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In all this reporting about the new administration in the Treasury pic, I've heard the number bending about that the US treasury market is twenty eight trillion dollars in size.
It's large, So say that.
Means I have to be a little bit nicer to our next guest than I typically.
Am Ira Jersey joins us.
I didn't know he was so influential. Twenty eight trillion dollars. Ira, do you care or to what extent does your market care about who President lect Trump selects as Secretary of the Treasury.
Well, so people have been talking about who it's going to be, and you know there's a mantra at the Treasury Department that typical is they want to be regular and predictable in terms of how they issue debt. So if you wind up with any of the three main picks that we've been hearing about, I don't suspect that you'll see a major seed change from that. But they
do influence how many of which securities are issued. In fact, when the Treasury Borrowing Advisory Committee, that's a committee of investors and dealers and the like, when they get together, they actually send a recommendation to the Treasury Secretary of how.
Things should be issued.
Now, in reality, you know, the Treasury Secretary kind of signs off on it, but mostly the decisions are made by the people under the Treasury Secretary. But I think that, you know, all three of these picks are reasonably middle of the road in terms of, you know, how they're
going to operate the Treasury Department in my opinion. And look, I haven't had any discussions with any of these folks, but I don't think that they're really outside of the realm of what we might expect as normal, especially since two of them are very much market people.
And they don't want to rock the boat.
They'll get feedback from markets and market participants and investors before they make any sweeping changes to how treasuries are issued, which treasuries.
Are issued, and the like.
T back.
So the cool kids call it IRA, it's good to chat with you. So I was out of commission for about a month and a half. And when that happened, you know, we're looking at treasury yields, hey, around like three point six percent. It was like, all right, guys, we're going to move money out of treasuries and we're going to put it into stocks. That's where the return is going to be. And then I come into the office and we're touching and we're close to four point five.
That's a big shift. How high do we stay for how long? And is that thesis? Then look, guys, you still got to put money in the long end.
Well, there's a so I do think that there's a cap on how high treasury yields are going to be
able to go. There's going to be a kind of this supply demand balance that probably is somewhere between four and a half and five percent, particularly in long term treasuries, just because the higher yields go from here, the more we get into the place where lie ability managers tend to really like like bond yields, and especially unless you get you know, really big shift up in inflation, there's no reason to think that we won't stabilize somewhere in
this area. So our view is will wind up staying in a pretty wide range over the next year.
Smaller range and we had the past year.
Remember over the past year, we've been between five percent and three and a half percent, right, so one hundred and fifty basis point range. I think it's probably a bit narrower than that over the next year, but we still wind up being volatile in that range. More important is going to be the or as important as going to be the curve, I think, and where do two year yields go, which is far less certain because we
don't know how far the Fed's going to cut. Right, the Fed's probably going to cut at least a little bit more. But are they only going to cut another seventy five basis points as the market expects, or are they going to cut another one hundred and fifty to two hundred basis points like we thought.
Just when you know, before you went out on.
Break, Because that's really been the big move and the reason why we've seen this massive selloff in treasuries is just a shifting expectation for what the Fed's going to do.
So what will we get at the December eighteenth meeting is I guess I've heard the word skip used. It's the first time I've heard that. But is skipping the December meeting in terms of rate cuts? Is that reasonable or is what? Do you think they're going to move forward?
Yeah, Paul, I do think that they There is the big distinct possibility that they skip in December.
You heard some language.
Out of out of Chair Powell over the last week that basically hinted that they might do that. So you know, you wind up getting an okay payroll report and okay CPI report, and you wind up with maybe a skip. The market right now, keep in mind, is basically pricing a skip in either December or January. So basically one cut between the two meetings. Kind of unsure which one is of those two meetings is going to be the skip.
What's interesting, though, is that it feels like we priced out a lot of the drama and the rate cuts that we had already priced in and say over the summer. So are we sort of at neutral in essence in terms of what the market actually expects versus what the Fed's actually going to deliver.
Well, I think, well, the market seems to think that maybe if the Fed's going to get back to neutral, that maybe the neutral rate is three and three quarters to four percent, because that's what the market's priced for where the Fed's going to get to. So again, a little bit more in terms of cuts, but not the not down to you know, two point seventy five percent, where we were priced very briefly for a.
Cup of coffee back in September.
So I do think that the market believes that neutral is higher.
I think the FED is skeptical of that.
Right, which is the reason why the FED, I think thinks that they might need to remain restrictive a little bit longer. And they do think that they're restrictive, right, Almost every single member of the FED has said that they that they're restrictive. But the question is how restrictive and will the Fed, you know, get when they get
to restrictive, how long then will they stay there? And that's when the reason why you have two year yields that kind of can't make up their mind whether or not they want to be at four percent or four and a quarter percent. And I suspect that we'll want a two year yields to wind up back back at four even under four percent by the end of next year. But there's still you know, that's that's incremental tightening or easing by the Federal Reserve over the course of that
period of time. And you know, unless we get a recession, it's hard to see how the yield curve significantly steepens from here unless you wind up with some kind of you know, deficit shock where where the Treasury Department has to go out initial a whole lot of long term debt. It's possible, but that I think is kind of an educase scenario.
All right, Ara, thank you so much as I always appreciate it.
Our Jersey chief viewers, interest rates strategists for Bloomberg Intelligence joining us from the b I headquarters down there in Princeton, New Jersey.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecard Play and Androud Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
We alex you here alongside Paul Sweeney. This is Bloomberg Intelligence Radio. We bring you all the top news and business, economics and finance through our lens of our Bloomberg intelligence folks. They cover two thousand companies and one hundred and thirty industries all around the world. We also like to tap them outside of Bloomberg as well to get a good read on what's actually happening in the market. If you're putting money to work, what's the smartest way to do that?
Fill Orlando, a chief equity market strategistic head of client portfolio Management at Federated Hermes, joins me. Now, Phil, what's the case for not being in equities?
Well, the stock market has had a phenomenal run here. Animal spirits have returned and from the bottom of the market in early to mid August, a lot of the indices are up fifteen to twenty percent, So that the case for not being in equities or being underweight equities at the moment is perhaps you think stocks are overvalued near term and you'd like to have you'd like to be patient and get a better re entry point in
order to get back to an overweight. But if we're taking, you know, a longer cycle position and looking at the prospect of less regulation, lower tax rates both individual and corporate, stronger economic growth, all of those things are good for corporate earnings. Ultimately, share prices reflect stronger earnings, and we could see the S and P five hundred, you know, from six thousand. Now let's call it up into the seventy five hundred neighborhood as we look out over the next couple of years.
So, Phil, to what extent did your I guess market call change the day after the election when it became a parent that not only president like Donald Trump coming back to the White House, but it looks like he's going to have a pretty solid Republican support in Congress.
How has that impacted your call?
The good news, Paul, is it did absolutely nothing to our call because we were we were expecting a a red wave, if you will, and had positioned for that accordingly in terms of overweights in domestic large cap value and the small cap categories. We had been essentially fading the dramatic outperformance of the mag seven names over the
eighteen month period into the middle of this year. And you know, as you look back on the third quarter and results over the last you know, six weeks or so, the values and the small caps have had a pretty good run of it. So we didn't need to make any changes after the election results became known.
What other thing I was just talking about that struck me was the rise in ten year yield almost a four and a half percent and the continued money into money market funds. Is that ever going to leave?
Well, there's a concern that's growing based upon developments over just the course of the last week. L And I think you know, we've seen this with the backup in treasury yields. We were at three point fifty three sixty or so a couple of months ago. You know, we're now up in that four forty four to fifty neighborhood. And the question is whether or not we're going to go back and retest you know, the four seventy five or five percent level we saw you know, October of
last year. The reasons for that backup, in our view is that inflation is is is not going down anymore. It's sort of stalled. And you know, based upon the wholesale inflation metrics we saw last week are actually starting to re accelerate. Is we look ahead to the core personal consumption expenditure index that we're going to get I think the day after Thanksgiving, the expectation is that that number is going to continue to go up as well to two point eight percent. Remember the Fed's target there
is two percent. You had some pretty strong economic growth from the second and third quarters compared to the first quarter. Last week's retail sales numbers upward, revisions in September, some strong nominal or headline numbers out of October. So the thinking is that the economy strong, inflation is sticky and persistent. You've got a red waves here that in all likelihood
is going to result in stronger economic growth. Maybe the Feds not on a glide path to you know, take the funds right down at three percent, which was sort of the gist of what most investors got out of their SEP back on September eighteenth.
So given that backdrop, Phil kind of where's your best opportunity after that? As you look at the equity markets here, where are you guys focusing these days?
Well, again, we're taking a longer term view and that if we're right that the issues that we just talked about do result in you know, let's our forecast is three hundred and fifty dollars in corporate earnings for the S ANDP looking out to calendar twenty seven embedded in that assumption is comparable or perhaps lower corporate tax rates and extension of the individual tax rates at the end of next year, the end of calendar twenty five when
they come up for renewal. So, as a result, as we look out to twenty six and twenty seven, the economy ought to do pretty well. So if we discount back three hundred and fifty dollars in earnings into the end of twenty six, that would suggest the seventy five hundred SMP we're trading at six thousand now. So if the market does pull back here, you know, let's say we pulled back to the two hundred day moving average,
you know, roughly about fifty four hundred. That gives you a couple of thousand points in the S and P potentially the upside over the next couple of years. That looks pretty attractive to us.
And sounds pretty attractive to me certainly. Phill Er, Orlando, Chief Epity market strategist and head of Client Portfolio Management and federator and Armies.
Thank you for your time.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple card Playing and broud Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Happy Monday, everybody. Alex Deal here alongside paulse We need. This is Bloomberg Intelligence. We are broadcasting to live on this lovely Monday morning for our interactive broker studio right here in Midtown Manhattan. Maybe lovely morning for us, but maybe not so much for Spirit Airlines. The company declares Chapter eleven bankruptcy. It's seeking Chapter eleven protection in New York to restructure about one point six billion dollars of debt.
It did tell customers on Monday that they should continue feeling comfortable booking fights now and in the future. I don't really I guess that stock is obviously halted for bankruptcy protection filing. We wanted to get the latest now with Francois do Flow. He is US airline analyst with Bloomberg News. He joins us, excuse me, Bloomberg Intelligence. I think, yes, okay, Bloomberg Elligence. That's important. We want to sparse that out.
What happens to Spirit, like, what does this process wind up looking like?
Yeah?
So good morning. Spirit have been struggling struggling since twenty twenty with losses and cashburns things. So God only was since twenty twenty three after the merger with Jeed Blue was blocked and Praught and Whitney and on the need for some engines to be inspected and that granted some twenty four aircraft for this year. So with everything, unicodes have increased faster than revenue, both because of inflationary effects
and also from competition. And there was this need of refinance one point one billion of debt raised during the pandemic that was packed by loyalty program and that was due on September twenty twenty five, and there is another five hundred million compatible debt due in twenty twenty six. And because of this cash burn and losses, this debt was needed to be written, recognociated, or restructure one way or another. And that's what's managed to do with this
announcement today. So eighty million or so of the date will be equitized, an exit of about eighty million eight hundred million will be issued and you on twenty thirty and in the meantime, Spirit will get three hundred million of debt in the orin position facility to go through the winter and continue to operate and make sure that the flyer passenger can still fly during this important radio season.
Is there an expectation about when Spirit will come out of.
Bankruptcy, so they expect they expect to end to exit the bankruptcy early March twenty twenty five, so there is an extension period of forty days that is possible. That will still be early twenty five to twenty five, which is a very fast process. But it's also because they managed to arrange to play arrange most of the big although before filing.
So what could a new administration under President Trump free up some more merger possibilities that were kind of squashed and does that sort of become Spirit's future in like April of twenty twenty.
Five, good course, that could be.
Definitely Spirit will emerge from this bankruptcy a liner and hopefully more profitable in the long term airlines, not necessarily in twenty twenty five. They only help to get back to profits in twenty twenty six, which can be event though very very hard to achieve, but definitely liner and better position and a more attractive airline for somebody else to grab, and definitely a change of an administration would luckily make that easier for a new buyer.
So what what kind of looking at Spirit are they do?
Are they a bad operator or do they just have a bad capital structure.
No, they faced a lot of end winds from everywhere, ending from exiting from the pandemic. They faced higher courts because of pilots, because of everything getting more expensive, and at the same time they faced strong competition from American Delta, United Airlines who were looking for passengers to fill seats at business travelers were we're not feeling and this was pressuring yields at low cost airlines, including Spirit. So and then on top of that you add their engine problems.
That makes only everything worse with one out of ten airplane grounded, even though they got some conversation from Product win. So it's a nation of plenty of things. Plus the fact that it seems that travelers are moving away from low cost ticket to more premium fly and that's why they are also changing their business model a little bit, offering more premium seats and services to their customers, and they are trying to change their experience.
And this is not something that.
Is specific to Spirit. But we also say that at a legend and frontier because of this change in customer behavior.
Yeah, and also you know then you add things they make their money by. Hey, I'm going to check a bag out, you pay for something. I want a pretty ticket, you got to pay for I'm a coffee, you got to pay for it at some point. It's like guys enoup with that. All right, I think so much. FIRSTOI, we appreciate Francois de Flow he joins us s Boomberg Intelligence, US Airlines analysts joining us from Princeton, New Jersey. Again,
that tickers s a ve. Also the big guys get Alta United, for example, they can really compete on lower affairs if they want to want at the end of the day too, So how do you compete with that?
Right?
And I didn't understand it, but now since Francois explained it.
During the pandemic, when they lost some of their business passengers or a lot of their business passengers, they had to fill those seats, and so let's discount some prices and get those people in boom So I think your question was the best, which is, now that we have a new administration, can we get a deal done with JetBlue or our Frontier one of those two, because it doesn't seem like they can operate on their own and it's a smaller market stick they get hurt.
Exactly because then you got to close maybe less flights, and it actually went to hurting the people who need the flight.
There, you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa playing Bloomberg eleven thirty.
Else you'll Paul Sweeney, You're live here in our Bloomberg Interactive Broker Studio. When you're streaming live on YouTube as well, also head over to YouTube dot com search Bloomberg Podcast and that's where you'll find it. So it's just listening to Charlie's report here the NASDAK up almost nine tens a one percent. Said what's pushing the NASDAC car and I look, go over to the mov function Tesla. It counts for forty five points of the move there in
the Nasdaq. So Tesla stock up set seven point two percent today, leading the Nasdaq higher the question is the Trump trade?
Is it a thing? How do you play it? Has it played out?
Let's talk to somebody who does this stuff for a living. Carol Schlife, chief investment officer for BEMO Family Office. Carol, the world's a different place since the election on November sixth.
Here, how did your investment out look change? If at all?
It didn't really change. We're always very intent about building durable and sturdy portfolios. And actually we had thought going into the election that you know, of a variety of potential outcome comes of red suite, Actually it was one of the most likely outcomes, and we didn't have high probabilities on any of them, if you will. It's not like it was run away, but you know, it is interesting because you are trying to make sure that you're
watching what the ten years doing and what treasuries are doing. So, if anything, we've probably backed off a little bit on duration, and we had been underweight on the duration side anyway, and we'd leaned into growth and into the United States and North American securities anyway. So we feel pretty good about the positioning and trying to be very adaptive and watching as things go forward.
You know, it appeared that the gridlock scenario was a scenario that would work well for markets. But I'm not sure we're going to have a gridlock Congress and an executive branch. Looks like it's going to be a clear swaite for the Republicans and maybe they can get a lot of stuff done here.
How do you position for that?
Well, the interesting thing is is I think if you go back and you listen to the way when Chairman Powell was asked at the last FMC conference call how they were going to adapt to the changes, and they said, look, until policy is there, we can't really start trying to
model for it. And I think that's one of the approaches to take because the market's trying to in advanced discount which way things are going to swing that come late January, depending on if we get across the board tariffs in the first week or two of a Trump administration, that's one potential policy response with portfolios as opposed to a more gradual response or using tariffs as a negotiating
tactic and an opening bit. So to preposition portfolios is probably a little premature, if you will, but keeping adept at watching the way those things play out will be import important, but it is ironic because historically markets have preferred gridlock. I think under the assumptions that if the legislators are all off bickering with each other, markets can
get on with being markets. But clearly this time I think it was both not having to wait for the election outcome and having a decisive sort of tilt to it. The presumption is then okay, fine, we'll get policy quickly and then we'll be able to adapt and adjust, and so that unknown period shrunk from being what could have been months and months to being basically just a matter of weeks.
Something that's really stood out to me in the last few weeks is the out performance of financials. Do you think that that continues?
We do.
And one of the things that's interesting is when you start digging into the stats and looking at how low the level of initial public offerings and m and A is. I saw once to to Stick recently that said something like twenty seven thousand companies are sitting in venture capital portfolios. Over half of them have been there for over four years. So you've got a lot of really high quality potential
companies that just haven't come public. You have a lot of M and A that hasn't happened, and that's teed up. I think that's one of the primary reasons why you're seeing Wall Street get pretty excited both and we hear anecdotally there's a lot of bankers out there teeing up deals and so that could be positive for the industry.
All right, Carol, we appreciate it. Thank you very much. Carol's life joining us there over at FEMO Family office.
She cio over at that shop.
Thank you so very much.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say to play Bloomberg eleven.
The Nasdak up almost nine tens a one percent of So what's pushing the nasdak? Karr and we'll go over to the mov function.
Tesla.
It counts for forty five points of the move there in the Nasdaq. So Tesla stock up set seven point two percent today, leading the Nasdaq higher.
The question is the Trump trade? Is it a thing?
How do you play it? Has it played out. Let's talk to somebody who does this stuff for a living. Carol Schleife, chief investment officer for BEMO Family Office. Carol, the world's a different place since the election on November sixth.
Here, how did your investment out look change?
If at all, it didn't really change. We're always very intent about building durable and sturdy portfolios, and actually we had thought going into the election that you know, of a variety of potential outcomes, a red suite actually was was one of the most likely outcomes, and we didn't have high probabilities on any of them, if you will. It's not like it was run away, but you know, it is interesting because you are trying to make sure that you're watching what the ten years doing and what
treasuries are doing. So, if anything, we've probably backed off a little bit on duration, and we had been underweight on the duration side anyway, and we'd leaned into growth and into the United States and North American securities anyway. So we feel pretty good about positioning and trying to be very adaptive and watching as things go forward.
You know, it appeared that the gridlock scenario was a scenario that would work well for markets but I'm not sure we're going to have a gridlock Congress and an executive branch looks like it's going to be a clear suite for the Republicans and maybe they can get a lot of stuff done here. How do you position for that?
Well, the interesting thing is is, I think if you go back and you listen to the way when Chairman Powell was asked at the last FMC conference call how they were going to adapt to the changes, and they said, look, until policy is there, we can't really start trying to
model for it. And I think that's one of the approaches to take because the market's trying to in advanced discount which way things are going to swing that come late January, depending on if we get across the board tariffs in the first week or two of a Trump administration, that's one potential policy response with portfolios as opposed to a more gradual response or using tariffs as a negotiating
tactic and an opening bit. So to preposition portfolios is probably a little premature, if you will, but keeping adept at watching the way those things play out will be important. But it is ironic because historic markets have preferred gridlock. I think under the assumptions that if the legislators are all off bickering with each other, markets can get on with being markets. But clearly this time I think it was both not having to wait for the election outcome
and having a decisive sort of tilt to it. The presumption is then okay, fine, we'll get policy quickly and then we'll be able to adapt and adjust, and so that unknown period shrunk from being what could have been months and months to being basically just a matter of weeks.
Something that's really stood out to me in the last few weeks is the outperformance of financials. Do you think that that continues.
We do.
And one of the things that's interesting is when you start digging into the stats and looking at how low the level of initial public offerings and m and A is. I saw one statistic recently that said something like twenty seven companies are sitting in venture capital portfolios. Over half of them have been there for over four years. So you've got a lot of really high quality potential companies that just haven't come public. You have a lot of m and A that hasn't happened, and that's teed up.
I think that's one of the primary reasons why you're seeing Wall Street get pretty excited both and we hear anecdotally there's a lot of bankers out there teeing up deals, so that could be positive for the industry.
All right, Carol, we appreciate it. Thank you very much. Carol's life joining us there over at FIMO family office.
She cio over at that shop.
Thank you so very much. All right, let's go to Steve Mann, now Bloomberg Intelligence, Global Autos and Industrial Research Manager. We were talking about Tesla earlier and how potentially the Trump new Trump administration might loosen some regulation on self driving cars. And this comes though as maybe ev subsidies will be rolled back, which is a bit of a
head scratcher for me. Steve Mann joins us. Now, hey, Steve, what do you make of the fact that maybe those fully self driving vehicles is a is a now hallmark or priority for the incoming Transportation Department?
Yeah.
I think it's important for self driving vehicles. It's it's the next kind of technology evolution for cars. And one of the biggest hurdles really in the US is regulations. There's only two states that allow uh, you know, self driving cars meeting without steering wheel and pedals on the road today is uh, California and Texas, But nationally, the other states or the National Highways Safety Board actually do not allow these steering wheel lists and pedal list vehicles
on the road. So it's it's a huge it's a huge evolution if they allow that.
So Elon Musk certainly having an influence there on this, presumably on this policy direction. Here in Tesla, stock is up seven point two percent today, Steve, how likely is the federal government to kind of maybe follow California and Texas and allow these on the road.
Well, the you know, first of all, Tesla is not going to be the only one benefiting from it. GM could benefit from it, way more cob benefit from it.
You know.
Actually, GM's Cruise division has actually lobbied the National Highway Safety Board to really push rules and regulations, relax those regulations to allowed you know, unsupervised vehicles, more unsupervised vehicles on the road. But that's been held up for the last two three years. And I mean, personally, I think I think it's really important for the for the government
to actually relax that regulation. It's not just the US trying to develop this technology, there's a lot of companies in China, there's a lot of companies in Europe that are trying to develop this uh kind of a driverless technology. And I think, you know, US needs to do this to to compete.
When you say that they need to do it to compete, wouldn't it be the same with EV's And I'm wondering from maybe Elon Musk's point of view, if Tesla is able to make a lot of inroads with the robotaxis and self driving cars that like that in essence will also help prop up evs because oh, by the way, those cars will be electric.
Oh that's that's very true. You know, those self driving software is propulsion or powertrain agnostic, agnostic. But you know, having an ev really helps help push that through, push that into the evolution into the future, because they do work better on evs than gasoline cars.
So, Steve, just give us a sense of these self driving vehicles. Where is the technology to day and when do you think it'll get to the point where Paul's.
Going to use one, which, by the way, let me tell you it's going to be a while.
Where are we I mean, I you know, we still think it's going to take a while.
Like when we.
Look at uh, you know folk, you know, autonomous vehicles as a main driver to Tesla's revenue, we don't really model that out until like twenty thirty five, So it's going to be a while because it's really relying on the AI technology, and specifically for Tesla, it's really using a lot of the data that is collecting from its cameras and all the vehicles are out there and teaching the machine how to react and respond response appropriately in
various situations. As you know, as both of your drive on the road, there's you know, there's an mptiene number of scenarios that could happen, So it will take a while for the machine to really learn and be proficient at driving as as well as a human being.
Uh what else do you make of that?
Now?
If we just switch focus to just the EV part of Tesla or other companies, if that subsidy winds up going away for EV's, what do you think happens the likes of like Rivian and Tesla and even the EV parts of major automakers.
Well, I think, you know, the initial thought for us is really it could be beneficial to companies like Tesla and Rivian. You know, if if the credit goes away, I think EV's will still be around. There's still gonna be some buyers who are really interested in in in driving evs. Will it you know, will it get past the eight percent penetration rate or will it drop down a little bit below eight It could, It could, But what that means is gonna weed out a lot of competition.
The unprofitable EV makers will have to probably leave exit the market. That will leave companies like Tesla, who's profitable. And the reason I bring a Arrivian is because they have a huge backing from Volkswagen right now to really you know, to really uh fund their next affordable vehicle.
So when I look at the forwards, the gms of the world, what's their level of commitment to the electric vehicle business, Steve, has it changed in the last several years or is it still there?
Uh?
It hasn't for GM. And that's that's a good point, Paul, because I think the Trump administration will have to actually take that into consideration. You know, with the Inflation Reduction Act one hundreds you know, over one hundred billion has been spent on kind of on shoring the EV supply chain, and for these companies to actually give that up and it's a you know, can convert that to a someunk costs, it's not gonna go very well with the with the carmakers.
So you know, for GM, they've invested a lot. You know, they're rolling out cheaper and cheaper evs. Next year you're gonna launch the Bolt which is EV E Chevrolet Bulb which is under thirty thousand. But Ford, on the other hand, is quite different. They actually have retrenched, they delay the battery, the new battery plant, and then they're also you know, cutting back on a three three year row su E V SUV. But so you know, depending on the different allmakers, the different approaches.
Yeah, all right, Steve As I always thank you very much. Steve Man, Global Autos and Industrials Analysts for Bloomberg Intelligencies down there in our Princeton office. Again, it seems like the presence of Elon Musk is certainly influencing some of the transportation policy that may be coming down the pike.
Would you be more apt to buy an EV or a self driving car EV?
Okay, yes, but you know I think about it every morning I get in a car with some dude I've never met before.
What's kind of the.
Difference between self driving in that? No, it's a good point. I mean, at least when it comes to say transportation like caps and taxis. Yes, would you get into a self driving taxi?
I don't know.
He's not there yet.
Yeah, I don't know if I would. I don't know.
All right, you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Alex Steel here alongside Paul Sweeney. This is Bloomberg Intelligence Radio. We bring you all the top news and business. Were my business, economics and finance. Thank you very much. You know, it's like riding a bike until you kind a speedbump all across the world. We also love to tap into our Bloomberg n EF folks. So Bloomberg n EF Research basically powers data sets and models for everything from commodities
to power, transport, industry, buildings, AG sectors. It's all about businesses helping to finance the energy transition dot dot dot. What does a Trump two point zero mean for something called the energy transition? Joining US now? Is Derek FLAKEL Bloomberg, EF lead US policy analyst. What do we think a Trump two point zero and energy means?
So, first of all, there's a lot of worries about the future of the Insfalation Reduction Acts, the US Signature Climate subsidy program. We expect that will mostly remain intact. A lot of Republican district states are benefiting fourteen health Republicans have signed a letter saying they don't want to see those tax credits repealed hastily, and the Speaker of the House has said that he wants to use a scalpel, not a sledgehammer. So we think a lot of that
will survive. Where you're likely to see more change is regulations and some voluntary initiatives like the procurement for clean products from the federal government.
So I'm just looking. You have a great, great chart graphic here. Fossil fuels are likely to farewell on our Trump administration.
Electric vehicles are not.
Wouldn't mister Musk have something to say about the fate of electric vehicles.
He certainly would, But the question is what if Tesla's strategy going to be visa the via of electric vehicle producers. Most of the valuation comes from the dream of a robotaxi. And we've certainly seen some Bloomberg reporting recently saying that Musk is likely to put for a favorable framework on
av's when it comes to evs or electric vehicles. You know, he has said and the business and now may or may not bear this out, that Tesla would do better sort of survive the loss of the EV tax credits in a way that some of his EV competitors might not. It ultimately depends on what you and what he thinks. Tesl's interest is whether it's dominating a smaller EV market or having a smaller share of a larger EV market.
Let's move to some of the stuff that feels a little bit disier, and those are the tax credits that are part of the IRA. So one is a tax credit for carbon that's captured, how you stored, how you capture it is debatable in terms of how much tax credit you receive, and the other has to do with hydrogen. How do we feel about those two policies either staying in place or getting reduced.
So these tax credits are favored by you know, industrial interests, oil and gas interests. From what I've heard, there's not a lot of republic appetite to appeal either of those. But you're likely to see is looser regulations on both, which actually strengthens the business case for both. We might see a better outlook for both carbon castor and for
hydrants than under Trump administrations. Now, as for emmistance benefits, the market acceptance of that, that might be a little bit diceier, But nevertheless we see the economic case beouse being a little bit easier as compliance costs go down.
So I'm just looking in again winners and losers here. How much of this is a day one type of policy thing versus boy, this is just take a while. To the extent that Trump administration may want to shift gears on this energy transition, it seems like a lot of stuff has already been spent. There's a lot of investment already pink around. What's the timing do you think?
Right?
Well, it depends on what you're talking about. If you're talking about taxes, there's going to be a big tax negotiation taking up probably most of twenty twenty five to do with extending the Trump tax cuts. Seeing what happens with the IRA et cetera. You're likely to see closure on that by the end of the year. But after that regulatory changes and so forth. In general, regulatory changes, including those for existing tax credits, take usually about two or three years, give or take, and so a lot
of the stuff can't really happen on day one. You can't really shift the stiff on a dime. However, in terms of carrick, those are things that can be done more or less immediately, though politically that might not fly too well. And programs that are sort of voluntary, like again federal procurement of clean products, those could be killed more or less day one by an executive order.
What about wind and solar, so to some extent, a lot has already been thrown into that, and it's hard to see onshore wind and solar, it's harder to reconcile that being really stripped away. But the offshore wind space that has question.
Marks for me, Yeah, it does have quite a few. If you look at BNF's modeling for what might happen if the IRA were repealed at the earliest opportunity, which again we don't think will happen, but even if it did, you would see about a seventeen percent drop overall in the combination of wind, solar, and storage installations. Wind itself, though, would see a much bigger drop because it's very expensive
and tax pres dependent. You might see about like thirty percent drop in on store wind and an over forty percent drop in offshore wind, and that's only based on the financial subsidies.
Right.
Trump has a lot more control over offshore leasing as well as federal permits. There's a pipeline of projects that already have both offer leases and permits, but a lot of proposed ones don't have that yet. And there's also questions about how the even would approach litigate and against existing off for wind permits. You might see some of that fall by the wayside depending on how lawsuits go.
Derek just broadly defined how committed is Congress as a legislative body to this whole energy transition. Do they feel like it's real or how did they feel about it?
Are facilities being built in their states?
Yeah?
That could they.
Answer to that exactly from what we attracted in clean tech factory deployments. I think about ninety sent is going
to red or purple, that is swing states. So there's a lot of electoral consequences, especially if you zoom down at the district level, where overwhelming with Republican districts with the planned better labor costs Richthoor, these are the place that they're seeing the most investment, and so I think the commitment primarily is to economic development, local opportunity, as well as to some degree on storing and supply chained diversificate and de risking, and that I think is fairly
durable in a bipartisan manner.
All right, most important question of the day, Derek, for you are the unc Tar Hills. Are they even going to be able to field a basketball team this year?
Go but go up against my dookies.
Well, my wife's duke. So I'm I'm gonna not take a position on that.
Man A very good all right, Derek, thanks so much for you. Appreciate it.
Derek Flackle, lead US policy analysts for b n e F.
Again, one of my thoughts here, as.
We think about it from the energy perspective, it just seems like there's so much or there is a certain degree of just movement towards cleaner energy that I'm not sure how you stop that much lessen slow it down, but I guess there are certain things that you can do.
Executive Order day one.
Yeah, I just think it's also going to be sort of a pick and choose, right, Like I mentioned sort of the carbon credit tax credit. You could see that staying, but hydrogen feels like a real question mark, maybe more of a push into nuclear, So like there's some nuances there, And also what happens with coal if you were going to shut out a coal plant or you have a clean coal plant, Like, does that change your calculus?
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