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One of the names Abigail was talk to us about was Boeing, And we want to figure out are these folks going to be getting back to work because they need planes to come off, you know the line, they need the cash flow, they need to get.
Folks back to work.
George Ferguson covers all of the aerospace, all the defense, and all the airlines for Bloomberg Intelligence. So, George, it seems like the union's representatives have agreed to a deal with Boeing. What do you think the actual workers are going to do when they vote?
So, I think we're getting closer.
Look, I think what thirty five percent is the increase over four years. Still, I think subs some of the other union agreements we've seen in the marketplace.
You know what, like the port workers.
But I would note that Textron had a similar strike by its machinists out in Wichita, Kansas. I'm not sure if you get through they're very often Paul were aware of that, but they just came back to they agreed to come back to work. It was kind of a sub thirty percent increase over four years. So my guess is, you know that the shore workers probably or the port workers probably set the high end of the of the mark these Wichita machinists for Textra and probably set the
lower end. Boeing probably lived somewhere in the middle of the thirty five.
Sounds about right.
Workers have been out on strike for about a month now, right, So my guess is that finances are probably starting to look.
Challenge at some of those those household I.
Think Kelly Orperg, you know, pulled out the Hey, we're gonna raise twenty five billion dollars in cash and we're ready to go the distance. So I think those combinations and then throwing some of the four to one K money at them, right, there was some plus ups on how much they would match the four O one K.
I think some initial.
You know, incentives on the four to one K. I think they're pretty close, although I note that the union leadership wouldn't endorse it.
From everything I've read, they they're just.
Passing along this offer from Boeing to the workers, you know, for for a vote.
My guess is this is pretty close.
I think they might make it here, but I guess we'll get we'll get a chance to see by Wednesday, you know how cranky the union is and how much more they want.
But it seems like it's pretty close.
George, how important is an end to this strike for Boeing and just broader sentiment there. I mean, shares are down about thirty nine percent you're today, Yeah, it's.
Huge, right.
I think if it doesn't get agreed to, I think Boeing almost needs to raise money anyways. I guess it might help them decide what amount of cash you.
Need to raise.
You know, I'm hearing stories that the supply chain still building at the rates prior to the strike. You know, components are stacking up on their you know, on their loading docks. I think the longer it goes, the harder it is to restart the line. The longer it takes to restart the line, and the longer it takes to
generate cash. And I think Kelly Orpberg would prefer not to go to the equity markets for a lot of money and prefer not to have to draw down any additional debt, not that they've said they would do that at this point.
So it's very important for the turnaround.
And again, timing is crucial to keeping the supply chain I think healthy and ready to go.
George talked to us about I know in the past you've you know, educated us about the cash and how the cash comes.
In and cash leaves a company like Boeing.
And it's it's tied pretty tightly to those seven three seven jets leaving the floor.
How quickly can they restart it?
And where do you think the build modes for that seven thirty seven jet will.
Be and what do they need to be.
Yeah, so, I mean they need to get that jet up into the into the mid forties and fifties.
I think it's going to take them, you know.
I think even if the strike ended today, I think they're not going to hit sort of you know, the forty ish Their target was thirty eight by the year end. I don't think they're going to hit maybe a forty ish level until midyear next year.
They ought to be.
Driving up towards towards fifty maybe hopefully by the end of next year if this strike ended relatively soon. You know, by comparison air buses competitor airplane the eight three twenty that's being built right now in the mid forties, you know, they're driving higher into the into the the they hope to be driving higher to the mid sixties think over the next year. So it hasn't gone as well for them as they like, but their competitor product is doing
much better. This that is the cash cow for the company. Defense is really you know, back on its heels right now because of some of these big fixed price contracts they signed that are that are out of water, which makes it that much more important to get the seven thirty seven rolling off lines. And just I think an interesting point of comparison if you look at Poeing's inventory level last time we saw it too q eighty five
billion dollars of inventory on their balance sheet. Their competitor airbus was in the mid forty level billion dollars, So you could tell that's just an example of how bloated that inventory level is and how much they can unlock as they start to deliver airplanes. But again seven thirty seven is the is the key to that, and they want to keep market share in that airplane too.
Speaking of market Chare, I did want to get your take on how investors are thinking about Boeing. I mean, of course it's had a really troubled year when we think about twenty twenty four, but as you mentioned, they have Airbus as a competitor, but not too many competitors out there. So how do investors think about this when they're thinking about Boeing and its longevity?
I think some of you know, what you've seen today in the stock price gives you a sense investors know it's a you know, it's a duopoly. And look, you know, we've been doing some work recently on the backlogs. And if you looked at Airbus's backlog for the competing airplane in the A three twenty I was just talking about competing to the seven thirty seven.
You know, we think it's probably ten years of backlog in that airplane right now.
Right so even if you stepped into Airbus's sales office, I'm sure it doesn't go, you know, all the way full out for ten years, because there's some airlines that'll come in and deliver or sorry, order out for a decade, but you're probably into the twenty thirties before you get that airplane.
So if you when you're.
Thinking about Boeing and you're thinking about the market share risks around this, striking the problems they've had, at least right now, if you want an airplane Boeing, you know it's probably your best place to buy a narrowbody, single aisle airplane, the seven thirty seven. So it's not like anybody's walking away with this business while Boeing is having
their problems. I think investors know that the Chinese are coming, you know, they Comac the C nine one nine that's a narrowbody, single aisle airplane like the A three twenty seven thirty seven that's just rolling out into fleets in China. Now last week looked, I think there was eight or ten of them. They don't get the service out of them per day that Boeing and Airbus do. They get about half, so they're still sort of you know, they're still up coming up the learning curve, learning how to
support that airplane in the marketplace. So that's no replacement yet, but that will move insize inside China in their fleets that's been a very important market for Boeing an airbus, and then it'll start to expand into that developing world
around China. Bowling at Airbus I think would really like to get you know, they'd like to build at the at the highest rates possible, build their cash flows and come out with successor products in the twenty thirties and forties that stay ahead of the Chinese and keep them from taking significant market share. But again going back to your initial question, it's still a two airplane builder world. We don't see him Braier really getting into this business.
So right now the narrow body the larger air commercial aircraft game. So it's really still a two manufacturer business and investors know that, and I think that's what, you know, what's leading to some of the action today.
Well, I can see the fleet aging right before my eyes. I flew back from Charleston last week, Alex Steele and I did, and the seven thirty seven still had like the old card reader to get a TV show. I mean, that's like twenty year old tech technology.
So I told I blame George for all that. He's got to get these people back to work.
George Ferguson, Thanks for joining us there. George Ferguson's senior Aerospace, Defense and Airlines analyzes our go to person and all things as it relates to aerospace and airlines. He's a
Bloomberg Intelligence then in Princeton. But it just seems like, you know, you think about I can just see all the you know, the stuff coming into the Boeing factory to make the plane and just sitting there and piling up, piling and appiling up because the line, the construction line, that the manufacturing line is not not running.
So and I wonder how many people are still looking at what plane they're taking for flights. As you remember months back, things were falling apart and people were apprehensive, they were nervous about getting on Boeing planes. So I'm curious how many people are still shopping around when it comes to flights there.
I never did that, and I always felt like you did.
Guilty as charged, okay, because.
I always I feel like the seven thirty seven Max is now the safest plane right because it's gone through so much.
Testing in review, But I don't know, I mean, it's continue to do.
Yeah, any of the USA or the Western airlines generally speaking, you know the safety.
Is what it is.
I think we feel pretty good about that.
Right. 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.
Let's turn back to the US markets here again.
Yes, and p I'm kind of down about five points now, off about one hundred and forty five and nasdak up twenty five. We check him with Phil Orlando, Federator at Hermes. He is our go to guys we think about some of these markets. He's a chief US equity market strategist
and head of the client portfolio group there. Hey, Phil, I don't know if you saw this, but Goldman sachs out with the note saying, you know, if you think about the SMP over the next ten years, think about low single digit returns as opposed to what we've seen over the past ten years, which have been much better. When you see some a note like that, how do you kind of digest that well?
I mean, Goldman's probably right, We've had such a phenomenal recovery in equities coming out of the depths of the pandemic, you know, four years ago, four and a half years ago, and just over the last year or so, that how much of this has borrowed from the returns that you
might expect over the next decade. So Goldman, you know, adjusting their capital market assumptions and saying, you know, mid single digits over the next ten years probably feels right, particularly in light of the fact that we're you know, sitting here with thirty six trillion dollars in federal debt and a total debt to GDP ratio of one hundred
and twenty five percent. Those numbers aren't sustainable, and you've got to believe that at some point Washington's going to find religion on trying to step away from the sugar high that we've seen over the last couple of years, with all of this massive amount of spending that'll have, you know, potentially a deleterious impact on economic growth and ultimately equity prices. So directionally, I don't disagree with what
Goldman said. The case for active management, though, is that what you want to do, is you want to find good firms, good managers, good products that can do better than you know, the average. You know, those top quartile performers that will you know, will will help you generate the returns that you need for your you know, college funds or retirement funds or whatever else.
Well, Phil, let's talk rates. Of course, we just got that jumbo rate cut just what felt like yesterday, and then here we're turning and we're going to be having another meeting in a matter of weeks. What do you expect to come out of that meeting? Of course, I know, as you flag just a month later after that last cut, we're seeing an economy that could be seen as reaccelerating and a labor market that has strengthened. What does this mean for markets? Do we see a rally continuing after
this next meeting? And what do you expect from the next meeting to come?
So to take half a step back, we were surprised by the pace of the fifty basis point raycut that the said gave us in September eighteenth. We think that the FED needs to sort of get back to you know, that quarter point level November seventh, December eighteenth, and then looking out over the next year and a half a quarter point cut per quarter, and that would take us down to a terminal value of the funds rate, let's say by the middle of calendar twenty sixth, at about
three percent. We think that's a reasonable pace. And then to your point, given the seeming reacceleration that we've seen in the US economy over the last month or so and sort of the sticky nature of inflation, in the fact that the labor market in September was actually surprisingly strong.
You know.
Raphael Bostik, for one, the president of Atlanta FED, made a comment, I guess was last week where he said, you know what, maybe we should just skip November and you know, come back in December and see where we're at. So our view is that that the fifty we saw in September was probably a little too aggressive, and given sort of the tone of the economic data we've seen over the last month or so, you know, ratcheting back to a more conservative quarter point pace is probably more realistic.
Phil We're just starting to get into the real teeth of the earnings season here. What have we seen so far from the big banks that have reported in and what do you think the market needs to see earnings wise from the corporate America.
Well, the earnings haven't been bad. We're probably up four percent or so year every year, which is fine. We're probably gonna end up beating expectations as we usually do. But importantly, the earning season is going to be slower than the eleven or twelve percent year on year earnings we saw in the second quarter. And I think that's
consistent with our soft landing thesis. We're not going negative, We're just gonna slow down, you know, sort of a trend to pace that that's you know, above zero, but nowhere near as hot as the double digit pace that we you know, we we saw in previous quarters.
So expectations for this earning season are low. Does that support a further rally when we're looking at equities more broadly coming out of this earning season, Well, you.
Know, we've seen a backup in treasury yields. From three fifty three sixty, we're up to you know, north of four to ten. Now, remember, price earnings ratios are inversely proportionate with the direction of inflation and interest rates. So the backup and yields suggested multiple should price earnings ratio should be contracting. Yet the stock market hit another, you know, all time record high last week. You've got stocks trading, the S and P trading at a forward multiple north
of twenty one times on next year's earnings. We're estimating two hundred and seventy five dollars for S and P next year. Yet the appropriate pe on stocks, given what treasury yields are, is probably south of eighteen times earning. So you've got a valuation gap right now, you know, of about twenty percent in round numbers. In my mind,
the market's extraordinarily enthusiastic here. It's looking through and discounting very favorable federal reserve behavior, very favorable election results, very favorable trajectory of economic roles and inflation. There's a lot of enthusiasm built in here that you know, maybe we ought to see a little bit of a pullback.
All right, Phil, thanks so much for that. I always appreciate getting your thoughts on these markets.
It's Phil Orlando.
He's a chief equity market strategist and head of the client portfolio MANAFIT team at Federated Hermes.
Zooming it in there from New York.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten Ami Staring on applecar Playing and broud Otto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Normal Linda sitting in for Alex Steel. I'm Paul Sweeney. We're live here in our Bloomberg Interactive Broker Studio.
We are streaming live on YouTube as well, so heitover to YouTube dot com search Bloomberg Podcast and that's where you will find us. Tensions in the Middle East, the military conflict in the Middle East still front and center for markets. We like to get some smart internal voices as well as external voices. And that brings us to our next guest, Ned Lazarius, Associate Professor of International Affairs at George Washington University, joining us via zoom from Washington, DC. Professor,
thanks so much for joining us here. I'm just not sure what next steps are there in the Middle East. I guess one of them is what or how Israel will respond to the missile attack on Israel, as well as I guess a potential attack on Netahu's home.
Where are we in that discussion?
Well, you're quite right, this is a multi front war now with active multiple active fronts, with Israeli troops fighting in Gaza for over a year now, fighting on the ground in southern Lebanon, as well as continuing airstrikes north to the Dahia neighborhood of Beirutz, which is the Hesbalah stronghold. We are still seeing missiles fired from Iraq from Yemen from around the region, and we are waiting to see what will be the Israeli response to the massive, second
massive Israel sorry Iranian missile barrage on Israel. We also, as you know, there was a recent leak of potential Israeli target plans that was leaked from the United States.
I believe there's now a secret meeting going on or top secret meeting going on in Congress to discuss what happened and try to identify the source that seems to have leaked to the telegram social media Israeli planned that were shared with the United States, and it's possible that that source has more documents that may come to light as well, so that may throw a wrench in Israeli plans. If the plans that were leaked are accurate, It's all
unclear as has been the case throughout this war. The only things that seem to be well known or that Israel intends to strike back at Iran, that there has been a tremendous amount of coordination and discussion with the United States, given the sensitivity of our electoral calendar, with our election coming up in just over two weeks.
Well, as you mentioned, we do have a presidential election in just a matter of weeks. In the US is hopeful for a cease fire before then, and it's been reported that the Secretary of State Anthony Blincoln is said to visit Israel among other countries in the area starting today, and this one his eleventh visit in the region since last October. Can you speak a bit more about how the US is playing a role.
Blincoln is headed there almost Hochstein, the President's Special envoy, who has been back and forth between Lebanon, Israel, and Washington for months is there again this week. They're making every effort to i think, at least keep it from spiraling further out of control and to try and manage
Israel's responses in line with US interests. But they certainly cannot control events, as we've seen events there, you know, are beyond anyone's control, and even include surprises such as the killing of Hamas leader Yehia Sinoar less than a week ago, who was killed by Israeli regular infantry troops who did not know that it was him. And this is a massively important event which may eventually help turn the course of the war. I do not expect a
ceasefire before the US election. There is just simply too much going on. It's too escalated of a conflict at the moment. As you said, we were waiting for Israel's response to the Iranian attack. It is possible, not unthinkable, that Israel would delay until after the US election, but I would say that that seems less likely, and once
Israel responds, then there will be an Iranian response. So a ceasefire, a total ceasefire on all the fronts, is not in evidence, and I think the probably the Biden administration is aware of that and is making every effort to keep this from against spiling out of control or escalating in a way that is contrary to US interests. The US has set up a special air defense battery, the Thaad Missile Battery, which Secretary of Defense Austin has
announced is now on the ground in Israel. He didn't say whether it's operational, but obviously that's the plan, and I assume that it will be shortly and that's to help defend against further Iranian missile attacks.
What are the end games for Israel now? Just in a year, it's gone from the initial strategy of neutralized hamas and get the hostages back to I.
Don't know what it is now.
Have they articulated what their endgame is here on this much broader front.
Well, I think there are two levels to this. So one is the Israeli defense establishment, the state, the broader strategy, and one is the prime minister, Prime Minister Nataniao, who has his own political interests which may well be guiding some of his decisions and often put him at odds with his own defense establishment. I think that the in terms of the broader Israeli interest, I think that right
now Israel has been on the offensive. After many months when it seemed that victory was you know, a ridiculous idea and that you know, things were not going well from an Israeli military point of view, Israel has been on the offensive. It's dealt severe blows to Hasbalah and to Hamas, and it has, you know, with help from the United States and regional allies, absorbed two massive Iranian attacks. Israel has killed you know, the leaders of Hamas Hasbola.
So this has actually been, from an Israeli military point of view, the most productive period of the war. And I think that a goal is really to damage Hezbollah and Hamas as much as possible before the US election. I do think that they're sensitive to our role calendar and looking at that and thinking that after that election they may need to recalibrate, so they're trying to get all the blows in they can before that.
Exactly, all right, Ned, thank you so much for joining us. Ned Lazarus, Associate Professor of International Affairs at George Washington University, giving us the latest out of the Middle East, a broadening.
Conflict that we've witnessed over the past twelve months ago.
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 Act. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
Normal Linda sitting in for Alex steel On Paul Sweeneyer live here in our Bloomberg Interactive Broker Studio. We are streaming live on YouTube as well, so hitover YouTube dot Com search Bloomberg Live Radio.
Our next guest.
It's been trialing all over the place Dubai Berlin, so we're gonna get some fresh color about what's going on in Global Wall Street. And Barry joins us. She is the founder and managing partner of Thread Needle. Joining us live here in our Bloomberg Interactive Broker Studio. Dubai A bunch of technology people.
What were you doing in Dubai?
Well, it was the world's biggest tech and investor startup conference, unbelievable scale, six hundred six hundred six and a half thousand companies, two hundred thousand tech executives and really leading a lot of the conversations around AI is at hype?
Where are we in terms of cybersecurity and applications of AI? So, Paul, it was just a really interesting way of seeing where the energy around tech is going, and more specifically in the rest of the world, not just us entrepreneurs, but really getting a sense, what's the Middle East doing, what's Asia doing, and how is policy and government action meeting the.
Private Sticking with tech, you're focus on the private side. I know you mentioned and recently invested in the software business that's focused on streamline contractor assessments. When they come to your house, I'll put in new HVAC systems. What are you seeing there? Can you talk a bit more about that?
Sure?
Well, Laura, I look at the tech sector a lot and talk about stocks out here at Bloomberg, and I've recently been getting wired with the rallies that if I thought that it was getting a little thin in terms of the air out there valuation wise, it's even more so, even more the case over the last couple of weeks, and so I've been looking a lot more at these sort of niche software as service businesses where people like the service Nows of the world, which is terrific company
but extremely expensive. If you look at the multiples in that business right now, where that could be the choir of choice as it looks to roll up some of these niche businesses. So that's the kind of place I'm looking at HVAC. I'm a believer that there's a big CAPEX replacement cycle coming as you know, global warming continues, and those kinds of businesses I think will win over the long term.
So and at this tech conference in Dubai, talk to us about kind of the discussion around regulation, because you know, just historically the last fifty years, you is how to relatively light touch on regulating the tech industry, and one can say that was maybe the reason why tech while Silicon Valley is Silicon Valley, can't say that about Europe
broadly defined. How do they think about the next wave of technology to the Europeans today or maybe other parts of the world Asia, Do they think differently about regulatory control?
I think quite differently. I think there's a core part of commonality though, and I think the core part of commonality is looking at how technology is going to impact national security. I think if you look at that specific point, the US, Europe, the Middle East, Asia are all aligned, which is trying to make sure that tech flourishes but doesn't pose as much of the risk that we fear when it comes to national security. That being said, you're right that EU has been leaning in in terms of
AI regulation. What I saw in the United Arab Emirates and what I've seen in Singapore two actually is quite different, and it's less about regulation and it's more about government
partnership with the private sector. In both of those nations, there's a really concerted effort by government aidencies to spend their money with startups and to take the risk on businesses that otherwise don't yet necessarily have the credibility of the track record to win those government contracts of their own volition, and they're leaning in to try and take them. They will take some of the tech risk, but will enable them to flourish as a result that I haven't seen quite so much in the US.
How are you thinking about energy and secular consumer growth? But what's the play there? I mean, let's talk sotout East Asia, well.
Southeast Asia. I find really fascinating and this really goes back, Nora to some time I spent in Singapore, in Taiwan and in Korea towards the end of last year, and there's been the secular shift in those nations where the middle class is rising and rising. You know, we've talked so much about the rise of the Chinese middle class consumer over the last twenty years. If you now look at these other Asian markets. You're seeing that happening with
a plumb as well. And one of the key things that's so fascinating there is this particular demographic is really hungry for homegrown brands, and they're really hungry for homegrown travel and homegrown experiences. And so that I think is a little bit different where you saw the Chinese consumer hungry for Western brands, right, So, I think that shift for local and that shift for regional is a little bit different and provides opportunity.
I know, you invest both in public securities and private securities. One could argue that public valuations are maybe too expensive for some people, so they're trying to look for opportunities in private. How do you think about valuations in public versus private, particularly in the tech sector.
I do think that the public market at this point is throftly. I think it's been that way for a while. I think there are some really specific companies that have got great secular tailwinds. I think those interesting places for tech. But this rising tide has lifted all tech shifts. Has been quite worrying to me for a while. When I look at the private sector, whether it's in tech or it's sort of tech adjacent industries trying to adopt tech
more quickly than before. I've been a long time private investor, and we haven't seen the pace, specifically of private equity activity I think, come back quite as much as we thought it would in twenty twenty four. That I think in twenty twenty five will change, and I think we're going to see more of a shift towards private market activity.
I personally see more value there now than I do in the public markets, and so I think that's an interesting place to play in the next eighteen to twenty four months.
What sectors are you favoring right now.
I've always been a fannuner of business services, and I've always liked companies that have had really good opportunity to play the outsourcing wave now. In Pau's question on tech, the kinds of software businesses I like are outsourced solutions, whether it's things like Salesforce or palow outer networks right these are domain experts using tech to enable companies to outsource their non core competencies. I like that too in
traditional businesses. I like that in terms of things like uniform outsourcing businesses like Centils, which have tended to do well really sort of no matter the macro environment. Those are the kinds of places I've enjoyed looking at now.
So I also know you were in your notes that you were in Berlin for the World Department Store Summit. Yeah. Hey, I didn't know there was such a but I'm glad that there is.
Yeah, And so I guess we're talking retail of the consumer, all that type of stuff.
What are some of your takeaways from that event?
You know it was the energy in Europe was really sad, to be honest, Paul, at that particular time, and Germany in particular. Not all parts of Europe polacy are the same. But the European consumer market domestically, it's been hit by continued inflation.
Right.
We've seen the fact of that in the sense we've seen more aggressive rate cuts happening from the ECB than we've seen here. We have seen consumer sentiment over there slow down much more dramatically than in other places, and we've seen the absence of the tourists from traditionally core markets like Russia, like the Middle East, like China. For Europe. When you look at the consumer though, again in other places,
and it's fascinating. MasterCards is really interesting presentation with some great data on where they're seeing international tourists travel and where they're spending their money once they get there. And again it's the Asian tourists from Korea, from Taiwan, from Malaysia out there spending their money causing some really interesting patents and growth. Also from the United Arab Emirates, from
Saudi Arabia, from Kutur, you know, the Middle East. Also, the consumer seems to be very robust at the moment.
How would you compare that to here in the US when we think about consumer activity.
Yeah, you know, I think the US, Nora, I look at that and I never cease to be amazed at how bifurcated the consumers in the US, where you've got the middle you know, the sort of upper a quartile and beyond of the middle class in the US actually doing very well. Right. They've continued to see their net worth increase, They've continued to see asset inflation support their consumer habits. You see that in terms of credit cards spending. You see that in terms of certain parts of niche
specialty retail holding up a lot better. Where I actually see a difference this time. You know, if you go look at back at prior cycles, places like the dollar stores or the national visions of the world tended to do really well. And so when we weren't so sure here it looked like the consumer sentiment was beginning to break. At the end of last year, I started to buy those stocks, looking at history and saying, oh, I've seen this before. I was wrong. By the way, those names
have actually done very poorly. They're not serving lower income demographic with the same success as they used to, and I think that just shows how compressed that demographic is. It also shows how their spending habits are changing. And so I do worry that that bifurcation has got implications that haven't yet shaken out in terms of the success of certain kinds of retail here.
How do you think about opportunities just geographically maybe US versus Europe versus Asia, and absolutely different growth rate's, probably different valuation parameters. Where are you guys finding the most opportunities these days?
Well, I just also in this sort of this bias of coming back from the sort of global tour, I do like businesses that have got really international exposure to some of those markets. We've talked about the high growth parts of the Middle East and Asia, but I do like them where they've got the US halo of quality and transparency and visibility around them. So two areas where I've tried to lean into. One's a little bit more controversial.
Ups.
I like logistics businesses. We've been in a freight procession. I did buy FedEx on that fifteen percent dip that we saw, and I think ups it's one of the world's biggest logistics companies. It does have exposure to a Chinese recovery, it's going through its restructuring. I like that global exposure, and I hope at least that we've come to a bit of a stabilization in the decline of the domestic business we've seen with Amazon compression, it took
up the United States postal office. The other one, I would say back nor to your question earlier around what am I seeing in terms of different consumer patterns. One thing that is consistent globally about the consumer is they're looking for experiences. They really are leaning into spending more and more experiences, disproportionately more so than stuff. And so a company that I like that's leaning into this is Hilton. Hilton I think has got you know, some valuation upside.
It's an asset light business. The streets upgraded some of its price outlooks. What I like about Hilton is they've really gotten the message on the rise on some of these markets like Bahrain for example, like other parts of Asia. And you know, one hundred and sixty five properties opened under the banner in Q two. More is coming or see the full run rate effect that in twenty twenty five.
And again, those regional middle class consumers are hungry to stay at quality properties and they want to do it locally.
And thank you so much for joining us. Really appreciate it.
Love getting your global view and coming back from some of your recent travels. And Berry, she's a founder and managing partner at Thread Needle. Joining us live here in our Bloomberg Interactive Brokers Studio level.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecard 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.
All right, normal, Linda sitting in for Alex steel On Paul Swiney. You're live here on our Bloomberg Interactive Brokers studio. We're streaming live on YouTube as well. A great Bloomberg Opinion column piece out today by mister Tim O'Brien. Trump goes all in on discord. Will voters follow him? Fascinating question. Tim O'Brien joins his senior executive editor Bloomberg Opinion joins us here on a Bloomberg Interactive Brokers student. The world
knows what former President Donald Trump is. He is not going to change for anyone. Will he have the same support that he had or to pass several cycles I e. Seventy five million people voting for him? He can count on that, Kenny.
I think he probably can. I mean, I think you know, the issues from the beginning has always been that middle swath. I'm saying nothing original here, but independent and moderate voters in the Swing States again to decide who the next president is.
I think.
I mean, when we think about Trump supporter is what differences have you seen in terms of those who rally behind him in this campaign versus previously? Have you seen more of an influx of individuals that are coming in and you.
Know, we're really struck. Where it really struck me is when I was at the RNC in Milwaukee, and you know, Trump's base hates the media, they hate critics, and it's generally a pretty hostile environment. I've been to other Trump rallies and events, and at the RNC there was much less of that. It was they were writing very high at the time because they'd arrived. They were no longer the outsiders storming the gates. They have acquired power and are fairly certain how they want to now use it.
And so I think there's more a sense of a rival and certainty among his supporters about what they'll do with the mandate he has given them. And I think that, you know, in my perspective, that's a dangerous thing. So I think it's a profoundly anti democratic and intolerant movement.
What's happened to the GOP, the Republican Party that my father grew up with since World War Two and that I grew up with, is that gone forever?
Yeah?
You know, I grew up in the Midwest around traditional Republicans and traditional defined by you know, I think people who believed in judicial restraint, robust national security, fiscal probity, et cetera, et cetera. And I think those are all wonky bread and but are policy issues that have been replaced by movement culture issues defined around gender, race. I think avoidance and engagement with the outside world beyond the borders of the United States, and and and paranoia about
the other. And it's it's proven to be a very effective path to power, So I think it's going to be with us for some time.
I mean, can you speak to what aspects of what Trump stands for speaks to certain pockets of the Republican community, whether that be the affluent and finances well, I.
Mean I think there are you know, like both within both parties. There are multifaceted members of both, you know, both parties. I think for working class Republicans, Trump is a guardian and against demographic and economic changes that they feel threatens their well being and their standing in the world socially and economically. I think are affluent Republicans, there's always been this idea that taxes wind up being pickpocketing more than anything else, because they don't need the help
from the government that other members of society. Do You can have a debate around the virtues of that argument, but I think that's where they stand, and to a certain extent, I think they're willing to digest anything Trump says or does as long as he does that for them.
So there is some concern there of I think some note out there in society that if former President Trump were to win again in this November, how he'll perform he'll behave once in office, and there are some concerns and fears about that behap behavior. How do you think that is as a risk perhaps.
Well, I mean, you know, I've never believed that Donald Trump is a strategist. I think it's a mistake to have the word strategy in the same sentence with.
As his name.
But I think that he is a profoundly emotional and this frankly sensationalistic man, and he prides himself in that kind of emotional connection with his voters. And he's clearly been on a revenge tour. You don't have to be particularly insightful to know what he's planning on doing. He wants to weaponize the Department of Justice and the military against perceived enemies American citizens and critics. That is against the Constitution and is against the standards we've all lived with.
I think he is intent on doing that. I think he wants to withdraw the US from the world, whether that's in East Asia, in the Middle East, or in Eastern Europe, and I think that that poses threats for national security.
Have you noticed any differences in terms of tolerance in this election as we think about the controversy that comes out of rhetoric from Trump. Have you noticed that people have become a bit more tolerant of some of the controversial things that he says, and they may have been before.
You know, what I think is that this has always been with us. You know, this is a country that was founded in a revolution. We fought a civil war to preserve the unity of the country. We have had all sorts of historical grotesqueries against indigenous people's, slaves, women, et cetera, et cetera, and have tried to work those out. It's one of the strengths in the United States is that we've tried to work through those differences. Few countries
globally been able to. But I think all of the animosities and ugly thoughts that attend to those moments have always been with us, and I think the difference in the Trump moment is it's been made transparent by social media, and he's made it okay for us to entertain the worst angels round nature. And I think that he's challenging us to really examine what the United States is about and where we want to take it.
Tim, thanks so much for joining us.
Thank you.
I appreciate it.
Tim O'Brien, he's a senior executive editor for Bloomberg Opinion. He's got a wonderful piece out on the Bloomberg terminal today. You can also get it at Bloomberg dot com. That's out there as well. As we approach I guess fifteen days to.
The election, so for some of us that can't come too soon. I kind of like for shorter periods.
You know.
It's kind of a you know, European.
Style Last race.
Yeah, kind of pretty interesting.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecard Play and right with the Bloomberg Business Act. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa, playing Bloomberg eleven thirty.
Nor of Linda.
She's sitting in for Alex steel On Paul Sweeney. We're live here in a Bloomberg Interactive Broker studio streaming live on.
YouTube as well. An EF.
We love our folks at Bloomberg n EF because they are the team within Bloomberg that tracks and analyzes the energy transition.
So they are go to folks here.
Chris Ganomski Joints is here at lead nuclear analyst for bn EF. Hey, Chris, talk to us about nuclear here because I'm seeing your first note here blooming away. For the first time since two thousand and seven, there are no nuclear reactors under construction in the US. Wow, talk to us about where we are with that technology, because I feel like it's got to be part of the transition somehow.
You know, think about a football team or a basketball team and you're sitting your best player on the bench, and there's a lot of issues with regards to nuclear energy, but it is a very, very robust technology that can provide the twenty four to seven type of base load power that many customers are looking for and interested in having.
We are, for the first time since two thousand and seven without a reactor under construction, which is very, very discouraging, especially in the context of the fact that China has got something like twenty seven to twenty eight reactors under construction and Russia is building twenty two or twenty three reactors around the world in six different countries. So what has happened to the US nuclear industry. We've kind of
dropped the ball on large reactor construction. And there's a lot of hope and a lot of cheerleading that some of these advanced reactors are being developed by a whole slew of companies will carry the day and provide an alternative nuclear solution.
Talk us through just how long it takes to license and build a lot of these large reactors.
So though the AP one thousand that was built in Vogel at a budget a cost of thirty four billion dollars, it took about fifteen years to license and build, and
that's quite a long period of time. What utility executive is going to look around and says, listen, let me grab another one of these and spend that type of cash and wait that long, especially since the new technologies intermittent renewables are coming on and they provide an alternatives and there's a lot of change in the utility industry and the electric power industry, and hence it becomes a pretty risky proposition to place a bet billions of dollars
for a technology that's not going to come and return investment for several different years. And there's several examples not only in the US, but also in Europe where this is going on.
Some of these smaller modular reactors that we hear about, that kind of seems like a reasonable solution to me. I don't have to build this monster, you know, generator. I do something smaller for maybe you know, much lower cost, presumably cheaper all the kind of stuff.
Well, the question is that we anticipate that those reactors may be more expensive on a per kilowide basis, but the risk that they present to a utility executive deciding to invest this technology is less. You can build them sequentiously, sequentially so that you get a cash flow after the first one is up and running and now you're building the second one, as opposed to waiting the many years to get that. We anticipate that licensing and building an
SMR will take about five to six years. Two years in the licensing process and three or four years optimistically for construction. We don't anticipate any of these advanced reactors coming online in North America until twenty thirty.
How does this compare internationally?
Well, the US is a leader in the development of advanced reactors and SMRs. There's only two SMRs that operate around the world, one in China, one in Russia, and only two under construction, one in China and allegedly in Russia. They're supposed to break around soon. We have a very interesting development in Wyoming with terror Power developing or replacing a coal plant with an advanced reactor, which is very,
very exciting. But they have not received a construction permit for that reactor yet and they're still doing preliminary work, and we anticipate that coming online around the twenty thirties.
What's the feeling within the halls of Congress about this power source? Is there any support for nuclear power or is ideologically divided or where are we on this?
It's certainly changing from being very very questionable and very very nervous about it to be more accepting of the technology because they realize the certain advantages of nuclear power. I live in a solar powered house in California. I get all of my electricity from solar energy. But when you think about empowering a large city or so, you need something more than just intermittent renewables. Renewables are very good solution for part of the problem, but they're not
a solution for the entire problem. So to displace some of the fossil fuel that we see being used now, we need to have a clean, carbon free source of nuclear power. SMRs have greater flexibility, easier to bring online, and hopefully they'll have a role to play in the future.
Well, let's talk about AI. We think about data centers and the demands there, and when we think about nuclear supplying these data centers. I know you mentioned that this should be a pretty much a post twenty thirty phenomenon, apart from the revival of Three Mile Island by twenty twenty eight. Can you talk a bit more about that, Yes.
I'd be There are several studies that suggest that there's a tremendous demand growth for nuclear power between now and twenty thirty. There are some questions will that growth continue after twenty thirty or will plateau for a while. I wish I could say that there'll be a solution from
the advanced nuclear community before twenty thirty. But if it is, it's just going to be first of a kind, one or two reactors, and the challenge is developing a supply chain that can deliver a fleet of these advanced reactors to really respond to the growing demand for electricity from the data centers.
Hi, Chris, thank you so much for joining us. Chris Kadomski.
He is the lead nuclear analyst for b NFBNF. They are the team within Bloomberg that tracks and analyzes the energy transition.
They do great, great work.
They have extraordinary data, a lot of proprietary data for the BNF folks as well.
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