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Saudi Pricing Power To Trigger Shale Patch Carnage · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you
0:05
Speaker 1: along with my co host Lisa Brahma Wicks. Each day
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Speaker 1: we bring you the most noteworthy and useful interviews for
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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
0:17
Speaker 1: at Bloomberg dot com. Looking at crude oil today, w
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Speaker 1: t I up six point two percent. That's to thirty
0:24
Speaker 1: three dollars and about three cents UH barrel. That's after
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Speaker 1: yesterday's twenty four point five decline. Just extraordinary, the biggest
0:33
Speaker 1: decline since one the golf. For to get a sense
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Speaker 1: of what's going on in the world of global crew,
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Speaker 1: we welcome John Kilduff, founding partner for Again Capital. John's
0:41
Speaker 1: based in New York City. So John, I want to
0:43
Speaker 1: go back just a couple of days ago and ask
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Speaker 1: my fundamental question about global oil. What were the saluities
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Speaker 1: thinking the Saudi's uh, you know, I knows that out
0:55
Speaker 1: of joint or however you want to put this. I
0:57
Speaker 1: mean they were quite exercised about the Russian position at
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Speaker 1: the OPEC meeting, uh, and when the Russians sort of
1:06
Speaker 1: stuck it to them and said, you know what, everybody
1:08
Speaker 1: can pump whatever they want come April first, because that's
1:11
Speaker 1: when the steel ends. The Sattie's quickly came together and
1:15
Speaker 1: decided to show the world what the price landscape looks
1:20
Speaker 1: like if Saudi Arabia can pump whatever it wants. And
1:23
Speaker 1: they unleashed a thermonuclear bomb on the on the oil
1:28
Speaker 1: market with several uh positions, provisions, uh, slashing mightily their uh,
1:36
Speaker 1: their their pricing scheme. They they cut their uh cost
1:39
Speaker 1: of cruder offered price to their customers by over ten
1:42
Speaker 1: dollars a barrel. You've heard how they are ramping up mightily. Uh.
1:46
Speaker 1: The latest this morning is that they're gonna go to
1:48
Speaker 1: tve point three million barrels a day next month. So
1:50
Speaker 1: that means they're gonna be taking oil out of storage.
1:53
Speaker 1: I mean, it is just they throw down by them
1:55
Speaker 1: of the first order. We're in a thermonuclear fish and
2:01
Speaker 1: throw down the explosion of I know, I love it. Uh.
2:06
Speaker 1: You know, given what we're dealing with in terms of
2:09
Speaker 1: both the knockdown in demand as well as the increase
2:12
Speaker 1: in supply, why have we seemed to have found a
2:15
Speaker 1: bottom if you view yesterday today's action as anything. Well,
2:20
Speaker 1: you know, first, I think, first of all, um, there's
2:24
Speaker 1: still some hope in the market that cooler heads will
2:26
Speaker 1: in fact prevail. UH. There's some talk that the Russians
2:29
Speaker 1: are regrouping themselves to maybe do a reproach mont with
2:32
Speaker 1: Saudi Arabia and try to maybe get cobbled back together
2:35
Speaker 1: some kind of deal. Also, too, there was a pretty
2:37
Speaker 1: swift reaction from several of the US oil producers, ranging
2:42
Speaker 1: from Diamondback Energy to Exxon Mobile and UH. As a
2:46
Speaker 1: result of that, you know, we we should be seeing
2:48
Speaker 1: some demand or production response here in the US RIGG cuts,
2:52
Speaker 1: production cuts, UH, pull back on investment going forward. So, um,
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Speaker 1: the market you found a bottom down around twenty seven
3:01
Speaker 1: dollars UH and bounced off that. And I think that
3:05
Speaker 1: that's sort of the skirched scorched Earth number for now. So, John,
3:09
Speaker 1: in this throwdown between Saudi Arabia and Russia, who's got
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Speaker 1: the stronger hand? Do you think Saudi Arabia by far?
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Speaker 1: First of all, that they have the low lowest cost
3:19
Speaker 1: of production of any country by far, uh, single digits, low,
3:23
Speaker 1: single digits that was in their RAMCO I p O disclosures. Um,
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Speaker 1: as you've been seeing from some of the UH palace
3:31
Speaker 1: intrigued to over the weekend. Uh, there's a consolidation of
3:35
Speaker 1: power there. Uh. The king and Mohammed and Salmon are
3:38
Speaker 1: firmly in charge with an iron grip. UH. I'm not
3:42
Speaker 1: so sure you can say that about Russia. If there's
3:44
Speaker 1: an extended low price environment for oil, it's but not
3:48
Speaker 1: the Soviet Union off. It's blocked back in the day.
3:51
Speaker 1: And UM, you know, Vladimir Putin and his government will
3:54
Speaker 1: start to feel pressure if the price stays low for long.
3:58
Speaker 1: So logically it doesn't seem like a benefits anyone, and
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Speaker 1: it would seem to behoove everyone to come to the table,
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Speaker 1: shake hands, pull that flag back up that was tipped
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Speaker 1: over in the OPEC meeting on Friday, and call it
4:08
Speaker 1: a day and get back to negotiating. That said, this
4:12
Speaker 1: is not that, and it doesn't seem like that's going
4:14
Speaker 1: to happen, at least in the next few days. What
4:17
Speaker 1: do you think it's going to take. What's the tipping
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Speaker 1: point when it comes to either the price of oil
4:21
Speaker 1: or the magnitude the length of time before they come
4:24
Speaker 1: to the table, it will probably seven several months. Uh.
4:30
Speaker 1: You know, this was the ultimate lever for Saudi Arabia
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Speaker 1: to pull. I mean, I've talked about this in the
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Speaker 1: past or over the years. This trimming output only served
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Speaker 1: to support really the US producers and another higher cost
4:43
Speaker 1: producers they needed to get shaken out. The corollary for
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Speaker 1: this is back in uh when pre Hugo Chavez Venezuela
4:51
Speaker 1: tried to compete for US oil market share, and the
4:55
Speaker 1: Staudis taught them and the market a lesson back then
4:57
Speaker 1: and created oil prices down to eight bucks of our
5:00
Speaker 1: The US oil industry in particular was hammered, and there
5:03
Speaker 1: was a lost decade or so or more of US
5:07
Speaker 1: production that was really moribund, and what helped to ultimately
5:12
Speaker 1: generate the ninety and a hundred dollar barrel oil that
5:14
Speaker 1: we had lived through there for a while, which then
5:16
Speaker 1: finally encouraged the frackers to to roll the bones again
5:20
Speaker 1: and get back in there. So, you know, this is
5:23
Speaker 1: gonna take some time and it's gonna wait for a response,
5:26
Speaker 1: but it's certainly what the Russians wanted to have happened,
5:29
Speaker 1: because they have their eye on the US producers. Uh,
5:33
Speaker 1: keep pointing to this weekly inventory report from last week
5:36
Speaker 1: that the government puts that it's ten thirty every Wednesday,
5:38
Speaker 1: and then you guys cover it. Um that last week's
5:41
Speaker 1: report record US production their teen point one million barrels
5:45
Speaker 1: a day and record US crude oil exports of over
5:48
Speaker 1: four million barrels a day. The numbers were astounding right
5:52
Speaker 1: as they were heading into the OPEC meeting. I really
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Speaker 1: still feel that was the trigger point for the Russian position.
5:58
Speaker 1: So John, just roll cookie thirty seconds. Um, how bad
6:01
Speaker 1: you think this is going to get for the U
6:02
Speaker 1: s show patch. It's gonna get. It's gonna get rather bad. Uh.
6:08
Speaker 1: You know there's going to be a host of bankruptcies
6:11
Speaker 1: and consolidations. Uh. And we'll even have to keep our
6:15
Speaker 1: eye on on some of the majors in terms of
6:17
Speaker 1: their ability to continue with the stock buybacks. It looks
6:20
Speaker 1: like capital investments is going to go by the boars first,
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Speaker 1: and that's gonna end up lowering US output and achieving
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Speaker 1: the ultimate goal here Up Saudi Arabia and even Russia
6:31
Speaker 1: for that matter, deal with some short term pain for
6:34
Speaker 1: some longer term gain. John killed off, Thank you so much.
6:37
Speaker 1: For being with us. We really appreciate it. John Killed,
6:39
Speaker 1: a founding partner of Again Capital, joining us as Oil
6:43
Speaker 1: tries to stage somewhat of a rebound, although off earlier highs,
6:47
Speaker 1: and after a absolutely an epic day for oil, absolutely
6:52
Speaker 1: terrible day, a record day when you saw the sell off,
6:55
Speaker 1: particularly when it comes to energy stocks. We've been talking
7:08
Speaker 1: a lot about the coronavirus, the effect on markets, the
7:11
Speaker 1: effect on businesses. What about the effect on the health
7:14
Speaker 1: care system? And this is an important topic and we're
7:17
Speaker 1: lucky to have Susan Duvore, chief executive officer of Premiere
7:20
Speaker 1: UH Incorporated, joining us on the phone. Susan, you are
7:24
Speaker 1: in a Premiere place to actually see the issues here.
7:27
Speaker 1: You're discussing with the government the potential vulnerabilities in the
7:31
Speaker 1: health care system. What are you finding. Yeah, we just
7:35
Speaker 1: briefed and Administrative task Force and Premiere. You know, we're
7:38
Speaker 1: working seven We've got four thousand hospitals and seventy five
7:42
Speaker 1: thousand non acute care providers. And what we're seeing is
7:46
Speaker 1: everybody is worrying about the current supply. The demand is
7:50
Speaker 1: three or four times what normal demand would be, and
7:54
Speaker 1: because we have a fragmented system. What we're hearing is federal,
7:58
Speaker 1: state governments and private health care systems really trying to
8:03
Speaker 1: figure out how to work together so as not to
8:06
Speaker 1: hoard supplies and to be able to get the supplies
8:09
Speaker 1: where they're needed. So, at this early stage here in
8:13
Speaker 1: the US, where are the bottlenecks, Where are the problems?
8:16
Speaker 1: Where the areas that you're focusing on in other folks
8:19
Speaker 1: in the industry are focusing on. Yeah, so premier to
8:23
Speaker 1: the survey of all of our health care systems to
8:25
Speaker 1: to ask that very question. And and what we're hearing
8:29
Speaker 1: and seeing in the data, uh, and in the responses
8:32
Speaker 1: is that people are most worried about the protective attire
8:36
Speaker 1: the mass the gowns. There is essentially a two week
8:40
Speaker 1: supply of that. There are um longer term supplies of
8:46
Speaker 1: some of the other stuff. But the protective attire um
8:50
Speaker 1: that really protects the healthcare workers, protects the people who
8:54
Speaker 1: don't have the coronavirus um, that is where very significant
9:00
Speaker 1: a short term challenges exist. I think longer term, UH,
9:05
Speaker 1: there are real challenges for nursing homes and non acute
9:08
Speaker 1: care providers, and there are real challenges in the pharmacy
9:12
Speaker 1: supply chain, But in the short term, it's it's centered
9:15
Speaker 1: around right now a lot of the protective equipment and attire. Susan,
9:20
Speaker 1: what's the historical precedent for this period for the health
9:24
Speaker 1: care system and the potential stress we may see there.
9:28
Speaker 1: You know, we have seen as a health care system
9:31
Speaker 1: a variety of you know, H one, N one viruses
9:34
Speaker 1: and other kinds of of challenges. The spread of this
9:39
Speaker 1: one is creating, um what many people think will be
9:43
Speaker 1: a significant demand. And when you couple that with our
9:46
Speaker 1: dependence on China and Southeast Asia for a lot of
9:51
Speaker 1: these products, we have sort of, um, the perfect storm,
9:55
Speaker 1: will have very increased demand for these products and will
10:00
Speaker 1: have limited supply of the products because they're coming from
10:04
Speaker 1: places that you know, have shut down that exportation. So
10:08
Speaker 1: we as a US healthcare industry have to figure out
10:12
Speaker 1: how to optimize the use of the supplies we have.
10:16
Speaker 1: We've got to follow the CDC guidelines to conserve it,
10:20
Speaker 1: and we've got to figure out how we're gonna get
10:22
Speaker 1: from what is a normal million masks used a year
10:27
Speaker 1: to a supply of five hundred million. So that is
10:31
Speaker 1: the magnitude of the challenge that we have. This is
10:35
Speaker 1: one of the problems for investors certainly, but probably consumers
10:38
Speaker 1: in generals. Again, you kind of a mixed message out
10:40
Speaker 1: of Washington, out of the administration and other entities about
10:44
Speaker 1: kind of the extent of this, the severity of this,
10:46
Speaker 1: how we should prepare within the medical community. And again
10:50
Speaker 1: you mentioned but on some conference calls with interested parties,
10:53
Speaker 1: what's kind of the scenario analysis. The scenario analysis for
10:58
Speaker 1: premier healthcare systems and providers is that ninety plus percent
11:03
Speaker 1: of them are worrying about the supply and demand and
11:07
Speaker 1: with the ability for this virus to spread, um, are
11:11
Speaker 1: they going to be able to protect their healthcare workers
11:13
Speaker 1: and are we going to have enough supply for um
11:17
Speaker 1: everybody that needs this protective attire. So I would say
11:20
Speaker 1: that healthcare systems are initiating policies to protect their employees.
11:25
Speaker 1: Many companies, healthcare and otherwise are canceling travel UH and
11:30
Speaker 1: limiting large group meetings and those kinds of things. So
11:33
Speaker 1: we're trying to slow the or suppress the the spread
11:37
Speaker 1: of this. And at the same time, Premiere is trying
11:41
Speaker 1: to unite all of these healthcare providers and work with
11:44
Speaker 1: the federal estate governments to to really try to ensure
11:48
Speaker 1: we have adequate supply of the of the products that
11:51
Speaker 1: are needed. Susan, thanks so much for joining us. We
11:53
Speaker 1: know you're incredibly busy in your team at Premiere kind
11:56
Speaker 1: of working through this as the healthcare communities in general.
11:59
Speaker 1: Susan Divore, chief executive officer for healthcare services company Premier
12:03
Speaker 1: that based in Charlotte, North Carolina. Right now, let's get
12:16
Speaker 1: a sense of what's going on in Italy. More news
12:18
Speaker 1: coming out there as they extend, expand the travel band
12:22
Speaker 1: to or lockdown if you will, to the entire country.
12:24
Speaker 1: Fernando Giuliano is an editor for Bloomberg Opinion based in Milan. Fernando,
12:30
Speaker 1: thanks so much for joining us. It just seems to
12:31
Speaker 1: be no end in sight in Italy. Can you give
12:34
Speaker 1: us the latest on what's going on in Italy? Well,
12:38
Speaker 1: the latest is that the Prime Minister decided to extend
12:44
Speaker 1: this lockdown which we've had in the region of Lombardy
12:47
Speaker 1: around Milan and did a number of other northern provinces
12:50
Speaker 1: through the whole of the country. Now, that doesn't mean
12:53
Speaker 1: that people can't leave their home. This is not like
12:56
Speaker 1: one in China. You're allowed to leave your house, but
13:00
Speaker 1: only for work. Related health related reasons, or if you
13:04
Speaker 1: need to go and do some food shopping. On top
13:09
Speaker 1: of that, there are a number of sick restrictions on
13:12
Speaker 1: For example, you know, things like Kim's swimming pools, ski
13:16
Speaker 1: slopes are all closed. Football matches have been canceled together
13:21
Speaker 1: with any supporting activities, and you've had the schools are
13:25
Speaker 1: closed until the start of April, and the government doesn't
13:28
Speaker 1: want people to do even small gatherings outside. In parts,
13:34
Speaker 1: they're really trying very hard to enforce uh you know,
13:38
Speaker 1: this social distance as they call because they think this
13:41
Speaker 1: is the only way to stop this outbreak. Fernando. There
13:45
Speaker 1: is the immediate concern just stopping the spread of the
13:47
Speaker 1: coronavirus Italy seeing the cases explode, and they're trying to
13:52
Speaker 1: prevent that. They're also getting some other countries in Europe
13:56
Speaker 1: closing their borders to Italy, trying to stave off the
13:59
Speaker 1: spread in their nations. There's also a larger question if
14:02
Speaker 1: you take a step back and not take away from
14:04
Speaker 1: the humanitarian issue of people getting very ill and dying um,
14:09
Speaker 1: but taking a step back, is democracy equipped to handle
14:13
Speaker 1: this as well as say, an authoritarian regime like what
14:17
Speaker 1: we've saw in China, where they just basically shut down
14:21
Speaker 1: entire cities and had the authority to throw people in
14:24
Speaker 1: jail if they didn't comply. Well, that's the question which
14:28
Speaker 1: I tried to, you know, pose in a column recently.
14:32
Speaker 1: Now clearly is harder. I mean, here the government really
14:37
Speaker 1: has to convince people to stick by the rules. Yes,
14:41
Speaker 1: there are policemen going around, and you need to prove
14:45
Speaker 1: to the policeman that you're going to work. There are
14:48
Speaker 1: fines and even small chandel terms for people to break
14:51
Speaker 1: the rooms. But you know, it's incredibly hard to enforce this.
14:55
Speaker 1: It's sold down to really persuasion and conviction. And now
15:01
Speaker 1: the good news I find is that South Korea seems
15:04
Speaker 1: to be at last, you know, containing the virus quite effectively.
15:08
Speaker 1: South Korea is a democracy, of course, is an Asian democracy.
15:11
Speaker 1: They have different traditions, different culture, and they had the
15:14
Speaker 1: experience of stars which really taught them an important lesson.
15:19
Speaker 1: But I think, you know, I still think Western democracies
15:22
Speaker 1: can do it. I just think they need to take measures,
15:25
Speaker 1: and I don't see other countries across Europe or even
15:27
Speaker 1: the United States during the same unfortunately, So Fernando, we
15:32
Speaker 1: we know there's been cases have been generally limited to
15:34
Speaker 1: the north of Italy. How has it has it progressed
15:37
Speaker 1: in the southern part of the country, if so, to
15:39
Speaker 1: what degree? And the expect the folks in the south
15:42
Speaker 1: of all this as well more slowly. I mean, the
15:46
Speaker 1: the big outbreak was here in southern Lamberty, and this
15:49
Speaker 1: is a big concern for the government. I Mean, what's outstanding,
15:53
Speaker 1: and I'm not sure people are quite grasped, is that
15:55
Speaker 1: the health care system in Lamberti, the region around Milan
15:58
Speaker 1: is one of the best in Europe. You know, access
16:01
Speaker 1: is very easy and free and and the healthcare system
16:05
Speaker 1: is very efficient. And yet they are overwhelmed with the
16:08
Speaker 1: number of patients, particularly people who need intensive care. There's
16:12
Speaker 1: just not enough you know, bed too or around to
16:16
Speaker 1: help the increasing quantity of people. Now Salvin Italy is
16:21
Speaker 1: poorer and the healthcare system is less effective there. So
16:27
Speaker 1: the government is trying really hard to contain the outbreak
16:30
Speaker 1: now because the theory is if it moves south, you're
16:33
Speaker 1: not going to be able to have the kind of
16:35
Speaker 1: response which are seeing from doctors and nurses here in
16:38
Speaker 1: regions like Lombardy, which has been just outstanding Fernando. There's
16:43
Speaker 1: this perception out there and it's been edified by a
16:46
Speaker 1: number of stories that people in Italy are are basically
16:51
Speaker 1: not submissive, but they're going out and they're saying, basically,
16:54
Speaker 1: I'll drinks of wine and it'll be fine. Is that
16:56
Speaker 1: the mood when you go out and when you're on
16:59
Speaker 1: the street or are people taking some of the curbs seriously? Look,
17:04
Speaker 1: I mean, I think last weekend there was an issue
17:06
Speaker 1: with you know, some people. You saw photos of crowds
17:12
Speaker 1: which were gathering outside. You know, there were it was
17:15
Speaker 1: a sunny day and people were making the most of it.
17:19
Speaker 1: Part of it is is natural, you know, you don't
17:21
Speaker 1: think this is going to happen to you. But there's also,
17:24
Speaker 1: if you want a generational problem, young people feel they
17:29
Speaker 1: are kind of immune, you know, from this virus because
17:33
Speaker 1: if you look at the lestality of the virus is
17:35
Speaker 1: mainly for older people and and so they go around
17:39
Speaker 1: as they think they have very little to fear. Now
17:42
Speaker 1: that's not completely true, because you do see people maybe
17:45
Speaker 1: in their twenties and thirties who who can have serious
17:49
Speaker 1: consequences of the virus. But it creates a problem. Now
17:52
Speaker 1: the government is trying very hard on clumping down this.
17:55
Speaker 1: For example, they shut down the ski slopes, which was
17:59
Speaker 1: one of the images last week, which calls some problem.
18:04
Speaker 1: Let's see whether it walks. Fernando, thank you so much
18:07
Speaker 1: for being with us. Stay safe, stay healthy, and we
18:09
Speaker 1: appreciate all your reporting and insights. Fernando Giuliano Alber opinion editor,
18:14
Speaker 1: joining us from Italy where there the nation is shut down. Currently,
18:29
Speaker 1: we are seeing the sell off wayne a bit. We
18:32
Speaker 1: had seen gains up over three percent, now in Nasdak
18:36
Speaker 1: up two point two percent. We are, though getting a
18:39
Speaker 1: sense of just the incredible volatility this wish to buy
18:43
Speaker 1: the dip that we saw yesterday that was the worst
18:45
Speaker 1: one day sell off since the financial crisis in the
18:48
Speaker 1: United States and frankly the world, which raises a question,
18:52
Speaker 1: are we fundamentally in the same place that we were
18:55
Speaker 1: three weeks ago, just with a virus that needs to
18:57
Speaker 1: be dealt with, gotten rid of, and then we can
18:59
Speaker 1: resist whom the rally and to buy everything and that
19:01
Speaker 1: there is no alternative trade, or are we in a
19:05
Speaker 1: fundamentally new situation that is much more likely poised for
19:10
Speaker 1: a recession? Joining us now, David Kat's chief investment officer
19:13
Speaker 1: at Matrix Asset Advisors based in New York, joining us
19:16
Speaker 1: by phones, so we don't give each other coronavirus. David,
19:19
Speaker 1: I'd love to get your sense here. I mean, on
19:20
Speaker 1: a day like yesterday, with such violent moves not only
19:23
Speaker 1: in stocks, but very much in bonds, government bonds absolutely surging,
19:27
Speaker 1: yields ripping to new lows, credits selling off, with the
19:31
Speaker 1: high yield energy sector seeing its biggest one day move
19:34
Speaker 1: and spreads since ever. Actually, um, were you buying, were
19:39
Speaker 1: you standing back? What was the mood? So the mood
19:44
Speaker 1: it's clearly very worrisome. However, if you have been through
19:48
Speaker 1: these before, and unfortunately or fortunately, we've been through them
19:51
Speaker 1: for quite a long time. We've been doing this for
19:53
Speaker 1: about thirty five years. We think we're in a tail
19:56
Speaker 1: end of a panic, uh, significant bear market sell off,
20:00
Speaker 1: and the key to being successful as an investor is
20:03
Speaker 1: not to get caught up in the mania of the moment,
20:06
Speaker 1: So not to lock into thirty year bonds that are
20:09
Speaker 1: paying one percent for thirty years, which is absurd, uh,
20:13
Speaker 1: And not to get scared out of stocks. You know,
20:15
Speaker 1: we think that the coronavirus ultimately will be able to
20:19
Speaker 1: be handled. Hopefully there will be some sort of treatment.
20:23
Speaker 1: Hopefully the governments will start to do better in terms
20:26
Speaker 1: of containing it. UH. And we think that the economic
20:29
Speaker 1: slowdown that you're going to see in the first and
20:31
Speaker 1: second quarters UH as a result of this, are going
20:35
Speaker 1: to be reversed at least by half in the third
20:37
Speaker 1: and fourth quarters. And if you look at crisis is
20:41
Speaker 1: historically the market is going to discount the negatives and
20:44
Speaker 1: start to look for the recovery. So the moral of
20:47
Speaker 1: that is take a longer term view. Nine to twelve
20:51
Speaker 1: months are able to buy some great businesses at great prices. Uh.
20:54
Speaker 1: You're gonna feel stupid a day later, a week later,
20:57
Speaker 1: a month later, but there's an enormous likelihood stocks are
20:59
Speaker 1: gonna be a lot higher twelve months out. So, David,
21:03
Speaker 1: if I do have the courage to look through to
21:05
Speaker 1: the other side, what are some names I should be
21:07
Speaker 1: thinking about here? What are some kind of strategies I
21:10
Speaker 1: should be thinking about? So we're going to give you
21:13
Speaker 1: a list of names that are sort of low risk.
21:16
Speaker 1: They're paying about a four and a half percent income stream,
21:19
Speaker 1: so you're getting paid while you wait. Compare that to
21:21
Speaker 1: getting points six in a tenure bond, so names like
21:24
Speaker 1: A T and T AB, the uh CBF, Cisco Home Depot,
21:28
Speaker 1: JP Morgan, Murk, p n C, Verizon, Viacom, and Wells Fargo.
21:34
Speaker 1: UH ten great businesses selling at ten times earnings, four
21:37
Speaker 1: and a half percent yield, And interestingly, they're really not
21:41
Speaker 1: going to be negatively impacted by the coronavirus. You know,
21:44
Speaker 1: their business might be down a little bit, but it
21:47
Speaker 1: definitely is not going to be severely impacted. And these
21:51
Speaker 1: businesses are worth as much today as they were three
21:54
Speaker 1: months ago, and you're getting them in a great price.
21:56
Speaker 1: What's your time horizon. UH, we're looking out nine twelve months.
22:01
Speaker 1: We think things will be a lot higher. I mean
22:03
Speaker 1: quite possibly if there's any sort of relief in terms
22:05
Speaker 1: of the coronavirus. UH have been quicker, but as an investor,
22:09
Speaker 1: be prepared for stocks to go lower first. When you
22:12
Speaker 1: have a big problem like the coronavirus or the oil
22:16
Speaker 1: price war that took called yesterday, you get very big solutions.
22:19
Speaker 1: So you're starting to hear both the US government and
22:22
Speaker 1: the global government's talking about relief, whether it's on a
22:25
Speaker 1: monetary or fiscal policy. UH science is going to kick
22:29
Speaker 1: in a huge way. They are enormous incentives for companies
22:32
Speaker 1: to find treatment for this. Hospitals are going to start
22:35
Speaker 1: to do better. So generally happens is when you have
22:38
Speaker 1: a crisis, people straightline the crisis, assume it lasts forever. Uh,
22:42
Speaker 1: and usually there are solutions along the way. Having said that,
22:47
Speaker 1: I'm sorry, but arguably that's exactly what was being priced
22:50
Speaker 1: into the market this morning before it opened with the
22:53
Speaker 1: rally that we saw, and it's being stifled a bit
22:56
Speaker 1: by news out of CNBC, in particular with the reporting
22:59
Speaker 1: at the White House may not release any details on
23:02
Speaker 1: any kind of fiscal stimulus today as they had said
23:05
Speaker 1: that they would yesterday. I'm just wondering, let's say we
23:08
Speaker 1: don't get a response on the fiscal side. What that Well,
23:13
Speaker 1: you know, everybody is a media gratification oriented. The reality
23:17
Speaker 1: is whether the government comes out of response today or
23:19
Speaker 1: to come out with a response next week, there will
23:21
Speaker 1: be a response, you know. To is a crisis. The
23:24
Speaker 1: economy is slowing substantially. Uh. The government needs to react.
23:28
Speaker 1: They need to take actions that will protect workers so
23:31
Speaker 1: that if you're sick, you can stay at home and
23:33
Speaker 1: self quarantine yourself and still get paid. Uh. Big problems
23:37
Speaker 1: will result in big solutions. So whether it's today or
23:40
Speaker 1: it's in a few days, it's gonna happen. And as
23:42
Speaker 1: I said earlier, the key is not to get caught
23:45
Speaker 1: up in the day to day movements of the morn
23:48
Speaker 1: because you're not going to get that relief. You're not
23:49
Speaker 1: gonna have a bell ring that says, okay, it's all
23:51
Speaker 1: clear to buy. You're gonna buy. Things will go lower.
23:55
Speaker 1: But there's a great likelihood if you were to buy
23:57
Speaker 1: some of the names on the list that we gave you, um,
24:00
Speaker 1: that by year end they could be higher. Uh, and
24:04
Speaker 1: you're getting that dividend along the way. You know. Contrast
24:07
Speaker 1: back to locking in point six for the next ten years,
24:10
Speaker 1: which is just patently absurd. So David, again, if do
24:14
Speaker 1: I think about taking on even maybe a little bit
24:16
Speaker 1: more risk here, I look at maybe the cruise lines
24:18
Speaker 1: or the travel companies that have been hit the hardest
24:20
Speaker 1: here down dramatically, is it time to kind of say, hey,
24:23
Speaker 1: before the coronavirus, these are good businesses and they're likely
24:26
Speaker 1: to return to being good businesses. So we would not
24:29
Speaker 1: be that bold, um, you know. So in terms of
24:33
Speaker 1: the cruise lines, they have huge capital expenses, and if
24:36
Speaker 1: the ship goes out or they have to cancel cruises,
24:38
Speaker 1: they really do lose money and they can have a
24:40
Speaker 1: cash crunch, so we would avoid things like that. We
24:44
Speaker 1: do think if you have a twenty four month time
24:46
Speaker 1: whererise and they probably will be high or they could
24:48
Speaker 1: go down. First the flip that is a company like
24:51
Speaker 1: Bookings Holdings dot com UM they booked travel and what
24:55
Speaker 1: they have shown historically is you have a significant UH
25:00
Speaker 1: down turn and bookings during a crisis, but as soon
25:02
Speaker 1: as the health issues are off the front page, people
25:05
Speaker 1: do book in terms of hotels UH and airlines UH.
25:10
Speaker 1: They are still making money during this downturn. They're buying
25:13
Speaker 1: a lot of stock back. So we've looked at it,
25:15
Speaker 1: we're not ready to act on it. If you really
25:17
Speaker 1: wanted to swing for the fences, we think this is
25:20
Speaker 1: probably one of the more reasonable ways to play it.
25:24
Speaker 1: But it happened also is the financials are getting marked
25:27
Speaker 1: down as if we're in a financial crisis UH, and
25:30
Speaker 1: as a result, you're able to buy businesses that are
25:32
Speaker 1: really not going to be that adversely impacted and are
25:35
Speaker 1: still going to come back really good. So you know
25:37
Speaker 1: you don't have to play the truck stocks. Well, we
25:41
Speaker 1: think there's so many stocks out there and a lot
25:43
Speaker 1: of them less exposed. I had mentioned Viacom the stocks
25:46
Speaker 1: at nineteen and a half. We think that company could
25:49
Speaker 1: easily be at forty or sixty uh in the next
25:52
Speaker 1: few years. Uh So we'd rather speculate on something like
25:55
Speaker 1: that than you know, go into things that are really
25:58
Speaker 1: being hurt. David, thanks much for your thoughts, and we
26:01
Speaker 1: appreciate you giving us some of those names to maybe
26:03
Speaker 1: take a look at. Here for those again willing to
26:05
Speaker 1: look through to the other side of this crisis. Here
26:08
Speaker 1: David Kat's, chief investment officer for Matrix Asset Managers based
26:12
Speaker 1: in York and calling us on the phone. We appreciate that.
26:15
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
26:18
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
26:20
Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on
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Speaker 1: Twitter at pt Sweeney. I'm Lisa Abram Woyd's I'm on
26:26
Speaker 1: Twitter at Lisa abram Woit's one before the podcast. You
26:29
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio