Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple, podcast, SoundCloud, Bloomberg dot com,
Speaker 1: and of course, on the Bloomberg terminal. Well, let's outlook
Speaker 1: right now. It's stephile with our chief economis Lindsay Pegs.
Speaker 1: That joins us right now, Lizzie, I don't want to
Speaker 1: get into the silliness of pivot this or pivot that.
Speaker 1: Where are we right now? What is your real g
Speaker 1: d P call for this ending que four? Well, I
Speaker 1: do think there's enough momentum or ongoing resilience in the
Speaker 1: consumer that we will see a second quarter of positive activity,
Speaker 1: albeit markedly below than your three percent pace we saw
Speaker 1: on the third quarter. But the bigger question is can
Speaker 1: we maintain that going into and I don't see that
Speaker 1: resilience being able to be maintained as we continue to
Speaker 1: see some of these variables increasingly way on the consumer,
Speaker 1: i e. Elevated prices, negative income growth, negative manufacturing activity,
Speaker 1: a housing montment that's under extreme pressure, so I think
Speaker 1: that we can argue you can check the recessionary box
Speaker 1: for nearly every sector of the economy even at this
Speaker 1: point except for the labor market. But even there we're
Speaker 1: starting to see cracks, were starting to see signs of
Speaker 1: emerging weakness. So while we do maintain that positive trajectory
Speaker 1: through December, I think is opening the door for recession.
Speaker 1: That's do algebra Monday, lindsay it's wyld coals. I don't
Speaker 1: know what it is C plus I plus G plus
Speaker 1: and X is out there somewhere. Can you split your
Speaker 1: analysis between domestic final sales in real g d P.
Speaker 1: Can you pair off trade dynamics? Are they part of
Speaker 1: getting to a recession? Oh? Absolutely? And I think this
Speaker 1: this when we passed through the trade and inventory data,
Speaker 1: that's really what complicates the earlier weakness that we saw
Speaker 1: at the start of the year and why it's likely
Speaker 1: that we don't see a technical recession in hindsight called
Speaker 1: for the first six months, because when you strip out
Speaker 1: that volatility from trade and inventories, we see that we
Speaker 1: actually had positive momentum from December into the first quarter
Speaker 1: of the year. So this is very much complicating the
Speaker 1: picture and will continue to complicate the picture going forward.
Speaker 1: If we look at third quarter g d P. Now,
Speaker 1: one of the largest contributors to that top line increase
Speaker 1: was trade, contributing nearly three percent, but a lot of
Speaker 1: that was reflective of the weakness on the import side,
Speaker 1: and that reflects a declining demand or at a level
Speaker 1: of declining demand on the consumer part, again highlighting the
Speaker 1: fact that consumers are on increasingly fragile footing. As we
Speaker 1: turned the calendar page into the next year, lindsay, there
Speaker 1: will be some people tuned into this program right now
Speaker 1: listening to another recession call for three and wondering why
Speaker 1: on earth the Federal Service hiking interest rates by fifty
Speaker 1: basis points on Wednesday and probably signaling they're going to
Speaker 1: do a whole lot more after that. Lindsay, how do
Speaker 1: you reconcile those two things? Well, remember, the Fed is
Speaker 1: trying to slow the economy. So the fact that we're
Speaker 1: seeing increasing calls for recession in three means that the
Speaker 1: feds earlier policy initiatives are already having the intended effect
Speaker 1: of tapping down investment, tapping down consumption, and resulting in
Speaker 1: a significant slowdown in the economy. Now the reason the
Speaker 1: FED is so focused on continuing to raise rates, not
Speaker 1: necessarily at the supersized sevent basis point increase that we
Speaker 1: saw earlier, but fifty basis points, and as you said,
Speaker 1: more work to come down the road is because inflation
Speaker 1: is still elevated and at this point, with the labor
Speaker 1: markets still arguably on modest footing, the FED is hyper
Speaker 1: focused on bringing down inflation reinstating price stability, which the
Speaker 1: Chairman has said time and time again is the bedrock
Speaker 1: of the economy. So how much more damage do you
Speaker 1: think another one hundred basis points of heightening does well?
Speaker 1: I think it ensures that we do see recessionary conditions,
Speaker 1: But depending on the behavior of inflation, depending on what
Speaker 1: we see in terms of international factors, that will determine
Speaker 1: the depth and duration of the downturn. But again from
Speaker 1: the FEDS perspective, it's not about whether or not we
Speaker 1: see negative activity. It's about whether or not we can
Speaker 1: get inflation on a meaningful downward trajectory back towards the
Speaker 1: committee's desire to processual target range. What's your probability getting
Speaker 1: back to two percent until England wins in football again, Lindsay,
Speaker 1: I mean come on, where are we getting back to
Speaker 1: or is well, if you look at the FEDS trajectory,
Speaker 1: there's still very optimistic that we're going to see a
Speaker 1: two handle by twenty by the end of maybe early
Speaker 1: But I think the reality of the data suggests that
Speaker 1: Committee members have been calling for this meaningful improvement in
Speaker 1: inflation for the better part of the past two years,
Speaker 1: and we see we have not seen that come to fruition.
Speaker 1: So the FED the market continues to under appreciate the
Speaker 1: complicated nature of the inflation equation at this point, and
Speaker 1: that's why, along with the fifty basis points increased this week,
Speaker 1: we do expect the FED to meaningfully revise higher their
Speaker 1: expectations and policy and inflation going forward. Does this PGS
Speaker 1: at one oh one? It's service inflation, isn't I mean,
Speaker 1: we're gonna get a reversion to David malpass A World
Speaker 1: Bank was great on this years ago. We're gonna get
Speaker 1: a legit goods disinflation. Dare I say true deflation? But
Speaker 1: services isn't going to get there? What will you? What
Speaker 1: do you see as the sustained services inflation above three?
Speaker 1: I think that's absolutely reasonable, But you're right, we are
Speaker 1: going to see this bifurcation between goods and services, and
Speaker 1: already we're seeing it in the data outside of inflation,
Speaker 1: manufacturing turning back into contractionary territory, while we look at
Speaker 1: the I s M Services Index and that is still
Speaker 1: arguably on solid footing. And so this by vurcation agun
Speaker 1: does highlight the difficult nature that the FED is going
Speaker 1: to face and trying to tackle broader inflation pressures, particularly
Speaker 1: as we see this wage price spiral continue to accelerate. Well, Lindsay,
Speaker 1: young John are way too young to understand this. We
Speaker 1: survived this before. If we only come down with services
Speaker 1: elevated to five or four percent or three point eight percent,
Speaker 1: life goes on, right, people adept right, absolutely, and we
Speaker 1: will come out of this. But I think the trajectory
Speaker 1: of how we come out of this depends on the
Speaker 1: Fed's resolve to reinstate price stability. If they start to
Speaker 1: get cold feet, if they start to pull back prematurely,
Speaker 1: then we could see inflation become entrenched in the economy,
Speaker 1: meaning that we don't see that improvement back to the
Speaker 1: FEDS two percent target. But if they stay the course,
Speaker 1: it will be more painful in the near term, but
Speaker 1: we could see the economy emerged faster and with more
Speaker 1: gusto as we begin to get back to a potential
Speaker 1: level after that two percent target is re stated. Lindsay,
Speaker 1: Thank you, Lindsay p excident of Stayfall. Lauren Canvas City
Speaker 1: joins US now at the US Ecrety Strategy at RBC
Speaker 1: Capital Markets. Laurie, I just want to start with Mike's
Speaker 1: worts and then we'll get to yours. Mike Wilson says
Speaker 1: the final chapter to this bare market, it's all about
Speaker 1: the path of earning's estimates, which we think are far
Speaker 1: too high. Laurie, you want a similar page. Do you
Speaker 1: agree with that? So I'm on a similar page with Mike,
Speaker 1: but I don't exactly agree with him. I think it's
Speaker 1: a little bit more complicated. So we're at one for
Speaker 1: next year. The consensus has been around one, and I
Speaker 1: do think that the need to pull those forecasts down
Speaker 1: is going to create some headwinds and additional volatility, perhaps
Speaker 1: a retesting of the low. But does it have to
Speaker 1: make a new low. I'm not so sure. I think
Speaker 1: the main issue here is that the by side wants
Speaker 1: certainty around multiple so that they can come in and
Speaker 1: buy and we can have a sustainable rally. All the
Speaker 1: by ciders know, and they've known since June the next
Speaker 1: year's numbers were too high. If you look historically, most
Speaker 1: of the cuts and down earnings years are in by April.
Speaker 1: And if you look on a single stock basis, when
Speaker 1: the rate of revisions to the upside is falling, you
Speaker 1: watch for it to turn positive again. You watch for
Speaker 1: that shift from negative revision territory back to positive revision territory.
Speaker 1: And stocks typically bottom the smp FI price three to
Speaker 1: six months before earnings estimate revisions for single stocks stopped
Speaker 1: going down. What that means is that if we can
Speaker 1: kind of get all these cuts out of the way
Speaker 1: by March, it's still reasonable based on the historical playbook,
Speaker 1: for October to be below. Now that doesn't mean we're
Speaker 1: not going to turn around, but I don't necessarily think
Speaker 1: that we have to break to a new low because
Speaker 1: of this earnings issue and making a time cooler. Now
Speaker 1: it's really really difficult, Lorrie, But what do you suggest
Speaker 1: people do between now and March? So I think you
Speaker 1: have to back up and say what have people already
Speaker 1: done and where are they? And most defensive sectors are
Speaker 1: near peak multiples relative to the SMP five hundred, and
Speaker 1: people have been loading into staples all year, wrote it
Speaker 1: into healthcare since the summer. I don't think people have
Speaker 1: enough recovery trades for when we finally do put that
Speaker 1: final bottom in and start to recover. So we tell
Speaker 1: people look at things like financials, look at things like tech,
Speaker 1: look at things like small caps. Those are areas that
Speaker 1: typically outperform when you're coming out of a recession, after
Speaker 1: you've made that final bottom, and small caps, frankly, John
Speaker 1: are already starting to outperform. They put in their relative
Speaker 1: blow back in Bay. So we think that people really
Speaker 1: don't need too much more defense. And you know, I
Speaker 1: wouldn't necessarily dump all your defensive shares right now, but
Speaker 1: I would start thinking ahead to that recovery trade, not
Speaker 1: just this final term, Lauren. I think of the great Dave,
Speaker 1: David Triple and pioneer years ago. It would explain to
Speaker 1: me the small cap and mid cap go once every
Speaker 1: nine years, once every eight years, whatever the pop is.
Speaker 1: And I read in your research you're really looking for
Speaker 1: that pop to be this year. If we have a
Speaker 1: great zombie roll up, which frankly, we're beginning to percolate
Speaker 1: and see because money actually costs something, how does small
Speaker 1: caps react to the fact we now have a risk
Speaker 1: free rate, we have zombie companies that have to do something.
Speaker 1: How does that play into your call? So I think
Speaker 1: you want to be in line with the higher quality
Speaker 1: small caps, the bigger names, the more liquid names, um,
Speaker 1: you know, kind of where the typical small and MidCap
Speaker 1: portfolio manager likes to invest, not kind of the bottom
Speaker 1: three quintiles of market cap, where you get tend to
Speaker 1: get the dicier balance sheets, you tend to get the
Speaker 1: lower quality names. We actually think there's plenty evaluation appeal
Speaker 1: in that upper echelot of small cap right now, which
Speaker 1: is one of the things that makes it so interesting
Speaker 1: to me because we haven't had that for a really
Speaker 1: long time. Or small caps correlated to the weaker dollar. Finally,
Speaker 1: end of strong dollar international play? Do you cross correlate
Speaker 1: those two categories. I think that the dollar is complicated
Speaker 1: for small caps. They have been benefiting from an earnings
Speaker 1: perspective by dollar strength. If you look at if you
Speaker 1: try to sort of match up the relative cycle with
Speaker 1: the dollar, of the time, you're not you're gonna just
Speaker 1: want to pull your hair out. It's not be careful with.
Speaker 1: But but recently they've been benefiting from an earnings perspective
Speaker 1: because they don't have those pressures. I think that what
Speaker 1: I see right now, And you know, I just got
Speaker 1: off a week of being in Europe talking to investors there.
Speaker 1: They are very European based. Equity investors are very perplexed
Speaker 1: by the expensive valuations that we have sitting in SMP
Speaker 1: five companies right now. You don't have that same valuation
Speaker 1: pressure down in small cap right now. So I think
Speaker 1: when you're you're starting to cross borders, I think you've
Speaker 1: still got the better valuation story here and that will
Speaker 1: be appealing regardless of some of these currents. But are
Speaker 1: they gonna? Are they gonna roll up? I mean, I
Speaker 1: don't mean the quality small caps and there's like three thousand,
Speaker 1: let's say is a working number. What are the other
Speaker 1: under gonna do? Is there gonna be one grand roll up?
Speaker 1: Because money finally costs something? I mean, what do you
Speaker 1: mean by roll of exactly? Time? Mergers, transactions, combinations. Microsoft
Speaker 1: taking out tency weensy bit of the London Stock Exchange
Speaker 1: today just to get on board that kind of stuff.
Speaker 1: I think I think that you will get that in
Speaker 1: certain sectors where you have have more valuation appeal. I
Speaker 1: think industrials, even though it's not cheap, it's always an
Speaker 1: area where we see those roll up stories, and the
Speaker 1: reshoring thesis could further some of that along. But I
Speaker 1: think ultimately those roll ups in that mn A cycle,
Speaker 1: that's really more about what waits us on the other
Speaker 1: side of this recovery and a sluggish GDP environment, growth
Speaker 1: is scarce, and companies, I think will feel more compelled
Speaker 1: to go out and buy growth. And you can find
Speaker 1: that in some of those higher qualities fall caps, not
Speaker 1: necessarily the smaller ones, but again it might bring you
Speaker 1: back to some of those higher quality, you know, more
Speaker 1: liquid type names and lor. You've touched on something really
Speaker 1: important here, and that's about ladyship in the recovery in
Speaker 1: the second half of next year. Is it too added
Speaker 1: to draw conclusions about where that leadership comes from. That's
Speaker 1: a discussion were ultimately happen right now. Why is the
Speaker 1: now the right time to have that conversation. I think
Speaker 1: it's the right time because you know, you know as
Speaker 1: well as I do, John, When these bottoms happen, and
Speaker 1: people are convinced of these bottoms, they just sort of
Speaker 1: take off and you don't have time to get in.
Speaker 1: You have to do your homework early while things are
Speaker 1: sort of quiet and turning around. But I saw you
Speaker 1: last week. We did have a lot of discussions about
Speaker 1: what is the new leadership. Typically in a sluggish economic
Speaker 1: growth backdrop, which I think is the price we pay
Speaker 1: for a short, shallow recession growth, stocks out per form.
Speaker 1: But is it the old growth or is it the
Speaker 1: new growth? And that's why I think the sector, like industrials,
Speaker 1: is starting to get a bit over valued. Now we're
Speaker 1: just neutral there. We don't like the valuations, but we
Speaker 1: have been talking to people a lot about how that
Speaker 1: might be the best long term growth story in town.
Speaker 1: And that might be one of the reasons why you're
Speaker 1: seeing these valuations lift. People basically kind of looking at
Speaker 1: the old economy and saying what's old might potentially be
Speaker 1: new again and that might be where you get for
Speaker 1: the better growth profile going forward. Laurie, this was brilliant.
Speaker 1: That would be a stranger come back saying, Laurie canvass
Speaker 1: in to the BBC capital market it is time for
Speaker 1: global Wall Street to lean forward for one of the
Speaker 1: great great calls of the last number of years has
Speaker 1: when the persistency and courage of HSBC to say strong
Speaker 1: and brilliant dollar. They amend that sort of So we
Speaker 1: have a sort of kind of like discussion with Darren Mayor,
Speaker 1: head of Research America's and ahead of the U s
Speaker 1: F strategy, with a great Paul Michael as well. I
Speaker 1: there's an ambivalence to your note. You're not calling for
Speaker 1: week dollar right, Well, we're calling for a dollar correction.
Speaker 1: It kind of amounts to the same. But it's not
Speaker 1: this big trend reversal. In other words, we don't undo
Speaker 1: everything that we've we've delivered by virtue of dollar strength
Speaker 1: over the last eighteen months or so. Let's talk to
Speaker 1: people like John who you know trade off folks on
Speaker 1: the break here. John's doing f X trade series. We
Speaker 1: want to do that. But is it a tradeable come
Speaker 1: off the bloom? After it's upon there, come off the bloom.
Speaker 1: Get that day loop nailed that, okay? Is it a
Speaker 1: tradeable come off the bloom? Or is this going to
Speaker 1: be a messy sludge where nobody really makes big figures.
Speaker 1: Look our whole process was we described it, We thought
Speaker 1: to be this would be the chop before the flop.
Speaker 1: We have this really choppy period, then we'll get the flop. Yeah,
Speaker 1: but nice phraseology, but completely the wrong way around, because
Speaker 1: what we've had is the flop and we're still kind
Speaker 1: of waiting for the chop. You know. This the reverse
Speaker 1: that we've had over the lad You know, we changed
Speaker 1: our dollar view for dollar abolitionist to dollar choppiness and
Speaker 1: then weakness just a month ago, and in that month
Speaker 1: we've had like one of the biggest monthly declines in
Speaker 1: the dollar. So it's really you know, even for quote
Speaker 1: unquote a bear like us, now our new found bear
Speaker 1: like us, it's been a big old move. I wonder
Speaker 1: as the chopping is about to come though, you know,
Speaker 1: into the CPI, into f O M c UM and
Speaker 1: and into kind of the beginnings of January where everybody
Speaker 1: thinks they know what the trend is for three and
Speaker 1: then they're all suddenly forced to revisit in the first
Speaker 1: couple of weeks their risk that we're over playing the
Speaker 1: one side of the currency pair. When I think about
Speaker 1: Euro dollar, which got down to about ninety five, and
Speaker 1: then we avoided the worst case scenario coming into winter.
Speaker 1: We had that period of mild weather for the Europeans.
Speaker 1: When I think about Sterling getting down to one or
Speaker 1: three fifty, I think in to day, the end of
Speaker 1: September and coming back through one twenty. Largely it was
Speaker 1: the other side of the trade. It was the Sterling side,
Speaker 1: the Euro side, that really kicked off that move. We
Speaker 1: cleaned up the policy story in the UK. We avoided
Speaker 1: that terrible winter and the shutdowns we anticipated. Maybe they
Speaker 1: still evolved. I don't know, But do you think we're
Speaker 1: overplaying the U S side of the currency pair. I
Speaker 1: would say, look showed us that the dominant thing to
Speaker 1: get right was the dollar. I mean we could at
Speaker 1: the margin we had periods where this Sterling was was
Speaker 1: the swing factor a couple of peers where euro was.
Speaker 1: But I mean look at us this week. We have
Speaker 1: got an ECB meeting, we have got talking about it.
Speaker 1: Who knew? You know? Um? And but I think there's
Speaker 1: a recognition and the reality is you've got to get
Speaker 1: the dollar right. And in a way, before you get
Speaker 1: the dollar right, you've got to get the SMP right.
Speaker 1: Because risk appetite has been the core of everything that's
Speaker 1: happening in the FX market and to the safe Avan dollar.
Speaker 1: So I'm not trading rates next year, I'm trading sentiment.
Speaker 1: You're training row row risk on risk, all right, that
Speaker 1: all the way to that. So when you think about
Speaker 1: paying some of that choppy dollar weakness through G ten,
Speaker 1: what's the select currency pay you want to do that through?
Speaker 1: I think the high betac currencies on the way up
Speaker 1: in the dollar should be the high beta occurrency is
Speaker 1: in the way down. So your Aussie, New Zealand, your
Speaker 1: knocky stocky and less so the Canadian dollar. And we
Speaker 1: we've seen that even in this dollar sell off. You know,
Speaker 1: Canada's underperformed others. So I think you go to the
Speaker 1: I mean, honestly, i'd say the AUSSI perhaps and and
Speaker 1: the Kiwi, Norway and Sweden. I know that's what you're
Speaker 1: day trading, just as we came off came on air.
Speaker 1: But you know they're there for the braver man side,
Speaker 1: there for the braver man and that's why you're still
Speaker 1: having to do this gig as well. So I yeah,
Speaker 1: I think as the US dollars as the US dollar
Speaker 1: and New Zealand US dollar, they they'd be the two
Speaker 1: this China reopening reinforced that trait. I think it's being
Speaker 1: overplayed a little bit. Um. I mean the transition is
Speaker 1: going to be complicated towards you know, a reopened China.
Speaker 1: Perhaps markets slightly overegging the tourist angle and what that
Speaker 1: might mean in terms of flows. Um. But it is
Speaker 1: encouraging and the pro growth stances encouraging. But look, even
Speaker 1: at HSBC, we've been looking for a rebound in China
Speaker 1: six months down the road for two years. Um. So
Speaker 1: you know, as as the market, and it's difficult because
Speaker 1: every time we think, okay, we're when I get there,
Speaker 1: we don't get there. And you've got the leadership there
Speaker 1: with the Hong Kong position of the Hong Kong and
Speaker 1: Shanghai Banking Corporation. What is the pair in the Pacific
Speaker 1: rim to play Asia open? I think Korea will be one. Um.
Speaker 1: It's w against what against the dollar? I mean, I
Speaker 1: think that's you gotta go. I think I think it's
Speaker 1: the cleanest way. I mean, I think you do to
Speaker 1: your question earlier, you do have to come back to
Speaker 1: a dollar view. Now, then how do you express it
Speaker 1: in Asia? I think Korea is one option. Um. I
Speaker 1: guess the round is another high beta option. Brazil is
Speaker 1: when you could like so as if you had there
Speaker 1: for sure. Mohammed from Cairo and Cambridge emails in and
Speaker 1: he says, would you tell us Dara about Durham ConA?
Speaker 1: I mean, I mean if we get a Creatian Morocco final, Yes,
Speaker 1: I mean they've got all these obscure currencies. I mean
Speaker 1: going there? You are you like long the Durham? Do
Speaker 1: you know what I would love to give you? I
Speaker 1: would love to give you the big figure in that cross,
Speaker 1: but I have no idea. But as I was mentioned
Speaker 1: in the break, I am trying to dust off my
Speaker 1: family treat to see if I've got any Moroccan heritage
Speaker 1: in there so I can join in the celebrations when
Speaker 1: they beat Croatian the final three nil. It's been fantastic
Speaker 1: to see you think of Croatian Morocco final. Is that
Speaker 1: what you're looking for? Now? We've always been counter consensus,
Speaker 1: so why not soccer? Guys? Can I ask you a question?
Speaker 1: They played before the Sunday game, like the third Wednesday?
Speaker 1: But yeah, yeah, yeah, that's never a great game. To
Speaker 1: everybody's like, don't hurt me, right, I don't know why
Speaker 1: they played that game. I really don't. Yeah, it's a
Speaker 1: tricky one. I think it's finding this finding the bronze
Speaker 1: medalist isn't really wanted. How easy was it to get
Speaker 1: tickets for this World Cup? I'd love some insight into
Speaker 1: that because every time I watched the game, they say
Speaker 1: it's another sell out, and I'm like totally with you
Speaker 1: and your gas like me because I could see literally
Speaker 1: from England was like thousands of empty s England. I
Speaker 1: thought it was busy, but when they keep saying to
Speaker 1: sell out when there's thousands of empty seats, well, look
Speaker 1: in English, you might think they're all down the pub,
Speaker 1: but you know that that could be a reason. I
Speaker 1: don't know. It's just when you can sell a ticket,
Speaker 1: doesnt mean you have to turn up. Steve Major made
Speaker 1: an appearance ship. If I have spoken to Steve Major,
Speaker 1: I don't know if he's been out like any of
Speaker 1: the games. I think he's he's watching from Hong Kong's
Speaker 1: probably looking forward to Primi League football stats in a
Speaker 1: new year again, Tom, and we can sort of move
Speaker 1: on with life and forget about you keep bringing up
Speaker 1: this seing them noll stn't you you just went at
Speaker 1: a guy. No, I'm fascinated by it as a foreigner.
Speaker 1: I mean, I'm a foreigner to soccer. Okay, let's get
Speaker 1: let's get to the foreigner point of view. Do you
Speaker 1: think we've set the stage for a great World Cup
Speaker 1: in four years time in North America? It is US
Speaker 1: and canadac superior to where we were ninety days ago.
Speaker 1: Is it a big deal? I think yes, it will
Speaker 1: be a big deal to a new America, young and
Speaker 1: there's an older right now I'm focused on is Carlos
Speaker 1: were don gonna end up with the Red Sox. That's
Speaker 1: all you thinking about that. He's like the Bobby. He
Speaker 1: throws only fastballs high in the strike zone. But that's
Speaker 1: a diminishing America, and it's an older America and the
Speaker 1: new America I think will really embrace it. Does Fox
Speaker 1: tell him to tell me? Tellamando is going to do it?
Speaker 1: I'm sure they will. I watch. But I was here
Speaker 1: in for for the original Soccer World Cup and that's
Speaker 1: too early for the US. But Ireland be literally so
Speaker 1: one more. You know, I'm still living off that lost
Speaker 1: to Ireland. New York in that atmosphere, was in that final.
Speaker 1: I can remember that fine penalty shoot out. Oh yes
Speaker 1: it was, isn't it? Yeah about a batio over the bar.
Speaker 1: I think Frank Cabaisy missed the penalty. I think miss
Speaker 1: Sarah missed the penalty. Remember remembers nothing about markets. Oh
Speaker 1: is Dara one of your friends? Then? Yeah, he paid
Speaker 1: me before he come on to mind? You got me
Speaker 1: trying knucky stuff down the Seriously, Maria TODAYO is on
Speaker 1: leave today, and we thank her for her comments the
Speaker 1: other day. That was really go she gave. I think
Speaker 1: Maria very courageously gave to a lot of the American
Speaker 1: audience frankly global. How people really care about it? We,
Speaker 1: I will say, with great certitude, we just don't get
Speaker 1: that that national identity has wrapped up in their football team.
Speaker 1: It was a ticket for countries like Brazil. The countries
Speaker 1: like Brazil on the international stage is something that's super
Speaker 1: proud of. So for that to go the wrong way,
Speaker 1: I don't know if Darre's coming back. Maybe you know,
Speaker 1: if I'm around the table, maybe that won't happened. As
Speaker 1: your sports correspondent, I'd appreciate that. Darren fantastic to catch
Speaker 1: everybody as HSBC right now, in the story that matters
Speaker 1: to you, the big shock here oil coming in in
Speaker 1: a breath of fresh air. With the concern of refined products.
Speaker 1: Stephen Short briefs us his research note with a short
Speaker 1: group and the Short report is absolutely definitive on dynamics
Speaker 1: on vel in pipelines. Stephen Short, what is our integrity
Speaker 1: now of our system if we get a cold like
Speaker 1: Aberdeen Scotland is getting. Yeah, absolutely in a lot of
Speaker 1: dire straits here it has to be called as far
Speaker 1: as the distolate market tom here in the mid Atlantic
Speaker 1: and the New England market areas at the northeast United
Speaker 1: States consumes seventy percent for space heating home heating oil. Uh,
Speaker 1: and there's still a dearth of product. We we've had
Speaker 1: a significant sell off over the past week a week
Speaker 1: and a half in this market. And quite frankly, my clients,
Speaker 1: the heating the people on the boots on the ground,
Speaker 1: people who have to consume, they buy and they sell
Speaker 1: and they distribute heating oil. They're perplexed by the move lower.
Speaker 1: They cannot find product, very difficult for them to find product,
Speaker 1: and yet prices are still moving lower. So it is
Speaker 1: a conundrum for for some of my home heating oil
Speaker 1: people in the Northeast. You know, I look at how
Speaker 1: they blast with a great shirt off this weekend, as
Speaker 1: he writes up as Bloomberg opinion piece on the spike
Speaker 1: the surge in English utility costs, Do we get the
Speaker 1: same surge if we get the same cold or are
Speaker 1: we are we managed in a way where distill its
Speaker 1: core oil, gasoline, diesel the rest of it, where we
Speaker 1: don't see a spike like they see in Europe. We
Speaker 1: won't see quite the spike that we've seen, but we are,
Speaker 1: we have and we will continue to see a spike
Speaker 1: in demand, not only for home heating oil, but of
Speaker 1: course our electricity costs are natural gas costs are sky
Speaker 1: high relative to recent norms. Tom probably the only market
Speaker 1: if you heat with propane, That is the only market
Speaker 1: here in the lower forty eight where there is actually
Speaker 1: surplus of propane. We are swimming in propane, whereas in
Speaker 1: our other heating bt s, be it distill fuels, are
Speaker 1: natural gas, there is there's actually no product. And that's
Speaker 1: a piece of thing we got to the deck. I mean,
Speaker 1: we're using that six days and we prose like a
Speaker 1: hot You've got the kids eating outside profane. We've got
Speaker 1: three pieces in there. It's like, you're absolutely ridiculous, Stephen,
Speaker 1: Can you talk to me about the demand supply bad
Speaker 1: drop down into next year. We've drained a big chunk
Speaker 1: of the spr You have managed to refill natural gas,
Speaker 1: but only doing so through nord Stream, and they got
Speaker 1: through most of this year at the back end of
Speaker 1: this year because the cold snap didn't kick in until now.
Speaker 1: Steve and I want to understand the dynamics into next year.
Speaker 1: You heard that warning from Jamie Diamond at JP Morgan.
Speaker 1: Can you run us through that well right now? I
Speaker 1: of course I'm going to agree with Jamie that the
Speaker 1: long term structural in bounce between supplying demand globally is
Speaker 1: not going away. And yes, we have for the moment
Speaker 1: dodged a bullet with regard to the start of winter
Speaker 1: in the Ukraine War, but we're not addressing the long
Speaker 1: term issues of bringing more infrastructure to suit growing demand.
Speaker 1: The narrative has shifted to a point now where it's
Speaker 1: moved away from supply, which has been the real bullet driver,
Speaker 1: and now it's a demand picture. I think all the
Speaker 1: Wall Street banks now are are singing the same course
Speaker 1: about economic contraction in the first half. If we look
Speaker 1: at the Federal Reserve banks favorite procession indicator, the three
Speaker 1: month ten year yield UH, it has rarely been as
Speaker 1: barished as it is currently trading on the inversion right now.
Speaker 1: So and then of course we look at the employment numbers. Now,
Speaker 1: the latest job numbers seem to be relatively constructive, but
Speaker 1: once again, people are not working, especially men in their
Speaker 1: twenties to forties are not working, and we're looking at
Speaker 1: a huge chasm between the household numbers and the establishment numbers.
Speaker 1: One one survey of jobs says yes, jobs are growing,
Speaker 1: the other one says no, jobs are contracting, and then
Speaker 1: one that says jobs are contracting. Really uh melds with
Speaker 1: what we're seeing in the tech sector. Tech, the white collar,
Speaker 1: the the halves are now starting to see massive layoffs,
Speaker 1: layoffs they haven't seen since the Great Recession. So there's
Speaker 1: a lot of mind fields to kind of navigate. In
Speaker 1: the first half. It's certainly pointing towards an economic contraction,
Speaker 1: and therefore that is really I think the overhang on
Speaker 1: the market right now. We're worried less about supply and
Speaker 1: more about dwindling demand for the new year, is that
Speaker 1: worry about amount of misplace given Shana's reopening, can trying
Speaker 1: to fill the gap, even if we do rollover next year,
Speaker 1: trying to can fill absolutely fill the gap. And there
Speaker 1: is that demand. But but they were giving a nice
Speaker 1: little gift by the West. They were giving a fantastic
Speaker 1: negotiating price, saying, okay, Russia, you can't sell your oil
Speaker 1: for more than sixty dollars a bet. Now, of course
Speaker 1: the Indians and the Chinese will continue to buy Russian oil.
Speaker 1: They will they will buy above sixty dollar. I mean
Speaker 1: they will negotiate, but there are a far better negotiating deal.
Speaker 1: So while this demand will continue to grow as trying
Speaker 1: to continues to lower their their mitigation protocols, were still
Speaker 1: going to be buying oil at a well below market value. Steven.
Speaker 1: One final question really important. How's that electric vehicle thing? Owen?
Speaker 1: I mean you follow it tangentially over from your expertise
Speaker 1: to hydrocarbons, but from where you sit, how's Eve doing?
Speaker 1: Eight s are going to be the biggest drain on
Speaker 1: the environment that will make a hundred and twenty years
Speaker 1: of mining for coal and oil look like a like
Speaker 1: they were members of the cra club here. The amount
Speaker 1: of rarewas we have to dig up now. Personally, guys,
Speaker 1: I drive an electric hybrid. It is a seventeen gallon tank.
Speaker 1: I just drove. I just had to refill my car
Speaker 1: after not filling it for two months. I drove nearly
Speaker 1: fourteen hundred miles on the combined electric seventeen gallant tank.
Speaker 1: That's the way of the future, and I'm getting out here.
Speaker 1: It's like compromise. We have to work together. It's not
Speaker 1: as we are the people that Stephen Short, thank you.
Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join
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