Eco Slowdown Impacting Oil More Than Supply Crunch

UH disputed over the nuclear development. You have the situation in Libya. On the other side, you have the prospect for even slower global growth in the face of rising

trade tensions. Here to help us understand why it is that the slowing global growth is what's winning out right now, with prices now at their lowest since early March, is Dr Ellen Walled, President of Transversal Consulting, a nonresident Senior Fellow at the Atlantic Council's Global Energy Center, as well as a contributor to Bloomberg Opinion, and she is in studio today in our Bloomberg Atta Active Broker Studios. So thank you so much for being here. So let's start

with that. Why is it that the global slowdown is the story that's taking pre eminence over this other, very real idea of a supply disruption. I think the big reason here is that a lot of the news and the headlines are really all about the global slowdown. They're all about every every other day we get a new headline of another economic indicator showing that global growth is slowing down. Economic growth is slowing down, trade tensions are

making everything worse. And then meanwhile, on the other side, we're hearing that Iranian exports are significantly lower, Thanezuela isn't exporting anywhere old to the United States. We've got problems in Russia, I mean real serious issues with this pipeline that have really dampened down Russian oil production. And yet at the same time, everything is just it's all the demand story. So we've got definitely a supply crunch, and yet we're seeing markets they're only paying attention to demand.

Where will if where will we see it in the data? The supply issue that you're talking about, well, we're seeing it right now. First of all, looking at what's happening in Iran is keeping a really close eye on this because exports really seem to cut off right at the beginning of May. But now we're actually seeing some tankers coming up into Iranian ports filling with oil, keeping a

very close eye on them. We do know that Iran has exported about three million barrels of oil to Syria, believe it or not, and that data comes from Tanker Trackers dot Com. And it seems like they're basically using Syria as a holding ground for their oil because they filled up all their other storage containers and that oil

has to go somewhere. Uh, And so we needed we're waiting basically on data to show is this oil going to go to China and is it going to enhance and really inflate the tensions that are already going on in that region. That's really interest saying actually and raises a whole other spectrum of conflict that I hadn't worried about,

but I will start to worry about now. I guess that one question I have is do you think that markets are wrong, that they're paying attention to the wrong thing, and that the potential supply disruptions really are perhaps the most dominant of these two factors, I think if we weren't seeing these constant headlines and fears about demand, we definitely see oil prices going up now because of of what we're seeing in terms of these supply issues. We're also it's not sure. I mean, it does look like

OPEC wants to rule over its supply reduction agreement. It's not sure, but it does. It does look like that, and that would normally send send prices up. So I do think that that we are seeing some some issues there, and um, this obsession with demand and with economic flu down is really just keeping prices down. So you mentioned Russia talk to us about that. I understood there was they had some issues with their pipelines, some contaminated oil. How severe is it and how quickly can they fix

it and get a ramped back up. Well, it's actually a lot more severe than we were led to believe initially. When we first heard about this, it was in April. There were some refineries in Eastern Europe that were reporting that they were receiving contaminated oil and uh, they really it's very very bad to put this in their refinery equipment, so they really can't process that oil and they said, oh,

two weeks, it'll be fixed. Well, it turns out that, you know, now we're looking at well into June before they completely fixed this problem because they have to basically clean out the entire pipeline. Meanwhile, Russia has actually cut back on its production. Believe it or not, in Russia was the one of the few countries in this Opeque

agreement that hadn't cut to its promised amounts. Now they're actually below the quota that they've agreed upon just because of this contamination issue, and so we're definitely going to see it go on into June. It's possible, could it could effect supplies even after June. What are you expecting about the PECK meetings? People have speculated that they will continue with the output cuts that have been planned, despite

the potential disruptions to supply. Is that you're expecting, I'm that's that's the expectation, is that they will roll over basically the the agreement as is. Although today we did hear news that Russia is looking for increased flexibility. It's not not entirely clear what that means, but that could definitely throw a wrench in their plans. Combined with the fact that Russia is also looking for flexibility in terms

of scheduling. They want to move the date of the OPAQU meeting, which is now for the end of June. They want to move it to July because the Russian Oil minister can't make it in June. And this is causing a big consternation amongst the opaque countries because they they see it as this is their OPEC meeting. Russia is not even a member. Why should they move the date of their meeting for this country that's not even

part of OPEC. And I think it's exposing some of the larger cracks in OPEC that have to do with the fact that they've basically kind of sold their soul to the Russians. He can't make it, what's he gonna be doing? Going on the case? I has the energy guy, what's what? What's more pressing? What's I learned that he can't make the meeting, But then we also learned that they're storing oil in Syria. So Dr ellen Wall, thank you so much. You always have great information on the

global oil markets. We appreciate you coming in. Dr Walden's president of Transversal Consulting also nonresident Senior Fellow at the Atlantic Council's Global Energy Center, and of course a Bloomber opinion contributor. Well amid rising trade tensions, the equity markets are off approximately five percent from recent highs. So the question many investors are asking is whether whether this is

a healthy dip or something more. To help us to answer that question, we welcome our next guest, David Diets, David's founder, president and chief investment strategists of Point View Wealth Management, located in the happening metropolis of a New Jersey. David, thanks so much for joining us. So again, let's just start real basic here. Is this a healthy pullback in the market or is it something more fundamental than investors

need to be concerned about. Well, truth be told, no one knows for sure, but certainly this is the type of pullback which we see every single year, often multiple times. I mean to put this into context, We're up about thirteen pcent year to date. We're down five percent this month, but that's five percent off all time highs. So although everything bears watching, this is not a crisis by by a long shot. Let's take a listen to what Morgan

Stanley is James Gorman had to say about it. He was speaking with Blueberg's Tom mackenzie, and honestly, he was talking about how the risk is is the equity markets have more downside than upside, but that the magnitude is not so big. Would you agree, well, um, you know, certainly, I do think that further risk to the downside, of course, but you know, let's put into context here. I think three key things are driving this market right now. One

is a very strong economy. We just got an affirmation basically of a three print on US GDP for the first quarter. We've got the lowest unemployment since the Vietnam War era. We've got super low interest rates, which makes affordability for house building capital expenisher is great. What's the big problem, of course, is the trade talks with China. We don't know. Since that tweet and May five, everything

starts to unravel. But if one tweet can undo it, quite frankly, another queek could put this um put this back together again. So you know, we think one should be selectively still buying in this market. What are we buying selectively in this market? Then? You know, I would

say two sectors. One is generally tech stocks, because I do think that there are secular, not just cyclical tail winds behind this sector where it's almost imperative for banks everyone in this economy to get the latest and greatest

to keep up with productivity and be competitive. Second, of course, I think with the before you move on from tech, because everybody wants to be a tech company right now, and everybody calls themselves a tech company and their tech areas that are doing well in tech areas uber that aren't. So I'm just wondering, what are you talking about when

you're talking about buying tech. Well, certainly you want selectivity. Um, there are many many tech names which are short on earnings, high evaluation, and we would we would be steering clearer that the one we'd be setting today would be Intel. Um. Why Intel? Because Intel is like the world's largest microprocessor manufacturer. And now that we have artificial intelligence, now that we have the Internet of Things, now that we're soon going

to have autonomous driving, microprocessors are going everywhere. They're the company that's best position to handle all that. Meanwhile, you have evaluation that you can stomach. Is trading at about ten times earnings, it's about forty five. That's down from sixties, so you have almost pull back. This is a great

entry point for these long term trends. So one of the names that and now you've mentioned in the past is Wells Fargo, and it's in a sector that, uh, you know, I think investors are very uncertain about number one in terms of the big global financials, and then number two it's got some companies specific issues, reputational issues, management issues. What makes you uh bullish on Wells Fargo. Well,

let's let's start with the macro's. Financials are the sector that is always poised to do better and never seems to. And I think one of the big culprits right now is very low interest rates. Now, um, of course we're seeing the interest rates at the lowest points since fall of two thousand and seventeen. My guess is, with just a little bit of constructive progress on China, those interest rates are going to move back up. We're seeing some movement in the right direction today and that's going to

improve net interest margins. So financials very cheap. Now, if we get just a little bit more of a net interest margin, I think banks are gonna do well. Now, why Wells Fargo? So there's a bad news and a good news. The good news is that is probably the best franchise in my view in America today. It's coast to coast. It's focusing on that middle market. Uh Lending

is focusing on retail banking. It had one of the largest share of those sticky f d I c ensured low cost deposits that do not move, and they've steered clear the more volatile capital markets. So that's the good news. The bad news, of course, is they are basically without a leader. They have an interim uh corporate lawyer as a leader. Um Jamie Diamond had some very negative comments about that just a couple of days ago. He happens to be a competitor, and uh so, I would I

wouldn't expect anything less. Um So, I think if you get a well known, prestigious someone from the outside coming in who sets the right tone, I think you can get a significant pop in that stock. And again, while you're waiting, have a close to four percent dividend on a stock that wasn't January of last year six now it's below fifties too. About another stock, Pecks see the shares down forty one percent going back since the end

of what are you seeing here? I wish our prescription drug prices were down um, But here's here's what I see. First of all, you've got the macro situation here where politicians of both sides of the aisle are beating on healthcare. They want prices to be lower. Now that we're entering the political season, there's some radical calls for single pair um healthcare system. All of that would be potential uncertainty,

if not a negative, and all healthcare stocks are down. CVS, I think is a sure survivor not more than a survivor. A winner is really three companies and one. You've got a coast to coast pharmacy operation close to ten thousand stores making about one point four billion prescriptions a year. Then, of course they've got a great uh pharmacy benefits management the form of care Mark. But now they vertically integrated with the acquisition of Aquis of Etna, which gives them

twenty million insurance customers. So one of the problems right now is, believe it or not, that merger has not been finally approved. Even though government authorities signed off on it, still hasn't be signed off by a judge who wants to take a second look. Now, if all the parties to say go ahead, I think once that judge makes the right decision, that stock moves higher. But isn't there just just for healthcare, there's just always this overhang of gee,

what are the politicians gonna be saying? What are the government? Regulation? Just seems like it's always in the crosshairs and there's so much overhang just from news about regulation. Yeah, you know, it's a great point. Certainly we have seen that before with proposal for Hillary Care, with proposals in the first

couple of years the Obama administration. But what happens is ultimately, and I believe it's a case now prices now we reflect that kind of dismal outlook where it can't catch a break and the politicians are being at the end of the day, we want the best healthcare possible. The UM population is growing worldwide, there's there's demand, and I think ultimately UM it will become business as usual and stock since we'll move higher. David Dits, thank you so

much for being with us here. David Diets is founder, president and chief investment strategist at Point View Wealth Management. In Summit, New Jersey, Paul, we talk a lot about the data that a lot of websites collect and the question is what can you do with it? And yelp has taken away to use it to try to indicate what the economy, how which shape the economy is in Joining us now is Carl Bolic, data Science editor at YELP. Carl, so happy to have you here in our Bloomberg Interactive

broker studios. Full disclosure. Carl and I went to high school together and worked on the school paper together. I'm so glad to see you breaking stories. Yeah, exactly, um, lots of them. So, Carl, what exactly is yelps economic average.

It's a benchmark of the local economy and it brings together thirty different really important but also really specific sectors in yelp across our most important really areas of the economy, which are restaurants and food, nightlife, shopping and services, which are really to us, the backbone of the local economy. So we've chosen thirty. I'm sure you and your listeners could recognize that number is like maybe a crucial number

for benchmarks of of economic health and market strength. And you know it has it has a long history, and it allows us to really cover the breadth of these kinds of businesses. So what makes your indicator unique? Do you think relter to what's out there in the market. Yeah, so there there's lots of economic indo cares out there.

We really saw an opportunity to look at something close to real time, very specific, very granular from a business type level, and then also very granular from a geographical level. So you know, we are aggreg aiding anonymized you know, consumer behavior and business activity down to you know, like not just this is a restaurant, not just this is

a Chinese restaurant, but this is a sexualan restaurant. So really being able to dig deep into what is happening on a very specific level with enough volume because of our tens of millions of users every month on the app and tens of millions on desktop, to be able to really say something about a lot of different parts of the local economy. I love this, by the way, because we do talk a lot about what people are

going to do with data. And just for a little background, so carlbi Alec, probably you've read him as the numbers guy on the Wall Street Journal back in the day, and then you worked at five thirty eight UM and you've done a lot of work with numbers, and I'm wondering whether you're seeing anything with these economic indicators that are somewhat at odds at the main story that we keep hearing, which is steady growth, strong consumer. What are

you seeing right now? Yeah, we're seeing a mixed picture. So we we introduced the up economic average looking back at the fourth quarter and saw a decline, so so it looked like a slump or the start of a slump. And then for the last quarter, we saw you know, a slight rally, pretty moderate, mostly flat, and some weakness

in a few key categories. So I think we we've been deviating a bit from the overall story, which I think has to do a lot with the sort of the real time nature of our data, but also like our our really laser focus on the kinds of local economic experiences that you have in person with with the service provider in a store. So which areas you're seeing a slow down? Yeah, so in this past quarter, in particular, autos we're weak and uh, you know, it's something that

we've been tracking for a while. We've been interested in sort of what the effect is of the shift from owning cars to too renting cars to you know, renting a driver in a car for twenty minutes for a ride around town. Like what that might be doing to some of these core sectors that rely on people owning and using their cars a lot, needing various services, needing to buy new cars or used cars. And it looks like across a lot of different categories we're seeing a

slump there. And then in retail, which again is the part of retail that is that in person experience going into the store, we're seeing weakness, especially in sort of tech retail, where I think a lot of the activity is moving online. So Carl, how about regionality. Are you seeing differences regionally from some of your data coming in, Yeah,

it's it's a great question. It really depends on the sector. Like, overall, the regions are moving roughly in line with each other, but in some areas, certain kinds of restaurants are stronger. You know, there's different demands for home services depending on what part of the country you're in. So we are seeing those kinds of differences, but generally the regional pictures tracking the national one to a way that I didn't expect going into this. I thought we would see more

regional differences. We do see bigger differences at the city level and the metro area level. I want to talk about how you use the data that Yelp collects, because there's sort of the activity in terms of ordering through Yelp or you know, reviewing through Yelp. What do you what do you pull for the economic average? Yeah, so we basically looked at everything. We looked at the full gamut.

I mean there, as you say, there's so many different ways that people interact with businesses, and they all show some kind of consumer interest. Some of them are very specific to one sector, like the restaurant space in the case of ordering food. So we looked at like, what is the combination of these that best matches what we think is, you know, the overall consumer activity on the platform. And so we went with that measure. Well, but I guess one question that I have is how do you

measure something that's qualitative, that's subjective like reviews. I mean, do you do you take that into That's a great question, right, Like is a higher rating an indicator? Yeah? For this measure, we were really just looking at at interest So if you went to a business page on yell to leave a two star review because you had an experience that disappointed you, that would still count as go as consumer activity from the point from a purely economic point of

view of you likely transacted with that business. For other studies, we do. We do think a lot about ratings and when ratings are going up, is that indicating an overall increase in quality or is that a change in you know, consumer psychology and their propensity to leave negative reviews. So

it's it's definitely something that we consider. And if we if we do see a rise in ratings that we think reflects uh an increase in sort of the quality of the consumer experience, then we think that's an important thing to capture, but is not normally capture in economic indicators. So you capture I'm thinking good jillions of pieces of data from all the users of a Yelp and they're coming at you all time, unstructured. How often do you release your number, your index number, your output? Is this

a daily thing a quarterly thing? So right now it's quarterly and we release it within typically within the month after after the quarter. We do want to become more frequent and faster, and we're working on that. You know, we're being very careful as well, because we want to release something that reflects, you know, the real underlying consumer behavior, and there are quarterly trends that we want to kind of remove, and it's easier to adjust on a quarterly

level than a monthly level. So we're thinking about how we're going to do this more frequently, but we certainly have the data to do it, and it's in our roadmap. Cool, Carl Bi Aleck, thank you so much for joining us, car back data science editor, former newspaperman in high school for Yellow with the Economic Average, So very cool. Exactly, I want to turn our attention to a story that has left me and Paul if I dare speak for you,

scratching our heads. So basically, a top Justice Department official or several of them, are hoping for T Mobile and Sprint to lay the groundwork for a new wireless carrier in order to go through with their merger, which is very hard to understand. What would that mean to creating a competitor? Joining us now to help us perhaps understand A re senior litigation analyst with Bloomberg Intelligence, So what what gives I know, it sounds really strange, and in

particular in relation to this deal. I mean, these companies are telecon companies. What you see in other deals where businesses are involved in a lot of different things. They sell one piece, but what they're gaining is still much bigger than what they're selling. But here let me explain what the Department of Justice as guidelines say is once they've identified a competitive problem, the remedy has to fully fix that problem. That has to replace the competition that's

been lost within that area where there's a problem. So the two things I'd say about this deal is one, do we know if they have a problem in both the prepaid side and the post paid side. If they do, then it's truly, you know, fully creating a new competitor. If they only have found a competitive problem on one side, it would be creating a new network and a new

competitor just for that kind of consumer. But but if you think about this um, it's still possible that what a combined T Mobile Sprint get is better than what would happen if they had to create a new competitor, because they'll get a blend of spectrum that Sprint doesn't

have today. And the idea here with the remedy is you're absorbing Sprint, you need we need to replace the competitive intensity that's lost, So you really need to create kind of what Sprint is today, not then necessarily the blend of spectrum, this mix that the combined Tea Mobile Sprint is going to get. So it's still possible they could create this new competitor but still gain as a merger coming out of this, as odd as that sounds. Okay, that that sounds odd, and I'm a little bit smarter

than that I was before. So let's just play this forwar. Let's say, okay, we'll effectively will will the Sprint mobile entity least some spectrum to whatever third party is out there, and that third party will then operate a wireless network. Is that kind of the thought process? Well, you see the devils in the details. And this is now going to be a pretty intense negotiation because obviously Springtan T Mobile will try to give up as little as they

can in terms of actual structural assets. Right, They probably prefer sell brands and least infrastructure and not sell spectrum. And the Department of Justice is likely to want them to put some spectrum in um and and and possibly even more even incentivize employees to go over and and

possibly more structural type assets. So this is going to be a difficult negotiation for them to come out with something that works for both if I'm trading on the rumors of a tie up or not, and then the success of the d J and signing off on this. Is this development positive or negative in terms of at least the d o J is engaging and has concrete proposals for how this deal can continue to go through.

That's right, that's the positive side, But I would say it's probably leans a little bit more negative because we're going to get to this point a pain point for these companies where it's too much for them and they have to then decide do we walk away or do we try to do or do we challenge this in court to try to see if we can convince a judge.

We know generally where the pain point sort of starts for these companies because in their merger agreement, they agreed to divest, but they agreed that they wouldn't have to go past any loss of seven billion or more. So we have generally understand that they don't want to give up um assets that would cause a loss of seven billion or more. Now they can waive that term. Other companies often do that when they have to find they have to divest more than they expected to get a

deal through. But you know it's gonna be a difficult decision for them, both of these stucks. Just for what trading off bad a little over one percent today. So obviously, as you suggested, Gen, the market isn't doesn't see this as a positive viewpoint. Just give us a sense. This thing has been you know, more than a year here. It sounds like the negotiations here as you suggest, it

will be very difficult. Any sense of timing when the d o J will wrap up its investigation here or to review you know, so many people would like to know that. But this is a closely guarded the arbitrage trade listening on the line. It is a closely guarded secret with between the companies and the Department of Justice. The d J has clearly passed its statutory time limit, that is thirty days after these companies comply with the second request, which has to have happened nine months ago.

But what this means is that Sprint and T Mobile ev entered to timing agreement with the d o J. It is confidential and the companies have not disclosed its terms, so we don't know when the timing expires. For the d J, Jennifery, thank you so much for helping us understand that I actually good. It helps a lot. Jennifer Ree, Senior litigation analyst for Bloomberg Intelligence. Thanks for listening to

the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney and Lisa abram Woyd's I'm on Twitter at Lisa A. Bramwoy. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio. H