WEBVTT - Bloomberg Surveillance TV: April 2nd, 2026 0:00:02.360 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordert. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify, or 0:00:31.320 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.199 Terminal and the Bloomberg Business App. Stephen Shark of the 0:00:37.200 --> 0:00:39.800 Short grew of writing Homer's Remains at Risk and cease 0:00:39.840 --> 0:00:43.120 Fire Prospects a week pointing to a prolonged geopolitical disruption 0:00:43.479 --> 0:00:46.240 to global flows, Stephen joins us now for more. Stephen, 0:00:46.240 --> 0:00:48.520 welcome to the program. Let's just run with the base 0:00:48.560 --> 0:00:51.720 case as presented by the President. Things can change, I 0:00:51.800 --> 0:00:53.960 know that, but let's run with two to three weeks. 0:00:54.200 --> 0:00:56.680 Where would this energy market be? Where will it be 0:00:57.040 --> 0:00:58.000 in two to three weeks? 0:00:59.360 --> 0:01:01.600 Absolutely so, with the rate we're going right now the 0:01:01.640 --> 0:01:04.160 way we've modeled it for the next actually three weeks, 0:01:04.160 --> 0:01:09.560 the current timeframe for the spot market right now is 0:01:09.600 --> 0:01:12.000 one hundred and three dollars at barrel. What was our 0:01:12.080 --> 0:01:14.680 top was our initial we'll call it our one stemit 0:01:14.760 --> 0:01:17.720 deviation envelope, and all of the simulations that we've run 0:01:17.880 --> 0:01:20.880 potential price pats. Now that we are well beyond that, 0:01:21.160 --> 0:01:23.000 what do we do we begin to look for that 0:01:23.240 --> 0:01:26.480 next And because of the volatile that's been introduced, we 0:01:26.560 --> 0:01:30.039 have extremely fat tails on the distributions of potential outcomes. 0:01:30.920 --> 0:01:33.200 Three weeks sense we could be looking at one hundred 0:01:33.200 --> 0:01:36.400 and thirty three dollars in oil. So John, what we're 0:01:36.480 --> 0:01:40.080 essentially looking at or doing is the United States. It's 0:01:40.120 --> 0:01:42.160 oil and the contract that we're following in this case 0:01:42.200 --> 0:01:43.120 nomics to WTI. 0:01:43.360 --> 0:01:45.640 That's been the cheapest barrel in the world. 0:01:45.840 --> 0:01:50.440 And now what's happened is the arbitrage is well established. 0:01:50.640 --> 0:01:52.840 So now you're having a tremendous amount of buying interest 0:01:52.920 --> 0:01:55.760 coming in from Asia, coming in from Europe, and hence 0:01:56.000 --> 0:01:58.440 we've been the cheapest barrel. But because of that buying in, 0:01:58.560 --> 0:02:01.200 just because you just can't get oil from Asian refiner 0:02:01.400 --> 0:02:04.000 from U typical sources, you're going to start bidding that 0:02:04.080 --> 0:02:05.880 oil higher. And that's what I think we're starting to 0:02:05.880 --> 0:02:08.560 see in the Gulf Coast is that US prices have 0:02:08.680 --> 0:02:11.320 been suppressed over the past four weeks, but that now 0:02:11.360 --> 0:02:14.240 it's starting to catch up to reality and therefore over 0:02:14.320 --> 0:02:18.760 the next three weeks, as this disruption continues, certainly the 0:02:18.800 --> 0:02:22.640 path is higher to our second tier envelope, which is, 0:02:22.720 --> 0:02:24.200 like I said, one hundred and thirty one hundred and 0:02:24.200 --> 0:02:25.160 thirty four dollars a hour. 0:02:25.600 --> 0:02:28.320 Is that high enough to cause demand destruction for people 0:02:28.360 --> 0:02:31.000 to pull back on their use of oil or their 0:02:31.000 --> 0:02:34.919 ability to get oil enough to get oil prices back 0:02:35.000 --> 0:02:36.160 lower in the near. 0:02:36.120 --> 0:02:40.959 Term based on recent observations and economic theory, noe, it's 0:02:41.000 --> 0:02:41.800 not there yet. 0:02:42.560 --> 0:02:43.880 We have to keep in mind that. 0:02:43.919 --> 0:02:47.520 Demand elasticities for guest line have changed tremendously. I'll give 0:02:47.560 --> 0:02:51.280 myself as an example. I drive plugging electric hydrid. I 0:02:51.320 --> 0:02:55.440 fill my car up about once every two to three months. Now, 0:02:55.600 --> 0:02:58.440 juxtapose this back to two thousand and eight when oil 0:02:58.480 --> 0:03:00.960 prices peaked that one hundred and forty nine dollars a barrow. 0:03:01.160 --> 0:03:03.800 I was filling my SUV up every single week. So 0:03:03.880 --> 0:03:07.760 that was an incredible pain point that has changed over 0:03:07.800 --> 0:03:09.440 the last fifteen years. 0:03:09.760 --> 0:03:12.240 So that part was that is. 0:03:12.400 --> 0:03:15.240 So what has happened is back then, if we adjust 0:03:15.280 --> 0:03:18.440 for inflation, three dollars and sixty cents at the pump, 0:03:18.919 --> 0:03:22.320 was that that that pressure point, that's that inflection point 0:03:22.320 --> 0:03:25.240 where demand started to fall off. We are higher because 0:03:25.280 --> 0:03:28.000 we've introduced more variables into the equation. 0:03:28.560 --> 0:03:32.160 So based on what we've seen recently, I e. We're 0:03:32.200 --> 0:03:32.600 still a. 0:03:32.600 --> 0:03:35.520 Dollar below a gallon where we were in twenty twenty two, 0:03:35.680 --> 0:03:38.400 and that did not destroy demand. So we'll look to 0:03:38.440 --> 0:03:41.080 see oil prices up of one hundred and fifty hundred 0:03:41.080 --> 0:03:43.040 and sixty dollars a level before I think we start 0:03:43.080 --> 0:03:45.680 to see the market correct and demand destruction kick in. 0:03:45.920 --> 0:03:48.400 Steven, are we done? You think what verbal intervention has 0:03:48.440 --> 0:03:49.320 its run its course? 0:03:51.280 --> 0:03:53.760 Well, are we doing verbal? So you're trying to draw 0:03:53.920 --> 0:03:59.000 on the market or try and do I don't think so. 0:03:59.120 --> 0:04:01.200 I mean, I think it's just something as an analyst, 0:04:01.240 --> 0:04:02.800 as a trade you just have to endure. 0:04:03.000 --> 0:04:05.120 And so this is why we look at the spread markets. 0:04:05.160 --> 0:04:08.520 So then the forward curve and any given market is 0:04:08.560 --> 0:04:11.920 your indication of where we're potentially going. And so when 0:04:11.920 --> 0:04:14.320 we see that, when we look at what is transpired 0:04:14.400 --> 0:04:15.200 now with the past. 0:04:15.080 --> 0:04:17.440 The week in wt I with the curve. 0:04:17.520 --> 0:04:20.719 That is an extreme bid or price increase on the 0:04:20.720 --> 0:04:23.200 front end of the curve for those prompt barrels, but 0:04:23.240 --> 0:04:26.320 that is now also starting to cascade down long from 0:04:26.360 --> 0:04:29.680 the curve. And then we look at a relationship between WTI, 0:04:29.839 --> 0:04:35.240 Dubai or you. For instance, we have oil production in 0:04:35.360 --> 0:04:39.000 West Texas delivered into Houston that is trading at a 0:04:39.080 --> 0:04:42.120 twelve dollars discount to the global price of oil, and 0:04:42.160 --> 0:04:45.240 that arbitr excuse me, and there's a backgradation along that, 0:04:45.600 --> 0:04:48.279 meaning that there's a strong bid for West Texas oil 0:04:48.320 --> 0:04:52.560 and hence why we're still bullish on this market. And 0:04:52.600 --> 0:04:56.000 so regardless, you could verbally, you could address in the 0:04:56.040 --> 0:04:59.359 market and say anything you want. The market is reality, 0:04:59.560 --> 0:05:02.440 and what the reality is telling us, it's that prices 0:05:02.480 --> 0:05:05.000 are here higher and they're going to be higher for longer, 0:05:05.440 --> 0:05:06.880 certainly over the next three weeks. 0:05:06.920 --> 0:05:11.320 Well, energy companies capitalized by actually reinvesting and expanding. 0:05:10.960 --> 0:05:15.720 Production eventually, but what we'll see now, and if you're 0:05:15.760 --> 0:05:19.240 looking at quarterly earnings, quarterly earnings for if you are 0:05:19.240 --> 0:05:23.159 a refiner, looked the great I mean, you have diesel 0:05:23.160 --> 0:05:25.760 fuel that's trading out one hundred and seventy dollars a 0:05:25.760 --> 0:05:29.360 barrel against one hundred dollars crude oil, or guess Liane 0:05:29.400 --> 0:05:31.440 trading out one hundred and thirty dollars a barrel against 0:05:31.440 --> 0:05:34.280 one hundred dollars oil. So the refinery margins are going 0:05:34.320 --> 0:05:39.000 to look extremely great coming through the first quarter. Now 0:05:39.040 --> 0:05:42.640 as we transition to this second quarter, as we've said 0:05:42.839 --> 0:05:46.480 that US prices are starting to catch up, so that 0:05:46.600 --> 0:05:48.560 is going to be a bigger hit now that that 0:05:48.760 --> 0:05:51.440 is what has been a boom from Golf Coast refineries, 0:05:51.680 --> 0:05:54.000 that wide margin between product. 0:05:53.680 --> 0:05:56.880 Prices and crude oil prices. That's catching up, and oil prices. 0:05:56.600 --> 0:05:59.440 Are catching up, and that's going to begin to squeeze margins, 0:05:59.760 --> 0:06:03.440 so we're going to see a lot of volatility. What 0:06:03.600 --> 0:06:06.479 was good for refiners last quarter is shaping up to 0:06:06.520 --> 0:06:09.599 be especially when demand is starting to pick up coming 0:06:09.640 --> 0:06:12.160 into the second quarter. So you've got the double wheremy 0:06:12.360 --> 0:06:15.600 of domestic oil prices catching up to the global price 0:06:15.600 --> 0:06:18.520 of oil at a time second quarter going into summer 0:06:18.680 --> 0:06:21.560 where demand for the output of the refinery is going 0:06:21.600 --> 0:06:22.160 to surge. 0:06:22.240 --> 0:06:24.120 Stephen, I don't just want to talk about price. I 0:06:24.160 --> 0:06:27.440 want to talk about shortages and outright shortages. This from 0:06:27.440 --> 0:06:30.200 the Australian Prime Minister. We mentioned his comment earlier on 0:06:30.240 --> 0:06:32.359 today over the coming weeks, if you can switch the 0:06:32.400 --> 0:06:34.200 catch in the train or bus or tramp to work, 0:06:34.440 --> 0:06:38.919 do so. The EU Commission suggesting people travel less across Europe. 0:06:39.360 --> 0:06:42.320 You can track, You've got visibility on the tankers that 0:06:42.400 --> 0:06:45.760 are arriving and won't be arriving. You can see the 0:06:45.800 --> 0:06:48.400 cushion that some of these countries have got the supply, 0:06:48.480 --> 0:06:51.240 they've got the inventories. How close are we to a 0:06:51.320 --> 0:06:55.240 shortage where these governments are actively tanning the people to 0:06:55.320 --> 0:06:58.000 stop doing things in the same way that they are 0:06:58.120 --> 0:06:59.080 in Asia at the moment. 0:07:00.520 --> 0:07:01.359 Yeah, absolutely so. 0:07:01.400 --> 0:07:03.880 Looking at the problem month, which has about three more weeks, 0:07:04.160 --> 0:07:07.320 that time frame that the President supposedly says we're going 0:07:07.400 --> 0:07:10.040 to be out of there or wrap this up. The 0:07:10.080 --> 0:07:12.520 market's highly skeptical, So I'll give it that three week 0:07:12.600 --> 0:07:16.480 time range where we'll start to see, certainly economies in 0:07:16.520 --> 0:07:18.920 the Far East, and now we're starting to see economies 0:07:18.920 --> 0:07:21.520 because that Atlantic basin spread is starting to tighten up, 0:07:21.760 --> 0:07:24.920 economies in Europe begin to seize. Up here in the 0:07:25.000 --> 0:07:27.600 United States, oil inventors are sitting. 0:07:27.320 --> 0:07:27.880 Out of three. 0:07:27.920 --> 0:07:30.000 We just got the weekly update yesterday sitting out of 0:07:30.040 --> 0:07:33.040 three year high. So there is oil here, but the 0:07:33.040 --> 0:07:34.520 problem is it's not where it. 0:07:34.520 --> 0:07:35.040 Needs to be. 0:07:35.640 --> 0:07:38.000 So even though we do have and the President might 0:07:38.040 --> 0:07:41.640 want to say buy American oil, that's great, but tanker 0:07:41.680 --> 0:07:45.400 logistics limitations, there's just a limit to how much stack. 0:07:45.120 --> 0:07:45.960 Can sate that. 0:07:46.360 --> 0:07:50.080 So while here in the US, as we said, oil 0:07:50.120 --> 0:07:54.640 prices or excuse me, oil supplies are fat three year highs, 0:07:55.200 --> 0:07:57.720 they're really being the seaze up and that's why we're 0:07:57.720 --> 0:08:02.960 starting to see the Brent mark it or WTI now 0:08:03.000 --> 0:08:08.000 outperforming Brent at this point because European buyers refineries are 0:08:08.040 --> 0:08:09.720 coming out of their once they come out of the 0:08:09.720 --> 0:08:11.960 refined maintenance season, they're going to be buying a lot 0:08:12.000 --> 0:08:14.080 more oil, a lot more US oil, but there is 0:08:14.120 --> 0:08:16.320 a limit to how much. So we are two to 0:08:16.400 --> 0:08:19.920 three weeks away from a shortage that we're already seeing 0:08:20.440 --> 0:08:21.880 that that's going to grow. 0:08:21.680 --> 0:08:24.880 Exponentially over the next couple of weeks. Stay with us. 0:08:25.200 --> 0:08:37.319 More Bloomberg surveillance coming up after this. So here's the 0:08:37.400 --> 0:08:40.719 laces this morning. The President's stirring investor anxiety, pledging more 0:08:40.760 --> 0:08:43.640 aggressive action in a round without concrete steps to reopen 0:08:43.679 --> 0:08:46.440 the stradit for Merz at Mills of Raymond James, writing, 0:08:46.520 --> 0:08:48.439 the clear desire of the US and a round to 0:08:48.480 --> 0:08:51.120 wind down the wall will need to be reconciled within 0:08:51.160 --> 0:08:54.160 the very narrow diplomatic pathway it joins US. Now for 0:08:54.240 --> 0:08:57.000 more ed, welcome to the program. Can you describe to 0:08:57.080 --> 0:08:58.760 us in a way you've described it to clients for 0:08:58.840 --> 0:09:01.040 the next two to three weeks might look. 0:09:01.000 --> 0:09:03.520 Like, Yeah, John, I think that there's going to be 0:09:03.559 --> 0:09:06.240 an intensity of the operations. I think there is a 0:09:06.360 --> 0:09:08.840 higher probability of a ground operation. 0:09:09.320 --> 0:09:10.920 I think that the market is prepared for. 0:09:11.400 --> 0:09:13.920 At Raymond James, we've been highlighting to clients that it 0:09:13.960 --> 0:09:16.200 will take a while for things to return to normal 0:09:16.280 --> 0:09:19.320 once the straits of Hormoz has reopened. Our energy team 0:09:19.360 --> 0:09:21.880 has been doing a considerable amount of work on that. 0:09:22.559 --> 0:09:24.679 And I do think that there has been an expectation 0:09:24.720 --> 0:09:27.040 in this market that things were going to go faster, 0:09:27.440 --> 0:09:30.440 quicker and cleaner. That expected, and we have been telling 0:09:30.480 --> 0:09:34.280 folks some cynicism here has been warranted, and the cynicism 0:09:34.360 --> 0:09:36.960 has actually been the thing that has played out consistently 0:09:37.120 --> 0:09:38.240 over this last month. 0:09:38.200 --> 0:09:40.640 And when you say ground operation, do you mean to 0:09:40.920 --> 0:09:43.400 open up the straight of Hormoves for normal traffic or 0:09:43.440 --> 0:09:46.760 do you mean for military boots on the ground to 0:09:46.800 --> 0:09:47.800 go seize the uranium. 0:09:48.720 --> 0:09:50.800 I think, Amory, that's to be determined. I do think 0:09:50.840 --> 0:09:53.840 that there is a history of President Trump. Once he 0:09:53.880 --> 0:09:58.000 has built up a military capability, he uses that military capability. 0:09:58.040 --> 0:10:00.480 So when we see how many troops have been positioned 0:10:00.520 --> 0:10:02.720 in the area, I do think that there is an 0:10:02.960 --> 0:10:05.960 obvious desire to reopen the straits of her moves. But 0:10:06.000 --> 0:10:08.280 President Trump last night did talk about that as something 0:10:08.480 --> 0:10:12.400 more natural than kinetic. There has been these conversations about 0:10:12.440 --> 0:10:16.120 the potential operations to seize uranium. To me, that's probably 0:10:16.120 --> 0:10:19.600 the higher probability. I don't know exactly how robust that 0:10:19.720 --> 0:10:21.160 is going to be. I think some of that is 0:10:21.200 --> 0:10:24.880 to be determined, but very clearly Emory here, President Trump 0:10:24.920 --> 0:10:28.160 is building up pressure and was telling even the kind 0:10:28.200 --> 0:10:31.079 of Iranians last night they have a choice still here 0:10:31.400 --> 0:10:35.160 that the operations can get much more intense and less 0:10:35.160 --> 0:10:36.440 they negotiate. 0:10:36.200 --> 0:10:39.760 And why give this speech last night? It felt like 0:10:39.840 --> 0:10:41.840 the tone of this speech was trying to get the 0:10:41.840 --> 0:10:44.000 American people on board that maybe it should have been 0:10:44.000 --> 0:10:46.800 given the first week or two of the operation. 0:10:47.760 --> 0:10:49.800 Yeah, Emory, That's what we were discussing internally here at 0:10:49.840 --> 0:10:52.120 Raymond James, because I think there was a hope and 0:10:52.160 --> 0:10:55.960 an expectation that a speech a month into this was 0:10:56.000 --> 0:10:58.360 a speech to wrap it up. The tone of the 0:10:58.360 --> 0:11:02.680 speech was the first real rationalization directly from President Trump 0:11:02.760 --> 0:11:06.160 speaking to the American people of exactly why and almost 0:11:06.200 --> 0:11:09.520 preparing the American people for what comes next. When you 0:11:09.559 --> 0:11:12.480 have all of those comparisons to the lengths of other wars, 0:11:12.640 --> 0:11:14.920 it is somewhat ominous. We are hopeful that this is 0:11:14.960 --> 0:11:17.520 two to three weeks from now, but there's no guarantees. 0:11:17.640 --> 0:11:19.240 I think that there was a hope that it was 0:11:19.280 --> 0:11:21.200 only going to be kind of less than a month 0:11:21.240 --> 0:11:24.199 when this started a month ago. Now we're already extending 0:11:24.240 --> 0:11:27.440 those timelines. So making that pitch to the American people 0:11:27.480 --> 0:11:30.599 because things are probably going to escalate before they de 0:11:30.800 --> 0:11:33.280 escalate is kind of my biggest takeaway from that speech. 0:11:33.320 --> 0:11:35.640 Emmory, This to me is the key pointed that this 0:11:35.760 --> 0:11:38.720 was essentially preparing the American people for whatever is to 0:11:38.760 --> 0:11:41.120 come next. Do you have a sense of what that 0:11:41.160 --> 0:11:43.040 could look like and how much it will come in 0:11:43.120 --> 0:11:47.280 concert with United Arab Emirates, with Saudi Arabia, with other alliances. 0:11:48.400 --> 0:11:51.319 Yeah, we're seeing kind of more of those alliances that 0:11:51.480 --> 0:11:55.120 take place. We're looking at the fact that AARAN in 0:11:55.160 --> 0:11:58.800 their initial response, probably kind of drew the region more 0:11:58.840 --> 0:12:02.120 together than split it. One of the key questions that 0:12:02.120 --> 0:12:04.800 we've been asking has been how long does the United 0:12:04.840 --> 0:12:08.079 States and Israel stay together? Because there is a big concern, 0:12:08.280 --> 0:12:10.520 especially in the national security community that I talk to, 0:12:10.840 --> 0:12:12.960 about whether or not the endgame for the United States 0:12:12.960 --> 0:12:15.240 and the endgame for Israel are going to be aligned, 0:12:15.360 --> 0:12:19.040 especially if this goes much longer than mid April here 0:12:19.480 --> 0:12:23.200 and politically you do want to have those alliances, but 0:12:23.320 --> 0:12:26.800 usually those alliances happened before an attack. Build those cases, 0:12:27.000 --> 0:12:30.120 get the American people on board. As we've seen gas prices, 0:12:30.240 --> 0:12:33.480 as we've seen inflation, as we've seen other impacts of this, 0:12:34.320 --> 0:12:36.800 As we see a market reaction to that, the American 0:12:36.840 --> 0:12:38.880 people are going to put more and more pressure on 0:12:38.920 --> 0:12:41.320 members of Congress in on this administration to wrap this 0:12:41.400 --> 0:12:42.520 up sooner rather than later. 0:12:42.360 --> 0:12:44.360 And let's just stay on international relations. There's a very 0:12:44.360 --> 0:12:47.559 strange dynamic to the addressed by the President yesterday, and 0:12:47.600 --> 0:12:51.080 it's as follows. For a long long time this country, 0:12:51.120 --> 0:12:53.559 successive governments have wanted to keep the likes of China 0:12:53.640 --> 0:12:56.960 out of these regions, keep them well away, contain any 0:12:57.000 --> 0:13:00.080 international ambition they might have. And now we're almost in 0:13:00.120 --> 0:13:03.240 fighting the men to help solve a problem. Do we 0:13:03.360 --> 0:13:08.760 really want the Chinese military in the straight offormers No. 0:13:09.520 --> 0:13:11.960 And when we've talked to some of the national security 0:13:12.000 --> 0:13:15.680 advisors and kind of China contacts that we have, there 0:13:15.720 --> 0:13:20.480 is almost zero expectation that a Chinese military will be involved. 0:13:20.840 --> 0:13:22.760 But you do have the fact that Trump and she 0:13:22.960 --> 0:13:26.200 will ultimately meet here over the next month and a half. 0:13:26.640 --> 0:13:31.200 And Trump always pulls things together, and to the extent 0:13:31.280 --> 0:13:33.040 that there are things that he is going to be 0:13:33.160 --> 0:13:35.520 asking China for, China is going to be asking us for, 0:13:35.840 --> 0:13:38.000 kind of adding in, hey, this is more of your 0:13:38.040 --> 0:13:41.480 problem than my problem. Is really the subcontext of everything 0:13:41.480 --> 0:13:43.800 that he's saying with this tracer for moves, it's like, yeah, 0:13:43.880 --> 0:13:47.559 it's a big issue, but maybe Chinese is more, Maybe 0:13:47.679 --> 0:13:50.920 NATO members outside of the United States needs more, maybe 0:13:50.960 --> 0:13:54.520 France needs is more. In particular, come in protect that 0:13:54.920 --> 0:13:57.079 it is not just our problem. I think this here 0:13:57.160 --> 0:13:59.839 is a reflection John over the fact that he does 0:14:00.160 --> 0:14:02.440 feel as if everyone has been willing to rally to 0:14:02.480 --> 0:14:05.200 his side on what he sees as an existential threat 0:14:05.320 --> 0:14:06.680 to the United States into the world. 0:14:07.120 --> 0:14:10.640 Stay with us more Bloomberg Surveillance coming up after this. 0:14:19.920 --> 0:14:22.520 Equities lower following back to back gains with the presidents 0:14:22.520 --> 0:14:25.280 turning up the pressure on a run once again. Sarah 0:14:25.360 --> 0:14:28.320 Hunt of Valpied saxon Words, writing, higher energy prices post 0:14:28.360 --> 0:14:30.800 a real challenge to both earnings and the consumer. But 0:14:30.840 --> 0:14:35.240 given the multiple compression and equity markets, valuations aren't becoming attractive. 0:14:35.440 --> 0:14:38.120 Sarah joins us now for more, Sarah, good morning, Good morning. 0:14:38.240 --> 0:14:40.440 Start with earnings. Is the outlook for earning solid or 0:14:40.440 --> 0:14:42.160 analysts just really really slow. 0:14:42.760 --> 0:14:46.000 I think that there is a problem with earnings that 0:14:46.080 --> 0:14:48.240 is going to come through from energy, and it looked 0:14:48.280 --> 0:14:49.880 like if we were going to get some sort of 0:14:49.880 --> 0:14:51.760 a change over the last couple of days, maybe that 0:14:51.800 --> 0:14:54.320 would be okay. I'm starting to think as that weill 0:14:54.560 --> 0:14:57.280 back curve starts to move higher. I don't see how 0:14:57.320 --> 0:14:59.480 earnings are going up for twenty twenty six. I think 0:14:59.480 --> 0:15:01.680 that there to be some sort of a balance, and 0:15:01.680 --> 0:15:03.160 I don't know where that balance is yet, but I 0:15:03.160 --> 0:15:05.120 think that we are getting a little over our skis 0:15:05.120 --> 0:15:05.680 on the arning. 0:15:05.640 --> 0:15:08.120 Makes the question if I should begin excited about multiple 0:15:08.120 --> 0:15:09.120 compression with that in mind. 0:15:09.920 --> 0:15:12.920 I think, you know, it's amazing you write something a 0:15:12.960 --> 0:15:15.240 day ago and the next day it's already different, which 0:15:15.240 --> 0:15:17.200 is why you know there's a lot of whiplash going 0:15:17.200 --> 0:15:19.960 on on the narratives. I think that there was. You 0:15:20.000 --> 0:15:22.400 could see how much the market was anticipating some sort 0:15:22.440 --> 0:15:24.400 of an off ramp. It looked like there might be 0:15:24.480 --> 0:15:27.160 some sort of discussions that might get to something. The 0:15:27.200 --> 0:15:29.400 fact that we're back in this place a day later 0:15:29.640 --> 0:15:32.160 tells you that this is going to be at least 0:15:32.560 --> 0:15:35.120 for the next foreseeable whatever future that is twenty four 0:15:35.120 --> 0:15:39.040 to forty eight hours, you are going to have more issues. 0:15:39.080 --> 0:15:40.960 To your point about trying to get back to normal, 0:15:41.400 --> 0:15:45.000 I think that because there was normal illustraight of horror moves, 0:15:45.040 --> 0:15:46.920 it was okay that the Red Sea wasn't back to normal. 0:15:46.920 --> 0:15:48.360 I think there's going to be a huge push to 0:15:48.360 --> 0:15:50.040 get anything back as soon as you get it open. 0:15:50.280 --> 0:15:52.360 But when that's going to be we don't know. The 0:15:52.400 --> 0:15:54.480 longer that takes the higher energy prices are that's going 0:15:54.480 --> 0:15:55.920 to feed through the earnings and people are not going 0:15:55.960 --> 0:15:57.960 to like that. So yes, I think that that definitely 0:15:58.360 --> 0:16:02.520 that tempers my usiasm for valuation compression because I don't 0:16:02.560 --> 0:16:04.120 think that you're going to get a solution as quickly 0:16:04.120 --> 0:16:05.720 as we thought just a day ago. 0:16:05.880 --> 0:16:08.320 So when I hear you talking, I'm like, oh, yeah, 0:16:08.360 --> 0:16:09.920 this is the reason why I'm nervous. And then when 0:16:09.960 --> 0:16:13.040 I read your commentary, you see opportunities out there, I think, 0:16:13.200 --> 0:16:15.200 what am I thinking about? I just obviously need to 0:16:15.200 --> 0:16:17.040 go take a walk. So how do you get the 0:16:17.040 --> 0:16:20.640 conviction to decide to buy given the level of uncertainty? 0:16:20.720 --> 0:16:21.920 Have there really been. 0:16:22.440 --> 0:16:26.360 Enough selloffs in specific sectors or names to justify taking 0:16:26.400 --> 0:16:26.880 that risk. 0:16:27.200 --> 0:16:29.080 I think that that's I think that's sort of the key. 0:16:29.120 --> 0:16:32.360 And I loved Jim zelter on earlier this morning because 0:16:32.360 --> 0:16:34.800 he was like, take a step back, look, zoom out, 0:16:35.120 --> 0:16:38.920 because it's also a timing question. Right over time, we 0:16:39.040 --> 0:16:42.080 know that market problems eventually get resolved. Am I looking 0:16:42.120 --> 0:16:44.080 at a five year window, at two year window a 0:16:44.200 --> 0:16:46.360 six month window? In a six month window, I can 0:16:46.400 --> 0:16:48.400 see a lot of volatility, and I would not be 0:16:48.560 --> 0:16:50.880 as sanguine on a six month basis as I would 0:16:50.920 --> 0:16:53.240 be on a longer term basis. Is there going to 0:16:53.280 --> 0:16:54.440 be more volatility this year? 0:16:54.520 --> 0:16:54.680 Yes? 0:16:54.720 --> 0:16:57.280 Do people are still thinking that we end the year 0:16:57.440 --> 0:17:00.360 either higher than we are today or a flat to 0:17:00.400 --> 0:17:02.920 where we started. That's really going to depend on the 0:17:02.920 --> 0:17:04.960 next on the developments over the next couple of months. 0:17:04.960 --> 0:17:07.640 And I think that a month ago this was let's 0:17:07.640 --> 0:17:10.440 see how long it takes. Well, we're into a period 0:17:10.480 --> 0:17:13.840 of time now where that compression and just the traffic 0:17:13.920 --> 0:17:16.080 jam of getting through there is going to be a 0:17:16.119 --> 0:17:18.280 problem and is going to keep energy levels high, and 0:17:18.320 --> 0:17:20.000 that's going to be hard for growth. I don't see 0:17:20.000 --> 0:17:21.119 how that doesn't impact earning. 0:17:21.240 --> 0:17:22.160 So taking a. 0:17:22.080 --> 0:17:24.040 Step back, I took a walk and I'm thinking, well, 0:17:24.160 --> 0:17:26.040 what has structurally changed if you take a look at 0:17:26.080 --> 0:17:27.919 a three to five year horizon, And what a lot 0:17:27.920 --> 0:17:31.040 of people keep saying is maybe not the equity story, 0:17:31.080 --> 0:17:33.960 not the AI story, but does the bond market story 0:17:34.040 --> 0:17:38.320 change given suddenly the renewed need for fiscal the renewed 0:17:38.400 --> 0:17:42.399 need to sort of support from a debt financing perspective, 0:17:42.560 --> 0:17:45.960 A lot of social initiatives that are only getting more current. 0:17:46.480 --> 0:17:49.520 Well, that turns into a much longer, deeper discussion about 0:17:49.520 --> 0:17:52.320 what is the point at which the government cannot keep 0:17:52.359 --> 0:17:54.480 throwing money at things? And at some point you would 0:17:54.480 --> 0:17:56.480 think that there is a point at which bonds start 0:17:56.520 --> 0:17:58.960 to get higher priced because everyone's worried about the fiscal 0:17:59.119 --> 0:18:01.000 Every time I think that's to happen, it seems to 0:18:01.040 --> 0:18:04.120 back off. So I don't know what that point is, right, 0:18:04.160 --> 0:18:06.600 but it's true there should be a point. Maybe that's 0:18:06.600 --> 0:18:09.080 why gold is sitting at forty five hundred dollars, because 0:18:09.080 --> 0:18:11.520 people are going at some point every currency has a 0:18:11.520 --> 0:18:13.840 problem because every government is too indebted. I don't know 0:18:13.880 --> 0:18:15.960 what that point is, though, and that point keeps moving. 0:18:16.119 --> 0:18:17.800 So why do you think the market is so fixated 0:18:17.800 --> 0:18:20.320 on Trump's truths and just not looking at what he's doing. 0:18:20.760 --> 0:18:23.440 Just this week again, another US aircraft carrier and two 0:18:23.520 --> 0:18:25.320 destroyers were sent again to the region. 0:18:25.480 --> 0:18:27.000 The troop build. 0:18:26.760 --> 0:18:29.080 Up is consistent and it's getting higher. 0:18:30.800 --> 0:18:31.040 You know. 0:18:31.119 --> 0:18:33.760 I don't know if people think that that is a 0:18:33.800 --> 0:18:36.240 strategic move, if that is an actual move, if that 0:18:36.320 --> 0:18:38.200 is a syops move, I don't know. And I think 0:18:38.240 --> 0:18:40.879 that the problem with dealing with a situation like this, 0:18:40.960 --> 0:18:42.920 that's so fluid, and everybody has something to say, and 0:18:42.960 --> 0:18:44.960 everybody has an agenda. It makes it really difficult to 0:18:45.040 --> 0:18:47.960 parse out what's actually going to happen. You know, maybe 0:18:47.960 --> 0:18:49.879 we could just be looking threatening. Maybe we're actually going 0:18:49.920 --> 0:18:51.680 to go and put boots on the ground. People said no, 0:18:51.760 --> 0:18:53.520 then they said yes, and they said no. I don't 0:18:53.560 --> 0:18:55.919 know what the answer is, but I think that trying 0:18:55.960 --> 0:18:58.320