WEBVTT - OPEC Cancels Press Conference In Unusual Move: Schenker (Podcast) 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.560 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.239 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. The 0:00:33.320 --> 0:00:38.200 topic now is energy. In Vienna, OPEC a tentatively agreeing 0:00:38.240 --> 0:00:42.760 on an oil output cut that was something on the agenda, 0:00:43.040 --> 0:00:46.120 but we're still waiting to hear from non OPEC members 0:00:46.159 --> 0:00:49.559 such as Russia before deciding what kind of volume in 0:00:49.600 --> 0:00:52.959 production reduction will actually take place. Here to tell us 0:00:53.040 --> 0:00:56.680 more from Vienna is Jason Schenker. He is the president 0:00:56.800 --> 0:01:01.400 of Prestige Economics and the chairman of the Futurist Institute. Jason, 0:01:01.680 --> 0:01:04.120 we've all been waiting for a press conference that apparently 0:01:04.240 --> 0:01:08.160 is not going to happen. Yeah, that's right, Tim. I'm 0:01:08.160 --> 0:01:11.160 sitting right now in the press conference room in Vienna. 0:01:11.840 --> 0:01:14.319 There were a few hundred people here up until about 0:01:14.319 --> 0:01:17.560 ten minutes ago when the story broke that there was 0:01:17.600 --> 0:01:19.560 not going to be a press conference. The room is 0:01:19.680 --> 0:01:23.480 mostly emptied out. Now it's maybe about only hundred people left, 0:01:23.959 --> 0:01:26.400 and uh, you know, folks are a little bit concerned, 0:01:26.440 --> 0:01:28.920 but it looks like lock the wait for tomorrow to 0:01:29.040 --> 0:01:32.440 see what happens if OPEC and non OPEC members, specifically 0:01:32.480 --> 0:01:34.760 Russia can come to an agreement on what happens with 0:01:34.840 --> 0:01:38.240 the production cuts for the year ahead. So, Jason, this 0:01:38.360 --> 0:01:42.840 actually is highly unusual for them to cancel a press conference. 0:01:43.040 --> 0:01:46.319 Does it indicate to you that there's more disagreement than 0:01:46.520 --> 0:01:49.240 usual on how much to cut production or even if 0:01:49.240 --> 0:01:52.680 they should cut it all? Well, I think what it 0:01:52.720 --> 0:01:56.400 really indicates is that the stakes are higher, and I 0:01:56.440 --> 0:01:58.240 think anyone you know, we look at what's going on 0:01:58.280 --> 0:02:00.600 across markets today and what's been going up for the 0:02:00.680 --> 0:02:02.880 last two months. Uh, you know, we see there's a 0:02:02.880 --> 0:02:06.640 lot of altimities. There's concerned about the U. S. China 0:02:06.720 --> 0:02:09.040 trade war and what's going on. What does that mean 0:02:09.120 --> 0:02:12.840 for risk in It's been really important for industrial medals, 0:02:12.840 --> 0:02:15.440 which have been crushed all year. Oil prices have taken 0:02:15.440 --> 0:02:18.680 a big hit after the driving season. UM equity markets 0:02:18.760 --> 0:02:20.959 highly voluntal on this, and then of course there's still 0:02:21.000 --> 0:02:23.919 interest rate tightening, not just in the US but everywhere 0:02:24.120 --> 0:02:26.400 higher cross the capital. What's that going to do. There's 0:02:26.400 --> 0:02:29.320 a risk of a campex recession in business investment in 0:02:29.320 --> 0:02:32.760 the US, there's a risk of a Chinese manufacturing recession. 0:02:33.000 --> 0:02:36.839 In these things are big risks on OPEX plate, and 0:02:37.000 --> 0:02:39.079 I think that OPEC and not PICK members want to 0:02:39.080 --> 0:02:41.160 make sure they get it right because the risks in 0:02:41.200 --> 0:02:45.600 the stakes couldn't be higher. Jason the Russian Energy Minister 0:02:45.720 --> 0:02:51.760 Alexander Novak, he went from Vienna back to St. Petersburg 0:02:51.880 --> 0:02:55.720 to talk to President Vladimir Putin. He's now scheduled to 0:02:55.800 --> 0:03:03.200 return to Vienna on Friday. What to the Russians one, Well, 0:03:03.240 --> 0:03:07.040 I think it's really you know, there's concern about the 0:03:07.120 --> 0:03:11.720 market going into an oversupplied situation. What happened in late 0:03:12.639 --> 0:03:17.320 through the middle of oil inventories globally rose sharply, and 0:03:17.480 --> 0:03:20.280 part of that was China, the biggest net importer in 0:03:20.320 --> 0:03:22.960 the world of crude oil, the biggest source of additional 0:03:23.000 --> 0:03:26.720 future marginal crude oil demand, was in a manufacturing recession. 0:03:27.000 --> 0:03:29.799 China is on an edge of the manufacturing recession right now. 0:03:30.120 --> 0:03:32.680 If it goes into one, and OPEC and non IMPEC 0:03:32.760 --> 0:03:36.000 members specifically if Russia and OPEC can't agree on how 0:03:36.080 --> 0:03:38.960 much to reduce, then the price of oil to get 0:03:39.000 --> 0:03:41.400 backed really hard. And so I think there's you know, 0:03:41.520 --> 0:03:44.440 potential to want to air on the side of more 0:03:44.520 --> 0:03:47.640 tightening rather than left. And that means, you know, there 0:03:47.680 --> 0:03:50.880 might need to be special approvals involved because they can't 0:03:50.880 --> 0:03:53.560 get this wrong, because if they do, with inventories go 0:03:53.680 --> 0:03:56.720 up a lot, more oil prances could get hammered. What's 0:03:56.800 --> 0:03:59.520 the price that they would like to see. I'm looking 0:03:59.600 --> 0:04:02.800 right now a crude on the IMAX hitting that fifty 0:04:03.120 --> 0:04:07.400 a barrel target are almost almost they're almost lowest levels 0:04:07.440 --> 0:04:11.440 in more than a year. What do they want, Well, 0:04:11.480 --> 0:04:14.240 I think that the most you know, I I would 0:04:14.280 --> 0:04:17.080 probably say sixty dollars are above. But they don't explicitly 0:04:17.160 --> 0:04:20.040 target an oil price. What they try to target, what 0:04:20.120 --> 0:04:22.560 they have targeted for the last two years with the 0:04:22.560 --> 0:04:27.119 OPEC mon OPEC agreement is the five year average inventory level. 0:04:27.560 --> 0:04:31.600 That inventory is built up massively above that through the 0:04:31.640 --> 0:04:35.400 early part of and they've run down this year. We've 0:04:35.400 --> 0:04:40.360 been below globally that five year average of oil inventory stocks, 0:04:40.400 --> 0:04:43.719 and so OPEC wants to keep it below that. We're 0:04:43.800 --> 0:04:47.040 at that five year inventory average. That's what they're really 0:04:47.040 --> 0:04:48.920 trying to target, because they know if they can keep 0:04:48.960 --> 0:04:51.560 it at that level, even if demand weakens, it will 0:04:51.560 --> 0:04:55.480 support prices. And while they might like sixty dollars a 0:04:55.520 --> 0:04:58.000 barrel with the prize very worried about, is it's a 0:04:58.080 --> 0:05:01.960 forty again Mason. One of the things the Russians have 0:05:02.120 --> 0:05:04.680 said is that it is more challenging for them to 0:05:04.760 --> 0:05:08.960 cut oil output in the winter than other producers because 0:05:09.120 --> 0:05:12.200 of the cold weather. Does this mean that they're going 0:05:12.279 --> 0:05:15.680 to have to wait until after winter and after the 0:05:15.720 --> 0:05:21.640 Europeans use all of that Russian natural gas? Well, I'd 0:05:21.640 --> 0:05:24.479 say there's a couple of things on this, and you know, 0:05:24.520 --> 0:05:26.679 I don't think it. I mean, they can structure wind 0:05:26.680 --> 0:05:29.880 cuts happen, how cuts happen. You know, those are things 0:05:29.920 --> 0:05:32.360 that can be worked out. But I think as long 0:05:32.400 --> 0:05:35.080 as the members are, you know, kind of of a 0:05:35.200 --> 0:05:38.159 singular mind to rain and supply, that's going to be 0:05:38.160 --> 0:05:40.720 the thing. But I think no one country wants to 0:05:40.760 --> 0:05:44.080 bear the entire brunt of it, and I think that 0:05:44.160 --> 0:05:46.919 the members also want to see it kind of spread around. 0:05:46.960 --> 0:05:49.360 I think, particularly Saudi Arabia wants to make sure that 0:05:49.640 --> 0:05:52.320 these are numbers that everybody's going to play with, and 0:05:52.640 --> 0:05:54.839 they're not the only country to pull back supply, and 0:05:54.880 --> 0:05:57.400 I think Russia wants to make sure that it too 0:05:57.760 --> 0:06:00.400 isn't the only one to reduce supply, because all everyone 0:06:00.400 --> 0:06:04.080 would like to benefit from potentially more supported or higher prices, 0:06:04.800 --> 0:06:06.800 not every you know, no country wants to pay the 0:06:06.839 --> 0:06:10.760 full right, right, Jason Schanker, thank you so much for 0:06:10.800 --> 0:06:14.520 being with us there from Vienna, where you are observing 0:06:14.720 --> 0:06:18.880 the undertakings at OPEC's latest meeting. Jason Shanker, President of 0:06:18.920 --> 0:06:23.200 a Prestige Economics, also chairman of the Futurist Institute, normally 0:06:23.200 --> 0:06:38.000 based in Austin, but over in Vienna. Canadian authorities in 0:06:38.080 --> 0:06:42.159 Vancouver have arrested Huawei Technologies chief financial officer at the 0:06:42.200 --> 0:06:47.360 request of the United States, for alleged violations of Iran sanctions. 0:06:47.839 --> 0:06:51.039 Here to help us understand the situation is Wu jin Ho. 0:06:51.360 --> 0:06:55.360 He is technology analyst for Bloomberg Intelligence and also joining 0:06:55.440 --> 0:07:00.840 us as Michael McKee, international Economics and Policy correspondent for Bloomberg. 0:07:01.360 --> 0:07:05.520 Michael McKee, let's just begin. The chief financial officer of 0:07:05.600 --> 0:07:10.600 Huawei Technologies is not an ordinary employee. Is she no 0:07:11.080 --> 0:07:13.480 she's not. She's the daughter of the founder. And this 0:07:13.600 --> 0:07:16.600 is also one of China's biggest companies, and it is 0:07:16.640 --> 0:07:19.000 one of the companies that China is relying on in 0:07:19.000 --> 0:07:23.200 the Made in China program to dominate the world's uh 0:07:23.480 --> 0:07:27.800 leading technologies of the future. So this has enormous implications. 0:07:27.880 --> 0:07:32.360 It may have been something completely separate from the president's 0:07:32.440 --> 0:07:36.000 overtures to Shi Jinping down in Buenos Aires, but it 0:07:36.080 --> 0:07:39.800 was the same day, so it could possibly be a 0:07:39.800 --> 0:07:43.320 message from the President to the Chinese. But it's definitely 0:07:43.360 --> 0:07:47.600 going to complicate the trade efforts that the administration is making. 0:07:47.600 --> 0:07:50.160 You have to expect the Chinese may have some sort 0:07:50.160 --> 0:07:53.480 of retaliatory move ahead. Just to be very clear, though, 0:07:53.800 --> 0:07:56.480 this is being prosecuted out of the Eastern District of 0:07:56.520 --> 0:07:59.120 New York, So this is a federal prosecutatorial office that 0:07:59.400 --> 0:08:01.560 is somewhat remove from the president in the day to 0:08:01.640 --> 0:08:05.120 day terms. And Cannada Canada did cooperate here. Come on 0:08:05.320 --> 0:08:07.800 here at wujin Ho. What do we know about the 0:08:07.840 --> 0:08:11.480 actual allegations and then can you talk about what the 0:08:11.560 --> 0:08:14.240 programming in the software and some of the some of 0:08:14.280 --> 0:08:17.760 the actual technology behind this is why it's such a 0:08:17.800 --> 0:08:22.880 security concern. Sure, So UM from a from the allegations 0:08:23.120 --> 0:08:27.640 standpoint is still fairly thin because the documents are sealed 0:08:27.720 --> 0:08:30.120 right now, So we really don't know why she's being 0:08:30.200 --> 0:08:33.160 arrested in Canada. Alway do know is that she was 0:08:33.280 --> 0:08:36.120 arrested on December one, and then she's being asked to 0:08:36.559 --> 0:08:38.680 the US is asking her to be extradited in back 0:08:38.720 --> 0:08:41.320 to the U s UH for some sort of charge. 0:08:41.600 --> 0:08:45.000 Right now, the timing of it, to your point is 0:08:45.440 --> 0:08:48.760 is a little bit rough, primarily because of the trade 0:08:48.760 --> 0:08:52.120 agreements between Trump and E G. Ping. So UM, I 0:08:52.160 --> 0:08:56.079 think there's a timing element to it, um, but from 0:08:56.080 --> 0:09:01.440 from from a trade perspective, still unclear, quite frankly, right, Um, 0:09:01.480 --> 0:09:05.760 In terms of UM, you know Whahwei and what Wahwei provides. 0:09:05.800 --> 0:09:10.679 Wahwei provides the actual network equipment that helps drive our 0:09:11.240 --> 0:09:15.160 UM wireless networks. So if you look at the Chinese 0:09:15.160 --> 0:09:19.479 wi uh wireless markets, some of the European wireless markets, 0:09:19.520 --> 0:09:23.120 they use a lot of the Wahwei equipment. UM. And 0:09:23.200 --> 0:09:26.160 if you think about how we have digital networks, a 0:09:26.200 --> 0:09:29.240 lot of the digital networks can you can actually peer 0:09:29.280 --> 0:09:32.440 into the packets itself and see what's being said and 0:09:32.480 --> 0:09:35.360 then you know, an eavesdrop into the communication. So there 0:09:35.440 --> 0:09:37.680 is a security concern element and that's one of the 0:09:37.679 --> 0:09:41.240 reasons why the US government has banned Wahwei equipment um 0:09:41.840 --> 0:09:44.200 for their use. And the other element of that is 0:09:44.240 --> 0:09:47.960 a Wahwei is the second largest first or second largest 0:09:47.960 --> 0:09:51.880 smartphone provider as well, and that was also banned UH 0:09:51.880 --> 0:09:56.640 into or uh discourage from being sold in the US. 0:09:56.679 --> 0:09:59.520 So there there are security elements on both fronts, on 0:09:59.559 --> 0:10:04.000 the equipment side as well as on on the smartphone side. Now, Michael, 0:10:04.040 --> 0:10:08.760 the chief financial officers you were describing of Huawei, Sabrina Mang, 0:10:09.800 --> 0:10:16.480 was arrested during a layover flight in Canada. The allegations 0:10:16.520 --> 0:10:22.000 have to do with an ongoing criminal investigation into Huawei, 0:10:22.040 --> 0:10:24.520 which started I think it was back in the spring. 0:10:25.200 --> 0:10:27.559 What exactly do you believe the government I mean, has 0:10:27.600 --> 0:10:30.920 to do with dealings with the Iran. What is there 0:10:30.960 --> 0:10:36.360 any subtext here based on the trade dispute. Well, the 0:10:36.400 --> 0:10:39.200 subtext would be that the US is cracking down on 0:10:39.360 --> 0:10:42.960 China for a lot of things. This is not directly 0:10:43.080 --> 0:10:46.040 related to trade with the US, but it is an 0:10:46.080 --> 0:10:50.760 allegation that the Huawei helped evade US sanctions on Iran. 0:10:51.080 --> 0:10:55.079 Huawei has a defense arguing that the regulations are unclear 0:10:55.080 --> 0:10:59.400 and that um they didn't necessarily violate the US law. 0:10:59.440 --> 0:11:03.160 That'll have we argued out. But while it's not directly 0:11:03.200 --> 0:11:06.840 related to the trade dispute, it does complicate matters because 0:11:07.200 --> 0:11:10.120 it is part of an effort, along with remember the 0:11:10.200 --> 0:11:14.360 Zte case, uh the US to crack down on these 0:11:14.360 --> 0:11:18.520 companies in China that it sees as threats. Now, it's 0:11:18.520 --> 0:11:21.040 not to say they did or didn't do something wrong. 0:11:21.880 --> 0:11:24.439 I'm not the judge, but there are credible allegations they 0:11:24.440 --> 0:11:27.360 did something wrong. But it does seem to be a 0:11:27.480 --> 0:11:30.280 coordinated effort on the part of the administration to go 0:11:30.400 --> 0:11:35.320 after companies deliberately because they are competitors to the U 0:11:35.400 --> 0:11:36.840 s they are a threat to the US and if 0:11:36.840 --> 0:11:39.200 they're getting there by breaking the law, then they should 0:11:39.240 --> 0:11:41.880 be prosecuted. Come on in here, because one thing that 0:11:41.880 --> 0:11:45.200 I'm struck by is how isolated is Huawei, which is 0:11:45.240 --> 0:11:48.200 a huge company in China, one of the most important, 0:11:48.240 --> 0:11:51.480 if not the most important companies there. How much business 0:11:51.480 --> 0:11:54.320 does it do with US companies and US suppliers. Sure 0:11:54.480 --> 0:11:59.960 so in terms of the equipment perspective. What we calculated 0:12:00.120 --> 0:12:03.559 was that Wahwei provides five billion, five billion with a 0:12:03.640 --> 0:12:07.360 B dollars of equipment in terms of network equipment from 0:12:07.360 --> 0:12:10.960 optical wireless infrastructure, so on and so forth. Right, that's 0:12:11.000 --> 0:12:12.880 different from z t E. Z t E is still 0:12:12.920 --> 0:12:17.480 a fairly domestic Chinese market. The US doesn't buy Chinese 0:12:17.520 --> 0:12:22.240 equipment for the most part, so it's mostly UM, Western Europe, Latan, 0:12:22.360 --> 0:12:27.200 austral Australia, Japan, and South Korea. UM. But there are 0:12:27.240 --> 0:12:31.120 broader implications for the suppliers. If we look at what 0:12:31.200 --> 0:12:34.719 we published today, UM, there Wahwei is the number one 0:12:34.720 --> 0:12:38.720 optical equipment supplier. And what we can see from the 0:12:38.800 --> 0:12:43.439 SPLC function on Bloomberg is that Momentum Neo Photonics provides 0:12:43.480 --> 0:12:48.160 about generates their sales from from Huahwei, and there are 0:12:48.200 --> 0:12:51.920 a host of others UH providers UM that provides temper 0:12:51.960 --> 0:12:55.040 sent or or or more on sales. Now we're not 0:12:55.200 --> 0:12:59.000 there yet, right. The z t E ban UM, you know, 0:12:59.360 --> 0:13:02.600 show that it can cripple the US supply band Camp, 0:13:02.600 --> 0:13:06.280 cripple STPLAI, but we're not there yet. Jho technology analyst 0:13:06.320 --> 0:13:10.320 for Bloomberg Intelligence and Mike McKee, international economics and policy 0:13:10.360 --> 0:13:13.320 correspondent for bloomber Both of you, thank you so much. 0:13:13.640 --> 0:13:16.760 A lot to figure out, a lot unknown as of yet, 0:13:16.800 --> 0:13:19.640 so we will continue to dig into it as new 0:13:19.720 --> 0:13:35.120 information arises. Real estate, commercial real estate, multi family realist state. 0:13:35.880 --> 0:13:38.599 We've got an expert, Gerald Gutterman. Jerry Gutterman is the 0:13:38.640 --> 0:13:42.720 senior principal partner and chief investment officer for Government Partners. 0:13:42.760 --> 0:13:45.280 They are based in New York and he joins us now. 0:13:45.400 --> 0:13:48.120 Jerry Gutterman, thank you very much for being with us. 0:13:48.520 --> 0:13:51.679 Let's begin right off the bat by. When you see 0:13:51.880 --> 0:13:55.520 a day like today in the stock market and the 0:13:55.559 --> 0:14:01.480 bond market, what's your reaction. Of course, I would rather 0:14:01.559 --> 0:14:05.480 the market be going up, But it doesn't really affect 0:14:05.720 --> 0:14:08.600 the real estate as an investment on a daily basis, 0:14:09.240 --> 0:14:12.880 because the real estate continues to work, the tenants continued 0:14:12.960 --> 0:14:15.520 to pay rent, and they're really not affected by this. 0:14:16.040 --> 0:14:18.880 We understand that four O one case can be affected, 0:14:19.200 --> 0:14:23.000 but the daily living of the average tenant is not affected. 0:14:23.160 --> 0:14:26.480 But Jerry, fair enough, fair enough. Although some people would 0:14:26.520 --> 0:14:29.680 interpret what we're seeing, certainly in bond and stock markets 0:14:29.720 --> 0:14:34.320 as a signal that growth is slowing, substantially around the world, 0:14:34.320 --> 0:14:37.680 including the US. We're seeing inflation expectations dropping the most 0:14:37.680 --> 0:14:40.040 more than a year today. I'm just wondering, how does 0:14:40.080 --> 0:14:42.760 that play into the housing market, given the fact that 0:14:42.800 --> 0:14:45.280 the last time we spoke, you said that you foresee 0:14:45.320 --> 0:14:49.720 an implosion in high end condos coming. Yes, because I've 0:14:49.720 --> 0:14:53.640 seen this now three different times. I saw it in 0:14:53.760 --> 0:14:59.280 nine seven, I saw it in two thousand six two 0:14:59.320 --> 0:15:04.640 thousand even, and then two thousand fourteen, two thousand sixteen, 0:15:05.200 --> 0:15:10.160 now been seeing it, and in seven to night. Of course, 0:15:10.280 --> 0:15:15.040 the real estate market had the same exact things happened 0:15:15.040 --> 0:15:17.120 to it. It wasn't a matter of the stock market, 0:15:17.160 --> 0:15:20.600 and I realized that in seven we had a big 0:15:20.640 --> 0:15:23.800 problem with the stock market, and we had that one 0:15:23.880 --> 0:15:27.280 day crashed. But on the other hand, the big problem 0:15:27.320 --> 0:15:30.800 and the big reason that the real estate market weakened 0:15:30.960 --> 0:15:36.840 was because of overbuilding, constantly, constantly overbuilding, because if you 0:15:37.000 --> 0:15:40.560 give a normal and usual builder a mortgage, he will 0:15:40.600 --> 0:15:46.080 build in the desert. And consequently, by nine eighty seven night, 0:15:47.120 --> 0:15:52.160 the over building and the over capacity was such that 0:15:52.240 --> 0:15:55.920 we saw it coming, and the pricing for it at 0:15:55.960 --> 0:15:58.560 that point because they were building so much, but they 0:15:58.600 --> 0:16:02.000 were building into with demand where the price of the 0:16:02.080 --> 0:16:05.360 product kept going up and up and up to where 0:16:05.800 --> 0:16:09.240 the return kept going down. The return went down to five, 0:16:10.080 --> 0:16:14.400 then below five. It reminds me of today we had 0:16:14.480 --> 0:16:17.560 the same thing happened that we saw in two thousand 0:16:17.600 --> 0:16:20.160 and six, two thousand and seven. We saw it happening 0:16:20.160 --> 0:16:24.320 in two thousand and eight. We sold everything between two 0:16:24.320 --> 0:16:27.440 thousand and six and two thousand and seven, just like 0:16:27.520 --> 0:16:32.880 we sold everything between seven and Alright, Jerry, advantage of it. 0:16:33.200 --> 0:16:36.640 We get it makes sense what you're saying in the 0:16:36.760 --> 0:16:40.520 high end condom market. I'm wondering does that sort of 0:16:40.600 --> 0:16:44.200 carry over to the rest of the housing market, especially 0:16:44.400 --> 0:16:47.600 in light of sensibly rising rates, although now they're going 0:16:47.680 --> 0:16:52.720 back down. You know, we specialize. We really have not 0:16:52.880 --> 0:16:57.000 been doing new homes. We've been doing more conversions, that is, 0:16:57.560 --> 0:17:02.560 buying rental properties and converting them to condominium ownership. Because 0:17:02.600 --> 0:17:05.760 when we do that, what we find is we can 0:17:05.760 --> 0:17:09.600 buy the product better cheaper, and we can actually sell 0:17:09.640 --> 0:17:14.800 it significantly cheaper. And when you realize, when you finally 0:17:14.880 --> 0:17:19.840 realize that if you buy an existing rental property, that 0:17:19.960 --> 0:17:23.800 tenant in possession is your partner. If you're going to 0:17:23.960 --> 0:17:27.439 do a condominium conversion. That is, you're going to convert 0:17:27.480 --> 0:17:31.160 the condominium ownership. Well, what is your partner want? Your 0:17:31.160 --> 0:17:34.120 partner wants to buy it almost as cheaply as you did. 0:17:34.840 --> 0:17:38.760 And the answer is, we believe that every tenant in 0:17:38.800 --> 0:17:42.560 possession is a partner, and we give the tenants in 0:17:42.640 --> 0:17:47.040 possession a significant price reduction. How do we do that? 0:17:47.760 --> 0:17:50.639 We do that because we're able to take advantage of 0:17:50.640 --> 0:17:54.840 the market as it is now. Starting now, because it's 0:17:54.880 --> 0:17:58.880 already started several months ago, the prices have been dropping 0:17:58.960 --> 0:18:03.359 significantly in the areas where there has been extreme over building. 0:18:03.440 --> 0:18:06.680 For instance, if I go to Florida and I pick 0:18:06.720 --> 0:18:10.199 a city like Sunny Isles Beach, which most people know, 0:18:11.359 --> 0:18:17.520 if you have a non luxury apartment that is going condominium, 0:18:17.560 --> 0:18:20.879 I would tell you today that there's about thirty two 0:18:20.920 --> 0:18:24.960 months of supply right now. That means it's going to 0:18:25.119 --> 0:18:29.199 take thirty two months to sell what is normally sold 0:18:29.520 --> 0:18:33.439 in one year. If you go to the luxury market, 0:18:33.880 --> 0:18:37.480 it's fifty five and a half months of supply. Can 0:18:37.480 --> 0:18:40.480 you imagine fifty five and a half months, that's four 0:18:40.520 --> 0:18:44.880 and a half years of supply on an average sale 0:18:45.160 --> 0:18:49.199 per year basis, Well, the builders can't hold out, and 0:18:49.359 --> 0:18:52.240 what's the only thing they can do. They have to 0:18:52.280 --> 0:18:55.439 be able to sell and get out. The builders can't 0:18:55.480 --> 0:18:59.240 sell at steep discounts. It's not possible. And the reason 0:18:59.400 --> 0:19:02.440 is the banks who have made them the loans will 0:19:02.480 --> 0:19:05.480 not allow the builders to sell at a discounted price. 0:19:06.040 --> 0:19:09.560 The reason is because if the bank allows the builder 0:19:09.640 --> 0:19:14.080 to sell at a discounted price, then the auditors are 0:19:14.080 --> 0:19:17.600 going to come in and they're going to drop all 0:19:17.640 --> 0:19:21.400 of the value for their mortgages that they have by 0:19:21.440 --> 0:19:24.760 at least that amount, and they're going to take their collateral. 0:19:24.840 --> 0:19:28.959 The banks collateral will only be worth a certain amount 0:19:29.040 --> 0:19:33.159 less if they dropped the price. Can you imagine the 0:19:33.320 --> 0:19:37.359 order is coming in and dropping the collateral by or 0:19:38.640 --> 0:19:43.000 or and that's what happens, Gerald, Jared. Let me let 0:19:43.000 --> 0:19:45.359 me ask you one question having to do with the 0:19:45.600 --> 0:19:51.000 non professional or the non experienced, the unexperienced real estate 0:19:51.119 --> 0:19:56.240 investor who have put billions of dollars into real estate projects. 0:19:57.160 --> 0:19:59.600 Is this going to be the time when they try 0:19:59.600 --> 0:20:04.320 to rush for the exits. If it is an investor 0:20:04.320 --> 0:20:08.119 who invested in the last year or two and the 0:20:08.240 --> 0:20:12.720 project was purchased at a price as it was priced 0:20:12.760 --> 0:20:15.080 over the last year or two. The answer is yes, 0:20:16.160 --> 0:20:19.560 and that's why we're so busy now, because we pick 0:20:19.680 --> 0:20:23.679 these times to keep coming back in when the market 0:20:23.760 --> 0:20:27.360 can be discounted significantly, and when we buy now it's 0:20:27.440 --> 0:20:31.160 common knowledge um in the market that we buy anything 0:20:31.240 --> 0:20:35.360 from fifty to discount. Jerry Gutterman, thank you so much 0:20:35.359 --> 0:20:37.840 for being with us. Uh and Uh, well, we'll see 0:20:37.840 --> 0:20:41.280 whether those discounts will only get steeper from here. So 0:20:41.320 --> 0:20:43.480 I'm sure you have a busy few months out of you. 0:20:43.560 --> 0:20:46.399 Jerry Gutterman, Senior principal partner in chief investment officer at 0:20:46.400 --> 0:21:00.960 Gotterman Partners LLLC in New York. It's interesting for him 0:21:01.040 --> 0:21:03.919 as we talk about trade tensions and some of the 0:21:03.960 --> 0:21:07.800 turmoil in the tech sector, how does one go about 0:21:07.840 --> 0:21:12.760 identifying opportunities among emerging tech companies with big data and 0:21:12.920 --> 0:21:17.119 artificial intelligence against this backdrop? And joining us from Tel Aviv, 0:21:17.280 --> 0:21:20.560 Israel to talk about this is Brock Rabinowitz, managing partner 0:21:20.600 --> 0:21:24.800 at F two Capital. Brock, wonderful to have you, especially 0:21:24.880 --> 0:21:28.760 on a day like this where the trade tensions are highlighted. 0:21:28.960 --> 0:21:33.480 How much does that backdrop color your view of how 0:21:33.520 --> 0:21:37.679 to invest in emerging tech sectors. Yeah, it's great to 0:21:37.720 --> 0:21:41.119 be here. UM. You know, we're ten year vehicles in 0:21:41.359 --> 0:21:44.040 UH in venture capital funds generally. And I was just 0:21:44.080 --> 0:21:46.520 in the US and I heard from you know, family 0:21:46.560 --> 0:21:49.240 offices and large institutional investors who are spread in the 0:21:49.240 --> 0:21:51.480 equity market is dead markets and also a bit in 0:21:51.520 --> 0:21:54.280 private equity and VC. They're actually moving more money to 0:21:54.359 --> 0:21:56.480 VC now because of that, because nobody knows what to 0:21:56.520 --> 0:22:01.320 make out of all this volatility. VC being venture capital, yes, ye, 0:22:01.520 --> 0:22:06.000 venture capital UM, transforming markets, transforming the world. UH. They 0:22:06.040 --> 0:22:08.960 still believe in tech despite the volatility, and VC is 0:22:08.960 --> 0:22:12.119 an attractive way to do it UM. And at the 0:22:12.160 --> 0:22:14.240 same time, all the big tech giants are sitting on 0:22:14.280 --> 0:22:16.920 hundreds of billions of dollars in cash, so people can 0:22:16.960 --> 0:22:20.639 see the exit activity will continue and it's about finding 0:22:20.720 --> 0:22:24.960 value in different locations around the world. Barack, can you 0:22:25.000 --> 0:22:27.680 just give us a little background on F two capital, 0:22:27.720 --> 0:22:31.159 because I believe what a spin out out of Genesis Partners, 0:22:31.240 --> 0:22:34.600 you and two others deciding to go out on your own, 0:22:34.760 --> 0:22:37.800 and you managed to also take something called the Junction 0:22:38.080 --> 0:22:43.720 with you. This is an accelerator program explain how it works. Sure, 0:22:43.760 --> 0:22:46.520 I'd be happy to pim so. Genesis Partners was one 0:22:46.520 --> 0:22:49.000 of the original venture capital funds formed in Israel when 0:22:49.000 --> 0:22:52.520 the industry started about twenty five years ago. It we 0:22:52.600 --> 0:22:56.879 had six fifty million dollars under management across four funds. 0:22:56.920 --> 0:22:59.000 And what we saw in Israel generally is the changing 0:22:59.040 --> 0:23:02.240 of the guard. At the time Genesis started, it was 0:23:02.320 --> 0:23:05.000 very much a buyer's market, those with the cash where kings. 0:23:05.640 --> 0:23:08.679 But what's happened over time is more and more strategic 0:23:08.720 --> 0:23:11.199 players moving to Israel and start buying up companies. Is 0:23:11.640 --> 0:23:14.199 power has shifted to the entrepreneurs, so the founders have 0:23:14.240 --> 0:23:17.560 the power. It's now a seller's market and vcs to 0:23:17.600 --> 0:23:21.240 be successful have to give more than cash UH in 0:23:21.359 --> 0:23:23.879 order to secure the top deals. In our way of 0:23:23.880 --> 0:23:26.119 doing that at F two Capital, F two is powered 0:23:26.160 --> 0:23:29.640 to founders UH in this spirit is through our platform 0:23:29.680 --> 0:23:33.080 called the Junction. The Junction is a network that we've 0:23:33.080 --> 0:23:38.000 created of multinationals including sap Unich, re Kuley, Packard and 0:23:38.040 --> 0:23:40.439 others largest players in the world who are looking to 0:23:40.560 --> 0:23:45.120 Israel for technology edge UH, and we leverage them as 0:23:45.119 --> 0:23:46.919 a way to stand out in the market and support 0:23:46.960 --> 0:23:49.959 founders and attract them to our program. So, Brock, I'm 0:23:49.960 --> 0:23:51.760 wondering if you could look into the crystal ball and 0:23:51.800 --> 0:23:55.480 tell us what the cutting edge technology is currently being 0:23:55.480 --> 0:23:59.520 developed that you think will change the world. Everybody is 0:23:59.560 --> 0:24:02.919 talking about artificial intelligence, and it's just different ways to 0:24:02.960 --> 0:24:06.600 apply that. Artificial intelligence In Israel, Uh, it all comes 0:24:06.600 --> 0:24:09.000 out of the military. Israel has always been at a 0:24:09.080 --> 0:24:12.560 numerical disadvantage to our neighbors in a hostile region. We've 0:24:12.560 --> 0:24:15.960 relied on artificial intelligence from the you know, basically the 0:24:15.960 --> 0:24:19.920 the the uh initial days of of of computers. Well, 0:24:19.920 --> 0:24:21.480 but how is it going to be applied in a 0:24:21.520 --> 0:24:23.639 cutting edge way that's going to sort of transform the 0:24:23.680 --> 0:24:26.840 way we think about things. It's it's gonna be applied 0:24:26.840 --> 0:24:30.479 in stages so um. You know, for example, enterprises are 0:24:30.520 --> 0:24:33.159 sitting on tons of data. They're drowning in data. They 0:24:33.160 --> 0:24:34.520 don't know how to make sense of all the data. 0:24:34.560 --> 0:24:37.000 So you can apply machine learning to comb through the data, 0:24:37.240 --> 0:24:39.199 enrich it with other data you can get off the 0:24:39.200 --> 0:24:41.679 web in order to create predictive models to tell you 0:24:41.720 --> 0:24:45.080 how much, uh to pay for your next house. Uh. 0:24:45.160 --> 0:24:47.720