1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:31,320 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Tesla 7 00:00:31,520 --> 00:00:35,400 Speaker 1: is under investigation by the Justice Department over public statements 8 00:00:35,440 --> 00:00:38,880 Speaker 1: made by the company and CEO Ellen Mosk. The shares 9 00:00:38,880 --> 00:00:42,400 Speaker 1: are down about two percent, making a little bit of 10 00:00:42,520 --> 00:00:45,919 Speaker 1: gains against the initial losses on that headline. We will 11 00:00:45,960 --> 00:00:49,400 Speaker 1: monitor it for you. Perhaps it is perfect timing, then 12 00:00:49,560 --> 00:00:52,080 Speaker 1: that we talk about what it is to be a 13 00:00:52,120 --> 00:00:54,880 Speaker 1: private company rather than a public company, and what it 14 00:00:54,880 --> 00:00:57,880 Speaker 1: means to be a good manager versus a bad manager. 15 00:00:58,200 --> 00:01:01,040 Speaker 1: Here joining us now is Nigel tracks Best, executive chairman 16 00:01:01,120 --> 00:01:03,960 Speaker 1: of the Duncan Brands Group, also the author of a book, 17 00:01:04,040 --> 00:01:07,000 Speaker 1: The Culture Challenge or The Challenge Culture. Excuse me why 18 00:01:07,040 --> 00:01:11,360 Speaker 1: the most successful organizations run on pushback? Nigel, thank you 19 00:01:11,400 --> 00:01:14,040 Speaker 1: so much for being with us. Delighted to be here. 20 00:01:14,360 --> 00:01:17,080 Speaker 1: Decades of experience in this business, you know, just just 21 00:01:17,680 --> 00:01:20,640 Speaker 1: talking about Tesla and some of the issues that they've 22 00:01:20,680 --> 00:01:24,160 Speaker 1: had with going private or going public. From your perspective, 23 00:01:24,319 --> 00:01:26,920 Speaker 1: is it better to be a private company? And why? 24 00:01:27,200 --> 00:01:31,640 Speaker 1: Great question, And as a very happy second time Tesla owner, 25 00:01:32,680 --> 00:01:35,560 Speaker 1: really yeah, yeah, I mean I think the machine is awesome. 26 00:01:35,600 --> 00:01:38,800 Speaker 1: As someone said last week, it's artificial intelligence on wheels, 27 00:01:39,360 --> 00:01:44,360 Speaker 1: So I think the product is fantastic, do you No, no, no. 28 00:01:44,440 --> 00:01:46,280 Speaker 1: I bought the stock a long time ago and got 29 00:01:46,319 --> 00:01:50,320 Speaker 1: out with a very hefty gain. But anyway, um, but 30 00:01:50,960 --> 00:01:53,680 Speaker 1: it's a fascinating question. It's a it's a question that's 31 00:01:54,200 --> 00:01:56,640 Speaker 1: discussed in the book. Because I joined Duncan back in 32 00:01:56,680 --> 00:02:00,080 Speaker 1: two thousand nine and we were private, I think we 33 00:02:00,120 --> 00:02:03,040 Speaker 1: were helped, which is going to sound slightly contradictory by 34 00:02:03,080 --> 00:02:04,840 Speaker 1: the fact it was in the middle of the recession. 35 00:02:05,160 --> 00:02:07,280 Speaker 1: You can't get more in the middle of the recession 36 00:02:07,280 --> 00:02:11,320 Speaker 1: than January two thousand and nine. And we spent the 37 00:02:11,360 --> 00:02:15,600 Speaker 1: first year studying the company and our franchisees with several 38 00:02:15,639 --> 00:02:19,840 Speaker 1: microscopes because everyone was under severe pressure and and in 39 00:02:19,880 --> 00:02:22,120 Speaker 1: many ways, when I look back, that was good. But 40 00:02:22,160 --> 00:02:25,720 Speaker 1: I was supported with a phenomenal group of private equity firms, 41 00:02:26,120 --> 00:02:30,120 Speaker 1: being Carlisle and thhle. We had an excellent board, and 42 00:02:30,160 --> 00:02:32,919 Speaker 1: what is interesting is that two of those original board 43 00:02:32,919 --> 00:02:37,480 Speaker 1: members are still on our board now um uh still 44 00:02:37,520 --> 00:02:41,440 Speaker 1: on the board um And we went completely public in 45 00:02:41,480 --> 00:02:45,360 Speaker 1: two thousand and twelve. So I like being private, but 46 00:02:45,480 --> 00:02:48,040 Speaker 1: I'm one of the few CEOs that actually likes being 47 00:02:48,080 --> 00:02:52,200 Speaker 1: public as well, because I truly believe that the questions 48 00:02:52,240 --> 00:02:57,119 Speaker 1: from people like yourself, or from analysts and certainly investors 49 00:02:57,520 --> 00:03:00,480 Speaker 1: have a role to make you better. They constantly challenged 50 00:03:00,520 --> 00:03:03,480 Speaker 1: the status quo, which is what what my book's all about. 51 00:03:03,840 --> 00:03:07,200 Speaker 1: It's about getting input from informed outsiders. It is the 52 00:03:07,280 --> 00:03:11,239 Speaker 1: outside looking in. And I truly believe you know that 53 00:03:11,480 --> 00:03:14,960 Speaker 1: good managers, as you say, good leaders, can operate in 54 00:03:15,080 --> 00:03:20,240 Speaker 1: both private circumstances and public circumstances. Nigel Travis as the 55 00:03:20,320 --> 00:03:25,440 Speaker 1: author of the Challenge Culture why the most successful organizations 56 00:03:25,560 --> 00:03:29,880 Speaker 1: run on pushback. In addition to your role at Duncan Brands, 57 00:03:30,320 --> 00:03:34,000 Speaker 1: you previously have experienced as the chief operating officer Blockbuster. 58 00:03:35,040 --> 00:03:38,720 Speaker 1: You also worked at Burger King and you've also had 59 00:03:38,720 --> 00:03:42,760 Speaker 1: a career at Papa John's. You've also helped to restructure 60 00:03:42,800 --> 00:03:47,320 Speaker 1: an English football team, Layton Orients. Can you tell us 61 00:03:47,520 --> 00:03:50,920 Speaker 1: what some of those things have in common. Well, actually 62 00:03:51,200 --> 00:03:55,400 Speaker 1: cook quite a bit um. Firstly, the English football team, 63 00:03:55,400 --> 00:04:01,320 Speaker 1: which UH a consultium led by myself bought the club 64 00:04:01,560 --> 00:04:04,680 Speaker 1: June last year. We had no bank account, no credit 65 00:04:04,720 --> 00:04:07,600 Speaker 1: card processing and worst of all, no players. But we 66 00:04:07,680 --> 00:04:10,440 Speaker 1: applied the challenge culture and everything we did. And the 67 00:04:10,600 --> 00:04:13,360 Speaker 1: challenge culture is about two things. Is about challenging, which 68 00:04:13,360 --> 00:04:16,560 Speaker 1: is what everyone focuses on, but mostly it's about culture. 69 00:04:16,960 --> 00:04:20,719 Speaker 1: So to link all those companies together over time, I've 70 00:04:20,760 --> 00:04:24,719 Speaker 1: tried to develop a very positive culture in all the companies. 71 00:04:24,960 --> 00:04:28,560 Speaker 1: I think we've got an extremely positive culture in Duncan 72 00:04:28,640 --> 00:04:32,320 Speaker 1: where people have always been encouraged to challenge, pushback too, 73 00:04:32,480 --> 00:04:36,240 Speaker 1: if you like, take all the hierarchical boundaries out the way. 74 00:04:36,640 --> 00:04:39,320 Speaker 1: Papa John's, despite some of their recent problems, we had 75 00:04:39,320 --> 00:04:41,560 Speaker 1: a great culture when I was there, and I did 76 00:04:41,600 --> 00:04:44,320 Speaker 1: it there without changing any of the leadership team. You 77 00:04:44,400 --> 00:04:47,600 Speaker 1: did a whole digital initiative there. Oh yeah, yeah. We 78 00:04:47,600 --> 00:04:51,560 Speaker 1: we became the leaders of online pizza ordering in nineteen sorry, 79 00:04:51,560 --> 00:04:55,040 Speaker 1: two thousand and five, two thousand and six, and I 80 00:04:55,240 --> 00:04:57,880 Speaker 1: focused on that because when I was at Blockbuster we 81 00:04:57,960 --> 00:05:01,080 Speaker 1: did a lot of great things. We had to constantly 82 00:05:01,160 --> 00:05:04,680 Speaker 1: fight new technology challenges coming towards us all the time. 83 00:05:05,200 --> 00:05:08,840 Speaker 1: We probably didn't tackle Netflix early enough. We certainly didn't 84 00:05:08,880 --> 00:05:11,320 Speaker 1: tackle Netflix early enough, and we could have bought the 85 00:05:11,360 --> 00:05:14,800 Speaker 1: company for about fifty million it's now worth I think 86 00:05:14,839 --> 00:05:18,200 Speaker 1: a hundred and sixty billions, something like that. But we 87 00:05:18,320 --> 00:05:20,919 Speaker 1: came back hard and we put them under pressure. And 88 00:05:21,080 --> 00:05:24,040 Speaker 1: after I left, after my then boss John anti Arco left, 89 00:05:24,839 --> 00:05:27,760 Speaker 1: the company struggled and eventually went bankrupts in two thousand 90 00:05:27,760 --> 00:05:30,760 Speaker 1: and ten. But we could have been the leaders. So 91 00:05:30,800 --> 00:05:33,640 Speaker 1: I think the messages you've got to constantly look at, 92 00:05:33,800 --> 00:05:37,040 Speaker 1: look where you are, how you challenge going forward, how 93 00:05:37,080 --> 00:05:41,000 Speaker 1: you challenge the status quo, but all within the context 94 00:05:41,040 --> 00:05:44,919 Speaker 1: to answer your question of a very positive, people oriented culture. 95 00:05:45,360 --> 00:05:47,720 Speaker 1: And that's what the books about. It's not just the challenging, 96 00:05:47,800 --> 00:05:50,920 Speaker 1: it's about creating that culture. We should live every day. 97 00:05:51,360 --> 00:05:54,560 Speaker 1: You should set an example of what it's about every day, 98 00:05:54,680 --> 00:05:57,919 Speaker 1: and I truly think we've demonstrated that at Duncan. I 99 00:05:57,960 --> 00:06:00,080 Speaker 1: want to go back to something that you were talking 100 00:06:00,120 --> 00:06:03,320 Speaker 1: about with respect to being a public company, that that 101 00:06:03,400 --> 00:06:07,200 Speaker 1: actually encourages a challenge culture, and I want to ask 102 00:06:07,240 --> 00:06:09,239 Speaker 1: you about the fact that we've seen a growing number 103 00:06:09,240 --> 00:06:13,680 Speaker 1: of companies go private from being public. Are you concerned 104 00:06:13,920 --> 00:06:16,880 Speaker 1: that that doesn't foster enough of a challenge culture that 105 00:06:16,920 --> 00:06:21,240 Speaker 1: potentially companies will end up struggling or being failures because 106 00:06:21,240 --> 00:06:24,640 Speaker 1: they're not getting scrutinized and questioned every step of the way. 107 00:06:25,000 --> 00:06:27,560 Speaker 1: I think that's a great question. And it's interesting that 108 00:06:27,760 --> 00:06:29,599 Speaker 1: the number of public companies, and I think this is 109 00:06:29,640 --> 00:06:33,000 Speaker 1: what you're referring to, is declining at quite a rapid rate. 110 00:06:33,640 --> 00:06:36,120 Speaker 1: I think it's down by something like that may not 111 00:06:36,160 --> 00:06:40,520 Speaker 1: be right, but yeah, it's traumatic. And I think the 112 00:06:40,560 --> 00:06:43,400 Speaker 1: point you make is fair comment because we all need 113 00:06:43,520 --> 00:06:46,920 Speaker 1: outsider input looking in. I mean, one of the benefits 114 00:06:46,960 --> 00:06:48,960 Speaker 1: we have in Duncan and we had the same in 115 00:06:49,000 --> 00:06:51,200 Speaker 1: Pupa John's, and we have the same at the football club. 116 00:06:51,480 --> 00:06:55,360 Speaker 1: The football club we have fans rather than franchisees. Duncan 117 00:06:55,440 --> 00:06:59,120 Speaker 1: and Papa John's we have franchisees. They are the ultimate challenges. 118 00:06:59,480 --> 00:07:02,440 Speaker 1: But some times you need people standing right outside the 119 00:07:02,560 --> 00:07:06,000 Speaker 1: organization looking at trends and by the way, analysts, this 120 00:07:06,040 --> 00:07:09,200 Speaker 1: is what people don't realize. Analysts, good analysts like some 121 00:07:09,279 --> 00:07:11,240 Speaker 1: of the people we have in our industry, and by 122 00:07:11,240 --> 00:07:14,119 Speaker 1: the way, we have thirty five analysts who follow Duncan, 123 00:07:14,160 --> 00:07:17,120 Speaker 1: which is probably too many, but thirty five. The benefit 124 00:07:17,240 --> 00:07:20,640 Speaker 1: is they talk to the competition, they followed the trends, 125 00:07:21,080 --> 00:07:23,120 Speaker 1: and they make you think the whole time. So the 126 00:07:23,320 --> 00:07:26,840 Speaker 1: Challenge culture, a major part of it has been being 127 00:07:26,880 --> 00:07:30,560 Speaker 1: pushed to think and say what direction are we going in? 128 00:07:30,800 --> 00:07:32,720 Speaker 1: Is it right or not? And by the way, just 129 00:07:32,760 --> 00:07:35,800 Speaker 1: say something on Duncan. Under the new leader, Dave Hoffman, 130 00:07:35,960 --> 00:07:39,760 Speaker 1: we're going in exactly the right direction. Well done, Thank 131 00:07:39,800 --> 00:07:41,840 Speaker 1: you very much for coming in and spending time with us. 132 00:07:42,560 --> 00:07:48,000 Speaker 1: Nigel Travis, the author of The Challenge Culture, Why the 133 00:07:48,040 --> 00:07:53,120 Speaker 1: most successful organizations run on pushback. He is the executive 134 00:07:53,200 --> 00:07:57,440 Speaker 1: chairman and the former chief executive of Duncan Donuts and 135 00:07:57,520 --> 00:07:59,880 Speaker 1: Baskin Robins. Don't want to miss out on the imp 136 00:08:00,080 --> 00:08:02,200 Speaker 1: laeve that he has a lot of doughnuts and ice cream, 137 00:08:02,200 --> 00:08:04,800 Speaker 1: because I will tell you he is not. He's very fit, 138 00:08:05,600 --> 00:08:09,640 Speaker 1: keep working out, challenged myself every day. All right, we uh, 139 00:08:09,680 --> 00:08:11,560 Speaker 1: we appreciate it and we look forward to having you 140 00:08:11,640 --> 00:08:25,920 Speaker 1: in the future. Much appreciated. China has decided to levy 141 00:08:26,120 --> 00:08:29,640 Speaker 1: levy tariffs on about sixty billion dollars worth of imports 142 00:08:29,680 --> 00:08:33,400 Speaker 1: from the United States. This is contingent, of course, on 143 00:08:33,480 --> 00:08:37,360 Speaker 1: the plan tariffs on two billion dollars worth of Chinese goods. 144 00:08:38,240 --> 00:08:41,480 Speaker 1: China plans to slap additional tariffs on over five thousand 145 00:08:41,559 --> 00:08:46,040 Speaker 1: categories of US products with two levels of tara phrase 146 00:08:46,160 --> 00:08:48,679 Speaker 1: ten and five percent. Here to tell us more about 147 00:08:48,679 --> 00:08:51,479 Speaker 1: the issue is Leland Miller. He is the chief executive 148 00:08:51,679 --> 00:08:55,800 Speaker 1: of China beige Book International. You can follow their work 149 00:08:55,880 --> 00:09:00,360 Speaker 1: on Twitter at China beige Book. Leland Miller. Always a pleasure, 150 00:09:00,400 --> 00:09:03,240 Speaker 1: Thank you for coming in. Do you believe that this 151 00:09:03,360 --> 00:09:05,840 Speaker 1: back and forth in tariffs will have a meaningful effect 152 00:09:05,840 --> 00:09:08,920 Speaker 1: on the Chinese economy. I think it will. I think 153 00:09:08,960 --> 00:09:11,040 Speaker 1: it already has. And we've got some new data they're 154 00:09:11,040 --> 00:09:13,120 Speaker 1: coming out next week that I think will shine a 155 00:09:13,200 --> 00:09:16,600 Speaker 1: light on on on on what is happening and and 156 00:09:16,600 --> 00:09:19,240 Speaker 1: and you know not that nothing is hit except the 157 00:09:19,280 --> 00:09:21,560 Speaker 1: fifty billions so far, and even that is just a 158 00:09:21,559 --> 00:09:25,120 Speaker 1: few weeks in. If that is showing an effect, then 159 00:09:25,200 --> 00:09:27,160 Speaker 1: it tells you a lot about what two billion will do, 160 00:09:27,200 --> 00:09:29,920 Speaker 1: and what about what will fillion will do? So I 161 00:09:29,920 --> 00:09:32,480 Speaker 1: do think it is is it's already showing an effect. Uh, 162 00:09:32,559 --> 00:09:35,719 Speaker 1: we'll have a little bit more on that week. Well, 163 00:09:35,720 --> 00:09:38,720 Speaker 1: it's manufacturing. So manufacturing has been going strong for a 164 00:09:38,720 --> 00:09:41,920 Speaker 1: long time, and in China, in China, and uh and 165 00:09:41,920 --> 00:09:45,360 Speaker 1: and I think that the manufacturing sector has gotten skittish 166 00:09:45,720 --> 00:09:49,000 Speaker 1: on what's going on next and and uh, and that's 167 00:09:49,040 --> 00:09:52,120 Speaker 1: one of their real concern points. Well, the Shanghai composit 168 00:09:52,320 --> 00:09:56,000 Speaker 1: rallied overnight in the heel on the heels of this news. 169 00:09:56,080 --> 00:09:58,280 Speaker 1: One theory had been, first of all, it had been 170 00:09:58,280 --> 00:10:00,719 Speaker 1: so beaten up and had been trade at its lowest level. 171 00:10:01,960 --> 00:10:05,240 Speaker 1: But also there are some theories out there that China 172 00:10:05,280 --> 00:10:08,520 Speaker 1: will come back with some kind of infrastructure project that 173 00:10:08,600 --> 00:10:11,080 Speaker 1: will help bolster the economy. So how does that factor 174 00:10:11,120 --> 00:10:13,800 Speaker 1: in and doesn't that offset this? Yeah, I think that 175 00:10:13,800 --> 00:10:16,480 Speaker 1: that's part of it. Um, China is now faced with 176 00:10:16,600 --> 00:10:19,360 Speaker 1: a serious trade threat that looks like it's going through, 177 00:10:20,000 --> 00:10:22,080 Speaker 1: in which case the government's gonna have to respond. So 178 00:10:22,120 --> 00:10:23,760 Speaker 1: I think it's going to be all systems go. We're 179 00:10:23,760 --> 00:10:25,480 Speaker 1: already seeing a little bit of that about that in 180 00:10:25,480 --> 00:10:28,439 Speaker 1: the in the credit world. Uh. And so there's that. 181 00:10:28,520 --> 00:10:30,160 Speaker 1: And I think the other part about this is that 182 00:10:30,200 --> 00:10:32,640 Speaker 1: the two billion didn't come out of nowhere. This was 183 00:10:32,679 --> 00:10:35,640 Speaker 1: going through. The surprise I think was that they they 184 00:10:35,679 --> 00:10:37,600 Speaker 1: expedited the process a bit and they moved up the 185 00:10:37,600 --> 00:10:40,600 Speaker 1: implementation date. But the two billion has been talked about 186 00:10:40,640 --> 00:10:44,360 Speaker 1: for months. It was always going through. Uh even if 187 00:10:44,400 --> 00:10:46,960 Speaker 1: you were to have a deal later this fall, the 188 00:10:47,000 --> 00:10:51,040 Speaker 1: president wanted that two either hovering right over him or 189 00:10:51,400 --> 00:10:54,280 Speaker 1: recently into effect in order to negotiate. So the twitter billion, 190 00:10:54,280 --> 00:10:57,120 Speaker 1: I don't think it's any major surprise. Leland. Tell us 191 00:10:57,160 --> 00:10:59,760 Speaker 1: about the Chinese economy right now. You spend a lot 192 00:10:59,760 --> 00:11:04,840 Speaker 1: of time time analyzing it, where its strengths and weaknesses. Well, 193 00:11:05,160 --> 00:11:08,480 Speaker 1: the two thousands, sixteen, two thousands seventeen years, we're all 194 00:11:08,480 --> 00:11:14,400 Speaker 1: about recovering from the early crisis and recovering the economy 195 00:11:14,400 --> 00:11:17,360 Speaker 1: into a into a period of strength and stability entering 196 00:11:17,360 --> 00:11:19,319 Speaker 1: the Party Congress, and they accomplished that. I think that 197 00:11:19,320 --> 00:11:21,520 Speaker 1: when we talked about this throughout twenty seventeen, it was, 198 00:11:21,720 --> 00:11:24,360 Speaker 1: you know, all systems go, things are looking good. They 199 00:11:24,360 --> 00:11:27,000 Speaker 1: didn't have this trade war hanging over them in seventeen 200 00:11:27,400 --> 00:11:29,560 Speaker 1: and and since then things have gotten a little bit 201 00:11:29,600 --> 00:11:32,640 Speaker 1: more tricky. So you have this, you have the trade 202 00:11:32,640 --> 00:11:38,040 Speaker 1: war looming, you have uh A a bunch of sectors 203 00:11:38,040 --> 00:11:40,960 Speaker 1: in the economy, the old economy, manufacturing, property and others 204 00:11:41,160 --> 00:11:44,320 Speaker 1: that have been run so hard for so long that 205 00:11:44,360 --> 00:11:47,760 Speaker 1: they're starting to weaken. And so you have this possibility 206 00:11:47,800 --> 00:11:51,000 Speaker 1: of a weakening economy with looming tariffs overhead, and it's 207 00:11:51,040 --> 00:11:53,960 Speaker 1: making people nervous. And so the big question is how 208 00:11:54,000 --> 00:11:57,520 Speaker 1: accurate official data are on credit, which they're saying there's 209 00:11:57,559 --> 00:11:59,840 Speaker 1: not that much barring yet and investment and they're saying 210 00:11:59,840 --> 00:12:02,160 Speaker 1: that this is at historic lows. Now, we don't agree 211 00:12:02,200 --> 00:12:04,440 Speaker 1: with that, and we'll have some different takes on that 212 00:12:04,480 --> 00:12:07,360 Speaker 1: in the coming weeks. I think that official data tells 213 00:12:07,360 --> 00:12:10,560 Speaker 1: you a good story three months earlier, but I think 214 00:12:10,679 --> 00:12:12,600 Speaker 1: there's some there's some new developments on the horizon right now. 215 00:12:12,640 --> 00:12:15,280 Speaker 1: Perhaps credit is expanding pretty quickly as they loosen up 216 00:12:15,320 --> 00:12:17,720 Speaker 1: the strings. I'm just wondering. One thing that we're waiting 217 00:12:17,760 --> 00:12:21,600 Speaker 1: for is details on retaliation from China. What could some 218 00:12:21,679 --> 00:12:23,520 Speaker 1: of those measures be in addition to some of the 219 00:12:23,559 --> 00:12:25,800 Speaker 1: tariffs that they've put out there on sixty billion dollars 220 00:12:25,800 --> 00:12:28,160 Speaker 1: of US goods, But what could they do as far 221 00:12:28,320 --> 00:12:31,840 Speaker 1: as basically shifting their supply chains and their lines of 222 00:12:31,840 --> 00:12:36,520 Speaker 1: business away from the US. Well, they are going to 223 00:12:37,440 --> 00:12:39,280 Speaker 1: have to look into that the same way that the 224 00:12:39,320 --> 00:12:41,319 Speaker 1: US is looking into it. They're gonna have a harder 225 00:12:41,360 --> 00:12:45,800 Speaker 1: time because I think that the you know, the US 226 00:12:45,840 --> 00:12:48,880 Speaker 1: trade with China is very one sided at this point, 227 00:12:48,880 --> 00:12:51,360 Speaker 1: and so the US is other places that can go China. 228 00:12:51,640 --> 00:12:54,360 Speaker 1: China wants to have markets for its goods, it's it's 229 00:12:54,360 --> 00:12:56,439 Speaker 1: going to be hard to avoid the US. So they 230 00:12:56,440 --> 00:12:59,120 Speaker 1: have a much tougher task here. But the z t 231 00:12:59,280 --> 00:13:01,440 Speaker 1: E incident was a wake up call for them. I 232 00:13:01,440 --> 00:13:04,960 Speaker 1: think that the the escalation and their of of these 233 00:13:04,960 --> 00:13:08,240 Speaker 1: tariffs and their apparent weakness in the face of them, 234 00:13:08,360 --> 00:13:10,520 Speaker 1: is another wake up call. So, you know what, what 235 00:13:10,600 --> 00:13:14,360 Speaker 1: we're seeing right now, independent of tariffs, and independent of 236 00:13:14,360 --> 00:13:18,320 Speaker 1: whether we somehow see a fall deal or a deal 237 00:13:18,400 --> 00:13:21,480 Speaker 1: in in early twenty nineteen, is a decoupling of the 238 00:13:21,600 --> 00:13:23,560 Speaker 1: U S and Chinese economies. And I think that that 239 00:13:23,679 --> 00:13:26,640 Speaker 1: is setting itself down a path that's not yet irreversible, 240 00:13:26,840 --> 00:13:28,360 Speaker 1: but is looking like this is going to be the 241 00:13:28,400 --> 00:13:31,880 Speaker 1: thing that defines the next decade. If that is indeed 242 00:13:31,880 --> 00:13:35,640 Speaker 1: what defines the next decade, where will the capital come 243 00:13:35,720 --> 00:13:39,960 Speaker 1: from in order to continue the accelerated growth that China 244 00:13:40,040 --> 00:13:45,280 Speaker 1: wants to enjoy. Well, you know, China in some ways 245 00:13:45,559 --> 00:13:48,080 Speaker 1: is a very attractive market. Now. You don't have a 246 00:13:48,160 --> 00:13:50,680 Speaker 1: very good regulatory structure. You don't trust that the government 247 00:13:50,720 --> 00:13:52,320 Speaker 1: is going to do what it says it's going to do. 248 00:13:52,679 --> 00:13:55,320 Speaker 1: On the other hand, you have enormous opportunities. You've got 249 00:13:55,360 --> 00:13:59,040 Speaker 1: a huge consumer base, you've got um interest rates that 250 00:13:59,040 --> 00:14:03,199 Speaker 1: that should be paying out relatively healthily, and as long 251 00:14:03,240 --> 00:14:06,000 Speaker 1: as you're in a low interest rate world, which we're 252 00:14:06,040 --> 00:14:08,880 Speaker 1: emerging from right now. So you've got this bod market 253 00:14:08,960 --> 00:14:11,320 Speaker 1: that's that's crying out for foreign capital. So there are 254 00:14:11,320 --> 00:14:13,400 Speaker 1: opportunities there. But the Chinese really have to get there, 255 00:14:13,720 --> 00:14:16,400 Speaker 1: get their economy into shape, and they have to be 256 00:14:16,520 --> 00:14:18,720 Speaker 1: more open, and I think they would be forced into 257 00:14:18,760 --> 00:14:21,280 Speaker 1: that the more they're back into a corner. Leland Miller, 258 00:14:21,560 --> 00:14:23,320 Speaker 1: such a pleasure having you on. Thank you so much 259 00:14:23,360 --> 00:14:26,280 Speaker 1: for coming in. Thank you. Really interesting him this idea 260 00:14:26,520 --> 00:14:30,480 Speaker 1: that the decoupling of the US and Chinese economies will 261 00:14:30,480 --> 00:14:33,040 Speaker 1: be the defining feature of the next decade. According to 262 00:14:33,120 --> 00:14:37,320 Speaker 1: Leland Miller, chief executive officer of the China Beige Book International, 263 00:14:49,480 --> 00:14:52,760 Speaker 1: there's been a lot of money raised recently for real estate, 264 00:14:52,920 --> 00:14:57,120 Speaker 1: for example, Carlisle has raised five and a half billion 265 00:14:57,200 --> 00:15:01,440 Speaker 1: dollars for its private equity real estate for fund. Black 266 00:15:01,520 --> 00:15:05,280 Speaker 1: Stone has said to raise more than eighteen billion dollars 267 00:15:05,320 --> 00:15:07,840 Speaker 1: for a real estate fund. And now we learned that 268 00:15:07,880 --> 00:15:11,360 Speaker 1: ox IF is looking to raise two point eight billion 269 00:15:11,520 --> 00:15:15,480 Speaker 1: dollars for real estate. So our next guest is probably 270 00:15:15,520 --> 00:15:19,000 Speaker 1: a very popular individual. Scott Lawler is the chief executive 271 00:15:19,080 --> 00:15:22,160 Speaker 1: of a way Point Residential and he joins us here 272 00:15:22,200 --> 00:15:25,040 Speaker 1: in our eleven three oh studios. Scott, thank you very 273 00:15:25,120 --> 00:15:27,920 Speaker 1: much for being here. Are you at all surprised at 274 00:15:27,920 --> 00:15:30,680 Speaker 1: the amount of money that's being raised by private equity 275 00:15:30,720 --> 00:15:34,120 Speaker 1: firms to invest in real estate? Well, first, thanks for 276 00:15:34,160 --> 00:15:36,600 Speaker 1: having me, And I would not say I'm surprised because 277 00:15:36,640 --> 00:15:39,040 Speaker 1: this is a trendline that's been evolving throughout this psycho 278 00:15:39,120 --> 00:15:42,800 Speaker 1: where you know, after the crash, the manager field, if 279 00:15:42,840 --> 00:15:45,040 Speaker 1: you will, real estate investment manager playing field got shaken 280 00:15:45,120 --> 00:15:48,560 Speaker 1: up quite a bit and the few survivors capitalized on 281 00:15:48,560 --> 00:15:51,440 Speaker 1: that opportunity and suddenly there were a fewer managers and 282 00:15:51,600 --> 00:15:54,600 Speaker 1: much much larger funds. And that's continued. Obviously now there's 283 00:15:54,600 --> 00:15:57,400 Speaker 1: more managers back in the game, but the trend towards 284 00:15:57,760 --> 00:16:00,120 Speaker 1: mega funds, if you will, amongst sort of the all 285 00:16:00,120 --> 00:16:02,000 Speaker 1: the fame name managers has been in place for some 286 00:16:02,080 --> 00:16:04,600 Speaker 1: time and they've been successful with it all, right, But 287 00:16:04,720 --> 00:16:07,680 Speaker 1: here we are, two thousand eighteen, some people are seeing 288 00:16:07,880 --> 00:16:11,160 Speaker 1: some possible wobbles in the US housing market. There isn't 289 00:16:11,200 --> 00:16:14,600 Speaker 1: the same kind of dynamism that we saw during the recovery, 290 00:16:14,720 --> 00:16:20,000 Speaker 1: certainly in terms of price increases. Where are the opportunities, right? So, 291 00:16:20,040 --> 00:16:22,040 Speaker 1: I mean, you know, ten billion, eighteen billion, that's a 292 00:16:22,080 --> 00:16:24,080 Speaker 1: lot of money to invest, for sure, But in a week, 293 00:16:24,200 --> 00:16:26,080 Speaker 1: I mean, this is we're talking literally, these are the 294 00:16:26,120 --> 00:16:28,720 Speaker 1: past week. But it's important to understand how they define 295 00:16:28,720 --> 00:16:31,000 Speaker 1: their playing field. So you know, you don't deploy a 296 00:16:31,040 --> 00:16:33,920 Speaker 1: fund like that. And it's not for me to say 297 00:16:33,760 --> 00:16:35,720 Speaker 1: these guys run their business other than we all know 298 00:16:35,720 --> 00:16:37,800 Speaker 1: they've done it very well. But you know they're thinking 299 00:16:37,840 --> 00:16:40,880 Speaker 1: in terms First of all, they're thinking globally of course um. 300 00:16:41,000 --> 00:16:45,320 Speaker 1: And secondly, um, you know, in terms of say larger transactions, 301 00:16:45,360 --> 00:16:47,800 Speaker 1: say there's been a public to private activity and so 302 00:16:47,840 --> 00:16:50,000 Speaker 1: on in the reach sector and things like that. So 303 00:16:50,040 --> 00:16:52,160 Speaker 1: they're really in the mega trade business. And when you 304 00:16:52,240 --> 00:16:54,960 Speaker 1: can't you raise funds at that level, you're kind of 305 00:16:55,000 --> 00:16:57,400 Speaker 1: playing at a different tier, and the and the competitive 306 00:16:57,400 --> 00:17:00,200 Speaker 1: supply and demand dynamics are different. So someone like me 307 00:17:00,240 --> 00:17:02,000 Speaker 1: and I have to be careful where I play because 308 00:17:02,280 --> 00:17:04,840 Speaker 1: in certain places that could be fifty folks chasing an opportunity, 309 00:17:04,840 --> 00:17:06,639 Speaker 1: and I don't want to be the fifty one. But 310 00:17:06,880 --> 00:17:09,040 Speaker 1: when you're playing at their level, that's not the case. 311 00:17:09,160 --> 00:17:11,360 Speaker 1: We hold on a second, So this is important. These 312 00:17:11,480 --> 00:17:14,280 Speaker 1: are direct competitors to you in certain circumstances. How do 313 00:17:14,320 --> 00:17:17,080 Speaker 1: you ensure that you're not playing in the same sandbox? 314 00:17:17,119 --> 00:17:19,480 Speaker 1: What's the sandbox that you see the opportunities for a 315 00:17:19,520 --> 00:17:22,520 Speaker 1: fund of your size? Right, So we're the biggest cut 316 00:17:22,560 --> 00:17:25,520 Speaker 1: obviously is deal size, Right, So if you read about 317 00:17:25,600 --> 00:17:28,560 Speaker 1: you know, five billion dollar public to private transaction as 318 00:17:28,600 --> 00:17:31,159 Speaker 1: an example, it's probably not going to be us, you know, 319 00:17:31,240 --> 00:17:34,120 Speaker 1: leading the charge there. So we're playing in smaller markets. 320 00:17:34,119 --> 00:17:36,480 Speaker 1: We're doing deals that are maybe fifty million dollars on 321 00:17:36,520 --> 00:17:39,800 Speaker 1: average of total capitalization, and we would very very rarely 322 00:17:39,840 --> 00:17:41,920 Speaker 1: cross paths with someone who had a ten billion dollar 323 00:17:41,920 --> 00:17:44,280 Speaker 1: fund because they're not going to get that money out 324 00:17:44,320 --> 00:17:47,320 Speaker 1: the door efficiently doing fifty million dollar deals. They're going 325 00:17:47,359 --> 00:17:49,680 Speaker 1: to get it out the door doing very very large transactions. 326 00:17:49,680 --> 00:17:52,320 Speaker 1: So it's a it's a very different playing field, all right, 327 00:17:52,720 --> 00:17:57,840 Speaker 1: very different playing field residential rental properties, that's that's a 328 00:17:57,880 --> 00:18:01,840 Speaker 1: specialty for you. That's right. Where are you looking to expand? 329 00:18:02,800 --> 00:18:05,840 Speaker 1: So we've been expanding the last couple of years, UM 330 00:18:05,880 --> 00:18:08,439 Speaker 1: in a couple of ways. I define it by geography 331 00:18:08,520 --> 00:18:12,160 Speaker 1: and I define it by strategy. So we really found 332 00:18:12,160 --> 00:18:14,960 Speaker 1: the greatest opportunity for the most part, not exclusively, but 333 00:18:15,000 --> 00:18:19,000 Speaker 1: heavily focusing on some smaller markets, UM, which are different 334 00:18:19,000 --> 00:18:22,520 Speaker 1: than when i've student housing, for example in North Carolina. 335 00:18:22,520 --> 00:18:24,479 Speaker 1: That's right, Well, that's as it relates to specialty. So 336 00:18:24,520 --> 00:18:27,240 Speaker 1: we've gone into smaller geographies half a million million person 337 00:18:27,280 --> 00:18:30,399 Speaker 1: metro areas, and in addition, we've gone into specialty property 338 00:18:30,440 --> 00:18:33,160 Speaker 1: types such as student and senior, and we find those 339 00:18:33,200 --> 00:18:36,199 Speaker 1: are more compelling areas right now than say keeping it 340 00:18:36,280 --> 00:18:37,919 Speaker 1: you know what I call center of the fairway, if 341 00:18:37,960 --> 00:18:41,040 Speaker 1: you stick with just conventional and just in the major metros, 342 00:18:41,280 --> 00:18:43,960 Speaker 1: it's where you see the fiercest competition and in my view, 343 00:18:44,000 --> 00:18:47,479 Speaker 1: the most troublesome pricing. So how much more are you 344 00:18:47,520 --> 00:18:50,480 Speaker 1: getting with respect to returns to invest in some of 345 00:18:50,520 --> 00:18:54,000 Speaker 1: these smaller opportunities that have a smaller pool of competitors 346 00:18:54,000 --> 00:18:56,720 Speaker 1: than the large cat type deals. The spread isn't what 347 00:18:56,720 --> 00:18:58,280 Speaker 1: it used to be, and I wish it was greater. 348 00:18:58,520 --> 00:19:01,080 Speaker 1: There's some I mean, look, if you talk about prime 349 00:19:01,119 --> 00:19:04,040 Speaker 1: properties and major metros, you know cap rates and you 350 00:19:04,080 --> 00:19:08,359 Speaker 1: know going in returns are sub four percent frequently. Um, 351 00:19:08,480 --> 00:19:11,080 Speaker 1: we're at least a hundred a hundred fifty basis points 352 00:19:11,119 --> 00:19:15,160 Speaker 1: higher than that. So I'd rather play a hundred fifty 353 00:19:15,160 --> 00:19:18,080 Speaker 1: basis points higher and be in Omaha, de Moin or 354 00:19:18,119 --> 00:19:20,399 Speaker 1: what have you, then pay a three seventy five to 355 00:19:20,480 --> 00:19:22,240 Speaker 1: be in San Francisco. Doesn't mean I'm right. There's a 356 00:19:22,280 --> 00:19:23,760 Speaker 1: lot of smart folks. You see it differently. It's just 357 00:19:23,760 --> 00:19:26,080 Speaker 1: what we do. Are you concerned about the amount of 358 00:19:26,119 --> 00:19:29,320 Speaker 1: money going into this space and how high valuations have gotten. 359 00:19:30,280 --> 00:19:32,240 Speaker 1: I'm absolutely concerned about the amount of money in the 360 00:19:32,240 --> 00:19:34,679 Speaker 1: space because it makes our life very difficult, you know. 361 00:19:34,760 --> 00:19:37,680 Speaker 1: It's why we have to focus on specialty property types, 362 00:19:37,720 --> 00:19:40,919 Speaker 1: why we focus on smaller markets. Um, we are constantly 363 00:19:40,960 --> 00:19:44,520 Speaker 1: looking for opportunity. You know, I call outside the center 364 00:19:44,520 --> 00:19:46,840 Speaker 1: of the fairway. We have to rummage around in the 365 00:19:46,920 --> 00:19:48,480 Speaker 1: rough quite a bit. We're in a we're in the 366 00:19:48,520 --> 00:19:50,240 Speaker 1: one in a hundred business, which is a very tough 367 00:19:50,280 --> 00:19:51,639 Speaker 1: way to make a living. We look at a hundred 368 00:19:51,680 --> 00:19:54,640 Speaker 1: deals to do one. But keep in mind our business 369 00:19:54,760 --> 00:19:58,160 Speaker 1: is still quite a bit less efficient than the securities world. 370 00:19:58,240 --> 00:20:00,439 Speaker 1: It's more efficient than it was thirty years ago, but 371 00:20:00,520 --> 00:20:03,560 Speaker 1: less efficient by far than say, trading securities. And so 372 00:20:03,600 --> 00:20:05,520 Speaker 1: the point is, if you're willing to endure the brain 373 00:20:05,600 --> 00:20:07,560 Speaker 1: damage and the wheel spinning of the one in a hundred, 374 00:20:07,760 --> 00:20:10,560 Speaker 1: you can find risk adjusted opportunity. That's how we define 375 00:20:10,600 --> 00:20:13,080 Speaker 1: the business is we're looking for miss price risk. You know, 376 00:20:13,440 --> 00:20:16,800 Speaker 1: I want to ask you to describe what it's like 377 00:20:16,960 --> 00:20:21,359 Speaker 1: to build student housing now compared to what your dorm 378 00:20:21,480 --> 00:20:25,000 Speaker 1: room looked like back in ninety two. For in a 379 00:20:25,000 --> 00:20:26,879 Speaker 1: lot of ways, I'm very jealous of those who were 380 00:20:26,880 --> 00:20:29,280 Speaker 1: born thirty years later. To me, that's one of them. 381 00:20:29,320 --> 00:20:31,880 Speaker 1: I was actually at my old school recently. Of course, 382 00:20:31,880 --> 00:20:34,119 Speaker 1: my daughter is looking at it, and we looked at 383 00:20:34,119 --> 00:20:35,600 Speaker 1: the dorm and she thought I was joking, and it 384 00:20:35,640 --> 00:20:38,720 Speaker 1: looked more like a prison cell than say the dorm 385 00:20:38,800 --> 00:20:40,520 Speaker 1: she'd seen at all the other schools we were trying. 386 00:20:40,640 --> 00:20:43,320 Speaker 1: Actually was riot proof. It was the biggest cement structure. 387 00:20:44,040 --> 00:20:48,600 Speaker 1: Literally it was built for riot proof situations. But if 388 00:20:48,640 --> 00:20:50,399 Speaker 1: all our kids saw our dorms, they won't believe it. 389 00:20:50,400 --> 00:20:52,760 Speaker 1: And so now the world has changed profoundly, which is 390 00:20:52,800 --> 00:20:55,280 Speaker 1: part of the opportunity because it's not just a matter 391 00:20:55,440 --> 00:20:59,880 Speaker 1: of existing inventory relative to demand. It's the quality and appropriate. 392 00:21:00,000 --> 00:21:02,040 Speaker 1: It's if you will have the existing inventory relative to 393 00:21:02,040 --> 00:21:04,719 Speaker 1: current taste and preference. And there's been a massive shift. 394 00:21:05,080 --> 00:21:07,760 Speaker 1: Basically the younger kids, you know, demand more and the 395 00:21:07,800 --> 00:21:11,760 Speaker 1: markets providing it, whether it's the physical layout, the services, amenities, 396 00:21:12,359 --> 00:21:14,119 Speaker 1: all that kind of stuff. I mean, you really, you, 397 00:21:14,160 --> 00:21:15,639 Speaker 1: as a parent, are you going to pay for it? 398 00:21:15,720 --> 00:21:17,600 Speaker 1: I mean, how much you're gonna pay for your kids housing? 399 00:21:17,680 --> 00:21:26,120 Speaker 1: Is that okay with you? That question exactly. We're gonna 400 00:21:26,200 --> 00:21:27,800 Speaker 1: next time. I'm going to bring an eighteen year old 401 00:21:27,800 --> 00:21:29,800 Speaker 1: young lady and she's going to join this conversation and 402 00:21:29,840 --> 00:21:32,240 Speaker 1: she's gonna say, yes, my dad's gonna pay. We welcome that. 403 00:21:32,600 --> 00:21:35,760 Speaker 1: If you buck now probably is hearing this loud and clear, Yeah, sure, 404 00:21:36,840 --> 00:21:40,280 Speaker 1: but um, you know, it's just something that's changed profoundly 405 00:21:40,600 --> 00:21:42,800 Speaker 1: over the course of a generation. And so as a result, 406 00:21:42,800 --> 00:21:45,879 Speaker 1: there's an opportunity even if there's a market with plenty 407 00:21:45,880 --> 00:21:48,480 Speaker 1: of inventory, there's a very good chance the majority that 408 00:21:48,520 --> 00:21:51,440 Speaker 1: inventory is just not favored by the current generation. Real quick, 409 00:21:51,600 --> 00:21:54,120 Speaker 1: thirty seconds. How close are we to the next downturn 410 00:21:54,119 --> 00:21:57,440 Speaker 1: of the housing market? Well, um, that's a tough one. 411 00:21:57,480 --> 00:21:59,080 Speaker 1: I call it the end in question. I get asked 412 00:21:59,080 --> 00:22:01,280 Speaker 1: it every day and book and say, Scott, would inning 413 00:22:01,280 --> 00:22:03,320 Speaker 1: are we in? And you know my answer is, I'm 414 00:22:03,359 --> 00:22:05,560 Speaker 1: not sure it's possible to answer the question, bequesse to 415 00:22:05,720 --> 00:22:08,600 Speaker 1: say we're in the seventh three hinting is to say here, 416 00:22:08,880 --> 00:22:11,639 Speaker 1: it's synonymous with asking, if you had just said to me, right, Scott, 417 00:22:11,760 --> 00:22:13,960 Speaker 1: when is the recession going to hit what? You know, 418 00:22:14,000 --> 00:22:16,119 Speaker 1: what quarter of what year? How long? How bad? My 419 00:22:16,160 --> 00:22:18,720 Speaker 1: answer will be, I don't exactly. So we are not 420 00:22:18,840 --> 00:22:21,600 Speaker 1: believers in market timing, and I talked to my investors 421 00:22:21,600 --> 00:22:24,840 Speaker 1: about this lot. We're very, very big believers in doing 422 00:22:24,920 --> 00:22:27,439 Speaker 1: quite a bit of severe downside sensitivity analysis. And so 423 00:22:27,480 --> 00:22:30,240 Speaker 1: my answer to the question always is here's what happens 424 00:22:30,280 --> 00:22:33,320 Speaker 1: if and making sure we're okay when the music stops 425 00:22:33,320 --> 00:22:36,040 Speaker 1: playing that we're fine, as opposed to here's why it's 426 00:22:36,040 --> 00:22:37,840 Speaker 1: going to happen in the third quarter of nineteen or 427 00:22:37,880 --> 00:22:40,520 Speaker 1: what have you? Scott Lawler, thank you so much. A 428 00:22:40,600 --> 00:22:43,800 Speaker 1: much more sophisticated, nuanced, and intelligent answer, although you could 429 00:22:43,800 --> 00:22:49,520 Speaker 1: have said, you know. September two thousand and one, Scott Lawler, 430 00:22:49,520 --> 00:22:53,080 Speaker 1: founder and chief executive officer of Waypoint Residential, thank you 431 00:22:53,119 --> 00:23:07,320 Speaker 1: so much. The price of oil moves higher. Brent oil 432 00:23:07,640 --> 00:23:11,760 Speaker 1: seventy eight dollars eighty five cents of barrel. West Texas 433 00:23:11,760 --> 00:23:15,840 Speaker 1: intermediate crude trades at sixty nine dollars and seventy two 434 00:23:15,880 --> 00:23:19,440 Speaker 1: cents of barrel. What's next for crude? Julian Lee are 435 00:23:19,520 --> 00:23:24,360 Speaker 1: oil strategies for Bloomberg News joins us from London. Julian 436 00:23:25,080 --> 00:23:29,320 Speaker 1: what are the implications for increased sanctions against Iran and 437 00:23:29,440 --> 00:23:33,240 Speaker 1: the price of crude oil? Well, I think that we 438 00:23:33,359 --> 00:23:36,960 Speaker 1: are going to see further declines in Iranian production and 439 00:23:37,000 --> 00:23:41,200 Speaker 1: Iranian exports. We've already seen as of the first half 440 00:23:41,240 --> 00:23:44,920 Speaker 1: of September that those flows coming out of Iran are 441 00:23:45,040 --> 00:23:48,640 Speaker 1: down by around about a million barrels a day from 442 00:23:48,680 --> 00:23:51,639 Speaker 1: where they were in April. That's the last full month 443 00:23:51,760 --> 00:23:56,280 Speaker 1: before President Trump announced that he was pulling the US 444 00:23:56,359 --> 00:23:58,680 Speaker 1: out of the Iran nuclear deal and that the sanctions 445 00:23:58,680 --> 00:24:01,800 Speaker 1: would snap back. So we've lost a million barrels a day, 446 00:24:01,880 --> 00:24:05,080 Speaker 1: and we're still a month and a half away from 447 00:24:05,160 --> 00:24:08,600 Speaker 1: the data at which those sanctions are to be fully implemented. 448 00:24:08,640 --> 00:24:11,280 Speaker 1: So I think over the next six weeks or so, 449 00:24:11,400 --> 00:24:15,280 Speaker 1: we will lose more Iranian oil. We could lose easily 450 00:24:15,280 --> 00:24:17,480 Speaker 1: another half a million barrels a day if you look 451 00:24:17,480 --> 00:24:21,600 Speaker 1: at what is still going to to Europe, to Japan, 452 00:24:22,320 --> 00:24:26,479 Speaker 1: Um and places like Turkey and India, who, even if 453 00:24:26,520 --> 00:24:30,240 Speaker 1: they don't fully stop buying Uranian oil, are likely to 454 00:24:30,320 --> 00:24:33,520 Speaker 1: start trimming the amount that they purchase. So, Julian, let's 455 00:24:33,520 --> 00:24:36,359 Speaker 1: take a step back here, because the broader picture is 456 00:24:36,440 --> 00:24:40,119 Speaker 1: that oil is going offline in Venezuela, it's going offline 457 00:24:40,280 --> 00:24:44,200 Speaker 1: in Iran, and there is a question of whether Saudia, 458 00:24:44,280 --> 00:24:47,520 Speaker 1: Arabia and Russia, some of the biggest producers in the world, 459 00:24:47,640 --> 00:24:51,240 Speaker 1: are willing to increase their production to offset the declines 460 00:24:51,280 --> 00:24:55,600 Speaker 1: that we're seeing in Venezuela as well as i Ran. 461 00:24:55,760 --> 00:24:59,680 Speaker 1: So I'm wondering, from your perspective, do you think that 462 00:25:00,040 --> 00:25:02,800 Speaker 1: Usha and Saudi Arabia are willing to produce more or 463 00:25:02,840 --> 00:25:06,040 Speaker 1: do they want to see the price rise to increase 464 00:25:06,080 --> 00:25:08,240 Speaker 1: their profits to shore up their economy is I'm thinking, 465 00:25:08,240 --> 00:25:12,320 Speaker 1: particularly of Russia. I don't think they do particularly want 466 00:25:12,359 --> 00:25:15,720 Speaker 1: to see the price rise. I think they are fairly 467 00:25:15,800 --> 00:25:18,320 Speaker 1: content with the sort of level that we see at 468 00:25:18,359 --> 00:25:21,000 Speaker 1: the moment, both of them. Yeah, absolutely, I think that 469 00:25:21,119 --> 00:25:23,800 Speaker 1: the question is not so much whether they want to 470 00:25:23,840 --> 00:25:27,359 Speaker 1: increase production as to whether they are able to increase production. 471 00:25:28,160 --> 00:25:31,840 Speaker 1: Saudi Arabia is producing about ten point four million barrels 472 00:25:31,840 --> 00:25:34,200 Speaker 1: a day at the moment. That was our estimate for August. 473 00:25:34,720 --> 00:25:38,919 Speaker 1: It's never produced more than ten point six ten point seven, 474 00:25:39,280 --> 00:25:43,439 Speaker 1: so it's getting close to not the theoretical limit of 475 00:25:43,480 --> 00:25:47,480 Speaker 1: its capacity, but certainly the uh if you like, the 476 00:25:47,560 --> 00:25:50,480 Speaker 1: tested level of its capacity. We don't know how much 477 00:25:50,520 --> 00:25:53,840 Speaker 1: beyond that it can go. Russia, too, I think, has 478 00:25:53,920 --> 00:25:58,240 Speaker 1: increased its production since the early part of this year, 479 00:25:58,280 --> 00:26:01,080 Speaker 1: when it was abiding by the deal it reached with Opeq. 480 00:26:02,240 --> 00:26:04,760 Speaker 1: Their oil minister has said they can add another three 481 00:26:04,840 --> 00:26:08,280 Speaker 1: hundred thousand barrels a day by the end of this year. 482 00:26:08,320 --> 00:26:14,640 Speaker 1: But again that is taking us into uncharted territory for 483 00:26:14,640 --> 00:26:18,879 Speaker 1: for post Soviet Russia, UM and the Russian government itself. 484 00:26:18,920 --> 00:26:23,200 Speaker 1: I think it was the the Economy minister UM came 485 00:26:23,240 --> 00:26:28,120 Speaker 1: out earlier earlier today, their finance minister who said that 486 00:26:28,560 --> 00:26:31,520 Speaker 1: the break even price that Russia needs to balance its 487 00:26:31,560 --> 00:26:35,840 Speaker 1: budget for is forty dollars a barrel UM. Now, yes, 488 00:26:35,880 --> 00:26:39,640 Speaker 1: they'd like more than that because they would like to 489 00:26:39,680 --> 00:26:41,680 Speaker 1: pay down some of their debt and build up a 490 00:26:42,280 --> 00:26:46,040 Speaker 1: UM a sort of a rainy day funds. So they'd 491 00:26:46,080 --> 00:26:49,440 Speaker 1: like more than forty. But I think both Saudi Arabia 492 00:26:49,480 --> 00:26:53,680 Speaker 1: and Russia are very aware that when prices get too high, 493 00:26:53,960 --> 00:26:57,480 Speaker 1: demand starts to suffer, and both of these countries want 494 00:26:57,520 --> 00:27:01,840 Speaker 1: to be exporting oil and selling oil into the market 495 00:27:01,960 --> 00:27:05,800 Speaker 1: for the long term future. Julian, just a little bit 496 00:27:05,840 --> 00:27:10,360 Speaker 1: more on Iran. They don't just export crude. They also 497 00:27:10,720 --> 00:27:14,840 Speaker 1: export condensate. This is that super light oil that's used 498 00:27:14,880 --> 00:27:19,280 Speaker 1: in the petrochemical industry. Tell us about condensate and the 499 00:27:19,320 --> 00:27:23,920 Speaker 1: potential buyers or those that are no longer buyers, Okay, 500 00:27:23,960 --> 00:27:27,920 Speaker 1: I mean condensate is is interesting this time around because 501 00:27:28,480 --> 00:27:33,640 Speaker 1: it was excluded from the sanctions when they were enacted 502 00:27:33,720 --> 00:27:37,960 Speaker 1: under President Obama. UM. President Trump has made it very 503 00:27:38,040 --> 00:27:42,440 Speaker 1: clear that he expects buyers to stop buying both crude 504 00:27:42,480 --> 00:27:47,600 Speaker 1: and condensates. Condensates are if you like a much smaller 505 00:27:48,280 --> 00:27:52,640 Speaker 1: pool of supply. There are fewer producers of condensates. It's 506 00:27:52,720 --> 00:27:57,960 Speaker 1: essentially a very light liquid that comes out of gas fields. UM. 507 00:27:58,000 --> 00:28:01,520 Speaker 1: The biggest buyer of irrain and condensate by far is 508 00:28:01,600 --> 00:28:06,480 Speaker 1: South Korea. They have already stopped. The last ship carrying 509 00:28:07,200 --> 00:28:11,520 Speaker 1: Iranian condensate to South Korea left I think in July. 510 00:28:12,280 --> 00:28:15,440 Speaker 1: Um it arrived in early August. May have been June 511 00:28:15,440 --> 00:28:18,920 Speaker 1: and July that it arrived, but certainly for the last 512 00:28:18,960 --> 00:28:23,480 Speaker 1: month or two, South Korea has not bought any Iranian condensate. 513 00:28:23,920 --> 00:28:27,640 Speaker 1: That causes a problem for South Korea in terms of 514 00:28:27,680 --> 00:28:32,480 Speaker 1: finding alternative sources of supply. One of the one of 515 00:28:32,520 --> 00:28:35,920 Speaker 1: the things is that the Iranian condensate is is quite 516 00:28:36,000 --> 00:28:41,960 Speaker 1: high in sulfur. This is a a an element that 517 00:28:41,960 --> 00:28:45,600 Speaker 1: that has to be removed from the condensate to make 518 00:28:45,640 --> 00:28:49,760 Speaker 1: it consistent with product specifications, so it also makes it cheaper. 519 00:28:50,240 --> 00:28:53,000 Speaker 1: I see, well, Julian Lee, We're gonna have to follow 520 00:28:53,080 --> 00:28:54,640 Speaker 1: up on that next time. We have to leave it there. 521 00:28:54,760 --> 00:28:56,840 Speaker 1: Julian Lee, Bloomberg ot oils strateg is coming to us 522 00:28:57,040 --> 00:29:00,760 Speaker 1: from London. Definitely an interesting moment. We have a Brent 523 00:29:00,880 --> 00:29:03,880 Speaker 1: crew climbing back up towards eighty dollars of barrel. Uh 524 00:29:03,920 --> 00:29:07,360 Speaker 1: and uh. We'll see how that factors into both consumer 525 00:29:07,400 --> 00:29:13,200 Speaker 1: prices as well as the political calculus. Thanks for listening 526 00:29:13,280 --> 00:29:16,160 Speaker 1: to the Bloomberg P and L podcast. You can subscribe 527 00:29:16,200 --> 00:29:19,760 Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever 528 00:29:19,840 --> 00:29:23,320 Speaker 1: podcast platform you prefer. I'm Pim Fox. I'm on Twitter 529 00:29:23,600 --> 00:29:27,120 Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo. It's 530 00:29:27,160 --> 00:29:30,200 Speaker 1: one before the podcast. You can always catch us worldwide 531 00:29:30,200 --> 00:29:31,160 Speaker 1: on Bloomberg Radio