WEBVTT - Glickman: Normal has been redefined for oil

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<v Speaker 1>This is Bloomberg Surveillance. We have to get back to

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<v Speaker 1>a point where we understand and believe that interest rates

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<v Speaker 1>going up is actually good for the economy and good

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<v Speaker 1>for the stock market over long periods of time. These

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<v Speaker 1>smaller banks can they do deliver for their shareholders if

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<v Speaker 1>they're managed well. You can get a better portfolio if

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<v Speaker 1>you find a lot of attractive idiosyncratic opportunities, and we

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<v Speaker 1>think this is a pretty good environment for that. Bloomberg

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<v Speaker 1>Surveillance your link to the world of economics, finance, and

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

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

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<v Speaker 1>San Francisco. Good morning on Serious Sex and Channel one

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<v Speaker 1>nineteen across the nation. Thrilled your with us around the world,

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<v Speaker 1>particularly good morning and good evening in Asia as you

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<v Speaker 1>look forward to a week and oil many of the

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<v Speaker 1>bets Paulsiana, Bank of America, Maryland, who with this. I

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<v Speaker 1>believe it was earlier in the week making a call

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<v Speaker 1>on weaker oil from here. We will address that, uh

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<v Speaker 1>here uh in a bit. Lots going on this morning,

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<v Speaker 1>and you know it's sort of a quiet three days

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<v Speaker 1>and it has picked up here, particularly with the fence,

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<v Speaker 1>Big Bill Dodley UM yesterday, uh showing the idea of

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<v Speaker 1>June June, June, and other people push you make Vincent right,

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<v Speaker 1>Nor I thought was quite good. Was standish on that.

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<v Speaker 1>Our for X Brief This Morning and Dynamics of the

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<v Speaker 1>Foreign Exchange Market, brought to you by Interactive Broker's winner

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<v Speaker 1>of f X Weeks two thousand fifteen award for the

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<v Speaker 1>best Retail for X trading platform visit ib at I

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<v Speaker 1>b k R dot com Slash four x I b

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<v Speaker 1>k R dot com Slash four x I featured Yen

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<v Speaker 1>this week weaker yen one ten, one o six seven,

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<v Speaker 1>eight ninety two, weaker yen, weaker this morning. Dollar churning

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

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<v Speaker 1>recent record dollar, however you want to phrase it, but elevated.

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<v Speaker 1>I would call the dollar elevated. And looking at rend

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<v Speaker 1>Minby this morning, Michael, what have you read on rend

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<v Speaker 1>Memby this week? It's just a grinding week or nowhere

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<v Speaker 1>near I think if David Wowood Bank of America Maryland

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<v Speaker 1>talking about seven, along with others, we're nowhere near seven

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<v Speaker 1>on you one are we They're they're in reactionary mode

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

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<v Speaker 1>trying to keep the basket of currencies as their primary

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<v Speaker 1>as the primary focus for the FX market, and uh,

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<v Speaker 1>they're adjusting to try and keep that level, and they

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<v Speaker 1>sometimes have to move the dollar around. Let's get reactionary

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<v Speaker 1>with David Wilson. Looked back, Mr Wilson, what a week

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

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<v Speaker 1>Depot or Lows. I mean Lows got rewarded more than

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<v Speaker 1>Home Deepot did. But I have a Shneer energy update

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

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<v Speaker 1>you know, US regulators forecast it's natural gas export capacity

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<v Speaker 1>will reach one billion cubic feet a day by the

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<v Speaker 1>end of the summer. That's up from the current six

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<v Speaker 1>hundred million cubic feet. So far, Shanir has shipped a

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<v Speaker 1>total of twenty six billion cubic feet of liquefied natural

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<v Speaker 1>gas otherwise known as l n G in eight cargoes.

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<v Speaker 1>Put that all together in the stocks up three percent

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

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<v Speaker 1>Materials with a gain of seven and a half percent.

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<v Speaker 1>The largest maker, Chip Production Machinery, expects fiscal third quarter

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<v Speaker 1>sales to beat analysts average. Aestmate in Bloomberg survey, demand

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<v Speaker 1>for the company's gear has searched as chip makers upgrade

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

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<v Speaker 1>and a half percent, the most active stock, and early

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<v Speaker 1>trading bids for the web portal's main business may be

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<v Speaker 1>lower than an early arrange, cording the Wall Street Journal.

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<v Speaker 1>People familiar with the matters said Rising and others are

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<v Speaker 1>expected to offer two billion to three million. We talked

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<v Speaker 1>with Peter Tag a city group today who's representing bidders,

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<v Speaker 1>and he chose his words carefully, David, as you know

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<v Speaker 1>he would. But Mr Tag made clear that there's an

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<v Speaker 1>ongoing dialogue and quite a separation between the many bidders

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<v Speaker 1>and the one seller. Those delicate conversation I can imagine

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<v Speaker 1>you know who's having delicate conversations today. People a Deer

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<v Speaker 1>that stocks down two percent in the world's biggest banker,

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<v Speaker 1>farmer equipment cuts fisically your profit forecast to reflect falling

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<v Speaker 1>crop prices. On the positive side, though, Deer said sales

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<v Speaker 1>will drop less than the company predicted. In February, Campbell

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<v Speaker 1>Soup down four and a half percent sales drop for

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

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<v Speaker 1>a weaker US soup season, among other things. And you

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

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<v Speaker 1>one of them that stocks down six percent, the off

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<v Speaker 1>price of Marrow chains, UH first quarter of sales coming

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<v Speaker 1>up short of Esmo, and UH foot Locker down four percent.

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<v Speaker 1>The athletic ware retailer's first quarter sales stores open with

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<v Speaker 1>rose less than as we're looking for. Because the other

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<v Speaker 1>side of that rival, Dick Sporting, goes up two percent.

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<v Speaker 1>The stock upgraded Goldman, Sachs and Morgan Stands. The highlight

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<v Speaker 1>of my week was you whispering in my ear as

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<v Speaker 1>you walked out of the studio on Tuesday. Tom By

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<v Speaker 1>the puts on Walmart. I want to thank you for

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<v Speaker 1>that recommendation. I am a journalist. I am not a

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<v Speaker 1>stop as I tell many many people who send the

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<v Speaker 1>emails that stop lost, Stop lost. Wilson will be with

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<v Speaker 1>us on Bloomberg Radio. My investment advice is worth what

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<v Speaker 1>you pay for David Wilson with wonderful perspective on the

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<v Speaker 1>back and forth of the equity market. Um. I've really

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<v Speaker 1>been looking forward to this. Mr clickman of Standard and Pores,

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<v Speaker 1>looks at the oil business, and he does this with

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<v Speaker 1>an extinguished view over many years of going back and

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<v Speaker 1>forth on oil. Stewart, where do we even start with oil?

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<v Speaker 1>I mean, you've got this star, that star, and the

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<v Speaker 1>other star. Is your business normal? Now? When you look

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<v Speaker 1>at it? Uh, it's I think I think normal have

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<v Speaker 1>been redefined for oil. It seems like any day where

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<v Speaker 1>stocks are moving less than five percent feels like a

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<v Speaker 1>normal day. Now. It used to be um, less than

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<v Speaker 1>call it two percent was a normal move. Um, it's

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<v Speaker 1>it's just it's it's it's really volatile times and you

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<v Speaker 1>have to have kind of an iron stomach. Is the

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<v Speaker 1>balance sheet adjustment over? We had interviews a year and

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<v Speaker 1>a half ago which said the middle of sixteen they'd

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<v Speaker 1>be through that. I don't buy it for a minute.

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

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<v Speaker 1>I don't think we're close yet. I think there's I

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<v Speaker 1>think there's a lot of companies that have persisted in

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<v Speaker 1>among the producers that have persisted so far because they've

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<v Speaker 1>had hedges protecting them while they've been waiting for for

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<v Speaker 1>crew prices to get back to a you know, a

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

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<v Speaker 1>we started to see more of these Chapter eleven silence

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

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<v Speaker 1>more of those to come probably well. Or as for

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<v Speaker 1>West Texas and brand, is that enough to get some

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<v Speaker 1>action restarted or how high would it have to go?

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<v Speaker 1>I think I think the number kind of a linement,

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<v Speaker 1>the stand that you should be looking for is maybe

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<v Speaker 1>sixty dollars a barrel. I think around sixty, there's a

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<v Speaker 1>lot of US shale plays that make economic sense. Below sixty,

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<v Speaker 1>you start to get into problems where there are some

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<v Speaker 1>plays that just aren't driving economic returns. Do we need

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<v Speaker 1>the shale? Do we need shale back to for for

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

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<v Speaker 1>So it's it's it's the shale that drove that massive

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<v Speaker 1>um boom and production in the US, and it's those

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<v Speaker 1>plays that you know, um, a lot of these companies

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<v Speaker 1>have had to pull back on their on their drilling

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<v Speaker 1>and their and their capex spent. Well, which of them

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<v Speaker 1>is likely to recover soonest which one has has has

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<v Speaker 1>the least bad out going forward? Well, I mean, we

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<v Speaker 1>we've been kind of defensive on energy for a while,

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<v Speaker 1>and I think we're we're largely looking at UM. Some

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<v Speaker 1>of the names that are are larger cap um E

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<v Speaker 1>n P s that AID you know, don't don't run

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<v Speaker 1>cash flow deficits nearly to the same degree that some

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<v Speaker 1>of the smaller ones do. And then secondly, they also

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<v Speaker 1>don't have this they don't have anywhere the same kind

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<v Speaker 1>of debt leverage that the smaller names do. So you know,

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<v Speaker 1>you have a name like you know, Occidental Petroleum, for example,

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<v Speaker 1>which is a it's a pretty large name, it's got

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<v Speaker 1>a good chemical business. Um it has very very low leverage.

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<v Speaker 1>And so I think if if crude prices recover UM,

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<v Speaker 1>that's a name, and I think UM is is better

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<v Speaker 1>position than most to to to do better. What percentage

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<v Speaker 1>of the price move on oil a given oil stock

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<v Speaker 1>in the next three or four or five years is

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<v Speaker 1>just simply a function of the oil price of gaming.

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<v Speaker 1>Here's where we think the terminal value is at four

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<v Speaker 1>or five years here's our bet. That's got to be

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<v Speaker 1>the massive factor, right, you know, it's it's it's obviously

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<v Speaker 1>it's important, but there's a whole bunch of other factors

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<v Speaker 1>that matter to UH. Service cost Inflation is a huge deal. Um.

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

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<v Speaker 1>And then of course you've got you know, you've got geopolitics,

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<v Speaker 1>which is I guess, I guess I gets embedded in

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<v Speaker 1>the oil price too. But you're right, I mean, the

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<v Speaker 1>oil prices is going to be the dominant factor. Do

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<v Speaker 1>you have a single best buy, Um, I don't have

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<v Speaker 1>any strong buys or five stars. You don't, not not

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<v Speaker 1>in the producers. I do have one. I have one

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<v Speaker 1>five stars name across the entire oil patch, which is UH.

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<v Speaker 1>It's a midstream nameed Magellan Midstream Partners ticker mmp UM.

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<v Speaker 1>And that's the name that I think is you know,

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<v Speaker 1>it's it's it flourishes on the boom and refined products

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<v Speaker 1>and we you know, we we we've seen inventories of

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<v Speaker 1>crude oil go up to crazy high levels, the highest

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<v Speaker 1>we've had since nineteen thirty and that has led to

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<v Speaker 1>a boom in product inventories and what Magellan does is

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<v Speaker 1>a lot of movement of refined products and and and

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<v Speaker 1>storage overfine, and it would be clear it's not an

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<v Speaker 1>MLP even though it's got a four point five percent

0:10:10.520 --> 0:10:16.120
<v Speaker 1>dividend with dividend growth five years back. That's pretty good. Yep. Yeah,

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<v Speaker 1>so I think it's a easily well run company and

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<v Speaker 1>it's it's actually in a perverse way. You don't want

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<v Speaker 1>a company with a mapive yield because that raises questions

0:10:26.000 --> 0:10:28.480
<v Speaker 1>about how sustainable it is. Well. Stir clickman, this is

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<v Speaker 1>very good. We're gonna come back and go downstream with

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<v Speaker 1>Mr Glickman, Stanerports, Tulsa, Oklahoma, Magellan MMP sixteen underemployees. We

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<v Speaker 1>said good morning to all listening in Tulsa, Oklahoma. Mike,

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<v Speaker 1>I'm gonna come back. Alan Blinder will join us here

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<v Speaker 1>in a bit. That's an important conversation with a former

0:10:46.520 --> 0:10:53.319
<v Speaker 1>vice chairman of the FED. Let's take it with like

0:10:53.400 --> 0:10:55.480
<v Speaker 1>a bar. Now get the latest world of national headlines,

0:10:55.880 --> 0:10:58.880
<v Speaker 1>my tom, Thank you very much. Egyptian authorities say they

0:10:59.000 --> 0:11:02.240
<v Speaker 1>found playing part ten belongings from the missing egypt Air

0:11:02.360 --> 0:11:06.240
<v Speaker 1>flight eight oh four. Egyptian military ships and aircraft found

0:11:06.240 --> 0:11:09.599
<v Speaker 1>the items about one hundred eighty miles north of Alexandria

0:11:09.640 --> 0:11:13.680
<v Speaker 1>and the Mediterranean Seat authorities say they also found bonding parts.

0:11:14.040 --> 0:11:16.360
<v Speaker 1>The rbs A three twenty was flying from Paris to

0:11:16.400 --> 0:11:19.679
<v Speaker 1>Cairo with sixty six people on board. Donald Trump will

0:11:19.720 --> 0:11:23.800
<v Speaker 1>speak today before the National Rifle Association's annual conference. The

0:11:23.800 --> 0:11:28.400
<v Speaker 1>presumptive Republican presidential nominee will speak at the convention in Louisville, Kentucky.

0:11:28.840 --> 0:11:31.360
<v Speaker 1>The former political organizer for the n r A says

0:11:31.360 --> 0:11:33.760
<v Speaker 1>Trump has been all over the map on the Second Amendment,

0:11:34.240 --> 0:11:36.319
<v Speaker 1>but a lot of the n r a s membership

0:11:36.520 --> 0:11:39.880
<v Speaker 1>is pro Trump. Hillary Clinton says Donald Trump is not

0:11:40.120 --> 0:11:43.000
<v Speaker 1>qualified to be president. She gave her comments during a

0:11:43.080 --> 0:11:46.360
<v Speaker 1>CNN interview. Global News twenty four hours a day, powered

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<v Speaker 1>by our twenty four hundred journalists more than a hundred

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<v Speaker 1>fifty news bureaus around the world on Michael bar Mike,

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<v Speaker 1>Tom and Michael thanks so much. Fish just advanced up

0:11:53.880 --> 0:11:56.559
<v Speaker 1>seven down features of fifty eight the vixed trading before

0:11:56.600 --> 0:12:00.480
<v Speaker 1>the opening sixteen point zero seven the VIX to better

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<v Speaker 1>this morning. We're doing better too with Stuart Glickman of

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<v Speaker 1>SMP Market. Driver is brought to you by the Bank

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<v Speaker 1>of Amanca Marrill Lynch seeing what others have seen, but

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<v Speaker 1>Radio plus Mobile lap and on your radio. This is

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<v Speaker 1>a Bloomberg Business Flash and I'm Karen Moscow. The Bloomberg

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<v Speaker 1>Futures Report brought to you by Interactive Brokers and CIMI Group.

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<v Speaker 1>Group US dot Index futures are higher, indicating the SNP

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<v Speaker 1>five well pair a fourth weekly decline. As investors a

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<v Speaker 1>way to report on the housing market for signs to

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<v Speaker 1>the strength of the economy, we checked the markets every

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<v Speaker 1>fifteen minutes about the trading day on Bloomberg SNP even

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<v Speaker 1>a future is up five and a half points. Now

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<v Speaker 1>even A future is up four and a forty four

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<v Speaker 1>nas vacumny future is up twenty two. The decks in

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<v Speaker 1>Germany's up nine tenths per cent ten Your treasury down

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<v Speaker 1>three thirty seconds, the yield one point eight six percent

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<v Speaker 1>non max screwed oil, it'll change down two cents to

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<v Speaker 1>forty eight fourteen a barrel. Comics gold is up three

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<v Speaker 1>tents per cent, or three dollars eighty cents at twelve

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<v Speaker 1>fifty eight fifty announced the euro a dollar twelve twenty seven,

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<v Speaker 1>the N one ten point four zero. That's a Bloomberg

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<v Speaker 1>business flash. Tom and Mike Caaron Moscow. We are discussing

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<v Speaker 1>the oil industry outlook. With oil prices moving higher. At

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<v Speaker 1>the end of the week, we're looking at forty eight

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

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<v Speaker 1>that's not enough, according to Stuart Clickman Uh, he's uh

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<v Speaker 1>with SMB capital i Q and suggesting that we need

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<v Speaker 1>to get to around sixty or so. Tom was looking

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<v Speaker 1>at the stars you have on the various companies. That

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<v Speaker 1>put me in mind, Tom of of a certain of

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<v Speaker 1>a company called the Texas Fuel Company was the original

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<v Speaker 1>name of it, founded in nine o one, went on

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<v Speaker 1>to become better known as Texico. You can trust your

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<v Speaker 1>car to the bad ways the star. So if you're

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<v Speaker 1>looking for a star, uh, you might want to look

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<v Speaker 1>at Texaco. But that made me think about because Texico

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<v Speaker 1>is known for its downstream operations, to art how downstream

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<v Speaker 1>is doing at this point and if the company is

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<v Speaker 1>like UM, like Excitomobile or Chevin, with Texico, our better

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<v Speaker 1>position because people are still going buy gasoline even if

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<v Speaker 1>the price goes down, you know, your input prices lower. Yeah,

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<v Speaker 1>downstream has really been the saving grace for for a

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<v Speaker 1>bunch of the integrated in the in the last several

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<v Speaker 1>quarters because even though upstreams and generating losses, refining has

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<v Speaker 1>has kind of helped blunt those losses are in xcellns case,

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<v Speaker 1>actually help deliver an overall profit. So I think I

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<v Speaker 1>think firms like UM, Concho and Marathon, which divested their

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<v Speaker 1>downstream operations several years ago, are probably looking wistfully at

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<v Speaker 1>those downstream UM operations now and thinking, geez, if we

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<v Speaker 1>just kept those, we we'd we'd probably be making money. Um.

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<v Speaker 1>The margins for downstream are not as good as they

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<v Speaker 1>had been last year, and I think it's a reflection

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<v Speaker 1>of how much excess supply of refined products is now

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<v Speaker 1>kind of pouring into the marketplace. But they're still they're

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

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<v Speaker 1>as good as as what it was like in especially

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<v Speaker 1>does I'm thinking of this because I'm looking at Texico

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<v Speaker 1>and I'm thinking of the old jingle. Um does does

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

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<v Speaker 1>you know, a handful of names, we all knew what

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<v Speaker 1>we're on the gas stations that you get everybody from

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<v Speaker 1>the Russians with Luke oil, uh, you know, to the

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<v Speaker 1>to the bargain brands. Uh? Or do people just look

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<v Speaker 1>at the price? I think it's really just price driven.

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<v Speaker 1>I think you go to those corners where you've got

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<v Speaker 1>three gas stations all at the same location, and there

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<v Speaker 1>there may be you know, a cent different per gallon

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<v Speaker 1>um relative to each other. I I really don't think

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<v Speaker 1>that that that brand has much of an influence now,

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<v Speaker 1>you know. I look Steward all of this and downstream

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<v Speaker 1>and that, and uh it goes to that. I think

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

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<v Speaker 1>Economics give us an update on the ability to make

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<v Speaker 1>new technology downstream? Can you actually go out and build something? Uh?

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<v Speaker 1>It would be extremely difficult and not impossible to to

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<v Speaker 1>build any kind of what they call a greenfield plants

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<v Speaker 1>starting with you know, just sort of just sort of

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<v Speaker 1>breaking ground on a on a on an open piece

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<v Speaker 1>of earth and trying to build a new refinery because

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<v Speaker 1>nobody wants one, like you said, in their backyard. What

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<v Speaker 1>you can do is you can do what are called

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<v Speaker 1>brown field expansions, where you're taking an existing plant and

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<v Speaker 1>adding to it, and in some cases it might be

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<v Speaker 1>um tweaking the operations of the refinement so that you

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<v Speaker 1>can you can turn around and generate more gasoline than

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<v Speaker 1>diesel because gasoline right now is preferred to diesel. So

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<v Speaker 1>you can do little operations like that. You can do

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<v Speaker 1>you can add a condensate splitter so that you can

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<v Speaker 1>take some of this these large volumes of for example,

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<v Speaker 1>Evilford content sate and turn that into um um into

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<v Speaker 1>refined products with you and I can use. So those

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<v Speaker 1>are those are smaller projects um and and and we've

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<v Speaker 1>already seen refineries do a lot of those, and I

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<v Speaker 1>think there's gonna be more to come. Is there a

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<v Speaker 1>technological revolution going on and downstream that will make it

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<v Speaker 1>as uh jaw dropping is what we saw upstream with

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<v Speaker 1>fracking and such. Well, that's tough that that's a it's

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

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<v Speaker 1>you have to keep in mind this is from an

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<v Speaker 1>industry that ten years ago, if you would ask them,

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<v Speaker 1>is there any way that the US can can stem

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<v Speaker 1>the tide of this dwindling production in the US, I

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

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<v Speaker 1>It wasn't something that was really on the radar. I

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<v Speaker 1>I don't think that um, technological advances downstream are going

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<v Speaker 1>to be game changing. UM. You know, despite that context, UM,

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<v Speaker 1>I do think that there's going to be an awful

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<v Speaker 1>lot of technological innovation in alternative energy, and I think

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<v Speaker 1>that's going to be amazing driver over the next ten

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<v Speaker 1>twenty years. Stewart think when standard pours an oil upstream

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<v Speaker 1>and downstream is well, Michael, a very important interview coming up.

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<v Speaker 1>The backdrop of this is where our nation is, where

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<v Speaker 1>a monetary policy is, but but also just a real

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<v Speaker 1>question about where the underpinnings of theory are given negative

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<v Speaker 1>interest rates in such it's always interesting with the gentleman

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<v Speaker 1>from Princeton on Blinder will be with us in just

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<v Speaker 1>a moment, I got a cf A problem for you here.

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

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<v Speaker 1>uh have noted that Papa John's Pizza has given away

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<v Speaker 1>in like twenty two ballparks around the country, and they

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<v Speaker 1>have either team has to win or your team has

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<v Speaker 1>to score a certain number of runs. They've put statistics

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<v Speaker 1>to work here and figured out where you are most

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<v Speaker 1>likely to getting free pizza. Please quickly. I think that

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<v Speaker 1>is a problem with Taylor Riggs and the other studying

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<v Speaker 1>for CFA should put their minds to. But St. Louis,

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<v Speaker 1>all you have to do is win, and the Cardinals

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<v Speaker 1>are good enough to have a fifty two point nine

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<v Speaker 1>percent chance of winning. Very good. The Atlanta Braves, not

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<v Speaker 1>only are there a terrible team, but the team has

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<v Speaker 1>to score six runs to get a free pizza. You

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<v Speaker 1>only have a seven point seven percent chance of getting it.

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<v Speaker 1>Here in New York fourteen point four percent at the

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<v Speaker 1>Yankee Stadium. I'm glad you mentioned Texico and the Texico Star.

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<v Speaker 1>We said good morning to all in Nashville. Vince Melamett

0:19:50.200 --> 0:19:52.680
<v Speaker 1>with one of the great songs for Tricia Herwood. Here

0:19:52.760 --> 0:20:09.960
<v Speaker 1>she is under the star she Bloomberks. Surveillances are brought

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