Bloomberg Markets Full Show (11/18/2021)
From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. Union 1 Deer 0 deer is month long workers strike ends now with a six year contract a 10 percent pay bump and a bonus. Is this finally wage inflation. And stocks really fight for a rally. Macy's blow out quarter hurdles the stock to its highest level in three years. Ali Baba though missing estimates falling the most since December. And oh sweet sweet green sweet green finally goes public. We're going to talk to the CEO Jonathan Nevin at later on in the show from New York. I'm Alix Steel my co-host in London Guy Johnson Mark Gurman Bloomberg Markets guy. We can get to the nitty gritty in a second but for me that
Philly Fed index just pointed to an economy that is super super hot which really echoes what we heard from say Macy's and Kohl's. And that to me is part of this underlying story in equities. So I don't know a lot about retailing. I don't know a lot about shops. I don't know a lot about Macy's. But I do know that everybody's been down on Macy's for a long time. So Macy's is doing well. That tells you that this economy is absolutely on fire and demand is absolutely massive. That Philly Fed. No it's a hugely volatile set of figures. But nevertheless to your point I guess just basically highlights the fact that the US economy is on fire right now. Demand is absolutely strong. Huge momentum. And we've got to talk about there as well. The labor
story in the mix as well. But Macy's Macy's is the real tell for me today. Well Philip ended up better next. This kind ties into Deere and Macy's. Prices received in DAX was up by 12 points. It's the highest since 1974. Yet Macy's and the consumer sentiment may be lower but the sales are really good meaning that that speaks to the fact that consumers are still willing to spend which kind of feeds into that wage story. They're willing to spend at Macy's which is kind of interesting in itself but they're also willing to take on the higher prices. Yes you are the discounting experts. I don't think there are many discounts
out there right now. People are paying up and they're prepared to do it. I'll told you a lot about the demand story. And you get a small discount on Barbie Dream House though which is what I really needed the discount on just so we can say OK. But it's it's a small one. Normally you'd have expected a huge one. Let's talk about that labor story as well because I think that's absolutely front and center. The other real tell for me today was that deer story for deer union workers. They're going back
to work. They're going back to work this morning. Basically what we've seen here is an ending of this month long strike. Now UAW members ratified a new labor contract that happened Wednesday. Alex ran through some of the details at the top. There's an eight thousand five hundred dollar signing bonus. There's an immediate 10 percent pay bump in the first year. And then basically you've got a series of sequential bumps beyond that. This is I think a five six year contract. That's not all. Workers get a 3 percent bonus every other year. It goes on and it goes on and it goes on. And it basically tells you that labor
have the grip on the situation at the moment which I think is such a big turnaround from the last few decades. So let's kick this around a little bit. Let's get an idea of what all of this is telling us about these markets right now and what you can do in terms of your investment decisions based around Joe Dough. He helps lead metals and agricultural coverage here at Bloomberg. He does so in the Americas. Katie Greifeld Bloomberg Cross Asset reporter writing a fantastic piece about inflation this morning.
Well worth a read on the Bloomberg terminal. Joe let me start with you. Alex framed it this way. UAW one DIA zero. Is that the correct way of interpreting this situation. Yeah I mean listen if you talk to the company they probably feel like they won because their workers are back to work. Not only did they start this morning they started last night at ten thirty Central Time shift. It's the third shift. But yeah I think on the whole whether you're talking to analysts or anybody else in the market did you feel like the workers finally got paid. Right. I remember when the second one of the three deals that went up when it failed I was kind of asking around the market and various union workers. Why did this felt like what
specifically. What's the nitty gritty and something. Explain to me. You know Joe you're missing the point. It has gotten personal now. We are recovering from the pandemic. It has been years where deal workers and many other union workers took pay cuts for a couple of decades. And now they're just saying you know what. We were essential workers during the pandemic. We put our lives at risk to be in those factories pay us. You are seeing you but you're seeing profits at levels that you've never seen before. Yeah. And Joe I have to wonder if this is a dear specific thing or do you think it's going to go to some of the
other companies. Because you know quite frankly I've heard of you know strikes in Hollywood. My God doctor had to strike because she works in Hollywood. I know that there's museum worker strikes like it's really a broad based thing. Yeah it really comes down to when does your collective bargaining agreement end. And I mean listen I was talking to some folks inside here who said hey our collective bargaining agreement is due up in 2023. So maybe mark that on your calendars right now. I think it really is. Timing is a part of this. I mean this is a conversation that we've had a lot at Bloomberg about the broader
labor story. And if your contract is up now or maybe in the next year your company is going to probably have to have quite a long negotiating period. Katie the market by large though the equity market the capital market seem pretty comfortable with the inflation narrative that we've got thus far. I to Joey's point. What he's basically saying is this is going to go on and on and on labor once more and that is going to be sticky. Do you think. Do you think the market at this point has got a grip on what is coming towards it. I would say it depends on
which market you're looking at. Because to your point I mean stocks seem totally comfortable. The S&P 500 up 25 percent this year the VIX near the lows of the year. But if you look at the bond market that's where things get a little funky. And especially if you look at implied volatility in treasuries right now that is at the highest level since April 20 20 which is never a good size and scope. You we're talking about volatility. So I think the bond market is looking at the inflation on the ground the inflation that's expected to come. Also trying to suss out who the Fed chair is going to be next year. And you're
starting to see much more anxiety in that market than you are in equities right now which is so interesting is Howard Marks. I was talking to Taylor Riggs yesterday and here's part of what he had to say about the S&P but also how he is positioning for inflation. Oaktree is certainly not taking a strong position on the assumption that there will be a lot of inflation and that we have to avoid it. We are doing R R R normal thing. We certainly have not. Inverted our portfolios to prepare for inflation. What do you make of that Katie. It's interesting. I mean it really depends on who you're talking to and what their timeframe. So in this article I have for Bloomberg Businessweek. I spoke to someone who said that she feels totally comfortable because she's looking three years out. She's based she's picking
companies based on balance sheets. But if you're a timeline is a year this is the call you have to get. Right. Whether we are going to see this spiral in inflation maybe drought driven by wage pressure or whether this really is going to be transitory. It's something that's going to cool down peak maybe in February. Note that Citigroup's call. But I mean if you're trying to manage money around this this is the question that you have to answer. One of the things that I think the market is beginning to pick up on as well is the idea that actually food price inflation is starting to rise and rise fairly rapidly. You're
seeing weights weights I think is at a nine year high Alex. I think you've got a situation where you're starting to see a bunch I think with coffee the other day. Yeah. Hitting a seven year high. That's a major crisis. Joe when we think about data I was looking at a chart as well. You'd use tractors earlier on. I think that they're up by 25 percent this year. Input costs are up massively for the feed industry. That's the wheat feature story in terms of what the near-term effects of a death strike is. I get this right. Sounds like something you do in your car. But at this strike does does in terms of the food industry. What
is the translation effect like the input cost story. Because people are starting to feed this in the thought of field this in the grocery stores. Yeah. Listen I mean dear union workers were very aware of this point right. Like this is a I've heard so many times people say this was a perfect storm. You have global supply chain issues. You have companies trying to ramp back up
production to meet the unbelievable demand that they just did not see coming in 2021. You have the rise in commodities. I mean I cover the metals industry. You cover the AGS industry. You look across the board. Everything is up every day. We're seeing what's the next redhead. Right. What's the next big headline about prices being up. And I think you look at Deere you have workers not working right. I mean we reported that parts were taking weeks to get to farmers at the peak of the harvest right in the busiest time of their farming season instead of you know one to two days. And it was all of these things compacting into
one. And that's why you started hearing farmers saying we want these people back to work as quickly as possible because we're getting it on all ends and the price curve on the price levels. Hey Joe I'm wondering the contract is for six years. So I'm just wondering does that in some way cap any kind of wage inflation because of inflation actually runs hot. We're gonna need a lot
more wages to keep up with it. Right. And that's where the dynamic the Katie is also talking about in the market. And I'm wondering if because the price increases is like just 3 percent and 5 percent down the road does that change the dynamic. What do you think. Yeah. Listen I mean Katie's looking a lot more macro than than if we're just looking at your daughter's 10000
workers. Right. I mean this is this is on the grand scale a thing not a lot of workers. And then you also have to ask well how many unions are actually up for contract negotiations. And that's where we start asking internally. Bloomberg like is this you know is this labor wide. Right. This is a moment we feel like this is a moment. How widespread is it. And I think the markets are still trying to figure that one out. I don't think anyone is saying yes for sure. We're going to see this wage inflation go not only in 2021 but 2022 to 2023. And I think that's one of the things Katie is kind of getting at is some people are just saying well hold on a minute. You know we've been around these markets a long time. There's a lot of people
who do remember seeing wage inflation now cash back in the 70s. But it's been a while. But I don't I don't know if we can quite say for sure that we're going to just see rampant wage raises going on for years. But maybe I'm wrong. I mean this has been some sort of a shift or sea change that we've seen this year that really we haven't seen especially in the manufacturing space probably for 30 to 40 years. Well yeah and that's that's the point isn't it Katie that this is a once in a generation
shift. ISE there are people. There are people my eye I'm 50. There are people my age that vaguely remember inflation but never really had to deal with it in the office. There are. There's a huge number of people that are younger that have never even seen inflation never seen interest rates in the teens. Never seen house prices going up. Kind of similar amounts as a result of what is happening here and asset prices reacting. Katie is there is there the institutional memory that is in the market that is capable of kind of contemplating such a big pivot. Well that's part of
the worry because if we're talking about core P.C. we're talking about headline CPI it's at the highest levels since 1990. I mean three decades even if you've been managing money for 10 20 years you probably haven't seen this in a long time and you haven't had to deal with this. And I mean the risk is that we do end up going back to what we were seeing in terms of the late 60s to the early 80s in terms of how the bond market reacts how the equity market takes its cues and whether institutional memory is there. I mean again we're talking in terms of decades so it's definitely questionable if that's enough to kind of move the
market then. All right Katie thanks a lot. Joe thank you as well. It was a really good conversation. We appreciate that. More and more about inflation how it's showing up in food prices. We're and talk to Jonathan Ne'eman. He's a sweet Shery Ahn CEO. He'll be joining us later on in this hour. Coming up right now. How do you hedge your portfolio against all of this.
Anastasia Amoroso I Capital Networks chief investment strategist joins us next with our strategy. This is Bloomberg. Not only have rates come down bringing with them the prospect of returns on all securities and all not not just fine but at the same time markets have become more efficient. It's not easy to beat the market these days and end. And the margin of superiority to be extended exists is smaller. That's the definition of efficiency. And you must expect that markets will become more efficient over time as this one was having rights.
Oh capital co-chairman and co-founder speaking in Bloomberg earlier yesterday. Joining us now on stage Amoroso Capital Network's chief investment strategist. Easy money has been made. Take a look what happened dear in wage inflation hot hot economy. How do you hedge it. How do you hedge inflation. Well I think it's the critical question to ask for 2022. Because
hedging inflation this year has not been a problem. If you look at equity returns we're up 25 percent. And even though fixed income has done pretty badly you still have a 60 40 portfolio that probably is giving you about 15 percent. But I don't think that's going to be the case next year. So if inflation persists next year and most economists agree that A will we're still expecting inflation of four point six percent next year. That means that hurdle rate for your investment returns has to at least be four point six percent. But when you look at consensus Alex and you look at the expectations for the S&P we might get a
nine or 10 percent return. And if you look at bonds prices and where they might be headed there's probably going to be another year of declines. So my point is that the 60 40 portfolio is just not going to be enough to beat inflation and deliver returns in real terms. So that was a long winded way of saying that you need to look elsewhere for those returns. And those
three things that I would point to first of all is real estate. Second of all is private credit. And the third one is crypto. Hayes I think has to be a part of the inflation hedge portfolio. But real estate you meet many people probably do have an allocation to reads but it's small. Right. It's 3 percent of the S&P. So the area that we're looking at is in private real estate where you get sectors like apartments or leisure and hospitality they give you a pretty good inflation pass. Yeah.
So there is an alternative to equities is what you're saying. Yes there is an alternative to equities and I think investors need to increasingly look there. Obviously that's been a big part of our discussion with clients is what's the alternative to the 60 40. So I like real estate. I like private credit because we badly need a guy an alternative to fixed income as well. As I mentioned if you look at the global bond market performance you're probably down two point two percent for the year. So at
this stage you're just to be clear this is you're talking about the 40 you're not talking about the 60 to 60 is still in equities. Well the 60 is in equities. And you know I think the 60 is going to be fine in terms of delivering that 10 percent return. The 40 is not going to be fine. It might deliver a negative return. But you blend the two together you're not going to get a very high rate of return most likely next year. So that things that you might want to do is peel a little bit from the 60 and allocate to something like crypto currencies because if the portfolio has a chance of beating inflation you have to have hyper growth in the portfolio. And if I look around the world today if I look across disruptive technology that hyper growth
is happening in crypto currencies. I mean look at the returns that's here in crypto. It's something like a Bloomberg Delphi index is up more than 200 percent I think to 150 percent. So this is clearly where that growth is happening. And the problem is inflation. And it's not just denting your disposable income is denting the real return. And the real value of your portfolio. So I'm trying to understand then sort of what crypto follows because as it minds it seems like it's falling gold a little bit. And then other times it feels like it's following large cap tech. So it's more of the growth here thing. So how
does that help as the hedge. Yeah Alex it doesn't unfortunately fit in neatly in any one category. When you think about something like bitcoin it probably has most of the classic inflation hedging characteristics because we know that it's supply constrained. And as long as the demand and adoption of it continues to rise that that should do fine. But what I what the way I think about it is really what is the space that can deliver that hyper growth. And it is crypto. So I do think that for most investors it's about it's more of a tech play. It's more of a growth player. Maybe it's a classic kind of a commodity currency play. But by the way when you look at technology one way to value
technology like we were doing in the early days with Facebook and Netflix is the network value. So it's all about adoption is about the number of new wallets the number of new addresses. And we've seen that number surged this year. And I think there's a lot more potential ahead. So David Solomon yesterday over Goldman Sachs CEOs talking about the fact the fear and greed are out of whack that greed is basically in charge and is in the driving seat right now. You're talking about looking at
alternative ways of valuing some of these assets. And many people will say well that sounds exactly like what we were talking about in 98 and 99. Do you think fear and greed are out of whack here. I think there's definitely performance chasing. I do think there is a lot of greed that has crept into the market. I will say you look at something like call buying call options. We saw the net buy in the top 2 percent since 2000 and since 2000 the other week. So there's definitely some aspect of chasing here. But you have to step back a little bit and to go back to crypto for a minute. If there is a hundred million theorem and block chain theorem and Bitcoin addresses right now. What does that hundred million going to do. Is it going to go to
two hundred. Three hundred more. And I think the answer to that most likely yes it will over time there is over five billion adults worldwide. So I do think that a potential adoption curve is pretty significant. So you know guy maybe near term you could definitely make an argument for a lot of the assets not just crypto but equities semiconductor software. Maybe that has run up a little bit. It's a little bit to stretch. So I would not be shocked. In fact I would love to see a pullback in some of those risky assets but as a pullback they would want to buy given what lies ahead in terms of adoption. So. It's not two thousand or is it.
I don't think it is. Two thousand in. In many ways probably one of the most significant ways. If you looked at two thousand and you had interest rates that have been hiked significantly leading up until then and as a result of that you actually would have been better off in the bond market versus the equity market. And that's just not the case today. Given where real rates are and given the Fed that is not really rushing to hike them anytime soon. I think it is just a very supportive environment for markets. And look I'm sure there is plenty of young and unprofitable companies that are commanding stretched valuations. And that's something that we need to be aware of. But I think the amount of destruction the amount of innovation the amount of opportunity is really significant at this stage. Thanks a lot. It was great to see you in person too. Thank you
so very much. Anastasia Amoroso of ISE Capital Networks. Thank you. Guy here stocks really rolling over. Cisco leading the decline. SALES force also lower as well and some in the large cap to some large cap names. Absolutely. You've seen it from the get go really in Europe. We've been down from the start of trading the stock 600 as you could see really nosing over now. It's been some of the old stocks that I've been doing it. It's been some of the heavyweight miners that have been doing this that you have to take a step back though. I what was the number there for 87 were
a full 90 record highs still on that that that far away. We're kind of bouncing around but nevertheless. Yeah a little bit of a sell off and it's on some okay. Volume. The volume is kind of mixed across Europe's better over in the United States. What are we gonna talk about next in video. The chip sector absolutely hot right now surging to a record. Its growth in the last eight quarters now makes its three times the size of Intel. A talk more about that next. This is David Wilson. This is Bloomberg. Look at the video. They Wilson over the fiscal third quarter results went over well earnings and sales beating analysts
average estimates in the Bloomberg survey. Fourth quarter revenue outlook same story. And it's all about data centers and video. That's the fastest growing area of the business. Fifty five percent increase in revenue in the latest quarter. Overall 50 percent six straight quarter where they had that kind
of increase. And in Virginia which took over rough last month from TSMC Taiwan as the biggest chip maker in the world. Now that gap is now about 30 percent after these results. And if you look at companies this year in terms of market value increases and video has now jumped the third it was fourth as of yesterday. Only Microsoft and Google's owner Alphabet have added
more market value. So it just then videos on a roll. Yeah. No kidding. Definitely on a roll. Huge market cap now. Hey Dave thanks. I really appreciate Bloomberg Daybreak and my team video stock up by about 9 percent. Coming up 17 sweeping goes public. We're gonna talk to the CEO Jonathan Nevin. That's coming up next. What is he to do with the money. What about inflation.
This is Bloomberg. Live in New York I'm Alix Steel Guy Johnson over in London. This is Bloomberg Markets we are about an hour into U.S. cash trading. Pretty good to look into where we stand Christi. We are rolling over now. We are. And we started green on the screen thanks to those chip makers in particular. But you can really see with the rest of the market started dragging the index lower not just here but over in Europe as well. You can really see it is a risk off tone. You're not seeing that though in treasuries which was really flat on the day yields not moving anywhere really in anticipation of whether or not we're going to hear about this new Fed decision. Is it going to be Lael Brainard. Is it going to be Chairman Powell again.
We don't know. And you can see the Treasury market really just bracing for that. Well where all the action seems to be Alex is going to be in the oil market in particular after days and days of trying to find some way to really get those oil prices lower. It looks like Joe Biden has had some success talking about a potential reserve release not from the United States but over from China one of the results of the conversation between Xi Jinping and Joe Biden as well. So you can see it is that that's
kind of pressuring oil prices just a little bit. But the question is how much and when is it coming. That's what you're seeing a little bit of choppiness intercession today. Let's get to some of those micro movers though because those earning stories are still trickling trickling out hot and heavy especially when it comes to those retailers. You do have Macy's up a whopping 17 percent. Same story with Kohl's up almost 7 percent. The story here beating their earnings. A positive holiday forecast. But here's the difference. Macy's is talking about expanding their digital marketplace using the
buzzword e-commerce. And that's why you see that 17 percent increase in Macy's at the moment. A different story when it comes to Victoria's Secret and Bath and Body works. No the two spin offs of limited brands in particular Victoria's Secret once again 14 percent for them. The story is a little bit different. They beat expectations. No one thought that they would. So coming into that they are having a pretty good boost. I'm going to end here with the tech story in particular because end video was the big market mover intraday. You did see it up expanding their business from gaming into data center chips in particular and ending with Cisco which of course Mr. Estimates blaming those supply chain concerns.
Christy thanks very much indeed. There are some reports suggesting that this sell off may be down to the fact that we are seeing Joe Manchin tweeting that his votes around build back better. The second part of the Biden plan. By no means locked in. I don't know why anybody is surprised by that but it looks like that could be the case. Yeah he's proves a little tricky when it comes to corralling him with the rest of the party. We'll see what happens next. Alex. Yeah. Also I should point out that there's a lot of options that expire tomorrow. So there's going to be no ability around that too. So we can't just count that part and volumes thinning out. Now I think it's going to be a real bumpy one tomorrow. Really
bumpy tomorrow. So it could be a fun Friday. We'll see what happens. Let's talk about an IPO that is happening today. Salad restaurant chain Sweet Green going public. It's doing so on the New York Stock Exchange. It's raised three hundred sixty four million dollars in an above range IPO. The business founded back in 2007 is got 240 locations. It now operates across 13 states.
Joining us now from the New York Stock Exchange is Jonathan Neiman Swe Sweet Greens C E Oh Jonathan I really appreciate your time today. Thanks for taking some of it to talk to us. Look you said at the business a while ago you've obviously been working towards this moment your IPO ing the business. Now what. Well first of all thank you so much for having me. You know over the past 14 years Sweet Shery Ahn has built an amazing brand supply chain CAC capabilities and most importantly culture and team and we believe were at it. We're at a very exciting inflection point as you mentioned. One hundred and forty restaurants across 13 states. But we have a very big mission and very big vision. Our mission is connecting building healthier communities by connecting people to real food. And we'd like to transform fast food and make it healthy. So the current plans
are to double our footprint in the next three to five years and over time create a massive global iconic brand. That changes the way people eat. Hey Jonathan congrats on the IPO. Also waiting for it to trade on. Where are you going gonna be building. You're obviously very much geared towards urban centers. And we've seen a lot of people from relocate to the suburbs particularly during the pandemic and a lot of work from home. How do you take advantage. What do you do with that. Yes. So we started the business in Washington D.C. in four and really intentionally wanted to open. And a lot of the major cities around the country whether that be New York Boston Chicago Los Angeles and San Francisco. But over the past few
years we have expanded our reach to many more communities including Colorado Texas Florida and. And we are really excited to continue to meet our customers wherever they are and follow them home. So Twittering is soars successful stores in both urban and suburban markets. And eventually we would like to be everywhere. So we're looking to open new markets every year and
bring our healthy offering to more and more communities. How do you think the sweet green should be valued. Are you a tech company. What kind of a company are you. I know you've got the the Spice acquisition which I think you are still incorporating. What kind of business all you particularly with with kind of rolling spice into the business. Do you think how should investors see you. So first of all Sweet Green is a brand and a food company. First we leverage technology in order to make it a better consumer experience and a better experience for our team members. Whether that be our five channel model and having multiple ways of ordering from a customer perspective. The software we build
inside of our kitchens or from a supply chain perspective to create a more efficient working environment. And eventually we do believe automation can help create a better working environment for our team members while creating a better experience for our customers with faster speed of service and many other attributes. We're very early in our in our development of automation but very excited for what that can do over time. Jonathan does that mean that you're going to replace
workers with robots and robots that make my salad. We're actually not going to replace workers. We believe the workers will work side by side with humans and elevate the job of humans and allow us to open many many more restaurants than we would without it thus creating many more jobs. Today we have 5000 passionate team members. And one thing I'm really really proud of is yesterday right before going public on the eve of our public offering we did what we call a gratitude grant an equity grant to every single team member in the company. That means you from the dishwasher through the executives every single person received equity so they aren't an owner in Sweet Green. As we look to expand
in terms of those team members what are they earning now versus what they earned a year ago. Are you struggling to find people. Is there a labor shortage that you're struggling with. Just give me a sense of from an operational point of view where the struggles life. So of course as you've read it you read it you read and hear in
the news. Labor's definitely been challenging for our industry. However people want to work at Sweet Green. We have a mission driven brand an amazing culture that people are attracted to. A lot of growth opportunities with the number of stores where we're building. You can come join Sweet Green and within three years go from a core team member to a general manager what we call a head coach. On top of that we have best in class pay and benefits including parental leave for every single person that works at Sweet Green we pay above market rates for all of our team members. And like I said we offer things like equity as
well. So we're really proud of the working environment and what we do for our team members. And they are a most important ingredient. They are what makes squeaking come to life every single day. In reality though the ingredients are actually like salad and stuff and vegetables and things like that. We were talking I were talking earlier about wheat prices being high. Copy prices being high. Soybean prices being high. How are you managing the cost inflation right now. How long you think it
last for. Sweet Green ISE is a really interesting supply chain. We have over 200 domestic and suppliers and partners made up of both small medium and large partners. We really focus on the relationship with those partners. Thinking about the soil health the nutrition and the taste of that food because of the way we've set up our supply chain. While there's definitely been challenges that we face like everyone else we've been able to
navigate it really well and have a lot of resiliency in our supply chain. So very proud of the way our team has navigated in the way we've taken care of our farmers and partners along the way. So you've got more suppliers then you've got outlets right now. Do you think ultimately that balance changes. Do you think
ultimately you will have to consolidate some of those suppliers. No. We look to build a both a national and regional supply chain. So we have national partners as well as regional and local partners in every city we go to. So as we continue to scale we would love to bring more suppliers onto our network but we would also be able to leverage the suppliers that we have today. Over 60 percent of the suppliers we have today. We've been working for multiple years at a time. So we're really proud of those deep relationships and what that does to bring the sweet Shery Ahn experience to life. Jonathan thanks a lot. We
appreciate it. Waiting for that stock to start trading. We appreciate your time today. Jonathan Ne'eman Sweet Green C E O. All right. Coming up Preeti was mentioning it. Oil prices rolling over. But is it going to be enough. U.S. propane prices are also dropping from those October highs. So have we hit the top or the worst fears about a winter shortage actually overdone. We're going to break it down with suburban propane CEO. Be joining us Matt next. Al Michaels developed. This is the.
This is Bloomberg Markets marriage could get better and you're looking at a live shot of the principal groom coming up. U.S. Senator Rob Portman to High Flyers p.m. a New York fact that 2 p.m. in London this is Bloomberg. That taking on the beanbag first Rodney's which could get to the leaders of the US Canada and Mexico will hold their first in-person meeting since President Biden's election. The three will meet at the White House today. Amongst the issues likely to be discussed energy borders and auto manufacturing. Trade disputes remain despite the rewrite of the North American Free
Trade Agreement in Canada. The city of Vancouver has been cut off from the rest of the country by land due to flooding and mudslides. Major highways and rail lines going in and out of Canada's third largest city have been blocked after what local officials call the storm of the century. That's led to panic buying at grocery stores and inflation's on the mind of bankers around the world. Economists at JP Morgan now expect the Fed to raise interest
rates next September. JP Morgan is the latest Wall Street back to abandon an earlier forecast that the Fed would stay on hold through next year. Meanwhile the CEO of HSBC also sees rising prices as a big issue. We took to Quinn at the Bloomberg New Economy Forum. I am concerned about inflation because I think at the same time as the supply chain recovery there are some new issues. Supply chains are repositioned in part because of geopolitics partly because of resilience considerations by governments. Oh prices are going to remain high for quite a while after hitting what
was a 70 year high. Oil prices have eased over the last four weeks. Global news 24 hours a day on air and on Bloomberg Quicktake pad by more than twenty seven hundred journalists and analysts and more than 120 countries which could get to this is bean bag. IBEX. All right. Thanks so much Vertigo. So let's stay with oil prices for a second. Will it be China. That's going to further help ease those concerns over higher oil prices. China does say it will release some of its strategic petroleum reserves to help the global energy markets. Joining us now Annmarie Horden from the White House. Anne-Marie did the Biden
administration do this. How did this sort of come about. We don't know yet because China has done this in the past and they recently did it in September to the tune of a little bit north of 7 million barrels. But the timing is interesting and it comes off the heels of President Biden and that virtual some summit with Xi Jinping and they talked about energy security and the volatility. And then the next day we heard from National Security Adviser Jake Sullivan and he said that the two leaders
agreed that they would work on energy and tasked their teams expeditiously. And then what do you have just 24 hours after that China looking at tapping their strategic reserves. It is a huge win we should say for the White House. They have not have to tap their own reserves just yet just corralling consumers. And the threat of it has been able to push down prices. So we're now in a situation where you've got a cartel of producers we call it OPEC OPEC plus and now a cartel of consumers. I wouldn't go that far. I wouldn't say it's a cartel of
consumers. We only just heard from Beijing. We still need to see what maybe India South Korea Japan and the United States will do. I think the question is is the verbal intervention enough or will the US have to actually go tap the SPDR to try to put a lid on gas price and of course ease concerns for consumers at the pump because that's really the president's biggest problem those rising price and gasoline and groceries and just the threat of higher inflation still yet to come. Groceries and gas. A lot of people pay attention to that. Annmarie Horden thank you very much indeed. Joining us from the White House let's stay with the
energy theme. Propane prices in the US have actually dropped from their recent highs down by around 25 percent off the October highs. So concerns over a winter shortage story kind of a little overdone. Suburban propane operates in 41 states and is one of the largest propane suppliers across the nation. Its CEO is Michael Stovall.
He joins us now Michael. Really appreciate your time today. It is perfectly timed. This conversation October saw the highs. We faded since then. Are we going to be OK this winter or are we going to revisit those highs. Do you think. Well first of all thanks guy for having me this morning. I
really appreciate being on the show. Look the the supply situation in the US is not is not necessarily what I would consider temporary. OK. Is there's three real factors that are playing into the current supply situation for propane here in the US. One you have to look back at pre pandemic activities where you had a significant ramp up in the industrial complex in Japan in China and other parts of Asia. As more and more production of the goods that we need every day was was coming from overseas. And so that significant ramp up in manufacturing activity in Asia a lot of that is fed by energy ls that that are
exported out of the United States and propane in particular on top of that. Recently obviously we've seen a significant shift in energy policy and significant regulations placed on the oil and gas industry which is really made production and refining activities very difficult in this environment. And so that's not allowing the production to keep up with some of the demand. So myself. So Michael on that point. Let's just pretend that the U.S. does release some oil from the SPDR and that China does the
same. Does that materially impact what you do. Certainly not what suburban propane does. We're we're a retail distributor here in the United States. We serve a million customers for their home heating cooking clothes drying. We serve commercial industrial customers. So we are a domestic provider of energy to to our consumers.
Let's face it. The release of strategic petroleum reserves ultimately needs to be refined. So the move just to release reserves is not going to immediately impact the supply of propane here in the United States until ultimately it gets refined. And I think that's where some of the regulatory framework can get in the way. The other the other aspect is we are exporting a significant amount of propane out of the United States into Asia. Exports have typically ranged in the million barrels a day range. And over the last several months as economic activity has increased we're touching closer to a million million and a half barrels a day going overseas.
Michael do you think the president should say enough's enough and say actually we're going to put some export bans on. Do you think that propane should be staying in the United States. I'm not. Look I'm not a proponent of a bands you know from from an export perspective. I think I think I'd rather see a little bit more regulatory relief to help out some of the situation. I mean certainly if if if the situation here in United States gets to be very challenging then then that that could be on the table. But the reality is it's all going to be driven by the weather. OK. The last time we were at propane prices that were this high
in November was in 2011. Then it was almost the same pricing structure. And we happened to hit the warmest winter on one of the warmest winters on record for 2012. And that ultimately significantly brought prices down immediately. By and by February prices were where almost a third below where they were in November. So lots going to depend on the severity of the winter weather. That's coming up where the weather occurs and how sustainable we get challenging weather or traditional winter weather. So my goal later on today you have an la Justin Trudeau and President Biden
are meeting. And something that's going to be talked about most likely is Line 5 which is a pipeline that runs from Canada to Michigan. Propane is on it and oil is on it. Do you think that that closes or does it live. Well I sure hope it lives. I think it's very misguided thought that we can do without the amount of propane and and oil that comes in from Canada to serve some of the critical needs particularly in the upper Midwest there. I mean that that line is a significant contributor to the energy needs particularly of Michigan Wisconsin ers. And I think if that if
that ultimately gets cancelled that that can be a real significant constraint on the energy needs in that particular part of the country. Michael how much of the propane that's being used the United States at the moment is related to outdoor dining. Covid starting to make a return in certain parts of the United States. Outdoor dining could be a feature once again this winter. Where is the propane that you're selling being used right now. Well we've seen a bit of a normalisation in propane demand over the over the course of the last twelve months. Right. When the pandemic hit you saw commercial industrial demand just completely crater. And we were surprised and pleasantly surprised by the residential sector that picked up significantly on that on the demand side both because of the stay at home initiatives where more people were in their homes and therefore using their their heat.
But also the outdoor activities. And through the summer of 2020 and ultimately into the fall of 2020 we did see a significant change in outdoor dining activities that brought demand for propane. But as we got into the winter of 20 21 and we started to see some of the Covid restrictions easing businesses opening up again we we saw a real normalization of demand where commercial activity came back. Industrial activity was back and residential sort of got back to a more traditional heat related demand. Right. Yeah. Michael thanks a lot. Really appreciate. I just walk in on the restaurants here in New York. See all that propane Michael Barr suburban propane CEO. Thanks very much. More on oil and gas
prices and yes PR release and commodities. That just coming up at 1 p.m. in New York 6:00 p.m. in London. Don't miss that today. This is the. Amanda Lang Guy Johnson Alix Steel over in New York. Let's take a look at where European stocks are. We're heading into the
close were fading into that close but there's some single stock names that we really need to talk about and dig into. And as the French luxury giant's trading really strongly today. J.P. Morgan suggesting maybe just maybe this is a stock that gets put into the euro stocks 50. That certainly would provide a huge tracking boost decent up. The steel giant's up by 7 percent. Let's call it good set of numbers today. People are a little iffy on the free cash flow outlook statements. But nevertheless this is a company that still has an awfully long way to go to the sum of the parts valuation that people talk about when you break this business up. We talked about it earlier on this week with the hydrogen story. And here's my story of the day. Naked wines down
by 5.2 percent. The reason for them to pass we're not drinking at home. Alix Steel is still drinking at home. This is Bloomberg Daybreak.
2021-11-22 01:08
