WEBVTT - Surveillance: $100 Oil with JP Morgan's Malek 0:00:05.160 --> 0:00:08.480 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.520 --> 0:00:12.360 with Jonathan Farrow and Lisa Abramowitz. Join us each day 0:00:12.400 --> 0:00:16.840 for insight from the best an economics, geopolitics, finance and investment. 0:00:17.280 --> 0:00:22.119 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.320 --> 0:00:26.600 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:26.640 --> 0:00:29.880 the Bloomberg Terminal, and the Bloomberg Business App. 0:00:30.040 --> 0:00:32.920 And my house is almost nothing on our guests. 0:00:33.080 --> 0:00:36.199 On my coffee table in my living room, there is 0:00:36.240 --> 0:00:39.600 a one hundred page plus researcher report from JP Morgan 0:00:40.560 --> 0:00:45.120 eighteen months ago which brilliantly plays out the demand dynamics 0:00:45.159 --> 0:00:47.559 of what we don't talking us about, which is emerging 0:00:47.600 --> 0:00:51.239 markets joining us now, Christian Malick, Global Heat of Energy, STRATUMY, 0:00:51.400 --> 0:00:53.480 JP Morgan, COVID dot in Away. 0:00:53.680 --> 0:00:56.680 Let's just be honest, China shutdown gotten Away. 0:00:57.280 --> 0:01:00.680 Do you reaffirm what you said eighteen months ago about 0:01:00.680 --> 0:01:02.960 the durability of demand. 0:01:02.680 --> 0:01:04.320 In em for sure? 0:01:04.319 --> 0:01:06.360 Actually, I think it's always good to be here again 0:01:06.400 --> 0:01:09.040 and on demand. What I'd say is that I think 0:01:09.080 --> 0:01:11.920 we're actually stronger in demand growth on a medium term 0:01:11.920 --> 0:01:13.880 than we thought you were. And the main reason is 0:01:13.920 --> 0:01:15.400 that when you look at all the fuels in the world, 0:01:15.600 --> 0:01:19.039 particularly the clean energy fuels. In the second edition of 0:01:19.040 --> 0:01:22.280 that report, we showed that the system the distribution of 0:01:22.280 --> 0:01:26.800 that energy will basically fail the generation of lean energy. 0:01:26.880 --> 0:01:28.800 So you've got all these duels being generated, you can't 0:01:28.840 --> 0:01:31.160 get it to the consumer. What happens is we end 0:01:31.200 --> 0:01:34.200 up with a massive gap of energy in terms of 0:01:34.200 --> 0:01:36.000 what to fill. How do we fill that? We have 0:01:36.040 --> 0:01:38.039 to fill it through the traditional fuels. What that will 0:01:38.080 --> 0:01:40.680 do is drive more demand for hydrocarbons. Are there for 0:01:40.760 --> 0:01:42.039 more demand for oil? 0:01:42.480 --> 0:01:44.160 I mean, I mean we can spend an hour with 0:01:44.240 --> 0:01:47.480 you and as duels focus as a physics estimate of 0:01:47.640 --> 0:01:50.720 energy and the thermone dynamics and ev vehicles and all there. 0:01:50.600 --> 0:01:52.200 But I'm not going there this morning. 0:01:52.480 --> 0:01:54.720 What I will say is you got to get traditional 0:01:54.760 --> 0:01:58.640 hydrocarbons from Saudi Arabian such through the straight to Malaca 0:01:58.760 --> 0:01:59.920 and up the Pacific Ring. 0:02:00.400 --> 0:02:02.800 Is that model still in place? Absolutely? 0:02:02.840 --> 0:02:04.720 And in fact, when we think about Sadi share of 0:02:04.760 --> 0:02:07.840 demand growth, and we've written about this extensively, you know 0:02:07.880 --> 0:02:10.760 a few years ago that ultimately with the industry retreating 0:02:10.800 --> 0:02:13.640 in terms of investments in oil. What we'll see is 0:02:13.639 --> 0:02:15.919 SADI share of demand growth going up to between fifty 0:02:15.960 --> 0:02:19.360 to sixty percent of all demand growth by twenty thirty. Now, 0:02:19.440 --> 0:02:21.360 just to give you perspective on that, the average was 0:02:21.360 --> 0:02:24.200 eleven percent the last thirty years. The low was four 0:02:24.600 --> 0:02:27.400 when we had shale at its max. But a high 0:02:27.400 --> 0:02:29.920 cost of equity, you know, more cash return to shareholders, 0:02:29.960 --> 0:02:32.600 a high cost of debt, higher for longer rates, and 0:02:32.639 --> 0:02:35.480 clearly a push to drive away from the transition has 0:02:35.520 --> 0:02:38.040 meant that the industry is massively underinvested, and that we 0:02:38.040 --> 0:02:39.720 weren't a fan of this un investment. Pisis for a 0:02:39.840 --> 0:02:42.280 very long time. We turn bullets with a super cycle 0:02:42.280 --> 0:02:44.600 in twenty twenty. I always like to say that, but 0:02:44.639 --> 0:02:47.600 that investment now is now way too late. 0:02:48.280 --> 0:02:51.880 Do presidential politics matter, given the crude production in America 0:02:52.000 --> 0:02:53.760 is close to a record at the moment. 0:02:54.560 --> 0:02:56.519 I think it does in the sense that you could 0:02:56.560 --> 0:02:58.919 potentially push for more investments in shale. 0:02:59.000 --> 0:03:00.440 But the issue of shale, and it sort of. 0:03:00.440 --> 0:03:02.800 Goes back years five or six years ago, were all 0:03:02.800 --> 0:03:04.360 wondering how is it when all prices go off, we 0:03:04.400 --> 0:03:06.359 see so many barrels just turning. 0:03:06.080 --> 0:03:07.600 Up, blowing up, lots and lots of wells. 0:03:07.840 --> 0:03:10.240 That was fine then, but we sort of what you 0:03:10.280 --> 0:03:13.760 saw now, you've seeing productivity slow. So as a result 0:03:13.800 --> 0:03:16.160 of the way that was fragged, well dated, showing us 0:03:16.200 --> 0:03:19.239 that productivity is now slowing. So even if we said right, 0:03:19.280 --> 0:03:22.600 go drill, baby, drill right and in lots of investments, 0:03:23.280 --> 0:03:25.040 even if banks were to turn around and say listen, 0:03:25.080 --> 0:03:28.000 will finance you, the issue is the wells themselves. It's 0:03:28.040 --> 0:03:30.600 not magic dust you just throw over wells. That slow 0:03:30.639 --> 0:03:34.120 down is happening, and the marginal cost is going up. 0:03:34.480 --> 0:03:36.160 The one thing I probably learned this year in all 0:03:36.240 --> 0:03:38.760 markets is that we tested seventy and we bounced back. 0:03:39.920 --> 0:03:42.440 Looking at prices now ninety four on Brent, looking at 0:03:42.440 --> 0:03:45.280 the bond market, yield to push in five percent, five 0:03:45.360 --> 0:03:47.480 twenty two year and four fifty out of ten year, 0:03:47.520 --> 0:03:50.120 conversation we're having in the bond market is what is 0:03:50.160 --> 0:03:50.640 the new normal? 0:03:50.760 --> 0:03:51.560 Is it the old normal? 0:03:52.040 --> 0:03:54.520 What's the conversation like in the commodity market, what's the 0:03:54.600 --> 0:03:56.440 new normal for commodity prices? 0:03:56.480 --> 0:03:58.080 Given everything you've just told us. 0:03:57.960 --> 0:03:59.240 Well, I love the way you talk about because I 0:03:59.240 --> 0:04:01.440 think that before in our in terms of we were 0:04:01.720 --> 0:04:03.360 very bullished and then we sort of took time out 0:04:03.400 --> 0:04:05.480 this year. We're very barish in December and we've basically 0:04:05.520 --> 0:04:08.160 gone back to bullish, So we're sort of we've been 0:04:08.200 --> 0:04:11.560 quite tactical that before and after its rates. The flow 0:04:11.600 --> 0:04:13.800 of capital into new or supply is just not what 0:04:13.840 --> 0:04:15.440 it was like in the last thirty years. You had 0:04:15.520 --> 0:04:17.800 cheap money, a lot of productivity. So to ask you 0:04:17.800 --> 0:04:20.960 a question, what that's doing is driving the long term 0:04:21.000 --> 0:04:23.560 price the back end of the curve up to eighty 0:04:23.600 --> 0:04:26.039 and north of eighty, we think it probably normalized towards 0:04:26.080 --> 0:04:27.880 one hundred dollars, And just to sort of give you 0:04:27.920 --> 0:04:34.080 a bottom up sense the companies themselves, if you take capex, dividends, buybacks, debt, 0:04:34.920 --> 0:04:38.599 and windfall tax in this country, in Europe, you need 0:04:39.040 --> 0:04:42.159 at least eighty dollars to be able to invest in 0:04:42.279 --> 0:04:45.680 marginal new oil. That's of fact we've done. We did analysis. 0:04:45.720 --> 0:04:47.720 We call it the cash break even. So that's very 0:04:47.760 --> 0:04:50.600 supportive for the eighty dollars. The question we've had a 0:04:50.600 --> 0:04:52.920 lot today is why one hundred. Well, when you look 0:04:52.960 --> 0:04:54.960 at their capacity of opek over the next few years, 0:04:55.000 --> 0:04:56.040 the only ones that are going to be able to 0:04:56.040 --> 0:05:00.360 fill that fill that gap in supply, is opek origue 0:05:00.360 --> 0:05:03.400 When spare capacity has fallen to sort of between five 0:05:03.440 --> 0:05:06.160 and ten percent of total capacity in the world, that's 0:05:06.200 --> 0:05:09.000 a risk premium, which we i haven't used that term 0:05:09.040 --> 0:05:11.279 for a very long time in oil, maybe last year briefly. 0:05:11.520 --> 0:05:14.080 That will drive twenty dollars above the eighty to one hundred. 0:05:14.440 --> 0:05:16.920 So when you talk about opek being the big swing factor, 0:05:17.320 --> 0:05:19.279 we've been hearing a lot that Saudi Arabia and what 0:05:19.320 --> 0:05:21.520 they decide to produce is really going to determine whether 0:05:21.560 --> 0:05:23.800 things stay at one hundred, whether things stay at ninety, 0:05:23.960 --> 0:05:26.360 or whether things stay below. Do you reject that? Do 0:05:26.400 --> 0:05:29.560 you think that that sort of a simplistic way of 0:05:29.600 --> 0:05:31.320 looking at it? And in the near term they have 0:05:31.400 --> 0:05:33.240 less control than people give them credit. 0:05:33.520 --> 0:05:36.760 Well, it's a question that's very, very very they have control. 0:05:36.839 --> 0:05:37.680 They have to have control. 0:05:37.720 --> 0:05:40.600 I think ultimately the size have played their cards very 0:05:40.640 --> 0:05:43.520 well and done a fantastic job managing the volatility and oil. 0:05:43.760 --> 0:05:46.839 Right With that in mind, if they're taking great share 0:05:46.839 --> 0:05:49.760 of demand growth, they have a sort of fiducial duty 0:05:49.800 --> 0:05:51.920 to make sure they're stabilizing the price. So people talk 0:05:51.960 --> 0:05:54.560 about an absolute price I just viewed that. I think 0:05:54.560 --> 0:05:55.960 what they're trying to do is make sure it stays 0:05:55.960 --> 0:05:58.520 within a range, which by definition means if we see 0:05:58.680 --> 0:06:02.200 a very cold winter, hurricanes and prices spike very quickly, 0:06:02.480 --> 0:06:04.960 they'll be managing the upside just this way they're managing 0:06:05.000 --> 0:06:08.080 the downside. So I've told generalists this morning, put your 0:06:08.080 --> 0:06:11.320 seatbelts on. It's it's going to be a very volatile supercycle. 0:06:11.320 --> 0:06:13.520 It's not going to be a straight line. And therefore, 0:06:13.560 --> 0:06:15.400 in some ways, I think the bullish factor to that 0:06:15.480 --> 0:06:19.880 inequities is Saudi can control that range, so generalists don't say, wait, 0:06:19.960 --> 0:06:22.400 this is way too this is way too high octane. 0:06:22.040 --> 0:06:23.280 For me to the right. Now. 0:06:23.279 --> 0:06:24.560 That's the reason why I think it's one hundred and 0:06:24.600 --> 0:06:26.240 not one hundred and ten. Right, You think that that's 0:06:26.279 --> 0:06:28.279 where they're going to kind of cap it. But what 0:06:28.360 --> 0:06:30.799 about say Russia and the fact that they just banned 0:06:30.839 --> 0:06:32.440 exports of gasoline. 0:06:32.000 --> 0:06:33.000 And things of that nature. 0:06:33.240 --> 0:06:36.200 Are there other areas that could kind of go against 0:06:36.360 --> 0:06:37.320 what we're seeing from Saudi. 0:06:37.520 --> 0:06:39.040 I think other areas will be demand, and I think 0:06:39.040 --> 0:06:41.120 we're in demand discovery. I mean, everyone's got a view. 0:06:41.160 --> 0:06:45.120 What price does demand? We've looked at historic analysis, and 0:06:45.200 --> 0:06:47.760 one hundred or oil is not that expensive. In fact, 0:06:47.800 --> 0:06:49.920 it's sort of closest or sevent soil of real Again 0:06:49.960 --> 0:06:52.599 before and after it's higher rates, you've got higher rates. 0:06:52.920 --> 0:06:56.080 And therefore, what's the real sort of level of normalized 0:06:56.120 --> 0:06:57.720 price the market demand the. 0:06:57.680 --> 0:06:59.919 World can acclimatize to. We don't know. 0:07:00.040 --> 0:07:02.440 We think one hundred and ten hundred and twenty is fine, 0:07:02.880 --> 0:07:05.279 and therefore at that price, if we started to see 0:07:05.360 --> 0:07:08.320 massive demand destruction, we're wrong. That's the point where I 0:07:08.360 --> 0:07:11.040 suspect Saudi and Rush will have to sort of manage 0:07:11.080 --> 0:07:12.600 that downside once again. 0:07:12.840 --> 0:07:15.960 So the message this morning is buckle up, buckle. 0:07:15.720 --> 0:07:19.560 Up, buckle up, very long, very bullish, but be very 0:07:19.560 --> 0:07:20.960 tactical when you get positioned in. 0:07:21.120 --> 0:07:23.040 That's quite something, Takay it is. 0:07:23.040 --> 0:07:23.480 There's a lot. 0:07:23.600 --> 0:07:25.640 You know, this is really important that the people we 0:07:25.760 --> 0:07:27.680 talk to they all have different views. We heard that 0:07:27.760 --> 0:07:30.280 from mister Morris's city group, different from mister Mail, like 0:07:30.280 --> 0:07:34.200 a JP Morgan, and you got to respect the density 0:07:34.520 --> 0:07:39.080 of the granularity rather Johan, that these people study something 0:07:39.120 --> 0:07:42.080 where we just go, well, Brent's ninety two and that 0:07:42.240 --> 0:07:43.160 just doesn't get it done. 0:07:43.200 --> 0:07:44.160 It's way more grand. 0:07:44.160 --> 0:07:46.080 You're about to do that right now. Brent's ninety four. 0:07:46.480 --> 0:07:51.200 Thanks Christ, Thank you of JP Morgan on the latest 0:07:51.200 --> 0:07:52.400 and the commodity market. 0:08:02.760 --> 0:08:05.040 Joining us right now with the most important interview of 0:08:05.080 --> 0:08:08.040 the day, because when it's like this, you triangulate to 0:08:08.160 --> 0:08:08.920 foreign exchange. 0:08:08.960 --> 0:08:12.560 Jordan Rochester's G ten epix strategists and Murra. I got 0:08:12.560 --> 0:08:13.520 one basic question. 0:08:14.120 --> 0:08:15.640 I'm told I can't get back on the plane and 0:08:15.680 --> 0:08:17.120 go back to New York unless they get a one 0:08:17.200 --> 0:08:21.000 nineteen print and sterling. How quick is Prime Minister Suna 0:08:21.080 --> 0:08:23.000 going to get me to a one nineteen sterling. 0:08:23.240 --> 0:08:26.280 That's something that could happen before your end. The moves 0:08:26.280 --> 0:08:28.160 aren't as rock and rollers last year, though. We haven't 0:08:28.160 --> 0:08:30.240 got a Liz Trust versus a Lettus moment right now 0:08:30.320 --> 0:08:32.360 to kind of get you that move lower. But we 0:08:32.360 --> 0:08:35.640 were at one eighteen in March earlier earlier this year, 0:08:35.800 --> 0:08:38.280 so it's very possible that one nineteen we could be 0:08:38.280 --> 0:08:39.520 talking the next six weeks. 0:08:39.800 --> 0:08:40.959 You're a parity call. 0:08:41.080 --> 0:08:43.880 Earlier this week on this program, Jane Foley wrap our Banks, 0:08:43.880 --> 0:08:45.600 she said, maybe where are you on that? 0:08:45.679 --> 0:08:45.760 Now? 0:08:45.800 --> 0:08:47.000 I was going to say, is that the call? 0:08:47.480 --> 0:08:50.280 It's definitely a maybe, but that that requires your next 0:08:50.360 --> 0:08:53.480 guest to tell us about oil, Christian Amic. So if 0:08:53.520 --> 0:08:56.120 oil goes to one hundred, okay, we get to one 0:08:56.160 --> 0:08:58.520 oh five maybe one o four in euro but to 0:08:58.679 --> 0:09:01.360 get down to parity, we need that energy squeeze that 0:09:01.400 --> 0:09:03.760 will hit that trade bands. Because what's happened. The euro 0:09:03.800 --> 0:09:06.400 Area's got a lovely current account service once again thanks 0:09:06.440 --> 0:09:08.680 to lower natural guests, so we need a cold weather 0:09:08.720 --> 0:09:09.520 forecas froctile. 0:09:09.559 --> 0:09:12.480 So things need to go wrong in Europe. We've done 0:09:12.559 --> 0:09:14.280 enough on the US side. That's not where the surprise 0:09:14.320 --> 0:09:15.559 comes from for you, I. 0:09:15.520 --> 0:09:18.760 Think, so the US in the next two CPI prints, 0:09:18.800 --> 0:09:21.440 what's going to be interesting is oil's up seven percent 0:09:21.480 --> 0:09:24.280 this month, but gasoline futures are down, so we're not 0:09:24.280 --> 0:09:26.400 going to get a really hot CPI print on headline 0:09:26.400 --> 0:09:28.480 that we got for last month. We've got zero point 0:09:28.480 --> 0:09:30.439 six month a month. The next month could just be 0:09:30.520 --> 0:09:33.200 zero point two for headline. But if gasoline futures weren't 0:09:33.200 --> 0:09:35.760 a spike back, we get another hot CPI for the US, 0:09:35.800 --> 0:09:37.840 followed by another one. If oil goes to one hundred, 0:09:38.400 --> 0:09:40.280 then you could be talking parity in Europe from a 0:09:40.400 --> 0:09:41.840 US perspective. 0:09:41.720 --> 0:09:43.880 In general, we talk about dollar strength right now, is 0:09:43.920 --> 0:09:46.200 it a dollar story or is it everything else story 0:09:46.480 --> 0:09:47.040 being weak? 0:09:47.480 --> 0:09:51.000 Oh, it's bothally, So the dollars strong because we've had 0:09:51.320 --> 0:09:54.480 a basically reinflation. We've had not just energy prices going 0:09:54.520 --> 0:09:58.360 back up, but these UAW strikes. We're interesting seeing some 0:09:58.400 --> 0:10:01.560 signals that car inflation could come back. So it's really 0:10:01.559 --> 0:10:03.520 hard for the market to look for a dubbish fed 0:10:03.600 --> 0:10:07.680 right now, especially with continuing claims falling lower once again. 0:10:07.760 --> 0:10:10.199 So we're not seeing any material job layoffs in the US, 0:10:10.679 --> 0:10:12.920 and then that's the US side. In Europe, it's horrendous 0:10:12.920 --> 0:10:15.520 in terms of growth. Look at the UK Services PMI. 0:10:15.600 --> 0:10:17.800 We had one of the biggest falls in the employment 0:10:17.840 --> 0:10:20.600 index within that PMI today, so it's quite clear that 0:10:20.679 --> 0:10:23.480 unemployment's rising in the UK and we're seeing softness in 0:10:23.520 --> 0:10:25.600 German labor market data as well. So an answer your 0:10:25.640 --> 0:10:28.120 question is always both, because it's currencies, we always do both. 0:10:28.320 --> 0:10:30.720 The European data for growth and for employments are looking 0:10:30.760 --> 0:10:31.280 pretty shaky. 0:10:31.400 --> 0:10:33.880 What's the level of strength for the dollar where it 0:10:33.880 --> 0:10:35.119 becomes truly disruptive. 0:10:35.640 --> 0:10:38.000 Well, in terms of the disruption, we're already getting close 0:10:38.040 --> 0:10:40.840 to those levels, as John said, parity in euro that 0:10:40.880 --> 0:10:42.320 would be a disruptive level for sure. 0:10:43.559 --> 0:10:43.920 Oil. 0:10:44.280 --> 0:10:45.959 I want to talk a little bit more about Croute 0:10:46.080 --> 0:10:49.160 and the move we've seen. You said that maybe if 0:10:49.200 --> 0:10:52.080 something goes wrong with gas, what about Brent and WTI? 0:10:52.440 --> 0:10:54.400 What about that we're already in the nineties on Brent. 0:10:54.400 --> 0:10:55.880 Doesn't that change things for Europe? 0:10:56.000 --> 0:10:58.560 It already has, it already has That's why I think 0:10:58.960 --> 0:11:00.880 the first half of this year and energy was weak. 0:11:01.160 --> 0:11:03.439 I thought that we could see euro finished a year higher, 0:11:03.840 --> 0:11:06.320 but that's completely changed. I didn't expect Brent to go 0:11:06.360 --> 0:11:08.640 above ninety. Well you changed from one fifteen to one 0:11:08.679 --> 0:11:11.520 oh five on the euro right, Brent move for sure, 0:11:11.920 --> 0:11:14.800 and we had this horrible range. So macro pms have 0:11:14.800 --> 0:11:16.920 had a very, really tough first half to the year 0:11:17.000 --> 0:11:19.080 because Euro has been in the yo yo and everyone 0:11:19.160 --> 0:11:21.040 getting excited at the high, it is excited at the 0:11:21.040 --> 0:11:23.760 lows get stopped out chasing their tail. I think we 0:11:23.760 --> 0:11:26.160 were going to see a proper breakout. FX has lacked 0:11:26.200 --> 0:11:28.640 a trend in the dollar this year. We're now getting 0:11:28.640 --> 0:11:30.839 a trend thanks to the energy story. So last year 0:11:30.960 --> 0:11:33.360 was thanks to Vladimir Putin. We got a big trend 0:11:33.360 --> 0:11:35.559 in the euro this year. It's thanks to MBS in 0:11:35.600 --> 0:11:39.079 Saudi Arabia. Why isn't the yen weaker today, Well, because 0:11:39.080 --> 0:11:41.000 you haven't had a hawkish move from the Bank Japan. 0:11:41.080 --> 0:11:43.520 What's what's quite interesting is we thought the Ford guidance 0:11:43.520 --> 0:11:48.120 would change. The Ford Guidance still says potential additional easoning easing. 0:11:47.840 --> 0:11:48.520 Could be used. 0:11:48.800 --> 0:11:51.160 So that was a bit odd given we thought you 0:11:51.200 --> 0:11:54.120 Wade a shifted a little bit more hawkish with his 0:11:54.280 --> 0:11:57.120 article from two about two weeks ago. And then the 0:11:57.200 --> 0:11:59.440 main problem for dolly En is it's quite easy to 0:11:59.480 --> 0:12:01.679 say cost to carry is very expensive to be long 0:12:01.760 --> 0:12:03.959 the ends, so therefore don't buy it. But you've got 0:12:03.960 --> 0:12:07.400 the Ministry of Finance threatening FX intervention risk and we've 0:12:07.400 --> 0:12:10.160 even had softer words from US Treasury Secretary of Yellen 0:12:10.559 --> 0:12:14.760 about maybe Japan can intervene. She hasn't said it that exclusively, 0:12:14.800 --> 0:12:16.400 but she's definitely softened her tone. 0:12:16.440 --> 0:12:17.800 So in other words, we can take a look at 0:12:17.800 --> 0:12:19.280 the yen and just say that nobody wants to bet 0:12:19.320 --> 0:12:21.360 against the central bank, and nobody wants to bet against 0:12:21.440 --> 0:12:24.520 foreign intervention that they're likely to deploy, but it has 0:12:24.640 --> 0:12:27.640 nothing to do with the differential at this point between 0:12:27.640 --> 0:12:30.000 the monetary particiesly. 0:12:29.080 --> 0:12:30.400 Has everything to do with the differential. 0:12:30.720 --> 0:12:33.880 And if the MF thret of intervention wasn't there, we 0:12:33.920 --> 0:12:36.360 would be closer to one fifty right now. If the 0:12:36.520 --> 0:12:39.160 idea of the boj turning hawkish wasn't there, we'd be 0:12:39.200 --> 0:12:42.360 closer to one fifty. But because of that threat, people 0:12:42.360 --> 0:12:44.480 are being reluctant to get into that trade. 0:12:44.679 --> 0:12:45.640 But if you were to look at. 0:12:45.520 --> 0:12:47.520 The cost of carry, it's even higher than what it 0:12:47.600 --> 0:12:49.680 was last year when we were at these exact same levels. 0:12:49.840 --> 0:12:51.000 Belisa, it's deja vus. 0:12:51.040 --> 0:12:53.679 I was in September, New York, in New York hours 0:12:53.840 --> 0:12:56.320 the Ministry of Finance came in and intervened at Dollian 0:12:56.360 --> 0:12:57.200 around one fifty. 0:12:57.240 --> 0:12:58.720 It feels a bit like deja VU's. 0:12:58.760 --> 0:13:00.560 People are just bit reluctant. 0:13:00.600 --> 0:13:00.760 Here. 0:13:01.040 --> 0:13:02.320 You and I are in the same page. 0:13:02.360 --> 0:13:04.000 First thing in the morning I do was I look 0:13:04.000 --> 0:13:07.640 at swissy frank different pairs to four decimal points, to 0:13:07.760 --> 0:13:10.280 just see when a Swiss Frank in his signal strength. 0:13:10.960 --> 0:13:15.800 You say, Switzerland stakey is a place chf sek swissy 0:13:15.800 --> 0:13:19.000 stacky is a trade to play here for long Swiss Frank. 0:13:19.080 --> 0:13:21.360 Why will the Swiss frank strength. Let's start with that. 0:13:21.480 --> 0:13:23.760 Yeah, absolutely, so we always have our main dollar views, 0:13:23.760 --> 0:13:25.600 our sterling views. But then you have to talk about 0:13:25.679 --> 0:13:28.520 RV and what we're talking about here, Tom is long Switzerland, 0:13:28.720 --> 0:13:32.439 short Sweden. Now, Switzerland has seen massive appreciation of its 0:13:32.480 --> 0:13:35.000 currency over the past year, but I think that's a 0:13:35.040 --> 0:13:37.040 trend that carries on. We're going through a period of 0:13:37.080 --> 0:13:41.080 an adjustment for Switzerland. Last year, before they started raising rates, 0:13:41.120 --> 0:13:44.120 it was negative seventy five basis points. We're now around 0:13:44.120 --> 0:13:46.120 the one fifty one seventy five on the front end, 0:13:46.400 --> 0:13:49.040 So you're getting paid for holding Swiss in the bank account, 0:13:49.120 --> 0:13:51.480 where last year you were being charged. We've known that 0:13:51.520 --> 0:13:54.000 for a while, but we're still going through an adjustment phase. 0:13:54.200 --> 0:13:57.960 And the banking repatriation flows back into Switzerland. Those Swiss 0:13:58.000 --> 0:14:01.400 banks were lending to American corporates, ping corporates, they're not 0:14:01.400 --> 0:14:03.560 going to do that next year because they've got nice 0:14:03.600 --> 0:14:05.400 yields at home. So we're seeing a lot of that 0:14:05.440 --> 0:14:08.040 money come back into Swiss, boosting the currency. And the 0:14:08.040 --> 0:14:10.960 second reason is when growth slows down, you go along 0:14:11.000 --> 0:14:11.400 the Swiss. 0:14:11.480 --> 0:14:14.040 Okay, I'll go with that, except the SMB to me's 0:14:14.040 --> 0:14:16.560 almost a sovereign wealth fund with the equity ownership they 0:14:16.559 --> 0:14:18.760 have and particularly the load de bode. 0:14:18.520 --> 0:14:21.160 Position and Apple as well. 0:14:21.240 --> 0:14:25.120 Does their equity stub within the central Bank Does that 0:14:25.240 --> 0:14:28.080 preclude usual strong Swiss dynamics. 0:14:28.480 --> 0:14:31.240 I think the SMB has just taking the view that 0:14:31.600 --> 0:14:33.640 we're happy to take a loss on our FX reserves. 0:14:33.680 --> 0:14:36.040 And in fact what they're doing is they're selling their 0:14:36.040 --> 0:14:39.200 foreigner holdings as well, so they're actually consistent sellers of 0:14:39.400 --> 0:14:42.920 They're eighty percent bonds, twenty percent inequities, so the largest 0:14:42.960 --> 0:14:45.000 part will be in the fixed income space. But we've 0:14:45.040 --> 0:14:48.360 seen eleven billion of intervention per month from the Swiss 0:14:48.360 --> 0:14:48.640 give me. 0:14:48.640 --> 0:14:51.720 A level and euroswissly the core pair there at the 0:14:51.720 --> 0:14:53.880 word point nine five point ninety four. 0:14:54.040 --> 0:14:57.840 It's easier to trade this Swiss stocky than EuroSwiss EuroSwiss. 0:14:57.840 --> 0:14:58.840 I've actually stayed out of it. 0:14:58.840 --> 0:15:01.440 It's one of the most non macro currency pairs in 0:15:01.440 --> 0:15:01.640 the G. 0:15:01.760 --> 0:15:07.240 Ten EuroSwiss Swissy stocky. It's the most London thing I've 0:15:07.240 --> 0:15:07.800 heard all week. 0:15:08.000 --> 0:15:10.160 Well, you know, I mean, it's it's real, man. We've 0:15:10.160 --> 0:15:11.200 got to bring these people in. 0:15:11.240 --> 0:15:15.200 I mean, there are days General Levy and I got 0:15:15.400 --> 0:15:18.000 Rochester here, and you know, we got to bring our 0:15:18.120 --> 0:15:20.320 FX people in. They start me, you know, go start 0:15:20.320 --> 0:15:22.320 me today. They watch in Singapore every evening. 0:15:22.360 --> 0:15:23.680 That's very killed, and they watch me and. 0:15:23.680 --> 0:15:26.920 There popa FX trades and Singapore off what we're blathering about. 0:15:27.200 --> 0:15:28.800 So I got to go to Rochester here to get 0:15:28.800 --> 0:15:29.800 some romance in it. 0:15:30.000 --> 0:15:32.480 Can we just finish Mayfair and look at a Ferrari? 0:15:32.680 --> 0:15:37.280 So that's Sweden versus Switzerland on the Swiss side, that 0:15:37.400 --> 0:15:40.080 haven currency on that growth slowed down, you think money 0:15:40.160 --> 0:15:42.480 is going to go back there? Who else is in 0:15:42.480 --> 0:15:44.280 that bucket? Because it used to be Japan? 0:15:44.600 --> 0:15:46.160 What else is the good question? 0:15:46.360 --> 0:15:48.040 Yeah, it's it is Euro. 0:15:48.280 --> 0:15:50.560 That's kind of why the Euro hasn't been rock and roll. 0:15:50.720 --> 0:15:52.120 So you're asking me about the one o five down 0:15:52.160 --> 0:15:54.120 to parrot of you. We've got better trades to do. 0:15:54.240 --> 0:15:57.160 Short sterling versus the dollars, a better trade. The way 0:15:57.200 --> 0:15:59.640 we're playing euro is short euro versus CAD. But the 0:15:59.640 --> 0:16:02.640 reason I mentioned Euro is because we are having banking repatriation. 0:16:02.840 --> 0:16:06.160 For a long time, German banks, French banks had negative 0:16:06.160 --> 0:16:06.800 interst rates. 0:16:06.920 --> 0:16:09.160 American corporates asking for money let's go for it. 0:16:09.240 --> 0:16:12.680 Let's lend abroad that's now reversing because they've got positive 0:16:12.720 --> 0:16:13.120 yields up. 0:16:13.280 --> 0:16:15.480 Do you have a level on DXY where you go omg, 0:16:15.600 --> 0:16:17.400 you wake up in London and go wow d X 0:16:17.520 --> 0:16:21.680 y one oh seven, one ten? What's what's the prism 0:16:21.760 --> 0:16:23.720 you have of DXY where things change? 0:16:24.040 --> 0:16:26.040 Well by what what do you mean? So for the 0:16:26.080 --> 0:16:27.760 Fed for it to have an impact. 0:16:27.840 --> 0:16:30.000 Mean for us, for people trading the market got. 0:16:29.840 --> 0:16:33.040 Ten seconds to give us a number before one tent. 0:16:33.200 --> 0:16:36.200 There you go, that's that's what we're scaring one ten Jordan, 0:16:36.200 --> 0:16:38.800 Thank you, Jord and roast of Numa. 0:16:39.080 --> 0:16:40.520 Swissy Stacking. 0:16:43.960 --> 0:16:47.400 Sarah Melick with US now chief investment officer at Nuven. Sarah, 0:16:47.400 --> 0:16:52.240 though fear is out priced down yield up. Should we 0:16:52.320 --> 0:16:56.240 be in a sense of panic or frenzy or caution 0:16:56.800 --> 0:16:57.440 or is this a. 0:16:57.480 --> 0:16:59.960 Normal adjustment that we will survive. 0:17:01.280 --> 0:17:03.480 Well, there's two issues the market needs to suggest to 0:17:03.560 --> 0:17:05.440 and that's what's going on with the economy and what's 0:17:05.480 --> 0:17:08.600