tv Bloomberg Markets Bloomberg October 7, 2021 1:00pm-2:00pm EDT
alix: welcome to commodities edge. i want to get to the data dig and look at the top market stories of the week. it is the volatility and spike in natural gas prices. that is causing a knock on effect to the power and commodity market. this chart shows the natural gas swings from the high of treating to the close of the session. recently, russian president putin calmed the markets but this volatility problem is not over, so how do you trade it? natural gas traders are paying the most for a decade for a bet against a potential surgeon prices. implied volatility has now more than doubled in the last month. how do you even trade it if you cannot hedge it?
it is most evident in the u.k. and europe, so i wanted to look at that. the yellow line is natural gas prices in euros. the white line is coal prices. you talk about how coal is expensive but nowhere near the six times increase we have seen in natural gas prices. even carbon permits have barely budged in comparison. let's look at some of the longer-term effects of these soaring gas and power prices. at this week's bloomberg invest global conference, we talked about the fact that these high energy prices are here to stay. >> high energy prices, high fossil fuel prices is not necessarily a bug of esg -- >> accelerant? >> by design. you will promote transition to
cleaner energy. while not the cause here, when we look forward, this will be the new norm where you see spikes in energy prices, something that we have to get used to. alix: joining us now is a bloomberg analyst covering natural gas. if we have to get used to these prices, do we run out of gas? >> great question. there have been fears of the u.s. running out of gas over the last couple years. the short answer is, no, the u.s. does not run out of gas, but our question was, what does the market do between now and the end of winter to ensure that does not happen? from the demand side, there are three main levers the market can use. the first is not under our control, the weather. how cold will it be? if it looks like the winter will be called, then we look at an increase in gas prices to cut
more power burns, run more coal. finally, lng. alix: to that point, do we ban lng exports to keep more here? >> we are running full tilt, and in fact we will grow exports over the next couple of months. i hope that we do not cut or legislate through law, reduce lng exports and that it is more of a price action. if there are laws that impact lng exports, it could be disastrous for the industry. alix: because where is the investment incentive for the long-term. thank you so much. time for commodity in chief, where we talk to one executive in the commodity world. ag co is one of the biggest
agricultural companies in the world. you know their brands, challenger, ferguson, gsi. it has been a bumpy year. on the others, you have the need to replace old equipment and higher farm incomes. all of that means higher sales growth. the downside is high input costs. agco saw steel costs increased by 150% in north america because of supply chain disruptions which made them raise their prices, which causes some demand instruction. they had to close the order books from some of their products because they were worried supply could not keep up with demand. like every other company out there, it is trying to launch new products to make farmers more efficient, sustainable, and greener. the goal is to improve farmer income by 20% in a bunch of ways, smart motives -- machines
that are taught to miss, smart planting, things helping with fertility rates, planting depths, and weiner machines that run on alternative fuels with admissions close to zero, and robots that can do some farming for you. the current ceo has only been in the job since january. i asked him what farmers are asking for now versus a few years ago. >> i have been in the industry my whole life, grew up working on a dairy farm in wisconsin, involved in 4h, ffa, went to school for engineering, then came to agco. i have been around the industry the whole time. what we are hearing from our farmers around the world are at you things. number one, labor productivity. they are not only having a hard time getting any labor, but the labor they have are not experienced operators. that is where the automation comes in. we have a sensor that travels
with the seeds when they are planting. it takes 2.1 million calculations, sensor readings every acre, makes up to 8000 adjustments every acre. there is no farmer in the world that would make that many of adjustments, but with the power of automation, we can keep that machine performing optimally, which means more profit for the farmer, and attacks texas labor issue. alix: when you look at your portfolio, where are the holes that you need to fill, and do you do that internally by building out a different kind of program? do you need to buy a lot of acquisitions? you didn't start as a tech company, but it sounds like you will become one. >> for sure. as far as the holes, they are opportunities in each of the machine parts, the sprayer, combine, tractor. we have projects lined up for
each one of those and we have programs to automate inputs and improve yields, bottom-line, help with the farmer's profitability. the way we are getting there is through our organic development. we raised our engineering spent the last year by the largest amount in the history of our company. we are also looking to buy and partner with several companies in the industry. we have announced some partnerships on intelligent spraying applications where you can go through the field, identify the difference between a weed and plant and spray just the weed, not the rest of the field. an automated system that looks over the top of poultry operations, through artificial intelligence, can make adjustments on the proteins for chickens to be raised in a more productive and sustainable way. alix: a lot of that is helping farmers play offense. how do you help them play
defense related to climate change? how do you help them mitigate those risks? >> we have moved a lot of our focus as far as field trials, engineering development from precision agriculture only to precision agriculture plus sustainability. sustainability comes in the form of a number of things. you can do cover crops, reduce tooling, other common practices. we are creating sensors to measure those things, data tracking systems, working with other companies to create a carbon monetization platform. those are all tools to help the farmer more rapidly a. these changes to their farming operation, to be able to adopt sustainability faster. alix: that was my interview with the agco ceo. it is the battle of the beefiest brown bear.
otis has been crowned the heavyweight champion of alaska's fat bear tournament. he is one of the oldest at the national park. a patriarch is also missing two of his canine teeth. the annual festival celebrates the bear's weight gain. it draws hundreds of thousands of votes and otis is showing no signs of embarrassment about his growing girth, crucial before his long slumber. fans say that they prefer his more mellow personality and his refusal to waste energy chasing salmon. here is what is on my commodity radar. gasoline prices in the u.s. and u.k. u.k. prices have risen the most since early july. that wraps it up for commodities edge. this is bloomberg. ♪
>> this is bloomberg markets. coming up, we speak to ron johnson, ceo of enjoy. and bess freedman, ceo of brown harris stevens on the hot manhattan apartment. let's take a quick check on the markets. green across the screen in the equity market. every sector is higher. equity investors finding optimism in the fact that we
have a debt ceiling resolution, punting it to december, but the market is celebrating. the s&p is up 1.4%. the vix is below 24 the first time in eight trading days. the equity market is not too spooked by the idea that yields are moving higher. right now at 1.56. oil rebounding after earlier losses. up .9% after the energy department said it will not tap into the emergency reserve to offset prices. 78.13 a barrel. apple, whose car play interface is used by millions to control music, take directions, is looking to expand its reach within cars. the company is working on tech to access functions like the climate control system, speedometer, and even seats.
it would require the cooperation of automakers. now let's turn to someone who knows apple well. ron johnson is currently the ceo of enjoy, formerly the ceo of jcpenney and executive at apple. great to speak with you. you are making your public debut via a merger. shareholder still have to vote on it. any doubt that they will say yes? ron: the votes are coming in but it is very positive. the date is next wednesday. a few days after that, people will be listed and starting trading. kailey: any doubts about that current market environment compared to when you made this announcement? ron: not at all. markets come and go, companies survive. i look forward to getting the capital received to continue our expansion. we are growing rapidly.
revenues are doubling year-over-year. we will start next year and with 1000 mobile retail stores. this will hit our core measure of profitability, profitability on average for every store we have. this is a great time to raise capital. i'm excited about the next phase of enjoy. kailey: you said you would not pursue going public unless you were clear on the path to profitability. what is your biggest issue on expansion, in terms of labor shortage, the markets you are entering into? ron: the biggest challenge is hiring enough people. we are recruiting 1000 new employees as i speak. i work every morning with the teams working on that. it is a very competitive market. we have a unique job. we have full-time employees in the mobile economy. we pay really well. we will get the people we need hired, but you have to work a little bit harder in this economy. kailey: your business is mobile,
you basically bring a wireless store into someone's home. i'm sure that has been a great business to be in in the pandemic area, when people have been more reluctant to leave their homes. as we emerge from the pandemic, do you expect the desire for that kind of service to wane? ron: i think it will expand. we operate stores for apple, british telecom, rogers, we are in the u.k. we are playing in that long-term trend of people shopping at home. you choose to shop at home instead of going to the store. that is 30% of how we shop, but all you have is convenience. we think people deserve more, so we bring an entire retail store to the home or free on behalf of our partners. i think the desire to shop at hobo continued to grow. kailey: not just the desire to shop at home but to get what you want as soon as possible.
we live in the age of amazon where we expect things in two days or less. e-commerce has had to invest in order to get that speed. how much is speed an issue for enjoy? ron: it is the most important issue. people make choices every day. they want something now. going to the store, they can get it today, online you cannot. we operate a network in every market of mobile retail stores will of inventory with a real person. we can deliver product in as fast as 15 minutes. we will be among the fastest ways to get a product long-term, and we will also offer a choice of experience. when we go to a store, sometimes we are in a hurry, sometimes we want help. we are going to deliver both. we think that is a differentiated model in a world where everyone is racing to the door. kailey: are you looking to expand and put this capital from the public listing to work, are
you prioritizing entering new markets or having new partners? ron: more growing with our existing partners. we currently serve about 50% of the population of north america and the u.k. we will go from 54 markets to 100 year in those same countries. beginning in 2023, we will expand to two new countries a year. we will have geographic growth, but the primary role is to serve our partners better. we partner with really big companies. apple has over a billion active devices in the market. at&t has over 100 million subscribers. we want to be the way to serve them in the home. it's a really big business, we just have to execute. kailey: that is the enjoy ceo ron johnson. still ahead, the bloomberg global conference about why his firm plans to invest in blockchain.
>> we have reached agreement to extend the debt ceiling through early december, and it is our hope can get this done as soon as today. kailey: this is bloomberg markets. i'm kailey leinz. that was chuck schumer speaking earlier about leaders pulling the u.s. from the brink of default with a deal for a short-term debt ceiling increase. the debt ceiling is just one concern for investors right now. people are also wary when considering spacs. orlando bravo, founder of thomas brown go believes there needs to be more disclosure around returns. he spoke exclusively about that and why he is investing in octane -- blockchain. >> we will be big players on the
bi outside as this industry matures, especially around blockchain technology. in many cases, blockchain provides better use cases for problems that exist, database software products. we are seeing this maturation and we will be participating. to us, it is just the software or digital market just became bigger, and is providing bigger opportunities for us. >> what does it look like in terms of the deals that we could see you do? companies you would avenue there --you would go after, biot models? >> first it is gross equity. late stage growth equity from this category is becoming feasible to investors. in the next two to five years, we will be right there, just like we were 20 years ago as one of the first software biot firms
in the world. >> another area we have discussed is spacs. you did the tom of bravo spac earlier this year, now trading as a public company. the spac game has been solid by abuse of some participants, too much energy too quickly going into the space. when we talked before, you had hoped to do another spac. is that something that is in the works? >> yes. nobody likes that term. regulators don't like it, investors don't like it, so we will call it something different. because it will be something different. we believe there should be great alignment between the spac sponsor and the investors, just like there is in private equity. investing real capital behind it.
being the lead investor, which is something that we did in our deal with -- we believe there should be more transparency in terms of what are the returns of the spac sponsor, what do they look like? there should be more transparency in how that company performs versus the projections they gave the investor. that should be a requirement. we feel spacs are one of the great financial vehicles for absorbing this wave of large software companies and tech innovators looking for alternatives for financing. it is also a great deal for those that are buying the best in the public markets, the diversity you get from those, and the best of private equity as well. >> when you look at it, yes, a lot of the spac deals involve those kinds of companies come about and also a lot of companies that were highly
speculative, predictions that were potentially meant but fairly ambitious, to put it lightly. is that going to make it difficult to do a spac in future because people will say we don't believe the predictions. the last time this was going around, people said it would achieve xyz, and none of it was delivered. >> the spac is about who the investor, sponsor is. that will also help operationally. the spac is about the company. that is what it is about. it is like an ipo. would an investor value a company differently because they went public with this set of banks instead of other banks? or if they did a direct listing instead of not a direct listing? that is irrelevant. it is about the fundamentals of the company. i agree with you, the spac
market should not be for venture deals. projecting a venture company, no matter how good you are, is very difficult. you have no track record of that company of producing results and see where you are going to be in the future. a venture company could go through a spac if there is a demand from retail investors and others that cannot access the retail industry. kailey: that was orlando bravo speaking earlier with ed hammond at the bloomberg invest global virtual event. coming up, a boost for new fortress energy. why the company had the biggest gains since march. it is our stock of the hour on an up day in the markets. this is bloomberg. ♪
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jon: this is bloomberg markets. i'm jon erlichman. we have been watching the food price story, one of the key parts of the inflation story. they are at a decade high, not great news for the restaurant industry, which we know is dealing with issues. let's get more perspective on this with caroline styne, luke's group co-owner, one of the founding members of the independent restaurant coalition. it is great to have you with us. you have spent so many years
being an entrepreneur in the restaurant industry just getting through so many headwinds. now these prices of everything from beef to cooking oil. give us a sense of what it is like on the ground. >> thank you for having me. the last year and have has been one challenge after another, after closing our doors, reopening, outdoor dining, doing to go, it has been one financial challenge after another. now we are trying to recover from this. blocked by the delta variant, by weather issues, lack of tourism. five people working from home. it has been one headwind after another. now, here we are experiencing these incredible increases in our cost. what is already a fragile restaurant, financial structure is being killed. kailey: how difficult is it to find a labor? caroline: the labor challenge
have been impossible. we have a lost -- lost a lot of people from moving out of state, different industries. that has been a multifaceted issue. all of these factors are just making the recovery for the restaurant industry that much more impossible. we provide 16 mi jobs between restaurant jobs and those in other industries that we support. trying to get all these people back to work and trying to recover financially ourselves as well as the labor market as a whole has been impossible. jon: i know a lot of your members had to take on debt to get through the tough times. debt is always a complicated story as well. what are you talking about to address those financial issues as you are also trying to get back to business? caroline: we have taken loans out, mortgaged homes, we have deferred rent for a year and a half. those payments are due now.
of course, everyone thinks that everything is hunky-dory because we have more guests in the door but it is not that way. one thing that has been a huge help for some is the restauran'' s really fond that was part of the revitalization act. that has been a huge help for some restaurants but there are still tens of thousands of restaurants that were left out of that. this is the key to survival for us because we are heading into uncertainty next year, year and a half. we really need congress to refill the fund, to get all these restaurants who need these grants. kailey: are you able to pass price increases on to consumers? caroline: that only goes so far, unfortunately. if we could charge what we really needed to charge, prices would be higher. we are forced into a box because
of public perception and what people are willing to spend for dinner. , for lunch. passing on those increases is very difficult and a touchy subject. you might make more on the stake but you are losing customers in the process. it is a balancing act that is really precarious. kailey: a difficult environment to be in. thank you to caroline styne for joining us. for jon, i'm kailey leinz. . up day for the market ahead of tomorrow's jobs report. we will see how much a labor shortage there is out there beyond restaurants. this is bloomberg. ♪ ♪
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prevent a government debt default by mid-october. >> we have reached agreement to extend the debt ceiling through early december, and it's our hope that we can get this done as soon as today. >> the pathway that our democratic colleagues have excepted will spare the american people any near-term crisis. while this does not accept the majorities excuse through the three or four reconciliation process, now there is no question they will have plenty of time. mark: this comes after weeks of partisanship over how to raise the debt ceiling, which janet yellen warned would be breached without legislative action. mayor bill de blasio is being accused of abusing city resources for personal and political reasons. i knew that's a new
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