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Welcome to Bloomberg Markets. Before we get to that we have the bank of canada. Guy a bit of a nonevent. 5 matching. Im curious to see what ted macklin has to say though. He cannot make the same mistake he made in january. He cannot say we will pause, i think they will avoid that this time around. It will be interesting to see if the ecb and the bank of england make the same decision. How they are hawkish but keep pausing at the same time. We are near the top of the cycle on Interest Rate. But the sentiment is strong. Alix yields are popping lets get to that with michael mckee. Mike it matches the Third Quarter gdp. Services come in at 54. 5. That is up from 52. 7. New orders rise 50 75 57. 5 from 55. Unemployment rises but it is too late to use that in terms of forecasting the august payrolls but it it was 54. 7. Supplies are easing under the weather a little bit at 48. 5 but 48. 1 was the previous. And prices paid 58. 9 compared to 56. 8. Questions asked about if we see the economy further reaccelerate does that lead to higher prices . That is something they are keeping an eye on. At this point, it looks like on the services side, things are pretty good. 54. 5 is a good headline number. Guy it is amazing this data is sensational considering where we are in the rate hikes we have already had. Sensational numbers. This economy is cracking on and really doing business. Thank, mike mckee. Analysis with ism services emi pmi chair. We are talking numbers. These numbers are strong. Give me your analysis on how we should be reading the data. Looking at the four subindexes that comprise the deposit ever up month over month. It came in at 54. 5. That was driven by employment. Employment remains a mixed bag for many. Some of the industries that comprise this sector specifically in combination and services had the largest gains and they have difficulty backfilling positions. Alix is this like the last gasp of summer . And we read any seasonality into this . Anthony i think this is actually better been what we have seen historically. We see usually a waning in the summer months when people are on vacation. Theres not as much hiring until september which is typically the pivotal month going into the last quarter. What we see now is this is even better what weve seen prepandemic levels at that threshold. Guy and i am looking at the prices paid index 58. 9. Has the fed got a grip on u. S. Inflation yet . Anthony it is a great question. One of our respondents commented on that and said they thought the fed was doing a great job of staving off inflation with the Interest Rate of looking at how prices have moderated from where we were near 80 ever months ago. Still, prices are increasing but not at the levels we had seen in the past several months. Alix so is the market too hot or just right . That is a question. Dollar up, yields up, we see higher odds in november rate hike coming into the story. This is a different story than pretty much anywhere in the world. Guy that is why the dollar is doing what it is doing right now. Alix right. Guy any other central banker right now you do not have this problem. This is a u. S. Problem and the rest of the world is looking on in awe as to what is happening. Is this to you and economy that is free accelerating, the rest of the world feels like it is going down, the u. S. Doesnt. Anthony all indications are that we are going to continue on this path. We had seen that from the respondents indicating this when we did our semiannual forecast back in may. There was no talk about a recession. Everyone was talking about the first half and all indications are we are on the track right now. Alix one said it looks like we found a trough in manufacturing. We do not know how long we will be there, but we found a trough. If that is true, do services need to roll over to meet manufacturing or can manufacturing about services . Manufacturing move up to meet services . Anthony i think it is manufacturing. They usually beat into and out of recessionary periods. We hope they will start to see them get north of the 50 basis line sooner rather than later. Manufacturing does give us that forecast as to what the economy will look like down the road. Guy cannot i just come back to the what is happening with the labor market . Clearly companies are still struggling in the Service Sector to get to labor day one but other data indicates that we see people come back into the labor market. The overall labor market is growing. We saw the jobs data last week indicating that maybe we are actually coming more into balance. Do you think, how consistent is your data related with the other data we see. How do you think these lineup with the moment . Are your numbers consistent with that or are your numbers telling us Something Different . Anthony they are fairly consistent with that. The respondents is a mixed bag. We have some company saying you are holding back and it is an expense and we will see how the economy and our business goes. It is the industry in the sector whereas other industries are not saying we cannot backfill back fast enough and we do not have a work enough workers in hospitality and food Retail Industries they cannot find workers as well as other industries can. Alix heres a list of worries when they look at the consumer, Student Loans ticking up, excess savings being run down, and there is an article on the terminal talking about daycare being an issue. 70,000 daycare closures could really impact the workforce. Does this ring true on your respondent . Today highlight any of this as risk factors . Anthony not at this juncture. I go by all the comments that we received, right now, i am not seeing that that could change next month. All indications are what they are mostly concerned about is inflation and the longterm outlook of the economy. Alix thanks a lot. We appreciate ism services pmi chair. Dollar higher, yields higher as well. The weakness we were waiting for is not coming. Guy the u. S. Economy continues to defy expectations. These are such strong numbers. The data are strong. Theres a great piece on the bloomberg talking about how the fed will have to upgrade its gdp forecast next time around. A look at the rest of the world, is it a completely different place right now. The fed will have to be higher for longer. You have to seriously ask the question of whether the ecb will come before the fed or the bank of england will come before the fed. These are Central Banks that come in late and now potentially come in earlier and we talk about the dollar in the moment the impact may be still has not been built yet. Alix and with a market moving on november hikes, we let price out cuts in 2024 . Is that we are facing now in the data . Guy how can the fed signal cuts at the same time raising its gdp forecast . At the same time all this data points to the fed raising its forecast. That has to tell you the cuts are further out, doesnt it . It logically indicates that. But i wonder whether the ecb has a real problem and i have to start fighting back against the cut narrative. The bank of england i think the same thing as well. Alix or is it just normalization . Or long and variable lags . He was just talking about the rate rises to come. Will be still be in that narrative for a while as well. It will be interesting. Guy yes all of his comes back to the dollar. You recognize the dollar just maybe it is just getting going. Alix i dont know anything about pop culture. But how do you deal with the dollar. Howdy we will address that with senior Portfolio Manager at Wealth Enhancement Group coming up next. This is bloomberg. the first law of thermodynamics states that energy cannot be created or destroyed. But it can be passed on to the next generation. when you look at the broad commodity market. Commodity prices are rising. Higher oil prices. Spike in oil and gasoline prices. They are both very strong it may be a spike in demand. And you start to see Inflation Numbers take up. Pressure on inflation. The last thing consumers need at this point in time. It looks like inflation bottomed at 3 in june and it will start drifting toward four. If we see Higher Commodity Prices that should eventually translate into higher yield. We see higher yields for a little longer. The reality is it is difficult to achieve a softer landing. Bad news may not be becoming bad news as we move forward from here. Alix those are Bloomberg Television guest weighing in on the challenges of our landing a soft landing. And it comes to the question of the day how do you deal with the dollar . We have avako yoshioka senior Portfolio Manager at Wealth Enhancement Group thank you for joining us. How do you deal with the dollar . Avako it is difficult with the expectations that the dollar could be weakening toward the end of the hiking cycle but the u. S. Dollar strength is a relaxed reflection of the yield differentials across the globe and the surprising economic strength we have seen today in the ism services number. Guy do you think this is it is a symptom in many ways of a u. S. Economy doing better than everybody else. It is also the sense of the economy that has the potential to generate inflation. Look at the prices paid with the ism data, do you think the fed is done . Anywhere near cutting . What you think the outlook is . Avako in terms of the fed, there will continue to be they will continue to be datadependent. Well they pause in the upcoming september meeting, probably. But i do not think they put take future hikes off the table just yet. I think they want some of the cuts priced into the market for next year to get the price out. And to not expect any cuts in 2024. That is still yet to come and needs to be reflected in overall market pricing. Alix i want to point out him remit bay kkr upgraded his growth forecast. He says the gdp growth will surprise to the upside. This is before we saw a superstrong services ism Goldman Sachs tracking number higher for the third and fourth quarter. How do you play that . Is the dollar a wrecking ball that will hurt multinationals . Do you play it on a u. S. Basis even though it is already priced in, what do you do with that . Ayako yes, you have to stay with the u. S. And lean into the economic strength we are seeing. It will hurt with the translation from a revenue standpoint, however with the multinationals that especially with the multinationals that have done well. However, we think the u. S. Has room to grow and with a lot of the companies that make up the Public Market and publix talks are rhymed or additional growth public stocks are primed for additional growth. Guy lets look at how everyone responds to this. Where is the surprise that could upset this narrative . Is the japanese getting rid of yield curve control and stepping into the market . Theyve been signaling that overnight. Is that the chinese coming out and delivering massives and meal is and that changes the case around the dollar as well . Where does this surprise or upset to the current narrative, we got used to narrative changing quickly, will we see another one . Ayako im not sure if we will see another one, but these are the concerns everybody is watching. Especially the one from japan. We are at levels in terms of the dollar cross currency levels that prompted japan to intervene in the past. We have not seen these levels in many years. This kind of additional potential relaxing of the yield curve control spooked markets at the end of july. We will see of all of the transmission mechanism in terms of Monetary Policy currencies and yields and we will see how it turns out in the next coming weeks. Alix it feels like if you front run it it does not pay off either. So i look at the sectors that have done well in the s p that have done well in the last three months it is purely cyclicals. What you still like and that group . Ayako within industrials we like the quality names. In general quality names with companies with strong Balance Sheet and free cash flow. Penny well comes to mind with the Industrial Complex as one of the strong diversified companies with good free cash flow. High quality exposure to some aerospace that continues to do well. We like honeywell and we like energy names like chevron and exxon they continue to perform. Gasoline with higher prices and refining margins will continue to go higher. We like cyclicals. On a longerterm basis, it is hard to judge right now given the potential slowdown that might occur in 2024. However, if you can ride through that, those are good names to continue to be on any sort of downturn in the economy. Guy Ayako Yoshioka at Wealth Enhancement Group thank you very much. What is happening with the u. S. Industrials is amazing. You look at honeywell and what is happening with deere the Big Industrial company they should be cyclicals and the economy should be slowing down but is not they are outperforming. The u. K. Has a flag that they will rejoin the eu Horizons Finance program. This is a huge deal for the u. K. And basically speaks to the idea that relations are starting incrementally, slowly, to normalize with the eu. This is a big step forward. Its fascinating to see that happening at this point. We will see what happens going forward. Clearly with the u. K. , the data, i know you like to rain on our raid, the u. K. Data is not as bad as it surprises upwards. The u. S. Data surprises down and the u. K. Data it revises up but nevertheless you look like you are on a different page right now. Alix we really do. Guy i hate to say it. Alix i know you do it is painful. But the stronger we are in qs redoes that set expectations too high for q4 . I can go back and say i made this argument for the past year and it did not pan out so there is that also. Guy the u. S. Looks like it is in a different place. The upside is that maybe you will come over to europe and a for the holiday in france once again. Alix not with the jet fuel prices but that is a different story. Guy that is definitely true. We talk about next we talk about san francisco, lost out in london, singapore, dubai, because of hostile u. S. Government policy this is according to the cofounder of the crypto pioneer chris larson. We will talk more on that next. This is bloomberg. [mo] if youre thinking about going back to school, this is for you. I ended up spending less money my entire time at snhu than i did in just one year at my other university. [juan] my time at snhu has given me more confidence. Now i can go for that promotion. If youre ready to go back to school. You can do it. Southern New Hampshire university has changed my life. And it can change yours too. [announcer] visit snhu. Edu. Alix it is 23 past 7 00 on the west coast. Silicon valley starts its morning. It joining us is ed ludlow. San francisco was supposed to be where the crypto world blossomed. You spoke with cofounder of ripple, chris larson. That is not how things panned out. Ed the conversation was supposed to be about how he fixed it but we changed to lamenting how the regulators killed the industry in the city and it lost his title as a Blockchain Capital of the world. He had sharp words for gary gensler the chair of the sec this is what he said. Chris genslers decision in gauging this by enforcement. Rather than giving clear laws, he likes the lack of claritys though he can go after anybody and make up the rules as he goes along true bullying. That is not the american way. Ed that is pretty sharp calling the chair of s. E. C. In the regulator a bully. But his point was they are trying to fix the industry through the court and not regulation. He gave me the stamp that if they had not killed the industry here that the postpandemic economy here would be better. He see rates for curve Marshall Real Estate would be about less than what they are and they are currently 32 . Guy lets transition to what is happening with apple. How big of a china problem does apple now have . You have a new iphone that people will look at comparison to an iphone. And they have a government working for us saying you cannot use those. Ed the Central Agency has given instruction to get rid of your foreign phone, not just apple but the nondomestic brand phone and make it a domestic brand phone. We remind the audience a year ago that bloomberg reported the Chinese Government issued a similar directive for personal computers. They gave a twoyear deadline for all Government Agencies and state backed corporations to transition domestic hardware to a personal computer. Next week we have the apple event on the 12th. We remind ourselves not just the proportion of revenue that comes from china, but so much of this is there. It is a worrying time for them and it will be interesting to see if they proactively address this next week. Guy thank you very much indeed. Bloombergs ed ludlow you can catch him and Caroline Hyde on Bloomberg Technology coming up in 90 minutes time. They will have more on that interview with ripple executive chris larsen. We get. The data that we got out o will join us from citizens he is the ceo. Up next tune in for a glimpse of an event in the business world. Now we take you to ges leadership summit taking place in new york city. These are three very different comparisons between gm and Auto Consumers to now what you are doing at e. G. Any. Pg e. When we transition to automotive and the approach that you took with consumers first with the compare and contrast, how did you go about that and how different was it . One of the biggest differences. I was hiring an executive that had come from automotive he and i had worked together. I brought him to the window in our Office Complex and we were looking out the community and i said, that is our shop floor. It is a totally different shopfloor. One of the things that was a great benefit in welldesigned operation was being able to see the work. And gamboa has a completely different understanding when you cover two thirds of aloe california. That is a different kind of challenge. So that was a big change for us. What that requires is a workforce that has an extremely high level of ownership. We do not have a one to one ratio worker to supervisor. The workforce in california today serving our friends, family, neighbors has to be equipped to make great decisions and has to have the skills. And the mindset to do it in the lowestcost way. That is a totally different time kind of challenge from seeing an Assembly Line and addressing the problems as they happen. So you have that challenge. You come back you come to pgn e that has a challenge of the environment. Youre trying to build a different culture it must be different trying to start at pg e relative to how you started at cms. Can you share a little bit about that . One thing i learned at cms and carried with me to pg e is that people can get confused about the tools and it can be tools for tools sake. We learned and designed a simple playbook that was not about the tools, it was about the mindset, culture, creating simple rubrics for people to be able to lean a place to lean and learn from. So we have a base stay tuned to heare i the next hour. Alix we are about an hour into the u. S. Trading session. Lets see if you heard this before news but bad news for the Equity Service market. Equities heavy on that were or. Abigail is tracking the moves. Abigail s p 500 down. 7 . It is the longest losing streak in about three weeks. This mini rally we have recently is being disrupted. The ism rent that you were talking about the idea that maybe the fed will have to step in, it may be the november meeting, but more money may be taken out of the system. We see this with the bloomberg dollar index up. 2 . Yields are higher pressuring stocks. S p 500 down more than 1 . This chart is pretty busy, lets connect this. What we are looking at here and why does the s p 500 the s p 500 is in blue you have a clear inverse relationship as the s p 500 has gone up the dollar was also in a range. But the dollar is breaking out. It looks to me like we might see the s p 500 go out of the range if the dollar continues to climb. I would say theres a strong chance about since the s p 500 right now in overbought territory is bullish. If it starts to turn back down, as it may, the where for sure. Beware for sure. We have oil higher. 22 up on the year, more than tempers 22 right now and up more than 10 on the year. And you have the oil rally. You usually do not see that, is there demand out there . Ism rent they suggest it ism print may suggest it. But it may produce a problem. Southwest airlines is offering down to 2 . They tightened their revenue range. Down 2. 2 . They tightened their revenue range. The Airline Group overall higher. Alix no doubt hedging will come back into play. Thank you. We have hiring, demand, watching the broader look at the consumer and overall economy, our guest from citizens financial ceo joining us. Thank you for joining us. The ism services savings, Student Loans, and credit cards pains another picture. What picture do you have . I think the economy remains in good shape. We are likely to see a soft landing scenario area i think the fed has done a good job of bringing inflation lower, but not completely snuffing out the job market so people can still find jobs. They exhausted some of their excess savings. As you say, they are drawing down on the savings built up during the pandemic. Also starting to borrow on cars of cards a bit. But we do not see a lot of delinquencies and companies are mostly in good shape as well. Guy good morning, do you think the fed has done enough . Do you think they need to do more to slow the economy down . Bruce i think they likely have done enough although we will have to watch it. I think the ticking up in Energy Prices is something to consider. The continued strong consumer. Monetary policy works with a big with a bit of a lag, so i think they have to wait through november and take another gauge of the data at that point. Likely if likely they are done if they go again it will be one more 25 basis point hike and then that is it. And then we will likely see a long period of stable rates before we see cut. I think those likely hold off to the middle of 2024. Alix on the consumer from that end, you ended up ending year in car dealer financing, right . Bruce right. Alix that is because of recession worries. Are you disappointed that you did that now . Bruce no it is more nuanced than that. Once deposit increases through the rising rate with the fed scenario and the deposits became more near, we looked at where we are invested on the asset light of our Balance Sheet. Auto is a relatively short duration asset that we use as a shock absorber. It is not a strategic business because we do not have a relationship with those customers, they are customers of the dealer. This was more of a strategic play lets run down that portfolio and in its place we are using the capitol freed up to launch this First Republic private bank and many people came over to private citizens. And we run down Auto Consumer related paper and build up 9 billion of loan to private bank customers. Therefore, that will become a strategic use of our Balance Sheet and replace something that was not that strategic. Guy are you feeling a little overregulated right now . Bruce now keeping you uptodate with news from around the world. Here is the first [laughter] we are in a heavily regulated industry. At this point, some of the new puzzles feel like they might be overcooked in terms of acquiring more capital and gold plating with the framework with what the framework intended. There is a comment right now that i think will get a lot of use on that. It will play out down the road, but for the most part we are continuing to try to maintain good relations with the regulators and keep the Banking Systems theyve and sound safe and sound. Alix if you have a market cap over 100 billion dollars theres reports on bloomberg that the fed is putting a lot of pressure on you guys and you personally have reasons to beef up other measures as well. How does that affect your end product . Bruce if you look at the report they did on svb failure they had a bunch of mras or recommendations for regulators that they did not follow up promptly. And they will put more pressure on banks to tighten up how they run and get things done on time if things are outstanding. I think that is manageable so i do not think it affects necessarily how we run the bank, we have the strength and breadth of talent to apply what they are looking for. Guy does more regulation imply more consolidation . Can i extrapolate one from the other . Bruce yeah i think theres a couple things that potentially drive more consolidation. That is one of them, the cost of operating the bank on a standalone basis, if it goes up in the new regulations really run right over tailoring which they used to be break points where the load was a little less the smaller you got which is now called into question by these new proposals. I think that could foster more consolidation. The other thing is the way the world is changing so fast and they have to invest in digital analytics and ai and cyber defenses. The smaller banks, really to afford all about investment they will need to consolidate. I think certainly of the smaller end of the equation you will see consolidation due to more technology and Business Model reason. The bigger banks, the question is, do you want to have four megabanks that are in the two big to fail category or do you want to spread that out and have more competition for the very big banks . That is a policy question i do not think washington has determined yet on which way to go. Alix does that mean no or yes to you . No or yes in terms of acquisitions . Because you sit right in the middle. Bruce i think right now you will not see a whole lot of acquisitions because with rates as high as they are, the deal math does not work very well and it is still opaque in washington as to what their posture is. I think it is kind of slimy deals over the next 612 month but you will start to see things getting done on the smaller end. And we will see what happens with the next election cycle and if there is a change in the regime. Could that with falling rates, if rates go back below 4 and there is a fresh, regulatory view does that facilitate more transactions in 25. Guy how long do you think it will be before america has another slip . Do you see your bank playing a part in that process . Bruce we have a long way to go before we get all the way to that size, but i think some of the category three banks, we had pnc be aggressive as a consolidator. U. S. Bank as well. Theres opportunities for some to try to scale that trillion dollar level. We will see how it plays out. Alix give me some idea in terms of the issues we are playing in this industry six months ago, deposit out lows and him close. There were concert inflows. Has the bleeding stopped, or where are we still bruce i think we are in a period of stability. I think the worst is behind us. Deposit flows has stabilized the migration from noninterestbearing deposits to interestbearing has slowed. You saw a pretty good results on those dimensions in the Second Quarter earnings. I think that will continue in the Third Quarter. You will see more deposit stability. Banks will continue to pay up for deposit and bank funding cost will go up and margins are still getting squeezed a little bit. I think they are close to bottoming out, the other thing we are seeing is Capital Markets are opening up. Citizens will be on the cover of three ipos this month. We have not been able to say that for a long time. Theres deals flows starting to pick up which should also help the revenue preacher picture. Alix great perspective. Citizens Financial Group ceo. Come back next time youre in new york. And we look at coming up the pressure on hedge funds to perform. This is bloomberg. I did have hearing aids from another company. I was just frustrated. I almost gave up. With miracle ear its all about service. Theyre personable. Theyre friendly. Im very happy with them. We provide you with a free lifetime of aftercare. Meaning free checkups, cleanings, and adjustments. I see someone new. Someone happy. Its really made a difference. Call miracle ear at 1800miracle and schedule your free, no obligation hearing evaluation today. Wake up, achievers. Youre making the most of every hour of your life. And schedule your free, except the hours that youre sleeping. So why do we leave so much Untapped Potential on the table . This is a next level bed, for a next level you. My circadian rhythm is kicking your circadian rhythms butt its not a competition. I know, but im still winning so, it is a competition. Save 50 on the sleep Number Limited Edition smart bed. Plus, free Home Delivery when you add an adjustable base. Shop now only at sleep number. Morgan Stanley is partnering with the Womens Tennis Association to remove boundaries. because this game is for everyone. Alix this is Bloomberg Markets youre looking at live pictures of the principal and room and. And there will be an exclusive conversation with John Williams the Federal Reserve bank of new york. That is at 4 00 on thursday area this is bloomberg. Alix breaking for you. We work is said to renegotiate nearly all of their leases and exit unfit locations. The stock was trading volatility. I go to wall street beach. Should nelly sonali basak is here. And we should talk about it. What are unfit locations. What are unfit locations . Sonali theres no official definition of what they are. They documented unsustainable growth. They navigated the pandemic and went through some transitions at that. They are trying to operate now to avoid any potential church after 11. They have cited growing concern issues. They say over two thirds of operating expense of the Second Quarter has been able to get a handle on it, but they still remain too high and this is their wording, they are dramatically out of that with the current market conditions. So to the point we were talking about in the commercial break when we saw this come out, there are very drastic moves in the commercial property prices. Now we they want their share of the benefit of that. Guy what is the next domino after we work . Sonali thats a great question because we know wework is in a lot of the properties and there was a question of where do these other problems lie. They remain in the majority of buildings at markets. The renegotiation process is ready him. It will determine whether they stay there or not. They will exit unfit locations, but again we do not know exactly how many locations that will be. Particularly they are also saying they want to stay in the majority of markets. There is a total pullback and there were a lot of wework copycats as well. The total dynamic of the market is still unknown. Especially when you see a giant in the room going through a massive transformation. Alix before i let you go theres an interesting article from the Financial Times talking about the basis trades. And ill regulators are worried about this. And jackson hole being an issue they are focused on. Sonali thats a massive story this year. The reason being you had the fed reserve sec also asking im brokerages about it. And the Financial Stability board targeting nonbank investors. And blaming these investors for the spike in demand for liquidity in the march of 2020. This is a largely pandemic era, but however this is a moment the fed had to use cap in and intervene. The markets are distorted in times of stress for the hedge fund. They say macro and relative Hedge Fund Strategies in particular tend to employ bases trades. This is arbitrage between future and Current Trading treasury markets which we know are volatile. Everyone does have their eye on it. Theres a lot of debate about how leveraged it is. And you have National Bodies taking a closer look as well. Guy they talk about the market being over fished. And maybe that is ultimately the direction of travel, cash. Thank you for being on hand to do that story. We will be back in a moment. This is bloomberg. Alix i want to highlight european Natural Gas Prices are down sharp leave. The strike in australia is on hold until friday. We get reprieved there. The energy and power conference is underway here in new york. The industry is in focus with oil around 90 and gas picking up. Joining us is allingham arms alan armstrong. It is great to see you. Alan thank you for having me today. Alix what is your outlook we talk about a recession whether we will get there are not what is your outlook on the economy based on the flow in the pipeline . Alan we see a pickup in current demand, we have five days this year over Power Generation. A 6 growth from last years which was also a big year for Power Generation. Last years peak which was also a big year for Power Generation. You may think well, it has been so hot, of course. This part of a country, as you know, boring this week has not been all that hot. A lot of the populated part of the country has not been that hot. Really extraordinary natural gas coming from Power Generation right now. Importantly, a lot of signs of increases in capacity on our pipeline system. I dont know that ive seen a time where we had so much request for new capacity builds on our pipelines. I think a lot of that is the market is realizing the reliability will have to be there. A lot of the electrification going on around the country. And with that comes more full on gasfired generation. And complementing renewables in the market. Alix that is a big outlook. Weve seen in the last 24 hours a lot of m a and utilities from 10 billion. Do you think this shift we will see in the next couple decades, are you buying stuff . What do you see for m a in this sector . Alan because we have so much growth, organic growth around our existing asset base and we have this footprint we can buy assets for our business, that is the best place for us to play right now. We high return have high return Investment Opportunities around our Gathering Systems and pipelines stems. Typically people think about pipelines being deregulated rate of return. The truth is, on expansion, we are not limited by that because we cannot be forced by the federal government or anybody else to expand our system. In one way, the permitting woes of our country, by the way i think are not really good for the country, but on the other hand being an incumbent pipeline it allows us to continue to have attractive returns and expansion with existing assets. Guy good morning. When you think about acquisitions, you think about the longterm. How long do you think the pipelines will be carrying natural gas . When you think about the acquisitions, will they Carry Hydrogen in the future . Can you talk with me about how you see your business going through the Energy Transition and whether a pipeline is good for natural gas, and is a good for other potential fuel systems. Alan with lowcost natural gas supplies hydrogen will have to be subsidized to make it work. We have four projects in front of the right now looking at hydrogen hubs. We are part of that. But the fact is that natural gas is so much lower price in the u. S. And a lower carbon fuel we think natural gas will be here for quite some time. We have a lot of room to run in terms of reducing higher carbon content fuels like coal and fuel oil. We have a lot of ways to go to continue to reduce missions by that. Replacing gas fire, sorry coal fire plants is a 4050 percent reduction. If we were to replace the remaining coal plants in the u. S. , theres 230 remaining coal plants in the u. S. If we replaced those with gas, that is 35 million vehicles off the road. Guy you talk about the permitting issue. If the republicans took the white house, would it be easier to get permit for pipeline in the united rates . Alan it was not easy in the trump administration. I remind people of that. Permitting often starts at the local level. Really our permitting ross as is such a morass these days that it is not that simple just to fix it. We are very thankful for the efforts for senator manchin in pushing for work permitting reform and pushing for pipeline which is a huge positive, but frankly, i do not think it is as simple as just replacing the administration its a complex issue. Alix we have 30 seconds let left but if people say business is booming, what is the most expensive thing labor, cost, what is it . Alan it is dealing with local right away. So if you said, it is hard for me to get my head around saying you can go build a pipeline. But i say billing building from the marcellas and connecting on the east coast is the single biggest positive we could gain for our country because we have this in normas resource and the market is really hungry for natural gas around the world. Alix we will get back to you on the hardest part about permitting. Thank you for joining us ceo and president. Joining us Georgina Taylor will join us in the next halfhour. This is bloomberg. And it was easy, with a partner that puts you first. Godaddy. You dont have to worry about things like changing tax rates or filing returns. Avalarahhh ahhh i may be known for my legendary football career, but truth is, i love a bunch of sports. Avalarahhh the only trouble is knowing where to find them. Thats why i got xfinity. So, i can easily find and watch whatever sport im into all in one place without missing a thing. Even if its football, australian football, or football football. In a word its fitzcredible. I got to trademark that one. This season, eligible xfinity rewards members can get up to 100 off nfl sunday ticket from youtube. Sign up for xfinity rewards now. Guy wednesday september 6 luxury sector under a lot of pressure. We will talk about why. The countdown to the close starts right now. This is Bloomberg Markets european close. Guy lets check the markets. European down about a half percent. The luxury Goods Company Management Team out to the a. A. G. M. Boss talking about europeans, well heeled have stopped

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