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The FED kicking off.
It's a two day policy and meeting tomorrow, and Bloomberg Economics has this a really cool tool. It's called the FED Sentiment Index. It's powered by natural language processing. It's an algorithm based on more than sixty thousand FED headlines, and it shows that back in December, power delivered a major pivot. Okay, we knew that from just watching the markets and seeing how investors have reacting. There's a catch, though. Four months on, with demand powering ahead and inflation stuck
above target, Powell has been forced into a reversal. The index now shows that there's more work to do to bring inflation back under control. Tom Morelick is Bloomberg Economics chief economist. He edited the story that's today's big take, also among the most read on the Bloomberg terminal. He
joins us from our Washington DC Bureau. So Tom, explain what exactly the FED speak tool is, tell us how it works, and also how it can give us some sort of preview of what we may hear from j. Powell come Wednesday at the press conference.
Well, great to be here, Tim. So what we've done is we've taken sixty thousand Bloomberg News headlines on fedspeak, the things which Powell and his team on the FOMC say to steer the markets on where policy is going, and we've trained a natural languaging natural language processing algorithm
to read those headlines as hawkish, neutral, or dubvish. What that means is that anytime we get a new FED headline, our algorithm can read it, assign a score to it, and we can tell you whether the fair is trending towards cuts, towards hikes, or towards a hold at its next meeting. Now the index is right now is telling us something pretty interesting. It's showing that in December there was a major dubvish pivot that was well timed. We think it saved the US economy from a looming downturn.
But in economics, as in life, there's no such thing as a free lunch, and the same impulse which propped up growth is now also giving an additional impulse to inflation. Our index shows that's already prompted a mini reverse pivot by Powell. He's already moved back in a hawkish direction. We think that pivot has further to travel, perhaps as soon as this week's FOMC.
So, Tom, what did the natural language tool teach us in December that we wouldn't have been able to figure out without using the tool?
So that's a really great question, Emily. So let's go back to a lady called Ellen Mead. Ellen Mead was a senior economist at the FED left a few years ago to become a professor at Duke University, and she was one of the pioneers of using data science, machine learning, natural language processing to understand FED communications. And what her early research demonstrated is that these data science tools they can reveal insights which aren't kind of visible when we're
just reading the headlines ourselves. And when it comes to December, what our index is telling us is that really this was a very significant pivot, one of the biggest monetary policy surprises of the current cycle. What our index is currently telling us based on the latest readings from April, is that things have started moving back in a more hawkish direction. But really they've undone only a small amount of the stimulus that they unleashed with that December pivot.
And that's why our US team are Chief US economist Anna Wong and her colleagues think that Powell has further to go in a hawkish direction.
Hey, Tom.
One interesting part of the story that is included in today's Big Take is this idea that well, with rays high, why are we still seeing inflation high? And different theories are put forth, and there's this theory that's gotten a little bit of attention over the last month when it comes to MMT and the idea that actually hikes from the Fed are a growth driver rather than a drag on the economy.
Can you talk a little bit about that.
Yeah, So it's an intriguing idea, Tim. Basically, it goes something like this, households businesses have got so much money in savings accounts and in bonds where they're getting higher returns when interest rates go up, that that's giving a boost to spending power. And so perhaps FED hikes aren't a drag on demand and a drag on inflation. Perhaps in the current cycle they're actually a driver, boosting spending power and actually keeping inflation lodged at a high level.
So that's an intriguing idea. It's an idea which has caught the attention of the markets, including from some big investors moving a huge amount of money around. Our view is that it's a bit difficult to support with either the economic theory or the economic data. If you think about it from the theory perspective, well, actually it's not too far from the view set out by Turkey's president Urduan, who of course famously said rate hikes drive inflation, rate
cuts reduce inflation. And look what happened to Turkey, right, Turkey had spiraling inflation a collapsing currency. So it doesn't seem like the theory worked out very well there. And then if we look at the data, well it does seem to us that interest income has actually been a drag on consumption this year, not a driver. So an intriguing theory, one that's fired the attention of the markets, not one which we give a huge amount of credibility to.
So what should we be looking out for on Wednesday is this going to be a Powell that has to kind of walk back some of that dubbishness that he did present during this big December pivot that your tool is showing.
So it's interesting, Emily, I mean, certainly we're not going to hear the same kind of dubvish messages from Powell that we heard in December. Already in April we heard from Powell that the data wasn't giving him confidence in disinflation, that the FED was prepared to wait with policy settings restrictive for as long as it takes to be convinced that disinflation is on track and price gains are coming
back to their two percent target. The question at Wednesday's press conference is if he goes further than that and perhaps hints at the world where there are no rate cuts coming in twenty twenty four or maybe in a risk scenario, also raises the possibility not as a base case for the FED, but as a possibility that there could be cuts hikes coming if needed.
Thanks to Tom Morel, like Bloomberg Economics chief economists, check out today's Big Take. It's just a fantastic read. The Natural Language processing tool, the FED Speak tool very cool, stuff and a Big Take or Bloomberg dot Com slash a Big Take.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern. Listen on Apple card Play and then Bright Auto with a Bloomberg Business at or watch just Live on YouTube.
Okay, something really interesting is happening in the world of electricity generation here in the US and the way that people are thinking about nuclear power right now. So more than a dozen US nuclear actors that have been shut down in recent years. Maybe they were too costly to operate, they were struggling to compete against renewable power, and also they were struggling to compete against plants that burn cheap natural gas. Conventional wisdom long held that these closures were permanent.
Now the industry is rethinking that view.
Well.
Wade is Bloomberg News Power and Renewable Energy reporter. He joins us here in the Bloomberg Studio.
So well, as you.
Mentioned, this is a as you writ in the piece which I just read from this is this is a story about economics. It's a story about numbers. Here these are power plants that were once thought to be too expensive to operate. But something happened over the last few years that changed the equation.
What was it?
Well, so nuclear power plants are big, expensive to operate, they need a lot of security. It's a complex thing to build. I've been covering nuclear for about five years, and when I started, the only real story was which plant are we going to close down next? And I started keeping a spreadsheet a few years ago and I tracked thirteen reactors that shut down since twenty thirteen, and they were all shut down ahead of time before they were supposed to run out of operating time. And every
time it was like, we just can't compete. Gas is cheap, solar is cheap, wind is cheap, nuclear is expensive. So they all shut down and I asked, Everyone's like, well, is that permanent. They're like, oh, yeah, yeah, we're never turning those six back on again. But in the past maybe two years or so, there's been a reversal and it's really about climate change. Nuclear is carbon free energy, and people are starting to say we really need those nuclear power plants.
So it's it's not as much about how expensive natural gas became. In the wake of Russia's invasion of Ukraine that was an.
Anomaly, went up, come down. It's pretty cheap right now.
So it's it's less about economics and more about renew more about clean environmentalists.
Yeah, it's it's about clean energy.
But what's interesting about that is environmentalists hated nuclear power plants for so many years.
And some still do. I mean, there's there's still reasonably strong opposition to nuclear power plants. And it's true the nuclear waste is really bad stuff, and it's not going away, it's still there. But what I like to say is that the prospect, the potential threat of a nuclear disaster is now being you know, compared to the definite threat of climate change.
So who is actually behind these changes? This is environmentalists persuading politicians now to reopen this. This is just a science community.
Oh, it's coming from all sorts of directions. One of my favorite stories from earlier this year, last year actually was about like Miss America, who was a huge pro nuclear activist. Well not the one we have now's she relinquished the crown, but last year's Miss America and all of these young kids, all these twenty somethings. There's a huge wave of young people saying we need nuclear energy. There's a groundswell of support for it. It's been coming from everywhere.
Yeah, it's pretty wild to see. I mean, they're okay, So let's talk about certain plants in you piece. You mentioned a dozen plants over the last few years that have been shut down. You weren't able to figure out the names of the ones that could be reopened necessarily all of them.
Okay, here's the name that you want to know. It's Palisades.
Okay.
So of all the plants that I tracked that were shutting down, Palisades was the last one that shut down in twenty twenty two, and almost immediately it's in Michigan, people were starting to think, oh, maybe that was a mistake. Like even before it shut down, like a couple weeks before it shut down, the governor was sending around a letter to the Energy Department saying, can we not shut it down? Can we figure out a way to keep
it open. It did shut down, but almost immediately the company that bought it, his name is Hultech, started saying, we could keep it open. We can figure out a way to turn this around. They've got they just got a couple of weeks ago, one point five billion dollar loan from the Department of Energy to restart it. And there was another one in California, Dieblo Canyon that was going to shut.
Down my hometown nuclear power plants.
Right Tim, I know, Yeah, So that was that was slated to be next, but the California state government started saying, we actually should keep it open for the clean energy.
What about Three Mile Island. You mentioned that one in the piece as well.
Okay, so there's two Three Mile Island reactors. One of them everybody knows. They had the accident in nineteen seventy nine. It has been shot ever since. The other one shut down in twenty nineteen. It ran for decades without incident. That's one of the plants that I've heard mentioned by name as maybe it could reopen. I talked to the company. They're not saying there's no plans, they're not talking about doing it. So something to keep in mind is that
the shift here. We don't have definite plans that I'm hearing about. We're definitely going to open this plant or that plant. But what I'm hearing is these things that everybody thought was like dead dead dead, never coming back. People are starting to think maybe we can bring them back. Now some of them they're already being dismantled and companies are tearing them apart. Those aren't coming back, like our neighbor, like in the point north of New York City.
What's going on there?
They're tearing out apart.
Done.
There's a big hole in the containment zone. You don't want holes in your containment.
Don'ts No, then it's no longer contained.
Right, so that you know that it would cost too much to try and fix that, there's no point. But there's others that have just been sort of mothballed and they're sitting there. Those could potentially be turned back on. It would take some work, if cost some money, but it's doable.
What about forget turning on the old nuclear power plants that have been decommissioned. What about constructing new ones? Which we've had one in recent.
Years open here in the US.
You didn't see this is today?
Okay, today there's a new one.
Yes, Vocal four went online this morning.
Okay, so this is in Georgia.
It's this it's the only major nuclear project in America in recent decades. They were like, I don't know, ten years late and fifteen billion dollars over budget. They were building two reactors. One of them got switched on last year. The other one officially was announced this morning. So that's good news, but it's you know, it's clear, it's a big project, it costs a lot. The potential for going over budget is notable.
Does it show that there is an appetite now that environmentalists have shifted their view? Does it show that there's an appetite for these expensive projects if they are indeed green save for the nuclear waste.
Okay, well, here's another shift up in tracking. Because I watched the Vogel project for years, as it took longer and longer and longer, and the cost overruns got higher and high and higher. The only thing I ever heard is we're never doing that again. And maybe in the last year or so, I've started to hear maybe we could do that again. So like again, nobody's announcing plans to do it, but just the idea that people are starting to say, maybe we could. That tells me there's a big shift.
Can we zoom out a little bit? What does this all mean then, for the future of renewable power? I guess with these reopenings like, how close are we getting to actually having a significant portion of the US's energy supply rely on nuclear.
It's gonna happen, but it's a slow thing. Nuclear is really slow industry to cover. The next thing you want to be watching for small modular reactors. It's a different generation of nuclear technology.
And there are a bunch of startups working on this.
There's a couple dozen that I know of that are working on it. Probably not this decade, maybe one or two small ones this decade, but the twenty thirties we could see a decent amount of it.
Okay, let's get to the waste issue here, because, as you mentioned, nuclear waste is not going away, Where does it end up going? And with this shifting view does it is it viewed differently at all?
Well, the answer of where it goes right now is really simple. It goes nowhere. Every single reactor has a stash of waste in these giant steel and concrete casks out behind. There's no place to put it. There was initially a push to create a national repository that kind of fell by this yucka mountain would have been yucka mountain that was officially shot down after decades of talking about it. I remember people talking about it when I was in college. So for the moment, they all stay
right there out behind the reactor. I was at a big nuclear power plant a couple weeks ago. They had a big stash way out back there's plant. There's some proposals to build sort of another consolidated site. It wouldn't be like yucka mountain. But there were two of them, ones in New Mexico, ones in West Texas. They're actually really close to each other. Both state governments have kind of passed sub legislation to make those projects unviable for
the moment. So for the moment, none of it's going anywhere.
Yeah, if you're a state, you don't necessarily want nuclear waste come into your backyard.
I guess it's fair to say.
The thing about nuclear waste is I mean, there's no denying it's dangerous, but everything is dangerous. You live near a coal plant, you might get asthma. You live near a gas plant, you're going to be exposed to gas. The people who run nuclear power plants, I've always been impressed with them. They handle this stuff very carefully. We don't have a lot of accidents from leaking nuclear waste casks.
Well, very briefly that the way you sum that up to me sums up what environmentalists have said in recent years the idea of using nuclear power. The benefits outweigh the potential consequences, especially compared to burning fossil fuels.
I think everything has a risk, everything has costs. You just have to figure out what risks you want to take.
Well Wade Bloomberg newspower and renewable energy editor here in our Bloomberg studio. Check out his story and all his nuclear power coverage at the Bloomberg Terminal and of course, at Bloomberg dot com as well.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Applecarplay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
I mean, I don't know about you, but it really seems like Las Vegas is having a moment right now.
What do you think it is? Yeah?
I see the sphere on my Twitter all the time, different concerts and people.
Do you see it on your Instagram though? Just on your Twitter? Just on your Instagram Twitter? Okay, Twitter?
Interesting, Okay, so the sphere is part of it. I think the Super Bowl was a lot. There are a bunch of pro sports teams, some new, some having moved now calling the city home. Certainly seems like Las Vegas is shining. Also, got to think about gambling. It's also doing well in Vegas. According to the industry group, the American Gaming Association, last year, the Las Vegas Strip experienced the highest year over year gaining casino revenue growth out
of any market in the US. For on the ground update, let's go to Patrick Nichols, president and CEO of the Venetian Resort. The pe firm Apollo Global Management bought the Venetian back in twenty twenty two. The resort now undergoing a one point five billion dollar renovation. Patrick, Welcome to Bloomberg Business Week. Give us a business update.
How is business?
Well, thanks for having me, Tim and Emily. Business is great. You know, we've seen, as you mentioned, a record twenty twenty three across the board of the Venetian and the industry benefit as well. I think what's interesting about Vegas in the past few years, is it's transitioned from really a gambling destination to something that's much more than that.
And now with sports teams as you mentioned, Raiders, the Knights, the Aces, and the Sphere, it's become a very very durable destination for our guests.
What about the impact of online gaming, because now with online gaming, people don't necessarily have to go to Vegas to actually make their bets. I know that you guys do have a new sports playbook partnership with Yahoo Sports.
Yeah, we launched the ya Who's Sports Book powered by William Hill just in time for this football season last year in twenty twenty three. It's been doing remarkably well. Just one of many new additions to the Venetian over the past few years. And they answer your question about online gaming. I think what makes Vegas so special is that you can't get the Vegas experience online. So people come to Las Vegas into the Venetian for so much more than just, you know, to put a couple of
dollars in a slot machine. It's about seeing fish at the Sphere, or seeing you two or coming to the Super Bowl, eating at one of the best restaurants in the world and staying in fantastic speeds. So you know, Vegas is a destination and the Venetian within Las Vegas really creates its own experience versus what you get online.
I'm chuckling when you mentioned fish because I have a friend who traveled to Vegas just to see the Fish Show. I mean lots of friends actually who did this at the Sphere and they were like, it's indescribable, completely life changing. It's just sounded it like it was pretty cool. Speaking of the Sphere, how big of a boon is it to your business? Explain the partnership that the Venetian has with the Sphere and talk a little bit about what it means.
To your business.
I mean, the Sphere has been very impactful. You know, the Venetian has four theaters today, so we have you know, the resort was built twenty five years ago. We're celebrating our twenty fifth anniversary in a couple of days, and twenty five years ago theaters were a lot smaller than they are today. So our largest theta that we have in the resorts about eighteen hundred and twenty two hundred seats, which loves to do a lot of really fun programming with a lot of great bands and a lot of
great entertainment concepts. But where the Venetian has historically kind of lack of competitive advantages is the scale really large entertainment offering. So the Sphere, with you know, almost twenty thousand seats now sets us apart. We have these intimate, great four intimate venues, and now we have the largest entertainment venue in Las Vegas physically connected to the resort. It's the easiest place to stay. If you want to see a show at the Sphere, you should be staying
at the Venetian. And it's been great. You know, we've seen really strong results from you too, as well as Fish. I also had a lot of friends that I didn't know are Fish fans that showed up the show. And it's been great for business. I think it's been great for the city and we're excited to see some future residencies at the Sphere now soon.
So you're doing a one point five billion dollar renovation. What is that going to look like? What can resort guests expect out of the new changes.
Yeah, it's a big undertaking. You know, we're as I mentioned, we're celebrating our twenty fifth anniversary later this week on Friday, and there's no better birthday gift than a billion five So we're investing, you know, a billion and a half dollars into the resort. It starts first and foremost with our suite store an all sweet hotels, seventy and seventy one hundred rooms, excuse me, the largest hotel in North America.
All of our suites are getting a complete redesign, so we're embracing kind of a modern Italian theme, like something you might find in modern day Venice or Milan, and we'll start the renovation in the next few months, with new renovated suites coming online in September of this year. We're also known as one of the largest convention hotels in the world, so if you have a big group of convention and expo, you're likely staying at the Venetian.
We have about two point two million square feed of convention and expo space and we're investing just under two hundred million dollars to create a new, cutting edge meeting
experience for our guests. And then, of course, you know, F and B entertainment restaurants have become such a big part of the Las Vegas experience that we're investing there to see some new announcements coming soon on some new culinary offerings at the resort, and we're leveling up our gaming spaces as well with some new high limit spaces a redesign. Can see a floor at the Venetian new poker room that opens later this summer. I'm just really excited.
It's not just a cosmetic upgrade or cosmetic refreshing c elsewhere, really kind of a grounds up refresh at the resort.
Hey, Patrick, I got to ask about the exit plan for the Venetian. As I mentioned, it was purchased by the private equity firm Apollo back in twenty twenty two. You were instrumental also in Blackstone's deal to sell the Cosmopolitan to MGM the previous year, back in twenty twenty one. I mean, it's private equity. I assume they want to return. What's the exit plan here?
You know, my job as CEO of the Venetian is to generate as much cash flow and earnings and potential for this resort and take care of our team here on the ground, and I leave the exit plan to Apollo, you know, that's what they do, the most sopisticated investors in the world, and we'll let them take care of that side, where we focus on delivering the best experience we can do our guests and our team members and delivering fantastic.
Do you see this as like a long term position that you have where you you their renovation and then you create a sustainable business moving forward, or do you see it as one where there's an exit and then you move on to your next thing.
I think for me personally, I love the Venetian. You know, my I never had the dream when I was a kid to be running a casino, But now that I'm here, there's no more enjoyable business, no more complicated business, no more surprising business day to day than the casino industry. So it's a ton of fun. It's a blast being here every day and getting to work with and the best people in the industry every day is just kind of a dream come true. So I love it here.
You know, I treat every job as kind of it. It's probably the last one I'm ever going to have, so I'm really excited to be here and we'll see what the future holds.
Patrick, we don't have a ton of time left. But who would say, who would you say is your biggest competition in Vegas right now? Who are you losing business to?
You know, thankfully, we're not losing business. We're actually growing our share. I think we're one of the few casinos in the city at the moment that is stealing share from our competitors, and I think that goes back to the investment we've made to Apollo's position of the resort. They're incredibly you know, competitive and also resourceful. I think we have resources and speed that our competitors don't have, and that's a huge advantage for us. So we're we're
right now stealing sure. I think if we had to look at competitors, you know, there's the old saying, you know, you don't necessarily want to follow your competition because you'll end up there. So we are trying to set our own path and move forward at a clip that our competitors can't keep up with, and bring innovation to the market as fast as possible.
Patrick Nichols, president and CEO of the Venetian Resort, joining us from Las Vegas. As we mentioned, a Pullo Global Management bought the Venetian back in at twenty twenty two. The resort now undergoing a one point five billion dollar renovation. Patrick, thanks so much for taking the time to join us. Really do appreciate it.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple card Play and then Broute Auto with a Bloomberg Business at or watch us live on YouTube.
Well, every manifestation of the dangerous weather wreaking havoc around the world has one thing in common.
Water.
As there is climate changes, the lack of water or its sudden abundance is reshaping the global economy and international trade. Think about it, from prolonged drought slowing down ships in the Panama Canal to deluge's halting industrial production in Japan. It's one of the most obvious ways that rising temperatures are affecting business. For more on what's going on and what companies are doing to try to alleviate it, we're joined by Susan Kennedy, the CEO of the water management
and agricultural resources company Kadiz. She joins us from Los Angeles. Susan people who are regular listeners of the program. They know I grew up in California. I wasn't allowed to play with water guns when I was a kid because we were living through a historic drought. But the idea of a water management firm, I think would be foreign to a lot of people who are not from an area that has experienced major drought. So explain for people exactly Cadiz does.
Well, very nice to be here with you. Thanks for thanks for the invite. You know, I've been in California for fifty years myself, and water is just something you don't think about. You turn on the faucet and there it is, But in fact it's, you know, the lifeblood of everything we do. Cadiz is one of the largest landowners in southern California. We own forty five thousand acres with water rights out in California's High Desert. Cadiz Ranch
has been farming out there for almost forty years. We sit on top of this aquifer system that has more water in it than Lake Mead, the largest reservoir in the United States, and we've been developing these water assets for the last two decades. We've got water supply because we catch the water as it before it evaporates in the desert. We have water storage capacity, we have hundreds of miles of pipeline assets that we recently acquired, and
we have a water treatment technology. So we're developing one of the largest new groundwater banks in the southwestern United States and that's going to be absolutely critical for California in particular, but for the entire Southwest in the coming years.
What is the biggest problem when it comes to water and water transportation that Kadiz is trying to solve.
Well, you know, the biggest problem is water storage. We don't we don't have a water scarcity problem. We have enough. We have the same amount of water on the planet as we've had for four billion years. Water doesn't leave
the planet. What we have is a problem with water infrastructure because you have to store fresh water in order to make it usable for human consumption, right, and our entire infrastructure system was developed around the snow pack, So that's where we store most of our water is in This is in the mountains as snow for many months out of the year, and then when it melts, it goes down into reservoirs that we've created right at the bottom of the rivers where we catch that water and
store it from the rest of the summer. But the problem is that where the climate has completely changed our ability to store water as snow, we're losing our snowpack. And that's happening in California, it's happening in the Rocky Mountains. So the major sources of water for the southwestern United States, which is a huge hot spot around the world when it comes to water access, is that we're not able
to store our water anymore. It's coming down in sheets as atmospheric rivers, and it's washing out to the ocean. So the biggest problem is storing water, and that's where Kadiz's land has the ability to store. We have thirty forty to fifty million acre feet of water already in storage.
We have, but do you have room for more?
Yeah? But using with technology to control the evaporation, we can actually impourt water and store it through pipelines that we have connected to our property. So we can actually store a million acre feet of water in our aquif and hold it and there for years that we needed for drought.
Is that infrastructure already in place? I mean when I was in middle school the California State Water Project went through essentially in my backyard, and this was like a huge, huge undertaking. And back then they were I don't know if these numbers were correct at the time, but everyone was quoting this was a long time ago, a million dollars a mile. I mean, this was expensive back then. Like you know, it's not like the subway here in New York, which is much more expensive than that.
Five million a mile.
Now, how much is it now?
Five million a mile?
Yeah, so that kind of makes sense that that kind of tracks here. Is that infrastructure though already in place or does it need to be built.
Well, here's where it gets interesting. So you know the biggest problem with water storage building water storage is you have to get you have to have the pipelines to move it hundreds of miles, and you know, it's very very challenging to build anything that, you know, hundreds of miles, especially in California. But we Cadiz is actually an old
railroad stop between where it was built. It was around the railroads when they had steam engines and so they used to stop with this little town called Kadiz and
get water for their steam engines. So we're sitting on a bunch of railroad lines and a bunch of gas lines, and so we we've purchased idle gas pipelines that were built thirty five years ago that that aren't in use today, and they cross hundreds of miles, so we can actually con will be the first in the world to convert gas pipelines to actually carry water and be able to transport water to all the major infrastructure in southern California.
Yeah, so I'm wondering, Yes, Susan, I'm curious. You know, it's a publicly traded company. Cadiz has a market cap about one hundred and fifty million dollars. It's a microcap. Shares are down twenty percent this year. What are investors, in your opinion, missing here?
Well, you know, we're in the utility space. Water is in the utility space, right, and so we've been this project has been around for twenty years and we've we've been developing these assets, uh you know, the pipeline assets and everything in the in the most recent years. But investors don't really look at water as a as a as a place to invest as a water industry because
it's usually done by public companies. And so, but everything changed in the last three years, and and now I think you're seeing some really creative public private partnerships with technology companies and with companies like ours to help build the assets and make them available for communities. So I think right now we're sort of we're invisible to the to the market for the most part. People aren't paying attention to us in the in the in the utility space.
But I think you know, when you when you look at what's happening and the contracts that we've just recently entered into, you can see that this is going to be a massive project. Uh, and I think should be very attractive to investors.
Susan, what kind of regulatory hurdles are you facing right now?
You know, twenty years ago this project was going to be purchased by the largest water agencies and in southern California to build a new storage bank. No one needed water twenty years ago, and nobody needed storage because they
had lake meat. And so the project, any major infrastructure projects, faces enormous environmental hurdles because nobody, nobody wants to build projects like this, and so you know, it hit all the barriers and we went through decades of litigation over the permits, and you know, came out of all of that with everything intact and ready to go. But we we've sort of had the twenty years of regulatory hell
behind us, if you will. Yeah, And so we're now we're now in a place where we can actually start putting the pumping stations and infrastructure in place and start moving forward.
Susan, you've been in California for years. You're pretty much your whole career there, and you were in the public sector for a long period of time. You were chief of staff to Governor Schwarzenegger, you were Cabinet secretary to Governor Gray Davis. I had a professor in college, this was not in California who essentially told me that people aren't supposed to live in California. It doesn't have the water infrastructure and doesn't have the water availability. It doesn't
have the environment for humans to be living there. What would you say to him, I'd.
Say that civilizations around the entire world, you know, developed around water resources, They around rivers, and then some of the aqueducts that we used today were designed by the Romans and the ancient Egyptians. I mean we've been moved, but humans have been moving water and storing water to create,
you know, civilization for thousands of years. So it's it's not about where we're supposed to live or not live, it's about whether or not we can we can, you know, sustainably develop the water resources in order to feed our communities and maintain the environment.
Susan Kennedy, she is CEO of the Water Management and Agricultural Resources Company, could ease. The publicly traded firm got a market cap about one hundred and fifty million dollars. Joining us from Los Angeles. Susan, thanks so much for taking the time. Really really appreciate it.
I'm brother Marco, a journal Now about you let me drive?
Oh no, no, no, no, who's going to drive?
Honry, Please, I'll travel.
I want to drive.
It's good question.
This is the drive to the globe. Well up, Dad on Bloomberg Radio.
I can't believe it's that time already. B Maloney talking a little bit about Domino's pizza just now. Okay, I must confess we be a little hungry. They soon, right, They had it today today. Yeah, and look at this shares her up five percent right now? Uh they we're up as much as more than eight percent. They hit the highest intra day since January of twenty twenty two. This after the company reported stronger than expected domestic results. Same store sales up five point six percent for the
period that ended March twenty fourth. This was a head of analyst estimates for a three point nine percent game. Here's what the CEO said quote. The US results came through positive order counts in both our carryout and delivery businesses for a second quarter in the row. Russell Wiener, the CEO, said that orders were generated from customers across all income cohorts.
I like Dominoes, and you know, in Manhattan there's a lot of good people.
I was gonna say, I mean it's there are also a lot of Dominoes.
It has its own lane. If you want a classic New York slice, you don't go to Dominoes. But I have to admit sometimes I'm in the mood for that Dominoes thickness.
Yeah, I love it. I love it. All right, let's get it.
Drive to the clothes because I believe it or not, we are just about fourteen minutes away. Well, actually yeah, no, we're about seventeen minutes away from the Clifs. Here we got Tony Roth with US chief investment officer over at Wilmington Trust, joining us from Pennsylvania. Tony, good to have you with us this afternoon.
How are you. I'm good, Thanks for having me. How are you guys? We're doing pretty well.
So Emily and I are just kind of on pins and needles, waiting for the Fed on Wednesday, Jobs on Friday, and then before that Apple Thursday and Amazon tomorrow. What's kind of on your radar for the week.
Probably more than anything else, focused on whether the FED meets expectations around starting to taper the quantitative tightening of its balance shape. So it's been, you know, sometime, it's been cutting ninety five billion a month, et cetera, and we'd like to be able to see the FED stop
that because it's not helping the banking ecosystem. So that would be essentially an accommodative approach for the FED to start to no longer run down as balance sheet in that way, and the Fed is alluded to it, and we think it may actually put a plan in place this week, and it would be helpful for the banking ecosys if it were to do that and thereby the economy.
So Tim I actually had the opportunity to meet Tony Well over a year ago at the Wilmington Trust twenty twenty three outlook event. I'm not sure if Tony remembers. I know he meets reporters all the time, but I remember that the theme of that event was that Wilmington Trust was making this big call that inflation was going to be sticky around three percent due to structural forces underlying the economy, labor force demographics.
So Memory, I want to check in with you.
Yeah, there was really good food there too, taco bar or something, which I totally wasn't swayed by. But yeah, maybe update us on your inflation call and what are you thinking about now about sticky inflation three the Fed?
Yeah, so the inflation.
The inflation data is really hard to understand, especially in the beginning of the year, because there are so many seasonal adjustments that come into it, and the focus has been on of course, as it typically should be, a CPI only because CPI and pc are so tightly correlated with one another and CPI comes out earlier in the month.
But CPI has been very dominated by the housing market, and the fact that the shelter numbers take a long time to show up in the data, as well as insurance, which is a nasticleical price adjustment, if you will, due to a lot of factors that have to do with the pandemic, which probably won't be repeated, and which are not really susceptible to the influence from monetary policy from
the Fed. So when you put all that together, suggests that the look that we're getting on inflation so far this year is not necessarily a good look on inflation. And what we see is when we look at the core PCEE going back twelve months, we see that we're about two points sep and two point eight percent going back twelve months. Now, when you look at the three month annualized numbers, admittedly it's higher. It's around three and some odd thro three three, three four, which is why
we think that inflation is sort of sticky. But we're not seeing it as stopping its downward march. It's it's just a slow march downward. We're seeing in fact, about fifteen to twenty basis points per month of reduction and housing cost acceleration in the CPI and Ultimately, we think the FED is going to start to cut rates in July and cut either through the equivalent of either three to four times this year. And what's really driving that more than anything else is our view on the consumer,
and we do believe that the consumer's moderating. Probably we're seeing that most clearly in clients than that own either restaurant chains or in retail shops, or on the part of sponsors that own portfolio companies that are also seeing significant slow down on the part of invatory build up and demand from both B two C and B to B. So we're definitely seeing a slowing in the economy which is going to plu throw we believe to the inflation data, but.
Just not it's not going to push us all the way.
To two percent to your point of our forecast from last year, because there are some structural factors like energy, the transition to green energy, labor markets, et cetera, tight labor markets that are going to keep inflation probably closer to two and a half or three percent.
So what does that mean for stocks? Do we need to see a rate cut, you know, a move towards the two percent for stocks too? And the year you know, much higher than they are right now. I mean we're already up seven percent year to date. It seems like so far the stock market has been fairly resilient despite all of the is changing macro factors.
Yeah, it's a really great observation in terms of the resilience of the market. In fact, we moved last week to add more money to equities. We were slightly overweight and now we're more overweight. We added to both US large cap and developed large cap, and the reason we did so was because we think the outlook has much more upside than downside.
Right now.
We're not seeing many scenarios that would result on a hard landing or recession. We're seeing a moderating consumer. And the question around the monetary direction of the FED or the speed at which they moved to a loosening posture, we think has more of an impact on where to invest with inequities than whether or not to move to an overweight. So if in fact it takes longer because the economy is stronger, we think that's going to continue
to favor large cap tech stocks. Somewhat ironically, given get disposedly inversely correlated to interest rates, but that's not what's happening recently. If, on the other hand, the fad does move in July and moves maybe three or four times this year, then we're going to start to see, I think, a further broadening out into small caps and into some of the more fatly sensitive orders of the of.
The stock market.
That's Tony Roth, chief investment officer over at Wilmington Trust, joining us from Pennsylvania.
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