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Venezuela Has a Refugee Crisis Of Syrian Magnitudes: Hausmann · 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
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  Speaker 1: you and your money, whether you're at the grocery store
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  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
• 0:32
  Speaker 1: International Monetary Fund estimates that the inflation in Venezuela could
• 0:37
  Speaker 1: reach more than thirteen thousand percent this year. Two pounds
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  Speaker 1: of chicken or beef costs as much as the monthly
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  Speaker 1: minimum wage package, and that includes food coupons that are
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  Speaker 1: worth about two and a half dollars. And yet President
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  Speaker 1: Nicholas Maduro one re election on Sunday. Here to tell
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  Speaker 1: us more were about the country and its economic predicament
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  Speaker 1: is Ricardo Houseman is the former Minister of Planning for
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  Speaker 1: Venezuela and director of the Center for International Development and Economics,
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  Speaker 1: professor at Harvard's Kennedy School of the Government. Ricardo Houseman,
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  Speaker 1: thank you very much for being with us. Maybe you
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  Speaker 1: could just give us your thoughts and reactions to Sunday's
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  Speaker 1: election and what that means for the future of your country. Well,
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  Speaker 1: the first thing is that the election was a sham.
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  Speaker 1: It was an election in which the three major opposition
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  Speaker 1: parties were outlawed. The two major opposition candidates were disqualified
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  Speaker 1: in the opposition boycotted the election two candidates. The government
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  Speaker 1: got two candidates to participate in the election, and that
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  Speaker 1: we're in the fringes of the opposition. Those two count
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  Speaker 1: candidates denounced the result as being fraudulent, being the national
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  Speaker 1: community has decided not to recognize these results. So the novelty,
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  Speaker 1: the only novelty, is that Madudu is still the president
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  Speaker 1: of Venezuela, but that his international elecitimacy is even further eroded.
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  Speaker 1: On the economic front, the government went on a spending
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  Speaker 1: spree in the months to the elections. They didn't have
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  Speaker 1: the money to spend, so they just printed it in.
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  Speaker 1: The money supply increased by sixty one in the four
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  Speaker 1: weeks to the election. That's an annualized rate of fifty
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  Speaker 1: percent a year. In monthly inflation is running at an
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  Speaker 1: annual equivalent of something like fifty percent also, so so
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  Speaker 1: I think that the I M F numbers that you
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  Speaker 1: just quoted at now look extremely optimistic. So I think
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  Speaker 1: that it will just be the continuous deterioration of the
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  Speaker 1: country until there is regime change, and all those numbers
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  Speaker 1: somehow get overshadowed by the images that we've seen, not
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  Speaker 1: only the lines, but of children and others just completely emaciated,
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  Speaker 1: lacking food. I'm wondering, what do you think that the
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  Speaker 1: international community should do in response? Well, I think there
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  Speaker 1: was a very quick response by this LIMA group that
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  Speaker 1: is composed of the US, Canada and the major Latin
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  Speaker 1: American countries. They have decided not to recognize the result.
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  Speaker 1: They have decided to recall their ambassadors, to lower the
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  Speaker 1: degree of diplomatic interaction, to call for an Organization of
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  Speaker 1: American States meeting, and they are they are a little
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  Speaker 1: bit shell shocked by the magnitude of the immigration, of
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  Speaker 1: the refugee crisis that is occurring in in Venezuela. This
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  Speaker 1: last week, the government of Colombia gave you announced the
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  Speaker 1: results of having given Venezuelans a month to register last year.
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  Speaker 1: They had given them a month to register and sixty
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  Speaker 1: thou people registered. This year. They gave the ones that
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  Speaker 1: were not registered last year, they gave them a month
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  Speaker 1: to register. So long as they had entered the country
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  Speaker 1: legally over two hundred thousand registers. So so this is
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  Speaker 1: a lower estimate of the amount of new outmigration into Colombia.
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  Speaker 1: But most people continue on to through Chile, Argentina, Brazil,
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  Speaker 1: Uruguay and Central America. You know in Panama, there's a
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  Speaker 1: big community in Costa Rica, and or they go to
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  Speaker 1: the US, Spain another destination. So so right now this
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  Speaker 1: is promises to be a refugee crisis of Syrian magnitudes,
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  Speaker 1: and and that means that the international community needs to
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  Speaker 1: act because it is becoming a very serious domestic policy issue.
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  Speaker 1: When we talk about actions, one has been just boycotting
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  Speaker 1: Venezuela and oil, oil being one of their mainstays of
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  Speaker 1: the entire economy. And we are seeing Petaviasa, the state
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  Speaker 1: owned oil producer, its bonds falling as people expect them
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  Speaker 1: to continue to suffer with your output. Uh, I'm just wondering,
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  Speaker 1: I mean, is that the right response given the fact
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  Speaker 1: that that you know, potentially could go to feeding people well,
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  Speaker 1: and there are essentially no sanctions on Perisa. The problems
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  Speaker 1: in Perisa are self are self inflicted. It is the
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  Speaker 1: fact that the government decided to use the vious as
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  Speaker 1: a cash cow and not to invest in oil, and
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  Speaker 1: that has caused a catastrophic collapse in production. The sanctions
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  Speaker 1: that have most piped our individual sanctions on and people
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  Speaker 1: who have been narco trafficking, laundering money and so on.
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  Speaker 1: And that includes, you know, the vice president of a
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  Speaker 1: country who in the Office of Foreign Asset Control of
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  Speaker 1: fact freeze from nine hundred million dollars in assets to
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  Speaker 1: his name or to the name of his his secretar.
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  Speaker 1: So there they have now issued the other sanctions to
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  Speaker 1: other top officials and that's complicating their life. That the
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  Speaker 1: problems of the oil company are not the consequence of
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  Speaker 1: international action, they're the consequence of self inflicted wounds. What
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  Speaker 1: do you believe is the ultimate strategy or of a
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  Speaker 1: president Medora, Well, I just I think he just needs
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  Speaker 1: to he's just trying to hang on and he's betting
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  Speaker 1: on the idea that this economic catastrophe, which is right
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  Speaker 1: now it's running at twice the size of the US
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  Speaker 1: grade depression, so it's twice as large decline and output
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  Speaker 1: as US great depression, that that it will weaken society
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  Speaker 1: faster than it weakens the government, so that the relative
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  Speaker 1: power of the government Pisa, the society does not change.
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  Speaker 1: I think I think the situation is just unsustainable, and
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  Speaker 1: unsustainable situations tend not to be sustained. So I think
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  Speaker 1: eventually there will be a regime change. But right now
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  Speaker 1: in what I think will happen is that because there
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  Speaker 1: is no short term electoral solution, there's no short term
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  Speaker 1: dates for elections, the need for other forms of regime
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  Speaker 1: change will have to be put on the table. You're
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  Speaker 1: talking about the refugee crisis that may eclipse what's happening
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  Speaker 1: in Syria, And I'm wondering, uh, from your personal perspective, professor,
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  Speaker 1: because you are the form of Venezuelan, Minister of Planning,
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  Speaker 1: former head of the Presidential Office of Coordination and Planning.
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  Speaker 1: Do you think it's the right move for people to
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  Speaker 1: just leave there as quickly as they can or do
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  Speaker 1: you think that there is anybody there who could go
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  Speaker 1: for to change? I mean, would you go back? Well,
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  Speaker 1: I mean I think that if I went back, it
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  Speaker 1: is a very good likelihood that I'll end up in prison,
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  Speaker 1: so as as as are many political leaders. So I
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  Speaker 1: think that people need to survive and their families need
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  Speaker 1: to survive. And and one way to do so is
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  Speaker 1: for somebody in the family to leave and try to
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  Speaker 1: earn some income, because you know, the minimum wages less
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  Speaker 1: than three dollars a month, and it doesn't it doesn't
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  Speaker 1: buy enough calories to feed a single person, much less
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  Speaker 1: a family. And the median worker earns the minimum wage.
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  Speaker 1: So the minimum wage in Manezuela is hard to earn
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  Speaker 1: and it doesn't feed anybody. So so just a stampede.
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  Speaker 1: The oil company is unable to retain its workers. It's
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  Speaker 1: lost some thirty five workers in the last year. The
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  Speaker 1: electricity companies are unable to retain its workers. They're leaving
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  Speaker 1: the country and growths. So now there's a water crisis.
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  Speaker 1: The water system was not maintained and and so there's
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  Speaker 1: a big water crisis that is having you know, delitorious
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  Speaker 1: effects on the health standards of people. So it's just
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  Speaker 1: a really serious catastrophic situation in um Uh. You know,
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  Speaker 1: the international community in essence is telling the Venezuela Armed
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  Speaker 1: forces that if they were to act, you know, they
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  Speaker 1: would see it as a as a reasonable action on
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  Speaker 1: their side in and they I think that the internal
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  Speaker 1: cohesion of the government is going to be further weekend,
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  Speaker 1: they already had a significant number of people leaving, you know,
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  Speaker 1: their political system and political coalition. Um and and so
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  Speaker 1: I see, I see just a of their weakening at
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  Speaker 1: an enormous humanitarian cost until there is regime change. Can
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  Speaker 1: you tell us about the military in Venezuela and do
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  Speaker 1: you believe that there are individuals and positions of power
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  Speaker 1: that will take it into their own hands to alleviate
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  Speaker 1: the crisis that the country is going through. Well, you know,
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  Speaker 1: the top brass is deeply involved in narco trafficking, money laundering, smuggling,
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  Speaker 1: in all sorts of different criminal activities, and many of
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  Speaker 1: them have been sanctioned by the US, Canada, European Union
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  Speaker 1: and so on. In they are involved in in significant,
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  Speaker 1: you know, financial crimes. They have violated human rights enormously.
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  Speaker 1: So the question is will the middle ranking officers that
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  Speaker 1: are also starving decide to to follow the orders of
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  Speaker 1: this top brass or will there be a break in
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  Speaker 1: military discipline that could itself be relatively messy. Ricardo Houseman,
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  Speaker 1: thank you so much for being with us, and we
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  Speaker 1: need to have you back as this situation progresses. He
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  Speaker 1: is director of the Center for International Development and professor
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  Speaker 1: of the Practice of Economic Development that Harvard's Kennedy School.
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  Speaker 1: He's also the former Minister of Planning for Venezuela. President
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  Speaker 1: Trump tweeted this morning, China has agreed to buy massive
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  Speaker 1: amounts of additional farm slash agricultural products. Would be one
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  Speaker 1: of the best things to happen to our farmers in
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  Speaker 1: many years. Certainly, people who trade futures on soybeans and
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  Speaker 1: corn seemed enthusiastic by thawing of trade tensions between the
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  Speaker 1: US and China, with futures popping ahead of trading, considering
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  Speaker 1: to see some of arise in early trading in the market.
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  Speaker 1: Allam Buerka joins is now he's agricultural reporter for Bloomberg
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  Speaker 1: News and Bloomberg Radio host Ellen, thank you so much
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  Speaker 1: for being with us. I would love to get your take,
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  Speaker 1: first of all, on what we've seen between the US
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  Speaker 1: and China and kind of just to sort of emphasize
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  Speaker 1: how important this is for US agricultural industries. I think
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  Speaker 1: one thing that's important to remember with agriculture and some
• 12:23
  Speaker 1: of its reaction to the Trump administration's move is what's
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  Speaker 1: now become the famous phrase. You know, folks in the
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  Speaker 1: media take Trump literally but not seriously, whereas his followers
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  Speaker 1: take him seriously but not literally. Um, when you take
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  Speaker 1: a look at agriculture markets and everything that's been going
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  Speaker 1: on with China, when Trump rattles the saber, of course
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  Speaker 1: people get concerned with sorghum prices and soybean prices and
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  Speaker 1: such and so. But they don't they don't they don't
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  Speaker 1: think there's an impending catastrophe. You know, they're not necessarily
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  Speaker 1: following the headlines as closely. You're seeing the same thing today.
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  Speaker 1: I mean, obviously the president tweeting that this is good
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  Speaker 1: for farmers and there could be some massive new increases
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  Speaker 1: in agriculture are bullish for markets, and you're seeing that
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  Speaker 1: market reaction. But like so many things with this administration, um,
• 13:02
  Speaker 1: there's a very much a weight and see attitude. You
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  Speaker 1: don't know if the trade talk will turn sour in
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  Speaker 1: a couple three months. When the President is trying to
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  Speaker 1: show up reelection campaigns with perhaps some anti China rhetoric,
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  Speaker 1: you haven't actually seen the sales materialize. That said, there
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  Speaker 1: is reason to be bullish because this is actually an
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  Speaker 1: area where, indeed, if China wanted to try to reduce
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  Speaker 1: its trade deficit with the US. Agriculture would be a
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  Speaker 1: logical place to go because this is a case where
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  Speaker 1: the US does have a supply of something for which
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  Speaker 1: there is demand in China, and so there probably is
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  Speaker 1: something real behind this rhetoric. At this point of course,
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  Speaker 1: the question is how real is it going to be? Okay,
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  Speaker 1: at the same time, we don't have a farm bill,
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  Speaker 1: do we know we don't have a farm bill? And um,
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  Speaker 1: that's another part of this narrative. And and this is
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  Speaker 1: the exactly the narrative that the President is trying to
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  Speaker 1: counter with this China announcement that Republican leadership and a
• 13:51
  Speaker 1: Republican White House hasn't necessarily been a blessing for the
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  Speaker 1: farmers that voted for the president. UM On Friday, you
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  Speaker 1: saw the House Farm Bill, which looked like it was
• 14:01
  Speaker 1: on a path to passage. It was people were starting
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  Speaker 1: to become more optimistic that this thing that did not
• 14:06
  Speaker 1: have any Democratic support could actually get through the House.
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  Speaker 1: When it got derailed by the House Freedom Caucus UM,
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  Speaker 1: which wants to use the farm bill basically as leveraged
• 14:15
  Speaker 1: to have a vote on a controversial immigration plan. The
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  Speaker 1: farm bill, is this nice sort of mid range bill
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  Speaker 1: where it's not so absolutely important that it must be
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  Speaker 1: passed immediately, but it's not so unimportant that it can't
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  Speaker 1: be taken hostage. And he used to be extracted for concessions.
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  Speaker 1: That's what happened. The concern with rural Republicans, especially Republicans
• 14:33
  Speaker 1: in rural districts, were expressed by a guy, freshman Congressman
• 14:37
  Speaker 1: Jody Arrington, he represents the Lubbock West, Texas Abilene area, saying,
• 14:42
  Speaker 1: you know, farmers have to be scratching their heads over
• 14:45
  Speaker 1: some of the actions that this Republican Congress and Republican
• 14:48
  Speaker 1: administration have been taking that have not necessarily been playing
• 14:51
  Speaker 1: into the interests of what agriculture might want. This is
• 14:54
  Speaker 1: a constituency that survey show voted about two thirds for
• 14:57
  Speaker 1: the president, and thus far, whenever there's a problem a
• 15:01
  Speaker 1: decision made between rust belt rural and farm belt rural,
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  Speaker 1: it always seems like the farm belt gets the short end.
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  Speaker 1: We'll see if this China decision just recently that that
• 15:10
  Speaker 1: starts to push a counter narrative. All right, so let's
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  Speaker 1: put into perspective how much agricultural America depends on China
• 15:17
  Speaker 1: for its well being quite a heck of a lot.
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  Speaker 1: Thanks for asking that question. About all right, about one
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  Speaker 1: third of all US soybeans go straight to China um
• 15:26
  Speaker 1: and sorghum. It's actually a higher proportion cotton. It's also
• 15:29
  Speaker 1: I think about one quarter. And some of these markets
• 15:31
  Speaker 1: have really emerged. I mean, there was very little sorghum
• 15:35
  Speaker 1: exported to China before eleven, and now it's become incredibly
• 15:38
  Speaker 1: dependent on it. Um. China, of course, has been this
• 15:41
  Speaker 1: big source of growth. And when you saw that big
• 15:43
  Speaker 1: agricultural boom sort of in the late two thousands, it
• 15:48
  Speaker 1: was being driven by ethanol and by China. What's kind
• 15:52
  Speaker 1: of interesting about this announcement is when you take a
• 15:53
  Speaker 1: look at how China might be buying more US agricultural goods,
• 15:57
  Speaker 1: one of the things that China is looking at is
• 15:59
  Speaker 1: putting more or ethanol in its cars. Interesting. If ethanol
• 16:03
  Speaker 1: becomes a driver of corn demand in China the way
• 16:05
  Speaker 1: it was a driver of corn demand in the US,
• 16:08
  Speaker 1: that has profound impacts on corn markets. We haven't seen
• 16:11
  Speaker 1: the markets react quite to that yet, but I'm sure
• 16:15
  Speaker 1: suddenly a bunch of traders are going to become big
• 16:17
  Speaker 1: experts on China ethanol policy, because that's one place where
• 16:19
  Speaker 1: money can move quickly. That's fascinating. I'm just wondering as
• 16:22
  Speaker 1: we heard about these uh curtains of US agricultural produce
• 16:26
  Speaker 1: just rotting in the ports because China didn't want to
• 16:29
  Speaker 1: or delayed admission while these trade tensions were building with US.
• 16:33
  Speaker 1: Have we seen any impact from that activity already on prices? Well,
• 16:38
  Speaker 1: that was what was pushing things down. Um. You know,
• 16:41
  Speaker 1: it's not even so much the lack of sales. Because
• 16:44
  Speaker 1: markets are fungible, they have a way to to react.
• 16:46
  Speaker 1: You know, if Brazil starts selling all their soybeans to China,
• 16:48
  Speaker 1: the US soybeans will go someplace. But as you note it,
• 16:51
  Speaker 1: in the meantime, while the confusion reigns, they can actually
• 16:54
  Speaker 1: sit in a port and lose value. Um. And that
• 16:56
  Speaker 1: indeed has been going on. How much of that is versable.
• 17:00
  Speaker 1: It's going to kind of depend on some of the
• 17:01
  Speaker 1: logistics of the shipment itself. But we have seen a
• 17:04
  Speaker 1: little bit of a glimpse of what could happen when
• 17:06
  Speaker 1: China stops buying, which is going to give markets a
• 17:10
  Speaker 1: lot of relief if they get a signal like today
• 17:12
  Speaker 1: that they might be buying again. Alan, if we were
• 17:15
  Speaker 1: to tour the winter wheat belt, what would we find
• 17:19
  Speaker 1: right now? Uh, Well, you know, the Midwest got pummeled
• 17:22
  Speaker 1: with a lot of rain. The question is is it
• 17:24
  Speaker 1: too late for the harvest. You know, especially in Kansas
• 17:27
  Speaker 1: more your southern plains, they're starting to look at preparing
• 17:29
  Speaker 1: fields and doing some harvesting in the next few weeks. Um.
• 17:32
  Speaker 1: I'm sure they're gonna be taking a look at the
• 17:33
  Speaker 1: quality of the crops right now and figuring out whether
• 17:36
  Speaker 1: some of the moisture that they've gotten will actually help
• 17:37
  Speaker 1: them out. So where are we going to see any
• 17:40
  Speaker 1: kind of big changes in agriculture? Is it going to
• 17:43
  Speaker 1: be weather related or is it going to be purely
• 17:45
  Speaker 1: because of the confrontation with We're not we're not quite
• 17:49
  Speaker 1: into the weather market yet, although we're getting there. You know,
• 17:51
  Speaker 1: planting is now pretty fully underway. Um. In a lot
• 17:54
  Speaker 1: of more southern parts of the country, your spring planting
• 17:56
  Speaker 1: is has been done. If you're my parents up in Minnesota,
• 17:59
  Speaker 1: you're just getting to your fields right now because you
• 18:01
  Speaker 1: have those late season snowstorms. But um, at this point,
• 18:05
  Speaker 1: it is unusual some of these macro trade moves are
• 18:08
  Speaker 1: actually moving markets in a way that weather won't. I
• 18:11
  Speaker 1: guarantee you come July and August. It's not gonna matter
• 18:14
  Speaker 1: what President Trump is saying about trade. Farmers are gonna
• 18:17
  Speaker 1: wonder if there's rain, and that's what's gonna move commodity
• 18:19
  Speaker 1: markets in Chicago. Alan, what's the one thing we should
• 18:22
  Speaker 1: be looking forward to see whether the thoughting of the
• 18:24
  Speaker 1: trade talks is real. You've got to be looking at
• 18:26
  Speaker 1: weekly export sales at the USDA puts out reports on
• 18:29
  Speaker 1: Thursday about how much got bought of where um. If
• 18:32
  Speaker 1: you start seeing tangible changes in these volumes, then indeed,
• 18:35
  Speaker 1: this this is real and this is a bowl market.
• 18:38
  Speaker 1: Give you twenty seconds, NAFTA, Where are we there? NAFTA Again,
• 18:43
  Speaker 1: just uncertainty, things sort of muddling along. And that's a
• 18:45
  Speaker 1: case where the farm constituency has sort of become comfortable
• 18:48
  Speaker 1: with US uncertainty. You don't see NAFTA being the driver
• 18:51
  Speaker 1: the way it was a few months ago. All Right,
• 18:52
  Speaker 1: I want to thank you very much for being with us.
• 18:54
  Speaker 1: Alan Bjorka is our expert for all things agriculture. Are
• 18:58
  Speaker 1: agriculture reporter from Bloomberg joining us from our one studios
• 19:02
  Speaker 1: in Washington, d c Yes, Lisa, I just I love
• 19:06
  Speaker 1: I love looking at the futures of corn and of sorghum,
• 19:10
  Speaker 1: and so I think this is super important. I think
• 19:12
  Speaker 1: that this is a lot of where the trade deal
• 19:14
  Speaker 1: and the trade negotiations will live, and that there is
• 19:18
  Speaker 1: definitely some skepticism because there isn't the same kind of
• 19:20
  Speaker 1: runaway rally you've seen. I was gonna say, you've seen
• 19:23
  Speaker 1: a fifty cent per bushel increase in the price of
• 19:26
  Speaker 1: corn since the beginning of the year. So, but that's
• 19:29
  Speaker 1: due to a lot of things, right, there are a
• 19:31
  Speaker 1: bunch of different factors, with people planting less of them,
• 19:34
  Speaker 1: less less of corn plants, and more so by being
• 19:37
  Speaker 1: so I mean, there are a bunch of different factors.
• 19:38
  Speaker 1: But yes, there's been a market increase, and we're going
• 19:40
  Speaker 1: to watch and see if they can get a farm
• 19:42
  Speaker 1: bill together. I know that the Senate has their own
• 19:44
  Speaker 1: version of a farm bill that they are trying to
• 19:46
  Speaker 1: put together. Bloomberg Markets brought to you by b and
• 20:04
  Speaker 1: Y Melons Insight Conference. It must attend for advisors June
• 20:10
  Speaker 1: six through the eighth in Orlando, Florida. Registered at b
• 20:13
  Speaker 1: and Y melon Insight dot com. Pam let's talk about robotics, please,
• 20:20
  Speaker 1: artificial and artificial intelligence and artificial intelligence and all that
• 20:23
  Speaker 1: great stuff. We're looking at the robo et F. It's
• 20:27
  Speaker 1: a two point three billion dollar e t F and
• 20:29
  Speaker 1: last year returned more than forty four I want to
• 20:33
  Speaker 1: bring in the CEO and partner of robo Global LLC,
• 20:37
  Speaker 1: Travis Briggs, who comes to us from Dallas, Texas. Travis,
• 20:40
  Speaker 1: thank you so much for joining us. I want to
• 20:42
  Speaker 1: start with what makes a company a robotics company? Well,
• 20:48
  Speaker 1: thank you for having me. Um. You know, we the
• 20:52
  Speaker 1: way that the lens that we look at robotics, automation
• 20:56
  Speaker 1: and AI is really from a percentage of revenue directly
• 21:01
  Speaker 1: or indirectly attributed to robots automation. So when you look
• 21:05
  Speaker 1: at the index, you'd be surprised to know there's over
• 21:09
  Speaker 1: eighty companies and and they they all focus on different
• 21:13
  Speaker 1: parts of the value chain of robotics and automation. So
• 21:16
  Speaker 1: half half of the half of the index is focused
• 21:19
  Speaker 1: on the technologies that enable the enabling technologies that allow
• 21:25
  Speaker 1: robotics actually sense, process and act. The other half is
• 21:28
  Speaker 1: the applications like drones or industrial manufacturing robots or logistics
• 21:33
  Speaker 1: automation or healthcare robots, things that you would immediately recognize, Travis.
• 21:39
  Speaker 1: Maybe let's talk about some examples if we can, that
• 21:41
  Speaker 1: way people can get a better idea. For example, ocean
• 21:45
  Speaker 1: Eering International, they use robotic and remote sensing technology in
• 21:51
  Speaker 1: order to become more efficient in the oil industry. That's right.
• 21:56
  Speaker 1: So that's one of the components of our energy sector. Oceaneering,
• 22:01
  Speaker 1: which is a bell weather meaning it has a high
• 22:03
  Speaker 1: revenue attribution to robotics UM uses what's called remote operated vehicles,
• 22:10
  Speaker 1: and those are simply robots that can go very deep
• 22:14
  Speaker 1: into the sea to monitor, to perform maintenance, to perform drilling.
• 22:18
  Speaker 1: It essentially allows companies, energy companies to drill where they
• 22:22
  Speaker 1: hadn't been able to drill before. And also you've got
• 22:25
  Speaker 1: Intuitive Surgical, so that's another health gets a health care application.
• 22:29
  Speaker 1: That's another example of a company in the index. Right,
• 22:32
  Speaker 1: they have the Da Vinci surgical system. That's that's absolutely right. Um,
• 22:38
  Speaker 1: we're seeing that's one of the biggest growth areas is
• 22:40
  Speaker 1: in surgical robotics, with not only uh Intuitive Surgical, but
• 22:45
  Speaker 1: also mas or robotics and others that are in the index.
• 22:49
  Speaker 1: So do you've you've touched on a couple of companies
• 22:52
  Speaker 1: on the application side. Let me give you an example
• 22:55
  Speaker 1: of a company that maybe your listeners haven't heard of
• 22:58
  Speaker 1: on the technology side, and that's cod Next, that's a
• 23:01
  Speaker 1: US based company, world leading machine vision company. You think, okay, well,
• 23:07
  Speaker 1: what does machine vision have to do with robotics. Turns
• 23:10
  Speaker 1: out it's a critical enabling technology of robotics. When you
• 23:13
  Speaker 1: think about surgical robots, you think about industrial manufacturing robots,
• 23:18
  Speaker 1: or even drones, a key component is their ability to
• 23:21
  Speaker 1: see right, is to sense their surroundings. So the machine vision,
• 23:25
  Speaker 1: the technology component, actually applies across multiple applications. We'll just
• 23:30
  Speaker 1: say that we do know about Cognis because it's based
• 23:33
  Speaker 1: in nati uh and of course Natick and Boston area
• 23:37
  Speaker 1: home Boston a Newburyport. But the stocks down this year,
• 23:43
  Speaker 1: Why is that? Well, I'll say this, Uh, you know,
• 23:48
  Speaker 1: stocks will go up and down in the short term,
• 23:50
  Speaker 1: but if you if you increase that lens to look
• 23:53
  Speaker 1: back two and a half years ago, I think the
• 23:56
  Speaker 1: stocks probably up over so short term pullback, but the
• 24:01
  Speaker 1: previous two years have been outstanding for the company, and
• 24:04
  Speaker 1: we think the future continues to look bright. So Travis
• 24:08
  Speaker 1: I want to assume out a little bit because we
• 24:10
  Speaker 1: hear a lot about how artificial intelligence is going to
• 24:13
  Speaker 1: transform every industry out there. Are you noticing that an
• 24:16
  Speaker 1: increasing number of companies are deriving a greater proportion of
• 24:21
  Speaker 1: the revenues from robotics and artificial intelligence and automation. Yeah,
• 24:26
  Speaker 1: the question on artificial intelligence is is a really good
• 24:29
  Speaker 1: one because it's it's it highlights how quickly this area
• 24:34
  Speaker 1: is changing. You know, we we launched that index will
• 24:36
  Speaker 1: be five years ago in August, and the reality is
• 24:40
  Speaker 1: a I was was a footnote um and within the
• 24:43
  Speaker 1: last two years, I'd say um AI has become at
• 24:48
  Speaker 1: the forefront of all conversations around automation. And the reason
• 24:53
  Speaker 1: that is is, you know, we now have extremely powerful
• 24:56
  Speaker 1: sensors and processing chips that the price reasonably. You have
• 25:02
  Speaker 1: these massive data centers that can process enormous amounts of
• 25:06
  Speaker 1: data and essentially, when you think about AI, it's algorithms,
• 25:11
  Speaker 1: processing power and then data. And of all the digital
• 25:16
  Speaker 1: data that's been captured through through history was captured in
• 25:21
  Speaker 1: the last two years. Now you created the index? Correct?
• 25:25
  Speaker 1: That is correct? And what motivates the index? In other words,
• 25:29
  Speaker 1: is there a person that decides what goes in what
• 25:32
  Speaker 1: goes out. Yeah, So the primary objective when we created
• 25:38
  Speaker 1: the index was to capture the entire ecosystem, or think
• 25:42
  Speaker 1: of it as the value chain. We we wanted to
• 25:46
  Speaker 1: make sure that when this theme of robotics and automation
• 25:49
  Speaker 1: continued to grow and expand as quickly as it has,
• 25:53
  Speaker 1: that we had identified the companies that would benefit from that.
• 25:57
  Speaker 1: And we realized earlier on the best coach was a
• 26:00
  Speaker 1: diversified one, and so, as I mentioned earlier, we chose
• 26:04
  Speaker 1: to capture the entire value chain, everything from the sensors,
• 26:07
  Speaker 1: the processing, the computing, you know, to the end use applications.
• 26:11
  Speaker 1: Hell as you mentioned oceaneering, surgical robots, industrial manufacturing robots
• 26:16
  Speaker 1: and such. So, as I mentioned earlier, the robo et
• 26:21
  Speaker 1: F was up more than forty four percent last year.
• 26:24
  Speaker 1: This year it's underperforming some of the broader US stock indusseries.
• 26:28
  Speaker 1: What do you expect, I mean, what do you what
• 26:30
  Speaker 1: do you attribute to sort of the underperformance and what
• 26:32
  Speaker 1: do you see the potential performance later? Sure? I think, um,
• 26:36
  Speaker 1: if you look at the index and the performance of
• 26:38
  Speaker 1: the index since inception, which has booked over a four
• 26:43
  Speaker 1: year track record, UM on average, it has outperformed the
• 26:48
  Speaker 1: broad market indusseries. And I think when you have a
• 26:52
  Speaker 1: focus on companies that are growing as quickly as these
• 26:57
  Speaker 1: as this robotics and automation sector is, is that you
• 27:01
  Speaker 1: would hope right. The obvious objective is to outperform broad
• 27:05
  Speaker 1: market indices over traditional market cycles just quickly. When you
• 27:11
  Speaker 1: talk about robotics, does that also include um uh sort
• 27:16
  Speaker 1: of systems in the aerospace and defense industry. So we
• 27:22
  Speaker 1: do have a subsector. There are twelve subsectors in the index,
• 27:28
  Speaker 1: one of which is surveillance, and it does include companies
• 27:33
  Speaker 1: that are UH focused on researching and development for the
• 27:40
  Speaker 1: unmanned aeral vehicle UH applications or overdrones. YEP, that's right,
• 27:46
  Speaker 1: Thanks very much for being with us. Travis Briggs is
• 27:48
  Speaker 1: the chief executive and the partner of robo a Global
• 27:52
  Speaker 1: based in Dallas, Texas, helping to manage more than two
• 27:54
  Speaker 1: point four billion dollars. Shares of General Electric they're higher
• 28:13
  Speaker 1: by three and a half percent. The shares of web
• 28:15
  Speaker 1: Tech they are up more than four and a quarter percent.
• 28:18
  Speaker 1: Here to tell us more, Brooks Sutherland Industrials and Deal's
• 28:21
  Speaker 1: columnists for Bloomberg opinion brook always a pleasure. Maybe you
• 28:25
  Speaker 1: could just explain what exactly is General Electric doing with
• 28:29
  Speaker 1: its locomotive business A little bit complicated. Um So, what
• 28:34
  Speaker 1: they're going to do is they're going to actually sell
• 28:36
  Speaker 1: a portion of the locomotive business to wob Tech. Then
• 28:40
  Speaker 1: they're going to spin off what's left of the transportation
• 28:43
  Speaker 1: division to its own shareholders, and then they'll merge that
• 28:47
  Speaker 1: spun off portion with wob Tech. Um So, sort of
• 28:50
  Speaker 1: a roundabout way. And the reason why they're doing that
• 28:52
  Speaker 1: is that this all ends up being tax free to shareholders,
• 28:56
  Speaker 1: which is what investors like to see. Um g E
• 28:58
  Speaker 1: will get a two point nine billion dollar cash payment
• 29:01
  Speaker 1: up front, and then between it and its shareholders that
• 29:05
  Speaker 1: will own about fifty point one percent of the combined entity.
• 29:09
  Speaker 1: So let's let's take a step back. Yes, shares are
• 29:11
  Speaker 1: up today, but they are still down nearly so far.
• 29:14
  Speaker 1: You're to date, General Electric is whild widely expected to
• 29:18
  Speaker 1: have to restructure its entire operations, possibly sell off traumatic
• 29:22
  Speaker 1: parts of its business. So do we get any insight
• 29:26
  Speaker 1: into what the leadership is thinking with respect to that
• 29:29
  Speaker 1: restructuring based on the deal announced today? Sure? So, Transportation
• 29:33
  Speaker 1: is a division that they have flagged for divested sure
• 29:35
  Speaker 1: since about November, so they said, you know, we're looking
• 29:38
  Speaker 1: at options for this. So it's definitely good to see
• 29:41
  Speaker 1: a deal actually happening here. I think investors were starting
• 29:44
  Speaker 1: to get a little bit restless that we hadn't really
• 29:46
  Speaker 1: seen any sort of major portfolio action. They did an
• 29:50
  Speaker 1: asset sale a little while ago with a healthcare I
• 29:52
  Speaker 1: T business, but that was fairly small, and so this
• 29:55
  Speaker 1: is the most significant thing we've seen to date. But
• 29:58
  Speaker 1: you know, I do think sort of the devil is
• 30:00
  Speaker 1: in the details here, and you know, they've done asset
• 30:03
  Speaker 1: divestitures before, and the purchase price has wound up not
• 30:06
  Speaker 1: being as great as it looks, just because you know,
• 30:09
  Speaker 1: you have to use some of that cash in the
• 30:11
  Speaker 1: case of the industrial solutions business that they sold to
• 30:14
  Speaker 1: a b B last year, use some of that cash
• 30:16
  Speaker 1: to pay back g capital for accounts receivable as you
• 30:19
  Speaker 1: have deal taxes. And then there's the pension liabilities that
• 30:22
  Speaker 1: are associated with a lot of these businesses. Oftentimes g
• 30:26
  Speaker 1: E retains those liabilities and does not pass those on
• 30:29
  Speaker 1: to the buyer, which creates sort of an obvious problem
• 30:31
  Speaker 1: as you look down the line in terms of more divestitures,
• 30:35
  Speaker 1: possible breakups. You know, how does GE find a home
• 30:37
  Speaker 1: for all of these assets and yet still get stuck
• 30:40
  Speaker 1: with a very big pension liability. Is there any information
• 30:44
  Speaker 1: as to why they believe that combining their locomotive business
• 30:48
  Speaker 1: with web tech is good for them? Sure, you know,
• 30:51
  Speaker 1: I do think this is a good deal on the
• 30:53
  Speaker 1: face of it. Um. You know, I think for wab
• 30:55
  Speaker 1: Tech it's clearly very transformational, significantly increases its business. UM.
• 31:00
  Speaker 1: You know, the locomotive business is a sort of a
• 31:02
  Speaker 1: cyclical low point um demand has been weak, but we're
• 31:06
  Speaker 1: just starting to see that pick up. This combined entity
• 31:09
  Speaker 1: will be able to take advantage of that. UM. It'll
• 31:12
  Speaker 1: have opportunities for cost savings, higher profitability. You know, I
• 31:16
  Speaker 1: think on the face of it it makes sense. It's
• 31:18
  Speaker 1: just as you sort of take a step back and
• 31:20
  Speaker 1: look at what this means bigger picture for GE. I
• 31:23
  Speaker 1: think that's where really sort of the interesting element is.
• 31:26
  Speaker 1: And you know, it's been sort of talked about could
• 31:28
  Speaker 1: you do a full blown breakup of G And I
• 31:30
  Speaker 1: think this structure with loob Tech, where you have, you know,
• 31:34
  Speaker 1: sort of a convoluted way of holding onto a stake
• 31:37
  Speaker 1: in the combined business and still getting some cash out
• 31:40
  Speaker 1: of it is something that g could explore for other
• 31:42
  Speaker 1: pieces of its business. But just to go back to
• 31:44
  Speaker 1: what I was talking to do do before, the real question
• 31:47
  Speaker 1: is you know what you do with sort of the
• 31:49
  Speaker 1: liabilities they're attached to these businesses. We don't have details
• 31:52
  Speaker 1: on that yet. I expect that will come in regulatory filings,
• 31:55
  Speaker 1: and that's going to be something investors are going to
• 31:57
  Speaker 1: want to pay close attention to. How do you have
• 31:59
  Speaker 1: a sense of the volume of pension liabilities that could
• 32:03
  Speaker 1: get sort of shunted back to GE if that's part
• 32:07
  Speaker 1: of this deal. Sure, So the underfunded pension was about
• 32:11
  Speaker 1: twenty eight point seven billion at the end of overall
• 32:15
  Speaker 1: for all of G for all of g e UM.
• 32:17
  Speaker 1: You know, JP Morgan Chase and co analyst Steve two
• 32:20
  Speaker 1: Sad did some interesting work on the Industrial Solutions business
• 32:23
  Speaker 1: UM and pointed out that, you know, the pension associated
• 32:27
  Speaker 1: with assets held for sale was about forty two million,
• 32:30
  Speaker 1: even though Industrial Solutions has I think it's about thirteen
• 32:34
  Speaker 1: thousand employees, so obviously it should be a much bigger percentage.
• 32:38
  Speaker 1: Transportation I believe has about eight thousand employees, so I mean,
• 32:42
  Speaker 1: if you sort of extrapolate what we saw with industrial
• 32:44
  Speaker 1: solutions and apply that to maybe a potential outcome for transportation. Again,
• 32:48
  Speaker 1: we don't have any details on this yet, so it's
• 32:50
  Speaker 1: sort of hard to say, but you know, if if
• 32:52
  Speaker 1: you have sort of a similar percentage, you can easily
• 32:55
  Speaker 1: see how ge gets stuck with sort of these billions
• 32:57
  Speaker 1: of liabilities without assets underneath to with that. Well, I
• 33:01
  Speaker 1: know that Lisa is eager to get her hands on
• 33:04
  Speaker 1: an HSP forty six high horsepower passenger locomotive that Correct
• 33:09
  Speaker 1: and web Tech actually builds already with partnership with General. Honestly,
• 33:14
  Speaker 1: Pim knows my innermost dreams and thoughts when it comes
• 33:18
  Speaker 1: to locomotives, and uh, you know, then I'll just let
• 33:21
  Speaker 1: you know the launch customer for the one version of
• 33:24
  Speaker 1: this the A is the Massachusetts Bay Transportation Authority. And
• 33:30
  Speaker 1: Lisa Abramowitz, thank you so much million apiece and you'll
• 33:35
  Speaker 1: front me the money, okay, A brook Sutherland, thank you
• 33:37
  Speaker 1: so much for being with us. Really fascinating, really good
• 33:40
  Speaker 1: insights on the idea of these pension liabilities, which could
• 33:43
  Speaker 1: potentially make investors a little less enthusiastic about this cash infusion.
• 33:48
  Speaker 1: Brick Sutherland is an industrials and deals columnist for Bloomberg Opinion.
• 33:55
  Speaker 1: Thanks for listening to the Bloomberg p m L podcast.
• 33:58
  Speaker 1: You can subscribe and listen to views at Apple Podcasts, SoundCloud,
• 34:02
  Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
• 34:06
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.
• 34:10
  Speaker 1: It's one before the podcast. You can always catch us
• 34:12
  Speaker 1: worldwide on Blueberg Radio.