Libya Conflict Is Hugely Overlooked Issue On Oil Capacity: Wald

all important Opeque meeting. Will they all come together, have a Kumbaya moment and have an agreement that doesn't end up with Saudi Arabia on one side and Iran and Brazil on the other. Joining us now, Dr Ellen Walt, President of Transversal Consulting. She has an energy industry and Middle East expert. She is also author of Saudi Inc. Which takes a look at Saudi Aramco and the family that controls the multi trillion dollar enterprise. Dr will thank

you so much for joining us. What do you expect to happen at the upcoming meeting which takes place in less than twenty four hours. I think that right now we are leaning towards some sort of agreement for a across the board production increase, and that's probably one of the reasons why we're seeing oil taking downwards. What's interesting right now is that Saudi Arabia is floating proposals of potential increases of anywhere between eight hundred thousand barrels per

day to one million barrels per day. Now, the key here, though, is that even if that is pushed through on paper in practice, because countries like Venezuela and Iran and Angola can't actually increase their production, they're just physically and financially unable to, that wouldn't actually bring that much oil back onto the market, and increase of one point five million barrels per day would only add eight hundred thousand barrels

per day. Does any potential agreement also have political implications when it comes to Iran and Saudi Arabia. Yeah, and this is the big, the big question. Iran has come into this meeting kind of with its UH pistols blazing. It said, no agreement, It's not going to agree to any kind of production increase. It's going to veto anything that that's put forward. And so it really does that

they really are pitted kind of across from each other. Now, what I think is likely that we will see is some sort of agreement that allows Iran with with wording that allows Iran to say, hey, we're not really increasing production, it's just we're moving back to full compliance as opposed to under compliance, and then to satisfy Russia on the other hand, which is really pushing for a big increase.

They'll have language where Russia can kind of say to it's oil companies, hey, look, you can increase production, all right. This is this is headspinning to me on many levels. Number one, uh, the question of Iran and Venezuela posing output increases or sort of lifting some of the caps simply because that cannibalizes from their own business because they're

unable to make the additional production. I'm struggling to see how it factors into the price of oil, because, as you were saying, any increase will be offset by decreases elsewhere. Do you think that the oil market is being overly sensitive right now, given how complicated this is, in the unlikelihood that it would be a rush of oil into the market, exactly, I think the oil market is very

very sensitive right now. Um, any news about, for example, news that China is considering putting tariffs on American oil. Any news about any oil refiners deciding to drop Ivanni oil, it all kind of sends shock waves through the prices. Everyone is extremely sensitive right now, and that's why every kind of a bit of news that comes out seems to kind of rock the prices. What about the addition of oil, let's say, from a country as such as Libya, Will that have any effect? Libya is a huge issue

that I think is really being underlooked right now. The fighting in Libya has taken out a significant number of Libya's a storage capacity to store oil for export. And even though um the Libyan government has kind of taken retaken control of uh its oil, it's going to take a while to get its oil exports back up to the levels where they were. And apparently some of these

UH some more storage fsacilities have caught on fire. This is a huge, huge issue that could really send Libyan production into a tailspin and mean that the market is really going to be undersupplied going into the second half of Yeah, you know, I'm just struck by sort of the power and cloud of OPEC. Are we seeing the decline of that? And is this cartel basically drastically losing its power. You know, everyone is kind of the you know, been saying, oh, OPEC is dead two years ago when

they weren't able to really lift prices. They were they were calling OPEC, you know, a relic, and now we're seeing everyone has basically defended on opaque headquarters just to see what they're going to decide. I think one of the reasons they've become more powerful, though, is this relationship that they have with Russia. Russia's the largest oral producer out there, and without that relationship they really wouldn't have

the kind of clouds that we're seeing now. I guess the reason why I ask that is because when you think about Iran coming in with their guns a blazing uh and saying we're not going to sign off on any increase to output, they have no recourse other than sort of the mirage of unity of OPEC, right, I mean they have no leverage here. Yeah, OPAQ is not OPEC is not UM you know, a majority rules organization, but they do have ways that certain countries can either

veto ideas or that other countries can override it. But really what we're looking at is UM Saudi Arabia's oil minister is a very talented negotiator, and he's been described as someone who just doesn't give up, whereas the previous oil minister, Alian the Emi, would sometimes get very frustrated and you know, just decide it's not worth it and walk out of the room. All Fala is known as

exceptionally patient and he will uh someone someone uh. One of my sources told me that he will talk and talk and talk until he's basically bloodened you into agreeing with him, because he's talked so much. And so I think we can't discount that and his ability to bring this group together basically just through the power of continued negotiation. What kind of patients are countries that are supporting Venezuela going to have if Venezeuela continues on its current economic path.

It's really a terrible situation for Venezuela. And it's very sad because originally OPEC was formed as kind of a solidarity movement for these producing countries who really were relying on Western companies to produce their oil, and it was designed for them to be able to kind of stand up to these companies together. And now that idea has kind of fallen apart in Venezuela has really been left by the wayside. It's almost as if they don't care really what is happening in Venezuela and kind of see

it as look at it's your own fault. All right, Well, we're going to leave it there. And I know that you're going to be following this opaque meeting for us. Much appreciated as always. Dr ellen Wald is the president of a transversal consulting energy industry and also Middle East expert, and she can be followed on Twitter at energies d Economy. That's e N E R g z D Economy. So I a you to do that right now. It is a seventy one billion dollar deal. This is a Walt

Disney's offer for twenty one century Foxes entertainment assets. And here to tell us more about the battle in the world of media is Porter bid, managing partner Media Tech Capital Partners, and you can follow Porter on Twitter at Porter three. Okay, Porter three, tell us why are these assets so valuable to the long term strategy of Walt Disney and Bob Iger. Well, Bob Iger has been late

to the game in over the top content. He's still selling most of Disney's product to the legacy television networks cable industry, and he wants to go over the top, wants to take on Netflix and everybody else who's streaming and acquiring the content that one century Foxes entertainment assets represent gives him an unassailable cache of huge, huge, popular

content to mind. And Disney has proven that they can take Marvel or Pixar or Lucas Films product and turn it into a ten times bigger business than it was as a standalone, and they'll do the same thing with Fox Porter. When we were talking ahead of this segment, you said that at the beginning of next year, Walt Disney Company is going to launch a Netflix killer. It's

it's going to be a net A Disney streaming channel. Uh. Priced, We don't know, but if they're smart, they will price it at at comparable pricing seven a month to Netflix, or maybe even a discount for the first year or two to build up traffic. Bob Iger has has made tentative, unsuccessful attempts to get into the streaming business. Now he's set everything he's got on the table towards building a Netflix Killer and making Disney the over the top champion

in the world. One thing that strikes me is that coming with this, Disney will probably pull all of its content off of Netflix, which is currently available to people who subscribe to Netflix. Correct, without question. There are contractual hurdles that Disney has to get over some some of the content that they licensed to Netflix has a year or two to run. But as soon as those contracts are over, you can bet Disney won't show up anywhere on Netflix. Disney has, of course ESPN, ABC all the

film content that you just described. Fox has Star India FS one. If you want to watch the World Cup, you're watching. Fox also got FX Network, National Geographic, the film division, the television division, and Sky. Can they put it all together. That's what Bob Iger's grand plan is. He wants to take Disney global. They they sell theme park and merchandise and and tickets in Europe and Asia and China, but they don't really have a viable footprint globally.

That's that's what the Fox assets and Sky, which is a critical part of this deal and is very likely to cost nearly as much as the Century Entertainment assets themselves. You know it sounds like it's obviously a huge win for Bob Iger to get the Fox assets, and he's obviously willing to pay quite a bit for them seventy one point three billion dollars, as my co host was saying earlier in Fox. Um, I'm just wondering, at what point do people start to worry that they are overpaying,

given that there is a bitting war going on with Comcast. Well, the problem with saying anybody is overpaying is what is the price? What is the value you? It's it's not really what it costs, it's what you can create out of it. And uh, Disney has has dominated the content and film industry over the last several years. Last year they represented almost of the profits of all of the

movie studios in the world. So they're going to do the same thing increase and not just incrementally, but gigantically the profit potential that the Fox assets they're acquired, they

will acquire. So basically, just to let I understand this, the the idea here is if you have enough of a critical mass, people cannot live without them, and that all of that content that people have gotten used to being able to stream elsewhere, they will not be able to get except directly from Disney, which will undermine the

business model of Netflix. That that's exactly right. And Disney has existed in the legacy media world on retransmission rights and contracts with cable and and UH tradition television networks for their content that has eroded. Everybody looked at the decline in in viewers and ESPN and that had a big impact on Disney's share price over the last eighteen months. They want to control the director consumer facing that their content can generate. They don't want to depend on old media.

Ten years from now, we won't even have a cable television system. All the cable companies will be going over the top. I'm glad you mentioned stock prices because if you compare what investors in Comcast have done to their stock, it's down seventeen so far this year, So clearly they're not dying to have this deal come through. On the other hand, Walt Disney shares basically unchanged. That's right. Why do you believe investors in Comcast feel so, let's say

negatively about this potential. Well, if if this deal were to go to Comcast, UH, they would take on a hundred and seventy billion dollars of new debt. They're already well over leveraged, and investors don't like that. And I think that that's a serious problem with Brian Roberts all cash offer. The interesting thing it's not been made very

clear by the media. The interesting thing about Disney's new offer is it on the surface, it appears to be half cash and half stock, but Disney put a rider in there that if any shareholder decides to take it in all stock, he can, and certainly the Murdoch interests are going to take all all stock because one of Rupert's legacies is I want to be the largest shareholder in Disney the We're the biggest entertainment company in the world, and taxes and no taxes right until unless he sells him.

I'm glad you brought up stock prices because Netflix, meanwhile, which you know we're saying, is going to pay some stiff competition. Netflix shares at record highs eighteen dollars share. What do you think is going to happen in Netflix? If Disney goes through it there it's a momo stock. It just keeps going up because everybody says they keep adding subscribers, but they look at the cash flow it's diminimous, and look at the increasing content costs that they're having

to budget to keep those subscribers coming on board. It's not a sustainable business model, and the market is taking advantage of the momentum um. They They are very good at marketing, they're very good at at selling a few original titles that have massive appeal. But what are they going to do when they run out of hits and they can't keep doing it. The odds against making hits in Hollywood for the last hundred years have been two out of ten, break even in one out of ten

as a blockbuster. What happens the other nine? Most of those end up in the dumper at Netflix. Quarter bit, thank you so much for being with us. Highly illuminating porter by managing partner at Media Tech Capital Partners in New York. It looked like perhaps things were coming down for Italy after their bond yields blew out just weeks ago, but today, well the turmoil is back. Joining us now

to talk about that is Alberto Gallo. He's partner and portfolio manager for the Algebras Macro Credit Fund that Algebras Investments Limited. He's also a Bloomberg opinion columnist. Alberto, thank you so much for joining us. So this latest hiccup is coming after two prominent euroskeptics were handed key roles in the Italian parliament. Do you think that the hiccup today is a more longer lasting kind of concern that will cause investors to continue just to withdraw from the nation.

Good morning. I do think that the situation will remain volatile, and simply because the spending plans are very ambitious from the from the Italian government. So you're looking at the potential plant spending of a hundred billion euros, which probably will be revised down but still unfunded by tax raises. So we think the short term probability of euro exit.

You know, all these fears of our weekend type of it are a bit overdone, but the depths it spending is still a problem in an environment where you know, Europe isn't really focusing on growth, so um, it's good to think about growth, but the depth spending plans they have are excessive. So Alberta, when does this hiccup turn into asset reflux? We've already seen a repricing in the Italian BTPs and some of the assets, some of the other assets like stocks and bonds. The reality is on

the ground on the corporates. Are the corporates that have survived the crisis. Um, you know, around one in four small or medium businesses have defaulted throughout the crisis. So the remaining corporates are much stronger. But obviously, you know, you know, the situation, a crisis, situation m scares investors, and we have seen a repricing across all assets, but

we see fundamental still strong. On the ground. Um, what we see is political volatility and unfortunately, you know, that's something that will continue in Europe because Europe needs to change. Europe needs to change the wards a more cohesive union that focuses on growth, not just on austerity. And I think you know, even in Germany, um Angela Merkel is getting the message with some dwindling in her contensus. So here here's what's so amazing to me. You say that

there's been a repricing, and certainly there has. In two year Italian yields are now gasped less than ninety basis points zero point nine percent. Right, this is still nothing mama mama miya. Indeed, so repricing to even uh, you know,

extremely low levels from unbelievably low levels. You do have to wonder, given the fact that the e c B has basically demonstrated its willingness to backstop this market, given the fact that you are seeing other peripheral regions also experience weakness on the heels of what's going on in Italy, is this a buying opportunity for you as the head of a macro credit fund. We think that there are

some things in credit that are becoming interesting. Um. We are still looking at UM corporate credit and some banks in countries that remain very stable from a political perspective, like Spain or Portugal, And tonight we'll learn the Eurogroup solutions for Greece, which has been working on reforms for a very long time and he's waiting for debt relief and there's there's very likely to be a an extension

of maturities for the loans degree. So when you see indiscriminate selling across the whole of Europe, every risk cast at selling off because of one country, because of one political headline. Yeah, that creates some um, some buying opportunities. Uh, in Italy, we do think the volatility will continue in the long end of the curves of five year plus ten year plus BTPs, so you know, it's a bit

early to to step in. But in other countries there are some opportunities, so you were saying incorporate debt in perhaps Spain or Portugal. UM are the particular industries that you see as being immune to some of the political discussions and seeing opportunities in Generally, the volatility will hit

every um, every credit in these countries. In Europe, UM, the corporates have been historically much more resilient to sovereign to sovereign volatility, because corporates have the levers, they have good balances, and many of them could survive even the worst case of a euro exit. The banks are more connected to the sovereign still in Europe, even though they've solved a lot of sovereign debt. UM Greece has been

in the sovereign market. Greece has been very resilient in the last few weeks because again it's going to benefit from a potential extension of maturities. And Grease remains the widest name, the widest sovereign debt in Europe with you know, a ten year yield of four two percent in euros, which is equivalent to around seven percent seven plus percent

in dollars. So it's trading still like an emerging market. UM. So we we think still Greece is good opportunity given the UM you know, the E s M European stability mechanisms just declare that they have satisfied all the reforms they needed to do to get help. UM. So we think Grease is reprising towards the same trajectory as as Portugal. But generally speaking, UM, we continue to see political risk populism in Europe and in other countries creating polatility for investors.

And we've been working on strategies that are short like a like a new fund that we launched a few days ago. Thank you very much. Alberto Gallo as a partner and portfolio manager at Algebra's UK Limited, talking about corporate debt in Europe. So we have been talking quite a bit about the Supreme Court decision. It is one

that is absolutely moving markets. Basically, it frees states and local governments to start collecting billions of dollars in sales tax from internet retailers that don't currently charge tax to their customers. Sure of it and joins us now. She is a Bloomberg opinion columnist covering all things tech. I'm looking at some of the bigger decla lines Overstock dot Com down more than one point three percent, Amazon down

nearly a percent, eBay down two percent. Uh. Just how much does this potentially bite into the business of these online behemoths. I don't know. I think it's probably not that big of a deal, particularly for the largest e commerce companies like Amazon. So the the issue is that Amazon, for example, already charges sales tax um in for for products that it sells directly two shoppers um on any in any state that charges sales tax, So that doesn't

that doesn't do anything for Amazon. But there are also about half the sales on on Amazon are coming from these independent merchants that use Amazon as a sales channel, and they may or may not charge sales tax. So now they'll have to be probably some enforcement mechanisms on sales tax in in on those independent merchants. But look, Amazon and eBay, to their wealthy companies, they can afford it.

The burden though, falls on these smaller players, these independent merchants, these mom and pop shops that are now going to have to figure out the tangle of US sales tax rules in every state in the country. And it's worth noting right that they are not charging it, they're just

collecting it. That's right, right. And the reason the reason I say this is just because that feeds into your your point about third party sellers that use Amazon or even maybe Facebook as a platform in order to sell, and now they have to compete with the stores that are around the corner. Perhaps that's right, and I look, it's it's there's been some research on the impact of what happens to the sales of an online retailer when

they begin to charge sales tax. At least from what I've seen, it's a little bit of a mixed bag. It's not like they've already run out of town all of the independence, right, I mean, because this has been going since Amazon started in business, and that was a way to beat the competition because it actually took less

money out of the consumer pocket. It was I mean, look, it's it's a good point that Amazon for many years fought paying sales tax, uh, in part because I mean It's stated rationale was the company wanted there to be a national rule about sales tax. En. That's kind of state by state hodgepodge, But you're right it did give Amazon an advantage, at least on paper, that it's it's bottom line for shoppers was less expensive than Walmart or whoever was forced to charge a sales tax on on everything.

All right, So Sharovida has spoken, and it seems like perhaps people are overreacting with the knee jerk reaction that this will somehow sync earnings for the Amazon's knee bays of the world. Uh, and correct me if I'm mischaracterizing that happence. Um, Sarah, I do want to switch gears a little bit. Intel made news today by firing the chief executive for a consensual relationship UM with an emloyee. This to me seemed to signal a sea change in

a tolerance for some of these things. What's your take? Yeah, I think that's exactly right. Um. Look, Brian Personage is not the first CEO to be pushed out over a consensual relationship with an employee. UM. It happened to the Price Line CEO a couple of years ago. It's not an unprecedented move. But we are in this me too era. There is more scrutiny of workplace behavior than ever before, And behavior that may have been kind of brushed, overlooked, or kind of covered up or ignored in the past,

it can no longer be ignored. That these things are now under heightened scrutiny. Corporate executive behavior is being more closely watched than ever, and so is the behavior of boards of directors and responding to that behavior, and the potential for lawsuits and the potential for lawsuits, and look, and the potential of kind of loss of faith among

investors and loyse. It's it's a big deal now, and um, look, Krasana didn't do himself any favors, maybe by he was a very vocal champion for gender equality in the workplace, to his credit, But when you're that kind of outspoken champion for workplace equity, your behavior has to be above board too. Indeed. All right, thanks very much, Shara over Day, Bloomberg columnist for Bloomberg Opinion for all things technology related. So if you need help maybe setting up your new iPhone,

maybe that's the person. I'm not tech support tech support. Although she did. She did spend about two years laughing at my lack of technological prowess. Well, it's not laughing at you, laughing with you. Thanks very much, sharra Ovi Day. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox, I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.

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