May 2, 2025 • 20 mins
Watch Alix and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Alix Steel
Today’s Podcast Features are:
Tom Gimbel, Vice Chairman, American Staffing Association and Founder of LaSalle Network, discusses the April jobs report. US job growth was robust in April and the unemployment rate held steady despite deep uncertainty over President Donald Trump’s trade policies, which economists expect will dent hiring plans over the coming months.
Brooke Sutherland, Bloomberg Boston Bureau Chief, discusses President Donald Trump declaring that Harvard University would lose its tax-exempt status, stepping up his attack on the Ivy League school by threatening to choke off an array of financial benefits.
Vincent Piazza, Bloomberg Intelligence Senior Equity Research Analyst, Oil & Gas, discusses Chevron and Exxon earnings. Chevron Corp. will reduce share buybacks this quarter after oil prices tumbled, indicating that President Donald Trump’s trade war is hurting a key US industry he pledged to help. Exxon Mobil Corp., which also reported earnings Friday, is sticking to its plan to buy back about $5 billion in shares per quarter.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Applecarplay and Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
us live on YouTube.
Speaker 2 (00:23):
I want to get right to the economic data of
the day. It is Jobs Day and the change of
non farm payroll came in one hundred and seventy seven thousand.
Consensus was one thirty eight, so a beat there. The
prior period was revised down sharply from two hundred and
twenty eight thousand to one and eighty five, so some
cross currents there. Let's break it down. Tom Gimball, Vice
chairman American Staffing Association and founder of LaSalle Networks. Hey, Tom,
(00:43):
what do you take away from today's non farm payroll data?
Speaker 3 (00:47):
I think it shows that the US economy is resilient.
Speaker 4 (00:50):
I think that the tariff hubbabaloo for lack of a
better word, hasn't hit yet.
Speaker 3 (00:55):
Companies didn't know.
Speaker 4 (00:56):
What to do following the announcement the first week in April,
so we have some time to show up on that.
And I think the real message is small and medium
sized businesses always drive the jobs numbers more than anything else,
and so if big companies do layoffs, small companies can
now afford to hire some talent they couldn't before, and
(01:16):
that's where you see a lot.
Speaker 3 (01:17):
Of the hiring.
Speaker 5 (01:18):
So since you run one of the leading staffing and
recruiting firms in the country, who's staffing and recruiting.
Speaker 3 (01:25):
Well, I think that that.
Speaker 4 (01:29):
The companies that are hiring are small and medium sized companies.
Speaker 3 (01:32):
You're not.
Speaker 4 (01:33):
You know, when you see the announcements that a company
like Starbucks is doing layoffs or what have you, is
that you see that big companies have to cut overhead.
But when you have small companies, you know, the two
sectors that I see a lot continue to be our
healthcare and you're going to have techn service firms, and
service firms are going to continue to be doing consulting work.
(01:53):
There's technology bases, things along those lines that aren't as
directly affected by lack of inventory and trade tariffs of
importing products from other countries.
Speaker 2 (02:03):
Tom some economists are concerned that tariffs and just economic
uncertainty resulting from tariff discussions could hit small and midsized
businesses harder because maybe they don't have the same profit
margins and resources as some of the bigger companies. What
are your respondents in your surveys telling you.
Speaker 4 (02:21):
I think there's no doubt about that that I'm talking
to leader CEOs of businesses every week, and there's obviously
a concern due to the uncertainty of what's going on
geopolitically and the tariffs. However, at the same time is
that labor for the most part, can be scaled up
(02:41):
and scaled down and companies right now have to focus
on where the opportunities lie. And so what we see
right now is there is a fear, there is an uncertainty. However,
there's also companies, small and medium sized companies. Again, I
want to repeat, if you're a small manufacturing company, you've
got real challenges. If you're a small distribution company, you've
(03:04):
got real challenges. But if you're a consulting firm, if
you're a services business, if you're a technology app development company,
there's still opportunity because companies have to figure out workarounds
to the situation, and those are usually going to be
technologically based solutions.
Speaker 5 (03:19):
To the other side of it, those small, medium sized
businesses that are geared towards the consumer is selling stuff
and products and manufacturing, et cetera. Are they laying off
people or are they just not hiring?
Speaker 4 (03:31):
No, I think you're seeing both. Listen, companies are laying
off in good economies, companies lay people off. What you
have is in a situation like this, companies have to
look at their infrastructure. It's the same thing with unloading
real estate during the COVID situation. They might not have
needed it all along, but it gives them an excuse
(03:52):
to do that. And so, you know, for lack of
a better phrase, are companies pruning some talent right now?
Speaker 3 (03:57):
They absolutely are.
Speaker 4 (03:59):
And at the same same time, you see that if
you go and look and search any job board, you're
going to see that companies are also hiring weeks after
they do layoffs because they're different skill sets, different positions,
and so you know, the word hiring freeze is usually
for new positions, but ones that are deemed to be
necessary to the business, Companies are always going to be
(04:19):
hiring in those spots.
Speaker 2 (04:21):
Labor hoarding, that's a term I learned during a pandemic.
I've never heard that before. Is that still a thing?
Speaker 3 (04:25):
Tom, No, I don't think so.
Speaker 4 (04:27):
You know, during the pandemic, when people were afraid that
there was going to be a boom coming out and
there ended up being one at the end of twenty
and all of twenty one and summ of twenty.
Speaker 3 (04:37):
Two, that made sense.
Speaker 4 (04:39):
But right now companies are more sitting here saying what
puts us in the strongest position to compete no matter
what the economic climate. And if you're a big company,
you do have excess labor, and so it's easy to
cut that back.
Speaker 3 (04:52):
If you're a small company, you.
Speaker 4 (04:54):
Couldn't always compete against big companies because you can't pay
the same wage. Well, when those big companies prune and
late p people off, now you can get some of
that talent for a little bit lower price. And at
the same time those people are a little bit burned
feel burned by the big companies. So you get a
more engaged employee who really appreciates the quality of life
at a smaller, medium sized company.
Speaker 6 (05:15):
All right, we.
Speaker 5 (05:16):
Appreciate it, Tom, Always good to get your perspective. Thank
you so very much. Tom Gimbal, Vice chairman American Staffing
Association and founder of LASAL Network, really helping understand the
difference of the big large companies and the smaller medium
sized businesses. I never thought that, like, if you get
fired in a large firm that the small medium sized
firm benefits.
Speaker 6 (05:33):
That actually makes sense.
Speaker 2 (05:34):
Good, Yeah, I guess in certain industries, yeah, certain areas.
So I'll have to see.
Speaker 1 (05:39):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten a m. Eastern on Apple, Cocklay and
Android Auto with the Bloomberg Business App. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 5 (05:52):
Kelex still here alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
We bring you all the top news and business, economics
and finance through our lens of our Oomberg Intelligence folks.
They cover two thousand companies and one hundred and thirty
industries all around the world.
Speaker 6 (06:04):
We also have an amazing bench of reporters as.
Speaker 5 (06:06):
Well as bureau chiefs that we like to tap as well.
We're going to go to one of them now, brook Sutherland.
She is the Boston bureau chief, one of my favorite people,
one of the smartest people that I've ever met. So
the headline for Boston is that President Trump is announced
that Harvard University would lose its tax exempt status and
that threatens to revoke the school's financial benefits. Brook, what's
the vibe in Boston right now.
Speaker 7 (06:29):
I mean, I think the vibe is not great. I
think there's a lot of concern about not just what
happens with Harvard, but what happens with some of the
other funding cuts, specifically around the NIH. I mean, this
is an economy that really thrives off of its higher
education institutions, its top tier hospitals, and its research facilities.
And these organizations support a much broader ecosystem that is
(06:52):
very linked to Massachusetts employment and the other overall health
of the state economy. And so this is an issue
that state politicians have really, you know, rallied around Harvard
for you know, in terms of just really pushing back
on this and trying to protect those interests that are
key to their economy. We've even seen, you know, the
Republican candidate for governor coming out and advocating for the
(07:15):
funding that goes to some of these institutions in the
important role that they play in the Massachusetts economy.
Speaker 2 (07:21):
What's the feeling a Brook as to the legality of
such a move. Does the President have the legal authority
to do so.
Speaker 7 (07:28):
It's still not clear at this point whether or not
his comments this morning about revoking Harvard's tax exempt status
actually came in conjunction with the directive from the I R.
S or from him in particular. It's it's not clear
exactly sort of what steps are being taken or where
we might be in any kind of process.
Speaker 8 (07:49):
Now.
Speaker 7 (07:49):
Typically the IRS standards prevent the President from interfering with
federal tax agency decisions, and so this is undoubtedly something
that if you know, the administration were to proceed with
revoking targets Harvard's tax exempt status, that you would likely
see the university challenge that, and it's a process that
(08:11):
would take years to play out between appeals and you know,
negotiations over what might happen here.
Speaker 5 (08:17):
So the dum dums like me are going to be like,
what's the big deal. They have a big endowment, they
charge a lot to tuition, Like why do they need
the status and what's the actual argument.
Speaker 7 (08:26):
So the endowment is helpful, but you can't really use
it like an ATM or you know, a piggy bank.
The funds that are in there are mostly earmarked for
certain programs, you know, scholarships, certain schools, and so they
can't just use that money as they wish to plug
whatever gaps that they might have. And you know, Harvard
(08:46):
is certainly in a better position to weather this storm
than a lot of institutions. It's one of the oldest
in the country and also the richest. But you know,
I still think the financial toll of this can be
really significant, and it can affect how the university dolls
out financial aid. If they're not tax exept, they would
also have to pay property taxes. They have a lot
(09:06):
of real estate, not just in Cambridge, but also in
Boston proper, and that bill alone would be extremely substantial.
Speaker 2 (09:14):
And stripping Harvard's taxes and status would deal a significant
financial blow to the university. This is in Bloomberg reporting,
which receives an estimated foreigner and sixty five million dollars
in tax benefits annually. And it's not just Harvard again, Brooke,
looking at your report here, some seventeen hundred private colleges
operate as nonprofits. Given their contributions to society, they receive
(09:35):
that benefit part of a section of the Internal Revenue
Service tax Code, which specifically mentions education as being a
purpose that can receive the exemption. So I'm guessing pretty
much every private college and the university around the country
brook is looking to this Harvard case.
Speaker 7 (09:51):
I think they definitely are. I mean, I think there's
a question of whether, you know, the administration is particularly
targeting Harvard because it is so well known and so
prestigious in terms of trying to effectuate some of the
change that it wants to see on college campuses. You know,
it's sort of making a model out of Harvard versus
(10:13):
some of the other universities in the country. But certainly,
I think they are watching this very carefully. And if
they're not, you know, directly connected to this particular fighter
going to see their own tax exempt status called into question,
they're likely feeling the pressure of the funding cuts because
NIH funding does not just go to the Harvards and
the Mits of the world. It also goes to a
(10:34):
number of other universities spread out all across the country
that are doing, you know, very important work to advance
US competitiveness and things that we've decided our national priorities,
you know, things around national security, around medical advancements, semiconductor research,
I mean, this all takes money, and historically that's a
role that the government has played in supporting that research
(10:56):
and innovation.
Speaker 5 (10:58):
Uh Brook, before we let you go, also touted your
expertise in the industrial industry. You've covered the industrial industry
for a very long time. You have a weekly newsletter
that sort of picks up on all the little details
happening within that very important space. And in your piece
today you talked about toothpaste versus which is like basically
factory orders. Can you give me the takeaway from that?
(11:19):
I thought it was quite interesting, is how we're looking
at the economy.
Speaker 7 (11:23):
Sure, I mean, I think there was a lot of
concern heading into this earning season about what we might
see from the manufacturing economy, the thinking being that that
was sort of the front lines of where tariffs would hit.
And these companies are certainly, you know, expecting an impact,
but by and large, they're mostly doing okay. I mean,
the demand in the first quarter was very strong, and
(11:44):
so far companies really aren't flagging any kind of material
step back or you know, some sort of serious pause
in projects. It's a very different story on the consumer
side of the economy though. I mean, you've seen airlines
pull their guidance because of a pullback and travel demand,
the concerns about consumer confidence. You've seen companies like Colgate
palm Olive, which makes toothpaste, with sales dropped about three
(12:06):
percent and the first quarter in part because customers are
trading down from premium toothpaste options to sort of middle
tier options, and that trade down effect is manifesting, you know,
in a number of different places across the consumer economy,
and I think, you know, it's just interesting. There was
an argument a few years ago about could you see
sort of a decoupling of the manufacturing sector from the
(12:27):
rest of the economy because there are sort of secular
reasons driving construction of new factories, whether it's reshoring or
you know, some of the energy initiatives that we've had,
all of the government stimulus around infrastructure and semiconductors that
didn't happen, And I think it would be extremely difficult
for that to happen again in an environment if we
(12:49):
do see tariffs really damp and consumer confidence and really
cause that consumer to pull back on spending. It's hard
to keep industrial equipment orders going along at a role
place when people can't afford sort of basic needs.
Speaker 6 (13:04):
All right, Brooke, we really appreciate it. Thank you so
very much.
Speaker 5 (13:06):
Brooks Sutherland, Boston Bureau Chief in Industrials expert.
Speaker 6 (13:09):
Right here at.
Speaker 1 (13:10):
Bloomberg, you're listening to the Bloomberg Intelligence podcast. Catch us
live weekdays at ten am Eastern on Applecarclay, and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (13:26):
For a recap.
Speaker 5 (13:27):
Chevron made a bid Dubai, Hess has accepted, and then
Exon came in and said, no, we have rite a
first refusal to Hess's project in Guyana, which is a
prolific oil region, and they've been an arbitration for quite
a long time on that. We may get final result
later on in this year. Vince Piazza heads up all
our oil and industry coverage for Bloomberg Intelligence and joins me, Now, Vincent,
(13:48):
what do you think of the answer that Nope, they
got complete confidence.
Speaker 6 (13:52):
If Chevron doesn't get Hess.
Speaker 8 (13:54):
What happens, well, look is, if Sevron doesn't get Hess,
someone of size would need to make a move on Hess, right,
and you.
Speaker 9 (14:07):
Know Exon suggests that it has these preemptive rights, and
so if the arbitration goes in its favor, there would
be a decision that needs to be made about that
value and what that value is. And I would suggest
to you that because of Hesse's size, the number of
(14:28):
suitors for hes whether it's the asset or the entire entity,
is quite limited, and you need someone that has the heft,
the balance sheet, the flexibility, the financial flexibility of an
Exon mobile and so I think both entities have a
solid case to be made. I've never heard of an
(14:51):
acquisition being held up because of a shared asset, but
you know, a lot of strange things that happened in
the world in the last year or so, so we'll
see what happens. But I think if you take a
look at just the earnings from today, guys, I think
it's obvious that Exon is pulling away both operationally and financially.
(15:18):
And I think that if you were to take a
look at this a year from now, you would see
the ongoing strength of the Exon operations and Exon's financial health.
Financial health.
Speaker 2 (15:33):
Right, So, hey, Vince, you've been covering these big oil
companies integrated oil companies for years. Here what are they
telling you with about life at blows sixty dollars a
borrower around sixty dollars a borrower for WTI crud.
Speaker 9 (15:47):
You know, life is sustainable when you have solid balance
sheet and you have the financial strength. And in this
case you have Exon Mobile, which paid back roughly five
billion of debt. Balance sheet leverage is very, very manageable.
(16:08):
They have the financial flexibility to push forward financially. They
threw off about nine billion of free castulow eight point
eight to be exact. The cadence of buybacks remains the same,
the dividend pace remains the same. So there is strength
there in their confidence in their decision to maintain those levels.
(16:35):
Contrast that with what you heard from Stevron. And when
you're throwing off roughly a billion dollars of free castlow
and you're trying to pay out dividends of three and
do buybacks of another four, the math doesn't compute right,
and so that pretends the decision to scale back the
(16:56):
buy backs closer to what two and a half or
three billion four to twenty twenty five. Hey, look, you know, operationally,
Exon's in a strong position, especially in Guiana, especially in
the Permian. You have a yellow tail likely coming on
sooner than expected, most likely in three Q. That's two
(17:18):
hundred and fifty thousand barrels a day of growth capacity
on a resource that has potential of well in excess
of six billion dollars. So you could understand the attraction
for both Exon and for Devron, and you know Exon's
and a driver feet there. You have also for Exon
(17:41):
the pioneer acquisition the Permium basin, which remains a strong,
low cost avenue for growth. So I'm not really concerned
here if this dips below the sixty six dollars Bollol range,
especially when you have the balance sheet strength to push
through that. Now, fifteen twenty years ago, the economics were different,
(18:06):
right leverage was a bigger thwart and also a bigger
thwart of pain for these organizations as well. But for
the most part, a lot of these names have gotten
their balance beats, and the right size and the right
gape maturities are quite manageable in twenty five and twenty six,
so I don't see the pain coming from any type
(18:29):
of balance sheet event. And for the most part, what
we're telling the operators is, let's manage that production. We
want to see the free cashulow being thrown off. We
don't want this excessive accelerated growth that we saw during
a one point zero. We're in a different situation here.
It's a mature industry. What we do want to see
(18:52):
is much more capital discipline. It's fine if you want
to go out there and pay for an asset using
your currency, using you for equity, because your equity is
valued higher than what a private equity sponsored company may be,
and you can consolidate, integrate and actually increase recash flow
(19:14):
going forward as well.
Speaker 6 (19:15):
All Right, Ben, thanks a lot. We really appreciate it.
Speaker 5 (19:18):
Vincent Piazza, he covers Boom, all the oil companies E
ANDPS as well as the big guys for Bloomberg Intelligence.
Speaker 6 (19:24):
We appreciate all of that insight. Shameless Plug.
Speaker 5 (19:27):
You can check out my full cheve On interview on
the Bloomberg podcast page on YouTube. It's also available on
Bloomberg dot com, and you can also check it out
on the terminal as well.
Speaker 6 (19:37):
Shameless plug, I did it.
Speaker 1 (19:39):
This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each
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Speaker 8 (20:04):
M
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Applecarplay and Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
us live on YouTube.
Speaker 2 (00:23):
I want to get right to the economic data of
the day. It is Jobs Day and the change of
non farm payroll came in one hundred and seventy seven thousand.
Consensus was one thirty eight, so a beat there. The
prior period was revised down sharply from two hundred and
twenty eight thousand to one and eighty five, so some
cross currents there. Let's break it down. Tom Gimball, Vice
chairman American Staffing Association and founder of LaSalle Networks. Hey, Tom,
(00:43):
what do you take away from today's non farm payroll data?
Speaker 3 (00:47):
I think it shows that the US economy is resilient.
Speaker 4 (00:50):
I think that the tariff hubbabaloo for lack of a
better word, hasn't hit yet.
Speaker 3 (00:55):
Companies didn't know.
Speaker 4 (00:56):
What to do following the announcement the first week in April,
so we have some time to show up on that.
And I think the real message is small and medium
sized businesses always drive the jobs numbers more than anything else,
and so if big companies do layoffs, small companies can
now afford to hire some talent they couldn't before, and
(01:16):
that's where you see a lot.
Speaker 3 (01:17):
Of the hiring.
Speaker 5 (01:18):
So since you run one of the leading staffing and
recruiting firms in the country, who's staffing and recruiting.
Speaker 3 (01:25):
Well, I think that that.
Speaker 4 (01:29):
The companies that are hiring are small and medium sized companies.
Speaker 3 (01:32):
You're not.
Speaker 4 (01:33):
You know, when you see the announcements that a company
like Starbucks is doing layoffs or what have you, is
that you see that big companies have to cut overhead.
But when you have small companies, you know, the two
sectors that I see a lot continue to be our
healthcare and you're going to have techn service firms, and
service firms are going to continue to be doing consulting work.
(01:53):
There's technology bases, things along those lines that aren't as
directly affected by lack of inventory and trade tariffs of
importing products from other countries.
Speaker 2 (02:03):
Tom some economists are concerned that tariffs and just economic
uncertainty resulting from tariff discussions could hit small and midsized
businesses harder because maybe they don't have the same profit
margins and resources as some of the bigger companies. What
are your respondents in your surveys telling you.
Speaker 4 (02:21):
I think there's no doubt about that that I'm talking
to leader CEOs of businesses every week, and there's obviously
a concern due to the uncertainty of what's going on
geopolitically and the tariffs. However, at the same time is
that labor for the most part, can be scaled up
(02:41):
and scaled down and companies right now have to focus
on where the opportunities lie. And so what we see
right now is there is a fear, there is an uncertainty. However,
there's also companies, small and medium sized companies. Again, I
want to repeat, if you're a small manufacturing company, you've
got real challenges. If you're a small distribution company, you've
(03:04):
got real challenges. But if you're a consulting firm, if
you're a services business, if you're a technology app development company,
there's still opportunity because companies have to figure out workarounds
to the situation, and those are usually going to be
technologically based solutions.
Speaker 5 (03:19):
To the other side of it, those small, medium sized
businesses that are geared towards the consumer is selling stuff
and products and manufacturing, et cetera. Are they laying off
people or are they just not hiring?
Speaker 4 (03:31):
No, I think you're seeing both. Listen, companies are laying
off in good economies, companies lay people off. What you
have is in a situation like this, companies have to
look at their infrastructure. It's the same thing with unloading
real estate during the COVID situation. They might not have
needed it all along, but it gives them an excuse
(03:52):
to do that. And so, you know, for lack of
a better phrase, are companies pruning some talent right now?
Speaker 3 (03:57):
They absolutely are.
Speaker 4 (03:59):
And at the same same time, you see that if
you go and look and search any job board, you're
going to see that companies are also hiring weeks after
they do layoffs because they're different skill sets, different positions,
and so you know, the word hiring freeze is usually
for new positions, but ones that are deemed to be
necessary to the business, Companies are always going to be
(04:19):
hiring in those spots.
Speaker 2 (04:21):
Labor hoarding, that's a term I learned during a pandemic.
I've never heard that before. Is that still a thing?
Speaker 3 (04:25):
Tom, No, I don't think so.
Speaker 4 (04:27):
You know, during the pandemic, when people were afraid that
there was going to be a boom coming out and
there ended up being one at the end of twenty
and all of twenty one and summ of twenty.
Speaker 3 (04:37):
Two, that made sense.
Speaker 4 (04:39):
But right now companies are more sitting here saying what
puts us in the strongest position to compete no matter
what the economic climate. And if you're a big company,
you do have excess labor, and so it's easy to
cut that back.
Speaker 3 (04:52):
If you're a small company, you.
Speaker 4 (04:54):
Couldn't always compete against big companies because you can't pay
the same wage. Well, when those big companies prune and
late p people off, now you can get some of
that talent for a little bit lower price. And at
the same time those people are a little bit burned
feel burned by the big companies. So you get a
more engaged employee who really appreciates the quality of life
at a smaller, medium sized company.
Speaker 6 (05:15):
All right, we.
Speaker 5 (05:16):
Appreciate it, Tom, Always good to get your perspective. Thank
you so very much. Tom Gimbal, Vice chairman American Staffing
Association and founder of LASAL Network, really helping understand the
difference of the big large companies and the smaller medium
sized businesses. I never thought that, like, if you get
fired in a large firm that the small medium sized
firm benefits.
Speaker 6 (05:33):
That actually makes sense.
Speaker 2 (05:34):
Good, Yeah, I guess in certain industries, yeah, certain areas.
So I'll have to see.
Speaker 1 (05:39):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten a m. Eastern on Apple, Cocklay and
Android Auto with the Bloomberg Business App. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 5 (05:52):
Kelex still here alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
We bring you all the top news and business, economics
and finance through our lens of our Oomberg Intelligence folks.
They cover two thousand companies and one hundred and thirty
industries all around the world.
Speaker 6 (06:04):
We also have an amazing bench of reporters as.
Speaker 5 (06:06):
Well as bureau chiefs that we like to tap as well.
We're going to go to one of them now, brook Sutherland.
She is the Boston bureau chief, one of my favorite people,
one of the smartest people that I've ever met. So
the headline for Boston is that President Trump is announced
that Harvard University would lose its tax exempt status and
that threatens to revoke the school's financial benefits. Brook, what's
the vibe in Boston right now.
Speaker 7 (06:29):
I mean, I think the vibe is not great. I
think there's a lot of concern about not just what
happens with Harvard, but what happens with some of the
other funding cuts, specifically around the NIH. I mean, this
is an economy that really thrives off of its higher
education institutions, its top tier hospitals, and its research facilities.
And these organizations support a much broader ecosystem that is
(06:52):
very linked to Massachusetts employment and the other overall health
of the state economy. And so this is an issue
that state politicians have really, you know, rallied around Harvard
for you know, in terms of just really pushing back
on this and trying to protect those interests that are
key to their economy. We've even seen, you know, the
Republican candidate for governor coming out and advocating for the
(07:15):
funding that goes to some of these institutions in the
important role that they play in the Massachusetts economy.
Speaker 2 (07:21):
What's the feeling a Brook as to the legality of
such a move. Does the President have the legal authority
to do so.
Speaker 7 (07:28):
It's still not clear at this point whether or not
his comments this morning about revoking Harvard's tax exempt status
actually came in conjunction with the directive from the I R.
S or from him in particular. It's it's not clear
exactly sort of what steps are being taken or where
we might be in any kind of process.
Speaker 8 (07:49):
Now.
Speaker 7 (07:49):
Typically the IRS standards prevent the President from interfering with
federal tax agency decisions, and so this is undoubtedly something
that if you know, the administration were to proceed with
revoking targets Harvard's tax exempt status, that you would likely
see the university challenge that, and it's a process that
(08:11):
would take years to play out between appeals and you know,
negotiations over what might happen here.
Speaker 5 (08:17):
So the dum dums like me are going to be like,
what's the big deal. They have a big endowment, they
charge a lot to tuition, Like why do they need
the status and what's the actual argument.
Speaker 7 (08:26):
So the endowment is helpful, but you can't really use
it like an ATM or you know, a piggy bank.
The funds that are in there are mostly earmarked for
certain programs, you know, scholarships, certain schools, and so they
can't just use that money as they wish to plug
whatever gaps that they might have. And you know, Harvard
(08:46):
is certainly in a better position to weather this storm
than a lot of institutions. It's one of the oldest
in the country and also the richest. But you know,
I still think the financial toll of this can be
really significant, and it can affect how the university dolls
out financial aid. If they're not tax exept, they would
also have to pay property taxes. They have a lot
(09:06):
of real estate, not just in Cambridge, but also in
Boston proper, and that bill alone would be extremely substantial.
Speaker 2 (09:14):
And stripping Harvard's taxes and status would deal a significant
financial blow to the university. This is in Bloomberg reporting,
which receives an estimated foreigner and sixty five million dollars
in tax benefits annually. And it's not just Harvard again, Brooke,
looking at your report here, some seventeen hundred private colleges
operate as nonprofits. Given their contributions to society, they receive
(09:35):
that benefit part of a section of the Internal Revenue
Service tax Code, which specifically mentions education as being a
purpose that can receive the exemption. So I'm guessing pretty
much every private college and the university around the country
brook is looking to this Harvard case.
Speaker 7 (09:51):
I think they definitely are. I mean, I think there's
a question of whether, you know, the administration is particularly
targeting Harvard because it is so well known and so
prestigious in terms of trying to effectuate some of the
change that it wants to see on college campuses. You know,
it's sort of making a model out of Harvard versus
(10:13):
some of the other universities in the country. But certainly,
I think they are watching this very carefully. And if
they're not, you know, directly connected to this particular fighter
going to see their own tax exempt status called into question,
they're likely feeling the pressure of the funding cuts because
NIH funding does not just go to the Harvards and
the Mits of the world. It also goes to a
(10:34):
number of other universities spread out all across the country
that are doing, you know, very important work to advance
US competitiveness and things that we've decided our national priorities,
you know, things around national security, around medical advancements, semiconductor research,
I mean, this all takes money, and historically that's a
role that the government has played in supporting that research
(10:56):
and innovation.
Speaker 5 (10:58):
Uh Brook, before we let you go, also touted your
expertise in the industrial industry. You've covered the industrial industry
for a very long time. You have a weekly newsletter
that sort of picks up on all the little details
happening within that very important space. And in your piece
today you talked about toothpaste versus which is like basically
factory orders. Can you give me the takeaway from that?
(11:19):
I thought it was quite interesting, is how we're looking
at the economy.
Speaker 7 (11:23):
Sure, I mean, I think there was a lot of
concern heading into this earning season about what we might
see from the manufacturing economy, the thinking being that that
was sort of the front lines of where tariffs would hit.
And these companies are certainly, you know, expecting an impact,
but by and large, they're mostly doing okay. I mean,
the demand in the first quarter was very strong, and
(11:44):
so far companies really aren't flagging any kind of material
step back or you know, some sort of serious pause
in projects. It's a very different story on the consumer
side of the economy though. I mean, you've seen airlines
pull their guidance because of a pullback and travel demand,
the concerns about consumer confidence. You've seen companies like Colgate
palm Olive, which makes toothpaste, with sales dropped about three
(12:06):
percent and the first quarter in part because customers are
trading down from premium toothpaste options to sort of middle
tier options, and that trade down effect is manifesting, you know,
in a number of different places across the consumer economy,
and I think, you know, it's just interesting. There was
an argument a few years ago about could you see
sort of a decoupling of the manufacturing sector from the
(12:27):
rest of the economy because there are sort of secular
reasons driving construction of new factories, whether it's reshoring or
you know, some of the energy initiatives that we've had,
all of the government stimulus around infrastructure and semiconductors that
didn't happen, And I think it would be extremely difficult
for that to happen again in an environment if we
(12:49):
do see tariffs really damp and consumer confidence and really
cause that consumer to pull back on spending. It's hard
to keep industrial equipment orders going along at a role
place when people can't afford sort of basic needs.
Speaker 6 (13:04):
All right, Brooke, we really appreciate it. Thank you so
very much.
Speaker 5 (13:06):
Brooks Sutherland, Boston Bureau Chief in Industrials expert.
Speaker 6 (13:09):
Right here at.
Speaker 1 (13:10):
Bloomberg, you're listening to the Bloomberg Intelligence podcast. Catch us
live weekdays at ten am Eastern on Applecarclay, and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (13:26):
For a recap.
Speaker 5 (13:27):
Chevron made a bid Dubai, Hess has accepted, and then
Exon came in and said, no, we have rite a
first refusal to Hess's project in Guyana, which is a
prolific oil region, and they've been an arbitration for quite
a long time on that. We may get final result
later on in this year. Vince Piazza heads up all
our oil and industry coverage for Bloomberg Intelligence and joins me, Now, Vincent,
(13:48):
what do you think of the answer that Nope, they
got complete confidence.
Speaker 6 (13:52):
If Chevron doesn't get Hess.
Speaker 8 (13:54):
What happens, well, look is, if Sevron doesn't get Hess,
someone of size would need to make a move on Hess, right,
and you.
Speaker 9 (14:07):
Know Exon suggests that it has these preemptive rights, and
so if the arbitration goes in its favor, there would
be a decision that needs to be made about that
value and what that value is. And I would suggest
to you that because of Hesse's size, the number of
(14:28):
suitors for hes whether it's the asset or the entire entity,
is quite limited, and you need someone that has the heft,
the balance sheet, the flexibility, the financial flexibility of an
Exon mobile and so I think both entities have a
solid case to be made. I've never heard of an
(14:51):
acquisition being held up because of a shared asset, but
you know, a lot of strange things that happened in
the world in the last year or so, so we'll
see what happens. But I think if you take a
look at just the earnings from today, guys, I think
it's obvious that Exon is pulling away both operationally and financially.
(15:18):
And I think that if you were to take a
look at this a year from now, you would see
the ongoing strength of the Exon operations and Exon's financial health.
Financial health.
Speaker 2 (15:33):
Right, So, hey, Vince, you've been covering these big oil
companies integrated oil companies for years. Here what are they
telling you with about life at blows sixty dollars a
borrower around sixty dollars a borrower for WTI crud.
Speaker 9 (15:47):
You know, life is sustainable when you have solid balance
sheet and you have the financial strength. And in this
case you have Exon Mobile, which paid back roughly five
billion of debt. Balance sheet leverage is very, very manageable.
(16:08):
They have the financial flexibility to push forward financially. They
threw off about nine billion of free castulow eight point
eight to be exact. The cadence of buybacks remains the same,
the dividend pace remains the same. So there is strength
there in their confidence in their decision to maintain those levels.
(16:35):
Contrast that with what you heard from Stevron. And when
you're throwing off roughly a billion dollars of free castlow
and you're trying to pay out dividends of three and
do buybacks of another four, the math doesn't compute right,
and so that pretends the decision to scale back the
(16:56):
buy backs closer to what two and a half or
three billion four to twenty twenty five. Hey, look, you know, operationally,
Exon's in a strong position, especially in Guiana, especially in
the Permian. You have a yellow tail likely coming on
sooner than expected, most likely in three Q. That's two
(17:18):
hundred and fifty thousand barrels a day of growth capacity
on a resource that has potential of well in excess
of six billion dollars. So you could understand the attraction
for both Exon and for Devron, and you know Exon's
and a driver feet there. You have also for Exon
(17:41):
the pioneer acquisition the Permium basin, which remains a strong,
low cost avenue for growth. So I'm not really concerned
here if this dips below the sixty six dollars Bollol range,
especially when you have the balance sheet strength to push
through that. Now, fifteen twenty years ago, the economics were different,
(18:06):
right leverage was a bigger thwart and also a bigger
thwart of pain for these organizations as well. But for
the most part, a lot of these names have gotten
their balance beats, and the right size and the right
gape maturities are quite manageable in twenty five and twenty six,
so I don't see the pain coming from any type
(18:29):
of balance sheet event. And for the most part, what
we're telling the operators is, let's manage that production. We
want to see the free cashulow being thrown off. We
don't want this excessive accelerated growth that we saw during
a one point zero. We're in a different situation here.
It's a mature industry. What we do want to see
(18:52):
is much more capital discipline. It's fine if you want
to go out there and pay for an asset using
your currency, using you for equity, because your equity is
valued higher than what a private equity sponsored company may be,
and you can consolidate, integrate and actually increase recash flow
(19:14):
going forward as well.
Speaker 6 (19:15):
All Right, Ben, thanks a lot. We really appreciate it.
Speaker 5 (19:18):
Vincent Piazza, he covers Boom, all the oil companies E
ANDPS as well as the big guys for Bloomberg Intelligence.
Speaker 6 (19:24):
We appreciate all of that insight. Shameless Plug.
Speaker 5 (19:27):
You can check out my full cheve On interview on
the Bloomberg podcast page on YouTube. It's also available on
Bloomberg dot com, and you can also check it out
on the terminal as well.
Speaker 6 (19:37):
Shameless plug, I did it.
Speaker 1 (19:39):
This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each
weekday ten am to noon Eastern on Bloomberg dot com,
the iHeartRadio app tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
and always on the Bloomberg Terminal
Speaker 8 (20:04):
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