1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing 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 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:23,080 Speaker 1: at Bloomberg dot com. Well, right now, Venezuela has two 8 00:00:23,239 --> 00:00:27,200 Speaker 1: presidents sort of. The current president of the person who 9 00:00:27,200 --> 00:00:29,840 Speaker 1: has been in charge, Nicholas Maduro, has come under a 10 00:00:29,920 --> 00:00:32,519 Speaker 1: president of pressure. We have a new thirty five year 11 00:00:32,560 --> 00:00:35,520 Speaker 1: old who declared himself the rightful president of the nation 12 00:00:35,840 --> 00:00:39,000 Speaker 1: in front of the National Assembly's thirty five years old. 13 00:00:39,479 --> 00:00:43,560 Speaker 1: He is uh Guido, who is actually represent was actually 14 00:00:43,600 --> 00:00:47,240 Speaker 1: supported by President Trump and a host of other nations. 15 00:00:47,320 --> 00:00:49,479 Speaker 1: Joining us down to talk about this. Eric Fine, portfolio 16 00:00:49,520 --> 00:00:53,680 Speaker 1: manager focusing on the emerging markets fixed income strategy at 17 00:00:53,760 --> 00:00:55,920 Speaker 1: Vannet Global in New York, joining us here in our 18 00:00:55,960 --> 00:00:59,120 Speaker 1: interactive broker studios. Eric, thank you so much for being here. 19 00:01:00,040 --> 00:01:03,720 Speaker 1: Why is this different than previous bouts of turmoil and 20 00:01:03,800 --> 00:01:07,560 Speaker 1: unrest in Venezuela? Yep, great, great, question um number one, 21 00:01:07,600 --> 00:01:10,480 Speaker 1: a new president was sworn in the That was the 22 00:01:10,520 --> 00:01:13,679 Speaker 1: event um number two. Of a range of countries in 23 00:01:13,680 --> 00:01:17,560 Speaker 1: the hemisphere UH recognized him as a new president, including 24 00:01:17,600 --> 00:01:19,600 Speaker 1: the U S which is important because it has sticks 25 00:01:20,240 --> 00:01:24,720 Speaker 1: um everything from UH the you know, an extreme version 26 00:01:24,760 --> 00:01:29,480 Speaker 1: would be military action or freezing or diverting control of 27 00:01:29,520 --> 00:01:32,240 Speaker 1: assets let's say Petavesa or certainly Sitco, which is in 28 00:01:32,280 --> 00:01:35,320 Speaker 1: the US, the refineries in the US. Another one is 29 00:01:35,520 --> 00:01:38,560 Speaker 1: another important thing to notice that violence was relatively low 30 00:01:38,560 --> 00:01:43,199 Speaker 1: compared to the last big protests in indicating um reluctance 31 00:01:43,240 --> 00:01:46,000 Speaker 1: on the possibly indicating reluctance on the part of security 32 00:01:46,000 --> 00:01:50,400 Speaker 1: forces to to you know, confront the population UM. And similarly, 33 00:01:50,480 --> 00:01:53,760 Speaker 1: when Maduro gave his speech at the presidential palace UM 34 00:01:53,800 --> 00:01:56,160 Speaker 1: there were not a lot of the not a lot 35 00:01:56,200 --> 00:01:59,760 Speaker 1: of key high command officials standing next to him. Normally, 36 00:01:59,800 --> 00:02:03,600 Speaker 1: when the president would say there's UH, there's a coup attempt, 37 00:02:03,680 --> 00:02:06,320 Speaker 1: you would expect not just the defense minister to issue 38 00:02:06,320 --> 00:02:08,040 Speaker 1: a Twitter statement, You'd expect a lot of the high 39 00:02:08,080 --> 00:02:10,079 Speaker 1: command to do it as well. So I'd say those 40 00:02:10,080 --> 00:02:11,840 Speaker 1: are the key those are the key developments. But the 41 00:02:11,840 --> 00:02:14,920 Speaker 1: most important a new president was sworn in and a 42 00:02:15,080 --> 00:02:18,400 Speaker 1: number of key countries recognized him. So I thought that 43 00:02:18,480 --> 00:02:21,280 Speaker 1: was critical that the fact that you know, recognized so 44 00:02:21,360 --> 00:02:25,320 Speaker 1: quickly by many countries three minutes afterwards exactly. So, um, 45 00:02:25,360 --> 00:02:28,600 Speaker 1: what are the next steps that investors should be looking 46 00:02:28,639 --> 00:02:32,960 Speaker 1: forward to see which way this thing could go? I, Uh, 47 00:02:33,000 --> 00:02:35,960 Speaker 1: it's very dynamic, So it's hard to say. There's a 48 00:02:36,040 --> 00:02:40,920 Speaker 1: strong temptation to say it's binary. Either the opposition wins 49 00:02:41,160 --> 00:02:45,480 Speaker 1: and Maduro's out, or Maduro's out, or more remains and 50 00:02:45,560 --> 00:02:47,880 Speaker 1: muddles through for another few months, and in which case, 51 00:02:47,880 --> 00:02:49,959 Speaker 1: you know, we'll just keep talking about it and we'll 52 00:02:49,960 --> 00:02:52,520 Speaker 1: see then. Um, I would say there might be and 53 00:02:52,560 --> 00:02:56,720 Speaker 1: I'd say that those are two serious scenarios. Um, But 54 00:02:56,840 --> 00:02:59,640 Speaker 1: there's a third scenario in which the military fractures. A 55 00:02:59,639 --> 00:03:02,320 Speaker 1: lot of a lot of the powerful folks in the 56 00:03:02,320 --> 00:03:07,119 Speaker 1: military are on sanctions lists with the US, and so 57 00:03:07,280 --> 00:03:10,520 Speaker 1: an amnesty domestically isn't going to really mean much to them. 58 00:03:10,880 --> 00:03:13,400 Speaker 1: They the temptation for them is to dig in their heels. 59 00:03:13,400 --> 00:03:16,440 Speaker 1: So I'd say there is that risky scenario of the 60 00:03:16,480 --> 00:03:18,880 Speaker 1: military breaking up in the fractions, But I basically look 61 00:03:18,960 --> 00:03:23,360 Speaker 1: for disaffection within the military disaffection between the military and 62 00:03:23,400 --> 00:03:26,480 Speaker 1: the government. Um U. S actions can do a lot 63 00:03:26,480 --> 00:03:30,080 Speaker 1: of can can can really pressure things, um UM. But 64 00:03:30,160 --> 00:03:33,120 Speaker 1: there is this other scenario of of of factionalization, which 65 00:03:33,120 --> 00:03:35,600 Speaker 1: could you know, which means we'll have to keep talking 66 00:03:35,640 --> 00:03:39,000 Speaker 1: about it. So Venezuela is a really important country for 67 00:03:39,160 --> 00:03:41,840 Speaker 1: the entire Latin American economy, given how much of an 68 00:03:41,840 --> 00:03:46,640 Speaker 1: oil producer it is. It also is a very big obligor, right. 69 00:03:46,640 --> 00:03:49,080 Speaker 1: I mean, it has seventy two billion dollars of debt, 70 00:03:49,320 --> 00:03:52,200 Speaker 1: including a whole host of bonds that are default. Of 71 00:03:52,280 --> 00:03:55,120 Speaker 1: the prices on those bonds surging on the hope that 72 00:03:55,240 --> 00:03:57,440 Speaker 1: Nicholas Maduro will get kicked out of power and we'll 73 00:03:57,480 --> 00:04:01,880 Speaker 1: get someone else in Guido in particular, How hopeful are 74 00:04:01,960 --> 00:04:06,360 Speaker 1: you that this price rise in these bonds is legitimate? 75 00:04:06,400 --> 00:04:08,520 Speaker 1: I mean, are you are you going more heavily into 76 00:04:08,600 --> 00:04:12,440 Speaker 1: Venezuela dead? So UM, we can only comment on where 77 00:04:12,440 --> 00:04:14,320 Speaker 1: we were at the end of December, because we're in 78 00:04:14,320 --> 00:04:16,080 Speaker 1: the middle of January, and at the end of December 79 00:04:16,120 --> 00:04:19,240 Speaker 1: we did have an overweight exposure to Venezuela. UM and 80 00:04:19,320 --> 00:04:22,159 Speaker 1: it was optionality was that this scenario was possible and 81 00:04:22,200 --> 00:04:23,800 Speaker 1: if it happened, there was a lot of upside, and 82 00:04:23,839 --> 00:04:26,320 Speaker 1: if it didn't happen, we were kind of already there. 83 00:04:26,440 --> 00:04:30,240 Speaker 1: UM and so UM, I think there there remains significant 84 00:04:30,320 --> 00:04:33,320 Speaker 1: upside to the bonds, UM, but one needs to be 85 00:04:33,360 --> 00:04:36,120 Speaker 1: sensitive and cautious about that scenario I mentioned. I think 86 00:04:36,160 --> 00:04:38,600 Speaker 1: that's the risky scenario. UM. I would say that the 87 00:04:38,680 --> 00:04:42,840 Speaker 1: upside for Venezuela is there are many reasons for it, 88 00:04:42,880 --> 00:04:45,479 Speaker 1: but one is with the high you know, among the 89 00:04:45,520 --> 00:04:48,320 Speaker 1: highest proven oil reserves in the world. That's the kind 90 00:04:48,320 --> 00:04:50,800 Speaker 1: of situation where credit can turn around very very quickly 91 00:04:51,200 --> 00:04:53,960 Speaker 1: with US and I m F support. Moreover, in a 92 00:04:54,279 --> 00:04:57,200 Speaker 1: by definition of friendly government. In this scenario, UM, you 93 00:04:57,240 --> 00:05:00,520 Speaker 1: can get the key thing that I've seen defining good workouts, 94 00:05:00,520 --> 00:05:02,800 Speaker 1: which is quick. Right. So I've been you know, I've 95 00:05:02,800 --> 00:05:05,760 Speaker 1: been doing this for decades and I guess almost thirty years. 96 00:05:06,080 --> 00:05:09,279 Speaker 1: The often, the most usually, the most important determinant of 97 00:05:09,279 --> 00:05:11,960 Speaker 1: the value of a bond in a non performing situation 98 00:05:12,240 --> 00:05:14,760 Speaker 1: is not the deal you get, it's how quickly it comes. 99 00:05:15,160 --> 00:05:17,599 Speaker 1: You should be discounting these things at high high rates, 100 00:05:17,600 --> 00:05:19,400 Speaker 1: and if it happens quickly, the price should go up. 101 00:05:19,520 --> 00:05:21,760 Speaker 1: Let's just talk though, for a second, about the toll 102 00:05:21,839 --> 00:05:24,839 Speaker 1: that the Nicholas Maduro regime has had on this nation. 103 00:05:24,920 --> 00:05:27,880 Speaker 1: I mean it's lost tremendous numbers of its people. Its 104 00:05:27,920 --> 00:05:32,200 Speaker 1: population has been decimated. I mean, is oil enough to 105 00:05:32,360 --> 00:05:36,480 Speaker 1: make its economy strong enough to legitimize its debtload and 106 00:05:36,640 --> 00:05:40,279 Speaker 1: legitimize the pop in the in the bonds that we're seeing. Um, well, 107 00:05:40,320 --> 00:05:44,600 Speaker 1: I think that's I think that's complicated. Um um. As 108 00:05:44,600 --> 00:05:47,760 Speaker 1: a stand on a standalone basis, you could so I 109 00:05:47,760 --> 00:05:50,880 Speaker 1: would say a few things. UM. Number one, it's not 110 00:05:51,200 --> 00:05:56,039 Speaker 1: just um um oil. It's economic management. UM. There have 111 00:05:56,120 --> 00:05:59,240 Speaker 1: been subs there, A lot of spending was essentially through 112 00:05:59,279 --> 00:06:02,800 Speaker 1: subsidization of gasoline. Right you Famously you could pay a 113 00:06:02,880 --> 00:06:06,000 Speaker 1: quarter to fill up your tank in a suburban um 114 00:06:06,120 --> 00:06:09,800 Speaker 1: um and uh a quarter of US twenty five cents 115 00:06:09,880 --> 00:06:13,279 Speaker 1: um worth of a bolivars um the absence of a 116 00:06:13,279 --> 00:06:17,080 Speaker 1: floating exchange rate regime, which orthodox you know thinking would 117 00:06:17,080 --> 00:06:21,440 Speaker 1: tell you is is reasonable or something towards that is reasonable. 118 00:06:21,560 --> 00:06:23,880 Speaker 1: So it's not just the debt load. What I'd say 119 00:06:23,880 --> 00:06:25,480 Speaker 1: about the debtload is there is going to be a 120 00:06:25,520 --> 00:06:29,520 Speaker 1: renegotiation UM. And the renegotiation could create a lot of 121 00:06:29,600 --> 00:06:32,599 Speaker 1: room a lot more room. So Peta Vesa has more 122 00:06:32,640 --> 00:06:36,600 Speaker 1: bonded debt UM and less hidden debt. Venezuela, the obl 123 00:06:36,680 --> 00:06:41,119 Speaker 1: board called Venezuela has more hidden debt and and less 124 00:06:41,560 --> 00:06:45,880 Speaker 1: UH is the opposite situation. And very importantly, a lot 125 00:06:45,960 --> 00:06:49,400 Speaker 1: of this hidden debt is Chinese and Russian and how 126 00:06:49,480 --> 00:06:53,400 Speaker 1: that gets treated, and China in particular has not participated 127 00:06:53,760 --> 00:06:56,200 Speaker 1: in the sort of post Breton Woods, Paris Club London 128 00:06:56,200 --> 00:06:58,320 Speaker 1: Cup structure. That's a longer discussion. We talked about it 129 00:06:58,320 --> 00:07:01,200 Speaker 1: when I was here last I'm a but debt diplomacy 130 00:07:01,320 --> 00:07:03,960 Speaker 1: in UH was a big issue when I was last year. Actually, 131 00:07:04,000 --> 00:07:05,480 Speaker 1: when you're asking me what happened and I'm f debt 132 00:07:05,480 --> 00:07:08,880 Speaker 1: diplomacy and how China um, will you know the there's 133 00:07:08,880 --> 00:07:11,280 Speaker 1: a caricature but lend money and then um when it 134 00:07:11,320 --> 00:07:13,880 Speaker 1: doesn't get paid in the case of Shri Lunka, see support, right, 135 00:07:13,960 --> 00:07:15,880 Speaker 1: That really is when you think about China and Russia. 136 00:07:15,880 --> 00:07:17,680 Speaker 1: It's not just the US that has an interest here. 137 00:07:17,840 --> 00:07:20,240 Speaker 1: China and Russia have been supporting Maduro. They have an 138 00:07:20,280 --> 00:07:24,040 Speaker 1: interest there that to me represents I would guess if 139 00:07:24,080 --> 00:07:26,120 Speaker 1: I'm thinking about the bonds or just the risk assessment 140 00:07:26,120 --> 00:07:30,800 Speaker 1: of that country a significant risk for a viable workout 141 00:07:30,880 --> 00:07:32,920 Speaker 1: solution that you might be interested in. Yes, it's a 142 00:07:33,040 --> 00:07:36,320 Speaker 1: it's a it's a big risk depending on the political 143 00:07:36,320 --> 00:07:39,600 Speaker 1: and policy scenario. And I'd say mostly the political scenario. Um, 144 00:07:39,640 --> 00:07:42,240 Speaker 1: if you get one of these, if you get the 145 00:07:42,480 --> 00:07:44,280 Speaker 1: what I think most people would say is the positive 146 00:07:44,320 --> 00:07:48,960 Speaker 1: outcome of of of of the existing government leaving UM 147 00:07:49,000 --> 00:07:51,800 Speaker 1: new government coming in led by Guido initially U S 148 00:07:52,000 --> 00:07:56,480 Speaker 1: I M F announcing they're willing, willing to work with them. Um. 149 00:07:56,600 --> 00:08:00,920 Speaker 1: Then um, I think, Uh, there's there's substantial further upside 150 00:08:00,920 --> 00:08:02,680 Speaker 1: in the bonds, and I think we're gonna be looking 151 00:08:02,680 --> 00:08:05,680 Speaker 1: at scenarios where where Russia and China get you know, 152 00:08:05,920 --> 00:08:09,280 Speaker 1: those obligations might be in a completely different queue. I 153 00:08:09,280 --> 00:08:10,880 Speaker 1: think the things that will be in the front of 154 00:08:10,880 --> 00:08:13,640 Speaker 1: the queue or in one type of Q will obviously 155 00:08:13,680 --> 00:08:17,400 Speaker 1: be petavas in Venezuela bonds. Pharmaceutical obligations are an obvious 156 00:08:17,480 --> 00:08:19,920 Speaker 1: one too. You want the company's back, so things like that. 157 00:08:19,960 --> 00:08:22,560 Speaker 1: But China, Russia, it's about the future and are they're 158 00:08:22,560 --> 00:08:24,000 Speaker 1: going to be a big part of the future of 159 00:08:24,040 --> 00:08:26,440 Speaker 1: a Venezuela with that leadership. I doubt it, so the 160 00:08:26,440 --> 00:08:29,680 Speaker 1: incentives are low. Just thirty seconds here, I'm wondering if 161 00:08:29,720 --> 00:08:33,160 Speaker 1: it's unfair to cast the US is support of Guido, 162 00:08:33,240 --> 00:08:36,679 Speaker 1: the opposition leader, as yet another front of the US 163 00:08:36,800 --> 00:08:39,760 Speaker 1: China battle. Absolutely, I would say not no, that, I 164 00:08:39,760 --> 00:08:42,199 Speaker 1: would say, this is a domestic thing, and this is 165 00:08:42,360 --> 00:08:45,000 Speaker 1: this is a domestic situation that's been festering for you 166 00:08:45,040 --> 00:08:49,600 Speaker 1: could argue for over ten years, um and uh. The 167 00:08:49,640 --> 00:08:53,320 Speaker 1: governments around the world are responding to it um. However, 168 00:08:53,720 --> 00:08:57,400 Speaker 1: because China and Russia are involved, it may offer other 169 00:08:57,480 --> 00:09:01,880 Speaker 1: opportunities for US geostras rategy to flex itself in an 170 00:09:01,880 --> 00:09:03,800 Speaker 1: area where China and Russia really at the end of 171 00:09:03,840 --> 00:09:06,480 Speaker 1: the day, are aren't aren't really involved, or it's not 172 00:09:06,520 --> 00:09:08,600 Speaker 1: a big part of their national interests, when it's obviously 173 00:09:08,600 --> 00:09:11,360 Speaker 1: a more clear part of US national interests. Eric, Fine, 174 00:09:11,400 --> 00:09:13,600 Speaker 1: thank you so much for being with us. Really really 175 00:09:13,640 --> 00:09:16,480 Speaker 1: wonderful insight on a day or we're actually starting to 176 00:09:16,480 --> 00:09:18,439 Speaker 1: see some of the change come to fruition that people 177 00:09:18,440 --> 00:09:32,920 Speaker 1: have been talking about in Venezuela. Market's kind of mixed 178 00:09:32,920 --> 00:09:34,760 Speaker 1: here this morning, but I didn't notice, you know, just 179 00:09:34,760 --> 00:09:37,160 Speaker 1: looking at my screen that year to date, the Russell 180 00:09:37,200 --> 00:09:39,840 Speaker 1: two thousand is the best performer, up eight point three 181 00:09:40,960 --> 00:09:42,560 Speaker 1: with us right now. To talk to us about what's 182 00:09:42,600 --> 00:09:44,840 Speaker 1: going on a small capital is Dave Wilson, Bloomberg Stocks 183 00:09:44,880 --> 00:09:49,000 Speaker 1: Reporter and Paul. We're actually seeing gains in the smaller 184 00:09:49,040 --> 00:09:53,400 Speaker 1: companies today, unlike they're larger piers. The Russell two thousand index, 185 00:09:53,480 --> 00:09:57,480 Speaker 1: up four tenths of a percent, is even hired by 186 00:09:57,480 --> 00:09:59,760 Speaker 1: one tenth of a percent at the moment. Now, the 187 00:10:00,080 --> 00:10:03,600 Speaker 1: Russell's sharpest game belongs to the the Triumph Groove, whose ticker 188 00:10:03,760 --> 00:10:06,920 Speaker 1: is t g I. The aircraft parts maker has risen 189 00:10:06,960 --> 00:10:09,840 Speaker 1: almost twenty eight percent trying for reach a deal to 190 00:10:09,880 --> 00:10:15,280 Speaker 1: transfer a wing building business to Canada's Bombardier Invocare ticker 191 00:10:15,600 --> 00:10:18,440 Speaker 1: i VC has gained ten a half percent. The healthcare 192 00:10:18,440 --> 00:10:21,360 Speaker 1: distributor received a by rating and new coverage that Needum 193 00:10:21,520 --> 00:10:24,760 Speaker 1: and Brooks Automation ticker b r k S is up 194 00:10:24,800 --> 00:10:28,800 Speaker 1: eight percent now. This company supplies chip production software and services, 195 00:10:29,040 --> 00:10:32,640 Speaker 1: so it's part of a much bigger rally after results 196 00:10:32,679 --> 00:10:36,240 Speaker 1: from the chip equipment maker LAMB Research, as well as 197 00:10:36,320 --> 00:10:40,199 Speaker 1: a chip companies Texas Instruments and zy Links. Now the 198 00:10:40,280 --> 00:10:43,439 Speaker 1: Russell steepest drop belongs to Briggs and Stratton ticker b 199 00:10:43,640 --> 00:10:46,560 Speaker 1: g g UH, the maker of Vengeance for lawnmowers and 200 00:10:46,600 --> 00:10:49,480 Speaker 1: other equipment, is down almost sixty and a half percent 201 00:10:49,960 --> 00:10:53,000 Speaker 1: after posting an unexpected loss for the physical second quarter, 202 00:10:53,240 --> 00:10:57,880 Speaker 1: and Wave Life Sciences ticker w V has fallen. The 203 00:10:58,000 --> 00:11:00,439 Speaker 1: drug developer is raising a hundred fifty million dollars to 204 00:11:00,600 --> 00:11:04,640 Speaker 1: a share sale equivalent to a twelve percent stake. Dave Wilson, 205 00:11:04,720 --> 00:11:07,600 Speaker 1: Bloomberg Stocks editor and a columnist as well as contributor 206 00:11:07,640 --> 00:11:09,480 Speaker 1: to Bloomberg Television and Radio, thank you so much for 207 00:11:09,520 --> 00:11:12,200 Speaker 1: being with us. I gotta say, Paul. One as a 208 00:11:12,240 --> 00:11:14,319 Speaker 1: class that has remained very confusing to me over the 209 00:11:14,360 --> 00:11:17,240 Speaker 1: past few weeks is oil. There's just so many conflicting 210 00:11:17,440 --> 00:11:20,040 Speaker 1: issues here. On one hand, it's sort of a proxy 211 00:11:20,160 --> 00:11:23,160 Speaker 1: for global growth and where people think it's going. On 212 00:11:23,200 --> 00:11:26,000 Speaker 1: the other hand, it's a supplied demand picture. And to 213 00:11:26,200 --> 00:11:28,640 Speaker 1: sort of pass us all out, UH, to give us 214 00:11:28,640 --> 00:11:31,600 Speaker 1: a sense of where some of the oil executives are 215 00:11:31,600 --> 00:11:34,120 Speaker 1: thinking things might be going, let's bring in Javier Blass, 216 00:11:34,120 --> 00:11:36,320 Speaker 1: who is on site at Davos. He has our chief 217 00:11:36,400 --> 00:11:40,480 Speaker 1: energy correspondent for Bloomberg, so have here right now. We're 218 00:11:40,559 --> 00:11:44,280 Speaker 1: kind of going sideways. Actually looking at Brent. Uh, that's 219 00:11:44,280 --> 00:11:47,440 Speaker 1: actually a little down on the day. I'm just wondering 220 00:11:47,440 --> 00:11:51,000 Speaker 1: what the tone is among the oil executives and others 221 00:11:51,040 --> 00:11:53,880 Speaker 1: that you're speaking with at Davos. The tone is positive 222 00:11:53,880 --> 00:11:56,640 Speaker 1: for oil prices. At the executives think that the market 223 00:11:56,720 --> 00:12:00,760 Speaker 1: is slowly tightening because Opec, I'm particularly the RABA are 224 00:12:00,840 --> 00:12:04,440 Speaker 1: cutting production and they're cutting quite aggressively. But there are 225 00:12:04,480 --> 00:12:07,640 Speaker 1: so many head winds. One is that OPEC was producing 226 00:12:07,679 --> 00:12:10,080 Speaker 1: a lot at the end of last year. The other 227 00:12:10,120 --> 00:12:13,840 Speaker 1: one is uncertainty around the global economy and also China. 228 00:12:14,240 --> 00:12:17,199 Speaker 1: And the third one is that the US production, particularly 229 00:12:17,240 --> 00:12:20,800 Speaker 1: in Texas and other places including Oklahoma and North Dakota, 230 00:12:20,880 --> 00:12:23,520 Speaker 1: continues to be very strong and that is putting a 231 00:12:23,600 --> 00:12:27,640 Speaker 1: cap on prices. Add to that, Iran and Venezuela and 232 00:12:27,679 --> 00:12:31,240 Speaker 1: everyone here is positive but rather confused or where is 233 00:12:31,760 --> 00:12:34,480 Speaker 1: gonna be the next leg for oil prices? Well have 234 00:12:34,640 --> 00:12:37,600 Speaker 1: here you mentioned Venezuela and that country now has the 235 00:12:37,600 --> 00:12:40,440 Speaker 1: benefit of the guess of two presidents um so obviously 236 00:12:40,440 --> 00:12:45,679 Speaker 1: political instability in that very important important oil market. With 237 00:12:46,080 --> 00:12:48,280 Speaker 1: you know, Venezuela. I was surprised to learn just recently 238 00:12:48,320 --> 00:12:51,559 Speaker 1: in one of the largest oil reserves is held by Venezuela. 239 00:12:51,840 --> 00:12:53,760 Speaker 1: What are you hearing over there as it relates to 240 00:12:54,320 --> 00:12:57,280 Speaker 1: the political issue at Venezuela, what that might do to 241 00:12:57,600 --> 00:13:00,920 Speaker 1: the future of oil markets well too. Things over the 242 00:13:00,960 --> 00:13:03,720 Speaker 1: short term, everyone is concerned this could be a bullish 243 00:13:03,720 --> 00:13:06,560 Speaker 1: factor for two reasons. One is that the White House 244 00:13:06,640 --> 00:13:10,360 Speaker 1: is considering, but has not taken yet action about imposing 245 00:13:10,440 --> 00:13:14,360 Speaker 1: oil sanctions on Venezuela that will be restricting or or 246 00:13:14,400 --> 00:13:18,839 Speaker 1: including including banning the importation of Venezuelan and crude oil 247 00:13:18,840 --> 00:13:22,200 Speaker 1: into the United States. Remember, Venezuela is the third largest 248 00:13:22,240 --> 00:13:25,200 Speaker 1: source of crude oil for include oil for the US. 249 00:13:25,240 --> 00:13:27,520 Speaker 1: That would be very bullish on the short term. Or 250 00:13:27,600 --> 00:13:30,559 Speaker 1: it could be a situation of civil undras in the country, 251 00:13:30,600 --> 00:13:33,360 Speaker 1: and again that will be bullish. Production could fall. But 252 00:13:33,480 --> 00:13:36,079 Speaker 1: over the long term, if we have a transition or 253 00:13:36,160 --> 00:13:41,160 Speaker 1: political transition, things could turn quite rather barries for oil prices. 254 00:13:41,160 --> 00:13:44,600 Speaker 1: Because Venezuela, as you said, has a lot of oil reserves, 255 00:13:44,800 --> 00:13:48,920 Speaker 1: the coal start increasing production. Remember, in the late ninety nineties, 256 00:13:49,120 --> 00:13:53,120 Speaker 1: Venezuela was pumping around three point five million bottles a day. 257 00:13:53,160 --> 00:13:55,400 Speaker 1: It barely does one million today. So it has the 258 00:13:55,480 --> 00:13:59,120 Speaker 1: capacity to increase production quite significantly. How much for that 259 00:13:59,200 --> 00:14:02,720 Speaker 1: lower prices given the fact that we have oil productions 260 00:14:02,760 --> 00:14:05,080 Speaker 1: out of the US at record highs and climbing to 261 00:14:05,160 --> 00:14:09,040 Speaker 1: new records every month. Well, that's one of the that's 262 00:14:09,080 --> 00:14:12,120 Speaker 1: the biggest cup factor. I was talking only a few 263 00:14:12,200 --> 00:14:14,959 Speaker 1: hours ago with a market don and he's the CEO 264 00:14:14,960 --> 00:14:18,040 Speaker 1: of Mercuria, one of the world's largest oil traders, and 265 00:14:18,080 --> 00:14:19,960 Speaker 1: he was telling me that he thinks that prices are 266 00:14:19,960 --> 00:14:22,920 Speaker 1: going to go a bit higher, potentially sixty five maybe 267 00:14:22,960 --> 00:14:26,160 Speaker 1: seventy dollars a barrel. But beyond there, he said, then 268 00:14:26,280 --> 00:14:29,440 Speaker 1: you really trigger the big machine of the Permian in 269 00:14:29,480 --> 00:14:33,160 Speaker 1: West Texas. You get another lack of increasing production from 270 00:14:33,200 --> 00:14:35,760 Speaker 1: the US and then prices go down and OPEC is 271 00:14:35,800 --> 00:14:38,840 Speaker 1: in trouble. So for OPEC, the sweet spot will be 272 00:14:38,920 --> 00:14:42,920 Speaker 1: to try to keep prices around sixty seventy dollars a barrel, 273 00:14:43,200 --> 00:14:46,200 Speaker 1: which is good enough for them, potentially not as high 274 00:14:46,240 --> 00:14:50,560 Speaker 1: as they will like Brent, right, I'm talking about oil 275 00:14:50,560 --> 00:14:54,280 Speaker 1: which currently but but that that will that will mean 276 00:14:54,360 --> 00:14:56,920 Speaker 1: that that they keep in check a U S production. 277 00:14:57,000 --> 00:15:00,240 Speaker 1: As you say, it's increasing, it goes up every week. 278 00:15:00,320 --> 00:15:03,520 Speaker 1: We're close to twelve million barrels a day, and we're 279 00:15:03,680 --> 00:15:07,360 Speaker 1: probably gonna add another million million point two barrels a 280 00:15:07,480 --> 00:15:10,400 Speaker 1: day uh in two thousand and nineteen. And let's not 281 00:15:10,480 --> 00:15:14,120 Speaker 1: forget last year in two thousand and eighteen, production increased 282 00:15:14,120 --> 00:15:16,680 Speaker 1: by two million bars a day. That was the largest 283 00:15:16,800 --> 00:15:19,640 Speaker 1: increase on an annual base in the United States in 284 00:15:19,680 --> 00:15:22,400 Speaker 1: a hundred years. So just real quickly, have you what 285 00:15:22,440 --> 00:15:24,520 Speaker 1: are you hearing over there? And doubles about Russia? They 286 00:15:24,520 --> 00:15:27,360 Speaker 1: seemed to be a wild card? Is a wild card? 287 00:15:27,520 --> 00:15:30,040 Speaker 1: Is a world card? In different factors? One is what 288 00:15:30,240 --> 00:15:33,400 Speaker 1: is gonna what is gonna happen with the collaboration between 289 00:15:33,480 --> 00:15:37,360 Speaker 1: OPEK and Russia. The Russians are are starting to sound like, um, 290 00:15:37,400 --> 00:15:39,840 Speaker 1: they're not that happy with the production cards. So that's 291 00:15:39,840 --> 00:15:42,520 Speaker 1: one wild car. Second world card on Russia. What is 292 00:15:42,560 --> 00:15:46,280 Speaker 1: gonna be Russia doing versus Iran and Syria. Third one 293 00:15:47,080 --> 00:15:51,880 Speaker 1: Venezuela Russia. Moscow has come supporting Nicolas Maduro today, so 294 00:15:51,920 --> 00:15:54,320 Speaker 1: that's gonna be also another big factor for the old market. 295 00:15:55,360 --> 00:15:57,680 Speaker 1: Have your blass, thank you very much? How areas? The 296 00:15:57,720 --> 00:16:13,080 Speaker 1: chief energy correspanner for Bloomberg News called in from Davos Switzerland. Well, 297 00:16:13,120 --> 00:16:16,080 Speaker 1: investors in the Walt Disney Company and Compcast, they know 298 00:16:16,280 --> 00:16:18,240 Speaker 1: very well that one of the best businesses in those 299 00:16:18,280 --> 00:16:22,000 Speaker 1: big media companies is their theme park business. Theme park business, 300 00:16:22,120 --> 00:16:23,960 Speaker 1: you know, we see a quarter after quarter, year after 301 00:16:24,040 --> 00:16:26,800 Speaker 1: year double ditchit profit growth, and as a result, big 302 00:16:26,840 --> 00:16:29,480 Speaker 1: companies like Disney and Comcast continue to ramp up their 303 00:16:29,520 --> 00:16:32,880 Speaker 1: investment in their parks and resorts business. One of our 304 00:16:32,920 --> 00:16:35,240 Speaker 1: next guest is certainly one of the beneficiaries of that 305 00:16:35,560 --> 00:16:37,760 Speaker 1: increase investment in the in the theme park and an 306 00:16:37,840 --> 00:16:41,240 Speaker 1: attractions business. That is Mike Conson. He is CEO of 307 00:16:41,360 --> 00:16:44,440 Speaker 1: pg A V Destinations Companies based in St. Louis. But 308 00:16:44,520 --> 00:16:46,440 Speaker 1: Mike is in here with in New York with our 309 00:16:46,440 --> 00:16:49,720 Speaker 1: Bloomberg Interactive Broker Studio. So, Mike, thanks so much for 310 00:16:49,760 --> 00:16:52,160 Speaker 1: being here. Can you just give us and our listeners 311 00:16:52,160 --> 00:16:54,800 Speaker 1: just a quick snapshot of what you do and how 312 00:16:55,080 --> 00:16:57,520 Speaker 1: you play in the theme park business. Well, sure, thank 313 00:16:57,520 --> 00:17:00,200 Speaker 1: you for having me. So. We started in the theme 314 00:17:00,240 --> 00:17:03,000 Speaker 1: park business back in the late sixties and we were 315 00:17:03,040 --> 00:17:05,840 Speaker 1: involved in the development of some of the early theme 316 00:17:05,880 --> 00:17:08,560 Speaker 1: parks in the United States like Bush Gardens and Williamsburg 317 00:17:08,680 --> 00:17:11,879 Speaker 1: and got our got our sense of roller coasters and 318 00:17:12,040 --> 00:17:15,200 Speaker 1: entertainment and and how these parks operate in function. And 319 00:17:15,359 --> 00:17:18,000 Speaker 1: since that time, we've been fortunate to see that continue, 320 00:17:18,600 --> 00:17:21,880 Speaker 1: not just in the United States and grow around the world. So, 321 00:17:22,119 --> 00:17:26,240 Speaker 1: given the progress in both designing these a roller coasters 322 00:17:26,280 --> 00:17:28,840 Speaker 1: as well as executing them, are there any roller coasters 323 00:17:29,040 --> 00:17:32,439 Speaker 1: that you would just not go on? Well, you know, 324 00:17:32,480 --> 00:17:36,480 Speaker 1: I like them all, but this is a danger perspective. Yeah, yeah, 325 00:17:36,640 --> 00:17:38,600 Speaker 1: you know. You you can go to some of the 326 00:17:38,680 --> 00:17:42,960 Speaker 1: historic theme parks in Europe where they have wooden roller 327 00:17:43,000 --> 00:17:46,800 Speaker 1: coasters actually have a brakeman who actually pulls a lever 328 00:17:46,960 --> 00:17:49,720 Speaker 1: to stop the coaster with and then break it. So 329 00:17:49,760 --> 00:17:52,360 Speaker 1: I always wondered what happens if something happens to the brakeman, 330 00:17:52,560 --> 00:17:55,119 Speaker 1: you know. So those are those are those cross the 331 00:17:55,160 --> 00:17:57,360 Speaker 1: line for me? Those are a little scary. So, Mike, 332 00:17:57,359 --> 00:17:59,040 Speaker 1: we've seen you know, if you think about the theme 333 00:17:59,040 --> 00:18:01,800 Speaker 1: park business, obviously in the United States, you think about 334 00:18:01,800 --> 00:18:05,760 Speaker 1: Disney and Orlando and in l A. But you know, 335 00:18:05,880 --> 00:18:08,200 Speaker 1: the investment that we're seeing and these companies are making 336 00:18:08,320 --> 00:18:12,320 Speaker 1: outside of the US is just you know, staggering. I know, 337 00:18:12,359 --> 00:18:16,200 Speaker 1: for example, Disney spent five billion dollars on its Shanghai resort. 338 00:18:16,640 --> 00:18:19,959 Speaker 1: What are you seeing kind of globally in demand for 339 00:18:20,080 --> 00:18:22,919 Speaker 1: some of these properties. Well, it's extraordinary. And if you 340 00:18:22,920 --> 00:18:25,000 Speaker 1: had asked me ten years ago, could I predict this 341 00:18:25,119 --> 00:18:27,080 Speaker 1: kind of growth? I don't think anyone really could have 342 00:18:27,160 --> 00:18:29,240 Speaker 1: foreseen it. And I think there are a lot of 343 00:18:29,320 --> 00:18:33,640 Speaker 1: forces in play. Obviously, Uh, the brands, the intellectual properties 344 00:18:33,680 --> 00:18:37,480 Speaker 1: associated with these entities are huge, and they're being consumed 345 00:18:37,480 --> 00:18:40,240 Speaker 1: globally now. So you know, this is a major brands 346 00:18:40,240 --> 00:18:43,119 Speaker 1: touch point for so many of the consumers in places 347 00:18:43,119 --> 00:18:45,919 Speaker 1: like China and the Middle East and so forth. We 348 00:18:46,000 --> 00:18:49,040 Speaker 1: see countries in places like the Middle East who are 349 00:18:49,040 --> 00:18:53,359 Speaker 1: trying to shift from a petro based economy to entertainment 350 00:18:53,359 --> 00:18:56,560 Speaker 1: and tourism. And we've been involved in some of these projects, 351 00:18:56,760 --> 00:18:59,320 Speaker 1: and one of the things that's interesting about those is 352 00:18:59,320 --> 00:19:02,560 Speaker 1: that those our tantamount to building a new national identity. 353 00:19:02,720 --> 00:19:05,760 Speaker 1: You know, think of the UAE as a destination, not 354 00:19:05,960 --> 00:19:08,520 Speaker 1: as a place of oil wealth. I love that Paul 355 00:19:08,600 --> 00:19:11,520 Speaker 1: is interested in, you know, how businesses are expanding into 356 00:19:11,560 --> 00:19:14,080 Speaker 1: theme parks and I'm just wondering, are my children going 357 00:19:14,119 --> 00:19:15,919 Speaker 1: to die on these things? And I'm wondering, you know, 358 00:19:15,960 --> 00:19:19,000 Speaker 1: there's a rumor. I remember a sort of old wives 359 00:19:19,040 --> 00:19:22,160 Speaker 1: tale that crazy people design these. Uh is that true 360 00:19:22,200 --> 00:19:23,639 Speaker 1: that they sort of get mad men to go in 361 00:19:23,680 --> 00:19:27,840 Speaker 1: there and imagine the craziest pattern and then they create 362 00:19:27,920 --> 00:19:30,159 Speaker 1: that recreate that. You know, you'd be surprised. I mean, 363 00:19:30,200 --> 00:19:32,760 Speaker 1: there is a crazy aspect to it, right, But but 364 00:19:32,840 --> 00:19:37,440 Speaker 1: we're working with some of the most precise Swiss engineers 365 00:19:37,720 --> 00:19:40,560 Speaker 1: in the world who are calculating g forces that your 366 00:19:40,640 --> 00:19:43,560 Speaker 1: children would experience on the ride. And it is they 367 00:19:43,720 --> 00:19:47,080 Speaker 1: know so much now about the physiological effects of rides 368 00:19:47,160 --> 00:19:49,280 Speaker 1: that you know, what a person can tolerate and what 369 00:19:49,359 --> 00:19:52,640 Speaker 1: a broad range of people can tolerate. Right, So, um, 370 00:19:52,640 --> 00:19:56,719 Speaker 1: they're very precise about all this, so don't worry. And 371 00:19:56,720 --> 00:19:59,520 Speaker 1: how much is sort of an average cause to how 372 00:19:59,600 --> 00:20:02,320 Speaker 1: much can people charged for one ride? Oh, I don't know. 373 00:20:02,400 --> 00:20:04,240 Speaker 1: You know, most of them are packaged in the context 374 00:20:04,280 --> 00:20:08,320 Speaker 1: of large attractions like theme parks and so uh. But 375 00:20:08,400 --> 00:20:10,280 Speaker 1: it is interesting that there are r a y on 376 00:20:10,320 --> 00:20:12,679 Speaker 1: a new coaster in an existing theme park. You know, 377 00:20:12,720 --> 00:20:14,760 Speaker 1: this thing is often pained for itself within a year 378 00:20:14,840 --> 00:20:17,760 Speaker 1: or two. And that's remarkable. Yeah, it's it's just amazing. 379 00:20:17,880 --> 00:20:20,959 Speaker 1: You know, when the Comcast Corporation bought NBC Universal. They 380 00:20:21,320 --> 00:20:23,040 Speaker 1: kind of thought the theme park business, which is a 381 00:20:23,080 --> 00:20:25,280 Speaker 1: throwaway business. They were buying the cable networks and the 382 00:20:25,320 --> 00:20:28,280 Speaker 1: studios and things like that. But they've since found that 383 00:20:28,320 --> 00:20:31,400 Speaker 1: it is one of the best, consistent, most profitable businesses, 384 00:20:31,920 --> 00:20:33,919 Speaker 1: uh they have. So, so, what are some of the 385 00:20:34,000 --> 00:20:37,919 Speaker 1: cool projects you're either working on or have you've recently launched. 386 00:20:37,920 --> 00:20:39,560 Speaker 1: What are you guys doing well? Since we were talking 387 00:20:39,560 --> 00:20:42,600 Speaker 1: about the global theme park industry, I would mention Ocean Kingdom, 388 00:20:42,840 --> 00:20:46,720 Speaker 1: which was built in China before Disney Shanghai opened, and 389 00:20:47,000 --> 00:20:49,479 Speaker 1: until Disney Shanghai opened, I would say it was probably 390 00:20:49,520 --> 00:20:52,320 Speaker 1: the best, arguably the best theme park in China, built 391 00:20:52,359 --> 00:20:54,600 Speaker 1: near Hong Kong and Macau. And in fact, one of 392 00:20:54,600 --> 00:20:57,240 Speaker 1: the big plans for that park was that the Hong 393 00:20:57,280 --> 00:21:00,800 Speaker 1: Kong to chew Hi Bridge would open. It's the largest, 394 00:21:00,840 --> 00:21:03,119 Speaker 1: the longest oversea bridge in the world, so it's fifty 395 00:21:03,119 --> 00:21:05,800 Speaker 1: two kilometers, So now you can go directly from Hong 396 00:21:05,880 --> 00:21:09,400 Speaker 1: Kong to this park and and without a necessarily even 397 00:21:09,440 --> 00:21:12,840 Speaker 1: having a Chinese visa, so that that that project is 398 00:21:12,840 --> 00:21:15,320 Speaker 1: now hosting about ten million visitors a year. So I'm 399 00:21:15,320 --> 00:21:17,960 Speaker 1: wondering you know, we hear a lot about the experience 400 00:21:18,000 --> 00:21:20,240 Speaker 1: and how important it is. I'm wondering, can you imagine 401 00:21:20,280 --> 00:21:22,959 Speaker 1: a Macy's roller coaster and orders from roller coaster at 402 00:21:22,960 --> 00:21:26,320 Speaker 1: will point to two retailers and malls get into it. 403 00:21:26,400 --> 00:21:28,400 Speaker 1: You know, it's interesting. I think that I think that 404 00:21:28,440 --> 00:21:30,520 Speaker 1: there's a lot of room for growth. I mean, I 405 00:21:30,520 --> 00:21:33,959 Speaker 1: think that the new wave of intellectual properties that we 406 00:21:34,000 --> 00:21:37,040 Speaker 1: see connected to theme park and roller coaster experiences are 407 00:21:37,359 --> 00:21:41,359 Speaker 1: video games for instance, you know, highly immersive story based 408 00:21:41,400 --> 00:21:44,720 Speaker 1: experiences that that are very visceral, right, so it translates 409 00:21:44,720 --> 00:21:47,920 Speaker 1: beautifully into something like a like a ride. Um. But yeah, 410 00:21:47,960 --> 00:21:50,400 Speaker 1: I think I think that more consumer brands will find 411 00:21:50,400 --> 00:21:52,919 Speaker 1: their way into this into this area as well. And 412 00:21:52,960 --> 00:21:55,159 Speaker 1: what are some of the technologies that are driving And 413 00:21:55,200 --> 00:21:56,800 Speaker 1: you said, you've you know, you've got some of these 414 00:21:56,920 --> 00:21:59,879 Speaker 1: amazing world class and engineers. I would think, you know, 415 00:22:00,320 --> 00:22:02,760 Speaker 1: consumers they you know, just I would guess their demands 416 00:22:02,760 --> 00:22:06,440 Speaker 1: are always going up in the Millennials want this wonderful experience. 417 00:22:06,440 --> 00:22:07,959 Speaker 1: What are some of the new technologies that you think 418 00:22:08,000 --> 00:22:09,760 Speaker 1: you're going to be important going forward? Well, I think 419 00:22:09,800 --> 00:22:12,520 Speaker 1: I think the integration of story and media is going 420 00:22:12,560 --> 00:22:15,440 Speaker 1: to change continue to change this. Obviously with you know, 421 00:22:15,520 --> 00:22:18,320 Speaker 1: the Harry Potter project down in Orlando for the Universal, 422 00:22:18,680 --> 00:22:22,919 Speaker 1: they went into new avenues of exploration of how you 423 00:22:23,040 --> 00:22:25,719 Speaker 1: how you take a coaster which is a moving experience 424 00:22:25,800 --> 00:22:28,480 Speaker 1: and yet you have it makes sense visually and you know, 425 00:22:28,560 --> 00:22:32,240 Speaker 1: cognitively to to a visitor flying through some environment and 426 00:22:32,280 --> 00:22:34,800 Speaker 1: the story is still powerful and apparent to you know, 427 00:22:34,840 --> 00:22:37,360 Speaker 1: the hippogriff is chasing you or whatever whatever it is. 428 00:22:37,800 --> 00:22:40,040 Speaker 1: But I think that you know, we we we put 429 00:22:40,119 --> 00:22:42,760 Speaker 1: VR glasses on people. You know, you've done all of 430 00:22:42,800 --> 00:22:45,399 Speaker 1: this sort of thing. That's so cool. So what's been 431 00:22:45,440 --> 00:22:50,600 Speaker 1: your favorite project to work on? You know, I don't 432 00:22:50,680 --> 00:22:53,200 Speaker 1: choose between my children right now. I think I think 433 00:22:53,240 --> 00:22:55,760 Speaker 1: that that, uh, there are a lot of good ones. 434 00:22:55,800 --> 00:22:58,520 Speaker 1: I think some of them are not theme park based. Okay, 435 00:22:58,560 --> 00:23:01,240 Speaker 1: So so I love the American Space program. So we 436 00:23:01,280 --> 00:23:04,240 Speaker 1: did a project called Space Shuttle Atlantis at Kennedy Space Center, 437 00:23:04,320 --> 00:23:07,840 Speaker 1: which celebrated the completion of the Space Shuttle program and 438 00:23:07,840 --> 00:23:10,119 Speaker 1: and is now you know, hosting a couple of million 439 00:23:10,119 --> 00:23:12,400 Speaker 1: people a year there. And it's not the biggest thing 440 00:23:12,400 --> 00:23:14,639 Speaker 1: we've ever done, about a hundred million, but it's but 441 00:23:14,720 --> 00:23:17,879 Speaker 1: it's very powerful, and it replicates the experience of launching 442 00:23:17,880 --> 00:23:20,520 Speaker 1: into space. It does, and it also has the actual 443 00:23:20,560 --> 00:23:23,600 Speaker 1: space shuttle Space Shuttle Atlantis, which went into space thirty 444 00:23:23,600 --> 00:23:26,040 Speaker 1: three times and fortunately came back so we can put 445 00:23:26,040 --> 00:23:28,720 Speaker 1: it in a museum. That's so cool. How many times 446 00:23:29,040 --> 00:23:31,320 Speaker 1: in a row can you go on a I don't know. 447 00:23:31,400 --> 00:23:33,919 Speaker 1: It's again. We had a lot of fun in the 448 00:23:34,000 --> 00:23:35,679 Speaker 1: early days, you know that was that was a lot 449 00:23:35,720 --> 00:23:37,320 Speaker 1: of fun. But that my kids love it. And I 450 00:23:37,400 --> 00:23:39,200 Speaker 1: tell you that the team park business is a fantastic 451 00:23:39,240 --> 00:23:42,520 Speaker 1: business and the millennials love the experience absolutely. Mike cons 452 00:23:42,560 --> 00:23:44,159 Speaker 1: and thank you so much for being with us. My 453 00:23:44,280 --> 00:23:47,000 Speaker 1: Consint a chief executive officer of p G a V 454 00:23:47,240 --> 00:23:50,479 Speaker 1: Destinations based in St. Louis, joining us here in our 455 00:23:50,480 --> 00:23:54,280 Speaker 1: Bloomberg Interactive Brokers studios. I gotta say I can't go 456 00:23:54,320 --> 00:23:56,360 Speaker 1: on roller coasters the way I used to, but they 457 00:23:56,400 --> 00:23:59,000 Speaker 1: always look amazing. And I will say Coney Island is 458 00:23:59,000 --> 00:24:12,520 Speaker 1: a lot of fun too. On the phone with us 459 00:24:12,560 --> 00:24:15,240 Speaker 1: to discuss what's going on in the US airline businesses 460 00:24:15,280 --> 00:24:19,000 Speaker 1: George Ferguson. George is a senior aerospace, defense and airline 461 00:24:19,040 --> 00:24:22,040 Speaker 1: analyst at Bloomberg Intelligence He comes to us from Bloomberg 462 00:24:22,040 --> 00:24:25,639 Speaker 1: Intelligence headquarters in Princeton, New Jersey. So, George, thanks for 463 00:24:25,680 --> 00:24:27,680 Speaker 1: being with us. And I know you're busy this morning 464 00:24:27,760 --> 00:24:30,480 Speaker 1: with a lot of these earnings, resorts reports and pretty 465 00:24:30,480 --> 00:24:33,400 Speaker 1: good numbers. So what are the highlights from your perspective? Yeah, 466 00:24:33,440 --> 00:24:36,360 Speaker 1: I think the markets. Uh, well, first, good morning, thanks 467 00:24:36,359 --> 00:24:39,159 Speaker 1: for having on. Paul. Good good talk to you. Um. 468 00:24:39,200 --> 00:24:41,880 Speaker 1: I think the excitement here is is a bit about American, 469 00:24:41,960 --> 00:24:46,840 Speaker 1: which is showing capacity increases I think lower than we 470 00:24:46,880 --> 00:24:50,240 Speaker 1: all expected. Um, They're a little more contained, and I 471 00:24:50,280 --> 00:24:52,160 Speaker 1: think there's some hope in the industry that we could 472 00:24:52,160 --> 00:24:56,760 Speaker 1: see less capacity come to the business over which would 473 00:24:56,760 --> 00:24:59,200 Speaker 1: help fairs. Uh. You know, if we can get fairs 474 00:24:59,240 --> 00:25:01,680 Speaker 1: to rise in this busines, we could probably improve profit 475 00:25:01,760 --> 00:25:06,160 Speaker 1: margins year over year. What about pricing power? Yeah, So 476 00:25:06,920 --> 00:25:08,680 Speaker 1: what I told you was where I thought the excitement 477 00:25:08,720 --> 00:25:11,640 Speaker 1: was coming from. Um, what I think is that there's 478 00:25:11,640 --> 00:25:13,920 Speaker 1: still too much capacity coming to this market and that's 479 00:25:13,920 --> 00:25:18,000 Speaker 1: going to really challenge pricing power. So American looked kind 480 00:25:18,000 --> 00:25:21,399 Speaker 1: of contained in their discussions about capacity uh this morning. 481 00:25:22,160 --> 00:25:25,480 Speaker 1: But we've got Delta and United, which you're adding. I 482 00:25:25,520 --> 00:25:27,879 Speaker 1: think you know, United have like five percent in the 483 00:25:27,920 --> 00:25:32,120 Speaker 1: first quarter, Delta like four percent. We're still growing, They're 484 00:25:32,119 --> 00:25:36,360 Speaker 1: still growing at rates above GDP growth, and so we 485 00:25:36,440 --> 00:25:40,480 Speaker 1: think that's a negative for pricing power. Well, most people 486 00:25:40,520 --> 00:25:44,480 Speaker 1: are are predicting, most airlines predicting guiding to sort of 487 00:25:44,560 --> 00:25:49,600 Speaker 1: flat to hire uh you know, revenue per available seat 488 00:25:49,600 --> 00:25:53,000 Speaker 1: mile or whatever metric they're using. I think there's still 489 00:25:53,119 --> 00:25:55,800 Speaker 1: some some potential here for weekness. We could be flat 490 00:25:55,920 --> 00:25:58,520 Speaker 1: or even down. And I think another challenge we have 491 00:25:58,600 --> 00:26:01,280 Speaker 1: out there is this him it shut down, and as 492 00:26:01,320 --> 00:26:04,119 Speaker 1: it drags on, I think there's a risk that flyers 493 00:26:04,200 --> 00:26:07,040 Speaker 1: won't want to be booking uh, you know, trips, they 494 00:26:07,040 --> 00:26:09,840 Speaker 1: won't be going to the airport and managing potential risk 495 00:26:09,920 --> 00:26:13,040 Speaker 1: with security. So I think one que especially, we could 496 00:26:13,040 --> 00:26:15,240 Speaker 1: have some challenges from that as well. But I think 497 00:26:15,280 --> 00:26:17,359 Speaker 1: pricing power is the big challenge. So what did the 498 00:26:17,640 --> 00:26:20,840 Speaker 1: as you listen to the quarterly conference calls with management, 499 00:26:20,960 --> 00:26:23,040 Speaker 1: what are they saying about the shutdown? Are they in 500 00:26:23,119 --> 00:26:27,240 Speaker 1: fact seeing any early signs to demand? Yes, so I'd say, 501 00:26:28,320 --> 00:26:30,480 Speaker 1: you know, United in Delta came much earlier, so there 502 00:26:30,520 --> 00:26:33,400 Speaker 1: wasn't a lot of commentary. We've just gotten through American 503 00:26:33,520 --> 00:26:36,399 Speaker 1: now it's it's closing as we speak. UM, not a 504 00:26:36,440 --> 00:26:40,320 Speaker 1: lot of commentary on the government shutdown yet. I've seen 505 00:26:40,359 --> 00:26:44,280 Speaker 1: some numbers thrown around the industry that maybe it's impacted 506 00:26:44,359 --> 00:26:46,760 Speaker 1: revenues by a hundred or a hundred and fifty million 507 00:26:46,800 --> 00:26:49,199 Speaker 1: dollars or you know, sort of a hundred million dollar levels. 508 00:26:49,720 --> 00:26:53,359 Speaker 1: And we're talking about industry that's going to have probably 509 00:26:53,440 --> 00:26:56,840 Speaker 1: thirty billion in revenues in one queue. So so far, 510 00:26:57,760 --> 00:27:01,439 Speaker 1: estimates are that it really hasn't impacted much. But remember, 511 00:27:01,480 --> 00:27:04,640 Speaker 1: we've gone through one miss paycheck, um, and we're getting 512 00:27:04,680 --> 00:27:06,560 Speaker 1: ready to come up to the second miss paycheck for 513 00:27:06,640 --> 00:27:09,480 Speaker 1: T s A workers this Friday, and I think things 514 00:27:09,520 --> 00:27:12,399 Speaker 1: get a bit more precarious after that about getting this 515 00:27:12,440 --> 00:27:15,399 Speaker 1: people to strow up to work, and you know, clearing 516 00:27:15,400 --> 00:27:19,520 Speaker 1: security lines are having security lines flow smoothly. So, George, 517 00:27:19,560 --> 00:27:21,600 Speaker 1: can you set us up taking a step back at 518 00:27:21,640 --> 00:27:26,679 Speaker 1: the war between the older behemoths in the airline industry 519 00:27:26,720 --> 00:27:29,119 Speaker 1: and the sort of newer upstarts that have catered to 520 00:27:29,119 --> 00:27:32,280 Speaker 1: people who are looking for discount fairs Southwestern Jet Blue 521 00:27:32,359 --> 00:27:35,600 Speaker 1: versus Delta an American, And I'm wondering how that's lighting up, 522 00:27:35,600 --> 00:27:38,960 Speaker 1: And I'm I'm pitting these against each other because of 523 00:27:39,040 --> 00:27:42,240 Speaker 1: the unions, because of the legacy workers and some of 524 00:27:42,280 --> 00:27:46,000 Speaker 1: the other issues that Delta an American have been pretty 525 00:27:46,040 --> 00:27:48,640 Speaker 1: vocal about. Where are we on that? Yeah, I mean, 526 00:27:49,040 --> 00:27:52,560 Speaker 1: so we expect it. We haven't gotten a full guide 527 00:27:52,560 --> 00:27:57,240 Speaker 1: into some of those fast movers yet, but we've looked 528 00:27:57,240 --> 00:27:59,480 Speaker 1: at the number of airplanes they're receiving and some of 529 00:27:59,480 --> 00:28:03,600 Speaker 1: their sc jeels guidance, and we really expect that. You know, 530 00:28:03,640 --> 00:28:05,359 Speaker 1: the ones that will bring a lot of capacity to 531 00:28:05,359 --> 00:28:07,200 Speaker 1: the market, the airlines and bring a lot of capacity 532 00:28:07,240 --> 00:28:12,880 Speaker 1: will be Frontier, will be Spirit airlines, even Jet Blue 533 00:28:12,920 --> 00:28:16,200 Speaker 1: is probably a bit a bit contained Southwest, those even 534 00:28:16,200 --> 00:28:19,720 Speaker 1: talking about five pc growth. So I think what you 535 00:28:19,800 --> 00:28:21,919 Speaker 1: had here is you have these these ultra low costs 536 00:28:21,960 --> 00:28:25,600 Speaker 1: which have absolutely the cheapest cost to deliver seats in 537 00:28:25,640 --> 00:28:29,560 Speaker 1: the air continue to add large amounts of capacity because 538 00:28:30,040 --> 00:28:34,040 Speaker 1: airplanes are relatively cheap, less lessers, least rates, and some 539 00:28:34,119 --> 00:28:37,160 Speaker 1: of the newest airplanes are actually dropping right now. Um, 540 00:28:37,200 --> 00:28:41,280 Speaker 1: so these airlines can go secure lift fairly cheaply, and 541 00:28:41,320 --> 00:28:44,320 Speaker 1: they're really expanding and looking for market share. And if 542 00:28:44,320 --> 00:28:47,680 Speaker 1: you're Southwest, you just can't let that happen, uh more 543 00:28:47,720 --> 00:28:51,640 Speaker 1: so than the Americans and the United's UM and the Deltas, 544 00:28:51,640 --> 00:28:54,400 Speaker 1: which have more of a business component. But but so 545 00:28:54,440 --> 00:28:56,240 Speaker 1: I think, you know, part of this drive is again 546 00:28:56,280 --> 00:28:59,479 Speaker 1: those ultralow costs, which which can deliver seat miles cheaper, 547 00:29:00,120 --> 00:29:03,640 Speaker 1: contuning continue to keep the heat on the industry, and 548 00:29:03,680 --> 00:29:06,520 Speaker 1: it's hurting. You know, it's hurting the Southwest. It's even 549 00:29:06,560 --> 00:29:09,840 Speaker 1: hurting the Deltas, United's and Americans because of the back 550 00:29:09,840 --> 00:29:12,240 Speaker 1: of their cabins are filled with flyers that are flying 551 00:29:12,320 --> 00:29:15,600 Speaker 1: once or twice a year and are very, very price sensitive. 552 00:29:15,960 --> 00:29:18,080 Speaker 1: And I think and see sort of get that get 553 00:29:18,160 --> 00:29:22,960 Speaker 1: some relief from that aggressive expansion from those UH spirits 554 00:29:23,080 --> 00:29:26,240 Speaker 1: and UH and Frontiers and allegiance, it's going to be 555 00:29:26,240 --> 00:29:28,400 Speaker 1: hard to see pricing power come back to this industry. 556 00:29:28,880 --> 00:29:30,600 Speaker 1: Let's look at the cost side of the equation a 557 00:29:30,600 --> 00:29:33,240 Speaker 1: little bit, George. We've got the crude oil down around 558 00:29:33,240 --> 00:29:37,680 Speaker 1: fifty two a barrel. I'm guessing fuel has the relatively 559 00:29:37,680 --> 00:29:40,440 Speaker 1: lower fuel costs have been a tail wind, so to speak, 560 00:29:40,480 --> 00:29:42,840 Speaker 1: for the airlines. What are they saying about their outlook 561 00:29:42,880 --> 00:29:45,280 Speaker 1: for fuel? Yeah, so you know we're hearing a lot 562 00:29:45,280 --> 00:29:48,440 Speaker 1: of them give us uh, guidance for at least one 563 00:29:48,520 --> 00:29:51,440 Speaker 1: queue and sort of the two two dollars and five 564 00:29:51,440 --> 00:29:54,840 Speaker 1: cent range that's gonna look. It's gonna look a little 565 00:29:54,840 --> 00:29:56,880 Speaker 1: bit lower than some of them paid last year, but 566 00:29:56,960 --> 00:29:59,360 Speaker 1: not a lot. So it's so it's not a lot 567 00:29:59,400 --> 00:30:02,560 Speaker 1: of a pickup. You know. One of the perverse problems 568 00:30:02,600 --> 00:30:07,320 Speaker 1: with that is that as fuel prices stay contained, older 569 00:30:07,360 --> 00:30:11,160 Speaker 1: airplanes are more economical to fly, and so more people 570 00:30:11,240 --> 00:30:13,720 Speaker 1: fly more of their equipment instead of retiring it because 571 00:30:13,760 --> 00:30:16,840 Speaker 1: of uh, you know, because of an efficiency, and that 572 00:30:16,920 --> 00:30:19,520 Speaker 1: sort of leads to a little more capacity in the industry. 573 00:30:19,600 --> 00:30:21,760 Speaker 1: So it's it's kind of a double edged sword there. 574 00:30:22,200 --> 00:30:25,479 Speaker 1: So George, as you're talking, I just pulled up Google 575 00:30:25,480 --> 00:30:27,240 Speaker 1: Flights since sort of thinking, all right, I want to 576 00:30:27,280 --> 00:30:29,360 Speaker 1: check out some of these prices that are rock bottom. 577 00:30:29,480 --> 00:30:31,400 Speaker 1: They're not that rock bottom. First of all, let's just 578 00:30:31,440 --> 00:30:33,480 Speaker 1: put that out there. And then you also have a 579 00:30:33,520 --> 00:30:36,360 Speaker 1: situation where you're paying for everything under the sun, from 580 00:30:36,400 --> 00:30:38,440 Speaker 1: your coke can to the extra space that you have 581 00:30:38,520 --> 00:30:41,360 Speaker 1: to breathe right above your nose. I'm just wondering, do 582 00:30:41,400 --> 00:30:44,640 Speaker 1: you expect an increase in those add ons that you 583 00:30:44,640 --> 00:30:47,160 Speaker 1: have to pay for that we see as a common 584 00:30:47,200 --> 00:30:50,280 Speaker 1: feature of the frontiers of the world, for example. So 585 00:30:50,360 --> 00:30:53,280 Speaker 1: I don't expect an increase. I expect that they'll continue 586 00:30:53,320 --> 00:30:56,160 Speaker 1: the strategy that if you show up at the airport 587 00:30:56,200 --> 00:30:58,120 Speaker 1: and you don't know whether or not you've got bags, 588 00:30:58,560 --> 00:31:01,080 Speaker 1: you've got your bags on the flight, you'll find it 589 00:31:01,160 --> 00:31:03,400 Speaker 1: that you probably haven't paid for the bags, and it's 590 00:31:03,440 --> 00:31:04,840 Speaker 1: going to cost you a heck of a lot more 591 00:31:04,880 --> 00:31:08,400 Speaker 1: at the airport than it will at you know, if 592 00:31:08,440 --> 00:31:11,360 Speaker 1: you did it when you booked, So if you had 593 00:31:11,400 --> 00:31:13,680 Speaker 1: any questions about whether you did have an extra fee, 594 00:31:13,680 --> 00:31:16,960 Speaker 1: the answer is yes. George Ferguson, we love having you on. 595 00:31:17,080 --> 00:31:20,240 Speaker 1: Thank you so much. George Ferguson, Senior Aerospace, Defense and 596 00:31:20,360 --> 00:31:24,480 Speaker 1: Airlines analyst for Bloomberg Intelligence. Thanks for listening to the 597 00:31:24,520 --> 00:31:27,120 Speaker 1: Bloomberg P and L podcast. You can subscribe and listen 598 00:31:27,160 --> 00:31:30,520 Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer. 599 00:31:30,880 --> 00:31:33,640 Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa 600 00:31:33,680 --> 00:31:36,320 Speaker 1: abram Woyit's I'm on Twitter at Lisa abram woits one 601 00:31:36,520 --> 00:31:39,080 Speaker 1: before the podcast. You can always catch us worldwide on 602 00:31:39,160 --> 00:31:40,000 Speaker 1: Bloomberg Radio.