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Real Estate, Markets, and Energy (Podcast) · 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
• 0:11
  Speaker 1: with essential market moving news. Find a Bloomberg Markets podcast
• 0:15
  Speaker 1: on Apple podcast or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Overall, we are seeing
• 0:22
  Speaker 1: the continuing contrast contractions in the housing market. We know
• 0:25
  Speaker 1: why interest rates going up, mortgage rates therefore going up,
• 0:28
  Speaker 1: more expensive to be buying your homes. But really, this
• 0:30
  Speaker 1: is the sixth straight month and remember this is a
• 0:33
  Speaker 1: November number, so it is quite backward looking, but it's
• 0:35
  Speaker 1: a sixth straight month. The US penning home sales have
• 0:37
  Speaker 1: indeed fallen. And we've got a great guest to dig into,
• 0:40
  Speaker 1: really where the housing markets going overall, Paul, because one
• 0:43
  Speaker 1: of one, Rich Hill is with us, were pleased to
• 0:45
  Speaker 1: welcome of course, his head of real estate strategy and
• 0:48
  Speaker 1: research coming in stairs. Rich once again move music on
• 0:53
  Speaker 1: manufacturing actually looking a little bit bit better, it would
• 0:55
  Speaker 1: seem for the data, but the housing data once again
• 0:58
  Speaker 1: really painful. Where are we in the cycle? Yeah, sure, look,
• 1:02
  Speaker 1: um uh this was an undeniably challenging year for real
• 1:06
  Speaker 1: estate investment trust known as rates. They were down around
• 1:10
  Speaker 1: through the close of business at the end of last week.
• 1:13
  Speaker 1: Um Uh. Inflation is usually pretty good for real estate,
• 1:15
  Speaker 1: but what is challenging for real estate is stagflation. So
• 1:18
  Speaker 1: what is stagflation. It's it's an environment where interest rates
• 1:21
  Speaker 1: are rising and growth is slowing. That's exactly what played
• 1:24
  Speaker 1: out for most of two thousand and twenty two, where
• 1:26
  Speaker 1: the Fed had to raise interest rates to uh combat
• 1:29
  Speaker 1: inflation that was at its highest level since nineteen eighty.
• 1:32
  Speaker 1: Um So it was really a backdrop of higher interest rates,
• 1:35
  Speaker 1: widening credit spread, and exceling growth that is pressured up
• 1:38
  Speaker 1: the real estate backdrop. So rich, I mean, there's there's
• 1:42
  Speaker 1: folks out there that watched the Fed thinks that, you know,
• 1:45
  Speaker 1: we're gonna see a peak and rates, and we in
• 1:47
  Speaker 1: fact may see some rates come down toward the back
• 1:49
  Speaker 1: half of the year. What's the real outlook for three
• 1:53
  Speaker 1: after what was is you just mentioned was a really
• 1:55
  Speaker 1: challenging Yeah. Sure, Look, we believe that there is potential
• 2:00
  Speaker 1: for low double digit returns in the year ahead. Um Uh.
• 2:04
  Speaker 1: That's pretty good compared to the negative that we had
• 2:07
  Speaker 1: so far this year. What is driving that view? I
• 2:10
  Speaker 1: think there's really three things that we would point out.
• 2:12
  Speaker 1: First of all, growth will undeniably slow in our view
• 2:16
  Speaker 1: UM given recessionary pressures, but it will be well above
• 2:19
  Speaker 1: trend versus prior recessionary environments. So that's point number one.
• 2:23
  Speaker 1: Point number two is that we actually do see a
• 2:26
  Speaker 1: better inflationary backdrop. I mentioned that stagflation where interest rates
• 2:30
  Speaker 1: are rising and growth is slowing, is really challenging for
• 2:33
  Speaker 1: real estate. But we see a backdrop where growth is
• 2:35
  Speaker 1: slowing still in two thousand twenty three, but rates are
• 2:38
  Speaker 1: beginning to come down, So we would call that a
• 2:40
  Speaker 1: stagnationary backdrop. As you transition from stagflation to stagnation, that's
• 2:44
  Speaker 1: a much better backdrop for for for real estate in general.
• 2:47
  Speaker 1: The third point I would make UM is that when
• 2:50
  Speaker 1: the Fed stops raising interest rates, and and that will
• 2:53
  Speaker 1: likely occur at some point over the next up about
• 2:56
  Speaker 1: twelve to eighteen months UM, reeds usually do very well.
• 3:00
  Speaker 1: So to summarize all of that, we think growth is
• 3:02
  Speaker 1: on solid footing. It was slow, but still in solid footing. UM.
• 3:05
  Speaker 1: We think a backdrop of transitioning from stagflation to stagnation
• 3:08
  Speaker 1: is really good for real estate. And the number three
• 3:11
  Speaker 1: as the FED stops raising interstrates, that's historically environment where
• 3:15
  Speaker 1: red produce plus sixteen percent returns historically six months after
• 3:18
  Speaker 1: the FED stops raising interstrates. So altogether we see a
• 3:21
  Speaker 1: better backdrop, which not all real estate is created equal,
• 3:25
  Speaker 1: as I know you know more than anyone. Of course,
• 3:27
  Speaker 1: with your focus on rates, we were breaking, of course,
• 3:30
  Speaker 1: depending home sales. We're talking about a consumer about where
• 3:33
  Speaker 1: one wants to live. But from your perspective, talk to
• 3:36
  Speaker 1: us about the most appetizing parts of the markets that
• 3:38
  Speaker 1: have aren and re recovering the bits that you're still
• 3:40
  Speaker 1: not tempted to be going into at the moment. Yeah. Sure,
• 3:44
  Speaker 1: So what are the selectors of the market that we
• 3:45
  Speaker 1: do like? Um, we like multifamily, particularly in the stun Belt.
• 3:49
  Speaker 1: We like single family rental. I think your point about
• 3:51
  Speaker 1: what's happened to the housing market really speaks to the
• 3:54
  Speaker 1: strength of the single family rental market. It's, uh, buying
• 3:57
  Speaker 1: homes is really unaffordable right now. But if you can
• 3:59
  Speaker 1: sort of rent the American dream, so to speak, through
• 4:02
  Speaker 1: single family rentals, we think that's compelling population migrations to
• 4:05
  Speaker 1: the Sunbelt are continuing to support multi family trends. Again,
• 4:09
  Speaker 1: if you can't buy at home, you have to live somewhere.
• 4:11
  Speaker 1: We do like data centers, um uh. And we like
• 4:13
  Speaker 1: healthcare as well. On the other end of the spectrum,
• 4:17
  Speaker 1: maybe sectors that were a little bit more cautious on,
• 4:19
  Speaker 1: I would say, I would say first and foremost office sector.
• 4:21
  Speaker 1: Maybe that doesn't come as too much of a surprise
• 4:24
  Speaker 1: from from anyone, but as we figure out work from
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  Speaker 1: home trends and other trends, it is still a sector
• 4:29
  Speaker 1: that's pressured, umh. And then hotels were a little bit
• 4:31
  Speaker 1: more cautious on as well. So Rich, Caroline and I
• 4:34
  Speaker 1: were asconced here in Bloomberg's headquarters in Midtown Manhattan, and
• 4:38
  Speaker 1: as we yes in the office, thank you. And as
• 4:41
  Speaker 1: we look around we see a lot of empty office
• 4:44
  Speaker 1: buildings in midtown Manhattan. If I'm an office rate manager,
• 4:48
  Speaker 1: what do I do? I mean, it's not just New
• 4:51
  Speaker 1: York at San Francisco, it's other major markets. Is there
• 4:54
  Speaker 1: a solution? Yeah, So let me make a couple of comments.
• 4:58
  Speaker 1: First and foremost, I think we paint office with maybe
• 5:00
  Speaker 1: too big of a proof, too broad of a brush new,
• 5:03
  Speaker 1: clean and green office we think is very well positioned,
• 5:06
  Speaker 1: and I think you can probably look outside your headquarters
• 5:08
  Speaker 1: and see that some of the newer buildings are doing
• 5:10
  Speaker 1: quite well. We think, um uh it's called suburban office
• 5:15
  Speaker 1: is well positioned, particularly in the sun Belt. But where
• 5:17
  Speaker 1: there's really much more of a challenge is Class B
• 5:19
  Speaker 1: and C office properties. Those are properties that will built
• 5:22
  Speaker 1: in the nineteen seventies of the nineteen eighties, and there
• 5:24
  Speaker 1: hasn't been a lot of money put into them. So
• 5:26
  Speaker 1: what do you have to do. But you have to
• 5:28
  Speaker 1: find a way to reposition them, redevelop them. Uh, there's
• 5:31
  Speaker 1: not an easy, one fit all solution. We've started to
• 5:33
  Speaker 1: see some friends of redeveloping them into multi family properties,
• 5:37
  Speaker 1: but I think it's going to take down a little
• 5:38
  Speaker 1: bit of a combination for entrepreneurs coming in, existing owners
• 5:41
  Speaker 1: working together to find a solution. The easiest one that
• 5:44
  Speaker 1: people are talking about is redeveloping them in a multifamily
• 5:48
  Speaker 1: um like. That's that's not easy, very very very hard.
• 5:53
  Speaker 1: The good news is the land underneath most of these properties,
• 5:56
  Speaker 1: particularly in New York City San Francisco, is pretty valuable,
• 6:00
  Speaker 1: So I do think we'll find a solution, but it's
• 6:02
  Speaker 1: really a question of where's the net operating income growth growing?
• 6:04
  Speaker 1: How much capexs do you have to spend? Uh, And
• 6:07
  Speaker 1: that's why the sector continues to be under pressure. Rich,
• 6:10
  Speaker 1: I'm kind of interesting. Also, you didn't just mention offices
• 6:12
  Speaker 1: that we've prided you with, but also the hotel sector.
• 6:14
  Speaker 1: Why are you worried about the hotel sector? Yeah? Look, um,
• 6:19
  Speaker 1: I think there. I think the easy solution is that
• 6:22
  Speaker 1: maybe travel is coming down from peak levels that we
• 6:24
  Speaker 1: saw in two thousand and twenty one two two. Um. Yes,
• 6:28
  Speaker 1: business travels coming back up. But one of the major
• 6:31
  Speaker 1: issues that I don't think a lot of people maybe
• 6:33
  Speaker 1: unpack enough is how much labor costs are rising. Um uh.
• 6:37
  Speaker 1: And to run a hotel it is it does require
• 6:39
  Speaker 1: a lot of labor. So that's one of the things
• 6:41
  Speaker 1: that keeps us maybe a little bit more on the sidelines.
• 6:43
  Speaker 1: Growth is beginning to slow. That's pressuring revenue at a
• 6:47
  Speaker 1: time that expenses and labor costs are going up. Hey, Rich,
• 6:50
  Speaker 1: As I drive down to the Jersey Shore on the
• 6:52
  Speaker 1: Parkway or the term Pike, I see tons and tons
• 6:57
  Speaker 1: of you know, just kind of warehouse space. I'm guests
• 7:00
  Speaker 1: sing it's all Amazon dot Com and all that kind
• 7:01
  Speaker 1: of stuff. Is that business overbuilt? Is that still a
• 7:04
  Speaker 1: good growth story? Um Uh, Some aspects of of industrial
• 7:10
  Speaker 1: are still a very very good growth story. I think
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  Speaker 1: if you can find infill locations, um that are new
• 7:15
  Speaker 1: properties that's very well positioned. But look, there has been
• 7:18
  Speaker 1: a significant amount of supply that has come in the
• 7:21
  Speaker 1: logistics space, the warehouse space over the past call it
• 7:24
  Speaker 1: five to ten years, and so if you own an
• 7:27
  Speaker 1: older property in a high supply market, that the growth
• 7:30
  Speaker 1: is probably going to slow. Um. So it is not
• 7:32
  Speaker 1: a one size fits all market anymore. We're still very
• 7:35
  Speaker 1: bullish on the call it the high growth, high barriers
• 7:39
  Speaker 1: to entry infil locations, and I think investors should be
• 7:43
  Speaker 1: aware that that maybe some of the older properties and
• 7:46
  Speaker 1: not well positioned markets with high supply, those could fit
• 7:49
  Speaker 1: based on growth type challengers. Rich, I'm looking at your
• 7:52
  Speaker 1: eight four billion dollars firm wide assets and management. That's
• 7:55
  Speaker 1: not just us, is it? Because we're a global network.
• 7:57
  Speaker 1: We've got European audience with us at the moment as
• 8:00
  Speaker 1: well as or maybe some Asian few are staying up
• 8:02
  Speaker 1: pretty late. Talk to us about why you're thinking globally
• 8:05
  Speaker 1: is attractive in rates. Yeah, yeah, Well, look, I would
• 8:09
  Speaker 1: say we think the best opportunities are certainly in the
• 8:11
  Speaker 1: United States right now. But as you start to think
• 8:14
  Speaker 1: about other opportunities, whether it be uh and some of
• 8:16
  Speaker 1: the Chinese locations that are beginning to open up, I
• 8:18
  Speaker 1: think that's interesting. Some of the major markets in Europe
• 8:21
  Speaker 1: are interesting, but I think we do see the best
• 8:23
  Speaker 1: value in the United States right now. Hey, rich, Let's
• 8:26
  Speaker 1: say I'm an entrepreneur in the real estate business. I
• 8:28
  Speaker 1: want to go buy one of those empty office towers
• 8:30
  Speaker 1: in Midtown Manhattan. Where do I get the money? Do
• 8:33
  Speaker 1: I go over to JP Morgan and borrow some money? Yeah? Uh,
• 8:38
  Speaker 1: So you're you're asking a really interesting question. The debt
• 8:41
  Speaker 1: markets are I would say, um, not frozen by any
• 8:45
  Speaker 1: means um, but they're not. They're not wide open. I
• 8:48
  Speaker 1: do think there is capital debt capital available for a
• 8:51
  Speaker 1: high for a high quality property with a well, well, uh, well,
• 8:56
  Speaker 1: a good sponsor. But there's also a tremendous amount of
• 8:59
  Speaker 1: money on sidelines that's been raised not yet deployed in
• 9:02
  Speaker 1: commercial real estate. Around three hundred billion maybe that's about
• 9:05
  Speaker 1: a call it nine hundred billion, A trillion dollars of
• 9:08
  Speaker 1: buying power once you put some leverage on it. Um.
• 9:10
  Speaker 1: So the debt markets are there. Um, they're not wide open.
• 9:14
  Speaker 1: Easy money has been gone. But I think it's a
• 9:16
  Speaker 1: combination of U finding a cheap debt capital where you
• 9:19
  Speaker 1: can find it, and cheap is all on a relative
• 9:21
  Speaker 1: basis at this point, plus some additional equity from the
• 9:24
  Speaker 1: amount of money on the sidelines. So UM. I think
• 9:26
  Speaker 1: lenders are being much more selective right now than they
• 9:28
  Speaker 1: have been in the past. They're being very focused on
• 9:31
  Speaker 1: what property types they lend to, but more importantly making
• 9:34
  Speaker 1: sure that the sponsor is well capitalized. All right, So
• 9:36
  Speaker 1: my lunch break, I'll walk over to the local, yeah,
• 9:41
  Speaker 1: private bank, or see if I can raise some money
• 9:42
  Speaker 1: here and go buy a midten Manhattan skyscraper. Rich Hill
• 9:45
  Speaker 1: ahead of real Estate Strategy and Research at Cohen and
• 9:48
  Speaker 1: Steers again eighty four billion with a B assets under management.
• 9:51
  Speaker 1: They know what they're doing in the in the reach space,
• 9:53
  Speaker 1: so we love to check in with them. A lot
• 9:57
  Speaker 1: of people are just saying I'm looking for I cannot
• 10:00
  Speaker 1: afford to look back. It was an ugly year. I
• 10:02
  Speaker 1: want to look forward to and see what the opportunities
• 10:05
  Speaker 1: might be bringing Kim Forest Boca Capital Partners, uh founder
• 10:09
  Speaker 1: and c I O Kim again. I think a lot
• 10:13
  Speaker 1: of investors are like me when they just say, uh,
• 10:16
  Speaker 1: in my rearview mirror, I'm looking ahead here. How are
• 10:19
  Speaker 1: you viewing here? After what was just a brutal year
• 10:23
  Speaker 1: in stocks and bonds? Sure? Well, I mean it was
• 10:27
  Speaker 1: a remarkable year, We'll give you that, right, And especially
• 10:31
  Speaker 1: if you had any of the former Fang stocks they
• 10:36
  Speaker 1: did not do well, or if you were into technology,
• 10:40
  Speaker 1: especially semiconductors. These are areas that just have gotten hit.
• 10:45
  Speaker 1: And that's for many reasons, but mostly at least here
• 10:48
  Speaker 1: in the US, it's because of the FEDS quick rais
• 10:51
  Speaker 1: So I guess COVID makes you do things quickly. Your
• 10:54
  Speaker 1: last segment talked about China opening quickly when we tried
• 10:58
  Speaker 1: to get a handle on inflation, and any kind of
• 11:01
  Speaker 1: growth oriented stocks just got killed. But should you care?
• 11:06
  Speaker 1: Should you care if you need the money this year? Yeah,
• 11:10
  Speaker 1: and you had to and you were forced to sell. Yeah,
• 11:12
  Speaker 1: you probably do care, but you really shouldn't if you're
• 11:15
  Speaker 1: a long term investor, because we know growth will come
• 11:19
  Speaker 1: back at some point, and computers really aren't a fad,
• 11:23
  Speaker 1: and semiconductors are going to be something that companies turn
• 11:27
  Speaker 1: to in the future to give them enhanced productivity. And
• 11:31
  Speaker 1: people find UM computers entertaining too, so it's not end
• 11:37
  Speaker 1: game for technology. Kim though, dovetailing those two ideas the FED,
• 11:42
  Speaker 1: but also China. An awful lot of what hit the
• 11:44
  Speaker 1: semiconductor industry was geopolitics. Was the tension between China and
• 11:48
  Speaker 1: the US. The fact that you know, an awful lot
• 11:49
  Speaker 1: of business colpi downe between the two. Now, how are
• 11:52
  Speaker 1: you looking towards that as well? Well? I think it
• 11:56
  Speaker 1: was the natural outcome, not necessarily the disagreement between China
• 12:00
  Speaker 1: and UH, the US. But I think a lot of
• 12:03
  Speaker 1: companies are rethinking their supply chain, and I don't know
• 12:08
  Speaker 1: that everything's going to end up in the US. I
• 12:10
  Speaker 1: think it's really smart to make a more distributed supply
• 12:15
  Speaker 1: chain because what happens if a continent does UM get
• 12:20
  Speaker 1: shut down for whatever reason geopolitical disagreement, UM, you know, UH,
• 12:27
  Speaker 1: I don't know, a large earthquake. I mean, it just
• 12:29
  Speaker 1: seems crazy to have a whole lot of manufacturing in
• 12:33
  Speaker 1: one and only one spot in the world. Hey, Kim,
• 12:37
  Speaker 1: you know, really since the Great Financial Crisis, technology has
• 12:41
  Speaker 1: really led the market Fang stocks, for example, but just
• 12:45
  Speaker 1: big tech in general has led the market both up
• 12:48
  Speaker 1: and down since a you know, two nine. There's a
• 12:52
  Speaker 1: concern here that as maybe this market begins to take off,
• 12:55
  Speaker 1: maybe in the back calf of that that might not
• 12:58
  Speaker 1: be the case. How do you think about big tech
• 13:01
  Speaker 1: and its leadership role? Sure, well, I think a couple
• 13:05
  Speaker 1: of things. First of all, UM, the low interest rate
• 13:10
  Speaker 1: environment that we find ourselves in the world, not just
• 13:12
  Speaker 1: in the US, but in the world, really has driven
• 13:16
  Speaker 1: growth companies. And by that I mean companies that traditionally
• 13:20
  Speaker 1: didn't have to have a super strong balance sheet, were
• 13:22
  Speaker 1: newer in the marketplace, and people were buying them on
• 13:26
  Speaker 1: the prospect that they would one day grow into their
• 13:30
  Speaker 1: valuation right that the cash flow would keep catch up.
• 13:33
  Speaker 1: But a lot of these companies now are big enough
• 13:36
  Speaker 1: to actually have profitable cash flow UM, and I think
• 13:41
  Speaker 1: some of them will come back because they've done great
• 13:45
  Speaker 1: convincing customers to use them, like I don't know, Amazon,
• 13:50
  Speaker 1: But others will probably never reach that peak because people
• 13:54
  Speaker 1: have moved on. UM. Technology is best looked at, in
• 13:58
  Speaker 1: my opinion, as a product of item, right, that increases productivity.
• 14:03
  Speaker 1: It's hard to understand what will catch anybody's imagination online.
• 14:08
  Speaker 1: It just is the metaverse, right yeah, I mean, well,
• 14:11
  Speaker 1: well we could go down the metaverse discussion for a
• 14:13
  Speaker 1: long time. I quickly want to really on the news
• 14:16
  Speaker 1: has been well, the pressure that's been felt by another
• 14:19
  Speaker 1: key celic and Valley leader and indeed want to move
• 14:21
  Speaker 1: to Austin and has perhaps been more distracted by social
• 14:23
  Speaker 1: media than perhaps his car company. Talked us about Tesla
• 14:27
  Speaker 1: and about whether you've been keeping an eye on that
• 14:28
  Speaker 1: stock at tool we actually finally get a reprieve after
• 14:30
  Speaker 1: seven days of selling, which was the longest dressing streak
• 14:33
  Speaker 1: since sure. I mean Elon Musk is one of the
• 14:37
  Speaker 1: most fascinating, fascinating people on Earth, right, Like, let's just
• 14:41
  Speaker 1: shortcut that he's in space, he's in the next wave
• 14:45
  Speaker 1: of cars, and now he is turning his attention towards Twitter.
• 14:49
  Speaker 1: And I don't think we're going to be able to
• 14:51
  Speaker 1: escape that. But it is a concern for Tesla. Are
• 14:54
  Speaker 1: they a car company or are they a technology company?
• 14:57
  Speaker 1: And I would say the valuation has to refer like
• 15:00
  Speaker 1: whatever it is that you believe, Um, I personally think
• 15:05
  Speaker 1: that it will come back that whatever he's doing politically
• 15:09
  Speaker 1: through Twitter is tarnishing his image and causing a lot
• 15:13
  Speaker 1: of people not to want to buyas cars. But also
• 15:16
  Speaker 1: the US, as you mentioned, is kind of in a
• 15:19
  Speaker 1: contentious space with China, and a lot of his revenue
• 15:22
  Speaker 1: has come from that, and it looks like that tiff
• 15:25
  Speaker 1: between the US is affecting um Tesla as well. I
• 15:30
  Speaker 1: wouldn't look for a quick rebound, but I wouldn't count
• 15:33
  Speaker 1: them out either. Always great to have some time if you, Kim,
• 15:36
  Speaker 1: you go back when you're looking at the software and
• 15:39
  Speaker 1: tech Stalks were number two software analysts back at the
• 15:41
  Speaker 1: Wall Street Journal's Best on the Street ranking back in
• 15:43
  Speaker 1: two too, So looking at the space a while good,
• 15:46
  Speaker 1: much the most history in the space, as you Paul,
• 15:49
  Speaker 1: thank you so much. Always great to have Kim Forest
• 15:51
  Speaker 1: Capital Partners founder and CIO talking about the record outputs
• 16:00
  Speaker 1: that we saw in the top Us gas basin, in
• 16:01
  Speaker 1: particular how that antagonized a lot of the power cat
• 16:04
  Speaker 1: chaos that we saw throughout the Christmas period deadly winter
• 16:07
  Speaker 1: storm as well, really perhaps exposing some of the flaws,
• 16:10
  Speaker 1: whether it be the infrastructure, whether it be the provision
• 16:12
  Speaker 1: of energy here in the United States. And well, one
• 16:15
  Speaker 1: man that might well have been exposed to an awful
• 16:17
  Speaker 1: lot of what's just been occurring is one at Toby
• 16:19
  Speaker 1: Rice's presidency of EQT, one of the largest natural gas
• 16:22
  Speaker 1: producers here in the country. And Toby, we know, and
• 16:25
  Speaker 1: you've come on Bloomberg TV and Radio before to really
• 16:28
  Speaker 1: discuss the fact that you feel more infrastructure is needed,
• 16:30
  Speaker 1: particularly the pipeline side of things. But let's just take
• 16:33
  Speaker 1: a step back. During this period, we've just seen wells freeze,
• 16:36
  Speaker 1: pipelines fail, we've seen gas pipe supplies therefore completely plunged,
• 16:40
  Speaker 1: and course this driving up prices. How was EQT hit
• 16:45
  Speaker 1: in the last few days. Well, what we've seen across
• 16:48
  Speaker 1: the country is natural gas production fell about ten due
• 16:54
  Speaker 1: to these freeze offs, which is which is normal. UM
• 16:58
  Speaker 1: in the industry responds very quickly. One thing I would note, though,
• 17:02
  Speaker 1: is that the reliability of natural gas and the share
• 17:05
  Speaker 1: of power generation natural gas performs in the cold weather
• 17:10
  Speaker 1: and specifically compared to renewables where they just don't show up.
• 17:13
  Speaker 1: So thank thank goodness that we've got UM natural gas
• 17:17
  Speaker 1: flowing and keeping the lights. It didn't but it didn't float.
• 17:20
  Speaker 1: I mean to be perfectly frank, it also frows their
• 17:23
  Speaker 1: work and can you know, freeze off how are common
• 17:25
  Speaker 1: as you say, they're normal, But I'm interested to be
• 17:27
  Speaker 1: how you particularly were affected, How was EQT particularly affected?
• 17:31
  Speaker 1: Were you benefiting this this situation, did you have wells
• 17:34
  Speaker 1: freeze what? What was your experience? Yeah, So in Appalachia, UM,
• 17:38
  Speaker 1: we saw about about four bcf a day, which is
• 17:42
  Speaker 1: a little bit over ten percent of our production for
• 17:45
  Speaker 1: the base on EQT specifically was around one to one
• 17:47
  Speaker 1: and a half bcf a day freasons. UM. Those issues
• 17:50
  Speaker 1: are going are scheduled to be resolved by you know,
• 17:53
  Speaker 1: the next couple of days. Uh. This is all part
• 17:55
  Speaker 1: of the winterization preparation plans that we were able to
• 17:58
  Speaker 1: put out. UM. But you know clearly the solution here
• 18:03
  Speaker 1: is to produce more natural gas and have a greater abundance.
• 18:06
  Speaker 1: And the key for us to be able to do
• 18:08
  Speaker 1: that so that we can have some cushion in the
• 18:10
  Speaker 1: systems when things do hit, like whether we know what's
• 18:13
  Speaker 1: going to show up every year. The key is to
• 18:15
  Speaker 1: is to get more natural gas production, and we need
• 18:18
  Speaker 1: more pipeline infrastructure so that we can create the industrial
• 18:21
  Speaker 1: capacity that this country needs to run, because what you're
• 18:25
  Speaker 1: seeing across the board is our industry is pretty much
• 18:28
  Speaker 1: redlining the limited infrastructure that we have right now, and
• 18:33
  Speaker 1: that's really making performance absolutely critical. It would be great
• 18:37
  Speaker 1: if we could have some some relief, and that relief
• 18:39
  Speaker 1: will come from building more pipeline infrastructure, all right, So, Toby,
• 18:43
  Speaker 1: in addition to building more capacity, there are a lot
• 18:45
  Speaker 1: of folks saying more investment needs to be done to
• 18:48
  Speaker 1: improve the weatherization of the existing infrastructure if we assume
• 18:53
  Speaker 1: that we're going to have more extreme weather events going forward,
• 18:55
  Speaker 1: so it's not just more production, but it's better more
• 18:58
  Speaker 1: robust suction and infrastructure. How do you respond to that, Well,
• 19:04
  Speaker 1: I think the I think you can look at places
• 19:06
  Speaker 1: like New England, which is a really great example of
• 19:09
  Speaker 1: the shortfalls that we have with our energy systems here
• 19:12
  Speaker 1: in America. You know, we have the biggest gas field
• 19:15
  Speaker 1: in the world, literally a couple hundred miles away from
• 19:19
  Speaker 1: New England. But they are burning, you know, oil to
• 19:22
  Speaker 1: generate their electricity. About thirty percent of their electricity past
• 19:25
  Speaker 1: few days has come from oil um and only of
• 19:29
  Speaker 1: that electricity is coming from natural gas. The solution there
• 19:32
  Speaker 1: is very simple. It's build more pipeline infrastructure so we
• 19:34
  Speaker 1: can connect you know, are low costs, very responsibly produced
• 19:38
  Speaker 1: natural gas with the demand centers, and you see the
• 19:43
  Speaker 1: lack of infrastructure is the reason why you have prices
• 19:46
  Speaker 1: in different parts of the country like New England, where
• 19:49
  Speaker 1: their energy prices are going to be over twenty dollars
• 19:51
  Speaker 1: this winter, and we'll be selling that same gas here
• 19:54
  Speaker 1: in Appalachia for a cost of five dollars um. These
• 19:57
  Speaker 1: are the really remarkable things. If you want to focus
• 20:00
  Speaker 1: on correcting the issue, it's getting more pipeline infrastructure, and
• 20:03
  Speaker 1: this industry will continue to find ways to make our
• 20:06
  Speaker 1: energy that we produce more reliable through the winterization efforts
• 20:09
  Speaker 1: that are largely already in place. All Right, Given the
• 20:12
  Speaker 1: pipeline issue is an ongoing issue we see with between
• 20:15
  Speaker 1: the government and industry and the marketplace in general, give
• 20:19
  Speaker 1: us a sense where we are now to be with
• 20:22
  Speaker 1: that argument. Here is there a better Do you have
• 20:25
  Speaker 1: a better platform to go to certain regulators in certain
• 20:27
  Speaker 1: states to say we really need more investment here. Here's
• 20:33
  Speaker 1: what's changed with the conversation in um you know, the
• 20:37
  Speaker 1: heading into two. The when people think about energy, the
• 20:41
  Speaker 1: number one thing that people are thinking about is the
• 20:43
  Speaker 1: impact on emissions UM. You know, EQT we put on
• 20:47
  Speaker 1: our plan to Unleash us Energy, which will be the
• 20:50
  Speaker 1: biggest green initiative on the planet. But what has really
• 20:54
  Speaker 1: shown us is that energy security is absolutely critical, just
• 20:58
  Speaker 1: as important. And you can look at what is happening
• 21:00
  Speaker 1: in Europe as an example of what happens when energy
• 21:03
  Speaker 1: security UM slips away and the conversation about energy transition UM.
• 21:11
  Speaker 1: It's really important for people to understand it's going to
• 21:13
  Speaker 1: be impossible to transition if you don't have energy security.
• 21:17
  Speaker 1: And that's what natural gas brings the table. It brings
• 21:20
  Speaker 1: both energy security and it also is the key to
• 21:23
  Speaker 1: lowering emissions around the world. And so with this new perspective,
• 21:28
  Speaker 1: coupled with the fact that now Americans are facing much
• 21:33
  Speaker 1: higher energy bills because of this lack of pipeline infrastructure,
• 21:37
  Speaker 1: you know, that's another thing that's changes. Americans are actually
• 21:40
  Speaker 1: feeling the brunt of this if these energy prices are unnecessary,
• 21:43
  Speaker 1: and there's things that we can do about it, and
• 21:45
  Speaker 1: it's as simple as building more pipeline infrastructure to your
• 21:48
  Speaker 1: point to be wholesale pipe prices social. The six thousand
• 21:50
  Speaker 1: percent and sent parts of the country over this crisis.
• 21:53
  Speaker 1: I'm interested in whether you whether did e QT benefit
• 21:57
  Speaker 1: from the high spot prices so we sell some of
• 22:01
  Speaker 1: our product on on spot. But you know, we've been saying,
• 22:05
  Speaker 1: we've been jumping up and down for the last year
• 22:07
  Speaker 1: saying these high energy prices are completely unnecessary and we
• 22:11
  Speaker 1: would like to see more pipeline infrastructure so we can
• 22:14
  Speaker 1: add supply um so that we can combat these high prices. Now,
• 22:18
  Speaker 1: it's absolutely amazing that we are sitting in the biggest
• 22:22
  Speaker 1: gas field in the world EQUT and we cannot grow
• 22:24
  Speaker 1: production because we do not have access to more pipeline capacity.
• 22:30
  Speaker 1: That is the root cause of the issue, and that's
• 22:32
  Speaker 1: where people need to focus is what can we do
• 22:34
  Speaker 1: to get more pipeline infrastructure so we can get the cheapest,
• 22:37
  Speaker 1: most reliable, cleanest produced energy in the world onto the
• 22:40
  Speaker 1: playing field. And that really is is the focus. Toby.
• 22:44
  Speaker 1: We're Texas last year had some issues talk to us
• 22:47
  Speaker 1: about the Texas grid and just had the Texas gas market,
• 22:51
  Speaker 1: uh their infrastructure there have they made some changes over
• 22:55
  Speaker 1: the last couple of years, some uh, some upgrades perhaps
• 22:58
  Speaker 1: in terms of the weatherization. Yeah, one of the biggest
• 23:02
  Speaker 1: issues that they faced during the winter storm jury was
• 23:05
  Speaker 1: that some of the compressor stations which rely on electricity. UM,
• 23:09
  Speaker 1: those compressors move natural gas to the actual power plants,
• 23:13
  Speaker 1: were not deemed as as critical, which is an oversight,
• 23:17
  Speaker 1: and UM that's what had electricity to get shut off.
• 23:20
  Speaker 1: That was something that was fixed. And I think you
• 23:22
  Speaker 1: can look at Texas performance of natural gas on the
• 23:26
  Speaker 1: grid these past week and you will see very strong
• 23:28
  Speaker 1: performance of natural gas down there in Texas, UM other
• 23:33
  Speaker 1: places that have really struggled to provide the reliability. You're
• 23:36
  Speaker 1: seeing this with utilities across the country, you know, warning
• 23:39
  Speaker 1: and telling people to pinch back their energy needs. It's
• 23:42
  Speaker 1: because we have lack of energy flowing into those areas,
• 23:45
  Speaker 1: and that energy can only flow if we have more
• 23:47
  Speaker 1: pipeline infrastructure. We've got the biggest gas field in the
• 23:50
  Speaker 1: world in Appalachia. We just need more infrastructure, more infrastructure
• 23:54
  Speaker 1: to connect this with the demands that we know is
• 23:57
  Speaker 1: going to continue and mean and clear, we hear your call.
• 24:01
  Speaker 1: You want more infrastructure in terms of pipelines, but just
• 24:05
  Speaker 1: we go back and we'll end where we started. The weatherization.
• 24:08
  Speaker 1: You said, of course there were elements that you know,
• 24:10
  Speaker 1: a lot of there is a lot of depleted. But
• 24:13
  Speaker 1: I did the well, why did so many wells freeze
• 24:16
  Speaker 1: in and of themselves? If you say that weatherization is
• 24:18
  Speaker 1: already sort of on its route and being invested in, well,
• 24:24
  Speaker 1: freeze us happened because when we produced this energy out
• 24:27
  Speaker 1: of the ground, it's a mixture of natural gas, water
• 24:30
  Speaker 1: and also water vapor. UM. You couple that with some
• 24:33
  Speaker 1: of the pressure changes and it creates freezing temperatures, and
• 24:37
  Speaker 1: that creates some ice blockages and the pipes. UM. These
• 24:40
  Speaker 1: are things that can be can be solved through drying
• 24:43
  Speaker 1: out some of the some of the equipment that we
• 24:47
  Speaker 1: the gas that we have flown through UM, and then
• 24:49
  Speaker 1: also making sure we have some lying heaters in place.
• 24:51
  Speaker 1: So these are all things that that we've been dealing
• 24:53
  Speaker 1: with for years. We have tools and techniques to combat that,
• 24:57
  Speaker 1: which is kind of nuts. Why why why therefore did
• 24:59
  Speaker 1: so many freeze? If it's been yeah, and and and
• 25:02
  Speaker 1: another thing is that that's that's important is when we
• 25:04
  Speaker 1: have winter storms, UM. You know, we need to get
• 25:07
  Speaker 1: water trucks to our location so that we can empty
• 25:09
  Speaker 1: to produce water tanks. And when the roads get icy
• 25:12
  Speaker 1: and shut down, it gets hard for us to get
• 25:14
  Speaker 1: water trucks out there to that location, and that means
• 25:17
  Speaker 1: we have to shut in production, not because of freezeroffs,
• 25:20
  Speaker 1: but because we don't have the ability to produce any
• 25:23
  Speaker 1: more water on location. So it's just a little bit
• 25:25
  Speaker 1: of time to get the dozers out and get the
• 25:27
  Speaker 1: roads taken care of. You know, safety is our number
• 25:30
  Speaker 1: one priority, and all of these things are are temporary,
• 25:33
  Speaker 1: and like I said, you know we're gonna have these
• 25:35
  Speaker 1: resolved in the next couple of days. All right, Toby,
• 25:37
  Speaker 1: great stuff, Really appreciate you taking the time to walk
• 25:39
  Speaker 1: us through that, Toby Rice e q T President and CEO.
• 25:46
  Speaker 1: If you march towards the close of trade in Europe,
• 25:48
  Speaker 1: we have thirty minutes left and looks as though we're
• 25:51
  Speaker 1: still seeing some little bit of bit into German debt markets,
• 25:54
  Speaker 1: but overall we are seeing a little bit of nervousness
• 25:56
  Speaker 1: when it comes to the overall equity market and the
• 25:58
  Speaker 1: stocks fifty is currently off by six tens percent. Let's
• 26:01
  Speaker 1: talk about the ECB, about some of the warriors in
• 26:04
  Speaker 1: the European economy, about the outlook for twenty three with
• 26:07
  Speaker 1: one yends eisen Schmidt, his chief European economist and Morgan Stanley.
• 26:11
  Speaker 1: He comes to us on vacation but very kindly turns
• 26:15
  Speaker 1: on his terminal, checks in on his emails and joins
• 26:18
  Speaker 1: us live. We thank you so much, ends happy in
• 26:21
  Speaker 1: between the Christmas festivities and New Year across Europe, and
• 26:25
  Speaker 1: just tell us a little bit about whether you are
• 26:27
  Speaker 1: gathering around your family tables and being peppered with questions
• 26:30
  Speaker 1: as to whether is going to be as bad as Yeah,
• 26:34
  Speaker 1: I thank thanks a lot for for the kind words.
• 26:36
  Speaker 1: And indeed, it's it's always the time, this time of
• 26:39
  Speaker 1: the year when when we economists and our families probably
• 26:42
  Speaker 1: are getting getting tough questions in terms of what's going
• 26:46
  Speaker 1: to be like next year. And now my other leg
• 26:49
  Speaker 1: of the family, my my wife is Spanish, so it's
• 26:51
  Speaker 1: in Spain. The typically I get a whole host of
• 26:54
  Speaker 1: questions also in Spain. You know, um, first time I
• 26:58
  Speaker 1: got tough questions goes around there the housing crisis here
• 27:01
  Speaker 1: in Spain or the banking crisis if you want, That
• 27:03
  Speaker 1: was over seven or eight and levels of the film
• 27:05
  Speaker 1: you that house prices are unsustainably high. That didn't get
• 27:08
  Speaker 1: me a lot of let's say, sympathy around the Christmas table,
• 27:13
  Speaker 1: but it turned out to be right. Now this year,
• 27:16
  Speaker 1: I'd say Spain, at least according to our forecasts, it
• 27:20
  Speaker 1: is probably doing relatively well within the set of countries
• 27:24
  Speaker 1: UM that that formed the R area where Germany is
• 27:27
  Speaker 1: probably the language. We're looking for a recession, a mild
• 27:33
  Speaker 1: one UM in terms of overall year and year growth numbers.
• 27:36
  Speaker 1: Twenty three. V think it's a point too, which is
• 27:39
  Speaker 1: slightly slightly it's had above consensus, it's it's it's slightly
• 27:43
  Speaker 1: below what the CD recently has been saying in their
• 27:46
  Speaker 1: expectation twenty three will look like UM. But you know,
• 27:50
  Speaker 1: I think that the main point here is that the
• 27:52
  Speaker 1: short term dynamic is pretty much well telegraphed. So we
• 27:55
  Speaker 1: are looking all of us, all professional forecasters, including the
• 27:58
  Speaker 1: should be, are looking for a contraction in Q four,
• 28:02
  Speaker 1: which is within the p M s and it's also
• 28:04
  Speaker 1: looking like the latest release of how data are confirming
• 28:07
  Speaker 1: that another contraction quarterly in Q one, And then the
• 28:12
  Speaker 1: debate starts. Is the recovery relatively strong or is it
• 28:15
  Speaker 1: more muted? We think it will be more muted. For instance,
• 28:18
  Speaker 1: the US to be things that will be much stronger,
• 28:21
  Speaker 1: and that has been probably one of the key ingredients
• 28:24
  Speaker 1: and their relatively strong rhetoric at their last meeting in
• 28:29
  Speaker 1: terms of where weights have to go. Ay, gents here
• 28:32
  Speaker 1: in the US, as people think about different scenarios for
• 28:35
  Speaker 1: a potential recession in twenty three, we do have to
• 28:38
  Speaker 1: backdrop that the consumers in pretty good shape. Unemployments at
• 28:41
  Speaker 1: a near historic lows, consumer retail sales continue to be
• 28:44
  Speaker 1: pretty decent. Here give us a sense in Europe how
• 28:47
  Speaker 1: that how the consumer is faring right now? What's the
• 28:49
  Speaker 1: outlook for the consumer as we head into twenty three? Yes,
• 28:53
  Speaker 1: so I think this is a key question also for
• 28:55
  Speaker 1: us here right. I mean, first of all, clearly, the
• 28:57
  Speaker 1: consumer side of the econ many it's not as strong
• 29:01
  Speaker 1: as in the US. That's historically always been the case,
• 29:03
  Speaker 1: So it's it's it's still a very important part of GDP,
• 29:06
  Speaker 1: but just not as high as in the US. That's
• 29:08
  Speaker 1: one second. We have seen lots of impact on things
• 29:12
  Speaker 1: like consumer confidence surveys already since the start of the
• 29:16
  Speaker 1: war in in February, but a lot of that hasn't
• 29:20
  Speaker 1: materialized so far. So for instance, the Q three growth numbers,
• 29:24
  Speaker 1: the last we have for the U area have been
• 29:26
  Speaker 1: particularly strong and driven by consumption. Now the debate is
• 29:30
  Speaker 1: on whether that is actually a reflection of the physical
• 29:33
  Speaker 1: spillovers um or whether this is still you know, COVID
• 29:38
  Speaker 1: reopening dynamics plus excess savings. I mean, there are elements
• 29:41
  Speaker 1: of all these in there. But it's clearly the case
• 29:45
  Speaker 1: that the consumer consumption on our and our expectation, and
• 29:48
  Speaker 1: you know, if you look at data, it's it's it's
• 29:50
  Speaker 1: very difficult to deny that there is weakness to come
• 29:53
  Speaker 1: and that is essentially the backdrop of our growth expectation,
• 29:56
  Speaker 1: of all weak growth expectation that essentially the hit to
• 29:59
  Speaker 1: real the supposably income is coming through inflation will be
• 30:03
  Speaker 1: such that consumption will take a big hit. Okay. It's
• 30:07
  Speaker 1: interesting because we had Charles to us this on from
• 30:09
  Speaker 1: Society General on yesterday talking about he thought maybe that
• 30:12
  Speaker 1: would be the wild card of the consumer would be
• 30:16
  Speaker 1: more strong, stronger than anticipated in for Europe. And interesting
• 30:21
  Speaker 1: to hear your counterpoint to that, and I wonder, therefore,
• 30:25
  Speaker 1: what what for you might be the upside risk here?
• 30:28
  Speaker 1: What might be something that comes in that's better. You know,
• 30:31
  Speaker 1: we hear about a slowing of inflation, we hear about
• 30:33
  Speaker 1: the ECB managing to understand the impact of that. But
• 30:38
  Speaker 1: is there any way that you think some of the
• 30:39
  Speaker 1: energy markets might be aimed better than expected with Russia
• 30:42
  Speaker 1: Ukraine being the ultimate world card for the entire year.
• 30:45
  Speaker 1: So I mean it's it's it's good to sort of
• 30:47
  Speaker 1: go back a little bit in time, say around the
• 30:50
  Speaker 1: middle of this year, when essentially, but it became increasingly
• 30:55
  Speaker 1: clear that Russia would turn off the gas supply um
• 31:00
  Speaker 1: in an increasively aggressive way than during summer, we have
• 31:03
  Speaker 1: seen huge increases in natural gas prices in the in
• 31:07
  Speaker 1: the area, and of course extrapolating that and associated with
• 31:11
  Speaker 1: that increases in electricity prices. And we have seen this
• 31:14
  Speaker 1: for the first time actually in years that for one
• 31:17
  Speaker 1: or two years out in the future space electricity and
• 31:20
  Speaker 1: natural gas grow trading really at very high prices. Lots
• 31:23
  Speaker 1: of clients raising the question whether that, you know, what
• 31:26
  Speaker 1: is the future of EU industrial base given these prices.
• 31:30
  Speaker 1: So this is the you know, the back drop in
• 31:32
  Speaker 1: the summer. Now, of course, against this or relative to
• 31:36
  Speaker 1: this back drop, things have improved marketly. So I think
• 31:39
  Speaker 1: this whole spectra of rationing of energy electricity that has vanished.
• 31:46
  Speaker 1: So we have seen a significant drop in both oil
• 31:49
  Speaker 1: and gas prices. Um. Now, the consumer tends to be
• 31:55
  Speaker 1: at this stage protected depending on the country a little
• 31:58
  Speaker 1: bit by by by seeking AFFICN fiscal measures, and I
• 32:02
  Speaker 1: would say, I would characterize this is the biggest upset
• 32:04
  Speaker 1: risk in the short term, in the near term. Now,
• 32:07
  Speaker 1: in the medium term, we have this thing that of
• 32:10
  Speaker 1: course relative to summer, the energy backdrop looks better, um
• 32:15
  Speaker 1: but monitor policy for instance, looks decisively more aggressive. Um.
• 32:20
  Speaker 1: So in that sense, I would say, in the short term,
• 32:23
  Speaker 1: there's very little you can you can think of. I
• 32:27
  Speaker 1: mean take away from the dynamic that you have that
• 32:30
  Speaker 1: essentially consumers are hit by these huge inflation rates and
• 32:33
  Speaker 1: that that eats into disposable income and that must do
• 32:35
  Speaker 1: something to consumption. There is a little bit of an
• 32:38
  Speaker 1: element of if there's a fiscal spillow is more physical,
• 32:41
  Speaker 1: then maybe it's needed. Then you get a bit of
• 32:44
  Speaker 1: a boost consumption. But overall the outlook is relatively muted.
• 32:48
  Speaker 1: And then the discussion, as I said before, is really
• 32:50
  Speaker 1: focusing into is the energy side giving way having you know,
• 32:56
  Speaker 1: essentially a better better outlook and better prices. Is this,
• 33:00
  Speaker 1: you know, dominating or is really the fiscal Sorry, the
• 33:03
  Speaker 1: monitor policy of response dominating in here as in terms
• 33:06
  Speaker 1: of it'd like to growth. Just in the last few days,
• 33:10
  Speaker 1: a big, big change in China zero COVID dropped, UH
• 33:14
  Speaker 1: seemed to be reopening extraordinarily quickly. That's got to be
• 33:18
  Speaker 1: good news for that European industrial base. I'm thinking about,
• 33:20
  Speaker 1: you know, our good friends and Munich. It seemens they're
• 33:23
  Speaker 1: gonna be feeling pretty good this morning. Is in this
• 33:25
  Speaker 1: air for nooon as they think about their opportunities in China.
• 33:27
  Speaker 1: How does that factor into your outlook? So we have
• 33:31
  Speaker 1: been looking into this in terms of scenario analysis and
• 33:35
  Speaker 1: looking into elasticities there. Of course we've been in touch
• 33:38
  Speaker 1: with our China team on this one. So when people
• 33:41
  Speaker 1: producing amongst Stanley all the noble outlook, and you know,
• 33:44
  Speaker 1: Robbin was one of those that were relatively early and
• 33:47
  Speaker 1: actually they are now about consensus with their core in
• 33:50
  Speaker 1: terms of growth for twenty three and they were relatively
• 33:52
  Speaker 1: early in calling for reopening happening. Now what happened there
• 33:56
  Speaker 1: is that they I mean, if you were looking close
• 34:00
  Speaker 1: are in terms of a what would be the new
• 34:02
  Speaker 1: sources of growth in China? It's it's a bit more
• 34:04
  Speaker 1: domestically oriented affair A and B H elasticities are that
• 34:09
  Speaker 1: is near nowhere near as big that we would sort
• 34:12
  Speaker 1: of get a huge impact from that. Having said it,
• 34:14
  Speaker 1: of course it's a positive, but it's really not not
• 34:16
  Speaker 1: the game changer in the sort of generalized state of
• 34:20
  Speaker 1: affairs where we see a drag on growth coming from
• 34:23
  Speaker 1: these two sources, which is consumption and investment weakness. And
• 34:27
  Speaker 1: I've got some recentcy bias and you can hear it
• 34:29
  Speaker 1: my voice that I haven't been in Spain for my holidays,
• 34:32
  Speaker 1: but I was back in the UK talk to us
• 34:34
  Speaker 1: a little bit about the strikes. The For me, there
• 34:38
  Speaker 1: was a sense of just lack of hope coming from
• 34:43
  Speaker 1: various members of my family in the United Kingdom. What
• 34:45
  Speaker 1: do you see from an economic perspective at the moment,
• 34:49
  Speaker 1: So the UK for us, it's clearly if you sort
• 34:51
  Speaker 1: of look at the European specter of things, it is
• 34:54
  Speaker 1: clearly the country legging things most simply because you know,
• 35:00
  Speaker 1: it has essentially the worst of all worlds, and it combines,
• 35:03
  Speaker 1: of course the same sources of the growth if you want,
• 35:06
  Speaker 1: investment weakness and consumption weakness. And you know, again here
• 35:10
  Speaker 1: against sky high inflation rates um and and you know
• 35:13
  Speaker 1: very sort of you know, not not very significant or
• 35:17
  Speaker 1: not not very high wage gains that can can sort
• 35:20
  Speaker 1: of go against the class. Of course, you have this
• 35:23
  Speaker 1: additional titan in coming in through the bontom my kid,
• 35:27
  Speaker 1: and here the mortgage market. So all in all we
• 35:30
  Speaker 1: see this economy shrinking by more than your area economy um.
• 35:34
  Speaker 1: And you know, the recovery being even more lack luster
• 35:38
  Speaker 1: than than than here in the in the your area continent.
• 35:40
  Speaker 1: So yeah, in that sense, it's indeed a little bit
• 35:42
  Speaker 1: of a sign of lots of structure reforms needed um
• 35:47
  Speaker 1: and lots lots of more adjustment needs to come. And
• 35:49
  Speaker 1: of course the labor market here that doesn't really help, right,
• 35:52
  Speaker 1: I mean, and I guess it's also a question of migration.
• 35:55
  Speaker 1: How much migration can you get into your labor market.
• 35:57
  Speaker 1: And I think here continental European labor markets are better
• 36:01
  Speaker 1: better place to to to sort of get get through
• 36:04
  Speaker 1: tight tight moments or moments of tightens all r. Yeah,
• 36:09
  Speaker 1: it's great stuff. Really appreciate you taking the time, particularly
• 36:11
  Speaker 1: on your holiday. You get a gold gold star for that,
• 36:14
  Speaker 1: y I can smit Chief European Economist for Morgan Stanley.
• 36:22
  Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
• 36:25
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• 36:29
  Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
• 36:33
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• 36:36
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• 36:39
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