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Stocks Rally, Bonds Slip on Trade Deal Hopes · Bloomberg Intelligence

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  Speaker 2: and thirty industries worldwide. They often also cover stuff like
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  Speaker 2: the bond market. I our Jersey Bloomberg Intelligence Chief US
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  Speaker 2: interest rate strategist joins us. Now, the two day move
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  Speaker 2: that we've seen in the back end is tremendous.
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  Speaker 3: What happened?
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  Speaker 4: Yeah, I think most of this is a liquidity issue.
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  Speaker 4: So if you look at dealer balance sheets, they're stuffed
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  Speaker 4: with bonds, and you know, given that the long end
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  Speaker 4: has a lot of duration risk and market risk and
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  Speaker 4: you have to hold a lot of capital against those trades,
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  Speaker 4: it seemed like there was just you know, there was
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  Speaker 4: some outflows and people trying to sell that long end
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  Speaker 4: paper and the and the dealer community just couldn't absorb it.
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  Speaker 4: You know, we've had this disintermediation where high frequency traders
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  Speaker 4: and some non dealer actors have tried to act more
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  Speaker 4: or less like dealers, but they don't step in front
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  Speaker 4: of a train like we had yesterday. So I think
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  Speaker 4: that's one of the reasons why you had this massive volatility.
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  Speaker 4: And look, yes it was a very big move in
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  Speaker 4: the thirty year it was the ninth largest daily range
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  Speaker 4: so high to low in terms of the treasuries in
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  Speaker 4: the last twenty five years, So definitely a big move,
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  Speaker 4: but not like unprecedentedly big, right, It wasn't like a
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  Speaker 4: thing that we've never seen in our lifetime.
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  Speaker 5: But at the same time, like it does.
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  Speaker 4: Bring up the fear and the worry that a lot
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  Speaker 4: of the market structure changes that occurred a decade ago
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  Speaker 4: with Basil three and with some of the Dodd Frank regulations.
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  Speaker 4: The issue with all of them is that they make
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  Speaker 4: the institutions like the large bank safe and sound at
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  Speaker 4: the expense at sometimes of balance sheet elasticity and therefore
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  Speaker 4: market liquidity. And that's what I think was a big
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  Speaker 4: reason why you saw such dramatic moves yesterday and probably
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  Speaker 4: a bit of the follow on today.
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  Speaker 6: That's kind of where I want to go to. I
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  Speaker 6: read liquidity in the marketplace. I mean, I remember my
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  Speaker 6: first dad, Solomon Brothers. They walked me out onto the
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  Speaker 6: massive trading floor and it was literally row after row
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  Speaker 6: after row of government bond traders. That's all they did.
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  Speaker 6: And that's liquidity to me? Is that still there at all?
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  Speaker 4: It's not not to the same extent that it was.
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  Speaker 4: And certainly even when I was on you know, working
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  Speaker 4: for one of the primary dealers, you know, they had
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  Speaker 4: shrunk their footprint in terms of what they were trying
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  Speaker 4: to do in terms of taking risk. Right, So you know,
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  Speaker 4: dealers are trying to match trades, match orders, all of
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  Speaker 4: those things, and and one of two things has to
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  Speaker 4: happen if you're just trying to have the market deal
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  Speaker 4: with you know, client client, a dealer with a client
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  Speaker 4: type of trades, and that's what you have to widen
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  Speaker 4: bid offer because and if you can't, if you can't
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  Speaker 4: inventory to sell, which is what a lot of bond
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  Speaker 4: dealers have done, particularly in the corporate bond market and
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  Speaker 4: some of the structure products markets, but in the treasury market.
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  Speaker 5: That's true to some extent as well.
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  Speaker 4: You need more balance sheet to be able to do that,
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  Speaker 4: so that means you have to hold more equity, and
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  Speaker 4: liquidity can be very fickle. So everything looks great until
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  Speaker 4: you have just a certain amount of risk that's trying
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  Speaker 4: to be laid off at one moment, and that's when
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  Speaker 4: you get these massive moves. There's a simple fix, at
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  Speaker 4: least temporarily, and that would be to exempt treasuries from
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  Speaker 4: the supplementary laverage ratio of the large banks, because most
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  Speaker 4: of the large banks have dealer arms. And by exempting
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  Speaker 4: the treasuries from the SLR, which would is a benefit
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  Speaker 4: of the government, right, it would be in the government's
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  Speaker 4: interest to do this. You would you would increase liquidity
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  Speaker 4: across most of the fixed income world, but treasuries in particular, obviously,
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  Speaker 4: because because you can now own more treasuries without having
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  Speaker 4: to worry about this extra capital that you have to
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  Speaker 4: hold against them.
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  Speaker 2: Such a good point. Here is my insanely smart question.
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  Speaker 2: Why were there so many sellers yesterday?
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  Speaker 5: Yeah?
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  Speaker 4: I think there were a couple of things going on.
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  Speaker 4: I mean, tariffs are a big one, right, There's people
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  Speaker 4: who are worried that, given that about a third of
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  Speaker 4: the treasury market is held by foreigners, that with less
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  Speaker 4: dollars leaving the US, it'd be less demand from foreign entities. Now,
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  Speaker 4: in aggregate, foreigners haven't been net buyers of treasuries, but
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  Speaker 4: private investors have been very large buyers of US treasuries.
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  Speaker 4: Central banks have been shedding their treasuries while while private
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  Speaker 4: buyers have been buying, have been purchasing. And why well,
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  Speaker 4: if you were an insurer who ensures, you know, oil
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  Speaker 4: on a ship, you have to own some treasuries or
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  Speaker 4: some other US assets because you have a dollar liability.
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  Speaker 5: That's the oil that's on that ship.
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  Speaker 4: Now, what happens if that oil winds up being dominated
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  Speaker 4: in another currency for that transaction, you'll hedge it, have
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  Speaker 4: to hedge it using that other currency. So I think
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  Speaker 4: there's there is this little bit of a fear that
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  Speaker 4: the US dollar, because of everything that's going on, might
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  Speaker 4: lose some of its reserve currency status. Now not gonna
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  Speaker 4: happen overnight, it's not going to be you know, something
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  Speaker 4: that's going to happen within the next year even but
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  Speaker 4: over time there could be alternatives that crop up. The
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  Speaker 4: The issue with I think the dollar story and and
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  Speaker 4: look au Jhild Freeman, my colleague and the leader of
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  Speaker 4: our of our FX strategy team at here at Bloomberg Intelligence.
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  Speaker 5: She's the expert on this by far.
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  Speaker 4: But the way that I view it is that the
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  Speaker 4: that the dollar over time, you know, has to can
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  Speaker 4: lose its status against maybe the euro, uh, you know,
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  Speaker 4: maybe there's more remimbee trades. The problem with all of
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  Speaker 4: those things is that you have to have very stable currencies,
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  Speaker 4: and you have to have enough debt for people to
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  Speaker 4: be able to or assets anyway for people to be
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  Speaker 4: able to purchase them in the open market or otherwise
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  Speaker 4: you can't be a proper reserve currency the way that
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  Speaker 4: Sterling was for a long time.
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  Speaker 5: The dollar has been since World War Two.
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  Speaker 3: Great context appreciated.
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  Speaker 2: Ira Jersey, Bloomberg Intelligence Chief UIs interest rate a strategist.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 3: We'll joining us in studio.
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  Speaker 2: He flew all the way here just to have this
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  Speaker 2: conversation as Chris Wantling, CEO and chief market strategist of
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  Speaker 2: Longview Economic. Chris, there's lots of questions to get into,
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  Speaker 2: but let's just pick up on what I was talking
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  Speaker 2: about and the worries that the dollar could lose its
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  Speaker 2: status as a safe pave in currency, as a world
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  Speaker 2: reserve currency. How real could that be in your world?
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  Speaker 7: I mean, I mean, clearly it's being chipped away at
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  Speaker 7: the edges with with the latest policy announcement with the terrorists.
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  Speaker 5: But I wouldn't want to overpin a one day move.
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  Speaker 7: I mean looks to me more like maybe there's some
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  Speaker 7: liquidation force liquidation for some sort of reasons, some sort
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  Speaker 7: of fund's blown up. There's been a lot of volativity.
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  Speaker 7: If you think about S and P moving eight percent
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  Speaker 7: in one day. There all sorts of things happening in
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  Speaker 7: portfolios yesterday. So yeah, I mean, I think the bigger
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  Speaker 7: picture is US exceptionalism was a well accepted theme at
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  Speaker 7: the end of last year, and now it's being chipped
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  Speaker 7: away at quite heavily by the sort of policy announcements
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  Speaker 7: we see, particularly what we saw last Wednesday.
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  Speaker 6: So what does that mean for maybe your economic growth? Forecast.
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  Speaker 6: I mean, both for the USA and globally, there's a
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  Speaker 6: lot of folks we're seeing bringing their estimates down for
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  Speaker 6: GDP growth and maybe even taking their inflation estimates up.
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  Speaker 7: What have you been doing well? I mean, we've been
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  Speaker 7: talking about the side of a mid cycle slowdown for
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  Speaker 7: the last few months, because I think Trump's initial policy
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  Speaker 7: agenda is negative for growth, but it does get better
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  Speaker 7: later on in the years. You get maybe some tax
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  Speaker 7: cuts into next year and some deregulation and so on.
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  Speaker 7: So I actually think the market's almost the sort of
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  Speaker 7: fear has gone too far. It's as if you know,
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  Speaker 7: the price has driven the fear to be on where
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  Speaker 7: it should be in terms of recession calls and that
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  Speaker 7: sort of stuff. There's a lot of there is a
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  Speaker 7: lot that's good about the US economy. There's a lot
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  Speaker 7: of the private sector that's healthy. But you know, to
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  Speaker 7: answer your question, yeah, I mean, I don't think there's
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  Speaker 7: going to be a lot of growth in the in
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  Speaker 7: the sort of middle of this year.
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  Speaker 2: So what do you do on a day like today?
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  Speaker 2: Is this a day to sell into the reality you
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  Speaker 2: want to sell the rips here?
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  Speaker 7: No, I think there's a day to buy so, I
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  Speaker 7: mean depends on your time frame, sure, But tactically we
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  Speaker 7: started buying this morning.
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  Speaker 5: I wish we'd.
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  Speaker 7: Started doing it yesterday, frankly, but I think I think
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  Speaker 7: there's you know, if you look, you know, when do
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  Speaker 7: you want to buy on a tactical basis in this market,
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  Speaker 7: you want to buy when everyone's panicky and fearful. And
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  Speaker 7: that was yesterday. That was a sense of a liquidation event.
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  Speaker 7: The market had been selling off for almost two months.
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  Speaker 7: It was twenty percent lower. I mean that's quite a move, ye,
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  Speaker 7: twenty percent lower prices in a small recession. I don't
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  Speaker 7: think it's going to be a recession. And I think
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  Speaker 7: we've we've had We've had the sort of shock of Wednesday,
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  Speaker 7: and now we're into the sort of nip and tuck
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  Speaker 7: of negotiation and sort of ebb and flow. I mean,
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  Speaker 7: some news will be better.
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  Speaker 5: So be worse.
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  Speaker 7: So I don't think it's the end of the economic
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  Speaker 7: workd for America.
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  Speaker 5: It's not good. I wouldn't.
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  Speaker 7: I wouldn't think it's a I don't think it's a
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  Speaker 7: great policy, but it's not the end of growth. It's
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  Speaker 7: not the end of the S and P five hundred
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  Speaker 7: and so on.
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  Speaker 5: What were you buying or what are you buying?
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  Speaker 6: Is it some of the tech names that have been
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  Speaker 6: such the leaders of this marketplace, or is it maybe
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  Speaker 6: more value.
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  Speaker 7: I think if you're a trader, you buy the tech
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  Speaker 7: names because what went down the hardest bounce is the hardest.
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  Speaker 7: But I think if you an investor, you buy the
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  Speaker 7: cyclical stuff in the market because the shape of global
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  Speaker 7: growth is changing going forwards on a six to eighteen
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  Speaker 7: twenty four month view, do you need.
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  Speaker 2: To do it in a nationalistic way in that you
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  Speaker 2: want to buy companies that are exposed to the country
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  Speaker 2: in which they actually operate, Like, is that going to
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  Speaker 2: be the way to think about things going forward?
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  Speaker 7: Maybe there's a bit of that, But I think I
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  Speaker 7: think what you know, what the shape of global growth
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  Speaker 7: is changing, and that we're I think we can get
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  Speaker 7: the Western consumer waking up. We've had a very weird
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  Speaker 7: post pandemic world.
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  Speaker 3: They were waking up without we're Honestly, I.
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  Speaker 7: Don't know what you guys are doing, but no, I
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  Speaker 7: mean in terms of so if you look look at
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  Speaker 7: a lot of the Western economies, including the US, you know,
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  Speaker 7: it's really a lot of it's really struggled for two
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  Speaker 7: or three years. Even parts of the US think of
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  Speaker 7: a housing activity.
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  Speaker 5: It's on the floor. I mean, it's terrible.
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  Speaker 7: We need low interest rates and that's what we're going
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  Speaker 7: to get out of this, and low interest rates monetary
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  Speaker 7: policy is going to stimulate Western consumers I think to
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  Speaker 7: really get going. I'll give you one start. There's thirty
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  Speaker 7: five trillion dollars for housing equity in US household balance
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  Speaker 7: sheets and then a mortgage debt and that was like
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  Speaker 7: ten trillion fifteen years ago. There is a ton of
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  Speaker 7: money and wealth waiting to be tapped. You just need
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  Speaker 7: the right macro environment, and I think we're moving towards that.
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  Speaker 7: It's a similar store in the UK, similar store in
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  Speaker 7: Southern Europe, and parts of Europe as well as in
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  Speaker 7: Northern Europe are doing some good things.
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  Speaker 6: Thirty seconds left, you mentioned Europe that had been a
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  Speaker 6: very nice place to start the year. Related to the
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  Speaker 6: US S and P five hundred, Is that still a
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  Speaker 6: play for you?
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  Speaker 7: I think it's still a play for US. As always,
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  Speaker 7: at the end of sell offs, everything gets sold. It's indiscriminate,
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  Speaker 7: but yeah, I like I think there's a lot going
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  Speaker 7: for Germany's changing southern Europe looks terrific. They've been deleveraging
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  Speaker 7: for fifteen years. We're getting low interest rates, you getting
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  Speaker 7: a defense fund. It's a long old list of a
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  Speaker 7: positive factors, cyclical and structural about Europe. So what Trump's
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  Speaker 7: done is is woken the West of the world up
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  Speaker 7: to get on with groin own economies.
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  Speaker 5: Yeah, I guess so.
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  Speaker 6: I mean, as we saw that out of Germany, you know,
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  Speaker 6: maybe close to a trillion dollars of spending on defense
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  Speaker 6: and infrastructure. So we'll see how that plays out for
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  Speaker 6: across Europe. Chris, thanks so much for joining us.
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  Speaker 7: Really appreciate it.
• 11:31
  Speaker 6: Chris Whitling, he's the CEO and chief market strategist at
• 11:34
  Speaker 6: Longview Economics. Joinings live here in our Bloomberg Interactive Brokers studio.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 2: All right, thanks so much, Charlie Pellett, Alex you here
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  Speaker 2: alongside pass. We need this as Bloomberg Intelligence Radio. We
• 11:58
  Speaker 2: gotually covered on all the bases internal and external sourcing.
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  Speaker 2: All Right, we got a pretty fierce rally underway here.
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  Speaker 3: My question is, doesn't actually last?
• 12:06
  Speaker 2: Nancy Dwood is private wealth advisor at Amerorprize Financial and
• 12:10
  Speaker 2: she joins us now.
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  Speaker 3: Also CEO of Opus Advice.
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  Speaker 2: First, Nancy, I appreciate that you're going to be a
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  Speaker 2: long term investor on this, but just with our decades
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  Speaker 2: of experience here, when we take a look at a
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  Speaker 2: market move like this after oversold conditions, does this bounce
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  Speaker 2: last for a while.
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  Speaker 8: Well, it's hard to predict, obviously, but I do expect
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  Speaker 8: a great deal of turbulence. I mean, there's no doubt
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  Speaker 8: that this was somewhat expected, maybe not to the degree
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  Speaker 8: that it occurred. You know, the first quarter was like
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  Speaker 8: feast and famine, you know, in the first half of
• 12:44
  Speaker 8: the first quarter was phenomenal, and then the second half
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  Speaker 8: just took it all back. So the magnificent seven stocks
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  Speaker 8: that had propelled the market prior is are the same
• 12:56
  Speaker 8: stocks that dragged it down. However, like you said, longer term,
• 13:02
  Speaker 8: I still feel that we should be bullish and in
• 13:06
  Speaker 8: these turbulent times, although it was much more severe than expected,
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  Speaker 8: we should really look at this as much more of
• 13:14
  Speaker 8: an opportunity because uptimes last a lot longer than downtimes,
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  Speaker 8: and we just lose sight of that when things are
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  Speaker 8: so scary like they happened in the last few days.
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  Speaker 6: So how does one reposition nancy if at all? Do
• 13:28
  Speaker 6: you just kind of stay the course with your portfolio allocation?
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  Speaker 6: Do you try to maybe buy some things that were
• 13:34
  Speaker 6: now more attractive? Have you kind of altered your view
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  Speaker 6: if at all?
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  Speaker 8: Well, clearly, staying the course or time in the market
• 13:44
  Speaker 8: has always been trying to time the market, because we
• 13:46
  Speaker 8: have no idea if we've hit bottom or not, and
• 13:51
  Speaker 8: if so, you know, how do you time that? There's
• 13:54
  Speaker 8: no way to do that. However, if you do have
• 13:58
  Speaker 8: longer term goals and some excess cash that is available
• 14:03
  Speaker 8: that you are willing to invest in the longer term,
• 14:06
  Speaker 8: there's such an opportunity. I mean, the sectors that have
• 14:09
  Speaker 8: taken the biggest beatings are financials and technology, so that's
• 14:13
  Speaker 8: certainly an opportunity. And we know that ultimately those things
• 14:17
  Speaker 8: will come back, just don't know when. But I think
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  Speaker 8: the biggest message is that in the near term there
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  Speaker 8: will be significant volatility.
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  Speaker 3: That's to be sure.
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  Speaker 2: The idea though that we go back to what we
• 14:32
  Speaker 2: knew before.
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  Speaker 3: Is this time different?
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  Speaker 2: I mean, is the US exceptionalism the Russian to US
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  Speaker 2: assets we've seen over the last decade.
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  Speaker 3: What's your level of conviction that that still holds.
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  Speaker 8: You know, I can't claim to be an expert on
• 14:46
  Speaker 8: politics or economic policy, but I do know, having been
• 14:51
  Speaker 8: around a very long time, is that history keeps repeating
• 14:55
  Speaker 8: itself with the markets. You know, the underlying variables may
• 14:59
  Speaker 8: be very different time, but ultimately the math rules because
• 15:03
  Speaker 8: that's how markets work. And so we may have a
• 15:06
  Speaker 8: lot of emotion due to more information and a lot
• 15:10
  Speaker 8: of propaganda both you know, positive and negative coming at us,
• 15:14
  Speaker 8: but ultimately things level out and revert to the mean,
• 15:19
  Speaker 8: because the math will always rule in the end. And
• 15:21
  Speaker 8: that's what when you're buying a stock in the market,
• 15:25
  Speaker 8: you're buying the balance sheet of that company. So corporate
• 15:28
  Speaker 8: earnings are important and corporate profit and economic profit fundamentals
• 15:34
  Speaker 8: are always going to be the determinants in the end,
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  Speaker 8: and those right now are actually quite solid.
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  Speaker 5: Now.
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  Speaker 8: Canteriffs have a negative impact? Absolutely so?
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  Speaker 6: Nancy, how does fixed income work into your outlook these days?
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  Speaker 8: Well, if you've gotten into fixed income, in the last
• 15:55
  Speaker 8: few months. You're feeling pretty good because that has been
• 15:58
  Speaker 8: a very big stabilized in the last few weeks, where
• 16:01
  Speaker 8: with all the turbulence, and I think fixed income prospects
• 16:05
  Speaker 8: look pretty good. Just watch the duration and go for
• 16:09
  Speaker 8: investment grade. But it's very likely that the Fed will
• 16:14
  Speaker 8: cut rates again. We just don't know when and how much,
• 16:18
  Speaker 8: but probably at least a couple of times this year.
• 16:22
  Speaker 8: And I think it's certainly an opportunity with stabilization and
• 16:27
  Speaker 8: diversification of a portfolio at this time.
• 16:30
  Speaker 6: Nancy, thank you so much for joining us. Always appreciate
• 16:32
  Speaker 6: getting a few minutes of your time. Nancy Daude, Private
• 16:35
  Speaker 6: Wealth Advisor, a maaor prize of financial Joining us from Miami,
• 16:39
  Speaker 6: Florida via zoom.
• 16:40
  Speaker 1: Here, you're listening to the Bloomberg Intelligence Podcast. Catch us
• 16:45
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• 16:52
  Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
• 16:56
  Speaker 2: All right, let's go now to the effect of President
• 16:58
  Speaker 2: Trump's policy on say green energy transition.
• 17:00
  Speaker 3: Today at three o'clock he's supposed to sign.
• 17:02
  Speaker 2: Some executive orders to push forward coal production here in
• 17:06
  Speaker 2: the US. Want to go to David FLACKL Bloomberg any
• 17:09
  Speaker 2: F lead US policy analyst. Any F is originally known
• 17:13
  Speaker 2: as New Energy Finance or the team within Bloomberg that
• 17:16
  Speaker 2: tracks and analyzes the energy transition. What do you make
• 17:19
  Speaker 2: of this executive order coming today at three o'clock on
• 17:22
  Speaker 2: coal and what does it mean for the broader transition?
• 17:25
  Speaker 9: Well, the executive order is interesting because this is sort
• 17:27
  Speaker 9: of a replay of what Trump tried to do in
• 17:29
  Speaker 9: his first term.
• 17:30
  Speaker 5: Right.
• 17:30
  Speaker 9: He had previously talked about increasing payments to you or
• 17:33
  Speaker 9: using emergency powers for preserving existing coal plants, maybe bringing
• 17:37
  Speaker 9: old ones back online, and as we can see from
• 17:40
  Speaker 9: the power generation data, that didn't really work out. Coal
• 17:42
  Speaker 9: is now fifteen percent of generation in the US per year,
• 17:46
  Speaker 9: down from considerably higher levels before. So there's a lot
• 17:50
  Speaker 9: of different moving parts to this. You might see more
• 17:52
  Speaker 9: say coal exports, more long term gathering of coal leases,
• 17:56
  Speaker 9: which have been sort of moving back and forth from
• 17:59
  Speaker 9: Obama to Trump one, to Biden and out of Trump two.
• 18:02
  Speaker 9: But in general it's hard to say that this will
• 18:06
  Speaker 9: be a huge boon to coal build out or restoration,
• 18:09
  Speaker 9: especially when you have tariffs weighing on any kind of
• 18:12
  Speaker 9: big capital project.
• 18:14
  Speaker 6: All right, so talk about, you know, the energy ecosystem.
• 18:18
  Speaker 6: Where do we get stuff for the energy ecosystem, whether
• 18:21
  Speaker 6: it's fossil fuels, clean energy, where do we get the
• 18:25
  Speaker 6: equipment and is that something that is going to be
• 18:28
  Speaker 6: impacted by these tariffs very heavily.
• 18:31
  Speaker 9: Even for fossil fuels, which are often a very domestically
• 18:34
  Speaker 9: extracted resource, there's reliance on steel, aluminum, specialized equipment that's important,
• 18:39
  Speaker 9: which is why you saw the Dallas Fed register such
• 18:42
  Speaker 9: negative opinions about the tariffs coming in generally, more broadly
• 18:47
  Speaker 9: in terms of say solar equipment that mostly comes from
• 18:51
  Speaker 9: Southeast Asia, because we've had batteries, we've had tariffs in
• 18:54
  Speaker 9: China for a long time. Batteries themselves tend to come
• 18:57
  Speaker 9: from China. Electric vehicles or order from a variety of places,
• 19:01
  Speaker 9: but especially you know, it's very domestic, with the fair
• 19:04
  Speaker 9: amount of Canada and Mexico in there. And lastly, if
• 19:06
  Speaker 9: you're thinking about say offshore wind, that's pretty dependent on Europe.
• 19:10
  Speaker 9: The only thing that's really effectively on shore and minimally
• 19:15
  Speaker 9: dependent on trade is onshore wind in the US.
• 19:19
  Speaker 3: What is the future of offshore wind in the US.
• 19:21
  Speaker 2: I mean, if we're talking about ramping up coal and
• 19:24
  Speaker 2: sort of there's zero love from the administration on offshore wind.
• 19:28
  Speaker 2: Have we seen sort of I don't know, leases or
• 19:31
  Speaker 2: any contracts be broken or do you feel like companies
• 19:34
  Speaker 2: that are still are still committed.
• 19:35
  Speaker 3: To the longer term world of offshore wind.
• 19:38
  Speaker 9: Well, I mean what the offshore win companies will tell you.
• 19:42
  Speaker 9: This is a multi year, long term process of building
• 19:46
  Speaker 9: that's beyond any one administration. We have seen one lease
• 19:50
  Speaker 9: be canceled by the federal government for an ongoing project,
• 19:54
  Speaker 9: but generally speaking, we haven't seen a lot more movement
• 19:56
  Speaker 9: for things that have already been permitted and leased. Now
• 19:58
  Speaker 9: that's important because the federal government has a lot of
• 20:00
  Speaker 9: leverage over that process. We're not seeing a lot more
• 20:03
  Speaker 9: being added to the pipeline. But the real issue is
• 20:05
  Speaker 9: going to come in the form of costs, inflation, and
• 20:08
  Speaker 9: also potentially interest rates. We saw a major slowan offshore
• 20:12
  Speaker 9: win under Biden, which is a very supportive administration, simply
• 20:14
  Speaker 9: because the cost of inputs went up and as inflation
• 20:16
  Speaker 9: went up, the FED height rates and wind is a
• 20:19
  Speaker 9: very large, capital intensive project category and especially sunsitive to
• 20:22
  Speaker 9: those kinds of things. So if the terrorists lead to
• 20:24
  Speaker 9: those broader impacts, we might see some fairly negative results
• 20:26
  Speaker 9: for even the offshore wind projects that are already allowed
• 20:28
  Speaker 9: to go forward.
• 20:30
  Speaker 6: Derek, I think even folks that are you know, that
• 20:32
  Speaker 6: question the value of the economic value of tariffs in general,
• 20:36
  Speaker 6: they kind of recognize that some of this strategically important
• 20:39
  Speaker 6: stuff maybe that we learned was strategically important from the
• 20:43
  Speaker 6: pandemic when the trade you know, the cycles were all disrupted,
• 20:47
  Speaker 6: the trade routes were disrupted. That makes some sense. Is
• 20:50
  Speaker 6: a clean energy did they have a focus on bringing
• 20:53
  Speaker 6: this stuff on shore as much as possible.
• 20:57
  Speaker 9: There's been a lot of discussion about across multiple administrations.
• 21:00
  Speaker 9: The Bide administration was in favor of that. The Trump
• 21:02
  Speaker 9: administration is in favor of on joining manufacturing generally and
• 21:06
  Speaker 9: of energy security independence, even dominance, as they like to
• 21:09
  Speaker 9: say generally. But that's a hard thing to achieve with
• 21:12
  Speaker 9: tariffs alone. Ultimately, a lot of the solar factories, battery factories,
• 21:16
  Speaker 9: ev factories that are coming up in the US are
• 21:19
  Speaker 9: dependent on imports, whether those are imports of upstream components
• 21:22
  Speaker 9: or the manufacturing equipment needed to make the final products
• 21:25
  Speaker 9: solar panels and batteries themselves, and right now we're seeing
• 21:29
  Speaker 9: costs go up on those across the board. Unless you
• 21:32
  Speaker 9: have more reliable revenue streams like tax credits, for example,
• 21:36
  Speaker 9: it's kind of hard to imagine new decisions to build
• 21:39
  Speaker 9: that stuff out. Even things that are already being built
• 21:42
  Speaker 9: are facing uncertainty not only from the Trump tariffs, from
• 21:44
  Speaker 9: other investigations into tariffs being run at the Department of
• 21:47
  Speaker 9: Commerce and the US Trade Representative, but also on the
• 21:49
  Speaker 9: fate of those tax credits, which is going to help
• 21:51
  Speaker 9: guarantee their revenues in the long term.
• 21:53
  Speaker 2: Yeah, there's a great point which leads us to the IRA,
• 21:55
  Speaker 2: the Inflation Reduction Act, which I mean, clearly President Trump
• 21:58
  Speaker 2: hates that thing, but there is a lot of value
• 22:01
  Speaker 2: in it through the tax credits and subsidies for companies
• 22:04
  Speaker 2: that supposedly he is a fan of the oil industry,
• 22:07
  Speaker 2: for example. When do you think we're going to know
• 22:09
  Speaker 2: the fate of the IRA and those tax credits.
• 22:13
  Speaker 9: That's a great question, and I've been wondering at myself. Obviously,
• 22:16
  Speaker 9: we're seeing a lot of wrangling between the House and
• 22:17
  Speaker 9: Senate today about the top lights on their big budget
• 22:20
  Speaker 9: bill they're going to try and pass by the end
• 22:22
  Speaker 9: of the year. Obviously, the end of the year is
• 22:24
  Speaker 9: when individual tax rates go up, and so that's one
• 22:26
  Speaker 9: of the big forcing functions. You also are seeing the
• 22:29
  Speaker 9: X state the debt ceiling occurring somewhere between July and
• 22:31
  Speaker 9: maybe September, and that's going to be a point where
• 22:33
  Speaker 9: there's going to be a lot of pressure to pass
• 22:35
  Speaker 9: a big budget package, raise the debt ceiling, and probably
• 22:38
  Speaker 9: also get some of this tax material done.
• 22:41
  Speaker 5: But we've seen a lot of deadlines blown.
• 22:44
  Speaker 9: Already for when we were allegedly going to get top
• 22:46
  Speaker 9: line packages, which are a preconditioned to figure out what's
• 22:49
  Speaker 9: going to happen to what tax credit, and we don't
• 22:51
  Speaker 9: even know that yet at this point. We don't even
• 22:53
  Speaker 9: know if they're going to use this particular budget gmmit
• 22:54
  Speaker 9: called current Policy, which would really reduce the pressures to
• 22:58
  Speaker 9: cut more. And as they're trying to use that, we're
• 23:00
  Speaker 9: seeing a lot of blowback from physical conservatives in both
• 23:02
  Speaker 9: that state but especially in the House.
• 23:04
  Speaker 5: And so we'll see, all.
• 23:06
  Speaker 6: Right, Derek, I think a lot of folks in the
• 23:08
  Speaker 6: marketplace are saying we'll see we don't sure. We're not
• 23:11
  Speaker 6: sure what's going to happen here.
• 23:12
  Speaker 2: So how long can you put off a business decision
• 23:14
  Speaker 2: with we'll see yes exactly.
• 23:15
  Speaker 6: Derek Flakel, a lead US policy analyst for b n EF,
• 23:19
  Speaker 6: really a smart guy. So I was shocked to find
• 23:22
  Speaker 6: that he went to the University of North Carolina.
• 23:23
  Speaker 4: Right.
• 23:24
  Speaker 6: Every once in a while, somebody will pop out of
• 23:26
  Speaker 6: that system and surprise you to the positive side. So,
• 23:29
  Speaker 6: but I would think that you know, these tariffs are
• 23:31
  Speaker 6: going to be it doesn't feel like anybody, any company.
• 23:35
  Speaker 5: Can really escape the impact.
• 23:37
  Speaker 6: I mean because so many countries, they are so broad based,
• 23:40
  Speaker 6: at least at this point.
• 23:41
  Speaker 2: And then also just makes me wonder how the contractors
• 23:43
  Speaker 2: are are already set up with your suppliers, right, and
• 23:46
  Speaker 2: who bears that commodity cost at the end of the day,
• 23:50
  Speaker 2: and if it's going to be a solar company or
• 23:52
  Speaker 2: a wind company.
• 23:53
  Speaker 3: That's really rough.
• 23:54
  Speaker 2: We saw that with offshore Wind during COVID and that
• 23:56
  Speaker 2: supply chain crunch, and that's basically what turned the tables
• 24:00
  Speaker 2: against offshore wind economically.
• 24:02
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