1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg PENL podcast. I'm Paul swing you. 2 00:00:05,360 --> 00:00:07,680 Speaker 1: Along with my co host Lisa Brahma Waits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor, find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:23,000 Speaker 1: at Bloomberg dot com. Right now, we are looking at 8 00:00:23,079 --> 00:00:26,520 Speaker 1: markets that are slightly down, not perhaps down as much 9 00:00:26,520 --> 00:00:30,120 Speaker 1: as someone expected, after oil prices surged and continue to 10 00:00:30,160 --> 00:00:34,040 Speaker 1: surge even higher, the most on record in the wake 11 00:00:34,200 --> 00:00:37,960 Speaker 1: of the Saudi Arabian attacks on the attacks on the 12 00:00:37,960 --> 00:00:41,680 Speaker 1: Saudi Arabian oil production facilities. Joining US now Peter Checchini, 13 00:00:41,720 --> 00:00:46,680 Speaker 1: Global Market try to Global Chief Market strategistic Canter Fitzgerald. Peter, 14 00:00:46,920 --> 00:00:48,960 Speaker 1: thank you so much for taking the time. Let's just 15 00:00:49,000 --> 00:00:52,280 Speaker 1: start with are you surprised that there isn't a more 16 00:00:52,360 --> 00:00:55,360 Speaker 1: market sell off in US equities in the wake of 17 00:00:55,400 --> 00:00:59,080 Speaker 1: this disruption oil production in the Middle East? Yes, good morning, 18 00:00:59,120 --> 00:01:02,680 Speaker 1: and thanks for having me. Um. You know, the reaction 19 00:01:02,720 --> 00:01:06,080 Speaker 1: I think is is about right. The broader markets are 20 00:01:06,080 --> 00:01:11,280 Speaker 1: obviously uh off overall. Um somewhat frankly offset by the 21 00:01:11,319 --> 00:01:14,920 Speaker 1: benefit to UH energy companies with the with the spike 22 00:01:15,000 --> 00:01:18,600 Speaker 1: and oil prices. UM. The spike and oil prices itself 23 00:01:18,680 --> 00:01:20,600 Speaker 1: doesn't really come as much of a surprise to us, 24 00:01:20,600 --> 00:01:22,560 Speaker 1: so our our target for oil this year has been 25 00:01:22,560 --> 00:01:25,800 Speaker 1: fifty to fifty five dollars on w T I UM. 26 00:01:25,920 --> 00:01:30,440 Speaker 1: But we wrote recently that we expected UH geopolitical risk 27 00:01:30,840 --> 00:01:33,240 Speaker 1: to come into play with spikes and oil between sixty 28 00:01:33,240 --> 00:01:35,600 Speaker 1: and sixty five, and in fact, quite frankly, I think 29 00:01:35,840 --> 00:01:39,120 Speaker 1: UH this would be a time to sell oil rather 30 00:01:39,200 --> 00:01:42,000 Speaker 1: than to buy it. I think UH around a COO 31 00:01:42,080 --> 00:01:45,959 Speaker 1: in particular, has an incentive to to cure this problem 32 00:01:45,959 --> 00:01:48,480 Speaker 1: as quickly as possible. May not be easy, but obviously 33 00:01:48,880 --> 00:01:50,320 Speaker 1: UH they don't want to delay their I p O 34 00:01:50,360 --> 00:01:53,040 Speaker 1: any longer than they have to. So market action seems 35 00:01:53,080 --> 00:01:56,040 Speaker 1: to be about right in response to this attack. But 36 00:01:56,120 --> 00:01:59,200 Speaker 1: for us, you know, more broadly, UM, we think, as 37 00:01:59,200 --> 00:02:01,200 Speaker 1: we've been saying, we're in the red zone for US 38 00:02:01,240 --> 00:02:04,320 Speaker 1: equities for other reasons. So, Peter, I know last week 39 00:02:04,560 --> 00:02:08,240 Speaker 1: you wrote a note suggesting that the credit markets might 40 00:02:08,280 --> 00:02:10,560 Speaker 1: be getting a little bit frothy. Give us your sense 41 00:02:10,560 --> 00:02:13,600 Speaker 1: of what you're thinking. There. Yeah, you know, we've we've 42 00:02:13,639 --> 00:02:17,280 Speaker 1: been careful not to overstate this because one of the 43 00:02:17,360 --> 00:02:21,640 Speaker 1: things that's been going on, UH is the capital flows 44 00:02:21,720 --> 00:02:25,560 Speaker 1: into US high yield really because there's there are very 45 00:02:25,600 --> 00:02:27,679 Speaker 1: few people places in the rest of the world that 46 00:02:27,760 --> 00:02:29,560 Speaker 1: on a risk adjusted basis, you can get the kind 47 00:02:29,560 --> 00:02:31,320 Speaker 1: of return that you can get in US high yield. 48 00:02:31,600 --> 00:02:34,040 Speaker 1: Default rates have been relatively low, about two point one 49 00:02:34,040 --> 00:02:37,320 Speaker 1: percent UH for trailing twelve months. And you know, with 50 00:02:37,320 --> 00:02:41,000 Speaker 1: with seventeen trillion dollars of negative yielding dead about to 51 00:02:41,160 --> 00:02:43,840 Speaker 1: trillion of that being in corporates, the flows into high 52 00:02:43,880 --> 00:02:47,359 Speaker 1: yield in the US have been have been pretty pretty 53 00:02:47,360 --> 00:02:50,880 Speaker 1: strong UM and a couple that with the low default rates. 54 00:02:51,280 --> 00:02:55,160 Speaker 1: Until one sees cash flows starting to roll over UH, 55 00:02:55,200 --> 00:02:59,280 Speaker 1: it's difficult to get barish of high yield. However, the 56 00:02:59,320 --> 00:03:02,959 Speaker 1: signs of FRA are there where we're seeing UH pictoggle 57 00:03:03,080 --> 00:03:06,560 Speaker 1: deals come coming out like the corn Main deal recently. 58 00:03:06,960 --> 00:03:08,800 Speaker 1: We haven't seen very many of those. I think there 59 00:03:08,800 --> 00:03:11,280 Speaker 1: are one or two last year, but that tends to 60 00:03:11,320 --> 00:03:14,960 Speaker 1: be a very market topy kind of event, especially when 61 00:03:14,960 --> 00:03:18,799 Speaker 1: they go to pay UH dividends to LBO sponsors UM. 62 00:03:19,040 --> 00:03:21,440 Speaker 1: And so we're seeing that and even just the issue 63 00:03:21,440 --> 00:03:25,880 Speaker 1: wance volumes of late have been gigantic, with I think 64 00:03:25,960 --> 00:03:29,600 Speaker 1: last week probably the third or fourth highest on record, 65 00:03:29,639 --> 00:03:32,160 Speaker 1: depending on whose data you look at. So so I 66 00:03:32,200 --> 00:03:35,200 Speaker 1: think the signs in terms of issue and volumes, as 67 00:03:35,200 --> 00:03:38,640 Speaker 1: well as the form of the deals are are sort 68 00:03:38,680 --> 00:03:42,400 Speaker 1: of singing to that that's froth, uh, and it's just 69 00:03:42,480 --> 00:03:44,360 Speaker 1: really to me a question of how much longer it 70 00:03:44,400 --> 00:03:46,760 Speaker 1: can last. So then there is sort of a flip 71 00:03:46,800 --> 00:03:48,880 Speaker 1: side to this, which is when you see froth and 72 00:03:48,920 --> 00:03:52,400 Speaker 1: credit markets in a real robust demand, uh, that typically 73 00:03:52,440 --> 00:03:54,680 Speaker 1: is a positive for US equities, at least to the 74 00:03:54,720 --> 00:03:57,040 Speaker 1: short term. So do you view this as being potentially 75 00:03:57,040 --> 00:04:01,840 Speaker 1: constructive even if in the longer term not great. Yeah, 76 00:04:02,040 --> 00:04:04,240 Speaker 1: that's that's an interesting point least, and I and I 77 00:04:04,240 --> 00:04:06,040 Speaker 1: would generally tend to agree with it. I think in 78 00:04:06,080 --> 00:04:09,200 Speaker 1: most cycles, when you look at the history of credit cycles, 79 00:04:09,240 --> 00:04:12,440 Speaker 1: credit actually tends to to to lead equities in the 80 00:04:12,520 --> 00:04:15,800 Speaker 1: hig yield market in particular, tends to be pretty important 81 00:04:15,840 --> 00:04:18,720 Speaker 1: to that. I think there are some interesting differences this cycle, 82 00:04:19,080 --> 00:04:23,679 Speaker 1: one of which is the dependence of equity markets uh, 83 00:04:23,839 --> 00:04:26,240 Speaker 1: less so on high yield and more so on the 84 00:04:26,320 --> 00:04:29,320 Speaker 1: levered loan market in particular in my view, and we're 85 00:04:29,400 --> 00:04:32,440 Speaker 1: we're seeing some some real signs of frosth there as well. 86 00:04:32,480 --> 00:04:36,120 Speaker 1: You know, for example, of the of the names in 87 00:04:36,160 --> 00:04:40,800 Speaker 1: the levered loan index are are now demonstrating interest coverage 88 00:04:40,880 --> 00:04:43,400 Speaker 1: ratios below one and a half, in leverage above seven times, 89 00:04:44,000 --> 00:04:47,040 Speaker 1: which is which is really quite something. And we're starting 90 00:04:47,080 --> 00:04:50,920 Speaker 1: to see a trend in cash flows for those same companies. Uh. 91 00:04:51,040 --> 00:04:53,280 Speaker 1: Really the growth and cash flows for those companies is 92 00:04:53,640 --> 00:04:56,800 Speaker 1: close to zero at this point. So so yes, I 93 00:04:56,800 --> 00:04:59,440 Speaker 1: would agree with you. In the near term, I would 94 00:04:59,440 --> 00:05:03,560 Speaker 1: say over all credit markets are still providing support, but um, 95 00:05:03,600 --> 00:05:06,279 Speaker 1: I think in particular equities are going to be very 96 00:05:06,320 --> 00:05:09,120 Speaker 1: sensitive to a turning cash flows, especially for some of 97 00:05:09,120 --> 00:05:12,360 Speaker 1: those levered names. Uh. And we're starting, at least in 98 00:05:12,600 --> 00:05:14,560 Speaker 1: the form of the second derivative of cash flow, is 99 00:05:14,560 --> 00:05:18,039 Speaker 1: starting to see that that rate of growth slow considerably. Peter, 100 00:05:18,080 --> 00:05:20,960 Speaker 1: thanks so much for joining us. Peter Stini, Global Chief 101 00:05:21,040 --> 00:05:38,480 Speaker 1: market Strategist for Cantor Fitzgerald joining us on the phone. Well, 102 00:05:38,520 --> 00:05:41,320 Speaker 1: the United Auto Workers Union is leading its first strike 103 00:05:41,360 --> 00:05:43,599 Speaker 1: against General Motors in twelve years, digging in for a 104 00:05:43,640 --> 00:05:46,480 Speaker 1: fight over jobs and benefits that could cost the Carmaker 105 00:05:46,600 --> 00:05:49,159 Speaker 1: deally for an indefinite period of time to get some 106 00:05:49,200 --> 00:05:52,200 Speaker 1: more details. We welcome David Welch. David is a Detroit 107 00:05:52,320 --> 00:05:56,279 Speaker 1: bureau chief for Bloomberg News located in our Detroit bureau 108 00:05:56,440 --> 00:05:58,560 Speaker 1: right now. David, thanks so much for joining us. Just 109 00:05:58,600 --> 00:06:01,159 Speaker 1: give us a sense of how far apart you think 110 00:06:01,200 --> 00:06:04,880 Speaker 1: the union and GM are right now. There's a key 111 00:06:04,880 --> 00:06:08,200 Speaker 1: issue here that I think really has them apart by 112 00:06:08,240 --> 00:06:10,680 Speaker 1: quite a bit, and that is the use of temporary workers. 113 00:06:11,320 --> 00:06:14,040 Speaker 1: GM wants more of them because they get paid less, 114 00:06:14,040 --> 00:06:16,520 Speaker 1: they have weaker benefits that they do cut their labor 115 00:06:16,560 --> 00:06:19,880 Speaker 1: costs overall, but you can also get rid of them 116 00:06:19,960 --> 00:06:22,159 Speaker 1: much more easily if there's a downturns that kind of 117 00:06:22,160 --> 00:06:25,960 Speaker 1: makes the workforce flexible. They want fewer are them, say 118 00:06:26,000 --> 00:06:29,039 Speaker 1: they want more um and the a W wants not 119 00:06:29,120 --> 00:06:30,919 Speaker 1: only few of them, but they want a path to 120 00:06:30,960 --> 00:06:34,240 Speaker 1: make those people permanent employees. So there's not a lot 121 00:06:34,240 --> 00:06:36,160 Speaker 1: of middle ground there. Someone's going to have to give 122 00:06:36,160 --> 00:06:39,160 Speaker 1: on that one. Uh GM had made an offer over 123 00:06:39,200 --> 00:06:42,159 Speaker 1: the weekend that had pretty hefty raises and I signing bonus. 124 00:06:42,160 --> 00:06:45,520 Speaker 1: They're going to hire more than five thousand new workers. 125 00:06:45,960 --> 00:06:48,080 Speaker 1: So there's some job security and there. It was a 126 00:06:48,080 --> 00:06:50,520 Speaker 1: pretty nice offer to start with, but that that one issue, 127 00:06:51,120 --> 00:06:52,920 Speaker 1: I think it's going to be a big sticking point 128 00:06:52,960 --> 00:06:56,000 Speaker 1: for them. You know, I'm looking right now General Motors 129 00:06:56,320 --> 00:06:59,679 Speaker 1: share price down three per cent and I'm wondering why 130 00:07:00,400 --> 00:07:03,400 Speaker 1: the union is doing this now. I mean, sort of 131 00:07:03,400 --> 00:07:07,560 Speaker 1: what what what catalyzed this strike? Well, you know, the 132 00:07:07,560 --> 00:07:11,760 Speaker 1: the labor agreement expired over the weekend, and this is 133 00:07:11,840 --> 00:07:13,480 Speaker 1: kind of the one shot in four years they have 134 00:07:13,680 --> 00:07:15,760 Speaker 1: to go out on strike and get a really good deal. 135 00:07:16,120 --> 00:07:19,320 Speaker 1: There's a lot of pent up anger over the plant 136 00:07:19,360 --> 00:07:23,440 Speaker 1: closing is that GM announced back in November. That's for plants, 137 00:07:23,440 --> 00:07:26,240 Speaker 1: including a very big one in Lordstown, Ohio that President 138 00:07:26,280 --> 00:07:29,400 Speaker 1: Trump has taken a personal interest in. So there was 139 00:07:29,400 --> 00:07:31,840 Speaker 1: a lot of anger there, especially when you have GM 140 00:07:31,880 --> 00:07:34,840 Speaker 1: putting out near record profits three years in a row 141 00:07:35,440 --> 00:07:37,840 Speaker 1: and actually affirming guidance that they might hit that number 142 00:07:38,520 --> 00:07:40,680 Speaker 1: something close to that profit number again this year's you 143 00:07:40,760 --> 00:07:45,239 Speaker 1: have a prosperous GM plant closings, and and the workers 144 00:07:45,240 --> 00:07:49,520 Speaker 1: are already pretty angry. They want a piece of of 145 00:07:49,600 --> 00:07:52,360 Speaker 1: the record profits, even if we are possibly headed into 146 00:07:52,360 --> 00:07:55,280 Speaker 1: a downturn um and and this is there one chance 147 00:07:55,320 --> 00:07:57,240 Speaker 1: to get a piece of those profits while the company 148 00:07:57,280 --> 00:08:00,640 Speaker 1: still has a lot of money. So that that's that's 149 00:08:00,680 --> 00:08:03,320 Speaker 1: the weather they're pulling at this point in time. So, David, 150 00:08:03,360 --> 00:08:07,240 Speaker 1: what's the sense here early days of this strike. Is 151 00:08:07,240 --> 00:08:09,560 Speaker 1: this something that is expected to drag on for a 152 00:08:09,600 --> 00:08:11,920 Speaker 1: long period of time or can this be a relatively 153 00:08:12,000 --> 00:08:16,920 Speaker 1: quick issue? Um? Honestly, I think this will last maybe 154 00:08:16,960 --> 00:08:20,120 Speaker 1: a week. Because GM did with their first offer that 155 00:08:20,160 --> 00:08:22,720 Speaker 1: the union really won't talk about yet. The GM made public, 156 00:08:23,000 --> 00:08:26,160 Speaker 1: they didn't address a lot of the issues, and those 157 00:08:26,200 --> 00:08:31,160 Speaker 1: issues things like pay, things like investing a lot of 158 00:08:31,200 --> 00:08:33,480 Speaker 1: money and plants that GM announced as part of this 159 00:08:33,559 --> 00:08:36,120 Speaker 1: that they're gonna invest seven billion dollars in their US 160 00:08:36,200 --> 00:08:40,200 Speaker 1: plants over the next four years. That the Lordstown plant 161 00:08:40,200 --> 00:08:42,160 Speaker 1: will not get a vehicle to build, but they would 162 00:08:42,160 --> 00:08:45,079 Speaker 1: make a battery plant. They would build a battery and 163 00:08:45,120 --> 00:08:47,680 Speaker 1: wint vehicle battery plant in Wordstown and that would hire 164 00:08:47,720 --> 00:08:49,640 Speaker 1: some of the workers who have not transferred out of 165 00:08:49,640 --> 00:08:52,200 Speaker 1: there already. And the plan in Detroit that was at 166 00:08:52,280 --> 00:08:53,800 Speaker 1: risk of being closed is also going to get a 167 00:08:53,880 --> 00:08:55,720 Speaker 1: vehicle to build, so that there were a few bones 168 00:08:55,720 --> 00:08:57,920 Speaker 1: in there for the workers who were waiting to see 169 00:08:57,920 --> 00:09:00,240 Speaker 1: what their fate is going to be, but the other 170 00:09:00,280 --> 00:09:02,640 Speaker 1: issues could take some time. And look, there's also a 171 00:09:02,640 --> 00:09:05,880 Speaker 1: bit of vaudeville here. The union negotiators have to show 172 00:09:05,920 --> 00:09:08,480 Speaker 1: the rank and file, who, by the way, they have 173 00:09:08,520 --> 00:09:10,720 Speaker 1: to vote to ratify the deal. They got to show 174 00:09:10,760 --> 00:09:12,320 Speaker 1: them that they're putting up a good fight in a story, 175 00:09:12,320 --> 00:09:14,720 Speaker 1: because the way to do that. Yeah, and it's so 176 00:09:15,400 --> 00:09:17,760 Speaker 1: I thought that part of the story was pretty interesting 177 00:09:17,760 --> 00:09:20,360 Speaker 1: that the piece that you wrote. I do have to wonder, 178 00:09:20,400 --> 00:09:23,079 Speaker 1: though it's been twelve years, right, this comes up every 179 00:09:23,120 --> 00:09:25,480 Speaker 1: four years that they have to negotiate a new contract, 180 00:09:25,840 --> 00:09:28,360 Speaker 1: this time is different, and they're going to dig their 181 00:09:28,400 --> 00:09:31,120 Speaker 1: heels in. And you said that part of what the 182 00:09:31,160 --> 00:09:33,960 Speaker 1: backdrop here is the record profits and the fact that 183 00:09:34,559 --> 00:09:37,480 Speaker 1: General Motors has been closing some plants. But you also 184 00:09:37,559 --> 00:09:41,160 Speaker 1: in the story pointed to a corruption scandal plaguing the 185 00:09:41,240 --> 00:09:45,000 Speaker 1: U a W as part of what is sort of 186 00:09:45,040 --> 00:09:47,120 Speaker 1: setting this setting the stage here. Can you give us 187 00:09:47,120 --> 00:09:50,480 Speaker 1: more color on that? Sure, So there's been a corruption 188 00:09:50,600 --> 00:09:54,079 Speaker 1: scandal at the union that's gone back for well over 189 00:09:54,120 --> 00:09:58,320 Speaker 1: the past year, and it started at theat Chrysler. On 190 00:09:58,480 --> 00:10:01,400 Speaker 1: both sides, Union and man manishment people have been indicted 191 00:10:01,800 --> 00:10:05,400 Speaker 1: and convicted basically giving union leaders graft out of a 192 00:10:05,480 --> 00:10:08,199 Speaker 1: union training fund in exchange for giving Fiat karist or 193 00:10:08,280 --> 00:10:12,520 Speaker 1: a more lenient contract. That investigation has moved a GM. 194 00:10:12,559 --> 00:10:15,679 Speaker 1: It's slightly different in that the union leaders and including 195 00:10:15,760 --> 00:10:20,320 Speaker 1: past president Dennis Williams and current president Gary Jones, are 196 00:10:20,360 --> 00:10:25,400 Speaker 1: being accused of stealing money from union charity funds and 197 00:10:26,400 --> 00:10:30,280 Speaker 1: community activism funds and the general fund for this lavish 198 00:10:30,320 --> 00:10:34,320 Speaker 1: lifestyle they woven in uh, Palm Springs, California, for renting 199 00:10:34,400 --> 00:10:37,800 Speaker 1: villas for a month or two, expensive cigars, expensive scotch. 200 00:10:38,520 --> 00:10:42,439 Speaker 1: Is kind of crazy stuff. So the union and everybody, 201 00:10:42,480 --> 00:10:45,400 Speaker 1: even some of the was called analysts wh watched the 202 00:10:45,480 --> 00:10:48,280 Speaker 1: unions say that they won't really play into this, but 203 00:10:48,320 --> 00:10:50,920 Speaker 1: I think it does. I think when members don't trust you, 204 00:10:50,920 --> 00:10:53,800 Speaker 1: you've got to drive a hard bargain uh to get 205 00:10:53,800 --> 00:10:56,160 Speaker 1: a deal ratified, because the membership is going to be 206 00:10:56,200 --> 00:10:59,559 Speaker 1: looking at any deal really scrutinizing it, saying, Okay, we 207 00:10:59,760 --> 00:11:02,880 Speaker 1: try these people. They're they're stealing our money to buy 208 00:11:02,960 --> 00:11:08,079 Speaker 1: mccalen eighteen and some good cigars. Why would I trust 209 00:11:08,080 --> 00:11:10,400 Speaker 1: them to give me a good deal. They've got to 210 00:11:10,520 --> 00:11:12,960 Speaker 1: drive a really hard bargain here. David Welch, thank you 211 00:11:12,960 --> 00:11:15,240 Speaker 1: so much for being with us. David Welch's Bloombergs Detroit 212 00:11:15,280 --> 00:11:18,960 Speaker 1: bureau chief. Talking about that GM news the first strike 213 00:11:19,160 --> 00:11:40,840 Speaker 1: of the labor Union in twelve years. There is that 214 00:11:41,040 --> 00:11:44,440 Speaker 1: surge in oil prices that we're seeing today in Brent crude. 215 00:11:44,480 --> 00:11:48,079 Speaker 1: At one point it was the most on record as 216 00:11:48,200 --> 00:11:52,040 Speaker 1: reaching the highest levels since May, but jumping more than 217 00:11:52,160 --> 00:11:56,559 Speaker 1: eleven percent. The question is how long will this disruption 218 00:11:56,640 --> 00:11:59,240 Speaker 1: oil production out of Saudi Arabia last what will be 219 00:11:59,240 --> 00:12:01,720 Speaker 1: the implications for the Middle East in terms of Iranian 220 00:12:01,760 --> 00:12:05,480 Speaker 1: relationships with the US and Saudi Arabia. To help us understand, 221 00:12:05,720 --> 00:12:08,840 Speaker 1: let's bring in John Killed, a founding partner of Again Capital. 222 00:12:08,880 --> 00:12:11,480 Speaker 1: So John, let's just first get your impression of how 223 00:12:11,559 --> 00:12:13,840 Speaker 1: much oil prices are rising. Do you view this as 224 00:12:13,880 --> 00:12:17,720 Speaker 1: a temporary blip or something that has longer lasting legs 225 00:12:18,000 --> 00:12:22,440 Speaker 1: and potentially even a higher leg up. Well, I think 226 00:12:22,440 --> 00:12:25,719 Speaker 1: the response has been um somewhat measured, even though it 227 00:12:25,800 --> 00:12:29,880 Speaker 1: was the biggest jump since the invasion of Kuwait bi 228 00:12:29,880 --> 00:12:33,200 Speaker 1: Iraq back in the day. Um, We're gonna have to 229 00:12:33,240 --> 00:12:37,240 Speaker 1: see how quickly the Saudis can get the situation under control. 230 00:12:37,320 --> 00:12:39,040 Speaker 1: You know, they're claiming that they can get a good 231 00:12:39,040 --> 00:12:42,440 Speaker 1: portion of the production back online UM, and they're also 232 00:12:42,480 --> 00:12:45,000 Speaker 1: claiming that they'll be able to supply everyone as needed 233 00:12:45,200 --> 00:12:49,440 Speaker 1: out of available inventories that are in the country. The 234 00:12:49,480 --> 00:12:51,599 Speaker 1: big thing to watch from here really is what the 235 00:12:51,679 --> 00:12:53,800 Speaker 1: response is going to be. It seems now that the 236 00:12:53,920 --> 00:12:56,400 Speaker 1: US and a few moments ago the Saudis themselves are 237 00:12:56,440 --> 00:13:01,200 Speaker 1: accusing Iran of having uh done this, and it's hard 238 00:13:01,240 --> 00:13:04,400 Speaker 1: to believe that the Saddies won't respond or the US 239 00:13:04,480 --> 00:13:07,240 Speaker 1: won't help them respond. But if they don't, you're gonna 240 00:13:07,280 --> 00:13:10,240 Speaker 1: look incredibly, incredibly weak. So it seems to me that 241 00:13:10,280 --> 00:13:13,120 Speaker 1: they'll be vulnerable to more attacks and that the security 242 00:13:13,120 --> 00:13:17,040 Speaker 1: premium and prices is only going to inflate. John. You know, 243 00:13:17,280 --> 00:13:21,320 Speaker 1: as someone who follows these markets closely, are you surprised 244 00:13:21,559 --> 00:13:25,280 Speaker 1: at how much this facility, again, one of the largest 245 00:13:25,280 --> 00:13:27,520 Speaker 1: facilities and we're not maybe the largest facility in the world. 246 00:13:28,240 --> 00:13:34,400 Speaker 1: How susceptible it was to attack? UM? Yes, and no, 247 00:13:35,040 --> 00:13:38,000 Speaker 1: uh look to the extent it was it was cruise 248 00:13:38,040 --> 00:13:41,120 Speaker 1: missiles coming from Iran. If that's the case, UM, you 249 00:13:41,120 --> 00:13:43,079 Speaker 1: would have think they should have been picked up by 250 00:13:43,120 --> 00:13:45,320 Speaker 1: some kind of anti missile defense that the Saddi's have 251 00:13:45,400 --> 00:13:50,120 Speaker 1: purchased from the US. Drones are almost impossible to stop, 252 00:13:50,840 --> 00:13:53,480 Speaker 1: and um, the Saddies are particularly bad at it. This 253 00:13:53,559 --> 00:13:56,120 Speaker 1: is not the first drone attack I think, as most 254 00:13:56,120 --> 00:14:01,160 Speaker 1: people know on Saudi infrastructure, UM that has occurred. It's 255 00:14:01,160 --> 00:14:03,360 Speaker 1: been going on for months, and the Satti's have really 256 00:14:03,360 --> 00:14:07,120 Speaker 1: done nothing about it, which I have found remarkable. Um. 257 00:14:07,160 --> 00:14:09,080 Speaker 1: They tried to put more pressure on the Hoothies and 258 00:14:09,160 --> 00:14:12,120 Speaker 1: Yemen and and do other things, but for the most part, 259 00:14:12,160 --> 00:14:14,680 Speaker 1: as far as the direct response goes, you know, there's 260 00:14:14,720 --> 00:14:18,040 Speaker 1: been nothing. So this day was almost inevitable. But if 261 00:14:18,080 --> 00:14:21,040 Speaker 1: you look at the satellite imagery, you can see there 262 00:14:21,200 --> 00:14:26,000 Speaker 1: is unbelievable precision in in where these uh these round 263 00:14:26,080 --> 00:14:29,000 Speaker 1: tanks that they have there that store the oil got 264 00:14:29,000 --> 00:14:32,720 Speaker 1: penetrated almost the exact same spot in each tank that 265 00:14:32,800 --> 00:14:36,560 Speaker 1: are in a row together. So um, high level sophistication. 266 00:14:36,680 --> 00:14:39,200 Speaker 1: And certainly for roll of money the Sadie's spent on 267 00:14:39,240 --> 00:14:41,440 Speaker 1: their defense, they should have had some kind of anti 268 00:14:41,480 --> 00:14:44,760 Speaker 1: missile technology uh AT in place here. So it's it's 269 00:14:44,800 --> 00:14:47,200 Speaker 1: it's a remarkable failing on their part. So, John, I 270 00:14:47,280 --> 00:14:48,920 Speaker 1: want to go back to what you were saying about 271 00:14:49,440 --> 00:14:52,280 Speaker 1: how the response in markets has been somewhat muted, especially 272 00:14:52,280 --> 00:14:55,400 Speaker 1: given the backdrop you were just talking about, which is 273 00:14:55,440 --> 00:14:58,160 Speaker 1: sort of a lack of protection on the part of 274 00:14:58,160 --> 00:15:02,560 Speaker 1: Saudi Arabia against an attack like this. I'm just trying 275 00:15:02,600 --> 00:15:05,360 Speaker 1: to understand the counter argument to that that there's loss 276 00:15:05,400 --> 00:15:09,960 Speaker 1: of production that can be increased elsewhere, and that you know, 277 00:15:10,000 --> 00:15:14,520 Speaker 1: the US can increase shell production, this will offset any 278 00:15:14,560 --> 00:15:16,720 Speaker 1: decline in production out of Saudi Arabia. What do you 279 00:15:16,760 --> 00:15:20,600 Speaker 1: say to that. I think that's partly right. I mean, 280 00:15:20,640 --> 00:15:22,680 Speaker 1: as far as there being any kind of you know, 281 00:15:23,040 --> 00:15:25,880 Speaker 1: spur of the moment US shell response that, I don't 282 00:15:25,960 --> 00:15:28,680 Speaker 1: buy that at all. I mean, they're not built that way. 283 00:15:28,840 --> 00:15:31,560 Speaker 1: We don't. Our guys don't necessarily e gals don't necessarily 284 00:15:31,600 --> 00:15:34,200 Speaker 1: dial up and down the production in reaction to price. 285 00:15:34,240 --> 00:15:36,480 Speaker 1: As we all know. They just plot along pump as 286 00:15:36,560 --> 00:15:38,560 Speaker 1: much as they can, and and and deal with the 287 00:15:38,600 --> 00:15:41,760 Speaker 1: prices as best they can. There is spirit capacity out there, though, 288 00:15:41,760 --> 00:15:43,920 Speaker 1: because of what OPEC and Russia have done to try 289 00:15:43,960 --> 00:15:48,200 Speaker 1: to um curtail the price slide. So we know Russia 290 00:15:48,240 --> 00:15:51,480 Speaker 1: has spirit capacity. You a some of the other countries. Also, 291 00:15:51,520 --> 00:15:53,440 Speaker 1: two of the other levers that are out there arguing 292 00:15:53,440 --> 00:15:56,760 Speaker 1: against the greater price increases is certainly the existence of 293 00:15:56,760 --> 00:15:59,920 Speaker 1: all the strategic petroleum reserves around the world, and China 294 00:16:00,040 --> 00:16:03,720 Speaker 1: in particular, which has almost two years worth of supply 295 00:16:03,880 --> 00:16:07,120 Speaker 1: to cover a complete cutoff of STATI supply to China. 296 00:16:07,560 --> 00:16:10,040 Speaker 1: So um, you know, we we're sort of well banked 297 00:16:10,320 --> 00:16:14,080 Speaker 1: in terms of oil supplies for now. The problem you 298 00:16:14,120 --> 00:16:16,120 Speaker 1: have though, is that this turns into any kind of 299 00:16:16,400 --> 00:16:19,000 Speaker 1: sort of hot war. And it's also remarkablelives if I 300 00:16:19,000 --> 00:16:21,320 Speaker 1: could just stay quick. Um, the fact that these prices 301 00:16:21,360 --> 00:16:24,320 Speaker 1: aren't up as much much more in light of the 302 00:16:24,360 --> 00:16:26,800 Speaker 1: fact that we have already lost I ran in Venezuela 303 00:16:26,840 --> 00:16:29,240 Speaker 1: oil to the global market as well, So it shows 304 00:16:29,280 --> 00:16:33,200 Speaker 1: you just how sloppy the situation has become supply wise 305 00:16:33,360 --> 00:16:35,360 Speaker 1: in the face of diminishing demand. As we were speaking 306 00:16:35,360 --> 00:16:37,280 Speaker 1: about a few weeks ago. Yeah, John, that's kind of 307 00:16:37,280 --> 00:16:38,880 Speaker 1: where I wanted to go. It seems like when we 308 00:16:38,960 --> 00:16:42,080 Speaker 1: talk about crude oil, it's obviously trying to get a 309 00:16:42,080 --> 00:16:44,920 Speaker 1: handle on the supplied to demand dynamics and what had 310 00:16:44,960 --> 00:16:47,920 Speaker 1: been driving price. It seems to have been the demand 311 00:16:47,960 --> 00:16:50,880 Speaker 1: side of the equation, and investors concerns that the trade 312 00:16:50,880 --> 00:16:54,040 Speaker 1: wars and other issues would be slowing down demand for crude. 313 00:16:54,040 --> 00:16:56,600 Speaker 1: But this news coming out of the Middle East brings 314 00:16:56,640 --> 00:16:59,680 Speaker 1: the supply story right back into focus. Here, How what 315 00:16:59,720 --> 00:17:01,560 Speaker 1: do you think will be the driver of oil over 316 00:17:01,520 --> 00:17:04,440 Speaker 1: the next several weeks, the supply or the demand or 317 00:17:04,520 --> 00:17:08,400 Speaker 1: some combination of the two, if the situation at all 318 00:17:08,520 --> 00:17:11,240 Speaker 1: calms down, and we're in the situation looked like it 319 00:17:11,280 --> 00:17:13,560 Speaker 1: was gonna be calming down, just generally with the overtures 320 00:17:13,560 --> 00:17:15,960 Speaker 1: that were being made to the Iranians by President Trump 321 00:17:16,280 --> 00:17:17,880 Speaker 1: over the past couple of weeks, you know, we're gonna 322 00:17:17,920 --> 00:17:20,480 Speaker 1: slide right back down lower. There's really no no two 323 00:17:20,480 --> 00:17:22,959 Speaker 1: ways about that. The key economic data that we're all 324 00:17:22,960 --> 00:17:25,320 Speaker 1: waiting for at a China last night, for example, was 325 00:17:25,400 --> 00:17:29,200 Speaker 1: horrific again, seventeen year low on industrial production growth goes 326 00:17:29,280 --> 00:17:30,840 Speaker 1: right to the heart of the matter in terms of 327 00:17:30,960 --> 00:17:33,439 Speaker 1: energy demand growth. I mean, it's just continuing to slip. 328 00:17:33,680 --> 00:17:36,240 Speaker 1: The U. S. China trade war is really rereaking havoc 329 00:17:36,280 --> 00:17:39,680 Speaker 1: on these manufacturing intensive economies in Asia, and and that's 330 00:17:39,720 --> 00:17:43,640 Speaker 1: oil demand. Uh so, um, you know, to the extent 331 00:17:43,720 --> 00:17:46,119 Speaker 1: this doesn't break out into a war, and it looks 332 00:17:46,160 --> 00:17:48,399 Speaker 1: like my sense of it is that it's not going 333 00:17:48,440 --> 00:17:50,360 Speaker 1: to It's not going to break out into a war. 334 00:17:50,400 --> 00:17:52,720 Speaker 1: The Trump administration wants to avoid it at all costs. 335 00:17:52,760 --> 00:17:55,960 Speaker 1: They're gonna take this one too. I guess, um and um, 336 00:17:56,040 --> 00:17:58,879 Speaker 1: you know it'll it'll stabilize and and head lower until 337 00:17:58,920 --> 00:18:02,000 Speaker 1: something else more horrific happens. So, John, I just wanna 338 00:18:02,359 --> 00:18:04,439 Speaker 1: wrap up with the idea of gas prices in the 339 00:18:04,520 --> 00:18:07,879 Speaker 1: US and the bleed through effects on the economy. Do 340 00:18:07,920 --> 00:18:10,479 Speaker 1: you think that if prices were to stay where they 341 00:18:10,520 --> 00:18:14,960 Speaker 1: are or go materially higher, that will translate into higher 342 00:18:15,000 --> 00:18:18,560 Speaker 1: gas prices in the United States? Yes, I mean then 343 00:18:18,640 --> 00:18:21,920 Speaker 1: I mix. Today gasoline prices are up about over ten 344 00:18:21,920 --> 00:18:25,080 Speaker 1: per center, up seventeen cents a gallon. Um. You'll see 345 00:18:25,160 --> 00:18:27,240 Speaker 1: some of that ripped through to the to the retail 346 00:18:27,280 --> 00:18:29,520 Speaker 1: pump over the course the next couple of days. It'll 347 00:18:29,560 --> 00:18:31,359 Speaker 1: take longer for that to go through. We're still at 348 00:18:31,359 --> 00:18:33,480 Speaker 1: a relatively low price at the pump, but to the 349 00:18:33,520 --> 00:18:36,000 Speaker 1: extent consumers start to get anxious and if or if 350 00:18:36,000 --> 00:18:38,760 Speaker 1: the price goes you know, even higher, Um, you'll see 351 00:18:38,760 --> 00:18:41,680 Speaker 1: another You'll see a hit to consumer confidence, and you'll 352 00:18:41,760 --> 00:18:44,800 Speaker 1: see a hit to UH freight rates and other industries 353 00:18:44,800 --> 00:18:47,560 Speaker 1: that rely obviously on fuel for transportation, but also with 354 00:18:47,640 --> 00:18:49,680 Speaker 1: the grocery store, you'll see the price of veggies whether 355 00:18:49,800 --> 00:18:52,239 Speaker 1: things that start decline. John Kildo, thank you so much 356 00:18:52,280 --> 00:18:54,600 Speaker 1: for joining us. John is the founding partner of Again Capital, 357 00:18:54,720 --> 00:18:57,320 Speaker 1: joining us to discuss what's going on in the energy market. 358 00:18:57,400 --> 00:19:15,520 Speaker 1: Certainly an eventful day. Well. The ongoing trade dispute between 359 00:19:15,560 --> 00:19:18,800 Speaker 1: the US and China is whips on currency markets around 360 00:19:18,840 --> 00:19:22,040 Speaker 1: the globe, presenting hedging challenges for a whole host of companies. 361 00:19:22,080 --> 00:19:23,800 Speaker 1: To get a sense of how some of these companies 362 00:19:23,840 --> 00:19:26,920 Speaker 1: are managing that currency risk as well as their cash overall, 363 00:19:26,960 --> 00:19:29,800 Speaker 1: we welcome our next guest, Wolfgang Coaster. Wolfgang is a 364 00:19:29,840 --> 00:19:33,240 Speaker 1: senior strategy officer at Kirrieba based in Phoenix, Arizona, but 365 00:19:33,320 --> 00:19:35,600 Speaker 1: joining us here in our Bloomberg Interact their broker studio. 366 00:19:35,640 --> 00:19:38,480 Speaker 1: So Wolfgang, thanks so much for joining us again. You know, 367 00:19:38,720 --> 00:19:41,679 Speaker 1: one of the issues with this the uncertainty presented by 368 00:19:41,760 --> 00:19:44,960 Speaker 1: the U S and China trade issues is currencies. Give 369 00:19:45,000 --> 00:19:48,640 Speaker 1: us a sense of how well you think companies are 370 00:19:48,800 --> 00:19:52,639 Speaker 1: managing their currencies at the currency risk. Yeah, so I 371 00:19:52,680 --> 00:19:54,639 Speaker 1: think that one of the things that we're seeing is 372 00:19:54,720 --> 00:19:56,639 Speaker 1: unfortunately it's all over them what map, Right, You have 373 00:19:56,680 --> 00:19:59,040 Speaker 1: some companies who do a really good job, and the 374 00:19:59,200 --> 00:20:02,440 Speaker 1: key thing is to actually understanding your exposures, really having 375 00:20:02,480 --> 00:20:05,439 Speaker 1: a good grasp around where are my exposures, how am 376 00:20:05,480 --> 00:20:07,600 Speaker 1: I exposed not just on the revenue side on the 377 00:20:07,720 --> 00:20:10,400 Speaker 1: but on the expense sides, and what's the net impact 378 00:20:10,440 --> 00:20:12,520 Speaker 1: of that? And then what do I do to manage 379 00:20:12,560 --> 00:20:16,199 Speaker 1: that properly? That's really the gist of it. The execution 380 00:20:16,240 --> 00:20:19,680 Speaker 1: of that strategy then of actually putting hedges on, etcetera, 381 00:20:19,720 --> 00:20:22,320 Speaker 1: isn't as hard. So as we see these companies doing 382 00:20:22,359 --> 00:20:23,960 Speaker 1: it the once we're doing it well are the ones 383 00:20:24,000 --> 00:20:26,680 Speaker 1: who are ahead of the game. I want to talk 384 00:20:26,720 --> 00:20:28,439 Speaker 1: a little bit about your company because I find it 385 00:20:28,480 --> 00:20:31,120 Speaker 1: really interesting and it sort of builds on what we've 386 00:20:31,160 --> 00:20:35,160 Speaker 1: been hearing a lot. Basically, you do liquidity management for companies, 387 00:20:35,280 --> 00:20:39,120 Speaker 1: right um, and what that means is helping them manage 388 00:20:39,160 --> 00:20:43,760 Speaker 1: their cash and risk as well as just in general operations. 389 00:20:43,920 --> 00:20:47,120 Speaker 1: And it's the software, uh that you that you provide 390 00:20:47,400 --> 00:20:50,639 Speaker 1: And I'm just wondering, why is this such a growth 391 00:20:50,680 --> 00:20:53,800 Speaker 1: area that companies are increasingly outsourcing some of the basic 392 00:20:53,840 --> 00:20:57,359 Speaker 1: functioning of the way they run their businesses to software 393 00:20:57,480 --> 00:20:59,960 Speaker 1: such as yours. Yeah, I think that it's an evolution 394 00:21:00,080 --> 00:21:02,679 Speaker 1: and really over time of how things are going. And 395 00:21:03,040 --> 00:21:06,600 Speaker 1: quite frankly, treasury and finance are often the later partists 396 00:21:06,640 --> 00:21:09,919 Speaker 1: to the stages than sales organizations and marketing organizations are. 397 00:21:10,160 --> 00:21:12,880 Speaker 1: So you've seen this, like you said, exactly like a salesforce. 398 00:21:12,880 --> 00:21:16,240 Speaker 1: There typically in the forefront finance more conservative and a 399 00:21:16,320 --> 00:21:18,639 Speaker 1: little bit difficult and more difficult to open up to 400 00:21:18,800 --> 00:21:20,960 Speaker 1: that because what you have to do when you help 401 00:21:21,040 --> 00:21:23,399 Speaker 1: companies at the very basis of it, you have to 402 00:21:23,440 --> 00:21:26,240 Speaker 1: help them get at their data and that's a really 403 00:21:26,280 --> 00:21:29,679 Speaker 1: tough thing to do. They have these enterprise systems like 404 00:21:29,720 --> 00:21:33,560 Speaker 1: these Earpie systems like an Oracle, or they have you know, 405 00:21:33,600 --> 00:21:35,639 Speaker 1: an s A P. But now they have both on. 406 00:21:35,720 --> 00:21:38,400 Speaker 1: So they have tursury management systems as one of our 407 00:21:38,600 --> 00:21:41,520 Speaker 1: offerings that we also have that help them manage that 408 00:21:41,920 --> 00:21:44,719 Speaker 1: in the pre trade and the post trade era, so 409 00:21:44,920 --> 00:21:47,800 Speaker 1: raw data to decision. Then they'll make some decision and 410 00:21:47,840 --> 00:21:50,359 Speaker 1: actually execute on that, and then they need to book 411 00:21:50,400 --> 00:21:53,959 Speaker 1: that and track those transactions as well, and automating that 412 00:21:54,119 --> 00:21:56,320 Speaker 1: was not easy, and quite frankly, being able to be 413 00:21:56,400 --> 00:22:00,560 Speaker 1: cloud driven made that a lot easier because installing those 414 00:22:00,600 --> 00:22:03,480 Speaker 1: soft wars was a very difficult prospect and quite frankly 415 00:22:03,560 --> 00:22:06,600 Speaker 1: is a very difficult business prospect. So we're purely cloud 416 00:22:06,720 --> 00:22:08,880 Speaker 1: driven and that's why all of a sudden, this incredible 417 00:22:08,880 --> 00:22:11,240 Speaker 1: growth because all you do is you hook up your 418 00:22:11,320 --> 00:22:13,320 Speaker 1: API as we do it for you, you implement, and 419 00:22:13,359 --> 00:22:15,720 Speaker 1: you're ready, ready to go, and all of a sudden, 420 00:22:15,800 --> 00:22:19,119 Speaker 1: year impacts are major. So you mean, we see thirty 421 00:22:19,160 --> 00:22:22,880 Speaker 1: to fifty percent risk reductions on the currency side, We're 422 00:22:22,880 --> 00:22:26,560 Speaker 1: seeing much more efficient use of capitals. So the our 423 00:22:26,640 --> 00:22:28,840 Speaker 1: eyes on that are pretty significant. But you know, sometimes 424 00:22:28,840 --> 00:22:31,240 Speaker 1: it's harder for people to say, well, my my great 425 00:22:31,280 --> 00:22:34,440 Speaker 1: Excel spreadsheets or my this process is good. But that's 426 00:22:34,440 --> 00:22:36,240 Speaker 1: when it kind of that's that's kind of where I 427 00:22:36,240 --> 00:22:38,480 Speaker 1: wanted to go. Like if I think about you know 428 00:22:38,520 --> 00:22:40,920 Speaker 1: that you know the world is becoming a smaller place, 429 00:22:41,000 --> 00:22:44,640 Speaker 1: arguably through technology global trade, despite some of the moves 430 00:22:44,680 --> 00:22:47,200 Speaker 1: against globe global trade. So even small and mid sized 431 00:22:47,240 --> 00:22:51,679 Speaker 1: companies have international exposures. Um, how do you find some 432 00:22:51,720 --> 00:22:53,920 Speaker 1: of these mid sized companies do they know what they're 433 00:22:53,960 --> 00:22:55,640 Speaker 1: doing and when they're hedging. I mean, but I think 434 00:22:55,640 --> 00:22:57,600 Speaker 1: a Microsoft, I'm sure that's got a hundred people thinking 435 00:22:57,640 --> 00:22:59,800 Speaker 1: about hedging in their finance department. But I think somebod 436 00:22:59,800 --> 00:23:02,480 Speaker 1: these small and mid sized companies, it's probably a black 437 00:23:02,480 --> 00:23:04,400 Speaker 1: box for them. What do you what's your experience been there? 438 00:23:04,800 --> 00:23:07,840 Speaker 1: You're absolutely right, And the difficulty for these mid sized companies, 439 00:23:07,840 --> 00:23:10,159 Speaker 1: and we see there as a major growth area for 440 00:23:10,240 --> 00:23:12,960 Speaker 1: ourselves as well, is you really have you need? You 441 00:23:13,040 --> 00:23:16,760 Speaker 1: require all these different um disciplines. So from it, let's 442 00:23:16,760 --> 00:23:19,000 Speaker 1: say a risk management on the finance on the form 443 00:23:19,040 --> 00:23:24,240 Speaker 1: exchange side A, you need really understanding purely accounting. Then 444 00:23:24,400 --> 00:23:27,320 Speaker 1: from that you go to really financial risk management, and 445 00:23:27,320 --> 00:23:29,040 Speaker 1: then you need to understand the markets. You need to 446 00:23:29,080 --> 00:23:32,560 Speaker 1: understand how to actually execute those things. And technology facilitates 447 00:23:32,560 --> 00:23:35,640 Speaker 1: that because typically small to mid sized company doesn't even 448 00:23:35,720 --> 00:23:37,920 Speaker 1: have you know, they're not going to hire three people 449 00:23:37,960 --> 00:23:41,000 Speaker 1: to do this. It's not very cost effective, for example. 450 00:23:41,040 --> 00:23:43,240 Speaker 1: But we help the largest companies in the world, like 451 00:23:43,280 --> 00:23:45,480 Speaker 1: the one you just mentioned, do the same thing because 452 00:23:45,560 --> 00:23:48,280 Speaker 1: for them, it's we're all over the world. We may 453 00:23:48,320 --> 00:23:50,680 Speaker 1: have two hundred and thirty currency payers. You're gonna stick 454 00:23:50,680 --> 00:23:53,159 Speaker 1: to the currencies. They all interact and even if they 455 00:23:53,240 --> 00:23:56,240 Speaker 1: hired a hundred people to do it, the technology tells 456 00:23:56,240 --> 00:23:58,000 Speaker 1: to split a second. If you have a hundred people 457 00:23:58,040 --> 00:23:59,520 Speaker 1: doing it, it it will still take you four or five 458 00:23:59,640 --> 00:24:02,720 Speaker 1: six hours to do. Now you're right at the pulse 459 00:24:02,720 --> 00:24:05,080 Speaker 1: of it. So, as we do talk about the currency 460 00:24:05,119 --> 00:24:09,240 Speaker 1: fluctuations and which companies are sort of able to better 461 00:24:09,320 --> 00:24:12,920 Speaker 1: weather some of the less predictable fluctuations that we see 462 00:24:13,000 --> 00:24:16,359 Speaker 1: emanating from tweets, which companies to sort of hone in 463 00:24:16,359 --> 00:24:19,440 Speaker 1: on as the as the potential benefactors frankly of a 464 00:24:19,760 --> 00:24:21,760 Speaker 1: lack of altility in the wake of that. Yes, so 465 00:24:21,800 --> 00:24:24,399 Speaker 1: I think you have a few different categories. Let's start 466 00:24:24,400 --> 00:24:26,800 Speaker 1: with as an investor, I first of all, if I 467 00:24:26,800 --> 00:24:28,239 Speaker 1: want to stay out of this, I'm gonna look at 468 00:24:28,240 --> 00:24:31,320 Speaker 1: companies that are not very international, big companies like a 469 00:24:31,400 --> 00:24:32,959 Speaker 1: General Mills. You say, listen, you know I don't want 470 00:24:32,960 --> 00:24:34,880 Speaker 1: to I don't understand this stuff, don't know how good 471 00:24:34,880 --> 00:24:37,800 Speaker 1: they are. Why don't understay in the area where they're 472 00:24:37,880 --> 00:24:40,800 Speaker 1: much more focused on growth. They only have eleven percent 473 00:24:40,920 --> 00:24:44,440 Speaker 1: of their sales are international. So that's an interesting one 474 00:24:44,560 --> 00:24:48,119 Speaker 1: that's very stable that's that's kind of an interesting strategy 475 00:24:48,200 --> 00:24:50,320 Speaker 1: to just stay out of it. Quite frankly, okay, But 476 00:24:50,359 --> 00:24:53,800 Speaker 1: then you go into companies UM like an Apple or 477 00:24:53,840 --> 00:24:57,720 Speaker 1: a Boeing or Texas instrument, they're really struggling with this, right, 478 00:24:57,760 --> 00:25:00,680 Speaker 1: they have macroeconomic moves, they have all these sort of things, 479 00:25:00,680 --> 00:25:02,439 Speaker 1: and what they have to do they have to go 480 00:25:02,480 --> 00:25:05,000 Speaker 1: in there and say, okay, like a like a UM 481 00:25:05,280 --> 00:25:10,199 Speaker 1: Texas instrument of their revenues out of China, that's a 482 00:25:10,240 --> 00:25:13,719 Speaker 1: major impact, what do I do with that? So you know, 483 00:25:13,840 --> 00:25:17,080 Speaker 1: some companies like a General Motors, they've gone really good 484 00:25:17,119 --> 00:25:19,520 Speaker 1: at figuring out what their exposures are both on the 485 00:25:19,600 --> 00:25:22,560 Speaker 1: revenue and their expense set, and they try to match 486 00:25:22,560 --> 00:25:24,760 Speaker 1: it as close as possible so they're not exposed to 487 00:25:24,800 --> 00:25:27,120 Speaker 1: the terrorists. But then what they do, they'll actually take 488 00:25:27,160 --> 00:25:30,320 Speaker 1: part of it, like the Apples, etcetera doing or Flextronics 489 00:25:30,320 --> 00:25:32,720 Speaker 1: for example, is doing really well. They're actually looking to 490 00:25:32,840 --> 00:25:35,720 Speaker 1: go somewhere else. They're going to Cambodia, They're going to Vietnam. 491 00:25:35,800 --> 00:25:39,240 Speaker 1: We all know that's big. The currency therefore strength things significantly. 492 00:25:39,560 --> 00:25:43,680 Speaker 1: So what this whole trade war does, it does, whether 493 00:25:43,760 --> 00:25:47,560 Speaker 1: one likes it or not, disrupt the supply chain of China, 494 00:25:48,160 --> 00:25:50,080 Speaker 1: and that's the intention of this whole thing at the 495 00:25:50,160 --> 00:25:52,639 Speaker 1: end of the day. And as investors do you have 496 00:25:52,680 --> 00:25:54,800 Speaker 1: to look at a are they going to be impacted 497 00:25:55,000 --> 00:25:57,399 Speaker 1: like a General Mills, No B. If they are going 498 00:25:57,440 --> 00:26:00,920 Speaker 1: to be impacted, how good are they manage gen that risk? 499 00:26:01,080 --> 00:26:03,399 Speaker 1: And quite frankly, if you read their ten cues and 500 00:26:03,440 --> 00:26:06,000 Speaker 1: ten caves and you can actually figure some of that 501 00:26:06,040 --> 00:26:08,600 Speaker 1: stuff out. Thank you so much for being with us. 502 00:26:08,640 --> 00:26:11,800 Speaker 1: My pleasure. Well for having me, it's really interesting. Wolfgang Coaster, 503 00:26:12,000 --> 00:26:15,399 Speaker 1: Senior strategy officer of Cariba based in Phoenix, Arizona, for 504 00:26:15,480 --> 00:26:18,240 Speaker 1: joining us here in our BLOOMBERGUNNA active broker's studios talking 505 00:26:18,240 --> 00:26:21,720 Speaker 1: about what he is seeing out of companies in terms 506 00:26:21,800 --> 00:26:24,640 Speaker 1: of how they are planning ahead for their currency risk 507 00:26:24,720 --> 00:26:28,200 Speaker 1: amid the trade wars. Thanks for listening to the Bloomberg 508 00:26:28,240 --> 00:26:30,439 Speaker 1: P and L podcast. You can subscribe and listen to 509 00:26:30,480 --> 00:26:33,720 Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer. 510 00:26:34,080 --> 00:26:36,879 Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa 511 00:26:36,880 --> 00:26:39,520 Speaker 1: abram Woyds. I'm on Twitter at Lisa abram Woit's one 512 00:26:39,720 --> 00:26:42,280 Speaker 1: before the podcast. You can always catch us worldwide on 513 00:26:42,359 --> 00:26:43,200 Speaker 1: Bloomberg Radio