Latest / Bloomberg Intelligence / Liquidity Crisis Is Coming To Credit Markets: TCW's Rivelle

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Liquidity Crisis Is Coming To Credit Markets: TCW's Rivelle · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul Swinge. You,
• 0:05
  Speaker 1: along with my co host Lisa Brahma wits each day
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  Speaker 1: we bring you the most noteworthy and useful interviews for
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  Speaker 1: you and your money. Whether at the grocery store or
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  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
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  Speaker 1: Podcast or wherever you listen to podcasts, as well as
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  Speaker 1: at Bloomberg dot com. Well, we are ten plus years
• 0:21
  Speaker 1: into this economic cycle. We've got a fed on the sideline,
• 0:25
  Speaker 1: We've had great returns in te What do we do
• 0:28
  Speaker 1: in Well, there's nobody better to chat about that on
• 0:31
  Speaker 1: the fixed income side than Tad Rivel Tadi's chief investment
• 0:34
  Speaker 1: officer for fixed income for tc W, a little firm
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  Speaker 1: out on the West Coast, hundred seventy billion under management.
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  Speaker 1: He joins us here in our Bloomberg Interactive Broker Studio. So, Tad,
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  Speaker 1: I know you wrote recently about a liquidity crisis. What
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  Speaker 1: do you mean by Whenever I see the word crisis,
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  Speaker 1: it grabs my attention. Having lived through the financial crisis
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  Speaker 1: of two thousand eight, what do you mean by liquidity crisis?
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  Speaker 1: Maybe we should parse that a little bit. I think
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  Speaker 1: the The point that's trying to be made is that
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  Speaker 1: all economic cycles, all asset price cycles, ultimately in in
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  Speaker 1: some type of of a crisis. Doesn't necessarily have to
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  Speaker 1: be of the scale as we saw in two thousand
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  Speaker 1: and eight. But let me give you a quick example
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  Speaker 1: about why it's almost inevitable. It's part of the human DNA,
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  Speaker 1: if you will. So most everyone has probably or perhaps
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  Speaker 1: had the experience of looking at a house to buy,
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  Speaker 1: perhaps in a hot market. So what what's that? What's
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  Speaker 1: that world? Like the moment that the house gets listed,
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  Speaker 1: you show up on the door, and so do twenty
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  Speaker 1: other people. And maybe you're thinking, I putting my whole
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  Speaker 1: life savings into this home, and I need to do
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  Speaker 1: my due diligence and ask a lot of questions. I
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  Speaker 1: want to ask about the roof, the foundation, maybe the
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  Speaker 1: crazy neighbors who live next door. And the seller if
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  Speaker 1: you are able to button home and is going to
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  Speaker 1: look at you like you've got two heads. He's gonna
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  Speaker 1: look at you and he's gonna say, hey, I got
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  Speaker 1: twenty people here. I only want to hear from you
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  Speaker 1: how much over offer offer side price you want to
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  Speaker 1: pay all cash? Otherwise, don't waste my time. The point
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  Speaker 1: is is that in a bull market, in a booming market,
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  Speaker 1: you don't get to do your due diligence. You don't
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  Speaker 1: get to ask questions. Okay, fast forward a couple of
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  Speaker 1: years now, maybe the market is stone cold. Maybe you
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  Speaker 1: bought the house, so you wait a couple of weeks
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  Speaker 1: after listing, and one barely qualified buyer walks in the door,
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  Speaker 1: and he wants to do his due diligence, and he's
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  Speaker 1: not going to accept uh non answers to questions about
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  Speaker 1: the roof and the foundation, And every time you can
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  Speaker 1: answer a question, he's going to make a worst case
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  Speaker 1: assumption about it. And so consequently, ultimately, when that buyer,
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  Speaker 1: recognizing that he's got market power, wants to potentially place
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  Speaker 1: an offer on your property, there's gonna be a huge
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  Speaker 1: disagreement between you the seller who says, hey, I paid
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  Speaker 1: acts the markets down maybe five but what you're talking
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  Speaker 1: about is paying me down. So I'll call that. I'll
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  Speaker 1: call that a liquidity crisis. Does that happen in the
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  Speaker 1: credit markets? Think about the drive by deals that were prevalent,
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  Speaker 1: if not ubiquitous, in two thousand and seventeen, and think
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  Speaker 1: ahead of the possibility that in a cooler or cold
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  Speaker 1: credit market, we probably will face some type of a
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  Speaker 1: liquidity crisis where the buyers say, I got in a part,
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  Speaker 1: I'll sell you down a few points, but I'm not
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  Speaker 1: gonna pay sixty I'm not gonna allow you to take
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  Speaker 1: these this credit off my hands at sixty five cents
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  Speaker 1: on the dollar. And by the way, you've already seen
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  Speaker 1: a lot of single name idiosyncratic volatility. So I think
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  Speaker 1: that if this view, if this sounds a little theoretical,
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  Speaker 1: just take a look at some of the market action
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  Speaker 1: and high yield in the loan space over the last
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  Speaker 1: year might disabuse you of that idea. That's what I
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  Speaker 1: wanted to go. Have you seen any meaningful evidence that
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  Speaker 1: maybe we are in or approaching liquidity crisis and any
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  Speaker 1: major of the fixed income markets that TCW plays in, Well,
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  Speaker 1: I think we are actually and UH, there's there's UH.
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  Speaker 1: As I mentioned, there's certainly been a significant amount of
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  Speaker 1: single name volatility in UH in the loan space. We
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  Speaker 1: could take or make a few statements about the high
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  Speaker 1: yield market, because I think that's very instructive. What you're
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  Speaker 1: seeing in the high yield market is very strange or
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  Speaker 1: um how do I say it? If you look at
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  Speaker 1: the performance of the triple C bond class, the triple
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  Speaker 1: C bonds are up on a total return basis here
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  Speaker 1: today it's something like four to The high yield market
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  Speaker 1: overall on average is up double digits. The equity market,
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  Speaker 1: as you pointed out, is I don't know north on
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  Speaker 1: a year today basis. Who would have expected the triple
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  Speaker 1: C asset class to have so badly underperformed in what
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  Speaker 1: would otherwise appear to be such a positive risk here.
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  Speaker 1: I think what it speaks to is that the market
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  Speaker 1: is discriminating between risk, and once it starts discriminating between risk,
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  Speaker 1: you are perhaps well on your way towards stepping into
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  Speaker 1: an environment that will be um well, a liquidity crisis
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  Speaker 1: of some kind. Are you give us a sense of
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  Speaker 1: the credit quality that you're seeing out there and maybe
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  Speaker 1: some of the more leverage loan space or the high
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  Speaker 1: yield space where we probably would see some concerns. First
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  Speaker 1: the overall level of credit quality, it's it's poor, and
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  Speaker 1: there's many different ways that you can sort of view
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  Speaker 1: that or understand that. So maybe the simplest way is
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  Speaker 1: just to recognize that in the high yield space. Naturally,
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  Speaker 1: the lending traditionally is done with with covenants. Right that
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  Speaker 1: you when you lend money to a levered enterprise, you
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  Speaker 1: attempt to tie the hands of management so that it
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  Speaker 1: can't take the money that you lent them and do
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  Speaker 1: things that you don't want them to do as a
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  Speaker 1: as a as a bond holder, your relationship with a
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  Speaker 1: company as a bond holder is contractual. And if you
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  Speaker 1: don't specify in the contract that you management can't take
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  Speaker 1: the money I gave you, buy backstock, pay yourself, dividends,
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  Speaker 1: uh sell my collateral, sell which is to say, a
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  Speaker 1: division of the business, and and pay yourself, well, then
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  Speaker 1: you don't really have the ability to restrict them. So,
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  Speaker 1: according to Moodis, covenant quality is as bad as it
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  Speaker 1: has been in a very long period of time. If
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  Speaker 1: you look at the amount of of leverage that's gone
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  Speaker 1: into it into that marketplace, measured by debt to two
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  Speaker 1: earnings ratios, it's quite high. And then if you look
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  Speaker 1: at things that are not so easily measured, but more disturbing,
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  Speaker 1: it's things like the ad backs that we're saying, the
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  Speaker 1: EPIDA add backs, tad ravelle, thank you so much for
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  Speaker 1: joining us with some interesting comments on the credit side.
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  Speaker 1: Chief Investment Officer or Fixed Income for TCW, joining us
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  Speaker 1: here in our Bloomberg and Director Brooker studio, giving us
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  Speaker 1: some thoughts about, uh, perhaps a liquidity crisis building in
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  Speaker 1: certain parts of the fixed income market. You're listening to
• 6:23
  Speaker 1: Bloomberg Markets with Lisa Abrama Eds and Paul Sweeney on
• 6:27
  Speaker 1: Bloomberg Radio. Oh, we got some management changes coming to
• 6:32
  Speaker 1: Alphabet or Google or Google or Alphabet however you want
• 6:34
  Speaker 1: to play, joining us to break it down as Laura Martin,
• 6:37
  Speaker 1: senior analysts for Needham and Company, joining us on the
• 6:39
  Speaker 1: phone from Los Angeles. We also Mark Bergen, technology reporter
• 6:43
  Speaker 1: for Bloomberg News. He's in our Bloomberg nine sixties studio
• 6:46
  Speaker 1: in San Francisco. Mark, let's start with you just lay
• 6:49
  Speaker 1: out for us what actually is happening at Alphabet slash
• 6:52
  Speaker 1: Google today. Sure, so officially Google student Chai who's been
• 6:58
  Speaker 1: running Google for the past four years to see is
• 7:00
  Speaker 1: now stepping up to be also the CEO of Alphabet,
• 7:03
  Speaker 1: which was a role that Larry Page, who was one
• 7:05
  Speaker 1: of the co founder had served. So Larry and Sir Gaybrin,
• 7:08
  Speaker 1: the co founders are both stepping back to the company,
• 7:10
  Speaker 1: but important to notice they are notes, they are still
• 7:13
  Speaker 1: on the board and um they also are still the
• 7:16
  Speaker 1: majority controlling shareholders of the special supervoting Class B stocks.
• 7:21
  Speaker 1: In a way, they still control the company. They're just
• 7:24
  Speaker 1: they're no longer involved and responsible. Hey, Lauren, why do
• 7:28
  Speaker 1: you why do you think they did this in the
• 7:30
  Speaker 1: first place? I create the alphabet structure. Why were they
• 7:35
  Speaker 1: doing it in the first place? Because I think Wall
• 7:38
  Speaker 1: Street was really frustrated at the lack of profitability, because
• 7:41
  Speaker 1: we think the search engine makes margins and other bets.
• 7:45
  Speaker 1: Was a way to break out really huge lossmakers with
• 7:49
  Speaker 1: almost zero revenue. So I think that was helpful and
• 7:52
  Speaker 1: it added a little bit of granularity about where these
• 7:54
  Speaker 1: enormous losses were coming from and what assets they were
• 7:56
  Speaker 1: attributable to. So are the stocks up two percent today?
• 7:59
  Speaker 1: It's up to any six percent year to date. It
• 8:01
  Speaker 1: seems like the market doesn't really care whether you've got
• 8:06
  Speaker 1: Larry as the Sea of Alphabet and whether you have
• 8:09
  Speaker 1: an alphabet or whether Sundars doing everything. Is it just
• 8:12
  Speaker 1: all about the search business? Um? I mean I think
• 8:17
  Speaker 1: it should be. I think a Google we agree with
• 8:19
  Speaker 1: the government that Google should be broken up and the
• 8:21
  Speaker 1: first thing they should do is spin off you two,
• 8:23
  Speaker 1: because we think YouTube alone would be worth uts, which
• 8:26
  Speaker 1: would leave about five billion behind and we get more
• 8:29
  Speaker 1: granularity and different forms of investors. We really do have
• 8:32
  Speaker 1: a streaming as we've seen from Disney hitting all time highs.
• 8:35
  Speaker 1: There really is a set of investors who want to
• 8:38
  Speaker 1: invest in the streaming world globally, and YouTube dominates that space.
• 8:42
  Speaker 1: So it would get a much higher multiple if it
• 8:44
  Speaker 1: wasn't part of the Google search conglomerate. Hey, Mark, you
• 8:49
  Speaker 1: are at within a story here Google's founders give up
• 8:51
  Speaker 1: on being the Warren buffet of tech. What do you
• 8:54
  Speaker 1: mean by that? So when they announced alphabet four years ago,
• 8:58
  Speaker 1: they talked about how they went to that warned Bufett
• 9:01
  Speaker 1: and they had this sort of Berkshire Hathaway model, right,
• 9:03
  Speaker 1: This was um at you at this point, and they
• 9:06
  Speaker 1: were working on Hounas cars for years. They had two
• 9:09
  Speaker 1: different the two door companies working on biosecond healthcare, including
• 9:12
  Speaker 1: one working on something uh ambitious is a life extension
• 9:16
  Speaker 1: UM And they sort of wanted to build this model
• 9:18
  Speaker 1: where um, you know, Google, the Internet business could be
• 9:20
  Speaker 1: sort of isolated and not have to deal with these
• 9:22
  Speaker 1: on a managerial level, but also sort of show Wall
• 9:25
  Speaker 1: Street you know how much they're spending on what they
• 9:27
  Speaker 1: called the other other bets UM and that models. We
• 9:30
  Speaker 1: understood it, and as the company talked about for a
• 9:32
  Speaker 1: long time was you're gonna have independent CEOs reporting up
• 9:35
  Speaker 1: to this this company that then like allocates capital depending
• 9:38
  Speaker 1: on sort of the prospects of the business. UM that's
• 9:41
  Speaker 1: changed where you now have the CEO of the company
• 9:43
  Speaker 1: responsible for any nine of the revenues and and most
• 9:46
  Speaker 1: of the employee base Google UM now running all the
• 9:49
  Speaker 1: Alphabet Laura, what I love about your career and you've
• 9:53
  Speaker 1: had a long career covering media in these tech stocks,
• 9:55
  Speaker 1: and you make some great bold calls, innovative calls, and
• 9:58
  Speaker 1: you know, thinking about bending out YouTube would certainly be
• 10:01
  Speaker 1: a bold move for Alphabet. What do you think the
• 10:05
  Speaker 1: company and management and is thinking about any kind of
• 10:08
  Speaker 1: spin out of some of their assets. I think founders
• 10:12
  Speaker 1: tend to love the assets they build or buy. In
• 10:16
  Speaker 1: the case of YouTube, they bought it and it was
• 10:18
  Speaker 1: a brilliant acquisition. I think professional managers, which is what
• 10:22
  Speaker 1: we have at Google as of today, are much more
• 10:25
  Speaker 1: willing to follow economics, and therefore I assume I believe
• 10:30
  Speaker 1: that Google will have be more likely to be willing
• 10:33
  Speaker 1: to spin off pieces under a non founder oversights, which
• 10:38
  Speaker 1: is what we have today. Lord, do you think the
• 10:40
  Speaker 1: founders Larry and Serrogei are How critical are they? Do
• 10:43
  Speaker 1: you think from investor's perspective to this company in the stock?
• 10:46
  Speaker 1: Not very much. Mostly they spend money. Mostly they spend
• 10:50
  Speaker 1: money on passion projects that we think should be part
• 10:53
  Speaker 1: of their billion dollar, multibillion dollar network. Mark, what do
• 10:56
  Speaker 1: you think, you know, when you when you take a
• 10:58
  Speaker 1: look at at Google, what do you think is the
• 11:00
  Speaker 1: next step for them? Is there anything transformational for them?
• 11:05
  Speaker 1: I think the big, big next step It's gonna be
• 11:07
  Speaker 1: interesting question is right so soon? Dar has put a
• 11:09
  Speaker 1: lot of emphasis on the cloud business, and that's where
• 11:11
  Speaker 1: they're spending a lot of their investment, their head count
• 11:13
  Speaker 1: money to build this this business to compete with Amazon
• 11:17
  Speaker 1: and Microsoft. Um that's been you know, about four years
• 11:20
  Speaker 1: now they're still in third place. I think, I'm not
• 11:23
  Speaker 1: sure how how long. That seems like a pretty long rope,
• 11:25
  Speaker 1: but at some point they have to sort of show
• 11:27
  Speaker 1: um soon are and the board and shareholders that they're
• 11:30
  Speaker 1: actually making significant progress and on this investment um and
• 11:33
  Speaker 1: they're going up against a couple of issues right there.
• 11:36
  Speaker 1: Some of the industries are moving into like the federal
• 11:38
  Speaker 1: contracts and military contracts, oil and gas industry has actually
• 11:43
  Speaker 1: prompted quite a bit of resistance from the rank and
• 11:46
  Speaker 1: file Google engineers, and so dealing with that internal tension
• 11:49
  Speaker 1: which has been impercolating for a couple of years now,
• 11:51
  Speaker 1: is also gonna be a major challenge for for soon
• 11:54
  Speaker 1: d Are and something that he's pretty much dealt with
• 11:56
  Speaker 1: on his own. Um not really. Founders have not been
• 11:58
  Speaker 1: involved at all. Mark Bergen, Technology reporter. Thank you so
• 12:01
  Speaker 1: much for joining us. Marcus covers all things tech for
• 12:04
  Speaker 1: Bloomberg News. Joining us from our Bloomberg nine sixties studio
• 12:07
  Speaker 1: in San Francisco. Laura Martin, senior analyst at Needham Company.
• 12:10
  Speaker 1: She has a buy on the stocks. She's been right
• 12:13
  Speaker 1: as she typically is. We appreciate you calling in, Laura
• 12:15
  Speaker 1: from Los Angeles where you're based. Google Stock again very
• 12:19
  Speaker 1: strong performer this year, up twenty percent. Making some management
• 12:22
  Speaker 1: changes there. Bloomberg Opinion informed perspectives and expert, data driven
• 12:29
  Speaker 1: commentary on breaking news. That's ten thirty three all in
• 12:33
  Speaker 1: Wall Street. Time to check in with Bloomberg Opinion. We're
• 12:35
  Speaker 1: turned by Ellen Walled, President, a Transversal consulting and a
• 12:38
  Speaker 1: Bloomberg Opinion contributor joining us now from Vienna at the
• 12:42
  Speaker 1: OPEC meeting. Uh. Ellen, thanks so much for joining us.
• 12:45
  Speaker 1: We appreciate you making the effort all the way from Vienna.
• 12:47
  Speaker 1: So you're at the OPEC meeting. Give us a sense
• 12:50
  Speaker 1: of what is going on there right now? Well, right now,
• 12:53
  Speaker 1: we're still waiting for me for all of the ministers
• 12:56
  Speaker 1: to arrive. Some of them I think are not even
• 12:59
  Speaker 1: spoos surviving early tomorrow morning. But there's a lot of
• 13:02
  Speaker 1: chatter about potentially putting together some sort of uh production cut.
• 13:08
  Speaker 1: We've definitely heard um Iraq talking about that. The thing
• 13:13
  Speaker 1: is that putting that together is going to be a
• 13:14
  Speaker 1: really hard uh sell. At this point tomorrow morning, we're
• 13:18
  Speaker 1: going to have the Joint Ministerial Monitoring Committee and then
• 13:22
  Speaker 1: finally in the afternoon the actual OPEC meeting itself, so
• 13:25
  Speaker 1: there is time to potentially put together some sort of
• 13:29
  Speaker 1: deeper production cut. I think the ministers are particularly concerned
• 13:33
  Speaker 1: about demand weakness in the first half of and the
• 13:38
  Speaker 1: fact that right now the cuts are extended through March,
• 13:41
  Speaker 1: but they want to at least get a roll over
• 13:44
  Speaker 1: through June. I think we might even see one through
• 13:47
  Speaker 1: the end of Interesting. I'm sure you're gonna be a
• 13:51
  Speaker 1: real strong performance here in Brent Crude up about three
• 13:55
  Speaker 1: point four today. Um. What is your sense, uh, Ellen,
• 13:59
  Speaker 1: about the cohesion of OPEC these days? How efficient are
• 14:03
  Speaker 1: they really kind of managing the market? Well, this is
• 14:07
  Speaker 1: this is a really difficult situation because, like we saw
• 14:10
  Speaker 1: a couple of days ago on Friday after thanks Giving,
• 14:13
  Speaker 1: crew just plummeted, and now today we're seeing it up. Um.
• 14:17
  Speaker 1: This really, I think is do much more to the
• 14:20
  Speaker 1: headlines coming out about the China trade negotiations much more
• 14:25
  Speaker 1: soon than any chatter from OPEC. I think that that
• 14:27
  Speaker 1: OPEC is really in this market, uh, and this atmosphere
• 14:31
  Speaker 1: where things are really being determined by the global economic
• 14:34
  Speaker 1: outlook and demand. It's not really so much about supply
• 14:39
  Speaker 1: and so OPEC may have had a very presciently timed
• 14:43
  Speaker 1: headline in terms of talking about putting together for their cuts,
• 14:46
  Speaker 1: but I do think most people realize that those cuts
• 14:49
  Speaker 1: are very unlikely to materialize, and the price action we're
• 14:52
  Speaker 1: seeing could be largely due to the talk in China exactly.
• 14:57
  Speaker 1: So what when we when I think about OPECUS, we
• 14:59
  Speaker 1: also have to talk about Russia. How is Russia performing
• 15:02
  Speaker 1: and acting in the marketplace right now, and what's kind
• 15:05
  Speaker 1: of the relationship between Russian and OPEC right now? Yeah,
• 15:08
  Speaker 1: Russia is essentially the dealmaker for OPEC at this point.
• 15:12
  Speaker 1: In fact, last year in December, OPEC itself could not
• 15:16
  Speaker 1: come to any sort of consensus even to just extend
• 15:20
  Speaker 1: what they already had in place until Russia showed up
• 15:24
  Speaker 1: the next day, sat down with the Saudis, sat down
• 15:26
  Speaker 1: with the Iranians, and only then did we get a
• 15:29
  Speaker 1: rollover in the status quo. So Russia really plays a
• 15:33
  Speaker 1: crucial role at this point, particularly since the previous Saudi
• 15:37
  Speaker 1: oil minister who put together this this current deal, i'll
• 15:40
  Speaker 1: fall it is no longer part of the Saudi government anymore.
• 15:44
  Speaker 1: We have this new Saudi oil minister who wall has
• 15:48
  Speaker 1: played a very large role in the Saudi delegation, has
• 15:51
  Speaker 1: never really sat at the head before, so people are
• 15:55
  Speaker 1: really looking to see what kind of force he's going
• 15:58
  Speaker 1: to bring to the negotiations. I think the big meeting
• 16:01
  Speaker 1: we're looking for at OPEC is going to be the
• 16:04
  Speaker 1: meeting between Russian oil Minister Novak and the new Saudi
• 16:09
  Speaker 1: oil minister, Prince Abdulzie's events, and let's switch gears just
• 16:14
  Speaker 1: a little bit of talk about the other big big
• 16:16
  Speaker 1: news in the energy world, and that is the Aramco
• 16:19
  Speaker 1: I p O. There's news reports out that Saudi UM
• 16:22
  Speaker 1: a RAMCA is considering pricing it's I p O at
• 16:25
  Speaker 1: the top end of the marketed range. What's the latest
• 16:29
  Speaker 1: from your perspective on this huge IPO and I'm not
• 16:32
  Speaker 1: surprised to hear that they want to price it at
• 16:34
  Speaker 1: the large end or at the higher end. We're supposed
• 16:37
  Speaker 1: to get word on pricing at the same time as
• 16:40
  Speaker 1: the OPEQUE meeting, which should be interesting those shares. We
• 16:43
  Speaker 1: don't know when shares are scheduled to start trading. What's
• 16:47
  Speaker 1: going on with this this I p O is is
• 16:49
  Speaker 1: we've seen pretty pretty strong demand within Saudi Rabbit, but
• 16:52
  Speaker 1: not as strong as it was billed as. And typically
• 16:55
  Speaker 1: a lot of I p O s are oversubscribed many
• 16:58
  Speaker 1: more times than what we've seen so are with the
• 17:01
  Speaker 1: A Ramco I p O UM. But there's an interesting
• 17:04
  Speaker 1: dynamic here between what's going to happen with OPEC and
• 17:07
  Speaker 1: this I p O. I think there's there's a general
• 17:10
  Speaker 1: assumption that you want to hire price for oil for
• 17:13
  Speaker 1: the RAMCO I p O. It's really not likely that
• 17:16
  Speaker 1: Saudi Arabia is able to push through or to galvanize
• 17:21
  Speaker 1: enough support to cut production enough to really increase the
• 17:24
  Speaker 1: price of oil right now, particularly since it's reacting so
• 17:27
  Speaker 1: much more to China trade than than anything in OPEX.
• 17:31
  Speaker 1: So I do think that what we have to understand
• 17:33
  Speaker 1: is from here on out, once a ramco is a
• 17:35
  Speaker 1: public company, Aramco will want to show revenue growth, and
• 17:39
  Speaker 1: the best way, at least in this oil market to
• 17:41
  Speaker 1: show revenue growth is to pump more. And so every
• 17:44
  Speaker 1: time OPEC comes up UH, there'll be an incentive for
• 17:47
  Speaker 1: Saudi Arabia to pump more oil as opposed to less,
• 17:51
  Speaker 1: and this could become an issue, particularly when Saudi Arabia
• 17:55
  Speaker 1: wants to sell more shares of a ramco, as it
• 17:58
  Speaker 1: has indicated it wants to. This could really shift the
• 18:01
  Speaker 1: OPEC dynamic in a very new way that we haven't
• 18:04
  Speaker 1: seen thus far. UH. Ellen's just really quickly twenty seconds.
• 18:08
  Speaker 1: How concerned are people there at OPEC that this deal
• 18:11
  Speaker 1: is only being done. It's not being done in the West.
• 18:13
  Speaker 1: There's no US or Western investors. Well. Uh, I think
• 18:18
  Speaker 1: a lot of people have kind of said, you know,
• 18:20
  Speaker 1: this is this is a Saudi thing. It's it's a
• 18:22
  Speaker 1: Saudi or it's a regional story. That's where this is
• 18:25
  Speaker 1: now a regional rather than an international story. Though I
• 18:29
  Speaker 1: do think it will continue to affect the market. Uh,
• 18:32
  Speaker 1: and we'll have major effects on the Saudi economy and
• 18:36
  Speaker 1: the regional economy going forward. Dr Ellen Wall, thank you
• 18:39
  Speaker 1: so much for joining us. Dr Walld is the president
• 18:42
  Speaker 1: of Transversal Consulting, also a nonresident Senior Fellow at the
• 18:46
  Speaker 1: Atlantic Council's Global Energy Center, and a Bloomberg Opinion columnist.
• 18:50
  Speaker 1: You can read more on this and other stories from
• 18:52
  Speaker 1: Bloomberg Opinion at Bloomberg dot com slash Opinion, and for
• 18:56
  Speaker 1: the folks on the terminal, you can type in O, P,
• 18:58
  Speaker 1: I N GO to get all of the great opinion
• 19:01
  Speaker 1: work coming out of Bloomberg Opinion. Again, looking at crude,
• 19:05
  Speaker 1: a very very strong day for crude here, up about
• 19:08
  Speaker 1: three and a half percent. Looking at Brent and w
• 19:11
  Speaker 1: t I and as Dr Wald mentioned, probably driven more
• 19:14
  Speaker 1: by positive tone of trade talks than about more so
• 19:18
  Speaker 1: than what's happening in Vienna at the OPEC meetings. But
• 19:20
  Speaker 1: we will follow up on those meetings. This is Bloomberg
• 19:24
  Speaker 1: Markets with Lisa Bromo, Eds and Paul Sweeney on Bloomberg Radio.
• 19:29
  Speaker 1: I've got an amazing story for you. I just heard
• 19:32
  Speaker 1: this amazing story over the last couple of minutes. Rob Lacasio, Founder,
• 19:35
  Speaker 1: chief executive officer of Live Person. It's a publicly traded company.
• 19:39
  Speaker 1: LP s n A is a symbol. He joins me
• 19:41
  Speaker 1: here in the Bloomberg Interactive Broker studio and they do
• 19:43
  Speaker 1: some type of communication AI powered conversational. I don't want
• 19:47
  Speaker 1: to do that right now, Rob, your company when public?
• 19:50
  Speaker 1: I was just looking on the Bloomberg terminal. April of
• 19:53
  Speaker 1: two thousand, Now, for those of you don't know, April
• 19:55
  Speaker 1: of two thousand was the absolute peak, maybe just past
• 19:59
  Speaker 1: the peak the dot com cycle. How did you guys
• 20:02
  Speaker 1: go public? And how did you survive two million in
• 20:07
  Speaker 1: revenues and twenty million in losses and we had a
• 20:11
  Speaker 1: three million dollar market cap, But um, we did those
• 20:14
  Speaker 1: deals in that's right. And there were companies went out
• 20:17
  Speaker 1: with no revenue, you know, but we got it. We
• 20:19
  Speaker 1: went out and we were the last Internet I p
• 20:22
  Speaker 1: O April seven to two thousand, went out at eight
• 20:25
  Speaker 1: dollars of share, and within twelve months we were seven
• 20:28
  Speaker 1: cents of share. So it was it got pretty hairy.
• 20:31
  Speaker 1: And the stock now is thirty seven dollars and seventy
• 20:34
  Speaker 1: five cents. You have a market cap today of two
• 20:39
  Speaker 1: point five billion dollars. Tell us what live person does?
• 20:42
  Speaker 1: What did you guys? What were you at your inception?
• 20:44
  Speaker 1: And what are you today? So yeah, so I invented
• 20:47
  Speaker 1: when you chat online for customer care. So we're on
• 20:49
  Speaker 1: a website yea in uh patented and then obviously took
• 20:54
  Speaker 1: a public But I've always had this vision obviously that
• 20:57
  Speaker 1: commerce is powered by conversations. It's not just a vending machine,
• 21:01
  Speaker 1: you know, you have to go and talk to somebody,
• 21:02
  Speaker 1: ask questions. So that's that's how we sort of built
• 21:05
  Speaker 1: the business. But about six years ago I made a
• 21:07
  Speaker 1: really big bet and we said, AI and bots and
• 21:11
  Speaker 1: automation will power these conversations so much like we see
• 21:14
  Speaker 1: with Alexa. So we decided to pivot the company, build
• 21:18
  Speaker 1: a whole new platform and launch it in the world
• 21:20
  Speaker 1: and allow every brand in the world to have that
• 21:22
  Speaker 1: sort of power of the Alexa, but have it for
• 21:24
  Speaker 1: your brand, and now you can run it on every
• 21:27
  Speaker 1: messaging front end. So through Apple business Chat or Facebook,
• 21:30
  Speaker 1: you can message a brand like Delta Airlines and you
• 21:33
  Speaker 1: can now ask a question instead of being put on hold.
• 21:36
  Speaker 1: So who else is in this space, because I mean
• 21:40
  Speaker 1: I would think that every tech company or there'll be
• 21:42
  Speaker 1: a lot of technology companies in there kind of playing
• 21:44
  Speaker 1: in the space. So there's a massive shift going on
• 21:47
  Speaker 1: from e commerce to what we call conversational commerce. And uh, Apple, Facebook,
• 21:54
  Speaker 1: Google and Amazon are all betting that the conversational users
• 21:59
  Speaker 1: or experience is future. And so for obviously Amazon, they've
• 22:04
  Speaker 1: got Alexa and so everyone's betting. And for the other companies,
• 22:07
  Speaker 1: they've gotten messaging front ends. So all the big technology
• 22:10
  Speaker 1: companies are in there, and we're in there with them,
• 22:12
  Speaker 1: except we built the platform for the brands to create
• 22:16
  Speaker 1: these very scalable, unique experiences through those front ends. So
• 22:20
  Speaker 1: you can go through Alexa to a Delta Airlines or
• 22:24
  Speaker 1: message through I message to Delta Airlines. But our platform
• 22:27
  Speaker 1: supports Delta Airlines. Because you have to build a body,
• 22:30
  Speaker 1: you have live human agents. All that has to be
• 22:32
  Speaker 1: on a on a very scalable platform, and that's what
• 22:35
  Speaker 1: we built. Well, is your company and others putting these
• 22:37
  Speaker 1: customer service agents out of business. No, contrary to what
• 22:42
  Speaker 1: people believe, the contact center agents are actually the ones
• 22:47
  Speaker 1: building the bots. They're the ones who know how to
• 22:49
  Speaker 1: have conversations. They're they're taking calls, they're doing chats, they're
• 22:53
  Speaker 1: doing messages, and so we empower them now to actually
• 22:56
  Speaker 1: be on our platform, create the conversations and deploy them.
• 23:00
  Speaker 1: And like at Low's, which is one of our customers,
• 23:02
  Speaker 1: they have a group of agents in the Dominican Republic
• 23:05
  Speaker 1: that are making these conversations, these automations, these ai s.
• 23:09
  Speaker 1: They're putting them in the world, and they're the ones
• 23:11
  Speaker 1: that are are doing it, not tech people. And in
• 23:13
  Speaker 1: some cases they've doubled their salaries. So for now, if
• 23:16
  Speaker 1: you think about the world and where it will be,
• 23:18
  Speaker 1: I'll be talking to my TV, I'm talking to my car,
• 23:21
  Speaker 1: I'm gonna be communicating through voice, through messaging, and there
• 23:26
  Speaker 1: needs to be a group of people who are designing
• 23:27
  Speaker 1: those conversational user experiences. Those are the agents today. In
• 23:30
  Speaker 1: the future they may get replaced, but today they're they're
• 23:34
  Speaker 1: the ones powering the conversations. So I see I was
• 23:36
  Speaker 1: reading something that in the future conversations will be with bots.
• 23:42
  Speaker 1: How does give us an example of that? Because we
• 23:45
  Speaker 1: we see today we have twenty thou customers and some
• 23:48
  Speaker 1: of the largest telcos and banks and retailers in the world,
• 23:51
  Speaker 1: and we see the data set. We we power sixty
• 23:54
  Speaker 1: million conversations a month on our platform, so we see
• 23:57
  Speaker 1: most of those conversations are pretty redundant. For instance, at
• 24:00
  Speaker 1: a bank, of calls that happened today, are these conversations
• 24:05
  Speaker 1: are related to paying your bill, like my pay my
• 24:09
  Speaker 1: my credit card bill, and I have questions? We know
• 24:11
  Speaker 1: a lot of that can be automated, and and the
• 24:13
  Speaker 1: consumers wanted automated. They don't want to pick up the phone,
• 24:16
  Speaker 1: they don't want to converse, They want to have it
• 24:18
  Speaker 1: in a conversational format like I don't understand why this
• 24:21
  Speaker 1: charge is on my bill? Okay, a question? What what charge?
• 24:24
  Speaker 1: And that's the back and forth. But that will be
• 24:26
  Speaker 1: automated though a lot of those will be automated. Interesting, Wow,
• 24:29
  Speaker 1: I'm looking at your stock again today seven cents up
• 24:34
  Speaker 1: this year. What were you thinking when your stock with
• 24:37
  Speaker 1: seven cents to share? How did you survive? Uh, you
• 24:43
  Speaker 1: know survival. I've always sort of taken the uh the
• 24:47
  Speaker 1: quote from Winston Churchill, you know, never never, never quit.
• 24:50
  Speaker 1: And UM, I just think if you have a purpose
• 24:53
  Speaker 1: in building a company, you feel like you've got to
• 24:55
  Speaker 1: get through the tough times. And I've found is that, um,
• 24:59
  Speaker 1: most of tough times is a place for learning. So
• 25:02
  Speaker 1: a lot of entrepreneurs, uh, they quit. You think this
• 25:05
  Speaker 1: this terrible and we had we had to fire forty people,
• 25:08
  Speaker 1: have eight people in two thousand one to survive and
• 25:11
  Speaker 1: it was a terrible thing. And but going through these
• 25:14
  Speaker 1: experiences makes you tougher and you start working through how
• 25:18
  Speaker 1: to build a better company. So to me, it's like
• 25:21
  Speaker 1: I find it when you hit those rough parts instead
• 25:25
  Speaker 1: of getting down, it's a time to learn. And so
• 25:28
  Speaker 1: I think psychologically, which is half the game. I've just
• 25:31
  Speaker 1: stated it to to learn and build a great company.
• 25:34
  Speaker 1: And we're we're not there yet, you know. I I
• 25:37
  Speaker 1: think we've arrived at a place where conversational commerce will
• 25:41
  Speaker 1: take over most of what we see in e commerce.
• 25:43
  Speaker 1: So I feel like we're here to own that, to
• 25:46
  Speaker 1: to drive that, and sort of to change the way
• 25:50
  Speaker 1: technology is to I'm not so proud of our world,
• 25:53
  Speaker 1: of the technology leaders today, and I think we can
• 25:56
  Speaker 1: change the game. Just a fascinating story. Rob Blacastio, Founder,
• 26:01
  Speaker 1: chief executive officer of Live person with Again. This was
• 26:05
  Speaker 1: the as Rob mentioned, the last you know Internet I
• 26:08
  Speaker 1: p O to get off and get the I p
• 26:11
  Speaker 1: O done during the Internet boom. That was April of
• 26:13
  Speaker 1: two thousand. We're here nineteen years later. The company is
• 26:17
  Speaker 1: still here, you know, from seventh cents to share at
• 26:19
  Speaker 1: thirty seven. Just extraordinary, Rob, Thanks so much. Thanks for
• 26:23
  Speaker 1: listening to the Bloomberg P and L podcast. You can
• 26:25
  Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever
• 26:28
  Speaker 1: podcast platform you prefer. Paul Sweeney, I'm on Twitter at
• 26:31
  Speaker 1: pt Sweeney. I'm Lisa abram Woy. It's I'm on Twitter
• 26:34
  Speaker 1: at Lisa abram Woyit's one before the podcast. You can
• 26:36
  Speaker 1: always catch us worldwide. I'm Bloomberg Radio