WEBVTT - Bloomberg’s Welch on GM: Already in the Works, Mostly Posturing 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg pm L podcast. I'm Pim Fox. 0:00:08.119 --> 0:00:11.200 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.640 the trading floor. Find the Bloomberg p L podcast on iTunes, 0:00:20.840 --> 0:00:31.080 SoundCloud and at Bloomberg dot com. I want to learn 0:00:31.160 --> 0:00:34.680 more about General motors announcement today that it was investing 0:00:34.720 --> 0:00:39.400 one billion dollars in a US investment plan, spending on 0:00:39.520 --> 0:00:42.800 models and plants that have long been in the work. 0:00:42.880 --> 0:00:45.880 So I want to bring in David Welch, Detroit Bureau chief. 0:00:46.040 --> 0:00:49.320 My first question for you, David, is how much of 0:00:49.360 --> 0:00:52.480 this plan was already in the works and how much 0:00:52.520 --> 0:00:55.760 of this is new as a result of some of 0:00:55.800 --> 0:00:59.680 the cajoling from President elect Trump's team. It looks like 0:00:59.760 --> 0:01:01.520 most of it, if not all of it. The only 0:01:01.560 --> 0:01:04.559 part that we didn't really know about that that wouldn't 0:01:04.560 --> 0:01:08.360 have been part of their initial capital expenditures plan might 0:01:08.400 --> 0:01:11.319 be the the axle jobs coming back from Mexico. But 0:01:11.360 --> 0:01:14.839 even there, uh GM shift things around all the time 0:01:15.600 --> 0:01:20.200 based on demand for vehicles. Uh and and that kind 0:01:20.200 --> 0:01:22.320 of thing you know that the White Coward jobs, which 0:01:22.319 --> 0:01:24.640 is the bulk of this. UH. That's five thousand workers 0:01:24.680 --> 0:01:26.600 who will be doing R and D, who will be 0:01:26.600 --> 0:01:30.280 doing advanced development work on autonomous vehicles, and also some 0:01:30.440 --> 0:01:32.680 people who are working for GM Financial, which is the 0:01:32.760 --> 0:01:35.000 lending unit. UH. None of that would have been in 0:01:35.040 --> 0:01:37.760 Mexico anyway, of course, but you know those are areas 0:01:37.840 --> 0:01:40.480 that GM has been growing and adding more people. They 0:01:40.520 --> 0:01:43.520 had announced a while ago they were expanding their technical 0:01:43.560 --> 0:01:45.440 center north of Detroit, so a lot of that stuff 0:01:45.480 --> 0:01:49.840 was already in the works. UM factories to UH down 0:01:49.920 --> 0:01:52.080 in Mexico. They do make a lot of small cars 0:01:52.120 --> 0:01:54.919 and things that are already well margin because the wages 0:01:54.960 --> 0:01:56.960 are cheaper, and that's the only way you can even 0:01:57.000 --> 0:02:00.120 have a hope of making money on compact cars. As 0:02:00.120 --> 0:02:02.120 the market ships away from that stuff and they're building 0:02:02.120 --> 0:02:06.080 more SUVs to meet demand, that stuff will naturally require 0:02:06.120 --> 0:02:09.359 investment in the US. Well, David, you know, we got 0:02:09.400 --> 0:02:12.080 a chance to spend some time with you at the 0:02:12.120 --> 0:02:15.560 North American International Auto Show at Cobo Hall in Detroit, 0:02:15.680 --> 0:02:17.520 and I'm wondering if you could give us a little 0:02:17.520 --> 0:02:20.600 bit of a look into the detail of the auto 0:02:20.680 --> 0:02:25.280 industry right now, what with the emissions scandal that plagues 0:02:25.360 --> 0:02:30.680 not only VW's balance sheet but certainly Vexus. Sergio Marcione 0:02:30.760 --> 0:02:35.079 of Fiat Chrysler, what are the big themes right now 0:02:35.120 --> 0:02:39.480 that you need that you recommend people watch well. Regulations 0:02:39.520 --> 0:02:42.120 a big part of it, and it's been a really 0:02:42.160 --> 0:02:44.440 busy a few weeks in the auto industry for a 0:02:44.440 --> 0:02:47.960 couple of reasons. You have the Obama administration leaving and 0:02:48.000 --> 0:02:50.280 on their way out, they're trying to really make sure 0:02:50.840 --> 0:02:54.640 that things like clean air regulations are are really adhered to. 0:02:55.160 --> 0:02:58.480 So they they both the Justice Department and the ep 0:02:58.560 --> 0:03:01.680 A really handled handed volks like and some really big 0:03:01.720 --> 0:03:04.560 fines and some in dipmonds. They really went after them. 0:03:04.639 --> 0:03:08.359 And they're going after fid Kreisler to make sure that 0:03:08.360 --> 0:03:11.320 that the devices they had in their cars were not cheating. 0:03:11.360 --> 0:03:13.400 They haven't said their cheat devices yet. There there are 0:03:13.440 --> 0:03:16.480 eight devices that changed the emissions performance of the vehicle 0:03:16.560 --> 0:03:19.960 under certain conditions, all kind of have those those are legal. 0:03:20.360 --> 0:03:22.200 You have to tell the government they're there and they 0:03:22.240 --> 0:03:27.000 didn't do that, so that is uh that would warrant 0:03:27.000 --> 0:03:30.280 a penalty. Even if they are fine. They have to 0:03:30.320 --> 0:03:32.440 be disclosed. Now, if it turns out that they were 0:03:32.440 --> 0:03:35.560 done to cheat emissions tests, which is something Sergio Marchioni, 0:03:35.600 --> 0:03:39.400 the CEO, has denied, then then the findes can get 0:03:39.440 --> 0:03:42.560 really big like they were with Volkswagen. But at the 0:03:42.560 --> 0:03:46.760 moment it's not really Uh, they haven't proven that. That's 0:03:46.800 --> 0:03:49.720 the situation, you know, David, Just a turning back to GM. 0:03:49.720 --> 0:03:52.160 I'm wondering, you know, how much of this is a 0:03:52.200 --> 0:03:55.080 pup relations stunt or how much of this would have 0:03:55.160 --> 0:03:58.839 been done in the past with a company extolling it's 0:03:58.920 --> 0:04:02.840 it's upcoming expenditure plan, uh, in a release like this. 0:04:04.120 --> 0:04:05.960 Is it just the media? Is it us that is 0:04:06.000 --> 0:04:08.280 making a bigger deal about this because we're putting it 0:04:08.280 --> 0:04:11.960 into our our pattern of trying to respond to President 0:04:11.960 --> 0:04:15.160 elect Trump? Or has there been a material shift in 0:04:15.240 --> 0:04:19.080 approach to how some of these car companies communicate. I 0:04:19.120 --> 0:04:21.160 think a lot of it is the former. The General 0:04:21.240 --> 0:04:24.280 Motors spends nine billion dollars a year in capital expenditures, 0:04:24.360 --> 0:04:26.919 and that's new cars that are coming to market the 0:04:26.960 --> 0:04:29.240 next few years, and that's tooling up the factories to 0:04:29.320 --> 0:04:31.440 make those new cars. Every time you have a new car, 0:04:31.839 --> 0:04:34.640 you've got a new chassis line, a new paint shop, 0:04:34.720 --> 0:04:38.240 a new line for the body panels, new stampings for 0:04:38.279 --> 0:04:41.920 those bodies, and all that requires a lot of capital investment, 0:04:42.000 --> 0:04:43.599 and they do it to the tune of nine billion 0:04:43.600 --> 0:04:45.960 dollars a year. Some of the vehicles they're coming out 0:04:46.000 --> 0:04:48.880 within the next few years are support utility vehicles that 0:04:48.880 --> 0:04:52.480 they didn't previously have. So between for example, between now 0:04:51.839 --> 0:04:55.320 and Cadillac is supposed to get three new SUVs that 0:04:55.360 --> 0:04:58.520 they don't have now. Why because Cadillac is behind in 0:04:58.640 --> 0:05:01.200 luxury crossover issue use, which is the sweet spot of 0:05:01.200 --> 0:05:04.880 the luxury market. They have one auld E BMW and 0:05:05.040 --> 0:05:07.839 UH Mercedes have to three or four in their wind up, 0:05:07.880 --> 0:05:10.080 so GM is just catching up. You're gonna need factories 0:05:10.120 --> 0:05:11.600 to make those, so that's gonna be a big part 0:05:11.640 --> 0:05:14.159 of the investment right there. So all that stuff was 0:05:14.200 --> 0:05:16.120 in the work. So you're talking nine billion a year 0:05:16.160 --> 0:05:20.479 between now and one billion dollars that they're announcing and 0:05:20.640 --> 0:05:24.680 the jobs that would assemble those and a lot of 0:05:24.680 --> 0:05:28.480 it has retained jobs, which means UH that had they 0:05:28.480 --> 0:05:30.760 not put a vehicle in that existing factory, they would 0:05:30.760 --> 0:05:33.360 have laid those people off, but instead they're giving them 0:05:33.400 --> 0:05:35.360 something to do so they'll keep those jobs. A lot 0:05:35.400 --> 0:05:37.800 of it is stuff that would have already happened. The 0:05:37.839 --> 0:05:40.360 investment and autonomous vehicles and R and D would have 0:05:40.400 --> 0:05:43.200 already happened. And they have already stated that they want 0:05:43.240 --> 0:05:45.880 to grow their lending business to make more car woons 0:05:46.360 --> 0:05:48.320 that already would that would have happened as well. The 0:05:48.360 --> 0:05:50.920 only thing that might have happened is the four and 0:05:51.000 --> 0:05:54.640 fifty jobs. These are people making axles coming back from 0:05:54.680 --> 0:05:57.159 Mexico to the US, so that may have stayed down there. 0:05:57.640 --> 0:06:00.440 So there's that. But a lot of this is just uh. 0:06:00.480 --> 0:06:03.160 And they told me this moving forward. The announcements they 0:06:03.160 --> 0:06:07.200 would have made basically under pressure from Trump and in 0:06:07.320 --> 0:06:10.200 order to play nice with them. Remember, the automakers have 0:06:10.240 --> 0:06:12.640 a lot of stuff they want out of the Trump administration, 0:06:13.120 --> 0:06:16.599 which is maybe a little bit more relaxation on a 0:06:16.640 --> 0:06:22.000 few economy standards, and also lower corporate tax rates are 0:06:22.000 --> 0:06:24.000 a lot of things they like that the Obama administration 0:06:24.040 --> 0:06:25.640 didn't want to do. We're going to leave that for 0:06:25.680 --> 0:06:27.640 another time. I want to thank you very much. David 0:06:27.680 --> 0:06:43.320 Welch is our Detroit bureau chief for Bloomberg News. I'm 0:06:43.320 --> 0:06:45.880 trying to make sense of some of the moves in 0:06:45.960 --> 0:06:50.120 the Pound following Prime Minister Theresa May's comments to diplomats 0:06:50.160 --> 0:06:54.640 about how Britain plans to break away from the European Union. 0:06:55.000 --> 0:06:56.800 For somebody with a lot more insight than I can 0:06:56.839 --> 0:07:00.000 bring for this is Rob Hutton, UK Government and Polity 0:07:00.000 --> 0:07:02.840 six reporter for Bloomberg, who is joining us now. Rob, 0:07:02.880 --> 0:07:06.120 thank you so much. So what is the main takeaway 0:07:06.400 --> 0:07:09.760 from the speech so far? Well, the main takeaway is 0:07:09.800 --> 0:07:12.880 that she does actually have a plan. And I think 0:07:12.880 --> 0:07:14.880 if you'd asked me this morning, is she going to 0:07:14.920 --> 0:07:17.200 say very much? I just said I'm not sure she is, 0:07:17.240 --> 0:07:20.040 you know, but we did get we got clarity on 0:07:20.040 --> 0:07:21.640 a number of things. We've got clarity. She wants to 0:07:21.640 --> 0:07:25.360 take Britain out of the European the European Union, single market, 0:07:25.400 --> 0:07:28.360 all the way out. Um, we got clarity before you 0:07:28.400 --> 0:07:31.280 continue with that. So what's the significance of that. Well, 0:07:31.520 --> 0:07:34.400 that is the basis on which I in Britain can 0:07:34.440 --> 0:07:38.600 sell something to Germany on exactly the same rules that 0:07:38.720 --> 0:07:42.320 somebody in Germany can sell to somebody in Germany. She 0:07:42.360 --> 0:07:45.040 wants to break from that. And now that's fantastically important 0:07:45.040 --> 0:07:47.520 for manufactured so you can build a car in Britain 0:07:47.560 --> 0:07:50.040 and sell it all the way across Europe with with 0:07:50.120 --> 0:07:54.160 exactly the same regulations, and does she want to replace 0:07:54.160 --> 0:07:56.440 it with something else? Well, what she wants to do, 0:07:56.560 --> 0:07:59.040 she wants to she says. She said she wants to 0:07:59.080 --> 0:08:01.120 keep access to the Stems Union. This is a slightly 0:08:01.160 --> 0:08:03.680 tricky language. She wants to take Britain out of the 0:08:03.760 --> 0:08:08.600 Customs Union which sort of underpins that, and but still 0:08:08.920 --> 0:08:11.600 but still continue trading within it. And at that point 0:08:11.680 --> 0:08:13.440 you then start to get into what she didn't say. 0:08:13.840 --> 0:08:16.280 There are interesting questions about well, let's say I build 0:08:16.280 --> 0:08:17.880 a car in Britain and then I want to sell 0:08:17.880 --> 0:08:20.200 it to Germany. But we have a regulatory dispute. Where 0:08:20.240 --> 0:08:22.640 are we going to resolve that? And let's say that 0:08:22.680 --> 0:08:25.560 Germany changes its car regulations, or did the rather the 0:08:25.560 --> 0:08:28.800 European Union changes its car regulations. Britain is no longer 0:08:28.840 --> 0:08:31.000 bound by those, but effectively we kind of still are 0:08:31.040 --> 0:08:33.120 because if we want to sell cars here and there, 0:08:33.520 --> 0:08:36.360 so we already have that going on with Fiat and 0:08:36.760 --> 0:08:40.760 VW because of emissions. Well that's you know, and who 0:08:40.800 --> 0:08:43.680 who actually you know takes over as the regulator. But 0:08:43.760 --> 0:08:46.920 in just the focus on Theresa May. For example, I'm 0:08:46.920 --> 0:08:49.920 trying to understand that it says that the Prime Minister 0:08:49.960 --> 0:08:53.880 has a twelve point brexit plan. Uh, is there any 0:08:53.960 --> 0:08:57.400 and anything other than putting it to a vote at Parliament? 0:08:57.960 --> 0:09:00.600 It is what else do we need? Else? Is the 0:09:00.600 --> 0:09:02.760 most important thing that we need? The most important thing 0:09:02.800 --> 0:09:05.040 is is leaving a single market. The second most important 0:09:05.040 --> 0:09:09.320 thing is is keeping some kind of customs union access. 0:09:09.360 --> 0:09:12.680 That's her compromise. The vote to Parliament, I think is 0:09:12.720 --> 0:09:14.640 slightly a red herring. I've got to say, and if 0:09:14.880 --> 0:09:16.640 that's what people are buying the pound on the back of, 0:09:16.720 --> 0:09:19.440 then they should think about that because basically what that 0:09:19.440 --> 0:09:22.079 means is in two years time, members of Parliament are asked, 0:09:22.240 --> 0:09:24.320 do you want whatever deal it is I've got or 0:09:24.360 --> 0:09:25.920 do you want to leave the European Union with no 0:09:26.040 --> 0:09:29.880 deal at all? So so let's just undo all of 0:09:29.920 --> 0:09:32.960 this and not leave is unlikely to be on the table. 0:09:33.600 --> 0:09:35.920 The choice. The choice is going to be this deal 0:09:35.960 --> 0:09:38.920 which you may not like, or no deal. I'm struggling 0:09:38.920 --> 0:09:42.000 to understand. I mean, people talk about hard brexit versus 0:09:42.000 --> 0:09:45.960 a soft brexit based on what you initially said. It 0:09:46.040 --> 0:09:48.040 seems like that would be a hard breath. This is 0:09:48.040 --> 0:09:50.840 a pretty hard brexit, yes, so so the soft that 0:09:50.920 --> 0:09:55.120 the people who wanted something softer are all slightly stunned today, 0:09:55.160 --> 0:09:58.840 I think because because there's there's there's no concessions to 0:09:58.880 --> 0:10:00.600 them at all. There was an nice bit in the 0:10:00.720 --> 0:10:02.160 in the speech where the Prime Minister said that we 0:10:02.240 --> 0:10:04.640 all had to come together and sort of unite however 0:10:04.640 --> 0:10:06.920 we voted in the referendum. But to be honest, there's 0:10:06.960 --> 0:10:08.640 not very much for people who voted to stay to 0:10:09.000 --> 0:10:11.840 unite around in this speech. I guess it's difficult to 0:10:11.840 --> 0:10:14.160 figure out in some quarters whether there's a hard boiled 0:10:14.160 --> 0:10:16.720 egg or a soft boiled. This is quite a hard boil. 0:10:17.880 --> 0:10:19.760 But you say it's a hard boiled egg, and yet 0:10:19.800 --> 0:10:22.240 you see that big rise in the value. Well, that's 0:10:22.240 --> 0:10:23.959 what I wanted, That's what right, That's what I wanted 0:10:24.000 --> 0:10:28.160 to expand on because why it is, as you said, 0:10:28.240 --> 0:10:30.640 is this just a red red herring and someone's climbing 0:10:30.679 --> 0:10:35.240 at something, And because I wonder is uh is President 0:10:35.240 --> 0:10:39.520 elect Donald Trump in some way connected to well, I mean, 0:10:39.600 --> 0:10:41.200 you know, there may be, there may be other reasons 0:10:41.200 --> 0:10:43.160 and other things are going on. We had higher than 0:10:43.200 --> 0:10:45.719 expected to expect inflation this morning, so the pound was 0:10:45.720 --> 0:10:49.000 already on its way up before the speech began. The pound, 0:10:49.440 --> 0:10:52.360 the pound did definitely rise when she she talked about 0:10:52.360 --> 0:10:55.560 a vote and on the past the pound has written 0:10:55.559 --> 0:10:59.160 on things that made Brexit look less likely. And I 0:10:59.160 --> 0:11:02.680 I mean, were trying very hard to to tell people 0:11:03.120 --> 0:11:06.319 don't don't count on that vote, don't sift the sand 0:11:06.360 --> 0:11:08.920 for a diamond. You know that that that that vote 0:11:09.000 --> 0:11:11.520 is highly unlikely to reverse the decision. And in fact, 0:11:11.520 --> 0:11:13.800 when we tried, when when somebody asked the Prime Minister, 0:11:13.880 --> 0:11:15.960 and when we've asked her office, well, come on, what 0:11:16.040 --> 0:11:17.760 happens if the vote goes the other way? They just 0:11:17.840 --> 0:11:19.319 laugh and say the vote won't go the other way 0:11:19.360 --> 0:11:21.640 and they're right, who you know, how bad would a 0:11:21.679 --> 0:11:24.160 deal have to be for you to decide? That's what 0:11:24.240 --> 0:11:29.439 David Cameron said, didn't he? Yeah, well that's true. We 0:11:29.520 --> 0:11:31.760 got to leave it there. Robin Huddon, UK Government and 0:11:31.800 --> 0:11:46.320 Politics reporter for Bloomberg joining us from London. I want 0:11:46.360 --> 0:11:49.040 to bring in Joe Carroll, who covers the oil industry 0:11:49.080 --> 0:11:51.760 for us at Bloomberg, to give a little bit more 0:11:51.920 --> 0:11:56.520 color around this. Excell and Mobile purchase of of shale 0:11:57.320 --> 0:12:00.240 land and they based they paid five point six billion 0:12:00.320 --> 0:12:05.760 dollars in shares for this premium basin land. And Joe, 0:12:05.800 --> 0:12:08.360 I want to start with, was this an expected acquisition 0:12:08.400 --> 0:12:11.520 of XS. Well, we've known Exon is looking around this 0:12:11.520 --> 0:12:14.360 this region in Texas and New Mexico called the Permian Basin. 0:12:14.400 --> 0:12:18.240 It's the biggest US oil field UM for for for 0:12:18.400 --> 0:12:22.480 quite a while, we didn't expect a deal this gigantic 0:12:23.040 --> 0:12:24.560 for x On. This is the biggest deal since they 0:12:24.559 --> 0:12:27.439 bought Xto and that was their first for a into 0:12:27.520 --> 0:12:30.520 into North American shale, and that was back in UM. 0:12:30.559 --> 0:12:33.720 Not only are they paying five point six billion in shares. 0:12:34.240 --> 0:12:37.280 If the resources as rich as UM you know, as 0:12:37.280 --> 0:12:39.600 their geologists expected to turn out to be, they'll pay 0:12:39.600 --> 0:12:42.760 another billion in cash over the next fifteen years. I 0:12:42.880 --> 0:12:45.360 got to imagine that somehow we're going to work in 0:12:45.800 --> 0:12:49.040 former chief executive of Exxon Mobile Rex Till listen into 0:12:49.040 --> 0:12:52.400 the conversation. Yeah, they haven't told us, but it sure 0:12:52.760 --> 0:12:56.319 appears almost certain that this was a transaction that began 0:12:56.600 --> 0:12:59.880 before he left January one. These things just don't come 0:12:59.880 --> 0:13:02.480 together that quickly. Well, do you think that it was 0:13:02.559 --> 0:13:06.360 expedited to come out before Rex Silerson took the role 0:13:06.400 --> 0:13:09.960 of Secretary of State under President elect Tromp. No, I 0:13:09.960 --> 0:13:12.640 don't think the I think once once a company cut 0:13:12.679 --> 0:13:18.280 ties with him, Um, they cut ties with him. So um. 0:13:18.440 --> 0:13:20.240 Right now I'm looking at X and shares there up 0:13:20.280 --> 0:13:23.640 a bit. But what could this do for X? And? 0:13:23.679 --> 0:13:26.080 I mean, how much better of a position does this 0:13:26.160 --> 0:13:29.280 put them in? Potentially this is a pretty even though 0:13:29.440 --> 0:13:31.640 for X on five and a half billion dollars doesn't 0:13:31.679 --> 0:13:35.560 sound like a lot of money. This gives them, yeah, 0:13:35.600 --> 0:13:38.600 for for you know, for a company with more annual 0:13:38.679 --> 0:13:43.680 sales that said, it's if at least twenty years of drilling, 0:13:43.679 --> 0:13:46.360 it's an enormous amount of oil. It's three something billion 0:13:46.440 --> 0:13:49.439 dollars worth of oil locked on the ground there. It's 0:13:49.480 --> 0:13:52.800 pretty low risk because because the superman folks have been 0:13:52.840 --> 0:13:55.959 drilling out there for for almost a century. Um. It's 0:13:56.000 --> 0:13:58.280 interesting to me because it strikes me that this is 0:13:58.320 --> 0:14:00.680 some of the consolidation that a lot of oil analysts 0:14:00.679 --> 0:14:03.720 have been waiting for. People said that because of the 0:14:04.200 --> 0:14:07.080 drop in oil prices, that we have to see this 0:14:07.160 --> 0:14:10.440 consolidation by the biggest oil companies. Do you expect there 0:14:10.480 --> 0:14:14.079 to be more announcements like this from exces, rivals, from everybody. 0:14:14.120 --> 0:14:16.920 You know. Yesterday was was the Clayton Williams Noble deal. 0:14:17.160 --> 0:14:19.320 Um that that Dave Wilson just referenced, And that's in 0:14:19.320 --> 0:14:22.400 the same area that's in this uh Delaware basin, which 0:14:22.400 --> 0:14:25.280 is a subrecon region of the Permian there on the 0:14:25.320 --> 0:14:28.040 Texas New Mexico border. It's the hottest m and A 0:14:28.120 --> 0:14:30.720 play in oil anywhere in the world. Um. I think 0:14:30.760 --> 0:14:35.040 it attracted the quarter of about of all the oil 0:14:35.160 --> 0:14:40.440 M and A dollars. That's that's from according to Wood mackenzie. Um. Yeah, 0:14:40.480 --> 0:14:42.200 of course this is just going to keep steam rolling on. 0:14:43.160 --> 0:14:45.960 At what point does the price just become too expensive, 0:14:46.080 --> 0:14:50.800 Because if you've got ample supply in a domestic market, 0:14:51.720 --> 0:14:55.160 then you face the prospect of having more supply than 0:14:55.160 --> 0:14:57.800 your needs. You mean, you're talking about the price of oil. 0:14:59.360 --> 0:15:01.640 As far as x sun goes there, they're confident they'll 0:15:01.680 --> 0:15:04.000 they'll get double digit returns as low you know, with 0:15:04.080 --> 0:15:08.200 oil as low as forty up barrel. I believe Nobile 0:15:08.240 --> 0:15:10.640 said the same thing yesterday. So forty dollars is the 0:15:10.680 --> 0:15:13.080 breakpoint for when you flipped the switch to get the 0:15:13.120 --> 0:15:17.040 shale out. The shale oil out well forty dollars is 0:15:17.080 --> 0:15:20.560 the break point where you're making you return. It can 0:15:20.560 --> 0:15:23.480 certainly go lower than that. Joe, has it gotten cheaper 0:15:23.800 --> 0:15:28.480 to extracate oil from shell drilling. What's happened is they've 0:15:28.680 --> 0:15:31.720 yeah on a per unit basis, sure, because what they've 0:15:31.720 --> 0:15:34.080 done is they just drill these sideways wells for for 0:15:34.120 --> 0:15:36.600 a mile for two miles. Now, it costs more to 0:15:36.680 --> 0:15:38.760 drill each one of those wells, but the amount of 0:15:38.760 --> 0:15:41.520 oil that comes gushing out is so much more massive 0:15:42.360 --> 0:15:44.720 that your per unit costs are a lot lower. Because 0:15:44.720 --> 0:15:46.320 that was one of the big obstacles right in the 0:15:46.440 --> 0:15:48.360 U s. It's a lot more expensive to extracate oil 0:15:48.400 --> 0:15:50.840 than it is, for example, in Saudi Arabia and Iran. 0:15:50.920 --> 0:15:57.560 Correct correct um. So going forward is could any regulations 0:15:57.600 --> 0:16:00.880 actually help Exxon access more of the land that they 0:16:00.880 --> 0:16:02.560 just purchased. Could that have played into this at all 0:16:02.640 --> 0:16:05.880 or not? Really? You know, unlike the rest of the world, 0:16:05.880 --> 0:16:09.240 in the United States, almost everything that gets drilled for 0:16:09.240 --> 0:16:12.760 oil and gas is privately owned. Uh, you know, it's 0:16:12.800 --> 0:16:14.720 not like working in Canada or the UK or really 0:16:14.720 --> 0:16:16.520 anywhere else in the world where the government or the 0:16:16.560 --> 0:16:21.400 crown owns the resource, so so and and and given 0:16:21.400 --> 0:16:23.200 the fact that most of the regulation comes at the 0:16:23.200 --> 0:16:25.920 state level, I don't see a huge impact from from 0:16:25.960 --> 0:16:29.800 from the federal situation. Well, Joe tell us about potential 0:16:29.840 --> 0:16:34.440 price changes fifty three fifty two dollars a barrel. The 0:16:34.600 --> 0:16:38.320 OPEC meeting is in May. You've got this confluence of 0:16:38.360 --> 0:16:44.600 shale oil plus a new president, President elect Donald Trump. Uh, 0:16:44.640 --> 0:16:47.040 what do you see in the next ninety days. In 0:16:47.120 --> 0:16:48.920 the next ninety days, I think you continue to see 0:16:49.000 --> 0:16:51.280 more deals in the Permian, more m and a UM 0:16:51.320 --> 0:16:54.760 as long as these companies can can lock in prices 0:16:54.800 --> 0:16:57.680 by by you know, with forward hedges. Uh, they're just 0:16:57.680 --> 0:17:00.480 gonna they're gonna drill as much as they can, you know, 0:17:00.520 --> 0:17:03.640 and make their returns. UM. I think it was the 0:17:03.680 --> 0:17:06.640 Southeast was yesterday the day before said they don't expect 0:17:07.600 --> 0:17:10.359 expect the cuts, the open cuts to last through June. 0:17:10.960 --> 0:17:14.920 So so I think we really see see an impact there. 0:17:15.280 --> 0:17:16.560 All right. I have a feeling you're going to be 0:17:16.680 --> 0:17:18.879 very busy, and we thank you for it. Joe Carroll 0:17:19.080 --> 0:17:23.960 is Energy America's reporter for Bloomberg, giving us some perspective 0:17:23.960 --> 0:17:28.240 and additional information about x On Mobile paying five point 0:17:28.359 --> 0:17:33.440 six billion dollars to expand it's acreage in uh Western Texas. 0:17:44.480 --> 0:17:46.520 Here to tell us about some innovation when it comes 0:17:46.520 --> 0:17:48.840 perhaps to your portfolio, but it might also include some 0:17:48.920 --> 0:17:53.119 healthcare stocks, is Mike Bailey. He is the chief of 0:17:53.119 --> 0:17:55.200 financial Officer I beg your pardon to see f A 0:17:55.320 --> 0:17:59.560 and director of Research at FBB Capital Markets. Hey Mike Bailey, 0:17:59.600 --> 0:18:02.120 I'm sorry, I thought you got a new title there, 0:18:02.119 --> 0:18:05.119 but you didn't. Good morning morning at least thanks for 0:18:05.119 --> 0:18:07.359 having me. All right, I'm gonna get some kind of 0:18:07.359 --> 0:18:10.240 surprised news there, no no, no, no more surprise that 0:18:10.240 --> 0:18:14.840 we've got enough people doing surprise news. It's ok. You're 0:18:14.880 --> 0:18:19.600 you're managing almost a billion at FBV Capital. What are 0:18:19.640 --> 0:18:22.359 you telling your your client base right now to do 0:18:22.760 --> 0:18:26.040 or not do well? I think as we look at 0:18:26.080 --> 0:18:29.879 the very short term and ideally we do next three months. Sure, 0:18:30.160 --> 0:18:32.720 so I think we are a bit concerned here. Um, 0:18:32.800 --> 0:18:34.919 you know, I think we're we've got the uh the 0:18:34.960 --> 0:18:38.280 Trump inauguration coming up here in a few days. I 0:18:38.320 --> 0:18:41.960 think will probably be a good year, maybe not quite 0:18:41.960 --> 0:18:44.760 as good as what what are you concerned about Yeah, 0:18:44.760 --> 0:18:47.200 I think so if we want to kind of create 0:18:47.320 --> 0:18:49.639 a new word here, people love Brexit and flash crash 0:18:49.680 --> 0:18:53.040 and such, so Trump's secution, uh doesn't quite roll off 0:18:53.040 --> 0:18:55.080 the tongue. But I think we're getting to a phase 0:18:55.119 --> 0:18:59.280 where investors expect Trump to execute and we're getting you know, 0:18:59.280 --> 0:19:02.000 the rubbers about to hit the road here Friday, and 0:19:02.040 --> 0:19:06.200 I think our concerns are basically investors are hoping that 0:19:06.240 --> 0:19:08.480 Trump is going to act on some of his promises, 0:19:08.520 --> 0:19:11.639 you know, whether that's lower taxes, whether that's juicing up 0:19:11.640 --> 0:19:14.359 the economy, um. And if that doesn't happen, or if 0:19:14.359 --> 0:19:17.040 it happens later than investors expect, you're going to see 0:19:17.040 --> 0:19:19.439 some downside. So I think for us, um, there's a 0:19:19.440 --> 0:19:22.200 little bit more hope in the market right now than 0:19:22.560 --> 0:19:24.600 what you might expect to see in the very short term. 0:19:24.920 --> 0:19:27.320 So you know, also, we sort of haven't seen much 0:19:27.440 --> 0:19:31.560 volatility at all really since you know, the election actually, 0:19:31.800 --> 0:19:33.680 so I think putting some of those pieces together, we 0:19:33.720 --> 0:19:35.879 wouldn't be surprised to see a little bit of downside 0:19:35.920 --> 0:19:38.159 you know, later this week, early next week, and then 0:19:38.200 --> 0:19:40.720 I think investors will will catch their breath, you will 0:19:40.760 --> 0:19:43.160 see the new administrations start to roll out some policies, 0:19:43.400 --> 0:19:45.720 and I think that some of those expectations will get 0:19:45.720 --> 0:19:48.200 realized as we head towards the later latter part of 0:19:48.200 --> 0:19:49.800 the year. Mike, I thought that it was interesting that 0:19:49.840 --> 0:19:52.480 you said that you think that there's roughly upside and 0:19:52.520 --> 0:19:55.080 five percent downside for the year, sort of to your 0:19:55.119 --> 0:19:57.320 point that the near term perhaps downside, but over the 0:19:57.359 --> 0:19:59.720 longer term upside. I thought it was also interesting that 0:19:59.800 --> 0:20:05.920 you mentioned industrials and healthcare as all whether sectors, particularly healthcare. 0:20:06.000 --> 0:20:08.080 This was interesting to me because we've seen a lot 0:20:08.119 --> 0:20:11.680 of volatility in biopharmaceutical stocks and as as well as 0:20:11.720 --> 0:20:15.160 a hospital shares on the back of Trump's comments. So 0:20:15.400 --> 0:20:18.480 why is this such a stalwart industry? You know, I 0:20:18.520 --> 0:20:20.520 think when we look at healthcare, and I am a 0:20:20.560 --> 0:20:22.400 bit biased, used to be a healthcare analysts, I've spent 0:20:22.440 --> 0:20:24.160 a lot of time looking at it. Um, I do 0:20:24.480 --> 0:20:26.240 think I think there are a lot of spaces within 0:20:26.359 --> 0:20:28.359 healthcare where or you can do well over a number 0:20:28.359 --> 0:20:31.119 of years, and it may not necessarily be you know, 0:20:31.200 --> 0:20:33.120 the big farm of the big biotech that folks think 0:20:33.160 --> 0:20:35.240 about is kind of the headlines. Uh you know, maybe 0:20:35.280 --> 0:20:38.280 it's uh services maybe it's a managed care insurance stock, 0:20:38.440 --> 0:20:41.479 maybe it's a MidCap medical device dock. But there are 0:20:41.520 --> 0:20:44.920 some companies that in our view are changing and growing 0:20:45.080 --> 0:20:47.600 pretty meaningfully over a number of years. Uh. And they've 0:20:47.640 --> 0:20:50.080 got you know, they're diversified, so if the US is 0:20:50.119 --> 0:20:52.280 down one year, you know, maybe they'll get helped uh 0:20:52.320 --> 0:20:55.440 internationally the next year. UM. So there are some spaces 0:20:55.440 --> 0:20:57.600 we like. However, as you mentioned, there are certainly some 0:20:57.680 --> 0:21:00.480 areas that had a great bull run or two three, 0:21:00.560 --> 0:21:02.359 four years and that kind of came to a screeching hall. 0:21:02.480 --> 0:21:04.880