WEBVTT - Trump Visa Crackdown Could Ship Work Offshore, Anurag Rana Says 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and L Podcast. I'm pim Fox. 0:00:08.119 --> 0:00:11.200 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg P L Podcast on iTunes, 0:00:20.840 --> 0:00:29.480 SoundCloud and at Bloomberg dot com. While the trucks began 0:00:29.720 --> 0:00:34.360 arriving before daybreak on Monday outside of Federal Building in 0:00:34.479 --> 0:00:38.920 Orange County, the trucks were carrying thousands and thousands of 0:00:39.000 --> 0:00:43.080 applications for H one B VISs. Well, this year it 0:00:43.120 --> 0:00:45.559 might be just slightly different for many of the companies 0:00:45.560 --> 0:00:48.839 seeking to hire people under the H one B VISA program. 0:00:48.920 --> 0:00:51.040 And here to tell us about it is A rag Rana, 0:00:51.159 --> 0:00:54.160 our senior analyst of Software and I T Services for 0:00:54.280 --> 0:00:58.400 Bloomberg Intelligence. On a rag Let's begin with a definition 0:00:58.440 --> 0:01:01.560 of what the H one B one VISA program is 0:01:01.600 --> 0:01:04.760 designed to do and then tell us about some of 0:01:04.800 --> 0:01:09.200 the confrontations around this program. Yeah, the basic premises that 0:01:09.240 --> 0:01:12.520 if you are looking for a highly skilled person and 0:01:12.800 --> 0:01:15.640 you are not able to find it locally, then you 0:01:15.640 --> 0:01:18.720 would use this program to bring somebody from outside. Now 0:01:18.800 --> 0:01:22.080 this is also used for students extensively. It's all and 0:01:22.640 --> 0:01:26.760 but the biggest controversy I would say is that the 0:01:26.800 --> 0:01:29.600 opponents of this plan are saying that this these visas 0:01:29.600 --> 0:01:32.880 are being used by i T services companies from India 0:01:33.160 --> 0:01:36.319 to bring largely from India and other areas, also to 0:01:36.440 --> 0:01:39.440 bring um, you know, engineers at a much lower cost 0:01:39.520 --> 0:01:42.960 and displaced workers. So that's really the controversy or the 0:01:43.120 --> 0:01:47.400 or the issue around it. So that so just to 0:01:47.440 --> 0:01:50.760 put this into perspectives of the use of administration under 0:01:50.800 --> 0:01:55.400 President Trump just made a change to basically double check essentially, 0:01:55.400 --> 0:01:59.400 if I'm understanding this correctly, applicants to get h one 0:01:59.480 --> 0:02:03.680 P visas. How much does this shift change the game? 0:02:04.480 --> 0:02:06.720 This one does not change you know, a whole lot 0:02:06.800 --> 0:02:09.200 in my view. If when we looked at this thing 0:02:09.240 --> 0:02:11.359 after the elections, we thought there would be a lot 0:02:11.400 --> 0:02:15.679 more stricter regulations, maybe on the you know, on the 0:02:15.760 --> 0:02:19.640 on the salary minimums or possibly you know, something which 0:02:19.680 --> 0:02:21.760 we saw a couple of years ago. There was a 0:02:22.080 --> 0:02:24.200 there was a clock call called the class called the 0:02:24.240 --> 0:02:28.320 outplacement clause, which prevented companies I T outsourcing companies to 0:02:29.120 --> 0:02:31.480 bring in people and then put it at somebody else's 0:02:32.280 --> 0:02:34.880 site to work. But none of those things have happened. 0:02:34.880 --> 0:02:38.120 And in fact, UM, you know, perhaps they're still working on, 0:02:38.520 --> 0:02:40.640 you know, coming up with a new order for the 0:02:40.680 --> 0:02:44.120 next filing season, but for this filing season, which you 0:02:44.160 --> 0:02:46.720 know is ongoing right now, it doesn't look like it's 0:02:46.720 --> 0:02:48.920 going to have that big of an effect. Just to 0:02:48.960 --> 0:02:52.880 put it into context, sixty five thousand, h one b 0:02:53.400 --> 0:02:57.919 visas are available to workers that have bachelor's degrees. Twenty 0:02:58.040 --> 0:03:02.280 thousand additional visas are available with those with master's degrees. 0:03:02.800 --> 0:03:05.919 But I like the number of people that applied last year, 0:03:06.280 --> 0:03:11.240 two hundred and thirty six thousand people applied for what 0:03:11.320 --> 0:03:15.360 are arguably eighty five thousand places. Yeah, one of the 0:03:15.400 --> 0:03:17.280 things I think this will happen this time would be 0:03:17.919 --> 0:03:20.519 kind of a mixed shift in the in the kind 0:03:20.560 --> 0:03:24.079 of applications that go in UM. In the prior years, 0:03:24.120 --> 0:03:26.640 a large portion of these applications were made by I 0:03:26.720 --> 0:03:30.519 T services companies, but this time they have said themselves 0:03:30.520 --> 0:03:32.320 that they're not going to be filing for a lot 0:03:32.360 --> 0:03:35.800 of these visas UM, which will give let's say that 0:03:35.840 --> 0:03:39.960 the you know, the likes of Microsoft, Apple, Google, uh, 0:03:40.040 --> 0:03:42.640 you know, more visas to file from, so their portion 0:03:42.720 --> 0:03:45.840 of this whole pool may increase into this season compared 0:03:45.840 --> 0:03:48.840 to the last several seasons. Do we have visibility into 0:03:49.080 --> 0:03:52.640 just how dominant with respect to H one visas the 0:03:52.840 --> 0:03:57.880 lower wage kind of more road to workers are in 0:03:57.920 --> 0:03:59.960 other words, how much how many of these jobs, how 0:04:00.000 --> 0:04:01.640 many of these visas are going to people who are 0:04:01.680 --> 0:04:04.880 doing work that isn't as specialized as you would think 0:04:05.080 --> 0:04:08.600 given the parameters set out by by the idea. At least, 0:04:08.840 --> 0:04:12.920 you know, the salary minimum is about sixty dollars or so, 0:04:12.920 --> 0:04:15.680 so it's not really anything a below that. Usually a 0:04:15.680 --> 0:04:18.760 lot of them have technology background or a science background, 0:04:19.040 --> 0:04:20.599 so you would have you know, some kind of a 0:04:20.600 --> 0:04:23.840 bachelor's degree for sure. Now it could be people with finance, 0:04:23.920 --> 0:04:26.080 or it could be actually any degree. But one of 0:04:26.080 --> 0:04:28.200 the things that happens, and I don't think people realize 0:04:28.240 --> 0:04:30.640 this when you're when you're filing for an h N and 0:04:30.600 --> 0:04:33.000 and B, you have to go through a labor certification process, 0:04:33.000 --> 0:04:36.359 which means for that particular job posting, you have to 0:04:36.400 --> 0:04:39.800 go to the Department of Labors database to see how 0:04:39.920 --> 0:04:42.400 much is that person getting paid, and you have to 0:04:42.440 --> 0:04:45.080 make sure it's not below that certain amount. Now, let's 0:04:45.080 --> 0:04:47.280 say that you know, I'm just making this up. Let's 0:04:47.279 --> 0:04:50.480 say software engineer one is getting paid somewhere between seventy 0:04:50.480 --> 0:04:53.839 five and eighty five thou dollars. The company might decide 0:04:53.880 --> 0:04:56.080 to pay that person on the lower end, but they 0:04:56.080 --> 0:04:59.280 can't just pay them twenty dollars and you know completely, 0:05:00.279 --> 0:05:03.040 you know, bypass the whole system. That's not possible. And 0:05:03.080 --> 0:05:05.479 for a lot of the I T services companies, even 0:05:05.520 --> 0:05:07.480 if they pay at the lower end, let's say between 0:05:07.480 --> 0:05:10.720 this band, if you add the visa application cost and 0:05:10.760 --> 0:05:13.400 the cost to bring them from an offshore location to 0:05:13.440 --> 0:05:16.520 the US, the net cost is the same. The big 0:05:16.560 --> 0:05:19.680 issue over here is, at least for engineering and science, 0:05:19.839 --> 0:05:22.080 we have a massive shortage of those people in the US. 0:05:22.800 --> 0:05:27.560 You also have a shortage of those people in research institutions. Correct, absolutely, 0:05:27.720 --> 0:05:31.000 But there are certain nonprofits and other areas they can 0:05:31.000 --> 0:05:34.040 actually fall into a different visa category, so they might 0:05:34.040 --> 0:05:36.679 not be, you know, part of that same pool. Top 0:05:36.720 --> 0:05:42.000 recipients of these visas are Tata Consultancy Services, Infosis, and 0:05:42.480 --> 0:05:46.040 whip Pro, all based in India. Although I will say 0:05:46.120 --> 0:05:48.840 it's very hard to know who the real beneficiaries are 0:05:48.880 --> 0:05:51.919 because those are outsourcing companies and it's unclear where exactly 0:05:51.960 --> 0:05:55.839 they're going to place some of their staff. Correct. I 0:05:55.839 --> 0:05:57.520 mean they could end up at a big bank or 0:05:57.560 --> 0:05:59.440 you know somewhere or something like that. So there are 0:05:59.440 --> 0:06:02.840 two pieces of it. One is large banks have been 0:06:02.880 --> 0:06:06.239 outsourcing their ID divisions for multiple yers for fifteen twenty 0:06:06.279 --> 0:06:08.720 years now, so they're skeleton you know, they're on I 0:06:08.800 --> 0:06:12.080 T departments on a skeleton basis, and some of these 0:06:12.080 --> 0:06:16.279 companies are working on their behalf. Second thing, there is 0:06:16.279 --> 0:06:18.800 a ratio of what we call an onshore offshore ratio, 0:06:19.440 --> 0:06:24.039 where if you have a legacy I T project, that 0:06:24.120 --> 0:06:26.200 work is done in an in a low cost country 0:06:26.240 --> 0:06:30.080 and thirty in the high cost One of the unintended 0:06:30.120 --> 0:06:33.119 consequence of something like this could be you could ship 0:06:33.200 --> 0:06:36.159 all of that work off shore because with communications with 0:06:36.240 --> 0:06:39.480 high connectivity, you really don't need to be sitting at 0:06:39.480 --> 0:06:42.920 that client's location to do some work. Now, if you're 0:06:42.920 --> 0:06:46.280 looking at some emerging technology work, whether cloud or analytics, 0:06:46.320 --> 0:06:49.640 you would still require a high on site presence. But 0:06:50.120 --> 0:06:54.480 if pressure like this continues, I expect a lot portion 0:06:54.560 --> 0:06:58.440 of some legacy work to go more offshore. Than then 0:06:58.480 --> 0:07:02.160 then what's intended to so may have unintended consequences, maybe 0:07:02.240 --> 0:07:05.159 the exact opposite of what the current administration is hoping 0:07:05.200 --> 0:07:07.599 to do with the H one b vs A program. Yes, 0:07:07.600 --> 0:07:09.360 because I don't think any bank is going to spend 0:07:09.400 --> 0:07:12.400 more money on it than they are currently doing right now, 0:07:12.680 --> 0:07:14.400 that that growth rate is not going to be very 0:07:14.400 --> 0:07:16.560 good operate, But just to be clear, to reiterate your 0:07:16.560 --> 0:07:21.120 point from earlier, this particular change won't necessarily move the 0:07:21.120 --> 0:07:23.920 needle that much, but it's sort of proceeds. What could 0:07:24.000 --> 0:07:27.200 be something that would be more substantial, substantive and have 0:07:27.440 --> 0:07:30.120 a more significant effect. Correct, Yeah, that could be. That's possible. 0:07:30.360 --> 0:07:32.920 An Grana, thank you so much for joining us. Always 0:07:32.920 --> 0:07:35.800 a pleasure on our Granda is senior analyst of software 0:07:35.840 --> 0:07:51.360 and I T Services here at Bloomberg Intelligence. A battle 0:07:51.520 --> 0:07:55.800 against Amazon in the vending machine business. Tom Mern is 0:07:55.840 --> 0:07:58.880 the founder and the chief executive of Via Touch Media, 0:07:59.000 --> 0:08:02.120 and he joins us now to explain his effort to 0:08:03.120 --> 0:08:06.360 push Amazon aside. Tom Urin, thanks very much for being 0:08:06.360 --> 0:08:09.080 with us. Thank you, good morning, good morning. You know, 0:08:09.120 --> 0:08:11.840 I was looking at some information about vending machines because 0:08:11.840 --> 0:08:14.280 this is the topic at hand, and I noted. You know, 0:08:14.360 --> 0:08:18.120 Japan of course has this love of vending machines, and 0:08:18.720 --> 0:08:22.080 you can buy Umbrella's eggs, surgical masks, you can even 0:08:22.120 --> 0:08:25.480 buy puppies from a vending machine. Now, I know you're 0:08:25.480 --> 0:08:32.640 not gonna go this far, but okay, right headline, right headline, 0:08:32.840 --> 0:08:36.200 tell us about your your business and how you put 0:08:36.240 --> 0:08:39.079 this together and what you're trying to accomplish. Oh sure, 0:08:39.200 --> 0:08:42.000 so we You know, we're a local New York company 0:08:42.040 --> 0:08:47.600 doing Manhattan and Connecticut and Long Island UM for years, 0:08:47.800 --> 0:08:52.480 so a lot of experience in major companies City Bank, Goldman, Sachs, 0:08:52.559 --> 0:08:55.720 Home Depot, Costco UM. So you know, we get a 0:08:55.720 --> 0:08:59.839 lot of feedback from what people wanted and the old 0:09:00.040 --> 0:09:02.760 experience and vending where you kind of have to bend 0:09:02.760 --> 0:09:05.440 down put your hand through a door. Uh, that's not 0:09:05.559 --> 0:09:09.080 what people liked anymore. They were looking more for the 0:09:09.160 --> 0:09:11.160 experience they get every day they can open a door, 0:09:11.440 --> 0:09:14.160 pick up a product, look at it, then decide if 0:09:14.160 --> 0:09:15.840 they want to buy it, you know, not have to 0:09:15.880 --> 0:09:18.000 be stuck with what you know, they pushed the button. 0:09:18.520 --> 0:09:24.320 So we developed technology where through biometrics, through your thumb 0:09:25.160 --> 0:09:27.760 or Apple pay, you can open the door, look at 0:09:27.760 --> 0:09:30.840 the item, decide if you like it. If you close 0:09:30.920 --> 0:09:33.480 the door, you've now purchased it. And then we also 0:09:33.559 --> 0:09:36.360 added media where when you pick up an item, we 0:09:36.440 --> 0:09:39.080 deliver content about the item in your hand. So you're 0:09:39.120 --> 0:09:41.000 not seeing media about things you don't care about, your 0:09:41.000 --> 0:09:43.760 seeing media about the item you've picked up. So, Tom, 0:09:43.800 --> 0:09:46.559 I mean, is this is this what's old is new again? 0:09:46.600 --> 0:09:48.280 I mean, is this sort of like a return of 0:09:48.320 --> 0:09:52.400 the automat where all of a sudden there's this future 0:09:52.440 --> 0:09:54.480 of the new real world of just you know these 0:09:54.520 --> 0:09:57.400 doors line wall to wall doors that you could open 0:09:57.480 --> 0:10:00.720 up and get stuff. Uh, I mean, I guess in 0:10:00.720 --> 0:10:03.920 one respect, yes, you know, sometimes returning to old is 0:10:04.320 --> 0:10:07.480 what what works. But when we take the Internet of 0:10:07.559 --> 0:10:11.679 Things and bring technology and today to it. So the 0:10:11.840 --> 0:10:14.720 difference between that on this one, if you use your thumb, 0:10:14.760 --> 0:10:16.960 we know it's you. We say like two would say hi, 0:10:17.120 --> 0:10:18.760 it does say. It says hi hi Tom, when I 0:10:18.800 --> 0:10:21.320 opened the door, and then it kind of remembers over 0:10:21.440 --> 0:10:24.200 time which you buy and it makes different offers based 0:10:24.240 --> 0:10:27.160 on it. It's an IoT device, so it's connected all 0:10:27.160 --> 0:10:30.920 the time. And that's our lease of version, our Vicky version, 0:10:30.960 --> 0:10:34.679 which comes out in August, has artificial intelligence in it 0:10:34.720 --> 0:10:36.319 where as you pick, but you can have a two 0:10:36.320 --> 0:10:38.720 way conversation about the item. So I don't think the 0:10:38.720 --> 0:10:41.760 automats did that give us a little detail of how 0:10:41.840 --> 0:10:45.480 much the machines cost and how they're all networked and 0:10:45.600 --> 0:10:49.839 connected to your supply chain. Okay, so, uh, they are 0:10:49.920 --> 0:10:52.320 all network there on the you know, the web based, 0:10:52.800 --> 0:10:57.360 so they do communicate to each other. Um, they retail 0:10:57.400 --> 0:11:00.319 for seven thousand. If somebody bought one, and I am 0:11:00.559 --> 0:11:03.360 they dropped a little five thousand. How much interest have 0:11:03.480 --> 0:11:07.760 you got? How many? How big is your business? Um? Well, 0:11:07.840 --> 0:11:10.280 my present vending business is about forty million in sales 0:11:10.880 --> 0:11:16.760 UM in this category. Um, it's we're getting calls worldwide. Um, 0:11:16.880 --> 0:11:18.760 there's no one that we brought it to. In the 0:11:18.760 --> 0:11:21.520 prototype version, we sold a quarter million of prototypes and 0:11:21.520 --> 0:11:24.800 we didn't even want to sell them. UM. Quarter million dollars, 0:11:24.840 --> 0:11:28.800 not a quarter million units and just gathering information, research 0:11:28.840 --> 0:11:33.319 and development, um and any when we've brought it, they 0:11:33.360 --> 0:11:38.800 want it food as a vending machine item, specifically coffee. 0:11:39.559 --> 0:11:43.240 Is that the high margin business you want to be in? Uh, well, 0:11:43.320 --> 0:11:45.720 we're looking to change it. It's like autal retail. So 0:11:45.760 --> 0:11:48.480 it's a great question. Coffee is definitely something we're interested in, 0:11:48.559 --> 0:11:52.000 like selling curis and things like that, so people can 0:11:52.280 --> 0:11:54.920 UM swipe their card or again, like I said, you'll 0:11:54.960 --> 0:11:58.199 be able to UM look at the machine and it 0:11:58.240 --> 0:12:00.600 will recognize your eye believe or not. The door open, 0:12:01.120 --> 0:12:03.280 So we want to we want to be able to 0:12:03.320 --> 0:12:06.200 open it during let the let the supplier decide what 0:12:06.200 --> 0:12:09.640 they want to sell. UM. You know curates disappear in 0:12:09.679 --> 0:12:12.920 our machine. They would not because as you take it out, 0:12:12.960 --> 0:12:15.640 you paid for it. So the things that get left 0:12:15.679 --> 0:12:18.719 out in the past UM will be now counted. It 0:12:18.800 --> 0:12:23.280 Autal inventories itself through cameras and sensors, so it virtually 0:12:23.320 --> 0:12:26.480 eliminates stuff. So Tom, how big do you think this 0:12:26.520 --> 0:12:30.959 business could get? UM in the billions? So it's not 0:12:30.960 --> 0:12:33.160 going to take on Amazon, but it might be a 0:12:33.240 --> 0:12:37.600 way for some investors to or some some retailers to 0:12:37.880 --> 0:12:41.520 at least uh cater to people's wish to just get 0:12:41.559 --> 0:12:43.480 stuff on demand to and sort of be able to 0:12:43.559 --> 0:12:44.679 pull it out and not have to deal with a 0:12:44.720 --> 0:12:48.360 human being. Yes, it's it's that, or you can it 0:12:48.440 --> 0:12:51.160 can take on Amazon in a way that the unit. 0:12:51.240 --> 0:12:54.280 Since they're online, you can see what inventories wear and 0:12:54.360 --> 0:12:57.040 we can direct you so you don't have to wait overnight. 0:12:57.080 --> 0:12:58.440 You don't have to wait till the next day. Do 0:12:58.520 --> 0:13:01.480 I have it? What's the close unit? Where can I 0:13:01.480 --> 0:13:04.840 pick it up? Um? Not? Not? You know, not everybody 0:13:04.880 --> 0:13:07.800 can get a package delivered to them they're not home. 0:13:08.280 --> 0:13:10.760 You know, there's a large population. Even New York City 0:13:10.840 --> 0:13:14.240 doesn't have dormant um. So it opens a whole new 0:13:14.280 --> 0:13:17.559 market of um. You know, maybe I want to pick 0:13:17.640 --> 0:13:20.160 up something and not, you know, not everybody know I'm 0:13:20.160 --> 0:13:23.480 getting it. It's a surprise gift or something. So uh, 0:13:23.840 --> 0:13:27.280 it enables the small guy to go into business, you know. 0:13:27.679 --> 0:13:30.000 Tom Martin, thank you so much for joining us, founder 0:13:30.040 --> 0:13:33.720 and chief executive officer of via Touch Media based in 0:13:33.720 --> 0:13:35.800 New York City. Talking about the vending machine and we're 0:13:35.800 --> 0:13:38.360 all going to see automats springing up all of it. 0:13:38.440 --> 0:13:41.840 I just like the name, Lisa tam you said. Now 0:13:54.000 --> 0:13:57.720 you know. In December, then President Barack Obama he signed 0:13:57.800 --> 0:14:00.920 legislation that ended in nearly forty year ban on the 0:14:01.000 --> 0:14:04.040 export of crude oil from the United States. The US 0:14:04.120 --> 0:14:08.120 currently produces over nine million barrels of oil a day. 0:14:08.360 --> 0:14:10.600 And here tell us more about the oil and energy 0:14:10.679 --> 0:14:13.199 sector is John Grotten. He is a director of equity 0:14:13.240 --> 0:14:17.120 research at a thrive Vent asset Management, helping to manage 0:14:17.200 --> 0:14:20.680 more than fifteen billion dollars. He's based in Minneapolis, but 0:14:20.720 --> 0:14:23.400 he joins us here in our studio. John, thank you 0:14:23.480 --> 0:14:26.240 very much for being with us. Give people the picture 0:14:26.360 --> 0:14:29.880 of the US oil production and how it fits in 0:14:29.920 --> 0:14:34.640 to the different refinery It's parts of the story because 0:14:34.680 --> 0:14:38.920 it's different kinds of crude require different kinds of refining processes. 0:14:39.120 --> 0:14:42.560 That's right, Pam, thank you for having me. US production 0:14:42.640 --> 0:14:45.880 is incredibly important right now to global balances. During the 0:14:45.880 --> 0:14:48.960 down cycle that started in two thousand fourteen and continue 0:14:49.000 --> 0:14:51.920 through two thousand and sixteen, production dropped off over one 0:14:51.920 --> 0:14:54.720 million barrels per day. That is now starting to rebound. 0:14:55.160 --> 0:14:58.200 Demand globally is robust. It's up one point for million 0:14:58.200 --> 0:15:00.240 barrels per day, and we expect that to go for ward. 0:15:00.600 --> 0:15:03.640 In the US, supply is an important component to make 0:15:03.640 --> 0:15:08.160 sure that demand is is adequately compensated for. There is 0:15:08.160 --> 0:15:10.560 some concern amongst investors, and this is one reason why 0:15:10.720 --> 0:15:13.080 energy stocks have not been terrific so far this year 0:15:13.600 --> 0:15:16.400 is that we're growing production too fast. We'll see how 0:15:16.440 --> 0:15:19.040 that goes. Some of the data that's been shared so 0:15:19.080 --> 0:15:21.920 far from the Department of Energy it doesn't look to 0:15:21.960 --> 0:15:24.280 be as robust as some of the companies are talking about. 0:15:24.840 --> 0:15:28.200 So we do have demand growth that will continue. We 0:15:28.240 --> 0:15:31.800 can talk about OPEC separately, but to your question directly, 0:15:32.240 --> 0:15:34.680 the US supply is very, very important. You do bring 0:15:34.760 --> 0:15:37.680 up an important point also, though there's different kinds of cruise, 0:15:37.680 --> 0:15:41.000 there's actually dozens of different varieties and they have different characteristics. 0:15:42.280 --> 0:15:46.480 Our refining system is optimized to to burn and distill 0:15:46.840 --> 0:15:50.400 more complicated, heavier crudes, whereas most of our new production 0:15:50.480 --> 0:15:52.680 is like crudes. And that's one reason why we are 0:15:52.720 --> 0:15:56.400 exporting for the first time in decades is that we 0:15:56.520 --> 0:15:59.800 produced the wrong kind of crude for what our refineries you. 0:16:00.480 --> 0:16:02.200 So it's a little bit of an odd dynamic that 0:16:02.200 --> 0:16:04.720 we're both an importer and an exporter at the same time. 0:16:05.120 --> 0:16:07.400 And that's the key reason why that the difference in 0:16:07.720 --> 0:16:12.040 crude that that our refiners require. Yeah, Jason Shanker of 0:16:12.080 --> 0:16:15.000 Prestige Economics actually wrote a column for bloom Review on 0:16:15.080 --> 0:16:17.560 exactly this issue, that perhaps we're looking at the wrong 0:16:17.680 --> 0:16:20.840 inventory data because of just what you're talking about. That 0:16:20.920 --> 0:16:24.680 people overestimate just how much the stockpiles have grown and 0:16:24.720 --> 0:16:27.120 aren't considering exactly what you're talking about, which is the 0:16:27.200 --> 0:16:30.520 light crude um. You know you oversee about fifteen billion 0:16:30.600 --> 0:16:33.960 dollars of assets at thrive in right um. How are 0:16:34.000 --> 0:16:37.360 you positioning and how have you changed your position with 0:16:37.400 --> 0:16:41.240 respect to energy related companies in the wake of some 0:16:41.320 --> 0:16:43.880 of the bouncing around of the oil price this year, 0:16:43.920 --> 0:16:47.760 as well as so such diverse speculation with some people 0:16:47.760 --> 0:16:49.720 saying it's poised for another crash and other people saying 0:16:49.720 --> 0:16:52.560 we're headed toward eighty dollars a barrel. To be precise, 0:16:52.640 --> 0:16:54.920 the fifteen billion dollars is for a mutual fine group 0:16:55.120 --> 0:16:57.840 Thriving Financial and total has over one billion dollars in 0:16:57.880 --> 0:17:00.440 asset under management. As far as what we're doing an 0:17:00.520 --> 0:17:04.240 energy we are positively biased towards it. We are an 0:17:04.320 --> 0:17:07.199 investment organization. We look out two and three years, not 0:17:07.320 --> 0:17:10.160 two in three months, and with that especially our view 0:17:10.160 --> 0:17:14.280 of where supply demand will be in twenties favorable. Having 0:17:14.280 --> 0:17:16.920 said that, we don't get too far away from our benchmarks. 0:17:17.359 --> 0:17:19.920 So most of our work. Especially in some of our 0:17:20.240 --> 0:17:23.679 our balanced funds. We tend to stay close to sector 0:17:23.720 --> 0:17:27.440 neutral and we fancy ourselves stock stock pickers, and our 0:17:27.440 --> 0:17:30.600 own attribution show that's that's where we've done bestins picking stocks. 0:17:31.000 --> 0:17:33.920 So we do have a positive energy view. But having 0:17:33.960 --> 0:17:37.119 said that, we don't make a massive bet in any sector. 0:17:37.560 --> 0:17:41.920 That's just our how we managed funds regardless of the sector. 0:17:42.280 --> 0:17:45.360 Increases in production in this high quality crew that you're 0:17:45.400 --> 0:17:48.600 talking about comes mainly where from Texas, from the Permian 0:17:48.680 --> 0:17:51.280 and the Eagle Forward basin. If you're an investor and 0:17:51.320 --> 0:17:53.920 you want to participate, what do you do? That's correct. 0:17:54.000 --> 0:17:57.280 The biggest increases are from the Permian basin. Activity will 0:17:57.320 --> 0:17:59.479 pick up in the Eagleford in South Texas as well 0:17:59.520 --> 0:18:01.320 as the Box in Shail in North Dakota, close to 0:18:01.320 --> 0:18:04.560 our hometown. But the Permian really is a driver, and 0:18:04.560 --> 0:18:06.919 the reason for that is it's been around for fifty 0:18:07.040 --> 0:18:10.200 plus years, but it's a layer cake of different geologic 0:18:10.320 --> 0:18:12.560 formations that are still being explored. So we still have 0:18:12.640 --> 0:18:15.560 the upside for companies that operate there. That's less of 0:18:15.600 --> 0:18:18.640 the case in Eagleford and Baking. Every oil play has 0:18:18.680 --> 0:18:22.879 a life cycle, whether it's ontore offshore conventional unconventional baking. 0:18:23.000 --> 0:18:24.960 Eagle Ford are further along in that life cycle, but 0:18:25.000 --> 0:18:27.760 Permian it's still early. So two of our favorite exploration 0:18:27.800 --> 0:18:30.800 companies do operate in the Permian. One Pioneer Natural Resources, 0:18:31.000 --> 0:18:34.959 second Parsley Energy. Curious thing is the CEO of Parsley 0:18:35.080 --> 0:18:37.560 Energy is the son of the chairman of Pioneer Natural 0:18:37.600 --> 0:18:40.240 Resources and the family has been working in the basin 0:18:40.320 --> 0:18:44.240 for literally since nineteen sixty six. Predecessor organizations a Pioneer, 0:18:44.720 --> 0:18:47.040 so they have an advantage in that they have worked there, 0:18:47.440 --> 0:18:50.720 they know the rocks better, they have cheap releases. Some 0:18:50.800 --> 0:18:53.639 other companies are paying thirty to thirty five thou dollars 0:18:53.640 --> 0:18:56.800 per acre for rights to drill. Pioneer doesn't have an 0:18:56.840 --> 0:18:58.919 issue because they've already been there, so they have a 0:18:58.920 --> 0:19:01.439 permanent advantage and there's a key reason why that's one 0:19:01.480 --> 0:19:04.199 of our favorite companies. John, you know you live, you 0:19:04.240 --> 0:19:07.160 said near North Dakota and some of the drilling boom 0:19:07.200 --> 0:19:09.879 that we we here talk about, how has the area 0:19:10.000 --> 0:19:13.919 changed in the past ten years? Um Western North Dakota, 0:19:13.960 --> 0:19:18.120 it's completely different. UM rigcount went from twenty riggs drilling 0:19:18.119 --> 0:19:21.159 for oil to two back to twenty, so it was 0:19:21.240 --> 0:19:26.160 a Western boom town. Unfortunately, this industry always cycles. Some 0:19:26.200 --> 0:19:29.360 people talk about new normals of lower prices. We don't 0:19:29.359 --> 0:19:32.440 accept that argument. Energy is all as a cyclical industry, 0:19:32.440 --> 0:19:36.000 and now we're coming out of one of those down cycles. 0:19:36.119 --> 0:19:39.760 So the backing will pick up from where it is currently. 0:19:39.880 --> 0:19:43.159 Recounts are increasing, but that one, like I said, the 0:19:43.200 --> 0:19:46.679 life cycle of what's available in the backing is a 0:19:46.720 --> 0:19:49.840 little bit longer in the tooth, and when that happens, 0:19:49.840 --> 0:19:51.879 the rocks can only give you so much oil. It 0:19:51.920 --> 0:19:55.280 doesn't matter how much better the technology gets. The industry 0:19:55.359 --> 0:19:59.080 is fantastic. The engineers are brilliant, the scientists are brilliant. 0:19:59.480 --> 0:20:02.120 Even the guys out the rake hands, drilling wheels, they're 0:20:02.119 --> 0:20:04.720 always getting better and better. But there's you can't squeeze 0:20:04.720 --> 0:20:06.879 blood from a turn up, and you're running out of 0:20:06.920 --> 0:20:10.520 time with um in the back in particularly what opportunity 0:20:10.560 --> 0:20:13.280 remains there. You can't squeeze a blood out of a 0:20:13.320 --> 0:20:15.199 sugar beet. I used to live in farther North Dakota, 0:20:15.240 --> 0:20:18.160 and I've heard a lot from my former co workers 0:20:18.280 --> 0:20:20.879 how much it has changed. So it's interesting. I wonder 0:20:20.920 --> 0:20:23.600 how the boom and the bust and you know, has 0:20:23.640 --> 0:20:26.240 has affected the whole area. Really fascinating stuff. Thank you 0:20:26.280 --> 0:20:29.280 so much for joining us, John Grotten, director of equity 0:20:29.320 --> 0:20:43.600 researcher Thrive into Asset Management. We're spending a lot of 0:20:43.600 --> 0:20:46.640 time talking about US and job growth there and political 0:20:46.760 --> 0:20:50.320 developments here in South Africa. There is a and has 0:20:50.359 --> 0:20:53.639 been a pretty dramatic situation unfolding with a quite a 0:20:53.640 --> 0:20:57.680 bit of political turmoil going on there and SMP downgrading 0:20:57.880 --> 0:21:01.000 that nation to junk. This matter are is tremendously to 0:21:01.200 --> 0:21:04.160 the global bond markets, since this country has one point 0:21:04.200 --> 0:21:07.680 seven trillion dollars of outstanding obligations. To get better perspective 0:21:07.880 --> 0:21:09.320 on what the implications are, I want to bring in 0:21:09.440 --> 0:21:12.600 Damien Sassaur, who is a fixed income strategist for Bloomberg 0:21:12.680 --> 0:21:15.720 Intelligence and is here with us. Uh Damien, what do 0:21:15.760 --> 0:21:17.479 you make of this? I mean, do you do you 0:21:17.520 --> 0:21:20.560 think that the market was just surprised by some of 0:21:20.560 --> 0:21:22.919 the political turmoil? Why? Why was there such a rapid 0:21:22.960 --> 0:21:26.200 sell off in the bonds and uh as a pretty 0:21:26.200 --> 0:21:29.320 substantial move in the currency as well. Yeah no, I mean, 0:21:29.320 --> 0:21:31.159 thank you lie so well. Um, I don't think the 0:21:31.160 --> 0:21:33.120 markets with that surprise. Quite frankly, I think a lot 0:21:33.160 --> 0:21:35.480 of this was priced in. I think what did surprise 0:21:35.760 --> 0:21:39.560 UM bond investors, certainly hard currency Emerging market bond investors, 0:21:39.560 --> 0:21:41.959 is that SMP maintained its negative outlook and then just 0:21:42.359 --> 0:21:45.879 today this morning, Moody's UM put put the country on 0:21:45.920 --> 0:21:48.360 review for they put them on negative credit watch. So 0:21:49.040 --> 0:21:51.240 that implies that at some point of the next one 0:21:51.280 --> 0:21:54.480 to three months Moody's as well maybe downgrading UM the 0:21:54.680 --> 0:21:58.040 country's UM issue or ratings. So so, yeah, I think 0:21:58.119 --> 0:22:01.800 markets are trying to digest the at that, you know, fundamentally, 0:22:01.880 --> 0:22:05.720 the economic situation in South Africa's deteriorating. The President of 0:22:05.760 --> 0:22:12.960 South Africa, Jacob Zuma, fired the finance minister, Prava Gord him. 0:22:13.040 --> 0:22:16.720