Latest / Bloomberg Intelligence / Sheryl Palmer Isn't Concerned About Rebuilding in Houston Flood Zones

Transcript

Sheryl Palmer Isn't Concerned About Rebuilding in Houston Flood Zones · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa A. Bramowitz. Each day
• 0:11
  Speaker 1: we bring you the most important, noteworthy, and useful interviews
• 0:15
  Speaker 1: for you and your money, whether you're at the grocery
• 0:17
  Speaker 1: store or the trading floor. Find the Bloomberg p m
• 0:20
  Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com.
• 0:32
  Speaker 1: After the hurricanes that swept through Houston a lot of
• 0:36
  Speaker 1: Texas as well as Florida and Puerto Rico, there's a
• 0:39
  Speaker 1: question of who is going to rebuild, whether there is
• 0:43
  Speaker 1: enough labor to make all of these new homes, and
• 0:46
  Speaker 1: whether the supplies are there and here. To answer those
• 0:49
  Speaker 1: questions is Cheryl Palmer, President and chief executive officer of
• 0:52
  Speaker 1: Taylor Morrison Home Corporation based in Scottsdale, Arizona. And Cheryl,
• 0:57
  Speaker 1: one question that I have is a lot of people
• 1:00
  Speaker 1: have raised concern about rebuilding in areas that are prone
• 1:06
  Speaker 1: to floods should there be another hurricane. What's your view
• 1:09
  Speaker 1: on that and how has your company addressed that. It's
• 1:13
  Speaker 1: an interesting question. Um, I'll be honest, I don't share
• 1:16
  Speaker 1: that same concern. Um. When I look at the market,
• 1:19
  Speaker 1: I think if you First of all, I think, yeah,
• 1:21
  Speaker 1: it's hard not to recognize the event that we had
• 1:24
  Speaker 1: a billion gallons of water fifty inches of rain. I mean,
• 1:30
  Speaker 1: I think the stat is something. You know, we designed
• 1:32
  Speaker 1: to a hundred and five hundred deer floodplain something like
• 1:35
  Speaker 1: forty five thousand years. You have to go back to
• 1:37
  Speaker 1: find a similar This is the Houston. This is in
• 1:40
  Speaker 1: Houston specifically. So when I look at the you know,
• 1:44
  Speaker 1: I look at Houston and I look at six and
• 1:45
  Speaker 1: a half million people, I actually don't have concerns. I
• 1:48
  Speaker 1: think it's important that we rebuild this city UM as
• 1:52
  Speaker 1: quick as we can. And when I look at how
• 1:54
  Speaker 1: new construction did UM, I think one of the things
• 1:57
  Speaker 1: that was most surprising is, you know, our company and
• 2:00
  Speaker 1: our communities across Houston as well as many other new
• 2:04
  Speaker 1: home builders didn't have the same level of devastation that
• 2:08
  Speaker 1: we had in older community. So I think when you
• 2:10
  Speaker 1: think about building sciences and design today, engineering and kind
• 2:16
  Speaker 1: of the you know, the way streets are used and
• 2:19
  Speaker 1: pads are built up, UM, I think, you know, I
• 2:24
  Speaker 1: don't think you're going to see that people are UM
• 2:26
  Speaker 1: running from Houston. I think you'll see that they're running
• 2:28
  Speaker 1: to new construction. Well let's get onto the new construction.
• 2:32
  Speaker 1: Maybe just give people a little hint as to the
• 2:34
  Speaker 1: kind of areas that you are focused on. I know
• 2:37
  Speaker 1: you just opened door expanded your presence in the South
• 2:40
  Speaker 1: Carolina market. Uh, Indian Land, I believe is the location there.
• 2:44
  Speaker 1: Maybe just tell people a little bit about Taylor Moore. Absolutely.
• 2:47
  Speaker 1: We built in twenty markets across the United States. So
• 2:51
  Speaker 1: we do build in Texas and Texas, we build in Houston, Dallas,
• 2:54
  Speaker 1: and Austin. UM. We do build to your point in
• 2:56
  Speaker 1: the Carolinas, both in Charlotte and Raleigh. We built in Florida, UM,
• 3:01
  Speaker 1: and that's Naples, Sara Soda, Tampa, Orlando, UM, Colorado, Georgia, Arizona,
• 3:09
  Speaker 1: and then southern and northern California. So really a pretty
• 3:11
  Speaker 1: good fit. Print across the United States. Built about eight
• 3:14
  Speaker 1: thousand homes a year UM and generally UM. When I
• 3:19
  Speaker 1: look at the business across the portfolio, we serve a
• 3:21
  Speaker 1: number of consumer groups. About a third of our business
• 3:24
  Speaker 1: is first time buyer, a third of it is that
• 3:27
  Speaker 1: first second time move up, and a third about the
• 3:29
  Speaker 1: you know, fifty plus buyer. All kinds of products and
• 3:33
  Speaker 1: different consumers. Have you found that there have been labor shortages,
• 3:37
  Speaker 1: not enough people available to actually build the homes? Absolutely,
• 3:41
  Speaker 1: So what are you doing to address that and what
• 3:43
  Speaker 1: do you attribute the shortage to? That is a very
• 3:47
  Speaker 1: big and complicated question. Um, But yeah, you know, this
• 3:50
  Speaker 1: has been a concern well before hurricane season. UM. And
• 3:55
  Speaker 1: if I think about specifically, business is something we've been
• 3:58
  Speaker 1: talking about for years. So maybe will start on why.
• 4:01
  Speaker 1: I mean there's so many candidly, there's so many reasons.
• 4:04
  Speaker 1: But you know, we've aged out through the downturn a
• 4:07
  Speaker 1: good amount of the workforce. Um. If I look at
• 4:11
  Speaker 1: the average plumber electrician, they're in their mid fifties today. UM,
• 4:15
  Speaker 1: so we've aged out some real good experience. People also
• 4:18
  Speaker 1: left the industry during the downturn. Immigration has had an
• 4:22
  Speaker 1: impact on the workforce. Um. We're also not developing new
• 4:28
  Speaker 1: talent into our industry. I mean many of the vocational
• 4:31
  Speaker 1: programs went away, um through the downturn. So there's a
• 4:36
  Speaker 1: it's it's a long journey to kind of rebuild the workforce.
• 4:39
  Speaker 1: And I would say there's this cultural kind of underpinning
• 4:43
  Speaker 1: that people aren't aspiring to go into the trades today,
• 4:46
  Speaker 1: which can be a wonderful you know, really a wonderful
• 4:49
  Speaker 1: career because of the shortage not being new news. What
• 4:52
  Speaker 1: we've done is, you know, early in the year, we
• 4:54
  Speaker 1: actually got very aggressive in getting um new production into
• 4:58
  Speaker 1: the ground, stimulating sale so that we were building homes
• 5:02
  Speaker 1: that were sold. It really that headstart, as it turns out,
• 5:06
  Speaker 1: was very fortunate. Um As I look at the impacts
• 5:09
  Speaker 1: that the hurricanes are going to have on so many
• 5:11
  Speaker 1: just a couple of data points, you increased the most
• 5:15
  Speaker 1: recently increased the stock buy back. I believe a program
• 5:18
  Speaker 1: right adding a hundred million dollars and the stock is
• 5:20
  Speaker 1: up more than sevent so far this year. What would
• 5:26
  Speaker 1: you tell an investor in this particular industry? What are
• 5:29
  Speaker 1: the specific things you would want to know before you
• 5:32
  Speaker 1: make an investment, either buying you know, as as a
• 5:35
  Speaker 1: shareholder buying a home builder, or even as someone that
• 5:39
  Speaker 1: wants to make an acquisition of an entire company. How
• 5:41
  Speaker 1: do you measure the value? Yeah, it's a really good,
• 5:44
  Speaker 1: fair question. You know, I don't think there's one metric,
• 5:47
  Speaker 1: but I think it starts with understanding the company strategy
• 5:49
  Speaker 1: and methodology and how you operate the business. Um So,
• 5:54
  Speaker 1: when I look at kind of our core operating principles,
• 5:58
  Speaker 1: it's really around protecting the business through a full cycle.
• 6:02
  Speaker 1: When you're when you're investing in real estate, I think
• 6:04
  Speaker 1: there's an appreciation that this tends to be a volatile
• 6:07
  Speaker 1: sectors and the markets can come and go, and how
• 6:10
  Speaker 1: have you really prepared the organization for that? Because it's
• 6:13
  Speaker 1: not if, it's when and how the company can perform.
• 6:19
  Speaker 1: And so when we look at our strategy around core
• 6:21
  Speaker 1: locations and making having a true appreciation that shelters a
• 6:25
  Speaker 1: basic need for folks um and understanding that no matter
• 6:28
  Speaker 1: what the markets do, we're still going to sell homes
• 6:31
  Speaker 1: compared to, for example, operating on the fringe where you
• 6:34
  Speaker 1: might have great run ups UM. So you start looking
• 6:37
  Speaker 1: at the different strategies that are deployed. But then it's
• 6:40
  Speaker 1: really about return um growth. Is it for growth sake?
• 6:45
  Speaker 1: Are you in the right places long term that can
• 6:48
  Speaker 1: sustain different market impacts? Well, talking about that in particular,
• 6:51
  Speaker 1: do you think that there are any large US cities
• 6:53
  Speaker 1: that are getting close to saturation that are seeming a
• 6:57
  Speaker 1: little bit overbuilt at this point? Now, you know, as
• 7:01
  Speaker 1: long as I've been doing this, you always wonder where
• 7:04
  Speaker 1: that next piece of land is going to come from,
• 7:07
  Speaker 1: but it does kind of regenerate and revigorate. And so no,
• 7:11
  Speaker 1: as I mean you think about what really um impacts
• 7:14
  Speaker 1: the home building industry, it's about job growth. It's about
• 7:17
  Speaker 1: some of those very basic services, but really mostly around jobs.
• 7:21
  Speaker 1: And when you look at your top twenty markets across
• 7:23
  Speaker 1: the US, I would argue just exactly the opposite that
• 7:27
  Speaker 1: I think those opportunities are becoming more plentiful. But how
• 7:30
  Speaker 1: we the creativity we use in securing new land that
• 7:34
  Speaker 1: meet the needs of our consumers at affordable prices is key.
• 7:37
  Speaker 1: Thank you very much for spending time with us. Cheryl
• 7:39
  Speaker 1: Palmer is the chief executive of Taylor Morrison Holmes. Thanks
• 7:43
  Speaker 1: very much, Thank you very much. Uh let's see what's
• 7:57
  Speaker 1: going on in the world of Netflix, and for that
• 7:59
  Speaker 1: we course bringing the Paul Sweeney. He is our expert
• 8:02
  Speaker 1: when it comes to everything internet media. He's our senior
• 8:06
  Speaker 1: media Internet analysts for Bloomberg Intelligence. So, Paul Sweeney, eight
• 8:10
  Speaker 1: billion dollars can buy you a lot of stuff, can it. Yeah,
• 8:13
  Speaker 1: it's gonna buy a lot of programming next year. And
• 8:15
  Speaker 1: that's a big jump from six billion dollars that they're
• 8:18
  Speaker 1: going to spend this year, uh and off balance sheet.
• 8:21
  Speaker 1: They have another seventeen billion dollars of long term liabilities
• 8:24
  Speaker 1: UM that they're contracted for, so um. You know, this
• 8:27
  Speaker 1: is a business. You know, it's I think from the
• 8:29
  Speaker 1: company's perspective, it's kind of a virtuous circle. And that is,
• 8:32
  Speaker 1: the more we spend on programming, the more new subscribers
• 8:36
  Speaker 1: we can attract, and the more those new subscribers then
• 8:39
  Speaker 1: generate revenue and cash flow for us, which then supports
• 8:42
  Speaker 1: more programming investments. So that's the business that they feel
• 8:45
  Speaker 1: like they're in at this moment. In over the last
• 8:47
  Speaker 1: four or five years, it's absolutely played out. You know.
• 8:50
  Speaker 1: Paul I was talking with my fellow Gadflight columnist Shira
• 8:53
  Speaker 1: Ovid this morning and she was saying, you know, it
• 8:56
  Speaker 1: seems like perhaps the underappreciated truth about Netflix is that
• 9:01
  Speaker 1: they're mortgaging. They're they're present for the future, and they're
• 9:06
  Speaker 1: going deeper and deeper into debt in order to get
• 9:10
  Speaker 1: more subscribers and to build out their content. But this
• 9:13
  Speaker 1: is this is a high risk proposition, and it's not
• 9:16
  Speaker 1: clear that they've reached sort of the warp speed necessary
• 9:20
  Speaker 1: to to make them successful over the long term. Now, well,
• 9:23
  Speaker 1: you know it's interesting. It's I think read Hastings and
• 9:25
  Speaker 1: the Netflix folks that they look at Jeff Bezos and
• 9:28
  Speaker 1: Amazon and they see, you know, a visionary there who
• 9:31
  Speaker 1: is willing to make huge long term investments based upon
• 9:35
  Speaker 1: what is believed as a is a great long term play,
• 9:38
  Speaker 1: that is e commerce. And so if you read Hastings,
• 9:40
  Speaker 1: you see you see yourself in a similar light, which
• 9:42
  Speaker 1: is uh, Internet enabled television or video of viewing is
• 9:46
  Speaker 1: a global opportunity. The market is clearly moving to that market,
• 9:50
  Speaker 1: to the over the top type of viewing. Um. Netflix
• 9:54
  Speaker 1: has always enjoyed first mover advantage. They've always enjoyed the
• 9:58
  Speaker 1: best brand name in the business. And if you do
• 10:01
  Speaker 1: believe in the long term opportunity here, you spend it now,
• 10:04
  Speaker 1: and you spend aggressively to take market share and defend
• 10:06
  Speaker 1: off competition. And that's clearly the strategy. But but they're
• 10:10
  Speaker 1: raising their prices at a time when Amazon, if you
• 10:14
  Speaker 1: have an Amazon Prime membership, you're also accessing their videos
• 10:19
  Speaker 1: for free. I put in air quotes because you're paying
• 10:21
  Speaker 1: for Amazon Prime. But that's that's a pretty big competitive proposition,
• 10:25
  Speaker 1: it is, and and I think, um, what the company
• 10:28
  Speaker 1: has really realized over the last really the last year
• 10:31
  Speaker 1: or so, I would say, is, you know, they need
• 10:33
  Speaker 1: to rely more on originally produced programming as opposed to
• 10:37
  Speaker 1: taking some of the content that's already been produced and
• 10:40
  Speaker 1: and viewed from the traditional media companies, whether it's a
• 10:42
  Speaker 1: movie or a TV series. So you see them really
• 10:45
  Speaker 1: stepping up in about that the eight billion dollars will
• 10:49
  Speaker 1: be spent on original programming, and that number they expect
• 10:52
  Speaker 1: to go to fifty. So it really goes to the
• 10:54
  Speaker 1: fact that in order they know that they have to
• 10:56
  Speaker 1: differentiate themselves in an increasingly competitive marketplace is from the Amazons,
• 11:01
  Speaker 1: from the Hulus, but also from just think about what
• 11:03
  Speaker 1: happened to Walt Disney Company a few weeks ago. They
• 11:05
  Speaker 1: announced that they are taking ESPN and the Disney channels
• 11:08
  Speaker 1: direct to consumer. Much like Net Netflix has offered directed
• 11:12
  Speaker 1: the consumers. So we're seeing a lot more competition in
• 11:15
  Speaker 1: the marketplace outside of the U S. There's a lot
• 11:17
  Speaker 1: of local competition that Netflix faces, um, but yet they
• 11:22
  Speaker 1: continue to put up a very strong subscriber gains, and
• 11:26
  Speaker 1: the company believes that the primary driver for that is
• 11:29
  Speaker 1: its high quality original programming, Paul, what's with the sweater?
• 11:33
  Speaker 1: What's with the Red Hastings, Stranger Things sweater? What is that?
• 11:37
  Speaker 1: Is sort of into it from Well, I think they're right.
• 11:41
  Speaker 1: So we put on a kind of a funny sweater
• 11:43
  Speaker 1: from one of the shows that that that airs on
• 11:45
  Speaker 1: net Netflix on the earnings conference call last night. The
• 11:48
  Speaker 1: video portion basically signaling that much like the Walt Disney
• 11:52
  Speaker 1: Company does so well, uh, they're gonna be to get
• 11:55
  Speaker 1: into the merchandizing business and get into the merchandizing of
• 11:58
  Speaker 1: some of their original content that they own and that
• 12:01
  Speaker 1: they can license and try to build out, you know,
• 12:03
  Speaker 1: different revenue streams um and we saw DreamWorks try to
• 12:07
  Speaker 1: do it, but really nobody does it nearly as well
• 12:09
  Speaker 1: as the Walt Disney Company. You keep mentioning the Disney Company,
• 12:12
  Speaker 1: which makes me think of ESPN, which makes me think
• 12:15
  Speaker 1: of the NFL controversy of late and I'm wondering if
• 12:18
  Speaker 1: you could just quickly touch on ratings for football games
• 12:21
  Speaker 1: and viewership. Has it gone down since the eruption of
• 12:25
  Speaker 1: the kneeling anthem controversy. Ratings over the last season and
• 12:30
  Speaker 1: a half in particular, have been flatted down for most
• 12:34
  Speaker 1: of the broadcast. Now we have so many broadcasts Sunday afternoon,
• 12:37
  Speaker 1: Sunday evening, Thursday evening, Monday night. Um, they all do differently,
• 12:41
  Speaker 1: but generally the trend has been down. And the question
• 12:43
  Speaker 1: is that just simply a function of what's happening in
• 12:45
  Speaker 1: traditional television where everybody's audience is deep declining as people
• 12:49
  Speaker 1: cut the court and spend more time on the internet.
• 12:52
  Speaker 1: Or is it something specific to the NFL? And I
• 12:54
  Speaker 1: think most observers I feel like there is something specific
• 12:57
  Speaker 1: to the NFL. The the political political z a of
• 13:00
  Speaker 1: the NFL and football has really been a net negative
• 13:03
  Speaker 1: for them and has hurt them in terms of audience.
• 13:05
  Speaker 1: And we kind of hear that from the players, the
• 13:07
  Speaker 1: owners as well as the broadcast partners. It can't be
• 13:10
  Speaker 1: good for Disney, but no. So the question is is
• 13:13
  Speaker 1: this a long term trenders this is something kind of
• 13:15
  Speaker 1: a bumping the road, that's something will you know? Presumably
• 13:18
  Speaker 1: we will pass. Thank you so much for joining us.
• 13:20
  Speaker 1: Always a pleasure to hear your insights. Paul Sweeney, US
• 13:23
  Speaker 1: Director of Research and Senior Senior Media and Internet Analyst
• 13:26
  Speaker 1: for Bloomberg Intelligence, talking about Netflix, NFL, all Things media,
• 13:44
  Speaker 1: Our topic now is gold and bank regulation. Ruth Crowle
• 13:48
  Speaker 1: is chief executive of the London Bullion Market Association and
• 13:52
  Speaker 1: she joins us now. Ruth, thank you very much for
• 13:55
  Speaker 1: being with us. UH. You know, one of the things
• 13:58
  Speaker 1: that I learned in preparing to speak with you is
• 14:00
  Speaker 1: that the new rules that are being set forth by
• 14:05
  Speaker 1: Basel three for central by central banks, for UH commercial
• 14:09
  Speaker 1: banks has some interesting and nuances. If you're a gold investor,
• 14:14
  Speaker 1: could you describe what they are and what you believe
• 14:17
  Speaker 1: the effects would be on the market. Sure, m hi,
• 14:21
  Speaker 1: and thanks so much for inviting me to speak to
• 14:23
  Speaker 1: you guys. This UM this afternoon UM basically the net
• 14:27
  Speaker 1: stable funding ratio, it's liquidity rules put in place for
• 14:31
  Speaker 1: commodities and in this case gold has been treated as
• 14:33
  Speaker 1: a commodity um. Which is one of the main issues
• 14:37
  Speaker 1: with not is the high cost um. And this is
• 14:40
  Speaker 1: going to have two major effects. One will be a
• 14:43
  Speaker 1: loss of the liquidity as banks are unable to reach
• 14:47
  Speaker 1: the higher costs, as well as an effect on what
• 14:50
  Speaker 1: we call the real economy, so the people who don't
• 14:52
  Speaker 1: have the option to get out of precious metals, so
• 14:56
  Speaker 1: the miners, the refiners, the jewelry manufacturers, they're going to
• 15:00
  Speaker 1: see big increases as well as uh a lack of financing. Well,
• 15:05
  Speaker 1: let's let's take a step back. So basically these les
• 15:08
  Speaker 1: BOSL three, which is looking to create a better and
• 15:14
  Speaker 1: stricter banking regulatory framework, includes different waitings for risky assets
• 15:21
  Speaker 1: that banks hold on their balance sheets. And basically, under
• 15:24
  Speaker 1: this proposal, gold would get a very high well we'll
• 15:29
  Speaker 1: get a very low risk waiting and others be considered
• 15:30
  Speaker 1: a very risky asset, making it UH valuable for banks
• 15:35
  Speaker 1: to hold as a liquid asset um. And you were
• 15:38
  Speaker 1: saying in in some of the in some of the
• 15:40
  Speaker 1: comments coming out of this latest in the conference, this
• 15:43
  Speaker 1: could potentially tank the prices of gold, right, No, I
• 15:48
  Speaker 1: mean absolutely, I think there could be real disruption to
• 15:51
  Speaker 1: the market um, not only in terms of loss of
• 15:54
  Speaker 1: liquidity um, but also in terms of a disruption to
• 15:59
  Speaker 1: the clear ring facility that happens for gold each day
• 16:02
  Speaker 1: in London. All Right, So if that were to happen,
• 16:06
  Speaker 1: what do you believe would be the reaction of large banks,
• 16:10
  Speaker 1: but also what would you believe would be the reaction
• 16:13
  Speaker 1: of the gold price. Well, I think we remain price neutral,
• 16:18
  Speaker 1: but in terms of the banks themselves. I mean, we've
• 16:20
  Speaker 1: already seen this start to happen in terms of banks
• 16:24
  Speaker 1: deciding to to pull out of precious metals UM. And
• 16:26
  Speaker 1: certainly there has been some departures. I mean, I think
• 16:30
  Speaker 1: there's a larger commodity story there too. UM. But certainly, UM,
• 16:34
  Speaker 1: the fact that gold perform performed extremely well during the crisis,
• 16:39
  Speaker 1: it's sort of ironic now that it's being considered this
• 16:41
  Speaker 1: risky asset that needs this um disproportional funding ratio. Is
• 16:46
  Speaker 1: this a done deal? I hope not. I think we're
• 16:50
  Speaker 1: working hard to make sure that we're raising it with
• 16:52
  Speaker 1: the right people. I think, as I said, because gold
• 16:55
  Speaker 1: did so well, UM, certainly it's to go to asset
• 16:58
  Speaker 1: in times of crisis. UM. It seems strange that you're
• 17:01
  Speaker 1: going to put it in a position where that could
• 17:03
  Speaker 1: no longer be the case because you have disruptions in
• 17:06
  Speaker 1: the market. Although in fairness, gold is or at least
• 17:10
  Speaker 1: gold prices have been rather volatile and uh. And you know,
• 17:14
  Speaker 1: if you're thinking about liquid assets that have predictable prices
• 17:19
  Speaker 1: when you want to get out of them, that could
• 17:21
  Speaker 1: that could be the issue, right, I mean, that's that's
• 17:24
  Speaker 1: that's sort of the reasoning behind UM the regulatory push here. Right. Well,
• 17:29
  Speaker 1: I think one of the major issues is the lack
• 17:31
  Speaker 1: of information on gold, and that's something that we've been
• 17:34
  Speaker 1: trying to address. UM. We've been working to get trade
• 17:38
  Speaker 1: statistics and reporting for the OTC market. UM. You might
• 17:42
  Speaker 1: not be aware of that the London OTC market is
• 17:44
  Speaker 1: actually the largest financial market in the world for gold.
• 17:47
  Speaker 1: I think people focus a lot on the futures because
• 17:49
  Speaker 1: you've got those statistics. UM, but certain London is certainly
• 17:54
  Speaker 1: within the industry seen as the epicenter. Can you explain
• 17:58
  Speaker 1: what is bullion banking and why people who are invested
• 18:02
  Speaker 1: in gold or thinking about investing in gold, whether that
• 18:04
  Speaker 1: be a gold miner or as you said, a jewelry
• 18:08
  Speaker 1: company or anybody that deals with gold, why is bullion
• 18:11
  Speaker 1: banking relevant? Well, I think there's two issues there. I mean,
• 18:15
  Speaker 1: within the same market, you have speculation, so gold is
• 18:19
  Speaker 1: treated as a currency and traded like a currency is
• 18:22
  Speaker 1: in the four x OTC markets. And then you also
• 18:25
  Speaker 1: have as I described, the real economy. So, UM, let's
• 18:28
  Speaker 1: say a mining company who needs financing or a jewelry
• 18:32
  Speaker 1: manufacturing who doesn't want to be exposed to the prey sensitivity.
• 18:36
  Speaker 1: As the metal goes through the plant, they will take
• 18:40
  Speaker 1: climate thing from a bullion bank, and the bullion bank
• 18:43
  Speaker 1: has that centered liquidity from the combination of the speculation
• 18:47
  Speaker 1: as well as the real economy financing. So you know,
• 18:52
  Speaker 1: one big question that I hear from people is sort
• 18:55
  Speaker 1: of this conflation between gold and bitcoin, that, in other words,
• 18:59
  Speaker 1: these crypt docurrencies are becoming the new gold and superseding
• 19:03
  Speaker 1: the precious metal as this sort of haven role. Ironically, uh,
• 19:08
  Speaker 1: considering the incredible volatility there, have you heard about that
• 19:12
  Speaker 1: or how is the organization kind of addressing that at all? Sure,
• 19:17
  Speaker 1: it's certainly about a topic. I mean, I'm actually calling
• 19:19
  Speaker 1: you live from Barcelona, the main LBBA industry conference. UM.
• 19:24
  Speaker 1: And what's been really interesting is how much we've been
• 19:26
  Speaker 1: talking about cryptocurrencies. Gold tends to be a rather conservative industry. UM.
• 19:32
  Speaker 1: So I was a bit surprised actually in terms of
• 19:34
  Speaker 1: how much interest there was in the crypto side of things.
• 19:37
  Speaker 1: And I think that's because fundamentally, UM, a lot of
• 19:40
  Speaker 1: people who are attracted to investing in gold, UM see
• 19:44
  Speaker 1: the benefit having the lack of government intervention because it
• 19:49
  Speaker 1: is no one's liability UM. Gold is gold, So there's
• 19:53
  Speaker 1: an interesting combination between crypto and gold, and that's something
• 19:56
  Speaker 1: we've certainly been hearing talked about in the last few days.
• 20:00
  Speaker 1: Does the increased participation on the part of governments or
• 20:03
  Speaker 1: bank regulators in the gold market, does that make it
• 20:07
  Speaker 1: less attractive? Um? It certainly makes it more frustrating UM.
• 20:13
  Speaker 1: From our side of things, UM, I think ultimately we
• 20:16
  Speaker 1: need some clarity when it comes to Basil three and
• 20:19
  Speaker 1: these rules that ultimately gold, having failed to become a
• 20:23
  Speaker 1: high quality liquid asset by their determination, has been lumped
• 20:27
  Speaker 1: in really wholesale with everything else and not been treated
• 20:32
  Speaker 1: um differently as it really should be given its role
• 20:34
  Speaker 1: as a currency as well. And just real quick, you
• 20:38
  Speaker 1: see that gold is probably going to climb six percent
• 20:42
  Speaker 1: by this time next year. Is that correct? I think
• 20:46
  Speaker 1: we're saying five and a bit, but yes, yes, we
• 20:49
  Speaker 1: had a prediction of going up about five and a
• 20:51
  Speaker 1: half percent UM in time for our conference in Boston
• 20:55
  Speaker 1: in October next year. Ruth Coral, thank you so much
• 20:58
  Speaker 1: for joining us. Ruth Coral as chief executive of the
• 21:00
  Speaker 1: London Bullion Market Association, which is based in London. We
• 21:16
  Speaker 1: were talking earlier about reports that Mexico and Canada will
• 21:20
  Speaker 1: reject us and after proposals, as reported by CNBC. Following
• 21:24
  Speaker 1: that report, the Canadian dollar and the Mexican pay so
• 21:27
  Speaker 1: fell sharply to session lows. They were traced a lot
• 21:30
  Speaker 1: of that move. But this highlights the perception that frankly,
• 21:33
  Speaker 1: Canada and Mexico have more to lose should NAFTA get
• 21:38
  Speaker 1: torn up or should negotiations deteriorate further. To discuss his
• 21:41
  Speaker 1: Josh wing Grove, Canada politics reporter for Bloomberg News, coming
• 21:45
  Speaker 1: to us from Ottawa in Canada, and Josh, you know,
• 21:49
  Speaker 1: right now naft negotiations are ongoing. The chatter that we
• 21:53
  Speaker 1: keep getting seems rather negative as far as reaching some
• 21:57
  Speaker 1: kind of new agreement. Can you just give us a
• 21:59
  Speaker 1: state of play of where things are right now? Yeah? Absolutely,
• 22:03
  Speaker 1: I mean we're we're sort of have our heads spinning
• 22:05
  Speaker 1: here this morning because that CNBC report you mentioned there's
• 22:08
  Speaker 1: nothing new in it. I mean, this has been going
• 22:11
  Speaker 1: for a week and what it really is saying is
• 22:13
  Speaker 1: that there are five core proposals that Mexico and Canada
• 22:17
  Speaker 1: have repeatedly and publicly rejected, and all kinds of observers
• 22:22
  Speaker 1: are saying if the US wants a deal, which of
• 22:23
  Speaker 1: course no one really knows if they do or not,
• 22:26
  Speaker 1: that they're going to have to water down their wine.
• 22:28
  Speaker 1: So CNBC, uh, you know, I'm here in Washington covering
• 22:31
  Speaker 1: the talks right now. This this, this report sort of
• 22:34
  Speaker 1: wrapped up what many of including Bloomberg, have been reporting
• 22:38
  Speaker 1: for quite some time, is that you know, they're meeting
• 22:41
  Speaker 1: today and what Robert lighthis are the US trade representative
• 22:44
  Speaker 1: who is slowly sort of losing power to Wilburgh Ross
• 22:47
  Speaker 1: on this file is going to hear from the Mexicans
• 22:49
  Speaker 1: and Canadians that on these five things, you know you're
• 22:53
  Speaker 1: going to have to do some soul searching on there's
• 22:55
  Speaker 1: essentially two negotiations going on, one on those five with
• 22:59
  Speaker 1: no progress and one on about two dozen other things
• 23:02
  Speaker 1: that is essentially modernizing the after bringing it into an
• 23:04
  Speaker 1: Internet era, and that that's going well. So you know,
• 23:07
  Speaker 1: it's it's ah, I feel like a little bit of
• 23:09
  Speaker 1: whiplash today here on this kind of thing. Yeah, it's
• 23:13
  Speaker 1: a long time coming that trade negotiations have this kind
• 23:15
  Speaker 1: of tension and an excitement. Josh, is there an undertone
• 23:21
  Speaker 1: to these back and forth because you mentioned the shift
• 23:26
  Speaker 1: of power in terms of the US negotiating team. What
• 23:30
  Speaker 1: you know, if even on an anecdotal basis, what's the
• 23:33
  Speaker 1: undertone to this about whether the US administration really wants
• 23:37
  Speaker 1: a deal or is really just looking for an excuse
• 23:39
  Speaker 1: to say goodbye? You know. I think the one thing
• 23:42
  Speaker 1: the Mexicans and Canadians have said is we're not going
• 23:44
  Speaker 1: to walk away. And what you can read into that
• 23:46
  Speaker 1: is they might think that the US is trying to
• 23:50
  Speaker 1: bait them into walking away and they're not going to
• 23:52
  Speaker 1: do that. Uh that you know, they're going to stay
• 23:54
  Speaker 1: at the table. But they are also saying that they're
• 23:58
  Speaker 1: not going to take just any deal, you know, the
• 24:01
  Speaker 1: on anything. And so I think the mood here has
• 24:04
  Speaker 1: certainly changed. The fourth round has been more tense than
• 24:07
  Speaker 1: the third, second and first. However, some people thought the
• 24:10
  Speaker 1: US would walk away at the fourth round to begin with,
• 24:12
  Speaker 1: and so that hasn't happened. Uh So, you know it,
• 24:16
  Speaker 1: I don't know things that things are always complicated. Christia Freeland,
• 24:19
  Speaker 1: the Canadian minister, did walk out of Canada EU trade
• 24:22
  Speaker 1: talks last year. Guess what the deal kicked in the
• 24:25
  Speaker 1: last month. You know, they said that'sn't necessarily kill a
• 24:27
  Speaker 1: deal that people walk out. Josh, let's talk about the
• 24:30
  Speaker 1: five aspects, the most controversial points of discussion right now?
• 24:34
  Speaker 1: What are they? Yeah, I'll give you the Cole's notes,
• 24:36
  Speaker 1: because you know, take it from me. Sometimes these talks
• 24:39
  Speaker 1: are like watching paint dry. Autos is probably the biggest
• 24:43
  Speaker 1: one you think of Donald Trump's lens on this. He
• 24:45
  Speaker 1: wants to bring back manufacturing jobs from Mexico. They've proposed
• 24:50
  Speaker 1: what are called rules of origin changes that would essentially
• 24:52
  Speaker 1: mean more of a car has to be built in
• 24:55
  Speaker 1: North America and in the US specifically. Automakers have warned
• 24:58
  Speaker 1: that no one would even bother. They would just pay
• 25:00
  Speaker 1: the w t O tariff and import more cars to
• 25:03
  Speaker 1: the US and actually decrease US production. Other big ones
• 25:07
  Speaker 1: are on a sunset clause that would essentially spike nafter
• 25:10
  Speaker 1: after five years unless people stepped in to save it.
• 25:12
  Speaker 1: You can imagine how many businesses would love the idea
• 25:15
  Speaker 1: of that making a long term investment decision with a
• 25:17
  Speaker 1: potential five year runway. Uh not great government procurement. The
• 25:21
  Speaker 1: US wants to basically close off nearly all of its
• 25:24
  Speaker 1: market to Mexico and Canada. Dispute panels. These are sort
• 25:27
  Speaker 1: of like the NAFTA cops. The US want US wants
• 25:29
  Speaker 1: to get rid of them entirely. And dairy that's always
• 25:31
  Speaker 1: a hot button issue, particularly for Canada. The US has
• 25:34
  Speaker 1: proposed essentially dismantling Canada's entire dairy system. That would be
• 25:39
  Speaker 1: just absolute political nonstarter for any Canadian government. And so
• 25:42
  Speaker 1: those are those are the big ones. And so the
• 25:44
  Speaker 1: the US proposals are so far out of out of
• 25:47
  Speaker 1: what the three countries agreed to enter the Trans Pacific
• 25:50
  Speaker 1: Partnership that you know, the other two countries are saying,
• 25:53
  Speaker 1: you know, like that's they're they're they're calling it a nonstarter.
• 25:56
  Speaker 1: They're saying phrases like flatly reject, completely reject, and they're
• 26:00
  Speaker 1: not leaving a lot of wiggle rold Well, But Josh,
• 26:02
  Speaker 1: you know, I was I thought it was compelling the
• 26:04
  Speaker 1: market response to the reports, even though they were old news,
• 26:07
  Speaker 1: but the idea that things were falling apart, it's interesting
• 26:12
  Speaker 1: to me to think that that created a fall in
• 26:15
  Speaker 1: both the luney and the pace. So is it expected
• 26:18
  Speaker 1: that if there is some kind of devolution of talks
• 26:20
  Speaker 1: here that will be negative most negative for Canada and
• 26:24
  Speaker 1: Mexico more than even the US. I think that's true.
• 26:27
  Speaker 1: I think that's true. You know, one of the things
• 26:29
  Speaker 1: that has really characterized the early rounds of talk is
• 26:32
  Speaker 1: there's been almost no American media interests. There's been almost
• 26:36
  Speaker 1: other than like Bloomberg and Writer's there's been almost no
• 26:39
  Speaker 1: UH stakeholder interest is the word I'm looking for in
• 26:43
  Speaker 1: the US. And so we we saw the US chambers
• 26:45
  Speaker 1: speak out this last week. The Canadians think that that
• 26:49
  Speaker 1: is less about the US Chamber thinking O G. Things
• 26:51
  Speaker 1: are going off the rails, and they are waking up
• 26:53
  Speaker 1: to the fact that things could go off the rails.
• 26:55
  Speaker 1: And so there's there's a tiered effect here the U
• 26:58
  Speaker 1: s if it pulls out, you know, um, there would
• 27:01
  Speaker 1: be all kinds of ripple effects are at the economy.
• 27:04
  Speaker 1: Canada has a safety net that Mexico does not. Canada
• 27:07
  Speaker 1: has a bilateral f t A with the US. It
• 27:11
  Speaker 1: was a predecessor of NAFTA, and they would hope to
• 27:13
  Speaker 1: sort of dust that off and see if it could
• 27:15
  Speaker 1: start up again if NAFTA and NAFTA collapse. So so
• 27:19
  Speaker 1: this sort of you know, like Mexico has has has
• 27:22
  Speaker 1: less of a safety net as I say it in Canada, Josh,
• 27:25
  Speaker 1: any chance you can do air Bus and the Bombardier
• 27:28
  Speaker 1: in less than fifteen seconds. Yeah, air Bus took half
• 27:32
  Speaker 1: of Bombardi's prized jewel for free because Bombarge was desperate
• 27:36
  Speaker 1: and needed a partner. They were talking with the Chinese.
• 27:39
  Speaker 1: They chose air Bus, balls and Boeing's court. Now alright,
• 27:42
  Speaker 1: well we're gonna be following this as well. Thank you
• 27:44
  Speaker 1: very much, Josh WiNDroVe. He is our Canadian politics reporter
• 27:48
  Speaker 1: reporting from Washington, d C, site of the continuing NAFTA talk.
• 27:57
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 28:00
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
• 28:04
  Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
• 28:07
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
• 28:11
  Speaker 1: Abramo wits one. Before the podcast, you can always catch
• 28:14
  Speaker 1: us worldwide on Bloomberg Radio