Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Speaker 1: Eastern on Applecarplay and Android Auto with the Bloomberg Business App.
Speaker 1: Listen on demand wherever you get your podcasts, or watch
Speaker 1: us live on YouTube.
Speaker 2: Now Every week around this time, we also bring your
Speaker 2: research from Bloomberg and EF. It is new Energy finance
Speaker 2: and it's powered by data sets and models, and it
Speaker 2: looks at things like commodities, power, transport, industry, buildings, AG
Speaker 2: sectors and talks about how businesses and governments can finance
Speaker 2: and navigate change and as we transition to a green
Speaker 2: energy future. And so today we're going to take a
Speaker 2: look at US oil supply and basically global oil supply.
Speaker 2: Really there is a falling rig count and the question
Speaker 2: is does that mean we're going to see falling oil production?
Speaker 2: And if not why Joining us now at the Interactive
Speaker 2: Broker Studio is Tylou, global oil supply specialist over at
Speaker 2: Bloomberg BNF. So Ty walk us through sort of the
Speaker 2: picture when it comes to how many wells we have
Speaker 2: just at this stage for US.
Speaker 3: Yeah, yeah, So I think the declining recont in the
Speaker 3: US that we've seen, it's not going to have that
Speaker 3: much that bigger for an impact as it seems as
Speaker 3: much as the headline number suggests. And part of the
Speaker 3: reasons that is because like if you look at the Permian,
Speaker 3: where we have the biggest all production region in the
Speaker 3: US the world, completions is only done about four and
Speaker 3: a half percent compared to the recount which is done
Speaker 3: about fifteen percent, and so and on top of that,
Speaker 3: you have a lot of efficiency gains in the sector,
Speaker 3: so you are able to complete a lot more wells
Speaker 3: with much fewer freight crews across the industry. So I
Speaker 3: think the recon number could be a little bit misceeding
Speaker 3: if you're focusing too much on that.
Speaker 4: So I'm spres just just looking at your report here
Speaker 4: and seeing how production in the US continues to increase,
Speaker 4: but maybe at the slower rate.
Speaker 5: I don't know.
Speaker 4: I got WTI coroyal seventy seven bucks. Why don't I
Speaker 4: drill some more? I can make money. I mean, it
Speaker 4: only costs those guys for the bucks to get it
Speaker 4: out of the ground.
Speaker 3: Right, Yeah, yeah, for sure. Yeah, So when we look
Speaker 3: at brick evens, especially in the Perman it's probably around
Speaker 3: in the low to mid forties for their Miden basin,
Speaker 3: and then for the Darrow basins probably even lower than
Speaker 3: that because they produce a lot more gas. But part
Speaker 3: of the reason is because the us L patch has
Speaker 3: really pivoted and transformed itself in the past couple of years. Now,
Speaker 3: before the pandemic, all producers were very much focused on
Speaker 3: production growth. But after the pandemic, the industry has changed
Speaker 3: and now they're focusing on financial returns. Now, in order
Speaker 3: to improve the financial returns, they have to become more efficient.
Speaker 3: So in the past few years you have seen a
Speaker 3: lot of cost cutting initiatives, a lot of optimizations on
Speaker 3: logistics and supply chains, a lot of investments in infrastructures.
Speaker 3: So the entire industry has become a lot more efficient
Speaker 3: in the past couple of years. And on top of that,
Speaker 3: they have also become a lot more resident And what
Speaker 3: that means is that nowadays the USL industry can produce
Speaker 3: a lots more oil with much lower capital investments compared
Speaker 3: to like just five years ago.
Speaker 2: Also, what are the cool things that oil companies are
Speaker 2: doing to extract more oil out of rock. At the
Speaker 2: end of the day, I mean I went to a
Speaker 2: conference but a year ago and everyone was like, ooh,
Speaker 2: three mile laterals. And what that means is that you
Speaker 2: basically drill a pipe down and then you drill it
Speaker 2: across the rock basically lateral, and you fracture it. And
Speaker 2: the longer you go, in theory, the more rock you'll
Speaker 2: be able to access, and then in theory, the more
Speaker 2: oil you'll get out of that rock. Wow, is that
Speaker 2: too nerdy?
Speaker 6: No?
Speaker 4: Okay, cool, I've learned that frackening is short for fracturing. Yes,
Speaker 4: I didn't know that.
Speaker 2: Good job, we learned things here at Boomberg Intelligence. So
Speaker 2: based on that, what are the cool technologies that are
Speaker 2: coming up that's going to enable even more oil to
Speaker 2: come out of the rock?
Speaker 3: Yeah, So during these longer letters, it's definitely like a
Speaker 3: big part of these efficiency games because you're reducing a
Speaker 3: lot of the service costs when you're during longer letters,
Speaker 3: and like you said, Alex, you're making a lot more
Speaker 3: contact with the source rock, so you can pull out
Speaker 3: a lot more resources from the same well. Had some
Speaker 3: of these, like I guess, better practices would be having
Speaker 3: a lot more building out the water handling infrastructure. Some
Speaker 3: of them will be optimizing your frag designs. Some of
Speaker 3: them would be let me see what else, I'm optimizing
Speaker 3: your spacing between the wells. So a lot of these
Speaker 3: like see many small things on individually, when they act together,
Speaker 3: they can have a big impact, especially over time. For example,
Speaker 3: one of the big producers in the perman I was
Speaker 3: looking at the data and they were able to reduce
Speaker 3: them costs per the well cause per letter foot by
Speaker 3: about thirty percent between twenty yes, between twenty nineteen and
Speaker 3: twenty twenty four. So there's a huge gains in terms
Speaker 3: of percentage.
Speaker 4: All right, So I thought, if you go into like
Speaker 4: you find some shale somewhere, don't you do you? Don't
Speaker 4: you do your good wells, your easy wells first, and
Speaker 4: then shouldn't the productivity decline over time?
Speaker 1: Yeah?
Speaker 3: That's exactly pretty muchre what we've seen, like you said,
Speaker 3: in the US, the oil and gas companies. So they
Speaker 3: do is they drew their best say which first, because
Speaker 3: they want to realize that that person why you have
Speaker 3: better weals. And when we look at the data for
Speaker 3: the past five years, what we're seeing is that all
Speaker 3: production on a well level basis has been declining every
Speaker 3: year for the past three or four years, pretty much
Speaker 3: across the board. But what's interesting is that in twenty
Speaker 3: twenty four, the data that are coming in so far
Speaker 3: is they're looking different.
Speaker 1: Well.
Speaker 3: Production again, sorry i'm aill. Production on a well level
Speaker 3: basis is actually better for the weals the camera line
Speaker 3: in twenty twenty four compared to those last year. So
Speaker 3: what that means is that technology improvements could be turning
Speaker 3: back to tide. For this production declined on a well level.
Speaker 2: Basis, which is why it's so cool when you when
Speaker 2: you talk about laterals. Now we're talking about three miles.
Speaker 2: That's all lot, and a lot can go wrong in
Speaker 2: three miles.
Speaker 1: Now.
Speaker 2: Just about five years ago, the talk was like, oh, well,
Speaker 2: if you frag here, then you're gonna hurt the rock
Speaker 2: over here, and then it's gonna mess up the oil
Speaker 2: distribution and all that kind of stuff. What are the
Speaker 2: problems that are emerging the longer out we go in
Speaker 2: these rocks.
Speaker 3: I think one of the biggest risk rep factors, Like,
Speaker 3: like you said, if something goes wrong on Alex, you
Speaker 3: lose production from three mile worths worth of flattro. So
Speaker 3: that's going to be a big opportunity. Opportunity costs for you.
Speaker 3: But at the same time, if things go right, you
Speaker 3: can save potentially save a lot of money. I think
Speaker 3: not only during longer ladros. Some of these companies they're
Speaker 3: actually making U turns under the ground so they can yeah,
Speaker 3: so they can stay within the acreage and so they
Speaker 3: can make more contact with the source rock.
Speaker 2: So if you do that, do they you turn into
Speaker 2: another layer of the rock or do they you turn
Speaker 2: in the same layer.
Speaker 3: The you turn in the same layer.
Speaker 2: Oh my god, that feels like a lot can go
Speaker 2: wrong there. Yeah, well what companies are doing that?
Speaker 3: Remember method of resources in the permit is doing our
Speaker 3: U turns on the letters, and there are a couple
Speaker 3: other ones. I don't be on top of my head.
Speaker 2: Oh man, is this nerdy enough for you?
Speaker 5: Yeah, it's really cool.
Speaker 4: Well, here's my dumb question of today, never other than
Speaker 4: shale oil coming from shale? Do we still drill old
Speaker 4: fashioned rigs and produce oil that way?
Speaker 3: We do?
Speaker 7: We do?
Speaker 4: We do.
Speaker 3: We still do that quite a bit. But the but
Speaker 3: if you're talking about on shore the productivities of these wells,
Speaker 3: it is probably like ten percent or maybe twenty percent
Speaker 3: of these horizontal wells, so the impact is probably it
Speaker 3: is definitely a lot smaller than the horizontal ones.
Speaker 7: Really confused, Well, No, I'm just saying, if I'm jab
Speaker 7: Clampe and you start drilling under my property.
Speaker 4: See I doesn't get that reference.
Speaker 7: Can I like, can you do that? Can you go
Speaker 7: under my property with your what?
Speaker 8: Yeah?
Speaker 2: You can pay for it?
Speaker 7: No, But I'm just saying, can a big oil company
Speaker 7: go under my lane?
Speaker 2: You for it?
Speaker 7: They have to pay, yes, but actually also makes shale.
Speaker 2: But that's what makes shales so unique in the US
Speaker 2: is because they have to pay you. Like other areas
Speaker 2: of the world, the people don't make the money, they
Speaker 2: don't own the mineral rights, and therefore they don't have
Speaker 2: the same kind of investment in making shale developed versus you.
Speaker 2: You're like, yeah, you can have it, but you got
Speaker 2: to pay me, and then you're actually invested in it.
Speaker 2: But I digress.
Speaker 7: All right, clamp it was from Feberleyfieldville.
Speaker 2: Like still thanks a lot, Tyler. We appreciate it being
Speaker 2: at a global oil supply specialist joining us on US
Speaker 2: oil production.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
Speaker 1: weekdays at ten am Eastern on Applecar Play and Android
Speaker 1: Auto with the Bloomberg Business app. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station.
Speaker 1: Just say Alexa playing Bloomberg eleven thirty.
Speaker 4: So all right, we've got that brank crude here. We've
Speaker 4: been calling it out this morning. Eight one dollars and
Speaker 4: fifty cents here up about three point one percent, So
Speaker 4: a big move. So whenever we see big moves and
Speaker 4: commodities we like, you got to get Mike mcgloan on
Speaker 4: the phone. He's a senior commodity strategist for Bloomberg Intelligence. Mike, again,
Speaker 4: like a lot of us, we woke up this morning
Speaker 4: and we had to read up and read in on
Speaker 4: what's happening in Libya. How much is the Libya situation
Speaker 4: responsible here for this move in global crude?
Speaker 8: It's much more positions. Libya exports about a million barrels
Speaker 8: a day. Their average since two thousand was less than that.
Speaker 8: If they shut off completely its way offset what what
Speaker 8: Alex meant and mentioned earlier, massive oversupply of spare capacity
Speaker 8: and OPEC and just look at the US and Canada,
Speaker 8: our excess of liquid fuels supply over demand, which is
Speaker 8: six million barrels a day I was compared to two
Speaker 8: thousand and eight was ten million deficits. So it's in significant.
Speaker 8: It's positions that matter, So I look at it as
Speaker 8: manage money net positions, futures positions, Kruda which drives at market.
Speaker 8: We're at least a week ago the most sold out
Speaker 8: in our database going back at least ten years. I mean,
Speaker 8: brank crude hardly ever gets short and it was so
Speaker 8: there's no room for anything but those positions that go
Speaker 8: up from buyers to go higher. So to me, that's
Speaker 8: much more significant. What's happening is we're just kind of
Speaker 8: normalizing the positions a little bit. And the reason they're
Speaker 8: sold out is because it's a bear market, and it's
Speaker 8: just a bear market that's reading I think, a short
Speaker 8: term bottom.
Speaker 2: Not to get too nerdy, but what about differentials? So
Speaker 2: Libya has a lot of light sweet crude, and there's
Speaker 2: also dark, and there's medium and all that stuff. They
Speaker 2: have light sweet, right, so are we going to see
Speaker 2: some differential movement in terms of Libya? Like I appreciate
Speaker 2: the fact that OPEC plus has a lot of spare capacity,
Speaker 2: et cetera. But what do you think we're going to
Speaker 2: see there?
Speaker 8: So, Alex, you know that area a lot better than
Speaker 8: I do. To me, it's more the macro and the
Speaker 8: light or heavy doesn't make much difference. I mean, one
Speaker 8: thing that's been significant is that narrowing spread between BRENT
Speaker 8: and WTI. That's one thing that's news. Brent positions are
Speaker 8: way sold out. In WTI. Pieces are normal ten percent
Speaker 8: of open interest, our net lungs and those are specs.
Speaker 8: So to me, it's much more the macro, and the macro,
Speaker 8: to me, is overwhelming, and I'll bring in an uber
Speaker 8: big macros. What's happening in China. We've seen declining demand
Speaker 8: and their bond yilds are just plunging for a reason.
Speaker 4: So if this move in, if this move and crude
Speaker 4: feels a little bit more technical, when did the fundamentals
Speaker 4: reassert themselves?
Speaker 8: Good question. I don't know. I think it's a matter
Speaker 8: of time it falls. Natural gas. Natural gas got to
Speaker 8: that low price cure a level that was first traded
Speaker 8: in nineteen ninety in futures. Now it's around two. That's
Speaker 8: just hovering there. Corn's there now. Front corn at three
Speaker 8: point sixty two is first traded in nineteen seventy three,
Speaker 8: seventy four. It's getting plowed. It's got to shut off
Speaker 8: that access supply. It's coming out. Copper's probably tilting lower.
Speaker 8: I don't know how long, and when it takes I'm
Speaker 8: surprised it's lasted this long. But one thing that's the
Speaker 8: bottom line palls the US stock market has to go up.
Speaker 8: And that's one thing we've noticed about Crudel in the
Speaker 8: last maybe ten years or so. When we have a
Speaker 8: normal correction in beta, crude all goes down a lot harder.
Speaker 8: It's just much more correlated with the stock market now,
Speaker 8: particularly what's happening in China. So I look at it
Speaker 8: as a risk as to the downside. It's a matter
Speaker 8: of time right now. We have to offset these positions.
Speaker 8: But the headlines are just overwhelming lead tilting now towards
Speaker 8: the opposite they were two years. One is recently oil's
Speaker 8: hot summer's ending, posing risks for majors in opek. Those
Speaker 8: are macro, which the big shifts, it's the big pendulum
Speaker 8: shift and commodities is unfamble for Crudell, and it's on
Speaker 8: the back of the high price cure.
Speaker 2: So when you say that the stock market has to
Speaker 2: go up. Do you mean that it just will go up,
Speaker 2: or you're saying in order for oil to catch a bit,
Speaker 2: it has to go up exactly.
Speaker 8: So prerequisite I started writing about this a few years ago,
Speaker 8: is it's the inordinate burden on commodities for stocks go
Speaker 8: up because the correlations are just going up and up
Speaker 8: and up, and at least historically they are. So though,
Speaker 8: I look at right now, if you're managing Crudell, if
Speaker 8: you have positions on Crudell, you know, okay, this is
Speaker 8: our short It's okay to be I don't want to
Speaker 8: run a positions are sold out. I can be long
Speaker 8: here a little bit, but you have to look over
Speaker 8: in your value at risk model. You have to say, okay,
Speaker 8: as long as the SMB five hundred stay stable, I'll
Speaker 8: stay stable. If you get a little ten five percent correction.
Speaker 8: Crude oil dropped twenty percent. Now it didn't done that
Speaker 8: last thing in October fifth because they were sold out.
Speaker 8: But now it's starting to normalize. So it's just the
Speaker 8: way markets work. Now.
Speaker 4: Hey, Mike kew about gold. Earlier this morning, we were
Speaker 4: speaking with Dennis Gartman, the former editor the Gartman Letter,
Speaker 4: and an a vowed gold bull for a long period
Speaker 4: of time. Here give us your gold call here, which
Speaker 4: I'm sure is gonna be very consistent with what I've
Speaker 4: known you for for these many years.
Speaker 8: I would consider Dennis a friend, and I do appreciate
Speaker 8: in the past you remember one of the few things
Speaker 8: I've been getting right, and that's gold. The problem is,
Speaker 8: and so I'm still quite bullish gold. It's the only
Speaker 8: major commodity go up. And I think the notable mention
Speaker 8: is a Bloomberg commodity index is down thirty percent since
Speaker 8: it's peaking twenty twenty two, and gold's up thirty percent
Speaker 8: over the same frame. But it's the fundamentals that are
Speaker 8: still very bullish for gold. Deepest pockets on the planet.
Speaker 8: Central banks are still buying ETFs, which events significant outflows
Speaker 8: are STI just starting to turn upward. And then you
Speaker 8: just look at the very expensive US stock market and
Speaker 8: US debt to GDP. It's just fiscal spending is off
Speaker 8: off the charts, and neither of the candidates are dressing that.
Speaker 8: So to me, gold is that trade that's looking for
Speaker 8: the normal recession to kick in. The eield curve, the
Speaker 8: US eel curve, that's disinvert at some point, just the
Speaker 8: normal cycles unemployment going up, and gold's kind of just
Speaker 8: ahead of that trade.
Speaker 2: You know, when I was covering gold back in the day, though,
Speaker 2: it was very much of a inflation goes up, you
Speaker 2: want to buy gold, it goes down, you want to
Speaker 2: sell gold. Es Central banks are buying not because of
Speaker 2: the macro, but because they have like a percentage they
Speaker 2: need to diversify, which is not necessarily based on macro
Speaker 2: headwinds or tailwinds. Is that still true.
Speaker 8: The questions out of sam Alex, the answers have changed.
Speaker 8: And in terms of any other currency, I think that
Speaker 8: was initially from Einstein coupling one time ago, but it's
Speaker 8: it's the in terms of any melting currency. Sure, goal
Speaker 8: is a great place to park your wealth, but in
Speaker 8: terms of you as dollars, it's the world's shifting now
Speaker 8: and it has a high correlation between that rising debt
Speaker 8: to GDP. I just published that tomorrow this morning. And
Speaker 8: key thing I'm concerned about is the number six forty three,
Speaker 8: six hundred and forty three, here's one for you. Is
Speaker 8: the number of bushels of corn equal to an ounce
Speaker 8: of gold. That's the highest ever that's where we are
Speaker 8: right now, So goals getting the expensive. But it's showing
Speaker 8: you what happens with the store of value global liquid
Speaker 8: assets going upward, and that's gold and elastic commodities like
Speaker 8: crudel and corn going down because humans can create more
Speaker 8: of it with less of it every day. So gold
Speaker 8: to me is running ahead of what I see happening
Speaker 8: with Ira Jersey says, a hard landing, lower US interest rates,
Speaker 8: probably falling China, and at some point a little bit
Speaker 8: of back and fill US stock market, which used to
Speaker 8: happen in bull markets.
Speaker 4: All right, here's the dumb question you get of the day,
Speaker 4: No question, how do you value a commodity? Like on
Speaker 4: a stock, I can say price to earnings ratio, on
Speaker 4: a bond, I can say relative to treasuries?
Speaker 8: Is gold?
Speaker 4: When are you say gold's expensive or gold's cheap?
Speaker 8: So gold's different from all most commodities of use stocks
Speaker 8: to use. What are the stocks versus the use? So
Speaker 8: stock's the use for all the grains and particularly crudels
Speaker 8: very high. There's a lot of stocks, there's more and
Speaker 8: more creative. What's that trend? Gold typically sticks with the
Speaker 8: more macroeconomic I like to use to me right now,
Speaker 8: it's interest rates, US interests, the trend in interest rates,
Speaker 8: debt to GDP, and much more. How is it relative
Speaker 8: to the stock market. And here's what I like to
Speaker 8: end with. One of my most enduring charts I've looked
Speaker 8: at free decades is that S and P five hundred
Speaker 8: divided by the pronouncis prices of gold. Historically, gold's just
Speaker 8: very cheap, and historically when you go to recessions that
Speaker 8: fedieses un deployment goes up. That why this parriage just
Speaker 8: kind of narrows a little bit. And that's the thing.
Speaker 8: It hasn't narrow too much because gold's catching up. And
Speaker 8: actually it is narrowing a little bit because gold on
Speaker 8: a one, two and three year basis is outperforming the
Speaker 8: S and P five hundred total return. The risk is
Speaker 8: it just catches.
Speaker 2: Up more bitcoin.
Speaker 8: How you feeling, it's the end. It's the last big
Speaker 8: trade and it's not the next big trade. So the
Speaker 8: LBT is no longer the NBT. It's Bitcoin is overdone.
Speaker 8: It's stretched. Everything that's happening in bigcoin where things we're
Speaker 8: hoping would happen, that is, it's into the mainstream. We
Speaker 8: have a former president who has embraced it because he
Speaker 8: wants to get elected. We have the ETFs and now
Speaker 8: everybody it's in the mainstream. The thing is also it's
Speaker 8: showing divergent weakness versus what it should versus beta since
Speaker 8: it made its peak in March, it's declining versus gold
Speaker 8: versus stock market. So that's the problem. I think the
Speaker 8: fastest horse in the race is telling us by showing
Speaker 8: divergent weakness is a race might be over. So I'm
Speaker 8: somewhat more defensive on bitcoin. A key thing I think
Speaker 8: to remember of bitcoin it trades three times of voltuli
Speaker 8: of gold and the SCDB five hundred. When the people
Speaker 8: tell you that, oh, when the stock mark goes down
Speaker 8: and we have a recession, bitcoin of our performance, well,
Speaker 8: it usually doesn't work that way with very high voltuli
Speaker 8: assets that are very speculative.
Speaker 2: All right, Bitcoin to cold to corn, corn to gold ratio.
Speaker 2: Oh okay, yeah, you got it. Just it's a it's
Speaker 2: a lot, Hey, Mike, we appreciate it. Thank you so much.
Speaker 2: Mike mcglohon Bloomberg Intelligence, a senior commodity strategist joining us
Speaker 2: on all the things commodity related.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple car Play and
Speaker 1: Android Auto with the Bloomberg Business App. Listen on demand
Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
Speaker 2: All right, let's go back to the trade situation here.
Speaker 2: So the latest news is that Canada is going to
Speaker 2: hit China with tariffs on EV's and steal Brian Platt,
Speaker 2: Government News, Canadian Government Reporter, Bloomberg News, Canadian Government reporter.
Speaker 2: I got that is joining us now on that from Ottawa. Hey, Brian,
Speaker 2: what is this about? Is this about Canada wanting to
Speaker 2: compete more in evs and steel or is this about
Speaker 2: making sure that those things can't come through Canada into
Speaker 2: the US.
Speaker 9: Honestly, I would say it's about both. Canada has put
Speaker 9: a lot of effort into attracting EV manufacturing and so
Speaker 9: for sure Prime Minister Justin Trudeau's government wants to make
Speaker 9: sure that those factories and investments and what they want
Speaker 9: to attract in the future is not undermined by China.
Speaker 9: But absolutely this is about Canada's relationship with the US
Speaker 9: as well, and the last thing Canada wants is for
Speaker 9: the US to see Canada as a weak point, right,
Speaker 9: as a potential side door for Chinese evs, and so
Speaker 9: I think it's really about both things, but especially that
Speaker 9: Canada US relationship.
Speaker 4: How much what's the support level amongst Canadians for just
Speaker 4: tariffs in general, because a lot of folks will tell you, hey,
Speaker 4: this is just a tax on consumers.
Speaker 9: Yeah, there will be some pushback on this, but I
Speaker 9: think I think generally there's a political consensus that these
Speaker 9: tariffs are necessary. And again it's for both reasons, right.
Speaker 9: I mean, you know, Canada wants its own manufacturing sector,
Speaker 9: especially that that share of the auto manufacturing sector in
Speaker 9: especially electorally important regions around Toronto in southern Ontario. That's
Speaker 9: where those factories tend to be, and so I think
Speaker 9: there's a lot of support for protecting those jobs. But
Speaker 9: Canadians also understand that Canada's got to make sure it
Speaker 9: doesn't get too far offside with the US. I'm sure
Speaker 9: there will be some people who are concerned that this
Speaker 9: will make evs more expensive at a time when it's
Speaker 9: hard to get to Consumer adoption of EV's is not
Speaker 9: as high as as a lot of environmentalists especially would
Speaker 9: want it to be. But I think generally you'll see
Speaker 9: a lot of consensus in support of this.
Speaker 2: Do Canada Does Canada buy a lot of China EV's.
Speaker 9: At the end of the day, though, right now it's
Speaker 9: basically Tesla's being manufactured in Shanghai. That's at the moment
Speaker 9: that is the only significant inflow of Chinese made evs
Speaker 9: into Canada. I suspect Tesla will move that production to
Speaker 9: other factories to avoid these tariffs, but we know that
Speaker 9: that byd in particular, the giant Chinese automaker is looking around.
Speaker 9: They have They've hired lobbyists in Ottawa to look at
Speaker 9: possible opportunities to build and or sell in Canada. So
Speaker 9: Canada is trying to get ahead of that. But at
Speaker 9: the moment, it's basically just Tesla's.
Speaker 4: Brian, what is just in terms of the EV what's
Speaker 4: the adoption been like in Canada? Because here in the
Speaker 4: US it seems to have hit a kind of a
Speaker 4: rough patch, a little bump in the road here in
Speaker 4: terms of adoption. How is it in Canada?
Speaker 9: It's pretty similar, I would say to the US. You know, Canadians,
Speaker 9: the really the very popular vehicles here tend to be
Speaker 9: SUVs and trucks, and I don't think that from what
Speaker 9: I've seen, there's not a lot of EV adoption in
Speaker 9: that space yet. It's pretty similar to the US. I
Speaker 9: will say there are a couple of provinces, Quebec and
Speaker 9: British Columbia who EV adoption is is higher in those
Speaker 9: provinces because those provinces are pretty early at rolling out
Speaker 9: consumer incentives and sales mandates. So some regions of the
Speaker 9: country have seen higher adoption than others.
Speaker 2: That's interesting. Is there going to be more? Is this
Speaker 2: the beginning or is this the end?
Speaker 9: I do think this is the beginning, and in fact,
Speaker 9: today they Trudeau announced there will also be a consultation
Speaker 9: on other products, basically again sort of following with the
Speaker 9: US what US President Joe Biden announced earlier. So I
Speaker 9: think the consultation that will start now on other potential
Speaker 9: tariffs will focus on solar cells, semiconductors, critical minerals. I
Speaker 9: think I suspect we will see more tariffs in the
Speaker 9: near future.
Speaker 4: All Right, Brian, thank you so much for joining us.
Speaker 4: Brian Platt, he's a Canadian government reporter for Bloomberg News,
Speaker 4: joining us from Canas. We appreciate getting the boots on
Speaker 4: the ground perspective there. But again it seems like, as
Speaker 4: Brian was reporting there, that this is as much a
Speaker 4: political move from Canada to maintain, you know, a lockstep
Speaker 4: policy with that of the US has released to China.
Speaker 2: Right, because if you think about it, the US can
Speaker 2: have all the tariffs that they want, but if there
Speaker 2: are no tariffs between Canada and China and Mexico and China,
Speaker 2: there's no reason they just can't move into those countries
Speaker 2: and then they don't get the tariffs when they come
Speaker 2: to the US. So this avoids it. Now Mexico kind
Speaker 2: of has to do the same thing or else we
Speaker 2: run that risk as well.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on applecar Play and Brot
Speaker 1: Auto with a Bloomberg Business Act. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 2: We also love talking about ETF flows. Eric Beltunas is
Speaker 2: probably on vacation. Although I saw a license plate, we've
Speaker 2: not he's here.
Speaker 4: Yeah, we had him in this morning.
Speaker 2: I saw a license plate yesterday. We're playing the license
Speaker 2: plate game. Came back from Connecticut and had etf in it,
Speaker 2: and I was like, who is.
Speaker 8: That Eric car?
Speaker 2: I mean, maybe it could also be Sean O'Hara's car.
Speaker 2: He's president of pacer ETFs and he's joining us. How
Speaker 2: to talk some more about flows? Hey, Sean, does your
Speaker 2: license plate have et finite?
Speaker 10: No? It does not. It might be might have cal
Speaker 10: Z cowz nice.
Speaker 2: Okay, So I've been reading a lot about where the
Speaker 2: flows are going, where the funds are going. There's still
Speaker 2: record amounts of money and money market funds just sitting
Speaker 2: there in cash. Are you noticing any of that coming
Speaker 2: into ETFs and wear are the flows?
Speaker 8: Well?
Speaker 10: Thanks for having me. It's been a little bit slow
Speaker 10: here for August, I think, you know, and talking to
Speaker 10: some of my friends around the industry, I think things
Speaker 10: have slowed down. I would expect that, you know, once
Speaker 10: we get past this weekend, things will pick back up.
Speaker 10: A lot of the flows earlier in the year were
Speaker 10: to the big broad market cap weighted indexes. You know.
Speaker 10: The big risk there I think you guys were talking
Speaker 10: about coming up is that there's such a high concentration
Speaker 10: of the return on the S and P five hundred
Speaker 10: for example, or the NASDAQ one hundred that is attributable
Speaker 10: to five to seven names, and that happens from time
Speaker 10: to time, but it never really lasts. And so I
Speaker 10: think you're seeing, you know, going to see flows away
Speaker 10: from traditional market cap as this market develops a little
Speaker 10: bit of breadth into different waiting schemes.
Speaker 4: Sean, we had an eventful day, certainly on Friday, BET
Speaker 4: chairman j Palout and Jackson Hole in his speech. What
Speaker 4: did you make of that speech and what do you
Speaker 4: think it means for the markets?
Speaker 10: Well, I think what I'm hopeful it means is that
Speaker 10: they're going to stay true to their word. I mean,
Speaker 10: they have not really deviated from what their message is.
Speaker 10: I think they're indicating now that they're going to have
Speaker 10: a cutout expected to be twenty five basis points, and
Speaker 10: then I would expect another cut perhaps later this year,
Speaker 10: to sort of deal with a little bit of the
Speaker 10: slowdown that's occurring. Hopefully. You know, they're able to engineer
Speaker 10: a soft landing as opposed to a crash landing, and
Speaker 10: so their strategy has been all along to be very
Speaker 10: very tight on money until they felt like inflation was
Speaker 10: under control. I think they feel like that's the case
Speaker 10: now and we're starting to see a little bit of
Speaker 10: a crack here and there in the labor market, and
Speaker 10: so that's their secondary concern, which is why I think
Speaker 10: they'll in cut rates just a little. And I think
Speaker 10: the market depending on what their message is. And I
Speaker 10: for example, they did fifty basis points, I think it
Speaker 10: would scare the market. So if they do twenty five,
Speaker 10: I think that the market will view that as a
Speaker 10: positive and continue to go up and forward from here.
Speaker 2: So based on that, then do you see the flows
Speaker 2: into more of the let me go buy super cool
Speaker 2: tech on it dip flows or is it let's just
Speaker 2: rotate into some defensives in case the FAD's going to
Speaker 2: have to cut fifty basis points.
Speaker 10: Yeah, I mean, I think you've seen some of that.
Speaker 10: I mean, you know, our big calling card is value.
Speaker 10: We think we redefined value with our cash Cow series
Speaker 10: and we've had a terrific year there. We have a
Speaker 10: growth strategy that we just launched Friday, a Nasdaq one
Speaker 10: hundred growth strategy that it takes a bit of a
Speaker 10: different take for that side of the equation. We use
Speaker 10: free cash flow margin, which this is a measure of
Speaker 10: how much free cash flow company generates based on the
Speaker 10: sales that they make and so, and we're optimistic that,
Speaker 10: you know, the success we've had on the value side,
Speaker 10: we can have on the growth side with a couple
Speaker 10: of those ETFs out there right now. And then one
Speaker 10: more important point is some of the flows we've been
Speaker 10: seeing here recently have been into risk management strategies. I
Speaker 10: think people are starting to get a little bit more
Speaker 10: position to if it's not a soft landing and the
Speaker 10: economy really does go into a recession, how do I
Speaker 10: position my portfolio manage to downside.
Speaker 4: Gold higher yet again?
Speaker 1: Today?
Speaker 4: Sean, how do you see that extraordinary performance of gold
Speaker 4: in your TF world?
Speaker 10: Well, I mean the big ETFs there are taken in
Speaker 10: some money, for sure. I think traditional gold investors would
Speaker 10: rather you know, stack it, as they say, right, keep
Speaker 10: it in a safe or store it somewhere in a
Speaker 10: safety box. You know, I don't really think gold as
Speaker 10: an investment is a good long term investment in true
Speaker 10: you know, it hasn't been historically a very high returning asset,
Speaker 10: although it goes through periods when you have a lot
Speaker 10: of uncertainty where a disc does tend to move a bit,
Speaker 10: and so I think that what's going on with the
Speaker 10: gold trade has been driven primarily by two things. One
Speaker 10: is people see it as an inflation hedge, and then
Speaker 10: there are also people that see it as a hedge
Speaker 10: against sort of a.
Speaker 2: Disaster, right, and that which brings us to bitcoin too.
Speaker 2: What kind of flows are we noticing into the ETFs
Speaker 2: right now in the crypto space?
Speaker 10: Yeah, well, we don't have anything in the crypto space.
Speaker 10: I'm not sure we're big believers in it, Okay, but
Speaker 10: I will tell you, just if you're from a market observer,
Speaker 10: there's been enormous flows into bitcoin e, which again I
Speaker 10: don't think makes any sense. I mean, if you're going
Speaker 10: to hold bitcoin, you don't need to hold it in
Speaker 10: a wrapper that charges you extra money on an average
Speaker 10: daily basis like an ETF and has a management fee.
Speaker 10: But there's been a great deal of money flowing into
Speaker 10: these ETFs. I think that was a lot of anticipation
Speaker 10: waiting for them to finally get launched, and I think
Speaker 10: eventually what you'll see in the bitcoin space is what
Speaker 10: we've seen in the broad market space, Like when you
Speaker 10: look at the several different versions of the S and
Speaker 10: P five hundred you can own. They're really all the same,
Speaker 10: and so I think eventually we're going to wind up
Speaker 10: seeing a fee war on the bitcoin side.
Speaker 4: Interesting, So the ETF business, Sean, I mean, I'm just
Speaker 4: looking at some of the research from Eric Balchunas from
Speaker 4: Bloomberg Intelligence showing, you know, the big, big players just
Speaker 4: dominating in terms of total assets, the vanguards of the world.
Speaker 4: Is that a healthy market structure for any market?
Speaker 10: Well, I think generally is big and it's not a
Speaker 10: bad thing. I think, you know, the bulk of the
Speaker 10: ETFs so far have been in what we would call
Speaker 10: cheat beta replication strategies, taking and existing broad index and
Speaker 10: just putting it in the ETF wrapper. So it adds
Speaker 10: some utility if you will, you can own the whole
Speaker 10: market for example, like the S and P pive hundred.
Speaker 10: I think there's a very very good use case for
Speaker 10: that in people's portfolios, and it presents a challenge for
Speaker 10: folks like us, which you know, we're right across the
Speaker 10: street from Vanguard, who are fully aware of who they are.
Speaker 10: We tend to build product that we think is innovative, disruptive,
Speaker 10: or unique, and I think there's plenty of room for
Speaker 10: folks like us in this business. We always focus on
Speaker 10: an outcome in mind or a customer in mind, like
Speaker 10: is this something that would be useful in their portfolio
Speaker 10: that's not out there, and we either try to design
Speaker 10: ets that are stretching for extra return or creating alpha
Speaker 10: or managing risk to the downside. And there's a place
Speaker 10: for that in people's portfolios as well. So I think
Speaker 10: the ecosystem in general has been very, very healthy. I
Speaker 10: think that you know that if you're not in that
Speaker 10: trillion dollar plus category, then you're in the bottom eighty
Speaker 10: five percent of issues in terms of dollars. But I
Speaker 10: think as an etf issuore, I think we're almost forty
Speaker 10: seven billion dollars today. We've grown almost nine or ten
Speaker 10: billion so far yere to date, which puts US at
Speaker 10: like six or seven in terms of year to date netflows.
Speaker 10: I think we can continue to chug along alongside of
Speaker 10: those folks and add value for financial advisors and investors
Speaker 10: going forward.
Speaker 2: Before I let you go with like thirty seconds, have
Speaker 2: you seen anything in terms of people betting on election
Speaker 2: outcomes or anything like that, or any ETFs that you
Speaker 2: see there, I have not seen anything.
Speaker 10: Yet, I think what you'll see is as we get closer,
Speaker 10: I think you'll see people trying to play that angle,
Speaker 10: if you will. I mean there's a pretty diverse philosophy
Speaker 10: between the two candidates, if you will. One is a
Speaker 10: little more less regulation, less tax, one is more government.
Speaker 10: And so I think we get closer to the investment
Speaker 10: to the election date and we see whether and people
Speaker 10: start to feel like whether or not there's going to
Speaker 10: be a clear winner. You may see some people betting
Speaker 10: with sector exposures for example. Yeah, as a way to
Speaker 10: play the election odds.
Speaker 2: All right, we appreciate that. Thanks so much, John Shan O'Hara,
Speaker 2: President of pacer ETFs.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
Speaker 1: Auto with the Bloomberg Business app. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station.
Speaker 1: Just say Alexa, play Bloomberg eleven thirty.
Speaker 2: All right, let's go macro here. So every once in
Speaker 2: a while, I love checking in with the real economy folks.
Speaker 2: So the companies that move the things all around the world,
Speaker 2: and to me, they're such a great indicator of what's
Speaker 2: happening in the supply and demand front. For that, we're
Speaker 2: going to start with Gene Soroka, Executive director of the
Speaker 2: Port of Los Angeles. Hey, Geene, just on a basic
Speaker 2: question here. You know, last week I was really struck
Speaker 2: with the two rail lines coming off line because of strikes.
Speaker 2: Operations have kicked back once the Canadian government came in.
Speaker 2: There are still some that are striking. Now have you
Speaker 2: noticed anything, Has anything been diverted to you guys.
Speaker 6: Good morning Alex and good to have you on the
Speaker 6: radio side today. No, we haven't seen much. The cargil
Speaker 6: that's moving from the Transpacific theater in through Canada will
Speaker 6: pretty much stay in that lane, even with the.
Speaker 5: Short disruption we saw last week.
Speaker 6: The bigger issue for American economy is the cargo that
Speaker 6: moves north south. So whether it be autoparts that you
Speaker 6: uses the USMCA agreement to go back and forth, grain,
Speaker 6: agriculture products, steel, that's what's impacted the most. You may
Speaker 6: see a couple of shippers in Asia try to book
Speaker 6: on Transpacific vessels coming down to LA but it will
Speaker 6: be very small amounts in an already over capacity over
Speaker 6: demand situation versus the capacity.
Speaker 4: Geene, I would think seasonally right here, we have retailers,
Speaker 4: you know, starting to build their inventories for the holiday season.
Speaker 4: What the traffic going through your poor what does it
Speaker 4: look like today versus some prior years.
Speaker 6: Yeah, Paul, great to hear from you. We're up eighteen
Speaker 6: percent year on year off of very modest comps. But
Speaker 6: we just crossed the five hundred thousand container unit mark
Speaker 6: last month and it's only the fourth time in our
Speaker 6: history we've had more than half a million imports coming
Speaker 6: through Los Angeles. Big number for US, and it continues
Speaker 6: the trend that we've seen thus far this year. In addition,
Speaker 6: exports are now up fourteen consecutive months year on year.
Speaker 6: So the volume as a whole is really great, based
Speaker 6: mainly on a strong economy and then some geopolitical issues
Speaker 6: around the around the world that I'm sure we'll talk about.
Speaker 2: Yeah, So, Gin, I'm curious how much are your customers
Speaker 2: talking about the geopolitics abroad? But also here in the
Speaker 2: US Anecdotally, I keep hearing that certain companies are just
Speaker 2: holding back on investments until we get clarity on who's
Speaker 2: going to be in the White House. Are you seeing any.
Speaker 8: Of that.
Speaker 6: In just about every conversation, alex It is an election
Speaker 6: year and folks are looking to see and try to
Speaker 6: hedge as to what type of policies will be in
Speaker 6: place after inauguration.
Speaker 5: You've got a protracted labor.
Speaker 6: Negotiation on the East Coast with the Dock Workers and
Speaker 6: Employers Association that's coming up for expiry at the end
Speaker 6: of September. The Panama Canal drought issues have been in
Speaker 6: the news for well over a year and a half,
Speaker 6: and the ongoing security concerns in the Red Sea have
Speaker 6: steymied crossings at the Suez Canal for more than a
Speaker 6: year as well. All of that put together fractionally, you
Speaker 6: see cargo coming to the West coast of the United
Speaker 6: States and specifically Los Angeles in addition to the strength
Speaker 6: of that economy.
Speaker 5: That shows where the numbers are going.
Speaker 10: Hejean.
Speaker 4: Just last week, Bloomberg News published a really in depth.
Speaker 5: Big Take story. Now look at.
Speaker 4: Your world ports around seaports around the world and how
Speaker 4: some governments are using them as really strategic tools here
Speaker 4: because they're becoming it's so important for global trade just
Speaker 4: for the US. Do you feel like our ports are
Speaker 4: where they need to be in terms of, you know,
Speaker 4: investments capacity or does the US whether it's a public
Speaker 4: private partnership, need to invest more.
Speaker 6: We absolutely need to invest more, but beginning with the Infrastructure,
Speaker 6: Investment in Jobs Act, the Inflation Reduction Act, and now
Speaker 6: applications that are in front of the Environmental Protection Agency,
Speaker 6: We've seen a focus on ports over the last three
Speaker 6: and a half years here in the United States we
Speaker 6: haven't seen in a generation. We'd like to have this
Speaker 6: type of federal investment budgeted annually.
Speaker 5: And I also know that.
Speaker 6: The work here in California under Governor Gavin Newsom has
Speaker 6: the same bent paying attention to these ports, investing not
Speaker 6: only in the infrastructure, but digitalization as well as clean
Speaker 6: and green technologies. This has to continue, But I like
Speaker 6: the trajectory that we're on right now.
Speaker 2: Going back to what you were mentioning about customers talking
Speaker 2: about election uncertainty, what's your best guess as to what
Speaker 2: happens after that? I'm trying to get a handle on, like, Okay,
Speaker 2: now I know who wins the White House. Are we
Speaker 2: going to see a flood of money coming in like
Speaker 2: a flood of buying or is it just going to
Speaker 2: be incremental.
Speaker 5: Well, Alex take away the politics.
Speaker 6: The presumptive Republican nominae and now Republican nominee has said
Speaker 6: he wants to put a ten percent tariff on all
Speaker 6: three trillion dollars worth of imports that come to the
Speaker 6: United States, sixty percent on those emanating from China, and
Speaker 6: potentially sixty percent on automobiles and other products coming out
Speaker 6: of Mexico. That would change the landscape here at the
Speaker 6: Port of Los Angeles forever, and it would create inflation.
Speaker 6: On the Democratic side, what we've seen is a continuation
Speaker 6: of this teriff regime and get tough on China policy,
Speaker 6: but in very small, targeted ways. What happens to investment
Speaker 6: after this has to revolve around international and trade aid policy.
Speaker 6: What are we going to do to stimulate not only
Speaker 6: the continuation of that government investment federal and state level,
Speaker 6: but how we can give confidence to the private sector
Speaker 6: to invest behind us.
Speaker 4: Gee, you know, nobody has a better view of China
Speaker 4: than you guys in the Port of Los Angeles. Are
Speaker 4: the boats still coming? Are they loaded as much? Because
Speaker 4: there's real concern about the Chinese economy.
Speaker 6: Yeah, A couple things, Paul. When we concluded calendar year
Speaker 6: twenty twenty two, fifty seven percent of our business portfolio
Speaker 6: here in Los Angeles was China cargo, imports and exports.
Speaker 6: Right now it's about forty three percent. Yet we're still growing.
Speaker 6: We've been nimble enough here in Los Angeles to attract
Speaker 6: the cargo in Southeast and South Asia. There are more
Speaker 6: NonStop services being put in place by the shipping lots.
Speaker 5: Speed has always been.
Speaker 6: Our selling point with cargo coming from Asia and distributing
Speaker 6: throughout the country. These NonStop services in place, that speed
Speaker 6: variable remains in our favor.
Speaker 2: What's your biggest problem right now, Gene, Like, what keeps
Speaker 2: you up at night?
Speaker 4: Well?
Speaker 6: Looking across the board, making sure we keep our costs
Speaker 6: in place. And we do that with a relatively expensive
Speaker 6: landscape on how we move cargo. But more volume means
Speaker 6: our unit cost becomes much more competitive, and we're trending
Speaker 6: in that direction nicely. We've got a very complex labor landscape.
Speaker 6: Our dock workers have a contract for another five years,
Speaker 6: but it's the trucker's warehouses folks in it and manufacturing.
Speaker 6: We've got to keep trained up and moving with this economy.
Speaker 6: And then, lastly, along the regulatory environment. Got to make
Speaker 6: sure the clean air is a priority, but making sure
Speaker 6: that we're balanced, because every four containers here in Los
Speaker 6: Angeles creates a job.
Speaker 4: Interesting, So, Gin, you mentioned some of your partners there,
Speaker 4: whether that are the docks, the warehouses, the transportation, the
Speaker 4: rails and trucks. How is that supply chain, how is
Speaker 4: that legit to chain performing in your area these days?
Speaker 6: I look at the vital statistics every morning, and after
Speaker 6: just checking in with you all, I saw that they're
Speaker 6: at or better than where they were pre COVID, with
Speaker 6: one exception, are on doc rail cargo sitting a little
Speaker 6: bit longer than I would like. We're working very closely
Speaker 6: with both the Union, Pacific Railroad and BNSF to make
Speaker 6: sure we have railcars, engine power, and crewing to match
Speaker 6: this surgeon cargo that we have coming now. Nothing sinister
Speaker 6: is happening on the ground. Just need to keep that
Speaker 6: velocity going so the next chips of which we have
Speaker 6: fifty six on the way from Asia, can be worked
Speaker 6: expeditiously by our long shore members and then gotten off
Speaker 6: into the American economy. And that's with all this data, Paul,
Speaker 6: we see these micro in many spikes or changes in
Speaker 6: the supply chain data so we can act much quicker
Speaker 6: than we ever have before.
Speaker 4: All Right, Gene, thank you so much for joining us.
Speaker 4: Gen Roka, Executive director of Port of Los Angeles.
Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: ten am to noon Eastern on Bloomberg dot com, the
Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You
Speaker 1: can also watch us live every weekday on YouTube and
Speaker 1: always on the Bloomberg terminal