Saudi Aramco IPO Will Happen When Pigs Fly: Kilduff

John always a pleasure. Where do you want to begin the direction of oil prices or the direction of Saudi Aramco's initial public offering. Good morning, Tim, It's always great

to be on with you as well. Thank you. Um. I think you know, just so you know folks at home, I know we're seeing the price of gasoline rise pretty swiftly now over the past several weeks, and I guess just to talk about how we're seeing the oil market and gasoline prices react to the imposition or reimposition of sanctions on Iran, and that's going to occur on November four.

International oil companies are already starting to stop buying Iranian oil so that puts the scramble on for other supplies from other countries, which is tightening up the global market. So that's part of what we're seeing. W t I price has got as high as seventy seven dollars a barrel last week, they've fallen all the way back to seventy four, just below seventy four here on on developing

things in this market. It's going to be a very volatile winter PIM as we get into the end of the year in terms of the supply demand balance, based upon several things, including whether or not China and India continue to buy Iran oil and whether or not the US actually gives some countries a break and allows them

to continue to buy Iran oil. John, is the price of oil moving higher visa v your comments to do with the Iranian oil sanction driven by speculators bidding up the price or is there a real lack of supply right now? I have to say it's sort of buy it now while it's relatively cheap, given what you're sort of breaking down and seeing in the market. As we get into the peak part of the Northern Hemisphere winter,

which is the peak global demand period. PIM I know we talked about the summer driving season here in the US, but that's really the peak. And when you do the numbers, considering where the saddie production is at a record level, Russian oil production at a record level and probably tapped out at this point, uh, it's looking like a crunch, a supply crunch, and so that's what got this market really bit up. A lot of the other Wall Street analysts are really up their price targets for a year end.

There's several hundred dollar barrel calls. I'm not in that camp. I don't think it will get that bad, but that that's what's sort of on the table. There's a real buying fervor that came into this market. What number are you looking at if you're not looking at a hundred dollars a barrel? I think Brent crude oil, which is at eighty three right now, will not get much higher than ninety if it even gets there. And I don't see w T I getting much higher than uh eight

over to eighty five at most. Why is that? Why? Just maybe explain your your reasoning well, because I think there was some question as to whether or not Saudi Arabia in particular, would come across with more barrels, and they already are and there they have apparently have come together with the Russians to supply this market sufficiently. Also to what's not being focused on as much is the demand picture, which is being called at the question now

because of the troubles in China. Because of the troubles and a lot of the emerging markets who are getting crushed by the rise in the dollar because they have to pay for their crude oil in dollars, so they're they're already paying the kind of prices that we saw back in two thousand and eight when oil prices got to a hundred and forty seven dollars a barrel for w t I. So there's a real demand crimp coming and it's going to be more US supply too as

we turned the corner into nineteen. Okay, so you look can at ninety tops for brand eight five for West Texas intermediate crude. I want to get your thoughts on natural gas just for a moment before we go to sout of your ram coat. Tell us about the trajectory of natural gas and what we can expect during the winter. Natural gas prices have gone parabolic to the upside, tim Um.

And that is because we are staring down a supply deficit going into the winter of about lower in terms of storage versus last year in the five year average. It's going to make for an incredibly volatile price picture for this winter. We could be staring down supply shortages if the winter is at all cold, and these prices will probably spike uh markedly. They could double, if not triple from here. There are three or so a unit right now on the first visit of the polar vortex

for example, if if from when we get one. Well, just to note that natural gas prices are higher by more than four on the Nymex today at three dollars and twenty seven cents per million BTU. How hard you got a price target there for that gas. Let's say even the future contracts I think you know, December January future contracts, futures contract uh could see upwards of at least seven to nine dollars. Seven to nine dollars, Yes, wow, that is gonna hurt a lot. And Tim, I'm I'm low.

I've seen estimates out there in the twelve to twenty dollar range. So that's the space to watch. All right, well, we certainly are going to watch that with you and John. Now to turn your attention to Saudi A Ramco and a potential initial public offering. What do you make of

the timetable? Is it really going to happen? Uh? No, I think pigs will fly before that company gets I p o tim Um this is uh, you know, more just prideful talk from Mohammed bin Salman, the young crown Prince who who desperately wants to sort of make his mark on the world by getting Saddi Ramco on a on a public exchange outside the Kingdom. Uh, it's just

not going to happen. I mean, there's there's there's really just too much in the way of patronage and other disclosure issues for a Ramco that's just gonna prevent it from you know, meeting the listing requirements of New York or London or even Hong Kong for that matter. Um. This they're doing a different deal right now where they're where they're sort of monetizing um A Ramco by having them by the Sabbok, which is the large petro chemical

or plastics maker in the Kingdom. They want them to buy a seventy dollar steak in that in s that the petro chemical company. That's right, and you know that that will give Mohamed and Psalman the thirty billion or so that he wants to play with. Um, but you know, the the Kingdom's conduct, you know, in the region, and other things that are going on, including uh, this mysterious disappearance of a noted journalist um Jamal Kashogi who went

to the Saudi consulate in Turkey and has not been seen. Uh, it's gonna be uh. These Keys kinds of actions are increasing, not decreasing. There's still hundreds, if not more than that of princes and other royalty locked up in the Kingdom, and it's just not a suitable investment climate. That's that's that's emerging there. So to try to list a Ramco is gonna be a very difficult proposition and he's certainly not going to get the two trillion dollar valuation that

he's looking for right now. Best I've seen is anywhere from eight hundred million, uh to one trillion. Wow. All right, well, thanks very much for being with us. John Kilduff is founding partner of Again Capital. Talking about the crude markets and what's happening to the price of oil. Our next guest is Joel Stern. He is the chairman and the

chief executive officer of Stern Value Management. And Joel has someone of a unique perspective because not only is he an active academic teaching in business schools around the world, but he is also the founder and chief executive of Stern Value Management, which has, over the course of many years, created a variety of methodologies for companies to follow in order to increase their economic value. And we're here to talk about the economic value of the United States. Joel Stern,

thanks for coming in to our Bloomberg Interactive Brokers. Let's begin with a look at interest rates. I want you to talk about is there a link between the level of interest rates and the performance of the stock market. Well, you and I have been frands for about five years, and over that time I've pulled your ear so many times about interest rates. Maybe you should answer the question instead of me. It here goes, I'll give you my best shot. Interest rates are a function of two things.

One is the strength of the U. S economy and the other is the expected rate of inflation. So if interest rates are rising because of inflation rising. And people have been talking about that now for months, saying, oh, oh, we better watch out for the coming inflation. I got news. There's something else that can help us with all of this, and that is the gold price. And here's the reason why. The gold price is a function of the real US

interest rate that is afty and knockout inflation. Now we know that interest rates have been rising, forget about the fit five year notes, two year notes, tend year notes, thirty year notes, things that are not controlled by the Federal Reserve. They can try to control it. They can try to control it, but in the end, it's up to what's really taking place in the economy. If the economy inflation rate is rising, then I got news the gold price will be heading north south. But guess what

the gold price is falling. How can that be happening. And the answer is, if the real interest rate rises, that's native inflation. That is actually a good sign for both the economy and for a low rate of inflation. And that's what's been happening. So when I sit down in the evening and I either listen to Bloomberg or listen to some other news, I don't worry at all. How come? All I have to do is take a look at what the gold price is doing. And guess what.

Over the last three days, the doao has been getting wett really badly, over two points a day now percentage why it's not I but it's still a significant thing. But guess what's been happening. The gold price has been falling, which means the reason interest rates are rising is as a signal to the rest of the world that the United States is the place to invest money. This is the place to um why non inflationary growth. That's what's

happening alright, non inflationary growth. Yeah. Does this have a political element because usually in the next paragraph of every investment newsletter is some prognostication about the mid term election. Of course, of course, because some of the policies that the president has been following leave a lot to be desired. Do you think he looked for this disaster to take place on the Supreme Court? Of course not. And did the Democrats look forward to I guess they did. They

were enjoying themselves. And it looks like the House of Representatives could well fall to the Democrats because of the Kavanaugh experiences, all bad, all bad. But today, unfortunately, with the polarization, unfortunately almost everything is politics. There is some element of politics there. And what are we supposed to expect. We've been having this problem now for twenty years already.

Would would a Democrat controlled House have a deleterious effect on your perspective when it comes to the trajectory of the U. S. Economy? And what's the reason? Because if they get the House, then they're gonna want to the House, the Senate, and the presidency in just two years. So

what will they do. They'll stop Trump from doing anything that would benefit the Republicans and in other ways if until now, the Republicans have controlled both houses of Congress, and so when Trump says, look at all these wonderful things I have done, well, there's no doubt he's right. All the things that he has done he has done principally because he was in control. But over the next two years, if they lose the House, the Democrats will

be fighting with the Republicans on everything. But isn't that necessarily good for business? That nothing will get done to the extent that they will be able to digest all of the changes that have taken place in the last two year years. You know, the left is that. My teacher, as you know, was the late Milton Friedman, and Milton says it would be a good thing if the houses in Congress were in different parties hands, so that nothing would get done, and that way we could keep the

government small instead of it getting out of control. Did I enjoy that? Hey? Listen. When I got to the University of Chicago, I was a left wing liberal. He made me into a right wing liberal. So the answer is everything matters. They'll be fighting like crazy because the Democrats cannot believe what happened in sixteen and they'll be doing everything to undo it. Let's talk about one of the key areas of the Trump administration's push, and this has to do with trade and trade tariffs. Well, I'm

a compulsive free marketeer. I mean why because what we learned at the University of Chicago so important is to ask ourselves questions about things we think for granted. So whenever something would come up, I would analyze it first through Milton's eyes, then through my own eyes. And my father, of course, would say, what's happening to you in Chicago? Because the family was left wing liberal and that's just

the way it was uh for generations. Okay, But the question is this, what is likely to take place between now and the next year. I think the Dow was going to be very strong, still continuing strong, and the Mark is going to do very well no matter what happens to trade. I'll tell you why. My position on the trade thing is this. I'm against any tariffs. I'm against export subsidies, I'm against import quotas. By the way, the highest quality cotton in the world is on the

west coast of Africa. The only way we can get it here. They sell it to the Chinese and then Ralph Floren makes it in China and sends it back here. Isn't that terrible? Why are we going through all of this RIGAMAROLEA doesn't make any sense? Now, how do I feel about it? I'm in favor of Trump's position. Why, because these people have been ripping us off for as

long as he was talking about it. He is correct about that, and he is an excellent negotiator, and he will figure out a way to get the EU to let our foods go in there. He'll make sure the Chinese capitulate. It's it's going to be in their interest to capitulate. When it's all over, everybody will be claiming credit for the good things that I have taken place. All well, we'll have to see what happens, but I

want to thank you very much for your views. Joel Stern is the chairman and the chief executive officer of Stern Value Management. The Brazilian real has gained nearly four percent against the US dollar since the vote on Sunday that saw a far right former military man win nearly half the votes in Brazil's presidential election. Now, this is just the first round of the elections. They will have

a runoff vote later this month. Here to tell us more about the situation in Brazil is Dan Cancel, Managing editor for Latin America for Bloomberg, and he joins us from sal Paolo. Dan tell us the details about the election results. Yeah, good morning. Um. You know, heading into the to the vote, the polls were showing uh, as you said, the far right conservative former army captain j R. Bilsonado, we're showing him ahead. Um, but he's his performance Sunday

was stronger than expected. Um. There was even the first print you know had him at, so he needed more than fifty two to win an outright. He ended up at about um and his closest rival, who who will go to the runoff with him, was at for Nanda. So beyond the presidential result, there was a huge impact on on his candidates that we're running for Congress and for for governor positions. So basically if you were on his ticket, you you you got swept into power and

a lot of these these posts. Can you tell us some of the policy changes that the Bosonaro is looking for if indeed he becomes the next president of Brazil? Sure? Yeah, I mean the market, as you mentioned, you know, has rallied off off the result. A lot of their hopes are pinned on one guy, which is the the economic advisory is called Paolo gettys Um. He has a degree

from the University of Chicago. He seemed to be as one of the more kind of liberal minds in in in Brazil who's keen on on privatizing most uh, you know, state companies shrink in the size of the state, UM pushing through you know, an aggressive pension reform, So that would be kind of best case scenario for the market. UM.

But of course, his relationship with Gets is relatively new. Um, he's been in Congress Bolsonado for nearly three decades, hasn't done much to be honest as a lawmaker, and no one really those kind of uh you know, where he hopes to take the economy. So it's quite uncertain, like there are there are hopes that that they'll go in the right direction. But uh, you know, if he gets into a into a battle with his economic advisor at some point the guy leaves, it would be kind of

floating down stream without a paddle. Okay, Dan, I'm gonna ask you three topics. Will go take one by one and it just give me a couple of points. And what you think people need to most understand about? Number one? The economy in Brazil? What's going on there? Yeah, it's just been muddling. You know. It's it's gonna be a

little better than one percent this year. Um, Basically you have these big reforms on on the horizon that need to get done in order to grow more than than their potential, which Goldman puts it something like two to three percent. Right now, Okay, tell us about corruption. Uh So, Bulsonado, you know ran on a big anti corruption platform. He beat the Workers Party has been in power since you know two two, um, basically on the back of saying everyone's corrupt and we need to clean up the system,

blow up Congress and and beat the establishment. So in some ways this is a step towards uh ousting some of the most corrupt sectors in Congress. We just don't know what him and his party will do in terms of cleaning up corruption going forward, all right, Topic number three, crime and a crime wave that's been hitting Brazil. Yeah, so last year, it's been reported, you know, widely, was was the most deadlier in terms of homicides. There was sixty four thousand homicides in a country of about two

million people. UM. Bolsonado's big, big platform has been crime and uh, you know, attacking crime, uh, basically giving police the right to shoot to kill if needed. Um. And so you know, a lot of the people, even if they didn't like what you said about you know, gay's women or other minorities, I think he's tough on crime,

then he's worth a vote. Well in that very context that you talk about, the comments that he's made about members of the constituency that even voted for him, he's a seven term congressman and from the Amazon to the beaches of Rio de Janeiro, he won votes even among

groups he insulted. How did he do that? So again, I mean, you know, people, I spoke to several people who who even didn't even know a lot about, you know, what he's done as a congressman, but see him as somehow an outsider, like you said, even though, like you just said, he's been in Congress for years. But he's someone that is not from one of the major parties. He's someone that is saying, uh, you know, we've been

too soft on criminals. You know, drug traffickers and and and petty crime taken over the country and we need to really get tough on crime. And so you know that has been his his biggest message and one that's resounded the most with people. What role has social media taken in this campaign? Yeah, it's been huge. I mean, you know, depending on you know, which party backs you

usually dictates how much TV time you get. During the campaigns um and Billsonato had very little time on TV or radio, but he had the biggest following on Facebook. He's got like forty three million followers. He was doing a lot of Facebook lives. You may recall he was stabbed during a campaign event, so he did a lot

of this stuff from a hospital bed. Um. He had a big grassroots kind of organization behind him that was very active, you know, both the positive side in terms of pushing some of his messages and then the negative side, which are kind of you know, they were calling the trolls and the bots that that were very aggressive and insulting his his opponents. And just quickly, when is the runoff? It's later this month, right, yeah, October, so we'll have

about three weeks. There will be a few more debates that we hope will both candidates will participate in, and yeah, by the end of the month will have a new president. Well done. Thanks very much for being with us. Dan Cancel is managing at it there for Latin America for Bloomberg, joining us from sal Powell. The topic now is biotechnology, how to invest in biotech successfully joining us now as someone who's managed to do it. Eli Kasden is managing

partner of Kasiden Capital and he joins us now. Eli, thanks very much for being with us. I just want to mention a couple of companies as examples Magenta Therapeutics, grit Stone, Neon Therapeutics, blue Point Blueprint. Rather, these are all companies that you and your firm invested in while they were private companies and they have since gone public. Can you offer a little bit of insight into your thinking and strategy for how do you identify the companies

to invest in? Sure? Thanks Tim for having me on and and uh, it's a it's a good question. UM. We you know, are are sort of hunt for good companies. Begins by UM thinking about new market opportunities for technology, whether it's UH sequencing, DNA sequencing technologies, or diagnostic technologies or in the cases you mentioned, technologies that create new

medicines for patients UM that don't have good options. UM. So it begins there and and we we immerse ourselves in the dynamics of the markets, try to understand what it means to to be a good company, what the technologies you need. And at the end of the day, what we've learned is the biggest determinant of success are

the people. And so once we find all those vectors, UM, and we find a great group of people behind a company will invest and occasionally that that company that we've identified is private, and so we've created in the partnership flexibility to invest in private companies. UM. I will say, we hope never to do it, and so we really want to be investing in public companies. But in the life of the fund, we've done it about fifty times. Okay.

The reason I asked that question is to kind of set us off on this path to explore some of the more recent trends in healthcare and biotechnology. And I'm wondering if you could speak about all of the research, the oncology, cancer research that is going on and where you see the industry right now. I mean, it is a it's just an amazing time in life science broadly

UM and cancer specifically. UM cancer is a molecular disease by definition, meaning there's some error in the DNA that in different ways allows cells to grow out of control, resulting in in uh menached other organs, and dysfunction. And so for the last thirty five for years, we've been trying to understand that the technologies have improved and increasingly

we're able to create drugs that that fight it. UM. Two of the companies you you mentioned their strategies actually are to stimulate the immune system to do its job, which is generally is fighting cancer and all of us. But in in some people it UM, the cancer is able to evade or trick the immune system and so it can't do its job. And so two of the companies you mentioned, Gridstone and neon Um, are both trying to develop personalized immunotherapy solutions to to fight cancer UM.

Others like Magenta recognized that UM having sort of bone marrow transplants can really reboot sort of faulty immune systems, uh in the in the case you've described in cancer UM. And so while those are very effective UM, the treatments the conditioning to to make room for these new bone marrow transplants can be very toxic and and limit the application of many patients. So they're trying to make it

easier for patients to receive curative bone marrow transplant. Tell us a little bit more about gene editing technology and how that is attracting either your attention or how people can follow it in a in a specific way. Yeah, I think I think one way to think about this whole field is that you know, um uh, it's all an engineering challenge the human body is the the most complex machine we know, and for a long time we could not figure out how to understand it, let alone

tinker with it. UM. We're getting better and better at understanding it, and there are now tools UM to tinker with the gene editing being one where this error that we identify in the molecular code it causes in the case of cancer cells to grout control. We now have tools to go in and start to rewrite that uh broken code and make it, you know, incorrected, so that the cells UH are functioning properly. That's you know, that's

the ideal. It's still very very complex to do, and some companies have developed new technologies that have the potential to allow you do that. UM. And still early and still very hard, but it's we're getting much better. Give you about thirty seconds. What is the biggest mistake you find when you meet non expert investors in biotechnology? It's very simple. At the end of the day, it's management, management, management,

and so people invest in technologies. But forget that very few molecules jumped off the medical bench and ended up in your medicine cabinet all on their own. There's a thousands of decisions made by hundreds of people, and you should always be in resting in the people. Well done. Thanks very much for being with us. Eli Hasden, Managing Partner at Kasden Capital, speaking about investing in biotechnology stocks, private as well as public entities. 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. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio