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Molly, A lot of movement here in a commodity's gold off, big Bitcoin.
Ripping, absolutely ripping. So who do we eaty two thousand?
Yes?
So who do we talk to?
We talked to Michael bloone Miami, Mike, Senior Commodity Strategies for Bloomberg Intelligence. Safely esconced in Miami. He was doing Miami before it was really chic. He was down there early. Mike talked to us first about Bitcoin eighty two. We're pushing up against eighty three thousand dollars per token.
What's happening here?
The world changed last Tuesday and it's almost a perfect storm for bitcoin. So think of all the anti bitcoin regulation and pushback from the pre Use Administration and Gary Gensler, that's completely flipped. It's delightful to see for some of us who wrote about this five years ago that any US representative or regulator that did not understand that the base layer of this place was actually organically went for the dollar most widely trading bitcoin cryptos not bitcoin. It's
actually tether. The dollar token was Finally, it's delightful to see them figuring it out. What's really happening in this space. So it's nothing but good for bitcoin. The market's getting frothy, but it had a good period of six months which just hung out. Now it's just taking off and you're seeing massive inflows in ETFs. People can get exposed to it and it's kind of kicking into the little match.
Is a digital goal or is leverage stock market? Right now, it's stock workers making new high bitcoins, making new high bitcoins back to it leadership role.
Mike, tell me how much of this trade right now is dependent on Gary Gensler not being in the SEC and it can trump?
Honestly do that?
Oh sure, well he's going to be gone within months. It's just a question of when. He's very unfavorable SEC chairman. He made a lot of enemies on both sides of the aisle, but this is just part of what got him elected. It's the key thing I think the market's figuring out is let's not underestimate this. In Bolden next president. He has been re elected by completely decisive election, and his mantra everything he said in his campaign, I'd say
be careful to disagree with. For instance, I'm reading the latest book for Robert Leiittheiser, who was his past trade representative, and it's called no trade is Free, and we shouldn't expect him to do what he says, partly because he has carte blanche at least to the midterms, and there's still pretty significant trade depthsits So from a commodity standpoint, it's very bearish. From a bitcoin standpoint, it's very bullish, partly because he tilted over and he got the bitcoin
people on his side. I don't think he wants to upset them.
Mike, I can't even remember the last time we talked about valuation and how you're supposed to value bitcoin. Just refresh our memory on how you think about that whole consent.
Yeah, well, in pectical analysis, so I mean, I like to compare it versus gold right now I'm looking at it. It's as some hedge fund managers call it, the fastest horse in the race. I mean versus all risk acids. The risk right now is bitcoins making new record highst but it's correlation sixty day correlation to this SMB five hundred ato point seven or so is the highest ever on the way up, So it's a leading risk acid.
It's rice for all this optimism about us, you know, the Trump election, but markets are so expensive ready versus when he was elected twenty sixteen, they were very low. Certainly bitcoin was. So there's so many ways, but stocks to use is one way to do it. The key thing that I like to say is there's definable diminishing supply and you can see that by just the code, and there's increasing demand and adoption, so over time the
price must go up. And right now it had a major switch flip that this the unexpected election of mister Trump has just flipped it over to the bullish spirits at the moment.
Now, this is something I was really surprised to read in one of our stories that bitcoin now ranks only second to the fossil fuel industry, or rather the crypto industry at large, and total money deployed since the twenty ten Supreme Court decision that limited funds on campaign political spending that's shocking anyone else to think that crypto is number two to fossil fuels. Where is all this cap campaign influence money coming from?
Mike?
Who are the big spenders here?
So well, I don't know exactly who they are. I mean, last time we heard from the bidenminstration, Sam Bankman Freed was the number two donator. That didn't work out so well. That's why partly the bidenministration pushed back after the collapse at the FTX. The bottom line is, let's look at an ETPs now ETFs Bitcoin's about ninety two billion. Total gold ETPs are about two hundred and thirty billions, so let's catching up fast. And remember this Bitcoin's only been
trading in exchange traded funds for a few years. Gold's been almost twenty years in exchange traded funds. So it's just the you know, the digital goal is taken on the old analog goal, and the question where it stops. The way I see it right now is yes, everything looks so bullish, it's just a little bit expensive. But I published today is bitcoin digital gold or is it leverage baiting? Right now? It's much more leveraged version the stock market and animal spirits are in full force.
Uh you mentioned gold, Mike. Gold is down about two point three percent today. What's the trade here in gold? Is this just a taking some money off the table after a big.
Run, potential lesson of geopolitical risks, the definitive election of Donald Trump. Gold was way overdue for a correction of already hearing of inklings of mister Putin and mister Trump talking this last weekend. And if there's any you know, Dayton coming in the world, that's going to be a major pressure factor for gold. But in the meantime, gold on the one year basis is still up about the same as S and P five hundred, around thirty five percent.
It's way overdue for a correction. I'm looking at twenty four to twenty five hundred as good support level as it could come back to. It just got way too bensive. So at its peak I think that was early October, is up thirty nine percent of the year. That would have been the best year since nineteen seventy nine. So it's a bull market pulling back. But then looking forward, if there's much if there's a major shift in what's happening in China, I mean, mister Z kind of filtering
away from President Putin maybe towards the US. That's bad for gold, But overall it's the key thing is there's still some major geopolitical factors supporting going to the bottom line, like say, for gold, is gold will be Gold's major catalyst. I think to go hires at some point when we see the next bear market in US stock market, maybe God help us if that ever happens again.
All right, Mike, thanks so much for joining us. As always, Mike mclohan.
He's a senior commodity strategist for Bloomberg Intelligence.
B I go go check out all his research on all commodities.
He covers everything from the sauce, you know, the grains, to the metals to the all kinds of stuff, including a bitcoin, so he kind of has it all covered there.
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Kim Farrest joins US founder and chief investment Officer, Boca Capital Partners on zoom from Pittsburgh, one of my favorite towns. So, Kim, you woke up with your team on Wednesday last week. What changed for you guys, if anything? And your outlook for markets if anything? If anything?
If anything, yeah, well, really nothing, because our few is the long term. We believe strongly that if you have money in the market, it should be in there for a minimum of three to five years. You know, you can think about harvesting what we do today in three to five years, so that.
Kind of.
You know, time heals a lot of wounds, we'll just say, and makes things better in the long run, and you just have to work with what you have. So that's what we're doing. And actually nothing changed because we were believers in having that Barbell strategy of large cap and small cap together. Small cap has been suffering for a myriad of reasons, and we're looking at and by small cap, I mean companies that have a billion or more in market cap. The microcaps were not at all interested in.
So we think that, you know, the large caps have had a great run over the last couple of years, and it looks like maybe small cap will have its moment in the sun coming up in the next couple of years.
So are you saying him that, like, you're not really buying into the Trump trade. You're not out there, you know, buying it's on a bitcoin and silling treasuries right now.
I'm sorry, I couldn't even let you get that out. Buying a lot of bitcoin. Well, you know, paint me as old fashioned. While I think bitcoin is interesting to watch, I don't really know how to value it.
I don't.
I heard your guest on the prior segment also kind of reflecting that. And my big thing whenever I talk to investors that we serve about bitcoin is whenever you can pay your taxes with it, I'll pay attention to it then because that means it's.
A real currency.
Right now, it is not a real currency.
So Kim, when when you look at the small caps, boy, you've got to have a good call on management because they have such an outsized influence on kind of just kind of how the business develops.
You how do you do that with some of these smaller cap companies?
Sure, well, first thing, we have time on our side.
Case.
I've been doing this for twenty four years and I started on the cell side, where my director of research encouraged me to have half small cap half large caps. So I'm kind of in the groove on this. But what I do is I look for several markers. First of all, growth is always important. I am not strictly a growth manager. I'm growth at a reasonable price, but growth has to be there. And how do you get growth, Well, you sell more product, and how do you do that
product marketing? It sounds really boring, but what it really is is having a process to understand your client or customer and then having a repeatable process where you make your product and service to light your customer and they come back over and over and over again. And can it really be that easy? Yes, it is. It's hard to spot and you have to do a lot of
fundamental research. But that's what we're doing, is looking for that kind of perpetual money machine where businesses know what clients they serve and every day get up and try to serve them the best they can.
So it's like you've got you know, with earning season still going on, we've got the retailers coming up next. Just tell me about your view right now of the US consumer, the economy, at large. You know, there's been all these calls for slow down and it just hasn't really been all that noticeable yet, and so.
Just wondering when you really think that tipping point's going to happen.
Sure, well, I kind of have an unusual view of the economy. I think there's a lot of slowness out there if you go out and look for it, pretty much in people who are in the lower two thirds of the economic food chain, we'll just call it. There's a lot of stress. If you walk around stores like Walmart, you hear a lot of discussions about what we can and can't buy as a family, And I think that had a lot of influence.
On the election, right.
But more importantly, I'm not one of the people that are necessarily looking for the next recession either. I think we have these slowdowns now. And why do I think that, Well, companies have software in place like CRM Salesforce to be able to understand what their pipeline is, and then they have erp or exotic or very fancy accounting systems that let them match the supply and demand. So we have seen over the past twenty years very few or no recessions that were caused by too much capacity.
Right.
Companies are really good about being able to tailor that to the conditions. But we do have crisis, and nobody can really predict crises very well, or at least the timing of them. They may see them coming. So that's what I think the economy does.
Now, right, all right, Kim, thanks so much for joining us. Really appreciated as always, Kim Farish.
She's a founder and chief investment officer Boca Capital Partners in from Pittsburgh, PA, one of my favorite towns.
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Today, Signia Group said it won't pursue a combination with rival Ensure Humana after reports two companies had renewed discussions. Signa shares jump by eight point seven at the New York market open, while shares in Humanity dropped by six percent, So not so much here for this particular deal.
Glenn Losev Joints is.
He's a senior Equiano's covering a healthcare services space for Bloomberg Intelligency Joints was here in a New York Bloomberg Interactive Brokers studio in New York. So Glenn talk to us about this deal that did not happen between Signa and Humana.
Yes, so this is the second try. If it wasn't the rumor the first time the companies tried to merge at the end of last year, it also didn't take long to sort of to fall apart. This was the last the second time, and you know, we don't exactly know what happened, but my view was that the the takeout price for Humana the companies will not agree upon, and that's probably the reason over the last eleven month Humana lost half of its market cap. You know, it's
very difficult. Obviously Signa is a much better place to to sort of to pitch the merger, but also when you were trading it twice the market cap just a few months ago, you know, it's difficult to agree on price and they.
Couldn't really adjust that at this stage, you know, with with Humanis stock now having dropped so much in the meantime, That's.
What I'm thinking. This is it wasn't confirmed. The only thing that Signa said that they're not pursuing the merger, but price is probably the reason for it, the agreement and the price.
All right, so.
Is insurance company? Yes, Humana is a healthcare services provider.
No, so, Signa and Humana are both health insurance insurance. Signa has a huge pharmaceutical benefit manager express Script. If you remember they are a few years ago, it's one of the top three human and and also seeing that focuses more on the commercial business, which is employer employer based UH insurance, while Humana is focusing on medicare people who are over sixty five?
Got it?
And you got to think now, like Signa's sack up a good bit today. They've done a lot of share buybacks. Would think that that's going to be now the strategy going forward back to those Yeah, again, what else do you do when you're not about to spend a couple billion dollars on another company?
You you basically yeah, but you're basically they're they're they're expanding their UH sort of expanding their pharmacy business UH part of the express Script. That's where the tailwans are over the next few years, and just stugging along trying to you know, cut costs and improve revenue. That's basically the business model.
All right.
So healthcare investors, they woke up Wednesday morning last week, what did the election mean for the health care space?
So for healthcare space, it's very broad. But for example, for health insurance, basically it's Trump's win is positive for Medicare advantage companies rule of time sort of like Humana, And there's an overhang of for Medicaid insurance companies like Stina and Malina because of the work requirements, possibilities and about my care, about my care subsidies expiring at the end of the end of the.
Four His presidency is also obviously positive for m and A.
Any chance that you know, this deal gets revisited again or SIGNA maybe has another target.
There is always a chance for this deal to be revisited again.
We got to give Paul a chance to live out his stream here being a healthcare of an a banker.
Right.
Over All, overall, managed care industry is facing headwinds. You know, costs are going up government that is through the roof, so they're not going to get paid as much as they did five years ago, so it's a marching contraction possibility, so you know, buying another health insurance companies always benefit for help for insurance business. Any insurance business. Scale is
the king for any type of insurance business. So there's certainly possibility that they will revisit and maybe a gree on the price this time.
All right, Glennlassa, thank you so much for joining us.
Glenlaw so he's a senior ecoanas covering the healthcare services businesses for Bloomberg Intelligence. You can get his research by going b I go on the terminal and then you can go down to the healthcare stuff and we got it all covered on a global scale.
So we appreciate gating a few minutes of this time. A deal, I guess not happening in.
The healthcare space, so you'll have to look for another one.
Yeah, exactly.
But again it just seems like if a lot of these big farmer companies that they can't come up with whatever they need to come up with through their R and D, they just got to just go on.
And buy it.
Yeah, if it's not organic, you know exactly right.
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All right, Molly Smith sitting in for Alex Steele Paul Swhen you were live here in our Bloomberg Interactive Brokers studio streaming live on YouTube as well, So go over there and check us out. You can search Bloomberg Podcast and that's where you will find it. A lot of questions being asked by market participants about some of the policies that we may see coming out of President like Trump's second stint in the White House. David Young joins us.
He's a president the Public Policy Center at the Conference Board. David, thanks so much for joining us here. What are the key areas you're looking for or looking at with a Republican in the White House, a Republican Senate, and potentially a Republican House, how do you think we'll see policy ramifications stem from that?
Yeah? Well, good morning, and thank you again for having me on.
I found the conversation before very interesting and also just a side note, as a former division one tennis player unfortunately was not six foot one to six three. That profession was short lived. But yeah, when we're looking at top kind of you know, the initial priorities from a Trump two point zero administration, I think the one that is talked about most, and you guys were talking about
it earlier is tariffs. Obviously you guys mentioned this. You know, there's this ten plus so ten to twenty percent universal tariff that Trump has talked about, but then also the sixty percent tariff on China. I think it's also important to just mention when we talk about tariffs here there is also a direct correlation towards trade, and when we start talking about trade, we start talking about trade agreements.
So upcoming next year will be the renewal should any of the three countries, Canada, the US, or Mexico require it, a.
Renewal or refresh of the US.
MCA, which I think will have some pretty significant ramifications, especially given the role and relationship between Mexico and Canada. I describe Mexico increasingly as one of those connector economies, so goods come from China Mexico then up through the US.
So it will be really interesting to see what Trump does with regards to that trade agreement and how he leverages tariffs beyond Teriff, a couple other areas to mention climate, and what he does with biden era of regulation with regards to climate, but also beyond just what Biden did international trade agreements. So Trump has said that in his initial days in office, taking a much closer look at the Paris Agreement and potentially leaving that agreement. In addition
to Terriff's and climate. Obviously the regulatory environment and regulation reform, industrial policy, and electric vehicles. I know you guys were talking earlier about Tesla. Trump has said that he would repeal Biden's electric vehicle mandate. And also there have been conversations around the value of the Chipsacks Chips Act versus the role and impact of tariffs. Finally, the tax bill.
And what that means in the year ahead.
And those are some of the domestic issues I think from a foreign policy standpoint, the two that initially jump out obviously Russia and Ukraine, and also Israel, Gaza Lebanon, the future role of Iran and what Trump decides to do with regards to those two issues. I'm not forgetting China and Taiwan. I just have left that one to the third position because the other two kind of have
dominated over the last twelve months. But with regards to China and Taiwan, it is clear of China's intentions, and so you can only anticipate that issue area from a foreign policy standpoint getting more and more traction in the years ahead.
Thanks David, that was very comprehensive look at what we're going to expect. You know something that in my other day job here at Bloomberg, I cover the US economy and we take a look at that confidence index that your firm puts out every month, and we're going to get the latest look at that a little bit later this month for the November reading. Just tell me a little bit about what your expectations are ahead of that.
We know it's an index that you know, tends to be a bit more tilted toward consumer views of the job market. But you know, curious to think, you know, especially based on the reactions from the exit polls and how consumers were obviously or voters rather were very concerned with the economy, how you think that the election results might be reflected in the next reading.
Yeah, so it is interesting and if you look at confidence, it's definitely moving. The trend is moving in the right direction, but it's it's interesting when you look at the right direction and things improving, did that actually relate to how voters voted on the day. And there's definitely a degree
of disconnect. And I think from from Harris's perspective, she was unable to convince voters that recent improvements in the economy, including the decline in the headline inflation, stronger than expected growth, have made a difference in them in kind of voters' lives. So number one, there is a disconnect, and I think there is also certainly a lag when you start looking at what people believe, how they feel, and how they
actually went out on that day and voted. I think that also connects and has shown to you know, if it is not the top issue area that affected how people voted, it is one of the top two issues, which is just economic growth and the economy and in terms of how that's playing out on a daily basis.
David, thank you so much for joining us.
David Young, he's a president a public policy center at the Conference Board, joining us via zoom from Atlanta here. So I have to see again the early days of president like Donald Trump. His administration, like any administration, is first one hundred days or our key to really get things done. So we'll see how aggressive mister Trump's administrations will be coming out of the gate.
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Well, Paul Sweeney were live here in our Bloomberg Interactive Broker studio. We're streaming live on YouTube, So go over to YouTube dot com search Bloomberg Podcast and that's where you'll find us. All Right, here's the mistake I make when thinking about commercial real estate.
I just think offices.
But there's so much fun, which I keep getting schooled on it brought in your I knew, I knew multi family housing, student housing, warehouses, all that kind of stuff.
Our next guest can he can kind of help me out here?
Jeff Brown, founder and CEO T two Capital Management, joining us from Chicago via that zoom thing.
Hey, Jeff, talk to us.
About where you guys at T two ten to traffic in commercial real estate?
What's your area of expertise?
Sure for starters PLA.
I appreciate your delineating office from the broader commercial real estate mark.
A lot of people do jump into that pool. Yeah. T two.
We are very focused on the student housing space, on the multi family space, and we also run a private credit fund as well.
You know, I find a student housing story so fascinating because this is like, you know, we talk about in the US economy, this structural shortage of housing, like you know, just for like everyday people, single family homes. But it's really like in some places, no more evident than on
a college campus. There's been so many stories about, you know, at UCLA, like kids renting out you know, RV's and like tryk well really renting out a private person's driveway to put the RV so because they can't find a place to live. And where I went to school, Syracuse, a hotel that was in the middle of campus is now fully a dorm and another apartment building bought back to be a dorm.
Anyways, all that to say, where are all these students living and where are the opportunities for you guys to come in and help.
Yeah, those are great anecdotes, smallite that are still pervasive today. So for us in the student housing space, we're active at schools like Purdue, Auburn University down in Alabama, University of Tennessee, Georgia Tech.
So we tend to migrate toward where there's.
Really explosive enrollment growth, where there's a stem focus, just a high demand for students to be there. Ironically, some of the anecdotes you just shared about students beingforced to live in hotels or just these makeshift apartments on campus because of the lack of supply. That has been our story at University of Tennessee as well as Purdue. So we're benefactors of those as landlords, but hate to be it, frankly for the students and those parents.
You know, in my freshman year at the University of Richmond.
It was a trailer where you lived.
Yes, was there not a dorm.
There was not a dorm. It was a trailer. My dad pulls up to unload music. You gotta be kidding me for the money turnaround. We had a heck of a good time in those trailers.
We'll just leave it at that.
The mods down to the University of Richmond.
Hey, Jeff, if you want to go out and build some student housing and multi family housing, where are you going to get the money?
Are banks lending?
Yeah?
Thankfully, I would say banks are lending. It's certainly much more conservative than probably historical standards. Interestingly, banks, I find them uniquely healthy right now. I think so many learn to their lessons from the two thousand and eight global financial crisis, and they have ratcheted back advanced levels, so they just have some decreased exposure. So maybe historically they would have been at sixty five or seventy percent of
cost or value on a project. I think today it's pretty customary to be at fifty five or sixty percent advanced rates. A lot of buffer for them, but the margin for air. So I would say banks are actively lending. There the hard part, frankly, and I think I heard your prior guests even touch on this.
The hard part is finding the equity. So if banks are at fifty five or sixty percent, where are you getting that.
Other forty or forty five percent of the capital stack necessary to take on a project and that's been a bit of a Rubis cube, frankly for the past couple of years, as interest rates of spiked and capitals retreated to the sidelines.
What do you do when you're looking though, at such a constrained labor supply right now in construction, and especially with the prospect of this new administration, really, you know, rolling back a lot of the immigrant workforce. Is that concerning to you of how much more building can really happen in the next four years?
It is, And I'll tell you, going back to the student housing aspect of our business, we have bought far more existing student housing and did some cosmetic changes properties when we have done ground up development, simply because most construction costs are They really spiked during COVID and caught a lot of attention for supply chain.
Issues, shortage of labor and other variables.
Unfortunately, the cost of construction hasn't plausibly come down to where it's still viable to build ground up construction.
Certainly, some folks can get away with it.
They'll take on lower margin projects thinking that maybe down the road the margins will make some sense. But it's been very, very tricky to make numbers work in the ground up construction, whether it's student multi or any other asset class.
How about you know we talked about student housing, how about senior housing? I mean, all we hear about is how this population is aging and there's going to need to be for more and more senior communities.
Is that?
How do you guys think about that business? Have you looked at that?
We've looked at it, We've participated in it, and we've kind of we've just paused on it. Frankly, it's a very operationally intensive business where you're so dependent on Like I said, it's a running business. So we have your operator who's handling all the day to day activities. Oftentimes there can be a bit of a misalignment between operations and ownership and the property. We try to stay away from those situations and just stick to what we know best, which is student and multi.
I got to ask you, though, you know something that I wonder when I see all of these universities that are like busting at the seams with students and nowhere to put them, are enrollment rates that much higher?
Acceptance rates rather that much higher?
Like I mean, because right now, the sentiment about getting a college education has really never been worse. So I just wonder are the universities just letting in that many more kids?
A great, great question, Mollie, and I'd say, just like Paul did a start off, this segment office doesn't define how the commercial real state market is doing. I think you really got to be careful with which student housing markets, which campuses you're at, before you say a broadbreast.
Statement about student housing as a whole.
There are some schools that are seeing our record applications and having the choice to make where how do we want to go with a record enrollment as well, and they got to be mindful of how much supply, how much infrastructure alone, classrooms and other space available on campus do they have to accommodate the student population.
So it.
Is it's very school specific from my perspective, and that's where I think Tennessee and produced schools that we're very close to. I've done a fantastic job at managing that and drawing demand at the schools. Others need to be careful and make sure they're not reenacting your experience calling and students are rolling up to a trailer show.
Up on campus.
Yep, the mods as we call them.
Jeff Brown, founder and CEU of T two Capital Management, thanks so much for joining us there.
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Every industry. I think everybody out there is trying to figure out what.
Does the second Trump administration mean for my company, my industry, you know, and that's certainly true of the energy space.
And my guess would be drill, baby, drill.
Two fo words out of my mouth.
There you go.
Let's talk to somebody who really thinks about this and knows what he's talking about. Ty Lou Oil Market Specialists for b n EF joining us here in our.
Bloomberg Interactive Broker Studio.
So Ty I would think that a second Trump administration would be good for the energy space.
Is that fair assumption? How do you guys think about it?
Yeah, Hi Paul, thank you for having me. Yeah, definitely, I think the USOL industry and the guess industry can benefit from Trumpet administration in the number of ways. I think the first half the BED is like a lower corporate tax rate. So person see that Trump has mentioned has indicated he would like to lower corporate tax rates from the current twenty one percent to fifteen percent. So
if the materializes, that's the way of the BED. That's like more money for the industry and for the shareholders.
What are they going to do with that money?
Then?
Are you suggesting it would be share buybacks or whatever?
Yeah, So there's definitely like a number of options these companies can do with this quote unquote extreme money. They can, like you said, they can do more buyback for the shares, they can issue more dibid and payouts, they can reduce the debt, and finally they can always they always have the option to funnel some of these money into capital expenditures, which ultimately retranslates into more production down the road.
How about from I mean from the regulatory standpoint, I mean, can I go down there now and drill a well, can I make a pipeline to take my natural guess to corporate Christian wherever it needs to get to. Is it going to be easier under a second Trump administration to build energy stuff?
Yeah, I would definitely think so. So under the Barton administration, that's the government has imposed a lot of regulations. There are team that's unfriendly to the on gas industry. The government is issued during rights moratorium they issued they placed the pause on energy exports permits, and they also increase royalties on federal land leases.
Uh.
And I would presume and all of these like we're pretty hostile and created a lot of uncertainty to the industry. So I would assume I would think that Trump administration would remove a lot of these regulations. There are team that's onwards to our gas producers. So definitely beneficial from that point.
Of view you mentioned before, you know, increasing capex potentially and how that would mean more production.
Gotta the worry about prices If.
You are producing so much more, what happens to the supply demand equation? There is that already something that drillers are thinking about of how much more they might want to maybe not go in too much.
Yeah, that's for sure. So if you look at the past ten years, use oil producers have on server occasions crashed the AILL process when it decided to turn on the production tabs. So they're very cognizange of the risks this time around. On top of that, there's like a lot of shareholder pressures on these oil and gas companies
to maintain capital discipline and to increase capital payback. So from that sense, I think even though if there's like more money to grow around in the industry, it would be more much harder for the oil producers to grow production the way they did in the past ten years.
So when did the US become a net exporter like twenty sixteen or something like that, I think so, okay, so we were a net importer forever, then we became thanks to the shell finds, we became.
A net exporter.
How does the US oil industry, I'm not sure if you can even characterize it or is it just individual companies. How does the US oil industry interact with OPEK if at all?
Yeah.
Yeah, So the way I think about that very competitive, like natural competitors against each other. So if if lower taxes in the Trump administration materializes, it would definitely make the us O patch a lot more competitive. It will also the brick given calculations there, and there would be more money to grow around. So it would be it will make it much harder for OPEC to increase the output, so it's going to place OPACK on a more difficult grant.
You know, something that in part got Donald Trump reelected to the White House was the idea of bringing prices down. And you know, gas prices obviously a big sticking point for a lot of Americans. Gas prices have been coming down pretty consistently over the past you know, six months or so, down to now like about roughly three dollars a gallon on average nationwide.
What can Trump really do for gas prices?
Well, when I think about gas prin just there are two pieces to it. That's the clude oil price part and then the that's the refinery margin part. Now, on the refinery margin, there's probably not much a person can do to it because you basically have to increase refining capacity and that takes years to build out. If you want to pray for their part, the outer part would be the all price part. Now, if you redo regulations
make it easier for companies to drew, you can pre rent. Theoretically, you can prevent some of the possible price spikes in all price in all prices, just because it's less onerous for these jurists to put more capital into the ground. So in this sense, you can help prices from seeing more spikes. But however, I don't think these companies will really go out and go all and endure again the way they did before for the reasons we talked about before.
So what's happened to the Russian oil?
It's been a couple of years now, and if it's not going to Germany, where's it going.
Yeah, so it's not going to the Western European nations, and Western nations has placed sanctions on Russian oil. So a lot of that has been brought up by unconstries like India and China, so they're pretty really benefiting from these sanctions.
So these sanctions aren't really working, are they.
They will be directing trade flow, the redirecting trade flow, and they're making it harder for Russia to ship the oils around the world. So it does increase the costs on the Russian oil producers. So that's an impact, but the impact I feel like it's probably more limited.
We do import some oil though, right it's not all domestically produced, I mean, is that subject to tariffs?
I well, I think this morning Trump has indicated he will accept where we do accept input out of oil from Canada just because of the crewe grate that we need in the golf coades. It's more fitting for Canadian heavier crew dogs. And I think this morning he did mention that he's going to exempt some of these crude and natural gas US from Canada so he can really like doing the very spigical race ways, even though if he does in prokes on tariff's all right.
So I think the takeaway from this conversation is that oil companies are going to make more money through lower.
Tax drill baby Trull.
Tyler, thank you so much for joining us, TYLERU oil market Specialist bn EF.
I guess our friends down in like Houston, Texas, they're happy.
About this, Oh, I would think so yeah.
I mean, we did just have that big take the other day about oil and gas being the most productive US industry. How to think of like, you know, what happens now you're just gonna ramp up the drills even more.
But they I mean, as you know, Tyler was mentioning and other analysts have mentioned that these companies they have financial discipline.
Now they don't just drill, that's right.
They return cash the shareholders and bond holders, unlike past cycles were.
I was going to say, the twenty sixteen to eighteen years.
Yeah, so they've I guess they've learned their lesson more helpful to their equity holders and their bondholders.
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