Speaker 1: This is Bloomberg Surveillance. We have to get back to
Speaker 1: a point where we understand and believe that interest rates
Speaker 1: going up is actually good for the economy and good
Speaker 1: for the stock market over long periods of time. These
Speaker 1: smaller banks can they do deliver for their shareholders if
Speaker 1: they're managed well. You can get a better portfolio if
Speaker 1: you find a lot of attractive idiosyncratic opportunities, and we
Speaker 1: think this is a pretty good environment for that. Bloomberg
Speaker 1: Surveillance your link to the world of economics, finance, and
Speaker 1: investment on Bloomberg Radio. Good running everyone, Michael mckaam, Tom Keen, Friday,
Speaker 1: nine am. We're thrilled you're with us from New York, Washington, Boston,
Speaker 1: San Francisco. Good morning on Serious Sex and Channel one
Speaker 1: nineteen across the nation. Thrilled your with us around the world,
Speaker 1: particularly good morning and good evening in Asia as you
Speaker 1: look forward to a week and oil many of the
Speaker 1: bets Paulsiana, Bank of America, Maryland, who with this. I
Speaker 1: believe it was earlier in the week making a call
Speaker 1: on weaker oil from here. We will address that, uh
Speaker 1: here uh in a bit. Lots going on this morning,
Speaker 1: and you know it's sort of a quiet three days
Speaker 1: and it has picked up here, particularly with the fence,
Speaker 1: Big Bill Dodley UM yesterday, uh showing the idea of
Speaker 1: June June, June, and other people push you make Vincent right,
Speaker 1: Nor I thought was quite good. Was standish on that.
Speaker 1: Our for X Brief This Morning and Dynamics of the
Speaker 1: Foreign Exchange Market, brought to you by Interactive Broker's winner
Speaker 1: of f X Weeks two thousand fifteen award for the
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Speaker 1: b k R dot com Slash four x I b
Speaker 1: k R dot com Slash four x I featured Yen
Speaker 1: this week weaker yen one ten, one o six seven,
Speaker 1: eight ninety two, weaker yen, weaker this morning. Dollar churning
Speaker 1: about nine on d x Y. That's not record dollar,
Speaker 1: recent record dollar, however you want to phrase it, but elevated.
Speaker 1: I would call the dollar elevated. And looking at rend
Speaker 1: Minby this morning, Michael, what have you read on rend
Speaker 1: Memby this week? It's just a grinding week or nowhere
Speaker 1: near I think if David Wowood Bank of America Maryland
Speaker 1: talking about seven, along with others, we're nowhere near seven
Speaker 1: on you one are we They're they're in reactionary mode
Speaker 1: right now, reacting to the FED and other things. They're
Speaker 1: trying to keep the basket of currencies as their primary
Speaker 1: as the primary focus for the FX market, and uh,
Speaker 1: they're adjusting to try and keep that level, and they
Speaker 1: sometimes have to move the dollar around. Let's get reactionary
Speaker 1: with David Wilson. Looked back, Mr Wilson, what a week
Speaker 1: it's been in retail? Terrible? Well, unless you're Walmart or
Speaker 1: Depot or Lows. I mean Lows got rewarded more than
Speaker 1: Home Deepot did. But I have a Shneer energy update
Speaker 1: for you. I know you're big on that company, and uh,
Speaker 1: you know, US regulators forecast it's natural gas export capacity
Speaker 1: will reach one billion cubic feet a day by the
Speaker 1: end of the summer. That's up from the current six
Speaker 1: hundred million cubic feet. So far, Shanir has shipped a
Speaker 1: total of twenty six billion cubic feet of liquefied natural
Speaker 1: gas otherwise known as l n G in eight cargoes.
Speaker 1: Put that all together in the stocks up three percent
Speaker 1: in early trading. Talking about another stock that's up, Applied
Speaker 1: Materials with a gain of seven and a half percent.
Speaker 1: The largest maker, Chip Production Machinery, expects fiscal third quarter
Speaker 1: sales to beat analysts average. Aestmate in Bloomberg survey, demand
Speaker 1: for the company's gear has searched as chip makers upgrade
Speaker 1: production technology. Okay, that's the goodness. Yahoo is down four
Speaker 1: and a half percent, the most active stock, and early
Speaker 1: trading bids for the web portal's main business may be
Speaker 1: lower than an early arrange, cording the Wall Street Journal.
Speaker 1: People familiar with the matters said Rising and others are
Speaker 1: expected to offer two billion to three million. We talked
Speaker 1: with Peter Tag a city group today who's representing bidders,
Speaker 1: and he chose his words carefully, David, as you know
Speaker 1: he would. But Mr Tag made clear that there's an
Speaker 1: ongoing dialogue and quite a separation between the many bidders
Speaker 1: and the one seller. Those delicate conversation I can imagine
Speaker 1: you know who's having delicate conversations today. People a Deer
Speaker 1: that stocks down two percent in the world's biggest banker,
Speaker 1: farmer equipment cuts fisically your profit forecast to reflect falling
Speaker 1: crop prices. On the positive side, though, Deer said sales
Speaker 1: will drop less than the company predicted. In February, Campbell
Speaker 1: Soup down four and a half percent sales drop for
Speaker 1: the sixth grade quarter, which analysts weren't expecting. Company sitting
Speaker 1: a weaker US soup season, among other things. And you
Speaker 1: mentioned retailing. We've got a couple of more disappointments ross stores,
Speaker 1: one of them that stocks down six percent, the off
Speaker 1: price of Marrow chains, UH first quarter of sales coming
Speaker 1: up short of Esmo, and UH foot Locker down four percent.
Speaker 1: The athletic ware retailer's first quarter sales stores open with
Speaker 1: rose less than as we're looking for. Because the other
Speaker 1: side of that rival, Dick Sporting, goes up two percent.
Speaker 1: The stock upgraded Goldman, Sachs and Morgan Stands. The highlight
Speaker 1: of my week was you whispering in my ear as
Speaker 1: you walked out of the studio on Tuesday. Tom By
Speaker 1: the puts on Walmart. I want to thank you for
Speaker 1: that recommendation. I am a journalist. I am not a
Speaker 1: stop as I tell many many people who send the
Speaker 1: emails that stop lost, Stop lost. Wilson will be with
Speaker 1: us on Bloomberg Radio. My investment advice is worth what
Speaker 1: you pay for David Wilson with wonderful perspective on the
Speaker 1: back and forth of the equity market. Um. I've really
Speaker 1: been looking forward to this. Mr clickman of Standard and Pores,
Speaker 1: looks at the oil business, and he does this with
Speaker 1: an extinguished view over many years of going back and
Speaker 1: forth on oil. Stewart, where do we even start with oil?
Speaker 1: I mean, you've got this star, that star, and the
Speaker 1: other star. Is your business normal? Now? When you look
Speaker 1: at it? Uh, it's I think I think normal have
Speaker 1: been redefined for oil. It seems like any day where
Speaker 1: stocks are moving less than five percent feels like a
Speaker 1: normal day. Now. It used to be um, less than
Speaker 1: call it two percent was a normal move. Um, it's
Speaker 1: it's just it's it's it's really volatile times and you
Speaker 1: have to have kind of an iron stomach. Is the
Speaker 1: balance sheet adjustment over? We had interviews a year and
Speaker 1: a half ago which said the middle of sixteen they'd
Speaker 1: be through that. I don't buy it for a minute.
Speaker 1: Where are we on balance sheet? Uh? Recalibration? No, we're not.
Speaker 1: I don't think we're close yet. I think there's I
Speaker 1: think there's a lot of companies that have persisted in
Speaker 1: among the producers that have persisted so far because they've
Speaker 1: had hedges protecting them while they've been waiting for for
Speaker 1: crew prices to get back to a you know, a
Speaker 1: more tolerable number. And we're not there yet. And you know,
Speaker 1: we started to see more of these Chapter eleven silence
Speaker 1: and I think we're sold there. There's going to be
Speaker 1: more of those to come probably well. Or as for
Speaker 1: West Texas and brand, is that enough to get some
Speaker 1: action restarted or how high would it have to go?
Speaker 1: I think I think the number kind of a linement,
Speaker 1: the stand that you should be looking for is maybe
Speaker 1: sixty dollars a barrel. I think around sixty, there's a
Speaker 1: lot of US shale plays that make economic sense. Below sixty,
Speaker 1: you start to get into problems where there are some
Speaker 1: plays that just aren't driving economic returns. Do we need
Speaker 1: the shale? Do we need shale back to for for
Speaker 1: these oil companies to start making money again and stop contracting? Yeah,
Speaker 1: So it's it's it's the shale that drove that massive
Speaker 1: um boom and production in the US, and it's those
Speaker 1: plays that you know, um, a lot of these companies
Speaker 1: have had to pull back on their on their drilling
Speaker 1: and their and their capex spent. Well, which of them
Speaker 1: is likely to recover soonest which one has has has
Speaker 1: the least bad out going forward? Well, I mean, we
Speaker 1: we've been kind of defensive on energy for a while,
Speaker 1: and I think we're we're largely looking at UM. Some
Speaker 1: of the names that are are larger cap um E
Speaker 1: n P s that AID you know, don't don't run
Speaker 1: cash flow deficits nearly to the same degree that some
Speaker 1: of the smaller ones do. And then secondly, they also
Speaker 1: don't have this they don't have anywhere the same kind
Speaker 1: of debt leverage that the smaller names do. So you know,
Speaker 1: you have a name like you know, Occidental Petroleum, for example,
Speaker 1: which is a it's a pretty large name, it's got
Speaker 1: a good chemical business. Um it has very very low leverage.
Speaker 1: And so I think if if crude prices recover UM,
Speaker 1: that's a name, and I think UM is is better
Speaker 1: position than most to to to do better. What percentage
Speaker 1: of the price move on oil a given oil stock
Speaker 1: in the next three or four or five years is
Speaker 1: just simply a function of the oil price of gaming.
Speaker 1: Here's where we think the terminal value is at four
Speaker 1: or five years here's our bet. That's got to be
Speaker 1: the massive factor, right, you know, it's it's it's obviously
Speaker 1: it's important, but there's a whole bunch of other factors
Speaker 1: that matter to UH. Service cost Inflation is a huge deal. Um.
Speaker 1: You've got currency, which is which has a big impact. UM.
Speaker 1: And then of course you've got you know, you've got geopolitics,
Speaker 1: which is I guess, I guess I gets embedded in
Speaker 1: the oil price too. But you're right, I mean, the
Speaker 1: oil prices is going to be the dominant factor. Do
Speaker 1: you have a single best buy, Um, I don't have
Speaker 1: any strong buys or five stars. You don't, not not
Speaker 1: in the producers. I do have one. I have one
Speaker 1: five stars name across the entire oil patch, which is UH.
Speaker 1: It's a midstream nameed Magellan Midstream Partners ticker mmp UM.
Speaker 1: And that's the name that I think is you know,
Speaker 1: it's it's it flourishes on the boom and refined products
Speaker 1: and we you know, we we we've seen inventories of
Speaker 1: crude oil go up to crazy high levels, the highest
Speaker 1: we've had since nineteen thirty and that has led to
Speaker 1: a boom in product inventories and what Magellan does is
Speaker 1: a lot of movement of refined products and and and
Speaker 1: storage overfine, and it would be clear it's not an
Speaker 1: MLP even though it's got a four point five percent
Speaker 1: dividend with dividend growth five years back. That's pretty good. Yep. Yeah,
Speaker 1: so I think it's a easily well run company and
Speaker 1: it's it's actually in a perverse way. You don't want
Speaker 1: a company with a mapive yield because that raises questions
Speaker 1: about how sustainable it is. Well. Stir clickman, this is
Speaker 1: very good. We're gonna come back and go downstream with
Speaker 1: Mr Glickman, Stanerports, Tulsa, Oklahoma, Magellan MMP sixteen underemployees. We
Speaker 1: said good morning to all listening in Tulsa, Oklahoma. Mike,
Speaker 1: I'm gonna come back. Alan Blinder will join us here
Speaker 1: in a bit. That's an important conversation with a former
Speaker 1: vice chairman of the FED. Let's take it with like
Speaker 1: a bar. Now get the latest world of national headlines,
Speaker 1: my tom, Thank you very much. Egyptian authorities say they
Speaker 1: found playing part ten belongings from the missing egypt Air
Speaker 1: flight eight oh four. Egyptian military ships and aircraft found
Speaker 1: the items about one hundred eighty miles north of Alexandria
Speaker 1: and the Mediterranean Seat authorities say they also found bonding parts.
Speaker 1: The rbs A three twenty was flying from Paris to
Speaker 1: Cairo with sixty six people on board. Donald Trump will
Speaker 1: speak today before the National Rifle Association's annual conference. The
Speaker 1: presumptive Republican presidential nominee will speak at the convention in Louisville, Kentucky.
Speaker 1: The former political organizer for the n r A says
Speaker 1: Trump has been all over the map on the Second Amendment,
Speaker 1: but a lot of the n r a s membership
Speaker 1: is pro Trump. Hillary Clinton says Donald Trump is not
Speaker 1: qualified to be president. She gave her comments during a
Speaker 1: CNN interview. Global News twenty four hours a day, powered
Speaker 1: by our twenty four hundred journalists more than a hundred
Speaker 1: fifty news bureaus around the world on Michael bar Mike,
Speaker 1: Tom and Michael thanks so much. Fish just advanced up
Speaker 1: seven down features of fifty eight the vixed trading before
Speaker 1: the opening sixteen point zero seven the VIX to better
Speaker 1: this morning. We're doing better too with Stuart Glickman of
Speaker 1: SMP Market. Driver is brought to you by the Bank
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Speaker 1: Group US dot Index futures are higher, indicating the SNP
Speaker 1: five well pair a fourth weekly decline. As investors a
Speaker 1: way to report on the housing market for signs to
Speaker 1: the strength of the economy, we checked the markets every
Speaker 1: fifteen minutes about the trading day on Bloomberg SNP even
Speaker 1: a future is up five and a half points. Now
Speaker 1: even A future is up four and a forty four
Speaker 1: nas vacumny future is up twenty two. The decks in
Speaker 1: Germany's up nine tenths per cent ten Your treasury down
Speaker 1: three thirty seconds, the yield one point eight six percent
Speaker 1: non max screwed oil, it'll change down two cents to
Speaker 1: forty eight fourteen a barrel. Comics gold is up three
Speaker 1: tents per cent, or three dollars eighty cents at twelve
Speaker 1: fifty eight fifty announced the euro a dollar twelve twenty seven,
Speaker 1: the N one ten point four zero. That's a Bloomberg
Speaker 1: business flash. Tom and Mike Caaron Moscow. We are discussing
Speaker 1: the oil industry outlook. With oil prices moving higher. At
Speaker 1: the end of the week, we're looking at forty eight
Speaker 1: dollars for both West Texas and Brent, closing in on fifty. However,
Speaker 1: that's not enough, according to Stuart Clickman Uh, he's uh
Speaker 1: with SMB capital i Q and suggesting that we need
Speaker 1: to get to around sixty or so. Tom was looking
Speaker 1: at the stars you have on the various companies. That
Speaker 1: put me in mind, Tom of of a certain of
Speaker 1: a company called the Texas Fuel Company was the original
Speaker 1: name of it, founded in nine o one, went on
Speaker 1: to become better known as Texico. You can trust your
Speaker 1: car to the bad ways the star. So if you're
Speaker 1: looking for a star, uh, you might want to look
Speaker 1: at Texaco. But that made me think about because Texico
Speaker 1: is known for its downstream operations, to art how downstream
Speaker 1: is doing at this point and if the company is
Speaker 1: like UM, like Excitomobile or Chevin, with Texico, our better
Speaker 1: position because people are still going buy gasoline even if
Speaker 1: the price goes down, you know, your input prices lower. Yeah,
Speaker 1: downstream has really been the saving grace for for a
Speaker 1: bunch of the integrated in the in the last several
Speaker 1: quarters because even though upstreams and generating losses, refining has
Speaker 1: has kind of helped blunt those losses are in xcellns case,
Speaker 1: actually help deliver an overall profit. So I think I
Speaker 1: think firms like UM, Concho and Marathon, which divested their
Speaker 1: downstream operations several years ago, are probably looking wistfully at
Speaker 1: those downstream UM operations now and thinking, geez, if we
Speaker 1: just kept those, we we'd we'd probably be making money. Um.
Speaker 1: The margins for downstream are not as good as they
Speaker 1: had been last year, and I think it's a reflection
Speaker 1: of how much excess supply of refined products is now
Speaker 1: kind of pouring into the marketplace. But they're still they're
Speaker 1: still profitable, they're still making money. It's just not quite
Speaker 1: as good as as what it was like in especially
Speaker 1: does I'm thinking of this because I'm looking at Texico
Speaker 1: and I'm thinking of the old jingle. Um does does
Speaker 1: brand matter downstream anymore to driver's care? It used to be,
Speaker 1: you know, a handful of names, we all knew what
Speaker 1: we're on the gas stations that you get everybody from
Speaker 1: the Russians with Luke oil, uh, you know, to the
Speaker 1: to the bargain brands. Uh? Or do people just look
Speaker 1: at the price? I think it's really just price driven.
Speaker 1: I think you go to those corners where you've got
Speaker 1: three gas stations all at the same location, and there
Speaker 1: there may be you know, a cent different per gallon
Speaker 1: um relative to each other. I I really don't think
Speaker 1: that that that brand has much of an influence now,
Speaker 1: you know. I look Steward all of this and downstream
Speaker 1: and that, and uh it goes to that. I think
Speaker 1: it's a cf A level four. Uh not in my backyard.
Speaker 1: Economics give us an update on the ability to make
Speaker 1: new technology downstream? Can you actually go out and build something? Uh?
Speaker 1: It would be extremely difficult and not impossible to to
Speaker 1: build any kind of what they call a greenfield plants
Speaker 1: starting with you know, just sort of just sort of
Speaker 1: breaking ground on a on a on an open piece
Speaker 1: of earth and trying to build a new refinery because
Speaker 1: nobody wants one, like you said, in their backyard. What
Speaker 1: you can do is you can do what are called
Speaker 1: brown field expansions, where you're taking an existing plant and
Speaker 1: adding to it, and in some cases it might be
Speaker 1: um tweaking the operations of the refinement so that you
Speaker 1: can you can turn around and generate more gasoline than
Speaker 1: diesel because gasoline right now is preferred to diesel. So
Speaker 1: you can do little operations like that. You can do
Speaker 1: you can add a condensate splitter so that you can
Speaker 1: take some of this these large volumes of for example,
Speaker 1: Evilford content sate and turn that into um um into
Speaker 1: refined products with you and I can use. So those
Speaker 1: are those are smaller projects um and and and we've
Speaker 1: already seen refineries do a lot of those, and I
Speaker 1: think there's gonna be more to come. Is there a
Speaker 1: technological revolution going on and downstream that will make it
Speaker 1: as uh jaw dropping is what we saw upstream with
Speaker 1: fracking and such. Well, that's tough that that's a it's
Speaker 1: a great question and it's tough to answer. And you know,
Speaker 1: you have to keep in mind this is from an
Speaker 1: industry that ten years ago, if you would ask them,
Speaker 1: is there any way that the US can can stem
Speaker 1: the tide of this dwindling production in the US, I
Speaker 1: think everybody would have told you no, it just wasn't.
Speaker 1: It wasn't something that was really on the radar. I
Speaker 1: I don't think that um, technological advances downstream are going
Speaker 1: to be game changing. UM. You know, despite that context, UM,
Speaker 1: I do think that there's going to be an awful
Speaker 1: lot of technological innovation in alternative energy, and I think
Speaker 1: that's going to be amazing driver over the next ten
Speaker 1: twenty years. Stewart think when standard pours an oil upstream
Speaker 1: and downstream is well, Michael, a very important interview coming up.
Speaker 1: The backdrop of this is where our nation is, where
Speaker 1: a monetary policy is, but but also just a real
Speaker 1: question about where the underpinnings of theory are given negative
Speaker 1: interest rates in such it's always interesting with the gentleman
Speaker 1: from Princeton on Blinder will be with us in just
Speaker 1: a moment, I got a cf A problem for you here.
Speaker 1: This is the math. Since we're doing math Friday dot com,
Speaker 1: uh have noted that Papa John's Pizza has given away
Speaker 1: in like twenty two ballparks around the country, and they
Speaker 1: have either team has to win or your team has
Speaker 1: to score a certain number of runs. They've put statistics
Speaker 1: to work here and figured out where you are most
Speaker 1: likely to getting free pizza. Please quickly. I think that
Speaker 1: is a problem with Taylor Riggs and the other studying
Speaker 1: for CFA should put their minds to. But St. Louis,
Speaker 1: all you have to do is win, and the Cardinals
Speaker 1: are good enough to have a fifty two point nine
Speaker 1: percent chance of winning. Very good. The Atlanta Braves, not
Speaker 1: only are there a terrible team, but the team has
Speaker 1: to score six runs to get a free pizza. You
Speaker 1: only have a seven point seven percent chance of getting it.
Speaker 1: Here in New York fourteen point four percent at the
Speaker 1: Yankee Stadium. I'm glad you mentioned Texico and the Texico Star.
Speaker 1: We said good morning to all in Nashville. Vince Melamett
Speaker 1: with one of the great songs for Tricia Herwood. Here
Speaker 1: she is under the star she Bloomberks. Surveillances are brought
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