P&L: Schork Says Oil Prices in Mid-50s Are 'Testing the Highs'

of the Short Group. Joining me from Villanova, Pennsylvania or at Stephen Shorka was noting that gasoline prices are at a two year high, at least on the national average track by the Triple A. Yes, they are on the high, and of course this has to do everything with the price rise in crude. All that has been going on for the better part of the year, and it really

got a kick start last month. With regard to the decision out of OPEC, I want to point out that though yes, even no, gasoline prices are high relative to where we've been in the past, that is to say, adjusted for inflation, gasoline prices, while they are dearer relative to a year ago, there are still relatively cheap and keep in mind, we're also at the time of the year where demand is very strong, and demand this December happened to be stronger than usual because we had the

coincidence of the Hanakah holiday overlapping with the Christmas holiday, so you had that many more shoppers hitting the road just about at the same time. So you have the combination of higher oil prices, strong demand, which is transitory, but once again just for inflation, were still in very good shape. Well, Stephen, what's your outlook oil right now? West Texas up one percent? That's fifty three fifty eight

for a barrel of West test West Texas seccrued. Also give us your thoughts on natural gas higher by one and a quarter percent, three dollars seventy one cents per million BTU. Yeah, absolutely, so, first and foremost with oil prices, I've been in the camp for the past two years and I will remain in that camp for seventeen. That oil in the mid fifties is you are testing the

highs of what the market can bear. There was an interesting study put up at the Dallas Federal Reserve a couple of months ago where they interviewed a hundred and fifty executives in the oil and gas industry. The key question was at what price would you need to see to bring back a substantial amount of production here in the US, and the overwhelming response was oil in between fifty five and sixty dollars a barrel. So now we

look at and what has happened during this rally. Well, first and foremost, we had a sharp decline in US production through the first half of this year, but that decline ebbed and plateaued at the end of the summer, and actually since October U S crudal production has been inching higher, and so US production was already rising in spite of what OPEC was or was not going to a last month in Vienna. And then when we look at some other metrics in the market, the CFTC data.

This is data that gives you and tells you and breaks out the positions being held by speculators, producers, merchants, so forth in the market. And when we look at that data, producers are now holding the shortest position. And when I say shortest position PIM, I'm talking about dy've sold oil forward in the futures market. That position now is at a nine year high. So a producer is not a speculator. A producer will only sell oil forward if they intend to bring more production to the markets.

So when we look at that data at a nine year high, when we also look at the data of the forward curve, if we look at the pricing as you go out along the future, as we go out along the X axis month after month, we've seen a sharp rise in the oil prices through the next six months.

But that sharp rise has actually declined and we're actually seeing heavy selling pressure because we have not seen a commensurate increase in price in oil for priced in the latta half of this year and in so anecdotally PIM what I'm taking away from that is when we look at the CFTC data, when we look at the Dallas Fed, when we look at the fact that we have not seen a knock on impact the prices out into the future of the belief that producers, US shell producers are

getting ready to have a very productive and a lot of the oil that OPEC has promised to take off of the market. US producers are willing to put a lot of that oil back onto the market. Thanks very much, Stephen Short, he is the president of the short group. He says, oil in the mid fifties barrel, that is testing the highs of oil prices. All right, to learn

more are about consumer confidence? We turned to Lynn Franco, director of Economic Indicators for the Conference Board, and just to note, the headline is US Consumer Confidence Index increased to one hundred and thirteen point seven in December. It is the highest level since August of two thousand one. Lynn Franco, thanks for being with us, Good to be back. Tell us the details current conditions. Let's start there. Okay,

we had a little bit of a mixed picture. We had a little bit of a decline in current conditions as consumers us a little bit of softening and overall economic conditions and economic conditions, but overall the figures for the fourth quarter remain very strong. Now, the quote that you have that leads the report talks about the post election surge in optimism for the economy. How much of

that is tied to the stock markets performance? A lot is tied to the stock market, but also consumers expectations for business conditions, employment, and income really urged in December. In fact, expectations are at the thirteen year high and expectations for the stock prices and the stock market overall are all sort of thirteen year high. Now this includes the short term report as well, the short term outlook improving in December as well. Absolutely, and that's what drove

consumer confidence this month. We saw expectations surged across the board. And now the question becomes is, you know, do these expectations become realizations, because that's really going to be the key for holding these high levels of optimism going into Then you mentioned consumer incomes and I'm wondering if you

could give us more detail. Well, we saw here that the percent of consumers expecting their incomes to increase one to that's the highest reading we've seen since December of oh seven, which is right before sort of the crisis hit a max um. And in terms of their decrease again we're going all the way back to two thousand and seven. So consumers are really positive about their income expectations, and tied into that is their expectations for stock markets

as well. What about consumer expectations for the labor market very good as well. Here we saw that increase to about saying they expect more jobs versus just a four saying they expect a fewer jobs, and that is the highest level we've seen since back in February of eleven. Conditions for businesses that's set to improve over the next six months as well. Absolutely, there we saw twenty three point six of consumers are telling us that they expect

conditions to improve. That's the highest level we've seen since February of two thousand and eleven. So it's really these expectations for business conditions, employment, and obviously that will then lend itself to an increase in income that are driving the surge that we've seen confidence this month. Now, Lynn, this is not the only indicator that you look at, For example, the measure of CEO confidence as well as things such as help Wanted Online. Tell us about how

this all fits together in a picture? What would you describe it as. I think what we're seeing right here is just sort of some post election optimism from what we're seeing with our under you know, other indicators, whether it's UH employment indicators or Leading Economic Index all look for a pickup in sort of economic activity in the first quarter of I think with consumer confidence now, the key is, you know, are we going to be able

to maintain these levels? And that then really becomes a question of will the economy pick up further, will UH employment gains pick up further, and will wage growth continue. So we're expecting that whether or not we get a little bit of a retreat in the next couple of months, that could be possible, but we still see a very confident consumer. And then just quickly, based on your experience, is the is the economy going to lead this indicator or is it going to lag the indicator. I think

it's going to sort of lead the indicator. And I think key here is what really happens in terms of job growth and wage growth. UH And if these both of these don't sort of pick up in the next couple of months, we could see a little bit of a retreat and consumer confidence. But if we just take a step back, I mean, we've been at very high levels since the summer. We've been at over a hundred, so I think overall we should maintain levels that reflect

a very confident consumer. Thank you very much, Lynn Franco, Director of Economic Indicators for the Conference Board. Part one stock that is falling and has well has fallen this year, Rather is uh Banca mont Sienna down more than eighty seven. Here I'll tell us more about the future of the bank. Is Kiara Albanesi are room based markets reporter for Bloomberg. Kara tell us the latest details on the rescue or

attempted rescue of Banka Monte di Paski. Good morning everyone. Yes, indeed the stock, as you mentioned, has fallen, but trading has been altered for a few days given that the bank, which is that the world oldest bank, is actually in the eye of the storm because of its inability to have a sustainable plan to to plug in a capital

short fall. The latest on this front has been a bank UM a letter from the European Central Bank to the to the bank, which was acknowledged yesterday evening, saying that the capital short fall is actually almost doubled that what initially was expected. Uh. This means that a twenty billion funds that was set up by the state UM earlier earlier this month to help the bank could be almost entirely taken up or for its most part taken

up by Montepasti only. Well, what has the government's response been to the e c b S letter saying that the bank needs more money and as you just described that twenty billion euro effort was designed not just for Monte di Paski, but for other Italian banks as well. The government has been um silent at the moment, but local media has been saying that the intervention could uh could be almost UH six point five billion from the States, so basically the government would step in covering most of

the capital shortfall. What about the bond holders? Will the bond holders end up with any value if the bank receives this injection of capital from the Italian government. The bond holders could say could save parts of their investments,

but they will most definitely their loss in this case. UM. Both the state and the ECB, especially in an interview with the CB supervisory board member Angeline earlier today, saying that yes, the bond holders also have to to chip in into into the shortfallen and and basically combine their

efforts with the state. What is the state of the bank's liquidity right now at the moment, The ECB said that the bank is still solvent, which is definitely good news for for the market, for investors and for those following the story closely. UM, But the liquidity has been deteriorating very quickly and the ECB mentioned in particular what happened in terms of liquidity degrees during the month of

December and the days before. So it has been a liquidity deterioration, quite sudden, quite fast, in the run up to to to the latest news that we just we just discussed KIA. It's worth noting that not all Italian banks are facing the kind of pressure that Monte Dipaski

is facing. Correct. Correct, Not only Italian banks are in the same condition, and Montepasky is definitely the bank which is in the weakest position, but most or several other banks are also feeling the pressure of non performing loans, a burden that overall is about three hundred and sixty billion for the country, and other banks are expected to also seek the aid of the funds that was approved

by the government. Has there been any reaction to a plan to put all of the bad loans into a bad loan bank and be able to ring fence the problems here Again, the issue is the European Central Bank, which is monitoring closely what is going on with with Monteparsky and UM. The plan that was advised by by GPE market until a few weeks ago, a few days actually go Um also looked into this possibility, but that was set aside for the moment. What happens over the

next week or so. Are there meetings between the Italian government and European Central Bank officials or they everyone just taking a break. The contexts are are still ongoing, and the fact that UM that the ECB responded to the letter and Montepasky send out a statement on on a day that is actually a holiday in Italy is a signal that everyone is still very much UM at the table, even if, of course UM that there is a festive break.

At the same time, it is likely that things are going to slow down until the new year and and more clarity is found between those the record discussion. Thank you very much. Giara alban Asi, markets reporter for Bloomberg News, reporting from Rome going up against Verizon and a T and T. Some would think it is suicidal, but not David Glickman. He is the chief executive of Ultra Mobile and he's here to tell us more about the company and its battle in the mobile phone business. David Glickman,

thank you very much for being with us. Thank you all right, So you are serial entrepreneur, as I understand it you you previously found it TelePacific that was back in and that was to compete with landline phone exchanges. Now you're going after mobile operators. Tell us about how Ultramobile works. UM. Ultramobile is a nationwide mobile carrier, and

we uh, we have stores and offices all around the country. Uh. And we assume that everybody has their own mobile phone handset, and we offer sim cards uh to put in your existing phones, very much like they do in Europe and in Asia, just hasn't come to America just yet, um, in full force, and we are making that happen. Well, David, how is it possible that you are able to compete against the likes of Verizon, A T and T T Mobile uh in offering what looks like to be a

per month all you can eat mobile fare um. Well, a little something that I like to call coopetition. UM. We we actually purchase network from T Mobile so that we have the same nationwide footprint. UM. And then since we don't spend hundreds of millions of dollars on advertising, um, and we just pass on all the savings to our end users. So uh yeah, So for for nineteen dollars, you can have unlimited talk, unlimited texts, unlimited UH data,

unlimited international calling and unlimited international texting. UM. All you need to do is get one of our SIM cards and put it into your phone. Now, in addition to it being as you describe, unlimited, you can also customize the service. Can you explain how that works? Sure? UM? So UM at them at the lower price levels, for example, nineteen dollars, UM, you get unlimited data. You don't get

unlimited high speed data. So we have very high speed four g LTE and we give you a chunk of that UM and if you want more, UM, you just pay for exactly what you use UH, and you don't. You don't end up having to pay sixty seventy eight dollars like you do with some of the other carriers. UM. And have you know, ten gigabytes of high speed data if you only use one or two? So this way, UM, you're you're unlimited. But after a certain amount you end up going back to more of a three g UH

data and you can upgrade to whatever you want. How did you decide to focus on what you describe as an underserved demographic of the U S consumer market, the foreign born US residents well, uh we uh. I. Basically I've lived overseas. I started my first songing company when I was living in South America and offered discounts to

businesses there. And uh, at the same time when when I when living in America, it's so hard to make international phone calls because usually the big mobile carriers want to charge you a dollar a minute tall overseas, or if you want to use the more inexpensive calling cards, it's the pain. You have to dial and access number, punch in your pin number, then punch in the destination number. If you're on a smartphone, if somebody calls you, you

can't just hit reply and call back. Um. And so we decided that we wanted to come up with a system that employed either free international calls or inexpensive you know, calling card rates on. Uh, it's not it's not free in the sense that you do have to actually buy the card. Correct. Well, I mean you've got the you've got a twenty, you've got a plan thirty four dollar and thirty nine dollar and so on. I mean you

have to actually buy the buy the card. Right. So, so what a saying is international is free on a discounted mobile phone so instead of paying six yr seventy dollars for unlimited talking text and UH in the US for nineteen dollars, you have UM. You're you're getting a discount on limited domestic talk in text. But at the same time, we give you sixty countries to call about two thirds of the world for free, so you can call Mexico unlimited, you can call China unlimited, Canada unlimited,

Europe unlimited. UM. It's sys some countries that are more expensive, for example, some of the African countries calling Philippines, etcetera, etcetera, where we will charge you, you know, two or three four cents a minute instead of UM. What the what

the large carriers will charge a dollar a minute. What's the incentive for the stores to sell your cards, your simcards versus the SIM cards of more established players like Verizon or A T and T. Well, you know, we focus very heavily on the stores as our distribution points, so we make it very easy for them to sell UM. We offer a great product to the consumers, so they know. The consumers are gonna be very happy when they get an ultramobile SIM cards and we offer one of the

highest commissions. You know, Our theory when we launched the company was the customer is going to have the best deal and the store is going to make more money and have happier customers by selling ultramobile. And we've stuck with that in the four years that we've been in business. Now, this idea of offering uh, data saving data your way, this is what they call voluntarily throttling the speeds and the access to various websites or services. How is that

working out? Actually it's been succeeded our expectation. Customers absolutely love it. So what happens is, um, you know, if you're on a plan that says says gives you five gigabytes of high speed data, and UH, you go on YouTube and you start looking at a video, and you know as you as you as the video starts to load, and as you start watching it, it's loading much more

than you're than you're watching. So if you're you're the seconds into the video, the YouTube is already downloaded UM onto your phone, maybe one minute of that video, UM. And then if you don't choose to watch the rest of that video, it wasn't the one you wanted. You want to go to the next one. Or the next one you ended up paying. You ended up using a lot of your data for video that you never watched.

The same thing happens with Netflix. The same thing happens with Facebook, especially because Facebook will automatically uh download and play a lot of videos that you have you haven't even watched yet, or you haven't even you clicked on UM. And so with data mind way, you picked the speed that you want. Essentially you decide how much of that

pretty loading you you want. And we've discovered as a lot of our customers that don't like paying for uh, you know, downloading pipe speed data UM for movies and videos that they're not watching. They they get onto the the the data my way, and they picked how much throttling they want and how much how much downloading. Indeed, thanks very much, David Glickman. He is the founder and the chief executive of Ultramobile. Thanks for listening to the

Bloomberg P and L podcast. You can subscribe and listen to interviews at iTunes, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm out there on Twitter at pim Fox. I'm out there on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio