Transcripts For BLOOMBERG Bloomberg 20240703

Well sit down with both c. E. O. s. Flying into the future. Were going to sit down for an interview with Virgin Atlantic and delta on the next steps in aviation. From new york, im alix steel with my cohost, guy johnson, joining me in new york. Welcome, everyone, to Bloomberg Markets. Guy you did really well. I thought we were going to say london. So nice to see you. Guy im a little discombobulated by sitting down, finding that whole thing weird. But side by side. Alix and chairs are squishy. Guy oh, yeah, i can lean back. All kinds of stuff. At some point if i keel over backwards, its not because im completely jet lagged, its because the chair doesnt work. Alix please dont do that. Guy we got a great show. So i come to new york, and it looks like things happen. Alix theres an oil deal, and then airline c. E. O. s, the best of both worlds on both ends. Well be talking to chevron and hess in the next 45 minutes on this deal. The number one question im getting from this is are those toy hess trucks going to be available . Guy this is the thing you get for christmas in america, right . You get like an oil truck. Alix you get an oil truck, yeah. An oil truck that, like, is cool and everyone loves it. Do they still exist now . Guy how big are they . Alix i dont know, really, really large. Guy you dont have one . Alix no, i dont know. So you get a toy tanker or you get a toy plane. Guy ok, we can do both of those. Its going to be a great show. The airline thing i think is fascinating. So i got this whole theory were going to talk about. If you want to know whats happening in the global economy, dont talk to an economist, you talk to an airline c. E. O. , because they see everything. They see consumer confidence, they see the oil story. They see cost, labor, everything. These fight are going to tell us whether they get a hard or soft landing. Alix as we see with some of the numbers, earnings really are mattering. Like, if you miss, you get hit really hard. Guy is that the nice segue . Shes done well. Ok, so what matters more this week . Is it yields or earnings . Also throw in the geo politics as well, which i think is going to be the wild card that were going to have to continue to factor in. May not go away any time soon. Joining us in the studio is an analyst ive never met liz before. This is a fantastic experience. Weave met in london. I feel like i spoke to liz so many times. I knew you were coming. Alix hes like a local celebrity. Guy coming in on a monday. I want to see guy [laughter] alix im serious. Guy dont be upset about this. Ok, so lets talk about what were meant to be talking about. Liz, what do you think . We come in on a monday. Mondays have recently been higher for equities. We come in on monday, im looking at a down market so far. Yields touching 5 . Its never a straight line, but looks like thats the direction. Tentacles dont look too good either. You got the hamasisraeli conflict we need to talk about. Bring it together. What do you think the market is going to focus . So we come in, we were joking, it was going to happen overnight that we finally hit the 5 , which is just psychological, right . Its not a huge technical level. But i think right now theres a lot of people in the market who lean more in equities that hope that maybe the tech earnings this week will kind of push to the front, and well have some great earnings and projections, and we can kind of stop worrying as much about the rise in yields. But thats like maybe, right . Because this rise in yields, i think the risky part is its not set to stop in the sense, youre not getting all these massive, you know, people coming in and buying. We have come off 5 . We were above that. But i think until the momentum for higher yields, which the fed is not doing a lot to help that. Theyre kind of leaning into higher for longer, the tech earnings and other earnings will kill it. Thats my two cents. Alix if you dont kill it, you wind of getting punished quite a bit. What do you think . Earnings, yields . Yeah, so obviously the losers are being punished quite a bit, but the interesting thing were seeing so far is the up winners are also being punished. Weve seen them lagging. Of course, were very early in the earnings season, only 1 5 of the names have reported so far. But this is definitely a sign that macro forces are being important. There is obviously, if you look at the complied correlation, weve seen a little bit of increase. They were pretty much the lowest since 2018, quite recently. But since its been heightening, weve seen the comovements being more and more open, which is another sign that really macro forces have become more important the last few weeks. Guy this is the week, isnt it . This is where everything gets exciting. You have the tech stocks have held up. Theyve done really well. Theyre coming face to face with a 5 yield. This is kind of this is everything. If tech doesnt hold up this week, if earnings dont hold up this week and the 5 story becomes the dominant narrative, theres a great piece talking about apple and its earnings yield, the fact that its beginning to struggle, even apple is beginning to struggle against the 5 yield. This is the game. Tech has held up, supported the equity market. Alix but tech is rolling over. Its back to the lowest level since june. Guy but it has held up this year, and its been the thing that supported equities. So we finally get to the point where tech doesnt hold up, is this the point to which equities start to crack . Are we finally getting to that moment where were going to be able to answer that question . Yeah, i think this is definitely going to be a very, very important point, and you see, even now the earnings is just waiting for big tech and this is the big thing, and of course, that competition as you said has been really increasing in terms of if we look at equity risk premium, its really attractive to treasuries against stocks. Its really attractive to cash. Weve been talking about this a lot. And yes, earlier this year, higher bond yields werent putting that much pressure on tech. That has kind of changed. The target is different now. So thats kind of the focus back to fundamentals the next few weeks. Really change the picture, and obviously previously tech has been the few companies that have been dragging the index up. And you can imagine if there is a disappointment, we can see the opposite reaction. Alix i wonder, guy, have we already seen some of the damage of 5 yield on tech . I was looking at clean Energy Stocks, we talk about solar edge on friday. That group, which can also be techy, is getting really hammered because of the yields. Its a different sector that we need to look at. Guy im still waiting for big tech. Those big tech guys that have held the market up, and if theres any indication that that story, that narrative isnt going to work anymore, and the tentacles to your point, they dont look particularly good either. Alix no, very bad. Guy all of that comes together. Liz, how do we fold in all the other stuff into that story . You got the conflict thats happening in israel. You still got conflicts that are happening elsewhere around the world, plus weve got the ongoing situation in d. C. As well, which weve got to think about as well. Whats the bond market looking at this week . Whats going to focus minds there . Is this going to be the e. C. B. Meeting . Is this going to be whats happening in geo politics . If yields are leading, then what is leading yields . Liz i think its everything. We have Third Quarter g. D. P. Later this week, which that may be a lagged indicator, because were in the Fourth Quarter already. But those g. D. P. Now forecasts have been running really strong, and i was reading steven stan live saying its going to be soft, but forecasters have been so wrong, right . What happens if Fourth Quarter starts looking good . Thats keeping the bonds yields high. And remember, i think the market still has some more room to go as far as pain in the bond market, because were not fully priced, way below 50 for one more hike. What if the he fed sees more strong data and hikes again and were priceddedded and were priced for cuts by june . I dont think you can write off that pain. Were looking at the economic data, the mayhem in d. C. Is not going away. And you know, we do have off and on again flight to quality bids, but lets hope officials are trying to contain a broader conflict happening. So, you know, the bond market just cannot kind of be at ease, and theyre on tender hooks. But i think the dataing is going to be key this week. Alix funds alone with throwing off 22 billion. Its a lot of money sticking around. Thats in part why its held up. Really appreciate it. Denise, not cool, and liz, thank you both very much. Coming up, more insight into the question of the day. What matters more, yields, earnings, geo politics, technicals . The Portfolio Manager at Advisors Capital managers joins us next. This is bloomberg. Ameritrade is now part of schwab. Bringing you an elevated experience, tailormade for trader minds. Go deeper with thinkorswim our awardwining trading platforms. Unlock support from the schwab trade desk, our team of passionate traders who live and breathe trading. And sharpen your skills with an immersive Online Education crafted just for traders. All so you can trade brilliantly. In the u. S. We see millions of Cyber Threats each year. That rate is increasing as more and more businesses move to the cloud. So, the question is. Cyber attack as cyber criminals expand their toolkit, we must expand as well. We need to rethink. Next level moments, need the next level network. [speaker continues in the background] the network with 24 7 builtin security. Chip . At t business. This is incredibly important week from an earnings perspective. The big cap. Were going to be looking for big tech to produce good results. Theres opportunity in technology companies. Weve seen some Pricing Power in some of the companies. Theyre experiencing an improvement in financial conditions as Interest Rates rise. We think about the tech group as a whole, a. I. Has been a big driver. Those companies are extraordinary. Most of them are extraordinary in terms of quality of their operations, the amount of cash they have. When you think about future of stock upside from here, we are very much focused on that earnings picture. Were going to be counting on big cap tech and communications to do the heavy lifting. The economy isnt necessarily the equity market. We need to be sensitive to valuation. Its important to focus on reasonably priced technology. We need to be very careful about stuff that is sensitive. Its not so much whats happened, but its the outlook statements and what consumers are going to be doing. Its absolutely about the guidance. Alix those are some of the guests previewing this week in big tech earnings, which nicely leads us to the question of the day. What does matter more right now for investors . Is it yields or is it earnings . Were also talking about technicals as well. Joining us now is a partner and Portfolio Manager at Advisors Capital management. Good to see you. What matters, yields or earnings . Well, alix, its earnings at this point. Yield is baked in. In fact, i think there are three words that characterize the market right now and probably for the foreseeable future, and thats the fed, fundamentals, and fear. And so were going to get a lot of information on the fundamentals over the next couple of weeks, particularly this week with some of the big Tech Companies reporting, and i think its important for investors to remember at this point where do they want to be in a year or two . Its important right now, given all thats going on, to look to the longer term, and thats why i think the big Tech Companies have been holding up so well. Guy joanne, good morning, its guy. Yields are continuing to rise though. And as they move incrementally up, up, up, how good do the tech earnings need to be to compete with that . Joanne right, the yields have his an lot, and guy, they may end up going up a little bit more. I agree thats still a risk. But that increase is still now taken out of those valuations. So anything thats good from here is pure gravy for the tech guys. I dont think theres a lot built in right now to near term expectations. In fact, i think theres a lot of caution about what the end of the year is shaping up to be. Theres a lot of concerns that the consumer strength could peter out, a lot of questions about what the Holiday Season brings. And also, theres a lot of questions around the u. S. China trade situation with those new restrictions coming into place last week. Alix you bring up a good point in terms of already being beaten up in some ways. The s p is trading below its 200day moving average at this point. Im wondering if the bar for clearing and getting a bounce after earnings is low enough that we can kind of take a little sigh of relief or not yet . Joanne yeah, i think its going to be companyspecific, alix, and thats what we saw last week. We saw some of the equipment guys report, and they had good numbers. But the conclusion was because china pulled forward a lot of the spending they want to do to get ahead of new restrictions, so they didnt get credit. I think its going to be company by company. And so when we see microsoft, amazon, google report this week, theyre going to probably be given more credit or more, you know, scrutiny on what they say for the longer term. Are they seeing the demand from a. I. . Are they seeing advertising bounce back . Microsoft announced a new arrangement, for example, with australia in a. I. This week. How much might they see in Revenue Generation over the next, not just quarter, and not just single year, but a few years . I think the big guys are going to speak to that. Guy joanne, can these tech stocks keep equity markets in positive territory . Can they stop the huge down drop that were seeing in other sectors . Are they big enough, Strong Enough with all of the forces that are competing with them right now to keep equities on track . Joanne you know, guys, you point to a really important question, which is what do investors care about . Do they care what the s p index does . To your point, do they care whether the s p continues to move higher . Not really. What they care about is what they own in their portfolios. And so if they dont own the market, if they dont own just the magnificent seven, theyre looking at what they do own. And so, you know, if youre selecting stocks to be diversified and not on the whole market, which because the whole market is basically the magnificent seven, then youre asking a different question, which is, you know, might healthcare recover . What are the fund meants driving industrials . How much u. S. Spending is going to happen to boost the industrials over the next year . I think we need to ask a different question, not what is the s p going to do, but what are specific Companies Going to do . And i think thats what investors ultimately should care about. Alix so what should we care about, oil and big oil buying hess and Energy Stocks . Joanne yes, absolutely. Right now, remember the third world i mentioned, the fed, fundamentals, and fear. Fear is an important consideration. Diversification being a big part of that. Energy stocks i think right now, given the geopolitical turmoil that were seeing, is a very good thing to have in a portfolio, particularly because of the income that it also generates, to help investors get through these tough times when the stocks themselves might be volatile. The m a in this space, consolidation, Large Capital costs type industries with large economies of scale, makes a lot of sense from an efficiency perspective. Generally these are good things, and we like the combination of chevron and hess here. Guy this sounds like stock picking. Alix it does, whats that . Guy yes, and it continues to be difficult. Investors are whipping around the stocks, trying to stay in a stock for a long time, or even in a medium term is really difficult. Alix yeah, also, how do you stock pick and not Pay Attention to the macro and yield at the same time . How do you do both in this environment . Guy its tough, but the market is almost forcing you to do that right now because of the magnificent seven. Its kind of making you do, its making you, forcing you down an alleyway, which i think a lot of investors dont want to go down. And its really difficult. And were relying more and more on these tech stocks to keep the index going. Thanks for stopping by, joanne. Were going to carry on talking about the big oil story that alix just alluded to. It is a huge week for the earnings story. Were going to talk more about oil, were going to talk about tech, were going to talk about yields. Our question of the day, what matters more this week, yields or earnings . Mark lehman, c. E. O. Of j. P. M. Security, joining us next. Security, joining us next. adventurous music be ready for any market with a liquid etf. Get in and out with dia. Todays the day you graduate from Southern New Hampshire university. Ive been waiting for this day my whole life. The fact that i get to walk across the stage and get my degree, its honestly unreal. Dont ever stop. Keep on believing in yourself. It is never too late. If youre out there to wonder if you could be an snhu graduate today is the day to find out. Visit snhu. Edu. Was also the first time you heard of a town named dinosaur, colorado. We just got an order from dinosaur, colorado. Start an easy to build, powerful website for free with a partner that always puts you first. Start for free at godaddy. Com guy were getting an update from the u. A. W. , theyre saying that 6,800 members at the stellantis sterling plant will now join the strike. Theyre saying that brings the walkout total on strike now to over 40,000. This from the u. A. W. The plant, stellantis is the biggest money maker, now being targeted. What is the standout line from the u. A. W. , currently they have the worst proposal on the table. The share price isnt reacting that much. Alix no, we didnt really get that much on friday, i dont think. I wonder where the auto talks are. Clearly this is how were going to go until something is resolved. Guy thats another head wind the market has to deal with, and you wonder when thats going to show up in the data. Lets talk about the week we got coming up, a massive week for tech earnings. Were going to get microsoft, amazon, apple, to name but a few. Those are probably the ones that everybody is going to focus on. Our question of the day, what matters more, yields or earnings . This is when these two, i think, really collide. Mark lehmann from j. P. M. Securities, a firm focused on tech and growth companies, hes here in new york, which is great. Nice to see you in person on set. What do you think . You got yields, you got the 10 at 5 , you got tech earnings, that feels like a real clash of the titans this week. Mark it is, and i think what do you worry about . You worry about both. But i thought last week was a really interesting week. You had obviously tesla and netflix report the same day, and youd argue that earnings matter. I think thats a harbinger for this week, where we have a third of the s p reporting. So i think earnings are more important than yields, but obviously yields creeping up clippers multiples for everybody. Alix for earnings for tech, has tech been beaten up enough that any surprise wont be punished as much or rewarded . What do you think . Mark listen, before the conflict in the middle east a few weeks ago, you had stocks like meta hit a 52week highs. You had a lot of stocks do that. Its not just the magnificent seven, service had a huge week a few weeks ago. Company by company, things are doing fine. I think it really relates to how well the companies are doing, what their visibility is going forward. We saw 2022, they cut profitability by letting go workers, and they bounced back mightily. Were seeing some of the fruits of that now. Guy are you in the market right now, or just single stocks . How do you approach the top down, bottom up . Mark i think its really hard with rates going up every day to feel like the market is going to go anywhere, but these are the teams to invest. The v. I. X. Is over 20, the first time in a few weeks. The fear factor of the market and the coming in every morning and seeing red and seeing the bond yields go up every day, it shows people that are in panic mode. Alix but then we reversed. Tech is higher, yields have erased and are now flat. It doesnt make sense. Mark what makes sense is you look at some of the ills of the market right now. We talked about the strikes, see whats going on globally. Tech is a safe haven in a way, because that kind of growth and that kind of utility for companies is expanding and accelerating. We saw a vista bought a company today. Those are things are still going on quietly while the rest of the market suffers, i think thats a reminder that innovation in tech, and were seeing that at citizens, our clients are calling us every day saying what should we do . Thats a good sign. When were sitting around saying i dont know what to do, thats a problem. Guy is the a. I. Narrative still alive now . Is that something were going to see . Previous quarter, beginning of the year, you said a. I. On an earnings call, you get a nice pop. Does that still work this time around . Mark we need to be more visible with whats actually happen. Sales force said that. I think youre seeing some Things Microsoft is doing that is actual until real time that theyre going to show met ticks on. Meta is showing things. A year ago they dont met the metaverse, it was a year ago october. Alix wow, thats october. Guy thats the new a. I. Alix tech, i dont know, not so much. Ok, so basic question, what do you like in earnings . What names are you looking for . Mark i still think meta. I still think their growth in a. I. , what theyre doing and the data that they have is better than all around them, at a reasonable multiple. Which youre seeing some of the big tech is less reasonable. A Company Called wix, which is not as large as the big seven, but israelbased, but is a a. I. Engine, a terrific, multibillion Dollar Company that weve financed. I think you can find pockets of tech that are really strong. I think microsoft continues to outperform. I think meta is one that you want to watch very, very closely. Guy you talk about israeli companies. How do you fold in the geo politics . Is that something that just makes you, should make you more cautious in terms of putting money on the table . Mark it does, and we have a terrific business in israel. I was supposed to go two weeks from now, and obviously thats tempered now. The resolve of the people and the innovation engine that there is not stalling. Theyre taking care of their people. I think you will see their technology and their commitment to growth and their commitment to venture back startups and their commitment to the future is not going to stall at all. I think you got to be really careful. The multiples have already compressed, but when you can buy it today, you want to do it. Alix so good to see you. I dont think ive ever actually met you in person. Thats weird. Mark lehmann, thanks so much. Im going to read the tease. Coming up, well talk more about the middle east. This is bloomberg. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Its easy to get lost in investment research. Introducing j. P. Morgan personal advisors. Hey david. Connect with an advisor to create your personalized plan. Lets find the right investments for your goals okay, great. J. P. Morgan wealth management. So, youve got the power of xfinity at home. Now take it outside with xfinity mobile. Okay, great. Like speed . Its the Fastest Mobile Service around. With the best price for two lines of unlimited. Only 30 bucks a line per month. Thats hundreds in savings a year when you wave bye to the other guys. All on the most reliable 5g network nationwide. You really shouldnt walk out the front door without it. Switch today at xfinitymobile. Com. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Guy so, we talked about the market, we talked about the yields, we need to talk about your politics now. Western leaders continuing to ramp up their efforts to keep the israelihamas more from escalating. The u. S. Is boosting its military presence in the middle east. For ages and set to enter Southern Gaza after two convoys more eight is set to enter Southern Gaza after two convoys over the weekend. The question over this weekend was when, if, and what does it look like, are we going to get the Ground Invasion. The Israeli Forces have been mustering for a while. We have been would see it. We havent seen it yet. Is the nature of what we should expect changing . I think so, guy. I think the genesis of this was the if was the first question, then it became the when, and now it is the what. The israelis have been laying the groundwork, the idf, saying forget what you think you know about what you assumed this invasion is going to look like, this incursion is going to look like. There is a lot of people who assumed it would be a scorchedearth going into gaza, doortodoor, and occupation. The israelis wanted to leave a lot of options on the table, particularly when you add the complexity of hostages, the complexity of international maybe not fair to say pressure, because the u. S. , the biggest sort of supporter of israel, has been very careful of what it, says, but Antony Blinken said it the first weekend of this event, the how, the how of how israel goes about this is critically important, particularly if according to gazan authorities, more than 5000 people have been killed since the beginning of this already. Alix nick, bring that perspective in front what has the u. S. s role in shaping the next leg of the conflict . Early on he basically heard from israeli officials that they were going to go in no matter what, disregarding the fact that hamas has about 200 hostages somewhere in the gaza strip. Now i think what you are seeing, given that you had two americans released on friday, there has been some tentative hope that you would have negotiations through qatar to free someone of the hostages. You have the u. S. And the eu and others basically saying, listen, lets put the bricks on this or reshape what the Ground Invasion might look like so that we can focus on getting those hostages out. You have seen an uptick on air strikes again. Very much israel determined to go in at some point. But it does appear that there is a great deal of backchannel diplomacy happening right now to ask israel to at least delay and maybe as we are saying reshape what the Ground Invasion look like to go for the hostages. Guy ollie, do we know how many people are at the northern end of the strip and how many people have gone south, how occupied that area is now . You talk about the level of casualties a moment ago. People have moved south. Is that process continuing . Is the northern end of the gaza strip continuing to empty out . Oliver i think it is very difficult to get accurate figures on this. Ive seen between 600,000 and 700,000 people have moved down, and some people are reporting larger numbers of people displaced. It is very hard to tell, amid reports that hamas is preventing people from moving. They began to set up camps in the southern bit and that is where the aid is coming through. Very hard to know what is going on at the rafah border crossing. There is egyptian media reporting that there was another convoy of aid moving in. This sort of aid is a drop in the ocean. The u. N. Is looking for 100 trucks a day for there to be meaningful progress, and are sticking points, fuel being one of them, on the israeli side. Alix i was reading a lot over the weekend by u. S. Forces in the middle east in general coming under some problems. And im just wondering how the u. S. Is being perceived within the middle east and what the repercussions of that may be. Nick you have a situation where the u. S. Is essentially flowing a great deal of military assets into the region and putting troops on ready and sending more fighter jets to Aircraft Carrier groups. On the one hand it is a situation where there is going to naturally be, you would think, a stepped up the pace of activity because there are more troops in the region. That has coincided with what u. S. Officials say is a disturbing trend, more drone attacks against u. S. Bases in syria and iraq. We were getting reports of another one this morning at 3 00 a. M. While there have not been severe casualties, you are seeing outcome and that is something that secretary of state blinken voiced over the weekend, the concern that there will be further escalation against u. S. Forces. Guy are we aware, have we seen, has been observed that there is a change in the nature of the ukrainian conflict as a result of what is happening in israel . How do these two wars, conflicts, interact with each other . Nick well, the big thing is artillery ammunition. 155mm shells, essentially there is ikn there is high demand by both sides, and we have some indications that the u. S. Has diverted some artillery shells to israel. The bigger question is one of the focus will serve ukraine us sought to keep International Attention focused on its plight and the pushback against russia, mostly for aid and obsolete military hardware. Obviously military hardware. If you dont have that support, they argue their position against russia is we can on the battlefield and in the halls of the u. N. And other places. Israel has shifted their focus away from ukraine, and that is something they are trying desperately to get back. Alix oliver, what is going to be the key thing for us to watch over the next 24 hours . Is it still going to be the ability to get aid in . What are the key metrics were focusing on . Oliver aid is going to be one of them. The other is the escalation risk, and where do you look for that . He looked north at the border with lebanon you look north at the border with lebanon. Despite the fact that the main theater of war is in gaza, where there has been another pummeling this weekend from israel, there is more and more engagement in the south of lebanon, and the israelis are backward more and more people near the border. Anecdotally for me, ive been staying in his hotel for about two weeks. I met a number of people that were evacuated from the south. Now it is more and more people evacuated from the north of israel as the tensions rise there. Alix all right, guys, thanks a lot. Oliver cook from tel aviv and nick wadhams, thank you very much. We are a little over an hour in the trading session. Abigail doolittle is tracking the moves. Abigail earlier we did have big losses for the u. S. Markets, but at this point we are looking at smaller moves even close to fluctuating for the major averages in the u. S. You can see the s p 500 down. 25 , but there is the nasdaq 100 down. 1 . The big story earlier today was the 10year yield closer to 5 . It is the relief of it being a good 10 basis points lower than that that is helping sox come off the lows. The other big question of the day is earnings, and as you know it is said to be one of the biggest weeks the biggest week in terms of marketcap reporting, 50. 8 trillion dollars worth of Companies Reporting this week, including to make a cap tech sectors over the last three months since basically the peak four stocks, or the near term peak for stocks. Megacap tech sectors are trading lower, including information technology, consumer discretionary, and the Telecom Sector in particular. Consumer discretionary is down close to 11 . As for the stocks, so many, because 15. 8 trillion worth of market cap is a lot. We are thinking about meta platforms, alphabet, amazon, and microsoft. While they may have been down the last months, you can see they are clearly higher on the year. Meta up 100 62 . Interesting meta up 160 . This is bloomberg. Alix this is Bloomberg Markets. You are looking at live pictures of the principal room. Coming up, a conversation with shai weiss and ed bastian. Is is bloomberg. We welcome our bloomberg tv audience and radio listeners. It is the second Major Oil Deal in just the past few weeks, and this is a big one could chevron announcing a 53 billion deal to buy hess. We are joined by the two men behind it. Gentlemen, thank you so much. What a pleasure. No joke complicit the only question im getting will be toy trucks continue to be available at christmas time . Not to hold you in suspense, yes, they will. Next year will be the 60th anniversary of the hess toy truck. We intend to continue selling them. Guy i didnt know about these trucks beforehand. Was that part of the deal . Was a part of a negotiation . Mike and i came to a mutually agreeable understanding. Alix that is a yes. [laughter] walk us through how this deal did come about. We heard that you guys have been talking for a couple of years. Curious as to why now is the right time to make this happen. We have been talking for a while. There is terrific alignment between the two companies, our portfolios, the cultures of the company, and the people, and particularly as hesss development in guiana has been devious and progressed what was a wider gap in valuation has narrowed. The stocks of the companies have treated to a range where it for both of us. Now is the time where the circumstances have come together, but for quite some time weve seen the fit and the appeal. Alix im curious, john, because on the call it seemed like some analysts were intimating, did you get a high enough price. Also, you are doing things very well in guyana, but you guys are already crushing it why do you need chevron . Its a great question. I think some context would be important. Our stock for the last five years was the number one total shareholder return in the industry whether independent or major oil company. Last year our stock went up 94 , number two on the s p. We have created a lot of value. At the same time, now that the pricing got in a range that would work both for chevron and hess, we think we came up with winwin. Hess brings chevron growth and resource, growth in production, growth in cash flow. Chevron brings hess financial strength in terms of the diversity of worldclass assets, in terms of sterling Balance Sheet, and in terms of industry leading cash returns. When you put the two together, you create the premier oil and gas coveney position for the Energy Transition for oil and gas company oil and gas coveney position for the Energy Transition. Guy what im hearing is this is a great fit. Could you do this on your own . Could you build what hess has built from the ground up . Is it easier to buy than build the right now . This is about longterm growth and longterm value. Hess has a unique portfolio that strengthens our portfolio, something we are always trying to do. Guiana is the biggest discovery in more than a decade in this industry. It is just a unique and compelling asset. It would be difficult for us to do on our own. We will continue to explore everybody in the industry is looking for these things. This was a great opportunity to join a partnership that has done a terrific job with this asset, and the other assets in the hess portfolio will be additive as well, gulf of mexico, southeast asia. It is a nice fit on a portfolio level, nice fit on a cultural level, and we will crave more value for shareholders. Alix how important is the bok and bakken . It is very important. We have a big shale business with the permian. Hess has been doing a great job with bakken for a while. It is about adding another scaled position in shale that is performing very well and we can bring whatever expertise we may have to improve recovery and learn from our new colleagues at hess. We are doing things in the baswin we learn things we hadnt been doing in the permian. It is actually an important part of the transaction. Guy you talk about the price narrowing. You started off widespread when you came in. What brought it in . What factors allow you to bring that understanding between the two firms together . John the gap in shareholders organizing our value, we werent getting credit for 11 billion barrels equipment guy the market narrowed the gap for you . John yes, exactly. It got to the win zone for mike and for us. This is a stock for stock deal, so some people say, geez we are staying invested. Our families will be a longterm holders in chevron and we are happy about it, and we think there is upside to come, in addition to which our own dividend is going to go from 1. 75 a share to six dollars a share and next year 6. 50 a share. You are getting the benefit of growth in asset value with growth in cash returns. I think will be the best will committee kn oil company known and the best work for. Alix i have the state, you guys i have to say, you guys get along quite well. You dont always see that with oil mergers. How did you start this conversation . What started that . Mike it was a dinner. John and i have been friends, great admirers of hess, ive been a great admirer of john for many years. It was a very natural evolution. I think we are both looking to improve our businesses and trade value for our shareholders. We had a nice conversation, as john said, in the beginning, the market wasnt recognizing the potential on the guyana asset in particular. That was the risk as we get closer and closer to the cash flow inflection. It has been a very friendly discussion alix seems like it. Mike by the way, you havent mentioned it yet, but we look forward to john joining chevrons board of directors and continuing to exert influence over this tragedy about company, and esq relationships over the strategy of our company, and he has key relationships around the world. John mike and i have known each other to the industry for years and i have a lot of respect for him. I think he is the best ceo in the Energy Industry and one of the best in the united states. I have a lot of respect for him. Alix it was not a succession john we were prepared to continue as an independent. We are submitting our 90th anniversary is accompanied this year celebrating our 90th anniversary as a company this year. And we are just executing the strategy to go forward. Chevron brings forward that diverse portfolio of assets from the Balance Sheet as well as high cash returns, and when you put those strengths together, you create, i do say, the premier Energy Company out there. Guy there arent many assets like hess out there, but there are a lot of assets out there for i hate to ask this on a massive deal, but are you done yet . We have seen 2 really big deals in as many weeks. I cant that cant be by accident. Mike this is the right deal for us. We have another deal this year. For us come in a grating is very important when you do the transaction. You need to bring companies together, people, operate safely and deliver to your customers. Our focus for the next several months if not longer is really about execution and executing well. In the longer term, our industry has grown through organic and inorganic committee. Organic and inorganic activity. That is not here an outcome that is for the down the road. Further down the road. Alix do think oil will stay volatile . Maybe you can talk more about what you think the Oil Prices Going to be now. John in the short term there is a direct correlation between Oil Inventories and price. Inventories are drawing in a Million Barrels a day this quarter. As you get to next year, demand will grow 1. 5 Million Barrels a day. Barring the world by. Hopefully we wont get there. There are all kinds of geopolitical events be it in ukraine or the levant, tragic events. Taking that factor out, we think the market is going to be tight and the supply side will have to run fast to keep up with the demand side. Shale is no longer the swing producer, saudi arabia and opec are. I think the real issue for the world to understand is oil and gas are needed for decades. They are key to an affordable, just, and secure Energy Transition. The conflict in ukraine put a shining light on energy security. At the end of the day, oil and gas are strategic industry for our country, in terms of job 12 million jobs, more than automotive, direct and indirect come in terms of electricity costs, two to three times less than they are in europe and most of asia, and ultimately, National Security. We are energy independent. Europe by 70 of the oil, china buys 70 of their oil. We have a real strength and we should be leaning into it for Economic Prosperity but also National Security. Guy you can offend a deal in the transition space as you could have done a deal in the Energy Transition space and you didnt, you did this deal. Is the message from this that the industry is now at a point where it is going to invest in the future, that the Energy Transition story is of interest, but it is not the only area of interest, that this is an industry that the world still needs to rely on . You could have done other deals. You did this one. Isnt that the message that comes from this . Mike i would put it a little differently, guy. We have done other deals. We close on the Largest Green Hydrogen Storage facility in the united states, the second largest Renewable Fuels producer in the u. S. , and we are spending our Production Capacity there. So we are doing the other deals. I think the point that john is making is really important we need to continue to invest in the Energy System that supplies the world today even as we are investing in one that can integrate into that and help reduce Carbon Intensity tomorrow. We believe the future of energy is lower carbon and these new technologies will play a greater role, and we continue to invest. I dont think you should read this as a lack of commitment to the Energy Transition, but we need to invest in what the world runs on today. This makes us is longer producer. It takes two great american, and and brings them together which is great for National Security and economic security, and both of our companies are committed to a lower carbon Energy System. Alix speaking of, are you able to pump more in venezuela right now, investing more in venezuela because of sanction relief . Mike we have seen production in our ventures in venezuela increase this year from around 30,000 barrels a day when the year began to something between 100 and 150 today. We have gradually seen that come up. We have seen further actions by the u. S. To reduce some of the sanctions on venezuela. This is a slow moving story. Alix is it sustainable . If you increase to 150,000, can you hold it there . Mike i think you can operate if some of the constraints have been taken off of us. Venezuelan industry has been under pressure for a variety of reasons for the last couple decades, and turning them around will take time and investment. I wouldnt expect this to be something that goes up dramatically, but yes, we have seen steady improvement and we are looking to try to continue that. Alix gentlemen, thank you so much. We could talk forever, but we will let you guys go. Mike wirth, chevron chairman and ceo, and john hess, congrats on the merger, guys. Thank you. Alix thats me, i do my oil think, and you do your thing in the next hour. Guy shai weiss, ceo of Virgin Atlantic, Delta Airlines ceo ed bastian. You want to know what is happening in the global economy, i argue you should talk to an airline ceo. We will find out in the next hour. This is bloomberg. Get help reaching your goals with j. P. Morgan wealth plan, a digital money coach in the chase mobile® app. Use it to set and track your goals, big and small. And see how changes you make today. Could help put them within reach. From your first big move to retiring poolside and the other goals along the way. Wealth plan can help get you there. J. P. Morgan wealth management. Hi, im jason and ive lost 202 pounds on golo. So the first time i ever seen a golo advertisement, i said, yeah, whatever. Theres no way this works like this. And threw it to the side. A couple weeks later, i seen it again after getting not so pleasant news from my physician. I was 424 pounds, and my doctor was recommending weight loss surgery. To avoid the surgery, i had to make a change. So i decided to go with golo and its changed my life. When i first started golo and taking release, my cravings, they went away. And i was so surprised. You feel that your body is working and functioning the way it should be and you feel energized. Golo has improved my life in so many ways. Im able to stand and actually make dinner. Im able to clean my house. Im able to do just simple tasks that a lot of people call simple, but when youre extremely heavy theyre not so simple. Golo is real and when you take release and follow the plan, it works. Guy monday, the 23rd of october. Im in new york. Back home in europe, stocks are off the lows. Paris back in the green, but london is still down. Frank for the still a little cash frankfurt is still a little frankfurt is still a little lower. Countdown to the close starts right now. The countdown is on in europe. This is Bloomberg Markets european close, with guy johnson and alix steel