Energy, Equities, and Tech (Podcast)

more than and asked that close to thirty percent. When you go over to the UK, it's not nearly as bad. The foot seat down around nine percent from it's high of the year. Uh so just some you know, a little bit better performance. But it's been a crazy, i don't know week or ten days or over the UK. Let's get the latest what's going on in the UK and new euro markets. We do that with Tim Craighead. He's a director of Research and senior European strategist for

Bloomberg Intelligence. He's based in London. Tim, crazy time for the UK market and just the I'm talking to stock market, the currency market, the bond market in the last ten day. Because you're only down from a pounds but at the beginning of your a pound was a dollar thirty five,

right now it's a dollar twelve. The currency issue is always an interesting when year to date, I'll make it even sound better, year to date that puts he's down about five and a half percent, but again in local currency.

Um so, look, it has been crazy. Actually used that word earlier this morning and something I was writing, and um, you know, part of this is what's going on with politics, with a new Prime minister putting forward some policies that clearly have calls disturb Part of this is um folding through into the bond markets, where we've had a Catharsis of sorts because of some you know, I won't go into the detail, but this thing called liability driven investments,

which is how pension plans across the UK have been trying to deal with the low interest rate environment, has caused sort of havoc um at all sorts of issues, like even the Bank of England, while it wants to tighten policy, it's had to be buying bonds to make sure that the market was functioning appropriately. All sorts of craziness and in the end, um, you know, we end up with the UK trading at about the foot see trading at about eight point seven times forward earnings, which

is pretty freaking nice from the standpoint evaluation. The question is where do we go from here? And we're looking right in the teeth of of the third quarter earnings, and I think that's the that's the key for the overall European market right now. We haven't seen negative revisions. We think their heads are still spinning from what's happened over the past couple of weeks, right, but um, well, you know the thing, Matt, I think this is like

super interesting. You know, there's always a question of consensus numbers and you know, are they Is that really what investors are thinking? The third quarter maybe the period where we see negative revisions, but stocks bounced because the market is already there. Um and if that's the case, along with some technical indicators that show a washout, maybe that's in a good indication. But I think you gotta watch how stocks trade on bad news. Shell today was off

on bad news. That's not a good indication. So in the UK and across Europe, I mean, is the expectation that a recession is going to be longer, deeper, perhaps than maybe the market's discounting or what's the market discounting? Do you think? Yeah, so, our our work is suggesting that the market right now is discounting a low single

digit decline in earnings for two thousand twenty three. If we end up having excuse me, plus cut in two thousand twenty three earnings and broadly across Europe at least to have some downside, you know. And it's one of those things where um did everybody's talking recession um, but there's still hope that we sort of skirt through UM. And frankly, part of this weather exactly part of this is going to be the weather. You know, how cold is it and how much energy do we have to

curtail from a business perspective to keep people warm? You know, Man, I thought I just pictured Tim Hard at work at his desk in Queen Victoria Street. Not the case, niece, France. Explain yourself, Tim, what are you doing in these France? Am I am at? I am at a conference where tomorrow I will be presenting on some of the longer term structural issues that are causing higher for longer inflation and what does it mean? So all right, let's front runner.

Let's front run your talk, what are some of the structure reasons. So so our basic premise, and I'm I'll give full credit to Gina Martin Adams because a lot of this is based off some of the good work that she's been doing. But you think about demographics that are reducing labor supply all else being equal, You think about deglobalization, which is reducing are accelerating the trend of the cheap import to be in a source of disinflation.

You know, that's that's yesterday's news. Anything about decarbonization, which is not only driving investments that are sucking up basic commodities, but it's also reducing investment in things like hydrocarbon fuels, all of which keep energy prices and probably even underlying metals higher for longer. You take those three and you end up with inflation that yes, it may come off the boil, but we're not going back to pre pandemic levels.

And if inflation is that way, then bond rates, you know, interest rates are going to stay somewhat elevated, and that all helps drive increased politility in markets. So it's it's you know, it's one of those things where then it depends there's still opportunities because you know, markets do price some of this stuff in. But clearly, UM, we've been through a rough patch and there's still some slopping just

to come. All I know is that when I'm asked to speak at the conference, it's usually in Cleveland in January, you know, not Nice France. I seem to think, Paul, you you've made the trip from New York to con be course, I think I might have done. That might be right, he might be right there calling me out. Tim Craig, head Director Research, Senior European strategist for Bloomberg Intelligence,

reporting live from Nice. I guess okay. Plus, I just finished up their first in person get together since March of That was in Vienna. That closed up yesterday. A lot going on in the global space, so we need to check in with Amina Baker, chief OPEC correspondent and Dubai Deputy Bureau Chief for Energy Intelligence. I mean, and I know you're back in London after spending time in Vienna. I'd love to start with just this crazy stories about the UM the North Stream leaks caused by detonations, uh

and maybe a sign of of of sabotage. What's the latest that you know. Um. Yeah, the latest is that there is the Swedish investigation into the pipeline leaks and their suspicion is of sabotage. Um. And uh yeah, they basically said that they there might have been an incident. They're still investigating. We understand that Russia isn't part of

the team that it's investigating what happened. But um, they said that there was also extensive damage calls to these pipelines, and there's no clear timeline or budget on how these pipelines are going to be repaired, so a lot of uncertainty there. So I mean, obviously they're not coordinating with Russia, nobody is in the West. But OPEC seems to be right. Um. The I just think astounding the cut. Even if they don't really cut two million barrels and we're hearing that, um,

the reality could be could be less than a million. Um, it still sends a message to the West. OPEC is firmly on the side of China and Russia in this sort of new paradigm, this new world order. Could it be any clearer? Or am I just seeing this too cynically? Uh, it's you're stating the obvious, and you're stating something that I think the general public would like to buy into. And more and more, I think this war has really polarized the East and the West, and taking a neutral

stance against this war is no longer acceptable. I find that, you know, countries are being forced to to take sides, and if they don't take sides, UH, their actions are are immediately and indicative of which side they're on. And that's the case with OPEC plus. I think. I mean at the UN General Council, you saw many of the Gulf States, actually all of the Gulf States voted UH against the war. Everybody wants to see an end to this humanitarian crisis. It's it's not fair to to let

it to go on. UM. With OPEC plus, yes, the headline figure is two million bears garls a day cut. We're probably going to see a cut of a million barrels a day a little bit under UH. We'll see how that goes. It depends on the countries. UM. It does send a bad signal to many of the consumer states. You saw the reaction from the US, from the Biden administration, especially UH saying that it's it's the wrong move. UH. And on. The move was criticized. Um, but oil prices

didn't move that much. They're at dollars. I mean that was like a two percent jump, so um. Because there is so much uncertainty in the market. I mean, the reason they took this step is one, there's an unprecedented uncertainty on both the demand and the supply side. We've never seen this level of uncertainty before in the past three decades or so, so they needed to prepare themselves.

They needed to free up more spare capacity city in anticipation that when the EU sanctions and when the price caps come into effect, we are going to see a disruption and oil supply from Russia. At Energy Intelligence we estimate UM oil supply from Russia to be reduced by a million point to UH one point two sorry million barrels a day. Uh And somebody needs to make up for that supply. So if they don't cut now and free up more spare capacity, they won't be able to

supply the market again. UM. So I would just wait and see how open plus reacts when we get a disruption. I'm sure some of that supply is going to come back. I mean just about thirty seconds how bad is it going to be from an energy consumption and availability this winter in Europe? Well, Uh, it is. I mean, we we've heard that a lot of European countries have have stalked up. They seem to be better place and UH

compared to UH in previous months. They're prepared. But the problem is not just this winter, how about the coming one UM. Energy crisis is going to continue with us

for a while. So yeah, alright, good stuff. Amina Baker, Baker chief OPEC corresponded and to buy Deputy Bureau Chief for Energy Intelligence, giving us kind of the latest coming out of the European energy UH situation very difficult with the war obviously UH in Ukraine and the supply that was critical for much of Europe from Russia now dramatically curtailed.

We had the OPEC plus meeting in Vienna the past couple of days, and again the headline coming out of there is OPEC plus agreeing to cut production by two million barrels per day UM and we'll have to see what that means for this market going forward. We want to continue our energy discussion. We started off this half hour kind of getting from the European perspective coming out of Vienna. On the global stage, Let's take a look

at the U S energy space. We do that with Scott Levine, senior energy and industry analysts for Bloomberg Intelligence. And Scott we've had a little bit of a stabilization here in oil prices. Talked to us about the oil stocks. You know, I think about some of the oil services names that you follow, like how Haliburton and Schlumbers A those stocks have done great. Is the energy play done for investors or is you still more room to go? I think there is more room to go, Paul Um.

The reality here is that while these stocks have had a great year, as you mentioned, they've had a lousy run for the preceding five years, decade longer than that, right, like so uh, so, you know, the backdrop here is that the industry had been obsessed with growth and UH had ignored returns and as result of that had lost the confidence of the investment community, and so uh in order to get that back, they really need to demonstrate

UH discipline. And so in a year where you've seen oil push a hundred and twenty dollars in the in March after the invasion of of Ukraine, Uh. Even before that, we saw oil prices rise, and investors really wanted to make sure that the industry was going to be measured in terms of uh, capitalizing that and growing in a discipline manner. And so we've seen that and uh, and I think the companies continue to demonstrate confidence that they will be restrained and and grow within a certain level

of of of rational behavior. And is there any way to talk them out of that? I mean, is there any way to get them to pull all the oil out of the ground here, because otherwise we have to send our president over to Saudi Arabia having him court Mohammed bin Salmon or um, you know, change the rules so that we can remove sanctions from countries like Venezuela and tap their oil, Like why don't we just get

our own? The industry can't grow like that, you know, even though you can add a little bit more rigs here on the margin here and there, etcetera. To ramp up production and ramp down production is a much more gradual process. So even in an environment like this, you see a spike and oil of ten fifteen dollars in a given week, and we've seen it up eight dollars or close to that. This week. You're not gonna see rig count on Friday jump by fifteen or twenty or

anything like that, will be up by one or two. See, I think I'm just gonna go down to Texas myself and put a hole in the ground and get some re equipment. What's come back? Is it just that discipline? Do they not trust the government um or do they not really have that much spare capacity to tap? Yeah? Now there is this capacity. I think the it's a combination of the way the business works and the fact that gramping production is a gradual process, and also the

past five years. And then they're committed to winning investors back to this sector after a lengthy all in turn, and and and they're committed to grow in a rational manner. That's really the key answer that. All right, anytime we talk energy, we need to get the political angle because it is a political football. And to do that, we welcome Joe Matthew Bloomberg News down and watching need CEC. We got Mint Bloomberg Interactive Brooker Studio in New York.

Sound on from here today right from this spot. Yes, oh nice, alright, Joe. So this administration it's not well loved by our good friends down in Texas and Oklahoma. How do you think the administration or the just the political wins in d C are about our energy policy? Well, it's just it really has become a game of trust here, right. I had a former energy official from the Trump administration on the program last night and he says, hey, we

got the band rolling here within a year. That that the Biden administration, if there were guarantees that came with the pleas for more production, could in fact start to see a meaningful increase within a year or so. I don't know if that's even realistic, but the Biden administration says, no, they're sitting on nine thousand, you know, Lisa's right. Still,

absolutely they are. And of course the truth is probably somewhere in between because a lot of these companies haven't been approved to do some of the stuff they want. The political capital that was spent though on that fist bump is pretty remarkable here, and even Democrats are really

angry about this. I don't know if you saw this tweet from Chris Murphy and Connecticut the Senator, I thought the whole point of selling arms to the Gulf States despite their human rights abuses, nonsensical Yemen war, working against US interests in Oblibias, Dan, etcetera. Was when an actual crisis came, the Gulf could choose America over Russia and China. And that's kind of what we're talking about here in

the tweets from a Democrat from Connecticut. That is painful. Um, And yet we do sell them a ton of very serious weapons with which they kill a lot of people, you know, And I think it's difficult to stomach, especially if they're gonna side with Russia and China at a time like this. What about releasing the SPR. I mean, I thought back in the day that was for emergency purposes, but it seems like now it's for They goes on

for a pretty long time here. It's kind of amazing that the conversation now though, is really about refilling it and whether the United States will go by Middle East oil at a premium to refill the SPR. That's gonna be a whole fun conversation after the holl of these two. All right, So we just want to get a sense here, Scott, of of the the big oil companies that you cover here in the US, are they bullish about oil longer term is the peak oil discussion thing in the past.

But you're you're bullish on these companies, right, I am and UH. I think that the the biggest issue the companies really have had UH with the Biden administration is really the fact that they've been demonized with regard to UH, the whole energy transition. They're being made to be the

black hat essentially, right. I think all the major oil field companies have renewable energy businesses, they're all involved in these types of things, but they feel like they've just been the whipping boy for so long, and the reality is the heart of their business. If you're Haliburton, if your slumberj is oil and gas production, okay, and it will be ten years from now, and it will be

twenty years from now. Despite the fact that they're harvesting and growing all of these energy transition businesses to support hydrogen battery storage, slumberside and announcement theory yesterday that they're supporting lithium mining. They're involved in all those businesses, but they have feel like the government hasn't been forthright about the reality of the energy transition, how long it will take, and they feel like the demonization of carbon has has

gone way too far. Look as the as the Saudi is, how they feel about Europeans burning trash to stay warm this winter. There's such a political side of this, and and it's such a global situation now that the United States may really find itself having to lean into this. The Biden administration wants to forward this transition. But as even Elon Musk, the king of the electric car, will

tell you, we need more oil now to make that happen. So, I mean his administration are they sensitive to that, because I don't see it. I mean the kind of the comments that Scott sees from his companies. Just President Biden, what was he getting off a helicopter or something on the lawn at the White House saying the Middle Eastern trip to Saudi or aven trip wasn't about all. Didn't regret it, of course, but he said that before they went to so we wouldn't have this segment right now.

But of course it was about oil largely, and it was about security. But you can't have security without oil and vice versa. Yes, Look, this is uh, this is an issue when you also hear reports now on the terminal about loosening sanctions against Venezuela. So you know which bad guy do you want to buy for room? All right, Joe Matthew, thanks so much for joining us on short notice. Joe Matthew Uh covering off Things, Washington, d C. For

Bloomberg newsm Sound absolutely good stuff. Scott Levin, he covers the energy uh space Industrial space for Bloomberg Intelligence. Thanks those guys for joining us here in our Bloomberg Interactive Brokers studio. Looking at Wacoud oil, it's up seventy one eighty eight dollars forty five cents of barrel for w t I Crude. Well, this Elon Musk Twitter story is kind of like, you know, an accident you pass on the road. You can't you can't, you know, you can't

help yourself at slowing down and take a look. And this has just been just an amazing saga here. So we want to break it down in some detail. We're gonna do that with Dan Ives, Managing Director and senior Equity analyst for web Bush Securities, also joining us here in our Bloomberg Interactive Broker Studios Men Deep Seeing. He's our senior technology analyst Bloomberg Intelligence. Dan, let's start with you, is Elon Musk gonna get this company? And if so,

what's he gonna do with it? An easy part for Musk is actually buying It's a hard part. It's gonna be fixing it. I mean, Twitter has really been a disaster for the last four or five years, and from a growth perspective. But I think now there's still some high steaks poker going on between Musk and the Twitter board lawsuit. You're going to Delaware's the web and das away and I think to find nthing continues to be front and center, especially the debt financing, and I think

that's caused some nervousness at Lease on the stock. Um is he going to be able to buy it? What's your what's your thoughts on whether or not he actually gets this deal done? Yeah? I believe now, especially the writing on the wall going into Delaware, I believe as early as next week he will own Twitter. You know, in terms of where this ultimately ends up the board, I think we'll agree to this, but you know, obviously

what does that mean, Dan? I mean, if he's gonna own Twitter, he has to raise billions and billions of dollars. People are starting to back out. Now, surely the banks, well maybe the banks will try as well in terms of debt financing. So how does he does he have to sell Tesla shares? Yeah, so he So it's a great question because obviously it's weight on Tesla. He's sold already a significant trying about fifties billion in terms of

tests of stock. You know, we've estimate he could sell upwards of another three big allion, but I think that's sort of a contained amount. Now when you talk about partners or other sort of banling, that obviously would add to some of the financing stress. But and it continues to be arguing. And know we've talked about four is that this was a nightmare deal from us and now ultimately he's basically trading in Calvia are testa stock for

a two dollars slice of pizza and Twitter. That's I fully agree with that, But this is of his own making. Mendip Singh here, I want to bring you in. Let's assume Elon must buys Twitter. Realistically, you've known this company for a long time. Realistically, what can he do to improve the fortunes of Twitter? Well, so think of any social media company, right, it's all about the network and you know the daily active users and how they engage,

and ultimately you can monetize the eyeballs. Granted, Twitter hasn't done a great job, but that's where I think it's fixable. It's not something that you know, nobody can fix. It's tough, but I think Twitter is a unique asset simply because of you know, the engagement and the community aspect they have, and he has talked about, you know, it should have a better constructure. Right now, Twittor has the most bloated

constructure among all the social media names. So I think the first thing is to clean up the constructure, but also figure out a way to monetize the engagement better and I'll be a combination of both ads and subscriptions. And then deep, I mean the balance sheet. Assuming he does raises twelve and a half billion dollars of debt, this seems gonna be leveraged. Just by my super back at the envelope, you know, ten times or something ebitda, I mean I need to seem to be two to

three or four times ebitda. Well, so that's where he can raise the ibada and and that's what I mean, like if once you clean up the constructure, you introduce subscriptions, and look, it's not that easy. I mean, we can talk about a plan, but there is no kind of playbook here. He's gonna try things out and he has to find someone to run the company first. He's not going to do it himself. So clearly a lot of unknowns.

But we know Twitter was the most inefficient when it comes to the social media platforms, and I think there is a clean out that can be done over there. Dan does, does this sour? What has been your very bullish call on Tesla in a sense that perhaps Elon Musk is losing focus? Is that factor into your analysis? Well, I think that's been some of the worry here is that he's going to juggle a lot of balls. This

stay sacks as well as Twitter as Mandy. I do believe he farms out the management of it in terms of Twitter, but there's nowhere. This is just a disaster deal from Musk, and it's weighed on Tesso Stock and then and now I think it's been put a little

in the penalty box until this soap opera cleared. His text messages that were released as a result of court case included one um between Elon Musk and someone called t J. That's why the speculated that that's his ex wife to Lula Riley starts out with a tweet from her. She says, quote, can you buy Twitter and then delete it? Please? X X? This is gonna Is it? Just too optimistic

and hopeful Dan that there's any chance he does that. Look, I think the bigger issue for Musk is that once he signed those documents, he crossed the invisible gray line and now he's going to ultimately on Twitter, and he got cold feet. He tried to escape through it in terms of the Bob issue, which is a big issue, and now he essentially's going to own a house that he doesn't want to live him. Alright, guys, this is

just amazing and and man, deeper stuff to finish up here. Um, you know, I guess the question is what advertisers do? Do you think? Are you hearing anything from the avertizing community in terms of this changing ownership? Not truly. I think Twitter is more brand focused, so nothing changes. They were never big in direct response ads, so it's not as if you know they have stopped innovating. Twtor was

all about, okay, showing a display at every four or five. Uh, you know, feed and look, I think I mean to give Ellen credit. You have to look at what he has accomplished, you know, when it comes to building a supercomputer and robots, so nothing is impossible. That one really

is man saying Bloomberg Intelligence. We appreciate you hearing it being alive in Bloomberg inter Active Broker Studio and Dan Ives managing Director and senior equity analysts on wed Bush Securities with some unvarnished take on Elon Musk and his move to acquire Twitter. That's sixty forty portfolio thing that we kind of grew up with that didn't work out so well this year. We've got stocks off anywhere from twenty to thirty percent this year, and we should have

been shorting rates. We should have been shorting rates and get made a tuner in seventy four percent gain this year, and that's what we should have been doing. Whiter sid Yeah, that's a nice Sorry sied Hyder is the name of the hedge fund fund. He did that, But a ton of hedge fund managers have made a killing this year. Yeah, yep, if you can be nimble on those rates, Joe Meyer, CEO and founder of Meyer Capital Joints is here, Joe.

I'd love to get your perspective on kind of what we've all experienced year to date, for kind of how did you guys navigate through it and what's your outlook. Hey, Matt and Paul, thanks so much for having me on to get today. Um, you know, obviously been an interesting year. Crypto got hammered from the get go and the technology has gotten beat up. We we started really starting to go back into technology in the middle of June, June

seventeen to be exact. Uh, we just felt that it had hit the bottom and it basically has come back down and almost tested that low and so you know, we're we're excited about it. I mean, look, it's been a difficult year. You know, if you take a look at rates. Tom Bark in the Philly Fed really signaled what the Fed was gonna do about four or five months ago when he came out very very hockeyish and

and they've been following through on that. So I think you know, to your point six isn't working right now. But you can't look at the world through one one lens. I mean you have to look at it overall. Obviously that the works for some but not all. If younger should be I guess you want to buy low anyway, Um, and if we're not at the bottoms um, we're pretty low right now. So what do you like? What? What stocks? Um are you a fan of right now? Yeah? So

we were big into workforce automation. So anything that can be done finding the right technology people or the right worker skills is very very difficult and there's a lot of repetitive tasks that can be done, uh with with technology. So we're not only buying public companies, were also acquiring some private companies in that space. And you kind of made your fortune in that area back in the day. We've we've been an entrepreneur and four of our three

companies are currently owned by public companies. So, uh, those are all companies I found it and so it's it's been fun. That's all been fin tech and technology and I and so I have a strong bias for Obviously I like UI Path. I think they're doing some very interesting things with workforce automation. And if you take a look at some of the security needs that are out there, you've got z scale er. Uh, you know, that Z scale. I thinks at one three that's basically a discount from

where it was well lots ago. M Ui Path is significantly beat up, but you know it's a mirror company's I think right now it's been as high as the ninety one company I've been into for a very very long time is Zebra. So Zebra is if you see all the bar code scanners that's all about the Internet of Things and tracking and soil. Those feed into the E r P systems and allow people to have a digital twin, if you will, meaning what can they see in the digital world that it is a physical world,

and Zebra really drives that. For those of you playing along at home, I just want to get the tickers out Zebra z z b R A um UI path is path p A t H that's a ticker and Z scaler as z s you like micro strategy as well. Is that a play? So everybody thinks it's a bit plain play, and it certainly is, but it's also a

technology play. But here's here's where they're going. And so my son who is is doing some interesting things, you know, as we talk about it, and really at a confidence about a year ago, called Bankless Permission List, I guess is the name of it. But basically what we saw there is it's really about web three doto and everybody wants to call it the metaverse, whatever you want to

call it. It's the decentralization of work of stuff, of systems of everything, and that's really what what three dotto is, and quite frankly, I think that Michael Saylor and his team understand that. And I think if you buy micro Strategies today, you're getting it for bitcoin, but you're also getting their enterprise business for free, and you're getting their start up mode um web three datto for free. And if you look back on any of these names in five years, you're gonna say, I'm glad I was on

the Man Paul and Joe Joe Joe. Is it true that you spend four years of your life inside of an army tank? I did spend actually five years active duty another eight in the reserves. I was on M one and M one A one tanks. And so when I see when I see some of the things with tanks going on in the Ukraine, I cringe a little bit, But I also know that technology is last are where are you stay. Where were you stationed. I was in

Germany and then I was also in the States. Was actually in the reserve during the first called for but a lot of my friends were overseas. And you know what nobody really recognizes. We've got Veterans Day coming up here about for SOMETHINGOW days. You know, it's the families that really do a lot for our veterans, because if the families at home aren't aren't supporting your soldiers and their men and women in the field, that it makes

it difficult. Joe, thanks for your service. We really appreciate it, and thanks for coming on today. Joe Meyer, CEO and founder of Meyer Capitol. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Pet On Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.