: you've got exactly right. They are the lone star state
• 24:32
  Speaker 1: and they are maintaining that in the electricity market too.
• 24:37
  Speaker 1: They are set up as an official grid by UM
• 24:41
  Speaker 1: the Federal Energy Regulatory Commission, but they have deliberately limited
• 24:45
  Speaker 1: how many inner ties, so how many high voltage lines
• 24:48
  Speaker 1: go out and connect to neighboring states. So it does
• 24:52
  Speaker 1: isolate them from importing power, and they are right now
• 24:55
  Speaker 1: importing as much as they can from neighboring states and
• 24:59
  Speaker 1: even from Mexico. So it does, you know, limit their
• 25:03
  Speaker 1: ability for alternative supplies and could be a reason why
• 25:06
  Speaker 1: they are seeing maybe limited ability to like UM to
• 25:12
  Speaker 1: you know, you know, find other supplies. UM. But again,
• 25:14
  Speaker 1: you know, California had an issue of like just a
• 25:18
  Speaker 1: few months ago with blackouts and they have way more ties,
• 25:22
  Speaker 1: but they also ran into issues. Yeah, so it's interesting.
• 25:27
  Speaker 1: So any sense of timing here, UM Marine in terms
• 25:30
  Speaker 1: of when things might get a little bit back to normal,
• 25:33
  Speaker 1: I know, it's dependent upon the weather. But what are
• 25:35
  Speaker 1: you hearing? So it depends on the weather, But it
• 25:39
  Speaker 1: really the big factor is going to be how fast
• 25:42
  Speaker 1: can power plants that tripped offline come back online? And
• 25:45
  Speaker 1: we keep seeing updates from the Texas grid operators that
• 25:49
  Speaker 1: within hours they'll get more generation and that should alleviate
• 25:53
  Speaker 1: the you know, some of the outages like that people
• 25:55
  Speaker 1: are experiencing. But you know, the conditions are going to
• 25:58
  Speaker 1: last like like into Tuesday. Parts of the South are
• 26:03
  Speaker 1: going to see like extreme conditions potentially into Thursday. So
• 26:07
  Speaker 1: there are a lot of moving parts and and that's
• 26:09
  Speaker 1: why it makes it really difficult to predict. Um. Yeah, yeah,
• 26:13
  Speaker 1: it's just been just been you know, when we have
• 26:16
  Speaker 1: power issues up here, you know, we see the trucks
• 26:19
  Speaker 1: from the rest of the country come here to help
• 26:21
  Speaker 1: us out and hopefully the rest of the country can.
• 26:23
  Speaker 1: How about Texas and the other areas that are getting
• 26:26
  Speaker 1: hit hard? And Marine Malt, natural gas and power markets
• 26:28
  Speaker 1: reporter for Bloomberg, Thank you so much for joining us
• 26:30
  Speaker 1: in matt This seems like this is a weather driven
• 26:32
  Speaker 1: issue when the good folks down in Texas is not
• 26:35
  Speaker 1: the bat batting down the hatches for a few guys.
• 26:37
  Speaker 1: I'd say coincidentally, I just watched last night the Day
• 26:40
  Speaker 1: after Tomorrow. Have you seen that with um Dennis? Yeah,
• 26:44
  Speaker 1: you're reading the grid right, you're doing the highbrow. You're
• 26:47
  Speaker 1: doing the highbrow in the weeds and I'm watching the
• 26:49
  Speaker 1: Dennis Quaid movie. But that's about um. Cold weather due
• 26:52
  Speaker 1: to climate change just freezing over North America and it's
• 26:55
  Speaker 1: just so's they're probably feeling that down in Texas. Thanks
• 27:01
  Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe
• 27:04
  Speaker 1: and listen to interviews of Apple Podcasts or whatever podcast
• 27:08
  Speaker 1: platform you prefer. I'm Matt Miller. I'm on Twitter at
• 27:12
  Speaker 1: Matt Miller three. On Fall Sweeney, I'm on Twitter at
• 27:16
  Speaker 1: pt Sweeney. Before the podcast. You can always catch us
• 27:18
  Speaker 1: worldwide at Bloomberg Radio.