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Top Market Worries Are Behind Us: State Street's Loh · 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 wits. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
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. Here we are again today, more
0:21
Speaker 1: green on the screen. What else is knew? This has
0:23
Speaker 1: been a fantastic year for risk assets, whether you're looking
0:26
Speaker 1: at equities, investment grade, high yield, even municipal bonds having
0:30
Speaker 1: a fantastic performance this year. The question obviously now turns
0:33
Speaker 1: to what do we do? Marvin low are good friend,
0:36
Speaker 1: senior global macro strategist for State Street uh joins us
0:39
Speaker 1: here on our Bloomberg Interactive Broker Studio. So, Marvin, I
0:41
Speaker 1: guess the question is for a lot of investors is
0:43
Speaker 1: even if I look at the market's performance in versus
0:47
Speaker 1: say the peak in September last year, I forget about
0:50
Speaker 1: the return in tu we had that big swoon in December.
0:53
Speaker 1: I'm still up double digits from that peak to peak.
0:57
Speaker 1: What do I do in do I pull some risk
0:59
Speaker 1: off the table where I just kind of keep everything
1:02
Speaker 1: in the game. You know what, UM, I think the
1:04
Speaker 1: animal spirits are pretty strong. UM. You know, I think
1:07
Speaker 1: what we've seen is that um our worst fears about
1:11
Speaker 1: growth UM certainly didn't come to fruition. And if anything,
1:15
Speaker 1: we're entering with a little bit more clarity than we
1:18
Speaker 1: had in the middle of the year. So UM, I think.
1:20
Speaker 1: I think UM steady as she goes is a decent
1:23
Speaker 1: way to look at the start of at this point,
1:26
Speaker 1: and I don't see much to shake that apple cart
1:29
Speaker 1: at this point. The still a lot of risk out there,
1:31
Speaker 1: but we've really taken a lot of the biggest concerns
1:34
Speaker 1: off the table. I think one of the biggest issues,
1:36
Speaker 1: as you and I were talking before the segment that
1:39
Speaker 1: really kind of a year ago today, what was spooking
1:42
Speaker 1: the market where a number of factors, but probably first
1:45
Speaker 1: and foremost was the FED. And it was in a
1:47
Speaker 1: you know, hiking mode here. What is your expectation for
1:51
Speaker 1: the FED here as we go through? Yeah, you know what, UM,
1:55
Speaker 1: And I think that I think kind of the outlook
1:57
Speaker 1: for the FED as well as kind of the Central
1:59
Speaker 1: Bank contingent to you will UM is supportive of this market. Ultimately,
2:02
Speaker 1: it's asymmetric. UM. They have for the most part set
2:07
Speaker 1: a pretty high bar in terms of cutting UM. Additionally,
2:11
Speaker 1: but they said that they're certainly watching everything. But the
2:13
Speaker 1: bar I think is even higher for hiking UM. And
2:15
Speaker 1: I think that not only is true for the FED,
2:17
Speaker 1: but it's true for a lot of central banks around
2:19
Speaker 1: the world, which gives investors, you know, a little bit
2:22
Speaker 1: of a tail when when you don't have to worry
2:24
Speaker 1: about the risk UM. Clearly that we saw at the
2:27
Speaker 1: end of eighteen from an overly aggressive hiking cycle. Okay,
2:31
Speaker 1: so we have global central banks generally in an easing mode.
2:35
Speaker 1: Uh jeeus, we got negative interest rates quite frankly a
2:38
Speaker 1: number of the big markets around the world. What asset
2:41
Speaker 1: classes should I be thinking about now, given that I
2:43
Speaker 1: am ten or eleven years into this economics cycle. Do
2:46
Speaker 1: I equities, investment grade, high emerging markets? How do I
2:50
Speaker 1: think about it? Yeah? You know, so, so I think
2:52
Speaker 1: interest rates are going to remain low. Um. You know,
2:54
Speaker 1: I'm not in the camp that we're gonna all of
2:56
Speaker 1: a sudden reinflate to a three to four percent tenure
2:59
Speaker 1: in the US. So if we kind of are looking
3:01
Speaker 1: at rates somewhere around here, I think the reach for
3:03
Speaker 1: yield still UM is strong. Uh, there is a lot
3:06
Speaker 1: of cash on the sidelines, so I think that that
3:08
Speaker 1: makes its way back into risk assets equities UM. Despite valuations,
3:13
Speaker 1: UM continue to look attractive. But I also even like
3:17
Speaker 1: credit in this in this market, I think you have
3:18
Speaker 1: to reach for it UM. I don't think that it's
3:21
Speaker 1: as you know, certainly the a lot of the low
3:23
Speaker 1: hanging food has been picked this year UM, but you know,
3:25
Speaker 1: people demographics are still going to need that income. So
3:28
Speaker 1: that leads me to UM, to high yield to a
3:31
Speaker 1: certain degree, and it doesn't lead me to EM particularly
3:33
Speaker 1: if we see a more stable environment when it comes
3:35
Speaker 1: to the FX market. All right, let's start with kind
3:38
Speaker 1: of the riskier side of the credit markets, high yield
3:41
Speaker 1: leverage loans. There's been some concern that you know, maybe
3:45
Speaker 1: credit quality starting to get a little tepid or certainly
3:48
Speaker 1: let's just start with the evaluation that high yield has
3:50
Speaker 1: had a great run here, that yields of titan do
3:52
Speaker 1: you have to be really selective and how yield are
3:54
Speaker 1: There's certain sectors you have to focus on or can
3:57
Speaker 1: you just kind of have a ladder across high yield. Yeah. No,
3:59
Speaker 1: I think you have to be more selective this year,
4:01
Speaker 1: and and and next year, I should say, but even
4:03
Speaker 1: this year you needed to be selective. Triple C certainly underperformed,
4:06
Speaker 1: the leverage loans certainly underperformed. So there were recession risk
4:10
Speaker 1: um that we're building, and I think that remains out
4:12
Speaker 1: there given that work. Like you said, we're eleven years
4:15
Speaker 1: into this expansion um. Having said that, the fact that
4:19
Speaker 1: we're pushing recession concerns you know a little bit in
4:21
Speaker 1: the future. Again, an active central bank kind of keeps
4:24
Speaker 1: those recession concerns at bay. You could get into that
4:27
Speaker 1: single B category and start picking your way around it
4:31
Speaker 1: because it would take a recession um to really push
4:34
Speaker 1: that into kind of the more bankruptcy bankruptcy type concern.
4:38
Speaker 1: You certainly can get um spread widening, but in terms
4:41
Speaker 1: of cutting coupons at about five, you know, it sounds
4:44
Speaker 1: pretty good. It does. I think a lot of people
4:47
Speaker 1: would take that. This year have an emerging markets that's
4:49
Speaker 1: an area that's chronically underperformed, and uh, I'm wondering an
4:53
Speaker 1: accescenario or maybe we do get some phase one kind
4:55
Speaker 1: of trade deal. Tensions kind of pulled back a little
4:58
Speaker 1: bit in terms of global trade. Can E I'm finally
5:00
Speaker 1: perform UM E M E M as as an asset
5:04
Speaker 1: class is always tricky because it encompasses so much UM.
5:08
Speaker 1: I think by definition you have to be choosing. You
5:11
Speaker 1: have to kind of know what the underlying aspects of
5:13
Speaker 1: UM each one of those countries economies are. But having
5:16
Speaker 1: said that, I do think again, going back to this
5:18
Speaker 1: lower interest rate environment, potentially less volatility will put you
5:22
Speaker 1: into certain UM em carry trades where uh you know, uh,
5:27
Speaker 1: I guess the risk of kind of going into em
5:30
Speaker 1: unheedged is certainly well known. But if you don't have
5:33
Speaker 1: volatility and you're and you are able to UM clip
5:36
Speaker 1: those local currency coupons, uh, it's something that you should
5:38
Speaker 1: think about real quickly. Trade deal. It seems like we're
5:42
Speaker 1: moving towards a phase one type of deal. How important
5:45
Speaker 1: is that to the market UM. I don't think it's
5:48
Speaker 1: that important because I think most of it's priced in already.
5:51
Speaker 1: I think that ultimately what UM is important for the
5:54
Speaker 1: data is if it gets companies comfortable in terms of
5:58
Speaker 1: starting to reinvest. You know, I think at was a
6:01
Speaker 1: challenge given how massive the cross winds around trade were.
6:05
Speaker 1: If we actually get to a point where some of
6:07
Speaker 1: the tensions um reduce and we move more towards an
6:10
Speaker 1: election kind of environment where we don't have as many headlines,
6:13
Speaker 1: businesses um very well could start to invest in a
6:16
Speaker 1: way that they haven't, and then that just provides additional
6:19
Speaker 1: tail winto what seems to be a fairly strong consumer. Hey, Marvin,
6:22
Speaker 1: thanks so much for joining us. I appreciate you coming
6:24
Speaker 1: in here. Marvin Lowe, senior global macro strategist for states
6:27
Speaker 1: Re based on Boston, but joining us here in his
6:30
Speaker 1: Bloomberg eleven three oh studio with his faithful sidekick as well,
6:33
Speaker 1: sitting in here in the studio forward. We appreciate you, Marvin,
6:36
Speaker 1: coming in with your thoughts. Well, it has been a
6:52
Speaker 1: fantastic year for risk assets. You need take a one
6:55
Speaker 1: take a look at one of the riskier stocks out there,
6:57
Speaker 1: one of the more volatile stocks out there, Tesla. It's
7:00
Speaker 1: really an interesting tape. The stock is up thirty percent
7:04
Speaker 1: year to date, but when you take a look from
7:05
Speaker 1: it's June low it's up a hundred and forty. There's
7:08
Speaker 1: a time back in June where it looked like the
7:10
Speaker 1: Bears were finally getting their due, but they've been punished
7:13
Speaker 1: since then again a stock up hundred forty percent off
7:16
Speaker 1: that June low. To get a sense of what comes next,
7:18
Speaker 1: we welcome to good friend Dan Ives. He's a managing
7:20
Speaker 1: director equity research for Webush Securities. Is also a Penn
7:24
Speaker 1: State Nitney Lion alumnus. We will talk about the Cotton
7:27
Speaker 1: Bowl coming up, certainly, but Dan, let's start with Tesla.
7:30
Speaker 1: What's your make here of this company? This stock? It
7:33
Speaker 1: has been all over the map in Yeah. I mean, look,
7:37
Speaker 1: there were some dark days earlier this year and it
7:39
Speaker 1: really came down to demand in the US that was
7:42
Speaker 1: starting to wayne. And you've got to give Musk and
7:45
Speaker 1: Testler credit. I mean, you've seen a rebound in Europe.
7:48
Speaker 1: The China growth story now looks to be alive and
7:52
Speaker 1: well with gig at three and the most importantly positability,
7:55
Speaker 1: and that sort of combination has caused not just a
7:59
Speaker 1: massive would squeeze, but I think right now starting to
8:02
Speaker 1: maybe see a real turnaround going. All right, So let's
8:06
Speaker 1: start with the production side first. That's always been a
8:09
Speaker 1: concern here. Yes, it's a great technology, it's a great car,
8:13
Speaker 1: um but can they ever built it at scale on
8:16
Speaker 1: a profitable basis? Do we have any more color there?
8:20
Speaker 1: I think right now that's why Gigga three is so
8:22
Speaker 1: important in terms of China because from production standpoint, that
8:27
Speaker 1: along with Europe, could really significantly incuruse production and actually
8:32
Speaker 1: get them to maybe susteem possibility. And to your point,
8:36
Speaker 1: it's been a one step forward, two step backstory for
8:39
Speaker 1: a number of years. Now it feels like maybe they're
8:42
Speaker 1: starting to finally turn the corner. And that's what you're
8:44
Speaker 1: seeing with the stock. I mean, it's a massive rerating
8:47
Speaker 1: that's starting to happen because not just the demand but
8:50
Speaker 1: the production capacity with Giga for three front and center.
8:55
Speaker 1: Do we have a sense of let' let's switch to
8:57
Speaker 1: that demand story because for a while they're just as
9:00
Speaker 1: a late person watching this stock, I never doubted the
9:03
Speaker 1: demand story because it was just again such a great car,
9:06
Speaker 1: great technology, so much ahead of everybody else. But then
9:09
Speaker 1: there really was uh some concern about you know, what's
9:13
Speaker 1: really the demand for electric cars out there? What's your
9:16
Speaker 1: sense of kind of the market demand for this test
9:19
Speaker 1: Tesla product? Damon look right now? E V two percent
9:24
Speaker 1: overall automobile sold and we we think that could be
9:28
Speaker 1: seven percent in the next four or five years. You know,
9:31
Speaker 1: last strong demand from Model three, especially on the price points.
9:35
Speaker 1: So if you look at action act those are higher
9:37
Speaker 1: and price points Model three demands strong. Look right now,
9:40
Speaker 1: it looks like sustainably four to four hundred fifty thousand units.
9:45
Speaker 1: That might be the line to stand going forward in
9:48
Speaker 1: terms of what pastor can see in terms of demand.
9:51
Speaker 1: But now it's going global and that's the key Europe
9:54
Speaker 1: in China, that's key of the growth story. I'm actually
9:57
Speaker 1: a little bit surprised again as a late person, not
9:59
Speaker 1: seeing a more concerted effort in the EV market from
10:04
Speaker 1: uh some of the existing auto manufacturers. Are you surprised
10:08
Speaker 1: that we haven't seen a bigger production and marketing push
10:12
Speaker 1: into this space. Yeah, I think it's sort of been
10:15
Speaker 1: a toe in the water. I mean, you've seen obviously
10:17
Speaker 1: BMW and PORES and and GM and forward go after
10:22
Speaker 1: the market, but right now it's really been test last
10:24
Speaker 1: where they've sort of built the big mode. I think
10:27
Speaker 1: a lot of it comes down to price points and
10:29
Speaker 1: overall demand, and I think you're gonna start to see
10:32
Speaker 1: that stepped up in terms of the e V push
10:35
Speaker 1: over the coming years that goes global, but I think
10:38
Speaker 1: it has been slower than expected, and I think that's
10:42
Speaker 1: something where you'll see a lot more competition going for
10:46
Speaker 1: this area of the market where I think you know,
10:48
Speaker 1: ultimately e V sALS probably double over the next three
10:51
Speaker 1: to four years. Interesting. Yeah, it's is the product advancing
10:56
Speaker 1: in terms of quality, in terms of like maybe you know,
10:59
Speaker 1: distance and so on, and so where there's a reliability
11:02
Speaker 1: improving because again we know the technology is really cool. Yeah,
11:06
Speaker 1: but but it really comes down to with stable gas prices.
11:11
Speaker 1: That's ultimately actually been a negative really for t V
11:15
Speaker 1: shouse and I think that's something where Pesto's obviously been
11:20
Speaker 1: the one that's really benefit from overall EV and if
11:24
Speaker 1: you look in the U S, e D has trailed
11:27
Speaker 1: Europe and others. Now the beat A lot of big
11:30
Speaker 1: growth's gonna be China. That's why Tessa has been so
11:32
Speaker 1: big on the Giggas three build out there, which they're
11:35
Speaker 1: factory in Shanghai, as well as overall demand China, and
11:39
Speaker 1: that's how you either have a five stock or two
11:44
Speaker 1: to two fifty and so much of that is going
11:46
Speaker 1: to be relying on the China growth story. All right, Dan,
11:51
Speaker 1: let's switch gears Penn State football going up against the
11:54
Speaker 1: University of Memphis in the cotton Ball Friday Night. You're
11:56
Speaker 1: proud p s U alumnus what you're called there? Yeah?
12:01
Speaker 1: I think Penn State by ten. I think fundamentally, you know,
12:06
Speaker 1: this continues to be one that uh it's gonna be
12:09
Speaker 1: all Penn State. And just given that offense that they
12:11
Speaker 1: have to be comprom Memphis to stay with them excellent.
12:15
Speaker 1: I'm I'm not an alumni, but I just I write
12:17
Speaker 1: tuition checks the Penn State. So I've become a de
12:19
Speaker 1: facto fan um so I will be rooting for Penn
12:22
Speaker 1: State as well. Dan, I thanks so much for joining us.
12:24
Speaker 1: Dan's I'm managing director Equity research at Wedbush Securities talking
12:28
Speaker 1: to us about Tesla. He's got a hold on the stock,
12:30
Speaker 1: but it sounds like he's getting a little bit more
12:33
Speaker 1: upbeat about the story and is as Dan was mentioning,
12:36
Speaker 1: the big probably the next big catalyst for the stock
12:39
Speaker 1: one way or the other is China. Can they produce
12:42
Speaker 1: cars in China profitably? What is the demand for the
12:46
Speaker 1: Tesla product in China? You know, I eat out a
13:05
Speaker 1: lot full disclosure, a lot of restaurants. Um. I always
13:08
Speaker 1: think that every time I got the restaurant seemed pretty
13:10
Speaker 1: packed in me. But our next guest, Mike Halen, senior
13:13
Speaker 1: restaurant anals Bloomberg Intelligence, joining us here in a Bloomberg
13:15
Speaker 1: Interactor broker studio. He says, might be a tough year
13:19
Speaker 1: for restaurants. So what's your thoughts about the restaurant business
13:22
Speaker 1: right now? Mike? What are you seeing out there in
13:24
Speaker 1: the marketplace. Well, this has been a pretty good year,
13:27
Speaker 1: you know, um, in general. So so the um, you know,
13:31
Speaker 1: fast food chains have done pretty well. Most of it,
13:34
Speaker 1: THO has been done through price increases. I mean those
13:36
Speaker 1: we know, those are you know, unsustainable because as as
13:39
Speaker 1: you continue to raise prices, eventually the lower income and
13:42
Speaker 1: middle income consumers are gonna start to pull back a
13:44
Speaker 1: little bit, maybe shop a little bit more at the
13:46
Speaker 1: grocery store. Um. The other thing is casual dining. So
13:50
Speaker 1: casual dining had a tough nineteen and we think that's
13:53
Speaker 1: going to continue in they're seeing a lot of competition
13:56
Speaker 1: from independent chains, fast casual chains, grocery stores that are
14:01
Speaker 1: picking up there. They're in store food experience, whether it's
14:05
Speaker 1: grab and grow, um, you know, hot food, pick up,
14:10
Speaker 1: you name it. So a lot of competition there, um,
14:15
Speaker 1: you know. And then also we're going to see breakfast
14:18
Speaker 1: wars breakfast fast food first coming in now with somebody's
14:20
Speaker 1: coming in with the breakfast. Yeah, Wendy's is coming in.
14:22
Speaker 1: So they were breakfast before. They were not. They failed
14:25
Speaker 1: three times prior, so why is this what's gonna be
14:28
Speaker 1: different this time? So it's interesting. I think part of
14:31
Speaker 1: the problem has been they've just been in locations that
14:34
Speaker 1: are better for uh, lunch and dinner right there on
14:37
Speaker 1: your drive home when you're driving home after work. But
14:40
Speaker 1: aren't they always in the same or similar spot than
14:42
Speaker 1: McDonald's are burger King typically, but sometimes on the opposite
14:47
Speaker 1: side of the street, which when you have to make
14:48
Speaker 1: a U turn on you know, Room East and then
14:52
Speaker 1: you know, make another you turn to make your way
14:55
Speaker 1: and that's that's a that's a big change. So we
14:57
Speaker 1: think that's part of the reason why it's failed in
14:59
Speaker 1: the past. Management talks about how they had a whole
15:01
Speaker 1: lot of um items on the menu before and it
15:05
Speaker 1: was just hard to execute, uh, and it caused you know,
15:08
Speaker 1: it caused them to need a lot of labor in
15:10
Speaker 1: the restaurant, so now they're doing a more limited menu.
15:13
Speaker 1: It's only going to be available through the drive through.
15:15
Speaker 1: There's only gonna be two or three employees in the store,
15:18
Speaker 1: so labor costs aren't gonna skyrocket. So they think for
15:21
Speaker 1: all those reasons, it's gonna work this time. And they're
15:24
Speaker 1: doing a national launch in January. But everyone knows this.
15:28
Speaker 1: You know, twenty nine team is a big year for
15:30
Speaker 1: Burger King. They said, you know, breakfast is only fifteen
15:32
Speaker 1: percent of our sales McDonald's. We want to close that gap.
15:36
Speaker 1: So they've been improving their offerings and well, that's been
15:39
Speaker 1: a big, big positive for the McDonald's story over the
15:42
Speaker 1: last seven years, is the breast breakfast menu, all day,
15:44
Speaker 1: all day breakfast for sure, and that's been a positive, right,
15:47
Speaker 1: traffic a very big positive for them. And then they're
15:50
Speaker 1: also rolling out Chicken in January, so you know, everybody's
15:54
Speaker 1: gonna be fighting very fiercely, uh in January for breakfast share.
15:59
Speaker 1: In January is when the the advertisements and the value
16:03
Speaker 1: offerings are at their peak, because most people come out
16:05
Speaker 1: of the new year saying, you know, a new media,
16:07
Speaker 1: I'm going to the gym. I'm gonna eat healthier, I'm
16:09
Speaker 1: not gonna eat at McDonald's and Wendy's. So, you know,
16:12
Speaker 1: discounting is very aggressive to begin with, and we expect
16:15
Speaker 1: some more aggressive discounting to kick off. And what is
16:19
Speaker 1: the whole thing about this whole chicken thing out there
16:21
Speaker 1: with you got chick fil A going against know Popeyees?
16:24
Speaker 1: Is that is it just kind of like a little
16:25
Speaker 1: marketing fat or is there actually some segment of the
16:29
Speaker 1: market that's changing. Well, chickens growing faster than burgers, and
16:32
Speaker 1: it has for a while. So um, you know, we've
16:34
Speaker 1: seen it with this huge growth of chick fil A
16:36
Speaker 1: over the last decade, um. But it's not just chick
16:39
Speaker 1: fil A. And chick fil A does a great job
16:41
Speaker 1: and they offer a great product, but you know, it's
16:43
Speaker 1: chains like Popeye Shop. Popeyes has been growing stores at
16:46
Speaker 1: about a six percent clip now since I've been covering
16:49
Speaker 1: the company in around uh so, yeah, chickens becoming more popular.
16:54
Speaker 1: People are eating more chicken and less beef. So we're
16:57
Speaker 1: seeing it, you know, make its way onto a lot
17:00
Speaker 1: of menus. All right, you mentioned beef. What's the whole
17:03
Speaker 1: scam on this plant based meats. I just thought. I mean,
17:06
Speaker 1: I see a lot of you know, network television ads
17:09
Speaker 1: now for from Burger King, the the whatever it's called,
17:12
Speaker 1: the Unbelievable market burger whatever it is. Is this a
17:14
Speaker 1: fat or is this real? What are the company's telling you? Well,
17:17
Speaker 1: we think it's here to stay, you know, Um, right
17:21
Speaker 1: now there's a lot of questions about you know, is
17:23
Speaker 1: the trial you know, right now we're seeing huge trial.
17:26
Speaker 1: Burger King sales were at five percent in the US
17:28
Speaker 1: last quarter, and a lot of that was people trying
17:30
Speaker 1: the impossible whopper? Is that the impossible whopper? But is
17:34
Speaker 1: that McDonald's have a product they're they're testing one of Canada.
17:38
Speaker 1: They're called it's called the p LT p LT plant
17:42
Speaker 1: Lettus And so they're a little bit behind, which is
17:43
Speaker 1: un characteristic for them. Yeah, they've been ahead of the
17:46
Speaker 1: curve on a lot of things over the last few years.
17:48
Speaker 1: I think part of the issue with them is just
17:50
Speaker 1: their scale. You have fourteen thousand stay stores in the
17:53
Speaker 1: United States. I don't know if beyond Meat or Impossible
17:56
Speaker 1: can actually supply fourteen thousand stores at their current Bigger
18:01
Speaker 1: the bigger food companies haven't just gotten in there and
18:04
Speaker 1: just satisfied the market if there's that demanding, well, they're
18:07
Speaker 1: they're starting to you know, we're seeing the UM. We're
18:10
Speaker 1: seeing Hormel, We're seeing Nestley has a product that McDonald's
18:13
Speaker 1: is actually selling already in Europe. UM. We're seeing a
18:16
Speaker 1: lot of these large package food companies get into this
18:19
Speaker 1: space because it's growing like wildfire. You know. We're we're
18:22
Speaker 1: trying to get some real reads on UM purchasing and
18:27
Speaker 1: we have some third party companies kind of looking into
18:30
Speaker 1: some things for us, and they're like, you know what,
18:32
Speaker 1: there's just such UM trial and so many chains are
18:36
Speaker 1: signing on to start selling these things for the first time.
18:38
Speaker 1: It's hard to trying to parse out what's repeat and
18:41
Speaker 1: what's just chains lining up to start selling this party
18:44
Speaker 1: just quickly thirty seconds. How the stocks performed in what
18:47
Speaker 1: you're outlook for sector. Yeah, so stocks have performed very
18:51
Speaker 1: well this year. Uh. Like I said, it was a
18:53
Speaker 1: decent year for market UM not about in line about
18:58
Speaker 1: in line UM, but the companies are training up premium
19:03
Speaker 1: on an e vd E. But dat basis to a
19:04
Speaker 1: ten year until last ten years in terms of evaluations,
19:07
Speaker 1: So for for an industry richer than the market for sure,
19:11
Speaker 1: and it's not generating much traffic right now, so we
19:13
Speaker 1: have concerns, have concerned about I got it, okay, so
19:16
Speaker 1: we're rich uh in the market fundamentals may not support that.
19:19
Speaker 1: I kind of get the call there. Mike Kalin, Senior rees,
19:22
Speaker 1: a restaurant analyst for Bloomberg Intelligence, joining us here in
19:24
Speaker 1: the Bloomberg and Director Broker studio, talking about the restaurant
19:27
Speaker 1: business plant based meat. I don't you know, I actually
19:30
Speaker 1: full the sculture. I have not tried it yet. I
19:33
Speaker 1: must try it at some point so I can have
19:34
Speaker 1: an a formed opinion. I'm taking a look at Brent
19:50
Speaker 1: crude right here up about thirty percent year today to
19:54
Speaker 1: get a sense of kind of what's driving global oil
19:57
Speaker 1: UH in nine and what we can look forward to.
20:00
Speaker 1: Welcome our good friend Dr Ellen Wald. She's a President
20:03
Speaker 1: of Transversal Consulting Non Residents, Senior Fellow at the Atlantic
20:06
Speaker 1: Council's Global Energy UH Center, and also a Bloomberg Opinion contributor.
20:11
Speaker 1: UH So we welcome Dr Wald. So, Ellen, give us
20:14
Speaker 1: a sense again Brent up thirty year to date. I
20:17
Speaker 1: guess my question is, you know kind of what's been
20:19
Speaker 1: driving then and kind of how do you kind of
20:21
Speaker 1: carry that into Yeah, I think the big driver right
20:25
Speaker 1: now for oil prices and and that's it's really the
20:27
Speaker 1: same thing that's been driving oil prices all year is
20:30
Speaker 1: demand growth perception. And for most of the perception that
20:36
Speaker 1: was that demand growth was going too slow, and so
20:39
Speaker 1: that led to a lot of volatility we saw in
20:43
Speaker 1: oil prices. But also every time there was something that
20:45
Speaker 1: pushed prices up, that um that perception that demand growth
20:49
Speaker 1: was going to decrease pushed it down. And so right
20:52
Speaker 1: now we've got a lot of optimism in terms of
20:55
Speaker 1: demand growth I think for the future, and a lot
20:58
Speaker 1: of that is being driven by this Phase one trade
21:02
Speaker 1: deal by the US and China, which which is very
21:06
Speaker 1: interesting because now that we've we've got that sentiment baked
21:10
Speaker 1: into the market, baked into oil prices, they've got to
21:12
Speaker 1: get the deal done. And so this is something to
21:15
Speaker 1: really keep a close eye on in the first quarter
21:18
Speaker 1: of because if something derails that trade deal, then we
21:23
Speaker 1: could really see a lot more volatility and prices. What
21:26
Speaker 1: do you think oil could pull back to it? In fact,
21:29
Speaker 1: this deal does not get put on paper, I mean
21:32
Speaker 1: we could we could see it you know, for w T,
21:35
Speaker 1: I certainly back into the fifties. Uh, and I wouldn't
21:38
Speaker 1: be surprised to see Brent as well fall a lot
21:41
Speaker 1: if things really fall apart between the US and China,
21:43
Speaker 1: because a lot is writing on this deal. Now. The
21:46
Speaker 1: interesting thing about it, though, is so it does go
21:48
Speaker 1: through uh and and everything goes as planned, We're not
21:51
Speaker 1: even gonna see oil demand pick up immediately because these
21:55
Speaker 1: things take time to kind of trickle through the system.
21:57
Speaker 1: It's really all about the perception that economic growth is
22:02
Speaker 1: going to continue and to grow. So Ellen, give us
22:07
Speaker 1: a sense that's the kind of the demand equation again,
22:09
Speaker 1: very much leveraged to what happens with the global trade
22:12
Speaker 1: agreement between the US and China. Just give us an
22:14
Speaker 1: update on kind of what you're hearing. I know you're
22:16
Speaker 1: in VN several weeks ago. Give us your thoughts on
22:19
Speaker 1: kind of how OPEC is going to market and maybe
22:21
Speaker 1: plus Russia. Yeah, so the supply side of the equation
22:26
Speaker 1: is is also Uh, it's also about some some volatility
22:29
Speaker 1: in it. Uh. This this deal between OPEC and OPEC
22:33
Speaker 1: plus to cut production even further really hinges right now,
22:36
Speaker 1: mostly on Saudi Arabia. Which is committed to cutting even
22:40
Speaker 1: more production than it has to UH and so that
22:44
Speaker 1: was supposed to be an incentive to these overproducers Iraq
22:49
Speaker 1: and Nigeria and Russia in particular to get inline and
22:53
Speaker 1: UH and follow the deal and and cut production. But
22:56
Speaker 1: now we're hearing that Russia is really kind of cooling
23:00
Speaker 1: off on its commitments UH and and Novak in particular,
23:03
Speaker 1: saying you know, well, we're gonna we're gonna reevaluate in March.
23:06
Speaker 1: We may not you know, continue these UH production cuts,
23:09
Speaker 1: keeping in mind that they haven't actually cut production yet.
23:12
Speaker 1: So the supply side of the equation is really hinging
23:15
Speaker 1: on Saudi Arabia and whether Saudi Arabia just decides, hey,
23:19
Speaker 1: we're gonna, you know, take the hit on this one
23:22
Speaker 1: and cut our production. Meanwhile, you've got the shale oil equation,
23:26
Speaker 1: which is really a big question mark going forward. Yeah,
23:29
Speaker 1: that's kind of where I wanted to go. Um. You know,
23:31
Speaker 1: it's I guess for those of us who weren't, we
23:33
Speaker 1: don't live and breathe the energy day to day. The
23:36
Speaker 1: one thing we can certainly recognize has been a c
23:37
Speaker 1: change in the global energy business is the growth of
23:40
Speaker 1: the US shale production and supply and what that's meant
23:43
Speaker 1: to the global marketplace. Give us a sense of what's
23:46
Speaker 1: going on in the shale patch today and kind of
23:48
Speaker 1: what your expectations are for It's it's really it's still
23:52
Speaker 1: a very big, big question because you've got on one side,
23:55
Speaker 1: you've got um the e i A predicting that, uh,
23:59
Speaker 1: the u US is going to average over thirteen million
24:02
Speaker 1: barrels per day of production in which is a huge number.
24:05
Speaker 1: I think in November the number was twelve point eight
24:09
Speaker 1: million barrels per day, which it makes the US the
24:11
Speaker 1: largest oil producer in the world. Now, on the other hand,
24:14
Speaker 1: you've got kind of the naysayers who are saying, look,
24:17
Speaker 1: there's a lot of issues going on. There's decline, there's
24:19
Speaker 1: well declined, there's financial issues, and we're gonna see slowing
24:25
Speaker 1: growth rate, possibly even slowing production in the Permian. And
24:28
Speaker 1: I think that that's really what Opek is banking on,
24:31
Speaker 1: is that is that things are going to going to
24:33
Speaker 1: start to slow. But then you've got people saying, look,
24:36
Speaker 1: the shale producers have ways to deal with this. They're
24:39
Speaker 1: drilling longer laterals, we've got more pipelines coming online, and uh,
24:43
Speaker 1: and you know, they're really very doing very targeted drilling,
24:46
Speaker 1: such that they're drilling only in areas that are really
24:49
Speaker 1: profitable to them. So I think we've we've kind of
24:52
Speaker 1: got uh two sides of the argument here, and we're
24:55
Speaker 1: just gonna have to see what pans out in Before
24:59
Speaker 1: I let you go, I want to talk to get
25:00
Speaker 1: your thoughts on A Ramco Saudi A Ramco the stock
25:03
Speaker 1: as we know. I pod on December eleventh at thirty
25:06
Speaker 1: to UH Saudi Rails. I guess um per share it's
25:11
Speaker 1: now at thirty five and change. What is the feedback
25:14
Speaker 1: you've been hearing within the energy circles? I mean it
25:16
Speaker 1: was this was such a limited deal in terms of
25:19
Speaker 1: you know, kind of really confined to the UH Saudi
25:24
Speaker 1: Arabian some neighboring countries. It didn't really get any real
25:27
Speaker 1: exposure in the West. Is there a sense that we
25:30
Speaker 1: really still don't know what this company's worth. Yeah, I
25:33
Speaker 1: think that there's there's a sense that whatever is being
25:36
Speaker 1: treated for on the market right now is not necessarily
25:39
Speaker 1: the market value or what what a real market would
25:42
Speaker 1: would say the value of the company is. It's very
25:45
Speaker 1: hard to say, because, first of all, it's got very
25:47
Speaker 1: low trading volume. I mean extremely low volume in terms
25:51
Speaker 1: of trading. Tadawal caps movement at ten percent per day,
25:54
Speaker 1: so you're never going to see upper down more than
25:57
Speaker 1: ten percent for a Ramco. But then you've also got
26:00
Speaker 1: had a lot of government intervention going on here, and
26:03
Speaker 1: we know that the Saudis do this for other stocks
26:05
Speaker 1: and to Dowald to try to stabilize prices, and so
26:08
Speaker 1: we can assume that they're also doing this with a
26:11
Speaker 1: Ramco to try to prevent a whole lot of volatility.
26:14
Speaker 1: So right now we're kind of in a I would say,
26:15
Speaker 1: in a holding position. They hit their two trillion dollar valuation,
26:19
Speaker 1: they since backed off from that, which I think was
26:21
Speaker 1: something that everyone expected. The real question, I think is
26:26
Speaker 1: what's going to happen uh in June, because in June
26:29
Speaker 1: that's when the lock up period ends, and it wouldn't
26:32
Speaker 1: be surprising to see more people selling their shares that
26:35
Speaker 1: they bought at the I p O. We'll see more
26:37
Speaker 1: of trading volumes starting to happen with a Ramco, and
26:41
Speaker 1: that's when we may get a real sense of what
26:43
Speaker 1: this company is actually worth. Dr Ellen Wall, thank you
26:46
Speaker 1: so much for joining US. Dr waldis president of Transversal Consulting.
26:51
Speaker 1: She's also a nonresident Senior Fellow at the Atlantic Council's
26:54
Speaker 1: Global Energy Sector Center, and also Bloomberg opinion contributors. So
26:58
Speaker 1: we appreciate Dr Wald coming on. She's our expert when
27:00
Speaker 1: it comes to global energy markets, giving us a sense
27:02
Speaker 1: of supply and demand. Thanks for listening to the Bloomberg
27:05
Speaker 1: P and L podcast. You can subscribe and listen to
27:07
Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.
27:11
Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa
27:14
Speaker 1: abram Woyds. I'm on Twitter at Lisa abram Woyits one
27:17
Speaker 1: before the podcast. You can always catch us worldwide. I'm
27:19
Speaker 1: Bloomberg Radio