1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:33,640 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Yesterday 7 00:00:33,640 --> 00:00:37,840 Speaker 1: we learned that Saudi Arabia has iced the initial public 8 00:00:37,880 --> 00:00:42,279 Speaker 1: offering for its Ramco UH state owned oil company. This 9 00:00:42,440 --> 00:00:46,519 Speaker 1: was arguably the most anticipated i p O of the decade, 10 00:00:46,520 --> 00:00:50,560 Speaker 1: would have been UH the largest such company in the 11 00:00:50,600 --> 00:00:53,840 Speaker 1: World's joining us now to understand what happened here and 12 00:00:54,000 --> 00:00:55,520 Speaker 1: what it would take for this i p O to 13 00:00:55,560 --> 00:00:59,000 Speaker 1: get back on the schedule. As Dr ellen Wald, president 14 00:00:59,040 --> 00:01:02,440 Speaker 1: of Transversal Insulting, also a nonresident Senior Fellow at the 15 00:01:02,440 --> 00:01:06,080 Speaker 1: Atlantic Council's Global Energy Center, and author of a book, 16 00:01:06,280 --> 00:01:10,000 Speaker 1: Saudi Inc. Looking at Saudi Aramco and the Family that 17 00:01:10,080 --> 00:01:12,080 Speaker 1: runs it uh, Dr, Well, thank you so much for 18 00:01:12,160 --> 00:01:15,400 Speaker 1: joining us. What was your impression when you saw the 19 00:01:15,440 --> 00:01:20,400 Speaker 1: news that this deal was being iced. My initial impression 20 00:01:20,560 --> 00:01:25,520 Speaker 1: was that, um, this isn't really all that new We've 21 00:01:25,560 --> 00:01:28,440 Speaker 1: kind of been hearing for a while that the I 22 00:01:28,640 --> 00:01:32,280 Speaker 1: p O was stalling, that the plans were not really 23 00:01:32,280 --> 00:01:37,319 Speaker 1: moving forward anymore, and that basically they were stuck on 24 00:01:37,680 --> 00:01:41,080 Speaker 1: a political decision of whether or not they want to 25 00:01:41,120 --> 00:01:45,119 Speaker 1: IPO the company, when the optimum time for that would 26 00:01:45,120 --> 00:01:47,800 Speaker 1: be and where. So it doesn't seem like this is 27 00:01:47,920 --> 00:01:51,960 Speaker 1: really a business or a financial issue more than it's 28 00:01:51,960 --> 00:01:55,040 Speaker 1: a political issue. If that's the case, then is it 29 00:01:55,120 --> 00:01:57,040 Speaker 1: more realistic to think that this is off the table 30 00:01:57,080 --> 00:01:58,639 Speaker 1: at this point that there will not be an initial 31 00:01:58,640 --> 00:02:02,720 Speaker 1: public offering of Saudia Aramco. I think it's much more 32 00:02:02,840 --> 00:02:06,960 Speaker 1: unlikely now than it was, say a year ago or 33 00:02:07,000 --> 00:02:10,800 Speaker 1: even six months ago, when the Crown Prince was visiting 34 00:02:11,120 --> 00:02:13,160 Speaker 1: the United States and he was making these rounds. He 35 00:02:13,200 --> 00:02:16,880 Speaker 1: was visiting London back in in March and April. This 36 00:02:17,000 --> 00:02:20,320 Speaker 1: was a huge talking point. Is a RAMCO going to 37 00:02:20,320 --> 00:02:22,680 Speaker 1: be listed in London, will be listed in New York 38 00:02:23,040 --> 00:02:25,639 Speaker 1: or would it be listed just on the Saudi stock market? 39 00:02:25,680 --> 00:02:28,960 Speaker 1: And now all of that talk is basically calmed down now. 40 00:02:29,000 --> 00:02:31,800 Speaker 1: There are there are a couple issues here. One is that, um, 41 00:02:31,840 --> 00:02:34,480 Speaker 1: this is really not a big time for business in 42 00:02:34,560 --> 00:02:37,880 Speaker 1: Saudi Arabia. The period between Ramadan and Hajj, you know, 43 00:02:37,960 --> 00:02:40,320 Speaker 1: not all that much gets done. So it's not like 44 00:02:40,440 --> 00:02:44,480 Speaker 1: we should have been expecting any big decisions to come anyway, 45 00:02:44,520 --> 00:02:47,200 Speaker 1: But the fact is that it does seem like all 46 00:02:47,280 --> 00:02:50,480 Speaker 1: of the massive preparations that were going on have just 47 00:02:50,560 --> 00:02:53,560 Speaker 1: kind of calmed down and basically shut shut down for 48 00:02:53,600 --> 00:02:58,320 Speaker 1: the present. So basically, the word yesterday was that Saudi 49 00:02:58,360 --> 00:03:02,120 Speaker 1: Arabia wants to focus more on buying, on Saudi Aramco 50 00:03:02,240 --> 00:03:06,400 Speaker 1: buying a strategic stake in Sabak, the local petrochemical group, 51 00:03:07,040 --> 00:03:10,960 Speaker 1: and that's the reason for this delay, indefinite delay in 52 00:03:11,000 --> 00:03:14,360 Speaker 1: the I p O. Do you buy that? Well, I 53 00:03:14,440 --> 00:03:18,280 Speaker 1: think that that's maybe a symptom as opposed to the 54 00:03:18,400 --> 00:03:21,680 Speaker 1: ultimate reason, because the fact is that the company has 55 00:03:21,720 --> 00:03:25,440 Speaker 1: said that they're prepared to go forward with an i 56 00:03:25,560 --> 00:03:28,639 Speaker 1: p O pending a decision by the top as in 57 00:03:28,760 --> 00:03:31,919 Speaker 1: the King and the Crown Prince on where and when 58 00:03:31,919 --> 00:03:34,320 Speaker 1: it should happen. So the company was ready, they had 59 00:03:34,320 --> 00:03:37,080 Speaker 1: their perspectus as prepared, They've done their financials, they gotten 60 00:03:37,080 --> 00:03:40,200 Speaker 1: their accounting in order. Um from their perspective, they were 61 00:03:40,240 --> 00:03:42,760 Speaker 1: just waiting on the final word, and that was something 62 00:03:42,800 --> 00:03:46,920 Speaker 1: that the CEO made clear months ago. Now they've gotten 63 00:03:46,960 --> 00:03:49,320 Speaker 1: into this deal with SABAC, and so it does seem 64 00:03:49,400 --> 00:03:52,320 Speaker 1: like they're saying that this is the reason for the delay, 65 00:03:52,320 --> 00:03:56,000 Speaker 1: whereas really the real reason is probably they're not sure 66 00:03:56,760 --> 00:03:59,400 Speaker 1: if this is the best course of action or they're 67 00:03:59,400 --> 00:04:03,080 Speaker 1: not ready to take that decision. That makes a lot 68 00:04:03,120 --> 00:04:05,600 Speaker 1: of sense. And one thing that I was wondering is, 69 00:04:05,800 --> 00:04:07,760 Speaker 1: you know how much this has to do with the 70 00:04:07,800 --> 00:04:10,080 Speaker 1: price of oil, given the fact that it has been 71 00:04:10,120 --> 00:04:14,480 Speaker 1: sort of fluctuating. It did rise substantially, but there seems 72 00:04:14,480 --> 00:04:16,440 Speaker 1: to be an increasing lack of clarity about how much 73 00:04:16,440 --> 00:04:19,560 Speaker 1: more it could increase. What's your sense of that. I 74 00:04:19,560 --> 00:04:22,600 Speaker 1: think a lot depends on what's going to be happening 75 00:04:22,680 --> 00:04:25,800 Speaker 1: in the next six months, even the next two or 76 00:04:25,839 --> 00:04:30,040 Speaker 1: three months with the Iran with the Iran sanctions. There 77 00:04:30,040 --> 00:04:32,039 Speaker 1: seems to be a kind of consensus from a lot 78 00:04:32,160 --> 00:04:35,640 Speaker 1: of the oil analysts that oil is heading upwards between 79 00:04:35,680 --> 00:04:38,679 Speaker 1: now and the beginning of two thousand uh nineteen, could 80 00:04:38,680 --> 00:04:42,839 Speaker 1: be going up. Some have even said hundred dollars of barrel, 81 00:04:43,080 --> 00:04:46,919 Speaker 1: But then they do see prices really dropping again by 82 00:04:47,000 --> 00:04:51,000 Speaker 1: the end of twenty nine. They see additional production coming 83 00:04:51,040 --> 00:04:53,680 Speaker 1: online in the United States and other places that would 84 00:04:53,920 --> 00:04:57,159 Speaker 1: put down with pressure. And it is possible that Saudi 85 00:04:57,160 --> 00:05:00,440 Speaker 1: Arabia just decided, you know, oil prices are still very volatile, 86 00:05:00,520 --> 00:05:02,480 Speaker 1: We're going to wait it out. On the other hand, 87 00:05:02,520 --> 00:05:05,000 Speaker 1: I don't think that whether or not the price of 88 00:05:05,040 --> 00:05:08,320 Speaker 1: oil is at sixty or eighty is really all that 89 00:05:08,400 --> 00:05:11,320 Speaker 1: big of a concern for an aram CO I p O. 90 00:05:11,680 --> 00:05:14,080 Speaker 1: If it was at thirty, that would be a different story. 91 00:05:14,480 --> 00:05:16,440 Speaker 1: So I do want to just talk about the oil markets. 92 00:05:16,440 --> 00:05:18,560 Speaker 1: I know you've been watching and studying it for years, 93 00:05:18,760 --> 00:05:22,839 Speaker 1: and you know, I'm struck by the close tie that 94 00:05:22,920 --> 00:05:25,679 Speaker 1: CREWD has had recently to the value of the dollar. 95 00:05:26,000 --> 00:05:29,680 Speaker 1: We're seeing today the dollar strengthen, oil is falling pretty much. 96 00:05:29,680 --> 00:05:32,799 Speaker 1: I have seen this inverse relationship steadily throughout the past 97 00:05:32,839 --> 00:05:35,279 Speaker 1: few weeks. Is this going to be the main driver 98 00:05:35,600 --> 00:05:39,760 Speaker 1: until there is some catalyst? I think that right now 99 00:05:39,839 --> 00:05:44,080 Speaker 1: we're seeing that the market fundamentals in the market are 100 00:05:44,160 --> 00:05:47,440 Speaker 1: increasingly coming into alignment, so there isn't as much of 101 00:05:47,520 --> 00:05:50,640 Speaker 1: a cushion in terms of supply as there used to be, 102 00:05:51,000 --> 00:05:55,119 Speaker 1: and the fact that we're not undersupplied and um so, 103 00:05:55,120 --> 00:05:57,960 Speaker 1: so there's definitely some room, but nothing like there was 104 00:05:58,120 --> 00:06:00,839 Speaker 1: a year or two ago. And that means that issues 105 00:06:01,000 --> 00:06:04,400 Speaker 1: like the value of the dollar or geopolitical issues will 106 00:06:04,720 --> 00:06:08,960 Speaker 1: have a much more amplified effect on the price of oil. So, 107 00:06:09,040 --> 00:06:11,400 Speaker 1: for example, if we get news in the next two 108 00:06:11,400 --> 00:06:16,080 Speaker 1: months that another country is cutting its imports from Iran, 109 00:06:16,360 --> 00:06:18,760 Speaker 1: that could cause oil prices to go up. Or if 110 00:06:18,760 --> 00:06:21,760 Speaker 1: we get news that um, you know, another pipeline is 111 00:06:21,800 --> 00:06:25,040 Speaker 1: coming online in Texas, that could push things down. So 112 00:06:25,400 --> 00:06:29,560 Speaker 1: given sort of all of the potential tail risks out there, 113 00:06:29,839 --> 00:06:32,680 Speaker 1: are there more to risks that will push the price 114 00:06:32,720 --> 00:06:36,159 Speaker 1: of oil to the upside or to the downside? I 115 00:06:36,200 --> 00:06:40,320 Speaker 1: think right now we're looking more at um at upside 116 00:06:40,400 --> 00:06:43,120 Speaker 1: rather than downside. It will say though, in terms of 117 00:06:43,120 --> 00:06:46,080 Speaker 1: what the dollar, the effect of the strengthening dollar has, 118 00:06:46,880 --> 00:06:49,400 Speaker 1: particularly when you look at the effect that it's having 119 00:06:49,480 --> 00:06:54,039 Speaker 1: on countries like Turkey or India which are seeing their 120 00:06:54,080 --> 00:06:57,840 Speaker 1: currencies devalued, that may push them because these are major 121 00:06:57,880 --> 00:07:01,320 Speaker 1: oil importers, that may push them to look for cheaper 122 00:07:01,360 --> 00:07:04,560 Speaker 1: sources of oil because they can't get as much you know, 123 00:07:04,640 --> 00:07:07,200 Speaker 1: for their for their currency because the dollar is so strong, 124 00:07:07,520 --> 00:07:09,840 Speaker 1: and that may in fact push them to try to 125 00:07:10,000 --> 00:07:12,920 Speaker 1: defy U S sanctions and purchase more oil from the Iran, 126 00:07:13,320 --> 00:07:16,239 Speaker 1: which Iran is happy to offer either at discounted prices 127 00:07:16,440 --> 00:07:19,800 Speaker 1: or to accept their currency is opposed to having to 128 00:07:19,800 --> 00:07:21,880 Speaker 1: treat it for dollars. In other words, it's not so 129 00:07:21,920 --> 00:07:25,320 Speaker 1: clear cut that if if the sanctions UH sort of 130 00:07:25,400 --> 00:07:29,160 Speaker 1: increase on Iran, there would be an exact corollary and 131 00:07:29,400 --> 00:07:32,640 Speaker 1: lack of oil kind of coming to market, right, And 132 00:07:32,680 --> 00:07:34,840 Speaker 1: some of that does depend on the strength of the 133 00:07:34,880 --> 00:07:38,520 Speaker 1: dollar visa v other countries currency than whether those countries 134 00:07:38,600 --> 00:07:42,400 Speaker 1: are oil exporters or oil importers. Thank you so much 135 00:07:42,440 --> 00:07:45,880 Speaker 1: for being with us, Dr Dr ellen Dr ellen Wald. 136 00:07:46,200 --> 00:07:50,280 Speaker 1: She is president of Transversal Consulting, also Nonresidents Senior Fellow 137 00:07:50,320 --> 00:07:54,120 Speaker 1: at the Atlantic Council's Global Energy Center, as also author 138 00:07:54,800 --> 00:07:57,440 Speaker 1: of a book, Saudi Inc. Which takes a look at 139 00:07:57,480 --> 00:07:59,960 Speaker 1: the history of Saudi Aramco and the family of the country. 140 00:08:00,080 --> 00:08:18,760 Speaker 1: Roles this multi fully intollar enterprise, What are we going 141 00:08:18,840 --> 00:08:22,040 Speaker 1: to eat over the next few years and how will 142 00:08:22,080 --> 00:08:25,480 Speaker 1: this reshape the agricultural industry. Joining us now to talk 143 00:08:25,480 --> 00:08:29,400 Speaker 1: about that is Alan berga agricultural reporter for Bloomberg News, 144 00:08:29,400 --> 00:08:33,920 Speaker 1: coming from our studios in Washington, D c. Alan I 145 00:08:33,960 --> 00:08:37,200 Speaker 1: loved this piece you pulled together looking at how it 146 00:08:37,280 --> 00:08:39,880 Speaker 1: tastes are changing. It's such a simple thing what you 147 00:08:39,920 --> 00:08:43,560 Speaker 1: decide to eat at each meal, and yet collectively the 148 00:08:43,600 --> 00:08:47,840 Speaker 1: decisions made by entire populations will dramatically shift and change 149 00:08:48,400 --> 00:08:52,160 Speaker 1: the agricultural industry, certainly of America but worldwide. Can you 150 00:08:52,200 --> 00:08:54,920 Speaker 1: just give us a sense, first of all, in how 151 00:08:55,000 --> 00:08:57,520 Speaker 1: tastes are going to be changing over the next decade, 152 00:08:57,760 --> 00:09:00,400 Speaker 1: and uh, what you're basing this on. I think the 153 00:09:00,640 --> 00:09:05,200 Speaker 1: big consideration to make when looking at this issue is 154 00:09:05,240 --> 00:09:07,600 Speaker 1: that you have the developed world and you have the 155 00:09:07,640 --> 00:09:10,280 Speaker 1: developing world. And and this study, which is very much 156 00:09:10,280 --> 00:09:13,319 Speaker 1: based on a report that the UN Food and Agriculture 157 00:09:13,400 --> 00:09:16,440 Speaker 1: Organization puts out twice a year. They do forecasts for 158 00:09:16,559 --> 00:09:18,920 Speaker 1: what they see as demand of different commodities and how 159 00:09:18,960 --> 00:09:22,839 Speaker 1: that translates to diets, is that the developing world is 160 00:09:22,880 --> 00:09:25,880 Speaker 1: still very much driving food consumption much more than the 161 00:09:25,920 --> 00:09:28,600 Speaker 1: developed world. And that's key because it leads to some 162 00:09:28,600 --> 00:09:32,000 Speaker 1: sort of counterintuitive conclusions. Um, if you take a look 163 00:09:32,040 --> 00:09:34,640 Speaker 1: at a lot of the concerns about public health, about obesity, 164 00:09:34,679 --> 00:09:36,440 Speaker 1: the fact that we have more people now dealing with 165 00:09:36,440 --> 00:09:38,640 Speaker 1: obesity in the world than we have dealing with hunger. 166 00:09:39,200 --> 00:09:41,440 Speaker 1: You start to think, well, clearly, we're going to have 167 00:09:41,520 --> 00:09:44,160 Speaker 1: probably less meat consumption, we're going to have less processed 168 00:09:44,160 --> 00:09:48,880 Speaker 1: food consumption, etcetera. That's not necessarily the case, um, because 169 00:09:49,000 --> 00:09:53,040 Speaker 1: overall global food consumption is not necessarily a First world issue. 170 00:09:53,080 --> 00:09:55,960 Speaker 1: So you see some changes in terms of more demand 171 00:09:56,000 --> 00:10:00,040 Speaker 1: for vegetable oil, more demand for sugar, things that you 172 00:10:00,160 --> 00:10:02,600 Speaker 1: might think we would be moving away from, but that's 173 00:10:02,600 --> 00:10:05,360 Speaker 1: only in richer nations. Poor nations still want some of 174 00:10:05,360 --> 00:10:08,320 Speaker 1: this stuff, and that's going to be driving growth global growth. Okay, 175 00:10:08,440 --> 00:10:11,640 Speaker 1: so let's just talk about the whole concept of developing 176 00:10:11,720 --> 00:10:16,880 Speaker 1: nations versus developed nations. So what have developing nations really, 177 00:10:17,000 --> 00:10:19,520 Speaker 1: what have they been consuming most and what are they 178 00:10:19,559 --> 00:10:21,600 Speaker 1: going to be consuming in the future. Well, and that's 179 00:10:21,600 --> 00:10:23,360 Speaker 1: the key distinction about taking a look at the next 180 00:10:23,400 --> 00:10:26,360 Speaker 1: year's ten years ahead, because this entire century you've seen 181 00:10:26,360 --> 00:10:29,080 Speaker 1: developing world growth very much driven by China. As China 182 00:10:29,160 --> 00:10:32,000 Speaker 1: has become wealthier. Of course, you've seen this massive increase 183 00:10:32,040 --> 00:10:36,080 Speaker 1: in soybean imports, which is now become a global trade story. Um. 184 00:10:36,240 --> 00:10:38,200 Speaker 1: You know, China has half of the world's pigs, and 185 00:10:38,240 --> 00:10:40,600 Speaker 1: so they've been pushing anything that can be used for 186 00:10:40,640 --> 00:10:43,240 Speaker 1: animal feed, and they've very much been the driver that's 187 00:10:43,240 --> 00:10:45,920 Speaker 1: going to slack off in the next decade um. And frankly, 188 00:10:46,280 --> 00:10:48,920 Speaker 1: China's growth was a unique event that we probably won't 189 00:10:48,960 --> 00:10:52,520 Speaker 1: see again. Because Chinese growth is slowing, there is still 190 00:10:52,520 --> 00:10:54,800 Speaker 1: growth in other areas. Of course, you will see India 191 00:10:54,840 --> 00:10:57,360 Speaker 1: overtake China as the world's most populous nation. You see 192 00:10:57,360 --> 00:10:59,920 Speaker 1: Sub Saharan Africa being the main source of global growth, 193 00:11:00,200 --> 00:11:03,600 Speaker 1: but they don't eat like the Chinese. Um don't expect 194 00:11:03,640 --> 00:11:06,000 Speaker 1: India to be pushing animal feed demand. I mean, this 195 00:11:06,080 --> 00:11:09,080 Speaker 1: is a very vegetarian society. They're going to be having 196 00:11:09,120 --> 00:11:11,920 Speaker 1: more dairy Africa is going to be having more vegetable, 197 00:11:11,920 --> 00:11:14,720 Speaker 1: sugar processed foods as they as those countries in Africa 198 00:11:14,760 --> 00:11:17,360 Speaker 1: move up the development curve, they're going to want a 199 00:11:17,440 --> 00:11:20,559 Speaker 1: more developed world diet for better and for worse. It's 200 00:11:20,559 --> 00:11:22,880 Speaker 1: going to be different than what we've seen with China's rise. 201 00:11:23,160 --> 00:11:25,640 Speaker 1: It's going to be maybe a little bit slower curve demand, 202 00:11:25,640 --> 00:11:26,920 Speaker 1: and it's going to be a demand that grows in 203 00:11:26,920 --> 00:11:29,240 Speaker 1: different commodities. So this is fascinating to me. So this 204 00:11:29,280 --> 00:11:33,160 Speaker 1: suggests to me, uh, certainly, the cheaper pork prices that 205 00:11:33,200 --> 00:11:36,200 Speaker 1: we've seen, it suggests that will continue going forward and 206 00:11:36,240 --> 00:11:40,319 Speaker 1: perhaps uh even accelerate if this really does come to pass. 207 00:11:40,360 --> 00:11:42,840 Speaker 1: And it also has some sort of bearage views on 208 00:11:42,880 --> 00:11:45,600 Speaker 1: the corn market as well. Now it does, and it's 209 00:11:45,720 --> 00:11:48,240 Speaker 1: very important again to remember for perspective about the global 210 00:11:48,280 --> 00:11:51,560 Speaker 1: agricultural system. Um, of course there are always supply shocks 211 00:11:51,559 --> 00:11:54,480 Speaker 1: and disruptions, and projections always look much more smoother than 212 00:11:54,480 --> 00:11:56,200 Speaker 1: the reality. But when you take a look at what's 213 00:11:56,200 --> 00:11:59,960 Speaker 1: being expected, we're not expecting large increases in food inflation. 214 00:12:00,040 --> 00:12:03,000 Speaker 1: It should be fairly mild. And that's because the world 215 00:12:03,080 --> 00:12:06,120 Speaker 1: does not have a problem feeding itself. It can create 216 00:12:06,160 --> 00:12:10,400 Speaker 1: the commodities. Um, sustainability becomes an issue, Distribution becomes an issue, 217 00:12:10,400 --> 00:12:12,880 Speaker 1: Wealth becomes an issue. But this is part of why 218 00:12:12,920 --> 00:12:14,720 Speaker 1: I get skeptical when I see all these stories about 219 00:12:14,720 --> 00:12:16,680 Speaker 1: how in ten years we need to be eating seaweed 220 00:12:16,800 --> 00:12:19,800 Speaker 1: or bugs or everything has to be grown hydroponically. The 221 00:12:19,800 --> 00:12:23,800 Speaker 1: global food system is feeding people just fine. Um, those 222 00:12:23,840 --> 00:12:27,400 Speaker 1: aren't the issues involving the global food system. It's about sustainability, 223 00:12:27,480 --> 00:12:30,920 Speaker 1: environmental issues. It's about whether people have the money to 224 00:12:30,960 --> 00:12:32,800 Speaker 1: get the food they need or the access to the 225 00:12:32,840 --> 00:12:35,439 Speaker 1: food they have. Um, the current global food system is 226 00:12:35,480 --> 00:12:37,960 Speaker 1: doing quite fine feeding people. In fact, some of the 227 00:12:37,960 --> 00:12:39,880 Speaker 1: problems we've been seeing in markets is that's been doing 228 00:12:39,920 --> 00:12:42,240 Speaker 1: too much of a productive job and we've actually seen 229 00:12:42,240 --> 00:12:44,400 Speaker 1: too much food being shoved down people's throats because it's 230 00:12:44,440 --> 00:12:48,000 Speaker 1: so inexpensive. And that's something that report underscores as well. Alright, 231 00:12:48,080 --> 00:12:50,600 Speaker 1: So are there any areas where you're gonna see demand 232 00:12:50,840 --> 00:12:53,520 Speaker 1: really dramatically increase? I mean, you mentioned the dairy industry 233 00:12:53,559 --> 00:12:56,800 Speaker 1: with India. Who benefits from that? What nation provides the milk? 234 00:12:57,080 --> 00:12:59,319 Speaker 1: So India is going to be a fascinating issue because 235 00:12:59,400 --> 00:13:02,800 Speaker 1: India isn't credibly protectionist in his agricultural policy, and they've 236 00:13:02,840 --> 00:13:07,000 Speaker 1: been meeting their dairy demand through domestic supply. The feeling 237 00:13:07,040 --> 00:13:09,280 Speaker 1: is at some point that's just going to give. And 238 00:13:09,320 --> 00:13:12,040 Speaker 1: we actually saw something similar with China two decades ago, 239 00:13:12,120 --> 00:13:14,240 Speaker 1: and they just decided they couldn't grow enough soybeans and 240 00:13:14,280 --> 00:13:16,880 Speaker 1: they were going to strategically rely on imports. If you 241 00:13:16,960 --> 00:13:19,120 Speaker 1: see that happen in India the next decade, that is 242 00:13:19,160 --> 00:13:22,000 Speaker 1: going to be an incredible opportunity for dairy producers. But 243 00:13:22,080 --> 00:13:24,400 Speaker 1: at this point in time, India is really trying to 244 00:13:24,400 --> 00:13:27,560 Speaker 1: boost domestic capacity, domestic process and because of course they 245 00:13:27,600 --> 00:13:29,840 Speaker 1: would like to see that wealth stay internally with their 246 00:13:29,840 --> 00:13:32,480 Speaker 1: own agriculture sector. That's going to be one of the 247 00:13:32,559 --> 00:13:34,960 Speaker 1: big business questions in the next ten years. You know, 248 00:13:35,040 --> 00:13:38,040 Speaker 1: this is such a great conversation to have, especially as 249 00:13:38,080 --> 00:13:40,480 Speaker 1: these tariffs pick up. You just have to wonder how 250 00:13:40,559 --> 00:13:43,880 Speaker 1: much this factors into China's calculus here with soybeans, you 251 00:13:43,960 --> 00:13:46,400 Speaker 1: do have to wonder. I mean, China is an aging society. 252 00:13:46,520 --> 00:13:49,640 Speaker 1: It's population growth is slowing and may actually shift into 253 00:13:49,640 --> 00:13:53,680 Speaker 1: reverse and upcoming years. Um, they would like more domestic 254 00:13:53,720 --> 00:13:56,880 Speaker 1: capacity as well. Frankly, Um, they don't like to necessarily 255 00:13:56,880 --> 00:14:00,520 Speaker 1: have such strategically important commodity be dependent on brazil um 256 00:14:00,800 --> 00:14:04,000 Speaker 1: us producers. You know, they will change their their production 257 00:14:04,080 --> 00:14:07,079 Speaker 1: more's with domestic markets as well. You may look back 258 00:14:07,120 --> 00:14:09,480 Speaker 1: on these these tariffs is sort of a zenith of 259 00:14:09,520 --> 00:14:12,680 Speaker 1: this particular system, and even if we get rid of 260 00:14:12,679 --> 00:14:15,600 Speaker 1: these tariffs, the system going forward is never going to 261 00:14:15,640 --> 00:14:18,880 Speaker 1: look quite like it did before. Alan Burga, thank you 262 00:14:18,920 --> 00:14:22,040 Speaker 1: so much. That was terrific. Allen burga agricultural reporter for 263 00:14:22,280 --> 00:14:26,800 Speaker 1: Bloomberg News coming to us from our studio in Washington, 264 00:14:26,920 --> 00:14:30,840 Speaker 1: d C. The Bloomber reporters put together, including Alambergo, put 265 00:14:30,920 --> 00:14:34,440 Speaker 1: together a piece infographic what will the World Eat in 266 00:14:34,480 --> 00:14:36,840 Speaker 1: the next decade? It's pretty interesting. I mean, it just 267 00:14:36,880 --> 00:14:39,920 Speaker 1: sort of highlights the shift in the developing worlds and 268 00:14:39,920 --> 00:14:43,920 Speaker 1: the changing tastes and the concept of what really will 269 00:14:43,960 --> 00:15:03,800 Speaker 1: happen with respect to our agricultural flows. Well, the legal 270 00:15:03,840 --> 00:15:07,840 Speaker 1: woes of President Trump appeared to be deepening, certainly with 271 00:15:07,880 --> 00:15:11,000 Speaker 1: Michael Cohen, his former attorney, pleading guilty to a number 272 00:15:11,040 --> 00:15:16,920 Speaker 1: of different issues, including campaign of finance misuse. But today 273 00:15:17,120 --> 00:15:19,960 Speaker 1: President Trump had a lot of comments on Fox and Friends, 274 00:15:20,000 --> 00:15:22,400 Speaker 1: including one on flippers. I want to bring in Bob 275 00:15:22,480 --> 00:15:25,560 Speaker 1: Men's who's a partner at mcarter in English in Newark, 276 00:15:25,640 --> 00:15:28,680 Speaker 1: New Jersey. Bob, I am so glad that you're joining 277 00:15:28,760 --> 00:15:32,760 Speaker 1: us today, especially given the fact your former assistant U 278 00:15:32,840 --> 00:15:36,160 Speaker 1: S Attorney in New Jersey as well as assistant counsel 279 00:15:36,200 --> 00:15:41,440 Speaker 1: to New Jersey Republican Governor Thomas Keene in the nine nineties. Bob, 280 00:15:41,440 --> 00:15:43,800 Speaker 1: I want to read you something the President Trump said 281 00:15:44,240 --> 00:15:46,960 Speaker 1: for thirty or forty years, I've been watching flippers. Everything 282 00:15:47,000 --> 00:15:49,120 Speaker 1: is wonderful. Then they get ten years in jail and 283 00:15:49,120 --> 00:15:51,680 Speaker 1: they flip on whoever the next highest one is, or 284 00:15:51,720 --> 00:15:54,440 Speaker 1: as high as you can go. As someone who headed 285 00:15:54,560 --> 00:15:56,920 Speaker 1: the organized crime division in New Jersey, what was your 286 00:15:56,920 --> 00:16:00,800 Speaker 1: reaction of that. Well, what I can tell you is 287 00:16:00,880 --> 00:16:05,920 Speaker 1: that federal prosecutors all over the country rely on cooperating 288 00:16:05,920 --> 00:16:09,600 Speaker 1: witnesses all the time. In fact, I would go so 289 00:16:09,640 --> 00:16:12,520 Speaker 1: far as to say that it is unusual for a 290 00:16:12,600 --> 00:16:16,720 Speaker 1: case not to involve a cooperating witness. And the reason 291 00:16:16,760 --> 00:16:19,600 Speaker 1: for that is simple because even cases in which there 292 00:16:19,760 --> 00:16:23,360 Speaker 1: is strong documentary evidence. You know, for example, the Paul 293 00:16:23,440 --> 00:16:26,960 Speaker 1: Mantifor case had lots of documents showing money being moved 294 00:16:27,440 --> 00:16:32,520 Speaker 1: from the Russian uh oligarch who was paying them into 295 00:16:32,720 --> 00:16:36,120 Speaker 1: these shell companies, and from the shell companies he was 296 00:16:36,280 --> 00:16:40,720 Speaker 1: paying his personal finances. You often need an insider, a 297 00:16:40,760 --> 00:16:45,360 Speaker 1: person who actually participated in the crime itself, to take 298 00:16:45,400 --> 00:16:48,120 Speaker 1: the jury by the hand and explain to them what 299 00:16:48,160 --> 00:16:51,320 Speaker 1: was going on and most importantly, what was in the 300 00:16:51,400 --> 00:16:54,920 Speaker 1: mind of the individuals who's charged with the criminal offense. 301 00:16:54,960 --> 00:16:59,960 Speaker 1: Because all criminal offenses boiled down to intent another word, 302 00:17:00,000 --> 00:17:02,800 Speaker 1: it's the possess to know what they're doing and know 303 00:17:02,920 --> 00:17:06,239 Speaker 1: what they're doing is wrong. So cooperating witnesses are an 304 00:17:06,280 --> 00:17:09,280 Speaker 1: integral part of federal law enforcement and it's something that 305 00:17:09,440 --> 00:17:12,359 Speaker 1: is used all the time. Alright. So given that the 306 00:17:12,400 --> 00:17:15,320 Speaker 1: fact that President Trump was talking about flippers and in 307 00:17:15,359 --> 00:17:18,640 Speaker 1: that context said it almost ought to be outlawed, it's 308 00:17:18,680 --> 00:17:22,600 Speaker 1: not fair. What does that do for federal prosecutors and 309 00:17:22,640 --> 00:17:25,800 Speaker 1: others who rely on cooperating witnesses. I mean, is this 310 00:17:25,920 --> 00:17:28,480 Speaker 1: just sort of a flip off the cuff, you know, uh, 311 00:17:28,880 --> 00:17:31,080 Speaker 1: inflamatory statement, but it's just part for the course with 312 00:17:31,119 --> 00:17:34,359 Speaker 1: our president, or does it have a material effect. Well, 313 00:17:34,359 --> 00:17:37,400 Speaker 1: it's really the same type of argument that defense lawyers 314 00:17:37,480 --> 00:17:40,119 Speaker 1: raise all the time. And to reference back to the 315 00:17:40,119 --> 00:17:43,760 Speaker 1: Paul Mantifort trial, it was the central theme of Manifort's 316 00:17:43,800 --> 00:17:46,560 Speaker 1: defense that in that case, Rick Gates, his former right 317 00:17:46,600 --> 00:17:49,639 Speaker 1: hand person, who had been involved intimately in all of 318 00:17:49,680 --> 00:17:54,040 Speaker 1: his financial dealings, had flipped on him and had cooperated 319 00:17:54,080 --> 00:17:56,840 Speaker 1: with the government. And it's fair game for the defense 320 00:17:56,920 --> 00:18:01,280 Speaker 1: to point out that individuals in those circumstances are trying 321 00:18:01,320 --> 00:18:03,840 Speaker 1: to save themselves, that they are going to get a 322 00:18:03,920 --> 00:18:06,359 Speaker 1: lesser sentence. Uh, it's up to the judge at the 323 00:18:06,440 --> 00:18:08,040 Speaker 1: end of the day how much of a reduction in 324 00:18:08,119 --> 00:18:10,919 Speaker 1: sentence they may receive. But they certainly are doing it 325 00:18:10,960 --> 00:18:13,280 Speaker 1: because they believe that at the end of this process 326 00:18:13,359 --> 00:18:15,800 Speaker 1: they will go to jail for less time or perhaps 327 00:18:15,800 --> 00:18:18,560 Speaker 1: no time at all, and that their credibility ought to 328 00:18:18,560 --> 00:18:21,600 Speaker 1: be challenged on that basis. And that's why prosecutors will 329 00:18:21,640 --> 00:18:24,160 Speaker 1: never go to trial in a case where they will 330 00:18:24,200 --> 00:18:27,720 Speaker 1: ask jurors to rely on the uncorroborated testimony of some 331 00:18:27,760 --> 00:18:30,879 Speaker 1: cooperating witness, because there's just too much of a motivation 332 00:18:31,160 --> 00:18:33,320 Speaker 1: for them to perhaps shade the truths in order to 333 00:18:33,320 --> 00:18:36,280 Speaker 1: save themselves. So those cases will always be cases in 334 00:18:36,320 --> 00:18:38,879 Speaker 1: which you've got a cooperating witness, but you also have 335 00:18:39,080 --> 00:18:43,280 Speaker 1: other witnesses and other documents that corroborate and support what 336 00:18:43,359 --> 00:18:46,000 Speaker 1: they're telling the jury to jurors don't have to rely 337 00:18:46,119 --> 00:18:49,919 Speaker 1: on those cooperating witnesses alone. And arguably with Michael Cohen, 338 00:18:50,000 --> 00:18:52,919 Speaker 1: for example, which is the context in which President Trump 339 00:18:53,080 --> 00:18:57,359 Speaker 1: was speaking, arguably he didn't even get a cooperation agreement 340 00:18:58,080 --> 00:19:00,560 Speaker 1: or any kind of uh you didn't cut get was 341 00:19:00,359 --> 00:19:03,720 Speaker 1: it wasn't able to reduce his sentence clearly or my 342 00:19:03,840 --> 00:19:07,920 Speaker 1: cooperating perhaps because he didn't need to, or wasn't credible enough, 343 00:19:08,160 --> 00:19:11,600 Speaker 1: or they had plenty of evidence didn't matter, correct. Yeah, 344 00:19:11,640 --> 00:19:13,679 Speaker 1: that certainly seems to be the case, and that doesn't 345 00:19:13,720 --> 00:19:17,240 Speaker 1: mean that that might not change. And it's possible that 346 00:19:17,400 --> 00:19:20,880 Speaker 1: prosecutors will give him a cooperating deal down the road, 347 00:19:20,920 --> 00:19:23,560 Speaker 1: but at this point it doesn't appear that he has 348 00:19:23,600 --> 00:19:26,400 Speaker 1: that kind of arrangement. And that can be for either 349 00:19:26,440 --> 00:19:28,880 Speaker 1: of the reasons that you decited that they believe that 350 00:19:29,240 --> 00:19:33,040 Speaker 1: he is his testimony just might not be credible. Um, 351 00:19:33,080 --> 00:19:35,760 Speaker 1: But more likely, if they don't give him a cooperating deal, 352 00:19:35,760 --> 00:19:37,840 Speaker 1: it's simply because they don't need it. That they have 353 00:19:38,280 --> 00:19:40,000 Speaker 1: lots of other evidence and they think they're going to 354 00:19:40,080 --> 00:19:43,440 Speaker 1: have other witnesses who perhaps have less baggage than Michael Cohn, 355 00:19:43,560 --> 00:19:48,240 Speaker 1: and therefore they don't need his testimony in some future prosecution. Yeah, 356 00:19:48,280 --> 00:19:50,520 Speaker 1: but a lot of people have been talking today about, 357 00:19:50,640 --> 00:19:53,920 Speaker 1: you know, the possibilities of impeachment President Trump also pining 358 00:19:53,960 --> 00:19:55,480 Speaker 1: on it and saying that the market would crash if 359 00:19:55,480 --> 00:19:57,719 Speaker 1: he were to be impeached. I'm just wondering, I mean, 360 00:19:57,760 --> 00:20:01,439 Speaker 1: if we are talking about campaign finance, Viole aations. Is 361 00:20:01,440 --> 00:20:04,920 Speaker 1: the issue that we're talking about an impeachable offense, Well, 362 00:20:04,920 --> 00:20:10,639 Speaker 1: that's a great question. Typically impeachable offenses involved abuses of 363 00:20:10,680 --> 00:20:14,600 Speaker 1: a position while somebody is in office. So, for example, 364 00:20:15,240 --> 00:20:19,399 Speaker 1: President Nixon UM would have been impeached presumably over his 365 00:20:19,480 --> 00:20:23,080 Speaker 1: attempts to interfere with the FBI's investigation into Watergate, and 366 00:20:23,119 --> 00:20:26,199 Speaker 1: all of that occurred while he was president. Here, the 367 00:20:26,240 --> 00:20:33,720 Speaker 1: allegations surrounding the campaign finance violations occurred before the president 368 00:20:33,840 --> 00:20:36,440 Speaker 1: was in office. But if you go back and look 369 00:20:36,440 --> 00:20:41,320 Speaker 1: at the history of the impeachment clause in the Constitution UM, 370 00:20:41,760 --> 00:20:47,040 Speaker 1: it does refer to a subset of violations which would 371 00:20:47,080 --> 00:20:50,800 Speaker 1: involve some type of abuse that related to the person 372 00:20:51,200 --> 00:20:53,760 Speaker 1: getting elected in the first place. So the framers were 373 00:20:53,800 --> 00:20:57,120 Speaker 1: sensitive not only to abuses that it would occur while 374 00:20:57,680 --> 00:21:00,639 Speaker 1: an elected official was in office, but all so a 375 00:21:00,720 --> 00:21:03,159 Speaker 1: circumstance in which there was an allegation of which there 376 00:21:03,240 --> 00:21:07,040 Speaker 1: was some abuse connected with their election to that office 377 00:21:07,080 --> 00:21:11,119 Speaker 1: in the first place. So it sounds complicated. It is. 378 00:21:11,200 --> 00:21:13,479 Speaker 1: It is complicated, And I think the answer is that 379 00:21:13,560 --> 00:21:17,639 Speaker 1: this could become something down the road that would be 380 00:21:17,640 --> 00:21:20,000 Speaker 1: considered in a teachable offense. But We're a long way 381 00:21:20,040 --> 00:21:22,560 Speaker 1: from that point, as we see here today. Bob Man's 382 00:21:22,600 --> 00:21:24,680 Speaker 1: thank you so much for taking the time. Really appreciate it, 383 00:21:25,359 --> 00:21:29,560 Speaker 1: my pleasure. Bob Man's partner with Macarter in English in Newark, 384 00:21:29,600 --> 00:21:32,840 Speaker 1: New Jersey. He was a former assistant U S Attorney 385 00:21:32,840 --> 00:21:36,480 Speaker 1: as well as assistant counsel to Governor Thomas Keane of 386 00:21:36,760 --> 00:21:40,400 Speaker 1: New Jersey in the nineties, and he was deputy chief 387 00:21:40,400 --> 00:21:43,119 Speaker 1: of the Organized Crime Strike Force Division for the District 388 00:21:43,200 --> 00:21:44,679 Speaker 1: of New Jersey. I'm sure there are a lot of 389 00:21:44,960 --> 00:22:04,879 Speaker 1: fascinating stories, particularly emerging from that division. The US stock 390 00:22:04,920 --> 00:22:10,080 Speaker 1: market is booming, bonds are stable, even in the riskier sectors. 391 00:22:10,080 --> 00:22:14,320 Speaker 1: So what does a distressed debt investor, distressed and equity 392 00:22:14,359 --> 00:22:18,040 Speaker 1: investor do. We're gonna ask that to George Shalty. He 393 00:22:18,119 --> 00:22:21,600 Speaker 1: is head of Salty Asset Management, and he's been mining, uh, 394 00:22:21,880 --> 00:22:25,360 Speaker 1: the various players out there who might be in distress 395 00:22:25,600 --> 00:22:29,320 Speaker 1: or just emerging from it to try to find some opportunities. So, George, 396 00:22:29,320 --> 00:22:33,040 Speaker 1: is this a particularly tough time to be a distressed investor? Well, 397 00:22:33,080 --> 00:22:35,560 Speaker 1: if you have the flexibility of going long and short, 398 00:22:35,680 --> 00:22:38,120 Speaker 1: up and down the capital structure, it's not because there 399 00:22:38,119 --> 00:22:42,160 Speaker 1: are a lot of companies that recently emerged from distress 400 00:22:42,200 --> 00:22:45,879 Speaker 1: and bankruptcy, especially in the energy and the oil and 401 00:22:45,880 --> 00:22:49,560 Speaker 1: gas field and the metals and mining field. UM. You know, 402 00:22:49,680 --> 00:22:52,520 Speaker 1: just a crazy amount of distressed companies there because it 403 00:22:52,560 --> 00:22:55,600 Speaker 1: was just really too much leverage in that space. Um. 404 00:22:55,680 --> 00:22:58,960 Speaker 1: In fact, it was about twenty or of the entire 405 00:22:59,040 --> 00:23:01,960 Speaker 1: high yield create a debt issue ones market for a while, 406 00:23:02,400 --> 00:23:04,399 Speaker 1: and then when commodity prices dropped, a lot of these 407 00:23:04,400 --> 00:23:06,560 Speaker 1: companies went bankrupt. Now many of them have come out 408 00:23:06,560 --> 00:23:09,480 Speaker 1: on the other side with clean balance sheets and a 409 00:23:09,560 --> 00:23:12,520 Speaker 1: much different outlook. Although I have to thank with so 410 00:23:12,600 --> 00:23:14,639 Speaker 1: much money out there trying to find any bit of 411 00:23:15,040 --> 00:23:18,440 Speaker 1: value whatsoever, these companies have had a pretty easy time 412 00:23:18,720 --> 00:23:23,080 Speaker 1: just absolutely rebounding and getting plenty of capital now. Well, 413 00:23:23,080 --> 00:23:25,080 Speaker 1: some of them are smaller, so they're flying a little 414 00:23:25,080 --> 00:23:27,479 Speaker 1: bit under the radar. They're small caps or mid caps. 415 00:23:28,080 --> 00:23:30,800 Speaker 1: And some of them are sort of semi listed or 416 00:23:30,840 --> 00:23:34,960 Speaker 1: on their way to being listed. UM. For instance, Contour 417 00:23:35,080 --> 00:23:37,320 Speaker 1: Energy is one that's on the pink sheets. It's about 418 00:23:37,359 --> 00:23:39,280 Speaker 1: to be listed again on the New York Socket Change 419 00:23:39,320 --> 00:23:42,680 Speaker 1: as soon as it completes its merger with Alpha Natural Resources. 420 00:23:43,200 --> 00:23:47,640 Speaker 1: That company is extraordinarily cheap. It's a could producer. Um 421 00:23:47,840 --> 00:23:51,600 Speaker 1: uh It's predecessor, Alpha Natural Resources came out of bankruptcy 422 00:23:51,600 --> 00:23:54,560 Speaker 1: in two thousand and sixteen UM and it had it 423 00:23:54,640 --> 00:23:57,800 Speaker 1: reduced debt by eight billion dollars UM. Now the company 424 00:23:57,840 --> 00:23:59,720 Speaker 1: trades at about two and a half times ebit doc 425 00:24:00,240 --> 00:24:03,000 Speaker 1: uh It recently paid a hundred million dollars special dividend, 426 00:24:03,560 --> 00:24:06,160 Speaker 1: and it recently brought back fifty million dollars of stock 427 00:24:06,240 --> 00:24:08,840 Speaker 1: as well. UM But again, that one's merging, and it's 428 00:24:08,840 --> 00:24:10,760 Speaker 1: about to be relisted on the New York Stock Exchange. 429 00:24:10,800 --> 00:24:13,560 Speaker 1: When the merger is complete. It trades in the low seventies, 430 00:24:13,600 --> 00:24:15,160 Speaker 1: but we think it's worth probably a hundred and ten 431 00:24:15,200 --> 00:24:17,399 Speaker 1: or a hundred and fifteen dollars a share. So you 432 00:24:17,440 --> 00:24:20,760 Speaker 1: get these events. It's very interesting for companies after they emerge, 433 00:24:21,119 --> 00:24:23,960 Speaker 1: if they remain cheap enough, sometimes you get these catalytic 434 00:24:24,000 --> 00:24:29,440 Speaker 1: events like special dividends, um emin A transactions or large 435 00:24:29,440 --> 00:24:31,800 Speaker 1: stock buy backs, and that tends to drive them closer 436 00:24:31,840 --> 00:24:34,000 Speaker 1: to fair value. So at this time, when the markets 437 00:24:34,040 --> 00:24:37,200 Speaker 1: are really stable and climbing higher, I have to wonder, 438 00:24:37,240 --> 00:24:40,240 Speaker 1: are you more long than short? We are still more 439 00:24:40,280 --> 00:24:42,240 Speaker 1: long than short, and we have not made the call 440 00:24:42,320 --> 00:24:44,840 Speaker 1: that the markets about to change yet. A lot of 441 00:24:44,840 --> 00:24:47,760 Speaker 1: people are saying that, you know, the equity market is 442 00:24:47,800 --> 00:24:51,280 Speaker 1: in the final stages of its bull run. It's been 443 00:24:51,320 --> 00:24:53,919 Speaker 1: going up really since March of two thousand. People are 444 00:24:53,920 --> 00:24:56,480 Speaker 1: saying that that though, honestly, and the more that I 445 00:24:56,480 --> 00:24:58,359 Speaker 1: speak with people, a fewer people are saying that we're 446 00:24:58,400 --> 00:25:01,199 Speaker 1: almost near the end and your crash and people are 447 00:25:01,200 --> 00:25:03,960 Speaker 1: saying it's six months twelve months. Yeah, maybe not that 448 00:25:04,000 --> 00:25:05,359 Speaker 1: many people are saying it, but but a lot of 449 00:25:05,400 --> 00:25:08,240 Speaker 1: people are holding onto cash, They're being cautious, they're chasing 450 00:25:08,760 --> 00:25:11,960 Speaker 1: lower risk securities like treasuries, and you know, I think 451 00:25:11,960 --> 00:25:15,080 Speaker 1: there's actually a bubble in the treasury market. Um. But anyway, 452 00:25:15,080 --> 00:25:17,520 Speaker 1: we're we we've had a long run anyway you look 453 00:25:17,560 --> 00:25:20,800 Speaker 1: at it. It's approaching three thousand, five hundred days of 454 00:25:20,840 --> 00:25:24,800 Speaker 1: appreciation with without a setback, So it's been a long 455 00:25:24,840 --> 00:25:28,240 Speaker 1: bowl market. Um. With that, you know, the macroeconomic trends 456 00:25:28,240 --> 00:25:31,160 Speaker 1: are very favorable, but you know, you can still find 457 00:25:31,280 --> 00:25:35,080 Speaker 1: very interesting value oriented equities within the market, and some 458 00:25:35,160 --> 00:25:37,080 Speaker 1: of them have these event type catalysts. And I think 459 00:25:37,080 --> 00:25:39,639 Speaker 1: that the stress market is a perfect place to find them. Okay, 460 00:25:39,680 --> 00:25:42,040 Speaker 1: So given the fact that we maybe a while out 461 00:25:42,119 --> 00:25:45,320 Speaker 1: yet before we see a market downturn, where are the 462 00:25:45,359 --> 00:25:48,199 Speaker 1: short positions? I mean, could companies go bust even in 463 00:25:48,280 --> 00:25:52,200 Speaker 1: this pretty benign time. Well, it's it's harder to short 464 00:25:52,240 --> 00:25:57,080 Speaker 1: sell well. Um, it takes a special sort of skill set. Um. 465 00:25:57,119 --> 00:26:00,520 Speaker 1: There's some companies that are extraordinarily overvalued, but you know, 466 00:26:00,560 --> 00:26:02,840 Speaker 1: you're not seeing the events that are driving them closer 467 00:26:02,880 --> 00:26:05,720 Speaker 1: to bankruptcy yet or are closer to drop. One of 468 00:26:05,760 --> 00:26:07,680 Speaker 1: the things that we do is we short companies headed 469 00:26:07,720 --> 00:26:10,240 Speaker 1: into trouble like that, and it's a little bit easier 470 00:26:10,280 --> 00:26:11,879 Speaker 1: because if you know they're going to run out of 471 00:26:11,880 --> 00:26:14,080 Speaker 1: money at a certain day, and you know that their 472 00:26:14,080 --> 00:26:17,040 Speaker 1: distressed debt is starting to sell off, then maybe you 473 00:26:17,080 --> 00:26:19,840 Speaker 1: can time their bankruptcy. And that's a big event on 474 00:26:19,840 --> 00:26:21,919 Speaker 1: the short side. If you're short selling company, it eventually 475 00:26:21,920 --> 00:26:25,560 Speaker 1: goes bankrupt. Um. So we're finding companies in the telecom space. 476 00:26:26,160 --> 00:26:28,760 Speaker 1: There's still some companies in the energy space. And then 477 00:26:28,800 --> 00:26:31,440 Speaker 1: of course there's a wait, there's still energy companies that 478 00:26:31,520 --> 00:26:35,200 Speaker 1: didn't go bankrupt downturn that you could see going under. 479 00:26:35,800 --> 00:26:37,639 Speaker 1: There are there are few and far between, but some 480 00:26:37,720 --> 00:26:39,960 Speaker 1: of them kicked the can down the road, you know, 481 00:26:40,040 --> 00:26:43,040 Speaker 1: they they restructured some of their debt or didn't really 482 00:26:43,080 --> 00:26:46,600 Speaker 1: restructure their debt, or made it through somehow, and and 483 00:26:46,640 --> 00:26:48,840 Speaker 1: so some of them will definitely still go bankrupt. And 484 00:26:48,880 --> 00:26:51,520 Speaker 1: when you talk about telecoms, certainly that sector has been 485 00:26:51,840 --> 00:26:56,399 Speaker 1: leveraging up dramatically, I mean from Frontier to to Dish 486 00:26:56,440 --> 00:26:59,000 Speaker 1: when it comes to trying to build out their networks 487 00:26:59,040 --> 00:27:02,200 Speaker 1: in rural area. Is from the case of Frontier, when 488 00:27:02,240 --> 00:27:05,080 Speaker 1: does sort of the road run out there, Well, it's 489 00:27:05,119 --> 00:27:08,320 Speaker 1: really a function of when the fixed income market stops 490 00:27:08,359 --> 00:27:11,879 Speaker 1: having an appetite to fund these cash flow negative business 491 00:27:11,920 --> 00:27:15,560 Speaker 1: plans at at such an aggressive level um. The multiples 492 00:27:15,640 --> 00:27:17,640 Speaker 1: of debt that you're seeing for some of these old 493 00:27:17,640 --> 00:27:21,560 Speaker 1: line telecom comm operators that are really struggling with secular 494 00:27:21,640 --> 00:27:25,359 Speaker 1: change UM and you know, weak cash flow or even 495 00:27:25,359 --> 00:27:28,800 Speaker 1: negative cash flow UM as well as upcoming debt maturities. 496 00:27:28,840 --> 00:27:31,399 Speaker 1: That's the key catalyst. If you get to an upcoming 497 00:27:31,400 --> 00:27:34,560 Speaker 1: debt maturity and they can't refinance because the fixed income 498 00:27:34,600 --> 00:27:37,800 Speaker 1: market becomes less hospitable, that's you know, a time when 499 00:27:37,840 --> 00:27:40,200 Speaker 1: you're thinking about a potential bankruptcy. Okay, So I'm looking 500 00:27:40,240 --> 00:27:42,840 Speaker 1: at Frontier right now. It has more than seventeen billion 501 00:27:42,880 --> 00:27:45,639 Speaker 1: dollars of debt, but it looks like it's big maturities 502 00:27:45,680 --> 00:27:48,919 Speaker 1: don't really start coming to until two or there are 503 00:27:48,920 --> 00:27:52,040 Speaker 1: other telecom companies that you're homing in on that have 504 00:27:52,119 --> 00:27:55,960 Speaker 1: more imminent debaturities. You know, there are a few, not 505 00:27:56,040 --> 00:27:57,639 Speaker 1: none that I wanted to close today on the radio. 506 00:27:58,680 --> 00:28:01,600 Speaker 1: One one that, you know, one in a different sector 507 00:28:01,640 --> 00:28:03,960 Speaker 1: that I think is very interesting and sort of like 508 00:28:04,000 --> 00:28:06,760 Speaker 1: I'm not going to give my hand. Yeah. Yeah, But 509 00:28:06,800 --> 00:28:09,480 Speaker 1: there's a different, you know, developing story that you guys 510 00:28:09,480 --> 00:28:12,960 Speaker 1: have covered very well here on Bloomberg with Tesla. You know, 511 00:28:13,000 --> 00:28:15,160 Speaker 1: it might be uh, you know, maybe too many people 512 00:28:15,200 --> 00:28:17,120 Speaker 1: are focused on it these days, but that's certainly one 513 00:28:17,160 --> 00:28:19,400 Speaker 1: that's we can talk Tesla following I'm a little sick 514 00:28:19,440 --> 00:28:21,240 Speaker 1: of it, but we can talk about Tesla. How do 515 00:28:21,240 --> 00:28:23,280 Speaker 1: you play Tesla at a time when this is a 516 00:28:23,359 --> 00:28:26,280 Speaker 1: belief based dock and and and debt play? Yeah, so 517 00:28:26,320 --> 00:28:28,480 Speaker 1: you have to be cautious, and you know, it's it's 518 00:28:28,480 --> 00:28:31,760 Speaker 1: been subject to you know, dramatic and emotional ups and 519 00:28:31,840 --> 00:28:38,760 Speaker 1: downs based on tweets and sleepless nights and being filled nights. 520 00:28:38,800 --> 00:28:41,959 Speaker 1: So that company has close to twenty billion dollars in liabilities, 521 00:28:41,960 --> 00:28:44,920 Speaker 1: including about eleven billion dollars in loans and bonds and 522 00:28:45,000 --> 00:28:49,200 Speaker 1: capital leases, so very heavy balance sheet. Um are you playing? 523 00:28:50,120 --> 00:28:52,640 Speaker 1: We aren't right now. We have in the past. Um, 524 00:28:52,680 --> 00:28:54,720 Speaker 1: but we'll be looking at it and watching it to 525 00:28:54,760 --> 00:28:57,200 Speaker 1: see if there's another opportunity to enter the trade. What's 526 00:28:57,280 --> 00:28:59,600 Speaker 1: what's the opportunity you're looking for? So what we're looking 527 00:28:59,600 --> 00:29:02,960 Speaker 1: there for potential short sale? Um. You know, the company 528 00:29:02,960 --> 00:29:05,960 Speaker 1: has hired a number of investment banks to help with 529 00:29:06,040 --> 00:29:11,240 Speaker 1: this proposed potential go private transaction. Um, we think it's 530 00:29:11,360 --> 00:29:13,480 Speaker 1: actually a lot of hot air and and uh, a 531 00:29:13,480 --> 00:29:15,080 Speaker 1: lot of people would agree with you, but it's sort 532 00:29:15,080 --> 00:29:16,920 Speaker 1: of we just have about three seconds here. But I'm 533 00:29:16,920 --> 00:29:19,040 Speaker 1: just curious, at what point do you say, all right, 534 00:29:19,040 --> 00:29:21,160 Speaker 1: now is the time to go in and short Yes, 535 00:29:21,280 --> 00:29:24,200 Speaker 1: So you have to wait for these sort of emotional 536 00:29:24,360 --> 00:29:26,840 Speaker 1: market drives, like when you have a tweet or something 537 00:29:26,880 --> 00:29:30,920 Speaker 1: else that gets people excited beyond reasonableness. And we saw 538 00:29:30,960 --> 00:29:34,520 Speaker 1: that recently. Um, you know, but but but interestingly, right now, 539 00:29:34,560 --> 00:29:37,400 Speaker 1: if the company is looking to raise capital for potential 540 00:29:37,480 --> 00:29:39,760 Speaker 1: buy out, you know the fact that you know the 541 00:29:39,800 --> 00:29:43,680 Speaker 1: CEO is under investigation by the SEC for market manipulation. 542 00:29:44,080 --> 00:29:45,560 Speaker 1: You know, it makes it much harder to do a 543 00:29:45,600 --> 00:29:48,040 Speaker 1: transaction like that, and I think that generally would spook 544 00:29:48,120 --> 00:29:51,280 Speaker 1: most investors, but we shall see how it plays out. Yeah, 545 00:29:51,360 --> 00:29:54,240 Speaker 1: a lot of the things you would expect as traditional 546 00:29:54,280 --> 00:29:56,960 Speaker 1: market behavior, it doesn't seem to work when it comes 547 00:29:56,960 --> 00:29:59,560 Speaker 1: to Tesla. George Shelty, thanks so much for being with 548 00:29:59,560 --> 00:30:01,240 Speaker 1: me today. Are really interesting to hear what you have 549 00:30:01,280 --> 00:30:04,160 Speaker 1: to say. George Shelty is chief executive officer of Shalty 550 00:30:04,240 --> 00:30:07,160 Speaker 1: Asset Management based in Purchase, New York. He joins us 551 00:30:07,200 --> 00:30:14,160 Speaker 1: here in our eleven three oh studios. Thanks for listening 552 00:30:14,200 --> 00:30:17,080 Speaker 1: to the Bloomberg P and L podcast. You can subscribe 553 00:30:17,080 --> 00:30:20,680 Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever 554 00:30:20,760 --> 00:30:24,240 Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter 555 00:30:24,520 --> 00:30:28,280 Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo wits one. 556 00:30:28,480 --> 00:30:31,160 Speaker 1: Before the podcast, you can always catch us worldwide on 557 00:30:31,240 --> 00:30:32,080 Speaker 1: Bloomberg Radio