Oil Infrastructure, Space and Climate Change

Middle East is certainly getting a lot of attention. There's been a lot of attacks over the last several months on oil fields, on tankers, just raising the question of the vulnerability of that infrastructure and very important source of energy in the world. To get a sense of what's going on, Welcome Seth Gray. Seth as a president CEO of light Bridge Corporation located in Reston, Virginia, joining us on the phone. So, Seth, again, we've had a series of attacks uh in the Middle East on some of

the oil infrastructure. How vulnerable do you consider that part of the world to be in terms of oil infrastructure. Well, really it's vulnerable, which is very sad and very dangerous as we see from the drone attacks on the Saudi oil fields, as we see on the attacks on the

Iranian oil tanker. One of the programs we have going under the Department of Energy here in this country is to improve our grid resiliency so that we have power plants that have can have fuel on site and if the supply is cut off, they can run for months or even years, the greatest of which are the nuclear power plants, which have several years of fuel on site. So we have supplies are cut off, they could run

for years. And in particular, as the US is producing more oil domestically, the potential cutoffs and supply of oil really threatened our allies, including Japan and many others that are very dependent on Middle East oil. So you know, it's an issue for US and it's an issue for our allies. So Seth, considering the fact that your company is a nuclear fuel technology company, it's not surprising that you'd say, look, it's so important to build that grid.

But I'm wondering how secure the nuclear grid would be or could be, given the fact that clearly energy infrastructure is a very very uh big target right now. Yeah, yeah, Well, the reactor sites themselves are are very robust, very protected sites. With many feet of concrete and steel protecting the facilities.

And we are moving toward more local grids over time in this country too, with small reactors advanced technologies coming out, so that rather than just the giant, interconnected electric grids that could be attacked, there could be smaller grids which provide a level of protection onto themselves. We're also starting to electrify the transportation sector with electric cars, with electric buses.

There are a lot of projections that will increase the use of electricity by fifty in the United States in the next couple of decades and similarly around the world, which puts even more pressure on the electric grid and

not having the source of energy cut off. So what we're seeing there is an opportunity for American innovation, not just for domestic markets, but for exports for this advanced technology that will produce no carbon as we do move to electrify the transportation sector in addition to the traditional electricity sectors. SETH just give us a sense of kind of the state of nuclear energy in the United States.

Are we adding plants, are we taking plants offline? What's kind of the trend here and how do you think that's going to play out well. We're pretty level at about one ent of our electricity from nuclear power, and we've closed some plants. We have two plants under construction in Georgia now, but mostly as the demand for electricity has been rising, we've been improving the efficiency of the existing plants to stay level at that. Now we're in danger of that falling down a bit and losing that

zero carbon energy from the grid. So we have companies like light Bridge bringing new technologies that can better justify the economic case of keeping those plants open and building

new plants. But part of the state domestically is where our nuclear companies are and the companies and the supply chain for exports, because the international market is bigger than the domestic market, and the greatest threats are from Russia and China, which together are taking about six of the global market and new reactors, and they are doing that

partly for strategic reasons, for their national security reasons. Setting hundred our supply relationships with countries like Turkey where Russia is selling reactors too, and that does not necessarily lead to good things in Turkey and other places where they're selling reactors, So there are national security implications as well for Americans competing and winning against Russia and China overseas. How expensive or or cheap is what's the relative cost

of nuclear energy versus say crude. Well, when when you levelize the cost of electricity, nuclear power is cheaper. It's it's quite a bit cheaper overall from these reactors that are already built and are operating. It's the new reactors that are being built. They're having problems with the cost overruns that are making those expensive. But as we design the new advanced reactors and build more of them, and we stop building a first of a kind plant, the

new reactors will also produce cheaper electricity. How much is the lack of adoption of nuclear energy in the United States relative to some of its competitors competing nations. How much does this do just because there's a diversion to the word nuclear and the fear that if something happens that it could be catastrophic. Well, look, obviously that's part of it. In the United States, nuclear is the safest industry we have. Nobody has ever died from radiation in

the history of the industry. Here, even at the only accident we ever had at three Mile Island, nobody died, nobody was hurt, and in fact, the twin plant on the same site kept operating for decades until just a few weeks ago when it was closed down. So we know how to build and operate these reactors very safely so that no one can can be hurt, and with the new advanced technologies that are coming, they'll be even safer with small underground plants uh where there will be

no danger to the public. Seth countries are deploying nuclear most aggressively. Well right now we're seeing the United Arab Emirates about to start opening four nuclear power plants that they've been building littill supply about a quarter of their country. In terms of exports, Russia is the largest in the

world right now, followed by China. The UK is making a big push to build new reactors, including one potentially from China, which shows how China is really impact then even our closest allies and UM generally, France has always been very strong and nuclear power, and they're they're deploying some in their own country as well as in neighboring

European countries, and actually even two in China. So those are the major markets right now, and for US companies throughout the supply chains, lots of manufacturing companies, it's important

that we keep pace and compete with them. Seth Great, thank you so much for being with as Seth Gray as president, chief executive officer of light Bridge Corporation, There's been a feeling that the bigger risk right now to markets at any time of central bank support and slowing but still positive growth is a trade deal that actually encourages people to rush into markets. Morgan Stanley today saying don't do it. It hasn't worked before, it won't work

this time. Let's find out if Steve dou Dash agrees. He's president of i HT Wealth Management based in Chicago. Steve, do you agree that if there is some sort of trade deal that isn't necessarily a signal to just go dive back into risk your stocks? Does anyone? Has anyone seen the same cycle over and over and over again,

or it last year or so. They come out and they say we got a trade deal or a partial deal, we're gonna work out something, and the markets go up upper cent or two, and then two weeks later they turned around and like, oh no, we're not gonna get a trade deal. No one wants to work this out, and then the cycle repeats itself over and over. So yes, I know they came out with some partial potential plan, and then today they didn't surprise anyone, come out and say no, maybe we don't have a plan. No one.

I do not believe right now that we're going to see some magical, huge deal worked out overnight or at least in the short order, um that answers all those questions and gives the market true clarity anytime soon. It's too massive of a deal and there's too much political drama around it for it to happen in such a short period of time. Steve, to what extent, if any, do you think that this trade uncertainty is weighing on global economic growth? I think it's it's completely been weighing

on it. If you if you strip out the tax break that took place a couple of years ago and the market snapping up because of that, you strip that out, we've been basically range bound for years now, Over and over again, we've not seen any substantial growth. Now that's a good thing too. To the extent that you know, I know a lot of people are worried about inversion

right now. I am not buying into that to the same extreme extreme, and they're worried about recession that could be meant from that, which again I do not believe in um. But if things do level off sideways, it's not like we have this euphoric high stock market price that's built on just you know, emotion. It's been flat for years with the exception of that trade tax deal, and therefore it's not like we have a huge downside

risk um posed to it. So what are you buying I'm by I personally do believe that they'll eventually get some sort of trade deal done over the next few six months. Let's just say, because the politics involved, the Trump organization does need to win. This is the one area that they can control a great deal of it.

I think the tech sector has been hit the hardest due to the trade deal, certainly the semi connector semiconductor set or if you want to go high risk, high return, I think that's an area where you can overload right now with the assumption that something works out, with the assumption that we are not sitting in the right before recession just because of the inversion that's going on, and question cutting into it, yes, and looking at Micron shares they're up this year, how do you how do you

say that they've gotten hit pretty hard from the trade wars because, frankly, because they probably should be higher right now, and you're in the sample size, just the here to day doesn't show how you're looking in the year's past

when it got hit a lot harder. I think there's so much uncertainty in the semiconductor sector right now because of the trade war and because of the unknown of how that's going to affect a political piece that is a part of the day of that deal right now that you're seeing restrictions on what the actual return should be. We are in the middle of the Internet of everything, right Everything is getting computerized. There's only going to be needing more and more chips to integrate everything that we

do in the future. And so you remove that politically induced unknown to it, and you have a very strong sector in moving forward. So, Steve, how do you feel, I guess within the tech sector about the Fang stocks. They've been such a big, big driver really over the last decade, both on the upside and on the downside. I think about the fourth quarter of the fourth quarter of last year. Where are you on those names? I

don't personally, I don't believe in Facebook. I think that the business model has been dying and that they're getting eaten up by their competition, including themselves in Instagram, and therefore generating less revenue UM per click because of it. Um the Amazons of the world. I've been on Amazon's bandwagon for a decade now. A decade ago people were talking about how was overpriced. Everyone uses it more and more and it's easier and easier to buy anything at

any given time. So I know people like the lump thing in together as one big thing. It's just not Netflix is not the same as Facebook. Uh. Amazon is not the same as Google. It was a cute little term that people could use for a couple of years there, but I think you've got to be a little more selective on what you're buying. I believe Facebook is a dying business model right now. So am I going to look at that It's the same as Amazon, which I

think is a high growth business model. No very interesting Facebook. Just looking at the stock up about this year, um. But you know a lot of those tech stocks to continue to perform well. Steve Doodash, thanks so much for joining us. Steve as a president of I h T Wealth Management based in Chicago, giving us his thoughts on the market. He does not see a recession. Um, it does not. He's not worried about the when we had

that inverted yield curve several weeks ago. Uh and UH I think probably believes on some light deal in the next six months. Might all that might be enough with a accommodator fed four equities. Well, space is a growth of business and it's no longer the sole purview of NASA. Investors can actually play it via the E t F market. To give us a sense of what's going on in the space investing race, we welcome Andrew Shannon, chief executive officer of procure a M, joins us here in our

Bloomberg Interactive Broker studio. Andrew, thanks so much for joining us. Real quickly, just tell us what procure a M is and how you kind of interact with the space business. So, procure a M is a registered investment advisor where we launched both our proprietary own ideas for e t s as well as help third parties launch their products, and UFO is the first product that we've brought to market listed on the New York Stock Exchange, launched in April

of this year. So I'm looking right now at UFO, which is obviously a really catchy ticker. And there's obviously a lot of intrigue around space exploration in what exactly do you invest in? So I think a lot of people have wanted to invest in space for a long time, and until launching this fund and very recently, it's been

a fairly difficult space to actually get exposure too. And so unless you're an institution making a private uh, you know, a private company type of purchase, that there weren't too many pure play space companies. But right now this market has really expanded and has brought new entrance into the market. And what we've seen is that satellite companies are a very big driver of this industry, as well as some of the traditional aerospace and defense companies, but those aren't

typically as pure play. So when you're looking at our fund, what you're actually getting exposure to is satellite operators and manufacturers, launch equipment company, ground station company, as well as other companies that are completely reliant upon UM space based systems in order to get their services or products to market. Space and exploration has changed a lot in my lifetime.

Remember being a little kid watching the moon landings. Um, now it seems like, you know, rockets going up left, right, and center, and I don't know who's sending them up there. So but give us a sense of how space has kind of changed. And it was the purview of kind of the US government, maybe the Russian government, NASA, but now there's mostly private right right. So in the early days you have the the EESA and ROSS, Cosmos and NASA, and those government agencies were really the driving force for

the space economy. And this year, actually the just a couple of weeks ago, the numbers came out for the two thousand eighteen space industry and it's set a new record for itself. Roughly four hundred fourteen billion plus dollars um spent on space was and so going over four hundred billion for the first time ever. And then you look at Morgan Stanley that's been building up research groups as well as Bank of America. Morgan Stanley's predicting over

a trillion dollars by twenty forty. Bank of America sees up to two point seven trillion dollar industry by so you're looking at a lot of UM analysts out there looking to see this this be a continuum trender of growth for the broader space industry. So I'm looking right now at the assets in UF It's a twelve million dollars and I'm wondering what you needed to get up to an order for this to be sort of a

sustainable investment vehicle in itself. So break even for for products such as this is in the several tens of millions typically UM. But you know right now, we just launched this product in April, so to be at twelve million, we're pretty happy, given that the summer is typically a pretty dead season for growth. How much is the construction of an index guided by what investors are asking for versus what registered investment advisors are looking to be able

to provide in terms of, you know, a pitch. That's a really good question because I think a lot of times you'll see a thematic fund and maybe the name is really catchy, and so someone says, oh, it invests in this you know, thematic area. I want to own it. But when you actually look at the index, and boil it down, you're actually getting the exposure that you actually wanted to when you invested in that product. So for me, looking at the index is one of the first most

important aspects of building a truly representative thematic product. And for this, we actually have a partner who's a former director of the Space Foundation. UM has been studying space policy, space business, all these various areas as well as the technologies, and he actually built this index. So I think what he was able to do is get a pretty strong representation of what the global publicly traded space industry looks like.

So you're not going to get every single company because some of them are private and some of them are maybe smaller or less liquid companies. But when you actually look at the breakdown as far as what's driving the space economy, a lot of these names are represented in the fund today. So the space business is growing, it's becoming more and more private. Are you expecting more publicly traded companies to come into the marketplace, UM, I would

certainly like to see that. I think, you know, the one getting the most buzz recently on that front is Virgin Galactic, which did this, uh this spack kind of merger that can bring it out to market, hopefully within the next couple of weeks or months um which could be a new way for investors to get exposure to the space industry. Um. You know, I love to see a strong industry that you're constantly seeing acquisitions and I p o s and things like that, and you know,

I hope we're getting closer to that stage. But right now, you know, thirty one companies from around the world is a pretty um my view, an interesting way to get exposure to this industry. Andrew Shannon, thank you so much for being with us. Andrew Shannon, the CEO of Procure a M and I gotta say UFO brings me back to watching Doctor Who, growing up with the tartists and with you know, the different the seven different doctors. I could geek out. I'm pretty much anything but definitely science

fiction and face exploration. If we appreciate you being with us. There's a lot of back and forth in the political sphere when it comes to global warming, climate change and some of the steps being taken, but the trend is clear when you take a look at business and joining us now to discuss that we are very pleased to say is Rich Lesser, who is the chief executive officer of Boston Consulting Group, which is based in New York.

But Rich right now is in Munich, Germany. And before we talk about climate change, what are you doing in Munich. I'm in the middle of hell. It's nice to be here with you. I'm in the middle of an around the world trip, just visiting clients, doing some meetings around the world. So I was in Boston, then Abu Dhabi, now here, then off the Asia, then Seattle, then dot Home.

Sounds pretty exciting. So I want to talk a little bit about climate change and what your research has shown in terms of the shift that you've been seeing among the c suite offices. Sure so, um so so, First just the facts and then what we're observing in terms

of the dialogue. The facts are really clear. The economic downside from not addressing climate change is enormous, and we're right now not on a one and a half degree path, or at two degree path, or on a much higher path, depending on who you talked to, three and a half or even four degrees. The economic consequences of that are enormous.

What was fascinating to us starting with what we just happened to do in Germany coincidentally and have now expended around the world is when you model through the macroeconomic impacts of addressing climate change at a macroeconomic level, that actually, even if a country does it alone, of course it gets better if all of us do it together. The

macroeconomic case is quite strong. So to take Germany in the US, for example, if you were to you could improve eight percent of carbon emissions, take down carbon emissions in Germany and in the seventies in the US with no net negative economic impact um. And that's true in many other countries around the world. The last twenty or thirty percent to get to net zero by that will

require technological innovation or have some economic consequence. If we can't find that innovation, So then the question is, if that's so good, why don't companies just go do this. It's because while it may be true at a macro economic level that the net impact is slightly positive or neutral macro economically for individual sectors, it will clearly be

very hard in many sectors of the economy. So we need governments to set good policy, to create the right incentives, ideality to create a market for carbon That will encourage companies to take the right action, because sector by sector it won't always make sense to do it on their own. So the suite executives now realize how much the public cares, and I think many companies are getting their arms around

being much more aggressive on this. So Rich, how difficult is it for you and for your clients to push through meaningful sustainability issues when President Trump and the U. S administration does not appear to be supporting that at all. I think most companies are realizing the there's more opportunity to make progress than they realize, and more of a sense of urgency from many of the customers than might have been in place a couple of years ago, and

that will lead to real progress. I think we're also seeing more integration across the public, private, and social sector than we had before. But let's be clear and certain sectors of the economy. Absent effective government action, it will not go as far as it needs to go. And so the lack of the lack of engagement, support and acknowledgement of the magnitude of the issue from the US

government and other governments. It's not the only one, but but certainly, the US, given the size of its economy, has a meaningful impact on how far we're going to get, even if companies are serious, and even if companies genuinely try to make progress. Can you give us an example of a concrete measure that an industry has been taking that actually costs them quite a bit of money that moves them towards being more sustainable. I think that's not

where most companies are right now. I don't think most companies feel like they either have a defense from their investor base or from others to be able to do things that have purely negative economic consequences. I think the focus right now is that there are a lot of ways you can get better. We see the banks pushing much more investment towards sustainable and renewable industry plays. You see the auto industry pushing towards electric vehicles. You've see

the industrial sectors focus on waste and water. But but part of the challenge we've got is it's very hard for one company to take the risk of very negative economic consequences when you've got activist investors and you've got how they'll be portrayed in the financial market. If there was a price on carbon or some other way to

have everybody bear a cost. Then I think you could see much more aggressive action and would have negative consequences for one, but collectively will have marginal impact if it's if it's shared burden Without that kind of measure, though, are any of these companies taking real measures towards becoming more sustainable or is it more of a PR push. I don't think it's PR. I don't I so, And to be direct, I don't think it's PR. I think

it's a genuine desire to make progress. But I think a genuine desire to make progress within the constraint of having real financial pressures on them. And I don't think we're yet at the stage because because the financial markets, as you know where then most you know, can be pretty unrelenting and and it's hard to do that. But but what I think companies are discovering, so that makes it sound like nothing's happening, I don't feel that way.

I think what we see in many sectors as people looking in ways to find win wins, to find wins to to drive carbon out of their footprints, to encourage investments in their industry or in other industries to encourage their suppliers to be bolder in improving their operations because they're the customers for those suppliers. So it's genuine action, but it's not sufficient action. So rich do we need an international framework to really push this forward? So that

was the interesting thing. We will be so much better off with an international framework. But look around the world right now, we're not finding international frameworks on many topics right now, trade, you know, many issues, so so we it's it's unfortunate because there would be so much easier

for the world to move if we moved together. But what was interesting about our researches that countries can take big actions on their own that are do not bear the negative economic consequences that are sometimes portrayed to make

major progress. Again, I don't want to overstate it's not to get net zero carbon by on their own, but to get seventy or eighty percent of the way they are is still a huge step that could be done without negative economic consequences at a country level, but it has to deal with the consequences set or bisector and steal and cement in the energy industries in other places in order to be able to make that viable for individual companies to drip the kind of actions that we

need to have them take. Ye. This may be an issue of I think globally and act locally. Rich Lesser, thanks so much for joining us. Rich as the chief executive officer of Boston Consulting Group, joining us on the phone from Munich, Germany, as he does, is around the world trip visiting clients, talking about climate change and how these companies should be dealing with it, a very compelling topic. Thanks for listening to the Bloomberg P and L podcast.

You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. And Lisa bram Woyds I'm on Twitter at Lisa bram Woyds. One before the podcast, you can always catch us worldwide on Bloomberg Radio