WEBVTT - Venezuela Bondholders Shouldn't Abet Bad Regime, Hausmann Says 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:31.360 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. It 0:00:31.520 --> 0:00:34.080 is my honor to bring in Ricardo Houseman, director of 0:00:34.120 --> 0:00:37.720 the Center for International Development at the Harvard Kennedy School. 0:00:37.760 --> 0:00:41.640 He also was the head of Planning in Venezuela previously 0:00:42.080 --> 0:00:45.280 UH and has a really good window into a situation 0:00:45.520 --> 0:00:49.280 that is devastating to watch unfold. And UH, I was 0:00:49.320 --> 0:00:52.880 reading through your recent essay for Project Syndicate, which is 0:00:52.920 --> 0:00:55.640 called the Hunger Bonds, and you're talking about really the 0:00:55.720 --> 0:01:00.840 ethics of investing in Valis Venezuelan debt at a time 0:01:01.000 --> 0:01:03.360 of such a humanitarian crisis, and you said, if you 0:01:03.400 --> 0:01:06.520 are a decent human being, investing in Venezuelan bonds should 0:01:06.600 --> 0:01:10.640 make you feel mildly nauseous, borrowing phrase from UH former 0:01:10.720 --> 0:01:15.520 FBI director James Coming. Why, Well, because essentially you have 0:01:15.600 --> 0:01:21.800 a country that is imploding imports have declined by between 0:01:21.800 --> 0:01:24.560 two thousand and twelve and two thousand sixteen. There further 0:01:25.560 --> 0:01:28.839 percent down in two thousand seventeen. That means that there's 0:01:28.880 --> 0:01:33.160 no food, there's no medicine, there's no intermediate inputs for production, 0:01:33.959 --> 0:01:38.520 there's no anything. So the economy is imploding. The capital 0:01:38.600 --> 0:01:42.560 stock of the country is dwindling, it's being you know, yes, 0:01:42.840 --> 0:01:45.800 But the thing that I'm trying to connect is if 0:01:45.840 --> 0:01:49.680 a situation is so dire, wouldn't you think that putting 0:01:49.720 --> 0:01:54.440 more money into it would actually help it? Well, right now, 0:01:55.280 --> 0:01:58.400 markets think that Venezuela is going to go broke, and 0:01:58.480 --> 0:02:01.800 so the guield on on Venezuelan bonds is upwards of 0:02:03.400 --> 0:02:07.120 so markets are pricing in a very very high likelihood 0:02:07.200 --> 0:02:11.360 of default. The government has decided not to default, and 0:02:11.400 --> 0:02:14.840 in order not to default, it has compressed imports. So 0:02:14.919 --> 0:02:20.680 when news comes out that imports are down, bonds rally, 0:02:20.960 --> 0:02:24.280 which means that the more Venezuela's go hungry, the better 0:02:24.320 --> 0:02:26.680 you feel about your bonds, because the more dollars are 0:02:26.760 --> 0:02:30.359 left to service your debt. So that service in Venezuela's 0:02:30.400 --> 0:02:35.520 costing around fourteen billion dollars and total imports this year 0:02:35.639 --> 0:02:39.760 are unlikely to reach sixteen billion dollars. So essentially you're 0:02:40.280 --> 0:02:43.520 you're in order to service the debt, you need not 0:02:43.639 --> 0:02:48.000 to import food, medicine inputs, and that is what is 0:02:48.080 --> 0:02:51.480 keeping the government paying the debt. So are you saying 0:02:51.800 --> 0:02:57.000 that if investors stopped putting money allocating money to Venezuela, 0:02:57.360 --> 0:02:59.960 that eventually the government wouldn't be able to ring an 0:03:00.000 --> 0:03:03.639 anything more out of imports and would be forced to default. 0:03:05.280 --> 0:03:10.320 The yes, that that is that when the markets have 0:03:10.480 --> 0:03:13.920 closed Venezuela out already. So all we're talking about is 0:03:13.960 --> 0:03:17.080 trading old debt. So if you hold this old debt, 0:03:17.200 --> 0:03:20.720 what you're now asking is, so this old debt was 0:03:20.800 --> 0:03:24.240 issued at the time and the money was wasted, corrupted, etcetera, 0:03:24.320 --> 0:03:26.720 and got us into this mess. So if you hold 0:03:26.800 --> 0:03:30.079 Venezuela that you're hoping maybe that a better government comes 0:03:30.160 --> 0:03:33.560 up and the economy recovers, and the recovery is used 0:03:33.919 --> 0:03:37.640 not to recover Venezuela and income levels, but to pay you. 0:03:38.240 --> 0:03:42.160 So you're again placed in a situation where you're in 0:03:42.720 --> 0:03:46.119 well being, the return on your assets depends on bad 0:03:46.160 --> 0:03:48.240 things happening to Venezuelans, and you don't want to do that. 0:03:48.560 --> 0:03:50.880 There is a story on the Bloomberg a couple of 0:03:50.880 --> 0:03:56.360 months ago talking about how autocratic UH dictatorships end up 0:03:56.400 --> 0:04:00.480 being fantastic investments for bondholders, and it saying, you know, 0:04:00.560 --> 0:04:04.720 just because you know, honestly, investing isn't necessarily moral, it's 0:04:04.760 --> 0:04:08.200 dollars and cents, and these autocratic leaders end up paying well, 0:04:08.240 --> 0:04:10.480 that that's not really true. I mean, the reason why 0:04:10.480 --> 0:04:14.000 there's impact investment is because people care about doing well, 0:04:14.040 --> 0:04:16.360 but they also care about doing good. I mean, would 0:04:16.360 --> 0:04:19.240 you put money into a company that is selling guns 0:04:19.240 --> 0:04:23.720 to drug traffickers? Would you invest in in so would 0:04:23.720 --> 0:04:28.400 you have bought Hitler bonds? So there is we are 0:04:28.480 --> 0:04:31.320 moral beings and we want to do well, and we 0:04:31.400 --> 0:04:34.880 also want to do good and and because of that, 0:04:36.920 --> 0:04:39.560 people choose what they're willing to invest in. You know, 0:04:39.600 --> 0:04:41.880 it's interesting that this is coming up at a time 0:04:42.160 --> 0:04:45.719 when emerging markets debt is on fire. There is billion 0:04:45.839 --> 0:04:49.520 billions of dollars going into emerging markets credit, in particular 0:04:49.680 --> 0:04:52.520 through funds that seek to track the JP Market Emerging 0:04:52.560 --> 0:04:55.560 Market Bond Index. And you talk about how even though 0:04:55.680 --> 0:04:58.200 Venezuela only represents five percent of the index, it accounts 0:04:58.240 --> 0:05:01.479 for about of the total yield. Uh. You know, so 0:05:01.600 --> 0:05:04.680 anyone who's going into emerging markets debt right now is 0:05:04.680 --> 0:05:07.440 contributing to this exactly. And I want, I want to 0:05:07.480 --> 0:05:09.840 save them. I think that all the other emerging markets 0:05:09.839 --> 0:05:12.760 are doing fine. I want just to take Venezuela out 0:05:12.760 --> 0:05:14.880 of the index so people are not forced into buying 0:05:14.960 --> 0:05:18.600 Venezuelan bonds, so people are not forced into these moral clones. Well, 0:05:18.680 --> 0:05:20.680 so are there people who are demanding the JP Morgan 0:05:20.720 --> 0:05:24.320 remove Venezuela debt from this benchmark index that is the 0:05:25.080 --> 0:05:28.600 gold standard for emerging markets credit investing. Well, I just 0:05:28.680 --> 0:05:31.599 put it out today, so let's see hear what you know. 0:05:31.600 --> 0:05:32.960 It's it's it's a tricky thing because at the end 0:05:32.960 --> 0:05:35.920 of the day, investors are responsible for doing well by 0:05:35.960 --> 0:05:38.600 their by their clients right now, and and they and 0:05:38.680 --> 0:05:42.320 you know, the managers don't want to be their their 0:05:42.360 --> 0:05:45.680 bonus to be dependent on getting the Venezuela called right 0:05:46.560 --> 0:05:51.200 because so, you know you Venezuela, everybody thought that was 0:05:51.240 --> 0:05:54.000 going to default. It didn't default, and that was good 0:05:54.000 --> 0:05:57.600 for the bonds. Why did it not default? Because it's starved. 0:05:57.640 --> 0:06:00.680 It's people you don't want to be rejoicing in those situations. 0:06:00.920 --> 0:06:03.400 Thank you so much for joining us. Really an important discussion. 0:06:03.480 --> 0:06:06.680 Ricardo Houseman is the director of the Center for International 0:06:06.680 --> 0:06:09.640 Development at Harvard's Kennedy School, which is based in Boston, 0:06:09.680 --> 0:06:12.280 but he is here in on Bloomberg eleven three oh studio. 0:06:12.320 --> 0:06:15.080 He also is the former Minister of Planning for Venezuela 0:06:15.120 --> 0:06:19.400 and former Chief Economists of the INTERN Inter American Development Bank. 0:06:19.839 --> 0:06:34.160 Really appreciate your comments right now, I want to try 0:06:34.200 --> 0:06:36.480 and focus where there is a lot going on, which 0:06:36.560 --> 0:06:39.560 is the G seven meeting that is going on in 0:06:39.760 --> 0:06:42.920 Sicily this weekend, and we are going to UH here 0:06:43.080 --> 0:06:45.880 from President Trump as well as other world leaders about 0:06:46.040 --> 0:06:50.760 issues ranging from trade negotiations, to the to the environment, 0:06:51.240 --> 0:06:54.359 UH to potentially how to fight terrorism. I want to 0:06:54.400 --> 0:06:56.880 bring in for some more perspective Arial Cohen, who is 0:06:56.920 --> 0:06:59.960 a Senior Fellow at the Atlantic Council. He's also director 0:07:00.040 --> 0:07:03.719 the Center for Energy, Natural Resources and Geopolitics at the 0:07:03.720 --> 0:07:08.000 Institute for Analysis of Global Security based in Washington, d c. Arial, 0:07:08.040 --> 0:07:10.520 thank you so much for joining us today. I would 0:07:10.520 --> 0:07:12.400 love to get your thoughts before we move into what 0:07:12.480 --> 0:07:16.640 to expect during the G seven summit. What's your evaluation 0:07:16.760 --> 0:07:20.360 so far President Trump, when he was at NATO and 0:07:20.520 --> 0:07:24.880 during this world tour, well, let's talk with the good news. 0:07:24.920 --> 0:07:28.240 The world tour went when went well until he got 0:07:28.240 --> 0:07:32.080 to Europe. He did well in Saudi Arabia, the historic 0:07:32.160 --> 0:07:36.600 one hunting and ten billion dollar arms deal hopefully will 0:07:36.600 --> 0:07:41.160 not hurt our ally. Israel. He did okay in Israel, 0:07:41.840 --> 0:07:45.840 although there was no clarity on how to proceed on 0:07:46.000 --> 0:07:51.240 the suggested talks with the Palestinians. The Palestinians are not 0:07:51.440 --> 0:07:56.160 doing their fair share in terms of stopping incitement to 0:07:56.280 --> 0:08:00.120 violence and controlling terror. But when he hit Europe, the 0:08:00.280 --> 0:08:05.680 rock UH don'ald Tom has very strong ideas about how 0:08:05.720 --> 0:08:11.680 our allies should behave. I was reading his book, The 0:08:11.840 --> 0:08:15.680 Art of the Deal that he co authored, and he 0:08:15.880 --> 0:08:20.520 is clearly even back then, So that's UH what thirty 0:08:20.600 --> 0:08:25.000 years ago believe that the Japanese and the Europeans are 0:08:25.000 --> 0:08:28.440 not paying UH their fair shriff for defense, that they 0:08:28.480 --> 0:08:32.959 have unequal trade deals that have heard of Americans. But 0:08:33.840 --> 0:08:36.920 with all that, NATA is one of the most successful 0:08:37.520 --> 0:08:42.080 military and political alliances of his of all the history. UH. 0:08:42.240 --> 0:08:47.760 NATA has been in existence since nine UH and UH 0:08:47.760 --> 0:08:51.679 it provided a lot of security. It's not rent a cop. 0:08:51.720 --> 0:08:54.440 It's not that you pay a monthly fee and we 0:08:54.600 --> 0:08:59.240 provide you with our missile defenses or our soldiers. So 0:08:59.480 --> 0:09:03.520 they there's a very steep learning curve in the Trump 0:09:03.600 --> 0:09:06.720 White House. And yes, do you think that anything that 0:09:06.760 --> 0:09:10.040 he said jeopardized that very strong alliance. I just came 0:09:10.080 --> 0:09:12.440 back from Europe. I was in a high level conference 0:09:12.480 --> 0:09:15.840 with the Germans UH, primarily looking at frustra there's a 0:09:15.880 --> 0:09:19.480 lot of disappointment now. I would say there was a 0:09:19.520 --> 0:09:24.079 lot of disappointment with some of Barack Obama's foreign policy, 0:09:24.160 --> 0:09:28.800 including in the Middle East. So uh, you know, we're 0:09:28.840 --> 0:09:32.959 grown ups. It's not very easy to satisfy each other 0:09:33.480 --> 0:09:37.680 all the time. But I would not push the Germans 0:09:37.800 --> 0:09:42.480 and the other Europeans in open forms as harshly as 0:09:42.520 --> 0:09:45.559 Donald Trump is doing right now. But I think his 0:09:46.000 --> 0:09:50.120 main issue that they need UH to pay in more 0:09:50.280 --> 0:09:54.760 into defense, that the fair the fair share UH is 0:09:54.800 --> 0:09:57.800 not there. You know, they're not paying enough for for 0:09:57.840 --> 0:10:01.960 the defense. That is a valid point, very valid. Okay, Well, 0:10:02.200 --> 0:10:05.720 Ariel moving on to the summit that is upcoming, the 0:10:05.800 --> 0:10:08.440 G seven summit that is happening in Sicily this year. 0:10:08.520 --> 0:10:12.320 Where world leaders, major world leaders get together. Not Russia, however, 0:10:12.880 --> 0:10:15.760 of course, Um, what do you think is the most 0:10:15.880 --> 0:10:18.280 important thing that will be discussed and what do you 0:10:18.280 --> 0:10:22.600 expect and come out of this meeting? I think European 0:10:22.640 --> 0:10:26.800 grows is anemic. They will be talking about how to 0:10:27.880 --> 0:10:31.240 get Europe beyond their one point nine grows. The global 0:10:31.240 --> 0:10:35.040 growth is projected three point five, which is okay, but 0:10:35.240 --> 0:10:37.800 you know, we probably could do better in the emerging markets. 0:10:38.320 --> 0:10:42.720 I don't think they have a lot in terms of solutions. 0:10:42.760 --> 0:10:45.160 I think that between the Europeans will be a talk 0:10:45.800 --> 0:10:48.960 about how to heal Brexit. There are some harsh statements 0:10:48.960 --> 0:10:52.040 on both sides. The Europeans said, you owe us what 0:10:52.160 --> 0:10:59.160 two billions? Uh? The Brits retaliated and responded with their number. 0:11:00.080 --> 0:11:06.839 But overall, as usual, interest rate, deficit, taxation, things like that. 0:11:07.120 --> 0:11:10.800 They are always on the G seven agenda. You're absolutely right, 0:11:10.840 --> 0:11:13.640 Russia is not there. Why Russia was a part of 0:11:13.679 --> 0:11:16.080 what used to be G eight. Russia is not there 0:11:16.120 --> 0:11:18.679 because of their aggression in Ukraine. So do you think 0:11:18.679 --> 0:11:21.520 that Russia is going to be a conversation That is 0:11:21.559 --> 0:11:23.360 going to be a difficult one for President Trump to 0:11:23.360 --> 0:11:27.560 wait into the Europeans indicated that with the exception of 0:11:27.559 --> 0:11:32.400 the sanctions, that they differ on Russia. But Europe is split. 0:11:32.480 --> 0:11:35.559 As I said, I just came back from Europe. There 0:11:35.760 --> 0:11:39.240 was I was a part of the conversation on Russia 0:11:39.280 --> 0:11:44.080 between US and Germany. UM. I think if Chancellor Merco 0:11:44.280 --> 0:11:48.920 wins re election as is widely expected, not just the 0:11:49.000 --> 0:11:53.680 sanctions will continue. The perception that Russia is a threat 0:11:53.720 --> 0:11:58.559 to Europe will persist in Europe, and the Trump administration 0:11:58.640 --> 0:12:03.240 is split. The leaders of our defense and foreign policy 0:12:03.320 --> 0:12:07.480 establishments understand the Russia is a threat, with the White 0:12:07.480 --> 0:12:11.240 House maybe not so much so. One other point that 0:12:11.480 --> 0:12:14.000 is probably going to come up and loom large at 0:12:14.000 --> 0:12:17.880 the G seven summit is the environment and the Paris 0:12:18.040 --> 0:12:21.959 Climate Accord and environmental protections. What do you think will 0:12:22.000 --> 0:12:26.200 come out with respect to that? Uh? This is sixty 0:12:26.280 --> 0:12:32.080 four billion dollar questions because the Trump White House is 0:12:32.280 --> 0:12:38.559 very climate skeptic. Uh. They are thinking seriously about pooling, um, 0:12:38.640 --> 0:12:41.920 the US out of the Paris Accords. Of course, the 0:12:41.920 --> 0:12:45.840 accords of volunteer accords, and the question is how enforceable 0:12:47.000 --> 0:12:51.720 are they? And I think the big divide among other 0:12:51.840 --> 0:12:56.160 things among besides the trade. Besides the Europeans not paying 0:12:56.200 --> 0:12:59.640 their fair share for defense is also climate and I 0:13:00.040 --> 0:13:04.840 would hate to see our relationship with Europe deteriorating further. 0:13:05.400 --> 0:13:10.120 But Mr Trump and his electorate have a very strong 0:13:10.720 --> 0:13:15.360 view on climate which is very different than our bi 0:13:15.440 --> 0:13:19.520 coastal elites. The West Coast and the East coast elites 0:13:19.520 --> 0:13:22.800 are of course pro climate change and recognize it as 0:13:22.920 --> 0:13:25.960 a major issue. And so do the European elite. So 0:13:26.240 --> 0:13:29.640 this is one of the serious folk lins when we're 0:13:29.679 --> 0:13:34.000 not staring into the abyss of the threat of the 0:13:34.120 --> 0:13:37.839 radical Islamist terrorism. Alright, real quick, Ariel, On a scale 0:13:37.840 --> 0:13:39.840 from one to ten, how would you create his international 0:13:39.920 --> 0:13:45.720 trip so far? Uh? Saudi Arabia, A, Israel B plus Europe. 0:13:45.800 --> 0:13:48.600 See Ariel Coh and thank you so much for joining us. 0:13:48.640 --> 0:13:52.000 Aero Cohen is Senior Fellow at the Atlantic Council. Also 0:13:52.040 --> 0:13:54.920 he is the director of the Center for Energy, Natural 0:13:54.920 --> 0:13:59.560 Resources and Geopolitics at the Institute for Analysis of Global 0:13:59.600 --> 0:14:11.760 Security in Washington, d C. We want to take a 0:14:11.760 --> 0:14:14.160 moment to let you know about something new from Bloomberg. 0:14:14.400 --> 0:14:16.640 Starting right now, you can use our i O s 0:14:16.679 --> 0:14:19.840 app or our new Google Chrome extension to scan any 0:14:19.840 --> 0:14:23.280 news story on any website, instantly revealing relevant news and 0:14:23.320 --> 0:14:25.960 market data from Bloomberg and other sources related to the 0:14:26.000 --> 0:14:28.720 companies and people you're reading about. So no matter where 0:14:28.720 --> 0:14:30.640 you're reading the news, you can bring the power of 0:14:30.680 --> 0:14:34.240 Bloomberg's news and data with you. It's pretty amazing. Download 0:14:34.240 --> 0:14:36.800 our io s app or search for the Bloomberg extension 0:14:36.840 --> 0:14:38.960 on the Chrome Store to try it out. Learn more 0:14:39.000 --> 0:14:51.560 at Bloomberg dot com slash lens. Right now, I want 0:14:51.560 --> 0:14:53.760 to talk about getting to the beach or the pub, 0:14:54.000 --> 0:14:56.680 particularly in a car or a truck or perhaps a 0:14:57.280 --> 0:15:00.480 I don't know, a diesel train after they exist, I 0:15:00.480 --> 0:15:03.560 don't know. Anyway, I want to bring in someone who 0:15:03.560 --> 0:15:06.520 knows a lot more about all things oil, Vincent Piazza. 0:15:06.680 --> 0:15:10.600 He is a senior equity energy Analystic Global sector leader 0:15:10.640 --> 0:15:15.600 for Bloomberg Intelligence, UH focusing on oil, focusing on Opaque, 0:15:15.640 --> 0:15:20.720 which just is completing their meeting and UH yesterday create 0:15:20.800 --> 0:15:23.560 values fell out of bed? What happened? So? If I 0:15:23.640 --> 0:15:28.200 recall my Jesuit high school English class, what's the Shakespeare play? 0:15:28.680 --> 0:15:32.760 Much Ado about? Nothing? So look, I think in order 0:15:32.800 --> 0:15:38.600 to extend confidence for price there needed to be something 0:15:38.640 --> 0:15:42.520 more than just the extension of the cuts um they needed. 0:15:42.640 --> 0:15:46.120 I think what the market was looking for. We're deeper cuts. Right, 0:15:46.600 --> 0:15:53.000 you can curtail production, but actually exports rose higher throughout 0:15:53.000 --> 0:15:57.280 this period of time, So you still had this overflow 0:15:57.520 --> 0:16:00.520 of petroleum out there in the marketplace. So if I 0:16:00.560 --> 0:16:04.480 think about just here in the US, still a major importer, 0:16:05.120 --> 0:16:08.720 you had uh patrolling, We had crude oil volumes, crude 0:16:08.720 --> 0:16:14.840 oil stockpiles quite high, roughly above the five year average. 0:16:14.880 --> 0:16:18.400 That's over a hundred million barrels of extra storage that 0:16:18.440 --> 0:16:21.680 we need to flush out. And so you have this 0:16:21.920 --> 0:16:26.120 range bound market. You know, OPEC during the during their 0:16:26.160 --> 0:16:30.560 first agreement to curtail output last year, set a floor 0:16:30.640 --> 0:16:34.480 for US and that floor is round forty. Okay, what 0:16:34.760 --> 0:16:38.600 US output and the ascendency of US output does is 0:16:38.720 --> 0:16:42.560 it puts a ceiling on that price rise because now 0:16:42.680 --> 0:16:46.480 those barrels can flow out into the global marketplace as well. 0:16:46.560 --> 0:16:49.360 And we've heard from four Q earnings calls and one 0:16:49.440 --> 0:16:54.160 Q earnings calls management teams suggesting that in that fifty 0:16:54.240 --> 0:16:58.920 dollar range they can push on that accelerator, complete those wells, 0:16:59.200 --> 0:17:03.320 and bring that put online. In that sixty range, we're 0:17:03.360 --> 0:17:07.840 talking about a resurgence of growth and new wells being drilled. 0:17:07.880 --> 0:17:10.480 So there you have that price range. You didn't really 0:17:10.520 --> 0:17:14.720 hear anything different the last day or so about deepening 0:17:14.800 --> 0:17:20.439 cuts to help push well dilution of the although stock piles, 0:17:20.520 --> 0:17:23.600 both in the US and also more broadly, just to 0:17:23.640 --> 0:17:28.159 put some numbers to this, So on on Wednesday, the 0:17:28.200 --> 0:17:30.040 price of crewed was fifty one, a little more than 0:17:30.040 --> 0:17:34.560 fifty one barrel, uh next day tumbling four point almost 0:17:35.840 --> 0:17:42.280 to forty a barrel in the wake of the expected 0:17:42.720 --> 0:17:46.679 prolonged output cuts, but not necessarily deeper output cuts. I mean, 0:17:46.720 --> 0:17:51.080 could you argue that if they had had deeper output 0:17:51.119 --> 0:17:53.399 cuts that I wouldn't have done anything because the higher 0:17:53.400 --> 0:17:57.280 prices go, the more shale producers just stick on the accelerator. 0:17:57.359 --> 0:17:59.919 And that's the conundrum. What's the eggit strategy? Right? So 0:18:00.160 --> 0:18:04.200 this this output cut, this this this strategy is likely 0:18:04.280 --> 0:18:09.359 more transitory. Um it's been engineered to prosecute other means. 0:18:09.760 --> 0:18:14.480 So for example, Saudias I p O okay, and boosting 0:18:14.520 --> 0:18:17.360 the price of oil, which boost sentiment, which would boost 0:18:17.840 --> 0:18:21.360 the reception for that I P O. But you're still 0:18:21.400 --> 0:18:24.359 in this range, and we've talked about this for several months, 0:18:24.359 --> 0:18:27.440 several quarters every time month on the show. It's consistent. Right, 0:18:27.480 --> 0:18:30.680 You have this tight range because you have this output 0:18:30.720 --> 0:18:34.119 from the US that can respond more quickly than perceived 0:18:34.440 --> 0:18:38.120 to any price signal. So what could break us out 0:18:38.119 --> 0:18:40.320 of this range? Because you know, we remember running into 0:18:40.320 --> 0:18:43.000 you getting a cup of coffee and you said, you 0:18:43.000 --> 0:18:45.919 know a lot of people haven't lived through a true cycle. 0:18:45.960 --> 0:18:49.119 This is not the cycle high and lower in a range, 0:18:49.160 --> 0:18:51.399 but it does break out eventually and it can go 0:18:51.560 --> 0:18:54.560 way higher or way lower. And it's it's demand centric. 0:18:54.720 --> 0:18:58.760 It's sustained demand centric. You know the Chinese filling their 0:18:58.960 --> 0:19:02.600 spr that is on a sustained demand trajectory. Right, And 0:19:02.640 --> 0:19:05.200 if you think about the broader scope, if you think 0:19:05.240 --> 0:19:10.720 about car efficiencies, um, better better mileage, right, that reduces 0:19:10.800 --> 0:19:14.240 that that demand cadence. So in a way, so if 0:19:14.280 --> 0:19:17.879 I'm hearing you correctly, given that the move is toward 0:19:18.000 --> 0:19:22.639 electric vehicles, is towards being less uh less focused on 0:19:22.720 --> 0:19:27.640 oil as a use for and a motive of getting energy. 0:19:27.800 --> 0:19:30.159 Given that, I mean, isn't demand only going to go 0:19:30.240 --> 0:19:33.280 down from here? I would say the demand growth will 0:19:33.320 --> 0:19:38.240 be more curtailed, and so that price range will be more, 0:19:38.760 --> 0:19:41.359 will be tighter and to the longer and longer, and 0:19:41.480 --> 0:19:45.040 likely to so lower relative to where we were in 0:19:45.280 --> 0:19:47.600 two thousand and fourteen and where we were in two 0:19:47.600 --> 0:19:51.120 thousand and seven relative to that period, Yes, it will 0:19:51.160 --> 0:19:53.840 be lower, but that but that tighter range, that forty 0:19:53.960 --> 0:19:56.919 is safety tight range really speaks to the paradigm shift 0:19:57.320 --> 0:20:00.280 that we've been seeing so real quick, I know we 0:20:00.400 --> 0:20:03.960 are heading into Memorial Day weekend, and does does gas 0:20:04.040 --> 0:20:07.160 demand really pick up that much? So again we talk 0:20:07.280 --> 0:20:11.920 about this this this this concept of more fuel efficient vehicles, right, 0:20:12.000 --> 0:20:15.760 and if you just think about the mild winter and 0:20:15.880 --> 0:20:20.320 the mount winter, actually we've seen of vehicle miles traveled 0:20:20.359 --> 0:20:24.119 tracking above the five year high. Okay, I'm sorry the 0:20:24.160 --> 0:20:27.560 five year average. Right, so more folks in the road. Now, 0:20:27.680 --> 0:20:32.439 consumption for the summertime will likely rise, maybe about one percent, 0:20:32.640 --> 0:20:35.160 but you have many more vehicles on the road, So 0:20:35.440 --> 0:20:38.280 that does speak to the fuel efficiency. Now that mix, 0:20:38.480 --> 0:20:42.040 and I talked to our autos analyst, Kevin Tynan, and 0:20:42.080 --> 0:20:45.560 he suggests that that new sales mix, that new vehicle 0:20:45.640 --> 0:20:49.720 mix is tilted more toward the light light truck side, 0:20:50.280 --> 0:20:53.879 so there could be some additional fuel consumption, but again 0:20:54.240 --> 0:20:57.399 relative to where you were in prior periods, it's a 0:20:57.480 --> 0:21:01.679 much more fuel efficient vehicle, and so consumption is likely 0:21:01.760 --> 0:21:04.280 not to budge that much, but it should be higher 0:21:04.320 --> 0:21:06.560 relative year a weear just because the mild winter that 0:21:06.720 --> 0:21:08.879 the mild winter we had, and also the outlook for 0:21:08.880 --> 0:21:11.679 the summertime. Vincent Piazza, thank you so much for joining us. 0:21:11.720 --> 0:21:14.280 Always a wonderful thing to talk with you. Vincent Piazza, 0:21:14.400 --> 0:21:30.800 senior equity energy analysts and global sector leader for Bloomberg Intelligence. Well, 0:21:30.880 --> 0:21:32.719 you know, I've got to say I was kind of 0:21:32.720 --> 0:21:36.399 surprised to realize just how big the market for auctioning 0:21:36.560 --> 0:21:40.080 off heavy industrial equipment is. Robbie Telegram joins us now. 0:21:40.119 --> 0:21:44.159 He's chief executive officer for Richie Brothers, which is the 0:21:44.280 --> 0:21:48.920 leading auctioneer of this equipment UH in the world. Robbie 0:21:49.119 --> 0:21:52.040 joins us now from Burnaby, Canada, which is a suburb 0:21:52.119 --> 0:21:56.280 of Vancouver. Robbie, thank you so much for joining us. First, congratulations, 0:21:56.280 --> 0:21:59.880 I know that you just recently announced that you would 0:22:00.040 --> 0:22:03.760 be going ahead and acquiring Iron Planet for almost a 0:22:03.760 --> 0:22:07.040 billion dollars eight point five million dollars UH. And now 0:22:07.040 --> 0:22:10.560 that you rank is a fifty tough fifty e commerce company. 0:22:10.600 --> 0:22:12.080 I would love you just give me a sense of 0:22:12.119 --> 0:22:16.800 how big this market is for auctioning off heavy industrial equipment. Lisa, 0:22:16.880 --> 0:22:20.960 thank you so much. The auction market is about three 0:22:21.040 --> 0:22:28.120 hundred sixty billion dollars globally and it encompasses um sectors 0:22:28.119 --> 0:22:32.680 such as construction, transportation which is over their own trucks, agriculture, 0:22:32.680 --> 0:22:35.639 oil and gas, and mining. And there are different channels 0:22:35.720 --> 0:22:39.280 through which used equipment and the three and sixty billion 0:22:39.400 --> 0:22:42.480 is used equipment that gets sold through these channels, so 0:22:42.720 --> 0:22:46.000 very large. So how do these how do these auctions work? 0:22:46.040 --> 0:22:48.480 I mean I was joking with with my producer earlier 0:22:48.480 --> 0:22:50.399 that I think of like pond stars, you know, people 0:22:50.400 --> 0:22:53.280 coming with their tractors up to a of to of 0:22:53.400 --> 0:22:55.760 to a window and saying, hey, you know, how much 0:22:55.760 --> 0:22:58.960 can you get for this? But has it work? Really? No, 0:23:00.080 --> 0:23:02.840 think it's actually a little bit more sophisticated than that. 0:23:03.640 --> 0:23:07.040 So we um uh Richie Brothers has been the pioneer 0:23:07.040 --> 0:23:09.320 in what is called us an unreserved auction, which is 0:23:09.800 --> 0:23:14.520 that everything will sell no matter what. And we have 0:23:14.600 --> 0:23:17.600 auction yards around the world. We have forty four yards 0:23:17.640 --> 0:23:19.840 and these auctions are unique in the sense that they're 0:23:19.840 --> 0:23:23.919 both live as well as online, so they integrated and 0:23:24.040 --> 0:23:27.600 people can call from all over the world or book 0:23:27.680 --> 0:23:32.719 our make purchases online as well as bid on site. 0:23:33.200 --> 0:23:37.520 So we've got that unique integrated model, and we merchandise 0:23:37.560 --> 0:23:40.399 our equipment on our yards. It's like a Picasso picture. 0:23:40.480 --> 0:23:44.240 Are people do a beautiful job. There's like ten thousand pieces, 0:23:44.240 --> 0:23:47.400 So think about it as dozers and tractors all over 0:23:48.400 --> 0:23:51.760 the yard and buyers, potential buyers come kick that ours 0:23:51.840 --> 0:23:55.080 look at the equipment. We also provide information so people 0:23:55.119 --> 0:23:58.119 can look at it online and then an auctioneer m 0:23:59.040 --> 0:24:02.080 much like any other UH industry, will auction off those 0:24:02.119 --> 0:24:04.920 items and we could sell potentially a three million dollar 0:24:04.960 --> 0:24:08.480 crane in less than sixty seconds. Wow. So what is 0:24:08.520 --> 0:24:13.480 the most popular item to get sold? Well, construction is 0:24:14.240 --> 0:24:20.720 our sweet spot. We do things like excavators and UH wheeloaders, 0:24:21.400 --> 0:24:25.119 UH dozers, so the gamut of it and all things 0:24:25.160 --> 0:24:29.960 that going to really bridge building, roadworks and so in 0:24:30.000 --> 0:24:32.840 many ways we think of Richie Brothers as enabling building 0:24:32.840 --> 0:24:37.280 of the world, but also with agricultural equipment farming. So 0:24:37.280 --> 0:24:39.800 so it's really a company that we feel very good 0:24:39.800 --> 0:24:43.720 about that our people are enabling commas. So I'm trying 0:24:43.760 --> 0:24:48.360 to understand whether your business stands to gain during periods 0:24:48.359 --> 0:24:52.680 of ramped up infrastructure or if, uh, you know, when 0:24:52.800 --> 0:24:55.040 when your company does best. We're part of the cycle. 0:24:56.240 --> 0:25:01.000 But interestingly, Lisa, it's we do well in good times 0:25:01.080 --> 0:25:03.760 and do well not so good times as well. And 0:25:04.080 --> 0:25:06.120 in good times when the economy is doing well, when 0:25:06.119 --> 0:25:10.600 there's infrastructure spending, new equipment production is at a peak 0:25:10.680 --> 0:25:13.960 and people like to buy new. Eventually that convert gets 0:25:14.000 --> 0:25:17.560 converted to used equipment, so we benefit from that. When 0:25:17.680 --> 0:25:20.320 times like we had the oil and gas crisis last 0:25:20.320 --> 0:25:23.960 few years, we were the beneficiaries because the people get 0:25:24.359 --> 0:25:29.040 dislocated and they want to sell their equipment, and we 0:25:29.160 --> 0:25:33.040 then are able to help our customers dispose of their 0:25:33.080 --> 0:25:35.760 equipment and get the best values. And we get the 0:25:35.760 --> 0:25:39.080 best best values because of our knowledge of pricing. Were 0:25:39.119 --> 0:25:42.439 known as the foremost authority or used equipment pricing, and 0:25:42.520 --> 0:25:45.080 that helps us get the best deals. Despite the fact 0:25:45.119 --> 0:25:49.080 that we're an unreserved auction Who are the sellers. The 0:25:49.160 --> 0:25:53.480 sellers are the majority for Richie Brothers end users. These 0:25:53.520 --> 0:25:56.720 are people who are general contractors who might be in 0:25:56.760 --> 0:26:00.960