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Crackdown on China Tech Could Create Two 5G Markets (Podcast) · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge you,
0:05
Speaker 1: along with my co host Lisa Brahma Waits. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money. Whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple
0:15
Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. Trade talks are continuing between the
0:23
Speaker 1: US and China as we head closer to the March deadline.
0:27
Speaker 1: Joining us here in our Bloomberg inactivist Broker Studios and
0:30
Speaker 1: Stevenson Yang, co founder and research director at JA Capital Research,
0:34
Speaker 1: also a Bloomberg Opinion contributor, and thank you so much
0:37
Speaker 1: for being here today. Let's just start with a state
0:41
Speaker 1: of play. Where are we in the trade negotiations between
0:44
Speaker 1: the US and China? To be honest, it looks like
0:47
Speaker 1: the US is just about to capitulate. Um. But we're
0:50
Speaker 1: in the in the last last lap. It looks like
0:55
Speaker 1: the US is about to capitulate. How so? Uh, you know,
1:00
Speaker 1: March was the what was was the delayed date for
1:03
Speaker 1: the implementation of the higher tariffs? Should should China not
1:07
Speaker 1: agree to a number of conditions. The conditions that were
1:10
Speaker 1: set for China were conditions that really could not be
1:14
Speaker 1: made be met. They were too vague, too broad. They
1:18
Speaker 1: meant basic restructuring of the economy and the political system.
1:22
Speaker 1: And I think that Trump and his administration don't really
1:27
Speaker 1: want to walk off that ledge, and so they're preparing
1:30
Speaker 1: to de find a face saving method to back down.
1:33
Speaker 1: What do you think that face saving method is in
1:35
Speaker 1: terms of acudan? Who knows? Last time it was Fentinel,
1:38
Speaker 1: which came right out of left field, so it could
1:41
Speaker 1: be anything this time. How about some of the more
1:44
Speaker 1: more substantive issues like technology and intellectual property or any
1:48
Speaker 1: of those really tough topics going to be addressed. Look,
1:52
Speaker 1: those are the issues that really need to be addressed.
1:55
Speaker 1: The question is how so the US has been going
1:57
Speaker 1: around to allies and asking them to you to drop
2:01
Speaker 1: Huawei from the from the five G network construction, and
2:04
Speaker 1: that could actually happen. There's a meeting in uh in
2:08
Speaker 1: Spain of the EU Committee on G S M Technologies
2:12
Speaker 1: at the end of the month where people are going
2:14
Speaker 1: to discuss that. I'm just wondering Huawei. Huawei, we were
2:18
Speaker 1: talking about the proscently the charges that the US levied
2:23
Speaker 1: against Huawei UH and and how this would be read politically.
2:27
Speaker 1: The US taking the stances is a completely separate legal
2:30
Speaker 1: action that has nothing to do with trade negotiations. Originally,
2:34
Speaker 1: China seemed to make noise saying that that you know,
2:36
Speaker 1: this is absolutely part of trade negotiations. We're not buying
2:39
Speaker 1: the U s S line. But recently they've got a
2:42
Speaker 1: little dark on that. What's the latest there? They've gone
2:45
Speaker 1: a little dark on that, but they're still holding in
2:47
Speaker 1: detention three Canadians as really naked leverage against Canada in
2:52
Speaker 1: hopes that Canada will not extradite among to the United States.
2:56
Speaker 1: And this is so so it really is clearly viewed
2:59
Speaker 1: in China, and all of the press coverage and Global
3:01
Speaker 1: Times and so forth is all about how how long
3:04
Speaker 1: is upon? So are we is the Lawwei situation? I e.
3:09
Speaker 1: You mentioned Barcelona, maybe you know asking our European UH
3:13
Speaker 1: countries not to use that technology. Are we creating a
3:16
Speaker 1: kind of a bifurcated technology market where the Chinese companies
3:20
Speaker 1: will supply Belt and Road countries and Western companies will
3:23
Speaker 1: supply Western technologies. And the reason I asked that I'm
3:26
Speaker 1: thinking about the global five G build out and rollouts
3:29
Speaker 1: could be the next mega trend in text spending. I
3:31
Speaker 1: wonder from creating kind of as a segregated market being developed. Yeah,
3:35
Speaker 1: I think of it as sort of a bamboo technology curtain.
3:38
Speaker 1: It's it's an interesting thing because the five G network
3:40
Speaker 1: is the thing that will really UH manage smart appliances,
3:46
Speaker 1: self driving cars, UH, power networks, all of those things
3:51
Speaker 1: and um and you can imagine some of the security
3:55
Speaker 1: uh issues that could arise from that. And so excluding UH,
4:00
Speaker 1: Huawei and Zte and Chinese providers from that network, I
4:04
Speaker 1: think is a key goal of the United States right
4:06
Speaker 1: now and you can you can understand why, but it
4:09
Speaker 1: would create a very interesting bifurcation. Yes, So we're speaking
4:13
Speaker 1: with and Stevenson Yang, co founder and research director at
4:16
Speaker 1: Jake Capital Research, also a Bloomberg opinion columnist. We're talking
4:19
Speaker 1: about China and U and US relations as well as
4:22
Speaker 1: the build out of five G, which is sort of
4:24
Speaker 1: integral in this whole issue. As we've been talking about
4:27
Speaker 1: for the past few weeks. How does the slowdown in
4:30
Speaker 1: China's economy affect the five G build out plan? If
4:34
Speaker 1: at all, well, I think what it really affects is
4:38
Speaker 1: the is the view internationally by investors of China. Formerly,
4:44
Speaker 1: you had companies like like Cisco which sued Huawei back
4:48
Speaker 1: in two thousand three, Motorola with sued Huawei, and I
4:51
Speaker 1: think it was you had them come to settlements because
4:56
Speaker 1: they were concerned about being shut out of the market.
4:58
Speaker 1: I think that there's much less of that concern now
5:00
Speaker 1: and more of a more of a combative stance. So
5:04
Speaker 1: the U S technology companies again, my my sense will
5:07
Speaker 1: be boy, China is a huge market to sell into
5:10
Speaker 1: on the one hand. On the other hand, we need
5:12
Speaker 1: some protection from China. So what are we hearing from
5:14
Speaker 1: Silicon Valley and some of the leaders about how they
5:17
Speaker 1: would like to see policy developed. You know, they've been
5:21
Speaker 1: surprisingly quiet. They used to be really strong supporters of
5:26
Speaker 1: accommodation with China, trying not to uh to to to
5:30
Speaker 1: make these issues tremendously public, trying not to embarrass China.
5:35
Speaker 1: Now you find that they're very quiet. So you said that,
5:38
Speaker 1: if I'm understanding you correctly, the US companies are becoming
5:41
Speaker 1: more combative and international companies are becoming more combative when
5:45
Speaker 1: negotiating with Chinese tech giants. First of all, how is
5:51
Speaker 1: this manifesting and why does this slowdown give them that
5:54
Speaker 1: sort of confidence. Well, because the slowdowns suggests that that
5:59
Speaker 1: the market is really not quite as promising as they thought,
6:03
Speaker 1: and that they may not after all, build billion or
6:06
Speaker 1: two billion dollar businesses in China, and therefore they're able
6:10
Speaker 1: to defend their interests or you know, in a more
6:13
Speaker 1: strident manner, does does China still need our technology? Or
6:18
Speaker 1: if they developed skills in court technology, but whether it's
6:21
Speaker 1: chips or software or hardware, they really don't need us
6:24
Speaker 1: or Western technology as much as I used to. Well,
6:26
Speaker 1: apparently they do. I mean. The thing that struck me,
6:30
Speaker 1: really bowled me over about the Huawei indictment, the Washington
6:34
Speaker 1: State indictment for its attempt to to steal Tappy technology
6:39
Speaker 1: from T Mobile was how, you know, the the US,
6:42
Speaker 1: the North American market is huge for Huawei, and its
6:45
Speaker 1: reputation in North America is also really important. So the
6:48
Speaker 1: idea that they would risk all these things in order
6:51
Speaker 1: to steal a technology that's really kind of hum drum,
6:54
Speaker 1: and that that a lot of other companies had developed
6:58
Speaker 1: in different ways um is really kind of stunning and
7:01
Speaker 1: suggest that there that there's been some myth making about
7:04
Speaker 1: Huawei's capabilities. Do you think there's been myth making overall
7:07
Speaker 1: in terms of China's technological prowess? Look, I do. I
7:11
Speaker 1: mean this is not to say at all that that
7:14
Speaker 1: that you know, extremely extreme competence doesn't exist in China's
7:19
Speaker 1: tech industry and that they're not inventing things all the time.
7:22
Speaker 1: But the fact is that the companies that get to
7:25
Speaker 1: scale and manage to uh to achieve big sales are
7:30
Speaker 1: not the companies that are innovative. You can't do that
7:32
Speaker 1: in China's economy. And Stevenson Yang, thank you so much
7:35
Speaker 1: for being with us. We really appreciate it. And Stevenson
7:38
Speaker 1: Yang co founder and research director at j Capital Research,
7:42
Speaker 1: also a Bloomberg opinion columnist, and she is normally based
7:46
Speaker 1: in Washington, d C. In Hong Kong, but joining us
7:48
Speaker 1: here in our eleven three our studios. It is the
8:06
Speaker 1: end of an era. Bill Gross, the erstwhile bond king
8:11
Speaker 1: of PIMCO, who went to Janice, said he was retiring
8:14
Speaker 1: after a period of mixed performance. If you want to
8:18
Speaker 1: hear what he had to say, let's listen to Bill
8:20
Speaker 1: Gross in his own word. Speaking with Bloomberg's Tom Keene
8:23
Speaker 1: earlier this morning about his performance, and you know, I
8:26
Speaker 1: look back on it um and the performance on the
8:29
Speaker 1: constrained fund in the past four years with Jannis has
8:31
Speaker 1: H has been unsatisfactory, no doubt, but still positively um
8:38
Speaker 1: positive and normal and nominal terms. Joining us now in
8:42
Speaker 1: our Bloomberg and Directive Broker Studios is Peggy Collins, investing
8:45
Speaker 1: team leader for Bloomberg News. Uh, Peggy really interesting. He
8:49
Speaker 1: had an amazing run at Pimco, falling out went to Janice.
8:54
Speaker 1: Since then his performance highly underwhelming, that's right, and also
8:59
Speaker 1: not a lot of money followed him to Janice. So
9:01
Speaker 1: when he left, I remember the morning he left Pimco September.
9:06
Speaker 1: People were shocked. We were scrambling around the newsroom trying
9:09
Speaker 1: to put the story out fast, and he basically at
9:12
Speaker 1: that time jumped to Janice, where he had been longtime
9:15
Speaker 1: friends with Dick Wild who was running Janie at the
9:18
Speaker 1: time out of Colorado. A couple of years later, Janice
9:21
Speaker 1: merged with Henderson Group in London, and so now it's
9:23
Speaker 1: a big London based firm that he's a part of.
9:26
Speaker 1: But Bill Gross maintained kind of a solo act um
9:30
Speaker 1: in Newport Beach for a long time over the last
9:32
Speaker 1: few years, and we've just seen the assets in the
9:35
Speaker 1: fund really deplete, the dip below one billion at the
9:38
Speaker 1: end of last year, and his performance, as you said,
9:40
Speaker 1: has really lagged about less than one percent over the
9:44
Speaker 1: annualizes four years, so it's been it's been a struggle
9:48
Speaker 1: since he left PIMCO. So Peggy is yet another example
9:51
Speaker 1: in the decline of the active manager. I will say
9:55
Speaker 1: it is it is a signal in terms of how
9:58
Speaker 1: difficult it is to be an active manager. Um. I
10:01
Speaker 1: think in general bond funds have had fewer outflows than
10:06
Speaker 1: equity funds. We've really seen a lot of investors pour
10:10
Speaker 1: into particularly US S stock funds on the passive side
10:14
Speaker 1: rather than active, but bond fund managers, in part because
10:17
Speaker 1: there's not as much of a delta between the expense
10:19
Speaker 1: ratios on bond funds passive or active, they have held
10:22
Speaker 1: up somewhat. But to your point, it is an indication
10:25
Speaker 1: of how hard it can be to do well in
10:27
Speaker 1: an active fund. It's interesting because he was known as
10:31
Speaker 1: a bond king, the bond king. Is there another bond
10:35
Speaker 1: king that has taken Bill Gross's place. You know, I
10:39
Speaker 1: think it's hard to say right now. I mean, he
10:41
Speaker 1: certainly was the person who built up the bond industry
10:45
Speaker 1: in terms of the total return fund at Pimco. PIMPO
10:48
Speaker 1: became the world's largest mutual fund manager while he was there.
10:52
Speaker 1: It reached a three hundred billion in assets by at
10:56
Speaker 1: the peak. So I think he really became the face
10:58
Speaker 1: of bond funds and in testing, and he was on
11:00
Speaker 1: TV a lot, he did investor letters. Tons of people
11:03
Speaker 1: had the total return fund at him go in there
11:05
Speaker 1: for oh one k plans, But I don't think we
11:08
Speaker 1: have someone to that degree, and in part because it
11:10
Speaker 1: was something new at the time. In hindsight, Peggy, what
11:14
Speaker 1: is probably the call here about what happened to Bill Gross?
11:16
Speaker 1: In terms of performance? He had such a good run there,
11:18
Speaker 1: as you mentioned then, the most more recent performance has
11:21
Speaker 1: been underwhelming at best. Did he just did the market
11:24
Speaker 1: just kind of move away from him? Did he just
11:25
Speaker 1: missed the evolution of the fixed income market. I think
11:28
Speaker 1: one of the things that may have happened was he
11:30
Speaker 1: changed his strategy, and he noted this today to Tom
11:33
Speaker 1: Keane on the interview with Bloomberg Radio and TV that
11:36
Speaker 1: he wished in some ways that he might have stuck
11:38
Speaker 1: with his total return strategy, which he really pioneered a
11:41
Speaker 1: bit more and Ben a little bit more constrained. Lisa,
11:44
Speaker 1: you know these funds really well. But these unconstrained bond
11:46
Speaker 1: funds which Bill Gross ran one at Janice, they were
11:49
Speaker 1: really un vogue after the financial crisis, and lots of
11:52
Speaker 1: bond managers said they're going to be the greatest thing
11:54
Speaker 1: because we can go anywhere and when interest rate starts
11:56
Speaker 1: to rise, we'll be able to move and groove. And well,
11:59
Speaker 1: it turned out to be a little bit more difficult
12:01
Speaker 1: than that. They had higher fees than other bond funds,
12:05
Speaker 1: and the whole argument was predicated on this idea of
12:08
Speaker 1: rising rates, of rising benchmark yields, which Bill grow subscribed to.
12:11
Speaker 1: He thought that, you know, he shorted tenure treasuries when
12:14
Speaker 1: the yields were three three and a half present. That
12:17
Speaker 1: was not right. But I do have to wonder, you know,
12:20
Speaker 1: how much of the active model is broken Bill Gross
12:24
Speaker 1: in particular, uh, you know, homing in on hedge funds
12:27
Speaker 1: and saying that that model is broken. Take a listen
12:29
Speaker 1: to what he had to say. Obviously, the hedge fund
12:31
Speaker 1: concepts suggested long and short, but it was really one
12:34
Speaker 1: in which managers took a lot of risk. So when
12:38
Speaker 1: you speak to diversification, you know, perhaps most of those
12:43
Speaker 1: hedge funds were non diversified in terms of the risk
12:46
Speaker 1: that they were taking. They were taking levered risk and
12:48
Speaker 1: still are. So he was talking about hedge funds Bill
12:51
Speaker 1: Gross this morning in a conversation with Bloomberg's Tom Keane.
12:55
Speaker 1: Of course he himself also took unlevered risk, but in
13:00
Speaker 1: mutual fun format, right and again, on this uncontrained bond fund,
13:04
Speaker 1: they had a lot more latitude and versus the total
13:06
Speaker 1: return fund that had a lot had to stay more
13:09
Speaker 1: constrained and take more measured risks. So when you have
13:12
Speaker 1: the ability to take big risks, sometimes it goes very
13:16
Speaker 1: well and sometimes it goes very sharply down the other way.
13:19
Speaker 1: And we saw Bill Gross's fund in the spring of
13:22
Speaker 1: last year really take a dive on a couple of
13:24
Speaker 1: bad bets that he had made in relation to the
13:26
Speaker 1: German bunds. So, and I think on hedge funds, you know,
13:28
Speaker 1: he makes a good point that a lot of we've
13:30
Speaker 1: seen a lot of the hedge funds kind of heard
13:32
Speaker 1: together into long bets with with the fang stocks, and
13:36
Speaker 1: then when things turned the other way kind of they
13:38
Speaker 1: go go in tandem downwards. So I think his point
13:41
Speaker 1: is made. But I do think he you know, he
13:43
Speaker 1: struggled over the last few years. We saw a lot
13:45
Speaker 1: of investor redemptions. He did say on the interview today
13:49
Speaker 1: on Bloomberg Radio and TV that he believes his legacy
13:52
Speaker 1: stands because for his over his four decade more than
13:55
Speaker 1: four decade career in the investment market, he certainly had
13:58
Speaker 1: great returns at Pimco. Peggy cons thank you very much
14:02
Speaker 1: for bringing us up to date on really momentous news
14:04
Speaker 1: in the fixed income world. Here Peggy Collins, investing team
14:06
Speaker 1: leader Bloomberg News, joining us live in a Bloomberg Interactive
14:10
Speaker 1: broker studio. And I think I have to agree with
14:12
Speaker 1: with Peggy that and with Bill that, you know, over
14:14
Speaker 1: his forty year career, just outstanding performance for his investors
14:19
Speaker 1: in the fixed income market. Uh, and he clearly was
14:22
Speaker 1: the bond king. You know, if we want to take
14:41
Speaker 1: a look at what's going on with the global economy,
14:44
Speaker 1: there is no better place to look than the shipping industry.
14:46
Speaker 1: And so we're very lucky to have Ian Webber with
14:48
Speaker 1: us here, chief executive officer of Global ship Leaves, normally
14:51
Speaker 1: based in London, but here with us in our New
14:53
Speaker 1: York studios today. Global ship Leaves actually just merged with
14:57
Speaker 1: Beside Containers late last year, now has point three billion
15:00
Speaker 1: dollars worth of ships as well as thirty eight modern
15:06
Speaker 1: fleet of thirty eight So, Ian, thank you so much
15:09
Speaker 1: for being here. Do you think the concern from your
15:12
Speaker 1: perspective of seeing ships in the water, the concern about
15:16
Speaker 1: trade tensions has been overplayed or underblown? Firstly, thanks for
15:20
Speaker 1: inviting me. It's good to be here again. Um. Yeah,
15:24
Speaker 1: trade wars and tariffs and and and the uncertainty that
15:28
Speaker 1: that creates never good for business, but it does create opportunities. Now,
15:33
Speaker 1: for for my business, you have to take a step
15:35
Speaker 1: back and look at the global container fleet and look
15:38
Speaker 1: at very big ships and then the rest medium sized
15:41
Speaker 1: and smaller. The very big ships are the ones that
15:43
Speaker 1: are deployed on trades between China and North America and
15:47
Speaker 1: China and Europe. They're the ones that are going to
15:49
Speaker 1: be most affected directly by tariffs and trade wars, at
15:54
Speaker 1: least until something is resolved. The midsize and smaller fleet
15:57
Speaker 1: is out with that. That's global contain a trade. That's
16:01
Speaker 1: where my company, Global Ship Leases is focused. There will
16:04
Speaker 1: be an indirect effects, of course, but the direct effect
16:08
Speaker 1: on global trade flows for US we expect to be negligible.
16:12
Speaker 1: That's interesting when you raise that seventy number, because when
16:15
Speaker 1: I think of global shipping, I think of the big
16:17
Speaker 1: monster container ships sitting in the harbor and Singapore, you know,
16:20
Speaker 1: in Bayo, New Jersey, getting loaded and offload of these
16:22
Speaker 1: monster things. But global trade is with the medium and
16:26
Speaker 1: smaller ships. As you say, what are the drivers of
16:29
Speaker 1: that business if it isn't the global trade that we're
16:32
Speaker 1: talking about China, Europe, China, US local local economies. These
16:35
Speaker 1: are trade lanes that connect the Indian Subconsinan and Australasia,
16:40
Speaker 1: Australasia and South America, North America and South America, Europe
16:44
Speaker 1: and South America. So it's everything else, and it's it's
16:48
Speaker 1: consumer products, it's some manufactured products, it's raw materials, it's
16:52
Speaker 1: frozen lamb, it's butter, it's wine, it's water, it's beer,
16:56
Speaker 1: it's shoes, it's all of these things that emerging economies,
16:59
Speaker 1: particularly in Okay so what changes have you seen in
17:02
Speaker 1: the past six months that sort of very indicative of
17:06
Speaker 1: either the global economy or the changing trade routes emerging
17:10
Speaker 1: from the tech Continued growth in demand in these non
17:13
Speaker 1: mainline trades, so we've got three or four demand growth.
17:17
Speaker 1: Where is it something from in particular, it's broadly spread,
17:21
Speaker 1: so you know, it's across the whole world, which is
17:24
Speaker 1: great because our ships are built to be able to
17:26
Speaker 1: be deployed around the world. On the other side of
17:29
Speaker 1: the occasion, the supply side, the order book ships that
17:33
Speaker 1: are contracted to be built for midsize and smaller container
17:36
Speaker 1: ships is tiny in flank. The supply of midsizing and
17:39
Speaker 1: smaller ships has contracted over the last half a dozen years.
17:43
Speaker 1: So we've got demand growth and supply contraction which will
17:47
Speaker 1: lead to increase in price charter rates for US rental
17:51
Speaker 1: income and ultimately asset values. So our ships that are
17:54
Speaker 1: coming open in the market later this year into two
17:57
Speaker 1: thousand and twenty, we're hoping to renew at higher rate
18:00
Speaker 1: driven by these economic fundamentals. What are you doing with
18:02
Speaker 1: your fleet right now? At least mentioned thirty eight ships,
18:06
Speaker 1: I believe are you adding to the fleet? How do
18:08
Speaker 1: you think about that capital expenditure as it related to
18:11
Speaker 1: the maybe the visibility you may have on your upcoming business. Sure,
18:16
Speaker 1: I mean, we've just double the size of the fleet.
18:17
Speaker 1: You're kind enough to observe that we've reduced the average
18:20
Speaker 1: age of the vessels. Who improve the quality of the ships.
18:23
Speaker 1: It's it's a great transaction. More than doubling the size
18:26
Speaker 1: of the business. Going forward, we still see opportunities to
18:30
Speaker 1: add selectively to the fleet second hand vessels, five ten
18:35
Speaker 1: year old vessels with a charter with a rental stream
18:38
Speaker 1: attached to it, when asset values are still relatively low.
18:42
Speaker 1: We're still it's a cyclical industry. We're still at the
18:44
Speaker 1: bottom of the cycle, and therefore there are good investment
18:47
Speaker 1: opportunities for those who have the appetite and the capital,
18:50
Speaker 1: which which we do. How does the growth that you're
18:53
Speaker 1: seeing right now in demand compared to the past few years,
18:57
Speaker 1: It's it's steady and wan it flucture. It's from me
19:00
Speaker 1: to you, we are cyclical. Not every trade lane is
19:02
Speaker 1: going gangbusters all at the same time. There are there
19:05
Speaker 1: are more prosperous economies and less prosperous, but on average
19:08
Speaker 1: three or four percent. The reason why I ask is
19:11
Speaker 1: because people are talking about this sort of global deceleration.
19:14
Speaker 1: I'm just wondering if your empirical evidence bears that out.
19:18
Speaker 1: Really is difficult to tell, but with no new ships
19:22
Speaker 1: being built in our sector um and positive demand growth
19:28
Speaker 1: even if it's three percent rather than four percent, and
19:30
Speaker 1: that's a great position for us to be in. So
19:32
Speaker 1: your company's interesting. You you own the ships and then
19:35
Speaker 1: you lease them to the large, larger container ship companies
19:38
Speaker 1: from maris them about the world. Um, so I would send,
19:41
Speaker 1: I would get it. I would sense that you would
19:43
Speaker 1: probably be a very you know, a high delta indicator
19:46
Speaker 1: to what is really going on in terms of demand
19:48
Speaker 1: in terms of global shipping. So do you have it?
19:51
Speaker 1: What's the average tenure of your contract? You have contracts
19:54
Speaker 1: rolling over, and what can you tell us about kind
19:56
Speaker 1: of the renegotiation rates you're currently seeing? I'm sure. I mean,
20:00
Speaker 1: if you were renewing a ship in today's market, you'll
20:03
Speaker 1: be looking at a new lease, a new charter of six, nine, twelve,
20:07
Speaker 1: maybe eighteen months, relatively short term, which is fined by
20:10
Speaker 1: us because we expect rates to continue to rise, so
20:12
Speaker 1: we'll then release again and an improving market but we
20:15
Speaker 1: have a mixture of long and short term charters. We
20:18
Speaker 1: have seven fifty million dollars of contracted revenue on average.
20:22
Speaker 1: Our charters run for two and a half years, So
20:24
Speaker 1: we've got a great mixture of a bedrock of of
20:27
Speaker 1: cash flow and then some short term charters renewing soon
20:30
Speaker 1: that we hope to be able to renew an improved market.
20:33
Speaker 1: So the supply demand dynamic really favors you in terms
20:36
Speaker 1: of being able to raise rates. For the marisks of
20:39
Speaker 1: the world, how much do they push back at a
20:42
Speaker 1: time when people all talk about margin compression, Uh, you know,
20:46
Speaker 1: inflation around the edges and the inability to pass it
20:50
Speaker 1: along to consumers. Oh, it's a it's a tough negotiation.
20:52
Speaker 1: You know, you've got a buyer and a seller and
20:54
Speaker 1: you're trying to come up with a price. Our our
20:57
Speaker 1: industry is very liquid. However, there are professional shipbrokers out there.
21:02
Speaker 1: Information flows extremely quickly, um and very broadly, so we
21:07
Speaker 1: kind of know what market rates are. But there is
21:10
Speaker 1: inevitably a bit of a tussle between owner and charter
21:13
Speaker 1: and you end up with something that you agree in
21:14
Speaker 1: terms of rate and duration. So who do you compete
21:17
Speaker 1: against every other container ship that's that's that's out there,
21:21
Speaker 1: but other people in your business that are in that
21:23
Speaker 1: leasing business, that are kind of in the flex business
21:26
Speaker 1: that that you're in. Yes, I mean there are just
21:29
Speaker 1: over five thousand container ships in the world. Roughly half
21:33
Speaker 1: of them are owned by owners like us, so two
21:35
Speaker 1: and a half thousand broadly spread. Some are on very
21:37
Speaker 1: long term charters, some are on short term charters. So
21:40
Speaker 1: it's a pretty fragmented industry, hence the availability of decent
21:43
Speaker 1: market information. So just real quick here in thirty seconds,
21:47
Speaker 1: what are you most concerned about with respect to global
21:49
Speaker 1: growth or do you think it's just smooth sailing ahead
21:51
Speaker 1: so to speak. Pardon my plan. It won't be smooth
21:54
Speaker 1: sailing for twenty years in the industry. I've known that.
21:58
Speaker 1: But we're looking forward. We came and it's there will
22:00
Speaker 1: be hiccups. Um you know, we're we're in a bit
22:02
Speaker 1: of a seasonal down to now. We expect things to
22:04
Speaker 1: pick up come come late February, early March, a seasonal
22:08
Speaker 1: downtown in industry. Um. Interesting, Ian Weber, thank you so
22:11
Speaker 1: much for joining us IAN as a chief executive officer
22:14
Speaker 1: of Global Ship Lease as symbols g S l on
22:16
Speaker 1: your Bloomberg terminal. He's based in London, but he joins
22:18
Speaker 1: us today in our Bloomberg eleven three oh studios. So
22:36
Speaker 1: unless you're a Patriots fan, you probably didn't find last
22:38
Speaker 1: night's thirteen to three Patriots win over the Brams very
22:42
Speaker 1: scintillating to television. But the real question for Madison Avenue
22:46
Speaker 1: has how did to do in ratings and how did
22:48
Speaker 1: the advertisers fair? So do you give us some color
22:50
Speaker 1: on that? We bring in John Swollen. John is a
22:53
Speaker 1: chief research officer from North America for Can'tar Media. He's
22:57
Speaker 1: based in Euyork and joins us on the phone. So again, John,
22:59
Speaker 1: not the most exciting of games, arguably, but what did
23:04
Speaker 1: you think of the ads and any winners and losers
23:06
Speaker 1: you saw? Well, you're right, it wasn't the most exciting
23:09
Speaker 1: game on the field. But that's why we have the
23:11
Speaker 1: Advertising Bowl as a backup. UM, and every year the
23:14
Speaker 1: advertisers do their best to entertain fans during the breaks
23:17
Speaker 1: in the action. So do they win? Did they do
23:19
Speaker 1: a good job of it? I don't know. Um. Late
23:23
Speaker 1: in the game, I heard Tony ruma I would call
23:25
Speaker 1: Tony Roma saying it hasn't been pretty, and I think
23:28
Speaker 1: that comment might apply to some of the advertising as well. UM.
23:32
Speaker 1: But by and large, I mean there were a handful
23:34
Speaker 1: of winners in the in the game. UM. Certainly Budweiser,
23:37
Speaker 1: which was the top advertiser in the game UH spent
23:40
Speaker 1: about sixty six million dollars to UH to run spots
23:43
Speaker 1: in the game promoting It's it's different beer brands and
23:46
Speaker 1: many of those. I think we're favorably received by the UM,
23:50
Speaker 1: by the by the doing audience, by the corner, and
23:54
Speaker 1: extending their Delly Delly franchise. Al Right, so we had
23:59
Speaker 1: a delidilly. Although the corn lobby is pretty upset with
24:02
Speaker 1: Budweiser today, I believe right that's right, because they were
24:05
Speaker 1: touting that there I guess corn syrup free maybe exactly,
24:08
Speaker 1: and people didn't realize that wasn't even aware, but most
24:12
Speaker 1: people didn't realize that corn syrup was used to brew
24:14
Speaker 1: beer in the first place. But you know, I gotta say,
24:17
Speaker 1: I was looking actually at some cantorvideos of some of
24:20
Speaker 1: your research, and I was really interested in the fact
24:23
Speaker 1: that the ads paid for by these brands, the total
24:26
Speaker 1: amount of time that they had was the lowest since
24:28
Speaker 1: two thousand and ten, with the rest being taken up
24:31
Speaker 1: by network promos and NFL promotions, etcetera. Uh, what do
24:34
Speaker 1: you make of that? I make that, Um, it's a
24:38
Speaker 1: supply and demand marketplace, and the fact that there was
24:42
Speaker 1: slightly less paid commercial time to me as an indication
24:45
Speaker 1: of a relative lack of demand. Um. I think the
24:49
Speaker 1: game was still very well received by advertisers, and many
24:52
Speaker 1: of them took advantage. But I think there was maybe
24:54
Speaker 1: a swing of a minute and a half to two
24:56
Speaker 1: minutes of commercial time that in previous years would have
24:59
Speaker 1: been paid at this time time was used by the
25:01
Speaker 1: network or by the NFL instead. So, John, we saw
25:04
Speaker 1: that CBS charged I think I saw between five point
25:07
Speaker 1: one and five point three million for their average thirty
25:10
Speaker 1: second spot. That was I think kind of flatish. Maybe
25:13
Speaker 1: with the prior year Super Bowl has I think thirty
25:17
Speaker 1: second spots that they plateaued they hit a peak, do
25:19
Speaker 1: you think, um? I think so. I mean, it certainly
25:23
Speaker 1: gets harder to raise prices once you're above that five
25:26
Speaker 1: million dollar threshold. The you know, the difficulty that CBS
25:30
Speaker 1: had in selling spots in this game, and the fact
25:32
Speaker 1: that they were still selling spots within twenty four hours
25:34
Speaker 1: of kickoff. UM. Is an indication I think that, you know,
25:37
Speaker 1: prices a barrier for for more and more advertisers. UM.
25:41
Speaker 1: But at the end of the day, UM, it's still
25:43
Speaker 1: a very large it's still a very large reviewing audience. UM.
25:46
Speaker 1: And there's still advertisers that will gravitate towards the Super Bowl.
25:50
Speaker 1: But I think increasingly we're going to see a fewer
25:52
Speaker 1: and few of those small upstart brands that are used
25:55
Speaker 1: the Super Bowl to try and break through make a
25:57
Speaker 1: big impression. I think they are an endangered SPECEI. You know, John,
26:02
Speaker 1: people talk about how this is the lowest scoring super
26:05
Speaker 1: Bowl ever and that it also probably had a decline
26:07
Speaker 1: in viewership. And I'm just wondering. You know, Paul was
26:10
Speaker 1: asking about whether the thirty second spot is kind of
26:14
Speaker 1: on its deathbed or have we seen the peak in
26:17
Speaker 1: prices for Super Bowl ads? UM. I don't know that
26:23
Speaker 1: we've seen a peak. UM. I think certainly if it
26:25
Speaker 1: continues to increase in future years, it will be at
26:28
Speaker 1: a very low rate. I mean, over the last ten years,
26:31
Speaker 1: the price of the Super Bowl ad doubled. UM. We're
26:34
Speaker 1: not gonna certainly not going to see that over the
26:36
Speaker 1: next ten years. So, John, given that maybe you know,
26:41
Speaker 1: these networks have kind of maybe seen some peak pricing,
26:44
Speaker 1: or maybe the growth rates will be a little bit
26:45
Speaker 1: lower than what they have been over the last ten years,
26:47
Speaker 1: is it still worth it for them to be into
26:50
Speaker 1: the Super Bowl business. It's definitely worth it for the networks. Yes, Um,
26:54
Speaker 1: I mean, it's a tremendous promotional platform for them. Um.
26:58
Speaker 1: It does bring in huge revenue. Even if the revenue
27:00
Speaker 1: growth slows in future years. There's nothing else out there
27:03
Speaker 1: that brings in nearly as much revenue as the super Bowl.
27:06
Speaker 1: I mean to put things in perspective, Um, the super
27:08
Speaker 1: Bowl brings in as much revenue as many small cable
27:12
Speaker 1: networks do in a full year. The super Bowl does
27:16
Speaker 1: it in one day. John swall and thank you so
27:19
Speaker 1: much for being with us. We really appreciate it. John Swallen,
27:21
Speaker 1: chief Research Officer for North America at Cantor Media, talking
27:25
Speaker 1: about the Super Bowl and the advertisers that did spend
27:30
Speaker 1: millions and millions of dollars getting that exposure. Thanks for
27:34
Speaker 1: listening to the Bloomberg P and L podcast. You can
27:36
Speaker 1: subscribe and listen to interviews at Apple Podcasts. Or whatever
27:39
Speaker 1: podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter
27:42
Speaker 1: at pt Sweeney. I'm Lisa A. Bram Woyds. I'm on
27:45
Speaker 1: Twitter at Lisa bramwo wits one before the podcast, you
27:47
Speaker 1: can always catch us worldwide on Bloomberg Radio