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 --> 00:00:31,360 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. It 7 00:00:31,520 --> 00:00:34,080 Speaker 1: is my honor to bring in Ricardo Houseman, director of 8 00:00:34,120 --> 00:00:37,720 Speaker 1: the Center for International Development at the Harvard Kennedy School. 9 00:00:37,760 --> 00:00:41,640 Speaker 1: He also was the head of Planning in Venezuela previously 10 00:00:42,080 --> 00:00:45,280 Speaker 1: UH and has a really good window into a situation 11 00:00:45,520 --> 00:00:49,280 Speaker 1: that is devastating to watch unfold. And UH, I was 12 00:00:49,320 --> 00:00:52,880 Speaker 1: reading through your recent essay for Project Syndicate, which is 13 00:00:52,920 --> 00:00:55,640 Speaker 1: called the Hunger Bonds, and you're talking about really the 14 00:00:55,720 --> 00:01:00,840 Speaker 1: ethics of investing in Valis Venezuelan debt at a time 15 00:01:01,000 --> 00:01:03,360 Speaker 1: of such a humanitarian crisis, and you said, if you 16 00:01:03,400 --> 00:01:06,520 Speaker 1: are a decent human being, investing in Venezuelan bonds should 17 00:01:06,600 --> 00:01:10,640 Speaker 1: make you feel mildly nauseous, borrowing phrase from UH former 18 00:01:10,720 --> 00:01:15,520 Speaker 1: FBI director James Coming. Why, Well, because essentially you have 19 00:01:15,600 --> 00:01:21,800 Speaker 1: a country that is imploding imports have declined by between 20 00:01:21,800 --> 00:01:24,560 Speaker 1: two thousand and twelve and two thousand sixteen. There further 21 00:01:25,560 --> 00:01:28,839 Speaker 1: percent down in two thousand seventeen. That means that there's 22 00:01:28,880 --> 00:01:33,160 Speaker 1: no food, there's no medicine, there's no intermediate inputs for production, 23 00:01:33,959 --> 00:01:38,520 Speaker 1: there's no anything. So the economy is imploding. The capital 24 00:01:38,600 --> 00:01:42,560 Speaker 1: stock of the country is dwindling, it's being you know, yes, 25 00:01:42,840 --> 00:01:45,800 Speaker 1: But the thing that I'm trying to connect is if 26 00:01:45,840 --> 00:01:49,680 Speaker 1: a situation is so dire, wouldn't you think that putting 27 00:01:49,720 --> 00:01:54,440 Speaker 1: more money into it would actually help it? Well, right now, 28 00:01:55,280 --> 00:01:58,400 Speaker 1: markets think that Venezuela is going to go broke, and 29 00:01:58,480 --> 00:02:01,800 Speaker 1: so the guield on on Venezuelan bonds is upwards of 30 00:02:03,400 --> 00:02:07,120 Speaker 1: so markets are pricing in a very very high likelihood 31 00:02:07,200 --> 00:02:11,360 Speaker 1: of default. The government has decided not to default, and 32 00:02:11,400 --> 00:02:14,840 Speaker 1: in order not to default, it has compressed imports. So 33 00:02:14,919 --> 00:02:20,680 Speaker 1: when news comes out that imports are down, bonds rally, 34 00:02:20,960 --> 00:02:24,280 Speaker 1: which means that the more Venezuela's go hungry, the better 35 00:02:24,320 --> 00:02:26,680 Speaker 1: you feel about your bonds, because the more dollars are 36 00:02:26,760 --> 00:02:30,359 Speaker 1: left to service your debt. So that service in Venezuela's 37 00:02:30,400 --> 00:02:35,520 Speaker 1: costing around fourteen billion dollars and total imports this year 38 00:02:35,639 --> 00:02:39,760 Speaker 1: are unlikely to reach sixteen billion dollars. So essentially you're 39 00:02:40,280 --> 00:02:43,520 Speaker 1: you're in order to service the debt, you need not 40 00:02:43,639 --> 00:02:48,000 Speaker 1: to import food, medicine inputs, and that is what is 41 00:02:48,080 --> 00:02:51,480 Speaker 1: keeping the government paying the debt. So are you saying 42 00:02:51,800 --> 00:02:57,000 Speaker 1: that if investors stopped putting money allocating money to Venezuela, 43 00:02:57,360 --> 00:02:59,960 Speaker 1: that eventually the government wouldn't be able to ring an 44 00:03:00,000 --> 00:03:03,639 Speaker 1: anything more out of imports and would be forced to default. 45 00:03:05,280 --> 00:03:10,320 Speaker 1: The yes, that that is that when the markets have 46 00:03:10,480 --> 00:03:13,920 Speaker 1: closed Venezuela out already. So all we're talking about is 47 00:03:13,960 --> 00:03:17,080 Speaker 1: trading old debt. So if you hold this old debt, 48 00:03:17,200 --> 00:03:20,720 Speaker 1: what you're now asking is, so this old debt was 49 00:03:20,800 --> 00:03:24,240 Speaker 1: issued at the time and the money was wasted, corrupted, etcetera, 50 00:03:24,320 --> 00:03:26,720 Speaker 1: and got us into this mess. So if you hold 51 00:03:26,800 --> 00:03:30,079 Speaker 1: Venezuela that you're hoping maybe that a better government comes 52 00:03:30,160 --> 00:03:33,560 Speaker 1: up and the economy recovers, and the recovery is used 53 00:03:33,919 --> 00:03:37,640 Speaker 1: not to recover Venezuela and income levels, but to pay you. 54 00:03:38,240 --> 00:03:42,160 Speaker 1: So you're again placed in a situation where you're in 55 00:03:42,720 --> 00:03:46,119 Speaker 1: well being, the return on your assets depends on bad 56 00:03:46,160 --> 00:03:48,240 Speaker 1: things happening to Venezuelans, and you don't want to do that. 57 00:03:48,560 --> 00:03:50,880 Speaker 1: There is a story on the Bloomberg a couple of 58 00:03:50,880 --> 00:03:56,360 Speaker 1: months ago talking about how autocratic UH dictatorships end up 59 00:03:56,400 --> 00:04:00,480 Speaker 1: being fantastic investments for bondholders, and it saying, you know, 60 00:04:00,560 --> 00:04:04,720 Speaker 1: just because you know, honestly, investing isn't necessarily moral, it's 61 00:04:04,760 --> 00:04:08,200 Speaker 1: dollars and cents, and these autocratic leaders end up paying well, 62 00:04:08,240 --> 00:04:10,480 Speaker 1: that that's not really true. I mean, the reason why 63 00:04:10,480 --> 00:04:14,000 Speaker 1: there's impact investment is because people care about doing well, 64 00:04:14,040 --> 00:04:16,360 Speaker 1: but they also care about doing good. I mean, would 65 00:04:16,360 --> 00:04:19,240 Speaker 1: you put money into a company that is selling guns 66 00:04:19,240 --> 00:04:23,720 Speaker 1: to drug traffickers? Would you invest in in so would 67 00:04:23,720 --> 00:04:28,400 Speaker 1: you have bought Hitler bonds? So there is we are 68 00:04:28,480 --> 00:04:31,320 Speaker 1: moral beings and we want to do well, and we 69 00:04:31,400 --> 00:04:34,880 Speaker 1: also want to do good and and because of that, 70 00:04:36,920 --> 00:04:39,560 Speaker 1: people choose what they're willing to invest in. You know, 71 00:04:39,600 --> 00:04:41,880 Speaker 1: it's interesting that this is coming up at a time 72 00:04:42,160 --> 00:04:45,719 Speaker 1: when emerging markets debt is on fire. There is billion 73 00:04:45,839 --> 00:04:49,520 Speaker 1: billions of dollars going into emerging markets credit, in particular 74 00:04:49,680 --> 00:04:52,520 Speaker 1: through funds that seek to track the JP Market Emerging 75 00:04:52,560 --> 00:04:55,560 Speaker 1: Market Bond Index. And you talk about how even though 76 00:04:55,680 --> 00:04:58,200 Speaker 1: Venezuela only represents five percent of the index, it accounts 77 00:04:58,240 --> 00:05:01,479 Speaker 1: for about of the total yield. Uh. You know, so 78 00:05:01,600 --> 00:05:04,680 Speaker 1: anyone who's going into emerging markets debt right now is 79 00:05:04,680 --> 00:05:07,440 Speaker 1: contributing to this exactly. And I want, I want to 80 00:05:07,480 --> 00:05:09,840 Speaker 1: save them. I think that all the other emerging markets 81 00:05:09,839 --> 00:05:12,760 Speaker 1: are doing fine. I want just to take Venezuela out 82 00:05:12,760 --> 00:05:14,880 Speaker 1: of the index so people are not forced into buying 83 00:05:14,960 --> 00:05:18,600 Speaker 1: Venezuelan bonds, so people are not forced into these moral clones. Well, 84 00:05:18,680 --> 00:05:20,680 Speaker 1: so are there people who are demanding the JP Morgan 85 00:05:20,720 --> 00:05:24,320 Speaker 1: remove Venezuela debt from this benchmark index that is the 86 00:05:25,080 --> 00:05:28,600 Speaker 1: gold standard for emerging markets credit investing. Well, I just 87 00:05:28,680 --> 00:05:31,599 Speaker 1: put it out today, so let's see hear what you know. 88 00:05:31,600 --> 00:05:32,960 Speaker 1: It's it's it's a tricky thing because at the end 89 00:05:32,960 --> 00:05:35,920 Speaker 1: of the day, investors are responsible for doing well by 90 00:05:35,960 --> 00:05:38,600 Speaker 1: their by their clients right now, and and they and 91 00:05:38,680 --> 00:05:42,320 Speaker 1: you know, the managers don't want to be their their 92 00:05:42,360 --> 00:05:45,680 Speaker 1: bonus to be dependent on getting the Venezuela called right 93 00:05:46,560 --> 00:05:51,200 Speaker 1: because so, you know you Venezuela, everybody thought that was 94 00:05:51,240 --> 00:05:54,000 Speaker 1: going to default. It didn't default, and that was good 95 00:05:54,000 --> 00:05:57,600 Speaker 1: for the bonds. Why did it not default? Because it's starved. 96 00:05:57,640 --> 00:06:00,680 Speaker 1: It's people you don't want to be rejoicing in those situations. 97 00:06:00,920 --> 00:06:03,400 Speaker 1: Thank you so much for joining us. Really an important discussion. 98 00:06:03,480 --> 00:06:06,680 Speaker 1: Ricardo Houseman is the director of the Center for International 99 00:06:06,680 --> 00:06:09,640 Speaker 1: Development at Harvard's Kennedy School, which is based in Boston, 100 00:06:09,680 --> 00:06:12,280 Speaker 1: but he is here in on Bloomberg eleven three oh studio. 101 00:06:12,320 --> 00:06:15,080 Speaker 1: He also is the former Minister of Planning for Venezuela 102 00:06:15,120 --> 00:06:19,400 Speaker 1: and former Chief Economists of the INTERN Inter American Development Bank. 103 00:06:19,839 --> 00:06:34,160 Speaker 1: Really appreciate your comments right now, I want to try 104 00:06:34,200 --> 00:06:36,480 Speaker 1: and focus where there is a lot going on, which 105 00:06:36,560 --> 00:06:39,560 Speaker 1: is the G seven meeting that is going on in 106 00:06:39,760 --> 00:06:42,920 Speaker 1: Sicily this weekend, and we are going to UH here 107 00:06:43,080 --> 00:06:45,880 Speaker 1: from President Trump as well as other world leaders about 108 00:06:46,040 --> 00:06:50,760 Speaker 1: issues ranging from trade negotiations, to the to the environment, 109 00:06:51,240 --> 00:06:54,359 Speaker 1: UH to potentially how to fight terrorism. I want to 110 00:06:54,400 --> 00:06:56,880 Speaker 1: bring in for some more perspective Arial Cohen, who is 111 00:06:56,920 --> 00:06:59,960 Speaker 1: a Senior Fellow at the Atlantic Council. He's also director 112 00:07:00,040 --> 00:07:03,719 Speaker 1: the Center for Energy, Natural Resources and Geopolitics at the 113 00:07:03,720 --> 00:07:08,000 Speaker 1: Institute for Analysis of Global Security based in Washington, d c. Arial, 114 00:07:08,040 --> 00:07:10,520 Speaker 1: thank you so much for joining us today. I would 115 00:07:10,520 --> 00:07:12,400 Speaker 1: love to get your thoughts before we move into what 116 00:07:12,480 --> 00:07:16,640 Speaker 1: to expect during the G seven summit. What's your evaluation 117 00:07:16,760 --> 00:07:20,360 Speaker 1: so far President Trump, when he was at NATO and 118 00:07:20,520 --> 00:07:24,880 Speaker 1: during this world tour, well, let's talk with the good news. 119 00:07:24,920 --> 00:07:28,240 Speaker 1: The world tour went when went well until he got 120 00:07:28,240 --> 00:07:32,080 Speaker 1: to Europe. He did well in Saudi Arabia, the historic 121 00:07:32,160 --> 00:07:36,600 Speaker 1: one hunting and ten billion dollar arms deal hopefully will 122 00:07:36,600 --> 00:07:41,160 Speaker 1: not hurt our ally. Israel. He did okay in Israel, 123 00:07:41,840 --> 00:07:45,840 Speaker 1: although there was no clarity on how to proceed on 124 00:07:46,000 --> 00:07:51,240 Speaker 1: the suggested talks with the Palestinians. The Palestinians are not 125 00:07:51,440 --> 00:07:56,160 Speaker 1: doing their fair share in terms of stopping incitement to 126 00:07:56,280 --> 00:08:00,120 Speaker 1: violence and controlling terror. But when he hit Europe, the 127 00:08:00,280 --> 00:08:05,680 Speaker 1: rock UH don'ald Tom has very strong ideas about how 128 00:08:05,720 --> 00:08:11,680 Speaker 1: our allies should behave. I was reading his book, The 129 00:08:11,840 --> 00:08:15,680 Speaker 1: Art of the Deal that he co authored, and he 130 00:08:15,880 --> 00:08:20,520 Speaker 1: is clearly even back then, So that's UH what thirty 131 00:08:20,600 --> 00:08:25,000 Speaker 1: years ago believe that the Japanese and the Europeans are 132 00:08:25,000 --> 00:08:28,440 Speaker 1: not paying UH their fair shriff for defense, that they 133 00:08:28,480 --> 00:08:32,959 Speaker 1: have unequal trade deals that have heard of Americans. But 134 00:08:33,840 --> 00:08:36,920 Speaker 1: with all that, NATA is one of the most successful 135 00:08:37,520 --> 00:08:42,080 Speaker 1: military and political alliances of his of all the history. UH. 136 00:08:42,240 --> 00:08:47,760 Speaker 1: NATA has been in existence since nine UH and UH 137 00:08:47,760 --> 00:08:51,679 Speaker 1: it provided a lot of security. It's not rent a cop. 138 00:08:51,720 --> 00:08:54,440 Speaker 1: It's not that you pay a monthly fee and we 139 00:08:54,600 --> 00:08:59,240 Speaker 1: provide you with our missile defenses or our soldiers. So 140 00:08:59,480 --> 00:09:03,520 Speaker 1: they there's a very steep learning curve in the Trump 141 00:09:03,600 --> 00:09:06,720 Speaker 1: White House. And yes, do you think that anything that 142 00:09:06,760 --> 00:09:10,040 Speaker 1: he said jeopardized that very strong alliance. I just came 143 00:09:10,080 --> 00:09:12,440 Speaker 1: back from Europe. I was in a high level conference 144 00:09:12,480 --> 00:09:15,840 Speaker 1: with the Germans UH, primarily looking at frustra there's a 145 00:09:15,880 --> 00:09:19,480 Speaker 1: lot of disappointment now. I would say there was a 146 00:09:19,520 --> 00:09:24,079 Speaker 1: lot of disappointment with some of Barack Obama's foreign policy, 147 00:09:24,160 --> 00:09:28,800 Speaker 1: including in the Middle East. So uh, you know, we're 148 00:09:28,840 --> 00:09:32,959 Speaker 1: grown ups. It's not very easy to satisfy each other 149 00:09:33,480 --> 00:09:37,680 Speaker 1: all the time. But I would not push the Germans 150 00:09:37,800 --> 00:09:42,480 Speaker 1: and the other Europeans in open forms as harshly as 151 00:09:42,520 --> 00:09:45,559 Speaker 1: Donald Trump is doing right now. But I think his 152 00:09:46,000 --> 00:09:50,120 Speaker 1: main issue that they need UH to pay in more 153 00:09:50,280 --> 00:09:54,760 Speaker 1: into defense, that the fair the fair share UH is 154 00:09:54,800 --> 00:09:57,800 Speaker 1: not there. You know, they're not paying enough for for 155 00:09:57,840 --> 00:10:01,960 Speaker 1: the defense. That is a valid point, very valid. Okay, Well, 156 00:10:02,200 --> 00:10:05,720 Speaker 1: Ariel moving on to the summit that is upcoming, the 157 00:10:05,800 --> 00:10:08,440 Speaker 1: G seven summit that is happening in Sicily this year. 158 00:10:08,520 --> 00:10:12,320 Speaker 1: Where world leaders, major world leaders get together. Not Russia, however, 159 00:10:12,880 --> 00:10:15,760 Speaker 1: of course, Um, what do you think is the most 160 00:10:15,880 --> 00:10:18,280 Speaker 1: important thing that will be discussed and what do you 161 00:10:18,280 --> 00:10:22,600 Speaker 1: expect and come out of this meeting? I think European 162 00:10:22,640 --> 00:10:26,800 Speaker 1: grows is anemic. They will be talking about how to 163 00:10:27,880 --> 00:10:31,240 Speaker 1: get Europe beyond their one point nine grows. The global 164 00:10:31,240 --> 00:10:35,040 Speaker 1: growth is projected three point five, which is okay, but 165 00:10:35,240 --> 00:10:37,800 Speaker 1: you know, we probably could do better in the emerging markets. 166 00:10:38,320 --> 00:10:42,720 Speaker 1: I don't think they have a lot in terms of solutions. 167 00:10:42,760 --> 00:10:45,160 Speaker 1: I think that between the Europeans will be a talk 168 00:10:45,800 --> 00:10:48,960 Speaker 1: about how to heal Brexit. There are some harsh statements 169 00:10:48,960 --> 00:10:52,040 Speaker 1: on both sides. The Europeans said, you owe us what 170 00:10:52,160 --> 00:10:59,160 Speaker 1: two billions? Uh? The Brits retaliated and responded with their number. 171 00:11:00,080 --> 00:11:06,839 Speaker 1: But overall, as usual, interest rate, deficit, taxation, things like that. 172 00:11:07,120 --> 00:11:10,800 Speaker 1: They are always on the G seven agenda. You're absolutely right, 173 00:11:10,840 --> 00:11:13,640 Speaker 1: Russia is not there. Why Russia was a part of 174 00:11:13,679 --> 00:11:16,080 Speaker 1: what used to be G eight. Russia is not there 175 00:11:16,120 --> 00:11:18,679 Speaker 1: because of their aggression in Ukraine. So do you think 176 00:11:18,679 --> 00:11:21,520 Speaker 1: that Russia is going to be a conversation That is 177 00:11:21,559 --> 00:11:23,360 Speaker 1: going to be a difficult one for President Trump to 178 00:11:23,360 --> 00:11:27,560 Speaker 1: wait into the Europeans indicated that with the exception of 179 00:11:27,559 --> 00:11:32,400 Speaker 1: the sanctions, that they differ on Russia. But Europe is split. 180 00:11:32,480 --> 00:11:35,559 Speaker 1: As I said, I just came back from Europe. There 181 00:11:35,760 --> 00:11:39,240 Speaker 1: was I was a part of the conversation on Russia 182 00:11:39,280 --> 00:11:44,080 Speaker 1: between US and Germany. UM. I think if Chancellor Merco 183 00:11:44,280 --> 00:11:48,920 Speaker 1: wins re election as is widely expected, not just the 184 00:11:49,000 --> 00:11:53,680 Speaker 1: sanctions will continue. The perception that Russia is a threat 185 00:11:53,720 --> 00:11:58,559 Speaker 1: to Europe will persist in Europe, and the Trump administration 186 00:11:58,640 --> 00:12:03,240 Speaker 1: is split. The leaders of our defense and foreign policy 187 00:12:03,320 --> 00:12:07,480 Speaker 1: establishments understand the Russia is a threat, with the White 188 00:12:07,480 --> 00:12:11,240 Speaker 1: House maybe not so much so. One other point that 189 00:12:11,480 --> 00:12:14,000 Speaker 1: is probably going to come up and loom large at 190 00:12:14,000 --> 00:12:17,880 Speaker 1: the G seven summit is the environment and the Paris 191 00:12:18,040 --> 00:12:21,959 Speaker 1: Climate Accord and environmental protections. What do you think will 192 00:12:22,000 --> 00:12:26,200 Speaker 1: come out with respect to that? Uh? This is sixty 193 00:12:26,280 --> 00:12:32,080 Speaker 1: four billion dollar questions because the Trump White House is 194 00:12:32,280 --> 00:12:38,559 Speaker 1: very climate skeptic. Uh. They are thinking seriously about pooling, um, 195 00:12:38,640 --> 00:12:41,920 Speaker 1: the US out of the Paris Accords. Of course, the 196 00:12:41,920 --> 00:12:45,840 Speaker 1: accords of volunteer accords, and the question is how enforceable 197 00:12:47,000 --> 00:12:51,720 Speaker 1: are they? And I think the big divide among other 198 00:12:51,840 --> 00:12:56,160 Speaker 1: things among besides the trade. Besides the Europeans not paying 199 00:12:56,200 --> 00:12:59,640 Speaker 1: their fair share for defense is also climate and I 200 00:13:00,040 --> 00:13:04,840 Speaker 1: would hate to see our relationship with Europe deteriorating further. 201 00:13:05,400 --> 00:13:10,120 Speaker 1: But Mr Trump and his electorate have a very strong 202 00:13:10,720 --> 00:13:15,360 Speaker 1: view on climate which is very different than our bi 203 00:13:15,440 --> 00:13:19,520 Speaker 1: coastal elites. The West Coast and the East coast elites 204 00:13:19,520 --> 00:13:22,800 Speaker 1: are of course pro climate change and recognize it as 205 00:13:22,920 --> 00:13:25,960 Speaker 1: a major issue. And so do the European elite. So 206 00:13:26,240 --> 00:13:29,640 Speaker 1: this is one of the serious folk lins when we're 207 00:13:29,679 --> 00:13:34,000 Speaker 1: not staring into the abyss of the threat of the 208 00:13:34,120 --> 00:13:37,839 Speaker 1: radical Islamist terrorism. Alright, real quick, Ariel, On a scale 209 00:13:37,840 --> 00:13:39,840 Speaker 1: from one to ten, how would you create his international 210 00:13:39,920 --> 00:13:45,720 Speaker 1: trip so far? Uh? Saudi Arabia, A, Israel B plus Europe. 211 00:13:45,800 --> 00:13:48,600 Speaker 1: See Ariel Coh and thank you so much for joining us. 212 00:13:48,640 --> 00:13:52,000 Speaker 1: Aero Cohen is Senior Fellow at the Atlantic Council. Also 213 00:13:52,040 --> 00:13:54,920 Speaker 1: he is the director of the Center for Energy, Natural 214 00:13:54,920 --> 00:13:59,560 Speaker 1: Resources and Geopolitics at the Institute for Analysis of Global 215 00:13:59,600 --> 00:14:11,760 Speaker 1: Security in Washington, d C. We want to take a 216 00:14:11,760 --> 00:14:14,160 Speaker 1: moment to let you know about something new from Bloomberg. 217 00:14:14,400 --> 00:14:16,640 Speaker 1: Starting right now, you can use our i O s 218 00:14:16,679 --> 00:14:19,840 Speaker 1: app or our new Google Chrome extension to scan any 219 00:14:19,840 --> 00:14:23,280 Speaker 1: news story on any website, instantly revealing relevant news and 220 00:14:23,320 --> 00:14:25,960 Speaker 1: market data from Bloomberg and other sources related to the 221 00:14:26,000 --> 00:14:28,720 Speaker 1: companies and people you're reading about. So no matter where 222 00:14:28,720 --> 00:14:30,640 Speaker 1: you're reading the news, you can bring the power of 223 00:14:30,680 --> 00:14:34,240 Speaker 1: Bloomberg's news and data with you. It's pretty amazing. Download 224 00:14:34,240 --> 00:14:36,800 Speaker 1: our io s app or search for the Bloomberg extension 225 00:14:36,840 --> 00:14:38,960 Speaker 1: on the Chrome Store to try it out. Learn more 226 00:14:39,000 --> 00:14:51,560 Speaker 1: at Bloomberg dot com slash lens. Right now, I want 227 00:14:51,560 --> 00:14:53,760 Speaker 1: to talk about getting to the beach or the pub, 228 00:14:54,000 --> 00:14:56,680 Speaker 1: particularly in a car or a truck or perhaps a 229 00:14:57,280 --> 00:15:00,480 Speaker 1: I don't know, a diesel train after they exist, I 230 00:15:00,480 --> 00:15:03,560 Speaker 1: don't know. Anyway, I want to bring in someone who 231 00:15:03,560 --> 00:15:06,520 Speaker 1: knows a lot more about all things oil, Vincent Piazza. 232 00:15:06,680 --> 00:15:10,600 Speaker 1: He is a senior equity energy Analystic Global sector leader 233 00:15:10,640 --> 00:15:15,600 Speaker 1: for Bloomberg Intelligence, UH focusing on oil, focusing on Opaque, 234 00:15:15,640 --> 00:15:20,720 Speaker 1: which just is completing their meeting and UH yesterday create 235 00:15:20,800 --> 00:15:23,560 Speaker 1: values fell out of bed? What happened? So? If I 236 00:15:23,640 --> 00:15:28,200 Speaker 1: recall my Jesuit high school English class, what's the Shakespeare play? 237 00:15:28,680 --> 00:15:32,760 Speaker 1: Much Ado about? Nothing? So look, I think in order 238 00:15:32,800 --> 00:15:38,600 Speaker 1: to extend confidence for price there needed to be something 239 00:15:38,640 --> 00:15:42,520 Speaker 1: more than just the extension of the cuts um they needed. 240 00:15:42,640 --> 00:15:46,120 Speaker 1: I think what the market was looking for. We're deeper cuts. Right, 241 00:15:46,600 --> 00:15:53,000 Speaker 1: you can curtail production, but actually exports rose higher throughout 242 00:15:53,000 --> 00:15:57,280 Speaker 1: this period of time, So you still had this overflow 243 00:15:57,520 --> 00:16:00,520 Speaker 1: of petroleum out there in the marketplace. So if I 244 00:16:00,560 --> 00:16:04,480 Speaker 1: think about just here in the US, still a major importer, 245 00:16:05,120 --> 00:16:08,720 Speaker 1: you had uh patrolling, We had crude oil volumes, crude 246 00:16:08,720 --> 00:16:14,840 Speaker 1: oil stockpiles quite high, roughly above the five year average. 247 00:16:14,880 --> 00:16:18,400 Speaker 1: That's over a hundred million barrels of extra storage that 248 00:16:18,440 --> 00:16:21,680 Speaker 1: we need to flush out. And so you have this 249 00:16:21,920 --> 00:16:26,120 Speaker 1: range bound market. You know, OPEC during the during their 250 00:16:26,160 --> 00:16:30,560 Speaker 1: first agreement to curtail output last year, set a floor 251 00:16:30,640 --> 00:16:34,480 Speaker 1: for US and that floor is round forty. Okay, what 252 00:16:34,760 --> 00:16:38,600 Speaker 1: US output and the ascendency of US output does is 253 00:16:38,720 --> 00:16:42,560 Speaker 1: it puts a ceiling on that price rise because now 254 00:16:42,680 --> 00:16:46,480 Speaker 1: those barrels can flow out into the global marketplace as well. 255 00:16:46,560 --> 00:16:49,360 Speaker 1: And we've heard from four Q earnings calls and one 256 00:16:49,440 --> 00:16:54,160 Speaker 1: Q earnings calls management teams suggesting that in that fifty 257 00:16:54,240 --> 00:16:58,920 Speaker 1: dollar range they can push on that accelerator, complete those wells, 258 00:16:59,200 --> 00:17:03,320 Speaker 1: and bring that put online. In that sixty range, we're 259 00:17:03,360 --> 00:17:07,840 Speaker 1: talking about a resurgence of growth and new wells being drilled. 260 00:17:07,880 --> 00:17:10,480 Speaker 1: So there you have that price range. You didn't really 261 00:17:10,520 --> 00:17:14,720 Speaker 1: hear anything different the last day or so about deepening 262 00:17:14,800 --> 00:17:20,439 Speaker 1: cuts to help push well dilution of the although stock piles, 263 00:17:20,520 --> 00:17:23,600 Speaker 1: both in the US and also more broadly, just to 264 00:17:23,640 --> 00:17:28,159 Speaker 1: put some numbers to this, So on on Wednesday, the 265 00:17:28,200 --> 00:17:30,040 Speaker 1: price of crewed was fifty one, a little more than 266 00:17:30,040 --> 00:17:34,560 Speaker 1: fifty one barrel, uh next day tumbling four point almost 267 00:17:35,840 --> 00:17:42,280 Speaker 1: to forty a barrel in the wake of the expected 268 00:17:42,720 --> 00:17:46,679 Speaker 1: prolonged output cuts, but not necessarily deeper output cuts. I mean, 269 00:17:46,720 --> 00:17:51,080 Speaker 1: could you argue that if they had had deeper output 270 00:17:51,119 --> 00:17:53,399 Speaker 1: cuts that I wouldn't have done anything because the higher 271 00:17:53,400 --> 00:17:57,280 Speaker 1: prices go, the more shale producers just stick on the accelerator. 272 00:17:57,359 --> 00:17:59,919 Speaker 1: And that's the conundrum. What's the eggit strategy? Right? So 273 00:18:00,160 --> 00:18:04,200 Speaker 1: this this output cut, this this this strategy is likely 274 00:18:04,280 --> 00:18:09,359 Speaker 1: more transitory. Um it's been engineered to prosecute other means. 275 00:18:09,760 --> 00:18:14,480 Speaker 1: So for example, Saudias I p O okay, and boosting 276 00:18:14,520 --> 00:18:17,360 Speaker 1: the price of oil, which boost sentiment, which would boost 277 00:18:17,840 --> 00:18:21,360 Speaker 1: the reception for that I P O. But you're still 278 00:18:21,400 --> 00:18:24,359 Speaker 1: in this range, and we've talked about this for several months, 279 00:18:24,359 --> 00:18:27,440 Speaker 1: several quarters every time month on the show. It's consistent. Right, 280 00:18:27,480 --> 00:18:30,680 Speaker 1: You have this tight range because you have this output 281 00:18:30,720 --> 00:18:34,119 Speaker 1: from the US that can respond more quickly than perceived 282 00:18:34,440 --> 00:18:38,120 Speaker 1: to any price signal. So what could break us out 283 00:18:38,119 --> 00:18:40,320 Speaker 1: of this range? Because you know, we remember running into 284 00:18:40,320 --> 00:18:43,000 Speaker 1: you getting a cup of coffee and you said, you 285 00:18:43,000 --> 00:18:45,919 Speaker 1: know a lot of people haven't lived through a true cycle. 286 00:18:45,960 --> 00:18:49,119 Speaker 1: This is not the cycle high and lower in a range, 287 00:18:49,160 --> 00:18:51,399 Speaker 1: but it does break out eventually and it can go 288 00:18:51,560 --> 00:18:54,560 Speaker 1: way higher or way lower. And it's it's demand centric. 289 00:18:54,720 --> 00:18:58,760 Speaker 1: It's sustained demand centric. You know the Chinese filling their 290 00:18:58,960 --> 00:19:02,600 Speaker 1: spr that is on a sustained demand trajectory. Right, And 291 00:19:02,640 --> 00:19:05,200 Speaker 1: if you think about the broader scope, if you think 292 00:19:05,240 --> 00:19:10,720 Speaker 1: about car efficiencies, um, better better mileage, right, that reduces 293 00:19:10,800 --> 00:19:14,240 Speaker 1: that that demand cadence. So in a way, so if 294 00:19:14,280 --> 00:19:17,879 Speaker 1: I'm hearing you correctly, given that the move is toward 295 00:19:18,000 --> 00:19:22,639 Speaker 1: electric vehicles, is towards being less uh less focused on 296 00:19:22,720 --> 00:19:27,640 Speaker 1: oil as a use for and a motive of getting energy. 297 00:19:27,800 --> 00:19:30,159 Speaker 1: Given that, I mean, isn't demand only going to go 298 00:19:30,240 --> 00:19:33,280 Speaker 1: down from here? I would say the demand growth will 299 00:19:33,320 --> 00:19:38,240 Speaker 1: be more curtailed, and so that price range will be more, 300 00:19:38,760 --> 00:19:41,359 Speaker 1: will be tighter and to the longer and longer, and 301 00:19:41,480 --> 00:19:45,040 Speaker 1: likely to so lower relative to where we were in 302 00:19:45,280 --> 00:19:47,600 Speaker 1: two thousand and fourteen and where we were in two 303 00:19:47,600 --> 00:19:51,120 Speaker 1: thousand and seven relative to that period, Yes, it will 304 00:19:51,160 --> 00:19:53,840 Speaker 1: be lower, but that but that tighter range, that forty 305 00:19:53,960 --> 00:19:56,919 Speaker 1: is safety tight range really speaks to the paradigm shift 306 00:19:57,320 --> 00:20:00,280 Speaker 1: that we've been seeing so real quick, I know we 307 00:20:00,400 --> 00:20:03,960 Speaker 1: are heading into Memorial Day weekend, and does does gas 308 00:20:04,040 --> 00:20:07,160 Speaker 1: demand really pick up that much? So again we talk 309 00:20:07,280 --> 00:20:11,920 Speaker 1: about this this this this concept of more fuel efficient vehicles, right, 310 00:20:12,000 --> 00:20:15,760 Speaker 1: and if you just think about the mild winter and 311 00:20:15,880 --> 00:20:20,320 Speaker 1: the mount winter, actually we've seen of vehicle miles traveled 312 00:20:20,359 --> 00:20:24,119 Speaker 1: tracking above the five year high. Okay, I'm sorry the 313 00:20:24,160 --> 00:20:27,560 Speaker 1: five year average. Right, so more folks in the road. Now, 314 00:20:27,680 --> 00:20:32,439 Speaker 1: consumption for the summertime will likely rise, maybe about one percent, 315 00:20:32,640 --> 00:20:35,160 Speaker 1: but you have many more vehicles on the road, So 316 00:20:35,440 --> 00:20:38,280 Speaker 1: that does speak to the fuel efficiency. Now that mix, 317 00:20:38,480 --> 00:20:42,040 Speaker 1: and I talked to our autos analyst, Kevin Tynan, and 318 00:20:42,080 --> 00:20:45,560 Speaker 1: he suggests that that new sales mix, that new vehicle 319 00:20:45,640 --> 00:20:49,720 Speaker 1: mix is tilted more toward the light light truck side, 320 00:20:50,280 --> 00:20:53,879 Speaker 1: so there could be some additional fuel consumption, but again 321 00:20:54,240 --> 00:20:57,399 Speaker 1: relative to where you were in prior periods, it's a 322 00:20:57,480 --> 00:21:01,679 Speaker 1: much more fuel efficient vehicle, and so consumption is likely 323 00:21:01,760 --> 00:21:04,280 Speaker 1: not to budge that much, but it should be higher 324 00:21:04,320 --> 00:21:06,560 Speaker 1: relative year a weear just because the mild winter that 325 00:21:06,720 --> 00:21:08,879 Speaker 1: the mild winter we had, and also the outlook for 326 00:21:08,880 --> 00:21:11,679 Speaker 1: the summertime. Vincent Piazza, thank you so much for joining us. 327 00:21:11,720 --> 00:21:14,280 Speaker 1: Always a wonderful thing to talk with you. Vincent Piazza, 328 00:21:14,400 --> 00:21:30,800 Speaker 1: senior equity energy analysts and global sector leader for Bloomberg Intelligence. Well, 329 00:21:30,880 --> 00:21:32,719 Speaker 1: you know, I've got to say I was kind of 330 00:21:32,720 --> 00:21:36,399 Speaker 1: surprised to realize just how big the market for auctioning 331 00:21:36,560 --> 00:21:40,080 Speaker 1: off heavy industrial equipment is. Robbie Telegram joins us now. 332 00:21:40,119 --> 00:21:44,159 Speaker 1: He's chief executive officer for Richie Brothers, which is the 333 00:21:44,280 --> 00:21:48,920 Speaker 1: leading auctioneer of this equipment UH in the world. Robbie 334 00:21:49,119 --> 00:21:52,040 Speaker 1: joins us now from Burnaby, Canada, which is a suburb 335 00:21:52,119 --> 00:21:56,280 Speaker 1: of Vancouver. Robbie, thank you so much for joining us. First, congratulations, 336 00:21:56,280 --> 00:21:59,880 Speaker 1: I know that you just recently announced that you would 337 00:22:00,040 --> 00:22:03,760 Speaker 1: be going ahead and acquiring Iron Planet for almost a 338 00:22:03,760 --> 00:22:07,040 Speaker 1: billion dollars eight point five million dollars UH. And now 339 00:22:07,040 --> 00:22:10,560 Speaker 1: that you rank is a fifty tough fifty e commerce company. 340 00:22:10,600 --> 00:22:12,080 Speaker 1: I would love you just give me a sense of 341 00:22:12,119 --> 00:22:16,800 Speaker 1: how big this market is for auctioning off heavy industrial equipment. Lisa, 342 00:22:16,880 --> 00:22:20,960 Speaker 1: thank you so much. The auction market is about three 343 00:22:21,040 --> 00:22:28,120 Speaker 1: hundred sixty billion dollars globally and it encompasses um sectors 344 00:22:28,119 --> 00:22:32,680 Speaker 1: such as construction, transportation which is over their own trucks, agriculture, 345 00:22:32,680 --> 00:22:35,639 Speaker 1: oil and gas, and mining. And there are different channels 346 00:22:35,720 --> 00:22:39,280 Speaker 1: through which used equipment and the three and sixty billion 347 00:22:39,400 --> 00:22:42,480 Speaker 1: is used equipment that gets sold through these channels, so 348 00:22:42,720 --> 00:22:46,000 Speaker 1: very large. So how do these how do these auctions work? 349 00:22:46,040 --> 00:22:48,480 Speaker 1: I mean I was joking with with my producer earlier 350 00:22:48,480 --> 00:22:50,399 Speaker 1: that I think of like pond stars, you know, people 351 00:22:50,400 --> 00:22:53,280 Speaker 1: coming with their tractors up to a of to of 352 00:22:53,400 --> 00:22:55,760 Speaker 1: to a window and saying, hey, you know, how much 353 00:22:55,760 --> 00:22:58,960 Speaker 1: can you get for this? But has it work? Really? No, 354 00:23:00,080 --> 00:23:02,840 Speaker 1: think it's actually a little bit more sophisticated than that. 355 00:23:03,640 --> 00:23:07,040 Speaker 1: So we um uh Richie Brothers has been the pioneer 356 00:23:07,040 --> 00:23:09,320 Speaker 1: in what is called us an unreserved auction, which is 357 00:23:09,800 --> 00:23:14,520 Speaker 1: that everything will sell no matter what. And we have 358 00:23:14,600 --> 00:23:17,600 Speaker 1: auction yards around the world. We have forty four yards 359 00:23:17,640 --> 00:23:19,840 Speaker 1: and these auctions are unique in the sense that they're 360 00:23:19,840 --> 00:23:23,919 Speaker 1: both live as well as online, so they integrated and 361 00:23:24,040 --> 00:23:27,600 Speaker 1: people can call from all over the world or book 362 00:23:27,680 --> 00:23:32,719 Speaker 1: our make purchases online as well as bid on site. 363 00:23:33,200 --> 00:23:37,520 Speaker 1: So we've got that unique integrated model, and we merchandise 364 00:23:37,560 --> 00:23:40,399 Speaker 1: our equipment on our yards. It's like a Picasso picture. 365 00:23:40,480 --> 00:23:44,240 Speaker 1: Are people do a beautiful job. There's like ten thousand pieces, 366 00:23:44,240 --> 00:23:47,400 Speaker 1: So think about it as dozers and tractors all over 367 00:23:48,400 --> 00:23:51,760 Speaker 1: the yard and buyers, potential buyers come kick that ours 368 00:23:51,840 --> 00:23:55,080 Speaker 1: look at the equipment. We also provide information so people 369 00:23:55,119 --> 00:23:58,119 Speaker 1: can look at it online and then an auctioneer m 370 00:23:59,040 --> 00:24:02,080 Speaker 1: much like any other UH industry, will auction off those 371 00:24:02,119 --> 00:24:04,920 Speaker 1: items and we could sell potentially a three million dollar 372 00:24:04,960 --> 00:24:08,480 Speaker 1: crane in less than sixty seconds. Wow. So what is 373 00:24:08,520 --> 00:24:13,480 Speaker 1: the most popular item to get sold? Well, construction is 374 00:24:14,240 --> 00:24:20,720 Speaker 1: our sweet spot. We do things like excavators and UH wheeloaders, 375 00:24:21,400 --> 00:24:25,119 Speaker 1: UH dozers, so the gamut of it and all things 376 00:24:25,160 --> 00:24:29,960 Speaker 1: that going to really bridge building, roadworks and so in 377 00:24:30,000 --> 00:24:32,840 Speaker 1: many ways we think of Richie Brothers as enabling building 378 00:24:32,840 --> 00:24:37,280 Speaker 1: of the world, but also with agricultural equipment farming. So 379 00:24:37,280 --> 00:24:39,800 Speaker 1: so it's really a company that we feel very good 380 00:24:39,800 --> 00:24:43,720 Speaker 1: about that our people are enabling commas. So I'm trying 381 00:24:43,760 --> 00:24:48,360 Speaker 1: to understand whether your business stands to gain during periods 382 00:24:48,359 --> 00:24:52,680 Speaker 1: of ramped up infrastructure or if, uh, you know, when 383 00:24:52,800 --> 00:24:55,040 Speaker 1: when your company does best. We're part of the cycle. 384 00:24:56,240 --> 00:25:01,000 Speaker 1: But interestingly, Lisa, it's we do well in good times 385 00:25:01,080 --> 00:25:03,760 Speaker 1: and do well not so good times as well. And 386 00:25:04,080 --> 00:25:06,120 Speaker 1: in good times when the economy is doing well, when 387 00:25:06,119 --> 00:25:10,600 Speaker 1: there's infrastructure spending, new equipment production is at a peak 388 00:25:10,680 --> 00:25:13,960 Speaker 1: and people like to buy new. Eventually that convert gets 389 00:25:14,000 --> 00:25:17,560 Speaker 1: converted to used equipment, so we benefit from that. When 390 00:25:17,680 --> 00:25:20,320 Speaker 1: times like we had the oil and gas crisis last 391 00:25:20,320 --> 00:25:23,960 Speaker 1: few years, we were the beneficiaries because the people get 392 00:25:24,359 --> 00:25:29,040 Speaker 1: dislocated and they want to sell their equipment, and we 393 00:25:29,160 --> 00:25:33,040 Speaker 1: then are able to help our customers dispose of their 394 00:25:33,080 --> 00:25:35,760 Speaker 1: equipment and get the best values. And we get the 395 00:25:35,760 --> 00:25:39,080 Speaker 1: best best values because of our knowledge of pricing. Were 396 00:25:39,119 --> 00:25:42,439 Speaker 1: known as the foremost authority or used equipment pricing, and 397 00:25:42,520 --> 00:25:45,080 Speaker 1: that helps us get the best deals. Despite the fact 398 00:25:45,119 --> 00:25:49,080 Speaker 1: that we're an unreserved auction Who are the sellers. The 399 00:25:49,160 --> 00:25:53,480 Speaker 1: sellers are the majority for Richie Brothers end users. These 400 00:25:53,520 --> 00:25:56,720 Speaker 1: are people who are general contractors who might be in 401 00:25:56,760 --> 00:26:00,960 Speaker 1: bridge building, roadworks. So the s are people that are 402 00:26:01,119 --> 00:26:04,479 Speaker 1: entrepreneurs and we have tremendous respect for them. Many of 403 00:26:04,520 --> 00:26:06,960 Speaker 1: them have grown with us and we've grown with them. 404 00:26:07,960 --> 00:26:10,480 Speaker 1: Say yeah, I'm just trying to understand why they want 405 00:26:10,480 --> 00:26:12,240 Speaker 1: to sell their equipment, right, I mean, like, what would 406 00:26:12,280 --> 00:26:14,200 Speaker 1: drive them to have too much and then I don't 407 00:26:14,200 --> 00:26:16,439 Speaker 1: want to offload some of it? Well, I think UM 408 00:26:16,840 --> 00:26:21,160 Speaker 1: contractors like to optimize their fleets. So after a certain 409 00:26:21,240 --> 00:26:23,560 Speaker 1: number of hours, or let's say the equipment is three 410 00:26:23,640 --> 00:26:26,359 Speaker 1: years old, they want to get in new equipment. Or 411 00:26:26,400 --> 00:26:28,639 Speaker 1: they've finished a job and there's a lot between the 412 00:26:28,720 --> 00:26:31,439 Speaker 1: next job, so they don't want to build up inventories. 413 00:26:31,960 --> 00:26:34,119 Speaker 1: So that's why they want to dispose it off So 414 00:26:34,200 --> 00:26:37,800 Speaker 1: it's replacement, and you know they can also take it 415 00:26:37,840 --> 00:26:40,840 Speaker 1: into a dealer and trade it in. But Richie Brothers 416 00:26:40,880 --> 00:26:43,920 Speaker 1: has trusted relationships and because of our ability to give 417 00:26:43,960 --> 00:26:47,399 Speaker 1: them great values, they come to us. Thank you so 418 00:26:47,480 --> 00:26:50,680 Speaker 1: much for joining me. It's a fascinating industry and one 419 00:26:50,720 --> 00:26:52,879 Speaker 1: that is much bigger than I had imagined it to 420 00:26:52,880 --> 00:26:56,679 Speaker 1: be three and sixty billion dollars globally. Rabbi Telegram. He 421 00:26:56,880 --> 00:27:00,240 Speaker 1: is the chief executive officer of Richie Brothers. Coming to 422 00:27:00,320 --> 00:27:03,520 Speaker 1: us from Burnaby, Canada, that is a suburb of Vancouver, 423 00:27:03,720 --> 00:27:07,080 Speaker 1: and Richie Brothers just got clearance from the Department of 424 00:27:07,080 --> 00:27:10,040 Speaker 1: Justice for their seven fifty eight point five million dollar 425 00:27:10,080 --> 00:27:13,359 Speaker 1: acquisition of Iron Planet uh and it is one of 426 00:27:13,400 --> 00:27:16,840 Speaker 1: the top fifty e commerce companies in the world. Really 427 00:27:16,880 --> 00:27:24,280 Speaker 1: interesting industry. Thanks for listening to the Bloomberg P and 428 00:27:24,359 --> 00:27:27,400 Speaker 1: L podcast. You can subscribe and listen to interviews at 429 00:27:27,440 --> 00:27:31,920 Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm 430 00:27:31,920 --> 00:27:35,359 Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on 431 00:27:35,400 --> 00:27:38,720 Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You 432 00:27:38,720 --> 00:27:41,240 Speaker 1: can always catch us worldwide on Bloomberg Radio.