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One of the stock stories of the day we've been reporting Macy's. They are disclosed that a employee may have hit as much as one hundred and fifty four million dollars of delivery expenses, so they don't know what's going on with their financials. They delayed their earnings release, so a lot of issues going on at macy Stocks off three and a half three point twenty five percent today on the news. Let's check in with the analysts who
follows this company. Mary Ross Gilbert for Bloomberg Intelligence. He's senior equity analyst, Mary. What have you heard from the company? What's going on there? Really is an odd story.
It is an odd story and something kind of wild to wake up on a Monday before Thanksgiving and Black Friday. But as you know, Macy's reported that one employee had hidden one hundred and thirty two to one hundred and fifty four million of cumulative costs. But when you look at it's over about a three year period, so it's about twenty cents a share impact, meaning that they might
have to restate their earnings by about twenty cents. It's not a huge number in that respect, it's huge in this sense of well, what happened with the financial controls here. On the other hand, I think they can move past this, and I think if there were some positive snippets in the press release that came out this morning with their
third quarter preliminary sales results. So they reported that their comparable sales on an owned plus license plus marketplace basis was down one point three percent for the company, and that was a little better than what analysts were looking for. They were looking for a while one and a half percent decrease. And if you look at the go forward stores, so this excludes the one hundred and fifty stores they are planning to close, the comp sales on that same
basis were down just zero point nine percent. And in the third quarter, most apparel retailers have been negatively impacted by unseasonable warm weather related to in September primarily but also in October, and so when you look at the results. We're already seeing November Macy's reported, and we've seen this with other retailers. Sales are actually performing better than what we saw on the third quarter because the weather, of
course has turned cooler. So we think those are some of the snippets of good news, including the luxury side of their business. With Bloomingdale's comp sales up three point two percent and Bloomergray up three point three percent. So I think that kind of outweighs this because that employee's now gone. And of course we'll learn more once this investigation is complete and they can report and their earnings. Call what's happened in terms of the financial controls.
Talk to me about what we know about inventory for Macy's and any discounting. I'm just asking for a friend, particularly for Bloomingdale's.
Yeah, well, of course going into Black Friday, and the one thing that we learned from a consumer survey that we recently completed, discounts and sales anything like that is a primary driver for sales, and the other one is weather. That comes second, is a change in weather, and that prompts apparel sales. So I think that we're already seeing pre Black Friday sales. Macy's is always top of mind.
They're known for their promotions, known for their sales, so they're already out there with their Black Friday sales going on. And of course they're going to open early on Friday on Black Friday, so we'll actually be there in the stores.
At that time. That Yeah, absolutely, all right, Mary, thank you so much. We appreciate that. Mary Ross Gilbert, senior equity analysts covering retail for Bloomberg Intelligence. Again, a wacky story or there Macy's. Macy's delays earnings after employee had millions and expenses. For me, it would just be you know, the the you know, the audit and control function for the company. Can I trust it? The other numbers that are out there? So that's kind of typically.
Do you think it takes for that to sort of clear its way out?
Well, I think what's most troubling is that it was over a multi year period. Yeah, you know, that's kind of goes to the quality of the controls both internally of the company and then from their auditor. I'd can be looking at my order saying, dude, I mean that's what we pay it for to kind of go through our statements. Make sure this stuff is, you know, in fine shapes, so we'll see.
I cannot argue with Paul Sweeney on this one.
Sorry, I can't do it.
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Let's get brought our take on the market.
Kati Kaminski, chief research strategist and portfolio manager at Alpha Simplex, joins us. All right, Katie, this record high here, potentially another record high on the SMP. How long until we start to see re upgrading the S ANDB forecast for twenty twenty five.
I mean this is exciting. I mean it's a positive day. I was actually surprised.
So I think, you know, the last week or two we've seen a little bit of retraction, and I think in general the market is still parsing through some of the aftermath of the elections.
So I do think that.
People are forecasting and I'm seeing more and more positive sentiment about equities US equities in particular, are going into your end.
So when you woke up the day after the election, did you and your team did you sit down and say, we got to redo our models here, we got to change some inputs. Did the market outlook materially changed for you guys.
No, not at all, actually, And what's strange is that, as quantitative traders or trend followers, we systematically follow where prices are moving.
And I think what was the.
Most interesting to me about the election is the Trump trade. So for example, long equities, short fixed income, long dollar was actually playing out quite a few weeks before the election, and it.
Just extended after the fact.
It's not really working today, but it has you know pretty much what pre and post.
Do you think that US exceptionalism, if would just call it like that, does that keep working?
Hopefully?
So, I mean, obviously since that's something we're seeing in the data and we're seeing in momentum signals.
But it has been an interesting month.
I mean, look at this month, like the Russell ahead US strongly ahead of em and Europe. So that's been sort of a US centric theme this month, and you're seeing that coupling from the US and other areas. So it does seem to have some steam so far.
And how about the US dollar here, because that was a pillar of the Trump trade long US dollar? How do you think about that?
So the US dollar, I mean, that's probably one of the bigger movers that I think a lot of investors don't realize how incredibly strong that move has been. We've had new highs on the dollar for eight weeks. It is selling off today for various reasons related to some of the you know, we can talk about that later, but basically the dollar has been an overall extremely strong
especially versus the Euro. I think that it's up six point five percent versus the Euro and the last you know, two months, which is pretty huge.
Yeah, it was one oh four we were talking about on Friday before we saw everything kind of calm down today. Okay, there is I keep getting notes though, to not discount Europe, in part because the economy could get better over in Europe because the ECB is going to have to cut more aggressively, and that that's going to be good for European equities, and that we can finally I've heard the story before, can finally sort of outshine the US a
little bit. Are you seeing any trends or flows or momentum into that kind of trade?
So I agree with that, but I also think that has two sides.
If the ECB keeps cutting, that's going.
To put more pressure on the euro, which is not going to be helpful. The one story that we will be looking for that we haven't seen so far is perhaps stronger growth at some point in Europe, So there will be potential for that rotation if we can see stronger growth. I think the euro trade is still a little bit more questionable because of what I said that. You know, if ECB continues to cut through next year and we see a more steady FED, that's actually going
to be pro dollar. So I think there's going to be it's going to require quite a bit, especially with the weaker euro.
Are you concerned about inflation here at the US economy or do you feel like the Fed's got that under control, Because I feel like I'm hearing more and more people say twenty twenty five that might be a thing in terms of researching inflation.
So we definitely do see cross asset themes and movements to show some indication of concern for inflation. I think Initially post selection, there was a lot of concern. Today is a day where you're seeing some of that abate because given some of the you know, the choice of US Treasury Secretary by the incoming president suggests that, you know, there's a little bit more pro business, and recent commentary has also focused on maybe tariffs won't be as aggressive.
So I think the general digesting of that information is about figuring out, you know, how much inflation could we actually have as a result of a change in policy. There's definitely still a good chance that that's something on the longer term, especially with the deficit as high as it is.
This gonna be a really dumb question, but does better US economic growth than mean more inflation in that? Yeah? No, I mean, I mean just that, like in order to small caps and mid caps to really work, in order for value to really work, you really need a stronger US economy. But then that comes with demand, and then you add tariffs into that, and then that leads to higher prices.
Yes, And I think that's part of the narrative that people are concerned about, is if we do have that coupled with high debt or high deficit, then at some point you have to have higher prices, which is kind of what happened post COVID, which is why people, especially us, we think a lot about what's going to happen to the yield curve because that's probably where you're going to
see those price expectations for inflation baked in. It is interesting to see also how much gold has gone up this year, because that.
Tends to be a play on inflation.
So I think there are definitely enough people out there that have significant concerns about inflation longer term and the potential impact of that.
Katie, thank you so much for joining us. Always appreciate getting a few minutes of your time. Katie Kaminski, Chief Research Strategy is important only a manatured alpha simplex up there in Cambridge.
Massive.
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Alex still here alongside Paul Sweenie. This is Bloomberg Intelligence Radio. We bring you all the tap news and business economics and finance through our lens of our Bloomberg Intelligence folks. And because I love energy, we talk a lot about energy. We'll just throw that in there too, why not. So one company that you may not have heard of is
called Bloom Energy. They are a fuel cell maker. They made a lot of headlines in the last couple of weeks and hid an all time high on November twenty second after it made a deal with American Electric Power.
American Electric Power.
Is going to use their fuel cells to bring electricity to say hyperscalers AEP is going to use up to one gigawatt of Bloom's fuel cells. Now, something that's quite interesting in this is that a lot of companies in the energy space do do cool stuff, but syncing up with the companies that could actually use their cool stuff isn't always easy. In fact, it is quite difficult. So we wanted to get an idea of how this came about.
K R.
Shweththar is CEO of Bloom Energy and he joins us now from Silicon Valley in California.
K Or how did this deal come about?
So we have been working with data centers for a very long time. Now we have over three hundred megawarts in multiple data centers across the country. These are the smaller data centers called the edge data centers that are located where customers are somewhere in.
The five to ten megawat range in a particular site.
So we have transacted close to three hundred megawards, so we are a known player to data centers. Now with the hyperscalers, what's the difference, it's a much larger data centers.
These are now particularly.
More important in terms of growth because of AI and the amount of power they need. And currently these hyperscalers, as they had growth going very fast, the transmission distribution is not able to keep up with providing those hundreds of megawats of power right at the site where you need it within the time that you need it maybe five.
To six years.
They may be able to provide the power, but the data center really wants it today, they want it now. So we are a perfect solution under those circumstances because our Bloom Energy servers can be deployed in a matter of months right where the customer is, thereby not worrying about the transmission distribution gridlock and providing that reliable, clean, always on power to the data center.
So that's the reason this happened.
And here what happened is the electricity provider AEP said, we don't make nuclear power plants, we don't make gas turbance, we don't make fuel cells.
We're agnostic. We'll buy your systems.
And similar to us using those other power sources to provide power to the customer. Here we can take your fuel cells and take the power you produce and give it to the data center.
However, the big advantage here.
Is we can put these fuel cells right where the data center is, thereby avoiding the transmission distribution issue.
So carry I mean, just you know, I didn't know much about your company before, so just reading up here, it's like right company, right place, at the right time, with the right technology, and boom. Talk to us about how good your fuel cells are. How would I know whether your fuel cell is better more productive than say a competitor.
That's a great question.
So let me go away from fuel cells just into electricity for the customer. At the end of the day, we all provide a service or a product to our end customer. That electricity that a data center takes has to be clean, it has to be always on and reliable twenty four to seven. It needs to have a pay su grow characteristic, and it needs to be future proofed. In terms of sustainability. Bloom Energy is one of those solutions that offer all of the above no rs.
It's the genius of end So.
We are the most efficient way of taking natural gas and making electricity out of it without combusting. Because we don't combust, there is no knock stocks particulates anything going into the atmosphere, so there is no local air pollution. And if you look at our system they're like lego blocks. You put many of these lego blocks, hundreds of them to be able to provide power to a data center. If any one of them has to be serviced, you
can just hot swap them in and out. So the reliability and the resiliency of our systems are very.
High and.
You can pay as you grow data centers. Even though they build a big data center, don't start that entire data center on day one. They may do one third of the load, and then a few months later they may add additional load. As they are adding the load, they can add more and more of our fuel cells. You can't do that with the gas turbine. You can't do that to the nuclear power plant. So we bring all these attributes in so I would say we are ideally suited for this AI data central market.
Oh, now the financial terms were not disclosed. I appreciate that, So I'm going to ask about the money a different way. How easy was it or difficult was it to come to an agreement on price with AEP.
In this particular case, it was fairly easy to come to that agreement. Nothing is easy, but relatively speaking, And here is why. There are three parties involved, actually four, the data center, customer, AP, the public at large where.
This is being installed, and blow energy we.
Were able to put together When when for all four of these stakeholders, why is.
That number one?
Let's started the public at large with other kind of provisions that were being contemplated. The fear of the rate payer was because the hyperscaler is going to get a large amount of power from the transmission distribution company, they will end up carrying the bill. In this construct, AEP made sure none of the costs associated with putting these fuel cells and providing that clean power to the data
center will cost the rate payer any money. So that was a win for the ratepayer Number two for the data center. For the data center, the price of not having power on time is significantly greater than the cost of power.
If you just think about.
The race in AI and who has to get there competitively. So time to power was the key metric, and they would pay a slight premium to be able to get that, and that penciled out for AP. They were able to grow their customer base, give them their growth needs without disintermediating them and having them go to some of their stake which is what has been happening in places like Virginia where data centers are moving away from there because
there is not enough power. So it was a win for AEP in retaining their customer and taking care of their customer and making money for Bloom. Whether we are in front of the meter or behind the meter, it is the same thing whether we sell it to AEP who then provides the power for the data center, or we sell to the data center and they provide it and they take their own power. You know, for us, we are agnostic because we get to make the sale and we get the gross margins and the product.
So that's how it was constructed.
Alex another story.
I missed.
Bloom Energy stocks up seventy two per year today, all time high today up ninety on a trolley twelve month basis, Where were you? Where was the story for me? Like fifty dollars ago?
Yeah, sorry, man, missed that one for you. Yeah, my bad.
All right, great to see you. Thank you so much for the great story. Archer reydar a CEO of Bloom Energy, and just sort of the idea that how you pair all these things together, whether you're an energy butt provider and then electricity provider and then a hyperscaler and getting all of that to match up sounds like it could be really simple, and sometimes it is, as Kara was saying, and sometimes it's really not.
It doesn't, but it sounds like, again, they have a great product for this part of you know, the AI energy provision kind of scenario.
Wow, you said, right time, right place.
And again in San Jose, California. I mean, just the amount of innovation is in all parts of the industry in that part of the country is just amazing.
Yeah.
Fortunately, my youngest goes to college there, so I'm like, dude, get a job.
You're like, just feel the feel the innovation, Get the innovation.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple car Play and Android Auto with the Bloomberg Business. You can also listen I have on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
Dallas Steele, Paul Swingey. We're live here on a Bloomberg Interactive Brooker Studio and are streaming live on YouTube as well. So head over to YouTube dot com search Bloomberg Podcast and that's where you'll find us. A part of the Trump trade was to sell bonds, and the market certainly did. We had rached shoot up. We got a little bit of a pullback today, as Charlie was pointing out, But see what's happening in the world of fixing. Come today
to do that. We check in with r J. Gallows, senior portfolio manager over the fixed income group at federatedt Hermes. They're in the great city of Pittsburgh, PA. RJ. When you and your team woke up the day after election Day, you sat down, you got to your next strategy meeting with your fixed income folks. Did you guys, change your outlook at all, or maybe how you approach the market.
Yeah, we did.
I know, plenty of people didn't want to bet on the election, and I would put us in that camp. I would say that the sharp increase in yields from mid September all the way up pretty much to election day, in part reflected that the betting markets had moved sharply in Trump's favor, and so the market was advancing to start pricing in a Trump trade even before the election outcome was known. We you know, we were a little cautious on duration during that period. You know, probably booked
a few basis points of excess returners, was all. We didn't make a big bet a little bit for the actual election itself. The you know, the polls were closed, the betting markets weren't. As it turned out, the betting markets were much more accurate. And then following the election, we also got a little short duration, thinking that we would maybe test four fifty on the tenure, and that's exactly what happened. But as we looked this morning, we're back to four thirty pretty much.
So yeah, so what does that mean then for the long end? Is it path of Lee's resistance lower, do we stay sticky?
I think that this is sort of a tactical replacement. I think that the moves of four to fifty was pricing in as much as one could the idea of the Trump trade, a broader fiscal deficit, stimulative suite of policies, especially deregulation, and the prospect of tariffs and trade war which could boost inflation in the short run. That's what
drove rates in part to where they were. I think the fact that we've had a retlacement that the market was sort of consolidating as we wait to see how all these policy plans actually get implemented, how successful would the Trump administration be in implementing them, How open to negotiation are they on tariffs.
The fact that the market's responding with a bit of.
A rally today yields sharply lower about almost ten eleven basis points in the tenure. It seems that the market views best int as a pretty conventional pick. I think I would agree with that. I wouldn't say it eliminates the Trump trade. It's just the next iteration of the unfolding of the actual Trump outcome, which is going to take time to see.
So let's talk about this US economy here, man, how do you think that'll be reflected in the rates market. It seems some of the economic Now this is going to be a busy week for economic data, inflation data, jobs data. In terms of claims your thought on the economy and how that might be affecting this federal reserve.
The economy has held up remarkably well. The once expected recession a year ago never showed up. The economy had a lot of tailwinds. Credit markets have done well.
You know.
The recipe for our performance and fixed income has been to own lower quality credit risk over higher quality credit risk. I'm glad to say broad fixed income indicies of all sorts have generated positive returns. The economic outlook from here is still relatively supportive.
I worry a little.
Bit that the overall suite of Trump policies that I've described previously might actually end up being stimulative in the short run, but at a meaningful cost in the longer run, in the sense that you'll have larger deficits, more debt, and the bond market might be left to be the source of discipline in terms of reacting to that outcome. With higher yields as we go into further into twenty
twenty five, but a lot remains to be seen. We have to see how serious are is the Trump administration about the broader tear of threat?
Is it in fact a negotiation.
I do think that the Feds the lesser expectations for FED easing are in fact rational as the fiscal policy expansion is pushing in the other direction in terms of monetary policy expectations.
So fiscal policy chain expand and the FED gets looser.
No, no, no, the Fed gets less loose those but they're still loose. You look at so for futures, for example, they gap sharply higher and implied rate in terms of the terminal rate in this trough.
Upon the election outcome, Really.
As the market was moving to price in the Trump trade, less FED easing was expected. That is very rational monetary stimulus as the fiscal side opens up more with bigger deficits.
The best performance by far and fixed to come this year RJ has been high yield and leverage loans in the US, So I guess the market the market's comfortable with risk.
I guess.
Well.
I think once it became clear that the economy had significant tailwinds and corporate profits have held up relatively well. It's been sort of risk on in terms of where you put your capital up and down the credit quality spectrum and spreads have tightened, and you've generated very very favorable returns. To be frank in our multisector, you know, a strategy here at Federated we've been a little more cautious thinking that spreads had gotten too tight.
As a result, we've been a little underweight.
Fortunately, we've been able to make it up a little bit more on curve positioning. Theyll curve is steep and sharply, and a number of our strategies taking an active position to benefit from that has really worked very well. We've also been overweight mortgages, which have generated incremental outperformance. Not as much as how you corporate, but there's a lot of eras in the quiver of a fixed income manager and we've been shooting some of them in the right direction.
The high yield one has been a little tough and the rally has outpaced us. We're still a little cautious that that might actually crack as we headed in next year, especially if rates start to rise in a sort of Bond benjel Ante theme around the Trump administration.
All right, our Jay, super appreciate it. Have a good week.
R J.
Gallows, Senior portfolio Manager, Fixed Income at Federated Hermes.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Otto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
We have a great story out in the Bloomberg terminal.
It talks about their new head of Wealth, Andy Sigg, and how the's revamping the wealth business and how that's going. Basically at the end of the day, joining us now from more Catherine Doherty, Bloomberg Finance reporter, joining ours on that story.
So how is it going?
So the story kind of goes in different directions on that exact answer, right. I mean, Andy is one year into his new role, and he came into it with a lot of difficulties, and the basic infrastructure that city was was working with in their wealth division was something
that had been lagging peers. It was way behind in terms of speed execution and really that was something that Andy had focused on right when he came in, and upgrading the technology was one thing, then bringing talent was kind of the second pillar to improving the wealth division. And keeping talent is the hardest part about building a wealth business across Wall Street because you're it's a very
competitive business. The pay is oftentimes used as a way to lure experience and advisors to competitors, and so not only are you trying to focus on keeping that talent, the talent is tied to the assets that they're managing for their clients. So anytime you lose some big advisors with millions or even billions in assets, that's going to affect your business moving forward.
So Andy had a very big.
Agenda in front of him in terms of having to clean up, and not just clean up, but then improve City's wealth business so that it could truly compete with the big peers on Wall Street.
Yeah, because like when I think of Morgan Stanley, I think of wealth management I use, and that's different. When I grew up in the business, I thought about them as sales and trading and investment banking.
City I don't.
Necessarily think of wealth as part as a kind of a growth driver for them. But I know in their private bank, which generates two point three billion dollars in revenue, it is high touch service for the wealthiest clients, including a quarter of the world's billionaire minimum net worth twenty five million dollars. So is this a situation for City that Jane Fraser has to just put a flag in a ground sake? This is a core business for City and we will invest accordingly.
Private bank is definitely one of their money makers. You can see that in the numbers. But also if you think two tiers down, you have City Gold and this is clients with average monthly balances of at least two hundred thousand. So it's definitely not at the private bank tier. The private bank tier. Why they're trying to keep that part of the wealth business up is because that's where the biggest assets are. That's where the revenue really gets generated.
When you have the wealthiest and it's not just Americans, it's oftentimes billionaires in Asia. They're really focused on growing their business outside of the US, which is different from some of the other big Wall Street banks that are more US focused in terms of building up their own private bank assets and so City, their private bank, I would say, was their strong suit and continues to be their strong suit, but it doesn't mean that that's going
to stay that way. So they really have to remain competitive keep their advisors that are catering to the wealthiest individuals, not just in the US, but across the globe.
Did they lose advisors because they were posed or because they let them go because they were revamping it, and.
So it's a combination. Just last week we reported that two of City's former private bank advisors defected to go to Bank of America actually in their private bank, which is interesting because that's where Andy sig had come. He worked in the Meryl division, but still it's under the Bank of America umbrella. And those two advisors they brought seven billion of assets that they managed. So that was a big kick to City. And so when you see that, but it's not i would say unique just to City.
There's stories like that all the time of some of these really big, big advisors bringing their team to a competitor and oftentimes they're just looking for uh, it's it's opportunity, and most of the time that opportunity is translated and in pay and in compensation.
Another risk to the talent is something that Alex and I work with Commonwealth people, those platforms that are non wire house investment banks. They say, hey, why are you working for Merrill Lynch or think you know, we have to sell their progress. Go on your own. We'll support you with all the technology, all the back office stuff, and you go run your business like you want to run your business. And that is also another risk to you know, the you know all these big wirehouses. So great,
great story. Not surprisingly it's the second most read story in the entire Bloomberg terminalism. You talk about our terminal users and their businesses in their futures. They read it.
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Happy Monday, everybody and Alexia alongside Paulus. We need this a Bloomberg Intelligence Radio. We are broadcasting to live from Interactive Brooker Studio right here in Midtown Manhattan. You can also check us out on YouTube as well. We also at this round this time every Monday, we tap our wonderful Bloomberg bn EF folks. They do amazing research on commodities, power, transport, industry, buildings, AG sectors, all in the terms of helping businesses and
finances transition to green energy to the energy transition. That cover great stuff for US and Davies is a Bloomberg b andn EF's head of renewable fuels and she joins US now and has worn many hats also over at b and EF over time. And what kind of renewable fuel projects are there, Let's just say in the US, and let's at the stage because then we want to know what's going to look like four years from now.
Sure, so there's a good number of projects in the US and needs to be here, and there's a wide range. The US is the biggest market at the moment, so a lot of the projects are based here, a lot of renewable fields. When we talk about reneable fuels, we're really talking about basically biofuels at the moment made from oils like soybean oil or even use cooking oil like
the excess grease from your Fryer. The key here is that unlike ethanol or biodiesel or biofuels you usually think about, renewable fuels are a special term for ones that are drop in ready, which means they produce a diesel molecule or a jet fuel molecule that's basically the same as fossil dieseler jet fuel, So you could just blend it one for one into your dieseler jet fuel pool. There's no blending limit. It can just go in however much
you have, so it's really cool in that regard. A lot of the projects in the US are based, especially out of California. You could take an old oil refinery and convert that to produce a biooil like a biofeedstock
instead of a crude feedstock, so that's really common. There's also a lot of projects being developed to use other feedstocks, things like corn ethanol, because if you think about passenger vehicle fleet going electric, you're going to have less demand for gasoline or ethanol, so this could be another use for that ethanol in the world today.
Got to ask the question everybody wants to ask, how will the Trump administration impact renewable fuel business?
That is the million dollar question. Probably for every clean energy sector. I'd say that renewable fuels, compared to a lot of the other sectors of clean energy, might be a bit better insulated than most because this is a sector where it really promotes the agriculture industry by using biofuels as a new demand source. It also is a way for the oil industry to get a second life because they can't take this old refinery and convert it into something new. So in that regard, I don't think
it's going to be completely in the crosshairs. There are ways, though, that the Trump administration might have a big impact on this sector. One of the big ones is if he puts a tariff on used cooking oil from China or some of the.
Feet support use cooking oil from China.
We do.
China produces a lot of used cooking oil, a lot of fried food. They export the cooking oil to California, which they can then blend into these refineries. Use cooking oil is a really popular feedstock for renewable fuels because it has a low carbon intensity. Otherwise it's just wasted right you throw it out, it has to be collected. It was collected into dumped in probably a dump.
But so we don't have.
Enough fuse cooking oil here in the US as supplement if everything, we.
Have a lot, but if you think about replacing you know, the diesel or the jet fuel pool, you can always use more.
I see.
So to that point, what is the price spread between renewable fuels and traditional fuels right now?
TI renewable fuels, their cheapest are probably two to four times, which is a big range, but cheaper than more expensive sorry than fossil like jet fuel. And if you talk about some of the novel technologies, So one of the ways to make these renewable fuels is to take carbon dioxide and green hydrogen, which is great because then you're not using any biofeedstock that could be up to like
ten times as expensive as jet fuel. These are pricey fuels and they're probably not going to get too much cheaper because a lot of it is just the technology.
So but if as an airline am I'm mandated to use a certain percentage of clean fuel.
Depends where you are in Europe starting next year, yes you are mandated to blend it in in the US, we don't have mandates yet. The biggest is we're doing a lot of carrot incentives. So the Inflation Reduction Act has a tax credit for producing renewable sustainable aviation fuel that would give a discount of about a dollar dollar twenty five to these producers. It's not enough to cover that bridge that cost. It could bring it down closer.
And then if that goes away, then it makes it even worse. So what's the best way to lower that gap? Is it we need better technology, we need scalable technology, or more sourcing.
I don't think technology is going to come down too much in cost because a lot of the cost technology is a big component, but the feedstock is a big component too, and it's hard China exactly, so that could make it worse. A lot of it is probably going to be a bit mix of mandates and subsidies. So if you have a mandate, then you just have to
blend a certain amount. That's going to cause you know, maybe you put a premium on the cost of jet fuel, a tax on jet fuel that can cause that price gap to close, or if you offer an incentive to produce these fuels that can bring it down. There's a lot of research being done on nude feedstocks like something like cover crops. If you have a fuel you could just plant a new oil crop in the off season that can help retain the soil. You can use the same land. You don't have to have this issue of
food versus fuel land use. But yeah, that's an dar question is how cheap can you get?
It? So interesting it is.
I'm glad we do this every week.
Yes see if we learn stuff?
All right, Anna Davis, thank you very much, really appreciate it.
No easy solutions is.
Basically at the end of the day, what we see, Anna Davies is Bloomberg bnif's head of renewable fuels. Here's something that caught my eye, apology, did you see this one that some colleges are cutting their tuition by fifty percent as Ivy's near one hundred thousand?
Did you see this?
No?
So, I mean okay, So basically you got some private colleges like Bethel University in Minnesota, for example, cuts his tuition price from forty four thousand to twenty five twenty six thousand, effort to attract more students because other ones are just so expensive.
But then can you survive if you slash your tuitions?
Right?
And small colleges that do not have an endowment. The answer probably is no, because they fund so much of their total funny comes from to tuition. They don't get income off the endowment like bigger schools do, so that's why they've always always had a very stretch of his business model. But having been involved in higher education for a long time at the board level, you got to cut your costs dramatically. There's no will to do that.
You get to cut costs, you got to cut tuition, you got to enroll more students, and you also got to spend to attract the best.
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