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Houston Police Chief Says Challenge Is Getting Resources · Bloomberg Intelligence

0:05
Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
0:08
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
0:11
Speaker 1: bring you the most important, noteworthy, and useful interviews for
0:15
Speaker 1: you and your money, whether you're at the grocery store
0:17
Speaker 1: or the trading floor. Find the Bloomberg p m L
0:20
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Earlier today,
0:33
Speaker 1: we spoke with Houston Police Chief are to us A
0:36
Speaker 1: Vado to discuss the current situation in Houston on the
0:39
Speaker 1: ground as Hurricane Harvey continues to rain down destruction on
0:43
Speaker 1: Southeast Texas. We started by asking what the most pressing
0:47
Speaker 1: problems were for the Houston Police Department as they continue
0:50
Speaker 1: to rescue thousands of people. The issue for us is
0:53
Speaker 1: obviously a capacity. You know, we've we've had so many
0:57
Speaker 1: resources trying to get here throughout the state and country,
1:00
Speaker 1: but flash flooding and flooding has impacted not just the
1:03
Speaker 1: city of Houston, but the entire region, a big part
1:05
Speaker 1: of our state, and so you know, we're running on fumes,
1:08
Speaker 1: but we're still getting it done. In our department alone
1:11
Speaker 1: already has about thirty rescues, So right now you're saying
1:16
Speaker 1: that there are backup efforts trying to get to you
1:19
Speaker 1: but cannot Does that include supplies as well that are
1:22
Speaker 1: trying to get to you. We're having a difficult time
1:25
Speaker 1: getting supplies through to to the city and to the region. Unfortunately,
1:30
Speaker 1: this storm has sat here for a daze now, but
1:34
Speaker 1: it's also impacted other roadways and so we leave convoys
1:39
Speaker 1: over the last few days of people and equipment and
1:42
Speaker 1: supplies have had a real challenge getting here. I'm I mean,
1:45
Speaker 1: it's still pouring down rain here in downtown Houston. I'm
1:48
Speaker 1: on my way to the heck So Emerge Communication Center
1:51
Speaker 1: and that's becoming a problem. And we've got a bunch
1:54
Speaker 1: of our stations now if I think we have four
1:56
Speaker 1: or five that we've had to evacuate. So it's just
1:58
Speaker 1: one one challenge after the other. But you know, we're
2:01
Speaker 1: rising to the task and we'll get to it with
2:04
Speaker 1: the help of our fellow Texans and the fellow Americans
2:07
Speaker 1: that are coming here to help. Chief as Surveato speak
2:10
Speaker 1: a little bit, if you can in detail about what's
2:12
Speaker 1: going on at the George Brown Convention Center, and also
2:16
Speaker 1: if you can just give us an update on things
2:17
Speaker 1: like electric and communications networks, airports and so on. Yeah,
2:23
Speaker 1: well the airports are still shut down. They're only going
2:25
Speaker 1: to be open for uh humanitarian and searching and obviously
2:28
Speaker 1: response uh flights, which means that people are coming here
2:33
Speaker 1: to help us. Uh. The George are brown the centers
2:36
Speaker 1: at capacity. We have I think on nine thousand folks there,
2:39
Speaker 1: but we're starting to open other shelters and uh we'll
2:42
Speaker 1: start transporting up exactly weis to those places. Our water
2:47
Speaker 1: supply is still intact, but you know how that goes.
2:49
Speaker 1: You just never know what will happen. You know that
2:51
Speaker 1: historically at some point in these storms anyone in the country,
2:55
Speaker 1: you end up having a disruption of water supply. So
2:57
Speaker 1: people should they if they, uh they can make you know,
3:01
Speaker 1: try to store us own your own in your back
3:03
Speaker 1: stupor containers, whatever you can in your home. Uh. Some
3:07
Speaker 1: of the cell piwers are starting to fail. Uh And
3:10
Speaker 1: so you know, it's it's it's what you would expect,
3:12
Speaker 1: an aread of one challenge after the other. But I'm
3:15
Speaker 1: very proud of the fact that our cities are region
3:17
Speaker 1: and our men and women in the Houston Department, our
3:19
Speaker 1: first responding community, are are still working they've been working
3:23
Speaker 1: NonStop since Friday. What about the main public hospitals. Uh, well,
3:28
Speaker 1: we've had to evacuate. Uh I know of at least
3:30
Speaker 1: one major hospitals evacuated. But you know, we've one of
3:34
Speaker 1: the things that the blessing that we have here in
3:36
Speaker 1: the city of Houston is it are our medicine here
3:39
Speaker 1: is a world right now. We've got some of the
3:41
Speaker 1: best doctors and nurses, uh, you know, from around the world,
3:44
Speaker 1: and uh, there's a reason that foreign leaders come here
3:48
Speaker 1: for treatment. And so we have a lot of capacity
3:51
Speaker 1: and we've been able to successfully transfer patients safely from
3:56
Speaker 1: facilities that have set down. What kind of aid have
3:59
Speaker 1: you already received from the federal government and what are
4:02
Speaker 1: you expecting? Well, the relief is that's coming, and we've
4:05
Speaker 1: got people here on the ground, so I'm still trying
4:08
Speaker 1: to get here. We know we have supplies coming. Uh.
4:12
Speaker 1: We we have rescue vehicles here. We've got uh National
4:16
Speaker 1: Guard high high high water vehicles here. But the currents
4:20
Speaker 1: have been strong for votes are trying to rescue folks.
4:23
Speaker 1: So it's just although we have the help, obviously, we
4:27
Speaker 1: don't have enough help. Chief, what's the best way that
4:30
Speaker 1: people who are listening to you can help. Well. One
4:32
Speaker 1: of the things we don't need more people self self
4:35
Speaker 1: dispatching themselves to the region of we want trying to
4:38
Speaker 1: get here is uh is precarious at best. Yeah, what
4:43
Speaker 1: we need is people to you know, donate to the
4:45
Speaker 1: Red Cross, go to the City of Houston website and
4:48
Speaker 1: uh donate food and obviously the recovery for our the
4:53
Speaker 1: poor citizens that and residents of this state have lost everything. Uh,
4:58
Speaker 1: they're going to need financial assistance, and so anything you
5:01
Speaker 1: can give, you know, it's uh, we'll we'll, we'll pay
5:04
Speaker 1: it forward. And just lastly, how are you fixed for
5:08
Speaker 1: a fuel, for food, for medicine for you and for
5:11
Speaker 1: all of your colleagues. You know what. It's a challenge,
5:14
Speaker 1: but we're balancing it. It's really interesting. You know, some
5:17
Speaker 1: a pizza place brought pizza to our folks yesterday and
5:21
Speaker 1: some guys said, well some citizens, Well the rest of
5:23
Speaker 1: the city starving there you guys eating pizza. What he
5:25
Speaker 1: doesn't know is that our folks have been going not
5:27
Speaker 1: going home since Friday. Their families are but that their
5:31
Speaker 1: families have been evacuated. If we can't feed our first responders,
5:35
Speaker 1: then nobody's going to respond to a lot of people
5:37
Speaker 1: are still unparil so it's a challenge to get all
5:40
Speaker 1: these things done. Our officers are being they're out of uniforms.
5:44
Speaker 1: We need help trying to get these uniforms washed because
5:48
Speaker 1: they've been contaminated. They've been in chest high water rescuing people.
5:53
Speaker 1: And so we're not making excuses and we're not going
5:56
Speaker 1: to stop and we're not going to arrest until this
5:58
Speaker 1: job gets done. That is as saved oh he is
6:01
Speaker 1: the chief of Police for the City of Houston. As
6:04
Speaker 1: those rescue and relief efforts continue. And Lisa, just to note,
6:08
Speaker 1: you know the seaports in Houston as well as in
6:10
Speaker 1: Corpus Christie, they've been closed to most ships before Harvey
6:13
Speaker 1: made landfall last Friday. This means a lot of rerouting
6:17
Speaker 1: for those ships for the freighters. Also, rail traffic has
6:21
Speaker 1: been suspended. UPS has suspended freight service in Houston and Beaumont, Texas.
6:26
Speaker 1: So there's going to be not only a humanitarian issue
6:29
Speaker 1: that needs to be dealt with, but there's also going
6:31
Speaker 1: to be an untangling of transport uh transport lines and
6:35
Speaker 1: transport networks. Indeed, and the police department in Houston sure
6:39
Speaker 1: has a lot going on. They've rescued more than three
6:42
Speaker 1: thousand people, and there are reports coming out today that
6:47
Speaker 1: there have been looters that have been violent that they're
6:50
Speaker 1: also trying to deal with. So quite a quite a
6:53
Speaker 1: situation that's unfolding. Also, there is a question of what
6:56
Speaker 1: the death toll is. So far, it has remained fairly limited,
7:01
Speaker 1: but many are expecting the numbers to rise. So definitely
7:05
Speaker 1: a tragic situation right now unfolding. Yeah, and some forecasters
7:09
Speaker 1: are saying that Houston will see another two feet of
7:13
Speaker 1: rain as it continues to pummel the area. Amazing, and
7:16
Speaker 1: this will obviously also raise questions about how this will
7:19
Speaker 1: get paid for and flood insurance which is currently provided
7:23
Speaker 1: by the US government in an underfunded and actually unsound program,
7:28
Speaker 1: the n f I P Let's turn our attention now
7:43
Speaker 1: to the energy markets. Right now, nimex gasoline is higher
7:46
Speaker 1: by more than two percent. The crude oil is falling
7:49
Speaker 1: one and a half percent. Here to have explain all
7:51
Speaker 1: this is Stephen Shorky is the president of the Short
7:54
Speaker 1: Group and he joins us now. Steven, thanks very much
7:57
Speaker 1: for being with us, So just briefly explain the diverge
8:00
Speaker 1: because on the surface it doesn't seem to make a
8:02
Speaker 1: lot of sense, but I know it does well. Absolutely.
8:06
Speaker 1: Hurricanes historically tend to be very barish for the stuff
8:10
Speaker 1: you put into the refinery crude oil, and very bullish
8:13
Speaker 1: for the stuff you take out of the refinery that
8:15
Speaker 1: is the product. And this is because, of course refineries
8:19
Speaker 1: now in the Gulf Coast epy center, a good majority
8:22
Speaker 1: of them now or a good share of them I
8:23
Speaker 1: should say, are shut in. So when the refinery shuts in,
8:26
Speaker 1: a refinery is the only person in the world that
8:29
Speaker 1: actually buys crudal physical crudal. So when you have that
8:32
Speaker 1: much capacity right now shut in, and right now the
8:35
Speaker 1: capacity that is linked to the New York Mercantile Exchange,
8:38
Speaker 1: one out of every four barrels of refining capacity is
8:41
Speaker 1: now shut in. So that's a lot of crudal that's
8:44
Speaker 1: floating around here. But the real big difference between this
8:47
Speaker 1: hurricane and the last hurricane that we saw in this
8:50
Speaker 1: region two thousand and eight with Hurricane Pike and Hurricane
8:54
Speaker 1: Goose stuff was the reversal of a major pipeline. Back
8:58
Speaker 1: in two thousand and eight, we used to take Rudel
9:00
Speaker 1: into the Houston market area and ship it up to
9:02
Speaker 1: the middle part of the country and into the Chicago
9:05
Speaker 1: market area. We reverse that pipeline in two thousand and twelve,
9:09
Speaker 1: So now there's a lot of oil that comes from
9:11
Speaker 1: Canada and from the Upper Midwest down into the Euston
9:14
Speaker 1: market to go to those refineries and then go to
9:17
Speaker 1: the export market. So now with the situation of the
9:20
Speaker 1: refineries being shut in so you can't boil that oil,
9:23
Speaker 1: and with the ports closed you can't export that crude oil,
9:27
Speaker 1: we are now in the process of building a very
9:29
Speaker 1: large glut and crude oil prices, hence why we're seeing
9:33
Speaker 1: them barrish reaction in the crude all market. Conversely, as
9:38
Speaker 1: we said, if you can't boil crude oil, well you
9:41
Speaker 1: can't make gasoline or diesel fuel. Hence why those markets
9:45
Speaker 1: are rallying over the past few days. Right, Stephen, that's fascinating.
9:49
Speaker 1: I'm looking right now at crude UH at a little
9:52
Speaker 1: bit less than forty six dollars a barrel. Are you
9:55
Speaker 1: thinking that perhaps this price will go substantially lower should
10:00
Speaker 1: the closures of these refineries get prolonged for for several
10:04
Speaker 1: weeks or more. Yes, I do because we also have
10:08
Speaker 1: to appreciate what time of the year we are at.
10:11
Speaker 1: We are now approaching the Labor Day holiday, which now
10:14
Speaker 1: means this summer holiday driving season is over. So guest
10:18
Speaker 1: Lene demand was about the fall regardless, that means we're
10:21
Speaker 1: also heading into September October, which is the fall maintenance
10:25
Speaker 1: season for the refineries. So the refiners were already starting
10:29
Speaker 1: to pair back purchases because they were going to go
10:32
Speaker 1: into maintenance. And so of course when a refiners in maintenance,
10:35
Speaker 1: it's not boiling oil, it's not buying oil. So therefore,
10:39
Speaker 1: with what this hurricane and if we see prolonged stoppages
10:43
Speaker 1: in and this, we're just these stoppages are just going
10:46
Speaker 1: to roll over into the maintenance season. So we could
10:48
Speaker 1: see a prolonged maintenance season and a tremendous amount of
10:51
Speaker 1: demand destruction already on top of what we're experiencing. So
10:55
Speaker 1: how low do you expect crude values to go in
10:59
Speaker 1: that scenario? Area? Uh? In that scenario, if we take
11:03
Speaker 1: out now normally between now in Halloween, we could expect
11:06
Speaker 1: crudal demand by us of finders here in um the
11:09
Speaker 1: fall anywhere between eight hundred thousand barrels a day upwards
11:13
Speaker 1: of over one point two million barrels a day. So
11:16
Speaker 1: if you take that normal uh seasonal demand instruction, and
11:20
Speaker 1: then you uh you compound it by extended closures because
11:25
Speaker 1: of hurricane related damage, then certainly we're now at the
11:29
Speaker 1: bottom of the range. We're in that mid forty dollar range.
11:32
Speaker 1: This is exactly where crudal has more or less found
11:34
Speaker 1: support over the past two and a half years. We
11:37
Speaker 1: have had some outliers, some dips below forty, even a
11:40
Speaker 1: dip below thirty. I'm certainly not expecting a dip below thirty,
11:44
Speaker 1: but any sort of prolonged outage both related to refinery
11:48
Speaker 1: capacity and also the export market with the port closures
11:52
Speaker 1: and pipeline issues, we could certainly see that forty dollar
11:55
Speaker 1: barrier tested in a perfect scenario. Well, Stephen, maybe just
11:59
Speaker 1: the expand on that, because some weather forecasters say that
12:02
Speaker 1: the Houston and the that area in Texas could see
12:06
Speaker 1: another two feet of rain. How long does it take
12:10
Speaker 1: to restart one of these refineries and what kind of
12:13
Speaker 1: safety checks do they need to go through in order
12:15
Speaker 1: to even start that process? Right now, the good news
12:19
Speaker 1: here is, unlike two thousand and five with Hurricane Katrina,
12:22
Speaker 1: on that Friday, if we recall for everyone was expecting.
12:25
Speaker 1: Every meteorologist thought that storm was going into the Florida Panhandle.
12:29
Speaker 1: It took a nasty turn over the weekend, and by Sunday,
12:32
Speaker 1: of course, it devastated New Orleans and the oil and
12:35
Speaker 1: gas infrastructure in that area. The good news here is
12:39
Speaker 1: this storm was well followed, so the industry initiated it's
12:43
Speaker 1: emergency protocols and a timely fashion. They shut down in
12:47
Speaker 1: a timely fashion. Even better, unlike Katrina, this storm did
12:51
Speaker 1: not develop into a monster cats fork storm until it
12:55
Speaker 1: was close to the shore, so you're not going to
12:57
Speaker 1: get it didn't have enough time to build up that
12:59
Speaker 1: wall of seaward that to flood the areas. Yeah, I
13:02
Speaker 1: mean it could have been. What I'm saying is it
13:04
Speaker 1: could have been a lot worse. So that said, the
13:07
Speaker 1: ongoing rain PIM is a problem because right now the
13:10
Speaker 1: closures with the refineries are in the Corpus Christie, which
13:14
Speaker 1: is west of Houston up to Houston. Now, with the
13:16
Speaker 1: track of all of this rain, we're moving towards the
13:19
Speaker 1: Texas Louisiana border, so that's going to threaten the Port.
13:23
Speaker 1: Arthur Beaumont Texas Refinery Epicenter. That's another one point five
13:27
Speaker 1: million barrels of refinery capacity. And then we can go
13:30
Speaker 1: into the Louisiana to the Mississippi Coast Refinery Center. That's
13:33
Speaker 1: another three point seven million barrels a day of demand.
13:36
Speaker 1: So that's a considerable amount of capacity that is in
13:40
Speaker 1: the wake of the storm that is susceptible to flooding.
13:43
Speaker 1: So we're by no means out of the woods, so
13:46
Speaker 1: that that this is still a bullishry event for gasoline prices.
13:48
Speaker 1: Stephen Shark, thank you so much for joining us. Stephen
13:50
Speaker 1: Shork as president of the Shark Group, also the author
13:53
Speaker 1: of the short report. Well, overnight, North Korea did do
14:09
Speaker 1: another missile test, in this time it went over Japan.
14:12
Speaker 1: Japan called this unprecedented. And here to give us a
14:16
Speaker 1: little more perspective on how this changes the backdrop for
14:21
Speaker 1: the US negotiations and dealings with North Korea is Brad Taylor.
14:25
Speaker 1: He's retired Special Forces lieutenant colonel, also author of Ghosts
14:30
Speaker 1: of War, which is available in paperback now. And Brad,
14:34
Speaker 1: thank you so much for joining us. I know that
14:36
Speaker 1: you were part of the Combined Unconventional Warfare Task Force
14:40
Speaker 1: review of how the US is dealing with North Korea,
14:44
Speaker 1: and I would love to get your sense of how
14:47
Speaker 1: much this latest provocation from North Korea ups the anti
14:51
Speaker 1: ups the tension and changes the backdrop for the US
14:54
Speaker 1: dealings with that region. Well, it uh at tensions quite
14:58
Speaker 1: a bit just because of the tensions where were at
15:00
Speaker 1: right now. It just amplifies it. But it's not you know,
15:02
Speaker 1: Japan screaming about it being unprecedent. It's actually the third
15:05
Speaker 1: time the missile's gone over Japan, so it's not entirely unprecedented.
15:08
Speaker 1: In the past, they always said they were launching the
15:10
Speaker 1: satellite uh no, satellite made into space, and so at
15:13
Speaker 1: least they were willing to camouflage the fact that they're
15:15
Speaker 1: testing the missile. This time, they just launched a missile,
15:16
Speaker 1: didn't say anything about the satellite. So it's definitely a
15:19
Speaker 1: poke in the eye. Uh Some of the unique things
15:21
Speaker 1: of it they launched this thing from Pyongyang right outside
15:24
Speaker 1: during the National Airport, which in the past they've alays
15:27
Speaker 1: launched them out in the hinter lands in the military basis. Basically,
15:30
Speaker 1: they're saying, you know, if you want to do a
15:31
Speaker 1: first strike or not, you have to take out Pyongang,
15:33
Speaker 1: which definitely amps up our capabilities for first strike. If
15:37
Speaker 1: you are going to write this as a novel with
15:39
Speaker 1: a happy ending, what would it be like? And then
15:42
Speaker 1: you can give us the alternative. I don't think there
15:45
Speaker 1: is a happy ending for this one. They're not going
15:48
Speaker 1: to give up the nuclear missiles. They've seen what happens
15:50
Speaker 1: when other regimes give up the nuclear missiles market off.
15:54
Speaker 1: He gave up his missiles, and you know, ten years
15:56
Speaker 1: later we came, we saw he died. So I'm a
15:59
Speaker 1: saying gave his up. We took kids regime down. So
16:01
Speaker 1: he wants the missiles. For him, the missiles are intertwined
16:04
Speaker 1: with his regime's stability. So when we say either get
16:07
Speaker 1: rid of the missiles or lose your resime, that's the
16:09
Speaker 1: same thing. To him. Getting rid of his missiles, it
16:11
Speaker 1: means the loss of his regime. So he's it's really
16:13
Speaker 1: off the table. Now. He'll certainly do talks, and we'll
16:16
Speaker 1: do bilettle talks and six party talks and all that
16:18
Speaker 1: kind of stuff, but he's going to keep marshing forward.
16:20
Speaker 1: So what is a better case scenario than a catastrophic
16:25
Speaker 1: altercation that leaves thousands and thousands of people dead in
16:29
Speaker 1: the region at this point. Well, the best case would
16:33
Speaker 1: be of China. You know, China has all the leverage
16:35
Speaker 1: in North Korea. And if China started leveraging the sanctions
16:38
Speaker 1: and we you know, this is our seventh set of
16:40
Speaker 1: sanctions and they were all voted um unanimously, so that's
16:43
Speaker 1: not unprecedented either. What happens though, is Russia and China
16:46
Speaker 1: failed to enforce their part of the sanctions. The problem
16:50
Speaker 1: with that is it's not in China's interest to enforce
16:52
Speaker 1: the sanctions. They do not want. I mean, sanctions work
16:55
Speaker 1: because you struggle, you hammer the people so much the
16:58
Speaker 1: leadership decides to change. Well, in this case, the leadership
17:00
Speaker 1: doesn't care about the people. So the only way the
17:02
Speaker 1: leadership would change is if the people overturned the leadership.
17:05
Speaker 1: And China definitely does not want that. What China does
17:08
Speaker 1: not want it's against their interest to have a unified
17:11
Speaker 1: Korean peninsula underneath this way of South Korea. Right. Well,
17:14
Speaker 1: I mean we were talking with j Leftwitz a couple
17:17
Speaker 1: of weeks ago, who was the former Human rights envoid
17:20
Speaker 1: to North Korea for the US, and he was saying, look,
17:24
Speaker 1: the US has to drop this UH unified Korean Peninsula
17:28
Speaker 1: concept entirely to get China on board. Do you have
17:31
Speaker 1: any sense that the US is taking that approach and
17:35
Speaker 1: is moving closer to some kind of agreement with China
17:37
Speaker 1: that would actually tighten the screws on this situation in
17:40
Speaker 1: a non catastrophic way. I think they're doing it right now.
17:43
Speaker 1: China historically when they sign a new sanction, they go
17:46
Speaker 1: ahead and do it, and then something will go along
17:48
Speaker 1: later on a couple of years down the road and
17:49
Speaker 1: they'll start slipping up on it. So on the surface, yes,
17:52
Speaker 1: they're all going to be on board. The one thing
17:54
Speaker 1: that wasn't reported, Russians actually flew a fleet of nuclear
17:57
Speaker 1: capable bombers out of the Sea of Japan. They got
17:59
Speaker 1: interest upted by South Korean UH fighter jets during the
18:03
Speaker 1: exercises we're doing last week, so they're they're playing the
18:05
Speaker 1: game too. Do you have any idea what exactly does
18:08
Speaker 1: the leader of North Korea want from all of this?
18:12
Speaker 1: What I think he wants is just to survive. That's
18:14
Speaker 1: what he's looking at. His his sole function in life,
18:17
Speaker 1: his regime survivability. His father was the same way. His
18:20
Speaker 1: grandfather who started the country was the same way. That's
18:23
Speaker 1: what they want. So is it possible that there's some
18:26
Speaker 1: way that either the United States, China, South Korea could
18:30
Speaker 1: ensure his survivability and say, all right, survive, keep your weapons,
18:35
Speaker 1: just don't launch them. Well, yeah, that's one school of
18:38
Speaker 1: thought is exactly that we might as well live with it.
18:40
Speaker 1: We live with it with Russia, we lived with it
18:41
Speaker 1: with Pakistan, all these other nuclear capable countries. But the
18:45
Speaker 1: problem is, you know, his thing is if he thinks
18:47
Speaker 1: his regime's going down, he's gonna launch everything he's got.
18:50
Speaker 1: He's going out with the blaze of glory, which makes
18:53
Speaker 1: it very hard to do any kind of provocative actions
18:55
Speaker 1: against him. So he launches a missile over Japan. We
18:58
Speaker 1: know it's not gonna hit anything that's a provocative if
19:00
Speaker 1: we try to do the same thing to him, he's
19:02
Speaker 1: loved to trigger and say they're attacking me. How much
19:05
Speaker 1: closer are we to a nuclear altercation at this point?
19:09
Speaker 1: I don't think we're close to a nuclear altercation. But
19:12
Speaker 1: what people fail to remember is that, uh, he's got
19:15
Speaker 1: five thousand tons of chemical and biological weapons. He's got
19:18
Speaker 1: enough devastation there he doesn't even need to use a
19:20
Speaker 1: nuke UH and if it if he launched all that
19:23
Speaker 1: into South Korea. Most of South Korea, the population is
19:26
Speaker 1: within the artillery fan of North Korea, and you can't
19:28
Speaker 1: It doesn't matter if you have a sad missile system
19:30
Speaker 1: of patriot battery or whatever. You're not taking out artillery.
19:32
Speaker 1: It's going to be devastation on a biblical scale. Well, Brad,
19:37
Speaker 1: let's let's say you get the call from the White
19:39
Speaker 1: House and they underscore that they don't they're not playing
19:43
Speaker 1: politics here. They just want an assessment of what you
19:46
Speaker 1: would recommend be done. And there's no issue about whether
19:51
Speaker 1: someone comes out looking good bad, or you know, whether
19:54
Speaker 1: they made the right decision in the past. I think
19:57
Speaker 1: the first thing that needs to be done is that
19:58
Speaker 1: the administration needs to get on the same set. To me,
20:00
Speaker 1: is it it about what signals are sending? When Rex Tillerson
20:02
Speaker 1: says we have no reason, I have no desire for
20:05
Speaker 1: regime change. We want you to talk, come on, let's talk,
20:07
Speaker 1: and then President Trump says I'm gonna rain fire and
20:10
Speaker 1: fury on you. That the posting party's seeing both those signals.
20:13
Speaker 1: Now he's trying to read, what does what does that mean?
20:15
Speaker 1: Am I getting fire and fury or do they want
20:17
Speaker 1: to talk? Well? Was it sort of encouraging to you
20:20
Speaker 1: that we did not get an immediate response from President
20:23
Speaker 1: Trump via Twitter, but after a market and noted silence,
20:28
Speaker 1: there was a very thought out statement that came from
20:32
Speaker 1: the White House instead. Yeah, I was, and I actually
20:36
Speaker 1: thought about now, He's called the hermit Kingdom for a reason,
20:39
Speaker 1: so he's definitely ensconsin his own little world there, but
20:42
Speaker 1: he does get news. And I wondered to myself, was
20:44
Speaker 1: he seen the devastations from Hurricane Harvey and thought this
20:47
Speaker 1: would be the time I can do this with a
20:48
Speaker 1: little blowback because they got their hands full. I don't
20:50
Speaker 1: know if he's as smart or not, but it did
20:51
Speaker 1: cross my mind. Is there anything that the South Koreans
20:55
Speaker 1: should be doing that would make the situation less perilous there?
21:00
Speaker 1: And they're they're doing pretty much what we want to
21:01
Speaker 1: have a new president in there right now. Although he
21:03
Speaker 1: did do a pretty provocative act when the missile went off,
21:05
Speaker 1: he launched a bunch of the exercise going on an
21:08
Speaker 1: ulti Freedom Guardian, which is really a tabletop map exercise.
21:11
Speaker 1: It happens by annually. It's not that big a deal.
21:14
Speaker 1: But when he launched the missiles um, the President ordered
21:18
Speaker 1: F fifteen strike to simulate destruction of the regime. So
21:21
Speaker 1: I'm not sure that was a smart thing to do.
21:23
Speaker 1: It sounds as if you're you're saying that there's no
21:26
Speaker 1: one person in charge who can really make these kinds
21:29
Speaker 1: of thoughtful decisions. Where am I wrong? No, it's because
21:32
Speaker 1: it's super complicated. We'd like the world to be black
21:34
Speaker 1: and white, but it's a complicated situation and everybody there
21:37
Speaker 1: has a vested interest that is not in the same
21:39
Speaker 1: vested interests of another party. So China has a lot
21:42
Speaker 1: of sway there. But China's goals are not our goals.
21:44
Speaker 1: We have sway. Our goals are not Russia's goals. So
21:47
Speaker 1: there's just a lot of you know, it's just a
21:49
Speaker 1: gray area's it's really hard to solve. I want to
21:51
Speaker 1: thank you for joining us. Brad Taylor is an author
21:54
Speaker 1: and consultant. He served more than twenty years as a
21:57
Speaker 1: US Army officer and also participated in the Combined Unconventional
22:02
Speaker 1: Warfare Task Force of a Unified Plan for Defense of
22:05
Speaker 1: the Korean Peninsula. All right, let's turn our attention to
22:20
Speaker 1: the world of luxury and to help us do so,
22:23
Speaker 1: we have Bob Shulman. He is the founder of the
22:25
Speaker 1: Shulman Research Center. They're based in Riverside, Connecticut, and the
22:29
Speaker 1: latest report is Insides Brief Insights into Luxury, Affluence, Wealth
22:34
Speaker 1: and More. And to tell us more, Bob is joining
22:36
Speaker 1: us here in our studio. Bob, thanks for being here.
22:38
Speaker 1: Delighted to be here. Before we get into any other
22:40
Speaker 1: results of the study, I'm wondering if you could just
22:42
Speaker 1: parse out who are the people that were surveyed and
22:46
Speaker 1: did they really count as the wealthy shoppers the wealthy
22:50
Speaker 1: consumers in the United States. We surveyed approximately consumers, and
22:58
Speaker 1: we structured it in such a way that we were
23:01
Speaker 1: able to focus not only on people with what I
23:05
Speaker 1: would call high incomes and wealth, but also what I
23:09
Speaker 1: call mass market Americans, people with we call more average
23:13
Speaker 1: incomes who also treat themselves to entry level luxuries, which
23:19
Speaker 1: are very important to the big luxury brands. I mean
23:23
Speaker 1: a lot of people don't focus it on it, but
23:26
Speaker 1: if you speak to the people at some of the
23:28
Speaker 1: major luxury companies like lvm Ajor Caring, Uh, they do
23:35
Speaker 1: care about mass market Americans. There's like a d eighty
23:39
Speaker 1: million of them versus the people with high incomes and wealth.
23:43
Speaker 1: And they buy a lot of champagne, they buy a
23:45
Speaker 1: lot of kerchiefs, they buy a lot of i'll call
23:48
Speaker 1: entry level high end watches. The matter yeah, well, and
23:52
Speaker 1: but you know, the survey is certainly matters and is
23:56
Speaker 1: interesting I'm sure too wealthy individuals themselves, but much more
23:59
Speaker 1: so too these brands that you're talking about, right, this
24:02
Speaker 1: is really the audience that is curious of how the
24:04
Speaker 1: appetites are changing for these luxury purchases. And uh, you know,
24:09
Speaker 1: in your latest survey, what were some of the most
24:11
Speaker 1: notable aspects that were different than well, more and more,
24:16
Speaker 1: I mean shopping. And that's really what the brands care about.
24:21
Speaker 1: How American consumers shop for their products and services. The
24:26
Speaker 1: shopping behaviors continue to go more and more. There's two aspects,
24:30
Speaker 1: the search and the actual buy. And searching is almost
24:34
Speaker 1: universally done online today and from my observations over the years,
24:40
Speaker 1: the digital brand. The luxury brands have been slower than
24:43
Speaker 1: many other brands to embrace digital because most of luxuries
24:49
Speaker 1: heritage is based upon quote unquote exclusivity, and they've had
24:55
Speaker 1: a difficult time coming to grips with the fact that
24:59
Speaker 1: even some of the older wealthier customers who buy the
25:02
Speaker 1: high end brands where they have great margins, are now
25:07
Speaker 1: doing their initial shopping online and they care about how
25:12
Speaker 1: things look online and their ability to basically buy online.
25:18
Speaker 1: Is there a natural diversion between those that are seeking
25:21
Speaker 1: experiences that already own all the luxury stuff they want
25:25
Speaker 1: and perhaps younger shoppers or younger consumers. Clearly, I mean
25:30
Speaker 1: when you get to some of the will call it
25:32
Speaker 1: older wealthier people who have closets full of some of
25:36
Speaker 1: the beautiful brands, draws full of the nice jewelry. Uh. Effectively,
25:42
Speaker 1: those people have the opportunity to travel much more, and
25:47
Speaker 1: they're also getting more into the article expressive parts of
25:51
Speaker 1: their lives. When we look at you know, depending on
25:54
Speaker 1: how you define wealth, but recently we looked at five
25:56
Speaker 1: million plus, which is a high end group. There's only
26:00
Speaker 1: about four million people in America adults who basically fall
26:06
Speaker 1: into that. It's a very elite group, one of whom
26:09
Speaker 1: is our ex President Bush. But they're into painting, They're
26:12
Speaker 1: into doing things that they want to do, because when
26:17
Speaker 1: you get to a certain level, you no longer have
26:20
Speaker 1: any obstacles to buying the products or services you want,
26:26
Speaker 1: and depending upon how you grew up in your education
26:29
Speaker 1: level and experiences, you start looking at things that the
26:33
Speaker 1: average American can't do because they don't have the wherewithal So, Bob,
26:37
Speaker 1: I have to wonder, are there any luxury brands that
26:40
Speaker 1: are trying to cater to uh that type of activity,
26:44
Speaker 1: say painting or taking you know, cruises, luxury cruises, or
26:49
Speaker 1: having experiences that people have always wanted to do and
26:52
Speaker 1: they have the money to doing more and more. You're
26:55
Speaker 1: seeing some of the major what I would call luxury
26:58
Speaker 1: groups like LVMH and Caring do it. I mean to me,
27:02
Speaker 1: one of the major i'll call it changes UH was
27:07
Speaker 1: when LVMH launch sever which is their website that basically
27:12
Speaker 1: puts all their brands in one spot so a consumer
27:16
Speaker 1: doesn't have to hunt and peck for the brands they
27:19
Speaker 1: are looking for. I don't think many people are aware,
27:23
Speaker 1: but LVMH did something like that like fifteen years ago,
27:27
Speaker 1: and they were ahead of their time. Now, depending on
27:30
Speaker 1: how you look at it, there behind the times, but
27:33
Speaker 1: you know, the people are getting with it. L v
27:36
Speaker 1: m H hired somebody out of Apple. I mean these
27:39
Speaker 1: brands and these groups can do it when they realize
27:43
Speaker 1: the shoppers are changing. You know, the future for them
27:47
Speaker 1: are the millennials and eventually gen Z and these younger
27:52
Speaker 1: people don't necessarily have the time or the desire at
27:57
Speaker 1: this time in their life to go to stores. They
28:00
Speaker 1: need to get them to try their brands, whether it's
28:03
Speaker 1: taking an entry level cruise or taking but going to
28:08
Speaker 1: a pop up store that sells. Like way back when
28:11
Speaker 1: Airms sold in Grand Central, they sold three items, two
28:15
Speaker 1: fifty dollar kerchief, a men's tie, and one other thing
28:19
Speaker 1: as I remember, but they were in the corner of
28:22
Speaker 1: Grand Central and the place was mobbed with younger people
28:25
Speaker 1: who never saw an air Mez store. They need to
28:27
Speaker 1: get out there, and the way to get out there today,
28:31
Speaker 1: whether they like or not, includes digital sports. I want
28:36
Speaker 1: to tell us about a sporting events. Sporting activities very important. Again,
28:41
Speaker 1: they get the opportunity to, depending on how you look
28:44
Speaker 1: at it, re live their youths, depending upon the teams
28:47
Speaker 1: they were into. When you look at the really wealthy people,
28:51
Speaker 1: the vast majority worked very hard to accumulate the wealth.
28:57
Speaker 1: When they get older, and if they're even young and
29:00
Speaker 1: retire or step out will say they now have the
29:03
Speaker 1: opportunity to enjoy what they did where. You know, most
29:08
Speaker 1: Americans don't ever accumulate that. The smart ones take the
29:14
Speaker 1: time and start basically experiencing and using their wealth for
29:19
Speaker 1: their own enjoyment, their families enjoyment, and frankly, the fellow
29:24
Speaker 1: owns this company gives it away because his attitude is
29:28
Speaker 1: I can't take it with me. Bob Shulman, thank you
29:31
Speaker 1: so much for taking the time. Bob Shulman is founder
29:33
Speaker 1: of the Shulman Research Center in Riverside, Connecticut that looks
29:37
Speaker 1: at the trends in luxury spending. Thanks for listening to
29:42
Speaker 1: the Bloomberg P and L podcast. You can subscribe and
29:45
Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast
29:49
Speaker 1: platform you prefer. I'm pim Fox. I'm on Twitter at
29:53
Speaker 1: pim Fox. I'm on Twitter at Lisa abramowits one before
29:57
Speaker 1: the podcast. You can always catch us worldwide on Brog
30:00
Speaker 1: Radio M