Latest / Bloomberg Intelligence / OPEC Cancels Press Conference In Unusual Move: Schenker (Podcast)

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OPEC Cancels Press Conference In Unusual Move: Schenker (Podcast) · 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 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 m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. The
• 0:33
  Speaker 1: topic now is energy. In Vienna, OPEC a tentatively agreeing
• 0:38
  Speaker 1: on an oil output cut that was something on the agenda,
• 0:43
  Speaker 1: but we're still waiting to hear from non OPEC members
• 0:46
  Speaker 1: such as Russia before deciding what kind of volume in
• 0:49
  Speaker 1: production reduction will actually take place. Here to tell us
• 0:53
  Speaker 1: more from Vienna is Jason Schenker. He is the president
• 0:56
  Speaker 1: of Prestige Economics and the chairman of the Futurist Institute. Jason,
• 1:01
  Speaker 1: we've all been waiting for a press conference that apparently
• 1:04
  Speaker 1: is not going to happen. Yeah, that's right, Tim. I'm
• 1:08
  Speaker 1: sitting right now in the press conference room in Vienna.
• 1:11
  Speaker 1: There were a few hundred people here up until about
• 1:14
  Speaker 1: ten minutes ago when the story broke that there was
• 1:17
  Speaker 1: not going to be a press conference. The room is
• 1:19
  Speaker 1: mostly emptied out. Now it's maybe about only hundred people left,
• 1:23
  Speaker 1: and uh, you know, folks are a little bit concerned,
• 1:26
  Speaker 1: but it looks like lock the wait for tomorrow to
• 1:29
  Speaker 1: see what happens if OPEC and non OPEC members, specifically
• 1:32
  Speaker 1: Russia can come to an agreement on what happens with
• 1:34
  Speaker 1: the production cuts for the year ahead. So, Jason, this
• 1:38
  Speaker 1: actually is highly unusual for them to cancel a press conference.
• 1:43
  Speaker 1: Does it indicate to you that there's more disagreement than
• 1:46
  Speaker 1: usual on how much to cut production or even if
• 1:49
  Speaker 1: they should cut it all? Well, I think what it
• 1:52
  Speaker 1: really indicates is that the stakes are higher, and I
• 1:56
  Speaker 1: think anyone you know, we look at what's going on
• 1:58
  Speaker 1: across markets today and what's been going up for the
• 2:00
  Speaker 1: last two months. Uh, you know, we see there's a
• 2:02
  Speaker 1: lot of altimities. There's concerned about the U. S. China
• 2:06
  Speaker 1: trade war and what's going on. What does that mean
• 2:09
  Speaker 1: for risk in It's been really important for industrial medals,
• 2:12
  Speaker 1: which have been crushed all year. Oil prices have taken
• 2:15
  Speaker 1: a big hit after the driving season. UM equity markets
• 2:18
  Speaker 1: highly voluntal on this, and then of course there's still
• 2:21
  Speaker 1: interest rate tightening, not just in the US but everywhere
• 2:24
  Speaker 1: higher cross the capital. What's that going to do. There's
• 2:26
  Speaker 1: a risk of a campex recession in business investment in
• 2:29
  Speaker 1: the US, there's a risk of a Chinese manufacturing recession.
• 2:33
  Speaker 1: In these things are big risks on OPEX plate, and
• 2:37
  Speaker 1: I think that OPEC and not PICK members want to
• 2:39
  Speaker 1: make sure they get it right because the risks in
• 2:41
  Speaker 1: the stakes couldn't be higher. Jason the Russian Energy Minister
• 2:45
  Speaker 1: Alexander Novak, he went from Vienna back to St. Petersburg
• 2:51
  Speaker 1: to talk to President Vladimir Putin. He's now scheduled to
• 2:55
  Speaker 1: return to Vienna on Friday. What to the Russians one, Well,
• 3:03
  Speaker 1: I think it's really you know, there's concern about the
• 3:07
  Speaker 1: market going into an oversupplied situation. What happened in late
• 3:12
  Speaker 1: through the middle of oil inventories globally rose sharply, and
• 3:17
  Speaker 1: part of that was China, the biggest net importer in
• 3:20
  Speaker 1: the world of crude oil, the biggest source of additional
• 3:23
  Speaker 1: future marginal crude oil demand, was in a manufacturing recession.
• 3:27
  Speaker 1: China is on an edge of the manufacturing recession right now.
• 3:30
  Speaker 1: If it goes into one, and OPEC and non IMPEC
• 3:32
  Speaker 1: members specifically if Russia and OPEC can't agree on how
• 3:36
  Speaker 1: much to reduce, then the price of oil to get
• 3:39
  Speaker 1: backed really hard. And so I think there's you know,
• 3:41
  Speaker 1: potential to want to air on the side of more
• 3:44
  Speaker 1: tightening rather than left. And that means, you know, there
• 3:47
  Speaker 1: might need to be special approvals involved because they can't
• 3:50
  Speaker 1: get this wrong, because if they do, with inventories go
• 3:53
  Speaker 1: up a lot, more oil prances could get hammered. What's
• 3:56
  Speaker 1: the price that they would like to see. I'm looking
• 3:59
  Speaker 1: right now a crude on the IMAX hitting that fifty
• 4:03
  Speaker 1: a barrel target are almost almost they're almost lowest levels
• 4:07
  Speaker 1: in more than a year. What do they want, Well,
• 4:11
  Speaker 1: I think that the most you know, I I would
• 4:14
  Speaker 1: probably say sixty dollars are above. But they don't explicitly
• 4:17
  Speaker 1: target an oil price. What they try to target, what
• 4:20
  Speaker 1: they have targeted for the last two years with the
• 4:22
  Speaker 1: OPEC mon OPEC agreement is the five year average inventory level.
• 4:27
  Speaker 1: That inventory is built up massively above that through the
• 4:31
  Speaker 1: early part of and they've run down this year. We've
• 4:35
  Speaker 1: been below globally that five year average of oil inventory stocks,
• 4:40
  Speaker 1: and so OPEC wants to keep it below that. We're
• 4:43
  Speaker 1: at that five year inventory average. That's what they're really
• 4:47
  Speaker 1: trying to target, because they know if they can keep
• 4:48
  Speaker 1: it at that level, even if demand weakens, it will
• 4:51
  Speaker 1: support prices. And while they might like sixty dollars a
• 4:55
  Speaker 1: barrel with the prize very worried about, is it's a
• 4:58
  Speaker 1: forty again Mason. One of the things the Russians have
• 5:02
  Speaker 1: said is that it is more challenging for them to
• 5:04
  Speaker 1: cut oil output in the winter than other producers because
• 5:09
  Speaker 1: of the cold weather. Does this mean that they're going
• 5:12
  Speaker 1: to have to wait until after winter and after the
• 5:15
  Speaker 1: Europeans use all of that Russian natural gas? Well, I'd
• 5:21
  Speaker 1: say there's a couple of things on this, and you know,
• 5:24
  Speaker 1: I don't think it. I mean, they can structure wind
• 5:26
  Speaker 1: cuts happen, how cuts happen. You know, those are things
• 5:29
  Speaker 1: that can be worked out. But I think as long
• 5:32
  Speaker 1: as the members are, you know, kind of of a
• 5:35
  Speaker 1: singular mind to rain and supply, that's going to be
• 5:38
  Speaker 1: the thing. But I think no one country wants to
• 5:40
  Speaker 1: bear the entire brunt of it, and I think that
• 5:44
  Speaker 1: the members also want to see it kind of spread around.
• 5:46
  Speaker 1: I think, particularly Saudi Arabia wants to make sure that
• 5:49
  Speaker 1: these are numbers that everybody's going to play with, and
• 5:52
  Speaker 1: they're not the only country to pull back supply, and
• 5:54
  Speaker 1: I think Russia wants to make sure that it too
• 5:57
  Speaker 1: isn't the only one to reduce supply, because all everyone
• 6:00
  Speaker 1: would like to benefit from potentially more supported or higher prices,
• 6:04
  Speaker 1: not every you know, no country wants to pay the
• 6:06
  Speaker 1: full right, right, Jason Schanker, thank you so much for
• 6:10
  Speaker 1: being with us there from Vienna, where you are observing
• 6:14
  Speaker 1: the undertakings at OPEC's latest meeting. Jason Shanker, President of
• 6:18
  Speaker 1: a Prestige Economics, also chairman of the Futurist Institute, normally
• 6:23
  Speaker 1: based in Austin, but over in Vienna. Canadian authorities in
• 6:38
  Speaker 1: Vancouver have arrested Huawei Technologies chief financial officer at the
• 6:42
  Speaker 1: request of the United States, for alleged violations of Iran sanctions.
• 6:47
  Speaker 1: Here to help us understand the situation is Wu jin Ho.
• 6:51
  Speaker 1: He is technology analyst for Bloomberg Intelligence and also joining
• 6:55
  Speaker 1: us as Michael McKee, international Economics and Policy correspondent for Bloomberg.
• 7:01
  Speaker 1: Michael McKee, let's just begin. The chief financial officer of
• 7:05
  Speaker 1: Huawei Technologies is not an ordinary employee. Is she no
• 7:11
  Speaker 1: she's not. She's the daughter of the founder. And this
• 7:13
  Speaker 1: is also one of China's biggest companies, and it is
• 7:16
  Speaker 1: one of the companies that China is relying on in
• 7:19
  Speaker 1: the Made in China program to dominate the world's uh
• 7:23
  Speaker 1: leading technologies of the future. So this has enormous implications.
• 7:27
  Speaker 1: It may have been something completely separate from the president's
• 7:32
  Speaker 1: overtures to Shi Jinping down in Buenos Aires, but it
• 7:36
  Speaker 1: was the same day, so it could possibly be a
• 7:39
  Speaker 1: message from the President to the Chinese. But it's definitely
• 7:43
  Speaker 1: going to complicate the trade efforts that the administration is making.
• 7:47
  Speaker 1: You have to expect the Chinese may have some sort
• 7:50
  Speaker 1: of retaliatory move ahead. Just to be very clear, though,
• 7:53
  Speaker 1: this is being prosecuted out of the Eastern District of
• 7:56
  Speaker 1: New York, So this is a federal prosecutatorial office that
• 7:59
  Speaker 1: is somewhat remove from the president in the day to
• 8:01
  Speaker 1: day terms. And Cannada Canada did cooperate here. Come on
• 8:05
  Speaker 1: here at wujin Ho. What do we know about the
• 8:07
  Speaker 1: actual allegations and then can you talk about what the
• 8:11
  Speaker 1: programming in the software and some of the some of
• 8:14
  Speaker 1: the actual technology behind this is why it's such a
• 8:17
  Speaker 1: security concern. Sure, So UM from a from the allegations
• 8:23
  Speaker 1: standpoint is still fairly thin because the documents are sealed
• 8:27
  Speaker 1: right now, So we really don't know why she's being
• 8:30
  Speaker 1: arrested in Canada. Alway do know is that she was
• 8:33
  Speaker 1: arrested on December one, and then she's being asked to
• 8:36
  Speaker 1: the US is asking her to be extradited in back
• 8:38
  Speaker 1: to the U s UH for some sort of charge.
• 8:41
  Speaker 1: Right now, the timing of it, to your point is
• 8:45
  Speaker 1: is a little bit rough, primarily because of the trade
• 8:48
  Speaker 1: agreements between Trump and E G. Ping. So UM, I
• 8:52
  Speaker 1: think there's a timing element to it, um, but from
• 8:56
  Speaker 1: from from a trade perspective, still unclear, quite frankly, right, Um,
• 9:01
  Speaker 1: In terms of UM, you know Whahwei and what Wahwei provides.
• 9:05
  Speaker 1: Wahwei provides the actual network equipment that helps drive our
• 9:11
  Speaker 1: UM wireless networks. So if you look at the Chinese
• 9:15
  Speaker 1: wi uh wireless markets, some of the European wireless markets,
• 9:19
  Speaker 1: they use a lot of the Wahwei equipment. UM. And
• 9:23
  Speaker 1: if you think about how we have digital networks, a
• 9:26
  Speaker 1: lot of the digital networks can you can actually peer
• 9:29
  Speaker 1: into the packets itself and see what's being said and
• 9:32
  Speaker 1: then you know, an eavesdrop into the communication. So there
• 9:35
  Speaker 1: is a security concern element and that's one of the
• 9:37
  Speaker 1: reasons why the US government has banned Wahwei equipment um
• 9:41
  Speaker 1: for their use. And the other element of that is
• 9:44
  Speaker 1: a Wahwei is the second largest first or second largest
• 9:47
  Speaker 1: smartphone provider as well, and that was also banned UH
• 9:51
  Speaker 1: into or uh discourage from being sold in the US.
• 9:56
  Speaker 1: So there there are security elements on both fronts, on
• 9:59
  Speaker 1: the equipment side as well as on on the smartphone side. Now, Michael,
• 10:04
  Speaker 1: the chief financial officers you were describing of Huawei, Sabrina Mang,
• 10:09
  Speaker 1: was arrested during a layover flight in Canada. The allegations
• 10:16
  Speaker 1: have to do with an ongoing criminal investigation into Huawei,
• 10:22
  Speaker 1: which started I think it was back in the spring.
• 10:25
  Speaker 1: What exactly do you believe the government I mean, has
• 10:27
  Speaker 1: to do with dealings with the Iran. What is there
• 10:30
  Speaker 1: any subtext here based on the trade dispute. Well, the
• 10:36
  Speaker 1: subtext would be that the US is cracking down on
• 10:39
  Speaker 1: China for a lot of things. This is not directly
• 10:43
  Speaker 1: related to trade with the US, but it is an
• 10:46
  Speaker 1: allegation that the Huawei helped evade US sanctions on Iran.
• 10:51
  Speaker 1: Huawei has a defense arguing that the regulations are unclear
• 10:55
  Speaker 1: and that um they didn't necessarily violate the US law.
• 10:59
  Speaker 1: That'll have we argued out. But while it's not directly
• 11:03
  Speaker 1: related to the trade dispute, it does complicate matters because
• 11:07
  Speaker 1: it is part of an effort, along with remember the
• 11:10
  Speaker 1: Zte case, uh the US to crack down on these
• 11:14
  Speaker 1: companies in China that it sees as threats. Now, it's
• 11:18
  Speaker 1: not to say they did or didn't do something wrong.
• 11:21
  Speaker 1: I'm not the judge, but there are credible allegations they
• 11:24
  Speaker 1: did something wrong. But it does seem to be a
• 11:27
  Speaker 1: coordinated effort on the part of the administration to go
• 11:30
  Speaker 1: after companies deliberately because they are competitors to the U
• 11:35
  Speaker 1: s they are a threat to the US and if
• 11:36
  Speaker 1: they're getting there by breaking the law, then they should
• 11:39
  Speaker 1: be prosecuted. Come on in here, because one thing that
• 11:41
  Speaker 1: I'm struck by is how isolated is Huawei, which is
• 11:45
  Speaker 1: a huge company in China, one of the most important,
• 11:48
  Speaker 1: if not the most important companies there. How much business
• 11:51
  Speaker 1: does it do with US companies and US suppliers. Sure
• 11:54
  Speaker 1: so in terms of the equipment perspective. What we calculated
• 12:00
  Speaker 1: was that Wahwei provides five billion, five billion with a
• 12:03
  Speaker 1: B dollars of equipment in terms of network equipment from
• 12:07
  Speaker 1: optical wireless infrastructure, so on and so forth. Right, that's
• 12:11
  Speaker 1: different from z t E. Z t E is still
• 12:12
  Speaker 1: a fairly domestic Chinese market. The US doesn't buy Chinese
• 12:17
  Speaker 1: equipment for the most part, so it's mostly UM, Western Europe, Latan,
• 12:22
  Speaker 1: austral Australia, Japan, and South Korea. UM. But there are
• 12:27
  Speaker 1: broader implications for the suppliers. If we look at what
• 12:31
  Speaker 1: we published today, UM, there Wahwei is the number one
• 12:34
  Speaker 1: optical equipment supplier. And what we can see from the
• 12:38
  Speaker 1: SPLC function on Bloomberg is that Momentum Neo Photonics provides
• 12:43
  Speaker 1: about generates their sales from from Huahwei, and there are
• 12:48
  Speaker 1: a host of others UH providers UM that provides temper
• 12:51
  Speaker 1: sent or or or more on sales. Now we're not
• 12:55
  Speaker 1: there yet, right. The z t E ban UM, you know,
• 12:59
  Speaker 1: show that it can cripple the US supply band Camp,
• 13:02
  Speaker 1: cripple STPLAI, but we're not there yet. Jho technology analyst
• 13:06
  Speaker 1: for Bloomberg Intelligence and Mike McKee, international economics and policy
• 13:10
  Speaker 1: correspondent for bloomber Both of you, thank you so much.
• 13:13
  Speaker 1: A lot to figure out, a lot unknown as of yet,
• 13:16
  Speaker 1: so we will continue to dig into it as new
• 13:19
  Speaker 1: information arises. Real estate, commercial real estate, multi family realist state.
• 13:35
  Speaker 1: We've got an expert, Gerald Gutterman. Jerry Gutterman is the
• 13:38
  Speaker 1: senior principal partner and chief investment officer for Government Partners.
• 13:42
  Speaker 1: They are based in New York and he joins us now.
• 13:45
  Speaker 1: Jerry Gutterman, thank you very much for being with us.
• 13:48
  Speaker 1: Let's begin right off the bat by. When you see
• 13:51
  Speaker 1: a day like today in the stock market and the
• 13:55
  Speaker 1: bond market, what's your reaction. Of course, I would rather
• 14:01
  Speaker 1: the market be going up, But it doesn't really affect
• 14:05
  Speaker 1: the real estate as an investment on a daily basis,
• 14:09
  Speaker 1: because the real estate continues to work, the tenants continued
• 14:12
  Speaker 1: to pay rent, and they're really not affected by this.
• 14:16
  Speaker 1: We understand that four O one case can be affected,
• 14:19
  Speaker 1: but the daily living of the average tenant is not affected.
• 14:23
  Speaker 1: But Jerry, fair enough, fair enough. Although some people would
• 14:26
  Speaker 1: interpret what we're seeing, certainly in bond and stock markets
• 14:29
  Speaker 1: as a signal that growth is slowing, substantially around the world,
• 14:34
  Speaker 1: including the US. We're seeing inflation expectations dropping the most
• 14:37
  Speaker 1: more than a year today. I'm just wondering, how does
• 14:40
  Speaker 1: that play into the housing market, given the fact that
• 14:42
  Speaker 1: the last time we spoke, you said that you foresee
• 14:45
  Speaker 1: an implosion in high end condos coming. Yes, because I've
• 14:49
  Speaker 1: seen this now three different times. I saw it in
• 14:53
  Speaker 1: nine seven, I saw it in two thousand six two
• 14:59
  Speaker 1: thousand even, and then two thousand fourteen, two thousand sixteen,
• 15:05
  Speaker 1: now been seeing it, and in seven to night. Of course,
• 15:10
  Speaker 1: the real estate market had the same exact things happened
• 15:15
  Speaker 1: to it. It wasn't a matter of the stock market,
• 15:17
  Speaker 1: and I realized that in seven we had a big
• 15:20
  Speaker 1: problem with the stock market, and we had that one
• 15:23
  Speaker 1: day crashed. But on the other hand, the big problem
• 15:27
  Speaker 1: and the big reason that the real estate market weakened
• 15:30
  Speaker 1: was because of overbuilding, constantly, constantly overbuilding, because if you
• 15:37
  Speaker 1: give a normal and usual builder a mortgage, he will
• 15:40
  Speaker 1: build in the desert. And consequently, by nine eighty seven night,
• 15:47
  Speaker 1: the over building and the over capacity was such that
• 15:52
  Speaker 1: we saw it coming, and the pricing for it at
• 15:55
  Speaker 1: that point because they were building so much, but they
• 15:58
  Speaker 1: were building into with demand where the price of the
• 16:02
  Speaker 1: product kept going up and up and up to where
• 16:05
  Speaker 1: the return kept going down. The return went down to five,
• 16:10
  Speaker 1: then below five. It reminds me of today we had
• 16:14
  Speaker 1: the same thing happened that we saw in two thousand
• 16:17
  Speaker 1: and six, two thousand and seven. We saw it happening
• 16:20
  Speaker 1: in two thousand and eight. We sold everything between two
• 16:24
  Speaker 1: thousand and six and two thousand and seven, just like
• 16:27
  Speaker 1: we sold everything between seven and Alright, Jerry, advantage of it.
• 16:33
  Speaker 1: We get it makes sense what you're saying in the
• 16:36
  Speaker 1: high end condom market. I'm wondering does that sort of
• 16:40
  Speaker 1: carry over to the rest of the housing market, especially
• 16:44
  Speaker 1: in light of sensibly rising rates, although now they're going
• 16:47
  Speaker 1: back down. You know, we specialize. We really have not
• 16:52
  Speaker 1: been doing new homes. We've been doing more conversions, that is,
• 16:57
  Speaker 1: buying rental properties and converting them to condominium ownership. Because
• 17:02
  Speaker 1: when we do that, what we find is we can
• 17:05
  Speaker 1: buy the product better cheaper, and we can actually sell
• 17:09
  Speaker 1: it significantly cheaper. And when you realize, when you finally
• 17:14
  Speaker 1: realize that if you buy an existing rental property, that
• 17:19
  Speaker 1: tenant in possession is your partner. If you're going to
• 17:23
  Speaker 1: do a condominium conversion. That is, you're going to convert
• 17:27
  Speaker 1: the condominium ownership. Well, what is your partner want? Your
• 17:31
  Speaker 1: partner wants to buy it almost as cheaply as you did.
• 17:34
  Speaker 1: And the answer is, we believe that every tenant in
• 17:38
  Speaker 1: possession is a partner, and we give the tenants in
• 17:42
  Speaker 1: possession a significant price reduction. How do we do that?
• 17:47
  Speaker 1: We do that because we're able to take advantage of
• 17:50
  Speaker 1: the market as it is now. Starting now, because it's
• 17:54
  Speaker 1: already started several months ago, the prices have been dropping
• 17:58
  Speaker 1: significantly in the areas where there has been extreme over building.
• 18:03
  Speaker 1: For instance, if I go to Florida and I pick
• 18:06
  Speaker 1: a city like Sunny Isles Beach, which most people know,
• 18:11
  Speaker 1: if you have a non luxury apartment that is going condominium,
• 18:17
  Speaker 1: I would tell you today that there's about thirty two
• 18:20
  Speaker 1: months of supply right now. That means it's going to
• 18:25
  Speaker 1: take thirty two months to sell what is normally sold
• 18:29
  Speaker 1: in one year. If you go to the luxury market,
• 18:33
  Speaker 1: it's fifty five and a half months of supply. Can
• 18:37
  Speaker 1: you imagine fifty five and a half months, that's four
• 18:40
  Speaker 1: and a half years of supply on an average sale
• 18:45
  Speaker 1: per year basis, Well, the builders can't hold out, and
• 18:49
  Speaker 1: what's the only thing they can do. They have to
• 18:52
  Speaker 1: be able to sell and get out. The builders can't
• 18:55
  Speaker 1: sell at steep discounts. It's not possible. And the reason
• 18:59
  Speaker 1: is the banks who have made them the loans will
• 19:02
  Speaker 1: not allow the builders to sell at a discounted price.
• 19:06
  Speaker 1: The reason is because if the bank allows the builder
• 19:09
  Speaker 1: to sell at a discounted price, then the auditors are
• 19:14
  Speaker 1: going to come in and they're going to drop all
• 19:17
  Speaker 1: of the value for their mortgages that they have by
• 19:21
  Speaker 1: at least that amount, and they're going to take their collateral.
• 19:24
  Speaker 1: The banks collateral will only be worth a certain amount
• 19:29
  Speaker 1: less if they dropped the price. Can you imagine the
• 19:33
  Speaker 1: order is coming in and dropping the collateral by or
• 19:38
  Speaker 1: or and that's what happens, Gerald, Jared. Let me let
• 19:43
  Speaker 1: me ask you one question having to do with the
• 19:45
  Speaker 1: non professional or the non experienced, the unexperienced real estate
• 19:51
  Speaker 1: investor who have put billions of dollars into real estate projects.
• 19:57
  Speaker 1: Is this going to be the time when they try
• 19:59
  Speaker 1: to rush for the exits. If it is an investor
• 20:04
  Speaker 1: who invested in the last year or two and the
• 20:08
  Speaker 1: project was purchased at a price as it was priced
• 20:12
  Speaker 1: over the last year or two. The answer is yes,
• 20:16
  Speaker 1: and that's why we're so busy now, because we pick
• 20:19
  Speaker 1: these times to keep coming back in when the market
• 20:23
  Speaker 1: can be discounted significantly, and when we buy now it's
• 20:27
  Speaker 1: common knowledge um in the market that we buy anything
• 20:31
  Speaker 1: from fifty to discount. Jerry Gutterman, thank you so much
• 20:35
  Speaker 1: for being with us. Uh and Uh, well, we'll see
• 20:37
  Speaker 1: whether those discounts will only get steeper from here. So
• 20:41
  Speaker 1: I'm sure you have a busy few months out of you.
• 20:43
  Speaker 1: Jerry Gutterman, Senior principal partner in chief investment officer at
• 20:46
  Speaker 1: Gotterman Partners LLLC in New York. It's interesting for him
• 21:01
  Speaker 1: as we talk about trade tensions and some of the
• 21:03
  Speaker 1: turmoil in the tech sector, how does one go about
• 21:07
  Speaker 1: identifying opportunities among emerging tech companies with big data and
• 21:12
  Speaker 1: artificial intelligence against this backdrop? And joining us from Tel Aviv,
• 21:17
  Speaker 1: Israel to talk about this is Brock Rabinowitz, managing partner
• 21:20
  Speaker 1: at F two Capital. Brock, wonderful to have you, especially
• 21:24
  Speaker 1: on a day like this where the trade tensions are highlighted.
• 21:28
  Speaker 1: How much does that backdrop color your view of how
• 21:33
  Speaker 1: to invest in emerging tech sectors. Yeah, it's great to
• 21:37
  Speaker 1: be here. UM. You know, we're ten year vehicles in
• 21:41
  Speaker 1: UH in venture capital funds generally. And I was just
• 21:44
  Speaker 1: in the US and I heard from you know, family
• 21:46
  Speaker 1: offices and large institutional investors who are spread in the
• 21:49
  Speaker 1: equity market is dead markets and also a bit in
• 21:51
  Speaker 1: private equity and VC. They're actually moving more money to
• 21:54
  Speaker 1: VC now because of that, because nobody knows what to
• 21:56
  Speaker 1: make out of all this volatility. VC being venture capital, yes, ye,
• 22:01
  Speaker 1: venture capital UM, transforming markets, transforming the world. UH. They
• 22:06
  Speaker 1: still believe in tech despite the volatility, and VC is
• 22:08
  Speaker 1: an attractive way to do it UM. And at the
• 22:12
  Speaker 1: same time, all the big tech giants are sitting on
• 22:14
  Speaker 1: hundreds of billions of dollars in cash, so people can
• 22:16
  Speaker 1: see the exit activity will continue and it's about finding
• 22:20
  Speaker 1: value in different locations around the world. Barack, can you
• 22:25
  Speaker 1: just give us a little background on F two capital,
• 22:27
  Speaker 1: because I believe what a spin out out of Genesis Partners,
• 22:31
  Speaker 1: you and two others deciding to go out on your own,
• 22:34
  Speaker 1: and you managed to also take something called the Junction
• 22:38
  Speaker 1: with you. This is an accelerator program explain how it works. Sure,
• 22:43
  Speaker 1: I'd be happy to pim so. Genesis Partners was one
• 22:46
  Speaker 1: of the original venture capital funds formed in Israel when
• 22:49
  Speaker 1: the industry started about twenty five years ago. It we
• 22:52
  Speaker 1: had six fifty million dollars under management across four funds.
• 22:56
  Speaker 1: And what we saw in Israel generally is the changing
• 22:59
  Speaker 1: of the guard. At the time Genesis started, it was
• 23:02
  Speaker 1: very much a buyer's market, those with the cash where kings.
• 23:05
  Speaker 1: But what's happened over time is more and more strategic
• 23:08
  Speaker 1: players moving to Israel and start buying up companies. Is
• 23:11
  Speaker 1: power has shifted to the entrepreneurs, so the founders have
• 23:14
  Speaker 1: the power. It's now a seller's market and vcs to
• 23:17
  Speaker 1: be successful have to give more than cash UH in
• 23:21
  Speaker 1: order to secure the top deals. In our way of
• 23:23
  Speaker 1: doing that at F two Capital, F two is powered
• 23:26
  Speaker 1: to founders UH in this spirit is through our platform
• 23:29
  Speaker 1: called the Junction. The Junction is a network that we've
• 23:33
  Speaker 1: created of multinationals including sap Unich, re Kuley, Packard and
• 23:38
  Speaker 1: others largest players in the world who are looking to
• 23:40
  Speaker 1: Israel for technology edge UH, and we leverage them as
• 23:45
  Speaker 1: a way to stand out in the market and support
• 23:46
  Speaker 1: founders and attract them to our program. So, Brock, I'm
• 23:49
  Speaker 1: wondering if you could look into the crystal ball and
• 23:51
  Speaker 1: tell us what the cutting edge technology is currently being
• 23:55
  Speaker 1: developed that you think will change the world. Everybody is
• 23:59
  Speaker 1: talking about artificial intelligence, and it's just different ways to
• 24:02
  Speaker 1: apply that. Artificial intelligence In Israel, Uh, it all comes
• 24:06
  Speaker 1: out of the military. Israel has always been at a
• 24:09
  Speaker 1: numerical disadvantage to our neighbors in a hostile region. We've
• 24:12
  Speaker 1: relied on artificial intelligence from the you know, basically the
• 24:15
  Speaker 1: the the uh initial days of of of computers. Well,
• 24:19
  Speaker 1: but how is it going to be applied in a
• 24:21
  Speaker 1: cutting edge way that's going to sort of transform the
• 24:23
  Speaker 1: way we think about things. It's it's gonna be applied
• 24:26
  Speaker 1: in stages so um. You know, for example, enterprises are
• 24:30
  Speaker 1: sitting on tons of data. They're drowning in data. They
• 24:33
  Speaker 1: don't know how to make sense of all the data.
• 24:34
  Speaker 1: So you can apply machine learning to comb through the data,
• 24:37
  Speaker 1: enrich it with other data you can get off the
• 24:39
  Speaker 1: web in order to create predictive models to tell you
• 24:41
  Speaker 1: how much, uh to pay for your next house. Uh.
• 24:45
  Speaker 1: We're equally which drug is going to be effective to
• 24:47
  Speaker 1: cure cancer. UH. In other realms, in real estate, we see,
• 24:51
  Speaker 1: for example, UH, the use of bots who can service
• 24:56
  Speaker 1: hundreds of clients compared to a regular agent who can
• 24:59
  Speaker 1: serve dozens at a time, and they do that through
• 25:01
  Speaker 1: artificial intelligence. So I think it will be a matter
• 25:04
  Speaker 1: of enhancing human capabilities, UH using computing power. Now, according
• 25:10
  Speaker 1: to the reports, you get pitches from let's say two
• 25:14
  Speaker 1: hundred and fifty applicants, and you select five companies and
• 25:18
  Speaker 1: they enter a six month boot camp program. You give
• 25:21
  Speaker 1: them a hundred thousand dollars in funding on a convertible note,
• 25:25
  Speaker 1: and then you get an option to invest more. Some
• 25:27
  Speaker 1: of the companies are Regulus X of firewall, anti virus
• 25:31
  Speaker 1: solution for drones and so on. But you say you
• 25:34
  Speaker 1: want to develop sophisticated insurance technology. Tell us about why
• 25:38
  Speaker 1: you don't want to go business to consumer. You want
• 25:40
  Speaker 1: to go business to business. You know. I always feel
• 25:44
  Speaker 1: that entrepreneurs they need to do things where they have
• 25:46
  Speaker 1: an advantage. And Israel is so far removed from the
• 25:50
  Speaker 1: big consumer markets, for example, the US, that we're really
• 25:54
  Speaker 1: going to be at a disadvantage to startups in New
• 25:56
  Speaker 1: York or California. Uh. Instead if we can work behind
• 25:59
  Speaker 1: the scenes, powering enterprises to do their jobs better, that's
• 26:03
  Speaker 1: really a sweet spot that we found, uh. And that's
• 26:06
  Speaker 1: what the multinationals like Google, Facebook, Apple, they all have
• 26:09
  Speaker 1: their R and D centers outside the US and Israel,
• 26:12
  Speaker 1: but more recently the Chinese Ali Baba and some of
• 26:15
  Speaker 1: the other big names have come here. Uh, And that's
• 26:18
  Speaker 1: why we chose to focus our program on these kind
• 26:20
  Speaker 1: of enterprise deep technologies. Brock Who's ahead when it comes
• 26:24
  Speaker 1: to tech advancement US or China? I think the the
• 26:31
  Speaker 1: US will always be ahead when it comes to creativity,
• 26:34
  Speaker 1: and that means that US will always be ahead. China
• 26:36
  Speaker 1: has always been good at copying. Where you see them
• 26:39
  Speaker 1: ahead is more in I would say, new forms of
• 26:43
  Speaker 1: payment technology or you know, specific areas, But I have
• 26:47
  Speaker 1: long term confidence in the US. Tell us just quickly
• 26:51
  Speaker 1: about frontier technology when it comes to augmented reality products.
• 26:55
  Speaker 1: How could they be used in business? And what are
• 26:57
  Speaker 1: you doing to support that. Three D printers for examp
• 27:00
  Speaker 1: and pull or cloud based quality assurance testing. Yeah, I'll
• 27:04
  Speaker 1: tell you. I mean you mentioned three D printers. Three
• 27:06
  Speaker 1: D printers you know gets into the realm of additive manufacturing.
• 27:09
  Speaker 1: And I'm actually born and raised in Ohio and Youngstown,
• 27:12
  Speaker 1: Ohio and the rust Belt, and we've done a partnership recently.
• 27:16
  Speaker 1: Alongside the big names I mentioned, we also have a
• 27:18
  Speaker 1: partnership with the Youngstown Business Incubator, which is looking to
• 27:22
  Speaker 1: Israeli tech and additive manufacturing as a way to stimulate
• 27:25
  Speaker 1: jobs UH in an economically depressed part of the nation
• 27:29
  Speaker 1: by embracing added manufacturing and restoring manufacturing power to the
• 27:33
  Speaker 1: rust belt. UM. But you know you mentioned augmented reality
• 27:37
  Speaker 1: as well. Same thing. We're seeing huge disruptions as people
• 27:40
  Speaker 1: adopt artificial intelligence. You've probably heard the statistics a lot
• 27:44
  Speaker 1: of people are going to be unemployed. Well, if you
• 27:46
  Speaker 1: could use augmented reality, for example, in classes, UH and
• 27:50
  Speaker 1: give that to people who would otherwise be laid off
• 27:52
  Speaker 1: and send them back into the field as service personnel
• 27:56
  Speaker 1: getting the training they need in real time in the
• 27:58
  Speaker 1: direction they need a real time UH to fix problems. UH.
• 28:02
  Speaker 1: It's it's a really impactful way of both generating profits
• 28:07
  Speaker 1: UH and a social impact. Thanks very much for being
• 28:10
  Speaker 1: with us. Barak Rabinowitz is the managing partner of F
• 28:13
  Speaker 1: two Capital based in Tel Aviv. Speaking about artificial intelligence
• 28:18
  Speaker 1: and venture capital incubators. Thanks for listening to the Bloomberg
• 28:24
  Speaker 1: P and L podcast. You can subscribe and listen to
• 28:27
  Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 28:32
  Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm
• 28:35
  Speaker 1: on Twitter at Lisa abramowits one before the podcast. You
• 28:39
  Speaker 1: can always catch us worldwide on Bloomberg Radio