Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether at the grocery store or
Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes,
Speaker 1: SoundCloud and at Bloomberg dot com. Let's talk about oil
Speaker 1: and gasoline. Joining me now, Stephen Shorky is the president
Speaker 1: of the Short Group. Joining me from Villanova, Pennsylvania or
Speaker 1: at Stephen Shorka was noting that gasoline prices are at
Speaker 1: a two year high, at least on the national average
Speaker 1: track by the Triple A. Yes, they are on the high,
Speaker 1: and of course this has to do everything with the
Speaker 1: price rise in crude. All that has been going on
Speaker 1: for the better part of the year, and it really
Speaker 1: got a kick start last month. With regard to the
Speaker 1: decision out of OPEC, I want to point out that
Speaker 1: though yes, even no, gasoline prices are high relative to
Speaker 1: where we've been in the past, that is to say,
Speaker 1: adjusted for inflation, gasoline prices, while they are dearer relative
Speaker 1: to a year ago, there are still relatively cheap and
Speaker 1: keep in mind, we're also at the time of the
Speaker 1: year where demand is very strong, and demand this December
Speaker 1: happened to be stronger than usual because we had the
Speaker 1: coincidence of the Hanakah holiday overlapping with the Christmas holiday,
Speaker 1: so you had that many more shoppers hitting the road
Speaker 1: just about at the same time. So you have the
Speaker 1: combination of higher oil prices, strong demand, which is transitory,
Speaker 1: but once again just for inflation, were still in very
Speaker 1: good shape. Well, Stephen, what's your outlook oil right now?
Speaker 1: West Texas up one percent? That's fifty three fifty eight
Speaker 1: for a barrel of West test West Texas seccrued. Also
Speaker 1: give us your thoughts on natural gas higher by one
Speaker 1: and a quarter percent, three dollars seventy one cents per
Speaker 1: million BTU. Yeah, absolutely, so, first and foremost with oil prices,
Speaker 1: I've been in the camp for the past two years
Speaker 1: and I will remain in that camp for seventeen. That
Speaker 1: oil in the mid fifties is you are testing the
Speaker 1: highs of what the market can bear. There was an
Speaker 1: interesting study put up at the Dallas Federal Reserve a
Speaker 1: couple of months ago where they interviewed a hundred and
Speaker 1: fifty executives in the oil and gas industry. The key
Speaker 1: question was at what price would you need to see
Speaker 1: to bring back a substantial amount of production here in
Speaker 1: the US, and the overwhelming response was oil in between
Speaker 1: fifty five and sixty dollars a barrel. So now we
Speaker 1: look at and what has happened during this rally. Well,
Speaker 1: first and foremost, we had a sharp decline in US
Speaker 1: production through the first half of this year, but that
Speaker 1: decline ebbed and plateaued at the end of the summer,
Speaker 1: and actually since October U S crudal production has been
Speaker 1: inching higher, and so US production was already rising in
Speaker 1: spite of what OPEC was or was not going to
Speaker 1: a last month in Vienna. And then when we look
Speaker 1: at some other metrics in the market, the CFTC data.
Speaker 1: This is data that gives you and tells you and
Speaker 1: breaks out the positions being held by speculators, producers, merchants,
Speaker 1: so forth in the market. And when we look at
Speaker 1: that data, producers are now holding the shortest position. And
Speaker 1: when I say shortest position PIM, I'm talking about dy've
Speaker 1: sold oil forward in the futures market. That position now
Speaker 1: is at a nine year high. So a producer is
Speaker 1: not a speculator. A producer will only sell oil forward
Speaker 1: if they intend to bring more production to the markets.
Speaker 1: So when we look at that data at a nine
Speaker 1: year high, when we also look at the data of
Speaker 1: the forward curve, if we look at the pricing as
Speaker 1: you go out along the future, as we go out
Speaker 1: along the X axis month after month, we've seen a
Speaker 1: sharp rise in the oil prices through the next six months.
Speaker 1: But that sharp rise has actually declined and we're actually
Speaker 1: seeing heavy selling pressure because we have not seen a
Speaker 1: commensurate increase in price in oil for priced in the
Speaker 1: latta half of this year and in so anecdotally PIM
Speaker 1: what I'm taking away from that is when we look
Speaker 1: at the CFTC data, when we look at the Dallas Fed,
Speaker 1: when we look at the fact that we have not
Speaker 1: seen a knock on impact the prices out into the
Speaker 1: future of the belief that producers, US shell producers are
Speaker 1: getting ready to have a very productive and a lot
Speaker 1: of the oil that OPEC has promised to take off
Speaker 1: of the market. US producers are willing to put a
Speaker 1: lot of that oil back onto the market. Thanks very much,
Speaker 1: Stephen Short, he is the president of the short group.
Speaker 1: He says, oil in the mid fifties barrel, that is
Speaker 1: testing the highs of oil prices. All right, to learn
Speaker 1: more are about consumer confidence? We turned to Lynn Franco,
Speaker 1: director of Economic Indicators for the Conference Board, and just
Speaker 1: to note, the headline is US Consumer Confidence Index increased
Speaker 1: to one hundred and thirteen point seven in December. It
Speaker 1: is the highest level since August of two thousand one.
Speaker 1: Lynn Franco, thanks for being with us, Good to be back.
Speaker 1: Tell us the details current conditions. Let's start there. Okay,
Speaker 1: we had a little bit of a mixed picture. We
Speaker 1: had a little bit of a decline in current conditions
Speaker 1: as consumers us a little bit of softening and overall
Speaker 1: economic conditions and economic conditions, but overall the figures for
Speaker 1: the fourth quarter remain very strong. Now, the quote that
Speaker 1: you have that leads the report talks about the post
Speaker 1: election surge in optimism for the economy. How much of
Speaker 1: that is tied to the stock markets performance? A lot
Speaker 1: is tied to the stock market, but also consumers expectations
Speaker 1: for business conditions, employment, and income really urged in December.
Speaker 1: In fact, expectations are at the thirteen year high and
Speaker 1: expectations for the stock prices and the stock market overall
Speaker 1: are all sort of thirteen year high. Now this includes
Speaker 1: the short term report as well, the short term outlook
Speaker 1: improving in December as well. Absolutely, and that's what drove
Speaker 1: consumer confidence this month. We saw expectations surged across the board.
Speaker 1: And now the question becomes is, you know, do these
Speaker 1: expectations become realizations, because that's really going to be the
Speaker 1: key for holding these high levels of optimism going into
Speaker 1: Then you mentioned consumer incomes and I'm wondering if you
Speaker 1: could give us more detail. Well, we saw here that
Speaker 1: the percent of consumers expecting their incomes to increase one
Speaker 1: to that's the highest reading we've seen since December of
Speaker 1: oh seven, which is right before sort of the crisis
Speaker 1: hit a max um. And in terms of their decrease
Speaker 1: again we're going all the way back to two thousand
Speaker 1: and seven. So consumers are really positive about their income expectations,
Speaker 1: and tied into that is their expectations for stock markets
Speaker 1: as well. What about consumer expectations for the labor market
Speaker 1: very good as well. Here we saw that increase to
Speaker 1: about saying they expect more jobs versus just a four
Speaker 1: saying they expect a fewer jobs, and that is the
Speaker 1: highest level we've seen since back in February of eleven.
Speaker 1: Conditions for businesses that's set to improve over the next
Speaker 1: six months as well. Absolutely, there we saw twenty three
Speaker 1: point six of consumers are telling us that they expect
Speaker 1: conditions to improve. That's the highest level we've seen since
Speaker 1: February of two thousand and eleven. So it's really these
Speaker 1: expectations for business conditions, employment, and obviously that will then
Speaker 1: lend itself to an increase in income that are driving
Speaker 1: the surge that we've seen confidence this month. Now, Lynn,
Speaker 1: this is not the only indicator that you look at,
Speaker 1: For example, the measure of CEO confidence as well as
Speaker 1: things such as help Wanted Online. Tell us about how
Speaker 1: this all fits together in a picture? What would you
Speaker 1: describe it as. I think what we're seeing right here
Speaker 1: is just sort of some post election optimism from what
Speaker 1: we're seeing with our under you know, other indicators, whether
Speaker 1: it's UH employment indicators or Leading Economic Index all look
Speaker 1: for a pickup in sort of economic activity in the
Speaker 1: first quarter of I think with consumer confidence now, the
Speaker 1: key is, you know, are we going to be able
Speaker 1: to maintain these levels? And that then really becomes a
Speaker 1: question of will the economy pick up further, will UH
Speaker 1: employment gains pick up further, and will wage growth continue.
Speaker 1: So we're expecting that whether or not we get a
Speaker 1: little bit of a retreat in the next couple of months,
Speaker 1: that could be possible, but we still see a very
Speaker 1: confident consumer. And then just quickly, based on your experience,
Speaker 1: is the is the economy going to lead this indicator
Speaker 1: or is it going to lag the indicator. I think
Speaker 1: it's going to sort of lead the indicator. And I
Speaker 1: think key here is what really happens in terms of
Speaker 1: job growth and wage growth. UH And if these both
Speaker 1: of these don't sort of pick up in the next
Speaker 1: couple of months, we could see a little bit of
Speaker 1: a retreat and consumer confidence. But if we just take
Speaker 1: a step back, I mean, we've been at very high
Speaker 1: levels since the summer. We've been at over a hundred,
Speaker 1: so I think overall we should maintain levels that reflect
Speaker 1: a very confident consumer. Thank you very much, Lynn Franco,
Speaker 1: Director of Economic Indicators for the Conference Board. Part one
Speaker 1: stock that is falling and has well has fallen this year,
Speaker 1: Rather is uh Banca mont Sienna down more than eighty seven.
Speaker 1: Here I'll tell us more about the future of the bank.
Speaker 1: Is Kiara Albanesi are room based markets reporter for Bloomberg.
Speaker 1: Kara tell us the latest details on the rescue or
Speaker 1: attempted rescue of Banka Monte di Paski. Good morning everyone. Yes,
Speaker 1: indeed the stock, as you mentioned, has fallen, but trading
Speaker 1: has been altered for a few days given that the bank,
Speaker 1: which is that the world oldest bank, is actually in
Speaker 1: the eye of the storm because of its inability to
Speaker 1: have a sustainable plan to to plug in a capital
Speaker 1: short fall. The latest on this front has been a
Speaker 1: bank UM a letter from the European Central Bank to
Speaker 1: the to the bank, which was acknowledged yesterday evening, saying
Speaker 1: that the capital short fall is actually almost doubled that
Speaker 1: what initially was expected. Uh. This means that a twenty
Speaker 1: billion funds that was set up by the state UM
Speaker 1: earlier earlier this month to help the bank could be
Speaker 1: almost entirely taken up or for its most part taken
Speaker 1: up by Montepasti only. Well, what has the government's response
Speaker 1: been to the e c b S letter saying that
Speaker 1: the bank needs more money and as you just described
Speaker 1: that twenty billion euro effort was designed not just for
Speaker 1: Monte di Paski, but for other Italian banks as well.
Speaker 1: The government has been um silent at the moment, but
Speaker 1: local media has been saying that the intervention could uh
Speaker 1: could be almost UH six point five billion from the States,
Speaker 1: so basically the government would step in covering most of
Speaker 1: the capital shortfall. What about the bond holders? Will the
Speaker 1: bond holders end up with any value if the bank
Speaker 1: receives this injection of capital from the Italian government. The
Speaker 1: bond holders could say could save parts of their investments,
Speaker 1: but they will most definitely their loss in this case. UM.
Speaker 1: Both the state and the ECB, especially in an interview
Speaker 1: with the CB supervisory board member Angeline earlier today, saying
Speaker 1: that yes, the bond holders also have to to chip
Speaker 1: in into into the shortfallen and and basically combine their
Speaker 1: efforts with the state. What is the state of the
Speaker 1: bank's liquidity right now at the moment, The ECB said
Speaker 1: that the bank is still solvent, which is definitely good
Speaker 1: news for for the market, for investors and for those
Speaker 1: following the story closely. UM, But the liquidity has been
Speaker 1: deteriorating very quickly and the ECB mentioned in particular what
Speaker 1: happened in terms of liquidity degrees during the month of
Speaker 1: December and the days before. So it has been a
Speaker 1: liquidity deterioration, quite sudden, quite fast, in the run up
Speaker 1: to to to the latest news that we just we
Speaker 1: just discussed KIA. It's worth noting that not all Italian
Speaker 1: banks are facing the kind of pressure that Monte Dipaski
Speaker 1: is facing. Correct. Correct, Not only Italian banks are in
Speaker 1: the same condition, and Montepasky is definitely the bank which
Speaker 1: is in the weakest position, but most or several other
Speaker 1: banks are also feeling the pressure of non performing loans,
Speaker 1: a burden that overall is about three hundred and sixty
Speaker 1: billion for the country, and other banks are expected to
Speaker 1: also seek the aid of the funds that was approved
Speaker 1: by the government. Has there been any reaction to a
Speaker 1: plan to put all of the bad loans into a
Speaker 1: bad loan bank and be able to ring fence the
Speaker 1: problems here Again, the issue is the European Central Bank,
Speaker 1: which is monitoring closely what is going on with with
Speaker 1: Monteparsky and UM. The plan that was advised by by
Speaker 1: GPE market until a few weeks ago, a few days
Speaker 1: actually go Um also looked into this possibility, but that
Speaker 1: was set aside for the moment. What happens over the
Speaker 1: next week or so. Are there meetings between the Italian
Speaker 1: government and European Central Bank officials or they everyone just
Speaker 1: taking a break. The contexts are are still ongoing, and
Speaker 1: the fact that UM that the ECB responded to the
Speaker 1: letter and Montepasky send out a statement on on a
Speaker 1: day that is actually a holiday in Italy is a
Speaker 1: signal that everyone is still very much UM at the table,
Speaker 1: even if, of course UM that there is a festive break.
Speaker 1: At the same time, it is likely that things are
Speaker 1: going to slow down until the new year and and
Speaker 1: more clarity is found between those the record discussion. Thank
Speaker 1: you very much. Giara alban Asi, markets reporter for Bloomberg News,
Speaker 1: reporting from Rome going up against Verizon and a T
Speaker 1: and T. Some would think it is suicidal, but not
Speaker 1: David Glickman. He is the chief executive of Ultra Mobile
Speaker 1: and he's here to tell us more about the company
Speaker 1: and its battle in the mobile phone business. David Glickman,
Speaker 1: thank you very much for being with us. Thank you
Speaker 1: all right, So you are serial entrepreneur, as I understand
Speaker 1: it you you previously found it TelePacific that was back
Speaker 1: in and that was to compete with landline phone exchanges.
Speaker 1: Now you're going after mobile operators. Tell us about how
Speaker 1: Ultramobile works. UM. Ultramobile is a nationwide mobile carrier, and
Speaker 1: we uh, we have stores and offices all around the country. Uh.
Speaker 1: And we assume that everybody has their own mobile phone handset,
Speaker 1: and we offer sim cards uh to put in your
Speaker 1: existing phones, very much like they do in Europe and
Speaker 1: in Asia, just hasn't come to America just yet, um,
Speaker 1: in full force, and we are making that happen. Well, David,
Speaker 1: how is it possible that you are able to compete
Speaker 1: against the likes of Verizon, A T and T T
Speaker 1: Mobile uh in offering what looks like to be a
Speaker 1: per month all you can eat mobile fare um. Well,
Speaker 1: a little something that I like to call coopetition. UM.
Speaker 1: We we actually purchase network from T Mobile so that
Speaker 1: we have the same nationwide footprint. UM. And then since
Speaker 1: we don't spend hundreds of millions of dollars on advertising, um,
Speaker 1: and we just pass on all the savings to our
Speaker 1: end users. So uh yeah, So for for nineteen dollars,
Speaker 1: you can have unlimited talk, unlimited texts, unlimited UH data,
Speaker 1: unlimited international calling and unlimited international texting. UM. All you
Speaker 1: need to do is get one of our SIM cards
Speaker 1: and put it into your phone. Now, in addition to
Speaker 1: it being as you describe, unlimited, you can also customize
Speaker 1: the service. Can you explain how that works? Sure? UM?
Speaker 1: So UM at them at the lower price levels, for example,
Speaker 1: nineteen dollars, UM, you get unlimited data. You don't get
Speaker 1: unlimited high speed data. So we have very high speed
Speaker 1: four g LTE and we give you a chunk of
Speaker 1: that UM and if you want more, UM, you just
Speaker 1: pay for exactly what you use UH, and you don't.
Speaker 1: You don't end up having to pay sixty seventy eight
Speaker 1: dollars like you do with some of the other carriers. UM.
Speaker 1: And have you know, ten gigabytes of high speed data
Speaker 1: if you only use one or two? So this way, UM,
Speaker 1: you're you're unlimited. But after a certain amount you end
Speaker 1: up going back to more of a three g UH
Speaker 1: data and you can upgrade to whatever you want. How
Speaker 1: did you decide to focus on what you describe as
Speaker 1: an underserved demographic of the U S consumer market, the
Speaker 1: foreign born US residents well, uh we uh. I. Basically
Speaker 1: I've lived overseas. I started my first songing company when
Speaker 1: I was living in South America and offered discounts to
Speaker 1: businesses there. And uh, at the same time when when
Speaker 1: I when living in America, it's so hard to make
Speaker 1: international phone calls because usually the big mobile carriers want
Speaker 1: to charge you a dollar a minute tall overseas, or
Speaker 1: if you want to use the more inexpensive calling cards,
Speaker 1: it's the pain. You have to dial and access number,
Speaker 1: punch in your pin number, then punch in the destination number.
Speaker 1: If you're on a smartphone, if somebody calls you, you
Speaker 1: can't just hit reply and call back. Um. And so
Speaker 1: we decided that we wanted to come up with a
Speaker 1: system that employed either free international calls or inexpensive you know,
Speaker 1: calling card rates on. Uh, it's not it's not free
Speaker 1: in the sense that you do have to actually buy
Speaker 1: the card. Correct. Well, I mean you've got the you've
Speaker 1: got a twenty, you've got a plan thirty four dollar
Speaker 1: and thirty nine dollar and so on. I mean you
Speaker 1: have to actually buy the buy the card. Right. So,
Speaker 1: so what a saying is international is free on a
Speaker 1: discounted mobile phone so instead of paying six yr seventy
Speaker 1: dollars for unlimited talking text and UH in the US
Speaker 1: for nineteen dollars, you have UM. You're you're getting a
Speaker 1: discount on limited domestic talk in text. But at the
Speaker 1: same time, we give you sixty countries to call about
Speaker 1: two thirds of the world for free, so you can
Speaker 1: call Mexico unlimited, you can call China unlimited, Canada unlimited,
Speaker 1: Europe unlimited. UM. It's sys some countries that are more expensive,
Speaker 1: for example, some of the African countries calling Philippines, etcetera, etcetera,
Speaker 1: where we will charge you, you know, two or three
Speaker 1: four cents a minute instead of UM. What the what
Speaker 1: the large carriers will charge a dollar a minute. What's
Speaker 1: the incentive for the stores to sell your cards, your
Speaker 1: simcards versus the SIM cards of more established players like
Speaker 1: Verizon or A T and T. Well, you know, we
Speaker 1: focus very heavily on the stores as our distribution points,
Speaker 1: so we make it very easy for them to sell UM.
Speaker 1: We offer a great product to the consumers, so they know.
Speaker 1: The consumers are gonna be very happy when they get
Speaker 1: an ultramobile SIM cards and we offer one of the
Speaker 1: highest commissions. You know, Our theory when we launched the
Speaker 1: company was the customer is going to have the best
Speaker 1: deal and the store is going to make more money
Speaker 1: and have happier customers by selling ultramobile. And we've stuck
Speaker 1: with that in the four years that we've been in business. Now,
Speaker 1: this idea of offering uh, data saving data your way,
Speaker 1: this is what they call voluntarily throttling the speeds and
Speaker 1: the access to various websites or services. How is that
Speaker 1: working out? Actually it's been succeeded our expectation. Customers absolutely
Speaker 1: love it. So what happens is, um, you know, if
Speaker 1: you're on a plan that says says gives you five
Speaker 1: gigabytes of high speed data, and UH, you go on
Speaker 1: YouTube and you start looking at a video, and you
Speaker 1: know as you as you as the video starts to load,
Speaker 1: and as you start watching it, it's loading much more
Speaker 1: than you're than you're watching. So if you're you're the
Speaker 1: seconds into the video, the YouTube is already downloaded UM
Speaker 1: onto your phone, maybe one minute of that video, UM.
Speaker 1: And then if you don't choose to watch the rest
Speaker 1: of that video, it wasn't the one you wanted. You
Speaker 1: want to go to the next one. Or the next
Speaker 1: one you ended up paying. You ended up using a
Speaker 1: lot of your data for video that you never watched.
Speaker 1: The same thing happens with Netflix. The same thing happens
Speaker 1: with Facebook, especially because Facebook will automatically uh download and
Speaker 1: play a lot of videos that you have you haven't
Speaker 1: even watched yet, or you haven't even you clicked on UM.
Speaker 1: And so with data mind way, you picked the speed
Speaker 1: that you want. Essentially you decide how much of that
Speaker 1: pretty loading you you want. And we've discovered as a
Speaker 1: lot of our customers that don't like paying for uh,
Speaker 1: you know, downloading pipe speed data UM for movies and
Speaker 1: videos that they're not watching. They they get onto the
Speaker 1: the the data my way, and they picked how much
Speaker 1: throttling they want and how much how much downloading. Indeed,
Speaker 1: thanks very much, David Glickman. He is the founder and
Speaker 1: the chief executive of Ultramobile. Thanks for listening to the
Speaker 1: Bloomberg P and L podcast. You can subscribe and listen
Speaker 1: to interviews at iTunes, SoundCloud, or whatever podcast platform you prefer.
Speaker 1: I'm pim Fox. I'm out there on Twitter at pim Fox.
Speaker 1: I'm out there on Twitter at Lisa Abramo. It's one
Speaker 1: before the podcast. You can always catch us worldwide on
Speaker 1: Bloomberg Radio