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Well, a little bit of FED speak. We had some economic data today with the jobs claims kind of right in line with expectations. I don't know, I kind of feel like this FED obviously has taken March off the table for a cut, and I don't know where we are from May, maybe fifty to fifty. I don't know what the worp thing mcgiggie says, But let's talk to somebody who actually does this for a living. That would be one Ira Jersey, chief US interest rate strategist for
Bloomberg Intelligence. He is down in the Bloomberg campus getting ready for what will be a spectacular lunch. I'm sure, because that's how they do it down there in Prince.
Let's just talk about that.
Yeah, I know, I mean, it's unbelievable. They did a renovation, which I don't even why they did a renovation because it was already a great facility. But it's even better now, all right, Ira, talk to us about May. I'll give you March. We're not going to do anything in March. That's fine, But I'm focusing now on May. I could argue that they don't need to do anything in May. What do you think?
Yeah, And there's certainly and there's Paul, There certainly are people who are arguing that very that very thing. When you look at the recent data, it does seem like the economy is not selling down very much. You don't have you have some signals that maybe inflation will kind of stabilize here instead of continuing to fall. So that's leading some people to think that the Federal Reserve might not might not cut in May. So we are pricing, like you said, using the WRP function, around around a
three quarters chance of a cut in May. And I think that that's probably the correct pricing given the information that we currently have. I think the you know, the thing that we have to remember, though, is that the Federal Reserve doesn't want the difference between inflation and the Fed funds rate to get too wide because they think that that will tighten financial conditions too much and slow the economy more. Now you know, how effective is monetary
policy right now? And what is the lead and lags of monetary policy right now? No one really knows, and it's certainly much longer this time, I think because of some of the structural changes, like everyone with low mortgage rates that are don't have to refinance again and won't when interest rates are four hundred basis points above where where their mortgages are.
That would be me so fair enough, IRA, And you had Thomas Barkin talking to Michael McKee earlier saying that it is conceivable that the neutral rate has risen after the pandemic.
So it feels like the thing that kind of throws some.
Cold water is that if a higher neutral rate, then were just less tight than we thought. Therefore we can wait longer to cut or you don't have to cut as much.
Sure, and the neutral rate almost certainly is higher, right the question is how much higher We had a time period in between the crises, both from two thousand and nine call it to twenty twenty to the pandemic, where where our star The real neutral rate, whatever you want to call it, was probably exceptionally low. And one of the big reasons for that was just the lack of
volatility in the economy. Also lack of volatility in some markets, although you know, obviously markets went up and down, but generally speaking, you had a situation where where you had exceptionally low our store. So you know, our store is higher, right, I mean there's almost people who are saying that it's not. I think, you know, aren't considering that we're in a different regime now than we were the last ten years.
I think the question is it higher like it was in two thousand and five or nineteen ninety five or you know, nineteen eighty and I suspect that that, yes, our store is higher than it was the last decade or so, but we're not going back to the nineteen eighties when you know, the real neutral rate was probably
somewhere closer to eight or nine percent. So you know, we're not We're not there, but we're also not at fifty basis points where at one and a half percent or two percent something like that is our estimate of where our star is.
So if I go you know, to the Morgan Stanley fixing come trading floor and go over to the government desk, I kind of feeling the traders there just kind of scrolling through TikTok there's not a lot going on. It feels like it's a trade range bound kind of trading range, Is that right, iron, What maybe gets us out of that?
Yeah, we've been in a range. I think we'll probably stay into a range at least until next week when we get CPI in retail sales. You know, I don't see really what would knock us out of this. So it's not unusual for ten longer term treasury yields to fall into some thirty to fifty base point range you know, call it forty basis point range right now that we're in, and just chop around within that until you get some impetus that's usually fundamentally driven that drives the market out
of those ranges. And sometimes those ranges last for months and months at a time. There was a you know, I remember going back to twenty fifteen when we were in the same range for about six months and I was thinking about switching careers because there was nothing right about. So,
you know, I don't think we're going there right. I think that we'll get some more information over at least the next six weeks that gives us a better direction, and maybe that direction and I think that this is something that is permeating some of the trading desks, is, Hey, what happens if the FED doesn't cut as much as the market's pricing. What happens if the FED only it
cuts two or three times? In fact, we have a model that you can find out, go to Beico Models, and we look at the options market on some industry of futures contracts, and what we say is that the market's pricing for a twenty percent chance that the FED only cuts once or twice this year. And that's something that we have to keep in mind. That's a real possibility now, and if we continue to have such good data, I think it becomes a higher and higher probability as a year goes on.
That's really interesting. I wonder what would happen in the markets in that case. Like equities may I mean like that equities may like get okay if the growth is really there, But the bond market, I don't know. I think that would be a real sea change. We've already come in from like six or seven to four real quick twenty seconds thirty year today?
Are you looked? You care?
Yeah?
Well, yesterday's ten year auction went very well, So I am a little bit concerned about the thirty year today because what we've seen sometimes is one auction does well, the next auction does poorly, or vice versa.
Bar enough, how can you know there's an tree auction today?
Because I know pays.
Attention to stuff.
To be totally fair, she pays attention in class. Bloomberg Daybreak is really helpful with these things. So I said it you get after that, work it up there. Oh listen John Tucker.
But if you read it Bloomberg day Break after five thirty am, they have really concise bits, not long stories, really bite sized information for you.
And then I cut and past, put them on my notes, put them on my thing.
Look at shoot our jersey.
Thanks no more organized in act intelligence.
Senior right strateg Just thank you so much for joining us and learning. I mean, this is how she gets so smart and see. But the key thing is if you get in after it five thirty this is Bloomberg.
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Let's go back to Disney, their stock that's having a good day, up about nine percent here in early trading on the back of a quarter that for some people was, you know, kind of like boy, I think they've got their handle on this thing now. And Laura Martin at Needham she upgraded the stock to a buy today, So that's helping the stock up nine point nine percent here today. Let's check in with Getha rang Anatha and she covers all the media stocks in the industry for Bloomberg Intelligence,
she's been all over this name here. Hey, Keith, the stock's up about ten percent here. What do you think the market's reacting to here today?
Yeah, I mean Disney is definitely back, Paul back with a bank. Market is reacting to all of the profitability that they're seeing with this company. I mean, one of the big pain points with Disney has really been the lack of streaming profitability. But now there seems to be a clear path to the streaming business kind of getting to that profitability metric. So we saw the losses come in way below expectations. It was sixty five percent below
what people were projecting. They're still kind of guiding to you know, hitting profitability by the September quarter, but most people, i think on the street expected to happen much much sooner. And then Hugh Johnston, who's the new CFO and this was his first call with Disney, basically said that look to or expect double digit operating margins in the streaming business.
And I think that was something that was really really powerful because we know that, you know, the number that we're all chasing is that twenty percent operating margin where you know Netflix has been with their streaming business.
So the based on what we got, what is your question today versus your question yesterday?
I mean, I think the one area that we kind of still need clarity is how all of this the streaming bundles are going to work. So it's really good to see them kind of be proactive and go out with their own solution. So they have that sports super app that's coming out a little bit later this year in conjunction with Fox and Warner Brothers. They have their own ESPN Plus standalone app. Again a little bit of you know, we're not really sure whether those are necessarily
going to can applies to each other. I don't think so. I think, really Disney, what they're trying to do here is kind of create this this super bundle because they know that, you know, content bundling works, and everybody's kind of looking aggregation is the holy grail, and I think Disney wants to be at the forefront of it. But definitely we need a little bit more kind of clarity at least around like what the financial value creation is going to be.
How about the theme park business that seems to continue to be a really solid business for them, and I know they you know, they announced several months ago that they're really stepping up their investment in their theme parks and their cruises and all that kind of stuff. How did that business do very very well?
So again, operating income was for the quarter was well above three billion dollars. That was again above what the street was expecting. And really what we're seeing is a lot of momentum at the international parks. So they opened, you know, they've opened so many new attractions in their overseas properties. You have a new Frozen Land in Hong Kong.
You have the new Zootopia attraction in Shanghai, and both of those are doing really really well for the company, and that has really enabled them to take, you know, implement all of these price increases. So international parks really
kind of doing extremely well. Domestically. There's a little bit of pressure from wage inflation, there's a little bit of pressure from you know, tough comms from like the Walt Disney World fifty that anniversary celebration, but again, you know, just transient parks are really set up very very well,
and you mentioned the sixty billion dollar investment. Now seventy percent of that capex is going to be towards new attractions, so this is really going to be a major, major profit driver for them going forward.
Git there was a journal article that I just felt like helped someone like me who's not seeped in Disney, like you guys, understand how they're just seeping in to all the Americana that's out there. They said, Taylor Swift, football and Fortnite, but like anywhere that you will want to be or listen to or watch.
Disney will be there. What did you make of the Fortnite investment?
Super smart move by them, right, It's so strategic, it's so smart, and it's still a kind of not a huge investment. One point five billion gives them some steak, gives them some skin in the game, and there's a lot of upside, not too much downside. So I think a really good way for them. And remember, Alex, they've had this kind of really checkered past when it comes to video games. It's not that they haven't been there. They were in the publishing business. Didn't really work out
for them. They exited that business in twenty sixteen started licensing out a lot of their content. But you know, licensing, you're still kind of this passive participant. They really need to be there. They need to be an active participant in the video gaming industry. There's so much overlap between all of the audiences that go to the you know,
the Disney parks and you know the people who are gaming. Right, it's all these youngsters and they really want to be there, and this is a great way for them to do it.
Well, listener, it just writes in here and says Carolo. Swift also announced her concert movie would be exclusively on Disney Plus starting next month.
Thank you for that, with five new songs. Really, yeah, so you already saw it. You're gonna want to see it again because there's five new performances.
On Contucker's all fired up for that, all right, So.
I'm going to address it throughout the two You were going to.
Have to say exactly. He to talk to us about the movie business to film, the entertainment business that was at one point for a long time just a sort of tremendous value. Just smash it after smash it, billion dollar box office became the norm. What are they saying about their theatrical business.
Yeah, and they were asked about this last night, Paul, And you know, the content the studio has not really been the blockbuster you know that it was. We've had a whole string of misfires over the past few months. But I think what Barb Bager was saying is they are in the process of rebuilding. The whole content pipeline is refilling. They're having this really smart move here with this new Taylor Swift movie coming out on March fifteenth. And then they spoke about, you know, having this new
Moana movie. This was originally going to be a series on Disney Plus it's it's now going to be a theatrical, full blown theatrical release. And again we're prepping for twenty twenty six, really, which is going to be the biggest year for the box office ever since the pandemic, and a lot of that will be Disney kind of driving the slate right with. You have the whole Star Wars coming back with Mandalorian and Grogu, you have a whole set of Marvel releases, so it's going to be really
interesting as we kind of build to that. So again, nothing really major in twenty twenty four, maybe other than you know, kind of the Deadpool movie. But we're kind of building towards a much stronger slate in twenty five twenty.
Nothing big coming except for the Deadpool. Excuse me, I've been waiting for this movie for years.
Deadpool three.
You're a big fan of the franchise.
Definitely not my audience that I'm talking to right now.
Okay, I thought you said Deadpool. I thought it was like a financial movie. I would have gone see.
That Reynolds Deadpool.
It's very brilliant. Yeah, I don't grow out much.
This is the third one having Wolverine make a little cameo.
Whatever.
Anyway, it's gonna be awesome. Paul, What do you make of like how fast Disney was.
Able to move Well, A lot of people tell you they didn't move fast enough. But it's I think when i Figer came in, I mean, yeah, yeah, and it's but the stock's been kind of dead money for a while and Githa well knows here. It's just a question of when can we get a sense of when the streaming losses are going to be in the rear view mirror. And you know, bob byger surprises. You know, I guess a year or so ago when he said some of these assets might be for sale, like the ABC networks,
some of the cable networks. Any update on that, no.
So you know, yes he did. He you know, we did have him kind of say everything's up for sale, and then he kind of walked back all of that. And now it's see, you know, it's kind of starting to make sense because they're obviously taking all that content, they're putting it now on the super app, So it makes sense for them to still kind of hold on to their linear TV assets because they still do have
very valuable sports rights on there. So I think they're kind of aiming for this bigger, kind of grander strategy. I don't necessarily think that they're looking to sell any of their linear TV networks right now.
So interesting. Okay, very good Keith, a great update, Thanks for taking the time. KEITHA wrong and nothing. She is the media analyst for Bloomberg Intelligence. Joining us via zoom from the HQ down at Princeton, New Jersey.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple car Playing and Broun Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Here's one of the top red stories in the terminal right now. Greenlight Capital forced to shift its strategy as the growth of passive investing in algorithmic trading transformed the markets. Quite a statement from David Einhorn. He spoke to barrybit Holtz, who's the host of Masters in Business on Bloomberg Radio.
Here's part of that conversation.
I view the markets as fundamentally broken, like the fundamentally broken.
That's a big statement.
Yeah, there's value is just not a consideration for most investment money that's out there. There's all the machine money and algorithmic money, which doesn't have an opinion about value. It has an opinion about price, like what is the price going to be in fifteen minutes and I want to be ahead of that? Or zero day options, what is the price of the S and P or what stock you're doing for today, what's it going to be in the next half hour, two hours, three hours. Those
are opinions about price. Those are not opinions about value. Passive investors have no opinion about value. They're going to assume everybody else has done the work right, right, and then you have all of what's left of active management, and so much of it the value industry has gotten completely annihilated.
That was David Einhorn speaking to Barry good Holtz, who is the host of Masters in Business podcast. You can definitely listen to the whole interview on that podcast. Barry joins us now in the studio.
Barry, what was your takeaway from the interview?
I mean, you could argue, obviously he's talking his book, but today is a beautiful case in point of like nearing five thousand on a couple big tech stocks and that's it.
So there were a couple of big takeaways. You know, we didn't talk about what he said surrounding the SEC no longer really enforcing things. She had to all enforce a little bit of insart or trading rules, but there's
an absence there, according to Einhorn. To me, what's really fascinating about him is, here's a guy who had a spectacular start to his career first fifteen years, put up incredible numbers, famously shorted Allied Capital, famously shorted Lehman Brothers right before they went bankrupt, and then hit a rough stretch in the twenty tens. Normally that's where a story would end. But what makes Einhorn such a fascinating investor and analyst, and he was very proud to describe himself
as an analyst, is they rethought their strategy. They looked at what's changed in the structure of the market and said, we can no longer do basic superficial value investing and hope the market catches up. We have to change our metrics, we have to change our approach. And for the past five years they've been putting up really good numbers. The shift has worked.
What did they change? What did they change till I guess so?
What their belief and their strategy used to be is find stocks that the market doesn't recognize the value what he described as variant perception, buy them and wait for the market to figure it out. Hey, you know, we buy stocks if the pe of the market is sixteen, we can find stocks with a pe of twelve and eventually everybody will come to our party, he said. As value investors have seen outflows as value funds have gone out of business.
You can't rely on.
That sector to do that. So now we have to find deep value stocks that are taking matters into their own hands.
What do you mean by.
That, Well, cheap companies that have enough growth and enough cash flow to do big increases in dividends, big increases in share buybacks, and even if the rest of the market doesn't figure out their own business model, will allow their stock price to grow by returning capital to shareholders through buybacks and dividends.
And that gets harder though.
Isn't everybody looking for exactly the same thing in a smaller pool of candidates.
You know, back when I was on a trading desk in the nineteen nineties, in the medieval times, there were thousands and thousands of sales side analysts, and everybody was looking for those sort of stocks, and there was there's something to be said for the shift, and I think he got this right. Algorithmic trading, quantitative analysis and passive investing has eliminated a huge number of those analysts. Then you take you know, the Wilshire five thousand is thirty
four hundred stocks. There aren't as many stocks as there once were. Anything that small cap or microcap is completely overlooked. And so the odd thing about price discovery and passive investing is it's created these inefficiencies where value is getting overlooked. If everybody is doing either growth or passive, it creates an opportunity for investors like Einhorn.
Do we know how much assets he has under mounage.
I think it's about three or four billion dollars. I mean it's off his peak. He went through a period in the mid twenty tens markets up ten twelve percent. They're down eight ten twelve percent. They saw a bunch of outflows after really putting some big numbers up. In fact, over since inception in ninety six, they've still outperformed the S ANDP by just about double Maybe it's a touch light of that, but not on an annual basis total
courtesy of compounding for twenty plus years. But there was the period in the twenty tens where he spent nearly the whole decade not putting up great numbers. And it's only the past five years that Greenlight has begun to outperform again. And that's what this second act is very unusual in finance. Most people don't say, Okay, I'm going to take everything I've done for the past twenty years, throw it out and start over. I give a lot of credit to him.
What's interesting too is that he mentioned you know, al goes, etc. But also one of the top right articles, also right now in the terminal is meme trader is fueling an over twenty six hundred percent spike in a holographic tech firm, meaning that like misadigive plotin getting taken out by a bunch of random guys sitting at home on a computer like that must be very difficult too for him to sort of reckon with.
You know, the funny thing when you see that take place is you have to realize that even a huge thousand percent move in some of these meme stocks, they have to be supported by the fundamentals. Eventually, you know, markets will eventually.
Maybe bed bath and beyond a disagree.
Right, Well, but you know, when we look at what happened with AMC, perfect example, they very intelligently said, hey, what's our stock price doing up? Yere, let's float some float some shares, Let's get get some capital in. And they were able to very inexpensively clean up their balance sheet in a way that most me companies don't get an option, don't get an opportunity to. So. So Yeah, and if you look at all those memestocks, they're all
around trips, every last one of them is. You know, they've run up one thousand percent, they've given back ninety percent of those gains go bankrupt, right they've been Hey, by the way, if you want to buy a bankrupt company, then maybe you're not before the bankruptcy filing afterwards a different conversation, but before maybe you're not a really good
fundamental investor. You're just playing that trend. I think Einhorn and we didn't talk about the meme stocks very much, but I think he would be he would be intended to you know, short those all.
Right, Barry, thanks a lot, really appreciate it wonderful to get you in here. I Barry Ritholtz joining us. You can download the Masters in Business podcast right now at Bloomberg dot com or wherever you get your podcast. Catch the show every Saturday at ten am Wall Street Time on Bloomberg Radio. Gonna be a great conversation. I'm really looking forward to this one.
Yeah. Absolutely. I don't know how he gets all these good guests. I think it's because he's a good interviewer. He's got a lot of people that download his podcast, so it's worth your times.
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.
We're like almost close to five thousand on the SMD, so I realize it's a round number, but we still care.
Let's see if Dan Griffith cares.
He is a Huntington private bank. He's a vice president, the senior vice president there and director of wealth Strategy. Dan, I appreciate that your longer term and like five thousand won't mean a lot. However, what I keeping struck by is that we are continually over sold, way above our skis, but no one wants to sell right now as we near five thousand.
No, I think that's right. I think what's interesting is as maybe this is for retail customers too. The five thousand number does make a difference because broadly it gets people to say, oh, maybe there is some confidence in the market, and I think there are a lot of underlying factors that support that. But I think round numbers sometimes do kind of wake people up and get them to say, maybe this is something I should pay a little more attention to.
So what are you paying attention to these days?
Dan?
We had a great finish to twenty twenty three, probably took a lot of investors, you know, by surprise. Here. What are we doing here in February?
A lot of I think we're looking at a lot of core numbers, and right now a lot of them look very positive.
You know.
Obviously we're looking for earnings growth next year. This year, you know, maybe ten percent or more. We're looking at jobless numbers.
Again.
We got a good number this morning, which I thought was really positive on the heels of you know, some great numbers earlier this month, and we're looking at the sentiment of our customers.
In particular.
We are a great middle market bank that does a wonderful job, particularly in the Midwest, particularly in manufacturing, and as we talk to our clients, they say, we're really optimistic about a lot of things, which is reflected in the ism numbers that you know earlier this month that we're pretty positive.
So I think what.
We're looking at is the core fundamentals. Even if we have a little bit of a slowdown later this year, which we're still fifty to fifty and have been for quite some time, we think that that will probably be a pretty modest pullback, that the economy is healthy enough to recover from.
Well, let's be honest, it's still big tech. I mean, you look at the SMP equal weighted and we have definitely hit resistance. SMP moves higher. Yeah, okay, you get the Russell is having a little bit of a bounce today, but this is not a widespread rally.
So what do you do.
I think there's some validity to that. I think it's it's better than it used to be. Maybe that might be the way to describe it.
We thought, okay, that's right exactly.
I think the recovery is a little broader this year. Obviously it's still still one sided to some degree, but you know, the earnings beats we saw were eighty percent across the board, and that's a good example of where we think that recovery is maybe broader than it would have been in twenty twenty three.
So what are some of the industries that are the sectors that you guys look at for opportunity here? I mean, John Tucker's belonging the Magnificent Seven, but the rest of us are looking for some value here.
I think, well, I think that's where to look around to say, if the the remainder of the sectors are going to be able to recover in ways the Magnificent Seven weren't, or they'll be able to kind of mirror what happened in twenty twenty three. And some of the sectors we're looking for are the ones that have been left out a little bit. Some of that also is going to be, you know, sectors that are less interested in interest rate fluctuation, so we're looking at that as well.
So again, a lot of manufacturing is less related to interest rate, and so as a result, they're looking at just core supply chain, core demand, with consumer sentiments still being really close to one hundred. Again, a lot of them are very optimistic, and so there's upside there too.
So let's talk about the industrial sector because it's so interesting with all the Infrastructure Act, the Chip Act, and the IRA, which is a structural story for these guys, But in terms of order books and actual profits and money in hand, we haven't seen that happen. How do you think that cycle plays out? And then how do you manage that as an investor? I think there are two things that are irrelevant.
One is that we are starting to see inventories in demand start to just the beginning of them start to tick up a little bit. So I think we're we're just watching the wave begin to grow there. And again, in the conversations I get to have every day with business owners, I see that on a kind of case
by case basis, there's optimism there that makes sense. If you look back at twenty twenty two, part of the strength that we see in the market today is that people were building in a potential recession in twenty twenty three, so they kind of tightened their belts and looked around and said, hey, what do we need to do to
prepare for a recession that ultimately didn't happen. And so as a result, many of those companies have a core strength going into twenty twenty four right now that results from some really conservative behavior, and I think, particularly in manufacturing, that is a great example of that. So I think a lot of people are coming from a very solid foundation that isn't as interest rate restricted as we mentioned before, and so as a result, I think they're going to do well as we move into this year.
One of the names that you guys talked about Parker Hannafin based in Cleveland, Ohio, Northeast Ohio.
Company that's right, that.
Is manufacturing and stocks up eleven percent year to date, up about forty seven percent of the trailing twelve months. So it's been a good call. What's your play there?
Well, I think there are two things that are kind of a good news bad news scenario. One of them is that as manufacturing and industry kind of recovers, they're going.
To recover, right.
They benefit from that as their core business, and that's the good news the bad news for them or maybe for other folks, is they really benefit from people like Boeing and Airbus kind of stubbing their toe a little bit. So as Boeing has suffered some bad news, that's kind of good news for Parker Hannafin. Unfortunately, it doesn't look like that news is going to go an go away anytime soon, and so we think that's that's a play and something that our folks are looking at.
You know, what Paul did, He left me Exon and there's Microsoft. We'll get to that. But you like Exon, I can't blame you after that quarter? What do you like about them? Could you still buy here?
Yes?
I think so.
We've been excited about them for a long time, and obviously it's kind of funny to come back and say we're still excited.
We still think it's good.
And fortunately good earnings news kind of played out well there. We think their play in the in the shale, the Permian and shale where they are right now, that is
kind of just beginning to come out. And I also think the fact that they are a much more vertical company makes a big difference, you know, because they have the opportunity to if oil is volatile, they're still working on the chemical side as well, So we think the vertical nature of their company makes it makes it something that is a lot more attractive than even others appeers in their sector.
Alex do people even talk about peak oil anymore?
No, no, no, but I mean yes, no, that'll always come back. But if what we've learned in the past fifteen years is that US oil companies will innovate like crazy, and they can and they can execute like the permium revolution on the show, revolution that happened from like the small.
Guys, not the big guys. So as long as we have.
That innovation there, it's going to be hard to really see that the peak demand thing.
Yeah, that's the question we ad.
We're definitely not at, but that's what we're definitely headed to that at some point. Hence Saudi Arabia, you know, pulling back on what they're going to be producing in terms of thirteen million barrels a day and developing a twelve million.
Right like you have. The end is coming, but it could be coming like forty years later.
Saudi ramcod do. I guess a secondary offering now with Bolmi Saxon City twenty billion dollars offering. So it's a nice payday. Yeah, yeah, how that goes? Because I got rent Crew, it's still at eighty bucks. Good time to sell some stock, I would think, right, all right? Another I think name that our analysts here at Bloomberg Intelligence are super bullish on is Microsoft. So what's your call there? Again?
Kind of singing the same song.
I hate to do it.
Not particularly innovative, but I think if you look at it, we used to talk about Microsoft as, you know, a computing company. Now you look at it and say they're computing, they're a cloud company, they're a gaming company, their AI company, and in particular, if you look back, they're really starting to report meaningful profits from their AI business. And so obviously we think that's the beginning of a wave as well. There's lots of reasons to think that Microsoft has some upside.
I'm looking at the an R function for Microsoft. A couple things jump out of me. First sixty five analysts cover the stock. How efficient is that? That's a lots five holds no cells? So Street likes it.
Yes.
What I also love about these picks is that these are like I mean, I appreciate Microsoft is at the forefront of AI, but they're also like old school real economy companies. Again, I realized that Microsoft might be treading that line in a big, big way. But like a Parker Hannat been in an Exxon like, these are not We're going to get into a recession.
Everything's going to be terrible. You can only a bet On AI right.
Well, I think Outset's right right. Exon's another example of where you've got wonderful core fundamentals and that vertical piece that we talked about, and on top of that, they've got the horsepower and ability and a track record I think in both cases to do the kind of innovation that's going to bring them into the future in a meaningful way. And those are the kind of companies we really like.
All Right, very good Dan, thanks for making the trip in. Thanks for having me. Dan, Yes, Senior vice president and director of Wealth Strategy, Huntington Private Bank.
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So something that's on my radar. It may have faded a little bit from yours, but it is important. Is the Biden administration placing a moratorium on LG export projects to non FTA countries.
It was huge.
I was in Florence and it was a huge, huge deal. Everyone was complaining about it. Everyone was worried about it, and no one understands it. So let's get into it, because Joe Manchin certainly is so today this is what's happening. The Senate Energy and Natural Resources Committee, which is led by West Virginia Democrat Joe Mansion, is probing the administration's decision, and they're holding a hearing on the issue, at which
Deputy Secretary of Energy David Turk will be there. This is just one of many hearings on this has many got a lot of head scratching when this came out, So let's get some more insight here. Dustin Meyer is Senior VP of Policy, Economics and Regulatory Affairs at the American Petroleum Institute down in DC.
What do you think, Dustin? We can expect. I realized for some people this may feel.
Niche, but This is a huge moment for energy in our country in terms of wealth and in terms of security.
Yeah, you got to write, Alex, I mean the benefits of USL ANDNG are clearer now than ever. I mean, the role that USL and G has played, especially in the last couple of years, in helping our allies in Europe displaced Russian pipeline gas is really difficult to overstate. But beyond the geopolitical benefits, the benefits to the US economy are equally obvious. These projects are enormous creators of job down in the Gulf coat wherever they're developed. This
is a really good thing for our country. This is a really good thing for our allies. That's why we think it's so unbelievably misguided for the administration to be issuing this pause right now.
What is the reasoning from the administration for issuing this pause.
They would cite a lot of things. I think most people would agree that this is pretty nakedly political in what they are doing. But they would cite concerns over what is the impact on domestic natural gas prices, what is the climate impact, and how does this play with the evolving transition around the energy landscape. We think at this stage we don't need to do studies on this anymore. We have the proof we've been exporting for seven years.
We have the evidence that can show the enormous economic benefits, that can show the enormous geopolitical benefits, and that can show the enormous environmental benefits. Everywhere around the world when gas gets scars, countries turned back to coal. That's why it's incredibly important for us to maintain that reliable and abundant supply from the United States.
And which Paul is also a head scratcher, because if you're worried about methane emissions from natural gas, then like limit production, Like why like that' sports the endgame, right, So that a little bit of head scratcher too, So Dustin, I mean, fair enough, it's political. So why do we really care come November six, isn't this just gonna all magically go away?
Well, it depends on the you know, incoming what the result of the election is. But we think that there's already serious consequences of doing this pause. There's a lot of buyer appetite out there right now for more leg right buyers from Japan, from Korea, from Europe, from Brazil, from India, from everywhere or everywhere around the world. They want more gas. They would love to get it from the United States. But this sends a very chilling message to investors and to potential buyers.
Dustin, how big of a player is the United States and the global LNG market?
Oh, We're huge. So we are right now the world's largest LG exporter. As a reminder, it wasn't that long ago when the United States was not just an importer of lergy. We were projected by many to be the world's largest importer of lergy. So that massive transformation and has of course been good for the United States, but that's brought enormous benefits overseas as well. So as the
world's largest LG exporter. You know, it was US who is able to redirect our flows in twenty twenty two to Europe to make sure that they could displace that Russian pipeline gas that their system had become dependent on. It's a really good thing to have these cargoes out there on the water, but everyone recognizes that we're going to need even more. We need a clear permitting process for doing exactly that, and that's what this pause jeopardizes.
Here's my question, justin where in this may there be a point like where should we be a little bit more judicial in how we issue permits and how things are built? Like where's the point?
Yeah, Well, no one is suggesting that there shouldn't be a process, but there is already a very well established and frankly fairly time consuming process for an LNG export project to get approved in the United States. First you need to permit from the DOE for exports to free trade countries, Then you have to go through a very lengthy, comprehensive pork review, and then finally you get your permit from DOE for exports to non FTA countries. Nobody's suggesting
that we shouldn't have a process. All were suggesting is that process should be clear and transparent and should use buy and large the process that not just the previous administration, but the Obama administration before it used. Remember, most of the projects that are exporting today are a result of approvals from the Obama administration because the Obama administration understood the geopolitical benefits, they understood the environmental benefits, and they
understood the local economic benefits. Here in the United States. That's all. We're suggesting that we should maintain that review process.
What type of response, if any, can the energy industry do to kind of I don't know, either reverse this, get around it, call him, yes, go.
To DC and touch lovemakers.
Yeah.
Yeah, And look, we have We have been talking with a lot of folks on the hill and around the Hill to make sure they understand the ramifications of this. We strongly believe that LNG has a great role to play in reducing emissions around the world and bolster and the energy security of our allies. Our allies have been very clear about this as well, and so we have
to communicate around this and make that abundantly clear. I would note that there's so much that the industry is doing, for example, on reducing methane emissions across our value chain. That is a good thing that we're doing. That we're doing to reduce emissions at the liquefaction sites themselves. Those are important questions. We're working on that very hard. We think that that cements and even further extends the value
proposition of LNG at this time. A lot of this conversation always proceeds as if coal demand around the world has already been eliminated, or that in fact is falling precipitously. Nothing could be further from the truth. Coal demand last year set a new record level. Most forecasters expect it
will be a new record this year as well. If you look at the energy outlooks for China, for India, for Vietnam, for major Asian economies, you can see they are left with the choice between coal or natural gas. We think that choice is pretty clear. It should be natural gas.
All right, Dustin, thanks so much, appreciate you. What happening on. I know it's a busy day for you.
Dustin Meyer, Senior VP of Policy, Economics and Regulatory Affairs at the American Petroleum Institute. And what he brings up at the end, there is the idea of energy equality. It's different to see it here versus like India or Africa or countries that don't have any power or minimal power at all. And then how do you go from something like cold to solar or nothing to solar, like there's just not the infrastructure or the money to do that.
And I just remember from you know, the first year the Russian invasion of Ukraine, European country is saying we're going to build floating plants to liquid to what is it, reliquify, re liquifed yea, yeah, so it comes across on the ship from the US and then we can you know, they have them.
They're good, they're they're building them up, they're they're floating outside. They're good. Yeah, it's pretty amazing.
Yeah, it is so key. On top of that, Alex will make sure we stay on top of that story.
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