Bloomberg Markets (04/29/2022)
From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. It's 30 minutes into the US trading day on Friday April 20 9th. You're at the top market stories we're following for you at this hour. The ISE don't have it. Amazon and Apple drop after reporting and take the market down with them. Meanwhile filings
show. Elon Musk has sold eight and a half billion dollars in Tesla shares this week to fund his Twitter bid. The EU energy puzzle Germany says it won't stand in the way of embargo on Russian oil but gas remains a question mark. We'll have more on that with the CEO of Natural Gas. Ukraine state run energy company and fuel to the fire. U.S. employment cost jumped by the most on record in the first quarter heightening inflation fears and sending two year yields shooting higher. From New York I'm Kailey Leinz with Guy Johnson in London. Alix Steel is off today. Welcome to Bloomberg Markets Guy. It's Friday. It's been another week chock full of earnings and economic data. And we're getting some more right now. Absolutely. There's two stories that show a focus on getting he gets his data or in just a second. There's a story that's just
flashed across the Bloomberg HSBC top hole the top shareholder and tests set to support a push to break up the bank. HSBC spiking higher on that day. It's hard to get HSBC to move in that kind of a way but it is right now watching. See the share price in just a moment. University of Michigan data are out as well which is kind of to the core of what we're really talking
about here. Kerry was referencing what's happening with Amazon. University of Michigan these are the headline numbers drop to sixty five point two from sixty five point seven. The market was looking for that number to be stable. Current conditions sixty nine point four. That's actually takes a higher. But the expectations number has ticked lower to sixty two point five. I can see what's really good now but it's starting to worry about the story going forward. One year inflation expectations stable of five point four as is the 5 10 number as well at 3 percent. Kelly the consumer is really front and center
right now. You look at what is happening in terms of the data we're seeing at the moment. It is absolutely pivotal. U.S. adjusted inflation inflation adjusted spending rising. That was the data we got today. But at the same time we've also got headlines coming out on Amazon. Amazon's Covid era bailout proved too much. As demand cools. I'm trying to figure out how you put those two things together. Yeah. So my guy and that's really the dilemma that brought us to
our question of the day which is what is the best read on the consumer. Is it the economic data or is it the earnings we're getting out of corporate America. Let's ask Anastasia Amoroso capital chief investment strategist who is joining me here on set in New York. Also in New York Michael McKee Bloomberg's international economics and policy correspondent. Mike let's first start with you on the data. Both of you mesh that just cross and that employment cost index from earlier. What's the
signal. Well the signal is we are still seeing wages rise. Employment costs went up at the highest rate ever in that measures history and wages went up the fastest since 2001. But that doesn't mean necessarily that the trend is going to continue because the PCC data showed wages wage growth at least slowing somewhat. Now the issue you ask about which is a better indicator. I have two charts. I'll just show you the first one here in
terms of what people say and what they do. Alan Greenspan famously said let's look at what people do not what they say. You can see the white line is what people say is a good time to buy durable goods. It's a terrible time according to the University of Michigan index. Let's then look at the blue line. That's the spending that they actually do. So they spend
more even if they say they're down. I say to the U.S. consumer is at the center of the U.S. economy. We've seen a whole raft of companies talking about the US consumer this week. What are you getting from the earnings picture as to the health or lack of health of the U.S. consumer. Yeah I think the U.S. consumer is hanging in there but there's clear shifts of deceleration in consumption and also just the shifting pattern of consumption as well. So for example Michael talked about the conditions for durable goods orders just deteriorating. And you see that. You see that
for example you see that in the numbers today. You see that consumers are pulling back on buying some of the durable goods and they're shifting towards services. And I think that's what we saw from Amazon earnings for example as well. You saw this deceleration in credit card spending that is being spent on e-commerce.
So I think consumers are definitely pulling back and it's hard not to feel the pinch when inflation is clearly outpacing the wage growth. Well an Amazon dealing with inflation headwinds as well not just in terms of how it impacts consumer behavior but on labor on the cost it takes to ship everything in two days. How concerned are you around the margin outlook while they've held up largely in the first quarter as we move forward through the remainder of the year. Yeah I think we have to be concerned for the margin outlook for consumer staples and consumer discretionary. Again the reality is the consumer is pulling back
and there's not a whole lot of room for error when it comes to margins for some of these consumption driven companies. So whether it's Amazon or whether it's another company and consumer discretionary space we have to be concerned about those because it's not technology it's not health care it's not even the S&P 500. The margins are a whole lot thinner. So you know and I don't know maybe causes do abate as the year progresses. But again the biggest concern I have for margins for these companies at this consumers are starting to pull back. So no pricing power ability is waning. Yeah that's right. And you know housing weathers autos. Where is even demand for energy. We're just starting to see incremental pullback of consumer on their
discretionary spending. So that's going to come to bite some of these discretionary companies. Mike how is the fight going to read this. The Fed is going to look at it is telling them exactly what they already knew that wages were rising because companies are trying to attract people back into the workforce that maybe they are slowing as the Fed expects once people do get back into the labor force and that the shift as Anastasia says in purchases from goods to spending and an overall drop in spending that's no longer fueled by pandemic assistance is going to put some downward pressure on inflation going forward. I don't fully go back to that Amazon chart we showed a little bit earlier. It did
show profit margins coming down a little bit. But the biggest thing that you have to notice about Amazon is we spent tons and tons of money during the pandemic. Everybody buying stuff from Amazon. And I put the red line there the arrow to show that's the percentage gain in revenues during the pandemic. Well of course it's going to be very high. It's way above normal. So if
things come back down to normal we should see a normalization of the inflation and spending rates. And that's what the Fed is counting on. Yeah. No more steady checks Mike to fuel our online shopping habit. I want to ask you though about some research that was out of JP Morgan yesterday essentially saying when you look at the forward outlook for these companies net earnings revisions are moving lower. If the outlook is deteriorating sending a signal potentially about slowing economic growth which actually in turn signals that the Federal Reserve isn't going to be able as aggressive as it thinks it can be now. Is it so much
about 50 basis points next week or after they front load. What do they do after that. Oh it's definitely what do they do after that. The market is always a what have you done for me lately. Organization. So the people admit it the minute to 0 1 after we get the decision on Wednesday. People are me say yeah but what's next. I don't think it's the Fed that thinks they can raise rates a lot. They want to raise rates up to neutral is kind of what they're warning. But the market's pushing them way beyond that. And that may get readjusted as we see not just the economy slow but as the profit outlook slow. All of that is what you would expect to happen. And the fact that people are trying to predict
the year two years in advance what the Fed's going to do that's really impossible. Yeah there's a lot of uncertainty yeah. That's Anastasia. We come towards the end of earning season. We've still got some of the big retailers to report. We're gonna learn more about the consumer when that happens. Do we have enough information yet to judge whether or not this market is cheap enough to start to put money back to work. Well here's what I would say guy. If you look at the market broadly I don't think it's cheap enough against the backdrop of this earnings revision story that Caylee was talking about which is slowing down.
So if you look at the valuations of the S&P and the Nasdaq they're somewhere in the fortieth and fiftieth percentile over the last five years. So that's not screaming Chief Bradley. But what I'll say if you look be below the surface and if you look at the valuations of software and semiconductors for example or even infotech and communication services broadly they're starting to screen pretty cheap. They're now in the 25th percentile or so of their valuations metrics over the last five years. But you juxtapose that with consumer staples for example that everybody has flocked to or utilities and they're actually quite on the expensive end of it. So I think the market participants
are going to need to be really selective here. And it's probably a barbell approach that I think you want to deploy here. You want to look for some of those bargains as we are at the bottom of the trading range right now. They're going to be a software. They're going to be in semiconductors. You want to look for those but you still know there's headwinds
to technology. So I would couple that with some of the dividend paying stocks that I think that's where you also need to focus in this environment. Well and as we're talking about valuations in the multiple you're willing to pay for stocks. Obviously it's going to be a story of relativity also. And bond yields have a huge role to play in it. Were it to eighty seven on the tenure
right now we got a taste of 293 earlier today. Have we seen the peak already or do you think we're moving higher. I think it's really hard to say that. I think it's really hard to rule out that this is it. And the Fed is not going to be any more hawkish. I think the reality is the economic numbers are still fairly strong. Inflation is not yet showing signs of peaking. So I think the Fed is going to have to be decisive. And they've
basically told us they want to do more not less and they want to front load some of these rate increases. So against this backdrop where the Fed this has this it's to be more and more hawkish. I think it's really hard to rule that rule that out that we've seen the peak in rates. And by the way it's not just the Fed it's the other central bankers. All right. Well and so as long as they push up their domestic rates that's going to put upward pressure on the 10 year as well. So I would rather wait for more clarity from the Fed before calling the peak on the tenure. And clearly that's why it's so hard to convincingly say that yes this is the bottom that we've seen in the market because until we've seen the peak in yields we really can't say that. OK so if that is the case do I want to be taking more out of the market on a stage that I'm putting
into it right now if I'm selling stuff. Do I reinvest it or do I hang on for a better opportunity. Yeah. Guys so this is kind of a two or three part answer. I think the first thing we really want to do is we wanted to say what kind of risk we want to take in the portfolio and that needs to be a lower level of risk than we've seen over the last several years. So the way you do that you shift to quality you shift to higher dividend paying stocks. And that's going to be the core of the equity part of the portfolio. You couple that with potentially some opportunities in high
yield leverage loans private credit real estate a slew of the other income producing opportunities. So that's the core. But you know I am tempted by some of the valuation reasons that we have had in the technology sector. And by the way amidst the slew of earnings that we've had it's clear that consumer driven advertising growth is slowing and maybe Ito's smartphone demand eventually is going to slow. But cloud computing you know digital transformation growth remains incredibly strong for companies like Microsoft for example. So that's why I think you fast forward especially a couple of quarters when you do have much slower economic growth is going to be back to tech is going to be back to those secular growth stories. And they are trading quite cheap right now. So I think you start logging in there but perhaps use options to help
log into those. For example you could sell a put on some of these you know cheaply valued stocks and you collect a really nice premium now because the volatility has surged. Well my gamma station there was just talking about tech which gets my mind thinking about Apple which we also heard from after the bell yesterday warning of potentially a billion dollar hit to revenue because of supply chain issues in China in particular. How influential is China. Its persistent Covid zero policy going to be not just a corporate America but the U.S. economy as a whole. If it persists if it persists it will be quite an impediment. You saw what happened last fall when the ships all lined up off the coast of the United States and couldn't bring stuff in. We
were jammed up. Once China opens up again you're going to have the same issue. And in the meantime you're not going to be getting all the parts that you want. And you can imagine that Apple is a leading indicator of that which kind of gets back to what you were asking Anastasia about in terms of the peak in yields. We don't know how bad that's going to be. So we don't know how high the Fed's going to have to go and whether the Fed will have any impact because if they can't get supplies from China to the United States higher interest rates isn't going to solve that problem. Lower interest rates isn't going to solve that problem. It's not a monetary policy issue. Yeah as one guest told me before the Fed cannot print ships. So
that is an issue we still face. Thank you so much to Bloomberg's Michael McKee as well as Anastasia Amoroso I capital chief investment strategist. Now coming up why Vladimir Putin cares so much about another one of the former Soviet republics Moldova. We'll talk to the country's foreign minister coming up next. This is no.
There is growing concern that Russia's president Vladimir Putin has plans for war beyond Ukraine. The possible target Moldova which borders Ukraine. With us now from Brussels Bloomberg's Maria today who has an exclusive interview with Moldova's foreign minister. Maria. Over to you. Yes killer. Let's go straight with NIKKEI Vasco he is the foreign minister of Moldova and of course for forever want to be clear on this. You're a neighboring country to Ukraine but in between the two countries there's a breakaway region trust needs here where there's right now Russian troops stationed there. We heard solutions happening there at the start of the week. And I have to ask you and I wish I didn't have to or put it this bluntly. But Mr. Pascoe do you
fear that Vladimir Putin is going to bring war to your country. Yes indeed. We have a separatist territory. It's called We Trust these three in the region of Moldova. We have had 13 some 13 hundred Russian troops since 30 years ago. But throughout all of this period there the situation has been calm and peaceful. In the last 30 years we've been engaged in a dialogue and a peaceful dialogue. We've we've been Transnistria and de facto authorities with the help and mediation of Ukraine Russia the EU the the US. And we see. So until the outbreak of this war two months ago two months ago this situation was reasonably peaceful
and quiet. Now of course this war is making every single person on the European continent less secure. Every single country less secure. Of course this insecurity is affecting gas as well. And especially with these explosions that we heard a few days ago in Transnistria this situation is a force far from being easy. It's quite tense. We as a government that are preparing for the full spectrum of threats and contingencies at the same time in our assessment Moldova is not about to become an immediate or imminent target for hostile military action. So the situation is there as we speak today and yesterday it was calm. These explosions are watching a lot of stress. They are increasing tensions. This we know. But at the same time the situation remains calm. And in our
assessment Moldova is not about to become a target for direct military aggression or full speed. Russian intervention. But Mr. Baskin when you hear Sergei Lavrov singing on TV we hope that Russia doesn't have to get involved in this. Doesn't that worry you. We've seen Russia repeatedly deny things and then that's exactly what they do. Do you worry about the language coming out of the Kremlin repeatedly every day. It's we've been increasingly worried for a long time as I've told you we've had this separatist conflict for two years. We can Russian troops. We always insisted and continue to insist on the withdrawal of Russian troops which are not stationed legally here and of course especially in the last two months. We
are more worried at the same time. As I said we're doing our best to keep this situation column. My colleagues from the government we have a deputy prime minister in charge of reintegration. It's been in the regular touch in the last weeks and months. We've been Transnistria and de facto for 40 days. Even yesterday commanded Transnistria either. And we are all very clear here. The absolute majority of people leaving on the legal territory of the Republic of Moldova which includes the absolute majority of people living in press needs to have do not want to live in a war zone. There are some provocateurs he did try to destabilize but we're doing our best to keep the situation calm. And we're in regular touch with the separatist
offloaded to soften the ceasefire. And we want to make sure that war is not imported on our territory. But but then you know can you tell me about these explosions then who did them. What information do you have. I mean do you have any intel that suggests actually that this was done by Russian backed separatists who made this explosions then. So as I said we don't control this territory. We don't have police
there. We cannot collect forensics. We don't have that system CCTV cameras. But in our understanding and from what we. You know we have of course several hypotheses but we're working through and we don't have a clear answer. But at this stage our understanding is that these provocations and explosions were staged by internal forces that wants to stoke up tensions. Want to destabilize one to create more psychological stress more economic stress more socio economic stress for the entire world over including the trustees in the region. But nonetheless as I said we're doing our best to do. And we hope that this will be a one off events rather than the beginning of some much more negative trends. And we're doing our best to be preparing for
the full spectrum of scenarios for the full spectrum of contingencies. And while doing so would also in touch with the trustees standard for interest to keep the situation calm. And just and just as a final question however are you in talks with the European Union about this. Because you say we're doing our best to avoid escalation but everyone here is very worried about escalation particularly in this context. Have you been in touch with the European Union about how they could potentially help
you. Absolutely. We're talking as if we have to be a delegation from the OSCE. We can see chairmanship which has fallen. They spoke today on the phone to the Romanian foreign minister to the Spanish and Swedish foreign minister. In the last couple of days I spoke to the French and Italian foreign minister. So we didn't touch with everyone without partners with our supporters. And we're we're really working full time to keep this situation conquer. Well Mr. Ambassador thank you so much and of course we wish you all the best and hopefully as you say these sanctions come down because of course the situation right now in Eastern Europe is very fragile but also very volatile. Thank you so much for joining us on Bloomberg Television today Guy. Thank you very much. Thank you Maria. Thank you very much indeed. Really interesting to find out what is happening there.
Keep an eye on that. Keep an eye on that carefully OK. What are we gonna do next. We gonna come back. We want to talk about this HSBC story. The stocks spiking massively over the last 10 minutes beginning to fade a little bit. Apparently thing in its biggest shareholder is going to support a breakup. We'll talk about it next. This is Bloomberg. It's time now for our ETF Friday Capping Ones flagship Ark Innovation Fund is heading for its worst ever month on record. The Gap is now down 26 percent in April and has fallen almost 70 percent from its all time high in 2021. A stay at home names
like Zoom and Teller Doc Tumble. However investors seem to be keeping faith in wood as the fun side. Two hundred and thirty one million dollars of inflows this month alone. That is what I'm watching guy. But I know you are watching that breaking news out of HSBC. Absolutely. The story right. HSBC fascinating. Zapping on the huge Chinese insurer which owns circa 8 percent of HSBC has apparently held talks with the bank about splitting it up about about creating a separately Hong Kong listed part of the bank that would basically allow it to crystallise some of the value that it feels is not being realized right now. The rest obviously would remain. I'm assuming listed in London. This has long been talked about as a possibility. As you can see HSBC spiking on the back of this news. Neither bank nor began
responding at the moment. Keep an eye on this story. This could be really interesting. This is Bloomberg. We are an hour into the U.S. trading session it is a down day for U.S. equities and you can largely blame that on just one stock Amazon. That is what's leading the losses in the S&P 500 and the Nasdaq today. They're down one and a half in one point seven percent respectively. Amazon down nearly 12 percent right now on pace for its worst day since 2011 and at its lowest since June of 2020. Of course that's after it reported after the bell yesterday. Revenue guidance that came up short of expectations.
They've overinvested in people and warehouses during the pandemic. Now there are signs that demand is softening. You're also seeing a little bit of softening for Apple shares down about three tenths of one percent even after a record non holiday quarter. The issue there the warning of a potential eight billion dollar hit to revenue in the current period thanks to supply chain issues. Now there's other stocks that I've been reporting today as well including Exxon and Chevron big oil
reaping in big profits due to higher oil prices. They're actually both down a little bit on the back of that today because they still came up short of expectations. But just take a look at where we had come from prior to today. These stocks up about 14 percent each year to date Exon by 42 percent Chevron by thirty five percent. Thanks to those higher oil prices WTI crude on twenty twenty two so far up 46 percent trading at 1 0 7 a barrel. Also playing into this energy story is of course not just oil but gas as well. A lot of question marks this week after Russia
cut off Poland and Bulgaria due to the failure to pay in rubles. Some questions on what other European countries are going to be able to do what does and does not violate sanctions. So you have seen natural gas front month futures for Dutch futures in Europe fluctuating a lot this week ending the week about 10 percent higher. Guy though I'm not sure we end the week with much more clarity really than we started with. So many questions around this story so many unanswered issues do we need to figure out Vladimir Putin's demand the countries pay for Russian gas in rubles starting to divide Europe Poland and Bulgaria. Kelly as
you say have now been cut off. They're refusing. Hungary says it has no choice but to comply. The big question really surrounds Germany. Joining us now is the CEO of Ukraine's state run energy company now Naphtha Gas Unilever. Thank you. Yuri thank you very much indeed for your time. So we've seen two European companies countries now being cut off from Russian gas. How do you expect
the situation to develop from here. Are you anticipating that the whole of Europe at some point this year will end up either being cut off or cutting itself off from Russian gas. I don't really think that we should anticipate the full cutoff of Europe from Russian guests. Also we advocate and others are advocating a full embargo on the nature of gas as well. But it probably takes some time. So it's more reasonable to expect such measures as some special duties on Russian gas or escrow accounts that there will be a lot of tensions around natural gas supplies. But I would not anticipate the pool got well. And of course Russia still is paying Ukraine to allow that gas supply to pass through your
country into Europe. Is Ukraine willing to sacrifice that billions of dollars potentially one point five billion dollars that you get for gas transit. Yes it can. It can pass of the war because the damage that we haven't because of the war has already exceeded the 300 billion euros. So it's 200 times more than we'd get for transit per year. So it cannot be compared. And I'm not even talking about human losses. So that's why you can observe war. Definitely. We
would sacrifice the revenues but we don't want to sacrifice those revenues if it won't change anything. If Europe continues to buy Russian gas. Russia just moves also flows to other pipelines like Nord Stream do for example that is ready to be operating. But it was stopped because of the sanctions. So that's not something that we would like to achieve with just
unilateral interruption of gas transit. So sorry just to be clear here. You're. Are you saying that if if Ukraine if Kiev decided to cut off gas transit that Germany would have no choice but to open up Nord Stream to. No I'm not saying it but there is a risk like this. So there is a risk that Russia will move gas flows to Nordstrom. Do your model you wear dark streams. There are alternative pipelines that can easily place old low as it currently go sweet green. And then Russia can start bombing Ukrainian guests transmission infrastructure. It's not happening in Zim moment. They bump our distribution infrastructure but not the transit infrastructure.
So there is also a military dimension that we should take into account. Well can you talk to us more about the military impact what how you have suffered from that. Again we have to be fair to say that the Russians deliberately do not bomb the transit infrastructure because it helps them just to get more money from Europe at the same time they do bomb the distribution infrastructure just to put more pressure on the Ukrainian government decreed some humanitarian crisis or even catastrophe in this in the towns that they besieged like for example in Mario or other towns. So we understand that if there is no transit then the risk of them bombarding the transit infrastructure increases.
Okay. At the moment there is some ambiguity there is some there's a lack of clarity about how Europe should be paying for its gas whether or not it should be paying in euros in those euros get converted into rubles. What is your view on this. You clearly indicated throughout this interview already that paying for Russian gas is helping to prolong the war in Ukraine. What do you think Europe should do in terms of the rules here. How would you set the rules in terms of paying for Russian gas. What do you think they should look like. At least Europe should stick to the contracts and do not allow Gazprom to avoid a potential financial sanctions. And so this whole idea is about rubles and this conversion is to be able to
avoid potential financial sanctions that would leave with limited financial flows to Putin's regime. Because probably you've heard about the so-called escrow accounts idea or some price cap that would limit the amount of money we can get to Russia from gas experts or European companies can still pay for gas. But at least the part of this money will be frozen on accounts in Europe. So in order not to let that happen Putin had this idea so that European of takers of Russian gas they instruct their banks to convert euros into rubles. And then it's very difficult to stop rubles from going into Russia. So European companies should not help religion avoid potential sanctions. That's why they should not agree to convert their euros into rubles as Gazprom insists. And they have all the contractual rights not to agree this blackmail from Gazprom and
from Putin. So what do you say to countries like Hungary that are doing exactly that. I'm saying that they're helping violent Putin regime to continue this war. And it doesn't help Ukraine. It doesn't help Hungary. It doesn't help the world because this war already brought so much damage that it should be stopped as soon as possible. Finally Uri what is the situation like on the ground in Ukraine when it comes to the availability of energy. How how do you feel about Ukrainian energy security for the country itself at this
time. As a national company you were able luckily to provide security of supply. So we covered all the demands from our customers. In Ukraine we have enough gas in our storage. We have sizable local production that we continue to maintain despite this to the guests. We also are financially strong. So for example in March
alone we provided one point three billion dollars excluding subsidies to our customers. We decided not to increase prices. We're very flexible with Spain endurance cetera. So currently again we can sustain. But at the same time because this work continues we would need assistance from the international partners because we're talking about the some critical needs of Ukrainian people who are still in Ukraine. It's about 35 million people. They need heating they need electricity they need water. And it all depends on natural gas. And it all depends on NASDAQ being able to satisfy the critical needs of Ukrainians. All right. On that note we will leave it. Thank you so much for your time today. You're even go naptime gas CEO. We sincerely appreciate it. Now from the geopolitics of energy to U.S. politics of energy to big oil names were out with
earnings today. Chevron posting its biggest profit in almost 10 years. Exxon seeing profits more than double boosting its share buyback to as much as 30 billion dollars. But the White House obviously has a view on this. We have heard President Biden say that oil companies should stop prioritizing returning capital to shareholders and start drilling more. We heard a similar mentions earlier today on Bloomberg Television when Brian Deese the director of the National Economic Council spoke to us. Just take a listen to what he had to say. We need to see more production in the United States. The market provides every
incentive that that companies need to produce more. And we are encouraging companies to do so. Joining us now Coles Meat of Speed Capital Management. He owns energy names in his portfolio like Chevron as well as the likes of Conoco Phillips. So Paul as a shareholder obviously you are on the beneficiary end of it when it comes to their capital
returns to shareholders. What should be adding to that position in Chevron today for example ISE it's down 2 percent. Yeah. Ah ah ah. It's relative to the S&P 500. A lot of these names are going to do well. They our concern with Chevron is their capital allocation. And what I mean by capital allocation is you know they're running their business fine in terms of the operating company and they're not wasting capital glut. A lot of the industry is not wasting capital like they have in the past but they could have used their balance sheet to really generate high returns by leveraging themselves. They have relatively no debt for an energy business but leveraging their balance sheet to be the aggressor and the acquirer in this era. And that
hasn't been going on. And they're paying down bonds. They're more interested in producing income rather than buying back these shares at attractive prices. And we see other people like Occidental Petroleum doing different. I mean they levered on Anadarko and now what they're doing is they're reaping all the benefits of those rewards in buybacks planned over the next twelve months. So most of their most of our capital churn is buybacks.
Cole what do you think of the idea of these companies producing more oil bats by the sounds of things what the administration would like to see happen. Is that a good idea the curve maybe not in their favor. Yeah I know. Guy your spot on. I mean if you look at the curve the backwardation says no one's gonna go out and produce when they have such lower prices in the future. If that futures curve was higher there would be people locking those prices in and going out and producing to meet that need. As long as they have backwardation it's not going to be there. Secondly the volatility of the commodity. I mean we're coming out of an equity era where low volatility was the winner in many respects.
The S&P 500 was the low volatile volatility trade of a lifetime. So volatility is a commodity natured type of price movement. And because of that there's a bunch of investors that don't believe that they want to own these type of assets. And what that's doing is they're just starving the arena for capital to make the investments that these administrations would like. But yet there's no incentives for any financial players to begin entering into those type of agreements. Cole Clearly energy and
these stocks have had a great run so far. But as we talk about a curve that is showing to low pointing to lower oil prices in the future how much oxygen is really left in that energy commodities reliant trade. Well I'd say first off look don't look at the futures curve and assume things are going to be terrible. Having spot be this
high. It's one of the most bullish things you'll ever see because the market is just short oil and and like like you were just mentioning that you know Chevron said that jet fuel demand is going to pick up. That is a that's one of the legs of this. That has not come about yet. I'm going to be doing some travel abroad for the next two weeks. That stuff wasn't going on a year
ago. So the lack of supply is all you need to know. You can't predict demand. That's a very tough thing to do. But the lack of supply just speaks to very high prices. And when I say hi I mean we can wake up at one hundred fifty dollars a barrel and we still would not be at a price where we would be hurting American wallets in terms of gasoline spend compared to areas like 2008 or 1973 we'd be still nowhere near that percentage of wallet for the American consumer at one hundred fifty dollars a barrel.
Energy is 4 percent of the S&P. Why should it be do you think of the average portfolio. Well guy we we own close to 25 percent. So I know what I want to own. The market can decide to do what they want to do. I think four is way too low. Go back to prior eras where we had bad stock markets like the 1970s that had inflation or the 2000s
where there wasn't much inflation but it was just a terrible market environment. The big winner in those two prior tough eras was energy. You made wonderful money and energy. In fact in the late 70s it was the biggest S&P sector 30 percent of the entire market. So I'm not saying we're going to go back to 30 percent in market but it would not be outlandish to see this wake up in the teens. And the question is how do you get there. Is that because the market the rest the market does really poorly or
this does really well. Either way I think we're going to be happy investors. All right. Call you have a lot of energy names in your portfolio. You also have a lot of banks. I see it makes up about 7 percent of your capital U.S. value strategy. We have seen a dramatic move higher in yields this year and yet the banks have not been able to keep up. What do you attribute that attribute that to. Yeah some of it's just the movement in these banks. They've been
really over earning on their investment bank side that will go away. It's when the the traditional consumer bank and commercial banks really get going. And I mean just to give you some stats I saw the other day I think Deutsche Bank put this out. Jim Reid did. American households have as much cash as they have debt. So this is a great banking area to lend in to to the consumer. There's a lot of questions right now over things like housing. We don't agree with that. This is a bright economic future. Remember these banks are old world things. The more frustrating commodity markets get the more opportunity it creates for
banking. One final quick question. You said either the energy stocks are going to go up or the market's going to go down. What do you think about the market going down. Bank of America is Michael Hot. It sees pain and exit. If the S&P dips below 4000. Do you see that happening. Yeah. But Michael is preaching to the choir. I tell people negative 1 to negative 2 percent compounded including dividends reinvested over the next 10 years. And I don't think we're going to be playing those kind of economics in the energy business. In comparison. Cole great to catch up. Have a good weekend. Enjoy the travel.
Thank you very much indeed for your time. Meats Meat Capital Management great to great to talk. Thank you very much indeed. Coming up Tesla shares are up after Elon Musk tweeted that that apparently is it. He's no longer selling stock to fund his Twitter bid. Details next. This is Bloomberg. This is Bloomberg Markets I'm Angel Feliciano live in the principal room. Nancy Tinkler Blatchford Tagger CIO joins
Bloomberg TV at three thirty p.m. New York time. This is Bloomberg. So it almost has been selling billions of dollars worth of Tesla shares apparently obviously which seems like a fairly straightforward line to help his purchase of Twitter filings indicate he's offloaded around eight point five billion dollars of the stock this week. Joining us now Alex Webb a Bloomberg Quicktake. This feels logical like we came into the week. How is he going to pay for it. We now know some of the answers to that. Do we know all of
the answers to how he's going to pay for it. That isn't quite enough yet. No he needs to find 21 billion to fund his portion of it. He's now announced all the filings have shown he's going to sell eight and a half billion. The thing is that yesterday he tweeted that he wasn't going to sell any more stock. Now it transpires there is more stock that he's selling. Does that mean there are more filings that are yet to come out that maybe indicate he's selling more. Is this all kind of
confusing with even communication as ever as clear as mud. But on the nine Tesla stock options that he has where are we in terms of potentially a private equity player coming into this. Sorry can you repeat that. In terms of say he's raised like he had a private equity firm for example. So we don't have a private equity firm in there yet. We've got some banks come in with financing. Their 44 billion is obviously the sticker price. He needs to fund 21 billion of that. He's got financing for the rest. You know I think there were conversations of private equity firms I haven't seen unless you guys have I haven't seen any reporting suggesting there is a private equity buy anywhere near it just yet. The thing that is also kind of noteworthy here
is that if you're a Tesla investor looking at this the signal you're getting from Elon is whether this is intentional from Elan on on its own. It's probably not that Twitter is a better investment case than Tesla. And that's not necessarily something you want to hear. Yeah I think you've got a. You've got to make certain assumptions to make that the case. But yeah I take your point. Let's talk a bit about Amazon. Amazon is the story for me today. Here is a company that is is clearly over expanded during the pandemic. It was the only way to sell stuff buy stuff during the pandemic. It's the second biggest employer in the United States. It's now beginning to reap the effects of that as we all go back to normal. But NWS continues to power on. We have somebody on a thing. I think it
was a little earlier talking about the idea that you get a WS for free. I'm sorry you get the rest of the business free because of NWS. NWS is such a powerhouse. You came on set and you said that's a big problem. Could you just explain that to me. Well typically the way you think about anti-trust in the US is is it a monopoly i.e. is it the only place that a consumer
can buy things. There's it's like pivot going on in the moment to whether it's a monopsony. That means it is the only place that if you're selling stuff you can sell your product. Right. And Amazon there is a suspicion that it has a. Great to great to say in that sense that if you are going sell things online you have to be on Amazon because when people try to buy stuff their first port of call is Amazon. And so the idea then that they can do that at a loss and it's offset by a W W.S. shows that the thing that lawmakers really don't like they might be squeezing small businesses. And in the US that is a real pain point which politically when they get up on Capitol Hill they all talk about trying to protect small businesses if they're able to squeeze the costs on the retail side because they are subsidizing with NWS that could get into lawmakers attention. Well speaking of paying Amazon down 12 and a half percent on the back of those results worst day since 2011. It's
on pace for Apple meanwhile only down 1 percent. ISE after that warning of potentially an eight billion dollar hit to revenue because of supply side issues in China. What do you make of that move. It was worse overnight. Often with Apple there is some profit taking off by investors off often quarterly earnings whether they're good or bad. The thing is with Apple it's all about supply here. There isn't necessarily an effect on demand. Now when is that demand going to come. They've been pushing demand out and often out because in quarter after quarter they have not necessarily been able to meet it all. Now there is going to be a new iPhone coming later this year. Perhaps investors then can think well if this demand
is pushed out into the next iPhone it's going to be at a higher price price point. That isn't necessarily a bad thing. The thing that has to be careful about is all refresh rates in terms of how often people buy new iPhones. Are they going to be pushed beyond three years which is the current average 5 8 10 years ago. It was every two years. Yeah. Especially in the face of
this kind of inflation are people really going to shell out more money to buy a new upgraded iPhone. Thank you so much Alex Webb of Bloomberg Quicktake as always for joining us. This is Bloomberg. So wrapping up the week here in Europe we're nearly done remember a long weekend coming up for many. Let's take a look at positioning as we coming through into the end of the week. Stocks 600 actually catching a little bit of a bed right now. We're back to 450. But only just as ever though I think the activity has been elsewhere. Euro dollar retaking 1 0 5. But
still look at the data that's come out today. Slower growth higher inflation. That is not a good combination for Europe. You're seeing peripheral yields starting to push out a little bit as well. All of that we are going to discuss next. Bonobo Wager chief strategist at UBS is going to be joining us. That conversation next. This is Bloomberg.
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