1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 2 00:00:09,200 --> 00:00:13,000 Speaker 1: with Jonathan Ferrell and Lisa Brawmowitz Jay Lee. We bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,239 --> 00:00:23,320 Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg 5 00:00:23,360 --> 00:00:29,360 Speaker 1: dot Com, and of course on the Bloomberg terminal. Joint 6 00:00:29,400 --> 00:00:31,480 Speaker 1: to us now in place to says David balan ce Io, 7 00:00:31,840 --> 00:00:34,480 Speaker 1: a global head of investments at City Global Wealth. David, 8 00:00:34,479 --> 00:00:36,159 Speaker 1: We're lucky to catch out with you, sir, because we 9 00:00:36,320 --> 00:00:38,879 Speaker 1: get to talk to you first about your outlook for three. 10 00:00:39,280 --> 00:00:41,720 Speaker 1: Is it any different to what we've heard so much 11 00:00:41,800 --> 00:00:44,879 Speaker 1: off in the last month. Well, it's a little bit 12 00:00:44,920 --> 00:00:47,680 Speaker 1: different because it's gonna be a tale of two halves. Jonathan. 13 00:00:47,720 --> 00:00:49,360 Speaker 1: You know, the first half of the year, we see 14 00:00:49,400 --> 00:00:51,600 Speaker 1: all the signs of recession, and you've just talked about 15 00:00:51,640 --> 00:00:54,600 Speaker 1: a lot of them with Lisa. Basically, have lower oil prices, 16 00:00:54,600 --> 00:00:56,960 Speaker 1: You've got the ten year at three forty four, You've 17 00:00:57,000 --> 00:00:59,000 Speaker 1: got you know, the stock market going through its third 18 00:00:59,040 --> 00:01:02,000 Speaker 1: mortgat bear, your third bear market, and then and then 19 00:01:02,040 --> 00:01:05,880 Speaker 1: heading down. Markets lead the economy, and what they're telling 20 00:01:06,040 --> 00:01:07,880 Speaker 1: us is that next year, the first half of next 21 00:01:07,959 --> 00:01:09,880 Speaker 1: year is going to be a difficult period, both in 22 00:01:09,920 --> 00:01:13,280 Speaker 1: the US and in Europe, and that is almost undeniable. 23 00:01:13,360 --> 00:01:15,480 Speaker 1: It's almost impossible for the fit to stop that now, 24 00:01:15,560 --> 00:01:18,039 Speaker 1: especially as they're going to continue to raise rates. And 25 00:01:18,080 --> 00:01:19,760 Speaker 1: so I think, you know, if you look at all 26 00:01:19,800 --> 00:01:21,839 Speaker 1: of the data, if you look at the yield curban version, 27 00:01:21,880 --> 00:01:23,240 Speaker 1: that's what it tells you, and I think we have 28 00:01:23,280 --> 00:01:26,480 Speaker 1: to respect that as investors. That's why bonds are back. 29 00:01:26,520 --> 00:01:28,399 Speaker 1: That's why it's a good idea to own bonds right now, 30 00:01:28,480 --> 00:01:30,640 Speaker 1: because a year from now, bonds are gonna be your 31 00:01:30,680 --> 00:01:33,360 Speaker 1: yields are gonna be even lower than they are today. 32 00:01:33,440 --> 00:01:35,800 Speaker 1: And then the second half of twenty three will be 33 00:01:35,880 --> 00:01:38,319 Speaker 1: the markets then looking at twenty four looking at a 34 00:01:38,360 --> 00:01:40,920 Speaker 1: recovery from whatever recession it is that we're going to have, 35 00:01:41,360 --> 00:01:43,680 Speaker 1: and those are great times to be an investor. So 36 00:01:43,720 --> 00:01:45,399 Speaker 1: it's not a great time to be a market timer. 37 00:01:45,760 --> 00:01:47,680 Speaker 1: And I think that this story of the two halves 38 00:01:47,800 --> 00:01:51,200 Speaker 1: right is really the core part of what the outlook 39 00:01:51,240 --> 00:01:53,640 Speaker 1: for twenty three is. I don't think investors are taking 40 00:01:53,680 --> 00:01:56,360 Speaker 1: seriously enough the slowdown that we can have, and they're 41 00:01:56,360 --> 00:01:59,320 Speaker 1: not also looking through it and necessarily owning the right 42 00:01:59,400 --> 00:02:01,560 Speaker 1: things that that are going to create profits for them, 43 00:02:01,960 --> 00:02:04,360 Speaker 1: uh into in late twenty four. How can that be 44 00:02:04,440 --> 00:02:06,960 Speaker 1: if everybody seems to be saying the exact same thing 45 00:02:07,040 --> 00:02:08,480 Speaker 1: that it's going to be a tale of two halves, 46 00:02:08,520 --> 00:02:11,200 Speaker 1: This is basically the consensus. How are people unprepared then 47 00:02:11,520 --> 00:02:14,440 Speaker 1: for exactly that scenario. Well, if you take a look 48 00:02:14,440 --> 00:02:16,839 Speaker 1: at what they actually own, Lisa, you know, that's that's 49 00:02:16,840 --> 00:02:18,760 Speaker 1: the big that's the big thing they own that they're 50 00:02:18,760 --> 00:02:21,799 Speaker 1: waiting with a lot of cash, right number one. Number two, 51 00:02:22,000 --> 00:02:25,359 Speaker 1: they haven't taken an enormous position in sort of intermediate 52 00:02:25,440 --> 00:02:29,640 Speaker 1: uh intermediate bonds. They have not necessarily repositioned themselves for 53 00:02:29,720 --> 00:02:32,240 Speaker 1: the best growth shares for next year. I think we're 54 00:02:32,240 --> 00:02:34,160 Speaker 1: going to see a time when when you're gonna have 55 00:02:34,200 --> 00:02:37,239 Speaker 1: a snap back in growth. And then lastly, you know, 56 00:02:37,320 --> 00:02:38,720 Speaker 1: with the dollar, right, you know, we look at the 57 00:02:38,760 --> 00:02:41,880 Speaker 1: dollar irritate around one oh five. This is the a 58 00:02:41,960 --> 00:02:44,440 Speaker 1: third large dollar rally in the last fifty years. This 59 00:02:44,520 --> 00:02:47,080 Speaker 1: is not a synchronous thing with the rest of the economy. 60 00:02:47,120 --> 00:02:49,480 Speaker 1: So how many how much the US investors for example, 61 00:02:49,520 --> 00:02:51,480 Speaker 1: have in China very little, how much they have in 62 00:02:51,480 --> 00:02:54,640 Speaker 1: in non US markets an extremely small amount, so there 63 00:02:54,680 --> 00:02:56,560 Speaker 1: are plenty of things that they don't have for the 64 00:02:56,639 --> 00:02:59,840 Speaker 1: year that we anticipate coming ahead. And and and by 65 00:02:59,880 --> 00:03:02,359 Speaker 1: the way, the very fact that you mentioned to other 66 00:03:02,480 --> 00:03:05,520 Speaker 1: two other firms and their views on interest rates, one 67 00:03:05,520 --> 00:03:07,760 Speaker 1: being at two fifty and one million four percent, is 68 00:03:07,760 --> 00:03:11,160 Speaker 1: indicative that there really is not consensus about about what 69 00:03:11,320 --> 00:03:13,160 Speaker 1: is going to happen or the or the depth, you know, 70 00:03:13,240 --> 00:03:15,520 Speaker 1: and length of whatever slowdown we have. I don't think 71 00:03:15,560 --> 00:03:18,080 Speaker 1: there is consensus about that. We started on oil, and 72 00:03:18,120 --> 00:03:19,480 Speaker 1: I want to just build on that a little bit 73 00:03:19,560 --> 00:03:22,639 Speaker 1: because I've been incredibly confused by some of the price action. Yes, 74 00:03:22,680 --> 00:03:26,560 Speaker 1: you see the potential deceleration and global growth with possibly 75 00:03:26,560 --> 00:03:29,800 Speaker 1: the weakest growth going back decades next year on the 76 00:03:29,800 --> 00:03:32,480 Speaker 1: flip side, China's reopening. On the flip side, people expect 77 00:03:32,480 --> 00:03:34,839 Speaker 1: a brighter time in the second half of next year. 78 00:03:35,080 --> 00:03:37,480 Speaker 1: Do you take a signal from oil or is that 79 00:03:37,640 --> 00:03:40,600 Speaker 1: noise at a time when liquidity, according to some measures, 80 00:03:40,680 --> 00:03:44,040 Speaker 1: is the lowest going back to two thousand fifteen. Well, 81 00:03:44,080 --> 00:03:46,760 Speaker 1: I think the oil is indicative right of the fact 82 00:03:46,760 --> 00:03:48,800 Speaker 1: that you know demand isn't going to be there. Just 83 00:03:48,840 --> 00:03:51,920 Speaker 1: think about US inventories right now. They've never been hired 84 00:03:51,920 --> 00:03:54,640 Speaker 1: for goods right, you know, in both wholesale channels and 85 00:03:54,640 --> 00:03:58,440 Speaker 1: in retail channels, and the US borrowed those goods right 86 00:03:58,520 --> 00:04:00,280 Speaker 1: imported them when you know, when when you have to 87 00:04:00,360 --> 00:04:03,560 Speaker 1: order two dishwashers to get one. Now, what's actually happening 88 00:04:03,640 --> 00:04:06,640 Speaker 1: is imports into the United States are going to be crashing, 89 00:04:06,840 --> 00:04:09,200 Speaker 1: and that ultimately is the reason why, you know, why 90 00:04:09,200 --> 00:04:12,840 Speaker 1: we're discounting Chinese reopening. China's domestic market and its regional 91 00:04:12,880 --> 00:04:15,600 Speaker 1: market are going to do extremely well, but imports right 92 00:04:15,680 --> 00:04:17,880 Speaker 1: coming up, or exports from China to US and to 93 00:04:17,960 --> 00:04:20,360 Speaker 1: the West are going to be really diminished this year 94 00:04:20,360 --> 00:04:23,000 Speaker 1: as a result of the current economic situation. David, what 95 00:04:23,040 --> 00:04:26,440 Speaker 1: would happen if this recession in America that everyone's forecasting 96 00:04:27,120 --> 00:04:30,000 Speaker 1: was delayed given the amount of cashus on the sidelines, 97 00:04:30,240 --> 00:04:32,760 Speaker 1: how big is the risk that people under own equities 98 00:04:33,160 --> 00:04:38,200 Speaker 1: going into the new years. That's possible. But what we 99 00:04:38,240 --> 00:04:39,800 Speaker 1: have to look at is whether or not the FED 100 00:04:40,040 --> 00:04:42,360 Speaker 1: is going to follow through, and there are two indications 101 00:04:42,400 --> 00:04:44,600 Speaker 1: I think that it will. One is they've said that 102 00:04:44,640 --> 00:04:46,680 Speaker 1: they're going to raise rates fifty basis points more or 103 00:04:46,760 --> 00:04:49,920 Speaker 1: LEASA has already highlighted that the the inflation a lot 104 00:04:49,920 --> 00:04:53,200 Speaker 1: of inflationary signals, especially you know, those leading indicators are 105 00:04:53,240 --> 00:04:57,920 Speaker 1: already falling. The FED is focused on the lagging indicators housing, right, 106 00:04:57,920 --> 00:04:59,760 Speaker 1: and and they're looking at that data even though we 107 00:04:59,800 --> 00:05:02,480 Speaker 1: know we're gonna have a reduction in uh in construction 108 00:05:02,480 --> 00:05:05,560 Speaker 1: employment and such, and they're looking backwards right in terms 109 00:05:05,600 --> 00:05:08,520 Speaker 1: of their their their inflationary expectations. So what does that mean? 110 00:05:08,800 --> 00:05:10,640 Speaker 1: And let's give you one example. Why will there be 111 00:05:10,720 --> 00:05:13,240 Speaker 1: less employment in the United States? All the houses that 112 00:05:13,240 --> 00:05:15,800 Speaker 1: were started a year ago are ultimately going to be built, 113 00:05:15,839 --> 00:05:17,880 Speaker 1: and there isn't gonna be demand for new ones. That's 114 00:05:17,880 --> 00:05:20,080 Speaker 1: gonna take out four hundred thousand and nine hundred thousand 115 00:05:20,120 --> 00:05:23,039 Speaker 1: residents or construction jobs. We could lose two million jobs 116 00:05:23,080 --> 00:05:25,600 Speaker 1: next year. So what I'm looking at is a situation 117 00:05:25,640 --> 00:05:30,000 Speaker 1: where only when the FED actually sees unemployment will they 118 00:05:30,040 --> 00:05:32,640 Speaker 1: begin to pivot and reduce rates. By that time, it 119 00:05:32,680 --> 00:05:34,880 Speaker 1: will be too late to actually sort of say we're 120 00:05:34,880 --> 00:05:37,039 Speaker 1: gonna have some type of soft landing, will already be 121 00:05:37,360 --> 00:05:40,600 Speaker 1: in a declining uh you know, employment situation for potentially 122 00:05:40,640 --> 00:05:42,880 Speaker 1: the next six to twelve months. And so to your 123 00:05:42,920 --> 00:05:46,200 Speaker 1: to your point, if that is exactly what happens, right, 124 00:05:46,200 --> 00:05:50,000 Speaker 1: Investors have to be defensively positioned now and inequities and 125 00:05:50,040 --> 00:05:53,039 Speaker 1: then become offensively positioned in more aggressive things next year. 126 00:05:53,080 --> 00:05:55,680 Speaker 1: And they should be, you know, having a fully invested portfolio, 127 00:05:55,920 --> 00:05:57,720 Speaker 1: and it's clear to us that they do not, so 128 00:05:57,960 --> 00:06:00,599 Speaker 1: David Win and this is for strength a lot of people. 129 00:06:00,680 --> 00:06:03,440 Speaker 1: If everyone's forecasting the same thing, So we're all waiting 130 00:06:03,440 --> 00:06:06,160 Speaker 1: for this recession to hit, for equities to roll out, 131 00:06:06,240 --> 00:06:07,640 Speaker 1: then were rolling up by because there's going to be 132 00:06:07,680 --> 00:06:10,800 Speaker 1: this great recovery in the second half, why not just 133 00:06:10,839 --> 00:06:15,120 Speaker 1: buy now, Jonathan. If people actually bought now, that would 134 00:06:15,160 --> 00:06:17,240 Speaker 1: be fun. I would actually much prefer people to have 135 00:06:17,279 --> 00:06:20,240 Speaker 1: a fully invested portfolio of stocks and bonds today and 136 00:06:20,360 --> 00:06:22,520 Speaker 1: to actually have of their money in cash, because there's 137 00:06:22,520 --> 00:06:23,840 Speaker 1: no way that they're going to be able to do 138 00:06:23,880 --> 00:06:26,960 Speaker 1: the right market timing. The critical point, though, and where 139 00:06:27,000 --> 00:06:29,800 Speaker 1: there is not consensus is on what you want to 140 00:06:29,839 --> 00:06:32,520 Speaker 1: be owning on the other side, and there's a lot 141 00:06:32,560 --> 00:06:34,480 Speaker 1: of areas are beaten down, you know, whether it's non 142 00:06:34,560 --> 00:06:37,600 Speaker 1: US equities, whether it's small caps, whether it's technology high 143 00:06:37,640 --> 00:06:41,240 Speaker 1: quality technology shares. Lots of place in the market. I'll 144 00:06:41,279 --> 00:06:43,160 Speaker 1: tell you one area the market that I think investors 145 00:06:43,200 --> 00:06:45,680 Speaker 1: are also overlooking, which is what if we don't have 146 00:06:45,720 --> 00:06:49,080 Speaker 1: a terrible credit cycle actual defaults and things, but we 147 00:06:49,120 --> 00:06:51,640 Speaker 1: have what Lisa talked about, which is a lot of illiquidity. 148 00:06:52,000 --> 00:06:54,080 Speaker 1: There are lots of bonds right on the periphery that 149 00:06:54,080 --> 00:06:57,080 Speaker 1: are trading now with fifteen percent handles just because of 150 00:06:57,080 --> 00:07:00,280 Speaker 1: the aliquidity, but not because of credit risk. So, as 151 00:07:00,279 --> 00:07:01,680 Speaker 1: I said, I think the defense is going to cause 152 00:07:01,680 --> 00:07:05,039 Speaker 1: an unusual circumstance um. And I think that people have 153 00:07:05,120 --> 00:07:07,159 Speaker 1: to really respect the market. They have to see what's 154 00:07:07,160 --> 00:07:10,320 Speaker 1: going to happen before they then, you know, rotate from 155 00:07:10,360 --> 00:07:13,119 Speaker 1: one type of equity investment to another. John was speaking 156 00:07:13,160 --> 00:07:16,400 Speaker 1: with Sevita Supermanian of Bank of America yesterday and she 157 00:07:16,680 --> 00:07:19,360 Speaker 1: does not think tech is going to remain a leader 158 00:07:19,520 --> 00:07:24,760 Speaker 1: in the upcoming cycle, that people are perhaps conditioned by 159 00:07:24,800 --> 00:07:27,560 Speaker 1: past performance. Do you disagree? And why why is that 160 00:07:27,680 --> 00:07:31,840 Speaker 1: still an area that you should own? Um? I could 161 00:07:31,840 --> 00:07:34,520 Speaker 1: not disagree more than with that. But let's just take 162 00:07:34,560 --> 00:07:37,800 Speaker 1: cybersecurity is as an example, right, you know, and let's 163 00:07:38,080 --> 00:07:39,720 Speaker 1: just take a look at big banks who have spent 164 00:07:39,800 --> 00:07:43,680 Speaker 1: you know, more on cybersecurity over the course of the 165 00:07:43,720 --> 00:07:47,240 Speaker 1: last five years. It's an unstoppable trend. Right, healthcare and 166 00:07:47,360 --> 00:07:50,600 Speaker 1: unstoppable trend. Take a look at biotechnology, drug development, same thing. 167 00:07:50,880 --> 00:07:54,440 Speaker 1: Take a look at energy technology right now. Europeans, if 168 00:07:54,440 --> 00:07:57,840 Speaker 1: they just bought heat pumps could literally take their your 169 00:07:57,880 --> 00:08:02,240 Speaker 1: dependence on gas down by So tech is going to 170 00:08:02,280 --> 00:08:05,280 Speaker 1: provide us with I think an enormous amount of growth 171 00:08:05,280 --> 00:08:07,840 Speaker 1: coming forward. But it is at the end of the day, 172 00:08:08,040 --> 00:08:12,080 Speaker 1: a replacement for capital spending. That's what it is. Instead 173 00:08:12,080 --> 00:08:15,280 Speaker 1: of buying, you know, buying new equipment, we're buying new software. Right. 174 00:08:15,280 --> 00:08:17,320 Speaker 1: Instead of going out and building new factories, which we 175 00:08:17,320 --> 00:08:19,320 Speaker 1: are in the United States, we're going to automate them 176 00:08:19,320 --> 00:08:22,840 Speaker 1: with robots and and so that to me is unstoppable. 177 00:08:23,160 --> 00:08:24,720 Speaker 1: And what we want to do is get our clients 178 00:08:24,800 --> 00:08:27,280 Speaker 1: invested in that right at much lower prices, which we 179 00:08:27,320 --> 00:08:30,640 Speaker 1: can now by identifying which companies are well positioned and 180 00:08:30,720 --> 00:08:33,840 Speaker 1: also which have the managements that have now just been 181 00:08:33,840 --> 00:08:36,120 Speaker 1: through the one of the most difficult periods in history 182 00:08:36,200 --> 00:08:39,280 Speaker 1: economically in terms of all of these vicissitudes, and now 183 00:08:39,280 --> 00:08:41,880 Speaker 1: they're going to go out and demonstrate that leadership. So 184 00:08:41,960 --> 00:08:43,839 Speaker 1: to me, we're gonna have a tech is back moment 185 00:08:43,960 --> 00:08:48,000 Speaker 1: in the spring. It's not meta, David, I don't think no, 186 00:08:48,120 --> 00:08:50,720 Speaker 1: I'm not talking just about the leadership of four companies anymore. 187 00:08:51,200 --> 00:08:53,360 Speaker 1: And that is that is just you know that you know, 188 00:08:53,400 --> 00:08:56,120 Speaker 1: the largest companies every ten years, we know that there's 189 00:08:56,120 --> 00:08:59,200 Speaker 1: a rotation of leadership, right. What I'm talking about it 190 00:08:59,320 --> 00:09:01,040 Speaker 1: is the is the group the leaders behind them that 191 00:09:01,080 --> 00:09:03,800 Speaker 1: are working, you know, on cloud related activity. You know, 192 00:09:03,840 --> 00:09:06,160 Speaker 1: we we we just simply have seen so many opportunities, 193 00:09:06,600 --> 00:09:10,520 Speaker 1: uh for truly transformation of check gains, and those companies 194 00:09:10,520 --> 00:09:13,360 Speaker 1: are readily apparent to us that inval inder to catch 195 00:09:13,520 --> 00:09:26,440 Speaker 1: the se as al whites of city glovel. Would we 196 00:09:26,480 --> 00:09:28,800 Speaker 1: do want to dig more into the labor market, into 197 00:09:28,800 --> 00:09:31,160 Speaker 1: the question about how far along we are in this 198 00:09:31,200 --> 00:09:34,880 Speaker 1: disinflationary moment, Cathey bust Jan Sik, Chief Economistic nation Wide 199 00:09:34,920 --> 00:09:36,920 Speaker 1: joining us right now, who has been incredibly on top 200 00:09:37,280 --> 00:09:40,000 Speaker 1: of the tightness of this labor market and how quickly 201 00:09:40,040 --> 00:09:42,680 Speaker 1: it could potentially loosen. Cathy, how much are you starting 202 00:09:42,720 --> 00:09:45,839 Speaker 1: to see true signs of softening of loosening in a 203 00:09:45,920 --> 00:09:48,880 Speaker 1: market that is consistently surprised to the upside in terms 204 00:09:48,920 --> 00:09:51,520 Speaker 1: of how hot and tight. It is good morning. LISTA 205 00:09:51,600 --> 00:09:53,719 Speaker 1: happened to be with you. We're not seeing a lot 206 00:09:53,720 --> 00:09:57,400 Speaker 1: of loosening, uh, and I think that's um actually, you know, 207 00:09:57,440 --> 00:09:59,920 Speaker 1: on one hand, good news, right, but on the other hand, 208 00:10:00,000 --> 00:10:02,640 Speaker 1: of the Fed reserve not what they're looking for. They 209 00:10:02,720 --> 00:10:06,880 Speaker 1: really don't want to need the labor market to loosen. Uh. 210 00:10:07,000 --> 00:10:09,599 Speaker 1: Not that they necessarily want to see jobless claims or 211 00:10:10,040 --> 00:10:12,720 Speaker 1: people be you know, become unemployed, but what they'd like 212 00:10:12,840 --> 00:10:14,640 Speaker 1: to do is take some of the air out of 213 00:10:14,640 --> 00:10:17,840 Speaker 1: the market. Right that the job opening is relatively unemployed, 214 00:10:17,960 --> 00:10:22,079 Speaker 1: still really high, running around one seventh. Wage growth accelerated. 215 00:10:22,120 --> 00:10:25,280 Speaker 1: Actually GDP growth looks like accelerating in the fourth quarter. 216 00:10:25,679 --> 00:10:28,480 Speaker 1: This is going the opposite way, at least for now. 217 00:10:28,640 --> 00:10:31,640 Speaker 1: What the Fed desire. They want growth to slow below potential, 218 00:10:31,880 --> 00:10:34,760 Speaker 1: so that needs GDP growth below one eight. We're running 219 00:10:34,760 --> 00:10:37,960 Speaker 1: a little bit above three for fourth quarters, so there's 220 00:10:38,000 --> 00:10:39,839 Speaker 1: more work to be done. And I just think it 221 00:10:40,000 --> 00:10:43,280 Speaker 1: reinforces for next week. Uh, that we you know here 222 00:10:43,320 --> 00:10:46,440 Speaker 1: from Chairman Pall. Yeah, they made out they will stattle 223 00:10:46,480 --> 00:10:48,440 Speaker 1: back to fifty basics place that seems to be in 224 00:10:48,440 --> 00:10:51,199 Speaker 1: the car in terms of rate. I but they still 225 00:10:51,240 --> 00:10:53,920 Speaker 1: need to sound a bit happish. Um, they don't want 226 00:10:53,920 --> 00:10:56,080 Speaker 1: to scare the markets, but they do need to lift 227 00:10:56,200 --> 00:10:59,440 Speaker 1: rates at least. Do you buy into this idea that 228 00:10:59,440 --> 00:11:02,560 Speaker 1: we are see more disinflation than the data can possibly 229 00:11:02,559 --> 00:11:05,520 Speaker 1: show now because it is a backward looking indication. People 230 00:11:05,600 --> 00:11:09,160 Speaker 1: point to dealer views on car sales next year. People 231 00:11:09,200 --> 00:11:11,800 Speaker 1: point to a lot of different goods, including even some 232 00:11:11,880 --> 00:11:14,080 Speaker 1: food that's starting to get a bit disinflated. They point 233 00:11:14,080 --> 00:11:16,679 Speaker 1: to gasoline prices, the even point to rents. Why is 234 00:11:16,720 --> 00:11:19,720 Speaker 1: that not all coming together with a feeling that perhaps 235 00:11:19,760 --> 00:11:21,880 Speaker 1: the FED is getting what they want in terms of 236 00:11:21,920 --> 00:11:27,560 Speaker 1: a disinflationary rollover effect that will help them. We're on 237 00:11:27,640 --> 00:11:29,959 Speaker 1: the way, you know, we're on the right path, and 238 00:11:30,040 --> 00:11:33,280 Speaker 1: particularly in the goods sector. UM. In the service sector, 239 00:11:33,440 --> 00:11:36,080 Speaker 1: that's where the issue is right and that's where their 240 00:11:36,160 --> 00:11:38,760 Speaker 1: services are very labor intensive. So coming back to the 241 00:11:38,840 --> 00:11:43,120 Speaker 1: labor market, you need to see wage growth slow um. 242 00:11:43,400 --> 00:11:47,160 Speaker 1: And for another for service producers to be able to 243 00:11:47,200 --> 00:11:50,760 Speaker 1: pull back on their incurses. And as long as the 244 00:11:50,800 --> 00:11:55,000 Speaker 1: consumers stay strong and willing to pay UM, we're still 245 00:11:55,080 --> 00:11:58,480 Speaker 1: kept you know, in this inflation sort of dynamic. UM. 246 00:11:58,720 --> 00:12:01,800 Speaker 1: I think what you have to see is labor market 247 00:12:01,800 --> 00:12:04,000 Speaker 1: wage growth slow and and what you know, the market 248 00:12:04,040 --> 00:12:06,000 Speaker 1: applaud it the fact that unit labor costs were a 249 00:12:06,000 --> 00:12:08,559 Speaker 1: bit cooler this week, but we really need to see 250 00:12:08,920 --> 00:12:12,840 Speaker 1: that be extended and maintain. My concern is that companies 251 00:12:12,840 --> 00:12:15,120 Speaker 1: will start to lose the pricing garage, just as you said, 252 00:12:15,160 --> 00:12:18,320 Speaker 1: some goods and even a little bit of services losing 253 00:12:18,360 --> 00:12:21,000 Speaker 1: some pricing power. But at the same time, infact costs 254 00:12:21,120 --> 00:12:24,679 Speaker 1: labor costs still running high. That's a profit margins please right, 255 00:12:24,720 --> 00:12:26,959 Speaker 1: and and that's um you know, the equity market is 256 00:12:27,000 --> 00:12:29,880 Speaker 1: not really priced for them, no, as the bottom market 257 00:12:29,920 --> 00:12:32,000 Speaker 1: friendly priced for the FED to go to five percent 258 00:12:32,040 --> 00:12:33,800 Speaker 1: and hold it there for all next year. As you know, 259 00:12:33,920 --> 00:12:36,680 Speaker 1: lesa bodo market is still pricing and some easing next year. 260 00:12:37,000 --> 00:12:39,240 Speaker 1: So people would say, what's the market seeing that the 261 00:12:39,280 --> 00:12:41,280 Speaker 1: Fed is not, that economists are not, that the market 262 00:12:41,320 --> 00:12:43,880 Speaker 1: has to be a forward indicator. And to your point 263 00:12:44,040 --> 00:12:47,439 Speaker 1: right now, there is a huge dissonance between what economists 264 00:12:47,480 --> 00:12:49,800 Speaker 1: say with projections are for where the FED funds rates 265 00:12:49,800 --> 00:12:52,200 Speaker 1: should end up and what you see with respect to 266 00:12:52,240 --> 00:12:54,600 Speaker 1: margin compression and what you see with respect to yields. 267 00:12:54,679 --> 00:13:00,640 Speaker 1: What gives who's right how do you know, Well, ultimately 268 00:13:01,559 --> 00:13:07,440 Speaker 1: we don't know, but maybe it's it's the fundamentals suggest 269 00:13:07,640 --> 00:13:09,800 Speaker 1: that the equity market has gotten ahead of itself, even 270 00:13:09,840 --> 00:13:12,680 Speaker 1: the bond market. From what we hear from the Federal 271 00:13:12,679 --> 00:13:16,440 Speaker 1: Reserve is they're very resolved and resolute to make sure 272 00:13:16,480 --> 00:13:20,319 Speaker 1: that inflation comes down. Even though we're seeing these disciplationary 273 00:13:20,360 --> 00:13:23,719 Speaker 1: forces come into play. It's not enough yet to get 274 00:13:23,760 --> 00:13:27,640 Speaker 1: us back towards the target level with confidence. And I 275 00:13:27,679 --> 00:13:29,680 Speaker 1: think that's what the Federal Reserve is saying, we really 276 00:13:29,720 --> 00:13:32,120 Speaker 1: want to be confident we're back to two percent just 277 00:13:32,160 --> 00:13:36,000 Speaker 1: because we go from you know, seven percent seven seven 278 00:13:36,040 --> 00:13:39,240 Speaker 1: on it, let's say headline inflation down to five percent. 279 00:13:39,520 --> 00:13:41,320 Speaker 1: You know, that's still not enough. So we're in the 280 00:13:41,400 --> 00:13:43,520 Speaker 1: right direction. And I think that means that the Fed 281 00:13:43,600 --> 00:13:45,640 Speaker 1: doesn't have to read race the six percent of higher, 282 00:13:45,800 --> 00:13:48,760 Speaker 1: but it doesn't mean that, you know, they're ready to 283 00:13:48,920 --> 00:13:51,599 Speaker 1: start to pause or even cut rates. Um, you know, 284 00:13:51,679 --> 00:13:53,839 Speaker 1: looking at the next year, as we talk about what's 285 00:13:53,880 --> 00:13:55,400 Speaker 1: going on with the labor market, we are awaiting a 286 00:13:55,440 --> 00:13:59,000 Speaker 1: press conference from President Biden on a prisoner swap after 287 00:13:59,040 --> 00:14:01,280 Speaker 1: releasing Britney grind Or. We will bring that to you 288 00:14:01,960 --> 00:14:04,439 Speaker 1: when he does come out with those comments, he did 289 00:14:04,440 --> 00:14:07,880 Speaker 1: say that he has spoken with her and she is safe. Cathy. 290 00:14:08,120 --> 00:14:11,240 Speaker 1: We're talking about the likelihood that the FED is going 291 00:14:11,240 --> 00:14:14,000 Speaker 1: to raise rates a lot further than people expect, that 292 00:14:14,120 --> 00:14:17,000 Speaker 1: perhaps the equity market is going to see a bigger 293 00:14:17,000 --> 00:14:20,680 Speaker 1: downturn as a result of margin compression. I am wondering 294 00:14:20,760 --> 00:14:25,120 Speaker 1: whether the structure of this market has been surprisingly resilient 295 00:14:25,200 --> 00:14:27,480 Speaker 1: to you, given how much debt has been incurred over 296 00:14:27,480 --> 00:14:30,200 Speaker 1: the past few years, over the past decade, and the 297 00:14:30,240 --> 00:14:32,720 Speaker 1: idea that it's been predicated on low rates. People thought 298 00:14:32,720 --> 00:14:34,600 Speaker 1: that it would break, it hasn't. Does that give you 299 00:14:34,880 --> 00:14:37,160 Speaker 1: confidence or does that make you think that it's just 300 00:14:37,200 --> 00:14:41,520 Speaker 1: a matter of time. But I think that that situation, 301 00:14:41,560 --> 00:14:44,760 Speaker 1: because rates were low for so long, it actually allowed 302 00:14:44,800 --> 00:14:48,560 Speaker 1: something to lock in for for a long period of time. UM, 303 00:14:48,640 --> 00:14:51,480 Speaker 1: So I was never really overly concerned. I mean, there's 304 00:14:51,480 --> 00:14:56,000 Speaker 1: certain sectors, text sector, which has already been repriced because 305 00:14:56,080 --> 00:14:58,480 Speaker 1: they rely on on debt and that not able to 306 00:14:58,560 --> 00:15:01,120 Speaker 1: lock in for a long perio to time. But if 307 00:15:01,120 --> 00:15:03,120 Speaker 1: you look at the big purty wall that people talk about, 308 00:15:03,120 --> 00:15:05,240 Speaker 1: it's at least three even you know, we even five 309 00:15:05,280 --> 00:15:09,400 Speaker 1: years away from now, so not not overly concerned about that. UM. 310 00:15:09,400 --> 00:15:11,200 Speaker 1: And I do think, you know, once we get past 311 00:15:11,240 --> 00:15:14,080 Speaker 1: this period, I think we go back to low Interesting. 312 00:15:14,160 --> 00:15:16,840 Speaker 1: I'm just saying that for two thousands penty three seems 313 00:15:16,880 --> 00:15:20,720 Speaker 1: to me the market is prematur and thinking you know, 314 00:15:20,800 --> 00:15:23,560 Speaker 1: this is all behind us. I guess the idea is, Um, 315 00:15:23,640 --> 00:15:25,400 Speaker 1: you were talking about the earlier this morning, it's an 316 00:15:25,440 --> 00:15:31,479 Speaker 1: unusual period, right, We've we've never seen a recession so anticipated. UM. 317 00:15:31,560 --> 00:15:33,240 Speaker 1: And it does make you, you know, I spent a 318 00:15:33,280 --> 00:15:34,720 Speaker 1: lot of time on well seet. It does make you 319 00:15:34,840 --> 00:15:36,400 Speaker 1: seem to think, well, maybe I should take the other 320 00:15:36,440 --> 00:15:38,880 Speaker 1: side of that and that that itself landing is more 321 00:15:38,960 --> 00:15:41,760 Speaker 1: likely now. But again you come back to those fundamentals, 322 00:15:42,360 --> 00:15:45,120 Speaker 1: it just doesn't seem to add up, UM that you know, 323 00:15:45,120 --> 00:15:47,880 Speaker 1: the recession risks are still there. Cathe Bi Stantic of 324 00:15:48,040 --> 00:15:54,720 Speaker 1: a nationwide Thank you so much, Dan, I've joined us 325 00:15:54,760 --> 00:15:57,760 Speaker 1: now Seemi equity research analyst over at web verst Dan. 326 00:15:58,160 --> 00:15:59,880 Speaker 1: Your thoughts on this story that came out, Mom's a 327 00:16:01,720 --> 00:16:03,320 Speaker 1: I think you're starting to see a bit of a 328 00:16:03,400 --> 00:16:06,280 Speaker 1: demand issue in China and that's something that I think 329 00:16:06,280 --> 00:16:09,960 Speaker 1: Tessa's adjusting to. I still view it more near term 330 00:16:10,040 --> 00:16:13,400 Speaker 1: not a long term systemic issue. But look after a 331 00:16:13,480 --> 00:16:17,160 Speaker 1: Cinderella story that they're starting to clearly hit some hurdles 332 00:16:17,160 --> 00:16:19,920 Speaker 1: in China. Does that extend to Apple? Is that tess 333 00:16:20,000 --> 00:16:23,680 Speaker 1: the problem or a broader problem. I think it's more 334 00:16:23,720 --> 00:16:26,040 Speaker 1: of a testa problem right now. I mean Apple right 335 00:16:26,080 --> 00:16:29,000 Speaker 1: if I will demand to supply still about three to one. 336 00:16:29,080 --> 00:16:32,560 Speaker 1: There issue can be a supply Apple, not demand, and 337 00:16:32,600 --> 00:16:34,760 Speaker 1: I think that's where the stock still continues to hold 338 00:16:34,800 --> 00:16:37,880 Speaker 1: in there because what we're seeing on an iPhone globally, 339 00:16:37,920 --> 00:16:41,680 Speaker 1: I think for Tessa, look, it's competition in China, they continue, 340 00:16:41,720 --> 00:16:44,720 Speaker 1: I think, being a very strong position, but you're starting 341 00:16:44,720 --> 00:16:46,640 Speaker 1: to see cracks in the armor and they need to 342 00:16:46,720 --> 00:16:49,040 Speaker 1: adjust and that's what you're starting to see here. But 343 00:16:49,120 --> 00:16:51,800 Speaker 1: our thesis for twenty three in terms of two million 344 00:16:51,880 --> 00:16:55,200 Speaker 1: units globally continues to stand. Others would start pushing back 345 00:16:55,240 --> 00:16:57,680 Speaker 1: on that. We heard from Morgan Stanley downgrading their view 346 00:16:58,080 --> 00:17:01,120 Speaker 1: of Apple as a result of some of the suppliers 347 00:17:01,120 --> 00:17:04,000 Speaker 1: discussing a draw down or a decline in some of 348 00:17:04,040 --> 00:17:07,720 Speaker 1: the demand side is the lack of demand in China 349 00:17:07,800 --> 00:17:11,080 Speaker 1: giving a pass to tech companies to start to divert 350 00:17:11,160 --> 00:17:14,200 Speaker 1: business out of that nation a little bit more, especially 351 00:17:14,240 --> 00:17:16,480 Speaker 1: in light of the turmoil we've seen over the past 352 00:17:16,520 --> 00:17:20,000 Speaker 1: few years. Yea, at least I think specifically for Apple, 353 00:17:20,000 --> 00:17:22,440 Speaker 1: I mean clock struck midnight in terms of what they've 354 00:17:22,480 --> 00:17:25,920 Speaker 1: seen in China because of the fox Con situation of 355 00:17:26,080 --> 00:17:28,639 Speaker 1: zero COVID, you see a little goosening of that. But 356 00:17:28,760 --> 00:17:31,479 Speaker 1: I think you know, it's really been a disaster in 357 00:17:31,560 --> 00:17:34,080 Speaker 1: terms of Christmas, We're gonna see about ten to fifteen 358 00:17:34,119 --> 00:17:37,760 Speaker 1: million shortages because of what we're seeing in China. So 359 00:17:37,800 --> 00:17:40,240 Speaker 1: I do think you're gonna start to see diversifying app 360 00:17:40,560 --> 00:17:44,720 Speaker 1: potentially India, Vietnam and others. And I think you're starting 361 00:17:44,760 --> 00:17:47,000 Speaker 1: to see a changing of the tide there in terms 362 00:17:47,000 --> 00:17:49,760 Speaker 1: of what we've seen in China the last few months. 363 00:17:49,760 --> 00:17:51,520 Speaker 1: So you think that this is more of a testless 364 00:17:51,520 --> 00:17:54,560 Speaker 1: story in terms of competition in China, lack of demands 365 00:17:54,560 --> 00:17:56,560 Speaker 1: at a time when that really had been a bright spot. 366 00:17:56,720 --> 00:17:59,560 Speaker 1: How much is this pressured even further by this idea 367 00:17:59,600 --> 00:18:02,919 Speaker 1: of a rigin loan to Elon Musk to back Twitter 368 00:18:03,000 --> 00:18:06,040 Speaker 1: to refinance It's like backed by Tesla Shares, I mean 369 00:18:06,080 --> 00:18:11,080 Speaker 1: just basically leveraging up some of his Holdings selling diamonds 370 00:18:11,119 --> 00:18:13,560 Speaker 1: to buy two dollars slice in New York City pizza. 371 00:18:13,760 --> 00:18:16,000 Speaker 1: I mean it's essentially the problem with the test of 372 00:18:16,119 --> 00:18:19,639 Speaker 1: story using it essentially as an ATM machine, and I 373 00:18:19,680 --> 00:18:22,720 Speaker 1: think that's really been an overhanging the test of story. 374 00:18:22,760 --> 00:18:25,679 Speaker 1: The frustration continues to build because of you know, the 375 00:18:25,720 --> 00:18:29,000 Speaker 1: Twitter circus show, and I think right now it's not 376 00:18:29,119 --> 00:18:32,040 Speaker 1: when investors want to see at a time where demand, 377 00:18:32,200 --> 00:18:35,440 Speaker 1: especially in China, this is finally a storm that must 378 00:18:35,440 --> 00:18:38,240 Speaker 1: needs to navigate TESTA through sometime. Why are you still 379 00:18:38,240 --> 00:18:42,520 Speaker 1: at two fifty on the stock out Perform Because I 380 00:18:42,520 --> 00:18:45,280 Speaker 1: mean my view is the two thousand, twenty three and 381 00:18:45,280 --> 00:18:49,000 Speaker 1: two thousand four story that's still two million units. I 382 00:18:49,160 --> 00:18:51,720 Speaker 1: still view this more of a soft path, not the 383 00:18:51,720 --> 00:18:54,159 Speaker 1: start of what I view is a broader structural issue. 384 00:18:54,560 --> 00:18:56,240 Speaker 1: And in terms of e V, I mean, I think 385 00:18:56,240 --> 00:18:59,080 Speaker 1: we're going to see that in terms of adoption double 386 00:18:59,200 --> 00:19:01,800 Speaker 1: in China next two to three years. Tests is going 387 00:19:01,880 --> 00:19:04,199 Speaker 1: to be a big major part of that. I just 388 00:19:04,280 --> 00:19:07,080 Speaker 1: think for right now, it's been a magic carpet ride 389 00:19:07,119 --> 00:19:09,919 Speaker 1: and they're finally hitting some uncertainty and they need to 390 00:19:09,960 --> 00:19:11,879 Speaker 1: navigate through it. What did you make of the Apple 391 00:19:11,960 --> 00:19:15,480 Speaker 1: delight when it comes to vehicle was an autonomous driving? 392 00:19:15,480 --> 00:19:18,119 Speaker 1: What did you make of that? Look? I think writing 393 00:19:18,200 --> 00:19:20,680 Speaker 1: was in the wall. I do think that the China 394 00:19:20,840 --> 00:19:24,280 Speaker 1: situations throwing a lot of those strategic plans, you know, 395 00:19:24,320 --> 00:19:27,480 Speaker 1: I think potentially out in terms of what Apples deal with. 396 00:19:27,600 --> 00:19:29,600 Speaker 1: Then I think right now juggling a out of balls. 397 00:19:29,640 --> 00:19:33,800 Speaker 1: I think first strategically moving out of China is number one. 398 00:19:34,119 --> 00:19:36,200 Speaker 1: And also I think, look the demand story in terms 399 00:19:36,240 --> 00:19:38,520 Speaker 1: of overall E d S and autonomous this is not 400 00:19:38,640 --> 00:19:41,360 Speaker 1: the top priority for Apple. That's why I think that's 401 00:19:41,400 --> 00:19:44,359 Speaker 1: pushed out. But I think it's German's talked about still 402 00:19:44,440 --> 00:19:47,720 Speaker 1: believed that the Apple car will come, even though it's 403 00:19:47,720 --> 00:19:50,800 Speaker 1: probably delayed by another year. Do you think that there 404 00:19:51,000 --> 00:19:54,840 Speaker 1: is overly pessimistic views around Apple, around big tech more 405 00:19:54,880 --> 00:19:57,440 Speaker 1: broadly as not being able to be the drivers of 406 00:19:57,520 --> 00:20:00,000 Speaker 1: the next cycle. We keep hearing about that again and again, 407 00:20:00,000 --> 00:20:02,320 Speaker 1: and the D indexing. I'm never going to get this right. 408 00:20:02,320 --> 00:20:06,040 Speaker 1: What it is is out texing, you know, basically throwing 409 00:20:06,040 --> 00:20:09,240 Speaker 1: out tex Yeah, okay, so throwing out some of the 410 00:20:09,280 --> 00:20:12,399 Speaker 1: big behemoths. Do you buy into that story? And if not, 411 00:20:12,440 --> 00:20:15,399 Speaker 1: how do you push back? Look the New York City 412 00:20:15,400 --> 00:20:18,199 Speaker 1: cab driver and now is barrash on tech, and I 413 00:20:18,240 --> 00:20:20,640 Speaker 1: think that's sort of the trend here. I look, my 414 00:20:20,760 --> 00:20:23,200 Speaker 1: view is that that's still not going to change over 415 00:20:23,240 --> 00:20:25,639 Speaker 1: the coming years in terms of the tech leading. You know, 416 00:20:25,680 --> 00:20:28,800 Speaker 1: I think the market hired because this transformation I've seen 417 00:20:28,840 --> 00:20:32,400 Speaker 1: a fourth Industrial Revolution is not ending. I think it's 418 00:20:32,400 --> 00:20:34,320 Speaker 1: just more of a ship. And I still think a 419 00:20:34,320 --> 00:20:36,879 Speaker 1: lot of these tech names are oversold here. They're clearly 420 00:20:36,920 --> 00:20:39,479 Speaker 1: going through a correction as we've scene, which has been brutal. 421 00:20:39,760 --> 00:20:42,520 Speaker 1: They're cutting costs, but growth on the other side of this, 422 00:20:42,720 --> 00:20:45,119 Speaker 1: I think he used to be robust, but it's as 423 00:20:45,240 --> 00:20:48,440 Speaker 1: under own as I've seen tex In two thousand ten, 424 00:20:49,640 --> 00:21:01,879 Speaker 1: wet Bush look at this for a lead paragraph in 425 00:21:01,880 --> 00:21:05,600 Speaker 1: our story on she two months after snubbing US President 426 00:21:05,640 --> 00:21:08,800 Speaker 1: Joe Biden's place for oil, Saudi Arabia is rolling down 427 00:21:08,840 --> 00:21:12,320 Speaker 1: the red carpet for his Chinese counterpart, Cheesing Pink and 428 00:21:12,400 --> 00:21:15,160 Speaker 1: well joined us now senior fellow at the Atlantic Council 429 00:21:15,200 --> 00:21:18,520 Speaker 1: and author of Saudi Inc. And how significant are these 430 00:21:18,600 --> 00:21:23,080 Speaker 1: mazings this week? I think they're pretty significant, especially from 431 00:21:23,119 --> 00:21:26,159 Speaker 1: an oil perspective, and I think they're much more significant 432 00:21:26,160 --> 00:21:29,719 Speaker 1: for Saudi Arabia than they are perhaps for China, because 433 00:21:30,320 --> 00:21:34,640 Speaker 1: the Saudis have long had very strong oil ties with China. 434 00:21:34,680 --> 00:21:37,000 Speaker 1: I think a lot of people don't realize that these 435 00:21:37,040 --> 00:21:40,200 Speaker 1: go back all the way in fact to nine when 436 00:21:40,240 --> 00:21:43,199 Speaker 1: Ali Nami, who was the then the CEO of Ramco, 437 00:21:43,480 --> 00:21:45,840 Speaker 1: went to China to try to see, you know, what 438 00:21:46,080 --> 00:21:48,680 Speaker 1: kind of interests there might be for Saudi oil there, 439 00:21:48,680 --> 00:21:50,920 Speaker 1: and he didn't really see all that much, but he's 440 00:21:51,000 --> 00:21:54,160 Speaker 1: had had his eye on China for years, and as 441 00:21:54,200 --> 00:21:58,479 Speaker 1: soon as he saw economic development there basically kind of 442 00:21:58,520 --> 00:22:01,840 Speaker 1: pounced and was able to get some really good long 443 00:22:01,960 --> 00:22:05,199 Speaker 1: term deals for UH Saudi crude oil there. So I 444 00:22:05,200 --> 00:22:07,840 Speaker 1: think this is partially a way of reminding China, hey, 445 00:22:07,960 --> 00:22:11,800 Speaker 1: we're your your really good stable crude suppliers. We've got 446 00:22:11,840 --> 00:22:14,439 Speaker 1: a lot of joint ventures and patrick chemicals in China, 447 00:22:14,800 --> 00:22:16,840 Speaker 1: and yeah, there's a lot of cheap Russian oil in 448 00:22:16,880 --> 00:22:19,600 Speaker 1: the market, but don't don't forget about us UH. And 449 00:22:19,640 --> 00:22:22,919 Speaker 1: then at the same time, Saudi Arabia is definitely trying 450 00:22:23,000 --> 00:22:26,560 Speaker 1: to see if it can capitalize on this relationship with 451 00:22:26,640 --> 00:22:31,200 Speaker 1: China and build even more economic ties, more business ties 452 00:22:31,200 --> 00:22:34,280 Speaker 1: that go beyond oil, which is something Saudi Arabia really 453 00:22:34,320 --> 00:22:37,840 Speaker 1: wants to do. Whether or not this can can extend 454 00:22:38,000 --> 00:22:42,000 Speaker 1: into the political and the diplomatic UH sphere is really 455 00:22:42,040 --> 00:22:45,679 Speaker 1: I think the big question for UH these meetings, what 456 00:22:45,720 --> 00:22:48,560 Speaker 1: do you think the message for America is? I think 457 00:22:48,560 --> 00:22:51,720 Speaker 1: the message for America is that UM China is also 458 00:22:51,800 --> 00:22:54,600 Speaker 1: looking to to put itself as a player, a really 459 00:22:54,760 --> 00:22:59,680 Speaker 1: big important player out there in the political and diplomatic arena, 460 00:22:59,760 --> 00:23:03,080 Speaker 1: and that the United States is no longer the biggest 461 00:23:03,160 --> 00:23:06,879 Speaker 1: or the only force in the Middle East. I think militarily, 462 00:23:07,480 --> 00:23:09,840 Speaker 1: China is not looking to supplant the US in any 463 00:23:09,840 --> 00:23:12,240 Speaker 1: way in the Middle East. China doesn't really have any 464 00:23:12,320 --> 00:23:15,520 Speaker 1: interest in kind of defending the Middle East as the 465 00:23:15,600 --> 00:23:18,919 Speaker 1: US has has put itself out there for so I 466 00:23:18,920 --> 00:23:21,879 Speaker 1: don't think that there's really a concern when it comes 467 00:23:21,920 --> 00:23:26,040 Speaker 1: to that. But there's definitely awareness that the United States 468 00:23:26,160 --> 00:23:30,760 Speaker 1: is no longer Saudi Arabia's most important economic relationship. Now 469 00:23:30,800 --> 00:23:34,080 Speaker 1: they've got a really important economic relationship with China, and 470 00:23:34,200 --> 00:23:37,480 Speaker 1: that's the message here. Is there also a message about 471 00:23:37,520 --> 00:23:40,480 Speaker 1: China reopening and trying to secure enough crude, enough of 472 00:23:40,560 --> 00:23:44,400 Speaker 1: the fossil fuels that it needs to support its economy. Yeah, 473 00:23:44,480 --> 00:23:46,719 Speaker 1: that's a really important point. And I think that the 474 00:23:46,760 --> 00:23:51,800 Speaker 1: fact that this meeting was planned before China decided to 475 00:23:51,880 --> 00:23:55,439 Speaker 1: relax it's zero COVID restrictions kind of gives you a 476 00:23:55,480 --> 00:23:58,640 Speaker 1: sense that perhaps they knew that this was coming, or 477 00:23:58,760 --> 00:24:01,600 Speaker 1: or perhaps even the Saudis knew that this was coming. 478 00:24:01,640 --> 00:24:04,800 Speaker 1: The fact that OPEC hasn't made any major moves says 479 00:24:04,920 --> 00:24:08,480 Speaker 1: that they definitely see that even with a China reopening, 480 00:24:08,560 --> 00:24:11,359 Speaker 1: the market, uh, you know for oil is definitely potentially 481 00:24:11,440 --> 00:24:14,639 Speaker 1: still soft. But I do see this as kind of 482 00:24:14,880 --> 00:24:17,840 Speaker 1: heralding that movement. I want to pick up on that 483 00:24:17,920 --> 00:24:21,400 Speaker 1: Ellen that even with China reopening the market, the demand 484 00:24:21,480 --> 00:24:25,360 Speaker 1: side of the equation is still softening for crude. Can 485 00:24:25,400 --> 00:24:28,640 Speaker 1: you explain how the current market pricing of oil makes 486 00:24:28,680 --> 00:24:30,960 Speaker 1: sense to you given that we are seeing a potential 487 00:24:30,960 --> 00:24:33,600 Speaker 1: opening up in China. That's one of our recent guests said, 488 00:24:33,800 --> 00:24:37,520 Speaker 1: as much faster than he expected. Yeah. I do think that, Um, 489 00:24:37,800 --> 00:24:40,040 Speaker 1: what what a lot of people are looking at now 490 00:24:40,080 --> 00:24:43,040 Speaker 1: is very much the financial market is how much you 491 00:24:43,040 --> 00:24:45,800 Speaker 1: know crude is out there, there's still oil being released. 492 00:24:45,880 --> 00:24:48,280 Speaker 1: I think from from the spr I think as that 493 00:24:48,400 --> 00:24:51,000 Speaker 1: wine sound. If it does indeed wind down, we will 494 00:24:51,080 --> 00:24:54,040 Speaker 1: see oil prices pick up a bit. But also this 495 00:24:54,119 --> 00:24:56,320 Speaker 1: time of year is not usually you know, a big 496 00:24:56,359 --> 00:24:59,199 Speaker 1: time for oil demands. So um, there's also that to 497 00:24:59,240 --> 00:25:02,440 Speaker 1: take into a into account. Um, there's the economic issues 498 00:25:02,440 --> 00:25:04,800 Speaker 1: in Europe, and we just see in general, you know, 499 00:25:04,880 --> 00:25:08,360 Speaker 1: things are are are not looking all that strong right now. 500 00:25:08,840 --> 00:25:12,400 Speaker 1: But I do think that that going out, you know, um, 501 00:25:12,440 --> 00:25:15,760 Speaker 1: farther out, we will probably see a pickup in demand. 502 00:25:16,000 --> 00:25:18,160 Speaker 1: Maybe not, you know, as as your previous guest said, 503 00:25:18,200 --> 00:25:19,879 Speaker 1: until you know, if we're going to be in a 504 00:25:19,920 --> 00:25:22,840 Speaker 1: recession for the first half of twenty three, we may 505 00:25:22,880 --> 00:25:26,000 Speaker 1: not see it until after that. But um, I think 506 00:25:26,000 --> 00:25:29,000 Speaker 1: that OPEC is kind of playing it safe here. They 507 00:25:29,040 --> 00:25:31,399 Speaker 1: made no changes, They're waiting to see what happens in 508 00:25:31,400 --> 00:25:34,439 Speaker 1: the market. I think their decision to cut earlier in 509 00:25:34,720 --> 00:25:39,920 Speaker 1: UM this year was probably the right one economically and financially, 510 00:25:39,960 --> 00:25:43,600 Speaker 1: even though the United States was very much displeased. The 511 00:25:43,720 --> 00:25:48,240 Speaker 1: right decision from okpack plus after all the pushback we 512 00:25:48,320 --> 00:25:50,760 Speaker 1: heard from a couple of months ago, was it the 513 00:25:50,840 --> 00:25:54,480 Speaker 1: right decision? Now, let's see what happened seventies kind of 514 00:25:54,560 --> 00:25:57,560 Speaker 1: saying maybe it was yes. Now, let's see on the 515 00:25:57,560 --> 00:25:59,720 Speaker 1: flip side, do they start refilling the SPR? And that's 516 00:25:59,760 --> 00:26:01,520 Speaker 1: the right because if are they going to go in 517 00:26:01,560 --> 00:26:04,199 Speaker 1: the opposite direction? And then do people start screaming you 518 00:26:04,200 --> 00:26:06,840 Speaker 1: guys are artificially increasing prices? I mean honestly, because at 519 00:26:06,840 --> 00:26:09,399 Speaker 1: what point does the US become the marginal swing producer 520 00:26:09,440 --> 00:26:11,960 Speaker 1: or the swing demand provider here and then let's squeeze 521 00:26:12,000 --> 00:26:14,760 Speaker 1: that in the SPR. What's your understanding of when the 522 00:26:14,840 --> 00:26:18,520 Speaker 1: US administration comes back and then starts buying again? Yeah, exactly. 523 00:26:18,560 --> 00:26:21,160 Speaker 1: I mean, how how soon can they start buying? Can 524 00:26:21,359 --> 00:26:25,080 Speaker 1: can you legitimately start refilling the SPR while you're still 525 00:26:25,720 --> 00:26:28,960 Speaker 1: while you're still draining it. That's a really good question 526 00:26:29,000 --> 00:26:31,720 Speaker 1: because I don't think the last release is happening. I 527 00:26:31,760 --> 00:26:34,440 Speaker 1: think it's happening right now. So I do think they're 528 00:26:34,440 --> 00:26:36,840 Speaker 1: gonna wait at least until we hit the seventy dollar 529 00:26:36,880 --> 00:26:39,880 Speaker 1: mark in w t I. But then there's also got 530 00:26:39,880 --> 00:26:42,720 Speaker 1: to be oil for them to buy, and um, you know, 531 00:26:42,920 --> 00:26:46,119 Speaker 1: is there US oil that's being produced that's available for 532 00:26:46,160 --> 00:26:49,159 Speaker 1: them to buy? And that's a good question, And is 533 00:26:49,240 --> 00:26:51,560 Speaker 1: our company is gonna want to sell to refill the 534 00:26:52,000 --> 00:26:55,120 Speaker 1: SPR when they could be selling potentially for a little 535 00:26:55,160 --> 00:26:58,640 Speaker 1: bit more overseas or whatnot. I think that's that's that's 536 00:26:58,680 --> 00:27:02,480 Speaker 1: the question. And we could potentially can see us buying 537 00:27:02,560 --> 00:27:05,680 Speaker 1: maybe some foreign oil for the SPR. And remember they 538 00:27:05,720 --> 00:27:08,480 Speaker 1: need to buy heavy oil. They can't just refill it 539 00:27:08,520 --> 00:27:11,439 Speaker 1: with light oil from uh, you know, the Permian. And 540 00:27:11,440 --> 00:27:13,040 Speaker 1: then can you just talk to me quickly about the 541 00:27:13,040 --> 00:27:15,800 Speaker 1: politics of buying foreign crude to fill up the SPR. 542 00:27:15,800 --> 00:27:18,120 Speaker 1: How do you think that's going to play out. It's 543 00:27:18,119 --> 00:27:20,600 Speaker 1: not gonna look good. Um, The truth is it has 544 00:27:20,640 --> 00:27:24,000 Speaker 1: to happen because you can't just have an SPR full 545 00:27:24,040 --> 00:27:27,320 Speaker 1: of very light crude oil. It's not gonna work, particularly 546 00:27:27,320 --> 00:27:30,200 Speaker 1: for American refineries if they have to use it for 547 00:27:30,280 --> 00:27:33,280 Speaker 1: some kind of you know, national emergency or say there's 548 00:27:33,280 --> 00:27:36,560 Speaker 1: a hurricane. You're gonna need various different types of crude. 549 00:27:36,560 --> 00:27:38,840 Speaker 1: But it's not gonna look good. And I'm well, thank 550 00:27:38,880 --> 00:27:41,560 Speaker 1: you at the Atlantic Council and author of Saundy Inc. 551 00:27:41,880 --> 00:27:46,880 Speaker 1: Fantastic conversation. This is the Bloomberg Surveillance Podcast. Thanks for listening. 552 00:27:47,240 --> 00:27:50,560 Speaker 1: Join us live weekdays from seven to ten am Eastern 553 00:27:50,840 --> 00:27:54,840 Speaker 1: on Bloomberg Radio and on Bloomberg Television each day from 554 00:27:54,920 --> 00:27:59,600 Speaker 1: six to nine am for insight from the best in economics, finance, 555 00:27:59,640 --> 00:28:05,000 Speaker 1: invest and international relations. And subscribe to the Surveillance podcast 556 00:28:05,280 --> 00:28:08,879 Speaker 1: on Apple podcast, SoundCloud, Bloomberg dot com, and of course, 557 00:28:09,200 --> 00:28:13,440 Speaker 1: on the terminal. I'm Tom Keene, and this is Bloomberg.