OPEC Cancels Press Conference In Unusual Move: Schenker (Podcast)

topic now is energy. In Vienna, OPEC a tentatively agreeing on an oil output cut that was something on the agenda, but we're still waiting to hear from non OPEC members such as Russia before deciding what kind of volume in production reduction will actually take place. Here to tell us more from Vienna is Jason Schenker. He is the president of Prestige Economics and the chairman of the Futurist Institute. Jason, we've all been waiting for a press conference that apparently

is not going to happen. Yeah, that's right, Tim. I'm sitting right now in the press conference room in Vienna. There were a few hundred people here up until about ten minutes ago when the story broke that there was not going to be a press conference. The room is

mostly emptied out. Now it's maybe about only hundred people left, and uh, you know, folks are a little bit concerned, but it looks like lock the wait for tomorrow to see what happens if OPEC and non OPEC members, specifically Russia can come to an agreement on what happens with the production cuts for the year ahead. So, Jason, this actually is highly unusual for them to cancel a press conference.

Does it indicate to you that there's more disagreement than usual on how much to cut production or even if they should cut it all? Well, I think what it really indicates is that the stakes are higher, and I think anyone you know, we look at what's going on across markets today and what's been going up for the last two months. Uh, you know, we see there's a lot of altimities. There's concerned about the U. S. China

trade war and what's going on. What does that mean for risk in It's been really important for industrial medals, which have been crushed all year. Oil prices have taken a big hit after the driving season. UM equity markets highly voluntal on this, and then of course there's still interest rate tightening, not just in the US but everywhere

higher cross the capital. What's that going to do. There's a risk of a campex recession in business investment in the US, there's a risk of a Chinese manufacturing recession. In these things are big risks on OPEX plate, and I think that OPEC and not PICK members want to make sure they get it right because the risks in the stakes couldn't be higher. Jason the Russian Energy Minister Alexander Novak, he went from Vienna back to St. Petersburg

to talk to President Vladimir Putin. He's now scheduled to return to Vienna on Friday. What to the Russians one, Well, I think it's really you know, there's concern about the market going into an oversupplied situation. What happened in late through the middle of oil inventories globally rose sharply, and part of that was China, the biggest net importer in the world of crude oil, the biggest source of additional future marginal crude oil demand, was in a manufacturing recession.

China is on an edge of the manufacturing recession right now. If it goes into one, and OPEC and non IMPEC members specifically if Russia and OPEC can't agree on how much to reduce, then the price of oil to get backed really hard. And so I think there's you know, potential to want to air on the side of more tightening rather than left. And that means, you know, there might need to be special approvals involved because they can't get this wrong, because if they do, with inventories go

up a lot, more oil prances could get hammered. What's the price that they would like to see. I'm looking right now a crude on the IMAX hitting that fifty a barrel target are almost almost they're almost lowest levels in more than a year. What do they want, Well, I think that the most you know, I I would probably say sixty dollars are above. But they don't explicitly

target an oil price. What they try to target, what they have targeted for the last two years with the OPEC mon OPEC agreement is the five year average inventory level. That inventory is built up massively above that through the early part of and they've run down this year. We've been below globally that five year average of oil inventory stocks, and so OPEC wants to keep it below that. We're

at that five year inventory average. That's what they're really trying to target, because they know if they can keep it at that level, even if demand weakens, it will support prices. And while they might like sixty dollars a barrel with the prize very worried about, is it's a forty again Mason. One of the things the Russians have said is that it is more challenging for them to cut oil output in the winter than other producers because

of the cold weather. Does this mean that they're going to have to wait until after winter and after the Europeans use all of that Russian natural gas? Well, I'd say there's a couple of things on this, and you know, I don't think it. I mean, they can structure wind cuts happen, how cuts happen. You know, those are things that can be worked out. But I think as long as the members are, you know, kind of of a singular mind to rain and supply, that's going to be

the thing. But I think no one country wants to bear the entire brunt of it, and I think that the members also want to see it kind of spread around.

I think, particularly Saudi Arabia wants to make sure that these are numbers that everybody's going to play with, and they're not the only country to pull back supply, and I think Russia wants to make sure that it too isn't the only one to reduce supply, because all everyone would like to benefit from potentially more supported or higher prices, not every you know, no country wants to pay the full right, right, Jason Schanker, thank you so much for

being with us there from Vienna, where you are observing the undertakings at OPEC's latest meeting. Jason Shanker, President of a Prestige Economics, also chairman of the Futurist Institute, normally based in Austin, but over in Vienna. Canadian authorities in Vancouver have arrested Huawei Technologies chief financial officer at the request of the United States, for alleged violations of Iran sanctions. Here to help us understand the situation is Wu jin Ho.

He is technology analyst for Bloomberg Intelligence and also joining us as Michael McKee, international Economics and Policy correspondent for Bloomberg. Michael McKee, let's just begin. The chief financial officer of Huawei Technologies is not an ordinary employee. Is she no she's not. She's the daughter of the founder. And this is also one of China's biggest companies, and it is one of the companies that China is relying on in the Made in China program to dominate the world's uh

leading technologies of the future. So this has enormous implications. It may have been something completely separate from the president's overtures to Shi Jinping down in Buenos Aires, but it was the same day, so it could possibly be a message from the President to the Chinese. But it's definitely going to complicate the trade efforts that the administration is making. You have to expect the Chinese may have some sort

of retaliatory move ahead. Just to be very clear, though, this is being prosecuted out of the Eastern District of New York, So this is a federal prosecutatorial office that is somewhat remove from the president in the day to day terms. And Cannada Canada did cooperate here. Come on here at wujin Ho. What do we know about the actual allegations and then can you talk about what the programming in the software and some of the some of the actual technology behind this is why it's such a

security concern. Sure, So UM from a from the allegations standpoint is still fairly thin because the documents are sealed right now, So we really don't know why she's being arrested in Canada. Alway do know is that she was arrested on December one, and then she's being asked to the US is asking her to be extradited in back to the U s UH for some sort of charge. Right now, the timing of it, to your point is is a little bit rough, primarily because of the trade

agreements between Trump and E G. Ping. So UM, I think there's a timing element to it, um, but from from from a trade perspective, still unclear, quite frankly, right, Um, In terms of UM, you know Whahwei and what Wahwei provides. Wahwei provides the actual network equipment that helps drive our UM wireless networks. So if you look at the Chinese wi uh wireless markets, some of the European wireless markets,

they use a lot of the Wahwei equipment. UM. And if you think about how we have digital networks, a lot of the digital networks can you can actually peer into the packets itself and see what's being said and then you know, an eavesdrop into the communication. So there is a security concern element and that's one of the reasons why the US government has banned Wahwei equipment um

for their use. And the other element of that is a Wahwei is the second largest first or second largest smartphone provider as well, and that was also banned UH into or uh discourage from being sold in the US. So there there are security elements on both fronts, on the equipment side as well as on on the smartphone side. Now, Michael, the chief financial officers you were describing of Huawei, Sabrina Mang,

was arrested during a layover flight in Canada. The allegations have to do with an ongoing criminal investigation into Huawei, which started I think it was back in the spring. What exactly do you believe the government I mean, has to do with dealings with the Iran. What is there any subtext here based on the trade dispute. Well, the subtext would be that the US is cracking down on

China for a lot of things. This is not directly related to trade with the US, but it is an allegation that the Huawei helped evade US sanctions on Iran. Huawei has a defense arguing that the regulations are unclear and that um they didn't necessarily violate the US law. That'll have we argued out. But while it's not directly related to the trade dispute, it does complicate matters because it is part of an effort, along with remember the Zte case, uh the US to crack down on these

companies in China that it sees as threats. Now, it's not to say they did or didn't do something wrong. I'm not the judge, but there are credible allegations they did something wrong. But it does seem to be a coordinated effort on the part of the administration to go after companies deliberately because they are competitors to the U s they are a threat to the US and if they're getting there by breaking the law, then they should

be prosecuted. Come on in here, because one thing that I'm struck by is how isolated is Huawei, which is a huge company in China, one of the most important, if not the most important companies there. How much business does it do with US companies and US suppliers. Sure so in terms of the equipment perspective. What we calculated was that Wahwei provides five billion, five billion with a B dollars of equipment in terms of network equipment from

optical wireless infrastructure, so on and so forth. Right, that's different from z t E. Z t E is still a fairly domestic Chinese market. The US doesn't buy Chinese equipment for the most part, so it's mostly UM, Western Europe, Latan, austral Australia, Japan, and South Korea. UM. But there are broader implications for the suppliers. If we look at what we published today, UM, there Wahwei is the number one

optical equipment supplier. And what we can see from the SPLC function on Bloomberg is that Momentum Neo Photonics provides about generates their sales from from Huahwei, and there are a host of others UH providers UM that provides temper sent or or or more on sales. Now we're not there yet, right. The z t E ban UM, you know, show that it can cripple the US supply band Camp,

cripple STPLAI, but we're not there yet. Jho technology analyst for Bloomberg Intelligence and Mike McKee, international economics and policy correspondent for bloomber Both of you, thank you so much. A lot to figure out, a lot unknown as of yet, so we will continue to dig into it as new information arises. Real estate, commercial real estate, multi family realist state.

We've got an expert, Gerald Gutterman. Jerry Gutterman is the senior principal partner and chief investment officer for Government Partners. They are based in New York and he joins us now. Jerry Gutterman, thank you very much for being with us. Let's begin right off the bat by. When you see a day like today in the stock market and the

bond market, what's your reaction. Of course, I would rather the market be going up, But it doesn't really affect the real estate as an investment on a daily basis, because the real estate continues to work, the tenants continued to pay rent, and they're really not affected by this. We understand that four O one case can be affected, but the daily living of the average tenant is not affected.

But Jerry, fair enough, fair enough. Although some people would interpret what we're seeing, certainly in bond and stock markets as a signal that growth is slowing, substantially around the world, including the US. We're seeing inflation expectations dropping the most more than a year today. I'm just wondering, how does that play into the housing market, given the fact that the last time we spoke, you said that you foresee an implosion in high end condos coming. Yes, because I've

seen this now three different times. I saw it in nine seven, I saw it in two thousand six two thousand even, and then two thousand fourteen, two thousand sixteen, now been seeing it, and in seven to night. Of course, the real estate market had the same exact things happened to it. It wasn't a matter of the stock market, and I realized that in seven we had a big problem with the stock market, and we had that one

day crashed. But on the other hand, the big problem and the big reason that the real estate market weakened was because of overbuilding, constantly, constantly overbuilding, because if you give a normal and usual builder a mortgage, he will

build in the desert. And consequently, by nine eighty seven night, the over building and the over capacity was such that we saw it coming, and the pricing for it at that point because they were building so much, but they were building into with demand where the price of the product kept going up and up and up to where the return kept going down. The return went down to five, then below five. It reminds me of today we had the same thing happened that we saw in two thousand

and six, two thousand and seven. We saw it happening in two thousand and eight. We sold everything between two thousand and six and two thousand and seven, just like we sold everything between seven and Alright, Jerry, advantage of it. We get it makes sense what you're saying in the high end condom market. I'm wondering does that sort of carry over to the rest of the housing market, especially in light of sensibly rising rates, although now they're going

back down. You know, we specialize. We really have not been doing new homes. We've been doing more conversions, that is, buying rental properties and converting them to condominium ownership. Because when we do that, what we find is we can buy the product better cheaper, and we can actually sell it significantly cheaper. And when you realize, when you finally realize that if you buy an existing rental property, that tenant in possession is your partner. If you're going to

do a condominium conversion. That is, you're going to convert the condominium ownership. Well, what is your partner want? Your partner wants to buy it almost as cheaply as you did. And the answer is, we believe that every tenant in possession is a partner, and we give the tenants in possession a significant price reduction. How do we do that? We do that because we're able to take advantage of

the market as it is now. Starting now, because it's already started several months ago, the prices have been dropping significantly in the areas where there has been extreme over building. For instance, if I go to Florida and I pick a city like Sunny Isles Beach, which most people know, if you have a non luxury apartment that is going condominium, I would tell you today that there's about thirty two

months of supply right now. That means it's going to take thirty two months to sell what is normally sold in one year. If you go to the luxury market, it's fifty five and a half months of supply. Can you imagine fifty five and a half months, that's four and a half years of supply on an average sale per year basis, Well, the builders can't hold out, and what's the only thing they can do. They have to be able to sell and get out. The builders can't

sell at steep discounts. It's not possible. And the reason is the banks who have made them the loans will not allow the builders to sell at a discounted price. The reason is because if the bank allows the builder to sell at a discounted price, then the auditors are going to come in and they're going to drop all of the value for their mortgages that they have by at least that amount, and they're going to take their collateral. The banks collateral will only be worth a certain amount

less if they dropped the price. Can you imagine the order is coming in and dropping the collateral by or or and that's what happens, Gerald, Jared. Let me let me ask you one question having to do with the non professional or the non experienced, the unexperienced real estate investor who have put billions of dollars into real estate projects. Is this going to be the time when they try

to rush for the exits. If it is an investor who invested in the last year or two and the project was purchased at a price as it was priced over the last year or two. The answer is yes, and that's why we're so busy now, because we pick these times to keep coming back in when the market can be discounted significantly, and when we buy now it's common knowledge um in the market that we buy anything from fifty to discount. Jerry Gutterman, thank you so much

for being with us. Uh and Uh, well, we'll see whether those discounts will only get steeper from here. So I'm sure you have a busy few months out of you. Jerry Gutterman, Senior principal partner in chief investment officer at Gotterman Partners LLLC in New York. It's interesting for him as we talk about trade tensions and some of the turmoil in the tech sector, how does one go about identifying opportunities among emerging tech companies with big data and

artificial intelligence against this backdrop? And joining us from Tel Aviv, Israel to talk about this is Brock Rabinowitz, managing partner at F two Capital. Brock, wonderful to have you, especially on a day like this where the trade tensions are highlighted. How much does that backdrop color your view of how to invest in emerging tech sectors. Yeah, it's great to be here. UM. You know, we're ten year vehicles in

UH in venture capital funds generally. And I was just in the US and I heard from you know, family offices and large institutional investors who are spread in the equity market is dead markets and also a bit in private equity and VC. They're actually moving more money to VC now because of that, because nobody knows what to make out of all this volatility. VC being venture capital, yes, ye,

venture capital UM, transforming markets, transforming the world. UH. They still believe in tech despite the volatility, and VC is an attractive way to do it UM. And at the same time, all the big tech giants are sitting on hundreds of billions of dollars in cash, so people can see the exit activity will continue and it's about finding

value in different locations around the world. Barack, can you just give us a little background on F two capital, because I believe what a spin out out of Genesis Partners, you and two others deciding to go out on your own, and you managed to also take something called the Junction with you. This is an accelerator program explain how it works. Sure, I'd be happy to pim so. Genesis Partners was one of the original venture capital funds formed in Israel when

the industry started about twenty five years ago. It we had six fifty million dollars under management across four funds. And what we saw in Israel generally is the changing of the guard. At the time Genesis started, it was very much a buyer's market, those with the cash where kings. But what's happened over time is more and more strategic players moving to Israel and start buying up companies. Is power has shifted to the entrepreneurs, so the founders have

the power. It's now a seller's market and vcs to be successful have to give more than cash UH in order to secure the top deals. In our way of doing that at F two Capital, F two is powered to founders UH in this spirit is through our platform

called the Junction. The Junction is a network that we've created of multinationals including sap Unich, re Kuley, Packard and others largest players in the world who are looking to Israel for technology edge UH, and we leverage them as a way to stand out in the market and support founders and attract them to our program. So, Brock, I'm wondering if you could look into the crystal ball and tell us what the cutting edge technology is currently being

developed that you think will change the world. Everybody is talking about artificial intelligence, and it's just different ways to apply that. Artificial intelligence In Israel, Uh, it all comes out of the military. Israel has always been at a numerical disadvantage to our neighbors in a hostile region. We've relied on artificial intelligence from the you know, basically the

the the uh initial days of of of computers. Well, but how is it going to be applied in a cutting edge way that's going to sort of transform the way we think about things. It's it's gonna be applied in stages so um. You know, for example, enterprises are sitting on tons of data. They're drowning in data. They don't know how to make sense of all the data.

So you can apply machine learning to comb through the data, enrich it with other data you can get off the web in order to create predictive models to tell you how much, uh to pay for your next house. Uh. We're equally which drug is going to be effective to cure cancer. UH. In other realms, in real estate, we see, for example, UH, the use of bots who can service hundreds of clients compared to a regular agent who can serve dozens at a time, and they do that through

artificial intelligence. So I think it will be a matter of enhancing human capabilities, UH using computing power. Now, according to the reports, you get pitches from let's say two hundred and fifty applicants, and you select five companies and they enter a six month boot camp program. You give them a hundred thousand dollars in funding on a convertible note, and then you get an option to invest more. Some of the companies are Regulus X of firewall, anti virus

solution for drones and so on. But you say you want to develop sophisticated insurance technology. Tell us about why you don't want to go business to consumer. You want to go business to business. You know. I always feel that entrepreneurs they need to do things where they have an advantage. And Israel is so far removed from the big consumer markets, for example, the US, that we're really going to be at a disadvantage to startups in New

York or California. Uh. Instead if we can work behind the scenes, powering enterprises to do their jobs better, that's really a sweet spot that we found, uh. And that's what the multinationals like Google, Facebook, Apple, they all have their R and D centers outside the US and Israel, but more recently the Chinese Ali Baba and some of the other big names have come here. Uh, And that's why we chose to focus our program on these kind of enterprise deep technologies. Brock Who's ahead when it comes

to tech advancement US or China? I think the the US will always be ahead when it comes to creativity, and that means that US will always be ahead. China has always been good at copying. Where you see them ahead is more in I would say, new forms of payment technology or you know, specific areas, But I have long term confidence in the US. Tell us just quickly about frontier technology when it comes to augmented reality products. How could they be used in business? And what are

you doing to support that. Three D printers for examp and pull or cloud based quality assurance testing. Yeah, I'll tell you. I mean you mentioned three D printers. Three D printers you know gets into the realm of additive manufacturing. And I'm actually born and raised in Ohio and Youngstown, Ohio and the rust Belt, and we've done a partnership recently.

Alongside the big names I mentioned, we also have a partnership with the Youngstown Business Incubator, which is looking to Israeli tech and additive manufacturing as a way to stimulate jobs UH in an economically depressed part of the nation by embracing added manufacturing and restoring manufacturing power to the rust belt. UM. But you know you mentioned augmented reality as well. Same thing. We're seeing huge disruptions as people

adopt artificial intelligence. You've probably heard the statistics a lot of people are going to be unemployed. Well, if you could use augmented reality, for example, in classes, UH and give that to people who would otherwise be laid off and send them back into the field as service personnel getting the training they need in real time in the direction they need a real time UH to fix problems. UH. It's it's a really impactful way of both generating profits

UH and a social impact. Thanks very much for being with us. Barak Rabinowitz is the managing partner of F two Capital based in Tel Aviv. Speaking about artificial intelligence and venture capital incubators. 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 abramowits one before the podcast. You can always catch us worldwide on Bloomberg Radio