WEBVTT - Surveillance: The Great Inflation Debate With Kasman 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.680 Bloomberg dot com, and of course on the Bloomberg. There 0:00:27.720 --> 0:00:30.960 are two kinds of technical analysis, which by the way, 0:00:31.040 --> 0:00:33.320 really works on Bloomberg Radio and we said good morning 0:00:33.320 --> 0:00:36.440 to all of you. One of them is stochastic, which 0:00:36.479 --> 0:00:39.200 is the movement the spikes trying to catch the knife 0:00:39.200 --> 0:00:42.320 in the dark, and the other is trend based analysis. 0:00:42.320 --> 0:00:44.839 Anybody that knows my work over the years knows I 0:00:44.880 --> 0:00:48.879 am totally and completely in the trend based camp, as 0:00:48.960 --> 0:00:52.960 is Christopher Verrou and the fabulous technical analysts. It's trtiguous. Chris, 0:00:52.960 --> 0:00:55.160 it was great to hear your children in the background 0:00:55.520 --> 0:00:58.520 before they were sequestioned before we came on. What is 0:00:58.560 --> 0:01:02.160 it like naming your young children's support and resistance? Did 0:01:02.160 --> 0:01:05.319 that go over well with Mrs vone? You know, it 0:01:05.360 --> 0:01:08.720 didn't go over as well as you might think. Support 0:01:08.880 --> 0:01:11.640 and resistance is the trend right now? What is the 0:01:11.640 --> 0:01:15.119 equity market trend? Now? Are we breaking out of resistance 0:01:15.160 --> 0:01:19.280 to new higher levels? Yeah, and I think that's clear. 0:01:19.319 --> 0:01:22.119 But what I think is less clear and arguably more important, 0:01:22.600 --> 0:01:24.840 is under the surface. We continue to see signs that 0:01:24.920 --> 0:01:27.720 participations actually getting broader. Here as you see it with 0:01:28.000 --> 0:01:30.640 just over the last month of the reinvolvement of industrial 0:01:30.720 --> 0:01:33.520 is the improvement in discretionary I mean, these are groups 0:01:33.560 --> 0:01:36.120 that have largely been relative laggard for the past two 0:01:36.160 --> 0:01:39.080 and a half years that are starting to showcase sometimes 0:01:39.080 --> 0:01:41.480 some type of relative strength. That is welcome, and I 0:01:41.520 --> 0:01:44.720 think it reflects a broadening of leadership and that's certainly 0:01:44.760 --> 0:01:48.240 something I think most participants have been creating. This word relative, folks, 0:01:48.360 --> 0:01:51.800 is absolutely foundational trend based analysis, and I want to 0:01:51.800 --> 0:01:54.960 go to the relativeness Christopher roone of those eight stocks 0:01:54.960 --> 0:01:56.360 that are going up, we know who they are, the 0:01:56.400 --> 0:02:01.120 digital dominance and everything else. For everything else to improve 0:02:01.240 --> 0:02:03.480 and go up, do they do it on an absolute 0:02:03.520 --> 0:02:06.440 basis or do they simply have to do it relative 0:02:06.560 --> 0:02:11.400 to a stable or even advancing tech group. I think 0:02:11.400 --> 0:02:12.920 they have to do on a relative basis. And what 0:02:12.960 --> 0:02:15.440 I'm occouraged by is that it's actually happening. I'll give 0:02:15.480 --> 0:02:18.680 you a couple of examples. When you look at like 0:02:18.760 --> 0:02:22.080 transportation group. For example, we look at transport relative to 0:02:22.160 --> 0:02:25.519 utility is as a barometer for cyclicality. It transports of 0:02:25.680 --> 0:02:28.239 underperformed utilities for the better part of the last two 0:02:28.240 --> 0:02:31.200 and a half years. That has decisively changed over the 0:02:31.280 --> 0:02:33.680 last eight to twelve weeks. We see with the broader 0:02:33.720 --> 0:02:38.000 industrial sector. Yesterday consumer discretionary flipped to positive in our 0:02:38.000 --> 0:02:40.880 relative trend model. So all the things you'd want to 0:02:40.919 --> 0:02:44.760 see that would support the idea that participation, particularly in 0:02:44.880 --> 0:02:47.560 relative terms, as you talk about, I think it's important 0:02:48.280 --> 0:02:49.919 all the things you'd want to see in that front 0:02:50.240 --> 0:02:53.120 are happening. I'm surprised to hear you say this because 0:02:53.160 --> 0:02:56.480 we hear from Morgan Stanley's uh. We hear from their 0:02:56.520 --> 0:02:59.920 chief equity strategist that he thinks that we're going to 0:03:00.120 --> 0:03:03.240 see a potential sell off if we get an ongoing 0:03:03.280 --> 0:03:06.640 optimism in the economy. The idea of Mike Wilson coming 0:03:06.639 --> 0:03:09.640 out and saying that because of how narrow the leadership 0:03:09.680 --> 0:03:13.320 has been, it makes this rally fragile. What are you 0:03:13.400 --> 0:03:17.840 seeing that he's not well. I think what's most important, 0:03:18.240 --> 0:03:20.680 and this has been the focus of our work over 0:03:20.720 --> 0:03:23.359 the last number of weeks, is that the leadership tone 0:03:23.360 --> 0:03:25.600 of the equity market, we think is telling us, is 0:03:25.720 --> 0:03:29.480 screaming at us that you should expect a positive economic 0:03:29.560 --> 0:03:32.120 surprise in the back half of the year. We just 0:03:32.160 --> 0:03:34.520 can't think of any other reason why things like industrials 0:03:34.560 --> 0:03:38.960 and discretionary and materials and transports would be acting as 0:03:39.000 --> 0:03:41.600 well as they are here. And frankly, that's pretty consistent 0:03:41.640 --> 0:03:43.920 with what you would expect to see in the first 0:03:43.920 --> 0:03:46.960 several months of a new economic cycle. So I think 0:03:46.960 --> 0:03:49.840 the market is telling us the consensus is probably still 0:03:50.600 --> 0:03:54.119 is still too pessimistic about the trajectory of the economy 0:03:54.320 --> 0:03:57.320 from here. Although Chris, I wonder about fundamental analysis at 0:03:57.320 --> 0:03:59.360 a time when best By this morning was the latest 0:03:59.360 --> 0:04:02.200 company to to draw any prediction for how their business 0:04:02.200 --> 0:04:04.840 would do for the rest of this year, how accurate 0:04:05.080 --> 0:04:07.920 can traders be in this equity market at a time 0:04:07.960 --> 0:04:12.200 of such limited visibility? Well, I would just positive. Is 0:04:12.240 --> 0:04:14.600 this really any different from any other moment in history? 0:04:14.720 --> 0:04:16.719 And it's easy to say yes, but I would argue 0:04:16.720 --> 0:04:19.000 that it's not. And by that I mean, go look 0:04:19.000 --> 0:04:22.040 five six months off any major market loan history. You're 0:04:22.040 --> 0:04:23.880 not gonna like where the economy was. You're not gonna 0:04:23.920 --> 0:04:25.720 like the visibility that was in front of you. That's 0:04:25.800 --> 0:04:28.440 the game we played. That's investing um so. I I 0:04:28.480 --> 0:04:31.080 don't think this is as unique as the consensus wants 0:04:31.200 --> 0:04:33.839 it to be. I think what you've seen historically is 0:04:34.279 --> 0:04:38.200 markets discount future improvement. I don't think the markets describing 0:04:38.240 --> 0:04:41.120 the economy today. I think the markets describing the economy 0:04:41.160 --> 0:04:42.799 that's in front of us, and I think it's stronger 0:04:42.839 --> 0:04:45.520 than what the consensus expects. Okay, Chrispherhon, I looked at 0:04:45.520 --> 0:04:48.080 the SPX and I used a fancy moving average study. 0:04:48.160 --> 0:04:51.080 This is three moving averages. Good morning, George Kleinman out 0:04:51.080 --> 0:04:54.200 of Nevada, if you're watching, christopherone. I looked at the 0:04:54.240 --> 0:04:58.480 trend base and it's extremely well behaved, extremely well contained. 0:04:58.720 --> 0:05:02.279 Can you extrample to a target? And if so, how 0:05:02.360 --> 0:05:06.839 far out can you go? With enthusiasm? So the only 0:05:06.880 --> 0:05:09.520 targets we care about are higher or lower, and that 0:05:09.560 --> 0:05:11.320 means it's the trend up or is the trend down. 0:05:11.560 --> 0:05:13.040 I think the trend is up here, and that tells 0:05:13.120 --> 0:05:15.680 us Tom what rules were playing by. And when trends 0:05:15.680 --> 0:05:18.839 are positive, you buy weakness. You know, it's been five 0:05:18.920 --> 0:05:20.800 or six months since we've had anything more than a 0:05:20.839 --> 0:05:22.880 five or six percent drawn out. Is it reasonable that 0:05:22.920 --> 0:05:25.279 we may get something like that over the next several months. 0:05:25.279 --> 0:05:27.040 Of course it is. But how do we want to 0:05:27.080 --> 0:05:29.640 treat weakness? We want to be buyers of weakness when 0:05:29.640 --> 0:05:33.080 participation expanding and when trend is up. And I think 0:05:33.080 --> 0:05:35.080 that's build a base case here, which sector is the 0:05:35.120 --> 0:05:37.720 best value the rest relative value? I mean, I want 0:05:37.720 --> 0:05:40.080 to buy the dip in Amazon. Maybe it happens, maybe 0:05:40.080 --> 0:05:43.080 it doesn't. The banks are unloved, which is the Christopher 0:05:43.080 --> 0:05:46.760 On sector where you get to pop off everything else. 0:05:48.200 --> 0:05:51.600 I think industrials are emerging as multi year leaders here. 0:05:52.080 --> 0:05:54.920 They've frankly have been in purgatory for the better part 0:05:55.320 --> 0:05:57.880 of the last half a decade. I think that's changed 0:05:57.880 --> 0:06:00.760 in a meaningful way. I would encourage everyone to look 0:06:00.800 --> 0:06:04.279 at an equally weighted industrial sector relative to the SMP 0:06:04.760 --> 0:06:06.840 you just broke out from a five year base. This 0:06:06.880 --> 0:06:08.720 is the real deal. This is the start of meetingful 0:06:08.800 --> 0:06:12.080 leadership in that group. Let's say yields rise, at what 0:06:12.240 --> 0:06:13.960 level do they have to rise to that that could 0:06:13.960 --> 0:06:16.640 potentially disrupt your theory and you could see a sell 0:06:16.680 --> 0:06:19.919 off in stocks. Well, I think what's interesting is this 0:06:20.000 --> 0:06:22.080 is the point in a new economic cycle where you 0:06:22.120 --> 0:06:24.800 would actually expect to see yields start to rise. I 0:06:24.839 --> 0:06:27.239 think the fact that they haven't is in many respects 0:06:27.320 --> 0:06:30.400 adding more fuel to this cyclical bias that has started 0:06:30.440 --> 0:06:33.839 to emerge. Um. In many respects, you know, go back 0:06:33.880 --> 0:06:37.839 to let's call it mid two eighteen, late two thousand eighteen, 0:06:38.279 --> 0:06:42.040 bond yields for three percent, cyclicality was starting to peak. Um, 0:06:42.520 --> 0:06:45.080 Chinese stocks are rolling over Chinese bond yields were rolling 0:06:45.120 --> 0:06:49.200 over all. The exact opposite trends are playing out right now. 0:06:49.279 --> 0:06:52.239 So I think the runway before you could say yields 0:06:52.240 --> 0:06:54.680 are a big problem to disrupting the story. I don't 0:06:54.720 --> 0:06:56.960 know whether that ninety bases points, the Hunter basis point, 0:06:57.000 --> 0:06:58.800 a hundred and ten basis points, but I think it's 0:06:58.880 --> 0:07:01.359 higher than where it is right now. Very good, Christopher on, 0:07:01.440 --> 0:07:07.000 Thank you so much. I just gotta Saint Lisa. There's 0:07:07.080 --> 0:07:12.960 so few people that work the circuit constructively like Regina Mayor. 0:07:13.280 --> 0:07:17.040 She owns for the World Economic Forum at Davos right 0:07:17.080 --> 0:07:20.080 on down to every other energy conference. She absolutely owns 0:07:20.400 --> 0:07:23.000 the high ground on this. But Lisa, there's something more 0:07:23.000 --> 0:07:25.280 important to talk to you right now, and that is 0:07:25.320 --> 0:07:28.720 there miserable and irving Texas this morning. Yeah, so they're 0:07:28.720 --> 0:07:32.320 watching the storm, they're watching Laura bear down on them, 0:07:32.400 --> 0:07:35.200 which is threatening a whole host of oil reserves. And 0:07:35.240 --> 0:07:37.880 let's start their Regina. The idea that you've got these 0:07:37.920 --> 0:07:41.200 twin storms, with Marco actually fizzling out, but Laura still 0:07:41.240 --> 0:07:43.960 looking like a hurricane headed toward the Gulf coast. How 0:07:44.040 --> 0:07:47.960 much could this disrupt oil production the US. Well, it's 0:07:48.000 --> 0:07:50.000 not less of a risk on the supply side with 0:07:50.040 --> 0:07:53.320 oil production because only about ten percent of US production 0:07:53.400 --> 0:07:55.880 comes out of the Gulf of Mexico, and we're sitting 0:07:56.040 --> 0:07:59.400 quite pretty with regard to crude supply. The thing to 0:07:59.480 --> 0:08:03.920 keep an eye on is refined product supply destruction because 0:08:05.120 --> 0:08:08.600 of the US refine capacity comes from the Texas and 0:08:08.640 --> 0:08:12.120 Louisiana Gulf coast. So, based on the current projection with 0:08:12.360 --> 0:08:16.120 hurricane or tropical storm Laura projected to become a Category 0:08:16.160 --> 0:08:21.000 three hurricane, you could say roughly of gasoline capacity is 0:08:21.040 --> 0:08:23.600 in the path. I'm less worried about that though, because 0:08:23.640 --> 0:08:27.200 I don't think it'll take that capacity offline. Um, But 0:08:27.200 --> 0:08:30.080 but there is at risk and meanwhile over in Irving, 0:08:30.120 --> 0:08:33.679 there's another storm, and that is the storm against hydrocarbons, 0:08:33.720 --> 0:08:37.240 with the energy moving away from that area Exxon and 0:08:37.320 --> 0:08:41.160 being removed from the TAO, the longest serving member of 0:08:41.200 --> 0:08:44.240 the index, after its market share fell from four hundred 0:08:44.240 --> 0:08:48.360 and fifty billion dollars of market capitalization back to less 0:08:48.360 --> 0:08:51.560 than two hundred billion dollars. Now, are we just seeing 0:08:51.600 --> 0:08:55.800 the beginning of the destruction of the hydrocarbon complex or 0:08:55.880 --> 0:08:59.600 is this the end of the destruction? Well, it is. 0:08:59.640 --> 0:09:03.080 It does mark a shift in the era of where 0:09:03.520 --> 0:09:06.520 capital wants to go and what investors are going to 0:09:06.600 --> 0:09:10.280 look at. Are the text box are clearly on a boom. 0:09:10.320 --> 0:09:12.440 You know, I wish I had made some different choices, 0:09:12.600 --> 0:09:16.200 you know, early in the pandemic. But it does indicate 0:09:16.280 --> 0:09:20.160 that the large industrial you know, the behemoths of our time, 0:09:20.360 --> 0:09:22.800 are probably not where capital wants to flow. And it 0:09:22.880 --> 0:09:27.000 does mean that these very large international oil companies have 0:09:27.160 --> 0:09:30.200 to pivot their portfolios to embrace what's known as the 0:09:30.320 --> 0:09:33.240 energy transition if they're going to stay relevant. And you 0:09:33.280 --> 0:09:36.360 see the different players taking different strategies, and I do 0:09:36.480 --> 0:09:39.960 think they will pivot and survive. But this does indicate 0:09:39.960 --> 0:09:43.079 a big shift in investor sentiment. Regina, what's so hard 0:09:43.080 --> 0:09:45.079 of the matter here is combination. I mean we saw 0:09:45.080 --> 0:09:47.600 Anna Darko takeout and what Ox he's done in their 0:09:47.640 --> 0:09:51.040 over extension and Mr Buffet coming into play as well. 0:09:51.240 --> 0:09:54.800 Do you just see an industry roll up to get 0:09:54.840 --> 0:09:58.520 back to the size of revenues where they have scale 0:09:58.600 --> 0:10:01.600 to profit. Well, I think it is a scale game, 0:10:01.720 --> 0:10:05.520 and you're absolutely right there. But you know, the bid 0:10:05.600 --> 0:10:08.400 ask spreads are still so far apart and where I 0:10:08.480 --> 0:10:10.720 would have thought we would have seen more of a 0:10:10.800 --> 0:10:14.760 wave of mergers and acquisitions. Balance sheets are under such 0:10:14.880 --> 0:10:17.719 pressure that it's difficult to get the capital to make 0:10:17.760 --> 0:10:21.120 a play um and it's difficult to see the consolidation 0:10:21.160 --> 0:10:23.640 that we need to see. However, you know there have 0:10:23.760 --> 0:10:27.280 been some moves, and there was Chevron's acquisition of Noble 0:10:27.320 --> 0:10:30.679 looks very very smart in this environment. Well, man, I 0:10:30.679 --> 0:10:32.120 was going to go to chevn but I really don't 0:10:32.120 --> 0:10:34.280 want to talk individual securities. I mean, they go after 0:10:34.360 --> 0:10:36.760 Noble and they got pushed out of Anna Darker. I 0:10:36.800 --> 0:10:39.040 get all that. Does the big money come into his 0:10:39.120 --> 0:10:44.840 private equity come in and start acquiring value priced hydrocarbons? 0:10:45.000 --> 0:10:47.679 Do you see someone like black Stone, or even black 0:10:47.760 --> 0:10:51.240 Rock for that matter, playing. I think the pe firms 0:10:51.280 --> 0:10:55.360 have have done their bit in the last decade, especially 0:10:55.360 --> 0:10:58.560 in the two thousand, in the two thousand tens, and 0:10:58.679 --> 0:11:01.160 most of them are actually trying pull out. Now, what 0:11:01.280 --> 0:11:04.199 I think will end up seeing is you'll see assets 0:11:04.280 --> 0:11:07.880 change hands because the assets still have underlying value, but 0:11:07.960 --> 0:11:10.640 the companies that are structured around them, with the debt 0:11:10.640 --> 0:11:14.120 and the equity portfolios that they have, look less attractive. 0:11:14.280 --> 0:11:16.760 So I think we're gonna have to see more restructuring, 0:11:16.920 --> 0:11:20.240 more debt consolidation, and then you'll see the assets shift, 0:11:20.320 --> 0:11:23.720 but maybe less the company logos shifting. Have we already 0:11:23.720 --> 0:11:29.040 seen Regina peak oil demand. I don't think so, Lisa. 0:11:29.200 --> 0:11:32.400 There has been some that will say two thousand nineteen 0:11:32.480 --> 0:11:35.720 might have been peak demand. We still see projections that 0:11:35.760 --> 0:11:38.520 will take us up to a ten million barrels per day, 0:11:38.520 --> 0:11:41.000 which is still ten million barrels per day more than 0:11:41.040 --> 0:11:45.280 we consume uh in, and you'll still see that into 0:11:45.320 --> 0:11:50.839 the timeframe. We don't have a base of energy that 0:11:50.960 --> 0:11:54.480 will sustain all of our needs that does not include 0:11:54.520 --> 0:11:57.720 some element of hydrocarbon, at least in the foreseeable future. 0:11:57.920 --> 0:12:00.559 Do you think the pandemic has accelerated the iift away 0:12:00.600 --> 0:12:03.199 from hydrocarbons or do you think that it's actually slowed 0:12:03.280 --> 0:12:06.240 it because of the subduing of the price of oil. 0:12:07.320 --> 0:12:11.320 I think it's accelerated the shift. We've demonstrated. You know 0:12:11.360 --> 0:12:13.760 what we can do for the environment and how we 0:12:13.800 --> 0:12:17.480 can reduce carbon simply by restricting our movements and not 0:12:17.600 --> 0:12:20.199 flying as much as we were from a business travel perspective, 0:12:20.520 --> 0:12:22.599 not commuting as much as we were, not going to 0:12:22.679 --> 0:12:26.440 different shopping centers. That doesn't directly translate into a reduction 0:12:26.440 --> 0:12:29.920 of gasoline demand, but we've seen the positive impacts we 0:12:29.960 --> 0:12:32.840 can have on the carbon and most of the other countries, 0:12:32.880 --> 0:12:37.280 when you look at their stimulus packages, they include green stimulus. 0:12:37.320 --> 0:12:41.080 Notably absent. The US isn't focusing as much on green stimulus, 0:12:41.120 --> 0:12:44.719 meaning you know, new energy types of transitions. But globally, 0:12:44.920 --> 0:12:48.080 I believe the pandemic has accelerated the move toward the 0:12:48.160 --> 0:12:51.080 energy transition. Regina, Thank you so much, Regina Mayor. Where 0:12:51.080 --> 0:12:54.840 there's the KPMG on this historic day, Exxon out of 0:12:54.880 --> 0:13:01.319 the Dow Jones industrial average right now and it is 0:13:01.320 --> 0:13:03.280 a great joy to speak to Terence Haynes. He's a 0:13:03.320 --> 0:13:08.280 Pengia policy writing a really grounded business centric policy note 0:13:08.559 --> 0:13:11.679 out of Washington, and he really sums it up nicely. 0:13:12.360 --> 0:13:17.600 Stuck doing just war duty, I say, out in western Maryland, folks, 0:13:17.640 --> 0:13:20.520 this is not Baltimore, Baltimore and Baltimore. If you go 0:13:20.600 --> 0:13:23.920 out west of Maryland, pass Hagerstown, it is some of 0:13:23.960 --> 0:13:27.000 the most gorgeous country in this nation. And Mr Haynes 0:13:27.559 --> 0:13:31.480 joins us from western Maryland this morning. Terry. The distance 0:13:31.520 --> 0:13:36.120 from Hagerstown to Baltimore, from Cumberland to Baltimore is the 0:13:36.160 --> 0:13:41.080 space between the Republican and the Democratic Party. How how 0:13:41.080 --> 0:13:44.760 does Mr Trump stretch that space? How does he get 0:13:44.800 --> 0:13:49.640 east of Hagerstown more towards the suburb voters that he needs. 0:13:50.520 --> 0:13:53.640 I think two ways, Tom one he and you're absolutely 0:13:53.679 --> 0:13:58.920 right about the chasm between Hagerstown and Baltimore. Um, the 0:14:00.040 --> 0:14:03.160 is it? In two ways? One? Uh? He? He excites 0:14:03.240 --> 0:14:05.360 his base. He tells a story. And you know, one 0:14:05.400 --> 0:14:08.400 of the great things about conventions is that they're they're 0:14:08.480 --> 0:14:10.959 rare opportunities for a candidate and a party to tell 0:14:11.000 --> 0:14:13.840 an unfiltered story. And that's what, of course the Democrats 0:14:13.920 --> 0:14:17.120 did last week. But the Republicans are doing this week. Um, 0:14:17.280 --> 0:14:21.480 he reminds people of kind of of of accomplishments, he 0:14:21.520 --> 0:14:25.080 contextualizes that. But then that's the positive message, and then 0:14:25.080 --> 0:14:28.880 the negative message is, of course, he differentiates very strongly 0:14:29.000 --> 0:14:33.400 from from what Democrats, Uh, the Democrats might prefer, and 0:14:35.160 --> 0:14:37.560 to to reach beyond the base and get the independence 0:14:37.680 --> 0:14:39.880 is actually an opportunity for Trump right now. There was 0:14:39.920 --> 0:14:43.480 a recent recent poll that was highlighted by the Axios 0:14:43.600 --> 0:14:49.160 site that showed that only Independence had a positive view 0:14:49.240 --> 0:14:52.480 of Biden. So that's, uh, that's fertile ground for Trump 0:14:52.560 --> 0:14:56.280 to really start hammering in that the economy is at stake, 0:14:56.400 --> 0:14:58.960 that the law and order is at stake, those sorts 0:14:59.000 --> 0:15:03.320 of things, and you appeal to people's most basic instincts 0:15:03.400 --> 0:15:06.440 and hopes and fears, and you know, you tell that 0:15:06.520 --> 0:15:09.680 story fairly free of new ones, and you know you 0:15:09.680 --> 0:15:15.040 can get there within this unique two thousand twenty. How 0:15:15.160 --> 0:15:18.960 is his law in order message different from Richard Nixon 0:15:19.080 --> 0:15:24.160 a lifetime ago? It is? But yeah, frankly it's broadly similar. Uh, 0:15:24.240 --> 0:15:28.720 and you know, and it and it appealed to the 0:15:28.760 --> 0:15:31.160 most likely voters. And this is a this is this 0:15:31.200 --> 0:15:33.840 is an election that's already substantially tightened. I mean, this 0:15:33.920 --> 0:15:36.200 whole idea that Biden is running away with anything is 0:15:36.440 --> 0:15:40.280 uh last month's news you've got. You know, people like 0:15:40.360 --> 0:15:43.000 to talk about real player of politics. Average. The national 0:15:43.040 --> 0:15:45.400 average for Biden now is about seven and a half 0:15:45.440 --> 0:15:49.440 and in the battleground states, uh, it is about four. 0:15:49.920 --> 0:15:52.920 One way to look at that is it's barely above 0:15:53.000 --> 0:15:57.160 the margin of error or two months away from the election. Uh. 0:15:57.320 --> 0:16:00.800 So you know, he can hammer on that and uh 0:16:00.840 --> 0:16:04.120 and appeal to people's feel to people's pocketbooks and their 0:16:04.160 --> 0:16:09.200 fit and their most basic desires and fears about security. Um, 0:16:09.400 --> 0:16:12.400 and he can continue to to to eat into what 0:16:12.520 --> 0:16:15.200 remains of a Biden lead. You know, it was interesting 0:16:15.200 --> 0:16:16.920 to me when I was looking at your notes, Terry, 0:16:17.000 --> 0:16:20.560 that you think that President Trump has a sixty percent 0:16:20.760 --> 0:16:24.160 chance of re election. That does not seem to be 0:16:24.200 --> 0:16:27.440 the consensus. How much pushback do you get that? Oh? 0:16:27.480 --> 0:16:30.320 I get pushback about that all the time. Lisa, and 0:16:30.440 --> 0:16:33.000 I would say two things one three things, but one 0:16:33.000 --> 0:16:35.040 of which I've already said, the race is already tightening, 0:16:35.120 --> 0:16:38.400 kind of moving in that direction. Secondly, the last thing 0:16:38.520 --> 0:16:42.360 that polls are aren't predictive and any any polster would 0:16:42.360 --> 0:16:46.520 tell you that. Thirdly, these polls look at the wrong things. Frankly, 0:16:46.640 --> 0:16:49.880 no disrespect anybody that's doing them, but they're looking at 0:16:49.960 --> 0:16:54.560 the by and large national the national snapshots of registered voters. 0:16:55.240 --> 0:16:57.720 What you will then, and they're already tightening, and what 0:16:57.760 --> 0:17:01.240 you'll start to see is more attention page to state 0:17:01.280 --> 0:17:03.920 by state races of likely voters, and there's a huge 0:17:03.960 --> 0:17:07.240 disparity between registers and the likeliest. That will mean that 0:17:07.320 --> 0:17:11.359 the race tightens even further. The Trump wins, uh, you know, 0:17:11.480 --> 0:17:13.640 and you know turnout here is going to make all 0:17:13.640 --> 0:17:19.000 the difference. And frankly, you know Trump counts an enthusiasm advantage, 0:17:19.560 --> 0:17:23.840 but that enthusiasm advantages is real and uh, and it's 0:17:23.880 --> 0:17:26.480 gonna be hard for Democrats to make that up. Well, 0:17:26.600 --> 0:17:29.120 when you talk about who's going to win the Democrat 0:17:29.240 --> 0:17:32.479 the the presidential race, it's unclear what the market effect 0:17:32.480 --> 0:17:34.639 will be. It is clear that if there is an 0:17:34.760 --> 0:17:38.080 increase intentions between the US and China, that is broadly 0:17:38.160 --> 0:17:41.920 viewed as a market negative. What is President Trump's policy 0:17:41.960 --> 0:17:45.120 that we may hear from Secretary State Mike Compeo tonight, 0:17:45.480 --> 0:17:48.119 especially given the easing and some of the tensions of 0:17:48.200 --> 0:17:52.040 late between the US and China. Uh. Let me say 0:17:52.080 --> 0:17:54.560 two things about that. One, what Pompeo is likely to 0:17:54.560 --> 0:17:58.080 say is, uh, look, you know, only you know, we 0:17:58.440 --> 0:18:02.680 wasted two decades on hoping China would would grow up 0:18:03.440 --> 0:18:05.920 and become a mature member of the Community of Nations 0:18:05.960 --> 0:18:10.040 and you know, and take the w t O obligations 0:18:10.040 --> 0:18:13.639 and others. Seriously, We're clearly past that. And you know, 0:18:13.720 --> 0:18:16.600 but only Trump could stood up to that. Obama and 0:18:16.600 --> 0:18:19.080 Biden were responsible for a decade of that that sort 0:18:19.080 --> 0:18:21.439 of thing. Um. The other thing I would say is 0:18:21.480 --> 0:18:24.840 that markets, I think markets, uh the mids to some 0:18:25.000 --> 0:18:27.240 extent that they tend to think that one bad thing 0:18:27.320 --> 0:18:29.560 is happening with between the United States and China, that 0:18:29.600 --> 0:18:32.840 means that all bad things are are increased. I don't 0:18:32.840 --> 0:18:35.520 think that's true. It remains in the mutual interests of 0:18:35.560 --> 0:18:37.760 the U. S and China to continue to trade and 0:18:37.840 --> 0:18:41.720 continue to say positive things about Phase one even as 0:18:42.080 --> 0:18:44.359 tensions are on the rise between the two nations and 0:18:44.359 --> 0:18:48.320 other geo political matters. Uh. It was the former British 0:18:48.320 --> 0:18:51.000 Prime Minister that noted that the you know, great nations 0:18:51.000 --> 0:18:54.200 have only interests, not friends. It remains in the mutual 0:18:54.240 --> 0:18:57.240 interests of these two countries to trade. They'll continue to 0:18:57.320 --> 0:18:59.520 do that, and they'll continue to say positive things about 0:18:59.560 --> 0:19:02.080 Phase one, which I think is a market But Terry Hynes, 0:19:02.119 --> 0:19:08.600 thank you so much. What we thought we'd do right now. 0:19:08.800 --> 0:19:11.240 Usually you know, it's economic data eight thirty and all 0:19:11.280 --> 0:19:14.360 that is. They have the definitive conversation of the day 0:19:14.880 --> 0:19:17.040 on what we're gonna hear from Chairman Paul. We can 0:19:17.080 --> 0:19:19.639 do that with James Sweeney. He is at Credit sweezy. 0:19:19.640 --> 0:19:21.679 He has been there all of twenty years, which UH 0:19:21.920 --> 0:19:26.880 shocksby as well. But James Sweeney has absolutely turned cautious here. 0:19:26.920 --> 0:19:30.240 I was stunned in his last visit with us how 0:19:30.320 --> 0:19:33.800 cautious he was on the American economic experiment. And we 0:19:33.840 --> 0:19:36.440 get a brief on what Mr Powell needs to do 0:19:36.880 --> 0:19:41.440 James Sweeney. This is always an important speech that's widely understood. 0:19:41.480 --> 0:19:44.879 Inflation will be the topic. How does the Central Bank 0:19:45.200 --> 0:19:51.040 manufacture inflation? Well, I mean they know that they need 0:19:51.080 --> 0:19:55.199 to continue to supply stimulus to the economy and they've 0:19:55.320 --> 0:20:00.040 been moving towards this Framework review, which is likely to 0:20:00.200 --> 0:20:04.879 to signal a tolerance for overshooting inflation. Meaning you know, 0:20:04.960 --> 0:20:10.320 somewhere north of two inflation would not trigger immediate interest 0:20:10.400 --> 0:20:14.560 rate responses from the Fed, sometimes several years in the future. 0:20:15.240 --> 0:20:19.760 So that's really what we expect from them today. In general, though, 0:20:20.440 --> 0:20:23.199 the short term caution is about the lack of a 0:20:23.240 --> 0:20:29.280 stimulus bill, persistent high unemployment, risks of of inflation staying 0:20:29.320 --> 0:20:32.040 lower for longer, and I think the FED is very 0:20:32.040 --> 0:20:34.720 focused on all of these risks, and I think some 0:20:34.800 --> 0:20:37.920 people in financial markets are not. But we will see 0:20:38.000 --> 0:20:39.680 as we go through what's set to be a pretty 0:20:39.680 --> 0:20:43.520 turbulent autumn, whether you know, market and economic data could 0:20:43.520 --> 0:20:47.840 trigger more than just talk from the FED more action. 0:20:48.040 --> 0:20:51.200 I give immense credit folks Olivier Blanchard as tour of 0:20:51.280 --> 0:20:53.200 duty at the i m F now at the Peterson 0:20:53.240 --> 0:20:57.159 Institute for jump starting this discussion. But change what the 0:20:57.200 --> 0:21:01.040 magnitude difference here is different. Olivia Blanchard created a firestorm 0:21:01.080 --> 0:21:04.359 of controversy talking about a goosing of three and even 0:21:04.440 --> 0:21:07.800 four percent inflation. I'm not hearing that from the Fed. 0:21:08.160 --> 0:21:10.360 What are they talking about nudging it up to two 0:21:10.400 --> 0:21:15.120 point oh five or two point one percent inflation? Yeah, 0:21:15.160 --> 0:21:17.240 I think it's in the tens of basis points that 0:21:17.320 --> 0:21:19.760 they would tolerate. I don't think we're talking about three 0:21:20.200 --> 0:21:22.520 core inflation or anything like that. And I mean, the 0:21:22.560 --> 0:21:26.320 difference between headline and core is important because energy prices 0:21:26.359 --> 0:21:29.520 can throw the headline inflation numbers around a lot. But 0:21:29.760 --> 0:21:31.960 I don't think that we're going to see three percent 0:21:32.119 --> 0:21:35.280 core inflation with you know, the set short rate that 0:21:35.560 --> 0:21:38.840 had close to zero um anytime in the future. But 0:21:38.840 --> 0:21:41.280 but what they're saying is that immediately drifting above two 0:21:42.160 --> 0:21:45.520 is not going to prompt immediate interest rate increases. James, 0:21:45.560 --> 0:21:48.200 We've getting We're we've been getting inflation pretty some some 0:21:48.480 --> 0:21:52.199 pretty serious inflation. I'm speechless, uh, tongue tied over how 0:21:52.280 --> 0:21:54.479 much asset prices have inflated, and the fact that we 0:21:54.520 --> 0:21:56.920 hear less and less about this from Federal Reserve officials 0:21:56.920 --> 0:22:00.040 who dismissed that as just a part of how to 0:22:00.119 --> 0:22:03.000 get to a more stable economy. But at what point 0:22:03.240 --> 0:22:05.199 does a fet have to take a look at just 0:22:05.280 --> 0:22:09.080 how much asset prices have increased and the lack of 0:22:09.119 --> 0:22:12.480 any gains that we're seeing necessarily in the economy from 0:22:12.600 --> 0:22:17.040 the regime that led to those higher asset prices. Well, 0:22:17.080 --> 0:22:20.200