1 00:00:05,080 --> 00:00:08,280 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa A. 2 00:00:08,320 --> 00:00:11,640 Speaker 2: Bromoids, along with Tom Keen and Jonathan Ferrell, join us 3 00:00:11,680 --> 00:00:15,280 Speaker 2: each day for insight from the best in economics, geopolitics, 4 00:00:15,320 --> 00:00:16,440 Speaker 2: finance and investment. 5 00:00:16,760 --> 00:00:18,760 Speaker 1: Subscribe to Bloomberg Surveillance. 6 00:00:18,400 --> 00:00:21,840 Speaker 2: Undemand on Apple, Spotify and anywhere you get your podcasts, 7 00:00:22,160 --> 00:00:25,200 Speaker 2: and always on Bloomberg dot Com, the Bloomberg Terminal, and 8 00:00:25,200 --> 00:00:26,440 Speaker 2: the Bloomberg Business app. 9 00:00:26,800 --> 00:00:30,160 Speaker 3: The inflation fight is an over, speaking of CBS over 10 00:00:30,160 --> 00:00:33,120 Speaker 3: the weekend, joining a chorus of Fed officials pushing back 11 00:00:33,320 --> 00:00:36,400 Speaker 3: on ray cut speculation in the wake of Jpow's dubvish outlook, 12 00:00:36,560 --> 00:00:39,839 Speaker 3: Former New York Fed President Bill Dudley, calling POW's comments 13 00:00:39,960 --> 00:00:43,160 Speaker 3: a gamble warning quote. There's plenty that can go wrong. 14 00:00:43,600 --> 00:00:46,960 Speaker 3: Power has repeatedly emphasized that the Fed must finish the job. 15 00:00:47,240 --> 00:00:49,239 Speaker 3: Yet the more weight he puts on cutting rates to 16 00:00:49,280 --> 00:00:52,440 Speaker 3: avoid a recession, the greater the risk of falling and 17 00:00:52,479 --> 00:00:57,200 Speaker 3: failing to control inflation of markets getting a big, unpleasant 18 00:00:57,280 --> 00:01:00,560 Speaker 3: surprise one way or another. Twenty twenty four promises be 19 00:01:00,600 --> 00:01:03,200 Speaker 3: an interesting year. Thanks for tearing that up, Bill. Let's 20 00:01:03,200 --> 00:01:05,640 Speaker 3: start the conversation there, just why do you think that 21 00:01:05,760 --> 00:01:07,800 Speaker 3: is so risky? And what on earth happened at the 22 00:01:07,800 --> 00:01:10,800 Speaker 3: news conference last week? We spoke immediately afterwards. You've had 23 00:01:10,840 --> 00:01:12,720 Speaker 3: an extra week. What was that, Bill? 24 00:01:13,880 --> 00:01:16,120 Speaker 4: I think he's been very pleased with how the economy 25 00:01:16,120 --> 00:01:19,280 Speaker 4: has performed to be pretty stridy growth. Yet the inflation 26 00:01:19,400 --> 00:01:22,120 Speaker 4: rate has come down, so the prospects of the soft 27 00:01:22,200 --> 00:01:23,160 Speaker 4: landing have gone up. 28 00:01:23,319 --> 00:01:25,240 Speaker 5: I think that's all really good and positive. 29 00:01:25,640 --> 00:01:27,759 Speaker 4: What I don't understand is why you'd want to add 30 00:01:27,760 --> 00:01:31,800 Speaker 4: fuels of the fire and cause financial conditions to ease substantially, 31 00:01:31,880 --> 00:01:35,080 Speaker 4: which is whether he provoked last week. The stocks are 32 00:01:35,160 --> 00:01:38,560 Speaker 4: up quite a bit, bonnials are down, financial conditions are 33 00:01:38,600 --> 00:01:41,800 Speaker 4: much more accommodative. The Goldman Sachs Financial Conditions Index, for example, 34 00:01:41,800 --> 00:01:44,440 Speaker 4: it is by a four percentage point at a time 35 00:01:44,480 --> 00:01:46,600 Speaker 4: that the economy has been growing, and above trempe ss. 36 00:01:46,959 --> 00:01:49,120 Speaker 5: To me, I'm worry the defense is not going to 37 00:01:49,240 --> 00:01:51,480 Speaker 5: finish the job. He's behaving a little bit more like 38 00:01:51,560 --> 00:01:53,320 Speaker 5: Arthur Burn than he is like Paul Bunker. 39 00:01:54,200 --> 00:01:56,040 Speaker 3: Bill, let's build on that just a touch more. Do 40 00:01:56,080 --> 00:01:57,920 Speaker 3: you think he's seduced by the prospect of net and 41 00:01:57,920 --> 00:01:59,600 Speaker 3: the soft landing. Do you think that's what sucked him 42 00:01:59,600 --> 00:01:59,960 Speaker 3: in a little bit. 43 00:02:01,080 --> 00:02:03,440 Speaker 4: Well, I think that's certainly what he's trying to achieve, 44 00:02:03,440 --> 00:02:05,720 Speaker 4: and if I was in issues, I would do the same. 45 00:02:06,000 --> 00:02:08,040 Speaker 4: I think there's there of a contest going on right 46 00:02:08,080 --> 00:02:10,680 Speaker 4: now between how to think about monitary policy. Is policy 47 00:02:10,720 --> 00:02:13,399 Speaker 4: really tight because real rates are high and inflation's coming down, 48 00:02:13,880 --> 00:02:16,359 Speaker 4: or is policy not so tight because financial condition that 49 00:02:16,440 --> 00:02:19,160 Speaker 4: needs significantly and that's providing support to the economy. If 50 00:02:19,200 --> 00:02:21,840 Speaker 4: we look at the Atlanta Fed GDP now has for 51 00:02:21,880 --> 00:02:24,480 Speaker 4: the fourth quarter, it's now tracking two point six percent 52 00:02:24,720 --> 00:02:26,519 Speaker 4: after a five point two percent growth right in the 53 00:02:26,600 --> 00:02:28,880 Speaker 4: third quarter. So it's not really clear that the economy 54 00:02:28,919 --> 00:02:31,320 Speaker 4: needs a lot more accommodation to support itself. 55 00:02:31,680 --> 00:02:34,480 Speaker 2: Bill, do you think the Fed jer J. Powell understood 56 00:02:34,680 --> 00:02:36,239 Speaker 2: what he was going to do to markets? 57 00:02:38,000 --> 00:02:39,480 Speaker 5: I think that he certainly. 58 00:02:39,720 --> 00:02:41,560 Speaker 4: I hope he understood that he was coming across with 59 00:02:41,560 --> 00:02:44,160 Speaker 4: a very optimistic sort of framework for markets to that 60 00:02:44,120 --> 00:02:45,000 Speaker 4: I digest. 61 00:02:46,160 --> 00:02:47,080 Speaker 5: I think that's true. 62 00:02:47,200 --> 00:02:50,000 Speaker 4: As Austin Golsby said a little a little bit earlier, 63 00:02:50,680 --> 00:02:53,079 Speaker 4: that this is a forecast, and so if the forecast 64 00:02:53,080 --> 00:02:55,160 Speaker 4: doesn't materialize and the FED rate cuts that are the 65 00:02:55,280 --> 00:02:58,040 Speaker 4: promise won't materialize, either, so the market may be get 66 00:02:58,080 --> 00:03:00,560 Speaker 4: a little bit ahead of itself. This is how Powell 67 00:03:00,600 --> 00:03:03,760 Speaker 4: thinks the world is going to evolve. Paul thinks the 68 00:03:03,800 --> 00:03:05,679 Speaker 4: Fed is going to be cutting rates in twenty twenty four. 69 00:03:05,960 --> 00:03:08,200 Speaker 4: But it's possible that the economy could be firmer for longer, 70 00:03:08,200 --> 00:03:10,240 Speaker 4: inflation could be more stubborn in the rate cuts might 71 00:03:10,240 --> 00:03:11,960 Speaker 4: not actually turn out to materialize. 72 00:03:12,000 --> 00:03:14,200 Speaker 2: The reason why I ask that is because feedcher Powell 73 00:03:14,280 --> 00:03:17,400 Speaker 2: had an opportunity to push back against the financial conditions 74 00:03:17,440 --> 00:03:19,280 Speaker 2: and the easing that we have seen. He had a 75 00:03:19,360 --> 00:03:22,560 Speaker 2: chance to say this is problematic and moves counter to 76 00:03:22,639 --> 00:03:23,360 Speaker 2: our goal. 77 00:03:23,160 --> 00:03:25,400 Speaker 1: Of bringing inflation down. He didn't. 78 00:03:25,600 --> 00:03:28,560 Speaker 2: And you're saying financial conditions still matter. So why do 79 00:03:28,600 --> 00:03:31,560 Speaker 2: they still matter? Is it becoming inflationary or at least 80 00:03:31,919 --> 00:03:34,480 Speaker 2: not necessarily restrictive in a way that's problematic for the 81 00:03:34,520 --> 00:03:37,160 Speaker 2: Fed to see financial conditions easing as much as you've 82 00:03:37,160 --> 00:03:37,960 Speaker 2: pointed out they have. 83 00:03:39,240 --> 00:03:41,280 Speaker 4: Well, the big problem here is that if financial conditions 84 00:03:41,280 --> 00:03:43,880 Speaker 4: ease a lot, that provides impetus to economic growth. If 85 00:03:43,920 --> 00:03:47,360 Speaker 4: the economy grows faster, the labor markets tighter, wage inflation's higher, 86 00:03:47,360 --> 00:03:49,680 Speaker 4: and then it's harder to actually achieve your two percent 87 00:03:49,760 --> 00:03:53,040 Speaker 4: inflation objective. So the question is does the economy need 88 00:03:53,080 --> 00:03:55,360 Speaker 4: more fuel? Does the economy need to grow faster? I 89 00:03:55,400 --> 00:03:58,920 Speaker 4: would say probably no. Labor markets already very very tight. 90 00:03:59,160 --> 00:04:01,920 Speaker 4: Wage inflation is Paul has acknowledged, is above a level 91 00:04:01,960 --> 00:04:04,520 Speaker 4: consistent with two percent inflation. So I'm not sure why 92 00:04:04,560 --> 00:04:06,240 Speaker 4: you'd want to put more fuel on the fire. 93 00:04:06,600 --> 00:04:08,280 Speaker 3: But do you think we've learned enough about the cycle 94 00:04:08,400 --> 00:04:11,120 Speaker 3: so far though to draw conclusions about the contribution of 95 00:04:11,160 --> 00:04:14,160 Speaker 3: the labor market to overall price pressure and just discount 96 00:04:14,200 --> 00:04:16,080 Speaker 3: it and say it's not as important as we thought 97 00:04:16,080 --> 00:04:16,440 Speaker 3: it was. 98 00:04:17,680 --> 00:04:18,400 Speaker 6: Well, I think it's. 99 00:04:18,279 --> 00:04:21,240 Speaker 5: True that there's a big labor force supply benefit that 100 00:04:21,240 --> 00:04:22,800 Speaker 5: you got. Last year. A lot of people rejoined the 101 00:04:22,839 --> 00:04:25,560 Speaker 5: labor force, so the Fed got sorry, had had skicking 102 00:04:25,720 --> 00:04:25,920 Speaker 5: to do. 103 00:04:26,400 --> 00:04:29,520 Speaker 4: They had pretty sturdy growth, but it didn't generate inflation 104 00:04:29,560 --> 00:04:33,520 Speaker 4: pressure because the labor force expanded to accommodate that growth. Now, 105 00:04:33,560 --> 00:04:35,279 Speaker 4: the question is is that going to continue in twenty 106 00:04:35,320 --> 00:04:39,480 Speaker 4: twenty four. That's a really important question in the eco 107 00:04:39,520 --> 00:04:41,880 Speaker 4: gal Look, I'm going to continue to see that kind 108 00:04:41,880 --> 00:04:44,880 Speaker 4: of rapid labor force growth that accommodates pyerial gains of 109 00:04:44,880 --> 00:04:47,120 Speaker 4: one hundred and fifty one hundred and seventy two hundred 110 00:04:47,160 --> 00:04:48,039 Speaker 4: thousand a month. 111 00:04:48,240 --> 00:04:50,159 Speaker 3: Do you see reason to believe that it won. 112 00:04:51,839 --> 00:04:53,800 Speaker 4: I think that that there's some reason to believe that 113 00:04:53,839 --> 00:04:55,640 Speaker 4: some of the labor force pers we saw last year 114 00:04:55,760 --> 00:05:00,480 Speaker 4: was a catchup, right. Basically, you opened up immigrat again, 115 00:05:00,520 --> 00:05:03,200 Speaker 4: so you had a surge of immigration of legal immigration 116 00:05:03,400 --> 00:05:07,520 Speaker 4: into the US last year. Worked from home allowed working 117 00:05:07,520 --> 00:05:10,440 Speaker 4: age women to re enter the layer force. But whether 118 00:05:10,480 --> 00:05:12,720 Speaker 4: that trend is going to continue at that pace, I 119 00:05:12,720 --> 00:05:15,000 Speaker 4: would be a bit skeptical about that. 120 00:05:15,279 --> 00:05:17,839 Speaker 2: There seems to be an acceptance or reacceptance of the 121 00:05:17,920 --> 00:05:23,039 Speaker 2: concept of transitory at fedchair among the FED officials, particularly 122 00:05:23,040 --> 00:05:23,560 Speaker 2: FED Shair J. 123 00:05:23,640 --> 00:05:25,279 Speaker 1: Powell. Are you pushing back on that? 124 00:05:25,320 --> 00:05:27,320 Speaker 2: Are you saying it's still too early to say that 125 00:05:27,360 --> 00:05:30,880 Speaker 2: there's still stickier aspects to inflation that they're discounting. 126 00:05:32,000 --> 00:05:34,440 Speaker 5: I think a lot of the inflation pressure clearly was transitory. 127 00:05:34,480 --> 00:05:36,040 Speaker 4: A lot of the upper pressure you saw on goods 128 00:05:36,080 --> 00:05:38,640 Speaker 4: prices was just to the pandemic and people increasing their 129 00:05:38,640 --> 00:05:42,599 Speaker 4: demand for goods temporarily during that shutdown period. Now we've 130 00:05:42,600 --> 00:05:44,640 Speaker 4: opened up the economy, the demand for goods falls, and 131 00:05:44,680 --> 00:05:45,400 Speaker 4: so that all. 132 00:05:45,279 --> 00:05:46,520 Speaker 5: That price pressure goes away. 133 00:05:46,680 --> 00:05:48,799 Speaker 4: I think the problem on inflation is really more about 134 00:05:49,160 --> 00:05:51,560 Speaker 4: pressure on resources in the labor market. The libor market 135 00:05:51,560 --> 00:05:54,920 Speaker 4: is still very very tight, Wage inflation is still too high, 136 00:05:55,200 --> 00:05:57,640 Speaker 4: and if the economy grows at above trend pace in 137 00:05:57,640 --> 00:06:00,680 Speaker 4: twenty twenty four, all that pressure on is going to 138 00:06:00,720 --> 00:06:03,279 Speaker 4: increase rather than diminished. So the real question I have 139 00:06:03,360 --> 00:06:06,560 Speaker 4: in my mind is monetary policy as tight as the 140 00:06:06,560 --> 00:06:08,640 Speaker 4: FED thinks it is. And I think the fact that 141 00:06:08,680 --> 00:06:12,000 Speaker 4: the FED is pivoted in this way by easing financial 142 00:06:12,040 --> 00:06:15,360 Speaker 4: conditions that makes monetary policy less restrictive rather more restrictive 143 00:06:15,400 --> 00:06:15,960 Speaker 4: going forward. 144 00:06:16,120 --> 00:06:18,159 Speaker 2: Some people have speculated that the FED wants to cut 145 00:06:18,240 --> 00:06:20,279 Speaker 2: rates in the first half of the year and avoid 146 00:06:20,320 --> 00:06:22,800 Speaker 2: making any moves whatsoever the second half because of the 147 00:06:22,920 --> 00:06:23,840 Speaker 2: presidential election. 148 00:06:24,360 --> 00:06:25,120 Speaker 1: Do you buy into that? 149 00:06:26,160 --> 00:06:27,120 Speaker 5: No, I don't buy into it. 150 00:06:27,120 --> 00:06:28,360 Speaker 4: I think at the end of the day, the FED 151 00:06:28,400 --> 00:06:31,800 Speaker 4: accident completely a political matter, because they understand that if 152 00:06:31,800 --> 00:06:35,560 Speaker 4: they start timing rate cuts or rate increases with the 153 00:06:35,600 --> 00:06:38,839 Speaker 4: political cycle, that politicizes the FED and puts them in 154 00:06:38,839 --> 00:06:41,200 Speaker 4: the middle of the whole debate. So the best thing 155 00:06:41,240 --> 00:06:43,400 Speaker 4: the FED can do is they totally ignore the political 156 00:06:43,440 --> 00:06:45,560 Speaker 4: cycle and do what they think is best to achieve 157 00:06:45,600 --> 00:06:47,160 Speaker 4: their dual man date objectives. 158 00:06:47,279 --> 00:06:49,000 Speaker 3: Let's just sit on the comments we've heard so far. 159 00:06:49,120 --> 00:06:52,760 Speaker 3: We've had clarifying remarks from New York Fed President John Williams, 160 00:06:52,839 --> 00:06:56,480 Speaker 3: year old Saint Bill, clarifying remarks from Gilsby over the weekend, 161 00:06:56,560 --> 00:06:59,480 Speaker 3: from Mesta this morning and the Financial Times Bill. How 162 00:06:59,520 --> 00:07:02,400 Speaker 3: does that work? These speeches, these interviews are scheduled well 163 00:07:02,400 --> 00:07:05,000 Speaker 3: ahead of time as we know. Is there someone on 164 00:07:05,000 --> 00:07:07,440 Speaker 3: the committee the Border government has that sends out a 165 00:07:07,480 --> 00:07:09,200 Speaker 3: message to for one and says, let's all get on 166 00:07:09,200 --> 00:07:11,240 Speaker 3: the same page. I need you to say x y C. 167 00:07:11,440 --> 00:07:11,640 Speaker 6: Bill. 168 00:07:11,760 --> 00:07:12,559 Speaker 3: Does that ever happen? 169 00:07:13,360 --> 00:07:14,760 Speaker 5: So the answer is yes and no. 170 00:07:15,560 --> 00:07:18,400 Speaker 4: Yes, John Williams, when John Wayns speaks, you have to 171 00:07:18,400 --> 00:07:21,600 Speaker 4: believe that that's been carefully choreographed with the Board of 172 00:07:21,640 --> 00:07:24,640 Speaker 4: Governors and Jay Paul. When other Fed presidents speak, No, 173 00:07:24,760 --> 00:07:28,040 Speaker 4: that's not choreographed. That's them operating on their own. So 174 00:07:28,600 --> 00:07:31,280 Speaker 4: Paul speaks, you want to pay Paul's speech, You want 175 00:07:31,280 --> 00:07:32,880 Speaker 4: pay attention to John Wayne' speech. You want to pay 176 00:07:32,880 --> 00:07:35,920 Speaker 4: attention because they're part of the Troyka, the core group 177 00:07:36,000 --> 00:07:37,720 Speaker 4: that sets monitor policy for the FED. 178 00:07:38,120 --> 00:07:39,560 Speaker 5: So I think, look, I think I think people are 179 00:07:39,640 --> 00:07:40,640 Speaker 5: pushing back a little bit. 180 00:07:41,120 --> 00:07:43,480 Speaker 4: I think the market is sort of running away from 181 00:07:43,520 --> 00:07:46,840 Speaker 4: them when when the story isn't really completed yet, I 182 00:07:46,880 --> 00:07:51,840 Speaker 4: mean Paul's Paul's remarks last week. We're all about how 183 00:07:51,840 --> 00:07:53,760 Speaker 4: he thinks things are going to evolve. We have to 184 00:07:53,760 --> 00:07:56,800 Speaker 4: see if they actually evolved in that way to provide 185 00:07:56,800 --> 00:07:58,040 Speaker 4: the motivation for rate cuts. 186 00:07:58,240 --> 00:08:00,400 Speaker 3: Hi, Bill, I appreciate the update, great pace of morning. 187 00:08:00,680 --> 00:08:03,440 Speaker 3: Enjoyed the raid. Bill down be there of Bloomberg opinion 188 00:08:03,480 --> 00:08:05,800 Speaker 3: on the gamble. He thinks this federal Reserve is taken 189 00:08:05,800 --> 00:08:13,400 Speaker 3: with the grand pivot that was seemingly unofficially announced. I'm 190 00:08:13,440 --> 00:08:16,680 Speaker 3: really placed to say that. Revisiting a surround a table 191 00:08:16,720 --> 00:08:19,800 Speaker 3: at Prayer Misra portfolio manager at JP Morgan Asset Management 192 00:08:19,800 --> 00:08:22,520 Speaker 3: more than Prayer. We were talking last week on Wednesday, 193 00:08:22,560 --> 00:08:24,640 Speaker 3: going into that news conference with chairman pound pushback, I 194 00:08:24,800 --> 00:08:26,280 Speaker 3: was with you. Surely we were going to get pushed 195 00:08:26,280 --> 00:08:28,840 Speaker 3: back from the chairman. We didn't get any Your point, 196 00:08:28,920 --> 00:08:30,840 Speaker 3: I think is an important one, and we dusting off 197 00:08:30,880 --> 00:08:34,000 Speaker 3: the twenty nineteen playbook. And for those that might have forgotten, 198 00:08:34,000 --> 00:08:36,079 Speaker 3: what is the twenty nineteen playbook? 199 00:08:36,559 --> 00:08:39,120 Speaker 7: So in twenty nineteen, what the Fed did was try to, 200 00:08:39,880 --> 00:08:42,400 Speaker 7: you know, cut rates. They cut rates seventy five basis points, 201 00:08:42,520 --> 00:08:45,680 Speaker 7: really trying to extend the cycle. I think this is 202 00:08:45,720 --> 00:08:48,600 Speaker 7: the power Fed. This is the Fed that says once 203 00:08:48,640 --> 00:08:51,040 Speaker 7: they get the green light from inflation. What did surprise 204 00:08:51,160 --> 00:08:53,720 Speaker 7: me was how quickly they convinced that inflation is actually 205 00:08:53,760 --> 00:08:55,520 Speaker 7: going to head all the way back down to two percent. 206 00:08:55,880 --> 00:08:58,559 Speaker 7: They're trying to get that soft landing. They're really really 207 00:08:58,559 --> 00:09:00,400 Speaker 7: trying to get that, and if that means that they 208 00:09:00,440 --> 00:09:03,079 Speaker 7: can normalize policy, that they can get real rates I 209 00:09:03,120 --> 00:09:05,920 Speaker 7: think closer to one percent, one and a quarter. They 210 00:09:05,960 --> 00:09:08,240 Speaker 7: think they can actually extend the cycle, that we don't 211 00:09:08,240 --> 00:09:10,520 Speaker 7: get that recession. I think it's a little, you know, 212 00:09:11,000 --> 00:09:13,600 Speaker 7: a little bit of a risky move here, because what 213 00:09:13,640 --> 00:09:15,920 Speaker 7: if inflation does tall but if you're at two and 214 00:09:16,000 --> 00:09:18,959 Speaker 7: a half, that's not that far from two. Now, whether 215 00:09:19,040 --> 00:09:20,920 Speaker 7: it will work or not, I think that's the trade 216 00:09:20,920 --> 00:09:24,040 Speaker 7: for six months out right now we're in immaculate disinflation. 217 00:09:24,120 --> 00:09:26,920 Speaker 7: We're seeing growth slow down but not to recession levels, 218 00:09:27,360 --> 00:09:30,720 Speaker 7: and they're hoping that by these preemptive rate cuts that 219 00:09:30,800 --> 00:09:34,920 Speaker 7: they can actually you know, get that. Yeah, that's soft landing. 220 00:09:35,080 --> 00:09:38,400 Speaker 3: Language matters, you didn't say easing, you said normalize. What's 221 00:09:38,480 --> 00:09:39,040 Speaker 3: the difference. 222 00:09:39,280 --> 00:09:42,319 Speaker 7: There's a big difference to not every rate cut is 223 00:09:42,679 --> 00:09:45,360 Speaker 7: essentially created equal. I think the Fed right now, the 224 00:09:45,400 --> 00:09:48,560 Speaker 7: market's hearing the Fed is cutting to the Fed is easing. 225 00:09:48,720 --> 00:09:50,640 Speaker 7: I think what they're trying to do is get rates 226 00:09:50,720 --> 00:09:53,560 Speaker 7: to some sort of neutral level. We don't know what 227 00:09:53,640 --> 00:09:55,800 Speaker 7: neutral is now. We'll be debating our star for the 228 00:09:55,880 --> 00:09:59,280 Speaker 7: next year. You know what's that level at which point 229 00:09:59,600 --> 00:10:03,120 Speaker 7: policy is essentially accommodative. We're very far from accommodative. In fact, 230 00:10:03,160 --> 00:10:05,760 Speaker 7: Japao said that last week. He said, we're well within 231 00:10:05,840 --> 00:10:09,360 Speaker 7: restrictive territory. Normalizing, in my mind, is getting rates to 232 00:10:09,600 --> 00:10:12,840 Speaker 7: you know, feed funds two seventy five, three percent, something 233 00:10:12,880 --> 00:10:16,960 Speaker 7: in that range. Easy would be. Well, you know, below that, 234 00:10:17,000 --> 00:10:19,480 Speaker 7: we're talking one percent two percent. The market right now 235 00:10:19,559 --> 00:10:22,320 Speaker 7: is pricing in normalizing. So when I hear that too 236 00:10:22,360 --> 00:10:25,440 Speaker 7: much is getting priced in, No, we're pricing in inflation 237 00:10:25,520 --> 00:10:27,839 Speaker 7: getting back down close to two percent two two and 238 00:10:27,920 --> 00:10:30,800 Speaker 7: a half, and you know growth in that one percent 239 00:10:30,880 --> 00:10:34,520 Speaker 7: range two seventy five or three percent fed funds is normalizing. 240 00:10:34,760 --> 00:10:37,040 Speaker 7: I actually think we still don't price in this chance. 241 00:10:37,120 --> 00:10:39,440 Speaker 7: So the FED may have to cut well through that 242 00:10:39,640 --> 00:10:41,840 Speaker 7: because they're trying to extend the cycle. But what if 243 00:10:41,840 --> 00:10:44,080 Speaker 7: the damage has already been done? What if the lags 244 00:10:44,160 --> 00:10:46,080 Speaker 7: kick in. I think there's a chance that the Fed 245 00:10:46,120 --> 00:10:48,480 Speaker 7: may have to cut, you know, well south of that 246 00:10:48,559 --> 00:10:50,920 Speaker 7: three percent level, which the market is not pricing in, 247 00:10:50,920 --> 00:10:52,720 Speaker 7: which is why I think there's more room for rates 248 00:10:52,760 --> 00:10:53,439 Speaker 7: to decline. 249 00:10:53,640 --> 00:10:55,800 Speaker 2: Why do you think there are so many Fed officials 250 00:10:55,840 --> 00:10:58,360 Speaker 2: lining up to push back, and we heard from Fedshair 251 00:10:58,440 --> 00:11:02,040 Speaker 2: Japowell if it is consistent in with what they hope 252 00:11:02,080 --> 00:11:02,360 Speaker 2: to do. 253 00:11:02,840 --> 00:11:05,160 Speaker 7: I think they're really trying to prevent getting bullied by 254 00:11:05,160 --> 00:11:07,199 Speaker 7: the market to cut all the way down to zero 255 00:11:07,320 --> 00:11:09,679 Speaker 7: a one percent. Whether that will work or not, I 256 00:11:09,720 --> 00:11:10,880 Speaker 7: think the market's saying it's not. 257 00:11:10,920 --> 00:11:12,200 Speaker 1: Even bullying them to that degree. 258 00:11:12,240 --> 00:11:14,920 Speaker 2: They're only billing them one hundred and fifty basis points exactly. 259 00:11:14,920 --> 00:11:17,640 Speaker 7: But what if the growth data does start to slow down? 260 00:11:17,720 --> 00:11:19,559 Speaker 7: Then I think the market might say, well, you're going 261 00:11:19,559 --> 00:11:21,360 Speaker 7: all the way down to zero, and I think the 262 00:11:21,360 --> 00:11:23,400 Speaker 7: Fed is saying, well, there's a very different bar. There's 263 00:11:23,440 --> 00:11:26,240 Speaker 7: a different bar to normalizing, We've we've reached that bar, 264 00:11:26,920 --> 00:11:29,640 Speaker 7: and then there's a different bar to actually take rates 265 00:11:29,679 --> 00:11:33,520 Speaker 7: into accommodative territory. It's a very nuanced message, but it's 266 00:11:33,600 --> 00:11:35,360 Speaker 7: very hard for the market to actually make that, for 267 00:11:35,400 --> 00:11:37,480 Speaker 7: the for the FED to make that point, and secondly 268 00:11:37,559 --> 00:11:39,120 Speaker 7: for the market to hear it. So I think the 269 00:11:39,160 --> 00:11:42,040 Speaker 7: trade for today is the Fed's going to ease. They're 270 00:11:42,080 --> 00:11:44,760 Speaker 7: trying to get that soft landing until we see data 271 00:11:44,840 --> 00:11:47,040 Speaker 7: that it's not working. It's risk on. 272 00:11:47,320 --> 00:11:48,640 Speaker 1: Well, here's my issue. 273 00:11:48,679 --> 00:11:50,840 Speaker 2: There was a time when we thought that the easing 274 00:11:50,840 --> 00:11:53,800 Speaker 2: and financial conditions mattered, that it actually would have some 275 00:11:53,800 --> 00:11:57,840 Speaker 2: sort of stimulative effect on the economy and potentially on inflation. 276 00:11:58,320 --> 00:11:58,840 Speaker 1: FED shir J. 277 00:11:58,960 --> 00:12:01,800 Speaker 2: Powell had the opportunity, he had a soft path respond 278 00:12:01,800 --> 00:12:02,160 Speaker 2: to that. 279 00:12:02,320 --> 00:12:04,440 Speaker 1: To basically lean into that message. 280 00:12:04,520 --> 00:12:06,839 Speaker 2: He did not do we take a message from that 281 00:12:06,920 --> 00:12:09,439 Speaker 2: if they don't care about the easing and financial conditions, 282 00:12:09,640 --> 00:12:11,360 Speaker 2: or do we take a lesson from all of the. 283 00:12:11,360 --> 00:12:13,120 Speaker 1: Other Feed officials that are trying to say it still 284 00:12:13,120 --> 00:12:13,679 Speaker 1: does matter. 285 00:12:14,320 --> 00:12:17,760 Speaker 7: So I think financial conditions are always context dependent, meaning 286 00:12:18,040 --> 00:12:21,160 Speaker 7: you know, financial conditions have yeast, but so has inflation. 287 00:12:21,240 --> 00:12:24,000 Speaker 7: Inflations come back down. Look at three month moving averages. 288 00:12:24,000 --> 00:12:26,520 Speaker 7: We're running, you know, south of two and a half percent, 289 00:12:27,040 --> 00:12:29,720 Speaker 7: and the growth data is weakening. I mean, even if 290 00:12:29,720 --> 00:12:31,640 Speaker 7: you look at payrolls, which is the strongest part of 291 00:12:31,640 --> 00:12:34,280 Speaker 7: the economy, if I strip out a few sectors, it's 292 00:12:34,320 --> 00:12:39,160 Speaker 7: actually looking pretty weak. The consumer is levering up, and 293 00:12:39,320 --> 00:12:42,320 Speaker 7: you know, we are seeing essentially a pickup in default. 294 00:12:42,400 --> 00:12:45,200 Speaker 7: So I think if the household sector is starting to weaken, 295 00:12:45,280 --> 00:12:47,559 Speaker 7: the FED looks at easy in financial conditions and says, 296 00:12:47,880 --> 00:12:50,679 Speaker 7: actually it's appropriate. So I don't think they push back now. 297 00:12:50,679 --> 00:12:53,680 Speaker 7: If we see a reacceleration and growth, absolutely, the Fed's 298 00:12:53,679 --> 00:12:56,600 Speaker 7: going to push back. If we see inflation stalling out, 299 00:12:56,640 --> 00:12:59,079 Speaker 7: I think they'll say not so fast. But for now, 300 00:12:59,080 --> 00:13:02,320 Speaker 7: if growth has slowing down, I think financial conditions matter 301 00:13:02,360 --> 00:13:02,959 Speaker 7: a lot less. 302 00:13:03,200 --> 00:13:05,199 Speaker 3: Let's go through the levels two year right now, for 303 00:13:05,400 --> 00:13:08,880 Speaker 3: forty two tenure at the moment three ninety thirty years, 304 00:13:08,920 --> 00:13:10,920 Speaker 3: just about four percent. How much space is there for 305 00:13:11,000 --> 00:13:12,760 Speaker 3: you to the fall from here given everything you've just 306 00:13:12,800 --> 00:13:13,400 Speaker 3: told us. 307 00:13:13,720 --> 00:13:15,440 Speaker 7: I mean, it is going to depend on the data. 308 00:13:15,559 --> 00:13:19,000 Speaker 7: My views. Things are slowing, and even though financial conditions 309 00:13:19,040 --> 00:13:22,160 Speaker 7: are easying, the Fed's talking about rate cuts, it's hard 310 00:13:22,280 --> 00:13:24,480 Speaker 7: for that to have an impact on the economy that quickly. 311 00:13:24,520 --> 00:13:27,280 Speaker 7: So I think this zero to five or seven year 312 00:13:27,320 --> 00:13:29,880 Speaker 7: part of the curve can absolutely decline a lot more. 313 00:13:30,120 --> 00:13:32,680 Speaker 7: We should price in at any point a ten to 314 00:13:32,679 --> 00:13:35,160 Speaker 7: fifteen percent chance of a recession. You start to put 315 00:13:35,200 --> 00:13:38,040 Speaker 7: that in and then you're looking at the ten year 316 00:13:38,160 --> 00:13:40,559 Speaker 7: or the five year closer to three percent. So I 317 00:13:40,559 --> 00:13:42,640 Speaker 7: think there is room for it to decline. May not 318 00:13:42,720 --> 00:13:44,640 Speaker 7: be a straight line. We've come a pretty long way, 319 00:13:44,720 --> 00:13:46,959 Speaker 7: very quickly. Two months ago we were at five percent 320 00:13:47,000 --> 00:13:49,440 Speaker 7: on tens. We're talking about, you know, the supply narrative, 321 00:13:49,480 --> 00:13:52,319 Speaker 7: so it's moved a long way. I think it can consolidate, 322 00:13:52,679 --> 00:13:54,560 Speaker 7: but I don't think we're getting much of a backup, 323 00:13:54,600 --> 00:13:57,480 Speaker 7: so I would use any backup as an opportunity to buy. 324 00:13:57,559 --> 00:14:00,000 Speaker 7: I think we can have a pretty flat gurve around 325 00:14:00,080 --> 00:14:01,480 Speaker 7: three percent, and for the next few months. 326 00:14:01,559 --> 00:14:03,040 Speaker 3: Let's talk about the shack of the curve on place 327 00:14:03,080 --> 00:14:04,880 Speaker 3: you went there. You've alluded to this. Just why is 328 00:14:04,880 --> 00:14:08,040 Speaker 3: this curve still at negative fifty one two year versus 329 00:14:08,080 --> 00:14:10,360 Speaker 3: ten yere Why don't we get in that classic end 330 00:14:10,400 --> 00:14:12,680 Speaker 3: of cycle boast state to come through what's happening? 331 00:14:13,000 --> 00:14:15,760 Speaker 7: I think that's you know, do your question earlier around 332 00:14:15,760 --> 00:14:18,600 Speaker 7: normalization versus easing. I think the market that's the part 333 00:14:18,600 --> 00:14:20,720 Speaker 7: of the market that understands. So this FED is not 334 00:14:20,840 --> 00:14:23,200 Speaker 7: talking about easing all the way down to zero, the 335 00:14:23,240 --> 00:14:26,000 Speaker 7: curve will really steepen. I think when we see signs 336 00:14:26,040 --> 00:14:28,080 Speaker 7: that were in front of a heart that a hard 337 00:14:28,120 --> 00:14:30,160 Speaker 7: landing is in front of us. If we're still in 338 00:14:30,200 --> 00:14:32,680 Speaker 7: a soft landing, I think we have a very flat curve. 339 00:14:32,960 --> 00:14:35,640 Speaker 7: There should be some term premium there. But here's my 340 00:14:35,720 --> 00:14:38,920 Speaker 7: pushback to term premium. There's six trillion sitting in money 341 00:14:38,960 --> 00:14:42,240 Speaker 7: market funds. It's felt cash has felt good, right, I'm 342 00:14:42,280 --> 00:14:44,560 Speaker 7: earning more If the FED hike's more well, I'll earn 343 00:14:44,600 --> 00:14:48,200 Speaker 7: more well. Now, actually think about reinvestment risks. As the 344 00:14:48,240 --> 00:14:50,600 Speaker 7: FED starts to cut rates, those rates are not going 345 00:14:50,640 --> 00:14:52,840 Speaker 7: to stay that high. Money is going to move out. 346 00:14:52,880 --> 00:14:55,000 Speaker 7: And it's not obvious to me that all moves to 347 00:14:55,040 --> 00:14:58,200 Speaker 7: stocks when real rates are close to two percent? What 348 00:14:58,440 --> 00:15:00,400 Speaker 7: bonds start to look very attractive as well? 349 00:15:00,640 --> 00:15:02,640 Speaker 3: You said things with slowing Can we finish there? What 350 00:15:02,800 --> 00:15:04,960 Speaker 3: is guiding you? Where are you looking across your dashboard 351 00:15:05,040 --> 00:15:07,560 Speaker 3: right now, looking at various economic indicators? What's guiding your 352 00:15:07,560 --> 00:15:10,120 Speaker 3: assessment of why this economy is going? Because I've looked 353 00:15:10,120 --> 00:15:12,080 Speaker 3: at a range forward looking indicators for a while now, 354 00:15:12,080 --> 00:15:14,480 Speaker 3: I've been signaling slow down and then Q three happened, 355 00:15:14,760 --> 00:15:16,400 Speaker 3: So what are you looking at right? 356 00:15:16,480 --> 00:15:18,760 Speaker 7: So you know, I think Q three part of why 357 00:15:18,880 --> 00:15:21,440 Speaker 7: Q three happened or that strength and the data was 358 00:15:21,520 --> 00:15:25,680 Speaker 7: real income surging, inflation decline, but wages was still high. 359 00:15:26,000 --> 00:15:28,360 Speaker 7: Well that's starting to decline because if you look at 360 00:15:28,400 --> 00:15:30,800 Speaker 7: wage growth. So what I'm looking at is I'm basically 361 00:15:30,840 --> 00:15:34,440 Speaker 7: looking at the household sector. So I'm looking at small 362 00:15:34,480 --> 00:15:38,360 Speaker 7: business hiring. That sentiment seems to be slowing, you know, 363 00:15:38,520 --> 00:15:41,200 Speaker 7: And I'm looking at the consumer. So at the margin 364 00:15:41,280 --> 00:15:44,040 Speaker 7: you've seen cracks. We still don't know if the cracks 365 00:15:44,040 --> 00:15:47,000 Speaker 7: will be systemic enough and can the FED this preemptive 366 00:15:47,000 --> 00:15:51,280 Speaker 7: easing actually prevent the cracks from deepening. But there are 367 00:15:51,320 --> 00:15:54,680 Speaker 7: cracks in terms of the consumer you know, leverage in 368 00:15:54,760 --> 00:15:59,160 Speaker 7: terms of consumer deforce delinquencies, so there's signs of trouble. 369 00:15:59,600 --> 00:16:01,400 Speaker 7: I think it still too early to say is this 370 00:16:01,480 --> 00:16:03,800 Speaker 7: hard landing, but we should put in some probability of 371 00:16:03,800 --> 00:16:04,880 Speaker 7: a hard landing there. 372 00:16:05,080 --> 00:16:06,640 Speaker 3: It's good to say, you always So it's pretty much 373 00:16:06,640 --> 00:16:20,720 Speaker 3: for the JP Morgan acid matter. Let's get straight to 374 00:16:20,800 --> 00:16:24,160 Speaker 3: the conversation. J Philoscy is found lonely oh year constructive 375 00:16:24,360 --> 00:16:26,760 Speaker 3: on the equity market. Now he's got a company, tons 376 00:16:26,760 --> 00:16:29,480 Speaker 3: of company. The founder and principal at TPW Advice we 377 00:16:29,560 --> 00:16:31,800 Speaker 3: joined us now, Jay, it's wonderful to catch up with you, sir. 378 00:16:32,080 --> 00:16:35,440 Speaker 3: How good does that external validation feel for you this morning? 379 00:16:36,240 --> 00:16:39,480 Speaker 8: Well, it's been makes up for a warm, wet and 380 00:16:39,840 --> 00:16:41,120 Speaker 8: windy Monday. 381 00:16:40,720 --> 00:16:43,000 Speaker 6: Morning in New York City, that's for sure. 382 00:16:43,280 --> 00:16:45,920 Speaker 8: So now it's you know, as you guys have been 383 00:16:45,960 --> 00:16:49,080 Speaker 8: talking about you and Lisa and others, markets of rallied 384 00:16:49,120 --> 00:16:52,040 Speaker 8: the rally right in your face. It's been very difficult 385 00:16:52,120 --> 00:16:53,680 Speaker 8: to stand aside. 386 00:16:53,880 --> 00:16:56,560 Speaker 6: It's a classic. As we talked about your end rally. 387 00:16:56,960 --> 00:16:59,040 Speaker 8: You have a gate a calendar end of the year, 388 00:16:59,440 --> 00:17:03,200 Speaker 8: you're under performing, because you have cash, you have to participate. 389 00:17:03,760 --> 00:17:07,639 Speaker 8: And I read something infintwit over the week where it 390 00:17:07,720 --> 00:17:10,560 Speaker 8: was like pain levels ten out of ten, right, So 391 00:17:10,600 --> 00:17:14,199 Speaker 8: there's a lot of pressure on people to perform in 392 00:17:14,240 --> 00:17:17,439 Speaker 8: this period and so there's a big chase going on 393 00:17:17,520 --> 00:17:21,480 Speaker 8: and as you see it's continuing now into week eight. 394 00:17:22,200 --> 00:17:24,320 Speaker 3: Jay, you weren't bullish for the sake of being bullish. 395 00:17:24,400 --> 00:17:27,480 Speaker 3: So let's talk about your framework, the process you've been 396 00:17:27,480 --> 00:17:31,280 Speaker 3: calling for this return to macro stability away from what 397 00:17:31,280 --> 00:17:35,320 Speaker 3: we've been experiencing over the previous twelve, eighteen, twenty four months. Jay, 398 00:17:35,320 --> 00:17:37,119 Speaker 3: why are you still so convinced by that? And why 399 00:17:37,200 --> 00:17:39,160 Speaker 3: is that the big outlook for you next year? 400 00:17:39,760 --> 00:17:42,560 Speaker 8: Yeah, I would say John, it's actually been three years, right, 401 00:17:42,600 --> 00:17:45,840 Speaker 8: We've been in three years since COVID of you know, 402 00:17:46,000 --> 00:17:50,639 Speaker 8: lots of volatility, you know, the inflation's fight, the central 403 00:17:50,640 --> 00:17:54,000 Speaker 8: bank response, all these things have manifested. 404 00:17:54,040 --> 00:17:56,600 Speaker 6: We've had conflict, we've had climate issues. 405 00:17:56,640 --> 00:18:00,000 Speaker 8: So it's been a period the last three years of macrovolatility, 406 00:18:00,480 --> 00:18:03,600 Speaker 8: and my view is that we're now exiting that period 407 00:18:03,960 --> 00:18:07,600 Speaker 8: and we're entering a period of macro stability. All that 408 00:18:07,680 --> 00:18:11,000 Speaker 8: stuff is in the background. It's all been in the past. 409 00:18:11,040 --> 00:18:14,520 Speaker 8: It's been priced in, it's been discounted, and going forward, 410 00:18:15,040 --> 00:18:18,200 Speaker 8: I think the outlook is pretty pretty positive. The FED 411 00:18:18,320 --> 00:18:21,399 Speaker 8: is done, we're moving from a rate height cycle to 412 00:18:21,520 --> 00:18:25,439 Speaker 8: a rate cutting cycle. We have economies that are doing 413 00:18:25,800 --> 00:18:29,720 Speaker 8: reasonably well. The US is growing this quarter two and 414 00:18:29,760 --> 00:18:31,480 Speaker 8: a half percent, probably going to grow two and a 415 00:18:31,520 --> 00:18:34,280 Speaker 8: half percent of the year next year consensus is one 416 00:18:34,320 --> 00:18:37,000 Speaker 8: and a half. It's quite likely that that's going to 417 00:18:37,040 --> 00:18:40,000 Speaker 8: be revised up, as you've talked about people revising up 418 00:18:40,040 --> 00:18:40,720 Speaker 8: their targets. 419 00:18:40,920 --> 00:18:41,880 Speaker 6: Europe is bottoming. 420 00:18:42,119 --> 00:18:45,000 Speaker 8: People love to bash Europe, but European equities have also 421 00:18:45,400 --> 00:18:46,560 Speaker 8: been up seven. 422 00:18:46,359 --> 00:18:47,120 Speaker 6: Weeks in a row. 423 00:18:47,280 --> 00:18:49,960 Speaker 8: And then you have China, you know, struggling to get 424 00:18:49,960 --> 00:18:52,720 Speaker 8: going on the traction front, but still growing. 425 00:18:52,480 --> 00:18:53,880 Speaker 6: At five percent per annum. 426 00:18:54,200 --> 00:18:58,160 Speaker 8: So I think the negative outlook on things is just misplaced. 427 00:18:58,200 --> 00:19:01,840 Speaker 8: It's been revealed to be placed by the market reaction. 428 00:19:02,280 --> 00:19:04,879 Speaker 8: Market knows better than any one of us what is 429 00:19:04,960 --> 00:19:07,760 Speaker 8: going to happen, and that's why it's forward looking, and 430 00:19:07,760 --> 00:19:10,399 Speaker 8: that's why you in turn have to be forward looking. 431 00:19:10,440 --> 00:19:14,040 Speaker 8: And so when we did our twenty our twenty four outlook, 432 00:19:14,280 --> 00:19:17,679 Speaker 8: we had four macro surprises. One of them the first 433 00:19:17,720 --> 00:19:22,560 Speaker 8: one was lower than expected inflation sooner than expected. That's 434 00:19:22,600 --> 00:19:25,480 Speaker 8: already playing out and the market is reacting to that. 435 00:19:25,960 --> 00:19:29,159 Speaker 8: Another one is a return to macro stability and the 436 00:19:29,359 --> 00:19:32,800 Speaker 8: unlock that it can present in terms of all that 437 00:19:32,920 --> 00:19:35,879 Speaker 8: money well over at trillion dollars that when into money 438 00:19:35,880 --> 00:19:39,200 Speaker 8: market funds can now start to come out. And that's 439 00:19:39,240 --> 00:19:41,760 Speaker 8: why I think, well, the market is surely going to 440 00:19:41,800 --> 00:19:44,040 Speaker 8: take a pause and surely going to pull back, and 441 00:19:44,320 --> 00:19:47,639 Speaker 8: that's all good, natural and healthy. There's so much money 442 00:19:48,200 --> 00:19:52,120 Speaker 8: that needs to participate that I think that macro stability, 443 00:19:52,520 --> 00:19:54,960 Speaker 8: the unlock of all that money that went into money 444 00:19:54,960 --> 00:19:58,359 Speaker 8: market funds, provides a nice cushion so that I don't 445 00:19:58,359 --> 00:20:00,520 Speaker 8: think you have to worry about a big down draft 446 00:20:01,160 --> 00:20:02,200 Speaker 8: in twenty twenty four. 447 00:20:02,440 --> 00:20:05,960 Speaker 2: You've been enthusiastic about non US stocks for quite a while, 448 00:20:05,960 --> 00:20:09,480 Speaker 2: including European banks. You were early to this party as well. 449 00:20:09,760 --> 00:20:12,680 Speaker 2: Now we are seeing that broadening out. How much more 450 00:20:12,720 --> 00:20:15,560 Speaker 2: conviction do you have now than say, six months ago, 451 00:20:15,600 --> 00:20:16,720 Speaker 2: that that can continue. 452 00:20:17,240 --> 00:20:20,680 Speaker 8: Yeah, no, great question, Lisa. And look, our view, our 453 00:20:20,720 --> 00:20:24,119 Speaker 8: framework has been very simple. We believe in keeping things simple. 454 00:20:25,280 --> 00:20:29,520 Speaker 8: Lower inflation leads to lower rates, leads through a weaker dollar, 455 00:20:30,080 --> 00:20:33,840 Speaker 8: leads to better out performance outside the US and good 456 00:20:33,880 --> 00:20:38,600 Speaker 8: performance for commodities. Our Friday Musings last week was titled 457 00:20:38,600 --> 00:20:41,160 Speaker 8: get Real, and the case we made was to. 458 00:20:41,119 --> 00:20:43,200 Speaker 6: Get real means get real assets. 459 00:20:43,640 --> 00:20:49,320 Speaker 8: And so we're really constructive on emerging markets, both debt, inequity. 460 00:20:49,640 --> 00:20:50,119 Speaker 6: They've been the. 461 00:20:50,200 --> 00:20:55,919 Speaker 8: Huge laggard, no one owns them, completely under priced, completely dismissed. 462 00:20:56,800 --> 00:21:01,320 Speaker 8: We see big opportunities in em around the regionalization of 463 00:21:01,400 --> 00:21:05,160 Speaker 8: supply chains. This fits right, John, you talk about framework. 464 00:21:05,480 --> 00:21:09,240 Speaker 8: Our framework is the tripolar world, regional deepening in Asia, 465 00:21:09,280 --> 00:21:12,200 Speaker 8: Europe and the Americans. And we're finally starting to see 466 00:21:12,240 --> 00:21:16,240 Speaker 8: the opportunity to invest in that pieces with emerging markets 467 00:21:16,400 --> 00:21:22,159 Speaker 8: Mexico and the Americas, Poland in Europe, Vietnam in Asia, 468 00:21:22,359 --> 00:21:26,199 Speaker 8: beneficiaries of the regionalization process. And then just to finish 469 00:21:26,240 --> 00:21:30,600 Speaker 8: on commodities, commodities are one thing that haven't participated and 470 00:21:30,680 --> 00:21:33,560 Speaker 8: yet what is a big beneficiary of a weaker dollar 471 00:21:33,720 --> 00:21:38,080 Speaker 8: in lower interest rates commodities And so that's the opportunity 472 00:21:38,160 --> 00:21:39,520 Speaker 8: as we see it right here. If you want to 473 00:21:39,560 --> 00:21:43,080 Speaker 8: buy something now, you buy commodities. You buy oil, you 474 00:21:43,119 --> 00:21:48,040 Speaker 8: buy copper, you buy gold miners, you buy agg We're 475 00:21:48,080 --> 00:21:51,639 Speaker 8: exposed across the spectrum. So our two big bets for 476 00:21:51,720 --> 00:21:54,800 Speaker 8: next year emerging markets in commodities. 477 00:21:55,200 --> 00:21:57,320 Speaker 2: Just real quick, can you take a page from Dalio's 478 00:21:57,320 --> 00:21:58,480 Speaker 2: book and say cash is trash? 479 00:21:58,520 --> 00:22:04,200 Speaker 8: At this point, you know, cash is definitely a lagger, 480 00:22:04,400 --> 00:22:06,800 Speaker 8: and that's what I said six months ago when everyone 481 00:22:07,280 --> 00:22:09,400 Speaker 8: loved it. It's going to be a lagger. So yes, cash, 482 00:22:09,480 --> 00:22:12,720 Speaker 8: you make four percent. Equities are up twenty percent. I 483 00:22:12,760 --> 00:22:16,120 Speaker 8: would rather have the twenty percent, And so that's what's 484 00:22:16,160 --> 00:22:18,400 Speaker 8: going to take money out of the money market fund 485 00:22:18,840 --> 00:22:21,560 Speaker 8: and put it into risk assets as we return to 486 00:22:21,600 --> 00:22:24,640 Speaker 8: macro stability in twenty four in twenty five. 487 00:22:24,720 --> 00:22:27,359 Speaker 3: In my view, very wise, Jay, because when people do 488 00:22:27,440 --> 00:22:30,240 Speaker 3: call it trash, typically bad things happen. That was the 489 00:22:30,320 --> 00:22:31,800 Speaker 3: right way Leason to answer that question. 490 00:22:32,119 --> 00:22:34,840 Speaker 1: All Right, there we go. That's called diploma diplomacy. 491 00:22:34,880 --> 00:22:37,679 Speaker 2: Although I will say that his note, I just have 492 00:22:37,760 --> 00:22:38,840 Speaker 2: to read the way that it began. 493 00:22:39,320 --> 00:22:39,760 Speaker 1: Wow. 494 00:22:39,920 --> 00:22:43,159 Speaker 2: One has to admit that external validation, especially from a 495 00:22:43,200 --> 00:22:44,320 Speaker 2: well respected source like. 496 00:22:44,280 --> 00:22:45,520 Speaker 1: The FED, sure feels good. 497 00:22:45,840 --> 00:22:48,520 Speaker 2: This is someone who is definitely taking a victory lap 498 00:22:48,560 --> 00:22:50,400 Speaker 2: after a really stellar year. 499 00:22:50,240 --> 00:22:53,280 Speaker 3: As well deserved. Jay enjoyed the Christmas holiday. It's going 500 00:22:53,320 --> 00:22:56,320 Speaker 3: to catch up Jack Peloski, the of TPW on the Nightist. 501 00:23:00,400 --> 00:23:03,560 Speaker 3: Let's talk about the other the war between Israel and Hamas. 502 00:23:03,600 --> 00:23:06,679 Speaker 3: Eliot Akiman joins us now the US Marine Corps veteran 503 00:23:06,720 --> 00:23:09,919 Speaker 3: and former White House fellow. Elliott, you've got experience of this. 504 00:23:10,200 --> 00:23:12,000 Speaker 3: It's valuable to us to lean on it. So thank 505 00:23:12,000 --> 00:23:15,440 Speaker 3: you for joining us again. The door to door combat 506 00:23:15,560 --> 00:23:18,520 Speaker 3: that we're seeing take place in Gaza, the fock of war, 507 00:23:18,960 --> 00:23:21,760 Speaker 3: so to speak, and the tragic loss of life, both 508 00:23:21,760 --> 00:23:24,439 Speaker 3: civilian loss of life and what we saw in the 509 00:23:24,480 --> 00:23:29,240 Speaker 3: last few days hostages losing their lives as well. Elliot, 510 00:23:29,240 --> 00:23:31,400 Speaker 3: can you talk to us about the nature of combat 511 00:23:31,480 --> 00:23:33,639 Speaker 3: right now and how on earth these things happen? 512 00:23:36,160 --> 00:23:40,399 Speaker 9: Well, the one thing I think is worth emphasizing is 513 00:23:40,160 --> 00:23:45,600 Speaker 9: it's very difficult to overstate how chaotic this type of 514 00:23:45,800 --> 00:23:48,960 Speaker 9: urban combat is, how difficult it is in certain situations 515 00:23:49,000 --> 00:23:52,000 Speaker 9: to know exactly what's going on. So obviously, you know, 516 00:23:52,040 --> 00:23:56,440 Speaker 9: this incident where these three hostages were killed is a tragedy. 517 00:23:57,359 --> 00:23:58,920 Speaker 9: You know, it's important to us to just bear in 518 00:23:58,960 --> 00:24:01,280 Speaker 9: mind the context and which happening in which these Israeli 519 00:24:01,320 --> 00:24:04,320 Speaker 9: soldiers that have been fighting for weeks house to house, 520 00:24:04,520 --> 00:24:08,240 Speaker 9: room to room in Gaza. You know, I fought in 521 00:24:08,520 --> 00:24:12,159 Speaker 9: the Fallujah battle in two thousand and four, and oftentimes, 522 00:24:12,200 --> 00:24:13,760 Speaker 9: you know, it can be difficult in the heat of 523 00:24:13,800 --> 00:24:16,080 Speaker 9: the moment to know, you know, who's a friend, who's 524 00:24:16,080 --> 00:24:19,879 Speaker 9: a foe, even when someone would be appear to be surrendering. 525 00:24:20,280 --> 00:24:22,639 Speaker 9: I actually have a friend of mine, Dan Malcolm. I 526 00:24:22,760 --> 00:24:24,879 Speaker 9: wear a bracelet for him, one of his bracelet for 527 00:24:24,880 --> 00:24:28,240 Speaker 9: twenty years, and he was on a rooftop in about 528 00:24:28,480 --> 00:24:30,840 Speaker 9: thirty minutes before he was shot dead by a sniper. 529 00:24:31,440 --> 00:24:35,399 Speaker 9: A group of individuals who we thought were civilians looked 530 00:24:35,400 --> 00:24:38,280 Speaker 9: like they were trying to surrender. In fact, they weren't civilians. 531 00:24:38,320 --> 00:24:40,960 Speaker 9: They were insurgeons posing as civilians. They were trying to 532 00:24:41,000 --> 00:24:43,680 Speaker 9: surrender so they could figure out where our positions were. Now, 533 00:24:43,680 --> 00:24:46,320 Speaker 9: this doesn't excuse what happened in Israel, but I hope 534 00:24:46,359 --> 00:24:48,399 Speaker 9: it just gives a little bit of a context for 535 00:24:48,440 --> 00:24:50,959 Speaker 9: the types of conditions these soldiers are dealing with. 536 00:24:51,119 --> 00:24:53,000 Speaker 3: As you know, Elliot, in the court of public opinion, 537 00:24:53,240 --> 00:24:55,879 Speaker 3: accidents don't seem to mean anything. It's the loss of 538 00:24:55,920 --> 00:24:59,440 Speaker 3: life that is important. There is pressure building to end 539 00:24:59,440 --> 00:25:02,359 Speaker 3: this war and quickly, And what we often hear about 540 00:25:02,720 --> 00:25:05,520 Speaker 3: is time. How much longer can it go on for? 541 00:25:06,000 --> 00:25:09,159 Speaker 3: I think you draw a really important distinction between time 542 00:25:09,200 --> 00:25:14,480 Speaker 3: based policy and condition based strategy on the ground. Why 543 00:25:14,560 --> 00:25:17,240 Speaker 3: is that so important, particularly for this conflict and for 544 00:25:17,280 --> 00:25:19,320 Speaker 3: where this administration in America stands on it. 545 00:25:21,600 --> 00:25:22,960 Speaker 9: Well, I think we've seen in the past that this 546 00:25:23,000 --> 00:25:27,200 Speaker 9: administration has got in itself in trouble when it's leaned 547 00:25:27,280 --> 00:25:30,800 Speaker 9: on times based conditions. And I'm speaking specifically of Afghanistan. 548 00:25:31,600 --> 00:25:34,320 Speaker 9: You know, when we pulled up on a calendar that 549 00:25:34,720 --> 00:25:37,320 Speaker 9: of not making sense on the ground. And I think 550 00:25:37,400 --> 00:25:40,400 Speaker 9: in the case of Israel, you know, the objective of 551 00:25:40,480 --> 00:25:43,119 Speaker 9: the Israeli government, as they've stated, is the destruction of Hamas. 552 00:25:43,560 --> 00:25:46,960 Speaker 9: If you pull out before that job is done, you know, 553 00:25:47,000 --> 00:25:49,360 Speaker 9: it's basically analogous of you know, if you had cancer, 554 00:25:49,440 --> 00:25:52,480 Speaker 9: finishing your chemotherapy when you've only got ninety five percent 555 00:25:52,520 --> 00:25:55,159 Speaker 9: of the cancer, it's going to metastasize and grow again. 556 00:25:55,400 --> 00:25:58,520 Speaker 9: So in my old business to military business, we are 557 00:25:58,560 --> 00:26:01,320 Speaker 9: to say, which is, you don't want a gentle surgeon 558 00:26:01,840 --> 00:26:03,480 Speaker 9: when you will go in to get these jobs done. 559 00:26:03,480 --> 00:26:05,520 Speaker 9: You've got to get the whole job done, and you 560 00:26:05,560 --> 00:26:07,640 Speaker 9: don't necessarily want to do it gently because you can 561 00:26:07,720 --> 00:26:09,640 Speaker 9: wind up causing more damage than if you just get 562 00:26:09,680 --> 00:26:12,439 Speaker 9: it done decisively. So, and I'd also just point out 563 00:26:12,480 --> 00:26:15,480 Speaker 9: it's sort of strange to see this juxtaposition of needing 564 00:26:15,520 --> 00:26:18,000 Speaker 9: the speed and needing this finish and demanding that it 565 00:26:18,160 --> 00:26:20,840 Speaker 9: be finished within days and weeks in Israel, while seeing 566 00:26:20,920 --> 00:26:23,119 Speaker 9: sort of a willingness to allow the war in Ukraine 567 00:26:23,119 --> 00:26:26,040 Speaker 9: to kind of just drag in year over year over year. 568 00:26:26,720 --> 00:26:28,600 Speaker 9: So I think it's important to also keep those two 569 00:26:28,600 --> 00:26:29,200 Speaker 9: in our minds. 570 00:26:29,400 --> 00:26:30,879 Speaker 1: Is Lloyd Austin a gentle surgeon. 571 00:26:33,560 --> 00:26:37,240 Speaker 9: I don't think Lloyd Austin visionlessly is a gentle surgeon. 572 00:26:37,280 --> 00:26:39,840 Speaker 9: But I think what the administration is calling for by 573 00:26:40,240 --> 00:26:42,320 Speaker 9: saying let's just finish this in this pressure campaign is 574 00:26:42,320 --> 00:26:46,680 Speaker 9: basically asking Israel to engage in gentle surgery. I don't 575 00:26:46,720 --> 00:26:49,920 Speaker 9: think Israel is going to. Frankly, I think there is 576 00:26:49,960 --> 00:26:52,400 Speaker 9: a level of result there that we can't completely appreciate 577 00:26:52,440 --> 00:26:54,000 Speaker 9: in the United States. But I think there is a 578 00:26:54,080 --> 00:26:56,440 Speaker 9: danger there that if they were to in this fight 579 00:26:56,560 --> 00:26:59,320 Speaker 9: right now, when it's mostly done but not all the 580 00:26:59,359 --> 00:27:01,479 Speaker 9: way done, that this would just wind up being an 581 00:27:01,480 --> 00:27:03,600 Speaker 9: even worse conflic because they're going to start fighting it again, 582 00:27:03,920 --> 00:27:05,880 Speaker 9: you know, months or years down down the road. 583 00:27:06,520 --> 00:27:08,320 Speaker 2: One of the best voices we could talk to because 584 00:27:08,359 --> 00:27:11,040 Speaker 2: you can appreciate what it is in a region like 585 00:27:11,119 --> 00:27:14,320 Speaker 2: that that is engaged in hand to hand combat and 586 00:27:14,359 --> 00:27:17,280 Speaker 2: that has been going on for a while. The civilians, 587 00:27:17,359 --> 00:27:18,960 Speaker 2: and this is sort of one of the big fears 588 00:27:19,160 --> 00:27:23,119 Speaker 2: is that the humanitarian crisis is getting incredibly difficult to 589 00:27:23,160 --> 00:27:25,160 Speaker 2: deal with and you cannot get aid in if there 590 00:27:25,200 --> 00:27:28,600 Speaker 2: is active combat. Is there any corollary to this moment 591 00:27:28,680 --> 00:27:32,040 Speaker 2: where there could be some way of assisting civilians while 592 00:27:32,080 --> 00:27:35,600 Speaker 2: continuing the campaign that you see as well continuing? 593 00:27:38,040 --> 00:27:39,800 Speaker 9: I mean this gets down to the particulars on the ground. 594 00:27:39,880 --> 00:27:42,439 Speaker 9: You know, what areas are safe. Are there areas that 595 00:27:42,560 --> 00:27:46,000 Speaker 9: the Israelis feel they've sufficiently cleared out of Hamas fighters 596 00:27:46,040 --> 00:27:48,040 Speaker 9: so they could allow civilians to come back into those 597 00:27:48,080 --> 00:27:51,360 Speaker 9: areas and get aid to them. And you know, hopefully 598 00:27:51,400 --> 00:27:54,560 Speaker 9: we can start to maybe see something like that where 599 00:27:54,680 --> 00:27:59,040 Speaker 9: Israel has areas that they feel they can control. But 600 00:27:59,480 --> 00:28:02,840 Speaker 9: you know, again, you know, they shouldn't be forced to 601 00:28:02,840 --> 00:28:06,000 Speaker 9: do that before they're ready to do it, at the 602 00:28:06,080 --> 00:28:08,800 Speaker 9: risk of having to go fight this fight all over again. 603 00:28:08,840 --> 00:28:11,800 Speaker 9: Because Hamas is a determined adversary. You know, we've seen that, 604 00:28:11,880 --> 00:28:14,199 Speaker 9: We've seen now the images of these tunnels that are 605 00:28:14,200 --> 00:28:16,639 Speaker 9: wide enough to drive cars through. You know, Hamas is 606 00:28:16,640 --> 00:28:20,480 Speaker 9: determined to destroy Israel, and Israel, I think appropriately is 607 00:28:20,520 --> 00:28:22,520 Speaker 9: determined to defend itself and make sure that that can 608 00:28:22,560 --> 00:28:23,040 Speaker 9: never happen. 609 00:28:23,240 --> 00:28:25,800 Speaker 3: If you look at financial markets, it's as if nothing's 610 00:28:25,840 --> 00:28:28,360 Speaker 3: really happening. I think there is a belief from investors 611 00:28:28,400 --> 00:28:31,600 Speaker 3: that this conflict will remain contained, and yet there are 612 00:28:31,640 --> 00:28:34,120 Speaker 3: some cracks in that theory when you start to see 613 00:28:34,440 --> 00:28:37,960 Speaker 3: attacks come from houthy militants on foreign shipping companies, and 614 00:28:38,040 --> 00:28:40,760 Speaker 3: foreign shipping companies start to think about pausing the use 615 00:28:40,800 --> 00:28:44,600 Speaker 3: of the Suez Canal. I just wonder, Elia, how convinced 616 00:28:44,640 --> 00:28:47,320 Speaker 3: you are that this particular conflict will be contained to 617 00:28:47,320 --> 00:28:48,640 Speaker 3: where it's playing out right now. 618 00:28:50,880 --> 00:28:52,920 Speaker 9: You know, it's less that I'm convinced that the conflict 619 00:28:52,960 --> 00:28:54,960 Speaker 9: will in all cases be contained, and we've seen that 620 00:28:55,000 --> 00:28:57,160 Speaker 9: it hasn't actually been contained where we've seen attacks on 621 00:28:57,320 --> 00:29:00,960 Speaker 9: US troops in Syria and Iraq from Ranian militants. But 622 00:29:00,960 --> 00:29:03,280 Speaker 9: I think what probably gives individuals confidence and gives me 623 00:29:03,360 --> 00:29:07,880 Speaker 9: confidence is that if it starts to really overflow into 624 00:29:07,920 --> 00:29:11,600 Speaker 9: areas that are problematic, the United States and as allies 625 00:29:11,600 --> 00:29:14,800 Speaker 9: have the capacity to quickly contain the conflict. 626 00:29:14,920 --> 00:29:16,400 Speaker 5: That the US Navy. 627 00:29:16,280 --> 00:29:19,960 Speaker 9: Goes up against some vessels from houthy rebel groups, the 628 00:29:20,040 --> 00:29:22,720 Speaker 9: US Navy is going to win, but you know, we 629 00:29:22,760 --> 00:29:24,520 Speaker 9: don't want it to get to that point. And I think, 630 00:29:24,760 --> 00:29:26,960 Speaker 9: in addition, what's going on Israel, the US Department of 631 00:29:27,000 --> 00:29:29,760 Speaker 9: Defense and the Biden administration is very very closely watching 632 00:29:29,760 --> 00:29:31,200 Speaker 9: these other events in the region. 633 00:29:31,440 --> 00:29:33,800 Speaker 2: Just quickly, Elliott, how much does it changed the game 634 00:29:33,880 --> 00:29:37,000 Speaker 2: that this is essentially the first war that's been live streamed. 635 00:29:39,960 --> 00:29:45,160 Speaker 9: Well, I think the game is so much as tactical decisions. 636 00:29:45,240 --> 00:29:48,840 Speaker 9: Things that happen, you know, on the ground are immediately 637 00:29:48,960 --> 00:29:51,960 Speaker 9: projected out to the entire world and have strategic implications. 638 00:29:52,000 --> 00:29:55,479 Speaker 9: And we saw that recently with the deaths of these 639 00:29:55,520 --> 00:29:58,960 Speaker 9: three hostages. And you know we've seen that, but not 640 00:29:59,000 --> 00:30:00,880 Speaker 9: only in Israel. I mean, well have seen the Ukraine 641 00:30:00,920 --> 00:30:04,560 Speaker 9: as a war that has been a social media war, 642 00:30:04,560 --> 00:30:07,520 Speaker 9: as was Afghanistan. And so really in the last handfull 643 00:30:07,560 --> 00:30:09,560 Speaker 9: of years of political capitalist of war has changed because 644 00:30:09,600 --> 00:30:11,640 Speaker 9: as you just put, you know, these wars are live 645 00:30:11,720 --> 00:30:15,000 Speaker 9: stream the runover social media and we all experience them. 646 00:30:15,160 --> 00:30:18,240 Speaker 3: Edie, thank you for the update. We appreciate it as always. 647 00:30:18,280 --> 00:30:22,080 Speaker 3: Elia Akman then leading on his leading on his personal 648 00:30:22,160 --> 00:30:23,920 Speaker 3: experience and in Irock. 649 00:30:23,720 --> 00:30:24,520 Speaker 10: And now Sweare. 650 00:30:34,320 --> 00:30:37,640 Speaker 2: Kevin book has been covering this trying to understand the implications. 651 00:30:37,720 --> 00:30:39,640 Speaker 2: And I'm so pleased to say joins us now co 652 00:30:39,720 --> 00:30:42,760 Speaker 2: founder of Clear Food You Energy partner is Kevin can 653 00:30:42,800 --> 00:30:46,440 Speaker 2: we just start by trying to understand how important this 654 00:30:46,520 --> 00:30:48,520 Speaker 2: red Seat passage really is for shipping. 655 00:30:49,640 --> 00:30:51,280 Speaker 10: Thanks good Martie, thanks for having me. 656 00:30:51,360 --> 00:30:54,280 Speaker 11: It's eight percent of global energy, about nine percent of 657 00:30:54,320 --> 00:30:58,720 Speaker 11: global oil and petroleum products. So an enormous amount of 658 00:30:58,840 --> 00:31:01,400 Speaker 11: energy that goes into the world goes through the Red Sea. 659 00:31:02,200 --> 00:31:06,520 Speaker 2: So what is the potential consequence if these attacks do continue? 660 00:31:06,880 --> 00:31:10,240 Speaker 2: How much more time is required to ship things in 661 00:31:10,320 --> 00:31:13,520 Speaker 2: alternate routs, how much more energy will be used? 662 00:31:13,760 --> 00:31:17,520 Speaker 1: Oil will be used for those shipping routes. 663 00:31:19,800 --> 00:31:22,840 Speaker 11: Is relatively insignificant compared to the supply impact. 664 00:31:23,120 --> 00:31:24,239 Speaker 10: There's two aspects to this. 665 00:31:24,320 --> 00:31:28,240 Speaker 11: The first is the additional latency introduced by going through 666 00:31:28,280 --> 00:31:32,400 Speaker 11: the Suez Canal and then around Africa, and that depending 667 00:31:32,440 --> 00:31:34,600 Speaker 11: on the speed of the ships moving, and they do 668 00:31:34,720 --> 00:31:38,000 Speaker 11: move somewhere between ten and fourteen knots, you could have 669 00:31:38,040 --> 00:31:41,160 Speaker 11: anywhere from between ten days to two weeks even a 670 00:31:41,200 --> 00:31:44,600 Speaker 11: little longer. The second is capacity constraints on the Suez 671 00:31:44,640 --> 00:31:49,600 Speaker 11: Canal itself, and to some degree, the number of ships 672 00:31:49,600 --> 00:31:51,480 Speaker 11: that move through is one aspect of it. 673 00:31:51,520 --> 00:31:53,880 Speaker 10: They're also the size of the ships that move through. 674 00:31:54,520 --> 00:31:58,240 Speaker 11: The Suez Max tanker size is so called because it's 675 00:31:58,280 --> 00:32:01,440 Speaker 11: the maximum size tanker you can move through the Suez Canal, 676 00:32:02,040 --> 00:32:07,120 Speaker 11: and obviously the limitations in fleet capacity can introduce additional 677 00:32:07,120 --> 00:32:07,959 Speaker 11: pinch on supply. 678 00:32:08,760 --> 00:32:11,440 Speaker 2: Right now, crude treated on the n IMAX is up 679 00:32:11,520 --> 00:32:12,800 Speaker 2: two point three percent. 680 00:32:13,480 --> 00:32:15,680 Speaker 1: Is this sort of appropriate in your view? 681 00:32:15,720 --> 00:32:18,200 Speaker 2: Do you think that we should see an even bigger 682 00:32:18,200 --> 00:32:20,240 Speaker 2: pop and oil price is just simply because of the 683 00:32:20,280 --> 00:32:24,320 Speaker 2: supply constraints that could come from prolonged shipping passages. 684 00:32:25,600 --> 00:32:27,520 Speaker 11: Well, yeah, we thought it was significant when we wrote 685 00:32:27,520 --> 00:32:29,400 Speaker 11: about it a week ago, and we noted how audit 686 00:32:29,600 --> 00:32:32,600 Speaker 11: was that the market wasn't yet pricing it in. As 687 00:32:32,640 --> 00:32:36,720 Speaker 11: for the magnitude of the increase to date, I mean, 688 00:32:36,800 --> 00:32:39,040 Speaker 11: obviously the numbers I gave you would be staggering. If 689 00:32:39,040 --> 00:32:41,920 Speaker 11: that amount of supply was disabled, we would see double 690 00:32:41,920 --> 00:32:43,920 Speaker 11: digit moves in the oil price on a dollar for 691 00:32:44,000 --> 00:32:47,400 Speaker 11: barrel basis. But a lot of this depends on really 692 00:32:47,440 --> 00:32:49,840 Speaker 11: the decisions that actors make, and there's a lot of 693 00:32:49,840 --> 00:32:53,240 Speaker 11: players in this. Questions about whether or not the Saudias, 694 00:32:53,280 --> 00:32:55,920 Speaker 11: for example, will continue to ship through the Red Sea, 695 00:32:56,360 --> 00:33:00,000 Speaker 11: and whether or not they believe they're at risk of attacks, 696 00:32:59,800 --> 00:33:02,480 Speaker 11: the risk tolerances of other players, and for that matter, 697 00:33:02,600 --> 00:33:05,320 Speaker 11: the evolution of the task force that the US government 698 00:33:05,640 --> 00:33:07,760 Speaker 11: is working right now actively to stand up with other 699 00:33:07,760 --> 00:33:11,040 Speaker 11: players in the region emulating a similar task force in 700 00:33:11,080 --> 00:33:14,280 Speaker 11: the strait of hormones. Last variable, not to make this 701 00:33:14,280 --> 00:33:17,080 Speaker 11: more complicated, is the question whether or not the Eisenhower 702 00:33:17,320 --> 00:33:20,400 Speaker 11: carrier strike group, which moved into position potentially to strike 703 00:33:20,440 --> 00:33:23,440 Speaker 11: the Huthis, risks a different kind of escalation that could 704 00:33:23,440 --> 00:33:25,880 Speaker 11: produce reprisals in other parts of the region. 705 00:33:26,480 --> 00:33:29,520 Speaker 2: Given all of those variables, what's the appropriate price for oil? 706 00:33:30,880 --> 00:33:33,600 Speaker 11: Well, we thought we saw pressure to the upside a 707 00:33:33,600 --> 00:33:34,880 Speaker 11: week ago, we're seeing it now. 708 00:33:35,040 --> 00:33:36,480 Speaker 10: We think there's a room for more. 709 00:33:36,920 --> 00:33:37,560 Speaker 1: At this point. 710 00:33:37,600 --> 00:33:41,200 Speaker 2: What kind of response would be de escalatory versus escalatory? 711 00:33:41,240 --> 00:33:41,720 Speaker 1: Right, there's this. 712 00:33:43,200 --> 00:33:45,320 Speaker 2: Group that you said is trying to come together to 713 00:33:45,360 --> 00:33:48,120 Speaker 2: come up with a way to deter Hoo they militants. 714 00:33:48,400 --> 00:33:51,320 Speaker 2: What are you looking for as a response that could 715 00:33:51,600 --> 00:33:55,000 Speaker 2: relieve some of the pressure on oil versus the opposite. 716 00:33:55,320 --> 00:33:58,680 Speaker 10: Well, it really depends on the root cause of the problem. 717 00:33:58,680 --> 00:33:58,840 Speaker 6: Here. 718 00:33:58,840 --> 00:34:01,040 Speaker 11: The Huthi seem to be doing some It's fundamentally and 719 00:34:01,080 --> 00:34:05,480 Speaker 11: conceptually similar to US secondary sanctions. Initially, they started targeting 720 00:34:05,800 --> 00:34:09,880 Speaker 11: anything with nexus to Israel and Israeli ownership or management 721 00:34:10,120 --> 00:34:13,239 Speaker 11: of the shipping company or the tanker, or for that matter, 722 00:34:13,360 --> 00:34:15,680 Speaker 11: just cargo's going into or out of Israel. They've cast 723 00:34:15,719 --> 00:34:18,719 Speaker 11: the net even more broadly. Now a stand down, some 724 00:34:18,760 --> 00:34:21,799 Speaker 11: sort of accommodation that they have a narrower focus. That 725 00:34:21,920 --> 00:34:24,960 Speaker 11: kind of thing might potentially take some pressure off the 726 00:34:25,000 --> 00:34:28,520 Speaker 11: Maritime Task Force to the degree that it can provide 727 00:34:28,560 --> 00:34:31,239 Speaker 11: security for tankers in the region. Might not eliminate the 728 00:34:31,320 --> 00:34:33,880 Speaker 11: risk premium, but it could potentially keep it from rising. 729 00:34:34,200 --> 00:34:36,239 Speaker 2: At this point, a lot of people are discounting a 730 00:34:36,320 --> 00:34:39,160 Speaker 2: lot of the geopolitics, simply saying the US pumping record 731 00:34:39,200 --> 00:34:42,520 Speaker 2: amounts of shale gasoline prices on average in the United 732 00:34:42,560 --> 00:34:46,440 Speaker 2: States are basically three dollars on average, and you can 733 00:34:46,480 --> 00:34:50,440 Speaker 2: see that across the nation. How much does US production 734 00:34:50,680 --> 00:34:55,200 Speaker 2: offset a lot of the potential geopolitical headwinds that could 735 00:34:55,239 --> 00:34:56,400 Speaker 2: cause prices to rise. 736 00:34:57,640 --> 00:34:58,800 Speaker 10: Well, so there's. 737 00:34:58,600 --> 00:35:00,640 Speaker 11: Two things that are really offsetting, and one is, of 738 00:35:00,640 --> 00:35:04,080 Speaker 11: course the prolific production here in Guyana and on Brazil. 739 00:35:04,560 --> 00:35:08,400 Speaker 11: You're seeing non OPEC production surgeon and that has buffered prices. 740 00:35:08,760 --> 00:35:11,719 Speaker 11: And of course we can't overlook demand weakness in China. 741 00:35:11,800 --> 00:35:13,960 Speaker 11: But the other side of that is that the supply 742 00:35:14,200 --> 00:35:18,000 Speaker 11: cushion that you get from spare capacity from OPEC producers 743 00:35:18,320 --> 00:35:20,440 Speaker 11: is usually something else that can come to the rescue. 744 00:35:20,440 --> 00:35:23,600 Speaker 11: But in this case, that supply cushion is less available 745 00:35:23,640 --> 00:35:26,719 Speaker 11: because part of that supply could potentially come out through 746 00:35:26,719 --> 00:35:28,959 Speaker 11: some of the very same choke points. 747 00:35:28,600 --> 00:35:30,200 Speaker 10: That we're discussing today. 748 00:35:30,600 --> 00:35:34,680 Speaker 11: So for that reason, I think we may see more 749 00:35:34,760 --> 00:35:38,720 Speaker 11: risk showing up in price perceptions as we go forward. 750 00:35:38,960 --> 00:35:40,480 Speaker 10: But yeah, we've been sleeping. 751 00:35:40,080 --> 00:35:42,799 Speaker 11: Through some very serious potential supply risks for some time, 752 00:35:43,480 --> 00:35:45,120 Speaker 11: very reassured by production. 753 00:35:45,600 --> 00:35:48,120 Speaker 2: Well, this is the reason why some people are wondering 754 00:35:48,120 --> 00:35:50,200 Speaker 2: what did they get wrong? How much do you think 755 00:35:50,440 --> 00:35:54,600 Speaker 2: is that the demand side is offset by the increase 756 00:35:54,640 --> 00:35:58,280 Speaker 2: in electric vehicle use and other alternative sources of energy. 757 00:35:59,600 --> 00:36:02,520 Speaker 11: Well, so, so every million electric vehicles on US roads, 758 00:36:02,560 --> 00:36:05,000 Speaker 11: where we drive more with less efficient cars than other 759 00:36:05,040 --> 00:36:07,720 Speaker 11: parts of the world, is only about thirty thousand barrels 760 00:36:07,719 --> 00:36:09,719 Speaker 11: per day of demand destruction. So we're selling more than 761 00:36:09,760 --> 00:36:12,839 Speaker 11: a million a year. That's not really showing up that much. 762 00:36:12,880 --> 00:36:16,160 Speaker 11: You see the bigger numbers posting in China, and now 763 00:36:16,160 --> 00:36:19,279 Speaker 11: you're getting bigger displacements, but still that's not changing the 764 00:36:19,280 --> 00:36:19,880 Speaker 11: demand picture. 765 00:36:19,920 --> 00:36:22,440 Speaker 10: Demand is going ahead, at least in the near term. 766 00:36:23,120 --> 00:36:24,640 Speaker 11: There are a lot of folks who would say that 767 00:36:24,680 --> 00:36:27,440 Speaker 11: maybe the predictions of a plateau or even a peak 768 00:36:27,719 --> 00:36:31,080 Speaker 11: this decade or even premature. So with that in mind, 769 00:36:31,080 --> 00:36:34,400 Speaker 11: I think we shouldn't discount that there's an immense appetite 770 00:36:34,400 --> 00:36:38,120 Speaker 11: for crude oil out there still and liquids generally, and 771 00:36:38,239 --> 00:36:40,399 Speaker 11: with that, supply risks still very much matter. 772 00:36:40,600 --> 00:36:42,680 Speaker 2: To put this all together, people have been talking about 773 00:36:42,760 --> 00:36:46,799 Speaker 2: ranges heading into twenty twenty four, ranges that oil could 774 00:36:46,800 --> 00:36:50,399 Speaker 2: move within, given the need to both not loose money 775 00:36:50,400 --> 00:36:53,600 Speaker 2: on product producing oil in the US and also the 776 00:36:53,640 --> 00:36:57,000 Speaker 2: desire for Saudi Arabia to make a certain amount per barrel, 777 00:36:57,320 --> 00:37:00,160 Speaker 2: what is that range? Given the risks and give in 778 00:37:00,200 --> 00:37:02,160 Speaker 2: the supplies that we've seen from the US. 779 00:37:03,320 --> 00:37:06,359 Speaker 11: Well, the idea that there's sort of a natural eight 780 00:37:06,440 --> 00:37:11,239 Speaker 11: handle floor established by fiscal break evens or other mathematical 781 00:37:11,280 --> 00:37:15,040 Speaker 11: computations has a little bit, you know, of I think 782 00:37:15,080 --> 00:37:18,560 Speaker 11: hopefulness to it. There's two active wars going on right 783 00:37:18,600 --> 00:37:22,880 Speaker 11: now in energy producing and consuming areas, with risks potentially 784 00:37:22,880 --> 00:37:26,279 Speaker 11: in Venezuela as well, although they currently seem to have 785 00:37:26,320 --> 00:37:27,720 Speaker 11: abated with. 786 00:37:27,600 --> 00:37:30,480 Speaker 10: That in mind. I think it's a bit odd to look. 787 00:37:30,280 --> 00:37:32,680 Speaker 11: Only at supply demand balances and assume that the world 788 00:37:32,719 --> 00:37:35,040 Speaker 11: as it is today will be how it is in 789 00:37:35,080 --> 00:37:37,080 Speaker 11: the coming year. But if you do look at that, 790 00:37:37,239 --> 00:37:40,080 Speaker 11: you see supply outstripping demand in the first half of 791 00:37:40,120 --> 00:37:43,000 Speaker 11: the year. Our latest look by College Jack Brusau looked 792 00:37:43,000 --> 00:37:45,680 Speaker 11: ahead at it and it looks like there's still weakness, 793 00:37:46,040 --> 00:37:49,839 Speaker 11: and with OPEC plus clamping down, the incremental clamp down 794 00:37:49,880 --> 00:37:52,200 Speaker 11: isn't necessarily enough to stem it in the near term. 795 00:37:52,560 --> 00:37:55,000 Speaker 10: But this is where geopolitics comes in, and. 796 00:37:55,040 --> 00:37:59,200 Speaker 11: Always it's important to remember there's an alignment of incentives 797 00:37:59,239 --> 00:38:02,680 Speaker 11: here for Iran and for the other folks who are 798 00:38:02,680 --> 00:38:03,480 Speaker 11: aligned with Iran. 799 00:38:03,680 --> 00:38:06,000 Speaker 10: The idea of a higher oil price because of geopolitical 800 00:38:06,080 --> 00:38:08,760 Speaker 10: risk isn't a bad thing. It's a tailwind. 801 00:38:09,080 --> 00:38:11,600 Speaker 2: Kevin Book of Clearview Energy. Thank you so much for 802 00:38:11,640 --> 00:38:15,040 Speaker 2: being with us. Subscribe to the Bloomberg Surveillance podcast on Apple, 803 00:38:15,120 --> 00:38:18,520 Speaker 2: Spotify and anywhere else you get your podcasts. Listen live 804 00:38:18,640 --> 00:38:21,800 Speaker 2: every weekday starting at seven am Eastern on Bloomberg dot Com, 805 00:38:21,800 --> 00:38:24,200 Speaker 2: the iHeartRadio app Tune In, and the. 806 00:38:24,160 --> 00:38:26,640 Speaker 1: Bloomberg Business app. You can watch us. 807 00:38:26,520 --> 00:38:30,040 Speaker 2: Live on Bloomberg Television and always on the Bloomberg Terminal. 808 00:38:30,239 --> 00:38:33,480 Speaker 2: Thanks for listening. I'm Lisa Abramowitz, and this is Bloomberg