1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul Swinge. You, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:21,319 Speaker 1: at Bloomberg dot com. Boy. There has been a lot 8 00:00:21,360 --> 00:00:23,600 Speaker 1: of news on the tape as it relates to China 9 00:00:23,640 --> 00:00:26,480 Speaker 1: over the last week or so. Just today, White House 10 00:00:26,480 --> 00:00:29,080 Speaker 1: trade advisor Peter Navarro expects to US and China to 11 00:00:29,120 --> 00:00:32,440 Speaker 1: sign a Phase one trade deal and then quote next 12 00:00:32,520 --> 00:00:35,840 Speaker 1: week or so, you've got that. Plus Bloomberg News reported uh, 13 00:00:35,920 --> 00:00:40,440 Speaker 1: last week about China thinking about launching a carrier aircraft 14 00:00:40,440 --> 00:00:43,680 Speaker 1: carrier sized investment bank to compete against Goldman sachs Uh 15 00:00:43,680 --> 00:00:48,000 Speaker 1: and Morgan Stanley. Bloomberg News also reporting, uh, just yesterday 16 00:00:48,000 --> 00:00:50,800 Speaker 1: that China is really thinking about dismantling it's great financial 17 00:00:50,760 --> 00:00:53,600 Speaker 1: wall allowing Western investment banks to come into China. So 18 00:00:53,640 --> 00:00:55,400 Speaker 1: a lot to kind of unpack their as it relates 19 00:00:55,440 --> 00:00:58,320 Speaker 1: to China. Let's start with the trade deal and we welcome, 20 00:00:58,440 --> 00:01:02,360 Speaker 1: uh Shazad Kazi, he's a managing director China beige Book International. 21 00:01:02,640 --> 00:01:04,480 Speaker 1: Just thanks so much for coming to our Bloomberg Gonna 22 00:01:04,480 --> 00:01:07,759 Speaker 1: Act their broker studio. Thanks. Let's just go to trade first, 23 00:01:07,840 --> 00:01:10,720 Speaker 1: kind of where do you think we are with trade 24 00:01:10,720 --> 00:01:13,640 Speaker 1: and kind of what the next steps? Yeah, so you 25 00:01:13,640 --> 00:01:16,240 Speaker 1: know what we've seen over here is you know, a 26 00:01:16,240 --> 00:01:19,120 Speaker 1: phase one trade deal. Uh seems like all but a 27 00:01:19,200 --> 00:01:22,600 Speaker 1: done deal at this point. This is definitely a much 28 00:01:22,640 --> 00:01:26,520 Speaker 1: smaller deal than was originally being discussed. Right. But when 29 00:01:26,520 --> 00:01:28,400 Speaker 1: the President first tried to go for a larger deal, 30 00:01:28,400 --> 00:01:31,160 Speaker 1: which would have from the U. S side involved um, 31 00:01:31,360 --> 00:01:33,920 Speaker 1: far bigger tiref rollbacks and what we're seeing in this 32 00:01:33,959 --> 00:01:37,480 Speaker 1: particular instance, Um, there really just wasn't much support for that. 33 00:01:37,560 --> 00:01:39,479 Speaker 1: So when as you know, people from the White House 34 00:01:39,480 --> 00:01:42,280 Speaker 1: started calling up folks on Congress start to socialize the 35 00:01:42,319 --> 00:01:46,640 Speaker 1: idea with other business uh unions, associations, etcetera, there really 36 00:01:46,680 --> 00:01:48,600 Speaker 1: wasn't much appetite. So what we've ended up with is 37 00:01:48,600 --> 00:01:51,680 Speaker 1: a much smaller deal. Um. The upside of course on 38 00:01:51,680 --> 00:01:53,680 Speaker 1: on that is that a smaller deal is also a 39 00:01:53,720 --> 00:01:57,800 Speaker 1: little bit more stable. The chances of things falling apart um, 40 00:01:57,920 --> 00:02:01,120 Speaker 1: for for this particular, you know, the mini mini deal, Um, 41 00:02:01,240 --> 00:02:03,880 Speaker 1: are are fewer The things I think we want to 42 00:02:03,880 --> 00:02:06,560 Speaker 1: watch for now is what happens in So we do 43 00:02:06,600 --> 00:02:09,360 Speaker 1: think this is going to get signed, But then you know, 44 00:02:09,520 --> 00:02:13,840 Speaker 1: what are the factors which may start to create problems? Um, 45 00:02:13,880 --> 00:02:17,000 Speaker 1: you know, especially as we get closer to elections. So, uh, 46 00:02:17,040 --> 00:02:20,920 Speaker 1: if perhaps the Democratic contender criticizes the president for the 47 00:02:20,960 --> 00:02:23,480 Speaker 1: fact that this deal really didn't do much for America much, 48 00:02:23,560 --> 00:02:26,160 Speaker 1: you know, all the structural issues were left out, etcetera, 49 00:02:26,480 --> 00:02:28,919 Speaker 1: how does the president react to that? Um? So those 50 00:02:28,919 --> 00:02:31,160 Speaker 1: are things and things to look out for. When I 51 00:02:31,200 --> 00:02:33,440 Speaker 1: knew that you were coming in, I got very excited 52 00:02:33,480 --> 00:02:35,080 Speaker 1: because I feel like this is sort of one of 53 00:02:35,080 --> 00:02:38,960 Speaker 1: the key pieces of that is it is kind of 54 00:02:38,960 --> 00:02:41,880 Speaker 1: still a conundrum, the question of how much a trade 55 00:02:41,880 --> 00:02:45,480 Speaker 1: deal will offer a support to the Chinese economy and 56 00:02:45,520 --> 00:02:50,400 Speaker 1: how much that tailwind will be offset by the over 57 00:02:50,560 --> 00:02:53,560 Speaker 1: leveraged sectors. I'm thinking of the housing market in particular, 58 00:02:53,600 --> 00:02:56,640 Speaker 1: it showing signs of weakness certain areas of the industrial 59 00:02:56,680 --> 00:02:59,640 Speaker 1: sector that are tied to the housing market. Uh, certainly 60 00:02:59,680 --> 00:03:03,800 Speaker 1: some regional and small banks. How much is that going 61 00:03:03,840 --> 00:03:06,519 Speaker 1: to play out in a negative way that will offset 62 00:03:06,760 --> 00:03:10,400 Speaker 1: the benefit from a little more trade certainty. Yeah, so 63 00:03:10,440 --> 00:03:12,720 Speaker 1: I mean on on the positive side. First, right, that 64 00:03:12,840 --> 00:03:15,280 Speaker 1: this stiffs a Chinese some breathing room, which they've been 65 00:03:15,280 --> 00:03:18,440 Speaker 1: wanting for a long time. The manufacturing sector, really the 66 00:03:18,440 --> 00:03:20,440 Speaker 1: economy as a whole over the over over the course 67 00:03:20,440 --> 00:03:23,600 Speaker 1: of two thousand and nineteen, UM has been receiving a 68 00:03:23,639 --> 00:03:25,760 Speaker 1: lot of credit support. A ton of it was really 69 00:03:25,760 --> 00:03:28,080 Speaker 1: targeted towards the manufacturing sector, as we saw in our 70 00:03:28,160 --> 00:03:31,720 Speaker 1: data repeatedly UM and and so this is much needed 71 00:03:31,760 --> 00:03:33,400 Speaker 1: breathing room from them. But as you said, now we've 72 00:03:33,400 --> 00:03:36,800 Speaker 1: got other issues. Domestic demand is still pretty weak, Domestic 73 00:03:36,920 --> 00:03:39,360 Speaker 1: orders are are still not doing as well. The ordered 74 00:03:39,400 --> 00:03:42,560 Speaker 1: order growth itself is actually uh somewhat slow in China 75 00:03:42,720 --> 00:03:45,920 Speaker 1: right now. You've got a property market that hash showing 76 00:03:46,000 --> 00:03:49,560 Speaker 1: signs of slowing down. Now, we ourselves saw the Chinese 77 00:03:49,600 --> 00:03:52,480 Speaker 1: property markets slowing down up until November. We saw it 78 00:03:52,720 --> 00:03:54,360 Speaker 1: a bit of an upturn in December, but you know, 79 00:03:54,440 --> 00:03:57,040 Speaker 1: one month is not a trend, right, So some of 80 00:03:57,040 --> 00:03:59,400 Speaker 1: those factors remain. If you look at that commodities is 81 00:03:59,440 --> 00:04:01,840 Speaker 1: struggling right now in China, which is which is not 82 00:04:01,920 --> 00:04:04,640 Speaker 1: a very positive sign for the economy. Um. Yeah, so, 83 00:04:04,640 --> 00:04:07,920 Speaker 1: so lots of other factors remain. The other problem. You know, 84 00:04:07,920 --> 00:04:11,360 Speaker 1: you brought up issues with being over leverage. One of 85 00:04:11,400 --> 00:04:13,520 Speaker 1: the things that we're starting to pick up on is 86 00:04:13,720 --> 00:04:18,280 Speaker 1: a major spike in firms which are delinquent and debt repayments. 87 00:04:18,720 --> 00:04:20,760 Speaker 1: Right then, this is at a time when credit and 88 00:04:20,800 --> 00:04:23,880 Speaker 1: borrowing is surging, So that really sets up to be 89 00:04:23,920 --> 00:04:26,080 Speaker 1: somewhat difficult for some of these firms just struggling. They're 90 00:04:26,080 --> 00:04:28,080 Speaker 1: not seeing the growth, they're not seeing the revenues, they're 91 00:04:28,120 --> 00:04:31,360 Speaker 1: falling behind on debt repayments, cash flows tied in general. Um, 92 00:04:31,480 --> 00:04:34,400 Speaker 1: yet they're taking out more loans alright. So given that 93 00:04:34,480 --> 00:04:37,400 Speaker 1: economic backdrop, is there a scenario from your perspective, that 94 00:04:37,480 --> 00:04:41,000 Speaker 1: China would move forward meaningfully with a Phase two type 95 00:04:41,040 --> 00:04:45,240 Speaker 1: of negotiation or maybe they just don't have the capacity 96 00:04:45,360 --> 00:04:48,800 Speaker 1: right now? You know, I think the Phase to deal 97 00:04:48,960 --> 00:04:51,880 Speaker 1: was supposed to be about larger structural issues, right and 98 00:04:52,480 --> 00:04:55,920 Speaker 1: those really haven't been on the table all along as 99 00:04:55,960 --> 00:04:58,159 Speaker 1: it is. What we may end up seeing really is 100 00:04:58,200 --> 00:05:01,320 Speaker 1: that Phase one egg it's done now, and then what 101 00:05:01,400 --> 00:05:04,839 Speaker 1: we see a discussions towards perhaps Phase one B where 102 00:05:04,839 --> 00:05:08,359 Speaker 1: their additional tariff rollbacks. Perhaps the Chinese made good on 103 00:05:08,400 --> 00:05:12,120 Speaker 1: their purchases, you know, for agricultural purchases, services a person 104 00:05:12,160 --> 00:05:14,040 Speaker 1: of other goods and services, which by the way, is 105 00:05:14,080 --> 00:05:16,039 Speaker 1: going to be very difficult for them to pull off. 106 00:05:16,160 --> 00:05:19,640 Speaker 1: Those numbers are pretty high. Um So any type of 107 00:05:19,640 --> 00:05:21,240 Speaker 1: phase two as we think about it in terms of 108 00:05:21,240 --> 00:05:24,200 Speaker 1: talking about you know, larger structural issues, I don't first 109 00:05:24,240 --> 00:05:26,680 Speaker 1: see there being any kind of meaningful progress from that 110 00:05:26,720 --> 00:05:29,520 Speaker 1: in and I'm wondering, you know, one thing that Paul 111 00:05:29,560 --> 00:05:33,400 Speaker 1: mentioned was the opening up of the financial sector in China. 112 00:05:33,480 --> 00:05:35,839 Speaker 1: We saw that rate move overnight where they change the 113 00:05:35,839 --> 00:05:39,360 Speaker 1: benchmark to a more market based kind of factor rather 114 00:05:39,400 --> 00:05:44,080 Speaker 1: than a state operated benchmark rate. How much do you 115 00:05:44,080 --> 00:05:46,320 Speaker 1: expect that to really take hold next year? Do you 116 00:05:46,360 --> 00:05:48,599 Speaker 1: expect you know a lot of foreign firms to really 117 00:05:48,920 --> 00:05:52,400 Speaker 1: make bigger in roads on the rate stuff. There's just 118 00:05:52,440 --> 00:05:55,160 Speaker 1: the one quick comment I'll make is you know who 119 00:05:55,200 --> 00:05:57,680 Speaker 1: pays the rate? Right? Who pays these age rates that 120 00:05:57,680 --> 00:06:01,040 Speaker 1: are set out their state firms have preference of borrowing access, 121 00:06:01,160 --> 00:06:03,919 Speaker 1: you know, interest rates close to zero sometimes adds zero. 122 00:06:04,360 --> 00:06:06,600 Speaker 1: So perhaps you have the smaller private firms who end 123 00:06:06,680 --> 00:06:09,120 Speaker 1: up being you know, charged. You know, high interest rates 124 00:06:09,120 --> 00:06:11,799 Speaker 1: in John are ppressive to pay something closer to the benchmark. 125 00:06:12,160 --> 00:06:15,000 Speaker 1: Um So, so some of those moves, uh, you know, 126 00:06:15,160 --> 00:06:17,640 Speaker 1: might be more window dressing than anything else. As far 127 00:06:17,680 --> 00:06:19,760 Speaker 1: as firms moving in, I think the proof proof is 128 00:06:19,800 --> 00:06:21,200 Speaker 1: in the pudding. It's it's yet to be seen. I 129 00:06:21,200 --> 00:06:23,159 Speaker 1: think it's way too early to tell. The financial sector 130 00:06:23,200 --> 00:06:26,240 Speaker 1: is so strategically important for Beijing. Um that the idea 131 00:06:26,320 --> 00:06:28,839 Speaker 1: there's going to be you know, uh, they're about to 132 00:06:28,839 --> 00:06:31,039 Speaker 1: take a major step back. It's it's a little bit 133 00:06:31,040 --> 00:06:33,960 Speaker 1: difficult to buy. And just real quickly here, I'm wondering 134 00:06:34,080 --> 00:06:36,920 Speaker 1: what you're seeing in terms of the credit expansion, the 135 00:06:36,960 --> 00:06:40,360 Speaker 1: idea that you've talked about, how the PBSC has been 136 00:06:40,400 --> 00:06:43,520 Speaker 1: pumping a lot of liquidity into the market. Has that 137 00:06:43,560 --> 00:06:46,360 Speaker 1: been effective from the preliminary data that you're looking at 138 00:06:46,360 --> 00:06:49,279 Speaker 1: in December in re accelerating the economy. I think what 139 00:06:49,440 --> 00:06:51,640 Speaker 1: is done is staunch the bleeding a little bit for sure. 140 00:06:51,680 --> 00:06:53,240 Speaker 1: You know, Q three was pretty weak. It was the 141 00:06:53,240 --> 00:06:56,039 Speaker 1: weakest data all year long. November was even November data 142 00:06:56,120 --> 00:06:57,800 Speaker 1: was even worse on what we were observing over the 143 00:06:57,880 --> 00:07:00,719 Speaker 1: Q three period. Um So, the decen b upturn tells 144 00:07:00,720 --> 00:07:02,520 Speaker 1: you that has done something or the other to help 145 00:07:02,560 --> 00:07:04,800 Speaker 1: staunch the bleeding a little bit. It has provided a 146 00:07:04,800 --> 00:07:08,200 Speaker 1: little bit of relief, um, you know, But but has 147 00:07:08,240 --> 00:07:09,800 Speaker 1: it Is it going to lead to a sort of 148 00:07:09,840 --> 00:07:12,640 Speaker 1: necessarily a turnaround the economy? I don't. I don't think 149 00:07:12,680 --> 00:07:14,840 Speaker 1: so necessarily. Especially again, as I said, when we're looking 150 00:07:14,880 --> 00:07:17,520 Speaker 1: at things like weakness and domestic demand, we're looking at 151 00:07:17,520 --> 00:07:21,480 Speaker 1: corporate health uh, deteriorating pretty significantly. It doesn't make me 152 00:07:21,560 --> 00:07:25,600 Speaker 1: very confident about a major economic rebound on the horizon. 153 00:07:25,680 --> 00:07:27,520 Speaker 1: She's that, Kazi, thank you so much for being here, 154 00:07:27,560 --> 00:07:29,400 Speaker 1: Thanks so much for having me. She's that. Cazi is 155 00:07:29,400 --> 00:07:32,160 Speaker 1: managing director at China beige Book International in New York, 156 00:07:32,200 --> 00:07:34,960 Speaker 1: joining us here in our interactive Broger Studios. China kind 157 00:07:34,960 --> 00:07:37,920 Speaker 1: of the key question mark when it comes to certainly 158 00:07:37,960 --> 00:07:40,920 Speaker 1: commodity markets, which we're gonna be talking about coming up, uh, 159 00:07:40,920 --> 00:07:44,960 Speaker 1: and the optimism in oil as the US and China 160 00:07:45,040 --> 00:07:49,000 Speaker 1: are poised sign phase one A. I'm going to say 161 00:07:49,200 --> 00:07:52,080 Speaker 1: of this trade deal because it is the beginning of 162 00:07:52,120 --> 00:08:10,680 Speaker 1: a rolling series of agreements. I am sure. I'm so 163 00:08:10,720 --> 00:08:13,600 Speaker 1: excited to talk about this. Paul Satellites, Yes, this is 164 00:08:13,680 --> 00:08:15,320 Speaker 1: very cool. It's very cool. Well, I mean this is 165 00:08:15,320 --> 00:08:18,600 Speaker 1: like what we talk about when the SpaceX Falcon UH launches. 166 00:08:18,880 --> 00:08:21,440 Speaker 1: This is the purpose, right to get these satellites in 167 00:08:21,680 --> 00:08:26,200 Speaker 1: and Aridium Communications is a company that has satellites attached 168 00:08:26,280 --> 00:08:30,280 Speaker 1: to UH, say the recent SpaceX Falcon nine reusable rocket 169 00:08:30,320 --> 00:08:32,679 Speaker 1: that went up in order to deposit them into space. 170 00:08:32,720 --> 00:08:36,120 Speaker 1: And we luckily have the chief executive officer of the company, 171 00:08:36,160 --> 00:08:39,800 Speaker 1: Matt Dash joining us from Washington, d C. Matt, I 172 00:08:39,840 --> 00:08:42,719 Speaker 1: just want to start with how much you've seen your 173 00:08:42,760 --> 00:08:47,440 Speaker 1: business grow as the emphasis on satellite, the emphasis on 174 00:08:47,520 --> 00:08:54,360 Speaker 1: expanding the network infrastructure has has grown increasingly important. Well, 175 00:08:54,440 --> 00:08:56,360 Speaker 1: we have a very unique network, and we've been in 176 00:08:56,400 --> 00:08:59,240 Speaker 1: operations now for almost twenty years. Now that we have 177 00:08:59,280 --> 00:09:01,360 Speaker 1: a brand new net work, we've really sort of seen 178 00:09:01,400 --> 00:09:04,720 Speaker 1: a and even increase in what has been really a 179 00:09:04,840 --> 00:09:07,439 Speaker 1: very steady and strong growth rate for the last twenty 180 00:09:07,480 --> 00:09:11,680 Speaker 1: years we've been in operation, especially since we moved from 181 00:09:11,960 --> 00:09:15,560 Speaker 1: voice communications moving over to data transmission, say, to this 182 00:09:15,600 --> 00:09:18,360 Speaker 1: thing called the Internet of Things where everything is getting connected, 183 00:09:18,840 --> 00:09:23,000 Speaker 1: We've been really growing on the basis of that. Give 184 00:09:23,080 --> 00:09:25,840 Speaker 1: us a sense of what five G means for your business, 185 00:09:25,840 --> 00:09:30,120 Speaker 1: if anything, Well, five G IS, you know, is the 186 00:09:30,160 --> 00:09:33,600 Speaker 1: next iteration of applications that are coming to all of 187 00:09:33,679 --> 00:09:36,000 Speaker 1: us around the world. And you know, one of the 188 00:09:36,040 --> 00:09:39,040 Speaker 1: key areas that five G brings is connecting not just 189 00:09:39,200 --> 00:09:41,600 Speaker 1: people to each other, but you know, every appliance and 190 00:09:41,640 --> 00:09:45,560 Speaker 1: car and vehicle and drone. And you know, despite the 191 00:09:45,600 --> 00:09:48,480 Speaker 1: fact that five G IS is very exciting, it still 192 00:09:48,480 --> 00:09:51,200 Speaker 1: only operates on about ten percent of the planet surface, 193 00:09:51,280 --> 00:09:54,400 Speaker 1: maybe a little bit more so the other whether you're 194 00:09:54,400 --> 00:09:57,600 Speaker 1: in the oceans and the skies, on a mountain, even 195 00:09:57,760 --> 00:09:59,400 Speaker 1: a lot of places here in the US, you know, 196 00:09:59,440 --> 00:10:02,360 Speaker 1: it doesn't have connection that they won't have five G connections. 197 00:10:02,360 --> 00:10:05,960 Speaker 1: So we're the things that make the bridge to bring 198 00:10:06,040 --> 00:10:09,199 Speaker 1: those applications to the rest of the planet. I want 199 00:10:09,240 --> 00:10:12,000 Speaker 1: to talk a little bit about your use of SpaceX 200 00:10:12,559 --> 00:10:16,400 Speaker 1: rockets to get up to space. How important is the 201 00:10:16,440 --> 00:10:19,560 Speaker 1: private sector in space exploration in your business? I mean, 202 00:10:19,600 --> 00:10:25,920 Speaker 1: I just I'm wondering about what you would be using otherwise. Yeah, 203 00:10:25,920 --> 00:10:29,400 Speaker 1: when we when we selected our launch program ten years ago, 204 00:10:29,480 --> 00:10:31,360 Speaker 1: we were one of the first. We took a chance 205 00:10:31,400 --> 00:10:35,280 Speaker 1: on SpaceX before they'd even had a successful launch. It 206 00:10:35,400 --> 00:10:37,920 Speaker 1: wasn't as hard as you think, because my you know it. 207 00:10:38,640 --> 00:10:41,480 Speaker 1: You know, they for eight launches, they wanted to charge 208 00:10:41,480 --> 00:10:43,640 Speaker 1: for me about a half a billion dollars, which seems 209 00:10:43,640 --> 00:10:45,960 Speaker 1: like a lot of money. But when the next the 210 00:10:46,040 --> 00:10:51,600 Speaker 1: next available rockets, save from the Russians or from the 211 00:10:51,640 --> 00:10:54,719 Speaker 1: French or from someone else, was one point to one 212 00:10:54,760 --> 00:10:57,320 Speaker 1: point three billion dollars, it was less than half the cost. 213 00:10:57,360 --> 00:11:00,320 Speaker 1: So it really helped help make our business case clothes. 214 00:11:00,360 --> 00:11:03,560 Speaker 1: And I think they've really driven down the cost of 215 00:11:03,640 --> 00:11:06,840 Speaker 1: launch for um for a lot of US satellite suppliers 216 00:11:06,880 --> 00:11:09,520 Speaker 1: and have made it more possible for some of these 217 00:11:09,559 --> 00:11:13,440 Speaker 1: business cases to close. So Matt Bloomberg News is reporting, 218 00:11:13,440 --> 00:11:15,480 Speaker 1: I guess about ten days ago or something that Apple 219 00:11:15,640 --> 00:11:18,040 Speaker 1: is said to be exploring satellites to beam data to 220 00:11:18,080 --> 00:11:20,640 Speaker 1: its devices. What does that mean for your business in 221 00:11:20,679 --> 00:11:24,199 Speaker 1: your company, Well, it doesn't mean too much. It's a 222 00:11:24,240 --> 00:11:27,240 Speaker 1: different sort of service that they want to provide, and 223 00:11:27,559 --> 00:11:32,000 Speaker 1: many of these new new satellite companies really are supplying 224 00:11:32,320 --> 00:11:35,360 Speaker 1: very different services than what Oridium provides. But you know, 225 00:11:35,440 --> 00:11:38,880 Speaker 1: I think we've been a successful company, and I think 226 00:11:38,880 --> 00:11:41,800 Speaker 1: we've inspired others to believe it's a lot easier to 227 00:11:42,160 --> 00:11:46,000 Speaker 1: have your own network in space. Uh, they'll they'll realize 228 00:11:46,040 --> 00:11:49,319 Speaker 1: that it's very challenging and very expensive and takes a 229 00:11:49,400 --> 00:11:51,760 Speaker 1: lot of time and effort, as as has many other 230 00:11:52,720 --> 00:11:55,439 Speaker 1: billionaires and very large companies who are looking to launch 231 00:11:55,480 --> 00:11:59,600 Speaker 1: their networks, whether the Amazon or SpaceX themselves and others 232 00:11:59,600 --> 00:12:02,439 Speaker 1: are all looking to launch networks as well. So I 233 00:12:02,720 --> 00:12:04,800 Speaker 1: wish them all well, it doesn't really mean much to us. 234 00:12:04,800 --> 00:12:06,720 Speaker 1: More than anything else, They're probably going to be partners 235 00:12:06,720 --> 00:12:09,520 Speaker 1: of ours because you know, we can help um sort 236 00:12:09,520 --> 00:12:12,200 Speaker 1: of bridge service, especially as they're getting their networks up. 237 00:12:13,000 --> 00:12:15,800 Speaker 1: So a Ridium Communications. You mentioned how it has a 238 00:12:15,880 --> 00:12:21,040 Speaker 1: twenty year operating history. It was the largest American bankruptcy 239 00:12:21,120 --> 00:12:24,679 Speaker 1: prior to Enron. How have you recreated the company or 240 00:12:24,720 --> 00:12:29,440 Speaker 1: how's the company recreated itself over the past decade to 241 00:12:29,960 --> 00:12:33,000 Speaker 1: be the successful company that it is that provides uh, 242 00:12:33,040 --> 00:12:37,160 Speaker 1: you know, crucial satellite services. Yeah, it was. It was 243 00:12:37,160 --> 00:12:40,199 Speaker 1: a challenging business case back in the nineties to spend 244 00:12:40,240 --> 00:12:43,160 Speaker 1: six billion dollars in expect you know, to compete with 245 00:12:43,200 --> 00:12:46,360 Speaker 1: cell phones right off the bat. Unfortunately, they put too 246 00:12:46,400 --> 00:12:48,840 Speaker 1: much dabt on the company and couldn't service it. But 247 00:12:48,920 --> 00:12:51,200 Speaker 1: over time we've just been able to generate more and 248 00:12:51,240 --> 00:12:54,320 Speaker 1: more products more and more partners to take us the 249 00:12:54,360 --> 00:13:00,959 Speaker 1: market and have steadily grown at ten on our subscribers 250 00:13:00,960 --> 00:13:03,840 Speaker 1: over the last twenty years. So I often say we're 251 00:13:03,880 --> 00:13:06,960 Speaker 1: like a thirty year overnight success story. It takes. It 252 00:13:07,040 --> 00:13:09,520 Speaker 1: takes some times sometimes in the satellite business because all 253 00:13:09,559 --> 00:13:13,000 Speaker 1: the capital required to make a success, but we finally 254 00:13:13,040 --> 00:13:15,320 Speaker 1: got there and really are a sort of an important 255 00:13:15,360 --> 00:13:18,080 Speaker 1: financial transformation right now. I just hope, I hope all 256 00:13:18,120 --> 00:13:20,480 Speaker 1: these new networks they're launching can go faster and turn 257 00:13:20,559 --> 00:13:23,200 Speaker 1: to their own success. I'm just looking real quickly at 258 00:13:23,200 --> 00:13:26,240 Speaker 1: your stock chart mid two eighteen. Your stock just started 259 00:13:26,240 --> 00:13:28,360 Speaker 1: a big ascension after being you know, kind of flatish 260 00:13:28,400 --> 00:13:30,080 Speaker 1: for the prior several years. What was that big event 261 00:13:30,120 --> 00:13:34,120 Speaker 1: there that turned investor sentiment around. Well, there were a 262 00:13:34,200 --> 00:13:36,520 Speaker 1: number of things. One, you know, completing the three billion 263 00:13:36,520 --> 00:13:38,680 Speaker 1: dollar new network and knowing that we weren't gonna have 264 00:13:38,760 --> 00:13:42,280 Speaker 1: to spend that kind of money for another ten years. Uh, 265 00:13:42,600 --> 00:13:46,680 Speaker 1: it meant that we could finally start generating significant cash. 266 00:13:46,679 --> 00:13:49,800 Speaker 1: In fact, we're deleveraging now and we'll you know, our 267 00:13:49,840 --> 00:13:52,120 Speaker 1: investors are starting to see the light that you know, 268 00:13:52,600 --> 00:13:55,720 Speaker 1: the dividends and and other things are possible. Really with 269 00:13:55,760 --> 00:13:57,480 Speaker 1: all the cash that we're going to be generating over 270 00:13:57,520 --> 00:13:59,559 Speaker 1: the next ten years. So I think it was just 271 00:14:00,000 --> 00:14:05,880 Speaker 1: the patient of that that real financial transformation we've been through. Matt, 272 00:14:06,000 --> 00:14:08,680 Speaker 1: thanks so much. We appreciate your thoughts there. Matt Desh, 273 00:14:08,800 --> 00:14:12,200 Speaker 1: CEO of a Ridium Communications stock symbols I R d 274 00:14:12,480 --> 00:14:15,200 Speaker 1: M based in Washington, d C. It's had a long, 275 00:14:15,440 --> 00:14:18,320 Speaker 1: long history, a little bit north of twenty years in 276 00:14:18,360 --> 00:14:21,680 Speaker 1: the satellite business. Probably uh you know, went through that bankruptcy, 277 00:14:21,720 --> 00:14:23,880 Speaker 1: as Matt said, uh you know, probably not the right 278 00:14:23,960 --> 00:14:27,200 Speaker 1: capital structure for a company that needed to undergrow six 279 00:14:27,200 --> 00:14:29,360 Speaker 1: billion dollars or capex just to get their network in 280 00:14:29,400 --> 00:14:31,920 Speaker 1: the sky. But the coming out of the bankruptcy, the 281 00:14:31,920 --> 00:14:34,760 Speaker 1: company is doing much better again just by judging by 282 00:14:34,800 --> 00:14:38,840 Speaker 1: the stock price, and the real future of satellite communications 283 00:14:38,880 --> 00:14:42,760 Speaker 1: going forward in the country certainly seems bright. More competition 284 00:14:42,800 --> 00:14:45,680 Speaker 1: SpaceX of course from Elon Musk, and again news that 285 00:14:45,760 --> 00:15:02,920 Speaker 1: maybe Apple thinking about getting into the satellite business. We've 286 00:15:02,960 --> 00:15:04,840 Speaker 1: been talking about it all morning. There seems to be 287 00:15:04,840 --> 00:15:08,120 Speaker 1: an increasing divergence between the bulls and the bears within 288 00:15:08,200 --> 00:15:11,880 Speaker 1: the fixed income market heading into but some I'm thinking 289 00:15:11,920 --> 00:15:15,880 Speaker 1: about PREAMSRA in particular, seeing lower yields ahead for the 290 00:15:15,920 --> 00:15:20,080 Speaker 1: benchmark tenure, meaning lower yields, higher price given the fact 291 00:15:20,120 --> 00:15:23,320 Speaker 1: that perhaps the consumer will disappoint and others coming out 292 00:15:23,360 --> 00:15:26,680 Speaker 1: and saying we're gonna get fiscal stimulus that's gonna push 293 00:15:26,800 --> 00:15:30,480 Speaker 1: up yields, price down. Tad Ravel joining us now chief 294 00:15:30,480 --> 00:15:33,880 Speaker 1: investment officer for fixed income at TCW with a hundred 295 00:15:33,880 --> 00:15:37,800 Speaker 1: and seventy five billion dollars under management, joining from Los Angeles, 296 00:15:37,880 --> 00:15:40,440 Speaker 1: had I'd love to get your view on this. Where 297 00:15:40,480 --> 00:15:43,080 Speaker 1: do you think this sort of balance lies. What's the 298 00:15:43,160 --> 00:15:49,200 Speaker 1: bigger likelihood yields lower, yields higher in Well, I guess 299 00:15:49,200 --> 00:15:52,520 Speaker 1: the starting point with that lead in is to confess 300 00:15:52,600 --> 00:15:55,320 Speaker 1: that we're probably in the in the bear camp as 301 00:15:55,360 --> 00:15:59,000 Speaker 1: it relates to returns in the bond market, opportunities in 302 00:15:59,000 --> 00:16:02,480 Speaker 1: the bond market in terms of rates. It's our view 303 00:16:02,520 --> 00:16:04,840 Speaker 1: that we're in a very late cycle type of environment. 304 00:16:04,920 --> 00:16:07,720 Speaker 1: The FEDS doing everything it can through the kitchen sink 305 00:16:07,800 --> 00:16:11,640 Speaker 1: and five billion dollars behind that in order to stabilize 306 00:16:11,640 --> 00:16:13,800 Speaker 1: the credit markets in the second half of this year, 307 00:16:13,880 --> 00:16:16,880 Speaker 1: the repo market being part of that. If if, if, 308 00:16:17,080 --> 00:16:18,800 Speaker 1: if you put a gun to our heads, we'd tell 309 00:16:18,840 --> 00:16:20,800 Speaker 1: you that in time, you're probably going to be in 310 00:16:20,840 --> 00:16:24,120 Speaker 1: a lower yield environment simply because economic growth isn't going 311 00:16:24,120 --> 00:16:27,440 Speaker 1: to support the higher rate environment, and the FED probably 312 00:16:27,480 --> 00:16:29,960 Speaker 1: is going to initially try to fight it with every 313 00:16:30,040 --> 00:16:33,760 Speaker 1: weapon it knows knows how to. So it's intering. Ted. 314 00:16:33,840 --> 00:16:36,960 Speaker 1: What is your I guess, your fundamental economic backdrop as 315 00:16:36,960 --> 00:16:41,200 Speaker 1: it relates kind of supporting your view, Well, there are 316 00:16:41,200 --> 00:16:43,280 Speaker 1: many I mean, first of all, I think that if 317 00:16:43,400 --> 00:16:45,200 Speaker 1: if you're looking for signs that you're in a late 318 00:16:45,240 --> 00:16:49,080 Speaker 1: cycle type of environment, you could begin with manufacturing. That's uh. 319 00:16:49,360 --> 00:16:52,440 Speaker 1: The data this morning from from Dallas and from Chicago 320 00:16:52,880 --> 00:16:56,200 Speaker 1: is further confirmation that the manufacturing sector has been weak 321 00:16:56,480 --> 00:16:58,800 Speaker 1: for at least the last six to nine months. This 322 00:16:58,920 --> 00:17:05,119 Speaker 1: is further refer in the data that reveals activity as 323 00:17:05,160 --> 00:17:07,320 Speaker 1: it relates to movement in and out of ports, air 324 00:17:07,359 --> 00:17:10,000 Speaker 1: transport type of activity as well. You can look at 325 00:17:10,040 --> 00:17:12,840 Speaker 1: corporate profit margins that have been declining for several years. 326 00:17:13,200 --> 00:17:16,040 Speaker 1: You can look at an equity market, which, notwithstanding the 327 00:17:16,080 --> 00:17:19,080 Speaker 1: fact that it's got complete blinders on in terms of 328 00:17:19,119 --> 00:17:22,960 Speaker 1: the reality that enterprise profits have actually been fairly flat 329 00:17:23,200 --> 00:17:26,359 Speaker 1: for the last couple of years. Nonetheless, stay has stayed very, 330 00:17:26,480 --> 00:17:28,280 Speaker 1: very buoyant. I don't view that as a as a 331 00:17:28,320 --> 00:17:30,800 Speaker 1: positive sign. I view that as a late cycle type 332 00:17:30,800 --> 00:17:34,560 Speaker 1: of sign. You could throw the real estate market into 333 00:17:34,600 --> 00:17:37,200 Speaker 1: it as well. The residential real estate market certainly there 334 00:17:37,200 --> 00:17:39,560 Speaker 1: seems to be pushed back from the point of view 335 00:17:39,560 --> 00:17:42,600 Speaker 1: of affordability. I think that's rather clear in markets as 336 00:17:42,640 --> 00:17:46,280 Speaker 1: diverse as Manhattan or some parts of southern California. But 337 00:17:46,400 --> 00:17:49,520 Speaker 1: luxury markets generally speaking, I think have essentially run into 338 00:17:49,600 --> 00:17:52,560 Speaker 1: that to the to that wall. You've pushed prices about 339 00:17:52,600 --> 00:17:54,359 Speaker 1: as far as you're gonna take it. And if you 340 00:17:54,400 --> 00:17:56,159 Speaker 1: want to put the cherry on top of all of this, 341 00:17:56,280 --> 00:17:58,080 Speaker 1: you take a look at the credit markets, and you 342 00:17:58,119 --> 00:18:01,000 Speaker 1: look at the excesses in the leverage loan market as 343 00:18:01,040 --> 00:18:03,560 Speaker 1: it relates to covenants. This is a widely reported story. 344 00:18:03,800 --> 00:18:06,560 Speaker 1: It hardly bears worth going into. At this point. You're 345 00:18:06,560 --> 00:18:09,720 Speaker 1: either deaf to the warnings that are out there with 346 00:18:09,760 --> 00:18:12,679 Speaker 1: respect to the week underwriting in the corporate sector, or 347 00:18:12,760 --> 00:18:14,399 Speaker 1: you just don't think it matters at the end of 348 00:18:14,400 --> 00:18:17,160 Speaker 1: the day. So if you're deaf to it, that also 349 00:18:17,200 --> 00:18:20,840 Speaker 1: means you probably did really well this year. Because the 350 00:18:20,680 --> 00:18:24,760 Speaker 1: the sort of the riskiest assets. Within the credit world, 351 00:18:25,040 --> 00:18:27,560 Speaker 1: particularly near the end of the year, we're outperforming. I'm 352 00:18:27,560 --> 00:18:30,160 Speaker 1: thinking of even the triple cs starting to outperform UH 353 00:18:30,800 --> 00:18:32,960 Speaker 1: this month. I'm trying to figure out what's going to 354 00:18:33,080 --> 00:18:37,840 Speaker 1: trigger this you know, potential late cycle mess and create 355 00:18:38,000 --> 00:18:41,320 Speaker 1: some kind of opportunity at least, you know, repricing that 356 00:18:41,440 --> 00:18:43,920 Speaker 1: people are dying to see. I mean, honestly, they've they've 357 00:18:43,960 --> 00:18:45,680 Speaker 1: been talking about this for so long, they've been hating 358 00:18:45,680 --> 00:18:49,200 Speaker 1: on this rally. What's going to be the washout? Well, 359 00:18:49,200 --> 00:18:51,399 Speaker 1: you never know for sure, but I think that if 360 00:18:51,400 --> 00:18:53,760 Speaker 1: I were to put a couple of possible catalysts, I 361 00:18:53,760 --> 00:18:56,320 Speaker 1: think one catalyst that could be put forward would be 362 00:18:56,359 --> 00:18:59,200 Speaker 1: the China economy, which has been slowing for a long 363 00:18:59,200 --> 00:19:02,639 Speaker 1: period of time, and while the data is always okay, 364 00:19:02,760 --> 00:19:05,080 Speaker 1: so you can't really bring much in the way of 365 00:19:05,119 --> 00:19:08,359 Speaker 1: precision or clarity to that type of a of a situation, 366 00:19:08,920 --> 00:19:11,120 Speaker 1: I think that that's been one of the big drivers 367 00:19:11,160 --> 00:19:13,280 Speaker 1: of global growth over the course of this cycle. So 368 00:19:13,400 --> 00:19:15,639 Speaker 1: any type of a slowdown there is going to ripple 369 00:19:15,680 --> 00:19:18,720 Speaker 1: through the global economy. UM and China for what it's worth, 370 00:19:18,840 --> 00:19:22,520 Speaker 1: as UM by g d P component is about of 371 00:19:22,520 --> 00:19:25,159 Speaker 1: the emerging market, so China and the e M are 372 00:19:25,400 --> 00:19:27,840 Speaker 1: there's a lot of overlap there. A second place I 373 00:19:27,880 --> 00:19:31,199 Speaker 1: think that it could come from is the continuation of 374 00:19:31,560 --> 00:19:34,040 Speaker 1: loose fiscal policy in the US. I think those that 375 00:19:34,280 --> 00:19:37,000 Speaker 1: view that as a as a good thing are not 376 00:19:37,040 --> 00:19:40,359 Speaker 1: paying attention to the realities that you sooner or later 377 00:19:40,720 --> 00:19:44,320 Speaker 1: run into affordability issues with respect to being able to 378 00:19:44,359 --> 00:19:47,800 Speaker 1: finance trillion trillion and a half, and with any economic 379 00:19:47,840 --> 00:19:51,360 Speaker 1: slowdown in the US, you would expect those those deficits 380 00:19:51,560 --> 00:19:54,560 Speaker 1: potentially to move past two trillion. You would be in 381 00:19:54,720 --> 00:19:58,360 Speaker 1: terror incognito with that, and that would create an interesting 382 00:19:58,400 --> 00:20:01,440 Speaker 1: push pull in the terms of longer term rates would 383 00:20:01,440 --> 00:20:03,240 Speaker 1: want to rise, the FED would want to fight that 384 00:20:03,320 --> 00:20:07,360 Speaker 1: because of its impact on the housing market, etcetera. So uh, 385 00:20:07,640 --> 00:20:11,840 Speaker 1: the the the um imprudence of fiscal policy, I think 386 00:20:11,880 --> 00:20:13,680 Speaker 1: is a second and the third one is that it 387 00:20:13,760 --> 00:20:17,760 Speaker 1: might just happen indogenously with respect to the continuing piling 388 00:20:17,800 --> 00:20:21,159 Speaker 1: on of of leverage and credit in the corporate sector, 389 00:20:21,480 --> 00:20:24,240 Speaker 1: with an awareness or at least an ultimate awareness that 390 00:20:24,280 --> 00:20:26,800 Speaker 1: there isn't the ability to finance it. You alluded to 391 00:20:26,840 --> 00:20:29,440 Speaker 1: triple CS. I think that was a good place to look. 392 00:20:29,560 --> 00:20:32,840 Speaker 1: Is that except for the big catch up, this incredible 393 00:20:32,920 --> 00:20:35,640 Speaker 1: rally that we've seen in triple seas over the last month. 394 00:20:36,160 --> 00:20:39,920 Speaker 1: The situation a month ago, if we had this conversation, 395 00:20:40,040 --> 00:20:42,320 Speaker 1: what I would have said and would have been wrong, obviously, 396 00:20:42,760 --> 00:20:46,560 Speaker 1: is the equity markets up. Triple sees are up four percent. 397 00:20:46,760 --> 00:20:49,680 Speaker 1: Tell me what's wrong with this picture? And what's wrong 398 00:20:49,720 --> 00:20:51,679 Speaker 1: with the picture, of course, is that the market is 399 00:20:51,720 --> 00:20:55,359 Speaker 1: becoming more intelligent and more discriminating about the kind of 400 00:20:55,440 --> 00:20:59,040 Speaker 1: risk that it's sponsoring. So tad given the fact that 401 00:20:59,119 --> 00:21:02,320 Speaker 1: you very well made be right, but it hasn't happened yet. 402 00:21:02,720 --> 00:21:04,320 Speaker 1: What do you say to clients who come to you 403 00:21:04,320 --> 00:21:06,840 Speaker 1: and say, God, come on you like, the triple c 404 00:21:07,040 --> 00:21:09,240 Speaker 1: is totally killed it. You know, the hile bonds they 405 00:21:09,240 --> 00:21:12,119 Speaker 1: crushed it. You can talk about liquidity crisis. It hasn't happened. 406 00:21:12,160 --> 00:21:15,000 Speaker 1: What do you tell them, Well, I think first of 407 00:21:15,000 --> 00:21:17,880 Speaker 1: all our clients generally speaking, I think understand where we're 408 00:21:17,880 --> 00:21:22,040 Speaker 1: coming from. But the basic organizing premise is essentially this 409 00:21:22,119 --> 00:21:24,960 Speaker 1: is that rather than try to call the next rally 410 00:21:25,119 --> 00:21:27,480 Speaker 1: or whether or not corporate spreads are going to move 411 00:21:27,480 --> 00:21:30,040 Speaker 1: tighter over the course of the next six or twelve months, 412 00:21:30,119 --> 00:21:32,439 Speaker 1: approach it this way is the way we have always 413 00:21:32,480 --> 00:21:36,240 Speaker 1: approached it, which is that think of the economic cycle 414 00:21:36,320 --> 00:21:39,320 Speaker 1: as really an asset price credit cycle, because those are 415 00:21:39,440 --> 00:21:42,800 Speaker 1: essentially the key underpinnings of it. Um don't talk about 416 00:21:42,840 --> 00:21:45,880 Speaker 1: it like a conventional business cycle. If you think about 417 00:21:45,920 --> 00:21:48,760 Speaker 1: it as an asset price credit cycle, then think about 418 00:21:48,800 --> 00:21:51,359 Speaker 1: your game plan being this. In the first third of 419 00:21:51,359 --> 00:21:53,600 Speaker 1: the cycle, you have a big bay to trade all 420 00:21:53,760 --> 00:21:57,160 Speaker 1: risks basically gets lifted with a very low level of risk, 421 00:21:57,480 --> 00:22:00,159 Speaker 1: and everybody tells you to stay away from risk, so 422 00:22:00,240 --> 00:22:03,120 Speaker 1: you're supposed to be an enthusiastic risk taker, and let's 423 00:22:03,119 --> 00:22:05,600 Speaker 1: say the first third of the cycle. In the next 424 00:22:05,640 --> 00:22:07,960 Speaker 1: third of the cycle, you're not so much in a 425 00:22:08,040 --> 00:22:10,439 Speaker 1: beta type trade. You're in a more of an alpha 426 00:22:10,480 --> 00:22:12,520 Speaker 1: trade that you still want to be risked on, but 427 00:22:12,640 --> 00:22:15,200 Speaker 1: be more particular in the late stage of the cycle. 428 00:22:15,280 --> 00:22:17,040 Speaker 1: So if you accepted the thesis that you're in the 429 00:22:17,119 --> 00:22:20,800 Speaker 1: late stage of the cycle, you're really supposed to essentially 430 00:22:20,920 --> 00:22:22,960 Speaker 1: preserve the gains that you've made in the early part 431 00:22:23,040 --> 00:22:25,199 Speaker 1: and not worry about and not worry about the the 432 00:22:25,240 --> 00:22:30,080 Speaker 1: incremental return because it comes with more than incremental risk. Hey, Tad, 433 00:22:30,080 --> 00:22:32,320 Speaker 1: thanks so much for joining us. We appreciate your thoughts 434 00:22:32,359 --> 00:22:35,120 Speaker 1: on the credit markets. As always, Tad Raveled, chief investment 435 00:22:35,160 --> 00:22:39,639 Speaker 1: officer for fixed income at TCW dred seventy five billion 436 00:22:39,720 --> 00:22:42,520 Speaker 1: under management, so they've got a lot of experience in 437 00:22:42,560 --> 00:22:45,840 Speaker 1: the credit markets fixed to coome. They're based in Los Angeles, 438 00:22:45,920 --> 00:22:48,400 Speaker 1: and uh, you know, Tad has always been consistently since 439 00:22:48,400 --> 00:22:51,359 Speaker 1: we've been chatting with them here, consistently cautious as it 440 00:22:51,400 --> 00:22:54,159 Speaker 1: relates to some of the fixed income markets here. Given 441 00:22:54,600 --> 00:23:10,560 Speaker 1: where we are late in the stage right now, we're 442 00:23:10,560 --> 00:23:14,440 Speaker 1: seeing the Bloomberg's Commodities Index rise to the highest levels 443 00:23:14,440 --> 00:23:19,399 Speaker 1: since eighteen as people uh survey the land of the 444 00:23:19,480 --> 00:23:22,639 Speaker 1: trade talks and come back with a positive read. But 445 00:23:22,840 --> 00:23:25,919 Speaker 1: has the positivity gotten ahead of itself? Mike mclogan, who 446 00:23:26,000 --> 00:23:29,359 Speaker 1: covers all things commodities for us for Bloomberg Intelligence Choices 447 00:23:29,400 --> 00:23:32,280 Speaker 1: here in our Interactive Broker Studios, we were talking earlier 448 00:23:32,320 --> 00:23:35,440 Speaker 1: about how perhaps some of the optimism has gotten ahead 449 00:23:35,440 --> 00:23:39,080 Speaker 1: of itself when it comes to certainly the agricultural sector. 450 00:23:39,119 --> 00:23:41,720 Speaker 1: That's at least according to Karen you be heard, do 451 00:23:41,760 --> 00:23:44,600 Speaker 1: you think broadly that's the feeling that perhaps people are 452 00:23:44,600 --> 00:23:47,600 Speaker 1: a little too sanguine about the risks on the horizon. Yes, 453 00:23:47,680 --> 00:23:50,679 Speaker 1: I feel it's exact opposite of this time last year. 454 00:23:50,680 --> 00:23:52,920 Speaker 1: Remember Christmas Eve, you were just supposed to break out 455 00:23:52,960 --> 00:23:55,800 Speaker 1: the buy tickets and everything and take the risk. This year, 456 00:23:55,840 --> 00:23:57,840 Speaker 1: I feel it's the opposite. Crude oil is kind of 457 00:23:57,840 --> 00:24:01,840 Speaker 1: filing along industrial metals, coppers, following along the record breaking 458 00:24:01,920 --> 00:24:04,920 Speaker 1: stock market, and we have this record trade weighting broad 459 00:24:05,000 --> 00:24:10,119 Speaker 1: dollar UM. That's that's the dollars a problem, push, a 460 00:24:10,200 --> 00:24:13,040 Speaker 1: problem for commandities, but just following the stock market higher 461 00:24:13,080 --> 00:24:15,640 Speaker 1: and being w t I crudeil near you know, above 462 00:24:15,720 --> 00:24:18,240 Speaker 1: sixty versus last year this time is near forty is 463 00:24:18,480 --> 00:24:21,679 Speaker 1: at risk. I'm fearful of memor version for next year. Alright. 464 00:24:22,040 --> 00:24:24,480 Speaker 1: One of the things I'm just reading here you characterize 465 00:24:25,000 --> 00:24:29,280 Speaker 1: h for crude oil and natural gas the lost decade trends. 466 00:24:29,840 --> 00:24:32,560 Speaker 1: Why Why is that? What happened to oil and that 467 00:24:32,720 --> 00:24:36,040 Speaker 1: gas over the last decade? The number one issue is 468 00:24:36,119 --> 00:24:39,600 Speaker 1: US production. Yes, so this is where I like to say, 469 00:24:39,640 --> 00:24:42,480 Speaker 1: you know, the making America great is really not good 470 00:24:42,520 --> 00:24:46,359 Speaker 1: for commodity prices because US is a net exporter of 471 00:24:46,480 --> 00:24:49,359 Speaker 1: crude l beginning this year, first time since the essentially 472 00:24:49,400 --> 00:24:52,040 Speaker 1: world War two almost and that's a pressure in prices. 473 00:24:52,040 --> 00:24:53,920 Speaker 1: And the key thing to look forward to the next 474 00:24:54,000 --> 00:24:56,639 Speaker 1: year and the next decade is is that going to change? 475 00:24:56,680 --> 00:24:59,000 Speaker 1: And I don't see that happening. Then we see the carbon, 476 00:24:59,040 --> 00:25:01,760 Speaker 1: and carbon is a shan't happening. So there's less demand. 477 00:25:02,160 --> 00:25:04,879 Speaker 1: Supplies quite strong. So that's why I see crude and 478 00:25:04,920 --> 00:25:07,960 Speaker 1: also natural gas. There's just so much natural gas. I 479 00:25:08,440 --> 00:25:10,880 Speaker 1: kept thinking demand's going to catch up, but it's not now. 480 00:25:10,960 --> 00:25:13,600 Speaker 1: Right now, in the short term, natural guests positions are 481 00:25:13,680 --> 00:25:16,520 Speaker 1: very short, so you might get a pop. But natural 482 00:25:16,560 --> 00:25:20,159 Speaker 1: gas is trading around two twenty million b t u 483 00:25:20,240 --> 00:25:21,639 Speaker 1: s and the low has been near two in the 484 00:25:21,720 --> 00:25:24,320 Speaker 1: highst been near three. I think it's more likely continue 485 00:25:24,320 --> 00:25:27,360 Speaker 1: to gravitate towards two and lower. Interesting when you talk 486 00:25:27,400 --> 00:25:29,520 Speaker 1: about futures positioning, I want to just go back to 487 00:25:29,560 --> 00:25:32,680 Speaker 1: crude for a second, because futures positioning has gotten increasingly bullish, 488 00:25:32,920 --> 00:25:35,200 Speaker 1: with the net longs out weighing the net shorts by 489 00:25:35,200 --> 00:25:38,320 Speaker 1: the most I believe since March or April. I mean, basically, 490 00:25:38,359 --> 00:25:41,359 Speaker 1: they've they've been climbing, and I'm wondering if you think 491 00:25:41,359 --> 00:25:43,199 Speaker 1: that they are going to be right that we're going 492 00:25:43,200 --> 00:25:45,359 Speaker 1: to see at least a near term pop in the 493 00:25:45,400 --> 00:25:48,359 Speaker 1: price of crude, even if it fizzles out eventually. I 494 00:25:48,400 --> 00:25:50,040 Speaker 1: think we've had it. I look at that as a risk. 495 00:25:50,560 --> 00:25:53,320 Speaker 1: For instance, last year around this time it was way 496 00:25:53,320 --> 00:25:55,560 Speaker 1: too short and the market is way too bears, which 497 00:25:55,600 --> 00:25:58,320 Speaker 1: is I look at it's okay by and manage money 498 00:25:58,320 --> 00:26:00,679 Speaker 1: net positions being too long now at the upper end 499 00:26:00,680 --> 00:26:02,520 Speaker 1: of the range, and we all know the fundamentals. You 500 00:26:02,600 --> 00:26:06,160 Speaker 1: have to be betting on a substantial cut from OPEC 501 00:26:06,240 --> 00:26:08,919 Speaker 1: and sustained cut, which we all know is kind of 502 00:26:09,000 --> 00:26:12,440 Speaker 1: unlikely in the big pictures, so I don't see it. Also, 503 00:26:12,520 --> 00:26:15,640 Speaker 1: crude oils dependent on the stock market. We we're this year, 504 00:26:15,720 --> 00:26:17,719 Speaker 1: I can do that again. Yeah great, but we know 505 00:26:17,760 --> 00:26:20,239 Speaker 1: what that means. It typically doesn't continue that way. So 506 00:26:20,920 --> 00:26:23,200 Speaker 1: I'm really worried about crude. I'm actually more bullish on 507 00:26:23,240 --> 00:26:26,600 Speaker 1: the eggs at some point when when the dollar peaks, 508 00:26:26,600 --> 00:26:29,240 Speaker 1: and that's a big if, and Paul and I've discussed that. 509 00:26:29,320 --> 00:26:35,760 Speaker 1: It's just hard to ask the favorite question, pork bellies hawks. 510 00:26:35,800 --> 00:26:37,680 Speaker 1: Don't we still have a problem in China? And aren't 511 00:26:37,680 --> 00:26:39,480 Speaker 1: they buying a bunch of our hogs? We do but 512 00:26:39,640 --> 00:26:42,440 Speaker 1: if there's one commodity sector I have never been able 513 00:26:42,480 --> 00:26:45,479 Speaker 1: to find, not being able to find good high correlations too, 514 00:26:45,640 --> 00:26:48,280 Speaker 1: it's live stock. I just have not been able to 515 00:26:48,560 --> 00:26:50,600 Speaker 1: pin down live stock, so I can it helps me 516 00:26:50,760 --> 00:26:53,320 Speaker 1: determine the prices of corn, soy means, and wheat. There's 517 00:26:53,359 --> 00:26:56,520 Speaker 1: so many metaphors. It's like I have a hard time, 518 00:26:57,440 --> 00:26:59,159 Speaker 1: but I have to be kind of back off on 519 00:26:59,320 --> 00:27:02,000 Speaker 1: live stock. And and it's live cattle. The hawk, I'm 520 00:27:02,080 --> 00:27:05,600 Speaker 1: long port bellies. I'm gonna one day bring in just 521 00:27:05,680 --> 00:27:08,200 Speaker 1: a plateful of bacon freedom munch on for the rest 522 00:27:08,200 --> 00:27:10,880 Speaker 1: of the rest of the show. I am curious though 523 00:27:10,920 --> 00:27:14,199 Speaker 1: about the potential boost to the eggs sector from the 524 00:27:14,240 --> 00:27:17,920 Speaker 1: trade deal. Do you expect China buying to actually give 525 00:27:18,040 --> 00:27:20,359 Speaker 1: a true boost to some of the farms where we've 526 00:27:20,359 --> 00:27:23,879 Speaker 1: seen the highest bankruptcy rates in years, particularly not for Midwest. Well, 527 00:27:23,880 --> 00:27:25,520 Speaker 1: that's the key sign. It's it's about as bad as 528 00:27:25,520 --> 00:27:27,919 Speaker 1: it can get. And I think eggs are in certainly 529 00:27:27,960 --> 00:27:30,320 Speaker 1: grains are in a classic case. And we always say 530 00:27:30,320 --> 00:27:32,960 Speaker 1: in commodities is the cure for lower prices and low prices, 531 00:27:33,240 --> 00:27:35,680 Speaker 1: so stocks to use globe we are really peaking heading 532 00:27:35,720 --> 00:27:38,720 Speaker 1: lower we see that. The key issue. Yes, China starting 533 00:27:38,720 --> 00:27:42,440 Speaker 1: to get priced back in, which is good. The problem 534 00:27:42,480 --> 00:27:45,680 Speaker 1: is the dollar so high and so expensive. That's only 535 00:27:45,760 --> 00:27:48,560 Speaker 1: so long that we can sustain US grain prices in 536 00:27:48,600 --> 00:27:51,200 Speaker 1: the dollar at so such high levels until the dollar peak. 537 00:27:51,280 --> 00:27:53,840 Speaker 1: So we need the dollar to peak or else grains 538 00:27:53,880 --> 00:27:57,960 Speaker 1: exported from US the world I used soy being South America, Argentina, 539 00:27:58,040 --> 00:28:00,359 Speaker 1: a corn still will have a bit. We will have 540 00:28:00,400 --> 00:28:03,200 Speaker 1: a problem in the US boosting these grain prices until 541 00:28:03,240 --> 00:28:06,520 Speaker 1: the dollar peaks. Trade weighted broad dollar Bitcoin I'm looking 542 00:28:06,520 --> 00:28:09,119 Speaker 1: at the year to date chart. Started the year about 543 00:28:09,160 --> 00:28:11,840 Speaker 1: four thousand, peaked at above twelve thousand. Here we are 544 00:28:11,840 --> 00:28:15,640 Speaker 1: at seventy two hundred. What's just the call for bitcoin 545 00:28:15,680 --> 00:28:19,439 Speaker 1: in if there is one higher? Okay, bottom line simply 546 00:28:19,600 --> 00:28:22,480 Speaker 1: the simplistic weight I like to describe bitcoin is there's 547 00:28:22,480 --> 00:28:26,040 Speaker 1: only one key thing that matters, and that's basically adoption. 548 00:28:26,119 --> 00:28:30,280 Speaker 1: So supply demand price there's really supply is going is 549 00:28:30,320 --> 00:28:32,760 Speaker 1: limited this year of supply increasing around four percent, next 550 00:28:32,840 --> 00:28:34,800 Speaker 1: year three two percent, and it's going to coninue to 551 00:28:34,800 --> 00:28:37,439 Speaker 1: go down to zero who knows when. So the supply 552 00:28:37,560 --> 00:28:39,960 Speaker 1: is done and the adoption is kicking in so the 553 00:28:40,000 --> 00:28:41,640 Speaker 1: only thing that's gonna Why is it done? Can I 554 00:28:41,680 --> 00:28:45,200 Speaker 1: just go to my computer and print more? No, because 555 00:28:45,480 --> 00:28:49,920 Speaker 1: it's the cost of mining is greater than the cost 556 00:28:50,080 --> 00:28:52,280 Speaker 1: of each bitcoin. Right, Well, that's part of it. But 557 00:28:52,280 --> 00:28:55,400 Speaker 1: there's only gonna be twenty one million bitcoins ever produced 558 00:28:55,440 --> 00:28:58,280 Speaker 1: based on the code now that subject, and there's only 559 00:28:58,320 --> 00:29:01,120 Speaker 1: seven there's seventeen, almost eighteen, there's eighteen million now, so 560 00:29:01,120 --> 00:29:02,880 Speaker 1: there's only gonna be any one. Where did that come from? 561 00:29:02,920 --> 00:29:07,200 Speaker 1: So Toshia Namo the god, I shouldn't have asked it. Yeah, Well, 562 00:29:07,280 --> 00:29:09,280 Speaker 1: well that's the difference between bitcoin and the other cryptos. 563 00:29:09,320 --> 00:29:12,480 Speaker 1: There's unlimited supply of cryptos, but bitcoin is becoming more 564 00:29:12,480 --> 00:29:15,360 Speaker 1: and more like gold. Yeah. And there is also this 565 00:29:15,400 --> 00:29:17,600 Speaker 1: mining issue that when it reaches a certain point, it's 566 00:29:17,600 --> 00:29:20,000 Speaker 1: not profitable, and you've had China cracking down on some 567 00:29:20,080 --> 00:29:23,600 Speaker 1: of the mining. Uh. Anyway, I'm in with the bitcoin 568 00:29:23,960 --> 00:29:26,040 Speaker 1: knowledge there like well, and I will say that there's 569 00:29:26,040 --> 00:29:28,480 Speaker 1: another issue when you talk about cryptocurrencies. I was reading 570 00:29:29,480 --> 00:29:33,920 Speaker 1: about how China is planning there they're sort of sovereign cryptocurrency, 571 00:29:33,920 --> 00:29:36,200 Speaker 1: and how that could up end the entire structure. I'm 572 00:29:36,200 --> 00:29:38,280 Speaker 1: gonna just stuff right, now because Paul is giving me 573 00:29:38,320 --> 00:29:40,000 Speaker 1: this look like, oh my god, what do you do 574 00:29:40,040 --> 00:29:42,440 Speaker 1: in your free time? Mike mclogan, thank you so much 575 00:29:42,440 --> 00:29:45,480 Speaker 1: for being with us. Mike mclogan covers all things commodities 576 00:29:45,920 --> 00:29:50,600 Speaker 1: plus bitcoin for us here at Bloomberg Intelligence. Uh and 577 00:29:50,840 --> 00:29:54,720 Speaker 1: he's a frequent contributor to Bloomberg Radio. Thanks for listening 578 00:29:54,760 --> 00:29:57,160 Speaker 1: to the Bloomberg P and L podcast. You can subscribe 579 00:29:57,160 --> 00:29:59,960 Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast 580 00:30:00,000 --> 00:30:03,520 Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. 581 00:30:03,560 --> 00:30:06,040 Speaker 1: I'm Lisa Abram wohit's I'm on Twitter at Lisa Abram 582 00:30:06,160 --> 00:30:09,360 Speaker 1: whits one before the podcast, you can always catch us worldwide. 583 00:30:09,360 --> 00:30:10,360 Speaker 1: I'm Bloomberg Radio.