Summer Driving Season Will Pump Oil Prices Until Fall: Schenker

Bloomberg prophet. He's based in Austin, Texas, currently at the Atlanta FEDS Financial Markets Conference in Emilia Island, and you can follow Jason on Twitter at Prestige e con. Uh. Jason, where you caught on the back foot by the rise in oil prices? No, we've had an expectation that we would see oil prices rise through the driving season. You know, the unemployment rate we saw it in Friday's report, you know,

the lowest we've seen since December two thousand. Strong labor market means we're going to see very strong driving demand that summer. Uh. The OPEC risks on top the Iranian risks of sanctions on top. That just adds fuel to a fire that we already expected would be burning. Because the U s summer driving season is one of the biggest factors for oil prices during the year seasonally. So I want to get a sense of how much is being baked in about the US withdrawing from the Iran packed.

If the US does go ahead and withdraw from the nuclear agreement, do you think the oil prices could rise much more from here? Well, I think they could. I don't think it's priced in at all. Um. You know, the technicals and fundamentals that we've seen in the market. You know, we're but we watched the thirty day on the hundred day moving averages. We've been above those now for a little bit. Um. We're above other critical supports,

these facts as were already supportive of prices. And you know, while we're seeing a little bit more upside today, and I think we're going to see quite a bit more moving forward. If we pull out of those that agreement with a run, you know, we could see five dollars, ten dollars, You could see a spike even higher than that.

I don't think it'd be sustained. And I think once we get past the driving season, I think there's downside risks from higher interest rates, and if the trade UH factors remain in play, then there's still going to be downstairs there. But we see the sort of bifurcated dynamic of upside through the driving season. This produces more upside,

but then in the fall more downside. Jason, how much is this increase in prices really tied to, let's say, the back and forth between the strength of the US dollar. Not much. I think that really if we look, the biggest fundamental driver for oil, like all commodities, is that they're bought and not sold. The global economy has been doing quite well, and despite what we've seen in industrial medals for those have been a weaker again, those seasonal

dynamics for oil demand. Right now in the spring where we're trading driving season contracts with binaries are ramping up production. This is a time when you see oil prices rise typically anyway, and now you've got a bit of a pressure cooker because these geopolitical risks. So I'm trying to figure out right now. It seems like last year people were saying oil is never gonna get above fifty dollars in barrel, perhaps get to sixty dollars of barrel. Now

we're at seventy dollars of barrel. How much of this is being driven by the fact that Saudi Arabia really wants to hit that eighty dollars of barrel mark for the Saudi aramco I p O possibly to happen next year. Yeah, I've seen as eighty dollars thrown around. Whether that's there you know, their actual explicit target or not that their explicit target was to push oil inventories to a five year towards the five year average range. That's been the

goal of Opecanano PECK members. It's been clear. Something we've talked to our clients about is that Saudi Arabia is priori ties in balance sheet over income statement. Right, That's what they're doing, will sacrifice selling your fewer barrels now in order to increase the valuation of our business. That's very clear. Um upside risk. We've been assessing the price risk this summer. We would see in the sixty dollar

range with potential spikes to eighty. That's something we were talking to clients about in December as a risk for the summer, so that definitely becomes a more material risk now with the geo political situation. That doesn't mean it will be sustained because the trade risks, global growth and interest rates will determine what happens once we get past

this summer. But for now, best job market. You know in eighteen years you're gonna see a lot of people on the road and families driving down from Chicago to Disneyland or the Disney World. Are the kinds of things that you see driving whale prices in the summer and driving a lot of other bills too. If you're going

to Disney World. Just saying I want to get I want to I want to get a sense of what you think of shale drillers and and the prospect of them really ramping up production in response to the higher price, meaning that they're basically going to offset some of the demand with just more output. What do you think is of that? Well, I think there's a couple of things

that you know you still have. On the one hand, these folks they're looking at the curve, they know the seasonalities of pricing, and if they're making the drilling decisions, you know they're still going to have to understand and they deal with those dynamics. So I think that you're going to see more production, but you know, one bit and twice shy, I think you're gonna see um still some of this holding back. And I'd say that for the funds that are out there to discussion, there's a

lot of money on the sidelines. There have been very large funds that have been raised in the last couple of years. I'm in Texas. I've been talking to a lot of these folks for the last year or so, and they they're still looking for distressed assets. I gotta tell you, seventy bucks of barrel looking for sweetheart deals with the stressed assets. If that's your mandate, that's going to be a pretty tough, tough fine for you. Jason, just quickly, what's the best way for investors to profit

from this rise in oil prices? Well, you know, I think if folks want exposure, then they need to be looking at companies that are producing oil. Um. They also may want to be thinking about the the underlying commodity as well that the price is likely to rise. Those are probably the areas where you're going to see people plays. I want to thanks very much for joining us at Jason Schenker is the president and the founder of Prestige Economics. He's also a Bloomberg profit and you can follow Adjason

on Twitter at the Prestige e con. We want to visit now in the world of real estate with Ken Wisenberg. He is a partner in charge of the real estate services group for Eisner Amper and he joins us here in our eleven three oh studious Ken, thanks very much for being with us. The news today, of course, is black Stone agreeing to buy Grammarcy Property Trust. The price tag is seven point six billion dollars. It's a fift

premium over the closing price on Friday. Why do you think they're making this move to buy Grammarscy Property Trust. If you look at the overall market for warehouse space UM, it's in high demand because of the increase in online sales and in the next day or same day delivery requirements that people are expecting. And uh, this is a good entry for black Stone into this marketplace paying a premium over the current prices, and prices for this kind

of space have been up last year. The reat UM warehouse reach space was up about six where the overall read market was down about eight or nine and they didn't get a big bump um it reads from the Trump tax cuts yet, so this seems to be a very good spot for them to go into. Uh, the spaces and high demand. It will continue to be in high demand for the same day delivery. And also um

other industrial uses are on the rise. Companies are bringing operations back into the United States because of the repatriation tax cut, and you'll see a increase in industrial activity in the United States in general and warehouse in particular, so reads stating for real estate investment trusts. Just to make that clear, last week, per Logus, the world's largest warehouse owner, agreed to acquire DCT Industrial for nearly eight and a half billion dollars. So you are seeing the

consolidation in this space. Can you just talk a little bit about what the differences between a warehouse and a big box store, because frankly, I hear about how warehouse space is in a real great demand, and then you hear about all these suffering malls and you think, well, I mean put two and two together, just make the malls into warehouses and you've got your demand sated. Well,

warehouse space generally leases essentially less than retail space. When you look as you know, retail space would it be anywhere depending where it is. So on Fifth Avenue, retail spaces four or five thousan dollars a square foot. In the suburbs that might be you know, hundred dollars of foot, but warehouse space in the suburbs is probably dollars a foot.

So it's a huge difference in the square footage. And also if you look at the parking arrangements UM and a big box store in the suburbs, there's a ton of parking UM at a warehouse there isn't. It's basically space for trucks UM. So if they do convert an existing big box store UM into warehouse, they have a lot of extra land available to build additional warehouse space on that property. It could be an interesting play well.

And then I guess there has to be some massive realized loss if there is conversion of say a big mall into a warehouse space just because of the smaller price that they can charge. Right right, I don't see a large mall being converted to warehouse a arge mall UM to the extent that it's going to be good doing a redevelopment, will have entertainment, residential and office space added to it. Um. You might see a reduction in the number of cars over the next ten years due

to self driving automobiles. People will not need to have their own cars and going through the mall will be you know, tapping your phone and a car will appear in your driveway. UM. So it's gonna be an interesting um change over the next ten years in terms of technology. UM. I think the malls are going through a repositioning and reimagining today which is really interesting. It's it's an experiential development in malls, um, which I love that word. Uh. And and if if you go down like in Florida

is a really great example. So the Ball Harbor Mall was the classy mall. All of the major stores were there, and they're adding restaurants, adding pilates, class studios, palatine bike stores, you know. So it's an experience to go there because you're going to eat, you're going to exercise, you're going to to the to the movies right there. Um. And

this good shopping and the you know, the best stores. Um. And that's an experience as opposed to just I'm going to the store to buy address or pair of pants, which you can now do online much easier, public versus private. Better to be a private real estate company these days.

UM reads have not had UM huge uptick UM and I'm surprised at that the new tax cuts really favorite reads UM and come from a read is subject to business exclusion UM, so that you're paying the twenty rate on read income UM general dividends or but the corporation pays twenty one, so the effective right there is thirty seven UM. So reads are really have a tax benefit and that hasn't been factored into their pricing. Why do you think that is, UM, I think it's complicated for

most people to understand. But you know, for analysts and stuff, they're looking at it, and reads are valued based on the dividend payout UM and and net asset value. But it's it's really the people buying it because of the dividend stream UM. And if interest rates are going up and you get three on a ten year treasury and three on a read, you're not going to pay as

much for the REAT. So I want to just ship back to the idea of the warehouse space, and it's a it's a question that Pim raised before the segment where he was saying, you know, are we seeing peak valuations here? Just because we are seeing such premiums bid up for these spaces at this time, you know, there's a lot of money waiting to be placed in the market. The stock market is experiencing significant volatility over the last

um ten or eleven months. People look for safe investments or safer investments that have a steady rate of return, and real estate provides that. So you're seeing real estate becoming a much more attractive investment when you look at what's going on in the world in terms of real estate UM affordable housing is in high demand UM housing in generalism and high demand. Hotels have been in high

demand UM. Office less so, retail much less so UM the warehouse because of the of the shift in consumer behavior brought about by companies like Amazon, UM, you're seeing the darling of the of the investor real quick. Have we seen rates to rent out warehouse space go up recently? Yes, how much significantly? I don't have the exact statistics, but it's on the rise because demand is on the rise. Fascinating,

Thank you so much for being with us. Kennt Weisenberg, partner in charge of the real estate services group for Eisner Amper in New York. We really appreciate you being here, especially on a day when Blackstone is buying Grammar Seat Property Trust. This is the second multi billion taller takeover of a warehouse company is in just the past two weeks fastening Space. We will continue to keep tabs on it customized in souls using three D printing technology. How

is it done and what is the goal here? To help us understand this new business adventure is Shamil Hargovin. He is the co founder and the chief executive, along with Hannah Chakrits, the director of product and design for Weaves. That W I I V V. That's W double I double V. Alright, Shamil tell us about we've and the science behind custom made insuls. Hey, Pam, thank you, Yeah, We've.

We've effectively taken Meta Greate medical great scan technology, put it on a phone and we're able to now from the comfort of your living room, measure your feet or other body parts and then run that through a system where we customize the product designed for your body. We buy mechanically enhance the product to serve your body, and then ultimately use additive manufacturing in three D printing to print the product in the United States and send it

to your door. Chamil, Before we do anything else, we have to get something out of the way. You ran a marathon and flip flops? Is that right? I apologize that was our product engineer, Chris Bellomdia. Yes, okay, I'm just making sure and he lived to see the other day. You know, this is a fascinating issue because this sort

of raises a question. Is this the future where you could just get a scan, have clothes or shoes manufactured at a three D printing press that doesn't require that many people there to do it, and then it gets shipped right to you. Is that what we're going to see, say in ten years from now. I'd say sooner than that, but yes, we're here. Um, we're starting with footwear, uh

and and and products like orthotics and insoles. But it's just a matter of time before we get is smarter, quicker, and it becomes something increasingly cheaper for everyone to have. So Hannah, come on in here, because I'm trying to figure out the actual process of the three D printing and how you figure how you make it work. Can you just give walk me through what happens once someone submits a scan of their foot to the point when they get the product. Yeah. So it's actually a very

simple process. You download our app, you pick the product that you want, and then with just a few photos, we digitally map your your feet and create a three D model of the product that we're building, and then can send that to the three D printer, print the product overnight, and get it to your door in under ten days. So you don't own the three D printing press, we do you do? Okay? So you have a press. Uh,

we have a manufacturing facility and San Diego Shamille. What prevents other companies from coming in and doing exactly the same thing? I mean, there are ways to buy orthotics now you can have them custom molded, I guess to your feet. But what prevents someone else from coming in scanning someone's foot and using three D printing technology to offer a competitor. Absolutely. Let's just set a really quick

piece of context. What's happening that's accelerating what we're doing for starters is we have scanning technologies and we've got the big players Apple, Intel, Microsoft, Google spending lots of money there on the printing side, ge Hewlett Packard, Carbon three D systems. What we are the leaders at is taking that scan and converting it into a three D printable file, and we do that in a matter of seconds. Uh. And that's the really, that's the patents, that's the technology,

that's what we've continues to innovate in. Is it's almost a machine learning meets computer vision meets customization algorithm s and so that that that's our core technology. That's hard to replicate. So I'm just trying to figure out the advantage to the consumer. Clearly, it's because if you do have a custom fit based on your technology, that's an advantage. What about the cost, Hannah, The cost is affordable. But

I want to touch on custom again. So the reason we do what we do is is not just because custom is cool. We truly believe that custom fit products will really impact how you move and you feel and you function on a day to day basis. So the Boston Marathon was an extreme example of that, where you have a product that's customed to each of your feet, uh, and it will impact how how you run, not just a marathon, but even how you walk to work, and how you stand and how you can you know, feel

how your mood is during the day. So um our goal is feel and function how you move and live UM and you you'll be able to see our sandals for a very accessible price and our insuls from seventy nine. Shamille maybe speak a little bit about the actual library, the database of scanned images that you have, because doesn't that also make it possible for you to then customize it based on what you've done in the past. Absolutely that the data here is is the actual goal mine

so to speak. We've has an extremely large repository footwear data we've collected and we actually acquired through one of our acquisitions in sixteen, was right, That's correct, yes, uh. And the idea here is that the more data we have, almost like you know, the search algorithms that the company is trying to bring AI into the world. Either more data you have, the more you're able, uh to kind of get this right in terms of understanding the different

form factors and feet you're dealing with. And so this is very critical for our for our company and its longevity. Really interesting Thank you so much both of you for being with us. Chamil Hargovin, co founder and chief executive officer of We've in Seattle, and Hannah Zachritz, director of product and design for the company based in Vancouver, thank you so much. Really interesting and uh it makes me wonder what else will be able to be printed in

those three D printers. I've seen houses being printed. I wonder how much they'll be part of our We're not going to help me in a marathon anyway. The Oracle of Omaha spoke and the world listened, and keep speaking and the world keeps listening. We're talking about the Berkshire Hathway Annual shareholder Meeting, which is ongoing. Joining us now is David Dead's founder, president, chief investment strategist at Point

View Wealth Management, overseeing about three million dollars in New Jersey. David, thank you so much for being with us. I want to start first with the loss that Berkshire Hathaway reported due to what they called punishing accounting changes. Can you just talk about what these are and whether we should paying attention to that. Yeah, Well, the bottom line is people are not paying attention to that. Um Buffa is always focused on, you know, economic potential and actual earnings

on cash invested. These changes in accounting treatment have have no impact on the value of his investment, on the value of his businesses, and so I think it's widely thought that investors and others should disregard these one time accounting issues. David diets rat poison. He talked about rat poison, didn't he? Well, uh, you know, there's a lot of even more colorful language that was used um in Omaha

on Saturday. Um, but uh, you know, depending on the topic, but particularly Charlie Munger a man of few words, but they are certainly colorful words that were used to describe all sorts of things, including his uh dislike of cryptocurrencies. Yeah, that's what Warren Buffett said, that bitcoin is is rat poison. Did you find many people there who disagreed with them? Well, you know, not to make that word raised in the hand to argue with him on that, But I think

the more important thing really was his reasoning there. And it all goes back for Warren Buffet um and Charlie Munger on productivity. If you have an asset that can do something for you, that can pay off income, that can grow crops which can produce a profit. They're all for that. When you have assets like gold, like cryptocurrencies, which just kind of exists in trade hands, but at the end of the day they don't multiply, they're not fertile, then he is very negative on that, and so he

analogy cryptocurrency. They both did to one of the biggest investment the bacles that the world has ever seen, which was the trading of toolip bolts bulbs in the UH seventeenth century over in Amsterdam Um. And so the message was quite clear, steer clear. He added to that in some comments this morning when he asked, well, why is Goldman's Acts going to start trading them? And he said, quite frankly, I think some of the senior people at

Goldman's Acts probably share the views I have. But you know, there's a market. The ducks are quacking, so you're gonna make a market dry and makes the money off the activity.

Warren Buffett also had some colorful words for Elon Musk. Yeah, exactly, well, I mean, I guess Elon Musk kind of started by calling moat, which is one of the favorite terms that they used to to give you a visual as to the type of protection they'd like to see around their businesses as lame um saying if that's your best defense against marauding armies, you're you're not much good and uh um. There's a lot of chuckling back and forth, but I think there's kind of a misunderstanding as to what a

mode is all about. And and they explained how most are your competitive advantage, a reason why the product gear offering will continue to have a market, which is values it above him beyond your cost of production. And I thought it was it was kind of cute at the end when they talked about, well, you can make fun of our moats, but we have a nice moat around Seas Chocolates, which is one of their businesses, which is very big in California of course, where Elon Musk is

and kind of challenged in a humorous way. Elon must to uh, you know, overcome the mote that Sees Chocolate has in California. Um. There's been some tweets back in the well from Elon Musk. He's saying he may take them up on the challenge, but I'll have to bet with the Warren and Charlie if there sees Canny enjoys a very great moat, and Elon is not gonna build

a touch it. What did he say about Apple, because they did buy one another seventy five million shares in the first quarter, and it turns out that neither of them actually use an iPhone. Yeah, you know, it's kind of odd. I think I think the analysis is that it's more of a consumer good rather than a tech company. And you know, they see people's embrace of the the everything mac and iPhone ecosphere and see recurring revenues coming

from that. So that's one thing. Of course, they really like the fact that it was well priced relative to a lot of other tech companies. Is actually priced um uh in terms of price to earnings below the overall market, and when you back out the cash is not being used to create the profits, the price earning creation is even less. And they also liked how Tim Cook thinks, which to cut to the chase means that unneeded capital will be returned to shareholders in the form of stock buybacks,

and we just saw increase in the dividend. I think he likes the financial management at Apple, he likes the product, and quite frantically when you're a six hundred billion dollar market cap company like Berkshire Hathaway, you need very large targets to invest in so you don't rock the market or end up controlling it and having a file with the SEC. Of course, Apple fits that bill to a t. I want to thank you very much for being with us.

David Diets is the founder of the president and chief investment strategist at Point of View Wealth Management, giving us his take on the Berkshire Hathway annual meeting that took place over the weekend in omah On, Nebraska. 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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