WEBVTT - P&L: AT&T-Time Warner Will Merge, But Will Be Dwarfed by Rivals 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and 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 --> 0:00:16.560 you and your money, whether you at the grocery store 0:00:16.800 --> 0:00:19.960 or the trading floor. Find the Bloomberg pm L podcast 0:00:20.000 --> 0:00:28.840 on iTunes, SoundCloud and at Bloomberg dot com. You know, 0:00:28.920 --> 0:00:30.840 Pim Fox. We hear a lot about the A, T 0:00:31.040 --> 0:00:35.080 and T and Time Warner merger, and we've heard Donald Trump, 0:00:35.360 --> 0:00:38.559 president elect, talk about it and say that he opposes it. 0:00:39.120 --> 0:00:42.800 Are we at least heard that according to sources, as 0:00:42.840 --> 0:00:46.800 reported by Bloomberg, that he has told people he still 0:00:46.840 --> 0:00:50.120 opposes it. So can this deal still get done? I 0:00:50.159 --> 0:00:52.640 want to bring in Porter bib managing partner at Media 0:00:52.720 --> 0:00:56.520 Tech Capital Partners in New York. Porter, what do you 0:00:56.520 --> 0:00:59.880 think is going on here? I mean, Ken Ken, President 0:01:00.200 --> 0:01:04.520 Trump even way in on this deal in any practical way. 0:01:04.640 --> 0:01:08.040 Actually he can't, but that's not going to stop him. 0:01:08.240 --> 0:01:12.000 And the one thing we have learned about President elect 0:01:12.040 --> 0:01:17.400 Trump is that whatever he says is always reversible, uh, 0:01:17.400 --> 0:01:20.720 in a millisecond, because he's been doing it every day. 0:01:20.800 --> 0:01:24.800 He's he's got a very interesting meeting in an hour 0:01:24.880 --> 0:01:30.080 and a half with the senior US intelligent the community leaders. 0:01:30.200 --> 0:01:34.280 And my guess is he's going to reverse his uh 0:01:35.160 --> 0:01:38.440 love affair that he's had with Julian Ensage when not 0:01:38.560 --> 0:01:41.840 meeting is over. But regarding Time Warner, A T and T, 0:01:42.920 --> 0:01:47.680 the two new UH Trump appointees to the SEC have 0:01:47.840 --> 0:01:51.360 both come out very strongly in favor of proving the deal. 0:01:52.000 --> 0:01:56.919 There's been no problem, uh surface that that the Obama 0:01:57.120 --> 0:02:03.400 Justice Department, UM, and I don't that that Trump's team 0:02:03.800 --> 0:02:07.240 is going to see this as anything but a very 0:02:07.320 --> 0:02:12.959 positive Jeff says Zebuscus UH and Randall Stevens. And when 0:02:12.960 --> 0:02:17.640 they came to Congress and UM testified about this deal, 0:02:18.080 --> 0:02:23.080 really pointed out the the fact that most people in 0:02:23.400 --> 0:02:27.840 Washington hadn't yet realized that the competition is not are 0:02:27.880 --> 0:02:31.760 the cable or telecom companies, It's the Frightful five, It's 0:02:31.800 --> 0:02:36.400 the Google's, the Amazon's, the Microsoft's. Uh. Those companies are 0:02:36.440 --> 0:02:40.240 on Facebook. They're going to rule the media market going forward, 0:02:40.360 --> 0:02:42.840 and A T and T and Time Warner are going 0:02:42.880 --> 0:02:48.560 to be rather rather small competitors compared to the tech companies. 0:02:49.280 --> 0:02:52.880 Porter if anyone doubts that this merger is going to happen. 0:02:52.960 --> 0:02:56.840 You're saying, don't doubt it. It will happen, at least 0:02:56.840 --> 0:03:00.760 not because of government interference. That's what I'm saying. And 0:03:01.080 --> 0:03:06.320 Jeff Mucas came out last week and chief executive Time Warner. Yes, 0:03:06.639 --> 0:03:10.119 then there he said, there is no Plan B. Plan 0:03:10.240 --> 0:03:13.680 A is what we're planning to do, and uh, um, 0:03:13.960 --> 0:03:16.880 it's going to go through and if it doesn't, uh, 0:03:17.520 --> 0:03:21.240 that's it. We're going to stay standalone. But that that 0:03:21.760 --> 0:03:25.240 had a hollow ring to it because he's as vulnerable 0:03:25.280 --> 0:03:30.679 as the other linear media content providers. They have to 0:03:31.360 --> 0:03:36.160 expand they have to go digital, and the huge consumer 0:03:36.280 --> 0:03:41.000 facing aspect of a T and T UM is going 0:03:41.040 --> 0:03:45.680 to elevate Time Warner into a very significant competitive position 0:03:45.760 --> 0:03:49.040 against the tech giants, where you know, there are going 0:03:49.080 --> 0:03:50.960 to be a lot of changes on in the media 0:03:51.040 --> 0:03:55.200 landscape next year. This year. Uh, two of the biggest 0:03:55.320 --> 0:03:57.200 moves that if it in the news recently are making 0:03:57.280 --> 0:03:59.880 Kelly and credit on suster and moving to and B 0:04:00.080 --> 0:04:03.920 see from Fox. Do you think that Fox is going 0:04:04.120 --> 0:04:06.680 to suffer from this? And conversely, do you think the 0:04:06.800 --> 0:04:12.040 NBC really will benefit well? The loss of Roger Ales 0:04:12.160 --> 0:04:16.719 has really put the pressure on James and Rockland Murdoch, 0:04:16.800 --> 0:04:20.080 who are who are essentially running the company right now 0:04:20.279 --> 0:04:25.760 with with Rupert taking a much less dominant role, and 0:04:25.800 --> 0:04:30.159 they have been both very adamant, but James and Laughlin 0:04:30.279 --> 0:04:32.600 saying they want to keep Fox the way it is 0:04:32.720 --> 0:04:41.640 positioned as a partisan network, partisan leading network, but emphasize 0:04:41.680 --> 0:04:45.200 the hard news and what they call the fair and 0:04:45.240 --> 0:04:49.599 balanced aspect. And I think having having lost Megan Kelly, 0:04:49.880 --> 0:04:55.560 especially because she was really a departure from the heavily 0:04:55.720 --> 0:05:00.200 partisan prime time lineup that Fox has, that that is 0:05:00.279 --> 0:05:03.039 going to be a very interesting situation to see whether 0:05:03.640 --> 0:05:07.360 Fox continues down the road that they have traveled for 0:05:07.360 --> 0:05:11.599 for the last twenty years. And the most important thing, however, 0:05:11.680 --> 0:05:18.160 that Fox is facing is the the very serious demographic situation. 0:05:18.920 --> 0:05:22.920 Almost sixty percent of their audience is over sixty years old, 0:05:23.440 --> 0:05:27.080 and they're very very weak and the key demographic eighteen 0:05:27.120 --> 0:05:30.799 to forty nine, which advertisers want. And despite the fact 0:05:30.800 --> 0:05:33.960 that they are the market leader in cable news right now, 0:05:34.680 --> 0:05:38.080 the demographics are very poor. And if you start looking 0:05:38.120 --> 0:05:42.240 at the ads that are running on Fox, there's more 0:05:42.320 --> 0:05:47.640 pharmaceutical and reverse mortgage advertising. Uh than anything else. You 0:05:47.680 --> 0:05:50.800 don't see the cars and the soft drinks and the 0:05:50.839 --> 0:05:55.679 other major advertising categories that the other networks are caring. 0:05:55.720 --> 0:05:58.120 So I think Fox has to do a lot of 0:05:58.160 --> 0:06:02.560 thinking about what kind of image and format they want 0:06:02.600 --> 0:06:06.719 to go with going forward. And losing Megan Kelly was 0:06:06.760 --> 0:06:10.280 a very serious loss to them. She is going to 0:06:10.400 --> 0:06:13.480 be replaced by we Gotta we gotta leave it there. 0:06:13.480 --> 0:06:15.640 I want to thank you very much, Porter bib He 0:06:15.720 --> 0:06:30.520 is managing partner Media Tech Capital Partners. Well more than 0:06:30.560 --> 0:06:34.440 two hundred thousand people are at the Consumer Electronics Show 0:06:34.480 --> 0:06:37.039 in Las Vegas, and one of them is our guest, 0:06:37.160 --> 0:06:40.520 Dr Alex Leedo. He is the chief executive and the 0:06:40.600 --> 0:06:45.159 co founder of Efficient Power Conversion. Dr Leado, thank you 0:06:45.200 --> 0:06:48.120 very much for being with us. Thank you. You know, 0:06:48.200 --> 0:06:50.240 I can't figure out whether we should start with you 0:06:50.320 --> 0:06:52.599 telling us what it's like to be at c e 0:06:52.839 --> 0:06:55.960 S with all of the new things and great televisions 0:06:55.960 --> 0:07:01.040 and everything, where maybe start with something totally complicated light 0:07:01.960 --> 0:07:06.440 light detection and ranging systems. The show you want to shake, 0:07:07.279 --> 0:07:10.040 you know, he's the coolest thing that what's the coolest 0:07:10.040 --> 0:07:13.200 thing that you've seen at the show did well. You know, look, 0:07:13.240 --> 0:07:16.360 I think that the coolest things all revolve around autonomous 0:07:16.400 --> 0:07:20.280 cars and augmented reality. There's all sorts of displays on 0:07:20.320 --> 0:07:23.200 that right now, and uh, it's just amazing. You know, 0:07:23.240 --> 0:07:25.000 our lives are going to change quite a bit from 0:07:25.000 --> 0:07:28.080 both of those, uh, those developments. So how do you 0:07:28.160 --> 0:07:31.640 envision our life being changed by some of these developments? Well, 0:07:31.680 --> 0:07:34.440 you know, I think the autonomous vehicle really takes away 0:07:34.480 --> 0:07:37.400 the need for individual car ownership. So you know, that 0:07:37.520 --> 0:07:41.120 redefines how cities will be defined, how we'll get around. 0:07:41.520 --> 0:07:44.239 And really, there hasn't been a major change in transportation 0:07:44.320 --> 0:07:47.600 since the jet engine was developed sixty seventy years ago. 0:07:48.000 --> 0:07:49.640 So this is really going to be a revolution. But 0:07:49.680 --> 0:07:53.400 it'll take time. It'll take you five years, and everybody's 0:07:53.440 --> 0:07:56.720 gonna expect it tomorrow. So um, dr Leader, this brings 0:07:56.800 --> 0:07:59.840 us back to, uh, the substances that Pim was trying 0:07:59.880 --> 0:08:04.120 to it out. Um, your company produces a substance that 0:08:04.160 --> 0:08:07.240 you're hoping will be instrumental in this revolution in the 0:08:07.240 --> 0:08:11.840 way that we transu we we get around, correct, that's correct. Yeah, 0:08:11.880 --> 0:08:15.440 we we make products out of the gallium nitride. Uh, 0:08:15.520 --> 0:08:18.840 and uh, these products are really the successor to silicon, 0:08:18.920 --> 0:08:21.040 which is the foundation of all of our computer chips 0:08:21.040 --> 0:08:24.320 and semiconductors. And it's it's a whole lot faster and 0:08:24.360 --> 0:08:27.160 its lower cost, so it enables things like these light 0:08:27.720 --> 0:08:31.840 detection and ranging systems and augmented reality systems. And in 0:08:31.840 --> 0:08:34.840 the next few years you'll start seeing power chords disappearing. 0:08:34.880 --> 0:08:36.320 And I don't know about you, but I don't know 0:08:36.360 --> 0:08:39.839 anybody who likes power chords. I think you've just you 0:08:40.440 --> 0:08:43.200 just made it made a convert here. I mean honestly, 0:08:43.360 --> 0:08:46.000 you said power chords are going away, and I almost 0:08:46.040 --> 0:08:48.840 jumped up and down in my seat. I see how 0:08:48.920 --> 0:08:53.800 easy it is to make people happy, you know, we were. 0:08:54.360 --> 0:08:57.320 I want you to just describe the actual thing, because 0:08:57.400 --> 0:08:59.360 right now it kind of looks like a hockey puck 0:08:59.400 --> 0:09:02.640 that sits on top of an automobile and it spins 0:09:02.640 --> 0:09:05.320 around to get that three hundred and sixty degree image. 0:09:05.720 --> 0:09:10.840 It's a hockey puck type, it's a lighter, it's a 0:09:10.920 --> 0:09:13.640 it's a lighter technology, and it spins around and it 0:09:13.720 --> 0:09:19.040 creates uh almost instantaneous map of whatever it is that 0:09:19.080 --> 0:09:23.640 you're around, and it's done with lasers. Now you've partnered 0:09:23.800 --> 0:09:29.600 with Veladine to do something else and it's much much smaller. 0:09:29.640 --> 0:09:33.160 Tell us about it. So you know, these lighter systems 0:09:33.160 --> 0:09:36.800 have been around since the Google mapping cars several years ago. 0:09:36.800 --> 0:09:38.720 They were one of the first users of it, and 0:09:38.760 --> 0:09:42.440 they really paint an immediate picture of the you know, 0:09:42.520 --> 0:09:46.400 all the objects and three dimensions around you in in 0:09:46.400 --> 0:09:49.280 in and they give you three dimensions. The problem has 0:09:49.320 --> 0:09:52.119 been they've been very expensive, so getting them less expensive 0:09:52.160 --> 0:09:54.400 so that they can get on cars that are driven 0:09:54.440 --> 0:09:56.480 by you and me has been the goal. So we 0:09:56.640 --> 0:10:00.240 partnered with Veladine and we developed some uh some more 0:10:00.280 --> 0:10:05.200 advanced integrated circuits with our gallium nitride devices that are 0:10:05.520 --> 0:10:08.560 are allowing shrink and make these things smaller so you 0:10:08.600 --> 0:10:10.880 can't see them, and also make them a whole lot 0:10:10.960 --> 0:10:13.880 cheaper so we can put them on everyday cars. Dr 0:10:13.960 --> 0:10:16.120 leto Do you expect that in the future when we're 0:10:16.160 --> 0:10:18.560 all sort of just being driven around by our computers. 0:10:19.080 --> 0:10:20.640 Do you think that we're going to have to update 0:10:20.720 --> 0:10:23.160 the programs, the systems and we go to bring our 0:10:23.200 --> 0:10:26.240 cars to sort of techys to to get them fixed. 0:10:26.280 --> 0:10:28.760 Me I'm just trying to think about the realities of 0:10:28.800 --> 0:10:32.240 having one of these. So first of all, you probably 0:10:32.240 --> 0:10:34.160 won't own the car, you know somebody. It will be 0:10:34.200 --> 0:10:36.959 a you know, transportation as a service kind of thing. 0:10:37.000 --> 0:10:39.560 A car will arrive with no driver, you'll get in it, 0:10:39.640 --> 0:10:42.320 you'll arrive at your destination, kind of like an Uber 0:10:42.320 --> 0:10:45.680 without a driver, which is why Uber's experimenting with these things. 0:10:46.280 --> 0:10:49.400 Um So in terms of service and all that, you know, 0:10:49.559 --> 0:10:52.120 the software updates will be over the air. I think 0:10:52.120 --> 0:10:55.680 Tesla has already pioneered that very successfully. And in terms 0:10:55.720 --> 0:10:59.760 of service, electric vehicles are are fundamentally simpler than than 0:11:00.240 --> 0:11:03.000 gasoline and diesel vehicle. So I think that the amount 0:11:03.000 --> 0:11:05.200 of service has been proved to be a lot less 0:11:05.440 --> 0:11:08.520 on an electric car. Thank you so much. Really really 0:11:08.559 --> 0:11:11.720 fascinating to hear what you're seeing and what you're doing 0:11:11.880 --> 0:11:14.640 over there. Dr Alex LIEDO CEO and co founder of 0:11:14.679 --> 0:11:19.600 Efficient Power Conversion talking about the future of our lives 0:11:19.760 --> 0:11:22.240 in cars that drive us around that we don't own, 0:11:22.440 --> 0:11:24.360 that have all sorts of cool little gadget you know, 0:11:24.440 --> 0:11:26.680 next week with no power courts, with no power courts, 0:11:26.720 --> 0:11:41.320 I mean, I am converted, and to get smarter on China, 0:11:41.480 --> 0:11:44.120 I want to focus right now on trade we have 0:11:44.200 --> 0:11:47.839 Dan Moss. He is executive editor on Global Economics for 0:11:48.000 --> 0:11:51.560 Bloomberg News and he can be followed on Twitter at 0:11:51.760 --> 0:11:56.120 moss underscore Eco. Seems appropriate, Dan, thanks for being with us. 0:11:56.440 --> 0:11:58.920 Tell us the what's going on now with China and 0:11:58.960 --> 0:12:02.120 President elected Don Trump and the back and forth of 0:12:02.160 --> 0:12:06.240 words him. The two sides are really figuring out how 0:12:06.320 --> 0:12:11.000 they're going to dance with each other after January. The 0:12:11.160 --> 0:12:15.440 Chinese are probably wondering which Donald Trump walks into the 0:12:15.480 --> 0:12:20.160 Oval Office that afternoon after the ceremony. Is it Donald 0:12:20.160 --> 0:12:25.160 Trump the deal maker advised by Rex Tillison and Gary Cohn, 0:12:26.080 --> 0:12:31.120 or is it Donald Trump the populist hitting all the 0:12:31.160 --> 0:12:35.480 bases for the white working class in the manufacturing hard land. 0:12:37.040 --> 0:12:40.880 While the Chinese appear to be unsure of that, they're thinking, 0:12:41.080 --> 0:12:43.360 let's take out some insurance while we're at it and 0:12:43.400 --> 0:12:46.360 say look. Earlier in the week, there was the line 0:12:46.360 --> 0:12:50.400 that there's a great lot of flowers outside key government 0:12:50.400 --> 0:12:53.960 ministries in Beijing, but inside there are also sticks. Now 0:12:54.000 --> 0:12:57.880 we're learning, we'll look. American companies have a lot invested 0:12:57.880 --> 0:13:00.600 in China. We all knew that the China his government 0:13:00.640 --> 0:13:04.960 is reminding the incoming administration of that saying, by the way, 0:13:05.000 --> 0:13:07.640 there are some things that we can do. We hope 0:13:07.679 --> 0:13:09.959 it won't come to that. We don't expect it will 0:13:10.000 --> 0:13:12.360 come to that. But hey, we're here and we're watching, 0:13:12.400 --> 0:13:15.319 and we're waiting, and we're not necessarily going to allow 0:13:15.320 --> 0:13:18.240 ourselves to be mulanova. You know, I was struck by 0:13:18.280 --> 0:13:20.920 this story that was on the terminal this morning, and 0:13:21.240 --> 0:13:23.360 I was struck in particular was talking about how China 0:13:23.480 --> 0:13:26.559 is preparing to step up the scrutiny of its US companies, 0:13:26.760 --> 0:13:29.440 just sort of what you were exactly talking about, dan 0:13:29.840 --> 0:13:32.679 Uh in a sort of way to retaliate. But there 0:13:32.760 --> 0:13:36.440 was a quote here, Um that was really crucial to me. 0:13:36.520 --> 0:13:38.840 When you have a country with a large trade deficit 0:13:38.880 --> 0:13:42.400 that retaliates against a country with a large trade surplus 0:13:42.400 --> 0:13:45.960 with it, it's the country with the trade deficit, i e. 0:13:46.280 --> 0:13:49.760 The US that wins. The country with the surplus loses 0:13:49.920 --> 0:13:53.200 every time. And America has had this trade deficit um 0:13:53.320 --> 0:13:56.960 with China has been narrowing somewhat um and yet you know, 0:13:57.160 --> 0:13:59.200 there is this feeling, you know, who has more to 0:13:59.320 --> 0:14:03.840 lose here? They both do. And let's just take a 0:14:03.880 --> 0:14:08.600 step back. This didn't get any scrutiny at all during 0:14:08.600 --> 0:14:11.320 the course of the campaign. But the nature of the 0:14:11.400 --> 0:14:15.760 Chinese economy and what's driving it is changing significantly, and 0:14:15.800 --> 0:14:19.200 the nature of the US as economic relationship with China 0:14:19.360 --> 0:14:22.040 as a result is changing as well. This image we 0:14:22.120 --> 0:14:25.440 all have of people going to Guangdong to set up 0:14:25.520 --> 0:14:30.240 T shirt factories, no one does that anymore because it's 0:14:30.280 --> 0:14:35.920 simply too expensive. That's gone elsewhere. When people think about 0:14:36.000 --> 0:14:39.160 trade with China, they think of that sort of thing 0:14:39.280 --> 0:14:42.400 which is completely out murdered, or they think of stuff 0:14:42.480 --> 0:14:46.640 being loaded onto a ship and brought to Mexico for 0:14:46.680 --> 0:14:49.800 assembly and end of the US. The Chinese economy is 0:14:49.800 --> 0:14:53.760 increasingly driven by services. When people talk about the trade 0:14:53.800 --> 0:14:57.120 surplus and the trade deficit, they're talking about merchandise, goods, 0:14:57.800 --> 0:15:02.320 services exports from the United States to China growing significantly. 0:15:02.640 --> 0:15:08.120 The Chinese current account surplus will basically disappear by twenty 0:15:08.280 --> 0:15:12.600 According to the IMF, The most interesting US company in 0:15:12.680 --> 0:15:17.600 China right now arguably is Starbucks. It's a services economy. 0:15:17.720 --> 0:15:22.720 The Chinese population is getting richer. Low cost manufacturing doesn't 0:15:22.720 --> 0:15:26.960 make sense there anymore. Services and consumption now account for 0:15:27.000 --> 0:15:30.160 more than half of GDP. You know. So Earlier this week, 0:15:31.040 --> 0:15:34.760 President elect Trump tweeted, China has been taking out massive 0:15:34.800 --> 0:15:37.880 amounts of money and wealth from the US in totally 0:15:37.880 --> 0:15:41.680 one sided trade, but won't help with North Korea. Nice 0:15:41.840 --> 0:15:44.640 exclamation point. Um. You know, with a tweet like this, 0:15:45.360 --> 0:15:46.960 there you have a lot of people saying, look, we 0:15:46.960 --> 0:15:49.600 all have a lot to lose. Uh. International trade has 0:15:49.600 --> 0:15:52.720 really helped the economy. You know, is there something to 0:15:53.160 --> 0:15:57.360 what President elect Trump is saying? Well, look, leaving aside 0:15:57.400 --> 0:16:00.800 the North Korea question, I don't want to get into. Um, 0:16:01.240 --> 0:16:04.840 not a lot of FDI going on there. Look, but 0:16:05.080 --> 0:16:08.440 they both have a lot to lose. So yeah, China 0:16:08.480 --> 0:16:12.000 has become wealthy from the opening the economy that began 0:16:12.080 --> 0:16:15.120 under Dung Shooping in the late seventies. By the way, 0:16:15.160 --> 0:16:18.120 it's not just US corporations that have gone in their 0:16:18.320 --> 0:16:26.240 Japanese corporations, European corporations. US corporations have also done well 0:16:26.280 --> 0:16:30.480 out of China. I mean, GM makes a huge amount 0:16:30.520 --> 0:16:35.520 of money out of China. Starbucks again, services economy, big 0:16:35.560 --> 0:16:39.480 expansion plans within China. Hello, last time I checked, these 0:16:39.520 --> 0:16:43.040 were US companies. So it really is a two way thing. 0:16:43.040 --> 0:16:45.520 In fact, you could argue that they aren't really the 0:16:45.720 --> 0:16:48.680 first and second largest economies on the planet, they are 0:16:48.720 --> 0:16:52.040 actually one economy. Well, then I was just gonna try 0:16:52.040 --> 0:16:54.320 to get in. Can you do fifteen seconds on them 0:16:54.360 --> 0:17:00.600 buying US treasuries in the currency? Well, they buy US treasuries, 0:17:00.880 --> 0:17:05.440 as do many governments. The question is really whether they're 0:17:05.480 --> 0:17:07.960 going to keep selling them at a pretty fast clip 0:17:07.960 --> 0:17:10.119 in order to support the u n UM And I 0:17:10.119 --> 0:17:11.680 think that's sort of the jury is still out whether 0:17:11.680 --> 0:17:13.200 they're going to have to do that um and whether 0:17:13.200 --> 0:17:16.280 they're going to continue and whether they've they've even put 0:17:16.280 --> 0:17:18.720 in certain capital controls and they've made it more difficult 0:17:18.720 --> 0:17:20.480 for people to take money out of the country and 0:17:20.600 --> 0:17:23.800 to even have foreign investors in the country. But it 0:17:23.840 --> 0:17:25.960 seems like some of those measures are starting to stick 0:17:26.080 --> 0:17:29.240 and the economy is is solidified to some degree. Dams. Unfortunately, 0:17:29.240 --> 0:17:30.359 we're gonna have to leave it there. We can talk 0:17:30.400 --> 0:17:31.879 about this for the rest of the show, and I 0:17:31.880 --> 0:17:33.440 would love to, actually, because I feel like this is 0:17:33.440 --> 0:17:35.720 the big backdrop for a lot of what happens next. 0:17:35.840 --> 0:17:51.200 Dan Moss, executive editor for Global Economics for Bloomer. Well, 0:17:51.200 --> 0:17:53.680 when we want to learn more about the world economy 0:17:53.680 --> 0:17:55.680 one place to look as the shipping industry. And here 0:17:55.720 --> 0:17:57.600 to help us his urs dir. He is the chief 0:17:57.640 --> 0:18:03.760 financial officer of t b S Ocean Logistics. Or maybe 0:18:03.800 --> 0:18:06.959 just give a quick recap of your breadth of experience 0:18:07.080 --> 0:18:09.359 and tell us what's going on in the shipping industry 0:18:09.440 --> 0:18:11.199 right now that we can take away and use in 0:18:11.240 --> 0:18:15.160 our understanding of the world economy. Hey Pimm, and good 0:18:15.160 --> 0:18:17.359 morning Lisa, and thanks for having me on UM and 0:18:17.480 --> 0:18:19.280 happy New Year. I think that this is a good 0:18:19.480 --> 0:18:21.399 subject matter to start the year off and looking a 0:18:21.440 --> 0:18:25.959 little bit macro and global shipping. My background just very briefly, 0:18:26.000 --> 0:18:27.960 I was on the street for eight years as an 0:18:28.000 --> 0:18:30.720 equity analyst prior to this role. But also I love 0:18:30.760 --> 0:18:32.639 that people here say on the street and it doesn't 0:18:32.640 --> 0:18:36.000 mean you know, on a corner. I was in Canon 0:18:37.000 --> 0:18:39.120 waving my hands, hanging by the stocks all the stock 0:18:39.160 --> 0:18:42.960 no no, working at de Lazard and Clarkson's uh and UM, 0:18:43.080 --> 0:18:44.760 I'm proud of that. I was a lender and a 0:18:44.760 --> 0:18:48.359 banker and working another shipping companies UM. Right now in 0:18:48.400 --> 0:18:50.679 the in the dry bak shipping markets where we compete, 0:18:50.720 --> 0:18:53.879 we have twenty six ships under our control we have 0:18:53.960 --> 0:18:56.840 no debt, a good balance sheet, but the industry itself 0:18:56.960 --> 0:19:00.560 is very much oversupplied, so there's too many ships. Overall, 0:19:00.600 --> 0:19:04.359 demand was fairly weak in sixteen, but didn't prove in 0:19:04.359 --> 0:19:07.480 the second half of the year significantly as a dollar stabilized, 0:19:08.200 --> 0:19:11.119 UH and UM. They outlook for next year on the 0:19:11.200 --> 0:19:14.600 demand side is for demand to slightly exceed fleet growth, 0:19:14.640 --> 0:19:18.479 So we do expect freight rates to stabilize four ships, UM. 0:19:18.520 --> 0:19:21.040 But we have high iron ore inventories I think you 0:19:21.080 --> 0:19:23.919 mentioned in one of the breaks, UM. We also have 0:19:24.040 --> 0:19:28.840 prices coming up. We have UM coking coal inventories in 0:19:28.920 --> 0:19:32.639 China moving up again but also prices coming high. And 0:19:32.640 --> 0:19:34.679 then we also have Chinese New York coming So I 0:19:34.680 --> 0:19:38.520 expect the first quarter of this year freight weight rate 0:19:38.640 --> 0:19:42.359 wise to be weak. I would also expect commodity prices 0:19:42.400 --> 0:19:46.159 to stabilize and possibly soften, and the rest of the 0:19:46.200 --> 0:19:49.480 year actually to be much better than which was a 0:19:49.560 --> 0:19:52.520 historic worst. Gil I wanted to talk about that. I mean, 0:19:52.520 --> 0:19:54.920 I was last year a lot of people were talking 0:19:54.920 --> 0:19:57.600 about the Baltic Dry and how it was plunging and 0:19:57.840 --> 0:19:59.959 the problem behind that and how it sort of indicate 0:20:00.040 --> 0:20:02.399 did that the global economy was slowing. This is what 0:20:02.440 --> 0:20:05.359 a lot of people were looking at for edification about 0:20:05.359 --> 0:20:08.320 their slow growth or no growth forever type of theces. 0:20:08.359 --> 0:20:10.280 All of a sudden you are seeing a little bit 0:20:10.320 --> 0:20:13.520 of pickup, but not really that gangbusters growth that backs 0:20:13.640 --> 0:20:15.160 up with a lot of people are talking about now, 0:20:15.160 --> 0:20:17.960 which is sudden global reflation. I mean, where is the 0:20:18.000 --> 0:20:22.720 optimism coming from suddenly? Now? At the beginning of last year, 0:20:22.720 --> 0:20:23.879 there was a couple of things that are going on 0:20:23.920 --> 0:20:26.199 a ship against great question um there were far too 0:20:26.240 --> 0:20:27.879 many ships. There are a lot of ships being delivered 0:20:27.880 --> 0:20:31.240 in the first quarter as well, but you also had 0:20:31.720 --> 0:20:35.280 a weakening dollar, and you had again a first quarter 0:20:35.280 --> 0:20:38.119 that is typically saw for commodity demand growth. So you 0:20:38.160 --> 0:20:40.840 have the freight rates really coming off into a deep 0:20:40.960 --> 0:20:45.040 historic low as a dollar stabilized. Everyone noticed the particularly 0:20:45.040 --> 0:20:47.840 in Asia, particularly in China, which is of the dry 0:20:47.880 --> 0:20:51.520 boat demand market seaborn demand that their inventories were low 0:20:51.560 --> 0:20:54.240 and the price was extremely attractive, much cheaper than their 0:20:54.280 --> 0:20:58.680 domestic sources of iron ore and coal. UH imports then 0:20:58.760 --> 0:21:01.560 improved very significantly, so year on year, Chinese iron or 0:21:01.640 --> 0:21:05.360 import import demands seaboard imports were up nine percent. Domestic 0:21:05.400 --> 0:21:09.600 production was off seven UM. Steel production is moving up. 0:21:09.600 --> 0:21:11.959 There's been good stimulus in China. China has also been 0:21:12.040 --> 0:21:15.680 rationalizing it's coal mines. Um. Part of that is clean air. 0:21:16.040 --> 0:21:17.760 Part of that is that many of the coal mines 0:21:17.760 --> 0:21:19.720 were losing money at those prices and they don't want 0:21:19.720 --> 0:21:23.480 to subsidize them any longer. And there's cheap coal available, 0:21:23.840 --> 0:21:27.040 particularly from Australia coming in, so that demand has been good. 0:21:27.040 --> 0:21:29.600 There's been good stimulus in China. Second half of the 0:21:29.640 --> 0:21:32.520 year was rather strong or as I just want to 0:21:32.560 --> 0:21:34.680 put some numbers to all of this, because in the 0:21:34.800 --> 0:21:37.680 dry bulk sector you've got maybe four groups. Right, You've 0:21:37.680 --> 0:21:42.159 got your cape size, Panamax, super Max, handy size. I 0:21:42.200 --> 0:21:44.679 was looking at the year to the comparisons. You're in 0:21:44.680 --> 0:21:50.600 your comparisons a cape size twelve thousand, three hundred today, right, 0:21:50.600 --> 0:21:53.720 That's that's how much it will cost me per day, 0:21:54.000 --> 0:21:58.040 right all Right? Last year, same time thirty eight hundred bucks. 0:21:58.200 --> 0:22:01.960 So from thirty eight hundred over twelve thousand, what do 0:22:02.000 --> 0:22:06.040 we need to take away from that? Overall demand has 0:22:06.080 --> 0:22:08.159 improved in the second half of the year. There was 0:22:08.280 --> 0:22:11.359 very good dust scrapping of ships. Also in the early 0:22:11.440 --> 0:22:13.440 part of last year. There has been no ordering of 0:22:13.520 --> 0:22:15.520 dry bull ships now for two years. A year ago 0:22:15.640 --> 0:22:18.920 was one year, right, so there's there has been a rebalancing. 0:22:19.240 --> 0:22:22.600 But also then this is very very macro. But if 0:22:22.640 --> 0:22:24.439 you look at the commodity prices coming off as the 0:22:24.480 --> 0:22:29.200 dollar was collapsing, dollar stabilizing and strengthening. Um typically we 0:22:29.280 --> 0:22:31.240 think of the dollar strengthens, then it would be the 0:22:31.320 --> 0:22:33.639 commodities are cheaper. They are, yes for the United States, 0:22:33.640 --> 0:22:35.280 but they're not for everyone else who buying, and they 0:22:35.320 --> 0:22:37.520 have to buy the dollars to buy the commodities. Then 0:22:37.560 --> 0:22:41.640 you end up having pricing in contango. People build inventories. 0:22:41.720 --> 0:22:45.240 Now inventories are high, looks like the dollar not the dollar. 0:22:45.280 --> 0:22:47.840 Excuse me that that's about as high as they're going 0:22:47.880 --> 0:22:51.159 to get due to their physical constraint. Uh, they're probably 0:22:51.160 --> 0:22:53.440 going to be some inventory eating over the course of 0:22:53.480 --> 0:22:56.600 the first quarter, so rays come down. But year on year, 0:22:56.680 --> 0:22:59.680 the overall conditions of the dry bull markets are are better. 0:23:00.119 --> 0:23:03.960 Or in two thousand fifteen, I believe hedge funds that 0:23:04.040 --> 0:23:07.320 had piled into the shipping industry in various ways got 0:23:07.440 --> 0:23:09.359 yeah you you laugh. I mean it was like a 0:23:09.400 --> 0:23:12.240 blood bath, right, and when they got hammered, it was, uh, 0:23:12.280 --> 0:23:14.120 the source of a lot of pain both at hedge 0:23:14.119 --> 0:23:15.919 funds as well as at some banks that had a 0:23:15.920 --> 0:23:21.160 lot of shipping investments globally. Um, from an investment standpoint, 0:23:21.240 --> 0:23:25.120 are you seeing investors coming back? Well, I don't necessarily 0:23:25.119 --> 0:23:29.520 want to comment on other competing companies, but I think 0:23:29.560 --> 0:23:32.879 that the interest level now in shipping remains as um 0:23:33.080 --> 0:23:35.760 as strong as it was back then. Is that what 0:23:35.800 --> 0:23:39.520 you basically mainly do is just make a shipping investment. No, No, 0:23:39.600 --> 0:23:43.439 we were We own and control ships, so we're shipping company, 0:23:43.480 --> 0:23:45.439 but we do have investors who are part of that 0:23:45.480 --> 0:23:49.760 group that you mentioned. Um and uh, there was some 0:23:49.880 --> 0:23:54.000 time ago, back in some time ago, but in there 0:23:54.119 --> 0:23:57.240