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Cushing's Toudouze Discusses Energy 'Renaissance' · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim
• 0:07
  Speaker 1: Fox along with my co host Lisa Abramowitz. Each day
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• 0:28
  Speaker 1: want to prepare for what is ahead in the oil industry.
• 0:32
  Speaker 1: I get confused looking at all the inputs in similar
• 0:34
  Speaker 1: argument for iron Ore that perhaps the rally has gone
• 0:37
  Speaker 1: on too long, has been made for the oil industry,
• 0:39
  Speaker 1: that perhaps oil prices have gotten too high and are
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  Speaker 1: due for a fall. I want to bring in Libby
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  Speaker 1: two does, a partner and portfolio manager at Cushing Asset
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  Speaker 1: Management UH to talk a little bit about what we
• 0:52
  Speaker 1: should be paying attention to with respect to oil. So, Libby,
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  Speaker 1: there is so much going on from the political angle,
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  Speaker 1: where you've got President Trump, who does seem to be
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  Speaker 1: supportive of fossil fuels, but then policy changes that could
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  Speaker 1: prove to be challenging frankly for some of the big
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  Speaker 1: energy companies that do business in the Middle East. What
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  Speaker 1: are you focusing on to determine the course ahead. Yeah,
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  Speaker 1: I think when you look at the crude oil, just
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  Speaker 1: like any other commodity, there are three main things supply, demand,
• 1:22
  Speaker 1: in inventories, and right now we have several things that
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  Speaker 1: are impacting that. We have rig counts that of course
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  Speaker 1: impacts supply. Those are going up, so the fear of overproduction,
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  Speaker 1: we've got that happening. We've got potential import tax on
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  Speaker 1: crude oil, which again that'll affect the big integrated companies,
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  Speaker 1: but there are a lot of smaller domestic independent E
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  Speaker 1: and P companies that that won't affect refiners. They could
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  Speaker 1: potentially be hurt, but it depends on the details of
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  Speaker 1: the tax, so you really have to dig into the details.
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  Speaker 1: But if you take a step back, Trump centered policy
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  Speaker 1: is reduced regulatory burden, increase production, increase infrastructure, and support export.
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  Speaker 1: All of that is very positive for the United States. Lebby,
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  Speaker 1: I'm wondering if you could help me just get my
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  Speaker 1: mind around the world of master limited partnerships. I used
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  Speaker 1: to pretend that I knew something about energy transfer partners
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  Speaker 1: but then it all went and it got complicated, and
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  Speaker 1: I think you would agree that it went from being
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  Speaker 1: something that was driven by demand for the yield uh
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  Speaker 1: specifically the payouts, because payouts from mlp s are treated
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  Speaker 1: as payouts let's say, from a real estate investment trust,
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  Speaker 1: so it passes through directly to the investor. So I'm
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  Speaker 1: wondering if you could just give me a view of
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  Speaker 1: what's going on in the MLP space, and you might
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  Speaker 1: even want to use uh, you know, enterprise energy transfer
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  Speaker 1: partners almost as an example. Well, it's interesting you pick
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  Speaker 1: energy transfer because that's probably one of the most complicated
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  Speaker 1: of the energy infrastructure compa's Yeah, exactly. Most of them
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  Speaker 1: are pretty straightforward. It's a fee based business to transport, process, store,
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  Speaker 1: crude oil, natural gas. I think that MLPs, which as
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  Speaker 1: you mentioned, used to be a yield story, probably still
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  Speaker 1: are a yield story in relative terms. Even though we're
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  Speaker 1: in a rising rate environment, yields are still fairly low,
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  Speaker 1: so people are looking for yield reads utilities that's expensive yield.
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  Speaker 1: MLPs are still cheap yield. But today, in the age
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  Speaker 1: of the energy renaissance, which we're truly in, the story
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  Speaker 1: is growth and so there are a ton of energy
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  Speaker 1: infrastructure companies that are going to be able to grow
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  Speaker 1: these distributions that can be five six seven percent on average.
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  Speaker 1: Where do we get a list? I can give you
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  Speaker 1: a whole list of energy infrastructure count so so olivy
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  Speaker 1: you oversee almost four billion dollars of assets. Where where
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  Speaker 1: are you investing right now? So right now, given the uh,
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  Speaker 1: what we've come through sixteen and coming out of the
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  Speaker 1: trough and the energy cycle, it's been interesting because the
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  Speaker 1: upstream companies, the production companies, there are price times volume game.
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  Speaker 1: Price went down crude those companies, cash flows went down.
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  Speaker 1: The MLP companies went down right in conjunction with the
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  Speaker 1: production companies, but their cash flows didn't go down. Why
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  Speaker 1: because it's just a volume game. So as long as
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  Speaker 1: the demand was there, the cash flows were going to
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  Speaker 1: be there, and so the opportunity. There are a lot
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  Speaker 1: of MLPs that now have trade a very attractive valuations,
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  Speaker 1: whether they have parents that have billions of dollars of
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  Speaker 1: infrastructure to drop down, or they become a value story
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  Speaker 1: because they've been beaten up unfairly. Let's do the value story.
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  Speaker 1: Tell us give us a couple of examples. Okay, so
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  Speaker 1: h n g L Energy Partners company that has been
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  Speaker 1: um was really beat up. Saw it's yield blowout tot um.
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  Speaker 1: They have, uh, they have done several things to improve
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  Speaker 1: their balance sheet, bring leverage down. Uh. Their big pipeline,
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  Speaker 1: Grand Makes of Pipeline is now online, it's moving crude,
• 5:17
  Speaker 1: and they entered into a strategic partnership with oak Tree.
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  Speaker 1: This is going to provide all kinds of opportunities. They
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  Speaker 1: are going to be able to grow that distribution twenty
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  Speaker 1: plus percent this year and in three years after that
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  Speaker 1: at ten plus. So how do you, as an investor
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  Speaker 1: away from oak Tree get in on that? So you
• 5:37
  Speaker 1: buy the public stock and g L and g L
• 5:40
  Speaker 1: right and g L trades right now four dollars somewhere
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  Speaker 1: around there, and you say growth, that's what you want
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  Speaker 1: to be looking for, right, because I often note that
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  Speaker 1: in dividend portfolios people are saying it's not just the yield,
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  Speaker 1: it's whether the company can actually grow the dividend into
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  Speaker 1: the future. All right, that was a value name, correct? Yes? Okay,
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  Speaker 1: what what you say that? There are maybe names out
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  Speaker 1: there also that are just going to provide new growth. Yeah,
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  Speaker 1: so let me touch on them. The fact that this
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  Speaker 1: business is going to have uh five billion dollars of
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  Speaker 1: infrastructure that has to be built out in the United
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  Speaker 1: States to handle the existing supply sources. So you have
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  Speaker 1: many companies who have a very nice footprint in the US,
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  Speaker 1: companies like Williams Partners that's the premier natural gas UH
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  Speaker 1: pipeline system in the United States. This is a company
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  Speaker 1: that has done some things to reduce their cost of
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  Speaker 1: capital UH. It's a company that is going to be
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  Speaker 1: able to grow at five to seven percent UH and
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  Speaker 1: a company that UM is really in the premier sweet
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  Speaker 1: spot of the energy renaissance. Williams Companies Williams Companies ticker
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  Speaker 1: w p Z. So right now, how much of your
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  Speaker 1: investments are predicated on the idea that oil prices will
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  Speaker 1: not fluctuate too much to the downside, meaning, you know,
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  Speaker 1: beyond forty five a barrel or lower. Yeah, that's a
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  Speaker 1: great point because the energy infrastructure business and and the
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  Speaker 1: success of the energy infrastructure business is predicated on the
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  Speaker 1: energy supply chain functioning normally. And when you get down
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  Speaker 1: below fifty dollars UH, it's difficult for producers. There are
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  Speaker 1: some that can can operate in that area, but there
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  Speaker 1: it's difficult for some producers to operate economically. So that
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  Speaker 1: becomes an issue if you get too higher prices, say
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  Speaker 1: we blow out, you have demand destruction, either of those things.
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  Speaker 1: Heard it, but we think we're writing the sweet spot
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  Speaker 1: fifty six. Thank you very much to do his partner,
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  Speaker 1: portfolio manager Cushing Asset Management. Apple. It's been touted as
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  Speaker 1: the world's most expensive company, at least by market share
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  Speaker 1: at one point or another. Apple coming out with their
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  Speaker 1: results after the market closes today here to tell us more.
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  Speaker 1: Michael Scanlan, portfolio manager Manu Life Asset Management, based in Boston. Michael,
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  Speaker 1: thanks for being with us. All right, so give us
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  Speaker 1: your your best estimate, guestimate and everything Apple. What's gonna happen?
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  Speaker 1: What are they gonna tell us? Thanks for having me.
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  Speaker 1: You know, I think when you when you look at
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  Speaker 1: the report tonight, there's obviously the results from last quarter.
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  Speaker 1: I think the bigger focus for everybody, uh they released
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  Speaker 1: tonight and conduct the conference call later on this evening
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  Speaker 1: will likely be more focused on what the guidance is
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  Speaker 1: going forward forward. I still think when you look at
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  Speaker 1: this company last year, there was a lot of focus
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  Speaker 1: on the fact that it was actually a down year
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  Speaker 1: for them in terms of revenues and uh, the actual
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  Speaker 1: iPhone units that they sold this year, they should give
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  Speaker 1: the back on a growth trajectory getting back to where
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  Speaker 1: they were in two thousand fifteen. So you know that
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  Speaker 1: will likely help prevent the type of stell off that
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  Speaker 1: we saw early last year in the stock. Have we
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  Speaker 1: gotten any indications already about what their iPhone sales are
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  Speaker 1: going to be like? And how much is the response
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  Speaker 1: to Apple's earnings hinged on that all important iPhone sales number. Well,
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  Speaker 1: I think when you look at the quarter, you know,
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  Speaker 1: people tend to focus, uh probably laser like focus on
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  Speaker 1: that growth margin number that they were report. And there
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  Speaker 1: are some one off items that they have had the
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  Speaker 1: last couple of quarters, especially last quarter with FX and
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  Speaker 1: some other things. Uh, and you know the stock tends
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  Speaker 1: to overreact to that number. You know, if you take
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  Speaker 1: a longer term focus on the Apple, you know it's
• 9:43
  Speaker 1: it's a stock that offers a phenomenal total return. Right.
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  Speaker 1: You get thirty five billion dollars of stock being bought
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  Speaker 1: back every year, You get just about a two percent
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  Speaker 1: dividend that buy backs about six percent of the company.
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  Speaker 1: See you add those two things together, you're getting an
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  Speaker 1: eight percent return before they do anything in terms of
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  Speaker 1: earnings growth or multiple expansions for the name. Well, well,
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  Speaker 1: just to do a little bit more math to make
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  Speaker 1: your head spin, we're talking about sales of anywhere between
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  Speaker 1: seventies six and seventy eight billion. That would actually be
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  Speaker 1: the highest revenue in a single quarter ever. Also gross
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  Speaker 1: margins of between thirty eight and thirty eight and a
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  Speaker 1: half percent. That does compared to about forty in the
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  Speaker 1: year ago quarter. Correc think that's one of the big
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  Speaker 1: things too. I mean, you look at this company. Nobody
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  Speaker 1: makes money in smartphones, right, and people are talking about
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  Speaker 1: this new Google Pixel phone, and you know, even the
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  Speaker 1: most robust projections are nowhere near the two thirty million
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  Speaker 1: or so iPhones at Apple cells in a year. So
• 10:39
  Speaker 1: you know, the numbers are big. Yes, the market cap
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  Speaker 1: is big, but when you look at it from evaluation standpoint,
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  Speaker 1: I mean, Apples at roughly thirteen thirteen and a half
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  Speaker 1: times this year, even cheaper than that, maybe nine and
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  Speaker 1: a half times free cash flow because they're pre cash
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  Speaker 1: flows greater than the EPs. So it's not like you're
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  Speaker 1: paying a premium multiple for those huge absolute numbers that
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  Speaker 1: you just mentioned. My uh, as an investor, how much
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  Speaker 1: you're hoping to hear from Apple about bigger pushes into
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  Speaker 1: for example, content creation or new apps and new services,
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  Speaker 1: So that that's been a big controversy on the stock.
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  Speaker 1: And you know, the last quarter, when you think back
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  Speaker 1: to the earnings called, they spent a lot of time
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  Speaker 1: talking about the services business there and the strong growth
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  Speaker 1: trajectory and the contribution that they get because that's pretty
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  Speaker 1: high margin revenues, so that's really critical. I wouldn't expect
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  Speaker 1: that you're going to hear anything new tonight in terms
• 11:30
  Speaker 1: of new product lines or anything that along those lines.
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  Speaker 1: They tend to keep that pretty close to the vest,
• 11:35
  Speaker 1: and obviously they have those well advertised product announcements that
• 11:39
  Speaker 1: they do. That being said, there is um uh, you know,
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  Speaker 1: a lot of the talk right now in the industry
• 11:46
  Speaker 1: in terms of original content production being Netflix and Amazon.
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  Speaker 1: Apple has dipped their toe into that area very very
• 11:53
  Speaker 1: slightly with this karaoke in cars initiative that they have.
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  Speaker 1: You know, I think the market would reward the stock
• 11:59
  Speaker 1: if you can ultimately do something with the TV product
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  Speaker 1: where you can get a skinny down chord shaped type
• 12:06
  Speaker 1: bundle product. But thus far they haven't been able to
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  Speaker 1: reach an agreement with the content providers. Hey, no, Michael,
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  Speaker 1: you follow much more than than Apple, and I'm wondering
• 12:17
  Speaker 1: if you can sort of give us a little bit
• 12:19
  Speaker 1: of a window into the John Hancock Balanced Fund and
• 12:23
  Speaker 1: some of the other funds that you run. Sure, so
• 12:27
  Speaker 1: you know, specific to the John Hancock Balanced Fund. Tech
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  Speaker 1: is a pretty healthy wait for us in the portfolio,
• 12:33
  Speaker 1: and you know, it's it's an area where we've done
• 12:36
  Speaker 1: pretty well from an individual stock selection perspective. Tech thus
• 12:39
  Speaker 1: far this year has been a pretty good sector. I
• 12:42
  Speaker 1: believe it's second the second best returning sector only two materials,
• 12:46
  Speaker 1: and we've had some nice winners in there with Seagate
• 12:48
  Speaker 1: reporting blowout earnings last week. Applied Materials has had a
• 12:52
  Speaker 1: really nice run here to start the year. Facebook has
• 12:54
  Speaker 1: been another big winner for us. I guess if you
• 12:57
  Speaker 1: were to look at it and point to the negative,
• 13:00
  Speaker 1: really the only blemish for us thus far this year
• 13:02
  Speaker 1: in tech has been Google, which you know, when you
• 13:05
  Speaker 1: when you sort of back out the one off items
• 13:07
  Speaker 1: that they had this quarter. Um, you know, that's still
• 13:09
  Speaker 1: a name that we like a lot, and it is
• 13:11
  Speaker 1: our biggest position in the portfolio overall, um by you know,
• 13:16
  Speaker 1: quite a wired margin over the number two holding that
• 13:18
  Speaker 1: we have. Well, I'll just tell you that the fund
• 13:20
  Speaker 1: is up I think a little bit more than one
• 13:22
  Speaker 1: point so far this year. Michael Scalon, thank you so
• 13:26
  Speaker 1: much for joining us. Michael Scalin, folio manager for Manu
• 13:29
  Speaker 1: Life Asset Management, talking about Apple. Max Neeson, my Bloomberg
• 13:46
  Speaker 1: Gadfly columnist, my neighbor who sits next to me all day. Uh, Max,
• 13:51
  Speaker 1: I want to talk to you about a lot of
• 13:53
  Speaker 1: things going on. There's certainly a lot of earnings coming
• 13:55
  Speaker 1: out from the pharmaceutical companies, but we need to really
• 13:57
  Speaker 1: start with some of the rhetorics we've heard from President
• 14:00
  Speaker 1: Trump after his meeting with some pharmaceutical CEOs. Can you
• 14:04
  Speaker 1: give us your impression of the comments that we've heard
• 14:07
  Speaker 1: so far. Yeah, So we're we're kind of just starting
• 14:09
  Speaker 1: to get some details that are coming out of the meeting,
• 14:12
  Speaker 1: from the part that the press eded on and and
• 14:14
  Speaker 1: from the ceo that are now out of the meeting.
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  Speaker 1: Trump did bring up pharmaceutical pricing again, called it astronomical.
• 14:23
  Speaker 1: That's obviously not a particularly good sign for the industry,
• 14:26
  Speaker 1: but that aside, it seemed to be comparatively friendly. He
• 14:30
  Speaker 1: talked up friendly at tax reform and some de regulation
• 14:34
  Speaker 1: at the f d A which might be a little
• 14:36
  Speaker 1: bit more mixed, But um, the pricing thing is still
• 14:39
  Speaker 1: out there, and that's kind of kind of remain illuming, toright.
• 14:42
  Speaker 1: I'm sure that the CEO has tried to kind of
• 14:44
  Speaker 1: talk him away from his preferred remedy, which is allowing
• 14:47
  Speaker 1: Medicare to negotiate drug prices directly. Those are the issues,
• 14:50
  Speaker 1: right that drug price, uh, competition perhaps, and maybe even
• 14:54
  Speaker 1: the bidding they were talking about, you know, bidding for
• 14:57
  Speaker 1: specific contracts that would not necessarily petitive bidding. Yeah, that
• 15:01
  Speaker 1: that would be definitely a big downside risk for a
• 15:05
  Speaker 1: lot of firms that do a lot of business with
• 15:06
  Speaker 1: the government. The government, you know, if it chooses to
• 15:09
  Speaker 1: has essentially unlimited negotiating leverage because they grant the monopolies
• 15:15
  Speaker 1: that these companies rely on. So if they use that
• 15:18
  Speaker 1: as a negotiating tool, they can pretty much push prices
• 15:21
  Speaker 1: down whatever they want. They can set prices, so there's
• 15:24
  Speaker 1: a lot of kind of a wide range of things
• 15:26
  Speaker 1: can happen, from just getting the same rebates that are
• 15:29
  Speaker 1: seen on the private market to something much more drastic,
• 15:32
  Speaker 1: which is what I think firms are afraid of. You know, Max,
• 15:34
  Speaker 1: based on the market reaction, do we have a sense
• 15:37
  Speaker 1: of what his President Trump's rhetoric means of astronomical pricing?
• 15:42
  Speaker 1: I mean, do people have a sense of what the
• 15:44
  Speaker 1: implications are for these companies based on the stock price
• 15:47
  Speaker 1: moves subsequent to the language being released. You know, it's
• 15:51
  Speaker 1: very much a guessing game whether this is going to
• 15:53
  Speaker 1: be a serious policy pushed by the president or if
• 15:56
  Speaker 1: he just wanted what happened today, you know, all the
• 15:58
  Speaker 1: seas to combine sort of kissed the ring and promise
• 16:02
  Speaker 1: to move manufacturing back and higher Americans, um or if um,
• 16:07
  Speaker 1: you know. And then there's the other kind of outstanding issue,
• 16:09
  Speaker 1: which is can Trump actually get the Republican Party to
• 16:12
  Speaker 1: come along on a policy that they've historically opposed. So really, um,
• 16:17
  Speaker 1: I think the CEOs and investors are still kind of
• 16:21
  Speaker 1: trying to guess what's going to happen next. Yeah, well
• 16:23
  Speaker 1: it is a challenge. I mean, I just I would
• 16:25
  Speaker 1: throw this quote at you and then you can tell
• 16:27
  Speaker 1: me which president said this. The pricing has been astronomical.
• 16:31
  Speaker 1: Now you could fill in the blank with a lot
• 16:32
  Speaker 1: of different presidents named there, because the many presidents have
• 16:35
  Speaker 1: been critical of the pharmaceutical industry for the prices of drugs. Yeah,
• 16:40
  Speaker 1: and that was today. Yeah, and that that's that's not
• 16:44
  Speaker 1: a quote you want to hear from the President exactly.
• 16:47
  Speaker 1: Another thing you don't want to hear is that the
• 16:50
  Speaker 1: US court system doesn't believe that you have a sufficient
• 16:55
  Speaker 1: patent restriction on some of your drugs. And that seems
• 16:58
  Speaker 1: to be what happened with Tava Parmaceuticals, which plunged to
• 17:01
  Speaker 1: its lowest in more than a decade following um. Yeah,
• 17:05
  Speaker 1: there's a there's an amazing story because there was stuff
• 17:07
  Speaker 1: going on. Just can you send mac sinistrate about Tava
• 17:10
  Speaker 1: and how it came to be its generic business plus Yeah,
• 17:13
  Speaker 1: and it's in debt, it's really were it's a it's
• 17:16
  Speaker 1: a pretty fascinating company that that's in pretty rough shape
• 17:20
  Speaker 1: right now. So they're the world's largest generic company and
• 17:23
  Speaker 1: very much the world's largest generic company after they spend
• 17:26
  Speaker 1: forty billion to buy Allorgan's legacy generic's portfolio. Now the
• 17:31
  Speaker 1: purchase price for that deal and its detload are larger
• 17:34
  Speaker 1: than its market cap after this uh setback to its
• 17:38
  Speaker 1: lead drug, It's which is a multiple scrosser strug. So
• 17:40
  Speaker 1: I totally bungled it. What is the setback? Can you
• 17:42
  Speaker 1: explain it? Yeah? Absolutely. So they have a drug called
• 17:46
  Speaker 1: capac zone. It treats multiple scorros is. Actually the lead
• 17:49
  Speaker 1: patent expired some years ago, but they got patents on
• 17:53
  Speaker 1: a more convenient dosage of the drug was just a
• 17:56
  Speaker 1: couple of times a week instead of more frequently, so
• 17:59
  Speaker 1: that they managed to switch patients to that and kind
• 18:01
  Speaker 1: of extend the sales life of this drug much farther
• 18:04
  Speaker 1: than anyone expected. But this might be the end of
• 18:07
  Speaker 1: the road for that strategy because the patents on that
• 18:09
  Speaker 1: extension got knocked down by by the district court. Holy cow,
• 18:14
  Speaker 1: Tava has more than a hundred billion dollars of debt.
• 18:17
  Speaker 1: That's insane. That's according to Bloomberg the A G G
• 18:22
  Speaker 1: D function. Uh m hmm. I wonder if that's accurate. Well,
• 18:26
  Speaker 1: so I'm going to check that. But it shares it down.
• 18:29
  Speaker 1: Uh Does Tava have a generics business that would be
• 18:33
  Speaker 1: attractive if it was spun off? I mean, well, the
• 18:37
  Speaker 1: generics business is the business. It's it's more than substantially
• 18:42
  Speaker 1: more than half of the revenue and should grow to
• 18:44
  Speaker 1: half the profit this year. Kind of as the the
• 18:48
  Speaker 1: activist acquisition matures. So I mean the they've kind of
• 18:52
  Speaker 1: made that acquisition in order to reduce dependence on on
• 18:55
  Speaker 1: copac zone, so that that's kind of what they're betting
• 18:58
  Speaker 1: on too, you know, see synergies from that and improved performance,
• 19:01
  Speaker 1: but to date it's been pretty difficult. They haven't seen
• 19:05
  Speaker 1: the expected to return from that deal or um or
• 19:08
  Speaker 1: improving the generic's business for a while now. Another being
• 19:12
  Speaker 1: hit by the slowdown in the generic's business is Fiser.
• 19:15
  Speaker 1: Can you talk about uh that company? Their shares are
• 19:17
  Speaker 1: currently falling after their report. Yeah, so they they missed
• 19:21
  Speaker 1: on EPs in the fourth quarter and also gave revenue
• 19:24
  Speaker 1: forecast that came in below expectations because they expect to
• 19:28
  Speaker 1: see greater than expected genneric compet shoot on their branded drugs,
• 19:32
  Speaker 1: So they're gonna lose sales to generics companies like Teva
• 19:35
  Speaker 1: at at an accelerated rate and don't quite have the
• 19:38
  Speaker 1: horses in terms of newly approved or or expanding drugs
• 19:42
  Speaker 1: to to kind of make up for to the degree
• 19:44
  Speaker 1: that animals expected. So that's why they're down. Just just
• 19:48
  Speaker 1: to clarify, when you set a hundred and thirty billions,
• 19:52
  Speaker 1: you were looking at Israeli shekels I did the math.
• 19:54
  Speaker 1: It's okay, thirty five billion, thirty four points seven billions,
• 19:57
  Speaker 1: all right, thank I love it. This is why you
• 20:01
  Speaker 1: have a bloomberg, uh you know, a Max just to
• 20:04
  Speaker 1: continue that that thought, No, don't. She's worried to continue
• 20:09
  Speaker 1: that that thought. You know, we heard today earlier about
• 20:12
  Speaker 1: the ups and they kind of said, you know, foreign
• 20:15
  Speaker 1: currency issues hurt their results. Do you hear that from
• 20:18
  Speaker 1: pharmaceutical companies um on on a pretty frequent basis? I mean,
• 20:23
  Speaker 1: you know, they do business all of the world, and
• 20:26
  Speaker 1: the strong dollars is not necessarily to their benefit. And
• 20:29
  Speaker 1: you know, most of the largest pharmaceutical companies in the
• 20:32
  Speaker 1: world reporting dollars, so they're they're facing that and you
• 20:36
  Speaker 1: know everything from the Euro two two problems in Venezuela.
• 20:40
  Speaker 1: So it's definitely. They keep a lot of their currency overseas.
• 20:43
  Speaker 1: You know, they do exactly, which is why you saw
• 20:46
  Speaker 1: the the You know, they keep a lot of cash overseas.
• 20:49
  Speaker 1: You saw that massive thirty billion dollar actially on deal,
• 20:52
  Speaker 1: which was as much about using that currency in a
• 20:55
  Speaker 1: tax efficient manner as it was in actually expecting and
• 21:00
  Speaker 1: speaking with the president today, Max Neeson, Thanks very much,
• 21:05
  Speaker 1: our gad fly when it comes to all things healthcare
• 21:09
  Speaker 1: as well as pharmaceutical related. I want to bring in
• 21:23
  Speaker 1: Patrick donohue. He's a German government reporter for Bloomberg in Berlin,
• 21:27
  Speaker 1: and Patrick, Um, just can we start with uh, your
• 21:30
  Speaker 1: lay of the land and Angela Merkel's response to this
• 21:34
  Speaker 1: assertion via President Trump's administration. Yeah. Sure. Michael was asked
• 21:40
  Speaker 1: about Peter Navarro's comments shortainly after he made them. Um.
• 21:44
  Speaker 1: The specific accusation was that Germany, Germany benefits from a
• 21:50
  Speaker 1: grossly undervalued thunder valued euro. Um. I mean, German officials
• 21:54
  Speaker 1: are pretty used to defending themselves against criticism about an
• 21:58
  Speaker 1: excessive trades there plus, But in this case, Michael simply
• 22:02
  Speaker 1: said that Germany upholds the independence of the e c
• 22:06
  Speaker 1: B and that she plans she's happy to do nothing
• 22:09
  Speaker 1: about the exchange rate. Well, she might not want to
• 22:12
  Speaker 1: do anything about the exchange rate, but traders might have
• 22:14
  Speaker 1: a different idea. Well, I mean, it's it's it was
• 22:19
  Speaker 1: kind of uh, I mean, it seemed to be a
• 22:21
  Speaker 1: version of this the of a standard criticism of Germany's
• 22:26
  Speaker 1: current account silurplus and the frame at Peter Navarro was
• 22:30
  Speaker 1: speaking to the Financial Times. Um, he seemed to articulate
• 22:34
  Speaker 1: this as a reason why they were dropping The US
• 22:37
  Speaker 1: administration was dropping U T TIP the MARKEEEU U S
• 22:41
  Speaker 1: trade agreement, and that to show that the EU was
• 22:44
  Speaker 1: not a bilateral partner, but was a multi lateral partner.
• 22:48
  Speaker 1: Therefore they would not pursue it. So, Uh, Navarro's comments
• 22:52
  Speaker 1: seemed to go in a lot of directions. You know,
• 22:55
  Speaker 1: it sort of brings up this other story that's on
• 22:58
  Speaker 1: the Bloomberg this morning. Let's talking about how the EU
• 23:02
  Speaker 1: President Donald Tusk said that the Nation Block is facing
• 23:06
  Speaker 1: the most dire threats in its six decade history, in
• 23:10
  Speaker 1: large part because of President Trump's pronouncements as well as
• 23:14
  Speaker 1: those by his staff. Um, what do you make of that? Well, you,
• 23:21
  Speaker 1: before the election was already facing huge problems with Brexits,
• 23:26
  Speaker 1: the threats of you know, possible disintegration of of of
• 23:31
  Speaker 1: the block, and it was a refugee crisis and everything. Um,
• 23:36
  Speaker 1: the unpredictability that's coming from Washington, according to Pusk, and
• 23:39
  Speaker 1: he was talking I think in the Baltic States adds
• 23:42
  Speaker 1: to that. And uh, he placed the new administration alongside
• 23:48
  Speaker 1: other you threats such as Russia and China, And so
• 23:53
  Speaker 1: that is kind of a snapshot of where we are
• 23:56
  Speaker 1: now and where European officials see this. Right, Um, Dave,
• 24:00
  Speaker 1: I want to bring you in here. You know, there's
• 24:01
  Speaker 1: a lot of catastrophic talk about the biggest risk, uh,
• 24:05
  Speaker 1: you know, in decades potentially we're getting closer to you know,
• 24:09
  Speaker 1: the end of the world's calculator or whatever. Uh. Some
• 24:12
  Speaker 1: some researchers talking about the atomic clock. Right, Uh, David,
• 24:15
  Speaker 1: where are we seeing this in the market. Well, all
• 24:17
  Speaker 1: you have to do is look at the results out
• 24:19
  Speaker 1: of the United Parcel Service UPS. I mean, their fourth
• 24:22
  Speaker 1: quarter earnings coming up short of analysts low assessment in
• 24:25
  Speaker 1: Bloomberg survey, uh, their profit forecast for this year missing projections,
• 24:30
  Speaker 1: and a lot of its currency related. Among other things
• 24:33
  Speaker 1: they're talking about UPS is that adjusted earnings may get
• 24:37
  Speaker 1: hit before taxes by four hundred million dollars this year
• 24:41
  Speaker 1: because of currency moves. And it all has to do
• 24:44
  Speaker 1: with the dollar strength. So don't investors look past that? Well,
• 24:48
  Speaker 1: and I was about to say, I mean, that's that's
• 24:50
  Speaker 1: not that's not hysteria. That's looking at the results and
• 24:53
  Speaker 1: responding it's not you know, people really all of a
• 24:56
  Speaker 1: sudden moving to cash or sort of preparing for armageddon.
• 24:59
  Speaker 1: This just people responding to earnings. I mean, I guess
• 25:02
  Speaker 1: when you hear the histrionic talk, you wonder, how do
• 25:04
  Speaker 1: you pair that with what we're actually seeing in the market. Yeah,
• 25:07
  Speaker 1: that's true. I mean, then again, you do have UPS
• 25:09
  Speaker 1: shares down almost seven percent in today's trading, So it's
• 25:13
  Speaker 1: something that clearly hasn't been quite factored into the extent
• 25:17
  Speaker 1: that you're seeing that move. You know, is it going
• 25:20
  Speaker 1: to be arm again? Well, I mean certainly UPS isn't
• 25:22
  Speaker 1: talking about arm again. At the same time, it is
• 25:25
  Speaker 1: clearly something that's having an effect on their performance. Let
• 25:29
  Speaker 1: me just to break it and Dave, is it possible
• 25:31
  Speaker 1: that any infrastructure spending plans that would upgrade roads, highways, bridges, etcetera.
• 25:35
  Speaker 1: Would be beneficial to FedEx as well as UPS they
• 25:38
  Speaker 1: would get to use these Well, sure, I mean you
• 25:41
  Speaker 1: have to think more in terms of the companies that
• 25:42
  Speaker 1: are actually going to do the work, the construction companies
• 25:45
  Speaker 1: or whoever. Uh. Nonetheless, I mean there is the benefit
• 25:49
  Speaker 1: down the line for companies that actually use the roads,
• 25:52
  Speaker 1: no question. And also just want to mention you don't.
• 25:54
  Speaker 1: I know this is off topic slightly, but you know
• 25:56
  Speaker 1: the Super Bowl is coming up on Sunday, right, super
• 25:59
  Speaker 1: Bowl fifty one. Guess who is delivering the Vince Lombardi
• 26:03
  Speaker 1: Trophy to Houston in advance of that FedEx There you go.
• 26:08
  Speaker 1: You know I could see your I could say, I
• 26:10
  Speaker 1: could see your face. Just I'm talking about global. Well,
• 26:15
  Speaker 1: well you can. I think they'll the world will be
• 26:19
  Speaker 1: around at least until Sunday to see them play the
• 26:22
  Speaker 1: Super Bowl. Just have a feeling, I hope. So, Patrick Donahue,
• 26:25
  Speaker 1: thank you so much for joining us, German government reporter
• 26:27
  Speaker 1: from Bloomberg in Berlin, as well as they both said,
• 26:31
  Speaker 1: thank you so much as always for joining us Bloomberg
• 26:33
  Speaker 1: SOX blumnist and a member of the live blog. Thanks
• 26:42
  Speaker 1: for listening to the Bloomberg P and L podcast. You
• 26:45
  Speaker 1: can subscribe and listen to interviews at iTunes, SoundCloud, or
• 26:49
  Speaker 1: whatever podcast platform you prefer. I'm Pim Fox. I'm out
• 26:53
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• 26:56
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• 26:59
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• 27:10
  Speaker 1: HM