Speaker 1: Welcome to the Bloomberg PENL podcast. I'm Paul swing you.
Speaker 1: Along with my co host Lisa Brahma Waits. Each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money. Whether at the grocery store or
Speaker 1: the trading floor, find a Bloomberg Penl podcast on Apple
Speaker 1: podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. Right now, we are looking at
Speaker 1: markets that are slightly down, not perhaps down as much
Speaker 1: as someone expected, after oil prices surged and continue to
Speaker 1: surge even higher, the most on record in the wake
Speaker 1: of the Saudi Arabian attacks on the attacks on the
Speaker 1: Saudi Arabian oil production facilities. Joining US now Peter Checchini,
Speaker 1: Global Market try to Global Chief Market strategistic Canter Fitzgerald. Peter,
Speaker 1: thank you so much for taking the time. Let's just
Speaker 1: start with are you surprised that there isn't a more
Speaker 1: market sell off in US equities in the wake of
Speaker 1: this disruption oil production in the Middle East? Yes, good morning,
Speaker 1: and thanks for having me. Um. You know, the reaction
Speaker 1: I think is is about right. The broader markets are
Speaker 1: obviously uh off overall. Um somewhat frankly offset by the
Speaker 1: benefit to UH energy companies with the with the spike
Speaker 1: and oil prices. UM. The spike and oil prices itself
Speaker 1: doesn't really come as much of a surprise to us,
Speaker 1: so our our target for oil this year has been
Speaker 1: fifty to fifty five dollars on w T I UM.
Speaker 1: But we wrote recently that we expected UH geopolitical risk
Speaker 1: to come into play with spikes and oil between sixty
Speaker 1: and sixty five, and in fact, quite frankly, I think
Speaker 1: UH this would be a time to sell oil rather
Speaker 1: than to buy it. I think UH around a COO
Speaker 1: in particular, has an incentive to to cure this problem
Speaker 1: as quickly as possible. May not be easy, but obviously
Speaker 1: UH they don't want to delay their I p O
Speaker 1: any longer than they have to. So market action seems
Speaker 1: to be about right in response to this attack. But
Speaker 1: for us, you know, more broadly, UM, we think, as
Speaker 1: we've been saying, we're in the red zone for US
Speaker 1: equities for other reasons. So, Peter, I know last week
Speaker 1: you wrote a note suggesting that the credit markets might
Speaker 1: be getting a little bit frothy. Give us your sense
Speaker 1: of what you're thinking. There. Yeah, you know, we've we've
Speaker 1: been careful not to overstate this because one of the
Speaker 1: things that's been going on, UH is the capital flows
Speaker 1: into US high yield really because there's there are very
Speaker 1: few people places in the rest of the world that
Speaker 1: on a risk adjusted basis, you can get the kind
Speaker 1: of return that you can get in US high yield.
Speaker 1: Default rates have been relatively low, about two point one
Speaker 1: percent UH for trailing twelve months. And you know, with
Speaker 1: with seventeen trillion dollars of negative yielding dead about to
Speaker 1: trillion of that being in corporates, the flows into high
Speaker 1: yield in the US have been have been pretty pretty
Speaker 1: strong UM and a couple that with the low default rates.
Speaker 1: Until one sees cash flows starting to roll over UH,
Speaker 1: it's difficult to get barish of high yield. However, the
Speaker 1: signs of FRA are there where we're seeing UH pictoggle
Speaker 1: deals come coming out like the corn Main deal recently.
Speaker 1: We haven't seen very many of those. I think there
Speaker 1: are one or two last year, but that tends to
Speaker 1: be a very market topy kind of event, especially when
Speaker 1: they go to pay UH dividends to LBO sponsors UM.
Speaker 1: And so we're seeing that and even just the issue
Speaker 1: wance volumes of late have been gigantic, with I think
Speaker 1: last week probably the third or fourth highest on record,
Speaker 1: depending on whose data you look at. So so I
Speaker 1: think the signs in terms of issue and volumes, as
Speaker 1: well as the form of the deals are are sort
Speaker 1: of singing to that that's froth, uh, and it's just
Speaker 1: really to me a question of how much longer it
Speaker 1: can last. So then there is sort of a flip
Speaker 1: side to this, which is when you see froth and
Speaker 1: credit markets in a real robust demand, uh, that typically
Speaker 1: is a positive for US equities, at least to the
Speaker 1: short term. So do you view this as being potentially
Speaker 1: constructive even if in the longer term not great. Yeah,
Speaker 1: that's that's an interesting point least, and I and I
Speaker 1: would generally tend to agree with it. I think in
Speaker 1: most cycles, when you look at the history of credit cycles,
Speaker 1: credit actually tends to to to lead equities in the
Speaker 1: hig yield market in particular, tends to be pretty important
Speaker 1: to that. I think there are some interesting differences this cycle,
Speaker 1: one of which is the dependence of equity markets uh,
Speaker 1: less so on high yield and more so on the
Speaker 1: levered loan market in particular in my view, and we're
Speaker 1: we're seeing some some real signs of frosth there as well.
Speaker 1: You know, for example, of the of the names in
Speaker 1: the levered loan index are are now demonstrating interest coverage
Speaker 1: ratios below one and a half, in leverage above seven times,
Speaker 1: which is which is really quite something. And we're starting
Speaker 1: to see a trend in cash flows for those same companies. Uh.
Speaker 1: Really the growth and cash flows for those companies is
Speaker 1: close to zero at this point. So so yes, I
Speaker 1: would agree with you. In the near term, I would
Speaker 1: say over all credit markets are still providing support, but um,
Speaker 1: I think in particular equities are going to be very
Speaker 1: sensitive to a turning cash flows, especially for some of
Speaker 1: those levered names. Uh. And we're starting, at least in
Speaker 1: the form of the second derivative of cash flow, is
Speaker 1: starting to see that that rate of growth slow considerably. Peter,
Speaker 1: thanks so much for joining us. Peter Stini, Global Chief
Speaker 1: market Strategist for Cantor Fitzgerald joining us on the phone. Well,
Speaker 1: the United Auto Workers Union is leading its first strike
Speaker 1: against General Motors in twelve years, digging in for a
Speaker 1: fight over jobs and benefits that could cost the Carmaker
Speaker 1: deally for an indefinite period of time to get some
Speaker 1: more details. We welcome David Welch. David is a Detroit
Speaker 1: bureau chief for Bloomberg News located in our Detroit bureau
Speaker 1: right now. David, thanks so much for joining us. Just
Speaker 1: give us a sense of how far apart you think
Speaker 1: the union and GM are right now. There's a key
Speaker 1: issue here that I think really has them apart by
Speaker 1: quite a bit, and that is the use of temporary workers.
Speaker 1: GM wants more of them because they get paid less,
Speaker 1: they have weaker benefits that they do cut their labor
Speaker 1: costs overall, but you can also get rid of them
Speaker 1: much more easily if there's a downturns that kind of
Speaker 1: makes the workforce flexible. They want fewer are them, say
Speaker 1: they want more um and the a W wants not
Speaker 1: only few of them, but they want a path to
Speaker 1: make those people permanent employees. So there's not a lot
Speaker 1: of middle ground there. Someone's going to have to give
Speaker 1: on that one. Uh GM had made an offer over
Speaker 1: the weekend that had pretty hefty raises and I signing bonus.
Speaker 1: They're going to hire more than five thousand new workers.
Speaker 1: So there's some job security and there. It was a
Speaker 1: pretty nice offer to start with, but that that one issue,
Speaker 1: I think it's going to be a big sticking point
Speaker 1: for them. You know, I'm looking right now General Motors
Speaker 1: share price down three per cent and I'm wondering why
Speaker 1: the union is doing this now. I mean, sort of
Speaker 1: what what what catalyzed this strike? Well, you know, the
Speaker 1: the labor agreement expired over the weekend, and this is
Speaker 1: kind of the one shot in four years they have
Speaker 1: to go out on strike and get a really good deal.
Speaker 1: There's a lot of pent up anger over the plant
Speaker 1: closing is that GM announced back in November. That's for plants,
Speaker 1: including a very big one in Lordstown, Ohio that President
Speaker 1: Trump has taken a personal interest in. So there was
Speaker 1: a lot of anger there, especially when you have GM
Speaker 1: putting out near record profits three years in a row
Speaker 1: and actually affirming guidance that they might hit that number
Speaker 1: something close to that profit number again this year's you
Speaker 1: have a prosperous GM plant closings, and and the workers
Speaker 1: are already pretty angry. They want a piece of of
Speaker 1: the record profits, even if we are possibly headed into
Speaker 1: a downturn um and and this is there one chance
Speaker 1: to get a piece of those profits while the company
Speaker 1: still has a lot of money. So that that's that's
Speaker 1: the weather they're pulling at this point in time. So, David,
Speaker 1: what's the sense here early days of this strike. Is
Speaker 1: this something that is expected to drag on for a
Speaker 1: long period of time or can this be a relatively
Speaker 1: quick issue? Um? Honestly, I think this will last maybe
Speaker 1: a week. Because GM did with their first offer that
Speaker 1: the union really won't talk about yet. The GM made public,
Speaker 1: they didn't address a lot of the issues, and those
Speaker 1: issues things like pay, things like investing a lot of
Speaker 1: money and plants that GM announced as part of this
Speaker 1: that they're gonna invest seven billion dollars in their US
Speaker 1: plants over the next four years. That the Lordstown plant
Speaker 1: will not get a vehicle to build, but they would
Speaker 1: make a battery plant. They would build a battery and
Speaker 1: wint vehicle battery plant in Wordstown and that would hire
Speaker 1: some of the workers who have not transferred out of
Speaker 1: there already. And the plan in Detroit that was at
Speaker 1: risk of being closed is also going to get a
Speaker 1: vehicle to build, so that there were a few bones
Speaker 1: in there for the workers who were waiting to see
Speaker 1: what their fate is going to be, but the other
Speaker 1: issues could take some time. And look, there's also a
Speaker 1: bit of vaudeville here. The union negotiators have to show
Speaker 1: the rank and file, who, by the way, they have
Speaker 1: to vote to ratify the deal. They got to show
Speaker 1: them that they're putting up a good fight in a story,
Speaker 1: because the way to do that. Yeah, and it's so
Speaker 1: I thought that part of the story was pretty interesting
Speaker 1: that the piece that you wrote. I do have to wonder,
Speaker 1: though it's been twelve years, right, this comes up every
Speaker 1: four years that they have to negotiate a new contract,
Speaker 1: this time is different, and they're going to dig their
Speaker 1: heels in. And you said that part of what the
Speaker 1: backdrop here is the record profits and the fact that
Speaker 1: General Motors has been closing some plants. But you also
Speaker 1: in the story pointed to a corruption scandal plaguing the
Speaker 1: U a W as part of what is sort of
Speaker 1: setting this setting the stage here. Can you give us
Speaker 1: more color on that? Sure, So there's been a corruption
Speaker 1: scandal at the union that's gone back for well over
Speaker 1: the past year, and it started at theat Chrysler. On
Speaker 1: both sides, Union and man manishment people have been indicted
Speaker 1: and convicted basically giving union leaders graft out of a
Speaker 1: union training fund in exchange for giving Fiat karist or
Speaker 1: a more lenient contract. That investigation has moved a GM.
Speaker 1: It's slightly different in that the union leaders and including
Speaker 1: past president Dennis Williams and current president Gary Jones, are
Speaker 1: being accused of stealing money from union charity funds and
Speaker 1: community activism funds and the general fund for this lavish
Speaker 1: lifestyle they woven in uh, Palm Springs, California, for renting
Speaker 1: villas for a month or two, expensive cigars, expensive scotch.
Speaker 1: Is kind of crazy stuff. So the union and everybody,
Speaker 1: even some of the was called analysts wh watched the
Speaker 1: unions say that they won't really play into this, but
Speaker 1: I think it does. I think when members don't trust you,
Speaker 1: you've got to drive a hard bargain uh to get
Speaker 1: a deal ratified, because the membership is going to be
Speaker 1: looking at any deal really scrutinizing it, saying, Okay, we
Speaker 1: try these people. They're they're stealing our money to buy
Speaker 1: mccalen eighteen and some good cigars. Why would I trust
Speaker 1: them to give me a good deal. They've got to
Speaker 1: drive a really hard bargain here. David Welch, thank you
Speaker 1: so much for being with us. David Welch's Bloombergs Detroit
Speaker 1: bureau chief. Talking about that GM news the first strike
Speaker 1: of the labor Union in twelve years. There is that
Speaker 1: surge in oil prices that we're seeing today in Brent crude.
Speaker 1: At one point it was the most on record as
Speaker 1: reaching the highest levels since May, but jumping more than
Speaker 1: eleven percent. The question is how long will this disruption
Speaker 1: oil production out of Saudi Arabia last what will be
Speaker 1: the implications for the Middle East in terms of Iranian
Speaker 1: relationships with the US and Saudi Arabia. To help us understand,
Speaker 1: let's bring in John Killed, a founding partner of Again Capital.
Speaker 1: So John, let's just first get your impression of how
Speaker 1: much oil prices are rising. Do you view this as
Speaker 1: a temporary blip or something that has longer lasting legs
Speaker 1: and potentially even a higher leg up. Well, I think
Speaker 1: the response has been um somewhat measured, even though it
Speaker 1: was the biggest jump since the invasion of Kuwait bi
Speaker 1: Iraq back in the day. Um, We're gonna have to
Speaker 1: see how quickly the Saudis can get the situation under control.
Speaker 1: You know, they're claiming that they can get a good
Speaker 1: portion of the production back online UM, and they're also
Speaker 1: claiming that they'll be able to supply everyone as needed
Speaker 1: out of available inventories that are in the country. The
Speaker 1: big thing to watch from here really is what the
Speaker 1: response is going to be. It seems now that the
Speaker 1: US and a few moments ago the Saudis themselves are
Speaker 1: accusing Iran of having uh done this, and it's hard
Speaker 1: to believe that the Saddies won't respond or the US
Speaker 1: won't help them respond. But if they don't, you're gonna
Speaker 1: look incredibly, incredibly weak. So it seems to me that
Speaker 1: they'll be vulnerable to more attacks and that the security
Speaker 1: premium and prices is only going to inflate. John. You know,
Speaker 1: as someone who follows these markets closely, are you surprised
Speaker 1: at how much this facility, again, one of the largest
Speaker 1: facilities and we're not maybe the largest facility in the world.
Speaker 1: How susceptible it was to attack? UM? Yes, and no,
Speaker 1: uh look to the extent it was it was cruise
Speaker 1: missiles coming from Iran. If that's the case, UM, you
Speaker 1: would have think they should have been picked up by
Speaker 1: some kind of anti missile defense that the Saddi's have
Speaker 1: purchased from the US. Drones are almost impossible to stop,
Speaker 1: and um, the Saddies are particularly bad at it. This
Speaker 1: is not the first drone attack I think, as most
Speaker 1: people know on Saudi infrastructure, UM that has occurred. It's
Speaker 1: been going on for months, and the Satti's have really
Speaker 1: done nothing about it, which I have found remarkable. Um.
Speaker 1: They tried to put more pressure on the Hoothies and
Speaker 1: Yemen and and do other things, but for the most part,
Speaker 1: as far as the direct response goes, you know, there's
Speaker 1: been nothing. So this day was almost inevitable. But if
Speaker 1: you look at the satellite imagery, you can see there
Speaker 1: is unbelievable precision in in where these uh these round
Speaker 1: tanks that they have there that store the oil got
Speaker 1: penetrated almost the exact same spot in each tank that
Speaker 1: are in a row together. So um, high level sophistication.
Speaker 1: And certainly for roll of money the Sadie's spent on
Speaker 1: their defense, they should have had some kind of anti
Speaker 1: missile technology uh AT in place here. So it's it's
Speaker 1: it's a remarkable failing on their part. So, John, I
Speaker 1: want to go back to what you were saying about
Speaker 1: how the response in markets has been somewhat muted, especially
Speaker 1: given the backdrop you were just talking about, which is
Speaker 1: sort of a lack of protection on the part of
Speaker 1: Saudi Arabia against an attack like this. I'm just trying
Speaker 1: to understand the counter argument to that that there's loss
Speaker 1: of production that can be increased elsewhere, and that you know,
Speaker 1: the US can increase shell production, this will offset any
Speaker 1: decline in production out of Saudi Arabia. What do you
Speaker 1: say to that. I think that's partly right. I mean,
Speaker 1: as far as there being any kind of you know,
Speaker 1: spur of the moment US shell response that, I don't
Speaker 1: buy that at all. I mean, they're not built that way.
Speaker 1: We don't. Our guys don't necessarily e gals don't necessarily
Speaker 1: dial up and down the production in reaction to price.
Speaker 1: As we all know. They just plot along pump as
Speaker 1: much as they can, and and and deal with the
Speaker 1: prices as best they can. There is spirit capacity out there, though,
Speaker 1: because of what OPEC and Russia have done to try
Speaker 1: to um curtail the price slide. So we know Russia
Speaker 1: has spirit capacity. You a some of the other countries. Also,
Speaker 1: two of the other levers that are out there arguing
Speaker 1: against the greater price increases is certainly the existence of
Speaker 1: all the strategic petroleum reserves around the world, and China
Speaker 1: in particular, which has almost two years worth of supply
Speaker 1: to cover a complete cutoff of STATI supply to China.
Speaker 1: So um, you know, we we're sort of well banked
Speaker 1: in terms of oil supplies for now. The problem you
Speaker 1: have though, is that this turns into any kind of
Speaker 1: sort of hot war. And it's also remarkablelives if I
Speaker 1: could just stay quick. Um, the fact that these prices
Speaker 1: aren't up as much much more in light of the
Speaker 1: fact that we have already lost I ran in Venezuela
Speaker 1: oil to the global market as well, So it shows
Speaker 1: you just how sloppy the situation has become supply wise
Speaker 1: in the face of diminishing demand. As we were speaking
Speaker 1: about a few weeks ago. Yeah, John, that's kind of
Speaker 1: where I wanted to go. It seems like when we
Speaker 1: talk about crude oil, it's obviously trying to get a
Speaker 1: handle on the supplied to demand dynamics and what had
Speaker 1: been driving price. It seems to have been the demand
Speaker 1: side of the equation, and investors concerns that the trade
Speaker 1: wars and other issues would be slowing down demand for crude.
Speaker 1: But this news coming out of the Middle East brings
Speaker 1: the supply story right back into focus. Here, How what
Speaker 1: do you think will be the driver of oil over
Speaker 1: the next several weeks, the supply or the demand or
Speaker 1: some combination of the two, if the situation at all
Speaker 1: calms down, and we're in the situation looked like it
Speaker 1: was gonna be calming down, just generally with the overtures
Speaker 1: that were being made to the Iranians by President Trump
Speaker 1: over the past couple of weeks, you know, we're gonna
Speaker 1: slide right back down lower. There's really no no two
Speaker 1: ways about that. The key economic data that we're all
Speaker 1: waiting for at a China last night, for example, was
Speaker 1: horrific again, seventeen year low on industrial production growth goes
Speaker 1: right to the heart of the matter in terms of
Speaker 1: energy demand growth. I mean, it's just continuing to slip.
Speaker 1: The U. S. China trade war is really rereaking havoc
Speaker 1: on these manufacturing intensive economies in Asia, and and that's
Speaker 1: oil demand. Uh so, um, you know, to the extent
Speaker 1: this doesn't break out into a war, and it looks
Speaker 1: like my sense of it is that it's not going
Speaker 1: to It's not going to break out into a war.
Speaker 1: The Trump administration wants to avoid it at all costs.
Speaker 1: They're gonna take this one too. I guess, um and um,
Speaker 1: you know it'll it'll stabilize and and head lower until
Speaker 1: something else more horrific happens. So, John, I just wanna
Speaker 1: wrap up with the idea of gas prices in the
Speaker 1: US and the bleed through effects on the economy. Do
Speaker 1: you think that if prices were to stay where they
Speaker 1: are or go materially higher, that will translate into higher
Speaker 1: gas prices in the United States? Yes, I mean then
Speaker 1: I mix. Today gasoline prices are up about over ten
Speaker 1: per center, up seventeen cents a gallon. Um. You'll see
Speaker 1: some of that ripped through to the to the retail
Speaker 1: pump over the course the next couple of days. It'll
Speaker 1: take longer for that to go through. We're still at
Speaker 1: a relatively low price at the pump, but to the
Speaker 1: extent consumers start to get anxious and if or if
Speaker 1: the price goes you know, even higher, Um, you'll see
Speaker 1: another You'll see a hit to consumer confidence, and you'll
Speaker 1: see a hit to UH freight rates and other industries
Speaker 1: that rely obviously on fuel for transportation, but also with
Speaker 1: the grocery store, you'll see the price of veggies whether
Speaker 1: things that start decline. John Kildo, thank you so much
Speaker 1: for joining us. John is the founding partner of Again Capital,
Speaker 1: joining us to discuss what's going on in the energy market.
Speaker 1: Certainly an eventful day. Well. The ongoing trade dispute between
Speaker 1: the US and China is whips on currency markets around
Speaker 1: the globe, presenting hedging challenges for a whole host of companies.
Speaker 1: To get a sense of how some of these companies
Speaker 1: are managing that currency risk as well as their cash overall,
Speaker 1: we welcome our next guest, Wolfgang Coaster. Wolfgang is a
Speaker 1: senior strategy officer at Kirrieba based in Phoenix, Arizona, but
Speaker 1: joining us here in our Bloomberg Interact their broker studio.
Speaker 1: So Wolfgang, thanks so much for joining us again. You know,
Speaker 1: one of the issues with this the uncertainty presented by
Speaker 1: the U S and China trade issues is currencies. Give
Speaker 1: us a sense of how well you think companies are
Speaker 1: managing their currencies at the currency risk. Yeah, so I
Speaker 1: think that one of the things that we're seeing is
Speaker 1: unfortunately it's all over them what map, Right, You have
Speaker 1: some companies who do a really good job, and the
Speaker 1: key thing is to actually understanding your exposures, really having
Speaker 1: a good grasp around where are my exposures, how am
Speaker 1: I exposed not just on the revenue side on the
Speaker 1: but on the expense sides, and what's the net impact
Speaker 1: of that? And then what do I do to manage
Speaker 1: that properly? That's really the gist of it. The execution
Speaker 1: of that strategy then of actually putting hedges on, etcetera,
Speaker 1: isn't as hard. So as we see these companies doing
Speaker 1: it the once we're doing it well are the ones
Speaker 1: who are ahead of the game. I want to talk
Speaker 1: a little bit about your company because I find it
Speaker 1: really interesting and it sort of builds on what we've
Speaker 1: been hearing a lot. Basically, you do liquidity management for companies,
Speaker 1: right um, and what that means is helping them manage
Speaker 1: their cash and risk as well as just in general operations.
Speaker 1: And it's the software, uh that you that you provide
Speaker 1: And I'm just wondering, why is this such a growth
Speaker 1: area that companies are increasingly outsourcing some of the basic
Speaker 1: functioning of the way they run their businesses to software
Speaker 1: such as yours. Yeah, I think that it's an evolution
Speaker 1: and really over time of how things are going. And
Speaker 1: quite frankly, treasury and finance are often the later partists
Speaker 1: to the stages than sales organizations and marketing organizations are.
Speaker 1: So you've seen this, like you said, exactly like a salesforce.
Speaker 1: There typically in the forefront finance more conservative and a
Speaker 1: little bit difficult and more difficult to open up to
Speaker 1: that because what you have to do when you help
Speaker 1: companies at the very basis of it, you have to
Speaker 1: help them get at their data and that's a really
Speaker 1: tough thing to do. They have these enterprise systems like
Speaker 1: these Earpie systems like an Oracle, or they have you know,
Speaker 1: an s A P. But now they have both on.
Speaker 1: So they have tursury management systems as one of our
Speaker 1: offerings that we also have that help them manage that
Speaker 1: in the pre trade and the post trade era, so
Speaker 1: raw data to decision. Then they'll make some decision and
Speaker 1: actually execute on that, and then they need to book
Speaker 1: that and track those transactions as well, and automating that
Speaker 1: was not easy, and quite frankly, being able to be
Speaker 1: cloud driven made that a lot easier because installing those
Speaker 1: soft wars was a very difficult prospect and quite frankly
Speaker 1: is a very difficult business prospect. So we're purely cloud
Speaker 1: driven and that's why all of a sudden, this incredible
Speaker 1: growth because all you do is you hook up your
Speaker 1: API as we do it for you, you implement, and
Speaker 1: you're ready, ready to go, and all of a sudden,
Speaker 1: year impacts are major. So you mean, we see thirty
Speaker 1: to fifty percent risk reductions on the currency side, We're
Speaker 1: seeing much more efficient use of capitals. So the our
Speaker 1: eyes on that are pretty significant. But you know, sometimes
Speaker 1: it's harder for people to say, well, my my great
Speaker 1: Excel spreadsheets or my this process is good. But that's
Speaker 1: when it kind of that's that's kind of where I
Speaker 1: wanted to go. Like if I think about you know
Speaker 1: that you know the world is becoming a smaller place,
Speaker 1: arguably through technology global trade, despite some of the moves
Speaker 1: against globe global trade. So even small and mid sized
Speaker 1: companies have international exposures. Um, how do you find some
Speaker 1: of these mid sized companies do they know what they're
Speaker 1: doing and when they're hedging. I mean, but I think
Speaker 1: a Microsoft, I'm sure that's got a hundred people thinking
Speaker 1: about hedging in their finance department. But I think somebod
Speaker 1: these small and mid sized companies, it's probably a black
Speaker 1: box for them. What do you what's your experience been there?
Speaker 1: You're absolutely right, And the difficulty for these mid sized companies,
Speaker 1: and we see there as a major growth area for
Speaker 1: ourselves as well, is you really have you need? You
Speaker 1: require all these different um disciplines. So from it, let's
Speaker 1: say a risk management on the finance on the form
Speaker 1: exchange side A, you need really understanding purely accounting. Then
Speaker 1: from that you go to really financial risk management, and
Speaker 1: then you need to understand the markets. You need to
Speaker 1: understand how to actually execute those things. And technology facilitates
Speaker 1: that because typically small to mid sized company doesn't even
Speaker 1: have you know, they're not going to hire three people
Speaker 1: to do this. It's not very cost effective, for example.
Speaker 1: But we help the largest companies in the world, like
Speaker 1: the one you just mentioned, do the same thing because
Speaker 1: for them, it's we're all over the world. We may
Speaker 1: have two hundred and thirty currency payers. You're gonna stick
Speaker 1: to the currencies. They all interact and even if they
Speaker 1: hired a hundred people to do it, the technology tells
Speaker 1: to split a second. If you have a hundred people
Speaker 1: doing it, it it will still take you four or five
Speaker 1: six hours to do. Now you're right at the pulse
Speaker 1: of it. So, as we do talk about the currency
Speaker 1: fluctuations and which companies are sort of able to better
Speaker 1: weather some of the less predictable fluctuations that we see
Speaker 1: emanating from tweets, which companies to sort of hone in
Speaker 1: on as the as the potential benefactors frankly of a
Speaker 1: lack of altility in the wake of that. Yes, so
Speaker 1: I think you have a few different categories. Let's start
Speaker 1: with as an investor, I first of all, if I
Speaker 1: want to stay out of this, I'm gonna look at
Speaker 1: companies that are not very international, big companies like a
Speaker 1: General Mills. You say, listen, you know I don't want
Speaker 1: to I don't understand this stuff, don't know how good
Speaker 1: they are. Why don't understay in the area where they're
Speaker 1: much more focused on growth. They only have eleven percent
Speaker 1: of their sales are international. So that's an interesting one
Speaker 1: that's very stable that's that's kind of an interesting strategy
Speaker 1: to just stay out of it. Quite frankly, okay, But
Speaker 1: then you go into companies UM like an Apple or
Speaker 1: a Boeing or Texas instrument, they're really struggling with this, right,
Speaker 1: they have macroeconomic moves, they have all these sort of things,
Speaker 1: and what they have to do they have to go
Speaker 1: in there and say, okay, like a like a UM
Speaker 1: Texas instrument of their revenues out of China, that's a
Speaker 1: major impact, what do I do with that? So you know,
Speaker 1: some companies like a General Motors, they've gone really good
Speaker 1: at figuring out what their exposures are both on the
Speaker 1: revenue and their expense set, and they try to match
Speaker 1: it as close as possible so they're not exposed to
Speaker 1: the terrorists. But then what they do, they'll actually take
Speaker 1: part of it, like the Apples, etcetera doing or Flextronics
Speaker 1: for example, is doing really well. They're actually looking to
Speaker 1: go somewhere else. They're going to Cambodia, They're going to Vietnam.
Speaker 1: We all know that's big. The currency therefore strength things significantly.
Speaker 1: So what this whole trade war does, it does, whether
Speaker 1: one likes it or not, disrupt the supply chain of China,
Speaker 1: and that's the intention of this whole thing at the
Speaker 1: end of the day. And as investors do you have
Speaker 1: to look at a are they going to be impacted
Speaker 1: like a General Mills, No B. If they are going
Speaker 1: to be impacted, how good are they manage gen that risk?
Speaker 1: And quite frankly, if you read their ten cues and
Speaker 1: ten caves and you can actually figure some of that
Speaker 1: stuff out. Thank you so much for being with us.
Speaker 1: My pleasure. Well for having me, it's really interesting. Wolfgang Coaster,
Speaker 1: Senior strategy officer of Cariba based in Phoenix, Arizona, for
Speaker 1: joining us here in our BLOOMBERGUNNA active broker's studios talking
Speaker 1: about what he is seeing out of companies in terms
Speaker 1: of how they are planning ahead for their currency risk
Speaker 1: amid the trade wars. Thanks for listening to the Bloomberg
Speaker 1: P and L podcast. You can subscribe and listen to
Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.
Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa
Speaker 1: abram Woyds. I'm on Twitter at Lisa abram Woit's one
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Speaker 1: Bloomberg Radio