Latest / Bloomberg Intelligence / Gas, Crude Markets at Odds After Harvey, Cushing's Toudouze Says

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Gas, Crude Markets at Odds After Harvey, Cushing's Toudouze Says · Bloomberg Intelligence

0:05
Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim
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0:32
Speaker 1: We have been talking today about the effect of Hurricane
0:36
Speaker 1: Harvey on gas prices and their lack of effect, frankly
0:40
Speaker 1: on crude prices. I want to bring in Libby to
0:43
Speaker 1: do his partner and portfolio manager, Cushing Asset Management, which
0:47
Speaker 1: is based in Dallas and overseas nearly four billion dollars
0:50
Speaker 1: of assets. Libby, can we get your sense of why
0:54
Speaker 1: we're seeing the increase in gas prices? Uh, and certainly
0:59
Speaker 1: that will likely affect the prices that people see at
1:02
Speaker 1: the pump, whereas we're actually seeing crude prices decline. Can
1:06
Speaker 1: you explain this to us? Yeah, I think that we've
1:09
Speaker 1: got a lot of moving parts going on right now. Certainly,
1:12
Speaker 1: the the storm situation is still active and we're going
1:16
Speaker 1: to probably continue to see more more damage and more
1:20
Speaker 1: refineries maybe come shut in. But on the crude side, UM,
1:25
Speaker 1: you're probably not seeing much reaction because what's happening is
1:29
Speaker 1: as as the crude UM W T I to Brent
1:33
Speaker 1: spread widens, that makes our exports more attractive. And so
1:38
Speaker 1: if there's an potential increase for exports, of course the
1:42
Speaker 1: ship the Houston ship channel has to open. UM. Then
1:45
Speaker 1: that's a little bit of a positive. But reality is
1:49
Speaker 1: that at some point there is no place for this
1:52
Speaker 1: crewd to go. If all the refineries are shut down,
1:56
Speaker 1: UM and to you're gonna have a problem. UH. And
2:00
Speaker 1: I would imagine you're gonna see some more weakness on
2:02
Speaker 1: in crude on the flip side, on the refined products.
2:05
Speaker 1: Even though we've seen gasoline futures jump, you have to
2:09
Speaker 1: remember the damage that's being done is also creating demand destruction. UH.
2:16
Speaker 1: And as we see this continue to unfold, this could
2:21
Speaker 1: be months of of of time UH and years of
2:25
Speaker 1: potential rebuild of the whole area because of this massive
2:31
Speaker 1: historic flooding and that demand destruction UM is going to
2:37
Speaker 1: probably put some pressure on refined products. So gasoline jump now,
2:43
Speaker 1: we're probably going to see that come back in Well, Libby,
2:46
Speaker 1: I wonder if you could give us. Any estimate in
2:47
Speaker 1: your mind about let's say, the infrastructure that has been
2:51
Speaker 1: damaged or that is key. For example, I know Exxon
2:53
Speaker 1: Mobile has a big refining operation in Baytown. Uh, there
2:57
Speaker 1: are over seven hundred platforms in the Gulf of Mexico.
3:01
Speaker 1: Another statistic, you know, more than a quarter of all
3:03
Speaker 1: natural gas production in the Gulf has been closed down.
3:07
Speaker 1: What are some of the most important things that you're
3:09
Speaker 1: watching as a manager of you know, over three and
3:12
Speaker 1: a half billion dollars focused mainly on master limited partnerships. Yeah,
3:17
Speaker 1: I think that that. You know, there's seven thirty seven
3:20
Speaker 1: platforms in the Gulf. A hundred and five were evacuated
3:22
Speaker 1: for the storms. You're probably looking about a quarter roughly
3:26
Speaker 1: give or take a couple of percents of oil and
3:28
Speaker 1: gas being production being shut in. But the key thing
3:31
Speaker 1: is going to be, uh, the refineries and going forward
3:36
Speaker 1: and how that impacts obviously the upstream companies is if
3:39
Speaker 1: there's no outlet, no place to push the crude oil um,
3:44
Speaker 1: then they're going to have to slow production. At the
3:47
Speaker 1: same time, on the midstream side, if there is not
3:51
Speaker 1: a place or volumes to be flowing, that has potential
3:56
Speaker 1: impact on on the mid steam stream business. I think
3:58
Speaker 1: the thing that you want to box right now is,
4:02
Speaker 1: you know, we have about pen refineries, including that big
4:04
Speaker 1: X on Baytown refinery down there's another huge refinery that's
4:08
Speaker 1: actually bigger than Baytown, it's the Motiva refinery and Port Arthur.
4:13
Speaker 1: If we begin to see, you know, the seventeen refineries
4:16
Speaker 1: a third of our capacity on the Gulf Coast more
4:19
Speaker 1: of those have to shut down because of of the flooding, UM,
4:24
Speaker 1: then that is really going to create some issues for
4:29
Speaker 1: some of the upstream and some of the midstream energy
4:31
Speaker 1: companies over the short term. Libby, over the longer term,
4:36
Speaker 1: do you think that this disaster will continue to accelerate
4:42
Speaker 1: the move of oil production, of crude production to uh
4:46
Speaker 1: the Northern States, to sort of Middle America and away
4:49
Speaker 1: from the Gulf Coast. No, I don't think you're going
4:53
Speaker 1: to see that because the most prolific basins, certainly on
4:57
Speaker 1: the oil side, are in Texas and Oklahoma, um and
5:03
Speaker 1: obviously being impacted, but the Permian and the Eagle Ford
5:06
Speaker 1: is the most southern field that is could be impacted
5:09
Speaker 1: by the hurricane. But the Permian is further west and north,
5:14
Speaker 1: and of course in Oklahoma. Uh, there's there's a lot
5:17
Speaker 1: of oil production in the Scoop stacked area, so so
5:21
Speaker 1: I don't think that is going to change. And that
5:23
Speaker 1: our most prolific natural gas basin is the Marcels on
5:26
Speaker 1: the East Post, so I don't see that changing. I
5:30
Speaker 1: actually think what this does and we'll we'll again, We'll
5:33
Speaker 1: see we need to balance how much supply impact there
5:37
Speaker 1: is with how much demand destruction, uh there is, and
5:41
Speaker 1: if that begins to change our days to cover or
5:45
Speaker 1: our inventory numbers either way, either higher or lower, that's
5:50
Speaker 1: where we're gonna have some some real impacts. And you
5:52
Speaker 1: can see that positively or or negatively reflected in the
5:56
Speaker 1: stock prices. I want to thank you for joining us.
5:58
Speaker 1: Levy two dues is a part our portfolio manager, Cushing
6:01
Speaker 1: Asset Management. They're based in Dallas, Texas. Three point seven
6:06
Speaker 1: billion dollars of assets under management. Want to thank you
6:09
Speaker 1: for spending time with us today and talking about this
6:11
Speaker 1: topic once again. UH. The cost of Hurricane Harvey could
6:27
Speaker 1: end up being more than twenty four billion dollars when
6:30
Speaker 1: you include the effects of flooding on the labor force,
6:34
Speaker 1: the power grid, transportation, and other elements of the region's
6:38
Speaker 1: energy sector plus the residential toll. Here to tell us
6:41
Speaker 1: more about the insurance angle is Jonathan Adams, our senior
6:45
Speaker 1: insurance industry analyst for Bloomberg Intelligence. Jonathan, I want you
6:49
Speaker 1: to begin, if you can, by just describing the different
6:52
Speaker 1: kinds of insurance, because there's flood insurance, wind insurance, hurricane insurance.
6:57
Speaker 1: There's a multitude that goes into this picture. Just dissected
7:01
Speaker 1: for us and tell us what's going on. Sure, so
7:04
Speaker 1: standard homeowners insurance will cover hurricane wind and many other perils,
7:10
Speaker 1: but it has a specific exclusion for flood. So the
7:14
Speaker 1: standard homeowners policy does not cover UH this type of
7:18
Speaker 1: event for many of the people, unfortunately UM in and
7:22
Speaker 1: around Houston. The good news is that there is a
7:25
Speaker 1: national program, National Flood Insurance Program, that allows individuals to
7:29
Speaker 1: buy a separate policy through the n f I P
7:33
Speaker 1: which is the name for that program, and they can
7:37
Speaker 1: have special coverage. I will say that UM auto policies
7:41
Speaker 1: do cover flood, so UH that particular peril will would
7:46
Speaker 1: be covered UM through your auto policy. But UH in
7:50
Speaker 1: the case of home which of course is a significant asset, UH,
7:54
Speaker 1: individuals need to go to the NFIP to get coverage. Well, Jonathan,
7:59
Speaker 1: do you have any sense of how many people in
8:02
Speaker 1: Houston had already gone to the n f I, Pizza
8:06
Speaker 1: National and Flooded Insurance program UH prior to this storm?
8:11
Speaker 1: And if they didn't, what's there what's their recourse? Now?
8:17
Speaker 1: That's an excellent question, and unfortunately, UM there's not a
8:22
Speaker 1: good figure on individual areas. Although if you analysis was
8:28
Speaker 1: done after Hurricane Sandy here in the northeast and not surprisingly,
8:33
Speaker 1: UM what's called take up rates people who decide to
8:36
Speaker 1: UH cover themselves with a particular type of protection are
8:42
Speaker 1: pretty good close to the coastline. So I would expect
8:46
Speaker 1: that individuals close to Galvis, Gavelston, Kelston, Exies, me UM
8:52
Speaker 1: and Corpus Christi UH, the take up rates would be
8:56
Speaker 1: close to close to areas in Houston where flooding has
9:02
Speaker 1: been um UH an occasional event. Again pretty good. UH
9:07
Speaker 1: take up grades outside of that area probably quite low,
9:12
Speaker 1: and on average, I believe the number is close to
9:15
Speaker 1: one in six or about so that is quite low.
9:19
Speaker 1: And for those that do not have coverage, really there's
9:22
Speaker 1: very little option um it. You know that there could
9:27
Speaker 1: be some federal or state support given, but that type
9:31
Speaker 1: of support is not really replacing damaged property. It's more
9:36
Speaker 1: along the lines of infestry loans or things of that
9:39
Speaker 1: nature that uh, the government tries to put in place
9:43
Speaker 1: in order to allow individuals to get back on their feet.
9:46
Speaker 1: But um, if you don't have any coverage, it really
9:49
Speaker 1: isn't a good picture. I was just reading actually an
9:52
Speaker 1: article talking about how after disasters like this, the percent
9:57
Speaker 1: of people in poverty typically does increase and stay elevated
10:01
Speaker 1: or higher than it was before for a for a
10:03
Speaker 1: long period of time. And perhaps this is part of
10:04
Speaker 1: the reason why I have people lose a lot of
10:06
Speaker 1: the value that they have been storing in the form
10:09
Speaker 1: of their homes. What about the national program itself? How
10:13
Speaker 1: well funded is that unfortunately not well funded? The billion
10:18
Speaker 1: dollars in debt to the U. S. Treasury um, it's
10:22
Speaker 1: a very unfortunate and simple situation where they don't collect
10:28
Speaker 1: enough premium for the risk that they are incurring. UM.
10:32
Speaker 1: When I say that, that's the the n f I
10:34
Speaker 1: P and there are certainly limitations that Congress puts on
10:39
Speaker 1: the program so that it's difficult for the administrators to
10:44
Speaker 1: put in place a program that is actually sound. That
10:48
Speaker 1: program is up for renewal as we speak, it expires
10:52
Speaker 1: at the end of September and unfortunately for the next
10:55
Speaker 1: six years. Based upon the bills that are currently being discussed,
10:59
Speaker 1: it's unlikely the program will be able to charge an
11:03
Speaker 1: actually actuarily sound rate, and that will ultimately come back
11:09
Speaker 1: to haunt us because the taxpayers obviously need to cover
11:13
Speaker 1: that in debt to the Treasury at some point. Jonathan,
11:17
Speaker 1: And what if you just outline for us quickly in
11:19
Speaker 1: looking at the big commercial insurers, the ones that maybe
11:23
Speaker 1: are used by the energy industry, what effect does have
11:27
Speaker 1: on them. So the good news of this storm is
11:33
Speaker 1: that the very high winds UM dropped very quickly after landfall,
11:39
Speaker 1: and um my channel checks show that many of the
11:44
Speaker 1: refiners and other industrial UM entities in that area suffered
11:49
Speaker 1: relatively modest damage. Again that's that's a relative term. But
11:54
Speaker 1: UM the likes of travelers, which provides a great deal
11:59
Speaker 1: of commercial proper D coverage a I G. CHUB UM
12:03
Speaker 1: will probably not incur the same percentage of loss given
12:08
Speaker 1: the total loss here as they would have if UM
12:12
Speaker 1: this was a more traditional wind driven loss event. So
12:17
Speaker 1: UM those are the names that are likely UM participating
12:21
Speaker 1: in that type of coverage and frankly, there'll be some claims,
12:24
Speaker 1: but they won't be too bad for them, Thank you
12:26
Speaker 1: very much. Jonathan Adams is our senior insurance industry analyst
12:30
Speaker 1: for Bloomberg Intelligence. We'll have about a price check in
12:46
Speaker 1: Aisle four organic bananas are now sixty nine cents a pound.
12:50
Speaker 1: That's down from cents. Avocados they used to cost nearly
12:54
Speaker 1: three bucks each, They're now a dollar fifty. Yes, this
12:57
Speaker 1: is what Amazon does the whole foods the Monday after
13:00
Speaker 1: its purchase is complete. And here to tell us more
13:03
Speaker 1: about this strategy is Scott Mushkin's senior retail staples analysts
13:06
Speaker 1: for Wolf Research. Scott, great to have you with us.
13:10
Speaker 1: Is this just we're gonna get used to the fact
13:12
Speaker 1: that Amazon deals with competition by just undercutting everybody else
13:17
Speaker 1: on price. I mean, I think that's what we're gonna see.
13:20
Speaker 1: I mean, I was in the store on Sunday at Sarasona, Florida.
13:24
Speaker 1: I was back there this morning. Um, the price cuts
13:26
Speaker 1: are pretty limited right now, but the size of the
13:29
Speaker 1: price cuts are pretty significant. So we're finding on average,
13:33
Speaker 1: the pricing what it's being cut is down about and
13:37
Speaker 1: you hit some of the items, the avocados, eggs, milk, butter,
13:40
Speaker 1: can of all these staple items that Amazon's moved on.
13:43
Speaker 1: And as they said, this is just the first time
13:45
Speaker 1: they're gonna do it. We're we're respecting more from them.
13:48
Speaker 1: And I think the most significant thing they analysis they're
13:50
Speaker 1: going to make it part of their Prime program um
13:52
Speaker 1: and you'll get discounts if you're a Prime member and
13:54
Speaker 1: Whole Foods it's a big deal. It's a game changer.
13:57
Speaker 1: So how big would the discounts be and would it
14:00
Speaker 1: just be at the physical locations of Whole Foods or
14:05
Speaker 1: does this mean that we are soon going to get
14:07
Speaker 1: some kind of online delivery and distribution mechanism from Amazon.
14:13
Speaker 1: I mean, I think we're going through. I think what
14:14
Speaker 1: you're gonna see is you're gonna integrate. No one knows
14:17
Speaker 1: you have by the way, but you know are guessing
14:18
Speaker 1: is that they're going to integrate pretty readily the Amazon
14:21
Speaker 1: Fresh operations and Whole Foods. Um it's likely to be
14:25
Speaker 1: pretty powerful as they do that. They already made the
14:28
Speaker 1: announcement that the Whole Foods private label three sixty five
14:31
Speaker 1: is going through going through Amazon. Uh, so you know Amazon,
14:35
Speaker 1: it's got sit set on this one point one trillion
14:38
Speaker 1: dollar consumables market, and unfortunately, you know, for other competitors
14:43
Speaker 1: in the market, if you look at what's going on
14:44
Speaker 1: with the consumer, they're really primed pun intended there, but
14:49
Speaker 1: primed to move some of their some of their purchasing
14:52
Speaker 1: over to Amazon and now Amazon Whole Foods. So, Scott,
14:55
Speaker 1: you know, you're talking about how the price cuts are
14:58
Speaker 1: fairly limited and are really focused on staples butter milk, eggs,
15:04
Speaker 1: avocados for the millennials out there. And I like them too,
15:08
Speaker 1: But but I want to ask about that strategy. Is
15:11
Speaker 1: that enough to bring people in the door, and does
15:14
Speaker 1: it make them more amenable to spending uh more for
15:18
Speaker 1: the other goods in the store or uh, you know,
15:22
Speaker 1: what's the evidence behind this approach? Oh? I mean, I
15:26
Speaker 1: actually think you're saying something really important. I don't think
15:28
Speaker 1: it's enough. Um, they're going to need to do more.
15:31
Speaker 1: Uh for instance, in our in our business today, Jason's
15:34
Speaker 1: body wash. Uh uh. You can see that at a
15:39
Speaker 1: GB down in Texas for every day. So they're gonna
15:44
Speaker 1: have to do more. They're gonna have to broaden this out.
15:46
Speaker 1: They're gonna have to really get rid of that whole
15:49
Speaker 1: paycheck uh persona on on whole food So I think
15:53
Speaker 1: it's the first step. I think the most interesting thing
15:55
Speaker 1: we will see is what they do for the prime
15:58
Speaker 1: members and what kind of discount you will get at
16:00
Speaker 1: being a prime member in shopping at Whole Foods. I
16:02
Speaker 1: think that's going to be incredibly powerful when they roll
16:04
Speaker 1: that out. Hey, Scott, the competition sprouts Kroger as well
16:09
Speaker 1: as Walmart. Can you give us an idea of whether
16:12
Speaker 1: there are opportunities to invest in those companies or whether
16:16
Speaker 1: you want to stay away, and also what they're doing
16:18
Speaker 1: to respond. I think you gotta stay uh the you know,
16:22
Speaker 1: if you look at some of the big markets. For instance,
16:24
Speaker 1: let's talk about program we can get kind of micro here.
16:27
Speaker 1: Kroger owns something called Mariano's in Chicago. The Whole Foods
16:31
Speaker 1: is a very large operation in Chicago and hasn't been
16:34
Speaker 1: doing very well. Mariano's has priced under Whole Foods in
16:38
Speaker 1: the Chicago market. That's going to change. They've also Amazon
16:42
Speaker 1: has rolled out their Amazon Fresh operations recently in Chicago.
16:45
Speaker 1: As they integrate the Amazon Fresh and the Whole Foods offering,
16:49
Speaker 1: very problematic for that Kroger banner there. But if you
16:52
Speaker 1: look at all Hold, which is uh, you know, owns
16:54
Speaker 1: the stopping shop banner again very large whole foods markets
16:58
Speaker 1: and markets stead of Amazon US. So for those traditional grossers,
17:03
Speaker 1: incredibly problematic. What's going on because they've done well with
17:07
Speaker 1: the natural organic, especially Kroger with simple Truth. So really
17:13
Speaker 1: stay away from the sector. That's what we've been telling
17:15
Speaker 1: people now for about the last twelve eighty months. If anything,
17:19
Speaker 1: we feel that more strongly about that today than than
17:22
Speaker 1: we have. It's really going to stand away from the
17:24
Speaker 1: sector until we kind of feel we kind of figure
17:26
Speaker 1: out where things are going. You know, one question in
17:29
Speaker 1: my mind, Scott, Yeah, the last week we were speaking
17:31
Speaker 1: with Shara o. V Day, a Bloomberg gad Fly columnists
17:34
Speaker 1: who is noting that Whole Foods had a bigger profit
17:37
Speaker 1: margin than Amazon itself at the time of purchase. How
17:42
Speaker 1: much can Amazon squeeze that profit margin at Whole Foods
17:47
Speaker 1: while still remaining viable and in good shape. I mean,
17:51
Speaker 1: I think they can squeeze it as much as they
17:53
Speaker 1: I mean, we've seen this with Amazon. They'll squeeze it
17:56
Speaker 1: as much as they can to grab the market share. Uh. So,
18:00
Speaker 1: I again repeating the idea of the prime. One of
18:03
Speaker 1: the things I don't think we all considered when Amazon
18:06
Speaker 1: did this, how much volume will Amazon be able to
18:08
Speaker 1: increase as they make it part of their prime membership. Um,
18:12
Speaker 1: that's gonna be very powerful. But the Amazon has been
18:15
Speaker 1: shownself to be a company that doesn't necessarily thinking short
18:18
Speaker 1: term profits. Uh And I don't think they're They're going
18:21
Speaker 1: to drop pricing as much as they can, um to
18:25
Speaker 1: to drive the traffic into the whole foods and and
18:28
Speaker 1: also to drive up the usage of Amazon Fresh. So
18:32
Speaker 1: they're playing a long game, and that's what's problematic for
18:34
Speaker 1: companies like a Kroger and a novel Scott. Do you
18:37
Speaker 1: foresee a change in the layout of the whole food
18:41
Speaker 1: stores to accommodate things like real time price changes and
18:46
Speaker 1: getting rid of the normal you know, stocking the shelves
18:50
Speaker 1: so that you can see everything is now going to
18:52
Speaker 1: be changed to maybe just you know, a few items
18:54
Speaker 1: or even a few days, and I have it be
18:56
Speaker 1: rotated more quickly. I think you'll see that. I also
18:59
Speaker 1: think just Amazon lockers show up, and especially in the
19:02
Speaker 1: suburban whole food stores, I think you know, obviously Amazon
19:06
Speaker 1: has been experimenting with their Amazon Ghost store out in Seattle,
19:10
Speaker 1: so I think you'll see Amazon try to bring in
19:11
Speaker 1: some technology to help the productivity of those stores and
19:15
Speaker 1: take down the cost. So I think over time you'll
19:18
Speaker 1: see Amazon doing a number of things in conjunction with
19:20
Speaker 1: Whole Foods UH to be able to again invest in
19:24
Speaker 1: price it. It It will invest back into the business, but
19:26
Speaker 1: to make it more efficient. So over time, I do
19:28
Speaker 1: think the stores to getularly, the suburban stores. The Artman
19:30
Speaker 1: stores are so busy, but those suburban stores, I think
19:34
Speaker 1: you'll see some changes come through. Another change that came
19:37
Speaker 1: through today is that Amazon's Echo was on display at
19:40
Speaker 1: Whole Foods, meaning that they are definitely putting their stamp
19:45
Speaker 1: on the store in many different ways. Scott Muschkin, thank
19:49
Speaker 1: you so much for joining us. Scott Mushkin is a
19:51
Speaker 1: senior retailed staples analyst at Wolf Research. Um. Definitely a
19:56
Speaker 1: new era for Whole Foods. Pound four galla apples that
20:00
Speaker 1: are organic will definitely entice some people to the store.
20:16
Speaker 1: All right, let's turn our attention out to a new
20:18
Speaker 1: chief executive for Uber and perhaps two hundred rather two
20:23
Speaker 1: hundred million dollar pay bonus here to tell us more
20:27
Speaker 1: is a men Deep sing He is our technology analyst
20:30
Speaker 1: for Bloomberg Intelligence. Man Deep, always a pleasure, Thanks for
20:33
Speaker 1: coming into the studio. Dara kosro Shah, he is tapped
20:37
Speaker 1: to be the new chief executive formally of Expedia, formerly
20:40
Speaker 1: of Barry Diller Allen and Company, Brown University. What can
20:45
Speaker 1: you tell me about the challenges that Dara faces? So
20:48
Speaker 1: clearly he is a very qualified candidate. He has proven
20:52
Speaker 1: himself at Expedia, you know, scaled Expedia from a small
20:56
Speaker 1: online travelers invendor to the largest O t A vendor
20:59
Speaker 1: by bookings. And I think what he'll find is he
21:03
Speaker 1: can repeat the same playbook over here, because when you
21:06
Speaker 1: think about Uber, there's a lot of similarity with online
21:10
Speaker 1: travel companies. You know, Uber also deals with price conscious customers.
21:14
Speaker 1: It has the same kind of network effects as an
21:17
Speaker 1: online travel company does. It has to overcome regulatory hurdles,
21:21
Speaker 1: which online travel vendors did as well. So there's a
21:24
Speaker 1: lot of similarity. And I think I feel personally Uber
21:29
Speaker 1: is where O t A vendors like Expedient price Line
21:32
Speaker 1: were ten years back, So he can repeat that playbook.
21:36
Speaker 1: Where did he come from in the running for the
21:40
Speaker 1: new Uber CEO. Because I heard a lot of names
21:44
Speaker 1: to be the potential new chief executive here, including Meg Whitman.
21:48
Speaker 1: I did not hear his until this weekend. I was
21:53
Speaker 1: as surprised as you were, Liza. He definitely was not
21:57
Speaker 1: in the running, or at least no one heard about
21:59
Speaker 1: him up on told Sunday where Meg Whitman. It seems
22:03
Speaker 1: that the board couldn't agree. So that's the thing about
22:05
Speaker 1: Uber is the board is very small and it's divided
22:09
Speaker 1: into two parts. One pro UH co founder Travis scan Lake,
22:13
Speaker 1: the other one is not supportive of him. And I
22:16
Speaker 1: think it came to a point where Dara was the
22:20
Speaker 1: least offensive choice, somebody who could pacify, you know, both
22:23
Speaker 1: the sides. And wow, that's that's the least offensive. I
22:26
Speaker 1: don't think of Jeffrey Emmilt and Meg Whitman necessarily as
22:30
Speaker 1: being offensive. But whatever it is that that flows your boat.
22:33
Speaker 1: I mean, I guess that the other question is a
22:35
Speaker 1: political question. And uh, you know, we know that that
22:40
Speaker 1: Uber has come under fire for some controversial political leanings
22:44
Speaker 1: and Dara comes in and has been an outspoken opponent
22:49
Speaker 1: of President Trump. Does that matter at all to Uber?
22:53
Speaker 1: I think it does. Because Uber is a global company.
22:56
Speaker 1: Think about it. It's operating in you know, worldwide eighty
23:00
Speaker 1: three countries, and as a global company, you can't be
23:05
Speaker 1: very narrow in your views. So the CEO really sets
23:08
Speaker 1: the bar. And I think it's a good thing for
23:11
Speaker 1: Uber to have such a CEO who's vocal about these
23:14
Speaker 1: kind of things. And and really I think, uh, he's
23:17
Speaker 1: setting up a good precedent if if he carries on
23:20
Speaker 1: that way. One of the issues I believe that Uber
23:23
Speaker 1: right now has to do with the lawsuit that has
23:25
Speaker 1: been filed by Benchmark about Travis Kalanak having a hand
23:29
Speaker 1: in appointment of two additional board members. Does this make
23:33
Speaker 1: it easier to solve this or I mean, is this
23:37
Speaker 1: We just gonna have to wait and see what what
23:39
Speaker 1: Benchmark thinks of the new CEO. Yeah, we'll have to
23:42
Speaker 1: wait and see. The board structure, like I said, is
23:45
Speaker 1: very complex, but based on how he has run Expedia,
23:50
Speaker 1: my gut feeling is he's going to diversify the board.
23:52
Speaker 1: He's going to add people who have experienced running billion
23:56
Speaker 1: dollar plus companies. This board is very new right now.
23:59
Speaker 1: Five appointees are new. You know, they've been at Uber
24:02
Speaker 1: for less than one year, So he may want to
24:05
Speaker 1: add people who have that experience running a multinational, multibillion
24:10
Speaker 1: dollar company. And and I think he also needs a CFO. Right,
24:14
Speaker 1: that's the other vacuum that is there in the company.
24:17
Speaker 1: There's no CEO, there is no CFO. So maybe one
24:19
Speaker 1: of those two guys could be on the board as well. Um.
24:22
Speaker 1: The price tag for this new chief executive officer is
24:25
Speaker 1: quite large, right. Um. Again, it's a tough question because
24:31
Speaker 1: obviously he had a lot of options, uh in Expedia,
24:35
Speaker 1: So of to get a guy like that who has
24:38
Speaker 1: been running the company successfully for twelve years, yes, you've
24:41
Speaker 1: got to pay up, but that's not a problem for Uber.
24:44
Speaker 1: Uber has all that you know, cash and and they
24:47
Speaker 1: can attract any candidates, So it's really about getting the
24:52
Speaker 1: right one. So two million dollars, which is the currently
24:55
Speaker 1: reported fee that they'll have to pay their new chief
24:58
Speaker 1: executive to leave Expedias, that's drop in the bucket for them.
25:02
Speaker 1: I mean it's not a drop, but they can you know,
25:04
Speaker 1: invest those options, they can create a package for him
25:08
Speaker 1: that kind of vessel over time, and I mean in
25:11
Speaker 1: the grand scheme of things, it's not really a big deal.
25:14
Speaker 1: I was just gonna say, and just taking a look
25:15
Speaker 1: at the Bloomberg at the at the total compensation cash,
25:19
Speaker 1: non cash, and so on, thirty one point six million
25:22
Speaker 1: dollars for a cost row shot EXPETI. Thanks for listening
25:29
Speaker 1: to the Bloomberg P and L podcast. You can subscribe
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Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter
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Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo. It's
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Speaker 1: one before the podcast. You can always catch us worldwide
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