1 00:00:02,279 --> 00:00:05,640 Speaker 1: Global business news twenty four hours a day at Bloomberg 2 00:00:05,720 --> 00:00:08,800 Speaker 1: dot Com, the radio plus mobile last, and on your radio. 3 00:00:09,080 --> 00:00:13,200 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World headquarters. 4 00:00:13,320 --> 00:00:15,840 Speaker 1: I'm Charlie Pallat. Just getting word of a two billion 5 00:00:15,880 --> 00:00:19,840 Speaker 1: dollar deal Leco Global, which is is acquiring Visio for 6 00:00:19,920 --> 00:00:23,880 Speaker 1: two billions. The Chinese technology conglomerate expands further in the 7 00:00:24,000 --> 00:00:27,920 Speaker 1: US Visio as a maker of inexpensive flat screen TVs. 8 00:00:28,000 --> 00:00:32,080 Speaker 1: It will continue to operate at its headquarters in Irvine, California. 9 00:00:32,680 --> 00:00:36,400 Speaker 1: Stocks fluctuating right now. We do have the SMP five 10 00:00:36,479 --> 00:00:39,960 Speaker 1: hundred index down five at three, a drop there of 11 00:00:40,040 --> 00:00:43,000 Speaker 1: three tents of one percent. Nasdak is lowered by three 12 00:00:43,080 --> 00:00:45,440 Speaker 1: points to five thousand ninety four, a drop of point 13 00:00:45,479 --> 00:00:48,879 Speaker 1: one percent down, Industrials down seventy four, a drop of 14 00:00:48,960 --> 00:00:51,560 Speaker 1: four tenths of one percent. The ten year of three 15 00:00:51,560 --> 00:00:54,280 Speaker 1: thirty seconds, the yield there one point five six percent, 16 00:00:54,640 --> 00:00:58,800 Speaker 1: Gold higher little changed up point one percent to thirty pounce, 17 00:00:59,040 --> 00:01:01,960 Speaker 1: and crude oil now at three a barrel to drop 18 00:01:02,000 --> 00:01:05,480 Speaker 1: there of seven tenths of one percent. I'm Charlie Pellett. 19 00:01:05,600 --> 00:01:10,119 Speaker 1: That's a Bloomberg Business flash. You're listening to Taking Stock 20 00:01:10,360 --> 00:01:15,800 Speaker 1: with bim Box and Dabline Hays on Bloomberg Radio. Freeport mcmaran, 21 00:01:16,000 --> 00:01:19,399 Speaker 1: this is the largest publicly traded copper miner, says it 22 00:01:19,520 --> 00:01:22,200 Speaker 1: no longer believes it has to sell assets in order 23 00:01:22,240 --> 00:01:25,480 Speaker 1: to deal with the aftermath of a commodity's meltdown. Instead, 24 00:01:25,560 --> 00:01:28,840 Speaker 1: the company says it's going to sell new shares in 25 00:01:28,959 --> 00:01:32,280 Speaker 1: order to help pay down debt. Well, if you're gonna 26 00:01:32,280 --> 00:01:34,080 Speaker 1: have to pay down debt, that means you've got some 27 00:01:34,200 --> 00:01:36,280 Speaker 1: cash flow. What do you do with that money? And 28 00:01:36,319 --> 00:01:38,880 Speaker 1: how do you get it? John Love is the president 29 00:01:38,959 --> 00:01:42,880 Speaker 1: the chief executive of u s CF United States Commodity 30 00:01:42,920 --> 00:01:48,120 Speaker 1: Funds assets under management five billion dollars, based in Redondo Beach, California. 31 00:01:48,160 --> 00:01:50,400 Speaker 1: But John joins us in the studio. Thanks for coming in, 32 00:01:50,520 --> 00:01:53,640 Speaker 1: Thanks for having me. I mentioned Freeport mcmaran really just 33 00:01:53,760 --> 00:01:56,800 Speaker 1: as a kind of poster child for a company that 34 00:01:57,080 --> 00:02:00,320 Speaker 1: has both mining assets as well as energy at sense, 35 00:02:00,360 --> 00:02:04,240 Speaker 1: what's your outlook for those particular industry groups. Well, energy 36 00:02:04,400 --> 00:02:07,680 Speaker 1: is one of our primary focus is We actually just 37 00:02:07,680 --> 00:02:11,480 Speaker 1: celebrated the tenure anniversary of our oil fund USO UH 38 00:02:11,560 --> 00:02:14,000 Speaker 1: today rang the bell in the New York stock exchange, 39 00:02:14,040 --> 00:02:16,480 Speaker 1: so it tends to be our focus. Uh energy. I 40 00:02:16,480 --> 00:02:19,520 Speaker 1: think as we've seen in the last couple of weeks, UH, 41 00:02:19,760 --> 00:02:22,959 Speaker 1: some of the enthusiasm that that we had coming into 42 00:02:23,000 --> 00:02:26,240 Speaker 1: summer has dissipated. I think there's some pressure on the market. 43 00:02:26,240 --> 00:02:29,960 Speaker 1: The supply has not fallen off as much as people expected, 44 00:02:30,000 --> 00:02:33,760 Speaker 1: and UH, gasoline inventories are high, oil inventories remain high. 45 00:02:34,200 --> 00:02:36,800 Speaker 1: Production has come down, but there's definitely some concern that 46 00:02:37,480 --> 00:02:41,079 Speaker 1: there's still so much pressure due to that inventory overhang. UM, 47 00:02:41,080 --> 00:02:43,040 Speaker 1: we think we think there'll be some pressure going into 48 00:02:43,080 --> 00:02:45,080 Speaker 1: the second half of the year. So John just gives 49 00:02:45,160 --> 00:02:48,680 Speaker 1: a little bit perspective on you and your company founded 50 00:02:48,680 --> 00:02:51,880 Speaker 1: ten years ago an oil ef You know, they were around, 51 00:02:51,919 --> 00:02:55,120 Speaker 1: but contmpared to that hyperbolic explosion of growth we've seen 52 00:02:55,160 --> 00:02:57,000 Speaker 1: the v t s. You're still a bit of a 53 00:02:57,000 --> 00:03:01,120 Speaker 1: pioneer there. What got you into the energy sector? What 54 00:03:01,200 --> 00:03:03,520 Speaker 1: got you to start the CTF. Sure, well, when we 55 00:03:03,560 --> 00:03:06,160 Speaker 1: first started looking into the space, there were actually no 56 00:03:06,240 --> 00:03:09,720 Speaker 1: commodity e t s yet. Out et s were um 57 00:03:09,760 --> 00:03:12,040 Speaker 1: still they were, like you said, about ten years old 58 00:03:12,040 --> 00:03:14,400 Speaker 1: as we started looking, but nothing in commodity. So we 59 00:03:14,480 --> 00:03:17,720 Speaker 1: looked we considered a basket, we considered some kind of 60 00:03:17,760 --> 00:03:20,080 Speaker 1: macro fund and just as we explored options, that looked 61 00:03:20,080 --> 00:03:22,720 Speaker 1: like oil was the best way to to to start. 62 00:03:22,760 --> 00:03:26,079 Speaker 1: And indeed as we went through the process, UH it 63 00:03:26,200 --> 00:03:29,280 Speaker 1: paid off and we launched April two thousand six and 64 00:03:29,880 --> 00:03:32,720 Speaker 1: um USO took off very rapidly. So I think it 65 00:03:32,800 --> 00:03:34,639 Speaker 1: was just the demand in the market, the interest from 66 00:03:34,639 --> 00:03:37,480 Speaker 1: participants and and they definitely showed up when we came 67 00:03:37,520 --> 00:03:40,960 Speaker 1: to market. What does us so this fun? What does 68 00:03:41,080 --> 00:03:45,080 Speaker 1: USO actually own in order to mimic the price of oil? 69 00:03:45,360 --> 00:03:48,680 Speaker 1: USO owns futures contracts were in the front month future 70 00:03:49,120 --> 00:03:51,440 Speaker 1: until two weeks before expiration, and then we roll over 71 00:03:51,520 --> 00:03:55,520 Speaker 1: the second month, so we're perpetually always in the oil 72 00:03:55,600 --> 00:03:59,240 Speaker 1: future and just hold a continuous position going forward. And 73 00:03:59,280 --> 00:04:02,240 Speaker 1: the significant so that is prior to USO, and if 74 00:04:02,280 --> 00:04:04,560 Speaker 1: an investor wanted to do that, they had to open 75 00:04:04,600 --> 00:04:08,200 Speaker 1: their own futures account, established margin, roll up position, do 76 00:04:08,280 --> 00:04:11,320 Speaker 1: all those things. And UM, we kind of we're kind 77 00:04:11,320 --> 00:04:12,960 Speaker 1: of the people who put it on the screen, I guess, 78 00:04:12,960 --> 00:04:15,800 Speaker 1: so to speak, is UH for for your average, average 79 00:04:15,800 --> 00:04:18,159 Speaker 1: every day investor. So, John, what do you tell people 80 00:04:18,160 --> 00:04:20,600 Speaker 1: who say you know, commodities oil, that's not really an 81 00:04:20,600 --> 00:04:24,840 Speaker 1: asset class. Uh. You know, I would disagree with that. 82 00:04:24,960 --> 00:04:28,160 Speaker 1: I think that if you look just at oil alone, 83 00:04:28,320 --> 00:04:31,000 Speaker 1: then yes, oil is a single commodity, gold is a 84 00:04:31,000 --> 00:04:33,640 Speaker 1: single commodity. But if you look at commodities in general, 85 00:04:34,080 --> 00:04:36,520 Speaker 1: at which we think people should, uh, then I think 86 00:04:36,520 --> 00:04:38,719 Speaker 1: I would consider it an asset class. But I agree 87 00:04:38,760 --> 00:04:41,320 Speaker 1: with you that oil on its own, it's it's something 88 00:04:41,320 --> 00:04:43,040 Speaker 1: that you should look like tactically, just as you would 89 00:04:43,040 --> 00:04:45,520 Speaker 1: look at a single stock. You want to uh know 90 00:04:45,680 --> 00:04:48,360 Speaker 1: the market and know what you're doing and be tactical 91 00:04:48,400 --> 00:04:49,920 Speaker 1: with it. But I think that you can look at 92 00:04:50,240 --> 00:04:55,799 Speaker 1: broad commodities as an asset class. As the strategy involves 93 00:04:56,040 --> 00:04:59,240 Speaker 1: buying futures and then rolling to the next month two 94 00:04:59,320 --> 00:05:02,880 Speaker 1: weeks prior to expiration. Everyone else must know that at 95 00:05:02,920 --> 00:05:07,080 Speaker 1: two weeks prior to expiration you're getting out. What has 96 00:05:07,120 --> 00:05:10,040 Speaker 1: that done to the volatility of USO, It actually really 97 00:05:10,080 --> 00:05:13,680 Speaker 1: hasn't affected it. Um. The the Goldman role takes place 98 00:05:13,880 --> 00:05:16,080 Speaker 1: roughly about the same time, just a little ahead of us, 99 00:05:16,120 --> 00:05:18,200 Speaker 1: and there are a number of other players in the market, 100 00:05:18,240 --> 00:05:20,800 Speaker 1: the entire market. Anybody who's in the front month has 101 00:05:20,839 --> 00:05:23,800 Speaker 1: to close their positions before expiration. So while people know 102 00:05:23,880 --> 00:05:26,400 Speaker 1: we're doing it, we are one player in the market, 103 00:05:26,560 --> 00:05:29,200 Speaker 1: and we have not seen We've done studies just to 104 00:05:29,240 --> 00:05:32,840 Speaker 1: see if if we are affecting role price before, price after, 105 00:05:32,920 --> 00:05:36,000 Speaker 1: and we have not found, um anything anything at all. 106 00:05:36,080 --> 00:05:39,440 Speaker 1: So USO seems to be a pretty solid aggregated position. 107 00:05:39,960 --> 00:05:43,920 Speaker 1: So how did you get interested, particularly in oil and commodities? 108 00:05:44,160 --> 00:05:47,599 Speaker 1: And we're based on you know, put putting this et 109 00:05:47,680 --> 00:05:50,000 Speaker 1: F together and and overseeing this fund of this company. 110 00:05:50,000 --> 00:05:51,800 Speaker 1: Where's well heading from here? Because you know, once you 111 00:05:51,800 --> 00:05:54,160 Speaker 1: talked about fifty bucks of barrel, the bulls are saying 112 00:05:54,200 --> 00:05:56,159 Speaker 1: that's it. Maybe you know, roar, but you can at 113 00:05:56,240 --> 00:05:58,440 Speaker 1: least get to sixty or seventy. Kind a bit of 114 00:05:58,440 --> 00:06:00,440 Speaker 1: a pullback last couple of days of saying, you know, 115 00:06:00,480 --> 00:06:02,719 Speaker 1: you just can't get out from under that weight of 116 00:06:02,760 --> 00:06:05,640 Speaker 1: a glut of global supply. Yeah, you're exactly right, that 117 00:06:06,040 --> 00:06:08,880 Speaker 1: weight that glut is is likely to persist for for 118 00:06:08,920 --> 00:06:12,880 Speaker 1: a while. Um, I think this pullback is completely warranted. Uh, 119 00:06:13,320 --> 00:06:15,560 Speaker 1: going in, you know, coming from spring into summer. As 120 00:06:15,560 --> 00:06:18,080 Speaker 1: I said, I think that there was reason for optimism. 121 00:06:18,080 --> 00:06:21,240 Speaker 1: I think there still is longer term, but right now 122 00:06:21,400 --> 00:06:25,560 Speaker 1: we have the overhang. We have um gasoline demand that 123 00:06:25,680 --> 00:06:27,080 Speaker 1: was strong in the first half of the year and 124 00:06:27,080 --> 00:06:29,560 Speaker 1: actually was strong summertime, just wasn't as strong as it 125 00:06:29,600 --> 00:06:31,760 Speaker 1: needed to be and as it was expected to be. 126 00:06:31,800 --> 00:06:33,920 Speaker 1: So that has put some weight on the market as well. 127 00:06:34,160 --> 00:06:36,039 Speaker 1: So I do think, like I said, pressure towards the 128 00:06:36,120 --> 00:06:38,440 Speaker 1: end of the year, but as we get into seventeen 129 00:06:38,480 --> 00:06:43,120 Speaker 1: and definitely eighteen, I do think, without any unexpected events, 130 00:06:43,120 --> 00:06:46,359 Speaker 1: supply balances and we start to see that that inventory 131 00:06:46,400 --> 00:06:49,120 Speaker 1: come down eventually, just quickly. Is there any way to 132 00:06:49,160 --> 00:06:54,520 Speaker 1: describe easily the discrepancy between the returns of USO and 133 00:06:54,640 --> 00:06:58,320 Speaker 1: if you just plot the valuations of crude oil as 134 00:06:58,360 --> 00:07:01,680 Speaker 1: a commodity, Absolutely, especially if you were on your on 135 00:07:01,680 --> 00:07:03,880 Speaker 1: your Bloomberg terminal and you you just look at the 136 00:07:03,920 --> 00:07:07,400 Speaker 1: price of oil itself. You use the front month future contract. 137 00:07:07,920 --> 00:07:11,040 Speaker 1: That is that the prices are correct, the prices are 138 00:07:11,400 --> 00:07:13,920 Speaker 1: an index of what's there every day, but that return 139 00:07:14,040 --> 00:07:16,640 Speaker 1: is not achievable, it's hypothetical. So the prices are right, 140 00:07:16,680 --> 00:07:19,840 Speaker 1: the returns are wrong. You have to adjust the price 141 00:07:19,880 --> 00:07:22,440 Speaker 1: series back. You have to back adjust it for the role, 142 00:07:22,920 --> 00:07:25,920 Speaker 1: and in that case, USO would roughly match what the 143 00:07:25,960 --> 00:07:29,280 Speaker 1: future does and has done. Ah, the endless utility of 144 00:07:29,320 --> 00:07:31,320 Speaker 1: the Bloomberg. John Love, thanks so much for joining as 145 00:07:31,320 --> 00:07:33,840 Speaker 1: President CEO of U s c F. The United States 146 00:07:33,880 --> 00:07:36,360 Speaker 1: come out of the funds, ringing the bell and stock 147 00:07:36,400 --> 00:07:39,000 Speaker 1: exchange today, Happy birth your mom, she was there too. 148 00:07:39,000 --> 00:07:41,640 Speaker 1: Thank you very much, John Love, thanks so much. This 149 00:07:41,720 --> 00:07:49,320 Speaker 1: is Bloomberg coming up on taking stock. How is the 150 00:07:49,400 --> 00:07:54,880 Speaker 1: consumer doing, consumer confidence and the housing market. We've got 151 00:07:54,920 --> 00:08:00,160 Speaker 1: that all covered. That's next.