This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
And the x On Mobile.
Agreed to buy Denberry from four point nine billion. It's biggest acquisition in six years. It's a deal that will give Xon, which is of course a major integrated oil company, major player. It's going to give it the largest network of carbon dioxide pipelines in the US. Danbury's key asset. I guess I've got thirteen hundred miles.
DO two pipelines.
What got my attention today because I was like, what are CO two pipelines? We have pipelines that ship around CO two. So I started looking into it, and it turns out that they use that to pull more oil out of old wells. But also they can use these pipelines to carry CO two around and put it back in the ground.
Yay, all right, so let's find out the significance of it. There's also some news on Shell looking for options to sell. I guess it's global renewable power operations with more on all of this is our energy guru, Alex Steel. She has also Bloomberg TV and Commodities Edge anchor, and she's on the phone in New York City, Yes.
From ten to twelve every weekday.
Alex, you da, I love the promo.
Hello Hello, So tell us about the significance of this deal, Alex.
So, basically, Exon's buying these pipelines, like Matt was just saying, and this is really an Inflation Reduction Act play. So here's the deal. In the Inflation Reduction Act, there is a subsidy where if you're able to put CO two in the ground, you get eighty five bucks a ton and that comes in the form of a check and then eventually it comes in the form of a tax credit. So there's a lot of money to be made in this and that went a very long way in making
the storage really viable. Right, So this is what Exon did. So they are working on a few projects on the golf code. They have three customers, CF Industries, Lend as well as new Core that they promise they're going to put some of their CO two back in the ground and this is going to go a really long way. In helping them do all of that net nets.
That's the deal.
So let me bring in Kevin Crowley right now, senior US oil reporter, Kevin, how serious is this, uh? Putting CO two back in the ground in terms of, you know, fighting climate change.
All the majors, all the major bodies really recognize that, you know, carbon capture is a key climate change fighting technology because there are certain sectors that are really impossible to decarbonize without carbon captures, such as cement airlines at the moment, you know, refineries, chemical plants, these these type type of things, they're always going to emit c O two and carbon capture really is the only way to to stop that CO two being put into the app However,
carbon catch has had a very long history of failure, and Egxon is really hoping that this acquisition is going to is going to help them, help them get it right this time, well and help us.
You know, I'm looking at a exceon mobile right. This is a company with alex what three hundred and forty two billion expected in revenues this coming year. It's a four hundred and twenty two billion dollar market cap. So put this in perspective, this deal in their overall business.
Fair I mean it was. It's a six billion dollar deal, I mean five billion dollars. It's their biggest in six years. So that's one part of it. But I think it's about the future that counts. So they've already committed about seventeen billion dollars over the next four years to decarbonize their own stuff as well as other company stuff, if I just put it that way. So the idea is that they're going to be making a lot of money on this in the future. Like, is it a viable,
super awesome business now? Probably not. I spoke to Dan Ammon, who runs their low carbon solutions business on that, and he's like, we don't make a deal unless it's already profitable. How profitable it's going to be? I don't think anyone really knows that, because they're going to need to customers like see if industries in New Core to come in
and sign these deals with them. What we do know is that this has the opportunity to be a lot more profitable than the deals like Shell and BP, who been on renewables and now are like, oh God, what do I do? The returns aren't there.
I got to get out of this, and we're seeing that today in Shell. I wonder, Kevin, and I'll throw this one to you. You know, Exon Mobile famously has board members from Engine number one, an activist shareholder that hopefully is going to do good for the climate. Is this kind of deal, Is this kind of movement, you know, bear the hallmark of Engine number one pushing Exon Mobile to be a more responsible kind of global citizen.
I think so. I think it's I think it's inconceivable that this would have happened before twenty twenty one, which is when those Engine number one directors were elected onto the boards. Now, Egxon has this low carbon solutions business, which is one of its three main divisions alongside it's a it's a big upstream and obviously refining in chemicals. So they are they are taking this now a lot more seriously than they were, you know, even even three
years ago. So clearly they are having a big effect on the on the on the company strategy.
Now.
It may not be as quick as as what some environmentalists would like, but I think the hallmarks of a Venge number one are definitely here.
Help me out, guys. I mean, this carbon dioxide has to go somewhere, right, and if a if a pipe bursts, not a good thing, right, I mean, so, Kevin, there are dangers to this strategy.
Yes, definitely. I mean, the best thing for the environment is not to produce the carbon direxide in the first place. And that's that's why, that's why a lot of environmentalists are actually anti carbon capture because it does it does perpetuate the life of the fossil fuels industry. But in the event that carbon is being produced, the industry says, well, you know, it's much better to capture it and put it in the ground. But you're right, there are there
are a lot of risks associated with that. The industry says that carbon can be sequestered in the ground for hundreds of thousands of years. Do we know that, we don't. It may not, it may not work like that. Pipelines also can be can be can be quite dangerous. There was a big incident in there early earlier this year I think in Mississippi where carbon dioxide pipeline burst and was awful for the surrounding community. Lots of hospitalizations, et cetera.
So this is certainly a strategy not without risk and As I said, carbon capture hasn't had the best hasn't really worked for the last twenty years. So now eggs On is really making a push to really really try and make it work this time.
It's got to be a valuable asset just just because this is pipeline that is built. I mean, Alex, you know the regulatory the regulatory andronment here. It's not easy to build pipelines for anything.
No, And then that's one of the questions I asked dan Am and I was like, why was this better to buy than build? It would have cost probably more or more importantly taken a lot longer. I read this one grade article or survey that said you're looking at anywhere from like three to six years to do anything like whether.
It's natural gas, whether it's win any of it takes forever to get it done, which is one of the main hurdles in the energy transition. Like everyone knows secretly you're going to need to put shovels projects in the ground, but no one wants to be the first person to say that. So this kind of gives them a leg up. What is also interesting too, and I wonder, you know, if Kevin has thought about this also, is it what
it means for their oil assets. There was lots of rumors circulating that Exam was going to buy Pioneer Natural Resources that would have been a straight up pure shale play. And I wonder if that like puts it on the back burner now or if they can you know, chew gum and tie their shoes all at.
The same time.
But I wonder if it also sort of takes the focus away from that part of the business in terms of actually buying that growth too.
Kevin, what do you think I think Excell can tie their shoes and chew gum than you are exactly this is, this is exactly exactly there is There is no way that this this this compromises or is a trade offs all with their oil and gas business. Eggs On is one hundred percent all in on oil and gas will be for for many decades to come if they they are expanding their oil and gas production quite aggressively actually
all over the world. So I mean, there's Guyana's the key example, but there's also Peri and we actually had this this week as well. They're sort of targeting final investment decision in Mozambique in twenty twenty five or so. So you know this is this is the complimentary to oil and gas. And of course you know this is a company that made record profits last year, so it can it can afford to do both.
You guys are incredible. Thank you so much. Alex Steele, Commodity's Edge anchor, Bloomberg Television, of course, the European market close on the phone in New York City, and Kevin Crawley are thanks to you as well, senior US oil reporter at Bloomberg News on Zoom from Houston. Interesting right, yeah, fascinating face gives them a pipeline.
It was one of the first stories I read this morning. Very cool stuff.
If you're listening to the Bloomberg Business Week podcast, catch US live weekday afternoons from three to six Eastern Listen on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or watch US live on YouTube.
I don't know if you've seen Matt. I was looking at some statistics getting ready for this segment, and so we know post pandemic, people were isolated, they were bored, a lot of people turned to illegal drugs.
And that's what I do, and I on board stop.
The increase in fatalities was fastest from twenty nineteen to twenty twenty one, as deaths from overdoses rose. In general, opioid overdoses took the lives of eighty thousand Americans in twenty twenty one. That's the last year with official final numbers. And then we had, of course the reckoning, a big settlement. So is like Purdue, McKesson, j and Jay, CBS, Walmart, Walgreens, a lot of them, all part of a more than
fifty billion dollars settlement of opioid claims. So I don't know, do you know exactly what's happening with that money?
It's interesting. I well, I don't know about the money. But I spent, as you know, the pandemic in Germany and had some skiing accidents and broken bones while I was there, you know. And they don't prescribe opioids essentially. I mean, they can obviously in terrible cases, but by and large, the most powerful drug you're getting for pain is ibuprofen. And yeah, as a result, they don't have any kind of problem with opioids.
All right.
Well, maybe that's a deeper subject or a deeper conversation.
I mean, that's the end of that conversation. That's how long it lasts.
All right, Well, let's see what Sarah Whaley has to say, because she is program manager of the Bloomberg Overdose Prevention Initiative at the Johns Hopkins Blueberg School Public Health, as you know, supported by Michael R. Bloomberg, founder of Bloomberg ELPI and Bluemberg Philanthropies. She z owns youim in Baltimore. Sarah, I feel like you bring up the subject of opioids, and Matt makes a really good point. It's there's a lot to this a.
Very American problem.
Well, and I agree. I just had a family member who had some surgery and they just kind of threw opioids. It's still yes, is nice? So where are we the opioid crisis? Can we start there? Yeah?
So it's it's not a great topic to start off with because it's it's unfortunate the opioid crisis continues to surge across the country. Like you mentioned, the numbers in
twenty twenty one are super high. They're four times higher than they were in the late nineties when oxycotton hit the market and that is because we're in this era where the main cause of overdose deaths are synthetic opioids like fentanyl and illicitly manufactured fentanyl is more potent than heroine and oxycotton, and it's unfortunately what we are finding in most street drugs across the country.
Why do people, I mean, I understand how people get hooked on oxies and vicodins and percocets. Ventanyl everybody knows is deadly, So why does anyone take fentanyl?
So when you have a substance use disorder, when you're addicted to opioids, there are cravings physiologically within your body, and there are drug seeking behaviors, and so even though you may know the risk of purchasing drugs on the street, you have these cravings and so you do it anyway.
Why are people, to Matt's point, in Germany, you wouldn't get opoioids. Why are we still prescribing them like that and giving them out if we know that they're dangerous?
Yeah, So I think this all goes back to the lawsuits that you were talking about and Purdue Pharma, and so they're the farmaceutical manufacture of the drug oxycotton, and that that drug was prescribed over prescribed in our country for quite some time. And that's why these cases are coming through our court system right now, is because of the role that these companies have played in supplying pain pills in our communities.
It just doesn't make sense that. I mean, Carol, your family member had surgery what recently? So they're still doing it. I mean, do doctors just take a while to get on the same page as you know, you know everyone else. Are the doctors still? Are they somehow paid? Do they get perks for prescribing these drugs? Do patients just demand them? I mean, what's why don't they just stop?
So?
I think I think it's a combination of a lot of things. Regulations in how we prescribe opioids have changed changed in response to kind of what happened in the late nineties with with oxycotton. I think there I am not a medical provider, so I don't I don't want to speak for them, but I do think there is
still some utility in them. So there is Fentanyl is used for patients who are experiencing a lot of pain from like cancer and other procedures, So there is utility in these pain pills, but they were were widely over prescribed for some time.
Are they not anymore? Do we know that for a.
Fact things have changed. The number of pills that are going out has decreased immensely.
So what do we do If you've got someone who's addicted and isn't able to just stop using, which I would think that's what you'd want to do, right, just stop. But if somebody says they can't for whatever reason, they're two, they love opioids too much, what do you do to get them off? Is there some kind of methadone suboxone treatment that actually works?
Yeah, So there's lots of avenues and interventions, and the money coming down from these opioid settlements can be used or should be used towards these opioid abatement programs, which are programs and interventions to treat, prevent, and reduce opioid misuse and the harms associated with this misuse. And they can be used on programs, for example, overdose reversal medication. So we often hear about inn oloxone going to first responders, but malaxim should be out in the community for people
who are at risk of overdosing. So if they do take an opioid and they overdose, someone who is near them can give them noloxone and save their life. You mentioned methadone, so these dollars can also be used to increase access to medications for the treatment of opioid use disorder. We have three of those medications that are approved by the FDA methodone, bupen, orphan, and meltrek zone. And while these are very effective treatments, they are currently pretty underutilized
across the country. So in thinking about how states want to spend their settlement money, they could use that money to invest in increasing access to these medications. And then the other one I just want to quickly mention is harm reduction services. So harm reduction is a broad term used to describe a spectrum of services to reduce the
harms associated with drug use. Like you said, it's hard to stop using opioids, So harm reduction programs offer safer drug use supplies like sterile syringes, but also an array of other services like medical supports, behavioral health, and other
social services. And these harm reduction programs are often the first access point to vulnerable populations and the relationships that are built by the staff at these programs can really help to facilitate entry into other services and ultimately recovery.
So for someone who's studied this situation, in this epidemic, I mean, what do you think is the most effective thing we can do to actually really make a difference and put an end to this so that I'm not talking about an opioid crisis or that isn't or you aren't in two years from now, three years from now, five years from now.
I mean, I think a big one is the stigma that we have and the lack of understanding of the physiological changes that happens when you develop an opioid use disorder. And there's still so much much stigma in the community that we hold as individuals, but it's also pervasive in
policies and within the medical system as well. And so I think just educating ourselves on opioid use disorder and centering ourselves that you know this the eighty six thousand people that we lost in twenty twenty one, those are individuals, Like that's somebody's son, somebody's daughter and husband, what you know, it's an individual and there are things that we can do to help and we all kind of have to change our mindset in how we approach this crisis.
All Right, We're gonna leave it on that note. Sarah, Thank you so much, Sarah Welle. She's a program manager of the Bloomberg Overdose Prevention Initiative over JOHNS. Hopkins Bloomberg School of Public Health.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business App, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
Well, someone who's been playing around certainly with threads is our own Max Chafkin. He's calumnist for Bloomberg Business Week here in our interactive broker studio. He writes about it in a story that's in the upcoming new issue, which is out on newsstands tomorrow, already online at Bloomberg dot com, slash BUSINESSWEEKND on the Bloomberg terminal. So tell us about your experience with threads.
Well, it's nicer than Twitter, I mean, in my experience, which probably the best thing you could say for I mean, so far to my mind. You know, Facebook has basically meta now has been doing this for basically the past decade, where you know, Mark Zackerberg's team look out at the app universe and figure out find things to copy, and
they they've copied a lot of things, mostly unsuccessfully. Every now and then that they have a hit Stories, which is you know, part of Instagram Reels, which we could debate, kind of a knockoff on TikTok. Both those have been successful, and Threads is kind of in that proud tradition.
Dude, don't forget Facebook. I mean, I will never forget how excited I was to find friends tor and started to convince my buddies around the world to sign up. And I was kind of bummed out when everyone switched over to MySpace and all of that was before Facebook even you know, was a glint in its mother's eyes.
Yeah, no, absolutely, you know.
And but I think that the what's made Threads, what sort of made it successful but also creates kind of a bit of a vulnerability, is like you said, it's super easy sign up for It's basically Twitter, except you sign up through Instagram and it kind of auto populates your feed with your Instagram friends, which has made it, which has created all this excitement because all these people are getting notifications, people are signing up, But once you
actually get in there, I think it's a little bit empty. I don't know what others probably have different experiences, but I've been getting all these alerts from people you know, so and so followed you, and you click on their profile and it's empty and it has this kind of manufactured quality to it, which is I think something you could you could say a lot about Facebook. Now, on the other hand, it doesn't have the kind of crazy
quality of Elon Musk's Twitter. And I think that's what Mark Zuckerberg is betting on, that that you know, Twitter has just gotten too weird, too chaotic or whatever, and that there is an appeal for you know, Instagram but with text.
So Twitter's disasters, if you will, are kind of providing an opportunity for others, including threads.
Yeah, that's potentially.
But I think I think that this the figures we're seeing in terms of threads, the uptake on threads, so it's a one hundred million people signed up in five days, which makes it, you know, but by that measure, the fastest growing app of all time. I think you need to take that with a grain assault because of the fact that it's essentially auto populating from this other social network, Instagram that has two billion users. So in certain ways it's a new app. In other ways, it's just like
another version of Instagram. And I think it also kind of shows a little bit of the weakness that that Facebook is dealing with. This what I wrote about in this piece, which is that you know, for a couple basically for several years, there's been this sort of flattening out or even decline and engagement. People are not sharing things on social media platforms the way they used to, and that's been a problem for years, and with the end of the pandemic, it's kind of bringing it to
the forefront. And so you have things like Threads, which is you know, I think Canon probably should be seen as an effort to kind of juice Instagram to like give people a reason to get back on this thing that maybe they're getting a little sick of, and also maybe give you know, Meta some other way to get people back engaged with its services and maybe away from TikTok.
I'm curious to know, Carol, what your experience is with Twitter because you seem to love it.
And I like tweet deck. I play a lot more on that than I do on Twitter, and because I have, although I have to say, I don't love it as it as I used it, because my feed is definitely things have been mucked around.
That's what I'm wondering about it. Like I love to put stuff out there, but how you consume the information that's on it.
What I do love when there's news happening, Like it's just a great place to get a lot of people weighing in and I actually feel like it's fairly accurate and you get just some really good observations. Having said that, I'll sometimes say something and somebody like, hey did you see this? And I feel like with financials, like you get a lot of good research. So I do like it, and I haven't played around with threads.
You're looking at me, fins, Well, yeah, I mean one thing on Instagram.
One interesting thing about threads is that.
I like to live life and actually go do things.
They don't want.
I mean that that's the kind of thing that they actually don't want. You know, they've come out there and said they don't want news to be a big part of the of the feed, which has you know, implications for you know, media outlets and so on who have built there, as you say, ecosystems, journalistic ecosystems on Twitter. That I think the idea is that they won't exist on Threads. And and part of that is because of
advertising and you know, Facebook Meta. For all their all the flaws of these apps, you know, they are very good at at serving advertisers, and I think that's part of what makes Threads unsatisfying, you know, from a user experience standpoint. On the other hand, it could turn into a successful business as.
The Sarah virus's ads are coming, right.
Yeah, that's definitely the ads are coming.
There's absolutely no question of that, you know, and they've said that, you know, they're gonna that's gonna get worked out. But but the idea is to have a place that feels safer and and friendlier to to add advertisers than Twitter.
And also I think, but well the bad guys come, well that's the post. Yeah, for sure, that's possible.
I think you know, the controversy or the it's right now, there's no you know, the original Twitter. The thing that most people know is this feed of chronological feed of things that you post your friends are posting, and Threads doesn't have that right now. Maybe they'll have it at some point. Right now, it's entirely algorithmic. It's just like
TikTok for text. So you see, you know, a bunch of your friends posts, but then when when that runs out, you just see like a steady scroll of influencers.
Brands and so on. So it's a different thing.
And I think Facebook is sort of betting that you know there, that the sort of Instagram crowd would want to share things in a text form.
I don't know if that's true.
I don't know if the people who are really good at like taking pictures of beautiful landscapes aren't necessarily the most creative or clever writers.
But you know, I suppose we'll see so.
In terms of advertisers and what they like and don't like. Obviously, the controversy and the bad people on Twitter has been one problem, or the bad person who owns Twitter has been one problem for them. But the other problem, uh Facebook and you know Threads, is the api. I know that a lot of you know, the industry that likes to sweep these platforms for data. Uh, they can do it very easily with Twitter's API, and they like Twitter's API. They don't love the API that Meta offers. Well.
I mean the thing is, though, that Musk has been cracking down on that, that that API access that made Twitter so popular, you know, is now as part of Elon Musk's efforts to like, you know, turn this thing into a profitable business and make his debt payments, he's been you know, uh starting to charge people for.
This API access. Uh. Facebook Meta, as he said, is a closed platform.
And and you know, we don't know exactly what's happening behind the scenes on the threads algorithm, but I think it's basically it's probably the same algorithm that's driving you know, the rest of the platform. And and the idea again is is yeh, is to keep it, like he said, kind of keep it inside and and eventually, you know, gather as much data as possible.
You know.
One challenge that Facebook has had over the last few years is people are not sharing as much, which creates problems, you know, both in terms of what is it going to show you, but also creates problems in terms of data collection and like how does it learn things about you. So so one opportunity here with this new platform is maybe people will start posting stuff again. Maybe they see a new app, there's a new form, and it could create,
you know, further opportunities for targeting. But again, I don't think we know for sure whether these one hundred million or how many users are on there now are going to be to come back.
Max.
My big takeaway from your story, which is kind of evident in the headline as well, but there was a number I took away of the pandemic where we are spending less on our devices still six hours forty three minutes a day, but slightly lower than twenty seventeen, down thirteen minutes. Biggest drop since I guess this company started
tracking it that you source. But my point is that when Facebook or when Twitter and different things were created, it was how many years ago, right, And it was like internet glow, all kind of new, right, and everybody was kind of into it at experiencing it. And at this point people have other things that they can do, and I just maybe we just don't want it anymore.
Yeah, well I think we were as money. Maybe we just don't want it as much. And and there's more competition, and you know, as you said, there was this kind of growth in audience and attention that happened so reliably and in such an explosive way that I think a lot of companies came to see it almost like a natural law, like gravity or something. Right, It's just bound to happen. And the pandemic, of course made it seem even more so. You had people talking about a new normal.
You know.
Mark Zuckerberg, you know, was so bought into this that he's that he changed the name of the company of Meta and started talking to the metaverse. And what's happened is you have more competition and less time, and that's creating a lot of dislocation, both in terms of social media companies.
You know, we've seen layoffs obviously at.
Meta streaming services, right streaming.
Streaming services and news you know, BuzzFeed and Vice, both of which really kind of hitched their wagons to to these social platforms, have struggled because because the audiences aren't there, people are spending less time and and that's creating all sorts of problems, you know, across the media landscape.
One of the things I thought was interesting, as I said, I signed up for Threads and then I quit. I think, I think I deactivated my account. There was a delete at least I know I deleted the app and I did something. But I read in the story that there's no way to delete your Threads account permanently unless you also delete your Instagram account. I know I didn't do that.
He's got you forever.
Yeah, so Threads is technically part of Instagram, So yes, you can delete the app, but you can't delete your account. They've they've said, and I don't know how to take this, like whether this is like a real whether this is just slip service or what, but they've said they are they're looking into ways that you could delete. Come at some point maybe you will be able to That was probably my favorite line of the whole story.
Instagram's head Adam Lazeri said the company is looking into a way to delete your Threads account separately. Come on, I mean, there's, dude, the cool.
Thing and also maybe the slightly disturbing thing, depending on your point of view of Facebook, is this Thread's launch really is an opportunity to see all the things that Facebook does well in terms of growth, in terms of like tricking people or convincing people or enticing people to download their apps and create create content, because really it's just it's engineered, starting from Instagram until you get on there to just sort of like bring you in, and
then once it's got you, as I said, you know, or as you discover it, it's it's hard to get out. And that's been kind of like the Mark Zuckerberg playbook for a really long time.
Oh wait, what happens if I delete my Twitter account? If I commit Twitter.
Side the universe?
Do they do they keep my data? Or do we not know?
I am not sure.
I think that in general, I mean Twitter has I had to monetize the data, so I doubt that the data goes away.
But but you have to have.
A special place in their storage areas. That's Matt Miller's So wait, because you're this amazing journalist, you obviously reached out to Twitter. What did they say to you?
They sent me a poop emoji?
Abu dude? I mean that guy has been he's prepping for a cage fight. He's in great shape. Like, what's the deal with this dude?
Well, he looks great.
I mean he's you know, he's he's inside of forty and I think, you know, there's I'm sure there's some psychological things going on, there reasons why people get into cage fighting. But I think one thing that I find interesting here about this Zuck Elon kind of reality show cycle is I think it's a symptom of of the way people are getting tired of this stuff. And and and you see Elon. I mean, the the big asset Twitter has is Elon. It's it's that he is just
endlessly fascinating. You cannot take your eyes off of him, even when he is doing, you know, stuff that is you know, abhorring or saying things that are are crazy. And and like the fact that Mark Zuckerberg is embracing that, to me is strange and suggests that he is trying to capture a little bit of that, you know.
But of course it's double short, and it's.
It's so different from Zuckerberg's you know, previous brand, So it's a little it's hard to know what to make of it.
Well, story, they're never letting go of you.
I don't mind. Everyone can have me.
Max Chafkin, thank you, what fun. He is calumnist at Bloomberg BusinessWeek. Check out the new issue on newstands tomorrow on the Bloomberg and of course at Bloomberg dot com Slish BusinessWeek. This is Bloomberg Radio, Marc.
Journal, you let me drive, honey, please, Gravel, I want to drive.
The question.
This is the drive to the Globe.
We should it on on Bluebird Radio.
All right, everybody, eighteen minutes left in today's trading session. Matt Miller wants again eating nerds or something.
I'm not eating nerds.
What are you eating?
It's a healthy nut mix with Look at this to be followed by nerds. That's a dried banana. There. It doesn't get any healthier than dried banana.
Their nerds around there anywhere, not here at your desk.
Maybe.
All right, let's get to it. We're watching the markets. Equities continue to march higher on this Thursday, Lecho and on. Let's get to it though. With Doug Sioka, I'm so glad to have him back, CEO and partner at Cavar Capital Partners. They've got about a billion in assets under management. Back with the sun Zoom from Leewood, Kansas. Doug, good to have you here. I'm assuming you're not eating any nerds. Having said I'm getting hungry though, for nerds or for
no but let's talk about it. Hey, listen, let's ask about Jim Bollard. I don't know, is there a thing for you in importance of Jim Bullard stepping down?
You know, I mean I was happy to see it, actually, Carol, And you know, I think just generally change is pretty positive. And I know technically there are I guess the term limit at fourteen years, but it's a really long time. So I think having fresh perspective interwoven, even with more regularity,
can't be bad. I also think it's exceedingly difficult now to come up with something impactful and insightful to share with as often as these FED governors and presidents are asked to speak, and I think sometimes there comes maybe a temptation to make grandiose statements or proclamations, even when they are that are necessary, and I always felt like Bullard cannot resist that temptation.
That was actually my takeaway as well. When I first read this story and saw that he won't be he won't be agreeing to any more speaking engagements from today, I was like, phew. He also got into a little bit of trouble with that speaking engagements, right because he was getting paid for speaking engagements that were kind of private.
Yeah.
I don't know the facts on that map, but again I know that with Powell as the president and elevating kind of communication, the public profile these these fed presidents voting or non to me was almost counterproductive. Right when you are making policy by consensus and then I get the SEP and I get the mysterious anonymous dot plotting, but when you come out then and have comments and commentary that are inconsistent with like the policy vote and
then we got to wait for the minutes. I just feel like the rhetoric and kind of the court of public opinion which monetary policy has been deployed over the last several years, I just have found it to be counter productive. And again I kind of felt like Jim Bulller was one of the lead. It's the kind of the lead of baton twirlers in that whole circus.
Let's put that aside and look at these markets, because over forty five hundred on the and you know, we continued it. Well, we're at session highs again here, up one percent after rallying every single day this week. What's good out there, Doug? I mean, why why are we so bullish here?
Yeah?
You know right now? I mean, obviously tech keeps running, and it's it's kind of a combination of three things. I mean, or one path least resistance number two fomo number three. We're actually seeing like tangible amounts of retail money beginning to come into the market. And I think commonly people they're like, there's a couturion sell saying Okay,
here comes retail. Time to get out. Maybe that's when retail is a little bit more fully invested, right, Retail creates kind of another wave of momentum in the direction kind of where the best opportunities have seemed to be identified,
and momentum itself is a factor, right. I read something the other day I thought that was pretty fascinating is that even when markets right with the expectation of identifying sort of oversold levels or overbought levels, even when the NASAQ one hundred historically has been twenty percent above a two hundred day moving average, the six to twelve month return going forward is still about twenty percent. So I think maybe there's some of that that that's playing itself out.
But certainly the momentum is extremely strong.
Right now.
We'll see what happens with earnings next week, right to see if that's gonna be an additional tailwinner that's going to be an impediment to continuation.
Have you been buying banks ahead of it?
You know, we haven't been too aggressive, like in the financial side. You know, one of the things, in spite of kind of the the calming down on the psychological concern about the viabilities of these banks, we really are really concerned about, like the ongoing profitability, particularly of the regional and smaller banks. Right you have lower loan demand
just because the economy is generally slowing. Number two, you have higher expenses because it's difficult to make that interest margin with your cost of financing is going up just to be competitive with the prevailing money market rates. And number three, you're gonna have more regulation. So it's difficult for us to ascertain where we are kind of in that profit cycle for the banks in general.
Carroll, I was actually making a list of pros and cons for the banks, and I could only come up with cons. And they slow down in deal making, higher deposit costs, flighter deposits, higher regulatory costs, too much headcount, dropping loan asset values. I mean, I just can't think of a pro.
Yeah, pro's going to be consolidation, man, I mean, which maybe gets a little bit more of the specuative side of why you want to own one outside the operational value, maybe the book value and kind of contributing value, the creative capability to be folded into a large organization. I feared for like the smaller community bank only because I feel what the FED has done, inadvertently or otherwise has made it a lot more difficult for them to survivive independently.
And I guess some of it depends on the economic cycle too. I mean, banks are so way down right because of all the regional but it.
Seems like the regulators want a consolidation wave in banks, right, I mean, there's over four thousand. They seem to be pushing for that. And ironically that could be a good thing for the big banks because their investment bankers could have some work to do.
That's true, I mean, and they're looking for work to do right now. And obviously, if you read what Golden has said in the last couple of quarters, and even in kind of the quasi pre announcement. I mean the deal flows lower, and I think multiples are contracting. Cost of capital's higher. Organ they generally, you know, global economic ambiguity is elevated, so you're not seeing a lot of deals that are just going to get rubber stamped and
put through. They're going to require a whole lot of kind of heft in that whole banking lineup right now. So yeah, they could be to where corporate es guys make an introduction, the M and A guys, they get a deal done, and then they make a bigger bank, and then sixty twelve years from now they deconstruct that bank and the bankers get paid again. So maybe that's where really to be focused.
The balance portfolio, it's back.
It's back. It's back because I mean, both both sides of it right are making contributions, and we're spending a lot of time right now in kind of the structure are fixed income portfolios, and I mean, there's no question the yield curve is going to normalize. So we've seen kind of a little bit of an attempt to do so just this week, and we're of the mind that it's going to be a disproportionate adjustment with with the front end coming down versus the back end going much higher.
In this whole we have a long way to go. Going back to the Fed rhetoric, it's a bit bizarre in my opinion right. I think the Fed needs to continue to relax. I don't think they're going to stand pat in July. But we have these known lags of monetary policy that are taking hold in any time.
Right.
Historically, when the Fed funds rate has gone above CPI, the fourd OUTLOK twelve months for the bond mark is extraordinarily strong. I don't see why that's going to be any different this time. But I think the thing is more than anything. Just wrap your brain around buying bonds in longer dates with shorter yields, and.
You have the right hand wisdom.
CEO and Capital Partner's Hunting out the Sand from mccamps fi Bloomberg BusinessWeek.
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