Latest / Bloomberg Intelligence / P&L: AT&T-Time Warner Will Merge, But Will Be Dwarfed by Rivals

Transcript

P&L: AT&T-Time Warner Will Merge, But Will Be Dwarfed by Rivals · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:14
  Speaker 1: you and your money, whether you at the grocery store
• 0:16
  Speaker 1: or the trading floor. Find the Bloomberg pm L podcast
• 0:20
  Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. You know,
• 0:28
  Speaker 1: Pim Fox. We hear a lot about the A, T
• 0:31
  Speaker 1: and T and Time Warner merger, and we've heard Donald Trump,
• 0:35
  Speaker 1: president elect, talk about it and say that he opposes it.
• 0:39
  Speaker 1: Are we at least heard that according to sources, as
• 0:42
  Speaker 1: reported by Bloomberg, that he has told people he still
• 0:46
  Speaker 1: opposes it. So can this deal still get done? I
• 0:50
  Speaker 1: want to bring in Porter bib managing partner at Media
• 0:52
  Speaker 1: Tech Capital Partners in New York. Porter, what do you
• 0:56
  Speaker 1: think is going on here? I mean, Ken Ken, President
• 1:00
  Speaker 1: Trump even way in on this deal in any practical way.
• 1:04
  Speaker 1: Actually he can't, but that's not going to stop him.
• 1:08
  Speaker 1: And the one thing we have learned about President elect
• 1:12
  Speaker 1: Trump is that whatever he says is always reversible, uh,
• 1:17
  Speaker 1: in a millisecond, because he's been doing it every day.
• 1:20
  Speaker 1: He's he's got a very interesting meeting in an hour
• 1:24
  Speaker 1: and a half with the senior US intelligent the community leaders.
• 1:30
  Speaker 1: And my guess is he's going to reverse his uh
• 1:35
  Speaker 1: love affair that he's had with Julian Ensage when not
• 1:38
  Speaker 1: meeting is over. But regarding Time Warner, A T and T,
• 1:42
  Speaker 1: the two new UH Trump appointees to the SEC have
• 1:47
  Speaker 1: both come out very strongly in favor of proving the deal.
• 1:52
  Speaker 1: There's been no problem, uh surface that that the Obama
• 1:57
  Speaker 1: Justice Department, UM, and I don't that that Trump's team
• 2:03
  Speaker 1: is going to see this as anything but a very
• 2:07
  Speaker 1: positive Jeff says Zebuscus UH and Randall Stevens. And when
• 2:12
  Speaker 1: they came to Congress and UM testified about this deal,
• 2:18
  Speaker 1: really pointed out the the fact that most people in
• 2:23
  Speaker 1: Washington hadn't yet realized that the competition is not are
• 2:27
  Speaker 1: the cable or telecom companies, It's the Frightful five, It's
• 2:31
  Speaker 1: the Google's, the Amazon's, the Microsoft's. Uh. Those companies are
• 2:36
  Speaker 1: on Facebook. They're going to rule the media market going forward,
• 2:40
  Speaker 1: and A T and T and Time Warner are going
• 2:42
  Speaker 1: to be rather rather small competitors compared to the tech companies.
• 2:49
  Speaker 1: Porter if anyone doubts that this merger is going to happen.
• 2:52
  Speaker 1: You're saying, don't doubt it. It will happen, at least
• 2:56
  Speaker 1: not because of government interference. That's what I'm saying. And
• 3:01
  Speaker 1: Jeff Mucas came out last week and chief executive Time Warner. Yes,
• 3:06
  Speaker 1: then there he said, there is no Plan B. Plan
• 3:10
  Speaker 1: A is what we're planning to do, and uh, um,
• 3:13
  Speaker 1: it's going to go through and if it doesn't, uh,
• 3:17
  Speaker 1: that's it. We're going to stay standalone. But that that
• 3:21
  Speaker 1: had a hollow ring to it because he's as vulnerable
• 3:25
  Speaker 1: as the other linear media content providers. They have to
• 3:31
  Speaker 1: expand they have to go digital, and the huge consumer
• 3:36
  Speaker 1: facing aspect of a T and T UM is going
• 3:41
  Speaker 1: to elevate Time Warner into a very significant competitive position
• 3:45
  Speaker 1: against the tech giants, where you know, there are going
• 3:49
  Speaker 1: to be a lot of changes on in the media
• 3:51
  Speaker 1: landscape next year. This year. Uh, two of the biggest
• 3:55
  Speaker 1: moves that if it in the news recently are making
• 3:57
  Speaker 1: Kelly and credit on suster and moving to and B
• 4:00
  Speaker 1: see from Fox. Do you think that Fox is going
• 4:04
  Speaker 1: to suffer from this? And conversely, do you think the
• 4:06
  Speaker 1: NBC really will benefit well? The loss of Roger Ales
• 4:12
  Speaker 1: has really put the pressure on James and Rockland Murdoch,
• 4:16
  Speaker 1: who are who are essentially running the company right now
• 4:20
  Speaker 1: with with Rupert taking a much less dominant role, and
• 4:25
  Speaker 1: they have been both very adamant, but James and Laughlin
• 4:30
  Speaker 1: saying they want to keep Fox the way it is
• 4:32
  Speaker 1: positioned as a partisan network, partisan leading network, but emphasize
• 4:41
  Speaker 1: the hard news and what they call the fair and
• 4:45
  Speaker 1: balanced aspect. And I think having having lost Megan Kelly,
• 4:49
  Speaker 1: especially because she was really a departure from the heavily
• 4:55
  Speaker 1: partisan prime time lineup that Fox has, that that is
• 5:00
  Speaker 1: going to be a very interesting situation to see whether
• 5:03
  Speaker 1: Fox continues down the road that they have traveled for
• 5:07
  Speaker 1: for the last twenty years. And the most important thing, however,
• 5:11
  Speaker 1: that Fox is facing is the the very serious demographic situation.
• 5:18
  Speaker 1: Almost sixty percent of their audience is over sixty years old,
• 5:23
  Speaker 1: and they're very very weak and the key demographic eighteen
• 5:27
  Speaker 1: to forty nine, which advertisers want. And despite the fact
• 5:30
  Speaker 1: that they are the market leader in cable news right now,
• 5:34
  Speaker 1: the demographics are very poor. And if you start looking
• 5:38
  Speaker 1: at the ads that are running on Fox, there's more
• 5:42
  Speaker 1: pharmaceutical and reverse mortgage advertising. Uh than anything else. You
• 5:47
  Speaker 1: don't see the cars and the soft drinks and the
• 5:50
  Speaker 1: other major advertising categories that the other networks are caring.
• 5:55
  Speaker 1: So I think Fox has to do a lot of
• 5:58
  Speaker 1: thinking about what kind of image and format they want
• 6:02
  Speaker 1: to go with going forward. And losing Megan Kelly was
• 6:06
  Speaker 1: a very serious loss to them. She is going to
• 6:10
  Speaker 1: be replaced by we Gotta we gotta leave it there.
• 6:13
  Speaker 1: I want to thank you very much, Porter bib He
• 6:15
  Speaker 1: is managing partner Media Tech Capital Partners. Well more than
• 6:30
  Speaker 1: two hundred thousand people are at the Consumer Electronics Show
• 6:34
  Speaker 1: in Las Vegas, and one of them is our guest,
• 6:37
  Speaker 1: Dr Alex Leedo. He is the chief executive and the
• 6:40
  Speaker 1: co founder of Efficient Power Conversion. Dr Leado, thank you
• 6:45
  Speaker 1: very much for being with us. Thank you. You know,
• 6:48
  Speaker 1: I can't figure out whether we should start with you
• 6:50
  Speaker 1: telling us what it's like to be at c e
• 6:52
  Speaker 1: S with all of the new things and great televisions
• 6:55
  Speaker 1: and everything, where maybe start with something totally complicated light
• 7:01
  Speaker 1: light detection and ranging systems. The show you want to shake,
• 7:07
  Speaker 1: you know, he's the coolest thing that what's the coolest
• 7:10
  Speaker 1: thing that you've seen at the show did well. You know, look,
• 7:13
  Speaker 1: I think that the coolest things all revolve around autonomous
• 7:16
  Speaker 1: cars and augmented reality. There's all sorts of displays on
• 7:20
  Speaker 1: that right now, and uh, it's just amazing. You know,
• 7:23
  Speaker 1: our lives are going to change quite a bit from
• 7:25
  Speaker 1: both of those, uh, those developments. So how do you
• 7:28
  Speaker 1: envision our life being changed by some of these developments? Well,
• 7:31
  Speaker 1: you know, I think the autonomous vehicle really takes away
• 7:34
  Speaker 1: the need for individual car ownership. So you know, that
• 7:37
  Speaker 1: redefines how cities will be defined, how we'll get around.
• 7:41
  Speaker 1: And really, there hasn't been a major change in transportation
• 7:44
  Speaker 1: since the jet engine was developed sixty seventy years ago.
• 7:48
  Speaker 1: So this is really going to be a revolution. But
• 7:49
  Speaker 1: it'll take time. It'll take you five years, and everybody's
• 7:53
  Speaker 1: gonna expect it tomorrow. So um, dr Leader, this brings
• 7:56
  Speaker 1: us back to, uh, the substances that Pim was trying
• 7:59
  Speaker 1: to it out. Um, your company produces a substance that
• 8:04
  Speaker 1: you're hoping will be instrumental in this revolution in the
• 8:07
  Speaker 1: way that we transu we we get around, correct, that's correct. Yeah,
• 8:11
  Speaker 1: we we make products out of the gallium nitride. Uh,
• 8:15
  Speaker 1: and uh, these products are really the successor to silicon,
• 8:18
  Speaker 1: which is the foundation of all of our computer chips
• 8:21
  Speaker 1: and semiconductors. And it's it's a whole lot faster and
• 8:24
  Speaker 1: its lower cost, so it enables things like these light
• 8:27
  Speaker 1: detection and ranging systems and augmented reality systems. And in
• 8:31
  Speaker 1: the next few years you'll start seeing power chords disappearing.
• 8:34
  Speaker 1: And I don't know about you, but I don't know
• 8:36
  Speaker 1: anybody who likes power chords. I think you've just you
• 8:40
  Speaker 1: just made it made a convert here. I mean honestly,
• 8:43
  Speaker 1: you said power chords are going away, and I almost
• 8:46
  Speaker 1: jumped up and down in my seat. I see how
• 8:48
  Speaker 1: easy it is to make people happy, you know, we were.
• 8:54
  Speaker 1: I want you to just describe the actual thing, because
• 8:57
  Speaker 1: right now it kind of looks like a hockey puck
• 8:59
  Speaker 1: that sits on top of an automobile and it spins
• 9:02
  Speaker 1: around to get that three hundred and sixty degree image.
• 9:05
  Speaker 1: It's a hockey puck type, it's a lighter, it's a
• 9:10
  Speaker 1: it's a lighter technology, and it spins around and it
• 9:13
  Speaker 1: creates uh almost instantaneous map of whatever it is that
• 9:19
  Speaker 1: you're around, and it's done with lasers. Now you've partnered
• 9:23
  Speaker 1: with Veladine to do something else and it's much much smaller.
• 9:29
  Speaker 1: Tell us about it. So you know, these lighter systems
• 9:33
  Speaker 1: have been around since the Google mapping cars several years ago.
• 9:36
  Speaker 1: They were one of the first users of it, and
• 9:38
  Speaker 1: they really paint an immediate picture of the you know,
• 9:42
  Speaker 1: all the objects and three dimensions around you in in
• 9:46
  Speaker 1: in and they give you three dimensions. The problem has
• 9:49
  Speaker 1: been they've been very expensive, so getting them less expensive
• 9:52
  Speaker 1: so that they can get on cars that are driven
• 9:54
  Speaker 1: by you and me has been the goal. So we
• 9:56
  Speaker 1: partnered with Veladine and we developed some uh some more
• 10:00
  Speaker 1: advanced integrated circuits with our gallium nitride devices that are
• 10:05
  Speaker 1: are allowing shrink and make these things smaller so you
• 10:08
  Speaker 1: can't see them, and also make them a whole lot
• 10:10
  Speaker 1: cheaper so we can put them on everyday cars. Dr
• 10:13
  Speaker 1: leto Do you expect that in the future when we're
• 10:16
  Speaker 1: all sort of just being driven around by our computers.
• 10:19
  Speaker 1: Do you think that we're going to have to update
• 10:20
  Speaker 1: the programs, the systems and we go to bring our
• 10:23
  Speaker 1: cars to sort of techys to to get them fixed.
• 10:26
  Speaker 1: Me I'm just trying to think about the realities of
• 10:28
  Speaker 1: having one of these. So first of all, you probably
• 10:32
  Speaker 1: won't own the car, you know somebody. It will be
• 10:34
  Speaker 1: a you know, transportation as a service kind of thing.
• 10:37
  Speaker 1: A car will arrive with no driver, you'll get in it,
• 10:39
  Speaker 1: you'll arrive at your destination, kind of like an Uber
• 10:42
  Speaker 1: without a driver, which is why Uber's experimenting with these things.
• 10:46
  Speaker 1: Um So in terms of service and all that, you know,
• 10:49
  Speaker 1: the software updates will be over the air. I think
• 10:52
  Speaker 1: Tesla has already pioneered that very successfully. And in terms
• 10:55
  Speaker 1: of service, electric vehicles are are fundamentally simpler than than
• 11:00
  Speaker 1: gasoline and diesel vehicle. So I think that the amount
• 11:03
  Speaker 1: of service has been proved to be a lot less
• 11:05
  Speaker 1: on an electric car. Thank you so much. Really really
• 11:08
  Speaker 1: fascinating to hear what you're seeing and what you're doing
• 11:11
  Speaker 1: over there. Dr Alex LIEDO CEO and co founder of
• 11:14
  Speaker 1: Efficient Power Conversion talking about the future of our lives
• 11:19
  Speaker 1: in cars that drive us around that we don't own,
• 11:22
  Speaker 1: that have all sorts of cool little gadget you know,
• 11:24
  Speaker 1: next week with no power courts, with no power courts,
• 11:26
  Speaker 1: I mean, I am converted, and to get smarter on China,
• 11:41
  Speaker 1: I want to focus right now on trade we have
• 11:44
  Speaker 1: Dan Moss. He is executive editor on Global Economics for
• 11:48
  Speaker 1: Bloomberg News and he can be followed on Twitter at
• 11:51
  Speaker 1: moss underscore Eco. Seems appropriate, Dan, thanks for being with us.
• 11:56
  Speaker 1: Tell us the what's going on now with China and
• 11:58
  Speaker 1: President elected Don Trump and the back and forth of
• 12:02
  Speaker 1: words him. The two sides are really figuring out how
• 12:06
  Speaker 1: they're going to dance with each other after January. The
• 12:11
  Speaker 1: Chinese are probably wondering which Donald Trump walks into the
• 12:15
  Speaker 1: Oval Office that afternoon after the ceremony. Is it Donald
• 12:20
  Speaker 1: Trump the deal maker advised by Rex Tillison and Gary Cohn,
• 12:26
  Speaker 1: or is it Donald Trump the populist hitting all the
• 12:31
  Speaker 1: bases for the white working class in the manufacturing hard land.
• 12:37
  Speaker 1: While the Chinese appear to be unsure of that, they're thinking,
• 12:41
  Speaker 1: let's take out some insurance while we're at it and
• 12:43
  Speaker 1: say look. Earlier in the week, there was the line
• 12:46
  Speaker 1: that there's a great lot of flowers outside key government
• 12:50
  Speaker 1: ministries in Beijing, but inside there are also sticks. Now
• 12:54
  Speaker 1: we're learning, we'll look. American companies have a lot invested
• 12:57
  Speaker 1: in China. We all knew that the China his government
• 13:00
  Speaker 1: is reminding the incoming administration of that saying, by the way,
• 13:05
  Speaker 1: there are some things that we can do. We hope
• 13:07
  Speaker 1: it won't come to that. We don't expect it will
• 13:10
  Speaker 1: come to that. But hey, we're here and we're watching,
• 13:12
  Speaker 1: and we're waiting, and we're not necessarily going to allow
• 13:15
  Speaker 1: ourselves to be mulanova. You know, I was struck by
• 13:18
  Speaker 1: this story that was on the terminal this morning, and
• 13:21
  Speaker 1: I was struck in particular was talking about how China
• 13:23
  Speaker 1: is preparing to step up the scrutiny of its US companies,
• 13:26
  Speaker 1: just sort of what you were exactly talking about, dan
• 13:29
  Speaker 1: Uh in a sort of way to retaliate. But there
• 13:32
  Speaker 1: was a quote here, Um that was really crucial to me.
• 13:36
  Speaker 1: When you have a country with a large trade deficit
• 13:38
  Speaker 1: that retaliates against a country with a large trade surplus
• 13:42
  Speaker 1: with it, it's the country with the trade deficit, i e.
• 13:46
  Speaker 1: The US that wins. The country with the surplus loses
• 13:49
  Speaker 1: every time. And America has had this trade deficit um
• 13:53
  Speaker 1: with China has been narrowing somewhat um and yet you know,
• 13:57
  Speaker 1: there is this feeling, you know, who has more to
• 13:59
  Speaker 1: lose here? They both do. And let's just take a
• 14:03
  Speaker 1: step back. This didn't get any scrutiny at all during
• 14:08
  Speaker 1: the course of the campaign. But the nature of the
• 14:11
  Speaker 1: Chinese economy and what's driving it is changing significantly, and
• 14:15
  Speaker 1: the nature of the US as economic relationship with China
• 14:19
  Speaker 1: as a result is changing as well. This image we
• 14:22
  Speaker 1: all have of people going to Guangdong to set up
• 14:25
  Speaker 1: T shirt factories, no one does that anymore because it's
• 14:30
  Speaker 1: simply too expensive. That's gone elsewhere. When people think about
• 14:36
  Speaker 1: trade with China, they think of that sort of thing
• 14:39
  Speaker 1: which is completely out murdered, or they think of stuff
• 14:42
  Speaker 1: being loaded onto a ship and brought to Mexico for
• 14:46
  Speaker 1: assembly and end of the US. The Chinese economy is
• 14:49
  Speaker 1: increasingly driven by services. When people talk about the trade
• 14:53
  Speaker 1: surplus and the trade deficit, they're talking about merchandise, goods,
• 14:57
  Speaker 1: services exports from the United States to China growing significantly.
• 15:02
  Speaker 1: The Chinese current account surplus will basically disappear by twenty
• 15:08
  Speaker 1: According to the IMF, The most interesting US company in
• 15:12
  Speaker 1: China right now arguably is Starbucks. It's a services economy.
• 15:17
  Speaker 1: The Chinese population is getting richer. Low cost manufacturing doesn't
• 15:22
  Speaker 1: make sense there anymore. Services and consumption now account for
• 15:27
  Speaker 1: more than half of GDP. You know. So Earlier this week,
• 15:31
  Speaker 1: President elect Trump tweeted, China has been taking out massive
• 15:34
  Speaker 1: amounts of money and wealth from the US in totally
• 15:37
  Speaker 1: one sided trade, but won't help with North Korea. Nice
• 15:41
  Speaker 1: exclamation point. Um. You know, with a tweet like this,
• 15:45
  Speaker 1: there you have a lot of people saying, look, we
• 15:46
  Speaker 1: all have a lot to lose. Uh. International trade has
• 15:49
  Speaker 1: really helped the economy. You know, is there something to
• 15:53
  Speaker 1: what President elect Trump is saying? Well, look, leaving aside
• 15:57
  Speaker 1: the North Korea question, I don't want to get into. Um,
• 16:01
  Speaker 1: not a lot of FDI going on there. Look, but
• 16:05
  Speaker 1: they both have a lot to lose. So yeah, China
• 16:08
  Speaker 1: has become wealthy from the opening the economy that began
• 16:12
  Speaker 1: under Dung Shooping in the late seventies. By the way,
• 16:15
  Speaker 1: it's not just US corporations that have gone in their
• 16:18
  Speaker 1: Japanese corporations, European corporations. US corporations have also done well
• 16:26
  Speaker 1: out of China. I mean, GM makes a huge amount
• 16:30
  Speaker 1: of money out of China. Starbucks again, services economy, big
• 16:35
  Speaker 1: expansion plans within China. Hello, last time I checked, these
• 16:39
  Speaker 1: were US companies. So it really is a two way thing.
• 16:43
  Speaker 1: In fact, you could argue that they aren't really the
• 16:45
  Speaker 1: first and second largest economies on the planet, they are
• 16:48
  Speaker 1: actually one economy. Well, then I was just gonna try
• 16:52
  Speaker 1: to get in. Can you do fifteen seconds on them
• 16:54
  Speaker 1: buying US treasuries in the currency? Well, they buy US treasuries,
• 17:00
  Speaker 1: as do many governments. The question is really whether they're
• 17:05
  Speaker 1: going to keep selling them at a pretty fast clip
• 17:07
  Speaker 1: in order to support the u n UM And I
• 17:10
  Speaker 1: think that's sort of the jury is still out whether
• 17:11
  Speaker 1: they're going to have to do that um and whether
• 17:13
  Speaker 1: they're going to continue and whether they've they've even put
• 17:16
  Speaker 1: in certain capital controls and they've made it more difficult
• 17:18
  Speaker 1: for people to take money out of the country and
• 17:20
  Speaker 1: to even have foreign investors in the country. But it
• 17:23
  Speaker 1: seems like some of those measures are starting to stick
• 17:26
  Speaker 1: and the economy is is solidified to some degree. Dams. Unfortunately,
• 17:29
  Speaker 1: we're gonna have to leave it there. We can talk
• 17:30
  Speaker 1: about this for the rest of the show, and I
• 17:31
  Speaker 1: would love to, actually, because I feel like this is
• 17:33
  Speaker 1: the big backdrop for a lot of what happens next.
• 17:35
  Speaker 1: Dan Moss, executive editor for Global Economics for Bloomer. Well,
• 17:51
  Speaker 1: when we want to learn more about the world economy
• 17:53
  Speaker 1: one place to look as the shipping industry. And here
• 17:55
  Speaker 1: to help us his urs dir. He is the chief
• 17:57
  Speaker 1: financial officer of t b S Ocean Logistics. Or maybe
• 18:03
  Speaker 1: just give a quick recap of your breadth of experience
• 18:07
  Speaker 1: and tell us what's going on in the shipping industry
• 18:09
  Speaker 1: right now that we can take away and use in
• 18:11
  Speaker 1: our understanding of the world economy. Hey Pimm, and good
• 18:15
  Speaker 1: morning Lisa, and thanks for having me on UM and
• 18:17
  Speaker 1: happy New Year. I think that this is a good
• 18:19
  Speaker 1: subject matter to start the year off and looking a
• 18:21
  Speaker 1: little bit macro and global shipping. My background just very briefly,
• 18:26
  Speaker 1: I was on the street for eight years as an
• 18:28
  Speaker 1: equity analyst prior to this role. But also I love
• 18:30
  Speaker 1: that people here say on the street and it doesn't
• 18:32
  Speaker 1: mean you know, on a corner. I was in Canon
• 18:37
  Speaker 1: waving my hands, hanging by the stocks all the stock
• 18:39
  Speaker 1: no no, working at de Lazard and Clarkson's uh and UM,
• 18:43
  Speaker 1: I'm proud of that. I was a lender and a
• 18:44
  Speaker 1: banker and working another shipping companies UM. Right now in
• 18:48
  Speaker 1: the in the dry bak shipping markets where we compete,
• 18:50
  Speaker 1: we have twenty six ships under our control we have
• 18:53
  Speaker 1: no debt, a good balance sheet, but the industry itself
• 18:56
  Speaker 1: is very much oversupplied, so there's too many ships. Overall,
• 19:00
  Speaker 1: demand was fairly weak in sixteen, but didn't prove in
• 19:04
  Speaker 1: the second half of the year significantly as a dollar stabilized,
• 19:08
  Speaker 1: UH and UM. They outlook for next year on the
• 19:11
  Speaker 1: demand side is for demand to slightly exceed fleet growth,
• 19:14
  Speaker 1: So we do expect freight rates to stabilize four ships, UM.
• 19:18
  Speaker 1: But we have high iron ore inventories I think you
• 19:21
  Speaker 1: mentioned in one of the breaks, UM. We also have
• 19:24
  Speaker 1: prices coming up. We have UM coking coal inventories in
• 19:28
  Speaker 1: China moving up again but also prices coming high. And
• 19:32
  Speaker 1: then we also have Chinese New York coming So I
• 19:34
  Speaker 1: expect the first quarter of this year freight weight rate
• 19:38
  Speaker 1: wise to be weak. I would also expect commodity prices
• 19:42
  Speaker 1: to stabilize and possibly soften, and the rest of the
• 19:46
  Speaker 1: year actually to be much better than which was a
• 19:49
  Speaker 1: historic worst. Gil I wanted to talk about that. I mean,
• 19:52
  Speaker 1: I was last year a lot of people were talking
• 19:54
  Speaker 1: about the Baltic Dry and how it was plunging and
• 19:57
  Speaker 1: the problem behind that and how it sort of indicate
• 20:00
  Speaker 1: did that the global economy was slowing. This is what
• 20:02
  Speaker 1: a lot of people were looking at for edification about
• 20:05
  Speaker 1: their slow growth or no growth forever type of theces.
• 20:08
  Speaker 1: All of a sudden you are seeing a little bit
• 20:10
  Speaker 1: of pickup, but not really that gangbusters growth that backs
• 20:13
  Speaker 1: up with a lot of people are talking about now,
• 20:15
  Speaker 1: which is sudden global reflation. I mean, where is the
• 20:18
  Speaker 1: optimism coming from suddenly? Now? At the beginning of last year,
• 20:22
  Speaker 1: there was a couple of things that are going on
• 20:23
  Speaker 1: a ship against great question um there were far too
• 20:26
  Speaker 1: many ships. There are a lot of ships being delivered
• 20:27
  Speaker 1: in the first quarter as well, but you also had
• 20:31
  Speaker 1: a weakening dollar, and you had again a first quarter
• 20:35
  Speaker 1: that is typically saw for commodity demand growth. So you
• 20:38
  Speaker 1: have the freight rates really coming off into a deep
• 20:40
  Speaker 1: historic low as a dollar stabilized. Everyone noticed the particularly
• 20:45
  Speaker 1: in Asia, particularly in China, which is of the dry
• 20:47
  Speaker 1: boat demand market seaborn demand that their inventories were low
• 20:51
  Speaker 1: and the price was extremely attractive, much cheaper than their
• 20:54
  Speaker 1: domestic sources of iron ore and coal. UH imports then
• 20:58
  Speaker 1: improved very significantly, so year on year, Chinese iron or
• 21:01
  Speaker 1: import import demands seaboard imports were up nine percent. Domestic
• 21:05
  Speaker 1: production was off seven UM. Steel production is moving up.
• 21:09
  Speaker 1: There's been good stimulus in China. China has also been
• 21:12
  Speaker 1: rationalizing it's coal mines. Um. Part of that is clean air.
• 21:16
  Speaker 1: Part of that is that many of the coal mines
• 21:17
  Speaker 1: were losing money at those prices and they don't want
• 21:19
  Speaker 1: to subsidize them any longer. And there's cheap coal available,
• 21:23
  Speaker 1: particularly from Australia coming in, so that demand has been good.
• 21:27
  Speaker 1: There's been good stimulus in China. Second half of the
• 21:29
  Speaker 1: year was rather strong or as I just want to
• 21:32
  Speaker 1: put some numbers to all of this, because in the
• 21:34
  Speaker 1: dry bulk sector you've got maybe four groups. Right, You've
• 21:37
  Speaker 1: got your cape size, Panamax, super Max, handy size. I
• 21:42
  Speaker 1: was looking at the year to the comparisons. You're in
• 21:44
  Speaker 1: your comparisons a cape size twelve thousand, three hundred today, right,
• 21:50
  Speaker 1: That's that's how much it will cost me per day,
• 21:54
  Speaker 1: right all Right? Last year, same time thirty eight hundred bucks.
• 21:58
  Speaker 1: So from thirty eight hundred over twelve thousand, what do
• 22:02
  Speaker 1: we need to take away from that? Overall demand has
• 22:06
  Speaker 1: improved in the second half of the year. There was
• 22:08
  Speaker 1: very good dust scrapping of ships. Also in the early
• 22:11
  Speaker 1: part of last year. There has been no ordering of
• 22:13
  Speaker 1: dry bull ships now for two years. A year ago
• 22:15
  Speaker 1: was one year, right, so there's there has been a rebalancing.
• 22:19
  Speaker 1: But also then this is very very macro. But if
• 22:22
  Speaker 1: you look at the commodity prices coming off as the
• 22:24
  Speaker 1: dollar was collapsing, dollar stabilizing and strengthening. Um typically we
• 22:29
  Speaker 1: think of the dollar strengthens, then it would be the
• 22:31
  Speaker 1: commodities are cheaper. They are, yes for the United States,
• 22:33
  Speaker 1: but they're not for everyone else who buying, and they
• 22:35
  Speaker 1: have to buy the dollars to buy the commodities. Then
• 22:37
  Speaker 1: you end up having pricing in contango. People build inventories.
• 22:41
  Speaker 1: Now inventories are high, looks like the dollar not the dollar.
• 22:45
  Speaker 1: Excuse me that that's about as high as they're going
• 22:47
  Speaker 1: to get due to their physical constraint. Uh, they're probably
• 22:51
  Speaker 1: going to be some inventory eating over the course of
• 22:53
  Speaker 1: the first quarter, so rays come down. But year on year,
• 22:56
  Speaker 1: the overall conditions of the dry bull markets are are better.
• 23:00
  Speaker 1: Or in two thousand fifteen, I believe hedge funds that
• 23:04
  Speaker 1: had piled into the shipping industry in various ways got
• 23:07
  Speaker 1: yeah you you laugh. I mean it was like a
• 23:09
  Speaker 1: blood bath, right, and when they got hammered, it was, uh,
• 23:12
  Speaker 1: the source of a lot of pain both at hedge
• 23:14
  Speaker 1: funds as well as at some banks that had a
• 23:15
  Speaker 1: lot of shipping investments globally. Um, from an investment standpoint,
• 23:21
  Speaker 1: are you seeing investors coming back? Well, I don't necessarily
• 23:25
  Speaker 1: want to comment on other competing companies, but I think
• 23:29
  Speaker 1: that the interest level now in shipping remains as um
• 23:33
  Speaker 1: as strong as it was back then. Is that what
• 23:35
  Speaker 1: you basically mainly do is just make a shipping investment. No, No,
• 23:39
  Speaker 1: we were We own and control ships, so we're shipping company,
• 23:43
  Speaker 1: but we do have investors who are part of that
• 23:45
  Speaker 1: group that you mentioned. Um and uh, there was some
• 23:49
  Speaker 1: time ago, back in some time ago, but in there
• 23:54
  Speaker 1: was a very strong story about eco ships. So there
• 23:57
  Speaker 1: was a technological advantage of the new ships being built
• 24:00
  Speaker 1: and this was going to be a boom and make
• 24:02
  Speaker 1: other ships obsolete, So there was quite a bit of
• 24:04
  Speaker 1: ship ordering. Now their ships are delivering and is keeping
• 24:07
  Speaker 1: the market down right now, the interest is fundamental. The
• 24:10
  Speaker 1: banks are worn out from this industry that's been in
• 24:12
  Speaker 1: a bad shape for a solid almost decade, but it's
• 24:15
  Speaker 1: call it eight years. Banks are worn out traditional sources
• 24:19
  Speaker 1: of funding a worn out Even the public markets seem
• 24:22
  Speaker 1: rather weary and worn out. Uh So it's going to
• 24:26
  Speaker 1: take some rather creative and smart investors that come in
• 24:29
  Speaker 1: and buy assets at a price that that makes sense
• 24:32
  Speaker 1: and put them into commercial managers such as ourselves, um
• 24:36
  Speaker 1: that can beat the market for them. And so I
• 24:40
  Speaker 1: think the interest today fundamentally makes more sense than it
• 24:44
  Speaker 1: did even two years ago. Thank you so much. This
• 24:46
  Speaker 1: is definitely a fascinating sector and really important one to watch.
• 24:49
  Speaker 1: Often used as a bell weather for global growth. Generally,
• 24:53
  Speaker 1: the Baltic Dry is a classic index that a lot
• 24:56
  Speaker 1: of people keep an eye on. Or Sdr CFO of
• 25:00
  Speaker 1: BBS Ocean Logistics talking about the global bulk and shipping
• 25:04
  Speaker 1: industry of this year. Thank you so much for joining us.
• 25:12
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 25:15
  Speaker 1: You can subscribe and listen to interviews at iTunes, SoundCloud,
• 25:19
  Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm
• 25:24
  Speaker 1: out there on Twitter at pim Fox. I'm out there
• 25:26
  Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.
• 25:30
  Speaker 1: You can always catch us worldwide on Bloomberg Radio