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Speaker 1: This is Bloomberg Surveillance. We have to get back to

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Speaker 1: a point where we understand and believe that interest rates

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Speaker 1: going up is actually good for the economy and good

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Speaker 1: for the stock market over long periods of time. These

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Speaker 1: smaller banks can they do deliver for their shareholders if

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Speaker 1: they're managed well. You can get a better portfolio if

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Speaker 1: you find a lot of attractive idiosyncratic opportunities, and we

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Speaker 1: think this is a pretty good environment for that. Bloomberg

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Speaker 1: Surveillance your link to the world of economics, finance, and

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Speaker 1: investment on Bloomberg Radio. Good running everyone, Michael mckaam, Tom Keen, Friday,

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Speaker 1: nine am. We're thrilled you're with us from New York, Washington, Boston,

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Speaker 1: San Francisco. Good morning on Serious Sex and Channel one

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Speaker 1: nineteen across the nation. Thrilled your with us around the world,

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Speaker 1: particularly good morning and good evening in Asia as you

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Speaker 1: look forward to a week and oil many of the

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Speaker 1: bets Paulsiana, Bank of America, Maryland, who with this. I

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Speaker 1: believe it was earlier in the week making a call

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Speaker 1: on weaker oil from here. We will address that, uh

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Speaker 1: here uh in a bit. Lots going on this morning,

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Speaker 1: and you know it's sort of a quiet three days

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Speaker 1: and it has picked up here, particularly with the fence,

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Speaker 1: Big Bill Dodley UM yesterday, uh showing the idea of

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Speaker 1: June June, June, and other people push you make Vincent right,

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Speaker 1: Nor I thought was quite good. Was standish on that.

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Speaker 1: Our for X Brief This Morning and Dynamics of the

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Speaker 1: Foreign Exchange Market, brought to you by Interactive Broker's winner

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Speaker 1: of f X Weeks two thousand fifteen award for the

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Speaker 1: best Retail for X trading platform visit ib at I

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Speaker 1: b k R dot com Slash four x I b

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Speaker 1: k R dot com Slash four x I featured Yen

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Speaker 1: this week weaker yen one ten, one o six seven,

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Speaker 1: eight ninety two, weaker yen, weaker this morning. Dollar churning

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Speaker 1: about nine on d x Y. That's not record dollar,

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Speaker 1: recent record dollar, however you want to phrase it, but elevated.

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Speaker 1: I would call the dollar elevated. And looking at rend

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Speaker 1: Minby this morning, Michael, what have you read on rend

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Speaker 1: Memby this week? It's just a grinding week or nowhere

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Speaker 1: near I think if David Wowood Bank of America Maryland

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Speaker 1: talking about seven, along with others, we're nowhere near seven

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Speaker 1: on you one are we They're they're in reactionary mode

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Speaker 1: right now, reacting to the FED and other things. They're

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Speaker 1: trying to keep the basket of currencies as their primary

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Speaker 1: as the primary focus for the FX market, and uh,

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Speaker 1: they're adjusting to try and keep that level, and they

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Speaker 1: sometimes have to move the dollar around. Let's get reactionary

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Speaker 1: with David Wilson. Looked back, Mr Wilson, what a week

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Speaker 1: it's been in retail? Terrible? Well, unless you're Walmart or

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Speaker 1: Depot or Lows. I mean Lows got rewarded more than

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Speaker 1: Home Deepot did. But I have a Shneer energy update

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Speaker 1: for you. I know you're big on that company, and uh,

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Speaker 1: you know, US regulators forecast it's natural gas export capacity

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Speaker 1: will reach one billion cubic feet a day by the

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Speaker 1: end of the summer. That's up from the current six

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Speaker 1: hundred million cubic feet. So far, Shanir has shipped a

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Speaker 1: total of twenty six billion cubic feet of liquefied natural

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Speaker 1: gas otherwise known as l n G in eight cargoes.

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Speaker 1: Put that all together in the stocks up three percent

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Speaker 1: in early trading. Talking about another stock that's up, Applied

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Speaker 1: Materials with a gain of seven and a half percent.

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Speaker 1: The largest maker, Chip Production Machinery, expects fiscal third quarter

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Speaker 1: sales to beat analysts average. Aestmate in Bloomberg survey, demand

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Speaker 1: for the company's gear has searched as chip makers upgrade

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Speaker 1: production technology. Okay, that's the goodness. Yahoo is down four

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Speaker 1: and a half percent, the most active stock, and early

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Speaker 1: trading bids for the web portal's main business may be

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Speaker 1: lower than an early arrange, cording the Wall Street Journal.

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Speaker 1: People familiar with the matters said Rising and others are

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Speaker 1: expected to offer two billion to three million. We talked

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Speaker 1: with Peter Tag a city group today who's representing bidders,

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Speaker 1: and he chose his words carefully, David, as you know

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Speaker 1: he would. But Mr Tag made clear that there's an

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Speaker 1: ongoing dialogue and quite a separation between the many bidders

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Speaker 1: and the one seller. Those delicate conversation I can imagine

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Speaker 1: you know who's having delicate conversations today. People a Deer

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Speaker 1: that stocks down two percent in the world's biggest banker,

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Speaker 1: farmer equipment cuts fisically your profit forecast to reflect falling

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Speaker 1: crop prices. On the positive side, though, Deer said sales

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Speaker 1: will drop less than the company predicted. In February, Campbell

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Speaker 1: Soup down four and a half percent sales drop for

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Speaker 1: the sixth grade quarter, which analysts weren't expecting. Company sitting

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Speaker 1: a weaker US soup season, among other things. And you

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Speaker 1: mentioned retailing. We've got a couple of more disappointments ross stores,

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Speaker 1: one of them that stocks down six percent, the off

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Speaker 1: price of Marrow chains, UH first quarter of sales coming

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Speaker 1: up short of Esmo, and UH foot Locker down four percent.

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Speaker 1: The athletic ware retailer's first quarter sales stores open with

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Speaker 1: rose less than as we're looking for. Because the other

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Speaker 1: side of that rival, Dick Sporting, goes up two percent.

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Speaker 1: The stock upgraded Goldman, Sachs and Morgan Stands. The highlight

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Speaker 1: of my week was you whispering in my ear as

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Speaker 1: you walked out of the studio on Tuesday. Tom By

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Speaker 1: the puts on Walmart. I want to thank you for

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Speaker 1: that recommendation. I am a journalist. I am not a

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Speaker 1: stop as I tell many many people who send the

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Speaker 1: emails that stop lost, Stop lost. Wilson will be with

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Speaker 1: us on Bloomberg Radio. My investment advice is worth what

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Speaker 1: you pay for David Wilson with wonderful perspective on the

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Speaker 1: back and forth of the equity market. Um. I've really

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Speaker 1: been looking forward to this. Mr clickman of Standard and Pores,

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Speaker 1: looks at the oil business, and he does this with

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Speaker 1: an extinguished view over many years of going back and

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Speaker 1: forth on oil. Stewart, where do we even start with oil?

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Speaker 1: I mean, you've got this star, that star, and the

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Speaker 1: other star. Is your business normal? Now? When you look

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Speaker 1: at it? Uh, it's I think I think normal have

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Speaker 1: been redefined for oil. It seems like any day where

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Speaker 1: stocks are moving less than five percent feels like a

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Speaker 1: normal day. Now. It used to be um, less than

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Speaker 1: call it two percent was a normal move. Um, it's

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Speaker 1: it's just it's it's it's really volatile times and you

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Speaker 1: have to have kind of an iron stomach. Is the

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Speaker 1: balance sheet adjustment over? We had interviews a year and

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Speaker 1: a half ago which said the middle of sixteen they'd

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Speaker 1: be through that. I don't buy it for a minute.

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Speaker 1: Where are we on balance sheet? Uh? Recalibration? No, we're not.

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Speaker 1: I don't think we're close yet. I think there's I

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Speaker 1: think there's a lot of companies that have persisted in

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Speaker 1: among the producers that have persisted so far because they've

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Speaker 1: had hedges protecting them while they've been waiting for for

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Speaker 1: crew prices to get back to a you know, a

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Speaker 1: more tolerable number. And we're not there yet. And you know,

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Speaker 1: we started to see more of these Chapter eleven silence

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Speaker 1: and I think we're sold there. There's going to be

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Speaker 1: more of those to come probably well. Or as for

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Speaker 1: West Texas and brand, is that enough to get some

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Speaker 1: action restarted or how high would it have to go?

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Speaker 1: I think I think the number kind of a linement,

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Speaker 1: the stand that you should be looking for is maybe

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Speaker 1: sixty dollars a barrel. I think around sixty, there's a

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Speaker 1: lot of US shale plays that make economic sense. Below sixty,

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Speaker 1: you start to get into problems where there are some

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Speaker 1: plays that just aren't driving economic returns. Do we need

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Speaker 1: the shale? Do we need shale back to for for

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Speaker 1: these oil companies to start making money again and stop contracting? Yeah,

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Speaker 1: So it's it's it's the shale that drove that massive

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Speaker 1: um boom and production in the US, and it's those

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Speaker 1: plays that you know, um, a lot of these companies

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Speaker 1: have had to pull back on their on their drilling

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Speaker 1: and their and their capex spent. Well, which of them

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Speaker 1: is likely to recover soonest which one has has has

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Speaker 1: the least bad out going forward? Well, I mean, we

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Speaker 1: we've been kind of defensive on energy for a while,

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Speaker 1: and I think we're we're largely looking at UM. Some

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Speaker 1: of the names that are are larger cap um E

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Speaker 1: n P s that AID you know, don't don't run

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Speaker 1: cash flow deficits nearly to the same degree that some

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Speaker 1: of the smaller ones do. And then secondly, they also

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Speaker 1: don't have this they don't have anywhere the same kind

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Speaker 1: of debt leverage that the smaller names do. So you know,

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Speaker 1: you have a name like you know, Occidental Petroleum, for example,

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Speaker 1: which is a it's a pretty large name, it's got

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Speaker 1: a good chemical business. Um it has very very low leverage.

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Speaker 1: And so I think if if crude prices recover UM,

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Speaker 1: that's a name, and I think UM is is better

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Speaker 1: position than most to to to do better. What percentage

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Speaker 1: of the price move on oil a given oil stock

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Speaker 1: in the next three or four or five years is

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Speaker 1: just simply a function of the oil price of gaming.

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Speaker 1: Here's where we think the terminal value is at four

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Speaker 1: or five years here's our bet. That's got to be

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Speaker 1: the massive factor, right, you know, it's it's it's obviously

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Speaker 1: it's important, but there's a whole bunch of other factors

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Speaker 1: that matter to UH. Service cost Inflation is a huge deal. Um.

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Speaker 1: You've got currency, which is which has a big impact. UM.

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Speaker 1: And then of course you've got you know, you've got geopolitics,

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Speaker 1: which is I guess, I guess I gets embedded in

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Speaker 1: the oil price too. But you're right, I mean, the

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Speaker 1: oil prices is going to be the dominant factor. Do

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Speaker 1: you have a single best buy, Um, I don't have

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Speaker 1: any strong buys or five stars. You don't, not not

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Speaker 1: in the producers. I do have one. I have one

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Speaker 1: five stars name across the entire oil patch, which is UH.

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Speaker 1: It's a midstream nameed Magellan Midstream Partners ticker mmp UM.

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Speaker 1: And that's the name that I think is you know,

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Speaker 1: it's it's it flourishes on the boom and refined products

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Speaker 1: and we you know, we we we've seen inventories of

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Speaker 1: crude oil go up to crazy high levels, the highest

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Speaker 1: we've had since nineteen thirty and that has led to

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Speaker 1: a boom in product inventories and what Magellan does is

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Speaker 1: a lot of movement of refined products and and and

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Speaker 1: storage overfine, and it would be clear it's not an

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Speaker 1: MLP even though it's got a four point five percent

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Speaker 1: dividend with dividend growth five years back. That's pretty good. Yep. Yeah,

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Speaker 1: so I think it's a easily well run company and

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Speaker 1: it's it's actually in a perverse way. You don't want

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Speaker 1: a company with a mapive yield because that raises questions

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Speaker 1: about how sustainable it is. Well. Stir clickman, this is

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Speaker 1: very good. We're gonna come back and go downstream with

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Speaker 1: Mr Glickman, Stanerports, Tulsa, Oklahoma, Magellan MMP sixteen underemployees. We

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Speaker 1: said good morning to all listening in Tulsa, Oklahoma. Mike,

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Speaker 1: I'm gonna come back. Alan Blinder will join us here

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Speaker 1: in a bit. That's an important conversation with a former

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Speaker 1: vice chairman of the FED. Let's take it with like

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Speaker 1: a bar. Now get the latest world of national headlines,

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Speaker 1: my tom, Thank you very much. Egyptian authorities say they

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Speaker 1: found playing part ten belongings from the missing egypt Air

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Speaker 1: flight eight oh four. Egyptian military ships and aircraft found

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Speaker 1: the items about one hundred eighty miles north of Alexandria

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Speaker 1: and the Mediterranean Seat authorities say they also found bonding parts.

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Speaker 1: The rbs A three twenty was flying from Paris to

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Speaker 1: Cairo with sixty six people on board. Donald Trump will

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Speaker 1: speak today before the National Rifle Association's annual conference. The

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Speaker 1: presumptive Republican presidential nominee will speak at the convention in Louisville, Kentucky.

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Speaker 1: The former political organizer for the n r A says

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Speaker 1: Trump has been all over the map on the Second Amendment,

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Speaker 1: but a lot of the n r a s membership

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Speaker 1: is pro Trump. Hillary Clinton says Donald Trump is not

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Speaker 1: qualified to be president. She gave her comments during a

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Speaker 1: CNN interview. Global News twenty four hours a day, powered

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Speaker 1: by our twenty four hundred journalists more than a hundred

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Speaker 1: fifty news bureaus around the world on Michael bar Mike,

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Speaker 1: Tom and Michael thanks so much. Fish just advanced up

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Speaker 1: seven down features of fifty eight the vixed trading before

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Speaker 1: the opening sixteen point zero seven the VIX to better

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Speaker 1: this morning. We're doing better too with Stuart Glickman of

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Speaker 1: a Bloomberg Business Flash and I'm Karen Moscow. The Bloomberg

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Speaker 1: Group US dot Index futures are higher, indicating the SNP

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Speaker 1: five well pair a fourth weekly decline. As investors a

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Speaker 1: way to report on the housing market for signs to

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Speaker 1: the strength of the economy, we checked the markets every

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Speaker 1: fifteen minutes about the trading day on Bloomberg SNP even

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Speaker 1: a future is up five and a half points. Now

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Speaker 1: even A future is up four and a forty four

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Speaker 1: nas vacumny future is up twenty two. The decks in

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Speaker 1: Germany's up nine tenths per cent ten Your treasury down

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Speaker 1: three thirty seconds, the yield one point eight six percent

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Speaker 1: non max screwed oil, it'll change down two cents to

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Speaker 1: forty eight fourteen a barrel. Comics gold is up three

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Speaker 1: tents per cent, or three dollars eighty cents at twelve

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Speaker 1: fifty eight fifty announced the euro a dollar twelve twenty seven,

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Speaker 1: the N one ten point four zero. That's a Bloomberg

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Speaker 1: business flash. Tom and Mike Caaron Moscow. We are discussing

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Speaker 1: the oil industry outlook. With oil prices moving higher. At

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Speaker 1: the end of the week, we're looking at forty eight

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Speaker 1: dollars for both West Texas and Brent, closing in on fifty. However,

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Speaker 1: that's not enough, according to Stuart Clickman Uh, he's uh

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Speaker 1: with SMB capital i Q and suggesting that we need

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Speaker 1: to get to around sixty or so. Tom was looking

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Speaker 1: at the stars you have on the various companies. That

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Speaker 1: put me in mind, Tom of of a certain of

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Speaker 1: a company called the Texas Fuel Company was the original

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Speaker 1: name of it, founded in nine o one, went on

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Speaker 1: to become better known as Texico. You can trust your

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Speaker 1: car to the bad ways the star. So if you're

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Speaker 1: looking for a star, uh, you might want to look

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Speaker 1: at Texaco. But that made me think about because Texico

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Speaker 1: is known for its downstream operations, to art how downstream

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Speaker 1: is doing at this point and if the company is

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Speaker 1: like UM, like Excitomobile or Chevin, with Texico, our better

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Speaker 1: position because people are still going buy gasoline even if

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Speaker 1: the price goes down, you know, your input prices lower. Yeah,

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Speaker 1: downstream has really been the saving grace for for a

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Speaker 1: bunch of the integrated in the in the last several

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Speaker 1: quarters because even though upstreams and generating losses, refining has

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Speaker 1: has kind of helped blunt those losses are in xcellns case,

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Speaker 1: actually help deliver an overall profit. So I think I

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Speaker 1: think firms like UM, Concho and Marathon, which divested their

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Speaker 1: downstream operations several years ago, are probably looking wistfully at

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Speaker 1: those downstream UM operations now and thinking, geez, if we

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Speaker 1: just kept those, we we'd we'd probably be making money. Um.

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Speaker 1: The margins for downstream are not as good as they

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Speaker 1: had been last year, and I think it's a reflection

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Speaker 1: of how much excess supply of refined products is now

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Speaker 1: kind of pouring into the marketplace. But they're still they're

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Speaker 1: still profitable, they're still making money. It's just not quite

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Speaker 1: as good as as what it was like in especially

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Speaker 1: does I'm thinking of this because I'm looking at Texico

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Speaker 1: and I'm thinking of the old jingle. Um does does

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Speaker 1: brand matter downstream anymore to driver's care? It used to be,

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Speaker 1: you know, a handful of names, we all knew what

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Speaker 1: we're on the gas stations that you get everybody from

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Speaker 1: the Russians with Luke oil, uh, you know, to the

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Speaker 1: to the bargain brands. Uh? Or do people just look

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Speaker 1: at the price? I think it's really just price driven.

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Speaker 1: I think you go to those corners where you've got

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Speaker 1: three gas stations all at the same location, and there

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Speaker 1: there may be you know, a cent different per gallon

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Speaker 1: um relative to each other. I I really don't think

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Speaker 1: that that that brand has much of an influence now,

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Speaker 1: you know. I look Steward all of this and downstream

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Speaker 1: and that, and uh it goes to that. I think

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Speaker 1: it's a cf A level four. Uh not in my backyard.

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Speaker 1: Economics give us an update on the ability to make

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Speaker 1: new technology downstream? Can you actually go out and build something? Uh?

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Speaker 1: It would be extremely difficult and not impossible to to

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Speaker 1: build any kind of what they call a greenfield plants

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Speaker 1: starting with you know, just sort of just sort of

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Speaker 1: breaking ground on a on a on an open piece

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Speaker 1: of earth and trying to build a new refinery because

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Speaker 1: nobody wants one, like you said, in their backyard. What

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Speaker 1: you can do is you can do what are called

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Speaker 1: brown field expansions, where you're taking an existing plant and

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Speaker 1: adding to it, and in some cases it might be

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Speaker 1: um tweaking the operations of the refinement so that you

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Speaker 1: can you can turn around and generate more gasoline than

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Speaker 1: diesel because gasoline right now is preferred to diesel. So

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Speaker 1: you can do little operations like that. You can do

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Speaker 1: you can add a condensate splitter so that you can

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Speaker 1: take some of this these large volumes of for example,

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Speaker 1: Evilford content sate and turn that into um um into

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Speaker 1: refined products with you and I can use. So those

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Speaker 1: are those are smaller projects um and and and we've

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Speaker 1: already seen refineries do a lot of those, and I

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Speaker 1: think there's gonna be more to come. Is there a

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Speaker 1: technological revolution going on and downstream that will make it

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Speaker 1: as uh jaw dropping is what we saw upstream with

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Speaker 1: fracking and such. Well, that's tough that that's a it's

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Speaker 1: a great question and it's tough to answer. And you know,

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Speaker 1: you have to keep in mind this is from an

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Speaker 1: industry that ten years ago, if you would ask them,

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Speaker 1: is there any way that the US can can stem

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Speaker 1: the tide of this dwindling production in the US, I

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Speaker 1: think everybody would have told you no, it just wasn't.

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Speaker 1: It wasn't something that was really on the radar. I

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Speaker 1: I don't think that um, technological advances downstream are going

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Speaker 1: to be game changing. UM. You know, despite that context, UM,

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Speaker 1: I do think that there's going to be an awful

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Speaker 1: lot of technological innovation in alternative energy, and I think

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Speaker 1: that's going to be amazing driver over the next ten

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Speaker 1: twenty years. Stewart think when standard pours an oil upstream

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Speaker 1: and downstream is well, Michael, a very important interview coming up.

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Speaker 1: The backdrop of this is where our nation is, where

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Speaker 1: a monetary policy is, but but also just a real

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Speaker 1: question about where the underpinnings of theory are given negative

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Speaker 1: interest rates in such it's always interesting with the gentleman

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Speaker 1: from Princeton on Blinder will be with us in just

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Speaker 1: a moment, I got a cf A problem for you here.

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Speaker 1: This is the math. Since we're doing math Friday dot com,

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Speaker 1: uh have noted that Papa John's Pizza has given away

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Speaker 1: in like twenty two ballparks around the country, and they

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Speaker 1: have either team has to win or your team has

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Speaker 1: to score a certain number of runs. They've put statistics

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Speaker 1: to work here and figured out where you are most

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Speaker 1: likely to getting free pizza. Please quickly. I think that

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Speaker 1: is a problem with Taylor Riggs and the other studying

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Speaker 1: for CFA should put their minds to. But St. Louis,

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Speaker 1: all you have to do is win, and the Cardinals

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Speaker 1: are good enough to have a fifty two point nine

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Speaker 1: percent chance of winning. Very good. The Atlanta Braves, not

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Speaker 1: only are there a terrible team, but the team has

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Speaker 1: to score six runs to get a free pizza. You

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Speaker 1: only have a seven point seven percent chance of getting it.

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Speaker 1: Here in New York fourteen point four percent at the

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Speaker 1: Yankee Stadium. I'm glad you mentioned Texico and the Texico Star.

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Speaker 1: We said good morning to all in Nashville. Vince Melamett

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Speaker 1: with one of the great songs for Tricia Herwood. Here

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Speaker 1: she is under the star she Bloomberks. Surveillances are brought

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Speaker 1: to you by the Jeap Grand Cherokee, the most awarded

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