WEBVTT - Tariffs, Energy, and Banks 0:00:00.040 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.240 --> 0:00:29.560 This is the most important interview of the day. What 0:00:29.680 --> 0:00:32.839 you got to understand is most titles in the investment 0:00:32.880 --> 0:00:36.760 business are not like some think tank thing from senior management. 0:00:36.920 --> 0:00:40.640 They're mostly decided in a Starbucks, like a two forty 0:00:40.680 --> 0:00:45.400 Greenwich downtown. She has the greatest title of anybody and 0:00:45.560 --> 0:00:52.080 Surveillance Head of Investment Strategy in Equity Advisory Solutions. It 0:00:52.240 --> 0:00:55.840 bny mel and that can only be Alicia Levine. I 0:00:55.880 --> 0:01:01.160 have never seen the divergence of opinions like literally, I'm 0:01:01.160 --> 0:01:07.000 not exaggerating, never What is your equity advisory solutions in 0:01:07.080 --> 0:01:07.920 this chaos? 0:01:08.120 --> 0:01:09.480 So long and strong? 0:01:09.840 --> 0:01:13.760 But you're right, it has been a relentlessly frustrating year. 0:01:14.400 --> 0:01:18.240 There's a lot of fear about tariffs and policy and 0:01:18.280 --> 0:01:22.120 the speed with which unusual suggestions are coming out of 0:01:22.120 --> 0:01:24.960 the White House. I'll just call it that. And yet, 0:01:25.480 --> 0:01:27.479 and yet, we just had one of the greatest earning 0:01:27.520 --> 0:01:31.520 seasons in a long time. Earnings up about sixteen percent 0:01:31.640 --> 0:01:35.320 for the fourth quarter. Okay, and the market saying, what 0:01:35.959 --> 0:01:38.280 are you all yapping about? Okay, what do you all 0:01:38.360 --> 0:01:39.160 yapping about? 0:01:39.560 --> 0:01:42.080 Don't forget, it's a lot of y happening. 0:01:42.120 --> 0:01:42.600 We yep. 0:01:42.800 --> 0:01:48.240 But what it's earnings, its growth and its margins. We 0:01:48.360 --> 0:01:51.400 know this right, and it's interest rates. This is what 0:01:51.560 --> 0:01:54.400 drives market. So I love the conversation. We live for 0:01:54.440 --> 0:01:58.400 the conversation, that's what we do. But essentially we're looking 0:01:58.440 --> 0:02:00.920 at the fundamentals and we say, it's good that there's 0:02:00.960 --> 0:02:03.120 a two way market this year. I like the two 0:02:03.160 --> 0:02:05.840 way market because last year when everyone was on the 0:02:05.840 --> 0:02:08.440 same side of the boat. Oh there's no recession that 0:02:08.480 --> 0:02:11.040 you know, no hard landing, it's great, it's great as great. 0:02:11.160 --> 0:02:14.200 Fed's gonna cut seven times this year. Yeah, there's there's 0:02:14.240 --> 0:02:15.600 there's there's room. 0:02:15.480 --> 0:02:17.040 For error there. 0:02:17.080 --> 0:02:21.520 And I prefer investing in an environment like this where 0:02:21.680 --> 0:02:22.600 he's back and forth. 0:02:22.720 --> 0:02:25.200 Can you see this, folks on YouTube? You can you 0:02:25.240 --> 0:02:28.440 can address this. Alicia Levine, did you get the white 0:02:28.440 --> 0:02:31.200 blazer from Taylor Swift? Is that is that? Are you 0:02:31.280 --> 0:02:33.400 wearing the YSL white blazer today? 0:02:33.480 --> 0:02:37.440 I got my own style, yes, Alicia. 0:02:37.480 --> 0:02:40.519 So you talked about earnings coming in strong. It seems 0:02:40.560 --> 0:02:42.560 like this is a market that has to have earning 0:02:42.600 --> 0:02:44.600 because it doesn't seem like the Fed's going to do 0:02:44.600 --> 0:02:46.680 a lot for us this year. How confident are you 0:02:46.720 --> 0:02:48.720 that earnings can in fact come. 0:02:48.560 --> 0:02:49.119 Through this year. 0:02:49.280 --> 0:02:52.920 So I think earnings can come through this year. We've 0:02:52.960 --> 0:02:55.919 seen some degradation in the last week or two. I 0:02:55.960 --> 0:02:59.160 think this is management saying we're just not giving guidance 0:02:59.240 --> 0:03:01.640 right here right. I think there's just a reluctance to 0:03:01.720 --> 0:03:04.920 go all in because nobody knows what the policy is 0:03:04.960 --> 0:03:07.079 going to be, and so just leaving a little bit 0:03:07.200 --> 0:03:12.000 of wiggle room for an arbitrage on what sized tariff, 0:03:12.040 --> 0:03:14.920 ten percent, twenty five percent, which country. What we'd like 0:03:15.000 --> 0:03:18.440 to remind our clients and the market is the US 0:03:18.520 --> 0:03:23.760 has a massive trade deficit with Europe. If there are tariffs, 0:03:24.440 --> 0:03:27.799 our trade partners suffer more than we do. It's fascinating 0:03:27.840 --> 0:03:30.240 to me that Europe's out performing the US by the 0:03:30.240 --> 0:03:32.359 way on this. And the question you have to ask 0:03:32.400 --> 0:03:34.680 yourself is how sustainable is this? 0:03:35.120 --> 0:03:38.520 Because in the end, we slowly, slowly just. 0:03:38.880 --> 0:03:42.520 Increase our imports from Europe and rather than having you know, 0:03:43.240 --> 0:03:46.000 a trade surplus with them. That's what the market is 0:03:46.040 --> 0:03:50.240 sussing out. And in the end, the hit to earnings 0:03:50.960 --> 0:03:53.560 on one round is not going to be that high. Now, 0:03:53.880 --> 0:03:56.200 if there's retaliation, that's a very different story. But the 0:03:56.240 --> 0:03:58.160 market's telling you that it does not believe the White 0:03:58.200 --> 0:04:00.600 House essentially on this technology. 0:04:01.120 --> 0:04:03.760 Is technology going in the mag seven but just broader tech, 0:04:03.800 --> 0:04:04.760 whether it's chips or whatever. 0:04:04.840 --> 0:04:06.360 Is that going to continue to be the leader in 0:04:06.360 --> 0:04:08.960 this market? Or is this market? Does is it broadening out? 0:04:08.960 --> 0:04:09.760 Does it need to broaden? 0:04:09.840 --> 0:04:12.680 Feels more cyclical to us. Okay, so I think that 0:04:13.320 --> 0:04:15.920 I think that the mags. Look, the top ten stocks 0:04:15.920 --> 0:04:19.760 are thirty seven percent of the index. Now everybody's losing 0:04:19.960 --> 0:04:22.799 sleep over this. Oh, it's the most concentrated market ever. 0:04:22.880 --> 0:04:23.320 You know what. 0:04:23.480 --> 0:04:27.560 There's more concentration in Japan, there's more concentration in Germany. 0:04:27.880 --> 0:04:29.760 Okay, So concentration of the. 0:04:29.680 --> 0:04:33.599 Top ten is nothing unusual, nor is it fatal. I 0:04:33.640 --> 0:04:37.360 do think that there's just a breather here and some 0:04:37.400 --> 0:04:39.840 of the market, some of the multiple has to just 0:04:39.960 --> 0:04:40.680 sit and have. 0:04:40.680 --> 0:04:42.560 The earnings grow into it. Because the earnings are still 0:04:42.640 --> 0:04:44.279 very good Alicia Levine. 0:04:44.000 --> 0:04:46.240 With being y wealth with us. We welcome here in 0:04:46.279 --> 0:04:51.800 your community. Crossination on YouTube, Subscribe to Bloomberg Podcast. Alicia 0:04:51.880 --> 0:04:55.760 Levine has prodigious math skills, which she likes to hide, 0:04:55.760 --> 0:05:00.159 but the fact is she's got massively outstanding chops. So 0:05:00.279 --> 0:05:03.599 let's go there right now. When you look at the 0:05:03.640 --> 0:05:07.039 four cross moments, forget about the fancy stuff like kurtosis 0:05:07.120 --> 0:05:10.600 and arrests. Just look at the variance that creates an 0:05:10.600 --> 0:05:15.240 intelligent sharp ratio where you're getting a risk reward payoff 0:05:15.720 --> 0:05:20.480 twelve months out thirty six months out to diminish variants. 0:05:20.839 --> 0:05:25.000 Do I want to be less diversified more diversified? Do 0:05:25.080 --> 0:05:28.320 I want to do factor or sector analysis? Or is 0:05:28.360 --> 0:05:30.520 it every individual stock for itself? 0:05:30.839 --> 0:05:34.440 So I think this is a great year for individual stocks, 0:05:34.520 --> 0:05:39.000 thank you, rather than the index. That is a healthy market, right, 0:05:39.200 --> 0:05:42.640 so that makes for an interesting market. That's the two 0:05:42.640 --> 0:05:46.800 way conversation. I think that's where you want to be here, 0:05:47.160 --> 0:05:48.200 But that doesn't. 0:05:47.920 --> 0:05:51.040 Mean you well look ahead, continue please, But. 0:05:50.960 --> 0:05:54.919 That doesn't mean you just discard overall diversification. 0:05:55.040 --> 0:05:57.480 Diversification is the. 0:05:57.400 --> 0:06:01.640 Important of smoothing out of returns, and we've had clients 0:06:01.680 --> 0:06:03.279 that said to us last year, why am I even 0:06:03.320 --> 0:06:07.719 in overseas markets? Why should I bother with like you 0:06:07.760 --> 0:06:10.520 know x US developed and said, well, you have to 0:06:11.040 --> 0:06:12.880 because the valuation is so. 0:06:12.880 --> 0:06:15.560 Extreme that there is going to be there will be a. 0:06:15.560 --> 0:06:18.760 Day where there's some resolution of this, and you want 0:06:18.760 --> 0:06:20.160 to be in the market, and let me do it 0:06:20.200 --> 0:06:22.280 is to be in it, and Paul. 0:06:22.080 --> 0:06:25.599 What's important here is Katie Greidfeld's wonderful story on Vanguard 0:06:25.760 --> 0:06:28.479 and the index funds. Did you see those numbers? I 0:06:28.480 --> 0:06:31.760 mean everybody's going away from Alicia Levine, so there is 0:06:31.800 --> 0:06:35.200 two it. I mean they're all index index, index index, Alicia. 0:06:35.880 --> 0:06:37.560 How about some sectors if I want to go find 0:06:37.560 --> 0:06:40.320 some value in the US market outside of technology? 0:06:41.120 --> 0:06:42.680 What screens wall for you guys these days? 0:06:42.720 --> 0:06:45.480 So we love industrials, We love financials here. I mean 0:06:45.600 --> 0:06:47.560 financials are a really interesting story. 0:06:47.960 --> 0:06:49.839 Buying Jpmork and Goldman Sachs, that kind of thing. 0:06:49.839 --> 0:06:50.200 Am right? 0:06:50.240 --> 0:06:53.040 Well, I can't talk about specific names if we like overall, 0:06:53.200 --> 0:06:57.080 I think that the capital providers, the alternative capital providers, 0:06:57.440 --> 0:07:00.520 they're taking a pause here. There's a reason they after 0:07:00.560 --> 0:07:03.240 the election, because you're going to see more activity, friendlier 0:07:03.279 --> 0:07:06.280 face at the FTC. This is all good for financials. Listen, 0:07:06.400 --> 0:07:11.000 if you lessen the regulatory burden, that sector becomes less 0:07:11.000 --> 0:07:13.040 of a utility and more of a growth sector again, 0:07:13.080 --> 0:07:15.240 and then the multiple changes and in the end it's 0:07:15.240 --> 0:07:17.720 not just the earnings moving higher. Because of it, you 0:07:17.840 --> 0:07:20.680 get a better multiple, and we think that's sustainable. 0:07:20.720 --> 0:07:22.200 Here MAG seven. 0:07:22.520 --> 0:07:24.360 MAG seven is going to be well, it's been the 0:07:24.440 --> 0:07:26.800 LAG seven yea for. 0:07:26.760 --> 0:07:28.880 A cup of coffee. It's been the lag seven. 0:07:28.680 --> 0:07:29.920 For a cup of coffee. 0:07:29.960 --> 0:07:32.600 You look for three years, so three years. 0:07:32.680 --> 0:07:36.280 Yeah, I think Alicia doesn't drink senka. Let's be sure 0:07:36.480 --> 0:07:38.480 that's Lily. It's like early or whatever. 0:07:38.560 --> 0:07:40.000 Yeah, it's ULTI. 0:07:40.560 --> 0:07:44.880 But look, the MAG seven needs to at least be 0:07:45.080 --> 0:07:48.880 in line. In other words, it can't massively underperform the market. 0:07:49.320 --> 0:07:50.920 In order to get to the place where we think 0:07:50.920 --> 0:07:51.320 the market is. 0:07:51.480 --> 0:07:55.000 Your securities research would be in Why Wealth suggesting they will. 0:07:54.920 --> 0:07:58.240 Underperform, not that it'll underperform. We still think you have 0:07:58.360 --> 0:08:02.640 massive earnings and massive marge. The cash flow and cash flow, wello, 0:08:02.760 --> 0:08:05.240 I sat here many times talking about the cash flow margin. 0:08:05.520 --> 0:08:07.240 So the question is, does all. 0:08:07.080 --> 0:08:11.040 The spending on AI crush that cash flow margin? 0:08:11.320 --> 0:08:12.520 It does on the margin. 0:08:12.760 --> 0:08:15.840 The market lives in a second derivative, It lives on 0:08:15.880 --> 0:08:18.360 the rate of change, so to that you could get 0:08:18.480 --> 0:08:20.880 some just sort of flattening out of performance. But that 0:08:20.920 --> 0:08:23.760 doesn't mean it's over, and it doesn't mean it's two thousand. 0:08:23.600 --> 0:08:26.480 Thirty second audible. Alicia and I bust their chops about 0:08:26.600 --> 0:08:30.000 education of offspring, and that what's the tip point of 0:08:30.040 --> 0:08:33.680 one hundred thousand dollars a year tuition? When do people 0:08:33.800 --> 0:08:34.440 just say no? 0:08:34.760 --> 0:08:37.280 They're not saying no, They're not saying guys, the market's 0:08:37.320 --> 0:08:40.439 up fifty eight percent over the last two years. Real 0:08:40.559 --> 0:08:43.319 estate's up forty five percent in the last four years. 0:08:43.360 --> 0:08:44.000 No one's saying no. 0:08:44.600 --> 0:08:53.880 Alicia Levine, thank you so much, Absolutely brilliant. Thank you. 0:08:53.880 --> 0:08:57.480 You're listening to the Bloomberg Surveillance Podcast. Catch us Live 0:08:57.559 --> 0:09:01.079 weekday afternoons from seven to ten amis the Listen on Apple, 0:09:01.120 --> 0:09:04.480 Karplay and Android Otto with the Bloomberg Business app, or 0:09:04.600 --> 0:09:06.120 watch us Live on YouTube. 0:09:06.280 --> 0:09:08.000 We've spent a couple of weeks trying to get him 0:09:08.040 --> 0:09:11.400 in here. He's with Hart Tree Partners. Edward Morris's absolutely 0:09:11.400 --> 0:09:16.720 definitive on hydrocarbon. Think of Daniel Jurgen's surprise. Ed Morris 0:09:16.720 --> 0:09:19.319 shows up about page twenty three in the prize from 0:09:19.360 --> 0:09:22.360 a few years ago definitive at City Group and of 0:09:22.360 --> 0:09:25.360 course now with Hart Tree Partners. When was the first 0:09:25.400 --> 0:09:28.480 time you were in riod. 0:09:28.600 --> 0:09:31.440 It was in the late nineteen seventies. 0:09:32.440 --> 0:09:35.920 With Faisal, with King Faisel. 0:09:36.240 --> 0:09:38.199 Yes, but I didn't see him at that point in time. 0:09:38.320 --> 0:09:41.120 What is the sharp okay, fine, but what is the 0:09:41.240 --> 0:09:46.120 strongest difference now between the Royalty of Riod Is They 0:09:46.160 --> 0:09:51.240 look out at this Maelstrom versus our stereotype of Saudi Arabia. 0:09:52.120 --> 0:09:55.320 So the sadiast have come a long way. They're looking 0:09:55.400 --> 0:10:00.880 at how to keep it public happy. They they are 0:10:01.200 --> 0:10:03.840 trying to diversify their economy as quickly as they can, 0:10:05.000 --> 0:10:08.640 and it's looking to the future rather than building on 0:10:08.679 --> 0:10:09.640 the present for the past. 0:10:09.760 --> 0:10:13.000 What is their relationship with Russia? This idea of Opec 0:10:13.160 --> 0:10:17.319 plus is it a what's a distinction of that relationship? 0:10:17.360 --> 0:10:21.160 The relationship is kind of critical. Think about where the 0:10:21.200 --> 0:10:24.640 Saudis are, where Opek is. The Saudis have a production 0:10:24.760 --> 0:10:28.880 capacity today between eleven and twelve million barrels a day. 0:10:29.280 --> 0:10:32.199 That's what they had in nineteen eighty nineteen eighty was 0:10:32.240 --> 0:10:36.760 a long time ago. OPEC's production capacity then was around 0:10:36.840 --> 0:10:39.520 thirty two to thirty three million barrels a day. Today 0:10:39.559 --> 0:10:41.760 it's thirty five thirty six million barrels a day. The 0:10:41.760 --> 0:10:45.200 oil market was then sixty million barrels a day and 0:10:45.240 --> 0:10:48.360 today it's one hundred million a day. So they discovered 0:10:48.440 --> 0:10:51.880 that they could not on their own balance the market, 0:10:51.960 --> 0:10:54.800 they could not put a floor under prices, and they 0:10:54.840 --> 0:10:58.480 needed to expand, and they had the opportunity to do 0:10:58.559 --> 0:11:02.800 so in the middle of the last decade when we 0:11:02.880 --> 0:11:06.280 had volatility across the planet, and a lot of that 0:11:06.400 --> 0:11:12.360 volatility was a result of the two fastest growing oil 0:11:12.400 --> 0:11:15.880 producing countries in the world, Russia and the United States. 0:11:16.679 --> 0:11:20.439 They were looking in the middle of the last decade, 0:11:20.480 --> 0:11:26.280 actually around twenty thirteen, just at the time before Russia 0:11:27.080 --> 0:11:32.040 had his first invasion of Ukraine, and they saw that 0:11:32.440 --> 0:11:35.120 the production growth was a million barrels a day in 0:11:35.120 --> 0:11:37.440 both countries if you look back a couple of years, 0:11:38.200 --> 0:11:41.400 and they decided to bring prices down. They thought if 0:11:41.400 --> 0:11:45.280 they could bring prices down to around seventy dollars a barrel, 0:11:45.640 --> 0:11:48.120 they would lose They would see the world lose two 0:11:48.120 --> 0:11:50.160 million barrels a day of oil and it didn't happen. 0:11:50.360 --> 0:11:53.200 Paul, I want to mention this. Everyone was looking for 0:11:53.320 --> 0:11:57.520 one hundred and it was a lone voice at City Group, 0:11:58.760 --> 0:12:01.600 a big grizzled Edward Morris, you know, a bit older, 0:12:01.679 --> 0:12:06.640 saying well, maybe not he nailed the move to seventy. 0:12:07.000 --> 0:12:09.480 So ed how do you think about Russia as a 0:12:09.520 --> 0:12:12.600 global supplier these days, because it seems like just in 0:12:12.640 --> 0:12:15.280 the last few days things are changing. When you think 0:12:15.280 --> 0:12:17.560 about the Trump administration how they're viewing Russia. 0:12:17.640 --> 0:12:18.640 Do you expect. 0:12:18.360 --> 0:12:21.360 Russia to be a bigger global supplier. I'm not sure 0:12:21.360 --> 0:12:22.040 where that oil went. 0:12:22.679 --> 0:12:24.760 You know, it all depends on when you're talking about 0:12:24.840 --> 0:12:28.120 what your horizon is and what could possibly happen. And 0:12:28.440 --> 0:12:30.720 you have to remember that it wasn't that long ago. 0:12:30.840 --> 0:12:38.199 It was twenty nineteen when Putin visited Russia, visited Saddi 0:12:38.320 --> 0:12:41.760 Raby right after the attack on the app Cake facility 0:12:42.520 --> 0:12:44.960 and said, listen, we're going to be cooperating with you 0:12:45.559 --> 0:12:48.840 through your Ramco IPO, and then we're going to be 0:12:49.160 --> 0:12:52.840 out on our own and section. The CEO of Roznev 0:12:52.920 --> 0:12:55.560 said right after that IPO, we're out on our own 0:12:56.040 --> 0:12:58.959 we are going to be growing oil production at home 0:12:59.320 --> 0:13:04.600 and abroad. They have right now the Vastok field in 0:13:04.640 --> 0:13:08.520 northern Siberia, and that field can produce its scheduled to 0:13:08.520 --> 0:13:12.120 produce two million incremental barrels a day. They are wash 0:13:12.200 --> 0:13:15.439 in oil and they need to do something about it. 0:13:15.520 --> 0:13:19.360 So President Trump says, drill, baby, drill, and we don't 0:13:19.760 --> 0:13:22.840 waste time on that. But what we can state with 0:13:23.120 --> 0:13:28.040 Edward Morse is oil a weapon for the United States 0:13:28.080 --> 0:13:29.520 in our geopolitics. 0:13:30.400 --> 0:13:33.840 Oil is certainly an important part of the foreign policy 0:13:33.840 --> 0:13:36.840 in the country. It cannot be weaponized other than the 0:13:36.880 --> 0:13:39.840 degree to which you can put sanctions on a country. 0:13:40.080 --> 0:13:42.600 I don't know what weaponizing it means. I don't know 0:13:42.880 --> 0:13:45.760 what we're going to pursue. Energy dominance means. I know 0:13:45.760 --> 0:13:51.040 what it means as a soft, powerful instrument of policy. 0:13:51.080 --> 0:13:53.600 And let me give you an example. We have become 0:13:54.040 --> 0:13:57.600 the largest exporter of energy in the world, the largest 0:13:57.600 --> 0:14:01.839 exporter of LNG. That LNG export growth enabled the United 0:14:01.840 --> 0:14:06.960 States to replace every drop of Russian energy, but particularly 0:14:07.080 --> 0:14:09.840 natural gas, going into Europe, and it did so at 0:14:09.880 --> 0:14:13.199 a time when it was able to globalize a gas 0:14:13.240 --> 0:14:17.040 market that had not been globalized. We have made oil 0:14:17.080 --> 0:14:21.360 because we don't allow destination restrictions. We've enabled natural gas 0:14:21.880 --> 0:14:24.240 to be global and the price of it is based 0:14:24.360 --> 0:14:27.040 at Henry Hubb in the United States. That's kind of 0:14:27.120 --> 0:14:32.520 soft diplomacy. We have an ability to expand l G globally, 0:14:32.560 --> 0:14:34.920 but it's a soft ability. We have an ability to 0:14:35.000 --> 0:14:40.160 say multilateral lending institutions ought to be pushing natural gas. 0:14:40.240 --> 0:14:45.600 They ought to be backstopping regasification. It's cleaner than coal, 0:14:45.960 --> 0:14:49.920 it's helpful to the global economy. But that's soft diplomacy. 0:14:49.920 --> 0:14:52.160 It's not using it as a weapon. 0:14:53.320 --> 0:14:55.840 So talk to us about the demand side of the equation. 0:14:55.840 --> 0:14:57.480 I know, when you think about some of these commodities, 0:14:57.480 --> 0:14:59.840 like global oil, you really have to have a call 0:15:00.160 --> 0:15:00.880 on demand. 0:15:01.520 --> 0:15:02.320 What do you think demand? 0:15:02.440 --> 0:15:07.360 Is brilliant question, But even more brilliant do you drive 0:15:07.400 --> 0:15:07.760 an EV? 0:15:09.320 --> 0:15:11.160 I got to tell you I did drive an EV 0:15:11.800 --> 0:15:14.360 until we moved back to New York full time, and 0:15:14.400 --> 0:15:17.000 then I discovered that it was too expensive to have 0:15:17.040 --> 0:15:20.680 a car to deal with Actually, the rush on garages 0:15:20.960 --> 0:15:24.000 right at the edge of the zone from where New 0:15:24.080 --> 0:15:25.440 York one to go south there. 0:15:25.600 --> 0:15:29.880 Coming up on the congestion text, Paul, continue with. 0:15:29.840 --> 0:15:33.360 Your demand view here of the next year or two. 0:15:33.840 --> 0:15:35.920 So as we know, there's been a difference of demand 0:15:36.000 --> 0:15:40.200 views between people in this country, between OPEK and the 0:15:40.560 --> 0:15:44.320 ia OPEK and the IAU. Demand is kind of very 0:15:44.360 --> 0:15:47.640 simple if you look at it. Historically, we've had a 0:15:47.880 --> 0:15:51.720 regular drop in the oil intensity of GDP around the world, 0:15:52.240 --> 0:15:55.640 starting at the really end of the post World War 0:15:55.680 --> 0:16:02.600 Two growth of road transport in reconstructed Europe, reconstructed Japan, 0:16:03.040 --> 0:16:05.360 and in the unterstate highway system in the US, We've 0:16:05.400 --> 0:16:10.080 had a year after year a drop in the percentage 0:16:10.640 --> 0:16:14.720 of demand growth per unit of GDP growth. Now, that 0:16:14.720 --> 0:16:17.520 doesn't mean that oil demand comes to an end. It 0:16:17.560 --> 0:16:21.280 means it slows down, okay. And to give you an example, 0:16:22.160 --> 0:16:25.120 if we go back to nineteen seventy seventy one, for 0:16:25.280 --> 0:16:28.720 every one percent increase in the world in global oil 0:16:28.800 --> 0:16:32.080 demand and GDP, there was a one point one point 0:16:32.080 --> 0:16:35.320 two percent increase in oil demand. Today's about zero point 0:16:35.360 --> 0:16:39.520 three to one. So if we have three percent global 0:16:39.560 --> 0:16:42.040 GDP growth, we have a million barrels a day on 0:16:42.120 --> 0:16:44.160 a one percent based on one hundred million barrel a 0:16:44.200 --> 0:16:48.880 day market of oil demand. And that's continuing to slide. 0:16:49.000 --> 0:16:51.120 So think of it as we're not going to have 0:16:51.200 --> 0:16:53.240 much more than million barrels a day of demand growth. 0:16:53.360 --> 0:16:55.640 We're going to thrilled that with us today. Edward Morris, 0:16:55.720 --> 0:16:58.280 of course you know I'm from City Group at harttreet Partners. 0:16:58.920 --> 0:17:02.880 Now definitive and geopolitics of oil and also of course 0:17:03.280 --> 0:17:05.639 pricing of will do you have at heart treat? Are 0:17:05.680 --> 0:17:08.639 you allowed to have a Brent guess? Do you have 0:17:08.680 --> 0:17:11.439 an oil barrel guess? Or is it a folk spot? 0:17:12.119 --> 0:17:15.159 No, No, it's not a problem. We live in the 0:17:15.160 --> 0:17:18.880 most volatile market the world has seen, based on things 0:17:18.920 --> 0:17:21.120 that are out of our control. We don't know what's 0:17:21.160 --> 0:17:24.040 going to happen here and there. It's a relatively evenly 0:17:24.080 --> 0:17:27.320 balanced market. But for the fact that Opek, going back 0:17:27.320 --> 0:17:30.280 to your first question, okay plus has taken so much 0:17:30.320 --> 0:17:32.560 oil out of the market that it now amounts to 0:17:32.680 --> 0:17:36.119 eight million barrels a day. That's a lot of shut 0:17:36.160 --> 0:17:39.199 in production capacity that can come on. And if we 0:17:39.240 --> 0:17:42.360 look at the volatility today, we have prices going up 0:17:42.760 --> 0:17:45.280 in part because of the drone attacks on the CPC 0:17:45.400 --> 0:17:48.959 pipeline coming out of the CASPI and bringing Russian and 0:17:49.119 --> 0:17:53.680 Kazakh oil into the Mediterranean. We have an announcement from 0:17:54.160 --> 0:17:59.400 Kurdistan from Baghdad that the pipeline from Kurdistan threw Turkey 0:17:59.400 --> 0:18:02.600 into the medical training is going to be revived next week. 0:18:03.160 --> 0:18:07.000 That's we've lost maybe three hundred thousand barrels a day 0:18:07.240 --> 0:18:10.560 out of the CPC pipeline. We'll get perhaps three hundred 0:18:10.600 --> 0:18:15.320 thousand barrels a day out of Iraq unexpected by next week. 0:18:15.359 --> 0:18:18.639 So given that volatility, we think oil is in the range. 0:18:18.720 --> 0:18:20.840 The range is sixty eight to seventy eight. 0:18:20.880 --> 0:18:24.159 I assume it's ghosh, that's French ghoshe of you to 0:18:24.240 --> 0:18:26.840 do by hold sell right now. I don't want to buyhold, 0:18:26.880 --> 0:18:29.720 sell and big oil. But how do you position big 0:18:29.760 --> 0:18:34.560 oil when I see Chevron announcing massive layoffs, massive restructure 0:18:35.160 --> 0:18:38.640 and you know it's weak double digit return over thirty years. 0:18:39.280 --> 0:18:43.120 Is big oil prosperous? Is it thriving? Is it the 0:18:43.160 --> 0:18:44.840 stereotype of our ute? 0:18:44.960 --> 0:18:46.960 Well, as we know, some big oil is prospering and 0:18:47.000 --> 0:18:50.560 some big oil is not prospering. Maybe for some investments 0:18:50.560 --> 0:18:52.800 that they were making in the past, in the recent past, 0:18:53.480 --> 0:18:58.240 in the drive to go heavily into renewables and into 0:18:58.280 --> 0:19:01.240 things that weren't providing the same level return. But look 0:19:01.280 --> 0:19:04.240 at the production growth of Chevron, the production growth of 0:19:04.480 --> 0:19:08.000 Exxon on a global platform based in part of the 0:19:08.080 --> 0:19:12.320 United States. They're increasing their output. They're increasing their output 0:19:12.320 --> 0:19:15.040 of oil and gas in a world in which they're 0:19:15.119 --> 0:19:15.800 very competitive. 0:19:16.720 --> 0:19:17.200 Talk to us. 0:19:17.320 --> 0:19:21.919 I'm watching the television show Landman at the life in 0:19:21.920 --> 0:19:23.879 the oil patch in West Texas. So I now consider 0:19:23.920 --> 0:19:27.200 myself an expert on global oil and gas. Here talk 0:19:27.240 --> 0:19:30.240 to us about the US. We're now a net exporter 0:19:30.520 --> 0:19:34.760 of energy. What is our role in the global energy market? Visavsay, 0:19:34.800 --> 0:19:36.240 maybe like an OPEC plus or something. 0:19:36.560 --> 0:19:39.800 We have transformed the energy market to the world, including 0:19:39.840 --> 0:19:42.720 the oil market. If you go back to twenty ten, 0:19:43.359 --> 0:19:46.960 we were a gross importer and a net importer, and 0:19:47.040 --> 0:19:50.520 our production base if you add NGLs and other liquids, 0:19:50.960 --> 0:19:54.080 was around eight million barrels a day. The last month 0:19:54.080 --> 0:19:56.840 for which we have data, our production of liquids was 0:19:56.880 --> 0:20:00.000 twenty three million barrels a day. We have moved from 0:20:00.080 --> 0:20:04.680 being the largest gross and net import of the world 0:20:04.680 --> 0:20:08.080 to being the largest gross exporter. We export sixteen to 0:20:08.119 --> 0:20:11.920 seventeen million barrels a day of liquids nobody. That's more 0:20:12.000 --> 0:20:15.840 than the combined exports of Russia and Saudi Arabia. Our 0:20:15.880 --> 0:20:18.840 production is more than the total production of Russia and 0:20:18.840 --> 0:20:22.199 Saudi Arabia combined. And we've become a net exporter on 0:20:22.240 --> 0:20:24.480 the order of magnitude of four million barrels a day. 0:20:24.800 --> 0:20:27.360 So that has made the basic difference in the global 0:20:27.400 --> 0:20:31.480 market is a wild difference. Is what gives the US leverage. 0:20:31.560 --> 0:20:33.159 I'd love to get you back in here in a 0:20:33.240 --> 0:20:35.760 six months three month basis, doctor Morris. Let me ask 0:20:35.760 --> 0:20:38.600 you one final question, and it's sort of from sixty 0:20:38.640 --> 0:20:44.400 thousand feet in philosophical how bad did Anglo miracle screw up? 0:20:44.720 --> 0:20:48.639 I mean, within the arch of Edward Morris's tenure owning 0:20:48.680 --> 0:20:53.240 the high ground on this how bad did German leadership 0:20:53.359 --> 0:20:58.199 screw up? From abnaw or forward. 0:20:58.320 --> 0:21:04.240 So my personal experience in it is dealing with the 0:21:05.640 --> 0:21:09.439 effort by Germany to become dependent on Russian gas. So 0:21:09.480 --> 0:21:11.280 I was in the State Department at the time. 0:21:11.160 --> 0:21:13.760 That the serving both Carter and Reagion. 0:21:15.200 --> 0:21:19.480 And the US and France were the only NATO countries 0:21:19.880 --> 0:21:22.680 that said, hey, you've got to look at you Germany 0:21:23.080 --> 0:21:26.960 have to look at dependence. Yes, you can import gas, 0:21:27.520 --> 0:21:30.520 but think about what it will do to your foreign policy. 0:21:30.560 --> 0:21:34.719 Think about what leverage you've lost in terms of that dependency, 0:21:34.960 --> 0:21:39.320 your inability to say no. And we saw that over time, 0:21:39.359 --> 0:21:42.080 and I think Germany has really learned that lesson in 0:21:42.200 --> 0:21:46.720 terms of being very reluctant as they go through this 0:21:46.800 --> 0:21:51.159 election process of this coming Sunday, almost all of the 0:21:51.200 --> 0:21:54.600 parties are reluctant to do more than say, we might 0:21:54.880 --> 0:22:00.040 consider importing oil on a spot basis, but not on 0:22:00.080 --> 0:22:02.160