Tellurian's Souki Expects Higher LNG Prices Globally in Two Years

My guest is Sharif Suki. He is the co founder and the chairman of Tullurian and he is the founder, former founder and former chief executive of Shanir and Sharif joins us in our studio here in UH. Great to have you with us, sir, Thanks for coming in. Thank you very much. You're the only trail blazing energy pioneer that I can think of. It is also run a chain of restaurants UH and managed to have a Hollywood

Um the film colorization company already in your past. Maybe just give people a little snippet of how you came to create Shaneer and the world of liquefied natural gas. Well, I guess it's a lesson and always keeping your options open and learning as much as you can as you go along, so you never know what's going to prepare you for what. But I think in the mid nineties I was looking for a niche to invest in and to raise money, which is the scale that I hand

into a sector there would be changed by technology. That's how I end up ended up being at the energy business. And slowly I learned and um Chanel was founded in nineteen ninety six and um I had twenty years and there huntil two thousan fifteen and then sure if you left Shaneer last year after carl Icon had some issues with the company, and now you've started this new venture to Laurian talld Us about that, what a what are

you trying to do with Tolaian? Well, I think the major disagreement with garn at the time was simply whether you would pay dividends out or whether you read invest the money to continue the growth of the company. So I had the view that the market has just been started and that although it didn't look so good for a couple of years, it would come back, and that we needed to continue to go to a company. Carl had a different opinion and we agreed to separate, to

go out separate ways Solan. So when they freed me, I had the opportunity to create to Louian In February of two thousand and sixteen. About three months after that, I was fired functioner and to pick up where the things that she Knew did not want to pursue at the time. So we founded a company, found another site that took a team that we were funding, a Chineer, but that j Knew decided to continue the funding led

by Martin Houston, and Martin has become my partner. We found it two looking together and we identified a good side, took our old team back, both BECTORL and ge t to collaborate with us again and developed a pretty good site for a plant for a big processing for a big processing plant, a big liquefaction facility in Louisiana with the capacity to export twenty six million tons, which is really replicating the success that I had antinue with the

twenty four million tons plant at Sebin Pass. Can you speak a little bit about the supply and demand that currently exists in natural gas because to turn it into liquefied natural gas requires this major investment in process. Uh. And then there is not really a global pricing uh platform for for natural gases there. I mean, it costs

different things in different countries. You exactly right. Uh. So there's a number of things that happened that are different from when I started the effort of The first thing is that it has become very clear than the United States is the low cost producer of natural gas and at the same time the low cost manufacturer of liquid faction facilities. So we have a constan advantage compared to

the rest of the countries in the world. The second very important thing that has happened is that the natural gas business on a global business is increasingly becoming a very liquid market, thanks in great part to liquid fu natural gas. So we the advent of Australia first and other United States has two major new players into the

energy business. You now have twelve cargoes per day available for sale on a global basis, with about forty bcf a day and and by to see if you've got to tell people at the British thermal units in cubic feet cubic feet. So that's why we needed you, so to to put it in perspective, UM, the in two years, when old liquor faction facilities under construction currently will come on the market, the market will be able to produce fifty BCF fifty billion cubic feet of natural gas every day.

The entire consumption of the United States is about seventy five billion cubic feet, so two thirds of the market on a global basis that is on the water at any given time. UH. It's two thirds of the size of the American market. It is larger than the European market. So it's a very very significant floating market that is extremely flexible in terms of what direction it can go into.

Because those are allowed ships and there's probably two hundred and twenty of those today and in two years there'll be two hundred and fifty loaded with not liquefied natural gas. They can basically go to wherever they need it. And sure if just in our last minute or so here, where do you see prices for UH natural gas and and and liquid natural gas over the next five to ten years, Well, in the United States, I don't see anything different than what we have today. So some workedween

two fifty and three donors in m MBTU. On a global basis, the the excess inventory is being solved very very very quickly because low prices generate new demand, so demand year on year for that liquid natural gasses up and on that basis, we're gonna have a very very tight system by two. Thank you. So I see higher prices for global prices very quickly, higher prices for global prices.

Thank you very much for joining us. A pleasure. I look forward to having you again because we didn't even get into the whole kind of history of how the liquefied natural gas came about and also some of the challenges that you that you faced. Much appreciated for joining A shriek Tuki. He is the co founder and chairman of Tlaurean. Thank you very much. Our topic is the world of retail and joining us as Bert Flickinger. He is managing director Strategic Resource Group and he can be

followed on Twitter at Bert Underscore Flickinger. Bert. Great to have you with us here in the studio. You know, uh, Peter Barnes is in our Bloomberg one oh six one studio in Boston, and maybe you could talk a little bit about the geographical issues that are facing retail because I was reading that in the support area of Boston, for example, it's attracted you. If you want to get retail space, you're gonna end up paying top dollar for that. But a lot of other places are not so hot.

To give us the the lowdown precisely, pim Southport, South Street seaports just booming in terms of customer accounts. They got Primark from the UK, which is drawing a lot of customers. They're doing off price full line department stores. Sex Fifth Avenue downtown is one of the great Sex Fifth Avenue stores in Boston is really really one of the birthplaces of retail. Ben Camarada for t j X Incorporated. Um,

are you taking me to Fi Leans basement too? But MRV wish to the great Chris Baldwin today at BJ's Wholesale Club and a lot of great retailers, George de Mulis and his Where where did all those great retailers go? Because we got the results all right, Michael Core's stock moves higher because they beat analyst estimates up like Ralph Lauren the same story. But Macy's, J C. Penny Nordstrom,

Cole's what what kind of market are they facing? Tailor two cities Nord from is making a lot of on characteristic mistakes, similar to mistakes Target made in Canada, and Canada's turning around to be really tough for Nords of Penn. J C. Penny wins are Frank Blake Retailer Turnaround of

the Year Award. Marvin Ellison is doing a great job with Steve set Off, former CEO of Sacks on the board, Mike Alman, who u cleaned up the company when Bill Ackman and Steve Roth left Penny on death store step Penny's got great apparel, great price points five seven nine dollars co exclusive with Disney Nike's coming in Adi DA. But Sophora is the real story at j C. Penny.

When we were Paris, Sephora attracts more custos as many customers consumers as the Eiffel Tower and the Eiffel Towers opened more hours per day than Sephoras because they can't control the Saphour crowds on Shaunsliz Sophor Cosmetics for Cosmetics over six million customers a year. Sephora, Shawnsalise, Macy's is

doing a lot of exciting things. So we're seeing this accelerating retail ice age consolidation where Barney's, Niemon Marcus Bergdorf could file for bankruptcy, Bonton Group, Macy with its blowing deal's company net consolidators as well, be Northstrom, as well

be Hudson Bay Sacks. So while it's tougher time now, as you said, earnings up, sales soft, we see that bouncing back, but they really have to do what's for is doing so well in the UK when we're talking to one of their co directors, what so foreign Harvey Nichols are doing in London in terms of digital special exciting events to your present point before going on air, making clothes that people want to buy, great styles, great fabric, great fit. The leaders are really in London and people

need to see that. And as you referenced, they're really really exciting development with young designers too. But Bert, if I'm a retail investor or even an institutional investor, should I just sit on the sidelines for now and wait until these these big big name company these like Macy's and Pennies and Nordstrom's get their act together. Peter, You're completely correct, sit on the sidelines until after Holiday seventeen.

The bankruptcy will start when they have to pay their bills when the vendors don't fill up Tin Cup and Tin Cup Week in February of eighteen, and then Macy's and a number of the other son Nords from Hudson Bay Sachs will be the real winners. And that's probably the time to invest off off price. Anytimes a good time, uh particularly with t j Ax. Well I was gonna, well, go ahead, Peter. Well. I was also going to ask about,

you know, any specialty retailers that you like. You know, I'm thinking about the foot lockers of the world, or the bed baths and beyond. How are they survive, how are they doing? Are they okay? And are they safe places for investors? These days they're okay, But it really depends on World World Cup and big athletic events in off price what we really like. There was an article in Barance this weekend that the dead on b JS is trading at nine and UH five eighths per cent.

Dynamic new leader and Chris Baldwin and uh b J's in the entire southeast and northeastern seaboard of the US is really doing well and saving customers money, both individual as well since institutional or commercial customers. Well, since you mentioned wholesale clubs, I gotta ask you about Costco because I mean that is the you know, that's the leader, right, Costco is the leader. Lost Jeff Bradman, who was even better than Sam Walton in terms of everything Jeff Bradman

and his dad did was a winner. They betted a thousand in retail save families at Costco UH five six thousand a year. During the supermarket strike the last decade, Brotman would let about eight to ten Latino families when we were in the market sign up on one Costco membership card. They couldn't shop in the neighborhood supermarkets. Costco has has stores that do up to five six million a week high volume stores anywhere outside our pack and save client in New Zealand and UH. Costco can beat

anybody and anything. And my former Procter and Gamble teammate Mike Parrott's doing a great job as their chief merchant. Hey Bert, Let's finish up though on with the online retailers. You know, where do these companies hide in the face of competition from Amazon, I mean, can they survive? Uh? Even the well costco has its special niche obviously, but what about the rest of these retailers. How do they how do they compete against the Amazons of the world.

I'm gonna I'm gonna channel Peter. To Macy's credit, they moved from the twentieth largest online retailer. Macy's dot com is now ranked number seven in retail Richard Baker and his team at Hudson Babe but guilt in off price for sex fifth avenue and sex says off fiveth. So a combination of bricks and clicks with I'm your channel's great way to survive. But you're you're right, there's gonna be darwinning destruction for the people that don't to it

ouch Darwinnie and destruction. You know, everybody, Let me just focus on Walmart. I know we did. You know we talked a little bit of Amazon. Walmart is serious about online right very stock is up eight eight for Walmart stock is up eighteen percent so far this year. They pay a two and a half percent dividend and they're not going quietly into the night. Not going quietly, and it might be a Peter Barnes good good investment for now. In eighteen Doug McMillan hand picked from Mr Sam Walton

out of Jonesboro, Arkansas. Uh, one of the first person in seventeen years, Pim and Peter top merchant top store operators, completely turning the company around. What and Walmart had a lot of nepotism with Sam Walton's son Robbed and brother in law running dot com. Now they have professionals running it,

and Walmart will win on land and online. All right, I gotta tell you, I think sometimes my wife is single handedly helping to keep t J Max and Walmart up there because she's that those places all the time. Your wife as smart as their summer interns of Goodbye Anywhere, and they find the best fashions for for ten dollars. This is your great producer, does uh? Sam Lang best

bargain's best prices. Peter, thanks very much. Bert Flickinger is managing director Strategic Resource Group, and I want to thank of course Peter Barnes, my guest host today. Let's turn our attention now to yield. How do you get yield in the yield starved environment? For example, the thirty year right now pays two point seven nine the ten year pays well, it doesn't pay very much more pace two point to one percent. And for people that are looking

for yield, where are they gonna go? Well, maybe they're gonna stop in Joel Beam's office. He's managing director senior portfolio manager at Salient and the topic is real estate investment trust. Joel, thank you very much for being with us, Thanks for having me give us the lay of the land when it comes to real estate investment trust. Because we know that the income gets passed through untaxed to the recipient, and the recipient pays the tax. But there

are a wide variety of reeds out there. Give us some some understanding. Indeed, it's a trillion dollar market cap and the the property exposure that's possible to access through this marketplace is quite diverse, and it really reflects the main street property markets. So there are shopping centers, office buildings, warehouses, specialty um reachs like things that an't like prisons for instance. I mean, there's all manner of commercial property available in

that trillion dollar market. What what do you specialize in or what what do you recommending that people pay attention to? Currently, we pay attention to the main food groups. So you know it's largely it's it's uh industrial property, office property, UM, retail hotels, so fairly standard fare um for us, and I think right now they're there's you know, actually there's quite a lot of dispersion that's come back into our market.

I mean, the prices have generally been a little bit homogeneous over the last few years, and this year is particularly with the retail sector you see getting knocked out of bed. It's um, it's been a really interesting opportunity to pick up some stock. And Joe Peter here in Boston, you do right, and your most recent research note though that people have to be really careful about the you know, chasing yield here. Uh, you have to be kind of selective can expand on that and so what what is

the risk right now in the reach space? Well, there's always risk, um, this is nothing is riskless. And UM, you know our our sector you know, certainly has some yield. The stocks that trade at lower multiples and you know, um, you know, I have a greater opportunity to get more of your return and current yield and less in growth. And if you um aren't careful, you know, sometimes you can get exposed to companies that might have a dividend cut,

maybe they're overpaying. So you know, we all want yield, but remember you can't We can't give you, and you can't find what the Earth doesn't provide. And we are in a low yield environment across the investment landscape, so one must always be careful. And um, you know that's my short advice somewhere. Yeah, and as with metals, which we were just talking about in the last segment, Um, your space is very interest rate sensitive and and we have the Fed placed yet again to raise interest rates

potentially by the end of the year. How does that play into all this? Well, long term real estate shouldn't and doesn't really correlate with rate changes except that right now, you know, we're living in an extraordinary time where the entire investment landscape seems to be priced at a premium, so as the overall return landscape moves, and that's primarily

risk free rates. Right, Um, there are certain sectors that might be susceptible to it from a you know, from a buying and selling in the markets every day point of view. Long term, Um, you know, a bond can't raise the rent um, like we can say on a commercial property that we own. So so there isn't correlation over the long term, but it's extremely important right now where it seems well established that many things are expensive,

it's important to have a strategy. Um, you know, I think the passive fad in today's environment is way long in the tooth. Can you speak about one particular read at all, Chatham Lodging Trust. They're based in Palm Beach, Florida, and I think that they kind of quality. I mean, I know they're in your fund, but there are a

read that's focused on the hospitality industry. Yeah, we think it's a great company that's been a little bit choppy, you know, performance wise, but the business is plotting along. In our in our strategies, we try to have our common stock hotel investments with limited service hotels because the margins are better. Um so, you know, really great brands like like Marriott Residents In and Hilton Garden In. You know,

really nice margins, great business. And in our more credit oriented investments, we like we like more full service hotels, like we have a big investment in Ashford hospit Mentality Prime that you probably saw just to quickly. I just said like that the dividend the yield on on Chatham Lodging Trust symbol is c l dt uh six and a half percent. Right now, Peter and Joel, you are looking at harvesting some gains here, are you not? We do that all the time, sir, so so what but

but specifically you're talking about harvesting gains and preferreds. Why? Well, I think it's as I mentioned earlier, it seems well established in the credit space, in particular that you know, valuations are elevated and there seems to be you know, really more you know, really more downside risk than than

upside opportunity for a lot of credit instruments. So we are absolutely for years have been in block and tackle mode sort of selling low yield where there's no more upside in the price, and we've been trying to source and buy opportunities for you know, a fair return and some price stability and and upside. I want to thank you very much for spending time of this coming in a very interesting Joel Beam is a managing director senior

portfolio manager at Salient. The topic of course is reets and just to mention that they manage the salient reats strategy. It's called the Select Income Fund. Joining us is Eric Lacel. He is the chief economist for URBC Global Asset Management. They've got a mirror three billion dollars under management and

joining us from Toronto. And you know, Eric, maybe you could give us a sort of non US perspective of how the US economy looks to you and what is it's uh, what are some of its strengths and some of its weaknesses at the moment, Well, thanks for having me to to me, it looks like it's doing pretty well. I won't say it's necessarily broken, unambiguously clear of that two percent to hurdle that has proven so hard to overcome over the last eight or nine years, but is

an economy running towards the top end. I think of what we've grown used to and you can see that demonstrated in quite a lot of measures. Granted, the hard data maybe not quite performing online with the soft data, but overall it looks like there's been a pickup. I don't know if we can attribute all of that back to the election in November, just because there's a global element to this, and there's a part of it that started way back last summer. But I would say moving

fairly well right now. And I should say, as as someone living to the north of the U. S. It's something that's been beneficial to Canada as well. It's helped Canada move quite nicely forward to but Erica Peter Barnes here, a lot of the rise in the equity markets has been attributed to the expectation that the new president's agenda will get past and we'll help to stimulate the economy even more if if if that, assuming that's what it needs.

But we haven't actually seen much of that agenda move forward, and it looks like the markets are really kind of hanging on tax reform. What about all that? Right Well, I think that's absolutely fair, and I'll circle around to that in a moment, but I would really make the comment at same time that do keep in mind there are some other things that work here. If financial conditions

in general are very favorable. There's a bit of a rubber ball bounce effect from a tough start to two thousand sixteen and so on, So there are other things that work. I would say that what's maybe underappreciated by the White House legacy. If I can say that so far is there does seem to be a shift in the deregulation environment. Not a lot of legislation, but a lot of executive orders. They could change in terms of

the temperature in the room as well. And when I look at various measures of concern about regulation, those are already coming down. So I think there's been some progress there. There's been that big boost in confidence, and don't make me try and link it back coherently to some sort of policy change, but that seems to have been linked in part to the change of political landscape as well, And then you're absolutely right, will we get tax cuts

doesn't look likely this year. I'm still budgeting for something in two thousand eighteen, but that something has slowly been whittled down to a much less exciting something than one might have imagined in the fall of last year. So I think there might be a bit of help in two thousand eighteen. But other factors are and maybe the most important and so far undiscussed one is that perhaps a bit of that secular stagnation is fading, really just

for for chronological reasons, if nothing else. And this idea that a negative confidence shock was maybe one of the things that did in the global economy back in two thousand and eight, two thousand nine, and maybe there's been a positive confident shock, and whether it makes sense that it happened or not, it has happened, and that might be helping to pull us out of that secular stagnation

as well. And a good and a good point to pivot to the FED with, because you know, obviously the FED helped help this recovery along, most analysts would agree, but now the FED is trying to, you know, reduce its accommodation. What about what's your outlook for FED policy going forward for the rest of the year, right, I

wouldn't say I have an overly provocative one. It involves the assumption of probably a rate hike and probably a bit of draw down on the bond side, So fairly in line I would say, with where the market sits right now. But to me that the big question, certainly as investors, is just whether or not this is the right decision, whether it's a policy error or not. And I sit firmly in the camp that thinks this is

the right thing to do. Granted, lots of ambiguity about what neutral or natural is and where eventually this all ends. But it does certainly make sense that rates are going up. I don't get too too concerned about the low wage story. It seems to me that this is clearly an economy getting fairly tight, and so it's it's probably the right thing to do in and so far the FED has acted reasonably in the market seems to be judging that

as well. Hey, Eric, whatever camp you're in, I'm assuming that it's using Canadian lumber to build the houses, right, to build the cabins. That's right, all right, I'm leading you know where I'm leading you. I'm leading you down the NAFTA path, because you know, everyone thinks NAFTA and then you know, unless the President pays a visit to uh,

you know the well. I mean, I guess I was gonna say Wisconsin or northern Michigan in order to uh sort of talk about the timber trade or indeed even the the oil and energy trade from Canada Mexico is always the in the headline, what's your view of any possible renegotiation for for NAFTA and making it actually better? Yeah, I mean, this is a timely subject in the sense that the official negotiations start next week, to my knowledge,

and so we will learn much more shortly. We learned a fair chunk last month, of course, when that that big eight teen page report came out of out of the White House proposing various NAFTA changes, And so in terms of how that plays out, I'll confess I'm a little concerned. And it's not that anyone's proposing to tear NAFTA up. It's not that giant new tear ups are being proposed for any particular area. I worry more about almost the foundation of NAFTA and some of the aims there,

and in particular some of the subtle changes. You're eliminating a trade resolution panel that that's actually quite important. Right now, disputes are resolved in an impartial way. If disputes instead are resolved by national courts, you get much less predictable

and maybe much less free trade oriented outcomes. And similarly, one of the proposals in there is to allow what are called safeguard exclusions, and really what that means is if any sector is hurt by free trade, they can put tariffs on and these basic point of free trade is, isn't the hurt sectors, but sectors do get hurt along the way be a comparative advantage. And so I do worry that NAFTA could continue with no new tariffs but

really be substantially defangd So consider me somewhat concerned. And of course that's hugely relevant for both Mexico and Canada. They are number two and three in terms of global trade linkages with the U S right after China. So it is a big deal, and I think that there are some more pernicious changes proposed than maybe the surface would suggest. Yeah, and the president's target is the sixty

billion dollar trade deficit with Mexico. So what sectors of trade between the US and Mexico do you think are most at risk? And all of this, I suppose the motor vehicle one is is a side that gets the greatest attention, And indeed Mexico has been hugely successful in terms of picking up a lot of production and manufacturing there.

To me, though, I think this will get very complicated very quickly, given the supply chain linkages and the reimporting and re exporting of products that were made in one country and back to the other. It really manufacturing and autos being one of the flagship is the is the

obvious one there. But you know, you do worry a little bit though about one of the aims that the US has here, which is that this goal to to achieve a more balanced trade trade balance, and so that that's a noble goal, but it's not clear whether a government can really achieve let me let me break in, Eric, because there's is there there's no evidence that having a trade balance one way or any other necessarily affects whether your economy is doing well or the people in your

country are actually living well well. I agree with me, and you know, Barry, I can Green would argue that the exorbitant privilege is if you're the world's reserve currency in the US certainly is then you almost by definition right a trade deficit, and so I think it will

be hard to eliminate. And simultaneously, the White House wants more business investment and fiscal stimulus, and of course that means less aggregate national savings, and of course you need to be a national net saver if you're going to run a current account surplus. So I'm not sure they'll be able to achieve that. That worries me a bit

as well. Well. I was not asking that Ontario and the linkages in the Ontario economy with the United States, because if you stand at the Acida Bridge, you know, or the Bluewater Bridge with their building, I mean, it's basically a unified economy. It really is, yeah, massively, So that's right. And I can say from the Canadian perspective that three quarters of Canadian exports go to the U S. And gosh, it represents at least a quarter of Canadian GDP,

so huge on that side. Not quite as big on the U S side, just because the U S economy is so much bigger, but these are hugely integrated. There would be massive consequences both for the border states in the US and also for Ontario in particular, but some of the other manufacturing and exporting hubs as well. So it's it's a big deal for all of us. It's a middling sized deal I think for all of you. Were slightly reassured that behind the scenes, one hears that

Trump isn't focused on Canada. Canada is getting caught up and there's nevertheless, thanks very much. Eric la Cell, chief economist RBC Global Asset Management, joining US from Toronto. 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 abramoids one before the podcast, you can always catch us worldwide on Bloomberg Radio