Latest / Bloomberg Intelligence / Oil Pressure Is To The Downside, Ex-Iran: Kilduff

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Oil Pressure Is To The Downside, Ex-Iran: Kilduff · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you.
• 0:05
  Speaker 1: Along with my co host Lisa Brahma Wicks. Each day
• 0:07
  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
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. Let's turn our attention to the
• 0:21
  Speaker 1: oil markets. We started the week with a lot of uncertainty,
• 0:24
  Speaker 1: a lot of volatility about Mid East and geopolitical tensions.
• 0:28
  Speaker 1: Brent crude at one point over this week was at
• 0:30
  Speaker 1: seventy one and change. We've backed off pretty significantly from
• 0:34
  Speaker 1: there as tensions have ease. Looking at Brent crude right
• 0:36
  Speaker 1: now sixty five dollars thirty six cents per barrel, let's
• 0:39
  Speaker 1: get a sense of kind of what's going on in
• 0:41
  Speaker 1: the oil markets. We welcome John killed Off, founding partner
• 0:44
  Speaker 1: of Again Capital, based in New York. So, John, what
• 0:47
  Speaker 1: do you make of the volatility that we saw in
• 0:50
  Speaker 1: the energy markets this week. Well, things we're looking you know,
• 0:54
  Speaker 1: very bleak there. On I guess Wednesday night, uh with
• 0:58
  Speaker 1: the Uranian attack. Uh, you know, there was some misinformation
• 1:01
  Speaker 1: around the market about potential casualties, if not fatalities, and
• 1:05
  Speaker 1: of course you know none of that came to pass.
• 1:07
  Speaker 1: So that that's why you got the spike up, because
• 1:09
  Speaker 1: it was you get yourself long some oil for protection
• 1:13
  Speaker 1: as quickly as you can, and then it came off
• 1:15
  Speaker 1: when our worst fears weren't realized, thankfully. So Um, the
• 1:19
  Speaker 1: market has now shifted back to being more concerned about
• 1:22
  Speaker 1: the relative oversupply in the market and uh, pretty weak
• 1:26
  Speaker 1: guests lean demand figured out of the US in this
• 1:28
  Speaker 1: week's report from the government. So um, back to more
• 1:32
  Speaker 1: normal analysis for now. Yeah, for now being the key
• 1:35
  Speaker 1: word here, because I just should know. There was a
• 1:38
  Speaker 1: little uptick, a little pairing of losses in the price
• 1:41
  Speaker 1: of crewed after the press conference held by a Secretary
• 1:44
  Speaker 1: of State Mike Pompeo as well as Treasure Secretary step
• 1:47
  Speaker 1: minut To announced new sanctions on Iran, the possible re
• 1:50
  Speaker 1: escalation depending on how Iran responds. Is it telling that
• 1:55
  Speaker 1: there has not been a bigger move frankly in oil
• 1:58
  Speaker 1: throughout all of this, even the fact that there were
• 2:01
  Speaker 1: actual missiles flying, right, I mean, it wasn't necessarily just
• 2:04
  Speaker 1: as theoretical back and forth of words, things were getting heated.
• 2:07
  Speaker 1: In another way, things were getting very heated. And I
• 2:13
  Speaker 1: think the oil price at Lesa was off to the
• 2:16
  Speaker 1: races the other night, um to the upside, because it
• 2:20
  Speaker 1: looked like there was going to be a real escalation. Um.
• 2:25
  Speaker 1: And if Iran had gone further than it did, Uh,
• 2:28
  Speaker 1: you have to figure that most slightly they're most certainly
• 2:31
  Speaker 1: would have been. And finally, you know, real volumes of
• 2:34
  Speaker 1: oil would have come off the market, particularly out of
• 2:37
  Speaker 1: southern Iraq. That's uh, that's where my focus is. Iraq
• 2:40
  Speaker 1: is proving to be the battle ground in this whole thing.
• 2:43
  Speaker 1: Unfortunately for those poor people and the Iraqi crude oil
• 2:48
  Speaker 1: at a Bassora in the south, a couple of million
• 2:51
  Speaker 1: barrels a day is the key element here that gets affected.
• 2:54
  Speaker 1: Prices are going to go soaring higher. All right, John,
• 2:57
  Speaker 1: Let's assume, and this might not be a fair sumption.
• 3:00
  Speaker 1: Let's assume geopolitical tensions remain muted here in the near
• 3:04
  Speaker 1: term to intermediate term. Where do you think oil goes here?
• 3:07
  Speaker 1: Given a supply and the demand dynamics out there, it
• 3:09
  Speaker 1: just seems to be a lot of supply out there. Yeah,
• 3:12
  Speaker 1: I mean x RAN. You're looking at at a steady
• 3:17
  Speaker 1: sell off here now. Um, you know, we broke down
• 3:19
  Speaker 1: through some key levels. Sixty dollars was key support. We
• 3:22
  Speaker 1: went through that like a hot knife through butter. The
• 3:24
  Speaker 1: next key level is just under fifty eight dollars of barrel.
• 3:29
  Speaker 1: That's the two day moving average, and if we can
• 3:32
  Speaker 1: break through that, we we could easily then go back
• 3:35
  Speaker 1: to the October lows, potentially test fifty two a barrel.
• 3:39
  Speaker 1: Once again, the technical setup is such that the chart
• 3:44
  Speaker 1: is a message. It got pretty much wrecked by the
• 3:47
  Speaker 1: spike higher and then an immediate reversal. So there's a
• 3:51
  Speaker 1: lot going against the bowls in the market right now.
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  Speaker 1: What about other possible disruptions forgetting we're on and I
• 3:57
  Speaker 1: remember when we were talking about Libya being a source
• 3:59
  Speaker 1: of concern. I remember Venezuela production was a concern for
• 4:03
  Speaker 1: a while, given the infrastructure in that country and what's
• 4:05
  Speaker 1: going on there. All those things not on the horizon anymore. Well,
• 4:12
  Speaker 1: the the issue we have, the market has is that
• 4:15
  Speaker 1: even with the Ran and Venezuela pretty much offline, Iran
• 4:19
  Speaker 1: is getting some crude oil app to China by the
• 4:21
  Speaker 1: way UM. There there's still relative oversupply. The position of
• 4:25
  Speaker 1: the United States, the ascendancyats to the number one oil
• 4:28
  Speaker 1: producer in the world, and now UH a soaring amount
• 4:31
  Speaker 1: of exports. We exported four point six million barrels a
• 4:34
  Speaker 1: day UH last two weeks ago during that week, just
• 4:37
  Speaker 1: an incredible figure. And UM as a result of that,
• 4:41
  Speaker 1: you know that the market keeps getting a sufficient amount
• 4:45
  Speaker 1: of supply to the market, if not more than it needs.
• 4:48
  Speaker 1: And there's still some cheating within the OPEC group, Nigeria
• 4:51
  Speaker 1: in particular, and even with all the strife in Libya,
• 4:54
  Speaker 1: their oil keeps getting out. So with all of these
• 4:57
  Speaker 1: serial issues UM in the Middle East, now with the
• 5:00
  Speaker 1: rack and Iran and the attack on Saudi Arabia in
• 5:03
  Speaker 1: the fall, the oil flows haven't been affected by any
• 5:07
  Speaker 1: of these things, and the market remains relatively well supplied.
• 5:10
  Speaker 1: So the market, the oil price UM is reflective of that.
• 5:14
  Speaker 1: There's no tightness, no constraints, UH, just relative oversupply. So
• 5:19
  Speaker 1: given that scenario, and given that, let's say you know,
• 5:22
  Speaker 1: a a two percent kind of global GDP type of growth,
• 5:26
  Speaker 1: where does w T I go? Does it drift down
• 5:28
  Speaker 1: close back to fifty that's what it's looking like that
• 5:32
  Speaker 1: the growth outlook for isn't really enough to UH to
• 5:37
  Speaker 1: support higher prices for sure. You know, maybe some stabilization
• 5:42
  Speaker 1: if the Sattie's were decided to cut back more, But
• 5:44
  Speaker 1: that is even in jeopardy, particularly because Russia is just
• 5:49
  Speaker 1: is about to bolt UH the agreement. It appears that
• 5:53
  Speaker 1: they want to be allowed to UH fight for market share,
• 5:56
  Speaker 1: continue with their investment capital plans that have been emplaced
• 6:00
  Speaker 1: by their by their various companies UM, and operate on
• 6:03
  Speaker 1: a more commercial basis. So um, Yes, short answer to
• 6:07
  Speaker 1: your question is that it's a downward bias again short
• 6:10
  Speaker 1: of a supply disruption that comes from an exogenous event,
• 6:13
  Speaker 1: I guess. Then the question becomes, John, how long before
• 6:16
  Speaker 1: we start worrying about the financial health of shale producers
• 6:19
  Speaker 1: which have been the swing players here. We've seen them
• 6:22
  Speaker 1: do really well in terms of bonds and stock prices
• 6:25
  Speaker 1: in the wake of the increase in oil prices. How
• 6:28
  Speaker 1: far do they have to drop before we have to
• 6:29
  Speaker 1: worry about their financial viability? Again, Well, they're definitely on
• 6:34
  Speaker 1: the ropes and this is the year to watch them um.
• 6:36
  Speaker 1: And it's also the year potentially where the shale miracle
• 6:41
  Speaker 1: UH drives up to a degree because as these weaker
• 6:45
  Speaker 1: companies either go out of business or merge or get
• 6:48
  Speaker 1: picked up by the stronger players, including these including the
• 6:51
  Speaker 1: majors like Exxon Mobile. UM, then a new round of
• 6:56
  Speaker 1: production discipline could befall the industry and that sector where
• 7:02
  Speaker 1: we would see a decline in US production uh instead
• 7:06
  Speaker 1: of the rampant and unbridled growth that has sort of
• 7:10
  Speaker 1: been the business model in that way, so UM. That
• 7:14
  Speaker 1: would also potentially help to stabilize prices down the road,
• 7:17
  Speaker 1: but it's not going to be really uh an impact
• 7:20
  Speaker 1: on prices to the upside this year. Thank you so
• 7:23
  Speaker 1: much for being with us. John Kilduff, founding partner of
• 7:25
  Speaker 1: Again Capital, based in New York, talking about the different
• 7:29
  Speaker 1: factors that are pushing and pulling on the price of oil.
• 7:41
  Speaker 1: Bart van Arc, chief economists at the Conference Board, joining
• 7:45
  Speaker 1: us now and you did this annual global CEO survey
• 7:48
  Speaker 1: and among the points made here, attracting and retaining talent
• 7:52
  Speaker 1: ranked as their top internal concern. If that's the case,
• 7:57
  Speaker 1: why our wages not going up more? Yes? Hi, good
• 8:00
  Speaker 1: morning these I H I mean that's uh, that's I
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  Speaker 1: think the conundrum here, right, I mean, we see this
• 8:05
  Speaker 1: continuous slow age growth and at the same time we
• 8:07
  Speaker 1: see companies, uh, we all complain about talent. It's a
• 8:11
  Speaker 1: very highly bifurcated labor market, right, I Mean, on the
• 8:14
  Speaker 1: one hand, you know, we see CEOs and spee suite
• 8:17
  Speaker 1: leaders in our conference board see suite sure of a
• 8:20
  Speaker 1: really put these issues of attracting and retaining talent, how
• 8:23
  Speaker 1: to develop a next generation of leaders in order to
• 8:26
  Speaker 1: move innovation forward, in order to make that company's more productive,
• 8:30
  Speaker 1: improve their performance. And on the other hand, there's just
• 8:32
  Speaker 1: lots of junctions and occupations out there where there are
• 8:36
  Speaker 1: still plenty of supplying the labor market. See pretty strong
• 8:39
  Speaker 1: job growth throughout two thousand nineteen and in two thousand twenty,
• 8:43
  Speaker 1: and there are people. There's still plenty people being added
• 8:46
  Speaker 1: to the labor markets, so neat for companies to raise
• 8:48
  Speaker 1: wages there so part the labor market remains strong, which
• 8:52
  Speaker 1: can be a challenge for corporations. What is the number
• 8:56
  Speaker 1: one risk your survey came back with here in terms
• 8:58
  Speaker 1: of the CEO serving Yeah, so there's a s sweet
• 9:01
  Speaker 1: survey by the conference word was done in September October
• 9:05
  Speaker 1: last year, So at that time, I think there were
• 9:08
  Speaker 1: big concerns about where the economy was was heaving also
• 9:11
  Speaker 1: in the United States. Don't forget we were in the
• 9:12
  Speaker 1: middle of the trade disputes at that point in time
• 9:15
  Speaker 1: and potensial threats of raising tariffs. So recession risk came
• 9:19
  Speaker 1: up pretty consistently among the suit leaders as their biggest
• 9:24
  Speaker 1: concern going into two thousand and twenty. Now we're a
• 9:26
  Speaker 1: few more months down the road. You know, we we
• 9:29
  Speaker 1: have a trade phase one deal coming along we all
• 9:32
  Speaker 1: hope very very soon. So you can see that has
• 9:35
  Speaker 1: helped um businesses become a little bit more confidence. Earlier
• 9:39
  Speaker 1: this week, the word releases CEO Confidence indexis is a
• 9:43
  Speaker 1: quarterly index, and CEO confidence has been going down for
• 9:46
  Speaker 1: about six quarters in a row, but in the last
• 9:49
  Speaker 1: quarter it actually began to pick up a little bit,
• 9:51
  Speaker 1: still less than fifty, so we still have more negative
• 9:54
  Speaker 1: CEOs than positive CEOs, but we're beginning to see a
• 9:56
  Speaker 1: little bit of recovery of confidence. So in that sense,
• 10:00
  Speaker 1: I think they may be hoping going into a slightly
• 10:02
  Speaker 1: better two thousand twenty than two thousand nineties. So this
• 10:05
  Speaker 1: recession risk has received somewhat okay. So and this is important,
• 10:09
  Speaker 1: especially because as one of the points that that your
• 10:11
  Speaker 1: survey found U S C e O S said that
• 10:14
  Speaker 1: a recession was their number one concern in and that
• 10:19
  Speaker 1: had been their third biggest concern back in. I do
• 10:23
  Speaker 1: want to go back to the labor issue and this
• 10:25
  Speaker 1: idea of the bifurcation in the market where you have
• 10:29
  Speaker 1: skilled and sort of educated workers who are in you know,
• 10:34
  Speaker 1: in well demand and they're able to demand their their
• 10:37
  Speaker 1: salary as they as they will, or have more bargaining
• 10:39
  Speaker 1: power versus the lower end. Can you talk a little
• 10:43
  Speaker 1: bit more about what companies said the color they gave
• 10:47
  Speaker 1: around the talent shortage that they face. Yeah, it's interesting
• 10:52
  Speaker 1: to see where these shortages are, and we see a
• 10:55
  Speaker 1: lot of these shortages in sort of more blue color
• 10:57
  Speaker 1: type workers, so manufacturing workers and eng years. We of
• 11:01
  Speaker 1: course know a lot about the stories about truck drivers
• 11:03
  Speaker 1: and train drivers and so on, and these are all
• 11:06
  Speaker 1: kinds of jobs occupations where basically people were told at
• 11:10
  Speaker 1: the time, you know, don't even go there because you
• 11:13
  Speaker 1: know it will be all automated. And we have you know,
• 11:16
  Speaker 1: driverless trucks and everything else to all be robotized. And
• 11:19
  Speaker 1: now here we are in two thousand twenty, and we're
• 11:22
  Speaker 1: seeing that, you know, a lot of people in those
• 11:24
  Speaker 1: occupations are all the people are now beginning to massively
• 11:27
  Speaker 1: retire and the technology hasn't really proceeded as rapidly, so
• 11:31
  Speaker 1: now we suddenly have a shortage because there's too few
• 11:34
  Speaker 1: young people coming into those kinds of occupations. So what
• 11:37
  Speaker 1: you see in this CEO survey is that people that
• 11:40
  Speaker 1: that that SCRET leaders are saying that, you know, things
• 11:43
  Speaker 1: like an innovative culture in that company, you know, dealing
• 11:47
  Speaker 1: with these kind of disruptions of technology. They feature very
• 11:50
  Speaker 1: high on the list of their concerns, so so they
• 11:52
  Speaker 1: are more aware than effort that I need to deal
• 11:54
  Speaker 1: with this. I guess I'm really struggling with this, and
• 11:57
  Speaker 1: I'm sorry that I'm basically asking the same question again.
• 12:00
  Speaker 1: But if this is not a training issue, why can't
• 12:03
  Speaker 1: you find more people to hire by just offering more pay. Well,
• 12:07
  Speaker 1: in a way, it is a training issue in the
• 12:09
  Speaker 1: sense that you know, you get people out of school
• 12:12
  Speaker 1: who don't have these skills yet in order to deal
• 12:15
  Speaker 1: with those new technologies. So it's just very hard to
• 12:18
  Speaker 1: find people who companies are comfortable with that they can
• 12:21
  Speaker 1: really sort of get them up to speed. So a
• 12:23
  Speaker 1: lot of people with lower skills can easily find jobs
• 12:27
  Speaker 1: in the services sector of the economy, but these are
• 12:29
  Speaker 1: those specific skills that need to be trained within a
• 12:32
  Speaker 1: company environment where there's a huge shortage off. So so
• 12:36
  Speaker 1: creating an innovation culture and creating a culture in which
• 12:38
  Speaker 1: people can improve those skills I think is one of
• 12:41
  Speaker 1: the real shortcomings here. Bart van Arc, thanks so much
• 12:44
  Speaker 1: for joining us. Bart van Ark, chief ECONMIS for the
• 12:46
  Speaker 1: Conference Board, based in yr City, giving us his thoughts
• 12:49
  Speaker 1: on the global CEO survey. Following up on those jobs data,
• 13:02
  Speaker 1: time to check in with Bloomberg Opinion. We're joined by
• 13:04
  Speaker 1: Opinion Commerce Alex web covers our Things European Technology, joining
• 13:08
  Speaker 1: us from London. Alex thanks so much for joining us.
• 13:11
  Speaker 1: We're seeing in the home food delivery business some consolidation
• 13:15
  Speaker 1: going on across the globe. It's actually coming to the
• 13:18
  Speaker 1: U S as well. What's going on so in Europe
• 13:21
  Speaker 1: and in parts of Asia, we've really seen the number
• 13:24
  Speaker 1: of online food delivery platforms reduced. Has been a series
• 13:28
  Speaker 1: of mergers and in the UK we've basically got three now.
• 13:31
  Speaker 1: In South Korea they have two and likely to go
• 13:33
  Speaker 1: down essentially to one, and Germany already has just one.
• 13:37
  Speaker 1: Now in the US, you've got four. You've got um,
• 13:40
  Speaker 1: grub Hub, door Dash, Postmates, and uber eats, and frankly,
• 13:44
  Speaker 1: there is a lot of competition, which is making life
• 13:46
  Speaker 1: hard because they are all trying to out discount each other.
• 13:50
  Speaker 1: Now yesterday or day for yesterday, we had the Wall
• 13:54
  Speaker 1: Street Journal reporting that grub hub was evaluating it's um
• 14:01
  Speaker 1: uh strategic options, including a possible sale, and you know
• 14:06
  Speaker 1: that would really herald a big move that we've not
• 14:09
  Speaker 1: yet seen. In the States. We've seen a couple of
• 14:11
  Speaker 1: smaller acquisitions where you know, players with one to three
• 14:15
  Speaker 1: four percent market share have been gold up by one
• 14:17
  Speaker 1: of the bigger guys, But the bigger guys themselves have largely,
• 14:20
  Speaker 1: for the past to three years um stayed in the
• 14:23
  Speaker 1: situation they're in. I'm gonna ask a really crazy question, Alex.
• 14:26
  Speaker 1: I know this is going to be it's going to
• 14:28
  Speaker 1: be a little mind blowing. Can this business make money? Personally,
• 14:33
  Speaker 1: I think it's very hard to see how, at least
• 14:35
  Speaker 1: in the recent iterations of online food delivery. There are
• 14:39
  Speaker 1: two business models here. The first one is that you
• 14:42
  Speaker 1: are literally a platform in the truest sense. You you
• 14:46
  Speaker 1: are a website or an app which connects the person
• 14:49
  Speaker 1: trying the dinner with the restaurant. Now the restaurant then
• 14:52
  Speaker 1: takes responsibility for delivering the food with their own careers.
• 14:56
  Speaker 1: The second one is what we've seen with uber Eats
• 14:58
  Speaker 1: in the US and door d our and in Europe
• 15:00
  Speaker 1: in London with companies like deliver U. Those companies own
• 15:04
  Speaker 1: the networks of couriers, and the first model, where it's
• 15:07
  Speaker 1: purely a platform, is very profitable. They grub Hub was
• 15:11
  Speaker 1: built around that model and has existed like that fifteen years.
• 15:14
  Speaker 1: It had EBITDA margins of more than twenty the like
• 15:19
  Speaker 1: the other guys owning their network and careers, have never
• 15:21
  Speaker 1: been profitable, and the path to profitability isn't immediately clear.
• 15:25
  Speaker 1: It certainly isn't clear they gonna get there any time
• 15:27
  Speaker 1: inside the next two or three years. I really, I
• 15:29
  Speaker 1: just want to bring you some headlines just crossing with
• 15:32
  Speaker 1: The US is set to impose sanctions on Iran's metal
• 15:35
  Speaker 1: exports as well as the nation's leaders. They are expecting
• 15:39
  Speaker 1: to unveil these new sanctions today. We are expecting a
• 15:42
  Speaker 1: press conference with Mike Papeo and Stephen Manuchin. So they
• 15:46
  Speaker 1: will be I expect speaking more in detail about that,
• 15:49
  Speaker 1: and we will bring that to you live pol when
• 15:53
  Speaker 1: we get it exactly. Um Alex, you mentioned kind of
• 15:56
  Speaker 1: the Uber model, the Uber eats models. Even you know,
• 15:58
  Speaker 1: among Uber investors, there's a lot of pressure to get
• 16:01
  Speaker 1: out of that business. So boy and and they have
• 16:04
  Speaker 1: such huge scale, So that suggests that that model may
• 16:08
  Speaker 1: never be profitable. It's certainly hard to see how the
• 16:11
  Speaker 1: guys in the space tend to make the argument that
• 16:13
  Speaker 1: what is now a food delivery business becomes every delivery
• 16:17
  Speaker 1: of everything. You know that you are delivering to ues
• 16:19
  Speaker 1: with toothpaste and groceries and clothing. You know, Postmates has
• 16:22
  Speaker 1: an agreement with Old Navy to deliver a fashion But
• 16:26
  Speaker 1: you know, volume doesn't necessarily account for profit, unless, of course,
• 16:30
  Speaker 1: you get to the stage where you're ordering televisions and
• 16:32
  Speaker 1: you're you're taking a cut of that. Then it becomes
• 16:34
  Speaker 1: a little bit more easy to you know, to to
• 16:37
  Speaker 1: justify the expense. But you know, is a guy on
• 16:39
  Speaker 1: a scooter going to be delivering a television probably not? Um.
• 16:42
  Speaker 1: The thing the kind of sticking point with grub pub
• 16:45
  Speaker 1: potentially being up for sale. The most ideal or the
• 16:48
  Speaker 1: ideal combination would be with one of Uber Eats or
• 16:50
  Speaker 1: door Dash. And the problem with that is that the
• 16:53
  Speaker 1: biggest investor in both of those companies, Ubeats and door
• 16:56
  Speaker 1: Dash is soft Bank, and as we've seen with soft
• 16:58
  Speaker 1: Bank around the world, they prefer to have their portfolio
• 17:00
  Speaker 1: companies combined with each other. And I can imagine a
• 17:03
  Speaker 1: scenario where Um, door Dash, and Uber Eats. Perhaps Uber
• 17:07
  Speaker 1: carves out that eats business and lumps it in with
• 17:09
  Speaker 1: door Dash. Then you've got three competitors in the space.
• 17:12
  Speaker 1: Soft Bank is only back in one of them. So
• 17:14
  Speaker 1: Massas on the head of that business, is very happy
• 17:17
  Speaker 1: and it leaves door Dash. Sorry, it leaves grub hub
• 17:20
  Speaker 1: with a greater competitive threat. Just to be clearer of
• 17:23
  Speaker 1: what the news, as grub Hub was reported by the
• 17:25
  Speaker 1: Wall Street Journal in New York Post on Wednesday that
• 17:28
  Speaker 1: it was considering a potential sale, Grohub has come out
• 17:31
  Speaker 1: and said unequivocally it is not running a sale process,
• 17:34
  Speaker 1: so denying those allegations and those reports. Still though, there
• 17:39
  Speaker 1: is a question about profitability, and ultimately, you know, people
• 17:42
  Speaker 1: talk about the Ubers of the world and they say, well,
• 17:45
  Speaker 1: if there's enough consolidation amongst some of these rides sharing
• 17:49
  Speaker 1: and these is a driving services that they will be
• 17:52
  Speaker 1: able to jack up prices. And that's the big question
• 17:56
  Speaker 1: with these delivery services, right what kind of pricing power
• 17:58
  Speaker 1: do they have even if they have the entire market,
• 18:01
  Speaker 1: because people can do the alternative, which is go out
• 18:04
  Speaker 1: their front door and go get their food themselves exactly.
• 18:06
  Speaker 1: That that that's the huge question that you know, if um,
• 18:10
  Speaker 1: if the answer is you only have one competitor in
• 18:12
  Speaker 1: a given market and buy a market I mean the
• 18:14
  Speaker 1: city of New York or the city of Chicago or London, um,
• 18:17
  Speaker 1: and you can one up the prices. Well, I think
• 18:19
  Speaker 1: right now, you know, one of the reasons people use
• 18:21
  Speaker 1: this stuff is because it's cheap. And the reason it's
• 18:23
  Speaker 1: cheap is because they're competing against each other and so
• 18:25
  Speaker 1: therefore they're subsidizing the costs. And yet to your point,
• 18:28
  Speaker 1: the moment that it becomes less affordable than just cooking
• 18:30
  Speaker 1: at home, are people going to try to do it?
• 18:32
  Speaker 1: As we've sort of going to continue to do it.
• 18:34
  Speaker 1: And you know, people are pretty fickle, um. You know,
• 18:38
  Speaker 1: brand loyalty in things like ride hailing or food delivery
• 18:41
  Speaker 1: platforms isn't great and um, the moment that a cheaper
• 18:45
  Speaker 1: product comes along, they switched to it. The one caveat
• 18:48
  Speaker 1: I would also raised to that statement today from grub
• 18:50
  Speaker 1: hub the report on Whens. They didn't say they were
• 18:52
  Speaker 1: running a sales process. It said they were evaluating strategic options.
• 18:56
  Speaker 1: So I don't think it completely leaves them some wiggle room.
• 18:58
  Speaker 1: In some ways, it kind it looks like a non
• 19:01
  Speaker 1: denial denial. They're denying something which wasn't quite reported. There
• 19:05
  Speaker 1: isn't It wasn't reported there's a sales process. It was
• 19:07
  Speaker 1: reported that is something they might be considering. So are
• 19:10
  Speaker 1: there I know you've looked at this space holistically. Are
• 19:13
  Speaker 1: there any markets out there, any countries or any companies
• 19:16
  Speaker 1: that are doing kind of the platform where there actually
• 19:19
  Speaker 1: are delivering the food on a profitable basis. Yes, I
• 19:22
  Speaker 1: mean in Germany takeaway dot Com, which is in fact
• 19:25
  Speaker 1: a Dutch company. Um, take away dot Com essentially has
• 19:27
  Speaker 1: a monopoly there. Um they had market share, which prompted
• 19:32
  Speaker 1: the only other player in the space delivery to leave.
• 19:35
  Speaker 1: They have a sort of hybrid model where maybe twenty
• 19:38
  Speaker 1: of their deliveries, Um are you know, service by their
• 19:42
  Speaker 1: own careers UM and the rest the restaurants delivered themselves
• 19:46
  Speaker 1: and so they are able to be very profitable. They
• 19:48
  Speaker 1: have literally in the past hour secured um the shareholder
• 19:53
  Speaker 1: approval to buy Just Eat in the UK, which has
• 19:57
  Speaker 1: a similar business model for a figure about x billion pounds.
• 20:01
  Speaker 1: In the UK, it's a bit different because of course
• 20:02
  Speaker 1: there's also competition from um Uber Eats and Delivery. But
• 20:06
  Speaker 1: in Germany, you know, huge market, a lot of growth
• 20:09
  Speaker 1: potential still and they don't have that that competition from
• 20:14
  Speaker 1: the the owned courier model, so they have the ability
• 20:17
  Speaker 1: to jack up prices to the extent they think it's possible,
• 20:20
  Speaker 1: but also eke out some help some you know, generous
• 20:23
  Speaker 1: profit margins because they're not having to account for the
• 20:26
  Speaker 1: cost of the couriers. We're talking with Alex Weorb but
• 20:28
  Speaker 1: European technology calumnist over in London for a Bloomberg opinion.
• 20:32
  Speaker 1: And one of the reasons why this particular area, this
• 20:35
  Speaker 1: industry has been so interesting is because of heart it's
• 20:38
  Speaker 1: gotten in terms of the money poured into it. Door
• 20:41
  Speaker 1: Dash is planning an initial public offering for this year.
• 20:45
  Speaker 1: We shall see whether they will be able to pull
• 20:47
  Speaker 1: it off, especially without proven profitability or a path to profitability. Alex,
• 20:52
  Speaker 1: I just want to wrap this up and put it
• 20:54
  Speaker 1: a bow around it. You mentioned soft Bank and how
• 20:56
  Speaker 1: they own a bunch of these companies. How much has
• 20:59
  Speaker 1: soft Bank singleheadedly inflated the valuations of the entire business
• 21:04
  Speaker 1: model here of delivering food I mean significantly. So the
• 21:08
  Speaker 1: grubhub was the dominant player back in seventeen, had more
• 21:13
  Speaker 1: than market share um soft Bank started pouring money into
• 21:18
  Speaker 1: door Dash, and then Uber, which was soft Bank backed,
• 21:21
  Speaker 1: started expanding um It's Uber Eats offering, and needless to say,
• 21:25
  Speaker 1: now we see door dash is the biggest player in
• 21:28
  Speaker 1: the US with something like thirty seven per cent market
• 21:30
  Speaker 1: share compared to grub hubs, and that is all down
• 21:33
  Speaker 1: to the fact that um it is burning through cash
• 21:36
  Speaker 1: to provide food and affordable rate to end customers. The
• 21:39
  Speaker 1: best estimates from last year, I think the Information reported
• 21:42
  Speaker 1: that door dash was set to make a four hundred
• 21:45
  Speaker 1: and fifty million dollar loss on revenue of only about
• 21:49
  Speaker 1: a billion dollars. So you know, if it didn't have
• 21:52
  Speaker 1: cash from not just soft Bank in their case, there's
• 21:55
  Speaker 1: Sequoia capital in there as well, but certainly from venture
• 21:58
  Speaker 1: if they didn't have venture funds in there, then they
• 22:01
  Speaker 1: would not be gobbling up that market share and and reforming,
• 22:04
  Speaker 1: reshaping the landscape, gobbling up the market share. If you will,
• 22:07
  Speaker 1: Alex Webs, nicely done there. You're a Vian technology columnist
• 22:10
  Speaker 1: or Bloomberg opinion joining us from London. Thank you so much.
• 22:13
  Speaker 1: You can find all his columns and all Bloomberg opinion
• 22:15
  Speaker 1: columns at opi and go on the Bloomberg Bloomberg dot
• 22:18
  Speaker 1: com slash opinion. Well, there was another M and a
• 22:31
  Speaker 1: deal in the healthcare space today, Eli Lily buying dere Myra,
• 22:36
  Speaker 1: a maker of treatments for skin conditions, for one point
• 22:38
  Speaker 1: one billion dollars. Shares of Demira up five point eight percent.
• 22:42
  Speaker 1: Today stock is up one and sixty percent over the
• 22:45
  Speaker 1: trailing twelve months. Help us walk through the deal. We
• 22:48
  Speaker 1: welcome Patrick Johnson, Senior vice president and president of Lily
• 22:52
  Speaker 1: Bio Medicines UH. It's based in Indianapolis. Patrick, thanks so
• 22:55
  Speaker 1: much for joining us. A pretty interesting deal for Lily.
• 22:59
  Speaker 1: Tell us a out why you're buying Derra. Well, thank
• 23:02
  Speaker 1: you very much, and good morning. Yes, this is truly
• 23:05
  Speaker 1: an interesting day for both Lily Darbyra and for patients
• 23:09
  Speaker 1: suffering from a topic demmatitis. First and foremost, we believe
• 23:13
  Speaker 1: this is a very good fit with the commitment that
• 23:16
  Speaker 1: we have to immunology and particularly dermatology. As you know,
• 23:20
  Speaker 1: Armira is a biopharmaceusical company that is dedicated to a
• 23:25
  Speaker 1: chronic finely medicine to chronic skin conditions, and based upon
• 23:29
  Speaker 1: the Phase two data oblibric Ki is a mob We
• 23:33
  Speaker 1: really believe that this is potentially a best in class
• 23:36
  Speaker 1: medicine for treatment of a topic demmatitis. I have to
• 23:40
  Speaker 1: wonder how much this also emphasizes the role of aesthetic
• 23:46
  Speaker 1: treatments and sort of how popular they have been and
• 23:48
  Speaker 1: how much of the drivers they have been in profitability
• 23:51
  Speaker 1: for the pharmaceutical industry while other sort of drugs have
• 23:55
  Speaker 1: moved towards generics and sort of requirements have been more
• 23:57
  Speaker 1: regulated and less profitable. How much is that plan well,
• 24:01
  Speaker 1: I think, first and most importantly, this is an area
• 24:05
  Speaker 1: of huge unmet medical needs. Still, if we look upon
• 24:08
  Speaker 1: the field of atomic a topic dematitis, it's currently estimated
• 24:12
  Speaker 1: that eighteen million Americans are suffering from a topic dematitis.
• 24:17
  Speaker 1: Out of those, ten million or suffering from moderate to
• 24:21
  Speaker 1: severe a topic to amatitis, and many people say that
• 24:24
  Speaker 1: this field where has been not any significant development, and
• 24:29
  Speaker 1: we are today with a topic dematities where we were
• 24:32
  Speaker 1: in the field of soiasis fifteen years ago. So I
• 24:35
  Speaker 1: think my response would be we, as an research and
• 24:38
  Speaker 1: development based company with oven one hundred fifty years of independence,
• 24:42
  Speaker 1: whenever we do what's right for people, who will also
• 24:44
  Speaker 1: do right for business. So Patrick, I know that Sonopi
• 24:48
  Speaker 1: also has a product in the market to pix and
• 24:51
  Speaker 1: I think is the name of that. Is this a
• 24:53
  Speaker 1: head on competitor to that, Well, we are really really
• 24:59
  Speaker 1: excited it with the Phase two data from from libritism
• 25:02
  Speaker 1: and what we saw was a very good fication on skin,
• 25:06
  Speaker 1: but not only a fication on skin. Most importantly, we
• 25:09
  Speaker 1: saw an opportunity to differentiate positively also on itching. And
• 25:15
  Speaker 1: itching is for those who are suffering from a topic
• 25:17
  Speaker 1: talimatitis very above some symptoms. It has a significant impact
• 25:22
  Speaker 1: on sleep and a significant impact on quality of life.
• 25:25
  Speaker 1: So therefore we we believe that we might have a
• 25:28
  Speaker 1: medicine here that can bring a lot of hope to
• 25:30
  Speaker 1: those that are not fully fully getting the needs met
• 25:33
  Speaker 1: with the current available treatments. But Overall, I think in
• 25:37
  Speaker 1: this very important field, it's important to have many different
• 25:40
  Speaker 1: medicines available and for the healthcare providers and for the
• 25:44
  Speaker 1: patients to have several opportunities. Patrick, to your point about
• 25:48
  Speaker 1: several medications available. Certainly for the patients it's helpful to
• 25:53
  Speaker 1: figure out what works best for them. For the pharmaceutical
• 25:56
  Speaker 1: companies themselves, it's helpful to rely on a number of
• 25:59
  Speaker 1: different drugs in order to diversify income streams. Are you
• 26:03
  Speaker 1: hoping to develop more more drugs through R and D?
• 26:07
  Speaker 1: Are you looking toward more acquisitions? What's the game plan
• 26:10
  Speaker 1: going forward? Well, we have made it very clear that
• 26:13
  Speaker 1: we we believe in in organic development and research and
• 26:17
  Speaker 1: development based over of our own laboratories, but we will
• 26:21
  Speaker 1: also augment those efforts whenever we see any opportunities in
• 26:25
  Speaker 1: those cortices areas where we have made a commitment. And
• 26:28
  Speaker 1: Armida was such a perfect fit because they share the
• 26:32
  Speaker 1: commitment to immunology and particularly chronic skin conditions as we do.
• 26:36
  Speaker 1: So we will always look for opportunities to augment our
• 26:40
  Speaker 1: internal OR and D efforts with external business development. Patrick,
• 26:44
  Speaker 1: I see the Starck price above your offer price of
• 26:48
  Speaker 1: eighteen seventy five starts trading in nineteen forty cents, do
• 26:50
  Speaker 1: you expect a counterbid? We strongly, strongly believe that we
• 26:54
  Speaker 1: have been providing both a full and a fair value
• 26:58
  Speaker 1: of dar Mira, and we have thoroughly assessed this, and
• 27:01
  Speaker 1: I think it's important to go back and also look
• 27:02
  Speaker 1: at the sixty days volume weighted average stock price, and
• 27:06
  Speaker 1: you can see that very is a premium of close
• 27:09
  Speaker 1: to use of that price. So again, we really believe
• 27:12
  Speaker 1: that this represents the full and the value of the ARMERA.
• 27:15
  Speaker 1: Just looking forward to a lot of people talk about
• 27:18
  Speaker 1: biopharmaceutical industry as being very much in focus as we
• 27:22
  Speaker 1: head into the elections. How are you sort of prepared
• 27:25
  Speaker 1: to handle that? What kinds of questions have you gotten
• 27:27
  Speaker 1: from investors? But I think we have made it very
• 27:30
  Speaker 1: clear that we are focusing on on unmet medical needs,
• 27:34
  Speaker 1: and we made the commitment to bring twenty new innovative
• 27:38
  Speaker 1: medicines to two people across the globe starting in fourteen.
• 27:41
  Speaker 1: We are more than halfway through, and I think as
• 27:44
  Speaker 1: long as we're making that bet on innovation in areas
• 27:47
  Speaker 1: un met medical needs, the investors have been reacting very positively.
• 27:50
  Speaker 1: But most importantly it brings a lot of hope and
• 27:53
  Speaker 1: value to the patients we serve. Hey, Patrick, thanks so
• 27:56
  Speaker 1: much for joining us. I know it's a busy day
• 27:57
  Speaker 1: for you, given your acquisition today del Meira for one
• 28:00
  Speaker 1: point one billion dollars. Patrick Johnson, senior vice president and
• 28:03
  Speaker 1: the president of Lily Biomedicines for the Elily Company based
• 28:07
  Speaker 1: in Indianapolis. Thanks for listening to the Bloomberg P and
• 28:10
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 28:13
  Speaker 1: Apple Podcasts or whatever podcast platform you prefer. M Paul Sweeney,
• 28:16
  Speaker 1: I'm on Twitter at PT Sweeney. I'm Lisa abram Woit's
• 28:19
  Speaker 1: I'm on Twitter at Lisa A. Bram Woits one before
• 28:22
  Speaker 1: the podcast. You can always catch us worldwide on'm Bloomberg Radio.