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U.S. Oil Demand Is Peaking, Expect Lower Prices At Pump: Schork · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg P and L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Crude
• 0:32
  Speaker 1: oil contracts are higher by nearly two on the NIMEX
• 0:36
  Speaker 1: right now Here to tell us more about the oil
• 0:39
  Speaker 1: complex is Stephen Shorky is the president of the Short Group.
• 0:43
  Speaker 1: Joining us from Villanova, Pennsylvania. Stephen shork always a pleasure.
• 0:47
  Speaker 1: Let's begin with news today about Saudi Arabia curbing output
• 0:52
  Speaker 1: last month. This is according to OPEC delegates, and also
• 0:57
  Speaker 1: the trade dispute that now has become political between Saudi
• 1:01
  Speaker 1: Arabia and Canada. What does this mean for oil prices? Well,
• 1:06
  Speaker 1: if we're left just to the seasonality of it all
• 1:09
  Speaker 1: him right now, oil demand in the United States, if
• 1:12
  Speaker 1: it has not peaked for the year, it shall peak
• 1:15
  Speaker 1: over the next couple of months, excuse me, a couple
• 1:18
  Speaker 1: of weeks. That is to say so, we typically see
• 1:20
  Speaker 1: the highest demand for crudal. At the peak of the summer,
• 1:23
  Speaker 1: we demand for gasolene is at its strongest. So as
• 1:26
  Speaker 1: we transition into August, Now, of course we look ahead
• 1:29
  Speaker 1: into September, we're not going to the shore, we're not
• 1:31
  Speaker 1: going to the Poconos anymore. The kids are back at school,
• 1:35
  Speaker 1: so demand for gasolene falls, and then demand for crudal
• 1:38
  Speaker 1: falls precipitously as we go into the fall maintenance season. Now, remember,
• 1:43
  Speaker 1: the refinery is the only guy in the world that
• 1:45
  Speaker 1: actually buys crudal to use it, and their consumption of
• 1:49
  Speaker 1: crudal drops tremendously in the months of September and October.
• 1:53
  Speaker 1: And based on the published UH schedules for maintenance coming
• 1:58
  Speaker 1: this fall, this maintenance season will be extraordinarily high. So
• 2:02
  Speaker 1: we can expect to see a sharp drop off in
• 2:04
  Speaker 1: demand for crude all in the months ahead. So what
• 2:08
  Speaker 1: does this mean for price? Well, intuitively, if you're at
• 2:11
  Speaker 1: the peak of the season and we're already well off prices,
• 2:15
  Speaker 1: that is, are already well off their highs and we're
• 2:17
  Speaker 1: only looking at weakening demand in the months ahead, that
• 2:20
  Speaker 1: would imply lower prices in the nearby future. Okay, So
• 2:25
  Speaker 1: does this mean that the best trade is to play
• 2:29
  Speaker 1: on investors fears of increased prices. That's going the other way,
• 2:33
  Speaker 1: that's the contrary bet. Make sure that you could stick
• 2:36
  Speaker 1: it to an investor to pay sixty nine to seventy
• 2:39
  Speaker 1: dollars a barrel when the price, based on what you
• 2:42
  Speaker 1: just described, looks like it's going to fall right exactly,
• 2:46
  Speaker 1: So we did. We came out of the worst worst
• 2:49
  Speaker 1: of it, and and I think on investor's mind, what
• 2:53
  Speaker 1: was really not focused on was the loss of Canadian
• 2:56
  Speaker 1: crude oil. Uh, the market seem to be really focused,
• 2:58
  Speaker 1: of course on the situation in Iran, the situation in Venezuela,
• 3:02
  Speaker 1: the situation in Libya. But we had a major upgrader,
• 3:06
  Speaker 1: a production plant in Calgary that went down for an
• 3:09
  Speaker 1: unplanned outage back in the late spring, right as we
• 3:12
  Speaker 1: were going into the peak demand season for oil. And
• 3:15
  Speaker 1: keep in mind, demand for oil, demand for guests lane
• 3:17
  Speaker 1: in the United States has never been stronger. And yet
• 3:20
  Speaker 1: we lost a key supplier of that oil at the
• 3:23
  Speaker 1: start of the season, and hence we did have a
• 3:26
  Speaker 1: sharp run upping price. But the market has endured that
• 3:29
  Speaker 1: right now, so prices at this level from a fundamental
• 3:33
  Speaker 1: from the seasonality standpoint, you would expect to see lower prices,
• 3:37
  Speaker 1: a softening in prices as it wore. But clearly with
• 3:41
  Speaker 1: the headlines the reported assassination attempt down in Venezuela. Of course,
• 3:47
  Speaker 1: the situation between this White House and Tehran, the situation
• 3:51
  Speaker 1: in um in Libya, all plays into fear. And when
• 3:55
  Speaker 1: you have in fear in the market, that fear gets
• 3:57
  Speaker 1: priced in as a premium into the market. So there
• 4:00
  Speaker 1: there is that still continue to overhang in this market. Okay,
• 4:04
  Speaker 1: So if you're a driver and you're looking to put
• 4:08
  Speaker 1: the gasoline or fuel in your automobile, should you expect
• 4:11
  Speaker 1: prices to remain stable or at least lower going into
• 4:14
  Speaker 1: the fall? Well going fall, we have to keep in mind,
• 4:17
  Speaker 1: the investor listeners here has to keep in mind that
• 4:20
  Speaker 1: come September fifteen, the rules begin to change with the
• 4:23
  Speaker 1: type of gasolene that we put into our cars. And
• 4:26
  Speaker 1: then that that transitions again in the month of October
• 4:29
  Speaker 1: and once again in November, as you transition from a
• 4:33
  Speaker 1: summer grade gasolene to quote unquote a winter grade gasolene
• 4:36
  Speaker 1: now winter grade gasolene. Given the amount of chemical feedstocks
• 4:40
  Speaker 1: to go into manufacturer, they're plentiful, so the manufacturer where
• 4:43
  Speaker 1: the grade gasolene is a cheaper proposition. So inherently we
• 4:48
  Speaker 1: are going to see lower oil prices. We're going to
• 4:50
  Speaker 1: gasolene prices because of the transition for the types of
• 4:53
  Speaker 1: gasolene that are going into the refinery, uh coming out
• 4:58
  Speaker 1: of the refiner, I should say. So that's at him.
• 5:00
  Speaker 1: I would expect to see lower prices because let's keep
• 5:03
  Speaker 1: in mind, as you said, at the beginning of the summer,
• 5:05
  Speaker 1: when demand was at all time high, we lost access
• 5:09
  Speaker 1: to a lot of crude oil. We we've withstood that,
• 5:12
  Speaker 1: and now we're going to a weak demand part of
• 5:14
  Speaker 1: the year when we're manufacturing a cheaper gasoline going into
• 5:18
  Speaker 1: that uh uh time frame. So I think at worst
• 5:24
  Speaker 1: expect prices, you know, a slow, steady decline. But but
• 5:29
  Speaker 1: certainly I would expect to see you're going to see
• 5:31
  Speaker 1: a decline. That's just economically a truth that we'll see
• 5:35
  Speaker 1: it over the next couple of months. All Right, I
• 5:37
  Speaker 1: want you to put oil to the side. For gasoline
• 5:41
  Speaker 1: to the side, I want you to talk about liquefied
• 5:43
  Speaker 1: natural gas and the potential Chinese tariffs on l en
• 5:47
  Speaker 1: g imports. Yeah, that that was a big surprise. Of course,
• 5:52
  Speaker 1: China has identified US energy imports as tariffs, but they
• 5:58
  Speaker 1: they had left out ellen G and I say that
• 6:01
  Speaker 1: as a surprise, and I think it is catching the
• 6:03
  Speaker 1: market a little bit off guard, given that China is
• 6:06
  Speaker 1: in a massive transition to wean itself off of coal
• 6:10
  Speaker 1: onto gas, and it's been a major buyer of l
• 6:13
  Speaker 1: en G cargoes over the past year. Some estimates now
• 6:17
  Speaker 1: have China as the world's largest buyer of l n G. Uh.
• 6:22
  Speaker 1: So this was a surprise. I am skeptical China's making
• 6:26
  Speaker 1: this threat. I am skeptical because we are we are
• 6:30
  Speaker 1: coming out of the summer, which means we're going into
• 6:32
  Speaker 1: the fall, and we're going into the peak demand season
• 6:34
  Speaker 1: for Chinese gas consumption the winter. And the flexibility that
• 6:39
  Speaker 1: us LG has it uh the cargoes can easily go
• 6:44
  Speaker 1: into China. And this is what we saw last year.
• 6:47
  Speaker 1: And when you have excess demand in the Chinese market,
• 6:50
  Speaker 1: it was the us LG that fit that gap because
• 6:52
  Speaker 1: of its flexibility. We gotta leave it there. Stephen Short
• 6:55
  Speaker 1: is the president of the Short Group. He's based in Villanova,
• 6:59
  Speaker 1: Pennsylvan and he's talking crude and liquefied natural gas. Right now,
• 7:18
  Speaker 1: let's talk about CBS and the decline in the value
• 7:22
  Speaker 1: of CBS shares since the accusations of sexual harassment against
• 7:28
  Speaker 1: the CBS chief executive less Moonvest. Here to help us
• 7:32
  Speaker 1: understand what's going on, is Tuna a MOBI. He is
• 7:34
  Speaker 1: the senior media and entertainment analysts for cf R Research.
• 7:38
  Speaker 1: Tuna always a pleasure. I was looking at the price
• 7:42
  Speaker 1: of CBS stock and all right, fifty two bucks to share.
• 7:48
  Speaker 1: But the decline since the revelation of these accusations against
• 7:55
  Speaker 1: less Moonvest. Do you believe that that is really what
• 7:58
  Speaker 1: is hurting the style? PIM? First off, good morning, Thanks
• 8:02
  Speaker 1: for having me. Um. Absolutely, I think um. I think
• 8:06
  Speaker 1: it does create an overhang on the stock, which is
• 8:09
  Speaker 1: kind of why we downgraded it shares um from it
• 8:12
  Speaker 1: by to a hold. Um. It's a little bit disappointing
• 8:16
  Speaker 1: PIM that the company chose to conduct business as usual
• 8:19
  Speaker 1: and the last earnings call as if wishing that the
• 8:23
  Speaker 1: matter of the ongoing investigation will will just go away.
• 8:27
  Speaker 1: But there is no questionably a cloud of overhang as
• 8:30
  Speaker 1: a results of this on for investigation, and we think
• 8:34
  Speaker 1: that as long as that cloud does not get resolved
• 8:38
  Speaker 1: in a substantive manner that investors should tread cautiously even
• 8:43
  Speaker 1: as the company has demonstrated continued strong fundamentals here. So
• 8:47
  Speaker 1: we are cautiously, um, you know, waiting for the uh
• 8:52
  Speaker 1: kind of the substance, and and based on that, we
• 8:55
  Speaker 1: just think it's uh, it's prudent to to not add
• 8:58
  Speaker 1: to current positions. Okay, but let me ask you a
• 9:00
  Speaker 1: little bit. If indeed the company is doing well. We
• 9:04
  Speaker 1: got the results last week. They're over the top business,
• 9:08
  Speaker 1: exceeding estimates. They're adding subscribers at an accelerated rate. Their
• 9:15
  Speaker 1: retransmission fees are also higher. Why wouldn't this be a
• 9:20
  Speaker 1: good opportunity to buy a stock that's trading at fifty
• 9:24
  Speaker 1: two that maybe just about let's say the middle of July,
• 9:27
  Speaker 1: was trading nearly sixty dollars To share the simple answer,
• 9:31
  Speaker 1: pay me that Less move is an integral part of
• 9:35
  Speaker 1: the investments here. And there's a lot of investors that
• 9:38
  Speaker 1: we speak to that actually brought into CBS precisely because
• 9:43
  Speaker 1: Less and his team have demonstrated division to execute on
• 9:47
  Speaker 1: that course strategy that you just alluded to. Growth in um,
• 9:51
  Speaker 1: you know, non traditional revenue streams, whether it's UH streaming
• 9:56
  Speaker 1: or content licensing UM over the time up you know,
• 10:00
  Speaker 1: things of that nature retransmission. So I think the fundamentals
• 10:05
  Speaker 1: definitely UM are very healthy, as you have alluded to.
• 10:09
  Speaker 1: But right now I think, uh, there's a real uh
• 10:12
  Speaker 1: some likelihood that some of the sharehold the value uh
• 10:16
  Speaker 1: that Less Movements has created over the last decades, some
• 10:19
  Speaker 1: of that could be uh eroded in the event that
• 10:22
  Speaker 1: he could, you know, potentially be found uh uh you
• 10:26
  Speaker 1: know somewhat complexity or even if should he leave. And
• 10:30
  Speaker 1: remember there's still the issue of the potential merger with Votcom,
• 10:34
  Speaker 1: which National Amusements is pushing uh and the litigation that
• 10:39
  Speaker 1: is pending in that regard also creates an overhanging. There's
• 10:42
  Speaker 1: a lot of CBS investors who would not like to
• 10:44
  Speaker 1: see that merger happened. And to the extent that you
• 10:47
  Speaker 1: know less who is the chief opponent of that marger
• 10:51
  Speaker 1: to the extent that he's displaced, I think bringing together
• 10:54
  Speaker 1: the two companies could also read some questions in the
• 10:57
  Speaker 1: minds of CBS investors as to whether at is in
• 11:00
  Speaker 1: fact something that will uh grow share all the value
• 11:03
  Speaker 1: over the long term. Well to know I'm glad you
• 11:06
  Speaker 1: mentioned Viacom. They're going to be reporting their results on
• 11:09
  Speaker 1: Thursday before the market opens. What do you expect so
• 11:14
  Speaker 1: CEO Robert Bakish. I think he's on on the on
• 11:18
  Speaker 1: the good path, right. So he's articulated his vision to
• 11:21
  Speaker 1: focus on the flagship brands, and we are actually encouraged
• 11:25
  Speaker 1: by by some of the strides that have been made
• 11:27
  Speaker 1: under his tenure. Um, you know, we're seeing some stabilization
• 11:31
  Speaker 1: in the ratings that a Nickelodeon and and and MTV
• 11:34
  Speaker 1: and v h one. Uh, there's still some challenges there,
• 11:37
  Speaker 1: to be sure. At the Paramount Studio, I think we
• 11:40
  Speaker 1: actually have been encouraged by a stemming of of the
• 11:44
  Speaker 1: the the challenges that they've faced over the last several
• 11:47
  Speaker 1: years where they've on the performed uh the other Hollywood studios.
• 11:51
  Speaker 1: So I think there's also progress there in terms of
• 11:54
  Speaker 1: the turnaround strategy. But we do expect to your question
• 11:58
  Speaker 1: that there's still some underlying issues with maintaining some operating
• 12:03
  Speaker 1: consistency on the advertising side. Uh. The company is still
• 12:08
  Speaker 1: somewhat I think disadvantaged in this highly consolidated landscape where
• 12:12
  Speaker 1: I think you see more uh, the bigger scale becomes
• 12:15
  Speaker 1: even more important, which is why I think the merger
• 12:19
  Speaker 1: with CBS is arguably much more crucial for Vatcom compared
• 12:23
  Speaker 1: to CBS. Let's talk about another merger. Tell us about
• 12:27
  Speaker 1: Disney and Century Fox. We get Disney results tomorrow after
• 12:31
  Speaker 1: the close. The shares right now hitting a new fifty
• 12:35
  Speaker 1: two week hi. The stock is up seven and a
• 12:37
  Speaker 1: half percent this year. Correct. We are still very bullish
• 12:41
  Speaker 1: on the shares of Disney. Withink the the the deal
• 12:45
  Speaker 1: with Fox which just got approved by shareholders recently. I
• 12:49
  Speaker 1: think that sets the company up very nicely to execute
• 12:53
  Speaker 1: on its direct to consumer strategy as well as the
• 12:57
  Speaker 1: advantages of scale. But I think, um, you know, the
• 13:00
  Speaker 1: elephant in the room here is going to be how
• 13:03
  Speaker 1: potentially h you know, Fox reacts to the bid for
• 13:08
  Speaker 1: for Sky, which, as you know, Comcast have loved a
• 13:11
  Speaker 1: much higher bid, and I think Fox has on until
• 13:14
  Speaker 1: Thursday too to beat that offer. I I do believe
• 13:17
  Speaker 1: that there's a very good chance that Fox can come
• 13:19
  Speaker 1: back with a higher offer for uh First Sky, which
• 13:23
  Speaker 1: could escalate the bid in war. And remember now that
• 13:26
  Speaker 1: Disney has an agreement in place, there's also the likelihood
• 13:30
  Speaker 1: we think that Disney could actually leap frog and make
• 13:33
  Speaker 1: a food beat for Sky. So there's all kinds of
• 13:35
  Speaker 1: moving parts here that will determine how, you know, the
• 13:40
  Speaker 1: Sky UH issue gets resolved, and I think that's probably
• 13:43
  Speaker 1: going to UH overshadow the results of these companies that
• 13:48
  Speaker 1: have coming up in the next couple of days or so. Well,
• 13:52
  Speaker 1: Century Fox reports on Wednesday just after the market closes.
• 13:58
  Speaker 1: What do you think comcasts UH strategic response will be
• 14:02
  Speaker 1: if they are not successful, as it looks as though
• 14:05
  Speaker 1: they will not be Fox, I wouldn't rule them out
• 14:09
  Speaker 1: as a matter of fact, Team. I would not even
• 14:10
  Speaker 1: say that they would not be successful, because I think
• 14:13
  Speaker 1: they made it pretty clear when they backed out of
• 14:15
  Speaker 1: the you know, of the chase for Fox that UM
• 14:19
  Speaker 1: Sky is now They're still focused, and I do believe
• 14:21
  Speaker 1: that's a real chance that they could come back yet
• 14:25
  Speaker 1: with a high offers. Should Disney and or Fox decide
• 14:28
  Speaker 1: to UH to top camp Comcast offer on the table,
• 14:31
  Speaker 1: I mean, Sky is an extremely strategic asset. We still
• 14:34
  Speaker 1: think that Sky is probably on balanced the better match
• 14:37
  Speaker 1: for Comcast rather than Disney, but I think expect both
• 14:42
  Speaker 1: companies to go all out because I think the Sky
• 14:45
  Speaker 1: assets are very unique skies as much as as as
• 14:50
  Speaker 1: a bona fide content provider as it is is a
• 14:52
  Speaker 1: satellite TV distributor, and the the most recent pact that
• 14:58
  Speaker 1: they just signed with the Premierly was very very compelling,
• 15:03
  Speaker 1: which makes it all the more valuable asset. Thanks very much.
• 15:07
  Speaker 1: Tuna Amobi, Senior Media Entertainment Analysts at c f r
• 15:12
  Speaker 1: A Research. What do the company's compona Arbor, how Arbor,
• 15:34
  Speaker 1: Holmes and Westwood Meets and Bound having common? They're all
• 15:38
  Speaker 1: companies that Warren Buffetts Berkshire Hathaway has acquired this year,
• 15:42
  Speaker 1: and while the names may not be familiar, that's probably
• 15:46
  Speaker 1: because they were not multibillion dollar deals. So here to
• 15:50
  Speaker 1: tell us what Warren Buffett and Berkshire Hathaway are going
• 15:52
  Speaker 1: to do with a hundred and eleven billion dollars worth
• 15:55
  Speaker 1: of cash Our own Tara La Chappelle, Boomberg opinion columnist,
• 15:59
  Speaker 1: Tara always a pleasure. Thanks for coming in, uh and
• 16:02
  Speaker 1: I just want to note to follow Tara on Twitter
• 16:05
  Speaker 1: just to go to at Tara lash L a c
• 16:09
  Speaker 1: h Alright, Tara lash what what kind of acquisition does
• 16:13
  Speaker 1: Warm Buffett need to make in order to really move
• 16:15
  Speaker 1: the needle at Berkshire Hathaway. Well, their cash is over
• 16:18
  Speaker 1: a hundred billion dollars, which has been the case for
• 16:20
  Speaker 1: a while now. I mean, obviously they need a big deal.
• 16:23
  Speaker 1: I think the challenge has been, you know, the same
• 16:25
  Speaker 1: over the past year, which is that everything is very
• 16:27
  Speaker 1: expensive compared to what a warm Buffett would like to
• 16:30
  Speaker 1: pay for deals. And I don't know if he just
• 16:32
  Speaker 1: bites the bullet and does something outside of evaluation he's
• 16:35
  Speaker 1: comfortable with, I don't know if that makes sense, or
• 16:38
  Speaker 1: does he finally give in and think about doing buy backs,
• 16:41
  Speaker 1: which I think is something investors are becoming more open
• 16:44
  Speaker 1: to as well, probably more so than the idea that's
• 16:47
  Speaker 1: been floated around of them paying a one time dividend. Now,
• 16:50
  Speaker 1: as I noted in the introduction, I mean, and I
• 16:52
  Speaker 1: was kind of kidding because, I mean I had never
• 16:54
  Speaker 1: heard of half of these companies. But uh, it's not
• 16:57
  Speaker 1: as if they've been completely out of the acquisition business, right,
• 17:01
  Speaker 1: I mean, because they bought Broun Group. They've also made
• 17:06
  Speaker 1: an offer for about fifty of Riverside Capital Global, Aerospace,
• 17:12
  Speaker 1: premium medical protection, medical liability, mutual insurance. I mean, these
• 17:16
  Speaker 1: are they making a lot of acquisitions. They're just tiny, right,
• 17:20
  Speaker 1: And I mean there was a large deal um last
• 17:23
  Speaker 1: year when they bought a steak in Flying J Pilot,
• 17:25
  Speaker 1: Flying J the stop company, which I think is a
• 17:28
  Speaker 1: really great deal for brickshere, but down the road they'll
• 17:31
  Speaker 1: be able to buy more of it. Um. It wasn't
• 17:34
  Speaker 1: you know, a fifty billion dollar transaction that's really going
• 17:37
  Speaker 1: to move the needle in the cash, But I think
• 17:38
  Speaker 1: it was something that really matched with their strategy. So
• 17:40
  Speaker 1: they're definitely active. You know, he has a lot of
• 17:42
  Speaker 1: people working for him that are tasked with looking for deals,
• 17:45
  Speaker 1: and I think there's just a lot of pressure right now,
• 17:48
  Speaker 1: not just because the cash is so high, but because
• 17:50
  Speaker 1: you know, Buffett is turning eighty eight later this month,
• 17:53
  Speaker 1: and you don't want to leave his successor with the
• 17:55
  Speaker 1: challenge of having all this cash and also trying to
• 17:58
  Speaker 1: make investors comfortable with someone other than Buffet running the company.
• 18:01
  Speaker 1: So I think he can make it a little bit
• 18:03
  Speaker 1: easier for the next in line if he can do
• 18:05
  Speaker 1: something to chip away at that cash with the deal
• 18:07
  Speaker 1: that investors really like. Well, just to note that Flying
• 18:11
  Speaker 1: J acquisition Pilot Flying JA acquisition that was only for
• 18:14
  Speaker 1: about the company right exactly, so they have the option
• 18:17
  Speaker 1: to buy more later on. But yeah, they don't. You know,
• 18:20
  Speaker 1: it's not completely in the Berkshire house. It wasn't you know,
• 18:23
  Speaker 1: the kind of deal that people were looking for, though
• 18:25
  Speaker 1: I think it was a good one. Do you get
• 18:27
  Speaker 1: the sense that investors in Berkshire Hathaway are eager for
• 18:31
  Speaker 1: warm Buffet to spend the money or are they content
• 18:34
  Speaker 1: to just sit and wait for a big market downturn
• 18:37
  Speaker 1: and see an opportunity evolve. It depends who you ask.
• 18:41
  Speaker 1: I've talked to a few different shareholders in recent weeks
• 18:43
  Speaker 1: and months about this, and I think a lot of
• 18:46
  Speaker 1: them are really patient, and then some other one, some
• 18:48
  Speaker 1: of the younger ones that are looking ahead at you know,
• 18:51
  Speaker 1: who's going to be running the company. I think they're
• 18:53
  Speaker 1: looking at it from the standpoint that I was saying
• 18:55
  Speaker 1: earlier that you know, it would be really hard for
• 18:58
  Speaker 1: someone other than Buffett to do, would deal of that size.
• 19:01
  Speaker 1: You know, he gets these deal sweeteners because of who
• 19:03
  Speaker 1: he is and because the honor it's it's sort of
• 19:06
  Speaker 1: perceived to be to be acquired by Berkshire. And I
• 19:09
  Speaker 1: don't know if it's going to be that easy for
• 19:10
  Speaker 1: his successor to to maintain that. So I think from
• 19:13
  Speaker 1: that standpoint and makes sense to do as much as
• 19:16
  Speaker 1: they can now with that money. But it's not as
• 19:18
  Speaker 1: if Berkshire Hathaway is not being opportunistic in actually selling
• 19:22
  Speaker 1: steaks as well. For example, that Philips sixties six divestiture
• 19:26
  Speaker 1: right which some people were also puzzled by that. UM
• 19:28
  Speaker 1: I was interested to see what they were going to
• 19:30
  Speaker 1: do with Kraft Hinds. I think it's getting to the
• 19:32
  Speaker 1: point where I really don't understand why Warren Buffett likes
• 19:35
  Speaker 1: the stock so much. UM I don't know why Berkshire
• 19:37
  Speaker 1: is still in it. I think that him stepping away
• 19:40
  Speaker 1: from the board, while that was mostly due to him
• 19:42
  Speaker 1: wanting to reduce his travel commitments, I think it could
• 19:44
  Speaker 1: be a precursor to them backing off of Kraft Hinds.
• 19:47
  Speaker 1: I just don't think if it never really did fit
• 19:51
  Speaker 1: the kind of Berkshire investment that we're used to seeing,
• 19:54
  Speaker 1: but he always was able to justify in what way
• 19:56
  Speaker 1: is it because it didn't give them total control? Well?
• 19:59
  Speaker 1: I think also the strategy you know, Kraft Times is
• 20:01
  Speaker 1: run by three G private equity firm. They're really good
• 20:04
  Speaker 1: at cutting costs and boosting profits. Craft Times became very
• 20:08
  Speaker 1: easily one of the most profitable companies in the food space.
• 20:10
  Speaker 1: But I think, you know, that's kind of maxing out now.
• 20:13
  Speaker 1: They're not really investing for long term growth, even though
• 20:16
  Speaker 1: they keep talking about it. And I think, you know,
• 20:19
  Speaker 1: Warren Buffett looks long term, and when you look at
• 20:22
  Speaker 1: Kraft Times, I don't know what that long term picture
• 20:25
  Speaker 1: could be. Campbell, right, I mean they could buy Campbell Soup.
• 20:28
  Speaker 1: I don't know that that does much for them. Sure,
• 20:30
  Speaker 1: they could fire a lot of Campbell's people, cut a
• 20:32
  Speaker 1: lot of costs U I'm sure they can make the
• 20:34
  Speaker 1: business leaner, but that's a temporary boost. I think, you know,
• 20:38
  Speaker 1: long term, Campbell Soup does not give them international exposure.
• 20:41
  Speaker 1: It's almost entirely North America. And then you know, on
• 20:45
  Speaker 1: top of it, it's not a growing business by any means.
• 20:47
  Speaker 1: So I don't know how this really helps them in
• 20:49
  Speaker 1: the long run. Is there a particular industry that you
• 20:53
  Speaker 1: think that Warren Buffett and Berkshire hath to Weigh are
• 20:55
  Speaker 1: focused on. I think they do. Like the consumer staples space.
• 20:59
  Speaker 1: I think companies with really strong brand names, um, you know,
• 21:02
  Speaker 1: Costco comes up a lot because Costco has this membership
• 21:06
  Speaker 1: that's almost functions like a float, and it's that kind
• 21:08
  Speaker 1: of brand, really strong brand equity that you could see
• 21:11
  Speaker 1: being something almost like the premium that is paid in
• 21:14
  Speaker 1: an insurance in exactly very similar. So I think he
• 21:17
  Speaker 1: could be drawn to that business. Um, companies like Nike
• 21:20
  Speaker 1: have come up. You know, uh, deer always comes up.
• 21:23
  Speaker 1: Steak in Apple Apple. Yes, Um, a lot of industrial
• 21:27
  Speaker 1: companies fit with the Berkshire strategy. But of course, you know,
• 21:30
  Speaker 1: as we see with Apple, his investing lieutenants could take
• 21:34
  Speaker 1: them a different direction. I mean it seems like they
• 21:35
  Speaker 1: are open to tech or consumer electronics. So I think
• 21:38
  Speaker 1: there's a lot out there. It's just prices the sticking point. Well,
• 21:42
  Speaker 1: right now, the shares of Berkshire Hathaway, the A shares,
• 21:45
  Speaker 1: they are up about five and a half percent so
• 21:49
  Speaker 1: far this year, So I have to wait and see
• 21:51
  Speaker 1: what happens. Much appreciated Tara la Chapelle are Bloomberg opinion
• 21:55
  Speaker 1: columnists covering deals and that means Berkshire Hathaway as many
• 21:59
  Speaker 1: other companies. And also once again, you can follow Tara
• 22:03
  Speaker 1: on Twitter. Go ahead, I'm gonna let you say at
• 22:05
  Speaker 1: Tara Lash. The last name is too long. Diffit into
• 22:08
  Speaker 1: Twitter handle. It is t A r A l A
• 22:12
  Speaker 1: c H. I'm pim Fox. If you believe technology skills
• 22:27
  Speaker 1: will land you a job with regular pay increases, well
• 22:31
  Speaker 1: you're gonna have to listen to Harley Lippman, the chief
• 22:34
  Speaker 1: executive and the founder of Genesis ten. This is one
• 22:37
  Speaker 1: of the nation's largest I T services and staffing firms,
• 22:41
  Speaker 1: and he joins US now. Harley Lippman, thanks very much
• 22:44
  Speaker 1: for being with us. So, if you believe that having
• 22:46
  Speaker 1: those tech skills means you're gonna have a great job
• 22:49
  Speaker 1: with regular pay increases, should you rethink that? No, not
• 22:52
  Speaker 1: at all. Actually, um, even though wages have been flat
• 22:57
  Speaker 1: for quite a while, especially because US big co operations
• 23:01
  Speaker 1: have been able to leverage volume discounts, discounts when they
• 23:05
  Speaker 1: work with vendors, and vendors provide a large number of
• 23:09
  Speaker 1: I professionals, things are going to change. They're actually wages
• 23:13
  Speaker 1: have been bottomed out and they're only going to go up. Well,
• 23:15
  Speaker 1: when you say wages have bottomed out, why have wages
• 23:19
  Speaker 1: in the tech sector been under pressure? Well, UH companies
• 23:23
  Speaker 1: have been able to keep pressure on UH. As I
• 23:28
  Speaker 1: mentioned a moment ago on vendors who provide I T professionals,
• 23:31
  Speaker 1: they've been able to keep pressure on wages because they
• 23:34
  Speaker 1: could leverage volume business. If you're doing business with a
• 23:37
  Speaker 1: fortune company and you're providing them with I T professionals,
• 23:42
  Speaker 1: they will leverage that will say well, if you have
• 23:44
  Speaker 1: hundreds of people here, we want a really big discount.
• 23:47
  Speaker 1: So they keep the wages low and they keep the
• 23:50
  Speaker 1: rates low, and vendors have been seeing margin compression. So
• 23:54
  Speaker 1: business for vendors has hasn't been as good as it
• 23:57
  Speaker 1: used to be, but now wages are going to go
• 23:59
  Speaker 1: up the course they're seeing turnover. They need the skills,
• 24:02
  Speaker 1: and especially in emerging technologies if you talk about artificial intelligence,
• 24:07
  Speaker 1: we're really going to see the results of that probably
• 24:10
  Speaker 1: in about five years from now, but until then you're
• 24:13
  Speaker 1: going to need I T professionals to build out the
• 24:17
  Speaker 1: software to support artificial intelligence. And artificial intelligence simply stated,
• 24:22
  Speaker 1: is the ability to do things on computers that humans
• 24:26
  Speaker 1: were previously doing. So what kinds of specific technology skills
• 24:32
  Speaker 1: are going to be in demand? Well, clearly UM cybersecurity
• 24:36
  Speaker 1: is high up on the list. Analytics, UM, things like DevOps.
• 24:41
  Speaker 1: These are technical terms but there are a lot of
• 24:43
  Speaker 1: skills learning Java, learning Python, uh, that is going to
• 24:49
  Speaker 1: be in high demand. So things will just change. Even
• 24:53
  Speaker 1: if you learn something in technology and a new emerging
• 24:56
  Speaker 1: one comes about, you could still learn it. So there's
• 25:00
  Speaker 1: always going to be a need for trained I T professionals.
• 25:04
  Speaker 1: Just keep your eye on where the emerging trends are going. Well,
• 25:07
  Speaker 1: you mentioned artificial intelligence. Are there specific types of programming
• 25:13
  Speaker 1: skills that are going to be necessary? Yes, Java and Python.
• 25:17
  Speaker 1: So for people who are taking computer classes or studying
• 25:21
  Speaker 1: computer science, I'm sure they know that, but those are
• 25:24
  Speaker 1: the two areas to focus on learning Python and Java.
• 25:27
  Speaker 1: There's a big future there. What about the use of
• 25:31
  Speaker 1: H one B visus the ability to attract foreign talent
• 25:35
  Speaker 1: in the United States and technology, Well, the companies have
• 25:39
  Speaker 1: been using H one B visas because that has allowed
• 25:43
  Speaker 1: them to keep wages at a low level. But now
• 25:48
  Speaker 1: companies are not taking people with H one visas because
• 25:52
  Speaker 1: of the uncertainty. They don't know if the visas will
• 25:54
  Speaker 1: be renewed, they don't know if they could get someone
• 25:57
  Speaker 1: of visa. It's a serious issue now. So we see
• 26:01
  Speaker 1: this among our clients where they want companies to replace
• 26:06
  Speaker 1: the h n D visa people because they don't want
• 26:08
  Speaker 1: them to stay on their premises, get involved in really
• 26:11
  Speaker 1: critical projects, and then their visas are coming out for
• 26:15
  Speaker 1: renewal and they have to go back to their home
• 26:17
  Speaker 1: country and they can't get back because Lego's government will
• 26:20
  Speaker 1: not renew the visas. Huge uncertainty. And if you and
• 26:24
  Speaker 1: and in technology, you need consistency and stability above all
• 26:28
  Speaker 1: predictability because you have deadlines, you have to get work done.
• 26:32
  Speaker 1: You can't depend on someone who may or may not
• 26:35
  Speaker 1: have to go back to their home country. Now, the
• 26:37
  Speaker 1: kinds of skills that you describe, software engineering, application development,
• 26:42
  Speaker 1: as well as app support and quality assurance, where are
• 26:46
  Speaker 1: people getting the skills in order to do that? Are
• 26:49
  Speaker 1: they getting that from university programs or is that something
• 26:53
  Speaker 1: that they have to then go out and get more
• 26:55
  Speaker 1: specialized consideration a little bit of both. You know, after
• 26:59
  Speaker 1: the the big recession of two thousand eight, American companies
• 27:04
  Speaker 1: by and large cut training, so people now have to
• 27:09
  Speaker 1: get that on their own. There's a big gap now,
• 27:12
  Speaker 1: and that presents real opportunity for people who really want
• 27:15
  Speaker 1: to get into the tech sector because that they could
• 27:18
  Speaker 1: get some training and there are vendors that provide it,
• 27:21
  Speaker 1: like we do a Genesis Tent. We provide training and
• 27:25
  Speaker 1: we provide domestic outsourcing. So that's what people could get trained.
• 27:29
  Speaker 1: So if they could get that training on their own
• 27:31
  Speaker 1: a little bit or through a vendor like Genesis Tent,
• 27:34
  Speaker 1: then they could take that and leverage that they could
• 27:36
  Speaker 1: get very good jobs at companies. Now you mentioned artificial intelligence,
• 27:41
  Speaker 1: what about robotics. Is that also an area that should
• 27:45
  Speaker 1: be trained for now? Oh? Yeah, that's the future of
• 27:47
  Speaker 1: costs robotics AI. That's the super hot area. But it's
• 27:51
  Speaker 1: not there yet. So a lot of people are are
• 27:55
  Speaker 1: getting caught up in this. And while it's important to
• 27:58
  Speaker 1: learn the skills as I ment and earlier learning Java,
• 28:01
  Speaker 1: learning Python will put you in a strong position for
• 28:04
  Speaker 1: artificial intelligence to your good points, it's also for robotics
• 28:08
  Speaker 1: very it's basically the same thing. Now there's a geographic
• 28:12
  Speaker 1: element to this as well, Is there not you're headquartered
• 28:15
  Speaker 1: in New York, you have operations in Miami Beach. Is
• 28:20
  Speaker 1: there a geographical tilt towards the coasts in terms of
• 28:24
  Speaker 1: where the talent is not at all? All over the
• 28:27
  Speaker 1: Hinded States and all over the world, Technology moves at
• 28:30
  Speaker 1: such speed that it's needed everywhere. It's needed in Des Moines, Minneapolis, Milwaukee,
• 28:35
  Speaker 1: Kansas City, Dallas, Atlanta. There's no one hub that is
• 28:40
  Speaker 1: using it, no one else is. The world is indeed
• 28:42
  Speaker 1: flattened that way, So it doesn't matter really where you are,
• 28:46
  Speaker 1: and that's the beauty of technology. Like like you know,
• 28:49
  Speaker 1: cell phones, emails, text, WhatsApp could be anywhere in the
• 28:52
  Speaker 1: world and communicate. It's the same thing with these technology skills.
• 28:56
  Speaker 1: But aren't costs related to geographic is is? Yes, you're
• 29:01
  Speaker 1: quite right on that. So a lot of companies are
• 29:04
  Speaker 1: looking to have more work done in lower cost areas
• 29:08
  Speaker 1: in the United States, the Midwest in particular, where that's
• 29:12
  Speaker 1: also rich in talent. But at the same time, there
• 29:15
  Speaker 1: are companies that have headquarters in major cities like New
• 29:18
  Speaker 1: York City, Atlanta, Dallas, and they need people there. So
• 29:22
  Speaker 1: it's a bit of a blend. You'll have some work
• 29:25
  Speaker 1: being done on shore but off site, as we say,
• 29:29
  Speaker 1: and you'll have work being done at the corporate headquarters,
• 29:31
  Speaker 1: which will be in the big cities. Now, Harley, just
• 29:35
  Speaker 1: give you about twenty seconds here. Employers around the United
• 29:38
  Speaker 1: States they posted more than three hundred thousand tech jobs.
• 29:41
  Speaker 1: This is in the month of May, for example, but
• 29:43
  Speaker 1: yet they only filled under nine thousand of those jobs.
• 29:47
  Speaker 1: What's the biggest lack of tech savvy jobs that are available?
• 29:52
  Speaker 1: What's the biggest vacuum here? It's it's interesting. I know
• 29:57
  Speaker 1: it's a it's a bit odd, isn't it. But I'll
• 30:00
  Speaker 1: given that there's a shortage, and you know, the unemployment
• 30:03
  Speaker 1: rate continues to go down to record levels and they're
• 30:05
  Speaker 1: not hiring basically because employers are looking for everything. If
• 30:09
  Speaker 1: they want fifteen things that someone has and you present
• 30:12
  Speaker 1: them with with twelve or thirteen, they may not take them.
• 30:16
  Speaker 1: They'll send the work off shore. It's just kind of
• 30:18
  Speaker 1: an easy but a false reaction and decision on their part.
• 30:22
  Speaker 1: It's got It'll catch up to them. Thanks very much.
• 30:25
  Speaker 1: Harley Lippman is the chief executive and the founder of
• 30:29
  Speaker 1: Genesis ten. Thanks for listening to the Bloomberg P and
• 30:35
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 30:38
  Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm
• 30:42
  Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on
• 30:46
  Speaker 1: Twitter at Lisa Abramo. It's one before the podcast You
• 30:49
  Speaker 1: can always catch us worldwide on Bloomberg Radio.