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And it feels like the worst act test of the consumer data is definitely present. So let's get to Dana Peterson, chief economist at the Conference Board, on this data. Hey, Dana, what was your bigger, biggest takeaway? What's my takeaway from the data this morning?
Sure, definitely the headline dipped and we're kind of at the bottom of the range that we've seen over the last two years. Much of it was because consumers are a little less optimistic when it comes to employment.
Now.
The overall net from jobs hard to get versus jobs easy to get is still positive, but it's come down a lot. And even for expectations, consumers are a little bit concerned about whether or not they're going to have easy jobs prospects going forward.
Talk to us a little bit about the transmission mechanism. I mean, when do we really think we're going to see any evidence in the data from some of these cuts we're seeing here out of the FED.
Sure, well, I mean you're already seeing that mortgage rates have been falling for a couple of months now, and they really accelerated after the Jackson Hole meeting, and they're certainly going to continue to fall, and that the FED is cut by fifty basis points. So we will see some relief there in the housing market, but it's going to take time because again we learn from cashial or home price index this morning that prices are still very elevated,
and hence affordability is still challenged. In terms of the consumer, I mean, as far as we know through July, consumers continue to spend. They pulled back a little bit in retail sales in August, but overall third quarter consumer spending is probably going to be positive. So it's really what happens in the balance of the year, and we do
think consumers are going to continue to pull back. However, they're still working, and I think that as long as consumers are working, they may complain about the job market, but they still have some capacity to spend.
All right, Dana, We appreciate that, thank you very much. It's that case shape recovery, but they're spending, but just not a time. Basically at the end of the eight day Dana Peterson joining us from the conference board.
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President Biden delivering his final speech at the UN General Assembly, making the point that he was elected back in nineteen seventy two, so emphasizing his long career. But it was a wide ranging speech, Damien, that talked very much about AI, the Center holding, peace and stability, ending the war on Gaza, as well the.
Generation of leadership. He alluded to it, so you know, it was kind of a farewell party. It's almost it almost brings a tear to my eye, Alex, I.
Mean, think about it, and he said too, that is a very very long career. He's seen a lot of change within that. But definitely talking about the Center holding, talking about democracy, bringing up Venezuela and different choices that company that countries can also make as well, and he also spent a good amount of time on AI and the risks around AI and how to insulate that. So let's go from more on that with Nick Wadams. He
leads up our US national security team for Bloomberg. Nick, what did he accomplish in that speech?
Well, I mean it's a great question, you know. I think this was much more of a swan song for President Biden looking back on his career. The thing that may be most remembered obviously, as he mentioned AI, but his plea to other leaders, essentially saying, listen, I decided that my country was more important than my own political career,
and that's why I decided to step down. An admonition to many leaders in the hall who have stayed in power for decades, A plea for leaders to relinquish power if they're no longer fit for office.
Nick, what do you think if you're sitting in that auditorium and you're listening to the president, if you're a foreign leader, a foreign head of state, what's your big takeaway?
Well, I mean a couple of things. One is President Biden certainly is he made a joke about how he looks only forty, but he certainly looks a little bit older. I think though, in a hall where support for Palestinians and anger toward Israel is pretty palpable, they are not going to be terribly happy with what he said on Gaza. He did call for a cease fire now, but every indication that the US is going to continue the flow of weapons and other support to Israel, So he's not going to budge on that.
So that brings up a good point. Then who was he then talking to in that room?
Well, I mean, you know, he's trying to set an example, but I mean this is something that leaders have traditionally used to sort of set their agenda for the next year on foreign policy. But obviously, given that he is essentially a lame duck president at this point, that's not something that he's going to be able to do. I mean, you know, the other big thing that's going to be on everybody's mind in that hall is, Okay, who's next?
So what would we get Kamala Harris to continue his policies or will we have Donald Trump, who you could almost be guaranteed would essentially blow up everything that Biden did as he looks to chart his course. So you know, President Biden very clearly is not making any promises. He didn't make any promises in that speech. Wanted to use it essentially as a valedictory for his own presidency.
You know, Nick, I do find it interesting. You know, it's the UN General Assembly. Obviously he's going to play the foreign policy, but it's what wasn't said, and what wasn't said for me is the US economy and lieu of this consumer confidence data and some of the recent economic prints we've seen on the payroll side. You know, is there any read through in your mind the fact that he completely didn't even touch the state of the US economy and inflation.
I mean, you know, very very brief mention on on the US as like a global leader and the and the powerhouse in that way. But I mean, you know, I think, for one thing, this is this is a speech where President Biden very much sees himself as a foreign policy president. He's he's explicit about understands very well who who his audience is, and he doesn't feel like this is a place where he wants to make that
case the foreign policy. He's said so many times that foreign policy is really a defining element of his own career. He mentioned that at the top, so I think it was probably more a situation where he was trying to read his audience and play to what he sees one of his biggest strengths. I mean, when you look at the campaign when he was still in the race, he was talking about all of his success and foreign policy and not even really hitting the economic issues as hard.
So this is something where he thinks he can take a victory left essentially.
All right, Nick, we really appreciate that. Thank you very much. Nick Wadams. He leads our US National Security team for Bloomberg News, commenting on President Biden's a final speech to the UN General Assembly.
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I mean, I'm waiting, Damian, I'm waiting for the actual stimulus from China.
Well, you know, I think what's interesting this time around is the announced it all at once. China doesn't normally do that, and China doesn't normally give you forward guidance. In this time, the PBOC governor actually said he's probably going to cut rates before the end of the year. Again, they don't often do exactly. China, well, the fiscal obviously is what we're all waiting for, but I don't even
know if fiscal stimulus is really what we're waiting for. Again, this comes down to the fact that unemployment is so high, there so much wealth destruction, So people just don't want to spend. It's not about them not having the capacity to spend outs, it's about the willingness too.
Okay, so that monetary isn'tenough, But we definitely look at commodities kind of flying on that news. Let's get more with Cali Cox, a chief market strategist at Ritholt's Wealth Management. She joins us, we're just talking about China and sort of that helping the commodity market today. Materials are flying high within the S and P. Freeport is the best performing stock on the S and P. Is this enough from China to really get things moving?
So sure, Alex, I mean, China isn't a tough spot right now, and I mean, like you mentioned, there's a dead situation going on over there. Unemployment is still quite high even though there is this capacity to spend. So it's kind of more of the same from China. I'm not sure what it can do on the commodity side of things. I mean, obviously China is a major player there, but from our perspective, I mean, emerging markets are still you know, quite attractive given the slide and the dollar
that we've seen. But you know, China is the big weak spot, and unfortunately it's the biggest part of emergent markets.
Callie, I've read your latest note when you're talking about the tug of war between wages and prices and you reference the big Mac.
Now, I went to McDonald's yesterday.
I paid fifteen dollars and eighty three cents for a twenty piece McNugget that doesn't include the sauce.
All to us.
About big nuggets.
They were really good, actually, but they're smaller. There's the mcdugget's even smaller. So what's the read through from the price of a big mac today relative to years past?
Small?
I have to give a shout out to the economists, because the economist has been compiling historical prices of the big mac.
Since nineteen eighty nine.
But it gives you a really interesting use case on you know, measuring exactly how much daily purchases. Now, the big bag is not a daily purchase for me, but
for some people it might be. And it's an item that we're all familiar with in the economy, and it can also show us how the economy is becoming more affordable, even though the price of a big Mac is at an all time high, and you know, a lot of things in our life are quite ex defensive compared to wages, and the big Mac has actually gotten a little cheaper, a little more affordable based on the average you know, wage per hour worked, you know, over the past year or so.
So, Kelly, based on that, and then the consumer confidence that we got today, how does one invest in that k shape consumer recovery when we are, though on a path of significant rate cuts.
Consumer confidence today was actually quite worrying. Yeah, I just read the details, and we obviously saw a huge shop in confidence. For me, the worrying detail was the fact that we saw a drop in the evaluation of present conditions because for most of the cycle, and to remind everybody, confidence is a combination of what people feel right now and what people are expecting in the future. That's how
the Conference board measures it. But the number that we got today was mostly driven by a drop in the evaluation of present conditions. People don't feel well about what's happening now before this, so it was mostly you know, souring on expectations. But the fact that president conditions and the fact that consumers are worried about what's happening now makes me a little more worried about the present situation
of the job market. And you know how able people are to afford these things, even though we've seen a pretty solid job market up until now.
Calori.
History doesn't often repeat itself, but it does rhyme. And so my question for you is, when you and Barrier in the war room at Ridthole's Wealth Management, you're looking at previous rate cutting cycles, and I believe you highlighted eighteen of them. I'm just curious, what cycle does this one most remant?
I mean, what's most reminiscent to you? What does it most look like.
I'd like to think that it's a rate cut cycle that won't overlap with a recession. And so far, so good. Even though I just mentioned that consumer confidence data has me a little worried right now. So, yeah, when Barry and I are looking at rate cut cycle data, you know, we usually note or we usually separate it at two. I mean, rate cuts that happened out of desperation and
rate cuts that have happened out of celebration. More policy adjustments, because the FED has reached its goal on inflation and unemployment, so it can take policy back down to normal. And so far we think the latter case is what's going on. I mean, the job market, of course is stalling, but unemployment is still quite low. So right now we feel pretty confident that the FED can take this over the line. We just hope that the economy can hold out for a.
Few more months.
So does that mean by midcaps, small caps or where does that land you?
Well, Alex, we really like small and mad caps. We think that there's a lot of opportunity there just because they haven't been able to keep up in this full market, and you know, speaking of emerging markets, small caps are more domestically focused. So if you believe that the US economy is the cleanest shirt in a dirty laundry pile, then you probably do want to be looking at the
small and meg paps. But overall, you know, as long as the economy stays okay, as long as the job market can make it through the next few months, then we think that there are a lot of good reasons to be buying into this market as long as you focus on the right things.
All right, Kelly, we appreciate it. Thank you so much, Kelly Cox joining us there for Matholt's wealth management and kind of setting us up. But you know, the consumer confidence data, if it continues to deteriorate, right, had to small caps and make that good investment.
How many big macs do you think Calli's really tried in the last few years. I mean, I wonder if it tastes the same today as it did ten years ago. I would bet even with the secret sauce and everything, it probably does.
Okay, So what does that tell you.
Well, it tells me that you know, somebody's making fat margins I e.
McDonald's, right, but probably to pay Paul.
What did they just change the ingredients? Because you change ingredients and that's cool and you get fresher stuff. We're using that they're trying to.
Like get I know where you're going here. It's not farm to table with McDonald's.
But you know it did taste good. I mean, those McDonald's were delicious.
Oh twenty piece nuggets. I don't even know they had twenty piece nuggets anymore. I was like a double cheeseburger with Burger King tons of cheese.
Anyway, you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business Act. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play, Bloomberg eleven thirty.
Alex Fielong, Sid Damien Sas Hour. This is Bloomberg Intelligence Radio when you're broadcasting to you live from the Earthshot Summit right here at the Plaza Hotel in Midtown Manhattan. The summit celebrates innovators who are trailblazing solutions to repair our planet, and that event is co hosted by Bloomberg Philanthropys. We have a great guest I lined up for you, sort of connecting the dots between how we go green and carbon neutral and how we also pay for it.
Joining us now is Nadia Calvino, President of the European Investment Bank EIB. European Green Deal is huge. There's a set of policies that look to meet the European Union climate neutral by twenty fifty. You're looking to mobilize over one trillion euros in order to do that.
How's it going, Yes, well, it's going well, it's going well. We are on track to meet the target of one trillion euros in investment in green finance. More than fifty percent of our our annual investments go to the climate transition, to the green finance, so as to make it a success, a European success, a global success for all of us.
But why do I keep hearing then that the europe has more at the stick approach and the US has the carrot approach with the IRA. How did they differ?
Well, I think that we have a shared endeavor, you know, which is to ensure that we do this green transition, that we move to an net zero economy, and that this is profitable. Well, my side of things is the carrots. Actually I am the investor, so we are probably we are the largest multilateral development bank in the world. Maybe people don't know. With a six hundred billion balance sheet, ninety percent of the investments are done in the EU,
where we are the largest investor in renewables. We're probably one of the largest investors in renewables in the in the whole world, and right now here in the UN General Assembly. Around the General Assembly, I'm having lots of meetings exchanges to try to bring that agenda forward with a global perspective.
Well, Nadia, I mean, renewables is a very broad topic, solar, wind, water, new nuclear. Talk to us about where you're deploying your balance sheet. I mean six hundred billions, a lot of money, well.
More than fifty percent, as I said, is going to climate finance. And this is sustainable infrastructures, This is sustainable transport. This is also renewables, wind energy, greeds, solar, and also new fuels, the fuels of the future, for example, green hydrogen. We're supporting very innovative, large projects, also large traditional infrastructures and dynamic startups that are really going to be the ones finding the technologies, the breakthrough technologies for all of us.
I mean we've seen with hydrogen though that a lot that it's hard, that green hydrogen particular is quite hard. I mean Germany had a sort of backtrack from that, in particular with the war in Ukraine. In addition, like Oorsied dropped and had to ditch out on a hydrogen project. Can you do hydrogen profitably? And how do you do that?
But we have to, we have to because it is can right now, well we are right now. We're investing in a number of projects in Europe which are more having to do with industry hubs. So we are greening industry, highly polluting, highly energy intensive.
So like as the men industry.
That yes, and still you know, all these large industry so we are we're seeing, for example, close to port to Report in the south of Portugal, we're going to have a green hydrogen hub, so that's very close to traditional industries and we're helping them become green and also profitable.
Likewise in other parts of Europe. You know, we are at the early stages of these new technologies and it is only normal you know that some projects fail, that some projects are succeeding, and that's that's why we are. The European Investment Bank is a public investment bank to take the risk, to make sure that patient capital long term investors are taking those risks. So that also we mobilize private capital and we make this a success.
Well, you know, other multi level finance institutions, I mean development banks out of for example, China, Korea, et cetera, have had a very poor track record of deploying capital profitably. And you know, I know the IB is different. I know the World Bank Group is very very different. And I know we're talking about perpetual capital, perpetual investments. But the end of the day, you do have to get
a return on your investment. So talk to us about which sectors within the broader renewable space, within the border climate space carry the highest return on investment from your perspective.
Well, actually, we are very profitable. Let me be very clear. The fact that we're a public bank doesn't mean that I don't have to deliver for a shareholders. So around two billion euros we had in profit last year. We've been profitable since the bank, since its inception. We have a very low, very low level of non performing assets. When I say very low, I mean like zero point four percent of our assets. Huh. So it is a
very profitable bank. And what we have is a very large balance sheet and very balanced portfolio with large infrastructures traditional infrastructures which are very profitable, lower risk and also highly risky endeavors like innovative startups or large investments into new green technologies. And that's what's allowing us, I think, to make a difference in making projects bankable at the end of the day.
So what have you noticed in terms of if you support a project that, does it bring in private investors in private capital.
At the end of the day, it does absolutely. You know, the European Investment Bank is considered to be a reference in terms of technical expertise in some areas for example green, for example health. So once the EiV says yes, I'm going to invest in this project, immediately a number of investors say.
I join, naddie. I'd love to ask you a question.
I mean, in my world, the emerging market space, there has been an absolute explosion of sustainable finance vehicles and mechanisms, you know, green bonds, clean bonds, you name it.
I'm curious to hear your thoughts about a lot of that.
I mean, a lot of sovereign nations, a lot of countries are issuing dead under this green bond umbrella.
You know, do you believe in that?
Do you think they're just green washing or are they really deploying that capital in a clean and efficient way.
We have to ensure, indeed that the green bond standards around the world are not green washing, and that that should be a top priority. Otherwise, you know, once you lose the credibility, then you lose everything in capital markets. I don't have to explain it to you. So that's why I think we have a very important shared interest in having global standards. You know, the taxonomies that are being developed in different parts of the world. In Europe
has been a pioneer in that area. Also, the European Investment Bank, by the way, has pioneered green bonds, and we have to make sure that those standards are met and that green investments are really green, so that we make sure that this is providing sufficient finance to close the investment gap.
How do you offset your risk? How do you offset risk when you're taking on riskier projects.
Well, we have a capital base, but generally what we do is that we have riskier and less risky projects and we mobilize our capital in a very wise manner. You know, sometimes our shareholders and say you should take on more risk because that's what your capital is for. But I think that we have a relatively good balance in terms of you give me.
A balance on that, like what would be considered a low risk project, what would be considered a high risk For example, well.
An infrastructure in a European country, that is a low risk project. When we are building trains or rolling stock or or a metro or port. I mean this is I mean we are lending to a sovereign state which has a very high rating and this is our shareholders. So investments within the EU are considered to be generally lower risk. Or for example, we do also through the financial sector, we do lending to SMEs in Europe that
is very proable, profitable, lower risk. Then if we are investing in a very large project one billion, two billion project in green hydrogen as you were seeing, you know, I'd.
Like to take a variation on that question.
That's important because you're right, it's a lot of these small medium enterprises. They're the ones who are actually proactively you know, taking risk in the market. What sort of risk hedges, transmission vehicles, carbon credits, offsets can they take advantage of it? I mean, what's available to them to help offset their risk in the space.
But what we do is we provide guarantees and portfolio guarantees or other sort of financial support to the banks so that they can lend to SMEs with lower interest rates. That's basically what we do and again that allows us to reach a large share of European SMEs. And there, for example now investing in green technologies energy efficiency thanks
to the support of the European Investment Bank. I don't know if many of them know it, you know, because they go to a bank, a commercial bank, and but you know, although they are they have to signal in their loans that this is supported by the European Investment Bank. I don't know if they always do. But the fact of the matter is the EiV is one of the key elements that is driving the European economy.
Where does natural gas fall into this? For you guys, well, we have.
To get away from natural gas.
Right if need it.
So it gets hard, I understand, and we all understand. We are in the midst of that transition. But if there is one thing that we have learned due to the war in Ukraine is that we cannot be dependent on Russia. And starting with Russia, but other parts of the world, be it talking about energy cheap, other elements of the of the supply chain, critical row materials. You know, Europe has to stand up on its two feet and become independent when it comes to energy. That's that's a clear idea I think.
You know, I want to talk about economic disparity, but more in terms of the type of partners you choose to go into business with, right the types of banks, you know, I think of the Brookfields, the Blackstones, the macquarie Is, you know, these big infrastructure investors, the Morgans and analysts.
You know, does that matter?
Like, you know, can you partner with smaller banks, medium sized banks, international banks? I mean how often do you do that? Or do you kind of stick to the people you know and love best.
No, we partner with a lot of financial institutions around the world. Of course, we do a very serious check when it comes to not only the financial strength of the counterparties, but also compliance and reputational risks. And also we are investing through funds, investment funds. We have a subsidiary, the European Investment Fund, which is partnering with private investment funds to then mobilize these other sort of venture capital and quasi capital investments.
What's the thing that you guys are most excited about right now, either some kind of technology or a certain type of project that you feel like has real potential that can really unlock other opportunities.
Well, I think there are two areas where let me focus on what I have been discussing here in New York, because back in Luxembourg there we discuss many others.
Going on behind closed doors. Here.
Indeed, that's why I'm going to give you a sneak review. Now we have been discussed. There's nothing so revolutionary or surprising. But actually I've been discussing. We've been discussing four main subjects. Green, climate, health, that's a big issue. I think that there's a lot of interest in health. Multilateral development institutions working as a system.
We're working better than ever. We're cooperating with the World Bank, African Development Bank, Asian Development Bank, and we want to really be giving as much value for money to our shareholders in supporting the global economy and investment. And then fourth points has been women. I think that there is also a lot of There are lots of things going on around the world in terms of partnering and networks of women, and I think.
We have to support that that endeavor aal so which definitely ties into help also at the same time. All Right, Dadia, thanks a lot. We really appreciate that was a wonderful sort of beneath the hood look on how you finance all of this. Ilmnik, president of European Investment Bank, thank you so much.
Thanks to you, Bye bye bye.
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.
Alex Deo Launchai Damien's That's our Possmuni is in Ireland today. We are here at the earth Shot Summit right here at the Plaza Hotel in New York City. The summit celebrates innovators who are trailblazing solutions to repair our plan at The event as co hosted Boomberg Philanthropies, and it also brings together world leaders of all ilk to kind of get together and try and solve many of the crises that we have in our world today, in particular
climate and one joins us today on set. Robbie Menon is Singapore's Climate Action Ambassador, but was also the former Monetary Authority of Singapore chief, and he joins us now right here on set. Robbie Danien's really excited to talk to you because he's an emerging markets credit guy. So let's just start with some ego for a second. What did you think of what China did today?
Sorry? What did China do today?
Yeah? Right, it's a great point.
Let's talk about the nominal effect of exchange rate in Singapore. Now, I'm just kidding seriously, you're here, you're in these closed door meetings, you're at this conference, you're talking about climate change, you're talking about economies. But your former role as the head of the Monetary Authority of Singapore, you know, you set policy. What is that like in a world now that the FED has decided to cut rates by fifty basis points?
You think Singapore comes next.
And China unleash is a stimulus package that's it?
Well, well, I've been a bit removed from that scene for quite a while now. So but if I were to reflect back two years ago when we were all facing a surge in inflation globally, and the conventional view at that time, which I subscribed to, also was that given how low interest rates were and how easy and accommodative monetary policies have been for ten years, the catch up to tighten rates to bring down this inflation is
going to be unprecedented. And indeed, the heights in rates and the tightening of monetary policy, including in Singapore through the exchange rate, was quite significant, and I thought this was going to come at the cost of a severe slowdown in economic growth and rise in unemployment. I'm talking globally, right, and this has been the case in all previous instances. I think looking back, we've done not too badly. We've
avoided major recession in the major economies. There hasn't been any sizeable increase in unemployment, the labor market has been quite resilient, and surely, but surely, you know, we've been bringing down inflation. I think this is a credit to many of my ex colleagues in the central banking world. I will not comment on specific policy moves, which as the one they made recently, but I think we should step back and see we actually did not too badly. It could have been much worse.
To be able to ease this early, But.
That itself is the right move.
I would not comment, but the fact that we were even having this conversation or easing about stimulus, when not too long ago we were fighting inflation. It has come down, so I think this has been quite remarkable.
And this also brings sort of the question of climate action and financing that part of the market as well, because part of the conversation here in the US with the Inflation Reduction Act is that that in essence is inflationary, and that the more money that every country spends on greeting stuff, the more you're going to create sort of an inflation bubble. Is that true? From where you sit?
I think that that is going to be at best quite short term. Some stimulus through any new investments going into an area of scarcity will create some price pressures and demand pressures against limited supply. But the objective of the Inflation Reduction Act as it is, as is the objective of similar packages in every other country, is to expand the supplying capacity. Is to expand the supply capacity
for renewables, for cleaner technologies and so on. So yes, in the short term that capacity has not increased, you will get momentary increase in inflation and price pressures as you put in demand. But when the supply capacity increases, that stabilized. So as with any industrial transformation or restructuring, there will be short term price effects, but that should even out once a supply and demanded back. In one thing, there's anything inherently inflationary in these packages.
In Singapore's key position along the malacostraight, it sits between two of the largest polluting countries on the planet, that being China and India. Talk to us about your location in the world, your geostrategic location. How are you addressing those two nations their cability to enact climate change.
I think both China and India have huge potential to address a climate challenge, particularly with respect to mitigation and renewable energy. The countries are large. We often forget that China is installing more renewable capacity each year than the rest of the world put together. India's a close second. So these two countries, in terms of their geography, are well endowed to deploy clean energy, but they're going to take time, because what we forget is that energy demand
in these countries is also increasing rapidly. The energy consumption per capita in China and India, it's a fraction of that in the West, and there are still many villages without access to electricity. So even as they install solar capacity, they're having to build cold plants and keep their fossil fuel plants running to meet that, which is why they're going.
To take longer.
But surely they will get there because of the inherent capacity for renewable energy. Actually, where I worry more is Southeast Asia because similar situation, rapid growth and energy demand, rise of middle class urbanization, people having access to electricity.
In Indonesia, Philippines, Vietnam.
Yes, all the countries around US, including US, we are in many ways alternative energy disadvantaged. Singapore particularly so because we're a small island city state. Imagine New York, you know,
deploys clean energy entirely within the city. But even in the countries that are relatively well endowed, they do have challenges with great for instance, is forested mountainous Laying those transmission lines is not easy, not straightforward, and the distribution of renewable energy capacity is very uneven geographically across Southeast Asia. So I think that's a very bigger challenge might be.
What about financing? We have like thirty seconds left. What's the biggest hurdle to financing all of this? Right now?
There is enough private capital in the world to solve the climate crisis. There is enough financing if you look at the annual flows of financial assets well in excess of the funding gap. The problem is you need to find bankable projects at appropriate risk return metrics, and this is where you need blended finance with public capital coming in to catalyze private capital. That synergistic combination is what we need and that will be enough to solve this.
All right, Rabbie, it was great to check in with you. This is a great conversation. Please come back at Rabi man in a single or as Climate Action Ambassador plus a former Monetary Authority of Singapore Chief.
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Let's get into the market here, guys, you're looking at excellent. Stock is up by four tenths of one percent. California sues the company over plastic pollution and recycling myth. But what it does bring up questions is does recycling actually work? And how do you scale it? How is it profitable?
How do you do it? Greenley while joining us now at scott Levine Bloomberg Intelligence senior industry analyst, and he joins us now to discuss you just had a recent note out that talked about waste companies and how they're managing and expanding their recycling operations.
Is it efficient? Is it good?
Yeah, it's an evolving story. So I think there's a lot of refe clignment that needs to take place for this to become a larger business. But yeah, this is probably one of the biggest growth areas within the recycling and more broadly speaking, the solid waste management business in general. So yes, is the is the answer to your question?
In summary?
I think what needs to happen.
Great to see you, Hey, Hey, you doing DamID? No, I was going to just I was just gonna how you doing. I was just going to ask you.
I mean, look, let's take a more broader approach to the question here about recycling, right, waste management the companies that you cover. We have an election coming up in November. What works best for your sector? Democrat Republican? What's going to be better for waste management in the broader sector at large?
I think conventional wisdom is that Democrats are better. The greater regulation requires greater sophistications large companies that generally have greater sophistication when it comes to environmental stewardships. So, but that said, you know the I think it's not a really different answer in either scenario. There are some specialized topics within the environmental business where it does make more of a difference, like the cleanup of pfas for you know,
for one example. But but by and large, Democrats generally are better for the environmental services industry. And I think that's true here.
So Democrats are better for the environmental services industry, But what's better for their stock price?
Scott?
I mean, is that really like the mechanism, the transmit mission mechanism, the fact that a you know, a democratic power power structure is going to basically allow some of these companies to extract a higher margin will not really translate through into the stock price. I'm just curious to hear your thoughts on valuations.
Yeah, well, the wastetocks has done very well this year. Wastetocks tend to do well. Uh, they're late cycle and light cyclicals, right, So you compare that to my energy services coverage universe, and the waste stocks are blowing them away. They were huge out performers in two thousand and eight when the economy was cratering, and they were huge underperformers when things came mooring back in two thousand and nine. So a lot of it kind of relates to the
macro as far as the solid waste companies concerned. And the valuations are at high levels, but I think sustainable given the fact that the industry is doing well. Earnings performance has been good. As inflation has come in, cost inflation has has declined at a faster pace than pricing, and so margins have expanded. And so you're seeing a lot of good things happening within the waste industry overall, and that's led to very strong stock performance in twenty twenty four.
What are the household waste management companies.
So we've got waste management and Republic Services at the top of the list, waste connections as well. It's really an oligopoly. You know, the big three probably have about forty percent market share. I think publicly traded stocks generally have fifty percent market share. Another twenty percent or so is with municipal operators like New York City Sanitation Department, And of the thirty percent are your mom and pops,
and they're always going to be out there. But it's a fairly consolidated industry, and it's fairly orderly in terms of everybody playing well in the sandbox together. Pricing discipline generally is held throughout the industry, and that's a lot of the reason you've seen the stocks do so well.
I wonder if you can help me understand also globally, especially as it relates to China, who we know is a huge consumer of commodities and goods worldwide.
You know, talk to us about you.
Know, solid waste recycling and recycling more broadly speaking outside of the United States, I mean, what companies dominate that sector.
Sure, I'm going to use as an opportunity to pivot to the recycling theme, which you mentioned at the outset as well. And so China, you know, historically had been the big dryver of the recycling business for the waste companies. The reason for that is because a lot of the biggest, the biggest piece of the recycling mix has been big brown boxes, and the demand for that has historically come
from China. China takes our big brown boxes and they send them back with TVs or consumer electronics, and so they've used the US waste industry or recycling more specifically as a source of packaging. Okay, about five years ago, China really cracked down on recycling and in fact banned imports of US brown boxes UH as an initiative to really kind of grow their own recycling business UH and also source some of their fiber from other markets.
UH.
And so China has become less significant to the US recycling business ever since. The US has really had to diversify their exports to other markets like India, other sub in Southeast Asia as well. So China's become less of a driving force within recycling broadly speaking within the last five years.
All right, Scott, Scott, we appreciate it, Scott Levine, joining us Bloomberg Intelligence and covers oil services as well as the recycling guys, so all the big players.
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