Latest / Bloomberg Intelligence / Libya Conflict Is Hugely Overlooked Issue On Oil Capacity: Wald

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Libya Conflict Is Hugely Overlooked Issue On Oil Capacity: Wald · Bloomberg Intelligence

0:05
Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
0:08
Speaker 1: Along with my co host Lisa Bramowitz. Each day we
0:11
Speaker 1: bring you the most important, noteworthy, and useful interviews for
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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 m L
0:20
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Oil
0:32
Speaker 1: prices are just a tick down today ahead of that
0:36
Speaker 1: all important Opeque meeting. Will they all come together, have
0:40
Speaker 1: a Kumbaya moment and have an agreement that doesn't end
0:44
Speaker 1: up with Saudi Arabia on one side and Iran and
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Speaker 1: Brazil on the other. Joining us now, Dr Ellen Walt,
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Speaker 1: President of Transversal Consulting. She has an energy industry and
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Speaker 1: Middle East expert. She is also author of Saudi Inc.
0:58
Speaker 1: Which takes a look at Saudi Aramco and the family
1:01
Speaker 1: that controls the multi trillion dollar enterprise. Dr will thank
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Speaker 1: you so much for joining us. What do you expect
1:07
Speaker 1: to happen at the upcoming meeting which takes place in
1:11
Speaker 1: less than twenty four hours. I think that right now
1:14
Speaker 1: we are leaning towards some sort of agreement for a
1:19
Speaker 1: across the board production increase, and that's probably one of
1:22
Speaker 1: the reasons why we're seeing oil taking downwards. What's interesting
1:26
Speaker 1: right now is that Saudi Arabia is floating proposals of
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Speaker 1: potential increases of anywhere between eight hundred thousand barrels per
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Speaker 1: day to one million barrels per day. Now, the key here, though,
1:41
Speaker 1: is that even if that is pushed through on paper
1:44
Speaker 1: in practice, because countries like Venezuela and Iran and Angola
1:49
Speaker 1: can't actually increase their production, they're just physically and financially
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Speaker 1: unable to, that wouldn't actually bring that much oil back
1:58
Speaker 1: onto the market, and increase of one point five million
2:02
Speaker 1: barrels per day would only add eight hundred thousand barrels
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Speaker 1: per day. Does any potential agreement also have political implications
2:10
Speaker 1: when it comes to Iran and Saudi Arabia. Yeah, and
2:14
Speaker 1: this is the big, the big question. Iran has come
2:17
Speaker 1: into this meeting kind of with its UH pistols blazing.
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Speaker 1: It said, no agreement, It's not going to agree to
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Speaker 1: any kind of production increase. It's going to veto anything
2:29
Speaker 1: that that's put forward. And so it really does that
2:32
Speaker 1: they really are pitted kind of across from each other. Now,
2:35
Speaker 1: what I think is likely that we will see is
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Speaker 1: some sort of agreement that allows Iran with with wording
2:43
Speaker 1: that allows Iran to say, hey, we're not really increasing production,
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Speaker 1: it's just we're moving back to full compliance as opposed
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Speaker 1: to under compliance, and then to satisfy Russia on the
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Speaker 1: other hand, which is really pushing for a big increase.
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Speaker 1: They'll have language where Russia can kind of say to
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Speaker 1: it's oil companies, hey, look, you can increase production, all right.
3:03
Speaker 1: This is this is headspinning to me on many levels.
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Speaker 1: Number one, uh, the question of Iran and Venezuela posing
3:10
Speaker 1: output increases or sort of lifting some of the caps
3:14
Speaker 1: simply because that cannibalizes from their own business because they're
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Speaker 1: unable to make the additional production. I'm struggling to see
3:20
Speaker 1: how it factors into the price of oil, because, as
3:24
Speaker 1: you were saying, any increase will be offset by decreases elsewhere.
3:29
Speaker 1: Do you think that the oil market is being overly
3:32
Speaker 1: sensitive right now, given how complicated this is, in the
3:35
Speaker 1: unlikelihood that it would be a rush of oil into
3:38
Speaker 1: the market, exactly, I think the oil market is very
3:41
Speaker 1: very sensitive right now. Um, any news about, for example,
3:45
Speaker 1: news that China is considering putting tariffs on American oil.
3:50
Speaker 1: Any news about any oil refiners deciding to drop Ivanni oil,
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Speaker 1: it all kind of sends shock waves through the prices.
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Speaker 1: Everyone is extremely sensitive right now, and that's why every
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Speaker 1: kind of a bit of news that comes out seems
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Speaker 1: to kind of rock the prices. What about the addition
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Speaker 1: of oil, let's say, from a country as such as Libya,
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Speaker 1: Will that have any effect? Libya is a huge issue
4:16
Speaker 1: that I think is really being underlooked right now. The
4:19
Speaker 1: fighting in Libya has taken out a significant number of
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Speaker 1: Libya's a storage capacity to store oil for export. And
4:29
Speaker 1: even though um the Libyan government has kind of taken
4:32
Speaker 1: retaken control of uh its oil, it's going to take
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Speaker 1: a while to get its oil exports back up to
4:39
Speaker 1: the levels where they were. And apparently some of these
4:42
Speaker 1: UH some more storage fsacilities have caught on fire. This
4:44
Speaker 1: is a huge, huge issue that could really send Libyan
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Speaker 1: production into a tailspin and mean that the market is
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Speaker 1: really going to be undersupplied going into the second half
4:55
Speaker 1: of Yeah, you know, I'm just struck by sort of
4:59
Speaker 1: the power and cloud of OPEC. Are we seeing the
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Speaker 1: decline of that? And is this cartel basically drastically losing
5:07
Speaker 1: its power. You know, everyone is kind of the you know,
5:11
Speaker 1: been saying, oh, OPEC is dead two years ago when
5:14
Speaker 1: they weren't able to really lift prices. They were they
5:17
Speaker 1: were calling OPEC, you know, a relic, and now we're
5:20
Speaker 1: seeing everyone has basically defended on opaque headquarters just to
5:25
Speaker 1: see what they're going to decide. I think one of
5:27
Speaker 1: the reasons they've become more powerful, though, is this relationship
5:32
Speaker 1: that they have with Russia. Russia's the largest oral producer
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Speaker 1: out there, and without that relationship they really wouldn't have
5:39
Speaker 1: the kind of clouds that we're seeing now. I guess
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Speaker 1: the reason why I ask that is because when you
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Speaker 1: think about Iran coming in with their guns a blazing
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Speaker 1: uh and saying we're not going to sign off on
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Speaker 1: any increase to output, they have no recourse other than
5:53
Speaker 1: sort of the mirage of unity of OPEC, right, I
5:55
Speaker 1: mean they have no leverage here. Yeah, OPAQ is not
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Speaker 1: OPEC is not UM you know, a majority rules organization,
6:02
Speaker 1: but they do have ways that certain countries can either
6:05
Speaker 1: veto ideas or that other countries can override it. But
6:09
Speaker 1: really what we're looking at is UM Saudi Arabia's oil
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Speaker 1: minister is a very talented negotiator, and he's been described
6:17
Speaker 1: as someone who just doesn't give up, whereas the previous
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Speaker 1: oil minister, Alian the Emi, would sometimes get very frustrated
6:24
Speaker 1: and you know, just decide it's not worth it and
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Speaker 1: walk out of the room. All Fala is known as
6:28
Speaker 1: exceptionally patient and he will uh someone someone uh. One
6:33
Speaker 1: of my sources told me that he will talk and
6:35
Speaker 1: talk and talk until he's basically bloodened you into agreeing
6:39
Speaker 1: with him, because he's talked so much. And so I
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Speaker 1: think we can't discount that and his ability to bring
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Speaker 1: this group together basically just through the power of continued negotiation.
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Speaker 1: What kind of patients are countries that are supporting Venezuela
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Speaker 1: going to have if Venezeuela continues on its current economic path.
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Speaker 1: It's really a terrible situation for Venezuela. And it's very
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Speaker 1: sad because originally OPEC was formed as kind of a
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Speaker 1: solidarity movement for these producing countries who really were relying
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Speaker 1: on Western companies to produce their oil, and it was
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Speaker 1: designed for them to be able to kind of stand
7:19
Speaker 1: up to these companies together. And now that idea has
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Speaker 1: kind of fallen apart in Venezuela has really been left
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Speaker 1: by the wayside. It's almost as if they don't care
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Speaker 1: really what is happening in Venezuela and kind of see
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Speaker 1: it as look at it's your own fault. All right, Well,
7:36
Speaker 1: we're going to leave it there. And I know that
7:38
Speaker 1: you're going to be following this opaque meeting for us.
7:41
Speaker 1: Much appreciated as always. Dr ellen Wald is the president
7:44
Speaker 1: of a transversal consulting energy industry and also Middle East expert,
7:50
Speaker 1: and she can be followed on Twitter at energies d Economy.
7:54
Speaker 1: That's e N E R g z D Economy. So
7:59
Speaker 1: I a you to do that right now. It is
8:16
Speaker 1: a seventy one billion dollar deal. This is a Walt
8:19
Speaker 1: Disney's offer for twenty one century Foxes entertainment assets. And
8:24
Speaker 1: here to tell us more about the battle in the
8:26
Speaker 1: world of media is Porter bid, managing partner Media Tech
8:29
Speaker 1: Capital Partners, and you can follow Porter on Twitter at
8:33
Speaker 1: Porter three. Okay, Porter three, tell us why are these
8:38
Speaker 1: assets so valuable to the long term strategy of Walt
8:43
Speaker 1: Disney and Bob Iger. Well, Bob Iger has been late
8:47
Speaker 1: to the game in over the top content. He's still
8:50
Speaker 1: selling most of Disney's product to the legacy television networks
8:56
Speaker 1: cable industry, and he wants to go over the top,
9:00
Speaker 1: wants to take on Netflix and everybody else who's streaming
9:03
Speaker 1: and acquiring the content that one century Foxes entertainment assets
9:08
Speaker 1: represent gives him an unassailable cache of huge, huge, popular
9:14
Speaker 1: content to mind. And Disney has proven that they can
9:17
Speaker 1: take Marvel or Pixar or Lucas Films product and turn
9:22
Speaker 1: it into a ten times bigger business than it was
9:26
Speaker 1: as a standalone, and they'll do the same thing with
9:28
Speaker 1: Fox Porter. When we were talking ahead of this segment,
9:31
Speaker 1: you said that at the beginning of next year, Walt
9:34
Speaker 1: Disney Company is going to launch a Netflix killer. It's
9:39
Speaker 1: it's going to be a net A Disney streaming channel. Uh. Priced,
9:44
Speaker 1: We don't know, but if they're smart, they will price
9:47
Speaker 1: it at at comparable pricing seven a month to Netflix,
9:51
Speaker 1: or maybe even a discount for the first year or
9:54
Speaker 1: two to build up traffic. Bob Iger has has made tentative,
10:00
Speaker 1: unsuccessful attempts to get into the streaming business. Now he's
10:05
Speaker 1: set everything he's got on the table towards building a
10:09
Speaker 1: Netflix Killer and making Disney the over the top champion
10:13
Speaker 1: in the world. One thing that strikes me is that
10:15
Speaker 1: coming with this, Disney will probably pull all of its
10:19
Speaker 1: content off of Netflix, which is currently available to people
10:22
Speaker 1: who subscribe to Netflix. Correct, without question. There are contractual
10:27
Speaker 1: hurdles that Disney has to get over some some of
10:29
Speaker 1: the content that they licensed to Netflix has a year
10:33
Speaker 1: or two to run. But as soon as those contracts
10:35
Speaker 1: are over, you can bet Disney won't show up anywhere
10:39
Speaker 1: on Netflix. Disney has, of course ESPN, ABC all the
10:45
Speaker 1: film content that you just described. Fox has Star India
10:51
Speaker 1: FS one. If you want to watch the World Cup,
10:53
Speaker 1: you're watching. Fox also got FX Network, National Geographic, the
10:57
Speaker 1: film division, the television division, and Sky. Can they put
11:01
Speaker 1: it all together. That's what Bob Iger's grand plan is.
11:05
Speaker 1: He wants to take Disney global. They they sell theme
11:09
Speaker 1: park and merchandise and and tickets in Europe and Asia
11:14
Speaker 1: and China, but they don't really have a viable footprint globally.
11:19
Speaker 1: That's that's what the Fox assets and Sky, which is
11:23
Speaker 1: a critical part of this deal and is very likely
11:26
Speaker 1: to cost nearly as much as the Century Entertainment assets themselves.
11:31
Speaker 1: You know it sounds like it's obviously a huge win
11:34
Speaker 1: for Bob Iger to get the Fox assets, and he's
11:37
Speaker 1: obviously willing to pay quite a bit for them seventy
11:40
Speaker 1: one point three billion dollars, as my co host was
11:43
Speaker 1: saying earlier in Fox. Um, I'm just wondering, at what
11:46
Speaker 1: point do people start to worry that they are overpaying,
11:50
Speaker 1: given that there is a bitting war going on with Comcast. Well,
11:53
Speaker 1: the problem with saying anybody is overpaying is what is
11:58
Speaker 1: the price? What is the value you? It's it's not
12:01
Speaker 1: really what it costs, it's what you can create out
12:04
Speaker 1: of it. And uh, Disney has has dominated the content
12:09
Speaker 1: and film industry over the last several years. Last year
12:12
Speaker 1: they represented almost of the profits of all of the
12:16
Speaker 1: movie studios in the world. So they're going to do
12:20
Speaker 1: the same thing increase and not just incrementally, but gigantically
12:25
Speaker 1: the profit potential that the Fox assets they're acquired, they
12:28
Speaker 1: will acquire. So basically, just to let I understand this,
12:30
Speaker 1: the the idea here is if you have enough of
12:33
Speaker 1: a critical mass, people cannot live without them, and that
12:37
Speaker 1: all of that content that people have gotten used to
12:39
Speaker 1: being able to stream elsewhere, they will not be able
12:41
Speaker 1: to get except directly from Disney, which will undermine the
12:45
Speaker 1: business model of Netflix. That that's exactly right. And Disney
12:49
Speaker 1: has existed in the legacy media world on retransmission rights
12:55
Speaker 1: and contracts with cable and and UH tradition television networks
13:01
Speaker 1: for their content that has eroded. Everybody looked at the
13:07
Speaker 1: decline in in viewers and ESPN and that had a
13:11
Speaker 1: big impact on Disney's share price over the last eighteen months.
13:15
Speaker 1: They want to control the director consumer facing that their
13:19
Speaker 1: content can generate. They don't want to depend on old media.
13:23
Speaker 1: Ten years from now, we won't even have a cable
13:26
Speaker 1: television system. All the cable companies will be going over
13:28
Speaker 1: the top. I'm glad you mentioned stock prices because if
13:32
Speaker 1: you compare what investors in Comcast have done to their stock,
13:38
Speaker 1: it's down seventeen so far this year, So clearly they're
13:41
Speaker 1: not dying to have this deal come through. On the
13:45
Speaker 1: other hand, Walt Disney shares basically unchanged. That's right. Why
13:50
Speaker 1: do you believe investors in Comcast feel so, let's say
13:55
Speaker 1: negatively about this potential. Well, if if this deal were
13:58
Speaker 1: to go to Comcast, UH, they would take on a
14:01
Speaker 1: hundred and seventy billion dollars of new debt. They're already
14:05
Speaker 1: well over leveraged, and investors don't like that. And I
14:09
Speaker 1: think that that's a serious problem with Brian Roberts all
14:12
Speaker 1: cash offer. The interesting thing it's not been made very
14:15
Speaker 1: clear by the media. The interesting thing about Disney's new
14:20
Speaker 1: offer is it on the surface, it appears to be
14:23
Speaker 1: half cash and half stock, but Disney put a rider
14:27
Speaker 1: in there that if any shareholder decides to take it
14:31
Speaker 1: in all stock, he can, and certainly the Murdoch interests
14:35
Speaker 1: are going to take all all stock because one of
14:38
Speaker 1: Rupert's legacies is I want to be the largest shareholder
14:41
Speaker 1: in Disney the We're the biggest entertainment company in the world,
14:45
Speaker 1: and taxes and no taxes right until unless he sells him.
14:49
Speaker 1: I'm glad you brought up stock prices because Netflix, meanwhile,
14:52
Speaker 1: which you know we're saying, is going to pay some
14:55
Speaker 1: stiff competition. Netflix shares at record highs eighteen dollars share.
15:01
Speaker 1: What do you think is going to happen in Netflix?
15:02
Speaker 1: If Disney goes through it there it's a momo stock.
15:06
Speaker 1: It just keeps going up because everybody says they keep
15:10
Speaker 1: adding subscribers, but they look at the cash flow it's diminimous,
15:14
Speaker 1: and look at the increasing content costs that they're having
15:18
Speaker 1: to budget to keep those subscribers coming on board. It's
15:23
Speaker 1: not a sustainable business model, and the market is taking
15:26
Speaker 1: advantage of the momentum um. They They are very good
15:30
Speaker 1: at marketing, they're very good at at selling a few
15:34
Speaker 1: original titles that have massive appeal. But what are they
15:38
Speaker 1: going to do when they run out of hits and
15:40
Speaker 1: they can't keep doing it. The odds against making hits
15:44
Speaker 1: in Hollywood for the last hundred years have been two
15:47
Speaker 1: out of ten, break even in one out of ten
15:49
Speaker 1: as a blockbuster. What happens the other nine? Most of
15:51
Speaker 1: those end up in the dumper at Netflix. Quarter bit,
15:55
Speaker 1: thank you so much for being with us. Highly illuminating
15:58
Speaker 1: porter by managing partner at Media Tech Capital Partners in
16:02
Speaker 1: New York. It looked like perhaps things were coming down
16:20
Speaker 1: for Italy after their bond yields blew out just weeks ago,
16:26
Speaker 1: but today, well the turmoil is back. Joining us now
16:29
Speaker 1: to talk about that is Alberto Gallo. He's partner and
16:31
Speaker 1: portfolio manager for the Algebras Macro Credit Fund that Algebras
16:36
Speaker 1: Investments Limited. He's also a Bloomberg opinion columnist. Alberto, thank
16:40
Speaker 1: you so much for joining us. So this latest hiccup
16:43
Speaker 1: is coming after two prominent euroskeptics were handed key roles
16:47
Speaker 1: in the Italian parliament. Do you think that the hiccup
16:52
Speaker 1: today is a more longer lasting kind of concern that
16:57
Speaker 1: will cause investors to continue just to withdraw from the nation.
17:02
Speaker 1: Good morning. I do think that the situation will remain volatile,
17:06
Speaker 1: and simply because the spending plans are very ambitious from
17:10
Speaker 1: the from the Italian government. So you're looking at the
17:13
Speaker 1: potential plant spending of a hundred billion euros, which probably
17:16
Speaker 1: will be revised down but still unfunded by tax raises.
17:21
Speaker 1: So we think the short term probability of euro exit.
17:25
Speaker 1: You know, all these fears of our weekend type of
17:29
Speaker 1: it are a bit overdone, but the depths it spending
17:31
Speaker 1: is still a problem in an environment where you know,
17:34
Speaker 1: Europe isn't really focusing on growth, so um, it's good
17:38
Speaker 1: to think about growth, but the depth spending plans they
17:41
Speaker 1: have are excessive. So Alberta, when does this hiccup turn
17:45
Speaker 1: into asset reflux? We've already seen a repricing in the
17:51
Speaker 1: Italian BTPs and some of the assets, some of the
17:55
Speaker 1: other assets like stocks and bonds. The reality is on
17:59
Speaker 1: the ground on the corporates. Are the corporates that have
18:02
Speaker 1: survived the crisis. Um, you know, around one in four
18:06
Speaker 1: small or medium businesses have defaulted throughout the crisis. So
18:10
Speaker 1: the remaining corporates are much stronger. But obviously, you know,
18:15
Speaker 1: you know, the situation, a crisis, situation m scares investors,
18:19
Speaker 1: and we have seen a repricing across all assets, but
18:22
Speaker 1: we see fundamental still strong. On the ground. Um, what
18:25
Speaker 1: we see is political volatility and unfortunately, you know, that's
18:28
Speaker 1: something that will continue in Europe because Europe needs to change.
18:32
Speaker 1: Europe needs to change the wards a more cohesive union
18:35
Speaker 1: that focuses on growth, not just on austerity. And I
18:37
Speaker 1: think you know, even in Germany, um Angela Merkel is
18:41
Speaker 1: getting the message with some dwindling in her contensus. So
18:47
Speaker 1: here here's what's so amazing to me. You say that
18:49
Speaker 1: there's been a repricing, and certainly there has. In two
18:52
Speaker 1: year Italian yields are now gasped less than ninety basis
18:57
Speaker 1: points zero point nine percent. Right, this is still nothing
19:00
Speaker 1: mama mama miya. Indeed, so repricing to even uh, you know,
19:05
Speaker 1: extremely low levels from unbelievably low levels. You do have
19:10
Speaker 1: to wonder, given the fact that the e c B
19:12
Speaker 1: has basically demonstrated its willingness to backstop this market, given
19:16
Speaker 1: the fact that you are seeing other peripheral regions also
19:19
Speaker 1: experience weakness on the heels of what's going on in Italy,
19:23
Speaker 1: is this a buying opportunity for you as the head
19:25
Speaker 1: of a macro credit fund. We think that there are
19:30
Speaker 1: some things in credit that are becoming interesting. Um. We
19:34
Speaker 1: are still looking at UM corporate credit and some banks
19:39
Speaker 1: in countries that remain very stable from a political perspective,
19:43
Speaker 1: like Spain or Portugal, And tonight we'll learn the Eurogroup
19:48
Speaker 1: solutions for Greece, which has been working on reforms for
19:51
Speaker 1: a very long time and he's waiting for debt relief
19:54
Speaker 1: and there's there's very likely to be a an extension
19:57
Speaker 1: of maturities for the loans degree. So when you see
20:01
Speaker 1: indiscriminate selling across the whole of Europe, every risk cast
20:05
Speaker 1: at selling off because of one country, because of one
20:08
Speaker 1: political headline. Yeah, that creates some um, some buying opportunities. Uh,
20:13
Speaker 1: in Italy, we do think the volatility will continue in
20:16
Speaker 1: the long end of the curves of five year plus
20:19
Speaker 1: ten year plus BTPs, so you know, it's a bit
20:22
Speaker 1: early to to step in. But in other countries there
20:25
Speaker 1: are some opportunities, so you were saying incorporate debt in
20:30
Speaker 1: perhaps Spain or Portugal. UM are the particular industries that
20:35
Speaker 1: you see as being immune to some of the political
20:38
Speaker 1: discussions and seeing opportunities in Generally, the volatility will hit
20:46
Speaker 1: every um, every credit in these countries. In Europe, UM,
20:51
Speaker 1: the corporates have been historically much more resilient to sovereign
20:56
Speaker 1: to sovereign volatility, because corporates have the levers, they have
21:01
Speaker 1: good balances, and many of them could survive even the
21:04
Speaker 1: worst case of a euro exit. The banks are more
21:07
Speaker 1: connected to the sovereign still in Europe, even though they've
21:10
Speaker 1: solved a lot of sovereign debt. UM Greece has been
21:13
Speaker 1: in the sovereign market. Greece has been very resilient in
21:17
Speaker 1: the last few weeks because again it's going to benefit
21:20
Speaker 1: from a potential extension of maturities. And Grease remains the
21:23
Speaker 1: widest name, the widest sovereign debt in Europe with you know,
21:29
Speaker 1: a ten year yield of four two percent in euros,
21:31
Speaker 1: which is equivalent to around seven percent seven plus percent
21:34
Speaker 1: in dollars. So it's trading still like an emerging market. UM.
21:38
Speaker 1: So we we think still Greece is good opportunity given
21:42
Speaker 1: the UM you know, the E s M European stability
21:46
Speaker 1: mechanisms just declare that they have satisfied all the reforms
21:51
Speaker 1: they needed to do to get help. UM. So we
21:54
Speaker 1: think Grease is reprising towards the same trajectory as as Portugal.
21:59
Speaker 1: But generally speaking, UM, we continue to see political risk
22:03
Speaker 1: populism in Europe and in other countries creating polatility for investors.
22:07
Speaker 1: And we've been working on strategies that are short like
22:10
Speaker 1: a like a new fund that we launched a few
22:13
Speaker 1: days ago. Thank you very much. Alberto Gallo as a
22:16
Speaker 1: partner and portfolio manager at Algebra's UK Limited, talking about
22:21
Speaker 1: corporate debt in Europe. So we have been talking quite
22:38
Speaker 1: a bit about the Supreme Court decision. It is one
22:41
Speaker 1: that is absolutely moving markets. Basically, it frees states and
22:45
Speaker 1: local governments to start collecting billions of dollars in sales
22:48
Speaker 1: tax from internet retailers that don't currently charge tax to
22:52
Speaker 1: their customers. Sure of it and joins us now. She
22:55
Speaker 1: is a Bloomberg opinion columnist covering all things tech. I'm
22:58
Speaker 1: looking at some of the bigger decla lines Overstock dot
23:01
Speaker 1: Com down more than one point three percent, Amazon down
23:04
Speaker 1: nearly a percent, eBay down two percent. Uh. Just how
23:08
Speaker 1: much does this potentially bite into the business of these
23:13
Speaker 1: online behemoths. I don't know. I think it's probably not
23:18
Speaker 1: that big of a deal, particularly for the largest e
23:21
Speaker 1: commerce companies like Amazon. So the the issue is that Amazon,
23:27
Speaker 1: for example, already charges sales tax um in for for
23:32
Speaker 1: products that it sells directly two shoppers um on any
23:36
Speaker 1: in any state that charges sales tax, So that doesn't
23:40
Speaker 1: that doesn't do anything for Amazon. But there are also
23:44
Speaker 1: about half the sales on on Amazon are coming from
23:46
Speaker 1: these independent merchants that use Amazon as a sales channel,
23:50
Speaker 1: and they may or may not charge sales tax. So
23:53
Speaker 1: now they'll have to be probably some enforcement mechanisms on
23:56
Speaker 1: sales tax in in on those independent merchants. But look,
24:01
Speaker 1: Amazon and eBay, to their wealthy companies, they can afford it.
24:04
Speaker 1: The burden though, falls on these smaller players, these independent merchants,
24:09
Speaker 1: these mom and pop shops that are now going to
24:11
Speaker 1: have to figure out the tangle of US sales tax
24:14
Speaker 1: rules in every state in the country. And it's worth
24:16
Speaker 1: noting right that they are not charging it, they're just
24:18
Speaker 1: collecting it. That's right, right. And the reason the reason
24:21
Speaker 1: I say this is just because that feeds into your
24:23
Speaker 1: your point about third party sellers that use Amazon or
24:28
Speaker 1: even maybe Facebook as a platform in order to sell,
24:33
Speaker 1: and now they have to compete with the stores that
24:36
Speaker 1: are around the corner. Perhaps that's right, and I look,
24:39
Speaker 1: it's it's there's been some research on the impact of
24:44
Speaker 1: what happens to the sales of an online retailer when
24:48
Speaker 1: they begin to charge sales tax. At least from what
24:50
Speaker 1: I've seen, it's a little bit of a mixed bag.
24:53
Speaker 1: It's not like they've already run out of town all
24:56
Speaker 1: of the independence, right, I mean, because this has been
24:59
Speaker 1: going since Amazon started in business, and that was a
25:02
Speaker 1: way to beat the competition because it actually took less
25:06
Speaker 1: money out of the consumer pocket. It was I mean, look,
25:08
Speaker 1: it's it's a good point that Amazon for many years
25:11
Speaker 1: fought paying sales tax, uh, in part because I mean
25:14
Speaker 1: It's stated rationale was the company wanted there to be
25:18
Speaker 1: a national rule about sales tax. En. That's kind of
25:20
Speaker 1: state by state hodgepodge, But you're right it did give
25:23
Speaker 1: Amazon an advantage, at least on paper, that it's it's
25:27
Speaker 1: bottom line for shoppers was less expensive than Walmart or
25:31
Speaker 1: whoever was forced to charge a sales tax on on everything.
25:35
Speaker 1: All right, So Sharovida has spoken, and it seems like
25:39
Speaker 1: perhaps people are overreacting with the knee jerk reaction that
25:41
Speaker 1: this will somehow sync earnings for the Amazon's knee bays
25:45
Speaker 1: of the world. Uh, and correct me if I'm mischaracterizing
25:48
Speaker 1: that happence. Um, Sarah, I do want to switch gears
25:51
Speaker 1: a little bit. Intel made news today by firing the
25:55
Speaker 1: chief executive for a consensual relationship UM with an emloyee.
26:00
Speaker 1: This to me seemed to signal a sea change in
26:03
Speaker 1: a tolerance for some of these things. What's your take? Yeah,
26:06
Speaker 1: I think that's exactly right. Um. Look, Brian Personage is
26:11
Speaker 1: not the first CEO to be pushed out over a
26:14
Speaker 1: consensual relationship with an employee. UM. It happened to the
26:20
Speaker 1: Price Line CEO a couple of years ago. It's not
26:22
Speaker 1: an unprecedented move. But we are in this me too era.
26:26
Speaker 1: There is more scrutiny of workplace behavior than ever before,
26:31
Speaker 1: And behavior that may have been kind of brushed, overlooked,
26:37
Speaker 1: or kind of covered up or ignored in the past,
26:40
Speaker 1: it can no longer be ignored. That these things are
26:43
Speaker 1: now under heightened scrutiny. Corporate executive behavior is being more
26:48
Speaker 1: closely watched than ever, and so is the behavior of
26:50
Speaker 1: boards of directors and responding to that behavior, and the
26:53
Speaker 1: potential for lawsuits and the potential for lawsuits, and look,
26:56
Speaker 1: and the potential of kind of loss of faith among
26:59
Speaker 1: investors and loyse. It's it's a big deal now, and um, look,
27:04
Speaker 1: Krasana didn't do himself any favors, maybe by he was
27:08
Speaker 1: a very vocal champion for gender equality in the workplace,
27:11
Speaker 1: to his credit, But when you're that kind of outspoken
27:15
Speaker 1: champion for workplace equity, your behavior has to be above
27:19
Speaker 1: board too. Indeed. All right, thanks very much, Shara over Day,
27:23
Speaker 1: Bloomberg columnist for Bloomberg Opinion for all things technology related.
27:29
Speaker 1: So if you need help maybe setting up your new iPhone,
27:32
Speaker 1: maybe that's the person. I'm not tech support tech support.
27:36
Speaker 1: Although she did. She did spend about two years laughing
27:38
Speaker 1: at my lack of technological prowess. Well, it's not laughing
27:44
Speaker 1: at you, laughing with you. Thanks very much, sharra Ovi Day.
27:52
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
27:55
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
27:59
Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox, I'm
28:02
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.
28:06
Speaker 1: It's one before the podcast. You can always catch us
28:09
Speaker 1: worldwide on Bloomberg Radio