1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

2
00:00:09,200 --> 00:00:13,200
Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you

3
00:00:13,280 --> 00:00:18,600
Speaker 1: insight from the best and economics, finance, investment, and international relations.

4
00:00:18,960 --> 00:00:23,799
Speaker 1: Find Bloomberg Surveillance on Apple, podcast, SoundCloud, Bloomberg dot com,

5
00:00:23,920 --> 00:00:30,040
Speaker 1: and of course, on the Bloomberg terminal. Well, let's outlook

6
00:00:30,120 --> 00:00:33,280
Speaker 1: right now. It's stephile with our chief economis Lindsay Pegs.

7
00:00:33,320 --> 00:00:35,519
Speaker 1: That joins us right now, Lizzie, I don't want to

8
00:00:35,520 --> 00:00:38,000
Speaker 1: get into the silliness of pivot this or pivot that.

9
00:00:38,520 --> 00:00:42,199
Speaker 1: Where are we right now? What is your real g

10
00:00:42,320 --> 00:00:45,920
Speaker 1: d P call for this ending que four? Well, I

11
00:00:45,920 --> 00:00:49,040
Speaker 1: do think there's enough momentum or ongoing resilience in the

12
00:00:49,040 --> 00:00:52,880
Speaker 1: consumer that we will see a second quarter of positive activity,

13
00:00:53,200 --> 00:00:56,080
Speaker 1: albeit markedly below than your three percent pace we saw

14
00:00:56,080 --> 00:00:58,520
Speaker 1: on the third quarter. But the bigger question is can

15
00:00:58,600 --> 00:01:02,080
Speaker 1: we maintain that going into and I don't see that

16
00:01:02,160 --> 00:01:05,200
Speaker 1: resilience being able to be maintained as we continue to

17
00:01:05,240 --> 00:01:08,960
Speaker 1: see some of these variables increasingly way on the consumer,

18
00:01:09,080 --> 00:01:13,800
Speaker 1: i e. Elevated prices, negative income growth, negative manufacturing activity,

19
00:01:13,840 --> 00:01:17,400
Speaker 1: a housing montment that's under extreme pressure, so I think

20
00:01:17,400 --> 00:01:20,040
Speaker 1: that we can argue you can check the recessionary box

21
00:01:20,080 --> 00:01:22,679
Speaker 1: for nearly every sector of the economy even at this

22
00:01:22,760 --> 00:01:26,320
Speaker 1: point except for the labor market. But even there we're

23
00:01:26,360 --> 00:01:29,200
Speaker 1: starting to see cracks, were starting to see signs of

24
00:01:29,240 --> 00:01:33,880
Speaker 1: emerging weakness. So while we do maintain that positive trajectory

25
00:01:34,120 --> 00:01:38,880
Speaker 1: through December, I think is opening the door for recession.

26
00:01:39,160 --> 00:01:42,400
Speaker 1: That's do algebra Monday, lindsay it's wyld coals. I don't

27
00:01:42,400 --> 00:01:45,000
Speaker 1: know what it is C plus I plus G plus

28
00:01:45,040 --> 00:01:48,160
Speaker 1: and X is out there somewhere. Can you split your

29
00:01:48,200 --> 00:01:52,040
Speaker 1: analysis between domestic final sales in real g d P.

30
00:01:52,840 --> 00:01:56,360
Speaker 1: Can you pair off trade dynamics? Are they part of

31
00:01:56,400 --> 00:02:00,080
Speaker 1: getting to a recession? Oh? Absolutely? And I think this

32
00:02:00,080 --> 00:02:03,840
Speaker 1: this when we passed through the trade and inventory data,

33
00:02:04,280 --> 00:02:07,640
Speaker 1: that's really what complicates the earlier weakness that we saw

34
00:02:07,680 --> 00:02:09,800
Speaker 1: at the start of the year and why it's likely

35
00:02:09,840 --> 00:02:13,600
Speaker 1: that we don't see a technical recession in hindsight called

36
00:02:13,680 --> 00:02:17,400
Speaker 1: for the first six months, because when you strip out

37
00:02:17,800 --> 00:02:20,400
Speaker 1: that volatility from trade and inventories, we see that we

38
00:02:20,440 --> 00:02:24,800
Speaker 1: actually had positive momentum from December into the first quarter

39
00:02:24,880 --> 00:02:27,400
Speaker 1: of the year. So this is very much complicating the

40
00:02:27,440 --> 00:02:30,680
Speaker 1: picture and will continue to complicate the picture going forward.

41
00:02:30,960 --> 00:02:33,720
Speaker 1: If we look at third quarter g d P. Now,

42
00:02:33,760 --> 00:02:36,639
Speaker 1: one of the largest contributors to that top line increase

43
00:02:36,960 --> 00:02:40,440
Speaker 1: was trade, contributing nearly three percent, but a lot of

44
00:02:40,480 --> 00:02:43,680
Speaker 1: that was reflective of the weakness on the import side,

45
00:02:44,040 --> 00:02:47,320
Speaker 1: and that reflects a declining demand or at a level

46
00:02:47,320 --> 00:02:50,960
Speaker 1: of declining demand on the consumer part, again highlighting the

47
00:02:50,960 --> 00:02:54,800
Speaker 1: fact that consumers are on increasingly fragile footing. As we

48
00:02:54,840 --> 00:02:57,320
Speaker 1: turned the calendar page into the next year, lindsay, there

49
00:02:57,360 --> 00:02:59,440
Speaker 1: will be some people tuned into this program right now

50
00:02:59,680 --> 00:03:03,600
Speaker 1: listening to another recession call for three and wondering why

51
00:03:03,600 --> 00:03:06,120
Speaker 1: on earth the Federal Service hiking interest rates by fifty

52
00:03:06,160 --> 00:03:09,440
Speaker 1: basis points on Wednesday and probably signaling they're going to

53
00:03:09,520 --> 00:03:11,600
Speaker 1: do a whole lot more after that. Lindsay, how do

54
00:03:11,639 --> 00:03:15,000
Speaker 1: you reconcile those two things? Well, remember, the Fed is

55
00:03:15,080 --> 00:03:17,480
Speaker 1: trying to slow the economy. So the fact that we're

56
00:03:17,520 --> 00:03:20,840
Speaker 1: seeing increasing calls for recession in three means that the

57
00:03:20,880 --> 00:03:24,960
Speaker 1: feds earlier policy initiatives are already having the intended effect

58
00:03:25,360 --> 00:03:28,920
Speaker 1: of tapping down investment, tapping down consumption, and resulting in

59
00:03:28,960 --> 00:03:32,760
Speaker 1: a significant slowdown in the economy. Now the reason the

60
00:03:32,840 --> 00:03:35,920
Speaker 1: FED is so focused on continuing to raise rates, not

61
00:03:36,000 --> 00:03:39,480
Speaker 1: necessarily at the supersized sevent basis point increase that we

62
00:03:39,520 --> 00:03:42,920
Speaker 1: saw earlier, but fifty basis points, and as you said,

63
00:03:42,960 --> 00:03:45,920
Speaker 1: more work to come down the road is because inflation

64
00:03:46,080 --> 00:03:49,280
Speaker 1: is still elevated and at this point, with the labor

65
00:03:49,280 --> 00:03:53,200
Speaker 1: markets still arguably on modest footing, the FED is hyper

66
00:03:53,240 --> 00:03:57,960
Speaker 1: focused on bringing down inflation reinstating price stability, which the

67
00:03:58,040 --> 00:04:00,640
Speaker 1: Chairman has said time and time again is the bedrock

68
00:04:00,760 --> 00:04:02,640
Speaker 1: of the economy. So how much more damage do you

69
00:04:02,640 --> 00:04:06,040
Speaker 1: think another one hundred basis points of heightening does well?

70
00:04:06,080 --> 00:04:08,880
Speaker 1: I think it ensures that we do see recessionary conditions,

71
00:04:08,880 --> 00:04:12,560
Speaker 1: But depending on the behavior of inflation, depending on what

72
00:04:12,600 --> 00:04:15,560
Speaker 1: we see in terms of international factors, that will determine

73
00:04:15,800 --> 00:04:18,840
Speaker 1: the depth and duration of the downturn. But again from

74
00:04:18,839 --> 00:04:21,320
Speaker 1: the FEDS perspective, it's not about whether or not we

75
00:04:21,360 --> 00:04:24,040
Speaker 1: see negative activity. It's about whether or not we can

76
00:04:24,040 --> 00:04:28,279
Speaker 1: get inflation on a meaningful downward trajectory back towards the

77
00:04:28,279 --> 00:04:32,719
Speaker 1: committee's desire to processual target range. What's your probability getting

78
00:04:32,720 --> 00:04:35,719
Speaker 1: back to two percent until England wins in football again, Lindsay,

79
00:04:35,839 --> 00:04:38,320
Speaker 1: I mean come on, where are we getting back to

80
00:04:39,960 --> 00:04:43,240
Speaker 1: or is well, if you look at the FEDS trajectory,

81
00:04:43,360 --> 00:04:46,000
Speaker 1: there's still very optimistic that we're going to see a

82
00:04:46,040 --> 00:04:49,360
Speaker 1: two handle by twenty by the end of maybe early

83
00:04:50,560 --> 00:04:52,760
Speaker 1: But I think the reality of the data suggests that

84
00:04:52,800 --> 00:04:56,560
Speaker 1: Committee members have been calling for this meaningful improvement in

85
00:04:56,560 --> 00:04:59,480
Speaker 1: inflation for the better part of the past two years,

86
00:04:59,520 --> 00:05:01,720
Speaker 1: and we see we have not seen that come to fruition.

87
00:05:02,120 --> 00:05:06,120
Speaker 1: So the FED the market continues to under appreciate the

88
00:05:06,240 --> 00:05:09,880
Speaker 1: complicated nature of the inflation equation at this point, and

89
00:05:09,920 --> 00:05:13,479
Speaker 1: that's why, along with the fifty basis points increased this week,

90
00:05:13,839 --> 00:05:17,240
Speaker 1: we do expect the FED to meaningfully revise higher their

91
00:05:17,240 --> 00:05:21,320
Speaker 1: expectations and policy and inflation going forward. Does this PGS

92
00:05:21,320 --> 00:05:23,840
Speaker 1: at one oh one? It's service inflation, isn't I mean,

93
00:05:23,880 --> 00:05:26,520
Speaker 1: we're gonna get a reversion to David malpass A World

94
00:05:26,520 --> 00:05:28,840
Speaker 1: Bank was great on this years ago. We're gonna get

95
00:05:28,880 --> 00:05:33,599
Speaker 1: a legit goods disinflation. Dare I say true deflation? But

96
00:05:33,760 --> 00:05:36,320
Speaker 1: services isn't going to get there? What will you? What

97
00:05:36,360 --> 00:05:40,200
Speaker 1: do you see as the sustained services inflation above three?

98
00:05:41,680 --> 00:05:44,080
Speaker 1: I think that's absolutely reasonable, But you're right, we are

99
00:05:44,080 --> 00:05:46,800
Speaker 1: going to see this bifurcation between goods and services, and

100
00:05:46,839 --> 00:05:49,680
Speaker 1: already we're seeing it in the data outside of inflation,

101
00:05:50,080 --> 00:05:54,080
Speaker 1: manufacturing turning back into contractionary territory, while we look at

102
00:05:54,080 --> 00:05:56,560
Speaker 1: the I s M Services Index and that is still

103
00:05:56,720 --> 00:06:00,760
Speaker 1: arguably on solid footing. And so this by vurcation agun

104
00:06:00,960 --> 00:06:03,719
Speaker 1: does highlight the difficult nature that the FED is going

105
00:06:03,760 --> 00:06:08,120
Speaker 1: to face and trying to tackle broader inflation pressures, particularly

106
00:06:08,160 --> 00:06:11,839
Speaker 1: as we see this wage price spiral continue to accelerate. Well, Lindsay,

107
00:06:11,880 --> 00:06:14,080
Speaker 1: young John are way too young to understand this. We

108
00:06:14,240 --> 00:06:18,479
Speaker 1: survived this before. If we only come down with services

109
00:06:18,520 --> 00:06:22,440
Speaker 1: elevated to five or four percent or three point eight percent,

110
00:06:23,080 --> 00:06:28,000
Speaker 1: life goes on, right, people adept right, absolutely, and we

111
00:06:28,080 --> 00:06:30,800
Speaker 1: will come out of this. But I think the trajectory

112
00:06:30,880 --> 00:06:32,920
Speaker 1: of how we come out of this depends on the

113
00:06:32,920 --> 00:06:36,680
Speaker 1: Fed's resolve to reinstate price stability. If they start to

114
00:06:36,720 --> 00:06:39,360
Speaker 1: get cold feet, if they start to pull back prematurely,

115
00:06:39,760 --> 00:06:43,040
Speaker 1: then we could see inflation become entrenched in the economy,

116
00:06:43,160 --> 00:06:45,360
Speaker 1: meaning that we don't see that improvement back to the

117
00:06:45,360 --> 00:06:48,200
Speaker 1: FEDS two percent target. But if they stay the course,

118
00:06:48,240 --> 00:06:50,599
Speaker 1: it will be more painful in the near term, but

119
00:06:50,680 --> 00:06:53,799
Speaker 1: we could see the economy emerged faster and with more

120
00:06:54,600 --> 00:06:57,880
Speaker 1: gusto as we begin to get back to a potential

121
00:06:57,960 --> 00:07:01,000
Speaker 1: level after that two percent target is re stated. Lindsay,

122
00:07:01,040 --> 00:07:14,440
Speaker 1: Thank you, Lindsay p excident of Stayfall. Lauren Canvas City

123
00:07:14,480 --> 00:07:16,640
Speaker 1: joins US now at the US Ecrety Strategy at RBC

124
00:07:16,800 --> 00:07:18,800
Speaker 1: Capital Markets. Laurie, I just want to start with Mike's

125
00:07:18,800 --> 00:07:21,000
Speaker 1: worts and then we'll get to yours. Mike Wilson says

126
00:07:21,000 --> 00:07:23,400
Speaker 1: the final chapter to this bare market, it's all about

127
00:07:23,440 --> 00:07:26,360
Speaker 1: the path of earning's estimates, which we think are far

128
00:07:26,560 --> 00:07:29,040
Speaker 1: too high. Laurie, you want a similar page. Do you

129
00:07:29,120 --> 00:07:32,840
Speaker 1: agree with that? So I'm on a similar page with Mike,

130
00:07:32,920 --> 00:07:35,000
Speaker 1: but I don't exactly agree with him. I think it's

131
00:07:35,000 --> 00:07:37,520
Speaker 1: a little bit more complicated. So we're at one for

132
00:07:37,600 --> 00:07:41,040
Speaker 1: next year. The consensus has been around one, and I

133
00:07:41,080 --> 00:07:43,360
Speaker 1: do think that the need to pull those forecasts down

134
00:07:43,440 --> 00:07:46,400
Speaker 1: is going to create some headwinds and additional volatility, perhaps

135
00:07:46,400 --> 00:07:48,760
Speaker 1: a retesting of the low. But does it have to

136
00:07:48,800 --> 00:07:51,040
Speaker 1: make a new low. I'm not so sure. I think

137
00:07:51,080 --> 00:07:53,280
Speaker 1: the main issue here is that the by side wants

138
00:07:53,280 --> 00:07:55,520
Speaker 1: certainty around multiple so that they can come in and

139
00:07:55,520 --> 00:07:58,000
Speaker 1: buy and we can have a sustainable rally. All the

140
00:07:58,040 --> 00:08:00,360
Speaker 1: by ciders know, and they've known since June the next

141
00:08:00,440 --> 00:08:03,440
Speaker 1: year's numbers were too high. If you look historically, most

142
00:08:03,440 --> 00:08:05,960
Speaker 1: of the cuts and down earnings years are in by April.

143
00:08:06,360 --> 00:08:08,520
Speaker 1: And if you look on a single stock basis, when

144
00:08:08,520 --> 00:08:11,080
Speaker 1: the rate of revisions to the upside is falling, you

145
00:08:11,120 --> 00:08:13,160
Speaker 1: watch for it to turn positive again. You watch for

146
00:08:13,200 --> 00:08:16,920
Speaker 1: that shift from negative revision territory back to positive revision territory.

147
00:08:17,000 --> 00:08:20,720
Speaker 1: And stocks typically bottom the smp FI price three to

148
00:08:20,800 --> 00:08:24,640
Speaker 1: six months before earnings estimate revisions for single stocks stopped

149
00:08:24,680 --> 00:08:27,320
Speaker 1: going down. What that means is that if we can

150
00:08:27,360 --> 00:08:29,000
Speaker 1: kind of get all these cuts out of the way

151
00:08:29,040 --> 00:08:32,280
Speaker 1: by March, it's still reasonable based on the historical playbook,

152
00:08:32,280 --> 00:08:34,600
Speaker 1: for October to be below. Now that doesn't mean we're

153
00:08:34,640 --> 00:08:37,480
Speaker 1: not going to turn around, but I don't necessarily think

154
00:08:37,480 --> 00:08:39,240
Speaker 1: that we have to break to a new low because

155
00:08:39,240 --> 00:08:41,400
Speaker 1: of this earnings issue and making a time cooler. Now

156
00:08:41,440 --> 00:08:43,800
Speaker 1: it's really really difficult, Lorrie, But what do you suggest

157
00:08:43,800 --> 00:08:48,240
Speaker 1: people do between now and March? So I think you

158
00:08:48,320 --> 00:08:51,320
Speaker 1: have to back up and say what have people already

159
00:08:51,400 --> 00:08:54,640
Speaker 1: done and where are they? And most defensive sectors are

160
00:08:54,760 --> 00:08:57,680
Speaker 1: near peak multiples relative to the SMP five hundred, and

161
00:08:57,679 --> 00:09:00,040
Speaker 1: people have been loading into staples all year, wrote it

162
00:09:00,200 --> 00:09:02,840
Speaker 1: into healthcare since the summer. I don't think people have

163
00:09:02,960 --> 00:09:05,440
Speaker 1: enough recovery trades for when we finally do put that

164
00:09:05,520 --> 00:09:08,439
Speaker 1: final bottom in and start to recover. So we tell

165
00:09:08,480 --> 00:09:10,920
Speaker 1: people look at things like financials, look at things like tech,

166
00:09:11,400 --> 00:09:13,440
Speaker 1: look at things like small caps. Those are areas that

167
00:09:13,520 --> 00:09:16,240
Speaker 1: typically outperform when you're coming out of a recession, after

168
00:09:16,280 --> 00:09:19,080
Speaker 1: you've made that final bottom, and small caps, frankly, John

169
00:09:19,080 --> 00:09:21,720
Speaker 1: are already starting to outperform. They put in their relative

170
00:09:21,720 --> 00:09:24,040
Speaker 1: blow back in Bay. So we think that people really

171
00:09:24,080 --> 00:09:26,400
Speaker 1: don't need too much more defense. And you know, I

172
00:09:26,440 --> 00:09:29,480
Speaker 1: wouldn't necessarily dump all your defensive shares right now, but

173
00:09:29,559 --> 00:09:32,480
Speaker 1: I would start thinking ahead to that recovery trade, not

174
00:09:32,600 --> 00:09:35,160
Speaker 1: just this final term, Lauren. I think of the great Dave,

175
00:09:35,280 --> 00:09:38,320
Speaker 1: David Triple and pioneer years ago. It would explain to

176
00:09:38,360 --> 00:09:40,840
Speaker 1: me the small cap and mid cap go once every

177
00:09:40,920 --> 00:09:43,520
Speaker 1: nine years, once every eight years, whatever the pop is.

178
00:09:43,880 --> 00:09:45,960
Speaker 1: And I read in your research you're really looking for

179
00:09:46,000 --> 00:09:48,560
Speaker 1: that pop to be this year. If we have a

180
00:09:48,600 --> 00:09:51,760
Speaker 1: great zombie roll up, which frankly, we're beginning to percolate

181
00:09:51,800 --> 00:09:55,240
Speaker 1: and see because money actually costs something, how does small

182
00:09:55,360 --> 00:09:58,600
Speaker 1: caps react to the fact we now have a risk

183
00:09:58,679 --> 00:10:01,840
Speaker 1: free rate, we have zombie companies that have to do something.

184
00:10:01,880 --> 00:10:05,400
Speaker 1: How does that play into your call? So I think

185
00:10:05,400 --> 00:10:07,960
Speaker 1: you want to be in line with the higher quality

186
00:10:08,040 --> 00:10:11,440
Speaker 1: small caps, the bigger names, the more liquid names, um,

187
00:10:11,480 --> 00:10:13,880
Speaker 1: you know, kind of where the typical small and MidCap

188
00:10:13,880 --> 00:10:16,920
Speaker 1: portfolio manager likes to invest, not kind of the bottom

189
00:10:16,960 --> 00:10:19,240
Speaker 1: three quintiles of market cap, where you get tend to

190
00:10:19,240 --> 00:10:21,240
Speaker 1: get the dicier balance sheets, you tend to get the

191
00:10:21,280 --> 00:10:24,840
Speaker 1: lower quality names. We actually think there's plenty evaluation appeal

192
00:10:24,920 --> 00:10:27,240
Speaker 1: in that upper echelot of small cap right now, which

193
00:10:27,240 --> 00:10:28,880
Speaker 1: is one of the things that makes it so interesting

194
00:10:28,960 --> 00:10:30,720
Speaker 1: to me because we haven't had that for a really

195
00:10:30,760 --> 00:10:34,880
Speaker 1: long time. Or small caps correlated to the weaker dollar. Finally,

196
00:10:34,960 --> 00:10:38,520
Speaker 1: end of strong dollar international play? Do you cross correlate

197
00:10:38,840 --> 00:10:43,439
Speaker 1: those two categories. I think that the dollar is complicated

198
00:10:43,480 --> 00:10:46,280
Speaker 1: for small caps. They have been benefiting from an earnings

199
00:10:46,320 --> 00:10:48,720
Speaker 1: perspective by dollar strength. If you look at if you

200
00:10:48,720 --> 00:10:50,560
Speaker 1: try to sort of match up the relative cycle with

201
00:10:50,600 --> 00:10:52,240
Speaker 1: the dollar, of the time, you're not you're gonna just

202
00:10:52,240 --> 00:10:55,880
Speaker 1: want to pull your hair out. It's not be careful with.

203
00:10:57,640 --> 00:11:01,040
Speaker 1: But but recently they've been benefiting from an earnings perspective

204
00:11:01,080 --> 00:11:03,440
Speaker 1: because they don't have those pressures. I think that what

205
00:11:03,520 --> 00:11:05,120
Speaker 1: I see right now, And you know, I just got

206
00:11:05,160 --> 00:11:08,120
Speaker 1: off a week of being in Europe talking to investors there.

207
00:11:08,440 --> 00:11:11,720
Speaker 1: They are very European based. Equity investors are very perplexed

208
00:11:11,720 --> 00:11:14,560
Speaker 1: by the expensive valuations that we have sitting in SMP

209
00:11:14,640 --> 00:11:18,040
Speaker 1: five companies right now. You don't have that same valuation

210
00:11:18,080 --> 00:11:20,240
Speaker 1: pressure down in small cap right now. So I think

211
00:11:20,240 --> 00:11:23,600
Speaker 1: when you're you're starting to cross borders, I think you've

212
00:11:23,600 --> 00:11:25,839
Speaker 1: still got the better valuation story here and that will

213
00:11:25,880 --> 00:11:28,839
Speaker 1: be appealing regardless of some of these currents. But are

214
00:11:28,880 --> 00:11:31,080
Speaker 1: they gonna? Are they gonna roll up? I mean, I

215
00:11:31,120 --> 00:11:34,199
Speaker 1: don't mean the quality small caps and there's like three thousand,

216
00:11:34,240 --> 00:11:36,600
Speaker 1: let's say is a working number. What are the other

217
00:11:37,360 --> 00:11:39,679
Speaker 1: under gonna do? Is there gonna be one grand roll up?

218
00:11:39,679 --> 00:11:43,760
Speaker 1: Because money finally costs something? I mean, what do you

219
00:11:43,760 --> 00:11:48,479
Speaker 1: mean by roll of exactly? Time? Mergers, transactions, combinations. Microsoft

220
00:11:48,559 --> 00:11:52,600
Speaker 1: taking out tency weensy bit of the London Stock Exchange

221
00:11:52,640 --> 00:11:55,240
Speaker 1: today just to get on board that kind of stuff.

222
00:11:55,360 --> 00:11:57,560
Speaker 1: I think I think that you will get that in

223
00:11:57,679 --> 00:12:01,840
Speaker 1: certain sectors where you have have more valuation appeal. I

224
00:12:01,880 --> 00:12:04,760
Speaker 1: think industrials, even though it's not cheap, it's always an

225
00:12:04,800 --> 00:12:06,840
Speaker 1: area where we see those roll up stories, and the

226
00:12:06,880 --> 00:12:09,760
Speaker 1: reshoring thesis could further some of that along. But I

227
00:12:09,800 --> 00:12:12,680
Speaker 1: think ultimately those roll ups in that mn A cycle,

228
00:12:12,760 --> 00:12:14,720
Speaker 1: that's really more about what waits us on the other

229
00:12:14,760 --> 00:12:18,000
Speaker 1: side of this recovery and a sluggish GDP environment, growth

230
00:12:18,040 --> 00:12:21,079
Speaker 1: is scarce, and companies, I think will feel more compelled

231
00:12:21,120 --> 00:12:22,959
Speaker 1: to go out and buy growth. And you can find

232
00:12:22,960 --> 00:12:25,080
Speaker 1: that in some of those higher qualities fall caps, not

233
00:12:25,160 --> 00:12:28,040
Speaker 1: necessarily the smaller ones, but again it might bring you

234
00:12:28,080 --> 00:12:30,080
Speaker 1: back to some of those higher quality, you know, more

235
00:12:30,120 --> 00:12:32,440
Speaker 1: liquid type names and lor. You've touched on something really

236
00:12:32,440 --> 00:12:35,160
Speaker 1: important here, and that's about ladyship in the recovery in

237
00:12:35,200 --> 00:12:37,920
Speaker 1: the second half of next year. Is it too added

238
00:12:37,960 --> 00:12:40,319
Speaker 1: to draw conclusions about where that leadership comes from. That's

239
00:12:40,320 --> 00:12:42,840
Speaker 1: a discussion were ultimately happen right now. Why is the

240
00:12:43,160 --> 00:12:46,600
Speaker 1: now the right time to have that conversation. I think

241
00:12:46,640 --> 00:12:48,480
Speaker 1: it's the right time because you know, you know as

242
00:12:48,480 --> 00:12:51,080
Speaker 1: well as I do, John, When these bottoms happen, and

243
00:12:51,120 --> 00:12:53,960
Speaker 1: people are convinced of these bottoms, they just sort of

244
00:12:54,000 --> 00:12:55,760
Speaker 1: take off and you don't have time to get in.

245
00:12:55,840 --> 00:12:57,760
Speaker 1: You have to do your homework early while things are

246
00:12:57,760 --> 00:12:59,920
Speaker 1: sort of quiet and turning around. But I saw you

247
00:13:00,080 --> 00:13:02,320
Speaker 1: last week. We did have a lot of discussions about

248
00:13:02,360 --> 00:13:05,880
Speaker 1: what is the new leadership. Typically in a sluggish economic

249
00:13:05,880 --> 00:13:07,880
Speaker 1: growth backdrop, which I think is the price we pay

250
00:13:07,920 --> 00:13:10,880
Speaker 1: for a short, shallow recession growth, stocks out per form.

251
00:13:11,160 --> 00:13:12,720
Speaker 1: But is it the old growth or is it the

252
00:13:12,720 --> 00:13:15,280
Speaker 1: new growth? And that's why I think the sector, like industrials,

253
00:13:15,360 --> 00:13:17,240
Speaker 1: is starting to get a bit over valued. Now we're

254
00:13:17,280 --> 00:13:20,120
Speaker 1: just neutral there. We don't like the valuations, but we

255
00:13:20,200 --> 00:13:21,960
Speaker 1: have been talking to people a lot about how that

256
00:13:22,040 --> 00:13:24,439
Speaker 1: might be the best long term growth story in town.

257
00:13:24,480 --> 00:13:26,719
Speaker 1: And that might be one of the reasons why you're

258
00:13:26,760 --> 00:13:30,240
Speaker 1: seeing these valuations lift. People basically kind of looking at

259
00:13:30,240 --> 00:13:33,360
Speaker 1: the old economy and saying what's old might potentially be

260
00:13:33,480 --> 00:13:35,760
Speaker 1: new again and that might be where you get for

261
00:13:35,840 --> 00:13:38,800
Speaker 1: the better growth profile going forward. Laurie, this was brilliant.

262
00:13:39,120 --> 00:13:41,080
Speaker 1: That would be a stranger come back saying, Laurie canvass

263
00:13:41,120 --> 00:13:48,040
Speaker 1: in to the BBC capital market it is time for

264
00:13:48,080 --> 00:13:50,800
Speaker 1: global Wall Street to lean forward for one of the

265
00:13:51,000 --> 00:13:53,720
Speaker 1: great great calls of the last number of years has

266
00:13:53,800 --> 00:13:59,000
Speaker 1: when the persistency and courage of HSBC to say strong

267
00:13:59,520 --> 00:14:04,720
Speaker 1: and brilliant dollar. They amend that sort of So we

268
00:14:04,760 --> 00:14:06,719
Speaker 1: have a sort of kind of like discussion with Darren Mayor,

269
00:14:06,840 --> 00:14:09,280
Speaker 1: head of Research America's and ahead of the U s

270
00:14:09,360 --> 00:14:12,439
Speaker 1: F strategy, with a great Paul Michael as well. I

271
00:14:12,760 --> 00:14:15,960
Speaker 1: there's an ambivalence to your note. You're not calling for

272
00:14:16,080 --> 00:14:19,360
Speaker 1: week dollar right, Well, we're calling for a dollar correction.

273
00:14:19,480 --> 00:14:21,680
Speaker 1: It kind of amounts to the same. But it's not

274
00:14:21,800 --> 00:14:25,600
Speaker 1: this big trend reversal. In other words, we don't undo

275
00:14:25,800 --> 00:14:28,960
Speaker 1: everything that we've we've delivered by virtue of dollar strength

276
00:14:29,000 --> 00:14:31,320
Speaker 1: over the last eighteen months or so. Let's talk to

277
00:14:31,440 --> 00:14:33,880
Speaker 1: people like John who you know trade off folks on

278
00:14:33,920 --> 00:14:37,920
Speaker 1: the break here. John's doing f X trade series. We

279
00:14:38,120 --> 00:14:41,200
Speaker 1: want to do that. But is it a tradeable come

280
00:14:41,240 --> 00:14:44,280
Speaker 1: off the bloom? After it's upon there, come off the bloom.

281
00:14:44,360 --> 00:14:47,640
Speaker 1: Get that day loop nailed that, okay? Is it a

282
00:14:47,720 --> 00:14:50,280
Speaker 1: tradeable come off the bloom? Or is this going to

283
00:14:50,400 --> 00:14:53,080
Speaker 1: be a messy sludge where nobody really makes big figures.

284
00:14:53,760 --> 00:14:56,200
Speaker 1: Look our whole process was we described it, We thought

285
00:14:56,240 --> 00:14:58,000
Speaker 1: to be this would be the chop before the flop.

286
00:14:58,040 --> 00:15:02,200
Speaker 1: We have this really choppy period, then we'll get the flop. Yeah,

287
00:15:02,240 --> 00:15:05,120
Speaker 1: but nice phraseology, but completely the wrong way around, because

288
00:15:05,160 --> 00:15:06,600
Speaker 1: what we've had is the flop and we're still kind

289
00:15:06,600 --> 00:15:09,880
Speaker 1: of waiting for the chop. You know. This the reverse

290
00:15:09,920 --> 00:15:11,800
Speaker 1: that we've had over the lad You know, we changed

291
00:15:11,800 --> 00:15:16,080
Speaker 1: our dollar view for dollar abolitionist to dollar choppiness and

292
00:15:16,120 --> 00:15:18,440
Speaker 1: then weakness just a month ago, and in that month

293
00:15:18,480 --> 00:15:21,000
Speaker 1: we've had like one of the biggest monthly declines in

294
00:15:21,080 --> 00:15:23,560
Speaker 1: the dollar. So it's really you know, even for quote

295
00:15:23,600 --> 00:15:25,560
Speaker 1: unquote a bear like us, now our new found bear

296
00:15:25,640 --> 00:15:28,680
Speaker 1: like us, it's been a big old move. I wonder

297
00:15:28,680 --> 00:15:30,440
Speaker 1: as the chopping is about to come though, you know,

298
00:15:30,560 --> 00:15:33,720
Speaker 1: into the CPI, into f O M c UM and

299
00:15:33,720 --> 00:15:36,920
Speaker 1: and into kind of the beginnings of January where everybody

300
00:15:36,960 --> 00:15:39,120
Speaker 1: thinks they know what the trend is for three and

301
00:15:39,160 --> 00:15:41,280
Speaker 1: then they're all suddenly forced to revisit in the first

302
00:15:41,280 --> 00:15:43,840
Speaker 1: couple of weeks their risk that we're over playing the

303
00:15:43,840 --> 00:15:46,000
Speaker 1: one side of the currency pair. When I think about

304
00:15:46,000 --> 00:15:48,400
Speaker 1: Euro dollar, which got down to about ninety five, and

305
00:15:48,400 --> 00:15:50,560
Speaker 1: then we avoided the worst case scenario coming into winter.

306
00:15:50,600 --> 00:15:52,920
Speaker 1: We had that period of mild weather for the Europeans.

307
00:15:52,920 --> 00:15:54,800
Speaker 1: When I think about Sterling getting down to one or

308
00:15:54,800 --> 00:15:56,280
Speaker 1: three fifty, I think in to day, the end of

309
00:15:56,280 --> 00:15:59,960
Speaker 1: September and coming back through one twenty. Largely it was

310
00:16:00,000 --> 00:16:02,040
Speaker 1: the other side of the trade. It was the Sterling side,

311
00:16:02,080 --> 00:16:05,000
Speaker 1: the Euro side, that really kicked off that move. We

312
00:16:05,080 --> 00:16:07,480
Speaker 1: cleaned up the policy story in the UK. We avoided

313
00:16:07,480 --> 00:16:10,480
Speaker 1: that terrible winter and the shutdowns we anticipated. Maybe they

314
00:16:10,520 --> 00:16:12,480
Speaker 1: still evolved. I don't know, But do you think we're

315
00:16:12,520 --> 00:16:15,640
Speaker 1: overplaying the U S side of the currency pair. I

316
00:16:15,680 --> 00:16:18,440
Speaker 1: would say, look showed us that the dominant thing to

317
00:16:18,440 --> 00:16:20,320
Speaker 1: get right was the dollar. I mean we could at

318
00:16:20,320 --> 00:16:22,720
Speaker 1: the margin we had periods where this Sterling was was

319
00:16:22,760 --> 00:16:25,680
Speaker 1: the swing factor a couple of peers where euro was.

320
00:16:25,720 --> 00:16:27,840
Speaker 1: But I mean look at us this week. We have

321
00:16:27,960 --> 00:16:30,600
Speaker 1: got an ECB meeting, we have got talking about it.

322
00:16:30,640 --> 00:16:33,800
Speaker 1: Who knew? You know? Um? And but I think there's

323
00:16:33,800 --> 00:16:36,040
Speaker 1: a recognition and the reality is you've got to get

324
00:16:36,040 --> 00:16:38,520
Speaker 1: the dollar right. And in a way, before you get

325
00:16:38,560 --> 00:16:40,440
Speaker 1: the dollar right, you've got to get the SMP right.

326
00:16:40,560 --> 00:16:44,400
Speaker 1: Because risk appetite has been the core of everything that's

327
00:16:44,400 --> 00:16:46,880
Speaker 1: happening in the FX market and to the safe Avan dollar.

328
00:16:47,000 --> 00:16:49,160
Speaker 1: So I'm not trading rates next year, I'm trading sentiment.

329
00:16:49,480 --> 00:16:51,880
Speaker 1: You're training row row risk on risk, all right, that

330
00:16:51,920 --> 00:16:53,280
Speaker 1: all the way to that. So when you think about

331
00:16:53,280 --> 00:16:55,800
Speaker 1: paying some of that choppy dollar weakness through G ten,

332
00:16:56,400 --> 00:16:58,400
Speaker 1: what's the select currency pay you want to do that through?

333
00:16:59,200 --> 00:17:01,520
Speaker 1: I think the high betac currencies on the way up

334
00:17:01,520 --> 00:17:03,160
Speaker 1: in the dollar should be the high beta occurrency is

335
00:17:03,160 --> 00:17:05,240
Speaker 1: in the way down. So your Aussie, New Zealand, your

336
00:17:05,280 --> 00:17:08,159
Speaker 1: knocky stocky and less so the Canadian dollar. And we

337
00:17:08,240 --> 00:17:10,240
Speaker 1: we've seen that even in this dollar sell off. You know,

338
00:17:10,320 --> 00:17:13,479
Speaker 1: Canada's underperformed others. So I think you go to the

339
00:17:13,960 --> 00:17:15,960
Speaker 1: I mean, honestly, i'd say the AUSSI perhaps and and

340
00:17:16,000 --> 00:17:18,719
Speaker 1: the Kiwi, Norway and Sweden. I know that's what you're

341
00:17:18,800 --> 00:17:20,560
Speaker 1: day trading, just as we came off came on air.

342
00:17:20,680 --> 00:17:23,280
Speaker 1: But you know they're there for the braver man side,

343
00:17:23,280 --> 00:17:24,920
Speaker 1: there for the braver man and that's why you're still

344
00:17:24,920 --> 00:17:27,840
Speaker 1: having to do this gig as well. So I yeah,

345
00:17:27,880 --> 00:17:32,240
Speaker 1: I think as the US dollars as the US dollar

346
00:17:32,480 --> 00:17:34,600
Speaker 1: and New Zealand US dollar, they they'd be the two

347
00:17:34,720 --> 00:17:37,560
Speaker 1: this China reopening reinforced that trait. I think it's being

348
00:17:37,600 --> 00:17:42,080
Speaker 1: overplayed a little bit. Um. I mean the transition is

349
00:17:42,080 --> 00:17:44,919
Speaker 1: going to be complicated towards you know, a reopened China.

350
00:17:45,640 --> 00:17:49,520
Speaker 1: Perhaps markets slightly overegging the tourist angle and what that

351
00:17:49,600 --> 00:17:52,399
Speaker 1: might mean in terms of flows. Um. But it is

352
00:17:52,480 --> 00:17:56,080
Speaker 1: encouraging and the pro growth stances encouraging. But look, even

353
00:17:56,080 --> 00:17:58,359
Speaker 1: at HSBC, we've been looking for a rebound in China

354
00:17:58,440 --> 00:18:02,320
Speaker 1: six months down the road for two years. Um. So

355
00:18:02,440 --> 00:18:04,680
Speaker 1: you know, as as the market, and it's difficult because

356
00:18:04,720 --> 00:18:06,400
Speaker 1: every time we think, okay, we're when I get there,

357
00:18:06,440 --> 00:18:08,680
Speaker 1: we don't get there. And you've got the leadership there

358
00:18:08,680 --> 00:18:10,399
Speaker 1: with the Hong Kong position of the Hong Kong and

359
00:18:10,520 --> 00:18:14,320
Speaker 1: Shanghai Banking Corporation. What is the pair in the Pacific

360
00:18:14,440 --> 00:18:20,159
Speaker 1: rim to play Asia open? I think Korea will be one. Um.

361
00:18:20,720 --> 00:18:24,920
Speaker 1: It's w against what against the dollar? I mean, I

362
00:18:24,960 --> 00:18:26,960
Speaker 1: think that's you gotta go. I think I think it's

363
00:18:26,960 --> 00:18:30,600
Speaker 1: the cleanest way. I mean, I think you do to

364
00:18:30,640 --> 00:18:32,760
Speaker 1: your question earlier, you do have to come back to

365
00:18:32,800 --> 00:18:34,760
Speaker 1: a dollar view. Now, then how do you express it

366
00:18:34,800 --> 00:18:38,240
Speaker 1: in Asia? I think Korea is one option. Um. I

367
00:18:38,280 --> 00:18:41,879
Speaker 1: guess the round is another high beta option. Brazil is

368
00:18:41,920 --> 00:18:43,760
Speaker 1: when you could like so as if you had there

369
00:18:44,680 --> 00:18:48,359
Speaker 1: for sure. Mohammed from Cairo and Cambridge emails in and

370
00:18:48,400 --> 00:18:50,720
Speaker 1: he says, would you tell us Dara about Durham ConA?

371
00:18:51,040 --> 00:18:54,240
Speaker 1: I mean, I mean if we get a Creatian Morocco final, Yes,

372
00:18:54,280 --> 00:18:56,800
Speaker 1: I mean they've got all these obscure currencies. I mean

373
00:18:57,040 --> 00:19:01,119
Speaker 1: going there? You are you like long the Durham? Do

374
00:19:01,119 --> 00:19:03,159
Speaker 1: you know what I would love to give you? I

375
00:19:03,160 --> 00:19:05,200
Speaker 1: would love to give you the big figure in that cross,

376
00:19:05,240 --> 00:19:07,359
Speaker 1: but I have no idea. But as I was mentioned

377
00:19:07,560 --> 00:19:09,520
Speaker 1: in the break, I am trying to dust off my

378
00:19:09,560 --> 00:19:11,760
Speaker 1: family treat to see if I've got any Moroccan heritage

379
00:19:11,760 --> 00:19:14,280
Speaker 1: in there so I can join in the celebrations when

380
00:19:14,320 --> 00:19:16,840
Speaker 1: they beat Croatian the final three nil. It's been fantastic

381
00:19:16,840 --> 00:19:19,040
Speaker 1: to see you think of Croatian Morocco final. Is that

382
00:19:19,040 --> 00:19:21,960
Speaker 1: what you're looking for? Now? We've always been counter consensus,

383
00:19:22,840 --> 00:19:25,159
Speaker 1: so why not soccer? Guys? Can I ask you a question?

384
00:19:25,600 --> 00:19:30,359
Speaker 1: They played before the Sunday game, like the third Wednesday?

385
00:19:30,800 --> 00:19:33,119
Speaker 1: But yeah, yeah, yeah, that's never a great game. To

386
00:19:34,920 --> 00:19:37,560
Speaker 1: everybody's like, don't hurt me, right, I don't know why

387
00:19:37,560 --> 00:19:40,080
Speaker 1: they played that game. I really don't. Yeah, it's a

388
00:19:40,080 --> 00:19:43,120
Speaker 1: tricky one. I think it's finding this finding the bronze

389
00:19:43,160 --> 00:19:45,680
Speaker 1: medalist isn't really wanted. How easy was it to get

390
00:19:45,680 --> 00:19:47,680
Speaker 1: tickets for this World Cup? I'd love some insight into

391
00:19:47,760 --> 00:19:49,400
Speaker 1: that because every time I watched the game, they say

392
00:19:49,400 --> 00:19:53,399
Speaker 1: it's another sell out, and I'm like totally with you

393
00:19:53,480 --> 00:19:55,679
Speaker 1: and your gas like me because I could see literally

394
00:19:55,680 --> 00:19:58,280
Speaker 1: from England was like thousands of empty s England. I

395
00:19:58,320 --> 00:20:00,080
Speaker 1: thought it was busy, but when they keep saying to

396
00:20:00,119 --> 00:20:02,320
Speaker 1: sell out when there's thousands of empty seats, well, look

397
00:20:02,320 --> 00:20:03,880
Speaker 1: in English, you might think they're all down the pub,

398
00:20:04,160 --> 00:20:07,280
Speaker 1: but you know that that could be a reason. I

399
00:20:07,320 --> 00:20:08,760
Speaker 1: don't know. It's just when you can sell a ticket,

400
00:20:08,760 --> 00:20:10,479
Speaker 1: doesnt mean you have to turn up. Steve Major made

401
00:20:10,520 --> 00:20:13,840
Speaker 1: an appearance ship. If I have spoken to Steve Major,

402
00:20:13,840 --> 00:20:14,960
Speaker 1: I don't know if he's been out like any of

403
00:20:14,960 --> 00:20:16,879
Speaker 1: the games. I think he's he's watching from Hong Kong's

404
00:20:16,880 --> 00:20:19,560
Speaker 1: probably looking forward to Primi League football stats in a

405
00:20:19,600 --> 00:20:21,280
Speaker 1: new year again, Tom, and we can sort of move

406
00:20:21,280 --> 00:20:23,480
Speaker 1: on with life and forget about you keep bringing up

407
00:20:23,520 --> 00:20:25,119
Speaker 1: this seing them noll stn't you you just went at

408
00:20:25,119 --> 00:20:27,680
Speaker 1: a guy. No, I'm fascinated by it as a foreigner.

409
00:20:27,800 --> 00:20:30,399
Speaker 1: I mean, I'm a foreigner to soccer. Okay, let's get

410
00:20:30,480 --> 00:20:31,800
Speaker 1: let's get to the foreigner point of view. Do you

411
00:20:31,800 --> 00:20:34,440
Speaker 1: think we've set the stage for a great World Cup

412
00:20:34,440 --> 00:20:37,520
Speaker 1: in four years time in North America? It is US

413
00:20:37,600 --> 00:20:41,400
Speaker 1: and canadac superior to where we were ninety days ago.

414
00:20:41,760 --> 00:20:45,000
Speaker 1: Is it a big deal? I think yes, it will

415
00:20:45,040 --> 00:20:48,359
Speaker 1: be a big deal to a new America, young and

416
00:20:48,400 --> 00:20:52,160
Speaker 1: there's an older right now I'm focused on is Carlos

417
00:20:52,200 --> 00:20:54,360
Speaker 1: were don gonna end up with the Red Sox. That's

418
00:20:54,400 --> 00:20:57,480
Speaker 1: all you thinking about that. He's like the Bobby. He

419
00:20:57,560 --> 00:21:01,200
Speaker 1: throws only fastballs high in the strike zone. But that's

420
00:21:01,200 --> 00:21:04,919
Speaker 1: a diminishing America, and it's an older America and the

421
00:21:04,920 --> 00:21:08,119
Speaker 1: new America I think will really embrace it. Does Fox

422
00:21:08,640 --> 00:21:10,639
Speaker 1: tell him to tell me? Tellamando is going to do it?

423
00:21:11,080 --> 00:21:13,480
Speaker 1: I'm sure they will. I watch. But I was here

424
00:21:13,480 --> 00:21:17,680
Speaker 1: in for for the original Soccer World Cup and that's

425
00:21:17,680 --> 00:21:19,399
Speaker 1: too early for the US. But Ireland be literally so

426
00:21:19,480 --> 00:21:23,320
Speaker 1: one more. You know, I'm still living off that lost

427
00:21:23,320 --> 00:21:27,480
Speaker 1: to Ireland. New York in that atmosphere, was in that final.

428
00:21:27,960 --> 00:21:30,800
Speaker 1: I can remember that fine penalty shoot out. Oh yes

429
00:21:30,920 --> 00:21:33,920
Speaker 1: it was, isn't it? Yeah about a batio over the bar.

430
00:21:34,160 --> 00:21:36,840
Speaker 1: I think Frank Cabaisy missed the penalty. I think miss

431
00:21:36,840 --> 00:21:43,080
Speaker 1: Sarah missed the penalty. Remember remembers nothing about markets. Oh

432
00:21:43,359 --> 00:21:45,400
Speaker 1: is Dara one of your friends? Then? Yeah, he paid

433
00:21:45,400 --> 00:21:47,480
Speaker 1: me before he come on to mind? You got me

434
00:21:47,480 --> 00:21:52,119
Speaker 1: trying knucky stuff down the Seriously, Maria TODAYO is on

435
00:21:52,359 --> 00:21:56,320
Speaker 1: leave today, and we thank her for her comments the

436
00:21:56,359 --> 00:21:59,440
Speaker 1: other day. That was really go she gave. I think

437
00:21:59,480 --> 00:22:02,800
Speaker 1: Maria very courageously gave to a lot of the American

438
00:22:02,840 --> 00:22:07,560
Speaker 1: audience frankly global. How people really care about it? We,

439
00:22:08,640 --> 00:22:11,600
Speaker 1: I will say, with great certitude, we just don't get

440
00:22:11,600 --> 00:22:14,200
Speaker 1: that that national identity has wrapped up in their football team.

441
00:22:14,359 --> 00:22:16,800
Speaker 1: It was a ticket for countries like Brazil. The countries

442
00:22:16,840 --> 00:22:19,240
Speaker 1: like Brazil on the international stage is something that's super

443
00:22:19,240 --> 00:22:21,880
Speaker 1: proud of. So for that to go the wrong way,

444
00:22:22,600 --> 00:22:25,520
Speaker 1: I don't know if Darre's coming back. Maybe you know,

445
00:22:25,560 --> 00:22:27,719
Speaker 1: if I'm around the table, maybe that won't happened. As

446
00:22:27,720 --> 00:22:30,800
Speaker 1: your sports correspondent, I'd appreciate that. Darren fantastic to catch

447
00:22:30,800 --> 00:22:45,600
Speaker 1: everybody as HSBC right now, in the story that matters

448
00:22:45,680 --> 00:22:48,800
Speaker 1: to you, the big shock here oil coming in in

449
00:22:48,840 --> 00:22:51,560
Speaker 1: a breath of fresh air. With the concern of refined products.

450
00:22:51,560 --> 00:22:55,000
Speaker 1: Stephen Short briefs us his research note with a short

451
00:22:55,000 --> 00:22:59,400
Speaker 1: group and the Short report is absolutely definitive on dynamics

452
00:22:59,400 --> 00:23:03,760
Speaker 1: on vel in pipelines. Stephen Short, what is our integrity

453
00:23:03,800 --> 00:23:07,320
Speaker 1: now of our system if we get a cold like

454
00:23:07,440 --> 00:23:11,840
Speaker 1: Aberdeen Scotland is getting. Yeah, absolutely in a lot of

455
00:23:11,880 --> 00:23:14,440
Speaker 1: dire straits here it has to be called as far

456
00:23:14,480 --> 00:23:17,359
Speaker 1: as the distolate market tom here in the mid Atlantic

457
00:23:17,400 --> 00:23:19,760
Speaker 1: and the New England market areas at the northeast United

458
00:23:19,800 --> 00:23:24,560
Speaker 1: States consumes seventy percent for space heating home heating oil. Uh,

459
00:23:24,600 --> 00:23:27,040
Speaker 1: and there's still a dearth of product. We we've had

460
00:23:27,040 --> 00:23:29,960
Speaker 1: a significant sell off over the past week a week

461
00:23:30,000 --> 00:23:33,720
Speaker 1: and a half in this market. And quite frankly, my clients,

462
00:23:33,760 --> 00:23:35,960
Speaker 1: the heating the people on the boots on the ground,

463
00:23:36,000 --> 00:23:38,800
Speaker 1: people who have to consume, they buy and they sell

464
00:23:38,880 --> 00:23:42,399
Speaker 1: and they distribute heating oil. They're perplexed by the move lower.

465
00:23:42,520 --> 00:23:45,679
Speaker 1: They cannot find product, very difficult for them to find product,

466
00:23:45,920 --> 00:23:48,560
Speaker 1: and yet prices are still moving lower. So it is

467
00:23:48,600 --> 00:23:51,720
Speaker 1: a conundrum for for some of my home heating oil

468
00:23:51,760 --> 00:23:54,119
Speaker 1: people in the Northeast. You know, I look at how

469
00:23:54,160 --> 00:23:56,359
Speaker 1: they blast with a great shirt off this weekend, as

470
00:23:56,400 --> 00:23:58,959
Speaker 1: he writes up as Bloomberg opinion piece on the spike

471
00:23:59,080 --> 00:24:03,960
Speaker 1: the surge in English utility costs, Do we get the

472
00:24:04,000 --> 00:24:07,120
Speaker 1: same surge if we get the same cold or are

473
00:24:07,160 --> 00:24:10,000
Speaker 1: we are we managed in a way where distill its

474
00:24:10,160 --> 00:24:13,679
Speaker 1: core oil, gasoline, diesel the rest of it, where we

475
00:24:13,800 --> 00:24:17,200
Speaker 1: don't see a spike like they see in Europe. We

476
00:24:17,240 --> 00:24:19,320
Speaker 1: won't see quite the spike that we've seen, but we are,

477
00:24:19,440 --> 00:24:22,240
Speaker 1: we have and we will continue to see a spike

478
00:24:22,400 --> 00:24:25,960
Speaker 1: in demand, not only for home heating oil, but of

479
00:24:26,000 --> 00:24:29,800
Speaker 1: course our electricity costs are natural gas costs are sky

480
00:24:29,960 --> 00:24:33,679
Speaker 1: high relative to recent norms. Tom probably the only market

481
00:24:33,680 --> 00:24:37,439
Speaker 1: if you heat with propane, That is the only market

482
00:24:37,600 --> 00:24:40,280
Speaker 1: here in the lower forty eight where there is actually

483
00:24:40,440 --> 00:24:44,960
Speaker 1: surplus of propane. We are swimming in propane, whereas in

484
00:24:44,960 --> 00:24:48,240
Speaker 1: our other heating bt s, be it distill fuels, are

485
00:24:48,320 --> 00:24:51,960
Speaker 1: natural gas, there is there's actually no product. And that's

486
00:24:51,960 --> 00:24:53,960
Speaker 1: a piece of thing we got to the deck. I mean,

487
00:24:55,280 --> 00:24:59,680
Speaker 1: we're using that six days and we prose like a

488
00:24:59,760 --> 00:25:03,560
Speaker 1: hot You've got the kids eating outside profane. We've got

489
00:25:03,600 --> 00:25:08,760
Speaker 1: three pieces in there. It's like, you're absolutely ridiculous, Stephen,

490
00:25:08,800 --> 00:25:10,680
Speaker 1: Can you talk to me about the demand supply bad

491
00:25:10,720 --> 00:25:12,840
Speaker 1: drop down into next year. We've drained a big chunk

492
00:25:12,880 --> 00:25:16,760
Speaker 1: of the spr You have managed to refill natural gas,

493
00:25:16,760 --> 00:25:19,440
Speaker 1: but only doing so through nord Stream, and they got

494
00:25:19,480 --> 00:25:21,280
Speaker 1: through most of this year at the back end of

495
00:25:21,280 --> 00:25:24,120
Speaker 1: this year because the cold snap didn't kick in until now.

496
00:25:24,440 --> 00:25:26,880
Speaker 1: Steve and I want to understand the dynamics into next year.

497
00:25:26,920 --> 00:25:29,119
Speaker 1: You heard that warning from Jamie Diamond at JP Morgan.

498
00:25:29,160 --> 00:25:31,919
Speaker 1: Can you run us through that well right now? I

499
00:25:32,000 --> 00:25:34,240
Speaker 1: of course I'm going to agree with Jamie that the

500
00:25:34,240 --> 00:25:38,280
Speaker 1: long term structural in bounce between supplying demand globally is

501
00:25:38,320 --> 00:25:40,879
Speaker 1: not going away. And yes, we have for the moment

502
00:25:40,920 --> 00:25:43,080
Speaker 1: dodged a bullet with regard to the start of winter

503
00:25:43,200 --> 00:25:46,000
Speaker 1: in the Ukraine War, but we're not addressing the long

504
00:25:46,080 --> 00:25:50,600
Speaker 1: term issues of bringing more infrastructure to suit growing demand.

505
00:25:51,000 --> 00:25:53,880
Speaker 1: The narrative has shifted to a point now where it's

506
00:25:53,920 --> 00:25:57,920
Speaker 1: moved away from supply, which has been the real bullet driver,

507
00:25:58,280 --> 00:26:00,480
Speaker 1: and now it's a demand picture. I think all the

508
00:26:00,480 --> 00:26:04,120
Speaker 1: Wall Street banks now are are singing the same course

509
00:26:04,160 --> 00:26:07,120
Speaker 1: about economic contraction in the first half. If we look

510
00:26:07,160 --> 00:26:11,600
Speaker 1: at the Federal Reserve banks favorite procession indicator, the three

511
00:26:11,600 --> 00:26:15,240
Speaker 1: month ten year yield UH, it has rarely been as

512
00:26:15,320 --> 00:26:18,560
Speaker 1: barished as it is currently trading on the inversion right now.

513
00:26:19,040 --> 00:26:22,320
Speaker 1: So and then of course we look at the employment numbers. Now,

514
00:26:22,359 --> 00:26:26,720
Speaker 1: the latest job numbers seem to be relatively constructive, but

515
00:26:26,800 --> 00:26:29,880
Speaker 1: once again, people are not working, especially men in their

516
00:26:29,920 --> 00:26:33,360
Speaker 1: twenties to forties are not working, and we're looking at

517
00:26:33,400 --> 00:26:37,560
Speaker 1: a huge chasm between the household numbers and the establishment numbers.

518
00:26:37,880 --> 00:26:40,920
Speaker 1: One one survey of jobs says yes, jobs are growing,

519
00:26:41,000 --> 00:26:43,640
Speaker 1: the other one says no, jobs are contracting, and then

520
00:26:43,720 --> 00:26:47,320
Speaker 1: one that says jobs are contracting. Really uh melds with

521
00:26:47,400 --> 00:26:50,800
Speaker 1: what we're seeing in the tech sector. Tech, the white collar,

522
00:26:50,880 --> 00:26:54,560
Speaker 1: the the halves are now starting to see massive layoffs,

523
00:26:54,600 --> 00:26:57,760
Speaker 1: layoffs they haven't seen since the Great Recession. So there's

524
00:26:57,800 --> 00:26:59,840
Speaker 1: a lot of mind fields to kind of navigate. In

525
00:26:59,880 --> 00:27:03,520
Speaker 1: the first half. It's certainly pointing towards an economic contraction,

526
00:27:03,680 --> 00:27:06,760
Speaker 1: and therefore that is really I think the overhang on

527
00:27:06,800 --> 00:27:09,879
Speaker 1: the market right now. We're worried less about supply and

528
00:27:09,960 --> 00:27:13,199
Speaker 1: more about dwindling demand for the new year, is that

529
00:27:13,240 --> 00:27:16,280
Speaker 1: worry about amount of misplace given Shana's reopening, can trying

530
00:27:16,280 --> 00:27:19,040
Speaker 1: to fill the gap, even if we do rollover next year,

531
00:27:20,000 --> 00:27:22,080
Speaker 1: trying to can fill absolutely fill the gap. And there

532
00:27:22,160 --> 00:27:24,440
Speaker 1: is that demand. But but they were giving a nice

533
00:27:24,480 --> 00:27:27,680
Speaker 1: little gift by the West. They were giving a fantastic

534
00:27:27,760 --> 00:27:32,200
Speaker 1: negotiating price, saying, okay, Russia, you can't sell your oil

535
00:27:32,240 --> 00:27:34,280
Speaker 1: for more than sixty dollars a bet. Now, of course

536
00:27:34,320 --> 00:27:37,040
Speaker 1: the Indians and the Chinese will continue to buy Russian oil.

537
00:27:37,040 --> 00:27:40,400
Speaker 1: They will they will buy above sixty dollar. I mean

538
00:27:40,400 --> 00:27:43,160
Speaker 1: they will negotiate, but there are a far better negotiating deal.

539
00:27:43,240 --> 00:27:47,320
Speaker 1: So while this demand will continue to grow as trying

540
00:27:47,359 --> 00:27:51,840
Speaker 1: to continues to lower their their mitigation protocols, were still

541
00:27:51,840 --> 00:27:55,679
Speaker 1: going to be buying oil at a well below market value. Steven.

542
00:27:55,720 --> 00:28:00,240
Speaker 1: One final question really important. How's that electric vehicle thing? Owen?

543
00:28:00,359 --> 00:28:03,200
Speaker 1: I mean you follow it tangentially over from your expertise

544
00:28:03,240 --> 00:28:06,600
Speaker 1: to hydrocarbons, but from where you sit, how's Eve doing?

545
00:28:08,440 --> 00:28:11,000
Speaker 1: Eight s are going to be the biggest drain on

546
00:28:11,040 --> 00:28:14,120
Speaker 1: the environment that will make a hundred and twenty years

547
00:28:14,119 --> 00:28:17,240
Speaker 1: of mining for coal and oil look like a like

548
00:28:17,320 --> 00:28:19,720
Speaker 1: they were members of the cra club here. The amount

549
00:28:19,760 --> 00:28:23,000
Speaker 1: of rarewas we have to dig up now. Personally, guys,

550
00:28:23,240 --> 00:28:27,080
Speaker 1: I drive an electric hybrid. It is a seventeen gallon tank.

551
00:28:27,720 --> 00:28:31,280
Speaker 1: I just drove. I just had to refill my car

552
00:28:31,840 --> 00:28:34,399
Speaker 1: after not filling it for two months. I drove nearly

553
00:28:34,480 --> 00:28:38,520
Speaker 1: fourteen hundred miles on the combined electric seventeen gallant tank.

554
00:28:38,840 --> 00:28:41,120
Speaker 1: That's the way of the future, and I'm getting out here.

555
00:28:41,160 --> 00:28:44,360
Speaker 1: It's like compromise. We have to work together. It's not

556
00:28:44,400 --> 00:28:49,000
Speaker 1: as we are the people that Stephen Short, thank you.

557
00:28:49,720 --> 00:28:53,480
Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join

558
00:28:53,600 --> 00:28:57,000
Speaker 1: us live weekdays from seven to ten am Eastern. I'm

559
00:28:57,040 --> 00:29:01,280
Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six

560
00:29:01,400 --> 00:29:06,240
Speaker 1: to nine am for insight from the best in economics, finance, investment,

561
00:29:06,400 --> 00:29:11,400
Speaker 1: and international relations. And subscribe to the Surveillance podcast on

562
00:29:11,480 --> 00:29:15,320
Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on

563
00:29:15,440 --> 00:29:19,520
Speaker 1: the terminal. I'm Tom Keene and this is Bloomberg