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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast

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Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. Lots going on in

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Speaker 1: these markets, especially in the commodities markets. Um, you are

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Speaker 1: see natural gas features certainly higher, especially here in the

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Speaker 1: United States natural gas up four point eight percent. That

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Speaker 1: is significant because we've seen all this volatility in the

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Speaker 1: European side, the US side not as developed of a market.

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Speaker 1: Nevertheless up just shy. Yeah, there's certainly been a lot

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Speaker 1: of volatility in energy markets, and I think the question

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Speaker 1: here also is what is going to be in the

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Speaker 1: next leg, not like the stock market lower, but the

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Speaker 1: next leg higher for a lot of these oil and

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Speaker 1: other energy market Yeah, we're looking at oil at one

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Speaker 1: oh four. When you look at Brent, there is no

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Speaker 1: better expert to talk to about this within Bloomberg Intelligence.

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Speaker 1: Fernando Valley, thank you as always for joining us. We

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Speaker 1: got to talk about these Russia issues. Bulgaria, Poland. But

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Speaker 1: before we do that, I have a very important question

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Speaker 1: to ask you. Have you seen Mamma Mia. I have not.

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Speaker 1: I mean I saw the movie back in the day

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Speaker 1: with Pierce Proston, but not the show noted. All right, well, Fernando,

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Speaker 1: we appreciate that. Don't worry. It'll all make sense in

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Speaker 1: about eight minutes when I asked that question. But Fernando,

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Speaker 1: let's talk about these headlines coming out of Russia. Essentially

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Speaker 1: natural gas flows halted to Poland and Bulgaria. Germany very

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Speaker 1: vocal about perhaps supporting a oil ban if it's gradual.

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Speaker 1: Why are oil prices not jumping on those headlines? I

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Speaker 1: think the biggest concern is what's happening with China and

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Speaker 1: the lockdown step we're seeing throughout um throughout the eastern

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Speaker 1: part of the country. How that will reap your cards

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Speaker 1: in UH, in supply chains and in consumption. The Chinese

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Speaker 1: consumption of oil has already decreased, but if we see

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Speaker 1: more inflation because of supply chain disruptions and the rest

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Speaker 1: of the world, that really puts puts a hammer blow

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Speaker 1: to to consumption of oil and gas globally, speaking of

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Speaker 1: global oil and gas and perhaps you can give us

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Speaker 1: a way to frame the thinking here as a world

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Speaker 1: so much of Europe tries to turn away from Russian energy,

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Speaker 1: what progress, what might we see in in the nearer term. Well,

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Speaker 1: it's very challenging in the short term to turn completely

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Speaker 1: off Russian gas, uh, specifically because it's so difficult to

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Speaker 1: move gas across oceans. You have to liquefy it. It's

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Speaker 1: very costly and it takes time to build out more capacity. UM.

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Speaker 1: Oil is a little bit easier. But as as vladimire

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Speaker 1: Putting is already showing you, he's not gonna let you

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Speaker 1: cut oil without cutting gas. So you're you're going to

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Speaker 1: be in a tough spot, UH if you if you

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Speaker 1: give up natural gas in the short term. Today European

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Speaker 1: inventories are only around of capacity. Uh. Brussels wants to

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Speaker 1: fill it up. To how your blast had a nice

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Speaker 1: piece on it today, UM about it? And the only

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Speaker 1: way to get and be prepared in case of a

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Speaker 1: very cold winter in Europe or a winter without a

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Speaker 1: lot of wind power, would be to fill out those

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Speaker 1: inventories up. And you need Russian gas to do that.

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Speaker 1: There's only so much that us. LOOKI fied natural gas

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Speaker 1: can do in the short term, or even Qatari uh

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Speaker 1: in Australian we just don't have the the spot cargoes

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Speaker 1: to to to reach that level of capacity for Europe

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Speaker 1: without relying at least in part on Russian gas. Fernando,

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Speaker 1: let's put the oil piece of the equation on ice

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Speaker 1: for a second, just given we're looking at one O

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Speaker 1: four on brand literally a down one tenth of one percent.

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Speaker 1: That is not the kind of oil vultility we've seen.

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Speaker 1: I'm very focused on the natural ass pace because, like

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Speaker 1: I said at the top of the segment, Russia and

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Speaker 1: halting those gas flows to polland Bulgaria claiming that it's

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Speaker 1: because they're not paying in rubles. You do, of course

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Speaker 1: have other European buyers also agreeing to pay in rubles.

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Speaker 1: Just given the dependence and for our US audience, the

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Speaker 1: significance of natural gas in Europe is so important to

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Speaker 1: underscore because this is how they heat their homes. If

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Speaker 1: anyone's ever been to London in the winter, you will

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Speaker 1: understand why this is such a big deal. If you

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Speaker 1: don't have natural gas to heat your homes, that's going

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Speaker 1: to be a problem going into the end of this year.

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Speaker 1: Now we know a lot of these European authorities have

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Speaker 1: said they're trying to reduce Russian dependence by the end

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Speaker 1: of the year. Dan Jurgen Uh, an oil historian and

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Speaker 1: natural gas story and I should say, has said that

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Speaker 1: plan by the end of the year seems intangible. He's

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Speaker 1: looking at a five year um kind of time frame. Fernando,

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Speaker 1: my question to you is where the United States natural

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Speaker 1: gas exports fits into this. You mentioned the infrastructure is hard.

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Speaker 1: You have to essentially take natural gas lit will find it,

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Speaker 1: ship it on this tanker across the Atlantic Ocean, but

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Speaker 1: we don't really have this market for it in the US.

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Speaker 1: How long does it take to build out that market

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Speaker 1: so that the US can come and provide those exports

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Speaker 1: that Russia can no longer provide. Well, I think you

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Speaker 1: framed it beautifully and I think you know you will

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Speaker 1: take at least five years to see a significant increase

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Speaker 1: in capacity. We have some capacity as being built um. Unfortunately,

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Speaker 1: the way that we had trended with the energy transition,

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Speaker 1: we've made it more difficult to build natural gas pipelines. Today.

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Speaker 1: A lot of our capacity sits in Louisiana, for example,

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Speaker 1: that doesn't have a significant natural gas production anymore, and

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Speaker 1: you'd have to bring that from Oklahoma or from Texas,

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Speaker 1: UM and other regions. So we need to develop the

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Speaker 1: inside infrastructure as well, and that will mean a reversal

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Speaker 1: of some of the recent push to make pipelines more

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Speaker 1: difficult to be built UM. It will also likely mean

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Speaker 1: that we need to expedite the regulatory process for some

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Speaker 1: of these l en G plants so we can build

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Speaker 1: them more quickly UH and get them to the market.

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Speaker 1: The beauty is that we have a significant resources of

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Speaker 1: natural gas throughout the US. We have the Marcellus in Ohio,

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Speaker 1: Western Pennsylvania and so forth. We have the Permian in

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Speaker 1: West Texas, and we have several other plays that can

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Speaker 1: give us significant supply, and so does Canada. So we

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Speaker 1: could be long term providers not just to Europe but

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Speaker 1: to other parts of the world. And in fact, natural

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Speaker 1: gas has been the biggest reason why we've decreased UH

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Speaker 1: we decreased emissions globally the switch from coal to natural gas.

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Speaker 1: So it's really an important part of the energy transition,

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Speaker 1: and I think in three to five years we could

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Speaker 1: make it also a significant part of energy security. Fascinating

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Speaker 1: stuff Fernando Valley, and for those of you who are listing,

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Speaker 1: I did promise a mom a Mia reference. I threw

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Speaker 1: Fernando off at the beginning and said, uh, did you

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Speaker 1: listen to it? Fernando is one of my favorite films.

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Speaker 1: But I think how you framed this oil and gas

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Speaker 1: kind of conflict is so significant. Fernando Valley of Bloomberg Intelligence.

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Speaker 1: We thank you, as always Channelli. This is all gonna

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Speaker 1: make sense in thirty seconds. Our radio listeners are being like,

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Speaker 1: I don't know, I know, but I have a surprise

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Speaker 1: and I want you guys to stick with me for

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Speaker 1: thirty seconds. But I think what's so significant about the

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Speaker 1: other stuff that Fernando was really talking about is that

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Speaker 1: we're caught. It's a catch twenty two in terms of

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Speaker 1: ramping up these exports when Europe is kind of running

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Speaker 1: down the clock. You know, I think the Bloomberg headline

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Speaker 1: on this makes everything wrapped up in just one sentence,

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Speaker 1: making energy a weapon, and it truly in this war,

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Speaker 1: energy has become one. And it really comes down to

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Speaker 1: the currency picture, as while we know the ruble weakening,

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Speaker 1: a lot of the funds in these payments are supposed

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Speaker 1: to be happening in rubles according to those Russian authorities.

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Speaker 1: The dollar still stronger, folks, We're looking at x y

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Speaker 1: one oh three handle. These technical levels are something to watch.

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Speaker 1: E're a weakness, Japanese week end weakness. I told you

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Speaker 1: the Aba reference would make sense. Thanks for sticking with me.

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Speaker 1: For those of you who did, like, we're dancing to

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Speaker 1: Fernando by Aba, a prominent song in Mamma Mia. We

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Speaker 1: of course appreciate Fernando Valley's intelligence and grateful that he

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Speaker 1: was named Fernando. M Tech earnings dominating the conversation when

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Speaker 1: it comes to the stock market. We had Microsoft, we

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Speaker 1: had Alphabet, we get Meta after the bell, Amazon and

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Speaker 1: Apple as well. Coming in tomorrow on RUG rona senior

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Speaker 1: software analyst with Bloomberg Intelligence joins us right here from

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Speaker 1: the Interactive Broker Studio. On RUG you had some brilliant

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Speaker 1: comments about the liquidity picture of some of these big

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Speaker 1: tech names that used to be such a positive for

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Speaker 1: for for a lot of these companies, especially in this

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Speaker 1: idea of kind of weather ring. A lot of these

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Speaker 1: inflation pressures, supply chain pressures. Well, don't worry about it.

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Speaker 1: Apple has so much money on their bouncies to cushion

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Speaker 1: that blow now kind of a negative perhaps in this

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Speaker 1: inflationary environment. So I mean, if you think about it,

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Speaker 1: a lot of these tech companies have massive powers in

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Speaker 1: terms of to counter inflation for their products. So from

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Speaker 1: that point, I'm not concerned. I think the concern comes

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Speaker 1: in when investor expectations are not met in some of

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Speaker 1: these areas. Now, one of the things I've said is,

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Speaker 1: I think it is ludicrous to think about that big

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Speaker 1: tech is not immune to any global slowdown. I really

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Speaker 1: never understand why people think that. However, they still fear

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Speaker 1: better than an average SMP company because the products that

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Speaker 1: they sell I would say majority of these large companies

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Speaker 1: is critical to the client base. So from that point,

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Speaker 1: like you know, look at Microsoft's results yesterday. Now, if

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Speaker 1: they would have slowed down by just two or three percent,

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Speaker 1: the stock would have been off quite a bit. And

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Speaker 1: that's the part I don't understand, because eventually it will

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Speaker 1: slow down, right well, speaking of the slowdown, and you

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Speaker 1: definitely are not seeing that in Microsoft stock today, right,

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Speaker 1: So what does this mean in terms of what can

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Speaker 1: be expected from a firm like Microsoft where cloud is

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Speaker 1: king In the next couple of quarters. So from that point,

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Speaker 1: I still think the top line is going to slow down.

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Speaker 1: The third comparisons these businesses as they become big, the

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Speaker 1: law of large number kicks in. You cannot grow these businesses.

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Speaker 1: I mean the cloud business, for example, of Microsoft, at

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Speaker 1: the rate of forty five forever. It's just not, you know,

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Speaker 1: possible from this simple maths point of view. But other

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Speaker 1: other areas are a little bit more resistant. Now, if

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Speaker 1: office grew twelve percent, let's say it's gonna grow eight percent,

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Speaker 1: So what it's still growing? I mean, that's the part

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Speaker 1: I don't get you me and I think a lot

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Speaker 1: of Bolish tech investors at the moment, I'm curious about

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Speaker 1: the m and A of it all. Because Microsoft has

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Speaker 1: also very notably created this activision deal. I think, I

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Speaker 1: want to say, over seventy billion dollars off the top

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Speaker 1: of my head, is it going to do more? Right?

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Speaker 1: You have this incentive to spend the money. A five

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Speaker 1: year old could tell you that if your dollar is

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Speaker 1: worth less tomorrow, you buy that lollipop today. What is

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Speaker 1: the Microsoft equivalent of that lollipop. It's it's a very

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Speaker 1: very good question. And I always wonder that when the

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Speaker 1: regulators are going to get to Microsoft also because sooner

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Speaker 1: or later they will. Um. They are the one company

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Speaker 1: that have been able to acquire UM companies while the

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Speaker 1: others are a little bit more cautious. So then begs

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Speaker 1: the question, well, what do you do with the sixties

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Speaker 1: sixty five billion pre cash flow that you're generating? I

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Speaker 1: do you pay used dividend? Which is it still happened

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Speaker 1: a little bit, but the bulk of that, in my view,

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Speaker 1: is going to go to buy backs. Grana senior software

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Speaker 1: analyst with Bloomberg Intelligence. We keep throwing curveballs at him

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Speaker 1: and he keeps knocking it out of the park. As

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Speaker 1: Tom Keane would say, that's as close to baseball as

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Speaker 1: I get. I don't watch baseball, but I do love

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Speaker 1: watching Microsoft today. It is a fascinating story, and we

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Speaker 1: thank Rod for me here. Yeah, And you know, I

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Speaker 1: think it's also a huge deal to just talk about

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Speaker 1: can you actually compose or is just transpose what you're

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Speaker 1: seeing in Microsoft and Alphabet to these other tech companies.

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Speaker 1: At the end of the day, UM, they're so different

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Speaker 1: when it comes to their business up models, when it

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Speaker 1: comes to their supply chains, when it comes to their

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Speaker 1: cash picture. There is simply just a lot going on. We're,

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Speaker 1: of course, I'm gonna keep you updated on all of that,

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Speaker 1: all the stock moves these markets, folks. Is I mean,

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Speaker 1: there's just really something to witness your volatility here the

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Speaker 1: vix handle at a thirty two. The story isn't about

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Speaker 1: do you play tech? Do you not play tech? Our

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Speaker 1: evaluations too high? Not too high. A lot of the

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Speaker 1: conversation is what do you do if you have recession?

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Speaker 1: The word recession in your vocabulary, whether you're in Europe,

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Speaker 1: whether you're in China, or whether you're right here in

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Speaker 1: the United States, cushioned by some of that stimulus that's

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Speaker 1: really been perhaps keeping the economy float for a while.

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Speaker 1: We're gonna ask all these questions to our very own

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Speaker 1: guests here. Um, if you give me a second, Alex

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Speaker 1: shall Off, co head of Investment Strategies, coming from burnst

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Speaker 1: in Private Wealth Management, Alex, I'm confused, why are stocks dropping?

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Speaker 1: Why is tech dropping? If they're the haven in this

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Speaker 1: storm of inflation and growth? Critty, It's all about what's

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Speaker 1: going on in the interest rate market. Clearly, the Fed

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Speaker 1: has a monumental task ahead of them. They've got too

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Speaker 1: slow inflation by raising rates, but they can't go enough

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Speaker 1: that they put the US into recession. And that's what

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Speaker 1: investors are most concerned about. It's that balance. Can they

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Speaker 1: get it right? Why don't you tell me? Can they

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Speaker 1: get it right? It's hard. I don't want to say

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Speaker 1: that there's a high degree of confidence. That's clearly what

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Speaker 1: the markets pricing in is that there's a lot of

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Speaker 1: doubt skepticism about, Uh, can they nail it? The real question, frankly,

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Speaker 1: is what happens if they if they get it wrong,

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Speaker 1: do they Are they able to pull it back fast

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Speaker 1: enough um to correct themselves? Uh? Is frankly a very

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Speaker 1: short recession? Could that be the answer to solve the

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Speaker 1: inflation problem? A lot of question marks. That's part of

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Speaker 1: the reason why you're seeing the markets behave the way

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Speaker 1: that they are, Not just the equity markets, by the way,

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Speaker 1: there's been a lot of stress and turmoil and the

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Speaker 1: fixed income markets as well. So I think that the

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Speaker 1: answer is remains to be seen. But clearly the market

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Speaker 1: is saying no, but okay, So walk us through that.

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Speaker 1: For folks who perhaps don't watch the minute mint to

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Speaker 1: minute ticks of the bond market, what does getting it

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Speaker 1: wrong look like in a market that perhaps is getting

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Speaker 1: more and more hawkish, and the actual Federal Reserve is itself.

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Speaker 1: There's so much conversation about markets investors getting ahead of

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Speaker 1: what Chairman Powell was even thinking. If you're pricing in

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Speaker 1: these moves and then the Fed executes, what's the problem here?

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Speaker 1: Where could this go wrong? That you are? You nail

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Speaker 1: that in the idea that the market is is hyper

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Speaker 1: sensitive to every single word that Chair Powell says, and

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Speaker 1: on multiple occasions, if you really read between the lines,

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Speaker 1: he's telling us relax, everybody, just relax. Um. He he

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Speaker 1: understands the stress of the moment and how each one

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Speaker 1: of these signals that he provides to the market is

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Speaker 1: stressed a hundred and fifty different ways. Um, what could

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Speaker 1: it look like if he gets it wrong? If if

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Speaker 1: the Fed moves too much on the overnight rate, I

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Speaker 1: think you'll see continued stress in the fixed income markets.

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Speaker 1: You know, a ten year today at two seventy five

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Speaker 1: neighborhood there there's a school of thought that says we

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Speaker 1: end the year with a ten year at to seventy five,

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Speaker 1: and while we continue to push short rates up, that's

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Speaker 1: a much flatter yield curve. So there's a lot of

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Speaker 1: investment opportunity that's created with a flat yield curve. When

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Speaker 1: you're when you're going to a flattener, there's things called

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Speaker 1: you know, you talk about people not paying attention minute

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Speaker 1: by minute. So maybe this is two inside baseball, but

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Speaker 1: you've got a bear flattener that that could be um

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Speaker 1: uh caused damage in the bond marketing at a bull flatty,

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Speaker 1: you have all kinds of different approaches. The point is,

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Speaker 1: though interest rates are going up, the market is probably

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Speaker 1: priced well in advanced We've priced in six twelve months

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Speaker 1: from now, and and that's why the bond market actually

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Speaker 1: provides an interesting investment opportunity on a go forward basis

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Speaker 1: because you've already taken the hit, you've already paid the

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Speaker 1: price of admission, if you will, and now as you

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Speaker 1: sit back and clip yields that are much higher than

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Speaker 1: they were six months ago, it's actually an interesting place

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Speaker 1: to put capital. So to seventy five by the end

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Speaker 1: of the year, which is actually exactly where we are

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Speaker 1: right now on the tenure, we're exactly at two. I'm

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Speaker 1: curious though, what the catalyst is to turn around some

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Speaker 1: of this selling. Remember We're coming off of a pretty

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Speaker 1: I think a historically bad quarter for bonds in terms

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Speaker 1: of selloffs, and you just made the call the I guess,

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Speaker 1: I guess the bull case for bonds, but once the

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Speaker 1: catalysts were waiting for when it comes to equities in

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Speaker 1: an environment, I might add where we're seeing a much

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Speaker 1: much stronger dollar, there's a number of catalysts uh for

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Speaker 1: the equity market. And maybe this is a little bit

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Speaker 1: of a gentrarian call, but I think there's likes Okay,

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Speaker 1: here we go. Um. I would say jobs, watch the

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Speaker 1: job's number. That job openings is a huge uh piece

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Speaker 1: of information that we don't think it's getting a lot

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Speaker 1: of attention, and it should. There are some eleven million

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Speaker 1: open positions, there's some six and a half million people

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Speaker 1: looking for that that spread that differential between open positions

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Speaker 1: and people looking for positions, if you would go back

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Speaker 1: over history and adjusted for for population inflation, it's never

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Speaker 1: been higher. So that's a big number. You can't have

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Speaker 1: a recession when you have this many open jobs to

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Speaker 1: supply chain disruption. What if we are closer than many

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Speaker 1: people suspect to aolving the supply chain disruption. If you

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Speaker 1: look at congestion imports is interesting. I'm on the West Coast,

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Speaker 1: so I look at l A and Long Beach. We're

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Speaker 1: down from the peak from the number of container ships

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Speaker 1: at UH Long Beach in l A. But what's interesting

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Speaker 1: is there's a new category called slow speed steaming. This

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Speaker 1: came from our Global Logistics Research Group, and this is

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Speaker 1: we've never seen more ships hanging around under slow power.

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Speaker 1: If if you think about the slowdown that's happening in China,

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Speaker 1: shouldn't say slow down the shutdown, zero COVID shutdown. What

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Speaker 1: if they're going to stop production and stop sending US

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Speaker 1: cargo ships that we can't even unload anyways, and we're

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Speaker 1: able to work through this excess inventory and then have

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Speaker 1: them rebuild it so we could be on the other

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Speaker 1: side of the supply chain disruption as well. Alex shell

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Speaker 1: off with the contrarian call. We thank him as always,

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Speaker 1: first time. We're gonna have you back soon. Let's bring

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Speaker 1: an Anna Wong, chief US economists for Bloomber Economics. Anna,

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Speaker 1: thank you so much for joining us. Where do we

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Speaker 1: go from here in terms of the strength of the

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Speaker 1: American consumer? I felt like the narrative really the summer

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Speaker 1: of one. So about maybe six nine months ago was

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Speaker 1: this is when the effects of fiscal stimulus is going

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Speaker 1: to wear off. This is when you're going to see

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Speaker 1: that deceleration in consumer spending. Are we there yet? I

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Speaker 1: don't think we're there yet. So American household balance sheet

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Speaker 1: is at a forty year low. And even though it's

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Speaker 1: true that some of those savings are being run down

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Speaker 1: and the impact of those fiscal stimulus checks would be

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Speaker 1: wearing out, it's still still American household half the runway

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Speaker 1: on the balance sheet to either continue to or expand

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Speaker 1: credit because the real interest rate, in fact is still

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Speaker 1: negative because interest rate is still below inflation. And also

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Speaker 1: that for the UM top forties sixty percentile in terms

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Speaker 1: of income. Uh, those households still have a lot of

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Speaker 1: excess savings. And those are the ones who are pivoting

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Speaker 1: towards more vacations, consumer and restaurants, going out to movie theaters.

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Speaker 1: Um so, so there's still a lot of consumption. Um yeah,

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Speaker 1: if you will in the US economy. You know, I'm

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Speaker 1: gonna steal a line from Pretty because she said it

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Speaker 1: a few times and it makes me laugh. The china

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Speaker 1: of it all. What about the lockdowns? That are happening

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Speaker 1: that you see in China, and then also kind of

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Speaker 1: these renewed fears about COVID, how might FATS start to

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Speaker 1: throw things here in the US off the track it's on. Yeah,

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Speaker 1: So you know, the biggest risk to the US economy, indeed,

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Speaker 1: is coming from abroad, from both China and Europe. China's

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Speaker 1: lockdown has to effects on inflation. On one hand, it's

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Speaker 1: very inflationary because of remuge supply chain bottlenecks. But on

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Speaker 1: the other hand, China is a huge commodity demand UH nation.

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Speaker 1: In in in the whole world, it accounts for over

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Speaker 1: fifty of demand for a lot of commodities categories. So

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Speaker 1: for Chinese GDP growth to plunge like what what we

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Speaker 1: are seeing right now, means that commodity prices ahead would

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Speaker 1: be falling, or at least there would be inflationary force

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Speaker 1: on commodities to fall, whereas um on the other side,

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Speaker 1: you know, the lockdown, would it be inflationary. So on net,

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Speaker 1: what is the impact on US especially It depends on

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Speaker 1: whether US demand for good especially good produced by China,

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Speaker 1: is softening. And we have been seeing signed since the

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Speaker 1: end of February that US helpful demand of cars or

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Speaker 1: and UH furnishing, household furnishing perils. You know, electronics, stuff

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Speaker 1: that China produce is being softening, and part of that

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Speaker 1: is related to the fact that demand is rotating from

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Speaker 1: goods UH two services and we have we have bought

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Speaker 1: too much electronics over the last few years. Working from

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Speaker 1: home and now we're going back to office, we have

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Speaker 1: left need for that. So that means that whatever inflationary

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Speaker 1: shock coming from China's lockdown would produce a smaller pass

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Speaker 1: through than the same degree of um you know, lockdown

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Speaker 1: that we have seen last year. So there's there's there's

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Speaker 1: there's reasons to be optimistic, slightly more optimistic about this

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Speaker 1: round of supply chain shocks from China. Well, let's bring

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Speaker 1: in the other major risk, right the war in Ukraine. Here.

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Speaker 1: I believe we have some headlines come out this morning.

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Speaker 1: Germany ready to support the EU ban on Russian oil

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Speaker 1: if it's gradually will there's something that you heard the

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Speaker 1: French finance Mr Bruno LAMAI are very vocal about a

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Speaker 1: couple of weeks ago. You also heard on the back

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Speaker 1: of that JP Morgan calling for a hundred eighty five

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Speaker 1: dollars on oil. And I was at Sarah Week a

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Speaker 1: month about about a month ago, essentially one of the

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Speaker 1: largest energy conferences in the world. We were talking about

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Speaker 1: some of these oil ministers from around the world, and

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Speaker 1: they were looking at two hundred dollar oil, three hundred

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Speaker 1: dollar oil potentially on the table, not their base case,

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Speaker 1: but potentially on the table. What does that do to

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Speaker 1: American GDP. Yeah, So, so if oil indeed searched to

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Speaker 1: one A two hundred, then we'll be seeing CPI inflation

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Speaker 1: headline of nine and that will make the said much

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Speaker 1: more hawkish. That had been talked last week about by

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Speaker 1: one of the f OMC participants, UM flirting with the

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Speaker 1: talks of bits grate hike. So if it's that Tennisinara

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Speaker 1: comes to pas Us with loyal at two hundred dollars

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Speaker 1: preparel seventies five, bits become a distinct possibility later this year,

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Speaker 1: and of course that would squeeze see US economy much more.

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Speaker 1: But still um Bloomberg Economics sees the chance of the

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Speaker 1: session in the next twelve month as being very very

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Speaker 1: low because of the for the reasons that I have

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Speaker 1: said earlier that the household balant sheets are still very solid.

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Speaker 1: You know, I'm wondering also, we're talking about the risk

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Speaker 1: over session and even if it's further off than it

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Speaker 1: was you know to some before, what about stagflation and

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Speaker 1: how much is that a worry and how much does

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Speaker 1: that start to impact both economic conditions and market conditions,

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00:24:44,840 --> 00:24:48,639
Speaker 1: you know, stagflation. Um. You know, if we're thinking about

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00:24:48,680 --> 00:24:53,480
Speaker 1: a stagflation, that's where where growth is stup one percent,

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00:24:54,440 --> 00:24:59,000
Speaker 1: between zero to one percent, and inflation at current rate,

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00:24:59,480 --> 00:25:03,160
Speaker 1: I still think that I still think that it wouldn't

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00:25:03,200 --> 00:25:08,360
Speaker 1: be um ah, it still has a lower probibility than

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00:25:08,880 --> 00:25:12,400
Speaker 1: growth being at one or two percent. That The main

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00:25:12,480 --> 00:25:16,359
Speaker 1: reason is because the US labor market is really strong.

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00:25:16,800 --> 00:25:21,320
Speaker 1: We're expecting to see on employment rate fall below three

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00:25:21,359 --> 00:25:25,160
Speaker 1: points five percent in the next couple of months. And

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00:25:25,720 --> 00:25:28,920
Speaker 1: you know, there's one point eight jobs open, jobs opening

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00:25:28,920 --> 00:25:32,240
Speaker 1: for every unemployed person, so those openings are not going

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00:25:32,320 --> 00:25:37,400
Speaker 1: to evaporate. And but then you know, in twelve months

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00:25:37,440 --> 00:25:40,920
Speaker 1: like that quickly. Uh So on the other hand, if

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00:25:40,960 --> 00:25:45,080
Speaker 1: we look um into deep into three, yeah, I can

445
00:25:45,119 --> 00:25:48,359
Speaker 1: see groups flowing too, you know, one percent or below

446
00:25:48,400 --> 00:25:52,600
Speaker 1: one percent. Um. So yeah, But at the same time

447
00:25:52,600 --> 00:25:55,920
Speaker 1: I do see that inflation would be down from today's

448
00:25:56,160 --> 00:25:59,600
Speaker 1: a point. I don't. I think it's um very likely

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00:25:59,760 --> 00:26:02,320
Speaker 1: that in flights it would be sticking around four percent

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00:26:02,600 --> 00:26:05,520
Speaker 1: next year, UM. And I don't think in flating of

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00:26:05,600 --> 00:26:09,359
Speaker 1: four percent and growth around like one percent would be

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00:26:09,400 --> 00:26:15,399
Speaker 1: a major staxation UM scenario. So yeah, below one percent

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00:26:15,520 --> 00:26:18,680
Speaker 1: growth potentially on the table. I mean, that's fascinating. Anna.

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Speaker 1: Let me give you one last question here. Historically, if

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00:26:21,359 --> 00:26:23,919
Speaker 1: you go back, say fifty years, recessions have come about

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00:26:23,960 --> 00:26:27,520
Speaker 1: every three to five years. In the last two decades

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00:26:27,600 --> 00:26:31,520
Speaker 1: we've seen these eight, nine, ten year long expansions. Do

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00:26:31,560 --> 00:26:33,800
Speaker 1: you think we're going to go back to the historical

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00:26:33,960 --> 00:26:36,679
Speaker 1: norm of a recession every three or five years in

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00:26:36,760 --> 00:26:40,560
Speaker 1: terms of the size of the economic cycle. That's a

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00:26:40,560 --> 00:26:43,800
Speaker 1: great question. UM. I think that the answer to this

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00:26:43,960 --> 00:26:48,040
Speaker 1: is the Power himself has answered this, which is that

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00:26:48,240 --> 00:26:52,440
Speaker 1: price stability and maximum employment go hand in hand together.

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Speaker 1: And the reason why in the last twenty five years

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00:26:55,160 --> 00:26:58,480
Speaker 1: we have seen long expansion year cycles is because of

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00:26:58,520 --> 00:27:03,840
Speaker 1: priced ability. So oh, currently inflation is so high that

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00:27:04,040 --> 00:27:11,560
Speaker 1: it's very hard to have a long expansion cycle because

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00:27:11,880 --> 00:27:14,719
Speaker 1: the FAID itself becomes a risk with the you know,

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00:27:15,720 --> 00:27:19,359
Speaker 1: deep but great Hicks. So to your question, I think, um,

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Speaker 1: it's more more challenging than ever. But now Annah Long,

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Speaker 1: chief US economists over here at Bloomberg Economics. Always a pleasure.

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Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can

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00:27:33,000 --> 00:27:36,760
Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever

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00:27:36,880 --> 00:27:40,520
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

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00:27:40,800 --> 00:27:44,600
Speaker 1: at Matt Miller. Put on false Sweeney I'm on Twitter

476
00:27:44,680 --> 00:27:47,520
Speaker 1: at pt Sweeney before the podcast. You can always catch

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00:27:47,600 --> 00:27:49,120
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