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Worn Buffett and Berkshire have I recording some earnings over the weekend. The question I always have is how much cash do they have on their balantie?
Everybody always wants to watch that as a contrarian potential indicator.
Yeah, I just I just don't know what's going on over there. But our next guest does. Matt Pelosola. He's seen around us covering the insurance business for Bloomberg Intelligence during us here in a Bloomberg Interactive Brokers studio, Matt, wou'd you take away from the Berkshire's results on Saturday?
So pult to answer your first question. Three hundred and twenty five billion dollars in cash. That's the most they've ever had. So when you look at their earnings, there's a couple of layers you have to unpeel. First, their gap earnings were swayed by investment changes. Buffett himself has said, you kind of just throw that out. We don't really look at that. It was like twenty six I think billion versus an eleven billion loss in the year ago.
Those numbers are a little bit irrelevant. The next part is their earnings from operating companies. Those, if you look at just the number they give you, those were down about six percent. What happened there, though, was they have a lot of yen debt and there was a big four x loss in there, so peel that back. The operating companies earnings were up a little bit, which was less than I expected. The insurance operation had a couple of unforeseen negatives in it, and that really turned it down.
Some of them I don't think are ongoing things, but that was really the negative variance was in the insurance business something.
Because we were actually chatting about this earlier. When it came to the percent of their cash pilot Berkshire Hathaway last time it was around this high. The stock market to continued to move on to records over the following fifty two weeks, but then the last time on this opposite into that the lowest percent of cash he had at any time over the past decade was right when the S and P five hundred briefly peeged in twenty
twenty one. So what's your thoughts when ever, you're kind of thinking about what this could mean more broadly for where like major indexes and equities could potentially be headed.
Yeah, So, I mean Buffett is a more of a time in than timing of the market right clearly, So, I don't think he's making big moves on large expectations on the market. If you look what happened, they sold about twenty two billion dollars worth of Apple stock in the quarter. That's along with about nine and a half billion worth of Bank of America stock in the quarter. I don't think you look at that and say, Okay, he's completely parish on everything in the market. I think
those were, you know, unique things. They were highly concentrated in Apple. Their Apple position is down seventy percent from its high in terms of the shares they own, so I think those things were unique to the stocks they own.
Buffett has repeatedly talked about taxes going up. I don't think it's even an election cycle now, but he's just saying even longer term, there's probably only one direction taxes are going for us and that's up, so you'd not be surprised to see them taking large gains off the board.
So three and twenty five billion dollars, is there any realistic scenario for deploying that capital over a multi year period.
You know, it's tough. They are limited in how much shares they can buy back just on the float.
We had wrote.
You know, it's tough to see them doing a tens of billion dollar acquisition. There is the ownership in Chubb out there, which is, you know, perhaps the megadeal that may or may not ever happen if they do something. They bought Allegheny, which was an insurance company kind of conglomerate a couple of years ago. That was about twelve billion dollar. It seems like that's going to be the max on what they're going to do. But if I could predict a Buffett would do, I'd be on an island somewhere.
So but no dividend.
There will not be a dividend as long as Warren Buffett is sitting in all is that. I mean, I think he likes getting them, he doesn't like paying them. He says, you know, look, I and I would agree with him. I'm better off holding this money than giving it. Your return on a divid end is going to be less than my return investing it. That probably hasn't been true actually recently, but I think that's his mindset.
You were mentioning about how claims they were years ago are costing them more than expected. Walk us through that dynamic.
Sure, So this is called reserve development. So what happens is insurance companies like so for example, Geico, they write auto, some home, well not really home, but they'll write auto. You're either going to have a car accident in a year or you're not. But they'll write some liability business where you may have a claim, and that you might
find out that I claim years into the future. And what is happening is you set up a reserve for that, and that reserve could be wrong or they're almost always wrong right, but it could be wrong too low or wrong too high. And what had happened in the quarter was those were their reserve for their primary insurance business. A specific unit of it was quite wrong, and there's there's new management took over that unit, and usually when
that happens, they add to their reserves. If this was If this was just a you know, X Y Z insurance company, this would be really bad. But it's Berkshire. Their financial strength is so superior to anything you might see that it's kind of just a blip.
I got a invest with Scooter Progressive. Progressive wrote the policy.
I always wear a helmet.
That's all I do. Have the helmet. Progressive. Give me thirty seconds on Progressive, because so far I'm happy with the Yeah.
I mean, so.
Berkshire themselves has kind of been saying Progressives eight our lunch for the past, you know. Progressive extremely innovative in pricing, which allowed them to kind of take a lot of market share. State Farms is kind of the big name there in auto insurance, and they all State has just been picking away, I mean not all State. Progressive has been picking away at them the recent spike in auto
insurance prices. They navigated that a lot better than the rest of the industry, which is allowing them to pull more share. Geico is shrinking, Progressives growing really best operator in the auto insurance space.
Progressive and actually Choice, my existing insurer, I've got like five thousand lines with their pricing was twice where Progressive was so I just.
Like see you.
They don't know how good of a risk you are.
Exactly right me the vest mouscooter's cruising the Jersey short John Tucker, What that's a view? This is Blonimer.
You see him, Come and get out of the way.
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All right, Jess Metton sitting in for Alex Steel on Paul Sweeney. You're live here on a Bloomberg Interactive Brokers studio streaming live as well on YouTube dot com. So search there for Bloomberg podcast. The election tomorrow obviously one of the key issues driving this market for some time. It's got the latest analysis here. Mayo Wiley joins us. She's president and CEO of the Leadership Conference on Civil
and Human Rights. Joining us if head that zoom thing here, so it comes in handy, Mayo, thank you so much for joining us here. I guess what we hear from you know a lot of the experts is this is too close to call. What are you hearing from some of the folks that you talk to.
Well, certainly, what we know is that voters are going to decide the outcome of this election and absolutely cannot predict based on the polls.
What we can say is what we're seeing in.
The absolute enthusiasm to show up to these holes, even in early voting. As we know, election day is tomorrow, but I was in Pennsylvania on Saturday where thousands of doors were being knocked all over the state.
Lots of high levels.
Of turnout across not just Pennsylvania, but other states. We're hearing already for Detroit, Michigan, for example, fifty one percent turnout for early voting. Michigan is also one of those states that has same day registration, meaning people can show up at the polls and register to vote and then
vote tomorrow. So what our own Civil Rights monitor polling showed in September that the Leadership Conference did with Brilliant Corners was enthusiasm is high on all sides in this election and seeing that at the polls.
Talk to us Maya about what the mood is like in some of these key states in these battleground areas well.
You know, I've been to Milwaukee, I've been to Detroit, I was in Pennsylvania. I think the mood is everything from completely motivated for folks to show up and have their voices heard at the polls, and anxiety. I mean, the anxiety is understandable. There is a lot at stake in this election. People are feeling it. You know.
There's also been the.
Reality of disinformation and the flood both from foreign governments like Russia, like China, like Iran trying to sow division and confusion, and sadly, some political leaders, some organizational leaders, some politicians picking up on that disinformation. So a lot of work on the ground across the country to make sure that voters know where to vote, how to vote,
and that their votes count and will be counted. Because we do have an exceptionally impressive election system in this country we should be proud of and that's a big part of the work that people are doing on the ground.
And Miley, a lot of experts are telling them to really be mindful of the turnout, that turnouts can be really critical for both sides. Actually, what's your understanding of maybe is one side better equipped to get the you know, the word out in the turnout going.
Well, look, certainly it's a turnout election. I would argue all elections are actually turnout elections.
When voters show up, they decide who lead us.
And so the more voters who show up, the more we have a true reading of the country. The voter motivation is very high. Turnout is exceptionally high. We're already seeing numbers of turnout that are historic. They're approaching twenty twenty numbers. Remember President Joe Biden won the most number of votes of any president for over one hundred years of voting history. This is on part of a historic turnout election. I think the point about who does that benefit?
I mean both sides, all sides are showing up.
The real question is what do voters want and what's a stake? And how many of these voters are new votvoters or voters who did not show up in twenty
twenty or in twenty twenty two. A lot of the get out the vote work has been focused in the civil rights community and certainly by US at the Leadership Conference, of making sure those people who can vote know where and how to vote and feel that their vote matters and will count, and that's why I think we're seeing high turnout as people are feeling that.
Whenever you're speaking anecdotal lead to Americans across the country, what is more specific when it comes to policy proposals do they constantly keep bringing up to you?
Look, people are very concerned obviously about everything from the state of our democracy and our freedoms, particularly abortion, but in communities of color, criminal justice reform is a huge issue.
As is education.
But I think we also know that across the board, costs are an issue. And you know, one of the things that's been so clear in this campaign is, you know, when Kamala Harris speaks about the fact that she is not going to drive up the cost of groceries, but Donald Trump obviously talking less about costs and more casting aspersions. I mean, people are really trying to listen for how
is my life going to be better? And they're responding to where and how They're hearing very clear messages about what things they would see and feel in their own households and communities. I think that's also why we're seeing so many women vote because abortion and access to abortion as an issue of healthcare. Reproductive freedom is not just reproductive freedom, it's also the ability to get the care
you need, including if your life is in danger. And we're seeing that as a huge motivator and topic of discussion, and I think that's part of why we're seeing what we saw in that Iowa poll, which showed frankly, that women were turning out in droves, and we've seen that gender gap so many women engaged in the selection, and.
That is a big reason, right, Maya, thank you so much for joining us. We really appreciate getting some of your time. Maya Wiley, she's a president and CEO of the Leadership Conference on Civil and Human Rights, giving us her peview of again the selection for tomorrow.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple car Playing and broun Otto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Katie Kaminski joins us. She's a chief research strategist and portfolio managed Alpha Simplex Group, joining us via that Zoom thing. Katie, when you look at the markets broadly defined here, what are they kind of telling me about the next twenty four forty eight hours, or do you just try to power through all that stuff and think about longer term?
Oh, this is tricky.
I mean, I'd say that as a trend fuller, we tend to think about holding the course.
But it's really hard.
I mean, you're seeing today some reversal of trends that have been following from the last month. Really, yields have moved so much, yields have moved so much higher.
You're seeing the reversal of that today.
You've seen the dollar had been sort of on a tear and then now as reverting again.
So there's just a lot of uncertainty in the short term.
So actually powering through is probably a better way to sort of handle all of this volatility.
Katie, I wanted to pick your brain about poly market because we've seen it a bit all over the place in recent weeks, sometimes favoring at Trump, whereas over the weekend you started to see that narrow out and begin to favor Harris instead. So as a trading kind of strategy, why would an investor use them for a trading strategy
over polls? And why are they using a betting website over polling for judging sentiment because obviously, as we know, it's not really correlated to who would actually end up winning.
Well, this is a good point, and I mean, I think it has to do more with market price discovery, and I think people a lot of faith in.
Sort of market pricing of odds.
But then you know, obviously polling could be sort of a different demographic group. So what's really making a lot of people, I think even myself, is you see the news and it's just flipping back and forth, and there are very different outlets pointing to different observations, and that just suggests how incredibly uncertain and tight.
This race really is.
And people are probably also looking at those areas which kind of they're used to, So I think the picture is very mixed.
So Katie, from your perspective and just maybe your equity allocation here have you made have you hedged it at all? Or are you just position that we're going to be fine no matter who's kind of controlling things down there in Washington.
Well, this is a good question because as a trend follower, our goal isn't really sort of to add a discretionary view on what we do we're just measuring where market directions are moving. And you have seen some momentum and equities over the last six weeks. But I think the biggest thing that people have been focused on is not necessarily just equities. It's just how much long bond signals have dissipated, even going short in US fixed income in
some ways. And also how much the dollar has moved, but it's a short term moved and things are still very mixed. But US equities seem to be the most robust signal, which tells you maybe we're going to be fine either way, let's hope.
So when it comes to Congress, in the makeup of Congress and particularly gridlock, because when I've been speaking with a lot of portfolio managers, especially when they're managing money for longer term horizons, they haven't been making big bets either way because a lot of times, even if they have certain policy proposals, as you know, it would take some time here to figure out whether or not those
would get passed. So how much to you when you're thinking about gridlock in Congress, will that make certain trading decisions in the coming months or even having to wait on that, you know more of what that could look like in Congress when you think about the House as well as the Senate.
I think you make a good point.
It's just if you think about NPV or sort of the value of the markets, it's really about weighing the different possible outcomes. And even though we're going to have at least hopefully some resolution in terms of the election, it still is quite a long road for many different policies, particularly if you have a gridlock in Congress, and that means that status quo is probably closer than sort of these extreme scenarios which people are trying to discount and valuate.
And so I think that that's why if you look for the overall trend, equities still remain somewhat positive, because the path to all of more extreme policy is actually a long one and it could take time to know, and we should have more information as that changes.
Katie. In the world of fixed income, how much credit risk are you taking if any of these days?
So we don't focus on credit risk, but I know that's in an area recently that has been very interesting, especially with yields higher. I think the fact that you didn't see a lot of credit deterioration in August was something that surprised me. We're much more focused on the directional level of yields, and we've really seen a major pivot towards higher, longer, steadier fed reaction, and I think that sort of is obviously going to impact credit as well.
Katie, thank you so much for joining us. We always appreciate getting a few minutes of your time. Kati Kaminski. She's a chief research strategist and she's a portfolio manager over to Alpha Simplex Group.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa, play Bloomberg eleven thirty.
At Bloomberg Interactive Brooks Studio, or streaming live on YouTube as well as to check us out there Trump trades, which is basically long the dollar, short bonds. Are you long the Trump trade? Are you not? It seemed like the narrative maybe change a little bit over the weekends of new polling. I don't know how if you're a trader, you're playing this thing I don't know, but our next guest has a great big take story. Honest, you know, we love the big take stories coming out of Bloomberg News.
Great topics, deeply resourced, deeply sourced.
Always great visuals and charts like the pictures.
The pictures helped me. Katherine Burton joins us. She's a senior reporter for Bloomberg News. She joins us here in our Bloomberg Interactive Broker studio. So, Kathy, what are traders on Global Wallstreet? What are they trying to do here ahead of this election? Are they trying to play it? Are they trying to hedge themselves? What are they doing?
They're trying to do both. Actually, I would say that most of the traders have a slight tendency towards the Trump trade that has maybe reversed a little bit overnight with the new poll that showed Harris ahead and I but there's also a lot of hedging going on. People are betting on inflation, they're betting on a steeper yield curve, and both those things should make money no matter who wins.
It's interesting because when I've been speaking to a lot of portfolio managers who are managing money for longer term. They're still kind of on the sidelines and are more focused on the Federal Reserve and kind of the direction
of the economy. But when you're talking to say hedge funds, which obviously have a much shorter type of timeframe, what is the mood like there, and how exactly are there priming their computer models for a moment like this and how they're treating because obviously they have a different time horizon than they say somebody who's managing money like five ten years out right.
So we spoke to one of those managers who has a pretty substantial quant aspect to their portfolio, and they did over the past few months, and because it's only been a few months since Harris came into the election, they've been looking at polls and betting markets and trying to put that into their models and isolate how set classes move with a rise or a fall in the polls. So people have been rejigging their models to try and get a better idea of what to do.
Global Wall Street, I mean, they're getting ready for this thing. JPMorgan Chase you report plans to increase staffing in Europe and Asia to handle overnight volume and volatility. Glob and Sachs expects to have hundreds from its sales and trading teams on site in New York well into the night. So Global Wall Street they're gear enough for this. It's not just gonna wake up and see what happened.
Yeah. Absolutely, And we have even smaller brokers who have never had people overnight before for an election saying that this election they might well have to have someone there throughout the night.
Something else I was keeping a close eye on is when you're looking at the CFTC data, we get updates every Friday at three thirty, so always convenient right before the closing bell at the end of the week. But hedgephnes were of course betting on bigger price wings coming up, probably not surprisingly so when you're looking at large speculators turning that long on vic's futures for the first time
since January of twenty nineteen. And so whenever you're speaking with your sources, specifically when you're thinking about the options equity side of things, what are they telling you with as more specifically of how they're trying to hedge or what they're trying to either buy or kind of shy away from at this point.
Yeah, there's definitely been more vics buying because they do expect that there's going to be more volatility m hm. And also more futures as well.
Something I was wondering too, because you have such a jam packed week and then other events coming up in the coming weeks. Two obviously the election, the Federal Reserve, we have a thirteen F filing deadline coming up to we still have about nine percent of the S and P five hundred by market cap reporting. And then of course we have Nvidia actually coming up on November twentieth. So when you're speaking with them, do they say there's
a specific event. Obviously we know the elections tomorrow, but is there is it harder to decipher one event versus another?
Yes?
Absolutely.
I mean the Fed is really an huge thing, and I think more people are looking at what's going to happen there than really than anything else, even the election.
Right, So the popular Trump trade again long the dollars short bonds, is that unwinding today a little bit because of this new polling data that came out. It does it move that short term?
Yes, it has.
The last time I left, the dollar was down almost a percent. For example, I think crypto is down to yep.
Yeah, we got a crypto a bitcoined down one percent, the Bloomberg Dollar index down about six tens to one percent, and the people mind a tenure treasures up to twenty four to thirty seconds. So it just day to day it seems.
Like, yeah, absolutely, and what would be really as we start getting results, it's going to be even more frequent, right.
Talk to us about the implied price swings that the options markets pricing in the days.
After the election, meaning what exactly kind of like the elevator, so City, for instance, du Kaiser at City he sees on actually a Wednesday, So the day after the election, the S and P five hundred could swing about one point.
Eight percent in either direction. But obviously we know we'll have the FED decision on Thursday too. But do you expect to see heightened kind of volatility, particularly in the vis and then in options in futures markets, especially you know, in the coming days and then the coming weeks two.
Oh, yes, particularly in the dollar.
People have told us that that's something they're really really going to be watching because they feel like that's going to be something that everyone will be looking on even people outside the US because of the trade issues, right such.
I mean that makes sense, Yeah, but there's also a chance that we're not going to know for some time. If you know, this thing could drag on for days, there could be legal challenges. So are fund managers are they kind of positioning themselves for that or is that just amount of hedging?
I guess yes, I think that would that's mostly hedging, although some people I think Golden Sachs had a note doubt that said that even if we don't have a precise decision, that there will be certain things that will let lead the market towards a conclusion of Trump or Harris.
How about just in terms of going forward, I mean a lot of folks say, don't worry about who wins the White House because it's going to have a gridlocked Congress.
Right the makeup of Congress. Ye, traders will usually focus on that.
That's interesting too. Are traders are looking at that as well?
Absolutely? We definitely had people say it does not really matter as much who as president, at least in the short term, as whether we have a sweep in Congress or not.
And specifically, when you think about policy proposals, whether they affect obviously trade if you think about big tech regulation, healthcare regulation, or there are particular types of policy proposals that those traders are looking at that they want to remain gridlock in Congress, so that obviously the status quote would stay in place and there would be big changes to different policies for those types of industries.
Yeah, definitely. I mean, I think crypto is one. I think clean energy is another one that a lot of people are looking at.
All.
Right, Catherine, thank you so much for joining us. Katherin Burton Burton J'SUS senior report for Bloomberg News, joining us here in our Bloomberg Interactive Broker's studio. The Big Takes story at on the Bloomberg Trumbo. You can read it on the terminal.
Great stuff.
Yeah, it's always great stuff. We love having talk about these stories, so you can read it on the Bloomberg Tremol. You can also go to Bloomberg dot com slash Big Take. And it's interesting to see, you know, how the markets are reacting to just seemingly daily swings and kind of how the polls are moving here when you take a look at some broadly traded asset classes like currencies like bonds.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play 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.
Alex Steel will'll be back in a couple of weeks. That'll be a good and wonderful thing. We're here in our Bloomberg INTERACTI Broker studio, streaming live on YouTube as well. All right, I'm going back to that big takes story, the trumpet trade, which is long the dollars short, the bonds seems to be unwinding a little bit here. I wonder if you're if you manage a jillion dollars like the good folks at TCW, do do you even care about that stuff? For you're looking through to the bigger picture.
I don't know how they do that stuff there. Rubin have anician. He is a general generalist portfolio manager at TCW's fixed income group. Rubin, what are you? And you know the smart UCLA grads which seems to be you guys own TCW. The UCLA School out there. What do you guys when you sit around on your Monday morning meeting, what do you say about the political backdrop period? Is it factor into what you guys do or do you just kind of plow through and focus on the building blocks.
Good morning, Thanks for having me back on the show.
We are we are not playing the political noise. We're looking through the noise, and we're positioning based on our convictions, based on our based on the value that we see in rates, in duration and.
Certain parts of the rates.
And from that perspective, the trade that we all and in the last materialized in the last month or so since late September, where we've seen rates higher by fifty sixty basisponts across the board. We saw it as an opportunity to add to our duration explored in the front end of the curve and do some other stuff, add to some sectors that are that got sold off and got you know, hurt by the duration by rates selling off.
We think that the sell off in rates, I mean, as you can see this morning, we see a partial reversal ofdea of the cell off that we saw since late September, and I think it's a healthy reminder that the you know, the we haven't heard if you think about it, we haven't heard a lot of new information. We knew it was a very close election. As of this morning, we know exactly the same that is a very close election.
So we're kind of splitting hair here.
And we think the markets got ahead of themselves in pricing in a very extreme scenario and very high probability of the Republican sweep.
So we saw it as an opportunity.
To express of our trades and our trades that are based on the value.
That we've seen rates heading into some of these big key events this week. What do you think speculative positioning in the bond market is telling us.
Well?
Within the speculative positioning in the bar bond market, and of course it's hard to decipher how much of this sell off in We think the sell off that we've seen in the last four or five weeks is driven by a some better than expected data that we saw, especially in the first half of October, which we would recommend to take with a grain of salt, and then some of it was the Republican momentum.
And it's telling you.
That investors are pricing in a very high Again, we saw a partial reversal of that this morning, But generally speaking, we think the data tells you that investors are pricing in very high probability of a Republican sweep, and add that a very high probability of some extreme, some extreme agenda.
Being enacted and implemented conditional on.
That Republicans, which we think is certainly a scenario, but we think that the weight assigned to that scenario is much higher than it's just the fuck end.
What we're seeing this morning is probly healthy reminder of that.
I'm looking at the end go function on the Bloomberg Turberton. I see the best performing fixed income category. It's for being US corporate high yielded almost seven and a half percent. There, what's your call on a high yeld market? I thought we were concerned about recessions, so.
We think that we are in a heart lending camp. We remain in heart lending camp. But you know, we have seen spreads compressed in credit in general. We have seen spreads compressed across the board, both the investment grade and below and high yield. In fact, if you look at the spreads against their historical against their history. They
are currently comfortably in the top fifth percentile. Generally speaking, if you look at investment grade credit spreads, they are in the top one first percentile, meaning spreads have been wider than where they are now ninety nine percent of the times. The stats are a little better for high
yield but similar. So we think the market is, you know, the market is very optimistic about the economic scenarios and outcomes and is not pricing, it's not compensating investors sufficiently for the potential volatility associated with the worst economic outcomes than the market is.
Currently pressing in When you're going into a pivotal week with a barrage of different events here, what is some of the questions that your clients are asking you.
Well, the I mean, it's what you would expect.
It's the questions that the market that you know your guests are asking you, or you're asking your guests.
It's what will be the politics, what will.
Be the outcome of the election, and what that really means for the economy and.
What that really means for the markets.
And we think that there is apparently a lot of extrapolation, there's some there's a lot of uncertainly that's probably an understatement, and there's some fear and there is also some extrapolation from twenty sixteen experience in terms of rates and what the election will mean for rates. And we do think that that those parallels that are being drawn by some investors at least are probably, you know, not justified, because we're sitting at a very different in a very different environment.
We're sitting in a different regime in twenty sixteen. In late twenty sixteen, as you remember, the FET had just embarked upon interest rate hiking path.
We had just come out of the.
Twenty fifteen sixteen mini prices and energy and commodities. This time around, we think we're late cycle. The FAT has started. It's cutting an interest rate cutting cycle. So it's a very different environment and there should be a lot of caution in extrapolating from twenty sixteen experience.
All right, Rubin, thanks so much for your time. I always appreciate getting a few minutes of your time to talk about these bond markets. Rubin, have an Asian general portfolio manager at tc TCW's fixed income group. They're based out there in Los Angeles, California.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on applecar Play 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 playing Bloomberg eleven thirty.
Jess Meant sitting in for Alex Steele and Paul Sweney. You're live here in on our Bloomerg Interactive Broker's studio, streaming live on YouTube as well. I'd say one of the best resources that we have at Bloomberg for our clients is Bloomberg and EF originally known as New Energy Finance. They're the team within Bloomberg that tracks and analyzes the energy transition. They cover everything, and they do it on a global basis and all that contents on the Bloomberg terminal.
Great stuff. Yajoe s Kenny joins us. She's head of Energy Storage for Bloomberg n EF. Where are we ya, YOEI? In terms of energy storage? Who's doing it? Well? Where are we in the game? How much more do we have to go in terms of the technology for energy storage?
All right, Well, thank you for having me today. So I'm here to tell you a little bit about energy storage, and a lot about clean power. So just for some context, and we're going to talk about some of the analysis that we actually published around the clean energy market outlook specifically look at the US for some context. There's just been a lot of investment that's been pouring into clean
power segments. We've seen a lot of that accelerated over the last I guess two years, and since the Inflation Reduction Act passed, facilitating a lot of new investments into win solar and storage sectors, which are the sectors that we cover in that particular report. There's about there's about three hundred billion dollars invested across these sectors, so win solar, storage and other clean transportation and other sectors in twenty twenty three. That's about twenty two percent higher than we
saw in previous years. And then what we're doing this report is to have a twenty thirty five view, so in the next decade, what do we investments and capacity editions look like around these clean sectors. There is actually a lot that's that's bound to happen in terms of just what's committed to date happening over the next few years, and that's likely to unlock a lot more investment over the twenty thirty five period. I can tell you a little bit more about that if you want to hear about it.
Well, I guess one of the risks is just political risks to those numbers, to that type of investment. If we get a change in Congress, if we get to change in the White House more towards re Republican is there are there risks to some of those moneies that have already been committed or earmarked.
Yeah, So what we did, I guess the way we think about it is to look at what is our expectation in the market out to twenty thirty five. So for some context, our expectation in terms of our forecast for winds, solar and storage installations is about one point one tarrawat of new yeah, new capacity editions out to twenty thirty five. Context, in the US power grid, as of the end of twenty twenty three, there was about one point two trawat of cumulative installed power generation capacity.
So essentially we're about doubling in terms of capacity and the grid out to twenty thirty five. But that addition is just from when solar and storage, which is really impressive in terms of the risk factors to your question. So the way we were investigating that in the report, or analyze that in the report is to try to
think about us in the worst case scenario. So there's a lot of investment that's already been committed at the back of the investment tax credits and some of the other incentives in the Inflation Reduction Act, but we wanted to look at, Okay, so what happens if these incentives, So the investment tax credit actually gets repealed right away, which is of course a worst case scenario. It's not our expectation of what will happen, but it gives us
some benchmark of what could happen. And under that scenario, it's about a seventeen percent decline, so it's a fifth of of capacity that gets dropped or not built in the twenty thirty five time frame. One additional component is like if that actually were to happen, is that projects would try to rush to try to be built before that step down happens, which could happen in the end of twenty twenty six or the end of twenty twenty five.
So essentially there's a rush to build a decline in the market, and then the market picks up up again, but not at the same rate or not to the same degree as it would in a non repeal scenario. So that's how we looked at.
That walk us through the key fundamentals that you think have helped build the industry.
Absolutely, so I think we're obviously in an acceleration mode at the moment. It's almost like certain key elements are keeping the market from growing as quickly as it could. But in terms of the fundamentals in the past, major one is the fact that the cost of wind, solar, and storage and batteries has come down significantly over the
last decades. That's really made the cost of these technologies competitive against conventional generation, conventional fossil fuel generators in the US that would be trying to displace gas, and we do see in most of the markets of the US wind and solar are competitive against gas. Of course, they don't deliver energy at all, like twenty four to seven,
and that's where batteries comes in. So the cost of batteries, like specifically Liteman batteries has fallen by more than ninety percent over the last decade, which is significant.
How's the US doing quote some really big numbers here in terms of investment in tara watts and all those. How are we versus the rest of the world in terms of, you know, just in terms of really embracing cleaner energy.
Yeah, so on a country level basis, the US is probably second in terms of stacked investments in these sectors. That's because China is really the giant in terms of attracting new investment into win, solar, and even batteries segments. And there is a bit of a pickup game in terms of some of the key segments in terms of the manufacturing side, so the supply chain and trying to invest that and bring that into the US. With mixed levels of comparative success across different sectors.
What should we expect for wind and solar capacity build in twenty twenty five for those forecasts.
Yeah, so we're expecting most of them to grow. That's certainly true for solar and storage. When when more or less keeping keeping a pace, generally, our expectation is that there will be more investment going in. And that's because there's just a lot of projects in the pipeline that
are essentially contracted to meet utility demands. So a lot of the US utilities have been you know, contracting work in power because they, as I said, they're cheaper, but also because they might have some specific goals in order to decarbonize. I guess. The other factors is just the corporate side, so a lot of the you know, the Amazons and Googles, these companies have increasingly also been looking for cleaner portfolios of energy generation to be meeting their demand.
Yeah, Sacchini head energy Storage at Bloomberg at an EF, thanks so much for joining us here. Again. The good folks at the Bloomberg a ne EF, they look at the I guess within Bloomberg they really track and analyze the energy transition on a global scale. So they're really doing some cutting edge work there, which is a keen importance to a lot of folks, including the Bloomberg criminal customers out there, So we appreciate getting a few minutes of their time every week.
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