WEBVTT - Libya Conflict Is Hugely Overlooked Issue On Oil Capacity: Wald 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.360 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Oil 0:00:32.400 --> 0:00:35.800 prices are just a tick down today ahead of that 0:00:36.040 --> 0:00:40.680 all important Opeque meeting. Will they all come together, have 0:00:40.720 --> 0:00:44.279 a Kumbaya moment and have an agreement that doesn't end 0:00:44.400 --> 0:00:48.040 up with Saudi Arabia on one side and Iran and 0:00:48.120 --> 0:00:50.520 Brazil on the other. Joining us now, Dr Ellen Walt, 0:00:50.640 --> 0:00:54.400 President of Transversal Consulting. She has an energy industry and 0:00:54.600 --> 0:00:58.040 Middle East expert. She is also author of Saudi Inc. 0:00:58.720 --> 0:01:01.560 Which takes a look at Saudi Aramco and the family 0:01:01.600 --> 0:01:04.800 that controls the multi trillion dollar enterprise. Dr will thank 0:01:04.840 --> 0:01:07.480 you so much for joining us. What do you expect 0:01:07.520 --> 0:01:10.959 to happen at the upcoming meeting which takes place in 0:01:11.000 --> 0:01:14.319 less than twenty four hours. I think that right now 0:01:14.440 --> 0:01:19.040 we are leaning towards some sort of agreement for a 0:01:19.040 --> 0:01:22.400 across the board production increase, and that's probably one of 0:01:22.440 --> 0:01:26.760 the reasons why we're seeing oil taking downwards. What's interesting 0:01:26.880 --> 0:01:30.800 right now is that Saudi Arabia is floating proposals of 0:01:31.000 --> 0:01:36.040 potential increases of anywhere between eight hundred thousand barrels per 0:01:36.120 --> 0:01:40.640 day to one million barrels per day. Now, the key here, though, 0:01:41.080 --> 0:01:43.960 is that even if that is pushed through on paper 0:01:44.360 --> 0:01:49.320 in practice, because countries like Venezuela and Iran and Angola 0:01:49.480 --> 0:01:54.760 can't actually increase their production, they're just physically and financially 0:01:54.800 --> 0:01:58.880 unable to, that wouldn't actually bring that much oil back 0:01:58.920 --> 0:02:02.560 onto the market, and increase of one point five million 0:02:02.600 --> 0:02:05.360 barrels per day would only add eight hundred thousand barrels 0:02:05.360 --> 0:02:10.440 per day. Does any potential agreement also have political implications 0:02:10.480 --> 0:02:14.440 when it comes to Iran and Saudi Arabia. Yeah, and 0:02:14.480 --> 0:02:17.200 this is the big, the big question. Iran has come 0:02:17.200 --> 0:02:21.480 into this meeting kind of with its UH pistols blazing. 0:02:21.520 --> 0:02:24.720 It said, no agreement, It's not going to agree to 0:02:24.760 --> 0:02:28.519 any kind of production increase. It's going to veto anything 0:02:29.120 --> 0:02:32.560 that that's put forward. And so it really does that 0:02:32.680 --> 0:02:35.760 they really are pitted kind of across from each other. Now, 0:02:35.960 --> 0:02:39.320 what I think is likely that we will see is 0:02:39.400 --> 0:02:42.880 some sort of agreement that allows Iran with with wording 0:02:43.160 --> 0:02:46.480 that allows Iran to say, hey, we're not really increasing production, 0:02:46.880 --> 0:02:50.600 it's just we're moving back to full compliance as opposed 0:02:50.600 --> 0:02:53.920 to under compliance, and then to satisfy Russia on the 0:02:53.960 --> 0:02:56.760 other hand, which is really pushing for a big increase. 0:02:57.120 --> 0:02:59.600 They'll have language where Russia can kind of say to 0:02:59.760 --> 0:03:03.520 it's oil companies, hey, look, you can increase production, all right. 0:03:03.600 --> 0:03:06.040 This is this is headspinning to me on many levels. 0:03:06.120 --> 0:03:10.720 Number one, uh, the question of Iran and Venezuela posing 0:03:10.800 --> 0:03:13.720 output increases or sort of lifting some of the caps 0:03:14.080 --> 0:03:16.440 simply because that cannibalizes from their own business because they're 0:03:16.480 --> 0:03:20.920 unable to make the additional production. I'm struggling to see 0:03:20.919 --> 0:03:24.160 how it factors into the price of oil, because, as 0:03:24.200 --> 0:03:29.359 you were saying, any increase will be offset by decreases elsewhere. 0:03:29.639 --> 0:03:32.600 Do you think that the oil market is being overly 0:03:32.720 --> 0:03:35.840 sensitive right now, given how complicated this is, in the 0:03:35.920 --> 0:03:38.320 unlikelihood that it would be a rush of oil into 0:03:38.360 --> 0:03:41.640 the market, exactly, I think the oil market is very 0:03:41.800 --> 0:03:45.360 very sensitive right now. Um, any news about, for example, 0:03:45.760 --> 0:03:49.800 news that China is considering putting tariffs on American oil. 0:03:50.240 --> 0:03:55.760 Any news about any oil refiners deciding to drop Ivanni oil, 0:03:55.800 --> 0:03:58.760 it all kind of sends shock waves through the prices. 0:03:58.840 --> 0:04:02.480 Everyone is extremely sensitive right now, and that's why every 0:04:02.560 --> 0:04:05.680 kind of a bit of news that comes out seems 0:04:05.720 --> 0:04:09.800 to kind of rock the prices. What about the addition 0:04:10.040 --> 0:04:12.960 of oil, let's say, from a country as such as Libya, 0:04:13.040 --> 0:04:16.760 Will that have any effect? Libya is a huge issue 0:04:16.839 --> 0:04:19.400 that I think is really being underlooked right now. The 0:04:19.520 --> 0:04:23.320 fighting in Libya has taken out a significant number of 0:04:23.440 --> 0:04:29.200 Libya's a storage capacity to store oil for export. And 0:04:29.279 --> 0:04:32.799 even though um the Libyan government has kind of taken 0:04:32.880 --> 0:04:35.960 retaken control of uh its oil, it's going to take 0:04:36.000 --> 0:04:39.279 a while to get its oil exports back up to 0:04:39.520 --> 0:04:41.840 the levels where they were. And apparently some of these 0:04:42.080 --> 0:04:44.880 UH some more storage fsacilities have caught on fire. This 0:04:44.960 --> 0:04:48.160 is a huge, huge issue that could really send Libyan 0:04:48.240 --> 0:04:51.680 production into a tailspin and mean that the market is 0:04:51.720 --> 0:04:55.119 really going to be undersupplied going into the second half 0:04:55.240 --> 0:04:59.120 of Yeah, you know, I'm just struck by sort of 0:04:59.160 --> 0:05:02.839 the power and cloud of OPEC. Are we seeing the 0:05:02.920 --> 0:05:07.279 decline of that? And is this cartel basically drastically losing 0:05:07.320 --> 0:05:11.720 its power. You know, everyone is kind of the you know, 0:05:11.880 --> 0:05:14.680 been saying, oh, OPEC is dead two years ago when 0:05:14.680 --> 0:05:17.280 they weren't able to really lift prices. They were they 0:05:17.279 --> 0:05:20.719 were calling OPEC, you know, a relic, and now we're 0:05:20.720 --> 0:05:25.120 seeing everyone has basically defended on opaque headquarters just to 0:05:25.600 --> 0:05:27.719 see what they're going to decide. I think one of 0:05:27.720 --> 0:05:32.680 the reasons they've become more powerful, though, is this relationship 0:05:32.720 --> 0:05:35.680 that they have with Russia. Russia's the largest oral producer 0:05:35.800 --> 0:05:39.000 out there, and without that relationship they really wouldn't have 0:05:39.080 --> 0:05:41.480 the kind of clouds that we're seeing now. I guess 0:05:41.480 --> 0:05:43.240 the reason why I ask that is because when you 0:05:43.279 --> 0:05:45.719 think about Iran coming in with their guns a blazing 0:05:46.279 --> 0:05:47.920 uh and saying we're not going to sign off on 0:05:47.960 --> 0:05:52.839 any increase to output, they have no recourse other than 0:05:53.120 --> 0:05:55.680 sort of the mirage of unity of OPEC, right, I 0:05:55.680 --> 0:05:58.920 mean they have no leverage here. Yeah, OPAQ is not 0:05:59.080 --> 0:06:02.320 OPEC is not UM you know, a majority rules organization, 0:06:02.400 --> 0:06:05.520 but they do have ways that certain countries can either 0:06:05.640 --> 0:06:09.800 veto ideas or that other countries can override it. But 0:06:09.960 --> 0:06:13.120 really what we're looking at is UM Saudi Arabia's oil 0:06:13.160 --> 0:06:17.320 minister is a very talented negotiator, and he's been described 0:06:17.360 --> 0:06:21.400 as someone who just doesn't give up, whereas the previous 0:06:21.400 --> 0:06:24.240 oil minister, Alian the Emi, would sometimes get very frustrated 0:06:24.279 --> 0:06:26.600 and you know, just decide it's not worth it and 0:06:26.680 --> 0:06:28.880 walk out of the room. All Fala is known as 0:06:28.960 --> 0:06:33.280 exceptionally patient and he will uh someone someone uh. One 0:06:33.320 --> 0:06:35.560 of my sources told me that he will talk and 0:06:35.600 --> 0:06:39.760 talk and talk until he's basically bloodened you into agreeing 0:06:39.800 --> 0:06:42.200 with him, because he's talked so much. And so I 0:06:42.200 --> 0:06:45.960 think we can't discount that and his ability to bring 0:06:46.200 --> 0:06:51.160 this group together basically just through the power of continued negotiation. 0:06:52.000 --> 0:06:56.280 What kind of patients are countries that are supporting Venezuela 0:06:56.360 --> 0:07:00.960 going to have if Venezeuela continues on its current economic path. 0:07:02.720 --> 0:07:05.920 It's really a terrible situation for Venezuela. And it's very 0:07:05.960 --> 0:07:09.440 sad because originally OPEC was formed as kind of a 0:07:09.480 --> 0:07:14.560 solidarity movement for these producing countries who really were relying 0:07:14.680 --> 0:07:17.160 on Western companies to produce their oil, and it was 0:07:17.280 --> 0:07:19.840 designed for them to be able to kind of stand 0:07:19.920 --> 0:07:24.240 up to these companies together. And now that idea has 0:07:24.280 --> 0:07:26.560 kind of fallen apart in Venezuela has really been left 0:07:26.600 --> 0:07:29.440 by the wayside. It's almost as if they don't care 0:07:29.600 --> 0:07:33.880 really what is happening in Venezuela and kind of see 0:07:33.920 --> 0:07:36.720 it as look at it's your own fault. All right, Well, 0:07:36.720 --> 0:07:38.000 we're going to leave it there. And I know that 0:07:38.040 --> 0:07:40.960 you're going to be following this opaque meeting for us. 0:07:41.400 --> 0:07:44.480 Much appreciated as always. Dr ellen Wald is the president 0:07:44.520 --> 0:07:50.280 of a transversal consulting energy industry and also Middle East expert, 0:07:50.400 --> 0:07:54.680 and she can be followed on Twitter at energies d Economy. 0:07:54.760 --> 0:07:59.440 That's e N E R g z D Economy. So 0:07:59.480 --> 0:08:16.040 I a you to do that right now. It is 0:08:16.160 --> 0:08:19.480 a seventy one billion dollar deal. This is a Walt 0:08:19.520 --> 0:08:24.080 Disney's offer for twenty one century Foxes entertainment assets. And 0:08:24.160 --> 0:08:26.560 here to tell us more about the battle in the 0:08:26.560 --> 0:08:29.400 world of media is Porter bid, managing partner Media Tech 0:08:29.520 --> 0:08:33.560 Capital Partners, and you can follow Porter on Twitter at 0:08:33.920 --> 0:08:38.120 Porter three. Okay, Porter three, tell us why are these 0:08:38.200 --> 0:08:43.760 assets so valuable to the long term strategy of Walt 0:08:43.800 --> 0:08:47.280 Disney and Bob Iger. Well, Bob Iger has been late 0:08:47.400 --> 0:08:50.439 to the game in over the top content. He's still 0:08:50.720 --> 0:08:56.360 selling most of Disney's product to the legacy television networks 0:08:56.400 --> 0:08:59.880 cable industry, and he wants to go over the top, 0:09:00.120 --> 0:09:03.080 wants to take on Netflix and everybody else who's streaming 0:09:03.480 --> 0:09:08.320 and acquiring the content that one century Foxes entertainment assets 0:09:08.360 --> 0:09:14.040 represent gives him an unassailable cache of huge, huge, popular 0:09:14.160 --> 0:09:17.679 content to mind. And Disney has proven that they can 0:09:17.720 --> 0:09:22.840 take Marvel or Pixar or Lucas Films product and turn 0:09:22.920 --> 0:09:25.800 it into a ten times bigger business than it was 0:09:26.400 --> 0:09:28.360 as a standalone, and they'll do the same thing with 0:09:28.400 --> 0:09:31.360 Fox Porter. When we were talking ahead of this segment, 0:09:31.520 --> 0:09:34.400 you said that at the beginning of next year, Walt 0:09:34.440 --> 0:09:39.760 Disney Company is going to launch a Netflix killer. It's 0:09:39.760 --> 0:09:44.559 it's going to be a net A Disney streaming channel. Uh. Priced, 0:09:44.600 --> 0:09:47.079 We don't know, but if they're smart, they will price 0:09:47.120 --> 0:09:51.439 it at at comparable pricing seven a month to Netflix, 0:09:51.559 --> 0:09:54.839 or maybe even a discount for the first year or 0:09:54.880 --> 0:09:58.960 two to build up traffic. Bob Iger has has made tentative, 0:10:00.160 --> 0:10:04.760 unsuccessful attempts to get into the streaming business. Now he's 0:10:05.160 --> 0:10:09.240 set everything he's got on the table towards building a 0:10:09.679 --> 0:10:13.080 Netflix Killer and making Disney the over the top champion 0:10:13.120 --> 0:10:15.560 in the world. One thing that strikes me is that 0:10:15.760 --> 0:10:19.240 coming with this, Disney will probably pull all of its 0:10:19.280 --> 0:10:22.400 content off of Netflix, which is currently available to people 0:10:22.400 --> 0:10:26.880 who subscribe to Netflix. Correct, without question. There are contractual 0:10:27.080 --> 0:10:29.640 hurdles that Disney has to get over some some of 0:10:29.679 --> 0:10:33.520 the content that they licensed to Netflix has a year 0:10:33.600 --> 0:10:35.960 or two to run. But as soon as those contracts 0:10:35.960 --> 0:10:39.120 are over, you can bet Disney won't show up anywhere 0:10:39.120 --> 0:10:45.440 on Netflix. Disney has, of course ESPN, ABC all the 0:10:45.480 --> 0:10:50.720 film content that you just described. Fox has Star India 0:10:51.160 --> 0:10:53.000 FS one. If you want to watch the World Cup, 0:10:53.000 --> 0:10:57.240 you're watching. Fox also got FX Network, National Geographic, the 0:10:57.320 --> 0:11:01.559 film division, the television division, and Sky. Can they put 0:11:01.600 --> 0:11:05.080 it all together. That's what Bob Iger's grand plan is. 0:11:05.160 --> 0:11:09.760 He wants to take Disney global. They they sell theme 0:11:09.840 --> 0:11:14.559 park and merchandise and and tickets in Europe and Asia 0:11:14.600 --> 0:11:19.559 and China, but they don't really have a viable footprint globally. 0:11:19.720 --> 0:11:23.040 That's that's what the Fox assets and Sky, which is 0:11:23.200 --> 0:11:26.120 a critical part of this deal and is very likely 0:11:26.160 --> 0:11:30.920 to cost nearly as much as the Century Entertainment assets themselves. 0:11:31.480 --> 0:11:34.360 You know it sounds like it's obviously a huge win 0:11:34.640 --> 0:11:37.800 for Bob Iger to get the Fox assets, and he's 0:11:37.800 --> 0:11:40.360 obviously willing to pay quite a bit for them seventy 0:11:40.360 --> 0:11:43.040 one point three billion dollars, as my co host was 0:11:43.160 --> 0:11:46.400 saying earlier in Fox. Um, I'm just wondering, at what 0:11:46.520 --> 0:11:49.360 point do people start to worry that they are overpaying, 0:11:50.000 --> 0:11:53.400 given that there is a bitting war going on with Comcast. Well, 0:11:53.400 --> 0:11:58.640 the problem with saying anybody is overpaying is what is 0:11:58.679 --> 0:12:00.959 the price? What is the value you? It's it's not 0:12:01.040 --> 0:12:04.320 really what it costs, it's what you can create out 0:12:04.320 --> 0:12:09.640 of it. And uh, Disney has has dominated the content 0:12:09.720 --> 0:12:12.840 and film industry over the last several years. Last year 0:12:12.840 --> 0:12:16.840 they represented almost of the profits of all of the 0:12:16.880 --> 0:12:20.040 movie studios in the world. So they're going to do 0:12:20.080 --> 0:12:25.079 the same thing increase and not just incrementally, but gigantically 0:12:25.200 --> 0:12:28.240 the profit potential that the Fox assets they're acquired, they 0:12:28.240 --> 0:12:30.400 will acquire. So basically, just to let I understand this, 0:12:30.520 --> 0:12:33.160 the the idea here is if you have enough of 0:12:33.160 --> 0:12:37.040 a critical mass, people cannot live without them, and that 0:12:37.200 --> 0:12:39.080 all of that content that people have gotten used to 0:12:39.080 --> 0:12:41.120 being able to stream elsewhere, they will not be able 0:12:41.160 --> 0:12:45.120 to get except directly from Disney, which will undermine the 0:12:45.120 --> 0:12:49.440 business model of Netflix. That that's exactly right. And Disney 0:12:49.480 --> 0:12:55.480 has existed in the legacy media world on retransmission rights 0:12:55.480 --> 0:13:01.319 and contracts with cable and and UH tradition television networks 0:13:01.640 --> 0:13:06.199 for their content that has eroded. Everybody looked at the 0:13:07.040 --> 0:13:11.120 decline in in viewers and ESPN and that had a 0:13:11.160 --> 0:13:14.480 big impact on Disney's share price over the last eighteen months. 0:13:15.000 --> 0:13:19.480 They want to control the director consumer facing that their 0:13:19.520 --> 0:13:23.440 content can generate. They don't want to depend on old media. 0:13:23.880 --> 0:13:26.000 Ten years from now, we won't even have a cable 0:13:26.160 --> 0:13:28.920 television system. All the cable companies will be going over 0:13:28.960 --> 0:13:32.520 the top. I'm glad you mentioned stock prices because if 0:13:32.559 --> 0:13:38.080 you compare what investors in Comcast have done to their stock, 0:13:38.280 --> 0:13:41.840 it's down seventeen so far this year, So clearly they're 0:13:41.840 --> 0:13:45.440 not dying to have this deal come through. On the 0:13:45.440 --> 0:13:50.800 other hand, Walt Disney shares basically unchanged. That's right. Why 0:13:50.840 --> 0:13:55.560 do you believe investors in Comcast feel so, let's say 0:13:55.559 --> 0:13:58.640 negatively about this potential. Well, if if this deal were 0:13:58.640 --> 0:14:01.760 to go to Comcast, UH, they would take on a 0:14:01.840 --> 0:14:05.760 hundred and seventy billion dollars of new debt. They're already 0:14:05.960 --> 0:14:09.480 well over leveraged, and investors don't like that. And I 0:14:09.520 --> 0:14:12.439 think that that's a serious problem with Brian Roberts all 0:14:12.520 --> 0:14:15.800 cash offer. The interesting thing it's not been made very 0:14:15.880 --> 0:14:19.960 clear by the media. The interesting thing about Disney's new 0:14:20.040 --> 0:14:23.320 offer is it on the surface, it appears to be 0:14:23.440 --> 0:14:27.920 half cash and half stock, but Disney put a rider 0:14:27.920 --> 0:14:31.600 in there that if any shareholder decides to take it 0:14:31.640 --> 0:14:35.280 in all stock, he can, and certainly the Murdoch interests 0:14:35.280 --> 0:14:38.320 are going to take all all stock because one of 0:14:38.400 --> 0:14:41.960 Rupert's legacies is I want to be the largest shareholder 0:14:41.960 --> 0:14:44.640 in Disney the We're the biggest entertainment company in the world, 0:14:45.200 --> 0:14:49.600 and taxes and no taxes right until unless he sells him. 0:14:49.640 --> 0:14:52.560 I'm glad you brought up stock prices because Netflix, meanwhile, 0:14:52.640 --> 0:14:55.000 which you know we're saying, is going to pay some 0:14:55.000 --> 0:15:00.320 stiff competition. Netflix shares at record highs eighteen dollars share. 0:15:01.000 --> 0:15:02.520 What do you think is going to happen in Netflix? 0:15:02.600 --> 0:15:06.560 If Disney goes through it there it's a momo stock. 0:15:06.720 --> 0:15:09.960 It just keeps going up because everybody says they keep 0:15:10.000 --> 0:15:14.000 adding subscribers, but they look at the cash flow it's diminimous, 0:15:14.040 --> 0:15:18.320 and look at the increasing content costs that they're having 0:15:18.400 --> 0:15:23.320 to budget to keep those subscribers coming on board. It's 0:15:23.360 --> 0:15:26.600 not a sustainable business model, and the market is taking 0:15:26.640 --> 0:15:30.360 advantage of the momentum um. They They are very good 0:15:30.400 --> 0:15:33.600 at marketing, they're very good at at selling a few 0:15:34.320 --> 0:15:38.720 original titles that have massive appeal. But what are they 0:15:38.720 --> 0:15:40.840 going to do when they run out of hits and 0:15:40.920 --> 0:15:44.400 they can't keep doing it. The odds against making hits 0:15:44.440 --> 0:15:47.400 in Hollywood for the last hundred years have been two 0:15:47.400 --> 0:15:49.240 out of ten, break even in one out of ten 0:15:49.320 --> 0:15:51.800 as a blockbuster. What happens the other nine? Most of 0:15:51.800 --> 0:15:55.320 those end up in the dumper at Netflix. Quarter bit, 0:15:55.800 --> 0:15:58.040 thank you so much for being with us. Highly illuminating 0:15:58.040 --> 0:16:01.920 porter by managing partner at Media Tech Capital Partners in 0:16:02.240 --> 0:16:20.480 New York. It looked like perhaps things were coming down 0:16:20.760 --> 0:16:25.880 for Italy after their bond yields blew out just weeks ago, 0:16:26.640 --> 0:16:29.560 but today, well the turmoil is back. Joining us now 0:16:29.560 --> 0:16:31.840 to talk about that is Alberto Gallo. He's partner and 0:16:31.920 --> 0:16:36.200 portfolio manager for the Algebras Macro Credit Fund that Algebras 0:16:36.240 --> 0:16:40.080 Investments Limited. He's also a Bloomberg opinion columnist. Alberto, thank 0:16:40.120 --> 0:16:43.480 you so much for joining us. So this latest hiccup 0:16:43.840 --> 0:16:47.600 is coming after two prominent euroskeptics were handed key roles 0:16:47.680 --> 0:16:52.080 in the Italian parliament. Do you think that the hiccup 0:16:52.360 --> 0:16:57.080 today is a more longer lasting kind of concern that 0:16:57.160 --> 0:17:00.320 will cause investors to continue just to withdraw from the nation. 0:17:02.440 --> 0:17:06.440 Good morning. I do think that the situation will remain volatile, 0:17:06.600 --> 0:17:10.280 and simply because the spending plans are very ambitious from 0:17:10.320 --> 0:17:12.920 the from the Italian government. So you're looking at the 0:17:13.000 --> 0:17:16.280 potential plant spending of a hundred billion euros, which probably 0:17:16.280 --> 0:17:21.199 will be revised down but still unfunded by tax raises. 0:17:21.880 --> 0:17:25.879 So we think the short term probability of euro exit. 0:17:25.920 --> 0:17:28.840 You know, all these fears of our weekend type of 0:17:29.000 --> 0:17:31.560 it are a bit overdone, but the depths it spending 0:17:31.640 --> 0:17:34.119 is still a problem in an environment where you know, 0:17:34.160 --> 0:17:38.400 Europe isn't really focusing on growth, so um, it's good 0:17:38.440 --> 0:17:41.760 to think about growth, but the depth spending plans they 0:17:41.800 --> 0:17:45.320 have are excessive. So Alberta, when does this hiccup turn 0:17:45.400 --> 0:17:51.520 into asset reflux? We've already seen a repricing in the 0:17:51.840 --> 0:17:55.800 Italian BTPs and some of the assets, some of the 0:17:55.840 --> 0:17:59.359 other assets like stocks and bonds. The reality is on 0:17:59.400 --> 0:18:02.600 the ground on the corporates. Are the corporates that have 0:18:02.720 --> 0:18:06.520 survived the crisis. Um, you know, around one in four 0:18:06.880 --> 0:18:10.159 small or medium businesses have defaulted throughout the crisis. So 0:18:10.240 --> 0:18:14.399 the remaining corporates are much stronger. But obviously, you know, 0:18:15.200 --> 0:18:19.600 you know, the situation, a crisis, situation m scares investors, 0:18:19.600 --> 0:18:21.919 and we have seen a repricing across all assets, but 0:18:22.000 --> 0:18:25.840 we see fundamental still strong. On the ground. Um, what 0:18:25.880 --> 0:18:28.720 we see is political volatility and unfortunately, you know, that's 0:18:28.760 --> 0:18:32.160 something that will continue in Europe because Europe needs to change. 0:18:32.200 --> 0:18:35.119 Europe needs to change the wards a more cohesive union 0:18:35.240 --> 0:18:37.800 that focuses on growth, not just on austerity. And I 0:18:37.800 --> 0:18:41.359 think you know, even in Germany, um Angela Merkel is 0:18:41.359 --> 0:18:46.960 getting the message with some dwindling in her contensus. So 0:18:47.119 --> 0:18:49.760 here here's what's so amazing to me. You say that 0:18:49.800 --> 0:18:52.120 there's been a repricing, and certainly there has. In two 0:18:52.160 --> 0:18:57.240 year Italian yields are now gasped less than ninety basis 0:18:57.240 --> 0:19:00.320 points zero point nine percent. Right, this is still nothing 0:19:00.440 --> 0:19:05.600 mama mama miya. Indeed, so repricing to even uh, you know, 0:19:05.720 --> 0:19:10.239 extremely low levels from unbelievably low levels. You do have 0:19:10.320 --> 0:19:12.440 to wonder, given the fact that the e c B 0:19:12.640 --> 0:19:16.920 has basically demonstrated its willingness to backstop this market, given 0:19:16.960 --> 0:19:19.720 the fact that you are seeing other peripheral regions also 0:19:19.840 --> 0:19:22.960 experience weakness on the heels of what's going on in Italy, 0:19:23.040 --> 0:19:25.400 is this a buying opportunity for you as the head 0:19:25.400 --> 0:19:30.440 of a macro credit fund. We think that there are 0:19:30.600 --> 0:19:34.560 some things in credit that are becoming interesting. Um. We 0:19:34.640 --> 0:19:38.800 are still looking at UM corporate credit and some banks 0:19:39.400 --> 0:19:43.000 in countries that remain very stable from a political perspective, 0:19:43.080 --> 0:19:47.560 like Spain or Portugal, And tonight we'll learn the Eurogroup 0:19:48.119 --> 0:19:51.280 solutions for Greece, which has been working on reforms for 0:19:51.320 --> 0:19:53.959 a very long time and he's waiting for debt relief 0:19:54.440 --> 0:19:57.960 and there's there's very likely to be a an extension 0:19:57.960 --> 0:20:01.200 of maturities for the loans degree. So when you see 0:20:01.240 --> 0:20:05.600 indiscriminate selling across the whole of Europe, every risk cast 0:20:05.640 --> 0:20:08.040 at selling off because of one country, because of one 0:20:08.080 --> 0:20:13.320 political headline. Yeah, that creates some um, some buying opportunities. Uh, 0:20:13.400 --> 0:20:16.359 in Italy, we do think the volatility will continue in 0:20:16.400 --> 0:20:19.639 the long end of the curves of five year plus 0:20:19.640 --> 0:20:22.480 ten year plus BTPs, so you know, it's a bit 0:20:22.520 --> 0:20:25.640 early to to step in. But in other countries there 0:20:25.640 --> 0:20:30.560 are some opportunities, so you were saying incorporate debt in 0:20:30.840 --> 0:20:35.560 perhaps Spain or Portugal. UM are the particular industries that 0:20:35.600 --> 0:20:38.600 you see as being immune to some of the political 0:20:38.760 --> 0:20:46.400 discussions and seeing opportunities in Generally, the volatility will hit 0:20:46.640 --> 0:20:50.960 every um, every credit in these countries. In Europe, UM, 0:20:51.800 --> 0:20:56.280 the corporates have been historically much more resilient to sovereign 0:20:56.840 --> 0:21:00.960 to sovereign volatility, because corporates have the levers, they have 0:21:01.040 --> 0:21:04.200 good balances, and many of them could survive even the 0:21:04.200 --> 0:21:06.960 worst case of a euro exit. The banks are more 0:21:07.000 --> 0:21:10.040 connected to the sovereign still in Europe, even though they've 0:21:10.119 --> 0:21:13.359 solved a lot of sovereign debt. UM Greece has been 0:21:13.960 --> 0:21:17.119 in the sovereign market. Greece has been very resilient in 0:21:17.119 --> 0:21:20.000 the last few weeks because again it's going to benefit 0:21:20.080 --> 0:21:23.760 from a potential extension of maturities. And Grease remains the 0:21:23.800 --> 0:21:29.080 widest name, the widest sovereign debt in Europe with you know, 0:21:29.119 --> 0:21:31.600 a ten year yield of four two percent in euros, 0:21:31.640 --> 0:21:34.679 which is equivalent to around seven percent seven plus percent 0:21:34.720 --> 0:21:38.480 in dollars. So it's trading still like an emerging market. UM. 0:21:38.760 --> 0:21:42.760 So we we think still Greece is good opportunity given 0:21:42.920 --> 0:21:46.560 the UM you know, the E s M European stability 0:21:46.560 --> 0:21:51.280 mechanisms just declare that they have satisfied all the reforms 0:21:51.320 --> 0:21:54.480 they needed to do to get help. UM. So we 0:21:54.560 --> 0:21:58.560 think Grease is reprising towards the same trajectory as as Portugal. 0:21:59.320 --> 0:22:02.880 But generally speaking, UM, we continue to see political risk 0:22:03.000 --> 0:22:06.959 populism in Europe and in other countries creating polatility for investors. 0:22:07.320 --> 0:22:10.520 And we've been working on strategies that are short like 0:22:10.600 --> 0:22:13.520 a like a new fund that we launched a few 0:22:13.600 --> 0:22:16.240 days ago. Thank you very much. Alberto Gallo as a 0:22:16.280 --> 0:22:21.520 partner and portfolio manager at Algebra's UK Limited, talking about 0:22:21.680 --> 0:22:38.160 corporate debt in Europe. So we have been talking quite 0:22:38.160 --> 0:22:41.640 a bit about the Supreme Court decision. It is one 0:22:41.680 --> 0:22:45.600 that is absolutely moving markets. Basically, it frees states and 0:22:45.640 --> 0:22:48.720 local governments to start collecting billions of dollars in sales 0:22:48.720 --> 0:22:52.520 tax from internet retailers that don't currently charge tax to 0:22:52.560 --> 0:22:55.439 their customers. Sure of it and joins us now. She 0:22:55.600 --> 0:22:58.800 is a Bloomberg opinion columnist covering all things tech. I'm 0:22:58.800 --> 0:23:01.080 looking at some of the bigger decla lines Overstock dot 0:23:01.080 --> 0:23:04.400 Com down more than one point three percent, Amazon down 0:23:04.440 --> 0:23:08.520 nearly a percent, eBay down two percent. Uh. Just how 0:23:08.640 --> 0:23:13.000 much does this potentially bite into the business of these 0:23:13.080 --> 0:23:17.960 online behemoths. I don't know. I think it's probably not 0:23:18.080 --> 0:23:21.600 that big of a deal, particularly for the largest e 0:23:21.640 --> 0:23:27.200 commerce companies like Amazon. So the the issue is that Amazon, 0:23:27.240 --> 0:23:32.760 for example, already charges sales tax um in for for 0:23:32.880 --> 0:23:36.680 products that it sells directly two shoppers um on any 0:23:36.800 --> 0:23:40.080 in any state that charges sales tax, So that doesn't 0:23:40.920 --> 0:23:43.840 that doesn't do anything for Amazon. But there are also 0:23:44.320 --> 0:23:46.920 about half the sales on on Amazon are coming from 0:23:46.960 --> 0:23:50.320 these independent merchants that use Amazon as a sales channel, 0:23:50.560 --> 0:23:53.359 and they may or may not charge sales tax. So 0:23:53.400 --> 0:23:56.320 now they'll have to be probably some enforcement mechanisms on 0:23:56.720 --> 0:24:00.880 sales tax in in on those independent merchants. But look, 0:24:01.000 --> 0:24:04.600 Amazon and eBay, to their wealthy companies, they can afford it. 0:24:04.840 --> 0:24:09.400 The burden though, falls on these smaller players, these independent merchants, 0:24:09.440 --> 0:24:11.680 these mom and pop shops that are now going to 0:24:11.760 --> 0:24:14.320 have to figure out the tangle of US sales tax 0:24:14.400 --> 0:24:16.560 rules in every state in the country. And it's worth 0:24:16.560 --> 0:24:18.639 noting right that they are not charging it, they're just 0:24:18.680 --> 0:24:21.920 collecting it. That's right, right. And the reason the reason 0:24:21.960 --> 0:24:23.760 I say this is just because that feeds into your 0:24:23.960 --> 0:24:28.840 your point about third party sellers that use Amazon or 0:24:28.880 --> 0:24:32.520 even maybe Facebook as a platform in order to sell, 0:24:33.160 --> 0:24:36.480 and now they have to compete with the stores that 0:24:36.520 --> 0:24:39.480 are around the corner. Perhaps that's right, and I look, 0:24:39.480 --> 0:24:43.159 it's it's there's been some research on the impact of 0:24:44.320 --> 0:24:48.360 what happens to the sales of an online retailer when 0:24:48.359 --> 0:24:50.800 they begin to charge sales tax. At least from what 0:24:50.840 --> 0:24:52.719 I've seen, it's a little bit of a mixed bag. 0:24:53.400 --> 0:24:56.440 It's not like they've already run out of town all 0:24:56.480 --> 0:24:59.640 of the independence, right, I mean, because this has been 0:24:59.640 --> 0:25:02.840 going since Amazon started in business, and that was a 0:25:02.880 --> 0:25:06.359 way to beat the competition because it actually took less 0:25:06.359 --> 0:25:08.520 money out of the consumer pocket. It was I mean, look, 0:25:08.520 --> 0:25:11.080 it's it's a good point that Amazon for many years 0:25:11.080 --> 0:25:14.800 fought paying sales tax, uh, in part because I mean 0:25:14.960 --> 0:25:18.080 It's stated rationale was the company wanted there to be 0:25:18.119 --> 0:25:20.639 a national rule about sales tax. En. That's kind of 0:25:20.680 --> 0:25:23.400 state by state hodgepodge, But you're right it did give 0:25:23.480 --> 0:25:26.920 Amazon an advantage, at least on paper, that it's it's 0:25:27.400 --> 0:25:31.159 bottom line for shoppers was less expensive than Walmart or 0:25:31.160 --> 0:25:35.280 whoever was forced to charge a sales tax on on everything. 0:25:35.359 --> 0:25:38.959