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Energy, Equities, and Tech (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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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
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. Of course, here in
0:22
Speaker 1: the US, we have the SMP year to date off
0:25
Speaker 1: more than and asked that close to thirty percent. When
0:29
Speaker 1: you go over to the UK, it's not nearly as bad.
0:31
Speaker 1: The foot seat down around nine percent from it's high
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Speaker 1: of the year. Uh so just some you know, a
0:37
Speaker 1: little bit better performance. But it's been a crazy, i
0:40
Speaker 1: don't know week or ten days or over the UK.
0:42
Speaker 1: Let's get the latest what's going on in the UK
0:44
Speaker 1: and new euro markets. We do that with Tim Craighead.
0:46
Speaker 1: He's a director of Research and senior European strategist for
0:48
Speaker 1: Bloomberg Intelligence. He's based in London. Tim, crazy time for
0:53
Speaker 1: the UK market and just the I'm talking to stock market,
0:56
Speaker 1: the currency market, the bond market in the last ten day.
0:59
Speaker 1: Because you're only down from a pounds but at the
1:03
Speaker 1: beginning of your a pound was a dollar thirty five,
1:05
Speaker 1: right now it's a dollar twelve. The currency issue is
1:10
Speaker 1: always an interesting when year to date, I'll make it
1:13
Speaker 1: even sound better, year to date that puts he's down
1:15
Speaker 1: about five and a half percent, but again in local currency.
1:18
Speaker 1: Um so, look, it has been crazy. Actually used that
1:22
Speaker 1: word earlier this morning and something I was writing, and um,
1:26
Speaker 1: you know, part of this is what's going on with politics,
1:29
Speaker 1: with a new Prime minister putting forward some policies that
1:33
Speaker 1: clearly have calls disturb Part of this is um folding
1:39
Speaker 1: through into the bond markets, where we've had a Catharsis
1:43
Speaker 1: of sorts because of some you know, I won't go
1:46
Speaker 1: into the detail, but this thing called liability driven investments,
1:50
Speaker 1: which is how pension plans across the UK have been
1:54
Speaker 1: trying to deal with the low interest rate environment, has
1:56
Speaker 1: caused sort of havoc um at all sorts of issues,
2:01
Speaker 1: like even the Bank of England, while it wants to
2:05
Speaker 1: tighten policy, it's had to be buying bonds to make
2:08
Speaker 1: sure that the market was functioning appropriately. All sorts of
2:12
Speaker 1: craziness and in the end, um, you know, we end
2:15
Speaker 1: up with the UK trading at about the foot see
2:18
Speaker 1: trading at about eight point seven times forward earnings, which
2:23
Speaker 1: is pretty freaking nice from the standpoint evaluation. The question
2:28
Speaker 1: is where do we go from here? And we're looking
2:30
Speaker 1: right in the teeth of of the third quarter earnings,
2:34
Speaker 1: and I think that's the that's the key for the
2:39
Speaker 1: overall European market right now. We haven't seen negative revisions.
2:43
Speaker 1: We think their heads are still spinning from what's happened
2:48
Speaker 1: over the past couple of weeks, right, but um, well,
2:51
Speaker 1: you know the thing, Matt, I think this is like
2:54
Speaker 1: super interesting. You know, there's always a question of consensus
2:57
Speaker 1: numbers and you know, are they Is that really what
3:01
Speaker 1: investors are thinking? The third quarter maybe the period where
3:05
Speaker 1: we see negative revisions, but stocks bounced because the market
3:10
Speaker 1: is already there. Um and if that's the case, along
3:13
Speaker 1: with some technical indicators that show a washout, maybe that's
3:18
Speaker 1: in a good indication. But I think you gotta watch
3:20
Speaker 1: how stocks trade on bad news. Shell today was off
3:23
Speaker 1: on bad news. That's not a good indication. So in
3:28
Speaker 1: the UK and across Europe, I mean, is the expectation
3:31
Speaker 1: that a recession is going to be longer, deeper, perhaps
3:36
Speaker 1: than maybe the market's discounting or what's the market discounting?
3:39
Speaker 1: Do you think? Yeah, so, our our work is suggesting
3:45
Speaker 1: that the market right now is discounting a low single
3:50
Speaker 1: digit decline in earnings for two thousand twenty three. If
3:55
Speaker 1: we end up having excuse me, plus cut in two
4:00
Speaker 1: thousand twenty three earnings and broadly across Europe at least
4:04
Speaker 1: to have some downside, you know. And it's one of
4:06
Speaker 1: those things where um did everybody's talking recession um, but
4:13
Speaker 1: there's still hope that we sort of skirt through UM.
4:16
Speaker 1: And frankly, part of this weather exactly part of this
4:21
Speaker 1: is going to be the weather. You know, how cold
4:23
Speaker 1: is it and how much energy do we have to
4:26
Speaker 1: curtail from a business perspective to keep people warm? You know, Man,
4:31
Speaker 1: I thought I just pictured Tim Hard at work at
4:33
Speaker 1: his desk in Queen Victoria Street. Not the case, niece, France.
4:38
Speaker 1: Explain yourself, Tim, what are you doing in these France?
4:42
Speaker 1: Am I am at? I am at a conference where
4:44
Speaker 1: tomorrow I will be presenting on some of the longer
4:48
Speaker 1: term structural issues that are causing higher for longer inflation
4:52
Speaker 1: and what does it mean? So all right, let's front runner.
4:55
Speaker 1: Let's front run your talk, what are some of the
4:56
Speaker 1: structure reasons. So so our basic premise, and I'm I'll
5:01
Speaker 1: give full credit to Gina Martin Adams because a lot
5:04
Speaker 1: of this is based off some of the good work
5:06
Speaker 1: that she's been doing. But you think about demographics that
5:10
Speaker 1: are reducing labor supply all else being equal, You think
5:15
Speaker 1: about deglobalization, which is reducing are accelerating the trend of
5:22
Speaker 1: the cheap import to be in a source of disinflation.
5:25
Speaker 1: You know, that's that's yesterday's news. Anything about decarbonization, which
5:30
Speaker 1: is not only driving investments that are sucking up basic commodities,
5:36
Speaker 1: but it's also reducing investment in things like hydrocarbon fuels,
5:40
Speaker 1: all of which keep energy prices and probably even underlying
5:44
Speaker 1: metals higher for longer. You take those three and you
5:48
Speaker 1: end up with inflation that yes, it may come off
5:51
Speaker 1: the boil, but we're not going back to pre pandemic levels.
5:54
Speaker 1: And if inflation is that way, then bond rates, you know,
5:58
Speaker 1: interest rates are going to stay somewhat elevated, and that
6:01
Speaker 1: all helps drive increased politility in markets. So it's it's
6:06
Speaker 1: you know, it's one of those things where then it
6:08
Speaker 1: depends there's still opportunities because you know, markets do price
6:12
Speaker 1: some of this stuff in. But clearly, UM, we've been
6:14
Speaker 1: through a rough patch and there's still some slopping just
6:17
Speaker 1: to come. All I know is that when I'm asked
6:19
Speaker 1: to speak at the conference, it's usually in Cleveland in January,
6:23
Speaker 1: you know, not Nice France. I seem to think, Paul,
6:27
Speaker 1: you you've made the trip from New York to con
6:30
Speaker 1: be course, I think I might have done. That might
6:32
Speaker 1: be right, he might be right there calling me out.
6:34
Speaker 1: Tim Craig, head Director Research, Senior European strategist for Bloomberg Intelligence,
6:38
Speaker 1: reporting live from Nice. I guess okay. Plus, I just
6:47
Speaker 1: finished up their first in person get together since March
6:50
Speaker 1: of That was in Vienna. That closed up yesterday. A
6:54
Speaker 1: lot going on in the global space, so we need
6:56
Speaker 1: to check in with Amina Baker, chief OPEC correspondent and
6:59
Speaker 1: Dubai Deputy Bureau Chief for Energy Intelligence. I mean, and
7:03
Speaker 1: I know you're back in London after spending time in Vienna.
7:06
Speaker 1: I'd love to start with just this crazy stories about
7:10
Speaker 1: the UM the North Stream leaks caused by detonations, uh
7:14
Speaker 1: and maybe a sign of of of sabotage. What's the
7:17
Speaker 1: latest that you know. Um. Yeah, the latest is that
7:21
Speaker 1: there is the Swedish investigation into the pipeline leaks and
7:25
Speaker 1: their suspicion is of sabotage. Um. And uh yeah, they
7:31
Speaker 1: basically said that they there might have been an incident.
7:35
Speaker 1: They're still investigating. We understand that Russia isn't part of
7:39
Speaker 1: the team that it's investigating what happened. But um, they
7:43
Speaker 1: said that there was also extensive damage calls to these pipelines,
7:47
Speaker 1: and there's no clear timeline or budget on how these
7:50
Speaker 1: pipelines are going to be repaired, so a lot of
7:52
Speaker 1: uncertainty there. So I mean, obviously they're not coordinating with Russia,
8:00
Speaker 1: nobody is in the West. But OPEC seems to be right. Um.
8:05
Speaker 1: The I just think astounding the cut. Even if they
8:09
Speaker 1: don't really cut two million barrels and we're hearing that, um,
8:12
Speaker 1: the reality could be could be less than a million. Um,
8:16
Speaker 1: it still sends a message to the West. OPEC is
8:20
Speaker 1: firmly on the side of China and Russia in this
8:25
Speaker 1: sort of new paradigm, this new world order. Could it
8:29
Speaker 1: be any clearer? Or am I just seeing this too cynically? Uh,
8:34
Speaker 1: it's you're stating the obvious, and you're stating something that
8:37
Speaker 1: I think the general public would like to buy into.
8:41
Speaker 1: And more and more, I think this war has really
8:43
Speaker 1: polarized the East and the West, and taking a neutral
8:47
Speaker 1: stance against this war is no longer acceptable. I find that,
8:51
Speaker 1: you know, countries are being forced to to take sides,
8:55
Speaker 1: and if they don't take sides, UH, their actions are
8:58
Speaker 1: are immediately and indicative of which side they're on. And
9:02
Speaker 1: that's the case with OPEC plus. I think. I mean
9:04
Speaker 1: at the UN General Council, you saw many of the
9:06
Speaker 1: Gulf States, actually all of the Gulf States voted UH
9:11
Speaker 1: against the war. Everybody wants to see an end to
9:13
Speaker 1: this humanitarian crisis. It's it's not fair to to let
9:16
Speaker 1: it to go on. UM. With OPEC plus, yes, the
9:19
Speaker 1: headline figure is two million bears garls a day cut.
9:23
Speaker 1: We're probably going to see a cut of a million
9:25
Speaker 1: barrels a day a little bit under UH. We'll see
9:27
Speaker 1: how that goes. It depends on the countries. UM. It
9:30
Speaker 1: does send a bad signal to many of the consumer states.
9:35
Speaker 1: You saw the reaction from the US, from the Biden administration,
9:38
Speaker 1: especially UH saying that it's it's the wrong move. UH.
9:43
Speaker 1: And on. The move was criticized. Um, but oil prices
9:47
Speaker 1: didn't move that much. They're at dollars. I mean that
9:51
Speaker 1: was like a two percent jump, so um. Because there
9:55
Speaker 1: is so much uncertainty in the market. I mean, the
9:58
Speaker 1: reason they took this step is one, there's an unprecedented
10:03
Speaker 1: uncertainty on both the demand and the supply side. We've
10:06
Speaker 1: never seen this level of uncertainty before in the past
10:10
Speaker 1: three decades or so, so they needed to prepare themselves.
10:14
Speaker 1: They needed to free up more spare capacity city in
10:18
Speaker 1: anticipation that when the EU sanctions and when the price
10:21
Speaker 1: caps come into effect, we are going to see a
10:24
Speaker 1: disruption and oil supply from Russia. At Energy Intelligence we
10:27
Speaker 1: estimate UM oil supply from Russia to be reduced by
10:31
Speaker 1: a million point to UH one point two sorry million
10:36
Speaker 1: barrels a day. Uh And somebody needs to make up
10:39
Speaker 1: for that supply. So if they don't cut now and
10:41
Speaker 1: free up more spare capacity, they won't be able to
10:44
Speaker 1: supply the market again. UM. So I would just wait
10:48
Speaker 1: and see how open plus reacts when we get a disruption.
10:53
Speaker 1: I'm sure some of that supply is going to come back.
10:55
Speaker 1: I mean just about thirty seconds how bad is it
10:57
Speaker 1: going to be from an energy consumption and availability this
11:00
Speaker 1: winter in Europe? Well, Uh, it is. I mean, we
11:05
Speaker 1: we've heard that a lot of European countries have have
11:07
Speaker 1: stalked up. They seem to be better place and UH
11:10
Speaker 1: compared to UH in previous months. They're prepared. But the
11:14
Speaker 1: problem is not just this winter, how about the coming
11:17
Speaker 1: one UM. Energy crisis is going to continue with us
11:21
Speaker 1: for a while. So yeah, alright, good stuff. Amina Baker,
11:25
Speaker 1: Baker chief OPEC corresponded and to buy Deputy Bureau Chief
11:28
Speaker 1: for Energy Intelligence, giving us kind of the latest coming
11:31
Speaker 1: out of the European energy UH situation very difficult with
11:35
Speaker 1: the war obviously UH in Ukraine and the supply that
11:39
Speaker 1: was critical for much of Europe from Russia now dramatically curtailed.
11:43
Speaker 1: We had the OPEC plus meeting in Vienna the past
11:46
Speaker 1: couple of days, and again the headline coming out of
11:48
Speaker 1: there is OPEC plus agreeing to cut production by two
11:52
Speaker 1: million barrels per day UM and we'll have to see
11:56
Speaker 1: what that means for this market going forward. We want
12:00
Speaker 1: to continue our energy discussion. We started off this half
12:04
Speaker 1: hour kind of getting from the European perspective coming out
12:06
Speaker 1: of Vienna. On the global stage, Let's take a look
12:08
Speaker 1: at the U S energy space. We do that with
12:10
Speaker 1: Scott Levine, senior energy and industry analysts for Bloomberg Intelligence.
12:14
Speaker 1: And Scott we've had a little bit of a stabilization
12:16
Speaker 1: here in oil prices. Talked to us about the oil stocks.
12:20
Speaker 1: You know, I think about some of the oil services
12:21
Speaker 1: names that you follow, like how Haliburton and Schlumbers A
12:25
Speaker 1: those stocks have done great. Is the energy play done
12:28
Speaker 1: for investors or is you still more room to go?
12:31
Speaker 1: I think there is more room to go, Paul Um.
12:33
Speaker 1: The reality here is that while these stocks have had
12:36
Speaker 1: a great year, as you mentioned, they've had a lousy
12:38
Speaker 1: run for the preceding five years, decade longer than that, right,
12:44
Speaker 1: like so uh, so, you know, the backdrop here is
12:48
Speaker 1: that the industry had been obsessed with growth and UH
12:53
Speaker 1: had ignored returns and as result of that had lost
12:56
Speaker 1: the confidence of the investment community, and so uh in
12:59
Speaker 1: order to get that back, they really need to demonstrate
13:02
Speaker 1: UH discipline. And so in a year where you've seen
13:05
Speaker 1: oil push a hundred and twenty dollars in the in
13:08
Speaker 1: March after the invasion of of Ukraine, Uh. Even before that,
13:13
Speaker 1: we saw oil prices rise, and investors really wanted to
13:17
Speaker 1: make sure that the industry was going to be measured
13:20
Speaker 1: in terms of uh, capitalizing that and growing in a
13:23
Speaker 1: discipline manner. And so we've seen that and uh, and
13:27
Speaker 1: I think the companies continue to demonstrate confidence that they
13:30
Speaker 1: will be restrained and and grow within a certain level
13:35
Speaker 1: of of of rational behavior. And is there any way
13:39
Speaker 1: to talk them out of that? I mean, is there
13:42
Speaker 1: any way to get them to pull all the oil
13:45
Speaker 1: out of the ground here, because otherwise we have to
13:49
Speaker 1: send our president over to Saudi Arabia having him court
13:52
Speaker 1: Mohammed bin Salmon or um, you know, change the rules
13:56
Speaker 1: so that we can remove sanctions from countries like Venezuela
13:59
Speaker 1: and tap their oil, Like why don't we just get
14:01
Speaker 1: our own? The industry can't grow like that, you know,
14:04
Speaker 1: even though you can add a little bit more rigs
14:06
Speaker 1: here on the margin here and there, etcetera. To ramp
14:09
Speaker 1: up production and ramp down production is a much more
14:12
Speaker 1: gradual process. So even in an environment like this, you
14:15
Speaker 1: see a spike and oil of ten fifteen dollars in
14:18
Speaker 1: a given week, and we've seen it up eight dollars
14:21
Speaker 1: or close to that. This week. You're not gonna see
14:23
Speaker 1: rig count on Friday jump by fifteen or twenty or
14:26
Speaker 1: anything like that, will be up by one or two. See,
14:28
Speaker 1: I think I'm just gonna go down to Texas myself
14:30
Speaker 1: and put a hole in the ground and get some
14:31
Speaker 1: re equipment. What's come back? Is it just that discipline?
14:34
Speaker 1: Do they not trust the government um or do they
14:39
Speaker 1: not really have that much spare capacity to tap? Yeah?
14:44
Speaker 1: Now there is this capacity. I think the it's a
14:46
Speaker 1: combination of the way the business works and the fact
14:50
Speaker 1: that gramping production is a gradual process, and also the
14:53
Speaker 1: past five years. And then they're committed to winning investors
14:57
Speaker 1: back to this sector after a lengthy all in turn,
15:01
Speaker 1: and and and they're committed to grow in a rational manner.
15:03
Speaker 1: That's really the key answer that. All right, anytime we
15:06
Speaker 1: talk energy, we need to get the political angle because
15:08
Speaker 1: it is a political football. And to do that, we
15:11
Speaker 1: welcome Joe Matthew Bloomberg News down and watching need CEC.
15:15
Speaker 1: We got Mint Bloomberg Interactive Brooker Studio in New York.
15:17
Speaker 1: Sound on from here today right from this spot. Yes,
15:20
Speaker 1: oh nice, alright, Joe. So this administration it's not well
15:25
Speaker 1: loved by our good friends down in Texas and Oklahoma.
15:28
Speaker 1: How do you think the administration or the just the
15:30
Speaker 1: political wins in d C are about our energy policy? Well,
15:33
Speaker 1: it's just it really has become a game of trust here, right.
15:37
Speaker 1: I had a former energy official from the Trump administration
15:40
Speaker 1: on the program last night and he says, hey, we
15:42
Speaker 1: got the band rolling here within a year. That that
15:45
Speaker 1: the Biden administration, if there were guarantees that came with
15:48
Speaker 1: the pleas for more production, could in fact start to
15:51
Speaker 1: see a meaningful increase within a year or so. I
15:53
Speaker 1: don't know if that's even realistic, but the Biden administration says, no,
15:56
Speaker 1: they're sitting on nine thousand, you know, Lisa's right. Still,
16:00
Speaker 1: absolutely they are. And of course the truth is probably
16:04
Speaker 1: somewhere in between because a lot of these companies haven't
16:06
Speaker 1: been approved to do some of the stuff they want.
16:08
Speaker 1: The political capital that was spent though on that fist
16:10
Speaker 1: bump is pretty remarkable here, and even Democrats are really
16:13
Speaker 1: angry about this. I don't know if you saw this
16:14
Speaker 1: tweet from Chris Murphy and Connecticut the Senator, I thought
16:18
Speaker 1: the whole point of selling arms to the Gulf States
16:20
Speaker 1: despite their human rights abuses, nonsensical Yemen war, working against
16:23
Speaker 1: US interests in Oblibias, Dan, etcetera. Was when an actual
16:27
Speaker 1: crisis came, the Gulf could choose America over Russia and China.
16:32
Speaker 1: And that's kind of what we're talking about here in
16:34
Speaker 1: the tweets from a Democrat from Connecticut. That is painful. Um,
16:40
Speaker 1: And yet we do sell them a ton of very
16:45
Speaker 1: serious weapons with which they kill a lot of people,
16:49
Speaker 1: you know, And I think it's difficult to stomach, especially
16:52
Speaker 1: if they're gonna side with Russia and China at a
16:54
Speaker 1: time like this. What about releasing the SPR. I mean,
16:57
Speaker 1: I thought back in the day that was for emergency purposes,
17:00
Speaker 1: but it seems like now it's for They goes on
17:04
Speaker 1: for a pretty long time here. It's kind of amazing
17:05
Speaker 1: that the conversation now though, is really about refilling it
17:08
Speaker 1: and whether the United States will go by Middle East
17:10
Speaker 1: oil at a premium to refill the SPR. That's gonna
17:13
Speaker 1: be a whole fun conversation after the holl of these two.
17:15
Speaker 1: All right, So we just want to get a sense here, Scott,
17:18
Speaker 1: of of the the big oil companies that you cover
17:21
Speaker 1: here in the US, are they bullish about oil longer
17:25
Speaker 1: term is the peak oil discussion thing in the past.
17:28
Speaker 1: But you're you're bullish on these companies, right, I am
17:31
Speaker 1: and UH. I think that the the biggest issue the
17:34
Speaker 1: companies really have had UH with the Biden administration is
17:39
Speaker 1: really the fact that they've been demonized with regard to UH,
17:44
Speaker 1: the whole energy transition. They're being made to be the
17:48
Speaker 1: black hat essentially, right. I think all the major oil
17:52
Speaker 1: field companies have renewable energy businesses, they're all involved in
17:57
Speaker 1: these types of things, but they feel like they've just
18:00
Speaker 1: been the whipping boy for so long, and the reality
18:03
Speaker 1: is the heart of their business. If you're Haliburton, if
18:06
Speaker 1: your slumberj is oil and gas production, okay, and it
18:09
Speaker 1: will be ten years from now, and it will be
18:10
Speaker 1: twenty years from now. Despite the fact that they're harvesting
18:13
Speaker 1: and growing all of these energy transition businesses to support
18:17
Speaker 1: hydrogen battery storage, slumberside and announcement theory yesterday that they're
18:21
Speaker 1: supporting lithium mining. They're involved in all those businesses, but
18:26
Speaker 1: they have feel like the government hasn't been forthright about
18:29
Speaker 1: the reality of the energy transition, how long it will take,
18:32
Speaker 1: and they feel like the demonization of carbon has has
18:36
Speaker 1: gone way too far. Look as the as the Saudi is,
18:40
Speaker 1: how they feel about Europeans burning trash to stay warm
18:43
Speaker 1: this winter. There's such a political side of this, and
18:46
Speaker 1: and it's such a global situation now that the United
18:48
Speaker 1: States may really find itself having to lean into this.
18:51
Speaker 1: The Biden administration wants to forward this transition. But as
18:54
Speaker 1: even Elon Musk, the king of the electric car, will
18:56
Speaker 1: tell you, we need more oil now to make that happen. So,
19:00
Speaker 1: I mean his administration are they sensitive to that, because
19:02
Speaker 1: I don't see it. I mean the kind of the
19:04
Speaker 1: comments that Scott sees from his companies. Just President Biden,
19:09
Speaker 1: what was he getting off a helicopter or something on
19:11
Speaker 1: the lawn at the White House saying the Middle Eastern
19:13
Speaker 1: trip to Saudi or aven trip wasn't about all. Didn't
19:15
Speaker 1: regret it, of course, but he said that before they
19:17
Speaker 1: went to so we wouldn't have this segment right now.
19:19
Speaker 1: But of course it was about oil largely, and it
19:21
Speaker 1: was about security. But you can't have security without oil
19:24
Speaker 1: and vice versa. Yes, Look, this is uh, this is
19:27
Speaker 1: an issue when you also hear reports now on the
19:29
Speaker 1: terminal about loosening sanctions against Venezuela. So you know which
19:33
Speaker 1: bad guy do you want to buy for room? All right,
19:36
Speaker 1: Joe Matthew, thanks so much for joining us on short notice.
19:38
Speaker 1: Joe Matthew Uh covering off Things, Washington, d C. For
19:42
Speaker 1: Bloomberg newsm Sound absolutely good stuff. Scott Levin, he covers
19:48
Speaker 1: the energy uh space Industrial space for Bloomberg Intelligence. Thanks
19:52
Speaker 1: those guys for joining us here in our Bloomberg Interactive
19:54
Speaker 1: Brokers studio. Looking at Wacoud oil, it's up seventy one
19:58
Speaker 1: eighty eight dollars forty five cents of barrel for w
20:01
Speaker 1: t I Crude. Well, this Elon Musk Twitter story is
20:08
Speaker 1: kind of like, you know, an accident you pass on
20:10
Speaker 1: the road. You can't you can't, you know, you can't
20:13
Speaker 1: help yourself at slowing down and take a look. And
20:15
Speaker 1: this has just been just an amazing saga here. So
20:17
Speaker 1: we want to break it down in some detail. We're
20:19
Speaker 1: gonna do that with Dan Ives, Managing Director and senior
20:21
Speaker 1: Equity analyst for web Bush Securities, also joining us here
20:25
Speaker 1: in our Bloomberg Interactive Broker Studios Men Deep Seeing. He's
20:27
Speaker 1: our senior technology analyst Bloomberg Intelligence. Dan, let's start with you,
20:32
Speaker 1: is Elon Musk gonna get this company? And if so,
20:36
Speaker 1: what's he gonna do with it? An easy part for
20:41
Speaker 1: Musk is actually buying It's a hard part. It's gonna
20:43
Speaker 1: be fixing it. I mean, Twitter has really been a
20:46
Speaker 1: disaster for the last four or five years, and from
20:48
Speaker 1: a growth perspective. But I think now there's still some
20:52
Speaker 1: high steaks poker going on between Musk and the Twitter
20:55
Speaker 1: board lawsuit. You're going to Delaware's the web and das
20:58
Speaker 1: away and I think to find nthing continues to be
21:01
Speaker 1: front and center, especially the debt financing, and I think
21:04
Speaker 1: that's caused some nervousness at Lease on the stock. Um
21:08
Speaker 1: is he going to be able to buy it? What's
21:10
Speaker 1: your what's your thoughts on whether or not he actually
21:13
Speaker 1: gets this deal done? Yeah? I believe now, especially the
21:18
Speaker 1: writing on the wall going into Delaware, I believe as
21:21
Speaker 1: early as next week he will own Twitter. You know,
21:24
Speaker 1: in terms of where this ultimately ends up the board,
21:26
Speaker 1: I think we'll agree to this, but you know, obviously
21:29
Speaker 1: what does that mean, Dan? I mean, if he's gonna
21:32
Speaker 1: own Twitter, he has to raise billions and billions of dollars.
21:36
Speaker 1: People are starting to back out. Now, surely the banks,
21:40
Speaker 1: well maybe the banks will try as well in terms
21:43
Speaker 1: of debt financing. So how does he does he have
21:45
Speaker 1: to sell Tesla shares? Yeah, so he So it's a
21:48
Speaker 1: great question because obviously it's weight on Tesla. He's sold
21:52
Speaker 1: already a significant trying about fifties billion in terms of
21:55
Speaker 1: tests of stock. You know, we've estimate he could sell
21:58
Speaker 1: upwards of another three big allion, but I think that's
22:01
Speaker 1: sort of a contained amount. Now when you talk about
22:04
Speaker 1: partners or other sort of banling, that obviously would add
22:07
Speaker 1: to some of the financing stress. But and it continues
22:10
Speaker 1: to be arguing. And know we've talked about four is
22:12
Speaker 1: that this was a nightmare deal from us and now
22:15
Speaker 1: ultimately he's basically trading in Calvia are testa stock for
22:20
Speaker 1: a two dollars slice of pizza and Twitter. That's I
22:24
Speaker 1: fully agree with that, But this is of his own making.
22:27
Speaker 1: Mendip Singh here, I want to bring you in. Let's
22:29
Speaker 1: assume Elon must buys Twitter. Realistically, you've known this company
22:35
Speaker 1: for a long time. Realistically, what can he do to
22:38
Speaker 1: improve the fortunes of Twitter? Well, so think of any
22:42
Speaker 1: social media company, right, it's all about the network and
22:46
Speaker 1: you know the daily active users and how they engage,
22:50
Speaker 1: and ultimately you can monetize the eyeballs. Granted, Twitter hasn't
22:55
Speaker 1: done a great job, but that's where I think it's fixable.
22:58
Speaker 1: It's not something that you know, nobody can fix. It's tough,
23:03
Speaker 1: but I think Twitter is a unique asset simply because
23:06
Speaker 1: of you know, the engagement and the community aspect they have,
23:10
Speaker 1: and he has talked about, you know, it should have
23:12
Speaker 1: a better constructure. Right now, Twittor has the most bloated
23:15
Speaker 1: constructure among all the social media names. So I think
23:19
Speaker 1: the first thing is to clean up the constructure, but
23:21
Speaker 1: also figure out a way to monetize the engagement better
23:24
Speaker 1: and I'll be a combination of both ads and subscriptions.
23:27
Speaker 1: And then deep, I mean the balance sheet. Assuming he
23:29
Speaker 1: does raises twelve and a half billion dollars of debt,
23:32
Speaker 1: this seems gonna be leveraged. Just by my super back
23:34
Speaker 1: at the envelope, you know, ten times or something ebitda,
23:37
Speaker 1: I mean I need to seem to be two to
23:39
Speaker 1: three or four times ebitda. Well, so that's where he
23:42
Speaker 1: can raise the ibada and and that's what I mean,
23:45
Speaker 1: like if once you clean up the constructure, you introduce subscriptions,
23:49
Speaker 1: and look, it's not that easy. I mean, we can
23:51
Speaker 1: talk about a plan, but there is no kind of
23:54
Speaker 1: playbook here. He's gonna try things out and he has
23:57
Speaker 1: to find someone to run the company first. He's not
23:59
Speaker 1: going to do it himself. So clearly a lot of unknowns.
24:02
Speaker 1: But we know Twitter was the most inefficient when it
24:05
Speaker 1: comes to the social media platforms, and I think there
24:09
Speaker 1: is a clean out that can be done over there.
24:11
Speaker 1: Dan does, does this sour? What has been your very
24:15
Speaker 1: bullish call on Tesla in a sense that perhaps Elon
24:18
Speaker 1: Musk is losing focus? Is that factor into your analysis? Well,
24:23
Speaker 1: I think that's been some of the worry here is
24:25
Speaker 1: that he's going to juggle a lot of balls. This
24:27
Speaker 1: stay sacks as well as Twitter as Mandy. I do
24:30
Speaker 1: believe he farms out the management of it in terms
24:33
Speaker 1: of Twitter, but there's nowhere. This is just a disaster
24:38
Speaker 1: deal from Musk, and it's weighed on Tesso Stock and
24:42
Speaker 1: then and now I think it's been put a little
24:44
Speaker 1: in the penalty box until this soap opera cleared. His
24:50
Speaker 1: text messages that were released as a result of court
24:53
Speaker 1: case included one um between Elon Musk and someone called
24:57
Speaker 1: t J. That's why the speculated that that's his ex
25:00
Speaker 1: wife to Lula Riley starts out with a tweet from her.
25:04
Speaker 1: She says, quote, can you buy Twitter and then delete it? Please?
25:07
Speaker 1: X X? This is gonna Is it? Just too optimistic
25:11
Speaker 1: and hopeful Dan that there's any chance he does that. Look,
25:16
Speaker 1: I think the bigger issue for Musk is that once
25:21
Speaker 1: he signed those documents, he crossed the invisible gray line
25:26
Speaker 1: and now he's going to ultimately on Twitter, and he
25:28
Speaker 1: got cold feet. He tried to escape through it in
25:31
Speaker 1: terms of the Bob issue, which is a big issue,
25:33
Speaker 1: and now he essentially's going to own a house that
25:36
Speaker 1: he doesn't want to live him. Alright, guys, this is
25:39
Speaker 1: just amazing and and man, deeper stuff to finish up here. Um,
25:44
Speaker 1: you know, I guess the question is what advertisers do?
25:46
Speaker 1: Do you think? Are you hearing anything from the avertizing
25:48
Speaker 1: community in terms of this changing ownership? Not truly. I
25:52
Speaker 1: think Twitter is more brand focused, so nothing changes. They
25:55
Speaker 1: were never big in direct response ads, so it's not
25:57
Speaker 1: as if you know they have stopped innovating. Twtor was
26:00
Speaker 1: all about, okay, showing a display at every four or five. Uh,
26:04
Speaker 1: you know, feed and look, I think I mean to
26:08
Speaker 1: give Ellen credit. You have to look at what he
26:11
Speaker 1: has accomplished, you know, when it comes to building a
26:14
Speaker 1: supercomputer and robots, so nothing is impossible. That one really
26:19
Speaker 1: is man saying Bloomberg Intelligence. We appreciate you hearing it
26:22
Speaker 1: being alive in Bloomberg inter Active Broker Studio and Dan
26:25
Speaker 1: Ives managing Director and senior equity analysts on wed Bush
26:28
Speaker 1: Securities with some unvarnished take on Elon Musk and his
26:32
Speaker 1: move to acquire Twitter. That's sixty forty portfolio thing that
26:39
Speaker 1: we kind of grew up with that didn't work out
26:41
Speaker 1: so well this year. We've got stocks off anywhere from
26:43
Speaker 1: twenty to thirty percent this year, and we should have
26:45
Speaker 1: been shorting rates. We should have been shorting rates and
26:47
Speaker 1: get made a tuner in seventy four percent gain this year,
26:50
Speaker 1: and that's what we should have been doing. Whiter sid Yeah,
26:52
Speaker 1: that's a nice Sorry sied Hyder is the name of
26:54
Speaker 1: the hedge fund fund. He did that, But a ton
26:57
Speaker 1: of hedge fund managers have made a killing this year. Yeah, yep,
27:00
Speaker 1: if you can be nimble on those rates, Joe Meyer,
27:03
Speaker 1: CEO and founder of Meyer Capital Joints is here, Joe.
27:06
Speaker 1: I'd love to get your perspective on kind of what
27:09
Speaker 1: we've all experienced year to date, for kind of how
27:13
Speaker 1: did you guys navigate through it and what's your outlook. Hey,
27:18
Speaker 1: Matt and Paul, thanks so much for having me on
27:19
Speaker 1: to get today. Um, you know, obviously been an interesting year.
27:25
Speaker 1: Crypto got hammered from the get go and the technology
27:29
Speaker 1: has gotten beat up. We we started really starting to
27:32
Speaker 1: go back into technology in the middle of June, June
27:35
Speaker 1: seventeen to be exact. Uh, we just felt that it
27:38
Speaker 1: had hit the bottom and it basically has come back
27:40
Speaker 1: down and almost tested that low and so you know,
27:44
Speaker 1: we're we're excited about it. I mean, look, it's been
27:45
Speaker 1: a difficult year. You know, if you take a look
27:48
Speaker 1: at rates. Tom Bark in the Philly Fed really signaled
27:53
Speaker 1: what the Fed was gonna do about four or five
27:55
Speaker 1: months ago when he came out very very hockeyish and
27:59
Speaker 1: and they've been following through on that. So I think
28:02
Speaker 1: you know, to your point six isn't working right now.
28:07
Speaker 1: But you can't look at the world through one one lens.
28:10
Speaker 1: I mean you have to look at it overall. Obviously
28:12
Speaker 1: that the works for some but not all. If younger
28:15
Speaker 1: should be I guess you want to buy low anyway, Um,
28:20
Speaker 1: and if we're not at the bottoms um, we're pretty
28:22
Speaker 1: low right now. So what do you like? What? What stocks?
28:26
Speaker 1: Um are you a fan of right now? Yeah? So
28:30
Speaker 1: we were big into workforce automation. So anything that can
28:35
Speaker 1: be done finding the right technology people or the right
28:38
Speaker 1: worker skills is very very difficult and there's a lot
28:40
Speaker 1: of repetitive tasks that can be done, uh with with technology.
28:44
Speaker 1: So we're not only buying public companies, were also acquiring
28:47
Speaker 1: some private companies in that space. And you kind of
28:50
Speaker 1: made your fortune in that area back in the day.
28:53
Speaker 1: We've we've been an entrepreneur and four of our three
28:56
Speaker 1: companies are currently owned by public companies. So, uh, those
29:00
Speaker 1: are all companies I found it and so it's it's
29:01
Speaker 1: been fun. That's all been fin tech and technology and
29:05
Speaker 1: I and so I have a strong bias for Obviously
29:07
Speaker 1: I like UI Path. I think they're doing some very
29:11
Speaker 1: interesting things with workforce automation. And if you take a
29:16
Speaker 1: look at some of the security needs that are out there,
29:19
Speaker 1: you've got z scale er. Uh, you know, that Z scale.
29:22
Speaker 1: I thinks at one three that's basically a discount from
29:26
Speaker 1: where it was well lots ago. M Ui Path is
29:31
Speaker 1: significantly beat up, but you know it's a mirror company's
29:35
Speaker 1: I think right now it's been as high as the
29:37
Speaker 1: ninety one company I've been into for a very very
29:41
Speaker 1: long time is Zebra. So Zebra is if you see
29:44
Speaker 1: all the bar code scanners that's all about the Internet
29:48
Speaker 1: of Things and tracking and soil. Those feed into the
29:51
Speaker 1: E r P systems and allow people to have a
29:55
Speaker 1: digital twin, if you will, meaning what can they see
29:58
Speaker 1: in the digital world that it is a physical world,
30:01
Speaker 1: and Zebra really drives that. For those of you playing
30:03
Speaker 1: along at home, I just want to get the tickers
30:05
Speaker 1: out Zebra z z b R A um UI path
30:10
Speaker 1: is path p A t H that's a ticker and
30:12
Speaker 1: Z scaler as z s you like micro strategy as well.
30:16
Speaker 1: Is that a play? So everybody thinks it's a bit
30:21
Speaker 1: plain play, and it certainly is, but it's also a
30:24
Speaker 1: technology play. But here's here's where they're going. And so
30:29
Speaker 1: my son who is is doing some interesting things, you know,
30:33
Speaker 1: as we talk about it, and really at a confidence
30:36
Speaker 1: about a year ago, called Bankless Permission List, I guess
30:40
Speaker 1: is the name of it. But basically what we saw
30:43
Speaker 1: there is it's really about web three doto and everybody
30:48
Speaker 1: wants to call it the metaverse, whatever you want to
30:50
Speaker 1: call it. It's the decentralization of work of stuff, of
30:56
Speaker 1: systems of everything, and that's really what what three dotto is,
31:00
Speaker 1: and quite frankly, I think that Michael Saylor and his
31:04
Speaker 1: team understand that. And I think if you buy micro
31:08
Speaker 1: Strategies today, you're getting it for bitcoin, but you're also
31:12
Speaker 1: getting their enterprise business for free, and you're getting their
31:16
Speaker 1: start up mode um web three datto for free. And
31:22
Speaker 1: if you look back on any of these names in
31:25
Speaker 1: five years, you're gonna say, I'm glad I was on
31:27
Speaker 1: the Man Paul and Joe Joe Joe. Is it true
31:32
Speaker 1: that you spend four years of your life inside of
31:34
Speaker 1: an army tank? I did spend actually five years active
31:38
Speaker 1: duty another eight in the reserves. I was on M
31:41
Speaker 1: one and M one A one tanks. And so when
31:43
Speaker 1: I see when I see some of the things with
31:45
Speaker 1: tanks going on in the Ukraine, I cringe a little bit,
31:47
Speaker 1: But I also know that technology is last are where
31:52
Speaker 1: are you stay. Where were you stationed. I was in
31:55
Speaker 1: Germany and then I was also in the States. Was
31:58
Speaker 1: actually in the reserve during the first called for but
32:01
Speaker 1: a lot of my friends were overseas. And you know
32:04
Speaker 1: what nobody really recognizes. We've got Veterans Day coming up
32:08
Speaker 1: here about for SOMETHINGOW days. You know, it's the families
32:11
Speaker 1: that really do a lot for our veterans, because if
32:13
Speaker 1: the families at home aren't aren't supporting your soldiers and
32:17
Speaker 1: their men and women in the field, that it makes
32:19
Speaker 1: it difficult. Joe, thanks for your service. We really appreciate it,
32:22
Speaker 1: and thanks for coming on today. Joe Meyer, CEO and
32:24
Speaker 1: founder of Meyer Capitol. Thanks for listening to the Bloomberg
32:30
Speaker 1: Markets podcast. You can subscribe and listen to interviews with
32:33
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
32:38
Speaker 1: I'm on Twitter at Matt Miller three. Pet On Ball
32:42
Speaker 1: Sweeney I'm on Twitter at pt Sweeney. Before the podcast,
32:45
Speaker 1: you can always catch us worldwide at Bloomberg Radio.