1 00:00:02,640 --> 00:00:12,960 Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,479 Speaker 1: Bloomberg dot Com, and of course on the Bloomberger. Let's 5 00:00:27,520 --> 00:00:30,760 Speaker 1: take a look at the economy, shall we. We have 6 00:00:30,880 --> 00:00:33,960 Speaker 1: the consumer very strong, we had retail sales. Looks like 7 00:00:33,960 --> 00:00:35,839 Speaker 1: the holiday retail sales are gonna come in about three 8 00:00:35,840 --> 00:00:38,840 Speaker 1: and a half percent growth year over year. That looks 9 00:00:39,840 --> 00:00:42,280 Speaker 1: very strong for the U S conserner. We've seen that before. 10 00:00:42,280 --> 00:00:44,960 Speaker 1: We strong job numbers, strong retail sales. It's got a 11 00:00:45,000 --> 00:00:47,760 Speaker 1: sense of whether that will continue to push us in 12 00:00:48,560 --> 00:00:51,880 Speaker 1: Andrew Holland Horst, he's the chief US economist for City. 13 00:00:51,920 --> 00:00:54,080 Speaker 1: He joins us here on a Bloomberg Interactive broker studio. 14 00:00:54,320 --> 00:00:56,360 Speaker 1: He just did a stint on Bloomberg Television. So we 15 00:00:56,400 --> 00:00:58,720 Speaker 1: are working Andrew hard today. Andrew, thanks so much for 16 00:00:58,840 --> 00:01:02,400 Speaker 1: joining us. What is your thought for I mean, the 17 00:01:02,520 --> 00:01:05,240 Speaker 1: consumer and the US economy seem to be kind of 18 00:01:05,319 --> 00:01:07,680 Speaker 1: chugging along here. Yeah, I think it still continues to 19 00:01:07,720 --> 00:01:10,399 Speaker 1: power ahead. I mean, we've had this really positive story 20 00:01:10,440 --> 00:01:13,039 Speaker 1: around what's going on with jobs, what's going on with wages, 21 00:01:13,640 --> 00:01:16,880 Speaker 1: that's supporting incomes and in turn supporting spending. So you know, 22 00:01:16,959 --> 00:01:20,080 Speaker 1: historically low unemployment rate. These are all the kind of 23 00:01:20,120 --> 00:01:22,280 Speaker 1: elements that you need for a strong consumer economy that 24 00:01:22,560 --> 00:01:24,480 Speaker 1: more concerned about what's going on in other places in 25 00:01:24,520 --> 00:01:26,520 Speaker 1: the economy. But the consumer, if you just focus on 26 00:01:26,560 --> 00:01:30,440 Speaker 1: that very very strong, what can break the streak. So 27 00:01:30,880 --> 00:01:33,400 Speaker 1: a few things that we were worried about in nineteen 28 00:01:33,440 --> 00:01:36,360 Speaker 1: that you would still think about going into One is 29 00:01:36,760 --> 00:01:38,920 Speaker 1: do you get a big correction in risk assets And 30 00:01:39,000 --> 00:01:40,880 Speaker 1: we don't think that will happen, but if you were 31 00:01:40,920 --> 00:01:42,640 Speaker 1: to get a big drop then we saw that at 32 00:01:42,680 --> 00:01:45,839 Speaker 1: the end of eighteen going into twenty nineteen and consumers 33 00:01:45,840 --> 00:01:48,040 Speaker 1: pulled back. So if we get a big drop in 34 00:01:48,120 --> 00:01:50,800 Speaker 1: equity markets, that's something that could slow down consumption. The 35 00:01:50,800 --> 00:01:53,560 Speaker 1: other thing that could, of course, always change is the 36 00:01:53,600 --> 00:01:56,160 Speaker 1: positives that we're talking about. If those jobs numbers start 37 00:01:56,240 --> 00:02:00,280 Speaker 1: to slow down, and there was a time in looked 38 00:02:00,280 --> 00:02:02,920 Speaker 1: like maybe they were now as we're going into actually 39 00:02:02,960 --> 00:02:05,160 Speaker 1: looks like they're holding up quite well. Um. But so 40 00:02:05,320 --> 00:02:08,320 Speaker 1: either this kind of pullback and sentiment among consumers that's 41 00:02:08,320 --> 00:02:10,240 Speaker 1: something that we're watching, or do you just get a 42 00:02:10,240 --> 00:02:12,640 Speaker 1: fundamental slowing and job growth. So I listened to you 43 00:02:12,639 --> 00:02:15,559 Speaker 1: on Bloomberg Television earlier today and you said that impeachment 44 00:02:15,720 --> 00:02:20,160 Speaker 1: wasn't necessarily something that would upend the markets, but that 45 00:02:20,280 --> 00:02:23,560 Speaker 1: the election rhetoric could. And I'm wondering, how does that 46 00:02:23,600 --> 00:02:26,560 Speaker 1: play into this kind of healthy economy that we're seeing 47 00:02:26,639 --> 00:02:29,040 Speaker 1: right now. Yeah, so these are the things that are 48 00:02:29,120 --> 00:02:31,839 Speaker 1: much harder to kind of forecast or get your hands 49 00:02:31,880 --> 00:02:35,200 Speaker 1: around as an economist. Um. So, like I was saying, 50 00:02:35,280 --> 00:02:37,720 Speaker 1: you have very different visions that are being presented for 51 00:02:37,800 --> 00:02:40,079 Speaker 1: the U. S. Economy. Of Course that's something that investors 52 00:02:40,120 --> 00:02:41,600 Speaker 1: have to take into account. Of course that's something that 53 00:02:41,639 --> 00:02:44,680 Speaker 1: economists have to take into account. Um, it still looks 54 00:02:44,760 --> 00:02:47,960 Speaker 1: like the modal outcome, the most likely outcome is that 55 00:02:48,240 --> 00:02:50,800 Speaker 1: while the U. S. Economy kind of continues along on 56 00:02:50,880 --> 00:02:53,840 Speaker 1: its current trajectory, which is this, you know, roughly two 57 00:02:53,840 --> 00:02:56,280 Speaker 1: percent growth. But I I think the point I was 58 00:02:56,320 --> 00:02:58,520 Speaker 1: making and we continue to make, is that this will 59 00:02:58,560 --> 00:03:02,120 Speaker 1: be an important theme in twenty twenty investors watching what's 60 00:03:02,120 --> 00:03:05,400 Speaker 1: going on with both the politics between parties and within 61 00:03:05,440 --> 00:03:07,519 Speaker 1: the parties. I'm trying to figure out what this really 62 00:03:07,520 --> 00:03:09,560 Speaker 1: means for the economy. So, Andrew, one of the you 63 00:03:09,600 --> 00:03:12,880 Speaker 1: know that one third of the economy that is manufacturing 64 00:03:12,960 --> 00:03:17,520 Speaker 1: business investment that is weak. We've got the manufacturing sector 65 00:03:17,680 --> 00:03:20,280 Speaker 1: contracting now for several months in a row. Do we 66 00:03:20,440 --> 00:03:22,360 Speaker 1: just kind of ignore that and because the consumer is 67 00:03:22,360 --> 00:03:25,240 Speaker 1: still so strong, Yeah, so definitely don't ignore it. I 68 00:03:25,280 --> 00:03:27,639 Speaker 1: think that is the key downside risk that we want 69 00:03:27,639 --> 00:03:31,600 Speaker 1: to continue watching. UM some positive stories. They're one is 70 00:03:31,760 --> 00:03:34,040 Speaker 1: it looks like and I think it's too early to 71 00:03:34,080 --> 00:03:35,880 Speaker 1: say anything more than it looks like, but it looks 72 00:03:35,920 --> 00:03:38,920 Speaker 1: like globally, maybe the weak manufacturing story is bottomed a 73 00:03:38,920 --> 00:03:41,640 Speaker 1: little bit. You see globally that data starting to turn over, 74 00:03:41,640 --> 00:03:43,800 Speaker 1: and if that continues, UM, then that would be a 75 00:03:43,840 --> 00:03:47,600 Speaker 1: positive dynamic for the US. Also, you have these idiosyncratic 76 00:03:47,760 --> 00:03:50,440 Speaker 1: u S specific issues. You had an auto workers strike 77 00:03:50,920 --> 00:03:54,920 Speaker 1: and you had the grounding of certain aircraft. If production 78 00:03:55,080 --> 00:03:59,080 Speaker 1: picks up as we head into twenty twenty around those 79 00:03:59,280 --> 00:04:01,600 Speaker 1: two store is that could be positive for manufacturing. But 80 00:04:01,640 --> 00:04:05,480 Speaker 1: particularly on the airplane story, that keeps getting pushed further 81 00:04:05,520 --> 00:04:07,640 Speaker 1: and further out. So yeah, I don't even know how 82 00:04:07,680 --> 00:04:10,760 Speaker 1: we Maybe I guess My question is, how do you 83 00:04:10,840 --> 00:04:12,760 Speaker 1: kind of account for that of economist account for that, 84 00:04:12,840 --> 00:04:14,960 Speaker 1: because I think about the supply chain for Boeing, it 85 00:04:15,080 --> 00:04:17,760 Speaker 1: just kind of stretches coast to coast and you know, 86 00:04:17,800 --> 00:04:20,279 Speaker 1: a whole host of industries. Yeah, it's it's definitely a 87 00:04:20,320 --> 00:04:23,920 Speaker 1: macroeconomically significant issue. This is not you know, some small 88 00:04:24,000 --> 00:04:27,240 Speaker 1: company's specific issue. It really matters for the US economy 89 00:04:27,640 --> 00:04:30,360 Speaker 1: UM and that supply chain is really important. So when 90 00:04:30,480 --> 00:04:34,880 Speaker 1: you know, we're talking about a shutdown of production in January, UM, 91 00:04:34,920 --> 00:04:38,840 Speaker 1: but then does the supply chain actually continue to produce? 92 00:04:38,960 --> 00:04:42,040 Speaker 1: If the supply chain continues producing during that time, then 93 00:04:42,040 --> 00:04:45,880 Speaker 1: you're not producing final completed aircraft, but you still are 94 00:04:45,920 --> 00:04:49,680 Speaker 1: keeping those workers employed in the supply chain. You're producing 95 00:04:49,760 --> 00:04:53,680 Speaker 1: parts that ultimately go into those final aircraft, so that 96 00:04:53,680 --> 00:04:56,359 Speaker 1: can kind of support demand while we wait for a 97 00:04:56,440 --> 00:04:59,040 Speaker 1: full restarting of production, which should happen at some point. 98 00:04:59,120 --> 00:05:01,279 Speaker 1: Something we talk a lot of about at this table 99 00:05:01,440 --> 00:05:05,160 Speaker 1: is the impact of automation on jobs. Obviously, the manufacturing 100 00:05:05,200 --> 00:05:07,599 Speaker 1: sector has seen a lot of this. It's floating into 101 00:05:07,640 --> 00:05:09,400 Speaker 1: a lot of other sectors. I cover the banks. We 102 00:05:09,560 --> 00:05:11,920 Speaker 1: see thousands of job cuts around the world, partially in 103 00:05:11,960 --> 00:05:14,520 Speaker 1: the name of automation. When you're thinking of automation, how 104 00:05:14,560 --> 00:05:17,719 Speaker 1: do you factor this into your longer term outlook on 105 00:05:18,400 --> 00:05:21,800 Speaker 1: what happens with jobs and what happens with growth, And 106 00:05:21,839 --> 00:05:25,080 Speaker 1: so this matters so much, and you have to be 107 00:05:25,160 --> 00:05:28,400 Speaker 1: careful because there have been many times in history when 108 00:05:28,440 --> 00:05:31,200 Speaker 1: we've looked at technological advances and said, this is the 109 00:05:31,320 --> 00:05:33,200 Speaker 1: end of labor, this is the end of workers. There's 110 00:05:33,240 --> 00:05:35,560 Speaker 1: gonna be no role for humans, um, And they're always 111 00:05:35,720 --> 00:05:38,120 Speaker 1: has been. But what we need to be very careful 112 00:05:38,160 --> 00:05:43,000 Speaker 1: about with this transition to more automation is that those 113 00:05:43,040 --> 00:05:47,240 Speaker 1: opportunities are created for the existing workforce. So we know, 114 00:05:47,400 --> 00:05:50,600 Speaker 1: as you were mentioning, there are certain industries where it's 115 00:05:50,640 --> 00:05:52,839 Speaker 1: just not going to make sense for humans to be 116 00:05:52,880 --> 00:05:54,320 Speaker 1: doing the jobs that they used to be doing in 117 00:05:54,360 --> 00:05:58,960 Speaker 1: those industries. Um, But are we creating new opportunities? Are 118 00:05:58,960 --> 00:06:02,920 Speaker 1: we creating new engines of growth? So maybe maybe you don't. 119 00:06:03,200 --> 00:06:05,200 Speaker 1: It's not clear yet. It's not clear yet that we are. 120 00:06:05,279 --> 00:06:06,960 Speaker 1: And I think I think that that that is the 121 00:06:07,360 --> 00:06:10,960 Speaker 1: kind of you know, difficulty of navigating this transition. So 122 00:06:11,200 --> 00:06:13,640 Speaker 1: maybe you have less traditional manufacturing jobs, we should have 123 00:06:13,720 --> 00:06:16,480 Speaker 1: more jobs around things like three d printing. Are we 124 00:06:16,520 --> 00:06:19,159 Speaker 1: really seeing those jobs come through? Um, that's what we're 125 00:06:19,160 --> 00:06:21,320 Speaker 1: looking for, and that will be an ultimately positive story 126 00:06:21,320 --> 00:06:23,480 Speaker 1: for the economy if we get there. So, Andrew, we've 127 00:06:24,120 --> 00:06:26,120 Speaker 1: you know, the trade has been such a big, big 128 00:06:26,160 --> 00:06:29,120 Speaker 1: issue for nineteen is kind of faded over the last 129 00:06:29,160 --> 00:06:30,600 Speaker 1: couple of weeks a little bit least, you know, in 130 00:06:30,680 --> 00:06:33,080 Speaker 1: terms of the news flow and the tweet flow. How 131 00:06:33,080 --> 00:06:36,680 Speaker 1: do you kind of gauge the trade uncertainty into your 132 00:06:37,120 --> 00:06:42,839 Speaker 1: economic forecast? For so any uncertainty, and in particular uncertainty 133 00:06:42,880 --> 00:06:45,600 Speaker 1: around trade is something that's gonna tend to hold back investment. 134 00:06:45,600 --> 00:06:47,320 Speaker 1: People are gonna want to wait, They're gonna want to 135 00:06:47,320 --> 00:06:50,200 Speaker 1: see what the actual outcome is. Um. That's true around trade, 136 00:06:50,200 --> 00:06:55,599 Speaker 1: It's true around politics, Brexit, everything. Um. It does seem that, 137 00:06:55,680 --> 00:06:58,440 Speaker 1: at least in a short term sense, we've had a 138 00:06:58,440 --> 00:07:02,440 Speaker 1: decrease in uncertainty. So there's still massive uncertainty about where 139 00:07:02,480 --> 00:07:04,680 Speaker 1: this story goes over the next five years, over the 140 00:07:04,720 --> 00:07:06,680 Speaker 1: next ten years. But as you look out over the 141 00:07:06,680 --> 00:07:09,880 Speaker 1: next six months, it seems like there are at least 142 00:07:09,880 --> 00:07:11,760 Speaker 1: the contours of a Phase one deal that have been 143 00:07:11,800 --> 00:07:14,640 Speaker 1: agreed to. It looks like these agricultural exports are going 144 00:07:14,720 --> 00:07:17,440 Speaker 1: to be restarted. UM. So all of that is short 145 00:07:17,520 --> 00:07:20,160 Speaker 1: term positive and that should helped unleash some of the 146 00:07:20,240 --> 00:07:23,760 Speaker 1: pent up investment that was waiting for some short term 147 00:07:23,760 --> 00:07:26,040 Speaker 1: resolution of uncertainty. Now, do you have a long term 148 00:07:26,080 --> 00:07:29,160 Speaker 1: resolution resolution of uncertainty where you can think about making 149 00:07:29,320 --> 00:07:31,440 Speaker 1: plans for the next five years, the next ten years. 150 00:07:31,560 --> 00:07:33,720 Speaker 1: I think that's a lot less clear. Can I ask 151 00:07:33,800 --> 00:07:36,720 Speaker 1: you also about the Federal Reserve, because I think you 152 00:07:36,720 --> 00:07:38,440 Speaker 1: have a more balanced view than a lot of people 153 00:07:38,480 --> 00:07:41,560 Speaker 1: who believe, yes, this is definitely quey and no, this 154 00:07:41,640 --> 00:07:45,000 Speaker 1: is absolutely not. But can you explain to us how 155 00:07:45,080 --> 00:07:47,880 Speaker 1: much is the is the FED propping up the economy 156 00:07:47,920 --> 00:07:50,880 Speaker 1: more than people realize right now? So there is a 157 00:07:50,960 --> 00:07:53,240 Speaker 1: very important sense in which the FED is important the 158 00:07:53,400 --> 00:07:58,200 Speaker 1: supporting the economy, and that's that's largely through low interest rates. 159 00:07:58,200 --> 00:08:01,200 Speaker 1: And they've achieved low long term interest traits both through 160 00:08:01,240 --> 00:08:04,560 Speaker 1: their bond purchase programs, which I would say, what they're 161 00:08:04,600 --> 00:08:06,320 Speaker 1: doing right now, I would not call it QUI. I 162 00:08:06,360 --> 00:08:08,200 Speaker 1: think many in the market will see it as qua 163 00:08:08,280 --> 00:08:10,160 Speaker 1: when we come back to that in a second. UM. 164 00:08:10,160 --> 00:08:13,120 Speaker 1: But low long term rates, which is partly these que programs, 165 00:08:13,160 --> 00:08:15,760 Speaker 1: but partly just the fact that the Fed is held 166 00:08:15,840 --> 00:08:18,160 Speaker 1: rates relatively low. It looks like the top of this 167 00:08:18,200 --> 00:08:20,920 Speaker 1: interest rate hiking cycle is going to be sub three percent, 168 00:08:21,280 --> 00:08:23,840 Speaker 1: and we're thinking about staying around these levels or maybe 169 00:08:23,880 --> 00:08:26,360 Speaker 1: in the future going down from these levels. So that's 170 00:08:26,400 --> 00:08:28,360 Speaker 1: gonna keep rates low. That's going to support the economy. 171 00:08:28,440 --> 00:08:31,000 Speaker 1: In terms of the specific program, at the end of 172 00:08:31,000 --> 00:08:33,880 Speaker 1: the day, they're buying T bills that's a three month, 173 00:08:34,000 --> 00:08:37,080 Speaker 1: six month liability of the U. S. Government that pays interest. 174 00:08:37,800 --> 00:08:39,800 Speaker 1: They take those T bills out of supply, and they 175 00:08:39,840 --> 00:08:42,800 Speaker 1: add reserves, which are an overnight interest paying liability of 176 00:08:42,800 --> 00:08:44,240 Speaker 1: the U. S. Government. So it's not clear that that's 177 00:08:44,240 --> 00:08:46,040 Speaker 1: really doing much. Okay, so we're not gonna call it 178 00:08:46,120 --> 00:08:49,199 Speaker 1: QUI at this moment. Andrew Holland Horse, thanks so much 179 00:08:49,200 --> 00:08:52,920 Speaker 1: for joining us. Andrews the chief US economists for City. 180 00:08:52,920 --> 00:08:55,679 Speaker 1: We appreciate them coming here to our Bloomberg Interactive Broker 181 00:08:55,679 --> 00:08:58,280 Speaker 1: studio giving us his thoughts for the economy. Again, as 182 00:08:58,280 --> 00:08:59,640 Speaker 1: we just kind of take a look at the most 183 00:08:59,640 --> 00:09:02,680 Speaker 1: recent data point, call it holiday retail sales pretty strong, 184 00:09:02,960 --> 00:09:06,480 Speaker 1: suggesting once again that the consumer is pretty strong, which 185 00:09:06,559 --> 00:09:08,640 Speaker 1: contends once again that the U S economy reigns on 186 00:09:08,720 --> 00:09:27,240 Speaker 1: pretty fair footing. We continue to see really disturbing images 187 00:09:27,280 --> 00:09:30,080 Speaker 1: coming from Hong Kong that the protests they're just so 188 00:09:30,280 --> 00:09:33,959 Speaker 1: no signs of winding down. The persistence, I think, is 189 00:09:34,000 --> 00:09:36,160 Speaker 1: it really amazing to a lot of us who are 190 00:09:36,320 --> 00:09:39,280 Speaker 1: watching these issues. You get the latest cheer. We welcome 191 00:09:39,360 --> 00:09:42,840 Speaker 1: Karen Lee. She has Bloomberg News, a Greater China Government editor. 192 00:09:43,320 --> 00:09:46,280 Speaker 1: She joins us on the phone. Uh, Karen, thanks so 193 00:09:46,400 --> 00:09:49,040 Speaker 1: much for joining us. Give us the latest of what 194 00:09:49,240 --> 00:09:54,280 Speaker 1: is happening in Hong Kong right now. Well, there are 195 00:09:54,280 --> 00:09:57,719 Speaker 1: protests scheduled for tonight in an area called Satan, which 196 00:09:57,720 --> 00:09:59,920 Speaker 1: has seen some of the more violent protester but the 197 00:10:00,000 --> 00:10:02,480 Speaker 1: past six months, and then again over the weekend in 198 00:10:02,520 --> 00:10:05,240 Speaker 1: an area near the Chinese border. UM. And this is 199 00:10:05,360 --> 00:10:07,680 Speaker 1: leading up to a major rally that's been planned for 200 00:10:07,800 --> 00:10:10,920 Speaker 1: New Year's Day organized by the Civil Human Rights Plant, 201 00:10:10,920 --> 00:10:13,560 Speaker 1: which is the organization that's home some of the biggest 202 00:10:13,600 --> 00:10:19,080 Speaker 1: peaceful protests since these demonstrations against China's grips began in June. 203 00:10:19,440 --> 00:10:21,439 Speaker 1: So we're going to be watching over the next few 204 00:10:21,480 --> 00:10:24,600 Speaker 1: days to see what the turnouts like. UM, how big 205 00:10:24,640 --> 00:10:27,920 Speaker 1: the classes between protesters and police, get if there are 206 00:10:28,000 --> 00:10:30,520 Speaker 1: classes at all, and to stands. We can draw a 207 00:10:30,559 --> 00:10:33,080 Speaker 1: new signals from all of this, especially the turnout on 208 00:10:33,160 --> 00:10:37,280 Speaker 1: January first, as to how much momentum this movement sustands 209 00:10:37,320 --> 00:10:41,120 Speaker 1: going into So, Karen, just give us a sense an 210 00:10:41,200 --> 00:10:44,400 Speaker 1: updated view of kind of what the protesters are really 211 00:10:44,440 --> 00:10:48,280 Speaker 1: protesting for right now. It's been months and months and months. 212 00:10:48,320 --> 00:10:53,440 Speaker 1: What kind of change are they really looking for right now? Yeah, Well, 213 00:10:53,480 --> 00:10:56,200 Speaker 1: their demands have shifted a lot over the past six months, 214 00:10:56,200 --> 00:10:59,640 Speaker 1: and this of course began um as blowback against a 215 00:10:59,720 --> 00:11:04,679 Speaker 1: really unpopular extradition law that would have allowed UM transfers 216 00:11:04,679 --> 00:11:08,160 Speaker 1: to mainland China, and it morphed pretty quickly into this 217 00:11:08,280 --> 00:11:13,000 Speaker 1: wider movement against Beijing script and protesters demands in that time. 218 00:11:13,320 --> 00:11:15,840 Speaker 1: It's since that time have changed. Right now, one of 219 00:11:15,840 --> 00:11:18,400 Speaker 1: the biggest demands is not the biggest, is an independent 220 00:11:18,440 --> 00:11:22,439 Speaker 1: inquiry into aggressive behavior by police and their conduct in 221 00:11:22,559 --> 00:11:25,640 Speaker 1: dispersing these protests. Going back to some of those images 222 00:11:25,679 --> 00:11:27,760 Speaker 1: we were talking about with these big clouds of tear 223 00:11:27,840 --> 00:11:30,640 Speaker 1: gas covering over these areas of Hong Kong where you 224 00:11:30,679 --> 00:11:33,280 Speaker 1: never thought you would see tear gas over the city center, 225 00:11:33,559 --> 00:11:36,360 Speaker 1: I'm going again, even on Christmas Eve, over a popular 226 00:11:36,400 --> 00:11:39,240 Speaker 1: shopping area in front of the Peninsula Hotel, which is 227 00:11:39,280 --> 00:11:42,400 Speaker 1: one of the most generated hotels here. UM. During this 228 00:11:42,640 --> 00:11:46,280 Speaker 1: what has been a major shopping season for this economy 229 00:11:46,320 --> 00:11:49,880 Speaker 1: that still runs on tourism and resale. UM. So we're 230 00:11:49,880 --> 00:11:52,560 Speaker 1: going to be looking at the new year really not 231 00:11:52,640 --> 00:11:55,600 Speaker 1: only to see whether this sustains its momentum, but whether 232 00:11:55,640 --> 00:11:58,480 Speaker 1: the demands shift again. UM, and what they shift to. 233 00:12:00,000 --> 00:12:02,120 Speaker 1: You give us a sense of the tone here, because 234 00:12:02,480 --> 00:12:06,280 Speaker 1: over the holiday hundreds were arrested. I'm looking at headlines. Now, 235 00:12:07,360 --> 00:12:11,800 Speaker 1: how much is this really escalating? UM? You know, this 236 00:12:11,880 --> 00:12:14,240 Speaker 1: has really become the new normal in a way for 237 00:12:14,320 --> 00:12:16,959 Speaker 1: this city, at least for parts of it. UM. And 238 00:12:17,120 --> 00:12:20,880 Speaker 1: what we saw on Christmas Eve was not shocking to 239 00:12:20,960 --> 00:12:24,080 Speaker 1: those of us who've been watching it for a while. UM. 240 00:12:24,160 --> 00:12:27,320 Speaker 1: We've become quite used to seeing these kind of clashes 241 00:12:27,360 --> 00:12:32,079 Speaker 1: scattered around town, especially in the area where they happened. UM. 242 00:12:32,120 --> 00:12:35,400 Speaker 1: And we've seen more violence than we saw on Christmas Eve. 243 00:12:35,440 --> 00:12:39,520 Speaker 1: And we've been seeing occasional live ammunition. UM. We've seen 244 00:12:39,559 --> 00:12:44,200 Speaker 1: webberable expired from pretty close range. UM. College campuses turned 245 00:12:44,240 --> 00:12:47,360 Speaker 1: into it looked like battle ground. UM. So really the 246 00:12:47,400 --> 00:12:50,960 Speaker 1: context for Christmas Eves importance was more that it happened 247 00:12:50,960 --> 00:12:53,000 Speaker 1: on the holiday and that it happened in an area 248 00:12:53,040 --> 00:12:57,199 Speaker 1: that nearest past um would have been full of tourists 249 00:12:57,240 --> 00:12:59,839 Speaker 1: and holiday shoppers. UM. In this year, it was a 250 00:13:00,080 --> 00:13:01,839 Speaker 1: of a different picture, and I think for a lot 251 00:13:01,880 --> 00:13:04,160 Speaker 1: of people that really serve to show what's happened to 252 00:13:04,240 --> 00:13:06,360 Speaker 1: the city over the past year and the kind of 253 00:13:06,480 --> 00:13:09,080 Speaker 1: impact that all of this has had on tourism and 254 00:13:09,120 --> 00:13:11,959 Speaker 1: retail UM, so of which have taken a massive hit. 255 00:13:12,120 --> 00:13:15,000 Speaker 1: So UM, we're going to We're going to see what 256 00:13:15,040 --> 00:13:17,800 Speaker 1: happens now on New Year's Day. But really the Sidney 257 00:13:17,880 --> 00:13:21,520 Speaker 1: bracing for a much bigger protests UM in the next 258 00:13:21,520 --> 00:13:23,839 Speaker 1: few days. Well, that was what I was gonna ask. Next. 259 00:13:23,960 --> 00:13:28,719 Speaker 1: What can we expect on January one? UM, Well, this 260 00:13:28,840 --> 00:13:31,800 Speaker 1: protest is being organized by the Similar Human Rights Front. 261 00:13:31,960 --> 00:13:35,040 Speaker 1: It is the organization that has brought millions of people 262 00:13:35,080 --> 00:13:38,280 Speaker 1: out onto the street UM at various points throughout all 263 00:13:38,280 --> 00:13:40,880 Speaker 1: of this. They organized the huge marches earlier in the 264 00:13:40,920 --> 00:13:43,080 Speaker 1: summer that really kicked this movement off and got it 265 00:13:43,080 --> 00:13:45,800 Speaker 1: in the global headlines. UM. And they're still waiting for 266 00:13:45,800 --> 00:13:48,800 Speaker 1: a police permit to march UM. They don't have that yet, 267 00:13:48,880 --> 00:13:51,680 Speaker 1: but even if they don't, we think that people will 268 00:13:51,720 --> 00:13:54,560 Speaker 1: still probably come out and they'll protest illegally and there 269 00:13:54,559 --> 00:13:57,520 Speaker 1: will be more arrest UM. So we're going to be 270 00:13:57,559 --> 00:14:00,200 Speaker 1: looking to see what the turnout is and they they've 271 00:14:00,360 --> 00:14:04,480 Speaker 1: they've generally get much figure furn out UM than other 272 00:14:04,640 --> 00:14:10,199 Speaker 1: protests organized by other UM either opposition groups or or activists. 273 00:14:10,240 --> 00:14:12,240 Speaker 1: So UM, and this is going to happen on a 274 00:14:12,320 --> 00:14:15,960 Speaker 1: day when before off here UM people might want to 275 00:14:16,000 --> 00:14:18,640 Speaker 1: send a signal that they do you intend to fight 276 00:14:18,720 --> 00:14:21,040 Speaker 1: into and if they want to do that, this is 277 00:14:21,080 --> 00:14:22,880 Speaker 1: going to be a good day to do it. So 278 00:14:22,960 --> 00:14:25,720 Speaker 1: it really will be UM a signal to us and 279 00:14:25,880 --> 00:14:28,520 Speaker 1: what we might expect going into the new year in 280 00:14:28,560 --> 00:14:31,120 Speaker 1: the first few months of the new year. Hey, Karen, 281 00:14:31,160 --> 00:14:33,000 Speaker 1: thanks so much for joining us. We really appreciate that. 282 00:14:33,080 --> 00:14:36,080 Speaker 1: On the spot reporting from Hong Kong, Karen Lye, Bloomberg 283 00:14:36,120 --> 00:14:51,720 Speaker 1: News Greater China Government Editor. Do you get a sense 284 00:14:51,720 --> 00:14:53,360 Speaker 1: of kind of what we should be thinking about as 285 00:14:53,400 --> 00:14:56,640 Speaker 1: we think about oil for Welcome Kevin book clear View 286 00:14:56,720 --> 00:14:59,000 Speaker 1: Energy Partner's head of research. Kevin, thanks so much for 287 00:14:59,200 --> 00:15:01,920 Speaker 1: joining us. So as we take a look at crude 288 00:15:01,960 --> 00:15:05,000 Speaker 1: around the world. Is it fair to say this is 289 00:15:05,040 --> 00:15:08,000 Speaker 1: just a clean proxy for what the market thinks is 290 00:15:08,000 --> 00:15:10,520 Speaker 1: going to happen to global trade and trade tensions between 291 00:15:10,640 --> 00:15:14,000 Speaker 1: US and China. Well, they're surely related. But we're also 292 00:15:14,080 --> 00:15:17,360 Speaker 1: in a seasonal second half of the year demands peak, 293 00:15:17,600 --> 00:15:19,840 Speaker 1: So when you think about what you're coming up to 294 00:15:20,040 --> 00:15:23,120 Speaker 1: in the first quarter and the second quarter, you're gonna 295 00:15:23,120 --> 00:15:26,360 Speaker 1: have the seasonal troughs. Uh So this is as strong 296 00:15:26,720 --> 00:15:30,040 Speaker 1: really as things could look right now, given those underlying 297 00:15:30,320 --> 00:15:34,080 Speaker 1: seasonal demand pulls on the trade side. You know, the 298 00:15:34,120 --> 00:15:36,600 Speaker 1: trade war, such as it is with China is far 299 00:15:36,640 --> 00:15:40,280 Speaker 1: from over. It's probably about over, and we don't know 300 00:15:40,320 --> 00:15:44,400 Speaker 1: how long it's going to stay over. So there's still 301 00:15:44,480 --> 00:15:47,840 Speaker 1: some looming uncertainty that could camp down industrial demand. That 302 00:15:47,960 --> 00:15:51,000 Speaker 1: industrial demand is in the end crude demand. So we 303 00:15:51,080 --> 00:15:54,160 Speaker 1: may not yet see a rebound into the into the 304 00:15:54,200 --> 00:15:56,360 Speaker 1: first half of next year the same way we've seen 305 00:15:56,400 --> 00:15:59,640 Speaker 1: it in markets in the equity market so far. Right 306 00:16:00,000 --> 00:16:03,200 Speaker 1: out of our colleagues over at Markets Live believe that 307 00:16:03,240 --> 00:16:05,560 Speaker 1: too much good news has already been priced into the 308 00:16:05,600 --> 00:16:09,400 Speaker 1: oil markets and that that could lead to a significant correction. 309 00:16:09,720 --> 00:16:12,720 Speaker 1: Is that what you believe. Well, yeah, we do see 310 00:16:13,000 --> 00:16:15,560 Speaker 1: you know a Brent range in the five handles, probably 311 00:16:15,560 --> 00:16:20,000 Speaker 1: the fifty five. They're about sixty range for next year, 312 00:16:20,560 --> 00:16:23,400 Speaker 1: which is below where we are now, and it's based 313 00:16:24,000 --> 00:16:26,560 Speaker 1: on a number of things, including significant supply coming on 314 00:16:26,680 --> 00:16:30,480 Speaker 1: stream in the Permian has a very long skid mark. 315 00:16:30,640 --> 00:16:32,480 Speaker 1: You know, when we talk over and over again about 316 00:16:32,480 --> 00:16:36,120 Speaker 1: shale correcting, it is not synthetic spare capacity. It is 317 00:16:36,160 --> 00:16:38,000 Speaker 1: not like OPEC where they can turn it on and 318 00:16:38,040 --> 00:16:41,160 Speaker 1: turn it off inside of ninety days. We're talking about 319 00:16:41,240 --> 00:16:44,240 Speaker 1: nine months before. Things usually respond to price, and the 320 00:16:44,240 --> 00:16:48,120 Speaker 1: bullishness you're seen in price today is preserving production tomorrow. 321 00:16:48,440 --> 00:16:50,640 Speaker 1: So that sets up some of the weakness we're talking 322 00:16:50,680 --> 00:16:55,320 Speaker 1: about in tandem with the production outside of the US. So, Kevin, 323 00:16:55,400 --> 00:16:57,440 Speaker 1: let's talk a little bit about OPEC or OPEC plus. 324 00:16:57,480 --> 00:16:59,040 Speaker 1: Give us a sense of kind of how you think 325 00:16:59,640 --> 00:17:04,200 Speaker 1: o Heck is behaving right now? Are are people cooperating? Um? 326 00:17:04,240 --> 00:17:06,320 Speaker 1: I think about Russia there, So give us a sense 327 00:17:06,359 --> 00:17:08,639 Speaker 1: of just on the supply side, how is OPEQ and 328 00:17:08,640 --> 00:17:12,080 Speaker 1: and OPEC plus kind of performing right now? You know, 329 00:17:12,119 --> 00:17:14,280 Speaker 1: I think the optics still stay ahead of actuals in 330 00:17:14,320 --> 00:17:16,359 Speaker 1: a lot of ways, the idea that the group is 331 00:17:16,400 --> 00:17:19,280 Speaker 1: still together may be more reassuring to the bulls and 332 00:17:19,320 --> 00:17:22,800 Speaker 1: the markets than the reality of things playing out. In 333 00:17:23,000 --> 00:17:27,520 Speaker 1: excluding Russian condensate from the volume constraints essentially freed up 334 00:17:27,520 --> 00:17:30,560 Speaker 1: barrels that Russia can bring to market, and liquids are 335 00:17:30,560 --> 00:17:33,880 Speaker 1: not perfectly interchangeable. But when we count barrels, we count 336 00:17:33,880 --> 00:17:37,960 Speaker 1: all liquids, and so that doesn't necessarily read is bullish 337 00:17:38,359 --> 00:17:41,760 Speaker 1: as the readout from the medium might have suggested. Going forward, 338 00:17:42,080 --> 00:17:44,879 Speaker 1: the cohesion of the group really reflects the wiliness and 339 00:17:44,920 --> 00:17:47,800 Speaker 1: ability of the Kingdom to keep doing the heavy lifting 340 00:17:47,840 --> 00:17:50,439 Speaker 1: which they have been doing. But when we look at 341 00:17:50,440 --> 00:17:53,600 Speaker 1: the neutral zone coming downstream, uh that's you know, somewhere 342 00:17:53,600 --> 00:17:56,440 Speaker 1: between three hundred and five thousand barrels per day coming 343 00:17:56,520 --> 00:17:59,520 Speaker 1: up in the next six to nine months probably, and 344 00:17:59,560 --> 00:18:01,919 Speaker 1: we're going to be looking at that pressuring crew to 345 00:18:01,960 --> 00:18:05,120 Speaker 1: the downside unless the Kingdom does more work. Uh So 346 00:18:05,400 --> 00:18:08,199 Speaker 1: what do we expect, Well, Kingdom's got invested interest and 347 00:18:08,240 --> 00:18:10,679 Speaker 1: they're in it to win it right now. But in 348 00:18:10,720 --> 00:18:12,360 Speaker 1: the end, if if it looks like there's too much 349 00:18:12,359 --> 00:18:15,960 Speaker 1: defection from other players, watch out below. The big oil 350 00:18:16,040 --> 00:18:20,880 Speaker 1: story often was obviously a ROMCO right, and nobody would 351 00:18:20,920 --> 00:18:25,600 Speaker 1: stop talking about it from everywhere, from everywhere in the world. Really, 352 00:18:25,720 --> 00:18:28,680 Speaker 1: can you touch us a little bit about international demand 353 00:18:28,880 --> 00:18:31,520 Speaker 1: for this i p O. Obviously it was a very 354 00:18:31,560 --> 00:18:35,320 Speaker 1: weak moving forward, but can we expect a little bit 355 00:18:35,359 --> 00:18:40,280 Speaker 1: more love from international investors? That's not really our area 356 00:18:40,280 --> 00:18:42,840 Speaker 1: of expertise. What we can't say with some some comfort 357 00:18:42,920 --> 00:18:46,280 Speaker 1: is that the you know, the circumscribing the the i 358 00:18:46,400 --> 00:18:49,600 Speaker 1: p O to non US nexus markets had it a 359 00:18:49,600 --> 00:18:52,320 Speaker 1: lot more to do not with trying to get a 360 00:18:52,440 --> 00:18:55,520 Speaker 1: good financial result for the Kingdom or to meet Prince 361 00:18:55,560 --> 00:18:58,280 Speaker 1: Mohammed ben Selmon's two trillion dollar target, had a lot 362 00:18:58,359 --> 00:19:01,240 Speaker 1: to do with the risk of sanctions and pressure here 363 00:19:01,280 --> 00:19:04,719 Speaker 1: in the US under the Justice Against Sponsors of Terrorism 364 00:19:04,760 --> 00:19:08,160 Speaker 1: Act and potentially under a Note Peck bill which would 365 00:19:08,160 --> 00:19:12,800 Speaker 1: allow the sanctions or trade UH sorry Sherman antitrust pressure 366 00:19:12,840 --> 00:19:17,280 Speaker 1: against the producers group. So UH looking outside the US 367 00:19:17,320 --> 00:19:20,600 Speaker 1: created a limited demand in its own way, looking outside 368 00:19:20,600 --> 00:19:23,639 Speaker 1: Western markets for the same reason. Beyond that, you know, 369 00:19:23,760 --> 00:19:26,600 Speaker 1: if they do a further offering, the secondary offering, UH, 370 00:19:26,680 --> 00:19:29,280 Speaker 1: they might look broader, but not whilely overhang here in 371 00:19:29,280 --> 00:19:33,280 Speaker 1: the US interdicts their easy access to markets like ours. 372 00:19:33,640 --> 00:19:36,040 Speaker 1: So Kevin, taking a look at the shale patch in 373 00:19:36,080 --> 00:19:38,520 Speaker 1: the US, we hear a lot about, really in the 374 00:19:38,600 --> 00:19:42,879 Speaker 1: last year plus about kind of the financial precarious the 375 00:19:42,880 --> 00:19:46,240 Speaker 1: precarious financial position a lot of the operators there are 376 00:19:46,240 --> 00:19:49,160 Speaker 1: we going to see in maybe some of the bigger 377 00:19:49,280 --> 00:19:51,920 Speaker 1: energy players go in there and try to consolidate something 378 00:19:51,960 --> 00:19:54,960 Speaker 1: that we're seeing in the permian um or how do 379 00:19:55,000 --> 00:19:58,640 Speaker 1: you see that playing out. Consolidation is happening, but it's 380 00:19:58,640 --> 00:20:02,040 Speaker 1: not happening with the apidity. I think that might be expected. 381 00:20:02,400 --> 00:20:04,360 Speaker 1: Some of this has to do with, again the lifeline 382 00:20:04,359 --> 00:20:06,199 Speaker 1: that you get from a boost in prices here in 383 00:20:06,280 --> 00:20:08,560 Speaker 1: four Q. Some of it also has to do with 384 00:20:08,600 --> 00:20:11,159 Speaker 1: the questions about buyers and the assets. They may not 385 00:20:11,280 --> 00:20:13,679 Speaker 1: want all the assets, and those sellers may not be 386 00:20:13,760 --> 00:20:16,000 Speaker 1: willing to go to the rock bottom that clears the 387 00:20:16,000 --> 00:20:19,639 Speaker 1: market just yet. The infusion of debt capital to to 388 00:20:19,800 --> 00:20:22,960 Speaker 1: the players that needed the most being constrained is a 389 00:20:23,000 --> 00:20:26,960 Speaker 1: catalyst for further sales, further consolidation, but at the right price. 390 00:20:27,600 --> 00:20:29,639 Speaker 1: Part of the problem with the vacillation in the market 391 00:20:29,640 --> 00:20:32,320 Speaker 1: that we're seeing up or down does a lot to 392 00:20:32,359 --> 00:20:34,480 Speaker 1: create uncertainty about whether or not there's going to be 393 00:20:34,520 --> 00:20:37,560 Speaker 1: some bottom feeding happening. Speaking of boom bottom feeding, that's 394 00:20:37,600 --> 00:20:39,560 Speaker 1: what I was going to ask, who are the buyers 395 00:20:39,640 --> 00:20:42,120 Speaker 1: for all of these assets? We had Sam's ll here 396 00:20:42,200 --> 00:20:43,879 Speaker 1: just a couple of months ago saying that he was 397 00:20:43,920 --> 00:20:47,560 Speaker 1: looking at assets himself as the prices start to drop. 398 00:20:48,280 --> 00:20:51,199 Speaker 1: Are there are other Sam's L's in the world that 399 00:20:51,240 --> 00:20:56,200 Speaker 1: are also looking You know, private equity has been pretty constrained. Yeah, 400 00:20:56,280 --> 00:20:58,240 Speaker 1: so the class of buyer that I think you're going 401 00:20:58,280 --> 00:21:00,480 Speaker 1: to get is shifting a little bit in character. It's 402 00:21:00,480 --> 00:21:02,760 Speaker 1: true that you've seen a lot of private private equity 403 00:21:02,800 --> 00:21:05,760 Speaker 1: sponsorship putting that capital for the last five or six years, 404 00:21:05,960 --> 00:21:07,560 Speaker 1: and that's done a lot to sustain the boom and 405 00:21:07,600 --> 00:21:09,640 Speaker 1: the permian. Now, what I think you're going to get 406 00:21:09,680 --> 00:21:12,000 Speaker 1: is capital discipline from the majors that are looking for 407 00:21:12,040 --> 00:21:14,600 Speaker 1: opportunity as well as some of the investors who are 408 00:21:14,640 --> 00:21:16,879 Speaker 1: going to have a different set of parameters around the 409 00:21:16,880 --> 00:21:19,640 Speaker 1: returns that they want to get. That doesn't necessarily mean 410 00:21:19,680 --> 00:21:22,040 Speaker 1: that when you get an acquisition you get production. You 411 00:21:22,119 --> 00:21:26,080 Speaker 1: might get acquisition consolidation and rationalization, and that flows the 412 00:21:26,080 --> 00:21:27,680 Speaker 1: growth of the permian, which of course, is what the 413 00:21:27,680 --> 00:21:29,800 Speaker 1: people who are putting the money into the region are 414 00:21:29,840 --> 00:21:32,160 Speaker 1: hoping for. They want returns on capital because they want 415 00:21:32,200 --> 00:21:37,120 Speaker 1: supply constrained to the highest performing, lowest cost basis assets. Kevin, 416 00:21:37,160 --> 00:21:38,360 Speaker 1: let's just take a look at one of the things 417 00:21:38,400 --> 00:21:40,600 Speaker 1: I just wanted to chat about real quickly is Venezuela. 418 00:21:40,600 --> 00:21:42,119 Speaker 1: We haven't talked about that in a while, but that, 419 00:21:42,359 --> 00:21:44,640 Speaker 1: you know, is a kind of a wild card out there. 420 00:21:44,640 --> 00:21:47,600 Speaker 1: How do you as you think about and supply coming 421 00:21:47,600 --> 00:21:49,640 Speaker 1: onto the market? What is how are you discounting what's 422 00:21:49,680 --> 00:21:53,080 Speaker 1: going on in Venezuela from a supply perspective. Well, the 423 00:21:53,359 --> 00:21:56,040 Speaker 1: biggest perturbation of the year from Venezuela was the loss 424 00:21:56,080 --> 00:21:58,000 Speaker 1: of heavy supply to the market, and it really did 425 00:21:58,080 --> 00:22:01,000 Speaker 1: a lot to close the light have spread and for 426 00:22:01,119 --> 00:22:04,040 Speaker 1: refiners that were configured for high complexity to make use 427 00:22:04,040 --> 00:22:07,000 Speaker 1: of those cheaper heavy crudes and make bigger margins, that 428 00:22:07,080 --> 00:22:10,160 Speaker 1: was bad news. Finding alternative heavy hasn't gone so well 429 00:22:10,200 --> 00:22:12,159 Speaker 1: because there's other sources of medium and heavy in the 430 00:22:12,200 --> 00:22:16,000 Speaker 1: world similarly constrained. So it's not like the market isn't 431 00:22:16,280 --> 00:22:19,640 Speaker 1: eager for some Venezuelan to crude to come back on 432 00:22:19,920 --> 00:22:22,239 Speaker 1: but the politics of the situation aren't going in that 433 00:22:22,280 --> 00:22:24,679 Speaker 1: direction right now. If you think about the politics of 434 00:22:24,680 --> 00:22:27,439 Speaker 1: the situation, Venezuela is in many ways of proxy for 435 00:22:27,520 --> 00:22:30,359 Speaker 1: Cuba in the in the Trump administration. For them, the 436 00:22:30,400 --> 00:22:33,200 Speaker 1: idea that they could could sell Florida on being tough 437 00:22:33,320 --> 00:22:36,399 Speaker 1: on on communism in Cuba by being tough on Venezuela 438 00:22:36,640 --> 00:22:39,399 Speaker 1: has been pretty persuasive, and so the the idea that 439 00:22:39,400 --> 00:22:41,560 Speaker 1: there's some sort of workout bargain or there's some sort 440 00:22:41,560 --> 00:22:44,360 Speaker 1: of US brokered way that Venezuelan and Crewde comes back 441 00:22:44,359 --> 00:22:47,720 Speaker 1: to the market doesn't look so strong. The next leg down, though, 442 00:22:47,760 --> 00:22:50,960 Speaker 1: seems also less likely because of what not involves is 443 00:22:51,080 --> 00:22:55,399 Speaker 1: essentially going after Russia Rosneft, which is doing the big 444 00:22:55,520 --> 00:22:57,920 Speaker 1: marketing and the essentially the bringing to market to the 445 00:22:57,960 --> 00:23:00,679 Speaker 1: Venezuelan crude in place of markets being opened in the 446 00:23:00,800 --> 00:23:03,879 Speaker 1: US and other Western destinations, and that is a mess. 447 00:23:03,960 --> 00:23:06,760 Speaker 1: To go after rust is to go after the world, 448 00:23:07,240 --> 00:23:10,360 Speaker 1: and that sanction probably doesn't happen anytime soon. Hey, Kevin, 449 00:23:10,359 --> 00:23:12,400 Speaker 1: thanks so much for joining us. We really appreciate your 450 00:23:12,440 --> 00:23:16,120 Speaker 1: insights on the global energy market. Kevin book is clear 451 00:23:16,160 --> 00:23:18,520 Speaker 1: View Energy Partner's head of research giving us his thoughts 452 00:23:18,600 --> 00:23:36,720 Speaker 1: on the global crude market. We are talking big tech 453 00:23:36,800 --> 00:23:39,639 Speaker 1: here again. Let's frame twenty nineteen. We came into the 454 00:23:39,720 --> 00:23:43,080 Speaker 1: year thinking, boy, a lot of these big unicorn deals 455 00:23:43,119 --> 00:23:45,840 Speaker 1: that we've been reading about, we're gonna come public. Everybody 456 00:23:45,920 --> 00:23:48,959 Speaker 1: was gonna make money. Public shareholders, the private equity folks, 457 00:23:49,240 --> 00:23:51,560 Speaker 1: and the investment bankers. It was gonna be great. Turned 458 00:23:51,560 --> 00:23:53,200 Speaker 1: out to be a little bit different. And I think 459 00:23:53,200 --> 00:23:55,639 Speaker 1: one of the big takeaways for me as we think 460 00:23:55,680 --> 00:23:58,520 Speaker 1: about the ubers and lifts and smile direction we works 461 00:23:58,600 --> 00:24:04,600 Speaker 1: is that mismatch between private market valuations and public market valuations. 462 00:24:04,640 --> 00:24:06,760 Speaker 1: It's greater than I've ever seen it in my career. 463 00:24:07,280 --> 00:24:08,600 Speaker 1: One of the issues I want to and I want 464 00:24:08,600 --> 00:24:11,520 Speaker 1: to get to this with David Kirkpatrick. He's Techomedy CEO 465 00:24:11,600 --> 00:24:15,120 Speaker 1: and founder. He knows everything about technology, about a great 466 00:24:15,240 --> 00:24:18,679 Speaker 1: seminal book on Facebook back in the day. So David, 467 00:24:18,760 --> 00:24:21,480 Speaker 1: my sense is again thinking about that mismatch between the 468 00:24:21,480 --> 00:24:24,240 Speaker 1: private market and the public market. A lot of blames 469 00:24:24,280 --> 00:24:26,560 Speaker 1: going to soft Bank and that, you know, a hundred 470 00:24:26,560 --> 00:24:29,240 Speaker 1: billion dollar Vision fund that invested in a lot of 471 00:24:29,240 --> 00:24:33,440 Speaker 1: these companies. You think that's a fair criticism of soft Bank. Well, 472 00:24:33,440 --> 00:24:36,359 Speaker 1: thanks Paul Um. Yes, I do, in fact um, but 473 00:24:36,400 --> 00:24:38,840 Speaker 1: it's not just a vision fund. It's SoftBank's own direct 474 00:24:38,880 --> 00:24:41,119 Speaker 1: investing as well as the investment they did through their 475 00:24:41,200 --> 00:24:45,680 Speaker 1: Vision fund. And in many cases they really almost literally 476 00:24:45,760 --> 00:24:49,280 Speaker 1: throw money at companies that they saw as such dramatic 477 00:24:49,359 --> 00:24:53,440 Speaker 1: disruptors that they might alter entire industries. And I think 478 00:24:53,760 --> 00:24:57,160 Speaker 1: we now can see they clearly didn't do enough analysis 479 00:24:57,640 --> 00:25:02,800 Speaker 1: in many instances before they made those seemingly rash decisions. 480 00:25:03,280 --> 00:25:05,280 Speaker 1: On the other hand, you know, the thing that has 481 00:25:05,320 --> 00:25:08,639 Speaker 1: also characterized this recent period and still characterizes it is 482 00:25:09,400 --> 00:25:12,240 Speaker 1: it's hard to get returns in a lot of places 483 00:25:12,280 --> 00:25:14,359 Speaker 1: where people used to expect them all. You know, stock 484 00:25:14,400 --> 00:25:17,080 Speaker 1: markets have gone up great, but people like to have 485 00:25:17,240 --> 00:25:21,000 Speaker 1: other ways of making money. And you know, one of 486 00:25:21,000 --> 00:25:24,640 Speaker 1: the reasons why the whole Unicorn phenomenon and the SoftBank 487 00:25:24,640 --> 00:25:28,440 Speaker 1: phenomenon phenomenon emerged the way they did is that large 488 00:25:28,480 --> 00:25:33,560 Speaker 1: institutional investors have been looking for more dramatic ways to 489 00:25:34,080 --> 00:25:38,080 Speaker 1: leverage large amounts of money, and that's a global phenomenon 490 00:25:38,200 --> 00:25:41,440 Speaker 1: and SoftBank took advantage of that in a very canny way. 491 00:25:41,480 --> 00:25:45,919 Speaker 1: But I think in retrospect they blundered. So something interesting 492 00:25:45,920 --> 00:25:49,280 Speaker 1: about the soft bank investment and we work still is that, 493 00:25:49,520 --> 00:25:53,479 Speaker 1: if I'm not mistaken, SCIFIOUS has not yet approved it. 494 00:25:53,560 --> 00:25:56,000 Speaker 1: That's the Committee of Foreign Investment in the United States 495 00:25:56,240 --> 00:25:58,800 Speaker 1: that is supposed to be keeping out for these kinds 496 00:25:58,800 --> 00:26:03,520 Speaker 1: of things. Wow. Well, you know, Ciffius, You've done a 497 00:26:03,520 --> 00:26:05,679 Speaker 1: lot of reporting on this, Tonali, so you're an expert. 498 00:26:06,000 --> 00:26:11,160 Speaker 1: But I I've been impressed actually by Scipius's role in 499 00:26:11,320 --> 00:26:15,680 Speaker 1: general during the Trump presidency. It has gotten much more 500 00:26:16,119 --> 00:26:20,080 Speaker 1: actively engaged with this question of what is and is good, 501 00:26:20,359 --> 00:26:24,000 Speaker 1: what is it is not good for the U s economy, UM. 502 00:26:24,119 --> 00:26:27,080 Speaker 1: When it comes to a lot of these consumer tech companies. 503 00:26:27,119 --> 00:26:29,920 Speaker 1: You know, CIFIUS generally has not spent tons of time 504 00:26:29,960 --> 00:26:32,880 Speaker 1: on that. But yes, maybe maybe they will get involved 505 00:26:32,880 --> 00:26:36,480 Speaker 1: retroactively in some of these deals. But in reality where 506 00:26:36,520 --> 00:26:40,960 Speaker 1: they're really getting superactive is around Huawei and other kinds 507 00:26:41,000 --> 00:26:46,960 Speaker 1: of Chinese American deals UM and Russian investments in US 508 00:26:47,040 --> 00:26:49,840 Speaker 1: companies UM. And they're going to be more and more involved. 509 00:26:49,960 --> 00:26:51,280 Speaker 1: One of the things I think is going to be 510 00:26:51,320 --> 00:26:55,320 Speaker 1: a trend for twenty in fact, is government in the 511 00:26:55,400 --> 00:26:59,480 Speaker 1: US and globally is just getting more savvy about tech 512 00:26:59,600 --> 00:27:02,320 Speaker 1: fine league, and I think that's going to change the 513 00:27:02,320 --> 00:27:04,360 Speaker 1: way markets behave. I think it's going to change how 514 00:27:04,400 --> 00:27:06,399 Speaker 1: investors behave, and it's going to change the way we 515 00:27:06,440 --> 00:27:09,199 Speaker 1: think about tech. David, That's exactly where I wanted to go. 516 00:27:09,240 --> 00:27:11,199 Speaker 1: I wanted to get your perspective on this, given that 517 00:27:11,240 --> 00:27:14,240 Speaker 1: you followed technology in the valley for such a long time. 518 00:27:14,280 --> 00:27:17,600 Speaker 1: I think really historically, from my experience, the U S 519 00:27:17,640 --> 00:27:22,160 Speaker 1: regulators have taken a generally a light touch to technology regulation. 520 00:27:22,720 --> 00:27:25,199 Speaker 1: Was of course, we've seen the European regulators, you know, 521 00:27:25,240 --> 00:27:27,080 Speaker 1: going back to the Microsoft days, you know, taking a 522 00:27:27,200 --> 00:27:30,840 Speaker 1: much heavier touch. But that seems to be changing. I'm 523 00:27:30,880 --> 00:27:33,440 Speaker 1: not sure. We've seen a bunch of texts hauled in 524 00:27:33,520 --> 00:27:35,160 Speaker 1: front of Congress this year. Do you think that's a 525 00:27:35,200 --> 00:27:38,920 Speaker 1: blip or is that a trend that's emerging. Oh, totally 526 00:27:39,160 --> 00:27:42,920 Speaker 1: a massive trend that began very clearly in twenty nineteen 527 00:27:43,000 --> 00:27:45,600 Speaker 1: and will continue. Because one of the other great great 528 00:27:45,960 --> 00:27:49,919 Speaker 1: gigantic trends of not good necessarily, but gigantic trends of 529 00:27:50,560 --> 00:27:54,720 Speaker 1: nineteen was the suspicions we all developed about giant tech 530 00:27:54,760 --> 00:27:58,600 Speaker 1: platforms went to a whole new level of great gravity 531 00:27:58,680 --> 00:28:02,280 Speaker 1: and concern on a global basis, and governments all over 532 00:28:02,320 --> 00:28:06,640 Speaker 1: the world are really much more involved in scrutinizing particularly 533 00:28:06,640 --> 00:28:09,600 Speaker 1: the largest global tech companies, all of which are American 534 00:28:10,240 --> 00:28:13,560 Speaker 1: um and and those companies for the most part have 535 00:28:13,720 --> 00:28:17,360 Speaker 1: not really responded sufficiently to the concerns that the public 536 00:28:17,359 --> 00:28:20,879 Speaker 1: and government have, so those concerns are only going to grow. 537 00:28:21,560 --> 00:28:25,080 Speaker 1: So another thing about big tech. You know, Scott Galloway 538 00:28:25,200 --> 00:28:28,960 Speaker 1: was really looking at Facebook, really critical of how big 539 00:28:29,000 --> 00:28:32,280 Speaker 1: it's grown and its responsibility in terms of data and 540 00:28:32,280 --> 00:28:37,480 Speaker 1: privacy and y you, Professor Scott Galloway, And now he's 541 00:28:37,560 --> 00:28:41,360 Speaker 1: turned his sights to Twitter and whether CEO Jack Dorsey 542 00:28:41,400 --> 00:28:44,560 Speaker 1: should be at CEO. David, I'm really curious about your 543 00:28:44,560 --> 00:28:47,480 Speaker 1: opinion here. Yeah, I'm I'm a I'm a fan of 544 00:28:47,520 --> 00:28:49,880 Speaker 1: Scott Galloway in general, and I think he's done a 545 00:28:49,920 --> 00:28:54,400 Speaker 1: really important service in the very close scrutiny he's given 546 00:28:54,440 --> 00:28:57,280 Speaker 1: to the tech giants, even for the last three or 547 00:28:57,320 --> 00:29:00,000 Speaker 1: four years. But I don't agree with him about Twitter. 548 00:29:00,320 --> 00:29:03,560 Speaker 1: Twitter is a whole different kind of company really than 549 00:29:04,000 --> 00:29:06,880 Speaker 1: than Facebook in particular, which it's compared to so often. 550 00:29:06,920 --> 00:29:10,440 Speaker 1: It's it's really tiny in comparison, and it really it's 551 00:29:10,480 --> 00:29:14,400 Speaker 1: it's significance is very very different. I also think Jack 552 00:29:14,440 --> 00:29:18,000 Speaker 1: Dorsey is a very different kind of leader than Mark Suckerberg, 553 00:29:18,440 --> 00:29:22,320 Speaker 1: far more thoughtful, far more responsible in many ways. And 554 00:29:22,440 --> 00:29:25,360 Speaker 1: you know, I don't really think that there's any reason 555 00:29:25,440 --> 00:29:29,280 Speaker 1: why Jack Dorsey shouldn't be remain a CEO of Twitter 556 00:29:29,320 --> 00:29:33,280 Speaker 1: if he wants to interesting the one I guess on 557 00:29:33,320 --> 00:29:37,920 Speaker 1: the extreme, David, as we think about the growing regulatory overhang, 558 00:29:37,960 --> 00:29:39,680 Speaker 1: if you will, of big U S Tech, And again 559 00:29:39,720 --> 00:29:41,600 Speaker 1: I agree with you, that was a big, big theme 560 00:29:41,640 --> 00:29:45,280 Speaker 1: emerging in twenty nine. On the far extreme, we've even 561 00:29:45,320 --> 00:29:49,320 Speaker 1: heard caused to break up big Tech. Do you think 562 00:29:49,360 --> 00:29:51,920 Speaker 1: that's even on the menu at any point in the 563 00:29:52,280 --> 00:29:55,040 Speaker 1: foreseeable future. Yeah, I think it is on the menu. 564 00:29:55,320 --> 00:29:58,000 Speaker 1: I I have my reservations about it, both from a 565 00:29:58,040 --> 00:30:00,520 Speaker 1: practical point of view and and even whether it's a 566 00:30:00,520 --> 00:30:02,720 Speaker 1: good idea. And I kind of go back and forth 567 00:30:02,760 --> 00:30:07,080 Speaker 1: on that. It's certainly a massive trend. You know, President Canada, 568 00:30:07,120 --> 00:30:10,520 Speaker 1: presidential candidate Elizabeth Warren, and even plenty of people inside 569 00:30:10,560 --> 00:30:14,320 Speaker 1: the Trump administration and the President himself have occasionally made 570 00:30:14,320 --> 00:30:17,360 Speaker 1: noises about that. So you know, I honestly think that 571 00:30:17,520 --> 00:30:20,160 Speaker 1: the companies are really scared about it, and you when 572 00:30:20,160 --> 00:30:23,240 Speaker 1: you look at their behavior visa v government, you should 573 00:30:24,000 --> 00:30:27,080 Speaker 1: ask yourself, are they doing whatever they're doing because they 574 00:30:27,120 --> 00:30:29,480 Speaker 1: don't want to be broken up? And I think many 575 00:30:29,480 --> 00:30:32,959 Speaker 1: things they've done recently are explained that way. So it's 576 00:30:33,000 --> 00:30:35,360 Speaker 1: a it's a You know, when Elizabeth Warren talks about it, 577 00:30:35,400 --> 00:30:38,280 Speaker 1: she talks about things like going back and peeling double 578 00:30:38,320 --> 00:30:41,120 Speaker 1: click out of Google. You know that happens fifteen years ago. 579 00:30:41,560 --> 00:30:45,840 Speaker 1: So I don't think that's pragmatic or or likely. But 580 00:30:45,840 --> 00:30:48,800 Speaker 1: but the concerns about these platforms are so huge. You 581 00:30:48,840 --> 00:30:50,640 Speaker 1: mentioned I wrote a book about Facebook and it was 582 00:30:50,680 --> 00:30:53,880 Speaker 1: generally positive quite a few years ago. The perceptions that 583 00:30:54,000 --> 00:30:56,720 Speaker 1: I have the world has about what Facebook is doing 584 00:30:56,760 --> 00:30:59,720 Speaker 1: and how it behaves and effectives has on society has 585 00:30:59,800 --> 00:31:03,080 Speaker 1: changed so completely. You know, we have real cause to 586 00:31:03,120 --> 00:31:05,880 Speaker 1: be worried about the power that a small number of 587 00:31:05,920 --> 00:31:10,040 Speaker 1: companies that are basically making non transparent decisions about our 588 00:31:10,080 --> 00:31:15,640 Speaker 1: lives are That that phenomenon is really worrisome and we're 589 00:31:15,640 --> 00:31:19,000 Speaker 1: going to see reactions against it continually going forward. Let's 590 00:31:19,040 --> 00:31:22,240 Speaker 1: be honest, though, even with all these concerns that big 591 00:31:22,320 --> 00:31:25,640 Speaker 1: keep getting bigger. Google looking to buy fit Bit. Are 592 00:31:25,680 --> 00:31:28,400 Speaker 1: we going to see more deals in among the big 593 00:31:28,440 --> 00:31:30,920 Speaker 1: tech companies, even in light of some of this um 594 00:31:31,040 --> 00:31:34,320 Speaker 1: rhetoric from Elizabeth Warren and others. I do think we will. 595 00:31:34,360 --> 00:31:37,480 Speaker 1: I mean partly because these companies are just so wealthy 596 00:31:37,560 --> 00:31:40,600 Speaker 1: and they have so much cash um that you know, 597 00:31:40,760 --> 00:31:43,920 Speaker 1: they they feel the mandate to grow. Look. Wall Street 598 00:31:43,960 --> 00:31:47,200 Speaker 1: is telling these companies keep growing. Their stocks are doing 599 00:31:47,320 --> 00:31:50,920 Speaker 1: great almost without exception these giant companies in the last 600 00:31:51,160 --> 00:31:56,280 Speaker 1: few months. So uh, that is what their fundamental priority remains. 601 00:31:56,960 --> 00:31:59,600 Speaker 1: But they have to be super careful about their moves, 602 00:31:59,600 --> 00:32:02,880 Speaker 1: and I think when they make acquisitions internally, they're going 603 00:32:02,920 --> 00:32:06,280 Speaker 1: to evaluate them much more carefully for the perception that 604 00:32:06,360 --> 00:32:09,960 Speaker 1: they will create. UM. Google buying Fitbit, I think is 605 00:32:10,280 --> 00:32:14,880 Speaker 1: you know, relatively innocuous from the standpoint of its policy implications. 606 00:32:15,280 --> 00:32:17,200 Speaker 1: All these companies really want to get into the health 607 00:32:17,200 --> 00:32:20,320 Speaker 1: care area, so that's one place you will see acquisitions, 608 00:32:20,320 --> 00:32:23,080 Speaker 1: and I think health technology is actually going to be 609 00:32:23,160 --> 00:32:25,120 Speaker 1: one of the great trends of the whole decade that 610 00:32:25,160 --> 00:32:28,080 Speaker 1: we're entering into. David, thanks so much for joining us. 611 00:32:28,120 --> 00:32:30,480 Speaker 1: I got a million other questions. I have for you, 612 00:32:30,560 --> 00:32:33,080 Speaker 1: but we'll catch up with you soon. David Kirkpatrick, tech 613 00:32:33,120 --> 00:32:36,440 Speaker 1: Commy CEO and founder, talking to us about all things tech. 614 00:32:36,920 --> 00:32:41,160 Speaker 1: Thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and 615 00:32:41,200 --> 00:32:46,520 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 616 00:32:46,560 --> 00:32:50,800 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 617 00:32:50,840 --> 00:32:54,680 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg 618 00:32:54,760 --> 00:32:55,040 Speaker 1: Radio