Latest / Bloomberg Intelligence / Eco Slowdown Impacting Oil More Than Supply Crunch

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Eco Slowdown Impacting Oil More Than Supply Crunch · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing 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. Oil markets these days have been
0:23
Speaker 1: a story of push and pull. We have on one
0:26
Speaker 1: side the possible supply disruptions coming from the Iranian us
0:30
Speaker 1: UH disputed over the nuclear development. You have the situation
0:34
Speaker 1: in Libya. On the other side, you have the prospect
0:37
Speaker 1: for even slower global growth in the face of rising
0:40
Speaker 1: trade tensions. Here to help us understand why it is
0:44
Speaker 1: that the slowing global growth is what's winning out right now,
0:46
Speaker 1: with prices now at their lowest since early March, is
0:49
Speaker 1: Dr Ellen Walled, President of Transversal Consulting, a nonresident Senior
0:54
Speaker 1: Fellow at the Atlantic Council's Global Energy Center, as well
0:57
Speaker 1: as a contributor to Bloomberg Opinion, and she is in
1:00
Speaker 1: studio today in our Bloomberg Atta Active Broker Studios. So
1:03
Speaker 1: thank you so much for being here. So let's start
1:05
Speaker 1: with that. Why is it that the global slowdown is
1:09
Speaker 1: the story that's taking pre eminence over this other, very
1:12
Speaker 1: real idea of a supply disruption. I think the big
1:15
Speaker 1: reason here is that a lot of the news and
1:19
Speaker 1: the headlines are really all about the global slowdown. They're
1:22
Speaker 1: all about every every other day we get a new
1:25
Speaker 1: headline of another economic indicator showing that global growth is
1:29
Speaker 1: slowing down. Economic growth is slowing down, trade tensions are
1:33
Speaker 1: making everything worse. And then meanwhile, on the other side,
1:36
Speaker 1: we're hearing that Iranian exports are significantly lower, Thanezuela isn't
1:42
Speaker 1: exporting anywhere old to the United States. We've got problems
1:46
Speaker 1: in Russia, I mean real serious issues with this pipeline
1:49
Speaker 1: that have really dampened down Russian oil production. And yet
1:53
Speaker 1: at the same time, everything is just it's all the
1:56
Speaker 1: demand story. So we've got definitely a supply crunch, and
2:01
Speaker 1: yet we're seeing markets they're only paying attention to demand.
2:05
Speaker 1: Where will if where will we see it in the data?
2:08
Speaker 1: The supply issue that you're talking about, well, we're seeing
2:11
Speaker 1: it right now. First of all, looking at what's happening
2:13
Speaker 1: in Iran is keeping a really close eye on this
2:17
Speaker 1: because exports really seem to cut off right at the
2:21
Speaker 1: beginning of May. But now we're actually seeing some tankers
2:24
Speaker 1: coming up into Iranian ports filling with oil, keeping a
2:28
Speaker 1: very close eye on them. We do know that Iran
2:30
Speaker 1: has exported about three million barrels of oil to Syria,
2:34
Speaker 1: believe it or not, and that data comes from Tanker
2:37
Speaker 1: Trackers dot Com. And it seems like they're basically using
2:40
Speaker 1: Syria as a holding ground for their oil because they
2:43
Speaker 1: filled up all their other storage containers and that oil
2:45
Speaker 1: has to go somewhere. Uh, And so we needed we're
2:49
Speaker 1: waiting basically on data to show is this oil going
2:51
Speaker 1: to go to China and is it going to enhance
2:54
Speaker 1: and really inflate the tensions that are already going on
2:58
Speaker 1: in that region. That's really interest saying actually and raises
3:01
Speaker 1: a whole other spectrum of conflict that I hadn't worried about,
3:03
Speaker 1: but I will start to worry about now. I guess
3:05
Speaker 1: that one question I have is do you think that
3:07
Speaker 1: markets are wrong, that they're paying attention to the wrong thing,
3:10
Speaker 1: and that the potential supply disruptions really are perhaps the
3:14
Speaker 1: most dominant of these two factors, I think if we
3:17
Speaker 1: weren't seeing these constant headlines and fears about demand, we
3:22
Speaker 1: definitely see oil prices going up now because of of
3:26
Speaker 1: what we're seeing in terms of these supply issues. We're
3:29
Speaker 1: also it's not sure. I mean, it does look like
3:31
Speaker 1: OPEC wants to rule over its supply reduction agreement. It's
3:35
Speaker 1: not sure, but it does. It does look like that,
3:37
Speaker 1: and that would normally send send prices up. So I
3:41
Speaker 1: do think that that we are seeing some some issues there,
3:44
Speaker 1: and um, this obsession with demand and with economic flu
3:48
Speaker 1: down is really just keeping prices down. So you mentioned
3:51
Speaker 1: Russia talk to us about that. I understood there was
3:54
Speaker 1: they had some issues with their pipelines, some contaminated oil.
3:57
Speaker 1: How severe is it and how quickly can they fix
3:59
Speaker 1: it and get a ramped back up. Well, it's actually
4:01
Speaker 1: a lot more severe than we were led to believe initially.
4:05
Speaker 1: When we first heard about this, it was in April.
4:07
Speaker 1: There were some refineries in Eastern Europe that were reporting
4:11
Speaker 1: that they were receiving contaminated oil and uh, they really
4:15
Speaker 1: it's very very bad to put this in their refinery equipment,
4:18
Speaker 1: so they really can't process that oil and they said, oh,
4:21
Speaker 1: two weeks, it'll be fixed. Well, it turns out that,
4:24
Speaker 1: you know, now we're looking at well into June before
4:27
Speaker 1: they completely fixed this problem because they have to basically
4:30
Speaker 1: clean out the entire pipeline. Meanwhile, Russia has actually cut
4:33
Speaker 1: back on its production. Believe it or not, in Russia
4:36
Speaker 1: was the one of the few countries in this Opeque
4:40
Speaker 1: agreement that hadn't cut to its promised amounts. Now they're
4:44
Speaker 1: actually below the quota that they've agreed upon just because
4:48
Speaker 1: of this contamination issue, and so we're definitely going to
4:51
Speaker 1: see it go on into June. It's possible, could it
4:54
Speaker 1: could effect supplies even after June. What are you expecting
4:59
Speaker 1: about the PECK meetings? People have speculated that they will
5:02
Speaker 1: continue with the output cuts that have been planned, despite
5:06
Speaker 1: the potential disruptions to supply. Is that you're expecting, I'm
5:09
Speaker 1: that's that's the expectation, is that they will roll over
5:12
Speaker 1: basically the the agreement as is. Although today we did
5:15
Speaker 1: hear news that Russia is looking for increased flexibility. It's
5:19
Speaker 1: not not entirely clear what that means, but that could
5:21
Speaker 1: definitely throw a wrench in their plans. Combined with the
5:24
Speaker 1: fact that Russia is also looking for flexibility in terms
5:27
Speaker 1: of scheduling. They want to move the date of the
5:29
Speaker 1: OPAQU meeting, which is now for the end of June.
5:31
Speaker 1: They want to move it to July because the Russian
5:34
Speaker 1: Oil minister can't make it in June. And this is
5:37
Speaker 1: causing a big consternation amongst the opaque countries because they
5:41
Speaker 1: they see it as this is their OPEC meeting. Russia
5:44
Speaker 1: is not even a member. Why should they move the
5:46
Speaker 1: date of their meeting for this country that's not even
5:49
Speaker 1: part of OPEC. And I think it's exposing some of
5:51
Speaker 1: the larger cracks in OPEC that have to do with
5:54
Speaker 1: the fact that they've basically kind of sold their soul
5:56
Speaker 1: to the Russians. He can't make it, what's he gonna
5:58
Speaker 1: be doing? Going on the case? I has the energy guy,
6:04
Speaker 1: what's what? What's more pressing? What's I learned that he
6:08
Speaker 1: can't make the meeting, But then we also learned that
6:10
Speaker 1: they're storing oil in Syria. So Dr ellen Wall, thank
6:13
Speaker 1: you so much. You always have great information on the
6:15
Speaker 1: global oil markets. We appreciate you coming in. Dr Walden's
6:18
Speaker 1: president of Transversal Consulting also nonresident Senior Fellow at the
6:22
Speaker 1: Atlantic Council's Global Energy Center, and of course a Bloomber
6:25
Speaker 1: opinion contributor. Well amid rising trade tensions, the equity markets
6:42
Speaker 1: are off approximately five percent from recent highs. So the
6:45
Speaker 1: question many investors are asking is whether whether this is
6:48
Speaker 1: a healthy dip or something more. To help us to
6:50
Speaker 1: answer that question, we welcome our next guest, David Diets,
6:53
Speaker 1: David's founder, president and chief investment strategists of Point View
6:56
Speaker 1: Wealth Management, located in the happening metropolis of a New Jersey. David,
7:01
Speaker 1: thanks so much for joining us. So again, let's just
7:04
Speaker 1: start real basic here. Is this a healthy pullback in
7:07
Speaker 1: the market or is it something more fundamental than investors
7:09
Speaker 1: need to be concerned about. Well, truth be told, no
7:11
Speaker 1: one knows for sure, but certainly this is the type
7:14
Speaker 1: of pullback which we see every single year, often multiple times.
7:18
Speaker 1: I mean to put this into context, We're up about
7:20
Speaker 1: thirteen pcent year to date. We're down five percent this month,
7:24
Speaker 1: but that's five percent off all time highs. So although
7:28
Speaker 1: everything bears watching, this is not a crisis by by
7:31
Speaker 1: a long shot. Let's take a listen to what Morgan
7:34
Speaker 1: Stanley is James Gorman had to say about it. He
7:36
Speaker 1: was speaking with Blueberg's Tom mackenzie, and honestly, he was
7:39
Speaker 1: talking about how the risk is is the equity markets
7:43
Speaker 1: have more downside than upside, but that the magnitude is
7:48
Speaker 1: not so big. Would you agree, well, um, you know, certainly,
7:53
Speaker 1: I do think that further risk to the downside, of course,
7:56
Speaker 1: but you know, let's put into context here. I think
8:00
Speaker 1: three key things are driving this market right now. One
8:02
Speaker 1: is a very strong economy. We just got an affirmation
8:05
Speaker 1: basically of a three print on US GDP for the
8:08
Speaker 1: first quarter. We've got the lowest unemployment since the Vietnam
8:11
Speaker 1: War era. We've got super low interest rates, which makes
8:14
Speaker 1: affordability for house building capital expenisher is great. What's the
8:17
Speaker 1: big problem, of course, is the trade talks with China.
8:21
Speaker 1: We don't know. Since that tweet and May five, everything
8:23
Speaker 1: starts to unravel. But if one tweet can undo it,
8:26
Speaker 1: quite frankly, another queek could put this um put this
8:30
Speaker 1: back together again. So you know, we think one should
8:34
Speaker 1: be selectively still buying in this market. What are we
8:37
Speaker 1: buying selectively in this market? Then? You know, I would
8:40
Speaker 1: say two sectors. One is generally tech stocks, because I
8:44
Speaker 1: do think that there are secular, not just cyclical tail
8:48
Speaker 1: winds behind this sector where it's almost imperative for banks
8:52
Speaker 1: everyone in this economy to get the latest and greatest
8:55
Speaker 1: to keep up with productivity and be competitive. Second, of course,
8:58
Speaker 1: I think with the before you move on from tech,
9:02
Speaker 1: because everybody wants to be a tech company right now,
9:04
Speaker 1: and everybody calls themselves a tech company and their tech
9:07
Speaker 1: areas that are doing well in tech areas uber that aren't.
9:11
Speaker 1: So I'm just wondering, what are you talking about when
9:13
Speaker 1: you're talking about buying tech. Well, certainly you want selectivity. Um,
9:18
Speaker 1: there are many many tech names which are short on earnings,
9:22
Speaker 1: high evaluation, and we would we would be steering clearer
9:25
Speaker 1: that the one we'd be setting today would be Intel. Um.
9:29
Speaker 1: Why Intel? Because Intel is like the world's largest microprocessor manufacturer.
9:34
Speaker 1: And now that we have artificial intelligence, now that we
9:37
Speaker 1: have the Internet of Things, now that we're soon going
9:39
Speaker 1: to have autonomous driving, microprocessors are going everywhere. They're the
9:42
Speaker 1: company that's best position to handle all that. Meanwhile, you
9:46
Speaker 1: have evaluation that you can stomach. Is trading at about
9:48
Speaker 1: ten times earnings, it's about forty five. That's down from sixties,
9:52
Speaker 1: so you have almost pull back. This is a great
9:56
Speaker 1: entry point for these long term trends. So one of
9:58
Speaker 1: the names that and now you've mentioned in the past
10:01
Speaker 1: is Wells Fargo, and it's in a sector that, uh,
10:05
Speaker 1: you know, I think investors are very uncertain about number
10:07
Speaker 1: one in terms of the big global financials, and then
10:09
Speaker 1: number two it's got some companies specific issues, reputational issues,
10:13
Speaker 1: management issues. What makes you uh bullish on Wells Fargo. Well,
10:18
Speaker 1: let's let's start with the macro's. Financials are the sector
10:23
Speaker 1: that is always poised to do better and never seems to.
10:27
Speaker 1: And I think one of the big culprits right now
10:29
Speaker 1: is very low interest rates. Now, um, of course we're
10:32
Speaker 1: seeing the interest rates at the lowest points since fall
10:35
Speaker 1: of two thousand and seventeen. My guess is, with just
10:39
Speaker 1: a little bit of constructive progress on China, those interest
10:41
Speaker 1: rates are going to move back up. We're seeing some
10:43
Speaker 1: movement in the right direction today and that's going to
10:46
Speaker 1: improve net interest margins. So financials very cheap. Now, if
10:49
Speaker 1: we get just a little bit more of a net
10:52
Speaker 1: interest margin, I think banks are gonna do well. Now,
10:54
Speaker 1: why Wells Fargo? So there's a bad news and a
10:57
Speaker 1: good news. The good news is that is probably the
11:01
Speaker 1: best franchise in my view in America today. It's coast
11:05
Speaker 1: to coast. It's focusing on that middle market. Uh Lending
11:09
Speaker 1: is focusing on retail banking. It had one of the
11:12
Speaker 1: largest share of those sticky f d I c ensured
11:16
Speaker 1: low cost deposits that do not move, and they've steered
11:19
Speaker 1: clear the more volatile capital markets. So that's the good news.
11:22
Speaker 1: The bad news, of course, is they are basically without
11:25
Speaker 1: a leader. They have an interim uh corporate lawyer as
11:28
Speaker 1: a leader. Um Jamie Diamond had some very negative comments
11:31
Speaker 1: about that just a couple of days ago. He happens
11:33
Speaker 1: to be a competitor, and uh so, I would I
11:36
Speaker 1: wouldn't expect anything less. Um So, I think if you
11:39
Speaker 1: get a well known, prestigious someone from the outside coming
11:44
Speaker 1: in who sets the right tone, I think you can
11:46
Speaker 1: get a significant pop in that stock. And again, while
11:49
Speaker 1: you're waiting, have a close to four percent dividend on
11:52
Speaker 1: a stock that wasn't January of last year six now
11:56
Speaker 1: it's below fifties too. About another stock, Pecks see the
12:00
Speaker 1: shares down forty one percent going back since the end
12:05
Speaker 1: of what are you seeing here? I wish our prescription
12:09
Speaker 1: drug prices were down um, But here's here's what I see.
12:14
Speaker 1: First of all, you've got the macro situation here where
12:18
Speaker 1: politicians of both sides of the aisle are beating on healthcare.
12:21
Speaker 1: They want prices to be lower. Now that we're entering
12:24
Speaker 1: the political season, there's some radical calls for single pair
12:27
Speaker 1: um healthcare system. All of that would be potential uncertainty,
12:32
Speaker 1: if not a negative, and all healthcare stocks are down. CVS,
12:35
Speaker 1: I think is a sure survivor not more than a survivor.
12:38
Speaker 1: A winner is really three companies and one. You've got
12:41
Speaker 1: a coast to coast pharmacy operation close to ten thousand
12:44
Speaker 1: stores making about one point four billion prescriptions a year. Then,
12:49
Speaker 1: of course they've got a great uh pharmacy benefits management
12:53
Speaker 1: the form of care Mark. But now they vertically integrated
12:56
Speaker 1: with the acquisition of Aquis of Etna, which gives them
13:00
Speaker 1: twenty million insurance customers. So one of the problems right
13:03
Speaker 1: now is, believe it or not, that merger has not
13:06
Speaker 1: been finally approved. Even though government authorities signed off on it,
13:09
Speaker 1: still hasn't be signed off by a judge who wants
13:11
Speaker 1: to take a second look. Now, if all the parties
13:13
Speaker 1: to say go ahead, I think once that judge makes
13:15
Speaker 1: the right decision, that stock moves higher. But isn't there
13:18
Speaker 1: just just for healthcare, there's just always this overhang of gee,
13:21
Speaker 1: what are the politicians gonna be saying? What are the government? Regulation?
13:24
Speaker 1: Just seems like it's always in the crosshairs and there's
13:26
Speaker 1: so much overhang just from news about regulation. Yeah, you know,
13:29
Speaker 1: it's a great point. Certainly we have seen that before
13:32
Speaker 1: with proposal for Hillary Care, with proposals in the first
13:35
Speaker 1: couple of years the Obama administration. But what happens is ultimately,
13:39
Speaker 1: and I believe it's a case now prices now we
13:41
Speaker 1: reflect that kind of dismal outlook where it can't catch
13:45
Speaker 1: a break and the politicians are being at the end
13:48
Speaker 1: of the day, we want the best healthcare possible. The
13:51
Speaker 1: UM population is growing worldwide, there's there's demand, and I
13:56
Speaker 1: think ultimately UM it will become business as usual and
13:59
Speaker 1: stock since we'll move higher. David Dits, thank you so
14:02
Speaker 1: much for being with us here. David Diets is founder,
14:04
Speaker 1: president and chief investment strategist at Point View Wealth Management.
14:08
Speaker 1: In Summit, New Jersey, Paul, we talk a lot about
14:25
Speaker 1: the data that a lot of websites collect and the
14:29
Speaker 1: question is what can you do with it? And yelp
14:31
Speaker 1: has taken away to use it to try to indicate
14:35
Speaker 1: what the economy, how which shape the economy is in
14:38
Speaker 1: Joining us now is Carl Bolic, data Science editor at YELP. Carl,
14:42
Speaker 1: so happy to have you here in our Bloomberg Interactive
14:44
Speaker 1: broker studios. Full disclosure. Carl and I went to high
14:47
Speaker 1: school together and worked on the school paper together. I'm
14:49
Speaker 1: so glad to see you breaking stories. Yeah, exactly, um,
14:54
Speaker 1: lots of them. So, Carl, what exactly is yelps economic average.
14:59
Speaker 1: It's a benchmark of the local economy and it brings
15:04
Speaker 1: together thirty different really important but also really specific sectors
15:09
Speaker 1: in yelp across our most important really areas of the economy,
15:14
Speaker 1: which are restaurants and food, nightlife, shopping and services, which
15:18
Speaker 1: are really to us, the backbone of the local economy.
15:20
Speaker 1: So we've chosen thirty. I'm sure you and your listeners
15:23
Speaker 1: could recognize that number is like maybe a crucial number
15:26
Speaker 1: for benchmarks of of economic health and market strength. And
15:30
Speaker 1: you know it has it has a long history, and
15:33
Speaker 1: it allows us to really cover the breadth of these
15:35
Speaker 1: kinds of businesses. So what makes your indicator unique? Do
15:39
Speaker 1: you think relter to what's out there in the market. Yeah,
15:42
Speaker 1: so there there's lots of economic indo cares out there.
15:45
Speaker 1: We really saw an opportunity to look at something close
15:50
Speaker 1: to real time, very specific, very granular from a business
15:54
Speaker 1: type level, and then also very granular from a geographical level.
15:58
Speaker 1: So you know, we are aggreg aiding anonymized you know,
16:01
Speaker 1: consumer behavior and business activity down to you know, like
16:07
Speaker 1: not just this is a restaurant, not just this is
16:09
Speaker 1: a Chinese restaurant, but this is a sexualan restaurant. So
16:12
Speaker 1: really being able to dig deep into what is happening
16:15
Speaker 1: on a very specific level with enough volume because of
16:18
Speaker 1: our tens of millions of users every month on the
16:21
Speaker 1: app and tens of millions on desktop, to be able
16:23
Speaker 1: to really say something about a lot of different parts
16:25
Speaker 1: of the local economy. I love this, by the way,
16:27
Speaker 1: because we do talk a lot about what people are
16:29
Speaker 1: going to do with data. And just for a little background,
16:31
Speaker 1: so carlbi Alec, probably you've read him as the numbers
16:34
Speaker 1: guy on the Wall Street Journal back in the day,
16:35
Speaker 1: and then you worked at five thirty eight UM and
16:38
Speaker 1: you've done a lot of work with numbers, and I'm
16:41
Speaker 1: wondering whether you're seeing anything with these economic indicators that
16:46
Speaker 1: are somewhat at odds at the main story that we
16:49
Speaker 1: keep hearing, which is steady growth, strong consumer. What are
16:52
Speaker 1: you seeing right now? Yeah, we're seeing a mixed picture.
16:56
Speaker 1: So we we introduced the up economic average looking back
17:00
Speaker 1: at the fourth quarter and saw a decline, so so
17:05
Speaker 1: it looked like a slump or the start of a slump.
17:08
Speaker 1: And then for the last quarter, we saw you know,
17:12
Speaker 1: a slight rally, pretty moderate, mostly flat, and some weakness
17:17
Speaker 1: in a few key categories. So I think we we've
17:19
Speaker 1: been deviating a bit from the overall story, which I
17:23
Speaker 1: think has to do a lot with the sort of
17:26
Speaker 1: the real time nature of our data, but also like
17:28
Speaker 1: our our really laser focus on the kinds of local
17:31
Speaker 1: economic experiences that you have in person with with the
17:34
Speaker 1: service provider in a store. So which areas you're seeing
17:37
Speaker 1: a slow down? Yeah, so in this past quarter, in particular,
17:40
Speaker 1: autos we're weak and uh, you know, it's something that
17:43
Speaker 1: we've been tracking for a while. We've been interested in
17:46
Speaker 1: sort of what the effect is of the shift from
17:49
Speaker 1: owning cars to too renting cars to you know, renting
17:53
Speaker 1: a driver in a car for twenty minutes for a
17:56
Speaker 1: ride around town. Like what that might be doing to
17:57
Speaker 1: some of these core sectors that rely on people owning
18:00
Speaker 1: and using their cars a lot, needing various services, needing
18:03
Speaker 1: to buy new cars or used cars. And it looks
18:06
Speaker 1: like across a lot of different categories we're seeing a
18:08
Speaker 1: slump there. And then in retail, which again is the
18:12
Speaker 1: part of retail that is that in person experience going
18:15
Speaker 1: into the store, we're seeing weakness, especially in sort of
18:18
Speaker 1: tech retail, where I think a lot of the activity
18:20
Speaker 1: is moving online. So Carl, how about regionality. Are you
18:24
Speaker 1: seeing differences regionally from some of your data coming in, Yeah,
18:28
Speaker 1: it's it's a great question. It really depends on the sector. Like, overall,
18:35
Speaker 1: the regions are moving roughly in line with each other,
18:37
Speaker 1: but in some areas, certain kinds of restaurants are stronger.
18:41
Speaker 1: You know, there's different demands for home services depending on
18:44
Speaker 1: what part of the country you're in. So we are
18:47
Speaker 1: seeing those kinds of differences, but generally the regional pictures
18:51
Speaker 1: tracking the national one to a way that I didn't
18:52
Speaker 1: expect going into this. I thought we would see more
18:55
Speaker 1: regional differences. We do see bigger differences at the city
18:57
Speaker 1: level and the metro area level. I want to talk
19:00
Speaker 1: about how you use the data that Yelp collects, because
19:04
Speaker 1: there's sort of the activity in terms of ordering through
19:08
Speaker 1: Yelp or you know, reviewing through Yelp. What do you
19:11
Speaker 1: what do you pull for the economic average? Yeah, so
19:15
Speaker 1: we basically looked at everything. We looked at the full gamut.
19:18
Speaker 1: I mean there, as you say, there's so many different
19:20
Speaker 1: ways that people interact with businesses, and they all show
19:24
Speaker 1: some kind of consumer interest. Some of them are very
19:26
Speaker 1: specific to one sector, like the restaurant space in the
19:29
Speaker 1: case of ordering food. So we looked at like, what
19:33
Speaker 1: is the combination of these that best matches what we
19:36
Speaker 1: think is, you know, the overall consumer activity on the platform.
19:41
Speaker 1: And so we went with that measure. Well, but I
19:43
Speaker 1: guess one question that I have is how do you
19:45
Speaker 1: measure something that's qualitative, that's subjective like reviews. I mean,
19:49
Speaker 1: do you do you take that into That's a great question, right,
19:52
Speaker 1: Like is a higher rating an indicator? Yeah? For this measure,
19:56
Speaker 1: we were really just looking at at interest So if
19:59
Speaker 1: you went to a business page on yell to leave
20:03
Speaker 1: a two star review because you had an experience that
20:05
Speaker 1: disappointed you, that would still count as go as consumer
20:08
Speaker 1: activity from the point from a purely economic point of
20:10
Speaker 1: view of you likely transacted with that business. For other studies,
20:14
Speaker 1: we do. We do think a lot about ratings and
20:18
Speaker 1: when ratings are going up, is that indicating an overall
20:20
Speaker 1: increase in quality or is that a change in you know,
20:23
Speaker 1: consumer psychology and their propensity to leave negative reviews. So
20:27
Speaker 1: it's it's definitely something that we consider. And if we
20:30
Speaker 1: if we do see a rise in ratings that we
20:32
Speaker 1: think reflects uh an increase in sort of the quality
20:35
Speaker 1: of the consumer experience, then we think that's an important
20:38
Speaker 1: thing to capture, but is not normally capture in economic indicators.
20:42
Speaker 1: So you capture I'm thinking good jillions of pieces of
20:45
Speaker 1: data from all the users of a Yelp and they're
20:47
Speaker 1: coming at you all time, unstructured. How often do you
20:49
Speaker 1: release your number, your index number, your output? Is this
20:53
Speaker 1: a daily thing a quarterly thing? So right now it's
20:56
Speaker 1: quarterly and we release it within typically within the month
20:59
Speaker 1: after after the quarter. We do want to become more
21:03
Speaker 1: frequent and faster, and we're working on that. You know,
21:05
Speaker 1: we're being very careful as well, because we want to
21:09
Speaker 1: release something that reflects, you know, the real underlying consumer behavior,
21:14
Speaker 1: and there are quarterly trends that we want to kind
21:17
Speaker 1: of remove, and it's easier to adjust on a quarterly
21:20
Speaker 1: level than a monthly level. So we're thinking about how
21:22
Speaker 1: we're going to do this more frequently, but we certainly
21:24
Speaker 1: have the data to do it, and it's in our roadmap. Cool,
21:28
Speaker 1: Carl Bi Aleck, thank you so much for joining us,
21:30
Speaker 1: car back data science editor, former newspaperman in high school
21:34
Speaker 1: for Yellow with the Economic Average, So very cool. Exactly,
21:57
Speaker 1: I want to turn our attention to a story that
22:00
Speaker 1: has left me and Paul if I dare speak for you,
22:03
Speaker 1: scratching our heads. So basically, a top Justice Department official
22:07
Speaker 1: or several of them, are hoping for T Mobile and
22:11
Speaker 1: Sprint to lay the groundwork for a new wireless carrier
22:15
Speaker 1: in order to go through with their merger, which is
22:18
Speaker 1: very hard to understand. What would that mean to creating
22:21
Speaker 1: a competitor? Joining us now to help us perhaps understand
22:25
Speaker 1: A re senior litigation analyst with Bloomberg Intelligence, So what
22:29
Speaker 1: what gives I know, it sounds really strange, and in
22:32
Speaker 1: particular in relation to this deal. I mean, these companies
22:34
Speaker 1: are telecon companies. What you see in other deals where
22:37
Speaker 1: businesses are involved in a lot of different things. They
22:39
Speaker 1: sell one piece, but what they're gaining is still much
22:42
Speaker 1: bigger than what they're selling. But here let me explain
22:44
Speaker 1: what the Department of Justice as guidelines say is once
22:47
Speaker 1: they've identified a competitive problem, the remedy has to fully
22:50
Speaker 1: fix that problem. That has to replace the competition that's
22:53
Speaker 1: been lost within that area where there's a problem. So
22:56
Speaker 1: the two things I'd say about this deal is one,
22:58
Speaker 1: do we know if they have a problem in both
23:00
Speaker 1: the prepaid side and the post paid side. If they do,
23:03
Speaker 1: then it's truly, you know, fully creating a new competitor.
23:08
Speaker 1: If they only have found a competitive problem on one side,
23:10
Speaker 1: it would be creating a new network and a new
23:12
Speaker 1: competitor just for that kind of consumer. But but if
23:15
Speaker 1: you think about this um, it's still possible that what
23:18
Speaker 1: a combined T Mobile Sprint get is better than what
23:21
Speaker 1: would happen if they had to create a new competitor,
23:24
Speaker 1: because they'll get a blend of spectrum that Sprint doesn't
23:27
Speaker 1: have today. And the idea here with the remedy is
23:29
Speaker 1: you're absorbing Sprint, you need we need to replace the
23:31
Speaker 1: competitive intensity that's lost, So you really need to create
23:35
Speaker 1: kind of what Sprint is today, not then necessarily the
23:38
Speaker 1: blend of spectrum, this mix that the combined Tea Mobile
23:41
Speaker 1: Sprint is going to get. So it's still possible they
23:44
Speaker 1: could create this new competitor but still gain as a
23:48
Speaker 1: merger coming out of this, as odd as that sounds. Okay,
23:51
Speaker 1: that that sounds odd, and I'm a little bit smarter
23:53
Speaker 1: than that I was before. So let's just play this forwar.
23:56
Speaker 1: Let's say, okay, we'll effectively will will the Sprint mobile
24:00
Speaker 1: entity least some spectrum to whatever third party is out there,
24:04
Speaker 1: and that third party will then operate a wireless network.
24:07
Speaker 1: Is that kind of the thought process? Well, you see
24:08
Speaker 1: the devils in the details. And this is now going
24:10
Speaker 1: to be a pretty intense negotiation because obviously Springtan T
24:13
Speaker 1: Mobile will try to give up as little as they
24:15
Speaker 1: can in terms of actual structural assets. Right, They probably
24:19
Speaker 1: prefer sell brands and least infrastructure and not sell spectrum.
24:23
Speaker 1: And the Department of Justice is likely to want them
24:26
Speaker 1: to put some spectrum in um and and and possibly
24:29
Speaker 1: even more even incentivize employees to go over and and
24:33
Speaker 1: possibly more structural type assets. So this is going to
24:36
Speaker 1: be a difficult negotiation for them to come out with
24:39
Speaker 1: something that works for both if I'm trading on the
24:43
Speaker 1: rumors of a tie up or not, and then the
24:45
Speaker 1: success of the d J and signing off on this.
24:47
Speaker 1: Is this development positive or negative in terms of at
24:51
Speaker 1: least the d o J is engaging and has concrete
24:55
Speaker 1: proposals for how this deal can continue to go through.
24:58
Speaker 1: That's right, that's the positive side, But I would say
25:01
Speaker 1: it's probably leans a little bit more negative because we're
25:04
Speaker 1: going to get to this point a pain point for
25:06
Speaker 1: these companies where it's too much for them and they
25:09
Speaker 1: have to then decide do we walk away or do
25:11
Speaker 1: we try to do or do we challenge this in
25:13
Speaker 1: court to try to see if we can convince a judge.
25:15
Speaker 1: We know generally where the pain point sort of starts
25:19
Speaker 1: for these companies because in their merger agreement, they agreed
25:22
Speaker 1: to divest, but they agreed that they wouldn't have to
25:25
Speaker 1: go past any loss of seven billion or more. So
25:28
Speaker 1: we have generally understand that they don't want to give
25:31
Speaker 1: up um assets that would cause a loss of seven
25:34
Speaker 1: billion or more. Now they can waive that term. Other
25:37
Speaker 1: companies often do that when they have to find they
25:39
Speaker 1: have to divest more than they expected to get a
25:41
Speaker 1: deal through. But you know it's gonna be a difficult
25:44
Speaker 1: decision for them, both of these stucks. Just for what
25:46
Speaker 1: trading off bad a little over one percent today. So obviously,
25:49
Speaker 1: as you suggested, Gen, the market isn't doesn't see this
25:51
Speaker 1: as a positive viewpoint. Just give us a sense. This
25:53
Speaker 1: thing has been you know, more than a year here.
25:55
Speaker 1: It sounds like the negotiations here as you suggest, it
25:58
Speaker 1: will be very difficult. Any sense of timing when the
26:00
Speaker 1: d o J will wrap up its investigation here or
26:04
Speaker 1: to review you know, so many people would like to
26:06
Speaker 1: know that. But this is a closely guarded the arbitrage
26:09
Speaker 1: trade listening on the line. It is a closely guarded
26:12
Speaker 1: secret with between the companies and the Department of Justice.
26:15
Speaker 1: The d J has clearly passed its statutory time limit,
26:18
Speaker 1: that is thirty days after these companies comply with the
26:21
Speaker 1: second request, which has to have happened nine months ago.
26:24
Speaker 1: But what this means is that Sprint and T Mobile
26:26
Speaker 1: ev entered to timing agreement with the d o J.
26:28
Speaker 1: It is confidential and the companies have not disclosed its terms,
26:31
Speaker 1: so we don't know when the timing expires. For the
26:33
Speaker 1: d J, Jennifery, thank you so much for helping us
26:37
Speaker 1: understand that I actually good. It helps a lot. Jennifer Ree,
26:42
Speaker 1: Senior litigation analyst for Bloomberg Intelligence. Thanks for listening to
26:46
Speaker 1: the Bloomberg P and L podcast. You can subscribe and
26:48
Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
26:51
Speaker 1: you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney
26:55
Speaker 1: and Lisa abram Woyd's I'm on Twitter at Lisa A. Bramwoy.
26:57
Speaker 1: It's one before the podcast. You can always catch us
27:00
Speaker 1: worldwide on Bloomberg Radio. H