WEBVTT - Venezuela Bonds Have More Upside On Regime Change 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.960 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.080 at Bloomberg dot com. Well, right now, Venezuela has two 0:00:23.239 --> 0:00:27.200 presidents sort of. The current president of the person who 0:00:27.200 --> 0:00:29.840 has been in charge, Nicholas Maduro, has come under a 0:00:29.920 --> 0:00:32.519 president of pressure. We have a new thirty five year 0:00:32.560 --> 0:00:35.520 old who declared himself the rightful president of the nation 0:00:35.840 --> 0:00:39.000 in front of the National Assembly's thirty five years old. 0:00:39.479 --> 0:00:43.560 He is uh Guido, who is actually represent was actually 0:00:43.600 --> 0:00:47.240 supported by President Trump and a host of other nations. 0:00:47.320 --> 0:00:49.479 Joining us down to talk about this. Eric Fine, portfolio 0:00:49.520 --> 0:00:53.680 manager focusing on the emerging markets fixed income strategy at 0:00:53.760 --> 0:00:55.920 Vannet Global in New York, joining us here in our 0:00:55.960 --> 0:00:59.120 interactive broker studios. Eric, thank you so much for being here. 0:01:00.040 --> 0:01:03.720 Why is this different than previous bouts of turmoil and 0:01:03.800 --> 0:01:07.560 unrest in Venezuela? Yep, great, great, question um number one, 0:01:07.600 --> 0:01:10.480 a new president was sworn in the That was the 0:01:10.520 --> 0:01:13.679 event um number two. Of a range of countries in 0:01:13.680 --> 0:01:17.560 the hemisphere UH recognized him as a new president, including 0:01:17.600 --> 0:01:19.600 the U S which is important because it has sticks 0:01:20.240 --> 0:01:24.720 um everything from UH the you know, an extreme version 0:01:24.760 --> 0:01:29.480 would be military action or freezing or diverting control of 0:01:29.520 --> 0:01:32.240 assets let's say Petavesa or certainly Sitco, which is in 0:01:32.280 --> 0:01:35.320 the US, the refineries in the US. Another one is 0:01:35.520 --> 0:01:38.560 another important thing to notice that violence was relatively low 0:01:38.560 --> 0:01:43.199 compared to the last big protests in indicating um reluctance 0:01:43.240 --> 0:01:46.000 on the possibly indicating reluctance on the part of security 0:01:46.000 --> 0:01:50.400 forces to to you know, confront the population UM. And similarly, 0:01:50.480 --> 0:01:53.760 when Maduro gave his speech at the presidential palace UM 0:01:53.800 --> 0:01:56.160 there were not a lot of the not a lot 0:01:56.200 --> 0:01:59.760 of key high command officials standing next to him. Normally, 0:01:59.800 --> 0:02:03.600 when the president would say there's UH, there's a coup attempt, 0:02:03.680 --> 0:02:06.320 you would expect not just the defense minister to issue 0:02:06.320 --> 0:02:08.040 a Twitter statement, You'd expect a lot of the high 0:02:08.080 --> 0:02:10.079 command to do it as well. So I'd say those 0:02:10.080 --> 0:02:11.840 are the key those are the key developments. But the 0:02:11.840 --> 0:02:14.920 most important a new president was sworn in and a 0:02:15.080 --> 0:02:18.400 number of key countries recognized him. So I thought that 0:02:18.480 --> 0:02:21.280 was critical that the fact that you know, recognized so 0:02:21.360 --> 0:02:25.320 quickly by many countries three minutes afterwards exactly. So, um, 0:02:25.360 --> 0:02:28.600 what are the next steps that investors should be looking 0:02:28.639 --> 0:02:32.960 forward to see which way this thing could go? I, Uh, 0:02:33.000 --> 0:02:35.960 it's very dynamic, So it's hard to say. There's a 0:02:36.040 --> 0:02:40.920 strong temptation to say it's binary. Either the opposition wins 0:02:41.160 --> 0:02:45.480 and Maduro's out, or Maduro's out, or more remains and 0:02:45.560 --> 0:02:47.880 muddles through for another few months, and in which case, 0:02:47.880 --> 0:02:49.959 you know, we'll just keep talking about it and we'll 0:02:49.960 --> 0:02:52.520 see then. Um, I would say there might be and 0:02:52.560 --> 0:02:56.720 I'd say that those are two serious scenarios. Um, But 0:02:56.840 --> 0:02:59.640 there's a third scenario in which the military fractures. A 0:02:59.639 --> 0:03:02.320 lot of a lot of the powerful folks in the 0:03:02.320 --> 0:03:07.119 military are on sanctions lists with the US, and so 0:03:07.280 --> 0:03:10.520 an amnesty domestically isn't going to really mean much to them. 0:03:10.880 --> 0:03:13.400 They the temptation for them is to dig in their heels. 0:03:13.400 --> 0:03:16.440 So I'd say there is that risky scenario of the 0:03:16.480 --> 0:03:18.880 military breaking up in the fractions, But I basically look 0:03:18.960 --> 0:03:23.360 for disaffection within the military disaffection between the military and 0:03:23.400 --> 0:03:26.480 the government. Um U. S actions can do a lot 0:03:26.480 --> 0:03:30.080 of can can can really pressure things, um UM. But 0:03:30.160 --> 0:03:33.120 there is this other scenario of of of factionalization, which 0:03:33.120 --> 0:03:35.600 could you know, which means we'll have to keep talking 0:03:35.640 --> 0:03:39.000 about it. So Venezuela is a really important country for 0:03:39.160 --> 0:03:41.840 the entire Latin American economy, given how much of an 0:03:41.840 --> 0:03:46.640 oil producer it is. It also is a very big obligor, right. 0:03:46.640 --> 0:03:49.080 I mean, it has seventy two billion dollars of debt, 0:03:49.320 --> 0:03:52.200 including a whole host of bonds that are default. Of 0:03:52.280 --> 0:03:55.120 the prices on those bonds surging on the hope that 0:03:55.240 --> 0:03:57.440 Nicholas Maduro will get kicked out of power and we'll 0:03:57.480 --> 0:04:01.880 get someone else in Guido in particular, How hopeful are 0:04:01.960 --> 0:04:06.360 you that this price rise in these bonds is legitimate? 0:04:06.400 --> 0:04:08.520 I mean, are you are you going more heavily into 0:04:08.600 --> 0:04:12.440 Venezuela dead? So UM, we can only comment on where 0:04:12.440 --> 0:04:14.320 we were at the end of December, because we're in 0:04:14.320 --> 0:04:16.080 the middle of January, and at the end of December 0:04:16.120 --> 0:04:19.240 we did have an overweight exposure to Venezuela. UM and 0:04:19.320 --> 0:04:22.159 it was optionality was that this scenario was possible and 0:04:22.200 --> 0:04:23.800 if it happened, there was a lot of upside, and 0:04:23.839 --> 0:04:26.320 if it didn't happen, we were kind of already there. 0:04:26.440 --> 0:04:30.240 UM and so UM, I think there there remains significant 0:04:30.320 --> 0:04:33.320 upside to the bonds, UM, but one needs to be 0:04:33.360 --> 0:04:36.120 sensitive and cautious about that scenario I mentioned. I think 0:04:36.160 --> 0:04:38.600 that's the risky scenario. UM. I would say that the 0:04:38.680 --> 0:04:42.840 upside for Venezuela is there are many reasons for it, 0:04:42.880 --> 0:04:45.479 but one is with the high you know, among the 0:04:45.520 --> 0:04:48.320 highest proven oil reserves in the world. That's the kind 0:04:48.320 --> 0:04:50.800 of situation where credit can turn around very very quickly 0:04:51.200 --> 0:04:53.960 with US and I m F support. Moreover, in a 0:04:54.279 --> 0:04:57.200 by definition of friendly government. In this scenario, UM, you 0:04:57.240 --> 0:05:00.520 can get the key thing that I've seen defining good workouts, 0:05:00.520 --> 0:05:02.800 which is quick. Right. So I've been you know, I've 0:05:02.800 --> 0:05:05.760 been doing this for decades and I guess almost thirty years. 0:05:06.080 --> 0:05:09.279 The often, the most usually, the most important determinant of 0:05:09.279 --> 0:05:11.960 the value of a bond in a non performing situation 0:05:12.240 --> 0:05:14.760 is not the deal you get, it's how quickly it comes. 0:05:15.160 --> 0:05:17.599 You should be discounting these things at high high rates, 0:05:17.600 --> 0:05:19.400 and if it happens quickly, the price should go up. 0:05:19.520 --> 0:05:21.760 Let's just talk though, for a second, about the toll 0:05:21.839 --> 0:05:24.839 that the Nicholas Maduro regime has had on this nation. 0:05:24.920 --> 0:05:27.880 I mean it's lost tremendous numbers of its people. Its 0:05:27.920 --> 0:05:32.200 population has been decimated. I mean, is oil enough to 0:05:32.360 --> 0:05:36.480 make its economy strong enough to legitimize its debtload and 0:05:36.640 --> 0:05:40.279 legitimize the pop in the in the bonds that we're seeing. Um, well, 0:05:40.320 --> 0:05:44.600 I think that's I think that's complicated. Um um. As 0:05:44.600 --> 0:05:47.760 a stand on a standalone basis, you could so I 0:05:47.760 --> 0:05:50.880 would say a few things. UM. Number one, it's not 0:05:51.200 --> 0:05:56.039 just um um oil. It's economic management. UM. There have 0:05:56.120 --> 0:05:59.240 been subs there, A lot of spending was essentially through 0:05:59.279 --> 0:06:02.800 subsidization of gasoline. Right you Famously you could pay a 0:06:02.880 --> 0:06:06.000 quarter to fill up your tank in a suburban um 0:06:06.120 --> 0:06:09.800 um and uh a quarter of US twenty five cents 0:06:09.880 --> 0:06:13.279 um worth of a bolivars um the absence of a 0:06:13.279 --> 0:06:17.080 floating exchange rate regime, which orthodox you know thinking would 0:06:17.080 --> 0:06:21.440 tell you is is reasonable or something towards that is reasonable. 0:06:21.560 --> 0:06:23.880 So it's not just the debt load. What I'd say 0:06:23.880 --> 0:06:25.480 about the debtload is there is going to be a 0:06:25.520 --> 0:06:29.520 renegotiation UM. And the renegotiation could create a lot of 0:06:29.600 --> 0:06:32.599 room a lot more room. So Peta Vesa has more 0:06:32.640 --> 0:06:36.600 bonded debt UM and less hidden debt. Venezuela, the obl 0:06:36.680 --> 0:06:41.119 board called Venezuela has more hidden debt and and less 0:06:41.560 --> 0:06:45.880 UH is the opposite situation. And very importantly, a lot 0:06:45.960 --> 0:06:49.400 of this hidden debt is Chinese and Russian and how 0:06:49.480 --> 0:06:53.400 that gets treated, and China in particular has not participated 0:06:53.760 --> 0:06:56.200 in the sort of post Breton Woods, Paris Club London 0:06:56.200 --> 0:06:58.320 Cup structure. That's a longer discussion. We talked about it 0:06:58.320 --> 0:07:01.200 when I was here last I'm a but debt diplomacy 0:07:01.320 --> 0:07:03.960 in UH was a big issue when I was last year. Actually, 0:07:04.000 --> 0:07:05.480 when you're asking me what happened and I'm f debt 0:07:05.480 --> 0:07:08.880 diplomacy and how China um, will you know the there's 0:07:08.880 --> 0:07:11.280 a caricature but lend money and then um when it 0:07:11.320 --> 0:07:13.880 doesn't get paid in the case of Shri Lunka, see support, right, 0:07:13.960 --> 0:07:15.880 That really is when you think about China and Russia. 0:07:15.880 --> 0:07:17.680 It's not just the US that has an interest here. 0:07:17.840 --> 0:07:20.240 China and Russia have been supporting Maduro. They have an 0:07:20.280 --> 0:07:24.040 interest there that to me represents I would guess if 0:07:24.080 --> 0:07:26.120 I'm thinking about the bonds or just the risk assessment 0:07:26.120 --> 0:07:30.800 of that country a significant risk for a viable workout 0:07:30.880 --> 0:07:32.920 solution that you might be interested in. Yes, it's a 0:07:33.040 --> 0:07:36.320 it's a it's a big risk depending on the political 0:07:36.320 --> 0:07:39.600 and policy scenario. And I'd say mostly the political scenario. Um, 0:07:39.640 --> 0:07:42.240 if you get one of these, if you get the 0:07:42.480 --> 0:07:44.280 what I think most people would say is the positive 0:07:44.320 --> 0:07:48.960 outcome of of of of the existing government leaving UM 0:07:49.000 --> 0:07:51.800 new government coming in led by Guido initially U S 0:07:52.000 --> 0:07:56.480 I M F announcing they're willing, willing to work with them. Um. 0:07:56.600 --> 0:08:00.920 Then um, I think, Uh, there's there's substantial further upside 0:08:00.920 --> 0:08:02.680 in the bonds, and I think we're gonna be looking 0:08:02.680 --> 0:08:05.680 at scenarios where where Russia and China get you know, 0:08:05.920 --> 0:08:09.280 those obligations might be in a completely different queue. I 0:08:09.280 --> 0:08:10.880 think the things that will be in the front of 0:08:10.880 --> 0:08:13.640 the queue or in one type of Q will obviously 0:08:13.680 --> 0:08:17.400 be petavas in Venezuela bonds. Pharmaceutical obligations are an obvious 0:08:17.480 --> 0:08:19.920 one too. You want the company's back, so things like that. 0:08:19.960 --> 0:08:22.560 But China, Russia, it's about the future and are they're 0:08:22.560 --> 0:08:24.000 going to be a big part of the future of 0:08:24.040 --> 0:08:26.440 a Venezuela with that leadership. I doubt it, so the 0:08:26.440 --> 0:08:29.680 incentives are low. Just thirty seconds here, I'm wondering if 0:08:29.720 --> 0:08:33.160 it's unfair to cast the US is support of Guido, 0:08:33.240 --> 0:08:36.679 the opposition leader, as yet another front of the US 0:08:36.800 --> 0:08:39.760 China battle. Absolutely, I would say not no, that, I 0:08:39.760 --> 0:08:42.199 would say, this is a domestic thing, and this is 0:08:42.360 --> 0:08:45.000 this is a domestic situation that's been festering for you 0:08:45.040 --> 0:08:49.600 could argue for over ten years, um and uh. The 0:08:49.640 --> 0:08:53.320 governments around the world are responding to it um. However, 0:08:53.720 --> 0:08:57.400 because China and Russia are involved, it may offer other 0:08:57.480 --> 0:09:01.880 opportunities for US geostras rategy to flex itself in an 0:09:01.880 --> 0:09:03.800 area where China and Russia really at the end of 0:09:03.840 --> 0:09:06.480 the day, are aren't aren't really involved, or it's not 0:09:06.520 --> 0:09:08.600 a big part of their national interests, when it's obviously 0:09:08.600 --> 0:09:11.360 a more clear part of US national interests. Eric, Fine, 0:09:11.400 --> 0:09:13.600 thank you so much for being with us. Really really 0:09:13.640 --> 0:09:16.480 wonderful insight on a day or we're actually starting to 0:09:16.480 --> 0:09:18.439 see some of the change come to fruition that people 0:09:18.440 --> 0:09:32.920 have been talking about in Venezuela. Market's kind of mixed 0:09:32.920 --> 0:09:34.760 here this morning, but I didn't notice, you know, just 0:09:34.760 --> 0:09:37.160 looking at my screen that year to date, the Russell 0:09:37.200 --> 0:09:39.840 two thousand is the best performer, up eight point three 0:09:40.960 --> 0:09:42.560 with us right now. To talk to us about what's 0:09:42.600 --> 0:09:44.840 going on a small capital is Dave Wilson, Bloomberg Stocks 0:09:44.880 --> 0:09:49.000 Reporter and Paul. We're actually seeing gains in the smaller 0:09:49.040 --> 0:09:53.400 companies today, unlike they're larger piers. The Russell two thousand index, 0:09:53.480 --> 0:09:57.480 up four tenths of a percent, is even hired by 0:09:57.480 --> 0:09:59.760 one tenth of a percent at the moment. Now, the 0:10:00.080 --> 0:10:03.600 Russell's sharpest game belongs to the the Triumph Groove, whose ticker 0:10:03.760 --> 0:10:06.920 is t g I. The aircraft parts maker has risen 0:10:06.960 --> 0:10:09.840 almost twenty eight percent trying for reach a deal to 0:10:09.880 --> 0:10:15.280 transfer a wing building business to Canada's Bombardier Invocare ticker 0:10:15.600 --> 0:10:18.440 i VC has gained ten a half percent. The healthcare 0:10:18.440 --> 0:10:21.360 distributor received a by rating and new coverage that Needum 0:10:21.520 --> 0:10:24.760 and Brooks Automation ticker b r k S is up 0:10:24.800 --> 0:10:28.800 eight percent now. This company supplies chip production software and services, 0:10:29.040 --> 0:10:32.640 so it's part of a much bigger rally after results 0:10:32.679 --> 0:10:36.240 from the chip equipment maker LAMB Research, as well as 0:10:36.320 --> 0:10:40.199 a chip companies Texas Instruments and zy Links. Now the 0:10:40.280 --> 0:10:43.439 Russell steepest drop belongs to Briggs and Stratton ticker b 0:10:43.640 --> 0:10:46.560 g g UH, the maker of Vengeance for lawnmowers and 0:10:46.600 --> 0:10:49.480 other equipment, is down almost sixty and a half percent 0:10:49.960 --> 0:10:53.000 after posting an unexpected loss for the physical second quarter, 0:10:53.240 --> 0:10:57.880 and Wave Life Sciences ticker w V has fallen. The 0:10:58.000 --> 0:11:00.439 drug developer is raising a hundred fifty million dollars to 0:11:00.600 --> 0:11:04.640 a share sale equivalent to a twelve percent stake. Dave Wilson, 0:11:04.720 --> 0:11:07.600 Bloomberg Stocks editor and a columnist as well as contributor 0:11:07.640 --> 0:11:09.480 to Bloomberg Television and Radio, thank you so much for 0:11:09.520 --> 0:11:12.200 being with us. I gotta say, Paul. One as a 0:11:12.240 --> 0:11:14.319 class that has remained very confusing to me over the 0:11:14.360 --> 0:11:17.240 past few weeks is oil. There's just so many conflicting 0:11:17.440 --> 0:11:20.040 issues here. On one hand, it's sort of a proxy 0:11:20.160 --> 0:11:23.160 for global growth and where people think it's going. On 0:11:23.200 --> 0:11:26.000 the other hand, it's a supplied demand picture. And to 0:11:26.200 --> 0:11:28.640 sort of pass us all out, UH, to give us 0:11:28.640 --> 0:11:31.600 a sense of where some of the oil executives are 0:11:31.600 --> 0:11:34.120 thinking things might be going, let's bring in Javier Blass, 0:11:34.120 --> 0:11:36.320 who is on site at Davos. He has our chief 0:11:36.400 --> 0:11:40.480 energy correspondent for Bloomberg, so have here right now. We're 0:11:40.559 --> 0:11:44.280 kind of going sideways. Actually looking at Brent. Uh, that's 0:11:44.280 --> 0:11:47.440 actually a little down on the day. I'm just wondering 0:11:47.440 --> 0:11:51.000 what the tone is among the oil executives and others 0:11:51.040 --> 0:11:53.880 that you're speaking with at Davos. The tone is positive 0:11:53.880 --> 0:11:56.640 for oil prices. At the executives think that the market 0:11:56.720 --> 0:12:00.760 is slowly tightening because Opec, I'm particularly the RABA are 0:12:00.840 --> 0:12:04.440 cutting production and they're cutting quite aggressively. But there are 0:12:04.480 --> 0:12:07.640 so many head winds. One is that OPEC was producing 0:12:07.679 --> 0:12:10.080 a lot at the end of last year. The other 0:12:10.120 --> 0:12:13.840 one is uncertainty around the global economy and also China. 0:12:14.240 --> 0:12:17.199 And the third one is that the US production, particularly 0:12:17.240 --> 0:12:20.800 in Texas and other places including Oklahoma and North Dakota, 0:12:20.880 --> 0:12:23.520 continues to be very strong and that is putting a 0:12:23.600 --> 0:12:27.640 cap on prices. Add to that, Iran and Venezuela and 0:12:27.679 --> 0:12:31.240 everyone here is positive but rather confused or where is 0:12:31.760 --> 0:12:34.480 gonna be the next leg for oil prices? Well have 0:12:34.640 --> 0:12:37.600 here you mentioned Venezuela and that country now has the 0:12:37.600 --> 0:12:40.440 benefit of the guess of two presidents um so obviously 0:12:40.440 --> 0:12:45.679 political instability in that very important important oil market. With 0:12:46.080 --> 0:12:48.280 you know, Venezuela. I was surprised to learn just recently 0:12:48.320 --> 0:12:51.559 in one of the largest oil reserves is held by Venezuela. 0:12:51.840 --> 0:12:53.760 What are you hearing over there as it relates to 0:12:54.320 --> 0:12:57.280 the political issue at Venezuela, what that might do to 0:12:57.600 --> 0:13:00.920 the future of oil markets well too. Things over the 0:13:00.960 --> 0:13:03.720 short term, everyone is concerned this could be a bullish 0:13:03.720 --> 0:13:06.560 factor for two reasons. One is that the White House 0:13:06.640 --> 0:13:10.360 is considering, but has not taken yet action about imposing 0:13:10.440 --> 0:13:14.360 oil sanctions on Venezuela that will be restricting or or 0:13:14.400 --> 0:13:18.839 including including banning the importation of Venezuelan and crude oil 0:13:18.840 --> 0:13:22.200 into the United States. Remember, Venezuela is the third largest 0:13:22.240 --> 0:13:25.200 source of crude oil for include oil for the US. 0:13:25.240 --> 0:13:27.520 That would be very bullish on the short term. Or 0:13:27.600 --> 0:13:30.559 it could be a situation of civil undras in the country, 0:13:30.600 --> 0:13:33.360 and again that will be bullish. Production could fall. But 0:13:33.480 --> 0:13:36.079 over the long term, if we have a transition or 0:13:36.160 --> 0:13:41.160 political transition, things could turn quite rather barries for oil prices. 0:13:41.160 --> 0:13:44.600 Because Venezuela, as you said, has a lot of oil reserves, 0:13:44.800 --> 0:13:48.920 the coal start increasing production. Remember, in the late ninety nineties, 0:13:49.120 --> 0:13:53.120 Venezuela was pumping around three point five million bottles a day. 0:13:53.160 --> 0:13:55.400 It barely does one million today. So it has the 0:13:55.480 --> 0:13:59.120 capacity to increase production quite significantly. How much for that 0:13:59.200 --> 0:14:02.720 lower prices given the fact that we have oil productions 0:14:02.760 --> 0:14:05.080 out of the US at record highs and climbing to 0:14:05.160 --> 0:14:09.040 new records every month. Well, that's one of the that's 0:14:09.080 --> 0:14:12.120 the biggest cup factor. I was talking only a few 0:14:12.200 --> 0:14:14.959 hours ago with a market don and he's the CEO 0:14:14.960 --> 0:14:18.040 of Mercuria, one of the world's largest oil traders, and 0:14:18.080 --> 0:14:19.960 he was telling me that he thinks that prices are 0:14:19.960 --> 0:14:22.920 going to go a bit higher, potentially sixty five maybe 0:14:22.960 --> 0:14:26.160 seventy dollars a barrel. But beyond there, he said, then 0:14:26.280 --> 0:14:29.440 you really trigger the big machine of the Permian in 0:14:29.480 --> 0:14:33.160 West Texas. You get another lack of increasing production from 0:14:33.200 --> 0:14:35.760 the US and then prices go down and OPEC is 0:14:35.800 --> 0:14:38.840 in trouble. So for OPEC, the sweet spot will be 0:14:38.920 --> 0:14:42.920 to try to keep prices around sixty seventy dollars a barrel, 0:14:43.200 --> 0:14:46.200 which is good enough for them, potentially not as high 0:14:46.240 --> 0:14:50.560 as they will like Brent, right, I'm talking about oil 0:14:50.560 --> 0:14:54.280 which currently but but that that will that will mean 0:14:54.360 --> 0:14:56.920 that that they keep in check a U S production. 0:14:57.000 --> 0:15:00.240 As you say, it's increasing, it goes up every week. 0:15:00.320 --> 0:15:03.520 We're close to twelve million barrels a day, and we're 0:15:03.680 --> 0:15:07.360 probably gonna add another million million point two barrels a 0:15:07.480 --> 0:15:10.400 day uh in two thousand and nineteen. And let's not 0:15:10.480 --> 0:15:14.120 forget last year in two thousand and eighteen, production increased 0:15:14.120 --> 0:15:16.680 by two million bars a day. That was the largest 0:15:16.800 --> 0:15:19.640 increase on an annual base in the United States in 0:15:19.680 --> 0:15:22.400 a hundred years. So just real quickly, have you what 0:15:22.440 --> 0:15:24.520 are you hearing over there? And doubles about Russia? They 0:15:24.520 --> 0:15:27.360 seemed to be a wild card? Is a wild card? 0:15:27.520 --> 0:15:30.040 Is a world card? In different factors? One is what 0:15:30.240 --> 0:15:33.400 is gonna what is gonna happen with the collaboration between 0:15:33.480 --> 0:15:37.360 OPEK and Russia. The Russians are are starting to sound like, um, 0:15:37.400 --> 0:15:39.840 they're not that happy with the production cards. So that's 0:15:39.840 --> 0:15:42.520 one wild car. Second world card on Russia. What is 0:15:42.560 --> 0:15:46.280 gonna be Russia doing versus Iran and Syria. Third one 0:15:47.080 --> 0:15:51.880 Venezuela Russia. Moscow has come supporting Nicolas Maduro today, so 0:15:51.920 --> 0:15:54.320 that's gonna be also another big factor for the old market. 0:15:55.360 --> 0:15:57.680 Have your blass, thank you very much? How areas? The 0:15:57.720 --> 0:16:13.080 chief energy correspanner for Bloomberg News called in from Davos Switzerland. Well, 0:16:13.120 --> 0:16:16.080 investors in the Walt Disney Company and Compcast, they know 0:16:16.280 --> 0:16:18.240 very well that one of the best businesses in those 0:16:18.280 --> 0:16:22.000 big media companies is their theme park business. Theme park business, 0:16:22.120 --> 0:16:23.960 you know, we see a quarter after quarter, year after 0:16:24.040 --> 0:16:26.800 year double ditchit profit growth, and as a result, big 0:16:26.840 --> 0:16:29.480 companies like Disney and Comcast continue to ramp up their 0:16:29.520 --> 0:16:32.880 investment in their parks and resorts business. One of our 0:16:32.920 --> 0:16:35.240 next guest is certainly one of the beneficiaries of that 0:16:35.560 --> 0:16:37.760 increase investment in the in the theme park and an 0:16:37.840 --> 0:16:41.240 attractions business. That is Mike Conson. He is CEO of 0:16:41.360 --> 0:16:44.440 pg A V Destinations Companies based in St. Louis. But 0:16:44.520 --> 0:16:46.440 Mike is in here with in New York with our 0:16:46.440 --> 0:16:49.720 Bloomberg Interactive Broker Studio. So, Mike, thanks so much for 0:16:49.760 --> 0:16:52.160 being here. Can you just give us and our listeners 0:16:52.160 --> 0:16:54.800 just a quick snapshot of what you do and how 0:16:55.080 --> 0:16:57.520 you play in the theme park business. Well, sure, thank 0:16:57.520 --> 0:17:00.200 you for having me. So. We started in the theme 0:17:00.240 --> 0:17:03.000 park business back in the late sixties and we were 0:17:03.040 --> 0:17:05.840 involved in the development of some of the early theme 0:17:05.880 --> 0:17:08.560 parks in the United States like Bush Gardens and Williamsburg 0:17:08.680 --> 0:17:11.879 and got our got our sense of roller coasters and 0:17:12.040 --> 0:17:15.200 entertainment and and how these parks operate in function. And 0:17:15.359 --> 0:17:18.000 since that time, we've been fortunate to see that continue, 0:17:18.600 --> 0:17:21.880 not just in the United States and grow around the world. So, 0:17:22.119 --> 0:17:26.240 given the progress in both designing these a roller coasters 0:17:26.280 --> 0:17:28.840 as well as executing them, are there any roller coasters 0:17:29.040 --> 0:17:32.439 that you would just not go on? Well, you know, 0:17:32.480 --> 0:17:36.480 I like them all, but this is a danger perspective. Yeah, yeah, 0:17:36.640 --> 0:17:38.600 you know. You you can go to some of the 0:17:38.680 --> 0:17:42.960 historic theme parks in Europe where they have wooden roller 0:17:43.000 --> 0:17:46.800 coasters actually have a brakeman who actually pulls a lever 0:17:46.960 --> 0:17:49.720 to stop the coaster with and then break it. So 0:17:49.760 --> 0:17:52.360 I always wondered what happens if something happens to the brakeman, 0:17:52.560 --> 0:17:55.119 you know. So those are those are those cross the 0:17:55.160 --> 0:17:57.360 line for me? Those are a little scary. So, Mike, 0:17:57.359 --> 0:17:59.040 we've seen you know, if you think about the theme 0:17:59.040 --> 0:18:01.800 park business, obviously in the United States, you think about 0:18:01.800 --> 0:18:05.760 Disney and Orlando and in l A. But you know, 0:18:05.880 --> 0:18:08.200 the investment that we're seeing and these companies are making 0:18:08.320 --> 0:18:12.320 outside of the US is just you know, staggering. I know, 0:18:12.359 --> 0:18:16.200 for example, Disney spent five billion dollars on its Shanghai resort. 0:18:16.640 --> 0:18:19.959 What are you seeing kind of globally in demand for 0:18:20.080 --> 0:18:22.919 some of these properties. Well, it's extraordinary. And if you 0:18:22.920 --> 0:18:25.000 had asked me ten years ago, could I predict this 0:18:25.119 --> 0:18:27.080 kind of growth? I don't think anyone really could have 0:18:27.160 --> 0:18:29.240 foreseen it. And I think there are a lot of 0:18:29.320 --> 0:18:33.640 forces in play. Obviously, Uh, the brands, the intellectual properties 0:18:33.680 --> 0:18:37.480 associated with these entities are huge, and they're being consumed 0:18:37.480 --> 0:18:40.240 globally now. So you know, this is a major brands 0:18:40.240 --> 0:18:43.119 touch point for so many of the consumers in places 0:18:43.119 --> 0:18:45.919 like China and the Middle East and so forth. We 0:18:46.000 --> 0:18:49.040 see countries in places like the Middle East who are 0:18:49.040 --> 0:18:53.359 trying to shift from a petro based economy to entertainment 0:18:53.359 --> 0:18:56.560 and tourism. And we've been involved in some of these projects, 0:18:56.760 --> 0:18:59.320 and one of the things that's interesting about those is 0:18:59.320 --> 0:19:02.560 that those our tantamount to building a new national identity. 0:19:02.720 --> 0:19:05.760 You know, think of the UAE as a destination, not 0:19:05.960 --> 0:19:08.520 as a place of oil wealth. I love that Paul 0:19:08.600 --> 0:19:11.520 is interested in, you know, how businesses are expanding into 0:19:11.560 --> 0:19:14.080 theme parks and I'm just wondering, are my children going 0:19:14.119 --> 0:19:15.919 to die on these things? And I'm wondering, you know, 0:19:15.960 --> 0:19:19.000 there's a rumor. I remember a sort of old wives 0:19:19.040 --> 0:19:22.160 tale that crazy people design these. Uh is that true 0:19:22.200 --> 0:19:23.639 that they sort of get mad men to go in 0:19:23.680 --> 0:19:27.840 there and imagine the craziest pattern and then they create 0:19:27.920 --> 0:19:30.159 that recreate that. You know, you'd be surprised. I mean, 0:19:30.200 --> 0:19:32.760 there is a crazy aspect to it, right, But but 0:19:32.840 --> 0:19:37.440 we're working with some of the most precise Swiss engineers 0:19:37.720 --> 0:19:40.560 in the world who are calculating g forces that your 0:19:40.640 --> 0:19:43.560 children would experience on the ride. And it is they 0:19:43.720 --> 0:19:47.080 know so much now about the physiological effects of rides 0:19:47.160 --> 0:19:49.280 that you know, what a person can tolerate and what 0:19:49.359 --> 0:19:52.640 a broad range of people can tolerate. Right, So, um, 0:19:52.640 --> 0:19:56.719 they're very precise about all this, so don't worry. And 0:19:56.720 --> 0:19:59.520 how much is sort of an average cause to how 0:19:59.600 --> 0:20:02.320 much can people charged for one ride? Oh, I don't know. 0:20:02.400 --> 0:20:04.240 You know, most of them are packaged in the context 0:20:04.280 --> 0:20:08.320 of large attractions like theme parks and so uh. But 0:20:08.400 --> 0:20:10.280 it is interesting that there are r a y on 0:20:10.320 --> 0:20:12.679 a new coaster in an existing theme park. You know, 0:20:12.720 --> 0:20:14.760 this thing is often pained for itself within a year 0:20:14.840 --> 0:20:17.760 or two. And that's remarkable. Yeah, it's it's just amazing. 0:20:17.880 --> 0:20:20.959 You know, when the Comcast Corporation bought NBC Universal. They 0:20:21.320 --> 0:20:23.040 kind of thought the theme park business, which is a 0:20:23.080 --> 0:20:25.280 throwaway business. They were buying the cable networks and the 0:20:25.320 --> 0:20:28.280 studios and things like that. But they've since found that 0:20:28.320 --> 0:20:31.400 it is one of the best, consistent, most profitable businesses, 0:20:31.920 --> 0:20:33.919 uh they have. So, so, what are some of the 0:20:34.000 --> 0:20:37.919 cool projects you're either working on or have you've recently launched. 0:20:37.920 --> 0:20:39.560 What are you guys doing well? Since we were talking 0:20:39.560 --> 0:20:42.600 about the global theme park industry, I would mention Ocean Kingdom, 0:20:42.840 --> 0:20:46.720 which was built in China before Disney Shanghai opened, and 0:20:47.000 --> 0:20:49.479 until Disney Shanghai opened, I would say it was probably 0:20:49.520 --> 0:20:52.320 the best, arguably the best theme park in China, built 0:20:52.359 --> 0:20:54.600 near Hong Kong and Macau. And in fact, one of 0:20:54.600 --> 0:20:57.240 the big plans for that park was that the Hong 0:20:57.280 --> 0:21:00.800 Kong to chew Hi Bridge would open. It's the largest, 0:21:00.840 --> 0:21:03.119 the longest oversea bridge in the world, so it's fifty 0:21:03.119 --> 0:21:05.800 two kilometers, So now you can go directly from Hong 0:21:05.880 --> 0:21:09.400 Kong to this park and and without a necessarily even 0:21:09.440 --> 0:21:12.840 having a Chinese visa, so that that that project is 0:21:12.840 --> 0:21:15.320 now hosting about ten million visitors a year. So I'm 0:21:15.320 --> 0:21:17.960 wondering you know, we hear a lot about the experience 0:21:18.000 --> 0:21:20.240 and how important it is. I'm wondering, can you imagine 0:21:20.280 --> 0:21:22.959