1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,440 Speaker 1: Bloomberg dot Com and of course on the Bloomberg Well 5 00:00:27,480 --> 00:00:29,159 Speaker 1: this as well. We're throw to bring you Kenney on 6 00:00:29,280 --> 00:00:32,360 Speaker 1: cf R a course years of experience and looking at 7 00:00:32,360 --> 00:00:34,360 Speaker 1: banks and he's more by hold sale than what else. 8 00:00:34,440 --> 00:00:37,120 Speaker 1: And Williams is doing. Ken what a bang up year 9 00:00:37,240 --> 00:00:40,600 Speaker 1: last year? Can you continue to acquire shares of this 10 00:00:41,080 --> 00:00:44,120 Speaker 1: of these banks this year? We do, but I think 11 00:00:44,240 --> 00:00:46,840 Speaker 1: we're all boats rows in the fourth quarter. With strong 12 00:00:47,080 --> 00:00:50,000 Speaker 1: stock performance for the banks, it's going to be more selective. 13 00:00:50,400 --> 00:00:53,160 Speaker 1: We have an America Fast First plan, which is really 14 00:00:53,520 --> 00:00:56,000 Speaker 1: the banks like Bank of America and JP that are 15 00:00:56,080 --> 00:00:59,480 Speaker 1: highly concentrated in the US. That's driven by the core, 16 00:00:59,560 --> 00:01:03,520 Speaker 1: which is loan growth and deposits. I would not really 17 00:01:03,560 --> 00:01:07,120 Speaker 1: look to the capital markets or the strong reprint for 18 00:01:07,240 --> 00:01:11,880 Speaker 1: fixed income. Last year was a very weak fourth quarter. Sequentially, 19 00:01:11,920 --> 00:01:14,759 Speaker 1: it's flat to down for six from the third quarter 20 00:01:14,800 --> 00:01:18,039 Speaker 1: of two thousand nineteen. So bringing it back um, what 21 00:01:18,160 --> 00:01:23,800 Speaker 1: we're continually seeing as um flat or weakness outside the US. UH. 22 00:01:23,920 --> 00:01:27,039 Speaker 1: The US consumer is just strong. So I think if 23 00:01:27,040 --> 00:01:30,039 Speaker 1: you can drive loan growth that offsets kind of a 24 00:01:30,160 --> 00:01:35,440 Speaker 1: flat environment for rates, and if you're growing accounts by 25 00:01:35,440 --> 00:01:39,200 Speaker 1: expanding into new metropolitan markets like Bank of American JP, 26 00:01:39,760 --> 00:01:43,280 Speaker 1: they are taking markets here from Wells Fargo. Ken, who's 27 00:01:43,280 --> 00:01:45,319 Speaker 1: having success? Get in the volume side of the story 28 00:01:45,400 --> 00:01:50,440 Speaker 1: up who's delivering loan growth? Um, you know clearly it's 29 00:01:50,560 --> 00:01:54,360 Speaker 1: being driven by mortgage auto, but also you know what 30 00:01:54,520 --> 00:01:58,000 Speaker 1: drives the US economy is small business in terms of 31 00:01:58,040 --> 00:02:02,640 Speaker 1: employment growth. We're also seeing households that have pretty good 32 00:02:02,680 --> 00:02:06,680 Speaker 1: balance sheets compared to where we were ten years ago. UH. 33 00:02:06,840 --> 00:02:09,560 Speaker 1: I think there's a surprise on the upside. Bank analysts 34 00:02:09,560 --> 00:02:14,200 Speaker 1: are generally very conservative. They look historically at price to book. 35 00:02:14,280 --> 00:02:16,960 Speaker 1: But if you have the loan growth here, and you 36 00:02:17,160 --> 00:02:22,280 Speaker 1: have very good credit quality via as a strong credit quality, 37 00:02:22,320 --> 00:02:26,480 Speaker 1: and there's no distressed industry on the commercial side, you 38 00:02:26,520 --> 00:02:30,440 Speaker 1: have a pretty good setting for financials, particularly banks, to 39 00:02:30,560 --> 00:02:33,880 Speaker 1: do well in the market because they're under price relative 40 00:02:33,960 --> 00:02:36,000 Speaker 1: to the market. Ken, which bank would you bet on 41 00:02:36,080 --> 00:02:40,360 Speaker 1: most for this year? Well? The by recommendations we have 42 00:02:40,480 --> 00:02:43,920 Speaker 1: as mentioned, our Bank of America and JP Morgan. We 43 00:02:44,000 --> 00:02:46,600 Speaker 1: mentioned it's going to be a stock picking market. We 44 00:02:46,680 --> 00:02:49,080 Speaker 1: have cells on Wealth Fargo and to sell in Goldman, 45 00:02:49,160 --> 00:02:53,679 Speaker 1: Sachs Morgan Stanley as a hold in City as well well. 46 00:02:53,800 --> 00:02:56,040 Speaker 1: Fargo just missed it, and I think Goldman, with the 47 00:02:56,040 --> 00:03:00,280 Speaker 1: core being cyclical, volatile businesses and capital markets, they're going 48 00:03:00,320 --> 00:03:02,239 Speaker 1: to have to have a great show on January twenty 49 00:03:02,320 --> 00:03:04,960 Speaker 1: nine talking about their five year plan. Hey, ken we'll 50 00:03:05,000 --> 00:03:06,760 Speaker 1: talk about that government called a little bit later in 51 00:03:06,760 --> 00:03:08,680 Speaker 1: the program. Ken Ley on a CFL Ray will be 52 00:03:08,680 --> 00:03:24,840 Speaker 1: sticking with us. The good news this morning the United 53 00:03:24,880 --> 00:03:27,160 Speaker 1: States and China a little bit later today in Washington, 54 00:03:27,240 --> 00:03:29,320 Speaker 1: d C. Set to sit around the table and sign 55 00:03:29,360 --> 00:03:32,200 Speaker 1: a phase one trade deal. The bad news for investors 56 00:03:32,200 --> 00:03:34,519 Speaker 1: out there at least is that the tariffs are expected 57 00:03:34,560 --> 00:03:37,400 Speaker 1: to stay in place until after the November election. The 58 00:03:37,480 --> 00:03:39,440 Speaker 1: issue for many of you I know, is that it 59 00:03:39,520 --> 00:03:42,920 Speaker 1: leaves too many issues with China unresolved. Went again on 60 00:03:42,920 --> 00:03:44,440 Speaker 1: this joining us on the phone, and please to say 61 00:03:44,480 --> 00:03:46,760 Speaker 1: is Henry had a trades DA partner's managing partner and 62 00:03:46,840 --> 00:03:49,760 Speaker 1: head of economic policy. Henry had to tell let's talk 63 00:03:49,800 --> 00:03:52,560 Speaker 1: about it. The issues, the outstanding issues for you as 64 00:03:52,600 --> 00:03:57,400 Speaker 1: we await this signing ceremony. Hey, guys, the biggest surprise 65 00:03:57,520 --> 00:03:59,280 Speaker 1: for me. I mean, we've we've known a couple of 66 00:03:59,360 --> 00:04:01,840 Speaker 1: mostly tales for about a month now, but the biggest 67 00:04:01,840 --> 00:04:05,880 Speaker 1: surprise came yesterday with Minu Chin and U str Lifeheiser 68 00:04:05,880 --> 00:04:08,320 Speaker 1: announced that there would be no upward or down or 69 00:04:08,360 --> 00:04:12,080 Speaker 1: well no downward adjustment to taris for more than ten months. 70 00:04:12,120 --> 00:04:15,200 Speaker 1: That's different than what Lifeheiser said about a year ago 71 00:04:15,280 --> 00:04:18,080 Speaker 1: when he walked through the enforcement mechanism on the trade deal. 72 00:04:18,360 --> 00:04:20,680 Speaker 1: He had explained to US a one, a two and 73 00:04:20,760 --> 00:04:24,000 Speaker 1: a six month period of essentially check ins with the 74 00:04:24,080 --> 00:04:26,760 Speaker 1: Chinese to see if they were essentially adhering to the 75 00:04:26,800 --> 00:04:30,320 Speaker 1: Phase one deal. And last night or yesterday afternoon, they announced, 76 00:04:30,600 --> 00:04:32,400 Speaker 1: you know, even if they are complying, we won't be 77 00:04:32,440 --> 00:04:35,080 Speaker 1: reducing tarish for here. And the reason that that's driving 78 00:04:35,120 --> 00:04:37,720 Speaker 1: markets a bit lower yesterday is because investors have this 79 00:04:37,920 --> 00:04:40,719 Speaker 1: very strong sense that the president cares deeply about the 80 00:04:40,720 --> 00:04:43,919 Speaker 1: stock market in particular, not so much macroeconomic data like 81 00:04:43,960 --> 00:04:47,160 Speaker 1: we're used to with earlier and previous administrations and congresses, 82 00:04:47,400 --> 00:04:49,920 Speaker 1: but specifically the stock market. So the hope had been, 83 00:04:50,240 --> 00:04:53,360 Speaker 1: should we get to you know, September October of next year, 84 00:04:53,400 --> 00:04:55,240 Speaker 1: and the president needs a boost to the stock market 85 00:04:55,240 --> 00:04:57,920 Speaker 1: to help carry him over in certain states to win 86 00:04:58,000 --> 00:05:02,160 Speaker 1: the election in he would drop tariffs, announce you know 87 00:05:02,240 --> 00:05:04,599 Speaker 1: something else. All right, all chat doesn't seem likely. Let's 88 00:05:04,600 --> 00:05:06,600 Speaker 1: talk about the numbers. So the US agreed to have 89 00:05:06,720 --> 00:05:10,520 Speaker 1: the duties on twenty billion dollars of imports and delay 90 00:05:11,400 --> 00:05:15,400 Speaker 1: others in return for Chinese promises, particularly on the infrastructure 91 00:05:15,600 --> 00:05:19,560 Speaker 1: subsidies and others. Henrietta, how is that palatable to the 92 00:05:19,640 --> 00:05:23,400 Speaker 1: Chinese government from their perspective politically to not have these 93 00:05:23,480 --> 00:05:25,839 Speaker 1: rolled back in the near future and have its allayed 94 00:05:25,920 --> 00:05:28,520 Speaker 1: for so for so long if it's for such political reasons, 95 00:05:28,520 --> 00:05:31,880 Speaker 1: as you say, my understanding of the Chinese perspective, as 96 00:05:31,920 --> 00:05:34,800 Speaker 1: they got spooked in August that the President was really 97 00:05:34,880 --> 00:05:38,039 Speaker 1: quite serious about escalating tariffs on List one through three 98 00:05:38,080 --> 00:05:40,760 Speaker 1: to thirty percent rates up from twenty five, and then 99 00:05:40,800 --> 00:05:43,360 Speaker 1: also on imposing the List four B tariffs, which would 100 00:05:43,360 --> 00:05:45,480 Speaker 1: have been a hundred and sixty billion dollars worth of 101 00:05:45,520 --> 00:05:48,719 Speaker 1: additional goods shifted in from China. So their primary goal 102 00:05:48,800 --> 00:05:52,960 Speaker 1: shifted away from caring about the political consequences and uh, 103 00:05:53,839 --> 00:05:56,680 Speaker 1: guessing whether Trump would be re elected or not, and onto, 104 00:05:57,040 --> 00:05:59,680 Speaker 1: how can we avoid further tariffs? From here? We need 105 00:05:59,720 --> 00:06:02,159 Speaker 1: to in some aggs. We need some pork, So let's 106 00:06:02,200 --> 00:06:04,440 Speaker 1: just move this along, Henrietta. My chart of the year 107 00:06:04,560 --> 00:06:07,400 Speaker 1: was customs money coming in and it's a hockey stick, 108 00:06:07,440 --> 00:06:10,040 Speaker 1: as you know, about four or five six standard deviations. 109 00:06:10,400 --> 00:06:15,280 Speaker 1: Let's back off from the math. Have tariffs worked? Um, 110 00:06:15,400 --> 00:06:19,120 Speaker 1: Tariffs have worked to essentially do what trade wars do, 111 00:06:19,240 --> 00:06:22,400 Speaker 1: which is forced losers upon everyone. UM. I think one 112 00:06:22,400 --> 00:06:24,560 Speaker 1: of the big reasons why you're not going to see 113 00:06:24,600 --> 00:06:28,080 Speaker 1: a lot of companies clamoring to take part in the 114 00:06:28,080 --> 00:06:31,560 Speaker 1: new sort of injunction and injustice processes in the Phase 115 00:06:31,600 --> 00:06:33,640 Speaker 1: one deal is because at the end of the day, 116 00:06:33,760 --> 00:06:36,520 Speaker 1: if they say that there's a problem in China's not 117 00:06:36,560 --> 00:06:40,120 Speaker 1: adhering to Phase one, what happens, well, those manufacturers importing 118 00:06:40,120 --> 00:06:42,560 Speaker 1: those same goods are going to see their cost rise. 119 00:06:42,960 --> 00:06:45,960 Speaker 1: So UM, I think the tariff data is proving what 120 00:06:46,200 --> 00:06:48,359 Speaker 1: a lot of economists have consistently said, which is that 121 00:06:48,360 --> 00:06:50,920 Speaker 1: nobody wins a trade war. This is the issue, isn't it, Henrietta. 122 00:06:50,960 --> 00:06:53,080 Speaker 1: The worry that this breaks down again? How long before 123 00:06:53,120 --> 00:06:55,880 Speaker 1: the United States sits there realizes that, as they have 124 00:06:55,960 --> 00:06:58,080 Speaker 1: done time and time again, China has agreed to something 125 00:06:58,120 --> 00:07:00,360 Speaker 1: they haven't followed through on. When you look at agreement 126 00:07:00,440 --> 00:07:02,600 Speaker 1: right now, Henrietta, the scarce desetails that we have at 127 00:07:02,600 --> 00:07:04,839 Speaker 1: the moment before the big reveal of the aty six 128 00:07:04,839 --> 00:07:06,800 Speaker 1: page document. If we do and did get it all, 129 00:07:07,120 --> 00:07:09,240 Speaker 1: what is it about this particular deal that you think 130 00:07:09,240 --> 00:07:12,720 Speaker 1: the samaria for some conflict further down the road. I 131 00:07:12,760 --> 00:07:16,080 Speaker 1: think the conflict is helpfully pushed off until after the election. 132 00:07:16,120 --> 00:07:19,280 Speaker 1: The White House has severely lost its appetite for further 133 00:07:19,360 --> 00:07:23,000 Speaker 1: tariffs here. UM. There are once again calls for at 134 00:07:23,080 --> 00:07:26,440 Speaker 1: least essentially as that we had into our recessionary environment 135 00:07:26,480 --> 00:07:30,680 Speaker 1: in the President's largest approval numbers come from his handling 136 00:07:30,680 --> 00:07:33,240 Speaker 1: of the economy. So I would not expect tariffs to 137 00:07:33,400 --> 00:07:35,960 Speaker 1: rise from here, which is probably the best news that 138 00:07:36,000 --> 00:07:38,240 Speaker 1: we have to look forward to. UM. But when it 139 00:07:38,280 --> 00:07:40,760 Speaker 1: comes to what people are looking at the most inbound 140 00:07:40,800 --> 00:07:43,680 Speaker 1: questions I get firm investors, are you know specifics, what 141 00:07:43,760 --> 00:07:46,400 Speaker 1: are going to be the soy commitments? What are the 142 00:07:46,440 --> 00:07:50,080 Speaker 1: purchase commitments for pork? What are the purchase commitments for ethanol? None? 143 00:07:50,120 --> 00:07:52,200 Speaker 1: Of those details are going to be forthcoming and they 144 00:07:52,200 --> 00:07:54,880 Speaker 1: won't ever be released, is my understanding. So the six 145 00:07:54,920 --> 00:07:57,400 Speaker 1: page document is all fine and well, there will be 146 00:07:57,480 --> 00:08:01,080 Speaker 1: some positive points. I will be monitoring what associations say 147 00:08:01,480 --> 00:08:04,560 Speaker 1: in the aftermath praising it or UM, you know, reserving 148 00:08:04,600 --> 00:08:06,600 Speaker 1: their praise for certain parts but not others. And what 149 00:08:06,680 --> 00:08:10,320 Speaker 1: I really want to see is UM farmers and manufacturers 150 00:08:10,320 --> 00:08:12,600 Speaker 1: on the ground saying we are so excited about x 151 00:08:12,640 --> 00:08:15,840 Speaker 1: amount of purchases in whichever sector and get those hard 152 00:08:15,840 --> 00:08:18,640 Speaker 1: and fast data points, because that's where President Trump's challengers 153 00:08:18,680 --> 00:08:21,440 Speaker 1: will be focused, trying to prove essentially the juice was 154 00:08:21,440 --> 00:08:23,560 Speaker 1: not worth a squeeze on this whole trade war and 155 00:08:23,560 --> 00:08:24,960 Speaker 1: the ultimately at the end of the day, we're no 156 00:08:25,000 --> 00:08:27,720 Speaker 1: better off than we were in and those details are 157 00:08:27,720 --> 00:08:31,200 Speaker 1: going to be what's reserved, so that those UM talking 158 00:08:31,200 --> 00:08:33,920 Speaker 1: points will never really materialize and MASSA always got to 159 00:08:33,920 --> 00:08:35,959 Speaker 1: catch up with you. That's the view from Henrietta Trey's 160 00:08:36,040 --> 00:08:53,560 Speaker 1: Vada Pounders, managing Powder and head of economic Policy. I 161 00:08:53,640 --> 00:08:56,800 Speaker 1: do think it's really telling that we have yet another 162 00:08:56,960 --> 00:09:00,560 Speaker 1: consecutive disappointment in inflation data comping in the United States, 163 00:09:00,600 --> 00:09:02,280 Speaker 1: and this is the thing that's really it's a little 164 00:09:02,360 --> 00:09:05,600 Speaker 1: light again. This comes after the little light CP. I 165 00:09:05,640 --> 00:09:07,480 Speaker 1: are we starting to see a trend though where people 166 00:09:07,480 --> 00:09:10,800 Speaker 1: are overestimating already sluggish inflation. And what does it say? 167 00:09:11,000 --> 00:09:13,319 Speaker 1: I mean, John's your point about the rate cut debate 168 00:09:13,360 --> 00:09:15,800 Speaker 1: heating up. I mean this basically edifies the calls for it. 169 00:09:16,200 --> 00:09:17,800 Speaker 1: I mean it to some degree at least the fedge 170 00:09:17,800 --> 00:09:20,120 Speaker 1: certainly is on hold. Let's bring someone in on this, 171 00:09:20,200 --> 00:09:22,480 Speaker 1: and we're very fortunate to have her. Megan Green is 172 00:09:22,520 --> 00:09:25,000 Speaker 1: at the Harvard Kennedy School. We really thought you would 173 00:09:25,040 --> 00:09:27,920 Speaker 1: cancel this morning because she is on the shortlist to 174 00:09:28,040 --> 00:09:30,679 Speaker 1: replace Mr Cora with the Boston Red Sox. She's been 175 00:09:30,920 --> 00:09:33,600 Speaker 1: sitting by the phone, I know, all the morning waiting 176 00:09:33,640 --> 00:09:36,080 Speaker 1: for the call. Mr Cora out at the Red Sox 177 00:09:36,120 --> 00:09:38,680 Speaker 1: and the same idea as the Houston astros uh and 178 00:09:38,800 --> 00:09:41,760 Speaker 1: stealing of signs. Megan Green, give us the signs and 179 00:09:41,840 --> 00:09:45,960 Speaker 1: the FED right now, Lisa Brammo, which mentions a little 180 00:09:46,040 --> 00:09:49,240 Speaker 1: dearth of inflation. Is that enough of a signal to 181 00:09:49,360 --> 00:09:53,480 Speaker 1: the Fed to change ways? No, I don't think so. 182 00:09:53,600 --> 00:09:55,839 Speaker 1: I don't think that this is enough of a mess 183 00:09:55,840 --> 00:09:58,839 Speaker 1: to cause the FED to sink in expectations that are 184 00:09:58,840 --> 00:10:00,960 Speaker 1: becoming on board. This is just more of the same 185 00:10:01,160 --> 00:10:04,720 Speaker 1: we've seen throughout this recovery, where we've just had a 186 00:10:04,880 --> 00:10:08,839 Speaker 1: dearth of inflation and investors might overestimated to do it 187 00:10:08,920 --> 00:10:11,880 Speaker 1: every time, it's still not coming in. So this is 188 00:10:11,880 --> 00:10:13,120 Speaker 1: not a new trend at all. And I think that 189 00:10:13,200 --> 00:10:15,240 Speaker 1: the set is probably going to stay on holes through 190 00:10:15,280 --> 00:10:18,559 Speaker 1: this year unless we get some kind of serious mess. So, yes, 191 00:10:18,600 --> 00:10:21,000 Speaker 1: we've got the p p I slight mess, we've got 192 00:10:21,000 --> 00:10:25,400 Speaker 1: the CPI yesterday slight miss. Meanwhile, Target uh kind of 193 00:10:25,440 --> 00:10:28,679 Speaker 1: really driving action today with their disappointment in terms of 194 00:10:28,720 --> 00:10:31,360 Speaker 1: holiday sales in the November through December period, shares down 195 00:10:31,400 --> 00:10:33,760 Speaker 1: more than seven percent ahead of the market open. And 196 00:10:34,040 --> 00:10:37,160 Speaker 1: I'm trying to understand how much of a signal this 197 00:10:37,320 --> 00:10:40,200 Speaker 1: is that the consumer is losing steam. Can we read 198 00:10:40,240 --> 00:10:44,000 Speaker 1: anything into this? No, I don't think we can read 199 00:10:44,040 --> 00:10:47,040 Speaker 1: anything into you know, one release like that. If we 200 00:10:47,120 --> 00:10:50,000 Speaker 1: started to see a series of releases and retail sales 201 00:10:50,040 --> 00:10:52,000 Speaker 1: really gets then we might start to think that the 202 00:10:52,040 --> 00:10:56,960 Speaker 1: consumer was flagging. The consumer confidences remain pretty high um 203 00:10:57,200 --> 00:10:59,640 Speaker 1: and so I think so far it's too early to 204 00:10:59,679 --> 00:11:02,360 Speaker 1: say that the consumers chuckered out because of course the 205 00:11:02,400 --> 00:11:05,800 Speaker 1: consumers carrying its entire recovery. So once they are chuckered out, 206 00:11:05,840 --> 00:11:07,720 Speaker 1: we need to worry. I just don't think we're there yet. 207 00:11:07,760 --> 00:11:09,760 Speaker 1: And I just want to say, Target, though, is not 208 00:11:09,880 --> 00:11:12,840 Speaker 1: the only one. J C. Penny and Cole's previously had 209 00:11:12,880 --> 00:11:15,960 Speaker 1: some disappointments as well recently, although a lot of people 210 00:11:16,000 --> 00:11:18,079 Speaker 1: just shrug that off because it's j C. Penny and 211 00:11:18,160 --> 00:11:20,160 Speaker 1: Coals and they've been sort of struggling for a while 212 00:11:20,200 --> 00:11:22,720 Speaker 1: and their business models are under attack. But Target has 213 00:11:22,720 --> 00:11:24,840 Speaker 1: been very strong, and it's been growing, and it's been 214 00:11:24,840 --> 00:11:27,839 Speaker 1: investing in their online presence, so you know, an increasing 215 00:11:27,880 --> 00:11:30,400 Speaker 1: amount of this. At what point, I mean, if this 216 00:11:30,480 --> 00:11:32,640 Speaker 1: is not enough, at what point do you start to say, 217 00:11:32,800 --> 00:11:36,800 Speaker 1: wait a second, what does it say about the consumer? Well, 218 00:11:36,840 --> 00:11:39,880 Speaker 1: I think we need to see other indicators of consumer 219 00:11:39,960 --> 00:11:43,800 Speaker 1: demand turn as well. So in addition to the results 220 00:11:43,840 --> 00:11:46,240 Speaker 1: showing it, we need to see retail sales flag, we 221 00:11:46,280 --> 00:11:49,120 Speaker 1: need to see consumer confidence start to fall UM And 222 00:11:49,160 --> 00:11:52,000 Speaker 1: so far there's other data points aren't coming through UM. 223 00:11:52,200 --> 00:11:54,200 Speaker 1: But you know, this could be the beginning of a turn. 224 00:11:54,200 --> 00:11:57,320 Speaker 1: I wouldn't extrapolate too much just yet. After a E 225 00:11:57,559 --> 00:12:01,319 Speaker 1: A been talking to dr pose of the Peterson Institute 226 00:12:01,360 --> 00:12:06,640 Speaker 1: Megan Green about what was accomplished their people talking about theory. 227 00:12:06,679 --> 00:12:10,240 Speaker 1: Are we operating going into two thousand twenty on sound 228 00:12:10,320 --> 00:12:13,960 Speaker 1: economic theory or did everybody making it up as they go? 229 00:12:14,080 --> 00:12:17,520 Speaker 1: What do you teach at Harvard Kennedy on that has 230 00:12:17,640 --> 00:12:20,000 Speaker 1: So I'm actually doing a lot of research into this 231 00:12:20,240 --> 00:12:22,360 Speaker 1: um and my conclusion is that a lot of our 232 00:12:22,400 --> 00:12:25,199 Speaker 1: theory just doesn't work anymore. A lot of the frameworks 233 00:12:25,200 --> 00:12:28,040 Speaker 1: that we learned in ECO one oh one just don't apply. 234 00:12:28,200 --> 00:12:30,640 Speaker 1: And so I thought it a a Actually, you know, 235 00:12:30,800 --> 00:12:33,800 Speaker 1: times were really starting to accept that there was a 236 00:12:33,880 --> 00:12:38,040 Speaker 1: really depressing consensus that we are just stuck with low growth, 237 00:12:38,080 --> 00:12:41,560 Speaker 1: low inflation, and low rates for the future. And and 238 00:12:41,600 --> 00:12:44,120 Speaker 1: that's a new consensus, I think, even though there's been 239 00:12:44,160 --> 00:12:46,480 Speaker 1: plenty of evidence for it for years. Well, to rip 240 00:12:46,559 --> 00:12:48,280 Speaker 1: up the script on this, and folks, this is some 241 00:12:48,360 --> 00:12:50,760 Speaker 1: background and I'll be discussing this, I hope A Davos 242 00:12:51,679 --> 00:12:55,320 Speaker 1: a really wonderful panel. Megan Green. It's really simple. The 243 00:12:55,400 --> 00:12:58,960 Speaker 1: debate was negative rates in their efficacy. What did you 244 00:12:59,080 --> 00:13:02,280 Speaker 1: learn about the negative rate debate? If we're making it 245 00:13:02,360 --> 00:13:06,520 Speaker 1: up as we go amid slow growth. Well, So I 246 00:13:06,520 --> 00:13:10,880 Speaker 1: think generally there's been a negative consensus about negative rates, 247 00:13:10,880 --> 00:13:13,679 Speaker 1: and I think that's probably right that you know, if 248 00:13:13,720 --> 00:13:16,720 Speaker 1: you push rates down that far um, you're actually punishing 249 00:13:16,800 --> 00:13:20,600 Speaker 1: thanks um and you don't see any kind of credit 250 00:13:21,520 --> 00:13:24,559 Speaker 1: demand develop off the back of it. So negative rates 251 00:13:24,600 --> 00:13:28,520 Speaker 1: aren't the answer, I mean, in particularly not in the US. UM. 252 00:13:28,559 --> 00:13:31,000 Speaker 1: There is kind of a consensus now that central banks 253 00:13:31,000 --> 00:13:33,240 Speaker 1: can't be holding the bag for this recovery. And that's 254 00:13:33,280 --> 00:13:36,880 Speaker 1: fairly new as well. So if it's not negative rates 255 00:13:36,880 --> 00:13:40,199 Speaker 1: cutting rates um, you know, maybe it's yield curve control. 256 00:13:40,520 --> 00:13:43,240 Speaker 1: Japan's had some success with it. It could be more QUI. 257 00:13:43,240 --> 00:13:46,160 Speaker 1: Though in academia, I think there's a consensus and QUI 258 00:13:46,240 --> 00:13:49,040 Speaker 1: hasn't really helped a whole lot overall. I think, so 259 00:13:49,280 --> 00:13:52,400 Speaker 1: people are accepting the central banks aren't responsible for the 260 00:13:52,720 --> 00:13:55,319 Speaker 1: this next downturn for combating it, and so we're gonna 261 00:13:55,320 --> 00:13:58,480 Speaker 1: need to see fiscal authorities step in. And there's this 262 00:13:58,600 --> 00:14:02,520 Speaker 1: overwhelming consensus among lots of economists who disagree on lots 263 00:14:02,520 --> 00:14:05,800 Speaker 1: of things, particularly the causes of all this speak to man, 264 00:14:06,240 --> 00:14:08,400 Speaker 1: But the one thing that would help all of the 265 00:14:08,440 --> 00:14:12,560 Speaker 1: potential causes is productive public investment. The problem there is 266 00:14:12,679 --> 00:14:16,880 Speaker 1: just the political support for that isn't necessarily there, particularly 267 00:14:16,920 --> 00:14:19,000 Speaker 1: those who are worried about blowing the budget deficit. But 268 00:14:19,040 --> 00:14:21,080 Speaker 1: you don't have to blow out the budget deficit to 269 00:14:21,160 --> 00:14:24,800 Speaker 1: actually do productive public investment, Megan. The longer that the 270 00:14:24,800 --> 00:14:27,160 Speaker 1: central banks hold the bag, when do we start talking 271 00:14:27,160 --> 00:14:31,520 Speaker 1: about ascid bubbles Again, It's a great question. You know, 272 00:14:31,600 --> 00:14:34,400 Speaker 1: we haven't really seen acid bubbles or merge unless you 273 00:14:34,400 --> 00:14:37,440 Speaker 1: can give it everything the bubble and and and maybe 274 00:14:37,440 --> 00:14:39,480 Speaker 1: you could, um, but I think that where the bubble 275 00:14:39,600 --> 00:14:42,080 Speaker 1: might be starting to crop up is in private markets, 276 00:14:42,120 --> 00:14:44,760 Speaker 1: not in publist markets that we can all see. Um, 277 00:14:44,800 --> 00:14:48,280 Speaker 1: that's possible in terms of leverage, floans, um, you know, 278 00:14:48,320 --> 00:14:50,120 Speaker 1: see a lot of things like that. But we don't 279 00:14:50,160 --> 00:14:52,000 Speaker 1: have a whole lot of ter guaranty on that. And 280 00:14:52,120 --> 00:14:54,160 Speaker 1: I think that could be frosty, but it's hard to 281 00:14:54,320 --> 00:14:56,840 Speaker 1: have any real sense of how to quantify it. Megan 282 00:14:56,880 --> 00:14:59,360 Speaker 1: Green with us at the Harvard Countedy School, And of 283 00:14:59,360 --> 00:15:02,000 Speaker 1: course we can tell talk about the specifics of market economics, 284 00:15:02,040 --> 00:15:05,040 Speaker 1: but we can also talk about bigger, broader themes. Megan. 285 00:15:05,080 --> 00:15:10,920 Speaker 1: This morning we saw target deliver saggy comp sales, traditional sales, 286 00:15:11,560 --> 00:15:15,240 Speaker 1: and their digital sales were up nineteen. What are you 287 00:15:15,440 --> 00:15:20,760 Speaker 1: seeing at Harvard Kennedy about this new technology overlaying all 288 00:15:20,840 --> 00:15:23,240 Speaker 1: of our business? I mean, it's something we're going to 289 00:15:23,320 --> 00:15:25,720 Speaker 1: write about in ten years or twenty years, or even 290 00:15:25,760 --> 00:15:28,880 Speaker 1: half a century out. But what is the effect of 291 00:15:29,040 --> 00:15:36,840 Speaker 1: technology on so much of American business, including consumption? It's well, 292 00:15:36,880 --> 00:15:40,680 Speaker 1: so I think in this example in retails were well, um, 293 00:15:40,720 --> 00:15:44,320 Speaker 1: you know, you see the technology increases transparency and price discovery, 294 00:15:44,320 --> 00:15:48,000 Speaker 1: and so that pushes prices down significantly. That provides a 295 00:15:48,200 --> 00:15:52,280 Speaker 1: disinflationary force in the economy. And generally technology is doing 296 00:15:52,320 --> 00:15:54,360 Speaker 1: that across the board, and so that's one of the 297 00:15:54,400 --> 00:15:58,440 Speaker 1: reasons that we've seen soft inflation data and will continue 298 00:15:58,480 --> 00:16:01,920 Speaker 1: to for the fort Gavel feature, Megan, just to wrap 299 00:16:01,960 --> 00:16:04,640 Speaker 1: things up here, I'm wondering, looking out, where do you 300 00:16:04,680 --> 00:16:07,560 Speaker 1: think we are in terms of a re acceleration or 301 00:16:07,560 --> 00:16:14,040 Speaker 1: a slowdown in the global economy? Just we're looking at 302 00:16:14,040 --> 00:16:16,920 Speaker 1: a slow down, no doubt. Every major economy has been 303 00:16:16,920 --> 00:16:20,000 Speaker 1: growing above potentials um and we shouldn't expect that to 304 00:16:20,040 --> 00:16:24,160 Speaker 1: continue without really significant amounts of monetary or fiscal stimulus. 305 00:16:24,160 --> 00:16:26,080 Speaker 1: And I just don't think that we'll see that this year. 306 00:16:26,200 --> 00:16:29,320 Speaker 1: So we should expect every major economy to continue to 307 00:16:29,360 --> 00:16:32,440 Speaker 1: converge with potential growth, which has been lower than what 308 00:16:32,560 --> 00:16:34,640 Speaker 1: growth has been over the past couple of years. Making 309 00:16:34,640 --> 00:16:36,720 Speaker 1: great to catch up with you making great there, Harvard Kennedy, 310 00:16:36,800 --> 00:16:38,680 Speaker 1: Senior Fellow, joining us on the phone on the latest 311 00:16:38,720 --> 00:16:41,040 Speaker 1: thing economic take to and the next most with central 312 00:16:41,080 --> 00:16:57,440 Speaker 1: banks worldwide. Right now, real question for investors here. You 313 00:16:57,560 --> 00:17:01,720 Speaker 1: had an extraordinary twenty nineteen in terms of market performance. 314 00:17:02,120 --> 00:17:05,040 Speaker 1: What do you do for Jim Paulson Luke old wed In, 315 00:17:05,119 --> 00:17:08,719 Speaker 1: Capital Manager, Chief Investment Strategists, joins us to give us 316 00:17:08,800 --> 00:17:11,879 Speaker 1: his thoughts. So, Jim again, it's you know, the question 317 00:17:11,920 --> 00:17:14,359 Speaker 1: is what have you done for me lately? How are 318 00:17:14,400 --> 00:17:21,800 Speaker 1: you thinking about positioning for Yeah? Probably I think, you know, 319 00:17:21,840 --> 00:17:25,080 Speaker 1: I think that the bowl continue this year, but I 320 00:17:25,119 --> 00:17:26,760 Speaker 1: think it's going to go up, you know, far less 321 00:17:26,760 --> 00:17:28,679 Speaker 1: than it did last year, of course, maybe more like 322 00:17:29,160 --> 00:17:33,160 Speaker 1: ten percent or something overall. Um, And I do think 323 00:17:33,200 --> 00:17:34,639 Speaker 1: I think you hit the nail on the head. I 324 00:17:34,840 --> 00:17:37,560 Speaker 1: think positioning is going to be the bigger issue in 325 00:17:37,880 --> 00:17:40,680 Speaker 1: two thousand and twenty that I was in two thousand nineteen, 326 00:17:40,760 --> 00:17:43,440 Speaker 1: rather than just buy anything around you. I think it's 327 00:17:43,440 --> 00:17:45,159 Speaker 1: going to be what to buy is going to be 328 00:17:45,200 --> 00:17:47,640 Speaker 1: more important. There's going to be I think a bit 329 00:17:47,680 --> 00:17:50,920 Speaker 1: of a leadership shift UH during the year. If the 330 00:17:50,920 --> 00:17:55,399 Speaker 1: if the global if the global recovery does revive here 331 00:17:55,440 --> 00:17:57,440 Speaker 1: a little bit accelerating a little bit, which I think 332 00:17:57,520 --> 00:18:02,520 Speaker 1: is happening, that tends to really change what leads. So 333 00:18:03,040 --> 00:18:06,720 Speaker 1: I think in the past, every time we've recovered or accelerated, 334 00:18:07,000 --> 00:18:09,920 Speaker 1: you've had international markets beat the United States. I think 335 00:18:09,920 --> 00:18:11,760 Speaker 1: that's going to be one of the big themes yet 336 00:18:11,760 --> 00:18:15,600 Speaker 1: this year, both developed and emerging, probably more so in emerging, 337 00:18:16,640 --> 00:18:18,760 Speaker 1: but I think moving away from the US here stopper 338 00:18:18,800 --> 00:18:22,639 Speaker 1: full it makes sense. I also think that cyclical areas 339 00:18:23,040 --> 00:18:27,000 Speaker 1: in general UH have a much better year relative to 340 00:18:27,040 --> 00:18:32,840 Speaker 1: more defensive UH investments, low volatility quality, defensive sectors and 341 00:18:32,880 --> 00:18:36,640 Speaker 1: the like. And then I also think maybe UH, depending 342 00:18:36,680 --> 00:18:40,040 Speaker 1: on how much we recover globally, you're you're going to 343 00:18:40,160 --> 00:18:43,320 Speaker 1: see small caps which have continue to do poorly this year, 344 00:18:43,359 --> 00:18:45,920 Speaker 1: but I think they're gonna maybe finally have a year 345 00:18:46,480 --> 00:18:52,359 Speaker 1: about performance UM overall, and I'm I'm sticking with tech 346 00:18:53,080 --> 00:18:56,560 Speaker 1: UM but but I think that's the one area that 347 00:18:56,640 --> 00:18:58,879 Speaker 1: might continue to do okay, But I think it's I 348 00:18:58,920 --> 00:19:01,119 Speaker 1: think I'd go with this mall cap tech rather than 349 00:19:01,119 --> 00:19:03,239 Speaker 1: a large cap How do you shift to that? I mean, 350 00:19:03,280 --> 00:19:05,720 Speaker 1: are you selling shares of Apple, Amazon and the rest 351 00:19:05,760 --> 00:19:07,560 Speaker 1: of them here to do that? Or is that with 352 00:19:07,640 --> 00:19:12,160 Speaker 1: new cash? I think i'd Uh. I think I definitely 353 00:19:12,200 --> 00:19:16,960 Speaker 1: maybe UH entertained some selling tom. Uh there's you know, 354 00:19:17,040 --> 00:19:20,200 Speaker 1: we've in our gap fund. We've put in uh E 355 00:19:20,359 --> 00:19:22,440 Speaker 1: t F. You can get an e t F for 356 00:19:22,520 --> 00:19:27,280 Speaker 1: the S and P six uh technology, UM, you know, 357 00:19:27,359 --> 00:19:32,159 Speaker 1: sell your SMP five tech. UM. I think if you 358 00:19:32,240 --> 00:19:35,440 Speaker 1: look at that tech, small cap tech and large cap 359 00:19:35,440 --> 00:19:37,720 Speaker 1: tech have done just as well in this recovery since 360 00:19:37,760 --> 00:19:41,160 Speaker 1: two thousand nine. They've had almost identical results, but they've 361 00:19:41,160 --> 00:19:44,440 Speaker 1: had very different leadership. Here ads sometimes large as dominant, 362 00:19:44,520 --> 00:19:47,760 Speaker 1: sometimes small. In the last couple of years, it's been large. 363 00:19:48,080 --> 00:19:51,720 Speaker 1: They're sitting now on a relative basis at the bottom 364 00:19:51,800 --> 00:19:53,840 Speaker 1: end of a trading range they've been in relative to 365 00:19:53,840 --> 00:19:56,680 Speaker 1: the large cap tech back to two thousand two. They're 366 00:19:56,720 --> 00:19:59,960 Speaker 1: they're trading right now at a slight discount p multiple, 367 00:20:00,080 --> 00:20:02,760 Speaker 1: when they've normally traded on average at about an eighteen 368 00:20:02,800 --> 00:20:06,600 Speaker 1: percent premium. They have a much higher long term growth 369 00:20:06,680 --> 00:20:10,680 Speaker 1: rate estimate among SMP six technology than the SMP five 370 00:20:11,040 --> 00:20:16,800 Speaker 1: technology has. They're certainly under owned, unloved, and basically not 371 00:20:17,000 --> 00:20:20,520 Speaker 1: even known. You probably can't name many of them. I 372 00:20:20,600 --> 00:20:23,480 Speaker 1: agree with that. So I mean, and lastly, I think 373 00:20:23,520 --> 00:20:26,400 Speaker 1: that they're not in the They're not in the crosshairs 374 00:20:26,480 --> 00:20:31,000 Speaker 1: of regulators. Um you know regularly, They're just not in 375 00:20:31,040 --> 00:20:32,800 Speaker 1: the cross Here is a regularly and no one's looking 376 00:20:32,840 --> 00:20:35,879 Speaker 1: at small camp Paul Sweeney, what's going to be the 377 00:20:35,960 --> 00:20:39,080 Speaker 1: catalyst to jump these brilliant for digit stock four letter 378 00:20:39,119 --> 00:20:41,760 Speaker 1: stocks and Jim is talking about it, Yeah, it's I 379 00:20:41,800 --> 00:20:45,040 Speaker 1: think it's, you know, some the search for top line growth, 380 00:20:45,080 --> 00:20:46,760 Speaker 1: which is something you always look forward. Tom. I think 381 00:20:46,760 --> 00:20:50,199 Speaker 1: top line growth technology still has it and lots of 382 00:20:50,200 --> 00:20:52,600 Speaker 1: pockets as we do a five G upgrade as the 383 00:20:52,640 --> 00:20:55,720 Speaker 1: cloud continues to grow. Jimmy, I'm interested in your comments 384 00:20:55,760 --> 00:20:58,840 Speaker 1: about emerging markets. Tom and I are hearing more and 385 00:20:58,880 --> 00:21:03,159 Speaker 1: more about emerging market as potential opportunity for you as 386 00:21:03,200 --> 00:21:07,200 Speaker 1: it driven more by maybe a moderating trade tensions globally 387 00:21:07,600 --> 00:21:11,280 Speaker 1: or lower rates or kind of stabilizing economy. What's kind 388 00:21:11,280 --> 00:21:14,520 Speaker 1: of driving your thoughts about emerging markets I think the 389 00:21:14,520 --> 00:21:18,480 Speaker 1: biggest thing is UM is a revival in growth. I mean, 390 00:21:18,520 --> 00:21:20,879 Speaker 1: you're starting to see the O E c D leading 391 00:21:20,880 --> 00:21:23,800 Speaker 1: economic indicator for the global economy just turned up in 392 00:21:23,840 --> 00:21:26,800 Speaker 1: the last two months for the first time since the 393 00:21:26,920 --> 00:21:31,440 Speaker 1: end of two thousand seventeen. The Westpac Global Economic Surprise 394 00:21:31,440 --> 00:21:34,919 Speaker 1: INDEXES has risen dramatically in the last few months. I 395 00:21:34,960 --> 00:21:37,159 Speaker 1: think we're starting to see signs all across the globe 396 00:21:37,200 --> 00:21:41,040 Speaker 1: of a recovery. Every time in this recovery since oh 397 00:21:41,119 --> 00:21:44,720 Speaker 1: nine that you've had a bouncing global growth. Emerging markets 398 00:21:44,880 --> 00:21:47,960 Speaker 1: have outperformed, and I think they will again. They tend 399 00:21:47,960 --> 00:21:51,760 Speaker 1: to be more leveraged to economic acceleration than is the 400 00:21:52,040 --> 00:21:56,399 Speaker 1: service based, tech based United States economy, for example. But 401 00:21:56,480 --> 00:22:00,159 Speaker 1: in addition to that, UM, I do think that you know, 402 00:22:00,200 --> 00:22:03,440 Speaker 1: we're just juice in the heck out of uh more 403 00:22:03,480 --> 00:22:07,760 Speaker 1: cyclical manufacturing, other areas with incredibly low rates. With quantitative 404 00:22:08,160 --> 00:22:11,119 Speaker 1: with physical students, I think it's gonna gonna work. I 405 00:22:11,160 --> 00:22:14,600 Speaker 1: also expect the dollar to go down, Paul Um. I've 406 00:22:14,600 --> 00:22:16,600 Speaker 1: been trying. I thought that last year. It didn't work. 407 00:22:16,640 --> 00:22:19,280 Speaker 1: I'm gonna try it again. And if the dollar does 408 00:22:19,359 --> 00:22:23,359 Speaker 1: go down, that's gonna boost some of those returns as well. Jim, 409 00:22:23,400 --> 00:22:26,400 Speaker 1: thank you so much, greatly appreciated with LUFAD group. Jim 410 00:22:26,440 --> 00:22:44,679 Speaker 1: Pauls enjoyed. H I've been waiting, waiting, waiting, Paults. We 411 00:22:44,680 --> 00:22:46,640 Speaker 1: need to speak to Mr Shark this. You know, hear 412 00:22:46,720 --> 00:22:50,280 Speaker 1: me folks talk about granular research reports. He is the 413 00:22:50,480 --> 00:22:54,720 Speaker 1: king of granular. He knows which valve out in Kansas 414 00:22:54,760 --> 00:22:58,439 Speaker 1: on which pipeline only has three bolts and not four bolts. 415 00:22:59,040 --> 00:23:02,520 Speaker 1: And it's Stephen. I'm gonna start with a sixty question. 416 00:23:03,080 --> 00:23:07,040 Speaker 1: Is the United States of America energy independent? Yeah? You know, 417 00:23:07,160 --> 00:23:10,639 Speaker 1: I keep on hearing that, especially in regard to the 418 00:23:10,680 --> 00:23:15,320 Speaker 1: recent geo political headlines, and that somehow the United States 419 00:23:15,440 --> 00:23:19,200 Speaker 1: is inoculated. Uh, you know what, Tom, some weeks we are, 420 00:23:19,359 --> 00:23:21,840 Speaker 1: some weeks we aren't. So if I can say some 421 00:23:21,880 --> 00:23:24,800 Speaker 1: weeks we aren't energy independent, you know what, we're not 422 00:23:24,960 --> 00:23:27,800 Speaker 1: energy independent. We have to keep in mind that we 423 00:23:27,920 --> 00:23:31,280 Speaker 1: still import a considerable amount three to four million barrels 424 00:23:31,280 --> 00:23:34,879 Speaker 1: of crude oil a day. This is very normal. Crude 425 00:23:34,880 --> 00:23:38,200 Speaker 1: oil is not a homogeneous commodity. It depends on where 426 00:23:38,200 --> 00:23:40,320 Speaker 1: you're what part of the world you're taking it out 427 00:23:40,359 --> 00:23:42,480 Speaker 1: of the ground. So It depends on what kind of 428 00:23:42,960 --> 00:23:46,359 Speaker 1: oil your refinery burns. Some of our refineries can burn 429 00:23:46,400 --> 00:23:49,399 Speaker 1: the oil that we do produce. Some of our refineries 430 00:23:49,440 --> 00:23:52,400 Speaker 1: have to buy oil outside the United States to keep 431 00:23:52,440 --> 00:23:55,840 Speaker 1: the refineries running. We have a balance market. But no, 432 00:23:56,160 --> 00:24:00,479 Speaker 1: we are not quote unquote energy independent if we cannot 433 00:24:00,480 --> 00:24:03,080 Speaker 1: put up a wall and not allow any oil to 434 00:24:03,080 --> 00:24:04,719 Speaker 1: come into this country. And you've got you know, he's 435 00:24:04,760 --> 00:24:06,879 Speaker 1: got a million charts folks from the weather maps and 436 00:24:06,880 --> 00:24:09,199 Speaker 1: all that out to actually hard your carbon stuff in 437 00:24:09,240 --> 00:24:11,879 Speaker 1: your upper left corner. You slam it with employment in 438 00:24:12,000 --> 00:24:16,560 Speaker 1: the Marcelas shale area. Where is that geographical in the 439 00:24:16,640 --> 00:24:20,280 Speaker 1: United States? Is that Manhattan or is that Bronx? Exactly, 440 00:24:20,359 --> 00:24:23,400 Speaker 1: it's a little west of the Bronx. So so we're 441 00:24:23,400 --> 00:24:27,880 Speaker 1: talking north central Pennsylvania Susquehanna County, and then western Pennsylvania, 442 00:24:28,160 --> 00:24:32,280 Speaker 1: um Washington County, and it extends over across the border 443 00:24:32,800 --> 00:24:36,160 Speaker 1: into Ohio and then West Virginia. Is so considerable amount. 444 00:24:36,560 --> 00:24:39,800 Speaker 1: And in my report, tom My concern here, of course 445 00:24:40,080 --> 00:24:42,679 Speaker 1: is the fact that the United States is now in 446 00:24:42,720 --> 00:24:45,560 Speaker 1: the industrial side of the economy is in recession. And 447 00:24:45,560 --> 00:24:47,520 Speaker 1: that is to say, one day through the U. S. Economy, 448 00:24:47,880 --> 00:24:51,760 Speaker 1: steel mills, factories, so forth. We're in recession right now. Uh. 449 00:24:51,840 --> 00:24:55,000 Speaker 1: And so if you've got lower demand for by industrial, 450 00:24:55,160 --> 00:24:57,920 Speaker 1: you have lower demand for oil. And we do have 451 00:24:58,040 --> 00:25:00,800 Speaker 1: loyal demand for oil and gas and sorts of energy. 452 00:25:01,119 --> 00:25:03,760 Speaker 1: So my concern living in the state of Pennsylvania, what 453 00:25:04,000 --> 00:25:07,240 Speaker 1: is this doing to the employment situation to some of 454 00:25:07,280 --> 00:25:09,760 Speaker 1: the really hard hit areas in the rust belt that 455 00:25:09,800 --> 00:25:13,080 Speaker 1: are really benefiting now from shale production. And so far, 456 00:25:13,359 --> 00:25:17,639 Speaker 1: so good, the employment picture still looks uh stable. But 457 00:25:17,800 --> 00:25:20,840 Speaker 1: my concern over the next two years, as a considerable 458 00:25:20,920 --> 00:25:24,800 Speaker 1: amount of debt come to do that we could uh, 459 00:25:24,880 --> 00:25:27,520 Speaker 1: those counties could be in for a rough outing, uh 460 00:25:27,680 --> 00:25:31,040 Speaker 1: throughout two Stephen, I'm looking at Brent crew here, sixty 461 00:25:31,119 --> 00:25:33,320 Speaker 1: four dollars thirty cents a barrel, and it's just a 462 00:25:33,400 --> 00:25:36,199 Speaker 1: weaker ten days ago when this thing was touching one 463 00:25:36,280 --> 00:25:40,160 Speaker 1: and change. Is that delta simply the you know, risk 464 00:25:40,240 --> 00:25:43,680 Speaker 1: premium coming out of Iran? Yeah, and yes, and it's 465 00:25:43,720 --> 00:25:46,320 Speaker 1: just it's it's mind boggling to me. If you if 466 00:25:46,560 --> 00:25:49,000 Speaker 1: if you told anyone ten years ago that you can 467 00:25:49,040 --> 00:25:52,960 Speaker 1: attack a major oil facility in Saudi Arabia and three 468 00:25:53,040 --> 00:25:55,280 Speaker 1: weeks later, oil prices would be lower than when they 469 00:25:55,320 --> 00:25:58,800 Speaker 1: were the day after the attack, or that we could 470 00:25:58,960 --> 00:26:02,480 Speaker 1: assassinating May your Iranian official in oil would be cheaper 471 00:26:02,560 --> 00:26:05,480 Speaker 1: ten dollars cheaper today than it was right after that event. 472 00:26:05,680 --> 00:26:07,399 Speaker 1: You would have said, you know, no one would have 473 00:26:07,440 --> 00:26:11,200 Speaker 1: thought that possible. So the geopolitics have completely been exercised 474 00:26:11,240 --> 00:26:14,320 Speaker 1: out of this market. There there is just this overwhelming 475 00:26:14,640 --> 00:26:17,280 Speaker 1: nonchalance and it and it is mind boggling. And for 476 00:26:17,400 --> 00:26:20,119 Speaker 1: me it is a concern because I do think the market, 477 00:26:21,040 --> 00:26:23,600 Speaker 1: you know, on this group, think that we are energy independent. 478 00:26:23,800 --> 00:26:26,000 Speaker 1: I do think that this market has lulled itself into 479 00:26:26,080 --> 00:26:29,800 Speaker 1: this false sense of security that anything can happen and 480 00:26:30,000 --> 00:26:33,000 Speaker 1: oil will continue to flow and prices will continue to 481 00:26:33,040 --> 00:26:35,480 Speaker 1: remain attractive. And I think it's a dangerous game we're playing. 482 00:26:35,720 --> 00:26:38,359 Speaker 1: And is that game predicated upon Steven just that maybe 483 00:26:38,720 --> 00:26:41,800 Speaker 1: the markets belief that, you know, things are different now 484 00:26:42,040 --> 00:26:45,120 Speaker 1: because of the US shale output. Is that a valid 485 00:26:45,200 --> 00:26:48,040 Speaker 1: point you think or is that overplayed? You know it is. 486 00:26:48,240 --> 00:26:50,000 Speaker 1: It is part of the equation we have to keep 487 00:26:50,000 --> 00:26:52,879 Speaker 1: in mind when we're talking about consumer behavior les ticity 488 00:26:52,920 --> 00:26:55,440 Speaker 1: of demand. You have two functions. You have you have 489 00:26:55,560 --> 00:26:58,320 Speaker 1: the price shock, that will alter consumer behavior. But you 490 00:26:58,440 --> 00:27:01,080 Speaker 1: also have to have a substitut to product, and up 491 00:27:01,160 --> 00:27:03,600 Speaker 1: until five years ago, we didn't have a substitute product. 492 00:27:03,880 --> 00:27:06,520 Speaker 1: So we do now have substitutes onto the market. And 493 00:27:06,560 --> 00:27:09,280 Speaker 1: of course I'm talking about e vs, either full evs 494 00:27:09,720 --> 00:27:12,560 Speaker 1: or a plug in hybrids such as the short household 495 00:27:12,600 --> 00:27:16,560 Speaker 1: has one. So you're you're an energy guy. I know, 496 00:27:17,040 --> 00:27:20,400 Speaker 1: I know, and and and my energy consumption has has been, 497 00:27:20,480 --> 00:27:22,680 Speaker 1: my oil consumption has been is a fraction of what 498 00:27:22,880 --> 00:27:25,359 Speaker 1: it was three years ago. And you know what that 499 00:27:25,520 --> 00:27:27,600 Speaker 1: is oil demand that's never coming back to the market. 500 00:27:27,640 --> 00:27:29,879 Speaker 1: So every time you see a Prius or a Tesla 501 00:27:30,400 --> 00:27:33,440 Speaker 1: or Audi e tron, now that's the demand that's never 502 00:27:33,560 --> 00:27:35,720 Speaker 1: coming back onto the market. So yeah, that that does 503 00:27:35,840 --> 00:27:38,800 Speaker 1: have a big impact in the long term, Steve, nobody cares. 504 00:27:39,040 --> 00:27:41,440 Speaker 1: What we do care about is the back end to 505 00:27:41,520 --> 00:27:44,920 Speaker 1: your reports. Stephen Short, You've got the famous T s 506 00:27:45,200 --> 00:27:48,520 Speaker 1: R Weather demand re gap. Come on, it's dooming gloom. 507 00:27:48,680 --> 00:27:51,040 Speaker 1: You've got the coldest part of the nation is directly 508 00:27:51,160 --> 00:27:53,720 Speaker 1: over Biscuit in New Jersey. We go to John Tucker, 509 00:27:53,880 --> 00:27:55,760 Speaker 1: John Tucker, when it really gets cold in New Jersey, 510 00:27:55,840 --> 00:27:58,720 Speaker 1: do you see like ice on the beach. Oh no, 511 00:27:59,040 --> 00:28:03,160 Speaker 1: will you see you certainly do see ice where it's 512 00:28:03,200 --> 00:28:09,639 Speaker 1: a an amalgam of saltwater. Yeah, st you got the 513 00:28:09,840 --> 00:28:13,200 Speaker 1: you got New England in the North Atlantic States in 514 00:28:13,320 --> 00:28:16,399 Speaker 1: one chart gloomy cold, and then you got the entire 515 00:28:16,560 --> 00:28:20,040 Speaker 1: half of the nation gloomy cold. How cold is cold? 516 00:28:21,000 --> 00:28:23,800 Speaker 1: You know cold and cold? You know anything? You know above, 517 00:28:23,920 --> 00:28:27,600 Speaker 1: you know sustained tempts below freezing, you know in my estimate. 518 00:28:27,720 --> 00:28:29,800 Speaker 1: So do you remember we're talking about in New Jersey, 519 00:28:30,080 --> 00:28:32,639 Speaker 1: Remember that poll of vortex in the fourteen win there 520 00:28:32,920 --> 00:28:36,920 Speaker 1: you you had icebergs coming ashore on Martha's vineyard. You've 521 00:28:36,920 --> 00:28:41,400 Speaker 1: had the ocean almost freezing, and salt water for salwader freeze. 522 00:28:41,440 --> 00:28:45,040 Speaker 1: We're talking about temperatures blowed water, temperatures blow twenty degrees. 523 00:28:45,400 --> 00:28:48,480 Speaker 1: That is cold. And what's crazy about this guy's is 524 00:28:48,560 --> 00:28:52,360 Speaker 1: that we do have this cold finally now in the forecast. 525 00:28:52,600 --> 00:28:56,040 Speaker 1: And the one commodity that normally responds to cold weather 526 00:28:56,480 --> 00:28:59,719 Speaker 1: is natural gas because we heat our homes in our 527 00:28:59,760 --> 00:29:02,000 Speaker 1: busy This is with natural gas. And guess what natural 528 00:29:02,200 --> 00:29:05,480 Speaker 1: gas is going in the complete opposite direction. Uh. And 529 00:29:05,600 --> 00:29:08,400 Speaker 1: this is a function of one even though you do 530 00:29:08,560 --> 00:29:11,440 Speaker 1: have the weather demand? What don't you have? My concern 531 00:29:11,920 --> 00:29:15,040 Speaker 1: we have an industrial recession, so you don't have that 532 00:29:15,120 --> 00:29:18,360 Speaker 1: industrial side that is really keeping a lid on natural 533 00:29:18,400 --> 00:29:21,960 Speaker 1: gas prices. So it's it's interesting. So how about another 534 00:29:22,040 --> 00:29:27,040 Speaker 1: consumer facing energy gasoline? Is it lower for longer just 535 00:29:27,560 --> 00:29:30,520 Speaker 1: at the pump? I do believe. So I think we 536 00:29:30,680 --> 00:29:34,640 Speaker 1: we we we've settled into um this area where and 537 00:29:34,760 --> 00:29:36,640 Speaker 1: we kind of look at the options markets and the 538 00:29:36,720 --> 00:29:38,360 Speaker 1: option markets. You always want to look at the option 539 00:29:38,400 --> 00:29:40,360 Speaker 1: markets because this is the insurance market. These are the 540 00:29:40,360 --> 00:29:42,560 Speaker 1: guys who are signing a risk of how high or 541 00:29:42,600 --> 00:29:44,640 Speaker 1: how low prices will go out into the future, and 542 00:29:44,680 --> 00:29:46,920 Speaker 1: then they're going to sell you an insurance policy that 543 00:29:47,040 --> 00:29:49,320 Speaker 1: that doesn't happen. And what we've seen with the option 544 00:29:49,400 --> 00:29:51,800 Speaker 1: markets through the first six months of this year, the 545 00:29:51,880 --> 00:29:54,720 Speaker 1: option writers, the guys selling these options, are telling you 546 00:29:54,840 --> 00:29:56,960 Speaker 1: that they think the ceiling in this market is between 547 00:29:57,080 --> 00:29:59,480 Speaker 1: sixty three and sixty six dollars. This is w T 548 00:29:59,560 --> 00:30:01,840 Speaker 1: I and the bottom of the market is between fifty 549 00:30:01,880 --> 00:30:04,600 Speaker 1: five and fifty three. And so when we run our 550 00:30:04,680 --> 00:30:09,040 Speaker 1: quantitative models, our money Collar Carlo simulations, it all kind 551 00:30:09,080 --> 00:30:11,840 Speaker 1: of dovetails right into that range. So if we're you're 552 00:30:11,880 --> 00:30:15,520 Speaker 1: looking at low fifties on the up to the midst sixties, 553 00:30:15,720 --> 00:30:18,320 Speaker 1: that is stability at the pump. And that's a good 554 00:30:18,400 --> 00:30:21,720 Speaker 1: thing because most producers can make money with oil in 555 00:30:21,760 --> 00:30:25,240 Speaker 1: that mid sixty dollar range, and most consumers oil consumers 556 00:30:25,280 --> 00:30:27,560 Speaker 1: can certainly afford it at the pump. Steven Short, thank 557 00:30:27,600 --> 00:30:29,720 Speaker 1: you so much, greatly appreciated with the Short group with 558 00:30:29,760 --> 00:30:33,760 Speaker 1: the Shorking bord uh this morning. Thanks for listening to 559 00:30:33,840 --> 00:30:38,320 Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on 560 00:30:38,400 --> 00:30:44,240 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 561 00:30:44,320 --> 00:30:47,560 Speaker 1: on Twitter at Tom Keane before the podcast. You can 562 00:30:47,640 --> 00:30:50,800 Speaker 1: always catch us worldwide. I'm Bloomberg Radio.