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 wits. 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 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:22,239 Speaker 1: at Bloomberg dot com. Perhaps Mexico is off the hook 8 00:00:22,280 --> 00:00:25,840 Speaker 1: with President Trump saying that tariffs there are not going 9 00:00:25,880 --> 00:00:30,200 Speaker 1: to be reinstated because of the ongoing progress made with immigration. However, 10 00:00:30,360 --> 00:00:34,879 Speaker 1: EU exactly in the crosshairs of the president, with President 11 00:00:34,920 --> 00:00:38,080 Speaker 1: Trump talking about a possible new round of tariffs there. 12 00:00:38,240 --> 00:00:42,120 Speaker 1: Joining us now is TERA's Raphael Bloomberg opinion editor covering 13 00:00:42,159 --> 00:00:46,080 Speaker 1: European politics and economics, joining us from London. Terra's so 14 00:00:46,159 --> 00:00:49,959 Speaker 1: let's start there. What is President Trump proposing now? So, 15 00:00:50,120 --> 00:00:54,720 Speaker 1: President Trump, UH is proposing a about three billion of 16 00:00:54,760 --> 00:00:58,360 Speaker 1: tariffs UM and you know what's been an escalation of 17 00:00:58,720 --> 00:01:02,160 Speaker 1: the EU US rage spat. These have to do not 18 00:01:02,320 --> 00:01:08,640 Speaker 1: with UH auto import but UM a ongoing, long long 19 00:01:08,680 --> 00:01:13,120 Speaker 1: standing dispute over subsidies for boeing UM and air Bus. 20 00:01:13,120 --> 00:01:17,759 Speaker 1: So the US alleges that air Bus has been illegally subsidized. Uh. 21 00:01:17,800 --> 00:01:21,600 Speaker 1: The EU has countered that Boeing has been illegally subsidized. 22 00:01:21,800 --> 00:01:24,320 Speaker 1: And this has just been a dispute that's gone on 23 00:01:24,360 --> 00:01:27,160 Speaker 1: and on. It's been um, you know, in the court. 24 00:01:27,760 --> 00:01:32,440 Speaker 1: And Trump is making these latest uh tariffs under w 25 00:01:32,600 --> 00:01:35,000 Speaker 1: t O rules. So the w t O still needs 26 00:01:35,040 --> 00:01:38,319 Speaker 1: to rule on his list in the summer. But what 27 00:01:38,480 --> 00:01:41,160 Speaker 1: it seems to be uh you know doing is just 28 00:01:41,319 --> 00:01:44,400 Speaker 1: ratcheting up the pressure on Europe ahead of what were 29 00:01:44,440 --> 00:01:47,680 Speaker 1: to be US EU trade talks, but those now seem 30 00:01:47,760 --> 00:01:49,840 Speaker 1: to have stalled, and there's this impression that Trump is 31 00:01:49,880 --> 00:01:52,800 Speaker 1: like turning his you know, attention away from China and 32 00:01:52,840 --> 00:01:56,360 Speaker 1: toward Europe. So tooreas, what is the expectation in terms 33 00:01:56,360 --> 00:02:00,680 Speaker 1: of the response from the European Union? Uh mean, the 34 00:02:00,680 --> 00:02:03,720 Speaker 1: European Union has tended to respond in kind to the 35 00:02:03,800 --> 00:02:06,680 Speaker 1: Last time Trump issued a list of uh, you know, 36 00:02:07,120 --> 00:02:11,080 Speaker 1: of items that he was going to uh impose higher 37 00:02:11,120 --> 00:02:14,480 Speaker 1: terrorists on, the EU issued a counter list. Um. I 38 00:02:14,520 --> 00:02:18,600 Speaker 1: think the EU will will seek to see what the 39 00:02:18,720 --> 00:02:21,320 Speaker 1: w t O says about Trump's list, but they'll be prepared, 40 00:02:21,360 --> 00:02:25,000 Speaker 1: they'll be preparing their own uh list of of tariffs 41 00:02:25,000 --> 00:02:28,560 Speaker 1: in response, and indeed Bank of England Governor Mark Karney 42 00:02:28,680 --> 00:02:33,000 Speaker 1: was warning today that the rising trade tensions, the return 43 00:02:33,080 --> 00:02:36,280 Speaker 1: to protectionism is going to be a hit on the 44 00:02:36,280 --> 00:02:39,160 Speaker 1: global economy and also on the UK economy. So Torey's 45 00:02:39,200 --> 00:02:41,880 Speaker 1: you wrote a really interesting column that we were reading 46 00:02:41,919 --> 00:02:46,040 Speaker 1: this morning about how President Trump maybe targeting Europe, but 47 00:02:46,120 --> 00:02:48,680 Speaker 1: it hasn't killed the sort of world trade order, and 48 00:02:48,720 --> 00:02:52,359 Speaker 1: that Europe is going ahead, uh certainly with trade negotiations 49 00:02:52,360 --> 00:02:55,120 Speaker 1: as specific regions such as Latin America. Can you give 50 00:02:55,160 --> 00:02:57,519 Speaker 1: us a sense of what Europe is doing right now? Yeah, 51 00:02:57,560 --> 00:03:01,080 Speaker 1: I mean, it's it's a really the sort of interesting 52 00:03:01,360 --> 00:03:05,160 Speaker 1: progression for Europe. For so long we've heard very valid 53 00:03:05,160 --> 00:03:10,240 Speaker 1: criticisms of Europe as protectionists in some areas, very slow moving, bureaucratic, 54 00:03:10,280 --> 00:03:12,880 Speaker 1: and yet since Donald Trump was elected, Europe has done 55 00:03:12,880 --> 00:03:15,640 Speaker 1: a number of trade deals with Canada, with Mexico, with Japan, 56 00:03:16,000 --> 00:03:19,600 Speaker 1: and now this deal with mircos or which is Brazil, Argentina, 57 00:03:19,680 --> 00:03:23,240 Speaker 1: Paraguay and Uruguay. And this is a pretty massive deal. 58 00:03:23,320 --> 00:03:28,880 Speaker 1: It uh it slashes or completely eliminates tariffs on um 59 00:03:30,120 --> 00:03:35,360 Speaker 1: of of of exports that are going between Mercosur and 60 00:03:35,400 --> 00:03:39,120 Speaker 1: the EU, and I think it's it sends a message 61 00:03:39,160 --> 00:03:42,440 Speaker 1: both to Brexitters in Britain and to Trump that says, 62 00:03:42,680 --> 00:03:44,440 Speaker 1: you know, the EU, one of the world's you know, 63 00:03:44,920 --> 00:03:50,120 Speaker 1: the world's largest trade block but also a massive trading superpower, 64 00:03:50,360 --> 00:03:52,600 Speaker 1: is simply going to do things a bit differently. It 65 00:03:52,640 --> 00:03:55,240 Speaker 1: is going to find alliances where it can to uphold 66 00:03:55,280 --> 00:03:58,600 Speaker 1: the trade order. So tre as you mentioned Brexit, I'm 67 00:03:58,640 --> 00:04:00,880 Speaker 1: wondering to what extent do you think the E the 68 00:04:01,000 --> 00:04:04,640 Speaker 1: UK is looking at the rising trade tensions between the 69 00:04:04,720 --> 00:04:07,480 Speaker 1: US and the European Union and saying, Gee, this trade 70 00:04:07,520 --> 00:04:11,200 Speaker 1: stuff is difficult. And you know President Trump was, you know, 71 00:04:11,200 --> 00:04:14,560 Speaker 1: promising a great trade deal with the UK once they 72 00:04:14,920 --> 00:04:17,000 Speaker 1: exit the European Union. Do you think people are starting 73 00:04:17,040 --> 00:04:19,880 Speaker 1: to say, g maybe we don't we maybe can't take 74 00:04:19,960 --> 00:04:21,920 Speaker 1: him at face value on that one. Yeah, I mean 75 00:04:21,920 --> 00:04:25,159 Speaker 1: the Brexitters aren't saying that publicly, but certainly some of 76 00:04:25,200 --> 00:04:29,520 Speaker 1: the assumptions that underscored the argument for leaving the EU 77 00:04:29,680 --> 00:04:33,919 Speaker 1: are now being seriously challenged. One of those assumptions was 78 00:04:33,960 --> 00:04:36,640 Speaker 1: that Britain would get new trade deals, they would be 79 00:04:36,680 --> 00:04:39,800 Speaker 1: advantageous trade deals, and they would be uh, they would 80 00:04:39,800 --> 00:04:43,720 Speaker 1: be done fairly quickly, and that um now looks h 81 00:04:44,200 --> 00:04:47,640 Speaker 1: incredibly unlikely if it ever looked, you know, feasible. Uh. 82 00:04:47,680 --> 00:04:50,400 Speaker 1: The idea that it would roll over existing EU agreements 83 00:04:50,480 --> 00:04:54,680 Speaker 1: also hasn't happened. And then seeing how Trump very aggressively 84 00:04:54,760 --> 00:04:58,320 Speaker 1: pursues uh, what he sees to be American interests, whether 85 00:04:58,360 --> 00:05:02,280 Speaker 1: it's Mexico or China, I think should give a lot 86 00:05:02,320 --> 00:05:04,800 Speaker 1: of pause because if the US is to do a 87 00:05:04,800 --> 00:05:08,159 Speaker 1: trade deal with the UK, it will be aggressively press 88 00:05:08,160 --> 00:05:14,080 Speaker 1: pressing the interests of American poultry, uh, farmers, agriculture producers, 89 00:05:14,240 --> 00:05:16,560 Speaker 1: and you know, all of the other industries where the 90 00:05:16,600 --> 00:05:20,760 Speaker 1: US has export interests and wants to see markets opened, trades. 91 00:05:20,880 --> 00:05:22,600 Speaker 1: I want to pick up on something that you were 92 00:05:22,600 --> 00:05:26,080 Speaker 1: talking about previously. This deal that the EU struck with 93 00:05:26,160 --> 00:05:29,080 Speaker 1: America sore after twenty years of talks, and I'm just 94 00:05:29,120 --> 00:05:34,080 Speaker 1: wondering whether the EU is feeling somewhat emboldened by President 95 00:05:34,120 --> 00:05:36,200 Speaker 1: Trump stands in the sense that the United States is 96 00:05:36,240 --> 00:05:38,599 Speaker 1: taking more of a back seat when it comes to 97 00:05:38,720 --> 00:05:42,320 Speaker 1: global trade talks, giving some room possibly for in the 98 00:05:42,440 --> 00:05:46,080 Speaker 1: European region to step in. Yeah, I mean I think 99 00:05:46,120 --> 00:05:49,120 Speaker 1: from the EU perspective. If you know, the EU is 100 00:05:49,200 --> 00:05:52,760 Speaker 1: a it's a block of sovereign nations. If they can't 101 00:05:52,839 --> 00:05:56,279 Speaker 1: act as a block, what are they for? I think 102 00:05:56,440 --> 00:05:59,279 Speaker 1: member states will begin to question what value they're getting 103 00:05:59,320 --> 00:06:02,159 Speaker 1: from your up if if the EU cannot show that 104 00:06:02,200 --> 00:06:04,560 Speaker 1: it can uh that it can it can work together 105 00:06:04,640 --> 00:06:09,080 Speaker 1: to uh improve access of EU companies to different markets. 106 00:06:09,080 --> 00:06:12,640 Speaker 1: So this is uh, you know, and this is a 107 00:06:12,640 --> 00:06:15,040 Speaker 1: a concerted effort on the part of the EU to 108 00:06:15,160 --> 00:06:18,640 Speaker 1: get these these deals done, whether it's you know, Canada, Mexico, 109 00:06:18,760 --> 00:06:20,919 Speaker 1: Japan or Marcus Or. And I think it is a 110 00:06:20,960 --> 00:06:23,520 Speaker 1: response to Trump, it's a response to Brexit as well. 111 00:06:23,880 --> 00:06:27,200 Speaker 1: And so in that way, ironically, these you know, populist 112 00:06:27,440 --> 00:06:31,080 Speaker 1: um forces UH in the world are actually you know, 113 00:06:31,160 --> 00:06:34,240 Speaker 1: pushing the EU in a direction that it's critics have 114 00:06:34,440 --> 00:06:36,599 Speaker 1: so long said that it should move in, which is, 115 00:06:36,760 --> 00:06:40,080 Speaker 1: you know, to be more market opening. And that has 116 00:06:40,120 --> 00:06:43,280 Speaker 1: also required the EU to stare down its own protection 117 00:06:43,320 --> 00:06:46,800 Speaker 1: as forces, so agriculture lobbies, ethanol lobbies and and that 118 00:06:46,920 --> 00:06:48,680 Speaker 1: sort of thing, and that and that I think it's 119 00:06:48,720 --> 00:06:50,960 Speaker 1: a very positive move for Europe. Now, whether the Marcus 120 00:06:51,120 --> 00:06:53,719 Speaker 1: Or deal will hold, it needs to be ratified by 121 00:06:53,839 --> 00:06:56,279 Speaker 1: all of the member parliaments. Remains to be seen. But 122 00:06:56,400 --> 00:06:58,800 Speaker 1: just the fact that after twenty years of negotiations, as 123 00:06:58,839 --> 00:07:01,520 Speaker 1: you said, they got to this point UM tells us 124 00:07:01,560 --> 00:07:04,920 Speaker 1: a lot. Tres Raphael, thank you so much. Dress Bloomberg 125 00:07:05,000 --> 00:07:23,800 Speaker 1: opinion editor covering European politics and the economy. Well, US 126 00:07:23,880 --> 00:07:27,480 Speaker 1: automakers may report the worst first half for new vehicle 127 00:07:27,520 --> 00:07:31,440 Speaker 1: sales since today, although deliveries to fleet customers will probably 128 00:07:31,440 --> 00:07:33,840 Speaker 1: take some of the sting out of the weaker consumer 129 00:07:33,880 --> 00:07:36,600 Speaker 1: demand to get the latest returned to Michelle Krebs. Michelle 130 00:07:36,680 --> 00:07:40,880 Speaker 1: is executive analyst at Auto trader dot com based in Detroit. Michelle, 131 00:07:40,880 --> 00:07:42,720 Speaker 1: thanks so much for joining us. I just wonder if 132 00:07:42,720 --> 00:07:44,680 Speaker 1: you could start off by just giving us a state 133 00:07:45,000 --> 00:07:49,000 Speaker 1: of the current state of the US car business. Sure, 134 00:07:49,440 --> 00:07:52,480 Speaker 1: you know it's still relatively strong, but what we have 135 00:07:52,560 --> 00:07:55,560 Speaker 1: seen in this first half and June continued the trend 136 00:07:55,640 --> 00:08:00,560 Speaker 1: is it's been volatile and unpredictable. We've seen UM months 137 00:08:00,600 --> 00:08:03,320 Speaker 1: that were far better than we expected and some that 138 00:08:03,360 --> 00:08:06,840 Speaker 1: were far worse. What we do definitely see is a 139 00:08:06,960 --> 00:08:10,840 Speaker 1: retail demand is softening and that is being offset by 140 00:08:10,920 --> 00:08:17,280 Speaker 1: higher fleet sales. Sales to commercial companies, UM daily rental companies, 141 00:08:17,320 --> 00:08:22,000 Speaker 1: because there's some advantage to adding to a replacing their 142 00:08:22,040 --> 00:08:25,880 Speaker 1: fleets under tax reform. So meanwhile, we are getting some 143 00:08:25,920 --> 00:08:29,840 Speaker 1: initial reports and they have been better than expected. And 144 00:08:29,880 --> 00:08:32,920 Speaker 1: I'm trying to figure out how to even look at 145 00:08:33,000 --> 00:08:35,920 Speaker 1: some of these readings. In other words, are we looking 146 00:08:36,000 --> 00:08:39,120 Speaker 1: for a bottom in the slowdown in the auto sector? 147 00:08:39,200 --> 00:08:42,400 Speaker 1: Are we looking for what? Are what are you looking for? Um? Well, 148 00:08:42,440 --> 00:08:44,920 Speaker 1: we're anticipating that the second half will be even more 149 00:08:45,000 --> 00:08:48,439 Speaker 1: challenging than the first half. Our our forecast for this 150 00:08:48,520 --> 00:08:52,160 Speaker 1: year is sixteen point eight million vehicles to be sold. 151 00:08:52,440 --> 00:08:55,840 Speaker 1: That's down from seventeen to seventeen three last year, and 152 00:08:55,880 --> 00:08:58,600 Speaker 1: we expect a little more softening next year. This has 153 00:08:58,679 --> 00:09:02,040 Speaker 1: been a big run we've had. This is an unprecedented 154 00:09:02,600 --> 00:09:05,600 Speaker 1: expansion in the economy and certainly were for vehicle sales, 155 00:09:05,640 --> 00:09:08,520 Speaker 1: and so we do see some softening. However, you know, 156 00:09:08,559 --> 00:09:11,440 Speaker 1: sixteen point eight million is still a pretty good year. 157 00:09:11,960 --> 00:09:13,720 Speaker 1: So Michelle, just give us a sense of kind of 158 00:09:13,720 --> 00:09:17,560 Speaker 1: what US consumers are buying is it's still primarily the 159 00:09:17,600 --> 00:09:24,360 Speaker 1: trucks and SUVs. Correct, car sales are down have been 160 00:09:24,440 --> 00:09:26,240 Speaker 1: for the last couple of years. And we have seen 161 00:09:26,280 --> 00:09:30,480 Speaker 1: companies take eliminate car models from their lines, like for 162 00:09:30,720 --> 00:09:34,560 Speaker 1: the Forward Focus and Chevrolet crews are gone. UM. We 163 00:09:34,600 --> 00:09:39,440 Speaker 1: are seeing UH crossovers, those sport utility like vehicles built 164 00:09:39,480 --> 00:09:42,840 Speaker 1: on car platforms and sport utilities doing well. And trucks 165 00:09:42,920 --> 00:09:46,720 Speaker 1: are having an incredible time, probably the highest truck sales 166 00:09:46,720 --> 00:09:48,800 Speaker 1: in history. And a lot of that has to do 167 00:09:48,880 --> 00:09:53,839 Speaker 1: with UM. Chrysler's Ram division had an amazing UH month 168 00:09:53,920 --> 00:09:57,320 Speaker 1: and first half. It's now moved into the second spot 169 00:09:57,440 --> 00:10:01,079 Speaker 1: behind ahead of Chevrolet Silver. So that's caused a lot 170 00:10:01,080 --> 00:10:05,160 Speaker 1: of chat or here in Detroit, the truck wars. So 171 00:10:05,280 --> 00:10:09,520 Speaker 1: I just based on Bloomberg surveys, US automakers are poised 172 00:10:09,520 --> 00:10:12,000 Speaker 1: to report the worst first half for new vehicle retail 173 00:10:12,040 --> 00:10:15,040 Speaker 1: sales since two thousand thirteen. Today we've already gotten some 174 00:10:15,080 --> 00:10:18,040 Speaker 1: of those numbers. They have been somewhat better than expected. 175 00:10:18,040 --> 00:10:21,160 Speaker 1: I'm wondering you said that you're expecting a further slow 176 00:10:21,240 --> 00:10:24,480 Speaker 1: down in the second half. Why is this? Is this 177 00:10:24,559 --> 00:10:26,840 Speaker 1: because of China? Is this because of just a slowing 178 00:10:26,920 --> 00:10:33,040 Speaker 1: US economy slow? Yes, I think slowing US economy UM 179 00:10:33,120 --> 00:10:37,640 Speaker 1: and also UH weakening retail demand. The we also expect 180 00:10:37,679 --> 00:10:40,839 Speaker 1: some credit tightening even though interest rates may go down 181 00:10:41,000 --> 00:10:43,360 Speaker 1: and we have not seen that in car loans and 182 00:10:43,480 --> 00:10:47,240 Speaker 1: car prices are going up. That's creating an affordability problem 183 00:10:47,280 --> 00:10:49,800 Speaker 1: for a lot of consumers, have knocked them right out 184 00:10:49,800 --> 00:10:52,480 Speaker 1: of the new car market into the used UM. So 185 00:10:52,520 --> 00:10:55,040 Speaker 1: there are a lot of factors on the consumer side, 186 00:10:55,080 --> 00:10:58,760 Speaker 1: but we do think the sales to fleets will push 187 00:10:58,760 --> 00:11:02,040 Speaker 1: it up a little bit. So you mentioned, just Michelle, 188 00:11:02,080 --> 00:11:04,719 Speaker 1: the used car market give us a sense of the 189 00:11:05,200 --> 00:11:09,640 Speaker 1: health and in the dynamics driving that market. Um. Yes, 190 00:11:09,720 --> 00:11:13,320 Speaker 1: so the used car market is very strong. Uh. We've 191 00:11:13,400 --> 00:11:16,640 Speaker 1: had record leasing a few years ago, and so that 192 00:11:16,720 --> 00:11:20,880 Speaker 1: has created this UM. All these off lease vehicles are 193 00:11:20,880 --> 00:11:23,960 Speaker 1: coming back into the market is used vehicles and those 194 00:11:24,000 --> 00:11:26,040 Speaker 1: are being snapped up. It used to be a lot 195 00:11:26,080 --> 00:11:29,559 Speaker 1: of lease vehicles were actually cars. Well now those are 196 00:11:29,559 --> 00:11:32,520 Speaker 1: sport utilities and crossover vehicles and that's exactly what the 197 00:11:32,559 --> 00:11:35,240 Speaker 1: consumer wants. And if they buy it as a three 198 00:11:35,320 --> 00:11:38,079 Speaker 1: year old vehicle we call them nearly new, UM, they 199 00:11:38,120 --> 00:11:41,480 Speaker 1: get a big discount. And so that's giving people who 200 00:11:41,679 --> 00:11:44,600 Speaker 1: are are more budget constrained a place to go to 201 00:11:44,640 --> 00:11:47,680 Speaker 1: buy a vehicle new to them. Michelle you you mentioned 202 00:11:47,679 --> 00:11:50,079 Speaker 1: fleet sales and how that's questioning some of the blow 203 00:11:50,080 --> 00:11:54,320 Speaker 1: in the slowdown of retail sales. What's the drawback with 204 00:11:54,320 --> 00:11:56,920 Speaker 1: with fleet sales, because there is one on both the 205 00:11:56,960 --> 00:12:00,080 Speaker 1: resale value side as well as just some of the 206 00:12:00,160 --> 00:12:02,520 Speaker 1: deals that some of these auto manufacturers have to cut 207 00:12:03,120 --> 00:12:06,400 Speaker 1: with the purchasers of those fleets. That used to be 208 00:12:06,440 --> 00:12:08,760 Speaker 1: the case, that is not the case anymore. It used 209 00:12:08,760 --> 00:12:10,720 Speaker 1: to we used to get the lecture there's good fleet 210 00:12:10,720 --> 00:12:13,520 Speaker 1: and there's bad fleet. The bad fleet is not that bad. 211 00:12:13,600 --> 00:12:16,560 Speaker 1: If you talk to daily rental companies that are buying vehicles, 212 00:12:16,760 --> 00:12:20,720 Speaker 1: they they're complaining they're not getting the big discounts anymore. Um. 213 00:12:20,760 --> 00:12:24,640 Speaker 1: So the automakers are being much smarter, uh, and they 214 00:12:24,679 --> 00:12:27,600 Speaker 1: are not giving these huge discounts. So it actually is 215 00:12:27,600 --> 00:12:30,040 Speaker 1: a pretty darn good business. Michelle Krabs, thank you so 216 00:12:30,120 --> 00:12:32,959 Speaker 1: much for being with us. Michelle Crabs, executive analyst with 217 00:12:33,120 --> 00:12:36,520 Speaker 1: our Auto trader dot com, which is a company of 218 00:12:36,640 --> 00:12:57,640 Speaker 1: Cox Automotive based in Detroit. Eleven United States have actually 219 00:12:57,880 --> 00:13:01,680 Speaker 1: legalized marijuana, with eleanor By becoming the latest joining us 220 00:13:01,679 --> 00:13:04,280 Speaker 1: now to talk about that is Steve White, chief executive 221 00:13:04,280 --> 00:13:08,040 Speaker 1: and founder of Harvest Health and Recreation, which is a 222 00:13:08,080 --> 00:13:15,000 Speaker 1: company specializing in uh the weed vweed actually vieweed. Steve, 223 00:13:15,040 --> 00:13:16,720 Speaker 1: thank you so much for being with us. Can you 224 00:13:16,760 --> 00:13:20,959 Speaker 1: just start by saying what Harvest Health and Recreation does. So, 225 00:13:21,000 --> 00:13:24,240 Speaker 1: we're one of a handful of companies that does everything 226 00:13:24,240 --> 00:13:27,559 Speaker 1: along the value chain, from growing cannabis to making products, 227 00:13:27,559 --> 00:13:31,400 Speaker 1: to selling it in retail outlets and owning those retail outlets. 228 00:13:32,120 --> 00:13:34,440 Speaker 1: And we are one of a few that has a 229 00:13:34,480 --> 00:13:39,080 Speaker 1: presence in many states across the US. So, Steve, just 230 00:13:39,080 --> 00:13:42,319 Speaker 1: give us a sense of the US market. How significant 231 00:13:42,360 --> 00:13:45,040 Speaker 1: is that we're you know, Illinois is now the eleventh state. 232 00:13:45,080 --> 00:13:46,320 Speaker 1: Just give us a sense of kind of how that 233 00:13:46,480 --> 00:13:50,960 Speaker 1: rollout is progressing across the US. It's really exciting times 234 00:13:50,960 --> 00:13:54,440 Speaker 1: for the cannabis industry the way we look at it 235 00:13:54,480 --> 00:13:57,800 Speaker 1: as we When you talk about the eleventh state to 236 00:13:57,920 --> 00:14:00,760 Speaker 1: roll out of recreational program, it tells you about the 237 00:14:00,760 --> 00:14:03,840 Speaker 1: potential for growth in the US more than anything, and 238 00:14:03,920 --> 00:14:07,240 Speaker 1: the opportunities for the US players. It also tells you 239 00:14:07,280 --> 00:14:11,240 Speaker 1: that it's happening at a regular cadence, which tells you 240 00:14:11,280 --> 00:14:14,720 Speaker 1: that there's no reason to expect that the the changes 241 00:14:14,760 --> 00:14:17,319 Speaker 1: will slow down at any point in the future. When 242 00:14:17,320 --> 00:14:21,120 Speaker 1: we talk about legalization, often we're talking about medical marijuana use. 243 00:14:21,280 --> 00:14:23,920 Speaker 1: How do you distinguish medical versus recreational and where the 244 00:14:23,920 --> 00:14:31,000 Speaker 1: opportunities lie for both? So they're both are are great opportunities, 245 00:14:31,000 --> 00:14:36,360 Speaker 1: and usually medical precedes the recreational changes. But for us, 246 00:14:36,440 --> 00:14:39,080 Speaker 1: we look at you know, a medical opportunity is one 247 00:14:39,120 --> 00:14:41,360 Speaker 1: where you can get in and start establishing your brand 248 00:14:41,360 --> 00:14:45,120 Speaker 1: in a particular state or a particular area, and then 249 00:14:45,760 --> 00:14:49,880 Speaker 1: the change to recreation is really about a significant growth 250 00:14:49,920 --> 00:14:53,280 Speaker 1: in the size of your marketplace um, And so we 251 00:14:53,360 --> 00:14:55,640 Speaker 1: look at one as the opportunity to kind of stick 252 00:14:55,680 --> 00:14:59,480 Speaker 1: our claim and then the second to really expand the business. So, Steve, 253 00:14:59,600 --> 00:15:03,880 Speaker 1: you mentioned just their brands. Has there been any brand 254 00:15:03,960 --> 00:15:07,160 Speaker 1: developed within the cannabis market. Is there a Marlborough of 255 00:15:07,320 --> 00:15:10,960 Speaker 1: cannabis for example, Well, I mean you kind of set 256 00:15:10,960 --> 00:15:12,800 Speaker 1: it yourself at the beginning when you're talking about the 257 00:15:12,800 --> 00:15:15,520 Speaker 1: eleventh state to actually be able to sell to the 258 00:15:15,640 --> 00:15:19,320 Speaker 1: vast majority of the population eleven out of fifty states, 259 00:15:19,360 --> 00:15:25,360 Speaker 1: it's pretty premature to declare a Marlborough um amongst any 260 00:15:25,760 --> 00:15:29,360 Speaker 1: um any of the brands. But what we're seeing, or 261 00:15:29,400 --> 00:15:31,960 Speaker 1: what we believe is that there is a there are 262 00:15:32,000 --> 00:15:34,560 Speaker 1: some conditions that are being or some foundations that are 263 00:15:34,560 --> 00:15:37,600 Speaker 1: being laid for brand development, and for us, we see 264 00:15:37,600 --> 00:15:41,360 Speaker 1: it as acquisition of licenses and being able to communicate 265 00:15:41,400 --> 00:15:45,920 Speaker 1: to those consumers because you can't communicate through normal channels, 266 00:15:45,920 --> 00:15:49,840 Speaker 1: So picking up the licenses and developing a footprint is 267 00:15:49,840 --> 00:15:51,200 Speaker 1: what we think is going to lead to it. But 268 00:15:51,240 --> 00:15:54,360 Speaker 1: as a bit premature to talk about the establishment of 269 00:15:54,400 --> 00:15:57,160 Speaker 1: a Marlborough at this point. Well, talking about Marlborough, what 270 00:15:57,200 --> 00:15:59,720 Speaker 1: about Philip Morris, what about al Trea. I mean they 271 00:15:59,760 --> 00:16:03,760 Speaker 1: have in pretty quiet with respect to their involvement in 272 00:16:03,800 --> 00:16:07,320 Speaker 1: the cannabis industry, but some speculate they've been making a 273 00:16:07,320 --> 00:16:09,840 Speaker 1: lot of investment on their own just in this so 274 00:16:09,880 --> 00:16:12,520 Speaker 1: that they can have a footprint when things get more 275 00:16:12,640 --> 00:16:17,400 Speaker 1: legal and accepted. Are you concerned about that competitive pressure? Oh, 276 00:16:17,440 --> 00:16:19,200 Speaker 1: I think it's all. I think it's great and I 277 00:16:19,200 --> 00:16:23,440 Speaker 1: think it's great for investors in the space today when 278 00:16:23,440 --> 00:16:25,960 Speaker 1: you have the operate, when you're when you finally see 279 00:16:26,600 --> 00:16:29,520 Speaker 1: UM capital pour into a market, that's great for share 280 00:16:29,560 --> 00:16:32,520 Speaker 1: prices and that's great for these businesses who, many of 281 00:16:32,520 --> 00:16:36,600 Speaker 1: whom have capital constraints. UM, so we look forward to it. 282 00:16:36,680 --> 00:16:39,440 Speaker 1: We also you know, we we love the fact that 283 00:16:39,440 --> 00:16:41,520 Speaker 1: we've got a nice head start, and so when when 284 00:16:41,520 --> 00:16:44,160 Speaker 1: there are new entrants in the market, we're ready to 285 00:16:44,160 --> 00:16:46,640 Speaker 1: compete with them. So, Steve, I know we're in relatively 286 00:16:46,720 --> 00:16:49,760 Speaker 1: early innings for the legalized marijuana in the US. But 287 00:16:49,840 --> 00:16:53,640 Speaker 1: what have you an industry learned about sales and consumption 288 00:16:53,680 --> 00:16:56,720 Speaker 1: in some of the earliest states that that legalized it. 289 00:16:57,760 --> 00:17:01,200 Speaker 1: You know that that that the biggest that the black 290 00:17:01,280 --> 00:17:03,880 Speaker 1: market tells us a lot about what consumption looks like 291 00:17:04,320 --> 00:17:06,440 Speaker 1: um and so estimates about the size of the black 292 00:17:06,480 --> 00:17:08,639 Speaker 1: market is what we hope to bring this market to 293 00:17:08,920 --> 00:17:11,680 Speaker 1: in the future. And what we're really looking to do 294 00:17:11,760 --> 00:17:14,199 Speaker 1: is have people transfer from the black market to the 295 00:17:14,280 --> 00:17:17,080 Speaker 1: legal market, and that tells us that there is a 296 00:17:17,280 --> 00:17:21,440 Speaker 1: really significant opportunity in the US. So interesting, So, Steve, why, 297 00:17:21,480 --> 00:17:23,600 Speaker 1: thanks so much? Steve as CEO and founder of Harvest 298 00:17:23,640 --> 00:17:26,480 Speaker 1: Health and Recreation based in tempor Arizona, giving us the 299 00:17:26,520 --> 00:17:45,239 Speaker 1: latest on the legal cannabis market in the US. Well, though, 300 00:17:45,280 --> 00:17:48,320 Speaker 1: certainly is a lot going on in the global oil space. 301 00:17:48,960 --> 00:17:52,760 Speaker 1: Most recently, the Organization of Petroleum Exporting Countries and ten 302 00:17:52,880 --> 00:17:56,639 Speaker 1: non members, including Russia, agreed to continue production limits for 303 00:17:56,680 --> 00:18:00,240 Speaker 1: another nine months. Oman oil Minister Mohammed all Roomy told 304 00:18:00,240 --> 00:18:04,400 Speaker 1: Bloomberg's Manus Cranny that he hopes the deal will erode volatility. 305 00:18:04,480 --> 00:18:08,840 Speaker 1: Let's take a listen. Hopefully it will erode some of 306 00:18:08,880 --> 00:18:14,399 Speaker 1: the volatility, and it will send a message of clarity 307 00:18:15,000 --> 00:18:20,399 Speaker 1: and removal of some kind of confusion and uncertainty. And 308 00:18:20,480 --> 00:18:22,760 Speaker 1: I hope time will tell, but I hope we have 309 00:18:22,800 --> 00:18:26,040 Speaker 1: achieved that. Let's bring in the next guest, Dr Ellen Wald, 310 00:18:26,240 --> 00:18:29,679 Speaker 1: President Transversal Consulting. She's also a nonresident Senior Fellow at 311 00:18:29,680 --> 00:18:33,439 Speaker 1: the Atlantic Council's Global Energy Center and a Bloomberg opinion 312 00:18:33,440 --> 00:18:35,679 Speaker 1: columnists out. Dr wall thanks so much for joining us. 313 00:18:35,680 --> 00:18:38,960 Speaker 1: Do you agree with the Oman oil minister that these 314 00:18:38,960 --> 00:18:44,160 Speaker 1: production limits may erode volatility in the global oil space. Well, 315 00:18:44,200 --> 00:18:47,680 Speaker 1: I'm not sure they're going to erode global volatility so 316 00:18:47,760 --> 00:18:51,760 Speaker 1: much as just keep things going the way they have 317 00:18:51,920 --> 00:18:54,280 Speaker 1: been going, meaning that we're not necessarily going to see 318 00:18:54,320 --> 00:18:58,680 Speaker 1: volatility from supply, but we are seeing a lot of 319 00:18:58,760 --> 00:19:03,480 Speaker 1: volatility on the demand inside and also volatility from geopolitical aspects. 320 00:19:04,200 --> 00:19:06,320 Speaker 1: You know, Ellen, I'm so glad that you're joining us today. 321 00:19:06,560 --> 00:19:11,600 Speaker 1: Why don't your perspective on Russia's role in these OPEC negotiations. 322 00:19:11,600 --> 00:19:14,240 Speaker 1: It seems like they've held kind of the main card 323 00:19:14,400 --> 00:19:17,040 Speaker 1: when it comes to determining how long the cuts will be. 324 00:19:17,160 --> 00:19:21,879 Speaker 1: How steep is that an accurate impression? That is absolutely 325 00:19:21,960 --> 00:19:26,199 Speaker 1: accurate with what's going on here. In fact, Putin basically 326 00:19:26,760 --> 00:19:31,760 Speaker 1: stole opex thunder by announcing at the G twenty that 327 00:19:32,000 --> 00:19:35,680 Speaker 1: he and Mohammed van Salmon had agreed to extend the 328 00:19:36,640 --> 00:19:40,080 Speaker 1: production cuts. And this was even before this was before 329 00:19:40,080 --> 00:19:42,760 Speaker 1: OPEC had met, This is before OPEC Plus had met 330 00:19:43,040 --> 00:19:45,280 Speaker 1: Um I don't even think that I'll follow, and Novak 331 00:19:45,359 --> 00:19:48,600 Speaker 1: had finished their their meeting before this was announced. This 332 00:19:48,640 --> 00:19:51,320 Speaker 1: was really putin kind of stealing the thunder from OPEQ, 333 00:19:51,440 --> 00:19:55,000 Speaker 1: and we definitely saw that reflected in the market, because 334 00:19:55,440 --> 00:19:58,320 Speaker 1: prices were up a little bit as the meeting went underway, 335 00:19:58,359 --> 00:20:01,040 Speaker 1: when everyone basically knew what the out home was, and 336 00:20:01,080 --> 00:20:03,480 Speaker 1: it's pretty clear that that was also due to just 337 00:20:03,720 --> 00:20:07,040 Speaker 1: very positive market sentiment coming off of the G twenty 338 00:20:07,119 --> 00:20:10,560 Speaker 1: and the meeting between Trump and President she Uh, and 339 00:20:10,600 --> 00:20:14,280 Speaker 1: then today we got nothing. In fact, if anything, oil 340 00:20:14,280 --> 00:20:18,119 Speaker 1: prices are falling, so it's pretty clear that the market 341 00:20:18,240 --> 00:20:21,160 Speaker 1: really isn't interested in what OPEC has to say, or 342 00:20:21,200 --> 00:20:23,600 Speaker 1: even what OPEC has to do. Well, we're seeing, as 343 00:20:23,640 --> 00:20:26,080 Speaker 1: you mentioned, oil falling again w t I crude off 344 00:20:26,080 --> 00:20:29,040 Speaker 1: about three point seven today. Just give us a sense 345 00:20:29,080 --> 00:20:32,119 Speaker 1: of where inventories are in the market. I think the 346 00:20:32,160 --> 00:20:34,200 Speaker 1: last time we spoke, we were we were over inventory 347 00:20:34,280 --> 00:20:37,600 Speaker 1: at the moment. Yeah, So it's it's actually a very 348 00:20:37,640 --> 00:20:41,520 Speaker 1: interesting question because it really depends on what kind of 349 00:20:41,840 --> 00:20:45,520 Speaker 1: measuring stick you're using to measure inventories. And um, the 350 00:20:45,600 --> 00:20:48,280 Speaker 1: last we heard about American inventories, it was a big 351 00:20:48,359 --> 00:20:52,000 Speaker 1: draw we saw from from the the e I announced 352 00:20:52,080 --> 00:20:54,600 Speaker 1: a huge draw. I think they were they do twelve 353 00:20:54,840 --> 00:20:57,720 Speaker 1: million barrels down last week and so that really helped 354 00:20:57,720 --> 00:21:01,719 Speaker 1: push oil prices up about four percent last week. So, uh, 355 00:21:01,840 --> 00:21:04,399 Speaker 1: now we're seeing them come down. At the OPEQUE meeting, 356 00:21:04,760 --> 00:21:07,120 Speaker 1: I'll Sally actually said, you know, we don't really want 357 00:21:07,119 --> 00:21:10,000 Speaker 1: to use this five year average that we've been using. 358 00:21:10,480 --> 00:21:12,760 Speaker 1: I think we should use the I think said the 359 00:21:13,040 --> 00:21:17,800 Speaker 1: two fourteen U five year average as a benchmark. And 360 00:21:17,840 --> 00:21:19,800 Speaker 1: then if you used as a benchmark, then there's an 361 00:21:19,800 --> 00:21:23,119 Speaker 1: overhang of over two hundred and forty million barrels in 362 00:21:23,160 --> 00:21:27,880 Speaker 1: the world. Wow. So Meanwhile, against this backdrop as they continue, 363 00:21:27,920 --> 00:21:31,240 Speaker 1: the OPEC members plus Russia continue to see reduced demand 364 00:21:31,400 --> 00:21:35,760 Speaker 1: and anticipate further cuts in response. We do have Saudi Aramco, 365 00:21:35,920 --> 00:21:39,160 Speaker 1: the state sponsored oil company of Saudi Arabia today UH 366 00:21:39,240 --> 00:21:43,280 Speaker 1: supposedly talking with banks to re engage and start restart 367 00:21:43,320 --> 00:21:45,800 Speaker 1: talks to have that initial public offering that some people 368 00:21:45,800 --> 00:21:48,639 Speaker 1: had said would reach two trillion dollars although many people 369 00:21:48,840 --> 00:21:51,200 Speaker 1: have said it's not going to be that big. Why 370 00:21:51,200 --> 00:21:56,200 Speaker 1: are they restarting those negotiations now? So that's that's really interesting, 371 00:21:56,240 --> 00:21:59,800 Speaker 1: And it's funny because the news broke right before the 372 00:22:00,080 --> 00:22:02,640 Speaker 1: pack a plus of a press conference happened, and I'll 373 00:22:02,640 --> 00:22:05,240 Speaker 1: folly this be at that press conference, and then he 374 00:22:05,520 --> 00:22:08,480 Speaker 1: was seriously wasn't there because he had some meeting with 375 00:22:08,520 --> 00:22:11,640 Speaker 1: the Austrian government. UH though I suspect he was probably 376 00:22:11,680 --> 00:22:14,760 Speaker 1: glad not to have to answer questions about that I 377 00:22:14,920 --> 00:22:18,240 Speaker 1: p O news. So, UM, what what had happened before 378 00:22:18,320 --> 00:22:21,680 Speaker 1: was that um A Ramco essentially suspended or they'd reached 379 00:22:21,720 --> 00:22:23,959 Speaker 1: the end of their a lotted budget for all of 380 00:22:24,000 --> 00:22:26,720 Speaker 1: these bakers and so they stopped paying them and and 381 00:22:26,760 --> 00:22:29,760 Speaker 1: so essentially that's what prompted this idea of the I 382 00:22:29,880 --> 00:22:32,600 Speaker 1: p O is on hold in reality. Once, once we 383 00:22:32,600 --> 00:22:35,800 Speaker 1: we actually got a look at a Ramco's finances from 384 00:22:35,800 --> 00:22:38,800 Speaker 1: the bond perspectives, you could see that they were nowhere 385 00:22:38,920 --> 00:22:42,800 Speaker 1: near ready to I p O in two thousand eighteen, 386 00:22:42,840 --> 00:22:45,639 Speaker 1: as the Crown Friends had originally suggested, and even in 387 00:22:45,880 --> 00:22:48,600 Speaker 1: two thousand nineteen there were nowhere near ready to I 388 00:22:48,720 --> 00:22:52,879 Speaker 1: p O. Uh, And now they're talking one. If you 389 00:22:53,000 --> 00:22:55,080 Speaker 1: want to IMPO then, especially if you want to impel 390 00:22:55,119 --> 00:22:57,359 Speaker 1: a company as big as a Ramco, they need a 391 00:22:57,440 --> 00:22:59,879 Speaker 1: lot of lead time for banks. So I'm not the 392 00:23:00,000 --> 00:23:01,919 Speaker 1: prize if they think they might want to do it 393 00:23:01,960 --> 00:23:04,240 Speaker 1: that they're starting to talk to banks again. But let's 394 00:23:04,240 --> 00:23:07,080 Speaker 1: see if they actually get them on payroll. So it's 395 00:23:07,119 --> 00:23:09,919 Speaker 1: interesting this on again, off again I PO of Saudi 396 00:23:10,040 --> 00:23:12,280 Speaker 1: ramcoll again. It could be the biggest I p O 397 00:23:12,359 --> 00:23:15,280 Speaker 1: of all time. But there is definitely some concerns here 398 00:23:15,400 --> 00:23:18,399 Speaker 1: about the valuation kind of what's the you know, the 399 00:23:18,480 --> 00:23:21,240 Speaker 1: valuation talk now is are they have they gotten to 400 00:23:21,280 --> 00:23:23,919 Speaker 1: that point? Are they still kind of using old numbers? 401 00:23:23,920 --> 00:23:27,199 Speaker 1: Where were in terms of valuation? You know? The real 402 00:23:27,840 --> 00:23:29,800 Speaker 1: the thing is there really isn't any There aren't any 403 00:23:29,840 --> 00:23:32,399 Speaker 1: real numbers at this point that that two trillion dollar 404 00:23:32,720 --> 00:23:36,520 Speaker 1: number was kind of thrown out by NBS, and it 405 00:23:36,640 --> 00:23:38,920 Speaker 1: was delivered in a way that actually made it seem 406 00:23:38,960 --> 00:23:41,760 Speaker 1: like it wasn't necessarily even talking about a RAM code 407 00:23:41,760 --> 00:23:45,160 Speaker 1: particularly was talking about the whole UM Saudi Public Investment 408 00:23:45,200 --> 00:23:48,120 Speaker 1: Fund so UM. But but we've kind of taken that 409 00:23:48,160 --> 00:23:51,960 Speaker 1: as this UM as this number for their UH for 410 00:23:52,000 --> 00:23:54,840 Speaker 1: their evaluation. But it will really depend on obviously the 411 00:23:54,840 --> 00:23:58,720 Speaker 1: price of oil whenever they do IPO, but also UM 412 00:23:58,800 --> 00:24:03,840 Speaker 1: they've basically assumed sabbag this massive petro chemicals company, and 413 00:24:03,920 --> 00:24:06,960 Speaker 1: so any valuation is going to have to include all 414 00:24:07,000 --> 00:24:11,040 Speaker 1: of these assets and to see whether their expansion in 415 00:24:11,119 --> 00:24:14,600 Speaker 1: downstream has added to their valuation. I'm not sure we're 416 00:24:14,600 --> 00:24:16,560 Speaker 1: going to get this two trillion dollars, not not in 417 00:24:16,600 --> 00:24:20,360 Speaker 1: this current atmosphere. But they may they may hit over 418 00:24:20,359 --> 00:24:23,479 Speaker 1: a trillion, which I think is not unreasonable. So just 419 00:24:23,520 --> 00:24:25,360 Speaker 1: real quick here, Ellen, I'm wondering where do you see 420 00:24:25,359 --> 00:24:29,080 Speaker 1: the next big move in oil up or down? I 421 00:24:29,400 --> 00:24:32,240 Speaker 1: really think that it depends on what happens with trade. 422 00:24:32,280 --> 00:24:36,240 Speaker 1: I think the the information the news that we're considering 423 00:24:36,280 --> 00:24:40,359 Speaker 1: more teriffs and Europe definitely sent uh, sent oil down 424 00:24:40,600 --> 00:24:43,480 Speaker 1: and um, but if we start negotiations with China, we 425 00:24:43,480 --> 00:24:46,080 Speaker 1: could see that moving right back up again. Dr ellen 426 00:24:46,160 --> 00:24:48,399 Speaker 1: Wald's thank you so much as always for being with us. 427 00:24:48,480 --> 00:24:52,919 Speaker 1: Dr ellen Wald, President of Transversal Consulting, also a nonresident 428 00:24:52,960 --> 00:24:56,280 Speaker 1: Senior Fellow at the Atlantic Council's Global Energy Center, and 429 00:24:56,560 --> 00:25:00,440 Speaker 1: a Bloomberg opinion columnist. Joining us from Jackson Fell, Florida. 430 00:25:01,240 --> 00:25:03,480 Speaker 1: Thanks for listening to the Bloomberg P and L podcast. 431 00:25:03,640 --> 00:25:06,280 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts 432 00:25:06,320 --> 00:25:09,320 Speaker 1: or whatever podcast platform you prefer. I'm Paul Sweeney. I'm 433 00:25:09,320 --> 00:25:12,040 Speaker 1: on Twitter at pt Sweeney. I'm Lisa abram Woyit's I'm 434 00:25:12,040 --> 00:25:14,880 Speaker 1: on Twitter at Lisa abram wits one. Before the podcast, 435 00:25:14,960 --> 00:25:17,560 Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio.